DIRECTORS' REPORT TO THE MEMBERS, Your Directors have pleasure in presenting the 9th Annual Report on the business and operations of the Company, together with the audited financial statements for the year ended March 31, 2015. BUSINESS OVERVIEW The year started with the promise of digitization in Phase 3 areas and we were fully geared up to ensure that SITI Cable was well placed to gain significant market share in the process. Although, the digitization drive got slowed down due to the extension in the Phase 3 digitization deadline by the Government of India, we were able to successfully seed 1.23 million STBs proactively in Phase-3 areas and expand our reach from 60 cities to 130 cities across India. Overall Siti Cable managed to close the year with over 5 Million digital subscribers and expand our cable universe to 10.5 Million. We will continue to digitize the remaining analogue subscriber base and also expand in select strategic geographies to consolidate our presence. The company made new forays into the broadband space and currently is offering broadband at speeds upto 100 Mbps on state of the art DOCSIS 2/3 Technology in Delhi/ NCR. Your Company has chalked out plans to expand broadband operations on all India basis and identified new markets for expansion in the next twelve months to increase its current subscriber base significantly. You will be happy to know that SITI Cable continued to work closely with the Sector Regulator and maintain a high-focus on adherence to regulatory compliances, in order to minimize regulatory risk and provide the end customer a quality service experience. The company has also been at the forefront of bringing together leading MSOs for policy advocacy and establishing the All India Digital Cable Federation (AIDCF), which is the recognized industry body for the sector. The industry continues to face an excessive tax burden in the form of both service tax and entertainment tax incidence, which is unhealthy considering it is the most popular and accessible medium of entertainment for the common man. There is a need to bring down the tax burden in line with other industries such as multiplexes and make cable a more affordable medium Siti Cable continues to monetize the business better and harness the inherent operational leverage that the business possesses. We worked with our LCO business associates to train and equip them with regards to the rapidly changing digital environment and serve the customer more effectively. We built durable relationships with leading content providers to ensure our subscribers get the best of content and value added services. SITI Cable, as part of the Essel Group is working in consonance with other group companies to ensure economies of scale and derive synergies in various aspects of the value chain such as STB procurement, content cost and shared services. We felt the need to bring in fresh talent from customer facing industries in line with our renewed focus on the end consumer and transition to a B2C business and have inducted the same at Senior Management and Middle management levels for our foray into broadband business on all India basis and also to drive execution capabilities. At the same time, processes and systems were further refined and streamlined to ensure the organization remains agile as it scales up. In terms of overall perspective, FY2014-15 was a year of unique differentiation for your Company. Your Company's consolidated revenue grew by 32% to INR 9370 million from INR 7103 million in 2014. Core Revenue, excluding other income and activation grew even faster at 37% YoY to reach INR 8435 million. The EBITDA also grew 34% to INR 1684 million compared to INR 1259 million last years. EBITDA, excluding other income and activation grew by a significant 132% YoY to reach INR 749 million, testimony to the inherent execution capabilities of your company. As an impact of successful digitization in phase I and II as well as proactive seeding in Phase 3, Subscription revenue grew by 57% over last fiscal.Carriage revenue grew by 9.6% YoY and broadband revenue grew by 53% YoY due to conscious decision by Management to use multiple growth levers and diversify revenue streams. Capital expenditure shall continue to be high this year as we strive for market expansion and establish our digital footprint to transform our business to a sustainable perpetual annuity with tremendous operating leverage which will generate a steady cash flow. We continue to pursue expansion of our digital cable and broadband business in the current year, so that we are able to provide the consumer the best of the content in a platform neutral manner. Our eventual aim is to become a triple play service provider. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 134 of the Companies Act, 2013 and based on representations received from the operating management, the Directors hereby confirm that :- i. in the preparation of the annual accounts, the applicable standards have been followed and there are no material departure; ii. the Directors have 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 as at March 31, 2015 and of the loss of the Company for the financial year ended on that date; iii. the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. the Directors had prepared the annual accounts on a going concern basis; v. the Directors 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 vi. t he Directors had devised proper systems to ensure compliances with the provisions of all applicable laws and that such systems were adequate and operating effectively. DIRECTORS & KEY MANAGERIAL PERSONNEL In accordance with the provisions of Section 152(6) of the Companies Act, 2013, Mr. Subodh Kumar, IAS (Retd.), is liable to retire by rotation at the ensuing Annual General Meeting of the Company and being eligible, offer himself for re-appointment. The Board recommends their reappointment. Mr. V.D.Wadhwa who has been holding the position of CEO of the Company since April 29, 2013, was appointed as the Executive Director of the Company for a period 3 years w.e.f. August 12, 2014, on the terms and conditions as approved by the shareholders by passing special resolution through postal ballot on October 14, 2014. Pursuant to Section 149(1) of the Companies Act, 2013 the Board of Directors of the Company had on March 31, 2015 appointed a Women Director Ms. Kavita Kapahi as Additional Director in the category of Independent Director. Ms. Kavita Kapahi shall hold office upto the date of the ensuing AGM of the Company and, being eligible, offer herself for re-appointment. The Company has also received a notice in writing from a member proposing her candidature for the office of Director along with a deposit of Rupees one lakh. During the period under review, Dr. Subhash Chandra resigned as Director of the Company w.e.f. April 4, 2015. Further Brief Profile of Directors proposed to be appointed / re-appointed are given in the Reports on the Corporate Governance forming part of the Annual Report. In compliance with the requirements of Section 203 of the Companies Act, 2013, Mr. V.D.Wadhwa, Executive Director & CEO, Mr. Sanjay Goyal, Chief Financial Officer and Mr. Suresh Kumar, Company Secretary of the Company were nominated as Key Managerial Personnel. Pursuant to the provisions under Section 134(3)(d) of the Companies Act, 2013, with respect to statement on declaration given by Independent Directors under Section 149(6) of the Act, the Board hereby confirms that all the Independent Directors of the Company have given a declaration and have confirmed that they meet the criteria of independence as provided in the said Section 149(6). BOARD AND COMMITTEE MEETINGS The Board met five times during the financial year, the details of which are given in the corporate governance report that forms part of the Annual Report. The Board has constituted an Audit Committee with Mr. B.K. Syngal as the Chairman and Mr. Vinod Kumar Bakshi & Mr. Sureshkumar Agarwal as the members of the Audit Committee. Details of the composition of the Board and its Committees and of the Meetings held and attendance of the Directors at such Meetings, are provided in the Corporate Governance Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act, 2013 and the Listing Agreement. BOARD EVALUATION In a separate meeting of Independent Directors, performance of non-independent directors, performance of the board as a whole and performance of the Chairman was evaluated. Based on such report of the meeting of Independent Directors and taking into account the views of executive directors and nonexecutive directors the Board had evaluated its performance on various parameters such as Board composition and structure, effectiveness of board processes, effectiveness of flow of information, contributions from each Directors etc. AUDITORS Statutory Auditors M/s. Walker Chandiok & Co. LLP, Chartered Accountants, having Firm Registration No. 001076N / N500013, Statutory Auditors of the Company, will retire at the conclusion of the ensuing AGM and being eligible have consented and offered themselves for re-appointment as Statutory Auditors for the financial year 2015-16. Pursuant to Section 141 of the Companies Act, 2013 and relevant Rules prescribed there under, the Company has received certificate dated May 27, 2015 from the Auditors to the effect, inter-alia, that their re-appointment, if made, would be within the limits laid down by the Act, shall be as per the term provided under the Act, that they are not disqualified for such re-appointment under the provisions of applicable laws and also that there is no proceeding against them or any of their partners pending with respect to professional matter of conduct. The Notes on Financial Statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments. Secretarial Auditors M/s Amit Agrawal & Associates, Company Secretaries in Whole Time Practice, were appointed as Secretarial Auditors of the Company for the financial year 2014-15 pursuant to Section 204 of the Companies Act, 2013. The Secretarial Audit Report submitted by them in the prescribed form MR-3 is annexed to this report as Annexure - I and forms part of the same. There are no qualifications or observations or other remarks of the Secretarial Auditors in the Report issued by them for the financial year 2014-15 which call for any explanation from the Board of Directors. SUBSIDIARIES During the period under review, the Company has subscribed on rights basis 45,000,000 equity shares of Indian Cable Net Company Limited, which is one of the subsidiary company of the Company. During the period under review, the Company has acquired 51% stake in Siti Global Private Limited, Siti Karnal Digital Media Network Private Limited, Siri Digital Network Private Limited and 100% stake in Siti Broadband Services Private Limited. Accordingly, the total No. of subsidiary companies of the Company has increased to 18 as compared to 14 during the financial year 2013-14. Pursuant to Section 129(3) of the Companies Act, 2013 and Accounting Standard- 21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company include the Financial Statements of its Subsidiaries. Further, a separate statement containing the salient features of the financial statements of subsidiaries of the Company in the prescribed form AOC-1 has been disclosed herewith as Annexure - II in the Consolidated Financial Statements. LOANS, GUARANTEE OR INVESTMENTS MADE BY THE COMPANY Particulars of loans, guarantees and investments made by the Company required under section 186(4) of the Companies Act, 2013 are contained in Note No. 44 to the Standalone Financial Statements. RELATED PARTIES TRANSACTIONS With reference to Section 134(3)(h) of the Companies Act, 2013, particular of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in the prescribed Form No.AOC.2 is annexed herewith as Annexure - III. Further, your attention is drawn to the Related Party disclosures set out in Note No. 34 of the Notes forming part of the Standalone Financial Statements. MATERIAL CHANGES There are no material changes and commitments, affecting the financial position of the Company which has occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report other than those disclosed in the financial statements. DEPOSITS During the year under review, your Company has not accepted or invited any deposits under Chapter V of the Companies Act, 2013. DIVIDEND In view of losses during the year, your Directors have not recommended any dividend either on Equity Shares or Preference Shares for the year under review. EMPLOYEE STOCK OPTION SCHEME During the period under review, your Company has not granted any Stock Options. Further, 245,680 options were exercised by the employees. Accordingly, during the period under review, the Company has allotted 245,680 equity shares to eligible employees on such exercise. These shares have been listed on the BSE Limited and National Stock Exchange of India Limited. Details of options granted till March 31, 2015 and other disclosures as required under Clause 12 ("Disclosure in the Directors' Report") of the SEBI (Employees Stock Option Scheme) Guidelines, 1999, as amended, are given in Annexure - IV to this Report. RIGHTS ISSUE OF SHARES - RECEIPTS AND UTILISATION Against the allotment of 236,767,351 equity shares of each issued at a price of Rs. 19/- per share (including premium of Rs. 18/- per share) aggregating to Rs. 4498.50 million during the financial year 2009-10 on rights issue basis, your Company had received a sum of Rs. 4488.27 million. The utilization of proceeds of the money received through rights issue by the Company as on March 31, 2015 are as under:- SHARE CAPITAL During the period under review, the authorised share capital of the Company has been increased from Rs. 750 million to Rs. 1000 million, by creation of additional 250,000,000 (Two Hundred Fifty Million) Equity Shares of Rs. 1/- each vide resolution passed on October 14, 2014 through postal ballot. The paid-up equity share capital of the Company as on March 31, 2015 was Rs. 677.63 million comprising of 677,633,135 equity shares of each. During the period under review, the Company has allotted: m 93,500,000 equity shares on April 2, 2014 on preferential basis to two foreign promoter entities upon conversion of equal number of Warrants; m 63,174,540 equity shares on March 9, 2015 on QIP (Qualified Institutional Placement) basis; and m 77,840 equity shares on February 4, 2015 and 167,840 equity shares on March 26, 2015 against the options exercised by employees pursuant to Employees Stock Option Scheme of the Company. Accordingly, during the review, the paid up equity share capital of the Company has been increased by Rs. 156.92 millions i.e. from Rs. 520.71 million as on March 31, 2014 to Rs. 677.63 million as on March 31, 2015. CORPORATE GOVERNANCE & POLICIES Your Company has been constantly reassessing and benchmarking itself with well-established Corporate Governance practices besides strictly complying with the requirements of Clause 49 of the Listing Agreement and applicable provisions of Companies Act, 2013. A detailed report on Corporate Governance together with the Certificate of Amit Agrawal & Associates, Practicing Company Secretaries, on compliance is attached to this Annual Report. Management's Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges is presented in separate section forming part of the Annual Report. The Audit Committee of the Board has been vested with powers and functions relating to Risk Management which inter alia includes (a) review of risk management policies and business processes to ensure that the business processes adopted and transactions entered into by the Company are designed to identify and mitigate potential risk; (b) laying down procedures relating to Risk assessment and minimization; and (c) formulation, implementation and monitoring of the risk management plan. In compliance with the requirements of Section 178 of the Companies Act, 2013, the Nomination & remuneration Committee of your Board had fixed various criteria for nominating a person on the Board which inter alia include desired size and composition of the Board, age limits, qualification / experience, areas of expertise and independence of individual. The Committee had also approved in-principle that the initial term of an Independent Director shall not exceed 3 years. Your Company has also adopted a Remuneration Policy, salient features whereof is annexed to this report as Annexure - V. Your Board has in accordance with the requirements of Companies Act, 2013 and Clause 49 of the Listing Agreement has adopted new policies and amended existing policies such as policy on Related Party Transaction, Code of Conduct for Directors and Senior Management, Corporate Social Responsibility Policy and Whistle Blower and Vigil Mechanism Policy. These policies are available on the website of the Company and can be viewed on www.siticable.com CORPORATE SOCIAL RESPONSIBILITY The Company aims to remain essential to the society with its social responsibility, strongly connected with the principle of sustainability. It is responsibility of your Company to practice its corporate values through its commitment to grow in a socially and environmentally responsible way, while meeting the interest of Stakeholders. Even though Section 135 of the Companies Act, 2013 is not applicable to the Company as it does not fall under any of the eligibility criteria prescribed therein, the Company has formulated the Corporate Social Responsibility Committee. CONSOLIDATED FINANCIAL STATEMENTS As stipulated by Clause 32 of the Listing Agreement with the Stock Exchanges, the attached Consolidated Financial Statements have been prepared in accordance with the Accounting Standard AS 21 - Consolidated Financial Statements read with Accounting Standard AS 23 - Accounting for Investments in Associates, and Accounting Standard AS 27 - Financial Reporting of Interests in Joint Ventures and forms part of the Annual Report. MANAGEMENT DISCUSSION AND ANALYSIS REPORT & CORPORATE GOVERNANCE In terms of requirement of Clause 49 of the Listing Agreement with the Stock Exchange(s) a separate section on Management Discussion and Analysis Report-disclosing the operations, performance and outlook of the business in which the Company operates forms an integral part of this report. Your Company is committed to maintain the highest standards of Corporate Governance. Your Company observes high standards of corporate governance in all areas of its functioning with strong emphasis on transparency, integrity and accountability. Your Company has complied with all the requirements as per Clause 49 of the listing agreement of the Stock Exchanges, as amended from time to time. The Auditor's certificate on compliance with Clause 49 is included in the section on Corporate Governance in this Annual Report. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual return in Form MGT -9 is annexed herewith as Annexure - VI. PARTICULARS OF EMPLOYEES Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as Annexure - VII which forms part of this report. In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules is attached as Annexure - VII which forms part of this report. INTERNAL FINANCIAL CONTROL The Company has a well placed, proper and adequate internal control system, which ensures that all assets are safeguarded and protected and that the transactions are authorized, recorded and reported correctly. As per Section 138 of the Companies Act, 2013 on the recommendation of the Audit Committee, the Board of Directors has appointed M/s. Rajneesh Gupta & Co., Chartered Accountants as the Internal Auditor of the Company. The Internal Auditors independently evaluate the adequacy of internal controls and concurrently audit the majority of the transactions in value terms. Independence of the audit and compliance is ensured by direct reporting of Internal Auditors to the Audit Committee of the Board. During the year, the Company continued to implement their suggestions and recommendations to improve the control environment. Internal Auditors findings are discussed at quarterly basis and suitable corrective actions taken as per the directions of Audit Committee on an ongoing basis to improve efficiency in operations. Based on internal financial control framework and compliance systems established in the Company, the work performed by statutory, internal and secretarial auditors and reviews performed by the management and/or relevant Audit and other Committees of the Board, your Board is of the opinion that the Company's internal financial controls were adequate and effective during the financial year 2014-15 VIGIL MECHANISMS/ WHISTLE BLOWER POLICY The Company has established a vigil mechanism/framed a whistle blower policy. The policy enables the employees and other stakeholders to report to the management instances of unethical behaviour, actual or suspected fraud or violation of the Company's code of conduct or ethics policy. This policy is reviewed annually by the Audit Committee to check the effectiveness of the policy. POLICY ON PREVENTION, PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORKPLACE The Company has zero tolerance for sexual harassment at workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at the workplace. The Policy aims to provide protection to employees at the workplace and prevent and redress complaints of sexual harassment and for matters connected or incidental thereto, with the objective of providing a safe working environment, where employees feel secure. The Company has also constituted an Internal Complaints Committee, known as the Prevention of Sexual Harassment (POSH) Committee, to inquire into complaints of sexual harassment and recommend appropriate action. The Company has not received any complaint of sexual harassment during the financial year 2014-15. REGULATORY ORDERS No significant or material orders were passed by the regulators or courts or tribunals which impact the going concern status and Company's operations in future. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The Company is a Multi System Operator (MSO) and is carrying on business of, inter alia, reception of signals of channels of various Broadcasters and distribution of same through cable networks. Since this does not involve any manufacturing activity, most of the Information required to be provided under Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, are nil / not applicable. FOREIGN EXCHANGE EARNINGS AND OUTGO The details of Foreign Exchange Earnings and Outgo are mentioned in Note Nos. 40 to 41 of the Notes forming part of the Standalone Financial Statements of the Company. HUMAN RESOURCES Your Company gives its human resources a special status and strongly believes that quality of its employees can be improved by consistently investing in them. The Company develops its human resources through education, training and enhanced benefits that ultimately leads to a quality service delivery. The Company has one of the most adept management team that is strategically transforming its cable business to broadband business. Attracting, developing and retaining talent has been found to be a fundamental solution for implementation of business plans. The Company is extensively focusing on change management that can absorb new businesses, ideas and people. Talent is being sought from across industries with focus on on-boarding people with broadband experience. Your Company embraces the notion of good human capital bringing in competitive advantages and development of human resources becomes part of its overall effort to achieve cost effective and firm performance. ACKNOWLEDGEMENT Your Directors' place on record their appreciation of the contribution made by the employees at all levels. Your Directors also express their gratitude for valuable support and cooperation extended by various Governmental Authorities mainly Ministry of Information and Broadcasting, Ministry of Communication and Information Technology, Telecom and Regulatory Authority of India and other stakeholders including local cable operators, bankers, financial institutions, viewers, broadcasters, vendors and other service providers, and also look forward to their continued support in future. For and on behalf of the Board Vinod Kumar Bakshi Director V.D.Wadhwa Executive Director & CEO Place : Delhi Dated : May 28, 2015 |