Financial Analysis of Tcs and Tech Mahindra

ACCOUNTS PROJECT Submitted By Kriti Singh Roll No 236 branch-D, LBSIM, Delhi 1. ) Calculation of balances (All figures employ For calculation be in Rs crores) liquidity balances 1. Current dimension decree Current proportionality=Current As focalises /Current Li efficacy Current dimension of TCS For 2012 23275. 09/10465. 01 = 2. 224 For 2011 17036. 41/7246. 03 = 2. 3511 Current balance of technical school Mahindra For 2012 19809/17007 = 1. 16475 For 2011 18412/15295 = 1. 20379 2. right away symmetry regulation Quick proportionality= Quick Current Assets/Current Liability Quick dimension of TCSFor 2012 23257. 32/10465. 01 = 2. 223 For 2011 17013. 59/7246. 03 = 2. 347 Quick dimension of tech Mahindra For 2012 19807/17007 = 1. 16463 For 2011 18406/15295 = 1. 20339 3. funds ratio statute hard cash Ratio of TCS For 2012 6003. 37/10465. 01 =0. 5736 For 2011 4700. 85/7246. 03 =0. 648 currency Ratio of tech Mahindra For 2012 1389/17007 = 0. 081 For 2011 1938/15295 = 0. 126 Leverage Ratios 1. Debt-Assets Ratio Formula Debt to Assets = count debt / wide assets Debt-Assets Ratio of TCS For 2012 116. 26/41394. 49 =0. 0028 For 2011 69. 27/32681. 04 =0. 0021Debt-Assets Ratio of tech Mahindra For 2012 11266/63454 = 0. 177 For 2011 11827/60804 =0. 194 2. Debt love railway strainss Ratio Formula Debt to Equity Ratio =(Short shape Debt + hanker Term Debt)/Tangible N. W. Debt to Equity Ratio of TCSFor 2012 116. 26/29840. 13 =0. 003 For 2011 69. 27/24651. 22 =0. 002 Debt to Equity Ratio of technical school Mahindra For 2012 11266/34369 = 0. 327 For 2011 11827/33810 =0. 349 3. invade directage Ratio Formula Interest c everywhereage Ratio =(EBIT) / interest.Interest c everywhereage Ratio of TCS For 2012 13945. 54/22. 23 =627. 32 For 2011 11047. 1/26. 48 =417. 18 Interest coverage Ratio of Tech Mahindra For 2012 7494/1025 =7. 3112 For 2011 9173/1113 =8. 2416 4. entirety Debt Ratio Formula perfect Debt Ratio = issue forth Debt / Capital Emp loyed score Debt Ratio of TCS For 2012 116. 26/30929. 48 =0. 00375 For 2011 69. 27/25435. 01 =0. 0027 Total Debt Ratio of Tech Mahindra For 2012 11266/46447 = 0. 425 For 2011 11827/45509 =0. 259 exertion Ratios 1. stemma upset Ratio Formula Inventory dollar the great unwashed rate Ratio = bell of Goods Sold/Inventory Cost Inventory overturn Ratio of TCSFor 2012 35398. 69/ 17. 77 =1992. 04 For 2011 26907. 89/22. 82 =1179. 132 Inventory derangement Ratio of Tech MahindraFor 2012 46638/2 =23319 For 2011 42861/6 =7143. 5 2. receivables perturbation Ratios Formula Receivable overturn Ratio = Sales/ Accounts Receivable Receivables turnover rate Ratio of TCSFor 2012 48893. 83/11520. 35 =4. 244 For 2011 37324. 1/8194. 97 =4. 554 Receivables turnover Ratio of Tech MahindraFor 2012 52430/12431 =4. 217 For 2011 49655/9643 =5. 149 3. Payable turnover Ratios Formula Payable Turnover Ratio = Cost/ Average Payables Payable turnover Ratio of TCSFor 2012 35398. 69/ 3247. 87 =10. 89 For 2011 26907. 89/2572. 33 =10. 46 Payable turnover Ratio of Tech MahindraFor 2012 46638/4684 =9. 956 For 2011 42861/3034 =14. 126 4. contumacious assets turnover Ratios Formula dictated assets turnover Ratios = Sales/ Fixed Assets Fixed assets turnover Ratios of TCS For 2012 48893. 83/6564. 97 =7. 4 For 2011 37324. 51/5440. 98 =6. 85 Fixed assets turnover Ratios of Tech Mahindra For 2012 52430/8153 =6. 430 For 2011 49655/6608 =7. 5143 5. Total assets turnover Ratios Formula Total assets turnover Ratios = Sales/ Total Assets Total assets turnover Ratios of TCS For 2012 48893. 83/11520. 35 =4. 244 For 2011 37324. 51/8194. 97 =4. 554 Total assets turnover Ratios of Tech Mahindra For 2012 52430/63454 =0. 826 For 2011 49655/60804 =0. 816 Profitability Ratios 1. PBIT Ratio Formula PBIT Ratio = EBIT/Sales PBIT Ratio of TCS For 2012 13945. 54/48893. 83 =0. 285 For 2011 11047. 1/37324. 51 =0. 959 PBIT Ratio of Tech Mahindra For 2012 7494/52430 =0. 1429 For 2011 9173/49655 =0. 1847 2. PBT Ra tio Formula PBT Ratio = EBT/Sales PBT Ratio of TCS For 2012 13923. 31/48893. 83 =0. 284 For 2011 11020. 62/37324. 51 =0. 2952 PBT Ratio of Tech Mahindra For 2012 5790/52430 =0. 1104 For 2011 8060/49655 =0. 1623 3. whack Ratio Formula PAT Ratio= EAT/Sales PAT Ratio of TCS For 2012 10413. 4/48893. 83 =0. 212 For 2011 9068. 04/37324. 51 =0. 242 PAT Ratio of Tech Mahindra For 2012 4606/52430 =0. 0878 For 2011 6967/49655 =0. 1403 4. ROA Ratio Formula ROA Ratio= EBIT/ Total Asset ROA Ratio of TCS For 2012 13945. 4/41394. 49 =0. 336 For 2011 11047. 1/32681. 04 =0. 338 ROA Ratio of Tech Mahindra For 2012 7494/63454 =0. 118 For 2011 9173/60804 =0. 15 5. ROE Ratio Formula ROE Ratio= EAT/Stockholders Equity ROE Ratio of TCS For 2012 10413. 4/29840. 13 =0. 348 For 2011 9068. 04/24651. 22 =0. 367 ROE Ratio of Tech Mahindra For 2012 4606/34369 =0. 134 For 2011 6967/33810 =0. 206 compend of Ratios Liquidity Ratios Ratio TCS Tech Mahindra 2012 2011 2012 2011 Current Ratio 2. 224 2. 3511 1. 16475 1. 20379 Quick Ratio 2. 2223 2. 347 1. 16463 1. 20339 nones Ratio 0. 5736 0. 648 0. 081 0. 126Ideal conclusion ratio is 21. In show window of TCS in both(prenominal)(prenominal) days contemporary ratio is roughly tinge to it. It means company has just the adequate amount of current assets. In outcome of Tech Mahindra, Current ratio is less(prenominal) than it in twain the socio-economic classs. But it is hitherto greater than 11. So the company still has sufficient assets to pay its short destination obligations. Quick assets means current assets document prepaid exp. So, it is much than conservative measure. Ideal quick ratio is 11. It shows that TCS and Tech Mahindra convey very less current enthronisation fundss in lines of inventories and prepaid expenses so the ratios ar almost equal to the current ratios.cash ratio is most conservative measure of three as it comprises only(prenominal) cash and marketable securities. TCS keeps more current assets in cash than Tech Mahindra. Leverage Ratios Ratio TCS Tech Mahindra 2012 2011 2012 2011 Debt Assets ratio 0. 0028 0. 0021 0. 177 0. 194 Debt To Equity Ratio 0. 003 0. 002 0. 327 0. 349 Interest Coverage Ratio 627. 32 417. 18 7. 3112 8. 2416 Total Debt Ratio 0. 00375 0. 0027 0. 2425 0. 259 abridgment of a firmlys capital structure is essential to prise its long- precondition guess and return prospects. Debt assets ratio implies portion of total debt in capital structure of a company.The more this ratio is the more forged company is beca implement embody of debt is always greater than follow of rightfulness. So, it is preferred to assimilate more amount of equity than debts. For both TCS and Tech Mahindra, debt ratio is untroubled enough though TCS has go bad debt ratio. Interest coverage ratio measures the protective covering for sale to creditors as the extent to which earnings available for interest cover interest expenses. In case of both companies in both tender cla sss debt holders ar secured as enough profit is available with firm still in case of TCS debt holders be very much secured.Payment of interest on debentures is always preferred to payment of dividends on equity and preference sh bes. Activity ratios Ratio TCS Tech Mahindra 2012 2011 2012 2011 Inventory Turnover Ratio 1992. 04 1179. 132 23319 7143. 5 Receivables Turnover Ratio 4. 244 4. 554 4. 217 5. 149 Payable Turnover Ratio 10. 89 10. 46 9. 956 14. 126 Fixed Assets turnover Ratio 7. 44 6. 85 6. 430 7. 5143 Total Assets Turnover ratio 1. 18 1. 142 0. 826 0. 816 Activity ratios describe the relationship amongst the firms sales/cost of steady-goings sold and the assets pick outed to perplex operational activities.The highschooler the ratio, the more efficient the firms trading operations as relatively fewer assets are indispensable to maintain a precondition take of operation. Inventory turnover ratio measures the efficiency of the firms inventory counsel. A higher ratio means inventory does not remain in warehouses for long meter. In both course of instructions Tech Mahindra has higher ratio than TCS has. Since both are software companies, need for inventory is very less. Hence the ratios are so high. Receivable turnover ratio measures the efficiencies of the firms credit policies and indicate the level of investment in receivables undeniable to maintain the firms sales level.The higher this ratio, the lesser the period in which debtors pays money. Its almost similar for both the companies for 2011-12. For 2010-11, Tech Mahindra is reasonably beforehand in comparison to TCS in this parameter . It implies that Tech Mahindra gives credit to its guest for lesser time period than TCS does. In 2010-11 number credit time given by TCS is 365/4. 554=80 days approx. while by Tech Mahindra is 365/5. 149=70 days. Payable turnover ratio implies the time duration aft(prenominal) which company makes payments to its creditors. The higher ayable tur nover ratio, the earlier company makes payments to its creditors. TCSs collectable turnover ratio is slightly better than that of Tech Mahindra in 2011-12. For 2010-11, Tech Mahindra has better payable ratio than TCS as it makes payment to its creditors earlier. Fixed assets turnover ratio measures the efficiency of long-term investment. This ratio strikes the level of sales generated by investment in production capacity and shows the efficiency level of frigid assets. The higher this ratio means more productive and efficient are fixed assets or long-term investments.From table it is clear that investments of TCS are slightly more productive than of Tech Mahindra for 2011-12 but it was reverse by almost the same amount for 2010-11. Total assets turnover ratio considers total assets or else of only current assets so it measures boilersuit efficiencies of all assets (current fixed). TCS has a better ratio than Tech Mahindra has. Profitability Ratios Ratio TCS Tech Mahindra 2012 2011 2012 2011 PBIT Ratio 2. 224 2. 3511 0. 1429 0. 1847 PBT Ratio 0. 284 0. 2952 0. 1104 0. 1623 PAT Ratio 0. 212 0. 242 0. 0878 0. 1403 ROA 0. 336 0. 338 0. 118 0. 150 ROE 0. 48 0,367 0. 134 0. 206 This is the most of import ratio because both shareholders and stakeholders profit/ earnings depends on profitability of company. These ratios measures profitability in terms of % of sales. Debenture holders are much concerned or so PBIT(profit before interest and tax revenue) as they are paid interest out of it, government is more concerned about PBT(profit before tax) as it charge tax on this profit, shareholders are more concerned about PAT(profit after tax) as they are paid dividends on the footing of it. For both the companies at that graze is a little change in these ratios over the previothem socio-economic class.Also profitability of TCS is more than Tech Mahindra. ROA measures the managements ability and efficiency in using the firms assets to generate winnings and it re ports the total return accruing to all providers of capital(debt and equity) while ROE considers amount available for distribution to shareholders. Both ROA and ROE are undoubtedly better for TCS than those of Tech Mahindra. TCS is giving superb rate of return on equity to its shareholders as 33-34 % in be two years while that for Tech Mahindra is 15-17%. The relationship in the midst of ROA and ROE reflects the firms capital structure. 2. Horizontal, good and Trend Analysis Items selected For horizontal, perpendicular and trend analysis are Items TCS Tech Mahindra 2012 2011 2012 2011 portion outholders depot 29579. 23 24504. 81 34432 33840 Inventory 17. 77 22. 82 2 6 Fixed Assets 6564. 97 5440. 98 8153 6608 coin and bank balance 6003. 47 4700. 85 1389 1938 Creditors 3247. 87 2572. 33 4684 3034 Debtors 11520. 35 8194. 97 12431 9643 Total assets/liabilities 41394. 49 32681. 04 63454 60804 Vertical Analysis In vertical analysis Auditors calculate portion of one concomitant i n total assets/liabilities in terms of percentages.Items TCS Tech Mahindra 2012 2011 2012 2011 dish outholders Fund 71. 45 74. 98 54. 26 55. 65 Inventory 0. 042 0. 069 0. 003 0. 009 Fixed Assets 15. 85 16. 64 12. 848 10. 86 Cash and bank balance 14. 5 14. 38 2. 18 3. 18 Creditors 7. 846 7. 871 7. 381 4. 9 Debtors 27. 83 25. 07 19. 59 15. 85 Horizontal Analysis In horizontal analysis Auditors calculate % change in an item over a chemical group year. Here Auditors are considering 2009-10 as base year and testament calculate % change. Items TCS Tech Mahindra 2012 2011 2012 2011 Shareholders Fund 95. 29 c 97. 50 cytosineInventory 60. 87 coke 33. 33 snow Fixed Assets 95. 25 100 118. 30 100 Cash and bank balance 100. 83 100 68. 55 100 Creditors 99. 68 100 150. 63 100 Debtors 111. 01 100 123. 59 100 Trend Analysis For TCS For Tech Mahindra 3. Suggestions i. Creditors Since the debt ratios are less, there is a split of assets and equity backing for the debts. Its a safe bet to a dd to both of these companies. ii. Banks and Financial institutions Interest Coverage ratio is high. So loaning to these companies is a safe thing to do. (More so to TCS which has excellent Interest Coverage Ratio) iii.Investors Both the companies feel high ROE. So its a good option to invest in them. Returns of TCS are as high as 34-36% while that of Tech Mahindra are 15-17%. iv. Government Tax benefits discharge be tightened a bit. Because with the proportion of sales tax appears to be less. PBT and PAT ratios for both the companies are almost equal. v. oversight Crediting policies should be changed a bit. Because software persistence being a intangible industry cant entrust much on low recievables turnover ratio. 4. Accounting Policies TCS Fixed Assets Fixed assets are tell apartd at cost, less accumulated depreciation / amortization.Costs overwhelm all expenses incurred to bring the asset to its present location and condition. Fixed assets miss computers and different (a) assets individually costing 50,000 or less which are not capitalized except when they are part of a larger capital investment program. depreciation / Amortization Depreciation / amortization on fixed assets, other than freehold land and capital work-in-progress is charged so as to write-off the cost of assets, on the following tail Type of asset Method measure / Period Leasehold land and buildings straight line Lease period Freehold buildings compose vote down value 5%Factory buildings Straight line 10% Leasehold improvements Straight line Lease period jell and machinery Straight line 33. 33% Computer equipment Straight line 25% Vehicles Written down value 25. 89% shoes equipment Written down value 13. 91% Electrical installations Written down value 13. 91% Furniture and fixtures Straight line 100% Intellectual property / distribution rights Straight line 24 60 months Rights under licensing compact Straight line at examination period Fixed assets purchased for specif ic projects are depreciated over the period of the project. InvestmentsLong-term investments are stated at cost, less provision for other than temporary decay in value. Current investments, except for current maturities of long term investments, comprising investment in mutual funds are stated at the dismay of cost and fair value. Inventories Raw materials, sub-assemblies and components are carried at the lower of cost and discharge realisable value. Cost is indomitable on a weighted average basis. Purchased goods-in-transit are carried at cost. Work-in-progress is carried at the lower of cost and net realisable value. Stores and write split are carried at cost, less provision for obsolescence.Finished goods produced or purchased by the political party are carried at lower of cost and net realisable value. Cost includes direct material and labtheir cost and a proportion of manufacturing overheads. Tech Mahindra Fixed Assets including intangible assets Fixed assets are stated at cost less accumulated depreciation. Costs comprise of purchase price and attributable costs, if any. Depreciation / amortization of fixed assets (i) The community computes depreciation of all fixed assets including for assets interpreted on lease using the straight line method base on estimated useful lives.Depreciation is charged on a pro rata basis for assets purchased or sold during the year. Managements estimate of the useful manner of fixed assets is as follows Buildings 28 years Computers 3 years Plant and machinery 5 years Furniture and fixtures 5 years Vehicles 3-5 Years Office Equipments 5 years (ii) Leasehold land is amortised over the period of lease. (iii) Leasehold improvements are amortised over the period of lease or expected period of occupancy whichever is less. (iv)Intellectual property rights are amortised over a period of septet years. (v) Assets costing upto Rs 5,000 are fully depreciated in the year of purchase. vi)The cost of software purchased for inte rnal use is capitalized and depreciated in full in the month in which it is put to use. Investments Long term investments are carried at cost. Provision is make to recognise a decline other than temporary in the carrying amount of long term investment. Current investments are carried at lower of cost and fair value. Inventories Components and parts Components and parts are valued at lower of cost and net realizable value. Cost is determined on First-In-First Out basis. Finished Goods wanted at the lower of the cost or net realisable value. Cost is determined on First-In-First Out basis. . ) let on laid-backlights TCS a. ) Auditors Report 1. Auditors gift scrutinizeed the attached consoli interlocking Balance Sheet of TATA CONSULTANCY SERVICES LIMITED (the fraternity) and its subsidiaries (collectively referred as the TCS Group) as at March 31, 2012,the Consolidated debate of Profit and bolshy and the Consolidated Cash Flow argumentation for the year ended on that date, bot h annexed thereto. These fiscal statements are the railway line of the partys management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components.Their responsibility is to express an opinion on these financial statements based on their audit. 2. Auditors conducted their audit in accordance with the auditing standards chiefly accepted in India. Those Standards require that Auditors curriculum and cause the audit to obtain likely assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, distinguish supporting the amounts and disclosures in the financial statements.An audit overly includes assessing the write up principles apply and significant estimates made by the management, as well as evaluating the overall financial statement presentation. Auditors believe that their audit provides a reasonable basis for their opin ion. 3. Auditors did not audit the financial statements of certain subsidiaries whose financial statements reflect total assets (net) of 4825. 13 crores as at March 31, 2012, total revenues of 7601. 89 crores and net cash inflow amounting to 514. 17 crores for the year ended on that date.These financial statements and other financial information has been audited by other auditors whose reports have been furnished to us, and their opinion in so cold as it relates to the amounts include in respect of these subsidiaries is based solely on the report of other auditors. 4. Auditors report that the consolidated financial statements have been prepared by the companions management in accordance with the requirements of the Accounting Standard (AS) 21, Consolidated Financial Statements prescribed by the Central Government under Section 211 (3C) of the Companies Act, 1956 and other recognized billing practices and policies. 5.Based on their audit and on attachment of the separate audit reports on the individual financial statements of the caller-out and the same subsidiaries and other financial information of the components, and to the outdo of their information and according to the explanations given to us, Auditors are of the opinion that the attached consolidated financial statements give a true and fair panorama in conformity with the accounting principles principally accepted in India (i) in the case of the Consolidated Balance Sheet, of the state of affairs of the TCS Group as at March 31, 2012 (ii) in the case of the Consolidated Statement of Prof t and Loss, of the profit of the TCS Group for the year ended on that date and (iii) in the case of Consolidated Cash Flow Statement, of the cash flows of the TCS Group for the year ended on that date. b. ) Management give-and-take The Companys strategy to support longer term proceeds is to continually extend the core IT serve business by expanding its geographic reach, industry coverage and good capabil ities and by deepening animated client elationships, building or acquiring emerging businesses and adopting or creating fresh business models and business solutions. happens The Company has put in place an Enterprise-wide Risk Management (ERM) programme based on the Committee of Sponsoring Organisations of the Treadway Commission (COSO) framework. Reports are placed before the bestride of music directors at regular intervals. The riskiness management process is continuously improved and adjusted to the changing global risk scenario. The agility of the risk management process is monitored and reviewed for appropriateness with the changing risk landscape. The process of continuous evaluation of risks includes taking stock of the risk landscape on an event driven as well as quarterly basis.The risk categories covered under the ERM programme includes strategic, operational and financial as well as respect-related risks across various levels of the organisation. This includes r isk assessment and easing at the company level, business / functional unit level, relationship level and project level. c. ) unified Governance Effective corporate governance practices set up the secure foundations on which successful commercial enterprises are built to persist. These practices are categorised by principle based standards and not just through a framework enforced by regulation. It develops through adoption of respectable practices in all of its dealings with a wide group of stakeholders embrace regulators, employees, shareholders, customers and vendors.Strong leadership and effective corporate governance practices have been the Companys hallmark and it has inherited these from the Tata culture. The Company testament observe to focus its resources, clevernesss and strategies to hit its vision of becoming a truly global leader in software operate, while upholding the core values of excellence, integrity, responsibility, unity and understanding, which are unfathomed to the Tata companies. By combining honorable values with business acumen, globalisation with field of study interests and core business with emerging business, the Company aims to be amongst the largest and most esteem global organisations. The Company elieves in adopting the best practices that are followed in the flying field of corporate governance across various geographies. The Company has a strong legacy of fair, transparent and ethical governance practices. The Company has adopt a mark of consider for its employees including the Managing Director and the Executive Directors. In addition, the Company has pick out a Code of fetch for its Non-Executive Directors. Both these codes are available on the Companys website. The Companys corporate governance ism has been further strengthened through the Tata Business Excellence Model, the Tata Code of Conduct for Prevention of Insider barter, as also the Code of Corporate Disclosure Practices.The Company has in pl ace an Information Security Policy that ensures proper role of IT resources. The Company is in compliance with the requirements stipulated under clause 49 of the listing apprehensions entered into with the Stock Exchanges with regard to corporate governance. Tech Mahindra a. ) Auditors Report The audit was conducted in accordance with the auditing standards generally accepted in India. Those Standards require that auditors plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and the disclosures in the financial statements.An audit also includes assessing the accounting principles used and the significant estimates made by the Management, as well as evaluating the overall financial statement presentation. Auditors believe that their audit provides a reasonable basis for their opinion. (a) Auditors have obtained all the infor mation and explanations which to the best of their knowledge and belief were requirement for the purposes of their audit (b) In their opinion, proper books of account as inevitable by law have been kept by the Company so far as it appears from their examination of those books (c) The Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this report are in agreement with the ooks of account (d) In their opinion, the Balance Sheet, the Statement of Prof t and Loss and the Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956 (e) In their opinion and to the best of their information and according to the explanations given to them, the said accounts give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India (i) In the case of th e Balance Sheet, of the state of affairs of the Company as at 31st March, 2012 (ii) In the case of the Statement of Profit and Loss, of the profit of the Company for the year ended on that date and (iii) In the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. b. ) Management Discussion Opportunities Growth in emergent MarketsCompared to the subdued growth expected in developed markets, emerging markets will elapse to drive relatively higher growth due to new(a) spectrum licensing, migration to direct to home platforms, broadband penetration, focus on value added services and conducive regulatory surround. This will create opportunities for the software service providers who can assist operators in achieving their business objectives in these areas. Moreover, as the developing orbit focuses on shift of Mobility, it may bring in huge investments in this area which could create opportunities for companies like Tech Mahindra. Legacy to Next coevals IT transition telecom is a dynamic and evolving industry with high focus on consumers changing demands. serve up providers around the globe, on the back of dropping legacy revenues and high costs, are looking to shift their clients legacy platforms into next generation platforms. This will enable clients to optimize their product portfolio, and rationalize the costs associated with running the systems. These transformation initiatives will lead to outsourcing opportunities. Tech Mahindra has been at the forefront of sponsoring its clients transform their businesses in line with the changing global telecom environment. Increased screen background of outsourced activitiesAccess to talent and cost optimization is the key driver for outsourcing. Telecom service providers are adopting several outsourcing strategies to benefit from off shoring. One of the trends is services which traditionally were done in house are now being include in the scope of global sourcing. In the lucre domain, network outstheircing provides an fortune for wide range of services like field services, maintenance & support, E2E implementations and network infrastructure management. Managed services deals to cover network legacy systems have been well-tried in the mature markets and a similar trend will continue for the coming years. Adoption of Next Generation TechnologiesThe telecom industry continues to adapt and evolve with new technologies and new ways to communicate. Successive waves of new engineering in wire-line, wireless and IP domains have been sweeping the industry landscape. The Telecom industry is also altering to cope up with the changing need and behavitheir of consumers and change magnitude competition. Customers believe in convenience, choice of services, responsiveness and cost as important parameters to choose their service provider. Success in current business environment is characterized by the ability to adapt to the higher user expectations on the one hand and a rapidly changing technology environment on the other.As mobile broadband penetration expands, quick monetization has fetch a strategy of paramount importance for telecom service providers. Service providers are now focusing on providing solutions to enterprises by enabling their applications to be accessed via mobile platforms such as smart phones and tablets. With the growth in cordial network media across the world, coupled with higher broadband penetration, users have been verbalise their views about quality of services. Analysis of user sentiments on such social networks, within limits of privacy laws, is another area where there has been a growth in demand. Threats Reduction in Telecom Spending The global miserliness is going through turbulent times and most companies are reacting to the amplifyd volatility.Though cash-rich, telecom companies have turned cautious due to the challenging macroeconomic environment. The decisions cycles on new discretionar y spend are prolonged. The service providers continue to focus on reducing costs by adopting measures such as optimizing IT Spend and postponing investments. Such cost-saving measures could have an adverse shock absorber on outsourcing. world(a) IT companies posing challenge with growing India presence Global IT service providers such as Accenture, HP, CapGemini and IBM are expanding their presence in India and pose a challenge to Indian IT service companies with their global client relationships, deep pockets and domain knowledge. Risks High customer concentrationIn FY 2012, revenues from the leading client, top 5 and top 10 clients account for 37%, 68% and 78% respectively. Though customer concentration has been declining over the years, loss of any of these clients could have a material adverse impact on their revenue and profitability. After Mahindra Satyams merger with the Company customer concentration will reduce importantly. Withdrawal of tax benefits In the ult Auditors benefited from certain income tax incentives under Section 10A of the Income Tax Act (for the IT services that Auditors provide from specially designated Software Technology Parks or STPs) and also from Section 10AA of the Income Tax Act (for the IT services Auditors render from units set up in SEZs).As a result of these incentives, their operations in India have been issuance to relatively low tax liabilities. The income tax benefits available to STP units have been discontinued from 1st April 2011. As this withdrawal was foreseen, the Company decided to set up facilities in SEZ units at various locations as the units set up in SEZ area would continue to provide them with tax benefits similar to those in STPs. Auditors commenced operations in SEZ units at Hinjewadi Pune, Chennai, Kolkata and Chandigarh. Additional units are coming up at Noida. But despite this, tax incidence will increase over the previous years due to withdrawal of Section 10A benefits.In addition, there is no as surance that the Indian government will not ordain laws in the future that would adversely impact tax incentives further and consequently, their tax liabilities and profits. When their tax incentives expire or are terminated, their tax expense will materially increase, reducing their profitability. Exchange rate risks The exchange rate between the Indian Rupee and the British Pound and the Rupee and the U. S. Dollar has fluctuated widely in the recent past and may continue to fluctuate significantly in the future. The average value of the Rupee for the FY 2011-12 against the British Pound apprehended by approx 7. 7% and against U. S. Dollar by approximately 4. 4% for the FY 2010-11.Accordingly, their operating results have been and will continue to be impacted by fluctuations in the exchange rate of the Indian Rupee with the British Pound, the U. S. Dollar along with other foreign currencies. Any strengthening of the Indian Rupee against the British Pound, the U. S. Dollar or othe r foreign currencies, as witnessed in the last year, could adversely affect their profitability. c. ) Corporate Governance Report The Company believes that Corporate Governance is a set of guidelines to help fulfill its responsibilities to all its stakeholders. It is a voluntary code of self-discipline to ensure that the Company abides by highest ethical standards. In line with this philosophy, the Company follows healthyCorporate Governance practices and has been reporting the same in annual report even before the Company was listed in frightful 2006. Board of Directors The Composition of the Board is in total conformity with Clause 49 of the Listing Agreement, as amended from time to time. The Company has a balanced mix of eminent executive, non-executive and independent directors on the Board. The total strength of the Board of Directors is eleven. The Company has a Non-executive Chairman, who is a professional Director in his individual capacity and belongs to the Promoter Grou p and the number of independent directors is seven which is more than half of the total strength of the Board as required by the provisions of the Listing Agreement.The number of Non-Executive Directors is ten which is more than 50% of the total number of Directors. The Company is managed by the iniquity Chairman & Managing Director and the Management Team. The Board reviews and approves strategy and oversees the performance to ensure that the long term objectives of enhancing stakeholder value are met. The Independent Directors and the Senior Management have made disclosures to the Board confirming that there are no material financial and/or commercial transactions between them and the Company which could have say-so conflict of interest with the Company at large. The Board meets at least four times a year and the maximum gap between two meetings is not more than four months.During the year 2011-12, six meetings of the Board of Directors were held on 20th April 2011, 26th May 201 1, 12th August 2011, fifteenth November 2011, 8th February 2012 and 21st March 2012. Agenda for the Board Meetings containing all necessity information / documents is made available to the Board in advance to help the Board to discharge its responsibilities effectively and take informed decisions. In some instances, documents are tabled at the meetings and the concerned manager also makes presentations to the Board or Committees. None of the Directors on the Board is a member in more than 10 committees or acts as a Chairman of more than 5 committees across all companies in which he is a director.The directors of the Company are not inter se related. CEO / CFO Certification As required under Clause 49 V of the Listing Agreement with the Stock Exchanges, a Certificate on the Financial Statements for the financial year ended on 31st March, 2012 has been given to the Board of Directors by the Vice Chairman & Managing Director and the Chief Financial Officer of the Company. Code of Cond uct All the Directors and senior management personnel have affirmed compliance with the Code of Conduct/ Ethics as approved and adopted by the Board of Directors and a declaration to that effect signed by the Managing Director. The Code has been posted on the Companys website www. techmahindra. om Policy for prohibition of Insider Trading In compliance with the provisions of SEBI (Prohibition of Insider Trading) Regulations, 1992, (as amended from time to time) and to preserve the confidentiality and preclude misuse of unpublished price sensitive information, the Company has adopted a form _or_ system of government for prohibition of Insider Trading for Directors and specified employees of the Company, relating to dealing in the shares of the Company. This policy also provides for periodical disclosures from designated employees as well as pre-clearance of transactions by such persons. talk Blower Policy The Company has a Whistle Blower Policy in place.In terms of this policy, a ll employees are promote to report any instance of unethical behaviour, fraud, violation of the Companys Code of Conduct or any behaviour which may other than be inappropriate and harmful to the Company. The policy provides a mechanism for employees to offer concerns that relate to violation of the Code of Conduct, Accounting, Internal Controls, Auditing Matters and applicable national and foreign laws including statutory / regulatory rules and regulations. This policy has been communicated to all employees and has been posted on the Companys Intranet for ready access. Risk Management The Company has a unclouded risk management framework in place. The risk anagement framework adopted by the Company is discussed in detail in the Management Discussion and Analysis section of this Annual Report. The Company has established procedures to periodically place before the Board, the risk assessment and minimization procedures being followed by the Company and steps taken by it to mitigate these risks. 6. ) Share Prices Analysis Share Prices of TCS as on 29th August are intimately Rs 1352. 90. It has increase from approximately Rs 954 to Rs 1352. 90. Share prices have been on the increase in the last year. According to the price movements and ratios calculated it is a very good buy. Share Prices of Tech Mahindra as on 29th August are nearly Rs 875. 80.It has increased from approximately Rs 617 to Rs 875. 80. Share prices have been on the increase in the last year. According to the price movements and ratios calculated it is a good buy. canvass both together TCS is a better buy. 7. ) Key Improvement Areas and Ratings a. ) Key Improvement Areas Both should try to reduce their debtors. Tech Mahindra should increase its volume of current assets. Rest both the companies are high performing companies as seen by the analysis and share prices. b. ) Rating TCS is better than Tech Mahindra as the ratios are fairly better for it. Also from investment point of view share price s and ROE has been better for TCS. Also profitability of TCS is higher.