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Directors Report of Nelco Ltd.

Mar 31, 2023

The Directors have pleasure in presenting Eightieth Annual Report of Nelco Limited (Company or Nelco) alongwith the Audited Statement of Accounts for the year ended 31st March 2023.

1. Financial Results

('' in lakhs)

Sr.

Particulars

Standalone*

Consolidated

No.

FY2022-23

FY2021-22

FY2022-23

FY2021-22

A

Continuing Operations

a

Revenue from Operations

19,704

14,316

31,333

26,007

b

Other Income

268

259

257

474

c

Total Income

19,972

14,575

31,590

26,481

d

Operating Expenditure

15,635

12,192

25,257

21,018

e

Profit before finance cost, tax and depreciation and amortization (PBITDA)

4,337

2,383

6,333

5,463

f

Less: Finance Cost

337

219

773

684

g

Less: Depreciation/Amortization

1,065

835

2,778

2,464

h

Net Profit/(Loss) before tax

2,935

1,329

2,782

2,315

i

Current/Deferred Tax Expenses

847

307

797

707

i

Net Profit/(Loss) after Tax

2,088

1,022

1,985

1,608

B

Discontinuing Operations** (being transferred to Wholly Owned Subsidiary)

k

Profit from Discontinuing operations (before tax)

-

116

-

-

l

Tax Expenses

-

29

-

-

m

Profit after Tax from Discontinuing operations

-

87

-

-

C

Profit after tax from Total Operations

2,088

1,109

1,985

1,608

n

Add: Other comprehensive income/(expenses)

(19)

(56)

(24)

(30)

o

Total Comprehensive Income

2,069

1,053

1,961

1,578

** Operations that are being transferred to Nelco Network Products Ltd. (Wholly Owned Subsidiary) as a part of internal restructuring.

*In the previous year ended March 31, 2022 the Company has received approval from Department of Telecommunications (DoT) for transfer of VSAT and ISP license held by subsidiary Company Tatanet Service Limited (TNSL) to Nelco Limited. Upon approval from DoT, the Composite Scheme of Arrangement and Amalgamation ("Scheme") becomes effective from appointment date i.e. April 1,2017. Pursuant to approval, the Proposed Scheme has been accounted for as follows:

• Discontinued operations have been transferred to NNPL in accordance with IND AS 105. Considering the materiality and convenience reason, demerger impact is given from June 1, 2021; and

• TNSL merger has been accounted in Nelco Limited (standalone) in accordance with Appendix C of IND AS 103 "Business Combination" and accordingly, results of all the previous periods have been restated by including results of the Company from the beginning of the previous year i.e. April 1, 2020.

2. Dividend

The Directors of your Company recommend for FY 2022-23, a dividend of '' 2.00/- per share of '' 10/- each i.e. 20% (previous year '' 1.80 per share i.e. 18%) subject to the approval of the Members at the ensuing AGM. If approved, the total dividend outgo for FY 2022-23 would amount to '' 456.37 lakhs (previous year '' 410.73 lakhs).

According to Regulation 43A of the Listing Regulations, the top 1000 listed entities based on market capitalization, calculated as on 31st March of every financial year are required to formulate a dividend distribution policy which shall be disclosed on the website of the listed entity and a web-link shall also be provided in their annual reports. Accordingly, the Dividend Policy of the Company can be accessed using the following link: https://www.nelco.in/pdf/ Policies/dividend-distribution-policy.pdf

3. Financial Performance and the state of the Company''s affairs3.1. Standalone

On a Standalone basis, your Company achieved revenue of '' 19,704 Lakhs in FY 2022-23 from Continuing Operations as against '' 14,316 Lakhs in FY 2021-22.

In FY 2022-23 the Company earned from continued operations, a net profit after tax of '' 2,088 Lakhs from its total operations as against profit of '' 1,022 Lakhs in FY 2021-22. This was due to increase in service revenue from satellite connectivity services.

In FY 2022-23 there is no revenue from discontinued operations as in the previous year 2021-22 in accordance with approved scheme of internal restructuring, Company has transferred discontinued business from June 1st 2021 to wholly owned subsidiary Nelco Network Products Limited. In the year 2021-22, from discontinued operations Company has earned revenue of '' 1,419 Lakhs and profit after tax of '' 87 Lakhs.

Profit from Discontinuing Operations related to FY 2021-22 are calculated considering the direct cost of those Operations and interest on identifiable loans that are being transferred under the Scheme. The entire corporate overheads are considered part of Continuing Operations.

3.2. Consolidated

On a Consolidated basis, revenue from Operations was '' 31,333 Lakhs in FY 2022-23 as against '' 26,007 Lakhs in FY 2021-22 i.e. increase by 20% over previous year.

The segment wise performance (Consolidated) from total operations for the year was as follows:

Based on evaluation of key financial parameters, the Company believes that it operates in only one reportable segment i.e. Network Systems and accordingly the financial results are reported as single reportable segment.

The Company earned a net profit after tax of '' 1,985 Lakhs from total operations as against profit of '' 1,608 Lakhs in FY 2021-22. No material changes and commitments have occurred after the close of the year under review till the date of this Report which affect the financial position of the Company.

During the year Telesat and Company have conducted their first in-orbit demonstration of high-speed broadband connectivity in India with Telesat''s Phase 1 Low Earth Orbit (LEO) satellite. LEO satellites will revolutionise satellite connectivity and bring transformational capabilities. The Company in partnership with Telesat, plans to serve existing and new market segments to enable broadband connectivity for low latency applications with Telesat Lightspeed services. Telesat Lightspeed is an advanced, enterprise-class satellite network that leverages Telesat''s innovative architecture and global Ka-band priority spectrum rights. Subject to the necessary regulatory clearances, this will help in addressing the need of the market for fibre-like connectivity in the remotest parts of the country with high reliability and flexibility of satellite communication.

During the year Company has entered an agreement with Intelsat Commercial Aviation (Intelsat) to provide inflight connectivity (IFC) services in Indian airspace. Intelsat is an operator of one of the world''s largest integrated satellite and terrestrial network and leading provider of IFC. This will enable the Intelsat''s airline partners and flyers to enjoy end-to-end broadband coverage on domestic and international aircraft flying to or from an Indian airport, as well as aircraft flying over the Indian airspace. The Company will be creating a great opportunity through this relationship with Intelsat for further growth of its Aero IFC services in the country in the coming years.

3.3. Operations

Information in detail has been given in the Management Discussion & Analysis which forms a part of this report.

4. Reserves

The Board of Directors has decided to retain the entire amount of profit for Financial Year 2022-23 in the statement of profit and loss.

5. Subsidiary Company

The Company has one wholly owned subsidiary i.e. Nelco Network Products Ltd. (NNPL) as on 31st March 2023.

Pursuant to the Scheme in the PY 2021-22, it has acquired from the Company two businesses on a going concern basis by way of slump sale. These businesses are (a) Industrial Security and Surveillance System (ISSS) and (b) sale and maintenance of VSAT and related equipment. NNPL also holds Inflight & Maritime Communication (IFMC) licence issued by DOT. There has been no change in business of NNPL during the year under review.

The revenue of NNPL for FY 2022-23 was '' 11,658 Lakhs and loss after tax was '' 113 Lakh and the accumulated reserve and surplus since incorporation was '' 3,264 Lakhs.

As required under Section 129(3) of the Companies Act, 2013 (Act), the salient features of financial statements of NNPL in Form AOC-1 is attached to the financial statements of the Company.

Further, pursuant to Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited financial statements in respect of subsidiary Company, are available on the website of the Company https://www.nelco.in/investor-relation/financial.php.

The Policy for determining material subsidiaries of the Company has been provided in the following link: https:// www.nelco.in/pdf/Policies/Policy%20for%20determining%20Material%20Subsidiaries.pdf

6. Directors and Key Managerial Personnel

During the year under review, there was no change in the composition of the Board. However, at the Annual General Meeting (AGM) held on 8th July 2022, Members approved the appointment of Mr. Saurabh Ray and Mr. A.S. Lakshminarayanan as Non-Executive Directors of the Company liable to retire by rotation.

In accordance with the requirements of the Companies Act 2013 and the Company''s Articles of Association, Mr. Saurabh Ray retires by rotation and is eligible for re-appointment. Members'' approval is being sought at the ensuing AGM for his re-appointment.

Independent Directors

In terms of Section 149 of the Act, Mr. K. N. Murthy, Dr. Lakshmi Nadkarni and Mr. Ajay Kumar Pandey are the Independent Directors of the Company.

In terms of Regulation 25(8) of the Listing Regulations, they have confirmed that they are not aware of any circumstances or situation which exists or may be reasonably anticipated that could impair or impact their ability to discharge their duties. Based upon the declarations received from the Independent Directors, the Board of Directors has confirmed that they meet the criteria of independence as mentioned under section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations and that they are independent of the management. Further, the Board is of the opinion that the Independent Directors of the Company possess requisite qualifications, experience (including the proficiency) and expertise in their respective fields and that they hold highest standards of integrity.

In the opinion of the Board, there has been no change in the circumstances which may affect their status as Independent Directors of the Company and the Board is satisfied of the integrity, expertise, and experience (including proficiency in terms of Section 150(1) of the Act and applicable rules thereunder) of all Independent Directors on the Board. Further, in terms of Section 150 read with Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, as amended, Independent Directors of the Company have included their names in the data bank of Independent Directors maintained with the Indian Institute of Corporate Affairs.

Additional information and brief profile as stipulated under Listing Regulations and Secretarial Standards-2 on General Meetings with respect to Director seeking appointment/re-appointment is annexed to the Notice of AGM.

During the year under review, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees and reimbursement of expenses incurred by them for the purpose of attending meetings of the Board/Committee of the Company.

Pursuant to Section 203 of the Act, the Key Managerial Personnel of the Company as on 31st March 2023 are:

• Mr. RJ. Nath, Managing Director & CEO

• Mr. Malav Shah, Chief Financial Officer

• Mr. Girish Kirkinde, Company Secretary & Head-Legal

Number of Board meetings

During the year under review, seven Board Meetings were held. For further details, please refer Report on Corporate Governance, which forms part of this annual report.

Governance Guidelines:

The Company has adopted Governance Guidelines on Board Effectiveness. The said Guidelines covers aspects related to composition and role of the Board, Chairman and Directors, Board diversity, definition of independence, Director''s term, retirement age and Committees of the Board. It also includes aspects relating to nomination, appointment, induction and development of Directors, Director Remuneration, subsidiary oversight, Code of Conduct, Board Effectiveness Review and mandates of Board Committees.

7. Annual Evaluation of Board Performance and Performance of its Committees and Individual Directors.

As required under the Act and Listing Regulations, the Board has carried out formal annual evaluation of the performance of the Board, its Committees and of individual directors. The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of criteria such as the Board composition and structure, effectiveness of board processes, information and functioning, etc.

The performance of the Committees was evaluated by the board after seeking inputs from the Committee members on the basis of criteria such as the composition of Committees, effectiveness of Committee meetings, etc.

The above criteria are broadly based on the Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India on 5th January 2017.

In a separate meeting of Independent Directors, performance of non-Independent Directors, the Board as a whole and the Chairman of the Company was evaluated, considering the views of Executive Director and non-Executive Directors.

The Board and the NRC reviewed the performance of individual Directors on the basis of criteria such as the contribution of the individual Director to the Board and Committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc.

In the Board meeting that followed the meeting of the Independent Directors and meeting of Nomination and Remuneration Committee, the performance of the Board, its Committees, and individual Directors was also discussed. Performance evaluation of Independent Directors was done by the entire Board, excluding the Independent Director being evaluated.

Based on inputs received from the Board members, it emerged that the Board had a good mix of competency, experience, qualifications and diversity. Each Board member contributed in his/her own manner to the collective wisdom of the Board, keeping in mind his/her own background and experience. There was active participation and adequate time was given for discussing strategy. Overall, the Board was functioning very well in a cohesive and interactive manner.

7.1. Committees of the Board

The Committees of the Board focus on certain specific areas and make informed decisions in line with the delegated authority. The following substantive Committees constituted by the Board function according to their respective roles and defined scope:

• Audit Committee (AC)

• Nominations, HR and Remuneration Committee (NRC)

• Stakeholders Relationship Committee (SRC)

• Risk Management Committee (RMC)

Details of composition, terms of reference and number of meetings held for respective Committees are given in the Report on Corporate Governance which forms part of the Annual Report. Further, during the year under review, all recommendations made by the Audit Committee have been accepted by the Board.

The details of the familiarization programs for Independent Directors are disclosed on the Company''s website and the web link for the same is: https://www.nelco.in/pdf/Policies/familarization-programme-22-23.pdf

The Company has adopted a Code of Conduct for its Non-Executive Directors including a code of conduct for Independent Directors which suitably incorporates the duties of Independent Directors as laid down in the Act. The Company has also adopted the Tata Code of Conduct for its employees including the Managing and Executive Directors. The above codes can be accessed on the Company''s website at https://www.nelco.in/ investor-relation/corporate-governance.php.

In terms of the Listing Regulations, all Directors and senior management personnel have affirmed compliance with their respective codes. The Managing Director & CEO has also confirmed and certified the same, which certification is provided at the end of the Report on Corporate Governance.

7.2. Remuneration Policy for the Directors, Key Managerial Personnel and other Employees.

In terms of the provisions of Section 178(3) of the Act and Regulation 19 read with Part D of Schedule II to the Listing Regulations, the NRC is responsible for formulating the criteria for determining qualification, positive attributes and independence of a Director. The NRC is also responsible for recommending to the Board a policy relating to the remuneration of the Directors, Key Managerial Personnel and other employees. In line with this requirement, the Board has adopted the Policy on Board Diversity, which is reproduced in Annexure-I forming part of this report and Remuneration Policy for Directors, Key Managerial Personnel and other employees of the Company is available on the websites of the Company at https://www.nelco.in/pdf/Policies/Remuneration%20 Policv%20for%20Directors.%20KMP%20and%20Qther%20emplovees.pdf.

Salient Features of this policy are as under:-

• The philosophy for remuneration of Directors, Key Managerial Personnel ("KMP") and all other employees of Nelco Ltd. ("Company") is based on the commitment of fostering a culture of leadership with trust. The remuneration policy is aligned to this philosophy.

• Independent Directors ("ID") and non-independent Non-Executive Directors ("NED") may be paid sitting fees (for attending the meetings of the Board and of committees of which they may be members) and commission within regulatory limits.

• Overall remuneration should be reflective of size of the company, complexity of the sector/industry/ company''s operations and the company''s capacity to pay the remuneration.

• The NRC will recommend to the Board the quantum of commission for each director based upon the outcome of the evaluation process which is driven by various factors including attendance and time spent in the Board and committee meetings, individual contributions at the meetings and contributions made by directors other than in meetings.

• The extent of overall remuneration to Managing Director ("MD")/ Executive Directors("ED")/ KMP/ rest of the employees should be sufficient to attract and retain talented and qualified individuals suitable for every role.

• The remuneration mix for the MD/EDs is as per the contract approved by the shareholders.

• In addition to the basic/fixed salary, the company provides to other KMPs and employees with certain

perquisites, allowances and benefits to enable a certain level of lifestyle and to offer scope for savings and tax optimization, where possible and also performance linked bonus.

• Remuneration is payable to Director for services rendered in professional capacity and which NRC is of the opinion that the director possesses requisite qualification for the practice of the profession.

• There is no change in the aforesaid policies during the year under review.

• Except the Performance Linked Payment (PLP) which is a part of his Cost to the Company (CTC), the

Managing Director & CEO has neither received any commission from the Company nor from its Holding or Subsidiary Company.

7.3. Particulars of Employees and Remuneration

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 (''Rules) is provided in Annexure - II (A) forming part of this Report.

Statement containing particulars of top 10 employees and the employees drawing remuneration in excess of limits prescribed under Section 197 (12) of the Act read with Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure II (B) forming part of this report. None of the employees listed in the said Annexure II (B) is related to any Director of the Company. In terms of proviso to Section 136(1) of the Act, the Report and Accounts are being sent to the shareholders excluding the aforesaid Annexure. The said Statement is also 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.

8. Significant and material Orders passed by the Regulators or Courts or Tribunal

No significant and materials orders were passed by the Regulators or Courts or Tribunals impacting the going concern status and your Company''s operations in future. There was no application made or proceeding pending against the Company under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year under review.

Corporate Governance, Management Discussion & Analysis and Business Responsibility and Sustainability Report

As per Listing Regulations, the Corporate Governance Report with the Auditors'' Certificate thereon and the Management Discussion and Analysis are attached, which forms part of this Annual Report. Pursuant to Regulation 34 of the Listing Regulations, the Business Responsibility and Sustainability Report, initiatives taken from an environmental, social, governance and sustainability perspective in the prescribed format is attached as a separate section of this Annual Report.

Vigil Mechanism

The Company believes in the conduct of the affairs of its constituents in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. In line with the Tata Code of Conduct (TCOC), any actual or potential violation, howsoever insignificant or perceived as such, would be a matter of serious concern for the Company. The role of the employees in pointing out such violations of the TCoC cannot be undermined.

Pursuant to Section 177(9) of the Act and Regulation 4(2)(d)(iv) of the Listing Regulations, a Whistle-blower Policy and Vigil Mechanism was established for Directors, employees and 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. The Vigil Mechanism provides a mechanism for employees of the Company to approach the Chief Ethics Counsellor (CEC)/Chairman of the Audit Committee of the Company for redressal. The policy has been posted on the Company''s website at https://www.nelco.in/pdf/Policies/Whistle%20Blower%20Vigil%20Mechanism%20Policy.pdf. The Company affirms that no personnel have been denied access to the Audit Committee.

9. Risks and Concerns

The Company is faced with risks of different types including strategic, financial, regulatory and operational. Each of the risks need different approaches for mitigation and management. Details of various risks faced by the Company are provided in Management Discussion & Analysis.

9.1. Risk Management Framework and Internal Financial Controls

Risk Management Framework: The Company has established a risk management framework and policy based on which risks are identified and assessed across its business segments. The Risk Management Committee (RMC) of the Board was constituted in FY22 to enhance the focus on risk identification and mitigation. The Committee is responsible for monitoring and reviewing the risk management plan and ensuring its effectiveness. The Company''s key risks are discussed with RMC on a half yearly basis.

The Audit Committee and Board have an additional oversight in key strategic and financial risks and controls. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

The internal Risk Management Committee at the Company level which comprises of the MD & CEO, CFO, Chief Risk Officer and key business and operations heads, ensures that existing and future risk exposures of the Company are identified, assessed, quantified, minimized, managed and appropriately mitigated. The Company''s framework of risk management process provides clear basis for informed decision making at all levels of the organization on an ongoing basis, having duly evaluated likely risks and their mitigation plans being controllable and within risk appetite of the Company. There are no elements of risk, which in the opinion of the Board may impact the existence of the Company.

Internal Financial Control and Systems: The Company has an internal financial control system, commensurate with the nature of its business, the size and complexity of its operations and as such the internal financial controls with reference to the Financial Statements are adequate. The Company has appointed independent Chartered Accountant firm as Internal Auditors who audits governance, risks management and internal controls and processes. The Internal Auditors present their findings to the Audit Committee. Testing of Internal Financials Controls also form a part of internal audit schedule. The scope and authority of internal audit is defined in Audit Committee Charter adopted by the Company.

As per the Audit Committee Charter adopted by the Board and as per provisions of Section 177 of the Companies Act, 2013 (the Act) one of the responsibilities of the Audit Committee is to review the effectiveness of the Company''s Internal control system, including Internal Financial Controls. Internal controls have been discussed in detail in Management Discussion & Analysis in this report. The Company has implemented robust processes to ensure that all internal financial controls are effectively working. On review of the internal audit observations and action taken on audit observations, there are no adverse observations having material impact on financials, commercial implications or material non-compliances which have not been acted upon. In addition, the statutory auditors carry out an audit at quarterly intervals and these reports also have not indicated any adverse findings.

Process Robustness: The Company also carries out business excellence assessments and process deep dives through external agencies to establish and improve efficiency and effectiveness of processes in various key functions. The Company assesses the process maturity and robustness for its key functions on the following:

• Process documentation and workflow

• Process measures and controls (manual/system driven) including maker-checker mechanisms

• Performance tracking for key measures/metrics

• Initiatives taken for process improvements

The Company also carries out internal audits and process deep dives through external agencies to establish and improve efficiency and effectiveness of processes in various key functions. On review of the internal audit observations and action taken on audit observations, there are no adverse observations having material impact on financials, commercial implications or material non-compliances which have not been acted upon. In addition, the statutory auditors carry out an audit at quarterly intervals and these reports also have not indicative any adverse findings.

10. Sustainability10.1. Corporate Social Responsibility

Pursuant to section 135 of the Companies Act 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended till date, Company is not mandatorily required to continue to constitute the Corporate Social Responsibility Committee. As the Company has not earned net profits computed pursuant to Section 198 of the Act, it is not mandatorily required to spend on CSR activities https://www.nelco.in/pdf/ Policies/CSR%20Policy.pdf

10.2. Safety, Health and Environment

The Company placed utmost importance to establish a safe work environment for its employees, contractual workforce, suppliers, visitors and partners. Specific focus was given to determine safety standards on Office Safety, Field Safety, Working at Height safety & Electrical and Fire Safety.

The Company adopts a proactive and responsible approach to safeguard the welfare of its employees. Communication on health tips, virtual seminars on health topics, fitness related sessions, Doctors availability in the premise, Health check-up packages are some of the services available for employees and families.

All hygiene specific guidance in office is ensured. The Company continued its hybrid model for working during the year, while ensuring that productivity is not compromised.

11. Human Resources

As on 31st March 2023, the Company had employee strength of 93. During the year under review, 17 employees were recruited, and 10 employees were separated.

Various people related initiatives were undertaken by the Company during the year to enable organizational growth

through people care and development which include:

• The Company utilises multiple platforms that encourage open communication amongst employees and allow them to voice their opinion. Every year Employee Engagement Surveys are conducted to enable people to voice out their views, concerns and suggestions for making the workplace better for everyone. Ideas Portal is a platform where employees share ideas which are further evaluated and translated into actions wherever feasible. Knowledge sessions, employee welfare and sports activities are conducted from time to time to ensure continuous learning, team bonding and motivation.

• Reward & Recognition (R&R): The company promotes Recognitions at all levels. Initiatives like Appreciation week, Quarterly awards which includes Individual & Team awards ensures that employee contributions are acknowledged timely. Nelco Innovista awards is an internal platform which encourages creativity and rewards participants for their out of the box thinking and innovative minds.

• Capability Development: Company focuses on overall capability building of functional, managerial and behavioural skills. The Company has been committed towards building the skill levels of employees through organizing inhouse, residential and virtual workshops and fulfilling the training requirements through e-learning platforms. Employees were also encouraged to undergo trainings of their choice available on the eLearning portal, apart from the training needs identified by their managers.

Innovative mindsets are encouraged through competitions like Tata Innovista and Tata Business Leadership Awards, where employees showcase creative ideas/actions in business, process or technology.

• Performance & Talent Management: Employee performance is monitored and managed through rigorous processes of Performance Appraisal. Mapping the SMART goals in the online system ensures that Goals are properly maintained and tracked for improving the people''s, departments'' and overall organization''s productivity. Continuous performance dialogues are encouraged between managers and their teams with focus on guiding and training first time managers through performance coaching. Talent management framework is rolled out for High-Potential employees which help them to grow in the organization faster.

As a step towards improving the overall organization performance and effectiveness, the company had initiated Continuous Improvement Projects in association with the Tata Groups TBExG team. The objective being improvement from the current state by adopting various tools/ methodologies and by learnings through best practices across Group companies.

• Succession Planning: The Company has a well-defined Succession Planning process. Successors have been identified for critical positions (for N & N-1 level) in the Company and are being groomed for taking over higher responsibilities in the next 4-5 years through focused interventions.

• The company has an instituted Policy on Prevention of Sexual Harassment (POSH), which seeks to govern the guidelines and grievance redressal procedures as required under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. As per policy, a Complaints Redressal Committee/Internal Complaints Committee exists in the Company with inclusion of an external lady member. POSH related sessions were conducted for employees and allied resources. No complaints related to POSH have been received during the year.

12. Credit Rating

During the year CRISIL has assigned ratings for long term and short-term bank facilities of the Company to CRISIL A

Stable and CRISIL A1 respectively.

13. Loans, Guarantees, Securities and Investments (LGSI)

Details of LGSI covered under the provisions of Section 186 of the Act, 2013 are given in Annexure III forming part of

this report.

14.

Foreign Exchange - Earnings and Outgo.

('' in lakhs)

Particulars - Standalone

Year ended 31st March 2023

Year ended 31st March 2022

Foreign Exchange Earnings

8,426

4,680

Foreign Exchange Outflow

1,489

1,434

15. Auditors

Members of the Company at the AGM held on 13th August 2020, approved the appointment of S.R. Batliboi & Associates LLP, Chartered Accountants, (ICAI Firm Registration No. 101049W /E300004), as the statutory auditors of the Company for a period of 5 years commencing from the conclusion of the 77th AGM held on 13th August 2020 until the conclusion of 82nd AGM of the Company to be held in the year 2025.

16. Auditors'' Report

The standalone and the consolidated financial statements of the Company have been prepared in accordance with applicable Indian Accounting Standards (Ind AS) notified under Section 133 of the Act. The Statutory Auditor''s report does not contain any qualifications, reservations, adverse remarks or disclaimers. The Notes to the Accounts referred to in the Auditors'' report are self-explanatory and therefore do not call for any further clarification under section 134(3)(f) of the Act.

During the year under review, neither the statutory auditors nor the secretarial auditors has reported to the Audit committee, under Section 143 (12) of the Companies Act, 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in the Board''s report.

17. Cost Auditor and Cost Audit Report

Your Board has appointed M/s. PD.Dani and Associates (Firm Registration No. 000593), Cost Accountants, as Cost Auditors of the Company for conducting cost audit for the FY 2022-23. A resolution seeking approval of the Members for ratifying the remuneration of '' 1,25,000 (Rupees One Lakh Twenty-Five thousand) plus GST and reimbursement of out-of-pocket expenses on actual basis payable to the Cost Auditors for FY23 is provided in the Notice to the ensuing 80th AGM. As specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013, the Company has maintained cost accounts and records.

18. Secretarial Audit Report

In terms of Section 204 of the Act and Rules made thereunder M/s. Bhandari & Associates, Practicing Company Secretaries, were appointed as Secretarial Auditors of the Company to carry out the secretarial audit for FY 2022-23. The report of the Secretarial Auditors for FY 2022-23 is enclosed as Annexure- IV forming part of this Report. The Secretarial Audit Report contains the observation relating delay in compliance with Regulation 23(9), 19(1) and 19(2) of SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015. The stock exchanges have levied the penalties. The Company has applied for waiver of penalties by giving justifiable grounds and their decision is awaited. There has been no other qualification, reservation, adverse remark or disclaimer given by the Secretarial Auditors in their Report.

The Company has devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards issued by the Institute of Company Secretaries of India and that such systems are adequate and operating effectively.

As per the requirements of the Listing Regulations, Practicing Company Secretaries have undertaken secretarial audit for FY 2022-23 of Nelco Network Products Ltd., the material unlisted subsidiary of the Company. As per the Audit Report (Annexure- IV-A) the subsidiary had complied with the applicable provisions of the Act, Rules, Regulations, and Guidelines and that there were no deviations or non-compliances.

19. Conservation of Energy and Technology Absorption

The information on conservation of energy and technology absorption stipulated under Section 134 (3) (m) of the Act read with Rule 8 of The Companies (Accounts) Rules, 2014, is given in Annexure - V forming part of this report.

20. Related Party Transactions

In line with the requirements of the Act and the Listing Regulations, the Company has formulated a Policy on Related Party Transactions and the same is available on the Company''s website: https://www.nelco.in/pdf/Policies/ Related%20Partv%20Transaction%20Policv.pdf

All related party transactions entered during the year under review were on an arm''s length basis and were in the ordinary course of business. All transactions with related parties were reviewed and approved by the Audit Committee. Prior omnibus approval is obtained for related party transactions which are of repetitive nature and entered in the ordinary course of business and on an arm''s length basis. There were no other materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel and Body Corporate(s) which had a potential conflict with the interest of the Company at large. Accordingly, the disclosure of these Related Party Transactions as required under Section 134 (3) (h) of the Act in Form AOC 2 is not applicable for the year under review. The details of the transactions with related parties are provided in the accompanying Financial Statements.

21. Deposits

The Company has not accepted any deposits from public and as such, no amount on account of principal or interest on deposits from public was outstanding as on the date of the Balance Sheet.

22. Annual Return

Pursuant to Section 92 of the Act read with the appliable Rules, the Annual Return for the year ended 31st March 2023 can be accessed on the Company''s website at the following link: https://www.nelco.in/pdf/disclosure-of-events/ annual-return-2022-23-nelco-ltd.pdf

23. Directors'' Responsibility Statement

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost auditors, secretarial auditors and external consultants including the audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by Management and the relevant Board Committees, including the Audit Committee, the Board believes the Company''s internal financial controls were adequate and effective during the period under review.

Accordingly, pursuant to Section 134(5) of the Companies Act 2013, the Board of Directors, to the best of their knowledge and ability, confirm that:

a) in the preparation of the annual accounts for the period ended 31st March 2023 the applicable accounting standards had been followed along with proper explanation relating to material departures.

b) they have, in the selection of the accounting policies, consulted the Statutory Auditors and have applied them consistently and made judgments and estimates that are reasonable and prudent to give a true and fair view of the Company for the period ended 31st March 2023 and of the profit of the Company for that period;

c) they have 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 have prepared the accounts for the period under review on a going concern basis.

e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

24. Acknowledgment

The Board of Directors thank the Company''s shareholders, customers, vendors, business partners, bankers and financial institutions for their continuous support.

The Directors also thank the Government of India, Dept. of Telecommunications, Dept. of Space, various Ministries, Regulatory Authorities, and their departments for co-operation.

We appreciate and value the contributions made by all our employees.

On behalf of the Board of Directors

A.S. Lakshminarayanan

Chairman

Navi Mumbai, 24th April 2023


Mar 31, 2022

The Directors have pleasure in presenting Seventy Nineth Annual Report of Nelco Limited (Company or Nelco) alongwith the Audited Statement of Accounts for the year ended 31st March 2022.

As informed earlier, the Hon''ble National Company Law Tribunal (NCLT), Mumbai Bench approved the Composite Scheme of Arrangement and Amalgamation (Scheme) involving the internal restructuring of the various businesses of the Company and its two wholly owned subsidiaries viz. Tatanet Services Limited (TNSL) and Nelco Network Products Limited (NNPL). As per the NCLT order, the scheme shall be effective on the date on which the last of all the approvals and sanctions from appropriate authorities as may be required under the law in respect of the Scheme have been obtained. The Company received the requisite approval from Department of Telecommunications (DoT) on 9th June 2021 for transfer of the Internet Service Provider license and VSAT license from TNSL to the Company under the Scheme. Accordingly, the Scheme became effective on 9th June 2021.

1. Financial Results

('' in lakhs)

Sr.

Particulars

Standalone1

Consolidated

No.

FY2021-22

FY2020-21

FY2021-22

FY2020-21

A

Continuing Operations

a

Revenue from Operations

14,316

13,112

26,007

22,612

b

Other Income

259

152

474

284

c

Total Income

14,575

13,264

26,481

22,896

d

Operating Expenditure

12,143

10,768

20,949

18,125

e

Profit before finance cost, tax and depreciation and amortization (PBITDA)

2,432

2,496

5,532

4,771

f

Less: Finance Cost

268

438

753

953

g

Less: Depreciation/Amortization

835

809

2,464

2,230

h

Net Profit/(Loss) before tax

1,329

1,249

2,315

1,588

i

Current/Deferred Tax Expenses

307

325

707

352

i

Net Profit/(Loss) after Tax

1,022

924

1,608

1,236

B

Discontinuing Operations2 (being transferred to Wholly Owned Subsidiary)

k

Profit from Discontinuing operations (before tax)

116

330

-

-

l

Tax Expenses

29

27

-

-

m

Profit after Tax from Discontinuing operations

87

303

-

-

C

Profit after tax from Total Operations

1,109

1,227

1,608

1,236

n

Add: Other comprehensive income/(expenses)

(56)

28

(30)

28

o

Total Comprehensive Income

1,053

1,255

1,578

1,264

**Operations that are being transferred to Nelco Network Products Ltd. (Wholly Owned Subsidiary) as a part of internal restructuring.

• During the year the Company has received approval from Department of Telecommunications (DoT) for transfer of VSAT and ISP license held by subsidiary Company Tatanet Service Limited (TNSL) to Nelco Limited. Upon approval from DoT, the scheme of restructuring becomes effective from appointment date i.e. April 1, 2017. Pursuant to approval, the Proposed Scheme has been accounted for as follows.

• Discontinued operations have been transferred to NNPL in accordance with IND AS 105. Considering the materiality and convenience reason, demerger impact is given from June 1, 2021; and

2. Dividend

The Directors of your Company recommend for FY 2021-22, a dividend of '' 1.80 per share of '' 10/- each i.e. 18% (previous year '' 1.20 per share i.e. 12%) subject to the approval of the Members at the ensuing AGM. If approved, the total dividend outgo for FY 2021-22 would amount to '' 410.73 lakhs (previous year '' 273.82 lakhs).

According to Regulation 43A of the Listing Regulations, the top 1000 listed entities based on market capitalization, calculated as on 31st March of every financial year are required to formulate a dividend distribution policy which shall be disclosed on the website of the listed entity and a web-link shall also be provided in their annual reports. Accordingly, the Dividend Policy of the Company can be accessed using the following link: https://www.nelco.in/pdf/Policies/dividend-distribution-policy.pdf

3. Financial Performance and the state of the Company''s affairs3.1 Standalone

On a Standalone basis, your Company achieved revenue of '' 14,316 Lakhs in FY 2021-22 from Continuing Operations as against '' 13,112 Lakhs in FY 2020-21.

In FY 2021-22 the Company earned from continued operations, a net profit after tax of '' 1,022 Lakhs from its total operations as against profit of '' 924 Lakhs in FY 2020-21. This was due to increase in service revenue from satellite connectivity services.

In FY 2021-22 revenue from discontinued operations is '' 1,406 Lakhs whereas in PY 2020-21 revenue was '' 9,513 Lakhs. There is lower revenue in the current year as Discontinued Operations were carried by the Company for two months till scheme of internal restructuring became effective, whereas in the previous year revenue was for full year period. Profit after tax from Discontinued Operations for 2021-22 is '' 87 Lakhs and for 2020-21''303 Lakhs. Same has been transferred by the Company to its subsidiary Nelco Network Products Limited (NNPL) in accordance with approved scheme of internal restructuring.

Profit from Discontinuing Operations are calculated considering the direct cost of those Operations and interest on identifiable loans that are being transferred under the Scheme. The entire corporate overheads are considered part of Continuing Operations.

3.2 Consolidated

On a Consolidated basis, revenue from Operations was '' 26,007 Lakhs in FY 2021-22 as against '' 22,612 Lakhs in FY 2020-21 i.e. increase by 15% over previous year.

The segment wise performance (Consolidated) from total operations for the year was as follows:

Based on evaluation of key financial parameters, the Company believes that it operates in only one reportable segment i.e. Network Systems and accordingly the financial results are reported as single reportable segment from the year ended 31st March, 2020.

The Company earned a net profit after tax of '' 1,608 Lakhs from total operations as against profit of '' 1,236 Lakhs in FY 2020-21. No material changes and commitments have occurred after the close of the year under review till the date of this Report which affect the financial position of the Company.

3.3 Operations

Information in detail has been given in the Management Discussion & Analysis which forms a part of this report.

4. Reserves

The Board of Directors has decided to retain the entire amount of profit for FY 2021-22 in the statement of profit and loss.

5. Subsidiary Companies

5.1. The Company has one wholly owned subsidiary i.e. Nelco Network Products Ltd. (NNPL) as on 31st March 2022. The other wholly owned subsidiary, Tatanet Services Ltd. was amalgamated with the Company on 9th June 2021 pursuant to NCLT order approving the Composite Scheme of Arrangement and Amalgamation (Scheme).

NNPL holds Inflight & Maritime Communication (IFMC) licence issued by DOT. Pursuant to the Scheme, it has acquired from the Company two businesses on a going concern basis by way of slump sale. These businesses are (a) Industrial Security and Surveillance System (ISSS) and (b) sale and maintenance of VSAT and related equipment. There has been no other major change in business of NNPL during the year under review.

The revenue of NNPL for FY 2021-22 was '' 11,734 Lakhs and profit after tax was '' 578 Lakh and the accumulated reserve and surplus since incorporation was '' 3,382 Lakhs.

As required under Section 129(3) of the Companies Act, 2013 (Act), the salient features of financial statements of NNPL in Form AOC-1 is attached to the financial statements of the Company.

Further, pursuant to Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited financial statements in respect of subsidiary Company, are available on the website of the Company https://www.nelco.in/investor-relation/financial.php.

The Policy for determining material subsidiaries of the Company has been provided in the following link: https://www.nelco.in/pdf/Policies/Policy%20for%20determining%20Material%20Subsidiaries.pdf.

6. Directors and Key Managerial PersonnelChange in Board Composition

Directors Appointment

Pursuant to the recommendation of the Nomination and Remuneration Committee (''NRC''), the Board of Directors appointed Mr. Saurabh Ray as Additional Director of the Company with effect from 26th April 2022. In accordance with Section 161(1) of the Act, he holds office upto the date of the ensuing AGM and a Notice under Section 160(1) of the Act has been received from a Member signifying the intention to propose their appointment as Director. The Board recommends his appointment as Director of the Company.

Cessation

On 29th May 2022, Mr. R. R. Bhinge ceases to be Director and Chairman of the Company on attaining the age of 70 years (the age of retirement), as per the Group Governance Guidelines on Board Effectiveness for retirement of Non-Executive Directors.

Mr. Anand Agarwal, the nominee of the Parent Company, The Tata Power Company Ltd. (TPC) resigned from the Board of Directors of the Company w.e.f. 26th April 2022 on withdrawal of his nomination by TPC.

The Board placed on record its deep sense of appreciation of the valuable contribution made by Mr. Bhinge and Mr. Agarwal to the operations and growth of the Company during their association with the Company.

Re-appointment

In accordance with the provisions of Section 152 of the Act and the Articles of Association of the Company, Mr. R J. Nath retires by rotation at the ensuing AGM and being eligible, has offered himself for re-appointment.

Independent Directors

In terms of Section 149 of the Act and SEBI (Listing Obligations & Disclosure Requirements), Regulations, 2015 (Listing Regulations), the Shareholders of the Company appointed, Mr. K. N.Murthy, Dr. Lakshmi Nadkarni and Mr. Ajay Kumar Pandey as Independent Directors for a period of 5 years from 28th January 2020 to 27th January 2025. The Company has received declarations from them confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Act read with Rules framed thereunder and Regulation 16(1) (b) of the Listing Regulations. In terms of Regulations 25(8) of the Listing Regulations, the Independent Directors have confirmed that they are not aware of any circumstance or situation which exists or may be anticipated that could impair or impact their ability to discharge their duties.

In the opinion of the Board, the Independent Directors fulfil the conditions of independence specified in the Act and the Listing Regulations and are independent of the management. Further, the Board is of the opinion that the Independent Directors of the Company possess requisite qualifications, experience (including the proficiency) and expertise in their respective fields and that they hold highest standards of integrity.

Further, the Independent Directors of the Company, wherever applicable, have undertaken requisite steps towards the inclusion of their names in the data bank of Independent Directors maintained with the Indian Institute of Corporate Affairs in terms of Section 150 of the Act read with Rule 6 of the Companies (Appointment & Qualification of Directors) Rules, 2014.

Additional information and brief profile as stipulated under Listing Regulations and Secretarial Standards-2 on General Meetings with respect to Director seeking appointment is annexed to the Notice of AGM.

During the year under review, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees and reimbursement of expenses incurred by them for the purpose of attending meetings of the Board/Committee of the Company.

Pursuant to Section 203 of the Act, the Key Managerial Personnel of the Company as on 31st March 2022 are:

• Mr. PJ. Nath, Managing Director & CEO

• Mr. Malav Shah, Chief Financial Officer

• Mr. Girish Kirkinde, Company Secretary & Head-Legal

Mr. Uday Banerjee, Chief Financial Officer superannuated from the services of the Company on 31st December 2021. Number of Board meetings

During the year under review, Seven Board Meetings were held. For further details, please refer Report on Corporate Governance.

Governance Guidelines:

The Company has adopted Governance Guidelines on Board Effectiveness. The said Guidelines covers aspects related to composition and role of the Board, Chairman and Directors, Board diversity, definition of independence, Director''s term, retirement age and Committees of the Board. It also includes aspects relating to nomination, appointment, induction and development of Directors, Director Remuneration, subsidiary oversight, Code of Conduct, Board Effectiveness Review and mandates of Board Committees.

7. Annual Evaluation of Board Performance and Performance of its Committees and Individual Directors

As required under the Act and Listing Regulations, the Board has carried out formal annual evaluation of the performance of the Board, its Committees and of individual directors. The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of criteria such as the Board composition and structure, effectiveness of board processes, information and functioning, etc.

The performance of the Committees was evaluated by the board after seeking inputs from the Committee members on the basis of criteria such as the composition of Committees, effectiveness of Committee meetings, etc.

The above criteria are based on the Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India on January 5, 2017.

In a separate meeting of Independent Directors, performance of non-Independent Directors, the Board as a whole and the Chairman of the Company was evaluated, considering the views of Executive Director and non-Executive Directors.

The Board and the NRC reviewed the performance of individual Directors on the basis of criteria such as the contribution of the individual Director to the Board and Committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc.

In the Board meeting that followed the meeting of the Independent Directors and meeting of Nomination and Remuneration Committee, the performance of the Board, its Committees, and individual Directors was also discussed. Performance evaluation of Independent Directors was done by the entire Board, excluding the Independent Director being evaluated.

Based on inputs received from the Board members, it emerged that the Board had a good mix of competency, experience, qualifications and diversity. Each Board member contributed in his/her own manner to the collective wisdom of the Board, keeping in mind his/her own background and experience. There was active participation and adequate time was given for discussing strategy. Overall, the Board was functioning very well in a cohesive and interactive manner.

7.1 Committees of the Board

The Committees of the Board focus on certain specific areas and make informed decisions in line with the delegated authority. The following substantive Committees constituted by the Board function according to their respective roles and defined scope:

• Audit Committee (AC)

• Nominations, HR and Remuneration Committee (NRC)

• Stakeholders Relationship Committee (SRC)

• Corporate Social Responsibility Committee (CSRC)

• Risk Management Committee (RMC)

• Executive Committee of the Board (ECOB)

Details of composition, terms of reference and number of meetings held for respective Committees are given in the Report on Corporate Governance which forms part of the Annual Report. Further, during the year under review, all recommendations made by the Audit Committee have been accepted by the Board.

The details of the familiarization programs for Independent Directors are disclosed on the Company''s website and the web link for the same is: https://www.nelco.in/pdf/Policies/programme-f-d-policy.pdf

The Company has adopted a Code of Conduct for its Non-Executive Directors including a code of conduct for Independent Directors which suitably incorporates the duties of Independent Directors as laid down in the Act. The Company has also adopted the Tata Code of Conduct for its employees including the Managing and Executive Directors. The above codes can be accessed on the Company''s website at https://www.nelco.in/investor-relation/corporate-governance.php:

In terms of the Listing Regulations, all Directors and senior management personnel have affirmed compliance with their respective codes. The CEO & Managing Director has also confirmed and certified the same, which certification is provided at the end of the Report on Corporate Governance.

7.2 Remuneration Policy for the Directors, Key Managerial Personnel and other Employees

In terms of the provisions of Section 178(3) of the Act and Regulation 19 read with Part D of Schedule II to the Listing Regulations, the NRC is responsible for formulating the criteria for determining qualification, positive attributes and independence of a Director. The NRC is also responsible for recommending to the Board a policy relating to the remuneration of the Directors, Key Managerial Personnel and other employees. In line with this requirement, the Board has adopted the Policy on Board Diversity, which is reproduced in Annexure-I forming part of this report and Remuneration Policy for Directors, Key Managerial Personnel and other employees of the Company is available on the websites of the Company at:

https://www.nelco.in/pdf/Policies/Remuneration%20Policy%20for%20Directors,%20KMP%20and%20Other%20

employees.pdf.

Salient Features of this policy are as under:-

• The philosophy for remuneration of Directors, Key Managerial Personnel ("KMP") and all other employees of Nelco Ltd. ("Company") is based on the commitment of fostering a culture of leadership with trust. The remuneration policy is aligned to this philosophy.

• Independent Directors ("ID") and non-independent Non-Executive Directors ("NED") may be paid sitting fees (for attending the meetings of the Board and of committees of which they may be members) and commission within regulatory limits.

• Overall remuneration should be reflective of size of the company, complexity of the sector/industry/ company''s operations and the company''s capacity to pay the remuneration.

• The NRC will recommend to the Board the quantum of commission for each director based upon the outcome of the evaluation process which is driven by various factors including attendance and time spent in the Board and committee meetings, individual contributions at the meetings and contributions made by directors other than in meetings.

• The extent of overall remuneration to Managing Director ("MD")/ Executive Directors("ED")/ KMP/ rest of the employees should be sufficient to attract and retain talented and qualified individuals suitable for every role.

• The remuneration mix for the MD/EDs is as per the contract approved by the shareholders.

• In addition to the basic/fixed salary, the company provides to other KMPs and employees with certain

perquisites, allowances and benefits to enable a certain level of lifestyle and to offer scope for savings and tax optimization, where possible and also performance linked bonus.

• Remuneration is payable to Director for services rendered in professional capacity and which NRC is of the opinion that the director possesses requisite qualification for the practice of the profession.

• There is no change in the aforesaid policies during the year under review.

• Except the Performance Linked Payment (PLP) which is a part of his Cost to the Company (CTC), the

Managing Director & CEO has neither received any commission from the Company nor from its Holding or Subsidiary Company.

7.3 Particulars of Employees and Remuneration

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 (''Rules) is provided in Annexure - II (A) forming part of this Report.

Statement containing particulars of top 10 employees and the employees drawing remuneration in excess of limits prescribed under Section 197 (12) of the Act read with Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure II (B) forming part of this report. None of the employees listed in the said Annexure II (B) is related to any Director of the Company. In terms of proviso to Section 136(1) of the Act, the Report and Accounts are being sent to the shareholders excluding the aforesaid Annexure. The said Statement is also 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.

8. Significant and material Orders passed by the Regulators or Courts or Tribunal

No significant and materials orders were passed by the Regulators or Courts or Tribunals impacting the going concern status and your Company''s operations in future.

Corporate Governance, Management Discussion & Analysis and Business Responsibility Report

As per Listing Regulations, the Corporate Governance Report with the Auditors'' Certificate thereon and the Management Discussion and Analysis are attached, which forms part of this Annual Report.

Pursuant to Regulation 34(2)(f) of the Listing Regulations, the Business Responsibility Report, initiatives taken from an environmental, social and governance perspective in the prescribed format is attached as a separate section of this Annual Report.

Vigil Mechanism

The Company believes in the conduct of the affairs of its constituents in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. In line with the Tata Code of Conduct (TCoC), any actual or potential violation, howsoever insignificant or perceived as such, would be a matter of serious concern for the Company. The role of the employees in pointing out such violations of the TCoC cannot be undermined.

Pursuant to Section 177(9) of the Act and Regulation 4(2)(d)(iv) of the Listing Regulations, a Whistle-blower Policy and Vigil Mechanism was established for Directors, employees and 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. The Vigil Mechanism provides a mechanism for employees of the Company to approach the Chief Ethics Counsellor (CEC)/Chairman of the Audit Committee of the Company for redressal. The Company has revised the Whistle-blower Policy to include "reporting of incidents of leak or suspected leak of unpublished price sensitive information" in terms of SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended from time to time. The revised Policy was approved by the Board at its meeting. The updated policy has been posted on the Company''s website at https://www.nelco.in/pdf/Policies/Whistle%20Blower%20Vigil%20Mechanism%20Policy.pdf. The Company affirms that no personnel have been denied access to the Audit Committee

9. Risks and Concerns

The Company is faced with risks of different types including strategic, financial, regulatory and operational. Each of the risks need different approaches for mitigation and management. Details of various risks faced by the Company are provided in Management Discussion & Analysis.

9.1 Risk Management Framework and Internal Financial Controls

Risk Management framework: The Company has established a risk management framework and policy based on which risks are identified and assessed across its business segments. The Risk Management Committee (RMC) of the Board was constituted in FY22 to enhance the focus on risk identification and mitigation. The Committee is responsible for monitoring and reviewing the risk management plan and ensuring its effectiveness. The Company''s key risks are discussed with RMC on a half yearly basis.

The Audit Committee and Board have an additional oversight in the area of key strategic and financial risks and controls. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

The internal Risk Management Committee at the Company level which comprises of the CEO, CFO, Risk Officer and key business and operations heads, ensures that existing and future risk exposures of the Company are identified, assessed, quantified, minimized, managed and appropriately mitigated. The Company''s framework of risk management process provides clear basis for informed decision making at all levels of the organization on an ongoing basis, having duly evaluated likely risks and their mitigation plans being controllable and within risk appetite of the Company. There are no elements of risk, which in the opinion of the Board may impact the existence of the Company.

Internal Financial Control and Systems: The Company has an internal control system, commensurate with the nature of its business, the size and complexity of its operations and as such the internal financial controls with reference to the Financial Statements are adequate. The Company has appointed independent Chartered Accountant firm as Internal Auditors who audits governance, risks management and internal controls and processes. The Internal Auditors present their findings to the Audit Committee. Testing of Internal Financials Controls also form a part of internal audit schedule. The scope and authority of internal audit is defined in Audit Committee Charter adopted by the Company.

As per the Audit Committee Charter adopted by the Board and as per provisions of Section 177 of the Companies Act, 2013 (the Act) one of the responsibilities of the Audit Committee is to review the effectiveness of the Company''s Internal control system, including Internal Financial Controls. Internal controls have been discussed in detail in Management Discussion & Analysis in this report. The Company has implemented robust processes to ensure that all internal financial controls are effectively working. On review of the internal audit observations and action taken on audit observations, there are no adverse observations having material impact on financials, commercial implications or material non-compliances which have not been acted upon. In addition, the statutory auditors carry out an audit at quarterly intervals and these reports also have not reported any adverse findings.

Process Robustness: The Company also carries out business excellence assessments and process deep dives through external agencies to establish and improve efficiency and effectiveness of processes in various key functions. The Company assesses the process maturity and robustness for its key functions on the following:

• Process documentation and workflow

• Process measures and controls (manual/system driven) including maker-checker mechanisms

• Performance tracking for key measures/metrics

• Initiatives taken for process improvements

The Company also carries out internal audits and process deep dives through external agencies to establish and improve efficiency and effectiveness of processes in various key functions. On review of the internal audit observations and action taken on audit observations, there are no adverse observations having material impact on financials, commercial implications or material non-compliances which have not been acted upon. In addition, the statutory auditors carry out an audit at quarterly intervals and these reports also have not reported any adverse findings.

10. Sustainability10.1 Corporate Social Responsibility

The Company has formed a CSR committee comprising of the following Directors:

Mr. R. R. Bhinge, Chairman Dr. Lakshmi Nadkarni and Mr. P. J. Nath

As the Company has not earned net profits computed as defined in Section 198 of the Act, it is not mandatorily required to spend on CSR activities. However, after the amalgamation on 9th June 2021 of Tatanet Services Ltd. (TNSL) as per the Scheme with the Company, TNSL''s obligation for CSR spend of '' 14.76 Lakhs stands transferred to the Company. Accordingly, the Company spent '' 14.76 Lakhs for FY2021-22 towards the CSR activities. The annual report on CSR activities is provided in Annexure - III to this Report. The Company has formulated the policy on CSR which is available on Company''s websites: https://www.nelco.in/pdf/Policies/ CSR%20Policy.pdf. The Company motivates employees to take up volunteering which benefit the society through participation in Nelco organized CSR activities, Tata ProEngage and Tata Volunteering week.

10.2 Safety, Health and Environment

The Company placed utmost importance to establish a safe work environment for its employees, contractual workforce, suppliers, visitors and partners. Specific focus was given to determine safety standards on Office Safety, Field Safety, Working at Height safety & Electrical and Fire Safety. The Apex Safety Committee met frequently to assess the work conditions, Incident reported and risk assessments. The Works Committee ensured specific safety norms are followed across regions. Reporting of Incidences and unsafe conditions are encouraged and the committee analysed the reported instances and corrective actions taken to avoid recurrence.

The Company adopts a proactive and responsible approach to safeguard the welfare of its employees. Communication on health tips, virtual seminars on health topics, fitness related sessions, Doctors availability in the premise are some of the services available for employees and families.

Training & awareness sessions were conducted periodically on Fire Safety and on usage of the fire saving equipment. Fire Evacuation Drills were conducted to check emergency preparedness. The compliance related to the Fire safety are followed and audited periodically to ensure adherence.

While VSAT services qualified under the ''essential services'' category, Safety and Health of the employees, especially those who were in customer services roles and employees who were visiting offices under special circumstances were taken on priority. All hygiene specific guidance were followed. Regular deep cleaning of the office premises and checks including thermal screening, oximeter check, footwear disinfectant and vehicle sanitization continued to ensure safety of the employees in office. Company initiated vaccination drives for employees & families and contract resources in the year. A part of our employees continued to work from home during the year.

11. Human Resources

As on 31st March 2022, the Company had employee strength of 86. During the year under review, 9 employees were

recruited, and 10 employees were separated.

Various people related initiatives were undertaken by the Company during the year to enable organizational growth

through people care and development which include:

• During ongoing Pandemic and lockdown, Health and wellbeing of the employees had become a major priority for the Company. The connect meetings gave opportunities to employees to express themselves and get solutions to their work matters. Besides HR connect meetings, the regular connect sessions were conducted by the Department Heads. Over and above this the MD connect sessions were also initiated to ensure that the employees are heard at the highest level and encouraged to give their best. The Company strengthened its engagement with 3rd party contract employees and included Franchisees and its engineers too in the connect programs. Special learning programmes, including Technical, Functional and Behavioural trainings were designed for contract employees and the Franchisee engineers. These trainings also included sessions on TCoC, Safety & POSH awareness. Performance awards were also announced for the Franchisee engineers.

• Every year Employee Engagement Surveys are conducted to enable people to voice out their concerns and suggestions for making the workplace better for everyone. The Company utilises multiple platforms that encourage open communication amongst employees and allow them to voice their opinion. MD Connects and Ideas Portal are two such platforms where employees share ideas which are further evaluated by a committee and translated into actions wherever feasible. Knowledge sessions and employee welfare and sports activities are also conducted from time to time to ensure continuous learning, team bonding and motivation.

• Reward & Recognition: In order to make recognitions an integral part of the Company, it has automated the Reward and Recognition module to ensure timely recognition. By introducing additional reward categories in the policy, which includes anytime, anywhere appreciation, Nelco wishes to add more vigour and robustness in the way employees are recognised and appreciated for their exemplary performances and operational excellence. Nelco Innovista awards is a platform which rewarded participants for their creative and innovative minds.

• Capability Development: Company focuses on overall capability building of functional, managerial and behavioural skills. The capability building programs considering the present and future business requirements are part of strategic planning exercise.

Training needs are primarily sourced through performance appraisal discussions with respective managers. Training programmes are facilitated by e-learning platform as well as internal and external trainers. During pandemic, the Company has been committed towards building the skill levels of employees through organizing virtual workshops and fulfilling the training requirements through e-learning platforms. Employees were encouraged to undergo trainings of their choice apart from the training needs identified by their managers. The company also arranged webinars and learning opportunities through Tata group learning portals & webinars and helped employees upgrade their knowledge.

Innovation in working is encouraged through competitions like Tata Innovista and Tata Business Leadership Awards, where employees showcase creative ideas/actions in business, process or technology. A comprehensive Competency assessment is carried out for employees and plans made for bridging the identified skill gaps through relevant training programs

• Performance & Talent Management: Employee performance is monitored and managed through rigorous processes of Performance Appraisal. Mapping the SMART goals in the online system ensures that Goals are properly maintained and tracked for improving the peoples, departments'' and overall organization''s productivity. The Annual Performance evaluation is based on achievement against pre-defined Key Result Areas (KRAs) for each individual, which are agreed at the beginning of the year and the role-based Tata Leadership Practices (TLP). Continuous dialogue is encouraged between managers and their teams with focus on guiding and training first time managers through performance coaching. Talent management framework is rolled out for High-Potential employees which help them to grow in the organization faster. The Company also conducted Critical resources Planning exercise in order to create succession plan at the middle management level.

• Succession Planning: Successors have been identified for critical positions (for N & N-1 level) in the Company to ensure business continuity. Based on the outcome of this process, decisions to hire capable person for specific positions have also been recommended. Wherever successors are not available, a detailed back up plan is drafted to ensure business is not impacted in case of any emergency situation.

• The Company has an instituted Policy on Prevention of Sexual Harassment (POSH), which seeks to govern the guidelines and grievance redressal procedures as required under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. As per policy, a Complaints Redressal Committee/Internal Complaints Committee has been formed in the Company with inclusion of an external lady member. POSH related sessions were conducted for employees and allied resources. No complaints related to POSH have been received during the year. The Company has ensured to cover all the Associates, Franchisee engineers and vendors in the POSH and Ethics workshops so that the culture of integrity and respect is spread throughout the extended arm of Nelco.

12. Credit Rating

During the year CRISIL has assigned ratings for long term and short-term bank facilities of the Company to CRISIL A

Stable and CRISIL A1 respectively.

13. Loans, Guarantees, Securities and Investments (LGSI)

Details of LGSI covered under the provisions of Section 186 of the Act, 2013 are given in Annexure IV forming part of

this report.

14. Foreign Exchange - Earnings and Outgo.

('' in lakhs)

Particulars - Standalone

Year ended 31st March 2022

Year ended 31st March 2021

Foreign Exchange Earnings

4,680

2,764

Foreign Exchange Outflow

1,434

2,838

15. Auditors

Members of the Company at the AGM held on 13th August 2020, approved the appointment of S. R. Batliboi & Associates LLP, Chartered Accountants, (ICAI Firm Registration No. 101049W /E300004), as the statutory auditors of the Company for a period of 5 years commencing from the conclusion of the 77th AGM held on 13th August 2020 until the conclusion of 82nd AGM of the Company to be held in the year 2025.

16. Auditors'' Report

The standalone and the consolidated financial statements of the Company have been prepared in accordance with applicable Indian Accounting Standards (Ind AS) notified under Section 133 of the Act. The Statutory Auditor''s report does not contain any qualifications, reservations, adverse remarks or disclaimers. The Notes to the Accounts referred to in the Auditors'' report are self-explanatory and therefore do not call for any further clarification under Section 134(3)(f) of the Act.

During the year under review, neither the statutory auditors nor the secretarial auditors has reported to the Audit committee, under Section 143 (12) of the Companies Act, 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in the Board''s report.

17. Cost Auditors and Cost Audit Report

Your Board has appointed M/s. PD.Dani and Associates (Firm Registration No. 000593), Cost Accountants, as Cost Auditors of the Company for conducting cost audit for the FY 2021-22. A resolution seeking approval of the Members for ratifying the remuneration of '' 1,25,000 (Rupees One Lakh Twenty-Five thousand) plus GST and reimbursement of out-of-pocket expenses on actual basis payable to the Cost Auditors for FY22 is provided in the Notice to the ensuing 79th AGM. As specified by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013, the Company has maintained cost accounts and records.

18. Secretarial Audit Report

In terms of Section 204 of the Act and Rules made thereunder M/s. Bhandari & Associates, Practicing Company Secretaries, were appointed as Secretarial Auditors of the Company to carry out the secretarial audit for FY 2021-22. The report of the Secretarial Auditors for FY 2021-22 is enclosed as Annexure- V forming part of this Report. There has been no qualification, reservation, adverse remark or disclaimer given by the Secretarial Auditors in their Report.

The Company has devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards issued by the Institute of Company Secretaries of India and that such systems are adequate and operating effectively.

As per the requirements of the Listing Regulations, Practicing Company Secretaries have undertaken secretarial audit for FY 2021-22 of Nelco Network Products Ltd., the material unlisted subsidiary of the Company. As per the Audit Report (Annexure- V-A) the subsidiary had complied with the applicable provisions of the Act, Rules, Regulations and Guidelines and that there were no deviations or non-compliances.

19. Conservation of Energy and Technology Absorption

The information on conservation of energy and technology absorption stipulated under Section 134 (3) (m) of the Act read with Rule 8 of The Companies (Accounts) Rules, 2014, is given in Annexure - VI forming part of this report.

20. Related Party Transactions

In line with the requirements of the Act and the Listing Regulations, the Company has formulated a Policy on Related Party Transactions and the same is available on the Company''s website: https://www.nelco.in/pdf/Policies/Related%20Party%20Transaction%20Policy.pdf

All related party transactions entered during the year under review were on an arm''s length basis and were in the ordinary course of business. All transactions with related parties were reviewed and approved by the Audit Committee. Prior omnibus approval is obtained for related party transactions which are of repetitive nature and entered in the ordinary course of business and on an arm''s length basis. There were no other materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel and Body Corporate(s) which had a potential conflict with the interest of the Company at large. Accordingly, the disclosure of these Related Party Transactions as required under Section 134 (3) (h) of the Act in Form AOC 2 is not applicable for the year under review. The details of the transactions with related parties are provided in the accompanying Financial Statements.

21. Deposits

The Company has not accepted any deposits from public and as such, no amount on account of principal or interest on deposits from public was outstanding as on the date of the Balance Sheet.

22. Extract of Annual Return

Pursuant to Section 92 of the Act read with the appliable Rules, the Annual Return for the year ended 31st March 2022 can be accessed on the Company''s website at the following link: https://www.nelco.in/pdf/disclosure-of-events/annual-return-2021-22-nelco-ltd.pdf.

23. Directors'' Responsibility Statement

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost auditors, secretarial auditors and external consultants including the audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by Management and the relevant Board Committees, including the Audit Committee, the Board believes the Company''s internal financial controls were adequate and effective during the period under review.

Accordingly, pursuant to Section 134(5) of the Companies Act 2013, the Board of Directors, to the best of their knowledge and ability, confirm that:

a) in the preparation of the annual accounts for the period ended 31st March 2022 the applicable accounting standards had been followed along with proper explanation relating to material departures.

b) they have, in the selection of the accounting policies, consulted the Statutory Auditors and have applied them consistently and made judgments and estimates that are reasonable and prudent to give a true and fair view of the Company for the period ended 31st March 2022 and of the profit of the Company for that period;

c) they have 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 have prepared the accounts for the period under review on a going concern basis.

e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

24. Acknowledgment

The Board of Directors thank the Company''s shareholders, customers, vendors, business partners, bankers and financial institutions for their continuous support.

The Directors also thank the Government of India, Dept. of Telecommunications, Dept. of Space, various Ministries, Regulatory Authorities and their departments for their co-operation.

We appreciate and value the contributions made by all our employees.

On behalf of the Board of Directors,

R.R. Bhinge

Chairman

Mumbai, 26th April 2022

1

TNSL merger has been accounted in Nelco Limited (standalone) in accordance with Appendix C of IND AS 103

2

"Business Combination" and accordingly, results of all the previous periods have been restated by including results of the Company from the beginning of the previous year i.e. April 1,2020.


Mar 31, 2019

DIRECTORS'' REPORT

To

The Members,

Your directors have pleasure in presenting their Seventy Sixth Annual Report on the business and operations of the Company together with the Audited Statement of Accounts for the year ended 31st March 2019.

The Hon''ble National Company Law Tribunal (NCLT), Mumbai Bench has approved, the Composite Scheme of Arrangement and Amalgamation (Scheme) involving the internal restructuring of the various businesses of the Company and its two wholly owned subsidiaries viz. Tatanet Services Ltd. (TNSL) and Nelco Network Products Ltd.(NNPL). The necessary steps for obtaining approvals from Department of Telecommunications (DoT) are being taken after which the Scheme will become effective. In the first phase of the Scheme, Nelco will transfer its two businesses to NNPL on a going concern basis by way of slump sale. These businesses are (a) ISSS and (b) sale and maintenance of VSAT and related equipment. In the second phase, TNSL will amalgamate with Nelco. Post the said restructuring, the VSAT Communication service business will be in Nelco, which is the listed parent entity and the related equipment business will be in NNPL. The VSAT license will be transferred from TNSL to Nelco.

1. Financial Results

Pending the DoT approval, the Scheme has not been given effect to in the financial results for the year ended 31st March 2019.

(Rs, in lakhs)

Sr.

No.

Particulars

Standalone

Consolidated

FY 2018-19

FY 2017-18

FY 2018-19

FY 2017-18

A

Continuing Operations

a

Net Sales / Income from Other Operations

3,357

3,190

19,101

14,961

b

Operating Expenditure

2,914

3,064

15,502

12,448

c

Operating Profit

443

126

3,599

2,513

d

Add:- Other Income

245

290

428

494

e

Less:- Finance Cost

439

478

738

593

f

Profit before Depreciation and Tax

249

(62)

3,289

2,414

g

Less :- Depreciation / Amortization/ Impairment

93

61

1,296

949

h

Less : Minority Interest

-

-

-

-

i

Add : Share of Profit of Associates

-

-

9

57

j

Net Profit / (Loss) after Minority interest and Share of Profit of Associates

156

(123)

2,002

1,522

k

Exceptional items

-

-

-

-

l

Current / Deferred Tax Expenses

(779)

-

(227)

311

m

Net Profit / (Loss) after Tax, Minority interest and Share of Profit of Associates from Continuing operations

935

(123)

2,229

1,211

B

Discontinuing Operations1 (being transferred to Wholly Owned Subsidiary)

n

Profit from Discontinuing operations (before exceptional item and tax)

1,192

1,274

-

-

o

Add:- Exceptional Profit

-

-

-

-

p

Tax Expenses

355

174

-

-

q

Profit after Tax from Discontinuing operations

837

1100

-

-

C

Profit after tax from Total operations

1,772

977

2,229

1,211

r

Add : Other Comprehensive Income/ (expenses)

(21)

(18)

(22)

(21)

s

Total Comprehensive Income

1,751

959

2,207

1,190

Operations that are being transferred to Nelco Network Products Ltd. (Wholly Owned Subsidiary) as a part of internal restructuring.

2. Dividend

Based on the Company''s performance, the Directors are pleased to recommend for approval of the Members a dividend of 15% ('' 1.50 per share of ''10/- each) for FY2018-19.

3. Financial Performance and the state of the Company''s affairs

3.1 Standalone

On a Standalone basis, your Company achieved revenue of Rs, 3,357 Lakhs in FY 2018-19 from Continuing Operations as against Rs, 3,190 Lakhs in FY 2017-18. On a total operation basis, your Company achieved revenue of Rs, 12,632 Lakhs in FY 2018-19 as against Rs, 9,363 Lakhs in FY 2017-18.

In FY 2018-19 the Company earned a net profit after tax of Rs, 1,772 Lakhs from total operations as against profit of Rs, 977 Lakhs in FY 2017-18. This profit was higher due to higher margin in service income of VSAT division, reduction of losses in Automation & Control division and reduction in interest expenses.

Profit from Discontinuing Operations are calculated considering the direct cost of those Operations and interest on identifiable loans that are being transferred under the Scheme. The entire corporate overheads are considered part of Continuing Operations.

3.2 Consolidated

On a Consolidated basis, revenue from Operations was Rs, 19,101 Lakhs in FY 2018-19 as against Rs, 14,961 Lakhs in FY 2017-18 i.e. increase by 28% over previous year.

The segment wise performance (Consolidated) from total operations for the year was as follows:

The revenue from Automation & Control segment was Rs, 361 Lakhs in FY 2018-19 as against Rs, 243 Lakhs in FY 2017-18. The segment loss was Rs, 284 Lakhs in FY 2018-19 as against loss of Rs, 340 Lakhs in FY 2017-18. This segment is being operated on a restricted mode and currently completing only its existing contractual obligations.

The revenue from Network Systems segment was Rs, 18,740 Lakhs in FY 2018-19 as against Rs, 14,718 Lakhs in FY 2017

18. The segment profit was Rs, 4,119 Lakhs in FY 2018-19 as against profit of Rs, 3,633 Lakhs in FY 2017-18.

The Company added 23,844 VSATs during FY 2018-19 and the installed base is approximately 71,500 as on 31st March 2018.

The Company earned a net profit after tax of Rs, 2,229 Lakhs from total operations as against profit of Rs, 1,211 Lakhs in FY 2017-18. There were no material changes and commitments affecting the financial position of the Company which occurred between the end of the year under review and the date of this Report.

3.3 Operations

The Consolidated revenue (% wise) from each segment was as under:

FY2018-19

FY2017-18

Network Systems comprising of VSAT and SATCOM business

98.11%

98.38%

Automation & Control

1.89%

1.62%

Further information in detail has been given in the Management Discussion & Analysis which forms a part of this report.

4. Reserves

The Board of Directors has not proposed any amount for transfer to reserves for the year ended 31st March 2019.

5. Subsidiary and Associate Company

5.1 The Company has two wholly owned subsidiaries viz. Tatanet Services Ltd. (TNSL) & Nelco Network Products Ltd. (NNPL) and one Associate Company i.e. Nelito Systems Ltd. (NSL).

TNSL holds the VSAT License as well as the Inflight & Maritime Communication (IFMC) licence issued by Department of Telecommunication (DoT). The Revenue of TNSL for FY 2018-19 was Rs, 9,827 Lakhs against Rs, 8,788 Lakhs for FY 2017-18. The Profit after tax was Rs, 468 Lakhs against Rs, 211 Lakhs in the previous year. The profit was higher mainly due to increase in overall turnover of the Company against increase in cost.

5.2 The organizational and operational structure would be simplified on implementation of the Scheme of Arrangement and Amalgamation with the VSAT communication service business vesting in the Company, the flagship listed parent entity and the related hardware business vesting in NNPL. This would result in the recurring revenue from VSAT communication service being in the Company and the revenue from sale of hardware including VSAT equipment being in NNPL. The enhanced net worth of the Company after the Scheme is effective will improve its ability to bid for larger projects and pursue bigger opportunities. Also, there will be increase in overall efficiency in terms of utilization of assets, employees, etc.

5.3 During the year the National Company Law Tribunal ("NCLT") approved the scheme vide its order dated November

2, 2018 (the "Scheme"). As required by the NCLT Order, the Company intimated the Registrar of the Companies ("RoC") about the approval of the Scheme by NCLT, stating that Department of Telecommunications ("DoT") approval has been pending. The RoC records were, however, updated to reflect the Scheme as effective and Company as "amalgamated" with the Nelco Limited. Based on legal advice, the Company has approached NCLT to direct the RoC to amend their records to reinstate Company to its earlier status and cancel the effect of the Scheme with immediate effect. The hearing on this matter is ongoing. The Scheme will be given effect to in the financial statements on receipt of all necessary approvals.

5.4 The Board of Directors of the Company at its meeting held on 21st September, 2018 has decided to exit from Nelito Systems Limited (an Associate Company). Considering the intent of the Board, this investment in the Associate has been classified as ''Assets classified as held for sale'' in accordance with IND AS 105. This decision has an impact on the way Company account for its investment in Associate. The Company has stopped recognizing its share of profit/ loss in Associate and valued its investment in Associate at cost or realizable value whichever is lower.

There has been no major change in business of the aforesaid Companies. Also, none of the existing Subsidiaries or Associates of the previous year ceased to be Subsidiary/ Associate of the Company during the year under review. The report on the performance and financial position of each of the Subsidiaries and Associate Company has been provided in Form AOC-1.

The Policy for determining material subsidiaries of the Company has been provided in the following link: http://www.nelco.in/pdf/Policies/Policy%20for%20determining%20Material%20Subsidiaries.pdf

6. Directors and Key Managerial Personnel

In terms of Section 149 of the Companies Act, 2013 ("Act") the Members at the AGM held on 28th January 2015 appointed the following Independent Directors of the Company till 27th January 2020:

- Mr. K.Raghuraman

- Mr. K.Ramachandran

- Ms. Hema Hattangady

In accordance with the requirements of the Act and the Articles of Association of the Company, Mr. R.R. Bhinge, Director retires by rotation at the ensuing AGM and is eligible for re-appointment. Additional information and brief profile as stipulated under SEBI (Listing Obligations & Disclosure Requirements), Regulations, 2015 (Listing Regulations) and Secretarial Standards - 2 on General Meetings with respect to Mr. Bhinge being a Director seeking re-appointment is annexed to the Notice of AGM.

On the recommendation of the Nominations, HR & Remuneration Committee, the Board of Directors of the Company approved the appointment of Mr. Rahul Shah as an Additional Director effective from 21st July 2018 who holds the office till the ensuing AGM. His reappointment has been placed for approval of the Members at the ensuing AGM scheduled on 24th July 2019.

Mr. S.Ramakrishnan resigned from the Directorship with effect from 21st July 2018 to facilitate restructuring of the Board as per the advice of The Tata Power Company Ltd., the Holding Company. The Board places on record its deep sense of appreciation of the valuable contribution to the Company made by Mr. Ramakrishnan during his tenure as a Board member.

In terms of Section 203 of the Act, the Board has designated the following persons as Key Managerial Personnel of your Company:

- Mr. RJ. Nath, Managing Director & CEO

- Mr. Uday Banerjee, Chief Financial Officer

- Mr. Girish Kirkinde, Company Secretary & Head-Legal

During the year under review, Nine Board Meetings were held. For further details, please refer Report on Corporate Governance.

The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the Act and Listing Regulations.

Governance Guidelines:

The Company has adopted Governance Guidelines on Board Effectiveness. The said Guidelines covers aspects related to composition and role of the Board, Chairman and Directors, Board diversity, definition of independence, Director''s term, retirement age and Committees of the Board. It also includes aspects relating to nomination, appointment, induction and development of Directors, Director Remuneration, subsidiary oversight, Code of Conduct, Board Effectiveness Review and mandates of Board Committees.

7. Annual Evaluation of Board Performance and Performance of its Committees and Individual Directors.

As required under the Act and Listing Regulations, the Board has carried out formal annual evaluation of the performance of the Board, its Committees and of individual directors.

The following process was adopted for Board Evaluation:

- Feedback was sought from each Director about his/her views on the performance of the Board covering various criteria such as degree of fulfillment of key responsibilities, Board structure and composition, establishment and delineation of responsibilities to various Committees, effectiveness of Board processes, information and functioning, Board culture and dynamics, quality of relationship between the Board and the Management and efficacy of communication with external stakeholders. The Nominations, HR and Remuneration Committee (NRC) then discussed the above feedback received from all the Directors.

- Based on the inputs received, the Chairman of the NRC also made a presentation to the Independent Directors at their meeting, summarizing the inputs received from the Directors about Board performance, and of the Chairman. The performance of the non-independent non-executive Directors and Board Chairman was also reviewed by them.

- Post the meeting of the Independent Directors, their collective feedback on the performance of the Board (as a whole) was discussed by the Chairman of the NRC with the Chairman of the Board. It was also presented to the Board and a plan for improvement was agreed upon.

- Every statutorily mandated Committee of the Board conducted a self-assessment of its performance and these assessments were presented to the Board for consideration. Areas on which the Committees of the Board were assessed included degree of fulfillment of key responsibilities, adequacy of Committee composition and effectiveness of meetings. Feedback was provided to the Directors as appropriate. Significant highlights, learning and action points arising out of the evaluation were presented to the Board.

7.1 Committees of the Board

The Committees of the Board focus on certain specific areas and make informed decisions in line with the delegated authority. The following substantive Committees constituted by the Board function according to their respective roles and defined scope:

- Audit Committee of Directors

- Nominations, HR and Remuneration Committee (NRC)

- Stakeholders Relationship Committee

- Corporate Social Responsibility Committee

- Executive Committee of the Board

Details of composition, terms of reference and number of meetings held for respective Committees are given in the Report on Corporate Governance which forms part of the Annual Report.

The details of the familiarization programs for Independent Directors are disclosed on the Company''s website and the web link for the same is: https://www.nelco.in/pdf/Policies/programme-for-familiarisation-development-of-board-members-fy2018-19.pdf

The Board has laid down separate Codes of Conduct for Non-Executive Directors and Senior Management personnel of the Company and the same are posted on the Company''s website. All Board Members and Senior Management personnel have affirmed compliance with the Code of Conduct. The Managing Director & CEO has also confirmed and certified the same. The certification is reproduced at the end of the Report on Corporate Governance.

7.2 Remuneration Policy for the Directors, Key Managerial Personnel and other Employees.

In terms of Section 178(3) of the Act and Part D of Schedule II of Listing Regulations, the NRC is responsible for formulating the criteria for determining qualification, positive attributes and independence of a Director. The NRC is also responsible for recommending to the Board a policy relating to the remuneration of the Directors, Key Managerial Personnel and other employees. In line with this requirement, the Board has adopted the Policy on Board Diversity, which is reproduced in Annexure-I forming part of this report and Remuneration Policy for Directors, Key Managerial Personnel and other employees of the Company is available on the websites of the Company at https://www.nelco. in/pdf/Policies/Remuneration%20Policy%20for%20Directors,%20KMP%20and%20Other%20employees.pdf.

Silent Features of this policy are as under:-

- The philosophy for remuneration of Directors, Key Managerial Personnel ("KMP") and all other employees of Nelco Ltd. ("company") is based on the commitment of fostering a culture of leadership with trust. The remuneration policy is aligned to this philosophy.

- Independent Directors ("ID") and non-independent non-executive directors ("NED") may be paid sitting fees (for attending the meetings of the Board and of committees of which they may be members) and commission within regulatory limits.

- Overall remuneration should be reflective of size of the company, complexity of the sector/ industry/ company''s operations and the company''s capacity to pay the remuneration.

- The NRC will recommend to the Board the quantum of commission for each director based upon the outcome of the evaluation process which is driven by various factors including attendance and time spent in the Board and committee meetings, individual contributions at the meetings and contributions made by directors other than in meetings.

- The extent of overall remuneration to Managing Director ("MD")/ Executive Directors ("ED")/ KMP/ rest of the employees should be sufficient to attract and retain talented and qualified individuals suitable for every role.

- The remuneration mix for the MD/ EDs is as per the contract approved by the shareholders.

- In addition to the basic/ fixed salary, the company provides to other KMPs and employees with certain perquisites, allowances and benefits to enable a certain level of lifestyle and to offer scope for savings and tax optimization, where possible and also performance linked bonus.

- Remuneration is payable to Director for services rendered in professional capacity and which NRC is of the opinion that the director possesses requisite qualification for the practice of the profession.

There is no change in the aforesaid policies during the year under review

Except the Performance Linked Payment (PLP) which is a part of his Cost to the Company (CTC), the Managing Director &CEO has neither received any commission from the Company nor from its Holding or Subsidiary Company.

7.3 Particulars of Employees and Remuneration

The information required under Section 197(12) of the Act read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in Annexure - II (A) forming part of this Report.

The information required under Rule 5 (2) and (3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in the Annexure II (B) forming pat of this Report. In terms of first proviso to Section 136 of the Act, the Report and Accounts are being sent to the Members excluding the aforesaid Annexure II (B). Any Member interested in obtaining the same may write to the Company Secretary at the Registered Office of the Company. None of the employees listed in the said Annexure II (B) is related to any Director of the Company.

8. Significant and material Orders passed by the Regulators or Courts or Tribunal

There were no significant and material orders passed by the Regulators / Courts or Tribunal which would impact the going concern status of the Company and its future operations. Further, no penalties have been levied by Regulators during the year under review.

8.1 Sales Tax matters of Tatanet Services Ltd. (TNSL) Wholly Owned Subsidiary

Maharashtra Sales Tax Department (Dept.) has issued orders against TNSL demanding payment of MVAT on the entire satellite communication services provided by TNSL claiming "The facility to use the transponders is a property, is commercial in nature and goods and therefore, transaction of lease of facility to use the transponders is a deemed sale and accordingly MVAT is applicable." The orders issued are for financial year 2006-07 to 2010-11 and aggregate amount under dispute is Rs, 38.36 Crores. The Company filed writ petition in Bombay High Court for the financial year 2008-09. The said Writ Petition was disposed by the Bombay High Court and referred to Maharashtra Sales Tax Tribunal (MSTT) to decide the above-mentioned matter.

MSTT in its order dated 29th April 2017, allowed the appeal of TNSL and set aside the demand of the Dept. made for financial year 2008-09. However, the Dept. has filed appeal in Bombay High Court against the order passed by MSTT for the year 2008-09.

Since, the facts of the above matter are similar for other financial years viz. 2006-07, 2007-08, 2009-10 and 2010-11, the Joint Commissioner of Sales Tax (JCST) has passed order against the Company demanding payment of MVAT for these financial years also. The Company has filed Appeals to MSTT against the said orders of JCST.

8.2 Income Tax matters of Nelco Ltd

Income Tax Department has reduced certain liabilities of Rs, 1,893 Lakhs while computing long term Capital Gain on a business sold under slump sale for Assessment Year 2011-12, due to which a Tax demand of Rs, 631 Lakhs has been raised on the Company. The said liabilities are not directly related to the businesses sold and as such the Company has gone in appeal against the demand. During the year, Company has received order from CIT(Appeals) rejecting claims of the Company and confirming tax demand. Company is in process of filling appeal against order of the CIT(Appeals).

8.3 Corporate Governance

Pursuant to Listing Regulations and relevant provisions of the Act, a Management Discussion and Analysis Statement, Report on Corporate Governance and Auditors'' Certificate are included in the Annual Report.

8.4 Vigil Mechanism

The Company believes in the conduct of the affairs of its constituents in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. In line with the Tata Code of Conduct (TCOC), any actual or potential violation, howsoever insignificant or perceived as such, would be a matter of serious concern for the Company. The role of the employees in pointing out such violations of the TCOC cannot be undermined.

Pursuant to Section 177(9) of the Act, a vigil mechanism has been established for Directors and employees to report to the management the instances of unethical behavior, actual or suspected, fraud or violation of the Company''s code of conduct or ethics policy. The Vigil Mechanism provides a mechanism for employees of the Company to approach the Chief Ethics Counsellor (CEC) as well as the Chairman of the Audit Committee of the Company.

9. Risks and Concerns

The Company is faced with risks of different types, all of which need different approaches for mitigation. Details of various risks faced by the Company are provided in Management Discussion & Analysis.

9.1 Risk Management Framework and Internal Financial Controls

Risk Management framework: The Company and its Subsidiary have Risk Management framework to inform the Audit Committee and Board members about risk assessment and minimization procedures and periodical review to ensure that Executive Management controls risks by means of properly designed framework.

The Company has also established a risk management policy based on which risks are identified and assessed across its businesses. The Risk Management Committee which comprises of the CEO, CFO, Senior Lead -Business Analytics and Risk Management and key business and operations heads, ensures that existing and future risk exposures of the Company are identified, assessed, quantified, minimized, managed and appropriately mitigated. The Company''s framework of risk management process provides clear basis for informed decision making at all levels of the organization on an ongoing basis, having duly evaluated likely risks and their mitigation plans being controllable and within risk appetite of the Company. There are no elements of risk, which in the opinion of the Board may threaten the existence of the Company.

Internal Financial Control and Systems: The Company has an internal control system, commensurate with its size, scale, nature and complexity of its operations. The Company has appointed independent Chartered Accountant firm as Internal Auditors who audits governance, risks management and internal controls and processes. The Internal Auditors present their findings to the Audit Committee. Testing of Internal Financials Controls also form a part of internal audit schedule. The scope and authority of internal audit is defined in Audit Committee Charter adopted by the Company.

As per the Audit Committee Charter adopted by the Board and as per provisions of Section 177 of the Companies Act, 2013 (the Act) one of the responsibilities of the Audit Committee is to review the effectiveness of the Company''s Internal control system, including Internal Financial Controls. Internal controls have been discussed in detail in Management Discussion & Analysis in this report.

Process Robustness: The Company assesses the process maturity and robustness for its key functions on the following:

- Process documentation and workflow

- Process measures and controls (manual/system driven) including maker - checker mechanisms

- Performance tracking for key measures/metrics

- Initiatives taken for process improvements

The Company also carries out internal audits and process deep-dives through external agencies to establish and improve efficiency and effectiveness of processes in various key functions. In addition, the statutory auditors carry out an audit at quarterly intervals and these reports have not reported any adverse findings.

10. Sustainability

10.1 Corporate Social Responsibility

Your Company has formed a CSR committee comprising of the following Directors:

Mr. R. R. Bhinge, Chairman Mrs. Hema Hattangady and Mr. P J. Nath

As the Company during the year under review has not earned net profit calculated as defined in Section 198 of the Act., it is not mandatorily required to spend any amount on CSR activity. However, as a good Corporate practice it has taken a project which involve installing 15 VSATs in identified schools in some remote areas, which will be used for downloading educational content during off-peak hours at night. The Company has formulated the policy on CSR which is available on Company''s websites: https://www.nelco.in/pdf/Policies/CSR%20Policy.pdf.

10.2 Safety, Health and Environment:

Nelco places utmost importance to the Safety agenda. An office Fire Evacuation Drill is regularly conducted covering all staff working at its Mahape office to check emergency preparedness. Existing safety policy, system, roles, site safety inspection and action planning, statutory compliances & records, counsel to Safety Committee & safety promotional activities were taken up with consultation of Occupational Health, Safety & Environment (OHSE) Management consultant. Office safety drawing documentation was completed and training & awareness sessions were conducted periodically. Inspection of Mahape office was conducted by OHS consultant and initial observations were communicated for discussion with Safety Committee and action on gaps monitored on periodic basis. The Occupation Health, Safety and Environment Policy was revised and safety processes & procedures drafted. Safety standards are maintained across all office locations. During National Safety Week, safety training, awareness sessions and promotion campaigns were conducted for Nelco employees, contract staff, suppliers & customers. Free health check-up camp through local hospital, regular health consultation through company doctor and annual health checkup through medical service provider were organized for employees. Proactive initiatives have been taken towards energy conservation and reduction of carbon footprint like conversion of office lighting at Mahape office from conventional to LED, Air Conditioner Refrigerants from R22 to R32, tree plantation, etc.

11. Human Resources

As on 31st March 2019, the Company had employee strength of 166. During the year under review, 41 employees were recruited, and 24 employees were separated.

Various people related initiatives were undertaken by the Company during the year to enable organizational growth through people care and development which include:

- Employee Engagement: Higher employee engagement leads to higher business productivity and Nelco is cognizant of the fact. It conducted the annual employee engagement survey for all permanent employees. It utilises multiple platforms like Voices, Engagement Action Planning, Open House, Employee Connect, HR Connect, Manager connect, Skip level meetings, weekly review meetings like AHM (All Hands Meet) that encourage open communication amongst all employees and allow them to voice their opinion in the Company.

- Reward & Recognition schemes like individual/ team quarterly performance awards, HoD spot awards, Nelco Innovista awards and peer recognition are various ways that the Company recognizes employee contributions.

- Engagement activities are planned based on a calendar and implemented on monthly basis covering all locations. Employee recreation and team-building activities like sports, festivals, picnics and team outings are also planned across locations to ensure employee engagement. As per Maternity Benefit Act, 2017, creche facility has been created at Mahape premises to enable new mothers to manage office work as well as child care as required by them.

- Capability Development: Company focuses on capability building of both functional, managerial and behavioural skills. Innovation in working is encouraged through competitions like Reimagine Nelco, Tata Innovista and Tata Business Leadership Awards, where employees showcase creative ideas/actions in process or technology. Training needs are primarily sourced through performance appraisals with respective managers and through dynamic business requirements. Training programmes are facilitated by both internal and external trainers. . Focused group training was organized to address specific emerging business needs like key account management & solutions selling. e-learning solution was implemented on anytime-anywhere basis to provide instant access to training content to employees and increase training coverage. Effectiveness of training programmes are monitored to ensure achievement of training objectives. Employees were also encouraged to take up relevant educational courses on self-learning basis.

- Performance & Talent Management: Employee performance is monitored through rigorous goal setting and audit, quarterly performance dialogues and developing manager capability on performance coaching. Continuous dialogue is encouraged between managers and their teams. Career discussions with high performers and new promotees were organized. Performance enablement programme was organized for employees whose performance did not meet expectations. Performance coaching workshop for people managers was organized. Development Centre was conducted at TMTC, Pune, focusing on evaluation and development of all its senior leaders based on Tata leadership competencies.

- Succession Planning: Successors and caretakers have been identified for critical positions in the Company to ensure business continuity. Based on the outcome, decisions to hire capable person for specific positions have also been recommended.

- The Company has an instituted Policy on Prevention of Sexual Harassment which seeks to govern guidelines and grievance redressal procedures as required under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. As per policy, a Complaints Redressal Committee/ Internal Complaints Committee has been formed at Nelco with inclusion of an external lady member. POSH theme training was conducted for employees and allied resources. No complaints related to POSH have been received in the current year.

12. Credit Rating

During the year CARE Ratings has reaffirmed ratings for long term and short-term bank facilities of the Company to CARE A/Stable and CARE 1 respectively.

13. Loans, Guarantees, Securities and Investments (LGSI)

Details of LGSI covered under the provisions of Section 186 of the Act, 2013 are given in Annexure III forming part of this report.

14. Foreign Exchange - Earnings and Outgo.

(Rs, in lakhs)

Particulars - Standalone

Year ended 31st March 2019

Year ended 31st March 2018

Foreign Exchange Earnings

44.31

215.39

Foreign Exchange Outflow

5,367.24

2,302.88

15. Auditors

At the 74th Annual General Meeting (AGM), the Members appointed Price Waterhouse Chartered Accountants LLP, Chartered Accountants (ICAI Firm Registration No. 012754N/N500016) as Statutory Auditors to hold the office for the period of five years from the conclusion of 74th AGM till the conclusion of 79th AGM of the Company to be held in the year 2022 on such remuneration as may mutually agree between the Board of Directors of the Company and the Auditors.

16. Auditors'' Report

The Auditors Report does not contain any qualifications, reservations or adverse remarks. The consolidated financial statements of the Company have been prepared in accordance with Indian Accounting Standard 110 Consolidated Financial Statements, Indian Accounting Standard 28 Accounting in Associates and Joint Ventures and other applicable Indian Accounting Standard prescribed under section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, 2015 and other provisions of the Companies Act, 2013 as amended from time to time. The Notes to the Accounts referred to in the Auditors'' report are self-explanatory and therefore do not call for any further clarification under section 134(3)(f) of the Act.

During the year under review, neither the statutory auditors nor the secretarial auditors has reported to the Audit committee, under Section 143 (12) of the Companies Act, 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in the Board''s report.

17. Maintenance of cost records

As specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013, the Company has made and maintained cost accounts and records.

18. Secretarial Audit Report

M/s. Bhandari & Associates, Practicing Company Secretaries, were appointed as Secretarial Auditors to conduct Secretarial Audit of records and documents of the Company for the year ended 31st March 2019. The Secretarial Audit Report confirms that the Company has generally complied with the provisions of the Act, Rules, Regulations, and Guidelines, etc. The Secretarial Audit Report is given in Annexure - IV forming part of this report. There are no remarks, qualifications or reservations in the Secretarial Audit Report. The Company confirms compliance with the requirements of Secretarial Standards 1 and 2.

19. Conservation of Energy and Technology Absorption

The information on conservation of energy and technology absorption stipulated under Section 134 (3) (m) of the Act read with Rule 8 of The Companies (Accounts) Rules, 2014, is given in as Annexure - V forming part of this report.

20. Related Party Transactions

All related party transactions entered during the year under review were on an arm''s length basis and were in the ordinary course of business. There were no other materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel and Body Corporate(s) which had a potential conflict with the interest of the Company at large. Accordingly, the disclosure of these Related Party Transactions as required under Section 134 (3) (h) of the Act in Form AOC 2 is not applicable for the year under review. The Directors draw attention of the Members to Note no. 38 to the Financial Statements (Standalone) which sets out related party disclosures.

In line with the requirements of the Act and the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Company has formulated a Policy on Related Party Transactions and the same is available on the Company''s website: https://www.nelco.in/pdf/Policies/Related%20Party%20Transaction%20Policy.pdf

Disclosures of transactions of the listed entity with any person or entity belonging to the promoter/promoter group which hold(s) 10% or more shareholding in the listed entity, in the format prescribed in the relevant accounting standards for annual results.

21. Deposits

The Company has not accepted any deposits from the public during the period under review.

22. Extract of Annual Return

Pursuant to Section 92 of the Act and Rule 12 of The Companies (Management and Administration) Rules, 2014, the extract of Annual Return in Form MGT-9, is given in Annexure-VI forming part of this report. The Annual Return in Form MGT-7 for the year ended 31st March 2018 filed with ROC is uploaded on the Company''s website: https://www. nelco.in/pdf/disclosure-of-events/annual-return.pdf.

23. Directors'' Responsibility Statement

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost auditors, secretarial auditors and external consultants and the reviews performed by Management and the relevant Board Committees, including the Audit Committee, the Board believes the Company''s internal financial controls were adequate and effective during the period under review.

Accordingly, pursuant to Section 134(5) of the Companies Act 2013, the Board of Directors, to the best of their knowledge and ability, confirm that:

a) in the preparation of the annual accounts for the period ended 31st March 2019 the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) they have, in the selection of the accounting policies, consulted the Statutory Auditors and have applied them consistently and made judgments and estimates that are reasonable and prudent to give a true and fair view of the Company for the period ended 31st March 2019 and of the profit of the Company for that period;

c) they have 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 have prepared the accounts for the period under review on a going concern basis;

e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

24. Acknowledgment

On behalf of the Directors of the Company, I would like to place on record our deep appreciation to our Shareholders, Customers, Business Partners, Vendors, Bankers and Financial Institutions. The Directors are thankful to the Government of India and the various Ministries and Regulatory Authorities. We appreciate and value the contributions made by all our employees.

On behalf of the Board of Directors,

R.R. Bhinge

Chairman

Mumbai, 27th April, 2019.


Mar 31, 2018

To

The Members,

The directors have pleasure in presenting their Seventy Fifth Annual Report on the business and operations of the Company together with the Audited Statement of Accounts for the year ended 31st March 2018.

The Members of the Company at their meeting convened on the orders of Hon’ble National Company Law Tribunal (NCLT), Mumbai Bench has approved the Scheme of Arrangement and Amalgamation (Scheme) involving the internal restructuring of the various businesses of the Company and its two wholly owned subsidiaries viz. Tatanet Services Ltd. (TNSL) and Nelco Network Products Ltd. (NNPL). In the first phase of the Scheme, Nelco will transfer its two businesses to NNPL on a going concern basis by way of slump sale. These businesses are (a) ISSS and (b) sale and maintenance of VSAT and related equipment. In the second phase 2, TNSL will amalgamate with Nelco. Post the said restructuring, the VSAT Communication service business will be in Nelco, which is the listed parent entity and the related equipment business will be in NNPL. The VSAT license will be transferred from TNSL to Nelco.

The Scheme has been approved by SEBI, BSE & NSE and is subject to approval from Dept. of Telecommunications (DoT), NCLT, other regulatory approvals such as ROC, Regional Director, etc.

1. Financial Results

(Rs. in lakhs)

Sr. No.

Particulars

Standalone

Consolidated

FY 2017-18

FY 2016-17

FY 2017-18

FY 2016-17

A

Continuing Operations

a

Net Sales / Income from Other Operations

3,190

2,569

14,961

14,367

b

Operating Expenditure

3,064

2,683

12,448

12,522

c

Operating Profit

126

(114)

2,513

1,845

d

Add:- Other Income

290

702

494

461

e

Less:- Finance Cost

478

687

593

850

f

Profit before Depreciation and Tax

(62)

(99)

2,414

1,456

g

Less :- Depreciation / Amortization/ Impairment

61

30

949

802

h

Less : Minority Interest

-

-

-

-

i

Add : Share of Profit of Associates

-

-

57

39

j

Net Profit / (Loss) after Minority interest and Share of Profit of Associates

(123)

(129)

1,522

693

k

Exceptional items

-

-

-

-

l

Current / Deferred Tax Expenses

-

-

311

65

m

Net Profit / (Loss) after Tax, Minority interest and Share of Profit of Associates from Continuing operations

(123)

(129)

1,211

628

B

Discontinuing Operations* (being transferred to Wholly Owned Subsidiary)

n

Profit from Discontinuing operations (before exceptional item and tax)

1,274

796

-

-

o

Add:- Exceptional Profit

-

-

-

-

p

Tax Expenses

174

-

-

-

q

Profit after Tax from Discontinuing operations

1100

796

-

-

C

Profit after tax from Total operations

977

667

1,211

628

r

Add : Other Comprehensive Income/ (expenses)

(18)

(25)

(21)

(26)

s

Total Comprehensive Income

959

642

1,190

602

* Operations that are being transferred to Nelco Network Products Ltd. (Wholly Owned Subsidiary) as a part of internal restructuring.

2. Dividend

Considering the profits available after providing for accumulated losses of the previous years and inadequacy of amount compared to what is required under the Companies Act, 2013 for declaration of dividend, the Board has not recommended dividend for the year 2017-18.

3. Financial Performance and the state of the Company’s affairs

3.1 Standalone

On a Standalone basis, your Company achieved revenue of Rs.3,190 Lakhs in FY 2017-18 from Continuing Operations as against Rs.2,569 Lakhs in FY 2016-17. On a total operation basis, your Company achieved revenue of Rs.9,363 Lakhs in FY 2017-18 as against Rs.8,939 Lakhs in FY 2016-17.

In FY 2017-18 the Company earned a net profit after tax of Rs.977 Lakhs from Total Operations as against profit of Rs.667 Lakhs in FY 2016-17. This profit was higher due to higher margin in service income of VSAT division, reduction of losses in Automation & Control division and reduction in interest expenses.

Profit from Discontinuing Operations are calculated considering the direct cost of those Operations and interest on identifiable loans that are being transferred under the Scheme. The entire corporate overheads are considered part of Continuing Operations.

3.2 Consolidated

On a Consolidated basis, revenue from Operations was Rs.14,961 Lakhs in FY 2017-18 as against Rs.14,367 Lakhs in FY 2016-17 i.e. increase by 4% over previous year.

The segment wise performance (Consolidated) from total operations for the year was as follows:

The revenue from Automation & Control segment was Rs.243 Lakhs in FY 2017-18 as against Rs.394 Lakhs in FY 2016-17. The segment loss was Rs.340 Lakhs in FY 2017-18 as against loss of Rs.466 Lakhs in FY 2016-17. This segment is being operated on a restricted mode and currently completing only its existing contractual obligations.

The revenue from Network Systems segment was Rs.14,718 Lakhs in FY 2017-18 as against Rs.13,973 Lakhs in FY 2016-17. The segment profit was Rs.3,633 Lakhs in FY 2017-18 as against profit of Rs.2,956 Lakhs in FY 2016-17.

The Company added 9450 VSATs during FY 2017-18 and the installed base is approximately 54,000 as on 31st March 2018.

The Company earned a net profit after tax of Rs.1,211 Lakhs from Total Operations as against profit of Rs.628 Lakhs in FY 2016-17. There were no material changes and commitments affecting the financial position of the Company which occurred between the end of the year under review and the date of this Report.

3.3 Operations

The Consolidated revenue (% wise) from each segment was as under:

FY2017-18

FY2016-17

Network Systems comprising of VSAT and SATCOM business

98.38%

97.26%

Automation & Control

1.62%

2.74%

Further information in detail has been given in the Management Discussion & Analysis which forms a part of this report.

4. Reserves

The Board of Directors has not proposed any amount for transfer to reserves for the year ended 31st March 2018.

5. Subsidiary and Associate Company

The Company has two wholly owned subsidiaries viz. Tatanet Services Ltd. (TNSL) & Nelco Network Products Ltd. (NNPL) and one Associate Company i.e. Nelito Systems Ltd. (NSL).

TNSL holds the VSAT License issued by Department of Telecommunication (DoT). The Revenue of TNSL for FY 2017-18 was Rs.8787 Lakhs against Rs.7997 Lakhs for FY 2016-17. The Profit after tax was Rs.213 Lakhs against Rs.224 Lakhs in the previous year. The profit was lower mainly due to increase in tax of Rs.48 Lakhs and increase in depreciation on assets bought for setting up new VSAT Hub.

The organizational and operational structure would be simplified on implementation of the Scheme of Arrangement and Amalgamation with the VSAT communication service business vesting in the Company, the flagship listed parent entity and the related hardware business vesting in NNPL. This would result in the recurring revenue from VSAT communication service being in the Company and the revenue from sale of hardware including VSAT equipment being in NNPL. The enhanced net worth of the Company after the Scheme will improve its ability to bid for larger projects and pursue bigger opportunities. Also there will be increase in overall efficiency in terms of utilization of assets, employees, etc.

There has been no major change business of the aforesaid Companies. Also, none of the existing Subsidiaries or Associates of the previous year ceased to be Subsidiary/ Associate of the Company during the year under review. The report on the performance and financial position of each of the Subsidiaries and Associate Company has been provided in Form AOC-1.

The Policy for determining material subsidiaries of the Company has been provided in the following link: http://www.nelco.in/pdf/Policies/Policy%20for%20determining%20Material%20Subsidiaries.pdf

6. Directors and Key Managerial Personnel

In terms of Section 149 of the Companies Act, 2013 (“Act”) the Members at the AGM held on 28th January 2015 appointed the following Independent Directors of the Company till 27th January 2020:

- Mr. K.Raghuraman

- Mr. K.Ramachandran

- Ms. Hema Hattangady

In accordance with the requirements of the Act and the Articles of Association of the Company, Mr. R.R. Bhinge, Director retires by rotation at the ensuing AGM and is eligible for re-appointment. Additional information and brief profile as stipulated under SEBI (Listing Obligations & Disclosure Requirements), Regulations, 2015 (Listing Regulations) and Secretarial Standards - 2 on General Meetings with respect to Mr. Bhinge being a Director seeking re-appointment is annexed to the Notice of AGM.

On the recommendation of the Nominations, HR & Remuneration Committee, the Board of Directors of the Company approved the reappointment of Mr. P J. Nath as Managing Director & CEO for a period of 3 years effective from 13th June 2018. The reappointment as also the terms thereof (including remuneration) has been placed for approval of the Members at the ensuing AGM of the Company scheduled on 20th July 2018.

In terms of Section 203 of the Act, the Board has designated the following persons as Key Managerial Personnel of your Company:

- Mr. PJ. Nath, Managing Director & CEO

- Mr. Uday Banerjee, Chief Financial Officer

- Mr. Girish Kirkinde, Company Secretary & Head Legal

During the year under review, ten Board Meetings were held. For further details, please refer Report on Corporate Governance.

The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the Act and Listing Regulations.

Governance Guidelines:

The Company has adopted Governance Guidelines on Board Effectiveness. The said Guidelines covers aspects related to composition and role of the Board, Chairman and Directors, Board diversity, definition of independence, Director’s term, retirement age and Committees of the Board. It also includes aspects relating to nomination, appointment, induction and development of Directors, Director Remuneration, subsidiary oversight, Code of Conduct, Board Effectiveness Review and mandates of Board Committees.

7. Annual Evaluation of Board Performance and Performance of its Committees and Individual Directors.

As required under the Act and Listing Regulations, the Board has carried out an annual evaluation of its own performance, performance of the Directors individually as well as the evaluation of the working of its Committees.

The following process was adopted for Board Evaluation:

- Feedback was sought from each Director about his/her views on the performance of the Board covering various criteria such as degree of fulfilment of key responsibilities, Board structure and composition, establishment and delineation of responsibilities to various Committees, effectiveness of Board processes, information and functioning, Board culture and dynamics, quality of relationship between the Board and the Management and efficacy of communication with external stakeholders. The Nominations, HR and Remuneration Committee (NRC) then discussed the above feedback received from all the Directors.

- Based on the inputs received, the Chairman of the NRC also made a presentation to the Independent Directors at their meeting, summarizing the inputs received from the Directors about Board performance, and of the Chairman. The performance of the non-independent non-executive Directors and Board Chairman was also reviewed by them.

- Post the meeting of the Independent Directors, their collective feedback on the performance of the Board (as a whole) was discussed by the Chairman of the NRC with the Chairman of the Board. It was also presented to the Board and a plan for improvement was agreed upon.

- Every statutorily mandated Committee of the Board conducted a self-assessment of its performance and these assessments were presented to the Board for consideration. Areas on which the Committees of the Board were assessed included degree of fulfilment of key responsibilities, adequacy of Committee composition and effectiveness of meetings. Feedback was provided to the Directors as appropriate. Significant highlights, learning and action points arising out of the evaluation were presented to the Board.

7.1 Committees of the Board

The Committees of the Board focus on certain specific areas and make informed decisions in line with the delegated authority. The following substantive Committees constituted by the Board function according to their respective roles and defined scope:

- Audit Committee of Directors

- Nominations, HR and Remuneration Committee (NRC)

- Stakeholders Relationship Committee

- Corporate Social Responsibility Committee

- Executive Committee of the Board

Details of composition, terms of reference and number of meetings held for respective Committees are given in the Report on Corporate Governance which forms part of the Annual Report.

The details of the familiarization programs for Independent Directors are disclosed on the Company’s website and the web link for the same is: http://www.nelco.in/pdf/Policies/Programme%20for%20familiarisation%20of%20 Board%20Members.pdf

The Board has laid down separate Codes of Conduct for Non-Executive Directors and Senior Management personnel of the Company and the same are posted on the Company’s website. All Board Members and Senior Management personnel have affirmed compliance with the Code of Conduct. The Managing Director & CEO has also confirmed and certified the same. The certification is enclosed at the end of the Report on Corporate Governance.

7.2 Remuneration Policy for the Directors, Key Managerial Personnel and other Employees.

In terms of Section 178(3) of the Act and Part D of Schedule II of Listing Regulations, the NRC is responsible for formulating the criteria for determining qualification, positive attributes and independence of a Director. The NRC is also responsible for recommending to the Board a policy relating to the remuneration of the Directors, Key Managerial Personnel and other employees. In line with this requirement, the Board has adopted the Policy on Board Diversity, which is reproduced in Annexure-I and Remuneration Policy for Directors, Key Managerial Personnel and other employees of the Company, which is reproduced in Annexure-II forming part of this report.

Except the Performance Linked Payment (PLP) which is a part of his Cost to the Company (CTC), the Managing Director &CEO has neither received any commission from the Company nor from its Holding or Subsidiary Company. With the approval of the Board (on the recommendation of the NRC) he has received fees for rendering professional services to TNSL, the wholly owned subsidiary of the Company.

7.3 Particulars of Employees and Remuneration

The information required under Section 197(12) of the Act read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in Annexure - III (A) forming part of this Report.

The information required under Rule 5 (2) and (3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in the Annexure III (B) forming pat of this Report. In terms of first proviso to Section 136 of the Act, the Report and Accounts are being sent to the Members excluding the aforesaid Annexure III (B). Any Member interested in obtaining the same may write to the Company Secretary at the Registered Office of the Company. None of the employees listed in the said Annexure III (B) is related to any Director of the Company.

8. Significant and material Orders passed by the Regulators or Courts or Tribunal

There were no significant and material orders passed by the Regulators / Courts or Tribunal which would impact the going concern status of the Company and its future operations. Further, no penalties have been levied by Regulators during the year under review.

Sales Tax matters of Tatanet Services Ltd. (TNSL) Wholly Owned Subsidiary.

Maharashtra Sales Tax Department (Dept.) has issued orders against TNSL demanding payment of MVAT on the entire satellite communication services provided by TNSL claiming “The facility to use the transponders is a property, is commercial in nature and goods and therefore, transaction of lease of facility to use the transponders is a deemed sale and accordingly MVAT is applicable.” The orders issued are for financial year 2006-07 to 2010-11 and aggregate amount under dispute is Rs.38.36 Crores. The Company filed writ petition in Bombay High Court for the financial year 2008-09. The said Writ Petition was disposed by the Bombay High Court and referred to Maharashtra Sales Tax Tribunal (MSTT) to decide the above-mentioned matter.

MSTT in its order dated 29th April 2017, allowed the appeal of TNSL and set aside the demand of the Dept. made for financial year 2008-09. However, the Dept. has filed appeal in Bombay High Court against the order passed by MSTT for the year 2008-09.

Since, the facts of the above matter are similar for other financial years viz. 2006-07, 2007-08, 2009-10 and 2010-11, the Joint Commissioner of Sales Tax (JCST) has passed order against the Company demanding payment of MVAT for these financial years also. The Company has filed Appeals to MSTT against the said orders of JCST Income Tax matters of Nelco Ltd:-

Income Tax Department has reduced certain liabilities of Rs.1,893.00 Lakhs while computing long term Capital Gain on a business sold under slump sale for Assessment Year 2011-12, due to which a Tax demand of Rs.631.00 Lakhs has been raised on the Company. The said liabilities are not directly related to the businesses sold and as such the Company has gone in appeal against the demand. As per legal opinion sought by Company, it has a very strong case. This matter is presently lying with the Commissioner of Appeal.

8.1 Corporate Governance

Pursuant to Listing Regulations, and relevant provisions of the Act, a Management Discussion and Analysis Statement, Report on Corporate Governance and Auditors’ Certificate, are included in the Annual Report.

8.2 Vigil Mechanism

The Company believes in the conduct of the affairs of its constituents in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. In line with the Tata Code of Conduct (TCOC), any actual or potential violation, howsoever insignificant or perceived as such, would be a matter of serious concern for the Company. The role of the employees in pointing out such violations of the TCOC cannot be undermined.

Pursuant to Section 177(9) of the Act, a vigil mechanism has been established for Directors and employees to report to the management the instances of unethical behaviour, actual or suspected, fraud or violation of the Company’s code of conduct or ethics policy. The Vigil Mechanism provides a mechanism for employees of the Company to approach the Chief Ethics Counsellor (CEC) as well as the Chairman of the Audit Committee of the Company.

9. Risks and Concerns

The Company is faced with risks of different types, all of which need different approaches for mitigation. Details of various risks faced by the Company are provided in Management Discussion & Analysis.

9.1 Risk Management Framework and Internal Financial Controls

Risk Management framework: The Company and its Subsidiary have Risk Management framework to inform the Audit Committee and Board members about risk assessment and minimization procedures and periodical review to ensure that Executive Management controls risks by means of properly designed framework.

The Company has also established a risk management policy based on which risks are identified and assessed across its businesses. The Risk Management Committee which comprises of the CEO, CFO, Senior Lead -Business Analytics and Risk Management and key business and operations heads, ensures that existing and future risk exposures of the Company are identified, assessed, quantified, minimized, managed and appropriately mitigated. The Company’s framework of risk management process provides clear basis for informed decision making at all levels of the organization on an ongoing basis, having duly evaluated likely risks and their mitigation plans being controllable and within risk appetite of the Company. There are no elements of risk, which in the opinion of the Board may threaten the existence of the Company.

Internal Financial Control and Systems: The Company has an internal control system, commensurate with its size, scale nature and complexity of its operations. The Company has appointed independent Chartered Accountant firm as Internal Auditors who audits governance, risks management and internal controls and processes. The Internal Auditors present their findings to the Audit Committee. Testing of Internal Financials Controls also form a part of internal audit schedule. The scope and authority of internal audit is defined in Audit Committee Charter adopted by the Company.

As per the Audit Committee Charter adopted by the Board and as per provisions of Section 177 of the Companies Act, 2013 (the Act) one of the responsibilities of the Audit Committee is to review the effectiveness of the Company’s Internal control system, including Internal Financial Controls. Internal controls have been discussed in detail in Management Discussion & Analysis in this report.

Process Robustness: The Company assesses the process maturity and robustness for its key functions on the following:

- Process documentation and workflow

- Process measures and controls (manual/system driven) including maker - checker mechanisms

- Performance tracking for key measures/metrics

- Initiatives taken for process improvements

The Company also carries out internal audits and process deep-dives through external agencies to establish and improve efficiency and effectiveness of processes in various key functions. In addition, the statutory auditors carry out an audit at quarterly intervals and these reports have not reported any adverse findings.

10. Sustainability

10.1 Corporate Social Responsibility

As per Section 135 of the Companies Act, 2013 (Act), every Company having a net worth of Rs.500.00 Crores or more, or turnover of Rs.1,000 Crores or more, or net profit of Rs.5.00 Crores or more during any financial year shall be required to constitute Corporate Social Responsibility Committee (CSRC). Accordingly, your Company has formed a committee comprising of the following Directors :

Mr. R. R. Bhinge, Chairman Mrs. Hema Hattangady and Mr. R J. Nath

Though your Company has made a net profit of more than Rs.5.00 Crores in the year under review, the said profit calculated as defined in Section 198 of the Act he is lower than Rs.5.00 Crores. As such, the Company need not mandatorily spend any amount on CSR activity.

10.2 Safety, Health and Environment:

The Company now operates in the services business category which does not involve any hazardous work. However, the Company maintains high standards of Safety, Health and Environment in its own premises as well as contractor work sites. During construction related activities like new satellite dish antenna installation and office renovation, all safety interventions like building stability certification, monitoring contractor safety, etc were undertaken. Safety awareness programme on promoting safety culture at Nelco, safe working environment, safe storage of materials, equipment, machinery etc. was conducted through external agency to cover permanent and contractual staff from all critical functions of the Company. Safety walkthrough of each department was also conducted to assess current preparedness to critical situations and suggested precautions to be taken. Tata Safety Code of Conduct drive was launched to ensure commitment of every employee towards safety. During National Safety Week, safety training, awareness sessions and promotion campaigns were conducted for Nelco employees, contract staff, suppliers & customers. Free health check-up camp through local hospital, regular health consultation through company doctor and annual health check-up through medical service provider were organised for employees. Company has been issued green certificate from pollution control board for adhering to environment norms.

11. Human Resources

As on 31st March 2018, the Company had employee strength of 149. During the year under review, 31 employees were recruited, and 18 employees were separated.

Various Human Resources initiatives were undertaken by the Company during the year to enable organizational growth through people care and development which include:

- Employee Engagement: Workforce engagement initiatives are rigorously deployed to enhance level of people connect in a geographically spread organization. Avenues such as Voices, Engagement Action Planning, Open House, Employee Connect, HR Connect, Manager connect, Skip level meetings, weekly review meetings like AHM (All Hands Meet) help in promoting open dialogues with employees and empowering them. There are various reward and recognition schemes to motivate employees like Quarterly Individual/ Team performance awards, HoD spot awards, Nelco Innovista awards and peer recognition. Employee recreation activities are also planned across locations to ensure employee engagement.

- Capability Development: Organizational capability development is a focused agenda for the Company. To strengthen and build its core functional competencies, the company has developed a Skill Inventory which is used to evaluate current resources and plan mitigation of gaps through learning interventions and job exposure. Tata Group level initiatives like Innovista and Tata Business Leadership Awards promote innovative thinking and entrepreneurship as a way of life amongst employees. Nelco also has a pool of certified internal trainers to cater to the various training requirements across locations. Learning & Development needs are identified through business inputs, strategic challenges, inputs from management discussions, board meetings, etc. In addition, individual level training & development needs are identified through assessment of KRAs and leadership behaviours during annual performance appraisal (PRD). Training effectiveness is tracked to ensure that training objectives are achieved.

- Performance & Talent Management: Employee performance was systematically monitored starting from goal-setting stage to year end appraisal with initiation of quarterly performance dialogues to encourage continuous conversations between manager and team members. Career conversations and counselling for high performing officers were organised.

- Succession Planning: There is a Succession Planning process in place to identify successors for all critical positions and to make them ready for the role.

- The Company has adopted a policy on prevention, prohibition and redressal of sexual harassment in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder for prevention and redressal of complaints of sexual harassment at workplace. Gender sensitization workshops have been conducted for all managers and employees to create the desired level of awareness and sensitivity of dealing with situations involving sexual harassment. Internal Complaint Committee members are also trained on latest statutes and practices. During the year under review, the Company has not received any complaints in this regard.

12. Credit Rating

During the year CARE Ratings has upgraded the long term and short-term ratings of the Company as under:

CARE Ratings has revised the ratings on the company’s long term and short-term bank facilities to CARE A/Stable and CARE A1 from CARE A- and CARE A2 respectively.

The upgrade reflects the improvement in the financial and operational performance of the Company.

13. Loans, Guarantees, Securities and Investments (LGSI)

Details of LGSI covered under Sec 186 of the Act are given in Annexure - IV forming part of this report.

14. Foreign Exchange - Earnings and Outgo.

15. Auditors

At the 74th Annual General Meeting (AGM), the Members appointed Price Waterhouse Chartered Accountants LLP, Chartered Accountants (ICAI Firm Registration No. 012754N/N500016) as Statutory Auditors to hold the office for the period of five years from the conclusion of 74th AGM till the conclusion of 79th AGM of the Company to be held in the year 2022 on such remuneration as may mutually agreed between the Board of Directors of the Company and the Auditors.

16. Auditors’ Report

The Auditors Report does not contain any qualifications, reservations or adverse remarks. The consolidated financial statements of the Company have been prepared in accordance with Accounting Standard 21 on Consolidated Financial Statements and Accounting Standard 23 on Accounting of Investments in Associates issued by the Council of The Institute of Chartered Accountants of India. The Notes to the Accounts referred to in the Auditors’ report are self-explanatory and therefore do not call for any further clarification under section 134(3)(f) of the Act.

17. Secretarial Audit Report

M/s. Bhandari & Associates, Practicing Company Secretaries, were appointed as Secretarial Auditors to conduct Secretarial Audit of records and documents of the Company for the year ended 31st March 2018. The Secretarial Audit Report confirms that the Company has generally complied with the provisions of the Act, Rules, Regulations, and Guidelines, etc. The Secretarial Audit Report is given in Annexure - V forming part of this report. There are no remarks, qualifications or reservations in the Secretarial Audit Report.

18. Conservation of Energy and Technology Absorption

The information on conservation of energy and technology absorption stipulated under Section 134 (3) (m) of the Act read with Rule 8 of The Companies (Accounts) Rules, 2014, is given in as Annexure - VI forming part of this report.

19. Related Party Transactions

All related party transactions entered during the year under review were on an arm’s length basis and were in the ordinary course of business. There were no other materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel and Body Corporate(s) which had a potential conflict with the interest of the Company at large. Accordingly, the disclosure of these Related Party Transactions as required under Section 134 (3) (h) of the Act in Form AOC 2 is not applicable for the year under review. The Directors draw attention of the Members to Note no. 38 to the Financial Statements (Standalone) which sets out related party disclosures.

In line with the requirements of the Act and the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Company has formulated a Policy on Related Party Transactions and the same is uploaded on the Company’s website: http://www.nelco.in/pdf/Policies/Related%20Party%20Transaction%20Policy.pdf

20. Deposits

The Company has not accepted any deposits from the public during the period under review.

21. Extract of Annual Return

Pursuant to Section 92 of the Act and Rule 12 of The Companies (Management and Administration) Rules, 2014, the extract of Annual Return in Form MGT-9, is given in Annexure-VII forming part of this report.

22. Directors’ Responsibility Statement

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost auditors, secretarial auditors and external consultants and the reviews performed by Management and the relevant Board Committees, including the Audit Committee, the Board believes the Company’s internal financial controls were adequate and effective during the period under review.

Accordingly, pursuant to Section 134(5) of the Companies Act 2013, the Board of Directors, to the best of their knowledge and ability, confirm that:

a) in the preparation of the annual accounts for the period ended 31st March 2018 the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) they have, in the selection of the accounting policies, consulted the Statutory Auditors and have applied them consistently and made judgments and estimates that are reasonable and prudent to give a true and fair view of the of the Company for the period ended 31st March 2018 and of the profit of the Company for that period;

c) they have 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 have prepared the accounts for the period under review on a going concern basis;

e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

23. Acknowledgement

On behalf of the Directors of the Company, I would like to place on record our deep appreciation to our Shareholders, Customers, Business Partners, Vendors, Bankers and Financial Institutions. The Directors are thankful to the Government of India and the various Ministries and Regulatory Authorities. We appreciate and value the contributions made by all our employees.

On behalf of the Board of Directors,

R.R. Bhinge

Chairman

Mumbai, 31st May, 2018.


Mar 31, 2016

To

The Members,

The directors have pleasure in presenting their Seventy Third Annual Report on the business and operations of the Company together with the Audited Statement of Accounts for the year ended 31st March 2016.

1. Financial Results (Rs. in lakhs)

Standalone

Consolidated

Sr. No.

Particulars

FY 14-16 18 months

FY 13-14 12 months

FY 14-16 18 months

FY 13-14 12 months

I

Continuing Operations

a

Net Sales / Income from Other Operations

13,370.32

9,172.45

20,043.98

12,326.73

b

Operating Expenditure

11,930.74

8718.28

17,788.67

11,210.34

c

Operating Profit

1,439.58

454.17

2,255.31

1,116.39

d

Add:- Other Income

482.49

320.67

297.44

158.39

e

Less:- Finance Cost

1142.66

619.36

1,293.51

682.23

f

Profit before Depreciation and Tax

779.41

155.48

1,259.24

592.55

g

Less :- Depreciation / Amortization/ Impairment

781.10

512.74

1,409.32

861.28

h

Profit before Tax

(169)

(357.26)

(150.08)

(268.73)

I

Exceptional items

-

1,240.90

-

1,240.90

j

Current / Deferred Tax Expenses

46.68

-

46.68

52.00

k

Net Profit / (Loss) after tax from Continuing operations

(48.37)

883.64

(196.76)

920.17

II

Discontinuing Operations

l

(Loss) from Discontinuing operations (before exceptional item and tax)

(625.63)

(755.02)

(625.63)

(755.02)

m

Add:- Exceptional Profit

162.00

-

162.00

-

n

Tax Expenses

-

-

-

-

o

(Loss) after Tax from Discontinuing operation

(463.63)

(755.02)

(463.63)

(755.02)

III

(Loss) / Profit after tax from total operations

(512.00)

128.62

(660.39)

165.15

p

Less :- Minority Interest

-

-

-

-

q

Add:- Share of profit of Associates

-

-

42.61

27.81

r

Net Profit after Tax, Minority interest and Share of Profit of Associates

(512.00)

128.62

(617.78)

192.96

As required under the Companies Act, 2013, the Company has extended its financial year by 6 months till 31st March, 2016. Accordingly, the financial year 2014-16 is of 18 months from 1st October, 2014 to 31st March, 2016.

2. Dividend

Due to loss, the Board of Directors has not recommended dividend for the year ended 31st March 2016.

3. Financial Performance and the state of the Company''s affairs

3.1 Standalone

On a Standalone basis, your Company achieved revenue of Rs 13,370.32 lakhs in FY 14-16 (18 months) from Continuing Operations as against Rs. 9,172.45 Lakhs in FY13-14 (12 Months). On an annualized basis revenue was lower by Rs 258.00 lakhs mainly due to reduced revenue from Automation and control segment by Rs 1,038.00 lakhs which was partly offset by increase in revenue from Network Management segment by Rs 780.00 lakhs.

Loss before Tax from continuing operation has reduced from Rs 357.26 lakhs in FY 13-14 (12 months) to Rs 1.69 lakhs in FY 14-16 (18 months).This was mainly due to increase in high margin service income of VSAT division.

The segment wise performance (Standalone) for the year was as follows :

Automation & Control earned total revenue of Rs 1,300 lakhs in FY 14-16 (18 months) [Rs 1,906 lakhs in previous year (12 months)] and incurred a segment loss of Rs. 593 lakhs in FY 14-16 (18 months) [loss of Rs. 740 lakhs in previous year(12 months)].

Network Systems earned a total revenue of Rs.12,024 lakhs in FY14-16(18 months) [Rs. 7,241 lakhs in previous year (12 months)] and reported a segment profit of Rs. 3,204 lakhs in FY 14-16 (18 months) [profit of Rs. 2,029 lakhs in previous year (12 months)]

Interest amounted to Rs.1,142 lakhs in FY 14-16 (18 months) [Rs. 619 lakhs in previous year (12 months)]. Other unallocable expenses (net of income) were Rs. 1,471 lakhs in FY 14-16 (18 months) as against un-allocable income (net of expenses) of Rs. 214 lakhs in the previous year (12 months).

3.2 Consolidated

On a consolidated basis, revenue from Continuing Operations stood at Rs 20,043.98 lakhs in FY 16 (18 months) as against Rs.12,326.73 Lakhs in FY14 (12 Months). On an annualized basis revenue of the Company increased by Rs 1,036 Lakhs mainly on account of increased in revenue from Network Management segment by Rs 2,074 Lakhs and revenue from Automation and Control segment reduced by Rs 1,038 Lakhs.

Loss before Tax from Continuing Operations reduced from Rs 268.73 Lakhs in FY 14 (12 months) to Rs 150.08 Lakhs in FY 16 (18 months).

There were no material changes and commitments affecting the financial position of the Company which occurred between the end of the period under review and the date of this Report.

3.3 Operations

Network System consisting of VSAT and SATCOM contributed to 93.49% of the consolidated continuing operations revenue during the 18 months period ended 31st March 2016 as against 84.50 % during 12 months period in FY 13-14.

Automation Control consisting of Integrated Security & surveillance Solutions (ISSS), currently being operated on a restricted mode contributed to 6.51% of the continued operations during this 18 months period ended 31st March 2016 as against 15.50% during FY 13-14 (12 months)

These are discussed in detail in the Management Discussion & analysis which forms a part of this report.

During the period under review, the Members, as a part of restructuring process, approved (subject to other requisite approvals) the transfer of following businesses as a “going concern” on a “slump sale” basis:

- Managed Services business (“MS Business”) which was forming part of Network System segment, to Secures Systems Pvt. Ltd. at a consideration of Rs. 210 lakhs with effect from 1st April, 2015. The transaction was concluded on 31st August, 2015.

- Unattended Ground Sensors business (“UGS Business”) which was forming part of Automation & Control segment, to The Tata Power Co. Ltd. (The Parent Company) at a consideration of Rs. 831 lakhs with effect from 1st October, 2014. The conclusion of the transaction is pending for approval (which has already been applied and pursued) of Ministry of Defense (the Customer).

4. Reserves

The Board of Directors has not proposed any amount for transfer to reserves for the period ended 31st March, 2016.

5. Subsidiary and Associate Company

As on 31st March 2016, the Company had one Wholly Owned Subsidiary viz. Tatanet Services Ltd. and one Associate Company viz. Nelito Systems Ltd. There has been no major change in the nature of business of these Companies. Also none of the then existing Subsidiary or Associate ceased to be Subsidiary/ Associate of the Company during the period under review.

During the period under review, the Company has infused Rs. 484 lakhs in its Wholly Owned Subsidiary by subscribing to the equity shares at par offered by it.

The Policy for determining material subsidiaries of the Company has been provided in the following link: http://www.nelco.in/_content/investorrelations/Policy_for_determining_Material_Subsidiaries.pdf

6. Directors and Key Managerial Personnel

In terms of Section 149 of the Companies Act, 2013 (“Act”) the Members, at the 72nd Annual General Meeting (AGM) held on 28th January 2015, appointed the following Independent Directors of the Company till 27th January, 2020:

- Mr. R.R.Bhinge

- Mr. P.K.Ghose

- Mr. R.Savoor

- Mr. K.Raghuraman

- Mr. K.Ramachandran

- Ms. Hema Hattangady

Due to pre-occupation and other commitments, Mr.P.K.Ghose and Mr. R. Savoor, Independent Directors and Mr. V.K.Deshpande and Mr. Sanjay Dube, Non-Independent Directors stepped down from the Directorship with effect from 18th March 2015. The Board places on record its sincere appreciation for their valuable guidance and contribution during their tenure as Directors of the Company.

Pursuant to the “Governance Guidelines for Tata Companies on Board Effectiveness” adopted by the Board of Directors of the Company at its meeting held on 18th March, 2015, Mr. R.R.Bhinge did not fall under the category of Independent Director. Hence, effective from 18th March, 2015, his category/status of Directorship has been changed from Independent Director to Non-Independent Director liable to retire by rotation. Hence, in accordance with the requirements of the Act and the Articles of Association of the Company, Mr. R.R. Bhinge retires by rotation at the ensuing AGM and is eligible for re-appointment. Additional information and brief profile as stipulated under SEBI (Listing Obligations & Disclosure Requirements), Regulations, 2015 with respect to Director seeking re-appointment is annexed to the Notice of AGM.

In terms of Section 203 of the Act, the Board has designated the following persons as Key Managerial Personnel of your Company:

- Mr. P.J. Nath, Executive Director & CEO

- Mr. Uday Banerjee, Chief Financial Officer

- Mr. Girish Kirkinde, Company Secretary

During the period under review, twelve Board Meetings were held. For further details, please refer Report on Corporate Governance.

The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the Act and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

Governance Guidelines:

The Company has adopted Governance Guidelines on Board Effectiveness. The said Guidelines covers aspects related to composition and role of the Board, Chairman and Directors, Board diversity, definition of independence, Director''s term, retirement age and Committees of the Board. It also includes aspects relating to nomination, appointment, induction and development of Directors, Director Remuneration, subsidiary oversight, Code of Conduct, Board Effectiveness Review and mandates of Board Committees.

7. Annual Evaluation of Board Performance and Performance of its Committees and Individual Directors.

As required under the Act and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Board has carried out an annual evaluation of its own performance, performance of the Directors individually as well as the evaluation of the working of its Committees.

The following process was adopted for Board Evaluation:

Feedback was sought from each Director about their views on the performance of the Board covering various criteria such as degree of fulfillment of key responsibilities, Board structure and composition, establishment and delineation of responsibilities to various Committees, effectiveness of Board processes, information and functioning, Board culture and dynamics, quality of relationship between the Board and the Management and efficacy of communication with external stakeholders. Feedback was also taken from every Director on his assessment of the performance of each of the other Directors.

The Nomination and Remuneration Committee (NRC) then discussed the above feedback received from all the Directors.

Based on the inputs received, the Chairman of the NRC also made a presentation to the Independent Directors at their meeting, summarizing the inputs received from the Directors as regards Board performance as a whole, and of the Chairman. The performance of the non-independent non-executive Directors and Board Chairman was also reviewed by them.

Post the meeting of the Independent Directors, their collective feedback on the performance of the Board (as a whole) was discussed by the Chairman of the NRC with the Chairman of the Board. It was also presented to the Board and a plan for improvements was agreed upon.

Every statutorily mandated committee of the Board conducted a self-assessment of its performance and these assessments were presented to the Board for consideration. Areas on which the Committees of the Board were assessed included degree of fulfillment of key responsibilities, adequacy of Committee composition and effectiveness of meetings.

Feedback was provided to the Directors, as appropriate. Significant highlights, learning and action points arising out of the evaluation were presented to the Board.

7.1 Committees of the Board

The Committees of the Board focus on certain specific areas and make informed decisions in line with the delegated authority. The following substantive Committees constituted by the Board function according to their respective roles and defined scope:

- Audit Committee of Directors

- Nominations, HR and Remuneration Committee (NRC)

- Stakeholders Relationship Committee

- Executive Committee of the Board

Details of composition, terms of reference and number of meetings held for respective Committees are given in the Report on Corporate Governance which forms part of the Annual Report.

The details of the familiarization programs for Independent Directors are disclosed on the Company''s website and the web link for the same is: http://www.nelco.in/_content/investor-relations/Familiarisation_Programme.pdf

The Board has laid down separate Codes of Conduct for Non-Executive Directors and Senior Management personnel of the Company and the same are posted on the Company''s website. All Board Members and Senior Management personnel have affirmed compliance with the Code of Conduct. The Executive Director & CEO has also confirmed and certified the same. The certification is enclosed at the end of the Report on Corporate Governance.

7.2 Remuneration Policy for the Directors, Key Managerial Personnel and other Employees.

In terms of Section 178(3) of the Act and Part D of Schedule II of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the NRC is responsible for formulating the criteria for determining qualification, positive attributes and independence of a Director. The NRC is also responsible for recommending to the Board a policy relating to the remuneration of the Directors, Key Managerial Personnel and other employees. In line with this requirement, the Board has adopted the Policy on Board Diversity, which is reproduced in Annexure-I and Remuneration Policy for Directors, Key Managerial Personnel and other employees of the Company, which is reproduced in Annexure-II forming part of this report.

Except the Performance Linked Payment (PLP) which is a part of his Cost to the Company (CTC), the Executive Director & CEO has not received any commission from the Company and also not received any commission / remuneration from its Holding or Subsidiary Company.

7.3 Particulars of Employees and Remuneration

The information required under Section 197 (12) of the Act read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in Annexure - III (A) forming part of this Report.

The information required under Rule 5 (2) and (3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in the Annexure - III (B) forming part of this Report. In terms of the first proviso to Section 136 of the Act, the Report and Accounts are being sent to the members excluding the aforesaid Annexure III (B). Any member interested in obtaining the same may write to the Company Secretary at the Registered Office of the Company. None of the employees listed in the said Annexure III (B) is related to any Director of the Company.

8. Significant and material Orders passed by the Regulators or Courts or Tribunal

There were no significant and material orders passed by the Regulators / Courts or Tribunal which would impact the going concern status of the Company and its future operations. Further, no penalties have been levied by Regulators during the period under review.

Sales Tax matters of Tatanet Services Ltd. (TNSL) Wholly Owned Subsidiary.

Maharashtra Sales Tax Department has issued orders against TNSL demanding payment of MVAT on the entire satellite communication services provided by TNSL on the ground that “The facility to use the transponders is property, is commercial in nature and goods and therefore, transaction of lease of facility to use the transponders is a deemed sale and accordingly MVAT is applicable”. The orders issued for financial year 2006-07 to 2010-11 and aggregate amount under dispute is Rs 38.36 crs. The Company has filed writ petition in Bombay High Court and outcome of judgment is being awaited.

As per legal opinion sought by Company, it has very strong case. Since TNSL provide only services to its customers and pays service tax, there are no goods or right to use of goods are involved in it.

Income Tax matters of Nelco Ltd:-

Income Tax Department has reduced certain liabilities of Rs.1,893.00 lakhs while computing long term Capital Gain which was not related to business sold under slump sale for Assessment Year 2011-12 due to which a Tax demand of Rs 631 lakhs has been raised on the Company. As per legal opinion sought by Company, it has a very strong case. Matter presently lying with Commission of Appeal.

8.1 Corporate Governance

Pursuant to SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 and relevant provisions of the Act, a Management Discussion and Analysis Statement, Report on Corporate Governance and Auditors'' Certificate, are included in the Annual Report.

8.2 Vigil Mechanism

The Company believes in the conduct of the affairs of its constituents in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. In line with the Tata Code of Conduct (TCOC), any actual or potential violation, howsoever insignificant or perceived as such, would be a matter of serious concern for the Company. The role of the employees in pointing out such violations of the TCOC cannot be undermined.

Pursuant to Section 177(9) of the Act, a vigil mechanism has been established for Directors and employees to report to the management the instances of unethical behavior, actual or suspected, fraud or violation of the Company''s code of conduct or ethics policy. The Vigil Mechanism provides a mechanism for employees of the Company to approach the Chief Ethics Counselor (CEC)/ Chairman of the Audit Committee of the Company.

9. Risks and Concerns

The Company is faced with risks of different types, all of which need different approaches for mitigation. Details of various risks faced by the Company are provided in Management Discussion & Analysis.

9.1 Risk Management Framework and Internal Financial Controls

Risk Management framework: The Company and its Subsidiary have Risk Management framework to inform the Audit Committee and Board members about risk assessment and minimization procedures and periodical review to ensure that Executive Management controls risks by means of properly designed framework.

The Company has also established a risk management policy based on which risks are identified and assessed across its businesses. The Risk Management Committee which comprises of the CEO, CFO and key business and operations heads, ensures that existing and future risk exposures of the Company are identified, assessed, quantified, appropriately mitigated, minimized and managed. The Company''s framework of risk management process provides clear basis for informed decision making at all levels of the organization on an ongoing basis, having duly evaluated likely risks and their mitigation plans being controllable and within risk appetite. There are no elements of risk, which in the opinion of the Board may threaten the existence of the Company.

Internal Financial Control and Systems: The Company has an internal control system, commensurate with size, scale and complexity of its operations. Testing of such control systems form a part of internal audit schedule. The Company has appointed independent Internal Auditors who oversee governance, risks management and internal controls. The scope and authority of internal audit is defined in Audit Committee Charter adopted by the Company. Internal control has been discussed in detail in Management Discussion & Analysis in this report.

10. Sustainability

10.1 Corporate Social responsibility

As per Section 135 of the Act, every Company having a net worth of Rs. 500 crore or more, or turnover of Rs.1,000 crore or more, or net profit of Rs. 5 crore or more during any financial year shall be required to constitute Corporate Social Responsibility Committee (CSRC). As your Company presently does not fall under any of the criterion mentioned above, the CSRC has not been constituted.

10.2 Safety, Health and Environment:

The Company accords high priority to health, safety, and environment treating these as integral part of all its activities. The operations of the Company are not of a hazardous nature. However, the Company emphasizes on maintaining a healthy and safe environment in and around its facilities as well as contract sites where projects are under execution. To ensure success of safety initiatives, the Company involves the line management along with contract workforce in all initiatives rolled out from time to time. Safety Awareness is inculcated through regular Safety Awareness Programs, basic fire safety training, mock drills, regular Safety Committee meetings and capturing employees'' voices through safety observation and near miss reporting. The employees working at project sites are given requisite training for ensuring safety during work. Periodic Safety Audit is carried out and action taken to eliminate unsafe conditions.

11. Human Resources

Some of the major human resource initiatives undertaken by the Company during the period under review to supplement efforts towards organizational growth include:

- Manpower: As on March 31st, 2016, the Company had employee strength of 160. During the period under review, 21 employees were recruited and 42 employees were separated (including those transferred as part of divestment of Managed Services business). None of the employees related to the business were retrenched due to the divestment of business but were transferred with full benefit of service continuity and service conditions not less favorable than the existing employment conditions.

- Employee Engagement: Company''s employee engagement platforms are inclusive and empowering. It connects employees with leaders, their peers and Human Resource function. Forums such as Open house, Employee Connect meetings, Skip level meetings, Manager connect meetings, weekly review meetings like AHM (All Hands Meet) provide interactive platforms for sharing information and feedback and also conferring rewards and recognitions. Various initiatives in the field of Employee Recreation have also been instrumental in taking engagement levels to the next level. The incessant efforts towards empowering people has resulted in overall participation being 96% and overall satisfaction score being 87% for 2016 as compared to 48% last year in the Employee engagement survey conducted by Aon.

- Capability Development: In order to build organizational capability that will enable the Company to sustain competitiveness in the market, a comprehensive exercise was undertaken to map the attributes required to develop Competency Framework for key functions. The training programs for the learning growth of employees have been developed based on the set of these identified competencies.

- Talent Management: As part of efforts for capability building of employees at all levels a personalized coaching on Interpersonal skills for 7 Senior management employees was conducted. Similarly, 8 Hi-potential employees have undergone Online Development Centre (ODC) which was conducted by Tata Power in collaboration with their talent partners CEB-SHL

- Industrial Relations: In the Industrial Relations front, the Company maintained cordial relations with its employees during the period.

- Policy for Prevention, Prohibition and Redressal of Sexual Harassment at work place: The Company has in place a Policy for Prevention, Prohibition and Redressal of Sexual Harassment at Work Place. Appropriate reporting mechanisms are in place for ensuring protection against Sexual Harassment and the right to work with dignity. During the year under review, the Company has not received any complaints in this regard.

12. Credit Rating

During the year, rating agency CRISIL has downgraded its rating on Company''s bank facilities and debt programme to CRISIL BBB /Stable/CRISIL A2 form CRISIL A-/negative /CRISILA2 .

Revised rating done by CRISIL based on their criteria on notching up rating for parent support. The downgrade reflects reassessment of the strategic importance of Nelco to the parent, The Tata Power Company Ltd. (TPCL), while continuing to factor the support that Nelco receives from TPCL and other Tata group companies.

13. Loans, Guarantees, Securities and Investments (LGSI)

Details of LGSI covered under Sec 186 of the Act are given in Annexure - IV forming part of this report.

14. Foreign Exchange - Earnings and Outgo Rs. In lakhs

Particulars - Standalone

Period ended 31st March 2016 (18 Months)

Year ended 30th September 2014 (12 Months)

Foreign Exchange Earnings

174.40

190.36

Foreign Exchange Outflow

3,178.44

1,903.12

15. Auditors

M/s. Deloitte Haskins & Sells LLP (DHS LLP), who are the statutory auditors of your Company, hold office until the conclusion of the Seventy Fifth AGM to be held in the year 2018, subject to ratification of their appointment at every AGM. The Members, year on year, will be requested, to ratify their appointment as Auditors and to authorize the Board of Directors to fix their remuneration. In this connection, the attention of the Members is invited to Item No.4 of the Notice.

16. Auditors'' Report

The consolidated financial statements of the Company have been prepared in accordance with Accounting Standard 21 on Consolidated Financial Statements and Accounting Standard 23 on Accounting of Investments in Associates issued by the Council of The Institute of Chartered Accountants of India. The Notes to the Accounts referred to in the Auditors'' report are self-explanatory and therefore do not call for any further clarification under section 134(3)(f) of the Act.

17. Cost Auditors and Cost Audit Report

M/s. PD. Dani & Co., Cost Accountants was appointed Cost Auditors of your Company for the period ended 31st March, 2016. In accordance with the requirement of the Central Government and pursuant to Section 148 of the Act, your Company carries out every year, an audit of cost accounts relating to Telecommunication (ISP) activities and Electronics Products. The Cost Audit Report and the Compliance Report of your Company for the Financial Year ended 30th September 2014, which was due for filing by 31st March 2015, was filed on 25th March 2015 with the Ministry of Corporate Affairs through Extensive Business Reporting Language (XBRL) by M/s PD. Dani & Co., Cost Accountants.

18. Secretarial Audit Report

M/s. Bhandari & Associates, Practicing Company Secretaries, were appointed as Secretarial Auditors to conduct Secretarial Audit of records and documents of the Company for the period ended 31st March, 2016. The Secretarial Audit Report confirms that the Company has generally complied with the provisions of the Act, Rules, Regulations, and Guidelines, etc. The Secretarial Audit Report is given in Annexure -V forming part of this report. There are no remarks, qualifications or reservations in the Secretarial Audit Report.

19. Conservation of Energy and Technology Absorption

The information on conservation of energy and technology absorption stipulated under Section 134 (3) (m) of the Act read with Rule 8 of The Companies (Accounts) Rules, 2014, is attached as Annexure - VI forming part of this report.

20. Related Party Transactions

The transaction of sale and transfer of Company''s Defense business consisting mainly of the UGSs to the Parent/Promoter Company, The Tata Power Co. Ltd. (being a related party) was entered on an arm''s length basis, based on the valuation arrived at by an independent value. However, since this transaction could be construed as being outside the ordinary course of business, the approval of the Members of the Company under section 188 of the Act was sought by way of a Special Resolution. The details of the said transaction are given in Form AOC-2 (Annexure - VII forming part of this report) as required under Section 134 (3)(h) of the Act.

All related party transactions entered into during the period under review were on an arm''s length basis and were in the ordinary course of business. There were no other materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel and Body Corporate(s) which had a potential conflict with the interest of the Company at large. Accordingly, the disclosure of these Related Party Transactions as required under Section 134 (3)

(h) of the Act in Form AOC 2 is not applicable for the period under review. The Directors draw attention of the Members to Note no. 32 to the Financial Statements which sets out related party disclosures.

In line with the requirements of the Act and the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Company has formulated a Policy on Related Party Transactions and the same is uploaded on the Company''s website: http://www.nelco.in/_content/investor-relations/Related_Party_Transaction_Policy.pdf.

21. Deposits

The Company has not accepted any deposits from the public during the period under review.

22. Extract of Annual Return

Pursuant to Section 92 of the Act and Rule 12 of The Companies (Management and Administration) Rules, 2014, the extract of Annual Return in Form MGT-9, is provided in Annexure-VIII forming part of this report.

23. Directors'' Responsibility Statement

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost auditors, secretarial auditors and external consultants and the reviews performed by Management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company''s internal financial controls were adequate and effective during the period under review.

Accordingly, pursuant to Section 134(5) of the Companies Act 2013, the Board of Directors, to the best of their knowledge and ability, confirm that:

a) in the preparation of the annual accounts for the period ended 31st March, 2016, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) they have, in the selection of the accounting policies, consulted the Statutory Auditors and have 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 for the period ended 31st March, 2016 and of the loss of the Company for that period;

c) they have 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 have prepared the accounts for the period under review on a going concern basis;

e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

24. Acknowledgement

On behalf of the Directors of the Company, I would like to place on record our deep appreciation to our Shareholders, Customers, Business Partners, Vendors, Bankers and Financial Institutions. The Directors are thankful to the Government of India and the various Ministries and Regulatory Authorities. We appreciate and value the contributions made by all our employees.

On behalf of the Board of Directors,

R.R.Bhinge

Chairman

Mumbai, 31st May, 2016


Sep 30, 2014

Dear Members,

The Directors present their Seventy second Annual Report together with the Audited Statement of Accounts for the year ended 30th September, 2014.

1. Financial Results

The summarized financial results (Standalone) are indicated below:-

(Rupees in Lakhs)

Particulars For the year ended For the year ended 30.09.2014 (Rs.) 30.09.2013 (Rs.)

Net Sales / Income from Operations 10,276.45 10,971.86

Operating Expenditure 10,251.75 11,215.70

Operating Profit /(Loss) 24.70 (243.84)

Add : Other Income 320.67 131.33 Less : Interest 886.91 954.91

Profit / (Loss) Before Tax & Depreciation and Exceptional items (541.54) (1,067.42)

Less : Depreciation 570.74 569.37

Profit / (Loss) Before Tax and Exceptional items (1,112.28) (1,636.79)

Exceptional Items

Add:- Decreetal dues received including interest & cost ** 1,240.90 -

Profit / (Loss) Before Tax 128.62 (1,636.79)

Less : Provision for Tax (including provision for Deferred Tax and Fringe Benefit Tax) - -

Net Profit / (Loss) After Tax 128.62 (1,636.79)

Balance Brought Forward (1,623.77) 13.02

Balance available for appropriation (1,495.15) (1,623.77)

Appropriated as under :

Proposed Dividend - -

Tax on Dividend - -

Transfer to General Reserve - -

Balance to be Carried Forward (1,495.15) (1,623.77)

** Refer to note no. 27 on notes to accounts.

Due to inadequacy of profits, the Board of Directors has not recommended any dividend for the year ended 30th September, 2014.

2. Financial Highlights

During the period under review, the total income was Rs. 10,276.46 lakhs as against Rs. 10,971.86 lakhs in the previous year. The Company reported a profit after tax of Rs.128.62 lakhs as against a loss after tax of Rs. 1636.79 lakhs in the previous year.

The segment wise performance (Standalone) for the year was as follows :

Automation & Control earned total revenue of Rs. 2,430 lakhs (Rs 3,356 lakhs in previous year) and incurred a segment loss of Rs. 746 lakhs (loss of Rs. 1,164 lakhs in previous year). In order to reduce further losses, the Board had decided to explore various options of restructuring including restricting the operations of this Business Segment which comprises of Integrated Security & Surveillance Solutions (ISSS) and Unattended Ground Sensors (UGS) solutions for Defense.

Network Systems earned a total revenue of Rs. 7,821 lakhs (Rs.7,599 lakhs in previous year) and reported a segment profit of Rs. 1,547 lakhs (profit of Rs. 1,520 lakhs in previous year)

Interest amounted to Rs. 824 lakhs (Rs. 887 lakhs in previous year). Other un-allocable income (net of expenses) is Rs. 151 lakhs as against un-allocable expenses (net of income) of Rs. 1,106 lakhs in the previous year.

The Notes forming part of the Accounts referred to in Auditors'' Report of the Company are self-explanatory and, therefore, do not call for any further explanation under Section 217(3) of the Companies Act, 1956.

3. Subsidiary Company

Tatanet Services Ltd. (TNSL) is a Wholly Owned Subsidiary of the Company. It holds the requisite licenses for providing the Shared Hub VSAT services. For the financial year ended 31st March, 2014, TNSL has posted revenue from operations of Rs.4,626.39 lakhs as against Rs. 4,039.00 lakhs in the previous year and profit after Tax of Rs.83.45 lakhs as against loss after Tax of Rs.116.29 lakhs in the previous year.

Vide General Circular No.: 2/201 1 dated 8th February, 2011, the Ministry of Corporate Affairs, Govt. of India has granted a general exemption to companies from attaching the Balance Sheet, the Statement of Profit and Loss and other documents referred to in Section 212 (1) of the Companies Act, 1956 in respect of its subsidiary companies, subject to fulfillment of the conditions mentioned therein.

Accordingly, the said documents are not being attached with the Balance Sheet of the Company. A gist of the financial performance of Tatanet Services Ltd. ("TNSL"), the subsidiary company is contained in the report. The Annual Accounts of TNSL are open for inspection by any Member / Investor and the Company will make available these documents / details upon request by any Member of the Company or to any Investor of TNSL who may be interested in obtaining the same. Further, the Annual Accounts of TNSL will be kept open for inspection by any investor at the Company''s Registered Office and that of the TNSL and would be posted on the website of the Company www.nelco.in.

4. Human Resource Management

The company believes that employees are its most valuable resource and has implemented effective Human Resource management practices, which has helped in making the Organization robust, progressive and dynamic. The company as a step towards nurturing talent and building competencies, has introduced a new E-learning initiative, "GyanJyoti", in collaboration with Tata Management Training Centre (TMTC) and Harvard Business Publishing (HBP) for employees. This self paced E-learning system covers 44 modules in General Management in the areas of managing Self, Others and Business. An Employee Engagement & Satisfaction survey was conducted by AON Hewitt. Engagement Action Planning (EAP) workshops were conducted across the company to communicate the survey findings and facilitate formulation of action plans for improving engagement. The Company launched "HR Connect" to provide a formal structured process for better engagement. The Company emphasizes Ethics, Safety and Innovation as part of its work culture. Its entry, "Unmanned Aviation Pilot weather briefing system", last year had been selected for the Final National round of Tata Innovista - 2014 which is a popular, annual, Group wide program to showcase and recognise the best innovations. The Company maintained cordial industrial relations during the period under review.

5. Internal Controls and Systems

The Company has an adequate system of internal controls to ensure that all assets are safeguarded and accounted for and business transactions are authorized and recorded. An external established audit firm carries out internal audit. This audit is based on an Annual Audit Plan and includes regular reviews by the Audit Committee of Directors to ensure adequacy of controls and adherence to laid down procedures and systems. The Board of Directors also carries out Company Wide Risk Assessment and Management on a systematic and regular basis.

6. Quality Systems

The Company''s manufacturing facility has been approved & certified by Directorate General of Quality Assurance (DGQA), an establishment under Ministry of Defence, Govt. of India through their regular Audits verification System. The Company''s in-house Development Department has been recognized by the Department of Science and Industrial Research (DSIR), an establishment under Ministry of Science & Technology Govt. of India. The company has been certified for ISO 20000 & ISO 27001 and its wholly owned subsidiary - Tatanet Services Ltd., with TL 9000.

7. Public Fixed Deposits

The Company has neither accepted nor renewed any public fixed deposits during the period under review. However, there were deposits amounting to Rs. 0.05 lakhs as on 30th September, 2014 which remain outstanding as some of the deposit holders have not claimed the repayment. In accordance with the provisions of Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2011, unclaimed deposits with interest aggregating to Rs. 0.48 lakhs were transferred during the financial year 2011-12 to the Investor Education and Protection Fund.

8. Safety, Health and Environment

The Company accords high priority to health, safety, and environment, treating these as integral part of all its activities. The operations of the Company are not of a hazardous nature. However, the Company emphasizes on maintaining a healthy and safe environment in and around its facilities as well as contract sites where projects are under execution. To ensure success of the safety initiatives, the Company involves the line management along with contract workforce in all initiatives rolled out from time to time. Safety Awareness is inculcated through regular Safety Awareness Programs, basic fire safety training, mock drills, regular Safety Committee meetings and capturing employees'' voices through safety observation and near miss reporting. The employees working at project sites are given requisite training for ensuring safety during work. Periodic Safety Audit is carried out and action taken to eliminate unsafe conditions.

9. Disclosure of Particulars

Particulars required by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in the prescribed format as Annexure "A" to the Directors'' Report.

Particulars of Employees: In terms of the provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, the names and other particulars of the employees are set out in the Annexure "B" to the Directors'' Report. However, having regard to the provisions of Section 219 (1 )(b)(iv) of the Companies Act, 1956, the Annual Report is being sent to all Members of the Company excluding the aforesaid information. Any Member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

10. Directors

Ms. Hema Hattangady was appointed as an Additional Director with effect from 1st October, 2014 in accordance with Article 125 of the Articles of Association of the Company and Section 161 of the Companies Act, 2013 (the Act). Ms. Hattangady holds office only upto the date of the forthcoming AGM and a Notice under Section 160(1) of the Act has been received from a Member signifying his intention to propose Ms. Hattangady''s appointment as a Director.

The Company has, pursuant to the provisions of Clause 49 of the Listing Agreements entered into with Stock Exchanges, appointed Mr. R. R. Bhinge, Mr. P K. Ghose, Mr. R. Savoor, Mr. K. Raghuraman, Mr. K. Ramachandran and Ms. Hema Hattangady as Independent Directors of the Company. The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 and under Clause 49. In accordance with the provisions of Section 149(4) and proviso to Section 152(5) of the Companies Act, 2013, these Directors are being appointed as Independent Directors to hold office as per their tenure of appointment mentioned in the Notice of the forthcoming AGM of the Company.

In accordance with the requirements of the Act and the Articles of Association of the Company, Mr. S.Ramakrishnan retires by rotation and is eligible for re-appointment.

11. Auditors

Messrs. Deloitte Haskins & Sells LLP (DHS), who are the statutory auditors of your Company, hold office until the conclusion of the forthcoming seventy second Annual General Meeting (AGM). It is proposed to re-appoint DHS as statutory auditors of the Company from the conclusion of the seventy second AGM till the conclusion of the seventy fifth AGM to be held in the year 2018, subject to ratification of their appointment at every AGM. DHS has, under Section 141 of the Act, furnished a certificate of its eligibility for re-appointment. The Members year on year will be requested, to ratify their appointment as Auditors and to authorize the Board of Directors to fix their remuneration. In this connection, the attention of the Members is invited to Item No.3 of the Notice.

M/s P D. Dani & Co., Cost Accountant, was appointed Cost Auditors of your Company for FY14.

In accordance with the requirement of the Central Government and pursuant to Section 233B of the Companies Act, 1956, your Company carries out an audit of cost accounts relating to Telecommunication (ISP) activities and Electronic Products. The Cost Audit Report and the Compliance Report of your Company for the Financial Year ended 30th September, 2013 by M/s P D. Dani & Co, has been filed with the Ministry of Corporate Affairs within the prescribed time.

12. Corporate Governance

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, a Management Discussion and Analysis Statement, Report on Corporate Governance and Auditors'' Certificate, are included in the Annual Report.

13. Directors'' Responsibility Statement

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors, based on the representations received from the operating management, confirm that:

1. In the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures therefrom;

2. They have, in the selection of the accounting policies, consulted the Statutory Auditors and have 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 profit of the Company for that period;

3. They have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. They have prepared the annual accounts on a going concern basis.

14. Acknowledgements

On behalf of the Directors of the Company, I would like to place on record our deep appreciation to our Shareholders, Customers, Business Partners, Vendors, Bankers and Financial Institutions. The Directors are thankful to the Government of India and the various Ministries and Regulatory authorities. We also appreciate and value the contributions made by all our employees.

On behalf of the Board of Directors

R.R. Bhinge Chairman

Mumbai, 27th November, 2014


Sep 30, 2010

The Directors present their Sixty Eighth Annual Report together with the Audited Statement of Accounts for the period ended 30th September, 2010.

1. FINANCIAL RESULTS

The summarized financial results are indicated below:-

(Rupees in 000)

For the For the

12 Months 18 Months

Period Ended Period Ended

30.09.2010 30.09.2009

(Rs.) (Rs.)

Net Sales / Income from Operations 1,394,554 3,404,475

Operating Expenditure 1,492,660 3,168,805

Operating Profit /(Loss) (98,106) 235,670

Add : Other Income 33,678 57,979

Less: Interest 127,256 182,528

Profit/(Loss) Before Tax and Depreciation and Exceptional Items (191,684) 111,121

Less: Depreciation 43,696 83,345

Profit/(Loss) Before Tax and Exceptional Items (235,380) 27,776

Exceptional Items

Less: Deferred Revenue Expenditure (Voluntary Retirement Scheme) (10,575) 31,722

Add : Profit on sale of Long term Investments (Associate) - 135,375

Add:- Profit on sale of Business 530,247 -

Profit Before Tax 284,292 131,429

Less : Provision for Tax (including provision for Deferred Tax and

Fringe Benefit Tax 70,270 98,630

Net Profit After Tax 214,022 32,799

Balance Brought Forward 33,216 16,434

Balance available for ]appropriation 247,238 49,233

Appropriated as under:

Proposed Dividend 45,635 13,690

Tax on Dividend 7,580 2,327

Transfer to General Reserve 25,000 -

Balance to be Carried Forward 169,023 33,216

2. DIVIDEND

The Directors of your Company are pleased to recommend for the approval of the shareholders a dividend of 20%, including 10% as special dividend (Rs.2/- per share including Re. 1/- as special dividend) (Previous year 6%).

3. FINANCIAL HIGHLIGHTS

The period under review is for 12 months as compared to the previous years figures which were for 18 months. During the period under review, the total income was Rs. 1,394,554(000) as against Rs. 3,404,475(000) in previous year. The Company reported Profit before tax of Rs. 2,84,292(000) as against Rs.131,429(000) for the previous year. The Profit after tax was Rs. 214,022(000) as against Rs. 32,799(000) in the previous year.

4. SALE OF BUSINESSES

Your Company has constantly faced the challenge of achieving growth in terms of revenue and profitability due to diverse portfolio, limited offerings and lack of critical mass. Despite having core competencies, execution of prestigious projects and references built over the years by Traction Electronics, Industrial Drives, and Supervisory Control and Data Acquisition (SCADA) consisting of Industrial Supervisory Control Data Acquisition System (I-SCADA) and Power Sector Supervisory Control and Data Acquisition System (PS - SCADA) businesses ("Businesses"), these businesses were facing major challenges in achieving sustained viability in the future. The Board of Directors of your Company at its meeting held on 29th April, 2010, approved the transfer of these Businesses as a "going concern" on a slump sale basis to Crompton Greaves Limited ("CGL") for a total consideration not exceeding Rs. 92.00 crores, subject to necessary statutory consents and approval by the Members.

On 14th June, 2010, the Members approved through postal ballot, the sale of these Businesses to CGL by passing an ordinary resolution pursuant to sections 293(1 )(a) and 192A of the Companies Act, 1956, read with the Companies (Passing of Resolution by Postal Ballot), Rules, 2001 .The votes cast assenting to the Ordinary Resolution were 1,16,19,913 shares (99.96%) of the total valid votes polled. On 28th July, 2010 i.e. the Closing Date, the Businesses were transferred as a going concern to CGL on slump sale basis for a consideration of Rs. 81 crores. The additional Rs. 11 crores has not been received as the financial parameters to be met by 30* September, 2010 were not achieved.

While your Company transferred the Traction Electronics, Industrial Drives and the I - SCADA businesses to CGL on 28th July 2010, the PS - SCADA business shall be transferred at a later date after obtaining the requisite clearances from relevant Government / Public Sector Authorities. Pending this transfer, the Company received the entire amount of consideration i.e. Rs. 81 crores.

Following the sale of these businesses, the Company intends to focus on building its position in Strategic Electronics, Network Systems (Tatanet) and pursue further synergistic opportunities in related areas.

5. SUBSIDIARY COMPANY

The financial statement and reports of the subsidiary company, Tatanet Services Limited (TNSL) for the financial year 2009-10 are attached. The revenue of TNSL for the year ended 31st March, 2010 was Rs. 289,975(000) [Rs. 252,368(000) for the year ended 31s* March, 2009.

6. HUMAN RESOURCE MANAGEMENT

There is consistent focus on development of Human Resources (HR). HR plans have been defined with appropriate measurement indicators keeping in mind both long term goals and short term requirements. Employeesvoices are captured through Open Houses, the forum through which employees are encouraged to voice their concerns, suggest innovative ideas and also seek answers from the top management on issues of common interest. The Company constantly reviews facilities and benefits to enhance overall employee well being. Employee Satisfaction / Engagement Surveys are carried out through external agency to formally assess the voice of employees. Action plans have been prepared and are being implemented to increase employee engagement.

Since the Company is in the high tech and high visibility areas of telecommunication (Tatanet Division) and Electronic Security and Surveillance (Strategic Electronics Division), maintaining the talent pool and competence building for the core areas of strength and the challenge of attracting and retaining talent continues. The Company has initiated measures like employee referral scheme, competency mapping, providing growth opportunities to existing employees and strengthening the Performance Management System (PMS) to include assessment on Tata Leadership Practices, training need assessment, identification of high potential employees and development plan for employees. Recruitment cycle time has been reduced and the attrition rates have been kept at a manageable level. The PMS recognizes individual and segment wise contribution through performance linked pay, thereby motivating employees ownership and responsibility. RACE (Reward and Recognition for Achievement and Contribution towards Excellence), a comprehensive reward and recognition scheme, has been put in place for motivation of employees for excellence in performance. In Tatanet Division, UNWIND, a monthly informal gathering on the last Friday of each month, has been successfully serving as a forum to foster teamwork in an informal manner.

The Company maintained cordial industrial relations during the period under review. The total manpower employed during the period was 336, after the transfer of the employees of the Businesses hived off to CGL.

7. INTERNAL CONTROLS AND SYSTEMS

The Company has an adequate system of internal controls to ensure that all assets are safeguarded and accounted for and business transactions are authorised and recorded. An external established audit firm carries out internal audit. This audit is based on an Annual Audit Plan and includes regular reviews by the Audit Committee of Directors to ensure adequacy of controls and adherence to laid down procedures and systems. The Board of Directors also carries out Company Wide Risk Assessment and Management on a systematic and regular basis.

8. QUALITY SYSTEMS AND TATA BUSINESS EXCELLENCE MODEL (TBEM)

The Company has focused on continuous improvement through internationally recognized Quality Management Systems viz. TL 9000 and ISO 9001 for Tatanet and ISG respectively. Tatanet has already got certified in ISO 20000 (Information Technology Management System) and ISO 27001 (Information Security Management System). This certification for Tatanet has been a key step towards success in its Managed Services revenue stream. During the period under review,Tatanet has participated as a Strategic Business Unit in TBEM external assessment by Tata Quality Management Services (TQMS). Tatanet implemented Balanced Score Card (BSC), Strategy Deployment Matrix (SDM), Quality Function Deployment (QFD), Process Management and improvement, etc. After the TBEM external assessment,Tatanet has scored 457 points and has been awarded the Serious Adoption Award in TBEM. ISG has been gearing up for revised ISO 9000:2008 certification from the current ISO 9000:2000 certification by Standardization, Testing and Quality Certification (STQC) audit.

9. FIXED DEPOSITS

The Company has neither accepted nor renewed any fixed deposits during the period under review. However, there were outstanding unclaimed deposits amounting to Rs.154,000/-as on 30th September, 2010 which remain outstanding as some of the deposit holders have not claimed the repayment despite follow up by the Company.

In accordance with the provisions of Investor Education Protection Fund (Awareness and Protection of Investors) Rules, 2001, an amount of unclaimed deposits with interest aggregating to Rs. 10,579/- has been transferred during the financial year 2009-10 to the Investor Education and Protection Fund.

10. SAFETY, HEALTH AND ENVIRONMENT

The Company accords high priority to health, safety, and environment. The operations of the Company are not of a hazardous nature. However, the Company emphasizes on maintaining a healthy and safe environment in and around its facilities as well as contract sites where ongoing projects are under execution. Safety Awareness is inculcated through regular Safety Awareness Programs, basic fire safety training, mock drills, regular Safety Committee meetings and capturing employeesvoices through safety observation and near miss reporting. The employees working at project sites are given requisite training for ensuring safety during work. Periodic Safety Audit is carried out and action taken to eliminate unsafe conditions.

There has been no incidence of any accidents reported in the past several years. The Company also has a disaster management system to take care of exigencies.

11. DISCLOSURE OF PARTICULARS

Particulars required by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in the prescribed format as Annexure A to the Directors Report.

Particulars of Employees: Information in accordance with Section 217(2A) of the Companies Act, 1956 (the Act) read with the Companies (Particulars of Employees) Rules, 1975, as amended, regarding employees is given in Annexure B to the Directors Report. However, having regard to the provisions of section 219(1) (b) (IV) of the Act, the Annual Report is being sent to all the Members excluding the aforesaid information. Any Member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

12. DIRECTORS

Mr. Z. J. Engineer retired as an Executive Director of the Company on 29h July, 2010. The Board expresses its sincere gratitude for the guidance and contribution of Mr. Engineer during his long and fruitful association with the Company.

In accordance with the requirements of the Companies Act, 1956 and Articles of Association of the Company, Mr. B. B. Dubash, Mr. S. Ramakrishnan and Mr. P. K. Ghose retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment.

13. AUDITORS

M/s. Deloitte Haskins & Sells, Chartered Accountants, who are the Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment.

14. CORPORATE GOVERNANCE

To comply with the conditions of Corporate Governance, pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Management Discussion and Analysis Statement, Report on Corporate Governance and Auditors Certificate, are included in the Annual Report.

15. DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors, based on the representations received from the Operating Management, confirm that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures therefrom;

(ii) they have, in the selection of the accounting policies, consulted the Statutory Auditors and have 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 profit of the Company for that period;

(iii) they have taken proper and sufficient care to the best of their knowledge and information, for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(iv) they have prepared the annual accounts on a going concern basis.

16. ACKNOWLEDGEMENTS

Your Directors place on record their appreciation for the support and Co-operation received from customers, vendors, investors, business associates, bankers, regulatory and governmental authorities. The Directors acknowledge the continued support and guidance from the Tata Group. The Directors appreciate the contribution made by employees at all levels.

On Behalf of the Board of Directors

P. R. Menon

Mumbai, 22nd November, 2010. Chairman


Sep 30, 2009

The Directors present their Sixty Seventh Annual Report together with the Audited Statement of Accounts for the period ended 30th September 2009.

1. FINANCIAL RESULTS

The summarised financial results are indicated below:-

(Rupees in 000)

For the For the 18 Months 12 Months Period Ended Period ended 30.09.2009 31.03.2008 (Rs.) (Rs)

Net Sales / Income from Operations 3,404,475 1,973,474

Operating Expenditure 3,168,805 1,764,913

Operating Profit 235,670 208,561

Add : Other Income 57,979 15,541

Less : Interest 182,528 108,226

Profit Before Tax and Depreciation and Exceptional Items 111,121 115,876

Less : Depreciation 83,345 43,638

Profit Before Tax and Exceptional Items 27,776 72,238 Exceptional Items

Less: Deferred Revenue Expenditure (Voluntary Retirement Scheme) 31,722 12,561 Add : Profit on sale of Long term Investments (Associate) 135,375

Profit Before Tax 131,429 59,677 Less : Provision for Tax (including provision for Deferred Tax and Fringe Benefit Tax) 98,630 15,352

Net Profit After Tax 32,799 44,325

Balance Brought Forward 16,434 (27,891)

Balance available for appropriation 49,233 16,434 Appropriated as under:

Proposed Dividend 13,690 NIL

Tax on Dividend 2,327 NIL

Balance to be Carried Forward 33,216 16,434

With the approval of the Registrar of Companies, Maharashtra, Mumbai, the financial year 2008-09 has been extended for a period of 6 months. Accordingly, the financial year 2008-09 has been for a period of 18 months ending on 30th September, 2009.

2. DIVIDEND

The Directors of your Company are pleased to recommend for the approval of the shareholders a dividend of 6% (Rs.0.60 per share) (FY08 dividend Nil).

3. MANAGEMENT DISCUSSION AND ANALYSIS (MD&A)

This Report includes MD&A as appropriate so that duplication and overlap between the Directors Report and a separate MD&A are avoided and the entire material is provided as a composite and comprehensive document.

4. BUSINESS SEGMENTS

The current business operation is structured along the following business segments: 4.1 Automation and Control: Industrial Systems Division (ISD)

ISD is further sub-structured along the following lines of business (LoB).

a. Strategic Electronics (SE)

Systems and solutions for defence and paramilitary organisations for security and surveillance, such as intrusion detection, integrated security systems, global positioning systems (GPS), automatic weather monitoring systems, scanners etc.

b. Energy Network Management System (ENMS)

Energy management, distribution management, automatic data logging and Supervisory Control and Data Acquisition (SCADA) systems for applications in power, oil and gas industry, railways etc.

c. Traction Electronics (Traction)

Power electronics equipment for the Indian Railways for their freight and passenger electric and diesel locomotives.

d. Drives Systems (Drives)

Integrated AC and DC drives systems for metal, mining, power, paper and process industries for energy optimization, control and automation.

e. Building Management Systems (BMS)

Integrated building management systems including Heating, Ventilation and Air Conditioning (HVAC) controls, fire alarms, access controls and CCTV for comfort, energy saving and security of buildings.

4.2 Tatanet Network Systems (Tatanet)

Tatanet provides solutions for management of network connectivity services and internet services over VSATs for corporates, banking and financial institutions and Small and Medium Enterprises (SMEs) for them to run ERP and other on-line office automation applications. It also provides solutions to manage bandwidth-on-demand services across industry verticals, interactive distance learning connectivity, IP multicast and digital streaming to some niche segments. In addition, the division participates in turnkey satellite communication systems supply and integration projects invited by customers primarily in Government and Public Sector.

5. FINANCIAL OVERVIEW

During the period under review, the total income was Rs.34,624.54 Lakhs (18 Months) as against Rs.19,890.15 Lakhs in the previous year (12 months). The profit before tax was Rs.1,314.29 lakhs (18 months) as against Rs. 596.77 Lakhs in the previous year (12 months).The net profit after tax was Rs.327.99 Lakhs (18 months) as against Rs.443.25 Lakhs in the previous year (12 months).

During the period under review, the Company has sold 5,70,000 equity shares of Rs.10/- each held in Nelito Systems Ltd. (Associate Company) to Af-Taab Investments Ltd. at a price of Rs.280/- per share, aggregating to Rs.1,596.00 Lakhs

6. A) AUTOMATION AND CONTROL DIVISION (ISD)

16. DISCLOSURE OF PARTICULARS

Particulars required pursuant to Section 217 (i) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Directors) Rules, 1988 are given in the prescribed format as Annexure A to the Directors Report.

Particulars of Employees: Information in accordance with Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended, regarding employees is given in Annexure B to the Directors Report.

17. DIRECTORS

The Central Government vide its letter no. SRN.NO. A49424013-CL-VII dated 3rd June, 2009, as amended, has given an approval for the payment of remuneration to Mr. K. A. Mahashur, Executive Director as approved by the Shareholders at the 66th Annual General Meeting of the Company held on 8th August 2008 for the period from Is September 2008 to 12th June 2012.

The existing term of Mr. Z. J. Engineer as Executive Director of the Company will be expiring on 31st May 2010. The Board of Directors at its Meeting held on 27th November 2009 re-appointed Mr. Z. J. Engineer as Executive Director of the Company for the period from 1st June 2010 to 29th July 2010 subject to approval of the members and the Central Govternment, if required and all other approvals / consents / sanctions / permissions as may be necessary.

In accordance with the requirements of the Companies Act, 1956 and Articles of Association of the Company, Lt. Gen. Davinder Kumar (Retd.), Mr. R. R. Bhinge and Mr. V. K. Deshpande retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment.

18. AUDITORS

M/s. Deloitte Haskins & Sells, Chartered Accountants, who are the Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.

19. REPORT ON CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Management Discussion and Analysis Report, the Corporate Governance Report and Auditors Certificate on compliance of the conditions of Corporate Governance forms part of this Annual Report.

20. DIRECTORSRESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors, based on the representations received from the Operating Management, confirm that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures;

(ii) they have, in the selection of the accounting policies, consulted the Statutory Auditors and have 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 profit of the Company for the period;

(iii) they have taken proper and sufficient care to the best of their knowledge and information, for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(iv) they have prepared the annual accounts on a going concern basis.

21. ACKNOWLEDGEMENTS

Your Directors place on record their appreciation for the support and co-operation received from customers, vendors, investors, business associates, bankers, regulatory and governmental authorities. The Directors acknowledge the continued support and guidance from the Tata Group.The Directors appreciate the contribution r:;,- made by employees at all levels.

On behalf of the Board of Directors

P. R. Menon Mumbai, 27th November 2009. Chairman

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