Mar 31, 2015
We, on behalf of the Board of Directors of your company, take plea- sure in presenting before you the 20th Annual Report on the business and operations of your Company together with the Audited Statement of Accounts for the Financial Year ended March 31, 2015.
1. Financial Highlights
A summary of your Company's financial performance is given below:
(Rs. in Crore)
Particulars Year ending Year ending 31 March 31 March 2015 2014
Total Operating and other Income 161.12 132.62
Operating Expenses 102.07 89.92
Earnings before Interest,Depreciation, 59.05 42.70
Tax & Amortization (EBIDTA)
Interest and Financial Charges 22.59 23.42
Foreign Exchange Fluctuation - 1.18
Earnings before Depreciation, 36.46 18.10
Tax & Amortization (EBDTA)
Depreciation, Amortization & other 29.41 27.71
Earning before Tax (EBT) 7.06 (13.93)
Tax 1.46 (13.78)
Earning after tax (EAT) 5.60 (13.78)
2. State of Company's affairs and Operational Results.
The highlights of the Company's performance are as under:
* Total Income increased by 21% to Rs. 1,61.12 cr from Rs. 1,32.62 cr of last financial year.
* EBITDA grew by 44%o to Rs. 59.05 Crs from Rs. 42.70 cr of last financial year
* EBITDA margins stood at 37%o in FY15 as compared to 31%o in FY14.,
* Profit After Tax stood at Rs. 5.60 cr as compared to a Loss of Rs. 13.8 cr of last fiscal
* EPS amounted to Rs. 2.30 as compared to negative EPS of Rs. 6.5 of last financial year.
The Financial year 2014-15 has been a very successful and remarkable year as the Company has achieved EAT positive after a continuous loss for six years. The overall performance of the Company both in terms of Turnover and Earning after tax has significantly improved for the period under review due to over all growth of cable TV, Data, carriage fee and infrastructure leasing income.
The contribution of each income stream to the total revenue is as below:-
Cable TV services has contributed 51 % to the total revenue during the year 2014-15. Data Services has attributed 18 % to the total revenue of the Company for the year. Infra-structure leasing has contributed 9% where as Carriage fees and other incomes have shared 16 % and 6 % respectively to the total revenue for FY. 2014-15.
During the year, Andhra Pradesh has turned EBIDTA positive and West Bengal is expected to be positive EBITDA in FY.2015-16. The company has also taken several initiatives in Chhattisgarh to reduce losses and we expect a marked improvement in EBIDTA performance in Chhattisgarh in the year 2015-16.
Review of Operations
ii) Cable TV Operation:
During the year under review, your company continued to be a dominant player in the Cable TV market in Odisha and has continued to consolidate its position in the other emerging markets too where operations were launched in last few years (Chhattisgarh, Andhra Pradesh & West Bengal). The total Cable TV customer base (Analog and Digital) has been increased to 471,592 (Previous Year: 461,408 ) as on 31.03.2015.
With digitalization mandated by the Government of India for mandatory digitization of cable TV signal across India, your company has already started converting more subscribers to digital cable tv platform. As your Company's distribution network is 100% digitally ready and possess the capability to further digitize customers already in analog platform, your company is contemplating to complete the same in its major markets ahead of timelines announced by the government. Further by deploying funds raised in IPO which has been allocated for network expansion and development of digital cable services, the Company is expecting to improve substantial Subscriber Base and revenue in FY 2015-16 and your company is taking aggressive steps in this direction.
ii) Data Operation:
During the year under review, your company continued to be a significant Data Services provider in the market it operates in spite of severe competition from wireless service providers notably the national telecom companies. The total subscriber base as on 31.03.2015 is 58,519 (Previous Year: 54,427). Though the growth in subscriber numbers during the year has been tough owing to lack of capital, but with better quality services, improved customer care and with aggressive marketing campaign plan and by deploying IPO proceeds set aside for expansion of network and development of data service, the Company is hopeful of increasing the growth trend of customer base in the coming years.
Further, the Company is in the process of upgrading present technologies of DOCSIS 2.0 standard used in cable modem for providing data services to DOCSIS 3.0 which once implemented will enable provision of broadband services at a higher speed which will result in more customer base and better service to the customers.
In total, your company has achieved total RGU base of 530,111 during the year (previous year 515,835), out of which 88 % are on its own last mile network.
Your Company also provides high bandwidth dedicated leased line service to various corporate subscribers. As on 31 March, 2015, your Company has provided 784.50 Mbps (Previous year 718.50 Mbps) bandwidth to various corporate customers, a 9.18% growth over previous year.
iii) Infrastructure leasing:
During the year, the Company has aggressively pursued as another major revenue generating stream by leasing out its own infrastructure to corporate clients for their communication requirement and has leased out to various corporates a total of 761.42 kms as on 31 March, 2015. With rapid industrialization in our target market, Company expects continued growth from providing these services.
Though the Company has reported profits for the year, no dividend is being recommended due to accumulated losses for the past Financial Years.
4. Particulars of Employees
Information as per section rule 5 (2) of Companies (Appointment & Remuneration of Managerial Personnel) Rule, 2014 read with Compa- nies (Particulars of Employees) Rules, 1975, is not applicable.
5. Observations of the Auditors
Observations of the Auditors on the Annual Accounts of the Company are annexed as part of "Auditors' Report". The observations made in their report have been dealt elsewhere within the Notes to the Ac- counts which are self-explanatory.
6. Directors' Responsibility Statement
Yours Directors hereby certify:-
a) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper expla- nation relating to material departures.
b) that the directors had selected such accounting policies and ap- plied them consistently and made judgment and estimates that they 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 or loss of the company for that period.
c) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act for safeguarding the assets of the company and preventing and detecting fraud and other irregularities.
d) that the directors had prepared the annual accounts on a going concern basis.
e) The directors had laid down internal financial controls to be fol- lowed by the company and that such internal financial controls are adequate and were operating effectively.
f) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Your Board is pleased to inform you all that, the Company has success- fully completed the Initial Public Offer (IPO) of the Company and got listed on both National Stock Exchanges of India Limited (NSE), being the designated Stock Excahnge and BSE Limited (BSE) on 19 March, 2015. The issue was open for subscription on 03 March 2015 and closed on 05 March 2015. Out of 1200 lakh shares issued for subscrip- tion, 96,52, 500 shares including offer for sale by the selling share holder, NSR PE Mauritius, LLC was subscribed by the investors at a price band of Rs. 181-200 per share. The final price per share was finalized as Rs. 181/- per share by IPO Committee of the Board. After final rejection of the applications for various reasons out of 96,52,500 shares subscribed by public, 95,93,850 Nos of total shares consisting of 60,00,000 nos. of fresh shares and 35,93,850 nos shares out of offer for sale (OFS) were allotted based on the basis of allotment approved by NSE (Designated Stock Exchange) and also IPO Commit- tee on 12 March, 2015. Further,Company got final listing permission of both BSE and NSE on 17March, 2015 and trading has been started w.e.f. 19 March, 2015.
8. Directors and Key Managerial Personnel.
During the year under review, Mr. Shantanu Yeshwant Nalavadi, the Nominee Director from NSR-PE Mauritius, LLC (NSR) has resigned from the Board w.e.f. 20 March, 2015 in compliance with the termination agreement executed between Company and NSR on 14 February, 2015 and the corresponding disclosure in the Prospectus as per SEBI (ICD) Regulation for IPO. The Board expressed its sincere thanks to Mr. Nalavadi for long standing association with the Company and guiding the Company for its success.
Further, Dr. Gautam Sehgal, Non-Executive Director of the Company is retiring at the ensuing Annual General Meeting. Your Directors have recommended his reappointment as Independent Director in the next AGM. The detailed resume of Dr. Sehgal who has offered for re-appointment is provided in the explanatory statement annexed to the notice of the Annual General Meeting.Further, Company has complied with the requirement of new Companies Act, 2013 relating to appoint ment of independent Directors and key managerial personnel. There are no other changes in the constitutions of the Board of Directors and key managerial personnel.
The Company has obtained declaration from Independent Directors as required under Section 149 of the Companies Act, 2013.
9. Share Capital
During the year under review, the Company had allotted 1,44,97,774 nos of 0.001% compulsorily convertible preference shares which got converted into 10,35,555 nos of equity shares.
During the same period, the Company has also allotted 35,500 equity shares under Employee Stock Option Scheme (ESOS 2010).
Further, as you know, during the year under review, the Company has allotted 60,00,000 nos of equity shares on 12 March, 2015 pursuant to the Initial Public Offer (IPO) of the Company under book building process.
a) Statutory Auditors
M/s. Haribhakti and Co. LLP, Chartered Accountants Kolkata, was ap- pointed as Statutory Auditors of the Company at the last Annual General Meeting for a period of five years subject to ratification of their appointment by the shareholders in the Annual General meeting of the Company every year if eligible.
Your Directors have recommended M/s. Haribhakti and Co. LLP, Char- tered Accountants Kolkata, being eligible, for ratification by the mem- bers of the Company in the next Annual General Meeting.
b) Cost Auditor
Terms of M/s. NIRAN & CO., Cost Accountants, Bhubaneswar, Odisha who was reappointed as Cost Auditor of the Company for Financial Year 2014-15 expired on 31 March, 2015.
Your Directors have approved their reappointment for FY. 2015-16 and their remuneration shall be ratified by the members in the ensuing Annual General Meeting.
c) Internal Auditor
Terms of M/s. SCM & Associates, Chartered Accountants, Bhubaneswar, Odisha who was reappointed as Internal Auditor of the Company for Financial Year 2014-15 expired on 31 March, 2015.
Your Directors have approved their reappointment.
d) Secretarial Auditor
Your Board has also appointed M/s. Kumar Suresh & Associates, Gurgaon, a firm of Practicing Company Secretaries as Secretarial Audi- tor for FY 2015-16.
11. Public Deposits
During the period under review, your company has not taken any public deposit.
12. Corporate Governance:
Pursuant to clause 49 of the Listing agreement, a report on the corporate governance, Management Discussion and Analysis, Certificate regarding Compliance of conditions of Corporate Governance, Secre- tarial Audit Report and Managing Director & CFO certification have been made part of the Annual Report
13. Conservation of Energy, technology, foreign exchange earnings and outgo
13.1 Conservation of energy
Conservation of RF ,Optical, Electrical and fuel energy is being accomplished by your company in economically responsible and beneficial ways by using power efficient equipment, broadband HFC network, provisioning system, ergonomics in the cable layout, cleanest and state of art technologies. Recent salient steps that are taken towards these methods in improving Conservation of Energy in efficient manner in your company are as under Increasing more deeper fiber by using Broadband HFC network in star structure has resulted less power consumption. Applying the strongest feasible energy efficiency standards to network opto electronics, RF products and signal quality.
Your company is one of the MSOs in India which has started Triple lay services over Broadband HFC network. It has chosen best, economical and state of art technologies.
Your company is using Cable Modem technology for high speed Internet access. The Company is also using Metro Ethernet ("MEN") and Ethernet over Cable (EoC) technology which engages different network topology for providing high speed data service at a lower cost.
Your company has adopted digital video technology to deliver qualita- tive video and audio using MPEG-2 and MPEG-4 Technology. Your com- pany has also started HD TV services and offers HD channels to its subscribers in select markets.
Further, your company deployed Home Wireless Cable modems in the market and also conducted trials of Voice over Internet Protocol.
We have completed Trials and running pilot projects on other new technologies such as DOCSIS 3.0 Cable Modem and expect commer- cial deployment soon.
13.3. Foreign Exchange Earnings & Outgo
Disclosure of foreign exchange earnings and outgo as required under Rule 2(C) is given in Note No. 38 "Notes on Accounts" forming part of the Audited Annual Accounts.
Foreign Exchange Earning: Nil
Foreign Exchange Outgo : Rs. 1607.67 lakhs.
Your company has been certified and recertified by Bureau Veritas Certification (India) Pvt. Ltd. (BVQI) to confirm with ISO 9001:2008 standardization for both cable and data services for Bhubaneswar, Cuttack, Rourkella and Sambalpur operational sites.
Your company has also received certification from BECIL (TRAI ap pointed Certifying Agency) for its digital Encryption and Subscriber Management System of digital services. Your company is the first of its kind in India to receive such certification.
15. Corporate Social Responsibility:
Your company has undertaken various social works as part of corporate social responsibility. It invests in Social programs for the underprivileged girl child, contributes towards their overall learning and personal growth, opens employment avenues and also it attempts to bring about significant and sustainable improvements in their standard of living. Your company's flagship CSR activity known as 'Ortel Dayitwa' provides financial support to girl children for college education. Ortel Dayitwa encourages girls to pursue education after secondary education with an objective to reduce dropouts after secondary education and also conducts various education awareness programs from time to time.
Further, as a part of its CSR initiatives, Ortel Dayitwa has tied up with "Gram Tarang Employibility Training Services Pvt. Ltd. a social enterpreneurial outreach of Centurion University, Odisha" in partnership with National Skill Developement Corporation to promote and provide vocational education to underprivileged youth therby providing employment after successfull completion of training and to encourage students to pursue higher education through University diploma/ degree programs.
The Company continues and shall continue to contribute towards social well being in future.
Further, as Company has made net profit of Rs. 5.59 Cr in FY 14-15, Section 135 of the Companies Act, 2013 and Listing agreement of the Stock Exchanges has become applicable which specifies constitution of a Corporate Social Responsibility Committee of the Board ("CSR Committee"). Accordingly, the Company will constitute ("CSR Committee") in F.Y. 2015-16.
16. Personnel & Industrial Relations
Personnel & industrial relations during the year were cordial & harmo- nious.
Your Directors place on record their sincere appreciation for the contin- ued support from share holders, customers, suppliers, government authorities, banks and financial institutions and other business associ- ates. A particular note of thanks to all employees of your company, without whose contribution, your company could not have achieved the year's results.
On behalf of the Board of Directors For Ortel Communications Ltd
Jagi Mangat Panda Jyoti Bhusan Pany Managing Director Director
Place: Bhubaneswar Date: 20 April, 2015