TVS Electronics Ltd Management Discussions.

Global & Indian Economy Outlook

The World Economic Situation has changed dramatically due to the outbreak of COVID-19. A rare disaster, the coronavirus pandemic, has resulted tragically in a large number of human lives being lost. As countries implement necessary quarantines and social distancing practices to contain the pandemic, the world has been put in a Great Lockdown. Many countries are facing multiple crises including health, financial and a collapse in commodity prices, which interact in complex ways.

There is extreme uncertainty around the global growth forecast. The economic fallout depends on factors that interact in ways that are hard to predict, including the pathway of the pandemic, the intensity and efficacy of containment efforts, the extent of supply disruptions and repercussions of the dramatic tightening in global financial market conditions, shifts in spending patterns, behavioural changes, confidence effects, and volatile commodity prices.

According to International Monetary Fund (IMF) Report, April2020, the global economy is projected to contract sharply by -3% in 2020. This is a downgrade of 6.3 percentage points from the IMF Report (January 2020), a major revision over a very short period. This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis of 2008. Assuming the pandemic fades in the second half of 2020 and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, the projected global growth in 2021 to rebound to 5.8 percent.

This recovery in 2021 is only partial as the level of economic activity is projected to remain below the level it was projected for 2021, before the virus hit. The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around 9 trillion dollars, greater than the economies of Japan and Germany, combined.

Countries reliant on tourism, travel, hospitality, and entertainment for their growth are experiencing particularly large disruptions. Emerging markets and developing economies face additional challenges with unprecedented reversals in capital flows as global risk appetite wanes, and currency pressures, while coping with weaker health systems, and more limited fiscal space to provide support. Moreover, several economies entered this crisis in a vulnerable state with sluggish growth and high debt levels.

For the first time since the Great Depression both advanced economies and emerging market and developing economies are in recession. For this year, growth in advanced economies is projected at -6.1 percent. Emerging market and developing economies with normal growth levels well above advanced economies are also projected to have negative growth rates of -1.0 percent in 2020, and -2.2 percent if China is excluded. Income per capita is projected to shrink for over 170 countries. Both advanced economies and emerging market and developing economies are expected to partially recover in 2021.

Among emerging market and developing economies, all countries face a health crisis, severe external demand shock, dramatic tightening in global financial conditions, and a plunge in commodity prices, which will have a severe impact on economic activity in commodity exporters. Emerging Asia is projected to be the only region with a positive growth rate of 1% in 2020. In China, indicators such as industrial production, retail sales, and fixed asset investment suggest that the contraction in economic activity in the first quarter could have been about 8% year over year. Even with a sharp rebound in the remainder of the year and sizable fiscal support, the economy is projected to grow at a subdued 1.2% in

2020. According to IMF, Indias growth is seen recovering sharply from 1.9% to 7.4% in the next fiscal year and Chinas growth is projected to grow from 1.2% to 9.2% in 2021.

The recovery forecast for 2021 depends critically on the pandemic being brought under control in the second half of 2020, allowing containment efforts to be gradually scaled back and restoring consumer and investor confidence. The Government of India is taking various initiatives to boost the Indian economy by way of announcing a number of relaxations and providing various relief funds including the COVID-19 relief package of Rs 20 Lakh Crores.

Industry Overview

IT & ITeS

India has become the digital capabilities hub of the world with around 75 percent of global digital talent present in the country and with a low-cost advantage by being 5-6 times inexpensive than the US. The IT & ITeS industry has always been a key part of Indias economy.

The Indian IT industry which was expected to grow at 7.7 percent in FY 2020 will now witness flattish to muted growth in FY 2020 owing to the coronavirus outbreak. As per the report of ICRA, the IT industry is expected to grow at 3-5% as against 6-8% in FY 2020. With the slowdown in growth during the first half of 2020-21, the margins are expected to decline from 22.4% in FY 2019 to 20.08% in FY 2021. The growth of the IT industry will remain at 6-8% over the FY2021-FY 2024.

According to IBEF Report (March 2020), the market size of IT services during FY 2019 is around US$ 92.49 which is a 51 % share of total Indian IT sector revenues in FY 19.

BFSI continues to be the major vertical of the IT sector.

The market size of Business Process Management (BPM), Software products and engineering services (SPES) and Hardware during FY 2019 is US$ 36.2,34.39 and 14.48 billion respectively.

New geographies, customer segments and new verticals provide huge opportunities for IT and ITeS industry. BIRC nations, continental Europe, Canada and Japan have IT spending of approximately US$ 380-420 billion.

Adoption of technology and outsourcing is expected to make Asia the 2nd largest IT market. Small and Medium businesses have IT spend of approximately US$ 230-250 billion, but contribute just 25 percent to Indias IT revenue. The emergence of new service offerings and business models would aid in tapping market profitably and efficiently. Government, healthcare, media and utilities together have IT spend of approximately US$ 190 billion, but account just 8 percent of Indias IT revenue. Emerging verticals like retail, healthcare, utilities are driving growth and are expected to increase the IT spending.

However, due to the dramatic change in the global economy, it is expected that there will be cuts in IT spending budgets. As per the reports of ICRA, it is expected that there will be consolidation in the industry especially among small and mid-size players. Indian IT companies with their stellar track record will be one of the major beneficiaries of any such consolidation initiatives.

IT Peripherals

The computer peripherals industry is riding high on the back of the ever-widening IT base in India. A sector that thrives on inventions, the peripherals industry has witnessed stable demand as customers crave newer and better products with each anticipated launch. Input, Output and Input/output (I/O) devices make up the computer peripherals market. Input devices include keyboards, mouse, scanners, microphones, barcode readers, digital cameras etc. whereas output devices comprise printers (impact and non-impact), plotters and monitors, terminals, projectors, speakers and auxiliary memory devices such as disk drives etc.

While several industries reel under the COVID-19 lockdown impact in India, PC and laptops have seen a massive surge in bulk buying from corporates and enterprises to keep their workforce stay home, safe and connected. Millions of Indians across the spectrum began working from home from early March as part of COVID-19 containment measures.

The computer peripherals market growth is driven by initial cost, recurring cost, brand names, warranty as well as innovation in product design. Another important demand driver is the number of functions, which a product may be able to perform. Most of the demand comes from sectors such as banking and finance, insurance, telecom, education, manufacturing and retail. The demand has also increased with the number of international companies opening offices in India, across all sectors.

With rapid new innovations, the rate of obsolescence in this industry is high. This has proved to be advantageous as it keeps the demand stable. However, it also affects the demand as customers are always anticipating better products.

For India, China is the biggest trading partner. As per the Financial Express report (May 10 2020), in 2019, India imported products valued at US$ 480 billion from around the world, in which products valued at US$ 68.16 Billion were imported from China. Due to the outbreak of COVID-19, there is a global supply chain disruptions and demand shocks. The industry is expected to recover partially in the second half of FY2020-21.

Consumer Electronics

The consumer electronics segment is one of the fastest growing industry segment in India. According to IBEF report, the market size of Indian appliance and consumer electronics (ACE) market has reached Rs 76,400 crore (US$ 10.93 billion) in 2019 and is expected to double to Rs 1.48 lakh crore (US$ 21.18 billion) by 2025. Electronics hardware production in the country reached Rs 38,800 crore (US$ 5.55 billion) in FY18, growing at a CAGR of 26.7 percent between FY14-18. Demand for electronics hardware in India is expected to reach US$ 400 billion by FY24 and also the Draft National Policy (DNP) targets production of one billion mobile handsets by 2025. The e-commerce has contributed immensely to increase the sale of consumer electronics including smartphone, television, air-conditioner and washing machine. The sales on e-commerce platform has gone up in 2019 from the previous year, which marketers attributed to a continued shift of consumption habits and a plethora of price aggressive online launches.

However, due to the outbreak of COVID-19, this industry is facing heavy headwinds across the globe. Retail shops and showrooms of major brands, super markets, and hypermarkets have been shut down for an indefinite period of time affecting sales of various consumer electronics products. Even home delivery of consumer electronics ordered through e-commerce platform was restricted. The outbreak of COVID-19 also disrupted the global supply chain of the major consumer electronic brands. China is not only the largest consumer and producer of various consumer electronics products but also caters to a wide range of countries by exporting several input supplies that are essentially used to produce finished goods. Shut down of the production in China has forced other consumer electronics makers based in the US and Europe to temporarily hold the production of finished goods. This is leading to an increase in the supply and demand gap.

The Government of India is influencing the development of the Indian appliances and consumer electronics market by strongly promoting the “Make in India” initiative by increasing the custom duty on imports of washing machines, refrigerators and other appliances. As a result, domestic brands have felt a growing pressure to manufacture products locally and are planning investment in manufacturing and backward integration.

The Indian electronic industry has a lot of scope for growth from rural markets with consumption expected to grow in these areas as penetration of brands increases. As per the IBEF report on Consumer Durables (March, 2020), Consumer electronics exports from India reached Rs 3,154.06 crore (US$ 451.29 million) in FY19. Also demand for durables like refrigerators as well as consumer electronic goods are likely to witness growing demand in the coming years in the rural markets as the government plans to invest significantly in rural electrification. The S&P BSE Consumer Durables Index is up 6.8 per cent in January 2020 and gained 32.1 percent in the last one year. Consumer durables index under the Index of Industrial Production (IIP) has grown 5.5 per cent year-on-year in 2018-19. Consumer durable loans in India increased by 70 per cent in December 2019.

Company Overview

A century is a fairly long span of time. And the TVS Group has notched several achievements and crossed many milestones in this time. With over $6 Billion in revenue, the TVS Group is one of the Top 5 family owned business groups in India. It is also one of the first companies in Asia to win the prestigious Deming Award for Quality.

TVS Electronics Limited (TVS-E), a subsidiary of the distinguished & prestigious TVS Group, was founded in 1986. TVS-E has two legacy business verticals viz. “Products & Solutions” and “Servicetec”.

In the Products & Solutions business vertical, we design, manufacture, assemble, market, sell and service various transaction automation products that include Dot Matrix Printers, Mechanical Keyboards, Thermal Printers, Label Printers, Barcode Scanners, Electronic Cash Registers, Membrane keyboards, Mouse, Currency Counting Machines to name a few.

In the Servicetec business vertical, we cover the entire lifecycle of after-sale service catering to both OEMs and end customers which includes repair engineering services, Installation and Demo Services, Remote Tech Support, Call Centre Services, Parts Management services etc.

The world as we see it is evolving, with new opportunities and fresh challenges branching off at every turn. We look forward to each day, with an eagerness to stay relevant and to deliver value. And, we have met each challenge with powerful ideas - from our early days to the present where we offer a vast number of solutions to the electronics industry.

This mind set has helped us anticipate and adapt to new developments. As our customers navigate the shape-shifting world of commerce, we stand by them, ever ready to transform and offer up-to-date support. We call this Infinite Evolution.

With our century-old legacy of quality and trust and over two decades of expertise in developing cutting edge technology products and services - we are poised to deliver need-of-the-hour solutions.

Our Business Verticals

Products & Solutions

With our extensive dealership network, we market and sell transaction automation products including Printers and Keyboards, and through our wide reach of service infrastructure we are able to cater to the end-to-end needs of our customers. Product development is at the core of our product solutions vertical and meeting customer requirements through innovative products has enabled us to retain the market share.

Our products cater to seven broad sectors, namely, Retail - SME, Government, BFSI, Hospitality, Healthcare, E-commerce and Transport, Large Format Retail (LFR) Stores and Quick Service Restaurants (QSR). Out of our total revenues from the product solutions business, transaction automation product peripheral hardware contributes 35% while 65% is being contributed by the Dot Matrix Printer, keyboard and related supplies.

Over the years, our product range has evolved with the evolving needs of our customers. Now our products ecosystem consists of Data Identification products, Data Capturing products, Data Processing products and Data Dissemination products. The complete details of our Products & Solutions offerings are available at our website www.tvs-e.in.

Performance

During FY2020, the product solutions business vertical refreshed its range of transaction automation products and further strategized to expand its reach into the “Point of Transactions” landscape.

The Companys Dot Matrix Printer range has gained added momentum during the year as its market share improved from 29% to 37% with supplies made to Insurance Companies during the year.

Also, Thermal Printer range has gained added momentum during the year as its market share improved from 22% to 24%. These printers are used largely to print invoices or receipts in modern Retail Stores, Quick Service Restaurants, E-Commerce Platforms, and the Health Care industry, amongst others. As legacy Dot Matrix Printers become more and more obsolete in certain sectors, they are being replaced by sophisticated Thermal range printers where TVS-E is gaining market traction.

The market for the Label Printers that print barcodes or QR code labels, and their scanners, growth is flat. For these products, TVS-E holds a market share of 14% and 19% respectively. While the share remained same for Label Printers, it has dropped 6% in case of Scanners due to the increase of many low-end variants in the market. However, the Company witnessed increase in the market share of Passbook printers from 4% to 15%

The Company expanded its GTM opportunities through participating in Government E-Commerce market place and built inside sales capability.

Overall, during the year, the Products BU witnessed a subdued demand for its categories of products reflecting an economy in the verge of recovering from large government policy actions and coupled with the impact of COVID 19 from mid of March 2020.

Servicetec

The Servicetec business vertical looks after installations and technical service calls for over 25 brand partners, covering more than 15,000+ pin codes across India, with a very wide array of electronic product categories. The Company has partnered with leading brands to provide onsite support and walk-in centre services for in-warranty and out-of-warranty fulfilment of their Products.

Apart from addressing the IT services segment, TVS Electronics has a strong presence in the mobile/ handheld segment, consumer electronics and the banking segment. For the mobility products and consumer electronics segments, we have strong relationships with leading smartphone and white goods manufacturing players for both in-warranty and out-of-warranty services. The Company also provides installation and service of PoS terminals apart from an extensive service network for its Products & Solutions business.

Customer centricity is at the forefront of every service that TVS-E provides and remains at the core of the Companys performance metrics. While our competitors typically serve specific customer segments, without much flexibility or customisation options in their offerings, we have a suite of services that encompasses every stage of the post-purchase product lifecycle. Over the next few years, we plan to consolidate our position as a strong player offering ‘one-stop- shop solutions for all customer post-purchase product needs. The complete details of our Servicetec business vertical offerings are available at our website www.tvs-e.in

Performance

During FY2020, the Servicetec business vertical revenue registered a growth of 16% YoY. This was 2nd consecutive year of double-digit growth for the services business.

The Company expanded its service footprint across more than 427 districts in India for onsite services and also increased its retail network for customer walk-in services to 200 centres which is more than 40% compared to previous year. Due to increased geography coverage, revenue from Onsite Services for IT & IT Peripheral products doubled during the year and were able to add new clients in the IT, Telecom and Consumer Electronics product segment.

TVS-E scaled up to support L3-L4 repairs for all electronics products including mobility products, IT & consumer electronics segment. The company continued its efforts to lower fixed costs by outsourcing of commodity skills and retaining niche skills which will allow to make service business scalable with faster growth.

New service offerings in areas of Repair factory, E-recycling, Extended warranty plans and Bio-Medical Equipment services were piloted during FY2020 and will be launched in the coming year.

The Company deployed more than 3000+ professionals pan India, offering onsite services to OEM brands, E-commerce brands and end customers for IT products, Telecom products and Consumer Electronics

Services business also expanded its footprint in newer skills and device categories like Consumer Electronics, Digital signage and classrooms, RO Water Purifiers and Audio products. To escalate the growth, the Company continues in investing in technology, people and infrastructure.

Growth Outlook and Initiatives

Electronics industry is one of Indias largest and fastest growing industry and is increasingly finding applications in all sectors of the economy. The National Policy on Electronics 2019 (NPE 2019), proposed by the Ministry of Electronics and Information Technology (MeitY) has been approved and it envisions positioning India as a global hub for Electronics System Design and Manufacturing - (ESDM) by encouraging and driving capabilities in the country for developing core components and creating an enabling environment for the industry to compete globally. NPE 2019 provides various incentives and support for manufacturing of core electronics components. According to the NPE 2019, the policy targets to achieve a turnover of USD 400 billion by 2025. This will include targeted production of 1.0 billion mobile handsets by 2025, valued at USD 190 billion. Surge in manufacturing of core electronics components will provide opportunities for TVS Electronics Limited (TVS-E) to increase its range of Automatic Identification and Data Capture (AIDC) products.

Further, with rapid development in the fields of information technology and hardware, India is about to witness a fourth industrial revolution (Industry 4.0). The concept of ‘Industry 4.0 is going to change the way India manufactures, designs and refurbishes the products. Driven by the power of big data, high computing capacity, artificial intelligence and analytics, Industry 4.0 aims to completely digitise the manufacturing sector. Industry 4.0, is mainly comprising of a ‘connected shop fioor where data is collected from various sensors (IoT) and other input devices to be used for predictive maintenance, better control and 100% traceability. Industry 4.0 will increase the market size of products with Radio Frequency Identification Device (RFID) scanning capabilities and TVS-E will explore opportunities by strengthening the scanner products portfolio with RFID scanning capabilities and its related solutions for manufacturing, logistics and warehousing.

TVS-E always aims to offer comprehensive after-sales service solutions across product categories from various industries. Currently, TVS-E is targeting to explore opportunities in the fast growing industries in India. One such is the medical devices market. As per the report on Medical devices (Feb, 2020) by Investindia.gov.in, India is amongst the top 20 global medical devices market and is the 4th largest medical devices market in Asia after Japan, China and South Korea. The current market size of the medical devices industry in India is estimated to be US$11 billion and it is expected to reach US$ 50 billion by 2025. The “Make in India” charter has motivated medical device manufacturers in India, with promise of the government support in the form of land allocation and subsidies to encourage growth of the domestic medical device industry. The Company has started to explore opportunities in the Medical device segment for repair and maintenance services in a phased manner.

We are also discovering opportunities in security and surveillance industry as the market size is expected to reach USD 144.85 Billion by 2027, growing at a 14.6% CARG from 2020 to 2027 as per the Valuates Report dated 11th May, 2020. Multiple factors are driving the growth in the segment, including Government & strong government push to enhance security, purchases for initiatives such as the Smart City project, which covers 100 cities and funds allocated under the Nirbhaya Fund for womens safety, which covers eight cities. TVS-E will explore opportunities by adding new product lines and by providing repair, maintenance and deployment services to AI based surveillance solutions.

Considering the outbreak of Covid-19 and current situation, TVS-E is exploring opportunities to support country fight against Covid-19 and stay healthy. Increased awareness on health and safety amongst the people has made temperature screening devices and sanitizing devices as one of the essential products. TVS-E will explore opportunities for adding new product lines to support people fight against Covid-19 and stay healthy.

In addition to the above, we continue to focus on achieving long-term growth through value-added services for customers by providing on-site and retail services, keeping the comfort of customers in mind. As customers are an integral part of the Company, we aim to bring in more regional repair centres, which are in close proximity to the customers. This in turn, will help reduce our logistics and transportation costs and will help serve our customers faster.

Financial and Operational Highlights

During FY2019-20, the Companys ‘Products & Solutions & ‘Customer Support Services segments collectively has earned revenues of Rs 234 Crores.

The Revenue for previous year included revenues from ‘online distribution business under ‘Distribution and Fulfilment segment for period of four months. This is a high volume, high value business with low margins and hence the revenues are not fully comparable.

Profit before ‘Exceptional items was Rs 3.48 Cr. Further during the Financial Year 2019-20, the Company focussed on new business development activities which will materialize and bring in benefits over the coming years. The businesses were also impacted in Q4 FY20 on account of lockdown (COVID). The Company has provided for an impairment of carrying value of intangible asset in the Customer Support Services segment, disclosed as ‘Exceptional Items.

The company has opted for lower tax rate u/s 115BAA of the Income Tax Act during the year. The company has not foregone any carried forward loss or MAT credit on this account. The Profit After Tax for the year was at Rs 0.4 Crores.

Financial Ratios

Particulars FY 2019-20 FY 2018-19 Change
Debt Turnover Ratios 8 13 -39%
Inventory Turnover Ratio 4 10 -60%
Interest Coverage Ratio 2.5 36 -93%
Current Ratio 1.21 1.36 -11%
Debt Equity Ratio 0.18 -
Operating Profit Margin 0.19% 0.53% -64%
Net Profit Margin 0.15% 0.27% -45%
Return on Net Worth 0.48% 8.55% -94%

Business Risks & Opportunities

The Companys key imperative over the medium term will be sustaining the current revenue streams, even as we build a strategic framework and drive the Technical Services business, leveraging macro trends and business opportunities as described elsewhere.

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

Enterprise Risks of TVS-E are categorised into (a) Strategic, (b) Operational, (c) Financial and (d) Legal and Compliance risks. Some of the significant risks have been enlisted below along with its mitigation plans:

Risk Type Risk Overview Mitigation Plan
Strategic Risk - Geopolitical risk TVS-E imports bulk of its supplies / finished products from the People Republic of China. Situation like disruption of manufacturing in China due to outbreak of Covid-19 or any impact to the bilateral trade arrangement will have multiple implications to TVS-Es business lines. The Company is continuously monitoring the risk and opportunities and are taking various measures to minimize the impact.
Strategic Risk - Technology risk Two dimensional printing as a technology and need could fade away impacting demand for TVS-Es Dot Matrix, Thermal, Label & Mobile Printers ‘Products& Solutions BU is expanding its range beyond Printers into ‘Point of Transaction solutions and added ‘Keyboards, ‘Touch POS, ‘Scanners etc. More such product range expansion will continue.
Operational Risk - Information security risk Both Products & Solutions and Services BUs of TVS-E deal with high volume personal data of device users and the service agents have access to customer data of brand partners carrying vulnerability. A strong Incident Prevention and Resolution Process along with an Intrusion Prevention System has been put in place to mitigate cyber security threats. TVS-E has also covered the risk under appropriate insurance.
Operational Risk - Reputation risk Service agents of TVS-E visits customer places of brand partners in the normal course of business. These agents are well trained on both technical and behavioural aspects before being assigned with the filed job. Nonetheless, the nature of job is susceptible to behavioural / induced behavioural incidents causing reputational and financial loss to TVS-E. The Company has published a code of conduct mandating the highest moral and ethical standards for its employees / agents, which is also periodically communicated to other stakeholders. It has a whistle-blower policy to ensure suspected or actual violations to the code are reported, investigated and acted upon.

Covid-19 Readiness and Business Continuity Plan

TVS-E always believes that success depends heavily on the readiness of business. During the outbreak of Covid-19, we have taken various measures for the safety of our employees, their families, customers and various stakeholders and to minimize the impact on production and volume of business.

The Company proactively framed a detailed SOP for safety of its field engineers, employees, Walk-in Centres and rendered critical and essential IT/repair services to Hospitals, Banks and other Government Departments, during the lockdown period. TVS-E also assisted in building up facilities for Covid-19 isolations wards with respect to IT and appliance infrastructure. TVS-E has provided personal protective kit to all its field staff to ensure safety of staffs, customers and society.

During the initial stage of outbreak of Covid-19, we anticipated the likely shortfall in inflow of materials and we procured 100% stocks that were required for 04 FY20. However, nationwide lockdown imposed by Government of India entailed reduction in sale during the late March, 2020.

Subsequently, based on the guidelines issued by the Central/State Government and local authorities from time to time, TVS-E partially resumed its operations at all its manufacturing plants, walk-in centres and field services.

The Company has framed “Work From Home” policy for its employees to ensure the safety and continuity of its corporate functions.

TVS-E has in place a well-defined business continuity plan which permits us to immediately respond to crises in order to shorten recovery time and mitigate impact.

To ensure the production at the manufacturing plants, we have procured sufficient stocks in advance which are required for Q1 FY21 and initiated measures for effective and uninterrupted supply chain by exploring alternate sources for procurement. We are following the Companys SOP including the guidelines issued by government and local authorities from time to time for safety of our employees at all our manufacturing plants.

To ensure the business continuity of our Servicetec segment, we are focusing on digitisation as a key to make the business model agile and scalable. Some of the key initiative taken are:-

• Remote resolution of service calls via Audio and Video DIY. All service complaints are first attempted remotely to offer solution and only the field / home services are offered where hardware failure is reported.

• Service on wheels initiated in 2 Metros and shall be extended to other major cities.

• It is expected that post lifting of lockdown, there will be a surge in service calls for completing all the deferred repairs of the customers. We are increasing resources in the field to address the expected surge in service calls. Local recruitment at city level or location level is being emphasized to ensure resource availability and also render better services to customers in that geography.

• To ensure the readiness of our engineers, we have given sufficient E-training to our engineers via Video.

The Company will closely monitor the developments and will take all the necessary actions to ensure business continuity and minimize the impact of the outbreak of Covid-19.

Internal Control Systems and adequacy of Internal Financial Controls

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Audit committee defines the scope and authority of the Internal Auditor. The Audit Committee comprises of professionally qualified Directors, who interact with the statutory auditors, internal auditors and management in dealing with matters within its terms of reference.

The Company has a proper and adequate system of internal controls. Adequate internal controls ensure transactions are authorised, recorded and reported correctly and assets are safeguarded and protected against loss from unauthorised use or disposition. In addition, there are operational controls and fraud risk controls, covering the entire spectrum of internal financial controls. An extensive program of internal audits and management reviews supplements the process of internal financial control framework. Documented policies, guidelines and procedures are in place for effective management of internal financial controls.

To maintain its objectivity and independence, the internal auditor reports to the Chairman of the Audit Committee of the Board. The internal auditor monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company.

Based on the report of internal auditor, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions proposed to fix the observations are presented to the Audit Committee of the Board.

The internal financial control framework design ensures that the financial and other records are reliable for preparing financial and other statements. As far as possible, emphasis is placed on automation of controls within the process to minimise deviations and exceptions. Investment in advanced IT tools on an ongoing basis is one of the keys means to achieve the automation. In addition, the Company has identified and documented the key risks and controls for each process that has a relationship to the financial operations and reporting. At regular intervals, internal teams test identified key controls. The internal auditors also perform an independent check of effectiveness of key controls in identified areas of internal financial control reporting.

Business Planning and Information Technology

The Company has moved its applications and data base to a Cloud-based server since 2015-16. This has resulted in de-risking the storage of critical information in our own hardware. The Company also simultaneously monitors software upgradation, which helps run business operations in an efficient manner. In terms of Companies Act, 2013, the details of maintenance of books of accounts on cloud server is being intimated to the Registrar of Companies at the time of annual filing.

The data analytics capabilities acquired by the Company last year helps capturing relevant information for decisionmaking across various businesses. The information dashboards so generated helped the management and operating teams to have real-time information on process controls and take pro-active steps to manage operations.

Human Resource Development

Human Capital is the core towards building talent for the future growth of the Organization. Considering the safety of our employees due to the outbreak of Covid-19, we have framed “Work From Home” policy and a detailed SOP for the safety of our employees, field engineers and agents. Personal protective kit has been provided to the field staff to ensure the safety of our employees, customers and society. We are closely monitoring the developments and conducting frequent awareness sessions on educating safety and precautionary measures to our employees.

As part of our structured Talent Management program, we organized Leadership coaching programs for the second level leaders who were coached by Senior Leadership team members as Internal Coaches and supported by an External consultant. The success of the program resulted in people taking up new roles and larger responsibilities. We also added lateral talent from Business Schools to build our Leadership pipeline. We continued to invest on the Senior Leadership talent by sponsoring them to specific functional training programs conducted by Business Schools / IIMs to get updated on best in class industry practices and methodologies.

Our e-Learning platform was extensively used for training our Employees and Partners as and when we added more Brands to our portfolio. We continued to work closely with our Engineers/Agents for multi-skilling, and supported them with routine soft skills and behavioural training.

Our focused approach of increasing diversity resulted in creating more opportunity for women employees in our organization and we were able to double the women workforce to 14%.

Digitalization continued during the year and more Business process digitization projects were initiated with active participation of our Employees. Our Performance Management System has been digitized leading to sharper focus on goal setting in alignment to our Quarterly / Annual plan. To drive performance across all levels and to build entrepreneurial mind set, variable pay has been extended across job levels with higher earning potential for exceptional performers.

We recognized best performers with awards at different forums for Individual and team performance as part of our Employee motivation and Communication program.

Corporate Social Responsibility

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

The Company has constituted the CSR Committee and based on the recommendation by the CSR Committee, the Company undertake various CSR activities. During the year, the Company has undertaken various CSR activities.

Considering the global warming issues and to ensure environmental sustainability, the Company identified government schools and gifted 50 saplings of 6 ft. each as a gift to the Schools. TVS-E employees and school children joined hands with an NGO to make this happen in three different locations. The tree saplings that were planted were carefully chosen in order to suit the soil conditions and Magilam, Badam, Pungam, Sarakondrai, Neem, Poovarasu and Panneer were planted.

TVS-E organized “joy of giving” where TVS-E employees handed over 175 gifts to the children, putting a priceless glee on the kids faces. On the occasion of Childrens day, TVS-E Employees organized a drawing competition for the school children and received a very good response from the school children. A kitchen garden was co-created by the children and the NGO at the School. This was done to create awareness and educate the children on a simple and healthy way to lead life.

Every year TVS-E organizes blood donation camps for the needy in our society and more than 100 employees of TVS-E donated this year.

The Company has also come forward to fight the Covid-19 outbreak by providing 200 face shields to the Rajiv Gandhi Hospital, Omandurar Estate, Chennai and to the frontline warriors (traffic police) at L.B.Road, Adyar, Chennai, Tamil Nadu.

In addition to the above, the Company has contributed to promote education, art and culture and woman empowerment. The Company has spent Rs 29.80 Lakhs during the FY 2019-20. The details of CSR activities are given in the Annexure G to the Boards Report.

Cautionary Statement:

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