Description
The report for the financial year 2011 - 2012 of Tech mahindra limited.
Corporate Information
Board of Directors Mr. Anand G. Mahindra, Chairman Mr. Vineet Nayyar, Vice Chairman & Managing Director Hon. Akash Paul Mr. Anupam Puri Mr. B. H. Wani Mr. Bharat N. Doshi Mr. M. Damodaran Mr. Nigel Stagg (Upto December 23, 2011) Mr. Paul Zuckerman Dr. Raj Reddy Mr. Ravindra Kulkarni Mr. Richard Cameron (Upto December 23, 2011) Mr. Ulhas N. Yargop Committees of Directors Audit Committee Mr. M. Damodaran, Chairman Mr. Anupam Puri Mr. Paul Zuckerman Dr. Raj Reddy Mr. Richard Cameron (Upto December 23, 2011) Mr. Ulhas N. Yargop Compensation & Nominations Committee Mr. Ravindra Kulkarni, Chairman Mr. Anupam Puri Mr. Nigel Stagg (Upto December 23, 2011) Mr. Paul Zuckerman Mr. Ulhas N. Yargop Investor Grievances-cum-Share Transfer Committee Mr. Ulhas N. Yargop, Chairman Mr. Richard Cameron (Upto December 23, 2011) Mr. Vineet Nayyar Executive Committee Chief Financial Of?cer Mr. Sonjoy Anand Mr. Vineet Nayyar, Chairman Mr. Nigel Stagg (Upto December 23, 2011) Mr. Ulhas N. Yargop Company Secretary & Compliance Of?cer Mr. Anil Khatri Securities Allotment Committee Mr. Vineet Nayyar, Chairman Mr. Richard Cameron (Upto December 23, 2011) Registered Of?ce Gateway Building, Apollo Bunder, Mumbai – 400 001 Mr. Ulhas N. Yargop Bankers IDBI Bank HSBC Bank Kotak Mahindra Bank HDFC Bank CITI Bank Auditors Deloitte Haskins & Sells Chartered Accountants
Corporate Of?ce Sharada Centre, Off Karve Road, Erandawane, Pune – 411 004
Table of Contents
Directors’ Report Management Discussion and Analysis Corporate Governance Report Standalone Financials Consolidated Financials Statement of Subsidiary Companies 5 15 24 39 84 122
Vice Chairman’s Message
Vineet Nayyar
Vice Chairman & Managing Director
Dear Shareholders The ?scal year 2011-12 was a year of steady performance in a challenging environment. Our consolidated revenues for ?scal 2011-12 grew 6.8% to ` 5,490 crores as against ` 5,140 crores in the previous year. Our consolidated Pro?t after Tax was ` 1,095 crore versus ` 644 crore in the previous year, a growth of 70%. Our journey of building the organization continued as we focussed on expanding our market share in our chosen vertical. The economic environment continues to be volatile. In the last year, we saw the global economy in turmoil due to the Euro crisis, and the uncertainty in the US economy. The European economy continues to be volatile and recovery in the Eurozone could be a prolonged process. Closer home, the Indian economy has also seen a slowdown in growth and reduction in investments. These economic ?uctuations have in?uenced and changed customer behaviour in the past year. Customers are looking for strong and reliable partnerships with IT providers like us to ?nd opportunities for optimization and ensure sustainability of their global delivery program. In the Telecom sector, revenue growth is expected to be sustained in the wireless area due to increased usage of smart devices. Telecom operators globally are looking to invest in new technologies like 4G and LTE to cater to the increasing demand for high speed data. Our customers are foraying into new avenues of revenue generation like Cloud services and offerings around machine to machine communication. They are looking to fund the investments required in these new areas, partly through the savings realized through increased operational ef?ciency. Our capability in the Telecom vertical and our global delivery presence enables us to offer the best value propositions to our customers, which addresses both their growth initiatives and offer them ?nancial savings. We continued to expand our portfolio of service offerings and solutions to better address the needs of our clients. Our strategy of focusing on developing offerings outside our traditional domain of application services has enabled us to address a larger share of the spending of our clients. Our focus on emerging markets and our initial investments in areas like Managed Services are now giving us a distinct advantage as we leverage our expertise in developed markets. We believe that we are well positioned to capitalize on the opportunities being generated by the economic environment and the new technology paradigm. Our investment in Mahindra Satyam is starting to yield dividends. It gives me great satisfaction in reporting that our three year turnaround plan for Mahindra Satyam has been quite successful. In the last year, Mahindra Satyam has not only achieved industry standards on revenue growth but has also shown signi?cant improvement in operating margins. In many ways this turnaround re?ects the innate strength and quality of the Mahindra Satyam staff and leadership. As a logical step forward, the Boards of both companies announced the merger of the two companies in March 2012. I am happy to inform all of you that the shareholders of both companies have approved the merger in the month of June 2012. We are con?dent of the bene?ts from this merger for all our stakeholders and look forward to achieving increased traction and better ef?ciencies once the merger is complete. We successfully stepped into the second year of Mahindra Group’s revised brand positioning “Rise”; which has contributed signi?cantly in reshaping positive energy within the Organization. The three tenets of Rise Accepting no limits, Alternative Thinking and Driving positive change are the guiding concepts for our vision, culture and strategy as we move forward in our journey as one entity. Lastly, I want to thank the employees of Tech Mahindra for their contribution to our continued growth, and the share holders of Tech Mahindra and Mahindra Satyam for their overwhelming support in the merger process. We look forward to live up to the faith reposed in us by all our stakeholders. All of us in Tech Mahindra look forward to an exciting year ahead with new milestones and new accomplishments. Sincerely,
Vineet Nayyar Vice Chairman & Managing Director
CONSOLIDATED FINANCIAL HIGHLIGHTS
Particulars 1 2 3 Revenue Total Income EBIDTA (Operating Pro?t) 4 PBIT 8,505 211.6 11,350 249.9 5 Interest 62 1.5 25 0.5 6 PBT 8,443 210.1 11,325 249.4 7,695 191.5 10,145 223.6 7 PAT before exceptional items and share of pro?t/(loss) in Associate 8 PAT 3,299 81.7 10,145 223.6 9 EBIDTA Margin % 21.9% 21.9% 28.7% 28.7% 10 PAT Margin %* 20.4% 20.4% 22.7% 22.7% 11 Equity Capital 1,214 30.3 1,217 24.0 12 Net Worth 12,572 313.4 19,434 383.2 13 Net Block Including 5,996 149.5 6,522 128.6 CWIP 14 Investments 633 15.8 4,346 85.7 15 Current Assets 15,562 387.9 17,370 342.5 16 Current Liabilities & 9,268 231.0 8,888 175.2 Provisions 17 Total Assets 22,251 554.6 28,434 560.6 18 Current Ratio 1.7 1.7 2.0 2.0 19 ROCE %* 75.8% 75.8% 70.0% 70.0% 20 EPS (Diluted, in ` and 58.9 1.5 78.8 1.7 US$)* * Before tax, exceptional item and share of pro?t/(loss) in Associate 2008 ` Mn US$ Mn 37,661 934.7 38,705 960.8 8,257 205.3 2009 ` Mn US$ Mn 44,647 984.9 44,269 977.0 12,824 281.9 2010 ` Mn US$ Mn 46,254 976.6 47,008 992.9 11,326 239.9 10,741 2,184 8,557 7,117 227.9 45.7 182.3 151.5 2011 ` Mn US$ Mn 51,402 1126.6 52,690 1155.1 10,033 219.3 9,887 1,113 8,774 7,458 216.2 24.5 191.7 163.0 2012 ` Mn US$ Mn 54,897 1156.3 55,879 1179.2 9,194 193.5 8,562 1,026 7,537 6,099 182.4 22.5 159.8 129.2
7,005 24.5% 15.4% 1,223 28,865 7,231 30,145 21,366 8,665 59,018 2.5 34.7% 54.4
149.1 24.5% 15.4% 27.2 643.0 161.1 671.5 476.0 193.0 1,314.8 2.5 34.7% 1.1
6,442 19.5% 14.5% 1,260 33,514 6,778 29,080 20,290 15,104 60,553 1.3 21.8% 49.3
140.7 19.5% 14.5% 28.2 751.6 152.0 652.2 455.0 338.7 1,358.0 1.3 22.1% 1.1
10,954 16.7% 11.1% 1,275 40,509 8,496 35,876 22,042 16,501 69,191 1.3 17.6% 82.9
229.7 16.7% 11.2% 25.1 796.3 167.0 705.2 433.3 324.4 1360.1 1.3 17.6% 1.7
Revenue
54,897
INR Mn
Geographywise Revenue 2011-12
Rest of World 19%
Customer Count
51,402
North Americas 34%
128
130
46,254 113
Europe 47% 2009-10 2010-11 2011-12 2009-10 2010-11 2011-12
Profit After Tax
INR Mn
Net Worth
INR Mn
Headcount
38,333 40,763
10,955 40,509 33,514 7,005 6,442 28,865
33,524
2009-10
2010-11
2011-12
2009-10
2010-11
2011-12
2009-10
2010-11
2011-12
DIRECTORS’ REPORT TO THE SHAREHOLDERS
Your Directors present their Twenty-?fth Annual Report together with the audited accounts of your Company for the year ended 31st March, 2012. FINANCIAL RESULTS (` in Million) For the year ended 31 March Income Pro?t before Interest, Depreciation, exceptional items and tax Interest Pro?t before Depreciation and tax Depreciation Pro?t before tax Provision for taxation Pro?t after tax before non-recurring / exceptional items Non-recurring / exceptional items Pro?t for the year after tax and non-recurring / exceptional items Balance brought forward from previous year Pro?t available for appropriation Transfer to Debenture Redemption Reserve Dividend Tax on dividend Transfer to General Reserve Balance carried forward - Final Dividend* - Dividend (Proposed)
st
2012 53,107 8,999 (1,025) 7,974 (1,505) 6,469 (1,184) 5,285 (679) 4,606 22,412 27,018 (1,353) (4) (510) (83) (1,000) 24,068
2011 50,921 10,556 (1,113) 9,443 (1,383) 8,060 (1,093) 6,967 6,967 17,740 24,707 (702) (6) (504) (83) (1,000) 22,412
* In respect of equity shares issued pursuant to ESOPs issued after 31st March, 2011 but before book closure date, the Company paid dividend of ` 4.3 Million for the year 2010-11 and tax on dividend of ` 0.7 Million as approved by the shareholders at the Annual General Meeting held on August 12, 2011. DIVIDEND Your Directors are pleased to recommend a dividend of ` 4 per Equity Share (40%), payable to those Shareholders whose names appear in the Register of Members as on the Book Closure Date. The equity dividend for the ?nancial year 2011-12, inclusive of tax on distributed pro?ts would absorb a sum of ` 593 Million (` 587 Million for the previous year). CHANGES IN SHARE CAPITAL During the year under review, your Company allotted 1,531,060 equity shares of face value ` 10 each on the exercise of stock options under its various Employee Stock Option Plans and consequently the number of issued, subscribed and paid-up equity shares has increased from 125,955,481 equity shares to 127,486,541 equity shares of ` 10 each aggregating to ` 1,274,865,410/-. BUSINESS PERFORMANCE / FINANCIAL OVERVIEW Your company is a leading IT services and solutions provider for the Telecom Industry, serving segments such as Telecom Services Providers (TSPs), Telecom Equipment Manufacturers (TEM’s) and Independent Software Vendors (ISV’s) with a wide array of services catering to the changing needs of the Telecom ecosystem. During the year 2011-12, your Company’s consolidated revenues increased to ` 54,897 Million from ` 51,402 Million in the previous year, at a growth rate of 6.8%. In Financial Year 2010-11, your Company executed a large System Integration project for an Indian Telecom Service Provider and had a one-time revenue of ` 2,989 Million from this project. Excluding this one-time revenue, the growth in revenue was 13.4% in Financial Year 2011-12. The geographical split of revenue was quite balanced with 47% share from Europe, 34% from Americas and 19% from the Rest of the World (ROW).
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ANNUAL REPORT 2011 - 2012
The consolidated Pro?t before Interest, Depreciation, Tax and Exceptional items was at ` 10,176 Million (18.5% of revenue) against ` 11,322 Million (22% of revenue) in the previous year. This decline in operating pro?ts was due to increase in employee costs and also change in the business mix. The consolidated Pro?t after tax, after exceptional items and minority interest, amounted to ` 5,385 Million as against ` 7,438 Million in the previous year. The cancellation of 2 G licenses by the Supreme Court in January 2012 impacted two of your company’s domestic customers’ business viability. As a matter of abundant precaution, your Company provided dues from these customers amounting to ` 679 Million as doubtful debts. The consolidated Pro?t after tax, including share of pro?t in associate company (Mahindra Satyam), amounted to ` 10,955 Million as against ` 6,442 Million in the previous year, a growth rate of 70%. The global technology landscape continues to be shaped by both economic forces and by the emergence of new trends like social media and cloud computing. The lingering crisis in Europe, volatile ?nancial markets and government austerity programs could impact spend on IT in the coming year. Our Customers have to face the twin challenges of optimizing current IT spend and investing in future technologies and trends. The underlying strength of the global delivery model and the signi?cant bene?ts it offers to global customers could help corporations in achieving both objectives. Your Company has been providing solutions, which leverage the global delivery model, to Telecom companies to improve Customer experience, bring in operational ef?ciencies and improve customer’s Average Revenue Per User (ARPU). Your Company serves large global telecom companies as well as green ?eld operators across 31 countries. Your company has 130 active customers at the end of the Financial Year 2011-12, and the focus for the coming year is broadening relationships across customer base leveraging Six Pillar Strategy. Your Company’s service offerings are grouped in six distinct domains based on the areas of customer spend. The six domains which are Applications, Networks, Infrastructure, Value Added Services (VAS), Security Solutions and Business Services together cover all areas of customers spend in our target markets. Customer Centricity and enhancing customer experience has always been a focus area for your Company. This year, your Company launched a Customer Centricity Of?ce (CCO), with a Chief Customer Centric Of?cer to ensure that the high levels of customer experience are sustained.
Your Company continues to invest in new technologies like smart computing products, cloud, analytics and mobility. These investments will help your Company capitalize on the emerging revenue opportunities in these areas. Your Company’s domain expertise and leading solutions in the telecom vertical has earned itself a niche in the market place. Your Company was awarded the 2011 Microsoft Communications sector Partner of the year award. Voice & Data – India’s leading communication magazine ranked the Company as India’s No. 1 Telecom Software service provider. CanvasM Technologies Limited (CanvasM), a wholly owned subsidiary of your Company, was ranked amongst the Top 10 Value Added Services (VAS) players. Your Company today has more than 15 delivery centers worldwide and 17 sales of?ces. In the year gone by, Company established a delivery center in Bonn Germany to service clients in Germany and Central Europe. In summary, your Company is well positioned in the markets it serves with a broad range of service offerings and a diversi?ed customer base across geographies. FINANCIAL OVERVIEW OF MAHINDRA SATYAM The turnaround of Mahindra Satyam (Satyam Computer Services Ltd.) gathered further momentum in the current year. Revenues grew by 24% to ` 63,956 Million over the previous year, EBITDA grew by 128% to ` 10,240 Million (16% of revenue) re?ecting the progress of the turnaround. PAT before exceptional item increased to ` 11,882 Million from ` 4,971 Million. A brief snapshot of Mahindra Satyam’s Statement of Pro?t and Loss is given below: Particulars (` in Million) Consolidated P&L Summary FY12 FY11 Revenue 63,956 51,451 EBITDA 10,240 4,489 EBITDA margins (% to revenue) 16% 8.7% Other Income 4,189 2,879 Interest 118 97 Depreciation 1,577 1,721 Pro?t Before Tax 12,734 5,550 Provision for Tax 852 579 Pro?t before exceptional items 11,882 4,971 and minority Interest Exceptional Items (1,094) 6,411 Minority interest (84) 33 Pro?t After Tax 13,061 (1,472) PAT margins (%to revenue) 20.4% (2.9%)
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UPDATE ON THE PROPOSED AMALGAMATION OF MAHINDRA SATYAM AND TECH MAHINDRA LIMITED: In March 2012, the respective Boards of Tech Mahindra and Mahindra Satyam approved the merger of Mahindra Satyam with Tech Mahindra. This landmark event, makes way for the creation of a formidable top-tier global player and one of India’s top IT employers. The Board of Directors at their meeting held on 21st March, 2012 have pursuant to the provisions of Sections 391 to 394 read with Sections 78, 100 to 104 and other applicable provisions, of the Companies Act, 1956 and subject to the requisite approval of the shareholders of the Company and subject to all necessary statutory approvals have approved to amalgamate Venturbay Consultants Private Limited (“Venturbay”), Satyam Computer Services Limited (“Mahindra Satyam”), C&S System Technologies Private Limited (“C&S System”), Mahindra Logisoft Business Solutions Limited (“Mahindra Logisoft”) and CanvasM Technologies Limited (“CanvasM”) with the Company. Based on the recommendation of the valuers, the Board of Directors have approved swap ratio of Two (2) fully paid Equity Shares of face value of `10/- each of the Company for every Seventeen (17) Equity shares of face value of ` 2/- each of Satyam Computer Services Limited (Mahindra Satyam). The proposed Scheme of amalgamation will be subject to approvals by various regulatory agencies and shareholders, including the approval from the High Courts of Bombay and Andhra Pradesh. This Amalgamation would result in creation of a new off shore services leader with revenues of over $ 2.4 billion, more than 75,000 professionals and 350 + active clients. Your Company is happy to inform that the Competition Commission of India has granted approval for the Amalgamation of the companies vide their order dated 26th April, 2012. The Hon’ble High Court, Bombay has dispensed the meeting of creditors & directed the Company to hold meeting of the equity shareholders of the Company on 7th June, 2012 to seek their consent on the said amalgamation and arrangement. The rationale for the merger
• • • •
De-risked business pro?le Optimized costs and productivity improvement with bene?ts of scale Diversi?cation into multiple verticals like BFSI, Manufacturing and Retail Ability to offer a wide range of service offerings like Enterprise Services and Engineering Services to current and future customers
The Power of one The combined entity will be able to better leverage Tech Mahindra’s depth of expertise developed in telecom to better penetrate the opportunity presented by Mahindra Satyam’s diverse set of clients across multiple verticals. Likewise, Mahindra Satyam’s expertise in enterprise solutions will enable a more complete value proposition to be delivered to Tech Mahindra’s clients and penetration into the larger landscape. Geographically, your Company derives a signi?cant portion of its revenues from Europe, while Mahindra Satyam’s business is highly focused on Americas. The amalgamated entity will have a further balanced share of revenue contribution from three key geographies viz Americas, Europe and Rest of World. There would be minimal overlap of services and offerings and this would lead to an ease in the integration process of the two entities. MANAGEMENT REPORT DISCUSSION AND ANALYSIS
A detailed analysis of your Company’s performance is discussed in the Management Discussion and Analysis Report, which forms part of this Annual Report. QUALITY Continuous improvement of process and enabling technologies that meet client expectation is a way of life in your Company. There is a very robust process framework which is implemented to ensure greater customer satisfaction through improved quality, higher productivity and reduced cycle time. One of key achievements of your Company was to get assessed at Stage 5 of the Mahindra Quality Way Model, a business excellence framework. Your Company is the ?rst Large Services Company within the Mahindra Group Companies to be assessed at Stage 5. We also embarked on the journey of CMMI 1.3 Level 5 assessment and successfully completed the same on 18th April, 2012. The customer satisfaction surveys also re?ected improved scores and good feedback across all levels of client organizations.
•
Creation of a single ‘go-to-market’ strategy with bene?ts of scale and enhanced depth and breadth of capabilities, translating into increased business opportunities Stronger merged entity – ?nancially and in industry positioning Uni?ed management focus and fungible talent pool
• •
7
ANNUAL REPORT 2011 - 2012
As in the previous years, in this year too, your Company successfully completed the surveillance audits and continues to be certi?ed for ISO9001:2008, ISO/IEC 20000-1:2005, ISO/IEC27001:2005, BS25999:2008. HUMAN RESOURCES Your Company believes in ability of each of its associates and hence provide ample opportunities to tap this potential and invests in the growth and development of all of its associates. Talent Management at the Company involves motivating and promoting leadership development. The Company launched a Global Leadership Cadre (GLC) program about 7 years ago with the aim of sculpting agile and creative young leaders. GLC Program identi?es management graduates from the Tier I business institutes across the globe and also technical specialists from within the organization. These highly talented GLC participants with a faster career progression could be potential successors to senior management in the organization. Complimenting the GLC program is Management Trainee (MT) program running successfully for past 5 years wherein candidates from Tier II B Schools across India are groomed for future GLC roles. The Shadow Board program continues to nurture young talent with high potential and make them a part of the organization’s strategy planning. Aiming to provide a platform to our associates for taking responsibility of shaping their careers, the Company launched this year a mentoring initiative that aims to provide a platform to associates with potential to be groomed and guided by in-house Mentors. This also gives an excellent opportunity to Mentors to hone their people motivation and developmental skills. This year also saw an increased focus on Senior Leadership Development to address speci?c training needs of nominated senior associates within the organisation. Company’s in-house Leadership Programs ran into their second successful year - the Excellence in Leadership Program, speci?cally designed for middle managers with an aim of grooming associates in skills required to excel from a team manager’s role to a business leader’s role; the Young Leaders Program, speci?cally designed for ?rst time managers with an aim at grooming associates in the skills required to move from a team member’s role to a team manager’s role. Associates participate in these 6 month programs while they are working. Another successful learning program is the Executive Post Graduate Diploma in Telecom Management in collaboration with Symbiosis Institute of Telecom Management (SITM). The program offers in-depth knowledge on telecom concepts and general business
management that helps our Company to be prepared for the ever changing telecom market, thus nurturing the leadership talent within the organization. The Company believes in inclusivity and has many initiatives to foster diversity in age, gender, culture and capability. Especially for women associates of the Company, a platform is created to voice their opinions & suggestions and promote Women in the Workplace. It helps to identify and implement initiatives that promote gender diversity and make TechM a preferred career destination for women associates. During the Financial Year 2011-12, your Company, along with its subsidiaries, made a net addition of 2,430 associates to its workforce. The strength was 40,763 associates as at 31st March, 2012, as compared to 38,333 associates a year before, registering an increase of 6.3%. BPO headcount included in this ?gure is 14,792 associates, up from 11,011 associates, a year before. SUBSIDIARY COMPANIES During the year under review, the Company incorporated a new step down subsidiary at America viz. Tech Talenta Inc. The said Company is a wholly owned subsidiary of Tech Mahindra – (Americas) - Inc. a wholly owned subsidiary of your Company. Further during the year under review, your Company bought the stake of 19.90% held by Motorola Cyprus in subsidiary Company CanvasM Technologies Limited (CanvasM) thus making CanvasM a wholly owned subsidiary of the Company. As on 31st March, 2012, your Company has 16 subsidiaries, including two step-down subsidiaries. There has not been any material change in the nature of the business of the subsidiaries. As required under the Listing Agreements with the Stock Exchanges, the Consolidated Financial Statements of your Company and all its subsidiaries and its associate Company i.e. Mahindra Satyam & its subsidiaries are attached. The Consolidated Financial Statements have been prepared in accordance with Accounting Standards AS 21, AS 23 and AS 27 issued by The Institute of Chartered Accountants of India and show the ?nancial resources, assets, liabilities, income, pro?ts and other details of your Company and its subsidiaries and associate companies as a single entity, after elimination of minority interest. In terms of general exemption granted by the Ministry of Corporate Affairs pursuant to Section 212(8) of the Companies Act, 1956, the Copy of the Balance Sheet, etc. of the subsidiaries are not required to be attached with the Balance Sheet of the Company. The Company Secretary will make these documents available upon receipt of request from any member of the Company interested in obtaining the same. These documents
8
will be available at Registered Of?ce / Corporate Of?ce of the Company and the of?ce of the respective subsidiary companies, during working hours up to the date of the Annual General Meeting. EMPLOYEE STOCK OPTION PLAN (ESOP) Details required to be provided under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in Annexure I to this Report. CORPORATE SOCIAL RESPONSIBILITY (CSR) Your Company is committed to play its role as an enlightened corporate citizen and continues to earmark 1.5% of its Pro?t after Tax (PAT) every year for CSR activities. CSR activities are carried through Tech Mahindra Foundation (TMF). TECH MAHINDRA FOUNDATION (TMF) TMF was established in its present form in 2007 by your Company as one of the major manifestations of its Corporate Social Responsibility. Your Company contributes 1.5% of its pro?t after tax to TMF which now has a corpus of ` 47 Crore as on 31st March, 2012. It has disbursed approx ` 33 Crores to 70 NGOs over 5 years and impacts more than 50,000 bene?ciaries per year through NGO partners across Delhi-Noida, Mumbai, Pune and Bangalore. TMF seeks to achieve its objectives by working in partnership with outstanding community based NGOs which share its goals and values and have demonstrated competence, dedication and integrity. TMF NGO projects address felt community needs. TMF’s major achievements have been:
steps not only in creating “Green” strategies but also making environmental stewardship a core part of our business strategy that takes accountability for every dimension of social, cultural, economic and environmental governance, creating sustainable value for all its stakeholders. Your Company has been participating in the Sustainability Reporting of the Mahindra Group since Financial Year 2007-08. During the year under review the 4th Sustainability Report for the year 2010-11 was released. All these reports were in accordance with the latest guidelines of the internationally accepted, Global Reporting Initiative (GRI). This report was assured by Ernst & Young and conforms to the highest level for reporting ‘Sustainability’ performance, which is A+. The report and the performance rating of A+ was checked and con?rmed by GRI*. The detailed Group Sustainability Reports are available on the website:http://www.mahindra.com/How-We-Help Environment/Sustainability-Reports. In order to take a structured path for reducing its carbon footprint, your Company has a 5 Year Sustainability Road map. We are consciously reducing GHG emissions and waste, as well as conserve water, bio-diversity and natural resources. In the Financial Year 2011-12 concerted efforts were made to ensure targets are met over committed time lines in the following thrust area:
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Renewable energy using Wind & Solar for generating electricity. Rainwater Harvesting & Sewage Treatment Plant. Eco-friendly e-waste disposal systems. Occupancy sensors to consumption. reduce the electricity
•
Qualitative improvement in Primary Education of both government and English medium NGO Schools. Development of Yuva English progamme to empower youth to become employable. Creation of Vision For India (VFI) – a network of outstanding visually impaired NGO partners – impact through shared resources & appropriate technology. Shikshak Samman Awards in Delhi – to outstanding municipal teachers - a way to bring about systemic change by recognizing merit.
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*GRI is a Netherlands based multi-stakeholder network of experts worldwide, which has pioneered the development of the world’s most widely used sustainability reporting framework. United Nations is one of its key stakeholders. This reporting framework sets out the principles and indicators that organizations can use to measure and report their economic, environmental, and social performance. CORPORATE GOVERNANCE PHILOSOPHY Your Company believes that Corporate Governance is a voluntary code of self-discipline. In line with this philosophy, it follows healthy Corporate Governance practices and reports to the shareholders the progress made on the various measures undertaken. Your Directors have reported the initiatives on Corporate Governance adopted by your Company in the section ‘Corporate Governance’ forming part of the Annual Report.
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Our Future plans include improving our outcomes and impact across 3 verticals – Education, Vocational Training and enablement of Visually Impaired. SUSTAINABILITY As a part of a responsible business group having a global presence, your Company has taken considerable
9
ANNUAL REPORT 2011 - 2012
DIRECTORS Hon. Akash Paul, Mr. B. H. Wani, Mr. M. Damodaran and Mr. Ravindra Kulkarni are directors liable to retire by rotation and being eligible, offers themselves for re-appointment. During the year under review, Mr. Nigel Stagg and Mr. Richard Cameron, nominees of British Telecommunications Plc (BT), resigned as Directors with effect from 23rd December, 2011. Directors placed on record their appreciation for the services rendered by Mr. Stagg and Mr. Cameron. BT has not nominated new Directors in place of their said nominees. DIRECTORS’ RESPONSIBILITY STATEMENT Pursuant to Section 217(2AA) of the Companies Act, 1956, your Directors, based on the representation received from the Operating Management and after due enquiry, con?rm that: i. in the preparation of the annual accounts, the applicable accounting standards have been followed; they have, in the selection of the accounting policies, consulted the Statutory Auditors and these have been applied consistently and reasonable and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2012 and of the pro?t of the Company for the year ended on that date;
CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION In view of the nature of activities that are being carried on by your Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, concerning conservation of energy and technology absorption, respectively are not applicable to your Company. Your Company being a software solution provider requires minimal energy consumption and every endeavour has been made to ensure the optimal use of energy, avoid wastage and conserve energy as far as possible. FOREIGN EXCHANGE EARNINGS AND OUTGO The foreign exchange earnings of your Company during the year were ` 47,074 Million (previous year ` 42,087 Million), while the outgoings were ` 20,834 Million (previous year ` 17,616 Million). During the year under the review, 89% of your Company’s revenues were derived from exports. PARTICULARS OF EMPLOYEES The information required under Section 217(2A) of the Act and the Rules (as amended) made there under, is provided in an Annexure to this Report. However, as per the provisions of Section 219 (1) (b) (iv) of the Companies Act, 1956, the Directors’ Report being sent to the shareholders does not include this Annexure. Any shareholder interested in perusing a copy of the Annexure may write to the Company Secretary at the Registered Of?ce / Corporate Of?ce of the Company. DEPOSITS AND LOANS/ADVANCES Your Company has not accepted any deposits from the public or its employees during the year under review. The particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, associates, etc., required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement are furnished separately. AWARDS/RECOGNITION Your Company continued its quest for excellence in its chosen area of business to emerge as a true global brand. Several awards and rankings continue to endorse your Company as a thought leader in telecom industry. Awards for Financial Year 2011-12
ii.
iii. proper and suf?cient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. the annual accounts have been prepared on a going concern basis.
AUDITORS M/s. Deloitte Haskins & Sells, Chartered Accountants, the Auditors of your Company, hold of?ce up to the conclusion of the forthcoming Annual General Meeting of the Company and have given their consent for re-appointment. The shareholders will be required to elect auditors for the current year and ?x their remuneration. Your Company has received a written con?rmation from M/s. Deloitte Haskins & Sells, Chartered Accountants to the effect that their appointment, if made, would be in conformity with the limits prescribed in Section 224 of the Companies Act, 1956. The Board recommends the re-appointment of M/s. Deloitte Haskins & Sells, Chartered Accountants as the Auditors of the Company.
•
CanvasM a wholly owned subsidiary of the company has won the National Telecom Award for FightBack 2012 CanvasM a wholly owned subsidiary of the company ranked amongst India’s Top 10 VAS players by V&D 2011
•
10
•
Tech Mahindra ranked among top 3 at the ‘DSCI excellence award for security in IT services company (Large)’, 2011 Tech Mahindra tops 2011 Global Services 100 in the following categories:
ACKNOWLEDGEMENTS Your Directors gratefully acknowledge the contributions made by employees towards the success of your Company. Your Directors are also thankful for the co-operation and assistance received from its customers, vendors, bankers, regulatory and Governmental authorities in India and abroad and its shareholders. For and on behalf of the Board Place: Noida Date: May 23, 2012 Anand G. Mahindra Chairman
•
• • • • •
Global ITO Vendors ADM Vendors IM Vendors Speciality Product Engineering Vendors Contact Center and Customer Management Vendors
Particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, associates, etc., required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement. Loans and advances in the nature of loans to subsidiaries: (` in Million) Name of the Company PT Tech Mahindra Indonesia Tech Mahindra (Nigeria) Limited Balance as on March 31, 2012 [-] 51 [-] Maximum outstanding during the year [40] 53 [-]
Loans and advances in the nature of loans to associates, loans and advances in the nature of loans where there is no repayment schedule or repayment beyond seven years or no interest or interest below Section 372A of the Companies Act, 1956 and loans and advances in the nature of loans to ?rms/companies in which directors are interested – Nil
11
12
ESOP 2000 4,274,350 494,500 Under the scheme, all options granted prior to the listing of the Company’s shares, were based on the annual valuation done by an independent Chartered Accountant. The grants made post listing of the Company’s shares on Stock Exchange have been made as per the latest available closing price on the Stock Exchange with the highest trading volume, prior to the date of the meeting of the *Compensation & Nominations Committee in which options were granted. Nil Nil Nil 46,000 No variation Nil 448,500 2,235,134 46,900,000 No variation Nil 700,000 700,000 2,235,134 1,090,008 831,060 831,060 305,660 No variation 71,900,170 1,931,883 The grants made post listing of the Company's shares on Stock Exchange have been made as per the latest available closing price on the Stock Exchange with the highest trading volume, prior to the date of the meeting of the *Compensation & Nominations Committee in which options were granted. Under the scheme, all options were granted prior to the listing of the Company’s shares.These options were granted, based on the annual valuation done by an independent Chartered Accountant. Under the scheme, all options granted prior to the listing of the Company's shares, were based on the annual valuation done by an independent Chartered Accountant. Under the scheme, all options were granted at face value of the shares. Nil 539,500 683,500 10,219,860 6,634,530 2,283,500 ESOP 2004 ESOP 2006 ESOP 2010
Annexure I Disclosure as required under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 as on March 31, 2012
Particulars
Total options granted under the plan
a)
Options Granted during the year
ANNUAL REPORT 2011 - 2012
b)
The Pricing Formula
c)
Options vested as of 31st March 2012
533,280 Nil Nil 5,000 No variation Nil 2,278,500
d)
Options exercised during the year
e)
The Total number of shares arising as a result of exercise of options
f)
Options lapsed/cancelled during the year
g)
Variation of terms of options during the year
h)
Money realised by exercise of options during the year
i)
Total Number of Options in force
j) Nil
Employee-wise details of options granted to: Nil Nil Nil
i.
Senior Managerial Personnel
ii. Any other employees who receives a grant in any one year of options amounting to 5% or more of options granted during that year
* The Board of Directors at its meeting held on May 23, 2012 renamed the Committee as Compensation & Nominations Committee.
Disclosure as required under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 as on March 31, 2012
ESOP 2000 Nil Mr. Vineet Nayyar 3,406,620 Mr.C.P. Gurnani 3,406,620 *Mr. Sanjay Kalra 3,406,620 * Resigned w.e.f. 15th September 2010 34.86 34.86 34.86 34.86 Nil Nil ESOP 2004 ESOP 2006 ESOP 2010
Particulars
iii. Identi?ed employees who were granted option, during any one year, equal or exceeding 1% of the issued capital (excluding outstanding options and conversions) of the Company at the time of grant
k
Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of options calculated in accordance with Accounting Standard AS 20 (`) The Company uses the intrinsic value based method of accounting for stock options granted after 1st April 2005. Had the compensation cost for the Company’s stock based compensation plan been determined in the manner consistent with the fair value approach, the Company’s net income would be lower by ` 32 Million and earnings per share (Basic) would have been ` 36.01
l
Where the Company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed. The impact of this difference on pro?ts and on EPS of the company shall also be disclosed
The Company uses the intrinsic value based method of accounting for stock options granted after 1st April 2005. Had the compensation cost for the Company’s stock based compensation plan been determined in the manner consistent with the fair value approach, the Company’s net income would be lower by ` 32 Million and earnings per share (Basic) would have been ` 36.01
The Company uses the intrinsic value based method of accounting for stock options granted after 1st April 2005. Had the compensation cost for the Company’s stock based compensation plan been determined in the manner consistent with the fair value approach, the Company’s net income would be lower by ` 32 Million and earnings per share (Basic) would have been ` 36.01
The Company uses the intrinsic value based method of accounting for stock options granted after 1st April 2005. Had the compensation cost for the Company’s stock based compensation plan been determined in the manner consistent with the fair value approach, the Company’s net income would be lower by ` 32 Million and earnings per share (Basic) would have been ` 36.01
13
14
ESOP 2000
10-June-2011 16-Sept-2011
Disclosure as required under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 as on March 31, 2012
ESOP 2004 Nil
10-June-2011 16-Sept-2011 15-Nov-2011 5-Dec-2011 8-Feb-2011 12-Mar-2011
Particulars
ESOP 2006
ESOP 2010
m) 701.00 323.67 302.09 Nil 387.41 359.91 598.78 577.23 630.47 614.66 636.00 Nil 701.00 636.00 10.00 10.00 10.00 10.00
Grant Date Weighted-average exercise prices and weighted-average Exercise price fair values of options shall (`) be disclosed seperately for Fair Value (`) options whose exercise price either equals or exceeds or is less than the market price of the stock
ANNUAL REPORT 2011 - 2012
n)
A description of the method and signi?cant assumptions used during the year to estimate the fair values of options, including the following Weighted- average information : NA
16-Sep-2011 10-Jun-2011 16-Sep 2011 15-Nov-2011
NA
5-Dec-2011 8-Feb-2011 12-Mar-2011
10-Jun-2011
I. 3.50 54.09% 0.46% 698.35 650.45 Nil 698.35 0.55% Nil 0.46% 53.52% Nil 53.67% 3.50 Nil 5.25 5.25 52.89% 0.55% 650.45
Risk Free Interest Rate
8.42%
8.26%
Nil
8.32%
8.28%
8.85% 3.50 51.41% 0.56% 617.85
8.42% 3.50 51.04% 0.56% 596.00
8.30% 3.50 49.45% 0.55% 650.30
8.86% 3.50 49.20% 0.55% 634.05
II. Expected Life (Yrs.)
III. Expected Volatility
IV. Expected dividends
V. The Price of the underlying share in market at the time of the option grant (`)
MANAGEMENT DISCUSSION AND ANALYSIS
Company Overview Tech Mahindra Limited (TechM) is a leading provider of IT Services, Networking Technology Solutions and Business Support Services to the global telecommunications industry. Formed in 1986, in partnership with British Telecommunications plc (BT), it is part of the US $15.4 billion Mahindra Group. In the year 2009 it expanded its IT portfolio by acquiring the leading global business and information technology services company, Satyam Computer Services Ltd (re-branded as Mahindra Satyam). In the month of March 2012, the merger between Tech Mahindra and Mahindra Satyam was announced thus making way for the creation of a leading services organization in the Indian offshore landscape. Tech Mahindra has garnered revenues of INR 54.9 Billion (US$ 1,156 Million) in Financial Year 2011-2012 (FY12). The Company has more 40,000 professionals who provide a unique blend of domain expertise and in-depth technology skill-sets. Tech Mahindra has proven domain expertise in the Telecom domain with differentiated skills, research & development capabilities and innovative delivery models. The Company’s solutions enable its clients to maximize returns on their investments, achieve faster time-to-market, reduce total cost of ownership and provide better customer experience. Its capabilities cover a wide array of services including System Integration (SI), Managed Services (MS), Operations Support Systems (OSS), Business Support Systems(BSS), Infrastructure Management Services (IMS), Network Services, Security Consulting, Product Engineering and Business Support Services (BSG/BPO). The Company has been focusing on delivering comprehensive services to Telecom Service Providers (TSPs), Telecom Equipment Manufacturers (TEMs) and Independent Software Vendors (ISVs) and is best positioned to leverage telecom IT outsourcing opportunities through its service offerings across the Telecom value chain. It has more than 130 active client engagements, predominantly in the Telecom Sector. Tech Mahindra’s achievements have been recognized by various industry analysts, forums and clients. The organization has also won several prestigious awards and accolades. Tech Mahindra has principal of?ces in the UK, United States, Germany, UAE, Egypt, Singapore, India, Thailand, Taiwan, Malaysia, Philippines, Canada and Australia. The Company has an extensive global foot print with 17 sales of?ces and 15 delivery centres in more than 31 countries around the world. Industry Structure & Development The Information Technology (IT) industry in India has gained a brand recognition as a knowledge economy. The IT–ITES (IT Enabled Services) industry has two major components: IT Services and Business Process Outsourcing (BPO). The growth in the services sector in India has been led by the IT–ITES sector, contributing substantially to increase in Gross Domestic Product (GDP), employment, and exports. The sector has increased its contribution to India’s GDP from 1.2% in FY1998 to about 7.1% in FY2011. According to NASSCOM, the IT–ITES sector in India generated revenues of US$ 88.1 billion in FY2011. Exports have dominated the IT–ITES industry, and constituted about 77% of the total industry revenue. Though the IT-ITES sector is export driven, the domestic market is also signi?cant with a robust revenue growth. The industry’s share of total Indian exports (merchandise plus services) increased from less than 4% in FY1998 to about 25% in FY2012. In the Calendar Year 2011 (CY11), the global IT-ITES industry grew by 5.4% in the midst of unpredictable economic environment and extremely volatile currency movements. The domestic IT-ITES Industry also grew at a steady pace backed by strong economic growth, technology, innovations, enhancements, competition and enhanced focus by the Government. According to NASSCOM, India retained its position as the world’s leading global sourcing destination for IT-ITES services with a total share of 58%. The Industry has experienced considerable traction within traditional segments like Customer Application, Application Management and Testing. Emerging technologies such as Cloud Computing, Social Media, Mobility, and Analytics are potential areas of growth. Outlook The Global economy is beset with various issues in the developed markets. Historically, IT spends have mirrored economic growth. Hence given the weak forecasts for global growth, growth in IT spends for FY13 are likely to be lower than previous years. The latest forecast for overall global IT spending growth was revised downwards from 3.7% to 2.5% for CY 2012 by a leading forecasting ?rm. However, even in this challenging global demand environment, we foresee a few trends that are likely to in?uence spending in the Telecom vertical. Mobility remains the top theme as growth in mobile devices is leading to investments in mobile data networks
15
ANNUAL REPORT 2011 - 2012
and application development. With the proliferation of smart devices, solutions around M2M (machineto-machine) communication which help companies improve operating performance are ?nding greater traction. Our M2M strategy leverages the experience and expertise of Mahindra Satyam (MSAT), Tech Mahindra (TechM), and CanvasM (subsidiary of TechM) to create compelling value propositions for customers globally. Another key trend seen is that video is increasingly taking a major share of the mobile data traf?c. To address the rapid growth of video traf?c demand, telecommunications service providers (TSPs) have begun investing in content delivery networks. Another area of investment is in the area of private and public cloud computing services. Investments in the Cloud arena, are seen as shifting from infrastructure development, to development of platforms and creation of ecosystems around those platforms. The Social networking phenomenon is expected to become the driver for additional investments in IT as companies look to monetize and bene?t from various social platforms being created. Telecom companies are a key part of the ecosystem in all of these emerging technologies and Tech Mahindra’s relationships and presence across all segments of the ecosystem positions the Company well in these emerging technology areas. TechM has been providing a range of services through its IMS offerings and has been implementing private cloud solutions for customers. Tech Mahindra has also made its foray into the Cable industry and has now formed a separate cable practice in order to capitalize on opportunities in the cable industry. Tech Mahindra also has been experiencing growth through application and system consolidation as Telecom operators are trying to optimize their IT spend. As part of this initiative, operators are looking for relationships with a few preferred vendors which is driving vendor consolidation. Customer centricity and provision of better customer experience across multiple channels is becoming a key trend. With its extensive portfolio of service offerings and investments in emerging areas of spend, Tech Mahindra is well positioned to capitalize on this trend of vendor consolidation. Opportunities Growth in Emerging Markets Compared to the subdued growth expected in developed markets, emerging markets will continue
to drive relatively higher growth due to new spectrum licensing, migration to direct to home platforms, broadband penetration, focus on value added services and conducive regulatory environment. This will create opportunities for the software service providers who can assist operators in achieving their business objectives in these areas. Moreover, as the developing world focuses on shift of Mobility, it may bring in huge investments in this area which could create opportunities for companies like Tech Mahindra. Legacy to Next Generation IT transformation Telecom is a dynamic and evolving industry with high focus on consumers’ changing demands. Service providers around the globe, on the back of dropping legacy revenues and high costs, are looking to transform their clients’ legacy platforms into next generation platforms. This will enable clients to optimize their product portfolio, and rationalize the costs associated with running the systems. These transformation initiatives will lead to outsourcing opportunities. Tech Mahindra has been at the forefront of helping its clients transform their businesses in line with the changing global telecom environment. Increased scope of outsourced activities Access to talent and cost optimization are the key drivers for outsourcing. Telecom service providers are adopting several outsourcing strategies to bene?t from offshoring. One of the trends is services which traditionally were done in house are now being included in the scope of global sourcing. In the network domain, network outsourcing provides an opportunity for wide range of services like ?eld services, maintenance & support, E2E implementations and network infrastructure management. Managed services deals to cover network legacy systems have been tried in the mature markets and a similar trend will continue for the coming years. Adoption of Next Generation Technologies The telecom industry continues to adapt and evolve with new technologies and new ways to communicate. Successive waves of new technology in wire-line, wireless and IP domains have been sweeping the industry landscape. The Telecom industry is also altering to cope up with the changing needs and behaviour of consumers and increased competition. Customers believe in convenience, choice of services, responsiveness and cost as important parameters to choose their service provider. Success in current business environment is characterized by the ability to adapt to the higher user expectations
16
on the one hand and a rapidly changing technology environment on the other. As mobile broadband penetration expands, quick monetization has become a strategy of paramount importance for telecom service providers. Service providers are now focusing on providing solutions to enterprises by enabling their applications to be accessed via mobile platforms such as smart phones and tablets. With the growth in social network media across the world, coupled with higher broadband penetration, users have been voicing their views about quality of services. Analysis of user sentiments on such social networks, within limits of privacy laws, is another area where there has been a growth in demand. Threats Reduction in Telecom Spending The global economy is going through turbulent times and most companies are reacting to the increased volatility. Though cash-rich, telecom companies have turned cautious due to the challenging macroeconomic environment. The decision cycles on new discretionary spend are prolonged. The service providers continue to focus on reducing costs by adopting measures such as optimizing IT Spend and postponing investments. Such cost-saving measures could have an adverse impact on outsourcing. Global IT companies posing challenge with growing India presence Global IT service providers such as Accenture, HP, Cap Gemini and IBM are expanding their presence in India and pose a challenge to Indian IT service companies with their global client relationships, deep pockets and domain knowledge. Risks High customer concentration In FY 2012, revenues from the leading client, top 5 and top 10 clients account for 37%, 68% and 78% respectively. Though customer concentration has been declining over the years, loss of any of these clients could have a material adverse impact on our revenue and pro?tability. After Mahindra Satyam’s merger with the Company customer concentration will reduce signi?cantly. Withdrawal of tax bene?ts In the past we bene?ted from certain income tax incentives under Section 10A of the Income Tax Act
(for the IT services that we provide from specially designated “Software Technology Parks” or STPs) and also from Section 10AA of the Income Tax Act (for the IT services we render from units set up in SEZs). As a result of these incentives, our operations in India have been subject to relatively low tax liabilities. The income tax bene?ts available to STP units have been discontinued from 1st April 2011. As this withdrawal was foreseen, the Company decided to set up facilities in SEZ units at various locations as the units set up in SEZ area would continue to provide us with tax bene?ts similar to those in STPs. We commenced operations in SEZ units at Hinjewadi Pune, Chennai, Kolkata and Chandigarh. Additional units are coming up at Noida. But despite this, tax incidence will increase over the previous years due to withdrawal of Section 10A bene?ts. In addition, there is no assurance that the Indian government will not enact laws in the future that would adversely impact tax incentives further and consequently, our tax liabilities and pro?ts. When our tax incentives expire or are terminated, our tax expense will materially increase, reducing our pro?tability. Exchange rate risks The exchange rate between the Indian Rupee and the British Pound and the Rupee and the U.S. Dollar has ?uctuated widely in the recent past and may continue to ?uctuate signi?cantly in the future. The average value of the Rupee for the FY 2011-12 against the British Pound appreciated by approx 7.7% and against U.S. Dollar by approximately 4.4% for the FY 2010-11. Accordingly, our operating results have been and will continue to be impacted by ?uctuations in the exchange rate of the Indian Rupee with the British Pound, the U.S. Dollar along with other foreign currencies. Any strengthening of the Indian Rupee against the British Pound, the U.S. Dollar or other foreign currencies, as witnessed in the last year, could adversely affect our pro?tability. Discussion on Financial Performance with respect to Operational Performance Overview The ?nancial statements have been prepared in compliance with the requirements of the Companies Act, 1956 and Generally Accepted Accounting Principles (GAAP) in India. The Consolidated ?nancial statements have been prepared in compliance with the Accounting Standard AS 21, AS 23 and AS 27 issued by the Institute of Chartered Accountants of India (ICAI).
17
ANNUAL REPORT 2011 - 2012
The discussion on ?nancial performance in the Management Discussion and Analysis relate primarily to the stand alone accounts of Tech Mahindra Limited. Wherever it is appropriate, information pertaining to consolidated accounts for Tech Mahindra Limited & its subsidiaries is provided. For purpose of comparison with other ?rms in this industry as well as to see the positioning and impact that Tech Mahindra Limited has in the marketplace, it is essential to take the ?gures as re?ected in the Consolidated Financial Statements. A. STANDALONE FINANCIAL POSITION 1. Share Capital The Authorized Share Capital of the Company is ` 1,750 Million, divided into 175 Million equity shares of ` 10 each. The paid up share capital stands at ` 1,275 Million as on 31st March 2012 compared to ` 1,260 Million on 31st March 2011. The increase in paid up capital during the year is due to conversion of options into shares by employees under Employee Stock Option Plan. 2. Reserves and Surplus a) Securities Premium Account The addition to the securities premium account of ` 103 Million during the year is due to the premium received on issue of 1,531,060 equity shares on exercise of option under stock option plans. b) General Reserve General reserve stands at ` 5,451 Million on 31st March 2012 as compared to ` 4,451 Million on 31st March 2011. ` 1,000 Million transferred from Statement of Pro?t and Loss as compared to ` 1,000 Million in previous year. c) Statement of Pro?t and Loss The balance retained in the Statement of Pro?t and Loss as of 31st March 2012 is ` 24,068 Million compared to ` 22,412 Million as of 31st March 2011. 3. Loan Funds Loan funds as on 31st March 2012 stand at ` 11,266 Million including ` 6,106 Million of secured loans and ` 5,160 Million of unsecured loans, compared to ` 11,827 Million including ` 6,000 Million of
secured loans and ` 5,827 Million of unsecured loans as on 31st March 2011. 4. Fixed Assets The movement in Fixed Assets is shown in the table below: ` in Million As of 31st March Gross Book Value Land - Freehold - Leasehold Buildings Leasehold Improvements Plant and Equipment Computers Of?ce Equipments Furniture and Fixtures Vehicles - Leased - Owned Intangible Assets Total Less: Accumulated Depreciation & Amortization Net Block Add: Capital work-inprogress Net Fixed Assets 0 59 214 13,969 7,443 0 48 76 12,485 6,485 175 679 4,679 888 2,566 2,534 491 1,684 175 425 4,102 822 2,348 2,470 440 1,579 2012 2011
6,526 1,627 8,153
6,000 608 6,608
The Net Block of Fixed Assets and Capital Work in Progress increased to ` 8,153 Million as on 31st March 2012, as against ` 6,608 Million as at 31st March 2011. During the year, the Company incurred capital expenditure (gross) of ` 2,039 Million (previous year ` 1,454 Million). The major items of Capital Expenditure Included Leasehold Improvements, Of?ce Building, Plant and Equipment, Computers and Furniture & Fixtures including amount spent on Pune, Chandigarh and Kolkata campus.
18
5.
Investments The summary of Company’s investments is given below: ` in Million Investments As at 31st March 2012 31,684 86 31,770 439 31,331 As at 31st March 2011 31,502 86 31,588 439 31,149 f)
activities. TMF primarily concentrates on rendering assistance to the needy and under privileged people in the society. All the CSR initiatives of the Company are carried through TMF. PT Tech Mahindra Indonesia PT Tech Mahindra Indonesia, established in 2006, is Tech Mahindra’s representative in Indonesia and acts as a service provider for sales, marketing, onsite software development and other related services. g) CanvasM Technologies Limited CanvasM Technologies Limited was set up as a joint venture between Tech Mahindra Limited and Motorola Cyprus Holding Limited in July 2006 with an objective to provide software services and solutions to wire line and wireless telecom service providers, cable companies, enterprise, media and broadcast companies, using SI expertise of Tech Mahindra and R&D investments of Motorola Cyprus. During the year, the entire stake of Motorola (19.9%) was bought by Tech Mahindra Limited. CanvasM Technologies Limited has thus become wholly owned subsidiary of Tech Mahindra Limited as on 31st March 2012. h) CanvasM (Americas) Inc. CanvasM (Americas) Inc. was incorporated in September 2006, as step down wholly owned subsidiary of CanvasM Technologies Limited to provide software services and solutions. i) Tech Mahindra (Malaysia) Sdn. Bhd. Tech Mahindra (Malaysia) Sdn. Bhd. was established in May 2007 as Tech Mahindra’s representative in Malaysia. It acts as a service provider for sales, marketing, onsite software development and other related services. j) Tech Mahindra (Beijing) IT Services Limited Tech Mahindra (Beijing) IT Services Limited was established in December 2007 to strengthen its marketing capabilities in China. k) Venturbay Consultants Private Limited (VCPL) VCPL became wholly owned subsidiary of the Company as on 19th March 2009. It was
Investment in Subsidiaries Investment (others) Total Investments Less : Provision for diminution of value Net Investments I.
Investment in Subsidiaries The Company had investment in the following subsidiaries: a) Tech Mahindra (Americas) Inc. Tech Mahindra (Americas) inc. was incorporated in November 1993 to provide marketing support services for the USA and Canada region. It acts as a service provider for sales, marketing, onsite software development and other related services. b) Tech Mahindra GmbH Tech Mahindra GmbH was established in July 2001 to provide marketing support in central Europe region. c) Tech Mahindra (Singapore) Pte. Limited Formed in 2002, Tech Mahindra (Singapore) Pte. Limited is Tech Mahindra’s representative in Singapore and acts as a service provider for sales, marketing, onsite software development and other related services. d) Tech Mahindra (Thailand) Limited Tech Mahindra (Thailand) Limited was established in August 2005 to strengthen its marketing infrastructure in Thailand. e) Tech Mahindra Foundation (TMF) TMF was promoted by Tech Mahindra Limited as Section 25 Company, in 2006, with the objective of promoting social and charitable
19
ANNUAL REPORT 2011 - 2012
acquired to act as a Special Purpose Vehicle (SPV) to bid for the acquisition of Satyam. It emerged as the highest and successful bidder in the global competitive bidding process and has since acquired 42.67% shares of Satyam. The Company has invested ` 30,461 Million in VCPL. l) Mahindra Logisoft Business Solutions Limited (Mahindra Logisoft) Mahindra Logisoft became wholly owned subsidiary of the Company in April 2009. It was acquired to augment software development capabilities in the area of Infrastructure support and dealer management. m) Tech Mahindra (Nigeria) Limited Tech Mahindra (Nigeria) Limited was incorporated in August 2009 as Tech Mahindra’s representative in Nigeria. It acts as a service provider for sales, marketing, onsite software development and other related services. n) Tech Mahindra (Bahrain) Limited S.P.C Tech Mahindra (Bahrain) Limited S.P.C. was incorporated in November 2009 to provide sales, marketing and account management support to customers in and around Bahrain. It acts as a service provider for sales, marketing, onsite software development and other related services. o) Tech Mahindra Informatica Ltda Brasil Servicos De
wholly owned subsidiary of Tech Mahindra (Americas) Inc. II. Investment in Liquid Mutual Funds The Company has been investing its temporary surplus in various mutual funds. These are typically investments in short-term/liquid funds to gainfully use the excess cash balance with the Company. There are investments of ` 1,203 Million in liquid mutual funds as at 31st March 2012 (previous year nil). 6. Deferred Tax Asset Deferred tax asset as at 31st March 2012 was at ` 820 Million as compared to ` 532 Million as of 31st March 2011. Deferred tax assets represent timing differences in the ?nancial and tax books arising from depreciation of assets, provision for debtors and leave encashment & gratuity. The Company assesses the likelihood that the deferred tax asset will be recovered from future taxable income before carrying it as an asset. 7. Sundry Debtors Sundry debtors increased to ` 12,431 Million (net of provision for doubtful debts amounting to ` 458 Million) as of 31st March 2012 from ` 9,643 Million (net of provision for doubtful debts amounting to ` 130 Million) as of 31st March 2011. Debtor days as of 31st March 2012 (calculated based on per-day sales in the last quarter) were 97 days, compared to 95 days as of 31st March 2011. 8. Cash and Bank Balance The bank balances include both Rupee accounts and foreign currency accounts. The bank balances in overseas current accounts are maintained to meet the expenditure of the overseas branches and overseas project-related expenditure. ` in Million As of 31st March Bank balances in India & Overseas - Current accounts 1,374 15 1,389 1,807 131 1,938 - Deposit accounts Total cash and bank balances* 2012 2011
Tech Mahindra Brasil Servicos De Informatica Ltda was incorporated in July 2010 as a wholly owned subsidiary of your Company to provide sales, marketing and account management support to customers in and around Latin America. It acts as a service provider for sales, marketing, onsite software development and other related services. p) Tech Talenta Inc. (TTI) TTI was formed in March 2012, to carry on business of recruitment, ful?llment and ongoing management of local temporary contractor resources in the areas of IT Development, Product Engineering and IT Systems Support Operations. TTI is a
* Including unrealised (gain) / loss on foreign currency.
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9.
Total Loans and Advances Total Loans and advances as on 31st March 2012 were ` 8,125 Million compared to ` 10,928 Million as on 31st March 2011. Signi?cant items of total loans and advances include payments towards rent/lease deposits, security deposit, unbilled revenue and balance with excise & custom.
10. Current Liabilities and Provisions Current liabilities and provisions were ` 11,741 Million as of 31st March 2012 compared to ` 9,868 Million as of 31st March 2011. Liabilities and provisions increased mainly due to higher employee related liabilities particularly retirement liabilities & proposed dividend.
B.
RESULTS OF OPERATIONS
The following table sets forth certain income statement items as well as these items as a percentage of our total income for the periods indicated: Particulars FY 2011-12 ` (In Million) Income Revenue from Services Other Income Total Income Expenditure Employee Bene?ts Expenses Operating and Other Expenses Depreciation Interest Total Expenditure Pro?t before tax and exceptional items Provision for Taxation Pro?t after taxation and before exceptional item Exceptional items Net Pro?t for the year 1. Revenue The Company derives revenue principally from technology services provided to clients in the telecommunications industry. The revenue increased by 5.6% to ` 52,430 Million in FY 2011-12 from ` 49,655 Million in FY 2010-11. This re?ected an increase in the number of clients served during the respective years as well as an increase in the amount of business from these clients. Revenue from Europe as a percentage of total revenue was 49.3% in FY 2011-12 compared 22,510 21,598 1,505 1,025 46,638 6,469 1,184 5,285 679 4,606 8.67 9.95 42.39 40.67 2.83 1.93 87.82 12.18 19,438 20,927 1,383 1,113 42,861 8,060 1,093 6,967 0 6,967 13.68 13.68 38.17 41.10 2.72 2.19 84.18 15.83 52,430 677 53,107 100.00 49,655 1,266 50,921 100.00 % of Total Income FY 2010-11 ` (In Million) % of Total Income
to 52.3% in FY 2010-11. Revenue from the Americas increased to 34.6% in FY 2011-12 from 29.4% in FY 2010-11 while the share of revenue attributable to the Rest of the World ( including India) segment was 16% in FY 2011-12 compared to 18.3% in the previous year. Consolidated Revenue Consolidated Revenue for the FY 2011-12 stood at ` 54,897 Million compared to ` 51,402 Million last FY 2010-11, a growth of 6.8%.
21
ANNUAL REPORT 2011 - 2012
Consolidated Revenue by Geography Revenue from Europe as a percentage of total revenue was 47.1% in FY 2011-12 compared to 50.5% in FY 2010-11. Revenue from the Americas increased to 34.3% in FY 2011-12 from 29.9% in FY 2010-11 while the share of revenue attributable to the Rest of the World (including India) segment was 18.6% in FY 2011-12 compared to 19.6% in the previous year. Consolidated Revenue by Segment For FY 2011-12, 80.7% of revenue came from Telecom Service Providers(TSP) segment, 6.6% from Telecom Equipment Manufactures (TEM), 9.7% came from Business Support Group BSG (BPO) segment while 3.1% from others. The revenue share in FY 2010-11 from TSP, TEM, BPO 3. Expenditure Particulars 2.
and Others segment was 87.0%, 5.1%, 6.3% and 1.6% respectively. Other Income Other income includes interest income, dividend income, pro?t on sale of current investments, foreign exchange gain/loss and sundry balances/ provisions written back. Interest income mainly consists of interest received on bank deposits. Dividend income includes dividend received on long term investments as well as that received on current investments. Exchange gain/loss consists of mark to market gain/loss on ineffective hedges, realized gain/loss and revaluation gain/loss on translation of foreign currency assets and liabilities. Other income is at ` 677 Million in FY 2011-12 compared to ` 1,266 Million in FY 2010-11.
FY 2011-12 ` (In Million) % of Total Income 42.39 40.67 2.83 1.93 87.82
FY 2010-11 ` (In Million) 19,438 20,927 1,383 1,113 42,861 % of Total Income 38.17 41.10 2.72 2.19 84.18
Employee Bene?ts Expenses Operating and Other Expenses Depreciation Interest Total Expenses
22,510 21,598 1,505 1,025 46,638
* Previous period numbers have been re-grouped / re-arranged wherever necessary Employee Bene?ts Expenses includes salaries, wages and bonus, allowances paid to associates deputed outside India, contribution to provident fund and other funds and staff welfare costs. The increase in Employee Bene?ts Expenses in absolute value is mainly due to increase in headcount and annual increments. Operating and other expenses mainly include Subcontracting costs, Travelling expenses, Rent, Repairs and Maintenance, Communication expenses, Of?ce establishment costs, Software Packages and Professional fees. The increase is due to increase in business volumes, increase in number of development centres/of?ce locations in India and overseas and overall growth in business activity. Increase in depreciation is mainly due to increase in investment in infrastructure and equipment to service our growing business. 4. The Company incurred interest expense of ` 1,025 Million in FY 2011-12 as compared to ` 1,113 Million in FY 2010-11. The borrowings which were taken to fund acquisition of Mahindra Satyam were partly repaid in 2010 & 2011 which along with lower interest rates on borrowings resulted in reduced interest. Pro?t before tax Pro?t before tax was ` 6,469 Million in FY 2011-12 compared ` 8,060 Million in FY 2010-11. Pro?t before tax as a percentage of total income was 12.2% in FY 2011-12 compared to 15.9% in FY 2010-11. 5. Income taxes The provision for income tax for the year ended 31st March 2012 was ` 1,184 Million as compared
22
to ` 1,093 Million in the previous year, higher by 8.4%.The effective tax rate in these years was 18.3% and 13.6% respectively. 6. Pro?t after tax before exceptional items Pro?t after tax before exceptional items was ` 5,285 Million in FY 2011-12 compared to ` 6,967 Million in FY 2010-11. Pro?t after tax as a percentage of revenue was 9.9% in FY 2011-12 and 13.7% in FY 2010-11. Consolidated PAT Consolidated PAT before exceptional item and minority interest for the FY 2011-12 was ` 6,100 Million compared to ` 7,458 Million in FY 2010-11. PAT as a percentage of revenue was 11.1% in FY 2011-12 compared to 14.5% in FY 2010-11. C. CASH FLOW ` in Million Particulars Net cash ?ow from operating activities Net cash ?ow from (used in) investing activities Net cash ?ow from (used in) ?nancing activities Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Financial Year 2011-12 6,654 (4,009) 2010-11 4,706 (1,317)
D. Internal Control Systems The Company maintains adequate internal control system, which provides, among other things, reasonable assurance of recording the transactions of its operations in all material aspects and of providing protection against signi?cant misuse or loss of Company’s assets. The company uses an Enterprise Resource Planning (ERP) package, which enhances the internal control mechanism. E. Material developments in human Resources including number of people employed
(3,216)
(2,867)
Despite a challenging year, Tech Mahindra has continued to make addition to its human resources during FY 2011-12. We had a net addition of 2,430 (previous year 4,809) employees mainly through campus recruitment in addition to lateral hiring. The global headcount of the company as on 31st March, 2012 was 40,763 employees compared to 38,333 employees as on 31st March, 2011. The Company used various sources for attracting talent during the year. It hired Engineering Graduates and Science Graduates for technical positions whereas MBAs were recruited from premier management institutes such as IIMs, ISB and XLRI to be groomed for future leadership positions. The IT attrition was 19% for the last quarter of the ?scal, witnessing a drop from 22% in the corresponding period of previous year. The Company has been working towards controlling the attrition rate by continuously investing in learning and development programs for associates, competitive compensation, creating a compelling work environment, empowering associates at all levels as well as a well-structured reward and recognition mechanism.
1,918
1,396
1,347
1,918
Cautionary Statement Certain statements made in the management discussion and analysis report relating to the Company’s objectives, projections, outlook, expectations, estimates and others may constitute ‘forward looking statements’ within the meaning of applicable laws and regulations. Actual results may differ from such expectations, projections and so on whether express or implied. Several factors could make signi?cant difference to the Company’s operations. These include economic conditions affecting demand and supply, government regulations and taxation, natural calamities and so on over which the Company does not have any direct control.
23
ANNUAL REPORT 2011 - 2012
CORPORATE GOVERNANCE REPORT
I. COMPANY’S PHILOSOPHY ON CODE OF CORPORATE GOVERNANCE: Your Company believes that Corporate Governance is a set of guidelines to help ful?ll its responsibilities to all its stakeholders. It is a voluntary code of self-discipline to ensure that the Company abides by highest ethical standards. In line with this philosophy, your Company follows healthy Corporate Governance practices and has been reporting the same in annual report even before the Company was listed in August 2006. BOARD OF DIRECTORS: The Composition of the Board is in total conformity with Clause 49 of the Listing Agreement, as amended from time to time. Your Company has a balanced mix of eminent executive, non-executive and independent directors on the Board. The total strength of the Board of Directors is eleven. Your Company has a Non-executive Chairman, who is a professional Director in his individual capacity and belongs to the Promoter Group and the number of independent directors is seven which is more than half of the total strength of the Board as required by the provisions of the Listing Agreement. The number of Non-Executive Directors is ten which is more than 50% of the total number of Directors. The Company is managed by the Vice Chairman & Managing Director and the Management Team. The Board reviews and approves strategy and oversees the performance to ensure that the long term objectives of enhancing stakeholder value are met. The Independent Directors and the Senior Management have made disclosures to the Board con?rming that there are no material ?nancial and/or commercial transactions between them and the Company which could have potential con?ict of interest with the Company at large. The Board meets at least four times a year and the maximum gap between two meetings is not more than four months. During the year 2011-12, six meetings of the Board of Directors were held on 20th April 2011, 26th May 2011, 12th August 2011, 15th November 2011, 8th February 2012 and 21st March 2012. Agenda for the Board Meetings containing all necessary information / documents is made available to the Board in advance to help the Board to discharge its responsibilities effectively and take informed decisions. In some instances, documents are tabled at the meetings and the concerned manager also makes presentations to the Board or Committees. None of the Directors on the Board is a member in more than 10 committees or acts as a Chairman of more than 5 committees across all companies in which he is a director. The directors of the Company are not inter se related. The names and categories of the Directors on the Board, their attendance at the Board and the Annual General Meeting held during the year and the number of Directorships and Committee Chairmanships / Memberships held by them in other companies as on 31st March, 2012 is given below:
No. of Board Attendance at the Directorship in No. of Committee positions held in Meetings attended AGM held on other Companies other public companies (**) (Held = 6) 12th August 2011 (*) As Chairman As Member Non-Executive Chairman 5 Yes 7 Nil 1 Non-Executive, Independent 5 Yes Nil Nil Nil Non-Executive, Independent 5 Yes 3 Nil 1 Non-Executive 6 Yes 7 2 1 Non-Executive, Independent 6 Yes Nil Nil Nil Non-Executive, Independent 31 Yes 6 Nil 2 Non- Executive 2 Yes Nil Nil Nil Non-Executive, Independent 51 Yes 2 Nil 1 Non-Executive, Independent 5 Yes 1 Nil Nil Non-Executive, Independent 6 Yes 7 2 4 Non- Executive 3 Yes Nil Nil Nil Vice Chairman & Managing Director 5 Yes 8 Nil Nil Non-Executive 6 Yes 6 2 4 Category
II.
Sr. Name No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.
1 #
Mr. Anand G. Mahindra Hon. Akash Paul Mr. Anupam Puri Mr. Bharat N. Doshi Mr. B.H. Wani Mr. M. Damodaran Mr. Nigel Stagg # Mr. Paul Zuckerman Dr. Raj Reddy Mr. Ravindra Kulkarni Mr. Richard Cameron# Mr. Vineet Nayyar Mr. Ulhas N. Yargop
In addition, participated in one meeting through teleconference. Resigned with effect from 23rd December, 2011 (*) This does not include private companies, foreign companies and companies under Section 25 of the Companies Act, 1956 (**) Committees include Audit Committee and Investor Grievances-Cum-Share Transfer Committee, excluding that of Tech Mahindra Limited.
24
Necessary information as required by Annexure 1A to Clause 49 of the Listing agreement is placed before the Board. During the year under review, Mr. Richard Cameron and Mr. Nigel Stagg, Directors representing British Telecommunications plc. resigned as directors with effect from 23rd December, 2011. Directors seeking re-appointment: Hon. Akash Paul, Mr. B.H. Wani, Mr. M. Damodaran and Mr. Ravindra Kulkarni retire by rotation and being eligible, have offered themselves for re-appointment. As required by clause 49 (G) (i) of the Listing Agreement, details of Directors seeking re-appointment are set out at the end of this Report. CEO / CFO Certi?cation As required under Clause 49 V of the Listing Agreement with the Stock Exchanges, a Certi?cate on the Financial Statements for the ?nancial year ended on 31st March, 2012 has been given to the Board of Directors by the Vice Chairman & Managing Director and the Chief Financial Of?cer of the Company. Code of Conduct All the Directors and senior management personnel have af?rmed compliance with the Code of Conduct/ Ethics as approved and adopted by the Board of Directors and a declaration to that effect signed by the Managing Director is attached and forms part of this report. The Code has been posted on the Company’s website - www.techmahindra.com Policy for prohibition of Insider Trading In compliance with the provisions of SEBI (Prohibition of Insider Trading) Regulations, 1992, (as amended from time to time) and to preserve the con?dentiality and prevent misuse of unpublished price sensitive information, the Company has adopted a policy for prohibition of Insider Trading for Directors and speci?ed employees of the Company, relating to dealing in the shares of the Company. This policy also provides for periodical disclosures from designated employees as well as pre-clearance of transactions by such persons. Whistle Blower Policy Your Company has a Whistle Blower Policy in place. In terms of this policy, all employees are encouraged to report any instance of unethical behaviour, fraud, violation of the Company’s Code of Conduct or any behaviour which may otherwise be inappropriate and harmful to the Company. The policy provides a mechanism for employees to raise concerns that relate to violation of the Code of Conduct, Accounting, Internal Controls, Auditing Matters and applicable national and international laws including statutory / regulatory rules and regulations. This policy has been communicated to all employees and has been posted on the Company’s Intranet for ready access. III. RISK MANAGEMENT: Your Company has a well-de?ned risk management framework in place. The risk management framework adopted by the Company is discussed in detail in the Management Discussion and Analysis section of this Annual Report. Your Company has established procedures to periodically place before the Board, the risk assessment and minimization procedures being followed by the Company and steps taken by it to mitigate these risks. IV. COMMITTEES OF THE BOARD: In compliance with the Listing Agreements the Board has constituted a set of committees with speci?c terms of reference and scope to deal with speci?ed matters (both mandatory and non-mandatory) expediently. The details of the committees constituted by the Board are given below: A. AUDIT COMMITTEE: The Audit Committee of the Board of Directors has been constituted in line with the provisions of Section 292A of the Companies Act, 1956, read with Clause 49 of the Listing Agreement. The Committee meets at least four times a year and the maximum gap between two meetings is not more than four months.
25
ANNUAL REPORT 2011 - 2012
1.
The composition of the Audit Committee and particulars of meetings attended by the members is as below: Four meetings of the Audit Committee were held during the Financial Year 2011-12. The meetings were held on 26th May 2011, 12th August 2011, 15th November, 2011 and 8th February 2012. The gap between two Meetings did not exceed four months. The details of the number of Audit Committee meetings attended by its members are given below: Name of Director Category Number of Audit Committee meetings attended (Held = 4) 3 4 4 4 3 4
Mr. M. Damodaran Mr. Anupam Puri Mr. Paul Zuckerman Dr. Raj Reddy Mr. Richard Cameron Mr. Ulhas N. Yargop
# #
Chairman, Non-Executive, Independent Non-Executive, Independent Non-Executive, Independent Non-Executive, Independent Non Executive Non Executive
Resigned with effect from 23rd December 2011.
The necessary quorum was present at all the meetings. 2. Recommendations of the Committee: All the recommendations of the Audit Committee were accepted by the Board of Directors. 3. Brief terms of reference: The terms of reference of this Committee are very wide. Besides having access to all the required information within the Company, the Committee can obtain external professional advice whenever required. The Committee acts as a link between the Statutory and the Internal Auditors and the Board of Directors of the Company. It is authorized to select and establish accounting policies, review reports of the Statutory and the Internal Auditors and meet with them to discuss their ?ndings, suggestions and other related matters. The Committee is empowered to review the remuneration payable to the Statutory Auditors and to recommend a change in Auditors, if felt necessary. It is also empowered to review Financial Statements and investments of unlisted subsidiary companies, Management Discussion & Analysis and material individual transactions with related parties not in normal course of business or which are not on an arm’s length basis. All items listed in Clause 49 II (D) of the Listing Agreement are covered in the terms of reference. The Audit Committee has been granted powers as prescribed under Clause 49 II (C). The Meetings of the Audit Committee are, generally, also attended by the Vice Chairman & Managing Director, Chief Financial Of?cer (CFO), the Statutory Auditors and the Internal Auditor. Mr. M Damodaran, Chairman of the Committee, was present at the Annual General Meeting of the Company held on 12th August 2011. The Company Secretary is the Secretary to the Committee. Necessary information as required by Clause 49 II (E) of the Listing Agreement is reviewed by the Audit Committee.
26
B.
COMPENSATION (REMUNERATION) COMMITTEE: 1. The composition of the Compensation Committee and particulars of meetings attended by the members are given below: Four meetings of the Compensation Committee were held during the Financial Year 2011-12. The meetings were held on 26th May 2011, 12th August 2011, 15th November 2011 and 8th February 2012. The details of the number of Compensation Committee meetings attended by its members are given below: Name of Director Category Number of Compensation Committee meetings attended (Held = 4) 4 4 2 4 4
Mr. Ravindra Kulkarni Mr. Anupam Puri Mr. Nigel Stagg
#
Chairman, Non-Executive Independent Non-Executive Independent Non-Executive Non-Executive Independent Non-Executive
Mr. Paul Zuckerman Mr. Ulhas N. Yargop
#
Resigned with effect from 23rd December 2011
The necessary quorum was present at all the meetings. 2. Brief terms of reference: The terms of reference of the Compensation Committee include determining the terms and conditions including the remuneration payable to Managing Director of the Company as well as the Employee Stock Option Plans (ESOPs) of the Company. During the course of its review, the Committee also decides on the commission of the Directors and/or other incentives payable, taking into account the individual’s performance as well as that of the Company. 3. Remuneration Policy: While deciding on the remuneration for Directors, the Board and Compensation Committee considers the performance of the Company, the current trends in the industry, the quali?cations of the appointee(s), his/ their experience, past performance and other relevant factors. The Board / Committee regularly keep track of the market trends in terms of compensation levels and practices in relevant industries through participation in structured surveys. This information is used to review the Company’s remuneration policies. 4. Compensation of Directors: i. Remuneration to Non-Executive Directors: Your Company’s Non-Executive Directors are entitled to sitting fees and/ or commission and actual expenses for attending the Board/ Committee meetings. Presently, the Company does not pay sitting fees to its Directors. The eligible Non-Executive Directors are paid commission upto a maximum of 1% of the net pro?ts of the Company, as speci?cally computed for this purpose. A commission of ` 22,120,372 Million (GBP 283,500) has been provided as payable to the eligible Non-Executive Directors in the accounts of the year under review. The said commission will be paid after approval of the members in the Annual General Meeting. The details of the stock options granted till date to
27
ANNUAL REPORT 2011 - 2012
the Non-Executive Directors and the commission of ` 20 Million (provided in the accounts for the year ended 31st March 2011), paid to them during the year under review are as under: Sr. Name of Director No. 1 2 3 4 5 6 7 8 9 10 11 12 Mr. Anand G. Mahindra Hon. Akash Paul Mr. Anupam Puri Mr. Bharat Doshi Mr. B. H. Wani Mr. M. Damodaran Mr. Nigel Stagg # Mr. Paul Zuckerman Dr. Raj Reddy Mr. Ravindra Kulkarni Mr. Richard Cameron Mr. Ulhas N. Yargop Total
# rd #
Commission for FY 2010-11, paid during the year (Amount in `) 1,996,512 2,067,816 1,925,208 2,067,816 1,996,512 1,996,512 2,067,816 2,067,816 1,996,512 2,067,816 20,250,336
Stock options granted till date 30,000 25,000 20,000 20,000 20,000 30,000 35,000 180,000
Resigned with effect from 23 December, 2011.
All these options (except those granted to Mr. M. Damodaran) are granted prior to the listing of Company’s shares, based on the annual valuation by an independent chartered accountant. The options granted to Mr. M. Damodaran during FY 2008-09 were in line with the provisions of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. Under ESOP 2000, options vest over a period of three years in the ratio of 33%, 33% and 34%. Under ESOP 2006, options vest over ?ve years in the ratio of 10%, 15%, 20%, 25% and 30%. Apart from reimbursement of expenses incurred in the discharge of their duties, the remuneration that these Directors would be entitled under the Companies Act, 1956 as Non-Executive Directors and the remuneration that a Director may receive for professional services rendered to the Company through a ?rm in which he is a partner, none of these Directors has any other material pecuniary relationships or transactions with the Company, its Promoters, its Directors, its Senior Management or its Subsidiaries and Associates which in their judgment would affect their independence. ii. Remuneration paid / payable to Managing Director for the year ended 31st March 2012: Remuneration to Managing Director is ?xed by the Compensation Committee. Following is the remuneration paid / payable to the Managing Director during the year ended 31st March 2012: (` in Million) Director Salary Bene?ts, Commission Total Contract Period No. of options (under Company’s ESOP 2004 and ESOP contribution to Perquisites & payable 2010) Provident Fund Allowances 1.21 13.91 10.80 36.00 Re-appointed ESOP 2004 -3,406,620 from 17th January ESOP 2010 - 800,000 2010 to 16th January 2013
Mr. Vineet Nayyar, Vice Chairman & Managing Director
10.08
28
5.
Details of Equity Shares of the Company held by the Directors as on 31st March 2012 are as below: Sr. No. Name of Director 1. 2. 3. 4. 5. 6. 7.
+
No. of Shares held 47,138 747,208 21,015 17,831 27,000 1,037 38,340 899,569
% to total paid-up Capital 0.03 0.58 0.01 0.01 0.02 0.00 0.03 0.68
Mr. Anand Mahindra+ Mr. Vineet Nayyar+ Hon. Akash Paul Mr. Bharat Doshi+ Dr. Raj Reddy Mr. Ravindra Kulkarni + Mr. Ulhas N. Yargop+ Total
Held jointly
Except the above, none of the other directors hold any shares of the Company. C. INVESTOR GRIEVANCES-CUM-SHARE TRANSFER COMMITTEE: The Board of Directors constituted the Investor Grievances-cum-Share Transfer Committee of the Board at its meeting held on 4th May, 2006. Mr. Ulhas N. Yargop, a Non-Executive Director is the Chairman of the Committee. Mr. Vineet Nayyar and Mr. Richard Cameron (Resigned with effect from 23rd December, 2011) are the other members of the Committee. Mr. Anil Khatri, Company Secretary is the Compliance Of?cer. During the year, the Committee has held one meeting on 15th November, 2011 which was attended by all Committee members. Terms of reference: The Investor Grievances-cum-Share Transfer Committee looks into redressal of shareholders’ and investors’ complaints, issue of duplicate/ consolidated share certi?cates, allotment and listing of shares and review of cases for refusal of transfer/ transmission of shares and debentures and reference to statutory and regulatory authorities. The Company also has an Investor Relations Department focused on servicing the needs of the investors, analysts, brokers and the general public. The status of complaints received and resolved during the year is as under: Opening balance of the number of Shareholders’ complaints/requests as on 1st April, 2011 0 Number of Shareholders’ complaints /requests received during the year 170 Number of Shareholders’ complaints / requests disposed during the year 170 Number of Shareholders’ complaints / requests pending as on 31st March, 2012 0
Number of Complaints/requests received during the year as a percentage of total number of members as on 31st March, 2012 is 0.13% D. EXECUTIVE COMMITTEE (a voluntary initiative of the Company): The Committee was formed to deal with urgent matters requiring immediate action of the Board of Directors before a meeting of the Board could be convened. The Committee also approves the making of loans and investments in accordance with the guidelines prescribed by the Board. Mr. Vineet Nayyar is the Chairman of the Committee. Mr. Ulhas N. Yargop and Mr. Nigel Stagg (Resigned with effect from 23rd December 2011) are the other Members of the Committee. E. SECURITIES ALLOTMENT COMMITTEE (a voluntary initiative of the Company): The Committee was formed in the year 2006 to enable exercise of Options and allotment of shares under ESOP. The Board in its meeting held on 27th April, 2009 renamed the Committee as “Securities Allotment Committee” to increase its scope with power to allot any marketable securities of the Company. Mr. Vineet Nayyar is the Chairman of the Committee. Mr. Ulhas N. Yargop and Mr. Richard Cameron (Resigned with effect from 23rd December, 2011) are the other Members of the Committee.
29
ANNUAL REPORT 2011 - 2012
V.
SUBSIDIARY COMPANIES: Clause 49 de?nes a material non-listed Indian subsidiary as an unlisted subsidiary, incorporated in India, whose turnover or net worth (i.e. paid up capital and free reserves) exceeds 20% of the consolidated turnover or net worth respectively, of the listed holding company and its subsidiaries in the immediately preceding accounting year. Venturbay Consultants Private Limited (Venturbay), a wholly owned subsidiary of the Company is a material non-listed Indian subsidiary. The Company regularly places before the Board minutes of all subsidiaries of the Company.
VI.
GENERAL BODY MEETINGS: The details of the last three Annual General Meetings of the Company and the Special Resolutions passed thereat are as under: Year 2009 Location of AGM Date Time Special Resolutions passed Resolution under Section 81(1A) of the Companies Act, 1956 for further issue of shares. Resolution under Section 81(1A) of the Companies Act, 1956 for further issue of shares. Re-appointment and revision of remuneration payable to Managing Director. Approval for payment of commission to Non - Executive Directors. Resolution under Section 81(1A) of the Companies Act, 1956 for further issue of shares. Approval for enhancing the ceiling on total holdings of Foreign Institutional Investors upto 35% of paid up equity capital.
Birla Matushri July 23, 2009 Sabhagar,19, New Marine Lines, Mumbai 400 020 Birla Matushri July 26, 2010 Sabhagar,19, New Marine Lines, Mumbai 400 020
3.00 p.m. -
2010
3.30 p.m.
-
-
2011
Sir Patkar Hall, 1, Nathibai Thackersey Road, Marine Lines, Mumbai 400 020
August 12, 2011 3.30 p.m.
-
-
Details of Resolutions passed through Postal Ballots during the year 2011-12: NIL VII. DISCLOSURES: i) There have been no materially signi?cant transactions, pecuniary transactions or relationships between the Company and directors, management, subsidiary or related parties except those disclosed in the ?nancial statements for the year ended 31st March, 2012. The Company has followed the Accounting Standards laid down by The Companies (Accounting Standards) Rules, 2006 in preparation of ?nancial statement. The Company has complied with all the requirements of regulatory authorities. During the last three years, there were no instances of non-compliance by the Company and no penalty or strictures were imposed on the Company by the Stock Exchanges or SEBI or any statutory authority, on any matter related to the capital markets. The Company has complied with the mandatory requirements of Clause 49. The Company has complied with the following non-mandatory requirements as prescribed in Annexure ID to Clause 49 of the Listing Agreement with the Stock Exchanges: (a) The Company has set up a Compensation (Remuneration) Committee long before it got listed. Please see the para on Compensation Committee for details. (b) During the period under review, there is no audit quali?cation in the Company’s ?nancial statements. The Company continues to adopt best practices to ensure regime of unquali?ed ?nancial statements. The Consolidated Audited Accounts were quali?ed by Auditors with quali?cations ?owing from audit quali?cations in Audit Report of Satyam Computer Services Limited, an associate of the Company.
ii) iii)
iv) v)
30
(c)
The Company has formulated a Whistle Blower Policy which provides a mechanism for employees to raise concerns that relate to violation of the Code of Conduct, Accounting, Internal Accounting Controls, Auditing Matters and applicable national and international laws including statutory / regulatory rules and regulations. No personnel have been denied access to the Audit Committee. The Company has 132,930 shareholders as on 31st March, 2012. The main channel of communication to the shareholders is through the annual report which includes inter alia, the Directors’ report, the report on Corporate Governance and the quarterly and annual audited ?nancial results. The website of the Company www.techmahindra.com acts as the primary source of information regarding the operations of the Company. The quarterly, half-yearly and annual results of the Company are published in leading newspapers in India which include Business Standard, Economic Times and Maharashtra Times. The results are also displayed on the Company’s website www.techmahindra.com. Of?cial Press Releases made by the Company from time to time are also displayed on the website. A Fact sheet providing a gist of the quarterly, half yearly and annual results of the Company is displayed on the Company’s website. The Company regularly posts information relating to its ?nancial results and shareholding pattern on Corporate Filing and Dissemination System (CFDS) viz. www.corp?ling.co.in. Besides, the Company also submits electronically various compliance reports / statements periodically in accordance with the provisions of the Listing Agreement on NSE’s Electronic Application Processing System (NEAPS).
VIII. COMMUNICATION OF RESULTS: •
•
• IX. 1.
A Management Discussion and Analysis forms part of this Annual Report. Annual General Meeting: Date Time Venue Friday, 10th August 2012 3.30 P.M. Y. B. Chavan Auditorium, General Jagannath Bhosle Marg, Nariman Point, Mumbai -400 021.
GENERAL SHAREHOLDER INFORMATION:
2.
Financial year: The ?nancial year is 1st April to 31st March. Financial Calendar: Financial reporting for Quarter ending 30th June 2012 Half year ending 30th September 2012 Quarter ending 31st December 2012 Year ending 31st March 2013 Annual General Meeting for the year ending 31st March 2013 Tentative Board Meeting schedule (subject to change) First fortnight of August 2012 First fortnight of November 2012 First fortnight of February 2013 Second fortnight of May 2013 First fortnight of August 2013
3.
Book Closure / Record Date: 6th August, 2012 to 10th August, 2012 (both days inclusive) for the purpose of Annual General Meeting and payment of dividend.
4. 5.
Date of Dividend Payment Date of payment of Dividend if declared would be on or after 10th August, 2012. Listing on Stock Exchanges: The Company’s equity shares are listed on The National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE). Listing Fee for FY 2012-13 has been paid in full for both the stock exchanges. The Company’s Non – convertible debentures (NCDs) are listed on the National Stock Exchange of India Limited (NSE).
31
ANNUAL REPORT 2011 - 2012
6.
Stock Code: National Stock Exchange of India Limited - TECHM Bombay Stock Exchange Limited - 532755
7.
Demat International Securities Identi?cation Number (ISIN) in NSDL and CDSL for equity shares: INE669C01028 The ISIN details for the Company’s other securities are as under: • • 10.25% Non-convertible Debentures (17 April 2013) Face Value ` 10 Lac: INE669C07025 10.25% Non-convertible Debentures (17 April 2014) Face Value ` 10 Lac: INE669C07033
8.
Market Price Data: High, Low during each month in last ?nancial year: Equity Shares NSE High (`) Low (`) 761.00 671.00 696.45 636.60 795.00 654.80 798.00 714.35 786.25 602.00 699.60 555.55 615.00 529.70 634.00 550.00 618.75 528.00 656.00 565.05 691.80 609.10 749.00 590.10
Month April 2011 May 2011 June 2011 July 2011 August 2011 September 2011 October 2011 November 2011 December 2011 January 2012 February 2012 March 2012 9.
BSE High (`) 760.00 697.00 724.70 797.70 784.00 699.00 615.85 635.00 602.45 656.00 694.40 745.00 Low (`) 675.85 587.15 658.05 715.00 604.00 524.20 531.00 550.10 537.20 567.45 579.25 590.65
Performance in comparison to broad-based indices such as NSE (NIFTY), BSE Sensex index etc.: The performance of the Company’s shares relative to the NSE (NIFTY) Index is given in the chart below:
900 800 700 600 500 400 300 200 100 -
7000 6000 5000 4000 3000 2000 1000 0
Tech Mahindra
Last trading day of the month
NIFTY
32
10.
Registrar and Transfer Agents: Share transfer, dividend payment and all other investor related matters are attended to and processed by our Registrar and Transfer Agents, i.e. Link Intime India Private Limited having their of?ce at Link Intime India Private Limited Block No. 202, 2nd Floor, Akshay Complex, Near Ganesh Temple, Off Dhole Patil Road, Pune 411 001 Tel No. +91 20 2616 0084, 2616 1629 Fax: +91 20 2616 3503 Contact Person: Mr. Bhagavant Sawant Email address: [email protected]
11.
Share Transfer System: The Company’s shares are covered under the compulsory dematerialization list and are transferable through the depository system. Shares sent for transfer in physical form are registered and returned within a period of thirty days from the date of receipt of the documents, provided the documents are valid and complete in all respects.
12.
Distribution of shareholding as on 31st March 2012: No. of Equity Shares held 001 500 Shareholders No. of Shareholders 130,853 905 594 213 106 62 86 111 132,930 % to Total 98.44 0.68 0.45 0.16 0.08 0.05 0.06 0.08 100.00 Equity shares held No. of shares 4,617,598 685,782 841,230 529,035 376,502 282,237 633,484 119,520,673 127,486,541 % to Total 3.62 0.54 0.66 0.41 0.30 0.22 0.50 93.75 100.00
501 - 1000 1001 - 2000 2001 - 3000 3001 - 4000 4001 - 5000 5001 - 10000 10,001 & above Total 13.
Shareholding Pattern as on 31st March 2012: Category Promoters holdings Public Share holding: Mutual Funds Banks, Financial Institutions & others Foreign Institutional Investors Bodies Corporate NRI/Foreign Nationals Indian Public & others Total 528,628 18,307,918 7,284,179 667,042 462,281 9,952,592 127,486,541 0.41 14.36 5.71 0.52 0.36 7.82 100.00 No. of shares held 90,283,901 % to Total 70.82
33
ANNUAL REPORT 2011 - 2012
14.
Dematerialization of shares and liquidity: 99.89% of the total equity share capital of the Company is held in a dematerialized form with National Securities Depository Limited and Central Depository Services (India) Limited as on 31st March 2012. The market lot is one share as the trading in equity shares of the Company is permitted only in dematerialized form. The stock is highly liquid.
15.
Outstanding GDRs / ADRs / Warrants or any Convertible instruments, conversion date and likely impact on equity: As on 31st March 2012, the Company did not have any outstanding GDRs/ADRs/Warrants or any Convertible instruments (excluding ESOPs).
16.
Plant Locations: The Company is in software business and does not require any manufacturing plants but it has software development centers in India and abroad. The addresses of the global development centers/ of?ces of the Company are given elsewhere in the annual report.
17.
Address for correspondence: Shareholders’ Correspondence: Shareholders may correspond with i. Registrar & Transfer Agents for all matters relating to transfer / dematerialization of shares, payment of dividend, IPO refunds / demat credits, etc. at : Link Intime India Private Limited Block No. 202, 2nd Floor Akshay Complex, Near Ganesh Temple Off Dhole Patil Road Pune 411 001 Tel No. +91 20 2616 0084, 2616 1629 Fax: +91 20 2616 3503 Contact Person: Mr. Bhagavant Sawant Email address: [email protected] ii. Respective Depository Participants (DPs) for shares held in demat mode. Shareholders are requested to take note that all queries in connection with change in their resident address, bank account details, etc. are to be sent to their respective DPs. For all investor related matters: Mr. Anil Khatri Company Secretary Tech Mahindra Limited 2nd Floor, Corporate Block, Rajiv Gandhi Infotech Park, Phase III, Pune – 411 057 India. Tel No. +91 20 42250000 Tel No. +91 20 6601 8100 Email address: [email protected]
iii.
34
18.
Details of shares held in Demat Suspense Account: The disclosure under Clause 5A of the Listing Agreement is as under: Sr. No. (i) (ii) (iii) (iv) Particulars Aggregate number of shareholders and the outstanding shares in the suspense account lying at the beginning of the year Number of shareholders who approached Company for transfer of shares from suspense account during the year Number of shareholders to whom shares were transferred from suspense account during the year Aggregate number of shareholders and the outstanding shares in the suspense account lying at the end of the year (In Numbers) 24 Shareholders 662 Shares None None 24 Shareholders 662 Shares
The voting rights on these shares shall remain frozen till the rightful owner of such shares claims the shares. 19. Transfer of Unclaimed Dividend to IEPF: Pursuant to Sections 205A and 205C and other applicable provisions, if any, of the Companies Act, 1956, dividends that are unclaimed for a period of seven years, are statutorily required to be transferred to Investor Education and Protection Fund (IEPF) administered by the Central Government, and thereafter, cannot be claimed by the investors. No claim shall lie against the said Fund or the Company for unpaid dividends transferred to the Fund nor shall any payment be made in respect of such claim. Members, who have not yet encashed their dividend warrant(s), are requested to make their claims without any delay to the Company’s Registrar and Transfer Agent, i.e. Link Intime India Private Limited. Calendar for transfer of unclaimed dividend to IEPF: Financial Year 2005-2006 2005-2006 2005-2006 2005-2006 2005-2006 2006-2007 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 X. GREEN INITIATIVES: The Company has taken steps in furtherance of the recent Green initiative proposed by the Ministry of Corporate Affairs (MCA). In order to save the forest and the economy the Company has sent a circular to all the shareholders seeking their concurrence on the electronic communication. The circular was sent by electronic communication as well as through post along with reply paid envelopes provided by the Company to enable the shareholders to intimate their email id’s and help the Company and the country in the green initiative. In order to save the precious forest, preserve the natural resources of the country and to help your Company to save on cost, Members are requested to register their email id’s with the Company’s Registrar & Transfer Agent i.e. Link Intime India Private Limited or with your DP or by sending email to [email protected] Type of Dividend First Interim Dividend Second Interim Dividend Third Interim Dividend Fourth Interim Dividend Final Dividend First Interim Dividend Second Interim Dividend Final Dividend Interim Dividend Final Dividend Final Dividend Date of Declaration 18/07/2005 17/10/2005 16/01/2006 04/05/2006 18/07/2006 17/07/2006 14/03/2007 22/07/2008 21/10/2008 26/07/2010 12/08/2011 Due for Transfer to IEPF August, 2012 November, 2012 February, 2013 June, 2013 August, 2013 August, 2013 April, 2014 August, 2015 November, 2015 September, 2017 September, 2018
35
ANNUAL REPORT 2011 - 2012
DETAILS PURSUANT TO CLAUSE 49 IV (G) (i) OF THE LISTING AGREEMENT IN RESPECT OF DIRECTORS SEEKING APPOINTMENT/RE-APPOINTMENT
1. Hon. Akash Paul Hon. Akash Paul has been with the Caparo Group, a steel and engineering Company, one of UK’s largest private companies. He has interest in education and serves on the School of Engineering, Dean’s Advisory Council at Carnegie-Mellon University and the Dean’s Advisory Council at the Sloan School of Management, MIT. He holds an MBA degree from Massachusetts Institute of Technology and a Bachelor of Science degree in Chemical Engineering and Economics from Carnegie-Mellon University. Directorship / Committee Membership in other public companies (excluding foreign companies and Section 25 companies): Nil Hon. Akash Paul holds 21,015 equity shares of the Company. Mr. B. H. Wani Mr. B. H. Wani is a senior solicitor and advocate. Subsequent to his retirement as senior partner of Little & Co, an old ?rm of solicitors and advocates, he is now practicing more in advisory capacity. During his career, he has handled civil matters of corporate bodies relating to formation of companies, joint ventures, collaborations, take overs and amalgamations as well as relating to sale and purchase of properties and matters covering commercial and banking laws, arbitrations. Directorship / Committee Membership in other public companies (excluding foreign companies and Section 25 companies): Nil Mr. Wani does not hold any shares in the Company. Mr. M. Damodaran Mr. Damodaran had been Chairman of SEBI upto February 2008. As Chairman of SEBI, he was instrumental in setting the pace for appropriate regulation of the securities market in India. His initiatives at SEBI have resulted in India’s ?nancial markets being recognized as being amongst the best regulated in the world. Mr. Damodaran’s prior appointments include Chairman of IDBI and Chairman of UTI. Earlier, he was Joint Secretary (Banking Division), Ministry of Finance for ?ve years. He was also a member of the Indian Administrative Service and has served as Chief Secretary, Government of Tripura, apart from various assignments with the Central Government at the Ministry of Finance, Ministry of Commerce and Ministry of Information & Broadcasting. Mr. Damodaran holds degrees in Economics and Law from the Universities of Madras and Delhi. Directorship / Committee Membership in other public companies (excluding foreign companies and Section 25 companies): Mr. Damodaran is a Director of Hero Honda Motors Limited, ING Vysya Bank Limited, SKNL Group, RSB Transmissions India Limited, Sobha Developers Limited and TVS Automobiles Solutions Limited. Mr. Damodaran does not hold any shares in the Company. Mr. Ravindra Kulkarni Mr. Ravindra Kulkarni holds Masters degree in Law from University of Mumbai. Having been in the legal arena for nearly four decades, Mr. Kulkarni has vast experience as a legal practitioner particularly on matters relating to foreign collaborations, joint ventures, mergers and acquisitions, capital markets, public offerings for listing of securities in India as well as in international markets, infrastructure projects, etc. He is a Senior Partner of M/s. Khaitan & Co., one of India’s leading law ?rms and heads their Mumbai of?ce. He is on the Boards of several listed companies as an independent director. He is also a member of the Advisory Committee and also a faculty member of the Post Graduate Diploma Course in Securities Law at the Government Law College, Mumbai. Directorship / Committee Membership in other public companies (excluding foreign companies and Section 25 companies): Mr. Kulkarni is a Director of Alternate Brand Solutions (India) Limited, Elantas Beck India Limited (also Chairman - Audit Committee & Shareholders’ / Investors’ Grievance Committee), Ineos ABS (India) Limited (also Member - Audit Committee and Remuneration Committee), Entertainment Network India Limited (also Member - Audit Committee and Remuneration Committee), Mahindra & Mahindra Limited (also Member - Audit Committee, Shareholders’ / Investors’ Grievance Committee and Governance-Remuneration and Nomination Committee), Shamrao Vithal Co-Op Bank Limited and Chowgule Steamships Limited. Mr. Kulkarni holds 1,037 equity shares in the Company.
2.
3.
4.
36
DECLARATION REGARDING COMPLIANCE BY BOARD MEMBERS AND SENIOR MANAGEMENT PERSONNEL WITH THE COMPANY’S CODE OF CONDUCT PURSUANT TO CLAUSE 49 OF THE LISTING AGREEMENT
As required by Clause 49 I (D) (ii) of the Listing Agreement, this is to con?rm that the Company has adopted a Code of Conduct for all Board Members and Senior Management of the Company. The Code is available on the Company’s web site. I con?rm that the Company has in respect of the ?nancial year ended March 31, 2012, received from the senior management team of the Company and the Members of the Board, a declaration of compliance with the Code of Conduct as applicable to them. For the purpose of this declaration, Senior Management Team comprises of employees in the President and Executive Vice President Cadre as on March 31, 2012 and Chief Financial Of?cer of the Company. For Tech Mahindra Limited Place: Noida Date: May 23, 2012 Vineet Nayyar Vice Chairman & Managing Director
CERTIFICATE
To the Members of Tech Mahindra Limited We have examined the compliance of conditions of Corporate Governance by Tech Mahindra Limited (“the Company”) for the year ended on March 31, 2012, as stipulated in Clause 49 of the Listing Agreement of the Company with the stock exchanges. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the ?nancial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us and the representations made by the Directors and the management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement. We state that such compliance is neither an assurance as to the future viability of the Company nor the ef?ciency or effectiveness with which the management has conducted the affairs of the Company. For Deloitte Haskins & Sells Chartered Accountants (Registration No. 117366W)
Place: Noida Date: May 23, 2012
Hemant M. Joshi Partner (Membership No. 38019)
37
Financial Statements of Tech Mahindra Limited
Auditors’ Report
To The Members of Tech Mahindra Limited 1. We have audited the attached Balance Sheet of TECH MAHINDRA LIMITED (“the Company”) as at 31st March, 2012, the Statement of Pro?t and Loss and the Cash Flow Statement of the Company for the year ended on that date, both annexed thereto. These ?nancial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these ?nancial statements based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the ?nancial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and the disclosures in the ?nancial statements. An audit also includes assessing the accounting principles used and the signi?cant estimates made by the Management, as well as evaluating the overall ?nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditor’s Report) Order, 2003 (CARO) issued by the Central Government in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters speci?ed in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to in paragraph 3 above, we report as follows: (a) (b) (c) (d) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books; the Balance Sheet, the Statement of Pro?t and Loss and the Cash Flow Statement dealt with by this report are in agreement with the books of account; in our opinion, the Balance Sheet, the Statement of Pro?t and Loss and the Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956; in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (i) (ii) (iii) 5. in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2012; in the case of the Statement of Pro?t and Loss, of the pro?t of the Company for the year ended on that date and in the case of the Cash Flow Statement, of the cash ?ows of the Company for the year ended on that date.
2.
3.
4.
(e)
On the basis of the written representations received from the Directors as on 31st March, 2012 taken on record by the Board of Directors, none of the Directors is disquali?ed as on 31st March, 2012 from being appointed as a director in terms of Section 274(1) (g) of the Companies Act, 1956. For Deloitte Haskins & Sells Chartered Accountants (Registration No. 117366W)
Place : Noida Dated : May 23, 2012
Hemant M. Joshi Partner (Membership No. 38019)
39
ANNUAL REPORT 2011 - 2012
Annexure to the Auditors’ Report
(Referred to in paragraph 3 of our report of even date) (i) (ii) Having regard to the nature of the Company’s activities, clauses (x), (xiii) and (xiv) of CARO are not applicable. In respect of its ?xed assets: (a) (b) The Company has maintained proper records showing full particulars, including quantitative details and situation of the ?xed assets. The major portions of ?xed assets were physically veri?ed during the year by the Management in accordance with a regular programme of veri?cation which, in our opinion, provides for physical veri?cation of all the ?xed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such veri?cation. The ?xed assets disposed off during the year, in our opinion, do not constitute a substantial part of the ?xed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company. As explained to us, the inventories were physically veri?ed during the year by the Management at reasonable intervals. In our opinion and according to the information and explanation given to us, the procedures of physical veri?cation of inventories followed by the Management were reasonable and adequate in relation to the size of the Company and the nature of its business. In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical veri?cation.
(c)
(iii)
In respect of its inventory: (a) (b)
(c)
(iv)
The Company has neither granted nor taken any loans, secured or unsecured, to/from companies, ?rms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of Sub Clauses (b), (c), (d), (f) and (g) of the Clause (iii) of paragraph 4 of Companies (Auditors’ Report) Order, 2003 are not applicable to the Company. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and ?xed assets and the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system. According to the information and explanations given to us, there are no contracts or arrangements that need to be entered into the register referred to in Section 301 of the Companies Act, 1956. Accordingly, the provisions of Sub Clauses (a) and (b) of the Clause (v) of paragraph 4 of Companies (Auditors’ Report) Order, 2003 are not applicable to the Company.
(v)
(vi)
(vii) According to the information and explanations given to us, the Company has not accepted any deposit from the public during the year. (viii) In our opinion, the Company has an adequate internal audit system commensurate with the size and the nature of its business. (ix) According to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Act. Accordingly, the provisions of Clause (viii) of paragraph 4 of Companies (Auditors’ Report) Order, 2003 is not applicable to the Company. According to the information and explanations given to us in respect of statutory dues: (a) The Company has generally been regular in depositing undisputed dues, including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income-tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other material statutory dues applicable to it with the appropriate authorities. There were no undisputed amounts payable in respect of Income-tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other material statutory dues in arrears as at 31st March, 2012 for a period of more than six months from the date they became payable.
(x)
(b)
40
(c)
Details of dues of Income-tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty and Cess which have not been deposited as on 31st March, 2012 on account of disputes are given below: (` in Million) Nature of Dues Forum where Dispute is pending Period to which the amount relates 2001-02 2001-02 2002-03 2002-03 2002-03 2003-04 2003-04 2004-05 2004-05 2004-05 2005-06 2005-06 2007-08 2005-06 2005-06 to 2008-09 2003-04 to 2006-07 2004-05 to 2007-08 2010-11 Amount involved
Statute
Assessing Of?cer 68.88 Assessing Of?cer 162.55 Assessing Of?cer 0.55 High Court 240.65 Assessing Of?cer 1.97 Commissioner of Income Tax (Appeals) 9.42 Income Tax Appellate Tribunal 151.69 Income Tax Appellate Tribunal 150.46 Assessing Of?cer 1.32 Assessing Of?cer 39.55 Income Tax Appellate Tribunal 1.57 High court 2.83 Commissioner of Income Tax (Appeals) 16.63 Assessing Of?cer 1.57 Deputy Commissioner of Commercial 9.22 Taxes, Karnataka Finance Act, 1994 Service Tax Commissioner of Central Excise, 12.86 (Appeals) Pune Finance Act, 1994 Service Tax Commissioner of Service Tax (Appeals), 86.60 Bangalore Finance Act, 1994 Service Tax Customs Excise & Service Tax Appellate 76.26 Tribunal * * The Company is in process of ?ling the appeal (xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of dues to banks and debenture holders. According to the information and explanations given to us, there are no dues payable to ?nancial institutions. (xii) According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. (xiii) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or ?nancial institutions. (xiv) The Company has not availed any term loans during the year. (xv) In our opinion and according to the information and explanations given to us and on an overall examination of the Balance Sheet, we report that funds raised on short-term basis have, not been used during the year for long- term investment. (xvi) According to the information and explanations given to us, the Company has not made preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956. (xvii) According to the information and explanations given to us, the Company has not issued any secured debentures during the period covered by our audit. Accordingly, the provisions of clause 4 (xix) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company. (xviii) As informed to us, during the period covered by our audit report, the Company has not raised any money by public issues. (xix) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no fraud on the Company has been noticed or reported during the year. For Deloitte Haskins & Sells Chartered Accountants (Registration No. 117366W) Hemant M. Joshi Partner (Membership No. 38019)
The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 Karnataka VAT Act, 2003
Income tax Income tax Income tax Income tax Income tax Income tax Income tax Income tax Income tax Income tax Income tax Income tax Income tax Fringe Bene?t Tax Sales Tax
Place : Noida Dated : May 23, 2012
41
ANNUAL REPORT 2011 - 2012
BALANCE SHEET AS AT MARCH 31, 2012
Note I. EQUITY AND LIABILITIES 1 Shareholders’ funds (a) Share Capital (b) Reserves and Surplus Share Application Money Pending Allotment Non-Current liabilities (a) Long-Term Borrowings (b) Other Long Term Liabilities (c) Long-Term Provisions Current Liabilities (a) Short-Term Borrowings (b) Trade Payables (c) Other Current Liabilities (d) Short-Term Provisions 2 3 1,275 33,157 34,432 0 6,000 4,309 1,706 12,015 5,266 4,684 5,669 1,388 17,007 63,454 1,260 32,580 33,840 0 6,400 3,931 1,338 11,669 5,427 3,034 5,324 1,510 15,295 60,804 March 31, 2012 ` in Million March 31, 2011
2 3
4 5 6 7 8 9 10
4
II.
ASSETS 1 Non-Current Assets (a) Fixed Assets (i) Tangible Assets (ii) Intangible Assets (iii) Capital Work-In-Progress (b) Non-Current Investments (c) Deferred Tax Asset (refer note 39) (d) Long-Term Loans and Advances 2 Current assets (a) Current Investments (b) Inventories (c) Trade Receivables (d) Cash and Cash Equivalents (e) Short-Term Loans and Advances
11 6,463 63 1,627 8,153 31,331 820 3,341 43,645 1,203 2 12,431 1,389 4,784 19,809 63,454 5,970 30 608 6,608 31,149 532 4,103 42,392 6 9,643 1,938 6,825 18,412 60,804
12 13 14 15 16 17 18 1 To 51
See accompanying notes to the ?nancial statements
In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Hemant M. Joshi Partner
For Tech Mahindra Limited Anand G. Mahindra Chairman Hon. Akash Paul Director B.H. Wani Director Dr. Raj Reddy Director Sonjoy Anand Chief Financial Of?cer Noida, Dated: May 23, 2012 Vineet Nayyar Vice Chairman & Managing Director Anupam Puri Bharat Doshi Director Director M. Damodaran Paul Zuckerman Director Director Ravindra Kulkarni Ulhas N. Yargop Director Director Anil Khatri Company Secretary
Noida, Dated: May 23, 2012
42
STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED MARCH 31, 2012
` in Million except Earnings per share Note I. II. Revenue from Services (refer note 28) Other Income 19 Year ended March 31, 2012 52,430 677 53,107 20 21 22 11 22,510 21,598 1,025 1,505 46,638 6,469 679 5,790 1,472 (288) 4,606 Year ended March 31, 2011 49,655 1,266 50,921 19,438 20,927 1,113 1,383 42,861 8,060 8,060 1,402 (309) 6,967
III. Total Revenue (I + II) IV. Expenses: Employee Bene?ts Expense Operating and Other Expenses Finance Costs Depreciation and Amortisation Expense Total Expenses V. Pro?t Before Exceptional Items and Tax (III-IV) VI. Exceptional Items (net) (refer note 35) VII. Pro?t Before Tax (V - VI) VIII. Tax Expense: (1) Current Tax (refer note 44) - Net of MAT credit of ` Nil (previous year: ` 180 Million) (2) Deferred Tax (refer note 39) IX. Pro?t for the year (VII-VIII) Earnings Per Equity Share (Before exceptional items) in ` (refer note 43) (1) Basic (2) Diluted Earnings Per Equity Share (After exceptional items) in ` (1) Basic (2) Diluted See accompanying notes to the ?nancial statements In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Hemant M. Joshi Partner 1 To 51
41.61 40.00
55.81 53.36
36.27 34.86
55.81 53.36
For Tech Mahindra Limited Anand G. Mahindra Chairman Hon. Akash Paul Director B.H. Wani Director Dr. Raj Reddy Director Sonjoy Anand Chief Financial Of?cer Noida, Dated: May 23, 2012 Vineet Nayyar Vice Chairman & Managing Director Anupam Puri Bharat Doshi Director Director M. Damodaran Paul Zuckerman Director Director Ravindra Kulkarni Ulhas N. Yargop Director Director Anil Khatri Company Secretary
Noida, Dated: May 23, 2012
43
ANNUAL REPORT 2011 - 2012
CASH FLOW FOR THE YEAR ENDED MARCH 31, 2012
Particulars A Cash ?ow from operating activities Net Pro?t before exceptional items and tax Adjustments for : Depreciation and Amortisation Amortisation of Deferred Revenue Provision for doubtful trade and other receivables, bad debts and loans and advances (net) Provision for Customer Claims and Warranties (net) (Pro?t) / Loss on sale of Fixed Assets (net) Finance costs Net unrealised exchange (gain) / loss Expense on Employee Stock Option Scheme Interest Income Dividend Income Net (gain) / loss on sale of investments Operating pro?t before working capital changes Adjustments for (increase) / decrease in operating assets : Trade receivables (including Finance lease) and short term loans and advances Trade payables and other current liabilities Settlement Fees received Cash generated from operations Net income tax (paid) / refunds Net cash ?ow from / (used in) operating activities (A) B Cash ?ow from investing activities Capital expenditure on ?xed assets, including capital advances Proceeds from sale of ?xed assets Purchase of current Investments Purchase of Government bonds/securities Sale of Government Bond/Securities Purchase of long-term investments in subsidiary Interest received from others Net cash ?ow from / (used in) investing activities (B) Cash ?ow from ?nancing activities Proceeds from issue of equity shares and application money Loan given to subsidiary Loans repaid by subsidiary Year ended March 31, 2012 6,469 1,505 (2,065) 138 (104) (1) 1,025 851 412 (70) (3) 1,688 8,157 ` in Million Year ended March 31, 2011 8,060 1,383 (2,217) 81 90 (11) 1,113 152 69 (84) (0) 576 8,636
(1,147) 1,719 572 8,729 (2,075) 6,654
(2,767) 348 377 (2,042) 6,594 (1,888) 4,706
(2,705) 9 (1,200) (182) 69 (4,009) 119 (45) -
(1,412) 21 (12) 11 (9) 84 (1,317) 260 (40) 40
C
44
CASH FLOW FOR THE YEAR ENDED MARCH 31, 2012 (Contd.)
Particulars Interest from Loan to Subsidiary Dividend (including dividend tax) paid Proceeds from short term borrowings Repayment of short term borrowings Finance cost Net cash ?ow from / (used in) ?nancing activities (C) Net increase / (decrease) in Cash and cash equivalents (A+B+C) Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 1 (591) 23,541 (25,331) (910) (3,216) (571) 1,918 1,347 Year ended March 31, 2012 ` in Million Year ended March 31, 2011 (508) 12,024 (13,584) (1,059) (2,867) 522 1,396 1,918
Notes : 1 Purchase of ?xed assets are stated inclusive of movements of capital work in progress between the commencement and end of the year and are considered as part of investing activity. 2 Cash and cash equivalents : Cash and Bank balances* Unrealised loss / (gain) on foreign currency Less Fixed deposits with original maturity over three months Total Cash and cash equivalents * Cash and cash equivalents comprises a) In current accounts b) In deposit accounts with original maturity of less than three months c) In earmarked accounts March 31, 2012 1,389 (42) 1,347 1,369 15 5 1,389 March 31, 2011 1,938 (20) 0 1,918 1,803 131 4 1,938
3
Cash and cash equivalents include equity share application money of ` 0 Million (previous year: ` 0 Million) and Unclaimed dividend of ` 5 Million (previous year: ` 4 Million)
In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Hemant M. Joshi Partner
For Tech Mahindra Limited Anand G. Mahindra Chairman Hon. Akash Paul Director B.H. Wani Director Dr. Raj Reddy Director Sonjoy Anand Chief Financial Of?cer Noida, Dated: May 23, 2012 Vineet Nayyar Vice Chairman & Managing Director Anupam Puri Bharat Doshi Director Director M. Damodaran Paul Zuckerman Director Director Ravindra Kulkarni Ulhas N. Yargop Director Director Anil Khatri Company Secretary
Noida, Dated: May 23, 2012
45
ANNUAL REPORT 2011 - 2012
Notes forming part of the Balance Sheet and Statement of Pro?t and Loss
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2012. 1. Signi?cant accounting policies: (a) Basis for preparation of accounts: The accompanying ?nancial statements have been prepared to comply in all material aspects with generally accepted accounting principles applicable in India, the Accounting Standards and the relevant provisions of the Companies Act, 1956. (b) Use of Estimates: The preparation of ?nancial statements, in conformity with the generally accepted accounting principles, requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of ?nancial statements and the reported amounts of revenues and expenses during the reported period. Differences between the actual results and estimates are recognised in the period in which the results are known / materialised. (c) Fixed Assets including intangible assets: Fixed assets are stated at cost less accumulated depreciation. Costs comprise of purchase price and attributable costs, if any. (d) Leases: Assets taken on lease are accounted for as ?xed assets in accordance with Accounting Standard 19 on “Leases”, (AS 19). (i) Finance lease Where the Company, as a lessor, leases assets under ?nance leases such amounts are recognized as receivables at an amount equal to the net investment in the lease and the ?nance income is based on constant rate of return on the outstanding net investment. Assets taken on ?nance lease are accounted for as ?xed assets at fair value. Lease payments are apportioned between ?nance charge and reduction of outstanding liability. (ii) Operating lease Lease arrangements under which all risks and rewards of ownership are effectively retained by the lessor are classi?ed as operating lease. Lease rental under operating lease are recognised in Statement of Pro?t and Loss on straight line basis. (e) Depreciation / amortization of ?xed assets: (i) The Company computes depreciation of all ?xed assets including for assets taken on lease using the straight line method based on estimated useful lives. Depreciation is charged on a pro rata basis for assets purchased or sold during the year. Management’s estimate of the useful life of ?xed assets is as follows: Buildings 28 years* Computers 3 years Plant and machinery 5 years Furniture and ?xtures 5 years Vehicles 3-5 Years Of?ce Equipments 5 years *Refer foot note 1 of Note 11 of Fixed Assets (ii) Leasehold land is amortised over the period of lease. (iii) Leasehold improvements are amortised over the period of lease or expected period of occupancy whichever is less. (iv) Intellectual property rights are amortised over a period of seven years. (v) Assets costing upto ` 5,000 are fully depreciated in the year of purchase. (vi) The cost of software purchased for internal use is capitalized and depreciated in full in the month in which it is put to use. (f) Impairment of Assets: At the end of each period, the Company determines whether a provision should be made for impairment loss on assets by considering the indications that an impairment loss may have occurred in accordance with Accounting Standard 28 on ‘‘Impairment of Assets’’. Where the recoverable amount of any asset is lower than its carrying amount, a provision for impairment loss on assets is made for the difference. Recoverable amount is the higher of an asset’s net selling price and value in use. In assessing value in use, the estimated future cash ?ows expected from the continuing use of the asset and from its
46
disposal are discounted to their present value using a pre tax discount rate that re?ects the current market assessments of time value of money and the risks speci?c to the asset. Reversal of impairment loss if any is recognised immediately as income in the Statement of Pro?t and Loss. (g) Investments: Long term investments are carried at cost. Provision is made to recognise a decline other than temporary in the carrying amount of long term investment. Current investments are carried at lower of cost and fair value. (h) Inventories: Components and parts: Components and parts are valued at lower of cost and net realizable value. Cost is determined on First-In-First Out basis. Finished Goods: Valued at the lower of the cost or net realisable value. Cost is determined on First-In-First Out basis. (i) Revenue recognition: Revenue from software services and business process outsourcing services include revenue earned from services rendered on ‘time and material’ basis, time bound ?xed price engagements and system integration projects. All revenues from services, as rendered, are recognised when persuasive evidence of an arrangement exists, the sale price is ?xed or determinable and collectability is reasonably assured and are reported net of sales incentives, discounts based on the terms of the contract and applicable indirect taxes. The Company also performs time bound ?xed price engagements, under which revenue is recognized using the proportionate completion method of accounting, unless work completed cannot be reasonably estimated. Provision for estimated losses, if any on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates. The cumulative impact of any revision in estimates of the percentage of work completed is re?ected in the year in which the change becomes known. (j)
Liquidated damages and penalties are accounted as per the contract terms wherever there is a delayed delivery attributable to the Company and when there is a reasonable certainty with which the same can be estimated. Revenues from the sale of software and hardware products are recognised upon delivery/deemed delivery, which is when title passes to the customer, along with risk and rewards. Unbilled revenues comprise revenues recognised in relation to efforts incurred, not billed as of the period end, where services are performed in accordance with agreed terms. The Company recognizes unearned ?nance income as ?nancing revenue over the lease term using the effective interest method. Dividend income is recognized when the Company’s right to receive dividend is established. Interest income is recognized on time proportion basis. (a) Foreign currency transactions: Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transaction. Monetary items are translated at the period end rates. The exchange difference between the rate prevailing on the date of transaction and on the date of settlement as also on translation of monetary items at the end of the period is recognised as income or expense, as the case may be. Any premium or discount arising at the inception of the forward exchange contract is recognized as income or expense over the life of the contract, except in the case where the contract is designated as a cash ?ow hedge. (b) Derivative instruments accounting: and hedge
The Company uses foreign currency forward contracts / options to hedge its risks associated with foreign currency ?uctuations relating to certain forecasted transactions. Effective April 1st 2007 the Company designates some of these as cash ?ow hedges applying the recognition and measurement principles set out in the Accounting Standard 30 “Financial Instruments: Recognition and Measurements”(AS 30).
47
ANNUAL REPORT 2011 - 2012
The use of foreign currency forward contracts/options is governed by the Company’s policies approved by the Board of Directors, which provide written principles on the use of such ?nancial derivatives consistent with the Company’s risk management strategy. The counter party to the Company’s foreign currency forward contracts is generally a bank. The Company does not use derivative ?nancial instruments for speculative purposes. Foreign currency forward contract/ option derivative instruments are initially measured at fair value and are re-measured at subsequent reporting dates. Changes in the fair value of these derivatives that are designated and effective as hedges of future cash ?ows are recognized directly in reserves and the ineffective portion is recognized immediately in Statement of Pro?t and Loss. The accumulated gains and losses on the derivatives in reserves are transferred to Statement of Pro?t and Loss in the same period in which gains or losses on the item hedged are recognized in Statement of Pro?t and Loss. Changes in the fair value of derivative ?nancial instruments that do not qualify for hedge accounting are recognized in the Statement of Pro?t and Loss as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer quali?es for hedge accounting. When hedge accounting is discontinued for a cash ?ow hedge, the net gain or loss will remain in reserves and be reclassi?ed to Statement of Pro?t and Loss in the same period or periods during which the formerly hedged transaction is reported in Statement of Pro?t and Loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in reserves is transferred to Statement of Pro?t and Loss (k) Employee Retirement Bene?ts: (a) Gratuity: The Company accounts for its gratuity liability, a de?ned retirement bene?t plan covering eligible employees. The gratuity plan provides for a lump sum
payment to employees at retirement, death, incapacitation or termination of the employment based on the respective employee’s salary and the tenure of the employment. Liabilities with regard to a Gratuity plan are determined based on the actuarial valuation carried out by an independent actuary as at the Balance Sheet date using the Projected Unit Credit method. Actuarial gains and losses are recognised in full in the Statement of Pro?t and Loss in the year in which they occur. (Refer note 29 below) (b) Provident fund: The eligible employees of the Company are entitled to receive the bene?ts of Provident fund, a de?ned contribution plan, in which both employees and the Company make monthly contributions at a speci?ed percentage of the covered employees’ salary (currently at 12% of the basic salary) and super annuation contributions, which are charged to the Statement of Pro?t and Loss on accrual basis. The provident fund contributions are paid to the Regional Provident Fund Commissioner by the Company. The Company has no further obligations for future provident fund and superannuation fund bene?ts other than its annual contributions. (c) Compensated absences: The Company provides for the encashment of leave subject to certain Company’s rules. The employees are entitled to accumulate leave subject to certain limits, for future encashment or availment. The liability is provided based on the number of days of unavailed leave at each balance sheet date on the basis of an independent actuarial valuation using the Projected Unit Credit method. Actuarial gains and losses are recognised in full in the Statement of Pro?t and Loss in the year in which they occur. The Company also offers a short term bene?t in the form of encashment of unavailed accumulated leave above certain limit for all of its employees and same is being provided for in the books at actual cost.
48
(d) Other short term employee bene?ts: Other short-term employee bene?ts, including overseas social security contributions and performance incentives expected to be paid in exchange for the services rendered by employees, are recognised during the period when the employee renders the service. (l) Borrowing costs: Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are charged to revenue. (m) Taxation: Tax expense comprises of current tax and deferred tax. Current tax is measured at the amount expected to be paid to/recovered from the tax authorities, based on estimated tax liability computed after taking credit for allowances and exemption in accordance with the local tax laws existing in the respective countries. Minimum Alternative Tax (MAT) paid in accordance with the tax laws, which gives rise to future economic bene?ts in the form of adjustment of future income tax liability is considered as an asset if there is convincing evidence that the Company will pay normal tax after the tax holiday period. Accordingly, it is recognized as an asset in the Balance Sheet when it is probable that the future economic bene?t associated with it will ?ow to the Company and the asset can be measured reliably. Deferred tax assets and liabilities are recognised for future tax consequences attributable to timing differences between taxable income and accounting income that are capable of reversal in one or more subsequent years and are measured using
relevant enacted tax rates. The carrying amount of deferred tax assets at each Balance Sheet date is reduced to the extent that it is no longer reasonably certain that suf?cient future taxable income will be available against which the deferred tax asset can be realized. Tax on distributed pro?ts payable in accordance with the provisions of the Income-Tax Act, 1961 is disclosed in accordance with the Guidance Note on Accounting for Corporate Dividend Tax issued by the ICAI.
Employee Stock Option Plans: Stock options granted to the employees are accounted as per the accounting treatment prescribed by the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999 (“ESOP Guidelines”) issued by Securities and Exchange Board of India (“SEBI”) and the Guidance Note on Accounting for Employee Share-based Payments, issued by the ICAI. Employees eligible for Employee Stock Option Plan 2010 are granted an option to purchase shares of TML at predetermined exercise price. These options vest over a period of three years from the date of grant. The stock compensation cost is computed under the intrinsic value method and amortised on a straight line basis over the total vesting period of three years. (o) Provision, Contingent Contingent Assets: Liabilities and
Provision is recognised, when the Company has a present obligation as a result of arising out of past events and it becomes probable that any out?ow of resources embodying economic bene?ts will be required to settle the obligation, in respect of which a reliable estimate can be made. Contingent liabilities are not recognised in the ?nancial statement. A Contingent asset is neither recognised nor disclosed in Financial statements.
49
ANNUAL REPORT 2011 - 2012
Note 2: Share Capital Share Capital Authorised Equity Shares of ` 10/- each Issued, Subscribed & Paid up Equity Shares of ` 10/- each As at March 31, 2012 Number ` Million 175,000,000 127,486,541 127,486,541 1,750 1,275 1,275 As at March 31, 2011 Number ` Million 175,000,000 125,955,481 125,955,481 1,750 1,260 1,260
Disclosure pursuant to Part I of Schedule VI to the Companies Act, 1956 Reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period: Particulars March 31, 2012 Equity Shares ` Number 125,955,481 1,259,554,810 1,531,060 15,310,600 127,486,541 1,274,865,410 March 31, 2011 Equity Shares ` Number 122,320,114 1,223,201,140 3,635,367 125,955,481 36,353,670 1,259,554,810
Shares outstanding at the beginning of the year Shares Issued during the year Shares outstanding at the end of the year
No of shares held by each shareholder holding more than 5 percent equity shares of the Company are as follows: Name of Shareholder March 31, 2012 No. of % of Holding Shares held 60,676,252 47.59 29,546,923 23.18 7,114,140 5.58 March 31, 2011 No. of % of Holding Shares held 60,676,252 48.17 29,546,923 23.46 6,753,525 5.36 Amount in `
Mahindra & Mahindra Limited British Telecommunications PLC Life Insurance Corporation of India
Information about bonus shares issued by capitalisation of free reserves. Particulars As at
March 31, March 31, March 31, March 31, March 31, March 31, 2012 2011 2010 2009 2008 2007 Aggregate No. of Equity Shares : Fully paid up equity shares of ` 2 each issued by way of bonus shares by capitalisation of a) Balance in Statement of Pro?t and Loss b) Balance in General reserve Refer note 37 for stock options. The Company has only one class of shares referred to as equity shares having a par value of ` 10/-. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. The Board of Directors in their meeting on 23rd May, 2012 proposed a ?nal dividend of ` 4 per equity share. The proposal is subject to approval of shareholders at the Annual General Meeting to be held on 10th August, 2012. 51,000,100 51,000,100 51,000,100 51,000,100 51,000,100 51,000,100 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000
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Note 3: Reserves and Surplus ` in Million As at March 31, 2012 a. Securities Premium Account Opening Balance Add: Received during the year from exercise of stock options Closing Balance b. Debenture Redemption Reserve Opening Balance Add: Transfer from statement of Pro?t and Loss (net) Closing Balance c. Share Options Outstanding Account (refer note 1) Opening Balance Add: Amortised amount of stock compensation cost Closing Balance d. General Reserve Opening Balance Add: Transfer from statement of Pro?t and Loss Closing Balance e. Hedging Reserve (refer note 40) Opening Balance Add: Movement during the year (net) Closing Balance f. Surplus in Statement of Pro?t and Loss Opening balance Add: Net Pro?t for the year Less: Final Dividend (refer note 45) Less: Proposed Final Dividend (refer note 2) Less: Tax on Dividend (refer note 2 and 45) Less: Transfer to Debenture redemption reserve (net) Less: Transfer to General reserve Closing Balance 22,412 4,606 4 510 83 1,353 1,000 24,068 33,157 17,740 6,967 6 504 83 702 1,000 22,412 32,580 412 (3,947) (3,535) 1,942 (1,530) 412 4,451 1,000 5,451 3,451 1,000 4,451 69 412 481 69 69 2,637 1,353 3,990 1,935 702 2,637 2,599 103 2,702 2,374 225 2,599 As at March 31, 2011
51
ANNUAL REPORT 2011 - 2012
Note 4: Long Term Borrowings ` In Million As at March 31, 2012 (a) Secured Debentures (i) 10.25% (previous year: 10.25%) Privately placed Non-Convertible Debentures (Due for redemption on 17th April 2014, at par) 3,000 3,000 As at March 31, 2011
(ii) 10.25% (previous year: 10.25%) Privately placed Non-Convertible Debentures (Due for redemption on 17th April 2013, at par) (The above debentures are secured by pari passu charge over the immovable property located in Gujrat. The Company has also deposited the title deeds of certain other immovable properties of the Company with the debenture trustees.) (b) Unsecured Term Loan from Bank
3,000
3,000
6,000
400 6,400
Note 5: Other Long Term Liabilities (a) Deferred revenue (refer note 28) (b) Fair values of foreign exchange forward and currency option contracts (refer note 40) (c) Deposits (d) Others 1,708 2,543 3,772 107
20 38 4,309
20 32 3,931
Note 6: Long Term Provisions Provision for employee bene?ts (refer note 29) 1,706 1,706 1,338 1,338
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Note 7: Short Term Borrowings ` in Million As at March 31, 2012 Secured Loans from Bank Cash credit * Unsecured Loans from Banks Export Packing credit ** *Cash credit is secured by charge over current assets, present and future, including receivables. ** Due for repayment within 6 months from date of disbursement of loan. 5,266 5,427 5,160 5,427 106 As at March 31, 2011
Note 8: Trade Payables Sundry Creditors: Total outstanding dues of Micro, Small and Medium Enterprises (refer note 50) Total outstanding dues of Creditors other than Micro, Small and Medium Enterprises * * Includes ` 1,288 Million (previous year: ` 622 Million) due to Tech Mahindra (Americas) Inc., a subsidiary company. ` 209 Million (previous year: ` 195 Million) due to Tech Mahindra GmbH, a subsidiary company. ` 61 Million (previous year: ` 42 Million) due to Tech Mahindra (Singapore) Pte. Limited, a subsidiary company. ` 4 Million (previous year: ` 0 Million) due to Tech Mahindra (Thailand) Limited, a subsidiary company. ` 59 Million (previous year: ` 19 Million) due to Tech Mahindra (Malaysia) Sdn. Bhd., a subsidiary company ` 122 Million (previous year: ` 52 Million) due to CanvasM Technologies Limited, a subsidiary company. ` 61 Million (previous year: ` 53 Million) due to Tech Mahindra (Bahrain) Limited S.P.C., a subsidiary company ` NIL (previous year: ` 0 Million) due to Mahindra Logisoft Business Solutions Limited, a subsidiary company. ` 8 Million (previous year: ` Nil) due to Tech Mahindra (Nigeria) Limited, a subsidiary company ` 568 Million (previous year: ` 569 Million) due to Satyam Computer Services Limited, an associate company ` 71 Million (previous year: ` 88 Million) due to Satyam BPO Limited, an associate company ` 1 Million (previous year: ` Nil) due to Satyam Computer Services (Shanghai) Co. Limited an associate Company 4,684 3,034 4,684 3,034
53
ANNUAL REPORT 2011 - 2012
Note 9: Other Current Liabilities ` in Million As at March 31, 2012 (a) Current maturities of long term debt (b) Deferred Revenue (refer note 28) (c) Interest accrued but not due on borrowings (d) Fair values of foreign exchange forward and currency option contracts (Refer note 40) (e) Advance from customers (f) Unearned revenue (g) Unpaid dividends (h) Accrued salaries and bene?ts (i) Others* 2,065 601 1,163 61 47 5 1,186 541 5,669 * Others mainly include withholding and other taxes payable. As at March 31, 2011 400 2,065 589 58 17 4 1,549 642 5,324
Note 10: Short Term provisions (a) Provision for employee bene?ts (refer note 29) (b) Provision for Dividend (c) Provision for Dividend tax (d) Provision for Taxation 364 510 83 431 1,388 193 504 82 731 1,510
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Note 11: Fixed Assets
` in Million Gross Block As at For the Deductions Upto As at As at April 01, year during the March 31, March 31, March 31, 2011 year 2012 2012 2011 36 1,334 1,267 996 38 2,050 239 479 6,439 46 46 6,485 5,188 75 105 1,505 1,383 30 1,400 546 546 86 241 223 80 0 299 264 2,085 319 497 7,292 76 75 151 7,443 6,485 1,627 8,153 608 6,608 7 2 42 228 34 1,190 390 23 1,634 932 494 17 449 172 391 6,463 0 63 63 6,526 131 1,465 3,214 24 60 619 175 175 389 2,768 1,081 583 10 421 200 343 5,970 30 30 6,000 Accumulated Depreciation / Amortisation Net Block
Cost as at Additions Deletions Balance as April 01, during the during the at March 2011 year year 31, 2012 175 425 577 246 142 14 328 51 289 1,901 138 138 2,039 1,454 97 12,485 555 13,969 214 138 76 555 13,755 223 888 0 491 264 2,534 3 59 37 1,684 28 2,566 4,679 254 679 175
a Tangible Assets
Freehold Land
Leasehold Land
Buildings
4,102
Plant and Equipment 48 440 822
2,348
Furniture and Fixtures
1,579
Vehicles
Computers
2,470
Of?ce Equipments
Leasehold Improvements
Total 76 76
12,409
b Intangible Assets
Intellectual property rights
Software
Total
Grand Total (a+b)
12,485
Previous year
11,128
c Capital Work In Progress
Total
Notes:
1. The useful life of buildings has been revised from 15 years to 28 years with effect from 1st April 2011. The net book value of these ?xed assets as at 31st March 2011 is being depreciated over the revised remaining useful life of the assets. As a result of this change, depreciation charge for the year ended 31st March 2012 is lower and the pro?t for the year is higher by ` 159 Million.
2. Depreciation includes accelerated charge of ` 83 Million on assets in leased premises consequent to the early termination of the lease.
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ANNUAL REPORT 2011 - 2012
Note 12: Non Current Investments ` in Million As at March 31, 2012 Long Term (Unquoted - at cost) Trade : In Subsidiary Companies : 375,000 Ordinary Shares (previous year: 375,000) of US$ 1 each fully paid-up of Tech Mahindra (Americas) Inc. 3 Shares of Euro 25,000, Euro 50,000 and Euro 500,000 each, fully paid-up of Tech Mahindra GmbH (refer note 1 below) Less : Provision for Diminution (refer note 25) 5,000 Equity Shares (previous year: 5,000) of Singapore $ 10 each fully paid-up of Tech Mahindra (Singapore) Pte. Limited 50,000 Equity Shares (previous year: 50,000) of Tech Mahindra (Thailand) Limited of THB 100 each fully paid-up 50,000 Equity Shares (previous year: 50,000) of Tech Mahindra Foundation of ` 10 each fully paid-up 500,000 Equity Shares (previous year: 500,000) of PT Tech Mahindra Indonesia of US $ 1 each fully paid-up 5,767,330 Equity Shares (previous year: 4,619,631) of CanvasM Technologies Limited of ` 100 each fully paid-up (refer note 48) 312,820 Equity Shares (previous year: 312,820) of Tech Mahindra (Malaysia) Sdn Bhd of Ringgit 1 each fully paid-up Investment in Tech Mahindra (Beijing) IT Services Limited 30,472,300 Equity Shares (previous year: 30,472,300) of Venturbay Consultants Private Limited of ` 10 each fully paid-up 12,450,000 Equity Shares (previous year: 12,450,000) of Mahindra Logisoft Business Solutions Limited of ` 10 each fully paid-up 500 Equity Shares (previous year: 500 ) of Tech Mahindra (Bahrain) Limited S.P.C. of BD 100 each fully paid-up 153,040,026 Equity Shares (previous year: 15,250,026) of Tech Mahindra (Nigeria) Limited of Naira 1 each fully paid up (Refer Note 47) 389 12 12 As at March 31, 2011
389
354 35 1
354 35 1
6
6
1 22
1 22
603
462
4
4
21 30,461
21 30,461
112
112
6
6
46
5
31,330
31,148
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Note 12: Non Current Investments (Contd.) As at March 31, 2012 In Other Company In Preference shares: 1,603,380 E1 Preference shares (previous year: 1,603,380) of Servista Limited of GBP 0.002 each fully paid up 896,620 E2 Preference shares (previous year: 896,620) of Servista Limited of GBP 0.002 each fully paid up In Equity shares: 4,232,622 Ordinary shares (previous year: 4,232,622) of Servista Limited of GBP 0.002 each fully paid up Less : Provision for Diminution (refer note 26) Long Term (Unquoted - at cost) Non Trade : Treasury Bills & Government Bonds (refer note 2 below) ` in Million As at March 31, 2011
54
54
30
30
1 85 85 -
1 85 85 -
1 1 31,331
1 1 31,149
Notes : 1. Includes ` 360 Million (previous year: ` 360 Million) invested towards capital reserve of the Company in accordance with the German Commercial Code. 2. As per statutory requirements for overseas branches. Particulars Aggregate amount of quoted investments Aggregate amount of unquoted investments Aggregate amount of provision for diminution in value of investments Statement showing percentage of holding Name of the Body Corporate Tech Mahindra (Americas) Inc. Tech Mahindra GmbH Tech Mahindra (Singapore) Pte. Limited Tech Mahindra (Thailand) Limited Tech Mahindra Foundation PT Tech Mahindra Indonesia CanvasM Technologies Limited Tech Mahindra (Malaysia) Sdn Bhd Tech Mahindra (Beijing) IT Services Limited Venturbay Consultants Private Limited Mahindra Logisoft Business Solutions Limited Tech Mahindra (Bahrain) Limited S.P.C. Tech Mahindra (Nigeria) Limited As at March 31, 2012 31,770 439 As at March 31, 2011 31,588 439
As at March 31, 2012 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
As at March 31, 2011 100% 100% 100% 100% 100% 100% 80.10% 100% 100% 100% 100% 100% 100%
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ANNUAL REPORT 2011 - 2012
Note 13: Long Term Loans and Advances ` in Million As at March 31, 2012 Unsecured, considered good unless otherwise stated a. Capital Advances Considered good Considered doubtful Less: Provision b. Security Deposits Considered good Considered doubtful Less: Provision c. d. e. f. g. h. Loan to subsidiary VAT credit receivable Advance Income Taxes (Net of provisions) Advance Fringe Bene?t Tax (Net of provisions) Long term lease receivable - Secured (refer note 35) Advances recoverable in cash or in kind for value to be received 671 15 686 15 671 51 9 1,766 16 706 3,341 613 9 622 9 613 27 1,237 7 1,112 612 4,103 122 5 127 5 122 495 5 500 5 495 As at March 31, 2011
Note 14: Current Investments Short Term (Unquoted - at cost) Trade : Investment in Mutual Fund 601,500.17 (Previous year: Nil) units of ` 1000.25 IDFC Cash Fund Super Inst Plan C - Daily Dividend plan 6,003,769.20 (Previous year: Nil) units of ` 100.20 Birla Sun Life Cash Plus Inst. Prem. Daily Dividend - Reinvestment plan 602 601 1,203 Aggregate amount of quoted investments Aggregate amount of unquoted investments Aggregate amount of provision for diminution in value of investments 1,203 -
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Note 15: Inventories ` in Million As at March 31, 2012 Raw Materials and components 2 2 As at March 31, 2011 6 6
Note 16: Trade Receivables Trade Receivables (Unsecured) (a) Over six months (i) Considered good* 210 298 211 130
(ii) Considered doubtful (b) Others (i) Considered good**
12,221 160 12,889
9,432 9,773 130 9,643
(ii) Considered doubtful
Less: Provision for doubtful debts
458 12,431
1. * Net of advances aggregating to ` 63 Million (previous year: ` 166 Million) pending adjustments with invoices. 2. ** Net of advances aggregating to ` 304 Million (previous year: ` 313 Million) pending adjustments with invoices.
Note 17: Cash and Cash Equivalents (a) Cash and Cash Equivalents Balances with banks In current accounts In deposit accounts 1,369 15 1,384 (b) Earmarked balances with banks 5 1,389 1,803 131 1,934 4 1,938
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ANNUAL REPORT 2011 - 2012
Note 18: Short Term Loans and Advances ` in Million As at March 31, 2012 (Unsecured, considered good unless otherwise stated) a. Advances to subsidiaries * ` 77 Million (previous year: ` 96 Million) due from Tech Mahindra (Americas) Inc. ` 22 Million (previous year: ` 9 Million) due from Tech Mahindra GmbH ` 1 Million (previous year: ` 5 Million) due from Tech Mahindra (Singapore) Pte. Limited ` 22 Million (previous year: ` 12 Million) due from Tech Mahindra (Beijing) IT Services Limited ` 1 Million (previous year: ` 2 Million) due from Tech Mahindra (Malaysia) Sdn. Bhd. ` 14 Million (previous year: ` 3 Million) due from CanvasM Technologies Limited ` 19 Million (previous year: ` 34 Million) due from Tech Mahindra (Bahrain) Limited S.P.C. ` 154 Million (previous year: ` 6 Million) due from PT Tech Mahindra Indonesia ` 41 Million (previous year: ` 19 Million) due from Tech Mahindra (Nigeria) Limited ` 1 Million (previous year: ` Nil) due from Mahindra Logisoft Business Solutions Limited * Non Interest bearing, in normal course of business. Unbilled revenues Fair values of foreign exchange forward and currency option contracts (refer note 40) MAT Credit Entitlement Balance with Excise and Customs Lease receivable - Considered doubtful (refer note 35) Less: Provision Advances recoverable in cash or in kind or for value to be received Considered good Considered doubtful Less: Provision 352 186 As at March 31, 2011
b. c. d. e. f.
2,039 233 1,278 231 231 882 96 978 96 882 4,784
2,174 877 467 1,029 866 866 1,226 43 1,269 43 1,226 6,825
g.
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Note 19: Other Income ` in Million Year Ended March 31, 2012 (a) Interest on: Deposit with banks Others 2 68 70 (b) Foreign exchange gain / (loss) - Net (c) Rent Income (d) Dividend received (e) Sundry balances written back (f) Miscellaneous income 372 70 3 128 34 677 39 45 84 911 83 79 109 1,266 Year Ended March 31, 2011
Note 20: Employee Bene?ts Expenses (a) Salaries and Bonus (b) Contribution to Provident and other funds (c) Gratuity (Refer note 29) (d) Employee stock compensation cost (e) Staff welfare expenses 19,791 1,029 273 412 1,005 22,510 17,446 965 182 69 776 19,438
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ANNUAL REPORT 2011 - 2012
Note 21: Operating and Other expenses Year Ended March 31, 2012 Power & Fuel Rent Rates and taxes Communication expenses Travelling expenses [Net of recoveries ` 339 Million (previous year: ` 400 Million)] Recruitment expenses Training Hire charges Sub-contracting costs (net) Professional and Legal fees (Refer note 30) Repairs and maintenance : Buildings (including leased premises) Machinery Others Insurance Software, hardware and project speci?c expenses* Claims and warranties (net) (refer note 46) Advertising, marketing and selling expenses (Pro?t) / Loss on sale of ?xed assets (net) Provision for doubtful debts and Bad debts (net) Provision for doubtful advances Advances written off Cost of materials consumed Donations Miscellaneous expenses 127 275 109 511 279 1,070 (104) 47 (1) 174 (36) 81 5 69 547 21,598 *(Includes ` Nil (previous year: ` 2,871 Million) for a customer speci?c project under ?nance lease) Note 22: Finance Cost Interest expense: On long term loans On working capital loans / cash credit Other borrowing costs Foreign currency translations 617 155 772 3 250 1,025 698 293 991 8 114 1,113 94 239 156 489 199 3,209 90 49 (11) 52 29 8 15 100 496 20,927 86 98 342 12,528 423 52 56 228 10,389 226 550 1,240 94 658 2,937 ` in Million Year Ended March 31, 2011 522 996 70 680 2,983
62
Notes on Accounts:
23. The estimated amount of contracts remaining to be executed on capital account (net of capital advances), and not provided for as at March 31, 2012 ` 443 Million (previous year: ` 1,382 Million). 24. Contingent liabilities: i) The Company has received demand notices from Income Tax Authorities resulting in a contingent liability of ` 946 Million (previous year: ` 920 Million). This is mainly on account of the following: (a) An amount of ` 140 Million (Previous year: ` 123 Million) relating to Transfer pricing adjustment on account of arm’s length transactions; (b) Deduction under Section 10A amounting to ` 790 Million (previous year: ` 781 Million) in relation to adjustment of expenditure in foreign currency being excluded only from Export turnover and not from Total turnover. The Company has already won the appeal before the Mumbai ITAT for the Assessment Year 2003-04. The Income Tax Department has ?led appeal before the High Court. The Company has already won the appeal before the CIT (A) for Assessment Year 2004-05, 2005-06 and 2007-08. The Income Tax Department has ?led appeal before ITAT for Assessment Year 2004-05 and 20052006. For Assessment Year 2007-2008 the Income Tax Department may intend to appeal against the said order before ITAT; (c) an amount of ` 16 Million (previous year: ` 16 Million) relating to Fringe Bene?t Tax. The Company has won the appeal before the CIT (A) and the Income Tax Department may intend to appeal against the said order before ITAT. The Company has received demand notices from Sales Tax Authority for ` 18 Million (previous year: ` 18 Million) towards Software services classi?ed under Works Contract Act for the ?nancial year 2005-06 to 2008-09. The Company has ?led an appeal before the Joint Commissioner of Commercial Tax (JCCT). The Joint Commissioner of Commercial Taxes (JCCT) has allowed the said Appeal vide its order dated December 30, 2011 in favour of the Company. The JCCT has directed the Dy. Commissioner of Commercial Taxes to issue a revised demand notice in accordance with this order.
ii)
iii) The Company has received demand / show cause notice / Order from Service Tax Authorities for ` 166 Million (net of provision), (previous year: ` 90 Million) out of which: 1) ` 77 Million (previous year: ` 77 Million) relates to marketing and onsite services rendered by the subsidiaries abroad for the ?nancial years 2004-05 to 2007-08 for erstwhile Tech Mahindra (R & D Services) Limited (TMRDL) and has paid an amount of ` 7 Million (previous year: ` 7 Million) “Under Protest”, ` 13 Million (previous year: ` 13 Million) towards services provided under Management consultancy services for Tech Mahindra Limited for which the Company has ?led an appeal against the same. The Deputy Commissioner of Service Tax (Refunds) has appealed against the Order of Assistant Commissioner of Service Tax towards refund granted ` 76 Million (previous year: Nil) to Company for the month of October, 2010 by holding a view that the amounts paid by the Company under reverse charge as per the provisions of Section 66A of Service Tax Act relate to the input for services rendered by the entities situated abroad and such amounts are not entitled to refund under Rule 5 of the Service Tax Rules, 2004. Against the said appeal the Company had ?led its cross objection, which was rejected by the Commissioner (Appeals). The Company prefers an appeal against the said order before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT).
2) 3)
iv) The Company has bank guarantees outstanding ` 1,085 Million (previous year: ` 1,131 Million) 25. The Company holds investment (unquoted) in subsidiary, Tech Mahindra GmbH (TMGMBH) aggregating to ` 389 Million (previous year: ` 389 Million) which is held as strategic long-term investment. The Company had made provision in the year ended March 31, 2005, to the extent of accumulated losses in TMGMBH aggregating to ` 354 Million (previous year: ` 354 Million) towards diminution in the value of its investment. TMGMBH has started earning pro?ts from ?nancial year 2006-07 onwards, however TMGMBH still has accumulated losses as of March 31, 2012 and in view of this, no change in provision is required. 26. In September 2008 the Company had made investment of ` 85 Million for 17.28% of the share capital of Servista Limited a leading European system integrator. With this investment the Company became Servista’s exclusive delivery arm for three years and will assist Servista in securing more large scale European IT off shoring business. The business plan of Servista was adversely affected by the economic downturn and it
63
ANNUAL REPORT 2011 - 2012
continued to incur losses and therefore, Servista in June 2009 decided to close down its operations. The Company had made provision of ` 85 Million in the year ended March 31, 2010, for diminution in the value of its investments in Servista. Servista is in process of winding up and in the view of the management; the Company would have no further unrecorded obligations towards settlement of any further liability. 27. The Company has on July 21, 2010 incorporated a Company in Brazil under the name of Tech Mahindra Brasil Servicecos De Informatica Ltda (TMBSL). There are no transactions till March 31, 2012 and Company is yet to infuse share capital into TMBSL. 28. During the year ended March 31, 2010 a customer had restructured long term contracts with the Company from April 01, 2009 which involves changes in commercial, including rate reduction, and other agreed contract terms. As per the amended contracts the customer had paid the Company restructuring fees of ` 9,682 Million. The services under the restructured contracts would continue to be rendered over the life of the contract. The restructuring fees received would be amortized and recognized as revenue over the term of the contract on a straight line basis. An amount of ` 2,005 Million (previous year: ` 2,005 Million) has been recognized as revenue for the year and the balance amount of ` 3,667 Million (previous year: ` 5,672 Million) has been carried forward and disclosed as deferred revenue in the Balance Sheet. In addition, it also includes a part of contract termination fees received from a customer, to the extent there is a continuing customer involvement. 29. Details of employee bene?ts as required by the Accounting Standard 15 (Revised) – Employee Bene?ts are as under: a) De?ned Contribution Plan Amount recognized as an expense in the Statement of Pro?t and Loss for the year ended March 31, 2012 in respect of de?ned contribution plan is ` 842 Million (previous year: ` 688 Million). b) De?ned Bene?t Plan The de?ned bene?t plan comprises of gratuity. The gratuity plan is not funded. Changes in the present value of de?ned obligation representing reconciliation of opening and closing balances thereof and fair value of Trust Fund Receivable (erstwhile TMRDL) showing amount recognized in the Balance Sheet: ` in Million Particulars Projected bene?t obligation, beginning of the year* Service cost Interest cost Actuarial (Gain) / Loss Bene?ts paid Trust Fund Receivable (erstwhile TMRDL)* Projected bene?t obligation, at the end of the year March 31, 2012 908 213 66 (3) (113) (35) 1,036 March, 31, 2011 796 199 58 (72) (72) (34) 875
* The Trust fund was created to fund the gratuity liability of the erstwhile TMRDL. After amalgamation of TMRDL with the Company, the balance in Trust Fund can be utilized only for the payment of obligation arising for gratuity payable to employees of erstwhile TMRDL. The composition of the Trust Balance as on March 31, 2012 is as follows: Particulars Government of India Securities / Gilt Mutual Funds State Government Securities / Gilt Mutual Funds Public Sector Unit Bonds Private Sector Bonds / Equity Mutual Funds Mutual Funds Bank Balance Total March 31, 2012 9 5 13 0 0 8 35 March 31, 2011 9 5 14 0 1 5 34
64
Components of expenses recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012: ` in Million Particulars Service cost Interest cost Expected Return on Plan Assets Actuarial (Gain)/Loss Total Experience Adjustments Particulars 1. 2. 3. 4. De?ned Bene?t Obligation Fair value of plan assets Surplus/(De?cit) Experience adjustment on plan liabilities [Gain/(Loss)] Experience adjustment on plan assets [Gain/ (Loss)] Actuarial Gain / (Loss) due to change on assumptions March 31, 2012 (1,071) 35 (1,036) 30 March 31, 2011 (908) 33 (875) 74 March 31, 2010 (796) 31 (765) 95 March 31, 2009 (692) 31 (661) 8 March 31, 2012 213 66 (3) (3) 273 March 31, 2011 199 58 (3) (72) 182
5.
(1)
(1)
2
0
6.
(25)
(2)
31
11
Principal Actuarial Assumptions Discount Rate Rate of increase in compensation levels of covered employees
March 31, 2012 8.6 % 11% for the 1st Year 9% thereafter
March 31, 2011 7.7 % 9% for the 1st Year 8% thereafter
• •
The discount rate is based on the prevailing market yields of Indian Government Bonds as at the balance sheet date for the estimated terms of the obligations. Salary escalation rates: The estimates of future salary increase is considered taking into account the in?ation, seniority, promotion and other relevant factors.
30. Payment to Auditors (net of service tax): Particulars Audit Fees (including quarterly audits) For other services For taxation matters For reimbursement of expenses Total March 31, 2012 7 3 1 0 11 March 31, 2011 7 2 1 0 10
65
ANNUAL REPORT 2011 - 2012
31. (a) Value of Imports on C.I.F. Basis: ` in Million Particulars Raw materials Components and spare parts Capital goods Total (b) Expenditure in Foreign Currency: Particulars Professional Fees Subcontracting cost Travelling Expenses Salaries Software / Hardware Royalty Foreign Taxes Others Total March 31, 2012 410 11,333 2,702 4,798 272 303 1,016 20,834 March 31, 2011 92 9,152 2,559 3,602 1,330 2 276 603 17,616 March 31, 2012 Nil 9 637 646 March 31, 2011 Nil 14 736 750
32. Remittance in foreign currency on account of dividends to non-Resident shareholders: Number of Shareholders 2011-12 10 2010-2011 13 Final 37,880,259 133 2009-2010 Final 29,691,404 119 2010-2011 Dividend Number of Equity Shares Amount remitted Dividend relating ` in Million to Year ended
The company does not have information as to the extent to which remittances, if any, in foreign currencies on account of dividend have been made by non-resident shareholders. 33. Earnings in foreign currency: Particulars Income from Services Contract Settlement Fees received Rent Received Interest Received Total March 31, 2012 47,028 41 5 47,074 March 31, 2011 41,657 377 51 2 42,087
66
34. Assets taken / given on Lease: a) The Company has taken vehicles on operating lease for a period of three to ?ve years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 28 Million (previous year ended March 31, 2011 ` 26 Million). The future lease payments of operating lease are as follows: ` in Million Particulars Not later than 1 year Later than 1 year not later than 5 years Later than 5 years
Minimum Lease rentals payable (previous year: ` 22 Million and ` 33 Million and ` Nil, respectively) b)
24
37
Nil
The Company has taken premises on operating lease for a period of one to ten years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 1,137 Million (previous year ended March 31, 2011 ` 936 Million). The future lease payments of operating lease are as follows: Particulars Not later than 1 year Later than 1 year not later than 5 years Later than 5 years
Minimum Lease rentals payable (previous year: ` 663 Million, ` 1,292 Million and ` 154 Million respectively) c)
869
2,418
376
The Company has taken computer equipments on operating lease for a period of one to ?ve years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 40 Million (previous year ended March 31, 2011 ` 33 Million). The future lease payments of operating lease are as follows: Particulars Not later than 1 year Later than 1 year not later than 5 years Later than 5 years
Minimum Lease rentals payable (previous year: ` 32 Million, ` 17 Million and ` Nil respectively) d)
26
36
Nil
The Company has given premises on operating lease for a period of one to ?ve years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 70 Million (previous year ended March 31, 2011 ` 83 Million). The future lease receivable of operating lease are as follows: Particulars Not later than 1 year Later than 1 year not later than 5 years Later than 5 years
Minimum Lease rentals receivable (previous year: ` 51 Million , ` 2 Million and ` Nil respectively)
12
35
Nil
35. The Company had provided in the previous year, end to end solution which includes sale of software and hardware to a customer in India which quali?es as Finance Lease and has accordingly accounted as such. These receivables are due in quarterly installments over the contractual period of 4 years.
67
ANNUAL REPORT 2011 - 2012
The components of ?nance lease receivables are: ` in Million Particulars Gross Investment in lease for the period Not later than 1 year Later than 1 year not later than 5 years Unguaranteed residual values Unearned Finance Income Net Investment in Finance Receivables * Present value of Minimum lease receivables are ` Nil Particulars Present value of minimum Lease receivable
nd
March 31, 2012 -
March 31, 2011 2,085 922 1,163 107 1,978
Not later than 1 year [866]
Later than 1 year not later than 5 years [1,112]
* The Hon’ble Supreme Court vide its order dated 2 February 2012 cancelled 2G licenses issued to some of Telecom Operators in India in 2008. As a result of the cancellation, the business of Company’s two customers has become unviable and one of the customers has started winding up proceedings of the Indian operations. The Company has made a provision of ` 679 Million on account of likely impairment in the carrying value of the related assets. 36. As per the requirements of Accounting Standard 17 on ‘Segment Reporting’ (AS 17), the primary segment of the Company is business segment by category of customers in the Telecom Service Providers (TSP), Telecom Equipment Manufacturer (TEM), Business Process Outsourcing (BPO) and Others, which includes non telecom vertical customers and the secondary segment is the geographical segment by location of its customers. The accounting principles consistently used in the preparation of the ?nancial statements are also applied to record income and expenditure in the individual segments. There are no inter-segment transactions during the year ended March 31, 2012. A. Primary Segments: For the year ended March 31, 2012 Particulars Telecom Service Provider 42,752 29,500 13,252 Telecom Equipment Manufacturer 3,342 2,558 784 Business Process Outsourcing 4,807 2,995 1,812 Others Total
Revenues Less : Direct Expenses Segmental Operating Income Less : Unallocable Expenses (net) Depreciation / Amortisation Finance Charges Other Unallocable Expenses (net) Total Unallocable Expenses (net)
1,529 1,389 140
52,430 36,442 15,988
1,505 1,025 7,666 10,196
68
` in Million Particulars Telecom Service Provider Telecom Equipment Manufacturer Business Process Outsourcing Others Total
Operating Income Add : Other Income (net) Net Pro?t before exceptional items and tax Less: Exceptional items Net Pro?t before tax Less : Provision for Tax Current Tax (net of MAT credit) Deferred tax bene?t Net Pro?t after tax
5,792 677 6,469 679 5,790 1,472 (288) 4,606
Segregation of assets, liabilities, depreciation and other non-cash expenses into various primary segments has not been done as the assets are used interchangeably between segments and Company is of the view that it is not practical to reasonably allocate liabilities and other non-cash expenses to individual segments and an adhoc allocation will not be meaningful. B. Secondary Segments: Revenues from secondary segments are as under – Geography Europe Americas Rest of world Total ` in Million 25,867 18,155 8,408 52,430
Segregation of assets into secondary segments has not been done as the assets are used interchangeably between segments. Consequently the carrying amounts of assets by location of assets are not given. A. Primary Segments: For the year ended March 31, 2011 ` in Million Particulars Telecom Service Provider 43,531 30,021 13,510 Telecom Equipment Manufacturer 2,206 1,554 652 Business Process Outsourcing 3,191 1,794 1,397 Others Total
Revenues Less : Direct Expenses Segmental Operating Income Less : Unallocable Expenses (net) Depreciation / Amortisation Finance Charges Other Unallocable Expenses (net) Total Unallocable Expenses (net)
727 595 132
49,655 33,964 15,691
1,383 1,113 6,401 8,897
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ANNUAL REPORT 2011 - 2012
` in Million Particulars Telecom Service Provider Telecom Equipment Manufacturer Business Process Outsourcing Others Total
Operating Income Add : Other Income (net) Net Pro?t before tax Less : Provision for Tax Current Tax (net of MAT credit) Deferred tax bene?t (includes ` 215 Million in respect of earlier years) Net Pro?t after tax
6,794 1,266 8,060 1,402 (309) 6,967
Segregation of assets, liabilities, depreciation and other non-cash expenses into various primary segments has not been done as the assets are used interchangeably between segments and Company is of the view that it is not practical to reasonably allocate liabilities and other non-cash expenses to individual segments and an adhoc allocation will not be meaningful. B. Secondary Segments: Revenues from secondary segments are as under – Geography Europe Americas Rest of world Total ` in Million 25,973 14,602 9,080 49,655
Segregation of assets into secondary segments has not been done as the assets are used interchangeably between segments. Consequently the carrying amounts of assets by location of assets are not given. 37. A) The Company has instituted “Employee Stock Option Plan 2000” (ESOP) for its employees and Directors. For this purpose it had created a trust viz. MBT ESOP Trust. In terms of the said Plan, the trust has granted options to the employees and Directors which vest at the rate of 33.33% on each successive anniversary of the grant date. The options can be exercised over a period of 5 years from the date of grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Trust on the basis of fair value of the equity shares at the time of grant. The details of the options are as under: Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during year Options exercised during the year Options outstanding at the end of the year March 31, 2012 494,500 46,000 448,500 March 31, 2011 82,490 1,670 1,670 79,150 -
Out of the options outstanding at the end of the year ended March 31, 2012, there are Nil (previous year: Nil) (Net of exercised & lapsed) vested options, which have not been exercised. B) The Company has instituted “Employee Stock Option Plan 2004” (ESOP 2004) for its employees. In terms of the said Plan, the Compensation Committee has granted options to employees of the Company. The options are divided into upfront options and Performance options. The Upfront Options are divided into three sets which will entitle holders to subscribe to option shares at the end of ?rst year, second year and third year. The vesting of the Performance Options will be decided by the Compensation Committee based on the performance of employees.
70
Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during the year Options exercised during the year Options outstanding at the end of the year
March 31, 2012 2,935,134 700,000 2,235,134
March 31, 2011 5,677,701 2,742,567 2,935,134
Out of the options outstanding at the end of the year ended March 31, 2012, there are 2,235,134 (previous year: 2,935,134) (Net of exercised & lapsed) vested options, which have not been exercised. C) The Company has instituted “Employee Stock Option Plan 2006 “(ESOP 2006) for the employees and Directors of TML and its subsidiary companies. In terms of the said plan, the compensation committee has granted options to the employees of the Company. The vesting of the options is 10%, 15%, 20%, 25%, and 30 % of total options granted after 12, 24, 36, 48 and 60 months, respectively from the date of grant. The maximum exercise period is 7 years from the date of grant. The details of the options are as under: Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during the year Options exercised during the year Options outstanding at the end of the year March 31, 2012 2,529,103 539,500 305,660 831,060 1,931,883 March 31, 2011 3,165,188 398,725 221,160 813,650 2,529,103
Out of the options outstanding at the end of year ended March 31, 2012, there are 1,090,008 (previous year: 1,907,933) (net of exercised & lapsed) vested options, which have not been exercised. D) The Company has instituted “Employee Stock Option Plan 2010 “(ESOP 2010) for the employees and Directors of TML and its subsidiary companies. In terms of the said Plan, options to the employees and Directors in form of option shall vest at the rate of 33.33% on each successive anniversary of the grant date. The options can be exercised over a period of 5 years from the date of grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by Compensation Committee. The details of the options are as under: Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during the year Options exercised during the year Options outstanding at the end of the year March 31, 2012 1,600,000 683,500 5,000 2,278,500 March 31, 2011 1,600,000 1,600,000
Out of the options outstanding at the end of year ended March 31, 2012, there are 533,280 (previous year: Nil) (net of exercised & lapsed) vested options, which have not been exercised.
71
ANNUAL REPORT 2011 - 2012
E)
The Company uses the intrinsic value-based method of accounting for stock options granted after April 1, 2005. Had the compensation cost for the Company’s stock based compensation plan been determined in the manner consistent with the fair value approach, the Company’s net pro?t would be lower by ` 32 Million (previous year higher by ` 14 Million) and earnings per share as reported would be as indicated below: ` in Million except earnings per share Particulars Net pro?t after exceptional items and tax (As reported) Add /(Less): Total stock-based employee compensation expense determined under fair value base method Adjusted net pro?t Basic earnings per share (in `) As reported 36.27 36.01 34.86 34.61 55.81 55.93 53.36 53.47 Adjusted Diluted earnings per share (in `) As reported Adjusted For the year ended March 31, 2012 March 31, 2011 4,606 6,967 (32) 4,574 14 6,981
The fair value of each option is estimated on the date of grant based on the following assumptions (on weighted average basis): Particulars March 31, 2012 March 31, 2011 Dividend yield (%) 0.50 0.46 Expected life 4.07 years 3.85 years Risk free interest rate (%) 8.54 7.97 Volatility (%) F) 52.72 55.16 The stock compensation cost for the Employee Stock Option Plan 2010 issued at par has been computed under the intrinsic value method and amortized on a straight line basis over the total vesting period of three years. For the year ended March 31, 2012 the Company has recorded stock compensation expense of ` 412 Million (previous year: ` 69 Million).
38. As required under Accounting Standard 18 “Related Party Disclosures” (AS – 18), following are details of transactions during the year with the related parties of the Company as de?ned in AS – 18: (a) List of Related Parties and Relationships Name of Related Party Mahindra & Mahindra Limited British Telecommunications Plc. Mahindra BT Investment Company (Mauritius) Limited Tech Mahindra (Americas ) Inc, USA Tech Talenta Inc, USA* Tech Mahindra GmbH Tech Mahindra (Singapore) Pte Limited Tech Mahindra (Thailand) Limited PT Tech Mahindra Indonesia Relation Promoter holding more than 20% stake Promoter holding more than 20% stake Promoter group company 100% subsidiary company 100% subsidiary company 100% Subsidiary company 100% Subsidiary company 100% Subsidiary company 100% Subsidiary company
72
CanvasM Technologies Limited** CanvasM (Americas) Inc** Tech Mahindra (Malaysia) SDN. BHD Tech Mahindra (Beijing) IT Services Limited Venturbay Consultant s Private Limited Tech Mahindra Foundation # Mahindra Logisoft Business Solutions Limited Tech Mahindra (Nigeria) Limited Tech Mahindra (Bahrain) Limited. S.P.C. Tech Mahindra Brasil Servicecos De Informatica Ltda Satyam Computer Services Limited Satyam BPO Limited Satyam Computer Services (Shanghai) Co. Limited Mr. Vineet Nayyar Vice Chairman and Managing Director Mr. Sanjay Kalra Chief Executive Of?cer @ # Section 25 Company not considered for consolidation * with effect from 6th March 2012 ** 100% subsidiary with effect from 3rd February 2012 @ Upto 15th September 2010
100% Subsidiary company 100% Subsidiary company 100% Subsidiary company 100% Subsidiary company 100% Subsidiary company 100% Subsidiary company 100% Subsidiary Company 100% Subsidiary Company 100% Subsidiary Company 100% Subsidiary Company Associate Company Associate Company Associate Company
Key Management Personnel
(b) Related Party Transactions for the year ended March 31, 2012: ` in Million Transactions Promoter Companies (211) [(263)] 19,925 [20,452] Paid for Services Received Interest on Loan/ICD Given Loan/ICD Given Loan/ICD Given Repaid Sub-contracting cost 21 [31] [-] [-] [-] [-] Subsidiary Companies (547) [(592)] 1,194 [1,038] [0] 1 [1] 45 [40] [40] 8,702 [6,503] Associate Companies (150) [(4)] 373 [142] [33] [-] [-] [-] 683 [540] Key Management Personnel [-] [-] [-] [-] [-] [-] [-]
Reimbursement of Expenses (Net)Paid/ (Receipt) Income from Services
73
ANNUAL REPORT 2011 - 2012
Transactions
Promoter Companies [-]
Subsidiary Companies 41 [9] [-] [-] [-] 67 [99] 4 [3] [-] [-] [-] [-] (914) [(349)]
Associate Companies [-] [-] [-] 129 [57] [-] 14 [20] 592 [-] [-] [-] 0 [271] (475) [(447)]
Key Management Personnel [-] 36 [62] -** [-] [-] [-] [-] [-] [-] 3 [2] [-] (11) [(11)]
Investments made
Salary, Perquisites & Commission
[-]
Stock Options
[-]
Rent Paid/ Payable
36 [53]
Donation Paid / Payable
[-]
Rent Received/ Receivable
41 [51]
Software/Hardware & project speci?c expenses Contract Settlement Fees Received
[-] [377]
Dividend Paid
361 [320]
Purchases of Fixed Assets
[-]
Debit / (Credit) balances (Net) (inclusive of unbilled) outstanding as on March 31, 2012
5,248 [5,302]
Figures in brackets “[ ]”are for the previous year ended March 31, 2011 **Stock options: Key Management Personnel Transactions Mr. Vineet Nayyar Vice Chairman & Managing Director 700,000 [Nil] Options granted and outstanding at the end of the year 1,992,567 [ 2,692,567] Figures in brackets “[ ]”are for the previous year ended March 31, 2011. Mr. Sanjay Kalra Chief Executive Of?cer Nil [1,892,567] Nil [Nil]
Options exercised during the year ended March 31, 2012
74
Out of the above transactions with Promoter companies, Subsidiary Companies, Associate Companies and Key Management Personnel in the excess of 10% of the total related party transactions are as under: ` in Million Transactions For the Year ended March 31, 2012 For the Year ended March 31, 2011
Reimbursement of Expenses (net) - Paid/(Receipt) Promoter Company - British Telecommunications Plc. Subsidiary Companies - Tech Mahindra (Americas) Inc. - Tech Mahindra (Bahrain) Limited S.P.C. - PT Tech Mahindra Indonesia Associate Company - Satyam Computer Services Limited
(218) (218) (58) (156) (102) (752)
(266) (273) (169) (15) 8 (715)
Income from Services Promoter Company - British Telecommunications Plc. Paid for Services Received Promoter Company - British Telecommunications Plc. Associate Company - Satyam Computer Services Limited Interest on Loan/ ICD given Subsidiary Company -Tech Mahindra (Nigeria) Limited - PT Tech Mahindra Indonesia Loan/ICD Given Subsidiary Companies - PT Tech Mahindra Indonesia - Tech Mahindra (Nigeria) Limited Loan/ICD Given Repaid Subsidiary Companies - PT Tech Mahindra Indonesia Sub-contracting cost Subsidiary Companies - Tech Mahindra (Americas) Inc. - Tech Mahindra GmbH
19,888 19,888
20,403 20,403
21 21
31 33 64
1 1
1 1
45 45
40 40
-
40 40
6,667 724 7,391
4,729 765 5,494
75
ANNUAL REPORT 2011 - 2012
Transactions
For the Year ended March 31, 2012
For the Year ended March 31, 2011
Investments made Subsidiary Companies -Tech Mahindra (Beijing) IT Services Ltd -Tech Mahindra (Nigeria) Limited Salary , Perquisites and Commission Key Management Personnel - Mr. Vineet Nayyar - Mr. Sanjay Kalra Rent Paid/(Payable) Promoter Company - British Telecommunications Plc Associate Company -Satyam Computer Services Limited Donation Paid / Payable Subsidiary Company - Tech Mahindra Foundation Rent Received/Receivable Promoter Company - British Telecommunications Plc. Associate Company - Satyam Computer Services Limited Software/Hardware & project speci?c expenses Associate Company -Satyam Computer Services Limited Contract Settlement Fees Received Promoter Company - British Telecommunications Plc. Dividend Paid Promoter Companies - Mahindra & Mahindra Limited - British Telecommunications Plc Purchase of Fixed Assets Associate Company - Satyam Computer Services Limited
41 41
4 5 9
36 36
36 26 62
36 129 165
53 57 110
67 67
99 99
41 14 55
51 20 71
592 592
-
-
377 377
243 118 361
188 132 320
0 0
271 271
76
39. The tax effect of signi?cant timing differences that has resulted in deferred tax assets are given below: ` in Million Particulars Deferred Tax Asset : Gratuity, Leave Encashment, superannuation and FBT etc. Doubtful Debts Depreciation Total Deferred Tax Asset 223 311 286 820 245 55 232 532 March 31, 2012 March 31, 2011
This includes deferred tax asset of ` Nil (previous year ` 215 Million) created in the current year pertaining to earlier years based on reassessment of deferred tax position post sunset of Section 10A of Income Tax Act, 1961. 40. Exchange gain/(loss)(net) accounted during the year: a) The Company enters into Foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Company’s foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. Forward Exchange Contracts and Currency Option Contracts in UK Pound exposure are split into two legs, which are GBP to USD and USD to INR. These contracts are for a period between 1 day and 5 years. The following are the outstanding GBP:USD Currency Exchange Contracts entered into by the Company which have been designated as Cash Flow Hedges as at March 31, 2012: Type of cover Forward Option Amount outstanding in Foreign currency (in Million) GBP 279 (previous year: 212) GBP 12 (previous year: 72) Fair Value Gain / (Loss) (` in Million) (50) (previous year: (154)) 258 (previous year: 1,317)
b)
The following are the outstanding USD: INR Currency Exchange Contracts entered into by the Company which has been designated as Cash Flow Hedges as at March 31, 2012: Type of cover Forward Option Amount outstanding in Foreign currency (in Million) USD 840 (previous year: 653) USD 87 (previous year: 189) Fair Value Gain / (Loss) (` in Million) (2,886) [previous year: 683] (1,028) (previous year: (1075))
Net loss on derivative instruments of ` 1,206 Million (previous year gain: ` 621 Million) recognised in hedging reserve as of March 31, 2012 is expected to be reclassi?ed to the Statement of Pro?t and Loss by March 31, 2013.
77
ANNUAL REPORT 2011 - 2012
The movement in hedging reserve during year ended March 31, 2012 for derivatives designated as Cash Flow Hedges is as follows: ` in Million Particulars Year ended March 31, 2012 412 (207) Year ended March 31, 2011 1,942 869
Credit Balance at the beginning of the year Gain/(Loss) transferred to income statement on occurrence of forecasted hedge transaction Changes in the fair value of effective portion of outstanding cash ?ow derivative (Debit) / Credit Balance at the end of year
(4,154) (3,535)
(661) 412
In addition to the above cash ?ow hedges, the Company has outstanding Foreign Exchange Currency Options Contracts aggregating to ` 396 Million (previous year: ` 6,993 Million) whose fair value showed a loss of ` 154 Million (previous year gain of ` 654 Million). Although these contracts are effective as hedges from an economic perspective, they do not qualify for hedge accounting and accordingly these are accounted as derivative instruments at fair value with changes in fair value recorded in the Statement of Pro?t and Loss and the cumulative gain of ` 94 Million as at March 31, 2009 would be recycled to Statement of Pro?t and Loss as and when the cash ?ows materialise. Exchange loss of ` 207 Million (previous year gain: ` 869 Million) on foreign exchange forward contracts and currency options contracts have been recognised in the year ended March 31, 2012. c) As at March 31, 2012, the Company has net foreign exchange exposures that are not hedged by a derivative instruments or otherwise amounting to ` 7,074 Million (previous year: ` 6,183 Million)
41. The Company has exercised the option given vide noti?cation number G.S.R. 225 (E) dated March 31, 2009 issued by the Ministry of Corporate Affairs, Government of India, on provisions of Accounting Standard 11, however this does not have any impact on the ?nancial statements, as the Company does not have any long term foreign currency monetary items. 42. Particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, Associates, etc, required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement. Loans and advances in the nature of loans to subsidiaries and investment in subsidiaries: Name of the Company Balance as on March 31, 2012 [-] 51 [-] Maximum outstanding during the year [40] 53 [-]
- PT Tech Mahindra Indonesia - Tech Mahindra (Nigeria) Limited Figures in brackets “[ ]”are for the previous year ended March 31, 2011.
There are no loans and advances in the nature of loans to associates, loans and advances in the nature of loans where there is no repayment schedule or repayment beyond seven years or no interest or interest below Section 372A of the Companies Act, 1956 and loans and advances in the nature of loans to ?rms/ companies in which directors are interested.
78
43. Earnings Per Share is calculated as follows: ` in Million except earnings per share Particulars Pro?t after taxation and before exceptional items Less: Exceptional items Pro?t after taxation and exceptional items Net Pro?t attributable to shareholders Equity Shares outstanding as at the end of the year (in nos.) Weighted average Equity Shares outstanding as at the end of the year (in nos.) Weighted average number of Equity Shares used as denominator for calculating Basic Earnings Per Share Add: Diluted number of Shares ESOP outstanding as at the end of the year Number of Equity Shares used as denominator for calculating Diluted Earnings Per Share Nominal Value per Equity Share (in `) Earnings Per Share - Before Exceptional Item Earnings Per Share (Basic) (in `) Earnings Per Share (Diluted) (in `) - After Exceptional Item Earnings Per Share (Basic) (in `) Earnings Per Share (Diluted) (in `) 36.27 34.86 55.81 53.36 41.61 40.00 55.81 53.36 5,118,848 132,123,991 10 5,736,254 130,563,383 10 Year ended March 31, 2012 5,285 679 4,606 4,606 127,486,541 127,005,143 127,005,143 Year ended March 31, 2011 6,967 6,967 6,967 125,955,481 124,827,129 124,827,129
44. Current tax for the year ended March 31st 2012 includes taxes for foreign branches amounting to ` 287 Million (previous year: ` 276 Million). Current tax for the year ended 31st March 2012 includes reversal of excess provision of ` 241 Million (previous year: ` 6 Million) of earlier years written back, no longer required. The Company had calculated its tax liability under Minimum Alternate Tax (MAT) from ?nancial year 2007-08. The MAT credit can be carried forward and set off against the future tax payable. In the current year ended March 31, 2012, the Company has calculated its tax liability under normal provisions of the Income Tax Act, 1961 and utilized the brought forward MAT credit of ` 234 Million. 45. In respect of equity shares pursuant to Employees Stock Option Scheme, the Company paid dividend of ` 4 Million for the year 2010-11 and tax on dividend of ` 1 Million as approved by the shareholders at the Annual General Meeting held on August 12, 2011. 46. The Company had made provision for claims and warranties of ` 168 Million (net) in the previous year as per contractual terms, the outcome of the same would get crystallized by next year. During the current year, the Company has made an additional provision of ` 157 Million. Further, the Company has reversed a portion of the said provision of ` 209 Million in the current year, being no longer required.
79
ANNUAL REPORT 2011 - 2012
The Movement of the provision is as under: ` In Million Particulars For the year ended March 31, 2012 168 157 16 For the year ended March 31, 2011 102 264 24
Carrying amount as at the beginning of the year Additional provision made during the year Less: Amount paid/Utilised during the year
47.
48.
49.
50. 51.
Less: Amount recovered from subcontractor 100 Less: Reversal of provision no longer required 209 174 Balance as at 168 During the year ended March 31, 2012, the Company has invested an additional amount of ` 41 Million in its subsidiary company Tech Mahindra (Nigeria) Limited towards equity share capital. Against this additional investment, 137,790,000 equity shares of Naira one each have been issued to the Company. During the year ended March 31, 2012, the Company has purchased by way of private arrangement 1,147,699 equity shares of CanvasM Technologies Ltd. at a consideration of ` 141 Million representing balance 19.90% stake from Motorola Cyprus Holdings Ltd. With this, CanvasM Technologies Ltd. has become 100% subsidiary of the Company with effect from 3rd February 2012. Consequently CanvasM (Americas) Inc. has also become 100% step down subsidiary of the Company with effect from 3rd February 2012. The Board of Directors of the Company in their meeting held on March 21, 2012 have approved the “Scheme of Amalgamation and Arrangement under Sections 391 to 394 read with Sections 78, 100 to 104 and other applicable provisions of the Companies Act, 1956 of Venturbay Consultants Private Limited and Satyam Computer Services Limited and C&S System Technologies Private Limited and Mahindra Logisoft Business Solutions Limited and CanvasM Technologies Limited with the Company (TML)” (“the Scheme”). The Appointed date of the Scheme is April 1, 2011. The Board of Directors of the Company has recommended issue of 2 fully paid up Equity Shares of ` 10 each of the Company for every 17 fully paid Equity Shares of ` 2 each of Satyam. As the other amalgamating companies are wholly owned by the Company / Satyam, no shares would be issued to shareholders of these companies. The Bombay Stock Exchange and the National Stock Exchange of India Limited have conveyed to the Company, their no-objection under Clause 24(f) of the Listing Agreement to the said Scheme. TML has also received approval of Competition Commission of India for the said Scheme. Further, TML has obtained directions from the Hon’ble High Court of Judicature at Bombay (“Court”) for convening the shareholders meeting on 7th June 2012 to approve the Scheme. The proposed Scheme is subject to the approvals of the shareholders, Hon’ble Bombay High Court, Hon’ble High Court of Andhra Pradesh and other authorities. Based on the information available with the Company, no creditors have been identi?ed as “supplier” within the meaning of “Micro, Small and Medium Enterprises Development (MSMED) Act, 2006”. Previous period’s ?gures have been regrouped wherever necessary, to con?rm to the classi?cation for year ended March 31, 2012 For Tech Mahindra Limited Anand G. Mahindra Vineet Nayyar Chairman Vice Chairman & Managing Director Hon. Akash Paul Anupam Puri Bharat Doshi Director Director Director B.H. Wani M. Damodaran Paul Zuckerman Director Director Director Dr. Raj Reddy Ravindra Kulkarni Ulhas N. Yargop Director Director Director Sonjoy Anand Anil Khatri Chief Financial Of?cer Company Secretary Noida, Dated: May 23, 2012
Signatures to Notes
80
Statement pursuant to Section 212 of the Companies Act, 1956 relating to subsidiary companies.
Names of the subsidiary companies Tech Mahindra (Singapore) Pte Limited Tech Mahindra (Thailand) Co Limited Tech Mahindra Foundation PT Tech Mahindra Indonesia CanvasM Technologies Limited CanvasM Americas Inc. Tech Mahindra (Malaysia) Sdn. Bhd. Tech Mahindra (Beijing) IT Services Limited Tech Mahindra (Bahrain) Ltd. S.P.C. Tech Mahindra (Nigeria) Limited Mahindra Venturbay Logisoft Consultants Business Private Solutions Limited Limited March 31, 2012 INR INR March 31, 2012 March 31, 2012 NGN March 31, 2012 BD March 31, 2012 RMB March 31, 2012 RM March 31, 2012 THB INR US $ INR US $ March 31, 2012 March 31, 2012 March 31, 2012 March 31, 2012 March 31, 2012 S$
Particulars
Tech Mahindra (Americas) Inc.
Tech Mahindra GMBH
The Financial Year of the Subsidiary ended on Euro
March 31, 2012
March 31, 2012
US $
Number of shares of the subsidiary Company held by Tech Mahindra Limited at the above date 3 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 5,000 50,000 50,000 500,000 5,767,330 100 312,820 3,314,450 500 153,040,026 12,450,000 100% 30,472,300 100%
Number of shares
375,000
Extent of holding
100%
The Net Aggregate of pro?ts/losses of the Subsidiary Company for its ?nancial year so far as they concern the members of Tech Mahindra Limited
a)
Dealth with in the accounts of Tech Mahindra Ltd. for the Year ended March 31,2012 279,337 (869,773) 793,058 161,619,750 159,273 827,781 109,261 172,798 232,128,500 18,805,569 (678,209)
b)
Not dealth with in the accounts of Tech Mahindra Ltd. for the Year ended March 31,2012
4,857,527
625,691
The Net Aggregate of pro?ts/losses of the Subsidiary Company for its previous ?nancial years so far as they concern the members of Tech Mahindra Limited
a)
Dealth with in the accounts of Tech Mahindra Ltd. for the Year ended March 31,2012
Not dealth with in the accounts of 3,613,612 724,458 408,149 183,032 2,565,688 93,752,900 185,582 431,010 (1,104,125) 183,113 50,071,347 11,272,687 (846,955) Tech Mahindra Ltd. for the Year ended March 31,2012 Note: The above Statement does not include information related to Tech Mahindra Brasil Servicecos De Informatica Ltda (TMBSL) and Tech Talenta Inc. (TTI) incorporated on July 21, 2010 and March 6, 2012 respectively, since there have been no transactions till March 31, 2012 and the holding Company is yet to infuse share capital in them.
b)
For Tech Mahindra Limited Vineet Nayyar Vice Chairman & Managing Director Anupam Puri Director M. Damodaran Director Ravindra Kulkarni Director Anil Khatri Company Secretary
Anand G. Mahindra Chairman Hon. Akash Paul Director B.H. Wani
Bharat Doshi Director Paul Zuckerman Director Ulhas N. Yargop Director
Director
Dr. Raj Reddy Director Sonjoy Anand Chief Financial Of?cer
Noida, Dated: May 23, 2012
81
Consolidated Financial Statements
ANNUAL REPORT 2011 - 2012
Auditors’ Report
To The Board of Directors of Tech Mahindra Limited 1. We have audited the attached Consolidated Balance Sheet of TECH MAHINDRA LIMITED (“the Company”) and its subsidiaries (the Company and its subsidiaries constitute “the Group”) as at 31st March 2012, the Consolidated Statement of Pro?t and Loss and the Consolidated Cash Flow Statement of the Group for the year ended on that date both annexed thereto (all together referred to as ‘Consolidated Financial Statements’). The Consolidated Financial Statements include investments in an associate accounted on the equity method in accordance with Accounting Standard 23 (Accounting for Investments in Associates in Consolidated Financial Statements) as noti?ed under the Companies (Accounting Standards) Rules, 2006. These Consolidated Financial Statements are the responsibility of the Company’s Management and have been prepared on the basis of the separate ?nancial statements and other ?nancial information regarding components. Our responsibility is to express an opinion on these Consolidated Financial Statements based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the ?nancial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and the disclosures in the ?nancial statements. An audit also includes assessing the accounting principles used and the signi?cant estimates made by the management, as well as evaluating the overall ?nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion. We did not audit the ?nancial statements of certain subsidiaries, whose ?nancial statements re?ect total assets (net) of ` 2,579 Million as at 31st March 2012, total revenues of ` 3,493 Million and net cash in?ows amounting to ` 188 Million for the year ended on that date as considered in the Consolidated Financial Statements. These ?nancial statements have been audited by other auditors whose reports have been furnished to us and our opinion in so far as it relates to the amounts included in respect of these subsidiaries is based solely on the reports of the other auditors. As stated in Note 40 (a) to the Consolidated Financial Statements, the auditors of Satyam Computer Services Limited (SCSL) have quali?ed their auditor’s report for the year ended 31st March 2012, expressing their inability to ascertain the impact and the consequential effects, if any, thereof which are not quanti?able on a number of items, namely, ongoing investigations and legal proceedings by various regulators / investigating agencies in respect of the ?nancial irregularities relating to prior years, Net debit amounts aggregating to ` 11,394 Million booked to ‘Unexplained Differences Suspense Account’ and fully provided for in prior years on grounds of prudence, alleged advances of ` 12,304 Million relating to prior years as claimed by various companies which is presented separately in the Balance Sheet of SCSL under “Amount Pending Investigation Suspense Account (Net)”, certain lawsuits (the “Aberdeen Action”, USA and the “Aberdeen(UK) Complaint”) ?led by certain investors in the United States of America and the United Kingdom, and adequacy or otherwise of the provision for taxation pertaining to prior years. Without qualifying our opinion, we draw attention to the matters as mentioned in Note 40 (b), where the auditors of SCSL have drawn attention on certain items including various demands/disputes raised by the indirect tax authorities and non-compliances with the provisions of certain statutory Acts /guidelines. The post acquisition pro?t (net) of SCSL, the amount of goodwill in the investment value, investment in associate and reserves and surplus in the Consolidated Financial Statements of the group are subject to the matters referred in Para 4 above, due to which we are unable to comment on the impact of the same on the post acquisition pro?t (net) of SCSL, amount of goodwill in investment value in associate and reserves and surplus in the consolidated ?nancial statements of the group. We report that the Consolidated Financial Statements have been prepared by the Company in accordance with the requirements of Accounting Standard 21 (Consolidated Financial Statements) and Accounting Standard 23 (Accounting for Investment in Associates in Consolidated Financial Statements) as noti?ed under the Companies (Accounting Standards) Rules, 2006.
2.
3.
4.
5.
6.
7.
84
8.
Further to our comments in Paragraph 5 above and subject to the matters referred to in paragraph 6 above, based on our audit and on consideration of the separate audit reports on the individual ?nancial statements of the Company, its aforesaid subsidiaries and associates, and to the best of our information and according to the explanations given to us, in our opinion, the Consolidated Financial Statements give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the Consolidated Balance Sheet, of the state of affairs of the Group as at 31st March 2012; (b) in the case of the Consolidated Statement of Pro?t and Loss, of the pro?t of the Group for the year ended on that date; and (c) in the case of the Consolidated Cash Flow Statement, of the cash ?ows of the Group for the year ended on that date.
For Deloitte Haskins & Sells Chartered Accountants (Registration No. 117366W)
Place : Noida Dated: May 23, 2012
Hemant M. Joshi Partner (Membership No. 38019)
85
ANNUAL REPORT 2011 - 2012
CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2012
Note I. 1 EQUITY AND LIABILITIES Shareholders’ funds (a) Share Capital (b) Reserves and Surplus Share application money pending allotment Minority Interest Non-current liabilities (a) Long-term borrowings (b) Other Long term liabilities (c) Long-term provisions Current liabilities (a) Short-term borrowings (b) Trade payables (c) Other current liabilities (d) Short-term provisions ASSETS Non-current assets (a) Fixed assets (i) Tangible assets (ii) Intangible assets (iii) Capital work-in-progress (b) Non-current investments (c) Deferred tax asset (refer note 35) (d) Long-term loans and advances 2 Current assets (a) Current investments (b) Inventories (c) Trade receivables (d) Cash and cash equivalents (e) Short-term loans and advances 2 3 1,275 39,234 40,509 0 6,000 4,295 1,886 12,181 5,266 3,649 6,080 1,506 16,501 69,191 1,260 32,254 33,514 0 159 6,400 3,917 1,458 11,775 5,427 2,474 5,582 1,621 15,104 60,553 March 31, 2012 ` in Million March 31, 2011
2 3 4
4 5 6 7 8 9 10
5
II. 1
11 6,729 96 1,671 8,496 34,271 998 3,384 47,149 1,605 2 13,172 2,418 4,845 22,042 69,191 6,107 63 608 6,778 28,701 638 4,146 40,263 379 6 10,361 2,665 6,879 20,290 60,553
12 13 14 15 16 17 18
See accompanying notes to the ?nancial statements In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Hemant M. Joshi Partner
1 to 46 For Tech Mahindra Limited
Noida, Dated: May 23, 2012
Anand G. Mahindra Chairman Hon. Akash Paul Director B.H. Wani Director Dr. Raj Reddy Director Sonjoy Anand Chief Financial Of?cer Noida, Dated: May 23, 2012
Vineet Nayyar Vice Chairman & Managing Director Anupam Puri Bharat Doshi Director Director M. Damodaran Paul Zuckerman Director Director Ravindra Kulkarni Ulhas N. Yargop Director Director Anil Khatri Company Secretary
86
STATEMENT OF CONSOLIDATED PROFIT AND LOSS FOR THE YEAR ENDED MARCH 31, 2012
` in Million except Earnings per share Note Year ended Year ended March 31, March 31, 2012 2011 54,897 51,402 19 982 1,288 55,879 52,690 20 21 22 11 28,681 17,022 1,026 1,613 48,342 7,537 679 6,858 1,797 (360) 5,421 (36) 5,385 5,103 467 10,955 24,116 17,252 1,113 1,435 43,916 8,774 8,774 1,678 (362) 7,458 (20) 7,438 2,106 (2,735) 1,066 (1,433) 6,442
Revenue from Services (refer note 27) Other income Total Revenue (I + II) Expenses: Employee bene?ts expense Operating and other expenses Finance costs Depreciation and amortisation expense Total expenses V Pro?t before Exceptional Items, Tax, Minority Interest and Share in Earnings of Associate (III - IV) VI Exceptional Items (net) (refer note 31) Pro?t before Tax, Minority Interest and Share in Earnings of Associate (V - VI) VII Tax expense: (1) Current tax (refer note 39) - Net of MAT credit of ` 3 Million (previous year: ` 182 Million) (2) Deferred tax (refer note 35) VIII Pro?t after tax and before Minority Interest and share in earnings in Associate (VI-VII) IX Minority interest X Pro?t after tax and Minority Interest and before share in earnings of Associate (VIII-IX) XI Share in Associate (refer note 40) (i) Pro?t after tax and minority interest (excluding exceptional items) - Exceptional items (ii) Earlier period items (refer note 40) - Pro?t after tax and minority interest (excluding exceptional items) - Exceptional items XII Pro?t for the year (X+XI) Earnings per equity share (Before exceptional items) in ` (refer note 38) (1) Basic (2) Diluted Earnings per equity share (After exceptional items) in ` (1) Basic (2) Diluted See accompanying notes to the ?nancial statements In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Hemant M. Joshi Partner
I. II. III. IV.
91.60 88.05 86.25 82.91 1 to 46
51.60 49.34 51.60 49.34
For Tech Mahindra Limited Anand G. Mahindra Chairman Hon. Akash Paul Director B.H. Wani Director Dr. Raj Reddy Director Sonjoy Anand Chief Financial Of?cer Noida, Dated: May 23, 2012 Vineet Nayyar Vice Chairman & Managing Director Anupam Puri Bharat Doshi Director Director M. Damodaran Paul Zuckerman Director Director Ravindra Kulkarni Ulhas N. Yargop Director Director Anil Khatri Company Secretary
Noida, Dated: May 23, 2012
87
ANNUAL REPORT 2011 - 2012
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2012
` in Million Particulars A Cash ?ow from operating activities Net Pro?t before exceptional items and tax Adjustments for : Depreciation and Amortisation Amortisation of Deferred Revenue Provision for doubtful trade and other receivables, bad debts and loans and advances (net) Provision for Customer Claims and warranties (net) (Pro?t) / Loss on sale of Fixed Assets (net) Finance costs Net unrealised exchange (gain) / loss Expense on employee stock option scheme Interest Income Dividend income Net (pro?t) / loss on sale of current investments Decrease in fair value of current investments Operating pro?t before working capital changes Adjustments for (increase) / decrease in operating assets and liabilities: Trade receivables (including Finance lease) and short term loans and advances Trade payables and other current liabilities Settlement Fees received Cash generated from operations Net income tax (paid) / refunds Net cash ?ow from / (used in) operating activities (A) B Cash ?ow from investing activities Capital expenditure on ?xed assets, including capital advances Proceeds from sale of ?xed assets Purchase of current Investments Sale of current investments Purchase of Government Bonds/Securities Sales of Government Bond/Securities Purchase of long-term investments in subsidiary Interest received from others Net cash ?ow from / (used in) investing activities (B) (2,958) 9 (1,506) 313 (141) 79 (4,203) (1,534) 21 (226) 316 (12) 11 90 (1,334) (1,271) 1,497 226 9,588 (2,471) 7,117 (3,009) (111) 377 (2,743) 6,724 (2,087) 4,637 1,613 (2,065) 197 (97) (0) 1,026 851 412 (79) (31) (2) 0 1,825 9,362 1,435 (2,217) 159 90 (11) 1,113 164 69 (90) (19) (1) (0) 692 9,466 7,537 8,774 Year ended March 31, 2012 Year ended March 31, 2011
88
CONSOLIDATED CASH FLOW FOR THE YEAR ENDED MARCH 31, 2012 (Contd.)
` in Million Particulars C Cash ?ow from ?nancing activities Proceeds from issue of equity shares and application money Dividend (including dividend tax) paid Proceeds from short term borrowings Repayment of short term borrowings Finance cost Net cash ?ow from / (used in) ?nancing activities (C) Net increase / (decrease) in Cash and cash equivalents (A+B+C) Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Year ended March 31, 2012 118 (591) 23,541 (25,331) (911) (3,174) (260) 2,649 2,389 Year ended March 31, 2011 260 (508) 12,024 (13,584) (1,059) (2,867) 436 2,213 2,649
Notes : 1 Purchase of ?xed assets are stated inclusive of movements of capital work in progress between the commencement and end of the year and are considered as part of investing activity. 2 Cash and cash equivalents : Cash and Bank balances* Unrealised loss/(gain) on foreign currency Less Fixed deposits with original maturity over three months Total Cash and cash equivalents * Cash and cash equivalents comprises a) In current accounts b) In deposit accounts with original maturity of less than three months c) In earmarked accounts March 31, 2012 2,418 (29) 2,389 2,107 306 5 2,418 March 31, 2011 2,665 (16) 0 2,649 2,340 321 4 2,665
3
Cash and cash equivalents include equity Share application money of ` 0 Million (previous year: ` 0 Million) and Unclaimed dividend of ` 5 Million (previous year: ` 4 Million) In terms of our report attached For Deloitte Haskins & Sells For Tech Mahindra Limited Chartered Accountants Anand G. Mahindra Vineet Nayyar Chairman Vice Chairman & Managing Director Hemant M. Joshi Hon. Akash Paul Anupam Puri Bharat Doshi Partner Director Director Director B.H. Wani M. Damodaran Paul Zuckerman Director Director Director Dr. Raj Reddy Ravindra Kulkarni Ulhas N. Yargop Director Director Director Sonjoy Anand Anil Khatri Chief Financial Of?cer Company Secretary Noida, Dated: May 23, 2012 Noida, Dated: May 23, 2012
89
ANNUAL REPORT 2011 - 2012
Notes forming part of the Consolidated Balance Sheet and Statement of Pro?t and Loss
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2012 1. Signi?cant accounting policies: (a) Basis for preparation of accounts: The accompanying Consolidated Financial Statements of Tech Mahindra Limited (TML) and its subsidiaries (together constitute “the Group”) have been prepared to comply with generally accepted accounting principles applicable in India, the relevant provisions of the Companies Act, 1956 and the Accounting Standards to the extent possible in the same format as that adopted by the holding company for its separate ?nancial statements. The ?nancial statements of the subsidiaries used in the consolidation are drawn up to the same reporting date as that of the holding company. (b) Principles of consolidation: The ?nancial statements of the holding company and its subsidiaries have been consolidated on a line by line basis by adding together like items of assets, liabilities, income, expenses, after eliminating intra-group transactions and any unrealized gains or losses in accordance with the Accounting Standard - 21 on “Consolidated Financial Statements” (AS 21). The ?nancial statements of the holding company and its subsidiaries have been consolidated using uniform accounting policies for like transactions and other events in similar circumstances. The excess of cost of investments in the subsidiary company/s over the share of the equity of the subsidiary company/s at the date on which the investment in the subsidiary company/s is made is recognised as ‘Goodwill on Consolidation’ and is grouped with Fixed Assets in the Consolidated Financial Statements. Alternatively, where the share of equity in the subsidiary company/s as on the date of investment is in excess of cost of the investment, it is recognised as ‘Capital Reserve’ and grouped with ‘Reserves and Surplus’, in the Consolidated Financial Statements. Minority interest in the net assets of the consolidated subsidiaries consists of the amount of equity attributable to the minority shareholders at the dates on which investments are made in the subsidiary company/s and further movements in their share in the equity, subsequent to the dates of investments. Minority interest also includes share application money received from minority shareholders. The losses in subsidiary/s attributable to the minority shareholder are recognised to the extent of their interest in the equity of the subsidiary/s. Investment in an entity in which the Group has signi?cant in?uence but not a controlling interest, is reported according to the equity method i.e. the investment is initially recorded at cost in accordance with Accounting Standard 23 “Accounting for Investments in associates in Consolidated Financial Statements”. The carrying amount of the investment is adjusted thereafter for the post acquisition change in the Company’s share of net assets of the associate. The excess of cost of investment in associate, over the net assets at the date of acquisition of the investment in the associate is separately disclosed in the investment schedule as Goodwill. (c) Use of Estimates: The preparation of Consolidated Financial Statements, in conformity with the generally accepted accounting principles, requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of ?nancial statements and the reported amounts of revenues and expenses during the reported twelve months. Differences between the actual results and estimates are recognised in the year in which the results are known/ materialised. (d) Fixed Assets including intangible assets Fixed assets are stated at cost less accumulated depreciation. Costs comprise of purchase price and attributable costs, if any. (e) Leases: Assets taken on lease by TML are accounted for as ?xed assets in accordance with Accounting Standard 19 on “Leases”, (AS 19). (i) Finance lease Where TML, as a lessor, leases assets under ?nance leases such amounts are recognised as receivables at an amount equal to the
90
net investment in the lease and the ?nance income is based on constant rate of return on the outstanding net investment. Assets taken on ?nance lease are accounted for as ?xed assets at fair value. Lease payments are apportioned between ?nance charge and reduction of outstanding liability. (ii) Operating lease Lease arrangements under which all risks and rewards of ownership are effectively retained by the lessor are classi?ed as operating lease. Lease rental under operating lease are recognised in Statement of Pro?t and Loss on straight line basis. (f) Depreciation / Amortisation of ?xed assets: (i) The Group computes depreciation of all ?xed assets including for assets taken on lease using the straight-line method based on estimated useful lives. Depreciation is charged on a pro-rata basis for assets purchased or sold during the year. Management’s estimate of the useful life of ?xed assets is as follows: Buildings 28 years* Computers 3 years Plant and machinery 5 years Furniture and ?xtures 5 years Vehicles 3-5 years Of?ce Equipments 5 years *Refer foot note 1 of Note 11 of Fixed Assets (ii) Leasehold land is amortised over the period of lease. (iii) Leasehold improvements are amortised over the period of lease or expected period of occupancy whichever is less. (iv) Intellectual property rights are amortised over a period of seven years. (v) Assets costing up to ` 5,000 are fully depreciated in the year of purchase. (vi) The cost of software purchased for internal use is capitalized and depreciated in full in the month in which it is put to use. (g) Impairment of Assets: At the end of each year, the Group determines whether a provision should be made for impairment loss on assets by considering
the indications that an impairment loss may have occurred in accordance with Accounting Standard 28 on ‘‘Impairment of Assets’’. Where the recoverable amount of any asset is lower than its carrying amount, a provision for impairment loss on assets is made for the difference. Recoverable amount is the higher of an asset’s net selling price and value in use. In assessing value in use, the estimated future cash ?ows expected from the continuing use of the asset and from its disposal are discounted to their present value using a pre-tax discount rate that re?ects the current market assessments of time value of money and the risks speci?c to the asset. Reversal of impairment loss if any is recognised immediately as income in the Statement of Pro?t and Loss. (h) Investments: Long-term investments are carried at cost. Provision is made to recognise a decline other than temporary in the carrying amount of long term investments. Current investments are carried at lower of cost and fair value. (i) Inventories : Components and parts: Components and parts are valued at lower of cost and net realizable value. Cost is determined on First – In – First Out basis. Finished Goods: Finished goods are valued at the lower of the cost or net realisable value. Cost is determined on First-In-First Out basis. (j) Revenue recognition: Revenue from software services and business process outsourcing services include revenue earned from services rendered on ‘time and material’ basis, time bound ?xed price engagements and system integration projects. All revenues from services, as rendered, are recognised when persuasive evidence of an arrangement exists, the sale price is ?xed or determinable and collectability is reasonably assured and are reported net of sales incentives, discounts based on the terms of the contract and applicable indirect taxes. The Group also performs time bound ?xed price engagements, under which revenue is recognised using the proportionate completion method of accounting, unless work completed cannot be reasonably
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ANNUAL REPORT 2011 - 2012
estimated. Provision for estimated losses, if any on uncompleted contracts are recorded in the year in which such losses become probable based on the current contract estimates. The cumulative impact of any revision in estimates of the percentage of work completed is re?ected in the year in which the change becomes known. Liquidated damages and penalties are accounted as per the contract terms wherever there is a delayed delivery attributable to the Group and when there is a reasonable certainty with which the same can be estimated. Revenues from the sale of software and hardware products are recognised upon delivery/deemed delivery, which is when title passes to the customer, along with risk and reward. Unbilled revenues comprise revenues recognised in relation to efforts incurred, not billed as of the period end, where services are performed in accordance with agreed terms. The Group recognizes unearned ?nance income as ?nancing revenue over the lease term using the effective interest method. Dividend income is recognised when the Group’s right to receive dividend is established. Interest income is recognised on time proportion basis. (k) (a) Foreign currency transactions: ` Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transaction. Monetary items are translated at the period end rates. The exchange difference between the rate prevailing on the date of transaction and on the date of settlement as also on translation of monetary items at the end of the period is recognised as income or expense, as the case may be. Any premium or discount arising at the inception of the forward exchange contract is recognised as income or expense over the life of the contract, except in the case where the contract is designated as a Cash Flow Hedge. (b) Derivative instruments and hedge accounting: The Group uses foreign currency forward contracts / options to hedge its risks associated with foreign currency ?uctuations relating to certain
forecasted transactions. Effective April 01, 2007, the Group designates some of these as cash ?ow hedges applying the recognition and measurement principles set out in the Accounting Standard 30 “Financial Instruments: Recognition and Measurements” (AS-30). The use of foreign currency forward contracts/options is governed by the Group’s policies approved by the Board of Directors, which provide written principles on the use of such ?nancial derivatives consistent with the Group’s risk management strategy. The counter party to the Group`s foreign currency forward contracts is generally a bank. The Group does not use derivative ?nancial instruments for speculative purposes. Foreign currency forward contract/ option derivative instruments are initially measured at fair value and are re-measured at subsequent reporting dates. Changes in the fair value of these derivatives that are designated and effective as hedges of future cash ?ows are recognised directly in reserves and the ineffective portion is recognised immediately in Statement of Pro?t and Loss. The accumulated gains and losses on the derivatives in reserves are transferred to Statement of Pro?t and Loss in the same period in which gains or losses on the item hedged are recognised in Statement of Pro?t and Loss. Changes in the fair value of derivative ?nancial instruments that do not qualify for hedge accounting are recognised in the Statement of Pro?t and Loss as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer quali?es for hedge accounting. When hedge accounting is discontinued for a cash ?ow hedge, the net gain or loss will remain in reserves and be reclassi?ed to Statement of Pro?t and Loss in the same period or periods during which the formerly hedged transaction is reported in Statement of Pro?t and Loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in reserves is transferred to Statement of Pro?t and Loss.
92
(l)
Translation and Accounting of Financial Statement of Foreign subsidiaries : In respect of foreign subsidiaries, the Group has classi?ed all of them as “Integral Foreign Operations” in terms of AS 11 with effect from April 01, 2009. The subsequent exchange differences arising on account of such translation is taken to Statement of Pro?t and Loss. The ?nancial statements of the foreign subsidiaries for the purpose of consolidation are translated to Indian Rupees as follows: a. All incomes and expenses are translated at the average rate of exchange prevailing during the year. Assets and liabilities are translated at the closing rate as on the Balance sheet date. The resulting exchange differences are accumulated in currency translation reserve till March 31, 2009, which is shown under Reserves & Surplus. c)
employees’ salary (currently at 12% of the basic salary) and super annuation contributions, which are charged to the Statement of Pro?t and Loss on accrual basis. The provident fund contributions are paid to the Regional Provident Fund Commissioner by TML and its Indian subsidiaries. The TML and its Indian subsidiaries have no further obligations for future provident fund and superannuation fund bene?ts other than its annual contributions. Compensated absences: The Group provides for the encashment of leave subject to certain group`s rules. The employees are entitled to accumulate leave subject to certain limits, for future encashment or availment. The liability is provided based on the number of days of un-availed leave at each balance sheet date on the basis of an independent actuarial valuation using the Projected Unit Credit method for TML and its Indian subsidiaries, whereas provision for encashment of unavailed leave on retirement is made on actual basis for Tech Mahindra (Americas) Inc. (TMA), Tech Mahindra GmbH (TMGMBH) and Tech Mahindra (Singapore) Pte. Ltd. (TMSL). TML does not expect the difference on account of varying methods to be material. Actuarial gains and losses are recognised in full in the Statement of Pro?t and Loss in the year in which they occur. The Group also offers a short term bene?t in the form of encashment of unavailed accumulated leave above certain limit for all of its employees and same is being provided for in the books at actual cost. d) Other short term employee bene?ts: Other short-term employee bene?ts, including overseas social security contributions and performance incentives expected to be paid in exchange for the services rendered by employees, are recognised during the period when the employee renders the service. Borrowing costs: Borrowing costs that are attributable to the acquisition or construction of qualifying
b. c.
(m) Employee Retirement Bene?ts: a) Gratuity : The Group accounts for its gratuity liability, a de?ned retirement bene?t plan covering eligible employees. The Gratuity plan provides for a lump sum payment to employees at retirement, death, incapacitation or termination of the employment based on the respective employee’s salary and the tenure of the employment. Liabilities with regard to a Gratuity plan are determined based on the actuarial valuation carried out by an independent actuary as at the Balance Sheet date using the Projected Unit Credit method for TML and its Indian subsidiaries. Actuarial gains and losses are recognised in full in the Statement of Pro?t and Loss in the year in which they occur. (refer note 28 below) b) Provident fund: The eligible employees of TML and its Indian subsidiaries are entitled to receive the bene?ts of Provident fund, a de?ned contribution plan, in which both employees and TML and its Indian subsidiaries make monthly contributions at a speci?ed percentage of the covered
93
ANNUAL REPORT 2011 - 2012
assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are charged to revenue. (o) Taxation: Tax expense comprises of current tax and deferred tax. Current tax is measured at the amount expected to be paid to/recovered from the tax authorities, based on estimated tax liability computed after taking credit for allowances and exemption in accordance with the local tax laws existing in the respective countries. Minimum Alternative Tax (MAT) paid in accordance with the tax laws, which gives rise to future economic bene?ts in the form of adjustment of future income tax liability is considered as an asset if there is convincing evidence that the Group will pay normal tax after the tax holiday period. Accordingly, it is recognised as an asset in the Balance Sheet when it is probable that the future economic bene?t associated with it will ?ow to the Group and the asset can be measured reliably. Deferred tax assets and liabilities are recognised for future tax consequences attributable to timing differences between taxable income and accounting income that are capable of reversal in one or more subsequent years and are measured using relevant enacted tax rates. The carrying amount of deferred tax assets at each Balance Sheet date is reduced to the extent that it is no longer reasonably certain that suf?cient future taxable income will be available against which the deferred tax asset can be realized. Tax on distributed pro?ts payable in accordance with the provisions of the
Income Tax Act, 1961 is disclosed in accordance with the Guidance Note on Accounting for Corporate Dividend Tax issued by the Institute of Chartered Accountants of India (ICAI). (p) Employee Stock Option Plan: Stock options granted to the employees are accounted as per the accounting treatment prescribed by the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999 (“ESOP Guidelines”) issued by Securities and Exchange Board of India (“SEBI”) and the Guidance Note on Accounting for Employee Share-based Payments, issued by the ICAI. Employees eligible for Employee Stock Option Plan 2010 are granted an option to purchase shares of TML at predetermined exercise price. These options vest over a period of three years from the date of grant. The stock compensation cost is computed under the intrinsic value method and amortized on a straight line basis over the total vesting period of three years. (q) Provision, Contingent Contingent Assets: Liabilities and
Provision is recognised, when The Group has a present obligation as a result of arising out of past events and it becomes probable that any out?ow of resources embodying economic bene?ts will be required to settle the obligation, in respect of which a reliable estimate can be made. Contingent liabilities are not recognised in the ?nancial statement. A Contingent asset is neither recognised nor disclosed in ?nancial statements.
94
Note 2: Share Capital Share Capital Authorised Equity Shares of ` 10/- each Issued, Subscribed & Paid up Equity Shares of ` 10/- each As at March 31, 2012 Number ` Million 175,000,000 127,486,541 127,486,541 1,750 1,275 1,275 As at March 31, 2011 Number ` Million 175,000,000 125,955,481 125,955,481 1,750 1,260 1,260
Disclosure pursuant to Part I of Schedule VI to the Companies Act, 1956 Reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period: Particulars March 31, 2012 Equity Shares ` Number 125,955,481 1,259,554,810 1,531,060 15,310,600 127,486,541 1,274,865,410 March 31, 2011 Equity Shares ` Number 122,320,114 1,223,201,140 3,635,367 125,955,481 36,353,670 1,259,554,810
Shares outstanding at the beginning of the year Shares Issued during the year Shares outstanding at the end of the year
No of shares held by each shareholder holding more than 5 percent equity shares of the Company are as follows: Name of Shareholder March 31, 2012 No. of % of Holding Shares held 60,676,252 47.59 29,546,923 23.18 7,114,140 5.58 March 31, 2011 No. of % of Holding Shares held 60,676,252 48.17 29,546,923 23.46 6,753,525 5.36
Mahindra & Mahindra Limited British Telecommunications PLC Life Insurance Corporation of India
Information about bonus shares issued by capitalisation of free reserves. Amount in ` Particulars As at March 31, March 31, March 31, March 31, March 31, March 31, 2012 2011 2010 2009 2008 2007 Aggregate No. of Equity Shares : Fully paid up equity shares of ` 2 each issued by way of bonus shares by capitalisation of a) Balance in Statement of Pro?t and Loss b) Balance in General reserve Refer note 33 for stock options. The Company has only one class of shares referred to as equity shares having a par value of ` 10/-. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. The Board of Directors in their meeting on 23rd May, 2012 proposed a ?nal dividend of ` 4 per equity share. The proposal is subject to approval of shareholders at the Annual General Meeting to be held on 10th August, 2012. 51,000,100 51,000,100 51,000,100 51,000,100 51,000,100 51,000,100 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000
95
ANNUAL REPORT 2011 - 2012
Note 3: Reserves and Surplus As at March 31, 2012 a. Capital Reserve Opening Balance Add: Additions during the year (refer note 23(c)) Closing Balance Securities Premium Account Opening Balance Add: Received during the year from exercise of stock options Closing Balance Debenture Redemption Reserve Opening Balance Add: Transfer from statement of Pro?t and Loss (net) Closing Balance Share Options Outstanding Account (refer note 1(p)) Opening Balance Add: Amortised amount of stock compensation cost Closing Balance Statutory Reserve (refer note 41) Opening Balance Add: Movement during the year f. Closing Balance Currency Translation Reserve As per last Balance Sheet (refer note 1 (l)) Add: Movement during the year Closing Balance General Reserve Opening Balance Add: Transfer from statement of Pro?t and Loss Closing Balance Hedging Reserve (refer note 36) Opening Balance Add: Movement during the year (net) Closing Balance Surplus in Statement of Pro?t and Loss Opening balance Add: Net Pro?t for the year Less: Final Dividend (refer note 44) Less: Proposed Final Dividend (refer note 2) Less: Tax on Dividend (refer note 2 and 44) Less: Transfer to Debenture redemption reserve (net) Less: Transfer to General reserve Closing Balance 55 55 2,599 103 2,702 2,637 1,353 3,990 69 412 481 3 3 105 105 4,451 1,000 5,451 412 (3,947) (3,535) 21,977 10,955 4 510 83 1,353 1,000 29,982 39,234 ` in Million As at March 31, 2011 2,374 225 2,599 1,935 702 2,637 69 69 3 3 105 105 3,451 1,000 4,451 1,942 (1,530) 412 17,830 6,442 6 504 83 702 1,000 21,977 32,254
b.
c.
d.
e.
g.
h.
i.
96
Note 4: Long Term Borrowings ` in Million As at March 31, 2012 (a) Secured Debentures (i) 10.25% (Previous Year: 10.25%) Privately placed Non-Convertible Debentures (Due for redemption on 17th April 2014, at par) 3,000 3,000 As at March 31, 2011
(ii) 10.25% (Previous Year: 10.25%) Privately placed Non-Convertible Debentures (Due for redemption on 17th April 2013, at par) (The above debentures are secured by pari passu charge over the immovable property located in Gujrat. The Company has also deposited the title deeds of certain other immovable properties of the Company with the debenture trustees.) (b) Unsecured Term Loan from Bank
3,000
3,000
6,000
400 6,400
Note 5: Other Long Term Liabilities (a) Deferred revenue (refer note 27) (b) Fair values of foreign exchange forward and currency option contracts (refer note 36) (c) Deposits (d) Others 1,708 2,543 6 38 4,295 3,772 107 5 33 3,917
Note 6: Long Term Provisions Provision for employee bene?ts (refer note 28) 1,886 1,886 Note 7: Short Term Borrowings Secured Loans from Bank Cash credit * Unsecured Loans from Banks Export Packing credit ** *Cash credit is secured by charge over current assets, present and future, including receivables. ** Due for repayment within 6 months from date of disbursement of loan. 5,266 5,427 5,160 5,427 106 1,458 1,458
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ANNUAL REPORT 2011 - 2012
Note 8: Trade Payables ` in Million As at March 31, 2012 Sundry Creditors* * Includes ` 711 Million (previous year: ` 588 Million) due to Satyam Computer Services Limited, an associate company ` 71 Million (previous year: ` 88 Million) due to Satyam BPO Limited, an associate company ` 1 Million (previous year: ` Nil) due to Satyam Computer Services (Shanghai) Co. Limited an associate Company 3,649 Note 9: Other Current Liabilities (a) Current maturities of long term debt (b) Deferred Revenue (refer note 27) (c) Interest accrued but not due on borrowings (d) Fair values of foreign exchange forward and currency option contracts (refer note 36) (e) Advance from customers (f) Unearned revenue (g) Unpaid dividends (h) Accrued salaries and bene?ts (i) Others* 2,065 601 1,163 115 153 5 1,350 628 6,080 * Others mainly include withholding and other taxes payable. Note 10: Short Term Provisions (a) Provision for employee bene?ts (refer note 28) (b) Provision for Dividend (c) Provision for Dividend Tax (d) Provision for Taxation 432 510 83 481 1,506 237 504 82 798 1,621 400 2,065 589 94 63 4 1,661 706 5,582 2,474 3,649 As at March 31, 2011 2,474
98
Note 11: Fixed Assets
` in Million Gross Block Accumulated Depreciation / Amortisation Net Block Cost as at Additions Deletions Balance as As at For the Deductions Upto As at As at April 01, during the during the at March April 01, year during the March 31, March 31, March 31, 2011 year year 31, 2012 2011 year 2012 2012 2011
176 425 4,103 2,550 1,593 48 2,517 440 822 12,674 33 76 148 148 2,277 1,572 556 101 148 257 14,505 12,783 46 6,613 5,269 85 115 1,613 1,435 76 46 30 33 547 91 76 85 161 7,680 6,613 33 0 63 96 6,825 1,671 8,496
254 577 452 145 17 344 51 290 2,129
29 37 2 264 0 223 556
176 678 4,680 2,973 1,701 63 2,596 491 889 14,247
36 1,334 1,351 1,007 38 2,083 239 479 6,567
24 131 476 230 8 308 80 241 1,498
23 34 2 264 0 223 547
60 1,465 1,803 1,203 43 2,128 320 497 7,518
176 618 3,215 1,170 498 20 468 171 392 6,729
176 389 2,769 1,199 586 11 433 201 343 6,107 33 30 63 6,170 608 6,778
a Tangible Assets Freehold Land Leasehold Land Buildings Plant and Equipment Furniture and Fixtures Vehicles Computers Of?ce Equipments Leasehold Improvements Total b Intangible Assets Goodwill on consolidation Intellectual property rights Software Total Grand Total (a+b) Previous year c Capital Work In Progress Total
109 12,783 11,312
Notes:
1.
2.
The useful life of Buildings has been revised from 15 years to 28 years with effect from 1st April 2011. The net book value of these ?xed assets as at 31st March 2011 is being depreciated over the revised remaining useful life of the assets. As a result of this change, depreciation charge for the year ended 31st March 2012 is lower and the pro?t for the year is higher by ` 159 Million. Depreciation includes accelerated charge of ` 83 Million on assets in a leased premises consequent to the early termination of the lease.
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ANNUAL REPORT 2011 - 2012
Note 12: Non Current Investments ` in Million As at March 31, 2012 Long Term (Unquoted - at cost) Trade : In Subsidiary Companies : 50,000 Equity shares (previous year: 50,000) of Tech Mahindra Foundation of ` 10 each fully paid up In Other Company 1,603,380 E1 Preference shares (previous year: 1,603,380) of Servista Limited of GBP 0.002 each fully paid up 896,620 E2 Preference shares (previous year: 896,620) of Servista Limited of GBP 0.002 each fully paid up 4,232,622 Ordinary shares (previous year: 4,232,622) of Servista Limited of GBP 0.002 each fully paid up Less: Provision for Diminution (refer note 26) Long Term (Quoted- at cost) Trade: 501,843,740 (previous year: 501,843,740) equity shares of Satyam Computer Services Limited of ` 2/- each, fully paid up # # includes Goodwill of ` 24,777 Million (previous year: ` 24,777 Million) and cumulative group share of post acquisition pro?t/loss (net) of ` 4,574 Million (previous year loss (net) of ` 996 Million) (refer note 40) Long Term (Unquoted - at cost) Non Trade : Treasury Bills & Government Bonds (refer note1 below) 1 1 34,271 Market value of quoted investment Note : As per statutory requirements for overseas branches As at March 31, 2012 Aggregate amount of quoted investments Aggregate amount of provision for diminution in value of investments Statement showing percentage of holding Name of the Body Corporate Satyam Computer Services Limited As at March 31, 2012 42.64% As at March 31, 2011 42.65% 34,269 85 As at March 31, 2011 28,699 85 40,449 1 1 28,701 32,971 34,269 28,699 54 30 54 30 1 1 As at March 31, 2011
1 85 85 1
1 85 85 1
100
Note 13: Long Term Loans and Advances As at March 31, 2012 Unsecured, considered good unless otherwise stated a. Capital Advances Considered good Considered doubtful Less: Provision b. Security Deposits Considered good Considered doubtful Less: Provision c. d. e. f. g. VAT credit receivable Advance Income Taxes (Net of provisions) Advance Fringe Bene?t Tax (Net of provisions) Long term lease receivable - Secured (refer note 35) Advances recoverable in cash or in kind for value to be received ` in Million As at March 31, 2011
122 5 127 5 122 679 15 694 15 679 10 1,851 16 706 3,384
497 5 502 5 497 620 9 629 9 620 27 1,273 7 1,112 610 4,146
Note 14 : Current Investments (Unquoted) Non Trade : Investment in Mutual Fund 310,252 (previous year: 289,659) units of ` 100.04 (previous year: ` 100.02) each of ICICI Prudential Floating Rate Plan D-Daily Dividend Nil (previous year: 11,613,267) units of ` Nil (previous year: ` 10.13) each of Birla Sunlife Short Term Fund - Inst - Fortnightly Dividend 601,500.17 (Previous year: Nil) units of ` 1000.25 IDFC Cash Fund - Super Inst Plan C - Daily Dividend plan 6,003,769.20 (Previous year: Nil) units of ` 100.20 Birla Sun Life Cash Plus Inst - Prem. Daily Dividend - Reinvestment plan 5,000,000 (Previous year: Nil) units of ` 10.00 IDFC Fixed Maturity Quarterly Series 69 Dividend Plan 5,006,861 (Previous year: Nil) units of ` 10.00 IDFC Fixed Maturity Quarterly Series 70 Dividend Plan 5,000,000 (Previous year: Nil) units of ` 10.00 DSP Black Rock FMP - Series 35 - 3M Plan Nil (previous year: 5,000,000) units of ` Nil (previous year: ` 10.00) each of Birla Sun Life Fixed Term Plan - series CP - Growth option 5,499,850 (previous year: Nil) units of ` 10.00 (previous year: ` Nil) each of Birla Sun Life Fixed Term Plan - series EM - Growth option Nil (previous year: 7,683,056) units of ` Nil (previous year: ` 10.01) each of Birla Sunlife Savings Fund - Inst - Weekly Dividend - Reinvestment 824,625 (previous year: Nil) units of ` 100.13 (previous yea: ` Nil) each of Birla Sunlife Savings Fund - Inst - Weekly Dividend - Reinvestment
31 602 601 50 50 50 55 83
29 118 50 77 -
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ANNUAL REPORT 2011 - 2012
Note 14 : Current Investments (Unquoted) (Contd.) As at March 31, 2012 Nil (previous year: 6,124,372) units of ` Nil (previous year: ` 10.00) each of Reliance Fixed Horizon Fund- XVIII Series 3 Dividend Plan 38,533 (previous year: Nil) units of ` 1,001.37 (previous year: ` Nil) each of Reliance Money Manager Fund - Inst - option Daily Dividend Plan 4,433,314 (previous year: 4,433,314) units of ` 10.00 (previous year: ` 10.00) each of Kotak Quarterly Interval Plan Series I Dividend 39 ` in Million As at March 31, 2011 61 -
44 1,605
44 379 (0) 379 379
Provision for Diminution in value of current Investment
(0) 1,605
Aggregate amount of unquoted investments
1,605
Note 15: Inventories Raw Materials and components 2 2 6 6
Note 16: Trade Receivables Trade Receivables (Unsecured) (a) Over six months (i) Considered good* 211 400 351 225
(ii) Considered doubtful (b) Others (i) Considered good**
12,961 211 13,783
10,010 10,586 225 10,361
(ii) Considered doubtful
Less: Provision for doubtful debts
611 13,172
1. * Net of advances aggregating to ` 184 Million (previous year: ` 166 Million) pending adjustments with invoices 2. ** Net of advances aggregating to ` 464 Million (previous year: ` 314 Million) pending adjustments with invoices
102
Note 17: Cash and Cash Equivalents ` in Million As at March 31, 2012 (a) Cash and Cash equivalents As at March 31, 2011
Balances with banks In current accounts In deposit accounts 2,107 306 2,413 (b) Earmarked balances with banks 5 2,418 2,340 321 2,661 4 2,665
Note 18: Short Term Loans and Advances (Unsecured, considered good unless otherwise stated)
a. b.
Unbilled revenue Fair values of foreign exchange forward and currency option contracts (refer note 1 k (b)) MAT Credit entitlement Balance with Excise and Customs Lease receivable - Considered doubtful (refer note 31) Less : Provision
2,124 -
2,206 877
c. d. e.
240 1,278 231 231 -
471 1,032 866 866
f.
Advances recoverable in cash or in kind or for value to be received Considered good Considered doubtful 1,203 97 1,300 Less : Provision 97 1,203 4,845 1,427 43 1,470 43 1,427 6,879
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ANNUAL REPORT 2011 - 2012
Note 19: Other Income ` in Million Year ended March 31, 2012 (a) Interest on: Deposit with banks Others 11 68 79 (b) Foreign exchange gain / (loss) - Net (c) Rent Income (d) Dividend received (e) Pro?t on sale of Current Investments (f) Sundry balances written back (g) Miscellaneous income 594 66 31 2 133 77 982 45 45 90 907 79 19 1 80 112 1,288 Year ended March 31, 2011
Note 20: Employee Bene?ts Expenses (a) Salaries and Bonus (b) Contribution to Provident and other funds (c) Gratuity (Refer note 28) (d) Employee stock compensation cost (e) Staff welfare expenses 25,525 1,425 287 412 1,032 28,681 21,776 1,296 188 69 787 24,116
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Note 21: Operating and Other Expenses ` in Million Year ended March 31, 2012 Power & Fuel Rent Rates and taxes Communication expenses Travelling expenses Recruitment expenses Training Hire charges Sub-contracting costs (net) Professional and Legal fees ( refer note 29 ) Repairs and maintenance : Buildings (including leased premises) Machinery Others Insurance Software, hardware and project speci?c expenses * Claims and warranties (net) (refer note 42) Advertising, marketing and selling expenses (Pro?t) / Loss on sale of ?xed assets (net) Excess of cost over fair value of current investments Provision for doubtful debts and Bad debts (net) Provision for doubtful advances Advances / bad debts written off Cost of materials consumed Donations Miscellaneous expenses 127 289 127 543 626 1,789 (97) 69 (0) 0 232 (35) 81 5 69 598 17,022 *(Includes ` Nil (previous year: ` 2,871 Million) for a customer speci?c project under ?nance lease) Note 22: Finance Cost Interest expense: On long term loans On working capital loans / cash credit Other borrowing costs Foreign currency translations 617 156 773 3 250 1,026 698 293 991 8 114 1,113 94 249 159 502 474 3,846 90 70 (11) (0) 130 29 8 15 100 540 17,252 564 1,285 112 739 3,548 96 119 343 5,802 534 Year ended March 31, 2011 524 1,031 83 739 3,487 59 59 228 4,946 304
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ANNUAL REPORT 2011 - 2012
Notes on Accounts:
23 (a) The consolidated ?nancial statements present the consolidated accounts of the Group, which consists of accounts of TML and its following subsidiaries: Name of the Subsidiary Company Tech Mahindra (Americas) Inc. (TMA) Tech Mahindra GmbH (TMGMBH) Tech Mahindra (Singapore) Pte. Limited. (TMSL) Tech Mahindra (Thailand) Limited (TMTL) PT Tech Mahindra Indonesia (TMI) CanvasM Technologies Limited (CTL) and its following subsidiary: CanvasM (Americas) Inc. (CAI) Refer note (c) below Tech Mahindra (Malaysia) SDN. BHD. (TMM) Tech Mahindra (Beijing) IT Services Limited (TMB) Venturbay Consultants Private Limited (VCPL) Mahindra Logisoft Business Solutions Limited (MLBSL) Tech Mahindra (Bahrain) Limited. S.P.C.(TMBL) Tech Mahindra Brasil Servicecos De Informatica Ltda (TMBSDIL) Refer note (e) below Tech Talenta Inc. (TTI) Refer note (f) below b) Country of Extent of Holding (%) incorporation as on March 31, 2012 United States of America Germany Singapore Thailand Indonesia India United States of America Malaysia China India India Bahrain Brazil United States of America 100 % 100 % 100 % 100% 100% 100% (with effect from 3rd February 2012) 100% (with effect from 3rd February 2012) 100% 100% 100% 100% 100% 100% 100% 100% (With effect from 6th March 2012)
Tech Mahindra (Nigeria) Limited (TMNL) Refer note (d) below Nigeria
TML has an investment in a subsidiary company viz. Tech Mahindra Foundation (TMF). TMF has been incorporated primarily for charitable purposes. TMF is not consolidated as a subsidiary as it can apply its income for charitable objects only and cannot pay dividend or transfer funds to its parent. During the year ended March 31, 2012, the TML has purchased by way of private arrangement 1,147,699 equity shares of CanvasM Technologies Limited at a consideration of ` 141 Million representing balance 19.90% stake from Motorola Cyprus Holdings Ltd. With this, CanvasM Technologies Limited has become 100% subsidiary of TML with effect from 3rd February 2012. Consequently CanvasM (Americas) Inc. has also become 100% step down subsidiary of TML with effect from 3rd February 2012. TML has infused additional capital of ` 41 Million into TMNL and given a loan of ` 45 Million during the year ended March 31, 2012. TMBSDIL was incorporated on July 21, 2010 and TML is yet to infuse share capital into TMBSDIL and there have been no transactions for the period April 1, 2011 to March 31, 2012. TTI was incorporated on March 6, 2012 and TMA is yet to infuse share capital into TTI and there have been no transactions for the period March 6, 2012 to March 31, 2012.
c)
d) e) f)
24. The estimated amount of contracts remaining to be executed on capital account, (net of capital advances) and not provided for as at March 31, 2012 for TML ` 478 Million (previous year: ` 1,382 Million). 25. Contingent liabilities: i) TML has received demand notices from Income Tax Authorities resulting in a contingent liability of ` 946 Million (previous year: ` 920 Million). This is mainly on account of the following: (a) An amount of ` 140 Million (previous year: ` 123 Million) relating to Transfer pricing adjustment on account of arm’s
106
length transactions; (b) Deduction under Section 10A amounting to ` 790 Million (previous year: ` 781 Million) in relation to adjustment of expenditure in foreign currency being excluded only from Export turnover and not from Total turnover. TML has already won the appeal before the Mumbai ITAT for the Assessment Year 2002-03 & 2003-04. The Income Tax Department has ?led appeal before the High Court. TML has already won the appeal before the CIT (A) for Assessment Year 2004-05, 2005-06 and 2007-08. The Income Tax Department has ?led appeal before ITAT for Assessment Year 2004-05, 2005-2006. For Assessment Year 2007-2008 the Income Tax Department may intend to appeal against the said order before ITAT; (c) an amount of ` 16 Million (previous year: ` 16 Million) relating to Fringe Bene?t Tax. TML has won the appeal before the CIT (A) and the Income Tax Department may intend to appeal against the said order before ITAT. ii) CTL has received demand notice from Income Tax Authority resulting in a contingent liability of ` 25 Million (previous year: ` Nil). This is mainly in relation to Transfer pricing adjustment on account of arm’s length transactions. CTL has appealed before Appellate Authority and is hopeful of succeeding in the same.
iii) TML has received demand notices from Sales Tax Authorities for ` 18 Million (previous year: ` 18 Million) towards Software services classi?ed under Works Contract Act for the ?nancial year 2005-06 to 2008-09. TML has ?led an appeal before the Joint Commissioner of Commercial Tax (JCCT). The Joint Commissioner of Commercial Taxes (JCCT) has allowed the said Appeal vide its order dated December 30, 2011 in favour of TML. The JCCT has directed the Dy. Commissioner of Commercial Taxes to issue a revised demand notice in accordance with this order. iv) The Company has received demand / show cause notice / Order from Service Tax Authorities for ` 166 Million (net of provision), (Previous year: ` 90 Million) out of which: a. ` 77 Million (previous year: ` 77 Million) relates to marketing and onsite services rendered by the subsidiaries abroad for the ?nancial years 2004-05 to 2007-08 for erstwhile Tech Mahindra (R & D Services) Limited (TMRDL) and has paid an amount of ` 7 Million (Previous year: ` 7 Million) “Under Protest”. ` 13 Million (previous year: ` 13 Million) towards services provided under Management consultancy services for TML for which TML has ?led an appeal against the same. The Deputy Commissioner of Service Tax (Refunds) has appealed against the Order of Assistant Commissioner of Service Tax towards refund granted ` 76 Million (previous year ` Nil) to TML for the month of October, 2010 by holding a view that the amounts paid by TML under reverse charge as per the provisions of Section 66A of Service Tax Act relate to the input for services rendered by the entities situated abroad and such amounts are not entitled to refund under Rule 5 of the Service Tax Rules, 2004. Against the said appeal the TML had ?led its cross objection, which was rejected by the Commissioner (Appeals). TML prefers an appeal against the said order before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT).
b. c.
v)
The Group has bank guarantees outstanding ` 1,087 Million (previous year: ` 1,140 Million).
vi) Claim on the Group not acknowledged as debts for Stamp duty and other matter are ` 5 Million (previous year: ` 5 Million). The above matter is subject to legal proceeding in the ordinary course of business. In the opinion of the management the legal proceeding, when ultimately concluded, will not have a material effect on result of operations or ?nancial position of the Group. 26. In September 2008, TML had made investment of ` 85 Million for 17.28% of the share capital of Servista Limited a leading European system integrator. With this investment, TML became Servista’s exclusive delivery arm for three years and will assist Servista in securing more large scale European IT off shoring business. The business plan of Servista was adversely affected by the economic downturn and it continued to incur losses and therefore, Servista in June 2009 decided to close down its operations. TML had made provision of ` 85 Million in the year ended March 31, 2010, for diminution in the value of its investments in Servista. Servista is in process of winding up and in the view of the management; TML would have no further unrecorded obligations towards settlement of any further liability. 27. During the year ended March 31, 2010, a customer had restructured long term contracts with TML from April 01, 2009 which involves changes in commercial, including rate reduction and other agreed contract terms. As per the amended contracts the customer had paid TML restructuring fees of ` 9,682 Million. The services under the restructured contracts would continue to be rendered over the life of the contract. The restructuring fees received would be amortized and recognized as revenue over the term of the contract on a straight line basis.
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ANNUAL REPORT 2011 - 2012
An amount of ` 2,005 Million (previous year: ` 2,005 Million) has been recognized as revenue for the year and the balance amount of ` 3,667 Million (previous year: ` 5,672 Million) has been carried forward and disclosed as deferred revenue in the Balance Sheet. In addition, it also includes a part of contract termination fees received from a customer, to the extent there is a continuing customer involvement. 28. Details of employee bene?ts as required by the Accounting Standard 15 (Revised) – Employee Bene?ts are as under: a) De?ned Contribution Plan Amount recognized as an expense in the Statement of Pro?t and Loss for the year ended March 31, 2012 in respect of de?ned contribution plan is ` 885 Million (previous year: ` 759 Million). b) De?ned Bene?t Plan The de?ned bene?t plan comprises of gratuity. The gratuity plan is not funded. Changes in the present value of de?ned obligation representing reconciliation of opening and closing balances thereof and fair value of Trust Fund Receivable (erstwhile TMRDL) showing amount recognized in the Balance Sheet: ` in Million Particulars Projected bene?t obligation, beginning of the year* Service cost Interest cost Actuarial (Gain) / Loss Bene?ts paid Trust Fund Receivable (erstwhile TMRDL)* Projected bene?t obligation, at the end of the year March 31, 2012 922 220 67 3 (115) (35) 1,062 March, 31, 2011 803 203 59 (71) (72) (34) 888
* The Trust fund was created to fund the gratuity liability of the erstwhile TMRDL. After amalgamation of TMRDL with TML, the balance in Trust Fund can be utilized only for the payment of obligation arising for gratuity payable to employees of erstwhile TMRDL. The composition of the Trust Balance as on March 31, 2012 is as follows: ` in Million Particulars Government of India Securities/ Gilt Mutual Funds State Government Securities/ Gilt Mutual Funds Public Sector Unit Bonds Private Sector Bonds / Equity Mutual Funds Mutual Funds Bank Balance Total March 31, 2012 9 5 13 0 0 8 35 March 31, 2011 9 5 14 0 1 5 34 ` in Million Particulars Net gratuity cost Service cost Interest cost Expected return on plan Assets Actuarial (Gain) / loss Total March 31, 2012 220 67 (3) 3 287 March 31, 2011 203 59 (3) (71) 188
Components of expenses recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012:
108
Experience Adjustments ` in Million Particulars 1. 2. 3. 4. 5. 6. De?ned Bene?t Obligation Fair value of plan assets Surplus/(De?cit) Experience adjustment on plan liabilities [Gain/(Loss)] Experience adjustment on plan assets [Gain/(Loss)] Actuarial gain / (loss) due to change on assumptions March 31, 2012 (1,097) 35 (1,062) 23 (1) (25) March 31, 2011 (922) 34 (888) 75 (1) (2) March 31, 2012 8.6 % 11% for the 1st Year 9% thereafter March 31, 2010 (801) 31 (770) 95 2 31 March 31, 2009 (696) 31 (665) 7 0 11 March 31, 2011 7.7 % 9% for the 1st Year, 8% thereafter
Principal Actuarial Assumptions Discount Rate Rate of increase in compensation levels of covered employees
• •
The discount rate is based on the prevailing market yields of Indian Government Bonds as at the balance sheet date for the estimated terms of the obligations. Salary escalation rates: The estimates of future salary increase is considered taking into account the in?ation, seniority, promotion and other relevant factors. ` in Million
29. Payment to Auditors (net of service tax):
Particulars Audit Fees (Including quarterly audits) For other Services For taxation matters For Reimbursement of Expenses Total 30. Assets taken / given on Lease: a)
March 31, 2012 8 4 1 0 13
March 31, 2011 8 2 1 0 11
TML has taken vehicles on operating lease for a period of three to ?ve years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 28 Million (previous year: ` 26 Million). The future lease payments of operating lease are as follows: ` in Million Particulars Minimum Lease rentals payable (previous year: ` 22 Million and ` 33 Million and ` Nil, respectively) Not later Later than 1 year not Later than than 1 year later than 5 years 5 years 24 37 Nil
b)
Group has taken premises on operating lease for a period of one to ten years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 1,186 Million (previous year: ` 974 Million). The future lease payments of operating lease are as follows:
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ANNUAL REPORT 2011 - 2012
` in Million Particulars Not later Later than 1 year not Later than than 1 year later than 5 years 5 years Minimum Lease rentals payable (previous year: 897 2,439 376 ` 695 Million, ` 1,331 Million and ` 154 Million, respectively) c) Group has taken computer equipments on operating lease for a period of one to ?ve years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 40 Million (previous year: ` 33 Million). The future lease payments of operating lease are as follows: ` in Million Particulars Not later Later than 1 year not Later than than 1 year later than 5 years 5 years Minimum Lease rentals payable (previous year: ` 32 26 36 Nil Million, ` 17 Million and ` Nil, respectively) d) TML has given premises on operating lease for a period of one to ?ve years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 70 Million (previous year: ` 83 Million). The future lease receivable of operating lease are as follows: ` in Million Particulars Not later Later than 1 year not Later than than 1 year later than 5 years 5 years Minimum Lease rentals receivable (previous year: ` 12 35 Nil 51 Million, ` 2 Million and ` Nil, respectively) 31. TML had provided in the previous year, end to end solutions, which includes sale of software and hardware to a customer in India which quali?es as Finance Lease and has accordingly accounted as such. These receivables are due in quarterly installments over the contractual period of 4 years. The components of ?nance lease receivables are: ` in Million Particulars Gross Investment in lease for the period Not later than 1 year Later than 1 year not later than 5 years Unguaranteed residual values Unearned Finance Income Net Investment in Finance Receivables* Present value of Minimum lease receivables is ` Nil ` in Million Particulars Present value of minimum Lease receivable Not later Later than 1 year not than 1 year later than 5 years [866] [1,112] March 31, 2012 March 31, 2011 2,085 922 1,163 107 1,978
*The Hon’ble Supreme Court vide its order dated 2nd February 2012 cancelled 2G licenses issued to some of Telecom Operators in India in 2008. As a result of the cancellation, the business of TML`s two customers has become unviable and one of the customers has started winding up proceedings of the Indian operations. TML has made a provision of ` 679 Million on account of likely impairment in the carrying value of the related assets.
110
32. As per the requirements of Accounting Standard 17 on ‘Segment Reporting’ (AS 17), the primary segment of the Group is business segment by category of customers in the Telecom Service Providers (TSP), Telecom Equipment Manufacturer (TEM), Business Process Outsourcing (BPO) and Others, which includes non telecom vertical customers and the secondary segment is the geographical segment by location of its customers. The Accounting principles consistently used in the preparation of the ?nancial statements are also applied to record income and expenditure in the individual segments. There are no inter-segment transactions during the period. A. Primary Segments For the Year ended March 31, 2012 Particulars Telecom Service Provider 44,290 29,276 15,014 Telecom Equipment Manufacturer 3,599 2,657 942 Business Process Outsourcing 5,322 3,383 1,939 ` in Million Others Total
Revenues Less : Direct Expenses Segmental Operating Income Less : Unallocable Expenses (net) Depreciation / Amortisation Finance charges Other Unallocable Expenses (net) Total Unallocable Expenses (net) Operating Income Add : Other Income (net) Net Pro?t before tax and Exceptional Item Less : Exceptional Item Net Pro?t before Tax Less : Provision for Tax Current Tax (net of MAT credit) Deferred Tax bene?t Net Pro?t after tax Minority Interest Net Pro?t before earnings in share of associate Share in Pro?t of Associate (Refer note 40) Net Pro?t for the year
1,686 1,462 224
54,897 36,778 18,119 1,613 1,026 8,925 11,564 6,555 982 7,537 679 6,858 1,797 (360) 5,421 (36) 5,385 5,570 10,955
Segregation of assets, liabilities, depreciation and other non-cash expenses into various primary segments has not been done as the assets are used interchangeably between segments and TML is of the view that it is not practical to reasonably allocate liabilities and other non-cash expenses to individual segments and an ad-hoc allocation will not be meaningful. B. Secondary Segments: Revenues from secondary segments are as under Geography Europe Americas Rest of world Total ` in Million 25,872 18,817 10,208 54,897
Segregation of assets into secondary segments has not been done as the assets are used interchangeably between segments. Consequently the carrying amounts of assets by location of assets are not given.
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ANNUAL REPORT 2011 - 2012
A. Primary Segments: For the year ended March 31, 2011 ` in Million Particulars Telecom Service Provider 44,722 29,824 14,898 Telecom Equipment Manufacturer 2,630 1,750 880 Business Process Outsourcing 3,213 1,812 1,401 Others Total
Revenues Less : Direct Expenses Segmental Operating Income Less : Un-allocable Expenses (net) Depreciation / Amortisation Finance charges Other Un-allocable Expenses (net) Total Un-allocable Expenses (net) Operating Income Add : Other Income (net) Net Pro?t before tax Less : Provision for Tax Current Tax (net of MAT credit)
837 643 194
51,402 34,029 17,373
1,435 1,113 7,339 9,887 7,486 1,288 8,774
1,678 (362) 7,458 (20) 7,438 (996) 6,442
Deferred Tax bene?t (includes ` 215 Million In respect of earlier years) Net Pro?t before Minority Interest Minority Interest Net Pro?t before earnings in share of associate Share in Loss of Associate (refer note 40) Net Pro?t for the year
Segregation of assets, liabilities, depreciation and other non-cash expenses into various primary segments has not been done as the assets are used interchangeably between segments and TML is of the view that it is not practical to reasonably allocate liabilities and other non-cash expenses to individual segments and an ad-hoc allocation will not be meaningful. B. Secondary Segments: Revenues from secondary segments are as under – Geography Europe Americas Rest of world Total ` in Million 25,975 15,355 10,072 51,402
Segregation of assets into secondary segments has not been done as the assets are used interchangeably between segments. Consequently the carrying amounts of assets by location of assets are not given.
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33. A) TML has instituted “Employee Stock Option Plan 2000” (ESOP) for its employees and Directors. For this purpose it had created a trust viz. MBT ESOP Trust. In terms of the said Plan, the trust has granted options to the employees and Directors which vest at the rate of 33.33% on each successive anniversary of the grant date. The options can be exercised over a period of 5 years from the date of grant. Each option carries with it the right to purchase one equity share of the TML at the exercise price determined by the Trust on the basis of fair value of the equity shares at the time of grant. The details of the options are as under: Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during the year Options exercised during the year Options outstanding at the end of the year March 31, 2012 494,500 46,000 448,500 March 31, 2011 82,490 1,670 1,670 79,150 -
Out of the options outstanding at the end of the year ended March 31, 2012, there are Nil (previous year: Nil) (Net of exercised & lapsed) vested options, which have not been exercised. B) TML has instituted “Employee Stock Option Plan 2004” (ESOP 2004) for its employees. In terms of the said Plan, the Compensation Committee has granted options to employees of the Group. The options are divided into upfront options and Performance options. The Upfront Options are divided into three sets which will entitle holders to subscribe to option shares at the end of First year, Second year and Third year. The vesting of the Performance Options will be decided by the Compensation Committee based on the performance of employees. Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during the year Options exercised during the year Options outstanding at the end of the year March 31, 2012 2,935,134 700,000 2,235,134 March 31, 2011 5,677,701 2,742,567 2,935,134
Out of the options outstanding at the end of the year ended March 31, 2012, there are 2,235,134 (previous year 2,935,134) (Net of exercised & lapsed) vested options, which have not been exercised. C) TML has instituted “Employee Stock Option Plan 2006“(ESOP 2006) for the employees and Directors of the Group. In terms of the said plan, the compensation committee has granted options to the employees of the Group. The vesting of the options is 10%, 15%, 20%, 25% and 30% of total options granted after 12, 24, 36, 48 and 60 months, respectively from the date of grant. The maximum exercise period is 7 years from the date of grant. The details of the options are as under: Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during the year Options exercised during the year Options outstanding at the end of the year March 31, 2012 2,529,103 539,500 305,660 831,060 1,931,883 March 31, 2011 3,165,188 398,725 221,160 813,650 2,529,103
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ANNUAL REPORT 2011 - 2012
Out of the options outstanding at the end of the year ended March 31, 2012, there are 1,090,008 (previous year: 1,907,933) (net of exercised & lapsed) vested options, which have not been exercised. D) TML has instituted “Employee Stock Option Plan 2010“ (ESOP 2010) for the employees and Directors of the Group. In terms of the said Plan, options to the employees and Directors in form of option shall vest at the rate of 33.33% on each successive anniversary of the grant date. The options can be exercised over a period of 5 years from the date of grant. Each option carries with it the right to purchase one equity share of TML at the exercise price determined by Compensation Committee. The details of the options are as under: Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during the year Options exercised during the year Options outstanding at the end of the year March 31, 2012 1,600,000 683,500 5,000 2,278,500 March 31, 2011 1,600,000 1,600,000
Out of the options outstanding at the end of year ended March 31, 2012, there are 533,280 (previous year: Nil) (net of exercised & lapsed) vested options, which have not been exercised. E) TML uses the intrinsic value-based method of accounting for stock options granted after April 1, 2005. Had the compensation cost for the TML’s stock based compensation plan been determined in the manner consistent with the fair value approach, the Group’s net pro?t would be lower by ` 32 Million (previous year higher by ` 14 Million) and earnings per share as reported would be lower as indicated below: ` in Million except earnings per share Particulars For the year ended March 31, 2012 Net pro?t after exceptional items and tax (As reported) (Add) / Less: Total stock-based employee compensation expense determined under fair value base method Adjusted net pro?t Basic earnings per share (in `) As reported Adjusted 86.25 86.00 51.60 51.72 10,955 (32) 10,923 March 31, 2011 6,442 (14) 6,456
Diluted earnings per share (in `) As reported Adjusted 82.91 82.66 49.34 49.44
The fair value of each option is estimated on the date of grant based on the following assumptions (on weighted average basis): Particulars Dividend yield (%) Expected life Risk free interest rate (%) Volatility (%) March 31, 2012 0.50 4.07 years 8.54 52.72 March 31, 2011 0.46 3.85 years 7.97 55.16
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F)
The stock compensation cost for the Employee Stock Option Plan 2010 issued at par has been computed under the intrinsic value method and amortized on a straight line basis over the total vesting period of three years. For the year ended March 31, 2012 TML has recorded stock compensation expense of ` 412 Million (previous year: ` 69 Million).
34. As required under Accounting Standard 18 “Related Party Disclosures” (AS – 18), following are details of transactions during the year ended March 31, 2012 with the related parties of the Group as de?ned in AS – 18: (a) List of Related Parties and Relationships Name of Related Party Mahindra & Mahindra Limited British Telecommunications Plc. Mahindra BT Investment Company (Mauritius) Limited Tech Mahindra Foundation# Satyam Computer Services Limited Satyam BPO Limited Satyam Computer Services (Shanghai) Co. Limited Mr. Vineet Nayyar Vice Chairman and Managing Director Mr. Sanjay Kalra Chief Executive Of?cer @ # Section 25 Company not considered for consolidation @ Up to September 15th, 2010 (b) Related Party Transactions for the year ended March 31, 2012: ` in Million Transactions Promoter Subsidiary Associate Companies Companies Companies (211) [(263)] 19,925 [20,457] 21 [31] [-] [-] [-] [-] 36 [53] 361 [320] [-] [-] [-] [-] [-] [-] [-] [-] [-] (160) [(1)] 409 [148] [33] 802 [545] 592 [-] [-] [-] 143 [64] [-] Key Management Personnel [-] [-] [-] [-] [-] 36 [62] -** [-] [-] 3 [2] Key Management Personnel Relation Promoter holding more than 20% stake Promoter holding more than 20% stake Promoter group company 100% subsidiary company Associate Company Associate Company Associate Company
Reimbursement of Expenses (Net) - Paid/ (Receipt) Income from Services Paid for Services Received Sub-contracting cost Software/Hardware & project speci?c expenses Salary, Perquisites & Commission Stock Options Rent Paid/ Payable Dividend paid
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ANNUAL REPORT 2011 - 2012
Transactions
Promoter Subsidiary Associate Companies Companies Companies [-] 41 [51] [377] [-] 5,248 [5303] 67 [99] [-] [-] [-] (2) [(8)] [-] 15 [20] [-] 0 [271] (589) [(459)]
Donation Paid / Payable Rent Received/ Receivable Contract Settlement Fees Received Purchase of Fixed Assets Debit / (Credit) balances (Net) (inclusive of unbilled) outstanding as on March 31, 2012 ** Stock options: Key Management Personnel Transactions
Key Management Personnel [-] [-] [-] [-] (11) [(11)]
Figures in brackets “[ ]”are for the previous period ended March 31, 2011.
Options exercised during the year ended March 31, 2012 Options granted and outstanding at the end of the period
Mr. Vineet Nayyar Vice Chairman & Managing Director 700,000 [Nil] 1,992,567 [2,692,567]
Mr. Sanjay Kalra Chief Executive Of?cer Nil [1,892,567] Nil [Nil]
Figures in brackets “[ ]”are for the previous year ended March 31, 2011 Out of the above transactions with Promoter companies, Subsidiary Companies, Associate Companies and Key Management Personnel in the excess of 10% of the total related party transactions are as under: ` in Million Transactions Reimbursement of Expenses (net) - Paid/(Receipt) Promoter Company - British Telecommunications Plc. Associate Company - Satyam BPO Limited - Satyam Computer Services Limited Income from Services Promoter Company - British Telecommunications Plc. Paid for Services Received Promoter Company - British Telecommunications Plc. Associate Company - Satyam Computer Services Limited For the year ended March 31, 2012 For the year ended March 31, 2011
(218) (48) (112) (378)
(266) (12) 11 (267)
19,888 19,888
20,403 20,403
21 21
31 33 64
116
Transactions Sub-contracting cost Associate Company - Satyam Computer Services Limited - Satyam BPO Limited Software/Hardware & project speci?c expenses Associate Company - Satyam Computer Services Limited Salary, Perquisites and Commission Key Management Personnel - Mr. Vineet Nayyar - Mr. Sanjay Kalra Rent Paid/(Payable) Promoter Company - British Telecommunications Plc Associate Company - Satyam Computer Services Limited. Donation Paid / Payable Subsidiary Company - Tech Mahindra Foundation Dividend Paid/Payable Promoter Company - British Telecommunications Plc - Mahindra & Mahindra Limited Rent Received/Receivable Promoter Company - British Telecommunications Plc. Associate Company - Satyam Computer Services Limited Purchase of Fixed Assets Associate Company - Satyam Computer Services Limited Contract Settlement Fees Received Promoter Company - British Telecommunications Plc.
For the year ended March 31, 2012
For the year ended March 31, 2011
577 224 801
406 139 545
592 592
-
36 36
36 26 62
36 143 179
53 64 117
67 67
99 99
118 243 361
132 188 320
41 15 56
51 20 71
0 0
271 271
-
377 377
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ANNUAL REPORT 2011 - 2012
35. The tax effect of signi?cant timing differences that has resulted in deferred tax assets are given below: ` in Million Particulars Deferred Tax Asset : Gratuity, Leave Encashment, superannuation and FBT etc. Doubtful Debts Depreciation Others Total Deferred Tax Asset March 31, 2012 292 338 316 52 998 March 31, 2011 290 80 241 27 638
This includes deferred tax asset of ` Nil (previous year: ` 215 Million) created in the current year pertaining to earlier years based on reassessment of deferred tax position post sunset of Section 10A of Income Tax Act, 1961. 36. Exchange gain/(loss)(net) accounted during the period: a) TML enters into Foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to TML’s foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. Forward Exchange Contracts and Currency Option Contracts in UK Pound exposure are split into two legs, which are GBP to USD and USD to INR. These contracts are for a period between 1 day and 5 years. The following are the outstanding GBP:USD Currency Exchange Contracts entered into by TML which have been designated as Cash Flow Hedges as at March 31, 2012: Type of cover Forward Option Amount outstanding in Foreign currency (in Million) GBP 279 (previous year: 212) GBP 12 (previous year: 72) Fair Value Gain / (Loss) (` in Million) (50) (previous year: (154)) 258 (previous year: (1,317)
b)
The following are the outstanding USD: INR Currency Exchange Contracts entered into by TML which have been designated as Cash Flow Hedges as at March 31, 2012: Type of cover Forward Option Amount outstanding in Foreign currency (in Million) USD 840 (previous year: 653) USD 87 (previous year: 189) Fair Value Gain / (Loss) (` in Million) (2,886) (previous year: 683) (1,028) (previous year: (1075))
Net loss on derivative instruments of ` 1,206 Million (previous year gain: ` 621 Million) recognized in hedging reserve as of March 31, 2012 is expected to be reclassi?ed to the Statement of Pro?t and Loss by March 31, 2013. The movement in hedging reserve during year ended March 31, 2012 for derivatives designated as Cash Flow Hedges is as follows: ` in Million Particulars Credit Balance at the beginning of the year Gain/(Loss) transferred to income statement on occurrence of forecasted hedge transaction Changes in the fair value of effective portion of outstanding cash ?ow derivative (Debit) / Credit Balance at the end of year Year ended March 31, 2012 412 (207) (4,154) (3,535) Year ended March 31, 2011 1,942 869 (661) 412
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In addition to the above cash ?ow hedges, TML has outstanding Foreign Exchange Currency Options Contracts aggregating to ` 396 Million (previous year: ` 6,993 Million) whose fair value showed a loss of ` 154 Million (previous year gain: ` 654 Million). Although these contracts are effective as hedges from an economic perspective, they do not qualify for hedge accounting and accordingly these are accounted as derivative instruments at fair value with changes in fair value recorded in the Statement of Pro?t and Loss and the cumulative gain of ` 94 Million as at March 31, 2009 would be recycled to Statement of Pro?t and Loss as and when the cash ?ows materialise. Exchange Loss of ` 207 Million (previous year gain: ` 869 Million) on foreign exchange forward contracts and currency options contracts have been recognised in the year ended March 31, 2012. c) As at March 31, 2012, the Group has net foreign exchange exposures that are not hedged by a derivative instruments or otherwise amounting to ` 8,281 Million (previous year: ` 6,864 Million)
37. TML has exercised the option given vide noti?cation number G.S.R. 225 (E) dated March 31, 2009 issued by the Ministry of Corporate Affairs, Government of India on provisions of Accounting Standard 11, however this does not have any impact on the ?nancial statements, as the Group does not have any long term foreign currency monetary items. 38. Earnings Per Share is calculated as follows: ` in Million except earnings per share Particulars Pro?t after taxation and before exceptional item Less: Exceptional Item Pro?t after taxation and exceptional items Net Pro?t attributable to shareholders Equity Shares outstanding as at the end of the year (in nos.) Weighted average Equity Shares outstanding as at the year end (in nos.) Weighted average number of Equity Shares used as denominator for calculating Basic Earnings Per Share Add: Diluted number of Shares ESOP outstanding at the end of the year Number of Equity Shares used as denominator for calculating Diluted Earnings Per Share Nominal Value per Equity Share (in `) Earnings Per Share Before Exceptional Item Earnings Per Share (Basic) (in `) Earnings Per Share (Diluted) (in `) Earnings Per Share After Exceptional Item Earnings Per Share (Basic) (in `) Earnings Per Share (Diluted) (in `)
st
Year ended March 31, 2012 11,634 679 10,955 10,955 127,486,541 127,005,143 127,005,143
Year Ended March 31, 2011 6,442 6,442 6,442 125,955,481 124,827,129 124,827,129
5,118,848 132,123,991 10.00 91.60 88.05 86.25 82.91
5,736,254 130,563,383 10.00 51.60 49.34 51.60 49.34
39. Current tax for the year ended 31 March 2012 includes reversal of excess provision of ` 241 Million (previous year: ` 6 Million) of earlier years written back, no longer required. TML and its Indian Subsidiaries had calculated its tax liability under Minimum Alternate Tax (MAT) from ?nancial year 2007-08.The MAT credit can be carried forward and set off against the future tax payable. In the current year ended March 31, 2012, TML and its Indian subsidiaries has calculated its tax liability under normal provisions of the Income Tax Act, 1961 and utilized the brought forward MAT credit of ` 234 Million.
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ANNUAL REPORT 2011 - 2012
40. The Board of Directors of Satyam Computer Services Limited (SCSL) on April 13, 2009 selected VCPL, a wholly owned subsidiary of Tech Mahindra Ltd (TML) as the highest bidder to acquire a controlling stake in SCSL and upon the Hon’ble Company Law Board’s approval on April 16, 2009, VCPL was declared as the winning bidder. TML through VCPL, acquired stake in Satyam Computer Services Limited, on May 5, 2009 through preferential allotment, representing 31% of equity share capital and further increased the share holding to 42.70 % by July 10, 2009 through a combination of open offer and a further preferential allotment. As a result of this investment, SCSL became an associate of TML as per Accounting Standard 23 “Accounting for Investments in Associates in Consolidated Financial Statements”. VCPL holds 501,843,740 equity shares, which is 42.64% of share capital of SCSL as at March 31, 2012. As per the share subscription agreement dated April 13, 2009, these investments have lock-in period of three years from the date of allotment. a) The auditors of SCSL have issued a quali?ed auditors report on the consolidated ?nancial results of SCSL for the year ended March 31, 2012 on certain matters set out below: • Inability to comment on any adjustments/disclosures which may become necessary as a result of further ?ndings of the ongoing investigations/legal proceedings by the regulatory authorities and the consequent impact, if any, on the ?nancial results. Inability to comment on the accounting treatment/disclosure of the unexplained amounts aggregating to ` 11,394 Million (accounted under “Unexplained Differences Suspense Account (Net)” in the ?nancial statements of SCSL) which was fully provided in the ?nancial results for the year ended March 31, 2009. Inability to determine whether any adjustments/disclosure will be required in respect of the alleged advances amounting to ` 12,304 Million (net) (presented separately under “Amounts Pending Investigation Suspense Account (Net)” in the ?nancial statements of SCSL) and in respect of the non-accounting of any damages / compensation / interest in the ?nancial results. Inability to comment on the consequential impact, if any, in relation to certain lawsuits (the “Aberdeen Action”, USA and the “Aberdeen (UK) Complaint”) ?led by certain investors in United States of America and the United Kingdom, the outcome of which is not determinable at this stage. Inability to comment on the adequacy or otherwise of the provision for taxation pertaining to prior years and the consequential impact, if any, due to uncertainties regarding the outcome of the tax disputes and tax demands pending before various authorities.
•
•
•
•
The impact of the above quali?cations on the Company’s share of post acquisition share of pro?t (net) of SCSL, the amount of goodwill in the investment value, investment in associate and reserves and surplus in the Consolidated Financial Statements of the Company is not ascertainable. b) The auditors of SCSL have invited attention to the following matters in their auditors report for the year ended March 31, 2012: • • • Various demands/disputes raised in respect of the past years by the indirect tax authorities in India. Matters relating to non-compliance with Foreign Exchange Management Act (FEMA), 1999 in respect of realisation and repatriation of export proceeds relating to earlier years. Non-compliances and breaches in the prior years under the erstwhile Management relating to certain provisions of the Companies Act, 1956 and certain employee stock option guidelines issued by the Securities and Exchange Board of India. In the case of one of the subsidiaries of SCSL, the other auditors have drawn attention to the write-back of liability in respect of sales commission pertaining to prior years and recording of provision for contingencies pending ?nal outcome of the ongoing dispute between the promoters of the subsidiary.
•
Pro?t after tax for the year ended 31st March 2012 and 2011 are not comparable as the ?gures in respect of 2011 include share in SCSL for May 2009 up to March 2010 (post acquisition period). 41. As required by the Bahrain Commercial Companies Law and the TMBL’s Articles of Association, 10% of the pro?t for each period is required to be transferred to a statutory reserve. TMBL may resolve to discontinue such annual transfers when the reserve totals 50% of the issued share capital. Accordingly during the previous
120
year, TMBL has transferred ?fty percent of share capital to statutory reserve. The reserve is not available for distribution, except in the circumstances stipulated in the Bahrain Commercial Companies Law. 42. TML had made provision for claims and warranties of ` 168 Million (net) in the previous year as per contractual terms, the outcome of the same would get crystallized by next year. During the current year, TML has made an additional provision of ` 164 Million. Further, TML has reversed a portion of the said provision of ` 209 Million in the current year, being no longer required. The Movement of the provision is as under: ` in Million Particulars Carrying amount as at the beginning of the year Additional provision made during the year Less: Amount paid/Utilised during year Less: Amount recovered from subcontractor Less: Reversal of provision no longer required Balance as at year end For the year ended March 31, 2012 168 164 23 100 209 For the year ended March 31, 2011 102 264 24 174 168
43. The Board of Directors of the Company in their meeting held on March 21, 2012 have approved the “Scheme of Amalgamation and Arrangement under Sections 391 to 394 read with Sections 78, 100 to 104 and other applicable provisions of the Companies Act, 1956 of Venturbay Consultants Private Limited and Satyam Computer Services Limited and C&S System Technologies Private Limited and Mahindra Logisoft Business Solutions Limited and CanvasM Technologies Limited with the Company(TML)” (“the Scheme”). The Appointed date of the Scheme is April 1, 2011. The Board of Directors of the Company has recommended to issue 2 fully paid up Equity Shares of ` 10 each of the Company for every 17 fully paid Equity Shares of ` 2 each of Satyam. As the other amalgamating companies are wholly owned by the Company / Satyam, no shares would be issued to shareholders of these companies. The Bombay Stock Exchange and the National Stock Exchange of India Limited have conveyed to the Company, their no-objection under Clause 24(f) of the Listing Agreement to the said Scheme. TML has also received approval of Competition Commission of India for the said Scheme. Further, TML has obtained directions from the Hon’ble High Court of Judicature at Bombay (“Court”) for convening the shareholders meeting on 7th June 2012 to approve the Scheme. The proposed Scheme is subject to the approvals of the shareholders, Hon’ble Bombay High Court, Hon’ble High Court of Andhra Pradesh and other authorities. 44. In respect of equity shares pursuant to Employees Stock Option Scheme, TML paid dividend of ` 4 Million for the year 2010-11 and tax on dividend of ` 1 Million as approved by the shareholders at the Annual General Meeting held on August, 12, 2011. 45. Figures pertaining to the subsidiary companies have been reclassi?ed wherever necessary to bring them in line with the group ?nancial statements. 46. Previous period’s ?gures have been regrouped wherever necessary, to con?rm to the classi?cation for the year ended March 31, 2012. Signatures to Notes For Tech Mahindra Limited Anand G. Mahindra Vineet Nayyar Chairman Vice Chairman & Managing Director Hon. Akash Paul Anupam Puri Bharat Doshi Director Director Director B.H. Wani M. Damodaran Paul Zuckerman Director Director Director Dr. Raj Reddy Ravindra Kulkarni Ulhas N. Yargop Director Director Director Sonjoy Anand Anil Khatri Chief Financial Of?cer Company Secretary Noida, Dated: May 23, 2012
121
122
` in Million Exchange Rate Turnover Pro?t before Taxation Provision for Taxation Pro?t after Taxation Proposed Dividend Capital Reserves Total Assets Total Liabilities Investment other than investment in Subsidiary 293.06 11.25 (0.07) 11.32 895.55 42.55 42.55 7,825.94 397.99 150.89 247.10 USD EUR SGD 40.51 2.03 140.78 228.10 85.30 68.01 39.11 273.23 452.83 140.50 50.87 19.08 870.01 1,611.63 722.53 THB INR USD INR USD RM CNY 8.09 26.80 (43.43) 15.69 32.32 16.62 5.20 28.34 107.62 74.08 523.56 25.43 50.87 0.01 21.02 300.25 279.23 819.27 1.00 576.73 375.40 1,364.36 412.23 401.51 1,197.38 215.26 12.50 13.76 0.88 50.87 25.44 339.83 708.94 343.68 1,179.06 58.19 1.00 0.50 473.69 474.34 0.14 83.32 (0.27) 17.85 53.64 4.40 1.65 8.25 3.37 12.47 0.85 3.89 (1.44) (1.44) (0.27) 40.34 161.62 8.10 13.76 0.88 -
Statement pursuant to general exemption under Section 212(8) of the Companies Act, 1956 relating to subsidiary companies
Sr. No.
Name of the Subsidiary Company
Country
Reporting Currency
1
Tech Mahindra (Americas) Inc.
USA
2
Tech Mahindra GmbH
Germany
3
Tech Mahindra (Singapore) Pte. Limited
Singapore
4
Tech Mahindra (Thailand) Limited
Thailand
ANNUAL REPORT 2011 - 2012
5
Tech Mahindra Foundation
India
6
PT Tech Mahindra Indonesia
Indonesia
7
CanvasM Technologies Limited
India
8
CanvasM (Americas) Inc.
USA
9
Tech Mahindra (Malaysia) Sdn. Bhd.
Malaysia
10
Tech Mahindra (Beijing) IT Services Limited BD 135.08 6.75 101.07 382.83 275.01 -
China
11
Tech Mahindra (Bahrain) Limited S.P.C. NGN INR 1.00 124.50 (4.86) 124.95 0.32 48.97 90.30 546.58 407.30 5.30
Bahrain
1,049.94
23.34
-
23.34
-
12
Tech Mahindra (Nigeria) Limited
Nigeria
0.00
900.44 64.67
109.77 19.48
35.49 0.68
74.28 18.81
-
13
Mahindra Logisoft Business Solutions Limited INR 1.00 304.72 29,414.95 29,720.23
India
14
Venturbay Consultants Private Limited
India
0.56
-
-
(0.68)
-
(0.68)
-
Note: The above Statement does not include information related to Tech Mahindra Brasil Servicecos De Informatica Ltda. (TMBSL) and Tech Talenta Inc. (TTI) incorporated on July 21, 2010 and March 6, 2012 respectively, since there have been no transactions till March 31, 2012 and the holding Company is yet to infuse share capital in them.
Asia-Paci?c
India Tech Mahindra Limited Sharda Centre, Off Karve Road, Erandwane, Pune - 411004 Maharashtra Tel: +91 20 6601 8100 Fax: +91 20 2542 4466 Tech Mahindra Limited Plot no 1, Phase III Rajiv Gandhi Infotech Park, Hinjewadi, Pune - 411 057, Maharashtra Tel: +91 20 4225 0000 Fax : 91 20 4225 2501 Tech Mahindra Limited Gigaspace Viman Nagar, Pune 411014, Maharashtra. Tel : +91 20 6622 1000 (Beta II) Tel : +91 20 6627 3000 (Delta) Fax: +91 20 6622 1300 ( Beta II) Fax: + 91 20 6627 3329 ( Delta) Tech Mahindra Limited Wing 1, Oberoi Gardens Estate, Chandivali, Andheri (E), Mumbai 400 072, Maharashtra Tel: +91 22 6688 2000 Fax: +91 22 2847 8959 Tech Mahindra Limited 9 / 7 Hosur Road, Bangalore - 560029 Karnataka Tel: +91 80 4024 3000 Fax: +91 80 2552 7027 Tech Mahindra Limited AMR Tech Park No 23 & 24, Hosur Road, Bommanahalli, Bangalore 560068 Tel: +91 80 4041 7000 Fax: +91 80 2573 5664 Tech Mahindra Limited ITC-5, 45-47, KIADB Industrial Area, Mahindra Satyam SDC, Electronics City Phase II, Hosur Main Road, Bangalore-560100, Tel: + 91 80 6780 7777 Tech Mahindra Limited SBC Tech Park, 90/B1, MTH Road, Industrial Estate, Ambattur, Chennai 600 058. Tamil Nadu, India Tel: +91 44 4741 6000, +91 44 6662 4000 Tech Mahindra Limited Block A-1, Ground, 5th,6th,7th |& 8th Floor Shriram The Gateway (SEZ Zone) No.16, GST Road Perungalathur Village Chennai - 600063 Tamil Nadu, India Tel: +91 44 4741 6000, +91 44 6662 4000 Fax: +91 44 2239 0076
Tech Mahindra Limited 3rd and 4th Floor, Bldg - Gamma Bengal Intelligence Park, Block EP& GP Sector - V Salt Lake Sector V, Kolkata - 700091, West Bengal, India. Tel: +91-33-40098100 Fax: +91 33 40098126 Tech Mahindra Limited (SEZ UNIT) DLF IT Park, Phase - II, 1st. to 4th. Floor, Tower 1B & 1 C, Premises No. IIF/1, Block - IIF, Rajarhat, Kolkata – 700156. West Bengal, India. Tel: +91 33 4446 1000 Fax: +91 33 44461779 Tech Mahindra Limited Ground Floor & 1 Floor – Tower III,DLF IT Park, Major Arterial Road, New Town Rajarhat, Kolkata - 700156 West Bengal, India. Tel: +91 33 4002 7300 Tech Mahindra Limited A-7, Sector 64, Noida - 201 301 Uttar Pradesh Tel: +91 120 465 2000 Fax: +91 120 307 6000 Tech Mahindra Limited A-6, Sector 64 Noida, 201 301 Tel: +91 120 400 5000 Tech Mahindra Limited D-157, Sec 63, Noida, 201 301. Tel: +91 120 453 4400 Tech Mahindra Limited A-20, Sec 60, Noida, 201301. Tel: +91 120 400 8000 Fax:+91 120 400 8837 Tech Mahindra Limited B-26, Sec 57, Noida,201301. Tel: +91 120 433 5298 Fax: +91 120 433 5290 Tech Mahindra Limited (erstwhile I-Policy Networks) SDF B-1, NSEZ, Noida-201305 Tel: +91 120 472 4900 Tech Mahindra Limited A13, Sector 64, Noida, 201 301, Tel: +91 120 674 1000 Tech Mahindra Limited A-100, Sector 58, Noida, 201 301. Tel: +91 120 4743600 Tech Mahindra Limited Plot No. 58A & B, Noida Special Economic Zone, Noida 201 305
Tech Mahindra Limited Unit No. B-08-805, 8th Floor, Tower B, Unitech Cyber Park Complex, Sec 39, Gurgaon, 122001. Tel: +91 124 4283 600 Fax: +91 124 428 3650 Tech Mahindra Limited 4th Floor, IT Tower - 4, Infocity, Near Indroda Circle, Gandhi Nagar - 382009, Gujarat, India. Tel: +91 79 4060 4100 Tech Mahindra Limited Plot No. 23, SEZ Phase-II, Rajiv Gandhi Chandigarh Technology Park, Kishangarh, Chandigarh. 160101 Tel: +91 172 6668400 Tech Mahindra Limited Wing-2, 1st Floor, “B” block, Cyber Gateway, HITEC CITY, Madhapur, Hyderabad 500081. Andhra Pradesh, India. Tel: +91 40 4030 1300, +91 40 4030 1500 Thailand Tech Mahindra (Thailand) Limited Level 29, The Of?ces at Centralworld, 999/9 Rama I Road, Kwaeng Pathumwan, Bangkok 10330 Thailand Tel: +66 2207 2346 Fax: +66 2207 2347 Tech Mahindra (Thailand) Limited BB Building 10th Floor, Unit – 1004-5, 54 Sukhumvit Soi 21 (Asoke Road), Klongtoey Nua, Bangkok 10110. Tel: +66 2640 8170 Singapore Tech Mahindra (Singapore) Pte. Limited No 1, Changi Business Park Avenue 1 #04-02, Ultro Building, Singapore - 486058 Tel: +65 6417 2000 Fax: +65 6417 2121 Taiwan Tech Mahindra Limited Level 37, Taipei 101, Tower No. 7 Section 5, Xinyi Road, Taipei, Taiwan Tel: +886 2 8758 2984 Fax: +886 2 6758 2999 Malaysia Tech Mahindra (Malaysia) Sdn. Bhd. Suite 3B-10-5, Level 10 I Block 3B,Plaza Sentral, Jalan Stesen Sentral 5, 50470 W.P Kuala Lumpur, Malaysia Tech Mahindra (Malaysia) Sdn. Bhd. Mahindra Satyam Malaysia Global Solution Centre, Persiaran APEC, 63000 Cyberjaya Selangor, Malaysia Tel: +603 8882 8000 Fax: +603 8882 8088
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ANNUAL REPORT 2011 - 2012
Indonesia PT. Tech Mahindra Indonesia Ariobimo Sentral, 4th ?, Suite #403, Jalan Rasuna Said Kavling X-2 # 5, Jakarta 12950 Indonesia Tel: +62 21 527 0718 Fax: +62 21 252 5760 Philippines Tech Mahindra Limited 5th Floor, Amberbase Building, Eastwood Avenue, Eastwood, Quezon City, 1110 Philippines Tel: +63 02 661 9620 China Tech Mahindra (Beijing) IT Services Limited Room 2955, 29/F, Block C, Central International Trade Center, No.6 Jianguomenwei Dajie, Chaoyang District, Beijing, PRC, 100022 Tel: +86 10 6563 9997 Australia Tech Mahindra Limited Level 2, 61 Lavender Street, Milsons Point, NSW 2061. Australia Tel: +612 9434 2770 Fax: +612 9460 3233 New Zealand Tech Mahindra Limited Regus Chancery, 41 Shortland Street, Auckland 1040, New Zealand Tel: +64 9 306 8949 Fax: +64 9 306 8889
Nigeria Tech Mahindra (Nigeria) Limited 2/4, Abebe village, Iganmu, Lagos, Nigeria. Tel: +234 8021920018 Extn : 25111 Zambia Tech Mahindra Limited 1st Floor, Petroda House, Great North Drive, Lusaka Zambia. Tel: + 260 97791 5000 Ghana Tech Mahindra Limited Plot No 83, Spintex Rd, (Adj Sneda Motors), East Airport, Accra, Ghana. Tel: + 233 30700 0000 - Extn: 5001 Congo Brazzaville Tech Mahindra Limited Airtel Commercial Agency - Infront of Elais Hotel , Avenue Charles de Gaulle B.P . 1267, Pointe Noire, Rep. of Congo Tel: + 243 99996 7191 / 99996 70552 Democratic Republic of Congo Tech Mahindra Limited Deuxieme niveau ( 2nd Floor) Gallerie de Centenaire,”N°10, Boulevard Commune de la Gombe/Kinshasa DRC Tel: +243 99996 7191 / 999967 0552 Malawi Tech Mahindra Limited City Mall (1-7) Mchinji Round About Area 47, PO Box 1666 Lilongwe, Malawi Gabon Tech Mahindra Limited II Floor, CFAO, 4-5, Ville Central, Libreville, Gabon Tele: +241 07280155
Nordics & Baltics Sweden Tech Mahindra Limited Norrtulsgatan 6, SE-113 29, Stockholm, Sweden. Tel: +46 73 600 3400 Email: [email protected] Germany Tech Mahindra GmbH Regus, Prinzenalle 7, 40549 Düsseldorf Germany Netherlands Tech Mahindra Limited Regus Business Park Einsteinlaan 10, Rijswijk ZH 2289CC, The Netherlands Tel: +31 70 300 2304 Cell: +31 64281 3600 North America USA New Jersey Tech Mahindra (Americas) Inc. 1001 Durham Avenue South Plain?eld, NJ 07080 Tel: +1 732 675 3047 Texas Tech Mahindra (Americas) Inc. 2140 Lake Park Blvd., Richardson, TX 75080 Tel: +1 972 991-2900 Fax: +1 972 991 3776 Georgia Tech Mahindra (Americas) Inc. 100 North Point Center East, Suite 305, Alpharetta, GA 30022 Tel: +1 972 991 2900 California Tech Mahindra (Americas) Inc. 2901 Tasman Drive, Suite 106 Santa Clara, California 95054 Tel: +1 408 588 1799, +1 408 654 9471 Fax: +1 408 588 1722 Washington Tech Mahindra (Americas) Inc. Columbia Business Park Building B 13427 NE 20th Street Suite 120, Bellevue, Washington 98004 Tel: +1 425 242 5965 Canada Toronto Tech Mahindra Limited 100 Consilium Place, Suite 315, Toronto Canada M3B 3H9 Latin America | Brazil Sao Paulo Tech Mahindra Brasil Servicecos De Informatica Ltda Rua Quintana, 887 – 8º Andar, Brooklin, CEP 04569-011, São Paulo - SP- Brasil. Tel: +55 11 3528 7207, +55 11 3528 7232
MEA – SAARC
UAE Tech Mahindra Limited #202, Building EIB-4 (BT Building), Near UOWD Building (Next to Knowledge Village), Dubai Internet City P.O.Box.- 30810, Dubai, UAE Fax: +971 4 391 1713 Egypt Tech Mahindra Limited Arkadia Building, Cornish El Nil, 8th ?oor, P.O. Box 14, Sabtteyah 11624, Cairo, Egypt Tel: +002 02 580 6608 Fax: +002 02 580 6601 Bahrain Tech Mahindra (Bahrain) Limited (SPC) 11th Floor, Al Salam Towers, PO Box 3282, Manama Center Bahrain South Africa Tech Mahindra Limited 6th Floor, Twin Towers West, Sandton City Mall, Sandton 2196, Johannesburg, South Africa Tel: +27 11 676 2800 Fax: +27 11 783 0543
Europe
UK Milton Keynes Tech Mahindra Limited Charles Schwab Building, 401, Grafton Gate (E), Milton Keynes MK9 1AQ. Tel: +44 01908 55 3400 Fax: +44 01908 55 3499 London Tech Mahindra Limited 3rd ?oor, Ormond House, 63, Queen Victoria Street, London EC4N 4UA United Kingdom. Tel: +44 1908 546150 Belfast Tech Mahindra Limited 7th Riverside Tower, 5 Lanyon Place, Belfast BT1 3BT, NI
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www.sapprints.com
doc_875428065.pdf
The report for the financial year 2011 - 2012 of Tech mahindra limited.
Corporate Information
Board of Directors Mr. Anand G. Mahindra, Chairman Mr. Vineet Nayyar, Vice Chairman & Managing Director Hon. Akash Paul Mr. Anupam Puri Mr. B. H. Wani Mr. Bharat N. Doshi Mr. M. Damodaran Mr. Nigel Stagg (Upto December 23, 2011) Mr. Paul Zuckerman Dr. Raj Reddy Mr. Ravindra Kulkarni Mr. Richard Cameron (Upto December 23, 2011) Mr. Ulhas N. Yargop Committees of Directors Audit Committee Mr. M. Damodaran, Chairman Mr. Anupam Puri Mr. Paul Zuckerman Dr. Raj Reddy Mr. Richard Cameron (Upto December 23, 2011) Mr. Ulhas N. Yargop Compensation & Nominations Committee Mr. Ravindra Kulkarni, Chairman Mr. Anupam Puri Mr. Nigel Stagg (Upto December 23, 2011) Mr. Paul Zuckerman Mr. Ulhas N. Yargop Investor Grievances-cum-Share Transfer Committee Mr. Ulhas N. Yargop, Chairman Mr. Richard Cameron (Upto December 23, 2011) Mr. Vineet Nayyar Executive Committee Chief Financial Of?cer Mr. Sonjoy Anand Mr. Vineet Nayyar, Chairman Mr. Nigel Stagg (Upto December 23, 2011) Mr. Ulhas N. Yargop Company Secretary & Compliance Of?cer Mr. Anil Khatri Securities Allotment Committee Mr. Vineet Nayyar, Chairman Mr. Richard Cameron (Upto December 23, 2011) Registered Of?ce Gateway Building, Apollo Bunder, Mumbai – 400 001 Mr. Ulhas N. Yargop Bankers IDBI Bank HSBC Bank Kotak Mahindra Bank HDFC Bank CITI Bank Auditors Deloitte Haskins & Sells Chartered Accountants
Corporate Of?ce Sharada Centre, Off Karve Road, Erandawane, Pune – 411 004
Table of Contents
Directors’ Report Management Discussion and Analysis Corporate Governance Report Standalone Financials Consolidated Financials Statement of Subsidiary Companies 5 15 24 39 84 122
Vice Chairman’s Message
Vineet Nayyar
Vice Chairman & Managing Director
Dear Shareholders The ?scal year 2011-12 was a year of steady performance in a challenging environment. Our consolidated revenues for ?scal 2011-12 grew 6.8% to ` 5,490 crores as against ` 5,140 crores in the previous year. Our consolidated Pro?t after Tax was ` 1,095 crore versus ` 644 crore in the previous year, a growth of 70%. Our journey of building the organization continued as we focussed on expanding our market share in our chosen vertical. The economic environment continues to be volatile. In the last year, we saw the global economy in turmoil due to the Euro crisis, and the uncertainty in the US economy. The European economy continues to be volatile and recovery in the Eurozone could be a prolonged process. Closer home, the Indian economy has also seen a slowdown in growth and reduction in investments. These economic ?uctuations have in?uenced and changed customer behaviour in the past year. Customers are looking for strong and reliable partnerships with IT providers like us to ?nd opportunities for optimization and ensure sustainability of their global delivery program. In the Telecom sector, revenue growth is expected to be sustained in the wireless area due to increased usage of smart devices. Telecom operators globally are looking to invest in new technologies like 4G and LTE to cater to the increasing demand for high speed data. Our customers are foraying into new avenues of revenue generation like Cloud services and offerings around machine to machine communication. They are looking to fund the investments required in these new areas, partly through the savings realized through increased operational ef?ciency. Our capability in the Telecom vertical and our global delivery presence enables us to offer the best value propositions to our customers, which addresses both their growth initiatives and offer them ?nancial savings. We continued to expand our portfolio of service offerings and solutions to better address the needs of our clients. Our strategy of focusing on developing offerings outside our traditional domain of application services has enabled us to address a larger share of the spending of our clients. Our focus on emerging markets and our initial investments in areas like Managed Services are now giving us a distinct advantage as we leverage our expertise in developed markets. We believe that we are well positioned to capitalize on the opportunities being generated by the economic environment and the new technology paradigm. Our investment in Mahindra Satyam is starting to yield dividends. It gives me great satisfaction in reporting that our three year turnaround plan for Mahindra Satyam has been quite successful. In the last year, Mahindra Satyam has not only achieved industry standards on revenue growth but has also shown signi?cant improvement in operating margins. In many ways this turnaround re?ects the innate strength and quality of the Mahindra Satyam staff and leadership. As a logical step forward, the Boards of both companies announced the merger of the two companies in March 2012. I am happy to inform all of you that the shareholders of both companies have approved the merger in the month of June 2012. We are con?dent of the bene?ts from this merger for all our stakeholders and look forward to achieving increased traction and better ef?ciencies once the merger is complete. We successfully stepped into the second year of Mahindra Group’s revised brand positioning “Rise”; which has contributed signi?cantly in reshaping positive energy within the Organization. The three tenets of Rise Accepting no limits, Alternative Thinking and Driving positive change are the guiding concepts for our vision, culture and strategy as we move forward in our journey as one entity. Lastly, I want to thank the employees of Tech Mahindra for their contribution to our continued growth, and the share holders of Tech Mahindra and Mahindra Satyam for their overwhelming support in the merger process. We look forward to live up to the faith reposed in us by all our stakeholders. All of us in Tech Mahindra look forward to an exciting year ahead with new milestones and new accomplishments. Sincerely,
Vineet Nayyar Vice Chairman & Managing Director
CONSOLIDATED FINANCIAL HIGHLIGHTS
Particulars 1 2 3 Revenue Total Income EBIDTA (Operating Pro?t) 4 PBIT 8,505 211.6 11,350 249.9 5 Interest 62 1.5 25 0.5 6 PBT 8,443 210.1 11,325 249.4 7,695 191.5 10,145 223.6 7 PAT before exceptional items and share of pro?t/(loss) in Associate 8 PAT 3,299 81.7 10,145 223.6 9 EBIDTA Margin % 21.9% 21.9% 28.7% 28.7% 10 PAT Margin %* 20.4% 20.4% 22.7% 22.7% 11 Equity Capital 1,214 30.3 1,217 24.0 12 Net Worth 12,572 313.4 19,434 383.2 13 Net Block Including 5,996 149.5 6,522 128.6 CWIP 14 Investments 633 15.8 4,346 85.7 15 Current Assets 15,562 387.9 17,370 342.5 16 Current Liabilities & 9,268 231.0 8,888 175.2 Provisions 17 Total Assets 22,251 554.6 28,434 560.6 18 Current Ratio 1.7 1.7 2.0 2.0 19 ROCE %* 75.8% 75.8% 70.0% 70.0% 20 EPS (Diluted, in ` and 58.9 1.5 78.8 1.7 US$)* * Before tax, exceptional item and share of pro?t/(loss) in Associate 2008 ` Mn US$ Mn 37,661 934.7 38,705 960.8 8,257 205.3 2009 ` Mn US$ Mn 44,647 984.9 44,269 977.0 12,824 281.9 2010 ` Mn US$ Mn 46,254 976.6 47,008 992.9 11,326 239.9 10,741 2,184 8,557 7,117 227.9 45.7 182.3 151.5 2011 ` Mn US$ Mn 51,402 1126.6 52,690 1155.1 10,033 219.3 9,887 1,113 8,774 7,458 216.2 24.5 191.7 163.0 2012 ` Mn US$ Mn 54,897 1156.3 55,879 1179.2 9,194 193.5 8,562 1,026 7,537 6,099 182.4 22.5 159.8 129.2
7,005 24.5% 15.4% 1,223 28,865 7,231 30,145 21,366 8,665 59,018 2.5 34.7% 54.4
149.1 24.5% 15.4% 27.2 643.0 161.1 671.5 476.0 193.0 1,314.8 2.5 34.7% 1.1
6,442 19.5% 14.5% 1,260 33,514 6,778 29,080 20,290 15,104 60,553 1.3 21.8% 49.3
140.7 19.5% 14.5% 28.2 751.6 152.0 652.2 455.0 338.7 1,358.0 1.3 22.1% 1.1
10,954 16.7% 11.1% 1,275 40,509 8,496 35,876 22,042 16,501 69,191 1.3 17.6% 82.9
229.7 16.7% 11.2% 25.1 796.3 167.0 705.2 433.3 324.4 1360.1 1.3 17.6% 1.7
Revenue
54,897
INR Mn
Geographywise Revenue 2011-12
Rest of World 19%
Customer Count
51,402
North Americas 34%
128
130
46,254 113
Europe 47% 2009-10 2010-11 2011-12 2009-10 2010-11 2011-12
Profit After Tax
INR Mn
Net Worth
INR Mn
Headcount
38,333 40,763
10,955 40,509 33,514 7,005 6,442 28,865
33,524
2009-10
2010-11
2011-12
2009-10
2010-11
2011-12
2009-10
2010-11
2011-12
DIRECTORS’ REPORT TO THE SHAREHOLDERS
Your Directors present their Twenty-?fth Annual Report together with the audited accounts of your Company for the year ended 31st March, 2012. FINANCIAL RESULTS (` in Million) For the year ended 31 March Income Pro?t before Interest, Depreciation, exceptional items and tax Interest Pro?t before Depreciation and tax Depreciation Pro?t before tax Provision for taxation Pro?t after tax before non-recurring / exceptional items Non-recurring / exceptional items Pro?t for the year after tax and non-recurring / exceptional items Balance brought forward from previous year Pro?t available for appropriation Transfer to Debenture Redemption Reserve Dividend Tax on dividend Transfer to General Reserve Balance carried forward - Final Dividend* - Dividend (Proposed)
st
2012 53,107 8,999 (1,025) 7,974 (1,505) 6,469 (1,184) 5,285 (679) 4,606 22,412 27,018 (1,353) (4) (510) (83) (1,000) 24,068
2011 50,921 10,556 (1,113) 9,443 (1,383) 8,060 (1,093) 6,967 6,967 17,740 24,707 (702) (6) (504) (83) (1,000) 22,412
* In respect of equity shares issued pursuant to ESOPs issued after 31st March, 2011 but before book closure date, the Company paid dividend of ` 4.3 Million for the year 2010-11 and tax on dividend of ` 0.7 Million as approved by the shareholders at the Annual General Meeting held on August 12, 2011. DIVIDEND Your Directors are pleased to recommend a dividend of ` 4 per Equity Share (40%), payable to those Shareholders whose names appear in the Register of Members as on the Book Closure Date. The equity dividend for the ?nancial year 2011-12, inclusive of tax on distributed pro?ts would absorb a sum of ` 593 Million (` 587 Million for the previous year). CHANGES IN SHARE CAPITAL During the year under review, your Company allotted 1,531,060 equity shares of face value ` 10 each on the exercise of stock options under its various Employee Stock Option Plans and consequently the number of issued, subscribed and paid-up equity shares has increased from 125,955,481 equity shares to 127,486,541 equity shares of ` 10 each aggregating to ` 1,274,865,410/-. BUSINESS PERFORMANCE / FINANCIAL OVERVIEW Your company is a leading IT services and solutions provider for the Telecom Industry, serving segments such as Telecom Services Providers (TSPs), Telecom Equipment Manufacturers (TEM’s) and Independent Software Vendors (ISV’s) with a wide array of services catering to the changing needs of the Telecom ecosystem. During the year 2011-12, your Company’s consolidated revenues increased to ` 54,897 Million from ` 51,402 Million in the previous year, at a growth rate of 6.8%. In Financial Year 2010-11, your Company executed a large System Integration project for an Indian Telecom Service Provider and had a one-time revenue of ` 2,989 Million from this project. Excluding this one-time revenue, the growth in revenue was 13.4% in Financial Year 2011-12. The geographical split of revenue was quite balanced with 47% share from Europe, 34% from Americas and 19% from the Rest of the World (ROW).
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ANNUAL REPORT 2011 - 2012
The consolidated Pro?t before Interest, Depreciation, Tax and Exceptional items was at ` 10,176 Million (18.5% of revenue) against ` 11,322 Million (22% of revenue) in the previous year. This decline in operating pro?ts was due to increase in employee costs and also change in the business mix. The consolidated Pro?t after tax, after exceptional items and minority interest, amounted to ` 5,385 Million as against ` 7,438 Million in the previous year. The cancellation of 2 G licenses by the Supreme Court in January 2012 impacted two of your company’s domestic customers’ business viability. As a matter of abundant precaution, your Company provided dues from these customers amounting to ` 679 Million as doubtful debts. The consolidated Pro?t after tax, including share of pro?t in associate company (Mahindra Satyam), amounted to ` 10,955 Million as against ` 6,442 Million in the previous year, a growth rate of 70%. The global technology landscape continues to be shaped by both economic forces and by the emergence of new trends like social media and cloud computing. The lingering crisis in Europe, volatile ?nancial markets and government austerity programs could impact spend on IT in the coming year. Our Customers have to face the twin challenges of optimizing current IT spend and investing in future technologies and trends. The underlying strength of the global delivery model and the signi?cant bene?ts it offers to global customers could help corporations in achieving both objectives. Your Company has been providing solutions, which leverage the global delivery model, to Telecom companies to improve Customer experience, bring in operational ef?ciencies and improve customer’s Average Revenue Per User (ARPU). Your Company serves large global telecom companies as well as green ?eld operators across 31 countries. Your company has 130 active customers at the end of the Financial Year 2011-12, and the focus for the coming year is broadening relationships across customer base leveraging Six Pillar Strategy. Your Company’s service offerings are grouped in six distinct domains based on the areas of customer spend. The six domains which are Applications, Networks, Infrastructure, Value Added Services (VAS), Security Solutions and Business Services together cover all areas of customers spend in our target markets. Customer Centricity and enhancing customer experience has always been a focus area for your Company. This year, your Company launched a Customer Centricity Of?ce (CCO), with a Chief Customer Centric Of?cer to ensure that the high levels of customer experience are sustained.
Your Company continues to invest in new technologies like smart computing products, cloud, analytics and mobility. These investments will help your Company capitalize on the emerging revenue opportunities in these areas. Your Company’s domain expertise and leading solutions in the telecom vertical has earned itself a niche in the market place. Your Company was awarded the 2011 Microsoft Communications sector Partner of the year award. Voice & Data – India’s leading communication magazine ranked the Company as India’s No. 1 Telecom Software service provider. CanvasM Technologies Limited (CanvasM), a wholly owned subsidiary of your Company, was ranked amongst the Top 10 Value Added Services (VAS) players. Your Company today has more than 15 delivery centers worldwide and 17 sales of?ces. In the year gone by, Company established a delivery center in Bonn Germany to service clients in Germany and Central Europe. In summary, your Company is well positioned in the markets it serves with a broad range of service offerings and a diversi?ed customer base across geographies. FINANCIAL OVERVIEW OF MAHINDRA SATYAM The turnaround of Mahindra Satyam (Satyam Computer Services Ltd.) gathered further momentum in the current year. Revenues grew by 24% to ` 63,956 Million over the previous year, EBITDA grew by 128% to ` 10,240 Million (16% of revenue) re?ecting the progress of the turnaround. PAT before exceptional item increased to ` 11,882 Million from ` 4,971 Million. A brief snapshot of Mahindra Satyam’s Statement of Pro?t and Loss is given below: Particulars (` in Million) Consolidated P&L Summary FY12 FY11 Revenue 63,956 51,451 EBITDA 10,240 4,489 EBITDA margins (% to revenue) 16% 8.7% Other Income 4,189 2,879 Interest 118 97 Depreciation 1,577 1,721 Pro?t Before Tax 12,734 5,550 Provision for Tax 852 579 Pro?t before exceptional items 11,882 4,971 and minority Interest Exceptional Items (1,094) 6,411 Minority interest (84) 33 Pro?t After Tax 13,061 (1,472) PAT margins (%to revenue) 20.4% (2.9%)
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UPDATE ON THE PROPOSED AMALGAMATION OF MAHINDRA SATYAM AND TECH MAHINDRA LIMITED: In March 2012, the respective Boards of Tech Mahindra and Mahindra Satyam approved the merger of Mahindra Satyam with Tech Mahindra. This landmark event, makes way for the creation of a formidable top-tier global player and one of India’s top IT employers. The Board of Directors at their meeting held on 21st March, 2012 have pursuant to the provisions of Sections 391 to 394 read with Sections 78, 100 to 104 and other applicable provisions, of the Companies Act, 1956 and subject to the requisite approval of the shareholders of the Company and subject to all necessary statutory approvals have approved to amalgamate Venturbay Consultants Private Limited (“Venturbay”), Satyam Computer Services Limited (“Mahindra Satyam”), C&S System Technologies Private Limited (“C&S System”), Mahindra Logisoft Business Solutions Limited (“Mahindra Logisoft”) and CanvasM Technologies Limited (“CanvasM”) with the Company. Based on the recommendation of the valuers, the Board of Directors have approved swap ratio of Two (2) fully paid Equity Shares of face value of `10/- each of the Company for every Seventeen (17) Equity shares of face value of ` 2/- each of Satyam Computer Services Limited (Mahindra Satyam). The proposed Scheme of amalgamation will be subject to approvals by various regulatory agencies and shareholders, including the approval from the High Courts of Bombay and Andhra Pradesh. This Amalgamation would result in creation of a new off shore services leader with revenues of over $ 2.4 billion, more than 75,000 professionals and 350 + active clients. Your Company is happy to inform that the Competition Commission of India has granted approval for the Amalgamation of the companies vide their order dated 26th April, 2012. The Hon’ble High Court, Bombay has dispensed the meeting of creditors & directed the Company to hold meeting of the equity shareholders of the Company on 7th June, 2012 to seek their consent on the said amalgamation and arrangement. The rationale for the merger
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De-risked business pro?le Optimized costs and productivity improvement with bene?ts of scale Diversi?cation into multiple verticals like BFSI, Manufacturing and Retail Ability to offer a wide range of service offerings like Enterprise Services and Engineering Services to current and future customers
The Power of one The combined entity will be able to better leverage Tech Mahindra’s depth of expertise developed in telecom to better penetrate the opportunity presented by Mahindra Satyam’s diverse set of clients across multiple verticals. Likewise, Mahindra Satyam’s expertise in enterprise solutions will enable a more complete value proposition to be delivered to Tech Mahindra’s clients and penetration into the larger landscape. Geographically, your Company derives a signi?cant portion of its revenues from Europe, while Mahindra Satyam’s business is highly focused on Americas. The amalgamated entity will have a further balanced share of revenue contribution from three key geographies viz Americas, Europe and Rest of World. There would be minimal overlap of services and offerings and this would lead to an ease in the integration process of the two entities. MANAGEMENT REPORT DISCUSSION AND ANALYSIS
A detailed analysis of your Company’s performance is discussed in the Management Discussion and Analysis Report, which forms part of this Annual Report. QUALITY Continuous improvement of process and enabling technologies that meet client expectation is a way of life in your Company. There is a very robust process framework which is implemented to ensure greater customer satisfaction through improved quality, higher productivity and reduced cycle time. One of key achievements of your Company was to get assessed at Stage 5 of the Mahindra Quality Way Model, a business excellence framework. Your Company is the ?rst Large Services Company within the Mahindra Group Companies to be assessed at Stage 5. We also embarked on the journey of CMMI 1.3 Level 5 assessment and successfully completed the same on 18th April, 2012. The customer satisfaction surveys also re?ected improved scores and good feedback across all levels of client organizations.
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Creation of a single ‘go-to-market’ strategy with bene?ts of scale and enhanced depth and breadth of capabilities, translating into increased business opportunities Stronger merged entity – ?nancially and in industry positioning Uni?ed management focus and fungible talent pool
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7
ANNUAL REPORT 2011 - 2012
As in the previous years, in this year too, your Company successfully completed the surveillance audits and continues to be certi?ed for ISO9001:2008, ISO/IEC 20000-1:2005, ISO/IEC27001:2005, BS25999:2008. HUMAN RESOURCES Your Company believes in ability of each of its associates and hence provide ample opportunities to tap this potential and invests in the growth and development of all of its associates. Talent Management at the Company involves motivating and promoting leadership development. The Company launched a Global Leadership Cadre (GLC) program about 7 years ago with the aim of sculpting agile and creative young leaders. GLC Program identi?es management graduates from the Tier I business institutes across the globe and also technical specialists from within the organization. These highly talented GLC participants with a faster career progression could be potential successors to senior management in the organization. Complimenting the GLC program is Management Trainee (MT) program running successfully for past 5 years wherein candidates from Tier II B Schools across India are groomed for future GLC roles. The Shadow Board program continues to nurture young talent with high potential and make them a part of the organization’s strategy planning. Aiming to provide a platform to our associates for taking responsibility of shaping their careers, the Company launched this year a mentoring initiative that aims to provide a platform to associates with potential to be groomed and guided by in-house Mentors. This also gives an excellent opportunity to Mentors to hone their people motivation and developmental skills. This year also saw an increased focus on Senior Leadership Development to address speci?c training needs of nominated senior associates within the organisation. Company’s in-house Leadership Programs ran into their second successful year - the Excellence in Leadership Program, speci?cally designed for middle managers with an aim of grooming associates in skills required to excel from a team manager’s role to a business leader’s role; the Young Leaders Program, speci?cally designed for ?rst time managers with an aim at grooming associates in the skills required to move from a team member’s role to a team manager’s role. Associates participate in these 6 month programs while they are working. Another successful learning program is the Executive Post Graduate Diploma in Telecom Management in collaboration with Symbiosis Institute of Telecom Management (SITM). The program offers in-depth knowledge on telecom concepts and general business
management that helps our Company to be prepared for the ever changing telecom market, thus nurturing the leadership talent within the organization. The Company believes in inclusivity and has many initiatives to foster diversity in age, gender, culture and capability. Especially for women associates of the Company, a platform is created to voice their opinions & suggestions and promote Women in the Workplace. It helps to identify and implement initiatives that promote gender diversity and make TechM a preferred career destination for women associates. During the Financial Year 2011-12, your Company, along with its subsidiaries, made a net addition of 2,430 associates to its workforce. The strength was 40,763 associates as at 31st March, 2012, as compared to 38,333 associates a year before, registering an increase of 6.3%. BPO headcount included in this ?gure is 14,792 associates, up from 11,011 associates, a year before. SUBSIDIARY COMPANIES During the year under review, the Company incorporated a new step down subsidiary at America viz. Tech Talenta Inc. The said Company is a wholly owned subsidiary of Tech Mahindra – (Americas) - Inc. a wholly owned subsidiary of your Company. Further during the year under review, your Company bought the stake of 19.90% held by Motorola Cyprus in subsidiary Company CanvasM Technologies Limited (CanvasM) thus making CanvasM a wholly owned subsidiary of the Company. As on 31st March, 2012, your Company has 16 subsidiaries, including two step-down subsidiaries. There has not been any material change in the nature of the business of the subsidiaries. As required under the Listing Agreements with the Stock Exchanges, the Consolidated Financial Statements of your Company and all its subsidiaries and its associate Company i.e. Mahindra Satyam & its subsidiaries are attached. The Consolidated Financial Statements have been prepared in accordance with Accounting Standards AS 21, AS 23 and AS 27 issued by The Institute of Chartered Accountants of India and show the ?nancial resources, assets, liabilities, income, pro?ts and other details of your Company and its subsidiaries and associate companies as a single entity, after elimination of minority interest. In terms of general exemption granted by the Ministry of Corporate Affairs pursuant to Section 212(8) of the Companies Act, 1956, the Copy of the Balance Sheet, etc. of the subsidiaries are not required to be attached with the Balance Sheet of the Company. The Company Secretary will make these documents available upon receipt of request from any member of the Company interested in obtaining the same. These documents
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will be available at Registered Of?ce / Corporate Of?ce of the Company and the of?ce of the respective subsidiary companies, during working hours up to the date of the Annual General Meeting. EMPLOYEE STOCK OPTION PLAN (ESOP) Details required to be provided under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in Annexure I to this Report. CORPORATE SOCIAL RESPONSIBILITY (CSR) Your Company is committed to play its role as an enlightened corporate citizen and continues to earmark 1.5% of its Pro?t after Tax (PAT) every year for CSR activities. CSR activities are carried through Tech Mahindra Foundation (TMF). TECH MAHINDRA FOUNDATION (TMF) TMF was established in its present form in 2007 by your Company as one of the major manifestations of its Corporate Social Responsibility. Your Company contributes 1.5% of its pro?t after tax to TMF which now has a corpus of ` 47 Crore as on 31st March, 2012. It has disbursed approx ` 33 Crores to 70 NGOs over 5 years and impacts more than 50,000 bene?ciaries per year through NGO partners across Delhi-Noida, Mumbai, Pune and Bangalore. TMF seeks to achieve its objectives by working in partnership with outstanding community based NGOs which share its goals and values and have demonstrated competence, dedication and integrity. TMF NGO projects address felt community needs. TMF’s major achievements have been:
steps not only in creating “Green” strategies but also making environmental stewardship a core part of our business strategy that takes accountability for every dimension of social, cultural, economic and environmental governance, creating sustainable value for all its stakeholders. Your Company has been participating in the Sustainability Reporting of the Mahindra Group since Financial Year 2007-08. During the year under review the 4th Sustainability Report for the year 2010-11 was released. All these reports were in accordance with the latest guidelines of the internationally accepted, Global Reporting Initiative (GRI). This report was assured by Ernst & Young and conforms to the highest level for reporting ‘Sustainability’ performance, which is A+. The report and the performance rating of A+ was checked and con?rmed by GRI*. The detailed Group Sustainability Reports are available on the website:http://www.mahindra.com/How-We-Help Environment/Sustainability-Reports. In order to take a structured path for reducing its carbon footprint, your Company has a 5 Year Sustainability Road map. We are consciously reducing GHG emissions and waste, as well as conserve water, bio-diversity and natural resources. In the Financial Year 2011-12 concerted efforts were made to ensure targets are met over committed time lines in the following thrust area:
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Renewable energy using Wind & Solar for generating electricity. Rainwater Harvesting & Sewage Treatment Plant. Eco-friendly e-waste disposal systems. Occupancy sensors to consumption. reduce the electricity
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Qualitative improvement in Primary Education of both government and English medium NGO Schools. Development of Yuva English progamme to empower youth to become employable. Creation of Vision For India (VFI) – a network of outstanding visually impaired NGO partners – impact through shared resources & appropriate technology. Shikshak Samman Awards in Delhi – to outstanding municipal teachers - a way to bring about systemic change by recognizing merit.
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*GRI is a Netherlands based multi-stakeholder network of experts worldwide, which has pioneered the development of the world’s most widely used sustainability reporting framework. United Nations is one of its key stakeholders. This reporting framework sets out the principles and indicators that organizations can use to measure and report their economic, environmental, and social performance. CORPORATE GOVERNANCE PHILOSOPHY Your Company believes that Corporate Governance is a voluntary code of self-discipline. In line with this philosophy, it follows healthy Corporate Governance practices and reports to the shareholders the progress made on the various measures undertaken. Your Directors have reported the initiatives on Corporate Governance adopted by your Company in the section ‘Corporate Governance’ forming part of the Annual Report.
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Our Future plans include improving our outcomes and impact across 3 verticals – Education, Vocational Training and enablement of Visually Impaired. SUSTAINABILITY As a part of a responsible business group having a global presence, your Company has taken considerable
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ANNUAL REPORT 2011 - 2012
DIRECTORS Hon. Akash Paul, Mr. B. H. Wani, Mr. M. Damodaran and Mr. Ravindra Kulkarni are directors liable to retire by rotation and being eligible, offers themselves for re-appointment. During the year under review, Mr. Nigel Stagg and Mr. Richard Cameron, nominees of British Telecommunications Plc (BT), resigned as Directors with effect from 23rd December, 2011. Directors placed on record their appreciation for the services rendered by Mr. Stagg and Mr. Cameron. BT has not nominated new Directors in place of their said nominees. DIRECTORS’ RESPONSIBILITY STATEMENT Pursuant to Section 217(2AA) of the Companies Act, 1956, your Directors, based on the representation received from the Operating Management and after due enquiry, con?rm that: i. in the preparation of the annual accounts, the applicable accounting standards have been followed; they have, in the selection of the accounting policies, consulted the Statutory Auditors and these have been applied consistently and reasonable and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2012 and of the pro?t of the Company for the year ended on that date;
CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION In view of the nature of activities that are being carried on by your Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, concerning conservation of energy and technology absorption, respectively are not applicable to your Company. Your Company being a software solution provider requires minimal energy consumption and every endeavour has been made to ensure the optimal use of energy, avoid wastage and conserve energy as far as possible. FOREIGN EXCHANGE EARNINGS AND OUTGO The foreign exchange earnings of your Company during the year were ` 47,074 Million (previous year ` 42,087 Million), while the outgoings were ` 20,834 Million (previous year ` 17,616 Million). During the year under the review, 89% of your Company’s revenues were derived from exports. PARTICULARS OF EMPLOYEES The information required under Section 217(2A) of the Act and the Rules (as amended) made there under, is provided in an Annexure to this Report. However, as per the provisions of Section 219 (1) (b) (iv) of the Companies Act, 1956, the Directors’ Report being sent to the shareholders does not include this Annexure. Any shareholder interested in perusing a copy of the Annexure may write to the Company Secretary at the Registered Of?ce / Corporate Of?ce of the Company. DEPOSITS AND LOANS/ADVANCES Your Company has not accepted any deposits from the public or its employees during the year under review. The particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, associates, etc., required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement are furnished separately. AWARDS/RECOGNITION Your Company continued its quest for excellence in its chosen area of business to emerge as a true global brand. Several awards and rankings continue to endorse your Company as a thought leader in telecom industry. Awards for Financial Year 2011-12
ii.
iii. proper and suf?cient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. the annual accounts have been prepared on a going concern basis.
AUDITORS M/s. Deloitte Haskins & Sells, Chartered Accountants, the Auditors of your Company, hold of?ce up to the conclusion of the forthcoming Annual General Meeting of the Company and have given their consent for re-appointment. The shareholders will be required to elect auditors for the current year and ?x their remuneration. Your Company has received a written con?rmation from M/s. Deloitte Haskins & Sells, Chartered Accountants to the effect that their appointment, if made, would be in conformity with the limits prescribed in Section 224 of the Companies Act, 1956. The Board recommends the re-appointment of M/s. Deloitte Haskins & Sells, Chartered Accountants as the Auditors of the Company.
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CanvasM a wholly owned subsidiary of the company has won the National Telecom Award for FightBack 2012 CanvasM a wholly owned subsidiary of the company ranked amongst India’s Top 10 VAS players by V&D 2011
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Tech Mahindra ranked among top 3 at the ‘DSCI excellence award for security in IT services company (Large)’, 2011 Tech Mahindra tops 2011 Global Services 100 in the following categories:
ACKNOWLEDGEMENTS Your Directors gratefully acknowledge the contributions made by employees towards the success of your Company. Your Directors are also thankful for the co-operation and assistance received from its customers, vendors, bankers, regulatory and Governmental authorities in India and abroad and its shareholders. For and on behalf of the Board Place: Noida Date: May 23, 2012 Anand G. Mahindra Chairman
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Global ITO Vendors ADM Vendors IM Vendors Speciality Product Engineering Vendors Contact Center and Customer Management Vendors
Particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, associates, etc., required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement. Loans and advances in the nature of loans to subsidiaries: (` in Million) Name of the Company PT Tech Mahindra Indonesia Tech Mahindra (Nigeria) Limited Balance as on March 31, 2012 [-] 51 [-] Maximum outstanding during the year [40] 53 [-]
Loans and advances in the nature of loans to associates, loans and advances in the nature of loans where there is no repayment schedule or repayment beyond seven years or no interest or interest below Section 372A of the Companies Act, 1956 and loans and advances in the nature of loans to ?rms/companies in which directors are interested – Nil
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ESOP 2000 4,274,350 494,500 Under the scheme, all options granted prior to the listing of the Company’s shares, were based on the annual valuation done by an independent Chartered Accountant. The grants made post listing of the Company’s shares on Stock Exchange have been made as per the latest available closing price on the Stock Exchange with the highest trading volume, prior to the date of the meeting of the *Compensation & Nominations Committee in which options were granted. Nil Nil Nil 46,000 No variation Nil 448,500 2,235,134 46,900,000 No variation Nil 700,000 700,000 2,235,134 1,090,008 831,060 831,060 305,660 No variation 71,900,170 1,931,883 The grants made post listing of the Company's shares on Stock Exchange have been made as per the latest available closing price on the Stock Exchange with the highest trading volume, prior to the date of the meeting of the *Compensation & Nominations Committee in which options were granted. Under the scheme, all options were granted prior to the listing of the Company’s shares.These options were granted, based on the annual valuation done by an independent Chartered Accountant. Under the scheme, all options granted prior to the listing of the Company's shares, were based on the annual valuation done by an independent Chartered Accountant. Under the scheme, all options were granted at face value of the shares. Nil 539,500 683,500 10,219,860 6,634,530 2,283,500 ESOP 2004 ESOP 2006 ESOP 2010
Annexure I Disclosure as required under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 as on March 31, 2012
Particulars
Total options granted under the plan
a)
Options Granted during the year
ANNUAL REPORT 2011 - 2012
b)
The Pricing Formula
c)
Options vested as of 31st March 2012
533,280 Nil Nil 5,000 No variation Nil 2,278,500
d)
Options exercised during the year
e)
The Total number of shares arising as a result of exercise of options
f)
Options lapsed/cancelled during the year
g)
Variation of terms of options during the year
h)
Money realised by exercise of options during the year
i)
Total Number of Options in force
j) Nil
Employee-wise details of options granted to: Nil Nil Nil
i.
Senior Managerial Personnel
ii. Any other employees who receives a grant in any one year of options amounting to 5% or more of options granted during that year
* The Board of Directors at its meeting held on May 23, 2012 renamed the Committee as Compensation & Nominations Committee.
Disclosure as required under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 as on March 31, 2012
ESOP 2000 Nil Mr. Vineet Nayyar 3,406,620 Mr.C.P. Gurnani 3,406,620 *Mr. Sanjay Kalra 3,406,620 * Resigned w.e.f. 15th September 2010 34.86 34.86 34.86 34.86 Nil Nil ESOP 2004 ESOP 2006 ESOP 2010
Particulars
iii. Identi?ed employees who were granted option, during any one year, equal or exceeding 1% of the issued capital (excluding outstanding options and conversions) of the Company at the time of grant
k
Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of options calculated in accordance with Accounting Standard AS 20 (`) The Company uses the intrinsic value based method of accounting for stock options granted after 1st April 2005. Had the compensation cost for the Company’s stock based compensation plan been determined in the manner consistent with the fair value approach, the Company’s net income would be lower by ` 32 Million and earnings per share (Basic) would have been ` 36.01
l
Where the Company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed. The impact of this difference on pro?ts and on EPS of the company shall also be disclosed
The Company uses the intrinsic value based method of accounting for stock options granted after 1st April 2005. Had the compensation cost for the Company’s stock based compensation plan been determined in the manner consistent with the fair value approach, the Company’s net income would be lower by ` 32 Million and earnings per share (Basic) would have been ` 36.01
The Company uses the intrinsic value based method of accounting for stock options granted after 1st April 2005. Had the compensation cost for the Company’s stock based compensation plan been determined in the manner consistent with the fair value approach, the Company’s net income would be lower by ` 32 Million and earnings per share (Basic) would have been ` 36.01
The Company uses the intrinsic value based method of accounting for stock options granted after 1st April 2005. Had the compensation cost for the Company’s stock based compensation plan been determined in the manner consistent with the fair value approach, the Company’s net income would be lower by ` 32 Million and earnings per share (Basic) would have been ` 36.01
13
14
ESOP 2000
10-June-2011 16-Sept-2011
Disclosure as required under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 as on March 31, 2012
ESOP 2004 Nil
10-June-2011 16-Sept-2011 15-Nov-2011 5-Dec-2011 8-Feb-2011 12-Mar-2011
Particulars
ESOP 2006
ESOP 2010
m) 701.00 323.67 302.09 Nil 387.41 359.91 598.78 577.23 630.47 614.66 636.00 Nil 701.00 636.00 10.00 10.00 10.00 10.00
Grant Date Weighted-average exercise prices and weighted-average Exercise price fair values of options shall (`) be disclosed seperately for Fair Value (`) options whose exercise price either equals or exceeds or is less than the market price of the stock
ANNUAL REPORT 2011 - 2012
n)
A description of the method and signi?cant assumptions used during the year to estimate the fair values of options, including the following Weighted- average information : NA
16-Sep-2011 10-Jun-2011 16-Sep 2011 15-Nov-2011
NA
5-Dec-2011 8-Feb-2011 12-Mar-2011
10-Jun-2011
I. 3.50 54.09% 0.46% 698.35 650.45 Nil 698.35 0.55% Nil 0.46% 53.52% Nil 53.67% 3.50 Nil 5.25 5.25 52.89% 0.55% 650.45
Risk Free Interest Rate
8.42%
8.26%
Nil
8.32%
8.28%
8.85% 3.50 51.41% 0.56% 617.85
8.42% 3.50 51.04% 0.56% 596.00
8.30% 3.50 49.45% 0.55% 650.30
8.86% 3.50 49.20% 0.55% 634.05
II. Expected Life (Yrs.)
III. Expected Volatility
IV. Expected dividends
V. The Price of the underlying share in market at the time of the option grant (`)
MANAGEMENT DISCUSSION AND ANALYSIS
Company Overview Tech Mahindra Limited (TechM) is a leading provider of IT Services, Networking Technology Solutions and Business Support Services to the global telecommunications industry. Formed in 1986, in partnership with British Telecommunications plc (BT), it is part of the US $15.4 billion Mahindra Group. In the year 2009 it expanded its IT portfolio by acquiring the leading global business and information technology services company, Satyam Computer Services Ltd (re-branded as Mahindra Satyam). In the month of March 2012, the merger between Tech Mahindra and Mahindra Satyam was announced thus making way for the creation of a leading services organization in the Indian offshore landscape. Tech Mahindra has garnered revenues of INR 54.9 Billion (US$ 1,156 Million) in Financial Year 2011-2012 (FY12). The Company has more 40,000 professionals who provide a unique blend of domain expertise and in-depth technology skill-sets. Tech Mahindra has proven domain expertise in the Telecom domain with differentiated skills, research & development capabilities and innovative delivery models. The Company’s solutions enable its clients to maximize returns on their investments, achieve faster time-to-market, reduce total cost of ownership and provide better customer experience. Its capabilities cover a wide array of services including System Integration (SI), Managed Services (MS), Operations Support Systems (OSS), Business Support Systems(BSS), Infrastructure Management Services (IMS), Network Services, Security Consulting, Product Engineering and Business Support Services (BSG/BPO). The Company has been focusing on delivering comprehensive services to Telecom Service Providers (TSPs), Telecom Equipment Manufacturers (TEMs) and Independent Software Vendors (ISVs) and is best positioned to leverage telecom IT outsourcing opportunities through its service offerings across the Telecom value chain. It has more than 130 active client engagements, predominantly in the Telecom Sector. Tech Mahindra’s achievements have been recognized by various industry analysts, forums and clients. The organization has also won several prestigious awards and accolades. Tech Mahindra has principal of?ces in the UK, United States, Germany, UAE, Egypt, Singapore, India, Thailand, Taiwan, Malaysia, Philippines, Canada and Australia. The Company has an extensive global foot print with 17 sales of?ces and 15 delivery centres in more than 31 countries around the world. Industry Structure & Development The Information Technology (IT) industry in India has gained a brand recognition as a knowledge economy. The IT–ITES (IT Enabled Services) industry has two major components: IT Services and Business Process Outsourcing (BPO). The growth in the services sector in India has been led by the IT–ITES sector, contributing substantially to increase in Gross Domestic Product (GDP), employment, and exports. The sector has increased its contribution to India’s GDP from 1.2% in FY1998 to about 7.1% in FY2011. According to NASSCOM, the IT–ITES sector in India generated revenues of US$ 88.1 billion in FY2011. Exports have dominated the IT–ITES industry, and constituted about 77% of the total industry revenue. Though the IT-ITES sector is export driven, the domestic market is also signi?cant with a robust revenue growth. The industry’s share of total Indian exports (merchandise plus services) increased from less than 4% in FY1998 to about 25% in FY2012. In the Calendar Year 2011 (CY11), the global IT-ITES industry grew by 5.4% in the midst of unpredictable economic environment and extremely volatile currency movements. The domestic IT-ITES Industry also grew at a steady pace backed by strong economic growth, technology, innovations, enhancements, competition and enhanced focus by the Government. According to NASSCOM, India retained its position as the world’s leading global sourcing destination for IT-ITES services with a total share of 58%. The Industry has experienced considerable traction within traditional segments like Customer Application, Application Management and Testing. Emerging technologies such as Cloud Computing, Social Media, Mobility, and Analytics are potential areas of growth. Outlook The Global economy is beset with various issues in the developed markets. Historically, IT spends have mirrored economic growth. Hence given the weak forecasts for global growth, growth in IT spends for FY13 are likely to be lower than previous years. The latest forecast for overall global IT spending growth was revised downwards from 3.7% to 2.5% for CY 2012 by a leading forecasting ?rm. However, even in this challenging global demand environment, we foresee a few trends that are likely to in?uence spending in the Telecom vertical. Mobility remains the top theme as growth in mobile devices is leading to investments in mobile data networks
15
ANNUAL REPORT 2011 - 2012
and application development. With the proliferation of smart devices, solutions around M2M (machineto-machine) communication which help companies improve operating performance are ?nding greater traction. Our M2M strategy leverages the experience and expertise of Mahindra Satyam (MSAT), Tech Mahindra (TechM), and CanvasM (subsidiary of TechM) to create compelling value propositions for customers globally. Another key trend seen is that video is increasingly taking a major share of the mobile data traf?c. To address the rapid growth of video traf?c demand, telecommunications service providers (TSPs) have begun investing in content delivery networks. Another area of investment is in the area of private and public cloud computing services. Investments in the Cloud arena, are seen as shifting from infrastructure development, to development of platforms and creation of ecosystems around those platforms. The Social networking phenomenon is expected to become the driver for additional investments in IT as companies look to monetize and bene?t from various social platforms being created. Telecom companies are a key part of the ecosystem in all of these emerging technologies and Tech Mahindra’s relationships and presence across all segments of the ecosystem positions the Company well in these emerging technology areas. TechM has been providing a range of services through its IMS offerings and has been implementing private cloud solutions for customers. Tech Mahindra has also made its foray into the Cable industry and has now formed a separate cable practice in order to capitalize on opportunities in the cable industry. Tech Mahindra also has been experiencing growth through application and system consolidation as Telecom operators are trying to optimize their IT spend. As part of this initiative, operators are looking for relationships with a few preferred vendors which is driving vendor consolidation. Customer centricity and provision of better customer experience across multiple channels is becoming a key trend. With its extensive portfolio of service offerings and investments in emerging areas of spend, Tech Mahindra is well positioned to capitalize on this trend of vendor consolidation. Opportunities Growth in Emerging Markets Compared to the subdued growth expected in developed markets, emerging markets will continue
to drive relatively higher growth due to new spectrum licensing, migration to direct to home platforms, broadband penetration, focus on value added services and conducive regulatory environment. This will create opportunities for the software service providers who can assist operators in achieving their business objectives in these areas. Moreover, as the developing world focuses on shift of Mobility, it may bring in huge investments in this area which could create opportunities for companies like Tech Mahindra. Legacy to Next Generation IT transformation Telecom is a dynamic and evolving industry with high focus on consumers’ changing demands. Service providers around the globe, on the back of dropping legacy revenues and high costs, are looking to transform their clients’ legacy platforms into next generation platforms. This will enable clients to optimize their product portfolio, and rationalize the costs associated with running the systems. These transformation initiatives will lead to outsourcing opportunities. Tech Mahindra has been at the forefront of helping its clients transform their businesses in line with the changing global telecom environment. Increased scope of outsourced activities Access to talent and cost optimization are the key drivers for outsourcing. Telecom service providers are adopting several outsourcing strategies to bene?t from offshoring. One of the trends is services which traditionally were done in house are now being included in the scope of global sourcing. In the network domain, network outsourcing provides an opportunity for wide range of services like ?eld services, maintenance & support, E2E implementations and network infrastructure management. Managed services deals to cover network legacy systems have been tried in the mature markets and a similar trend will continue for the coming years. Adoption of Next Generation Technologies The telecom industry continues to adapt and evolve with new technologies and new ways to communicate. Successive waves of new technology in wire-line, wireless and IP domains have been sweeping the industry landscape. The Telecom industry is also altering to cope up with the changing needs and behaviour of consumers and increased competition. Customers believe in convenience, choice of services, responsiveness and cost as important parameters to choose their service provider. Success in current business environment is characterized by the ability to adapt to the higher user expectations
16
on the one hand and a rapidly changing technology environment on the other. As mobile broadband penetration expands, quick monetization has become a strategy of paramount importance for telecom service providers. Service providers are now focusing on providing solutions to enterprises by enabling their applications to be accessed via mobile platforms such as smart phones and tablets. With the growth in social network media across the world, coupled with higher broadband penetration, users have been voicing their views about quality of services. Analysis of user sentiments on such social networks, within limits of privacy laws, is another area where there has been a growth in demand. Threats Reduction in Telecom Spending The global economy is going through turbulent times and most companies are reacting to the increased volatility. Though cash-rich, telecom companies have turned cautious due to the challenging macroeconomic environment. The decision cycles on new discretionary spend are prolonged. The service providers continue to focus on reducing costs by adopting measures such as optimizing IT Spend and postponing investments. Such cost-saving measures could have an adverse impact on outsourcing. Global IT companies posing challenge with growing India presence Global IT service providers such as Accenture, HP, Cap Gemini and IBM are expanding their presence in India and pose a challenge to Indian IT service companies with their global client relationships, deep pockets and domain knowledge. Risks High customer concentration In FY 2012, revenues from the leading client, top 5 and top 10 clients account for 37%, 68% and 78% respectively. Though customer concentration has been declining over the years, loss of any of these clients could have a material adverse impact on our revenue and pro?tability. After Mahindra Satyam’s merger with the Company customer concentration will reduce signi?cantly. Withdrawal of tax bene?ts In the past we bene?ted from certain income tax incentives under Section 10A of the Income Tax Act
(for the IT services that we provide from specially designated “Software Technology Parks” or STPs) and also from Section 10AA of the Income Tax Act (for the IT services we render from units set up in SEZs). As a result of these incentives, our operations in India have been subject to relatively low tax liabilities. The income tax bene?ts available to STP units have been discontinued from 1st April 2011. As this withdrawal was foreseen, the Company decided to set up facilities in SEZ units at various locations as the units set up in SEZ area would continue to provide us with tax bene?ts similar to those in STPs. We commenced operations in SEZ units at Hinjewadi Pune, Chennai, Kolkata and Chandigarh. Additional units are coming up at Noida. But despite this, tax incidence will increase over the previous years due to withdrawal of Section 10A bene?ts. In addition, there is no assurance that the Indian government will not enact laws in the future that would adversely impact tax incentives further and consequently, our tax liabilities and pro?ts. When our tax incentives expire or are terminated, our tax expense will materially increase, reducing our pro?tability. Exchange rate risks The exchange rate between the Indian Rupee and the British Pound and the Rupee and the U.S. Dollar has ?uctuated widely in the recent past and may continue to ?uctuate signi?cantly in the future. The average value of the Rupee for the FY 2011-12 against the British Pound appreciated by approx 7.7% and against U.S. Dollar by approximately 4.4% for the FY 2010-11. Accordingly, our operating results have been and will continue to be impacted by ?uctuations in the exchange rate of the Indian Rupee with the British Pound, the U.S. Dollar along with other foreign currencies. Any strengthening of the Indian Rupee against the British Pound, the U.S. Dollar or other foreign currencies, as witnessed in the last year, could adversely affect our pro?tability. Discussion on Financial Performance with respect to Operational Performance Overview The ?nancial statements have been prepared in compliance with the requirements of the Companies Act, 1956 and Generally Accepted Accounting Principles (GAAP) in India. The Consolidated ?nancial statements have been prepared in compliance with the Accounting Standard AS 21, AS 23 and AS 27 issued by the Institute of Chartered Accountants of India (ICAI).
17
ANNUAL REPORT 2011 - 2012
The discussion on ?nancial performance in the Management Discussion and Analysis relate primarily to the stand alone accounts of Tech Mahindra Limited. Wherever it is appropriate, information pertaining to consolidated accounts for Tech Mahindra Limited & its subsidiaries is provided. For purpose of comparison with other ?rms in this industry as well as to see the positioning and impact that Tech Mahindra Limited has in the marketplace, it is essential to take the ?gures as re?ected in the Consolidated Financial Statements. A. STANDALONE FINANCIAL POSITION 1. Share Capital The Authorized Share Capital of the Company is ` 1,750 Million, divided into 175 Million equity shares of ` 10 each. The paid up share capital stands at ` 1,275 Million as on 31st March 2012 compared to ` 1,260 Million on 31st March 2011. The increase in paid up capital during the year is due to conversion of options into shares by employees under Employee Stock Option Plan. 2. Reserves and Surplus a) Securities Premium Account The addition to the securities premium account of ` 103 Million during the year is due to the premium received on issue of 1,531,060 equity shares on exercise of option under stock option plans. b) General Reserve General reserve stands at ` 5,451 Million on 31st March 2012 as compared to ` 4,451 Million on 31st March 2011. ` 1,000 Million transferred from Statement of Pro?t and Loss as compared to ` 1,000 Million in previous year. c) Statement of Pro?t and Loss The balance retained in the Statement of Pro?t and Loss as of 31st March 2012 is ` 24,068 Million compared to ` 22,412 Million as of 31st March 2011. 3. Loan Funds Loan funds as on 31st March 2012 stand at ` 11,266 Million including ` 6,106 Million of secured loans and ` 5,160 Million of unsecured loans, compared to ` 11,827 Million including ` 6,000 Million of
secured loans and ` 5,827 Million of unsecured loans as on 31st March 2011. 4. Fixed Assets The movement in Fixed Assets is shown in the table below: ` in Million As of 31st March Gross Book Value Land - Freehold - Leasehold Buildings Leasehold Improvements Plant and Equipment Computers Of?ce Equipments Furniture and Fixtures Vehicles - Leased - Owned Intangible Assets Total Less: Accumulated Depreciation & Amortization Net Block Add: Capital work-inprogress Net Fixed Assets 0 59 214 13,969 7,443 0 48 76 12,485 6,485 175 679 4,679 888 2,566 2,534 491 1,684 175 425 4,102 822 2,348 2,470 440 1,579 2012 2011
6,526 1,627 8,153
6,000 608 6,608
The Net Block of Fixed Assets and Capital Work in Progress increased to ` 8,153 Million as on 31st March 2012, as against ` 6,608 Million as at 31st March 2011. During the year, the Company incurred capital expenditure (gross) of ` 2,039 Million (previous year ` 1,454 Million). The major items of Capital Expenditure Included Leasehold Improvements, Of?ce Building, Plant and Equipment, Computers and Furniture & Fixtures including amount spent on Pune, Chandigarh and Kolkata campus.
18
5.
Investments The summary of Company’s investments is given below: ` in Million Investments As at 31st March 2012 31,684 86 31,770 439 31,331 As at 31st March 2011 31,502 86 31,588 439 31,149 f)
activities. TMF primarily concentrates on rendering assistance to the needy and under privileged people in the society. All the CSR initiatives of the Company are carried through TMF. PT Tech Mahindra Indonesia PT Tech Mahindra Indonesia, established in 2006, is Tech Mahindra’s representative in Indonesia and acts as a service provider for sales, marketing, onsite software development and other related services. g) CanvasM Technologies Limited CanvasM Technologies Limited was set up as a joint venture between Tech Mahindra Limited and Motorola Cyprus Holding Limited in July 2006 with an objective to provide software services and solutions to wire line and wireless telecom service providers, cable companies, enterprise, media and broadcast companies, using SI expertise of Tech Mahindra and R&D investments of Motorola Cyprus. During the year, the entire stake of Motorola (19.9%) was bought by Tech Mahindra Limited. CanvasM Technologies Limited has thus become wholly owned subsidiary of Tech Mahindra Limited as on 31st March 2012. h) CanvasM (Americas) Inc. CanvasM (Americas) Inc. was incorporated in September 2006, as step down wholly owned subsidiary of CanvasM Technologies Limited to provide software services and solutions. i) Tech Mahindra (Malaysia) Sdn. Bhd. Tech Mahindra (Malaysia) Sdn. Bhd. was established in May 2007 as Tech Mahindra’s representative in Malaysia. It acts as a service provider for sales, marketing, onsite software development and other related services. j) Tech Mahindra (Beijing) IT Services Limited Tech Mahindra (Beijing) IT Services Limited was established in December 2007 to strengthen its marketing capabilities in China. k) Venturbay Consultants Private Limited (VCPL) VCPL became wholly owned subsidiary of the Company as on 19th March 2009. It was
Investment in Subsidiaries Investment (others) Total Investments Less : Provision for diminution of value Net Investments I.
Investment in Subsidiaries The Company had investment in the following subsidiaries: a) Tech Mahindra (Americas) Inc. Tech Mahindra (Americas) inc. was incorporated in November 1993 to provide marketing support services for the USA and Canada region. It acts as a service provider for sales, marketing, onsite software development and other related services. b) Tech Mahindra GmbH Tech Mahindra GmbH was established in July 2001 to provide marketing support in central Europe region. c) Tech Mahindra (Singapore) Pte. Limited Formed in 2002, Tech Mahindra (Singapore) Pte. Limited is Tech Mahindra’s representative in Singapore and acts as a service provider for sales, marketing, onsite software development and other related services. d) Tech Mahindra (Thailand) Limited Tech Mahindra (Thailand) Limited was established in August 2005 to strengthen its marketing infrastructure in Thailand. e) Tech Mahindra Foundation (TMF) TMF was promoted by Tech Mahindra Limited as Section 25 Company, in 2006, with the objective of promoting social and charitable
19
ANNUAL REPORT 2011 - 2012
acquired to act as a Special Purpose Vehicle (SPV) to bid for the acquisition of Satyam. It emerged as the highest and successful bidder in the global competitive bidding process and has since acquired 42.67% shares of Satyam. The Company has invested ` 30,461 Million in VCPL. l) Mahindra Logisoft Business Solutions Limited (Mahindra Logisoft) Mahindra Logisoft became wholly owned subsidiary of the Company in April 2009. It was acquired to augment software development capabilities in the area of Infrastructure support and dealer management. m) Tech Mahindra (Nigeria) Limited Tech Mahindra (Nigeria) Limited was incorporated in August 2009 as Tech Mahindra’s representative in Nigeria. It acts as a service provider for sales, marketing, onsite software development and other related services. n) Tech Mahindra (Bahrain) Limited S.P.C Tech Mahindra (Bahrain) Limited S.P.C. was incorporated in November 2009 to provide sales, marketing and account management support to customers in and around Bahrain. It acts as a service provider for sales, marketing, onsite software development and other related services. o) Tech Mahindra Informatica Ltda Brasil Servicos De
wholly owned subsidiary of Tech Mahindra (Americas) Inc. II. Investment in Liquid Mutual Funds The Company has been investing its temporary surplus in various mutual funds. These are typically investments in short-term/liquid funds to gainfully use the excess cash balance with the Company. There are investments of ` 1,203 Million in liquid mutual funds as at 31st March 2012 (previous year nil). 6. Deferred Tax Asset Deferred tax asset as at 31st March 2012 was at ` 820 Million as compared to ` 532 Million as of 31st March 2011. Deferred tax assets represent timing differences in the ?nancial and tax books arising from depreciation of assets, provision for debtors and leave encashment & gratuity. The Company assesses the likelihood that the deferred tax asset will be recovered from future taxable income before carrying it as an asset. 7. Sundry Debtors Sundry debtors increased to ` 12,431 Million (net of provision for doubtful debts amounting to ` 458 Million) as of 31st March 2012 from ` 9,643 Million (net of provision for doubtful debts amounting to ` 130 Million) as of 31st March 2011. Debtor days as of 31st March 2012 (calculated based on per-day sales in the last quarter) were 97 days, compared to 95 days as of 31st March 2011. 8. Cash and Bank Balance The bank balances include both Rupee accounts and foreign currency accounts. The bank balances in overseas current accounts are maintained to meet the expenditure of the overseas branches and overseas project-related expenditure. ` in Million As of 31st March Bank balances in India & Overseas - Current accounts 1,374 15 1,389 1,807 131 1,938 - Deposit accounts Total cash and bank balances* 2012 2011
Tech Mahindra Brasil Servicos De Informatica Ltda was incorporated in July 2010 as a wholly owned subsidiary of your Company to provide sales, marketing and account management support to customers in and around Latin America. It acts as a service provider for sales, marketing, onsite software development and other related services. p) Tech Talenta Inc. (TTI) TTI was formed in March 2012, to carry on business of recruitment, ful?llment and ongoing management of local temporary contractor resources in the areas of IT Development, Product Engineering and IT Systems Support Operations. TTI is a
* Including unrealised (gain) / loss on foreign currency.
20
9.
Total Loans and Advances Total Loans and advances as on 31st March 2012 were ` 8,125 Million compared to ` 10,928 Million as on 31st March 2011. Signi?cant items of total loans and advances include payments towards rent/lease deposits, security deposit, unbilled revenue and balance with excise & custom.
10. Current Liabilities and Provisions Current liabilities and provisions were ` 11,741 Million as of 31st March 2012 compared to ` 9,868 Million as of 31st March 2011. Liabilities and provisions increased mainly due to higher employee related liabilities particularly retirement liabilities & proposed dividend.
B.
RESULTS OF OPERATIONS
The following table sets forth certain income statement items as well as these items as a percentage of our total income for the periods indicated: Particulars FY 2011-12 ` (In Million) Income Revenue from Services Other Income Total Income Expenditure Employee Bene?ts Expenses Operating and Other Expenses Depreciation Interest Total Expenditure Pro?t before tax and exceptional items Provision for Taxation Pro?t after taxation and before exceptional item Exceptional items Net Pro?t for the year 1. Revenue The Company derives revenue principally from technology services provided to clients in the telecommunications industry. The revenue increased by 5.6% to ` 52,430 Million in FY 2011-12 from ` 49,655 Million in FY 2010-11. This re?ected an increase in the number of clients served during the respective years as well as an increase in the amount of business from these clients. Revenue from Europe as a percentage of total revenue was 49.3% in FY 2011-12 compared 22,510 21,598 1,505 1,025 46,638 6,469 1,184 5,285 679 4,606 8.67 9.95 42.39 40.67 2.83 1.93 87.82 12.18 19,438 20,927 1,383 1,113 42,861 8,060 1,093 6,967 0 6,967 13.68 13.68 38.17 41.10 2.72 2.19 84.18 15.83 52,430 677 53,107 100.00 49,655 1,266 50,921 100.00 % of Total Income FY 2010-11 ` (In Million) % of Total Income
to 52.3% in FY 2010-11. Revenue from the Americas increased to 34.6% in FY 2011-12 from 29.4% in FY 2010-11 while the share of revenue attributable to the Rest of the World ( including India) segment was 16% in FY 2011-12 compared to 18.3% in the previous year. Consolidated Revenue Consolidated Revenue for the FY 2011-12 stood at ` 54,897 Million compared to ` 51,402 Million last FY 2010-11, a growth of 6.8%.
21
ANNUAL REPORT 2011 - 2012
Consolidated Revenue by Geography Revenue from Europe as a percentage of total revenue was 47.1% in FY 2011-12 compared to 50.5% in FY 2010-11. Revenue from the Americas increased to 34.3% in FY 2011-12 from 29.9% in FY 2010-11 while the share of revenue attributable to the Rest of the World (including India) segment was 18.6% in FY 2011-12 compared to 19.6% in the previous year. Consolidated Revenue by Segment For FY 2011-12, 80.7% of revenue came from Telecom Service Providers(TSP) segment, 6.6% from Telecom Equipment Manufactures (TEM), 9.7% came from Business Support Group BSG (BPO) segment while 3.1% from others. The revenue share in FY 2010-11 from TSP, TEM, BPO 3. Expenditure Particulars 2.
and Others segment was 87.0%, 5.1%, 6.3% and 1.6% respectively. Other Income Other income includes interest income, dividend income, pro?t on sale of current investments, foreign exchange gain/loss and sundry balances/ provisions written back. Interest income mainly consists of interest received on bank deposits. Dividend income includes dividend received on long term investments as well as that received on current investments. Exchange gain/loss consists of mark to market gain/loss on ineffective hedges, realized gain/loss and revaluation gain/loss on translation of foreign currency assets and liabilities. Other income is at ` 677 Million in FY 2011-12 compared to ` 1,266 Million in FY 2010-11.
FY 2011-12 ` (In Million) % of Total Income 42.39 40.67 2.83 1.93 87.82
FY 2010-11 ` (In Million) 19,438 20,927 1,383 1,113 42,861 % of Total Income 38.17 41.10 2.72 2.19 84.18
Employee Bene?ts Expenses Operating and Other Expenses Depreciation Interest Total Expenses
22,510 21,598 1,505 1,025 46,638
* Previous period numbers have been re-grouped / re-arranged wherever necessary Employee Bene?ts Expenses includes salaries, wages and bonus, allowances paid to associates deputed outside India, contribution to provident fund and other funds and staff welfare costs. The increase in Employee Bene?ts Expenses in absolute value is mainly due to increase in headcount and annual increments. Operating and other expenses mainly include Subcontracting costs, Travelling expenses, Rent, Repairs and Maintenance, Communication expenses, Of?ce establishment costs, Software Packages and Professional fees. The increase is due to increase in business volumes, increase in number of development centres/of?ce locations in India and overseas and overall growth in business activity. Increase in depreciation is mainly due to increase in investment in infrastructure and equipment to service our growing business. 4. The Company incurred interest expense of ` 1,025 Million in FY 2011-12 as compared to ` 1,113 Million in FY 2010-11. The borrowings which were taken to fund acquisition of Mahindra Satyam were partly repaid in 2010 & 2011 which along with lower interest rates on borrowings resulted in reduced interest. Pro?t before tax Pro?t before tax was ` 6,469 Million in FY 2011-12 compared ` 8,060 Million in FY 2010-11. Pro?t before tax as a percentage of total income was 12.2% in FY 2011-12 compared to 15.9% in FY 2010-11. 5. Income taxes The provision for income tax for the year ended 31st March 2012 was ` 1,184 Million as compared
22
to ` 1,093 Million in the previous year, higher by 8.4%.The effective tax rate in these years was 18.3% and 13.6% respectively. 6. Pro?t after tax before exceptional items Pro?t after tax before exceptional items was ` 5,285 Million in FY 2011-12 compared to ` 6,967 Million in FY 2010-11. Pro?t after tax as a percentage of revenue was 9.9% in FY 2011-12 and 13.7% in FY 2010-11. Consolidated PAT Consolidated PAT before exceptional item and minority interest for the FY 2011-12 was ` 6,100 Million compared to ` 7,458 Million in FY 2010-11. PAT as a percentage of revenue was 11.1% in FY 2011-12 compared to 14.5% in FY 2010-11. C. CASH FLOW ` in Million Particulars Net cash ?ow from operating activities Net cash ?ow from (used in) investing activities Net cash ?ow from (used in) ?nancing activities Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Financial Year 2011-12 6,654 (4,009) 2010-11 4,706 (1,317)
D. Internal Control Systems The Company maintains adequate internal control system, which provides, among other things, reasonable assurance of recording the transactions of its operations in all material aspects and of providing protection against signi?cant misuse or loss of Company’s assets. The company uses an Enterprise Resource Planning (ERP) package, which enhances the internal control mechanism. E. Material developments in human Resources including number of people employed
(3,216)
(2,867)
Despite a challenging year, Tech Mahindra has continued to make addition to its human resources during FY 2011-12. We had a net addition of 2,430 (previous year 4,809) employees mainly through campus recruitment in addition to lateral hiring. The global headcount of the company as on 31st March, 2012 was 40,763 employees compared to 38,333 employees as on 31st March, 2011. The Company used various sources for attracting talent during the year. It hired Engineering Graduates and Science Graduates for technical positions whereas MBAs were recruited from premier management institutes such as IIMs, ISB and XLRI to be groomed for future leadership positions. The IT attrition was 19% for the last quarter of the ?scal, witnessing a drop from 22% in the corresponding period of previous year. The Company has been working towards controlling the attrition rate by continuously investing in learning and development programs for associates, competitive compensation, creating a compelling work environment, empowering associates at all levels as well as a well-structured reward and recognition mechanism.
1,918
1,396
1,347
1,918
Cautionary Statement Certain statements made in the management discussion and analysis report relating to the Company’s objectives, projections, outlook, expectations, estimates and others may constitute ‘forward looking statements’ within the meaning of applicable laws and regulations. Actual results may differ from such expectations, projections and so on whether express or implied. Several factors could make signi?cant difference to the Company’s operations. These include economic conditions affecting demand and supply, government regulations and taxation, natural calamities and so on over which the Company does not have any direct control.
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ANNUAL REPORT 2011 - 2012
CORPORATE GOVERNANCE REPORT
I. COMPANY’S PHILOSOPHY ON CODE OF CORPORATE GOVERNANCE: Your Company believes that Corporate Governance is a set of guidelines to help ful?ll its responsibilities to all its stakeholders. It is a voluntary code of self-discipline to ensure that the Company abides by highest ethical standards. In line with this philosophy, your Company follows healthy Corporate Governance practices and has been reporting the same in annual report even before the Company was listed in August 2006. BOARD OF DIRECTORS: The Composition of the Board is in total conformity with Clause 49 of the Listing Agreement, as amended from time to time. Your Company has a balanced mix of eminent executive, non-executive and independent directors on the Board. The total strength of the Board of Directors is eleven. Your Company has a Non-executive Chairman, who is a professional Director in his individual capacity and belongs to the Promoter Group and the number of independent directors is seven which is more than half of the total strength of the Board as required by the provisions of the Listing Agreement. The number of Non-Executive Directors is ten which is more than 50% of the total number of Directors. The Company is managed by the Vice Chairman & Managing Director and the Management Team. The Board reviews and approves strategy and oversees the performance to ensure that the long term objectives of enhancing stakeholder value are met. The Independent Directors and the Senior Management have made disclosures to the Board con?rming that there are no material ?nancial and/or commercial transactions between them and the Company which could have potential con?ict of interest with the Company at large. The Board meets at least four times a year and the maximum gap between two meetings is not more than four months. During the year 2011-12, six meetings of the Board of Directors were held on 20th April 2011, 26th May 2011, 12th August 2011, 15th November 2011, 8th February 2012 and 21st March 2012. Agenda for the Board Meetings containing all necessary information / documents is made available to the Board in advance to help the Board to discharge its responsibilities effectively and take informed decisions. In some instances, documents are tabled at the meetings and the concerned manager also makes presentations to the Board or Committees. None of the Directors on the Board is a member in more than 10 committees or acts as a Chairman of more than 5 committees across all companies in which he is a director. The directors of the Company are not inter se related. The names and categories of the Directors on the Board, their attendance at the Board and the Annual General Meeting held during the year and the number of Directorships and Committee Chairmanships / Memberships held by them in other companies as on 31st March, 2012 is given below:
No. of Board Attendance at the Directorship in No. of Committee positions held in Meetings attended AGM held on other Companies other public companies (**) (Held = 6) 12th August 2011 (*) As Chairman As Member Non-Executive Chairman 5 Yes 7 Nil 1 Non-Executive, Independent 5 Yes Nil Nil Nil Non-Executive, Independent 5 Yes 3 Nil 1 Non-Executive 6 Yes 7 2 1 Non-Executive, Independent 6 Yes Nil Nil Nil Non-Executive, Independent 31 Yes 6 Nil 2 Non- Executive 2 Yes Nil Nil Nil Non-Executive, Independent 51 Yes 2 Nil 1 Non-Executive, Independent 5 Yes 1 Nil Nil Non-Executive, Independent 6 Yes 7 2 4 Non- Executive 3 Yes Nil Nil Nil Vice Chairman & Managing Director 5 Yes 8 Nil Nil Non-Executive 6 Yes 6 2 4 Category
II.
Sr. Name No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.
1 #
Mr. Anand G. Mahindra Hon. Akash Paul Mr. Anupam Puri Mr. Bharat N. Doshi Mr. B.H. Wani Mr. M. Damodaran Mr. Nigel Stagg # Mr. Paul Zuckerman Dr. Raj Reddy Mr. Ravindra Kulkarni Mr. Richard Cameron# Mr. Vineet Nayyar Mr. Ulhas N. Yargop
In addition, participated in one meeting through teleconference. Resigned with effect from 23rd December, 2011 (*) This does not include private companies, foreign companies and companies under Section 25 of the Companies Act, 1956 (**) Committees include Audit Committee and Investor Grievances-Cum-Share Transfer Committee, excluding that of Tech Mahindra Limited.
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Necessary information as required by Annexure 1A to Clause 49 of the Listing agreement is placed before the Board. During the year under review, Mr. Richard Cameron and Mr. Nigel Stagg, Directors representing British Telecommunications plc. resigned as directors with effect from 23rd December, 2011. Directors seeking re-appointment: Hon. Akash Paul, Mr. B.H. Wani, Mr. M. Damodaran and Mr. Ravindra Kulkarni retire by rotation and being eligible, have offered themselves for re-appointment. As required by clause 49 (G) (i) of the Listing Agreement, details of Directors seeking re-appointment are set out at the end of this Report. CEO / CFO Certi?cation As required under Clause 49 V of the Listing Agreement with the Stock Exchanges, a Certi?cate on the Financial Statements for the ?nancial year ended on 31st March, 2012 has been given to the Board of Directors by the Vice Chairman & Managing Director and the Chief Financial Of?cer of the Company. Code of Conduct All the Directors and senior management personnel have af?rmed compliance with the Code of Conduct/ Ethics as approved and adopted by the Board of Directors and a declaration to that effect signed by the Managing Director is attached and forms part of this report. The Code has been posted on the Company’s website - www.techmahindra.com Policy for prohibition of Insider Trading In compliance with the provisions of SEBI (Prohibition of Insider Trading) Regulations, 1992, (as amended from time to time) and to preserve the con?dentiality and prevent misuse of unpublished price sensitive information, the Company has adopted a policy for prohibition of Insider Trading for Directors and speci?ed employees of the Company, relating to dealing in the shares of the Company. This policy also provides for periodical disclosures from designated employees as well as pre-clearance of transactions by such persons. Whistle Blower Policy Your Company has a Whistle Blower Policy in place. In terms of this policy, all employees are encouraged to report any instance of unethical behaviour, fraud, violation of the Company’s Code of Conduct or any behaviour which may otherwise be inappropriate and harmful to the Company. The policy provides a mechanism for employees to raise concerns that relate to violation of the Code of Conduct, Accounting, Internal Controls, Auditing Matters and applicable national and international laws including statutory / regulatory rules and regulations. This policy has been communicated to all employees and has been posted on the Company’s Intranet for ready access. III. RISK MANAGEMENT: Your Company has a well-de?ned risk management framework in place. The risk management framework adopted by the Company is discussed in detail in the Management Discussion and Analysis section of this Annual Report. Your Company has established procedures to periodically place before the Board, the risk assessment and minimization procedures being followed by the Company and steps taken by it to mitigate these risks. IV. COMMITTEES OF THE BOARD: In compliance with the Listing Agreements the Board has constituted a set of committees with speci?c terms of reference and scope to deal with speci?ed matters (both mandatory and non-mandatory) expediently. The details of the committees constituted by the Board are given below: A. AUDIT COMMITTEE: The Audit Committee of the Board of Directors has been constituted in line with the provisions of Section 292A of the Companies Act, 1956, read with Clause 49 of the Listing Agreement. The Committee meets at least four times a year and the maximum gap between two meetings is not more than four months.
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ANNUAL REPORT 2011 - 2012
1.
The composition of the Audit Committee and particulars of meetings attended by the members is as below: Four meetings of the Audit Committee were held during the Financial Year 2011-12. The meetings were held on 26th May 2011, 12th August 2011, 15th November, 2011 and 8th February 2012. The gap between two Meetings did not exceed four months. The details of the number of Audit Committee meetings attended by its members are given below: Name of Director Category Number of Audit Committee meetings attended (Held = 4) 3 4 4 4 3 4
Mr. M. Damodaran Mr. Anupam Puri Mr. Paul Zuckerman Dr. Raj Reddy Mr. Richard Cameron Mr. Ulhas N. Yargop
# #
Chairman, Non-Executive, Independent Non-Executive, Independent Non-Executive, Independent Non-Executive, Independent Non Executive Non Executive
Resigned with effect from 23rd December 2011.
The necessary quorum was present at all the meetings. 2. Recommendations of the Committee: All the recommendations of the Audit Committee were accepted by the Board of Directors. 3. Brief terms of reference: The terms of reference of this Committee are very wide. Besides having access to all the required information within the Company, the Committee can obtain external professional advice whenever required. The Committee acts as a link between the Statutory and the Internal Auditors and the Board of Directors of the Company. It is authorized to select and establish accounting policies, review reports of the Statutory and the Internal Auditors and meet with them to discuss their ?ndings, suggestions and other related matters. The Committee is empowered to review the remuneration payable to the Statutory Auditors and to recommend a change in Auditors, if felt necessary. It is also empowered to review Financial Statements and investments of unlisted subsidiary companies, Management Discussion & Analysis and material individual transactions with related parties not in normal course of business or which are not on an arm’s length basis. All items listed in Clause 49 II (D) of the Listing Agreement are covered in the terms of reference. The Audit Committee has been granted powers as prescribed under Clause 49 II (C). The Meetings of the Audit Committee are, generally, also attended by the Vice Chairman & Managing Director, Chief Financial Of?cer (CFO), the Statutory Auditors and the Internal Auditor. Mr. M Damodaran, Chairman of the Committee, was present at the Annual General Meeting of the Company held on 12th August 2011. The Company Secretary is the Secretary to the Committee. Necessary information as required by Clause 49 II (E) of the Listing Agreement is reviewed by the Audit Committee.
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B.
COMPENSATION (REMUNERATION) COMMITTEE: 1. The composition of the Compensation Committee and particulars of meetings attended by the members are given below: Four meetings of the Compensation Committee were held during the Financial Year 2011-12. The meetings were held on 26th May 2011, 12th August 2011, 15th November 2011 and 8th February 2012. The details of the number of Compensation Committee meetings attended by its members are given below: Name of Director Category Number of Compensation Committee meetings attended (Held = 4) 4 4 2 4 4
Mr. Ravindra Kulkarni Mr. Anupam Puri Mr. Nigel Stagg
#
Chairman, Non-Executive Independent Non-Executive Independent Non-Executive Non-Executive Independent Non-Executive
Mr. Paul Zuckerman Mr. Ulhas N. Yargop
#
Resigned with effect from 23rd December 2011
The necessary quorum was present at all the meetings. 2. Brief terms of reference: The terms of reference of the Compensation Committee include determining the terms and conditions including the remuneration payable to Managing Director of the Company as well as the Employee Stock Option Plans (ESOPs) of the Company. During the course of its review, the Committee also decides on the commission of the Directors and/or other incentives payable, taking into account the individual’s performance as well as that of the Company. 3. Remuneration Policy: While deciding on the remuneration for Directors, the Board and Compensation Committee considers the performance of the Company, the current trends in the industry, the quali?cations of the appointee(s), his/ their experience, past performance and other relevant factors. The Board / Committee regularly keep track of the market trends in terms of compensation levels and practices in relevant industries through participation in structured surveys. This information is used to review the Company’s remuneration policies. 4. Compensation of Directors: i. Remuneration to Non-Executive Directors: Your Company’s Non-Executive Directors are entitled to sitting fees and/ or commission and actual expenses for attending the Board/ Committee meetings. Presently, the Company does not pay sitting fees to its Directors. The eligible Non-Executive Directors are paid commission upto a maximum of 1% of the net pro?ts of the Company, as speci?cally computed for this purpose. A commission of ` 22,120,372 Million (GBP 283,500) has been provided as payable to the eligible Non-Executive Directors in the accounts of the year under review. The said commission will be paid after approval of the members in the Annual General Meeting. The details of the stock options granted till date to
27
ANNUAL REPORT 2011 - 2012
the Non-Executive Directors and the commission of ` 20 Million (provided in the accounts for the year ended 31st March 2011), paid to them during the year under review are as under: Sr. Name of Director No. 1 2 3 4 5 6 7 8 9 10 11 12 Mr. Anand G. Mahindra Hon. Akash Paul Mr. Anupam Puri Mr. Bharat Doshi Mr. B. H. Wani Mr. M. Damodaran Mr. Nigel Stagg # Mr. Paul Zuckerman Dr. Raj Reddy Mr. Ravindra Kulkarni Mr. Richard Cameron Mr. Ulhas N. Yargop Total
# rd #
Commission for FY 2010-11, paid during the year (Amount in `) 1,996,512 2,067,816 1,925,208 2,067,816 1,996,512 1,996,512 2,067,816 2,067,816 1,996,512 2,067,816 20,250,336
Stock options granted till date 30,000 25,000 20,000 20,000 20,000 30,000 35,000 180,000
Resigned with effect from 23 December, 2011.
All these options (except those granted to Mr. M. Damodaran) are granted prior to the listing of Company’s shares, based on the annual valuation by an independent chartered accountant. The options granted to Mr. M. Damodaran during FY 2008-09 were in line with the provisions of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. Under ESOP 2000, options vest over a period of three years in the ratio of 33%, 33% and 34%. Under ESOP 2006, options vest over ?ve years in the ratio of 10%, 15%, 20%, 25% and 30%. Apart from reimbursement of expenses incurred in the discharge of their duties, the remuneration that these Directors would be entitled under the Companies Act, 1956 as Non-Executive Directors and the remuneration that a Director may receive for professional services rendered to the Company through a ?rm in which he is a partner, none of these Directors has any other material pecuniary relationships or transactions with the Company, its Promoters, its Directors, its Senior Management or its Subsidiaries and Associates which in their judgment would affect their independence. ii. Remuneration paid / payable to Managing Director for the year ended 31st March 2012: Remuneration to Managing Director is ?xed by the Compensation Committee. Following is the remuneration paid / payable to the Managing Director during the year ended 31st March 2012: (` in Million) Director Salary Bene?ts, Commission Total Contract Period No. of options (under Company’s ESOP 2004 and ESOP contribution to Perquisites & payable 2010) Provident Fund Allowances 1.21 13.91 10.80 36.00 Re-appointed ESOP 2004 -3,406,620 from 17th January ESOP 2010 - 800,000 2010 to 16th January 2013
Mr. Vineet Nayyar, Vice Chairman & Managing Director
10.08
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5.
Details of Equity Shares of the Company held by the Directors as on 31st March 2012 are as below: Sr. No. Name of Director 1. 2. 3. 4. 5. 6. 7.
+
No. of Shares held 47,138 747,208 21,015 17,831 27,000 1,037 38,340 899,569
% to total paid-up Capital 0.03 0.58 0.01 0.01 0.02 0.00 0.03 0.68
Mr. Anand Mahindra+ Mr. Vineet Nayyar+ Hon. Akash Paul Mr. Bharat Doshi+ Dr. Raj Reddy Mr. Ravindra Kulkarni + Mr. Ulhas N. Yargop+ Total
Held jointly
Except the above, none of the other directors hold any shares of the Company. C. INVESTOR GRIEVANCES-CUM-SHARE TRANSFER COMMITTEE: The Board of Directors constituted the Investor Grievances-cum-Share Transfer Committee of the Board at its meeting held on 4th May, 2006. Mr. Ulhas N. Yargop, a Non-Executive Director is the Chairman of the Committee. Mr. Vineet Nayyar and Mr. Richard Cameron (Resigned with effect from 23rd December, 2011) are the other members of the Committee. Mr. Anil Khatri, Company Secretary is the Compliance Of?cer. During the year, the Committee has held one meeting on 15th November, 2011 which was attended by all Committee members. Terms of reference: The Investor Grievances-cum-Share Transfer Committee looks into redressal of shareholders’ and investors’ complaints, issue of duplicate/ consolidated share certi?cates, allotment and listing of shares and review of cases for refusal of transfer/ transmission of shares and debentures and reference to statutory and regulatory authorities. The Company also has an Investor Relations Department focused on servicing the needs of the investors, analysts, brokers and the general public. The status of complaints received and resolved during the year is as under: Opening balance of the number of Shareholders’ complaints/requests as on 1st April, 2011 0 Number of Shareholders’ complaints /requests received during the year 170 Number of Shareholders’ complaints / requests disposed during the year 170 Number of Shareholders’ complaints / requests pending as on 31st March, 2012 0
Number of Complaints/requests received during the year as a percentage of total number of members as on 31st March, 2012 is 0.13% D. EXECUTIVE COMMITTEE (a voluntary initiative of the Company): The Committee was formed to deal with urgent matters requiring immediate action of the Board of Directors before a meeting of the Board could be convened. The Committee also approves the making of loans and investments in accordance with the guidelines prescribed by the Board. Mr. Vineet Nayyar is the Chairman of the Committee. Mr. Ulhas N. Yargop and Mr. Nigel Stagg (Resigned with effect from 23rd December 2011) are the other Members of the Committee. E. SECURITIES ALLOTMENT COMMITTEE (a voluntary initiative of the Company): The Committee was formed in the year 2006 to enable exercise of Options and allotment of shares under ESOP. The Board in its meeting held on 27th April, 2009 renamed the Committee as “Securities Allotment Committee” to increase its scope with power to allot any marketable securities of the Company. Mr. Vineet Nayyar is the Chairman of the Committee. Mr. Ulhas N. Yargop and Mr. Richard Cameron (Resigned with effect from 23rd December, 2011) are the other Members of the Committee.
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ANNUAL REPORT 2011 - 2012
V.
SUBSIDIARY COMPANIES: Clause 49 de?nes a material non-listed Indian subsidiary as an unlisted subsidiary, incorporated in India, whose turnover or net worth (i.e. paid up capital and free reserves) exceeds 20% of the consolidated turnover or net worth respectively, of the listed holding company and its subsidiaries in the immediately preceding accounting year. Venturbay Consultants Private Limited (Venturbay), a wholly owned subsidiary of the Company is a material non-listed Indian subsidiary. The Company regularly places before the Board minutes of all subsidiaries of the Company.
VI.
GENERAL BODY MEETINGS: The details of the last three Annual General Meetings of the Company and the Special Resolutions passed thereat are as under: Year 2009 Location of AGM Date Time Special Resolutions passed Resolution under Section 81(1A) of the Companies Act, 1956 for further issue of shares. Resolution under Section 81(1A) of the Companies Act, 1956 for further issue of shares. Re-appointment and revision of remuneration payable to Managing Director. Approval for payment of commission to Non - Executive Directors. Resolution under Section 81(1A) of the Companies Act, 1956 for further issue of shares. Approval for enhancing the ceiling on total holdings of Foreign Institutional Investors upto 35% of paid up equity capital.
Birla Matushri July 23, 2009 Sabhagar,19, New Marine Lines, Mumbai 400 020 Birla Matushri July 26, 2010 Sabhagar,19, New Marine Lines, Mumbai 400 020
3.00 p.m. -
2010
3.30 p.m.
-
-
2011
Sir Patkar Hall, 1, Nathibai Thackersey Road, Marine Lines, Mumbai 400 020
August 12, 2011 3.30 p.m.
-
-
Details of Resolutions passed through Postal Ballots during the year 2011-12: NIL VII. DISCLOSURES: i) There have been no materially signi?cant transactions, pecuniary transactions or relationships between the Company and directors, management, subsidiary or related parties except those disclosed in the ?nancial statements for the year ended 31st March, 2012. The Company has followed the Accounting Standards laid down by The Companies (Accounting Standards) Rules, 2006 in preparation of ?nancial statement. The Company has complied with all the requirements of regulatory authorities. During the last three years, there were no instances of non-compliance by the Company and no penalty or strictures were imposed on the Company by the Stock Exchanges or SEBI or any statutory authority, on any matter related to the capital markets. The Company has complied with the mandatory requirements of Clause 49. The Company has complied with the following non-mandatory requirements as prescribed in Annexure ID to Clause 49 of the Listing Agreement with the Stock Exchanges: (a) The Company has set up a Compensation (Remuneration) Committee long before it got listed. Please see the para on Compensation Committee for details. (b) During the period under review, there is no audit quali?cation in the Company’s ?nancial statements. The Company continues to adopt best practices to ensure regime of unquali?ed ?nancial statements. The Consolidated Audited Accounts were quali?ed by Auditors with quali?cations ?owing from audit quali?cations in Audit Report of Satyam Computer Services Limited, an associate of the Company.
ii) iii)
iv) v)
30
(c)
The Company has formulated a Whistle Blower Policy which provides a mechanism for employees to raise concerns that relate to violation of the Code of Conduct, Accounting, Internal Accounting Controls, Auditing Matters and applicable national and international laws including statutory / regulatory rules and regulations. No personnel have been denied access to the Audit Committee. The Company has 132,930 shareholders as on 31st March, 2012. The main channel of communication to the shareholders is through the annual report which includes inter alia, the Directors’ report, the report on Corporate Governance and the quarterly and annual audited ?nancial results. The website of the Company www.techmahindra.com acts as the primary source of information regarding the operations of the Company. The quarterly, half-yearly and annual results of the Company are published in leading newspapers in India which include Business Standard, Economic Times and Maharashtra Times. The results are also displayed on the Company’s website www.techmahindra.com. Of?cial Press Releases made by the Company from time to time are also displayed on the website. A Fact sheet providing a gist of the quarterly, half yearly and annual results of the Company is displayed on the Company’s website. The Company regularly posts information relating to its ?nancial results and shareholding pattern on Corporate Filing and Dissemination System (CFDS) viz. www.corp?ling.co.in. Besides, the Company also submits electronically various compliance reports / statements periodically in accordance with the provisions of the Listing Agreement on NSE’s Electronic Application Processing System (NEAPS).
VIII. COMMUNICATION OF RESULTS: •
•
• IX. 1.
A Management Discussion and Analysis forms part of this Annual Report. Annual General Meeting: Date Time Venue Friday, 10th August 2012 3.30 P.M. Y. B. Chavan Auditorium, General Jagannath Bhosle Marg, Nariman Point, Mumbai -400 021.
GENERAL SHAREHOLDER INFORMATION:
2.
Financial year: The ?nancial year is 1st April to 31st March. Financial Calendar: Financial reporting for Quarter ending 30th June 2012 Half year ending 30th September 2012 Quarter ending 31st December 2012 Year ending 31st March 2013 Annual General Meeting for the year ending 31st March 2013 Tentative Board Meeting schedule (subject to change) First fortnight of August 2012 First fortnight of November 2012 First fortnight of February 2013 Second fortnight of May 2013 First fortnight of August 2013
3.
Book Closure / Record Date: 6th August, 2012 to 10th August, 2012 (both days inclusive) for the purpose of Annual General Meeting and payment of dividend.
4. 5.
Date of Dividend Payment Date of payment of Dividend if declared would be on or after 10th August, 2012. Listing on Stock Exchanges: The Company’s equity shares are listed on The National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE). Listing Fee for FY 2012-13 has been paid in full for both the stock exchanges. The Company’s Non – convertible debentures (NCDs) are listed on the National Stock Exchange of India Limited (NSE).
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ANNUAL REPORT 2011 - 2012
6.
Stock Code: National Stock Exchange of India Limited - TECHM Bombay Stock Exchange Limited - 532755
7.
Demat International Securities Identi?cation Number (ISIN) in NSDL and CDSL for equity shares: INE669C01028 The ISIN details for the Company’s other securities are as under: • • 10.25% Non-convertible Debentures (17 April 2013) Face Value ` 10 Lac: INE669C07025 10.25% Non-convertible Debentures (17 April 2014) Face Value ` 10 Lac: INE669C07033
8.
Market Price Data: High, Low during each month in last ?nancial year: Equity Shares NSE High (`) Low (`) 761.00 671.00 696.45 636.60 795.00 654.80 798.00 714.35 786.25 602.00 699.60 555.55 615.00 529.70 634.00 550.00 618.75 528.00 656.00 565.05 691.80 609.10 749.00 590.10
Month April 2011 May 2011 June 2011 July 2011 August 2011 September 2011 October 2011 November 2011 December 2011 January 2012 February 2012 March 2012 9.
BSE High (`) 760.00 697.00 724.70 797.70 784.00 699.00 615.85 635.00 602.45 656.00 694.40 745.00 Low (`) 675.85 587.15 658.05 715.00 604.00 524.20 531.00 550.10 537.20 567.45 579.25 590.65
Performance in comparison to broad-based indices such as NSE (NIFTY), BSE Sensex index etc.: The performance of the Company’s shares relative to the NSE (NIFTY) Index is given in the chart below:
900 800 700 600 500 400 300 200 100 -
7000 6000 5000 4000 3000 2000 1000 0
Tech Mahindra
Last trading day of the month
NIFTY
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10.
Registrar and Transfer Agents: Share transfer, dividend payment and all other investor related matters are attended to and processed by our Registrar and Transfer Agents, i.e. Link Intime India Private Limited having their of?ce at Link Intime India Private Limited Block No. 202, 2nd Floor, Akshay Complex, Near Ganesh Temple, Off Dhole Patil Road, Pune 411 001 Tel No. +91 20 2616 0084, 2616 1629 Fax: +91 20 2616 3503 Contact Person: Mr. Bhagavant Sawant Email address: [email protected]
11.
Share Transfer System: The Company’s shares are covered under the compulsory dematerialization list and are transferable through the depository system. Shares sent for transfer in physical form are registered and returned within a period of thirty days from the date of receipt of the documents, provided the documents are valid and complete in all respects.
12.
Distribution of shareholding as on 31st March 2012: No. of Equity Shares held 001 500 Shareholders No. of Shareholders 130,853 905 594 213 106 62 86 111 132,930 % to Total 98.44 0.68 0.45 0.16 0.08 0.05 0.06 0.08 100.00 Equity shares held No. of shares 4,617,598 685,782 841,230 529,035 376,502 282,237 633,484 119,520,673 127,486,541 % to Total 3.62 0.54 0.66 0.41 0.30 0.22 0.50 93.75 100.00
501 - 1000 1001 - 2000 2001 - 3000 3001 - 4000 4001 - 5000 5001 - 10000 10,001 & above Total 13.
Shareholding Pattern as on 31st March 2012: Category Promoters holdings Public Share holding: Mutual Funds Banks, Financial Institutions & others Foreign Institutional Investors Bodies Corporate NRI/Foreign Nationals Indian Public & others Total 528,628 18,307,918 7,284,179 667,042 462,281 9,952,592 127,486,541 0.41 14.36 5.71 0.52 0.36 7.82 100.00 No. of shares held 90,283,901 % to Total 70.82
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ANNUAL REPORT 2011 - 2012
14.
Dematerialization of shares and liquidity: 99.89% of the total equity share capital of the Company is held in a dematerialized form with National Securities Depository Limited and Central Depository Services (India) Limited as on 31st March 2012. The market lot is one share as the trading in equity shares of the Company is permitted only in dematerialized form. The stock is highly liquid.
15.
Outstanding GDRs / ADRs / Warrants or any Convertible instruments, conversion date and likely impact on equity: As on 31st March 2012, the Company did not have any outstanding GDRs/ADRs/Warrants or any Convertible instruments (excluding ESOPs).
16.
Plant Locations: The Company is in software business and does not require any manufacturing plants but it has software development centers in India and abroad. The addresses of the global development centers/ of?ces of the Company are given elsewhere in the annual report.
17.
Address for correspondence: Shareholders’ Correspondence: Shareholders may correspond with i. Registrar & Transfer Agents for all matters relating to transfer / dematerialization of shares, payment of dividend, IPO refunds / demat credits, etc. at : Link Intime India Private Limited Block No. 202, 2nd Floor Akshay Complex, Near Ganesh Temple Off Dhole Patil Road Pune 411 001 Tel No. +91 20 2616 0084, 2616 1629 Fax: +91 20 2616 3503 Contact Person: Mr. Bhagavant Sawant Email address: [email protected] ii. Respective Depository Participants (DPs) for shares held in demat mode. Shareholders are requested to take note that all queries in connection with change in their resident address, bank account details, etc. are to be sent to their respective DPs. For all investor related matters: Mr. Anil Khatri Company Secretary Tech Mahindra Limited 2nd Floor, Corporate Block, Rajiv Gandhi Infotech Park, Phase III, Pune – 411 057 India. Tel No. +91 20 42250000 Tel No. +91 20 6601 8100 Email address: [email protected]
iii.
34
18.
Details of shares held in Demat Suspense Account: The disclosure under Clause 5A of the Listing Agreement is as under: Sr. No. (i) (ii) (iii) (iv) Particulars Aggregate number of shareholders and the outstanding shares in the suspense account lying at the beginning of the year Number of shareholders who approached Company for transfer of shares from suspense account during the year Number of shareholders to whom shares were transferred from suspense account during the year Aggregate number of shareholders and the outstanding shares in the suspense account lying at the end of the year (In Numbers) 24 Shareholders 662 Shares None None 24 Shareholders 662 Shares
The voting rights on these shares shall remain frozen till the rightful owner of such shares claims the shares. 19. Transfer of Unclaimed Dividend to IEPF: Pursuant to Sections 205A and 205C and other applicable provisions, if any, of the Companies Act, 1956, dividends that are unclaimed for a period of seven years, are statutorily required to be transferred to Investor Education and Protection Fund (IEPF) administered by the Central Government, and thereafter, cannot be claimed by the investors. No claim shall lie against the said Fund or the Company for unpaid dividends transferred to the Fund nor shall any payment be made in respect of such claim. Members, who have not yet encashed their dividend warrant(s), are requested to make their claims without any delay to the Company’s Registrar and Transfer Agent, i.e. Link Intime India Private Limited. Calendar for transfer of unclaimed dividend to IEPF: Financial Year 2005-2006 2005-2006 2005-2006 2005-2006 2005-2006 2006-2007 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 X. GREEN INITIATIVES: The Company has taken steps in furtherance of the recent Green initiative proposed by the Ministry of Corporate Affairs (MCA). In order to save the forest and the economy the Company has sent a circular to all the shareholders seeking their concurrence on the electronic communication. The circular was sent by electronic communication as well as through post along with reply paid envelopes provided by the Company to enable the shareholders to intimate their email id’s and help the Company and the country in the green initiative. In order to save the precious forest, preserve the natural resources of the country and to help your Company to save on cost, Members are requested to register their email id’s with the Company’s Registrar & Transfer Agent i.e. Link Intime India Private Limited or with your DP or by sending email to [email protected] Type of Dividend First Interim Dividend Second Interim Dividend Third Interim Dividend Fourth Interim Dividend Final Dividend First Interim Dividend Second Interim Dividend Final Dividend Interim Dividend Final Dividend Final Dividend Date of Declaration 18/07/2005 17/10/2005 16/01/2006 04/05/2006 18/07/2006 17/07/2006 14/03/2007 22/07/2008 21/10/2008 26/07/2010 12/08/2011 Due for Transfer to IEPF August, 2012 November, 2012 February, 2013 June, 2013 August, 2013 August, 2013 April, 2014 August, 2015 November, 2015 September, 2017 September, 2018
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ANNUAL REPORT 2011 - 2012
DETAILS PURSUANT TO CLAUSE 49 IV (G) (i) OF THE LISTING AGREEMENT IN RESPECT OF DIRECTORS SEEKING APPOINTMENT/RE-APPOINTMENT
1. Hon. Akash Paul Hon. Akash Paul has been with the Caparo Group, a steel and engineering Company, one of UK’s largest private companies. He has interest in education and serves on the School of Engineering, Dean’s Advisory Council at Carnegie-Mellon University and the Dean’s Advisory Council at the Sloan School of Management, MIT. He holds an MBA degree from Massachusetts Institute of Technology and a Bachelor of Science degree in Chemical Engineering and Economics from Carnegie-Mellon University. Directorship / Committee Membership in other public companies (excluding foreign companies and Section 25 companies): Nil Hon. Akash Paul holds 21,015 equity shares of the Company. Mr. B. H. Wani Mr. B. H. Wani is a senior solicitor and advocate. Subsequent to his retirement as senior partner of Little & Co, an old ?rm of solicitors and advocates, he is now practicing more in advisory capacity. During his career, he has handled civil matters of corporate bodies relating to formation of companies, joint ventures, collaborations, take overs and amalgamations as well as relating to sale and purchase of properties and matters covering commercial and banking laws, arbitrations. Directorship / Committee Membership in other public companies (excluding foreign companies and Section 25 companies): Nil Mr. Wani does not hold any shares in the Company. Mr. M. Damodaran Mr. Damodaran had been Chairman of SEBI upto February 2008. As Chairman of SEBI, he was instrumental in setting the pace for appropriate regulation of the securities market in India. His initiatives at SEBI have resulted in India’s ?nancial markets being recognized as being amongst the best regulated in the world. Mr. Damodaran’s prior appointments include Chairman of IDBI and Chairman of UTI. Earlier, he was Joint Secretary (Banking Division), Ministry of Finance for ?ve years. He was also a member of the Indian Administrative Service and has served as Chief Secretary, Government of Tripura, apart from various assignments with the Central Government at the Ministry of Finance, Ministry of Commerce and Ministry of Information & Broadcasting. Mr. Damodaran holds degrees in Economics and Law from the Universities of Madras and Delhi. Directorship / Committee Membership in other public companies (excluding foreign companies and Section 25 companies): Mr. Damodaran is a Director of Hero Honda Motors Limited, ING Vysya Bank Limited, SKNL Group, RSB Transmissions India Limited, Sobha Developers Limited and TVS Automobiles Solutions Limited. Mr. Damodaran does not hold any shares in the Company. Mr. Ravindra Kulkarni Mr. Ravindra Kulkarni holds Masters degree in Law from University of Mumbai. Having been in the legal arena for nearly four decades, Mr. Kulkarni has vast experience as a legal practitioner particularly on matters relating to foreign collaborations, joint ventures, mergers and acquisitions, capital markets, public offerings for listing of securities in India as well as in international markets, infrastructure projects, etc. He is a Senior Partner of M/s. Khaitan & Co., one of India’s leading law ?rms and heads their Mumbai of?ce. He is on the Boards of several listed companies as an independent director. He is also a member of the Advisory Committee and also a faculty member of the Post Graduate Diploma Course in Securities Law at the Government Law College, Mumbai. Directorship / Committee Membership in other public companies (excluding foreign companies and Section 25 companies): Mr. Kulkarni is a Director of Alternate Brand Solutions (India) Limited, Elantas Beck India Limited (also Chairman - Audit Committee & Shareholders’ / Investors’ Grievance Committee), Ineos ABS (India) Limited (also Member - Audit Committee and Remuneration Committee), Entertainment Network India Limited (also Member - Audit Committee and Remuneration Committee), Mahindra & Mahindra Limited (also Member - Audit Committee, Shareholders’ / Investors’ Grievance Committee and Governance-Remuneration and Nomination Committee), Shamrao Vithal Co-Op Bank Limited and Chowgule Steamships Limited. Mr. Kulkarni holds 1,037 equity shares in the Company.
2.
3.
4.
36
DECLARATION REGARDING COMPLIANCE BY BOARD MEMBERS AND SENIOR MANAGEMENT PERSONNEL WITH THE COMPANY’S CODE OF CONDUCT PURSUANT TO CLAUSE 49 OF THE LISTING AGREEMENT
As required by Clause 49 I (D) (ii) of the Listing Agreement, this is to con?rm that the Company has adopted a Code of Conduct for all Board Members and Senior Management of the Company. The Code is available on the Company’s web site. I con?rm that the Company has in respect of the ?nancial year ended March 31, 2012, received from the senior management team of the Company and the Members of the Board, a declaration of compliance with the Code of Conduct as applicable to them. For the purpose of this declaration, Senior Management Team comprises of employees in the President and Executive Vice President Cadre as on March 31, 2012 and Chief Financial Of?cer of the Company. For Tech Mahindra Limited Place: Noida Date: May 23, 2012 Vineet Nayyar Vice Chairman & Managing Director
CERTIFICATE
To the Members of Tech Mahindra Limited We have examined the compliance of conditions of Corporate Governance by Tech Mahindra Limited (“the Company”) for the year ended on March 31, 2012, as stipulated in Clause 49 of the Listing Agreement of the Company with the stock exchanges. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the ?nancial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us and the representations made by the Directors and the management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement. We state that such compliance is neither an assurance as to the future viability of the Company nor the ef?ciency or effectiveness with which the management has conducted the affairs of the Company. For Deloitte Haskins & Sells Chartered Accountants (Registration No. 117366W)
Place: Noida Date: May 23, 2012
Hemant M. Joshi Partner (Membership No. 38019)
37
Financial Statements of Tech Mahindra Limited
Auditors’ Report
To The Members of Tech Mahindra Limited 1. We have audited the attached Balance Sheet of TECH MAHINDRA LIMITED (“the Company”) as at 31st March, 2012, the Statement of Pro?t and Loss and the Cash Flow Statement of the Company for the year ended on that date, both annexed thereto. These ?nancial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these ?nancial statements based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the ?nancial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and the disclosures in the ?nancial statements. An audit also includes assessing the accounting principles used and the signi?cant estimates made by the Management, as well as evaluating the overall ?nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditor’s Report) Order, 2003 (CARO) issued by the Central Government in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters speci?ed in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to in paragraph 3 above, we report as follows: (a) (b) (c) (d) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books; the Balance Sheet, the Statement of Pro?t and Loss and the Cash Flow Statement dealt with by this report are in agreement with the books of account; in our opinion, the Balance Sheet, the Statement of Pro?t and Loss and the Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956; in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (i) (ii) (iii) 5. in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2012; in the case of the Statement of Pro?t and Loss, of the pro?t of the Company for the year ended on that date and in the case of the Cash Flow Statement, of the cash ?ows of the Company for the year ended on that date.
2.
3.
4.
(e)
On the basis of the written representations received from the Directors as on 31st March, 2012 taken on record by the Board of Directors, none of the Directors is disquali?ed as on 31st March, 2012 from being appointed as a director in terms of Section 274(1) (g) of the Companies Act, 1956. For Deloitte Haskins & Sells Chartered Accountants (Registration No. 117366W)
Place : Noida Dated : May 23, 2012
Hemant M. Joshi Partner (Membership No. 38019)
39
ANNUAL REPORT 2011 - 2012
Annexure to the Auditors’ Report
(Referred to in paragraph 3 of our report of even date) (i) (ii) Having regard to the nature of the Company’s activities, clauses (x), (xiii) and (xiv) of CARO are not applicable. In respect of its ?xed assets: (a) (b) The Company has maintained proper records showing full particulars, including quantitative details and situation of the ?xed assets. The major portions of ?xed assets were physically veri?ed during the year by the Management in accordance with a regular programme of veri?cation which, in our opinion, provides for physical veri?cation of all the ?xed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such veri?cation. The ?xed assets disposed off during the year, in our opinion, do not constitute a substantial part of the ?xed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company. As explained to us, the inventories were physically veri?ed during the year by the Management at reasonable intervals. In our opinion and according to the information and explanation given to us, the procedures of physical veri?cation of inventories followed by the Management were reasonable and adequate in relation to the size of the Company and the nature of its business. In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical veri?cation.
(c)
(iii)
In respect of its inventory: (a) (b)
(c)
(iv)
The Company has neither granted nor taken any loans, secured or unsecured, to/from companies, ?rms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of Sub Clauses (b), (c), (d), (f) and (g) of the Clause (iii) of paragraph 4 of Companies (Auditors’ Report) Order, 2003 are not applicable to the Company. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and ?xed assets and the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system. According to the information and explanations given to us, there are no contracts or arrangements that need to be entered into the register referred to in Section 301 of the Companies Act, 1956. Accordingly, the provisions of Sub Clauses (a) and (b) of the Clause (v) of paragraph 4 of Companies (Auditors’ Report) Order, 2003 are not applicable to the Company.
(v)
(vi)
(vii) According to the information and explanations given to us, the Company has not accepted any deposit from the public during the year. (viii) In our opinion, the Company has an adequate internal audit system commensurate with the size and the nature of its business. (ix) According to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Act. Accordingly, the provisions of Clause (viii) of paragraph 4 of Companies (Auditors’ Report) Order, 2003 is not applicable to the Company. According to the information and explanations given to us in respect of statutory dues: (a) The Company has generally been regular in depositing undisputed dues, including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income-tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other material statutory dues applicable to it with the appropriate authorities. There were no undisputed amounts payable in respect of Income-tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other material statutory dues in arrears as at 31st March, 2012 for a period of more than six months from the date they became payable.
(x)
(b)
40
(c)
Details of dues of Income-tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty and Cess which have not been deposited as on 31st March, 2012 on account of disputes are given below: (` in Million) Nature of Dues Forum where Dispute is pending Period to which the amount relates 2001-02 2001-02 2002-03 2002-03 2002-03 2003-04 2003-04 2004-05 2004-05 2004-05 2005-06 2005-06 2007-08 2005-06 2005-06 to 2008-09 2003-04 to 2006-07 2004-05 to 2007-08 2010-11 Amount involved
Statute
Assessing Of?cer 68.88 Assessing Of?cer 162.55 Assessing Of?cer 0.55 High Court 240.65 Assessing Of?cer 1.97 Commissioner of Income Tax (Appeals) 9.42 Income Tax Appellate Tribunal 151.69 Income Tax Appellate Tribunal 150.46 Assessing Of?cer 1.32 Assessing Of?cer 39.55 Income Tax Appellate Tribunal 1.57 High court 2.83 Commissioner of Income Tax (Appeals) 16.63 Assessing Of?cer 1.57 Deputy Commissioner of Commercial 9.22 Taxes, Karnataka Finance Act, 1994 Service Tax Commissioner of Central Excise, 12.86 (Appeals) Pune Finance Act, 1994 Service Tax Commissioner of Service Tax (Appeals), 86.60 Bangalore Finance Act, 1994 Service Tax Customs Excise & Service Tax Appellate 76.26 Tribunal * * The Company is in process of ?ling the appeal (xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of dues to banks and debenture holders. According to the information and explanations given to us, there are no dues payable to ?nancial institutions. (xii) According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. (xiii) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or ?nancial institutions. (xiv) The Company has not availed any term loans during the year. (xv) In our opinion and according to the information and explanations given to us and on an overall examination of the Balance Sheet, we report that funds raised on short-term basis have, not been used during the year for long- term investment. (xvi) According to the information and explanations given to us, the Company has not made preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956. (xvii) According to the information and explanations given to us, the Company has not issued any secured debentures during the period covered by our audit. Accordingly, the provisions of clause 4 (xix) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company. (xviii) As informed to us, during the period covered by our audit report, the Company has not raised any money by public issues. (xix) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no fraud on the Company has been noticed or reported during the year. For Deloitte Haskins & Sells Chartered Accountants (Registration No. 117366W) Hemant M. Joshi Partner (Membership No. 38019)
The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 Karnataka VAT Act, 2003
Income tax Income tax Income tax Income tax Income tax Income tax Income tax Income tax Income tax Income tax Income tax Income tax Income tax Fringe Bene?t Tax Sales Tax
Place : Noida Dated : May 23, 2012
41
ANNUAL REPORT 2011 - 2012
BALANCE SHEET AS AT MARCH 31, 2012
Note I. EQUITY AND LIABILITIES 1 Shareholders’ funds (a) Share Capital (b) Reserves and Surplus Share Application Money Pending Allotment Non-Current liabilities (a) Long-Term Borrowings (b) Other Long Term Liabilities (c) Long-Term Provisions Current Liabilities (a) Short-Term Borrowings (b) Trade Payables (c) Other Current Liabilities (d) Short-Term Provisions 2 3 1,275 33,157 34,432 0 6,000 4,309 1,706 12,015 5,266 4,684 5,669 1,388 17,007 63,454 1,260 32,580 33,840 0 6,400 3,931 1,338 11,669 5,427 3,034 5,324 1,510 15,295 60,804 March 31, 2012 ` in Million March 31, 2011
2 3
4 5 6 7 8 9 10
4
II.
ASSETS 1 Non-Current Assets (a) Fixed Assets (i) Tangible Assets (ii) Intangible Assets (iii) Capital Work-In-Progress (b) Non-Current Investments (c) Deferred Tax Asset (refer note 39) (d) Long-Term Loans and Advances 2 Current assets (a) Current Investments (b) Inventories (c) Trade Receivables (d) Cash and Cash Equivalents (e) Short-Term Loans and Advances
11 6,463 63 1,627 8,153 31,331 820 3,341 43,645 1,203 2 12,431 1,389 4,784 19,809 63,454 5,970 30 608 6,608 31,149 532 4,103 42,392 6 9,643 1,938 6,825 18,412 60,804
12 13 14 15 16 17 18 1 To 51
See accompanying notes to the ?nancial statements
In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Hemant M. Joshi Partner
For Tech Mahindra Limited Anand G. Mahindra Chairman Hon. Akash Paul Director B.H. Wani Director Dr. Raj Reddy Director Sonjoy Anand Chief Financial Of?cer Noida, Dated: May 23, 2012 Vineet Nayyar Vice Chairman & Managing Director Anupam Puri Bharat Doshi Director Director M. Damodaran Paul Zuckerman Director Director Ravindra Kulkarni Ulhas N. Yargop Director Director Anil Khatri Company Secretary
Noida, Dated: May 23, 2012
42
STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED MARCH 31, 2012
` in Million except Earnings per share Note I. II. Revenue from Services (refer note 28) Other Income 19 Year ended March 31, 2012 52,430 677 53,107 20 21 22 11 22,510 21,598 1,025 1,505 46,638 6,469 679 5,790 1,472 (288) 4,606 Year ended March 31, 2011 49,655 1,266 50,921 19,438 20,927 1,113 1,383 42,861 8,060 8,060 1,402 (309) 6,967
III. Total Revenue (I + II) IV. Expenses: Employee Bene?ts Expense Operating and Other Expenses Finance Costs Depreciation and Amortisation Expense Total Expenses V. Pro?t Before Exceptional Items and Tax (III-IV) VI. Exceptional Items (net) (refer note 35) VII. Pro?t Before Tax (V - VI) VIII. Tax Expense: (1) Current Tax (refer note 44) - Net of MAT credit of ` Nil (previous year: ` 180 Million) (2) Deferred Tax (refer note 39) IX. Pro?t for the year (VII-VIII) Earnings Per Equity Share (Before exceptional items) in ` (refer note 43) (1) Basic (2) Diluted Earnings Per Equity Share (After exceptional items) in ` (1) Basic (2) Diluted See accompanying notes to the ?nancial statements In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Hemant M. Joshi Partner 1 To 51
41.61 40.00
55.81 53.36
36.27 34.86
55.81 53.36
For Tech Mahindra Limited Anand G. Mahindra Chairman Hon. Akash Paul Director B.H. Wani Director Dr. Raj Reddy Director Sonjoy Anand Chief Financial Of?cer Noida, Dated: May 23, 2012 Vineet Nayyar Vice Chairman & Managing Director Anupam Puri Bharat Doshi Director Director M. Damodaran Paul Zuckerman Director Director Ravindra Kulkarni Ulhas N. Yargop Director Director Anil Khatri Company Secretary
Noida, Dated: May 23, 2012
43
ANNUAL REPORT 2011 - 2012
CASH FLOW FOR THE YEAR ENDED MARCH 31, 2012
Particulars A Cash ?ow from operating activities Net Pro?t before exceptional items and tax Adjustments for : Depreciation and Amortisation Amortisation of Deferred Revenue Provision for doubtful trade and other receivables, bad debts and loans and advances (net) Provision for Customer Claims and Warranties (net) (Pro?t) / Loss on sale of Fixed Assets (net) Finance costs Net unrealised exchange (gain) / loss Expense on Employee Stock Option Scheme Interest Income Dividend Income Net (gain) / loss on sale of investments Operating pro?t before working capital changes Adjustments for (increase) / decrease in operating assets : Trade receivables (including Finance lease) and short term loans and advances Trade payables and other current liabilities Settlement Fees received Cash generated from operations Net income tax (paid) / refunds Net cash ?ow from / (used in) operating activities (A) B Cash ?ow from investing activities Capital expenditure on ?xed assets, including capital advances Proceeds from sale of ?xed assets Purchase of current Investments Purchase of Government bonds/securities Sale of Government Bond/Securities Purchase of long-term investments in subsidiary Interest received from others Net cash ?ow from / (used in) investing activities (B) Cash ?ow from ?nancing activities Proceeds from issue of equity shares and application money Loan given to subsidiary Loans repaid by subsidiary Year ended March 31, 2012 6,469 1,505 (2,065) 138 (104) (1) 1,025 851 412 (70) (3) 1,688 8,157 ` in Million Year ended March 31, 2011 8,060 1,383 (2,217) 81 90 (11) 1,113 152 69 (84) (0) 576 8,636
(1,147) 1,719 572 8,729 (2,075) 6,654
(2,767) 348 377 (2,042) 6,594 (1,888) 4,706
(2,705) 9 (1,200) (182) 69 (4,009) 119 (45) -
(1,412) 21 (12) 11 (9) 84 (1,317) 260 (40) 40
C
44
CASH FLOW FOR THE YEAR ENDED MARCH 31, 2012 (Contd.)
Particulars Interest from Loan to Subsidiary Dividend (including dividend tax) paid Proceeds from short term borrowings Repayment of short term borrowings Finance cost Net cash ?ow from / (used in) ?nancing activities (C) Net increase / (decrease) in Cash and cash equivalents (A+B+C) Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 1 (591) 23,541 (25,331) (910) (3,216) (571) 1,918 1,347 Year ended March 31, 2012 ` in Million Year ended March 31, 2011 (508) 12,024 (13,584) (1,059) (2,867) 522 1,396 1,918
Notes : 1 Purchase of ?xed assets are stated inclusive of movements of capital work in progress between the commencement and end of the year and are considered as part of investing activity. 2 Cash and cash equivalents : Cash and Bank balances* Unrealised loss / (gain) on foreign currency Less Fixed deposits with original maturity over three months Total Cash and cash equivalents * Cash and cash equivalents comprises a) In current accounts b) In deposit accounts with original maturity of less than three months c) In earmarked accounts March 31, 2012 1,389 (42) 1,347 1,369 15 5 1,389 March 31, 2011 1,938 (20) 0 1,918 1,803 131 4 1,938
3
Cash and cash equivalents include equity share application money of ` 0 Million (previous year: ` 0 Million) and Unclaimed dividend of ` 5 Million (previous year: ` 4 Million)
In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Hemant M. Joshi Partner
For Tech Mahindra Limited Anand G. Mahindra Chairman Hon. Akash Paul Director B.H. Wani Director Dr. Raj Reddy Director Sonjoy Anand Chief Financial Of?cer Noida, Dated: May 23, 2012 Vineet Nayyar Vice Chairman & Managing Director Anupam Puri Bharat Doshi Director Director M. Damodaran Paul Zuckerman Director Director Ravindra Kulkarni Ulhas N. Yargop Director Director Anil Khatri Company Secretary
Noida, Dated: May 23, 2012
45
ANNUAL REPORT 2011 - 2012
Notes forming part of the Balance Sheet and Statement of Pro?t and Loss
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2012. 1. Signi?cant accounting policies: (a) Basis for preparation of accounts: The accompanying ?nancial statements have been prepared to comply in all material aspects with generally accepted accounting principles applicable in India, the Accounting Standards and the relevant provisions of the Companies Act, 1956. (b) Use of Estimates: The preparation of ?nancial statements, in conformity with the generally accepted accounting principles, requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of ?nancial statements and the reported amounts of revenues and expenses during the reported period. Differences between the actual results and estimates are recognised in the period in which the results are known / materialised. (c) Fixed Assets including intangible assets: Fixed assets are stated at cost less accumulated depreciation. Costs comprise of purchase price and attributable costs, if any. (d) Leases: Assets taken on lease are accounted for as ?xed assets in accordance with Accounting Standard 19 on “Leases”, (AS 19). (i) Finance lease Where the Company, as a lessor, leases assets under ?nance leases such amounts are recognized as receivables at an amount equal to the net investment in the lease and the ?nance income is based on constant rate of return on the outstanding net investment. Assets taken on ?nance lease are accounted for as ?xed assets at fair value. Lease payments are apportioned between ?nance charge and reduction of outstanding liability. (ii) Operating lease Lease arrangements under which all risks and rewards of ownership are effectively retained by the lessor are classi?ed as operating lease. Lease rental under operating lease are recognised in Statement of Pro?t and Loss on straight line basis. (e) Depreciation / amortization of ?xed assets: (i) The Company computes depreciation of all ?xed assets including for assets taken on lease using the straight line method based on estimated useful lives. Depreciation is charged on a pro rata basis for assets purchased or sold during the year. Management’s estimate of the useful life of ?xed assets is as follows: Buildings 28 years* Computers 3 years Plant and machinery 5 years Furniture and ?xtures 5 years Vehicles 3-5 Years Of?ce Equipments 5 years *Refer foot note 1 of Note 11 of Fixed Assets (ii) Leasehold land is amortised over the period of lease. (iii) Leasehold improvements are amortised over the period of lease or expected period of occupancy whichever is less. (iv) Intellectual property rights are amortised over a period of seven years. (v) Assets costing upto ` 5,000 are fully depreciated in the year of purchase. (vi) The cost of software purchased for internal use is capitalized and depreciated in full in the month in which it is put to use. (f) Impairment of Assets: At the end of each period, the Company determines whether a provision should be made for impairment loss on assets by considering the indications that an impairment loss may have occurred in accordance with Accounting Standard 28 on ‘‘Impairment of Assets’’. Where the recoverable amount of any asset is lower than its carrying amount, a provision for impairment loss on assets is made for the difference. Recoverable amount is the higher of an asset’s net selling price and value in use. In assessing value in use, the estimated future cash ?ows expected from the continuing use of the asset and from its
46
disposal are discounted to their present value using a pre tax discount rate that re?ects the current market assessments of time value of money and the risks speci?c to the asset. Reversal of impairment loss if any is recognised immediately as income in the Statement of Pro?t and Loss. (g) Investments: Long term investments are carried at cost. Provision is made to recognise a decline other than temporary in the carrying amount of long term investment. Current investments are carried at lower of cost and fair value. (h) Inventories: Components and parts: Components and parts are valued at lower of cost and net realizable value. Cost is determined on First-In-First Out basis. Finished Goods: Valued at the lower of the cost or net realisable value. Cost is determined on First-In-First Out basis. (i) Revenue recognition: Revenue from software services and business process outsourcing services include revenue earned from services rendered on ‘time and material’ basis, time bound ?xed price engagements and system integration projects. All revenues from services, as rendered, are recognised when persuasive evidence of an arrangement exists, the sale price is ?xed or determinable and collectability is reasonably assured and are reported net of sales incentives, discounts based on the terms of the contract and applicable indirect taxes. The Company also performs time bound ?xed price engagements, under which revenue is recognized using the proportionate completion method of accounting, unless work completed cannot be reasonably estimated. Provision for estimated losses, if any on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates. The cumulative impact of any revision in estimates of the percentage of work completed is re?ected in the year in which the change becomes known. (j)
Liquidated damages and penalties are accounted as per the contract terms wherever there is a delayed delivery attributable to the Company and when there is a reasonable certainty with which the same can be estimated. Revenues from the sale of software and hardware products are recognised upon delivery/deemed delivery, which is when title passes to the customer, along with risk and rewards. Unbilled revenues comprise revenues recognised in relation to efforts incurred, not billed as of the period end, where services are performed in accordance with agreed terms. The Company recognizes unearned ?nance income as ?nancing revenue over the lease term using the effective interest method. Dividend income is recognized when the Company’s right to receive dividend is established. Interest income is recognized on time proportion basis. (a) Foreign currency transactions: Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transaction. Monetary items are translated at the period end rates. The exchange difference between the rate prevailing on the date of transaction and on the date of settlement as also on translation of monetary items at the end of the period is recognised as income or expense, as the case may be. Any premium or discount arising at the inception of the forward exchange contract is recognized as income or expense over the life of the contract, except in the case where the contract is designated as a cash ?ow hedge. (b) Derivative instruments accounting: and hedge
The Company uses foreign currency forward contracts / options to hedge its risks associated with foreign currency ?uctuations relating to certain forecasted transactions. Effective April 1st 2007 the Company designates some of these as cash ?ow hedges applying the recognition and measurement principles set out in the Accounting Standard 30 “Financial Instruments: Recognition and Measurements”(AS 30).
47
ANNUAL REPORT 2011 - 2012
The use of foreign currency forward contracts/options is governed by the Company’s policies approved by the Board of Directors, which provide written principles on the use of such ?nancial derivatives consistent with the Company’s risk management strategy. The counter party to the Company’s foreign currency forward contracts is generally a bank. The Company does not use derivative ?nancial instruments for speculative purposes. Foreign currency forward contract/ option derivative instruments are initially measured at fair value and are re-measured at subsequent reporting dates. Changes in the fair value of these derivatives that are designated and effective as hedges of future cash ?ows are recognized directly in reserves and the ineffective portion is recognized immediately in Statement of Pro?t and Loss. The accumulated gains and losses on the derivatives in reserves are transferred to Statement of Pro?t and Loss in the same period in which gains or losses on the item hedged are recognized in Statement of Pro?t and Loss. Changes in the fair value of derivative ?nancial instruments that do not qualify for hedge accounting are recognized in the Statement of Pro?t and Loss as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer quali?es for hedge accounting. When hedge accounting is discontinued for a cash ?ow hedge, the net gain or loss will remain in reserves and be reclassi?ed to Statement of Pro?t and Loss in the same period or periods during which the formerly hedged transaction is reported in Statement of Pro?t and Loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in reserves is transferred to Statement of Pro?t and Loss (k) Employee Retirement Bene?ts: (a) Gratuity: The Company accounts for its gratuity liability, a de?ned retirement bene?t plan covering eligible employees. The gratuity plan provides for a lump sum
payment to employees at retirement, death, incapacitation or termination of the employment based on the respective employee’s salary and the tenure of the employment. Liabilities with regard to a Gratuity plan are determined based on the actuarial valuation carried out by an independent actuary as at the Balance Sheet date using the Projected Unit Credit method. Actuarial gains and losses are recognised in full in the Statement of Pro?t and Loss in the year in which they occur. (Refer note 29 below) (b) Provident fund: The eligible employees of the Company are entitled to receive the bene?ts of Provident fund, a de?ned contribution plan, in which both employees and the Company make monthly contributions at a speci?ed percentage of the covered employees’ salary (currently at 12% of the basic salary) and super annuation contributions, which are charged to the Statement of Pro?t and Loss on accrual basis. The provident fund contributions are paid to the Regional Provident Fund Commissioner by the Company. The Company has no further obligations for future provident fund and superannuation fund bene?ts other than its annual contributions. (c) Compensated absences: The Company provides for the encashment of leave subject to certain Company’s rules. The employees are entitled to accumulate leave subject to certain limits, for future encashment or availment. The liability is provided based on the number of days of unavailed leave at each balance sheet date on the basis of an independent actuarial valuation using the Projected Unit Credit method. Actuarial gains and losses are recognised in full in the Statement of Pro?t and Loss in the year in which they occur. The Company also offers a short term bene?t in the form of encashment of unavailed accumulated leave above certain limit for all of its employees and same is being provided for in the books at actual cost.
48
(d) Other short term employee bene?ts: Other short-term employee bene?ts, including overseas social security contributions and performance incentives expected to be paid in exchange for the services rendered by employees, are recognised during the period when the employee renders the service. (l) Borrowing costs: Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are charged to revenue. (m) Taxation: Tax expense comprises of current tax and deferred tax. Current tax is measured at the amount expected to be paid to/recovered from the tax authorities, based on estimated tax liability computed after taking credit for allowances and exemption in accordance with the local tax laws existing in the respective countries. Minimum Alternative Tax (MAT) paid in accordance with the tax laws, which gives rise to future economic bene?ts in the form of adjustment of future income tax liability is considered as an asset if there is convincing evidence that the Company will pay normal tax after the tax holiday period. Accordingly, it is recognized as an asset in the Balance Sheet when it is probable that the future economic bene?t associated with it will ?ow to the Company and the asset can be measured reliably. Deferred tax assets and liabilities are recognised for future tax consequences attributable to timing differences between taxable income and accounting income that are capable of reversal in one or more subsequent years and are measured using
relevant enacted tax rates. The carrying amount of deferred tax assets at each Balance Sheet date is reduced to the extent that it is no longer reasonably certain that suf?cient future taxable income will be available against which the deferred tax asset can be realized. Tax on distributed pro?ts payable in accordance with the provisions of the Income-Tax Act, 1961 is disclosed in accordance with the Guidance Note on Accounting for Corporate Dividend Tax issued by the ICAI.
Employee Stock Option Plans: Stock options granted to the employees are accounted as per the accounting treatment prescribed by the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999 (“ESOP Guidelines”) issued by Securities and Exchange Board of India (“SEBI”) and the Guidance Note on Accounting for Employee Share-based Payments, issued by the ICAI. Employees eligible for Employee Stock Option Plan 2010 are granted an option to purchase shares of TML at predetermined exercise price. These options vest over a period of three years from the date of grant. The stock compensation cost is computed under the intrinsic value method and amortised on a straight line basis over the total vesting period of three years. (o) Provision, Contingent Contingent Assets: Liabilities andProvision is recognised, when the Company has a present obligation as a result of arising out of past events and it becomes probable that any out?ow of resources embodying economic bene?ts will be required to settle the obligation, in respect of which a reliable estimate can be made. Contingent liabilities are not recognised in the ?nancial statement. A Contingent asset is neither recognised nor disclosed in Financial statements.
49
ANNUAL REPORT 2011 - 2012
Note 2: Share Capital Share Capital Authorised Equity Shares of ` 10/- each Issued, Subscribed & Paid up Equity Shares of ` 10/- each As at March 31, 2012 Number ` Million 175,000,000 127,486,541 127,486,541 1,750 1,275 1,275 As at March 31, 2011 Number ` Million 175,000,000 125,955,481 125,955,481 1,750 1,260 1,260
Disclosure pursuant to Part I of Schedule VI to the Companies Act, 1956 Reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period: Particulars March 31, 2012 Equity Shares ` Number 125,955,481 1,259,554,810 1,531,060 15,310,600 127,486,541 1,274,865,410 March 31, 2011 Equity Shares ` Number 122,320,114 1,223,201,140 3,635,367 125,955,481 36,353,670 1,259,554,810
Shares outstanding at the beginning of the year Shares Issued during the year Shares outstanding at the end of the year
No of shares held by each shareholder holding more than 5 percent equity shares of the Company are as follows: Name of Shareholder March 31, 2012 No. of % of Holding Shares held 60,676,252 47.59 29,546,923 23.18 7,114,140 5.58 March 31, 2011 No. of % of Holding Shares held 60,676,252 48.17 29,546,923 23.46 6,753,525 5.36 Amount in `
Mahindra & Mahindra Limited British Telecommunications PLC Life Insurance Corporation of India
Information about bonus shares issued by capitalisation of free reserves. Particulars As at
March 31, March 31, March 31, March 31, March 31, March 31, 2012 2011 2010 2009 2008 2007 Aggregate No. of Equity Shares : Fully paid up equity shares of ` 2 each issued by way of bonus shares by capitalisation of a) Balance in Statement of Pro?t and Loss b) Balance in General reserve Refer note 37 for stock options. The Company has only one class of shares referred to as equity shares having a par value of ` 10/-. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. The Board of Directors in their meeting on 23rd May, 2012 proposed a ?nal dividend of ` 4 per equity share. The proposal is subject to approval of shareholders at the Annual General Meeting to be held on 10th August, 2012. 51,000,100 51,000,100 51,000,100 51,000,100 51,000,100 51,000,100 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000
50
Note 3: Reserves and Surplus ` in Million As at March 31, 2012 a. Securities Premium Account Opening Balance Add: Received during the year from exercise of stock options Closing Balance b. Debenture Redemption Reserve Opening Balance Add: Transfer from statement of Pro?t and Loss (net) Closing Balance c. Share Options Outstanding Account (refer note 1
) Opening Balance Add: Amortised amount of stock compensation cost Closing Balance d. General Reserve Opening Balance Add: Transfer from statement of Pro?t and Loss Closing Balance e. Hedging Reserve (refer note 40) Opening Balance Add: Movement during the year (net) Closing Balance f. Surplus in Statement of Pro?t and Loss Opening balance Add: Net Pro?t for the year Less: Final Dividend (refer note 45) Less: Proposed Final Dividend (refer note 2) Less: Tax on Dividend (refer note 2 and 45) Less: Transfer to Debenture redemption reserve (net) Less: Transfer to General reserve Closing Balance 22,412 4,606 4 510 83 1,353 1,000 24,068 33,157 17,740 6,967 6 504 83 702 1,000 22,412 32,580 412 (3,947) (3,535) 1,942 (1,530) 412 4,451 1,000 5,451 3,451 1,000 4,451 69 412 481 69 69 2,637 1,353 3,990 1,935 702 2,637 2,599 103 2,702 2,374 225 2,599 As at March 31, 201151
ANNUAL REPORT 2011 - 2012
Note 4: Long Term Borrowings ` In Million As at March 31, 2012 (a) Secured Debentures (i) 10.25% (previous year: 10.25%) Privately placed Non-Convertible Debentures (Due for redemption on 17th April 2014, at par) 3,000 3,000 As at March 31, 2011
(ii) 10.25% (previous year: 10.25%) Privately placed Non-Convertible Debentures (Due for redemption on 17th April 2013, at par) (The above debentures are secured by pari passu charge over the immovable property located in Gujrat. The Company has also deposited the title deeds of certain other immovable properties of the Company with the debenture trustees.) (b) Unsecured Term Loan from Bank
3,000
3,000
6,000
400 6,400
Note 5: Other Long Term Liabilities (a) Deferred revenue (refer note 28) (b) Fair values of foreign exchange forward and currency option contracts (refer note 40) (c) Deposits (d) Others 1,708 2,543 3,772 107
20 38 4,309
20 32 3,931
Note 6: Long Term Provisions Provision for employee bene?ts (refer note 29) 1,706 1,706 1,338 1,338
52
Note 7: Short Term Borrowings ` in Million As at March 31, 2012 Secured Loans from Bank Cash credit * Unsecured Loans from Banks Export Packing credit ** *Cash credit is secured by charge over current assets, present and future, including receivables. ** Due for repayment within 6 months from date of disbursement of loan. 5,266 5,427 5,160 5,427 106 As at March 31, 2011
Note 8: Trade Payables Sundry Creditors: Total outstanding dues of Micro, Small and Medium Enterprises (refer note 50) Total outstanding dues of Creditors other than Micro, Small and Medium Enterprises * * Includes ` 1,288 Million (previous year: ` 622 Million) due to Tech Mahindra (Americas) Inc., a subsidiary company. ` 209 Million (previous year: ` 195 Million) due to Tech Mahindra GmbH, a subsidiary company. ` 61 Million (previous year: ` 42 Million) due to Tech Mahindra (Singapore) Pte. Limited, a subsidiary company. ` 4 Million (previous year: ` 0 Million) due to Tech Mahindra (Thailand) Limited, a subsidiary company. ` 59 Million (previous year: ` 19 Million) due to Tech Mahindra (Malaysia) Sdn. Bhd., a subsidiary company ` 122 Million (previous year: ` 52 Million) due to CanvasM Technologies Limited, a subsidiary company. ` 61 Million (previous year: ` 53 Million) due to Tech Mahindra (Bahrain) Limited S.P.C., a subsidiary company ` NIL (previous year: ` 0 Million) due to Mahindra Logisoft Business Solutions Limited, a subsidiary company. ` 8 Million (previous year: ` Nil) due to Tech Mahindra (Nigeria) Limited, a subsidiary company ` 568 Million (previous year: ` 569 Million) due to Satyam Computer Services Limited, an associate company ` 71 Million (previous year: ` 88 Million) due to Satyam BPO Limited, an associate company ` 1 Million (previous year: ` Nil) due to Satyam Computer Services (Shanghai) Co. Limited an associate Company 4,684 3,034 4,684 3,034
53
ANNUAL REPORT 2011 - 2012
Note 9: Other Current Liabilities ` in Million As at March 31, 2012 (a) Current maturities of long term debt (b) Deferred Revenue (refer note 28) (c) Interest accrued but not due on borrowings (d) Fair values of foreign exchange forward and currency option contracts (Refer note 40) (e) Advance from customers (f) Unearned revenue (g) Unpaid dividends (h) Accrued salaries and bene?ts (i) Others* 2,065 601 1,163 61 47 5 1,186 541 5,669 * Others mainly include withholding and other taxes payable. As at March 31, 2011 400 2,065 589 58 17 4 1,549 642 5,324
Note 10: Short Term provisions (a) Provision for employee bene?ts (refer note 29) (b) Provision for Dividend (c) Provision for Dividend tax (d) Provision for Taxation 364 510 83 431 1,388 193 504 82 731 1,510
54
Note 11: Fixed Assets
` in Million Gross Block As at For the Deductions Upto As at As at April 01, year during the March 31, March 31, March 31, 2011 year 2012 2012 2011 36 1,334 1,267 996 38 2,050 239 479 6,439 46 46 6,485 5,188 75 105 1,505 1,383 30 1,400 546 546 86 241 223 80 0 299 264 2,085 319 497 7,292 76 75 151 7,443 6,485 1,627 8,153 608 6,608 7 2 42 228 34 1,190 390 23 1,634 932 494 17 449 172 391 6,463 0 63 63 6,526 131 1,465 3,214 24 60 619 175 175 389 2,768 1,081 583 10 421 200 343 5,970 30 30 6,000 Accumulated Depreciation / Amortisation Net Block
Cost as at Additions Deletions Balance as April 01, during the during the at March 2011 year year 31, 2012 175 425 577 246 142 14 328 51 289 1,901 138 138 2,039 1,454 97 12,485 555 13,969 214 138 76 555 13,755 223 888 0 491 264 2,534 3 59 37 1,684 28 2,566 4,679 254 679 175
a Tangible Assets
Freehold Land
Leasehold Land
Buildings
4,102
Plant and Equipment 48 440 822
2,348
Furniture and Fixtures
1,579
Vehicles
Computers
2,470
Of?ce Equipments
Leasehold Improvements
Total 76 76
12,409
b Intangible Assets
Intellectual property rights
Software
Total
Grand Total (a+b)
12,485
Previous year
11,128
c Capital Work In Progress
Total
Notes:
1. The useful life of buildings has been revised from 15 years to 28 years with effect from 1st April 2011. The net book value of these ?xed assets as at 31st March 2011 is being depreciated over the revised remaining useful life of the assets. As a result of this change, depreciation charge for the year ended 31st March 2012 is lower and the pro?t for the year is higher by ` 159 Million.
2. Depreciation includes accelerated charge of ` 83 Million on assets in leased premises consequent to the early termination of the lease.
55
ANNUAL REPORT 2011 - 2012
Note 12: Non Current Investments ` in Million As at March 31, 2012 Long Term (Unquoted - at cost) Trade : In Subsidiary Companies : 375,000 Ordinary Shares (previous year: 375,000) of US$ 1 each fully paid-up of Tech Mahindra (Americas) Inc. 3 Shares of Euro 25,000, Euro 50,000 and Euro 500,000 each, fully paid-up of Tech Mahindra GmbH (refer note 1 below) Less : Provision for Diminution (refer note 25) 5,000 Equity Shares (previous year: 5,000) of Singapore $ 10 each fully paid-up of Tech Mahindra (Singapore) Pte. Limited 50,000 Equity Shares (previous year: 50,000) of Tech Mahindra (Thailand) Limited of THB 100 each fully paid-up 50,000 Equity Shares (previous year: 50,000) of Tech Mahindra Foundation of ` 10 each fully paid-up 500,000 Equity Shares (previous year: 500,000) of PT Tech Mahindra Indonesia of US $ 1 each fully paid-up 5,767,330 Equity Shares (previous year: 4,619,631) of CanvasM Technologies Limited of ` 100 each fully paid-up (refer note 48) 312,820 Equity Shares (previous year: 312,820) of Tech Mahindra (Malaysia) Sdn Bhd of Ringgit 1 each fully paid-up Investment in Tech Mahindra (Beijing) IT Services Limited 30,472,300 Equity Shares (previous year: 30,472,300) of Venturbay Consultants Private Limited of ` 10 each fully paid-up 12,450,000 Equity Shares (previous year: 12,450,000) of Mahindra Logisoft Business Solutions Limited of ` 10 each fully paid-up 500 Equity Shares (previous year: 500 ) of Tech Mahindra (Bahrain) Limited S.P.C. of BD 100 each fully paid-up 153,040,026 Equity Shares (previous year: 15,250,026) of Tech Mahindra (Nigeria) Limited of Naira 1 each fully paid up (Refer Note 47) 389 12 12 As at March 31, 2011
389
354 35 1
354 35 1
6
6
1 22
1 22
603
462
4
4
21 30,461
21 30,461
112
112
6
6
46
5
31,330
31,148
56
Note 12: Non Current Investments (Contd.) As at March 31, 2012 In Other Company In Preference shares: 1,603,380 E1 Preference shares (previous year: 1,603,380) of Servista Limited of GBP 0.002 each fully paid up 896,620 E2 Preference shares (previous year: 896,620) of Servista Limited of GBP 0.002 each fully paid up In Equity shares: 4,232,622 Ordinary shares (previous year: 4,232,622) of Servista Limited of GBP 0.002 each fully paid up Less : Provision for Diminution (refer note 26) Long Term (Unquoted - at cost) Non Trade : Treasury Bills & Government Bonds (refer note 2 below) ` in Million As at March 31, 2011
54
54
30
30
1 85 85 -
1 85 85 -
1 1 31,331
1 1 31,149
Notes : 1. Includes ` 360 Million (previous year: ` 360 Million) invested towards capital reserve of the Company in accordance with the German Commercial Code. 2. As per statutory requirements for overseas branches. Particulars Aggregate amount of quoted investments Aggregate amount of unquoted investments Aggregate amount of provision for diminution in value of investments Statement showing percentage of holding Name of the Body Corporate Tech Mahindra (Americas) Inc. Tech Mahindra GmbH Tech Mahindra (Singapore) Pte. Limited Tech Mahindra (Thailand) Limited Tech Mahindra Foundation PT Tech Mahindra Indonesia CanvasM Technologies Limited Tech Mahindra (Malaysia) Sdn Bhd Tech Mahindra (Beijing) IT Services Limited Venturbay Consultants Private Limited Mahindra Logisoft Business Solutions Limited Tech Mahindra (Bahrain) Limited S.P.C. Tech Mahindra (Nigeria) Limited As at March 31, 2012 31,770 439 As at March 31, 2011 31,588 439
As at March 31, 2012 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
As at March 31, 2011 100% 100% 100% 100% 100% 100% 80.10% 100% 100% 100% 100% 100% 100%
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ANNUAL REPORT 2011 - 2012
Note 13: Long Term Loans and Advances ` in Million As at March 31, 2012 Unsecured, considered good unless otherwise stated a. Capital Advances Considered good Considered doubtful Less: Provision b. Security Deposits Considered good Considered doubtful Less: Provision c. d. e. f. g. h. Loan to subsidiary VAT credit receivable Advance Income Taxes (Net of provisions) Advance Fringe Bene?t Tax (Net of provisions) Long term lease receivable - Secured (refer note 35) Advances recoverable in cash or in kind for value to be received 671 15 686 15 671 51 9 1,766 16 706 3,341 613 9 622 9 613 27 1,237 7 1,112 612 4,103 122 5 127 5 122 495 5 500 5 495 As at March 31, 2011
Note 14: Current Investments Short Term (Unquoted - at cost) Trade : Investment in Mutual Fund 601,500.17 (Previous year: Nil) units of ` 1000.25 IDFC Cash Fund Super Inst Plan C - Daily Dividend plan 6,003,769.20 (Previous year: Nil) units of ` 100.20 Birla Sun Life Cash Plus Inst. Prem. Daily Dividend - Reinvestment plan 602 601 1,203 Aggregate amount of quoted investments Aggregate amount of unquoted investments Aggregate amount of provision for diminution in value of investments 1,203 -
58
Note 15: Inventories ` in Million As at March 31, 2012 Raw Materials and components 2 2 As at March 31, 2011 6 6
Note 16: Trade Receivables Trade Receivables (Unsecured) (a) Over six months (i) Considered good* 210 298 211 130
(ii) Considered doubtful (b) Others (i) Considered good**
12,221 160 12,889
9,432 9,773 130 9,643
(ii) Considered doubtful
Less: Provision for doubtful debts
458 12,431
1. * Net of advances aggregating to ` 63 Million (previous year: ` 166 Million) pending adjustments with invoices. 2. ** Net of advances aggregating to ` 304 Million (previous year: ` 313 Million) pending adjustments with invoices.
Note 17: Cash and Cash Equivalents (a) Cash and Cash Equivalents Balances with banks In current accounts In deposit accounts 1,369 15 1,384 (b) Earmarked balances with banks 5 1,389 1,803 131 1,934 4 1,938
59
ANNUAL REPORT 2011 - 2012
Note 18: Short Term Loans and Advances ` in Million As at March 31, 2012 (Unsecured, considered good unless otherwise stated) a. Advances to subsidiaries * ` 77 Million (previous year: ` 96 Million) due from Tech Mahindra (Americas) Inc. ` 22 Million (previous year: ` 9 Million) due from Tech Mahindra GmbH ` 1 Million (previous year: ` 5 Million) due from Tech Mahindra (Singapore) Pte. Limited ` 22 Million (previous year: ` 12 Million) due from Tech Mahindra (Beijing) IT Services Limited ` 1 Million (previous year: ` 2 Million) due from Tech Mahindra (Malaysia) Sdn. Bhd. ` 14 Million (previous year: ` 3 Million) due from CanvasM Technologies Limited ` 19 Million (previous year: ` 34 Million) due from Tech Mahindra (Bahrain) Limited S.P.C. ` 154 Million (previous year: ` 6 Million) due from PT Tech Mahindra Indonesia ` 41 Million (previous year: ` 19 Million) due from Tech Mahindra (Nigeria) Limited ` 1 Million (previous year: ` Nil) due from Mahindra Logisoft Business Solutions Limited * Non Interest bearing, in normal course of business. Unbilled revenues Fair values of foreign exchange forward and currency option contracts (refer note 40) MAT Credit Entitlement Balance with Excise and Customs Lease receivable - Considered doubtful (refer note 35) Less: Provision Advances recoverable in cash or in kind or for value to be received Considered good Considered doubtful Less: Provision 352 186 As at March 31, 2011
b. c. d. e. f.
2,039 233 1,278 231 231 882 96 978 96 882 4,784
2,174 877 467 1,029 866 866 1,226 43 1,269 43 1,226 6,825
g.
60
Note 19: Other Income ` in Million Year Ended March 31, 2012 (a) Interest on: Deposit with banks Others 2 68 70 (b) Foreign exchange gain / (loss) - Net (c) Rent Income (d) Dividend received (e) Sundry balances written back (f) Miscellaneous income 372 70 3 128 34 677 39 45 84 911 83 79 109 1,266 Year Ended March 31, 2011
Note 20: Employee Bene?ts Expenses (a) Salaries and Bonus (b) Contribution to Provident and other funds (c) Gratuity (Refer note 29) (d) Employee stock compensation cost (e) Staff welfare expenses 19,791 1,029 273 412 1,005 22,510 17,446 965 182 69 776 19,438
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ANNUAL REPORT 2011 - 2012
Note 21: Operating and Other expenses Year Ended March 31, 2012 Power & Fuel Rent Rates and taxes Communication expenses Travelling expenses [Net of recoveries ` 339 Million (previous year: ` 400 Million)] Recruitment expenses Training Hire charges Sub-contracting costs (net) Professional and Legal fees (Refer note 30) Repairs and maintenance : Buildings (including leased premises) Machinery Others Insurance Software, hardware and project speci?c expenses* Claims and warranties (net) (refer note 46) Advertising, marketing and selling expenses (Pro?t) / Loss on sale of ?xed assets (net) Provision for doubtful debts and Bad debts (net) Provision for doubtful advances Advances written off Cost of materials consumed Donations Miscellaneous expenses 127 275 109 511 279 1,070 (104) 47 (1) 174 (36) 81 5 69 547 21,598 *(Includes ` Nil (previous year: ` 2,871 Million) for a customer speci?c project under ?nance lease) Note 22: Finance Cost Interest expense: On long term loans On working capital loans / cash credit Other borrowing costs Foreign currency translations 617 155 772 3 250 1,025 698 293 991 8 114 1,113 94 239 156 489 199 3,209 90 49 (11) 52 29 8 15 100 496 20,927 86 98 342 12,528 423 52 56 228 10,389 226 550 1,240 94 658 2,937 ` in Million Year Ended March 31, 2011 522 996 70 680 2,983
62
Notes on Accounts:
23. The estimated amount of contracts remaining to be executed on capital account (net of capital advances), and not provided for as at March 31, 2012 ` 443 Million (previous year: ` 1,382 Million). 24. Contingent liabilities: i) The Company has received demand notices from Income Tax Authorities resulting in a contingent liability of ` 946 Million (previous year: ` 920 Million). This is mainly on account of the following: (a) An amount of ` 140 Million (Previous year: ` 123 Million) relating to Transfer pricing adjustment on account of arm’s length transactions; (b) Deduction under Section 10A amounting to ` 790 Million (previous year: ` 781 Million) in relation to adjustment of expenditure in foreign currency being excluded only from Export turnover and not from Total turnover. The Company has already won the appeal before the Mumbai ITAT for the Assessment Year 2003-04. The Income Tax Department has ?led appeal before the High Court. The Company has already won the appeal before the CIT (A) for Assessment Year 2004-05, 2005-06 and 2007-08. The Income Tax Department has ?led appeal before ITAT for Assessment Year 2004-05 and 20052006. For Assessment Year 2007-2008 the Income Tax Department may intend to appeal against the said order before ITAT; (c) an amount of ` 16 Million (previous year: ` 16 Million) relating to Fringe Bene?t Tax. The Company has won the appeal before the CIT (A) and the Income Tax Department may intend to appeal against the said order before ITAT. The Company has received demand notices from Sales Tax Authority for ` 18 Million (previous year: ` 18 Million) towards Software services classi?ed under Works Contract Act for the ?nancial year 2005-06 to 2008-09. The Company has ?led an appeal before the Joint Commissioner of Commercial Tax (JCCT). The Joint Commissioner of Commercial Taxes (JCCT) has allowed the said Appeal vide its order dated December 30, 2011 in favour of the Company. The JCCT has directed the Dy. Commissioner of Commercial Taxes to issue a revised demand notice in accordance with this order.
ii)
iii) The Company has received demand / show cause notice / Order from Service Tax Authorities for ` 166 Million (net of provision), (previous year: ` 90 Million) out of which: 1) ` 77 Million (previous year: ` 77 Million) relates to marketing and onsite services rendered by the subsidiaries abroad for the ?nancial years 2004-05 to 2007-08 for erstwhile Tech Mahindra (R & D Services) Limited (TMRDL) and has paid an amount of ` 7 Million (previous year: ` 7 Million) “Under Protest”, ` 13 Million (previous year: ` 13 Million) towards services provided under Management consultancy services for Tech Mahindra Limited for which the Company has ?led an appeal against the same. The Deputy Commissioner of Service Tax (Refunds) has appealed against the Order of Assistant Commissioner of Service Tax towards refund granted ` 76 Million (previous year: Nil) to Company for the month of October, 2010 by holding a view that the amounts paid by the Company under reverse charge as per the provisions of Section 66A of Service Tax Act relate to the input for services rendered by the entities situated abroad and such amounts are not entitled to refund under Rule 5 of the Service Tax Rules, 2004. Against the said appeal the Company had ?led its cross objection, which was rejected by the Commissioner (Appeals). The Company prefers an appeal against the said order before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT).
2) 3)
iv) The Company has bank guarantees outstanding ` 1,085 Million (previous year: ` 1,131 Million) 25. The Company holds investment (unquoted) in subsidiary, Tech Mahindra GmbH (TMGMBH) aggregating to ` 389 Million (previous year: ` 389 Million) which is held as strategic long-term investment. The Company had made provision in the year ended March 31, 2005, to the extent of accumulated losses in TMGMBH aggregating to ` 354 Million (previous year: ` 354 Million) towards diminution in the value of its investment. TMGMBH has started earning pro?ts from ?nancial year 2006-07 onwards, however TMGMBH still has accumulated losses as of March 31, 2012 and in view of this, no change in provision is required. 26. In September 2008 the Company had made investment of ` 85 Million for 17.28% of the share capital of Servista Limited a leading European system integrator. With this investment the Company became Servista’s exclusive delivery arm for three years and will assist Servista in securing more large scale European IT off shoring business. The business plan of Servista was adversely affected by the economic downturn and it
63
ANNUAL REPORT 2011 - 2012
continued to incur losses and therefore, Servista in June 2009 decided to close down its operations. The Company had made provision of ` 85 Million in the year ended March 31, 2010, for diminution in the value of its investments in Servista. Servista is in process of winding up and in the view of the management; the Company would have no further unrecorded obligations towards settlement of any further liability. 27. The Company has on July 21, 2010 incorporated a Company in Brazil under the name of Tech Mahindra Brasil Servicecos De Informatica Ltda (TMBSL). There are no transactions till March 31, 2012 and Company is yet to infuse share capital into TMBSL. 28. During the year ended March 31, 2010 a customer had restructured long term contracts with the Company from April 01, 2009 which involves changes in commercial, including rate reduction, and other agreed contract terms. As per the amended contracts the customer had paid the Company restructuring fees of ` 9,682 Million. The services under the restructured contracts would continue to be rendered over the life of the contract. The restructuring fees received would be amortized and recognized as revenue over the term of the contract on a straight line basis. An amount of ` 2,005 Million (previous year: ` 2,005 Million) has been recognized as revenue for the year and the balance amount of ` 3,667 Million (previous year: ` 5,672 Million) has been carried forward and disclosed as deferred revenue in the Balance Sheet. In addition, it also includes a part of contract termination fees received from a customer, to the extent there is a continuing customer involvement. 29. Details of employee bene?ts as required by the Accounting Standard 15 (Revised) – Employee Bene?ts are as under: a) De?ned Contribution Plan Amount recognized as an expense in the Statement of Pro?t and Loss for the year ended March 31, 2012 in respect of de?ned contribution plan is ` 842 Million (previous year: ` 688 Million). b) De?ned Bene?t Plan The de?ned bene?t plan comprises of gratuity. The gratuity plan is not funded. Changes in the present value of de?ned obligation representing reconciliation of opening and closing balances thereof and fair value of Trust Fund Receivable (erstwhile TMRDL) showing amount recognized in the Balance Sheet: ` in Million Particulars Projected bene?t obligation, beginning of the year* Service cost Interest cost Actuarial (Gain) / Loss Bene?ts paid Trust Fund Receivable (erstwhile TMRDL)* Projected bene?t obligation, at the end of the year March 31, 2012 908 213 66 (3) (113) (35) 1,036 March, 31, 2011 796 199 58 (72) (72) (34) 875
* The Trust fund was created to fund the gratuity liability of the erstwhile TMRDL. After amalgamation of TMRDL with the Company, the balance in Trust Fund can be utilized only for the payment of obligation arising for gratuity payable to employees of erstwhile TMRDL. The composition of the Trust Balance as on March 31, 2012 is as follows: Particulars Government of India Securities / Gilt Mutual Funds State Government Securities / Gilt Mutual Funds Public Sector Unit Bonds Private Sector Bonds / Equity Mutual Funds Mutual Funds Bank Balance Total March 31, 2012 9 5 13 0 0 8 35 March 31, 2011 9 5 14 0 1 5 34
64
Components of expenses recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012: ` in Million Particulars Service cost Interest cost Expected Return on Plan Assets Actuarial (Gain)/Loss Total Experience Adjustments Particulars 1. 2. 3. 4. De?ned Bene?t Obligation Fair value of plan assets Surplus/(De?cit) Experience adjustment on plan liabilities [Gain/(Loss)] Experience adjustment on plan assets [Gain/ (Loss)] Actuarial Gain / (Loss) due to change on assumptions March 31, 2012 (1,071) 35 (1,036) 30 March 31, 2011 (908) 33 (875) 74 March 31, 2010 (796) 31 (765) 95 March 31, 2009 (692) 31 (661) 8 March 31, 2012 213 66 (3) (3) 273 March 31, 2011 199 58 (3) (72) 182
5.
(1)
(1)
2
0
6.
(25)
(2)
31
11
Principal Actuarial Assumptions Discount Rate Rate of increase in compensation levels of covered employees
March 31, 2012 8.6 % 11% for the 1st Year 9% thereafter
March 31, 2011 7.7 % 9% for the 1st Year 8% thereafter
• •
The discount rate is based on the prevailing market yields of Indian Government Bonds as at the balance sheet date for the estimated terms of the obligations. Salary escalation rates: The estimates of future salary increase is considered taking into account the in?ation, seniority, promotion and other relevant factors.
30. Payment to Auditors (net of service tax): Particulars Audit Fees (including quarterly audits) For other services For taxation matters For reimbursement of expenses Total March 31, 2012 7 3 1 0 11 March 31, 2011 7 2 1 0 10
65
ANNUAL REPORT 2011 - 2012
31. (a) Value of Imports on C.I.F. Basis: ` in Million Particulars Raw materials Components and spare parts Capital goods Total (b) Expenditure in Foreign Currency: Particulars Professional Fees Subcontracting cost Travelling Expenses Salaries Software / Hardware Royalty Foreign Taxes Others Total March 31, 2012 410 11,333 2,702 4,798 272 303 1,016 20,834 March 31, 2011 92 9,152 2,559 3,602 1,330 2 276 603 17,616 March 31, 2012 Nil 9 637 646 March 31, 2011 Nil 14 736 750
32. Remittance in foreign currency on account of dividends to non-Resident shareholders: Number of Shareholders 2011-12 10 2010-2011 13 Final 37,880,259 133 2009-2010 Final 29,691,404 119 2010-2011 Dividend Number of Equity Shares Amount remitted Dividend relating ` in Million to Year ended
The company does not have information as to the extent to which remittances, if any, in foreign currencies on account of dividend have been made by non-resident shareholders. 33. Earnings in foreign currency: Particulars Income from Services Contract Settlement Fees received Rent Received Interest Received Total March 31, 2012 47,028 41 5 47,074 March 31, 2011 41,657 377 51 2 42,087
66
34. Assets taken / given on Lease: a) The Company has taken vehicles on operating lease for a period of three to ?ve years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 28 Million (previous year ended March 31, 2011 ` 26 Million). The future lease payments of operating lease are as follows: ` in Million Particulars Not later than 1 year Later than 1 year not later than 5 years Later than 5 years
Minimum Lease rentals payable (previous year: ` 22 Million and ` 33 Million and ` Nil, respectively) b)
24
37
Nil
The Company has taken premises on operating lease for a period of one to ten years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 1,137 Million (previous year ended March 31, 2011 ` 936 Million). The future lease payments of operating lease are as follows: Particulars Not later than 1 year Later than 1 year not later than 5 years Later than 5 years
Minimum Lease rentals payable (previous year: ` 663 Million, ` 1,292 Million and ` 154 Million respectively) c)
869
2,418
376
The Company has taken computer equipments on operating lease for a period of one to ?ve years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 40 Million (previous year ended March 31, 2011 ` 33 Million). The future lease payments of operating lease are as follows: Particulars Not later than 1 year Later than 1 year not later than 5 years Later than 5 years
Minimum Lease rentals payable (previous year: ` 32 Million, ` 17 Million and ` Nil respectively) d)
26
36
Nil
The Company has given premises on operating lease for a period of one to ?ve years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 70 Million (previous year ended March 31, 2011 ` 83 Million). The future lease receivable of operating lease are as follows: Particulars Not later than 1 year Later than 1 year not later than 5 years Later than 5 years
Minimum Lease rentals receivable (previous year: ` 51 Million , ` 2 Million and ` Nil respectively)
12
35
Nil
35. The Company had provided in the previous year, end to end solution which includes sale of software and hardware to a customer in India which quali?es as Finance Lease and has accordingly accounted as such. These receivables are due in quarterly installments over the contractual period of 4 years.
67
ANNUAL REPORT 2011 - 2012
The components of ?nance lease receivables are: ` in Million Particulars Gross Investment in lease for the period Not later than 1 year Later than 1 year not later than 5 years Unguaranteed residual values Unearned Finance Income Net Investment in Finance Receivables * Present value of Minimum lease receivables are ` Nil Particulars Present value of minimum Lease receivable
nd
March 31, 2012 -
March 31, 2011 2,085 922 1,163 107 1,978
Not later than 1 year [866]
Later than 1 year not later than 5 years [1,112]
* The Hon’ble Supreme Court vide its order dated 2 February 2012 cancelled 2G licenses issued to some of Telecom Operators in India in 2008. As a result of the cancellation, the business of Company’s two customers has become unviable and one of the customers has started winding up proceedings of the Indian operations. The Company has made a provision of ` 679 Million on account of likely impairment in the carrying value of the related assets. 36. As per the requirements of Accounting Standard 17 on ‘Segment Reporting’ (AS 17), the primary segment of the Company is business segment by category of customers in the Telecom Service Providers (TSP), Telecom Equipment Manufacturer (TEM), Business Process Outsourcing (BPO) and Others, which includes non telecom vertical customers and the secondary segment is the geographical segment by location of its customers. The accounting principles consistently used in the preparation of the ?nancial statements are also applied to record income and expenditure in the individual segments. There are no inter-segment transactions during the year ended March 31, 2012. A. Primary Segments: For the year ended March 31, 2012 Particulars Telecom Service Provider 42,752 29,500 13,252 Telecom Equipment Manufacturer 3,342 2,558 784 Business Process Outsourcing 4,807 2,995 1,812 Others Total
Revenues Less : Direct Expenses Segmental Operating Income Less : Unallocable Expenses (net) Depreciation / Amortisation Finance Charges Other Unallocable Expenses (net) Total Unallocable Expenses (net)
1,529 1,389 140
52,430 36,442 15,988
1,505 1,025 7,666 10,196
68
` in Million Particulars Telecom Service Provider Telecom Equipment Manufacturer Business Process Outsourcing Others Total
Operating Income Add : Other Income (net) Net Pro?t before exceptional items and tax Less: Exceptional items Net Pro?t before tax Less : Provision for Tax Current Tax (net of MAT credit) Deferred tax bene?t Net Pro?t after tax
5,792 677 6,469 679 5,790 1,472 (288) 4,606
Segregation of assets, liabilities, depreciation and other non-cash expenses into various primary segments has not been done as the assets are used interchangeably between segments and Company is of the view that it is not practical to reasonably allocate liabilities and other non-cash expenses to individual segments and an adhoc allocation will not be meaningful. B. Secondary Segments: Revenues from secondary segments are as under – Geography Europe Americas Rest of world Total ` in Million 25,867 18,155 8,408 52,430
Segregation of assets into secondary segments has not been done as the assets are used interchangeably between segments. Consequently the carrying amounts of assets by location of assets are not given. A. Primary Segments: For the year ended March 31, 2011 ` in Million Particulars Telecom Service Provider 43,531 30,021 13,510 Telecom Equipment Manufacturer 2,206 1,554 652 Business Process Outsourcing 3,191 1,794 1,397 Others Total
Revenues Less : Direct Expenses Segmental Operating Income Less : Unallocable Expenses (net) Depreciation / Amortisation Finance Charges Other Unallocable Expenses (net) Total Unallocable Expenses (net)
727 595 132
49,655 33,964 15,691
1,383 1,113 6,401 8,897
69
ANNUAL REPORT 2011 - 2012
` in Million Particulars Telecom Service Provider Telecom Equipment Manufacturer Business Process Outsourcing Others Total
Operating Income Add : Other Income (net) Net Pro?t before tax Less : Provision for Tax Current Tax (net of MAT credit) Deferred tax bene?t (includes ` 215 Million in respect of earlier years) Net Pro?t after tax
6,794 1,266 8,060 1,402 (309) 6,967
Segregation of assets, liabilities, depreciation and other non-cash expenses into various primary segments has not been done as the assets are used interchangeably between segments and Company is of the view that it is not practical to reasonably allocate liabilities and other non-cash expenses to individual segments and an adhoc allocation will not be meaningful. B. Secondary Segments: Revenues from secondary segments are as under – Geography Europe Americas Rest of world Total ` in Million 25,973 14,602 9,080 49,655
Segregation of assets into secondary segments has not been done as the assets are used interchangeably between segments. Consequently the carrying amounts of assets by location of assets are not given. 37. A) The Company has instituted “Employee Stock Option Plan 2000” (ESOP) for its employees and Directors. For this purpose it had created a trust viz. MBT ESOP Trust. In terms of the said Plan, the trust has granted options to the employees and Directors which vest at the rate of 33.33% on each successive anniversary of the grant date. The options can be exercised over a period of 5 years from the date of grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Trust on the basis of fair value of the equity shares at the time of grant. The details of the options are as under: Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during year Options exercised during the year Options outstanding at the end of the year March 31, 2012 494,500 46,000 448,500 March 31, 2011 82,490 1,670 1,670 79,150 -
Out of the options outstanding at the end of the year ended March 31, 2012, there are Nil (previous year: Nil) (Net of exercised & lapsed) vested options, which have not been exercised. B) The Company has instituted “Employee Stock Option Plan 2004” (ESOP 2004) for its employees. In terms of the said Plan, the Compensation Committee has granted options to employees of the Company. The options are divided into upfront options and Performance options. The Upfront Options are divided into three sets which will entitle holders to subscribe to option shares at the end of ?rst year, second year and third year. The vesting of the Performance Options will be decided by the Compensation Committee based on the performance of employees.
70
Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during the year Options exercised during the year Options outstanding at the end of the year
March 31, 2012 2,935,134 700,000 2,235,134
March 31, 2011 5,677,701 2,742,567 2,935,134
Out of the options outstanding at the end of the year ended March 31, 2012, there are 2,235,134 (previous year: 2,935,134) (Net of exercised & lapsed) vested options, which have not been exercised. C) The Company has instituted “Employee Stock Option Plan 2006 “(ESOP 2006) for the employees and Directors of TML and its subsidiary companies. In terms of the said plan, the compensation committee has granted options to the employees of the Company. The vesting of the options is 10%, 15%, 20%, 25%, and 30 % of total options granted after 12, 24, 36, 48 and 60 months, respectively from the date of grant. The maximum exercise period is 7 years from the date of grant. The details of the options are as under: Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during the year Options exercised during the year Options outstanding at the end of the year March 31, 2012 2,529,103 539,500 305,660 831,060 1,931,883 March 31, 2011 3,165,188 398,725 221,160 813,650 2,529,103
Out of the options outstanding at the end of year ended March 31, 2012, there are 1,090,008 (previous year: 1,907,933) (net of exercised & lapsed) vested options, which have not been exercised. D) The Company has instituted “Employee Stock Option Plan 2010 “(ESOP 2010) for the employees and Directors of TML and its subsidiary companies. In terms of the said Plan, options to the employees and Directors in form of option shall vest at the rate of 33.33% on each successive anniversary of the grant date. The options can be exercised over a period of 5 years from the date of grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by Compensation Committee. The details of the options are as under: Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during the year Options exercised during the year Options outstanding at the end of the year March 31, 2012 1,600,000 683,500 5,000 2,278,500 March 31, 2011 1,600,000 1,600,000
Out of the options outstanding at the end of year ended March 31, 2012, there are 533,280 (previous year: Nil) (net of exercised & lapsed) vested options, which have not been exercised.
71
ANNUAL REPORT 2011 - 2012
E)
The Company uses the intrinsic value-based method of accounting for stock options granted after April 1, 2005. Had the compensation cost for the Company’s stock based compensation plan been determined in the manner consistent with the fair value approach, the Company’s net pro?t would be lower by ` 32 Million (previous year higher by ` 14 Million) and earnings per share as reported would be as indicated below: ` in Million except earnings per share Particulars Net pro?t after exceptional items and tax (As reported) Add /(Less): Total stock-based employee compensation expense determined under fair value base method Adjusted net pro?t Basic earnings per share (in `) As reported 36.27 36.01 34.86 34.61 55.81 55.93 53.36 53.47 Adjusted Diluted earnings per share (in `) As reported Adjusted For the year ended March 31, 2012 March 31, 2011 4,606 6,967 (32) 4,574 14 6,981
The fair value of each option is estimated on the date of grant based on the following assumptions (on weighted average basis): Particulars March 31, 2012 March 31, 2011 Dividend yield (%) 0.50 0.46 Expected life 4.07 years 3.85 years Risk free interest rate (%) 8.54 7.97 Volatility (%) F) 52.72 55.16 The stock compensation cost for the Employee Stock Option Plan 2010 issued at par has been computed under the intrinsic value method and amortized on a straight line basis over the total vesting period of three years. For the year ended March 31, 2012 the Company has recorded stock compensation expense of ` 412 Million (previous year: ` 69 Million).
38. As required under Accounting Standard 18 “Related Party Disclosures” (AS – 18), following are details of transactions during the year with the related parties of the Company as de?ned in AS – 18: (a) List of Related Parties and Relationships Name of Related Party Mahindra & Mahindra Limited British Telecommunications Plc. Mahindra BT Investment Company (Mauritius) Limited Tech Mahindra (Americas ) Inc, USA Tech Talenta Inc, USA* Tech Mahindra GmbH Tech Mahindra (Singapore) Pte Limited Tech Mahindra (Thailand) Limited PT Tech Mahindra Indonesia Relation Promoter holding more than 20% stake Promoter holding more than 20% stake Promoter group company 100% subsidiary company 100% subsidiary company 100% Subsidiary company 100% Subsidiary company 100% Subsidiary company 100% Subsidiary company
72
CanvasM Technologies Limited** CanvasM (Americas) Inc** Tech Mahindra (Malaysia) SDN. BHD Tech Mahindra (Beijing) IT Services Limited Venturbay Consultant s Private Limited Tech Mahindra Foundation # Mahindra Logisoft Business Solutions Limited Tech Mahindra (Nigeria) Limited Tech Mahindra (Bahrain) Limited. S.P.C. Tech Mahindra Brasil Servicecos De Informatica Ltda Satyam Computer Services Limited Satyam BPO Limited Satyam Computer Services (Shanghai) Co. Limited Mr. Vineet Nayyar Vice Chairman and Managing Director Mr. Sanjay Kalra Chief Executive Of?cer @ # Section 25 Company not considered for consolidation * with effect from 6th March 2012 ** 100% subsidiary with effect from 3rd February 2012 @ Upto 15th September 2010
100% Subsidiary company 100% Subsidiary company 100% Subsidiary company 100% Subsidiary company 100% Subsidiary company 100% Subsidiary company 100% Subsidiary Company 100% Subsidiary Company 100% Subsidiary Company 100% Subsidiary Company Associate Company Associate Company Associate Company
Key Management Personnel
(b) Related Party Transactions for the year ended March 31, 2012: ` in Million Transactions Promoter Companies (211) [(263)] 19,925 [20,452] Paid for Services Received Interest on Loan/ICD Given Loan/ICD Given Loan/ICD Given Repaid Sub-contracting cost 21 [31] [-] [-] [-] [-] Subsidiary Companies (547) [(592)] 1,194 [1,038] [0] 1 [1] 45 [40] [40] 8,702 [6,503] Associate Companies (150) [(4)] 373 [142] [33] [-] [-] [-] 683 [540] Key Management Personnel [-] [-] [-] [-] [-] [-] [-]
Reimbursement of Expenses (Net)Paid/ (Receipt) Income from Services
73
ANNUAL REPORT 2011 - 2012
Transactions
Promoter Companies [-]
Subsidiary Companies 41 [9] [-] [-] [-] 67 [99] 4 [3] [-] [-] [-] [-] (914) [(349)]
Associate Companies [-] [-] [-] 129 [57] [-] 14 [20] 592 [-] [-] [-] 0 [271] (475) [(447)]
Key Management Personnel [-] 36 [62] -** [-] [-] [-] [-] [-] [-] 3 [2] [-] (11) [(11)]
Investments made
Salary, Perquisites & Commission
[-]
Stock Options
[-]
Rent Paid/ Payable
36 [53]
Donation Paid / Payable
[-]
Rent Received/ Receivable
41 [51]
Software/Hardware & project speci?c expenses Contract Settlement Fees Received
[-] [377]
Dividend Paid
361 [320]
Purchases of Fixed Assets
[-]
Debit / (Credit) balances (Net) (inclusive of unbilled) outstanding as on March 31, 2012
5,248 [5,302]
Figures in brackets “[ ]”are for the previous year ended March 31, 2011 **Stock options: Key Management Personnel Transactions Mr. Vineet Nayyar Vice Chairman & Managing Director 700,000 [Nil] Options granted and outstanding at the end of the year 1,992,567 [ 2,692,567] Figures in brackets “[ ]”are for the previous year ended March 31, 2011. Mr. Sanjay Kalra Chief Executive Of?cer Nil [1,892,567] Nil [Nil]
Options exercised during the year ended March 31, 2012
74
Out of the above transactions with Promoter companies, Subsidiary Companies, Associate Companies and Key Management Personnel in the excess of 10% of the total related party transactions are as under: ` in Million Transactions For the Year ended March 31, 2012 For the Year ended March 31, 2011
Reimbursement of Expenses (net) - Paid/(Receipt) Promoter Company - British Telecommunications Plc. Subsidiary Companies - Tech Mahindra (Americas) Inc. - Tech Mahindra (Bahrain) Limited S.P.C. - PT Tech Mahindra Indonesia Associate Company - Satyam Computer Services Limited
(218) (218) (58) (156) (102) (752)
(266) (273) (169) (15) 8 (715)
Income from Services Promoter Company - British Telecommunications Plc. Paid for Services Received Promoter Company - British Telecommunications Plc. Associate Company - Satyam Computer Services Limited Interest on Loan/ ICD given Subsidiary Company -Tech Mahindra (Nigeria) Limited - PT Tech Mahindra Indonesia Loan/ICD Given Subsidiary Companies - PT Tech Mahindra Indonesia - Tech Mahindra (Nigeria) Limited Loan/ICD Given Repaid Subsidiary Companies - PT Tech Mahindra Indonesia Sub-contracting cost Subsidiary Companies - Tech Mahindra (Americas) Inc. - Tech Mahindra GmbH
19,888 19,888
20,403 20,403
21 21
31 33 64
1 1
1 1
45 45
40 40
-
40 40
6,667 724 7,391
4,729 765 5,494
75
ANNUAL REPORT 2011 - 2012
Transactions
For the Year ended March 31, 2012
For the Year ended March 31, 2011
Investments made Subsidiary Companies -Tech Mahindra (Beijing) IT Services Ltd -Tech Mahindra (Nigeria) Limited Salary , Perquisites and Commission Key Management Personnel - Mr. Vineet Nayyar - Mr. Sanjay Kalra Rent Paid/(Payable) Promoter Company - British Telecommunications Plc Associate Company -Satyam Computer Services Limited Donation Paid / Payable Subsidiary Company - Tech Mahindra Foundation Rent Received/Receivable Promoter Company - British Telecommunications Plc. Associate Company - Satyam Computer Services Limited Software/Hardware & project speci?c expenses Associate Company -Satyam Computer Services Limited Contract Settlement Fees Received Promoter Company - British Telecommunications Plc. Dividend Paid Promoter Companies - Mahindra & Mahindra Limited - British Telecommunications Plc Purchase of Fixed Assets Associate Company - Satyam Computer Services Limited
41 41
4 5 9
36 36
36 26 62
36 129 165
53 57 110
67 67
99 99
41 14 55
51 20 71
592 592
-
-
377 377
243 118 361
188 132 320
0 0
271 271
76
39. The tax effect of signi?cant timing differences that has resulted in deferred tax assets are given below: ` in Million Particulars Deferred Tax Asset : Gratuity, Leave Encashment, superannuation and FBT etc. Doubtful Debts Depreciation Total Deferred Tax Asset 223 311 286 820 245 55 232 532 March 31, 2012 March 31, 2011
This includes deferred tax asset of ` Nil (previous year ` 215 Million) created in the current year pertaining to earlier years based on reassessment of deferred tax position post sunset of Section 10A of Income Tax Act, 1961. 40. Exchange gain/(loss)(net) accounted during the year: a) The Company enters into Foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Company’s foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. Forward Exchange Contracts and Currency Option Contracts in UK Pound exposure are split into two legs, which are GBP to USD and USD to INR. These contracts are for a period between 1 day and 5 years. The following are the outstanding GBP:USD Currency Exchange Contracts entered into by the Company which have been designated as Cash Flow Hedges as at March 31, 2012: Type of cover Forward Option Amount outstanding in Foreign currency (in Million) GBP 279 (previous year: 212) GBP 12 (previous year: 72) Fair Value Gain / (Loss) (` in Million) (50) (previous year: (154)) 258 (previous year: 1,317)
b)
The following are the outstanding USD: INR Currency Exchange Contracts entered into by the Company which has been designated as Cash Flow Hedges as at March 31, 2012: Type of cover Forward Option Amount outstanding in Foreign currency (in Million) USD 840 (previous year: 653) USD 87 (previous year: 189) Fair Value Gain / (Loss) (` in Million) (2,886) [previous year: 683] (1,028) (previous year: (1075))
Net loss on derivative instruments of ` 1,206 Million (previous year gain: ` 621 Million) recognised in hedging reserve as of March 31, 2012 is expected to be reclassi?ed to the Statement of Pro?t and Loss by March 31, 2013.
77
ANNUAL REPORT 2011 - 2012
The movement in hedging reserve during year ended March 31, 2012 for derivatives designated as Cash Flow Hedges is as follows: ` in Million Particulars Year ended March 31, 2012 412 (207) Year ended March 31, 2011 1,942 869
Credit Balance at the beginning of the year Gain/(Loss) transferred to income statement on occurrence of forecasted hedge transaction Changes in the fair value of effective portion of outstanding cash ?ow derivative (Debit) / Credit Balance at the end of year
(4,154) (3,535)
(661) 412
In addition to the above cash ?ow hedges, the Company has outstanding Foreign Exchange Currency Options Contracts aggregating to ` 396 Million (previous year: ` 6,993 Million) whose fair value showed a loss of ` 154 Million (previous year gain of ` 654 Million). Although these contracts are effective as hedges from an economic perspective, they do not qualify for hedge accounting and accordingly these are accounted as derivative instruments at fair value with changes in fair value recorded in the Statement of Pro?t and Loss and the cumulative gain of ` 94 Million as at March 31, 2009 would be recycled to Statement of Pro?t and Loss as and when the cash ?ows materialise. Exchange loss of ` 207 Million (previous year gain: ` 869 Million) on foreign exchange forward contracts and currency options contracts have been recognised in the year ended March 31, 2012. c) As at March 31, 2012, the Company has net foreign exchange exposures that are not hedged by a derivative instruments or otherwise amounting to ` 7,074 Million (previous year: ` 6,183 Million)
41. The Company has exercised the option given vide noti?cation number G.S.R. 225 (E) dated March 31, 2009 issued by the Ministry of Corporate Affairs, Government of India, on provisions of Accounting Standard 11, however this does not have any impact on the ?nancial statements, as the Company does not have any long term foreign currency monetary items. 42. Particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, Associates, etc, required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement. Loans and advances in the nature of loans to subsidiaries and investment in subsidiaries: Name of the Company Balance as on March 31, 2012 [-] 51 [-] Maximum outstanding during the year [40] 53 [-]
- PT Tech Mahindra Indonesia - Tech Mahindra (Nigeria) Limited Figures in brackets “[ ]”are for the previous year ended March 31, 2011.
There are no loans and advances in the nature of loans to associates, loans and advances in the nature of loans where there is no repayment schedule or repayment beyond seven years or no interest or interest below Section 372A of the Companies Act, 1956 and loans and advances in the nature of loans to ?rms/ companies in which directors are interested.
78
43. Earnings Per Share is calculated as follows: ` in Million except earnings per share Particulars Pro?t after taxation and before exceptional items Less: Exceptional items Pro?t after taxation and exceptional items Net Pro?t attributable to shareholders Equity Shares outstanding as at the end of the year (in nos.) Weighted average Equity Shares outstanding as at the end of the year (in nos.) Weighted average number of Equity Shares used as denominator for calculating Basic Earnings Per Share Add: Diluted number of Shares ESOP outstanding as at the end of the year Number of Equity Shares used as denominator for calculating Diluted Earnings Per Share Nominal Value per Equity Share (in `) Earnings Per Share - Before Exceptional Item Earnings Per Share (Basic) (in `) Earnings Per Share (Diluted) (in `) - After Exceptional Item Earnings Per Share (Basic) (in `) Earnings Per Share (Diluted) (in `) 36.27 34.86 55.81 53.36 41.61 40.00 55.81 53.36 5,118,848 132,123,991 10 5,736,254 130,563,383 10 Year ended March 31, 2012 5,285 679 4,606 4,606 127,486,541 127,005,143 127,005,143 Year ended March 31, 2011 6,967 6,967 6,967 125,955,481 124,827,129 124,827,129
44. Current tax for the year ended March 31st 2012 includes taxes for foreign branches amounting to ` 287 Million (previous year: ` 276 Million). Current tax for the year ended 31st March 2012 includes reversal of excess provision of ` 241 Million (previous year: ` 6 Million) of earlier years written back, no longer required. The Company had calculated its tax liability under Minimum Alternate Tax (MAT) from ?nancial year 2007-08. The MAT credit can be carried forward and set off against the future tax payable. In the current year ended March 31, 2012, the Company has calculated its tax liability under normal provisions of the Income Tax Act, 1961 and utilized the brought forward MAT credit of ` 234 Million. 45. In respect of equity shares pursuant to Employees Stock Option Scheme, the Company paid dividend of ` 4 Million for the year 2010-11 and tax on dividend of ` 1 Million as approved by the shareholders at the Annual General Meeting held on August 12, 2011. 46. The Company had made provision for claims and warranties of ` 168 Million (net) in the previous year as per contractual terms, the outcome of the same would get crystallized by next year. During the current year, the Company has made an additional provision of ` 157 Million. Further, the Company has reversed a portion of the said provision of ` 209 Million in the current year, being no longer required.
79
ANNUAL REPORT 2011 - 2012
The Movement of the provision is as under: ` In Million Particulars For the year ended March 31, 2012 168 157 16 For the year ended March 31, 2011 102 264 24
Carrying amount as at the beginning of the year Additional provision made during the year Less: Amount paid/Utilised during the year
47.
48.
49.
50. 51.
Less: Amount recovered from subcontractor 100 Less: Reversal of provision no longer required 209 174 Balance as at 168 During the year ended March 31, 2012, the Company has invested an additional amount of ` 41 Million in its subsidiary company Tech Mahindra (Nigeria) Limited towards equity share capital. Against this additional investment, 137,790,000 equity shares of Naira one each have been issued to the Company. During the year ended March 31, 2012, the Company has purchased by way of private arrangement 1,147,699 equity shares of CanvasM Technologies Ltd. at a consideration of ` 141 Million representing balance 19.90% stake from Motorola Cyprus Holdings Ltd. With this, CanvasM Technologies Ltd. has become 100% subsidiary of the Company with effect from 3rd February 2012. Consequently CanvasM (Americas) Inc. has also become 100% step down subsidiary of the Company with effect from 3rd February 2012. The Board of Directors of the Company in their meeting held on March 21, 2012 have approved the “Scheme of Amalgamation and Arrangement under Sections 391 to 394 read with Sections 78, 100 to 104 and other applicable provisions of the Companies Act, 1956 of Venturbay Consultants Private Limited and Satyam Computer Services Limited and C&S System Technologies Private Limited and Mahindra Logisoft Business Solutions Limited and CanvasM Technologies Limited with the Company (TML)” (“the Scheme”). The Appointed date of the Scheme is April 1, 2011. The Board of Directors of the Company has recommended issue of 2 fully paid up Equity Shares of ` 10 each of the Company for every 17 fully paid Equity Shares of ` 2 each of Satyam. As the other amalgamating companies are wholly owned by the Company / Satyam, no shares would be issued to shareholders of these companies. The Bombay Stock Exchange and the National Stock Exchange of India Limited have conveyed to the Company, their no-objection under Clause 24(f) of the Listing Agreement to the said Scheme. TML has also received approval of Competition Commission of India for the said Scheme. Further, TML has obtained directions from the Hon’ble High Court of Judicature at Bombay (“Court”) for convening the shareholders meeting on 7th June 2012 to approve the Scheme. The proposed Scheme is subject to the approvals of the shareholders, Hon’ble Bombay High Court, Hon’ble High Court of Andhra Pradesh and other authorities. Based on the information available with the Company, no creditors have been identi?ed as “supplier” within the meaning of “Micro, Small and Medium Enterprises Development (MSMED) Act, 2006”. Previous period’s ?gures have been regrouped wherever necessary, to con?rm to the classi?cation for year ended March 31, 2012 For Tech Mahindra Limited Anand G. Mahindra Vineet Nayyar Chairman Vice Chairman & Managing Director Hon. Akash Paul Anupam Puri Bharat Doshi Director Director Director B.H. Wani M. Damodaran Paul Zuckerman Director Director Director Dr. Raj Reddy Ravindra Kulkarni Ulhas N. Yargop Director Director Director Sonjoy Anand Anil Khatri Chief Financial Of?cer Company Secretary Noida, Dated: May 23, 2012
Signatures to Notes
80
Statement pursuant to Section 212 of the Companies Act, 1956 relating to subsidiary companies.
Names of the subsidiary companies Tech Mahindra (Singapore) Pte Limited Tech Mahindra (Thailand) Co Limited Tech Mahindra Foundation PT Tech Mahindra Indonesia CanvasM Technologies Limited CanvasM Americas Inc. Tech Mahindra (Malaysia) Sdn. Bhd. Tech Mahindra (Beijing) IT Services Limited Tech Mahindra (Bahrain) Ltd. S.P.C. Tech Mahindra (Nigeria) Limited Mahindra Venturbay Logisoft Consultants Business Private Solutions Limited Limited March 31, 2012 INR INR March 31, 2012 March 31, 2012 NGN March 31, 2012 BD March 31, 2012 RMB March 31, 2012 RM March 31, 2012 THB INR US $ INR US $ March 31, 2012 March 31, 2012 March 31, 2012 March 31, 2012 March 31, 2012 S$
Particulars
Tech Mahindra (Americas) Inc.
Tech Mahindra GMBH
The Financial Year of the Subsidiary ended on Euro
March 31, 2012
March 31, 2012
US $
Number of shares of the subsidiary Company held by Tech Mahindra Limited at the above date 3 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 5,000 50,000 50,000 500,000 5,767,330 100 312,820 3,314,450 500 153,040,026 12,450,000 100% 30,472,300 100%
Number of shares
375,000
Extent of holding
100%
The Net Aggregate of pro?ts/losses of the Subsidiary Company for its ?nancial year so far as they concern the members of Tech Mahindra Limited
a)
Dealth with in the accounts of Tech Mahindra Ltd. for the Year ended March 31,2012 279,337 (869,773) 793,058 161,619,750 159,273 827,781 109,261 172,798 232,128,500 18,805,569 (678,209)
b)
Not dealth with in the accounts of Tech Mahindra Ltd. for the Year ended March 31,2012
4,857,527
625,691
The Net Aggregate of pro?ts/losses of the Subsidiary Company for its previous ?nancial years so far as they concern the members of Tech Mahindra Limited
a)
Dealth with in the accounts of Tech Mahindra Ltd. for the Year ended March 31,2012
Not dealth with in the accounts of 3,613,612 724,458 408,149 183,032 2,565,688 93,752,900 185,582 431,010 (1,104,125) 183,113 50,071,347 11,272,687 (846,955) Tech Mahindra Ltd. for the Year ended March 31,2012 Note: The above Statement does not include information related to Tech Mahindra Brasil Servicecos De Informatica Ltda (TMBSL) and Tech Talenta Inc. (TTI) incorporated on July 21, 2010 and March 6, 2012 respectively, since there have been no transactions till March 31, 2012 and the holding Company is yet to infuse share capital in them.
b)
For Tech Mahindra Limited Vineet Nayyar Vice Chairman & Managing Director Anupam Puri Director M. Damodaran Director Ravindra Kulkarni Director Anil Khatri Company Secretary
Anand G. Mahindra Chairman Hon. Akash Paul Director B.H. Wani
Bharat Doshi Director Paul Zuckerman Director Ulhas N. Yargop Director
Director
Dr. Raj Reddy Director Sonjoy Anand Chief Financial Of?cer
Noida, Dated: May 23, 2012
81
Consolidated Financial Statements
ANNUAL REPORT 2011 - 2012
Auditors’ Report
To The Board of Directors of Tech Mahindra Limited 1. We have audited the attached Consolidated Balance Sheet of TECH MAHINDRA LIMITED (“the Company”) and its subsidiaries (the Company and its subsidiaries constitute “the Group”) as at 31st March 2012, the Consolidated Statement of Pro?t and Loss and the Consolidated Cash Flow Statement of the Group for the year ended on that date both annexed thereto (all together referred to as ‘Consolidated Financial Statements’). The Consolidated Financial Statements include investments in an associate accounted on the equity method in accordance with Accounting Standard 23 (Accounting for Investments in Associates in Consolidated Financial Statements) as noti?ed under the Companies (Accounting Standards) Rules, 2006. These Consolidated Financial Statements are the responsibility of the Company’s Management and have been prepared on the basis of the separate ?nancial statements and other ?nancial information regarding components. Our responsibility is to express an opinion on these Consolidated Financial Statements based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the ?nancial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and the disclosures in the ?nancial statements. An audit also includes assessing the accounting principles used and the signi?cant estimates made by the management, as well as evaluating the overall ?nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion. We did not audit the ?nancial statements of certain subsidiaries, whose ?nancial statements re?ect total assets (net) of ` 2,579 Million as at 31st March 2012, total revenues of ` 3,493 Million and net cash in?ows amounting to ` 188 Million for the year ended on that date as considered in the Consolidated Financial Statements. These ?nancial statements have been audited by other auditors whose reports have been furnished to us and our opinion in so far as it relates to the amounts included in respect of these subsidiaries is based solely on the reports of the other auditors. As stated in Note 40 (a) to the Consolidated Financial Statements, the auditors of Satyam Computer Services Limited (SCSL) have quali?ed their auditor’s report for the year ended 31st March 2012, expressing their inability to ascertain the impact and the consequential effects, if any, thereof which are not quanti?able on a number of items, namely, ongoing investigations and legal proceedings by various regulators / investigating agencies in respect of the ?nancial irregularities relating to prior years, Net debit amounts aggregating to ` 11,394 Million booked to ‘Unexplained Differences Suspense Account’ and fully provided for in prior years on grounds of prudence, alleged advances of ` 12,304 Million relating to prior years as claimed by various companies which is presented separately in the Balance Sheet of SCSL under “Amount Pending Investigation Suspense Account (Net)”, certain lawsuits (the “Aberdeen Action”, USA and the “Aberdeen(UK) Complaint”) ?led by certain investors in the United States of America and the United Kingdom, and adequacy or otherwise of the provision for taxation pertaining to prior years. Without qualifying our opinion, we draw attention to the matters as mentioned in Note 40 (b), where the auditors of SCSL have drawn attention on certain items including various demands/disputes raised by the indirect tax authorities and non-compliances with the provisions of certain statutory Acts /guidelines. The post acquisition pro?t (net) of SCSL, the amount of goodwill in the investment value, investment in associate and reserves and surplus in the Consolidated Financial Statements of the group are subject to the matters referred in Para 4 above, due to which we are unable to comment on the impact of the same on the post acquisition pro?t (net) of SCSL, amount of goodwill in investment value in associate and reserves and surplus in the consolidated ?nancial statements of the group. We report that the Consolidated Financial Statements have been prepared by the Company in accordance with the requirements of Accounting Standard 21 (Consolidated Financial Statements) and Accounting Standard 23 (Accounting for Investment in Associates in Consolidated Financial Statements) as noti?ed under the Companies (Accounting Standards) Rules, 2006.
2.
3.
4.
5.
6.
7.
84
8.
Further to our comments in Paragraph 5 above and subject to the matters referred to in paragraph 6 above, based on our audit and on consideration of the separate audit reports on the individual ?nancial statements of the Company, its aforesaid subsidiaries and associates, and to the best of our information and according to the explanations given to us, in our opinion, the Consolidated Financial Statements give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the Consolidated Balance Sheet, of the state of affairs of the Group as at 31st March 2012; (b) in the case of the Consolidated Statement of Pro?t and Loss, of the pro?t of the Group for the year ended on that date; and (c) in the case of the Consolidated Cash Flow Statement, of the cash ?ows of the Group for the year ended on that date.
For Deloitte Haskins & Sells Chartered Accountants (Registration No. 117366W)
Place : Noida Dated: May 23, 2012
Hemant M. Joshi Partner (Membership No. 38019)
85
ANNUAL REPORT 2011 - 2012
CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2012
Note I. 1 EQUITY AND LIABILITIES Shareholders’ funds (a) Share Capital (b) Reserves and Surplus Share application money pending allotment Minority Interest Non-current liabilities (a) Long-term borrowings (b) Other Long term liabilities (c) Long-term provisions Current liabilities (a) Short-term borrowings (b) Trade payables (c) Other current liabilities (d) Short-term provisions ASSETS Non-current assets (a) Fixed assets (i) Tangible assets (ii) Intangible assets (iii) Capital work-in-progress (b) Non-current investments (c) Deferred tax asset (refer note 35) (d) Long-term loans and advances 2 Current assets (a) Current investments (b) Inventories (c) Trade receivables (d) Cash and cash equivalents (e) Short-term loans and advances 2 3 1,275 39,234 40,509 0 6,000 4,295 1,886 12,181 5,266 3,649 6,080 1,506 16,501 69,191 1,260 32,254 33,514 0 159 6,400 3,917 1,458 11,775 5,427 2,474 5,582 1,621 15,104 60,553 March 31, 2012 ` in Million March 31, 2011
2 3 4
4 5 6 7 8 9 10
5
II. 1
11 6,729 96 1,671 8,496 34,271 998 3,384 47,149 1,605 2 13,172 2,418 4,845 22,042 69,191 6,107 63 608 6,778 28,701 638 4,146 40,263 379 6 10,361 2,665 6,879 20,290 60,553
12 13 14 15 16 17 18
See accompanying notes to the ?nancial statements In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Hemant M. Joshi Partner
1 to 46 For Tech Mahindra Limited
Noida, Dated: May 23, 2012
Anand G. Mahindra Chairman Hon. Akash Paul Director B.H. Wani Director Dr. Raj Reddy Director Sonjoy Anand Chief Financial Of?cer Noida, Dated: May 23, 2012
Vineet Nayyar Vice Chairman & Managing Director Anupam Puri Bharat Doshi Director Director M. Damodaran Paul Zuckerman Director Director Ravindra Kulkarni Ulhas N. Yargop Director Director Anil Khatri Company Secretary
86
STATEMENT OF CONSOLIDATED PROFIT AND LOSS FOR THE YEAR ENDED MARCH 31, 2012
` in Million except Earnings per share Note Year ended Year ended March 31, March 31, 2012 2011 54,897 51,402 19 982 1,288 55,879 52,690 20 21 22 11 28,681 17,022 1,026 1,613 48,342 7,537 679 6,858 1,797 (360) 5,421 (36) 5,385 5,103 467 10,955 24,116 17,252 1,113 1,435 43,916 8,774 8,774 1,678 (362) 7,458 (20) 7,438 2,106 (2,735) 1,066 (1,433) 6,442
Revenue from Services (refer note 27) Other income Total Revenue (I + II) Expenses: Employee bene?ts expense Operating and other expenses Finance costs Depreciation and amortisation expense Total expenses V Pro?t before Exceptional Items, Tax, Minority Interest and Share in Earnings of Associate (III - IV) VI Exceptional Items (net) (refer note 31) Pro?t before Tax, Minority Interest and Share in Earnings of Associate (V - VI) VII Tax expense: (1) Current tax (refer note 39) - Net of MAT credit of ` 3 Million (previous year: ` 182 Million) (2) Deferred tax (refer note 35) VIII Pro?t after tax and before Minority Interest and share in earnings in Associate (VI-VII) IX Minority interest X Pro?t after tax and Minority Interest and before share in earnings of Associate (VIII-IX) XI Share in Associate (refer note 40) (i) Pro?t after tax and minority interest (excluding exceptional items) - Exceptional items (ii) Earlier period items (refer note 40) - Pro?t after tax and minority interest (excluding exceptional items) - Exceptional items XII Pro?t for the year (X+XI) Earnings per equity share (Before exceptional items) in ` (refer note 38) (1) Basic (2) Diluted Earnings per equity share (After exceptional items) in ` (1) Basic (2) Diluted See accompanying notes to the ?nancial statements In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Hemant M. Joshi Partner
I. II. III. IV.
91.60 88.05 86.25 82.91 1 to 46
51.60 49.34 51.60 49.34
For Tech Mahindra Limited Anand G. Mahindra Chairman Hon. Akash Paul Director B.H. Wani Director Dr. Raj Reddy Director Sonjoy Anand Chief Financial Of?cer Noida, Dated: May 23, 2012 Vineet Nayyar Vice Chairman & Managing Director Anupam Puri Bharat Doshi Director Director M. Damodaran Paul Zuckerman Director Director Ravindra Kulkarni Ulhas N. Yargop Director Director Anil Khatri Company Secretary
Noida, Dated: May 23, 2012
87
ANNUAL REPORT 2011 - 2012
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2012
` in Million Particulars A Cash ?ow from operating activities Net Pro?t before exceptional items and tax Adjustments for : Depreciation and Amortisation Amortisation of Deferred Revenue Provision for doubtful trade and other receivables, bad debts and loans and advances (net) Provision for Customer Claims and warranties (net) (Pro?t) / Loss on sale of Fixed Assets (net) Finance costs Net unrealised exchange (gain) / loss Expense on employee stock option scheme Interest Income Dividend income Net (pro?t) / loss on sale of current investments Decrease in fair value of current investments Operating pro?t before working capital changes Adjustments for (increase) / decrease in operating assets and liabilities: Trade receivables (including Finance lease) and short term loans and advances Trade payables and other current liabilities Settlement Fees received Cash generated from operations Net income tax (paid) / refunds Net cash ?ow from / (used in) operating activities (A) B Cash ?ow from investing activities Capital expenditure on ?xed assets, including capital advances Proceeds from sale of ?xed assets Purchase of current Investments Sale of current investments Purchase of Government Bonds/Securities Sales of Government Bond/Securities Purchase of long-term investments in subsidiary Interest received from others Net cash ?ow from / (used in) investing activities (B) (2,958) 9 (1,506) 313 (141) 79 (4,203) (1,534) 21 (226) 316 (12) 11 90 (1,334) (1,271) 1,497 226 9,588 (2,471) 7,117 (3,009) (111) 377 (2,743) 6,724 (2,087) 4,637 1,613 (2,065) 197 (97) (0) 1,026 851 412 (79) (31) (2) 0 1,825 9,362 1,435 (2,217) 159 90 (11) 1,113 164 69 (90) (19) (1) (0) 692 9,466 7,537 8,774 Year ended March 31, 2012 Year ended March 31, 2011
88
CONSOLIDATED CASH FLOW FOR THE YEAR ENDED MARCH 31, 2012 (Contd.)
` in Million Particulars C Cash ?ow from ?nancing activities Proceeds from issue of equity shares and application money Dividend (including dividend tax) paid Proceeds from short term borrowings Repayment of short term borrowings Finance cost Net cash ?ow from / (used in) ?nancing activities (C) Net increase / (decrease) in Cash and cash equivalents (A+B+C) Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Year ended March 31, 2012 118 (591) 23,541 (25,331) (911) (3,174) (260) 2,649 2,389 Year ended March 31, 2011 260 (508) 12,024 (13,584) (1,059) (2,867) 436 2,213 2,649
Notes : 1 Purchase of ?xed assets are stated inclusive of movements of capital work in progress between the commencement and end of the year and are considered as part of investing activity. 2 Cash and cash equivalents : Cash and Bank balances* Unrealised loss/(gain) on foreign currency Less Fixed deposits with original maturity over three months Total Cash and cash equivalents * Cash and cash equivalents comprises a) In current accounts b) In deposit accounts with original maturity of less than three months c) In earmarked accounts March 31, 2012 2,418 (29) 2,389 2,107 306 5 2,418 March 31, 2011 2,665 (16) 0 2,649 2,340 321 4 2,665
3
Cash and cash equivalents include equity Share application money of ` 0 Million (previous year: ` 0 Million) and Unclaimed dividend of ` 5 Million (previous year: ` 4 Million) In terms of our report attached For Deloitte Haskins & Sells For Tech Mahindra Limited Chartered Accountants Anand G. Mahindra Vineet Nayyar Chairman Vice Chairman & Managing Director Hemant M. Joshi Hon. Akash Paul Anupam Puri Bharat Doshi Partner Director Director Director B.H. Wani M. Damodaran Paul Zuckerman Director Director Director Dr. Raj Reddy Ravindra Kulkarni Ulhas N. Yargop Director Director Director Sonjoy Anand Anil Khatri Chief Financial Of?cer Company Secretary Noida, Dated: May 23, 2012 Noida, Dated: May 23, 2012
89
ANNUAL REPORT 2011 - 2012
Notes forming part of the Consolidated Balance Sheet and Statement of Pro?t and Loss
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2012 1. Signi?cant accounting policies: (a) Basis for preparation of accounts: The accompanying Consolidated Financial Statements of Tech Mahindra Limited (TML) and its subsidiaries (together constitute “the Group”) have been prepared to comply with generally accepted accounting principles applicable in India, the relevant provisions of the Companies Act, 1956 and the Accounting Standards to the extent possible in the same format as that adopted by the holding company for its separate ?nancial statements. The ?nancial statements of the subsidiaries used in the consolidation are drawn up to the same reporting date as that of the holding company. (b) Principles of consolidation: The ?nancial statements of the holding company and its subsidiaries have been consolidated on a line by line basis by adding together like items of assets, liabilities, income, expenses, after eliminating intra-group transactions and any unrealized gains or losses in accordance with the Accounting Standard - 21 on “Consolidated Financial Statements” (AS 21). The ?nancial statements of the holding company and its subsidiaries have been consolidated using uniform accounting policies for like transactions and other events in similar circumstances. The excess of cost of investments in the subsidiary company/s over the share of the equity of the subsidiary company/s at the date on which the investment in the subsidiary company/s is made is recognised as ‘Goodwill on Consolidation’ and is grouped with Fixed Assets in the Consolidated Financial Statements. Alternatively, where the share of equity in the subsidiary company/s as on the date of investment is in excess of cost of the investment, it is recognised as ‘Capital Reserve’ and grouped with ‘Reserves and Surplus’, in the Consolidated Financial Statements. Minority interest in the net assets of the consolidated subsidiaries consists of the amount of equity attributable to the minority shareholders at the dates on which investments are made in the subsidiary company/s and further movements in their share in the equity, subsequent to the dates of investments. Minority interest also includes share application money received from minority shareholders. The losses in subsidiary/s attributable to the minority shareholder are recognised to the extent of their interest in the equity of the subsidiary/s. Investment in an entity in which the Group has signi?cant in?uence but not a controlling interest, is reported according to the equity method i.e. the investment is initially recorded at cost in accordance with Accounting Standard 23 “Accounting for Investments in associates in Consolidated Financial Statements”. The carrying amount of the investment is adjusted thereafter for the post acquisition change in the Company’s share of net assets of the associate. The excess of cost of investment in associate, over the net assets at the date of acquisition of the investment in the associate is separately disclosed in the investment schedule as Goodwill. (c) Use of Estimates: The preparation of Consolidated Financial Statements, in conformity with the generally accepted accounting principles, requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of ?nancial statements and the reported amounts of revenues and expenses during the reported twelve months. Differences between the actual results and estimates are recognised in the year in which the results are known/ materialised. (d) Fixed Assets including intangible assets Fixed assets are stated at cost less accumulated depreciation. Costs comprise of purchase price and attributable costs, if any. (e) Leases: Assets taken on lease by TML are accounted for as ?xed assets in accordance with Accounting Standard 19 on “Leases”, (AS 19). (i) Finance lease Where TML, as a lessor, leases assets under ?nance leases such amounts are recognised as receivables at an amount equal to the
90
net investment in the lease and the ?nance income is based on constant rate of return on the outstanding net investment. Assets taken on ?nance lease are accounted for as ?xed assets at fair value. Lease payments are apportioned between ?nance charge and reduction of outstanding liability. (ii) Operating lease Lease arrangements under which all risks and rewards of ownership are effectively retained by the lessor are classi?ed as operating lease. Lease rental under operating lease are recognised in Statement of Pro?t and Loss on straight line basis. (f) Depreciation / Amortisation of ?xed assets: (i) The Group computes depreciation of all ?xed assets including for assets taken on lease using the straight-line method based on estimated useful lives. Depreciation is charged on a pro-rata basis for assets purchased or sold during the year. Management’s estimate of the useful life of ?xed assets is as follows: Buildings 28 years* Computers 3 years Plant and machinery 5 years Furniture and ?xtures 5 years Vehicles 3-5 years Of?ce Equipments 5 years *Refer foot note 1 of Note 11 of Fixed Assets (ii) Leasehold land is amortised over the period of lease. (iii) Leasehold improvements are amortised over the period of lease or expected period of occupancy whichever is less. (iv) Intellectual property rights are amortised over a period of seven years. (v) Assets costing up to ` 5,000 are fully depreciated in the year of purchase. (vi) The cost of software purchased for internal use is capitalized and depreciated in full in the month in which it is put to use. (g) Impairment of Assets: At the end of each year, the Group determines whether a provision should be made for impairment loss on assets by considering
the indications that an impairment loss may have occurred in accordance with Accounting Standard 28 on ‘‘Impairment of Assets’’. Where the recoverable amount of any asset is lower than its carrying amount, a provision for impairment loss on assets is made for the difference. Recoverable amount is the higher of an asset’s net selling price and value in use. In assessing value in use, the estimated future cash ?ows expected from the continuing use of the asset and from its disposal are discounted to their present value using a pre-tax discount rate that re?ects the current market assessments of time value of money and the risks speci?c to the asset. Reversal of impairment loss if any is recognised immediately as income in the Statement of Pro?t and Loss. (h) Investments: Long-term investments are carried at cost. Provision is made to recognise a decline other than temporary in the carrying amount of long term investments. Current investments are carried at lower of cost and fair value. (i) Inventories : Components and parts: Components and parts are valued at lower of cost and net realizable value. Cost is determined on First – In – First Out basis. Finished Goods: Finished goods are valued at the lower of the cost or net realisable value. Cost is determined on First-In-First Out basis. (j) Revenue recognition: Revenue from software services and business process outsourcing services include revenue earned from services rendered on ‘time and material’ basis, time bound ?xed price engagements and system integration projects. All revenues from services, as rendered, are recognised when persuasive evidence of an arrangement exists, the sale price is ?xed or determinable and collectability is reasonably assured and are reported net of sales incentives, discounts based on the terms of the contract and applicable indirect taxes. The Group also performs time bound ?xed price engagements, under which revenue is recognised using the proportionate completion method of accounting, unless work completed cannot be reasonably
91
ANNUAL REPORT 2011 - 2012
estimated. Provision for estimated losses, if any on uncompleted contracts are recorded in the year in which such losses become probable based on the current contract estimates. The cumulative impact of any revision in estimates of the percentage of work completed is re?ected in the year in which the change becomes known. Liquidated damages and penalties are accounted as per the contract terms wherever there is a delayed delivery attributable to the Group and when there is a reasonable certainty with which the same can be estimated. Revenues from the sale of software and hardware products are recognised upon delivery/deemed delivery, which is when title passes to the customer, along with risk and reward. Unbilled revenues comprise revenues recognised in relation to efforts incurred, not billed as of the period end, where services are performed in accordance with agreed terms. The Group recognizes unearned ?nance income as ?nancing revenue over the lease term using the effective interest method. Dividend income is recognised when the Group’s right to receive dividend is established. Interest income is recognised on time proportion basis. (k) (a) Foreign currency transactions: ` Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transaction. Monetary items are translated at the period end rates. The exchange difference between the rate prevailing on the date of transaction and on the date of settlement as also on translation of monetary items at the end of the period is recognised as income or expense, as the case may be. Any premium or discount arising at the inception of the forward exchange contract is recognised as income or expense over the life of the contract, except in the case where the contract is designated as a Cash Flow Hedge. (b) Derivative instruments and hedge accounting: The Group uses foreign currency forward contracts / options to hedge its risks associated with foreign currency ?uctuations relating to certain
forecasted transactions. Effective April 01, 2007, the Group designates some of these as cash ?ow hedges applying the recognition and measurement principles set out in the Accounting Standard 30 “Financial Instruments: Recognition and Measurements” (AS-30). The use of foreign currency forward contracts/options is governed by the Group’s policies approved by the Board of Directors, which provide written principles on the use of such ?nancial derivatives consistent with the Group’s risk management strategy. The counter party to the Group`s foreign currency forward contracts is generally a bank. The Group does not use derivative ?nancial instruments for speculative purposes. Foreign currency forward contract/ option derivative instruments are initially measured at fair value and are re-measured at subsequent reporting dates. Changes in the fair value of these derivatives that are designated and effective as hedges of future cash ?ows are recognised directly in reserves and the ineffective portion is recognised immediately in Statement of Pro?t and Loss. The accumulated gains and losses on the derivatives in reserves are transferred to Statement of Pro?t and Loss in the same period in which gains or losses on the item hedged are recognised in Statement of Pro?t and Loss. Changes in the fair value of derivative ?nancial instruments that do not qualify for hedge accounting are recognised in the Statement of Pro?t and Loss as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer quali?es for hedge accounting. When hedge accounting is discontinued for a cash ?ow hedge, the net gain or loss will remain in reserves and be reclassi?ed to Statement of Pro?t and Loss in the same period or periods during which the formerly hedged transaction is reported in Statement of Pro?t and Loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in reserves is transferred to Statement of Pro?t and Loss.
92
(l)
Translation and Accounting of Financial Statement of Foreign subsidiaries : In respect of foreign subsidiaries, the Group has classi?ed all of them as “Integral Foreign Operations” in terms of AS 11 with effect from April 01, 2009. The subsequent exchange differences arising on account of such translation is taken to Statement of Pro?t and Loss. The ?nancial statements of the foreign subsidiaries for the purpose of consolidation are translated to Indian Rupees as follows: a. All incomes and expenses are translated at the average rate of exchange prevailing during the year. Assets and liabilities are translated at the closing rate as on the Balance sheet date. The resulting exchange differences are accumulated in currency translation reserve till March 31, 2009, which is shown under Reserves & Surplus. c)
employees’ salary (currently at 12% of the basic salary) and super annuation contributions, which are charged to the Statement of Pro?t and Loss on accrual basis. The provident fund contributions are paid to the Regional Provident Fund Commissioner by TML and its Indian subsidiaries. The TML and its Indian subsidiaries have no further obligations for future provident fund and superannuation fund bene?ts other than its annual contributions. Compensated absences: The Group provides for the encashment of leave subject to certain group`s rules. The employees are entitled to accumulate leave subject to certain limits, for future encashment or availment. The liability is provided based on the number of days of un-availed leave at each balance sheet date on the basis of an independent actuarial valuation using the Projected Unit Credit method for TML and its Indian subsidiaries, whereas provision for encashment of unavailed leave on retirement is made on actual basis for Tech Mahindra (Americas) Inc. (TMA), Tech Mahindra GmbH (TMGMBH) and Tech Mahindra (Singapore) Pte. Ltd. (TMSL). TML does not expect the difference on account of varying methods to be material. Actuarial gains and losses are recognised in full in the Statement of Pro?t and Loss in the year in which they occur. The Group also offers a short term bene?t in the form of encashment of unavailed accumulated leave above certain limit for all of its employees and same is being provided for in the books at actual cost. d) Other short term employee bene?ts: Other short-term employee bene?ts, including overseas social security contributions and performance incentives expected to be paid in exchange for the services rendered by employees, are recognised during the period when the employee renders the service.
Borrowing costs: Borrowing costs that are attributable to the acquisition or construction of qualifyingb. c.
(m) Employee Retirement Bene?ts: a) Gratuity : The Group accounts for its gratuity liability, a de?ned retirement bene?t plan covering eligible employees. The Gratuity plan provides for a lump sum payment to employees at retirement, death, incapacitation or termination of the employment based on the respective employee’s salary and the tenure of the employment. Liabilities with regard to a Gratuity plan are determined based on the actuarial valuation carried out by an independent actuary as at the Balance Sheet date using the Projected Unit Credit method for TML and its Indian subsidiaries. Actuarial gains and losses are recognised in full in the Statement of Pro?t and Loss in the year in which they occur. (refer note 28 below) b) Provident fund: The eligible employees of TML and its Indian subsidiaries are entitled to receive the bene?ts of Provident fund, a de?ned contribution plan, in which both employees and TML and its Indian subsidiaries make monthly contributions at a speci?ed percentage of the covered
93
ANNUAL REPORT 2011 - 2012
assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are charged to revenue. (o) Taxation: Tax expense comprises of current tax and deferred tax. Current tax is measured at the amount expected to be paid to/recovered from the tax authorities, based on estimated tax liability computed after taking credit for allowances and exemption in accordance with the local tax laws existing in the respective countries. Minimum Alternative Tax (MAT) paid in accordance with the tax laws, which gives rise to future economic bene?ts in the form of adjustment of future income tax liability is considered as an asset if there is convincing evidence that the Group will pay normal tax after the tax holiday period. Accordingly, it is recognised as an asset in the Balance Sheet when it is probable that the future economic bene?t associated with it will ?ow to the Group and the asset can be measured reliably. Deferred tax assets and liabilities are recognised for future tax consequences attributable to timing differences between taxable income and accounting income that are capable of reversal in one or more subsequent years and are measured using relevant enacted tax rates. The carrying amount of deferred tax assets at each Balance Sheet date is reduced to the extent that it is no longer reasonably certain that suf?cient future taxable income will be available against which the deferred tax asset can be realized. Tax on distributed pro?ts payable in accordance with the provisions of the
Income Tax Act, 1961 is disclosed in accordance with the Guidance Note on Accounting for Corporate Dividend Tax issued by the Institute of Chartered Accountants of India (ICAI). (p) Employee Stock Option Plan: Stock options granted to the employees are accounted as per the accounting treatment prescribed by the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999 (“ESOP Guidelines”) issued by Securities and Exchange Board of India (“SEBI”) and the Guidance Note on Accounting for Employee Share-based Payments, issued by the ICAI. Employees eligible for Employee Stock Option Plan 2010 are granted an option to purchase shares of TML at predetermined exercise price. These options vest over a period of three years from the date of grant. The stock compensation cost is computed under the intrinsic value method and amortized on a straight line basis over the total vesting period of three years. (q) Provision, Contingent Contingent Assets: Liabilities and
Provision is recognised, when The Group has a present obligation as a result of arising out of past events and it becomes probable that any out?ow of resources embodying economic bene?ts will be required to settle the obligation, in respect of which a reliable estimate can be made. Contingent liabilities are not recognised in the ?nancial statement. A Contingent asset is neither recognised nor disclosed in ?nancial statements.
94
Note 2: Share Capital Share Capital Authorised Equity Shares of ` 10/- each Issued, Subscribed & Paid up Equity Shares of ` 10/- each As at March 31, 2012 Number ` Million 175,000,000 127,486,541 127,486,541 1,750 1,275 1,275 As at March 31, 2011 Number ` Million 175,000,000 125,955,481 125,955,481 1,750 1,260 1,260
Disclosure pursuant to Part I of Schedule VI to the Companies Act, 1956 Reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period: Particulars March 31, 2012 Equity Shares ` Number 125,955,481 1,259,554,810 1,531,060 15,310,600 127,486,541 1,274,865,410 March 31, 2011 Equity Shares ` Number 122,320,114 1,223,201,140 3,635,367 125,955,481 36,353,670 1,259,554,810
Shares outstanding at the beginning of the year Shares Issued during the year Shares outstanding at the end of the year
No of shares held by each shareholder holding more than 5 percent equity shares of the Company are as follows: Name of Shareholder March 31, 2012 No. of % of Holding Shares held 60,676,252 47.59 29,546,923 23.18 7,114,140 5.58 March 31, 2011 No. of % of Holding Shares held 60,676,252 48.17 29,546,923 23.46 6,753,525 5.36
Mahindra & Mahindra Limited British Telecommunications PLC Life Insurance Corporation of India
Information about bonus shares issued by capitalisation of free reserves. Amount in ` Particulars As at March 31, March 31, March 31, March 31, March 31, March 31, 2012 2011 2010 2009 2008 2007 Aggregate No. of Equity Shares : Fully paid up equity shares of ` 2 each issued by way of bonus shares by capitalisation of a) Balance in Statement of Pro?t and Loss b) Balance in General reserve Refer note 33 for stock options. The Company has only one class of shares referred to as equity shares having a par value of ` 10/-. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. The Board of Directors in their meeting on 23rd May, 2012 proposed a ?nal dividend of ` 4 per equity share. The proposal is subject to approval of shareholders at the Annual General Meeting to be held on 10th August, 2012. 51,000,100 51,000,100 51,000,100 51,000,100 51,000,100 51,000,100 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000
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ANNUAL REPORT 2011 - 2012
Note 3: Reserves and Surplus As at March 31, 2012 a. Capital Reserve Opening Balance Add: Additions during the year (refer note 23(c)) Closing Balance Securities Premium Account Opening Balance Add: Received during the year from exercise of stock options Closing Balance Debenture Redemption Reserve Opening Balance Add: Transfer from statement of Pro?t and Loss (net) Closing Balance Share Options Outstanding Account (refer note 1(p)) Opening Balance Add: Amortised amount of stock compensation cost Closing Balance Statutory Reserve (refer note 41) Opening Balance Add: Movement during the year f. Closing Balance Currency Translation Reserve As per last Balance Sheet (refer note 1 (l)) Add: Movement during the year Closing Balance General Reserve Opening Balance Add: Transfer from statement of Pro?t and Loss Closing Balance Hedging Reserve (refer note 36) Opening Balance Add: Movement during the year (net) Closing Balance Surplus in Statement of Pro?t and Loss Opening balance Add: Net Pro?t for the year Less: Final Dividend (refer note 44) Less: Proposed Final Dividend (refer note 2) Less: Tax on Dividend (refer note 2 and 44) Less: Transfer to Debenture redemption reserve (net) Less: Transfer to General reserve Closing Balance 55 55 2,599 103 2,702 2,637 1,353 3,990 69 412 481 3 3 105 105 4,451 1,000 5,451 412 (3,947) (3,535) 21,977 10,955 4 510 83 1,353 1,000 29,982 39,234 ` in Million As at March 31, 2011 2,374 225 2,599 1,935 702 2,637 69 69 3 3 105 105 3,451 1,000 4,451 1,942 (1,530) 412 17,830 6,442 6 504 83 702 1,000 21,977 32,254
b.
c.
d.
e.
g.
h.
i.
96
Note 4: Long Term Borrowings ` in Million As at March 31, 2012 (a) Secured Debentures (i) 10.25% (Previous Year: 10.25%) Privately placed Non-Convertible Debentures (Due for redemption on 17th April 2014, at par) 3,000 3,000 As at March 31, 2011
(ii) 10.25% (Previous Year: 10.25%) Privately placed Non-Convertible Debentures (Due for redemption on 17th April 2013, at par) (The above debentures are secured by pari passu charge over the immovable property located in Gujrat. The Company has also deposited the title deeds of certain other immovable properties of the Company with the debenture trustees.) (b) Unsecured Term Loan from Bank
3,000
3,000
6,000
400 6,400
Note 5: Other Long Term Liabilities (a) Deferred revenue (refer note 27) (b) Fair values of foreign exchange forward and currency option contracts (refer note 36) (c) Deposits (d) Others 1,708 2,543 6 38 4,295 3,772 107 5 33 3,917
Note 6: Long Term Provisions Provision for employee bene?ts (refer note 28) 1,886 1,886 Note 7: Short Term Borrowings Secured Loans from Bank Cash credit * Unsecured Loans from Banks Export Packing credit ** *Cash credit is secured by charge over current assets, present and future, including receivables. ** Due for repayment within 6 months from date of disbursement of loan. 5,266 5,427 5,160 5,427 106 1,458 1,458
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ANNUAL REPORT 2011 - 2012
Note 8: Trade Payables ` in Million As at March 31, 2012 Sundry Creditors* * Includes ` 711 Million (previous year: ` 588 Million) due to Satyam Computer Services Limited, an associate company ` 71 Million (previous year: ` 88 Million) due to Satyam BPO Limited, an associate company ` 1 Million (previous year: ` Nil) due to Satyam Computer Services (Shanghai) Co. Limited an associate Company 3,649 Note 9: Other Current Liabilities (a) Current maturities of long term debt (b) Deferred Revenue (refer note 27) (c) Interest accrued but not due on borrowings (d) Fair values of foreign exchange forward and currency option contracts (refer note 36) (e) Advance from customers (f) Unearned revenue (g) Unpaid dividends (h) Accrued salaries and bene?ts (i) Others* 2,065 601 1,163 115 153 5 1,350 628 6,080 * Others mainly include withholding and other taxes payable. Note 10: Short Term Provisions (a) Provision for employee bene?ts (refer note 28) (b) Provision for Dividend (c) Provision for Dividend Tax (d) Provision for Taxation 432 510 83 481 1,506 237 504 82 798 1,621 400 2,065 589 94 63 4 1,661 706 5,582 2,474 3,649 As at March 31, 2011 2,474
98
Note 11: Fixed Assets
` in Million Gross Block Accumulated Depreciation / Amortisation Net Block Cost as at Additions Deletions Balance as As at For the Deductions Upto As at As at April 01, during the during the at March April 01, year during the March 31, March 31, March 31, 2011 year year 31, 2012 2011 year 2012 2012 2011
176 425 4,103 2,550 1,593 48 2,517 440 822 12,674 33 76 148 148 2,277 1,572 556 101 148 257 14,505 12,783 46 6,613 5,269 85 115 1,613 1,435 76 46 30 33 547 91 76 85 161 7,680 6,613 33 0 63 96 6,825 1,671 8,496
254 577 452 145 17 344 51 290 2,129
29 37 2 264 0 223 556
176 678 4,680 2,973 1,701 63 2,596 491 889 14,247
36 1,334 1,351 1,007 38 2,083 239 479 6,567
24 131 476 230 8 308 80 241 1,498
23 34 2 264 0 223 547
60 1,465 1,803 1,203 43 2,128 320 497 7,518
176 618 3,215 1,170 498 20 468 171 392 6,729
176 389 2,769 1,199 586 11 433 201 343 6,107 33 30 63 6,170 608 6,778
a Tangible Assets Freehold Land Leasehold Land Buildings Plant and Equipment Furniture and Fixtures Vehicles Computers Of?ce Equipments Leasehold Improvements Total b Intangible Assets Goodwill on consolidation Intellectual property rights Software Total Grand Total (a+b) Previous year c Capital Work In Progress Total
109 12,783 11,312
Notes:
1.
2.
The useful life of Buildings has been revised from 15 years to 28 years with effect from 1st April 2011. The net book value of these ?xed assets as at 31st March 2011 is being depreciated over the revised remaining useful life of the assets. As a result of this change, depreciation charge for the year ended 31st March 2012 is lower and the pro?t for the year is higher by ` 159 Million. Depreciation includes accelerated charge of ` 83 Million on assets in a leased premises consequent to the early termination of the lease.
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ANNUAL REPORT 2011 - 2012
Note 12: Non Current Investments ` in Million As at March 31, 2012 Long Term (Unquoted - at cost) Trade : In Subsidiary Companies : 50,000 Equity shares (previous year: 50,000) of Tech Mahindra Foundation of ` 10 each fully paid up In Other Company 1,603,380 E1 Preference shares (previous year: 1,603,380) of Servista Limited of GBP 0.002 each fully paid up 896,620 E2 Preference shares (previous year: 896,620) of Servista Limited of GBP 0.002 each fully paid up 4,232,622 Ordinary shares (previous year: 4,232,622) of Servista Limited of GBP 0.002 each fully paid up Less: Provision for Diminution (refer note 26) Long Term (Quoted- at cost) Trade: 501,843,740 (previous year: 501,843,740) equity shares of Satyam Computer Services Limited of ` 2/- each, fully paid up # # includes Goodwill of ` 24,777 Million (previous year: ` 24,777 Million) and cumulative group share of post acquisition pro?t/loss (net) of ` 4,574 Million (previous year loss (net) of ` 996 Million) (refer note 40) Long Term (Unquoted - at cost) Non Trade : Treasury Bills & Government Bonds (refer note1 below) 1 1 34,271 Market value of quoted investment Note : As per statutory requirements for overseas branches As at March 31, 2012 Aggregate amount of quoted investments Aggregate amount of provision for diminution in value of investments Statement showing percentage of holding Name of the Body Corporate Satyam Computer Services Limited As at March 31, 2012 42.64% As at March 31, 2011 42.65% 34,269 85 As at March 31, 2011 28,699 85 40,449 1 1 28,701 32,971 34,269 28,699 54 30 54 30 1 1 As at March 31, 2011
1 85 85 1
1 85 85 1
100
Note 13: Long Term Loans and Advances As at March 31, 2012 Unsecured, considered good unless otherwise stated a. Capital Advances Considered good Considered doubtful Less: Provision b. Security Deposits Considered good Considered doubtful Less: Provision c. d. e. f. g. VAT credit receivable Advance Income Taxes (Net of provisions) Advance Fringe Bene?t Tax (Net of provisions) Long term lease receivable - Secured (refer note 35) Advances recoverable in cash or in kind for value to be received ` in Million As at March 31, 2011
122 5 127 5 122 679 15 694 15 679 10 1,851 16 706 3,384
497 5 502 5 497 620 9 629 9 620 27 1,273 7 1,112 610 4,146
Note 14 : Current Investments (Unquoted) Non Trade : Investment in Mutual Fund 310,252 (previous year: 289,659) units of ` 100.04 (previous year: ` 100.02) each of ICICI Prudential Floating Rate Plan D-Daily Dividend Nil (previous year: 11,613,267) units of ` Nil (previous year: ` 10.13) each of Birla Sunlife Short Term Fund - Inst - Fortnightly Dividend 601,500.17 (Previous year: Nil) units of ` 1000.25 IDFC Cash Fund - Super Inst Plan C - Daily Dividend plan 6,003,769.20 (Previous year: Nil) units of ` 100.20 Birla Sun Life Cash Plus Inst - Prem. Daily Dividend - Reinvestment plan 5,000,000 (Previous year: Nil) units of ` 10.00 IDFC Fixed Maturity Quarterly Series 69 Dividend Plan 5,006,861 (Previous year: Nil) units of ` 10.00 IDFC Fixed Maturity Quarterly Series 70 Dividend Plan 5,000,000 (Previous year: Nil) units of ` 10.00 DSP Black Rock FMP - Series 35 - 3M Plan Nil (previous year: 5,000,000) units of ` Nil (previous year: ` 10.00) each of Birla Sun Life Fixed Term Plan - series CP - Growth option 5,499,850 (previous year: Nil) units of ` 10.00 (previous year: ` Nil) each of Birla Sun Life Fixed Term Plan - series EM - Growth option Nil (previous year: 7,683,056) units of ` Nil (previous year: ` 10.01) each of Birla Sunlife Savings Fund - Inst - Weekly Dividend - Reinvestment 824,625 (previous year: Nil) units of ` 100.13 (previous yea: ` Nil) each of Birla Sunlife Savings Fund - Inst - Weekly Dividend - Reinvestment
31 602 601 50 50 50 55 83
29 118 50 77 -
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ANNUAL REPORT 2011 - 2012
Note 14 : Current Investments (Unquoted) (Contd.) As at March 31, 2012 Nil (previous year: 6,124,372) units of ` Nil (previous year: ` 10.00) each of Reliance Fixed Horizon Fund- XVIII Series 3 Dividend Plan 38,533 (previous year: Nil) units of ` 1,001.37 (previous year: ` Nil) each of Reliance Money Manager Fund - Inst - option Daily Dividend Plan 4,433,314 (previous year: 4,433,314) units of ` 10.00 (previous year: ` 10.00) each of Kotak Quarterly Interval Plan Series I Dividend 39 ` in Million As at March 31, 2011 61 -
44 1,605
44 379 (0) 379 379
Provision for Diminution in value of current Investment
(0) 1,605
Aggregate amount of unquoted investments
1,605
Note 15: Inventories Raw Materials and components 2 2 6 6
Note 16: Trade Receivables Trade Receivables (Unsecured) (a) Over six months (i) Considered good* 211 400 351 225
(ii) Considered doubtful (b) Others (i) Considered good**
12,961 211 13,783
10,010 10,586 225 10,361
(ii) Considered doubtful
Less: Provision for doubtful debts
611 13,172
1. * Net of advances aggregating to ` 184 Million (previous year: ` 166 Million) pending adjustments with invoices 2. ** Net of advances aggregating to ` 464 Million (previous year: ` 314 Million) pending adjustments with invoices
102
Note 17: Cash and Cash Equivalents ` in Million As at March 31, 2012 (a) Cash and Cash equivalents As at March 31, 2011
Balances with banks In current accounts In deposit accounts 2,107 306 2,413 (b) Earmarked balances with banks 5 2,418 2,340 321 2,661 4 2,665
Note 18: Short Term Loans and Advances (Unsecured, considered good unless otherwise stated)
a. b.
Unbilled revenue Fair values of foreign exchange forward and currency option contracts (refer note 1 k (b)) MAT Credit entitlement Balance with Excise and Customs Lease receivable - Considered doubtful (refer note 31) Less : Provision
2,124 -
2,206 877
c. d. e.
240 1,278 231 231 -
471 1,032 866 866
f.
Advances recoverable in cash or in kind or for value to be received Considered good Considered doubtful 1,203 97 1,300 Less : Provision 97 1,203 4,845 1,427 43 1,470 43 1,427 6,879
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ANNUAL REPORT 2011 - 2012
Note 19: Other Income ` in Million Year ended March 31, 2012 (a) Interest on: Deposit with banks Others 11 68 79 (b) Foreign exchange gain / (loss) - Net (c) Rent Income (d) Dividend received (e) Pro?t on sale of Current Investments (f) Sundry balances written back (g) Miscellaneous income 594 66 31 2 133 77 982 45 45 90 907 79 19 1 80 112 1,288 Year ended March 31, 2011
Note 20: Employee Bene?ts Expenses (a) Salaries and Bonus (b) Contribution to Provident and other funds (c) Gratuity (Refer note 28) (d) Employee stock compensation cost (e) Staff welfare expenses 25,525 1,425 287 412 1,032 28,681 21,776 1,296 188 69 787 24,116
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Note 21: Operating and Other Expenses ` in Million Year ended March 31, 2012 Power & Fuel Rent Rates and taxes Communication expenses Travelling expenses Recruitment expenses Training Hire charges Sub-contracting costs (net) Professional and Legal fees ( refer note 29 ) Repairs and maintenance : Buildings (including leased premises) Machinery Others Insurance Software, hardware and project speci?c expenses * Claims and warranties (net) (refer note 42) Advertising, marketing and selling expenses (Pro?t) / Loss on sale of ?xed assets (net) Excess of cost over fair value of current investments Provision for doubtful debts and Bad debts (net) Provision for doubtful advances Advances / bad debts written off Cost of materials consumed Donations Miscellaneous expenses 127 289 127 543 626 1,789 (97) 69 (0) 0 232 (35) 81 5 69 598 17,022 *(Includes ` Nil (previous year: ` 2,871 Million) for a customer speci?c project under ?nance lease) Note 22: Finance Cost Interest expense: On long term loans On working capital loans / cash credit Other borrowing costs Foreign currency translations 617 156 773 3 250 1,026 698 293 991 8 114 1,113 94 249 159 502 474 3,846 90 70 (11) (0) 130 29 8 15 100 540 17,252 564 1,285 112 739 3,548 96 119 343 5,802 534 Year ended March 31, 2011 524 1,031 83 739 3,487 59 59 228 4,946 304
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ANNUAL REPORT 2011 - 2012
Notes on Accounts:
23 (a) The consolidated ?nancial statements present the consolidated accounts of the Group, which consists of accounts of TML and its following subsidiaries: Name of the Subsidiary Company Tech Mahindra (Americas) Inc. (TMA) Tech Mahindra GmbH (TMGMBH) Tech Mahindra (Singapore) Pte. Limited. (TMSL) Tech Mahindra (Thailand) Limited (TMTL) PT Tech Mahindra Indonesia (TMI) CanvasM Technologies Limited (CTL) and its following subsidiary: CanvasM (Americas) Inc. (CAI) Refer note (c) below Tech Mahindra (Malaysia) SDN. BHD. (TMM) Tech Mahindra (Beijing) IT Services Limited (TMB) Venturbay Consultants Private Limited (VCPL) Mahindra Logisoft Business Solutions Limited (MLBSL) Tech Mahindra (Bahrain) Limited. S.P.C.(TMBL) Tech Mahindra Brasil Servicecos De Informatica Ltda (TMBSDIL) Refer note (e) below Tech Talenta Inc. (TTI) Refer note (f) below b) Country of Extent of Holding (%) incorporation as on March 31, 2012 United States of America Germany Singapore Thailand Indonesia India United States of America Malaysia China India India Bahrain Brazil United States of America 100 % 100 % 100 % 100% 100% 100% (with effect from 3rd February 2012) 100% (with effect from 3rd February 2012) 100% 100% 100% 100% 100% 100% 100% 100% (With effect from 6th March 2012)
Tech Mahindra (Nigeria) Limited (TMNL) Refer note (d) below Nigeria
TML has an investment in a subsidiary company viz. Tech Mahindra Foundation (TMF). TMF has been incorporated primarily for charitable purposes. TMF is not consolidated as a subsidiary as it can apply its income for charitable objects only and cannot pay dividend or transfer funds to its parent. During the year ended March 31, 2012, the TML has purchased by way of private arrangement 1,147,699 equity shares of CanvasM Technologies Limited at a consideration of ` 141 Million representing balance 19.90% stake from Motorola Cyprus Holdings Ltd. With this, CanvasM Technologies Limited has become 100% subsidiary of TML with effect from 3rd February 2012. Consequently CanvasM (Americas) Inc. has also become 100% step down subsidiary of TML with effect from 3rd February 2012. TML has infused additional capital of ` 41 Million into TMNL and given a loan of ` 45 Million during the year ended March 31, 2012. TMBSDIL was incorporated on July 21, 2010 and TML is yet to infuse share capital into TMBSDIL and there have been no transactions for the period April 1, 2011 to March 31, 2012. TTI was incorporated on March 6, 2012 and TMA is yet to infuse share capital into TTI and there have been no transactions for the period March 6, 2012 to March 31, 2012.
c)
d) e) f)
24. The estimated amount of contracts remaining to be executed on capital account, (net of capital advances) and not provided for as at March 31, 2012 for TML ` 478 Million (previous year: ` 1,382 Million). 25. Contingent liabilities: i) TML has received demand notices from Income Tax Authorities resulting in a contingent liability of ` 946 Million (previous year: ` 920 Million). This is mainly on account of the following: (a) An amount of ` 140 Million (previous year: ` 123 Million) relating to Transfer pricing adjustment on account of arm’s
106
length transactions; (b) Deduction under Section 10A amounting to ` 790 Million (previous year: ` 781 Million) in relation to adjustment of expenditure in foreign currency being excluded only from Export turnover and not from Total turnover. TML has already won the appeal before the Mumbai ITAT for the Assessment Year 2002-03 & 2003-04. The Income Tax Department has ?led appeal before the High Court. TML has already won the appeal before the CIT (A) for Assessment Year 2004-05, 2005-06 and 2007-08. The Income Tax Department has ?led appeal before ITAT for Assessment Year 2004-05, 2005-2006. For Assessment Year 2007-2008 the Income Tax Department may intend to appeal against the said order before ITAT; (c) an amount of ` 16 Million (previous year: ` 16 Million) relating to Fringe Bene?t Tax. TML has won the appeal before the CIT (A) and the Income Tax Department may intend to appeal against the said order before ITAT. ii) CTL has received demand notice from Income Tax Authority resulting in a contingent liability of ` 25 Million (previous year: ` Nil). This is mainly in relation to Transfer pricing adjustment on account of arm’s length transactions. CTL has appealed before Appellate Authority and is hopeful of succeeding in the same.
iii) TML has received demand notices from Sales Tax Authorities for ` 18 Million (previous year: ` 18 Million) towards Software services classi?ed under Works Contract Act for the ?nancial year 2005-06 to 2008-09. TML has ?led an appeal before the Joint Commissioner of Commercial Tax (JCCT). The Joint Commissioner of Commercial Taxes (JCCT) has allowed the said Appeal vide its order dated December 30, 2011 in favour of TML. The JCCT has directed the Dy. Commissioner of Commercial Taxes to issue a revised demand notice in accordance with this order. iv) The Company has received demand / show cause notice / Order from Service Tax Authorities for ` 166 Million (net of provision), (Previous year: ` 90 Million) out of which: a. ` 77 Million (previous year: ` 77 Million) relates to marketing and onsite services rendered by the subsidiaries abroad for the ?nancial years 2004-05 to 2007-08 for erstwhile Tech Mahindra (R & D Services) Limited (TMRDL) and has paid an amount of ` 7 Million (Previous year: ` 7 Million) “Under Protest”. ` 13 Million (previous year: ` 13 Million) towards services provided under Management consultancy services for TML for which TML has ?led an appeal against the same. The Deputy Commissioner of Service Tax (Refunds) has appealed against the Order of Assistant Commissioner of Service Tax towards refund granted ` 76 Million (previous year ` Nil) to TML for the month of October, 2010 by holding a view that the amounts paid by TML under reverse charge as per the provisions of Section 66A of Service Tax Act relate to the input for services rendered by the entities situated abroad and such amounts are not entitled to refund under Rule 5 of the Service Tax Rules, 2004. Against the said appeal the TML had ?led its cross objection, which was rejected by the Commissioner (Appeals). TML prefers an appeal against the said order before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT).
b. c.
v)
The Group has bank guarantees outstanding ` 1,087 Million (previous year: ` 1,140 Million).
vi) Claim on the Group not acknowledged as debts for Stamp duty and other matter are ` 5 Million (previous year: ` 5 Million). The above matter is subject to legal proceeding in the ordinary course of business. In the opinion of the management the legal proceeding, when ultimately concluded, will not have a material effect on result of operations or ?nancial position of the Group. 26. In September 2008, TML had made investment of ` 85 Million for 17.28% of the share capital of Servista Limited a leading European system integrator. With this investment, TML became Servista’s exclusive delivery arm for three years and will assist Servista in securing more large scale European IT off shoring business. The business plan of Servista was adversely affected by the economic downturn and it continued to incur losses and therefore, Servista in June 2009 decided to close down its operations. TML had made provision of ` 85 Million in the year ended March 31, 2010, for diminution in the value of its investments in Servista. Servista is in process of winding up and in the view of the management; TML would have no further unrecorded obligations towards settlement of any further liability. 27. During the year ended March 31, 2010, a customer had restructured long term contracts with TML from April 01, 2009 which involves changes in commercial, including rate reduction and other agreed contract terms. As per the amended contracts the customer had paid TML restructuring fees of ` 9,682 Million. The services under the restructured contracts would continue to be rendered over the life of the contract. The restructuring fees received would be amortized and recognized as revenue over the term of the contract on a straight line basis.
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ANNUAL REPORT 2011 - 2012
An amount of ` 2,005 Million (previous year: ` 2,005 Million) has been recognized as revenue for the year and the balance amount of ` 3,667 Million (previous year: ` 5,672 Million) has been carried forward and disclosed as deferred revenue in the Balance Sheet. In addition, it also includes a part of contract termination fees received from a customer, to the extent there is a continuing customer involvement. 28. Details of employee bene?ts as required by the Accounting Standard 15 (Revised) – Employee Bene?ts are as under: a) De?ned Contribution Plan Amount recognized as an expense in the Statement of Pro?t and Loss for the year ended March 31, 2012 in respect of de?ned contribution plan is ` 885 Million (previous year: ` 759 Million). b) De?ned Bene?t Plan The de?ned bene?t plan comprises of gratuity. The gratuity plan is not funded. Changes in the present value of de?ned obligation representing reconciliation of opening and closing balances thereof and fair value of Trust Fund Receivable (erstwhile TMRDL) showing amount recognized in the Balance Sheet: ` in Million Particulars Projected bene?t obligation, beginning of the year* Service cost Interest cost Actuarial (Gain) / Loss Bene?ts paid Trust Fund Receivable (erstwhile TMRDL)* Projected bene?t obligation, at the end of the year March 31, 2012 922 220 67 3 (115) (35) 1,062 March, 31, 2011 803 203 59 (71) (72) (34) 888
* The Trust fund was created to fund the gratuity liability of the erstwhile TMRDL. After amalgamation of TMRDL with TML, the balance in Trust Fund can be utilized only for the payment of obligation arising for gratuity payable to employees of erstwhile TMRDL. The composition of the Trust Balance as on March 31, 2012 is as follows: ` in Million Particulars Government of India Securities/ Gilt Mutual Funds State Government Securities/ Gilt Mutual Funds Public Sector Unit Bonds Private Sector Bonds / Equity Mutual Funds Mutual Funds Bank Balance Total March 31, 2012 9 5 13 0 0 8 35 March 31, 2011 9 5 14 0 1 5 34 ` in Million Particulars Net gratuity cost Service cost Interest cost Expected return on plan Assets Actuarial (Gain) / loss Total March 31, 2012 220 67 (3) 3 287 March 31, 2011 203 59 (3) (71) 188
Components of expenses recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012:
108
Experience Adjustments ` in Million Particulars 1. 2. 3. 4. 5. 6. De?ned Bene?t Obligation Fair value of plan assets Surplus/(De?cit) Experience adjustment on plan liabilities [Gain/(Loss)] Experience adjustment on plan assets [Gain/(Loss)] Actuarial gain / (loss) due to change on assumptions March 31, 2012 (1,097) 35 (1,062) 23 (1) (25) March 31, 2011 (922) 34 (888) 75 (1) (2) March 31, 2012 8.6 % 11% for the 1st Year 9% thereafter March 31, 2010 (801) 31 (770) 95 2 31 March 31, 2009 (696) 31 (665) 7 0 11 March 31, 2011 7.7 % 9% for the 1st Year, 8% thereafter
Principal Actuarial Assumptions Discount Rate Rate of increase in compensation levels of covered employees
• •
The discount rate is based on the prevailing market yields of Indian Government Bonds as at the balance sheet date for the estimated terms of the obligations. Salary escalation rates: The estimates of future salary increase is considered taking into account the in?ation, seniority, promotion and other relevant factors. ` in Million
29. Payment to Auditors (net of service tax):
Particulars Audit Fees (Including quarterly audits) For other Services For taxation matters For Reimbursement of Expenses Total 30. Assets taken / given on Lease: a)
March 31, 2012 8 4 1 0 13
March 31, 2011 8 2 1 0 11
TML has taken vehicles on operating lease for a period of three to ?ve years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 28 Million (previous year: ` 26 Million). The future lease payments of operating lease are as follows: ` in Million Particulars Minimum Lease rentals payable (previous year: ` 22 Million and ` 33 Million and ` Nil, respectively) Not later Later than 1 year not Later than than 1 year later than 5 years 5 years 24 37 Nil
b)
Group has taken premises on operating lease for a period of one to ten years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 1,186 Million (previous year: ` 974 Million). The future lease payments of operating lease are as follows:
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ANNUAL REPORT 2011 - 2012
` in Million Particulars Not later Later than 1 year not Later than than 1 year later than 5 years 5 years Minimum Lease rentals payable (previous year: 897 2,439 376 ` 695 Million, ` 1,331 Million and ` 154 Million, respectively) c) Group has taken computer equipments on operating lease for a period of one to ?ve years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 40 Million (previous year: ` 33 Million). The future lease payments of operating lease are as follows: ` in Million Particulars Not later Later than 1 year not Later than than 1 year later than 5 years 5 years Minimum Lease rentals payable (previous year: ` 32 26 36 Nil Million, ` 17 Million and ` Nil, respectively) d) TML has given premises on operating lease for a period of one to ?ve years. The lease rentals recognized in the Statement of Pro?t and Loss for the year ended March 31, 2012 are ` 70 Million (previous year: ` 83 Million). The future lease receivable of operating lease are as follows: ` in Million Particulars Not later Later than 1 year not Later than than 1 year later than 5 years 5 years Minimum Lease rentals receivable (previous year: ` 12 35 Nil 51 Million, ` 2 Million and ` Nil, respectively) 31. TML had provided in the previous year, end to end solutions, which includes sale of software and hardware to a customer in India which quali?es as Finance Lease and has accordingly accounted as such. These receivables are due in quarterly installments over the contractual period of 4 years. The components of ?nance lease receivables are: ` in Million Particulars Gross Investment in lease for the period Not later than 1 year Later than 1 year not later than 5 years Unguaranteed residual values Unearned Finance Income Net Investment in Finance Receivables* Present value of Minimum lease receivables is ` Nil ` in Million Particulars Present value of minimum Lease receivable Not later Later than 1 year not than 1 year later than 5 years [866] [1,112] March 31, 2012 March 31, 2011 2,085 922 1,163 107 1,978
*The Hon’ble Supreme Court vide its order dated 2nd February 2012 cancelled 2G licenses issued to some of Telecom Operators in India in 2008. As a result of the cancellation, the business of TML`s two customers has become unviable and one of the customers has started winding up proceedings of the Indian operations. TML has made a provision of ` 679 Million on account of likely impairment in the carrying value of the related assets.
110
32. As per the requirements of Accounting Standard 17 on ‘Segment Reporting’ (AS 17), the primary segment of the Group is business segment by category of customers in the Telecom Service Providers (TSP), Telecom Equipment Manufacturer (TEM), Business Process Outsourcing (BPO) and Others, which includes non telecom vertical customers and the secondary segment is the geographical segment by location of its customers. The Accounting principles consistently used in the preparation of the ?nancial statements are also applied to record income and expenditure in the individual segments. There are no inter-segment transactions during the period. A. Primary Segments For the Year ended March 31, 2012 Particulars Telecom Service Provider 44,290 29,276 15,014 Telecom Equipment Manufacturer 3,599 2,657 942 Business Process Outsourcing 5,322 3,383 1,939 ` in Million Others Total
Revenues Less : Direct Expenses Segmental Operating Income Less : Unallocable Expenses (net) Depreciation / Amortisation Finance charges Other Unallocable Expenses (net) Total Unallocable Expenses (net) Operating Income Add : Other Income (net) Net Pro?t before tax and Exceptional Item Less : Exceptional Item Net Pro?t before Tax Less : Provision for Tax Current Tax (net of MAT credit) Deferred Tax bene?t Net Pro?t after tax Minority Interest Net Pro?t before earnings in share of associate Share in Pro?t of Associate (Refer note 40) Net Pro?t for the year
1,686 1,462 224
54,897 36,778 18,119 1,613 1,026 8,925 11,564 6,555 982 7,537 679 6,858 1,797 (360) 5,421 (36) 5,385 5,570 10,955
Segregation of assets, liabilities, depreciation and other non-cash expenses into various primary segments has not been done as the assets are used interchangeably between segments and TML is of the view that it is not practical to reasonably allocate liabilities and other non-cash expenses to individual segments and an ad-hoc allocation will not be meaningful. B. Secondary Segments: Revenues from secondary segments are as under Geography Europe Americas Rest of world Total ` in Million 25,872 18,817 10,208 54,897
Segregation of assets into secondary segments has not been done as the assets are used interchangeably between segments. Consequently the carrying amounts of assets by location of assets are not given.
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ANNUAL REPORT 2011 - 2012
A. Primary Segments: For the year ended March 31, 2011 ` in Million Particulars Telecom Service Provider 44,722 29,824 14,898 Telecom Equipment Manufacturer 2,630 1,750 880 Business Process Outsourcing 3,213 1,812 1,401 Others Total
Revenues Less : Direct Expenses Segmental Operating Income Less : Un-allocable Expenses (net) Depreciation / Amortisation Finance charges Other Un-allocable Expenses (net) Total Un-allocable Expenses (net) Operating Income Add : Other Income (net) Net Pro?t before tax Less : Provision for Tax Current Tax (net of MAT credit)
837 643 194
51,402 34,029 17,373
1,435 1,113 7,339 9,887 7,486 1,288 8,774
1,678 (362) 7,458 (20) 7,438 (996) 6,442
Deferred Tax bene?t (includes ` 215 Million In respect of earlier years) Net Pro?t before Minority Interest Minority Interest Net Pro?t before earnings in share of associate Share in Loss of Associate (refer note 40) Net Pro?t for the year
Segregation of assets, liabilities, depreciation and other non-cash expenses into various primary segments has not been done as the assets are used interchangeably between segments and TML is of the view that it is not practical to reasonably allocate liabilities and other non-cash expenses to individual segments and an ad-hoc allocation will not be meaningful. B. Secondary Segments: Revenues from secondary segments are as under – Geography Europe Americas Rest of world Total ` in Million 25,975 15,355 10,072 51,402
Segregation of assets into secondary segments has not been done as the assets are used interchangeably between segments. Consequently the carrying amounts of assets by location of assets are not given.
112
33. A) TML has instituted “Employee Stock Option Plan 2000” (ESOP) for its employees and Directors. For this purpose it had created a trust viz. MBT ESOP Trust. In terms of the said Plan, the trust has granted options to the employees and Directors which vest at the rate of 33.33% on each successive anniversary of the grant date. The options can be exercised over a period of 5 years from the date of grant. Each option carries with it the right to purchase one equity share of the TML at the exercise price determined by the Trust on the basis of fair value of the equity shares at the time of grant. The details of the options are as under: Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during the year Options exercised during the year Options outstanding at the end of the year March 31, 2012 494,500 46,000 448,500 March 31, 2011 82,490 1,670 1,670 79,150 -
Out of the options outstanding at the end of the year ended March 31, 2012, there are Nil (previous year: Nil) (Net of exercised & lapsed) vested options, which have not been exercised. B) TML has instituted “Employee Stock Option Plan 2004” (ESOP 2004) for its employees. In terms of the said Plan, the Compensation Committee has granted options to employees of the Group. The options are divided into upfront options and Performance options. The Upfront Options are divided into three sets which will entitle holders to subscribe to option shares at the end of First year, Second year and Third year. The vesting of the Performance Options will be decided by the Compensation Committee based on the performance of employees. Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during the year Options exercised during the year Options outstanding at the end of the year March 31, 2012 2,935,134 700,000 2,235,134 March 31, 2011 5,677,701 2,742,567 2,935,134
Out of the options outstanding at the end of the year ended March 31, 2012, there are 2,235,134 (previous year 2,935,134) (Net of exercised & lapsed) vested options, which have not been exercised. C) TML has instituted “Employee Stock Option Plan 2006“(ESOP 2006) for the employees and Directors of the Group. In terms of the said plan, the compensation committee has granted options to the employees of the Group. The vesting of the options is 10%, 15%, 20%, 25% and 30% of total options granted after 12, 24, 36, 48 and 60 months, respectively from the date of grant. The maximum exercise period is 7 years from the date of grant. The details of the options are as under: Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during the year Options exercised during the year Options outstanding at the end of the year March 31, 2012 2,529,103 539,500 305,660 831,060 1,931,883 March 31, 2011 3,165,188 398,725 221,160 813,650 2,529,103
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ANNUAL REPORT 2011 - 2012
Out of the options outstanding at the end of the year ended March 31, 2012, there are 1,090,008 (previous year: 1,907,933) (net of exercised & lapsed) vested options, which have not been exercised. D) TML has instituted “Employee Stock Option Plan 2010“ (ESOP 2010) for the employees and Directors of the Group. In terms of the said Plan, options to the employees and Directors in form of option shall vest at the rate of 33.33% on each successive anniversary of the grant date. The options can be exercised over a period of 5 years from the date of grant. Each option carries with it the right to purchase one equity share of TML at the exercise price determined by Compensation Committee. The details of the options are as under: Particulars Options outstanding at the beginning of the year Options granted during the year Options lapsed during the year Options cancelled during the year Options exercised during the year Options outstanding at the end of the year March 31, 2012 1,600,000 683,500 5,000 2,278,500 March 31, 2011 1,600,000 1,600,000
Out of the options outstanding at the end of year ended March 31, 2012, there are 533,280 (previous year: Nil) (net of exercised & lapsed) vested options, which have not been exercised. E) TML uses the intrinsic value-based method of accounting for stock options granted after April 1, 2005. Had the compensation cost for the TML’s stock based compensation plan been determined in the manner consistent with the fair value approach, the Group’s net pro?t would be lower by ` 32 Million (previous year higher by ` 14 Million) and earnings per share as reported would be lower as indicated below: ` in Million except earnings per share Particulars For the year ended March 31, 2012 Net pro?t after exceptional items and tax (As reported) (Add) / Less: Total stock-based employee compensation expense determined under fair value base method Adjusted net pro?t Basic earnings per share (in `) As reported Adjusted 86.25 86.00 51.60 51.72 10,955 (32) 10,923 March 31, 2011 6,442 (14) 6,456
Diluted earnings per share (in `) As reported Adjusted 82.91 82.66 49.34 49.44
The fair value of each option is estimated on the date of grant based on the following assumptions (on weighted average basis): Particulars Dividend yield (%) Expected life Risk free interest rate (%) Volatility (%) March 31, 2012 0.50 4.07 years 8.54 52.72 March 31, 2011 0.46 3.85 years 7.97 55.16
114
F)
The stock compensation cost for the Employee Stock Option Plan 2010 issued at par has been computed under the intrinsic value method and amortized on a straight line basis over the total vesting period of three years. For the year ended March 31, 2012 TML has recorded stock compensation expense of ` 412 Million (previous year: ` 69 Million).
34. As required under Accounting Standard 18 “Related Party Disclosures” (AS – 18), following are details of transactions during the year ended March 31, 2012 with the related parties of the Group as de?ned in AS – 18: (a) List of Related Parties and Relationships Name of Related Party Mahindra & Mahindra Limited British Telecommunications Plc. Mahindra BT Investment Company (Mauritius) Limited Tech Mahindra Foundation# Satyam Computer Services Limited Satyam BPO Limited Satyam Computer Services (Shanghai) Co. Limited Mr. Vineet Nayyar Vice Chairman and Managing Director Mr. Sanjay Kalra Chief Executive Of?cer @ # Section 25 Company not considered for consolidation @ Up to September 15th, 2010 (b) Related Party Transactions for the year ended March 31, 2012: ` in Million Transactions Promoter Subsidiary Associate Companies Companies Companies (211) [(263)] 19,925 [20,457] 21 [31] [-] [-] [-] [-] 36 [53] 361 [320] [-] [-] [-] [-] [-] [-] [-] [-] [-] (160) [(1)] 409 [148] [33] 802 [545] 592 [-] [-] [-] 143 [64] [-] Key Management Personnel [-] [-] [-] [-] [-] 36 [62] -** [-] [-] 3 [2] Key Management Personnel Relation Promoter holding more than 20% stake Promoter holding more than 20% stake Promoter group company 100% subsidiary company Associate Company Associate Company Associate Company
Reimbursement of Expenses (Net) - Paid/ (Receipt) Income from Services Paid for Services Received Sub-contracting cost Software/Hardware & project speci?c expenses Salary, Perquisites & Commission Stock Options Rent Paid/ Payable Dividend paid
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ANNUAL REPORT 2011 - 2012
Transactions
Promoter Subsidiary Associate Companies Companies Companies [-] 41 [51] [377] [-] 5,248 [5303] 67 [99] [-] [-] [-] (2) [(8)] [-] 15 [20] [-] 0 [271] (589) [(459)]
Donation Paid / Payable Rent Received/ Receivable Contract Settlement Fees Received Purchase of Fixed Assets Debit / (Credit) balances (Net) (inclusive of unbilled) outstanding as on March 31, 2012 ** Stock options: Key Management Personnel Transactions
Key Management Personnel [-] [-] [-] [-] (11) [(11)]
Figures in brackets “[ ]”are for the previous period ended March 31, 2011.
Options exercised during the year ended March 31, 2012 Options granted and outstanding at the end of the period
Mr. Vineet Nayyar Vice Chairman & Managing Director 700,000 [Nil] 1,992,567 [2,692,567]
Mr. Sanjay Kalra Chief Executive Of?cer Nil [1,892,567] Nil [Nil]
Figures in brackets “[ ]”are for the previous year ended March 31, 2011 Out of the above transactions with Promoter companies, Subsidiary Companies, Associate Companies and Key Management Personnel in the excess of 10% of the total related party transactions are as under: ` in Million Transactions Reimbursement of Expenses (net) - Paid/(Receipt) Promoter Company - British Telecommunications Plc. Associate Company - Satyam BPO Limited - Satyam Computer Services Limited Income from Services Promoter Company - British Telecommunications Plc. Paid for Services Received Promoter Company - British Telecommunications Plc. Associate Company - Satyam Computer Services Limited For the year ended March 31, 2012 For the year ended March 31, 2011
(218) (48) (112) (378)
(266) (12) 11 (267)
19,888 19,888
20,403 20,403
21 21
31 33 64
116
Transactions Sub-contracting cost Associate Company - Satyam Computer Services Limited - Satyam BPO Limited Software/Hardware & project speci?c expenses Associate Company - Satyam Computer Services Limited Salary, Perquisites and Commission Key Management Personnel - Mr. Vineet Nayyar - Mr. Sanjay Kalra Rent Paid/(Payable) Promoter Company - British Telecommunications Plc Associate Company - Satyam Computer Services Limited. Donation Paid / Payable Subsidiary Company - Tech Mahindra Foundation Dividend Paid/Payable Promoter Company - British Telecommunications Plc - Mahindra & Mahindra Limited Rent Received/Receivable Promoter Company - British Telecommunications Plc. Associate Company - Satyam Computer Services Limited Purchase of Fixed Assets Associate Company - Satyam Computer Services Limited Contract Settlement Fees Received Promoter Company - British Telecommunications Plc.
For the year ended March 31, 2012
For the year ended March 31, 2011
577 224 801
406 139 545
592 592
-
36 36
36 26 62
36 143 179
53 64 117
67 67
99 99
118 243 361
132 188 320
41 15 56
51 20 71
0 0
271 271
-
377 377
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ANNUAL REPORT 2011 - 2012
35. The tax effect of signi?cant timing differences that has resulted in deferred tax assets are given below: ` in Million Particulars Deferred Tax Asset : Gratuity, Leave Encashment, superannuation and FBT etc. Doubtful Debts Depreciation Others Total Deferred Tax Asset March 31, 2012 292 338 316 52 998 March 31, 2011 290 80 241 27 638
This includes deferred tax asset of ` Nil (previous year: ` 215 Million) created in the current year pertaining to earlier years based on reassessment of deferred tax position post sunset of Section 10A of Income Tax Act, 1961. 36. Exchange gain/(loss)(net) accounted during the period: a) TML enters into Foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to TML’s foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. Forward Exchange Contracts and Currency Option Contracts in UK Pound exposure are split into two legs, which are GBP to USD and USD to INR. These contracts are for a period between 1 day and 5 years. The following are the outstanding GBP:USD Currency Exchange Contracts entered into by TML which have been designated as Cash Flow Hedges as at March 31, 2012: Type of cover Forward Option Amount outstanding in Foreign currency (in Million) GBP 279 (previous year: 212) GBP 12 (previous year: 72) Fair Value Gain / (Loss) (` in Million) (50) (previous year: (154)) 258 (previous year: (1,317)
b)
The following are the outstanding USD: INR Currency Exchange Contracts entered into by TML which have been designated as Cash Flow Hedges as at March 31, 2012: Type of cover Forward Option Amount outstanding in Foreign currency (in Million) USD 840 (previous year: 653) USD 87 (previous year: 189) Fair Value Gain / (Loss) (` in Million) (2,886) (previous year: 683) (1,028) (previous year: (1075))
Net loss on derivative instruments of ` 1,206 Million (previous year gain: ` 621 Million) recognized in hedging reserve as of March 31, 2012 is expected to be reclassi?ed to the Statement of Pro?t and Loss by March 31, 2013. The movement in hedging reserve during year ended March 31, 2012 for derivatives designated as Cash Flow Hedges is as follows: ` in Million Particulars Credit Balance at the beginning of the year Gain/(Loss) transferred to income statement on occurrence of forecasted hedge transaction Changes in the fair value of effective portion of outstanding cash ?ow derivative (Debit) / Credit Balance at the end of year Year ended March 31, 2012 412 (207) (4,154) (3,535) Year ended March 31, 2011 1,942 869 (661) 412
118
In addition to the above cash ?ow hedges, TML has outstanding Foreign Exchange Currency Options Contracts aggregating to ` 396 Million (previous year: ` 6,993 Million) whose fair value showed a loss of ` 154 Million (previous year gain: ` 654 Million). Although these contracts are effective as hedges from an economic perspective, they do not qualify for hedge accounting and accordingly these are accounted as derivative instruments at fair value with changes in fair value recorded in the Statement of Pro?t and Loss and the cumulative gain of ` 94 Million as at March 31, 2009 would be recycled to Statement of Pro?t and Loss as and when the cash ?ows materialise. Exchange Loss of ` 207 Million (previous year gain: ` 869 Million) on foreign exchange forward contracts and currency options contracts have been recognised in the year ended March 31, 2012. c) As at March 31, 2012, the Group has net foreign exchange exposures that are not hedged by a derivative instruments or otherwise amounting to ` 8,281 Million (previous year: ` 6,864 Million)
37. TML has exercised the option given vide noti?cation number G.S.R. 225 (E) dated March 31, 2009 issued by the Ministry of Corporate Affairs, Government of India on provisions of Accounting Standard 11, however this does not have any impact on the ?nancial statements, as the Group does not have any long term foreign currency monetary items. 38. Earnings Per Share is calculated as follows: ` in Million except earnings per share Particulars Pro?t after taxation and before exceptional item Less: Exceptional Item Pro?t after taxation and exceptional items Net Pro?t attributable to shareholders Equity Shares outstanding as at the end of the year (in nos.) Weighted average Equity Shares outstanding as at the year end (in nos.) Weighted average number of Equity Shares used as denominator for calculating Basic Earnings Per Share Add: Diluted number of Shares ESOP outstanding at the end of the year Number of Equity Shares used as denominator for calculating Diluted Earnings Per Share Nominal Value per Equity Share (in `) Earnings Per Share Before Exceptional Item Earnings Per Share (Basic) (in `) Earnings Per Share (Diluted) (in `) Earnings Per Share After Exceptional Item Earnings Per Share (Basic) (in `) Earnings Per Share (Diluted) (in `)
st
Year ended March 31, 2012 11,634 679 10,955 10,955 127,486,541 127,005,143 127,005,143
Year Ended March 31, 2011 6,442 6,442 6,442 125,955,481 124,827,129 124,827,129
5,118,848 132,123,991 10.00 91.60 88.05 86.25 82.91
5,736,254 130,563,383 10.00 51.60 49.34 51.60 49.34
39. Current tax for the year ended 31 March 2012 includes reversal of excess provision of ` 241 Million (previous year: ` 6 Million) of earlier years written back, no longer required. TML and its Indian Subsidiaries had calculated its tax liability under Minimum Alternate Tax (MAT) from ?nancial year 2007-08.The MAT credit can be carried forward and set off against the future tax payable. In the current year ended March 31, 2012, TML and its Indian subsidiaries has calculated its tax liability under normal provisions of the Income Tax Act, 1961 and utilized the brought forward MAT credit of ` 234 Million.
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ANNUAL REPORT 2011 - 2012
40. The Board of Directors of Satyam Computer Services Limited (SCSL) on April 13, 2009 selected VCPL, a wholly owned subsidiary of Tech Mahindra Ltd (TML) as the highest bidder to acquire a controlling stake in SCSL and upon the Hon’ble Company Law Board’s approval on April 16, 2009, VCPL was declared as the winning bidder. TML through VCPL, acquired stake in Satyam Computer Services Limited, on May 5, 2009 through preferential allotment, representing 31% of equity share capital and further increased the share holding to 42.70 % by July 10, 2009 through a combination of open offer and a further preferential allotment. As a result of this investment, SCSL became an associate of TML as per Accounting Standard 23 “Accounting for Investments in Associates in Consolidated Financial Statements”. VCPL holds 501,843,740 equity shares, which is 42.64% of share capital of SCSL as at March 31, 2012. As per the share subscription agreement dated April 13, 2009, these investments have lock-in period of three years from the date of allotment. a) The auditors of SCSL have issued a quali?ed auditors report on the consolidated ?nancial results of SCSL for the year ended March 31, 2012 on certain matters set out below: • Inability to comment on any adjustments/disclosures which may become necessary as a result of further ?ndings of the ongoing investigations/legal proceedings by the regulatory authorities and the consequent impact, if any, on the ?nancial results. Inability to comment on the accounting treatment/disclosure of the unexplained amounts aggregating to ` 11,394 Million (accounted under “Unexplained Differences Suspense Account (Net)” in the ?nancial statements of SCSL) which was fully provided in the ?nancial results for the year ended March 31, 2009. Inability to determine whether any adjustments/disclosure will be required in respect of the alleged advances amounting to ` 12,304 Million (net) (presented separately under “Amounts Pending Investigation Suspense Account (Net)” in the ?nancial statements of SCSL) and in respect of the non-accounting of any damages / compensation / interest in the ?nancial results. Inability to comment on the consequential impact, if any, in relation to certain lawsuits (the “Aberdeen Action”, USA and the “Aberdeen (UK) Complaint”) ?led by certain investors in United States of America and the United Kingdom, the outcome of which is not determinable at this stage. Inability to comment on the adequacy or otherwise of the provision for taxation pertaining to prior years and the consequential impact, if any, due to uncertainties regarding the outcome of the tax disputes and tax demands pending before various authorities.
•
•
•
•
The impact of the above quali?cations on the Company’s share of post acquisition share of pro?t (net) of SCSL, the amount of goodwill in the investment value, investment in associate and reserves and surplus in the Consolidated Financial Statements of the Company is not ascertainable. b) The auditors of SCSL have invited attention to the following matters in their auditors report for the year ended March 31, 2012: • • • Various demands/disputes raised in respect of the past years by the indirect tax authorities in India. Matters relating to non-compliance with Foreign Exchange Management Act (FEMA), 1999 in respect of realisation and repatriation of export proceeds relating to earlier years. Non-compliances and breaches in the prior years under the erstwhile Management relating to certain provisions of the Companies Act, 1956 and certain employee stock option guidelines issued by the Securities and Exchange Board of India. In the case of one of the subsidiaries of SCSL, the other auditors have drawn attention to the write-back of liability in respect of sales commission pertaining to prior years and recording of provision for contingencies pending ?nal outcome of the ongoing dispute between the promoters of the subsidiary.
•
Pro?t after tax for the year ended 31st March 2012 and 2011 are not comparable as the ?gures in respect of 2011 include share in SCSL for May 2009 up to March 2010 (post acquisition period). 41. As required by the Bahrain Commercial Companies Law and the TMBL’s Articles of Association, 10% of the pro?t for each period is required to be transferred to a statutory reserve. TMBL may resolve to discontinue such annual transfers when the reserve totals 50% of the issued share capital. Accordingly during the previous
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year, TMBL has transferred ?fty percent of share capital to statutory reserve. The reserve is not available for distribution, except in the circumstances stipulated in the Bahrain Commercial Companies Law. 42. TML had made provision for claims and warranties of ` 168 Million (net) in the previous year as per contractual terms, the outcome of the same would get crystallized by next year. During the current year, TML has made an additional provision of ` 164 Million. Further, TML has reversed a portion of the said provision of ` 209 Million in the current year, being no longer required. The Movement of the provision is as under: ` in Million Particulars Carrying amount as at the beginning of the year Additional provision made during the year Less: Amount paid/Utilised during year Less: Amount recovered from subcontractor Less: Reversal of provision no longer required Balance as at year end For the year ended March 31, 2012 168 164 23 100 209 For the year ended March 31, 2011 102 264 24 174 168
43. The Board of Directors of the Company in their meeting held on March 21, 2012 have approved the “Scheme of Amalgamation and Arrangement under Sections 391 to 394 read with Sections 78, 100 to 104 and other applicable provisions of the Companies Act, 1956 of Venturbay Consultants Private Limited and Satyam Computer Services Limited and C&S System Technologies Private Limited and Mahindra Logisoft Business Solutions Limited and CanvasM Technologies Limited with the Company(TML)” (“the Scheme”). The Appointed date of the Scheme is April 1, 2011. The Board of Directors of the Company has recommended to issue 2 fully paid up Equity Shares of ` 10 each of the Company for every 17 fully paid Equity Shares of ` 2 each of Satyam. As the other amalgamating companies are wholly owned by the Company / Satyam, no shares would be issued to shareholders of these companies. The Bombay Stock Exchange and the National Stock Exchange of India Limited have conveyed to the Company, their no-objection under Clause 24(f) of the Listing Agreement to the said Scheme. TML has also received approval of Competition Commission of India for the said Scheme. Further, TML has obtained directions from the Hon’ble High Court of Judicature at Bombay (“Court”) for convening the shareholders meeting on 7th June 2012 to approve the Scheme. The proposed Scheme is subject to the approvals of the shareholders, Hon’ble Bombay High Court, Hon’ble High Court of Andhra Pradesh and other authorities. 44. In respect of equity shares pursuant to Employees Stock Option Scheme, TML paid dividend of ` 4 Million for the year 2010-11 and tax on dividend of ` 1 Million as approved by the shareholders at the Annual General Meeting held on August, 12, 2011. 45. Figures pertaining to the subsidiary companies have been reclassi?ed wherever necessary to bring them in line with the group ?nancial statements. 46. Previous period’s ?gures have been regrouped wherever necessary, to con?rm to the classi?cation for the year ended March 31, 2012. Signatures to Notes For Tech Mahindra Limited Anand G. Mahindra Vineet Nayyar Chairman Vice Chairman & Managing Director Hon. Akash Paul Anupam Puri Bharat Doshi Director Director Director B.H. Wani M. Damodaran Paul Zuckerman Director Director Director Dr. Raj Reddy Ravindra Kulkarni Ulhas N. Yargop Director Director Director Sonjoy Anand Anil Khatri Chief Financial Of?cer Company Secretary Noida, Dated: May 23, 2012
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` in Million Exchange Rate Turnover Pro?t before Taxation Provision for Taxation Pro?t after Taxation Proposed Dividend Capital Reserves Total Assets Total Liabilities Investment other than investment in Subsidiary 293.06 11.25 (0.07) 11.32 895.55 42.55 42.55 7,825.94 397.99 150.89 247.10 USD EUR SGD 40.51 2.03 140.78 228.10 85.30 68.01 39.11 273.23 452.83 140.50 50.87 19.08 870.01 1,611.63 722.53 THB INR USD INR USD RM CNY 8.09 26.80 (43.43) 15.69 32.32 16.62 5.20 28.34 107.62 74.08 523.56 25.43 50.87 0.01 21.02 300.25 279.23 819.27 1.00 576.73 375.40 1,364.36 412.23 401.51 1,197.38 215.26 12.50 13.76 0.88 50.87 25.44 339.83 708.94 343.68 1,179.06 58.19 1.00 0.50 473.69 474.34 0.14 83.32 (0.27) 17.85 53.64 4.40 1.65 8.25 3.37 12.47 0.85 3.89 (1.44) (1.44) (0.27) 40.34 161.62 8.10 13.76 0.88 -
Statement pursuant to general exemption under Section 212(8) of the Companies Act, 1956 relating to subsidiary companies
Sr. No.
Name of the Subsidiary Company
Country
Reporting Currency
1
Tech Mahindra (Americas) Inc.
USA
2
Tech Mahindra GmbH
Germany
3
Tech Mahindra (Singapore) Pte. Limited
Singapore
4
Tech Mahindra (Thailand) Limited
Thailand
ANNUAL REPORT 2011 - 2012
5
Tech Mahindra Foundation
India
6
PT Tech Mahindra Indonesia
Indonesia
7
CanvasM Technologies Limited
India
8
CanvasM (Americas) Inc.
USA
9
Tech Mahindra (Malaysia) Sdn. Bhd.
Malaysia
10
Tech Mahindra (Beijing) IT Services Limited BD 135.08 6.75 101.07 382.83 275.01 -
China
11
Tech Mahindra (Bahrain) Limited S.P.C. NGN INR 1.00 124.50 (4.86) 124.95 0.32 48.97 90.30 546.58 407.30 5.30
Bahrain
1,049.94
23.34
-
23.34
-
12
Tech Mahindra (Nigeria) Limited
Nigeria
0.00
900.44 64.67
109.77 19.48
35.49 0.68
74.28 18.81
-
13
Mahindra Logisoft Business Solutions Limited INR 1.00 304.72 29,414.95 29,720.23
India
14
Venturbay Consultants Private Limited
India
0.56
-
-
(0.68)
-
(0.68)
-
Note: The above Statement does not include information related to Tech Mahindra Brasil Servicecos De Informatica Ltda. (TMBSL) and Tech Talenta Inc. (TTI) incorporated on July 21, 2010 and March 6, 2012 respectively, since there have been no transactions till March 31, 2012 and the holding Company is yet to infuse share capital in them.
Asia-Paci?c
India Tech Mahindra Limited Sharda Centre, Off Karve Road, Erandwane, Pune - 411004 Maharashtra Tel: +91 20 6601 8100 Fax: +91 20 2542 4466 Tech Mahindra Limited Plot no 1, Phase III Rajiv Gandhi Infotech Park, Hinjewadi, Pune - 411 057, Maharashtra Tel: +91 20 4225 0000 Fax : 91 20 4225 2501 Tech Mahindra Limited Gigaspace Viman Nagar, Pune 411014, Maharashtra. Tel : +91 20 6622 1000 (Beta II) Tel : +91 20 6627 3000 (Delta) Fax: +91 20 6622 1300 ( Beta II) Fax: + 91 20 6627 3329 ( Delta) Tech Mahindra Limited Wing 1, Oberoi Gardens Estate, Chandivali, Andheri (E), Mumbai 400 072, Maharashtra Tel: +91 22 6688 2000 Fax: +91 22 2847 8959 Tech Mahindra Limited 9 / 7 Hosur Road, Bangalore - 560029 Karnataka Tel: +91 80 4024 3000 Fax: +91 80 2552 7027 Tech Mahindra Limited AMR Tech Park No 23 & 24, Hosur Road, Bommanahalli, Bangalore 560068 Tel: +91 80 4041 7000 Fax: +91 80 2573 5664 Tech Mahindra Limited ITC-5, 45-47, KIADB Industrial Area, Mahindra Satyam SDC, Electronics City Phase II, Hosur Main Road, Bangalore-560100, Tel: + 91 80 6780 7777 Tech Mahindra Limited SBC Tech Park, 90/B1, MTH Road, Industrial Estate, Ambattur, Chennai 600 058. Tamil Nadu, India Tel: +91 44 4741 6000, +91 44 6662 4000 Tech Mahindra Limited Block A-1, Ground, 5th,6th,7th |& 8th Floor Shriram The Gateway (SEZ Zone) No.16, GST Road Perungalathur Village Chennai - 600063 Tamil Nadu, India Tel: +91 44 4741 6000, +91 44 6662 4000 Fax: +91 44 2239 0076
Tech Mahindra Limited 3rd and 4th Floor, Bldg - Gamma Bengal Intelligence Park, Block EP& GP Sector - V Salt Lake Sector V, Kolkata - 700091, West Bengal, India. Tel: +91-33-40098100 Fax: +91 33 40098126 Tech Mahindra Limited (SEZ UNIT) DLF IT Park, Phase - II, 1st. to 4th. Floor, Tower 1B & 1 C, Premises No. IIF/1, Block - IIF, Rajarhat, Kolkata – 700156. West Bengal, India. Tel: +91 33 4446 1000 Fax: +91 33 44461779 Tech Mahindra Limited Ground Floor & 1 Floor – Tower III,DLF IT Park, Major Arterial Road, New Town Rajarhat, Kolkata - 700156 West Bengal, India. Tel: +91 33 4002 7300 Tech Mahindra Limited A-7, Sector 64, Noida - 201 301 Uttar Pradesh Tel: +91 120 465 2000 Fax: +91 120 307 6000 Tech Mahindra Limited A-6, Sector 64 Noida, 201 301 Tel: +91 120 400 5000 Tech Mahindra Limited D-157, Sec 63, Noida, 201 301. Tel: +91 120 453 4400 Tech Mahindra Limited A-20, Sec 60, Noida, 201301. Tel: +91 120 400 8000 Fax:+91 120 400 8837 Tech Mahindra Limited B-26, Sec 57, Noida,201301. Tel: +91 120 433 5298 Fax: +91 120 433 5290 Tech Mahindra Limited (erstwhile I-Policy Networks) SDF B-1, NSEZ, Noida-201305 Tel: +91 120 472 4900 Tech Mahindra Limited A13, Sector 64, Noida, 201 301, Tel: +91 120 674 1000 Tech Mahindra Limited A-100, Sector 58, Noida, 201 301. Tel: +91 120 4743600 Tech Mahindra Limited Plot No. 58A & B, Noida Special Economic Zone, Noida 201 305
Tech Mahindra Limited Unit No. B-08-805, 8th Floor, Tower B, Unitech Cyber Park Complex, Sec 39, Gurgaon, 122001. Tel: +91 124 4283 600 Fax: +91 124 428 3650 Tech Mahindra Limited 4th Floor, IT Tower - 4, Infocity, Near Indroda Circle, Gandhi Nagar - 382009, Gujarat, India. Tel: +91 79 4060 4100 Tech Mahindra Limited Plot No. 23, SEZ Phase-II, Rajiv Gandhi Chandigarh Technology Park, Kishangarh, Chandigarh. 160101 Tel: +91 172 6668400 Tech Mahindra Limited Wing-2, 1st Floor, “B” block, Cyber Gateway, HITEC CITY, Madhapur, Hyderabad 500081. Andhra Pradesh, India. Tel: +91 40 4030 1300, +91 40 4030 1500 Thailand Tech Mahindra (Thailand) Limited Level 29, The Of?ces at Centralworld, 999/9 Rama I Road, Kwaeng Pathumwan, Bangkok 10330 Thailand Tel: +66 2207 2346 Fax: +66 2207 2347 Tech Mahindra (Thailand) Limited BB Building 10th Floor, Unit – 1004-5, 54 Sukhumvit Soi 21 (Asoke Road), Klongtoey Nua, Bangkok 10110. Tel: +66 2640 8170 Singapore Tech Mahindra (Singapore) Pte. Limited No 1, Changi Business Park Avenue 1 #04-02, Ultro Building, Singapore - 486058 Tel: +65 6417 2000 Fax: +65 6417 2121 Taiwan Tech Mahindra Limited Level 37, Taipei 101, Tower No. 7 Section 5, Xinyi Road, Taipei, Taiwan Tel: +886 2 8758 2984 Fax: +886 2 6758 2999 Malaysia Tech Mahindra (Malaysia) Sdn. Bhd. Suite 3B-10-5, Level 10 I Block 3B,Plaza Sentral, Jalan Stesen Sentral 5, 50470 W.P Kuala Lumpur, Malaysia Tech Mahindra (Malaysia) Sdn. Bhd. Mahindra Satyam Malaysia Global Solution Centre, Persiaran APEC, 63000 Cyberjaya Selangor, Malaysia Tel: +603 8882 8000 Fax: +603 8882 8088
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Indonesia PT. Tech Mahindra Indonesia Ariobimo Sentral, 4th ?, Suite #403, Jalan Rasuna Said Kavling X-2 # 5, Jakarta 12950 Indonesia Tel: +62 21 527 0718 Fax: +62 21 252 5760 Philippines Tech Mahindra Limited 5th Floor, Amberbase Building, Eastwood Avenue, Eastwood, Quezon City, 1110 Philippines Tel: +63 02 661 9620 China Tech Mahindra (Beijing) IT Services Limited Room 2955, 29/F, Block C, Central International Trade Center, No.6 Jianguomenwei Dajie, Chaoyang District, Beijing, PRC, 100022 Tel: +86 10 6563 9997 Australia Tech Mahindra Limited Level 2, 61 Lavender Street, Milsons Point, NSW 2061. Australia Tel: +612 9434 2770 Fax: +612 9460 3233 New Zealand Tech Mahindra Limited Regus Chancery, 41 Shortland Street, Auckland 1040, New Zealand Tel: +64 9 306 8949 Fax: +64 9 306 8889
Nigeria Tech Mahindra (Nigeria) Limited 2/4, Abebe village, Iganmu, Lagos, Nigeria. Tel: +234 8021920018 Extn : 25111 Zambia Tech Mahindra Limited 1st Floor, Petroda House, Great North Drive, Lusaka Zambia. Tel: + 260 97791 5000 Ghana Tech Mahindra Limited Plot No 83, Spintex Rd, (Adj Sneda Motors), East Airport, Accra, Ghana. Tel: + 233 30700 0000 - Extn: 5001 Congo Brazzaville Tech Mahindra Limited Airtel Commercial Agency - Infront of Elais Hotel , Avenue Charles de Gaulle B.P . 1267, Pointe Noire, Rep. of Congo Tel: + 243 99996 7191 / 99996 70552 Democratic Republic of Congo Tech Mahindra Limited Deuxieme niveau ( 2nd Floor) Gallerie de Centenaire,”N°10, Boulevard Commune de la Gombe/Kinshasa DRC Tel: +243 99996 7191 / 999967 0552 Malawi Tech Mahindra Limited City Mall (1-7) Mchinji Round About Area 47, PO Box 1666 Lilongwe, Malawi Gabon Tech Mahindra Limited II Floor, CFAO, 4-5, Ville Central, Libreville, Gabon Tele: +241 07280155
Nordics & Baltics Sweden Tech Mahindra Limited Norrtulsgatan 6, SE-113 29, Stockholm, Sweden. Tel: +46 73 600 3400 Email: [email protected] Germany Tech Mahindra GmbH Regus, Prinzenalle 7, 40549 Düsseldorf Germany Netherlands Tech Mahindra Limited Regus Business Park Einsteinlaan 10, Rijswijk ZH 2289CC, The Netherlands Tel: +31 70 300 2304 Cell: +31 64281 3600 North America USA New Jersey Tech Mahindra (Americas) Inc. 1001 Durham Avenue South Plain?eld, NJ 07080 Tel: +1 732 675 3047 Texas Tech Mahindra (Americas) Inc. 2140 Lake Park Blvd., Richardson, TX 75080 Tel: +1 972 991-2900 Fax: +1 972 991 3776 Georgia Tech Mahindra (Americas) Inc. 100 North Point Center East, Suite 305, Alpharetta, GA 30022 Tel: +1 972 991 2900 California Tech Mahindra (Americas) Inc. 2901 Tasman Drive, Suite 106 Santa Clara, California 95054 Tel: +1 408 588 1799, +1 408 654 9471 Fax: +1 408 588 1722 Washington Tech Mahindra (Americas) Inc. Columbia Business Park Building B 13427 NE 20th Street Suite 120, Bellevue, Washington 98004 Tel: +1 425 242 5965 Canada Toronto Tech Mahindra Limited 100 Consilium Place, Suite 315, Toronto Canada M3B 3H9 Latin America | Brazil Sao Paulo Tech Mahindra Brasil Servicecos De Informatica Ltda Rua Quintana, 887 – 8º Andar, Brooklin, CEP 04569-011, São Paulo - SP- Brasil. Tel: +55 11 3528 7207, +55 11 3528 7232
MEA – SAARC
UAE Tech Mahindra Limited #202, Building EIB-4 (BT Building), Near UOWD Building (Next to Knowledge Village), Dubai Internet City P.O.Box.- 30810, Dubai, UAE Fax: +971 4 391 1713 Egypt Tech Mahindra Limited Arkadia Building, Cornish El Nil, 8th ?oor, P.O. Box 14, Sabtteyah 11624, Cairo, Egypt Tel: +002 02 580 6608 Fax: +002 02 580 6601 Bahrain Tech Mahindra (Bahrain) Limited (SPC) 11th Floor, Al Salam Towers, PO Box 3282, Manama Center Bahrain South Africa Tech Mahindra Limited 6th Floor, Twin Towers West, Sandton City Mall, Sandton 2196, Johannesburg, South Africa Tel: +27 11 676 2800 Fax: +27 11 783 0543
Europe
UK Milton Keynes Tech Mahindra Limited Charles Schwab Building, 401, Grafton Gate (E), Milton Keynes MK9 1AQ. Tel: +44 01908 55 3400 Fax: +44 01908 55 3499 London Tech Mahindra Limited 3rd ?oor, Ormond House, 63, Queen Victoria Street, London EC4N 4UA United Kingdom. Tel: +44 1908 546150 Belfast Tech Mahindra Limited 7th Riverside Tower, 5 Lanyon Place, Belfast BT1 3BT, NI
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