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Company and Performance Overview
Tech Mahindra Limited is a leading provider of digital transformation, consulting and business re-engineering services and solutions and is a part of theUSD21BillionMahindraGroup;aglobalfederation of companies divided into 11 business sectors. Befitting its size, the Mahindra Group operates in 20 key industries, providing insightful and ingenious solutions that are global in their ramifications. The Companies Act as a federation, with an optimum balance of entrepreneurial independence and synergy. From Mobility to Rural Prosperity and Information Technology (IT), from Financial Services to Clean Energy and Business Productivity, they are empowering enterprise everywhere. Headquartered in Mumbai, India, the Group has an operational presence in over 100 countries and employs more than 200,000 people. The Group operates across vast geographies and the governing spirit of "Rise" binds it as one Mahindra.
Rise: House of Mahindra
Tech Mahindra represents the connected world, offering innovative and customer-centric information technology experiences, enabling Enterprises, Associates and the Society to Rise. It is a USD 4.9 billion company with 121,000+ professionals across 90 countries, helping over 935 global customers including Fortune 500 companies. The companys convergent, digital, design experiences, innovation platforms and reusable assets connect across a number of technologies to deliver tangible business value and experiences to its stakeholders. Tech Mahindra is the highest ranked non-US company in the Forbes Global Digital 100 list (2018), and also featured in the Forbes Fab 50 companies in Asia (2018).
Businesses are impacted more and more by new technologies
TechMahindra progresses forward with the philosophy of "Connected World, Connected Experiences". The company continues to offer a portfolio of services, to include, amongst others, Next Generation Solutions, Customer experience, Enterprise Architecture, Enterprise-of-Future (Network Services, Infrastructure
& Cloud Services, Mobility solutions, Performance engineering), Platforms, Analytics and connected enterprise solutions. Alongside these offerings, there have been a wave of disruptive business influences, which have now emerged as more crucial aspects of business than ever before. The company has developed capabilities helping customers deploy such technologies across its businesses.
Tech Mahindras revenue was at 347,421 Million (USD 4,970.5 Million) for the financial year ended March 31, 2019, registering a growth of 12.9% (4.2% in USD terms) on a YoY basis. The companys Profit After Tax (PAT) was at 42,976 Million (USD 614.6 Million) for financial year 2018-19 registering a growth of 13.1% (4.5% in USD terms).
Tech Mahindra is a Public Listed Company, incorporated and domiciled in India and has its registered office in Mumbai, Maharashtra, India. It has a primary listing on The National Stock Exchange of India Limited (NSE) and BSE Limited (BSE).
Industry Structure and Development
India continues to provide thought leadership in various growing and evolving areas across the entire spectrum of the technology ecosystem, with focus on re-skilling and digital transformation. As per NASSCOM Strategic Review Report 2019, Indias IT-BPM industry stands at USD ~177 billion market (registering 6.1% annual growth) and employs around 4.14 Million people. The year has been christened as The Year of Digital Acceleration, wherein the industry was able to fast-forward its journey to be the digital solutions partner across the different sectors.
2018-19 was an exciting year for the industry, as the export sector crossed USD 137 billion of revenues. Interestingly, the industry sectors have also expanded beyond IT Services and together are almost half the industry revenues in 2018-19.
Digital technology is throwing up a new set of opportunities for the technology industry and over the past few years, the business has seen a shift
(a) in revenue share (currently, digital share is between 18%-20% and increasing),
(b) talent (India accounts for 75% share in global digital talent),
(c) business models (partnerships, As-a-Services, etc.),
(d) revenue source (IP-led, platforms, cloud) and
(e) organizational structure (dedicated BUs, CoEs, etc.).
The key themes for the year included solutions across emerging technologies, especially those that are AI and Automation based. Skilling has been a priority for organizations in the industry, to adapt to the digitally transforming operations and the industry now has over 600,000 digitally skilled professionals. Setting up Centers of Excellence & Innovation Hubs in key markets and enhanced focus on products and platforms are key investments being made by the industry for digital capabilities. The year 2018 marked a decade post the financial crisis of 2008 and witnessed global technology growth as a result of revived customer and business confidence. The decade has witnessed a complete transformation of the technology and services industry in India. As we stand at the cusp of the next decade, the IT-BPM industry will continue to accelerate the digital journey and focus on its vision of Transforming Businesses and Transforming India.
According to Gartner Inc., the worlds leading information technology research and advisory company, the worldwide IT spending is projected to total USD 3.79 trillion in 2019, an increase of 1.1% from 2018. The shift of enterprise IT spending from traditional (non-cloud) offerings to new, cloud-based alternatives is continuing to drive growth in the Enterprise software market. In 2019, the market is expected to reach USD 427 billion, up ~ 7% from USD 399 billion in 2018. However, Gartner expects increased growth for the Infrastructure software segment in the near-term, particularly in integration platform as a service (iPaaS) and application platform as a service (aPaaS). As per Indias IT-BPM Industry Association NASSCOM, the outlook for the Indian information technology (IT) sector is expected to be steady, with a positive bias for FY2019. Industry is expected to grow marginally above NASSCOM guidance of 7-9% in constant currency. Export revenues are estimated to grow to ~USD 135-137 billion from the USD 126 billion in FY 2018, a growth of 8.3%. The domestic revenues are expected to grow 7.9% percent to ~INR 28-29 billion in the financial year 2018-19 while digital is seen to be growing at 30% year-on-year and is estimated to touch USD 33 billion in 2018-19 due to investment in digital transformation and the use of automation.
Opportunities and Risks Opportunities
The Information technology market has been in a state of flux due to emerging technological changes. The marketplace is exploding all over the world, with myriad disruptions, changing buyer behaviour. IT solution providers of all shape and size can no longer rely on the successes of the past to guarantee their future.
The technological changes are rewriting the rules of business. There is little doubt that the connected future is taking shape faster than most businesses anticipated. The question remains are companies prepared for the new realities of this connected future? IT services providers will need to reinvent themselves to stay relevant. The new imperatives of success for service providers are: business outcome enablement; new business models and new engagement models to support client expectations; new operating models that increase speed and agility; and building and creating smarter solutions that are programmable. We, at Tech Mahindra are committed to bridging the gap between todays capabilities and tomorrows endless possibilities.
More than five decades ago, the world witnessed its first chat-bot ELIZA created by Joseph Weizenbaum. Today, the chat-bot market has skyrocketed. The market is projected to cross USD 5 billion by 2023, supporting sectors such as BFSI, healthcare, IT, telecom, retail, utilities and notably, governments. This is just one of the multitude of examples on technologys unmatched pace. Technology will continue to remain a key enabler in whatever we do.. AR/ VR, ML, Analytics, Cloud, IoT, Design are nothing but the key parts of the technology bandwagon we shall need for our flight to the future.
In addition to technology, deeper business involvement, customizable yet repeatable solutions and re-skilling of workforce to keep pace with new technologies and trends will be of utmost importance. This overhaul across areas shall present opportunities unknown to todays world and full of uncertainties. The only answer to this new paradigm is being prepared and well-equipped to face the new future. Your company has taken several initiatives to address these opportunities
Tech Mahindra has architected and implemented a comprehensive strategy to position itself as one of the worlds leading Blockchain companies. As part of this strategy, Tech Mahindra has identified and is working on a holistic framework called Block Ecosystem, which creates industry-leading applications that are architected on innovation and human excellence to unlock significant value for all stakeholders. This framework has enabled us to not only promote Blockchain adoption by clients but also successfully deploy several cutting-edge solutions across our clients businesses during the last 12 months.
The key components of our Block Ecosystem are as below:
1. Block Studio: It has the potential to evolve into the worlds first Blockchain Decentralized Apps (dApps) marketplace.
2. Block Talk: It is a Blockchain Thought Leadership forum that aims to evangelize Blockchain technology to internal employees and to clients.
3. Block Engage: Tech Mahindra envisions to engage with the Government and Analyst firms to develop the Blockchain ecosystem. In the course of last one year, we have been recognized by the leading analyst firms as one of the leading Blockchain Service Providers in the industry.
4. Block Geeks: Tech Mahindra reiterates its commitment to provide best-in-class training to its employee base and nurture a significant talent pool.
5. Block Accelerate: Through Block Accelerate, Tech Mahindra commits to building the Blockchain ecosystem by encouraging the growth of startup companies and incubators through strategic investments, thereby triggering accelerated revenues and valuation.
6. Block Access: This focuses on tapping into 3rd party innovation through collaboration with Start-ups, Blockchain Protocol Developers & Industry Associations. Last year, we collaborated with 13+ startup partners, 6 protocol developers and 4 consortium members.
7. Block Value: Through Block Value we focus on generating revenues and profitability across our clients businesses.
As the businesses digitize, security and privacy issues have taken center stage. Cyber Security attacks have begun to severely impact businesses of affected organizations. The main cyber threats are loss of intellectual property due to nation state actors, loss of services due to denial of service attacks by hacktivists, extortion due to ransomware, theft of customer data, fines and penalties due to noncompliance to regulations and lastly the increasing sensitivity of customers to security and privacy issues. Without being assured of a comprehensive security posture, our customers would not be keen to outsource large projects or sensitive areas of their business. Given the spate of cyber security incidents, customers contractual agreements are more stringent and audited at regular intervals. In addition, laws around data protection and data privacy are evolving and this is creating a growing market for service providers like us. The scope of Information Security Management at Tech Mahindra includes all business processes, delivery management functions, support services, Infrastructure services and IT domains Hardware,
Software, Applications and Services. It covers all our corporate functions and Strategic business units delivering to over 900 accounts.
Your company follows a Requirements-to-Outcome model as summarized below:
The Information Security process is certified to the ISO 27001:2012 security management standard and to the Business Continuity Management System ISO22301:2012.
Augmented Reality (AR)/ Virtual Reality (VR):
The world is rapidly shifting to embrace the paradigm of extended reality. Tech Mahindra have successfully nurtured requisite skills and capabilities ranging from creating Enterprise Gamification to creating augmented insights of data and services for customers.
Machine Learning (ML) & Artificial Intelligence (AI):
The mission of our research arm, referred as Makers lab, is to make smart machines of the future. Our research in algorithms is a combination of current AI /ML algorithms going further in the neuroscience domain where we look at how the brain works and how does thought and memory occur. The research is to either develop a simplistic machine model or an algorithm which would use lesser data and would understand at a primal level the actions and insights. While we conduct research in the area of ML/ AI, we also solve practical customer challenges using various AI algorithms. We also put our solutions and IPs to test within the organization. We launched a program on AI and botification within the organization. Under this charter we have opened three of our IPs viz. Acumos (joint IP with customer), Entellio (conversational AI assistant) and Uno (RPA agent) to each one of our associates and who use these technologies for providing value to our customers.
Quantum Computing has been a recent foray by Tech Mahindra, under the aegis of Makers Lab. The most prominent use cases in the field of Quantum Computing has been in the area of E-security, wherein we delivered a first use case of Quantum-Enabled Application. There is a lot more happening in the Quantum world with respect to the realm of AI and Distributed Ledgers, to enable companies solve complex classical optimization problems.
Tech Mahindra implemented the 3-4-3 strategy that focuses on disruptive trends and transformative technologies in order to help customers in various industries with focussed approach solutions and clear outcomes. This means addressing the 3 megatrends happening in the market, 4 bets that Tech Mahindra would take to address those mega trends and which fits into 3 areas of CXOs priorities. The company has customized this 3-4-3 strategy to cater to specific market needs in each of the verticals it targets. We diversified successfully over past five years to the extent that Communications vertical represents less than half of total revenue. Also, Manufacturing is now a billion dollar vertical for us.
The Core "3-4-3 strategy" in depicted in a nutshell below:-
One of the cornerstones of our strategy has been enabled by developing a strong ecosystem of new-age partners through TechMNxt. The key focus of this initiative is to re-position Tech Mahindra as a Next Gen Services company that executes with Next Gen technologies, Next Gen business model and most importantly, Next Gen associates. TechMNxt is all about leveraging industry leaders & start-ups, academia and partners to effectively deliver solutions to the clients in areas of AI, ML, Cyber Security, next-gen networks, Big Data, IoT, CX and new delivery models leveraging micro services and crowd sourcing and more. While implementing 3-4-3 strategy in each industry vertical, we had a guiding structure to pick up initiatives across the spectrum in from Wave 1-4 summarised below:
Wave 1: The Company continues to transform the current business and make it efficient with use of Automation and Artificial Intelligence while adopting to changes in industry landscape.
Wave 2: We target high growth non-linear business by focusing on key platforms, many of which the company developed internally. These platforms cut across in three segments Utility, Technology and Vertical focused. Today with 20+ platforms, Tech Mahindra augments its service delivery through these platforms to offer a complete solution.
We have also refreshed our approach to Digital. In line with the movement of the expectations of our customers moving from IT-outcome focussed approach to a business outcome based approach, here are the 6 themes across which Tech Mahindra sees Digital opportunities:
Wave 3: We believe in collaborative disruption wherein the company focuses on portfolio companies, M&A and alliances to develop a powerful ecosystem of partners by investments in innovation and startups.
Wave 4: With the current model of operations, we are solving problems of today for a better tomorrow. However, the problems of tomorrow will need us to respond at an intersection. Tech Mahindra focusses on addressing such problems of tomorrow in each of our verticals by experimental approach towards developing transformational solutions.
Some of Tech Mahindras key risks and their corresponding mitigation strategies have been highlighted below.
|Key Risk||impact of risk||Mitigation / strategy|
|High concentration in communication Vertical||For the Financial year 2018-19 (FY19), Communication Vertical had a revenue share of ~41.2% of the total business. This is much higher when compared to leading Indian and global IT peers of Tech Mahindra and is one of the highest top-vertical revenue concentration amongst peers.||The Communication industry is one of the largest spenders on the IT and Network Services and the nature of these spends keeps evolving and changing as new technologies get introduced. Tech Mahindra has made significant investments in being relevant and benefiting from new age technologies. Tech Mahindra has also entered into several partnerships to disrupt these technologies. The concentration has been coming down gradually over years and stands at 41.2% for FY19 versus 52% in FY16.|
|Communication vertical cyclicality||Historically, IT services spend in Communications industry has been cyclical, resulting in periods of prolonged and tepid spends. This increasing the risk of secular growth for ~41% of the business, going forward.||While IT services spends growth have been tepid in the Global Communications space, Tech Mahindra has been able to grow in line with its peers in the Communication vertical over longer periods, which captures both the up and down cycles. The Company is one of the few Global IT Company, which has a complete end-to-end span of services in the Communications vertical and has been able to leverage its expertise and unique positioning to grow faster.|
|The Company today provides its services to almost all the key Global Communications Companies. Further, the Company has made a foray in to the USD ~40 billion Network Services market, which has helped open up a completely new and untapped market with huge growth opportunities.|
|Further, the Communication Service Providers are consolidating and getting in to areas like Media & Entertainment, Cable and Content. These would provide significant opportunities to Tech Mahindra in the future, by capitalising on the investment in these emerging opportunities.|
|Global economy risk||Tech Mahindras export revenues are over 94% and it derives 47.3% revenue from Americas, 29.3% from Europe and 23.5% from the Rest of the World. One aspect of the companys growth strategy is to continue to expand in key markets around the world. The Economic growth activity in these markets could directly or indirectly affect Tech Mahindra customers IT spends. A slowdown in these economies would pose lower growth or deferred IT spends, thus impacting growth for Tech Mahindra.||Tech Mahindra has been operating in volatile business environment for over three decades and its business model has evolved to deal with these changes in the business environment and IT spend outlook of its clients. However, severe adverse Global Economic activities risks and any recessionary trends can impact any Company including Tech Mahindra and remains a business risk, akin to any other IT services business.|
|Key Risk||impact of risk||Mitigation / strategy|
|Regulatory changes risk/ Visa Risk||The Company has operations in over 90 countries and its employees work onsite at client facilities and locations on visas granted for extended or short term work. Protectionism is rising in few economies like USA, UK, Australia, Singapore, etc. Any changes in immigration laws or any local regulations can impact the profitability and growth.||Tech Mahindra has been in the software services business for over three decades and has been familiar and complying with the local regulations across its working locations. The Company has adequate and well defined internal processes, including contingency plans to deal with the changing regulatory environment. The Company has delivery centres in overseas geographies including USA and also has been hiring local employees from time to time. Tech Mahindra has been engaging with its clients on a regular basis to discuss and deal with any critical regulatory issues, which might have an impact on its business.|
|M&a and integration risk||The Company has a focused M&A strategy. The Company has acquired multiple companies in the past several years. M&As and its integrations by nature involve risks relating to failure to achieve strategic objectives, financial loss, cultural and financial integration etc.||Acquisitions and M&As have not been new to the Company. The Company has well laid out defined plans on acquisitions. It uses M&A to fill up gaps in its portfolio of competency / services, verticals and client / geography access. Tech Mahindra has a dedicated and professional M&A team led by executive Leadership.|
|The Company undertakes extensive due diligence and deals are evaluated by the senior management and the Board. Company also engages with Investment bankers, subject matter experts and advisors in the required areas.|
|Managements experience with most of the acquisitions done until now has been quite satisfactory and in-line with its expectations.|
|Competition risk||The global IT services industry is highly competitive with competition from Indian IT companies and MNC IT services companies having sizable presence in low cost geographies, deep pockets, strong client relationships, in-house and Captive services companies etc. This stiff competition can lead to pressure on pricing, vendor consolidation and hence can impact the Companys growth and profitability.||IT services companies including Tech Mahindra have been operating under competitive environment for several years. Tech Mahindra has not only been able to become competitive from a multi-pillar services and competency perspective, but has also been able to move up in the IT services value chain. The Company has deep domain knowledge, skilled workforce, delivery capabilities and efficient sales force and relationship managers to help retain its competitive positioning amongst peers.|
|Key Risk technology risk||impact of risk||Mitigation / strategy|
|The industry is seeing a shift to new age technologies which are continually evolving. This shift, coupled with changes in delivery models and consumer spending patterns could be a threat to the growth in traditional IT spends and technology obsolescence.||Tech Mahindra has been a specialist provider of connected solutions and has been investing in competencies required for a digital enterprise. The company has made significant investments in service areas like IoT, Cloud, microservices, Artificial Intelligence, Automation, Blockchain, Cyber Security Services etc. The Company invests in Centres of Excellence (CoEs) and provides many opportunities to its employees through internal and external training on technology and domain skill upgrades and also focuses on reskilling and upskilling employees. One of the key focus areas for this year was nurturing talent and Company has tied up with world class content partners, and with AI based personalized learning aggregators, to ensure that its human capital / intellectual machinery gets reskilled and honed to become the workforce of the future.|
|employee related / supply side risks||With the evolving IT industry, right skillset and talent is required to respond quickly to the ongoing changes. Cost effective hiring and retaining increased number of professionals with the required skillset is a challenge.||Tech Mahindra has been diversifying its fresher talent pools by recruiting science graduates, diploma holders and certified skilled undergrads, while increasing hiring of local people in onsite locations. Tech Mahindra has a comparable remuneration structure, matured HR process and various employee friendly incentives.|
|The Company focuses on reskilling and runs various programmes for employee enhancement and growth like the Global Leadership Cadre (GLC), Young CEO program, Shadow board, 1000 Leaders program etc. The Company has also invested in various learning platforms to provide training to the employees on the new and digital technologies.|
|Currency risks||The exchange rate of Tech Mahindras major billing currencies like GBP, USD, Euro and AUD has fluctuated widely in the recent past and may continue to fluctuate significantly in the future thus resulting in wide fluctuation in not only revenues but also Foreign Exchange losses and gains. Adverse currency movements could also lead to impact on Companys profitability being hit.||Tech Mahindra has a well-established hedging policy which has been followed consistently over the past years. Hedging is undertaken to protect the Company from unfavourable currency movements & the Company does not undertake any speculative hedging. More than half of Companys revenue is contributed by its onsite activities and a substantial portion of overall cost is incurred is onsite, which provides as a natural hedge. The Company has a dedicated Treasury Department, which seeks advice from expert professionals and banks for its hedging decisions.|
|Key Risk data Privacy Risk||impact of risk||Mitigation / strategy|
|Many countries have stringent Data Protection and Privacy Laws. There is cyber security risk related to companys corporate and client data, which may hamper companys relationship with customers and companys brand value.||Tech Mahindras Information Security (IS) policy is to ensure confidentiality, integrity and availability of required information that is acquired, developed and provided to all relevant stakeholders. Tech Mahindras Information and Data Security initiatives are in line with ISO/IEC 27001:2005 standard and code of practice ISO 27002. Tech Mahindra is one among the five companies in India to be certified and the requirements of the specification are implemented through the Information Security Management System (ISMS).|
|Tech Mahindra has its own security risk assessment and management methodology that is designed based on the generally accepted methods within the industry.|
|litigation Risk||Company has been working with over 900 customers across 90 countries and is prone to risk of litigation arising out of contract execution, Intellectual Property related, regulatory compliances, employment related, adverse rulings, mergers etc.||Businesses carry an inherent risk of litigations. To mitigate same, the company has an in-house Legal Team, spread across regions and catering to all the kinds of risks relevant to the IT business. The company also seeks expertise from external Global Law firms, Taxation and Compliance experts in the relevant areas wherever required. Further, the company has a robust process and framework for dealing appropriately and in a timely manner, to all the litigation related risks arising either external or internal to the company.|
|Cyber attack risk||Reputation loss and penalties due to data theft of customer data or TM personal data by external hackers||The company invests in best cyber security tools to defend its environment from cyber security threats such as advanced persistence threats, phishing attacks and other forms of malicious attacks. We also use best of the breed controls such as encryption, 2FA, mobile device management, data leakage protection to keep Intellectual property and customer data safe.|
|People form a key part in our journey towards a secure organisation. We invest in comprehensive training with assessment for the entire workforce. This covers security, data protection and secure delivery. Employees sign appropriate agreement to protect the confidentiality and integrity of data and are employment screened and reference checked.|
Discussion on Financial Performance with respect to Operational Performance Overview
The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013 and as per Indian Accounting Standards (IND AS) for the year ended March 31, 2019.
The financial statements of TechM and its subsidiaries have been consolidated on a line by line basis by adding together like items of assets, liabilities, income, expenses, after eliminating intra group transactions and any unrealized gains or losses in accordance with the Indian Accounting Standard - 110 on "Consolidated Financial Statements" (IND AS 110).
The discussion on financial performance in the Management Discussion and Analysis relate primarily to the standalone accounts of Tech Mahindra Limited. Wherever it is appropriate, information pertaining to consolidated accounts for Tech Mahindra Limited & its subsidiaries is provided for the current year and previous year. For purpose of comparison with other firms in this industry as well as to see the positioning and impact that Tech Mahindra Limited has in the marketplace, it is essential to take the figures as reflected in the Consolidated Financial Statements.
A. STANDALONE FINANCIAL POSITION
1. Share Capital
The authorized share capital of the Company is
7,932 Million, divided into 1,586,300,000 equity shares of 5 each. The paid up share capital stood at 4,917 Million as on March 31, 2019 compared to 4,897 Million as on March 31, 2018. The increase in paid up capital during the year is due to issue of 3,628,662 shares on account of conversion of options into shares (18 Million) by employees under the Employee Stock Option Plans.
2. Reserves and Surplus
a) Securities premium account
The addition to the securities premium account of 1,607 Million during the year is due to amount transferred from share option outstanding account on exercise of stock options to the tune of 1,262 Million, transfer on allotment of equity shares 343 Million and
2 Million allotment of shares by ESOP Trust to employees. Reduction is due to Contractual obligation for Buyback 19,453 Million.
b) Retained Earnings
The surplus in the Statement of Profit and Loss as on March 31, 2019 was 171,950 Million compared to
150,495 Million as on March 31, 2018.
3. Borrowings including Current Maturities
Borrowings including Current Maturities as on March 31, 2019 were 126 Million, as compared to 2,548 Million as on March 31, 2018.
4. Fixed Assets
The movement in Fixed Assets is shown in the table below:
|As at March 31|
|Gross Book Value|
|Land - Freehold||477||472|
|Lease hold Improvements||840||929|
|Plant & Equipments|
|Furniture and fixtures||6,708||6,580|
|Less: Accumulated depreciation & amortization||46,357||43,764|
|Add: Capital work-in-progress||2,713||2,354|
|Net fixed assets||29,427||33,370|
The Net Block of Fixed Assets and Capital Work in Progress stood at 29,427 Million as on March 31, 2019 as against 33,370 Million as on March 31, 2018. During the year, the Company incurred capital expenditure (gross) of 3,194 Million (previous year 13,361 Million includes
8,939 Million IPR). The major items of Capital Expenditure include addition to Computer equipment, Software, Plant and Equipment, & Furniture.
The summary of Companys investments is given below
|As at March 31|
|I N VESTMENTS|
|Non Current Investments|
|I nvestment in Subsidiaries||61,163||58,085|
|Investment in Non convertible debentures, Associates & others||7,060||11,473|
|Less: Provision for diminution of value||1,936||907|
|Net Non Current Investments||66,287||68,650|
|Investment (in Property)||1,141||1,289|
|Total Non-Current Investments||67,428||69,939|
|Investment in mutual funds||37,508||25,479|
|Term Deposits with Financial Institutions||11,000||5,500|
|Investment in non-convertible debentures and commercial papers||14,812||2,952|
Total investments (non-current) as on 31st March 2019 stood at 67,428 Million as against 69,939 Million, as on 31st March 2018. During the year, Non Current Investment in Non-Convertible Debentures reduced to 6,908 Million as on 31st March 2019 as against 11,236 Million as on 31st March 2018. Investment in Subsidiaries Increased to 61,163 Million as on 31st March 2019 as against 58,085 Million as on 31st March 2018. Investment in liquid mutual funds as at 31st March 2019 was 37,508 Million (previous year 25,479 Million) and additional investment during the year is in Term Deposits with Financial Institutions 5,500 Million and in Current Investment in non-convertible debentures and commercial papers to the tune of 11,860 Million. Investment in Subsidiaries
The Company invested in the following subsidiaries during the FY18-19:
a) Dynacommerce Holdings B.V.
The Company has entered into an agreement to acquire 100% stake in Dynacommerce Holdings B.V. vide Share Purchase Agreement dated January 31, 2019 for a value of EUR 0.48 Million ( 37 Million).
b) The CJS Solutions Group, LLC "The HCI Group"
During the year as per the agreement with minority stakeholders, Company has acquired additional 4.07% stake in CJS Solutions Group, LLC (CJS) of USD 7.4 Million ( 510 Million).
6. Deferred Tax Asset
Deferred tax asset as at 31st March 2019 was at
2,182 Million as compared to 2,753 Million as of 31st March 2018. Deferred tax assets represent timing differences in the financial and tax books arising from depreciation of assets, provision for debtors and leave encashment & gratuity. The Company assesses the likelihood that the deferred tax asset will be recovered from future taxable income before carrying it as an asset.
7. Sundry Debtors
Sundrydebtorsat59,633Million(netofprovision for doubtful debts of 3,090 Million) as of 31st March 2019 as compared to 51,010 Million (net of provision for doubtful debts of 2,918 Million) as of 31st March 2018. Debtor days as of 31st March 2019 (calculated based on per-day sales in the last quarter) were 106 days as compared to 104 days as of 31st March 2018.
8. Cash and Bank Balances
The bank balances include both Rupee accounts and foreign currency accounts. The bank balances in overseas current accounts are maintained to meet the expenditure of the overseas branches and overseas project-related expenditure.
|As at March 31|
|CASH & BANK BALANCES|
|Bank balances in India &|
|Funds in transit||131||382|
|Total cash and bank balances*||12,085||19,303|
* Including unrealised (gain) / loss on foreign currency.
9. Other financial assets, other assets & loans
Other financial assets, other assets & loans as on 31st March, 2019 were 69,321 Million compared to 57,998 Million as on 31st March, 2018. Other financial assets include foreign currency derivative assets, security deposits, advances to related parties, interest receivable and unbilled revenue. Other assets include prepaid expenses, balance with government authorities, advance income tax, capital advances, amounts deposited and held in escrow accounts for settlement consideration of Aberdeen UK & US and class action on erstwhile Satyam Computer Services Ltd.
10. Provisions, Financial Liabilities & Other liabilities
Liabilities and provisions were 84,492 Million as of 31st March 2019 including long term liabilities and provision of 6,132 Million and short term / current liabilities and provisions of 78,360 Million compared to 58,104 Million including long term liabilities and provision of 8,566 Million and short term / current liabilities and provisions of 49,538 Million as of 31st March 2018. Increase is on account of Contractual Obligation of 19,556 Million towards Buyback of equity shares payable to shareholders.
B. RESULTS OF OPERATIONS
The following table sets forth certain income statement items as well as these items as a percentage of our total income for the periods indicated:
|Fiscal 2019||Fiscal 2018|
|Particulars||in Million||% of Total Income||in Million||% of Total Income|
|Revenue from Services||272,196||236,922|
|Operating and Other Expenses||34,859||12.37%||26,432||10.40%|
|Profit before tax and exceptional items||54,273||19.26%||49,002||19.28%|
|Provision for Taxation||10,469||9,063|
|Net profit for the year||43,804||15.54%||39,939||15.71%|
The Company derives revenue principally from technology services provided to clients from various industries.
The revenue increased to 272,196 Million in fiscal 2019 from 236,922 Million in fiscal 2018. The increase in revenue is mainly due to increase in number of clients served & increase in amount of business from these clients.
Consolidated Revenue for fiscal 2019 was
347,421 Million compared to 307,729 Million in fiscal 2018, growth of 12.9%.
Consolidated revenue by Geography
Revenue from Americas was 47.2% in fiscal 2019 compared to 46.6% in fiscal 2018 while the share of revenue attributable to Europe was 29.3% in fiscal 2019 compared to 29.8% in the previous year. Revenue from Rest of the World (including India) as a percentage of total revenue was 23.5% in fiscal 2019 compared to 23.6% in fiscal 2018.
Consolidated revenue by Vertical
For fiscal 2019, revenue from Communications was 41.2 % compared to 43.3% in previous year. Revenue from Manufacturing was 20.2 % in fiscal 2019 compared to 19.2% in fiscal 2018. Revenue from Technology, Media
& Entertainment was 7.2% in fiscal 2019 compared to 6.5% in fiscal 2018. Revenue from Banking, financial services & insurance was 13.4% in fiscal 2019 compared to 13.7% in fiscal 2018. Revenue from Retail Transport & Logistics was 6.4% in fiscal 2019 compared to 6.8% in fiscal 2018. Revenue from Others was 11.5% in fiscal 2019 compared to 10.6% in previous year.
Consolidated Revenue by Segment
For fiscal 2019, 91.9% of revenue came from IT services, whereas 8.1% of revenue came from BPO services. The revenue share for fiscal 2018 from IT & BPO services was 92.8% & 7.2% respectively.
2. Other Income (Standalone)
Other income includes interest income, dividend income, foreign exchange gain/loss and net gain on disposal of assets. Interest income mainly consists of interest received on bank deposits. Dividend income includes dividend received on long term investments as well as that received on current investments. Exchange gain/loss consists of mark to market gain/loss on ineffective hedges, realized gain/loss and revaluation gain/loss on translation of foreign currency assets and liabilities. Other income was 9,601 Million in fiscal 2019 compared to 17,280 Million in fiscal 2018. The decrease in other income was mainly due to lower foreign exchange gain in current fiscal year and gain on disposal of immovable property in last fiscal year.
|3. Expenditure (Standalone)|
|Fiscal 2019||Fiscal 2018|
|Particulars||in Million||% of Total expenditure||in Million||% of Total expenditure|
|Operating and Other Expenses||34,859||15.3%||26,432||12.9%|
Personnel cost includes salaries, wages and bonus, allowances paid to associates deputed outside India, contribution to provident fund and other funds and staff welfare costs. The increase in personnel cost in absolute value is due to annual increments.
Subcontracting expenses include cost of direct contractors and agency contractors to support current and future business growth.
Operating and other expenses mainly include travelling expenses, rent, repairs and maintenance, communication expenses, office establishment costs, software packages and professional fees.
4. Profit before tax
Profit before tax and exceptional item was
54,273 Million in fiscal 2019 compared to
49,002 Million in fiscal 2018. Profit before tax as a percentage of total revenue was 19.9% in fiscal 2019 compared to 20.7% in fiscal 2018.
5. Income taxes
The provision for income tax for the year ended 31st March 2019 was 10,469 Million as compared to 9,063 Million in the previous year. The effective tax rate in these years was 19.3% and 18.5% respectively.
6. Profit after tax
Profit after tax was 43,804 Million in fiscal 2019 as compared to 39,939 Million in fiscal 2018. Profit after tax as a percentage of revenue was 16.1% in fiscal 2019 and 16.9% in fiscal 2018. Consolidated PAT
Consolidated PAT (owners of the company) for fiscal 2019 was 42,976 Million as compared to 37,998 Million last fiscal 2018. PAT as a percentage of revenue is 12.4% in fiscal 2019 &
|C. CASH FLOW|
|Net cash flow from operating activities||36,344||32,730|
|Net cash flow from (used in) investing activities||(15,425)||(21,848)|
|Net cash flow from (used in) financing activities||(20,359)||(12,095)|
|Increase/(Decrease) in Cash and Cash Equivalents||560||(1,213)|
|Effect of exchange rate changes on cash and cash equivalents||129||388|
|Cash and cash equivalents at the beginning of the year||8,892||9,717|
|Cash and cash equivalents at the end of the year||9,581||8,892|
D. In accordance with the SEBI (Listing Obligations and Disclosure Requirements 2018) (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key financial ratios.
|1 Debtors Turnover||3.6||3.7|
|2 Inventory Turnover||NA||NA|
|3 Interest Coverage Ratio||159.4||209.2|
|4 Current Ratio||2.3||2.9|
|5 Debt Equity Ratio||0.5||0.4|
|6 Operating Profit Margin (%)||20.1%||21.0%|
|7 Net Profit Margin (%)||16.1%||16.9%|
|8 Return on Net Worth||21.8%||21.9%|
* Ratios are based on standalone financials
As movements are not greater than 25%, they are not material.
E. Internal Control Systems
The Company maintains adequate internal control system, which provides, among other things, reasonable assurance of recording the transactions of its operations in all material aspects and of providing protection against significant misuse or loss of Companys assets. The Company uses an Enterprise Resource Planning (ERP) package, Business Intelligence and Analytics package, which enhances the internal control mechanism. The Company also has a Chief Information Risk Officer (CIRO) and Chief Information Officer (CIO) for overseeing the Internal Control and Systems.
F. Material developments in human resources including number of people employed
Being an organization that focuses on staying at the cutting edge of technology through our people, we strive at attracting the best talent through intensive recruitment drives in premier engineering and management institutes. During the year, Tech M saw a net addition of 8,275 professionals through campus recruitment, lateral hiring and acquisitions. The global headcount of the Company as on March 31, 2019 was 121,082 as compared to 112,807 as on March 31, 2018.
The IT attrition was 20.8% during the year as compared to 18.1% in the previous year. The Company has been working towards retaining talent by investing in career development programs, talent engagement initiatives, employee well-being (personal and professional), rewards and recognition as well as an empowered work environment.
Certain statements made in the management discussion and analysis report relating to the Companys objectives, projections, outlook, expectations, estimates and others may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ from such expectations, projections and so on, whether express or implied. Several factors could make a significant difference to the Companys operations. These include economic conditions affecting demand and supply, government regulations and taxation, natural calamities and so on over which the Company does not have any direct control.