TCS - 2008-2009 - Annual Report

TATA CONSULTANCY SERVICES LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

To
The Members,

The Directors submit the Annual Report of the Company together with the
audited statement of accounts for the year ended March 31, 2009.

1. Financial Results:

Financial Year

(Rs. in crore)
2008-2009 2007-2008

(i) Income from Sales and Services 22404.00 18289.85

(ii) Other Income (456.24) 689.82

(iii) Total Income 21947.76 18979.67

(iv) Operating Expenditure 16383.17 13513.61

(v) Profit before Interest, Depreciation and Tax 5564.59 5466.06

(vi) Interest 7.44 3.42

(vii) Depreciation 417.46 458.78

(viii) Profit before Taxes 5139.69 5003.86

(ix) Provision for Taxes 443.48 495.10

(x) Net Profit for the Year 4696.21 4508.76

(xi) Balance Brought Forward from Previous Year 7374.89 4919.99

(xii) Amount Available for Appropriation 12071.10 9428.75

Appropriations:

(a) Interim Dividends on Equity Shares 880.74 880.74

(b) Proposed Final Dividend on Equity Shares 489.31 489.31

(c) Proposed Dividend on Redeemable Preference 7.00 0.08
Shares

(d) Tax on Dividends 234.02 232.85

(e) General Reserve 469.62 450.88

(f) Balance carried to Balance Sheet 9990.41 7374.89

(1 crore = 10 million)

2. Issue of Bonus Shares and proposed change in Authorised Share Capital
and Paid-up Equity Share Capital:

The Directors have, subject to the approval of the shareholders, approved a
bonus issue of equity shares in the ratio of ONE equity share of the
Company of Re.1/- each, for every ONE equity share of the Company held by
the shareholders of the Company as on a Record Date to be fixed for this
purpose. This would result in issue of additional 97,86,10,498 equity
shares of Re.1/- each and consequently the paid-up equity share capital of
the Company would increase to Rs.195,72,20,996 consisting of 195,72,20,996
equity shares of Re.1/- each. To facilitate this, the Authorised Share
Capital of the Company is being increased from Rs.220,00,00,000 divided
into 120,00,00,000 Equity Shares of Re.1/- each and 100,00,00,000
Redeemable Preference Shares of Re.1/- each to Rs.325,00,00,000 divided
into 225,00,00,000 Equity Shares of Re.1/- each and 100,00,00,000
Redeemable Preference Shares of Re.1/- each.

3. Dividend:

Based on the Company's performance, the Directors are pleased to recommend
for approval of the Members a Final Dividend of Rs.5/- per share on
97,86,10,498 Equity Shares of Re.1/- each of the Company for the financial
year 2008-09. The Final Dividend on the Equity Shares, if declared as
above, would involve an outflow of Rs.489.31 crore towards dividend and
Rs.83.18 crore towards dividend tax, resulting in a total outflow of
Rs.572.49 crore. The total outflow on dividend on Equity Shares of the
Company for the year 2008-09 would translate to 34.13% of the profits of
the Company. A table on the dividends paid by the Company on Equity Shares
during the year and during the previous year is given below:

(Rs. in Crore)
2008-09
Number of Dividend Dividend Dividend Total
shares per share Amount Tax Outflow
(Rs.)



First Interim 978610498 3.00 293.58 49.89 343.47
Dividend

Second Interim - do - 3.00 293.58 49.89 343.47
Dividend

Third Interim - do - 3.00 293.58 49.89 343.47
Dividend

Sub-total - - 880.74 149.67 1030.41
Final Dividend 978610498 5.00 489.31 83.18 572.49

Total - 14.00 1370.05 232.85 1602.90

(Rs. in Crore)
2007-08
Number of Dividend Total
shares per share Outflow
(Rs.) (including
Dividend
Tax)

First Interim 97,86,10,498 3.00 343.47
Dividend

Second Interim -do- 3.00 343.47
Dividend

Third Interim -do- 3.00 343.47
Dividend

Sub-total - - 1030.41

Final Dividend 97,86,10,498 5.00 572.49

Total - - 1602.90

The Redeemable Preference Shares which have been allotted on March 28, 2008
are entitled to a fixed cumulative dividend of 1 % per annum and a variable
non-cumulative dividend of 1 % of the difference between the rate of
dividend declared during the year on the Equity Shares of the Company and
the average rate of dividend declared on the Equity Shares of the Company
for the three years preceding the year of issue of the said Redeemable
Preference Shares. Accordingly, the Directors have recommend

4. Transfer to Reserves:

The Company proposes to transfer Rs.469.62 crore to the General Reserve out
of the amount available for appropriations and an amount of Rs.9990.41
crore is proposed to be retained in the Profit and Loss Account.

5. Operating Results and Business:

The Company continued to see profitable growth in the financial year 2008-
09 across all markets in existing and new areas of business.

For the year ended March 31, 2009, the Company earned a total income of
Rs.21947.76 crore, an increase of 15.64% over previous year's Rs.18979.67
crore. As per the Consolidated Accounts the total income was Rs.27385.89
crore, an increase of 17.30% over the previous year's Rs.23347.81 crore.

The net profit of the Company for the year increased to Rs.4696.21 crore
(21.40% of the total income) as compared to Rs.4508.76 crore (23.76% of
total income) in the previous year. As per the Consolidated Accounts

The net profit for the year was Rs.5256.42 crore (19.19% of total income)
as compared to Rs.5026.02 crore (21.53% of total income) in 2007-08.

TCS is amongst the leading global IT companies and continues to retain its
leadership position in the Indian IT Industry. With Consolidated Revenues
at Rs.27812.88 crore for the year ended March 31, 2009, TCS has, over the
last five years as a listed company, recorded a CAGR of 23.33%. TCS
operates extensively in the global market and the global economic slowdown
in general, and the particular difficulties that the key global markets and
the customers of TCS have faced during this year on account of the economic
conditions, has required TCS to help customers meet their cost reduction
goals, while enhancing the value. The currency movement has been more
volatile, with TCS gaining due to depreciation of the Rupee against major
currencies like US Dollar and Euro, while losing due to appreciation of
Rupee against Pound Sterling. Given these difficult market and volatile
currency environment, TCS did well in achieving business growth. At the
same time, TCS continued to improve its operational profitability by
conserving costs and creating efficiencies. Improving cash collection was
taken as a key focus area and TCS has improved on the key measure in
Accounts Receivable. The number of days outstanding of its Debtors came
down by 13 days to 78 days at the end of the year. TCS continues to focus
on acquiring new customers while increasing its level of operations with
existing customers, post high growth in new markets which are not as
adversely affected by the economic slowdown and take efficiency and cost
improvement measures.

TCS has had growth in all industry segments. The Banking and Financial
Services sector, which is the largest segment for TCS, has faced
unprecedented volatility and uncertainty in the global financial markets.
Some of the major customers of TCS have had to restructure themselves. In
this environment, TCS has registered growth in this sector. The
Manufacturing and Retail verticals have grown as large transformation deals
have ramped up, while the Travel, Energy and Media verticals have gained
traction in new markets. Engineering services continue to experience demand
across all markets.

Full services play continued to get traction with key service lines
including Application Development and Maintenance, Infrastructure and
Assurance services contributing to growth. TCS' Engineering and Industrial
Services along with IT services is enabling TCS to provide comprehensive
offering to clients in Manufacturing and Hi-Tech verticals, while the
Global Consulting Practice is engaged by customers for IT optimization and
overall IT strategy and governance related engagements. The broad range of
services enables the Company to provide 'end-to-end' services to its
clients, in line with its position as a Global IT and Consulting Services
Company. Combined with its industry focus and its geographical spread, the
Company is able to provide comprehensive and high value adding services to
its clientele.

In India, the Central and various State Governments are increasing their
spending on e-governance initiatives. Many mission mode projects have been
introduced and TCS has won a number of deals in this area.

The USA continued to be the largest market for TCS and contributed 51.38%
to the Company's consolidated revenues. Ramp-ups from recent large
outsourcing contracts continue to drive growth in the UK and continental
Europe which have contributed 29.53% of the consolidated revenues. Balanced
growth across new growth markets like Latin America, Asia Pacific, Middle
East and Africa has contributed 11.24% of the consolidated revenues of the
Company. India will continue to be a strategic market for the Company and
has shown growth in absolute terms. Adoption of IT would increase in the
coming years across all segments in India.

The Company has 140 offices globally. The Company has in addition, Global
Delivery Centres in a number of countries. This helps the Company to meet
the needs of its global clients. TCS has pioneered the Global Network
Delivery Mode ITM, which the customers see as a key differentiator.

6. International Credit Rating:

The Company continues to have from Moody's Investors Services, an
investment-grade issuer rating of A3 as well as an indicative foreign
currency debt rating of Baal, with the ratings outlook as stable. The
rating is not for any specific debt issuance by TCS.

The Company has also been rated by Dun & Bradstreet at 5A1 (Condition-
Strong). The rating is assigned on the basis of tangible networth and
composite appraisal of the Company.

Standard and Poor's Ratings Services has assigned to the Company its 'BBB'
corporate credit rating with outlook as Stable.

7. Strategic Acquisitions and Alliances:

The Company has been making acquisitions during the past few years, with
the objective of moving towards its goal of being among the top IT
companies in the world.

During the year 2008-09, the Company has acquired Citigroup Inc.'s (Citi)
96.26% interest in TCS e-Serve Limited (formerly known as Citigroup Global
Services Limited), the India-based captive BPO, for a total consideration
of USD 504.54 million. In addition to the sale, Citi has signed an
agreement for TCS to provide process outsourcing services to Citi and its
affiliates for an aggregate amount of USD 2.5 billion over a period of 9.5
years. The acquisition broadens TCS' portfolio of end-to-end IT and BPO
services in the global Banking and Financial Services (BFS) sector. The
agreement builds upon the existing relationship between Citi and TCS
whereby TCS provides application development, infrastructure support, help
desk and other process outsourcing services to Citi. This acquisition has
not only helped in acquiring new capabilities in the banking domain, but
has also underscored the importance of TCS' long-term, sustainable
relationships with its large customers, including Citi. The acquisition
complements TCS' domain expertise and has brought in new capabilities to
TCS that will help drive growth going forward.

8. Human Resource Development:

TCS is the largest IT employer in India with more than 126,000 employees
and with over 143,000 employees including those in its subsidiaries. This
diverse and global employee base from 67 nationalities is central to
sustaining TCS' competitive edge.

The Company's recruitment practice ensures that suitable candidates with
merit are recruited and provided with the right opportunities to grow
within the organization. During the year, the Company added a net of 19,216
persons through recruitment. Over 10,500 non-Indian nationals are employed
in TCS. The percentage of women working for the Company has increased to
30% from 28% last year. The attrition rate for this fiscal is 11.4%, which
is amongst the lowest in the industry.

TCS continues to be recognized for its excellent Human Resource (HR)
practices. TCS has once again received the top ranking in HR in Data Quest-
IDC's Best Employer Award and has been ranked No. 2 as a Dream Company.
Further, TCS has been certified as 'Investor in People' and received the
'Champion of Learning' certificate from the American Society for Training &
Development (ASTD) in the UK, and ranked among the 'Top 15 Great Places to
Work' in Uruguay. These recognitions re-affirm the robustness of TCS'
processes not only in India, but world-wide, and its commitment to be a
Global Employer.

TCS won the Recruiting and Staffing Best in Class Awards (RASBIC) 2008-09
for 'Best Use of Technology in Recruiting' and 'Most Innovative
Program/Initiative in Recruiting' and also received the Finalist Award for
the 'Best Employee Referral Programme' at ERE Expo 2009 by showcasing the
'Bring Your Buddy Programme'.

The HR function has been restructured to align with the new business
structure. This re-organization has created multiple opportunities for
leadership growth and has empowered the next generation of leaders. A host
of new leadership development programmes have been developed to equip the
potential leaders to meet with business challenges. The training programs
at the entry level as well as the continuous learning programs covering
technology, domain and project management practices have been enhanced to
ensure that the Company has the right competency in its workforce that can
deliver to customers' business needs and keep the Company's commitment of
'Experience certainty'. The total number of person days spent on various
learning programs amount to over 16 lakh and over 22,000 certifications
have been completed by the employees on varied technology and products.
Considering TCS' global spread of operations, a separate cell within the HR
function has been created to ensure compliance to applicable laws and
statutes in all the countries that TCS operates.

As part of the Tata Group, TCS believes in being an Equal Opportunity
Employer which reflects in its global people policies. As a part of TCS'
Affirmative Action Plan, a new initiative called DAWN (Diversity and
Women's Network) @TCS has been launched to encourage diversity and
inclusion in the workforce, particularly for women.

9. Interface with Academia:

TCS has been supporting the academic community across the globe, right from
its inception. The support for 2008-09 included 390 technical workshops
benefiting about 52,000 students, 131 Faculty Development Programmes
benefiting about 4,000 college teachers and internship opportunity for
about 1,300 students. TCS awarded 72 TCS Best Student/Best Student Project
Awards to recognize and reward academic excellence - 61 of them in India
and 11 of them abroad. Further, TCS also has on-going research alliances
with 13 universities - 8 overseas and 5 in India.

The 10' TCS Annual Academic Meet - Sangam 2008: Meeting of Minds was held
on November 25, 2008 at Chennai. Around 50 academic leaders and several
TCSers took part and contributed to invigorating interactions on various
collaboration opportunities between industry and academia.

10. Quality Initiatives:

Process Excellence at TCS:-

The organization structure introduced effective April 2008 is aimed at
facilitating the Company to achieve profitable growth, while adapting
itself to rapidly changing market conditions. Customers continue to
recognize TCS' 'Experience certainty' brand promise with improved quality
of responsiveness and customer focus.

Reinforcing its commitment to high levels of quality, best-in-class service
management and robust information security practices, TCS attained a number
of milestones during the year.

TCS was recommended enterprise wide for ISO 9001:2008 (new version of
Quality Management standard) certification. TCS was recommended enterprise
wide for continuation of the ISO 27001:2005 (Security Management) and ISO
20000:2005 (Service Management) certification. TCS was re-certified for
domain specific quality certification TL 9000 for the Telecom business. TCS
also continues to maintain the domain specific certifications AS9100 (for
Aerospace industry) and ISO 13485 (for Medical Devices), thus further
reinforcing the industry domain focus within the organization.

A successful enterprise-wide appraisal endorses the best in class
deployment of the integrated Quality Management System (iQMS) which enables
consistent delivery experience to TCS' customers across the globe. It
reiterates customers' expectations to experience a high degree of certainty
in service delivery, as TCS stays focused on improving quality and
processes constantly in an environment of rapid growth.

Two centres of TCS were re-certified for ISO 14001 (Environmental Health
and Safety). Seventeen centres continue to maintain their ISO 14001
certification. Twelve new centres of TCS have also been recommended for ISO
14001 certification.

The above certifications are a testimony to TCS' commitment to achieve the
highest standards of quality. The cornerstone of these certifications is
the in-house developed integrated Quality Management System (iQMS) - a
vibrant, process-driven, people-oriented and customer-focused quality
management system which is continuously evolving to cater to the
requirements of the Company's varied business offerings and today, is the
backbone supporting the Global Network Delivery ModeITM.

The Tata Business Excellence Model:

TCS won the highest incremental improvement award and moved to the Industry
Leader position in the Tata Business Excellence Model ('TBEM ') at the JRD
QV Awards ceremony on July 29, 2008.

11. Corporate Sustainability:

In keeping with the rich Tata tradition of giving back to Society,
Corporate Sustainability (CS) lies at the heart of TCS' corporate culture.
Health, education and concern for the environment comprise the focus of CS.
The differentiator in TCS is volunteering through 'Maitree' while TCS
endeavours to address large scale societal problems through its IT core
competence.

'Maitree' the unique association of employees and families, reaches out to
address large scale societal problems, through active employee
participation. Maitree also contributes towards improving employee health
through in-house doctors, medical camps, and the innovative 'Serenity'
programme for assisting employees in stress management. In addition, the
Maitree platform includes music, dance, trekking and sport which helps
develop team spirit and bonding with the organization.

The Maitree village development initiative at Waze near Panvel, now
includes Nainar near Chennai, Chalera near Delhi and Padmapur near
Bhubhaneshwar. It comprises a children's education programme, a science lab
and computer lab, women's employment generation through sewing programme
and rainwater harvesting programme. The village initiative is replicable at
other villages in India and the rest of the developing world.

The Advanced Computer Training Centre for the visually impaired, set up by
Maitree along with MN Banajee Industrial Home for the Blind, conducts a
course in soft skills, BPO specific skills and Infrastructure Services
Training (Helpdesk).

In addition to volunteering, some noteworthy on-going CS initiatives of TCS
in India are:

Krishi, a Mobile based agro advisory system for farmers to access localized
information and advice on agricultural issues through graphic and voice
formats in local languages. The programme is being run on pilot basis in
three locations in Maharashtra and one in Uttar Pradesh before the
commercial launch in mid 2009.

InsighT a 72 hour IT and soft skills camp for students in their pre-
university segment. Since 2007, InsighT has covered over 1,500 students in
Chennai, Coimbatore, Kochi and Mumbai and has also been conducted twice in
Sydney, Australia.

Rural IT Quiz in collaboration with Government of Karnataka, which saw a
record participation of 1.2 million students both in 2007 as well as in
2008.

The Computer-based Functional Literacy (CBFL) Programme has served over
1,20,000 learners with its offerings in nine Indian languages. Development
in Arabic and Spanish is now underway. CBFL V.2 offers the facility of
teaching one language through the medium of another.

Software for Childline to link and monitor the 82 Childline centres in
India for children in distress.

Geo-Vun, a decision support system integrating maps to help in the
management of the Sanjay Gandhi National Park, Mumbai, to check illegal
encroachment, find remedial measures to control/prevent forest fires,
implement measures to prevent poaching and plundering of forest wealth,
etc.

Low Vision Aid, a digital image processing technique using a wearable
device to help persons with low vision to increase their visual acuity by
increasing context sensitivity. TCS' effort is focused on enhancing an
algorithm which will be computationally inexpensive. This solution could be
incorporated in set top boxes/DVDs to enhance TV viewing for the visually
impaired.

Country-wise database of information for both global and local advocacy and
impact assessment for Aflatoun, a global network based charitable
organization based in Netherlands, which provides social and financial
education to 250,000 children in 20 countries.

The TCS-Education World Teachers Award for teachers from across the country
who have exhibited innovative techniques, inspired students and aroused
their curiosity. In 2008, the Award drew 18,000 nominations from across
India.

TCS continues to expand its Corporate Sustainability initiatives in USA.
The American Cancer Society commended TCS for its active participation in
fund-raising walks in Minneapolis, Detroit and support of its Hope Lodge
initiative for Cancer survivors.

Along with Tata Sons and Tata Business Support Services, TCS has committed
a three year grant of USD 75,000 to create educational opportunities for
children in the Appalachian counties of Ohio. The three companies have been
honored as new corporate partners with the Foundation for Appalachian Ohio
in November 2008.

In the UK, TCS regularly partners on social causes along with some of its
clients in fund-raising. TCS supports the Stepney Football Club in East
London for less privileged youth. TCS has trained them in social and
business skills besides organizing a Football Training tour to Kolkata and
Jamshedpur.

In China, TCS has been active with the Hope School Project in Beijing which
has more than 200 students from less privileged families.

TCS has continued its support of the UN World Food Program's Walk of Life
across Europe, as also the Down Syndrome Association in Singapore and
Australia.

In Uruguay, TCS has supported the 'Endeavor' programme since 2005. This is
a training programme for grooming local entrepreneurs from all over South
America.

TCS regards climate change mitigation and environmental improvement as
essential elements of TCS' sustainable business philosophy. TCS calculates
its carbon footprint and constantly takes steps to mitigate the same. The
Company also has a Green Office 10-point plan. TCS promotes the use of
video conferencing to reduce travel by employees to client locations for
meetings. TCS is constantly conducting major environment sensitization
drives amongst its employees.

Since incorporation, TCS has begun reporting on Corporate Sustainability in
the public domain. TCS participates in Business in the Community UK's
Corporate Responsibility Index (since 2005), the UN Global Compact (since
2006) and the Global Reporting Initiative (GRI) (since 2007). Some
significant instances of recognition for TCS include:

* One of two Indian corporates in the Dow Jones Sustainability World Index
- 2008.

* Gold status (90% +) in Business in the Community UK's Corporate
Responsibility Index (CRI) 2007-08

* Golden Peacock Environment Management System Award - 2008

* Among top ten in Karmayog CSR Ratings of 1,000 Indian Companies - 2008

12. Awards/Recognitions:

During the year, the Company received various awards and recognitions, some
of which are given below:

* World Record in Information Technology Infrastructure Library (ITIL)
Masters Certifications.

* Best Governed Company Award 2008 of the Asian Centre of Corporate
Governance and Sustainability and Indian Merchants Chamber.

* Topper of the Dataquest Top 20 list of Indian IT companies.

* Golden Peacock Award for Innovation, 2008.

* V&D 100's Top Telecom Software Company of the Year Award for the sixth
consecutive year.

* Most Admired Knowledge Enterprise (MAKE) Award, for the fourth time.

* Highest Delta Award in the 600+ company category on the TATA Business
Excellence Model.

* Innovation Award from Ferrari.

* Best Partner for Oracle in India.

* Lilly Global Supplier Award.

13. Corporate Governance Report and Management Discussion and Analysis
Statement:

A report on Corporate Governance is attached to this Report as also a
Management Discussion and Analysis statement.

14. Directors' Responsibility Statement:

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956
('Act'), and based on the representations received from the operating
management, the Directors hereby confirm that:

(i) In the preparation of the Annual Accounts for the year 2008-09, the
applicable Accounting Standards have been followed and there are no
material departures;

(ii) They have selected such accounting policies in consultation with the
statutory auditors and applied them consistently and made judgments and
estimates that are reasonable and prudent so as to give a true and fair
view of the state of affairs of the Company at the end of the financial
year and of the profit of the Company for the financial year;

(iii) They have taken proper and sufficient care to the best of their
knowledge and ability for the maintenance of adequate accounting records in
accordance with the provisions of the Companies Act, 1956. They confirm
that there are adequate systems and controls for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities;

(iv) They have prepared the Annual Accounts on a going concern basis.

15. Subsidiary Companies and Consolidated Financial Statements:

The Company had 52 subsidiaries at the beginning of the year.

The following five subsidiaries were set up/acquired during the year:

* Tata Consultancy Services (Thailand) Ltd. (set up by Tata Consultancy
Services Asia Pacific Pte Ltd.)

* Tata Consultancy Services (Philippines) Inc. (set up by Tata Consultancy
Services Asia Pacific Pte Ltd.)

* TCS e-Serve Limited (acquired).

* TCS e-Serve International Limited (acquired).

* TCS e-Serve America, Inc. (set up by TCS e-Serve International Limited).

During the current year, Tata Infotech Deutschland GmbH, a subsidiary, has
merged with another subsidiary Tata Consultancy Services Deutschland GmbH
and another subsidiary viz. Financial Network Services (Europe) Plc has
been liquidated.

In view of the above, the total number of subsidiaries as on March 31, 2009
is 55.

TCS Financial Management LLC, a subsidiary of the Company's wholly-owned
subsidiary Tata America International Corporation has been dissolved during
April 2009.

There has been no material change in the nature of the business of the
subsidiaries. A statement containing brief financial details of the
subsidiaries is included in the Annual Report.

As required under the Listing Agreements with the Stock Exchanges, a
Consolidated Financial Statement of the Company and all its subsidiaries is
attached. The Consolidated Financial Statement has been prepared in
accordance with Accounting Standards 21, 23 and 27 issued by The Institute
of Chartered Accountants of India and show the financial resources, assets,
liabilities, income, profits and other details of the Company, its
associate companies, its joint ventures and its subsidiaries after
elimination of minority interest, as a single entity.

The Company has been granted exemption for the year ended March 31, 2009 by
the Ministry of Corporate Affairs from attaching to its Balance Sheet, the
individual Annual Reports of its subsidiary companies. As per the terms of
the Exemption Letter, a statement containing brief financial details of the
Company's subsidiaries for the year ended March 31, 2009 is included in the
Annual Report. The annual accounts of these subsidiaries and the related
detailed information will be made available to any Member of the Company /
its subsidiaries seeking such information at any point of time and are also
available for inspection by any Member of the Company/its subsidiaries at
the Registered Office of the Company. The annual accounts of the said
subsidiaries will also be available for inspection, as above, at the Head
Offices/Registered Offices of the respective subsidiary companies.

16. Fixed Deposits:

The Company has not accepted any public deposits and, as such, no amount on
account of principal or interest on public deposits was outstanding as on
the date of the Balance Sheet.

17. Directors:

Prof. Clayton M. Christensen and Mr. Aman Mehta, Directors, retire by
rotation and being eligible have offered themselves for re-appointment. Mr.
Naresh Chandra, Director, would also be retiring by rotation at the ensuing
Annual General Meeting. However, Mr. Naresh Chandra has not offered himself
for re-appointment, in view of the retirement age for Non-Executive
Directors, as per the Group Policy adopted by the Company.

18. Auditors:

M/s. Deloitte Haskins & Sells, Chartered Accountants, who are the statutory
auditors of the Company, hold office, in accordance with the provisions of
the Act upto the conclusion of the forthcoming Annual General Meeting and
are eligible for re-appointment.

19. Particulars of employees:

Information as required under Section 217(2A) of the Act, read with the
Companies (Particulars of Employees) Rules, 1975, as amended, are given in
an Annexure forming part of this report.

20. Conservation of energy, technology absorption, foreign exchange
earnings and outgo:

The particulars as prescribed under section 217(1)(e) of the Act, read with
the Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988, are set out in an annexure to this report.

21. Acknowledgements:

The Directors thank the Company's customers, vendors, investors, business
associates, bankers and academic institutions for their support to the
Company.

The Directors also thank the Government of India, the Governments of
various countries, the concerned State Governments, Government Departments
and Governmental Agencies for their co-operation.

The Directors appreciate and value the contributions made by every member
of the TCS family across the world.

On behalf of the Board of Directors,

Place: Mumbai R.N. Tata
Date : April 20, 2009 Chairman

Annexure to the Directors' Report

Particulars pursuant to Companies (Disclosure of particulars in the Report
of Board of Directors) Rules, 1988:

CONSERVATION OF ENERGY:-

The operations of the Company involve low energy consumption. Adequate
measures have, however, been taken to conserve energy.

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION:

The Company continues to use the latest technologies for improving the
productivity and quality of its services and products.

RESEARCH & DEVELOPMENT (R&D):

Specific areas in which R&D was carried out by the Company:-

TCS' Chief Technology Office (CTO) and R&D function align closely to
support TCS' business objectives. iConnect, the Innovations marketing
group, owns the mission of facilitating better communication between the
CTO and R&D functions, and all stakeholders inside and outside TCS. The
Innovations Go-to-market team supports the sales teams to win new
businesses. The Industry Solution Unit (ISU) interface works on creating
solutions based on R&D from the Innovation Labs and the Co-Innovation
partners. Co-Innovation comes alive for customers in 'Co-Innovation Days'
held for each strategic customer.

TCS' Research is focused on enhancing outcomes that customers expect from
IT as well as in Business. Master Craft and other tools have increased
efficiency and productivity. TCS' InstantApps Technology, enabling flexible
and collaborative application development, has delivered agility and
savings. With managed evolution of IT infrastructures, SURe (Sense
Understand Respond) framework has helped customers reduce complexity and
costs. Web 2.0 tools enabled Insurance and retail customers get close to
their customers, bringing in innovative business models. TCS continues to
help engineering industries with process tools that optimize performance.

TCS' Co-innovation Network ('COIN') has expanded, forging new alliances.
Stronger links have been created with Indian Institutes of Technology; work
is in progress with several startups on leading edge solutions in GPRS
(General Packet Radio Service) and RFID (Radio Frequency Identification)
(for asset tracking), Analytics (for Dynamic pricing) Web 2.0 (Enterprise
networking and collaboration); TCS' carbon footprint is being studied to
further TCS' internal green initiative with several Co-innovation Network
partners. Customers are continued to be helped to create their own
innovation networks based on TCS' network.

The CTO Incubation Group, focusing on big bets from 'Inception to
Implementation' has made good progress with solutions and services in the
areas of advertising ecosystems, mobile value-added services and digital
devices. The Corporate Tools group promotes the use of tools and enables
business units to deliver continuously improving productivity and quality
of services to customers.

Internally, TCS CTO and R&D, sponsored several initiatives to foster TCS'
culture of innovation. The TCS Top 10 coding challenge open to associates
across organizational units in the enterprise, created a buzz among
programmers in every region and geography. Web 2.0 platforms such as
JustAsk and IdeaMax were deployed to capture tacit knowledge as well as
innovative ideas within the enterprise and were adopted eagerly.

The Company's R&D function has grown with the number of PhDs more than
doubled and has attracted top talent from notable universities across the
world. Further, the research internship program brings interns from many
world class universities.

TCS has hosted and participated in several events, creating a rich and
interactive environment for the researchers. The 7t' TCS Excellence in
Computer Science Week (TECS Week 2009) was held at the TCS Innovation Labs
with experts of international repute delivering a series of lectures.
Senior Researchers from TCS Innovation Labs were a part of the prestigious
Stanford Engineering Symposium, India. TCS' Academic Interaction Meet
'Sangam' held its 10' conclave this year and showcased innovation at TCS.
The delegates, heads from noted institutions of research and higher
education, visited several TCS Innovation Labs. TACTICS - TCS Technical
Architects' Conference, was held in a distributed, 'Green' format this year
and had over 500 delegates in 4 events held across 35 locations connected
by collaboration tools, video conferencing and even a 'Second Life'
presence.

The Company's efforts have won many awards. TCS' Mobile Agro Advisory
Solution won the Wall Street Journal Innovation Technology Award in the
wireless category and the Golden Peacock Innovation Award. Scientists from
TCS' Innovation Labs won Tata Innovation Day Awards. Infoworld ranked TCS'
Global Certainty IdeaStorm in its list of Top 100 Innovative IT projects.
Further, many of the researchers and scientists have won individual laurels
and awards.

This year saw greater participation of TCS' CTO and R&D organization in
Tata group's innovation efforts: linking up through COIN to Group companies
on various projects including ones that helped build visibility like the
launch of the social interaction features for the Tata Nano portal. Many of
TCS' scientists have been closely involved with Tata CRL's (Computational
Research Laboratories) EKA, which was rated Asia's fastest and the world's
fourth fastest 'super' computer.

Benefits derived:

The CTO and R&D Go-to-market team were able to influence customers and
facilitate business wins in several verticals. The past R&D efforts of the
Company have resulted in the sale of software licenses and usage of these
licenses internally, yielding savings of USD 26 million.

Patents:

Details of patents granted during the year are:-

Title/Description Country

1. Method and Apparatus for Pattern based Generation of
Graphical User Interfaces (GUI) USA

2. Method and Apparatus for Batch Programs Implementation USA

3. Methods for Aligning Measured Data taken from Specific
Rail Track Sections of a Railroad with the Correct
Geographic Locations of the Sections India

4. Selective separation of phosphate minerals from other
minerals, using aminotris (methylenephosphonic acid), and
diethylenetriaminepentakis (m ethyl enephosphonic acid)
as depressants India

5. A Device for Handling Message Queues India

Future plan of action:

The global economic scenario makes the year ahead seem challenging. TCS has
relied on its innovation strengths in the face of challenges to create
strong differentiators for its customers.

TCS will continue to invest in technologies that enhance productivity and
operational efficiency to create savings for its customers. Cloud and
ubiquity computing will gain focus. Energy, Life sciences and security
domains will be domains of prime importance.

Expenditure on R&D:

(Rs. in crore)
Year ended
31.3.2009 31.3.2008
(a) Capital 1.61 1.84

(b) Recurring 42.31 36.94

(c) Total 43.92 38.78

(d) Total R&D expenditure as percentage of 0.20% 0.20%
total income

Foreign exchange earnings and outgo:

Activities relating to exports, initiatives taken to increase exports:
development Mentioned in the of new export markets for products and
services; and export plans Directors' Report.

(Rs. in crore)
Year ended
31.3.2009 31.3.2008

(a) Foreign exchange earnings 20836.65 16776.48

(b) CIF Value of Imports 302.87 272.81

(c) Expenditure in foreign currency 7867.52 6421.96

On behalf of the Board of Directors,

Place: Mumbai R.N. Tata
Date : April 20, 2009 Chairman

DECLARATION REGARDING COMPLIANCE BY BOARD MEMBERS AND SENIOR MANAGEMENT
PERSONNEL WITH THE COMPANY'S CODE OF CONDUCT:

This is to confirm that the Company has adopted a Code of Conduct for its
employees including the Managing Director and Executive Directors. In
addition, the Company has adopted a Code of Conduct for its Non-Executive
Directors. Both these Codes are available on the Company's website.

I confirm that the Company has in respect of the financial year ended March
31, 2009, received from the Senior Management Team of the Company and the
Members of the Board a declaration of compliance with the Code of Conduct
as applicable to them.

For the purpose of this declaration, Senior Management Team means the Chief
Financial Officer, employees in the Executive Vice President cadre, Vice

President Global Human Resources and the Company Secretary as on March 31,
2009.

Place: Mumbai S. Ramadorai
Date : April 20, 2009 CEO & Managing Director

Management Discussion and Analysis:

A. INDUSTRY OVERVIEW:

World-wide technology and related services spend is estimated to have
crossed USD 1.6 trillion in 2008, a growth rate of 4.6% over 2007. Due to
the slowdown, considerable reductions were experienced in IT service spends
across geographies. According to technology analyst firm Gartner, the
Americas experienced a 6.6% growth in 2008 in comparison to 7.1 % growth in
2007. Europe experienced a growth rate of 11.5% in 2008 in comparison to
14.3% in 2007 and UK experienced 12% growth in 2008 in comparison to 15%
growth in 2007, with most of the growth being experienced in the first two
quarters of 2008.

The economic downturn contributed to reductions in spending in the last
quarter of 2008 and the first quarter of 2009. Companies reduced IT
spending either by delaying the decisions or by putting some discretionary
spending on new IT projects on hold. This in turn, led to both pricing and
volume pressures for IT service providers.

Some of the drivers of IT spending were focused around the following:

* Increase in operational efficiency through improvements in business
processes, infrastructure consolidation, re-engineering, virtualization,
workload management, cut down on cycle time, increase speed to market

* Increased regulation leading to more enterprise regulation, security and
reporting

* New focus areas including green IT and mobility/ ubiquity initiatives.

Industry performance and projections:

Globally technology spending continues to grow even during tough economic
times and this is expected to further increase once the global economy
starts its recovery process. Information Technology (IT) has become an
integral part of business operations across industries and is seen by
organizations as a primary driver of productivity improvement and business
transformation that lead to sustained competitive advantages in the market
place. The IT services segment grew by 9.0% in 2008 to USD 820 billion and
is expected to grow at a Compounded Annual Growth Rate (CAGR) of 7.1 % till
2012, according to a Gartner Dataquest estimate. The Business Process
Outsourcing sector grew by 11.9% worldwide last year as per NASSCOM
strategic review 2009.

Size and scope of global opportunity:

Gartner forecast for information technology spends Chart 1: World-wide IT
spends Amount in USD Million Worldwide IT services market size forecast
(2008- 2012) for services.

Services/Year CY 2008 CY 2012 CAGR
(2008
2012)
Global Consulting

Practice 72,448 85,903 6.7%

Development and
Integration 254,500 302,983 6.9%
Enterprise solutions,

Business Intelligence
and Knowledge
Management 55,847 74,486 10.6%

IT Infrastructure
Services 221,254 268,361 7.4%

Business Process
Outsourcing 120,078 157,495 9.1%

Others 95,661 101,936 3.0%

Total 819,788 991,164 7.1%

Source: Gartner Feb'09

Chart 2: IT Services spends by Geography:-


Worldwide IT services market size forecast (20082012) for geographies:

Amount in USD Million
Geography/Year CY 2008 CY 2012 CAGR
(2008
2012)

Americas 329,763 410,534 7.1%
Asia Pacific 150,097 170,020 6.2%
Europe 187,265 215,885 7.1%
Ibero America 50,385 70,721 12.9%
India 5,453 9,413 18.4%
Middle East Africa 12,439 16,813 12.8%
UK & Ireland 84,386 97,778 4.0%
Total 819,788 991,164 7.1%

Source: Gartner Feb'09

Chart 3: IT Services spends by industry verticals:


Worldwide IT services market size forecast (20082012) for industry
verticals:-

Amount in USD Million
Industry/Year CY 2008 CY 2012 CAGR
(2008
2012)
Banking and Financial
Services 137,676 165,580 6.6%
Insurance 53,765 62,963 6.6%
Manufacturing 98,533 113,048 5.5%
Energy 3,951 4,609 5.7%
Utilities 33,714 44,225 9.9%
Government 154,144 194,422 8.2%
Healthcare 26,375 33,580 9.4%
Hi-Tech 57,823 68,318 6.6%
Life Sciences and
Pharmaceutical 11,303 13,306 7.0%
Telecom, Media and
Entertainment 108,199 128,952 7.0%
Retail 58,998 71,632 7.1%
Travel and
Transportation 29,587 35,729 7.0%
Hospitality 8,999 10,751 6.5%
Others 36,721 44,049 7.3%
Total 819,788 991,164 7.1%

Source: Gartner Feb'09

NASSCOM STRATEGIC REVIEW 2009 MARKET SIZING AND FORECAST:

IT Industry estimates of spending.

Chart 4: IT services spends by category:

Global Industry Sizing 6 Growth:-

Amount in USD Million
2007 2008 Growth(%)

R&D Enggn 861 886 2.9%
HW 570 594 4.2%
Pkgd.SW 277 295 6.5%
BPO 103 115 11.7%
IT Services 528 557 5.5%

The spending on IT Services of USD 557 billion in CY 2008 included USD 211
billion on IT outsourcing. The IT outsourcing business grew by 7.2% over CY
2007.

Chart 5: Share of key markets in global IT services spending in 2008:

IT services market CY 2008 Growth (%)
% share

North America 39.0 }
United States 36.0 } 4.2
Latin America 3.0 10.0
Western Europe 37.6 5.0
Central Europe 4.7 14.7
Asia Pacific 15.7 }
Japan 8.0 } 6.8
Total 100

Source: NASSCOM Strategic Review 2009.

Chart 6: Share of key markets in global BPO spending in 2008:

BPO market CY 2008 Growth (%)
% share

Americas 63.2 10.8
Europe, Middle East
and Africa 19.2 11.8
Asia Pacific 17.6 15.3
Total 100.0 11.9

Source: NASSCOM Strategic Review 2009.

As per the Nasscom Strategic Review 2009, global technology spends is
expected to increase from USD 1,561 billion in 2008 to USD 1,962 billion in
2012 at a CAGR of 5.2 % .

Chart 7: Global sourcing trends in 2008:

Analysis of IT Services for Global Sourcing Market in % terms:-

Global Sourcing Global IT Market
as a % of Total Spend Available
Global IT Spend for targeting

Application Manegement 14.1 85.9
Custom- Application 25.9 74.1
IT Conslting 45 95.5
IT Outsourcing 2 98
System Integration 63 93.7

Source: NASSCOM Strategic Review 2009.

As per NASSCOM Strategic Review 2009 the analysis of the IT Services global
sourcing market by the level of penetration in the various components of IT
services reveals that there is significant headroom for growth.

The chart below is an analysis of the market for the areas of interest to
the Company based on the NASSCOM Strategic Review 2009.

Chart 8: Trend of outsourcing in global technology spending - area of
interest:

Amount in USD Billion
Services/Year CY 2008 CY 2012 CAGR (%)

IT Outsourcing 211 275 6.9
BPO 115 181 11.9
Total 326 456 8.8

Nasscom says the IT Outsourcingl8P0 sub-segment is expected to grow at a
CAGR of 8.8% till FY 2012 Chart 9, 10 and 11 highlight spending trends
across various sub-segments in IT services and BPO market.

Chart 9: Trends in IT Services Related Spending:

Worldwide IT services related spending:-

Amount in USD Billion
Services/Year CY 2008 CY 2012 CAGR (%)

Project Based 196 231 4.1
Outsourcing 211 275 6.9
Support /Training 149 166 2.6
IT Services 556 672 4.8

Source: NASSCOM Strategic Review 2009.

Chart 10: Trends in BPO Services spending:

Worldwide BPO related spending:-

Amount in USD Billion
Services/Year CY 2008 CY 2012 CAGR (%)

Customer care 62 97 11.9
Finance and Accounts 26 40 11.3
Human Resources 18 29 12.5
Training 7 11 10.8
Procurement 2 4 19.5
BPO Services 115 181 11.9

Source: NASSCOM Strategic Review 2009.

The growth in BPO spends and BPO outsourcing spends is expected to
continue. (Chart 10)

Chart 11: Trends in vertical IT services spending:

Industry vertical CY 2008 CY 2012 CAGR (%)

Banking, Financial
services, Insurance 256 298 3.9

Manufacturing 240 295 5.3

Retail 137 163 4.4

Services 109 129 4.3

Healthcare 33 41 5.6

Transportation 39 46 4.2

Communication 185 217 4.1

Utilities &
Construction 59 72 5.1

Government 169 210 5.6

Source: NASSCOM Strategic Review 2009

Only market sizing and growth prospects of select verticals of interest to
the Company are shown in chart 11. Growth of Indian information technology
industry. Trends in Indian IT services With estimated revenues of USD 71.6
billion in fiscal 2009 (Growth of 12.0%), the IT-BPO industry continues to
grow at a CAGR of 27.1 % since FY 2004. The India-Centric IT business
growth in FY 2009 has slowed down to 12.0% from 33.0% in FY 2008.

B. FOCUS AREAS OF THE COMPANY:

1. Vision, Mission and Values:-

In the last four decades, TCS has established a global reputation for its
ability to help customers achieve their business objectives by providing
innovative, best-in-class consulting, IT solutions and services and making
it a joy for all stakeholders to work with the Company. These objectives
are underpinned by a robust code of transparency, ethics and governance
based on the Tata Code of Conduct which embodies leadership with trust,
integrity and excellence; respect for the individual as well as learning
and sharing.

Your Company has achieved its stated vision of being among the top ten IT
services companies in the world by 2010. On the basis of parameters like
revenues, profits, number of employees and market capitalization, the
Company is among the top ten IT services companies in the world. We will
continue to consolidate and strengthen our position in the industry as an
integrated full services player with an unparalleled global footprint in
terms of innovation, operations and service delivery.

2. Strategy of the Company:

The core of TCS strategy is to enable our clients to 'Experience Certainty'
by offering a level of certainty in their IT operations that no other
company can match. This is built by ensuring operational excellence and
rigor in all aspects of operations; offering an integrated full service
play using our Global Network Delivery Model (GNDMT01) that offers
customers unmatched value. The Company develops tools, asset-based services
frameworks, and methodologies which help speed up the delivery of client
solutions at minimal cost to the client.

2.1 Experience Certainty: Our strategy is defined by our ability and
experience to play the critical role of a trusted business partnerto large
global corporations. We have built a customer-centric organization based on
the brand promise of 'Experience Certainty'. This promise of certainty
resonates with customers as it offers them real business results through
optimal IT design and deployment, ensuring a level of certainty no other
global firm can match. It reflects our ability to solve the customer's most
hallenging business problem and be recognized as the benchmark of
excellence in software development.

In order to drive the promise of certainty in customer experience, TCS has
implemented its world class integrated Quality Management System (iQMS)
across the organization and through this we ensure excellence in delivery
to our customers.

TCS has pioneered a new level of transparency and direct focus on quality
of customer experience, by building 'Experience Certainty' dashboards for
customers to view and compare quality of delivery vis-a-vis their quality
of experience.

Launched last year, these digitized delivery dashboards provide internal
metrics on quality of delivery, timeliness of delivery, performance within
budget, cost of quality and compliance to SLAB (Service Level Agreements)
which can then be compared against quality of customers experience as
reported by customers through the biannual customer feedback survey.

These 'Experience Certainty' dashboards have been successfully piloted in
50 customer accounts across verticals and geographies last year where C-
level executives at customers have on-line real-time access to their
relationship metrics. In these times of uncertainty, TCS transparency on
the 'Experience Certainty' brand promise is being very positively viewed by
its customers.

2.2. Global Network Delivery Model:

Underpinning the promise of delivery excellence and the experience of
certainty for our customers is our unique Global Network Delivery Model
(GNDMTM) that allows the Company to deliver services to customers from
multiple global locations in India, China, Europe, North America and Latin
America. The GNDMTM enables the Company's delivery centers to collaborate
on projects, leverage all its assets in order to ensure 'One Global Service
Standard'- through homogeneity in terms of quality, skills as well as look-
and-feel. This gives the Company's customers the same'experience of
certainty', irrespective of delivery location. TCS' Global Network Delivery
Mode ITM offers clients:

Global, Interconnected Workforce:

* On-site, domestic and offshore staffing.

* Deep technology and domain expertise.
* Effective and scalable talent management.

Integrated Processes:

* Capability Maturity Model Integrated (CMMI) Level 5 quality processes.

* World-class security procedures.

* Consistent project management processes and tools.

Multi-Tiered Infrastructure:

Multi-continent and interconnected development center network State-of-the-
art telecommunications network with redundancies Global collaboration
tools.

2.3 Integrated Full Services Offering:

The Company continues to build on its 'Full Services Offering' that offer
global customers an integrated portfolio of services including a
comprehensive range of IT and Application related services, Remote
Infrastructure Management, BPO and Engineering services, front-ended by a
strong, domain- led Global Consulting Practice. This suite of integrated
services continues to present an exciting value proposition for global
corporations and is gaining traction in the market place. The operational
strategy captures the entire value chain of IT - from consulting to
products and solutions and from implementation to support.

2.4 Strategic Acquisitions:

In addition to sustaining strong organic growth, the Company continues to
closely look at acquisitions that are strategic in nature. Through
inorganic means the Company may look to fill gaps in its services
portfolio, enter new geographies or market segments as well as insource
domain and technology expertise. The strategic acquisitions done over the
years which have created new capabilities within the Company have started
yielding synergistic growth.

With the acquisition of the captive BPO unit of Citigroup the Company
supplemented its portfolio of offerings for the global banking and
financial services industry by adding banking operations capabilities. The
acquisition brought over 12,000 consultants with strong domain expertise
into the TCS fold. Along with TCS' strong Banking and Financial Services
(BFS) expertise, end-to-end offerings, comprehensive product suite and
scalable processes the Company believes it is well positioned to service
the integrated IT-BPO needs of its customers in the fast changing BFS
landscape. The significant strategic value creation which was the driver of
this strategic acquisition by TCS was creation of a sizable business with
market leadership position. Post the acquisition, TCS has become the second
largest integrated BPO player from India with over 25,000 professionals.
The BPO operations now encompass seven verticals, executing over one
billion plus transactions, with full services capability, 24x7 operations
and multi-domain, multi delivery locations across the globe.

2.5 Non Linear Growth Strategies: As a long term strategy, the Company
continues to invest in Non-Linear Growth initiatives that will allow the
Company to drive revenue growth without commensurate growth in the number
of people employed. The Company is focused on three growth initiatives.

2.5.1 Asset Leveraged Solutions: The Company continues to invest in
building products and solutions for select verticals and markets. One
pillar of this initiative is the strategic business unit, TCS Financial
Solutions, that is focused on building and selling software products to the
global financial services industry from capital markets and securities
trading and settlement to core banking products and other risk, compliance
and private banking products. Other verticals where the Company is building
in frameworks and solutions include the government and life sciences
verticals.

2.5.2 Platform-based BPO: Platform-based BPO, which involves combining
ITwith operationsto create a standardized technology-led platform for
process execution, is an important long term non-linear growth initiative
for the Company. We have already launched a few platforms in areas like
life and pensions processing, human resource outsourcing and look forward
to launching new platforms in finance and accounting as well as
procurement.

2.5.3 Small and Medium Business Initiative: TCS has recently launched a new
'IT as a service' for Small and Medium Business (SMB) sector, initially in
India. Given the complexities involved in the SMB sector adopting IT, the
Companys offering that allows SMB firms to use IT on a pay-as-you-use model
greatly simplifies IT adoption and allows SMB firms to leverage Technology
to growtheir business and become more competitive. Once matured, this model
will be leveraged in other markets which have a significant presence of
SMBs.

2.6 Organisation: From April 2008, TCS effected a organizational
restructuring aimed at aligning the organization closely to the Company's
business strategy and operating imperatives. The new organization consists
of individual business units structured as industry solution units for the
major markets in the USA and Europe; independent business units in new
growth markets like India, Asia Pacific, Latin America, Middle-east and
Africa; and strategic business units to drive new non-linear growth
initiatives.

The integrated customer-centric units help enhance customer focus, drive
operational agility and address new growth opportunities in the market. The
new'global operating model' has provided customers with a single view of
the Company, encompassing project delivery and relationship management and
enabled a sharper focus on the customer. This new operating model has
stabilized during the year and is delivering value to the customers. The
flat structure, enables closer collaboration among the leadership teams in
each operating unit which helps the Company remain agile and adapt to
rapidly changing market conditions across industries and markets. It
enables the Company to retain talent as it provides greater leadership
opportunities across the organization and enables each business unit to
have the space and headroom to growwithout losing the benefits derived from
TCS' scale, size and geographical reach.

The new organizational framework ultimately helps to ensure that customers
can 'Experience Certainty' in their relationship with TCS as it provides a
clear customer focus and enables us to be close to the customer as a
virtual extension of their organization.

2.7 TCS' Global Footprint:

The Company is investing in developing and optimizing its global presence,
in order to pursue opportunities in global markets on an ongoing basis and
has 140 offices in 42 countries as well as 101 solution centers in 18
countries. The Company has 8 near-shore solution centers in 7 countries and
93 global solution centers in 27 locations in 10 countries. (See Chart 13)

The TCS sales organisation has been aligned to meet the needs of the
customers. As at March 31, 2009, TCS had 23 offices in USA and Canada, 11
offices in 7 countries in lberoamerica, 9 offices in UK and Ireland, 22
offices in 12 countries in Europe, 18 offices in 12 countries in the Asia
Pacific region and 7 offices in 6 countries in the Middle East and Africa.
In India, TCS had 56 offices in 13 locations.

2.8 Market Presence: In terms of geographies the Company continues to grow
in multiple geographies, particularly in mature markets like North America
and Europe including the United Kingdom, The Company has increased its
focus on the Western European markets like Germany, France, Benelux and the
Nordic region as well as emerging markets like Latin America and Asia
Pacific regions. The Company has also been investing in emerging markets
such as the Middle East, Africa and Eastern Europe, identified as future
high growth markets. TCS' geographical growth strategy has a two pronged
approach focused on major markets and new growth markets.

2.9 Major Markets: The Company continues to focus on serving large global
clients and growing its business in the major markets, namely North
America, Western Europe, the UK and Ireland. The key focus in these mature
markets is on growing our wallet share in key customer accounts and
penetration of new key accounts using our integrated full services and the
GNDMTM offerings through a vertical approach. This focus allows the Company
to push for aggressive growth using a client centric strategy. The Company
has numerous multi year relationships established with global
multinationals in these markets and has been providing them a multiple
range of services.

2.10 New Growth Markets: The Company has been investing in emerging or new
growth markets since 2003 and has achieved significant size and scale in
Latin American markets like Brazil, Chile, Mexico, Argentina, Colombia and
Ecuador, where over 6,000 professionals are working with global, regional
and national corporations.

We have increased our presence in the Asia Pacific region including China
and the other Asean countries, as well as Eastern Europe, Middle-East and
Africa. The Company continues to remain committed to investing in the fast
developing market in India. New growth markets have the potential to be
significant revenue drivers over the long-term.

2.11 Industry Solution Units:

In order to retain a sharp customer focus in key global accounts and
enhance customer centricity across the organization, the Company has
established Industry Solution Units (ISUs) along industry verticals in
major markets where the Company has sizable presence. The list of Industry
Solutions Unit includes: Banking and Financial Services, Insurance,
Telecom, Manufacturing, Retail and Distribution, Life Science and
Healthcare, Media and Information, Hi-tech, Government, Energy Resources
and Utilities and Travel and Hospitality.

2.12 Strategic Growth Business:

The Company established three Strategic Growth Businesses:

2.12.1 TCS Financial Solutions:

TCS Financial Solutions creates value for financial institutions across the
globe by leveraging its integrated financial services applications
platform, TCS BaNCS, forthe global banking, capital markets and insurance
industries. By focusing on increasing efficiency levels for its customers
through a co-innovative network of partnerships and sharing of best
practices, TCS Financial Solutions won 37 new customers across advanced and
emerging markets, while delivering the experience of certainty by going
live on-time and within budgets to 41 customers in the fiscal year 2009.

TCS BaNCS won and received evaluations and accolades, both from
international institutions and industry analysts in financial services,
throughout the year.

TCS Financial Solutions debuted as a Leader in Forrester Wave: Global
Banking Platforms, Q1 2009

TCS BaNCS improved its ranking to number 6 and TCS is the highest ranked
Indian IT firm, in the annual survey 'FinTech 100' by 'The American Banker'
a leading research firm

TCS BaNCS was selected for the premier Benchmarking International Systems &
Services (B.I.S.S.) Award 'System of the Year' for having the highest
aggregate score across all three market sectors of Asset Manager, Broker /
Dealer and Custodian for the broad range of its system modules including
Integration, Compliance, Corporate Finance and Corporate Actions. TCS BaNCS
also gained the B. I. S. S. Corporate Actions Accreditation in all three
market sectors for the sixth year running.

2.12.2 Platform Based BPO:

Platform based Business Process Outsourcing (BPO) is an outsourcing model
in which the Company utilizes established technology platforms to provide
business solutions and services to customers for executing highly
standardized processes.

The strategic driver behind such a service offering from the Company is the
increased recognition amongst organizations that significant leverage
opportunities exists in sharing costs and investments for executing
critical business processes. TCS believes that its ability to create and
deliver value to customers will be superior when it controls all aspects
people, process and technology - of such business areas. TCS essentially
envisages creating business process utility services, which combine the
best of applications, infrastructure and BPO services.

The Company started the Platform BPO unit in April 2008 as a strategic
growth business unit. The platform BPO unit has seen good traction in Human
Resource Outsourcing (HRO) platform, and has conceptualized and created new
Platforms in select areas of Finance & Accounting (F&A), Procurement and
Analytics. TCS is working closely with partners to take these growth
opportunities to the market.

As per analyst estimates, Platform BPO which constitutes 5-10% of the
overall BPO services market today (-$190 billion) is expected to increase
to around 15% by 2010.

2.12.3 Small and Medium Business:

The Company has launched the Small and Medium Business (SMB) Strategic
Business Unit (SBU) with the objective of offering 'IT-as-a-Service'
framework. This is an innovative business model in terms of providing and
managing IT remotely, and charging for these services on subscription
basis. SMBs are getting the experience of customized low-cost solutions,
scalable to their growing business needs. The service is modeled on the
'pay-as-you-use' and 'build-as-yougrow' paradigms.

The services and solutions within 'IT-as-aservice' include the core
business applications such as ERP, CRM, Finance and accounting among
others.

2.13 Services and Offerings:

The details of the Company's Service Offerings are discussed below.

2.13.1 IT Solutions and Services:

These services include:-

Application Development and Maintenance, Migration and Re-engineering as
well as Package Implementation services. The Company also offers
Performance Management, Business Intelligence, Assurance (Testing) and
Systems Integration services.

TCS' IT service offerings won and received evaluations and accolades from
industry analysts in application services, throughout the year.

* Positioned as a leader in 'Gartner's Magic Quadrant' for North American
Offshore Application Services.

* Positioned as a leader in Gartner's Magic Quadrant for European Offshore
Application Services.

* Positioned as a leader in'Gartner's Magic Quadrant' for Business
Intelligence & Performance Management Services, North America.

2.13.2 Enterprise Solutions: The Company provides services in the areas of
Enterprise Resource Management, Supply Chain Management, Customer
Relationship Management and Content Management Solutions to integrate
enterprise wide functions with comprehensive solutions.

2.13.3 IT Infrastructure Services (IT IS): This unit is an end-to-end
infrastructure Services provider of innovative IT Infrastructure Management
solutions and value enablers, which help transform the way the business
uses 'Infrastructure Technology'. The Unit provides services which are
'Application Driven' there by ensuring an Infrastructure eco-system which
is 'available, scalable, flexible and adaptable'. The value proposition
associated with infrastructure management are:

* Increased business effectiveness through alignment of IT Infrastructure
to business objectives

* Optimization of the 'Infrastructure Technology' consumption through
discrete, platform & disruptive transformation techniques.

* Service Level Agreements (SLA) driven service delivery.

* Flexibility, transparency and scalability in infrastructure management.

* Reduced Total Cost of Ownership (TCO)

* Enhanced operational efficiency by adoption of incident management
techniques.

* Single window program management for greater cost control and
predictability.

Chart 15: Revenues from IT IS:

Infrastructure
Services (Rs cr)

2096-07 1121

2007-08 1470

2008-09 2225

TCS Infrastructure management service offerings' won and received
evaluations and accolades from industry analysts in infrastructure
services, throughout the year and was positioned as a Leader in 'The
Forrester Wave T0'' Global IT Infrastructure Outsourcing report of Q1 2009.

2.13.4 Business Process Outsourcing (BPO): TCS BPO is increasingly
becoming a supplier of choice for many global customers due to its focus on
domain-intensive transaction processing services, knowledge-based services
and TCS' reputation and long standing relationship with many of its
customers.

TCS BPO is structured and positioned to deliver services in the customer's
business hours by efficiently leveraging TCS GNDMTM model for delivery of
services to global customers. TCS BPO is uniquely positioned due to its
global reach and delivery capabilities which leverages TCS' centers in
Latin America, Eastern Europe and China. The Company acquired the captive
BPO operations unit of Citigroup and this unit has been renamed TCS e-Serve
Limited. With this acquisition, TCS is well positioned to meet endto-end
IT-BPO requirements of financial services customers. The combined revenues
of TCS BPO and its subsidiary BPO units places TCS in second position
amongst India based BPO providers in FY10. The Company offers value added
transaction processing services to its customers in industry verticals like
Banking, Insurance, Telecom, Pharma, Travel and Transportation and Retail.
Knowledge Services focuses on areas like Clinical Trials,
Pharmacovigilance, Market Research and Retail Solutions.

Chart 16: Revenues from Business Process Outsourcing Services (BPO):

BPO Revenues
(Rs cr)

2006-07 1084

2007-08 1402

2008-09 1919

2.13.5 Engineering and Industrial Services: The Engineering and Industrial
Services (EIS) business is an integral element of TCS' strategy to provide
full services across the engineering and product development value stream
of companies in the manufacturing and hi-tech sectors. The EIS portfolio of
TCS provides a wide range of R&D and Product Development solutions. These
end-to-end services are New Product Development Solutions, Plant Solutions
& Services and Geospatial Solutions.

Chart 17: Revenues from Engineering and Industrial Services (EIS)

Engineering
Services
(Rs cr)

2006-07 1084
2007-08 1221
2008-09 1669

2.13.6 Global Consulting Practice: The Global Consulting Practice (GCP)
uses consulting and IT services capabilities to bring continuity and
consistency to strategic programs and help organizations manage current
business requirements, while preparing for the future. It is a key
component of the Company's full services strategy to deliver greater value
to clients. Our consulting-led, integrated portfolio of IT and IT-enabled
services is designed to help

organizations increase alignment between Business Operations and IT.
Building on TCS' delivery excellence and proven technology expertise, GCP
leverages TCS' industry insight and consulting know-how gained over the
last 40 years to deliver trusted advice to client organizations globally.

GCP is instrumental in positioning TCS as a business advisor. It allows us
to develop closer, and broad based relationships with leading
organizations, as they strive to optimize and transform their businesses
using technology. GCP partners with such clients across the transformation
landscape and lifecycle to create innovative business solutions, support
implementation and deliver measurable results.

2.13.7 Asset Based Solutions: Asset based solutions are critical for the
Company's non-linear growth drive. These services are based on the Company
developed knowledge, intellectual property and know how, which have been
built over the years. Some of the prominent asset-based solutions include:

2.13.7.1 TCS BaNCS: A suite of asset based offerings for the financial
services industry that range from capital market solutions covering
corporate actions, trading, settlement and custody to commercial core
banking solutions that cover all aspects of a banks functioning from core
operations to treasury, trade finance, anti-money laundering, risk
management and compliance as well as niche products like wealth management
and private banking.

2.13.7.2 Industry Solutions: The Company has a number of asset-based
solutions in different Industry segments in which it operates. These
include asset based solutions in the Life Sciences and Healthcare and
Energy Resources and Utilities industries as well as Engineering and
Industrial Services. In addition the Company has developed numerous tools
and in-house assets for ensuring that its clients benefit from its
technology products which assist customers to achieve significantly higher
operational efficiency and realize time and cost benefits.

3. Alliances and Partnerships: The Company recognises that a holistic,
complete solution to customers requires an efficient combination of
hardware, software products and services and therefore continues to work
with partners in the technology industry including key strategic partners
like SAP, Oracle, Cisco, Microsoft, SAS, Unigraphics, IBM and HP as well as
multiple solution partners whose niche products may be provided as part of
our systems integration offerings to clients.

4. R&D and Innovation Labs: TCS established the first software R&D centre
in Pune, India in 1981 called the Tata Research Design and Development
Centre, mindful of the importance of research to ensure sustained market
leadership. Over the last two and a half decades, R&D has evolved in TCS in
line with the environment and market conditions with renewed customer
focus. As on March 31, 2009, TCS had established 20 R&D Innovation Labs
with specific focus on technologies and verticals. The Company has also
established 46 Centers of Excellence (CoEs) in all areas of information
technology and business services as well as on partner products. This
ensures all our offerings incorporate the latest products and services
capabilities from the Company and its alliance partners and allows us to
build new skill sets among the employee base.

The network of TCS Innovation Labs work on research themes ranging from
Operational Efficiency, Business Agility and Simplification, to Customer
Experience, Ubiquity and Enterprise Security. They also explore new areas
like Green IT and emerging technologies like Cloud Computing and the
evolution of the internet beyond Web 2.0. The Innovation labs work closely
with the TCS business units and customers across a well-defined set of
innovation horizons.

4.1 Tools and Frameworks: The Company continues to invest in technology
products, frameworks and tools to assist customers to achieve significantly
higher operational efficiency and realize time, cost and energy benefits at
maximum Return on Investment (Rol). These are based on leading edge
technologies and address both IT and business requirements of customers.
Company has invented and developed a number of products, frameworks and
productivity tools in the following areas:

Software Engineering tools for development, testing, migration,
reengineering, and performance management

Infrastructure Management tools for relating systems information to
business events, simplification of server, network and storage, measurement
and optimization of 'Data Center' power, and high-performance computing
applications.

Domain-specific frameworks and components for customer analytics,
authentication and security, market understanding, risk and compliance,
optimization, visualization and modeling, 'Business Process', management
tools for task automation, work flow, applications integration and
knowledge capture Knowledge management tools using social networking
techniques, information extraction &text mining and Web 2.0.

These tools and frameworks are built and supported by TCS Innovation labs
working closely with the technology excellence group and the domain teams
from different business units.

4.2 Intellectual Property (IP) and Patents: We have defined an IP strategy
with a view to building an effective portfolio for future monetization,
collaboration and risk mitigation. The total number of granted patents is
42. In addition, TCS has over 150 patents pending in multiple
jurisdictions, including 58 filed in 2008 09.

Chart 18: TCS Intellectual Property Strategy

- Patents filed and granted

Inelledlual Properly: Patents

Granted Filed
(Cumulative) (Cumulative)

2005-06 17 83

2006-07 20 108

2007-08 37 234

2008-09 42 192


4.3 R&D talent pool: Our R&D organization has grown to over 500 people. We
have more than doubled the number of PhDs in TCS R&D to over 50 and have
attracted top talent from notable universities across the world. A large
number of lateral hires from Indian and overseas institutions were inducted
into the R&D groups in FY09 and 17 global university academic alliances
were put in place.

5. Human Resources: The Company continued to invest in human resources
development. The total number of employees including subsidiaries as at
March 31, 2009 was 143,761 (111,407 as at March 31, 2008). Of these 143,761
employees at the end of fiscal 2009, 17,611 were the employees of the
Company's Subsidiaries like CIVIC, WTI, TCS e Serve Limited, Diligenta and
others. The number of non-Indian nationals in the TCS global workforce was
11,484 (previous year 10,005 employees).Our overseas delivery centers have
4,795 employees.

According to Company estimates, TCS was the biggest recruiter in the
private sector globally. The Company had a gross addition (including Indian
subsidiaries) of 48,595 (previous year 35,672) employees and a net addition
of 32,354 (previous year 22,116) employees. This included over 12,500
people as a result of the Citigroup BPO acquisition as well as over 750
people insourced from customer organizations.

Chart 19: Growing talent Base: Gross and net employee addition in last 3
years

- Growing ralertt Base:

Gross Additoins Net Additions

FY07 32462 22750
FY08 35672 22116
FY09 48595 32354

Talent retention: The attrition rate of 11.4% (previous year 12.6%) in
fiscal 2009 is the lowest in the industry. This low attrition rate has been
achieved by continuously investing in learning and development programs for
employees, competitive compensation, creating a compelling work
environment, empowering employees at all levels as well as a well
structured reward and recognition mechanism.

Chart 20: Attrition rate for last twelve months:

Attrition Rate

FY07 10.60%
FY08 12.60%
FY09 11.40%

Even though the Company has added 84,267 employees to its rolls in the last
two years, 54% of the Company's associates have more than 3 years work
experience.

Chart 21: TCS employees with experience greater than 3 years in last three
fears

Employees with > 3 years' experience:

Employees with
> 3 years'
experience

FY09 54%
FY08 50%
FY07 48%

5.2 Talent Diversity: The composition of the global workforce continues to
show increasing trends in the number of female employees and foreign
nationals from countries across the globe. As at March 31, 2009 women
constituted 30% of the Company's workforce (28% as at March 31, 2008). The
Company employed persons from 67 different nationalities. There were net
additions during the year of 1,479 non-Indian nationals and TCS is focused
on adding to its global knowledge workforce and integrating these
professionals into its workforce.

Chart 22: Diversity: Increase in women employees in last 3 years

Women Employees

FY07 26%
FY08 28%
FY09 30%

Chart 23: Diversity: Increase in Non-Indian Nationals in last 3 years.

Non Indian Nationals:

Non Indian
Nationals

FY09 11484
FY08 9801
FY07 8216

5.3 Academic Program: Continuous interaction with universities and other
educational institutions remains a central plank of TCS' strategy to
attract the best scientific and engineering talent. TCS has also set-up an
Industry-Academia collaboration network with some of the foremost
Universities in India and rest of the world.

Chart 25: Academic interface program - workshops conducted, faculty trained



# Of Workshops # Of FDP # Of Faclty
Conducted Conducted Trainted

2008-09 131 390 4229
2008-07 151 427 3719
2006-07 94 367 2096

5.4 Talent acquisition: The Company continues to invest in building talent
development in the country through a stringent academic accreditation
program as well as by providing training, internships and projects to
students. As a result of these initiatives, TCS continues to be an employer
of choice on engineering campuses across the country. The program is
helping TCS source the best engineering talent in the country with over 95%
of 'Day 1' slots on technical campuses in 2008-09, up from 94% in 2006-07.

For 2009-10, the Company has made 24.885 campus offers. The trainees will
join in a staggered manner during the financial year 2009-10.

Chart 25-A: Number of offers as per category of city:

No. of Offers
as per Calegory
of City

Tier I 7,316
Tier II 11,697
Tier III 5,872

Table: Academic Interface Program Number of TCS accredited academic
institutes Accreditation of Technical Institutes:

Fiscal 2009 Fiscal 2008 Fiscal 2007

309 274 250

5.5 Inclusive Talent Development: TCS Ignite:

Launched in 2007, Ignite continues to make significant strides in the areas
of training, digitization, and innovation. Ignite also demonstrates the
commitment of the organization to inclusive growth by hiring 60% first
generation graduates. 946 science graduates from nearly 500 colleges across
the country and from Nepal, Bhutan were trained and fully deployed in FY08-
09. Since the inception of the program, the total number of graduates
trained and deployed is 2,517. The project leader community rated
deployability of Ignite trainees as very high.

Ignite trainees are encouraged to pursue higher education while working.
For example, for a MCA degree program at Sastra University in Tamil Nadu,
students are given credit for their training in TCS and by completing the
remaining credits, they are awarded a MCA degree. Around 1000 Ignite
trainees have enrolled for this program. The top 1% of Ignite trainees
enroll for a challenging MSc Computer Science program at the Chennai
Mathematical Institute.

Chart 27: Number of students hired through TCS Ignite:

Ignite Students
Trained and
indueted

2008-09 1571
2007-08 946

5.6 Learning and Development: As the recruitment mix of new employees
becomes biased towards hiring greater numbers of fresh engineering
graduates from campuses, the capacity of Initial Learning Program (ILP) had
to be increased. Two new ILP centers were opened in Ahmedabad and Guwahati,
in addition to one in Thiruvananthapuram. More than 19,500 trainees
completed the ILP. Our employees gained 23,000 new technology
certifications during 2008-09 as part of the Continuous Learning Program
(CLP) in FY09. The e-Learning coverage increased to 32% of total learning
days with modules in Portuguese, Mandarin and Spanish rolled out. A new
version of Competency Management System (iCALMS) and a Learning Planning
System have been implemented to increase the automation of L&D Processes.

Chart 28: Number of trainees who completed the initial learning program:-

No. of ILP
Participants

2008-09 19631
2007-08 14513
2006-07 11718

Chart 29: Number of additional certifications gained by TCS employees.

No. of certifications Techology /Process / Industry:

Techology Process Industry

2006-07 5661 711 1076
2007-08 12550 2358 2169
2008-09 16486 3646 2462

C. OPPORTUNITIES AND RISKS:

1. Opportunities:-

TCS is the largest Indian IT Services Company in terms of revenues and
number of employees. Established in 1968 as a division of Tata Sons, TCS
has pioneered the concept of offshore IT services since 1974 and has
emerged as an integrated full-services player with a global footprint and
scale.

Opportunities for the Company for sustaining profitable growth emerge from:

* Increasing deployment of technology to sustain competitive advantage in
business resulting in increasing global IT spends thus generating demand
for our services portfolio.

* Validation and acceptance of multisourcing as a relevant business
strategy in a globalised world.

* Emergence of new services that can be delivered from remote locations
like infrastructure services and business process services.

* The Company's ability to bid for large value, complex global engagements
requiring IT partners that are capable of serving the customer 24x7 from
different parts of the world.

* Consolidation of vendors by large corporations to fewer Tier I players
with global scale as they drive greater value from their IT investments.

* Increased focus on cost reductions and optimizing operations among global
corporations creating greater opportunities for the Company's 'Full
Services Offerings' leveraging our GNDMTM.

* Opportunities in emerging areas like 'Green technologies', Analytics,
Security Solutions.

2. Risks and Risk Mitigation:

The Company has put in place an Enterprisewide Risk Management (ERM)
process and reports are put up to the Board of Directors at regular
intervals. The Company believes that it has robust and 'fit for purpose'
risk management processes in place. Some of the major risks and concerns
and risk mitigation plans the Company has identified are as follows:

2.1 Macro-Economic Risks:

* During the last financial year, the global economy was subject to great
turmoil. The crisis in the financial sector led to a lower confidence in
financial markets leading to a global credit crunch. The past year has seen
some of the fastest and sharpest falls in both the financial marketplace as
well as the industrial economy. According to International Monetary Fund
(IMF) World Economic Outlook 2009, the advanced economies declined by 7.5
percent in real Gross Domestic Product during the third quarter of the last
financial year. Although the U.S. economy was among the hardest hit, the
crisis also had its cascading effect on economies in both Western Europe
and Asia. The cascading effect on the emerging economies was partially
driven by low confidence on these economies resulting in capital flight
from these economies to developed economies and contraction of global
trade. The uncertainties in the markets led to significant volatility in
exchange rates as well as commodity prices

* These events led to a set of rapid fiscal and monetary policy responses
from governments across the globe. Responses included fiscal stimulus
packages across various economies, coordinated efforts by central banks
worldwide to lower interest rates, injection of liquidity into financial
markets including quantitative easing

* IMF indicates that overall world economic growth is likely to decline by
1.3% in 2009 and would recover in 2010. However, the growth and revival
process is expected to be slow. However, the Indian and Chinese economies
are expected to grow at 5% and 7% respectively during 2009.

* As a result of the global recession, market related business and credit
risks with clients in some industries and countries where we conduct
business operations are expected to rise.

* There has also been a rise in protectionist sentiment in many countries
which are looking to impose tariff and non-tariff barriers affecting
companies in the Indian IT industry. Some initiatives to curb mobility of
IT professionals have been introduced in the US. The Company is following
the events closely to determine the impact, if any, on its operations.

To address these risks, the Company which already has a wide presence both
in developed world and in emerging markets has taken the following steps:

* Increasing the breadth and depth of service offerings and penetration of
new customer accounts and markets to combat slowdown in some customer
segments.

* To counter possible protectionist tendencies by other countries, the
Company is refining the business model to reduce the amount of work at
customer locations and move work to other remote locations and hiring of
more local nationals in key markets to ensure continuity for customers.

2.2 Financial Risks:

2.2.1 Currency Fluctuations related risks:-

* Volatility of the Indian Rupee has had both positive and negative impact
on the IT industry in fiscal 2009. This trend may continue in fiscal 2010

* The Company has used various types of foreign currency forward and
options contracts to hedge the risks associated with fluctuations in these
currencies. The Company has also noted that the contour of exchange risk
exposure now is quite different from what it has been in previous years, as
cross currency movements have added an additional dimension of volatility

* The Company has strengthened the existing policies and processes forthe
use of financial derivative instruments consistent with its risk management
strategy and these strategies are reviewed by a Risk Management Board on a
quarterly basis. Also, the Company has developed software products to
monitor, manage and report the exposures related to hedging transactions on
a daily basis.

2.2.2 Counter party risk in treasury operations:

* The treasury operations of hedging have to be conducted through banks
mandated by the RBI as 'authorised' for the purpose of such transactions.
In the recent economic and banking turmoil, all leading banks have been
affected in varying degrees.

* In order to protect itself against possible default by the counter
parties for these hedging transactions, TCS has been monitoring
counter party health, diversifying the risk by having multiple banks with
whom such transactions are undertaken and also monitoring limits with each
of them dynamically.

* Detailed records are maintained of all such forward and options contracts
and a daily P&L statement is also prepared and reviewed by senior
management.

2.3 Regulatory & Compliance related risk:

* The Company has a global footprint and as it increases its global reach
and operations the risk of ensuring 100% compliance with the regulations
and laws in the various jurisdictions where it has a presence has increased

* To mitigate this risk, the Company has established a separate office
under a senior and experienced Chief Compliance Officer and has also put in
place an institutionalized structure to ensure 100% regulatory and legal
compliance across the globe. The Chief Compliance Officer has a team of
senior persons from all relevant functions as part of his team to ensure
compliance with all laws and statutory requirements in these countries. The
use of local managers as well as consultants, auditors, lawyer's
specialists and experts in these countries where we have a presence is
encouraged to ensure 100% compliance.

2.4 Strategic Risks:

2.4.1 Global Market Risks:-

* With economic slowdown, coupled with consequences of credit squeeze
across the globe and the consequent increase in bankruptcies, M&As and
Governmental bailouts of global organizations in the developed economies,
the contours for conducting business globally is continually changing

* TCS has adapted its agile approach, customer reach and market presence,
to effectively create proactive opportunities in such dynamic scenarios-
where vendor consolidation, cutbacks in discretionary spending and
increased demands for more services has become common place.

* The approach adopted by the Company involves effectively leveraging its
market/ product/customer relationships built over many years, to work
closely with its clients - to help them address their business problems and
to enable them to meet their business objectives. TCS does this by bringing
all the innovation, domain knowledge and technical expertise of the entire
organization to bear on customer requirements and needs so that we can
provide clients with value-added solutions.

2.4.2 Reputation risks:

* The Company has recognized that its wide global presence has to be
strengthened by appropriate brand building. It has been investing in
building the brand of 'Experience Certainty' through multiple means

* As TCS is part of the Tata Group of Companies and is a signatory of the
Tata Brand Equity - Brand Promotion (BE-BP) agreement, it is governed by
strict standards in its communications as well as use of the Tata Brand and
ensures compliance with the same. Strong Corporate Governance practices and
strict adherence to the Tata 'Code of Conduct' governs all actions and
decisions made by the officers in the Company. We believe that these
practices minim ize'Reputation risks'.

2.5 Operational Risks:

2.5.1 Business Model Redundancy Risks:-

* Increased competition could result in pressure on pricing and
commoditisation of some services.

* TCS is focusing on addressing the risk of commoditization of its business
model by focusing on innovations in resourcing models as well as developing
and proposing new business models and value propositions to our clients.

2.5.2 Innovation related risks:

* The Company is focused on innovation. Innovation initiatives are in
multiple forms, but all of these are focused on better productivity through
continuous improvement in processes, systems, methodologies and
capabilities. Emphasis on innovation also helps the Company in moving up
the value chain.

* Innovation in the Company is practiced by adopting 'derived' innovation
that seeks continuous improvement in every area and by 'platform'
innovation, whereby multiple capability and skill teams engage to develop
innovative ideas.

* The risks associated with translating all the investments that the
Company is making in Innovation into successful business opportunities for
its future growth are high. These risks of investments in innovation
projects are addressed by structured periodic reviews of all programs and
investments by senior management.

2.5.3 Resource risks:

* The movement of people between nations for providing the high-end
technical and business services skills required by the global customer
organizations in the developed markets including USA, UK, Europe,
Australia, Japan are governed by procedures and legislation in each country
and may result in delays in procuring visas and work permit on occasions.

In order to address this risk TCS has adopted a number of strategies:

* It has strengthened its efforts to identify and train local recruits in
all these markets.

* It has strengthened its Global Compliance Process for ensuring strict
compliance with Visa and work permit requirements and regulations.

* The Company is also working closely with all its global customers and
monitoring and planning in advance the need for such resources, to ensure
smooth conduct of business.

2.5.4 Security Risks:

* The terrorist attacks in Mumbai during Nov 2008 highlighted the need for
companies to adopt systems and process to safeguard its people and assets
as well as ensure business continuity.

* To mitigate these risks surrounding security, TCS has a comprehensive
security plan in place which is preventive in nature and aims at protecting
its facilities from the various risks observed from time to time. The plan
uses a blend of people, process and technology to ensure that the security
levels are maintained at all times in line with the risk landscape.
Following last year's attacks, additional security measures have been put
in place, especially to enhance the perimeter security.

* The overall security deployment is governed by a Corporate Committee
which looks at the integrated security requirements across the organization
globally. Periodic audits are conducted by a group of experts, which helps
validate the deployment strategy and the need to reinforce any of the
existing controls, etc. Concerted efforts have been made to create greater
awareness amongst the associates.

2.5.5 Executing M&A Transaction's risk:

* Ensuring successful integration of the inorganic growth opportunities
that the Company undertakes in line with the goals and the underlying
premise for these transactions is a risk.

* Risk mitigation action includes well-laid out integration plans and close
monitoring and review of these transactions to ensure that the goals and
milestones related to the transactions are achieved.

FINANCIAL PERFORMANCE:

OVERVIEW -EXECUTIVE SUMMARY:-

The financial performance of Tata Consultancy Services Limited (TCS
Limited) as per Indian GAAP is discussed hereunder in two parts:

(i) Tata Consultancy Services Limited (Unconsolidated) which excludes the
performance of subsidiaries of TCS Limited.

(ii) Tata Consultancy Services Limited (Consolidated) which includes
performance of subsidiaries of TCS Limited. The Consolidated Financial
Statements bring out comprehensively the performance of the TCS group of
companies and are more relevant for understanding the overall performance
of the TCS group.

The financial statements are prepared in compliance with the Companies Act,
1956 and generally accepted accounting principles in India.

Financial performance summary (unconsolidated);

The total revenues of TCS Limited aggregated Rs.22,404.00 crore in fiscal
2009 as compared to Rs.18,289.85 crore in fiscal 2008, registering a growth
of 22.49%.

In fiscal 2009, the Company's profit before taxes aggregated Rs.5,139.69
crore (Rs.5,003.86 crore in fiscal 2008).

In fiscal 2009, the Company's profit after taxes aggregated Rs.4,696.21
crore (Rs.4,508.76 crore in fiscal 2008).

In fiscal 2009, the Company's earnings per share were Rs.47.91 (Rs.46.07 in
fiscal 2008).

Financial performance summary (consolidated):

In fiscal 2009, the total consolidated revenues of TCS Limited aggregated
Rs.27,812.88 crore as compared to Rs.22,619.52 crore in fiscal 2008,
registering a growth of 22.96%.

The consolidated profit before taxes aggregated Rs.6,150.07 crore in fiscal
2009 (Rs.5,845.95 crore in fiscal 2008).

In fiscal 2009, the Company's consolidated profit after taxes aggregated
Rs.5,256.42 crore (Rs.5,026.02 crore in fiscal 2008).

In fiscal 2009, the Company's consolidated earnings per share were Rs.53.63
(Rs.51.36 in fiscal 2008).

Dividends declared and proposed bonus issue:

For fiscal 2009 the Company declared three interim dividends of Rs.3 each
on the equity shares. A final dividend of Rs.5 per equity share has been
recommended. On approval of the final dividend, total dividend for fiscal
2009 would be Rs.14 per equity share. The total outflow on dividend would
stand at 34.13% of the profits of the Company. Complete details of the
dividend paid are available in the director's report. On preference shares
a dividend of 7% has been proposed.

The Directors have recommended issue of bonus shares in the ratio of 1:1
subject to the approval of the shareholders.

TCS LIMITED (UNCONSOLIDATED) RESULTS OF OPERATIONS - TCS LIMITED
(UNCONSOLIDATED):

The Management's Discussion and Analysis given below relates to the audited
financial statements of TCS Limited (Unconsolidated). The discussion should
be read in conjunction with the financial statements and related notes for
the year ended March 31, 2009. The following table gives an overview of the
financial results of TCS Limited (unconsolidated):

Amount in Rs. crore
For the year ended
Particulars March 31,
2009 2008 % Incre-
Revenue from operations Rs. crore % of Rs. crore % of ase/(dec-
revenues revenues rease)

Information technology 21535.75 96.12 17446.51 95.39 23.44
and consultancy
services

Sale of equipment and 868.25 3.88 843.34 4.61 2.95
software licences

Total revenues 22404.00 100.00 18289.85 100.00 22.49

Expenditure:
Employee costs 7370.09 32.90 5961.17 32.59 23.63

Overseas business
expenses (employee
allowance paid
overseas) 4306.25 19.22 3451.88 18.87 24.75
Total employee costs 11676.34 52.12 9413.05 51.47 24.04

Overseas business
expenses (other than
employee allowance
paid overseas) 421.63 1.88 417.19 2.28 1.06

Services rendered by
business associates
and others 1019.67 4.55 689.25 3.77 47.94

Other operating 3265.53 14.58 2994.12 16.37 9.06
expenses

Total expenditure 16383.17 73.13 13513.61 73.89 21.23
Other income (net) (456.24) (2.04) 689.82 3.77 -
Profit before
interest, deprecia-
tion and taxes 5564.59 24.84 5466.06 29.89 1.80
Interest 7.44 0.03 3.42 0.02 117.54
Depreciation 417.46 1.86 458.78 2.51 (9.01)
Profit before taxes 5139.69 22.94 5003.86 27.36 2.71

Provision for taxes:

Income tax expense
(including deferred
tax benefit and MAT
credit entitlement) 420.48 1.88 470.45 2.57 (10.62)

Fringe benefit tax 23.00 0.10 24.65 0.13 (6.69)

Net profit for the 4696.21 20.96 4508.76 24.65 4.16
year.

Revenues:

Revenues from operations:-

The Company's (unconsolidated) total revenues increased to Rs.22,404.00
crore in fiscal 2009, from Rs.18,289.85 crore in fiscal 2008, a growth of
22.49%.

Revenues from information technology and consultancy services increased to
Rs.21,535.75 crore in fiscal 2009 from Rs.17,446.51 crore in fiscal 2008, a
growth of 23.44%. Revenues from information technology and consultancy
services contributed 96.12 % of revenues in fiscal 2009 (95.39% in fiscal
2008).

Revenues from sale of equipment and software licenses increased to
Rs.868.25 crore in fiscal 2009 from Rs.843.34 crore in fiscal 2008, a
growth of 2.95%. Sale of equipment and software licenses was at 3.88% of
revenues in fiscal 2009 (4.61 % in fiscal 2008).

Expenditure Employee costs and overseas business expenses

Employee costs includes salaries which have fixed and variable components,
contribution to provident fund, superannuation fund, gratuity fund and the
employee insurance schemes. It also includes expenses incurred on staff
welfare.

Overseas business expenses primarily comprise living allowances paid to
employees in connection with overseas assignments. For purpose of this
Management Discussion and Analysis (MD & A), these costs grouped in
'overseas business expenses' have been regrouped in 'employee costs' for
aggregating all costs related to employee compensations. In this MD & A, we
refer to such aggregated costs as 'Total employee costs'.

'Total employee costs' in fiscal 2009 was Rs.11,676.34 crore (Rs.9,413.05
crore in fiscal 2008). 'Total employee costs' as percentage of revenues was
52.12% in fiscal 2009 (51.47% in fiscal 2008). This increase of 0.65% is
attributable primarily to:

* Increase in head count.

* Increase in compensation package, particularly in India

* Effect of exchange variation for foreign currency allowances paid to
employees deployed at various overseas locations.

Overseas business expenses (other than employee allowances):

This includes travel, marketing and office expenses incurred overseas.

Expenses on this account went up from Rs.417.19 crore in fiscal 2008 to
Rs.421.63 crore in fiscal 2009 mainly due to increase in travel related
costs by Rs.9.96 crore and

decrease in marketing costs by Rs.5.52 crore in fiscal 2009 as compared to
fiscal 2008. As a percentage of revenues, overseas business expenses
decreased from 2.28% in fiscal 2008 to 1.88% in fiscal 2009.

Services rendered by business associates and others

Payments for services rendered by business associates or sub-contractors
engaged for software development and other IT services, are included in
this head. The Company normally engages these consultants to bridge
shortages in certain skill sets.

These expenses increased from Rs.689.25 crore in fiscal 2008 to Rs.1,019.67
crore in fiscal 2009. As a percentage of revenues, it went up from 3.77% in
fiscal 2008 to 4.55% in fiscal 2009. This increase of 0.78% is attributable
to hiring of services of professionals with required skill sets not
available within the Company, required for delivering end-to-end IT
services projects undertaken by the Company.

Other operating expenses:

Amount in Rs. crore
Nature of expenses For the year
ended March 31,
2009 2008
Rs crore % of Rs crore % of
revenues revenues
Software, hardware
and material costs 918.17 4.10 838.46 4.58

Software licences 337.28 1.51 390.23 2.13

Communication 292.77 1.31 245.09 1.34

Travelling and
conveyance 263.42 1.18 278.00 1.52

Rent 492.75 2.20 322.58 1.76

Legal and professional 103.82 0.46 93.12 0.51

Repairs and

Maintenance 122.16 0.55 112.29 0.61

Electricity 164.34 0.73 135.57 0.74

Recruitment and
training 98.89 0.44 140.46 0.77

Others 471.93 2.10 438.32 2.41

Total 3,265.53 14.58 2,994.12 16.37

Other operating expenses given above, have increased from Rs.2,994.12 crore
in fiscal 2008 to Rs.3,265.53 crore in fiscal 2009. As a percentage of
revenues, it has decreased from 16.37% in fiscal 2008 to 14.58% in fiscal
2009. The decrease of 1.79% is primarily due to:

* Reduction in the cost of software, hardware and material procured for
rendering systems integration projects by 0.48%

* Reduction in cost of software licenses procured by 0.62.

* Reduction in recruitment and training costs by 0.33.

* Reduction in travel and conveyance costs by 0.34%.

* Reduction in 'other expenses' by 0.31 %.

* The reductions in the above items of expenses are results of cost control
measures instituted throughout the Company.

However, rent costs as a percentage of revenues went up from 1.76% in
fiscal 2008 to 2.20% in fiscal 2009 mainly due to renting of additional
space commensurate with growth of business.

Other income:

Other income comprises interest received on deposits with banks, dividends
received on investments in subsidiaries, dividends from mutual funds and
gains/losses due to exchange rate fluctuations.

Net 'other income' was a gain of Rs.689.82 crore in fiscal 2008, which in
fiscal 2009 was a loss of Rs.456.24 crore. The primary reason for the
decrease in 'other income' is the net exchange loss of Rs.746.11 crore in
fiscal 2009 as compared to net exchange gain of Rs.511.32 crore in fiscal
2008. This was partially offset by higher interest income of Rs.82.24 crore
in fiscal 2009 (Rs.36.48 crore in fiscal 2008), higher dividend income of
127.85 crore in fiscal 2009 (Rs.111.08 crore in fiscal 2008), higher profit
on sale of mutual funds and other current investments of Rs.48.98 crore in
fiscal 2009 (Rs.13.49 crore in fiscal 2008).

Forward and options contracts accounting:

TCS Limited enters into various forward and option contracts to manage its
exposure to exchange rates, in accordance with its risk management policies
and procedures. These contracts are generally entered into with banks as
counterparties and are for a maximum period of eight years. The Company
designates its hedging instruments as cash flow hedges upon completion of
the formal documentation and testing for effectiveness which is done
periodically, applying the recognition and measurement principles set out
in the 'Financial Instruments: Recognition and Measurement' (Accounting
Standard 30). All such hedging instruments are measured at fair value, at
the reporting dates. Changes in the fair value between the reporting dates
of such instruments designated as effective hedge of future cash flows are
recognised in the shareholders funds' and the ineffective portion is
recognised as 'other income' (net) in the profit and loss account.

On sale or termination of any effective hedge instrument before maturity,
hedge accounting is discontinued and

cumulative gains or losses on such instruments are retained in the
'shareholders'funds' until the maturity of the instrument and thereafter
transferred to the profit and loss account. If a hedged transaction is no
longer expected to occur, the net cumulative gain or loss recognised in
'shareholders' funds' is transferred to other income' in the profit and
loss account for the period. On sale or termination of hedge instruments on
maturity, the resultant gains or losses are taken to the profit and loss
account for the period.

Forward contracts and currency options outstanding at the reporting dates,
other than designated cash flow hedges, are stated at their fair values and
any gains or losses are recognised as 'other income' in the profit and loss
account for the period.

Exchange loss of Rs.982.88 crore have been recognised in the year ended
March 31, 2009 (Exchange gain of Rs.527.63 crore for the year ended March
31, 2008) on foreign exchange forward contracts and currency option
contracts .

Foreign exchange loss (net of the revaluation of all current assets and
liabilities in foreign currencies as at March 31, 2009) was Rs.746.11 crore
in fiscal 2009 as compared to a net foreign exchange gain of Rs.511.32
crore in fiscal 2008.

Profit before interest, depreciation and taxes (PBIDT):

The PBIDT in fiscal 2009 was Rs.5,564.59 crore (Rs.5,466.06 crore in fiscal
2008). The profit as a percentage of revenues went down from 29.89% in
fiscal 2008 to 24.84% in fiscal 2009. The decrease in the PBIDT of 5.05% as
a percentage of revenues during fiscal 2009 is attributable to:

* Increase in 'total employee cost' of 0.65%.

* Increase in the cost of services rendered by business associates of 0.78%

* Decrease in overseas business expense other than employee cost of 0.40%

* Decrease in other operating expenses of 1.79%

* Net loss in fiscal 2009 over net gain in fiscal 2008 in 'other income' of
5.81 %.

Interest costs:

Interest expenses increased from Rs.3.42 crore in fiscal 2009 to Rs.7.44
crore in fiscal 2009 mainly attributable to finance charges related to
lease contract entered into during fiscal 2009.

Depreciation:

Depreciation charge decreased from Rs.458.78 crore in fiscal 2008 to
Rs.417.46 crore in fiscal 2009. Depreciation charge was 1.86% of revenues
in fiscal 2009 (2.51 % in fiscal 2008). The decrease in depreciation of
0.65% as a percentage of revenues is primarily the net impact of:

* Lower depreciation for computers in current fiscal of 0.89% on account of
a revision in the original estimate of the useful life of computers from
two to four years

* Higher depreciation of 0.27% on additional infrastructural facilities.

Profit before taxes (PBT):

The PBT in fiscal 2009 was Rs.5,139.69 crore (Rs.5003.86 crore in fiscal
2008). As a percentage of revenues, the PBT decreased from 27.36% in fiscal
2008 to 22.94% in fiscal 2009. The primary reason for the decrease in the
PBT of 4.42% as a percentage of revenues is due to:

Decrease in PBIDT by 5.05%:

Increase in PBT due to lower depreciation costs by 0.65 %.

Provision for taxation:

Income tax expenses comprise the current income tax and the net change in
the deferred tax assets and liabilities in the applicable fiscal period
from operations in India and foreign tax jurisdictions. The Company
benefits in India from certain tax incentives under section 10A of the
Income Tax Act, 1961, for the IT services exported from designated
'Software Technology Parks (STP)'. In addition, benefit from tax incentives
applicable to Free Trade Zones are available to the Company in respect of
some of the units located in such zones. The benefits applicable to the
Software Technology Parks (STPs) are due to expire by March 31, 2010.

Minimum Alternative Tax (MAT) paid in accordance with the tax laws, gives
rise to tax credit which according to the Income Tax Act 1961, can be
carried forward for subsequent seven years. Post tax-holiday period for
STP, the Company would have sufficient tax liability to off set these tax
credits. Accordingly, MAT is recognised as an asset in the balance sheet.

Fringe benefit tax (FBT) is payable by the Company on the value of the
benefits provided and/or deemed to be provided to its employees.

The tax expense (excluding FBT) decreased from Rs.470.45 crore in fiscal
2008 to Rs.420.48 crore in fiscal 2009. Tax expense represented 1.88% of
revenues in fiscal 2009 (2.57% in fiscal 2008). The reduction in tax
expense is primarily attributable to increase in the provision for domestic
taxes of Rs.0.80 crore and a reduction in the provision for overseas taxes
of Rs.50.77 crore.

Domestic tax increase of Rs.0.80 crore is primarily on account of (a) lower
current tax of Rs.23.10 crore attributable to incremental exchange loss and
(b) higher deferred tax expense of Rs.25.80 crore arising out of impact of
change in the depreciation charge for STP/SEZ units, post-tax holiday
period.

Overseas taxes were lower by Rs.50.77 crore mainly due to (a) refunds and
reversals of taxes in overseas locations of Rs.86.47 crore coupled with (b)
net increase in tax provisions for overseas jurisdictions of Rs.35.70
crore.

The FBT was Rs.23.00 crore in fiscal 2009 (Rs.24.65 crore in fiscal 2008).
As a percentage of revenues, the expense has reduced to 0.10% in fiscal
2009 as compared to 0.13% in fiscal 2008.

Net profit:

The Company's net profit was Rs.4,696.21 crore in fiscal 2009 (Rs.4,508.76
crore in fiscal 2008). Net profit margin as a percentage of revenues
declined from 24.65% in fiscal 2008 to 20.96% in fiscal 2009. The reduction
of 3.69% is attributable to lower PBT of 4.42% reduction in taxes
(including FBT) of 0.73%.

FINANCIAL POSITION - TCS LIMITED (UNCONSOLIDATED):

Share capital:-

Amount in Rs. crore
As at March 31,
2009 2008

Authorised share capital 220.00 220.00

Issued, subscribed and paid-up 197.86 197.86
share capital

The issued, subscribed and paid-up share capital as at March 31, 2009
comprised Rs.97.86 crore of equity shares of face value of Re. 1/- each and
Rs.100.00 crore of cummulative redeemable preference shares of face value
of Re.1/- each.

The Company proposes to increase the authorized share capital to Rs.325.00
crore.

The Directors have recommended issue of bonus shares in the ratio of 1:1
subject to the approval of the shareholders.

Post bonus issue, the issued, subscribed and paid-up share capital will go
up to Rs.295.72 crore.

Reserves and surplus:

As at March 31, 2009 the balance in the securities premium accountwas
Rs.2,016.33 crore, remaining unchanged from fiscal 2008.

General reserve as at March 31, 2008 was Rs.1,394. 67 crore. On transfer of
10% of the profit after tax for fiscal 2009 amounting to Rs.469.62 crore
(previous fiscal Rs.450.88 crore), the general reserve as at March 31, 2009
increased to Rs.1,864.29 crore.

Balance in the profit and loss account as at March 31, 2009 was at
Rs.9,990.41 crore (Rs.7,374.89 crore as at March 31, 2008).

Foreign currency translation reserve was Rs.99.22 crore as at March 31,
2009 (Rs.36.21 crore as at March 31, 2008). This increase is primarily on
account of revaluation of loans outstanding with overseas subsidiaries as
at March 31, 2009.

Loss on cash flow hedges was Rs.721.86 crore as at March 31, 2009 (loss of
Rs.15.15 crore as at March 31, 2008). This loss represents effect of mark-
to-market valuation of cash flow hedges taken for projected revenues. Of
this loss in the hedging reserve account, Rs.462.63 crore relates to fiscal
2010.

Reserves and surplus as at March 31, 2009 was Rs.13,248.39 crore, an
increase of 22.59% over Rs.10,806.95 crore as at March 31, 2008 due to
accretion of profits for fiscal 2009.

Loans:

Secured loans as at March 31, 2009 aggregated Rs.32.63 crore (Rs.9.27 crore
as at March 31, 2008). This increase is primarily due to finance lease
obligations of Rs.31.18 crore undertaken as at March 31, 2009 (Rs.'Nil' as
at March 31, 2008). These obligations are secured against fixed assets.
Bank overdrafts as at March 31, 2009 aggregated Rs.1.45 crore (Rs.9.27
crore as at March 31, 2008). These overdrafts are secured against domestic
book debts.

Unsecured loans as at March 31, 2009 stood at Rs.7.74 crore (Rs.8.98 crore
as at March 31, 2008). Out of the above unsecured loans, Rs.1.24 crore is
repayable within one year.

Deferred tax liability (net):

As stated in the accounting policy (see notes to accounts, schedule Q1
(k)), deferred tax assets and liabilities are offset, taxjurisdiction wise.
Schedule 'E' brings out details of component wise deferred tax balances
where the net values result into liabilities or assets, jurisdiction wise.
A combined view of all deferred tax assets and liabilities, across all tax
jurisdictions is summarized below.

Amount in Rs. crore
Liabilities Assets
March March March March Increase
31, 31, 31, 31, / (dec-
2009 2008 2009 2008 rease)
Foreign branch
profit tax (net
liability) (108.86) (104.70) (4.16)

Depreciation
(net liability) (61.54) (61.54)

Depreciation
(net asset) 0.86 11.43 (10.57)

Employee
benefit
(net asset) 31.13 23.53 7.60

Provision for
doubtful debts
(net asset) 19.46 13.91 5.55

Others
(net asset) 19.55 6.04 13.51

Others
(net liability) (4.70) 4.70

Total asset /
(liability) (170.40) (109.40) 71.00 54.91 (44.91)

Fixed assets:

Addition to the gross block (excluding capital work-inprogress) in fiscal
2009 amounted to Rs.1,183.19 crore (Rs.943.87 crore in fiscal 2008). The
significant additions were:

* Land and buildings of Rs.430.91 crore in fiscal 2009 (Rs.303.90 crore in
fiscal 2008)

* Leasehold improvements of Rs.140.78 crore in fiscal 2009 (Rs.87.05 crore
in fiscal 2008)

* Computers of Rs.329.51 crore in fiscal 2009 (Rs.293.59 crore in fiscal
2008)

* Office equipment, electrical installations and furniture and fixtures of
Rs.278.87 crore in fiscal 2009 (Rs.256.05 crore in fiscal 2008).

In fiscal 2009 the following premises were added:

Facility Location Built-up Area
(in square feet)

Infocity Tower 3 Ahmedabad 89,016
Rameshwar Baroda 55,297
Pioneer (ITPL) Bangalore 472,698
Sirusseri Chennai 1,394,958
Synergy Park Hyderabad 99,205
Kalinga Park Bhubaneshwar 132,381
Kensington Mumbai 174,580
Empire Plaza Mumbai 132,800
DLF Akruti Pune 222,120
Awadh Park Lucknow 123,365
DLF Gurgaon Gurgaon 138,093
Total 3,034,513

The amount of capital work in progress (CWIP) of Rs.685.13 crore as at
March 31, 2009 (Rs.889.74 crore as at March 31, 2008) mostly relates to
construction/ improvement of facilities which are expected to be ready for
use during fiscal 2010 and beyond.

The Company made contractual commitments to vendors who are executing
various infrastructure projects. The estimated amount of such contracts
remaining to be executed on capital account were Rs.637.87 crore as at
March 31, 2009 (Rs.503.40 crore as at March 31, 2008).

The number of seats available in India as at March 31, 2009 was 101,623
(89,622 seats as at March 31, 2008).

Investments:

Summary of the Company's investments:-

Amount in Rs. crore
As at March 31,
2009 2008
Trade investments, bonds and
debentures 4,530.11 2,108.32

Investments in mutual funds 1,410.42 2,405.51

Total investments 5,940.53 4,513.83

Less: provision for diminution
in value of investments 4.50 4.50

Net investments 5,936.03 4,509.33

The Company had been investing in various mutual funds. These are typically
investments in short-term debt funds to gainfully use the excess cash
balances with the Company. Investments in mutual funds aggregated
Rs.1,410.42 crore as at March 31, 2009 (Rs.2,405.51 crore as at March 31,
2008), a reduction of Rs.995.09 crore. While investing in short-term
instruments, the Company balances tax-efficient returns with risks involved
in such investments. Consequently, there has been an increase in
investments in bank fixed deposits of duration greater than three months,
Rs.1,125.33 crore as at March31, 2009 (Rs.125.28 crore as at March 31,
2008).

During fiscal 2009, the Company has made the following trade investments:

Investments:

Acquisition of TCS e-Serv Limited (formerly Citigroup Global Services
Limited):

Details:

During the fiscal 2009 TCS Limited acquired 1,19,36,313 shares (96.26
percent equity interest) for a consideration of Rs.2,449.48 crore.

Investments:

Investment in National Power Exchange Limited

Details:

During the fiscal 2009 TCS invested in 25,00,000 shares (representing 50%
of National Power Exchange Limited share capital) for a consideration of
Rs.2.50 crore. This company was established to promote trading of
electrical power in India.
Deferred tax assets (net)

Details of deferred tax assets (net) have been explained under the head of
'Deferred tax liabilities (net)'.

Inventories:

The Company had inventories of Rs.16.95 crore as at March 31, 2009
(Rs.17.19 crore as at March 31, 2008) at its Goa manufacturing plant. The
inventory constitutes raw materials, components, sub-assemblies and
finished goods.

Current assets, loans and advances:

Unbilled revenues:-

Unbilled revenues comprise revenues recognised in relation to efforts
incurred on fixed-price-fixed-time contracts and time and material
contracts not billed as of the year-end. Unbilled revenues were at
Rs.817.06 crore as at March 31, 2009 (Rs.870.18 crore as at March 31, 2008)
representing 3.65% of the revenues for fiscal 2009 (4.76% for fiscal 2008).

Sundry debtors:

Sundry debtors as at March 31, 2009 aggregated Rs.3,717.73 crore
(Rs.3,747.01 crore as at March 31, 2008). Provision for bad and doubtful
debts in fiscal 2009 was Rs.110.08 crore (Rs.69.75 crore in fiscal 2008).
The amounts considered bad and doubtful as a percentage of total revenues
was 0.49% as at March 31, 2009 (0.38% as at March 31, 2008). The increase
in provisions for bad and doubtful debts is mainly attributed to a few
overseas clients facing economic difficulties and some domestic clients
whose dues fell beyond stipulated period.

Sundry debtors as at March 31, 2009 were 16.59 % of revenues for fiscal
2009 (20.49% as at March 31, 2008). Days Sales Outstanding (DSO) improved
by 14 days, from 75 days as at March 31, 2008 to 61 days as at March 31,
2009.

Cash and bank balances:

The Company had cash and bank balances of Rs.1,605.26 crore as at March 31,
2009 (Rs.527.52crore as at March 31, 2008). The balances with scheduled
banks (including bank deposits and cash in transit) in India aggregated
Rs.1,205.58 crore as at March 31, 2009 (Rs.192.09 crore as at March 31,
2008). This increase in deposits with scheduled banks is in line with the
shortterm investment strategy adopted in the present economic climate. The
balances with foreign banks were Rs.398.55 crore as at March 31, 2009
(Rs.333.78 crore as at March 31, 2008).

Loans and advances:

* Loans and advances as at March 31, 2009 were Rs.3,089.85 crore
(Rs.2,166.60 crore as at March 31, 2008). Significant items of loans and
advances are:

* Loans to subsidiary companies of Rs.536.79 crore as at March 31, 2009
(Rs.446.74 crore as at March 31, 2008)

* Advances recoverable in cash or kind or for value to be received
Rs.1,316.54 crore as at March 31, 2009 (Rs.970.77 crore as at March 31,
2008)

* Net advance tax (including refunds receivable) Rs.337.86 crore as at
March 31, 2009 (Rs.178.47 crore as at March 31, 2008)

* MAT credit entitlement of Rs.775.14 crore as at March 31, 2009 (Rs.351.58
crore as at March 31, 2008)

* Reduction in loans and advances to employees Rs.123.52 crore as at March
31, 2009 (Rs.219.04 crore as at March 31, 2008).

Current liabilities:

Current liabilities went up to Rs.3,501.13 crore as at March 31, 2009 as
compared to Rs.2,404.18 crore as at March 31, 2008. This increase is
primarily due to:

* Change in fair values of foreign exchange forward and currency option
contracts Rs.683.18 crore as at March 31, 2009 (Rs.191.08 crore as at March
31, 2008)

* Increase in payables to subsidiary companies Rs.381.41 crore as at March
31, 2009 (Rs.229.56 crore as at March 31, 2008)

* Higher advances from customers Rs.197.38 crore as at March 31, 2009
(Rs.44.76 crore as at March 31, 2008)

* Increases in 'other liabilities', mainly on account of subcontracting
expenses, selling and administrative expenses and employee incentives which
are in line with the increase in business, infrastructure and employee
base. Provisions

Provisions:

Provisions made towards taxes, employee retirement benefits, proposed
dividend, tax on dividend and warranties aggregated Rs.1,450.23 crore as at
March 31, 2009 (Rs.1,187.44 crore as at March 31, 2008).

The increase is mainly attributable to higher income tax provisions of
Rs.460.97 crore as at March 31, 2009 (Rs.277.15 crore as at March 31,
2008), provision for increased employee benefits Rs.407.29 crore as at
March 31, 2009 (Rs.334.83 crore as at March 31, 2008) and an additional
provision of Rs.8.19 crore for the proposed dividend on redeemable
preference shares (including tax on dividend).

CASH FLOW - TCS LIMITED (UNCONSOLIDATED):

The Company's growth has been financed largely by cash generated from
operations. The Company has sufficient cash generated from operations for
meeting its working capital requirements as well as the requirements for
capital expenditure. In addition, the Company has short term working
capital facilities with various banks.

Banking and financing arrangements:

As at March 31, 2009, the Company had available lines of credit with
multiple bankers aggregating Rs.2,080.00 crore interchangeable between
fund-based and non-fund based limits. As at March 31, 2009 TCS utilised
Rs.584.42 crore of these limits. The available unutilised facility as at
March 31, 2009 was Rs.1,495.58 crore. In addition TCS had a separate
additional banking limit of GBP 75 million.

Cash movement summary:

Amount in Rs. crore
Particulars Fiscal Fiscal Increase/
2009 2008 (decrease)
Cash and cash equivalents
at beginning of the year 398.79 429.38 (30.59)

Net cash provided by
operating activities 4,874.12 3,827.91 1,046.25

Net cash used in investing
activities (3,162.22) (2,405.03) (757.19)

Net cash used in financing
activities (1,588.25) (1,425.61) (162.64)

Net increase / (decrease) in
cash and cash equivalents 123.65 (2.73) 126.38

Exchange difference on
translation of foreign
currency cash and cash
equivalents 18.21 (27.86) 46.07

Cash and cash equivalents
at end of the year 540.65 398.79 141.86

Cash flow from operations:

Profit before taxes and
exceptional items 5,139.69 5,003.86 135.83

Add:

Depreciation 417.46 458.78 (41.32)

Others (243.35) (93.95) (149.40)

Operating profit before
working capital changes 5,313.80 5,368.69 (54.89)

Effect of working capital
changes 359.74 (767.19) 1,126.93

Cash generated from
operations 5,673.54 4,601.50 1,072.04

Tax payments made (799.42) (773.59) (25.83)

Net cash provided by
operations 4,874.12 3,827.91 1,046.21

In fiscal 2009 the Company generated net cash of Rs.4,874.12 crore
(Rs.3,827.91 crore in fiscal 2008) from operating activities. Apart from
profit before taxes of Rs.5,139.69 crore (Rs.5,003.86 crore in fiscal 2008)
and adjustments on account of depreciation of Rs.417.46 crore in fiscal
2009 (Rs.458.78 crore in fiscal 2008), other significant items contributing
in generation/use of cash from operating activities relating to working
capital changes are given in the table below.

Amount in Rs. crore
Particulars Fiscal Fiscal Increase/
2009 2008 (decrease)
Adjustments for:

Inventories 0.24 (5.13) 5.37

Unbilled revenues 53.12 (346.30) 399.42

Sundry debtors (11.05) (957.57) 946.52

Loans and advances (198.73) (106.18) (92.55)

Current liabilities and
provisions 516.16 647.99 (131.83)

Effect of working
capital changes 359.74 (767.19) 1,126.93

Cash flow from investing activities:

Amount in Rs. crore
Particulars Fiscal Fiscal Increase/
2009 2008 (decrease)

(Purchase) of fixed assets (978.58) (1,075.76) 97.18

(Purchase) of trade
investments (2,451.98) (4.92) (2,447.06)

Loans given to
subsidiaries (net) (29.28) (196.41) 167.13

Sale/(purchase) of other
investments (net of mutual
fund dividends) 1,176.86 (1,162.28) 2,339.14

(Purchase) of fixed
deposits with banks
having maturity more
than three months (935.00) (0.13) (934.87)

Others 55.76 34.47 21.29

Net cash used for
investing activities (3,162.22) (2,405.03) (757.19)

In fiscal 2009 the Company used Rs.3,162.22 crore on investing activities
(Rs.2,405.03 crore in fiscal 2008).

The significant items in fiscal 2009 were:

* Purchase of fixed assets Rs.978.58 crore (Rs.1,075.76 crore in fiscal
2008).

* Purchase of trade investments Rs.2,451.98 crore primarily for the
acquisition of shares of Citigroup Global Services Limited in fiscal 2009.

* Sale/redemption of mutual fund investments of Rs.1,176.86 crore (purchase
of Rs.1,162.28 crore in fiscal 2008).

* Loans given to subsidiaries Rs.29.28 crore (Rs.196.41 crore in fiscal
2008).

* Investments in bank fixed deposits of maturity greater than three months
Rs.935.00 crore.

* Other cash flows related to investing activities like proceeds from sale
of fixed assets, inter-corporate deposits placed/refunded, dividends
received from subsidiaries and from other investments and interest received
aggregating Rs.55.76 crore in fiscal 2009 (Rs.34.47 crore in fiscal 2008).

Cash flow from financing activities:

Amount in Rs. crore
Particulars Fiscal Fiscal Increase/
2009 2008 (decrease)
Proceedsl (repayments)
from/of borrowings (net) 22.12 (32.49) 54.61

Dividends paid including
dividend tax (1,602.88) (1,488.40) (114.48)

Interest paid (7.49) (3.30) (4.19)

Issue of preference shares
(net of issue expenses) - 98.58 (98.58)

Net cash used in
financing activities (1,588.25) (1,425.61) (162.64)

In fiscal 2009 the significant item of cash used in financing activities
was payment of dividend Rs.1,602.88 crore including dividend tax
(Rs.1,488.40 crore in fiscal 2008).

TCS LIMITED (CONSOLIDATED):

The Management Discussion and Analysis below relates to the consolidated
audited financial statements of TCS Limited and includes the results of its
subsidiaries. The discussion should be read in conjunction with the
financial statements and the related 'Notes to the Consolidated Accounts'
of TCS Limited for the year ended March 31, 2009.

1. RESULTS OF OPERATIONS - TCS LIMITED (CONSOLIDATED):-

The table below gives an overview of the financial results of TCS Limited
(consolidated):

Amount in Rs. crore
Particulars For the year ended For the year ended
31st March, 2009 31st March, 2008 % Incr-
Revenue from operations Rs. crore % of Rs. crore % of ease /
revenues revenues (decr-
ease)

Information technology
and consultancy services 26781.86 96.29 21437.43 94.77 24.93

Sale of equipment and 1031.02 3.71 1182.09 5.23 (12.78)
software licenses

Total revenues 27812.88 100.00 22619.52 100.00 22.96
Expenditure:

Employee costs 9901.58 35.60 7800.58 34.49 26.93

Overseas business
expenses (employee
allowances paid 4572.28 16.44 3610.47 15.96 26.64
overseas)

Total employee costs 14473.86 52.04 11411.05 50.45 26.84
Overseas business
expenses (other than
employee allowances
paid overseas) 460.07 1.65 438.41 1.94 4.94

Services rendered by
business associates
and others 1108.71 3.99 850.49 3.76 30.36

Other operating 4600.44 16.54 4208.19 18.60 9.32
expenses

Total expenditure 20643.08 74.22 16908.14 74.75 22.09
Other income (net) (426.99) (1.54) 728.29 3.22 (158.63)

Profit before interest,
depreciation and taxes 6742.81 24.24 6439.67 28.47 4.71

Interest 28.66 0.10 30.01 0.13 (4.50)

Depreciation 564.08 2.03 563.71 2.49 0.07

Profit before taxes 6150.07 22.11 5845.95 25.84 5.20

Provision for taxes:

Income tax expense
(including deferred
tax benefit and MAT
credit entitlement) 812.51 2.92 760.11 3.36 6.89

Fringe benefit tax 26.44 0.10 26.20 0.12 0.92

Net profit for the
year before minority
interest and share
of profit of associate 5311.12 19.10 5059.64 22.37 4.97

Minority interest (54.00) (0.19) (34.42) (0.15) 56.89

Share of (loss)/profit (0.70) - 0.80 - (187.50)
of associate

Net profit for the 5256.42 18.90 5026.02 22.22 4.58
year

Revenues:

Revenues from operations:-

The Company's total consolidated revenues increased in fiscal 2009 to
Rs.27,812.88 crore from Rs.22,619.52 crore in fiscal 2008, a growth of
22.96%. Information technology and consultancy services revenues which was
96.29% of revenues in fiscal 2009 (94.77% in fiscal 2008) increased by
24.93 % to Rs.26,781.86 crore in fiscal 2009 from Rs.21,437.43 crore in
fiscal 2008.

Consolidated revenues from sale of equipment and software licenses
decreased by 12.78 % to Rs.1,031.02 crore in fiscal 2009 from Rs.1,182.09
crore in fiscal 2008.

Analysis of revenue growth:

The increase in revenues is mainly attributable to the growth in the volume
of business (17.74%), impact of exchange rates (10.80%) and acquisition of
TCS e-Serve Limited (1.59%). This was offset by reduction in billing rates
(4.89%) and shift of on-site business to offshore (2.27%). Shift of
revenues from on-site to offshore was a strategic decision.

Revenue by segments:

The classification of revenues by geography and industry practice is more
relevant when viewed on a consolidated basis.

Revenue by geography :

% of revenues
Geography 2008-09 2007-08

Americas 51.38 50.35
UK 18.99 19.91
Europe 10.53 9.28
India 7.85 9.04
AsiaPacific 4.75 5.27
IberoAmericas 4.71 4.45
Middle East and Africa 1.79 1.70
Total 100.00 100.00

The Company has been focusing on diversifying the source of its revenues
from multiple geographies across the globe.

Revenues by industry practice:
% of revenues
Major industry practice 2008-09 2007-08
Banking, Financial Services and
Insurance (BFSI) 43.32 44.61

Manufacturing 10.08 9.93

Retail and Distribution 8.91 6.52

Telecom 16.30 16.32

Others 21.39 22.62

Total 100.00 100.00

Revenues from the BFSI segment have increased by Rs.1,955.94 crore in
fiscal 2009. Major industry practice verticals have grown well. Hi-Tech,
Life Sciences and Healthcare, Energy Utilities and Transportation included
in 'others' in the above chart also witnessed good growth.

Revenue by significant services;

Service lines 2008-09 2007-08
% of % of
revenues revenues
IT solutions and services
Application development
and maintenance 48.46 48.34
Business intelligence 8.13 9.66
Enterprise solutions 12.60 13.10
Assurance services 4.26 3.83
Subtotal-IT solutions and
services 73.45 74.93
Engineering and industrial
services 6.01 5.35
Infrastructure services 8.04 6.54
Global consulting 2.68 3.36
Asset leverage solutions 2.93 3.59
Business process outsourcing 6.89 6.23
Total revenues 100.0 100.0

The Company's newer service offerings such as Infrastructure services,
Assurance services and Business Process Outsourcing have been showing
significant growth. Engineering and Industrial Services (EIS) business is
also growing.

The Company generated 44.79% of its revenues in fiscal 2009 from fixed
price, fixed time contracts (44.06% in fiscal 2008).

The distribution of Company's revenues from on-site/ off-shore in fiscal
2009 are as follows: off-shore services 44.22% (41.92% in fiscal 2008) on-
site services 51.19% (53.87% in fiscal 2008) services from global and
regional delivery centers 4.59% (4.21 % in fiscal 2008).

Expenditure:

Employee costs and overseas business expenses:-

The consolidated 'Total employee costs' for fiscal 2009 was Rs.14,473.86
crore (Rs.11,411.05 crore in fiscal 2008). Employee costs as a percentage
of revenues was 52.04% in fiscal 2009 (50.45% in fiscal 2008).

This increase of 1.59% as a percentage of revenues is attributable
primarily to:

* Increase in head count.

* Increase in compensation package, particularly in India.

* Effect of exchange variation for foreign currency allowances paid to
employees deployed at various overseas locations

* Increased contributions to retirement funds.

Utilisation of manpower resources including trainees was 69.40% as at March
31, 2009 (75.80% as at March 31, 2008). The utilisation excluding trainees
was 79.70% as at March 31, 2009 (79.10% as at March 31, 2008).

Overseas business expenses (other than employee allowances paid overseas):

Overseas business expenses (other than employee allowances paid overseas)
increased from Rs.438.42 crore in fiscal 2008 to Rs.460.07 crore in fiscal
2009. As a percentage of revenues these expenses decreased from 1.94% in
fiscal 2008 to 1.65% in fiscal 2009. Overseas travel which constituted the
largest component, increased from Rs.274.10 crore in fiscal 2008 (1.21 % of
revenues) to Rs.303.87 crore in fiscal 2009 (1.09% of revenues). This
reduction in travel related costs as a percentage of revenues of 0.12% is
primarily due to controls put in place and increased utilization of
videoconferencing and Voice Over Internet Protocol (VOIP) facilities.

Services rendered by business associates and others:

Expenses on business associates increased from Rs.850.49 crore in fiscal
2008 to Rs.1,108.71 crore in fiscal 2009. As a percentage of revenues,
these expenses increased from 3.76% in fiscal 2008 to 3.99% in fiscal 2009.
The increase of 0.23% is attributable to the need for hiring the services
of professionals with required skill sets, not available within the
Company. The management conducts periodic reviews of the need for these
associates and the availability of the required skill sets within the
Company and manages these costs appropriately.

Other operating expenses:

Nature of expenses For the year For the year
ended ended
March 31, 2009 March 31, 2008
Rs. crore % of Rs. crore % of
revenues revenues
Software, hardware
and material costs 1,031.22 3.71 1,068.26 4.72

Software licenses 423.51 1.52 466.23 2.06

Communication 390.33 1.40 308.42 1.36

Travelling and
conveyance 408.64 1.47 419.45 1.85

Rent 595.89 2.14 423.85 1.87

Legal and
professional 256.63 0.92 198.33 0.88

Repairs and
maintenance 176.53 0.63 145.53 0.64

Electricity 196.23 0.71 158.22 0.70

Recruitment and
training 120.99 0.44 173.03 0.76

Others 1,000.47 3.60 846.87 3.76

Total 4,600.44 16.54 4,208.19 18.60

Other operating expenses have increased from Rs.4,208.19 crore in fiscal
2008 to Rs.4,600.44 crore in fiscal 2009. As a percentage of revenues,
these expenses decreased from 18.60% in fiscal 2008 to 16.54% in fiscal
2009, primarily due to:

* Reduction in the cost of software, hardware and material procured for
rendering systems integration projects by 1.02%

* Reduction in cost of software licenses procured by 0.54%.

* Reduction in recruitment and training costs by 0.32%.

* Reduction in travel and conveyance costs by 0.38%.

* Reduction in 'other expenses' by 0.16%.

* Reductions in the above items of expenses are results of cost control
measures taken by the Company.

However, rent costs as a percentage of revenues went up from 1.87% in
fiscal 2008 to 2.14% in fiscal 2009 mainly due to requirement of additional
space commensurate with growth of business.

Other income:

Consolidated 'other income' in fiscal 2008 was a gain of Rs.728.29 crore,
which in fiscal 2009 was a loss of Rs.426.99 crore.

The primary reasons for the decrease in 'other income' are: net exchange
loss of Rs.781.36 crore in fiscal 2009 as compared to a net exchange gain
of Rs.500.49 crore in fiscal 2008 partially offset by higher interest
income of Rs.102.32 crore in fiscal 2009 (fiscal 2008 Rs.56.99 crore),
higher dividend income of Rs.125.89 crore in fiscal 2009 (Rs.107.98 crore
in fiscal 2008), higher profit on sale of mutual funds and other current
investments Rs.50.41 crore in fiscal 2009 (Rs.15.70 crore in fiscal 2008),
increased profit on sale of fixed assets of Rs.7.31 crore (loss of Rs.1.45
crore in fiscal 2008) and higher rent and miscellaneous income of Rs.68.44
crore in fiscal 2009 (Rs.45.04 crore in fiscal 2008). Profit before
interest, depreciation and taxes (PBIDT) PBIDT in fiscal 2009 was
Rs.6,742.81 crore, (Rs.6,439.67 crore in fiscal 2008). The profit as a
percentage of revenues was 24.24% in fiscal 2009 (28.47% in fiscal 2008).
The decline in the PBIDT of 4.23% as percentage of revenues in fiscal 2009
is attributable to: increase in 'total employee cost' of 1.59% increase in
the cost of services rendered by business associates of 0.23% decrease in
overseas business expenses such as travel, marketing and office expenses of
0.29% decrease in operating expenses of 2.06% net loss in fiscal 2009 over
net gain in fiscal 2008 in 'other income' as percentage of revenues of
4.76%. Interest costs Interest costs decreased from Rs.30.01 crore in
fiscal 2008 to Rs.28.66 crore in fiscal 2009. Depreciation Depreciation
charge has increased from Rs.563.71 crore in fiscal 2008 to Rs.564.08 crore
in fiscal 2009. As a percentage of revenues the depreciation charge was
2.49% in fiscal 2008 and 2.03% in fiscal 2009. The decrease in depreciation
of 0.46% as a percentage of revenues is primarily attributable to: lower
depreciation for computers in current fiscal of 0.68% due to revision in
the original estimate of the useful life from two to four years higher
depreciation on account of infrastructure added in fiscal 2009 of 0.20%.

Profit before taxes:

Profit before taxes in fiscal 2009 was Rs.6,150.07 crore (Rs.5,845.95 crore
in fiscal 2008). As a percentage of revenues the profit reduced from 25.84%
in fiscal 2008 to 22.11 % in fiscal 2009. The decline in profit before tax
of 3.73% as a percentage of revenues can be attributed to lower PBIDT of
4.23%, partially offset by lower depreciation of 0.46 % and lower interest
costs of 0.03%.

Provision for taxation:

Income tax expense comprises tax on income from operations in India and
foreign tax jurisdictions. Tax expenses relating to operations are
determined in accordance with tax laws applicable in countries where such
operations are carried out.

The Company's consolidated tax expense (excluding fringe benefit tax) in
fiscal 2009 increased to Rs.812.51 crore from Rs.760.11 crore in fiscal
2008. As a percentage of revenues, it decreased to 2.92% in fiscal 2009
from 3.36% in fiscal 2008. As a percentage of profit before taxes, the tax
charge has gone up from 13.00% in fiscal 2008 to 13.21 % in fiscal 2009.

The increase in tax expense of Rs.52.40 crore is primarily attributable to:

* Higher net tax liabilities in some of our subsidiaries resulting in
additional tax expense of Rs.102.18 crore

* Lower net tax liabilities for TCS Limited (unconsolidated) of Rs.51.60
crore as explained earlier.

The tax expense on account of FBT was Rs.26.44 crore in fiscal 2009
(Rs.26.20 crore in fiscal 2008). As a percentage of revenues, FBT has come
down to 0.10% in fiscal 2009 as compared to 0.12% in fiscal 2008.

Net profit before minority interest and share of profit of associates:

The Company's net profit before minority interest increased from
Rs.5,059.64 crore in fiscal 2008 to Rs.5,311.12 crore in fiscal 2009. Net
profit margin on revenues decreased from 22.37% in fiscal 2008 to 19.10% in
fiscal 2009. The reduction in net profit margin of 3.27% is attributable to
a decline of PBT margin of 3.73% offset by lower nettaxes (including FBT)
of 0.46% in fiscal 2009.

Minority interest:

Minority interest represents the amount of net profit attributable to third
party ownership interests in the Company's subsidiaries.

Minority interest registered an increase from Rs.34.42 crore in fiscal 2008
to Rs.54.00 crore in fiscal 2009.

The details of the increase in minority interest are shown in the table
below.
Amount in Rs. crore
As at As at Increase/
March March (decrease)
31, 2009 31, 2008

CIVIC Limited 55.01 42.93 12.08

Tata Consultancy
Services (China)
Co., Ltd. 3.16 (1.23) 4.39

Diligenta Limited (9.57) (8.18) (1.39)

TCS e-Serve Limited 3.20 - 3.20

C-Edge Technologies
Limited 0.08 0.14 (0.06)

MP Online Limited - (0.07) 0.07

Tata Consultancy

Services (Africa)
(PTY) Ltd. 2.12 0.83 1.29

Total 54.00 34.42 19.58

Share of profit of associates:

Investments in companies in which TCS Limited or any of its subsidiaries
has significant influence by virtue of ownership of 20% to 50% in the
equity capital of the said companies are defined as 'investments in
associates'.

In its consolidated books of accounts the Company recognises its share of
income or loss in the investee companies on the principles of equity method
of accounting.

The Company's share of profit/loss of associates as a result of such
minority shareholding was a loss of Rs.0.70 crore in fiscal 2009 as
compared to a profit of Rs.0.80 crore in fiscal 2008.

Net profit:

The Company's consolidated net profit was Rs.5,256.42 crore in fiscal 2009
(18.90% of revenues) against Rs.5,026.02 crore (22.22% of revenues) in
fiscal 2008.

2. FINANCIAL POSITION - TCS LIMITED (CONSOLIDATED):

Share capital:

Amount in Rs. crore
As at As at
March March
31, 2009 31, 2008

Authorised share capital 220.00 220.00

Issued, subscribed and paid-up 197.86 197.86
share capital

Composition of share capital has been explained under the heading of 'Share
capital' in MD & A for TCS Limited (unconsolidated).

Reserves and surplus:

Securities premium account stood at Rs.2,016.33 crore as at March 31, 2009.
(Rs.2,016.33 crore as at March 31, 2008).

The opening balance of general reserve as at March 31, 2008 was Rs.1,406.81
crore. In fiscal 2009 Rs.496.56 crore was transferred to the general
reserve from the profit and loss account. The closing balance as on March
31, 2009 was Rs.1,903.37 crore.

Balance in the profit and loss account as at March 31, 2009 was at
Rs.11,835.03 crore (Rs.8,688.21 crore as at March 31, 2008).

Foreign currency translation reserve was Rs.471.94 crore as at March 31,
2009 (Rs.0.64 crore as at March 31, 2008). The increase is primarily on
account of translation of financials of overseas subsidiaries into the
reporting currency of the holding company. The major subsidiaries
contributing to this increase are Tata America International Corporation
(Rs.234.14 crore), Tata Consultancy Services Netherlands BV (Rs.86.74
crore), TCS Iberoamerica SA (Rs.31.34 crore) and Tata Consultancy Services
Asia Pacific Pte Ltd. (Rs.48.05 crore).

Loss on cash flow hedges was Rs.729.94 crore as at March 31, 2009 (loss of
Rs.15.15 crore as at March 31, 2008). This loss represents effect of mark-
to-market valuation of cash flow hedges taken for projected revenues. Of
this loss in the hedging reserve account, Rs.470.72 crore relates to the
immediate next fiscal period.

Reserves and surplus at the end of fiscal 2009 was Rs.15,502.15 crore, an
increase of 28.09% over Rs.12,102.26 crore at the end of fiscal 2008.

Loans:

Secured loans as at March 31, 2009 were Rs.37.89 crore (Rs.18.07 crore as
at March 31, 2008).

Bank overdrafts as at March 31, 2009 aggregated Rs.1.45 crore (Rs.9.27
crore as at March 31, 2008) and are secured against domestic book debts,
hypothecation of inventories and other current assets. The Company's
obligations under finance lease was Rs.36.44 crore as at March 31, 2009
(Rs.8.80 crore as at March 31, 2008) and these are also secured against
fixed assets obtained under finance lease arrangements.

Unsecured loans as at March 31, 2009 were Rs.525.32 crore (Rs.436.95 crore
as at March 31, 2008). Loans from banks as at March 31, 2009 were at
Rs.512.37 crore (Rs.422.29 crore as at March 31, 2008). These were
commercial borrowings taken by the Company and by its North American
subsidiary. Loans repayable within one year are Rs.513.63 crore as at March
31, 2009 (Rs.22.44 crore as at March 31, 2008). Other unsecured loans were
Rs.12.95 crore as at March 31, 2009 (Rs.14.66 crore as at March 31, 2008).

Deferred tax liability (net):

As stated in the accounting policies (see notes to accounts, schedule Q1
(I)), deferred tax assets and liabilities are offset, taxjurisdiction wise.
Schedule 'E' brings out details of component-wise deferred tax balances
where the net values result into liabilities or assets, jurisdiction wise.
A combined view of all deferred tax assets and liabilities, across all tax
jurisdictions is summarized below.

Amount in Rs. crore
Liabilities Assets
March March March March Increase
31, 31, 31, 31, / (dec-
2009 2008 2009 2008 rease)

Foreign branch
profit tax (net
liability) (108.86) (104.70) (4.16)

Foreign branch
profit tax (net
asset) 0.53 3.08 (2.55)

Depreciation
(net liability) (68.33) (7.90) (60.43)

Depreciation
(net asset) 7.89 (7.89)

Employee
benefit
(net asset) 56.04 47.66 8.38

Provision for
doubtful debts
(net asset) 32.07 17.73 14.34

Others
(net liability) (8.66) (23.45) 14.79

Others
(net asset) 28.70 26.66 2.04

Total asset /
(liability) (185.85) (136.05) 117.34 103.02 (35.48)

Fixed assets:

Additions to the gross block excluding CWIP in fiscal 2009 amounted to
Rs.1,659.63 crore (Rs.1,157.15 crore in fiscal
2008). The significant items of additions in fiscal 2009 were:

* Land and buildings of Rs.448.23 crore in fiscal 2009 (Rs.398.62 crore in
fiscal 2008)

* Leasehold improvements of Rs.192.24 crore in fiscal 2009 (Rs.89.19 crore
in fiscal 2008)

* Computers of Rs.543.54 crore in fiscal 2009 (Rs.338.50 crore in fiscal
2008)

* Office equipment, electrical installations and furniture and fixtures of
Rs.442.39 crore in fiscal 2009 (Rs.327.11 crore in fiscal 2008).

The amount in CWIP was Rs.705.49 crore as at March 31, 2009 (Rs.906.87crore
as at March 31, 2008) mostly related to construction/improvement of
facilities which are likely to be ready for use in fiscal 2010 and beyond.
This CWIP included capital advances of Rs.181.57 crore as at March 31, 2009
(Rs.243.81 crore as at March 31, 2008).

The Company made contractual commitments to vendors who are executing
various infrastructure projects. The estimated amount of such contracts
remaining to be executed on capital account was Rs.664.59 crore as at March
31, 2009 (Rs.515.88 crore as at March 31, 2008).

Goodwill on consolidation:

Goodwill on consolidation as at March 31, 2009 was Rs.3,261.40 crore
(Rs.1,264.95 crore as at March 31, 2008). The Company acquired 96.26 % of
equity interest in TCS e-Serve Limited (formerly known as Citigroup Global
Services Limited). On consolidation with TCS e-Serve Limited, a goodwill of
Rs.1,952.18 crore has been recognized in fiscal 2009. Details of goodwill
on consolidation as at March 31, 2009 and March 31, 2008 are shown below:

Amount in Rs. crore
As at As at Increase/
March March (decrease)
31, 2009 31, 2008

CIVIC Limited 296.16 296.16 -

Tata America

International

Corporation 161.30 170.36 (9.06)

Tata Consultancy
Services

Netherlands BV 336.03 314.94 21.09

TCS Sverige AB 25.35 27.17 (1.82)

TCS Iberoamerica

SA 305.55 264.88 40.67

AP Online Limited 0.25 0.25 -

TCS FNS Pty Limited 138.09 144.70 (6.61)

Diligenta Limited 46.49 46.49 -

TCS e-Serve Limited 1,952.18 - 1,952.18

Total 3,261.40 1,264.95 1,996.45

Investments:

Summary of the investments:-

Amount in Rs. crore

As at March 31,
2009 2008

Investments in fully paid-up equity shares of
associates and others (unquoted) 8.68 5.61

Investments in fully paid-up preference shares
of associates and others (unquoted) 9.31 9.28

Investments in bonds and debentures (quoted) 11.99 43.14

Investments in bonds and debentures (unquoted) - 0.10

Investments in mutual funds (unquoted) 1,584.43 2,548.03

Total investments 1,614.41 2,606.16

Investments in mutual funds aggregated Rs.1,584.43 crore as at March 31,
2009 (Rs.2,548.03 crore as at March 31, 2008). During fiscal 2009 the
Company has reduced its investments in mutual funds by Rs.963.60 crore and
increased its balances in deposit accounts with banks in India by
Rs.1,214.80 crore.

Trade investments/mergers/liquidations during fiscal 2009 through
subsidiaries



Name of subsidiaries:

Investment in Tata Consultancy Services (Thailand) Limited

Details:

Subscription to 100 percent share capital of Tata Consultancy Services
(Thailand) Ltd. by Tata Consultancy Services Asia Pacific Pte Ltd.

Name of subsidiaries:

Investment in Tata Consultancy Services (Philippines) Inc.

Details:

Subscription to 100 percent share capital of Tata Consultancy Services
(Philippines) Inc. by Tata Consultancy Services Asia Pacific Pte Ltd.

Name of subsidiaries:

Investment in 100% share capital of TCS e-Serve America, Inc.

Details:

TCS e-Serve International Limited, the Indian subsidiary of TCS e-Serve
Limited, subscribed to 100% share capital of TCS e-Serve America, Inc

Name of subsidiaries:

Merger of Tata Infotech Deutschland GmbH.

Details:

During the year Tata Infotech Deutschland GmbH has merged with Tata
Consultancy Services, Deutschland GmbH. The merged entity is a wholly owned
subsidiary of Tata Consultancy Services Limited.

Name of subsidiaries:

Liquidation of Financial Network Services (Europe) Plc (subsidiary of TCS
FNS Pty Limited)

Details:

Financial Network Services (Europe) Plc (subsidiary of TCS FNS Pty Limited)
has been voluntarily liquidated.

Deferred tax assets (net):

Details of deferred tax assets (net) have been explained under the heading
'Deferred tax liabilities (net)'.

Inventories:

The Company had inventories of Rs.36.60 crore as at March 31, 2009
(Rs.42.43 crore as at March 31, 2008). The inventory constitutes raw
materials, components, subassemblies and finished goods. The reduction is
on account of lower stock of finished goods.

Current assets, loans and advances:

Unbilled revenues:-

Unbilled revenues were Rs.1,481.38 crore as at March 31, 2009 (Rs.1,352.50
crore as at March 31, 2008) representing 5.33% of the revenues for fiscal
2009 (5.98% as at March 31, 2008). The significant items are:

* Addition of Rs 80.89 crore arising out of acquisition of TCS e-Serve
Limited (formerly known as Citigroup Global Services Limited)

* Increase in unbilled revenues of subsidiaries.

Sundry debtors:

Sundry debtors as at March 31, 2009 aggregated Rs.6,022.82 crore
(Rs.5,378.07 crore as at March 31, 2008). As a percentage of revenues,
sundry debtors were at 21.66% as at March 31, 2009 as compared to 23.78% as
at March 31, 2008.

The cumulative provision towards bad and doubtful debts as at March 31,
2009 stood at Rs.169.22 crore (Rs.106.26 crore as at March 31, 2008). The
increase in provisions for bad and doubtful debts is mainly attributed to
additional provisions required to be made in respect of a few overseas
clients facing economic difficulties and some domestic clients whose dues
fell beyond stipulated period.

Debtors in terms of DSO, as at March 31, 2009 was 79 days (87 days as at
March 31, 2008). The Company's increased focus on collection of outstanding
dues has resulted in a reduction of DSO during fiscal 2009. The Company
continues to monitor closely the creditworthiness of its clients and is
working closely with them to ensure that the dues are collected in time.

Cash and bank balances:

The Company had cash and bank balances of Rs.2,698.14 crore as at March 31,
2009 (Rs.1,223.40 crore as at March 31, 2008). Of this balance, Rs.1,202.07
crore was held in foreign bank accounts as at March 31, 2009 (Rs.983.51
crore as at March 31, 2008). The balance held in fixed deposits with banks
in India increased from
Rs.137.03 crore as at March 31, 2008 to Rs.1,351.83 crore as at March 31,
2009.

Loans and advances:

Loans and advances as at March 31, 2009 were Rs.3,283.79 crore (Rs.2,033.03
crore as at March 31, 2008). The increase is primarily attributable to:

* Higher loans and advances of Rs.1,658.33 crore as at March 31, 2009
(Rs.1,176.42 crore as at March 31, 2008)

* Higher net advance tax (including refunds receivable) Rs.700.03 crore as
at March 31, 2009 (Rs.269.16 crore as at March 31, 2008)

* Higher MAT credit Rs.775.32 crore as at March 31, 2009 (Rs.351.58 crore
as at March 31, 2008)

* Lower loans and advances to employees Rs.150.11 crore as at March 31,
2009 (Rs.235.87 crore as at March 31, 2008).

Current liabilities:

Current liabilities increased to Rs.4,253.58 crore as at March 31, 2009 as
compared to Rs.3,190.57 crore as at March 31, 2008. The increase is
primarily due to:

* Increase in the fair values of foreign exchange forward and currency
option contracts Rs.691.27 crore as at March 31, 2009 (Rs.191.08 crore as
at March 31, 2008)

* Increase in sundry creditors Rs.2,114.37 crore as at March 31, 2009
(Rs.1,887.94 crore as at March 31, 2008)

* Increase in advances from customers Rs.184.62 crore as at March 31, 2009
(Rs.74.64 crore as at March 31, 2008)

* Increase in other items of liabilities mainly on account of
subcontracting expenses, selling and administrative expenses and employee

incentives, which are in line with the increase in business, infrastructure
and employee base.

Provisions:

Provisions made towards taxes, employee retirement benefits, contingencies,
proposed dividend, tax on dividend and warranties aggregated Rs.1,726.57
crore as at March 31, 2009 as against Rs.1,286.61 crore as at March 31,
2008. The increase is mainly attributable to:

* The increase in the provision for income taxes Rs.591.80 crore as at
March 31, 2009 (Rs.311.28 crore as at March 31, 2008)

* Higher provision for employee benefits Rs.540.95 crore as at March 31,
2009 (Rs.387.51 crore as at March 31, 2008).

3. CASH FLOW - TCS LIMITED (CONSOLIDATED):

Cash flow summary:-

Amount in Rs. crore

Particulars Fiscal Fiscal Increase/
2009 2008 (decrease)
Cash and cash equivalents
at beginning of the year 1,067.47 1,147.76 (80.29)
Net cash provided by
operating activities 5,353.83 3,894.88 1,458,95

Net cash used in investing
activities (3,432.91) (2,519.31) (913.60)

Net cash used in financing
activities (1,655.51) (1,441,70) (213.81)

Net increase / (decrease) in
cash and cash equivalents 265.41 (66.13) 331.54
Exchange difference on
translation of foreign
currency cash and cash
equivalents 89.79 (14.16) 103.95
Cash and cash equivalents
at end of the year 1,422.67 1,067.47 355.20

Cash flow from operations:

Profit before taxes and
exceptional items 6,150.07 5,845.95 304.12

Add:

Depreciation 564.08 563.71 0.37

Others (280.90) (96.66) (184.24)

Operating profit before
working capital changes 6,433.25 6,313.00 120.25

Effect of working capital
changes 132.50 (1,327.98) 1,460.48

Cash generated from
operations 6,565.75 4,985.02 1,580.73

Tax payments made (1,211.92) (1,090.14) (121.78)

Net cash provided by
operations 5,353.83 3,894.88 1,458.95

In fiscal 2009 the Company generated net cash of Rs.5,353.83 crore
(Rs.3,894.88 crore in fiscal 2008) from operating activities. Apart from
profit before taxes of Rs.6,150.07 crore (Rs.5,845.95 crore in fiscal
2008), the net cash generated includes adjustments for non-cash items like
depreciation of Rs.564.08 crore (Rs.563.71 crore in fiscal 2008).

Other significant items contributing in generation/use of cash from
operating activities relating to working capital are given in the table
below:

Amount in Rs. crore
Particulars Fiscal Fiscal Increase/
2009 2008 (decrease)
Adjustments for:
Inventories 5.83 (0.83) 6.66

Unbilled revenues (64.73) (569.00) 504.27

Sundry debtors (513.61) (1,103.12) 589.51

Loans and advances (222.49) (137.78) (84.71)

Current liabilities and
provisions 402.17 557.70 (155.53)

Adjustments of
translation differences on
working capital 525.33 (74.95) 600.28

Effect of working
capital changes 132.50 (1,327.98) 1,460.48

Cash Flow from investing activities:

Amount in Rs. crore
Particulars Fiscal Fiscal Increase/
2009 2008 (decrease)

(Purchase) of fixed assets (1,108.81) (1,270.98) 162.17

Sale/(purchase) of other
investments 1,150.34 (1,247.18) 2,397.52

Acquisitions (net of cash
acquired) (2,445.29) (156.84) (2,288.45)

(Purchase)/sale of fixed
deposit with banks (net)
having maturity over
three months (1,114.53) 99.38 (1,213.91)

Others 85.38 56.31 29.07

Net cash used for
investing activities (3,432.91) (2,519.31) (913.60)

In fiscal 2009 the Company used Rs.3,432.91 crore on investing activities
(Rs.2,519.31 crore in fiscal 2008).

The significant items in investing activities in fiscal 2009 were:

* Cash used for the purchase of fixed assets Rs.1,108.81 crore (Rs.1,270.98
crore in fiscal 2008)

* Cash generated from sale of other investments net of mutual fund dividend
of Rs.1,150.34crore in fiscal 2009 (Rs.1,247.18 crore cash used in fiscal
2008 for purchase of investments in mutual funds)

* Cash used for the purchase of subsidiaries (primarily Citigroup Global
Services Limited acquisition) of Rs.2,445.29 crore in fiscal 2009
(Rs.156.84 crore in fiscal 2008)

* Cash used for investments in fixed deposits of maturity greater than
three months Rs.1,114.53 crore in fiscal 2009 (Rs.99.38 crore cash
generated in fiscal 2008 by encashment of fixed deposits)

* Other cash flows related to investing activities such as proceeds from
sale of fixed assets, intercorporate deposits placed/refunded, dividends
received from subsidiaries and from other investments and interest/grants
received resulting in cash generation of Rs.85.38 crore in fiscal 2009
(Rs.56.31 crore in fiscal 2008).

Cash flow from financing activities:

Amount in Rs. crore
Particulars Fiscal Fiscal Increase/
2009 2008 (decrease)
Proceeds from the issue of
shares by subsidiaries 3.93 3.28 0.65

(Repayments) of
borrowings (net) (12.51) (21.25) 8.74

Dividends paid including
dividend tax (1,606.07) (1,490.29) (115.78)

Dividends paid to
minority shareholders (8.11) (5.90) (2.21)

Interest paid (32,75) (26.12) (6.63)

Issue of preference shares
(net of issue expense) - 98.58 (98.58)

Net cash used in
financing activities (1,655.51) (1,441.70) (213.81)

In fiscal 2009 the Company used Rs.1,655.51 crore on financing activities
(Rs.1,441.70 crore in fiscal 2008).

In fiscal 2009, the significant item of cash used in financing activities
was payment of dividend including tax Rs.1,606.07 crore (Rs.1,490.29 crore
in fiscal 2008).

COMPANY'S CONSOLIDATED PERFORMANCE TREND ANALYSIS (INDIAN GAAP):

Item Units FY 2008-09 FY 2007-08 FY 2006-07

Total revenues Rs. crore 27,812.88 22,619.52 18,685.21

International revenues Rs. crore 25,630.76 20,573.90 17,003.22

International to total % 92.15 90.96 91.00
revenues

PBIDT Rs. crore 6,742.81 6,439.67 5,367.90

PBIDT margin % 24.24 28.47 28.73

PAT Rs. crore 5,256.42 5,026.02 4,212.63

PAT margin % 18.90 22.22 22.55

Earning per share (EPS) Rs. 53.63 51.36 43.05

Head count Number 143,761 111,407 89,419

Revenue per associate Rs. '000 1,934.66 2,030.35 2,089.62

Revenues from off-shore
business % 44.20 41.90 40.50

Revenues by geographic
segments:

Americas % 56.09 54.79 56.27

Europe % 29.53 29.19 28.47

India % 7.85 9.04 9.00

Others % 6.53 6.98 6.26

Capital accounts FY 2008-09 FY 2007-08 FY 2006-07

Share capital Rs. crore 197.86 197.86 97.86

Reserves and surplus Rs. crore 15,502.15 12,102.26 8,752.24

Gross block Rs. crore 5,843.86 4,291.80 3,197.71

Total investments
(for TCS unconsolidated) Rs. crore 5,936.03 4,509.33 3,252.04

Net current assets Rs. crore 7,543.45 5,553.32 4,331.11


Item Units FY 2005-06 FY 2004-05

Total revenues Rs. crore 13,263.99 9,748.47
International revenues Rs. crore 11,595.37 8,560.90

International to total % 87.50 87.82
revenues

PBIDT Rs. crore 3,798.19 2,909.96

PBIDT margin % 28.66 29.85

PAT Rs. crore 2,966.74 1,976.90

PAT margin % 22.37 20.28

Earning per share (EPS) Rs. 30.32 20.20

Head count Number 66,480 45,715

Revenue per associate Rs. '000 1,993.40 2,132.44

Revenues from off-shore

business % 37.40 38.70

Revenues by geographic
segments:

Americas % 59.04 59.20

Europe % 22.43 23.08

India % 12.49 12.18

Others % 6.04 5.54

Capital accounts FY 2005-06 FY 2004-05

Share capital Rs. crore 48.93 48.01

Reserves and surplus Rs. crore 5,949.88 3,429.53

Gross block Rs. crore 1,951.04 1,170.65

Total investments
(for TCS unconsolidated) Rs. crore 1,963.52 1,404.42

Net current assets Rs. crore 2,867.18 1,797.09


INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has in place adequate systems of internal control commensurate
with its size and the nature of its operations. These have been designed to
provide reasonable assurance with regard to recording and providing
reliable financial and operational information, complying with applicable
statutes, safeguarding assets from unauthorised use or losses, executing
transactions with proper authorisation and ensuring compliance of corporate
policies.

The Company has a well defined delegation of power with authority limits
for approving revenue as well as expenditure. Processes for formulating and
reviewing annual and long-term business plans have been laid down. The
Company uses a state-of-the-art ERP system to record data for accounting
and management information purposes and connects to different locations for
efficient exchange of information. It has continued its efforts to align
all its processes and controls with global best practices.

The Company has appointed Ernst and Young Private Limited to oversee and
carry out internal audit of the Company's activities. The audit is based on
an Internal Audit Plan, which is reviewed each year in consultation with
the statutory auditors (Deloitte Haskins & Sells) and the Audit Committee.
In line with international practice, the planning and conduct of internal
audit is oriented towards the review of controls in the management of risks
and opportunities in the Company's activities. The Internal Audit process
is designed to reviewthe adequacy of internal control checks in the system
and covers all significant areas of the Company's operations such as

software delivery, accounting and finance, procurement, employee
engagement, travel, insurance, IT processes in the Company, including
significant subsidiaries and selected foreign branches. Safeguarding of
assets and their protection against unauthorised use are also a part of
these exercises.

The Company has an Audit Committee, the details of which have been provided
in the Corporate Governance Report. The Audit Committee reviews Audit
Reports submitted by the Internal Auditors. Suggestions for improvement are
considered and the Audit Committee follows up on the implementation of
corrective actions.

The Committee also meets the Company's statutory auditors to ascertain,
inter alia, their views on the adequacy of internal control systems in the
Company and keeps the Board of Directors informed of its major observations
from time to time.

CAUTIONARY STATEMENT:

Certain statements made in the Management Discussion and Analysis Report
relating to the Company's objectives, projections, outlook, expectations,
estimates and others may constitute 'forward looking statements' within the
meaning of applicable laws and regulations. Actual results may differ from
such expectations, projections and so on whether express or implied.
Several factors could make significant difference to the Company's
operations. These include climatic conditions and economic conditions
affecting demand and supply, government regulations and taxation, natural
calamities and so on over which the Company does not have any direct
control.