Tata Consultancy Services Ltd

1.1 Market sizing, trends and potential

World-wide spending on technology and related products and services is estimated tohave crossed US$ 1.6 trillion in 2010, a growth of 4.0% over 2009, with growth driven byemerging verticals and emerging geographies in addition to USA.

Global IT services spend increased from US$ 566 billion in 2009 to US$ 574 billion in2010. The geographic revenues break-up for IT services was as follows:

- America's share 43.0% in 2010 (42.8% in 2009)

- Europe Middle-East and Africa revenues 39.7% in 2010 (40.2% in 2009)

- Asia-Pacific revenues 17.3% in 2010 (17.0% in 2009)

Global Business Process Outsourcing (BPO) services spend has increased from US$ 152billion in 2009 to US$ 158 billion in 2010. The geographic revenues break-up for BPO spendwas as follows:

- America's share at 55.3% in 2010 (55.8% in 2009)

- Europe Middle-East and Africa revenues 25.9% in 2010 (26.0% in 2009)

- Asia-Pacific revenues 18.8% in 2010 (18.2% in 2009)

Trends in global sourcing remained positive and showed a growth rate of 10.4% in 2010over 2009 and the global sourcing market size was in the range of US$ 102 to 106 billionin 2010. IT sourcing grew at 10.3% to a market size of US$ 62 to 64 billion and BPOsourcing grew at 10.6% to a market size of US$ 40 to 42 billion.

There is enough potential for growth. Estimate of the addressable global sourcingmarket is in the range of US$ 500 billion (US$ 280 billion for IT services and US$ 220billion for BPO services). (Source: NASSCOM Strategic Review 2008 - 2011)

One of the major beneficiary countries of the global sourcing trend continues to beIndia whose expertise and capability in the area of Information Technology (IT) andInformation Technology Enabled Services (ITES) has made it a leading destination forglobal corporations looking for technology partners.

1.2 Growth forecasts for IT Services Industry

IT services spend is expected to increase from US$ 566 billion in 2009 to US$ 684billion by 2014 at a CAGR3 of 3.9%.

• IT outsourcing component is expected to grow from US$ 225 billion in 2009 to US$239 billion in 2014 at a CAGR of 1.1%.

• IT services offshored are expected to grow from US$ 31.1 billion in 2009 to US$42.8 billion in 2014 at a CAGR of 6.6%.

BPO spend is expected to increase from US$ 152.1 billion in 2009 to US$ 201.5 billionin 2014 at a CAGR of 5.8%.

IT spend forecasts by global technology analyst firms like Gartner, Forrester, IDC andothers indicate a growing market for IT and ITES for industry verticals, service offeringsand geographies of interest to the Company and excellent prospects for growth in thefuture.

2.1 Mission and Values

TCS has built a global reputation for its ability to help customers achieve theirbusiness objectives - by providing innovative, best-in-class consulting, IT and IT-enabledsolutions and services. TCS' core set of values underpin all activities in the Company andthese include leadership with trust, integrity, excellence, respect for the individual andlearning/sharing.

The Company plans to further strengthen and consolidate its position in the global ITindustry as an integrated full services player with a global footprint in terms ofinnovation, operations and service delivery.

2.2 Strategy of the Company

TCS' strategy is focused on using its full services capabilities and its Global NetworkDelivery ModelTM to create business value for its customers and help them optimise theiroperations and execute new growth initiatives. The Company's ability to deliver anunparalleled quality of experience allows customers to experience a high level ofcertainty in their IT operations.

2.2.1 Customer-centricity

The Company's strategy is to be a trusted business partner to large globalcorporations. TCS has built a customer-centric organisation structure which puts customersat the center of its operating units and teams. The Company's promise of certaintyresonates with customers as it offers them real business results through optimal IT designand deployment. TCS' ability to solve the customer's most challenging business problems isthe core business need around which our offerings and services evolve.

2.2.2 Global Network Delivery ModelTM

TCS has established a unique Global Network Delivery ModelTM (GNDMTM) that allows theCompany to deliver services to customers from multiple global locations in India, China,Europe, North America and Latin America. The GNDM™ enables the Company's deliverycenters to collaborate on projects and leverage all its assets in order to ensure 'OneGlobal Service Standard'.

2.2.3 Integrated Full Services Offerings

TCS continues to build on its 'Full Services Play' that offers its global customers anintegrated portfolio of services. This includes a comprehensive range of (3)Infrastructure management services with a strong focus on 'Remote InfrastructureManagement' and transformation (4) Engineering services with a focus on Enterprise AssetManagement, Industrial Embedded Systems, Plant Automation Services and Product Engineering(5) Assurance and Validation services (6) TCS' own product based solutions, primarily infinancial services area with its TCS BaNCS suite of offerings and (7) GlobalConsulting capability that brings strong skills in program management, change management,process management and architecture.

This suite of integrated full services portfolio presents a compelling valueproposition for global corporations and continues to increase traction in the marketplace, as customers look for opportunities and partners who can bring transformationsolutions which include innovation, optimisation and time to market competitive advantagefor their businesses. This integrated full-services offering strategy captures the entirevalue chain of IT - from consulting and design to products and solutions and fromimplementation to support.

2.2.4 Strategic Acquisitions

In addition to sustaining strong organic growth, the Company continues to closely lookat acquisitions that are strategic in nature. Through inorganic means the Company may lookto strengthen gaps in its services portfolio, enter new geographies or market segments aswell as in-source domain and technology expertise. The strategic acquisitions done overthe years have created new capabilities within the Company and these acquisitions continueto yield synergistic growth.

2.2.5 Non-Linear Growth Strategies

The Company is focused on a set of strategic growth business initiatives to drivenon-linear growth opportunities, in addition to its continuing focus on improvedproductivity and process enablers for its current business lines. TCS continues to investin nonlinear growth initiatives that will allow it to drive revenue growth withoutcommensurate growth in the number of people. TCS pursues three initiatives -SoftwareProducts, Platform based BPO services, and iON - an IT-as-a-service solution for Small andMedium Business. Cloud based software services, 'Managed Services' and 'AcceleratedSolutions' bring non linearity to the mainstream IT and ITES businesses of the Company.

2.2.5.1 TCS Financial Solutions

TCS Financial Solutions is a strategic business unit that enhances the competitivecapability of global financial institutions in the banking, capital markets and insuranceindustries using its portfolio of software products. This is marketed under the TCS BaNCSbrand globally. TCS BaNCS solutions are servicing business operations in about 80countries.

TCS Financial Solutions increased its customer base by adding 36 new clients duringfiscal 2011 to its active client base of 271 clients. In addition, 20 clients went"live" on BaNCS solutions during the year.

The product vision for TCS BaNCS is driven by 'Any place is a banking place'paradigm. 'TCS BaNCS Securities Trading' went operational in India with its mobiletrading application with a leading financial services provider in November 2010. TCS BaNCSconsists of 27 modules and covers multiple lines of businesses like Core Banking,Insurance, Payments, Securities and Treasury.

TCS BaNCS is increasingly gaining market recognition and industry analystendorsements as listed below:

• The 2010 'Gartner Magic Quadrant' rates TCS as a leader in International RetailCore Banking

• The 2010 'Forrester Waves & Platform Deals'rates TCS as a leader for GlobalBanking Platforms. TCS BaNCS scored highest in banking platform functionality,deployment and operations, product and corporate strategy.

2.2.5.2 Platform-based BPO

Platform based Business Process Outsourcing (BPO) or Process Clouds represent a newbusiness model. TCS manages and executes customers' business processes using its owntechnology platform. This involves combining Information Technology, Infrastructure andBPO services into a bundled service offering that enables end-to-end execution of abusiness process. The strategic driver behind this offering is to address a customer'sincreasing need for more efficiency, superior business performance and single point ofaccountability in the execution of many of their business processes.

The Platform based Business Process Outsourcing strategic unit of TCS (TCS P-BPO)offered four different solutions: Analytics, Finance and Accounts (F&A), HumanResource Outsourcing (HRO) and Procurement. TCS' platform BPO offerings continued to gainacceptance with customers, with key deals being won in India and North America.

During fiscal 2011 TCS' P-BPO unit expanded its suite of offerings across the fourplatforms.

2.2.5.3 iON

iON is the 3rd Generation Service Delivery Model using Cloud Computing for Small andMedium Business (SMB)

In fiscal 2011, TCS launched iON - the world's first fully integrated informationtechnology solution for SMBs. iON is pre-configured with hardware, network and softwarebundled together and backed by business, technical and consulting services. iON has beendeveloped to deliver IT in the 3rd generation service model to SMBs - deliverTechnology-on-Tap. Using the very latest in scalable cloud computing technology, iONremoves the need for SMBs to invest in IT assets or retain scarce IT talent. Usingpay-per-use business model, iON helps SMBs leverage world-class technology at anaffordable cost. Today, more than 150 SMBs across India are leveraging the iON solutionand have reduced their total cost of technology ownership significantly.

To provide SMB customers with seamless service, iON has created an eco-system of 90+Cloud Service Partners across India.

3. Organisational Structure

A key concern that sustained growth engenders, is the potential loss of agility in anorganisation that has outgrown its structure. Another concern is around whether and howthe organisation will be able to focus on the right sectors for future growth.

Both these concerns were addressed by the customer-centric organisation structure thatthe Company rolled out in 2008. This structure was designed to not only enhance customerfocus and accountability, but also to provide agility by reorganising TCS into multiple,smaller operational units consisting of 3,000-14,000 employees, each pursuing the bestpossible growth in their individual domain.

Each of the market-facing business units owns its own resources and pursues growth inits respective domain at the best possible pace that the domain can support, with all theagility and focus of a smaller company. Further, each business unit manages its own costsand is accountable for its margins. This has turned out to be an important enablingmechanism for better control of the various margin levers. The effectiveness of thisstructure was evident over the last two years, when the Company had to exercise variousoperational levers rapidly and streamline costs to expand operating margin.

4. Industry Verticals

In the section below, the Company's positioning in the various industry verticals arediscussed.

4.1 Banking, Financial Services and Insurance (BFSI)

Financial markets witnessed improved growth through the year, as equity prices rose andcredit spreads tightened in major advanced economies. Authorities in major emerging marketeconomies continued to take gradual steps to tighten monetary policy as inflationarypressures there intensified.

These evolving dynamics required financial institutions to establish and continuallyenhance systems that effectively responded to increasing governance, risk and compliancerequirements. All of this needed to be accomplished while achieving superior levels ofcustomer experience and successfully managing revenues and costs. The Company continues towork with leading global clients in this industry, executing complex programmes in theseareas.

TCS has partnered globally with more than half of the world's top twenty bankinginstitutions and one fourth of the world's top hundred insurers.

4.2 Telecom

The Company's differentiated domain offerings and continued customer focus in thetelecom industry have enabled it to grow with most of its existing strategic clients. TheCompany also added a few new marquee customers with potential for future growth.

The Company's core strategy in the Telecom industry continues to be ITservices-centered full services play for telecom service providers and equipment vendors.The Company continues to invest in research to play the innovator's role and be a catalystfor change in the emerging Telecom landscape. TCS has been responsible for the deploymentof mobile number portability solutions and IT infrastructure for launch of 3G services inIndia.

The continuing recovery of the global economy, despite its uneven nature, willstimulate investments by telecom service-providers in networks and launch of new services.The Company remains focused on expanding its global footprint and expects to see increasedinvestment in policy management, analytics, and strengthening of the trend towardsoutsourcing and managed services.

4.3 Manufacturing

The Company is positioned as a partner of choice for its clients in Automotive,Industrial Manufacturing and Components (IMC), Process and Chemical and Aerospace sectors.

TCS enjoys a strong position in the manufacturing industry, by virtue of its uniqueproposition of end-to-end business-focused IT and IT-enabled solutions and services. Theseofferings cover the entire value chain, from new product introduction to customerexperience management and boardroom to shop floor connect. All the major customers inmanufacturing have grown moderately in the last one year.

4.4 Retail and Consumer Packaged Goods

The Retail and Consumer Packaged Goods industry has been one of the fastest growingverticals in TCS. The Company offers a complete portfolio of services in this industry -Consulting, IT Infrastructure services, BPO, Assurance and Enterprise solutions. This fullservices play has found resonance amongst the clientele, making the Company the preferredservice provider for six of the top ten global retailers.

4.5 Other Industries

The Company also services several other industries such as Life Sciences andHealthcare, Hi-Tech, Energy, Resources and Utilities, Media and Entertainment and Travel,Transportation and Hospitality.

The Company's growing domain expertise in these industries is reflected in the higherthan average growth that these verticals registered.

5. TCS' Global Footprint

The Company continues to invest in developing and optimising its global presence, inorder to pursue opportunities in global markets on an ongoing basis and enable existingand potential customers to access its services seamlessly. As on March 31, 2011, TCS had145 offices in 42 countries as well as 106 delivery centers in 20 countries.

5.1 Major Markets

TCS continues to focus on serving large global clients in the major markets of NorthAmerica and Europe including UK.

The Company's key focus in these mature markets is to grow its wallet-share in keycustomer accounts by increasing the scope of engagement. TCS is also focused on winningnew key accounts in these major markets by using its integrated full services and GNDMTMofferings.

The Industry domain and consulting led focus has enabled the Company to push foraggressive growth. The Company has numerous multi-year relationships established withglobal multinationals in these markets and continues to provide them a multiple range ofservices.

In North America, the Company has further strengthened its local presence by focusingon growing its investments in Cincinnati, Ohio, by recruiting local talent to supportNorth American operations.

In Europe, the Company has increased its focus on the Western European markets likeGermany, France, Switzerland, Benelux and the Nordic region.

5.2 New Growth Markets

The Company has been investing in emerging markets since 2002-03 and has achievedscale. New growth markets include Latin America, Middle East and Africa, Asia-Pacific andIndia.

TCS believes that these markets have the potential to be significant revenues driversover the long-term.

6. Service Offerings

The Company's full services portfolio consists of Application Development andMaintenance, Business Intelligence, Enterprise Solutions, Assurance, Engineering andIndustrial Services, IT Infrastructure services, Business Process Outsourcing, Consultingand Asset leveraged solutions.

The Company's ADM service offering covers the entire range of services around thesoftware development lifecycle, including re-engineering and migration. Key highlightsrelated to the Company's positioning in this space includes:

• Leadership position in 'Gartner Magic Quadrant' for North American and EuropeanOffshore Application Services

• Leadership position in '2010 Forrester Wave' for Europe Middle East Africa(EMEA) Application Outsourcing

• Leadership position in '2010 Forrester Wave' for North American ApplicationsOutsourcing.

6.2 Business Intelligence (BI)

Subsequent to the financial crisis, during the recovery phase, business intelligenceand analytics are becoming very important areas and the Company is focused on thissegment.

6.3 Assurance Services

Growing adoption of independent and unbiased software testing and varioustransformational initiatives undertaken by clients spurred strong demand for the Company'sAssurance Services.

TCS' in-depth knowledge of industry verticals, combined with its emphasis on processand technology has created a strong value proposition for it's customers. Also, astuteinvestments in quality assurance and software testing space, including solutionaccelerators and frameworks created by the Company's in-house Research and Development(R&D) team, are paying handsome dividends.

6.4 Enterprise Solutions

The Company serves customers in the areas of Enterprise Resource Planning (ERP),Customer Relationship Management (CRM), Supply Chain and Content Management services withend-to-end offerings and solutions that address their global market needs, from strategyto transformation, blue-printing to implementation, as well as rollouts, upgrades andmanaged services.

In fiscal 2011, Enterprise Solutions returned to robust growth, witnessing all rounddemand and it won deals across verticals, markets, platforms and offerings. Key accoladesreceived by the Company in this area were:

• Leadership position in '2010 Gartner Magic Quadrant' for Oracle ERPimplementation service providers, North America

• Leadership position in '2010 Gartner Magic Quadrant' for SAP ERP implementationservice providers, North America.

6.5 IT Infrastructure Services (IT IS)

IT Infrastructure Services (IT IS) is a growth engine for TCS. The Company offersend-to-end IT Infrastructure services by providing transparent solutions and superiorservice delivery, aligned to business metrics. These solutions are delivered by leveragingan analytics-led approach, remote management, Centers of Excellence (CoE), automation,innovation frameworks and continuous improvement processes.

During fiscal 2011, the unit bagged large end-to-end strategic managed services deals,implemented transformation deals involving consolidation, virtualisation and optimisationservices, including provisioning of 'on demand environment' for customers and leveragednew delivery models like Cloud Services and Integrated Command Center (ICC).

The Company has been positioned as a leader in IT infrastructure services in the'Forrester Wave Report', with the highest overall customer reference scores amongst allthe vendors in the analysis.

6.6 Business Process Outsourcing (BPO)

TCS' BPO offers value-added transaction processing services to its customers acrossmultiple industry verticals. It also offers knowledge-based services focused on areas ofresearch and analytics, such as biostatistics, customer insights, risk analytics andpredictive analytics.

The Company has performed well in this service area due to its differentiated positionin the market backed by superior domain expertise and innovative pricing models such astransaction and outcome based pricing. TCS is the first BPO in the world to be assessedenterprise wide at Level 5 in Capability Maturity Model Integration (CMMI) for services,assuring delivery excellence to its clients.

In line with the GNDMTM strategy, during the current year, the Company openedadditional BPO sites in Manila, Philippines and Midland, Michigan, USA. It also continuedto invest in scaling up its BPO operations across the globe.

6.7 Engineering and Industrial Services (EIS)

EIS offers full services across the engineering, product development and R&D valuestream of companies in multiple industry verticals. The EIS portfolio provides a widerange of solutions catering to individual customer needs focusing on New ProductDevelopment Solutions, Product Lifecycle Management Solutions, Plant Solutions andServices and Geospatial Solutions.

6.8 Global Consulting Practice (GCP)

GCP is a key ingredient in TCS' full services strategy to deliver greater value toclients. The Company's consulting-led, integrated portfolio of services helpsorganisations increase alignment between business operations and IT. GCP positions theCompany for winning larger downstream deals by working with clients worldwide in the earlypart of their transformation lifecycle.

GCP operates as a single global unit focusing on the Company's existing customers aswell as supporting new customer acquisitions. Today, GCP has breadth and depth in ITconsulting, growing capability in business consulting and increased ability to go tomarket with multi-competency solutions. This has helped the Company gain strong tractionfor its consulting services in fiscal 2011.

6.9 Asset Leveraged Solutions

The Company's offerings in this area are primarily focused on the Banking, FinancialServices and Insurance industry. TCS has since been replicating the model in otherindustry verticals. Examples include:

• Legal Management Solution in the Hi-Tech vertical,

• Customer loyalty (Rewardz) and Point of Sale (POS) solutions in the Retailvertical.

The Asset Based Solutions business has registered a progressive growth and the Companysees greater opportunities to productise these assets, working collaboratively with itsclients.

6.10 Eco-Sustainability Services

It is estimated that the use of IT has the potential to reduce carbon emissions by 15%by 2020. This could translate into an economic benefit of Euro 600 billion for thosebusinesses choosing to transition to an environmentally friendly and ecologicallysustainable lower carbon footprint. To capture this sizable market opportunity, theCompany set up a separate Eco-Sustainability Service with the following offerings:

• Enterprise level - Green IT, Eco-footprinting, Sustainability performancemanagement, Eco-awareness and education, Compliance management

• Business Process level - Sustainable supply chain, Green logistics, Greenproduct engineering

• Consumption level - Demand side Energy management, Life cycle assessments forenvironment.

7. Technology and Innovation

TCS' R&D remained focused on twin objectives: meeting current customer needs andinnovating to meet their future business needs. The Company's customer-focused R&Dinitiatives connected with key customers across domains, along the themes of increasingproductivity, agility, simplification, compliance and understanding of consumer behavior.

The Company's innovation offerings for infrastructure simplification, socialcollaboration, connected marketing and data privacy have been active differentiators withnew deals and given the Company an edge over global competitors. TCS Tools have seengreater implementation in all phases of the software lifecycle, ensuring efficientdelivery and cost savings for the customer. R&D initiatives in cloud computing andsustainability solutions have helped clients reduce capital expenditure and carbonfootprint.

8. Intellectual Property (IP)

The Company has a long tradition of nurturing creativity and innovation. To promote astrong culture of recognising inventions the Company formed a dedicated Corporate IPR Cellin fiscal 2011, steered by the IP Management Board. The Company's IP strategy seeks tobuild an effective portfolio of Intellectual Property Assets for future monetisation,collaboration and risk mitigation.

The total number of patents granted till March 31 2011 were 68. TCS had over 448patents filed in multiple jurisdictions till March 31, 2011.

9. Human Resources Strategy

The Company continued to invest in developing its human capital, building strongrelationships with academia and establishing its brand in the market to attract and retainthe best talent.

The strategic initiatives include developing competencies, identifying and nurturing astrong pipeline of leaders, continually engaging talent and helping employees in theircareer aspirations. This has helped the Company build a culture where people arerespected, performance is rewarded and where every employee can realise his or herpotential.

TCS consolidated headcount fiscal 2011 summary

During fiscal 2011, the Company's HR strategy helped it fulfill the demand to generatevalue and provide the experience of certainty to all stakeholders. TCS grew to 1,98,614employees (including 23,241 employees working for subsidiaries) as on March 31, 2011,compared to 1,60,429 as on March 31, 2010.

9.1 Talent Acquisition

A robust talent acquisition ecosystem and an evolved people transition model helped theCompany source, transition and effectively integrate new recruits. Close collaborationbetween the 'Talent Acquisition' team, 'Learning and Development' teams and the businessunits has ensured that the sourcing-to-deployment process supported business in fulfillingdemand.

The Company set yet another benchmark with a gross addition (including subsidiaries) of69,685 employees and a net addition of 38,185 employees in fiscal 2011 - the largest inthe industry. This included over 1,626 people insourced from customer organisationsglobally.

The Company continues to invest in talent development through a well establishedAcademic Interface Programme, providing internships, conducting faculty developmentprogrammes, conducting student workshops to orient students to the IT industry andsponsoring technical and research programmes in various institutes. TCS also launched aprogramme in fiscal 2011 to support bright students to pursue doctoral programmes thuscontributing to national talent development.

The Company's Industry - Academia collaboration network with over 500 of the foremostuniversities in India and overseas helps it source the best engineering talent in thecountry. TCS got day one slots at over 99.4% of the campuses visited in fiscal 2011, upfrom 98.4% in the previous year.

For fiscal 2012, the Company has made 37,396 campus offers, up from 20,050 made forfiscal 2011. These recruits will be inducted in a staggered manner.

9.2 Learning and Development

The Company continued its focus on talent development to build skills and competenciesin four dimensions namely Technology, Domain, Process and Soft Skills including foreignlanguage capability.

Regular classroom-based training, technology-enabled learning, external certifications,on the job training and sponsorship for higher education constituted the other keychannels for competency development. Increased focus on technology-enabled learninginitiatives has enhanced the Company's ability to provide these opportunities to itsglobal workforce deployed across 42 countries.

Initial Learning Program (ILP) content was revised and training infrastructure wasscaled to address business needs. During fiscal 2011, 28,170 trainees completed ILPprogramme and a total of 15,84,480 learning days effort were spent on ILP.

Continuous Learning Programmes (CLP) addressed the business need of buildingcompetencies in advance and helped fulfilling demand and improved workforce productivity.TCS invested 6,67,683 learning days to build competencies in niche technology and 24,656certifications were completed by its employees during fiscal 2011. The Company's web-basedlearning platform was enhanced with richer content, additional programmes and greaterdomain coverage.

9.3 Talent Management and Leadership Development

Highly engaged employees are critical for sustaining the Company's growth. A continuousfocus on improving HR practices around talent engagement, talent deployment, performanceand career management, reward and recognition for high performance and competitivecompensation and benefits, helped the Company to attract and retain the best talent.

Communication and engagement with employees, rotating talent across projects, countriesand roles, providing opportunities for upgrading competencies and helping employeesprogress to higher level roles, provides the necessary platform for employees to realisetheir potential.

Leadership Development Programmes (LDP) address the need for developing the necessaryleadership talent pool for the current growth as well as future requirements. Candidatesare identified and nominated for LDPs and provided experiential learning to hone theirskills and take up leadership positions.

Programmes were offered in-house at the TCS Leadership Institute at Trivandrum and theTata Management Training Centre at Pune. Senior leaders were sponsored for programmes atreputed institutes in India and abroad.

A number of employee engagement initiatives including fun events, wellness programmesand talent shows were organised. Employees were encouraged to volunteer for CorporateSocial Responsibility (CSR) programmes. These initiatives helped improve employee bonding,develop their personalities and manage stress at work. The Company's culture of listeningto employees, taking their feedback and addressing their concerns swiftly has helpedimprove employee satisfaction.

These practices have helped the Company win recognition and a number of awardsglobally. TCS remains the industry benchmark for talent retention. The Company's attritionrate including BPO went up to 14.4% in fiscal 2011 as compared to 11.8% in the previousyear, due to higher demand in the industry. However, this represents the lowest attritionfigure in the industry.

9.4 Talent Diversity

The Company has improved its workforce diversity through an equal-opportunity globalrecruitment program and as an outcome of strategic initiatives like Mergers andAcquisitions (M&A) and insourcing. Avenues have also been provided to integratedifferently-abled people with the mainstream workforce. The annual 'Talent Acquisition'plan includes an optimal mix of fresh and experienced recruits with diverse educationaland cultural backgrounds.

As of March 31, 2011, women constituted 30.30% of the Company's workforce. The Companyemployed persons from 99 different nationalities.

9.5 Giving back to society

The Company encouraged employees to volunteer in a range of CSR activities classifiedunder three focus areas: Education/Skill Development, Environmental Sustainability andHealth Awareness. Employees participated in issues of larger global impact through eventslike Earth Hour 2011, World Water Day and Earth Day.

The Company's advanced computer training center trained visually impaired youth,thereby opening new avenues for employment and further studies. Adult literacy camps wereorganised in collaboration with the National Literacy Mission using its computer-basedfunctional literacy package.

The Company runs a programme to improve employability of underprivileged graduates andthose hailing from scheduled castes and scheduled tribes, under which over 2,000candidates were trained. As of March 31, 2011, over 1,000 were under training. Provisionalemployment offers were made to 428 candidates.

9.6 Compliance

The Compliance Cell within HR continues to track development in immigration, employmentand labour laws globally and recommends changes in policies and procedures to mitigatefuture risks arising out of changes in the legal environment.

10.1 Opportunities

TCS is the industry leader in India and amongst the Top 10 IT services companies in theworld in terms of revenues, profits, market capitalisation and number of employees.Continuing investments in technology by its clientele, a growing preference for globalsourcing and the emergence of newer technologies and business models offer manyopportunities for TCS.

The Company's integrated full services capability, global delivery footprint and scalehave expanded its addressable market, strengthened its reputation and ensured itsinclusion in the top tier list of vendors invited for the largest and most complex bids.These offer a sizable growth opportunity for the Company.

10.2 Risks and Risk Mitigation

The Company has put in place an Enterprise-wide Risk Management (ERM) programme basedon the Committee of Sponsoring Organisations of the Treadway Commission (COSO) framework.Reports are placed before the Board of Directors at regular intervals.

The risk management process is continuously improved and adapted to the changing globalrisk scenario. The agility of the risk management process is monitored and reviewed forappropriateness with the changing risk landscape. The process of continuous evaluation ofrisks, includes taking stock of the risk landscape on an event-driven as well as quarterlybasis.

The risk categories covered under the ERM programme includes strategic, operational andfinancial as well as compliance-related risks across various levels of the organisation.This includes risk assessment and mitigation at the company level, business / functionalunit level, relationship level and project level.

Some of the key strategic risks the Company faces, their impact and corresponding riskmitigation actions undertaken by the Company are discussed in the table:

PERFORMANCE TREND

Over the years, TCS has built itself into an organisation that not only partners withits customers, but also provides value addition, through a repertoire of innovativesolutions and superior quality of services. It has thus emerged from being a trustedexpert, to a trusted business advisor to all its clients. Today, TCS has risen toeminence, as a leading Company in the IT / ITES space in the globe.

In its journey of business success and excellence, TCS has created significant wealthfor all its stakeholders.

Earnings per share

Earnings per share (EPS), adjusted for two 1:1 bonus issues, went up from Rs. 11.84 inFY 2005 to Rs. 46.27, in FY 2011 - almost a four-fold increase.

Market Capitalisation

Market capitalisation saw a phenomenal increase from Rs. 47,254 crores in August 2005,to Rs. 2,31,713 crores in March 2011, a rise of almost five times.

Increase in net worth

The net worth of the Company has increased seven times in the last seven years.

Economic Value Addition (EVA)

EVA in FY 2011 has increased more than four times from FY 2005. The chart below showsthe cumulative EVA in the last seven years, indicating a steady and consistent increase inthe value created.

SHARING OF CASH GENERATED SINCE FISCAL 2005

As much as 48% of the cash generated from FY 2005 to FY 2011 has been distributed tothe shareholders as dividend.

The Company's dividend payment record is one of the best in the industry.

Revenue trend

Revenues grew to a record high of Rs. 37,325 crores ($ 8.2 billion) in 2010-11 - a riseof almost four times from 2004-05, with a compounded annual growth rate (CAGR) of 21.14%.

Management of costs

The company has been able to strengthen its cost management processes. The operatingcosts, as percentage of revenues have come down.

Earnings trends

Earnings before interest, depreciation, tax and amortisation (EBIDTA) excluding otherincome have grown by four times from Rs. 2,814 crores in FY 2005 to Rs. 11,178 crores inFY 2011.

Profits after taxes (PAT) have grown by more than four times from Rs. 1,977 crores inFY 2005 to Rs. 9,068 crores in FY 2011.

Profitability has been one of the focus areas of the Company. In recent timesprofitability has improved substantially.

GROWTH OF MANPOWER RESOURCE

Headcount (including subsidiaries) has expanded by more than four times from 45,714 inFY 2005 to 1,98,614 in FY 2011.

FINANCIAL PERFORMANCE - (CONSOLIDATED)

Tata Consultancy Services Limited (TCS Limited) is a public company listed on"National Stock Exchange of India Limited (NSE)" and "The Bombay StockExchange Limited (BSE)" since August 25, 2004.

The financial statements of TCS Limited are prepared in compliance with the CompaniesAct, 1956 and generally accepted accounting principles in India (Indian GAAP).

TCS Limited has a number of subsidiary companies which are either wholly-owned orpartly-owned.

TCS Limited discloses audited financial results on a quarterly and annual basis. Thefinancial results of TCS Limited as per Indian GAAP are discussed hereunder in two parts:

(i) Tata Consultancy Services Limited (Consolidated) which includes performance ofsubsidiaries of TCS Limited. Preparation and presentation of such Consolidated FinancialStatements depicts comprehensively the performance of the TCS group of companies and ismore relevant for understanding the overall performance of TCS.

(ii) Tata Consultancy Services Limited (Unconsolidated) which excludes the performanceof subsidiaries of TCS Limited. [see Management Discussion and Analysis (unconsolidated)].

The following discussion and analysis should be read together with the ConsolidatedIndian GAAP Financial Statements of Tata Consultancy Services Limited (hereinafterreferred to as TCS or the Company) for the financial years ended March 31, 2011, 2010 and2009.

Financial performance summary (consolidated)

The Global economy and the IT industry in particular have been going through volatiletimes. The major markets in which the Company operates had to navigate through a phase ofone of the worst economic crisis the world has ever faced. The period of crisis was usedby the Company for revamping its internal business processes, without losing focus ondelivering value to customers and growth with profitability for the company. Driven by thepassion for continuous improvement and diligent implementation of its strategy, theCompany has gone from strength to strength and is well positioned for future growth.

In fiscal 2011, the global economic environment improved. The Company remained focusedon overall growth and management of costs. As compared to fiscal 2010, there has been allround improvement in its financial performance in fiscal 2011.

The trends in the financial performance of the Company can be seen in the section'Company's Performance Trend (Indian GAAP Consolidated)'.

In fiscal 2011, the consolidated revenues of the Company aggregated Rs. 37,324.51crores (Rs. 30,028.92 crores in fiscal 2010), registering a growth of 24.30%.

The consolidated profit before taxes (PBT) aggregated Rs. 11,020.62 crores in fiscal2011 (Rs. 8,289.63 crores in fiscal 2010) - a growth of 32.94%. Pre-tax profit as apercentage of revenues improved from 27.61% in fiscal 2010 to 29.53% in fiscal 2011.

The consolidated net profit for the fiscal 2011 after taxes aggregated Rs. 9,068.04crores (Rs. 7,000.64 crores in fiscal 2010) - a growth of 29.53%. Post-tax profit as apercentage of revenues improved from 23.31% in fiscal 2010 to 24.30% in fiscal 2011.

In fiscal 2011, the Company's consolidated earnings per share were Rs. 46.27 (Rs. 35.67in fiscal 2010).

FINANCIAL PERFORMANCE — (CONSOLIDATED)

The Management Discussion and Analysis below relates to the consolidated auditedfinancial statements of TCS Limited and includes the results of its subsidiaries. Thediscussion should be read in conjunction with the consolidated financial statements andthe related 'notes to the consolidated accounts' for the year ended March 31, 2011.

Revenues from operations

The Company's consolidated revenues increased in fiscal 2011 to Rs. 37,324.51 croresfrom Rs. 30,028.92 crores in fiscal 2010, a growth of 24.30% (7.97% in fiscal 2010).

Revenues from information technology and consultancy services increased in fiscal 2011to Rs. 36,046.13 crores from Rs. 29,085.21 crores in fiscal 2010, a growth of 23.93%.Revenues from information technology and consultancy services constituted 96.57% of thetotal revenues in fiscal 2011 (96.86%in fiscal 2010).

Consolidated revenues from sale of equipment and software licenses increased by 35.46%to Rs. 1,278.38 crores in fiscal 2011 from Rs. 943.71 crores in fiscal 2010.

Analysis of revenue growth

The growth in volume in fiscal 2011 was 29.65%, significantly more than that of fiscal2010 (17.37%) and fiscal 2009 (19.33%). The growth in volume is attributable to increaseddemand for services from existing and new customers in fiscal 2011.

Unlike in earlier years, which witnessed pricing pressure (4.89% in fiscal 2009 and3.32% in fiscal 2010), fiscal 2011 was more or less steady on the pricing front.

Effort-wise, the relative position for India offshore deployment in fiscal 2011 andfiscal 2010 did not change. The onsite deployment increased while Global Delivery Center(GDC) deployment declined in fiscal 2011.The effect on revenue growth as a result of thisonsite/offshore/GDC mix change - was a negative 0.85%, primarily on account of shift ofefforts - intra onsite/ GDC locations.

TCS is a global company and earns its revenues in multiple currencies. During fiscal2011, the volatility in exchange rates impacted growth. The trend in average exchangerates of the Indian Rupee vis-a-vis some of the major currencies in which TCS transactsits business is shown in the following table:

In fiscal 2010, all significant currencies, except British Pound Sterling (GBP),appreciated vis-a-vis Indian Rupee and the revenue growth attributable to exchange ratevariation for all currencies was 2.04%.

In fiscal 2011, US Dollar (USD), Euro (EUR) and British Pound Sterling (GBP) weakenedvis-a-vis Indian Rupee. Though the Australian Dollar (AUD) and Canadian Dollar (CAD)continued to strengthen, the impact on the Company's revenue was low because of their lowweightage in the mix of the Company's business. The significant negative movement in themajor currencies during fiscal 2011 resulted in degrowth of 4.20%.

Revenues by industry segment - Fiscal 2011

The composition of major industry segments as a percentage of revenues is shown in thetable. During fiscal 2011, revenues for all industry segments showed growth. Some detailsabout the growth of various industry segments are discussed below:

• BFSI was one of the most affected industry segments during the global economicslowdown. In fiscal 2011, BFSI had a healthy growth (22.52% over fiscal 2010) due tosustained demand

• Industry segments which recorded high growth in fiscal 2011 vis-a-vis fiscal2010 were Retail and CPG (29.03%), Life Science and Healthcare (26.80%), Hi-Tech (43.70%),Energy, Resources and Utilities (79.50%), Media and Entertainment (39.80%) and Travel,Transportation and Hospitality (33.30%)

• Industry segments which recorded growth lower than Company's average revenuesgrowth in fiscal 2011 vis-a-vis fiscal 2010 were Telecom (21.25%) and Manufacturing(13.06%).

Revenues by geographic segments

Despite the fact that in fiscal 2011 almost all the major currencies depreciatedvis-a-vis Indian Rupee, revenues from major markets showed growth. Growth in North Americawas 26.82%, the United Kingdom was 18.74% and Europe was 10.49%. New growth markets whichwitnessed significant growth were Asia Pacific (56.10%), India (32.22%) and Middle Eastand Africa (26.16%).

Revenues by significant services

The composition of major service lines as a percentage of revenues is shown in thetable above. During fiscal 2011 revenues from all service lines showed growth. Detailsabout the growth of service lines are shown below:

Revenues from fixed-price-fixed-time contracts

As part of its strategy, the Company has been moving more towardsfixed-price-fixed-time contracts. TCS has aligned its capabilities and strategy to deliversuch fixed-price-fixed-time contracts and the trends over the last three years areindicative of the success of the said strategy.

Revenues by location of service delivery

The Company has been using its network of Global Delivery Centers (GDCs) to serviceclient requirements as part of its GNDMTM strategy. Onsite revenues are for those serviceswhich are performed at client locations. Offsite revenues reflect the aggregation ofrevenues from services which are performed at delivery centers located in India (referredto as offshore revenues) as well as GDCs in various countries. The composition of theCompany's revenues from offshore, GDC and onsite are as follows:

Onsite-Offsite Revenue Mix (% of Revenues)

The revenues from onsite, offsite GDC and offshore services are aligned with customerrequirements. In fiscal 2011 the India offshore revenues as a percentage of TCS' totalrevenues remained at 50.96% - almost same as 50.97% in fiscal 2010. There have been smallintra onsite/ GDC movements as reflected in the chart.

Employee costs and overseas business expenses

Employee costs include salaries which have fixed and variable components, contributionto provident, superannuation and gratuity funds and employee pension schemes. It alsoincludes expenses incurred on staff welfare.

Overseas business expenses primarily comprise living allowances paid to employees onoverseas assignments. For purpose of this Management Discussion and Analysis (MD&A),these costs included in 'overseas business expenses' have been regrouped in 'employeecosts' for aggregating all costs related to employee compensation. In this MD&A, werefer to such aggregated costs as 'Total employee costs'.

The table below summarises the employee costs:

Total employee costs have increased in fiscal 2011 over fiscal 2010 by 24.21%.

Total employee costs as a percentage of revenues has decreased marginally by 0.03%,mainly attributable to:

• Increase in India employee costs 0.55% - primarily on account of increase inIndia head count 0.40% and increase in staff welfare costs 0.13%

• Decrease in employee costs in overseas locations was 0.58%. During fiscal 2011,the customer centric strategy adopted by the Company to service the larger volume ofbusiness requirements of its customers, required increase in the use of the services ofbusiness associates. In terms of percentage of revenues the decrease in employee costs inoverseas locations 0.58% is more than compensated by an increase in costs for businessassociates employed by the Company 0.72% of revenues.

Utilisation of manpower resources including trainees was 76.20% during fiscal 2011(74.00% during fiscal 2010). The utilisation excluding trainees was 83.10% during fiscal2011 (80.40% during fiscal 2010). The significant improvement in utilisation alsocontributed to margin improvement.

Overseas business expenses (other than employee allowances paid overseas)

These expenses include travel, marketing and office expenses incurred overseas.

Overseas business expenses (other than employee allowances paid overseas) increasedfrom Rs. 383.89 crores in fiscal 2010 to Rs. 542.52 crores in fiscal 2011. As a percentageof revenues these expenses increased from 1.28% in fiscal 2010 to 1.45% in fiscal 2011.Overseas travel which constituted the largest component, increased from Rs. 225.32 croresin fiscal 2010 (0.75% of revenues) to Rs. 319.20 crores in fiscal 2011 (0.86% ofrevenues). This increase of 0.11% was mainly attributable to increased business travel inline with business growth.

Services rendered by business associates and others

Payments for services rendered by business associates or sub-contractors engaged forsoftware development and other IT services are included under this head. The Companynormally engages these consultants to bridge shortages in certain skill-sets.

Expenditure on business associates increased from Rs. 1,261.97 crores in fiscal 2010 toRs. 1,836.55 crores in fiscal 2011. As a percentage of revenues, the increase was from4.20% in fiscal 2010 to 4.92% in fiscal 2011. The total increase of 0.72% was attributablemainly to higher requirement of business associates at some overseas locations.

The analysis of services rendered by business associates is shown below:

The management conducts periodic reviews of the need for such associates vis-a-visavailability of the required skill sets within the Company and manages these costsappropriately.

Operation and other expenses

Operation and other expenses include all other expenses affecting the profit and lossstatement, incurred to conduct the Company's operations.

The reduction in other operating expenses as a percentage of revenues 1.85% (from15.39% in fiscal 2010 to 13.54% in fiscal 2011) was primarily due to:

• Decrease in software and hardware costs 0.48%

• Decrease in rent 0.43%

• Decrease in legal and professional fees 0.09%

• Decrease in other items of expenditure 1.17% primarily on account of write backof provision for bad debts 0.84%, lower insurance expenses 0.07% and lower other expenses0.23%

• Offset by an increase in communication expenses 0.04%, travelling and conveyanceexpenses 0.13% and recruitment and training expenses 0.19%.

The leadership team continued to focus on cost management during fiscal 2011 as isevident from the reduction in costs in relation to the revenues.

Other income (net)

Other income comprises interest received on deposits with banks, dividends from mutualfunds and losses due to exchange rate fluctuations.

Other income in fiscal 2011 was Rs. 604.00 crores (Rs. 272.07 crores in fiscal 2010),an increase of 0.71% as a percentage of revenues.

Net loss on account of foreign exchange fluctuations reduced in fiscal 2011. There wasan increase in other income as a result of continuous review of portfolio of investmentsin interest-bearing bank deposits, mutual funds and inter-corporate deposits. Increase inother income (net) was mainly attributable to:

• Increase in interest income 0.65%

• Decrease in exchange loss (net) 0.54%

• Offset by

o Decrease in profit on redemption/sale of mutual funds and other current investments(net) 0.30%

o Decrease in miscellaneous income 0.17%.

Forward and option contracts

The Company enters into various forward and option contracts to manage its exposure toexchange rate fluctuations, in accordance with its risk management policies andprocedures. These contracts are generally entered into with banks as counterparties. TheCompany designates some of its hedges as 'cash flow hedges' on completion of the requireddocumentation. Hedge effectiveness testing is done periodically by applying therecognition and measurement principles set out in the Indian Accounting Standard 39"Financial Instruments: Recognition and Measurement" (Ind AS 39). All such 'cashflow hedges' are measured at their respective fair values at the reporting dates. Changesin the fair value of effective hedges are recognised in the 'Shareholders' funds' and theineffective hedges are recognised as 'Other income' in the profit and loss account.

On sale or termination of any 'cash flow hedge' before maturity, hedge accounting isdiscontinued and cumulative gains or losses on such instruments are retained in the'Shareholders' funds' until the maturity of the instrument and thereafter transferred tothe profit and loss account. On sale or termination of hedges on maturity, the resultantgains or losses are taken to 'Other income' in the profit and loss account for the period.

Forward contracts and currency options outstanding at the reporting dates, other thandesignated cash flow hedges, are stated at their fair values and gains or losses arerecognised as 'Other income' in the profit and loss account for the period.

Note 18 to the consolidated accounts provides details of the Company's 'DerivativeFinancial Instruments'.

(PBIDT)

PBIDT in fiscal 2011 was Rs. 11,782.36 crores (Rs. 8,966.62 crores in fiscal 2010).PBIDT as percentage of revenues was 31.57% in fiscal 2011 (29.86% in fiscal 2010). Theincrease in the PBIDT of 1.71% as percentage of revenues in fiscal 2011 was mainlyattributable to:

• Decrease in operation and other expenses 1.85%

• Improvement in other income (net) 0.71%

• Offset by an increase in overseas business expenses 0.17% and services renderedby business associates 0.72%.

Interest costs

Interest costs increased to Rs. 26.48 crores in fiscal 2011 (0.07% of revenues) fromRs. 16.10 crores in fiscal 2010 (0.05% of revenues).

Depreciation and amortisation

Depreciation/amortisation charge has increased from Rs. 660.89 crores (2.20% ofrevenues) in fiscal 2010 to Rs. 735.26 crores (1.97% of revenues) in fiscal 2011. Theincrease in depreciation/amortisation was primarily due to additional capitalisation ofcomputer equipment.

The decrease in terms of revenues 0.23% was primarily attributable to:

• Decrease on account of furniture and fixtures and office equipment 0.17%

• Decrease on account of intangible assets 0.06%

• Decrease on account of buildings and leasehold improvements 0.04%

• Increase on account of computers 0.05%.

Profit before taxes

Profit before taxes (PBT) in fiscal 2011 was Rs. 11,020.62 crores (Rs. 8,289.63 croresin fiscal 2010). As a percentage of revenues PBT increased from 27.61% in fiscal 2010 to29.53% in fiscal 2011. The substantial increase of 1.92% can be attributed to higher PBIDTof 1.71% and lower depreciation of 0.23% marginally offset by higher interest costs 0.02%.

Provision for taxation

Income tax expense comprises current income tax and the net changes in the deferred taxassets and liabilities from operations in India and foreign tax jurisdictions. Taxexpenses relating to operations are determined in accordance with tax laws applicable incountries where such operations are carried out. The Company has been benefiting fromcertain tax incentives under the Indian Income Tax Act, 1961 (IT Act), in respect of ITservices exported from designated 'Software Technology Park (STP)' units. The benefitsapplicable to STP expired on March 31, 2011. The Company also avails tax incentivesapplicable to Special Economic Zones (SEZ) under the IT Act.

Till March 31, 2011, 'Minimum Alternative Tax' (MAT) was applicable to the Companyexcluding its income from SEZ. With effect from April 1, 2011, MAT would be applicable toincome from SEZ also. MAT paid gives rise to tax credit which according to the IT Act canbe carried forward for subsequent ten years and adjusted against future tax liabilities.In the view of the Company, it would have sufficient tax liabilities to offset the MATcredits during the prescribed carry forward period. Accordingly, MAT was recognised as anasset in the balance sheet.

The Company's consolidated tax expense in fiscal 2011 increased to Rs. 1,830.83 croresfrom Rs. 1,196.97 crores in fiscal 2010. As a percentage of revenues, it increased to4.91% in fiscal 2011 from 3.99% in fiscal 2010. As a percentage of profit before taxes,the tax charge has gone up from 14.44% in fiscal 2010 to 16.61% in fiscal 2011.

The increase in the effective tax rate from 14.44% in fiscal 2010 to 16.61% in fiscal2011 was primarily attributable to:

• Increase in effective tax rate for Tata Consultancy Services Ltd.(unconsolidated) from 11.80% in fiscal 2010 to 12.99% in fiscal 2011 primarily on accountof increase in other income and expiry of period of tax holiday for certain STP units

• Increase in tax provision of one of the Company's subsidiaries in India as aresult of expiry of tax holiday of its STP Units

• Increase in taxable profits of the overseas subsidiary companies.

Net profit before minority interest

The Company's net profit before minority interest increased from Rs. 7,092.66 crores infiscal 2010 to Rs. 9,189.79 crores in fiscal 2011. Net profit margin on revenues increasedfrom 23.62% in fiscal 2010 to 24.62% in fiscal 2011. The increase in net profit margin of1.00% is attributable to increase in PBT margin of 1.92% offset by higher net taxes of0.92% in fiscal 2011.

Minority interest

Minority interest represents the amount of net profit attributable to third partyownership interests in the Company's subsidiaries.

Minority interest registered an increase from Rs. 90.99 crores in fiscal 2010 to Rs.121.45 crores in fiscal 2011. This is primarily due to increase of profits in two of itssubsidiaries.

Share of loss of associate

The Company's share of loss of associate as a result of such minority shareholding wasa loss of Rs. 0.30 crores in fiscal 2011 as compared to a loss of Rs. 1.03 crores infiscal 2010.

Net profit

The Company's consolidated net profit was Rs. 9, 068.04 crores in fiscal 2011 (24.30%of revenues) against Rs. 7,000.64 crores in fiscal 2010 (23.31% of revenues). TheCompany's consolidated net profit has increased 29.53% in fiscal 2011 as compared tofiscal 2010.

Consolidated segment result

The Company considers 'Industry' as its primary segment and 'Geography' as itssecondary segment.

Revenues and expenses directly attributable to segments are reported under eachreportable primary segment.

The Company's industry segment results are summarised below.

The following table presents each industry segment's revenues as a percentage of totalindustry revenues and each industry segment's result, i.e., operating profit (excludingunallocated expenses) as a percentage of total industry segment result.

Industry segment-wise performances are discussed below:

BFSI constitutes the Company's largest segment. This constituted 44.28% of Company'srevenues in fiscal 2011 (44.92% in fiscal 2010) and has contributed 46.73% of totalsegment result in fiscal 2011 (45.23% in fiscal 2010).

BFSI has shown satisfactory growth in terms of revenues (22.52% over fiscal 2010) aswell as segment result (33.48% over fiscal 2010). The result in terms of revenues also hasimproved from 28.72% in fiscal 2010 to 31.29% in fiscal 2011. The customers in thissegment were adversely affected during the global economic slowdown. However, fiscal 2011witnessed economic recovery and increased spending by customers. The change in the BFSIlandscape is reflected in the result for fiscal 2011. Other significant developments infiscal 2011 were (1) addition of new customers across geographies, including marquee logosthat hold good potential for future growth, (2) establishing a group of 'IndustryPrincipals' to advise customers on high end business strategy and (3) filing applicationfor patenting 'Risk Assessment System', which is a component of the Company's MobileTelematic Solution.

The second largest segment of the Company is Telecom (including Media andEntertainment). This constituted 14.18% of Company's revenues in fiscal 2011 (14.54% infiscal 2010) and has contributed 16.66% of total segment result in fiscal 2011 (15.77% infiscal 2010).

Media and Entertainment vertical did extremely well -the revenues registered a growthof 39.80% over fiscal 2010. Some of the agile processes and technologies put in place havemade it possible for the Company to position itself well in the industry.

In fiscal 2010, telecom faced some setbacks. Some of the major customers cut down theirIT budgets and the Company witnessed a reduction in revenues compared to fiscal 2009. Infiscal 2011 telecom witnessed moderate growth (18.47% over fiscal 2010), driven byrecovery of business with some of the strategic customers.

The segment result has shown significant improvement from 30.95% in fiscal 2010 to34.84% in fiscal 2011.

In fiscal 2011 Telecom was able to (1) add new customers with annuity businesspotential across geographies (2) deploy mobile number portability solutions and ITinfrastructure for launch of 3G services (3) commercially deploy 'Telco in a Box' offeringto large telecom companies and (4) create a separate unit called 'Mobility Solutions Unit'to service all the industry verticals of TCS.

In fiscal 2011 Media and Entertainment surged ahead by (1) exploiting the Company'sfull service capability (2) deploying Platform Based Solutions (3) pre-building a SocialWeb Monetisation Platform to enable its customers to rapidly establish social media basedpresence on the web and (4) acquiring significant experience and capability inbroadcasting segment.

The third largest segment for the Company is the Retail and CPG segment. Thisconstituted 11.00% of the Company's revenues in fiscal 2011 (10.59% in fiscal 2010) andhas contributed 9.69% of total segment result in fiscal 2011 (9.88% in fiscal 2010).

Capitalising on the increased spending by retailers on discretionary programmes andmaking full use of its domain driven full services offerings, the Retail and CPG segmentdid well in fiscal 2011. The segment revenues have shown a healthy growth of 29.03% infiscal 2011. Segment result has also shown creditable growth of 26.60% in fiscal 2011.

During fiscal 2011, the segment has (1) won several transformational deals using theCompany's deep domain capabilities (2) offered non-linear solutions using the Company'sdomain driven 'Full Services Offerings' for certain mission critical programmes and (3)co-opted alliances and also used the Company's rich repository of intellectual propertiesto bring best practices to its customers.

The fourth largest segment for the Company is the Manufacturing segment. Thisconstituted 7.37% of Company's revenues in fiscal 2011 (8.10% in fiscal 2010) and hascontributed 6.37% of total segment result in fiscal 2011 (8.68% in fiscal 2010).

Manufacturing was one of the industries worst affected during the global economicslowdown. Fiscal 2010 witnessed de-growth in revenues as well as segment result. Aerospaceand process engineering areas continued to face strong headwinds in fiscal 2011.Automotive and Industrial Manufacturing and Components improved marginally - the resultwas a moderate 13.06% growth in revenues in fiscal 2011 over fiscal 2010. However, thesegment had to face pressure on margins, which resulted in decrease in segment resultsfrom 30.53% in fiscal 2010 to 25.59% in fiscal 2011. The manufacturing segment continuedto invest in the expected growth areas, namely, mobility, Knowledge Process Outsourcing(KPO) and green and sustainability initiatives.

Other segments include:

• Life Sciences and Healthcare

• Energy, Resources and Utilities

• Travel, Transportation and Hospitality

• Third Party Products

• Hi-Tech

• s-Governance

• Others

The 'Other segments' constituted 23.17% of Company's revenues in fiscal 2011 (21.85% infiscal 2010) and has contributed 20.55% of total segment result in fiscal 2011 (20.44% infiscal 2010).

The combined performance of 'Other segments' was an excellent growth in revenues(31.84% in fiscal 2011 over fiscal 2010) and an impressive improvement in segment result(29.89% in fiscal 2011 over fiscal 2010). Segment result remained steady at 26.29%. Someof the star performers were Life Sciences and Healthcare (revenue growth 26.80%), Energy,Resources and Utilities (revenue growth 79.50%), Hi-Tech (revenue growth 43.70%) andTravel, Transportation and Hospitality (revenue growth 33.30%) in fiscal 2011 over fiscal2010.

FINANCIAL POSITION — CONSOLIDATED

Share capital

The authorised share capital remained at 225 crores equity shares of Rs. 1 each and 100crores redeemable preference shares of Rs. 1 each.

Reserves and surplus

The balance in the Capital reserve (on consolidation) stood at Rs. 24.50 crores as atMarch 31, 2011 (Rs. 5.02 crores as at March 31, 2010). The increase in the balance ofCapital reserve during fiscal 2011 is on account of the purchase accounting for theacquisition of Unisys Insurance Services Limited (UISL) (renamed as Diligenta 2 Limited)where the net assets acquired were higher as compared to the purchase consideration.

The balance in the Capital redemption reserve remained unchanged at Rs. 0.40 crores asat the end of March 31, 2011.

Securities premium account stood unchanged at Rs. 1,918.47 crores as at March 31, 2011.

The opening balance of General reserve as at April 1, 2010 was Rs. 2,539.59 crores. Infiscal 2011, Rs. 827.58 crores was transferred to the General reserve from the profit andloss account. The closing balance in the General reserve as at March 31, 2011 was Rs.3,367.17 crores.

Balance in the profit and loss account as at March 31, 2011 was at Rs. 18,635.05 crores(Rs. 13,604.84 crores as at March 31, 2010).

Foreign currency translation reserve

For purpose of consolidation of subsidiaries with the financial information of theholding company, income and expenses are translated at average rates and the assets andliabilities are stated at closing rate. Use of such different rates for translation givesrise to exchange difference which is accumulated in foreign currency translation reserve.

Foreign currency translation reserve was Rs. 200.77 crores as at March 31, 2011 (Rs.108.75 crores as at March 31, 2010).

The closing balance of hedging reserve (arising out of cash flow hedges) as at March31, 2011 showed net accumulated gain of Rs. 62.73 crores (Rs. 6.07 crores net accumulatedloss as at March 31, 2010).

Reserves and surplus at the end of fiscal 2011 was Rs. 24,209.09 crores, an increase of33.23% over Rs. 18,171.00 crores at the end of fiscal 2010.

Loans

Secured loans as at March 31, 2011 were Rs. 38.44 crores (Rs. 31.21 crores as at March31, 2010).

Bank overdrafts as at March 31, 2011 aggregated Rs. 0.46 crores (Rs. 'Nil' as at March31, 2010) and were secured against domestic book debts.

The Company's obligations under finance lease (refer note 9 to schedule Q inconsolidated notes to accounts) was Rs. 37.98 crores as at March 31, 2011 (Rs. 31.21crores as at March 31, 2010) - these are secured against fixed assets obtained underfinance lease arrangements.

Unsecured loans as at March 31, 2011 aggregated Rs. 36.36 crores (Rs. 72.04 crores asat March 31, 2010). Loans from banks as at March 31, 2011 were at Rs. 31.11 crores (Rs.58.31 crores as at March 31, 2010). Other unsecured loans were Rs. 5.25 crores as at March31, 2011 (Rs. 13.73 crores as at March 31, 2010).

Deferred tax liability (net) and deferred tax assets (net)

As stated in the accounting policies (see notes to consolidated accounts, schedule Q 1(I)), deferred tax assets and liabilities are offset, tax jurisdiction-wise. Schedule 'E'of the balance sheet brings out details of component-wise deferred tax balances where thenet values result into liabilities or assets, jurisdiction-wise.

Deferred tax liabilities are created against certain items such as foreign branchprofit and depreciation. The net deferred tax liability was Rs. 109.49 crores as at March31, 2011 (Rs. 68.68 crores as at March 31, 2010). Deferred tax assets are created againstcertain items such as employee benefits, depreciation and provision for doubtful debts. Asat March 31, 2011, the net deferred tax asset had a balance of Rs. 160.18 crores (Rs.167.86 crores as at March 31, 2010). The Company assesses the likelihood of deferred taxassets getting recovered from future taxable income.

Fixed assets

Additions to the gross block excluding Capital-Work-in -Progress (CWIP) in fiscal 2011amounted to Rs. 1,493.79 crores (Rs. 737.93 crores in fiscal 2010). The significant itemsof additions were:

• Land and buildings Rs. 299.11 crores in fiscal 2011 (Rs. 179.90 crores in fiscal2010)

• Leasehold improvements Rs. 140.88 crores in fiscal 2011(Rs. 62.90 crores infiscal 2010)

• Computers Rs. 587.16 crores in fiscal 2011 (Rs. 266.84 crores in fiscal 2010)

• Office equipment, electrical installations and furniture and fixtures Rs. 366.23crores in fiscal 2011 (Rs. 214.30 crores in fiscal 2010)

The amount in CWIP was Rs. 1,469.18 crores as at March 31, 2011 (Rs. 1,017.37 crores asat March 31, 2010) mostly related to construction / improvement of facilities which arelikely to be ready for use in fiscal 2012 and beyond. The CWIP included capital advancesof Rs. 275.29 crores as at March 31, 2011 (Rs. 219.73 crores as at March 31, 2010).

The Company entered into contractual commitments with vendors who are executing variousinfrastructure projects. The estimated amount of such contracts remaining to be executedon capital account was Rs. 1,208.27 crores as at March 31, 2011 (Rs. 1,172.62 crores as atMarch 31, 2010).

Goodwill on consolidation

Goodwill on consolidation represents the excess of purchase consideration over netasset value of acquired subsidiaries on the date of such acquisition. Such goodwill istested for impairment annually or more frequently, if there are indications forimpairment. The management does not foresee any risk of impairment on the carrying valueof goodwill as at March 31, 2011.

Goodwill on consolidation as at March 31, 2011 stood at Rs. 3,232.00 crores (Rs.3,215.99 crores as at March 31, 2010).

The strategic acquisitions which have significant contribution to goodwill onconsolidation are

(1) TCS e-Serve Ltd. - 59.68%

(2) TCS Switzerland Ltd. - 9.74%

(3) TCS FNS (Pty) Ltd. - 5.60% and

(4) Subsidiaries of TCS Iberoamerica S.A. - 9.18%.

Investments

Investments in bonds and debentures (quoted and unquoted) as at March 31, 2011 was Rs.1,390.14 crores (Rs. 1,210.97 crores). The additional investments in bonds and debenturesare attributable to investments made by a subsidiary in India.

In order to achieve higher yield, the Company has increased its exposure in fixeddeposit with banks in India from Rs. 3,531.31 crores as at March 31, 2010 to Rs. 6,061.70crores as at March 31, 2011 and consequently the exposure in mutual funds has been reducedfrom Rs. 2,459.44 crores as at March 31, 2010 to Rs. 343.24 crores as at March 31, 2011.This was in line with the Company's strategy for optimum utilisation of surplus cash.

Mergers

Custodia De Documentos Interes Limitada, Syscrom SA and Tata Consultancy Services ChileSA were merged with Tata Consultancy Services BPO Chile SA and subsequently the name ofthe merged entity was changed to Tata Consultancy Services Chile SA.

Exegenix Research Inc. and ERI Holdings Corp. were merged with Tata ConsultancyServices Canada Inc. The merged entity is a wholly owned subsidiary of Tata ConsultancyServices Limited.

Acquisitions

Diligenta Limited, U.K., acquired 100% equity interest in Unisys Insurance ServicesLimited (renamed as Diligenta 2 Limited).

CMC America Inc. subscribed to 100% share capital of CMC eBiz, Inc.

Tata America International Corporation acquired 100% equity share capital of MS CJVInvestments Corporation. Consequently, the group holding in Tata Consultancy Services(China) Co. Ltd. has increased from 65.94% to 74.63%.

Liquidations

Financial Network Services (H.K.) Limited (subsidiary of TCS Financial SolutionsAustralia Holdings Pty Limited) has been voluntarily liquidated and de-registered.

Unbilled revenues

Unbilled revenues primarily comprise revenues recognised in relation to effortsincurred on contracts, which are yet to be billed.

Unbilled revenues were Rs. 1,348.85 crores as at March 31, 2011 (Rs. 1,201.14 crores asat March 31, 2010) representing 3.61% of the revenues for fiscal 2011 (4.00% as at March31, 2010).

Sundry debtors

Sundry debtors as at March 31, 2011 aggregated Rs. 8,198.84 crores (Rs. 5,855.41 croresas at March 31, 2010). As a percentage of revenues, sundry debtors were at 21.97% as atMarch 31, 2011 as compared to 19.50% as at March 31, 2010.

Cash and bank balances

The amount held in fixed deposits with banks in India increased from Rs. 3,531.31crores as at March 31, 2010 to Rs. 6,061.17 crores as at March 31, 2011 in line with theCompany's cash management strategies. As a result, the yield from deployment of surpluscash has increased in fiscal 2011.

Loans and advances

Loans and advances include advances recoverable, advance tax net of provision fortaxes, loans and advances to employees and MAT credit.

Loans and advances as at March 31, 2011 were at Rs. 4,858.16 crores (Rs. 3,969.77crores as at March 31,2010). The increase was primarily attributable to:

• Advances recoverable Rs. 2,377.06 crores as at March 31, 2011 (Rs. 1,938.44crores as at March 31, 2010)

• Advance tax (net of provision for taxes) Rs. 1,249.72 crores as at March 31,2011 (Rs. 771.12 crores as at March 31, 2010).

Current liabilities

Current liabilities include sundry creditors, advances from customers, advance billingsand deferred revenues and other liabilities.

Current liabilities increased to Rs. 4,698.09 crores as at March 31, 2011 as comparedto Rs. 4,093.79 crores as at March 31, 2010. The increase was primarily due to:

• Sundry creditors Rs. 3,354.49 crores as at March, 31, 2011 (Rs. 2,977.73 croresat March 31, 2010)

• Other liabilities Rs. 522.42 crores as at March 31, 2011 (Rs. 371.82 crores asat March 31, 2010). These other liabilities include fair values of foreign exchangeforward and currency option contracts Rs. 57.70 crores as at March 31, 2011 (Rs. 115.92crores as at March 31, 2010).

Provisions

Provisions include employee benefits, proposed final dividend on equity shares,provisions for taxes (net of advance tax), proposed dividend on redeemable preferenceshares, tax on dividend and provision for contingencies and warranties.

Provisions aggregated Rs. 2,906.49 crores as at March 31, 2011 (Rs. 4,300.07 crores asat March 31, 2010). The decrease was mainly attributable to:

• Proposed final dividends on equity shares Rs. 1,565.78 crores as at March 31,2011 (Rs. 2,740.11 crores as at March 31, 2010)

• Tax on dividends Rs. 266.74 crores as at March 31, 2011 (Rs. 466.23 crores as atMarch 31, 2010).

Cash flows are reported by adjusting net profit before tax for effect of non-cashtransactions, changes in working capital, income taxes paid, cash transactions of capitalnature, cash transactions relating to investing and financing activities. Cash flows fromoperating, investing and financing activities of the Company are identified and reportedseparately.

Summary of cash flow statement is given below:

Cash flow from operations

Net cash of Rs. 6,638.09 crores was generated from operating activities by the Companyin fiscal 2011 (Rs. 7,406.23 crores in fiscal 2010).

The operating profit in fiscal 2011 as compared to fiscal 2010 went up by 25.00%.However, requirement of additional working capital and increased income tax payments19.38% in fiscal 2011 resulted in reduction of net cash inflow from operating activities.Additional working capital was driven by business needs.

Cash flow from investing activities

In fiscal 2011 the Company used Rs. 1,485.25 crores on investing activities (Rs.5,413.22 crores in fiscal 2010). The significant items of investing activities were:

• Fixed deposits with banks (net) having maturity greater than 3 months of Rs.2,141.38 crores in fiscal 2011 ( Rs. 2,421.99 crores in fiscal 2010)

• Sale of investments (primarily mutual funds) Rs. 2,001.67 crores in fiscal 2011(purchase Rs. 1,914.80 crores in fiscal 2010).

• Interest on deposits received in fiscal 2011 of Rs. 398.75 crores (Rs. 92.81crores in fiscal 2010) included in 'Others'.

Cash flow from financing activities

In fiscal 2011 the Company used Rs. 4,658.90 crores in financing activities ( Rs.2,381.35 crores in fiscal 2010). In fiscal 2011, the significant items of cash used infinancing activities were:

• Payment of dividend including tax of Rs. 4,592.69 crores due to the substantialincrease attributable to a special one-time dividend of Rs. 10 per share declared infiscal 2010 and paid in fiscal 2011 (Rs. 1,958.43 crores in fiscal 2010)

• Repayment of bank borrowings (net) of Rs. 24.39 crores in fiscal 2011 (Rs.400.57 crores in fiscal 2010).

COMPANY'S PERFORMANCE TREND (INDIAN GAAP CONSOLIDATED) PERFORMANCE SUMMARY

RATIO ANALYSIS

Summary

The total revenues of TCS Limited aggregated Rs. 29,275.41 crores in fiscal 2011 ascompared to Rs. 23,044.45 crores in fiscal 2010, registering a growth of 27.04%.

Other financial performance parameters are shown below:

• Company's profit before taxes aggregated Rs. 8,700.43 crores in fiscal 2011 (Rs.6,370.38 crores in fiscal 2010), registering a growth of 36.58%

• Company's profit after taxes aggregated Rs. 7,569.99 crores in fiscal 2011 (Rs.5,618.51 crores in fiscal 2010), registering a growth of 34.73%

• Company's earnings per share (EPS) were Rs. 38.61 in fiscal 2011 (Rs. 28.61 infiscal 2010), registering a growth of 34.95%.

DIVIDENDS

Decision on dividend is based on Tata Consultancy Services Limited (Unconsolidated)financials which excludes the performance of subsidiaries of TCS Limited. The Board ofDirectors declares quarterly interim dividends based on the performance of the Company.

For fiscal 2011 the Company declared three interim dividends of Rs. 2 per equity share.A final dividend of Rs. 8 per equity share has been recommended by the Board of Directorsat its meeting held on April 21, 2011.

On approval by the shareholders of the final dividend of Rs. 8 per equity share, totaldividend for fiscal 2011 would be Rs. 14 per equity share (total dividend for fiscal 2010was Rs. 20 per equity share which included a special one-time dividend of Rs. 10 perequity share).

DISCUSSIONS ON FINANCIAL PERFORMANCE - UNCONSOLIDATED

The Management's Discussion and Analysis given below relates to the audited financialstatements of TCS Limited (Unconsolidated). The discussion should be read in conjunctionwith the financial statements and related notes to the financial statements for the yearsended March 31, 2011 and March 31, 2010.

The following table gives an overview of the financial results of TCS Limited(unconsolidated):

Revenues from operations

The Company's revenues increased in fiscal 2011to Rs. 29,275.41 crores from Rs.23,044.45 crores in fiscal 2010, a growth of 27.04% (2.86% in fiscal 2010).

Revenues from information technology and consultancy services increased in fiscal 2011to Rs. 28,171.26 crores from Rs. 22,232.93 crores in fiscal 2010, a growth of 26.71%.Revenues from information technology and consultancy services constituted 96.23% of totalrevenues in fiscal 2011 (96.48% in fiscal 2010).

Revenues from sale of equipment and software licenses increased in fiscal 2011 to Rs.1,104.15 crores from Rs. 811.52 crores in fiscal 2010, an increase of 36.06%. Sale ofequipment and software licenses constituted 3.77% of total revenues in fiscal 2011 (3.52%in fiscal 2010).

Total employee costs

Total employee costs in fiscal 2011 increased to Rs. 14,723.60 crores from Rs.11,783.19 crores in fiscal 2010, a growth of 24.95%. Total employee costs as a percentageof revenues was 50.29% in fiscal 2011 (51.14% in fiscal 2010). The decrease in employeecost in fiscal 2011 over fiscal 2010 of 0.85% of revenues was primarily attributable to:

• Higher salaries and incentives to employees in India of 0.60%, due to increasein the India headcount

• Offset by lower employee allowances to overseas employees of 1.45%. However,expenses for business associates were higher at 5.93% of revenues in fiscal 2011 (4.30% ofrevenues in fiscal 2010).

Overseas business expenses (other than overseas employee allowances)

Expenses on this account went up from Rs. 324.54 crores in fiscal 2010 to Rs. 446.65crores in fiscal 2011 mainly due to increase in overseas travel related costs 0.92% ofrevenues in fiscal 2011 (0.85% of revenues in fiscal 2010). As a percentage of revenues,overseas business expenses increased from 1.41% in fiscal 2010 to 1.53% in fiscal 2011.Such increase was necessitated by business needs in the changing market conditions.

Services rendered by business associates and others

Expenditure on business associates increased from Rs. 992.02 crores in fiscal 2010 toRs. 1,735.72 crores in fiscal 2011. As a percentage of revenues, these expenses increasedfrom 4.30% in fiscal 2010 to 5.93% in fiscal 2011. The increase of 1.63% in the fiscal2011 is attributable to increase in requirement of business associates globally to ensuremeeting of customer expectations.

The table below summarises the nature of expenses considered under Other operatingexpenses

Operation and other expenses increased to Rs. 3,605.91 crores in fiscal 2011from Rs.3,273.03 crores in fiscal 2010. As a percentage of revenues, these expenses decreased from14.20% in fiscal 2010 to 12.32% in fiscal 2011. The decrease of 1.88% was primarily dueto:

• Reduction in software and hardware purchased 0.53%

• Reduction in communication costs 0.20%

• Reduction in rent expenses 0.56%

• Reduction in 'other expenses' 0.99% primarily on account of write back ofprovision for doubtful debts 0.98%

• Offset by an increase in travelling and conveyance expenses 0.20% andrecruitment and training expenses 0.23% on account of increased levels of businessactivity.

Other income (net)

Other income (net) was a gain of Rs. 494.73 crores in fiscal 2011(Rs. 177.60 crores infiscal 2010). Other income (net) was 1.69% of revenues in fiscal 2011 (0.77% of revenuesin fiscal 2010).

The primary reasons for the increase in other income were:

• Higher interest income Rs. 427.95 crores in fiscal 2011 (Rs. 196.69 crores infiscal 2010)

• Higher dividend income Rs. 39.27 crores in fiscal 2011 (Rs. 15.99 crores infiscal 2010)

• Reduction in net exchange loss Rs. 53.04 crores in fiscal 2011 as compared toRs. 205.42 crores in fiscal 2010

• Offset by lower profit on sale of mutual funds and other current investments Rs.73.61 crores in fiscal 2011 (Rs. 148.41 crores in fiscal 2010).

Forward and options contracts

Details of 'Derivative Financial Instruments' are available in note 26 of notes toaccounts (unconsolidated).

Profit before Interest, Depreciation and Taxes (PBIDT)

The PBIDT in fiscal 2011 was Rs. 9,258.26 crores (Rs. 6,849.27 crores in fiscal 2010).PBIDT as a percentage of revenues went up from 29.72% in fiscal 2010 to 31.62% in fiscal2011. The increase in the PBIDT of 1.90% as a percentage of revenues during fiscal 2011was attributable to:

• Decrease in operation and other expenses 1.88%

• Decrease in total employee cost 0.85%

• Increase in other income (net) 0.92%

• Offset by an increase in the cost of services rendered by business associates1.63% and an increase in overseas business expenses other than employee costs by 0.12%.

Interest costs

Interest costs increased to Rs. 20.01 crores in fiscal 2011 from Rs. 9.54 crores infiscal 2010.

Depreciation

Depreciation charge increased to Rs. 537.82 crores in fiscal 2011from Rs. 469.35 croresin fiscal 2010.

In terms of percentage of revenues, depreciation charge was 1.83% in fiscal 2011 (2.04%in fiscal 2010).

The decrease of depreciation in terms of percentage of revenues 0.21% was primarilyattributable to lower depreciation charge for:

• Freehold building 0.04%

• Office equipment and electrical installations 0.04%

• Leasehold improvements 0.04%

• Furniture and fixtures 0.15%

• Offset by increase on account of computers 0.07%.

Profit before taxes (PBT)

The PBT in fiscal 2011 was Rs. 8,700.43 crores (Rs. 6,370.38 crores in fiscal 2010). Asa percentage of revenues, the PBT increased from 27.64% in fiscal 2010 to 29.72% in fiscal2011. The primary reasons for the increase in the PBT of 2.08% was due to:

• Increase in PBIDT 1.90%

• Decrease in depreciation charge 0.21%

• Offset by increase in interest cost 0.03%

Provision for taxation

The tax expense increased from Rs. 751.87 crores in fiscal 2010 (3.26% of revenues) toRs. 1,130.44 crores in fiscal 2011 (3.86% of revenues). The increase in net tax provisionwas primarily attributable to:

• Increase in tax provision as a result of expiry of tax holiday of certain STPunits

• Increase in other income

• Higher deferred tax expense arising out of reversal of provision for bad anddoubtful debts.

Net Profit

The Company's net profit was Rs. 7,569.99 crores in fiscal 2011 (Rs. 5,618.51 crores infiscal 2010).

Net profit margin increased from 24.38% in fiscal 2010 to 25.86% in fiscal 2011. Theimprovement of 1.48% was attributable to:

• higher PBT 2.08%

• offset by higher taxes 0.60%.

Dividends

For fiscal 2011 the Company declared three interim dividends of Rs. 2 per equity share.A final dividend of Rs. 8 per equity share has been recommended.

On approval of the final dividend of Rs. 8 per equity share the total dividend forfiscal 2011 would be Rs. 14 per equity share.

The table below provides summary of dividend payout in last three fiscal years:

Proposed dividend on redeemable preference shares of Rs. 100.00 crores was Rs. 11.00crores and dividend tax Rs. 1.78 crores in fiscal 2011 (Rs. 17.00 crores and dividend taxRs. 2.82 crores in fiscal 2010). The dividend payable on the preference shares is 1.00%fixed component and a variable component linked to the dividends paid out to the equityshareholders.

Share capital

The issued, subscribed and paid-up share capital as at March 31, 2011 comprised 195.72crores equity shares of Rs. 1/- each and 100.00 crores cumulative redeemable preferenceshares of Rs. 1/- each , the same balances stood as at the March 31, 2010.

Reserves and surplus

The balance in the Securities premium account as at March 31, 2011 was Rs. 1,918.47crores (Rs. 1,918.47 crores as at March 31, 2010).

General reserve as at March 31, 2010 was Rs. 2,426.14 crores. On transfer of 10.00% ofthe profit after tax in fiscal 2011 amounting to Rs. 757.00 crores (Rs. 561.85 crores infiscal 2010), the General reserve as at March 31, 2011 increased to Rs. 3,183.14 crores.

Balance in the profit and loss account as at March 31, 2011 was at Rs. 14,069.20 crores(Rs. 10,458.13 crores as at March 31, 2010).

Foreign currency translation reserve was Rs. 101.61 crores as at March 31, 2011 (Rs.94.98 crores as at March 31, 2010).

The balance in hedging reserve account as at March 31, 2011 showed an accumulatedbalance of Rs. 11.35 crores (accumulated loss of Rs. 76.82 crores as at March 31, 2010).

Reserves and surplus grew due to accretion of profits and as at March 31, 2011 wasRs.19,283.77 crores, an increase of 30.11% over Rs. 14,820.90 crores, as at March 31,2010.

Loans

Secured loans as at March 31, 2011 aggregated Rs. 35.87 crores (Rs. 29.25 crores as atMarch 31, 2010) due to finance lease obligations which are secured against fixed assets.For details refer to obligation under finance lease (note 7 to Schedule Q inunconsolidated notes to accounts).

Unsecured loans stood at Rs. 5.25 crores as at March 31, 2011 (Rs. 6.49 crores as atMarch 31, 2010). Out of the unsecured loans, Rs. 1.25 crores is repayable within one year(Rs. 1.25 crores as at March 31, 2010).

Deferred tax liability (net) and deferred tax assets (net)

As stated in the accounting policy (see notes to accounts (unconsolidated), schedule Q1(k)), deferred tax assets and liabilities are offset, tax jurisdiction-wise. Schedule 'E'of the balance sheet brings out details of component-wise deferred tax balances where thenet values result into liabilities or assets, jurisdiction-wise.

Deferred tax liabilities are created against certain items such as foreign branchprofit and depreciation. The net deferred tax liability was Rs. 69.32 crores as at March31, 2011(Rs. 40.10 crores as at March 31, 2010). Deferred tax assets are created againstcertain items such as employee benefits, depreciation and provision for doubtful debts. Asat March 31, 2011, the net deferred tax asset had a balance of Rs. 52.03 crores (Rs. 53.13crores as at March 31, 2010).

The Company assesses the likelihood of deferred tax assets getting recovered fromfuture taxable income.

Fixed assets

Addition to the gross block excluding Capital-Work-in-Progress (CWIP) in fiscal 2011amounted to Rs. 1,202.72 crores (Rs. 571.42 crores in fiscal 2010). The significantadditions in fiscal 2011 were:

• Land and buildings Rs. 280.69 crores in fiscal 2011 (Rs. 161.65 crores in fiscal2010)

• Leasehold improvements Rs. 98.54 crores in fiscal 2011 (Rs. 49.45 crores infiscal 2010)

• Computers Rs. 490.29 crores in fiscal 2011 (Rs. 179.37 crores in fiscal 2010)

• Office equipment, electrical installations, and furniture and fixtures Rs.269.39 crores in fiscal 2011 (Rs. 178.00 crores in fiscal 2010).

The amount of CWIP of Rs. 1,345.37 crores as at March 31, 2011 (Rs. 940.72 crores as atMarch 31, 2010) mostly relates to construction / improvement of facilities which areexpected to be ready for use during fiscal 2012 and beyond.

The Company entered into contractual commitments with vendors who are executing variousinfrastructure projects.

The estimated amount of such contracts remaining to be executed on capital account wasRs. 1,132.27 crores as at March 31, 2011(Rs. 1,115.02 crores as at March 31, 2010).

The Company has embarked on a large scale infrastructure development across variouslocations in India to meet its growing business needs. The Company has successfully put inplace a state-of-the-art facility at Chennai for a significant capacity of 25,000 seats.The Company has also initiated construction of large delivery centers across 11 locationsin India in order to create additional 1,75,000 seats. Many of these locations arenotified as Special Economic Zones.

The number of seats available in India as at March 31, 2011 was 1,28,572 (1,09,105seats as at March 31, 2010).

Investments

The Company's trade investments made over the years till date shows a balance of Rs.5,795.49 crores. Investment in mutual funds decreased substantially to Rs. 4.00 crores asat March 31, 2011 from Rs.2,123.46 crores as at March 31, 2010. Correspondingly, fixeddeposits with banks registered substantial increase. This was in line with the Company'sstrategy for optimum utilisation of surplus cash.

The Company's Investments in debentures, bonds, preference shares and trade investmentsas at March 31, 2011 was Rs. 5,799.78 crores (Rs. 5,769.93 crores as at March 31, 2010).The amount of trade investments made during fiscal 2011 aggregated to Rs. 57.06 crores.

The Company' trade related investments during fiscal 2011 are shown in the table:

Current assets, loans and advances Unbilled Revenues

Unbilled revenues were Rs. 836.37 crores as at March 31, 2011 (Rs. 646.96 crores as atMarch 31, 2010) representing 2.86% of the revenues for fiscal 2011 (2.81% for fiscal2010).

Sundry debtors

Sundry debtors as at March 31, 2011 aggregated Rs. 4,806.67 crores (Rs. 3,332.30 croresas at March 31, 2010). As a percentage of revenues, sundry debtors were at 16.42% as atMarch 31, 2011 compared to 14.46% as at March 31, 2010.

Cash and bank balances

The Company had cash and bank balances of Rs. 5,604.52 crores as at March 31, 2011 (Rs.3,396.16 crores as at March 31, 2010). The balances with scheduled banks (including bankdeposits and remittances in transit) in India aggregated Rs. 5,412.82 crores as at March31, 2011 (Rs. 3,214.05 crores as at March 31, 2010). This increase in deposits withscheduled banks was in line with the investment strategy adopted by the Company. Thebalances with overseas banks were Rs. 190.94 crores as at March 31, 2011 (Rs. 181.39crores as at March 31, 2010).

Loans and advances

Loans and advances as at March 31, 2011 were Rs. 4, 110.41 crores (Rs. 3,385.11 croresas at March 31, 2010). Significant items of loans and advances were:

• Advances recoverable in cash or kind or for value to be received Rs. 1,968.86crores as at March 31, 2011 (Rs. 1,538.62 crores as at March 31, 2010)

• Advance tax (net of provision for taxes) Rs. 513.89 crores as at March 31, 2011(Rs. 183.50 crores as at March 31, 2010).

Current liabilities

Current liabilities increased to Rs. 3,863.07 crores as at March 31, 2011 (Rs. 3,312.64crores as at March 31, 2010). The increase was primarily due to:

• Sundry creditors Rs. 2,864.53 crores as at March 31, 2011(Rs. 2,426.32 crores asat March 31, 2010)

• Advance billings and deferred revenues Rs. 557.34 crores as at March 31, 2011(Rs. 492.15 crores as at March 31, 2010)

• Other liabilities Rs. 317.37 crores as at March 31, 2011 (Rs. 278.75 crores asat March 31, 2010). Other liabilities include fair values of foreign exchange forward andcurrency option contracts Rs. 54.69 crores as at March 31, 2011 (Rs. 121.90 crores as atMarch 31, 2010).

Provisions

Provisions aggregated Rs. 2,490.11 crores as at March 31, 2011 (Rs. 3,926.61 crores asat March 31, 2010).

The decrease was mainly attributable to:

• Proposed final dividend on equity shares Rs. 1,565.78 crores as at March 31,2011 (Rs. 2,740.11 crores as at March 31, 2010)

• Tax on dividend Rs. 255.79 crores as at March 31, 2011 (Rs. 457.92 crores as atMarch 31, 2010)

• Current income taxes (net of advance tax) Rs. 182.09 crores as at March 31, 2011(Rs. 263.45 crores as at March 31, 2010).

CASH FLOW — UNCONSOLIDATED

The Company's growth has been financed largely by cash generated from operations. TheCompany has sufficient cash generated from operations for meeting its working capitalrequirements as well as the requirements for capital expenditure.

Banking and financing arrangements

As at March 31, 2011, the Company had available lines of credit with multiple bankersaggregating Rs. 2,104.00 crores interchangeable between fund-based and non-fund basedlimits (Rs. 1,920.00 crores as at March 31, 2010). As at March 31, 2011 the Company hadutilised Rs. 1,182.73 crores of these limits (Rs. 809.49 crores utilised as at March 31,2010). The available unutilised facility as at March 31, 2011 was Rs. 921.27 crores (Rs.1,110.51 crores as at March 31, 2010). In addition the Company had a separate, additionalone-off banking limit of GBP 98.1 million in UK, which is fully utilised for bankguarantee issued in favour of our subsidiary company in UK.

Summary of cash flow statement is given below

(Rs. crores)

Cash flow from operations

In fiscal 2011, the Company generated net cash of Rs. 5,741.28 crores (Rs. 6,264.74crores in fiscal 2010) from operating activities.

The primary reason for decrease in the operating cash flow in fiscal 2011 as comparedto fiscal 2010 was on account of additional working capital requirements.

Cash flow from investing activities

In fiscal 2011, the Company used Rs. 863.16 crores in investing activities (Rs. 4,556.64 crores in fiscal 2010).

The significant items of investing activities were:

• Purchase of fixed assets (net) Rs. 1,584.08 crores in fiscal 2011 (Rs. 816.27crores in fiscal 2010).

• Sale of investments (primarily mutual funds) Rs. 2,136.01 crores in fiscal 2011(purchase Rs. 1,759.83 crores in fiscal 2010).

• Interest on deposits received in fiscal 2011 of Rs. 349.42 crores (Rs. 91.21crores in fiscal 2010) included in 'Others'.

Cash flow from financing activities

In fiscal 2011, the Company used Rs. 4,605.61 crores in financing activities (Rs.1,969.65 crores in fiscal 2010).

In fiscal 2011, the significant item of cash used in financing activities was paymentof dividend Rs. 4,584.38 crores including dividend tax (Rs. 1,954.57 crores in fiscal2010).

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place adequate systems of internal control commensurate with itssize and the nature of its operations. These have been designed to provide reasonableassurance with regard to recording and providing reliable financial and operationalinformation, complying with applicable statutes, safeguarding assets from unauthorised useor losses, executing transactions with proper authorisation and ensuring compliance ofcorporate policies.

The Company has a well defined delegation of power with authority limits for approvingrevenues as well as expenditure. Processes for formulating and reviewing annual and longterm business plans have been laid down. The Company uses a state-of-the-art ERP system torecord data for accounting, consolidation and management information purposes and connectsto different locations for efficient exchange of information. It has continued its effortsto align all its processes and controls with global best practices.

The Company has appointed Ernst and Young Private Limited to oversee and carry outinternal audit of the Company's activities. The audit is based on an internal audit plan,which is reviewed each year in consultation with the statutory auditors (M/s. DeloitteHaskins & Sells) and the audit committee. In line with international practice, theplanning and conduct of internal audit is oriented towards the review of controls in themanagement of risks and opportunities in the Company's activities. The internal auditprocess is designed to review the adequacy of internal control checks in the system andcovers all significant areas of the Company's operations such as software delivery,accounting and finance, procurement, employee engagement, travel, insurance, IT processesin the Company, including significant subsidiaries and selected foreign branches.Safeguarding of assets and their protection against unauthorised use are also a part ofthese exercises.

The Company has an audit committee, the details of which have been provided in theCorporate Governance Report. The audit committee reviews audit reports submitted by theinternal auditors. Suggestions for improvement are considered and the audit committeefollows up on the implementation of corrective actions. The Committee also meets theCompany's statutory auditors to ascertain, inter alia, their views on the adequacy ofinternal control systems in the Company and keeps the Board of Directors informed of itsmajor observations from time to time.

CAUTIONARY STATEMENT

Certain statements made in the Management Discussion and Analysis Report relating tothe Company's objectives, projections, outlook, expectations, estimates and others mayconstitute 'forward looking statements' within the meaning of applicable laws andregulations. Actual results may differ from such expectations, projections and so onwhether express or implied. Several factors could make significant difference to theCompany's operations. These include climatic conditions and economic conditions affectingdemand and supply, government regulations and taxation, natural calamities and so on overwhich the Company does not have any direct control.