TCS e-Serve Ltd

TCS E-SERVE LIMITED ANNUAL REPORT 2011-2012 DIRECTOR'S REPORT To the Members, Your Directors have pleasure in presenting the Twenty Eighth Annual Report of the Company with the audited financial statements for the financial year ended March 31, 2012. FINANCIAL RESULTS Financial Performance of the Company on a consolidated and unconsolidated basis is as follows: (Rs. in crores) Consolidated Unconsolidated 2011-12 2010-11 2011-12 2010-11 Total Revenue 2,088.14 1,858.28 1,733.34 1,588.71 Profit before tax 899.53 838.02 769.24 737.46 Profit after tax 644.05 649.76 522.04 550.04 Appropriations (a) Proposed final dividend 37.20 37.20 37.20 37.20 (b) Tax on dividend 6.03 6.03 6.03 6.03 (c) General Reserve 52.20 55.00 52.20 55.00 (d) Balance carried forward 2,146.78 1,598.16 1,906.90 1,480.29 DIVIDEND Based on the Company's performance, the Directors are pleased to recommend for approval of the members a dividend of Rs. 30 per equity share for the year ended March 31, 2012 (previous year: Rs. 30 per equity share). TRANSFER TO RESERVES The Company proposes to transfer Rs. 52.20 crores to the General Reserve out of the amount available for appropriations and an amount of Rs.1,906.90 crores is proposed to be retained in the statement of profit and loss. FINANCIAL PERFORMANCE On consolidated basis, revenue from operations for the year 2011-12 grew by 13% at Rs. 1,920.11 crores (previous year: Rs. 1,700.83 crores). Profit before tax (PBT) recorded an increase of 7% at Rs. 899.53 crores (previous year: Rs. 838.02 crores). Profit after tax (PAT) was marginally lower by 1% at Rs. 644.05 crores (previous year: Rs. 649.76 crores). On an unconsolidated basis, revenue from operations for the year 2011-12 grew by 10% at Rs. 1,578.44 crores (previous year: Rs. 1,440.78 crores). Revenue from operations comprises of export income, which was higher by 11 % at Rs. 1,284.59 crores (previous year: Rs. 1,156.69 crores) and domestic income, which grew at 3%, was at Rs. 293.85 crores (previous year: Rs.284.09 crores). PBT grew by 4% at Rs. 769.24 crores (previous year: Rs. 737.46 crores). PAT was lower by 5% at Rs. 522.04 crores (previous year: Rs. 550.04 crores). OPERATIONS OVERVIEW The operating environment during the year 2011-12 was challenging, caused primarily by volatility in the macro-economic environment impacting both the domestic as well as global economies. This has provided opportunities as well as challenges for your Company. Being a strategic partner to its clients, your Company has actively partnered in solving the challenges faced by its customers and contributed towards meeting their business targets. Cost increases owing to wage inflation could only marginally be mitigated in such an environment as inflation related pricing increase could not be passed on to the customers. The need of the hour has been to significantly improve on efficiencies to offset costs and create a long term and sustainable value for Company's customers. Several strategic initiatives were worked on during the year to deliver cost efficiencies. Innovative techniques to improve operating efficiencies, review of various cost levers to mitigate the effect of inflation, alternate business models to address specific customer requirements and selling offerings like collections. Business Process Management (BPM) etc., to customers beyond Banking, Financial Services and Insurance (BFSI) industry segments, were some of the actions taken to address the situation. Your Company continued on its customer-centric approach to understand and solve specific customer issues, thereby enhancing value for customers. It also actively focused on initiatives to grow the opportunities pipeline with existing customers and win new customers. Being a part of Tata Consultancy Services Limited has also enabled the Company to access some of the industry best practices across multiple areas like talent management, customer relationship management etc., and access to a broader customer base to sell BFSI Business Process Services (BPO). On the people front, various learning and development initiatives commenced in the past years continued to be run successfully, augmenting competency levels of associates and aligning the same to current market requirements. As a part of this, Business Domain Academies were set up as repositories of knowledge with development managers to guide associates to acquire/upgrade their skills and enable them to work across domains. QUALITY INITIATIVES The Company is enterprise-wide certified against ISO 9001:2008 (Quality Management), ISO 27001:2005 (Security Management) and ISO 20000:2005 (Service Management) and has attained Customer Operations Performance Centre (COPC), Certification for Outsourced Service Provider (OSP) version 5.0 for the Global Loan Operations of Consumer Banking, Collections and Services domains. Your Company also has a Capability Maturity Model Integration (CMMI) Level 5 certification. This year, your Company has won an award at the Indian Statistical Institute's Lean Six Sigma Process excellence awards. CORPORATE SOCIAL RESPONSIBILITY Your Company is committed to support local communities and actively participate in the Corporate Social Responsibility (CSR) programmes, which focus on affirmative action. Towards the objective of enhancing employability and creating employment for deprived and socially disadvantaged candidates across the country, the Company has currently covered 10 states across India under the programme. About 3,000 college graduates were trained to be job ready, of these about 39% were socially disadvantaged candidates. During the year, 13% of the participants have been offered jobs upon meeting selection criteria and about 250 candidates have joined the Company. SUBSIDIARY COMPANIES TCS e-Serve International Limited is a wholly owned subsidiary of the Company. TCS e-Serve America Inc. is a step down subsidiary of your Company and is a wholly owned subsidiary of TCS e-Serve International Limited. Pursuant to the provisions of Section 212(8) of the Companies Act, 1956, the Ministry of Corporate Affairs vide its circular dated February 8, 2011 has granted general exemption from attaching the balance sheet, statement of profit and loss and other documents of the subsidiary companies with the balance sheet of the Company. A Statement containing brief financial details of the Company's subsidiaries for the financial year ended March 31, 2012 is included in the Annual Report. The annual accounts of these subsidiaries and the related detailed information will be made available to any Member of the Company / its subsidiaries seeking such information at any point of time and are also available for inspection by any Member of the Company/ its subsidiaries at the Registered Office of the Company. The annual accounts of the said subsidiaries will also be available for inspection, as above, at the head offices / registered offices of the respective subsidiary companies. The Company shall furnish a copy of details of annual accounts of subsidiaries to any member on demand. DIRECTORS Mr. Vishwanathan Iyer and Mr. Abid Ali Neemuchwala, Directors, retire by rotation and being eligible, have offered themselves for re-appointment. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirement of Section 217 (2AA) of the Companies Act, 1956 ('Act'), and based on the representations received from the operating management, the Directors hereby confirm that: (i) in the preparation of the Annual Accounts for the year 2011-12, the applicable Accounting Standards have been followed and there are no material departures; (ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the financial year; (iii) they have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Act. They confirm that there are adequate systems and controls for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) they have prepared the Annual Accounts on a going concern basis. CORPORATE GOVERNANCE REPORT AND MANAGEMENT DISCUSSION AND ANALYSIS STATEMENT Corporate Governance Report and Management Discussion and Analysis statement are attached to this Report. PUBLIC DEPOSITS The Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the Balance Sheet. AUDITORS Messrs Deloitte Haskins & Sells, Chartered Accountants, who are the statutory auditors of the Company, hold office, in accordance with the provisions of the Act upto the conclusion of the forthcoming Annual General Meeting and are eligible for re-appointment. PARTICULARS OF EMPLOYEES The information required under Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended, are given in an annexure forming part of this report. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The particulars as prescribed under Section 217 (1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are set out in an annexure to this report. ACKNOWLEDGMENTS The Board takes this opportunity to thank its employees, shareholders, clients, bankers, vendors and others for the continued support. On behalf of the Board of Directors, N. Chandrasekaran Chairman Mumbai, June 14, 2012 Particulars pursuant to the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988, are furnished hereunder: (a) Conservation of Energy: Continuous steps are taken to use the energy conservatively, by (i) installing energy saving devices wherever necessary and (ii) preventive upkeep of all the equipment. (b) Technology Absorption: Technology is an essential and integral part of delivery to the customers. Your Company strives to remain abreast of state- of-the-art systems and has used tested, proven and appropriate technology to minimize time to delivery and improve maintainability. As an ongoing process, your Company is strengthening itself in getting appropriate tools for Information & Network Management to ensure that it remains in the forefront of technology delivery. (c) Foreign Exchange Earnings: Rs. 1,284.59 crores (previous year: Rs.1,156.69 crores) Foreign Exchange Outgo: Rs. 14.56 crores (previous year: Rs. 30.31 crores) On behalf of the Board of Directors, N. Chandrasekaran Chairman Mumbai, June 14, 2012 MANAGEMENT DISCUSSION AND ANALYSIS This part of the Directors' Report contains the views and analysis of the management regarding the Company and industry. These are in context of the environment and in relation to parameters such as the Indian economy, the global economy and forecast regarding the industry, based on reports from industry associations such as Nasscom. It is not the Company's policy to issue any forward looking statement I guidance and the Company and its management shall not be liable for any loss or damage that may arise as a result of any action taken based on the information contained herein. 1. INDUSTRY STRUCTURE, DEVELOPMENTS & OUTLOOK Global scenario According to Nasscom Strategic Review 2012, the world economy in 2011 remained sluggish entering a very difficult phase characterised by significant downside risks and fragility. The global economy is now expected to expand 2.5 per cent and 3.1 per cent in 2012 and 2013 respectively, versus the 3.6 per cent projected in June for both years. For the moment, the magnitude of the effects of these developments on global growth is uncertain. The major uncertainty concerns have been the interaction of the policy-driven slowing of growth in the middle income countries and the financial turmoil-driven slow down in Europe. In the face of the volatility in economic environment and currency, 2011 recorded steady growth for the technology and related services sector, with worldwide spending exceeding USD 1.7 trillion, a growth of 5.4 per cent over 2010. Software products, IT and BPO services continued to lead, accounting for over USD 1 trillion - 63 per cent of the total spend. IT- hardware spend, at USD 645 billion, accounted for the balance 38 per cent of the worldwide technology spend in 2011. 2011 saw renewed demand for overall global sourcing, which grew by 12 per cent over 2010, nearly twice the global technology spend growth. Growth in BPO was around 10 per cent, slightly lower than the IT offshoring rate of 13 per cent, despite the uncertainty in the Western nation economies, particularly the US and Europe, which disrupted and in some cases halted deal flow in the first half of the year. Global IT offshoring accounts for over 61 per cent of the total global sourcing market while BPO off-shoring accounts for 39 per cent. Region-wise spending Concerns of an economic recession in US and the debt crisis in Europe have had a slight effect on IT spending. However, EMEA and the Asia Pacific regions together grew at over 6 per cent in 2011, a growth of over 1.5 times than that of mature geographies. Vertical spending In 2011, while the BFSI and manufacturing segment remained the two largest verticals in terms of total share in spending, these sectors recorded a below average growth of 1.5 per cent and 2 per cent respectively. Going forward, technology services spending in the BFSI segment will be driven by the key imperatives of integration, optimisation and regulation. Emerging verticals like healthcare, communication and media, government were the key growth drivers for the IT segment during 2011. These verticals together garnered a growth of over 6 per cent in 2011 compared to a growth of around 2.4 per cent recorded by the traditional segments during the same period. BPO spends Worldwide spending in BPO services touched USD 153 billion in 2011, reflecting an increase of 4.3 per cent over the previous year. The economic crisis continued to impact BPO spend as customers focused on getting the highest ROI out of every BPO engagement through extensive due diligence and intense negotiations of contracts. BPO vendors have played a key role in helping their customers improve processes, increase revenues and improve profitability thus enabling them to position themselves as the business transformation partner for their customers. Traditionally, BPO service providers took over customers' operations and ran it for them, which is now evolving to include business process transformation for the customers and operations delivered through innovative business models. These services include platform BPO, business analytics and others. Global outlook While the growth in IT-BPO spend is expected to be gradual over the next two to three years, global sourcing spend is seen to outpace this growth. IT off shoring market is set to grow at a CAGR of about 8 per cent over 2011 to 2013, while BPO off shoring is expected to grow at a little over 7 per cent during the same period. India outlook: As per Nasscom Strategic Review 2012, direct employment within the IT-BPO sector is expected to grow by over 9 per cent to reach -2.8 million, with over 230,000 jobs being added in FY2012. IT services exports (including ER&D and software products) continues to be the largest employer within the industry with nearly 47 per cent share of total direct employment, BPO exports generate about 32 per cent of the total industry employment, and the remaining 22 per cent is accounted for by the domestic IT-BPO sector. The IT-BPO sector has become one of the key sectors for the Indian economy because of its economic impact. The sector is responsible for enabling employment to an additional 8.9 million people in various associated sectors -catering, security, transportation, housekeeping, etc. - many of whom belong to rural areas / small towns of India. Indian IT-BPO exports are expected to cross USD 69 billion during FY2012. This indicates a year-on-year growth of 16 per cent. This year has been marked by the return of discretionary spends. Even though the economic situation in the US and Europe continues to be a concern and customers are still being cautious, there has not been any panicked reactions and therefore IT budgets have remained strong. US and APAC led growth among geographies and BFSI and emerging verticals (Retail, Utilities, Healthcare and MPE) drove vertical growth. 2. COMPANY OVERVIEW Your Company, along with its subsidiary companies - TCS e-Serve International Limited and TCS e-Serve America Inc., is primarily engaged in the business of providing Business Process Services (BPO) for its customers in Banking, Financial Services and Insurance domain. The Company's operations include delivering core business processing services, analytics & insights (KPO) and support services for both data and voice processes. Your Company is an integral part of the Tata Consultancy Services' (TCS) strategy to build on its 'Full Services Offerings' that offer global customers an integrated portfolio of services ranging from IT services to BPO services. The Company provides its services from various processing facilities, backed by a robust and scalable infrastructure network tailored to meet clients' needs. A detailed Business Continuity Plan has also been put in place to ensure the services are provided to the customers without any disruptions. OPPORTUNITIES AND RISKS: Opportunities: Nasscom Strategic Review 2012 has estimated that the Indian IT-BPO exports are likely to cross USD 69 billion during the financial year 2011-12, indicating a year-on-year growth of 16 per cent. Your Company, backed by TCS' full service strategy, strong domain expertise, operational efficiency, inherent 'India based' cost advantage, experience in handling global clients and a dedicated workforce is well-placed to expand and diversify its service offerings as new opportunities come up. The Company is actively focused on initiatives to grow the opportunities pipeline with existing customers and win new customers. Key demand side strategies are: 1. Cross-sell BPO services to existing customers 2. Grow within the current BPO accounts 3. Acquire new customers Key supply side strategies are: 1. Transformation 2. Talent Acquisition and Talent Development 3. One Global Service Standard 4. Growth in Tier II BPO cities in India. Risks and Risk Mitigation: * Delivery concentration: Your Company primarily operates from multiple delivery centers located within India, thereby reducing the delivery concentration. * Macro-Economic Risks: Your Company's performance is sensitive to the global economic environment. For the foreseeable future, the Company expects to continue to derive most of its revenue from services provided to the BSFI clients. Given this concentration, the Company is exposed to current global economic conditions in the financial services industry. Factors such as economic environment, rise in protectionist sentiment, competition from other players / countries and regulatory changes may affect the demand for these services by current and potential clients. The Company is increasing the breadth and depth of service offerings and penetrating new customer accounts and markets to mitigate this risk. * Ability to hire and retain talent: Company's performance is largely dependent on the talent and efforts of its employees. To compete effectively in this expanding business, to manage its business effectively and to expand into new businesses depends on the Company's ability to attract talent and to retain and motivate its existing employees. The Company proposes to continue to invest in its people with robust and feature rich human resource practices that would help manage the problem of attrition. * Data protection: Security of information outsourced by Clients is one of the most challenging and crucial tasks facing BPO industry today. The risks associated with Information Security are real and the ramifications of security breaches are serious in terms of financial, reputation, franchise and regulatory impact especially for an organization like the Company which handles critical and sensitive customer data in the Banking, Financial Services and Insurance industry. Your Company has defined and implemented an Information Security Management System (ISMS) framework across the organization and is certified on ISO 27001: 2005 standards. The Company is also certified on Payment Card Industry Data Security Standards (PCIDSS) for some of the Company's processes to ensure secure processing of card related information. Your Company has also obtained a CMMI Level 5 certification and has also been successfully audited under the Statements of Standards for Attestation Engagements (SSAE) 16 and International Standard for Attestation Engagements(ISAE) 3402. Further, in order to comply with the Company's obligations under various laws including international laws, the Company complies with annual reporting / licensing requirements and also implements operating policies and procedures to protect, among other matters, the privacy and security of clients' information. * Technology, network and telecommunications risk: The Company is dependent upon infrastructure like electricity, telecommunication and internet facilities among others for providing its services. Any disruption of these could seriously impact the business of the Company. To mitigate this risk, the Company has detailed contingency plans in place to ensure smooth and uninterrupted conduct of its business. Your company is also BS 25999 certified. * Risks from operations: Risks from operations basically means risk of non- performance / loss resulting from inadequate or failed internal processes, people or systems, or from external events. The chance of human error or system failure is endemic to every business. In case of processing, these risks are higher due to the large value of the underlying transactions being processed and risk of resultant claims from clients for non- performance. Besides, there is a risk of person acting with malafide intent. Your Company has a robust Risk Management Framework, which is benchmarked to the Committee of Sponsoring Organizations of the Treadway Commission (COSO), Capability Maturity Model Integration (CMMI) Level 5, Customer Operations Performance Centre (COPC) (local and international), regulatory bodies such as Office of the Comptroller of the Currency (OCC), Financial Services Authority (FSA), Reserve Bank of India (RBI), etc., in place to identify, mitigate, monitor and report these risks. Further, risks can come from external events, which may result in expenses for maintaining continuity of business. These are mitigated through vulnerability assessments of these external risks to your Company's assets which ensure timely mitigation of these risks. In order to mitigate the risks of financial liability, contingency provisions have been created. The adequacy of this is reviewed from time to time based on management perception of the quantitative liability that may arise. * Financial risk: Financial risk represents risk on account of foreign exchange fluctuations, leverage and liquidity risks. Currently, the Company has foreign exchange surplus due to its export activities. It has procedures in place to actively manage its foreign exchange positions. The Company currently has minimal leverage and liquidity risk and has followed the strategy of funding all its expansions and infrastructure related expenditure through internal accruals, as well as, earning returns through investment of surplus funds. Your Company actively manages risks through a variety of governance / control mechanisms. * Legal & statutory liabilities risk: The Company has certain matters under dispute / litigation in regard to taxation and labour laws. The Company believes it is in a strong position in these matters and has taken adequate legal steps to safeguard its position. * Government policies: While the policies of the Government at state and national level have generally been supportive of the IT & ITES industry, any amendments which may have an adverse impact, will affect your Company's performance. These opportunities and risks have been identified based on the external environment viewed in conjunction with the Company's plan and are in no way exhaustive or in order or importance. The Company has put in place a risk management framework across the various units in the Company and a report thereon is placed before the Board of Directors at regular intervals. SEGMENT-WISE/PRODUCT-WISE PERFORMANCE: The Company has identified industry segments as its primary segment and geographic segments as its secondary segment (refer segment information in Note 27 of the Unconsolidated Financial Statements and Note 28 of the Consolidated Financial Statements). INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY: The Company has an internal control and internal audit system that is adequate and commensurate with the size and nature of its business. Adequate controls are established to ensure that assets of the Company are safeguarded and transactions executed in accordance with appropriate authorization and are properly recorded in the books of accounts. Internal Control guidelines have been formulated and circulated within the Company and are implemented in all transactions. The roles and responsibilities of people at various levels are well defined to ensure appropriate information flow and to facilitate effective monitoring. An authority-responsibility matrix has been separately articulated for the employees, management team, the Managing Director & CEO and the Board. The Company has appointed Ernst & Young Private Limited to oversee and carry out internal audit of the Company's activities. Their audit is based on a plan, which is reviewed in consultation with the statutory auditors and the Audit Committee. In line with international practice, the planning and conduct of internal audit is oriented towards the review of controls in the management of risks and opportunities in the Company's activities. The internal audit process is designed to review the adequacy of internal control checks in the system and covers all significant areas of the Company's operations. The Company monitors and reviews progress on the internal audit reports at the meetings of its Audit Committee and keeps the Board of Directors regularly informed about major observations. FINANCIAL PERFORMANCE - (UNCONSOLIDATED) DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO UNCONSOLIDATED OPERATIONAL PERFORMANCE: Overview: The financial statements are prepared under the historical cost convention, on an accrual basis, and are in accordance with the requirements of the Companies Act, 1956 and comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the said Act. During the financial year ended March 31, 2012, the revised Schedule VI notified under the Companies Act, 1956, has become applicable to the Company for the preparation and presentation of its financial statements. Accordingly, the Company has adopted the new reporting and disclosure requirement mandated in the revised Schedule VI with one of the changes being on classification of assets and liabilities as long term and short term. Assets and liabilities with expected date of realization / settlement exceeding twelve months from the balance sheet date have been classified as long term assets / liabilities while those expected to be realized / settled within twelve months from balance sheet date have been classified as short term assets / liabilities. The financial statements have been prepared using 'Rupees in crores' as a denomination for reporting purpose. All Income and Expenditure, having a material bearing on the financial statements, are recognized on accrual basis. The management accepts responsibility for the integrity and the objectivity of these financial statements, as well as for various estimates and judgments used therein. Balance Sheet 1. SHARE CAPITAL March 31, 2012 March 31, 2011 Number (Rs. in Number (Rs. in (crores) crores) (crores) crores) Equity (paid-up) 1.24 12.40 1.24 12.40 The Company has at present, two classes of shares, viz., preference shares aggregating to Rs. 5 crores and Equity Shares aggregating to Rs. 20 crores. This constitutes the Authorised Share Capital of Rs. 25 crores. Of this, the issued and paid-up share capital is Rs. 12.40 crores, comprising 1.24 crores Equity Shares of Rs. 10 each, fully paid-up. Of the total share capital as at March 31, 2012, Tata Consultancy Services Limited, representing, 96.26% of the total, holds 11,936,313 shares of the issued and paid-up share capital. 2. RESERVES AND SURPLUS The Company's Reserves & Surplus as on March 31, 2012, stood at Rs.2,101.04 crores as against Rs. 1,760.11 crores in the previous year, an increase of Rs. 340.93 crores. This increase is on account of profits for the year after taxes and appropriations, as partially offset by movement in the hedging reserve. 3. LIABILITIES a) Long term liabilities Long term liabilities increased from Rs. 18.99 crores to Rs. 32.79 crores primarily on account of increase in the non current portion of the derivative liability as well as rent escalation liability. b) Trade payables Trade payables (Sundry creditors) represent the amount payable to vendors for the supply of services and goods. c) Other current liabilities Other current liabilities increased to Rs. 99.97 crores as at March 31, 2012, as against 14.76 crores as on March 31, 2011 owing primarily to increase in current portion of derivative liability. Unclaimed dividends of Rs. 1.03 crores (previous year: Rs. 0.83 crores) indicates dividend paid, but not encashed by shareholders, and are represented by earmarked balances in bank accounts separately maintained for an equivalent amount. 4. PROVISIONS a) Long term provisions Long term provisions are for gratuity liability and are based on independent actuarial valuations as at end of the financial year. b) Short term provisions Short term provision includes provision on employee benefits Rs. 21.65 crores (previous year: Rs. 25.33 crores), provision for current income taxes (net) Rs. 11.69 crores (previous year: Rs. 5.52 crores) and provision towards proposed dividend including dividend tax Rs. 43.23 crores (previous year: Rs. 43.23 crores). 5. FIXED ASSETS (Rs. in crores) As at As at Growth March 31,2012 March 31, 2011 Owned assets Improvement on Leasehold Premises 42.74 42.74 0% Office equipments 62.85 61.39 2.38% Computer equipments - Hardware 166.52 173.43 -3.98% Computer equipments - Software 36.39 33.76 7.79% Furniture and fixtures 34.37 34.51 -0.41% Electrical fittings 27.29 27.11 0.66% Vehicles 5.23 7.35 -28.84% Total Gross Block 375.39 380.29 -1.29% Less: Accumulated depreciation 312.92 295.35 5.95% Net Block 62.47 84.94 -26.45% Add: Capital work in progress 0.28 1.66 -83.13% Net Fixed Assets 62.75 86.60 -27.54% Depreciation charge for the year 41.06 47.72 -13.96% Depreciation as a% of revenue 2.60% 3.31% -21.45% Accumulated depreciation as a % of gross block 83.36% 77.66% 7.34% The addition to the gross block of assets (exclusive of assets disposed / retired) during the year was Rs. 20.82 crores, including Rs. 15.41 crores in respect of computer equipments. 6. DEFERRED TAX Deferred tax benefit of Rs. 1.87 crores has been made for the year ended March 31, 2012. The deferred tax asset balance as at March 31, 2012 is made of: (Rs. in crores) Particulars As at As at March 31, 2012 March 31,2011 Provision for doubtful receivables and advances 0.77 0.87 Depreciation on fixed assets 18.41 17.36 Provision for employee benefits 7.02 9.00 Rent escalation 7.72 5.98 Provision for contingencies 0.13 4.65 Interest u/s 143(1) not credited to statement of profit and loss 3.73 - Unrealized loss on derivatives recognized in statement of profit and loss 1.23 (0.72) Grand Total 39.01 37.14 7. LOANS AND ADVANCES a) Long term loans and advances Long term loans and advances increased from Rs. 348.63 crores to Rs.398.95 crores, primarily due to increase in tax receivables and inter- corporate deposits. b) Short term loans and advances Short term loans and advances include loans and advances to related parties, inter-corporate deposits, prepaid expenses and other various advances, and has decreased marginally to Rs. 294.14 crores as against Rs. 308.98 crores as at the end of the previous financial year. 8. TRADE RECEIVABLES Trade receivables (Sundry debtors) inclusive of unbilled revenues amounted to Rs. 291.16 crores (18.44% of revenue) as at March 31, 2012 as compared to Rs. 253.97 crores (17.62% of revenue) as at March 31, 2011. The Day Sales Outstanding (DSO) was 67 days, including unbilled revenues as at March 31, 2012 as against 64 days in the previous year. The increase in DSO is attributable to one-time delays in billing in the fourth quarter pending final confirmation on pricing negotiations as well as some delays in collection of dues. Controls have been reinforced to bring in greater efficiency. 9. CASH AND BANK BALANCES (Rs. in crores) Particulars March 31,2012 March 31.2011 Bank balances - current accounts 0.50 2.57 Bank balances - cash credit accounts - 0.77 Remittances in transit 8.71 - Total cash and bank balances 9.21 3.34 Fixed deposits with banks 762.90 475.55 Earmarked balances with banks 1.03 0.83 Total cash and cash equivalents 773.14 479.72 The bank balances include unclaimed dividend of Rs.1.03 crores in the unclaimed dividend account as at March 31, 2012 (previous year: Rs.0.83 crores). RESULTS OF OPERATIONS 10. TOTAL REVENUE Revenue from operations for the year ended March 31, 2012 is Rs. 1,578.44 crores as compared to Rs. 1,440.78 crores for the previous year ended March 31, 2011, growth of 9.55% over previous year. Share of export revenue to revenue from operations for the year ended March 31, 2012 has increased by 1%. 11. EXPENDITURE Staff and operating expenses increased by 14.87% to Rs. 922.93 crores for the year ended March 31, 2012 as compared to Rs. 803.43 crores for the year ended March 31, 2011. The detailed break-up of the expenditure is given below: Particulars Year ended Year ended March 31, 2012 March 31, 2011 Amount % to Amount % to (Rs. in Revenue (Rs. in Revenue crores) crores) Employee benefits expense 697.91 44.2% 588.22 40.8% Services rendered by business associates and others 15.91 1.0% 25.83 1.8% Rent 67.43 4.3% 50.58 3.5% Communication expenses 19.02 1.2% 18.69 1.3% Legal and professional fees 3.07 0.2% 1.84 0.1% Travelling and conveyance 31.23 2.0% 34.15 2.4% Others & miscellaneous expenses 88.36 5.6% 84.12 5.8% Total staff and operating expenses 922.93 58.5% 803.43 55.8% The increase in staff and operating expenses by about 2.7% of revenues is primarily attributable to the impact of salary / promotion actions, higher investments in head counts and mix as partially offset by certain savings initiatives. The Company provided Rs. 41.06 crores towards depreciation for the year ended March 31, 2012 as compared to Rs. 47.72 crores for the year ended March 31, 2011. It represents 2.60% and 3.31 % of the revenues for the respective years. 12. PROVISION FOR TAXATION Provision for income tax is made on an annual basis on the tax liability as computed, after taking credit for allowances and exemptions. Apart from the current tax, deferred tax asset or liability is recognized for timing differences between the profit as per financial statements and the profit offered for the income taxes. Deferred tax assets are recognized only if there is reasonable certainty that sufficient future taxable income will be available, against which they can be realized. The net deferred tax credited to the statement of profit and loss during the year was Rs. 1.87 crores (previous year: deferred tax charge of Rs. 10.90 crores). The Company has provided a net sum of Rs. 247.20 crores towards tax expense during the year compared to Rs. 187.42 crores during the previous year. The break-up of tax expense is as follows: (Rs. in crores) Particulars Year ended Year ended March 31, 2012 March 31, 2011 Current tax 249.07 176.52 Deferred tax (1.87) 10.90 Grand Total 247.20 187.42 The net tax charge increased to Rs. 247.20 crores from Rs. 187.42 crores during the financial year 2011-12 mainly due to impact of lower tax write- back during the current year. 13. NET PROFIT The net profit of the Company after tax was marginally lower at Rs. 522.04 crores as compared to Rs. 550.04 crores during the previous year primarily due to a higher tax charge owing to lower tax write-back. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT: As at March 31, 2012, the Company employed 14,785 employees. The Company considers human resources as its most critical assets and has various practices in place including incentive awards, career planning, training programs, etc. to ensure a healthy work environment. There were no material developments in human resources.