Tata Elxsi has posted an impressive 73-percent jump in net profit for 2011-12. What are the factors that have influenced the company’s performance in the recent past?
Over the last three years, we have had a choppy ride, primarily because some long-duration projects were called off in early 2009 and the predictability in revenues from our Japanese customers went awry. It forced us to look at alternate sources of revenue and, for a while, we booked orders from diverse businesses, knowing that there were certain risks involved in engagements where the scope of work was not well defined or understood. Some of these turned out to be good projects and gave us interesting new capabilities, while others resulted in unusually high financial write-offs.

We now do business with larger customers and more respectable names, where engagements are more predictable and, therefore, revenues are more secure than they were in the last couple of years. Even during this period of difficulty, we continued to invest in our animation and visual effects studio, the Tata Elxsi Visual Computing Labs (VCL), in the belief that it would pay off some day. That our other businesses, embedded product design, industrial design and systems integration, have done well last year is an outcome of the processes that we set in place the previous financial year and the discipline that we have brought to the execution of our projects. Also, we have also been helped in 2011-12 by a favourable exchange rate.

Has the economic slowdown in the United States and Europe affected Tata Elxsi?
At the moment we don’t see any negative impact of the economic conditions; beyond the fact that deals are taking a little longer to close, we are not seeing much of a negative effect. During the slowdowns of 2001-02 and 2008, companies that continued to invest in new product development prospered subsequently, and that seems to be the case this time round as well. So, instead of just cutting back on all expenditure in product development, the better run companies are continuing to invest in this area.

What are the growth opportunities for Tata Elxsi in India and overseas?
In India, the government’s draft electronics policy could present interesting growth opportunities. We see major growth potential in three markets that we address: broadcast and media, transportation and communications.

In transportation, the scope of electronics in new cars is increasing substantially. There is a lot of opportunity in putting together interesting electronic solutions for various auto companies. Original equipment manufacturers depend on service providers like us to create unique, customised products. We have a play here and in the next 6-12 months, we should have many interesting offerings to make to car companies.

The second big driver for growth is broadcast-related electronics, which is undergoing interesting changes, especially in display technology and transmission media; we have some engagements in this area.

In communication, we have what is called a ‘long-term evolution’ (LTE) micro-cell stack that has been licensed and has found a lot of traction in the market. This should benefit from this as the technology matures.

Tata Elxsi has made its presence felt in Hollywood for a few years now. What has the overseas experience been like for the company?
We are working on some television shows for European broadcasters and producers but, clearly, the major market is Hollywood. We need to complete our joint venture productions and get them into the market quickly. Once that happens, our play in the American market will be bigger.

The company recently announced a small cell software suite for LTE. Are there any other innovations forthcoming from Tata Elxsi?
For every 10 ongoing initiatives, we have only one or two that we take to completion. One of our promising products is a medical device that prevents maternity fatalities. We have been commissioned by an international medical trust to create this device. It is a work in progress, but once it is successful it will make a huge difference, especially in a country such as India.

Will the animation, visual effects, gaming and comics policy enacted by the Karnataka state government have any effect on Tata Elxsi?
The policy is interesting but it will be limited in its impact. For instance, the proposal to waive or reduce state taxes and to set up a Rs500 million venture capital fund is a good initiative, but more is needed to make a meaningful impact. The biggest game changer would be income-tax exemption; if that happens more investment will flow into this area. Having said that, Karnataka is the first state in India to have enacted a policy in this sphere and, hopefully, it will inspire other states and the central government to take similar action.

What corporate social responsibility initiatives does Tata Elxsi promote?
We are a very eco-friendly company. In the Bengaluru campus, we have our own source of water and we practise rainwater harvesting and recharge the water table. We have an effluent treatment plant which provides recycled water for our gardens. Our social responsibility activities are mostly employee-led. We give financial aid and donate notebooks to schools that have limited financial resources, and occasionally we donate equipment requested by schools.

We also try to work on products that can positively impact people. The original Pureit water filter was reasonably priced and required no electricity and running water. The medical device that we are working on is another example. We don’t lose focus of the fact that we are a commercial enterprise, but, at the same time, we try to do things that improve the lives of people.

What are the critical challenges faced by Tata Elxsi as it seeks further growth?
The biggest challenge right now is to make VCL profitable; once that happens we can start investing in other growth areas. When we started we provided services under customer supervision, and we soon moved into providing services to customer specifications. Now we have to get to a point where we write the specification of products, develop them, put together a functioning prototype and license it to our customers. So we need to invest in the transition from working to customer specifications to creating new products.

What are Tata Elxsi’s plans for the year ahead? And how do you see it evolving over the next five years?
We are in the process of firming up plans for the next financial year, aiming to get back to our old growth trajectory. In terms of strategic shift, we have to get into full product development and licensing within three years. We will continue to focus on transportation, broadcast and communication, and look at new offerings, sub-markets and territories.