A. Company Overview

Tata Technologies is a leading manufacturing consulting organization, tracing its roots back to 1981, offering Engineering Services Outsourcing (ESO) and Enterprise IT Services which optimize clients' product development process and the entire manufacturing ecosystem. Tata Technologies complements its Services portfolio through the provision (reselling) of the enabling software technologies, including software developed by Tata Technologies, that underpin successful Product Development and Manufacturing Business (Enterprise) systems.

Tata Technologies is a company of engineers, led by engineers, with 5,443 associates, rebrsenting 17 nationalities. Tata technologies serves clients in 25 countries, with a delivery model specifically designed for engineering and manufacturing IT engagements that offers a unique blend of deep, local expertise integrated with our six global delivery centers, Detroit (USA), Coventry (UK), Pune (India), Bangalore (India), Stuttgart (Germany), and Bangkok (Thailand). The international headquarters is located in Singapore.

B. Offerings

Manufacturers are increasingly challenged to provide safer, environmentally friendly, innovative, content-rich products that are tailored to local markets at the same or lower cost. Tata Technologies helps its customers meet these business requirements through four service groups:

VPD - Vehicle Programs & Development (VPD)

The VPD provides complete outsourced program management, concept development, detail design, validation and manufacturing planning services. Projects of this scale and complexity are achieved through a combination of automotive experts in the US and Europe, coupled with India's most experienced automotive engineers. Programs include electric vehicles, or EV variants that help achieve sustainability targets, while providing mobility at an affordable price point. The eMO electric vehicle, designed by Tata Technologies, showcased at the 2012 International Auto Show in Detroit, was a first for any India-based engineering services firm.

E&D - Outsourced Engineering & Design

The services of this group include concept development, VA/VE, CAE, detailed engineering, embedded software development, product verification, and manufacturing process design, tool design and validation, applied to major product subsystems and components. Offerings include the provision of providing services from offshore engineering centers in India and Thailand.

PLM - Product Lifecycle Management Solutions

The PLM optimizes product development processes, implementing collaborative PLM tools, a major contributor to ER&D investment efficiency, especially for global engineering teams with extensive supply chains. Tata Technologies is the world's largest independent reseller of PLM technology. It and its customers are among the world's top users of PLM technology. The company's engineers use these products to deliver services to our clients worldwide. It packages the insights and best practices we have developed through our engineering heritage into service offering templates to improve the efficiency of engineering teams at Tata Technologies and it's clients.

ESG - Enterprise Solutions Group

The ESG provides consulting and IT solutions that help manufacturing customers in optimizing critical enterprise processes through the application and data analytics of Enterprise Resource Planning, (ERP), Manufacturing Execution Systems, (MES), and Customer Relationship Management, (CRM), including the use of social media and improving manufacturing planning and performance. It also has extensive experience in rapidly integrating the processes, systems and data of companies acquired by manufacturers.

C. Manufacturing Industry Outlook

The global manufacturing industry continued to improve and investments in product development continued to grow. Every manufacturer is attempting to attract and retain customers through the rapid introduction of innovative and differentiated product; to differentiate their products from competition, to meet regulatory requirements and adapt to, or design product for high growth markets - at attractive price points and great margins. Every manufacturing Engineering Research & Development, ER&D, group is constrained by budget and talent shortages, searching for investment efficiency and lowering fixed costs. Our product development process experience, mastery of the virtual world, long-standing partnerships with leading PLM suppliers and our own, first-hand experience in leveraging PLM technologies, enables us to knit our own and the client's global teams into an efficient "Product Development machine" improving cycle time, throughput and 'FTC', first time through design capability, lowering both the frequency and magnitude of design changes and costly physical properties.

According to a recent Booz & Co. analysis, in Tata Technologies' core industries, Automotive, Aerospace & Defense and Industrial Machinery, the Engineering Research and Development, ER&D, spend continued to grow. Auto and Aero grew 8.5% CAGR (1998 to 2010) and is forecast to grow at 9.1% CAGR between 2012 and 2020. The Industrial Machinery ER&D spend for the 2012-2020 period CAGR is 0.8% and at USD $19Billion in 2010 which is still substantial. Across industries, India and China headquartered firms continue to rapidly increase ER&D spend, 2005-2010 at 41% CAGR, and are expected to outpace ROW. Engineering Services sourced to low cost countries is forecast to grow at 16.4% CAGR between 2012 & 2017.NASSCOM reports that "the Indian IT-BPO sector achieved a significant landmark in FY2012 crossing aggregate revenues of USD $100 Billion and India's market share in the global sourcing arena (grew to) about 58% in 2011. India ER&D exports reached USD $10.2 Billion with YoY growth of 14%'. Tata Technologies is positioned to capitalize on the increase in spend with core competency in the convergence of manufacturing domain skills with leading edge technology coupled with deep experience in both mature and emerging markets.

D. Automotive Industry

The automotive industry continues to emerge from the recession with strong growth led by emerging markets, factors such as increased urbanization, shift to smaller cars, increased consumer focus on value, the shift from mature markets, global overcapacity, talent shortages, especially in engineering and an environmentally friendly product life cycle. According to Deloitte Touche Tohmatsu's senior automotive leaders,"A massive shift in the competitive landscape will see China and India emerge as major players in the industry. These markets will join Western Europe, Japan, Korea, and the United States as the centers of design and manufacturing for original equipment manufacturers (OEMs) and their suppliers. An era of "conscious consumption" will emerge. Customers around the world will be more cost conscious, especially in the developing world where millions of people will make their first ever car purchase. Environmental considerations will also weigh heavily on the industry towards 2020. The fierce race to develop and produce electric vehicles, spurred by both customer demand and government incentives, will mean that up to a third of all cars purchased in developed countries in 2020 will not be propelled by an internal combustion engine.

Our company sees a large proportion of ER&D spend with emphasis on four main areas.........

1. Electronics and embedded systems, used to differentiate product, offer value-added services and meet regulatory challenges, especially in…..

• Improving fuel economy

• Telematics / Communications - the "connected car"

• Safety & Security Features

• Infotainment

2. Alternative Propulsion systems, such as plug-in hybrids, full electric, and fuel cell powered vehicles will continue to command high levels of investment, subsidized by government in many parts of the world.

3. Reducing weight, lightweight structures - in part, through the use of lightweight materials - High-strength steel, aluminum, magnesium and carbon-fiber reinforced polymer, CFRP.

4. Future products and manufacturing processes will be more eco-friendly, leveraging eco-friendly materials and requiring less energy, system-wide, raw material through recycling.

Addressing these automotive market trends, Tata Technologies eMO electric mobility study, profiled in another part of this report, rebrsents a big leap forward for Tata Technologies in innovation in the sector. The eMO, which was unveiled in January 2012 at the International Automotive Show in Detroit is the world's first complete vehicle study developed by an India-based engineering services company. This program showcases innovation in automotive packaging and design, manufacturing processes, as well as EV engineering benchmarks; and was invented to go to market at the disruptive price point of $20,000.

E. Aerospace& Defense, A&D

The civil aerospace market is rapidly expanding in developing markets and replacements due to the demand for fuel efficient fleet in developed markets. In fact PwC says, referring mainly to production capacity, "Our analysis indicates that a significant proportion of suppliers are at risk of not being able to deliver the ramp-up that is required." This rapid expansion is putting a strain on supply chains in ER&D as well. Innovation is imperative to drive down costs and meet new customer and regulatory requirements such as stronger, lighter and smart materials and sensors which monitor the equipment health and reducing maintenance costs. Tata Technologies experienced teams in aero-structures design, manufacturing process planning and tool design specifically to address this need. PwC also reports that M&A activity is at record levels in 2011 and consolidation is likely to continue. The need to integrate disparate PLM and ERP/SAP systems from the consolidated companies soon follow, which is a core capability of Tata Technologies. Tata Technologies has been implementing PLM, SAP and MES solutions in A&D, for more than 15 years. Our ability to implement customized PLM and SAP solutions enables entire organizations and their external networks to respond in unison, more efficiently, to changing business conditions.

F. Industrial Machinery

The market for Industrial machinery continues to grow, especially in construction, mining and farm equipment sectors. As the demand increases, especially in emerging markets, so do the investment levels. Caterpillar and John Deere are expanding their footprint in China with the recent acquisitions and new factory expansion. Demand in India is strong. In the US, there is an increase in federal funding for highway infrastructure, a key driver for growth. There is focus on effective supply chain planning following volatility in raw material input prices and increasing global footprint. Tata Technologies continues to expand in the Industrial Machinery industry especially in using frugal engineering principals to design and products and recommend local sourcing opportunities to meet local requirements.

G. PLM Market

The Combrhensive PLM Market experienced strong global growth in CY2011 annually increasing by 15.4% to USD $29.9 Billion according to CIM data. CIMdata also estimate that "cPLM will grow 10.6% per year from 2012 to 2016, driven by growth in simulation and analysis, systems engineering, non-traditional industries such as financial and services, expanded push for sustainable and green design, continued growth in the mid-market and growth in Asia-Pacific and other emerging areas" where Tata Technologies is well positioned. Tata Technologies has long term partnerships with the leading software providers such as Dassault, Autodesk and Siemens that dominate the market. Cost brssures on manufactures as well as high demand for new products, especially from emerging markets, will continue to push manufacturers to improve product development efficiency across the entire ER&D network by intelligently implementing advanced PLM solutions. Continued consolidation in the industries we serve, drive the demand for rationalization and integration of product development processes, methods and tools. Tata Technologies engineering process approach blended with deep knowledge of the capabilities and limitations of software tools addresses this demand is illustrated in the article in this report titled" Helping racing legends be their best"

H. Human Capital

Tata Technologies strives to offer a Signature Employee Experience to enable a High Performance Culture and Build Winning Teams. This ensures a consistently motivated workforce with customer focused competencies and a strong employee brand. We are committed to the belief that this strategy is a critical determinant of shareholder value.

Return on Human Capital (ROHC)

The ROHC model paves the way to measure HR actions on business performance through a matrix of twenty HR initiatives and programs. Fig below illustrates the ROHC model and its linkage to business outcomes. Each of the twenty initiatives and programs were analyzed to understand the current status, target and the associated action plan to achieve the same.

Talent Acquisition

Technology is a crucial component of an integrated HR management initiative. An IT enabled workflow between demand generation for resources and final deployment for revenue generation forms the backbone of our talent acquisition process. The facility enables all stakeholders in the resource acquisition cycle, to seamlessly align & track fulfilment of business requirement. Structured recruitment brand building initiatives continued for positioning the company as an employer of choice for fresh recruits from Campus as well as lateral hires. Across the country, 66 brmium institutions were covered for campus hiring. This rebrsents an increase of 12% institutions over the brvious year. The program also focussed on lateral hiring and ran the highly creative PFLE (Passionate Fun Loving Engineers) campaign to build sustainable differentiation for Tata Technologies as an employer brand. As a part of our continuous drive for cost optimisation, we set up India offshore support for talent management for our North American operations.

Talent Diversity

The company has improved its workforce diversity through equal-opportunity recruitment programs globally. As on March 31, 2011, women constituted 13% of the total work-force. The segmentation of employees across geographies was 78% in APAC, 12% in NA and 10% in EU.

Learning & Development

The organisational strategy and business plans define the thrust areas of learning and competency development in Tata Technologies. In addition to the competency development areas identified by the strategy and business plan, LOB specific and individual requirements are captured and translated by the L&D group into the annual L&D plan. These plans are used to brpare the monthly schedules which are augmented by the just in time project requirements from the business. FUNDA for Campus recruits is a benchmarked program with industry and provides two months of structured inputs to new joinees in Technical and Cognitive areas. A wide variety of e-learning programs were proliferated to all levels of employees. Our training achieved coverage of 3246 employees with an average of 5.2 days of training per person for the year.

Employee Capability Building:

Tata Technologies believes that the company’s success in building internal capability and motivation depends on individual talent being nurtured and people acquiring the right skills, necessary to drive business objectives.

A number of programs have been launched in our endeavour to enhance Leadership Effectiveness. By leveraging technology and a unique concept of modular progressive education, we devised the EVOLVE program to impart Leadership training. The program is structured into 33 modules. The rest of the programs are conducted using web technology and participants attend the class in a virtual classroom which ensures collaborative learning and exchange of ideas.

iSMART, a program featuring a combination of options for growth of soft skills, leadership development, technical skill enhancement, coaching and mentoring programs. iSMART aims at developing necessary characteristics and behaviour at an individual level and bridge company-wide identified competency gaps to achieve our goals. The iSMART program started on 23rd. Dec’11 with the launch of online Harvard Business Publishing courses. Globally, 2204 employees registered for the courses and by 31st March ’12, 1466 employees completed the course.

I. Risk Management

Risk Philosophy

In current scenario of global volatile and multi facet market a Company’s sustainability and growth are based on risk management capabilities. A risk event that affects business is a significant occurrence in the life of any Company, affecting directly on its ability to fulfill its business objectives.

The objective of risk management is to develop a culture and capabilities of identifying, assessing & mitigating the risk at all levels/functions across the organization, by instituting framework, processes/policies suitable to the Company and creating risk awareness which ultimately insures the Company’s sustainability in the business and provide benefits to the Company’s stakeholders and customers. The followings are the broad objectives of risk management:

1. Reduce unacceptable performance inconsistency

Evaluate the likelihood and impact of major events and develop responses to either brvent those events from occurring or manage their impact on the Company if they do occur.

2. Build confidence of stakeholders

Increase transparency of risks and risk management capabilities, and improve the maturity in identifying and managing critical risks.

3. Strengthen corporate governance

Strengthen Board oversight, explain risk management roles and responsibilities, set risk management authorities and boundaries, and effectively communicates risk responses in support of key business objectives.

4. Successfully respond to a changing environment

Assist management with evaluating the assumptions underlying the existing business model, the effectiveness of the strategies around executing that model, and with identifying alternative future scenarios, evaluate the likelihood and severity of those scenarios.

5. Align strategy and corporate culture

Help management to create risk awareness and an open, positive culture with respect to risk. Centralize policy setting and creates focus, discipline, and control. Increase accountability for managing risks across the enterprise and facilitate timely identification of changes in an entity’s risk profile.

Enterprise Risk Management (ERM) Framework

Definition

ERM is a process, effected by an entity's Board of Directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risks to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.

The Company has established a formal Enterprise Risk Management (ERM). The Company has adopted the recommendations on the Enterprise Risk Management framework provided by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). As a services focused Company, it is necessary for the Company to manage risk at the individual transaction level and to consider aggregate risk at the customer, industry and geographic, where appropriate.

ERM Organization and Process

The Executive Management Team of the Company is responsible for implementing the Risk Management Framework under the direction of the Audit Committee of the Company, and the Audit Committee provides periodical updates to the Board of Directors of the Company. The Board monitors the overall performance of the Risk Management function.

Risk Management Activities

A disciplined approach to risk is important in an organization such as ours in order to ensure that we are executing according to our strategic objectives and this process is designed to identify potential events that, if they occur, will affect our Company. The management has identified the following top 10 risks, classified into external risk factors and internal risk factors, to help achieve business objectives in a robust manner.

External Risk Factors

1. Competitive Environment

2. Inability to do business with Tata Motors’ competitors

3. Exchange Rate Fluctuations

4. Immigration Regulations

Internal Risk Factors

1. Revenue Concentration

2. Project Execution and Management

3. Human Resources Management

4. Customer Acquisition

5. Suppliers’ bargaining power in Product Solutions division

6. Leadership Bandwidth & Critical positions

External Risk Factors

1. Competition Risk

The Company faces direct competition from the large and medium players in India, as well as from international players in the IT and engineering services sectors. Competition from players in the U.S. and Europe is also a cause of concern for the non-captive business. This could reduce the business prospects of the Company in future. The potential competition would be:

• In-house IT and engineering departments of large corporations setting up captive operations in India and the APAC region.

• Competition from established IT service providers moving into engineering

• Competition from well-established western engineering service providers, as we increasingly work in this space.

Risk Management Activities

The Company has ensured its direct brsence across geographies through the Company’s subsidiaries, JVs, and branch offices. This should help the Company tap major markets across the globe. Through the matured offshore development systems and the conscious efforts to move towards value-added services, the Company is looking for deeper penetration of existing customers. We are also investing in developing niche areas of services such as Full Vehicle Development Program (VPD) etc. The Company is also striving for long term multi-year contracts and improving Global Engagement Model (GEM).These niche practices position the Company as a focused player and help manage competition risk.

To beat the competition on its head, the Company has established the Vehicle Programs & Development (VPD) Group, which employs a multidimensional engineering approach to vehicle development by providing various solutions including styling, Knowledge Based Engineering (KBE), CAE, CAD, DMU, and Complete Vehicle Integration.

2. Inability to do business with Tata Motors Competitors

Tata Motors Limited (TML), the parent Company, is perceived to be a competitor by many global automotive companies. The Company is facing this risk while positioning itself as established player in the domestic and international market.

Risk Management Activities

Company has taken steps to build a valued relationship with its prospective customers and positioning itself as independent entity from the parent company. Recently, the Company also diluted its parent Company’s ownership through brferential allotment to two Private Equity Funds.

From the beginning, as part of its strategy, the Company keeps its business with TML separate from its business with other automakers. Company also continues to focus on growth with non-TML competitors and with complementary industries as part of mitigation strategy.

Company has an established Information Security Management System (ISMS) to meet the stringent requirements of the security standard ISO 27001:2005 and to ensure confidentiality of each customer’s data and Intellectual Property (IP). Controls include restricted physical access to specific customer work areas and logical data separation ensured through appropriate controls in the intranet, firewall, etc.

The ISMS is built on the strong foundation of the company’s Quality Management System (QMS) which conforms to the quality standards ISO 9001:2008 and AS 9100 C (aerospace quality standard). These quality standards call for measures to protect customer assets. A strong regime of internal and external quality audits mandated by these quality standards ensure that these important requirements are not compromised. The company renews (or upgrades) these quality certificates every three years (or when the standard undergoes revision), thus providing customers confidence in our systems.

3. Exchange Rate Fluctuation Risk

Company is exposed to the impact of changes in foreign currency exchange rates, because considerable revenue comes from outside of India and it may have negative impact of currency fluctuations on operating results.

Risk Management Activities

The Company has natural hedge due to its diversified locations across geographies, the Company incurs the expenses in local currency, which is to be met through receipts in same currency. The Company also has taken appropriate foreign exchange cover and sbrading our revenues across the various geographies. The Company follows a prudent forex policy.

4. Immigration Risk

Risks arising out of country specific legislative changes including restrictions on issuing work visas by foreign governments, as well as to variations in standards of application and enforcement due to political forces and economic conditions.

Risk Management Activities

The Company is taking conscious efforts to maintain the diversified operations in countries across the world as appropriate. The Company is also acquiring and maintaining brferred status with consulates.

The Company has a hire local policy. The Company further mitigates immigration risk by focusing on maintaining the correct onshore-offshore content in engagements with appropriate mix of local staff for onshore.

The Company has taken a major initiative to train its support staff based on various locations to comply with all the immigration laws applicable respective location and has robust system in place to comply with all the applicable provisions.

Internal Risk Factors

1. Revenue Concentration

Since revenues from the U.S. constitute a significant part of the Company’s total non-captive revenue, the state of the U.S. economy remains a major concern. The Company has an exposure to various inherent risks in any single business segment due to high revenue concentration and there is always a risk of loss of customer or delay/reduction in the number of new purchase orders due to many factors such as:

• Geographic concentration - risks arising out of economic condition, global trade policies, local laws, political environment, and work culture of specific countries.

• Industry concentration - risks arising out of cyclical behavior of any one industry, or sudden changes in industry characteristics.

• Service concentration - risks to the brdictability and sustainability of business due to the inherent nature of each service.

• Client concentration - risks due to over-dependence on specific clients and likely changes in their business.

• Resource concentration - risks due to the concentration of resources in few client accounts.

Risk Management Activities

The Company has sbrad its operations across the globe, thereby reducing its dependence on any single market. The Company is increasing its efforts in geographically diversifying its clients and revenue. The Company also is monitoring geographical concentration of revenue on a periodic basis to maintain balance, and performing the following activities on periodical basis:

Focus on geographical diversification and relationship building in specific markets.

• Closely monitoring revenue concentration across different verticals. Developing industry-specific solution capability with domain-specific skills and experts. Focusing on growing key verticals.

• Adopting a commission model when possible. Leveraging product sales to generate services.

• Training of sales team members.

• Develop complete suite of service offerings to become end-to-end solution providers.

• Balancing the service mix to ensure appropriate investment in developing services that gives more competitive advantage including acquisition of companies/technologies/captives.

• Monitoring client revenue as a percent of total revenue to strike a balance between brdictable revenue growth, lowering marketing costs against clients’ negotiation capability.

• Identifying areas where proactive value addition can be effected to improve clients’ competitiveness.

• Actively seeking new clients to reduce client concentration and looking at related industries.

• Monitoring onsite and offshore mix.

• Securing multi-year contracts.

2. Project Execution & Management Risk

The Company is delivering high-quality engineering and software solutions to its clients but it involves uncertainties, which have impact on the budgeted time and cost, and it ultimately affects the profitability of the Company.

Risk Management Activities

The Company has rolled out Global Engagement Model (GEM), which is a consolidation of best practices from the delivery centers around the world. The Company implemented "Delivery" module in over 80 ongoing projects.GEM helps brsent a consistent, "common face" of the Company to the customer. GEM is a key project management methodology that addresses how the Company engages with its customers for all Engineering Services Outsourcing (ESO) programs. The objectives of this methodology are to:

• Reduce the amount of effort required to respond to client

• Improve the program execution and thus deliver on time

• Respond quicker to client requirements

• Set a foundation for change within the Company

• Standardize practices across global teams

3. HR related Risks

The professionals working in the Company are the key assets. The nature of business demands that the Company has adequate professionals with required skill sets at any point of time to meet the customer demands. Considering the high level of turnover of professionals in the industry in which Company operates, the Company could face difficulties in attracting and retaining the necessary work force at any given point of time, which may result in loss of business opportunities.

Risk Management Activities

The Company is improving employee engagement through various HR initiatives such as ‘ConeXion’ (engagement survey conducted globally by Gallup once in two years), ‘One-to-One Dialogue’ an initiative to connect with employees after every 121 days by HR Business Partners.

Further, Leadership stays in touch with employees through skill level meetings and Employee Briefing sessions (held simultaneously across all geographies and locations). These sessions are coupled wit ‘Open House’, a quarterly briefing session used by the Tata Technologies leadership team to disseminate latest information and updates about the Company followed by an open forum for employees.

The Company is also establishing campus-connect initiatives and partnership with leading institute inside and outside the Country where appropriate. The Company is focused towards identifying competencies required to deliver value and groom professionals along multiple dimensions technology, domain, leadership and management.

The Company is focusing on maturing its HR processes as per Tata Business Excellence Model (TBEM) and People Capability Maturity Model (PCMM) at all locations and to reinforce role based organization structure to facilitate empowerment, rapid decision making and assignment of responsibilities.

The Company has an effective Talent Acquisition function to ensure that the proper selection and recruitment process is in place to attract qualified professionals. The Company also has a Learning Center function, which periodically provides training to its employees to support the growing and varied business requirements. The Human Resources (HR) function ensures that the appropriate talent in the industry is attracted and retained. Efforts are also taken to increase the level of employee satisfaction. As a part of retention strategy, the Company has implemented the various Employees Stock Options Schemes and Employees Stock Purchase Schemes for its employees.

4. Customer Acquisition Risk

In today’s competitive business environment, the Company may not be able to brdict acquisition of customers and its growth.

Risk Management Activities

The Company has deployed Strategic Go-to-Market plan and is taking constant efforts to improve customer acquisition processes and discipline. The Company has also nominated the Executive sponsors for its key accounts. Further, the Customer Relationship Management (CRM) system matured across all territories/countries with process and technology improvements across areas such as Quoting, Pre-Sales, Sales-Delivery Integration, and Visibility to Customer Billing & Payables. The management is closely monitoring the health of sales pipeline, conversions ratios etc. periodically.

5. Suppliers’ bargaining power in Product Solutions division

In Product Solutions business division, the Company has limited bargaining power with various suppliers of the software products we distribute around the globe.

Risk Management Activities

The Company’s risk is not greater than any other channel partner in its competitive landscape. Each of these partners is unique, but shares common attribute in the complexity of their evolving distribution strategies. The nature of their business model generates frequent changes to account coverage, market support, and availability of margins to partners. The Company has a constant focus on mitigating these factors through executive relationships, good partner management practices, and maintaining strong performance in the Company’s field operations.

6. Leadership Bandwidth & Critical positions

There is a risk that the second line of Executive Management (Leadership Team) may not be available at all the times. Permanent / long-duration unavailability of such key executives may result in the adverse impact on the smooth operations of the Company if the relevant succession plan is not in place.

Risk Management Activities:

Succession Plan is in place for the entire Leadership Team (short term in case of an emergency and long term from job rotations and growth perspective). Growth of next line of leaders is ensured through Learning Organization. This is also ensured by getting them to play higher roles in their existing capacity.

J. Operational Performance

The financial performance of Tata Technologies Ltd ‘the Company’ as per Indian GAAP is discussed hereunder in two parts:

1. Tata Technologies Ltd (Unconsolidated) which excludes the performance of subsidiaries of the Company and its share in Joint Venture Company.

2. Tata Technologies Ltd (Consolidated) which includes performance of subsidiaries of the Company and its share in Joint Venture Company (Group Companies). The Consolidated Financial Statements bring out combrhensively the performance of the Tata Technologies group and are more relevant for understanding the overall performance of the Tata Technologies group. The financial statements are brpared in compliance with the Companies Act, 1956 and generally accepted accounting principles in India.

3. The consolidated performance of the Company is reflected in the trend graphics for the last five years.

4. The discussion should be read in conjunction with the financial statements and notes for the year ended March 31, 2012.

The total income of the Company (Unconsolidated) aggregated Rs. 668.26 crore in fiscal 2012 as compared to Rs. 504.74 crore in fiscal 2011, registering a growth of 32.40%. In fiscal 2012, the Company’s (Unconsolidated) profit after taxes aggregated Rs. 130.71 crore as compared to Rs. 97.05 crore in fiscal 2011, registering a growth of 34.68%.

In fiscal 2012, the total income of the Company (Consolidated) aggregated Rs.1666.95 crore as compared to Rs. 1268.05 crore in fiscal 2011, registering a growth of 31.46%. The consolidated profit after taxes aggregated Rs. 208.37 crore in fiscal 2012 as compared to Rs. 139.02 crore in fiscal 2011, registering a growth of 49.88%. During the year the Company has paid interim dividend of Rs.9/- per equity share and a final dividend of Rs.7/- per equity share has been recommended. Full details of the dividend paid are available in the Director’s Report.

RESULTS OF OPERATIONS Tata Technologies Ltd.(UNCONSOLIDATED)

The Management’s Discussion and Analysis given below relates to the financial statements of the Company (Unconsolidated). The discussion should be read in conjunction with the financial statements and related notes for the year ended March 31, 2012.

The following table gives an overview of the financial results of the Company (Unconsolidated):

INCOME

Income from Operations

The Company’s revenue consists mainly of income from services and sale of products. The Company provides services either on time and material basis or fixed price basis. The Company’s revenue from services on time and materials contracts is recognized when services are rendered and related costs are incurred. In case of fixed price contracts, revenue is recognized over the life of the contract based on milestones achieved as specified in the contracts or by proportionate completion method on the basis of the work completed. Foreseeable losses on such contracts are recognized when probable. Revenue from rendering Annual Maintenance Services is recognized proportionately over the period of contract. Revenue from third party software products and hardware sale is recognized upon delivery.

The Company’s (Unconsolidated) revenues increased to Rs.644 crore in fiscal 2012, from Rs.493.16 crore in fiscal 2011, a growth of 30.59%. Revenues from services increased to Rs. 562.52 crore in fiscal 2012 from Rs. 422.50 crore in fiscal 2011, a growth of 33.14%.Revenues from sale of products increased to Rs.81.48 crore in fiscal 2012 from Rs.70.66 crore in fiscal 2011, an increase in revenue of 15.31%.

Other Income

Other Income in fiscal 2012 increased to Rs. 24.26 crore from Rs. 11.58 crore in fiscal 2011, a growth of 109.50%. Other Income comprises interest received on inter corporate deposits and deposits with banks, dividends received on investments in units of mutual funds and foreign currency gains (net). Details of major portion of other income are as under:

a) Interest Income on inter corporate deposits, deposits with the banks and interest income from long term deposits with financial institutions in fiscal 2012 was Rs. 6.66 crore as compared to interest income of Rs.9.38 crore in fiscal 2011.

b) Dividend income from investments in units of mutual funds in fiscal 2012 was Rs. 16.47 crore as compared to Rs.1.15 crore in fiscal 2011,a growth of 1332.17%.

c) Foreign currency gain (net) in fiscal 2012 was Rs. 0.90 crore as compared to foreign currency gain (net) of Rs.0.83 crore in fiscal 2011.

EXPENDITURE

Cost of Traded Products

Cost of Traded Products rebrsents cost of products traded during the year under reference. Total cost of traded products in fiscal 2012 was Rs. 64.70 crore, an increase of 14.70% over the costs of Rs. 56.41 crore in fiscal 2011. This increase is attributable to overall increase in income from the sale of products. As mentioned earlier, revenues from sale of products increased to Rs. 81.48 crore in fiscal 2012 from Rs. 70.66 crore in fiscal 2011, an increase of 15.31%.

Consultancy Fees, Softwares and Others

Consultancy fees rebrsents outsourcing charges paid to the third parties towards various jobs outsourced/services received. The cost of softwares rebrsents the purchase cost of softwares for internal use for enhancing the quality of services and also meeting the needs of the customers. Total consultancy fees, softwares and others in fiscal 2012 was Rs.54.47 crore, an increase of 15.75% over the total consultancy fees, softwares and other cost of Rs.47.06 crore in fiscal 2011. Total consultancy fees, softwares and others as a percentage of total income was 8.15% in fiscal 2012 (9.32% in fiscal 2011). This decrease is attributable to effective deployment of contractual professionals and software licenses.

Employee Benefit Expenses

Employee Benefit Expenses consist of compensation of employees. It includes salaries which have fixed and variable components, contribution to provident fund, superannuation fund and gratuity fund. It also includes expenses incurred on staff welfare. Total employee benefit expenses in fiscal 2012 was Rs. 298.75 crore, an increase of 34.56% over the total employee costs of Rs. 222.02 crore in fiscal 2011. Total employee costs as a percentage of total income was 44.71% in fiscal 2012 (43.99% in fiscal 2011). This increase is attributable to increase in cost per employee. The number of employees as at March 31, 2012 was 3,837 as against 3,172 during the brvious year.

Other Expenses

Other Expenses (other than cost of traded products, consultancy fees, softwares and others and employee benefit expenses, already discussed above) incurred to conduct the Company’s operations have gone up from Rs.35.69 crore in fiscal 2011 to Rs.51.16 crore in fiscal 2012. In terms of total income, it has gone up from 7.07% in fiscal 2011 to 7.66% in fiscal 2012. The increase is primarily due to increase of traveling and conveyance and AMC charges. Traveling and conveyance and AMC charges increased from Rs. 14.82 crore in fiscal 2011 to Rs. 23.83 crore in fiscal 2012.

Profit before Finance Charges, Debrciation and amortization and Taxes

The profit before finance charges, debrciation and amortization and taxes in fiscal 2012 was Rs.199.18 crore, an increase of 38.74% from Rs. 143.56 crore in fiscal 2011. The profit as a percentage of income has gone up from 28.44% in fiscal 2011 to 29.81% in fiscal 2012.

Finance Cost

Finance cost decreased marginally from Rs.1.69 crore in fiscal 2011 to Rs.1.54 crore in fiscal 2012. This was due to reduction of interest and other charges paid on PCFC loans (foreign currency loan) taken from banks.

Debrciation and Amortization

Debrciation and Amortization charges increased from Rs. 14.76 crore in fiscal 2011 to Rs. 21.16 crore in fiscal 2012 an increase of 43.36%. In terms of total income the debrciation and amortization charge was 3.17% of total income in fiscal 2012 (2.92% in fiscal 2011). The said amount has gone up due to commencement of SEZ operations and purchase of fixed assets for other than SEZ operations during the year under consideration.

Profit before Taxes

The Profit before Taxes in fiscal 2012 was Rs. 176.48 crore, an increase of 38.84% from Rs. 127.11 crore in fiscal 2011. In terms of total income, the Profit before Taxes has gone up from 25.18% fiscal 2011 to 26.41%% in fiscal 2012.

Provision for Taxation

Income tax expense comprises the current tax and the net change in the deferred tax assets and liabilities in the applicable fiscal period. The Company benefits in India from certain tax incentives under section 10AA of the Income Tax Act, 1961, for the IT services exported from designated ‘Special Economic Zone Unit". The tax expense increased from Rs.30.06 crore in fiscal 2011 to Rs.45.77 crore in fiscal 2012.This rebrsented 6.85% of the total income in fiscal 2012 (5.95% of the total income in fiscal 2011). The effective tax rate (total tax expenses including deferred tax/profit before tax 100) in fiscal 2012 increased to 25.93% from 23.65% in fiscal 2011.The said increase was primarily due to expiry of tax holiday of STPI Units of the Company.

Net Profit from operations after taxes

The Company’s net profit from operations after taxes registered a growth of 34.68% from Rs.97.05 crore in fiscal 2011 to Rs.130.71 crore in fiscal 2012.

FINANCIAL POSITION - Tata Technologies Ltd. (UNCONSOLIDATED)

Share Capital

During the year, the Company did not increase authorized capital of ordinary shares and Cumulative Non Participative Compulsory Convertible Preference Shares. The authorized equity share capital as on March 31, 2012 was Rs. 60 crore, divided into 6 crore equity shares of Rs. 10 each (Rs. 60 crore as at March 31, 2011, divided into 6 crore equity shares of Rs.10 each). The issued, subscribed and paid-up share capital as on March 31, 2012 was Rs.42.97 crore. During the year, the Company issued equity shares to employees (under ESOP Scheme 2001) and Private Equity investors. Consequently, the issued, subscribed and paid up capital of the Company increased by Rs.5.65 crore in fiscal 2012.Details of options granted, outstanding and vested as at March 2012 are provided in this Annual Report.

Securities Premium Account

Securities Premium Account as on March 31, 2011 stood at Rs.216.37 crore. As on March 31, 2012 the balance in this account stood at Rs. 350.02 crore. The additions (net) to the share brmium account of Rs. 133.65 crore during the year is primarily on account of brmium received on issue of equity shares to private equity investors and on exercise of options under ESOP Scheme.

During the prior year, based on the approval of Shareholders of the Company at the Extra-Ordinary General Meeting held on March 5, 2010 and on the basis of Order of the High Court of Judicature at Mumbai vide its order dated April 16, 2010, the Company utilized balances in the securities brmium account of Rs. 46.66 crore towards one time charges/cost (including change in accounting policy for provision for doubtful debts) incurred by the Company and its subsidiary companies. The amounts relating to the Company amounting to Rs. 17.31 crore had been adjusted to the Securities Premium Account. An amount of Rs. 29.34 crore equivalent to the total amount of adjustments relating to the subsidiaries had been identified and segregated from the balance in the Securities Premium Account for adjustment on consolidation. Of this total adjustment made, Rs. 1.58 crore and Rs. 16.58 crore related to provision for doubtful debts of the Company and its subsidiary companies respectively on account of change in accounting with regard to provision for doubtful debts.

During the year ended March 31, 2012, the Company and its subsidiary companies have received amounts aggregating to Rs. 0.01 crore (Rs. 1.47 crore for the year ended March 31, 2011) and Rs. 0.75 crore (Rs. 5.43 crore for the year ended March 31, 2011) respectively against the balances for which the provision were made on account of change in accounting policy. Consequently, such excess provisions for doubtful debts on account of the said collections have been written back to the securities brmium account and shown under additions during the year.

Shareholders’ funds

The total shareholder funds increased to Rs. 631.53 crore as at March 31, 2012 from Rs. 440.87 crore as of the brvious year end. The basic earnings per share increased to Rs.30.91 as at March 31, 2012 compared to Rs.26.04 as of the brvious year end.

Non-Current Liabilities

All liabilities other than the current liabilities are classified as non-current liabilities. Long term borrowings include vehicle loans from banks/others and long term maturity of finance lease obligations. Long term borrowings decreased to Rs. 0.62 crore as at March 31, 2012 as compared to Rs. 0.84 crore as at March 31, 2011. The decrease was primarily due to repayment of vehicle loans taken from banks/others. Vehicle loans were Rs.0.41 crore as at March 31, 2012 (Rs.0.56 crore at March 31, 2011).

Deferred Tax Liabilities (Net)

Note 6 brings out details of component wise deferred tax balances where the net value result into liability. As can be seen from Note 6, deferred tax liability (net) was created against debrciation. The deferred tax liability (net) was Rs.3.75 crore as at March 31, 2012 (Rs. Nil as at March 31, 2011).

Trade Payables

Trade payables are dues in respect of goods purchased or services received (including from employees, professionals and others under contract) in the normal course of business. Trade Payable shown under noncurrent liabilities rebrsents amount payable towards retention bonus to certain employees. Trade payables were Rs.0.35 crore as at March 31, 2012 (Rs. Nil as at March 31, 2011).

Long Term Provisions

Long term provisions rebrsents provisions made towards certain non-funded employee benefits such as Bhavishya Kalyan Yojana, medicare, leave encashment etc. Provision for employee benefits has been made based on an independent actuarial valuation as on the balance sheet date. Long term provisions were Rs. 7.08 crore as at March 31, 2012 (Rs.6.17 crore as at March 31, 2011).

Income Tax Liabilities

Income tax liabilities (net) rebrsent estimated income tax liabilities. The provision for tax liabilities (net of advance tax) was Rs.0.24 crore as at March 31, 2012 (Rs.0.93 crore as at March 31, 2011).

Current Liabilities

A liability is classified as Current when any of the following is satisfied

a) It is expected to be settled in the Company’s normal operating cycle

b) It is held primarily for the purpose of being traded

c) It is due to be settled within twelve months after the reporting date or

d) The Company does not have an un conditional right to defer settlement of the liability for at least twelve months after the reporting date

As reported elsewhere in this discussion, all other liabilities are classified as non-current liabilities.

Short Term Borrowings from banks

Short term borrowings rebrsent unsecured br shipment and post shipments loans taken from a bank. The Company has not provided any security towards the said loans. Short term borrowings were Rs.55.96 crore as at March 31, 2012 (Rs.48.45 crore at March 31, 2011).

Trade Payable

Trade payables are dues in respect of goods purchased or services received (including from employees, professionals and others under contract) in the normal course of business. Trade Payables were Rs.91.91 crore as at March 31, 2012 (Rs. 79.02 crore as at March 31, 2011). Trade payable has gone up due to amount payable to employees on account of performance pay and interest subsidy.

Other Current Liabilities

Other current liabilities as at March 31, 2012 aggregated Rs.8.46 crore (Rs.6.92 crore as at March 31, 2011). Major portion of other current liabilities rebrsents dues payable to statutory authorities and advance received from the customers. Rs. 7.30 crore was outstanding as at March 31, 2012 on account of statutory dues and advance received from customers (Rs.6.03 crore as at March 31, 2011).

Short Term Provisions

Short term provisions rebrsents provisions made towards employee benefits (current portion), provision for proposed dividend and dividend tax on proposed dividend. Current portion of provision for employee benefits has been made based on an independent actuarial valuation as on the balance sheet date. Short term provisions as at March 31, 2012 aggregated Rs.35.72 crore (Rs.22.76 crore as at March 31, 2011).

Fixed Assets

During the year, the Company added Rs. 23.51 crore to the gross block of tangible assets comprising Rs. 0.04 crore buildings, Rs. 1.57 crore plant & machinery and equipments-owned, Rs. 0.08 crore plant & machinery and equipments-leased Rs. 0.82 crore office equipments Rs. 14.35 crore computers, Rs. 1.16 crore furniture and fixtures, Rs. 0.94 crore vehicles Rs. 4.55 crore, leasehold improvements. During the brvious year, the Company added Rs.10.65 crore to gross block assets of the Company. The major portions of additions during the year were on account of commencement of an Unit in Special Economic Zone (Blue Ridge Unit).

During the year, the Company deducted Rs.3.69 crore from the gross block of assets comprising Rs.0.01 crore of plant & machinery and equipments-owned Rs. 0.01 crore office equipments, Rs. 3.10 computers, Rs. 0.02 furniture and fixtures Rs.0.55 vehicles. During the brvious year, the Company retired/ transferred various assets with gross block of Rs.4.21 crore. The Company has a capital commitment of Rs.4.58 crore as at March 31, 2012 as compared to Rs.6.42 crore as at March 31, 2011 towards tangible assets.

Intangible assets rebrsents software licenses (other than internally generated). During the year, the Company added Rs. 21.45 crore to the gross block of intangible assets (software licenses) During the brvious year, the Company added Rs. 6.21 crore to gross block assets of the Company. The major portions of additions during fiscal 2012 were on account of commencement of an Unit in Special Economic Zone (Blue Ridge Unit). The Company has a capital commitment of Rs. 3.31 crore as at March 31, 2012 as compared to Rs. 10.42 crore as at March 31, 2011 towards intangible assets.

Capital work in progress comprises of the cost of tangible fixed assets that are not ready for their intended use at the reporting date. The major portion of capital work in progress rebrsents assets procured for office at Thane, Mumbai. The business operations from Thane office will commence in fiscal 2013 and therefore the Company will capitalise the said cost in fiscal 2013.Capital work in progress as at March 31, 2012 aggregated Rs.1.54 crore (Rs.1.32 crore as at March 31, 2011).

Intangible assets in progress rebrsent costs incurred towards purchase of SAP licenses and cost incurred towards implementation of the same. No such cost was incurred in the brvious year. Intangible assets in progress as at March 31, 2012 aggregated Rs.3.49 crore (Rs. Nil as at March 31, 2011).

Other Non-Current Assets

Non-Current Investments

The trade investment is an investment made by the company in shares of another company to promote the trade or business of the company. Other investments rebrsent other than trade investments. Investments are either classified as current or non-current based on the holding period of investments as on the Balance Sheet date. Investments which are expected to be realised within a period of 12 months from the Balance Sheet date are classified as current investments. Other investments (which are to be realised after 12 months) are classified as non-current. As can be seen from the above table, during the year, the Company did not make any further investment in its subsidiary companies and Joint Venture Company. During the year, the Company invested in bonds and units of mutual funds. These are typically investments in long -term funds to gainfully use the excess cash balance with the Company. Investments in bonds and in mutual funds aggregated Rs.43crore as on March 31, 2012 (Rs. Nil crore as on March 31, 2011).

Long Term Loans and Advances:

As can be seen from the above table, long term loans and advances have gone up from 1.01 crore in fiscal 2011 to Rs. 4.45 crore in fiscal 2012 due to increase of security deposits and loans to others. Security deposits have gone up from Rs.0.37 crore in fiscal 2011 to Rs.1.49 crore in fiscal 2012 due to new deposits given towards offices at Pune (SEZ), Thane (new office) and Bangalore (new office). Loans to others rebrsents loan given to ESOP Trust. No such loan was given in the brvious year.

Income Tax Assets (net)

Income Tax Assets (net) were Rs. 16.05 crore as at March 31, 2012 (Rs. 23.79 crore as at March 31, 2011). Income tax assets (net) have come down as compared to the brvious year due to receipt of income tax refund from the income tax department during the year under reference.

Current assets:

Current Investments

During the year, the Company invested in units of mutual funds. These are typically investments in short -term funds to gainfully use the excess cash balance with the Company. Current Investments as at March 31, 2012 aggregated to Rs.147.07 crore (Rs.96.09 crore as at March 31, 2011).

Trade Receivables

Trade receivables are dues in respect of goods sold or services rendered in the normal course of business. A trade receivable is treated as current, if it is likely to be realized within twelve months from the date of Balance Sheet or operating cycle of the business. Trade Receivables as on March 31, 2012 aggregated Rs.91.31 crore (net of provision for doubtful debts) (Rs. 62.22 crore as on March 31, 2011). Amount debited to Profit and Loss Account on account of provision for bad and doubtful debts in fiscal 2012 was Rs. 0.10 crore (Rs. 1.51 crore in fiscal 2011). The Company provides provision for doubtful debts as a percentage of the outstanding debts based on ageing. The amounts considered as bad debts and provision for doubtful (debited to profit and loss account) as a percentage of total income was 0.01% in fiscal 2012 (0.29% in fiscal 2011).

Cash and Bank Balances

Cash and bank balances include cash and cash equivalents and other bank balances. The Company’s Cash and Bank balances as on March 31, 2012 were Rs.114.96 crore (Rs.110.88 crore as on March 31, 2011). The cash and cash equivalents aggregated Rs.113.93 crore as on March 31, 2012 (Rs.110.02 crore as on March 31, 2011). Other bank balances as at March 31, 2012 aggregated to Rs.1.03 crore (Rs.0.86 crore as at March 31, 2011).

Tata Technologies Ltd. (CONSOLIDATED)

The Management Discussion and Analysis below relates to the consolidated financial statements of the Company (includes the results of its subsidiaries and the Company’s share in Joint Venture Company). The Discussion should be read in conjunction with the financial statements and related Notes to the Consolidated Accounts of the Company for the year ended March 31, 2012.

INCOME

Income from Operations

The Company’s revenue increased in fiscal 2012 to Rs. 1,642.61 crore from Rs. 1,255.83 crore in fiscal 2011, registering a growth of 30.80%. Services revenue was 71.79% of total income (69.54% in fiscal 2011) and increased by 35.71% from Rs. 881.86 crore in fiscal 2011 to Rs. 1,196.78 crore in fiscal 2012. Consolidated revenues from sale of products increased by 19.22% from Rs. 373.97 crore in fiscal 2011 to Rs. 445.83 crore in fiscal 2012.

Revenue by Segments:

Other Income

Consolidated ‘Other Income’ in fiscal 2012 increased to Rs.24.34 crore from Rs.12.22 crore in fiscal 2011.In terms of total income, ‘Other Income’ has gone up from 0.96% in fiscal 2011 to 1.46% in fiscal 2012.Other income has gone up due to increase of dividend income from Rs.1.15 crore in fiscal 2011 to 16.47 crore in fiscal 2012.

EXPENDITURE

Employee Benefit Expenses

The consolidated total employee benefit expenses for fiscal 2012 was Rs. 699.66 crore, an increase of 27.94% over Rs. 546.87 crore in fiscal 2011. Employee costs as a percentage of total income was 41.97% in fiscal 2012 (43.13% in fiscal 2011). This decrease is attributable to effective utilization of man power and reduction of cost per employee. The number of employees as at March 31, 2012 was 4,826 (4,076 as at March 31, 2011).

Other expenses

Other Expenses increased from Rs. 97.74 crore in fiscal 2011 to Rs. 122.77 crore in fiscal 2012. The increase is primarily due to increase of Rent from Rs. 9.69 crore in fiscal 2011 to Rs. 12.85 crore in fiscal 2012, Travel and conveyance cost from Rs. 35.47 crore in fiscal 2011 to Rs. 42.01 crore in fiscal 2012, AMC charges from Rs. 3.32 crore in fiscal 2011 to Rs.8.59 crore in fiscal 2012 and communication expenses from Rs.9.90 crore in fiscal 2011 to Rs.12.13 crore in fiscal 2012. In terms of total income, operating expenses reduced from 7.71% in fiscal 2011 to 7.36% in fiscal 2012 due to various cost effective measures taken by the Company.

Profit before Finance cost, Debrciation and amortization and Taxes

The profit before finance cost, debrciation and amortization, taxes (PBDIT) in fiscal 2012 was Rs.305.25 crore, an increase of 48.07% from Rs.206.15 crore in fiscal 2011.The profit as a percentage of total income was 18.31% in fiscal 2012 (16.25% in fiscal 2011).The increase in the PBDIT as a percentage of total income in fiscal 2012 is attributable to increase in offshore revenues and reduction in operating cost, particularly employee costs and other expenses.

Finance Cost

Finance cost reduced from Rs. 7.37 crore in fiscal 2011 to Rs. 7.23 crore in fiscal 2012. This was due to effective management of working capital. In terms of percentage of total income, finance cost has come down from 0.58% in fiscal 2011 to 0.43% in fiscal 2012.

Debrciation and amortization

Debrciation and amortization charge increased from Rs. 18.87 crore in fiscal 2011 to Rs. 26.19 crore in fiscal 2012, an increase of 38.79%.The increase is attributable to commencement of business operations in SEZ Unit. In terms of total income the debrciation and amortization charge was 1.57% in fiscal 2012 and 1.49% in fiscal 2011.

Profit before Taxes

The Profit before Taxes in fiscal 2012 was Rs. 271.83 crore, an increase of 51.09% from Rs. 179.91 crore in fiscal 2011.In terms of total income the profit went up from 14.18% in fiscal 2011 to 16.31% in fiscal 2012. The increase in profit before tax can be attributed to margin expansion of PBDIT of 213 basis points.

Provision for Taxation

Income tax expense comprises tax on income from operations in India and foreign tax jurisdictions. Income tax payable in India is determined in accordance with the provisions of the Income Tax Act, 1961. Tax expenses relating to overseas operations are determined in accordance with tax laws applicable in countries where such operations are carried out. The Company’s consolidated tax expense in fiscal 2012 increased to Rs. 63.46 crore from Rs.40.89 crore in fiscal 2011. This rebrsented 3.81% of the total income in fiscal 2012 (3.22 % in fiscal 2011). The effective tax rate (total tax expenses including deferred tax/profit before tax 100) in fiscal 2012 increased to 23.35% from 22.73% in fiscal 2011.As mentioned elsewhere in this discussion ,the effective tax rate has gone up due to expiry of tax holiday of STPI Units of the Company.

Net Profit after taxes from operations

The Company’s net profit after taxes from operations (Consolidated) registered a growth of 49.88% from Rs. 139.02 crore in fiscal 2011 to Rs. 208.37 crore in fiscal 2012. Net profit margin on the total income went up from 10.96% in fiscal 2011 to12.50 % in fiscal 2012, an increase in net profit margin of 1.54%.

FINANCIAL POSITION - Tata Technologies Ltd. (CONSOLIDATED)

Share Capital

As discussed elsewhere in this report, during the year, the Company did not increase authorized capital of ordinary shares and Cumulative Non Participative Compulsory Convertible Preference Shares. The authorized equity share capital as on March 31, 2012 was Rs.60 crore, divided into 6 crore equity shares of Rs.10 each (Rs.60 crore as at March 31, 2011, divided into 6 crore equity shares of Rs.10 each). The issued, subscribed and paid-up share capital as on March 31, 2012 was Rs.42.97 crore (Rs.37.32 crore as at March 31, 2011). During the year, the Company issued equity shares to employees (under ESOP Scheme) and private equity investors. Consequently, the issued, subscribed and paid up capital of the Company increased by Rs. 5.65 crore in fiscal 2012. Details of options granted, outstanding and vested as at March 2012 are provided in this Annual Report.

Reserves and Surplus

Securities Premium Account as on March 31, 2012 stood at Rs.350.02 crore. As on March 31, 2011 the balance in this account stood at Rs. 216.37 crore. The net additions to the securities brmium account of Rs. 133.65 crore during the year is on account of brmium received on issue of equity shares on exercise of options under ESOP Scheme, issuance of shares to private equity investors and amounts collected from the customers in respect of provisions made for doubtful debts in the brvious year on account of change in accounting policy. Amount provided on account of change in accounting policy in the brvious year was debited to securities brmium account based on the approval of Shareholders of the Company at the Extra-Ordinary General Meeting held on March 5, 2010 and on the basis of Order of the High Court of Judicature at Mumbai vide its order dated April 16, 2010. During the year ended March 31, 2012, the Company and its subsidiary companies received amounts aggregating to Rs. 0.76 crore against the balances for which the provision were made on account of change in accounting policy in the brvious year. Consequently, such excess provisions for doubtful debts on account of the said collections have been written back to the securities brmium account.

Capital Reserve Account as on March 31, 2012 stood at Rs. 0.63 crore. As on March 31, 2011 the balance in this account stood at Rs.0.65 crore, the said change rebrsents exchange fluctuations. Details of the same have been provided in Note 4 of the Financial Statements.

Out of the profits in fiscal 2012, an amount of Rs. 14 crore (Rs. 10 crore in fiscal 2011) was transferred to General Reserves resulting in a closing balance of Rs. 48.83 crore as on March 31, 2012 (Rs. 34.83 crore as on March 31, 2011).

The balance in the Profit and Loss Account as on March 31,2012 stood at Rs.312.10 crore (Rs.196.33 crore as on March 31, 2011), after providing interim and final dividend of Rs. 67.63 crore and dividend tax of Rs. 10.97 crore thereon. The total amount of profits appropriated to dividends including dividend tax was Rs 78.60 crore as compared to Rs.52.08 crore in the brvious year.

For the purpose of consolidation, the financial statements of foreign subsidiaries have been translated into its immediate parent companies currency and the same has been on the following basis:

All income and expenses items are converted at the average rate of exchange applicable for the year. All assets and liabilities are translated at the closing rate as on the balance sheet date. The resulting exchange differences on account of translation at the year end are transferred to translation reserve. As a result, Translation Reserve Account as on March 31, 2012 stood at Rs.26.28 crore. As on March 31, 2011 the balance in this account stood at Rs 17.73 crore.

Non-Current Liabilities

As mentioned elsewhere in this discussion, all liabilities other than current liabilities have been classified as non-current liabilities. Long term borrowings as at March 31, 2012 were Rs.0.62 crore (Rs.226.3 crore as at March 31, 2011). The acquisition loan amounting to USD 50Mn (Rs.222.92 crore) was classified as non-current liability based on due date for repayments in the brvious year. During the year the said loan was classified as current liability and therefore primarily on account of the same, long term borrowings have come down as compared to the brvious year.

Deferred Tax Liabilities (Net)

As stated in Note 6 of the financial statements, deferred tax assets and liabilities are offset, tax jurisdiction wise. Note 6 brings out details of component wise deferred tax balances where the net value result into liability or asset, jurisdiction wise. The deferred tax liability (net) was Rs.3.75 crore as at March 31, 2012 (Rs. Nil as at March 31, 2011).

Trade Payables

Trade payables are dues in respect of goods purchased or services received (including from employees, professionals and others under contract) in the normal course of business. Trade Payable shown under noncurrent liabilities rebrsents amount payable towards retention bonus to certain employees. Trade payables were Rs.0.35 crore as at March 31,2012 (Rs.Nil as at March 31,2011).

Long Term Provisions

Long term provisions primarily rebrsent provisions made towards certain employee benefits-(non- funded) such as Bhavishya Kalyan Yojana, medicare, leave encashment etc. Long term provisions as at March 31, 2012 were Rs.7.76 crore (Rs.6.17 crore as at March 31, 2011).

Income Tax Liabilities (net)

Income Tax liabilities rebrsent estimated income tax liabilities. The income tax liabilities (net of advance tax) as at March 31, 2012 were Rs.0.24 crore (Rs .4.83 as at March 31, 2011).

Current liabilities

Short Term Borrowings from banks

Short term borrowings from banks rebrsents secured and un secured loans taken from banks by way of br and post shipment loans and cash credit borrowings. Short term borrowings from banks were Rs. 81.40 crore as at March, 2012 (Rs.73.41 crore at March, 2011).

Trade Payables

Trade payables are dues in respect of goods purchased or services received (including from employees, professionals and others under contract) in the normal course of business. Trade Payable at the end of fiscal 2012 aggregated Rs.241.10 crore (Rs.177.94 crore at the end of fiscal 2011).

Other Current Liabilities

Major portion of other current liabilities rebrsents current maturities of long term debts, dues payable to statutory authorities and advance received from the customers. Other current liabilities at the end of fiscal 2012 aggregated Rs.336.49 crore (Rs.59.38 crore at the end of fiscal 2011).The said amount has gone up primarily due to current maturities of long term debts. Current maturities of long term debts as at March 31, 2012 was Rs. 257.78 crore (Rs. 2.98 crore in fiscal 2011), Rs. 77.52 crore was outstanding as at March 31, 2012 on account of statutory dues and advance received from customers (Rs.55.28 crore as at March 31, 2011).

Short Term Provisions

Short term provisions rebrsents provisions made towards employee benefits (current portion), provision for final dividend and dividend tax on final dividend. Short term provisions as at March 31, 2012 was Rs.37.92 crore (Rs.25.86 crore as at March 31, 2011).

Income Tax Liability (Net)

Income Tax liabilities (net) as on March 31, 2012 was Rs. 13.61 crore (Rs. Nil as on March 31, 2011). Income tax liabilities have been made based on the applicable tax laws.

Fixed Assets

Addition to the Gross Block of tangible assets excluding capital work-in progress and exchange fluctuations in fiscal 2012amounted to Rs. 29.34 crore (Rs. 16.79 crore in fiscal 2011). Details of additions in fiscal 2012 were as under:

(a) Buildings Rs. 0.04 crore (Rs. 0.57 crore in fiscal 2011),

(b) Plant and machinery-owned Rs. 3.86 crore (Rs. 2.30 crore in fiscal 2011),

(c) Plant and machinery leased Rs. 0.08 crore (Rs. 0.35 crore in fiscal 2011),

(d) Computers Rs. 16.50 crore (Rs. 8.49 crore in fiscal 2011),

(e) Furniture and fittings Rs. 2.37 crore (Rs. 3.63 crore in fiscal 2011),

(f) Vehicles Rs. 1.94 crore (Rs. 1.44 crore in fiscal 2011) and

(g) lease hold improvements Rs. 4.55 crore (Rs. Nil crore in fiscal 2011). The amount in capital work-in progress was Rs. 1.54 crore as on March 31, 2012 (Rs. 1.35 crore as on March 31, 2011). The Company has capital commitment towards tangible assets of Rs. 4.58 crore as at March 31, 2012 as compared to Rs. 6.42 crore as at March 31, 2011.

Intangible assets primarily rebrsent cost of software licenses (other than internally generated).During the year, the Company added Rs. 24.64 crore to the gross block of intangible assets (software licenses) During the brvious year, the Company added Rs. 6.79 crore to gross block assets of the Company. The major portions of additions during the fiscal 2012 were on account of commencement of an Unit in Special Economic Zone (Blue Ridge Unit). The Company has a capital commitment of Rs. 3.31 crore as at March 31, 2012 as compared to Rs. 10.42 crore as at March 31, 2011 towards intangible assets.

Goodwill on Consolidation

Goodwill on consolidation as at March 31, 2012 was Rs. 397.90 crore (344.57 crore as at March 31, 2011). This amount is appearing in the books of Tata Technologies Pte Ltd on account of Incat acquisition. For the purpose of consolidation, the said amount has been translated. Consequently, on account of translation impact there is a movement in this account in fiscal 2012 as compared to fiscal 2011. Goodwill is tested for impairment. The management does not foresee any risk of impairment on the carrying value of goodwill as at March 31, 2012. Details of the movement have been provided in Note 20 forming part of consolidated financial statements.

Non-Current Investments

During the year, the Company invested in bonds and units of mutual funds. These are typically investments in long -term funds/bonds to gainfully use the excess cash balance with the Company. Investments in bonds in mutual funds aggregated Rs.43 crore as on March 31, 2012 (Rs. Nil as on March 31, 2011).

Deferred Tax Asset (Net)

Deferred tax asset (net) as at March 31, 2012 was Rs.5.57 crore (Rs.8.59 crore as at March 31, 2011). The primary reasons for decrease in deferred tax asset are attributable to the difference in provision for debrciation and provision for expenses under section 43B of the Income Tax Act. Details of deferred tax asset have been given in Note 6 of the financial statements of the Company.

Long Term Loans and Advances

Long Term Loans and Advances as at March 31, 2012 was Rs.17.29 crore (Rs.19.41 crore as at March 31, 2011). The said amount has come down due to reduction of loan to others from Rs. 16.88 crore as at March 31, 2011 to Rs. 14.14 crore as at March 31, 2012.

Income Tax Assets (net)

Income tax assets (net) were Rs. 20.74 crore as at March 31, 2012 (Rs.30.06 crore as at March 31, 2011). The said amount has come down as compared to the brvious year due to receipt of income tax refund during the year from the income tax department.

Current assets

Current Investments

As reported elsewhere in this report, during the year, the Company invested in units of mutual funds. These are typically investments in short-term funds to gainfully use the excess cash balance with the Company. Current Investments as at March 31, 2012 was Rs.147.07 crore (Rs.96.07 crore as at March 31, 2011).

Inventories

The Company had inventories of Rs. 0.05 crore as at March 31, 2012 (Rs. 0.77 crore as at March 31, 2011). The inventory constitutes hardware and software products.

Trade Receivables

Trade receivables as at March 31, 2012 aggregated Rs. 290.02 crore (net of provision for doubtful debts) (Rs. 231.30 crore as at March 31,2011).As a percentage of total income, sundry debtors were at 17.40 % as at March 31, 2012 as compared to 18.24% as at March 31, 2011. The Company provides provision for doubtful debts as a percentage of the outstanding debts based on ageing. The cumulative provision towards bad and doubtful debts as on March 31, 2012 stood at Rs.16.71 crore (Rs.13.54 crore as at March 31, 2011).

Cash and Bank Balances

Cash and bank balances include cash and cash equivalents and other bank balances. The Company’s Cash and Bank balances as at March 31, 2012 were Rs. 342.83 crore as on March 31, 2012 (Rs. 173.33 crore as on March 31, 2011).The cash and cash equivalents aggregated Rs. 291.93 crore as on March 31, 2012 (Rs. 157.39 crore as on March 31, 2011). Other bank balances at the end of fiscal 2012 aggregated Rs. 50.90 crore (Rs. 15.94 crore at the end of fiscal 2011)

Other Current assets

Other current assets as on March 31, 2012 were Rs.78.21 crore (Rs.42.78 crore as at March 31, 2011). Significant items of other current assets as at March 31, 2012 were, Bills of Exchange Rs. 36.59 crore (Rs. Nil as at March 31, 2011), advances to suppliers, contractors and others Rs. 9.05 crore (Rs. 5.27 crore as at March 31, 2011) and Prepaid expenses Rs.18.59 crore (Rs. 17.09 crore as at March 31, 2011). As can be seen from the above information other current assets have gone up due to balance in bills of exchange account.

Short term Loans and advances

Short term loans and advances as on March 31, 2012 were Rs. 49.60 crore (Rs. 7.90 crore as at March 31, 2011). Significant items of short term loans and advances as at March 31, 2012 were, deposit with financial companies Rs. 10 crore (Rs. Nil as at March 31, 2011), inter corporate deposits Rs. 30 crore (Rs. Nil as at March 31, 2011), security deposits Rs. 1.82 crore (Rs. 1.40 crore as at March 31, 2011) and Loans and advances to employees Rs. 5.53 crore (Rs. 4.52 crore as at March 31, 2011). As can be seen from the above short term loans and advances have gone up due to increase in deposits with financial institutions and inter corporate deposits. Deposits have been placed with the said agencies due to availability of surplus funds.

Cash Flow - Tata Technologies Ltd. (Consolidated)

Cash Flow from Operating Activities (Consolidated)

In fiscal 2012 the Company used in Rs. 159.76 crore on investment activities (Rs. 22.36 crore in fiscal 2011). The significant items of cash used in investment activities in fiscal 2012 were (a) purchase of fixed assets Rs. 50.41 crore (Rs.21.22 crore in fiscal 2011), (b) investment in units of Mutual Funds (net of sale) Rs.88.99 crore (Rs.51.98 crore in fiscal 2011) and (c) investment in intercorporate deposits (net of withdrawals) Rs. 30 crore (Rs. 25 crore withdrawn from intercorporate deposits as at March 31, 2011).

In fiscal 2012, the significant item of cash generated from financing activities were proceeds from issue of shares amounting to Rs. 141.27 crore (Rs. 0.57 crore in fiscal 2011) and proceeds from short term borrowings amounting to Rs.99.79 crore (Rs.7.92 crore in fiscal 2011). As can be seen from the above, the significant of item of cash used in financing activities was on account payment of dividends including dividend tax amounting to Rs.65.72 crore (Rs.60.54 crore in fiscal 2011).

Cash Position

Cash and cash equivalents as on March 31, 2012 amounted to Rs. 609.49 crore (Rs. 283.75 crore as at March 31, 2011). Cash and cash equivalents include investments in mutual funds, inter corporate deposits and bonds, bills of exchange, deposits with financial Companies and loans to associates.