DIRECTORS REPORT The Members, Your Directors are pleased to present their Twelfth Annual Report together with the Audited Financial Statements for the year ended March 31, 2015. 2. RESULTS OF OPERATIONS AND BUSINESS OVERVIEW Results Of Operations During the year, total revenue of the Company was Rs. 623.10 Cr. against Rs. 615.44 Cr. for the previous year. Operating Profit (before Depreciation / Amortization, Finance Costs & Tax) was at Rs. 220.46 Cr. in comparison to previous year's Operating Profit (before Depreciation / Amortization, Finance Costs & Tax) of Rs. 276.44 Cr. Net Loss for the year was at Rs. 514.71 Cr. against Net Loss of Rs. 551.24 Cr. for the previous year. The telecom scenario in the country changed drastically since the beginning of year 2012 due to cancellation of 122 2G licenses by the Hon'ble Supreme Court, slower 2G and 3G growth, failure of spectrum auctions, inflationary costs of power & fuel and general economic slowdown. Further, during this time, the Company was expected to get increased / additional business arising out of its acquisition of telecom tower portfolio from Aircel Limited and its subsidiaries (Aircel) through Chennai Network Infrastructure Limited (CNIL). However, owing to several external factors, the Company and CNIL could not garner the required 20,000 additional new tenancies on Right of First Refusal basis from Aircel. In the meanwhile, the Company had already placed orders on various vendors to procure tower assets and made expenses / advances against those orders. Consequently, the Company had to short close its commitment to vendors and is currently pursuing legal action against its vendors for recovery of these advances. However, as a matter of prudence, a provision for a sum of Rs. 208.75 Cr. has been made during the year under review. Further, pursuant to the settlement agreement between the Company, CNIL and Aircel, Rs. 150 Cr. has been recognized as income towards final settlement during the year under review. The above amounts have been shown as exceptional items in the Financial Statements. Going Concern basis Owing to factors as referred above, the Company's net worth has been eroded substantially and the Company has incurred cash losses. The Company continues to take various measures such as cost optimisation, improving operating efficiency, renegotiation of contracts with customers to improve Company's operating results and cash flows. Further the management believes that new spectrum auction will result in exponential growth in 3G, 4G & LTE which are expected to generate incremental cash flows to the Company. Based on the Master Services Agreement executed for passive infrastructure sharing with new operators, having BWA spectrum and preparing to launch 4G services Pan India, the Company has already commenced roll outs for it. In view of the above mentioned factors, the Company continued to prepare its Financial Statements on going concern basis. Recent Developments at Macro And Micro Economic Level The telecom industry has shown tremendous increase in subscriber base to 960.58 Mn. at the end of February 2015 against 903.36 Mn. at the end of February 2014, registering a growth of 6.33%. The share of urban subscribers declined to 58.01% at the end of February 2015 from 59.16% in February 2014 vis-a-vis the share of rural subscribers which increased to 41.99% at the end of February 2015 from 40.84% at the end of February 2014. With this, the overall tele-density in India has shown marginal improvement at 76.60 at the end of February 2015 visa-vis the overall tele-density of 72.92 at the end of February 2014. (Source: Telecom Regulatory Authority of India (TRAI), Press Release dated April 10, 2015) India saw fastest growth in subscription base with 65 million new connections in FY 2014-15. Given this the Indian telecom industry has been one of the fastest growing and most competitive in the world. The Indian call tariffs are still among the lowest in the world. Growth Drivers It is observed, globally that telecom industry is a vital sector for the overall development of a nation. It is catalyst to growth and modernization of a nation. Given the recent developments, we have identified a few growth drivers for the coming few fiscals. 1) 2015 Spectrum Auction was successful with Rs. 1.10 Lacs Cr. investment by the industry signaling restored faith in business prospect 2) Industry Friendly and liberal policies a. Government plans to allocate the Spectrum auctioned in March 2015 by end of this year b. Government's ambitious US$ 1.1 Bn. Smart City program to facilitate telecom growth 3) Attractive FDI market 4) Subscriber base continues to see upward trend 5) 3G and 4G rollouts expected to lead to machine to machine (M2M) growth in India in F.Y. 2016-17 6) Reliance Jio the only Pan India license 4G provider to roll out 4G in this fiscal 7) India a Data usage driven economy (Nokia Networks' MBit Index study) a. Mobile data traffic generated by 2G and 3G services has risen by a whopping 74 percent at the end of 2014 b. Use of 3G devices capable of supporting a speed of up to 21.1 Mbps increased from 23% in 2013 to 54% in 2014 c. Average monthly data consumption by a 2G consumer was seen to be 216 MB, an increase of 48% during 2014 d. The average data consumed by a 3G consumer, on the other hand, 688 MB, an increase of 29% during 2014 8) India to be 4th largest Smartphone market in the world Since Tower Network plays vital role for growth mapping, the Company will see growth in the near future. Major Developments in the industry (source: A brief Report on Telecom Sector in India - January 2015, Corporate Catalyst (India) Pvt. Ltd.) 1) Reliance Jio infocomm has signed an agreement to share telecom towers of GTL Infrastructure Limited. Seventh Tower sharing agreement by Reliance Jio; 2) Ericsson has won US$ 9.42 Mn. 3 years operations support system deal with Reliance Jio; 3) Japanese telecom Company softbank has planned to invest around US$ 10 billion in India's IT sector over next few years. 4) Bharti Infratel plans to take over telecom towers of few operators at a valuation of approx US$ 785.82 Mn. 5) Bharti Infratel plans to explore acquisition opportunities in neighboring countries The Company believes that though the current scenario in telecom sector and in general economy is encouraging, it would take some time in improving overall economic scenario inter-alia the telecom and telecom infrastructure sector. Hence, in order to overcome the CDR scenario, the Company is contemplating bi-lateral / multi-lateral settlements, either one time, negotiated or otherwise, with the Lenders. The Company has already obtained requisite approvals from Members of the Company at the 11th Annual General Meeting (AGM) and through Postal Ballot, result of which was declared on September 25, 2014. 3. DEBT RESTRUCTURING Further to information furnished in the Directors' Report for financial year 2013-14, after successful implementation of Corporate Debt Restructuring (CDR) mechanism for its Rupee Term Loans, as approved by CDR EG, the Company has complied and continues to comply with the terms and conditions of CDR package. The CDR Rupee Debt outstanding as on March 31, 2015 is Rs. 3,417.49 Cr., details of which are as follows: Principal - Rs. 3,245.09 Cr. FITL - Rs. 169.22 Cr. Interest - Rs. 3.18 Cr. Subject to cash flow permitting, your Company has been continuing to pay on account of its debt service obligation and is committed to work towards honouring its debt obligation in future. However, due to the effect of continuing downturn in the economy in general and telecom sector in particular, there has been delay at times in debt servicing. The Company continues to explore opportunities to monetize its investment (held through Tower Trust) in CNIL, the proceeds of which will be utilized for meeting debt service obligations of the Company. 4. DIVIDEND Since your Company has posted losses and is currently under CDR Mechanism, your Directors express their inability to recommend any dividend on the paid up Equity Share Capital of the Company for the financial Year ended March 31, 2015. b. Foreign Currency Convertible Bonds (FCCBs) Further to information furnished in the Directors’ Report for financial year 2013-14, during the year under review, as per Terms and Conditions of the Series B Bonds issued in terms of Offering Circular dated November 8, 2012, the Conversion Price of Series B Bonds i.e. US$ 207,546,000 Interest Bearing Convertible Bonds due 2017 convertible into share, have been reset to ` 10 against ` 11.38. The Status of FCCBs allotted is as under: c. Consideration to CNIL shareholders for merger Consequent to the approval of CDR proposals of the Company and CNIL and further to the modifications to be made in the petitions by the Company and CNIL (subject to approval of CDR Lenders), the Company would be required to issue its equity shares to the shareholders of CNIL towards consideration of merger of CNIL with the Company as may be approved by Hon'ble High Courts of Bombay and Madras. 6. FIXED DEPOSITS There are no unclaimed deposits lying with the Company and during the year under review, the Company has not accepted any fresh fixed deposits from Public or from its Shareholders. 7. SCHEME OF ARRANGEMENT Further to information furnished in the Directors' Report for financial year 2013-14, the Company continues to pursue the Scheme of Arrangement for the merger of CNIL with the Company by way of modification of Scheme of Arrangement to give effect to financial and capital structure changes consequent upon restructuring under CDR. Once the modified Scheme of Arrangement between CNIL and Company is approved by the Hon'ble Bombay and Madras High Courts, the Company's financial statements will be re-casted / re-stated with effect from the Appointed Date as may be approved. 8. MATERIAL CHANGES AND COMMITMENTS Save and except as discussed in this Annual Report, no material changes have occurred and no commitments were given by the Company thereby affecting its financial position between the end of the financial year to which these financial statements relate and the date of this report. 9. PROMOTER GROUP The Company is a part of Global Group of Companies which is promoted by GTL Limited (GTL). The Members may note that the Promoter Group comprises of Global Holding Corporation Private Limited and such other persons as defined under SEBI Regulations. As on March 31, 2015, the shareholding of promoters is 27.04%. 10. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to the provisions of Section 134(3)(c) of the Companies Act, 2013 (the "Act"), the Board of Directors, to the best of their knowledge and ability, in respect of financial year ended March 31, 2015 confirm that: a. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; b. they had selected such accounting policies 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 loss of the Company for that period; c. they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d. they had prepared the annual accounts on a going concern basis. e. they had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and f. they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 11. DIRECTORS & KEY MANAGERIAL PERSONNEL Pursuant to the provisions of Section 149 of the Act, which came into effect from April 1, 2014, Mr. N. Balasubramanian, Dr. Anand Patkar, Mr. Vinod Agarwala and Mr. Vijay Vij were appointed as Independent Directors at the AGM of the Company held on September 16, 2014. The terms and conditions of appointment of Independent Directors are as per Schedule IV of the Act. They have submitted a declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Act and there have been no change in the circumstances which may affect their status as Independent Directors during the year under review. Mr. Milind Naik retires by rotation and being eligible has offered himself for re-appointment. Pursuant to provisions of Section 149 of the Act and Clause 49 of the Listing Agreement entered into with the Stock Exchanges, Mrs. Sonali P. Choudhary was appointed as an Additional Director with effect from March 31, 2015 by way of resolution passed by circulation and the same was taken on record by the Board of Directors in its meeting held on May 6, 2015. She will hold office up to the date of the ensuing AGM. The resolutions seeking approval of the Members for the re-appointment / appointment of Mr. Milind Naik and Mrs. Sonali P. Choudhary have been incorporated in the notice of the forthcoming AGM of the Company. The background of the Directors proposed for re-appointment / appointment as stipulated under Clause 49 of the Listing Agreement entered into with Stock Exchanges is given under the Corporate Governance section of this Report. The Company has received a notice under Section 160 of the Act along with the requisite deposit proposing the appointment of Mrs. Sonali P. Choudhary as Director, liable to retire by rotation. Pursuant to the provisions of Section 203 of the Act, which came into effect from April 1, 2014, the appointments of Mr. Milind Naik, Whole-time Director, Mr. L. Y. Desai, Chief Financial Officer and Mr. Nitesh A. Mhatre, Company Secretary as key managerial personnel of the Company were formalized. During the year under review, none of the managerial personnel have relinquished their positions. 12. NUMBER OF MEETINGS OF THE BOARD The Board of Directors met four (4) times during the financial year, the details of which are given in Corporate Governance Report that forms part of this Report. The intervening gap between any two meetings was within the period prescribed under the Act. 13. BOARD EVALUATION The Board of Directors has carried out an annual evaluation of its own performance, Board committees and individual directors pursuant to the provisions of the Act and Clause 49 of the Listing Agreement entered into with the Stock Exchanges. The performance of the Board and its Committees was evaluated by the Board after seeking inputs from all the directors on the basis of the criteria such as composition of the Board / Committee and structure, effectiveness of Board / Committee processes, information and functioning etc. The Board and the Nomination and Remuneration Committee ("NRC") reviewed the performance of the individual directors on the basis of the criteria such as attendance in Board / Committee meetings, contribution of the individual director to the Board and committee meetings like preparedness on the issues to be discussed etc. In a separate meeting of Independent Directors, performance of non-independent directors, performance of Board as a whole and performance of the Chairman was evaluated taking into account the views of executive directors and non-executive directors. 14. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION AND OTHER DETAILS The Company has put in place appropriate policy on Directors Appointment and remuneration and other matters as provided in Section 178(3) of the Act, which is provided in the Policy Dossier that has been uploaded on the Company's website www.gtlinfra.com Further, salient features of the Company's Policy on Directors' remuneration have been disclosed in the Corporate Governance Report, which forms part of this Report. 16. INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY The details in respect of internal financial control systems and their adequacy are included in the Management Discussion & Analysis (MD&A) Report, which forms part of this Report. 17. AUDIT COMMITTEE The details pertaining to composition of Audit Committee are included in the Corporate Governance Report, which forms part of this report. 18. AUDITORS AND AUDITORS' REPORT Pursuant to the provisions of Section 139 of the Act and rules framed there under, M/s. Chaturvedi & Shah, Chartered Accountants, Mumbai and M/s. Yeolekar & Associates, Chartered Accountants, Mumbai, were appointed as Joint Auditors at the Eleventh (11th) AGM of the Company held on September 16, 2014 to hold office from conclusion of the said meeting till the conclusion of the Fifteen (15th) AGM to be held in year 2018, subject to ratification of their appointment at every AGM. The Company has received the necessary certificates from the Joint Auditors respectively pursuant to Sections 139 and 141 of the Act regarding their eligibility for appointment. The resolution seeking approval of the Members for ratification of the appointment of M/s. Chaturvedi & Shah, Chartered Accountants, Mumbai and M/s. Yeolekar & Associates, Chartered Accountants, Mumbai, as Joint Auditors of the Company have been incorporated in the notice of the forthcoming AGM of the Company. As regards the Joint Auditors' comments / observations / emphasis of matters, the Company has furnished required details / explanations in Note nos. 22.1, 29, 30 and 31 of Notes to the Financial Statements. 19. COST AUDITORS Pursuant to provisions of Section 148 of the Act, on the recommendation of Audit Committee, the Board of Directors of the Company had appointed Mr. Vikas V. Deodhar, Cost Accountants as the Cost Auditor for the financial year 2014-15. However, the Government of India, Ministry of Corporate Affairs (MCA), New Delhi vide G.S.R. 425 (E) dated June 30, 2014 introduced the Companies (cost records and audit) Rules, 2014 repealing the then extant rules, regulation and orders, which has excluded the Company's business activity viz. passive telecom infrastructure and tower facilities from the list of industries to which these rules are applicable. Resultantly, the Company was not required to undertake audit of its cost record during the year under review. The Company has duly filed the Cost Audit Report for financial year 2013-14 with Ministry of Corporate Affairs on September 27, 2014. 20. SECRETARIAL AUDITORS' REPORT The Secretarial Auditors' Report does not contain any qualifications, reservations, disclaimers or adverse remark and the same is given in Annexure A (Form No. MR-3) to this Report. 21. RISKS A separate section on risks and their management is provided in the MD&A Report forming part of this Report, which covers the development and implementation of risk management framework. The Audit Committee monitors the risk management plan and ensures its effectiveness. It is important for shareholders and investors to be aware of the risks that are inherent in the Company's businesses. The major risks faced by your Company have been outlined in this section to allow shareholders and prospective investors to take an independent view. We strongly urge Shareowners/ Investors to read and analyze these risks before investing in the Company. 22. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS The particulars of loans, guarantees and investments have been disclosed in the Note nos. 11, 13 & 33 of Notes to the Financial Statements. 23. PARTICULARS OF RELATED PARTY TRANSACTION All related party transactions that were entered into during the financial year were on arms' length basis and were in ordinary course of business. None of the transactions with related parties falls under the scope of Section 188(1) of the Act. The Policy on Related Party Transactions as approved by the Board is uploaded on the Company's website www.gtlinfra.com The particulars as required under the Act are furnished in Annexure B (Form No. AOC - 2) to this Report. 24. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES The Company does not have Subsidiary or Joint Venture Company. The Company has CNIL as the Associate Company. However, in the light of the amendment made in Rule 6 of the Companies (Account) Rule, 2014 vide Circular dated October 14, 2014, the Company does not require to consolidate the Financial Statements of the Associate Company with Financial Statements of the Company for the financial year ended March 31, 2015. Pursuant to provisions of Section 129(3) of the Act, a statement containing salient features of the Financial Statements of the Company's Associate is furnished in Annexure C (Form No. AOC-1) to this Report. 25. CORPORATE SOCIAL RESPONSIBILITY The Company continued, during the period under review, to contribute through Global Foundation, a Public Charitable Trust, towards social causes as described in the MD&A Report under the caption 'Corporate Social Responsibility (CSR)'. The details as prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014 are set out in Annexure D to this Report. 26. EXTRACT OF ANNUAL RETURN AS ON MARCH 31, 2015 In terms of Section 134(3)(a) read with Section 92(3) of the Act and Rule 12 of the Companies (Management and Administration) Rules, 2014, an extract of Annual Return as on March 31, 2015 is annexed as Annexure E (Form No. MGT- 9) to this Report. 27. CORPORATE GOVERNANCE AND VIGIL MECHANISM The Company continues to comply with Clause 49 of the Listing Agreement entered into with the Stock Exchanges. A separate Report on Corporate Governance along with the Certificate of the Joint Auditors, M/s. Chaturvedi & Shah, Chartered Accountants and M/s. Yeolekar & Associates, Chartered Accountants confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India is given elsewhere in this Report. The Company has formulated and published a Whistle Blower Policy, details of which are furnished in the Corporate Governance section, thereby establishing a vigil mechanism for directors and employees for reporting genuine concerns, if any. 28. MANAGEMENT DISCUSSION AND ANALYSIS The Management Discussion and Analysis (MD&A) for the year under review, as stipulated under Clause 49 of the Listing Agreement entered into with the Stock Exchanges, on the Company's performance, industry trends and other material changes with respect to the Company is presented in a separate section forming part of this Annual Report. 29. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO a. Conservation of Energy: The Company has continued its enhanced focus on reduction of diesel consumption at telecom tower sites through several initiatives of energy efficiency and fuel savings. Further, trials of various green energy solutions are carried out through pilot deployment of Solar Photovoltaic panels, Deep discharge and Lithium Ion batteries which have technological superiority and/or lesser carbon footprint. Through deployment of additional battery banks at sites and site electrification works for non-grid diesel generator operated sites, the Company has about 1,650 tower sites which are identified as Green Sites (each of which consumes diesel less than 35 litre per month). The various initiatives for conservation of energy in respect of telecom towers taken by the Company are enumerated below: i) the steps taken or impact on conservation of energy: a. Installation of Free Cooling / Emergency Free Cooling systems to utilize cool ambient temperatures for saving electrical energy consumption of air-conditioning systems b. Installation of High Efficiency Rectifiers with wide input voltage range SMPS with minimum derating at lower input voltages c. Upgra dation of DC power plants with compatible high efficiency rectifiers d. Deployment of additional battery banks for increasing backup power and thereby minimizing diesel consumption at sites e. Fuel optimizer feature of DG controller for optimum utilization of battery backup and air-conditioning system f. Implemented Stage-wise capacity enhancement with upgradeability as and when site load increased g. Aircon efficiency improvement solutions for better heat transfer of refrigerant h. Deployment of Integrated Power Management Units for AC power line conditioning and AC to DC conversion i. Remote monitoring of site health parameters through NOC (Network Operations Centre) ii) the steps taken by the Company for utilizing alternate source of energy: a. Deployment of Deep discharge and Lithium Ion batteries for faster charging / better utilization of backup power and thereby reducing diesel consumption b. Deployment of DC type Diesel Generator of smaller capacity at pilot sites iii) the capital investment on energy conservation equipment: Not Applicable b. Technology Absorption: 1. Efforts made towards technology absorption 2. The benefits derived like product improvement, cost reduction, product development or import substitution 3. In case of imported technology (imported during last three years reckoned from the beginning of the financial year) a. the details of technology imported b. the year of import c. whether the technology been fully absorbedRs. The Company has not absorbed, adopted and innovated any new technology. Hence, the details relating to technology absorption are not furnished. d. if not fully absorbed, the areas where absorption has not taken No significant expenditures were incurred during the year. place, reasons thereof 4. the expenditure incurred on Research and Development c. Foreign Exchange Earnings and Outgo: There were no actual inflow of Foreign Exchange during the year and the particulars regarding actual outflow of Foreign Exchange appear in Note No. 38 of Notes to the Financial Statements. 30. PARTICULARS OF EMPLOYEES The statement containing particulars of employees as required under Section 197(12) of the Act read Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in a separate annexure forming part of this Report. Further, the Report and the Financial Statements are being sent to the Members excluding the aforesaid annexure. In terms of Section 136 of the Act, the said annexure is open for inspection at the Registered Office of the Company. Any Member interested in obtaining a copy of the same may write to the Company Secretary. None of the employees listed in the said annexure are related to any Director of the Company. 31. SPECIAL BUSINESS As regards the items of the Notice of the AGM relating to Special Business, the Resolutions incorporated in the Notice and the Explanatory Statement relating thereto, fully indicate the reasons for seeking the approval of members to those proposals. Members' attention is drawn to these items and Explanatory Statement annexed to the Notice. 32. GENERAL Notes forming parts of the Accounts are self - explanatory. 33. ACKNOWLEDGEMENT Your Directors wish to place on record their appreciation and acknowledge with gratitude the support and cooperation extended by the clients, employees, vendors, bankers, financial institutions, investors, media and both the Central and State Governments and their Agencies and look forward to their continued support. On behalf of the Board of Directors, Manoj G. Tirodkar Chairman Place: Mumbai date : May 6, 2015 |