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Notes to Accounts of Ortel Communications Ltd.

Mar 31, 2015

1 a) The Company had allotted 10.50% Non Convertible Redeemable Preference Shares as fully paid up which were due for redemption at par at any time before 28 December 2015. However, the Shareholders approved conversion of the said 10.50% Non Convertible Redeemable Preference Shares into 0.001% Non Cumulative Compulsorily Convertible Preference Share of Rs.10/- each in their meeting held on 10 February 2014 and the same have been converted into fully paid-up equity shares of Rs.10/- each at a conversion price of Rs. 140/- per equity share in the Board Meeting held on 21 July, 2014.

b) 0.001% Non cumulative Compulsorily convertible Preference shares were allotted as fully paid up and have been converted into fully paid-up equity shares of Rs. 10/- each of the Company at a conversion price of Rs. 140/- per Share in the Board Meeting held on 21 July, 2014.

2 Rights, preferences and restrictions in respect of each class of shares

The Company has two classes of shares referred to as Equity Shares and Preference Shares having par value of Rs.10/- per share. Each holder of Equity Share is entitled to one vote, when present in person on a show of hands. In case of poll, each holder of Equity Shares shall be entitled to vote in proportion to his paid up Equity Share capital. Preference Shareholder is eligible to vote only on the resolutions directly affecting the rights attached to his Preference shares.

In the event of liquidation, the Equity Shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their paid up value of Capital.

3 Shares reserved for issue under options:

Refer note no. 39 for details of shares to be issued under Employee Stock Option Scheme.

4 Security Description:

Term Loans of Rs.1261.79 lakhs (31 March 2014: Rs.1401.70 lakhs) from banks are secured by way of hypothecation of Fixed assets. The following have been provided as collateral:Already hypothecated fixed assets purchased out of term loan availed from Industrial Promotion and Investment Corporation of Odisha Limited (IPICOL) and SREI Equipment Finance Private Limited (SREI) charged on pari passu basis, equitable mortgage of leasehold property at Bhubaneswar, equitable mortgage of immovable property and flat at Cuttack and Bhubaneswar, pledge of term deposits of Rs.109.01 lakhs (31 March 2014: Rs.109.01 lakhs) and personal guarantee of one of the Directors.

Term Loans of Rs.1098.60 lakhs (31 March 2014: Rs.1200.00 lakhs) from banks are secured by way of pari passu charge on assets/ equipments acquired out of the said Term Loan and ranking pari passu with other Banks. Second charge on fixed assets already hypothecated to other banks and institutions. The following have been provided as collateral:

Equitable mortgage of leasehold property at Bhubaneswar, equitable mortgage of Immovable property and flat at Cuttack and Bhubaneswar, pledge of term deposits of Rs.177.78 lakhs (31 March 2014: Rs. 177.78 lakhs) and personal guarantee of one of the Directors.

Term Loans of Rs.9706.76 lakhs (31 March 2014: Rs.9989.35 lakhs) from Others are secured by way of First/exclusive charge created by way of hypothecation of assets including various networking equipment and personal guarantee of one of the Directors. The following have been provided as collateral :

Against Term Loan of Rs.8292.82 lakhs (31 March 2014: Rs.8534.25 lakhs), equitable mortgage of immovable property at Raipur together with all buildings and structures thereon and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth, both present and future.

Term Loans of Rs.Nil (31 March 2014: Rs.15.87 lakhs) from Others are secured by way of hypothecation of different types of plant and machineries and personal guarantee of one of the Directors.

Finance Lease Obligations of Rs.729.57 lakhs (31 March 2014: Rs.360.52 lakhs) from Others are secured on equipment together with all parts, accessories and substitutions taken on lease.

Rs. In Lakh

As at As at 31 March 31 March 2015 2014

5 Contingent Liabilities and Commitments (To the extent not provided for)

A. Contingent Liabilities

(Claims against the Company not acknowledged as debts:

Entry Tax demand under Appeal 1.00 1.00

Entertainment Tax demand under Appeal 69.75 69.75

Income Tax and Interest for non-deduction of tax at source - 2005-06, 2006-07, 2008-09 and 2010-11 175.15 175.15

Service Tax and Interest for 2006-07, 283.58 283.58 2007-08 and 2008-09

Penalty u/s 271 (1) (c) for furnishing of inaccurate particulars in the Return of Income for 1996-97 - 1.72

Paradip Port Trust (Refer Note Below)* 52.69 52.69

The Company has received legal notices of claims / lawsuits filed against it in relation to miscellaneous damages. In the opinion of the management supported by legal advise, no material liability is likely to arise on account of such claims / lawsuits. - -

Total 582.17 583.89

B. Commitments

Estimated amount of Contracts remaining to be executed on Capital

Account and not provided for 1,462.83 628.72 [Net of advance Rs.59.56 Lakhs (31 March 2014: Rs.38.58 Lakhs)]

*The Company had been providing services in Paradeep Port Trust (PPT) area as per contracts. In an earlier year, the Company had committed to cover programmes/news of PPT in its news channel as "PARADIP PARIKRAMA". As per terms of the contract, the contents of the programmes were to be provided by PPT for coverage and transmission of the programmes by the Company. Subsequently, PPT had claimed that it incurred Rs. 52.69 Lakhs for shooting and covering the same. However, the said claim has not been accepted by the Company. By the time PPT raised this claim, the contract had expired and a new contract pursuant to fresh negotiation was executed. PPT then claimed that they would adjust the said amount with subscription money payable by PPT to the Company. Accordingly, the Company had filed a writ petition dated 10 July 2006 against the demand of PPT before Hon'ble High Court, Orissa. The demand has been stayed by the Hon'ble High Court vide its interim Order dated 20 July 2006. The matter is still pending for final hearing. As on date, all earlier contracts with PPT have expired.

38 Disclosure pursuant to Accounting Standard (AS) 15 (Revised)- Employee Benefits

The Company maintains a provident fund with Regional Provident Fund Commissioner. Contributions are made by the Company to the funds, based on the current salaries. In the provident fund schemes, contributions are also made by the employees. An amount of Rs. 76.54 Lakhs (31 March 2014 : Rs.71.70 Lakhs) has been charged to the Statement of Profit and Loss on account of the above defined contribution schemes.

The Company operates a superannuation scheme for its eligible employees with Life Insurance Corporation of India (LICI) towards which the Company contributes upto a maximum of 15% of the employees' current salary amounting to Rs. 1.26 Lakhs (31 March 2014 : Rs.1.26 Lakhs) which is charged to the Statement of Profit and Loss.

The Company has taken a policy with Life Insurance Corporation of India (LICI) for future payment of gratuity liability to its employees, which is a defined benefit scheme. Actuarial valuations are carried out by an independent actuary based on the methods prescribed in the Accounting Standard 15 - "Employee Benefits" of the Companies (Accounting Standard) Rules, 2006. Contributions are also made by the Company. Employees are not required to make any contribution.

The Company also provides for leave encashment benefit to the employees. Actuarial valuations for the year are carried out by an independent actuary based on the methods prescribed in the Accounting Standard 15 - "Employee Benefits" of the Companies (Accounting Standard) Rules, 2006.

6 Employee Stock Option Scheme :

Brief descriptions about the plans:

Employee Stock Option Scheme, 2010 (ESOS 2010): The Board, vide its resolution dated 19 December 2010, approved (i) ESOS 2010 for granting Employee Stock Options in the form of Equity Shares linked to the completion of a minimum period of continued employment and (ii) Employee Performance Linked Stock Option to be issued at par in lieu of loyalty bonus linked to specified performance target to the eligible employees of the Company monitored and supervised by the Compensation Committee of the Board of Directors in compliance with the provisions of Securities and Exchange Board of India(Employee Stock Option Scheme And Employee Stock Purchase Scheme) Guidelines, 1999 and amendments thereof from time to time [since repealed on October 28,2014 pursuant to the coming into force of Securities and Exchange Board of India (Share Based Employee Benefits) Regulations,2014 with effect from the said date.] An employee who is a promoter or belongs to the promoter group shall not be eligible to participate in the scheme. The eligible employees for the purpose of ESOS 2010 will be determined by the Compensation Committee from time to time. The Employee Performance Linked Stock Option shall be subject to 18 months lock in after the date of allotment whereas the Employee Stock Option is free from lock in. The vesting period of Employee Performance Linked Stock Option and Employee Stock Option are 18 and 36 months respectively with 3 months exercise period for exercising the option to subscriber.

(a) Name of the Related Parties and their relationship

i) Key Managerial Mrs. Jagi Mangat Panda - Personnel (KMP) : Managing Director

ii) Relative of Key Mr. Baijayant Panda - Husband Managerial Personnel : of Mrs. Jagi Mangat Panda

iii) Enterprises over which Indian Metals & Ferro Alloys Ltd. KMP and/or relative of such KMP is able to exercise Odisha Television Ltd. significant influence (with whom transactions Orissa Infratech Pvt. Ltd. have"taken place during the year): B.Panda & Company Pvt. Ltd.

Barabati Investment & Trading Co. Pvt. Ltd.

Panda Investment Pvt. Ltd.

(c) Material Related Party Transactions during the year (excluding reimbursements):

1 Managerial Remuneration paid to Mrs. Jagi Mangat Panda Rs.42.11 lakhs (Previous Year: Rs.43.32 lakhs)

2 Sitting fees as nominee paid to Panda Investment Pvt. Ltd Rs. 0.05 lakhs (Previous Year: Rs.0.15 lakhs)

3 Sitting fees as nominee refunded back from Panda Investment Pvt. Ltd Rs. 0.05 lakhs (Previous Year: Rs.Nil)

4 Signal Uplinking Income received from Odisha Television Ltd. Rs.288.38 lakhs (Previous Year: Rs.288.65 lakhs)

5 Rent Received from Odisha Television Ltd. Rs.7.20 lakhs (Previous Year: '.7.20 lakhs)

6 Leaseline Bandwidth income received from Odisha Television Ltd. Rs.10.13 lakhs (Previous Year: Rs.10.13 lakhs) and Indian Metals & Ferro Alloys Ltd. Rs.6.23 lakhs (Previous Year: Rs.5.88 lakhs)

7 Subscription Income received from Indian Metals & Ferro Alloys Ltd. Rs.0.34 lakhs (Previous Year: Rs.0.47 lakhs)

8 Material Issued to Odisha Television Ltd. Rs.0.44 lakhs (Previous Year: Rs.0.04 lakhs)

9 Advertisement Expenses paid to Odisha Television Ltd. Rs.18.00 lakhs (Previous Year: Rs .Nil)

10 Channel Carriage Income received from Odisha Television Ltd. Rs.174.39 lakhs (Previous Year: Rs.150.00 lakhs)

11 Programming Costs paid to Odisha Television Ltd. Rs.179.70 lakhs (Previous Year: '.154.00 lakhs)

12 Share application money received from Mr.Baijayant Panda '.2.50 lakhs (Previous Year: '.220.00 lakhs), B Panda & Company Pvt. Ltd. Rs.Nil (Previous Year: Rs.150.00 lakhs) and Barabati Investments and Trading Co. Pvt. Ltd. Rs. Nil (Previous Year: Rs.100.00 lakhs)

13 Advance Received from Odisha Television Ltd. '.Nil (Previous year: '.9.60 lakhs)

14 Unsecured Loan received from Orissa Infratech Pvt. Ltd. '. 662.49 lakhs(Previous Year: Rs.500.00 lakhs)

15 Unsecured Loan repaid to Orissa Infratech Pvt. Ltd. Rs.164.73 lakhs (Previous Year: '.64.58 lakhs)

16 Interest and Processing Fees on Unsecured Loan paid to Orissa Infratech Pvt. Ltd. Rs.65.22 lakhs (Previous Year: Rs.58.82 lakhs), Mr.Baijayant Panda Rs.Nil (Previous Year: Rs.2.00 lakhs) and B Panda & Company Pvt. Ltd. Rs. Nil (Previous Year: '.2.88 lakhs)

7 Advance from customers include Rs. 74.46 Lakhs, being Electricity Inspection Duty collected from the customers (levied by the Department of Energy, Government of Orissa vide its notification dated 29 March 2002 under Indian Electricity Rules, 1956) but not deposited with the appropriate authorities on the ground that neither the rules nor the notification is applicable to the Company and the charging chapter of the Notification does not authorise the electrical Inspector to levy fees on any person other than the owner of the television connection. The Company has filed a writ petition before Hon'ble High Court of Orissa against the said Notification and obtained an order to the effect that no coercive action can be taken against the Company until the disposal of the case. However, as per the direction of Hon'ble High Court of Orissa vide its order dated 09 February 2007, Rs. 29.00 Lakhs was deposited with the said Court.

Subsequently, Hon'ble High Court of Orissa vide its order dated 5 November 2007 directed the Government of Orissa to take a decision as to whether the inspection charges so far as consumer of television connections are concerned can be waived and/or imposed and also directed the Company not to collect any amount from any individual customer until a decision is taken by the Government of Orissa.

8 The Company acquires the "Cable Network Business" of various Local Cable Operators ('LCOs') which, inter alia, consists of equipments, infrastructure and cable television subscribers and enters into agreements with the LCOs in this regard, whereby the LCOs agree to sell their "Cable Network Business" . The LCOs also agree not to compete with the Company for a specified period in the areas where the LCOs have transferred their cable television subscribers to the Company. The amount payable for acquisition of equipments & infrastructure has been capitalised under relevant categories of tangible assets and the amount payable as non-compete fee has been treated as an Intangible asset.

9 In accordance with the requirements of Schedule II to the Companies Act, 2013, the Company reassessed the remaining useful life of tangible fixed assets with effect from 01 April 2014. Accordingly, the carrying values as on that date( net of residual values) are depreciated over their assessed remaining useful lives. As a result of this change, the depreciation charge for the year ended 31 March, 2015 is higher by Rs.35.70 lakhs.

Further, the carrying amount of assets (after retaining the residual value) amounting to Rs.101.11 lakhs, where remaining useful lives have been reassessed to be nil as at 01 April 2014, has been recognised in the opening balance of retained earnings as on 01 April 2014.

10 Capital Work-in-Progress includes capital inventory of Rs.1115.97 Lakhs (31 March, 2014: Rs.495.33 Lakhs).

11 The Company completed its Initial Public Offering (IPO) during the year pursuant to which equity shares of Rs.10 each were allotted at a price of Rs. 181 per equity share. The issue comprised of a fresh issue to the public of 60,00,000 equity shares and an Offer For Sale of 35,93,850 equity shares by NSR - PE Mauritius LLC (the selling shareholder). The equity shares of the Company were listed on National Stock Exchange of India Limited and BSE Ltd. on 19 March, 2015.

12 There are no Micro, Small and Medium Enterprises, as required to be disclosed under the 'Micro, Small and Medium Enterprise Development Act, 2006' identified by the Company on the basis of information available with the Company.

13 Previous year's financial statements have been audited by M/s Lovelock & Lewes, Chartered Accountants.

14 Previous year's figures have been regrouped/rearranged, wherever necessary to make them comparable with those of current year.

 
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