BOARD'S REPORT TO THE MEMBERS The Board of Directors present their Twenty First Annual Report on the business and operations of the Company and the financial statements for the year ended 31st March, 2016. The Management Discussion and Analysis (MDAR) is an integral part of this report. Business results and key highlights of operations For the year ended 31st March, 2016, the Company reported Sales Revenue and Other Income of Rs. 595.03 Cr as against Rs. 271.03 Cr in the previous year. Sales include Rs.135.54 Cr from Servicemen business (Previous year Rs.94.10 Cr) and Rs.299.46 Cr from Distribution service business. The Servicetec business recorded a robust growth of over 40% in revenue and established itself as a strong player in the 'Exclusive Branded Service Centre' delivery model. With strategic tie-up with leading international brands, the Company operates over 60 such exclusive centres across India. The Company also focused on the 'Repair Factory' model where high level repair services are carried out for these brands. The Company is becoming a preferred choice for major brands in the Mobile Phones and Computers and other IT products for their warranty and repair services. The market for Dot Matrix Printers (DMP) continued to decline given the preference for end users for new technology laser printers. However, the Company has mitigated this impact by improving POS (Point-of-Sale) business. The market for POS products is growing at a CAGR of 12% riding on the demand from retail sector. The Company focuses on customer-centric products like Thermal Printers, Scanners, Label Printers and has recorded good volume growth. Meeting customer needs through innovative products and solutions helped the Company retain market share in many of these categories. Company's market share in dot matrix printers is strong and the business is profitable and generates valuable cash flow. During the year, the Company forayed into 'Distribution Services' by tying up with one of the reputed international mobile phone manufacturers to distribute their products in India through e-commerce route. Though the revenue from this line of business is high, the margins are low due to the inherent nature of the business of distribution. The Company is building up valuable experience by distribution through leading e-commerce portals. The e-auction business provides a robust transparent platform for various manufacturers in disposing off their scrap and surplus materials and realise good value. The Company launched a new product - 'e-procurement' during the year to offer integrated services to customers. Growing the business Our Company believes that 'Servicetec Business' remains the major focus in the future for profitable growth; which will come from expanding our service footprints to more cities, (Tier 2/3), where the demand for mobile phone service is increasing. The Company plans to tie up with more leading brands in computers, mobile phones and other consumer electronics products by offering warranty services through multiple delivery models. With the demand for Out-of-Warranty services increasing, we envisage to set up consumer service centres under 'Multi-Brand Outlet' (MBO) model. This will help consumers get reliable and high quality services for their devices. In the 'Products Business' the Company expects the POS category to grow at 12-15% in the future, driven by expanding retail sector. Other sectors like hotels, hospitals, manufacturing also need these products for various customer applications. With the impending movement to GST, it will become mandatory for all retail establishments to generate invoices, which will help grow the category. The Company plans to launch appropriate products for various segments and also work closely with the system integrators in making our products available to the customers. The field team will also be trained to focus more on this growing category, supported by a strong inside-sales team. Code of Business Conduct and Ethics The Board of Directors at their meeting held on 5th November 2014 approved the Code of Business Conduct and Ethics (Code) in terms of Schedule IV of Companies Act, 2013 and as per listing regulations. All the members of the Board and senior management personnel have confirmed compliance with the Code for the year ended 31st March, 2016. The Annual Report contains a declaration to this effect signed by the Managing Director and Company Secretary as Compliance Officer for the Code. The Code is available on the Company's Website www.tvs- Vigil Mechanism / Whistle Blower policy The Company has established a vigil mechanism, which is overseen by the Audit Committee. The Chairman of the Audit Committee has been appointed as the Ombudsman of the Vigil mechanism. The policy provides a formal mechanism for all directors, employees to report to the management, their genuine concerns or grievances about unethical behaviour, actual or suspected fraud and any violation of the Company's Code of Business Conduct and Ethics policy. The Company has also provided direct access to the Chairman of the Audit Committee on reporting issues concerning Company. The Policy is available on the Company's Website www.tvs-e.in Prevention of Insider Trading The Company has complied with the provisions of SEBI (Prevention of Insider Trading) Regulations, which is to be complied with effect from 15th May, 2015. The Company has adopted Fair Practices Code (FPC) as per the regulations. The Board and the designated employees of the Company have confirmed compliance with the FPC as applicable as on 31st March 2016. Code of Conduct for Insider Trading Regulation and the Fair Practices Code are available on the Company's Website www.tvs-e.in Holding Company Sundaram Investment Limited, our Promoter Company has changed its name to TVS Investments Limited, which was approved by the Registrar of Companies witheffect from 2nd May 2016. The Promoter Company holds 60.15% as on 31st March 2016 (previous year 61.92%). Subsidiary Company Prime Property Holdings Limited (PPH), is the Company's Wholly Owned Subsidiary, which holds 100% of 50,000 Equity Shares of the Company at Rs.10/- each. The Board of Directors of the Company have approved a Scheme of Amalgamation of PPH with the Company, under Sections 391-394 of Companies Act, 1956 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. [SEBI( LODR) Regulations] The Appointed Date for amalgamation is fixed on 1st April, 2016. The Scheme will be subject to the approval of the Honourable High Court of Madras. The Company is in the process of filing necessary applications with the concerned statutory authorities. Consolidated Accounts The accounts of the subsidiary Company, Prime Property Holdings Limited are consolidated with the accounts of the Company in accordance with the provisions of Section 129 of the Companies Act, 2013 and Regulation 33 of SEBI (LODR) Regulations, 2015 and Accounting Standard 21 (AS 21) prescribed by The Institute of Chartered Accountants of India. The consolidated accounts duly audited by the Statutory Auditors and the consolidated financial information forms part of the Annual Report. The Company does not have any associate or joint venture companies. A Statement under Section 129(3) of the Companies Act, 2013 in Form AOC-1 is enclosed as Annexure A. The Annual Accounts of PPH and related detailed information will be available for inspection by the shareholders at the Registered Office of the Company and the PPH and will also be made available to the shareholders upon request. Considering the current financial position of the Company, the Directors do not propose any dividend for the financial year ended 31st March, 2016. Extract of Annual Return The details of the Extract of Annual return is enclosed as Annexure B. Number of Board Meetings The Board of Directors met four times during 2015-16. The details of the Board Meetings and the attendance of the Directors are provided in the Corporate Governance Report. Changes in the Share Capital The paid up share capital of the Company as on 31st March 2016 is Rs.18,55,28,180/- consisting of 1,85,52,818 Equity Shares of Rs.10/- each. During the year, Company allotted 5,30,000 Equity shares of Rs.10/-each to a Non Executive Non Independent Director of the Company, pursuant to his exercise of stock options, in terms of the Employees Stock Option Scheme, 2011. Particulars of Loans, Guarantees or Investments During the year, the Company gave an unsecured loan of Rs.1.50 Cr to Prime Property Holdings Limited, its Wholly Owned Subsidiary, to enable them to meet the advance tax obligations and to pursue a new investment opportunity. The said inter corporate deposit carries an interest rate of 12.15% and is repayable before 31st March 2017. The Company has not given any guarantees or provided any security in connection with any loan to any other body corporate or person covered under the provisions of Section 186 of Companies Act 2013. The details of investments made by the Company are given in the financial statements. Related Party Transactions All the related party transactions entered in to are on 'arm's length' basis and in the ordinary course of business and are in compliance of the provisions of the Companies Act, 2013 and the SEBI (LODR) Regulations. None of the transactions are in the nature of having any potential conflict with the interest of the Company at large. There were no material related party transactions during the year. Omnibus approvals are obtained for related party transactions which are repetitive in nature. In respect of unforeseen transactions, specific approvals are obtained. All related party transactions are approved / reviewed by the Audit Committee on a quarterly basis, with all the necessary details and are presented to the Board and taken on record. The details of transactions with related parties are provided in the financial statements. The Related Party Transactions policy as approved by the Board is uploaded on the Company's website at www.tvs-e.in Directors Retirement by Rotation Ms. Srilalitha Gopal (DIN: 02329790), Director retires by rotation at the ensuing Annual General Meeting of the Company under Section 152(6) of the Companies Act, 2013 and being eligible offers herself for re-appointment. The Board recommends her re-appointment. Appointment of Non Executive Non Independent Director Mr. R S Raghavan (DIN 00260912) was appointed as an Additional Director (Non Executive Non Independent) under Section 161 of Companies Act, 2013 with effect from 4th May 2016, to hold office up to the date of the ensuing Annual General Meeting. The Company has received a notice under Section 160(1) of Companies Act, 2013 from a member proposing his appointment as a Director. A brief resume of Mr. R S Raghavan has been furnished in the Notice convening the Annual General Meeting. Independent Directors All independent Directors hold office for a fixed period of five years and are not liable to retire by rotation. An Independent Director representing small shareholder hold office for a period of 3 years. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 and Regulation 16 (1) (b) of the SEBI (LODR) Regulations. The terms of appointment of Independent Directors are available in the Company's web site www.tvs-e.in Separate Meeting of Independent Directors A separate meeting of Independent Directors for the year 2015-16 was held on 6th May 2015. The Independent Directors actively participated and provided guidance to the Company in all it spheres. Woman Director In terms of Section 149 of the Companies Act, 2013 read with Companies (Appointment and Qualification of Directors) Rules, 2014 and Regulation 17 of the SEBI (LODR) Regulations, the Company has appointed Ms. Srilalitha Gopal (DIN: 02329790) who is serving on the Board of the Company, since the year 2011. Chief Executive Officer Mr. Prakash Katama, Chief Operating Officer, was appointed as the Chief Executive Officer of the Company with effect from 4th May 2016. He is an accomplished professional in Global Supply Chain Practices, with strong leadership and general management skills. His leadership will help the Company achieve its ambitious growth targets and catalyse its transformation into a customer services and solutions business. He is an Industrial Engineer with a degree from University of Texas, Austin, and played a significant role in setting up Nokia's Indian operations. He is designated as a Key Managerial Person under Section 203 of Companies Act, 2013. As part of Mr. Katama's joining terms, Company agreed to invest through its subsidiary Company, Prime Property Holdings Limited (PPH) in Benani Foods Private Limited (BFPL), a Ready to Cook venture promoted by Mr. Katama and his associates The Company and PPH helped BFPL strengthen its leadership team and finance its growth through this investment. PPH has nominated a director to the Board of BFPL. This was done to ensure that Mr. Katama devotes his full time and efforts to Company and consequently he has since resigned from Board of BFPL. On a standalone basis, this investment in BFPL is expected to do well, given its products profile which has appeal among the growing urban middle-class Key Managerial Personnel Mr. K E Ranganathan (DIN 00058990), Managing Director, Mr. Prakash Katama, Chief Executive Officer and Ms. S Nagalakshmi, Company Secretary and Compliance Officer are the Key Managerial Personnel of the Company under the provisions of the Companies Act, 2013. Evaluation of the Board's performance The Board has carried out an evaluation of its own performance, and that of its directors individually and the sub committees of the Board. The manner in which the evaluation has been carried out is explained in the Corporate Governance report. The Company has also devised a Policy on Board Diversity detailing the functional, strategic and structural diversity of the Board. The Company has adopted a Remuneration Policy of Directors and senior management personnel, detailing inter alia the procedure for Director's appointment and remuneration including criteria for determining qualification. The Policy ensures that (a) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors of the quality required to run the Company successfully; (b) relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and (c) remuneration to directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long term performance objectives appropriate to the working of the Company and its goals. The Policy has been approved by the Nomination and Remuneration Committee and the Board. The Remuneration Policy document as approved by the Board is available on the Company Website www.tvs-e.in Statutory Auditors The Company at the Annual General Meeting held on 4th September, 2014, appointed M/s. Sundaram & Srinivasan, Chartered Accountants, Chennai (Registration No.004207S) as the statutory auditors of the Company, to hold office for the transitional period of three consecutive years, from the conclusion of the said Annual General Meeting, subject to ratification at every Annual General Meeting, at such remuneration in addition to service tax, out of pocket expenses, travelling and other expenses as may be approved by the Board of Directors of the Company. It is proposed to re-appoint them as statutory auditors for the final year in the transitional period of three consecutive years, from the conclusion of this Annual General Meeting, subject to ratification by the members. The Company has obtained necessary certificate under Section 141 of the Companies Act, 2013 conveying their eligibility for re-appointment as statutory auditors of the Company for the year 2016-17. In terms of the SEBI (LODR) Regulations, the Auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. Explanation to remarks in the Independent Auditors Report 1. With reference to the basis of qualified opinion, in the Independent Auditors report, Board wishes to state that the unsecured loan of Rs.1.50 Cr given to Prime Property Holdings Limited, (PPH) was to meet its advance tax obligations and to pursue a new investment opportunity. The Company has been advised by its legal counsel that utilization for the said purpose can be considered as utilization for the purpose of principal business activity of the subsidiary. 2. With reference to the remark made by the Auditors in para 10 of Annexure - 1, the Board wishes to state that the theft of mobile sets and the defalcation of cash were detected through internal fraud detection mechanism available in the Company. Since then, the Company has further strengthened the internal procedures as to verification of cash balances and monitoring control over quantities of mobile sets to avoid recurrence of such events. Internal Auditors The Company has appointed M/s. Grant Thornton India LLP, as Internal Auditors for the year 2016-17. Cost Auditors In terms of Section 148 of the Companies Act, 2013 read with Companies (Cost Records and Audits) Rules, 2014, printers manufactured by the Company and falling under the specified Central Excise Tariff Act heading are covered under the ambit of mandatory cost audits from the financial years commencing on or after 1st April 2015. The Audit Committee recommended and the Board of Directors appointed Mr. P Raju Iyer, Cost Accountant, Chennai as the Cost Auditor of the Company, to carry out the cost audit for 2016-17. The Company has also received the consent from Mr. P Raju Iyer for his appointment. A sum of Rs.1.50 Lakhs plus service tax, has been fixed by the Board of Directors in addition to the reimbursement of out of pocket expenses and is required to be ratified by the members at the ensuing Annual General Meeting as per Section 148(3) of Companies Act, 2013. Secretarial Auditors The Company appointed M/s. S Krishnamurthy & Co., Practising Company Secretaries, Chennai to carry out Secretarial Audit for the financial year 2015-16. The Secretarial Audit Report for the financial year 31st March, 2016 is enclosed as Annexure C. The Board has appointed M/s. S Krishnamurthy & Co., Practicing Company Secretaries, Chennai as the Secretarial Auditors for the financial year 2016-17. Necessary consent has been received from them to act as Secretarial Auditors. Clarification to the observations in the Secretarial Audit Report The Secretarial Auditors Report for the year 2015-16 contains an observation that the Company is yet to appoint Chief Financial Officer. The Company has a Business Finance Controller, who is currently discharging the functions of Chief Financial Officer. The Company has shortlisted a few candidates and the recruitment is in the final stages of completion. Employee Stock Option Plan During the year, 3,00,000 stock options were granted under the Employees Stock Options Scheme 2011, to an employee of the Company. These options were issued at Rs.10/- per Equity Share and be allotted one Equity Share of the Company of the nominal value of Rs.10/- per Equity Share on payment of exercise price during the exercise period, subject to the criteria to be determined by the Nomination and Remuneration Committee of the Company. The current position of the Stock Options granted under Employees Stock Option Scheme 2011 are provided in this Report as Annexure D. Credit Rating During the year 2015-16 Brickwork Ratings India Private Limited has upgraded the Company's Credit Rating from 'BBB' to 'BBB+'. The Company has informed the Stock Exchanges accordingly. Transfer to Investor Education and Protection Fund The details of transfer to Investor Education and Protection Fund is provided in the Corporate Governance Report forming part of this Annual Report. Particulars of Employees and related disclosures The particulars of the employees covered by the provisions of Section 197 (12) of Companies Act, 2013 and the rules there under forms part of this report. However, as per the provisions of Section 136(1) of Companies Act, 2013, the annual report is being sent to all the members excluding this statement. This will be made available for inspection at the registered office of the Company during working hours. E-Waste Management The Company is well ahead in terms of e-waste management compliance directed by Government of India with effect from 1st May, 2012. The Company has registered and authorized collection, storage and disposal centres in the required locations and has complied with the statutory requirements relating to E-Waste Management. Report on energy conservation, technology absorption, foreign exchange and research and development Information relating to energy conservation, technology absorption, foreign exchange earned and spent and research and development activities undertaken by the Company in accordance with the provisions of Section 134 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 are given in Annexure E to the Board's Report. Corporate Governance Pursuant to Regulation 34(3) read with Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015, a Management Discussion and Analysis Report and a Corporate Governance Report are made part of this Annual Report. A Certificate from the Auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is attached to this Report. Public Deposits The Company has not accepted any deposits from the public within the meaning of Sections 73 to 76 of the Companies Act, 2013 for the year ended 31st March, 2016. During the year under review, the Company has not received any complaint of sexual harassment from any of the women employees of the Company in terms of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Awards and Recognitions During the year, the Company has been awarded: i) Kalinga Digital Media Private Limited Award for Top 100 Most Trusted Company 2015 ii) First Data Appreciation Award 2015 iii) DELL Appreciation Award for Outstanding Performance and Lasting Contribution in Onsite Services 2015 iv) Lenovo India Services Award 2015 Directors' Responsibility Statement Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost and secretarial auditors and external consultants, advisors of the Company and the reviews performed by Management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company's internal financial controls were adequate and effective during the financial year 2015-16. In terms of Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, further confirm: i) that in the preparation of the annual accounts for the financial year ended 31st March, 2016, the applicable accounting standards have been followed and that there were no material departures; ii) that they had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 31st March, 2016 and of the profits of the Company for the year under review; iii) that they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv) that they had prepared the annual accounts for the year ended 31st March, 2016 on a "going concern" basis; v) that they had laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and were operating effectively; vi) that they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. ACKNOWLEDGEMENT The Directors wish to place on record their appreciation for the committed service of all the employees. The Directors would also like to express their grateful appreciation for the assistance and co-operation received from the customers, dealer partners, business partners, bankers and its holding companies TVS Investments Limited (Formerly Sundaram Investment Limited) and T.V.Sundram Iyengar & Sons Private Limited. The Directors thank the Shareholders for the continued confidence and trust placed by them in the Company. For and on behalf of the Board Gopal Srinivasan Chairman Date : 4th May, 2016 Place ; Chennai |