Board's Report Dear Members, Your Directors are pleased to present the Tenth Board's Report on the business and operations of the Company together with the audited financial statements for the financial year ending March 31, 2016. Business Overview Bharti Infratel is a provider of tower and related infrastructure sharing services. On a consolidated basis, we are one of the largest PAN India tower infrastructure providers, based on the number of towers owned and operated by Bharti Infratel and Indus Towers, which are represented by Bharti Infratel's 42% equity interest in Indus Towers. The business of Bharti Infratel and Indus Towers is to acquire, build, own and operate towers and related infrastructure. Bharti Infratel and Indus Towers provide access to their towers primarily to wireless telecommunication service providers on a shared basis under long-term contracts. Our three largest customers are Bharti Airtel (together with Bharti Hexacom), Vodafone India and Idea Cellular, which are the three leading wireless telecommunication service providers in India by wireless revenue. We have a nationwide presence with operations in all 22 telecommunication circles in India, with Bharti Infratel and Indus Towers having operations in 4 overlapping circles. As of March 31, 2016, Bharti Infratel owned and operated 38,458 towers with 81,632 co-locations in 11 telecommunication circles while Indus Towers operated 119,881 towers with 270,006 co-locations in 15 telecommunication circles. With Bharti Infratel's towers and its 42% interest in Indus Towers, we have an economic interest in the equivalent of 88,808 towers and 195,035 co-locations in India as of March 31, 2016. We have entered into Master Service Agreements (MSAs) with our customers. The MSAs are long-term contracts which set out the terms on which access is provided to Bharti Infratel's and Indus's Towers, with all service providers being offered substantially the same terms and receiving equal treatment at towers where they have installed their active infrastructure. Under the MSAs, Bharti Infratel and Indus Towers enter into service contracts in respect of individual towers. The MSAs and service contracts govern Bharti Infratel's and Indus's relationship with their customers, the services provided, the applicable charges and incorporate annual escalation clauses in respect of the applicable charges. This provides stability to our business and provides visibility with regard to future revenues. Share Capital During the year, the Company has allotted 2,897,776 equity shares under the ESOP Scheme 2008. Thus, the paid up share capital of the Company has increased from Rs. 18,937,692,930 to Rs. 18,966,670,690 represented by 1,896,667,069 equity shares of Rs. 10 each fully paid up as on March 31, 2016. Transfer to Reserves The Company has not transferred any amount to the General Reserve for the financial year ended March 31, 2016. Dividend The Board has recommended a dividend of Rs. 3 per equity share of Rs. 10 each fully paid up (30% of face value) for FY 2015-16 amounting to Rs. 5,690 Mn (excluding tax on dividend). The payment of dividend is subject to the approval of the shareholders at the ensuing annual general meeting of the Company. Material Changes and Commitment Affecting the Financial Position Between the End of the Financial Year and Date of Report of the Balance Sheet Buy-Back of Equity Shares The Board of Directors, at its meeting held on April 26, 2016, approved the Buy-back of fully paid-up equity shares of the Company ('Equity Shares') at a price not exceeding Rs. 450/-per Equity Share payable in cash for a total consideration not exceeding Rs. 2,000 Crores (Rupees Two Thousand Crores Only) excluding transaction costs viz. brokerage, applicable taxes such as securities transaction tax, service tax, stamp duty, etc., which is 19.3% of the total paid-up equity capital and free reserves as per the audited financial statement of the Company for the financial year ended March 31, 2016, through the Tender Offer route. The Buy-back is subject to regulatory and other approvals, if any, including the shareholders' approval by way of special resolution through Postal Ballot. The Board has authorised the Committee of Directors to finalise the terms of Buy-back and administer the Buy-back procedure. Deposits The Company has not accepted any deposit and as such, no amount of principal or interest was outstanding as on the date of balance sheet. Details of Utilisation of IPO Proceeds Pursuant to the Initial Public Offer in December, 2012, the Company has received Rs. 31,657 Mn (net of selling shareholders' proceeds). The Company had, in terms of Prospectus, proposed to utilise the IPO Proceeds towards objects of the Issue by March 31, 2016. Whilst the Company had made best efforts to utilise the IPO proceeds as per the terms of the Issue, Rs. 9,403 Mn was pending utilisation as on December 31, 2015 for which the Company has obtained approval of the shareholders' by way of special resolution through Postal Ballot for variation in terms of the Objects of the Issue. For details of utilisation of IPO proceeds subsequent to approval of the shareholders', please refer note no. 39 of the standalone financial statements for the year ended March 31, 2016 on page 224. Directors and Key Managerial Personnel Inductions, Re-appointments, Retirements & Resignations In line with the Company's policy on Independent Directors, Mr. Vinod Dhall has retired from the Board w.e.f. September 2, 2015. Further, during the previous financial year, Mr. Rakesh Bharti Mittal, Non-Executive Director resigned from the Board w.e.f. January 27, 2016. The Board placed on record its' sincere appreciation for help, guidance and contribution made by the outgoing Directors during their tenure on the Board. Mr. Rajan Bharti Mittal was appointed as a Non-Executive Additional Director on the Board w.e.f. January 27, 2016. The Company has received requisite notice from a member under Section 160 of the Companies Act, 2013, along with deposit of Rs. 1,00,000/- proposing the appointment of Mr. Rajan Bharti Mittal as the Company's Non-Executive Director, liable to retire by rotation at the ensuing AGM. Pursuant to the provisions of the Companies Act, 2013, Mr. Mark Chin Kok Chong, Director of the Company, is liable to retire by rotation at the forthcoming AGM and being eligible, has offered himself for re-appointment. A brief resume, nature of expertise, details of other directorships and other information of the Directors proposed to be appointed/ re-appointed as stipulated in Secretarial Standard 2 and Regulation 36 of the Listing Regulations is appended as an annexure to the notice of ensuing AGM. During the year, Mr. R P Singh was appointed as an Independent Director on the Board w.e.f. July 15, 2015 and his tenure was fixed by the members at the last AGM held on August 11, 2015. Mr. Anupam Garg, Company Secretary has resigned w.e.f. July 22, 2015. The Directors placed on record their appreciation for the contribution made by him during his tenure. The Board in its meeting held on July 22, 2015 has appointed Ms. Shweta Girotra as the Company Secretary and Compliance Off icer of the Company w.e.f. July 23, 2015. Declaration by Independent Directors The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed under Section 149 of the Companies Act, 2013 and the Listing Regulations. The Independent Directors have also confirmed that they have complied with the Company's code of conduct. Policy on Nomination, Remuneration and Board Diversity The Company believes that building a diverse and inclusive culture is integral to its success. A diverse Board, among others, will enhance the quality of decisions by utilising different skills, qualifications, professional experience and knowledge of the Board members necessary for achieving sustainable and balanced development. Accordingly, the Board has adopted a Policy on Nomination, Remuneration and Board Diversity, which sets out the criteria for determining qualifications, positive attributes and independence of a Director. The detailed policy is available on the Company's website at www.bharti-infratel.com <http://www.bharti-infratel.com> and is annexed as Annexure A to this report. Annual Board Evaluation and Familiarisation Programme for Board Members A note on the familiarisation programme adopted by the Company for orientation and training of the Directors, and the Board evaluation process undertaken in compliance with the provisions of the Companies Act, 2013 and the Listing Regulations is provided in the Report on Corporate Governance, which forms part of this Annual Report. Board Meetings During FY 2015-16, the Board of Directors met 4 (four) times on April 27, 2015; July 22, 2015; October 23, 2015 and January 27, 2016. The period between any two consecutive meetings of the Board of Directors of the Company was not more than 120 days. The details regarding composition, number of board meetings held and attendance of the Directors during FY 2015-16 are set out in the Report on Corporate Governance, which forms part of this Annual Report. Board Committees The Company has several Committees which have been established as a part of the best corporate governance practices and are in compliance with the requirements of the relevant provisions of applicable laws and statutes. As on March 31, 2016, the Board has 5 Committees, namely, Audit and Risk Management Committee; HR, Nomination and Remuneration Committee; Corporate Social Responsibility (CSR) Committee; Stakeholders' Relationship Committee and Committee of Directors. The details with respect to the compositions, powers, roles, terms of reference, no. of meetings etc. of the Committees held during the FY 2015-16 and attendance of the Directors at each meeting is provided in the Report on Corporate Governance which forms part of this Annual Report. Subsidiary / Associate and Joint Venture Company During the FY 2015-16, Smartx Services Limited was incorporated as a wholly owned subsidiary Company. Bharti Infratel Services Limited, another wholly owned subsidiary Company has applied to the Registrar of Companies for striking-off its name from the register of Companies. Company has a joint venture in the name of Indus Towers Limited, there was no change in the joint venture during the financial year under review. In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared consolidated financial statements of the Company, its subsidiaries and joint venture, which forms part of the Annual Report. A statement in Form AOC - 1, containing the salient features of the financial statements of the subsidiaries and Joint Venture Company is annexed as Annexure B to this report. The statement also provides the details of performance and financial position of each of the subsidiary and joint venture. Audited financial statements of Smartx Services Limited for FY 2015-16 and Statement of Accounts of Bharti Infratel Services Limited as on March 30, 2016 have been placed on the website of the Company, www.bharti-infratel.com . The audited financial statements of the subsidiaries are available for inspection at the Company's registered office and registered office of respective companies. Shareholders interested in obtaining a copy of the audited financial statements of subsidiaries may write to the Company Secretary at the Company's registered office. Human Resources At Bharti Infratel, our workforce is fundamental to the business strategy and its success. We venture to offer an encouraging, empowering and engaging environment where employees are ardent towards achieving customer excellence and realising the vision of the Company. We commenced FY 2015-16 with an endeavour to fortify our stature as 'Employer of Choice'. In order to deliver on this agenda, we undertook various initiatives. In order to satisfy our jobs with continuous improvement, we launched the concept of 'Infratel DNA', to provide our leadership a direction towards achieving the corporate vision. This DNA forms the anchor of our Talent Acquisition, Performance Management, Leadership Development and our Succession planning processes. A second initiative was the launch of the 'Applause Online' program, which aims at recognising teams and individuals who deliver superior performance with imbibed Infratel values. This portal provides real time recognition to our human resources. A major aspect of our success is also from the initiative of iLearn. This is wrapped around the theme of 'Own Your Development', where employees have a marketplace for all their learning needs. This builds a culture where the workforce is responsible for their career, development and a holistic growth. To ensure relentlessly exceeding business targets, we introduced the '3600 Feedback', to provide a holistic feedback to our middle and senior management. To foster the culture of safety and to ensure compliance of safety norms, we also launched the 'Consequence Management Guidelines'. Finally, to take workforce diversity to a new high, we not only organised a 'Women in Business' Conclave, but also introduced the initiative of 'Bits n Bytes'. This platform provides high women connect network in all circles. We also conducted the Gender Sensitisation Workshop for all our employees, to ensure employee integrity, at every level. Employees Stock Option Plan To retain, promote and motivate the best talent in the Company and to develop a sense of ownership among employees, the Company has instituted two ESOP schemes i.e. Employee Stock Option Scheme 2008 (ESOP Scheme 2008) and Employee Stock Option Scheme 2014 (ESOP Scheme, 2014) with the approval of shareholders. The said schemes are in compliance with the SEBI (Share based Employee Benefits) Regulation, 2014, (ESOP Regulations) The HR, Nomination and Remuneration Committee administers and monitors the Company's ESOP schemes. During FY 2015-16, the Company has allotted 2,897,776 equity shares pursuant to exercise of stock options under ESOP Scheme, 2008. In accordance with the ESOP Regulations, 2014, the Company had set up Bharti Infratel Employees' Welfare Trust (ESOP Trust) for the purpose of implementation of employees' stock option schemes. Since October, 2015, both the ESOP schemes are administered through ESOP Trust, whereby shares held by the Trust are transferred to the employee, upon exercise of stock options as per the terms of the Scheme. In terms of ESOP Regulations, neither the ESOP Trust nor any of its trustees shall exercise voting rights in respect of the shares of the Company held by the ESOP Trust. During the year, Company has formulated LTI Plan - 2015 under ESOP Scheme, 2014 and has granted 90,261 stock options under the said Plan. A detailed report with respect to options exercised, vested, lapsed, exercise price, vesting period etc. under ESOP Scheme, 2008 and ESOP Scheme, 2014 is disclosed on the website of the Company at <http://> www.bharti-infratel.com/cps-portal/web/shares.html . A certificate from M/s S. R. Batliboi & Associates LLP Chartered Accountants, Statutory Auditors, with respect to ESOP Scheme, 2008 and ESOP Scheme, 2014 would be placed before the shareholders at the ensuing AGM and a copy of the same will also be available for inspection at the registered office of the Company. Auditors and Auditors' Report Statutory Auditors In terms of the provisions of Section 139 of the Companies Act, 2013, M/s S. R. Batliboi & Associates LLP, were appointed as the Statutory Auditors of the Company by the shareholders in the 8th AGM held on August 4, 2014 for a period of three years i.e. up to the conclusion of the 11th AGM of the Company. The said appointment is subject to ratification by the members at every AGM. Accordingly, the Board has recommended ratification of appointment of M/s S. R. Batliboi & Associates LLP, Chartered Accountants, by the shareholders at the forthcoming AGM. The Company has received a letter from M/s S. R. Batliboi & Associates LLP, Chartered Accountants, confirming their consent and eligibility under Section 139 and 141 of the Companies Act, 2013. Auditors' Report The Board has duly examined the Statutory Auditor's Report to the accounts, which is self-explanatory. The report does not contain any observations, disclaimer, qualification or adverse remarks. Secretarial Auditors & Their Report The Company had appointed M/s. Chandrasekaran Associates, Company Secretaries, New Delhi, to conduct its Secretarial Audit for the financial year ended March 31, 2016. The Secretarial Auditors have submitted their report, confirming compliance by the Company of all the provisions of applicable corporate laws. The Report does not contain any qualification, observations, disclaimer or adverse remark. The Secretarial Audit Report is annexed as Annexure C to this report. The Board has reappointed M/s. Chandrasekaran Associates, Company Secretaries, New Delhi, as Secretarial Auditor of the Company for the FY 2016-17. Corporate Social Responsibility (CSR) At Bharti Infratel, Corporate Social Responsibility (CSR) encompasses much more than social outreach programmes. Over the years, the Company has aligned its business processes and goals to make a more deep-rooted impact on the society's sustainable development. In accordance with the requirements of Section 135 of the Companies Act, 2013, the Company has constituted a CSR Committee. The composition and terms of reference of the CSR Committee is provided in the Report on Corporate Governance, which forms part of this Report. The Company has also formulated a Corporate Social Responsibility Policy, which is available on the Company's website at <http://www.bharti-infratel.com/cps-portal/web/> pdf/Corporate%20Social%20Responsibility%20Policy.pdf. During FY 2015-16, the Company has spent Rs. 209.4 Mn. towards the CSR activities and a balance of Rs. 45.6 Mn was left unspent. The Company had increased/ scaled up the intervention for CSR activities as prescribed in the Company's CSR policy and there was an increase of approx 22% in the total CSR spend vis-à-vis last year i.e. from Rs. 173 Mn in financial year 2014-15 to Rs. 209.4 Mn this year. As a socially responsible company, our Company is committed to increase its CSR impact and spend over the coming years, with its aim of playing a larger role in India's sustainable development by embedding wider economic, social and environmental objectives. As the Company has added new projects and scaled up the existing ones, there will be increased CSR spend in coming years. A detailed update on the CSR initiatives of the Company is provided in the Corporate Social Responsibility section, which forms part of the Annual Report. The Annual Report on Corporate Social Responsibility u/s 135 of the Companies Act, 2013 is annexed as Annexure D to this Report. Business Responsibility Report As stipulated under the Listing Regulations, the Business Responsibility Report, describing the initiatives taken by the Company from environmental, social and governance perspective forms a part of this Annual Report. Management Discussion and Analysis The Management Discussion and Analysis Report for the year under review, as stipulated under the Listing Regulations, is presented in a separate section, forming part of this Annual Report. Corporate Governance Your Company is committed to benchmarking itself with global standards for providing good corporate governance. The Board constantly endeavours to take the business forward in such a way that it maximises long term value for the stakeholders. The Company has put in place an effective corporate governance system which ensures that the provisions of the Listing Regulations are duly complied with. A detailed report on the corporate governance pursuant to the requirements of the Listing Regulations forms part of this Annual Report. A certificate from the auditors of the Company, M/s S. R. Batliboi & Associates LLP, Chartered Accountants, confirming compliance of conditions of corporate governance as stipulated in the Listing Regulations is annexed as Annexure E to this report. Risk Management Risk management is embedded in the operating framework of Bharti Infratel. The Company believes that managing risks goes hand in hand with maximising returns. To this effect, there is a robust process in place to identify key risks across the Company and prioritise relevant action plans to mitigate these risks. Risk Management Framework is reviewed periodically by the Board and the Audit and Risk Management Committee which includes discussing the management submissions on risks, prioritising key risks and approving action plans to mitigate such risks. The Company has a Risk Management Policy approved by Audit and Risk Management Committee and the Board. The objective of this policy is to have a well-defined approach to risk. The Policy lays broad guidelines for the appropriate authority so as to be able to do timely identification, assessment, and prioritisation of risks affecting the Company in the short and foreseeable future. The Policy suggests framing an appropriate response action for the key risks identified so as to make sure that risks are adequately compensated or mitigated. The Internal Audit function is responsible to assist the Audit and Risk Management Committee on an independent basis with a full status of the risk assessment and management. Detailed discussion on Risk Management has been given as a part of Management Discussion & Analysis under the section "Risks and Concerns", which forms part of this Annual Report. Internal Finance Control The Company has in place a robust and comprehensive internal financial control system for all the major financial transactions to ensure orderly and efficient conduct of its business, including adherence to Company's policies and procedures, the safeguarding of its assets, the prevention and detection of frauds and errors and reliability of financial reporting. The Internal financial controls of the Company have been further discussed in detail in the Management Discussion and Analysis section. Vigil Mechanism The Code of Conduct and vigil mechanism of the Company is posted on the website of the Company at www.bharti- infratel.com . A brief note on the highlights of the Ombudsperson Policy and compliance with Code of Conduct is also provided in the Report on Corporate Governance which forms part of this Annual Report. Quality Control The Company has established well-structured quality processes and systems at every stage of the Company's work, from designs, materials, and workmanship at site, operations and maintenance throughout the lifecycle. The Company also undertake validation of passive assets, factory testing and regular quality checks. The Company is empowering quality team with PDA Tablets to ensure real time information and proper documentation for effective quality control. The Company has adopted the following quality assurance practices stage-wise: 1. Pre-dispatch inspection of all major material such as tower components, DG sets, battery banks, power interface equipment; 2. On-site inspection during installation work in progress; 3. Quality audits post completion of work to ensure process completion; 4. Preventive maintenance audits during operation and maintenance of sites to ensure timely maintenance of equipment and basic site hygiene; and 5. Maintenance of tower and civil structures to ensure optimised utilisation of assets throughout their design life. The Company has a Standard Quality Process and Guidelines for civil, tower and electrical works and a Quality Assurance Plan ("QAP") for pre-dispatch inspection for effective material verification at vendor premises. Regular project reviews, governance meetings and third party audits are conducted on a regular basis in order to encourage maintenance of quality and ensure that tower assets are strictly in accordance with Company's approved specifications. These quality assurance practices enable us to maintain high performance standards across the network, resulting in key long-term advantages: a. Good asset life as per specifications and designs; b. High network uptime for customers, with fewer network outages; and c. High levels of customer satisfaction due to hassle-free active infrastructure installation. Other Statutory Disclosures Related Party Transactions A detailed note on procedure adopted by the Company in dealing with contracts and arrangements with Related Parties is provided in the Report on Corporate Governance, which forms part of this Annual Report. All arrangements / transactions entered by the Company with its related parties during the year were in ordinary course of business and on an arm's length basis. Particulars of material related party transactions are given in form AOC-2, annexed as Annexure F to this report. Names of Related Parties and details of transactions with them have been included in Note no. 35 of the standalone financial statements for the year ended March 31, 2016 under Accounting Standard 18 on page 218. The Policy on the Related Party Transactions is available on the Company's website at www.bharti-infratel.com . Significant and Material Orders There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future. Particulars of Loans, Guarantees or Investments The details of loans given, investments made or guarantees given are provided in the standalone financial statement in Note no. 12, 13, 15 and 18. Particulars of Employees Disclosures relating to remuneration of Directors u/s 197(12) of the Companies Act, 2013 read with Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as Annexures G to this report. The information as required to be provided in terms of Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as Annexures H to this report. Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo The details of energy conservation, technology absorption and foreign exchange earnings and outgo as required under Section 134(3) of the Companies Act, 2013, read with the Rule 8 of Companies (Accounts of Companies) Rules, 2014 is annexed as Annexure I to this report. Extract of Annual Return In terms of provisions of Section 92, 134(3)(a) of the Companies Act, 2013 read with Rule 12 of Companies (Management and Administration) Rules, 2014, the extracts of Annual Return of the Company in form MGT-9 is annexed as Annexure J to this report. Directors' Responsibility Statement Pursuant to Section 134(5) of the Companies Act, 2013, the Directors to the best of their knowledge and belief confirm that: I. I n the preparation of the annual accounts for the year ended March 31, 2016, the applicable accounting standards had been followed and there is no material departure from the same; II. The Directors had selected such accounting policies and applied them consistently and made judgements 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 ended March 31, 2016 and of the profit of the Company for the year ended on that date; III. The Directors 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; 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 are operating effectively; VI. The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively. Acknowledgements The Directors wish to place on record their appreciation for the assistance and co-operation extended by customers, strategic investors, bankers, vendors, business partners, various agencies and departments of Government of India and State Governments where Company's operations are existing, supporting the Company's various projects. The Directors would also like to place on record their sincere appreciation for the valuable contribution, unstinted efforts and the spirit of dedication shown by the employees of the Company at all levels in ensuring an excellent all round operational performance. For and on behalf of the Board Akhil Gupta Chairman DIN: 0028728 Date : April 26, 2016 Place: Gurgaon |