BOARDS’ REPORT The Board hereby presents the Thirty Fourth Annual Report of your Company together with the Audited Statement of Accounts for the Financial Year ended 31st March, 2015 alongwith Independent Auditors' Report thereon and Secretarial Audit Report for the financial year 2014-2015. Review of Operations During the year, the company continued its efforts to improve sales of its own products i.e. Primary Drop/Insert Multiplexer as well as PLCC (Power Line Carrier Communication equipment). The company is also looking for tie ups to enhance its product line. As part of the new initiatives company successfully entered into SPV solar power plant business and also looking for opportunities emerging around smart city project. Further due to aggressive marketing tie-ups, the company achieved a healthy turnover of approx. Rs.2251.77 lacs in financial year 2014-15 besides income of Rs.1005.22 lacs from other activities. The book value of share held by you is around Rs.78.28 per share and the Reserves stood at approx. Rs.8206.66 lacs. The Company has invested an amount of Rs.8.17 lacs during the year in acquiring fixed assets. We are thankful for continuous support of our esteemed customers all through & also continuous support of shareholders, bankers and stakeholders, including the business associates as they reposed undoubting faith in the Company. Puncom offered value-added products and services to the customers on the basis of strategic and effective use of technology aided by aggressive market and product initiatives. Corporate Plan/ Operations With lot of hard work and best efforts Puncom has been able to increase its market share of its PLCC product. This has been well supplemented by its V-Mux Product. Though the Government did not make any appreciable change in its policy to promote manufacturing in India, yet Puncom has done reasonably well keeping in mind the stiff competition in Telecom field and squeezing margins. Puncom is executing some prestigious OFC turnkey projects for railways. Puncom is focusing on outdoor projects in addition to the indoor turnkey projects. This would help Puncom in improving its market share in Railways. Puncom is also offering its V-Mux and Power Plant equipment to other contractors who are executing turnkey projects for Railways. This not only helps in improving the sales but also increase in Puncom make equipment in Railway network. Puncom has established itself very well in the power utility sector by improving its share of PLCC in various state electricity boards, PGCIL etc. To further increase its market share in this sector Puncom is offering and supplying PLCC equipment to private parties which are undertaking turnkey projects of sub-stations for various state electricity boards. While Puncom has made good inroads in turnkey projects it is also undertaking repair and maintenance contracts for V-Mux, power plant and PLCC equipment. Undertaking such value added activities would not only help in improving the sales but also help in strengthening the performance of Puncom equipment in various networks of railways, power utility sector etc. In the recent industrial policy of Govt of India, lots of efforts are being made to strengthen and promote manufacturing sector in India. Puncom is making continuous efforts to add new products to its kitty by having tie-ups with other potential companies. Puncom is also in continuous search of companies which are looking for a tie-up from services point of view involving installation, erection and commissioning work. The Future • India has seen an exponential growth of telecom network in India for several years now, leading to an increase in subscriber density to an impressive 80% and a sizeable broadband penetration. Liberal government policies and fierce competition between operators have ensured that India received latest and best equipments and technologies from largest equipment MNCs at lowest prices. Unfortunately, this technology upgrade, by-passed Indian telecom manufacturers, as majority of the equipment was simply imported fully finished into India. Government of India has now become sensitive to the huge current account deficit caused by unbridled import of MNC equipment, and is creating policy frame work, including preference for increased domestic manufacturing in telecom and IT. Driven by these imperatives, and by the gradual maturing of industry, domestic manufacturing by MNCs directly or in tie ups is likely to increase with increased localization and IP content. • Fortunately large scale upgrade of main telecom network and IT in general is also changing the work environment and catalysing other segments like power, railways, defence, government, security, education etc to upgrade their networks and work processes and are generating new business opportunities. New areas of network and information security, renewable energy, green and clean technologies, information access and automation etc are becoming increasingly important and emerging as new growth segments. Apart from this, defence with its unique domestic focus remains a major potential growth segment. • Historically, Puncom has been deriving its revenue mainly from Power, Railway and BSNL segments. Unfolding telecom and industrial scenario however foresees increased role of new revenue streams from emerging growth segments. Puncom is monitoring these emerging trends and is on look out for appropriate opportunities for itself for sustenance and growth and preparing itself to meet the emerging challenges in the changing environment. Change in the nature of business During the year 2014-2015, there was no change in the nature of Business of the Company. Dividend Due to inappropriate profit/loss in the current year, the Board of Directors of your Company have not recommended any dividend for the Financial Year 2014-15. Reserves Due to inappropriate profit/loss in the current year, no amount was carried over to Reserves and Surplus. Instead, the reserves have been utilized to the extent of Rs.1026.61 Lacs. Share Capital During the year, there was no change in the Share Capital of Puncom. The Company neither issued further shares nor shares with differential rights or sweat equity shares. Moreover, none of the ESOPs were offered to any of the employees. Directors and Key Managerial Personnel Following changes, in the constitution of Board of Directors and Key Managerial Personnel, took place during the period under review upto 12th August, 2015. Sh. Karan Avtar Singh, IAS was appointed as an Alternate Director to Sh. D.P. Reddy, IAS on 28th October, 2014. However, he ceased as Alternate Director on 8th December, 2014. Sh. Vikas Pratap, IAS has been appointed as Vice Chairman and Managing Director replacing Sh. D.K. Tiwari, IAS w.e.f. 20th November, 2014. Smt. Neena Singh has been appointed as an Independent Director w.e.f. 31st March, 2015. Further, Sh. Anirudh Tewari, IAS has been appointed as an Additional Director in the capacity of Chairman w.e.f. 13th May, 2015 replacing Sh. D.P. Reddy, IAS. Meetings During the year, five Board meetings and four Audit Committee meetings were duly convened and held. The details of which are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the provisions of Companies Act, 2013 and Listing Agreement. Directors' Responsibility Statement Pursuant to the requirement under section 134(5) of the Companies Act, 2013, with respect to Directors' Responsibility Statement, it is hereby confirmed: i) That in the preparation of accounts for the financial year ended 31st March, 2015, the applicable Accounting Standards have been followed along with proper explanation relating to material departures; ii) That the Directors have selected such accounting policies and applied them consistently and made judgment and estimates that were 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 or loss of the company for the year under review; iii) That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 and the Companies Act, 1956, wherever applicable, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; iv) That the Directors have prepared the accounts for the financial year ended 31st March 2015 on a going concern basis. v) That the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls were adequate and were operating effectively. vi) That the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and were operating effectively. Board Evaluation Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, and subsequent Government Notification G.S.R. 463(E) dated 5th June, 2015, the Board evaluation is not applicable. However, there is a system in place for evaluation of the Board, its committees and individual directors and the company is complying with the same. Declaration by Independent Director(s) All the Independent Directors on the Board of Puncom have given their respective declaration that they meet the criteria of independence, as per the provisions of sub-section (6) section 149 of Companies Act, 2013. The term of Appointment of Independent Directors has been fixed for 5 years, in accordance with the provisions of the Companies Act, 2013, and none of the Independent Directors have been reappointed for more than 5 years. Frauds reported by Auditors u/s 143(12) Your company has complied with all the provisions of Section 143 of the Companies Act, 2013. Hence, there are no frauds reported by the Auditors other than those which are reportable to the Central Government. Further, no fraud has been reported to the Central Government. Nomination and Remuneration Committee The details of the Nomination and Remuneration Policy in accordance with Section 178(2) are mentioned in the Report on Corporate Governance. There is a Nomination and Remuneration Committee of the Company and there is a policy in place. The same is exempted to our Company as referred to in Govt. Notification No G.S.R. 463(E) dated 5th June, 2015 to the extent it is applicable to Directors. However, it is applicable to Senior Management and the same is being duly complied with. Vigil Mechanism In accordance with the provisions of section 177(9) & (10) of the Companies act, 2013, and Clause 49 of the Listing Agreement, a Vigil Mechanism (Whistle Blower Policy) has been adopted and the same is complying with the provisions of the Act and Clause 49 of the Listing Agreement. Risk Management Policy The Risk Management structure conforms to the requirements of clause 49 of Listing Agreement and is formed to ensure the harmonious growth of the company and to maximize the net worth of the shareholders. An integrated risk management system continuously identifies monitors and manages Puncom's risks. The Audit Committee of the Board provides the overall policy guidelines. The committee also conducts periodic reviews of Puncom's Risk Management Policy, while the Board monitors and manages Puncom's risk management through quarterly risk reports to achieve above objectives. Details of Puncom's Subsidiaries Puncom has no material subsidiary. However, the Company has two subsidiaries namely M/s PCL Telecom Limited and M/s Punjab Digital Industrial Systems Limited. The former one is not in operations since 1997-98 and an application for winding-up was filed before the Hon'ble Punjab & Haryana High Court at Chandigarh. The Court on 20th October, 2005 has passed the order of its winding-up. Subsequently the Statement of Affairs has been filed with the Official Liquidator attached with the said Court. The Hon'ble Court is yet to issue the dissolution order. M/s Punjab Digital Industrial Systems Limited, the other subsidiary is also not in operation since long. Accordingly, a winding-up petition was filed with the Hon'ble Punjab & Haryana High Court at Chandigarh for winding-up of the company. The Court on 20th February 2009 has passed the order of its winding-up. Subsequent to that, the Statement of Affairs has been filed with the Official Liquidator attached with the said Court. The records have been handed over to the 'Liquidator's Office'. Management's Reply to Statutory Auditors Remarks M/s B. Rattan & Associates, Chartered Accountants, was appointed as Statutory Auditors of the Company for the financial year 2014-15. Notes to accounts forming part of Annual Accounts are self- explanatory and exhaustive to the remarks of Auditors in their report dated 28th May, 2015. Though there is no qualification in Independent Auditor's Report, the reply to some observations/remarks are as follows : a) As regards non- recognition of the accrued interest amounting to Rs.968.43 lacs (up to 12.07.2005 i.e. date of deposit of Rs.735.63 lacs by UP Government) from UPCSMFL as per decree awarded by the court, we are of the opinion that there being contingency in realization of interest in near future and as the execution of the same is pending before the lower court, the same has not been recognized to comply with AS-9 on Revenue Recognition. All the courts below the Hon'ble Supreme Court had decided in favour of Puncom but unfortunately the Hon'ble Supreme Court on 19.01.2015 had decided against the ex-parte decree earlier made in favour of the Company. Accordingly, now in view of protracted litigation and uncertainty of the amount realizable, pending settlement of the case, the accrued interest standing at the beginning of the year amounting to Rs.115.63 lacs has also been provisioned by the company. The same has also been dealt in accordance with applicable AS -29 "Provisions, Contingent Liabilities and Contingent Assets". [Refer Matter of Emphasis Para (a) of Independent Auditor's Report] b) Regarding accounting of certain income and expenditure on cash basis, the same has been accounted for as per disclosures made in Significant Accounting Policy I(b). [Refer Matter of Emphasis Para (b) of Independent Auditor's Report] c) Regarding provision of Rs.52.35 lacs for 30% back wages of Sh. A.S. Gill, the same has been correctly provided for in books of accounts in compliance with applicable Accounting standards and order of Hon'ble Supreme Court. [Refer Matter of Emphasis Para (c) of Independent Auditor's Report] d) Regarding selection of Company for disinvestment by Cabinet Committee on Disinvestment in 2003, we are to inform that there is no final decision in respect of mode of Disinvestment during FY 2014-15. Relevant developments in this matter have already been informed and explained to Auditors for which reference can be made to Point 1 of Report on Directions u/s 143(5) of Companies Act 2013, [Refer Matter of Emphasis Para (d) of Independent Auditor's Report] e) The excise and custom duty demand of Rs.30.20 lacs is disputed with Deputy Commissioner of Customs, New Delhi, Excise and Custom department. In this regard Puncom had submitted the reply/ necessary documents but no further communication has been received till date. [Refer Annexure to the Independent Auditor's Report Point VII (b)(i)] f) As regards Sales Tax demand including interest aggregating to Rs.14.85 lacs (net of pre deposit), which is disputed, we are to inform that company has filed an appeal and the same is pending at the office of Sales Tax Appellate Tribunal, Andhra Pradesh. [Refer Annexure to the Independent Auditor's Report Para VII (b)(ii)] g) Regarding Sales Tax demand including interest aggregating to Rs.16.77 lacs, which is disputed, we are to inform that company has filed an appeal and the same is pending at the office of Ld. Senior Joint Commissioner, Salt Lake Taxation appellate office (South 24 Parganas), Kolkata, West Bengal. [Refer Annexure to the IndependentAuditor's Report Para VII (b)(iii)] Management's reply to Secretarial Auditor's Report Secretarial Auditors have reported that the Company is not complying with the desired ratio of Independent Directors in their report for the financial year 2014-2015. Efforts to comply with the desired ratio were made. However, as on the date of this report, the Company is maintaining the desired ratio. Internal Audit & Controls Puncom, being a Government owned undertaking, is subject to various internal Audits and Controls. M/s Rakesh Krishan & Associates, Chartered Accountants, were engaged as Internal Auditors during the Financial year 2014-2015. During the year, Puncom continued to implement their suggestions and recommendations to improve the control environment. Internal Auditors findings were discussed with the product owners and suitable corrective actions have been taken as per the directions of the Audit Committee on an ongoing basis to improve efficiency in operations. Thus, there were adequate internal controls w.r.t. the Financial Statements. Particulars of Deposits under Section 73 of the Companies Act, 2013 The particulars with respect to Deposits under section 73 of the Companies Act, 2013 are NIL. Particulars of Loans and Guarantees under Section 186 of the Companies Act, 2013 The particulars with respect to Loans and Guarantees under section 186 of the Companies Act, 2013 are NIL. Particulars of Related Party Transactions Under Section 188 of the Companies Act, 2013 Puncom has not entered into any Related Party Transaction except with its Holding Company Punjab Infotech which is at arm's length price and governed by the provisions of section 188 of the Companies Act, 2013. The details of the same are given in the prescribed form AOC 2 and is annexed herewith. Disclosures relating to Remuneration of Directors and KMP: A. Disclosure under Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 : a) Ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year : c) Percentage increase in the median remuneration of employees in the financial year : 16% d) Number of permanent employees on rolls of the Company : 232 e) Relationship between average increase in remuneration and company performance: Average increase in remuneration is equivalent to rate of inflation declared by state for the purpose of DA. The company being an undertaking of Punjab Government follows applicable pay-scales uniformly for all its employees as per the respective designation and tenure of employee with the company. f) Comparison of the remuneration of the Key Managerial Personnel against the performance of the company: There are no performance linked hikes, variable pay or special monetary benefits for Directors/KMPs. The Company came out with its Initial Public Offer in October 1994 @ Rs.250 per share (including Rs.240 as share premium). Market quotations of the shares of the company have decreased by 79.64% and have come down to Rs.50.90 (Closing Price at 31st March, 2015). h) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration : NIL i) Comparison of the each remuneration of the Key Managerial Personnel against the performance of the company: The Company being an undertaking of Punjab Government follows applicable pay-scales uniformly for all its employees as per the respective designation and tenure of employee with the company. There are no performance linked hikes, variable pay or special monetary benefits for Directors/KMPs. j) Key parameters for any variable component of remuneration availed by the directors : NIL k) Ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year : N/A l) affirmation that the remuneration is as per the remuneration policy of the company : Yes B. Companies (Particulars of Employees) Rules, 1975 As per Section 134 of the Companies Act, 2013 and Section 217(2A) of the Companies Act, 1956 (wherever applicable) read with the Companies (Particulars of Employees) Rules, 1975, the Company is required to give the list of employees who have been paid annual remuneration of Rs.60,00,000/- or above and a monthly remuneration of Rs.5,00,000/- and above in case the employee worked for less than a year. Since there is no employee drawing remuneration exceeding the aforesaid limits, hence the same is not applicable. Puncom's shares on the Bourses The Shares of your Company are listed with The Bombay Stock Exchange Limited, Mumbai (BSE) only. Presently approx. 95% of the company's shares have been dematerialized. During the year under report, the share price of the company ranged between the low of Rs.47.10 (26th March, 2015) to the high of Rs.107.75 (17th June, 2014). Disclosure w.r.t. Conservation of energy, technology absorption and Foreign Exchange Earnings and Outgo: A. CONSERVATION OF ENERGY a) Steps taken & impact on conservation of energy: Steps taken: We have continued with the practice of switching off the supply to the areas where the lights are not required or where the production work is not taking place. Impact: The consumption has reduced due to the above measures taken. b) Steps taken for utilizing alternate sources of energy : The system is in place for alternate sources of energy. c) Capital investment on energy conservation equipments : NIL B. TECHNOLOGY ABSORPTION a) Efforts made towards technology absorption: Efforts in brief made towards technology absorption, adoption and innovation. b) Benefits derived: Company shall be able to achieve significant cost reduction and improvement in the product and generate new markets; and as a result shall be able to strengthen its position in its market segments c) Technology imported (during the last three years) : Details of technology imported NIL Year of Import N/A Whether the technology has been fully absorbed NIL If not absorbed, areas where absorption has not taken place and reasons thereof N/A d) Expenditure incurred on Research and Development Material changes and Commitments affecting the financial position of the company after the close of the year The particulars with respect to Material changes and commitments affecting the financial position of the company which have occurred between the end of the financial year i.e. 31st March, 2015 till the date of this report i.e. 12th August, 2015 under Section 134(3)(l) of the Companies Act, 2013 are as follows : 1. The appointment of Global Advisors and Legal Advisors for the purpose of disinvestment has been terminated and as per the decision of the Core Group of Officers on Disinvestment, fresh appointment of Global Advisors and Legal Advisors is to be made from Sale of Assets point of view. Corporate Social Responsibility As the Company is not covered under the provisions of section 135 of the Companies Act, 2013, hence the Company has not formed any Corporate Social Responsibility Committee to carry on CSR programs and activities. Details of significant and material orders passed Following significant orders were passed by Courts, Tribunals affecting the going concern status and operations in future of the company : a) In the matter of Punjab Communications Limited v/s State of UP, an application under Order 9 Rule 13 of the Civil Procedure Code was filed by the State of UP, which was decided in all the lower and High court in favour of the company. However, on appeal of the State of UP before the Hon'ble Supreme Court of India, the decision was reversed, The company has filed a Curative Petition and the same is pending in the said Court. b) Your Company is in the list of Companies to be disinvested by the Government of Punjab and steps in this regard have already been initiated by them. Adequacy of Internal Financial Controls The company has adequate internal financial controls with reference to financial statements and these are working effectively. Management Discussion and Analysis Report The Management Discussion and analysis Report for the year under review as stipulated under the Listing Agreement with the Stock Exchange(s) is annexed as Annexure and is an integral part of this report. Corporate Governance Report The Corporate Governance Report for the year under review as stipulated under the Listing Agreement with the Stock Exchange(s) is annexed as Annexure and is an integral part of this report. Industrial Relations The employee-employer relationship remained cordial and harmonious throughout the year. The Board of Directors of your Company placed on record their satisfaction for the dedicated services rendered by the employees of the company. Extract of Annual Return The extract of Annual Return pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and administration) Rules, 2014 in the prescribed form MGT-9 is enclosed as Annexure and is an integral part of this Report. Acknowledgement The Board places on record its gratitude to the BSNL, Punjab Energy Development Agency (PEDA), Department of Railways, Ministry of Defence, VSNL, MTNL, PGCIL, PSEB and other esteemed customers in India and abroad. The Board also places on record its gratitude to IndusInd Bank & Allahabad Bank for their keen interest in the affairs of the company, continuous help and co-operation for successful working of the Company. The Board also places on record its gratitude to the Punjab Information Communications and Technology Corporation Limited (PICTCL), the Holding Company, for its guidance and support. The Board also places on record its appreciation for the dedication, commitment and hard work of staff at all levels. The Board in particular acknowledges the co-operation of esteemed shareholders for their constant support and for the confidence reposed in the Management of the Company. (ANIRUDH TEWARI) CHAIRMAN List of Annexures to the Boards' Report 1) AOC 2 2) MGT 9 3) Corporate Governance Report 4) Management Discussion and Analysis Report Date : August 12, 2015 Place : S.A.S. Nagar |