Mar 31, 2023
The Directors present the 37th Integrated Annual Report (âReportâ) of Tata Communications Limited (the âCompanyâ) along with the audited financial statements for the financial year ended March 31, 2023. The Company along with its subsidiaries, wherever required, is referred as âweâ, âusâ, âourâ, or âTata Communicationsâ. The consolidated performance of the Company and its subsidiaries has been referred to wherever required.
The table below sets forth the key financial parameters of the Companyâs performance during the year under review:
(Hin crores) |
||||
Standalone |
Consolidated |
|||
2022-23 |
2021-22 |
2022-23 |
2021-22 |
|
Income from operations |
7,236.28 |
6,587.35 |
17,838.26 |
16,724.73 |
Other income |
497.02 |
558.49 |
363.15 |
332.09 |
Total Income |
7,733.30 |
7,145.84 |
18,201.41 |
17,056.82 |
Expenses |
||||
Network and transmission expenses |
2,511.53 |
2,238.61 |
6,375.49 |
6,199.49 |
Employee benefits expenses |
1,553.18 |
1,279.22 |
3,597.46 |
3,040.34 |
Operating and Other Expenditure |
1,325.47 |
1,113.74 |
3,547.08 |
3,258.18 |
Depreciation and amortization expenses |
996.03 |
916.14 |
2,261.81 |
2,204.54 |
Total Expenses |
6,386.21 |
5,547.71 |
15,781.84 |
14,702.55 |
Profit before finance cost, exceptional items and tax |
1,347.09 |
1,598.13 |
2,419.57 |
2,354.27 |
Finance Cost |
90.04 |
88.59 |
432.46 |
360.25 |
Profit before exceptional items and tax |
1,257.05 |
1,509.54 |
1,987.11 |
1,994.02 |
Exceptional items |
(276.02) |
10.78 |
76.35 |
5.96 |
Profit before tax (âPBTâ) |
981.03 |
1,520.32 |
2,063.46 |
1,999.98 |
Tax expense / (benefit) |
||||
Current tax |
325.51 |
333.00 |
432.77 |
431.31 |
Deferred tax |
(10.63) |
20.00 |
(136.15) |
90.82 |
Profit / (Loss) before share in profit / (loss) of associates |
666.15 |
1,167.32 |
1,766.84 |
1,477.85 |
Share in profit / (loss) of associates |
34.03 |
6.82 |
||
Profit / (Loss) for the year |
1,800.87 |
1,484.67 |
||
Attributable to: |
||||
Shareholders of the Company |
1,795.96 |
1,481.76 |
||
Non-Controlling Interest |
4.91 |
2.91 |
On a standalone basis, the revenue for FY 2022-23 was H7,236.28 crores, higher by 9.85% over the previous yearâs revenue of H6,587.35 crores. The profit after tax (âPATâ) attributable to shareholders for FY 2022-23 was H666.15 crores as compared to the profit after tax of H1,167.32 crores for FY 2021-22. The decrease in PAT is attributable to the impact of exceptional items and
operating expenses coming back to pre-Covid levels as Covid benefits recede, as described in greater detail in the Standalone Financial Statements.
On a consolidated basis, the revenue for FY 2022-23 was H17,838.26 crores, higher by 6.66% over the previous yearâs revenue of H16,724.73 crores. The PAT attributable to shareholders and non-controlling interests for FY 2022-23 was H1,800.87 crores as compared to H1,484.67 crores for
FY 2021-22. The growth in the consolidated PAT is on account of higher revenues and international subsidiaries becoming profitable helping us realise net operating losses during FY 2022-23.
The Board recommends a dividend of H21.00 per fully paid Equity Share on 285,000,000 Equity Shares of face value H10/- each, for the financial year ended March 31, 2023. The Board has recommended dividend based on the parameters laid down in the Dividend Distribution Policy which can be accessed on www.tatacommunications. com/resource/corporate-resources/policies/tcl-dividend-distribution-policy/.
The dividend on Equity Shares is subject to the approval of the Members at the Annual General Meeting (âAGMâ) scheduled to be held on Tuesday, July 18, 2023.
The dividend, once approved by the Members, will be paid, subject to deduction of tax at source, on or before Tuesday, July 25, 2023. If approved, the dividend will result in a cash outflow of H598.50 crores. The dividend on Equity Shares is 210% of the paid-up value of each share. The total dividend pay-out works out to 33.23% of the profit after tax for the consolidated financial results.
The Company has fixed Monday, June 26, 2023 as the âRecord Dateâ and will close the Register of Members and Transfer Books from Tuesday, June 27, 2023 till Thursday, June 29, 2023 (both days inclusive) for determining entitlement of Members to final dividend for the financial year ended March 31, 2023, if approved at the AGM.
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.
As on March 31, 2023, the Company had 55 subsidiaries and 3 associates. There has been no material change in the nature of business of the subsidiaries.
A report on the financial position of each of the subsidiaries and associates as per the Companies Act, 2013 (âActâ) as provided in Form AOC-1 is attached to the financial statements of the Company.
Further, pursuant to the provisions of Section 136 of the Act, the standalone and consolidated financial statements of the Company along with relevant documents and separate audited financial statements in respect of subsidiaries, are available on the website of the Company at www.tatacommunications.com/investors/results.
Vide a business transfer agreement dated December 14, 2022, the Company transferred its non-network Internet of Things (âIoTâ) business comprising of Device, Application, Platform and Managed Services components to its wholly-owned subsidiary, Tata Communications Collaboration Services Private Limited, as a going concern on âslump saleâ basis. The transfer came into effect on January 1, 2023.
On December 22, 2022, Tata Communications
(Netherlands) B.V., a wholly-owned indirect subsidiary of the Company, entered into a Membership Investment Purchase Agreement to acquire 100% equity stake in The Switch Enterprises LLC (a target company in the United States of America) and as part of the transaction, through its wholly-owned subsidiaries, to acquire assets of the subsidiaries of The Switch Enterprises LLC based out of Canada, the United States of America and the United Kingdom. The acquisition was completed on May 1, 2023. As a result, The Switch Enterprises LLC has become a wholly-owned indirect subsidiary of the Company.
The Switch Enterprises LLC is one of the leading managed services providers for live production and video transmission. The Switch Enterprises LLC is a leading global end-to-end live video production and transmission services provider with reach to top tier sporting venues in North America.
Based on the framework of internal financial controls and compliance systems established and maintained by the Company, the work performed by the internal, statutory, cost and secretarial auditors and external consultants, including the audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by the Management and the relevant Board committees, including the Audit Committee, the Board is of the opinion that the Companyâs internal financial controls were adequate and effective during Financial Year 2022-23.
Pursuant to Section 134(5) of the Act, the Board of Directors, to the best of its knowledge and ability, confirm that for the year ended March 31, 2023:
i. In the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;
ii. They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to
give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;
iii. They have taken proper and sufficient care 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;
iv. They have prepared the annual accounts on a going concern basis;
v. They have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; and
vi. They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
There have been no changes in the Board of Directors during the financial year. As reported in the previous year, Mr. Krishnakumar Natarajan was appointed as Additional Director (Independent) with effect from July 15, 2021; Mr. Ashok Sinha was appointed as Additional Director (Independent) with effect from October 8, 2021; and Mr. N. Ganapathy Subramaniam was appointed as Additional Director (Non-Executive, Non-Independent) with effect from December 2, 2021. Their appointment was approved by the Members at the AGM held on June 29, 2022.
Mr. Srinath Narasimhan, Non-Executive, Non-Independent Director of the Company tendered his resignation from the Board with effect from the close of business hours on April 19, 2023. The Board places on record its deep appreciation for the contributions and guidance of Mr. Srinath during his association with the Company for more than two decades.
On the recommendation of the Nomination and Remuneration Committee, the Board of Directors, at its meeting held on April 19, 2023, appointed Mr. Ankur Verma (DIN: 07972892) as an Additional Director (Non-Executive, Non-Independent) of the Company with effect from April 19, 2023. A proposal for appointment of Mr. Verma will be placed before the Members for their approval at the ensuing AGM on July 18, 2023.
Pursuant to the provisions of Section 149 of the Act and Regulation 25(8) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (âSEBI Listing Regulationsâ), the Independent Directors have submitted declarations that each of them fulfill the criteria of independence as provided in Section 149(6) of the Act along with the rules framed thereunder and Regulation 16(1)(b) of the SEBI Listing Regulations. There has been no change in the circumstances affecting their status as Independent Directors of the Company. In the opinion of the Board, the Independent Directors are competent, experienced, proficient and possess necessary expertise and integrity to discharge their duties and functions as Independent Directors.
None of the Companyâs directors are disqualified from being appointed as a director as specified in Section 164 of the Act. For details about the directors, please refer to the Corporate Governance Report.
In accordance with provisions of Section 152 of the Act and the Articles of Association of the Company, Mr. N. Ganapathy Subramaniam (DIN: 07006215), retires by rotation at the ensuing AGM and being eligible, has offered himself for re-appointment.
During the year under review, the Non-Executive Directors of the Company had no pecuniary relationship or transactions with the Company, other than receipt of sitting fees and commission, reimbursement of expenses incurred by them for the purpose of attending meetings of the Board and its committees and any other transactions as approved by the Audit Committee or the Board which are disclosed under the Notes to Accounts.
During the year, there was no change in the Key Managerial Personnel of the Company.
Pursuant to the provisions of Section 203 of the Act, the Key Managerial Personnel of the Company are:
Mr. A. S. Lakshminarayanan - Managing Director & Chief Executive Officer;
Mr. Kabir Ahmed Shakir - Chief Financial Officer;
Mr. Zubin Adil Patel - Company Secretary and Head Compliance.
Seven Board meetings were held during FY 2022-23. For details of meetings of the Board, please refer to the Corporate Governance Report, which is a part of this Report.
The Board of Directors has carried out an annual evaluation of its own performance, performance of the committees and that of individual directors pursuant to the provisions of the Act and SEBI Listing Regulations.
The performance of the Board, its committees and individual directors was evaluated by the Board after seeking inputs from all the directors on the basis of criteria based on the Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India on January 5, 2017, such as the board / committee composition and structure, effectiveness of board processes / committee meetings, information and functioning, etc.
In a separate meeting of the Independent Directors, performance of Non-Independent Directors and the Board as a whole was evaluated, taking into account the views of the Executive Director and Non-Independent Directors. Separate discussions were also held by the Chairperson of the Nomination and Remuneration Committee with each of the Non-Independent Directors.
The Board and the Nomination and Remuneration Committee 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, 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 the meeting of the 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.
The Companyâs policy on directorâs appointment and remuneration and other matters provided in Section 178(3) of the Act, has been disclosed in the Corporate Governance Report, which is a part of this Report, and is also available on www.tatacommunications.com/ investors/governance/.
The details in respect of internal financial controls and their adequacy are included in the Management Discussion and Analysis, which is a part of this Report.
The details, including the composition of the Audit Committee, terms of reference, attendance etc., are included in the Corporate Governance Report, which is a part of this report. The Board has accepted all the recommendations of the Audit Committee and hence, there is no further explanation to be provided for in the Boardâs Report.
The Company has adopted a Whistleblower Policy and has established a vigil mechanism for directors and employees to report their concerns. For more details on the Whistleblower Policy please refer to the Corporate Governance Report and the Business Responsibility and Sustainability Report.
At the 36th AGM held on June 29, 2022, the Members approved re-appointment of M/s. S.R. Batliboi & Associates LLP, Chartered Accountants (Firm Registration No. 101049W / E300004) as Statutory Auditors of the Company to hold office for a second tenure of five consecutive years from the conclusion of 36th AGM till the conclusion of the 41st AGM to be held in the year 2027.
The Statutory Auditorâs Report for FY 2022-23 does not contain any qualifications, reservations, adverse remarks or disclaimers.
The Statutory Auditors of the Company have not reported any fraud as specified under Section 143(12) of the Act, for the year under review.
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company appointed a practising company secretary, Mr. U. C. Shukla, (FCS No. 2727 / CP No. 1654), to undertake the Companyâs secretarial audit.
The report of the Secretarial Auditor in Form MR-3 for the financial year ended March 31, 2023 is attached to this report. The Secretarial Audit Report does not contain any qualifications, reservations, or adverse remarks or disclaimers.
As per Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014, the Company is required to prepare and maintain cost records and have the cost records audited by a Cost Accountant and accordingly it has made and maintained such cost accounts and records. The Board, on the recommendation of the Audit Committee, has appointed Ms. Ketki D. Visariya, Cost Accountant (Firm Registration No. 102266) as the Cost Auditor of the Company for FY 2023-24 under Section 148 and all other applicable provisions of the Act. Ms. Visariya has confirmed that she is free from disqualification specified under Section 141(3) and proviso to Section 148(3) read with Section 141(4) of the Act and that the appointment meets the requirements of Section 141(3)(g) of the Act. She has further confirmed her independent status and an armâs length relationship with the Company.
The remuneration payable to the Cost Auditor is required to be placed before the Members in a General Meeting for their ratification. Accordingly, a resolution seeking Membersâ ratification for the remuneration payable to Ms. Visariya is included in the Notice convening the AGM.
The Board of Directors of the Company has formed a Risk Management Committee for monitoring and reviewing the risk management plan and ensuring its effectiveness. The Audit Committee has additional oversight in the area of financial risks and controls. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuous basis.
The development and implementation of risk management policy has been covered in the Management Discussion and Analysis, which forms part of this Report.
Your Company falls within the scope of a company providing infrastructural facilities under Schedule VI of the Act. Accordingly, the Company is exempt from the provisions of Section 186 of the Act with regards to Loans, Guarantees and Investments.
In line with the requirements of the Act and the SEBI Listing Regulations, the Company has formulated a
Policy on Related Party Transactions (âRPT Policyâ) and the same can be accessed on the Companyâs website at www.tatacommunications.com/investors/qovernance. The RPT Policy was last reviewed and amended by the Board at its meeting held on January 23, 2023, on the recommendation of the Audit Committee.
All related party transactions are placed before the Audit Committee for review and approval. Prior omnibus approval is obtained for transactions which are of a repetitive nature and are in the ordinary course of business and at arm''s length pricing.
None of the transactions with related parties falls under the scope of Section 188(1) of the Act. There have been no materially significant related party transactions between the Company and the directors, KMPs, subsidiaries or relatives of directors and KMPs, except for those disclosed in the financial statements. Accordingly, particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Act and Regulation 23 of the the SEBI Listing Regulations, along with the justification for entering into such contracts or arrangements in Form AOC-2, does not form part of the Boardâs Report. There were no material related party transactions entered into by the Company during the year i.e., transactions with a related party exceeding H1,000 crores or 10% of the annual consolidated turnover of the Company, whichever is lower, requiring approval of the Members.
A brief outline of the Corporate Social Responsibility (âCSRâ) policy of the Company and the initiatives undertaken by the Company on CSR activities during the year under review are set out in Annexure I of the Boardâs Report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014 including any statutory modifications / amendments thereto for the time being in force. For other details regarding the Corporate Social Responsibility, Safety and Sustainability Committee, please refer to the Corporate Governance Report, which is a part of this Report. The CSR Policy is also available on the Companyâs website at www.tatacommunications.com/investors/qovernance.
As per the requirements of Section 134(3)(a) read along with Section 92(3) of the Act and the rules framed thereunder, including any statutory modifications / amendments thereto for the time being in force, the Annual Return for FY 2022-23 is available on www. tatacommunications.com/investors/results/.
Particulars of Employees
The information required under Section 197 of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given below:
a. The ratio of the remuneration of each director to the median remuneration of the employees of the Company and percentage increase in remuneration of each Director, Chief Executive Officer, Chief Financial Officer and Company Secretary for the financial year 2022-23:
Name of Directors / KMPs |
Ratio to median remuneration* |
% increase in remuneration in the financial year |
Non-Executive Directors |
||
Ms. Renuka Ramnath |
7.56 |
9.92 |
Mr. Srinath Narasimhan |
4.53 |
9.75 |
Mr. Krishnakumar Natarajan1 |
5.25 |
NA |
Mr. Ashok Sinha1 |
4.64 |
NA |
Mr. N. Ganapathy Subramaniam1 and 2 |
NA |
NA |
Executive Director |
||
Mr. A. S. |
43.78 |
10 |
Lakshminarayanan |
||
Chief Financial Officer |
||
Mr. Kabir Ahmed Shakir |
20.32 |
14 |
Company Secretary |
||
Mr. Zubin Adil Patel |
3.45 |
10 |
*While calculating the ratio for Non-Executive Directors, both commission and sitting fees paid have been taken into consideration.
1 Since the remuneration for previous year was only for part of the year, the percentage increase in remuneration is not comparable and hence, not stated.
2 As per a Tata Group directive, in case an executive who is in full-time employment of a Tata Company and is receiving salary as a full-time employee is appointed as a Non-Executive Director (âNEâ) on any Tata Company, such NE would not accept any commission. The ratio of median to remuneration is not comparable in this case and hence, not stated.
b. The percentage increase in the median remuneration of employees in the financial year:
10.9%
c. The number of permanent employees on the rolls of Company:
6,867 employees as on March 31, 2023
d. Average percentile increase already made in the salaries of employees, other than the managerial personnel in the last financial year, and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:
During the course of the year, the total average increase was approximately 10.3% for employees based in India, after accounting for promotions and other event-based compensation revisions. The increase in the managerial remuneration for the year was 10.01%.
e. Affirmation that the remuneration is as per the remuneration policy of the Company:
The Company affirms that the remuneration is as per the remuneration policy of the Company.
The statement containing names of top ten employees in terms of remuneration drawn and the particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in a separate annexure forming part of the Boardâs Report. The Boardâs Report and the accounts are being sent to the Members excluding the aforesaid annexure. In terms of Section 136 of the Act, the said annexure is open for inspection. Any Member interested in obtaining a copy of the same may write to the Company Secretary at investor.relations^ tatacommunications.com.
As per SEBI Listing Regulations, the Corporate Governance Report with the Auditorsâ Certificate thereon, and the Management Discussion and Analysis form part of this Report.
As per Regulation 34 of the SEBI Listing Regulations, a Business Responsibility and Sustainability Report is attached and is a part of this Integrated Annual 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 such systems are adequate and operating effectively.
The Company has not accepted any deposits from the public and as such, no amount on account of principal or interest on deposits from the public was outstanding as on the date of the balance sheet.
The Company continues to adopt and use the latest technologies to improve the efficiency and effectiveness of its business operations.
The details pertaining to energy conservation initiatives of Tata Communications are as follows:
Name |
Category |
The steps taken or impact on conservation of energy |
In FY 2022-23, 130 energy-saving opportunities were identified including projects on Heating, Ventilation and Air Conditioning (âHVACâ), Switched-Mode Power Supply (âSMPSâ) and Uninterruptible Power Supply (âUPSâ) efficiency enhancement / Optimisation and Consolidation, Smart Lighting (conversion of conventional lighting into LED), and usage of Internet of Things (âIoTâ). 108 out of 130 projects were completed, resulting in energy savings of 6.56 million KWh (cumulative) and energy cost savings of H6.38 crores. Our Metro Area Network and National Long Distance teams completed 23 energy efficiency projects, resulting in energy savings of 1,03,200 KWh with cost savings of H8.3 lakhs. |
The steps taken by the Company for utilising alternate sources of energy. |
We have consumed 173 million KWh of energy during FY 2022-23, procured from the national grid. Almost 30.6 million units (-18%) out of 173 million units consumed were produced from solar and wind energy. Of this, 8.4 million units of solar power were generated at the Companyâs campus in Dighi, Pune. On the international front, we signed a contract to purchase renewable energy certificates from Portland General Electric Company for our Portland and Hillsboro facilities, totaling to around 6 million units. We also completed the first solar power operating expense model project in Seixal, Portugal, where solar energy power generation is equivalent to approximately 44% of the site capacity. We expect to finish the project and its implementation in the first quarter of FY 2023-24. |
The capital investment on energy conservation |
118 energy-saving opportunities out of 130 projects were completed with a capital investment of -H6.9 crores. |
equipment |
Our Facility Infrastructure Management teams identified 130 energy saving opportunities involving projects on EB Utilisation, Electric Load Reduction, HVAC, PUE Enhancement, Transformer and Load optimisation, SMPS and UPS efficiency enhancement / Optimisation and Consolidation, Smart Lighting (conversion of conventional lighting into LED) etc. A detailed break-up of the amount invested is below: |
Row Labels Amount of Investment (?) |
|
Electric load reduction 1,16,835 |
|
HVAC efficiency enhancement / Optimisation and 3,77,61,749 Consolidation |
|
Installation of Hot Air Diverter 1,92,000 |
|
PUE Enhancement 80,41,490 |
|
Smart Lighting 8,53,186 |
Name |
Category |
|
Row Labels |
Amount of Investment (?) |
|
Tower B Basement, Tower B battery room and Tower A, B, C staircase and terrace area |
47,250 |
|
Transformer and LT load optimisation |
1,85,22,200 |
|
UPS efficiency enhancement / Optimisation and Consolidation |
35,30,560 |
|
UPS Optimisation |
3,26,540 |
|
Foreign exchange earnings were equivalent to H795.47 crores and foreign exchange outgo was equivalent to H937.78 crores.
Tata Communicationsâ sustainability strategy, based on Environmental, Social and Corporate Governance (âESGâ) framework which aims to create long-term stakeholder value and sustainable growth for our business, stems from, and corresponds to the three key pillars - People, Planet and Community. These are further strengthened by our robust Corporate Governance practices.
As a digital ecosystem enabler, Tata Communications is committed to promoting resource-efficient urban infrastructure with a smaller carbon footprint and technological solutions towards a circular economy that utilises resources more sustainably by supporting our customers to build a better world together. We are dedicated to solving some of the worldâs most pressing challenges such as climate change, gender equality, well-being and resource conservation through our reach and technology and ensuring inclusive growth of its people and community.
In the past year, we have continued a strong focus on sustainability and made several interventions in the direction of Climate Change, Energy Conservation, Zero Harm, Human Rights, Community, Water and Waste Reduction aspects, which affirm the principle of âZero Harmâ to our employees, society and the environment.
During the year under review, the Board also amended the scope of the Corporate Social Responsibility Committee and renamed it as the Corporate Social Responsibility, Safety and Sustainability Committee (âCSRSS Committeeâ) to additionally review and monitor safety and sustainability initiatives and matters. Your Company has adopted the following long-term sustainability goals:
a. Carbon Neutral by FY 2030 and Net Zero by FY 2035;
b. GHG reduction potential of 20x by FY 2027 at Customer end;
c. 20% water reduction by FY 2030 compared to FY 2020; and
d. Zero Waste to Landfill by FY 2027.
Kindly refer to the Natural Capital section of the Integrated Annual Report for more details.
At Tata Communications, we believe in creating a conducive workplace that fosters innovative ideas, welcomes change and creates multiple avenues for the upward mobility of our human resources. Through dedicated employee engagement and upskilling programmes, we strive to create a mutually beneficial environment that encourages people to offer their best and propel the organisation to greater heights.
Our Talent and People Strategy focus has been across four key pillars: Employee experience, Effectiveness and Efficiency, Talent Pipeline and Enhanced Leadership. With employees at the centre, our focus has been to continue to be a Great Place to Work, create a value proposition for our employees and provide avenues for career mobility.
We firmly believe that learning is essential for driving innovation, productivity, and business impact. To achieve our goal of empowering hyperconnected ecosystems, we strive to maintain a culture of continuous learning by providing our employees with the necessary tools, technology, and environment.
We have a holistic talent management approach which includes immediate term levers for proactive retention of people engaged in critical roles and medium-term measures such as job rotation, short-term assignments, secondments etc.
You can read more about our employee engagement and development programmes in the Human Capital section of the Integrated Annual Report.
Disclosures pertaining to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
Tata Communications has zero tolerance for sexual harassment and has adopted a charter 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 complied with all provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 including constitution of Internal Complaints Committee.
During the financial year 2022-23, the Company received two sexual harassment complaints, of which one was resolved by the Internal Complaints Committee, while investigation is under progress for the second one.
Remaining cautiously optimistic in light of the global decline in Covid-19 infection rates, Tata Communications has implemented a âReturn to Officeâ in hybrid mode for our employees across the globe starting April 1, 2022, after ensuring a safe working environment in our office locations. With the pandemic still not completely behind us, we continue to monitor the global situation and will continue to keep the best interests of our employees, customers and partners as the topmost priority.
Statutory Information and Disclosures
There are no other subsequent events between the end of the financial year and the date of this report which have a material impact on the financials of the Company.
On April 20, 2020, the Company, by way of private placement, issued and allotted 5,250 (Five Thousand Two Hundred and Fifty) Rated, Secured, Listed, Redeemable, Non-Convertible Debentures (âNCDsâ) at a nominal value of H10,00,000 (Rupees Ten lakhs only)
each, aggregating up to H5,25,00,00,000 (Rupees Five Hundred and Twenty-Five Crores only). The NCDs were rated AA by CARE Ratings Limited. The NCDs were listed on the Wholesale Debt Segment of the National Stock Exchange of India Limited.
The NCDs have been redeemed on their maturity date i.e., April 19, 2023. The proceeds from the issue of debentures have been utilised as per the objects stated in the offer document and there have been no deviations or variations in the use of proceeds of the NCD issuance from the objects stated in the offer document.
Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Companyâs operations in future
During the year under review, there were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and the Companyâs operations in future.
The directors thank the Companyâs employees, customers, vendors, investors and all other stakeholders for their continuous support.
The directors appreciate and value the contributions made by all our employees and their families for making the Company what it is.
On behalf of the Board of Directors
Chairperson DIN: 00147182
Dated: June 1, 2023
Registered Office:
VSB, Mahatma Gandhi Road, Fort,
Mumbai - 400 001
Mar 31, 2022
On a consolidated basis, the revenue for FY 2021-22 was H16,724.73 crore, lower by 2.20% as compared to the previous year''s revenue of H17,100.10 crore. The PAT attributable to shareholders and non-controlling interests for FY 2021-22 was H1,484.67 crore as compared to H1,251.52 crore for FY 2020-21. The growth in the consolidated PAT is primarily on account of lower expenses during FY 2021-22.
COVID-19
During FY 2021-22, the Coronavirus (''COVID-19'') pandemic continued to cause significant disruption to the world economy with new and highly infectious variants like Omicron and Delta spreading at unprecedented rates. Over the past year, Tata Communications has been closely monitoring the COVID-19 situation as it evolves and adapting our business continuity plans to ensure minimal potential impact on services to our customers while maintaining strict precautions for our employees and their families.
Throughout the year, our taskforce overseen by our Global Management Committee led by our Managing Director and CEO assessed and monitored the COVID-19 situation, keeping our Business Continuity Plan aligned with mandates issued by national and local governments and health authorities at all times. Our teams have been in constant communication with our customers and partners to support them in navigating any connectivity, security and collaboration challenges faced by them as businesses around the world define new ways to re-open safely.
While our operations are built for maximum flexibility and agility, we have been actively engaging with third parties and partners that support us to strengthen the continuity of our operations and minimise the impact of the continuing pandemic on our customers.
Keeping the physical safety and mental well-being of our employees on top priority, we implemented several precautionary measures and initiatives to provide necessary support to our employees during these testing times. For the greater part of FY 2021-22, majority of our workforce continued to work from home with only employees in essential roles travelling to office or other locations. We continued the implementation of safety guidelines to address employee and customer queries; issued regular COVID-19 advisories to employees and conducted periodic testing through Rapid Antigen Tests for employees working from office locations to ensure a safe working environment. As part of the larger programme initiated by the Tata group, Tata Communications organised vaccination drives for its employees and their families at various office locations in India.
Remaining cautiously optimistic in light of the global decline in COVID-19 infection rates, coupled with rising vaccination numbers, Tata Communications has implemented a gradual Return to Office in hybrid mode for its employees across the globe starting April 1, 2022, after ensuring a safe working environment in our office locations. However, with the pandemic still not completely behind us, we continue to monitor the global situation and will change our plans where needed in the best interests of our employees, customers and partners.
The Directors present the 36th Annual Report of Tata Communications Limited (the ''Company'') along with the audited financial statements for the financial year ended March 31, 2022. The Company along with its subsidiaries wherever required is referred as ''we'', ''us'', ''our'', or ''Tata Communications''. The consolidated performance of the Company and its subsidiaries has been referred to wherever required.
The table below sets forth the key financial parameters of the Company''s performance during the year under review:
(H in crores) |
||||
Standalone |
Consolidated |
|||
2021-22 |
2020-21 |
2021-22 |
2020-21 |
|
Income from operations |
6,587.35 |
6,225.32 |
16,724.73 |
17,100.10 |
Other income |
558.49 |
274.56 |
332.09 |
156.76 |
Total Income |
7,145.84 |
6,499.88 |
17,056.82 |
17,256.86 |
Expenses |
||||
Network and transmission expenses |
2,238.61 |
2,051.01 |
6,199.49 |
6,513.66 |
Employee benefits expenses |
1,279.22 |
1,104.61 |
3,040.34 |
3,049.09 |
Operating and Other Expenditure |
1,113.74 |
1,086.16 |
3,258.18 |
3,276.77 |
Depreciation and amortization expenses |
916.14 |
972.89 |
2,204.54 |
2,313.87 |
Total expenses |
5,547.71 |
5,214.67 |
14,702.55 |
15,153.39 |
Profit from ordinary activities before finance cost, exceptional items and tax |
1,598.13 |
1,285.21 |
2,354.27 |
2,103.47 |
Finance Cost |
88.59 |
106.73 |
360.25 |
420.20 |
Profit from ordinary activities before exceptional items and tax |
1,509.54 |
1,178.48 |
1,994.02 |
1,683.27 |
Exceptional items |
10.78 |
50.82 |
5.96 |
(74.72) |
Profit before tax (PBT) |
1,520.32 |
1,229.30 |
1,999.98 |
1,608.55 |
Tax expense/(benefit) |
||||
Current tax |
333.00 |
286.92 |
431.31 |
406.49 |
Deferred tax |
20.00 |
(20.28) |
90.82 |
(51.60) |
Profit / (Loss) before share in profit/(loss) of associates |
1,167.32 |
962.66 |
1,477.85 |
1253.66 |
Share in profit/(loss) of associates |
6.82 |
(2.14) |
||
Profit/(Loss) for the period |
1,484.67 |
1251.52 |
||
Attributable to: |
||||
Shareholders of the Company |
1,481.76 |
1250.63 |
||
Non-Controlling Interest |
2.91 |
0.89 |
On a standalone basis, the revenue for FY 2021-22 was H6,587.35 crore, higher by 5.82% over the previous year''s revenue of H6,225.32 crore. The profit after tax (''PAT'') attributable to shareholders for FY 2021-22 was H1,167.32 crore registering a growth of 21.26% over the profit (after tax) of H962.66 crore for FY 2020-21. The growth in the standalone profits is reflective of higher revenues during FY 2021-22.
The Board recommends a dividend of H20.70 per fully paid Equity Share on 285,000,000 Equity Shares of face value H10/- each, for the financial year ended March 31, 2022. The Board has recommended dividend based on the parameters laid down in the Dividend Distribution Policy.
The dividend on Equity Shares is subject to the approval of the Shareholders at the Annual General Meeting (''AGM'') scheduled to be held on Wednesday, June 29, 2022.
The dividend, once approved by the Shareholders, will be paid, subject to deduction of tax at source, on or before Wednesday, July 6, 2022. If approved, the dividend would result in a cash outflow of H589.95 crore. The dividend on Equity Shares is 207% of the paid-up value of each share. The total dividend pay-out works out to 39.74% of the profit after tax for the consolidated financial results.
The Company has fixed Monday, June 13, 2022 as the ''Record Date'' for determining entitlement of members to final dividend for the financial year ended March 31, 2022, if approved at the AGM.
The Board of Directors has decided to retain the entire amount of profit for Financial Year 2021-22 in the statement of profit and loss.
As on March 31, 2022, the Company had 55 subsidiaries and 3 associate companies. There has been no material change in the nature of business of the subsidiaries.
TC IOT Managed Solutions Limited, a wholly owned subsidiary of Tata Communications Limited had applied for voluntary strike off on November 29, 2019. The application was approved by the Registrar of Companies, Ministry of Corporate Affairs, vide its order dated January 13, 2022.
The application for voluntary strike-off filed by Tata Communications MOVE UK Limited (formerly known as Teleena UK Limited), a wholly-owned subsidiary of Tata Communications (Netherlands) B.V. and indirect subsidiary of the Company was approved by the Companies House, United Kingdom, and the subsidiary was dissolved on March 1, 2022.
A report on the financial position of each of the subsidiaries and joint ventures as per the Companies Act, 2013 (''Act'') as provided in Form AOC-1 is attached to the financial statements of the Company.
Further, pursuant to the provisions of Section 136 of the Act, the standalone and consolidated financial statements of the Company along with relevant documents and separate audited financial statements in respect of
ii. Dr. Uday B. Desai completed his second term as an Independent Director of the Company on June 5, 2021.
iii. Mr. Krishnakumar Natarajan was appointed as an Additional Director (Independent) on the Board of the Company with effect from July 15, 2021.
iv. Mr. Ashok Sinha was appointed as an Additional Director (Independent) on the Board of the Company with effect from October 8, 2021.
v. Mr. N. Ganapathy Subramaniam was appointed as an Additional Director (Non-Executive, NonIndependent) on the Board of the Company with effect from December 2, 2021.
Mr. Krishnakumar Natarajan and Mr. Ashok Sinha fulfil the criteria under Regulation 16(1)(b) and Regulation 25(8) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''SEBI Listing Regulations'') and Section 149(6) of the Companies Act, 2013. All the appointments to the Board are subject to receipt of clearance of the Ministry of Information and Broadcasting under the Policy Guidelines for Uplinking of Television Channels from India dated December 5, 2011, applicable to the Company and the Company has obtained necessary approvals prior to appointment of new directors.
Pursuant to the provisions of Section 149 of the Act and Regulation 25(8) of the SEBI Listing Regulations, the independent directors have submitted declarations that each of them meet the criteria of independence as provided in Section 149(6) of the Act along with Rules framed thereunder and Regulation 16(1)(b) of the SEBI Listing Regulations. There has been no change in the circumstances affecting their status as independent directors of the Company. Pursuant to Rule 8(5)(iii)(a) of the Companies (Accounts) Rules, 2014, in the opinion of the Board, the Independent Directors are competent, experienced, proficient and possess necessary expertise and integrity to discharge their duties and functions as Independent Directors.
None of the Company''s directors are disqualified from being appointed as a director as specified in Section 164 of the Act. For details about the directors, please refer to the Corporate Governance Report. In accordance with provisions of Section 152 of the Act and the Articles of Association of the Company, Mr. Srinath Narasimhan, retires by rotation at the ensuing AGM and being eligible, has offered himself for reappointment.
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, commission, reimbursement of expenses incurred by them for the purpose of attending meetings of the Board and its Committees and any other transactions as
subsidiaries, are available on the website of the Company at www.tatacommunications.com/investors/results.
Based on the framework of internal financial controls and compliance systems established and maintained by the Company, the work performed by the internal, statutory, cost and 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 is of the opinion that the Company''s internal financial controls were adequate and effective during Financial Year 2021-22.
Pursuant to Section 134(5) of the Act, the Board of Directors, to the best of its knowledge and ability, confirm that for the year ended March 31, 2022:
i. In the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;
ii. They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;
iii. They have taken proper and sufficient care 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;
iv. They have prepared the annual accounts on a going concern basis;
v. They have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; and
vi. They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
There have been the following changes in the Board of Directors during the financial year.
i. Pursuant to the Government of India having sold-off its entire stake in the Company, Dr. Rajesh Sharma and Dr. Maruthi Prasad Tangirala tendered their resignations effective from May 10, 2021.
approved by the Audit Committee or the Board which are disclosed under the Notes to Accounts.
During the year there was no change in the Key Managerial Personnel of the Company.
Pursuant to the provisions of Section 203 of the Act, the Key Managerial Personnel of the Company as on March 31, 2022 are Mr. A. S. Lakshminarayanan - Managing Director & Chief Executive Officer; Mr. Kabir Ahmed Shakir - Chief Financial Officer and Mr. Zubin Adil Patel -Company Secretary.
Number of Meetings of the Board
Eight Board meetings were held during the FY 2021-22. For details of meetings of the Board, please refer to the Corporate Governance Report, which is a part of this report.
The Board of Directors has carried out an annual evaluation of its own performance, performance of the committees, and that of individual directors pursuant to the provisions of the Act and SEBI Listing Regulations.
The performance of the Board and individual directors 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 and the Board as a whole was evaluated, taking into account the views of executive directors and non-executive directors.
The Board and the Nomination and Remuneration Committee 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.
Policy on Directorsâ Appointment and Remuneration and other Details
The Company''s policy on directors'' appointment and remuneration and other matters provided in Section 178(3) of the Act, has been disclosed in the Corporate Governance Report, which is a part of this report and is available on www.tatacommunications.com/investors/ governance/.
Internal Financial Control Systems and their Adequacy
The details in respect of internal financial controls and their adequacy are included in the Management Discussion and Analysis, which is a part of this report.
Audit Committee
The details, including the composition of the Audit Committee, terms of reference, attendance etc., are included in the Corporate Governance Report, which is a part of this report. The Board has accepted all the recommendations of the Audit Committee and hence, there is no further explanation to be provided for, in this Report.
Vigil Mechanism
The Company has adopted a whistle-blower policy and has established a vigil mechanism for directors and employees to report their concerns. For more details on the whistle-blower policy please refer to the Corporate Governance Report and the Business Responsibility Report.
Auditors
At the 31st AGM held on June 27, 2017 the Members approved appointment of M/s. S.R. Batliboi & Associates LLP, Chartered Accountants (Firm Registration No. 101049W/E300004) as Statutory Auditors of the Company to hold office for a period of five years from the conclusion of that AGM till the conclusion of the 36th AGM.
The Board has approved the re-appointment of M/s. S.R. Batliboi & Associates LLP, Chartered Accountants (Firm Registration No. 101049W/E300004) as Statutory Auditors of the Company, for a second tenure of 5 years, based on the recommendations of the Audit Committee and the same is subject to the approval of the Members of the Company.
The necessary resolutions for re-appointment of M/s. S.R. Batliboi & Associates LLP form part of the Notice convening the ensuing AGM scheduled to be held on Wednesday, June 29, 2022.
The statutory auditor''s report for FY 2021-22 does not contain any qualifications, reservations, adverse remarks or disclaimer.
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed a practising company secretary, Mr. U. C. Shukla, (FCS No. 2727/CP No. 1654), to undertake the Company''s secretarial audit.
The report of the Secretarial Auditor in Form MR-3 for the financial year ended March 31, 2022 is attached to this report. The Secretarial Audit Report contains the following observation: "During the year under review, the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc., mentioned above subject to the following observations:
The Company has complied with the requirements of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Companies Act, 2013 except for the following:
i. From May 10, 2021 to December 2, 2021, the
total strength of the Board was below the limit of six directors as prescribed under the SEBI
(Listing Obligations and Disclosure Requirements) Regulations, 2015.
ii. The composition of the Audit Committee,
Nomination and Remuneration Committee and Stakeholders Relationship Committee was not as per the requirements of the SEBI (Listing Regulations and Disclosure Requirements) Regulations, 2015 and the Companies Act, 2013 from May 10, 2021 to July 20, 2021.
iii. The composition of the Corporate Social
Responsibility Committee was not as per the requirements of the Companies Act, 2013 from May 10, 2021 to July 20, 2021.
iv. The composition of the Risk Management Committee
was not as per the requirements of the SEBI (Listing Regulations and Disclosure Requirements) Regulations, 2015 from May 10, 2021 to July 20, 2021.
In view of the Government of India having sold-off its entire stake in the Company, the two nominees of the Government of India on the Board of Directors of the Company viz., Dr. Rajesh Sharma and Dr. Maruthi Prasad Tangirala tendered their resignations on May 10, 2021. This resulted in the total number of directors of the Company being reduced to 4. Furthermore, the second term of office of Dr. Uday B Desai, an Independent Director
on the Board of the Company ended on June 5, 2021, thereby reducing the strength of the Board of Directors to 3. With their cessation as directors of the Company, Dr. Sharma, Dr. Tangirala and Dr. Desai also ceased to be members of various committees of the Board. Hence, the composition of the Audit Committee, Nomination and Remuneration Committee and Stakeholders Relationship Committee was not as per the requirements of the SEBI (Listing Regulations and Disclosure Requirements) Regulations, 2015 and the Companies Act, 2013 up to July 20, 2021. Further, the composition of the Corporate Social Responsibility Committee was not as per the requirements of the Companies Act, 2013 and the composition of the Risk Management Committee was not as per the requirements of the SEBI (Listing Regulations and Disclosure Requirements) Regulations, 2015 up to July 20, 2021.
The Company was in the process of identifying suitable directors to be appointed in place of the outgoing directors and had accordingly made an application to SEBI under Regulation 102(8) of the SEBI Listing Regulations seeking relaxation from strict enforcement of regulations pertaining to minimum number of directors and constitution of committees. All appointments to directorship positions in the Company are subject to receipt of clearance of the Ministry of Information and Broadcasting (''MIB'') under the Policy Guidelines for Uplinking of Television Channels from India dated December 5, 2011, applicable to the Company. The NRC, after careful evaluation, identified suitable candidates for appointment to the Board and applications to the MIB were made by the Company immediately upon identification of each incumbent by the NRC.
On receipt of relevant approvals from the MIB, and in accordance with the recommendation of the NRC, the Board of Directors of the Company effected the following appointments:
i. Appointment of Mr. Krishnakumar Natarajan as Additional Director (Independent) with effect from July 15, 2021;
ii. Appointment of Mr. Ashok Sinha as Additional Director (Independent) with effect from October 8, 2021;
iii. Appointment of Mr. N. Ganapathy Subramaniam as Additional Director (Non-Executive, NonIndependent) with effect from December 2, 2021.
Thereafter, with effect from December 2, 2021 the composition of the Board was in compliance with the requirement of having minimum number of six directors as stipulated under the SEBI Listing Regulations.
Further, vide its resolution dated July 20, 2021, the Board reconstituted all its committees to make them compliant with the relevant requirements of the Act and/or the SEBI Listing Regulations, as applicable.
As per Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014, the Company is required to prepare, maintain as well as have the audit of its cost records conducted by a Cost Accountant and accordingly it has made and maintained such cost accounts and records. The Board, on the recommendation of the Audit Committee, has appointed Ms. Ketki D. Visariya, Cost Accountant (Firm Registration No. 102266) as the Cost Auditor of the Company for FY 2022-23 under Section 148 and all other applicable provisions of the Act. Ms. Visariya has confirmed that she is free from disqualification specified under Section 141(3) and proviso to Section 148(3) read with Section 141(4) of the Act and that the appointment meets the requirements of Section 141(3) (g) of the Act. She has further confirmed her independent status and an arm''s length relationship with the Company.
The remuneration payable to the Cost Auditor is required to be placed before the Members in a General Meeting for their ratification. Accordingly, a resolution for seeking Members'' ratification for the remuneration payable to Ms. Visariya is included in the Notice convening the AGM.
The Board of Directors of the Company has formed a Risk Management Committee for monitoring and reviewing the risk management plan and ensuring its effectiveness. The Audit Committee has additional oversight in the area of financial risks and controls. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuous basis.
The development and implementation of risk management policy has been covered in the Management Discussion and Analysis, which forms part of this report.
Your Company falls within the scope of a company providing infrastructural facilities under Schedule VI of the Act. Accordingly, the Company is exempt from the provisions of Section 186 of the Act with regards to Loans, Guarantees and Investments.
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 can be accessed on the Company''s website at www.tatacommunications. com/investors/governance/.
None of the transactions with related parties falls under the scope of Section 188(1) of the Act. There have been no materially significant related party transactions between the Company and the directors, the management, the subsidiaries or the relatives except for those disclosed in the financial statements. Accordingly, particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Act and Regulation 23 of the Listing Regulations, along with the justification for entering into such a contract or arrangement in Form AOC-2, does not form part of the Directors'' Report.
Corporate Social Responsibility
The brief outline of the Corporate Social Responsibility (''CSR'') policy of the Company and the initiatives undertaken by the Company on CSR activities during the year under review are set out in Annexure I of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014 including any statutory modifications/amendments thereto for the time being in force. For other details regarding the CSR Committee, please refer to the Corporate Governance Report, which is a part of this report. The CSR Policy is also available on the Company''s website at www.tatacommunications.com/investors/governance.
Annual Return
As per the requirements of Section 92(3) of the Act and Rules framed thereunder, including any statutory modifications/amendments thereto for the time being in force, the annual return for FY 2021-22 is available on www.tatacommunications.com/investors/results/.
Particulars of Employees
The information required under Section 197 of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given below:
a. The ratio of the remuneration of each director to the median remuneration of the employees of the Company and percentage increase in remuneration of each Director, Chief Executive Officer, Chief Financial Officer and Company Secretary for the financial year 2021-22:
Non-Executive Directors |
Ratio to median remuneration * |
% increase in remuneration in the financial year |
Non-Executive Directors |
||
Ms. Renuka Ramnath |
7.70 |
15 |
Mr. Srinath Narasimhan |
4.62 |
20 |
2. Since the remuneration is only for part of the year, the ratio of their remuneration to median remuneration and percentage increase in remuneration is not comparable and hence not stated.
Non-Executive Directors |
Ratio to median remuneration * |
% increase in remuneration in the financial year |
Dr. Uday B. Desai |
NA |
NA |
Dr. Rajesh Sharma1 |
- |
NA |
Dr. Maruthi Prasad Tangirala1 |
- |
NA |
Mr. Krishnakumar Natarajan2 |
NA |
NA |
Mr. AshoK Sinha2 |
NA |
NA |
Mr. N. Ganpathy Subramaniam2 |
NA |
NA |
Executive Directors |
||
Mr. A. S. Lakshminarayanan |
49.17 |
10 |
Chief Financial Officer |
||
Mr. Kabir Ahmed Shakir |
- |
7 |
Company Secretary |
||
Mr. Zubin Adil Patel |
- |
NA |
''While calculating the ratio for non-executive directors, both commission and sitting fees paid have been taken.
1 The Government directors had informed the Company that they shall not accept any sitting fees and commission as their directorships are considered to be part of their official duty.
The Company being in the telecommunications business, there is no material information on technology absorption to be furnished. The Company continues to adopt and use the latest technologies to improve the efficiency and effectiveness of its business operations.
The details pertaining to energy conservation initiatives of the Company are as follows:
b. The percentage increase in the median remuneration of employees in the financial year:
12.9%
c. The number of permanent employees on the rolls of Company:
6,087 employees as on March 31, 2022
d. Average percentile increase already made in the salaries of employees, other than the managerial personnel in the last financial year, and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:
During the course of the year, the total average increase was approximately 14.5% for employees based in India, after accounting for promotions and other event-based compensation revisions. The increase in the managerial remuneration for the year was 17.3%.
e. Affirmation that the remuneration is as per the remuneration policy of the Company:
The Company affirms that the remuneration is as per the remuneration policy of the Company.
f. The statement containing names of top ten employees in terms of remuneration drawn and the particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in a separate annexure forming part of this report. Further,
the report and the accounts are being sent to the Members excluding the aforesaid annexure. In terms of Section 136 of the Act, the said annexure is open for inspection. Any Member interested in obtaining a copy of the same may write to the Company Secretary at [email protected].
As per SEBI Listing Regulations, the Corporate Governance Report with the Auditors'' Certificate thereon, and the Management Discussion and Analysis are attached, which forms part of this report.
As per Regulation 34 of the SEBI Listing Regulations, a Business Responsibility Report is attached and is a part of this Annual Report.
As per Regulation 43A of the SEBI Listing Regulations, the Dividend Distribution Policy is disclosed in the Corporate Governance Report and is uploaded on the Company''s website at www.tatacommunications.com/ investors/governance/.
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 such systems are adequate and operating effectively.
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.
(i) |
The steps taken or impact on conservation of energy |
The Company has identified 125 energy-saving opportunities during FY 2021-22. These involved projects on Heating, Ventilation and Air Conditioning (''HVAC''), Switched-Mode Power Supply (''SMPS'') and Uninterruptible Power Supply (''UPS'') efficiency enhancement/ optimisation and consolidation, smart lighting (conversion of conventional lighting into LED), and usage of IoT. We completed 91 out of 125 projects which resulted in energy savings of 5.57 million KWH and energy cost savings of H4.82 crores. |
(ii) |
The steps taken by the company for utilising alternate sources of energy. |
We have consumed 173 million KWH of energy during FY 2021-22, procured from the national grid. Almost 22 million units (~13%) out of 173 million units consumed were produced from solar and wind energy. |
(iii) The capital investment on energy conservation equipment |
We completed 91 opportunities out of 125 projects with a capital investment of ~H8.2 crores. Our Facility Infrastructure Management teams identified 125 energysaving opportunities involving projects on EB Utilisation, Electric Load Reduction, Heating, Ventilation and Air Conditioning (''HVAC''), PUE Enhancement, Transformer and Load optimisation, Switched-Mode Power Supply (''SMPS'') and Uninterruptible Power Supply (''UPS'') efficiency enhancement/optimisation and consolidation, smart lighting (conversion of conventional lighting into LED) etc. A detailed break-up of the amount invested is below: Amount of investment Row Labels ^ EB utilisation 4,325,500 Electric load reduction -HVAC efficiency enhancement/ 52,704,183 optimisation and consolidation Power factor improvement 27,537 PUE Enhancement 6,661,476 Smart Lighting 1,238,010 SMPS efficiency enhancement / 7,850,000 optimisation and consolidation Transformer and LT load optimisation 1,891,260 UPS efficiency enhancement /optimisation 6,374,367 and consolidation Grand Total 81,072,333 |
Foreign exchange earnings and outgo
For the purpose of Form ''C'' under the Companies (Accounts) Rules 2014, foreign exchange earnings were equivalent to H684.37 crores and foreign exchange outgo was equivalent to H876.53 crores.
At Tata Communications, we have a highly distributed multicultural workforce representing more than 50 nationalities, dedicated to drive meaningful change for our customers. Our structured approach towards Diversity and Inclusion is reflected in our strategic business imperative - "Winning Mixâ which categorically states our commitment towards creating a workplace culture that is diverse and drives organisational success and innovation. The program is focused towards nurturing a diverse workforce to ensure each employee''s full and effective participation along with equal opportunities for leadership at all levels of decision-making. The diversity policy is based on the pillars of an inclusive culture, diversity talent pool and talent management.
We consider our employees to be top priority for us and have launched a number of initiatives in FY 202122 to attract and retain talent including attractive compensation and bonus plans, flexibility in work location, capability development, upskilling opportunities, training and certifications etc.
You can read more about our employee engagement and development programmes in the ''Human Capital'' section of the Integrated Report.
Disclosures pertaining to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
Tata Communications has zero tolerance for sexual harassment and has adopted a charter 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 complied with all provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 including constitution of Internal Complaints Committee.
During the financial year 2021-22, the Company did not receive any sexual harassment complaint.
STATUTORY INFORMATION AND DISCLOSURES
Material Events after Balance Sheet Date
There are no subsequent events between the end of the financial year and the date of this report which have a material impact on the financials of the Company.
On April 20, 2020, the Company, by way of private placement, issued and allotted 5,250 (Five Thousand Two Hundred and Fifty only) Rated, Secured, Listed, Redeemable, Non-Convertible Debentures (''NCDs'') at a nominal value of H10,00,000 (Indian Rupees Ten Lakhs only) each, aggregating up to H525,00,00,000 (Indian Rupees Five Hundred and Twenty Five Crores only). The NCDs were rated AA by CARE Ratings Limited. The NCDs are listed on the Wholesale Debt Segment of the National Stock Exchange of India Limited.
Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Companyâs operations in future
During the year under review, there were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.
The Directors thank the Company''s employees, customers, vendors, investors and partners for their continuous support.
The Directors also thank the Government of India, Governments of various states in India, Governments of various countries and concerned Government departments and agencies for their co-operation.
The directors are also grateful to Tata Communications'' other stakeholders and partners including our shareholders, promoters, bankers and others for their continued support.
The directors appreciate and value the contributions made by all our employees and their families for making the Company what it is.
On behalf of the Board of Directors
Chairperson DIN: 00147182
Dated: April 21, 2022
Registered Office:
VSB, Mahatma Gandhi Road, Fort,
Mumbai - 400 001
Mar 31, 2021
The Directors present the 35th Annual Report of Tata Communications Limited (the ''Company'') along with the audited financial statements for the financial year ended March 31, 2021. The Company along with its subsidiaries wherever required is referred as ''we'', ''us'', ''our'', or ''Tata Communications''. The consolidated performance of the Company and its subsidiaries has been referred to wherever required.
The table below sets forth the key financial parameters of the Company''s performance during the year under review:
(H in crores)
Particulars |
Standalone |
Consolidated |
||
2020-21 |
2019-20 | |
2020-21 |
2019-20 |
|
Income from operations |
6,225.32 |
5,750.33 |
17,100.10 |
17,067.99 |
Other income |
274.56 |
180.27 |
156.76 |
69.68 |
Total Income |
6,499.88 |
5,930.60 |
17,256.86 ¦ |
17,137.67 |
Expenses |
||||
Network and transmission expenses |
1,920.74 |
1,842.35 |
6,333.27 |
6,777.56 |
Employee benefits expenses |
1,104.61 |
998.83 |
3,049.09 |
3,039.14 |
Operating Expenditure |
1,216.43 |
1,337.09 |
3,457.16 |
3,962.34 |
Depreciation and amortization expenses |
972.89 |
977.44 |
2,313.87 |
2,357.72 |
Total expenses |
5,214.67 |
5,155.71 |
15,153.39 ¦ |
16,136.76 |
Profit from ordinary activities before finance cost, exceptional items and tax |
1,285.21 |
774.89 |
2,103.47 |
1,000.91 |
Finance Cost |
106.73 |
55.19 |
420.20 |
470.74 |
Profit from ordinary activities before exceptional items and tax |
1,178.48 |
719.70 |
1,683.27 |
530.17 |
Exceptional items |
50.82 |
(346.15) |
(74.72) |
(390.51) |
Profit before tax (PBT) |
1,229.30 |
373.55 |
1,608.55 ¦ |
139.66 |
Tax expense/(benefit) |
||||
Current tax |
286.92 |
238.48 |
406.49 |
334.18 |
Deferred tax |
(20.28) |
(73.71) |
(51.60) |
(107.51) |
Profit / (Loss) before share in profit/(loss) of associates |
962.66 |
208.78 |
1,253.66 |
(87.01) |
Share in profit/(loss) of associates |
(2.14) |
2.18 |
||
Profit/(Loss) for the period |
1,251.52 ¦ |
(84.83) |
||
Attributable to: |
||||
Shareholders of the Company |
1,250.63 |
(85.96) |
||
Non-Controlling Interest |
0.89 |
1.13 |
The Novel Coronavirus (''COVID-19'') pandemic has continued to cause substantial disturbance globally and in India, resulting in considerable slowdown of economic activity. Tata Communications has been closely monitoring the COVID-19 situation, and our response to COVID-19 is a showcase of our business agility, keeping our employees safe and our customers'' businesses and their employees connected and mobile.
We have been in constant communication with our customers and partners to address their concerns and to support them in navigating any connectivity, security and collaboration challenges that they face.
We deployed a taskforce which is overseen by our Global Management Committee led by our CEO to continuously assess and monitor the COVID-19 situation. Our Business Continuity Plan covers all functions and with effective backup and resiliency. Additionally, our Global
Emergency Response team continues to interact with national governments and health authorities to ensure best practice in health and safety while maintaining business continuity.
To ensure business continuity for us and our customers, keeping in mind the safety of our employees, we:
⢠continued work from home for all employees globally, with the exception of some essential roles that need to be conducted from an office or on location for critical network maintenance, for which all necessary arrangements were made to ensure their safety and protection.
⢠continued to prioritise virtual meetings and events, even while global businesses gradually opened.
The physical safety and mental well-being of our employees has been our top priority and we implemented several precautionary measures and initiatives to provide the necessary support to our employees during these testing times. We developed safety guidelines to address employee and customer queries; risk assessment checklists for teams working and visiting customer locations for meetings, issued COVID-19 advisories to essential employees and framed an overall safety Standard Operating Procedure to ensure business continuity while ensuring protection of our employees. We implemented several initiatives to promote the emotional well-being of our employees including several virtual sessions on managing anxiety and building emotional resilience; fitness sessions and enablement applications, employee assistance, counselling etc.
Partnering with several Non-Governmental Organisations (''NGOs'') and Trusts, Tata Communications extended efforts to provide immediate relief to communities in distress by leveraging our core business competencies in the form of digital infrastructure support while also undertaking hunger and healthcare relief initiatives.
The situation continues to evolve at pace and as governments around the world implement measures to contain this public health crisis while finding safe ways of getting back to business, we remain fully committed to monitoring the situation; evaluating our preparedness and changing our plans, where needed.
The Board recommends a dividend of H14.00 per fully paid Equity Share on 285,000,000 Equity Shares of face value of H10/- each, for the financial year ended March 31, 2021. The Board has recommended dividend based on the parameters laid down in the Dividend Distribution Policy.
The dividend on Equity Shares is subject to the approval of the Shareholders at the Annual General Meeting (''AGM'') scheduled to be held on Wednesday, June 30, 2021.
The dividend, once approved by the Shareholders, will be paid, subject to deduction of tax at source, on or before Wednesday, July 7, 2021. If approved, the dividend would result in a cash outflow of H399 crores. The dividend on Equity Shares is 140% of the paid-up value of each share. The total dividend pay-out works out to 41.45% of the net profit for the standalone financial statements.
The Register of Members and Share Transfer Books of the Company will remain closed from Saturday, June 19, 2021 to Wednesday, June 30, 2021 (both days inclusive) for the purpose of payment of the dividend for the Financial Year ended March 31, 2021.
The Board of Directors has decided to retain the entire amount of profit for Financial Year 2020-21 in the statement of profit and loss.
On a standalone basis, the revenue for FY 2020-21 was H6,225.32 crores, higher by 8.26% over the previous year''s revenue of H5,750.33 crores. The profit after tax (''PAT'') attributable to shareholders for FY 2020-21 was H962.66 crores registering a growth of 361.09% over the profit (after tax) of H208.78 crores for FY 2019-20. The growth in the standalone profits is reflective of higher revenues during FY 2020-21 and higher exceptional items during FY 2019-20.
On a consolidated basis, the revenue for FY 2020-21 was H17,100.10 crores, higher by 0.19% over the previous year''s revenue of H17,067.99 crores. The PAT attributable to shareholders and non-controlling interests for FY 202021 was H1,251.52 crores as compared to negative H84.83 crores for FY 2019-20. The growth in the consolidated profits is on account of lower expenses during FY 202021 and higher exceptional items during FY 2019-20.
Subsidiary companies
As on March 31, 2021, the Company had 57 subsidiaries and three associate companies. There has been no material change in the nature of business of the subsidiaries.
On December 23, 2020, Tata Communications International Pte. Ltd. (''TCIPL''), a wholly-owned subsidiary of the Company acquired majority equity stake of 58.1% in Oasis Smart SIM Europe SAS (''Oasis''), thus becoming the majority shareholder of Oasis and its subsidiary Oasis Smart E-Sim
Pte. Ltd. (''OSEPL''). As a result, Oasis and OSEPL became subsidiaries of TCIPL and indirect subsidiaries of the Company.
The application for voluntary strike-off filed by Tata Communications MOVE Singapore Pte. Ltd. (earlier known as Teleena Singapore Pte. Ltd.), a wholly-owned subsidiary of TCIPL and indirect subsidiary of the Company was approved by the Accounting and Corporate Regulatory Authority, Singapore on January 4, 2021.
A report on the financial position of each of the subsidiaries and joint ventures as per the Companies Act, 2013 (''Act'') is provided in Form AOC-1 is attached to the financial statements of the Company.
Further, pursuant to the provisions of Section 136 of the Act, the standalone and consolidated financial statements of the Company, along with relevant documents and separate audited financial statements in respect of subsidiaries, are available on the website of the Company at www.tatacommunications.com/investors/results.
Directorsâ Responsibility Statement
Based on the framework of internal financial controls and compliance systems established and maintained by the Company, the work performed by the internal, statutory, cost and 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 is of the opinion that the Company''s internal financial controls were adequate and effective during Financial Year 2020-21.
Pursuant to Section 134(5) of the Act, the Board of Directors, to the best of its knowledge and ability, confirm that for the year ended March 31, 2021:
i. In the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;
ii. They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;
iii. They have taken proper and sufficient care 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;
iv. They have prepared the annual accounts on a going concern basis;
v. They have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; and
vi. They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
Directors and Key Managerial Personnel
There has been no change in the Board of Directors during the financial year.
Pursuant to the provisions of Section 149 of the Act, the independent directors have submitted declarations that each of them meet the criteria of independence as provided in Section 149(6) of the Act along with Rules framed thereunder and Regulation 16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''SEBI Listing Regulations''). There has been no change in the circumstances affecting their status as independent directors of the Company.
None of the Company''s directors are disqualified from being appointed as a director as specified in Section 164 of the Act. For details about the directors, please refer to the Corporate Governance Report. In accordance with provisions of Section 152 of the Act and the Articles of Association of the Company, Mr. Srinath Narasimhan, retires by rotation at the ensuing AGM and being eligible, has offered himself for reappointment.
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, commission, reimbursement of expenses incurred by them for the purpose of attending meetings of the Board and its Committees and any other transactions as approved by the Audit Committee or the Board which are disclosed under the Notes to Accounts.
During the year under review, Mr. Manish Sansi tendered his resignation as the Company Secretary of the Company with effect from the close of business hours on October 17, 2020 and Ms. Pratibha K. Advani resigned as the Chief Financial Officer of the Company with effect from October 20, 2020. The Board places on record its
appreciation for their invaluable contribution
Mr. Kabir Ahmed Shakir was appointed as Chief Financial Officer of the Company with effect from October 21, 2020 and Mr. Zubin Patel was appointed as Company Secretary with effect from March 24, 2021.
Pursuant to the provisions of Section 203 of the Act, the Key Managerial Personnel of the Company as on March 31, 2021 are Mr. Amur S. Lakshminarayanan -Managing Director and Chief Executive Officer; Mr. Kabir Ahmed Shakir - Chief Financial Officer and Mr. Zubin Patel - Company Secretary.
Ten Board meetings were held during the FY 2020-21. For details of meetings of the Board, please refer to the Corporate Governance Report, which is a part of this report.
The Board of Directors has carried out an annual evaluation of its own performance, board committees, and individual directors pursuant to the provisions of the Act and SEBI Listing Regulations.
The performance of the Board and individual directors 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 and the Board as a whole was evaluated, taking into account the views of executive directors and non-executive directors.
The Board and the Nomination and Remuneration Committee 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 directors being evaluated.
The Company''s policy on directors'' appointment and remuneration and other matters provided in Section 178(3) of the Act, has been disclosed in the Corporate Governance Report, which is a part of this report and is available on www.tatacommunications.com/investors/qovernance/.
The details in respect of internal financial control and their adequacy are included in the Management Discussion and Analysis, which is a part of this report.
The details including the composition of the Audit Committee, terms of reference, attendance etc. are included in the Corporate Governance Report, which is a part of this report.
At the 31st AGM held on June 27, 2017 the Members approved appointment of M/s. S.R. Batliboi & Associates LLP, Chartered Accountants (Firm Registration No. 101049W / E300004) as Statutory Auditors of the Company to hold office for a period of five years from the conclusion of that AGM till the conclusion of the 36th AGM, subject to ratification of their appointment by Members at every AGM. Although the requirement to place the matter relating to appointment of auditors for ratification by Members at every AGM has been done away by the Companies (Amendment) Act, 2017 with effect from May 7, 2018, a resolution proposing ratification of appointment of statutory auditors at the ensuing AGM has been included in the Notice for this AGM.
The statutory auditor''s report and the secretarial audit report do not contain any qualifications, reservations, or adverse remarks or disclaimer. Secretarial audit report is attached to this report.
As per Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014, the Company is
required to prepare, maintain as well as have the audit of its cost records conducted by a Cost Accountant and accordingly it has made and maintained such cost accounts and records. The Board on the recommendation of the Audit Committee has appointed Ms. Ketki D. Visariya, Cost Accountant (Firm Registration No. 102266) as the Cost Auditor of the Company for FY 202122 under Section 148 and all other applicable provisions of the Act. Ms. Visariya has confirmed that she is free from disqualification specified under Section 141(3) and proviso to Section 148(3) read with Section 141(4) of the Act and that the appointment meets the requirements of Section 141(3) (g) of the Act. She has further confirmed her independent status and an arm''s length relationship with the Company.
The remuneration payable to the Cost Auditor is required to be placed before the Members in a General Meeting for their ratification. Accordingly, a resolution for seeking Members'' ratification for the remuneration payable to Ms. Visarya is included at Item No. 6 of the Notice convening the AGM.
The Board of Directors of the Company has formed a Risk Management Committee for monitoring and reviewing the risk management plan and ensuring its effectiveness. The Audit Committee has additional oversight in the area of financial risks and controls. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuous basis.
The development and implementation of risk management policy has been covered in the Management Discussion and Analysis, which forms part of this report.
Your Company falls within the scope of the definition "infrastructure companyâ as provided by the Companies Act, 2013 (''Act''). Accordingly, the Company is exempt from the provisions of Section 186 of the Act with regards to Loans, Guarantees and Investments.
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 can be
accessed on the Company''s website at https://www. tatacommunications.com/investors/governance/.
None of the transactions with related parties falls under the scope of Section 188(1) of the Act. There have been no materially significant related party transactions between the Company and the directors, the management, the subsidiaries or the relatives except for those disclosed in the financial statements. Accordingly, particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Act, along with the justification for entering into such a contract or arrangement in Form AOC-2, does not form part of the Directors'' Report.
The brief outline of the Corporate Social Responsibility (''CSR'') policy of the Company and the initiatives undertaken by the Company on CSR activities during the year under review are set out in Annexure I of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014 including any statutory modifications/amendments thereto for the time being in force. For other details regarding the CSR Committee, please refer to the Corporate Governance Report, which is a part of this report. The CSR Policy is also available on the Company''s website at https://www. tatacommunications.com/investors/governance/.
As per the requirements of Section 92(3) of the Act and Rules framed thereunder, including any statutory modifications/amendments thereto for the time being in force, the annual return for FY 2020-21 is available on https://www.tatacommunications.com/investors/results/.
The information required under Section 197 of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given below:
a. The ratio of the remuneration of each director to the median remuneration of the employees of the Company and percentage increase in remuneration of each Director, Chief Executive Officer, Chief Financial Officer and Company Secretary for the financial year 2020-21:
Non-Executive Directors |
Ratio to median remuneration * |
% increase in remuneration in the financial year |
Non-Executive Directors |
||
Ms. Renuka Ramnath |
7.80 |
22.50 |
Mr. Srinath Narasimhan |
4.48 |
82.22 |
Dr. Uday B. Desai |
6.16 |
31.55 |
Dr. Rajesh Sharma1 |
- |
- |
Dr. Maruthi Prasad Tangirala1 |
- |
- |
Executive Directors |
||
Mr. Amur S. Lakshminarayanan |
46.48 |
NA |
Chief Financial Officer |
||
Ms. Pratibha K. Advani2 |
NA |
NA |
Mr. Kabir Ahmed Shakir2 |
NA |
NA |
Company Secretary |
||
Mr. Manish Sansi2 |
NA |
NA |
Mr. Zubin Patel2 |
NA |
NA |
* While calculating the ratio for non-executive directors, both commission and sitting fees paid have been taken.
1. The Government directors have informed the Company that they shall not accept any sitting fees and commission as their directorships are considered to be part of their official duty.
2. Since the remuneration is only for part of the year, the ratio of their remuneration to median remuneration and percentage increase in remuneration is not comparable and hence, not stated.
As per Regulation 43A of the SEBI Listing Regulations, the Dividend Distribution Policy is disclosed in the Corporate Governance Report and is uploaded on the Company''s website at https://www.tatacommunications. com/investors/governance/.
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 such systems are adequate and operating effectively.
Deposits from the Public
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.
Particulars of Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo
The Company being in the telecommunications business, there is no material information on technology absorption to be furnished. The Company continues to adopt and use the latest technologies to improve the efficiency and effectiveness of its business operations.
Foreign exchange earnings and outgoings
For the purpose of Form ''C'' under the Companies (Accounts) Rules 2014, foreign exchange earnings were equivalent to H636.82 crores and foreign exchange outgo was equivalent to H830.58 crores.
Human resources
Tata Communications offers a dynamic work environment where its employees benefit from working with other innovators from around the globe, driving meaningful change together, both for its customers and Tata Communications. We have a multicultural workforce representing more than 50 nationalities, of which women constitute 22%.
Tata Communications'' compensation and employee benefit practices are designed to be competitive in the respective geographies where we operate. Employee relations continue to be harmonious at all our locations. In line with the Company strategy, the Learning and Development (''L&D'') strategy saw a shift in FY 2020-21, and in addition to democratisation of learning, targeted development avenues were introduced to cater to current and medium-term business needs. FY 2020-21 was an exceptional time; and despite being a difficult year due to the pandemic, our learners had 9.5 days of average learning days per employee that led to a 35% increase in total learning person-days (to 112,782) from FY 2019-20. Targeted development
b. The percentage increase in the median remuneration of employees in the financial year:
(1.3)%
c. The number of permanent employees on the rolls of Company:
5,999 employees as on March 31, 2021
d. Average percentile increase already made in the salaries of employees, other than the managerial personnel in the last financial year, and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:
During the course of the year, the total average increase was approximately 6.4% for employees based in India, after accounting for promotions and other event-based compensation revisions. The increase in the managerial remuneration for the year was 5.9%.
e. Affirmation that the remuneration is as per the remuneration policy of the Company:
The Company affirms that the remuneration is as per the remuneration policy of the Company.
f. The statement containing names of top ten employees in terms of remuneration drawn and the particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in a separate annexure forming part of this report. Further, the report and the accounts are being sent to the Members excluding the aforesaid annexure. In terms of Section 136 of the Act, the said annexure is open for inspection. Any Member interested in obtaining a copy of the same may write to the Company Secretary at investor.relations@ tatacommunications.com.
As per SEBI Listing Regulations, the Corporate Governance Report with the Auditors'' Certificate thereon, and the Management Discussion and Analysis are attached, which forms part of this report.
As per Regulation 34 of the SEBI Listing Regulations, a Business Responsibility Report is attached and is a part of this Annual Report.
across all skill categories was done for 2046 units and 3722 certifications were completed across different skill categories. Six Role Skill Academies were introduced for critical roles across Tata Communications'' value chain and 1600 employees across 90 roles are enrolled for 1218 months development journeys. All of this is achieved through a platform strategy approach for L&D through our single learning interface, Tata Communications Learning Academy (''TCLA'').
Disclosures pertaining to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
Tata Communications has zero tolerance for sexual harassment and has adopted a charter 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 complied with all provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 including constitution of Internal Complaints Committee.
During the financial year 2020-21, the Company received one sexual harassment complaint which was disposed of after investigation during the year. One complaint received in the previous financial year and under investigation as on March 31, 2020, was also disposed of during the current financial year. As on March 31, 2021, both complaints were disposed of with appropriate action.
You can read more about our employee engagement and development programmes in the ''Human Capital'' section of the MDA.
Surplus land
As previously reported, the Company acquired its assets, including numerous parcels of land, in 1986 from the Government of India (''GoI'') as the successor to the Overseas Communications Service. At the time of disinvestment to Panatone Finvest Limited (''Panatone'') in 2002, a total of 773.13 acres of land was identified as surplus under the terms of the SHA and it was agreed that this surplus land would be demerged into a separate entity.
To accomplish the surplus land''s demerger, Panatone incorporated Hemisphere Properties India Limited (''HPIL'') in 2005-06 to hold the surplus land as and when it is demerged. In March 2014, the GoI acquired ~51.12% of the shares in HPIL making it a Government owned company.
On March 5, 2018, the Company filed the scheme of arrangement and reconstruction for demerger of surplus land (''Scheme'') with the National Company Law Tribunal, Mumbai Bench (''NCLT''). HPIL, being a Government
nominal value of H10,00,000 (Indian Rupees Ten Lakhs only) each, aggregating up to H525,00,00,000 (Indian Rupees Five Hundred and Twenty Five Crores only).
The NCDs were rated AA by CARE Ratings Limited. The NCDs are listed on the Wholesale Debt Segment of the National Stock Exchange of India Limited.
Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Companyâs operations in future
During the year under review, there were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.
Acknowledgment
The Directors thank the Companyâs employees, customers, vendors, investors and partners for their continuous support.
The Directors also thank the Government of India, Governments of various states in India, Governments of various countries and concerned Government departments and agencies for their co-operation.
The directors are also grateful to Tata Communicationsâ other stakeholders and partners including our shareholders, promoters, bankers and others for their continued support.
The directors appreciate and value the contributions made by all our employees and their families for making the Company what it is.
On behalf of the Board of Directors
Renuka Ramnath
Chairperson DIN: 00147182
Dated: April 28, 2021
Registered Office:
VSB, Mahatma Gandhi Road, Fort,
Mumbai - 400 001
Company, had filed the Scheme for approval with the Ministry of Corporate Affairs (''MCA'') vide its application dated March 28, 2018.
The Scheme was approved by the NCLT on July 12, 2018 and by the MCA on August 5, 2019.
The effective date of demerger was August 7, 2019. The Record Date for determining the shareholders of the Company to whom the equity shares of HPIL were to be allotted pursuant to the Scheme was determined as September 18, 2019. The Board of Directors of HPIL, at its meeting held on February 18, 2020, approved the allotment of HPIL''s shares to the shareholders of the Company on the Record Date in the ratio of 1 share of HPIL for every share of the Company. On October 22, 2020, the shares of HPIL were listed on BSE Limited and the National Stock Exchange of India Limited.
In March 2021, the Government of India (''GoI'') divested its entire equity shareholding of 26.12% in the Company. GoI sold 16.12% of its stake to the general public by an offer for sale through the stock exchange mechanism on March 16, 2021 and March 17, 2021 and sold the balance shareholding of 10% to Panatone Finvest Limited through an off-market inter se transfer of shares between promoters on March 18, 2021.
STATUTORY INFORMATION AND DISCLOSURES
There are no subsequent events between the end of the financial year and the date of this Report which have a material impact on the financials of the Company.
On April 20, 2020, the Company, by way of private placement, issued and allotted 5,250 (Five Thousand Two Hundred and Fifty only) Rated, Secured, Listed, Redeemable, Non-Convertible Debentures (''NCDs'') at a
Mar 31, 2019
Dear Shareholders,
The Directors present the 33rd Annual Report and audited financial statements of Tata Communications Limited (the âCompanyâ) for the financial year ended March 31, 2019. The Company along with its subsidiaries wherever required is referred as âweâ, âusâ, âourâ, or âTata Communicationsâ.
PERFORMANCE
The table below sets forth the key financial parameters of the Companyâs performance during the year under review:
(Rs. in crores)
Standalone |
Consolidated |
|||
Particulars |
2018-19 |
2017-18 |
2018-19 |
2017-18 |
Continuing operations |
||||
Income from operations |
5389.13 |
5252.03 |
16524.95 |
16671.69 |
Other income |
92.23 |
323.53 |
60.26 |
259.66 |
Total revenue |
5481.36 |
5575.56 |
16585.21 |
17031.35 |
Total expenses |
5090.16 |
4852.26 |
16244.25 |
16610.22 |
Profit from ordinary activities before exceptional items, tax and share of profit of associate |
391.20 |
723.30 |
340.96 |
421.13 |
Exceptional items |
(666.97) |
(234.23) |
2.24 |
(375.52) |
Profit / (Loss) before tax and share of profit of associate |
(275.77) |
489.07 |
343.20 |
45.61 |
Tax expense/(benefit) |
||||
Current tax |
223.83 |
304.85 |
332.67 |
409.16 |
Deferred tax |
(57.28) |
(82.41) |
(59.35) |
(54.24) |
Profit / (Loss) for the period |
(442.32) |
266.63 |
69.88 |
(309.31) |
Share in profit of associates |
- |
- |
(150.31) |
(16.30) |
Profit/ (Loss) for the period from continuing operations |
(442.32) |
266.63 |
(80.43) |
(325.61) |
Other Comprehensive Income (net of tax) |
(8.86) |
(517.26) |
(445.36) |
(562.86) |
Total Comprehensive Income / (Loss) |
(451.18) |
(250.63) |
(525.79) |
(888.47) |
During the year under review, consolidated revenue of Tata Communicationsâ voice services business revenue contributed 32% of the total revenue, while data services business contributed 68% of the total revenue. You can read more about Tata Communicationsâ performance in the Management Discussion and Analysis (MDA), which forms part of this Report.
Dividend
The Directors are pleased to recommend a dividend of RS.4.50 per share, from the balance available in the reserves and surplus, for the financial year ended March 31, 2019, subject to the approval of the shareholders at the ensuing Annual General Meeting. For comparison, in FY17-18, the Company paid a dividend of RS.4.50 per share.
Transfer to reserves
On a standalone basis, the Company does not propose to transfer any amount to the General Reserve out of the amount available for appropriation. The surplus balance in the statement of profit and loss stood at RS.2576.62 crores as at March 31, 2019.
Human resources
Tata Communications offers a dynamic work environment where its employees benefit from working with other innovators from around the globe - driving meaningful change together, both for its customers and Tata Communications. We have a multicultural workforce representing more than 47 nationalities, of which women constitute 22.5%. An ongoing gender diversity and inclusion initiative to raise this figure to at least 30% across the business - âWinning Mixâ - shows an upward curve since its inception in 2014.
Tata Communicationsâ compensation and employee benefit practices are designed to be competitive in the respective geographies where we operate. Employee relations continue to be harmonious at all our locations. FY18-19 ended with impressive learning statistics; 83,560 person-days of learning, a 21% increase on total person-days recorded in FY17-18. Through these trainings, over 4,000 employees completed certifications in various skills.
Disclosures pertaining to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
Tata Communications has zero tolerance for sexual harassment and has adopted a charter 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 complied with all provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 including constitution of Internal Complaints Committee.
During the financial year 2018-19, the Company received seven sexual harassment complaints. As at March 31, 2019, six complaints were disposed off with appropriate action. One complaint which was received towards the end of March 2019 remained pending as at March 31, 2019.
You can read more about our employee engagement and development programmes in the âHuman Capitalâ section of the MDA.
Risk management
The Companyâs Board of Directors (âBoardâ) has formed a Risk Management Committee to frame, implement, review and monitor the Companyâs risk management plan and to ensure its effectiveness. The major risks identified across the business are systematically addressed and mitigated against on a continual basis.
The details of the development and implementation of the enterprise-wide risk management (âERMâ) framework are covered in the MDA.
CORPORATE MATTERS
Subsidiary companies
As on March 31, 2019, the Company had fifty four (54) subsidiaries and four (4) associate companies. There has been no material change in the nature of business of the subsidiaries and associate companies.
In January 2017, Tata Communications (Netherlands) B. V., a wholly owned indirect subsidiary of the Company, had acquired a 35% stake in Teleena Holding B.V. (âTeleenaâ), a mobile virtual network enabler headquartered in the Netherlands, becoming its single largest shareholder, and thus, Teleena had become an associate of the Company. On October 2, 2018, Tata Communications (Netherlands) B. V. made a further investment of 65% in Teleena, consequent to which Teleena along with its four subsidiaries became indirect wholly-owned subsidiaries of the Company.
On February 21, 2019, NetFoundry Inc. was established as an indirect wholly-owned subsidiary of the Company under Tata Communications (Netherlands) B. V. to house and drive growth in the NetFoundryTM business which utilises software-based principles to enable applications to make networks, empowering developers and businesses to embed network-independent, programmable networking inside of their services using owned, leased or internet connectivity.
A statement in Form AOC-1 pursuant to the first proviso to Section 129 of the Act read with rule 5 of the Companies (Accounts) Rules, 2014 containing salient features of the financial statement of subsidiaries/associate companies/ joint ventures forms part of this Report. The Company adopted Ind AS from April 1, 2016 and the consolidated financial statements of the Company and its subsidiaries are prepared in accordance with the recognition and measurement principles stated therein.
The financial statements of the Company, both standalone and consolidated, along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the Companyâs website pursuant to the provisions of section 136 of the Companies Act, 2013, General Circular No. 11/ 2015 dated July 21, 2015 issued by Ministry of Corporate Affairs and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
The financial statements of the subsidiaries will be provided to any shareholder on written requests addressed to the Company Secretary at the Companyâs registered office. These documents will also be available for inspection by any shareholder at the Companyâs registered office during normal business hours and also at the venue of the Annual General Meeting on the day of the Meeting till the conclusion of the Meeting.
Changes to the Board of Directors and key managerial personnel
As of the date of this Report, the Board comprised of six Directors, of whom two were independent.
Ms. Renuka Ramnath, Independent Director, continues to act as the Chairperson of the Board.
Dr. Gopichand Katragadda stepped down from the Board with effect from September 11, 2018. Mr. Saurabh Kumar Tiwari tendered his resignation from the Board of the Company with effect from the close of business hours on January 30, 2019 and Mr. G. Narendra Nath resigned from directorship of the Company with effect from March 4, 2019. The Board places on record its sincere appreciation for their immense contributions and guidance to the Company during their tenure on the Board.
After obtaining necessary security clearance under the Companyâs TV uplinking license from the Ministry of Information and Broadcasting, Dr. Maruthi Prasad Tangirala and Dr. Rajesh Sharma , were appointed as Additional Directors on the Board with effect from March 5, 2019 as per the nominations received from the Government of India.
The Board seeks approval of the shareholders at the 33rd Annual General Meeting for confirmation of the appointment of Dr. Maruthi Prasad Tangirala and Dr. Rajesh Sharma.
Based on the recommendation of the Nomination and Remuneration Committee, the Board approved the reappointment of Dr. Uday B. Desai, as an Independent Director for a second term commencing from August 4, 2019 to June 5, 2021, subject to approval of the shareholders.
The Board seeks approval of the shareholders via a special resolution at the 33rd Annual General Meeting for re-appointment of Dr. Uday B. Desai as an Independent Director.
In accordance with the provisions of the Act and the Companyâs Articles of Association, Mr. Srinath Narasimhan retires by rotation at the ensuing Annual General Meeting and, being eligible, offers himself for reappointment.
None of the Companyâs Directors are disqualified from being appointed as a Director as specified in Section 164 of the Act. For details about the Directors, please refer to the Report on Corporate Governance.
As previously reported to the Stock Exchanges, when the Government of India (GoI) transferred 25% of its stake in the Company to Panatone Finvest Limited (Pantone) in 2002, a shareholdersâ agreement (hereafter âSHAâ) was entered into between the parties. This agreement, inter alia, sets forth the rights and obligations of the parties in appointing Directors on the Board of the Company. The relevant clauses from the SHA were incorporated in the Companyâs Articles of Association, which provide that the Board shall comprise of four Independent Directors.
Till September 10, 2018, the Board comprised of seven Directors of whom two were independent. The Company continues to seek both the GoIâs and Panatoneâs recommendation for the other two remaining vacancies for Independent Directors.
Subsequent to the resignation of Dr. Gopichand Katragadda with effect from September 11, 2018, the Board comprises of six Directors including two Independent Directors, and is compliant with the provisions of Section 149 (4) of the Companies Act, 2013 and Regulation 17 (1) (b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 of having one-third of the Board as Independent Directors.
Declaration of Independent Directors
The Independent Directors have provided necessary disclosures to the Company that they comply with all the requirements stipulated in Section 149(6) of the Act and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 for being appointed as an Independent Director which form part of the Boardâs Report.
Number of Board meetings
Eight Board meetings were held during the FY18-19. For further details, please see the Report on Corporate Governance, which forms part of the Boardâs Report.
Board evaluation
The Board carried out an annual evaluation of its own performance, including that of its committees, Independent Directors and other Directors, pursuant to the provisions of the Act and the corporate governance requirements as prescribed under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Input was sought from all Directors relating to criteria such as composition and structure, effectiveness of and contribution to processes, the adequacy, appropriateness and timeliness of information provided, as well as the Boardâs overall performance. At a meeting of Independent Directors held on March 29, 2019, the results of the evaluation were reviewed and then also discussed at a meeting of the Nomination and Remuneration Committee (âNRCâ). Thereafter, the Board, based on a briefing by the Chairperson and the NRC, discussed, as a whole, the output of the evaluation.
Policy on Directorsâ appointment and remuneration and other details
The Companyâs policy on Directorsâ appointment and remuneration, and other matters provided in Section 178(3) of the Act, is detailed in the Report on Corporate Governance, which forms part of the Boardâs Report.
Surplus land
As previously reported, the Company acquired its assets, including numerous parcels of land, in 1986 from the Government of India (âGoIâ) as the successor to the Overseas Communications Service. At the time of disinvestment to Panatone Finvest Limited (âPanatoneâ) in 2002, a total of 773.13 acres of land was identified as surplus under the terms of the Shareholders Agreement and it was agreed that this surplus land would be demerged into a separate entity.
To accomplish the surplus landâs demerger, Panatone incorporated Hemisphere Properties India Limited (âHPILâ) in 2005-06 to hold the surplus land as and when it was demerged. In March 2014, the GoI acquired -51.12% of the shares in HPIL making it a Government owned company.
On March 5, 2018, the Company filed the scheme of arrangement and reconstruction for demerger of surplus land with the National Company Law Tribunal, Mumbai Bench (âNCLTâ). By order of the NCLT, a shareholdersâ meeting was held on May 10, 2018, at which the shareholders approved the scheme of arrangement and reconstruction for demerger of surplus land. The NCLT, vide its order dated July 12, 2018 has approved the Scheme.
As on date, the Company, GoI and Panatone continue to work toward implementation of the scheme.
STATUTORY INFORMATION AND DISCLOSURES
Material Events After Balance Sheet Date
There are no subsequent events between the end of the financial year and the date of this Report which have a material impact on the financials of the Company.
Public deposits
The Company has not accepted, nor does it hold any public deposits.
Non-convertible Debentures (NCDs)
The Company had RS.150 crores of outstanding Unsecured NCDs as at March 31, 2019. RS.5 crores of Secured NCDs were redeemed by the Company during FY18-19.
All debentures issued by the Company were rated AA by CARE Ratings Limited and AAA by Brickworks Ratings India Pvt. Ltd.
Particulars of loans, guarantees or investments under Section 186
The particulars of loans, guarantees and investments are disclosed in the financial statements which also form part of this.
Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Companyâs operations in future
During the year under review, there were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Companyâs operations in future.
Internal financial controls
The Company has adequate internal financial controls covering the preparation and presentation of financial statements which are operating effectively.
Particulars of contracts or arrangements with related parties referred to in Section 188 of the Act
There have been no materially significant related party transactions between the Company and the Directors, the management, the subsidiaries or the relatives except for those disclosed in the financial statements.
Accordingly, particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Act, along with the justification for entering into such a contract or arrangement in Form AOC-2, does not form part of the Boardâs Report.
Audit Committee
Details pertaining to composition of the Audit Committee are included in the Report on Corporate Governance, which forms part of the Boardâs Report.
Corporate social responsibility
A brief outline of the Companyâs corporate social responsibility (CSR) policy and related initiatives undertaken during the year is set out in Annexure I of this Report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The CSR Policy is also available on the Companyâs website at www.tatacommunications.com.
Corporate governance
Pursuant to Regulation 24 and Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Management Discussion and Analysis, Business Responsibility Report, Report on Corporate Governance and Auditorsâ Certificate regarding compliance with conditions of corporate governance form part of the Boardâs Report and is also available on the Companyâs website at www. tatacommunications.com.
Extract of annual return
As provided under Section 92(3) of the Act, the extract of annual return is given in Annexure II in the prescribed Form MGT-9, which forms part of the Boardâs Report.
Particulars of employees
The provisions of Section 134 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, require the Company to provide certain details about the remuneration of its employees.
According to the provisions of section 136(1) of the Act, the Boardâs Report being sent to the shareholders need not include this information as an annexure. The annexure regarding the particulars of employees will be available for inspection by any member at the registered office of the Company during working hours, for 21 days before the date of the Annual General Meeting. Any Member interested in obtaining a copy of the same may write to the Company Secretary.
The information required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given below:
a. The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year 2018-19:
(Rs. in crores)
Non-Executive Directors |
Ratio to median remuneration * |
Ms. Renuka Ramnath |
4.82 |
Mr. Srinath Narasimhan1 |
1.93 |
Dr. Uday B. Desai |
3.20 |
Mr. Saurabh Kumar Tiwari2 (up to January 30, 2019) |
- |
Dr. Gopichand Katragadda1 (up to September 11, 2018) |
- |
Mr. G. Narendra NatRs.2 (up to March 4, 2019) |
- |
Dr. Rajesh Sharma2 (w.e.f. March 5, 2019) |
NA |
Dr. Maruthi Prasad Tangirala2 (w.e.f. March 5, 2019) |
NA |
Executive Director |
|
Mr. Vinod Kumar |
76.06 |
* While calculating the ratio for non-executive Directors, both commission and sitting fees paid have been taken and Directors who have not been in the Company for the entire financial year 2018-19 have not been considered for the calculations.
1. In line with the internal guidelines of the Company, no payment is made towards commission to the Non-Executive Directors of the Company, who are in full-time employment of any Tata Company.
2 The Government Directors have informed the Company that they shall not accept any sitting fees and commission as their directorships are considered to be part of their official duty.
b. The percentage increase in remuneration of each Director, Chief Executive Officer, Chief Financial Officer, Company Secretary in the financial year:
Directors, Chief Executive Officer, Chief Financial Officer and Company Secretary |
% increase in remuneration in the financial year* |
Ms. Renuka Ramnath |
12.55 |
Mr. Srinath Narasimhan1 |
75.40 |
Dr. Uday B. Desai |
11.36 |
Mr. Saurabh Kumar Tiwari2&3 (up to January 30, 2019) |
- |
Dr. Gopichand Katragadda1®2 (up to September 11, 2018) |
- |
Mr. G. Narendra NatRs.2&3 (up to March 4, 2019) |
- |
Dr. Rajesh Sharma2®3 |
- |
Dr. Maruthi Prasad Tangirala2®3 |
- |
Mr. Vinod Kumar, Managing Director & Group CEO |
37.30 |
Ms. Pratibha K. Advani, Chief Financial Officer |
(5.12) |
Mr. Manish Sansi, Company Secretary |
25.16 |
*While calculating the ratio for non-executive Directors, both commission and sitting fees paid have been taken.
1. In line with the internal guidelines of the Company, no payment is made towards commission to the Non-Executive Directors of the Company, who are in full-time employment of any Tata Company
2. Directors and KMPs who have not been in the Company for the entire financial years 2017-18 and 2018-19 have not been considered for the calculations.
3. The Government Directors have informed the Company that they shall not accept any Sitting Fees and commission as their Directorships are considered to be part of their official duty.
c. The percentage increase in the median remuneration of employees in the financial year: (12.91%)
d. The number of permanent employees on the rolls of Company: 5,238 employees as on March 31, 2019
e. Average percentile increase already made in the salaries of employees, other than the managerial personnel in the last financial year, and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:
During the course of the year, the total average increase was approximately 7.5% for employees based in India, after accounting for promotions and other event-based compensation revisions. The increase in the managerial remuneration for the year was 21.2%.
f. Affirmation that the remuneration is as per the remuneration policy of the Company:
The Company affirms that the remuneration is as per the remuneration policy of the Company.
Conservation of energy
The âNatural Capitalâ section of the Management Discussion and Analysis describes our consistent efforts towards conservation of energy and creating a better tomorrow.
Technology absorption
The Company continues to use the latest technologies for improving its productivity and the quality of its services and products. Its operations do not require the significant importation of technology.
Foreign exchange earnings and outgoings
For the purpose of Form âCâ under the Companies (Accounts) Rules 2014, foreign exchange earnings were equivalent to RS.546.55 crores and foreign exchange outgo was equivalent to RS.991.27 crores.
Statutory Auditors and their report
The Companyâs Statutory Auditors, M/s. S.R. Batliboi & Associates LLP, Chartered Accountants (Firm Registration No. 101049W/E300004), hold office until the conclusion of the 36th Annual General Meeting, subject to ratification of their appointment by shareholders at every Annual General Meeting.
The Statutory Auditors have not reported any incident of fraud to the Companyâs Audit Committee in the year under review.
The Companyâs standalone and consolidated financial statements have been prepared in accordance with the Indian Accounting Standards prescribed under Section 133 of the Act read with relevant rules issued thereunder (Ind AS) and other accounting principles generally accepted in India.
Secretarial Auditors and their report
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed a practising company secretary, Mr. U. C. Shukla, (FCS No. - 2727/CP No. - 1654), to undertake the Companyâs secretarial audit. The report of the Secretarial Auditor in Form MR-3 for the Financial Year ended March 31, 2019 is annexed to this Report. . The Secretarial Audit Report contains the following observation:
âDuring the year under review, the Company has complied with the provisions of the Act, Rules Regulations, Guidelines, Standards, etc. mentioned above subject to the following observations:
The Company has complied with the requirements of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Companies Act, 2013 except with regard to appointment of Independent Directors to the extent of 1/3rd of the total strength of the Board till 10th September, 2018.â
Boardâs Comment:
As previously reported to the stock exchanges, when the Government of India (GoI) transferred 25% of its stake in the Company to Panatone Finvest Limited (Pantone) in 2002, a shareholdersâ agreement (hereafter âSHAâ) was entered into between the parties. This agreement, inter alia, sets forth the rights and obligations of the parties in appointing Directors on the Board of the Company. The relevant clauses from the SHA were incorporated in the Companyâs Articles of Association, which provide that the Board shall comprise of four Independent Directors.
Till September 10, 2018, the Board comprised of seven Directors of whom two were independent. The Company continues to seek both the GoIâs and Panatoneâs recommendation for the other two remaining vacancies for Independent Directors.
Subsequent to the resignation of Dr. Gopichand Katragadda with effect from September 11, 2018, the Board comprises of six Directors including two Independent Directors, and is compliant with the provisions of Section 149 (4) of the Companies Act, 2013 and Regulation 17 (1) (b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 of having one-third of the Board as Independent Directors.
DIRECTORSâ RESPONSIBILITY STATEMENT
The Board is of the opinion that the Companyâs internal financial controls were adequate and effective during the financial year 2018-19, based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost and secretarial auditors and external consultant(s), as applicable, including an 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.
Accordingly, pursuant to Section 134(5) of the Act, the Board of Directors, to the best of their knowledge and ability, confirms that:
in the preparation of the annual accounts, the applicable accounting standards were followed and there were no material departures.
the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period.
the Directors had taken proper and sufficient care 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.
the Directors had prepared the annual accounts on a going concern basis.
the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.
the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
ACKNOWLEDGMENTS
The Directors would like to thank each one of our customers, business associates and suppliers around the world for their valuable contribution to Tata Communicationsâ continued growth and success. The Directors recognise and appreciate the passion and commitment of Tata Communicationsâ employees and workforce globally.
The Directors are also grateful to Tata Communicationsâ other stakeholders and partners including our shareholders, promoters, bankers and others for their continued support.
Thank you,
On behalf of the Board of Directors
Renuka Ramnath
DIN: 00147182
Chairperson
Dated: May 8, 2019
Mar 31, 2018
The table below sets forth the key financial parameters of the Company''s performance during the year under review:
in crores)
Standalone |
Consolidated |
|||
2017-18 |
2016-17 |
2017-18 |
2016-17 |
|
Continuing operations |
||||
Income from operations |
5120.90 |
5068.15 |
16650.84 |
17619.73 |
Other income |
454.66 |
(16.91) |
380.51 |
360.29 |
Total revenue |
5575.56 |
5051.24 |
17031.35 |
17980.02 |
Total expenses |
4852.26 |
4670.22 |
16610.22 |
17446.79 |
Profit from ordinary activities before exceptional items, tax and share of profit of associate |
723.30 |
381.02 |
421.13 |
533.23 |
Exceptional items |
(234.23) |
823.82 |
(375.52) |
(1063.33) |
Profit / (Loss) before tax and share of profit of associate |
489.07 |
1204.84 |
45.61 |
(530.10) |
Tax expense / (benefit) |
||||
Current tax |
304.85 |
602.50 |
409.16 |
270.30 |
Deferred tax |
(82.41) |
(87.49) |
(54.24) |
(33.92) |
Profit / (Loss) for the period |
266.63 |
689.83 |
(309.31) |
(766.48) |
Share in profit of associates |
- |
- |
(16.30) |
5.08 |
Profit / (Loss) for the period from continuing operations |
- |
- |
(325.61) |
(761.40) |
Discontinued operations |
||||
Profit / (Loss) before tax from discontinued operations |
- |
- |
- |
123.31 |
Gain on sale of business and subsidiaries (including impairment of goodwill) |
- |
- |
- |
2420.51 |
Profit / (Loss) from discontinued operations (before tax) |
- |
- |
- |
2543.82 |
Tax expense on discontinued operations |
- |
- |
- |
546.96 |
Profit / (Loss) from discontinued operations after tax |
- |
- |
- |
1996.86 |
Net Profit / (Loss) from total operations |
- |
- |
(325.61) |
1235.46 |
Other Comprehensive Income (net of tax) |
(517.26) |
(188.02) |
(562.86) |
864.75 |
Total Comprehensive Income / (Loss) |
(250.63) |
501.81 |
(888.47) |
2100.21 |
You can read more about the Company''s performance in the Management Discussion and Analysis (MDA), which forms part of this report.
Dividend
The directors are pleased to recommend a dividend of Rs, 4.50 per share for the financial year ended March 31, 2018, subject to the approval of the shareholders at the ensuing annual general meeting. For comparison, in FY 16-17, the Company paid a dividend of Rs, 6.00 per share (Normal dividend of Rs, 4.50 per share of face value Rs, 10/- each plus a One-time special dividend Rs, 1.50 per share of face value Rs, 10/- each).
Transfer to reserves
On a standalone basis, the Company does not propose to transfer any amount to the general reserve out of the amount available for appropriation. The surplus balance in the statement of profit and loss stood at Rs, 3172.34 crores as at March 31, 2018.
Human resources
Tata Communications offers a dynamic work environment where our employees benefit from working with other innovators from around the globe - driving meaningful change together, both for our customers and Tata Communications. We have a multicultural workforce representing more than 37 nationalities, of which women constitute 21.4% of our employees. An ongoing gender diversity and inclusion initiative to raise this figure to at least 30% across the business - ''Winning Mix'' - shows an upward curve since its inception in 2014.
Tata Communications'' compensation and employee benefit practices are designed to be competitive in the respective geographies where we operate. Employee relations continue to be harmonious at all our locations. The number of training person days provided to employees increased by 19% over the previous year and stood at 69,080 as at March 31, 2018.
Tata Communications has zero tolerance for sexual harassment and has adopted a charter 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. During the financial year 2017-18, the Company received five sexual harassment complaints. As at March 31, 2018, all complaints were disposed of with appropriate action and no complaint remained pending.
You can read more about our employee engagement and development programmes in the ''People'' section of the MDA.
Risk management
The Company''s Board of Directors has formed a risk management committee to frame, implement, review and monitor the Company''s risk management plan ensuring its effectiveness. The major risks identified across the business are systematically addressed and mitigated against on a continual basis.
The details of the development and implementation of the enterprise-wide risk management (ERM) framework are covered in the MDA.
CORPORATE MATTERS
Subsidiary companies
As on March 31, 2018, the Company had 48 subsidiaries and five associate companies. There has been no material change in the nature of business of the subsidiaries and associate companies.
A statement in Form AOC-1 pursuant to the first proviso to Section 129 of the Act read with rule 5 of the Companies (Accounts) Rules, 2014 containing salient features of the financial statement of subsidiaries / associate companies / joint ventures forms part of this report. The Company adopted Ind AS from April 1, 2016 and the consolidated financial statements of the Company and its subsidiaries are prepared in accordance with the recognition and measurement principles stated therein.
The financial statements of the Company, both standalone and consolidated along with relevant documents and separate accounts in respect of subsidiaries, are available on the Company''s website pursuant to the provisions of section 136 of the Companies Act, 2013 (''Act'') and General Circular No. 11/ 2015 dated July 21, 2015 issued by Ministry of Corporate Affairs.
The financial statements of the subsidiaries will be provided to any shareholder on written requests addressed to the Company Secretary at the Company''s registered office. These documents will also be available for inspection by any shareholder at the Company''s registered office
Investment in Tata Teleservices Limited
As reported last year, in 2008-09, NTT DoCoMo Inc (Docomo) entered into an agreement with Tata Teleservices Limited (TTSL) and Tata Sons Limited (Tata Sons) to acquire 20% of the equity share capital under the primary issue and 6% under the secondary sale from Tata Sons. In terms of the agreements with Docomo, Tata Sons, inter alia, agreed to provide various indemnities and a Put Option entitling Docomo to sell its entire shareholding at a minimum pre-determined price of Rs, 58.05 per share if certain performance parameters were not met by TTSL. The minimum pre-determined price represented 50% of the acquisition price paid by Docomo in 2008-09.
An Inter-se agreement dated March 25, 2009, was executed by the Company with Tata Sons and other TTSL shareholders to give effect to the Docomo/Tata Sons'' sale and purchase agreement, in accordance with the terms of which, the Company sold 36,542,378 equity shares of TTSL to Docomo at Rs.116.09 per share, resulting in a profit of Rs.346.65 crores.
In or around July 2014, Docomo exercised its Put Option and called upon Tata Sons to acquire Docomo''s entire shareholding in TTSL at the pre-determined price of Rs.58.05 per share. However, the Reserve Bank of India did not permit acquisition of the shares at the pre-determined price and advised the parties that the acquisition can only be made at Fair Market Value (FMV) prevailing at the time of the proposed acquisition. Tata Sons conveyed to Docomo its willingness to acquire the shares at the FMV, however, Docomo reiterated its position that the shares had to be acquired at Rs.58.05 per share. Thereafter, Docomo initiated Arbitration in the matter before the London Court of International Arbitration (LCIA), the evidentiary hearing of which was completed on May 06, 2016.
The Arbitral Tribunal appointed by the LCIA to arbitrate the dispute between Tata Sons and Docomo, issued a final award (LCIA Award) on June 22, 2016, which required Tata Sons to pay to Docomo, damages of US$ 1,172 million upon tender of shares held by Docomo in TTSL, together with interest, arbitration costs and legal costs.
Thereafter, Docomo filed a petition with the Delhi High Court for implementation of the LCIA Award and the Delhi High Court directed Tata Sons to deposit the damages including costs and interest in an escrow account. Under the terms of the Inter-Se agreement, and pursuant to the LCIA award, the Company was to acquire 158,350,304 equity shares of TTSL at a value of approximately Rs.1058 crores. On August 2, 2016, the Company paid to Tata Sons approximately Rs.1058 crores as a recoverable advance in anticipation of satisfaction of the LCIA Award and receipt of the TTSL Shares.
By its judgment and order of April 2017, the Delhi High Court ruled that the LCIA Award to be enforceable in India and to operate as a deemed decree of the Court. During the financial year 2017-18, the Company received 158,350,304 shares of TTSL against the advance of Rs.1058 crores paid to Tata Sons. Additionally, Tata Sons has also settled the above-mentioned advances during the current year, as a result of which the Company has received net interest income of Rs.29.72 crores from Tata Sons, thereby closing the matter. Please also refer to the Notes to Accounts No. 29 of the standalone financial statements.
Compliance under the Companies Act 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
As previously reported to the stock exchanges, when the Government of India (GoI) transferred 25% of its stake in the Company to Panatone Finvest Limited (Pantone) in 2002, a shareholders'' agreement (hereafter ''SHA'') and a share purchase agreement were entered into between the parties. These agreements, inter alia, set forth the rights and obligations of the parties in appointing directors on the Board of the Company. The relevant clauses from the SHA were incorporated in the Company''s Articles of Association, which provide in part, that the Board is to be comprised of twelve directors, four of whom must be independent. The GoI and Panatone are each entitled to recommend two independent directors to the Board.
As of the date of this Report, the Board comprised of seven directors, of whom two were independent. Each of the independent directors were recommended by the GoI and Panatone, respectively. The Company continues to seek both the GoI''s and Panatone''s recommendation for the other two independent directors to fill the remaining board vacancies. Until such time as the Company receives the recommendation from the GoI and Panatone, enabling the Nomination and Remuneration Committee (NRC) and the Board to appoint two additional independent directors, the Company will be unable to comply with provisions of Section 149 (4) of the Companies Act, 2013 and Regulation 17 (1) (b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Changes to the Board of Directors and key managerial personnel
Ms. Renuka Ramnath, independent director, was elected as the Chairperson of the Board with effect from April 14, 2017.
Mr. Kishor A. Chaukar stepped down from the Board with effect from July 31, 2017 and Mr. Bharat Vasani tendered his resignation with effect from February 5, 2018. The Board places on record its sincere appreciation for their immense contributions and guidance to the Company during their tenure on the Board.
In accordance with the provisions of the Act and the Company''s Articles of Association, Dr. Gopichand Katragadda retires by rotation at the ensuing Annual General Meeting and, being eligible, offers himself for re-appointment.
None of the Company''s directors are disqualified from being appointed as a director as specified in Section 164 of the Act. For details about the directors, please refer to the Report on Corporate Governance.
Declaration of Independent Directors
The independent directors have provided necessary disclosures to the Company that they comply with all the requirements stipulated in Section 149(6) of the Act for being appointed as an independent director which form part of the Directors'' Report.
Number of Board meetings
Eleven Board meetings were held during the FY17-18. For further details, please see the Report on Corporate Governance, which forms part of the Directors'' Report.
Board evaluation
The Board carried out an annual evaluation of its own performance, including that of its committees and individual directors, pursuant to the provisions of the Act and the corporate governance requirements as prescribed under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Input was sought from all of the directors relating to criteria such as composition and structure, effectiveness of and contribution to processes, the adequacy, appropriateness and timeliness of information provided, as well as the Board''s overall performance. At a meeting of independent directors held on March 13, 2018, the results of the evaluation were reviewed and then also discussed at a meeting of the NRC. Thereafter, the Board, based on a briefing by the Chairperson and the NRC, discussed as a whole the output of the evaluation.
Policy on directorsâ appointment and remuneration and other details
The Company''s policy on directors'' appointment and remuneration, and other matters provided in Section 178(3) of the Act, is detailed in the Report on Corporate Governance, which forms part of the Directors'' Report.
Surplus land
As previously reported, the Company acquired its assets, including numerous parcels of land, in 1986 from the GoI as the successor to the Overseas Communications Service. At the time of disinvestment to Panatone in 2002, a total of 773.13 acres of land was identified as surplus under the terms of the SHA and it was agreed that this surplus land would be demerged into a separate entity
To accomplish the surplus land''s demerger, Panatone incorporated Hemisphere Properties India Limited (HPIL) in 2005-06 to hold the surplus land as and when it was demerged. In March 2014, the GoI acquired ~51.12% of the shares in HPIL making it a Government owned company.
On March 5, 2018, the Company filed the scheme of arrangement and reconstruction for demerger of surplus land with the National Company Law Tribunal, Mumbai Bench (''NCLT''). By order of the NCLT, a shareholders'' meeting was held on May 10, 2018, at which the shareholders approved the scheme of arrangement and reconstruction for demerger of the surplus land. As on date, the Company, GoI and Panatone continue to work toward implementation of the scheme.
STATUTORY INFORMATION AND DISCLOSURES
Material Events After Balance-Sheet Date
There are no subsequent events between the end of the financial year and the date of this Report which have material impact on the financials of the Company.
Public deposits
The Company has not accepted, nor does it hold any public deposits.
Non-convertible Debentures (NCDs)
The Company had Rs, 155 crores of outstanding NCDs (Secured NCDs - Rs, 5 crores and Unsecured NCDs - Rs, 150 crores) as at March 31, 2018. The trust deed for the secured NCDs will be available for inspection by members at the Company''s registered office during normal working hours, 21 days before the date of the 32nd Annual General Meeting i.e. August 9, 2018.
All debentures issued by the Company were rated AA by CARE.
Particulars of loans, guarantees or investments under Section 186
The particulars of loans, guarantees and investments are disclosed in the financial statements which also form part of this report.
Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Companyâs operations in future
During the year under review, there were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.
Internal financial controls
The Company has adequate internal financial controls covering the preparation and presentation of financial statements which are operating effectively.
Particulars of contracts or arrangements with related parties referred to in Section 188 of the Act
There have been no materially significant related party transactions between the Company and the directors, the management, the subsidiaries or the relatives except for those disclosed in the financial statements.
Accordingly, particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Act, along with the justification for entering into such a contract or arrangement in Form AOC-2, does not form part of the Directors'' Report.
Audit Committee
Details pertaining to composition of the Audit Committee are included in the report on Corporate Governance, which forms part of the Directors'' Report.
Corporate social responsibility
A brief outline of the Company''s corporate social responsibility (CSR) policy and related initiatives undertaken during the year is set out in Annexure I of this Report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The CSR Policy is also available on the Company''s website.
Extract of annual return
As provided under Section 92(3) of the Act, the extract of annual return is given in Annexure II in the prescribed Form MGT-9, which forms part of the Directors'' Report.
Corporate governance
Pursuant to Regulation 24 and Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Management Discussion and Analysis, Business Responsibility Report, Report on Corporate Governance and Auditors'' Certificate regarding compliance with conditions of corporate governance form part of the Directors'' Report.
Particulars of employees
The provisions of Section 134 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, require the Company to provide certain details about the remuneration of its employees.
According to the provisions of section 136(1) of the Act, the Directors'' Report being sent to the shareholders need not include this information as an annexure. The annexure regarding the Particulars of Employees will be available for inspection by any member at the registered office of the Company during working hours, for 21 days before the date of the AGM.
The information required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given below:
The ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year 2017-18:
Non-Executive Directors |
Ratio to median remuneration* |
Ms. Renuka Ramnath |
3.73 |
Mr. Srinath Narasimhan1 |
0.96 |
Mr. Kishor A. Chaukar (up to July 31, 2017) |
0.66 |
Dr. Uday B. Desai |
2.50 |
Mr. Saurabh Kumar Tiwari2 |
1.80 |
Mr. Bharat Vasani1 (up to February 5, 2018) |
0.59 |
Dr. Gopichand Katragadda1 |
0.78 |
Mr. G. Narendra Nath2 |
1.41 |
Executive Director |
|
Mr. Vinod Kumar |
48.24 |
*While calculating the ratio for non-executive directors, both commission and sitting fees paid have been taken.
1 Non-Executive Directors who are in full-time employment of any Tata Company and are receiving salary as such full-time employees shall not accept any commission from FY17-18.
2The Government directors have informed the Company that they shall not accept any sitting fees and commission as their directorships are considered to be part of their official duty.
b. The percentage increase in remuneration of each director, chief executive officer, chief financial officer, company secretary in the financial year:
Directors, Chief Executive Officer, Chief Financial Officer and Company Secretary* |
% increase in remuneration in the financial year* |
Ms. Renuka Ramnath |
98.35 |
Mr. Srinath Narasimhan1 |
54.94 |
Mr. Kishor A. Chaukar2 |
NA |
Dr. Uday B. Desai |
11.26 |
Mr. Saurabh Kumar Tiwari3 |
NA |
Mr. Bharat Vasani1 and 2 |
NA |
Dr. Gopichand Katragadda1 |
(0.88) |
Mr. G. Narendra Nath3 |
NA |
Mr. Vinod Kumar, Managing Director and Group CEO |
10.01 |
Ms. Pratibha K. Advani, Chief Financial Officer |
24.80 |
Mr. Manish Sansi, Company Secretary |
14.62 |
*While calculating the ratio for non-executive directors, both commission and sitting fees paid have been taken.
1 Non-Executive Directors who are in full-time employment of any Tata Company and are receiving salary as such full-time employees shall not accept any commission from FY17-18.
2 Directors and KMPs who have not been in the Company for the entire financial years 2016-17 and 2017-18 have not been considered for the calculations.
3 The Government Directors have informed the Company that they shall not accept any Sitting Fees and commission as their Directorships are considered to be part of their official duty.
c. The percentage increase in the median remuneration of employees in the financial year: 10.51%
d. The number of permanent employees on the rolls of Company: 4,517 employees as on March 31, 2018
e. Average percentile increase already made in the salaries of employees, other than the managerial personnel in the last financial year, and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:
During the course of the year, the total average increase was approximately 9.0%, after accounting for promotions and other event-based compensation revisions. The increase in the managerial remuneration for the year was 12.5%.
f. Affirmation that the remuneration is as per the remuneration policy of the Company:
The Company affirms that the remuneration is as per the remuneration policy of the Company.
Conservation of energy
The ''Sustainable Business'' section of the Management Discussion and Analysis describes our consistent efforts towards conservation of energy and creating a better tomorrow.
Technology absorption
The Company continues to use the latest technologies for improving its productivity and the quality of its services and products. Its operations do not require the significant importation of technology.
Foreign exchange earnings and outgoings
For the purpose of Form ''C'' under the Companies (Accounts) Rules 2014, foreign exchange earnings were equivalent to Rs, 728.24 crores and foreign exchange outgo was equivalent to Rs, 465.30 crores.
Statutory Auditors and their report
The Company''s Statutory Auditors, M/s. S.R. Batliboi & Associates LLP, Chartered Accountants (Firm Registration No. 101049W / E300004), hold office until the conclusion of the 36th Annual General Meeting, subject to ratification of their appointment by shareholders at every Annual General Meeting.
The Statutory Auditors have not reported any incident of fraud to the Company''s Audit Committee in the year under review.
The Company''s standalone and consolidated financial statements have been prepared in accordance with the Indian Accounting Standards prescribed under Section 133 of the Act read with relevant rules issued there under (Ind AS) and other accounting principles generally accepted in India.
Secretarial Auditors and their report
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed a practicing company secretary, Mr. U. C. Shukla, (FCS No. - 2727/CP No. -1654), to undertake the Company''s secretarial audit. The report of the Secretarial Auditor in Form MR-3 for the Financial Year ended March 31, 2018 is annexed to this report. The Secretarial Audit Report contains the following observation:
âDuring the year under review the Company has complied with the provisions of the Act, rules, regulations, guidelines, standards etc mentioned above subject to the following observation:
The Company has complied with the requirements of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Companies Act, 2013 except with regard to appointment of Independent Directors to the extent of one third of the total strength of the Board.â
Boardâs Comment:
When the Government of India (GoI) transferred 25% of its stake in the Company to Panatone Finvest Limited (Pantone) in 2002, a shareholders'' agreement (hereafter ''SHA'') and a share purchase agreement were entered into between the parties. These agreements, inter alia, set forth the rights and obligations of the parties in appointing directors on the Board of the Company. The relevant clauses from the SHA were incorporated in the Company''s Articles of Association, which provide, in part, that the Board is to be comprised of twelve directors, four of whom must be independent. The GoI and Panatone are each entitled to recommend two independent directors to the Board.
As of the date of this Report, the Board comprised of seven directors, of whom two were independent. Each of the independent directors were recommended by the GoI and Panatone, respectively. The Company continues to seek both, the GoI''s and Panatone''s recommendation for the other two independent directors to fill the remaining Board vacancies. Until such time as the Company receives the recommendations from the GoI and Panatone, enabling the Nomination and Remuneration Committee (NRC) and the Board to appoint two additional independent directors, the Company will be unable to comply with provisions of Section 149 (4) of the Companies Act, 2013 and Regulation 17 (1) (b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
DIRECTORSâ RESPONSIBILITY STATEMENT
The Board is of the opinion that the Company''s internal financial controls were adequate and effective during the financial year 2017-18, based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost and secretarial auditors and external consultant(s), as applicable, including an 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.
Accordingly, pursuant to Section 134(5) of the Act, the Board of Directors, to the best of their knowledge and ability, confirm that:
- in the preparation of the annual accounts, the applicable accounting standards were followed and there were no material departures
- the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period
- the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities
- the directors had prepared the annual accounts on a going concern basis
- the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively
- the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively
- the directors have reviewed and approved the Annual Operating Plan (including the strategy and resource plan) of the Company
- the directors have overseen maintenance of high standards of Tata values and ethical conduct of business
- the directors have reviewed the Tata Business Excellence Model (TBEM) findings and monitored the action plan
- the directors have protected and enhanced the Company reputation and brand, and also the Tata brand, where companies are using this.
ACKNOWLEDGMENTS
The directors would like to thank each one of our customers, business associates and suppliers around the world for their valuable contribution to Tata Communications'' continued growth and success. The directors recognize and appreciate the passion and commitment of Tata Communications'' employees and workforce globally.
The directors are also grateful to Tata Communications'' other stakeholders and partners including our shareholders, promoters, bankers and others for their continued support.
On behalf of the Board of Directors
Chairperson
Dated: May 10, 2018
Registered Office:
VSB, Mahatma Gandhi Road, Fort,
Mumbai - 400 001
Mar 31, 2017
DIRECTORS'' REPORT
Dear Shareholder:,
The directors present the 31st Annual Report and audited financial statements of Tata Communications Limited ("Company") for the financial year ended March 31, 2017. The Company along with its subsidiaries wherever required is referred as "we", "us", "our", "Tata Communications" or ''Tata Communications Group''.
performance
The key financial parameters of the Company''s performance during the year under review are given in the table below:
Rs, in Croce
Standalone |
Consolidated |
|||
2016-17 |
2015-16 |
2016-17 |
2015-16 |
|
Continuing operations |
||||
Income from operations |
5068.15 |
4790.32 |
17619.73 |
18148.58 |
Other Income |
(16.91) |
209.77 |
360.29 |
396.64 |
Total Revenue |
5051.24 |
5000.09 |
17980.02 |
18545.22 |
Total Expenses |
4670.22 |
4372.52 |
17446.79 |
17980.21 |
Profit from ordinary activities before exceptional items, tax and share of profit of associate |
381.02 |
627.57 |
533.23 |
565.01 |
E-creational Items |
823.82 |
(22.63) |
(1063.33) |
(102.79) |
Profit / (Loss) before tax and share of profit of associate |
1204.84 |
604.94 |
(530.10) |
462.22 |
Tax expense/(benefit) |
||||
Current Ov |
602.50 |
150.32 |
270.30 |
203.95 |
Deferred Tv |
(87.49) |
61.94 |
(33.92) |
28.90 |
Profit / (Loss) for the period |
689.83 |
392.68 |
(766.48) |
229.37 |
Share in Profit of Associates |
- |
- |
5.08 |
- |
Profit/ (Loss) for the period from continuing operations |
- |
- |
(761.40) |
229.37 |
Discontinued operations |
||||
Profit/(Loss) before tax from discontinued operations |
- |
- |
123.31 |
(109.66) |
Gain on sale of business and subsidiaries (including impairment of goodwill) |
- |
- |
2420.51 |
(90.00) |
Profit /(Loss) from Discontinued operations (before tax) |
- |
- |
2543.82 |
(199.66) |
Tax expense on Discontinued operations |
- |
- |
546.96 |
19.25 |
Profit /(Loss) from discontinued operations after tax |
- |
- |
1996.86 |
(218.91) |
Net Profit/ (Loss) from total operations |
- |
- |
1235.46 |
10.46 |
Other Comprehensive Income (net of tax) |
(188.02) |
(334.37) |
864.64 |
(608.82) |
Total Comprehensive Income / (Loss) |
501.81 |
58.31 |
2100.10 |
(598.36) |
Dividend
The directors are pleased to recommend a dividend of Rs,6.00 per share [Normal dividend of Rs,4.50 per share of face value Rs,10/- each plus a one-time special dividend Rs,1.50 per share of face value Rs,10/- each] for the financial year ended March 31, 2017 (Rs,4.30 per share dividend in FY 15-16), subject to the approval of the shareholders at the ensuing annual general meeting.
Transfer to Reserves
On a standalone basis, the Company does not propose to transfer any amount to the general reserve out of the amount available for appropriation and the balance in the surplus in the statement of profit and loss stood at Rs, 3105.08 crores as on March 31, 2017.
OPERATIONS Segment Distribution
We have been successful in our goal of diversifying revenues, to tap new opportunities and reduce any risks of an overtly concentrated portfolio. Our revenues are broadly diversified across our voice and data services businesses. Taking advantage of the growing data services market the Tata Communications Group has been focusing on segments such as mobility, Internet of Things (IoT), media and entertainment, financial services, and health care. During the year under review, consolidated continuing business revenue from our voice services business contributed 38% (45% in FY15-16) of total revenue and our data services business contributed 62% (55% in FY15-16) of total revenue. This is discussed in detail in the Management Discussion & Analysis, which forms a part of this report.
Voice
We continue to be one of the largest players worldwide in wholesale voice business. The volumes in this business continued to decline due to a continued shift in traffic to voice over internet protocol (VoIP) based calling. During the year under review, total voice traffic declined by
0.6% over the previous year, EBITDA margins increased by 0.13% and EBITDA declined by 14.9%. Developing innovative commercial offerings and optimizing costs to maintain free cash flow generation remains the focus for this business.
Data
In the data services business, we are the industry leaders in India and an emerging challenger globally. We have made significant capital expenditure in our data business to create a global infrastructure and a suite of growth products and services. Our ongoing focus and investment in brand, sales and marketing to scale up our global enterprise data business have increased recognition for the Tata Communications Group in the market place.
Over the years, we have moved from being a traditional connectivity services provider, largely in India, to a truly global services provider - offering a broad range of managed communication and collaboration services as well as IT infrastructure services. With our current portfolio of data services, Tata Communications is no longer seen as a mere provider of raw bandwidth. Our customers see us as an essential provider of technologies that help them make the shifts to digital business models, in addition to being a globalization enabler.
Our investments and innovations are enabling us to be viewed more as an Over-The-Top (OTT) player than as a telecom operator. Our data business has continued its robust momentum with revenues growing 6.8% during 2016-17. During the year, Tata Communications Group launched the latest addition to its IZO Cloud Enablement Platform called IZO⢠SDWAN, SDWAN standing for Software Defined Wide Area Networking. This will strengthen the Company''s data services offerings with new capabilities that allow enterprises to take advantage of greater service agility and automated provisioning.
The Tata Communications Group has a strong set of offerings across the gamut of unified communications and collaboration (UCC) services, hosting services, security services and continues to see further growth in its data services portfolio. Our strategy of expanding into managed services continues to pay off, as these services now contribute 37% to the data services segment.
HUMAN RESOURCES
Tata Communications Group offers a dynamic work environment where our employees benefit from working with other innovators from around the globe who are driving meaningful change to our customers and the planet. We have a multicultural workforce, with people of more than 36 nationalities on our rolls, out of which women constitute 20% of our employees. Tata Communications Group''s compensation and employee benefit practices are designed to be competitive in the respective geographies where it operates. Employee relations continue to be harmonious at all our locations. The number of training person days provided to employees increased by 17% over the previous year.
The Tata Communications Group has zero tolerance for sexual harassment and the Company has adopted a charter 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 made there under. During the financial year 2016-17, the Company received five complaints on sexual harassment. As on March 31, 2017, all complaints were disposed off with appropriate action and no complaint remained pending.
BUSINESS EXCELLENCE
The Tata Communications Group has adopted the Tata Business Excellence Model (TBEM), which is formulated on the Baldrige Excellence Framework, to enable the Tata Communications Group to improve performance and attain higher levels of efficiency in its businesses. Tata Communications was classified as an "Emerging Industry Leader" following a rigorous assessment conducted by the Tata Business Excellence Group (a division of Tata Sons) and continues to use this assessment as a framework as part of its business excellence journey. We have taken actions on the findings of the assessment which have considerably improved our processes and TBEM score in the current year.
ENTERPRISE RISK MANAGEMENT
The Company has established an enterprise-wide risk management (ERM) framework to optimize the identification and management of risks globally and to comply with provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. In line with the Company''s commitment to delivering sustainable value, this framework aims to provide an integrated and organized approach for evaluating and managing risks.
There are no elements of risk, which in the opinion of the
Board may threaten the existence of the Company. RISK-BASED INTERNAL AUDIT
The risk assessments performed under the ERM exercise are a key input for the annual internal audit programme, which covers various businesses and functions of the Tata Communications Group. This approach provides adequate assurance to the management that the right areas are covered under the audit plan.
CORPORATE MATTERS Subsidiary Companies
a) The Company had 47 subsidiaries as on March 31, 2017 and 5 associate companies within the meaning of Section 2(6) of the Companies Act, 2013 ("Act"). Except for the transfer of the Singapore data centre business described below, there has been no material change in the nature of business of the subsidiaries and associate companies.
Pursuant to the provisions of Section 129(3) of the Act, a statement containing salient features of the financial statements of the Company''s subsidiaries in Form AOC-1 is attached to the financial statements.
Pursuant to the provisions of section 136 of the Act and General Circular No. 11/ 2015 dated July 21, 2015 issued by Ministry of Corporate Affairs, the financial statements of the Company, consolidated financial statements along with relevant documents and separate accounts in respect of subsidiaries, are available on the website of the Company.
b) On February 10, 2017, the Company and Nexus Connexion successfully completed the sale of its entire shareholding in Neotel Pty. Ltd. ("Neotel") to Liquid Telecom, a privately owned, pan-African telecoms group, majority owned by Econet Wireless Global, who partnered with Royal Bafokeng Holdings (RBH), a South African empowerment investment group, in the transaction. The deal has created the largest pan-African broadband network and B2B telecom provider, enabling African companies to connect with each other and internationally on a single fibre network. Thus, Neotel ceased to be our subsidiary from February 10, 2017.
c) As reported last year in May 2016, Tata Communications and Singapore Technologies Telemedia (ST Telemedia), a strategic global investor focused on the communications, media and technology sectors, had entered into definitive agreements whereby ST Telemedia, through ST Telemedia Global Data Centres (STT GDC), would, upon closing of the transaction acquire a 74% majority stake in Tata Communications'' data centre business in India and Singapore, with Tata Communications holding the remaining stake as a minonty ^hJlehoklel.
The India data centre transaction was successfully completed on October 19, 2016 and Tata Communications Data Centres Private Limited ceased to be our subsidiary from that date, while the Singapore data centre joint venture transaction was successfully completed on February 13, 2017.
The completion of both India and Singapore transactions reinforces the strategic partnership between the two dynamic companies, working closely and drawing on each other''s complementary capabilities and experience to accelerate growth in the vibrant data centre markets in India and Singapore.
d) On January 20, 2017, Tata Communications (Netherlands) B. V., a wholly owned indirect subsidiary of the Company, acquired a 35% stake in Teleena Holding B.V. ("Teleena"), a mobile virtual network enabler headquartered in the Netherlands, thus becoming its single largest shareholder. Thus, Teleena has become an Associate of the Company from January 20, 2017.
Investment in Tata Teleservices Limited
In 2008-09, NTT DoCoMo Inc (Docomo) entered into an agreement with Tata Teleservices Limited (TTSL) and Tata Sons Limited (Tata Sons) to acquire 20% of the equity share capital under the primary issue and 6% under the secondary sale from Tata Sons. In terms of the agreements with Docomo, Tata Sons, inter alia, agreed to provide various indemnities and a Put Option entitling Docomo to sell its entire shareholding at a minimum pre-determined price of Rs, 58.05 per share if certain performance parameters were not met by TTSL. The minimum pre-determined price represented 50% of the acquisition price paid by Docomo in 2008-09.
An Inter-se agreement dated March 25, 2009, was executed by the Company with Tata Sons and other TTSL shareholders to give effect to the Docomo/Tata Sons'' sale and purchase agreement. In accordance with the terms of the Inter-se agreement, the Company sold 36,542,378 equity shares of TTSL to Docomo at Rs, 116.09 per share, resulting in a profit of Rs, 346.65 crores.
In or around July 2014, Docomo exercised its Put Option and called upon Tata Sons to acquire Docomo''s entire shareholding in TTSL at the pre-determined price of Rs, 58.05 per share. The Reserve Bank of India did not permit acquisition of the shares at the pre-determined price and had advised the parties that the acquisition can only be made at Fair Market Value (FMV) prevailing at the time of the proposed acquisition. Tata Sons conveyed to Docomo its willingness to acquire the shares at the FMV, however, Docomo reiterated its position that the shares had to be acquired at Rs, 58.05 per share. Thereafter, Docomo had initiated Arbitration in the matter before the London Court of International Arbitration (LCIA), the evidentiary hearing of which was completed on May 06, 20 16.
The Arbitral Tribunal appointed by the LCIA to arbitrate the dispute between Tata Sons and Docomo, issued a final award (LCIA Award) on June 22, 2016, which required Tata Sons to pay to Docomo, damages of US$1,172 million upon tender of shares held by Docomo in TTSL, together with interest, arbitration costs and legal costs.
Thereafter, Docomo filed a petition with the Delhi High Court for implementation of the LCIA Award. The Delhi High Court directed Tata Sons to deposit the damages including costs and interest in an escrow account. Under the terms of the Inter-Se agreement, and pursuant to the LCIA award, the Company was to acquire 158,350,304 equity shares of TTSL at a value of approximately Rs,1058 crores. On August 2, 2016, the Company paid to Tata Sons approximately Rs,1058 crores as a recoverable advance in anticipation of satisfaction of the LCIA Award and receipt of the TTSL Shares.
On April 28, 2017, the Delhi High Court, approved the consent terms between Tata Sons and Docomo for resolution of the LCIA Award (hereafter, the "Order").
Under the terms of the Order, the monies deposited by Tata Sons in the Court by way of Fixed Deposit Receipts, together with interest accrued thereon, shall be retained by the Registrar of the Delhi High Court until requisite clearance from the Competition Commission of India and the Withholding Tax Certificate as mentioned in the consent terms between the parties have been obtained, at which time the funds shall be returned to Tata Sons for onward payment to Docomo in satisfaction of the
Award.
Based on the Delhi High Court Order dated April 28, 2017, the Company has made a provision of Rs, 872.01 crores towards the contractual obligation under the Inter-se agreement being difference between the fair value of equity shares to be repurchased (based on the valuation undertaken as at November 18, 2016) and the consideration paid for discharge of the Company''s obligation under the Inter-se agreement and Put Option. The provision has been adjusted against the deposit of Rs, 1.058 crores which is included in Non-current - Other financial assets.
The Company''s overall investment in the equity shares of TTSL is recognized at fair value through Other Comprehensive Income. During the current year, the Company reassessed the fair value of TTSL and accordingly recognized a loss of Rs, 166.71 crores (Rs, 344.40 crores in FY15-16) in Other Comprehensive Income. Due to the continued volatility of market conditions, it was not possible to complete an updated valuation report to determine fair value as at March 31, 2017.
Compliance under the Companies Act, 2013 and additional SEBI stipulations
As on the date of this Report, the Board comprised of nine directors out of whom two were independent. As reported to stock exchanges, in February 2002, when the Government of India ("GoI") transferred 25% of its stake in the Company to Panatone Finvest Limited ("Panatone"), a shareholders'' agreement and a share purchase agreement were signed. These agreements, inter alia, set forth the rights and obligations of Panatone and the GoI including appointment of directors on the Board of the Company. The relevant clauses from the agreements were incorporated in the Articles of Association of the Company which in part provide that the Board is to comprise of twelve directors, four of whom must be independent. The GoI and Panatone are entitled to indicate the names of two independent directors each.
The two independent directors indicated by the GoI and appointed to the Board resigned in May 2011. Since the resignation of these two independent directors, the GoI has indicated only one independent director to replace them - Dr. Uday B. Desai, who has been duly appointed. Further, Mr. Subodh Bhargava, an independent director has ceased to be a director with effect from March 30, 2017. Ms. Renuka Ramnath, an independent director, has been elected as the Chairperson of the Board w.e.f. April 14, 2017.
The Company is pursuing with the GoI and Panatone for indication of candidates for appointment as independent directors so as to fill the vacancies on the Board. Until the recommendation is received enabling the Nomination and Remuneration Committee (NRC) and the Board to appoint two more independent directors, the Company will not be able to comply with provisions of Section 149 (4) of Companies Act, 2013 and Regulation 17 (1) (b) of SEBI (Listing Obligations and Disclosure Requirements) R^gulationo 2015.
PENDING MATTERS OF SIGNIFICANCE
Inability to Raise Additional Equity Funding
In response to Company''s request for consideration of additional equity funding, the GoI has informed the Company that it is neither willing to invest in any further equity of the Company nor will it accept dilution of its stake in the Company. This has resulted in the Company not being able to avail of any non-debt funding through issue of equity since 1997.
Surplus Land
Out of the total land acquired by the Company (then Videsh Sanchar Nigam Limited) in 1986 from the GoI as the successor to the Overseas Communications Service, 773.13 acres of land at five different locations was identified as ''surplus'' (Surplus Land) for demerger under the terms of the share purchase and shareholders'' agreements (SHA) signed between the GoI and Panatone at the time of disinvestment. Under the terms of the SHA it was agreed that this Surplus Land would be demerged into a separate entity. It was further provided that if, for any reason, the Company could not transfer or demerge the Surplus Land into a separate entity, alternative solutions would be explored.
To accomplish the demerger of the Surplus Land in accordance with the SHA, Panatone incorporated Hemisphere Properties India Limited (HPIL) in 2005-06 to hold the Surplus Land as and when demerged. In March 2014, the GoI acquired ~51.12% of the shares in HPIL making it a Government company.
Additionally, with the objective to give effect to the terms of the SHA and to facilitate the demerger of Surplus Land in a tax neutral manner for the Company, the GoI has inserted an Explanation 5 to clause (19AA) of section 2 of the Income Tax Act, 1961 (Explanation 5) with effect from April 1, 2017 by a recent Taxation Laws (Amendment) Act, 2016. This Explanation 5 provides as follows:
"Explanation 5 - For the purposes of this clause, the reconstruction or splitting up of a company, which ceased to be a public sector company as a result of transfer of its shares by the Central Government, into separate companies, shall be deemed to be a demerger, if such reconstruction or splitting up has been made to give effect to any condition attached to the said transfer of shares and also fulfils such other conditions as may be notified by the Central Government in the Official Gazette"
Further, in exercise of the powers conferred by Explanation 5, the GoI pursuant to Central Board of Direct Taxes Notification 93/2016, No. 149/251/2015-TPL dated October 14, 2016, issued a notification (Notification) which states:
"that the reconstruction or splitting up of a company which ceased to be a public sector company as a result of transfer of its shares by the Central Government, into separate companies, shall be deemed to be a demerger, if the following conditions are fulfilled, namely:â
i. that such reconstruction or splitting up has been made to transfer any assets of the demerged company to the resulting company to give effect to the conditions mentioned in the Share Holders'' Agreement and Share Purchase Agreement; and
ii. that the resulting company is a public sector company."
The Directors place on record their sincere appreciation for the GoI for affecting the above mentioned Explanation 5 and Notification. The Company has sought certain clarifications on the said Explanation 5 and Notification and is pursing the same with the GoI.
The Company is currently actively working with the GoI, Panatone and HPIL to finalize the scheme of demerger and expects that the same shall be finalized sometime in the near future.
Continuous efforts are being made by the GoI, Panatone, HPIL and the Company to measure the land, demarcate it between Surplus Land and non-Surplus Land and to resolve the issues of variance in the physical areas of land vis a vis the areas of land mentioned in the SHA. As reported earlier, 32.5 acres of land situated at Padianallur was transferred in July 2009 to the VSNL Employees Cooperative Housing Society, Chennai (society) as per the order of the Hon''ble Delhi High Court. As this land was part of the Surplus Land, Panatone has written to the GoI to exclude these 32.5 acres of land from the Surplus Land to be demerged.
Additionally, as mentioned below in this Report, Delhi Metro Rail Corporation Limited (DMRC) has acquired approximately 2.6 acres of Company land for the Delhi Metro work, out of which 0.55 acres constitutes Surplus
Land.
Furthermore, as per the terms of the SHA, the Company owns 774 acres of land at Dighi, Kalas and other villages near Pune (Pune Land), of which 524 acres constituted Surplus Land. In 1940, approximately 94.7 acres of the Pune Land was leased to the Ministry of Defense (MoD) for the duration of the war which could form part of Surplus Land. The MoD continued to occupy this land and pay the agreed annual rent until March 31, 2006. Since this time, the Company has been seeking payment from the MoD for all rent due on the land. On July 31, 2010 the MoD informed the Company that the land in their possession had been transferred to the MoD in 2007 by the Collector of Pune and that no rent on this land was owed to the Company. The MoD further claims that the land was transferred to the MoD under a "Pune Package Deal" by the GoI and no compensation is payable by it to the Company for the land. The Company continues to pursue the matter for compensation for the unpaid rent and the value of the land.
In view of the above, the quantum of Surplus Land available for demerger has reduced. Significant progress has been made in reconciliation of the Surplus Land and the Board is hopeful that the outstanding issues on the demarcation of land shall be resolved by the promoters of the Company very soon.
The book value of the Surplus Land is ~Rs,0.16 crores. Delhi Metro Land Acquisition
In September 2013, the Delhi Metro Rail Corporation Limited ("DMRC") informed the Company that as part of its Delhi Metro work, it required a parcel of the Company''s land at Greater Kailash-I, New Delhi. This land parcel measured 1 1622 square meters (2.6 acres). On January 2, 2014, the Company received an acquisition notice for this land pursuant to an award granted by the Land Acquisition Collector (LAC). The Company subsequently received a certified copy of the LAC award on February 6, 2014 stating the total compensation for the land determined by LAC as Rs, 18,880,168/- based on an indicative price fixed by the Government of Delhi for agricultural land. Aggrieved, the Company filed a Reference Petition with LAC for the proper determination of the compensation due on the land based on commercial and not agricultural usage of land. Simultaneously, the Company also filed a writ petition with the Delhi High Court. On April 24, 2014, the Delhi High Court directed DMRC to deposit a sum of Rs, 247 crores with the Court Registrar which has since been deposited by DMRC. This amount is approximately 80% of the estimated compensation valuation for the land based on commercial usage. In the meantime, DMRC has commenced construction for the Delhi Metro work on the land. The writ petition in the Delhi High Court is at the stage of final arguments between the parties.
Premature Termination of Monopoly and Compensation
As reported earlier, the GoI had allowed other players into the International Long Distance (ILD) business from April 1, 2002, terminating the Company''s exclusivity in ILD two years ahead of schedule. The GoI agreed to give the Company a compensation package for this early termination by the terms of its communication to the Company dated September 7, 2000. The GoI also gave the Company an assurance that it would consider additional compensation, if found necessary, following a detailed review.
However, pursuant to its letter dated January 18, 2002, issued just before its disinvestment of the Company, the GoI issued a further dispensation to the Company and unilaterally declared that the conditions stated in its letter were to be treated as full and final settlement of every sort of claim against the early termination of the Company''s rights in the ILD market. The Company filed a suit in the Bombay High Court in 2005. The Bombay High Court, on July 7, 2010, ruled that it did not have the jurisdiction to hear this suit, in view of the provisions of the Telecom Regulatory Authority of India Act, 1997 (TRAI). In response, the Company has instituted an appeal before a division bench of the Bombay High Court on various grounds. This appeal in the Bombay High Court is yet to come up for hearing.
STATUTORY INFORMATION AND DISCLOSURES Material Events After Balance-Sheet Date
During the current year, NTT Docomo Inc. ("Docomo") had filed a petition with the Delhi High Court for implementation of the arbitration award (damages along with costs and interest) made by the London Court of International Arbitration. The Delhi High Court directed Tata Sons to deposit the damages, including costs and interest, in an escrow account. During the quarter ended September 30, 2016, the Company had remitted its share of Rs, 1058.00 crores, to Tata Sons. During the current year, based on the High Court Order dated April 28, 2017, the Company has made a provision of Rs, 872.01 crores towards the contractual obligation under the inter-se agreement being the difference between the fair value of the equity shares to be repurchased, based on the valuation undertaken as at November 18, 2016 and the consideration payable to the buyer for discharge of the Company''s obligations under the Put Option. The provision has been adjusted against the deposit of Rs, 1058 crores which is included in Non-current - Other financial assets. The Company does not believe that there is any obligation of any further payment in this regard.
Deposits from Public
The Company has not accepted nor does it hold any public deposits.
Non-convertible Debentures (NCDs)
The Company had Rs, 155 crores of outstanding NCDs (Secured NCDs - Rs, 5 crores and Unsecured NCDs Rs, 150 crores) as on March 31, 2017. The trust deed for the secured NCDs will be available for inspection by the members at the Company''s registered office during normal working hours, 21 days before the date of the 31st Annual General Meeting i.e. June 27, 2017.
All debentures issued by the Company were rated AA
by CARE.
Particulars of Employees
The provisions of Section 134 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, require the Company to provide certain details about the remuneration of its
employees.
According to the provisions of section 136(1) of the Act, the Directors'' Report being sent to the shareholders need not include this information as annexure. The annexure regarding the Particulars of Employees under section 134 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, will be available for inspection by any member at the registered office of the Company during working hours, for 21 days before the date of the AGM.
Conservation of Energy
To achieve optimal energy efficiency, we aim to employ continuous measurement of energy consumption, identify leakages and review our operating procedures. Our facilities / sites are designed to connect utilities such as chillers, Un-interrupted Power Supply (UPS) and Air Handling Units (AHUs) to a customer''s Building Management System (BMS) for maximizing efficiency and sourcing Renewable Energy (RE) from third party sources. We implemented several energy efficiency projects in 2016-17 across our operations, which further reduced our global emissions by 69,000 metric tons.
We consume nearly 2 million gigajoules of energy mainly comprising of indirect power supply (97%) from the national grid whereas rest comes from conventional sources. There is an on-going move to use renewable energy at key locations of Tata Communications. The Company has signed multiple agreements with wind power suppliers in Tamil Nadu, Karnataka and Hyderabad for 69 million kilowatt hours per annum for the facilities at Chennai, Bangalore & Hyderabad.
Technology Absorption
The Company continues to use the latest technologies for improving the productivity and quality of its services and products. The Company''s operations do not require significant import of technology.
Foreign exchange earnings and outgoings
For the purpose of Form ''C'' under the said rules, foreign exchange earnings were equivalent to Rs, 898.45 crores and foreign exchange outgo was equivalent to Rs, 623.1 1 crores.
Statutory Auditor''s Report
The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review.
The standalone and consolidated financial statements of the Company have been prepared in accordance with the Indian Accounting Standards prescribed under Section 133 of the Act read with relevant rules issued there under (Ind AS) and other accounting principles generally accepted in India.
The Auditors have given a qualified opinion on the standalone and consolidated financial statements of the Company, as described below:
Standalone Financial Statements:
"As described in Note No. 6(VI) to the standalone Ind AS Financial Statements, the fair value of the Company''s investment in the unquoted equity shares of Tata Teleservices Limited (TTSL) has not been determined as at March 31, 2017. Accordingly, we are unable to comment whether the carrying value of the investment in TTSL ofRs, 515.53 crores represents the fair value as at March 31,2017 and whether any consequent adjustment is required to be recognized in other comprehensive income, and whether the expense for provision for contractual obligation, as described in Note No. 29 to the standalone Ind AS Financial Statements, is adequate."
Board''s Comment:
The equity investment in question is in an unlisted company where the Company is a minority shareholder holding less than 10 percent of the shares of the unlisted company. The Company was provided an external valuation report dated November 18, 2016 from the unlisted company.
As of the date of the issue of these financial statements, due to the continued volatility of market conditions, it was not possible to complete an updated valuation report to determine fair value as at March 31, 2017.
Consolidated Financial Statements:
1. "As described in Note No. 8(i) to the Consolidated Ind AS Financial Statements, investment in the unquoted equity shares of Tata Teleservices Limited (TTSL) has not been determined as at March 31,2017. Accordingly, we are unable to comment whether the carrying value of the investment in TTSL ofRs, 515.53 crores represents the fair value as at March 31, 2017 and whether any consequent adjustment is required to be recognized in other comprehensive income, and whether the expense for provision for contractual obligation, as described in Note No. 31 to the Consolidated Ind AS Financial Statements, is adequate."
Board''s Comment:
The equity investment in question is in an unlisted company where the Company is a minority shareholder holding less than 10 percent of the shares of the unlisted company. The Company was provided an external valuation report dated November 18, 2016 from the unlisted company.
As of the date of the issue of these financial statements, due to the continued volatility of market conditions, it was not possible to complete an updated valuation report to determine fair value as at March 31, 2017.
2. "As described in Note No. 34(II)(a), the Consolidated Ind AS Financial Statements includes loss from discontinued operations of '' 69.98 crores for the year ended March 31,2017, in respect of a subsidiary (disposed on February 10, 2017), whose financial statements have not been audited by us. These financial statements are unaudited and have been furnished to us by the Management and our opinion on the Consolidated Ind AS Financial Statements, in so far as it relates to the amounts and disclosures included in respect of this subsidiary is based solely on such unaudited financial statements."
Board''s Comment:
On February 10, 2017 the Company concluded sale of its entire shareholding in Neotel and the Company does not have any control over Neotel. Neotel is in the process of obtaining its audited Financial Statement and hence the Company has considered the management accounts of Neotel to prepare its consolidated financial statements. The Company believes that the numbers provided by the management will not differ significantly from the final audited financials. Further, this will not have any impact on the Consolidated Balance Sheet as on March 31, 2017.
Secretarial Auditors'' Report
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. U. C. Shukla a Practising Company Secretary (FCS No. - 2727/CP No. - 1654) to undertake the Secretarial Audit of the Company. The report of the Secretarial Auditor in Form MR-3 for the Financial Year ended March 31, 2017 is annexed to this Report. The Secretarial Audit Report contains the following observation:
"During the year under review the Company has complied with the provisions of the Act, Rules Regulations, Guidelines, Standards, etc. mentioned above subject to the following
observation
The Company has complied with the requirements of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Companies Act, 2013 except for appointment of Independent Directors to the extent of 1/3rd of the total strength of the Board."
Board''s Comment:
In February 2002, when the Government of India (GoI) transferred 25% of its stake in the Company to Panatone Finvest Limited (Pantone), a shareholders'' agreement and a share purchase agreement were signed. These agreements, inter alia, set forth the rights and obligations of Panatone and the GoI including appointment of directors on the Board of the Company. The relevant clauses from the agreements were incorporated in the Articles of Association of the Company which in part provide that the Board is to comprise of twelve directors, four of whom must be independent. The GoI and Pantone are entitled to indicate the names of two independent directors each.
The two independent directors indicated by the GoI and appointed to the Board resigned in May 2011. Since the resignation of these two independent directors, the GoI has indicated only one independent director to replace them - Dr. Uday B. Desai, who has been duly appointed. Further, Mr. Subodh Bhargava, an independent director has ceased to be a director with effect from March 30, 2017. Ms. Renuka Ramnath, an independent director, has been elected as the Chairperson of the Board w.e.f. April
14, 2017.
The Company is pursuing with the GoI and Panatone for indication of candidates for appointment as independent directors so as to fill the vacancies on the Board. Until the recommendation is received enabling the Nomination and Remuneration Committee (NRC) and the Board to appoint two more independent directors, the Company will not be able to comply with provisions of Section 149 (4) of Companies Act, 2013 and Regulation 17 (1) (b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Particulars of loans, guarantees or investments under Section 186
The particulars of loans, guarantees and investments have been disclosed in the Financial Statements which also form part of this report.
Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future
During the year under review, there were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.
Financial Controls
The Company has adequate internal financial controls with reference to the preparation and presentation of Financial Statements which are operating effectively.
Subsidiaries
A statement in Form AOC-I pursuant to first proviso to Section 129 of the Act read with rule 5 of Companies (Accounts) Rules, 2014 containing salient features of the financial statement of subsidiaries/ associate companies/ joint ventures forms a part of this report. The Company adopted Ind AS from April 1, 2016 and accordingly, the consolidated financial statements of the Company and its subsidiaries, are prepared in accordance with the recognition and measurement principles stated therein. The account statements of the subsidiaries will be provided on request to any shareholder wishing to have a copy, on receipt of such request addressed to the Company Secretary at the Company''s registered office. These documents will also be available for inspection by any shareholder at the Company''s registered office and will be available on the Company''s website.
Changes in the Board of Directors & Key Managerial
Personnel
Mr. Subodh Bhargava, independent director ceased to be a director on the Board with effect from March 30, 2017, as his term as independent director came to an end. The Board places on record its sincere gratitude for Mr. Bhargava''s counsel and leadership which has been invaluable to the growth and development of the Company. Ms. Renuka Ramnath, independent director, has been elected as the Chairperson of the Board with effect from April 14, 2017.
Dr. Ashok Jhunjhunwala stepped down from the Board with effect from January 27, 2017. The Board places on record its sincere appreciation for his contributions and guidance to the Company.
After obtaining the requisite security clearance under the Company''s TV up linking license from the Ministry of Information and Broadcasting, GoI, the Board, at its meeting held on October 18, 2016, appointed Mr. G. Narendra Nath, Deputy Director General (Security), Department of Telecommunictions, Government of India, as an additional director of the Company, as per the nomination received from the Government of India.
The Board seeks approval of the shareholders at the 31st Annual General Meeting for confirmation of the appointment of Mr. G Narendra Nath.
In accordance with the provisions of the Act and the Company''s Articles of Association, Mr. Bharat Vasani and Mr. N. Srinath retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.
None of the Company''s directors are disqualified from being appointed as a director as specified in Section 164 of the Act. For details about the directors, please refer to the report on Corporate Governance.
Declaration of Independent Directors
The independent directors have provided necessary disclosures to the Company that they comply with all the requirements stipulated in Section 149(6) of the Act for being appointed as an independent director which forms part of the Directors'' Report.
Particulars of contracts or arrangements with related parties referred to in Section 188 of the Act
There have been no materially significant related party transactions between the Company and the directors, the management, the subsidiaries or the relatives except for those disclosed in the financial statements.
Accordingly, particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Act along with the justification for entering into such contract or arrangement in Form AOC-2 does not form part of the Directors'' Report.
Number of meetings of the Board
Eleven meetings of the Board were held during the year. For details of the meetings of the Board, please refer to the report on Corporate Governance, which forms part of the Directors'' Report.
Board evaluation
The Board of Directors of the Company carried out annual evaluation of its own performance, of committees of the Board and individual directors pursuant to the provisions of the Act and the corporate governance requirements as prescribed under SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015.
Inputs were sought from all the directors on the basis of criteria such as the Board composition and structure, effectiveness of and contribution to Board processes, adequacy, appropriateness and timeliness of information and the Board''s overall functioning, etc. In a meeting of independent directors held on March 1, 2017, the performance of the Board as a whole, its committees and the Chairperson was evaluated. The conclusions were discussed in a meeting of the NRC where the performance of the Board, its committees and individual directors were reviewed. Thereafter, the Board, based on the briefing by the Chairperson and the NRC discussed the assessment of the Board, its committees and the Cl ijnperoM-i.
Policy on directors'' appointment and remuneration and other details
The Company''s policy on directors'' appointment and remuneration and other matters provided in Section 178(3) of the Act has been disclosed in the report on Corporate Governance, which forms part of the Directors''
Report.
Audit committee
The details pertaining to composition of the Audit Committee are included in the report on Corporate Governance, which forms part of the Directors'' Report.
Corporate Social Responsibility
The brief outline of the Corporate Social Responsibility (CSR) Policy of the Company and the initiatives undertaken on CSR activities during the year are set out in Annexure I of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The policy is available on the Company''s website.
Extract of annual return
As provided under Section 92(3) of the Act, the extract of annual return is given in the prescribed Form MGT-9 which forms part of the Directors'' Report as Annexure II.
Particulars of employees
The information required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given below:
a. The ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year 2016-17:
Non-Executive Directors |
Ratio to median remuneration * |
Mr. Subodh Bhargava (up to March 30, 2017) |
3.06 |
Mr. N. Srinath |
0.68 |
Mr. Kishor A. Chaukar |
1.51 |
Dr. Ashok Jhunjhunwala (up to January 27, 2017) |
1.07 |
Dr. Uday B. Desai |
2.48 |
Mr. Saurabh Kumar Tiwari # |
1.10 |
Mr. Bharat Vasani |
0.76 |
Ms. Renuka Ramnath |
2.08 |
Dr. Gopichand Katragadda |
0.87 |
Mr. G. Narendra Nath # |
0.20 |
Executive Director |
|
Mr. Vinod Kumar |
48.46 |
* While calculating the ratio for non-executive directors, both commission and sitting fees paid have been taken.
# The Government directors have informed the Company that they shall not accept any sitting fees and commission as their directorships are considered to be part of their official duty.
b. The percentage increase in remuneration of each director, chief executive officer, chief financial officer, company secretary in the financial year:
Directors, Chief Executive |
% increase in |
Officer, Chief Financial Officer |
remuneration |
and Company Secretary* |
in the financial |
year * |
|
Mr. Subodh Bhargava @ |
|
(up to March 30, 2017) |
NA |
Mr. N. Srinath |
(11.34) |
Mr. Kishor A. Chaukar |
(3.76) |
Directors, Chief Executive Officer, Chief Financial Officer and Company Secretary* |
% increase in remuneration in the financial year * |
Dr. Ashok Jhunjhunwala @ (up to January 27, 2017) |
NA |
Dr. Uday B. Desai |
12.01 |
Mr. Saurabh Kumar Tiwari # |
NA |
Mr. Bharat Vasani |
28.34 |
Ms. Renuka Ramnath |
19.85 |
Dr. Gopichand Katragadda |
69.14 |
Mr. G. Narendra Nath # |
NA |
Mr. Vinod Kumar, Managing Director & Group CEO |
17.60 |
Ms. Pratibha K Advani, Chief Financial Officer @ |
NA |
Mr. Manish Sansi, Company Secretary @ |
NA |
* While calculating the ratio for non-executive directors, both commission and sitting fees paid have been taken.
@ Directors and KMPs who have not been in the Company for the entire financial years 2015-16 and 2016-17 have not been considered for the calculation::..
# The Government Directors have informed the Company that they shall not accept any sitting fees and commission as their Directorships are considered to be part of their official duty.
c. The percentage increase in the median remuneration of employees in the financial year:
d. The number of permanent employees on the rolls of Company: 4064
e. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:
The average annual increase was around 8.4%. However, during the course of the year, the total increase is approximately 7.9%, after accounting for promotions and other event based compensation revisions. Increase in the managerial remuneration for the year was 14.3''%.
f. Affirmation that the remuneration is as per the remuneration policy of the Company:
The Company affirms that the remuneration is as per the remuneration policy of the Company.
g. Particulars of Employees:
The statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, including any statutory modifications and amendments thereto, is provided in a separate annexure forming part of this report. Further, the report and the accounts are being sent to the members excluding the aforesaid annexure. In terms of Section 136 of the Act, the said annexure is open for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary.
Corporate Governance
Pursuant to Regulation 24 and Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Management Discussion and Analysis, Business Responsibility Report, Report on Corporate Governance and Auditors'' Certificate regarding compliance with conditions of corporate governance form part of the Directors'' Report.
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 and secretarial auditors and external consultant(s), as applicable, including 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 is of the opinion that the Company''s internal financial controls were adequate and effective during the financial year 2016-1''.
Accordingly, pursuant to Section 134(5) of the Act, the Board of Directors, to the best of their knowledge and ability, confirm that:
- In the preparation of the annual accounts, the applicable accounting standards were followed and there were no material departures;
- the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;
- the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other iueciulautiec;
- the directors had prepared the annual accounts on a going concern basis.
- the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.
- the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
- the directors have reviewed and approved the Annual Operating Plan (including the strategy and resource plan) of the Company.
- the directors have overseen maintenance of high standards of Tata values and ethical conduct of business.
- the directors have reviewed TBEM (Tata Business Excellence Model) findings and monitored the action plan.
- the directors have protected and enhanced the
Company and Tata brand, where companies are using the same.
Awards & Recognitions
Gartner''s Magic Quadrant for Network Services, Global
- Tata Communications has been positioned as a Leader in the Gartner Magic Quadrant for Network Services, Global for the fourth year in a row.
A 2017 Best Employer in India and Hong Kong by Aon
Hewitt
- In 2017, for the second year in a row, Tata Communications has been recognized as one of the Best Employers in India. Only 18 other companies in India have received this recognition and it is a testament of the Company''s commitment to its employees and progressive people practices, specifically in the area of Learning and Development. In addition, earlier this year we were also recognized as one of the Best Employers in Hong Kong.
Ranked 19th in the Top 25 companies in India (2017) -
- In 2017, Tata Communications was ranked 19th in the Top 25 companies to work for in India by LinkedIn.
Certified as Great Place to Work in India (2017) - Great
Place to Work Institute
- In 2017, Tata Communications was also certified as a Great Place to Work in India by the Great Place to Work Institute, again a testament of the progressive people practices deployed by the Company.
ACKNOWLEDGMENTS
The directors would like to thank each one of our customers, business associates and suppliers located in different parts of the world for their valuable contribution to the Company''s growth and success. The directors recognize and appreciate the passion and commitment of all the employees around the world.
The directors are grateful to the Company''s other stakeholders and partners including its shareholders, promoters, bankers and others for their continued support.
On behalf of the Board of Directors
OiSiilperosn
Dated: May 4, 2017
Registered Office:
VSB, Mg Road, Fort,
Mumbai â 400001
Mar 31, 2015
Dear Shareholders,
The directors present the 29th Annual Report and audited financial
statements of Tata Communications Limited (the 'Company') for the
financial year ended 31 March 2015. The consolidated performance of the
Company and its subsidiaries has been referred to wherever required.
PERFORMANCE
The key financial parameters of the Company during the year under
review are given in the table below:
2014-15 2013-14 Percentage
(Rs.in Crores) (Rs.in Crores) Change
Consolidated continuing
total income 18,264.42 17,848.62 2.33%
Consolidated continuing
total EBIDTA 2,456.94 2,432.40 1.01%
Profit before taxes from
continuing operations 506.29 503.66 0.52%
Net profit from continuing
operations before
minority interest 135.83 160.38 -15.31%
Loss from discontinuing
operations (132.74) (57.56) 130.61%
Consolidated profit after tax 1.29 101.42 -98.73%
Standalone total income 4,989.88 4,840.35 3.09%
Standalone profit before tax 1,003.27 803.48 24.87%
Standalone profit after tax 674.62 542.43 24.37%
On a Standalone basis, profit after tax during the year under review
improved to Rs.674.62 crores from Rs. 542.43 crores last year. The
consolidated profit after tax was Rs.1.29 crores against Rs.101.42 crores
in the previous year. The consolidated profit figures for the year are
after taking into consideration the loss of Rs.171.64 crores (Rs.136.06
crores in FY13-14) of Tata Communications Payment Solutions Ltd (TCPSL)
a 100 % subsidiary of the Company which is in its gestation period. Of
the Company's total consolidated revenues, 27% (25% in FY 13-14) came
from India. The rest of the world contributed 73% or Rs.13,140.04 crores
of the total continuing operations revenue against 75% or Rs. 13,280.03
in the previous year.
The consolidated accounts for 2014-15 have been drawn up using
management accounts (pending completion of audit) of one of the
Company's foreign subsidiaries, Neotel Pty. Ltd. Therefore, the
Company's statutory auditors have issued a qualified Audit Report for
the year.
Dividend
The directors are pleased to recommend a dividend of Rs.5.50 per share
(Rs.4.50 per share last year) for the financial year ended 31 March 2015,
subject to the approval of the shareholders at the upcoming annual
general meeting.
Transfer to Reserves
On a standalone basis, the Company proposes to transfer Rs.407.46 crores
to the general reserve out of the amount available for appropriation
and an amount of t1,726.94 crores is proposed to be retained in the
Company's profit and loss account.
OPERATIONS
Segment Distribution
Over the last few years, Tata Communications has been successful in its
goal of diversifying revenues, to tap new opportunities and reduce any
risks of an overly concentrated portfolio. Accordingly, the revenues
are now broadly diversified across data and voice products and across
business segments, especially by taking advantage of greater
opportunities in the data market in new segments such as media and
entertainment, financial services, health care, etc. During 2014-15,
consolidated continuing operations revenue from voice services
contributed 49% (53% last year) of total revenue and data services
contributed 51% (47% last year). This is discussed in details in the
Management Discussions & Analysis which forms a part of this report.
Voice
In the voice business, Tata Communications remains one of the largest
players worldwide. The trend of declining margins continues due to
traffic shifting to VoIP-based calling. Therefore, Tata Communications
is focused on developing innovative commercial offerings and optimizing
costs to maintain free cash flow generation from this business. During
the year under review total voice traffic fell by 13% over the previous
year, while EBITDA margins have declined by 19% and EBITDA declined
23%. Free cash flow or (EBITDA less capex)generated during the year
from the voice business was Rs.608 crores (Rs.804 crores in the previous
year).
Data
Data continues to present substantial opportunities for Tata
Communications to achieve rapid growth and improved profitability. Over
the years, Tata Communications has moved from being a traditional
connectivity services provider, largely in India, to a truly global
services provider - offering a broad range of managed communication and
collaboration services as well as IT infrastructure services. The data
business has continued its robust momentum, with data revenues growing
in double digits during 2014-15. The launch of cloud enablement
solutions such as IZOTM services, coupled with network and data center
services, helped the Tata Communications to grow its data portfolio and
strengthen its presence in this high-growth business. Tata
Communications has also been strengthening its unified communications
services portfolio encompassing all forms of communications, as well as
its industry solutions for the Media & Entertainment sector and the
Banking & Financial Services sector. The Company's strategy of
expanding into managed services continues to pay off, as managed
services now contribute 36% to the data services segment (35% last
year).
Neotel (Disclosed as Discontinuing Operations)
Neotel is a subsidiary of the Company in South Africa. In May 2014, the
shareholders of Neotel and Vodacom SA concluded an agreement on the
commercial structure and terms to proceed for Vodacom to acquire 100%
of the shares of Neotel valued at an enterprise value of ZAR 7.0
billion. The structure of the deal and its commercial terms remain
subject to necessary approvals of regulatory and competition
authorities.
Human Resources
Tata Communications worldwide has a multicultural workforce, with
people of more than 40 nationalities on its rolls, while women
constitute 18% of the workforce. The compensation and employee benefit
practices of Tata Communications are designed to be competitive in the
respective geographies where it operates. Employee relations continued
to be harmonious at all our locations, through continuous dialogue and
openness. The number of training person days provided to employees
increased by 26.72% over the previous year, to a total of 42260 days.
Tata Communications has zero tolerance for sexual harassment at the
workplace and has adopted a policy on prevention, prohibition and
redressal of sexual harassment at workplace in line with the provisions
of the Sexual Harassment of Women at Workplace (Prevention, Prohibition
and Redressal) Act, 2013. As on 31 March 2015, out of the two
complaints on sexual harassment received during the year, one complaint
has been resolved with appropriate action taken and one complaint
remained pending.
Business Excellence
The Company has progressed in its endeavors to transform itself in
tandem with market and regulatory changes, using as its framework the
Tata Business Excellence Model (TBEM), which has been devised based on
the Baldrige Excellence Framework. The Company has been classified as
an "Emerging Industry Leader" following a rigorous assessment conducted
by Tata Quality Management Services.
In the financial year 2014-15, for the second year in a row, Tata
Communications has been positioned as a leader in the Gartner Magic
Quadrant for network services -global, a testament to its ongoing
commitment to driving its network capabilities forward, while extending
coverage in both developed and emerging markets.
Enterprise Risk Management
The Company has established an enterprise-wide risk management (ERM)
framework to optimise the identification and management of risks
globally and to comply with clause 49 of the listing agreement with
Indian stock exchanges. In line with the Company's commitment to
delivering sustainable value, this framework aims to provide an
integrated and organized approach for evaluating and managing risks.
There are no elements of risk, which in the opinion of the Board may
threaten the existence of the Company.
Risk-based Internal Audit
The risk assessments performed under the ERM exercise are a key input
for the annual internal audit programme, which covers Tata
Communications' various businesses and functions. This approach
provides adequate assurance to the management that the right areas are
covered under the audit plan.
CORPORATE MATTERS
Subsidiary Companies
The Company had 42 subsidiaries as on 31 March 2015 and two associate
companies within the meaning of Section 2(6) of the Companies Act, 2013
("Act"). There has been no material change in the nature of the
business of the subsidiaries and associate companies.
Pursuant to the provisions of Section 129(3) of the Act, a statement
containing salient features of the financial statements of the
Company's subsidiaries in Form AOC-1 is attached to the financial
statements.
Pursuant to the provisions of section 136 of the Act, the financial
statements of the Company, consolidated financial statements along with
relevant documents and separate audited accounts in respect of
subsidiaries, are available on the website of the Company.
During the year, the process of closure of the following wholly-owned
indirect subsidiaries, which were not in operation, was completed:
a. TCNL 1 B.V. (w.e.f. 26 August 2014)
b. TCNL 2 B.V. (w.e.f. 26 August 2014)
During the year, in order to optimize the subsidiary structure, a
wholly-owned indirect subsidiary, BitGravity Inc. was merged with
another wholly-owned indirect subsidiary Tata Communications (America)
Inc.
During the year, the Company incorporated a wholly- owned indirect
subsidiary in China named Tata Communications (Beijing) Technology
Limited.
In May 2014, the shareholders of Neotel and Vodacom SA concluded an
agreement to acquire 100% of the shares of Neotel. On 17 June 2014,
Neotel Pty. Ltd. (together with all its shareholders) and Vodacom
Proprietary Limited (Vodacom) submitted an application to the
Independent Communications Authority of South Africa (the Authority)
for approval in respect of the proposed acquisition by Vodacom of the
entire issued share capital of Neotel (the application). The Authority
has commenced with the public consultation process alluded to above.
Investment in Tata Teleservices Limited
The Company was informed about the decision taken on 25 April 2014 by
the Board of Directors of NTT DoCoMo, Inc. of Japan (NTT) to exercise
the sale option in respect of Tata Teleservices Limited (TTSL) shares
under the terms of a legal agreement and the option was required to be
exercised by 30 June 2014. Prevailing regulations permit a company to
acquire shares from a non-resident only at a valuation based on the
prescribed method.
In terms of agreements entered into in 2008-09, the Company was
entitled to and had sold to NTT part of its stake in TTSL atRs. 116.09
per share resulting in a profit of Rs. 346.65 crores in that year.
According to the sale agreement, the Company, along with other selling
shareholders of TTSL, may be obligated to indemnify NTT against claims
arising from the possible failure of certain representations and from
specified contingent liabilities. The amount in the case of failure of
certain representations is not determinable, while the Company is
liable to pay up to Rs. 39.86 crores towards specified contingent
liabilities. With NTT deciding to divest its entire shareholding in
TTSL and a buyer not being found for such shares, the Company along with
other selling shareholders of TTSL may be obligated to acquire the
entire stake from NTT at the higher of the fair value or Rs. 58.05 per
share i.e. 50% of the subscription purchase price subject to compliance
with applicable laws and regulations. Should NTT decide to divest its
entire shareholding in TTSL at a lower price, then, the Company along
with other selling shareholders of TTSL may be obligated to indemnify
any loss byway of a monetary compensation equal to the difference
between such lower sale price and the price referred to above subject
to compliance with applicable exchange control regulations. Tata Sons
Limited has informed the Company that NTT has filed a request for
arbitration with the London Court of International Arbitration alleging
breach by Tata Sons Limited of its obligations under the shareholders
agreement. Tata Sons Limited has filed its response to the said request
for arbitration and has communicated the name of its nominee
arbitrator. Please see Note No.36(a)(5) of standalone Notes to Accounts
and Note No.40(a)(4) of the consolidated notes to accounts.
Compliance under the Companies Act 2013 ("Act") and additional SEBI
stipulations
The Act came into force substantially from 1 April 2014. Also, SEBI in
its master circular dated 17 April 2014 notified additional
requirements on corporate governance which became effective from 1
October 2014. These requirements substantially increase the compliance
requirements for companies.
As on the date of this Report, the Board comprised 11 directors, out of
whom three were independent. As reported to the Indian stock exchanges,
in February 2002, when the Government of India (GoI) transferred 25% of
its stake in the Company to the strategic partner, a shareholders
agreement and a share purchase agreement were signed. The said
agreements, inter alia, set forth the rights and obligations of the
strategic partner and the GoI including appointment of directors on the
Board of the Company. The relevant clauses from the agreements were
incorporated in the articles of association of the Company. Under the
articles of association and in accordance with the agreements referred
above, the Board is to comprise of 12 directors, four of whom must be
independent. The GoI and the strategic partner are entitled to
recommend two independent directors each. The GoI has been in the
process of recommending the name of the other independent director. The
Company and the Board have been vigorously pursuing with the GoI to
recommend the name of one more independent director so as to fill in
this vacancy. Until the recommendation is received from the GoI
enabling the Board to appoint one more independent director, the
Company will not be able to be compliant with Clause 49(IA)(ii) of the
listing agreement.
As per the listing agreement, the Company is required to send to the
stock exchanges, consolidated annual accounts within 60 days of the end
of the financial year. The Company was not able to file its annual
accounts with the stock exchanges within the stipulated time as one of
the foreign subsidiaries of the Company, Neotel Pty. Ltd. and its
associated companies were not able to finalize their audited accounts
within that time. Neotel continues to work with its auditors to
resolve the outstanding issues and hopes to be in a position to finalize
its audited financial statements. In compliance with the SEBI circular
dated 30 September 2013, the Company has paid the specified fines
imposed by the stock exchanges for the delay in filing of annual
accounts with the stock exchanges. On 28 July 2015, rather than further
delaying the release of the consolidated financial statements, the
Company finalized its annual accounts using the management accounts for
Neotel. For this reason, the Company's statutory auditors have issued a
qualified audit report on the consolidated financial statements.
PENDING MATTERS OF SIGNIFICANCE
Surplus Land
Under the terms of the share purchase and shareholders' agreements
(SHA) signed between the Government of India (GoI) and the strategic
partner (SP) at the time of disinvestment, it was agreed that certain
identified land in the ownership of the Company would be demerged into
a separate company. It was further provided that if, for any reason,the
Company cannot hive off or demerge the said surplus land into a
separate entity, alternative courses that were also stipulated in the
SHA would be explored. A draft scheme of demerger was presented to the
Board in April 2005, which was forwarded to the GoI with the Board's
observations. The Board/management have been exploring other
alternatives also with the GoI and SP. The GoI has informed the Company
that it is willing neither to invest in any further equity of the
Company nor will it allow dilution of its stake in the Company. This
has resulted in the Company not being able to avail of any non-debt
funding through issue of equity since 2002. The Company has been
regularly following up the matter with the GoI and has addressed
several communications and held several meetings with both the GoI and
SP highlighting the urgency for resolution and also the need for
non-debt funding. To accomplish demerger of the surplus land in
accordance with such scheme of demerger, the SP incorporated Hemisphere
Properties India Limited (HPIL) sometime in 2005-06 to hold the surplus
land as and when demerged. In March 2014, the GoI acquired
51.12%shares in HPIL making it a Government company. It is understood
that the GoI will send its modifications to the draft scheme of
arrangement of demerger of surplus land, which will be placed before
the boards of the Company and HPIL.
Out of the total land purchased by the Company (then Videsh Sanchar
Nigam Limited) in 1986 from the Government of India as the successor of
Overseas Communications Service, 773.13 acres of land at different
locations was initially identified as 'surplus' land for demerger as
per the SHA.
As mentioned below in this report, land measuring ~2.6 acres has been
acquired in Greater Kailash - I, Delhi for Delhi Metro Rail Corporation
Limited (DMRC) for the Delhi Metro work, out of which ~21% (i.e. ~0.54
acres) falls within surplus land.
As reported earlier, 32.5 acres of land situated at Padianallur was
transferred in July 2009 to the VSNL Employees Cooperative Housing
Society, Chennai(society) as per the order of the Hon'ble Delhi High
Court. As this land was part of the identified surplus land, the SP has
written to the GoI to exclude the 32.5 acres of land so transferred to
the society, from the 773.13 acres mentioned in the SHA as the land
identified to be demerged.
The Company owns at Dighi, Kalas and other villages near Pune 774 acre
of land. Out of this land (Pune land), 524 acres were identified as
surplus as per the SHA. In 1940, approximately 94 acres out of the Pune
land were given to the Ministry of Defense on lease for duration of the
war, which land falls within the land identified as surplus land. As
then agreed, the Ministry of Defense had been paying annual rent for
occupying this land till 31 March 2006. The Company has been following
up with the Ministry of Defense for release of rent due, since 1 April
2006. On 31 July 2010 the said Ministry of Defense informed that the
land in its possession was transferred to it in 2007 by the Collector
of Pune and therefore rent cannot be paid. Ministry of Defense claims
that the land was transferred under the Pune Package Deal by the
Government and no compensation is payable. The Company continues to
pursue the matter with the Ministry of Defense for compensation.
In view of the above, the quantum of surplus and available for demerger
has reduced. The book value of the surplus land is Rs. 0.16 crores.
Premature Termination of Monopoly and Compensation
As reported earlier, the GoI had allowed other players into the
international long distance (ILD) business from 1 April 2002,
terminating the Company's exclusivity two years ahead of schedule. The
GoI gave the Company a compensation package as per its communication
dated 7 September 2000; wherein the GoI also gave an assurance that it
would consider additional compensation, if found necessary, on a
detailed review when undertaken.
However, vide its letter dated 18 January 2002, issued just
before the disinvestment of the Company, the GoI issued a further
dispensation and unilaterally declared that the conditions stated in
its said letter of 18 January 2002 were to be treated as full and final
settlement of every sort of claim against the premature ILD
de-monopolisation. The Company filed a claim in the Bombay High Court
in 2005. The Bombay High Court, on 7 July 2010, ruled that it did not
have the jurisdiction to entertain this suit, in view . of the
provisions of the Telecom Regulatory Authority of India Act, 1997
(TRAI). Since the Company holds a different opinion, it has preferred
an appeal before a division bench of the Bombay High Court on various
grounds including that the compensation granted was in breach of
promise from the GoI, acting as a policy maker and not as a licensor
under the Indian Telegraph Act; that the dispute did not relate to the
provision of telecommunication services as envisioned under the TRAI
Act; and that the suit was not under, pursuant to and consequent upon
the license then granted to the Company. The appeal for hearing
admitted by the Bombay High Court is yet to come up.
Delhi Metro Rail Corporation Limited (DMRC) Land Acquisition
In September 2013, DMRC conveyed that as part of the Delhi Metro work,
DMRC needs a piece of company's land at Greater Kailash-I, New Delhi.
This land parcel measuring ~10489.18 sq metres (2.6 acres) also
includes approximately 21% (0.54 acres) surplus land. On 3 January
2014, TCL received an acquisition notice stating award announced by the
land acquisition collector (LAC) on 30 December 2013, without giving
any details of the award. The Company received the certified copy of
the award on 7 February 2014 as per which, the total compensation
determined by the LAC is Rs. 188,80,168/- based on indicative price fixed
by Govt. of Delhi for agricultural land. Aggrieved, the Company filed a
reference petition for proper determination of the compensation with
the LAC based on commercial usage of land. Simultaneously, the Company
also filed a writ petition with the Delhi High Court challenging the
acquisition proceedings. On 24 April 2014, the High Court directed
DMRC to deposit the sum of Rs. 247 crores with the Court Registrar which
has since been deposited by DMRC. This amount is approximately 80% of
the estimated compensation valuation for the acquired property. In the
meantime DMRC has commenced construction for the Delhi Metro work on
the land. The writ petition as well as the reference petition are
pending for disposal.
STATUTORY INFORMATION AND DISCLOSURES
Material Events after Balance-Sheet Date
There has been no material changes and commitments affecting the
financial position of the Company which have occurred between the end
of the financial year 2014-15 and the date of this report.
Deposits from Public
The Company has not accepted nor does it hold any public deposits.
Non-convertible Debentures (NCDs)
The Company had Rs.210 crores of outstanding NCDs as on 31 March 2015.
The trust deeds for the NCDs issued by the Company will be available
for inspection by the members at the Company's registered office during
normal working hours, 21 days before the date of the 29th annual
general meeting.
The Company redeemed Rs.190 crores of long term secured and Rs.150 crores
of unsecured debentures during the year 2014-15. All debentures issued
by the Company were rated AA by CARE.
Particulars of Employees
The provisions of Section 134 of the Act and the Companies (Appointment
and Remuneration of Managerial Personnel) Rules, 2014, require the
Company to provide certain details about the remuneration of the
employees.
According to the provisions of section 136(1) of the Act, the
Directors' Report being sent to the shareholders need not include this
information as annexure. The annexure regarding the Particulars of
Employees under section 134 of the Act and the Companies (Appointment
and Remuneration of Managerial Personnel) Rules, 2014, will be
available for inspection by any member at the registered office of the
Company during working hours, for 21 days before the date of the AGM.
Conservation of Energy
The Company has taken a number of steps in improving energy efficiency.
More than 80% of the energy is consumed by the data centres. The energy
efficiency in data centers in India is measured by PUE- Power
Utilization Effectiveness. Over the last 4 years, the PUE has steadily
come down from 2.2 to 1.7. The various steps taken include adaptation
and implementation of new and improved technology for improving the air
conditioning efficiency and implementing efficient electrical
engineering for avoiding UPS energy and power distribution losses.
The Company has also taken steps for utilising alternate sources of
energy through on-site solar power plants by installing energy
conservation equipment. The Company is also in the process of
co-building solar power plants in Tamil Nadu to provide 140 M units of
green power by April 2016.
Technology Absorption
The Company continues to use the latest technologies for improving the
productivity and quality of its services and products. The Company's
operations do not require significant import of technology.
Foreign Exchange Earnings and Outgo
For the purpose of Form 'C under the said rules, foreign exchange
earnings were equivalent to t 1,031.43 crores and foreign exchange
outgo was equivalent to Rs. 408.85 crores.
Statutory Auditor's Report
The consolidated financial statements of the Company have been prepared
in accordance with Accounting Standard 21 on Consolidated Financial
Statements, Accounting Standard 23 on Accounting of Investments in
Associates and Accounting Standard 27 on Financial Reporting of
Interest in Joint Ventures, issued by the Council of The Institute of
Chartered Accountants of India.
The auditors have given a qualified opinion on the consolidated
financial statements of the Company, as listed below:
As referred to in note 34 to the consolidated financial statements, the
consolidated financial statements include the unaudited consolidated
financial information of a subsidiary and its Group consisting its
subsidiary and an associate, pending resolution of certain matters
resulting from an inquiry into certain transactions undertaken by such
subsidiary. Accordingly, the unaudited consolidated financial
information consisting of such subsidiary and its Group reflect total
assets of Rs. 2,738.13 crores as at March 31 2015, total revenues of Rs.
2,140.25 crores and net cash outflows amounting to Rs. 49.04 crores for
the year then ended, as considered in the consolidated financial
statements, based on their unaudited consolidated financial information.
These unaudited consolidated financial information has been furnished by
the management and our opinion, in so far as it relates to the amounts
included in respect of such subsidiary and its Group, is based solely
on such unaudited consolidated financial information and consequently we
are unable to determine whether any adjustment might be necessary to
the consolidated financial statements.
Board's comment:
One of the Company's foreign subsidiaries, Neotel Pty. Ltd., and its
associated companies, has been unable to finalise their audited
accounts. The issue at Neotel involves potential reportable
irregularities identified by its statutory auditors in respect of a
particular third party intermediary engaged by Neotel during the third
quarter of FY 2014-15 in connection with a customer contract. Upon
learning of the auditor's concern, the Board of Neotel appointed an
independent firm to investigate the matter.
The Company has since been advised by the Neotel Board that to the best
of their knowledge, based on the investigation, there has been no
finding of corruption or illegal activities undertaken by employees of
Neotel, with the exception of misconduct by one of its employees, who
is no longer with Neotel. Pursuant to its obligations under the laws of
South Africa, the matter has been referred to the appropriate
authorities in South Africa. Neotel continues to work with its
auditors to resolve the outstanding issues, and hopes to be in a
position to approve its audited financial statements soon.
Based on the current facts, the Company believes that these matters
will not have a material adverse effect on its business, financial
condition, results of operations or cash flow of the Company.
Therefore, the Company finalised its annual accounts using the
management accounts for Neotel.
Consequently, the Company was not able to file its annual accounts with
the stock exchanges within the stipulated time. In compliance with the
SEBI Circular No.CIR/MRD/DSA/31/2013 dated 30 September 2013, the
Company has paid the specified fines imposed by the stock exchanges for
the delay in filing of annual accounts with the stock exchanges.
Secretarial Auditor's Report
Due to the above, the Independent Secretarial Auditor has made an
observation in the secretarial audit report, the comment on which is
the same as the comment above.
Particulars of loans, guarantees or investments under Section 186
The particulars of loans, guarantees and investments have been
disclosed in the financial statements which also form part of this
report.
Significant and material orders passed by the regulators or courts or
tribunals impacting the going concern status and company's operations
in future
During the year under review, there were no significant and material
orders passed by the regulators or courts or tribunals impacting the
going concern status and Company's operations in future.
Financial Controls
The Company has adequate internal financial controls with reference to
the preparation and presentation of financial statements which are
operating effectively.
Subsidiaries
A statement in Form AOC-I pursuant to first proviso to Section 129 of
the Act read with rule 5 of Companies (Accounts) Rules, 2014 containing
salient features of the financial statements of subsidiaries/ associate
companies/ joint ventures forms a part of this report. The consolidated
financial statements of the Company and its subsidiaries, prepared in
accordance with accounting standard 21 (AS 21) prescribed by the
Institute of Chartered Accountants of India, form part of the Annual
Report and accounts. The accounts statements of the subsidiaries will
be provided on request to any shareholder wishing to have a copy, on
receipt of such request addressed to the company secretary at the
Company's registered office. These documents will also be available
for inspection by any shareholder at the Company's registered office
and will be available on the Tata Communications' website.
Changes in the Board of Directors and Key Managerial Personnel
In accordance with the applicable Tata guidelines regarding age limit
prescribed for a director, Mr. S. Ramadorai and Mr. Amal Ganguli
stepped down from the Board with effect from 6 October 2014 and 16
October 2014 respectively. The Board places on record its deep
appreciation for their contributions and guidance to the Company.
In accordance with the Act and the Rules made thereunder read with
Schedule IV to the Act, as amended from time to time, Ms. Renuka
Ramnath was appointed by the Board as an additional director -
independent, subject to shareholders' approval. The appointment of Ms.
Ramnath, who has submitted a declaration that she meets the criteria
for independence as provided in Section 149(6) of the Act and who is
eligible for appointment as an independent director, not liable to
retire by rotation, to hold the office for a period of 5 years from 8
December 2014 till 7 December 2019, is being placed before the
shareholders for approval at the ensuing annual general meeting.
In accordance with the provisions of the Act and the Company's Articles
of Association, Dr. Ashok Jhunjhunwala and Mr. N. Srinath retire by
rotation at the ensuing annual general meeting and being eligible,
offer themselves for reappointment.
Dr. Gopichand Katragadda who was appointed as an additional director
holds office only up to date of the this annual general meeting and in
respect of whom a notice under the provisions of Section 160 of the Act
has been received by the Company from a member signifying his intention
to propose Dr. Gopichand Katragadda as a candidate for the office of
director liable to retire by rotation.
Mr. Sanjay Baweja, resigned from the office of the Chief Financial
Officer with effect from 2 November 2014 and Ms. Pratibha K Advani
joined as the Chief Financial Officer from 8 May 2015.
None of the Company's directors are disqualified from being appointed
as a director as specified in Section 164 of the Act. For details about
the directors, please refer to point 2 of the Report on Corporate
Governance.
Declaration of Independent Directors
The independent directors have provided necessary disclosures to the
Company that they comply with all the requirements stipulated in
Section 149(6) of the Act for being appointed as an independent
director.
Particulars of contracts or arrangements with related parties referred
to in Section 188 of Act
There have been no materially significant related party transactions
between the Company and the directors, the management, the subsidiaries
or the relatives except for those disclosed in the financial
statements.
Accordingly, particulars of contracts or arrangements with related
parties referred to in Section 188(1) along with the justification for
entering into such contract or arrangement in Form AOC-2 does not form
part of the report.
Number of Meetings of the Board
Six meetings of the Board were held during the year. For details of the
meetings, please refer to the corporate governance report, which forms
part of this report.
Board Evaluation
The Board of Directors has carried out an annual evaluation of its own
performance, of Board committees and individual directors pursuant to
the provisions of the Act and the corporate governance requirements as
prescribed by Securities and Exchange Board of India ("SEBI") under
Clause 49 of the listing agreements ("Clause 49").
The performance of the Board was evaluated by the Board after seeking
inputs from all the directors on the basis of the criteria such as the
Board composition and structure, effectiveness of and contribution to
Board processes, adequacy, appropriateness and timeliness of
information and the Board's overall functioning, etc.
The performance of the committees was evaluated by the Board after
seeking inputs from the members of the respective committees on the
basis of the criteria such as the composition of committees,
effectiveness of committee meetings, etc.
The Board and the Nomination and Remuneration Committee ("NRC")
reviewed the performance of the individual directors on the basis of
the 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 addition, the chairman was also evaluated on the key
aspects of his role.
In a separate meeting of independent directors, the performance of the
non-independent directors, the Board as a whole and of the chairman was
evaluated, taking into account the views of executive directors and
non-executive directors. The consensus on conclusions was discussed in
the Board meeting that followed the meeting of the independent
directors, at which the performance of the Board, its committees and
individual directors was also discussed.
Policy on Directors' Appointment and Remuneration and Other Details
The Company's policy on directors' appointment and remuneration and
other matters provided in Section 178(3) of the Act has been disclosed
in the Corporate Governance report, which forms part of the Directors'
Report.
Audit Committee
The details pertaining to composition of the Audit Committee are
included in the Corporate Governance Report, which forms part of this
report.
Corporate Social Responsibility
The brief outline of the corporate social responsibility (CSR) policy
of the Company and the CSR initiatives undertaken during the year are
set out in Annexure I of this report in the format prescribed in the
Companies (Corporate Social Responsibility Policy) Rules, 2014. The
policy is available on the website of the Company.
Extract of Annual Return
As provided under Section 92(3) of the Act, the extract of annual
return is given in Annexure II in the prescribed Form MGT-9, which
forms part of this report.
Particulars of Employees
The information required under Section 197 of the Act read with rule
5(1) of the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014 are given below:
a. The ratio of the remuneration of each director to the median
remuneration of the employees of the Company for the financial year
2014-15:
Non-Executive Directors Ratio to
median remuneration*
Mr. Subodh Bhargava 1.97
Mr. Srinath Narasimhan 0.58
Mr. Kishor Chaukar 1.18
Dr. Ashok Jhunjhunwala 0.72
Dr. U.B. Desai 1.76
Mr. Ajay Kumar Mittal# 0.78
M r. Saurabh Tiwari# 0.43
Mr. Bharat Vasani 0.63
Non-Executive Directors Ratio to
median
remuneration*
Ms. Renuka Ramnath (From 8 Dec 0.51
2014)
Dr. Gopichand Katragadda (From NA
26 March 2015)
Mr. S. Ramadorai (Up to 6 October NA
2014) **
Mr. Amal Ganguli (Up to 16 0.64
October 2014)
Executive Director
Mr. Vinod Kumar 35.63
* While calculating the ratio for non-executive directors, both
commission and sitting fees paid have been taken.
** Mr. Ramadorai has not received any remuneration from the Company for
FY 2014-15.
# The Government directors have informed the Company that they shall
not accept any sitting fees and commission as their directorships are
considered as part of their official duty.
i. The percentage increase in remuneration of each director, chief
executive officer, chief financial officer, company secretary in the
financial year:
Directors, Chief
Executive % increase in
Officer, Chief Financial Officer remuneration
and Company Secretary * in the financial year
Mr. Subodh Bhargava 43.32
Mr. Srinath Narasimhan 44.29
Mr. Kishor Chaukar 62.83
Dr. Ashok Jhunjhunwala 28.74
Dr. U.B. Desai 52.57
Mr. Ajay Kumar Mittal# NA
Mr. Saurabh Tiwari# NA
Mr. Bharat Vasani** 485.71
Ms. Renuka Ramnath (From 8 Dec NA
2014)
Dr. Gopichand Katragadda (From NA
26 March 2015)
Mr. S. Ramadorai (Up to 6 NA
October 2014)
Mr. Amal Ganguli (Up to 16 NA
October 2014)
Mr. Vinod Kumar, Managing 26.89%
Director & Group CEO
Mr. Satish Ranade, Company 27.37%
Secretary
Ms. Pratibha K Advani, Chief NA
Financial Officer (From 8 May 2015)
Mr. Sanjay Baweja, Chief Financial NA
Officer (Up to 2 November 2014)
* Directors and KMPs who have not been in the Company for the entire
financial year have not been considered for the calculations.
# The Government Directors have informed the Company that they shall
not accept any Sitting Fees and commission as their Directorships are
considered to be part of their official duty.
** Mr. Bharat Vasani joined the Board w.e.f 16 December 2013. Since he
received remuneration only for a part of the financial year 2013-14,
the same is not comparable with remuneration that he has received for
financial year 2014-15.
c. The percentage increase in the median remuneration of employees in
the financial year:
6.96%
d. The number of permanent employees on the rolls of the Company:
3,531
e. The explanation on the relationship between average increase in
remuneration and Company performance:
On an average, employees received an annual increase of 11.6%. The
individual increments varied from 0% to 20%, based on individual
performance. The increase in remuneration is in line with the market
trends in the respective countries. In order to ensure that
remuneration reflects Company performance; the performance pay is also
linked to organization performance, apart from an individual's
performance.
f. Comparison of the remuneration of the key managerial personnel
against the performance of the Company:
Aggregate remuneration of key 8.84
managerial personnel (KMP) in
FY15 (Rs. crores)
Revenue (Rs. crores) 4319.35
Remuneration of KMPs 0.20%
(as % of revenue)
Profit before Tax (PBT) (Rs.crores) 1003.27
Remuneration of KMP 0.88%
(as % of PBT)
g. Variations in the market capitalisation of the Company, price
earnings ratio as at the closing date of the current financial year and
previous financial year:
Variations in the market capitalization of the company (31 March 2015
vs. 31 March 2014): 37.4% increase in market capitalization.
Variations price earnings ratio (31 March 2015 vs. 31 March 2014):
9,683.9% increase in price earnings ratio.
h. Percentage increase or decrease in the market quotations of the
shares of the Company in comparison to the rate at which the Company
came out with the last public offer:
Particulars March Open %
31,2015 Offer Change
price
in April
2002
Market Price (BSE) 420.75 202 108.29
Market Price (NSE) 422.00 202 108.91
i. Average percentile increase already made in the salaries of
employees other than the managerial personnel in the last financial
year and its comparison with the percentile increase in the managerial
remuneration and justification thereof and point out if there are any
exceptional circumstances for increase in the managerial remuneration:
The average annual increase was around 11.6%. However, during the
course of the year, the total increase is approximately 12.3%, after
accounting for promotions and other event based compensation revisions.
Increase in the managerial remuneration for the year was 16.1%.
j. Comparison of each remuneration of the key managerial personnel
against the performance of the Company:
Mr. Vinod
Kumar, Mr. Satish Ms. Pratibha Mr. Sanjay
Managing Ranade, K Advani, CFO Baweja,
CFO (Up
Director &
Group Company (From 8 May to 2 Novem
-ber
CEO* Secretary 2015) 2014)
Remuneration in
FY15 (Scrores) 3.72 1.45 NA 3.66
*Exclusion of
retiral benefits
and leave encahhment
Revenue (Rs.crores) 4319.35
Remuneration as %
of Revenue 0.09% 0.03% NA 0.08%
Profit before Tax
(PBT) (Rs.crores) 1003.27
Remuneration (as %
of PBT) 0.37% 0.14% NA 0.36%
* Mr. Vinod Kumar as a Chief Executive Officer of one of the Company's
wholly-owned foreign subsidiaries, Tata Communications Services
(International) Pte. Ltd., has also received a remuneration of Rs.4.64
crores during the year from that subsidiary
k. The key parameters for any variable component of remuneration
availed of by the directors:
The members have, at the AGM of the Company on 11 October 2011 approved
payment of commission to the non-executive directors within the ceiling
of 1% of the net profits of the Company as computed under the
applicable provisions. The said commission is decided each year by the
Board of Directors and distributed amongst the non- executive directors
based on the Board evaluation process taking into account their
attendance and contribution at the Board and certain committee
meetings, as well as the time spent on operational matters other than
at meetings.
l. The ratio of the remuneration of the highest paid director to that
of the employees who are not directors but receive remuneration in
excess of the highest paid director during the year: 0.97
m. Affirmation that the remuneration is as per the remuneration policy
of the Company:
The Company affirms that the remuneration is as per the remuneration
policy of the Company.
n. Particulars of Employees:
The statement containing particulars of employees as required under
Section 197(12) of the Act read with Rule 5(2) of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014, is
provided in a separate annexure forming part of this report. Further,
the report and the accounts are being sent to the members excluding the
aforesaid annexure. In terms of Section 136 of the Act, the said
annexure is open for inspection at the Registered Office of the
Company. Any shareholder interested in obtaining a copy of the same may
write to the company secretary.
Corporate Governance
Pursuant to Clause 49 of the listing agreement with the stock
exchanges, the Management Discussion and Analysis, Corporate Governance
Report and Auditors' Certificate regarding compliance with conditions
of corporate governance form part of the Directors' Report. Pursuant to
Clause 55 of the listing agreement with the stock exchanges, business
responsibility reports have been included elsewhere in this Annual
Report.
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 and secretarial auditors and external
consultant(s) 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 financial year 2014-15.
Accordingly, pursuant to Section 134(5) of the Act, the Board of
Directors, to the best of their knowledge and ability, confirm that:
- In the preparation of the annual accounts, the applicable accounting
standards were followed and there were no material departures;
- the directors had selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profit and loss
of the Company for that period;
- the directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities;
- the directors had prepared the annual accounts on a going concern
basis;
- the directors have laid down internal financial controls to be
followed by the Company and that such internal financial controls are
adequate and were operating effectively; and
- The directors have devised proper systems to ensure compliance with
the provisions of all applicable laws and that such systems were
adequate and operating effectively.
Awards & Recognitions
Gartner's Magic Quadrant for Network Services, Global
Tata Communications is positioned in the Leaders Quadrant in this Magic
Quadrant for the second year in a row
Frost & Sullivan 2015 Best Practices Award - India ICT Awards
Enterprise Ethernet Provider of the Year
Enterprise Data Service Provider of the Year
Enterprise Telecom Service Provider of the Year - Large Enterprise
Segment
Hosted Contact Centre Service Provider of the Year Frost & Sullivan
2014 Asia Pacific ICT Award
Data Communications Service Provider of the Year.
2014 Frost & Sullivan Best Practices Awards
Asia Pacific UC as a Service Product Line Strategy Award
Frost & Sullivan 2014 India ICT Awards
Enterprise Data Service Provider of the Year (sixth year in a row)
Audio Conferencing Service Provider of the Year
Third Party Data Center Service Provider of the Year
Enterprise Ethernet Provider of the Year
Current Analysis (US-Based Global Analyst Firm)
Global IP VPN Service, Priority Ethernet, Dedicated Ethernet - rated as
'strong' in the global data WAN segment
Wholesale - rated as 'very strong' in the global wholesale segment
Global Enterprise - rated as 'very strong' in the global enterprise,
business network and IT services segment
ACKNOWLEDGMENTS
The directors would like to thank each one of Tata Communications'
customers, business associates and other stakeholders globally for
their valuable contribution to the Company's growth and success. The
directors also recognise and appreciate the passion and commitment of
all its employees around the world.
The directors are also grateful to the Company's other stakeholders and
partners including its shareholders, promoters (strategic partner and
the GoI), bankers and others for their continued support.
On behalf of the Board of Directors
Subodh Bhargava
Chairman
Dated: 28 July 2015
Registered Office:
VSB, MG Road, Fort,
Mumbai - 400001.
Mar 31, 2014
Dear Shareholders,
The directors are pleased to present the 28th annual report and audited
accounts of Tata Communications Limited (TCL) for the financial year
ended 31 March 2014.
PERFORMANCE
The key financial parameters of the Company during the year under
review are given in the table below:
2013-14 2012-13 Percentage
(Rs.in
Crores) (Rs.in Crores) Change
Consolidated income 19,809.20 17,439.54 13.59%
Consolidated EBIDTA 3,087.96 2059.71 49.92%
Consolidated profit/(loss)
after exceptional items 444.41 (430.71) NA
and before tax
Consolidated Profit/(loss)
after tax 101.42 (623.31) NA
Standalone total income 4,840.35 4,796.34 0.92%
Standalone Profit before tax 803.48 656.69 22.35%
Standalone Profit after tax 542.43 475.24 14.14%
The consolidated profit after tax of Rs.101.42 crores for the year
2013-14 is against a consolidated loss of Rs.623.31 crores in the
previous year - a turnaround of Rs.724.73 Crores. The consolidated profit
figures are after taking into account the profit/(loss) of Rs.87.54
crores ((Rs.246.90) crores in FY12-13) from the Company''s holding in
Neotel Pty Limited (Neotel), South Africa and the loss of Rs.136.06
crores (Rs.141.72 crores last year ) of Tata Communications Payment
Solutions Ltd (TCPSL) a 100% subsidiary which is in gestation period.
On a standalone basis, profit after tax improved toRs.542.43 crores from
Rs.475.24 crores last year. This excludes the data centre business
figures on account of hive off of the Data Centre business segment into
100% subsidiary effective March 1, 2014.
The Company has established a strong presence globally. As a result,
while 23% (24% last year) of the Company''s revenues in 2013-14 came
from India, the rest of the world contributed 77% (76% last year) of
the total revenue. The revenue from other than India for the year
2013-14 was Rs.15226.46 crores (77% of the total revenue) as against
Rs.13077.61 (76%) in the previous year. We are pleased that our long-term
strategies are yielding value for all stakeholders.
Dividend
The directors are pleased to recommend a dividend of Rs.4.50 per share
(Rs.3 per share dividend last year) for the financial year ended 31 March
2014, subject to the approval of the shareholders at the ensuing Annual
General Meeting (AGM).
OPERATIONS Segment Distribution
Over the last few years, the Company has been successful in its goal of
diversifying revenues, to tap new opportunities and reduce any risks of
an overly concentrated portfolio. Accordingly, the Company''s revenues
are now broadly diversified across its various products and segments,
especially by taking advantage of greater opportunities in the data
market in new segments such as media and entertainment, financial
services, health care, etc. During 2013-14, consolidated revenue from
voice services contributed 49% (50% last year) of total revenue, while
data services contributed 40% (39% last year) and 11% from Neotel.
Voice
In the voice business, the Company remains one of the largest players
worldwide in terms of market share. The trend of declining margins
continues due to traffic shifting to VoIP based calling and therefore,
the Company is focused on developing innovative commercial offerings
and optimizing costs to maintain free cash fow generation from this
business. Year on Year (YOY) ILD voice traffic declined by 2%, however
the traffic mix is better. YoY EBITDA margins improved by 1% and YoY
EBITDA grew by 24%. Free cash flow generated during the year from the
voice business was Rs.804 crores (previous yearRs.669 crores).
Data
Data continues to present substantial opportunities for rapid growth
and improved profitability. The launch of cloud enablement solutions,
including network and data centre service, helped the Company to grow
its data portfolio and strengthen its presence in this high growth
business. The Company has also been strengthening its Unified
Communications Services portfolio encompassing all forms of
communications, as well as its industry solutions for the Media &
Entertainment Sector and the Banking & Financial Services Sector. The
Company''s strategy of expanding into managed services continues to pay
off, as managed services now contribute 5.2% to the data services
segment (Previous Year 4.6%).
Neotel
Neotel, a subsidiary of the Company in South Africa, though still in
its gestation period, continued to achieve growth. During the year
2013-14, Neotel turned the corner with several major achievements: its
revenues grew 23% year-on-year and it remained profitable at the
operating (EBIT) level. EBITDA for Neotel for 2013-14 was Rs.618.07
crores as against an EBITDA of Rs.322.23 crores in the previous year, a
jump of 92%.
In May 2014, the shareholders of Neotel and Vodacom SA concluded an
agreement on the commercial structure and terms to proceed for Vodacom
to acquire 100 per cent of the shares of Neotel valued at an enterprise
value of ZAR 7.0 billion. This decision is in line with the Company''s
financial objectives, while paving the way for Neotel to continuously
improve its value proposition in the South African market. The
structure of the deal and its commercial terms remain subject to
regulatory and competition authority approvals and the parties have
commenced the necessary processes in that regard.
Human Resources
The Company worldwide has a multicultural workforce, with people of
more than 40 nationalities on its rolls. The compensation and employee
benefit practices of Tata Communications are designed to be competitive
in the respective geographies where we operate. Employee relations
continued to be harmonious at all our locations, through continuous
dialogue and openness. The number of training person days provided to
employees increased by 22% over the previous year, to a total of 33347
days.
Customer Satisfaction and Business Excellence
Providing an excellent customer experience remains an important pillar
of the Company''s strategy to generate sustainable advantages. In
2013-14, according to an independent survey, the Company''s customer
loyalty ratings stood at the 87th percentile of its global peer set, an
improvement of 3% over the previous year. The Company continues with
several other initiatives such as customer portal that enables
real-time customer interaction, obtaining better feedback through the
"Customer Voice" initiative etc.
The Company continues to transform itself in tandem with market and
regulatory changes, using successfully the framework of the Tata
Business Excellence Model (TBEM). The Company has further extended the
validity of its TL 9000 certification for Quality Management by three
years, commencing 31 March 2013, for the India and Singapore offices.
The company also has ISO 14001 Environmental Management certification
for the 13 key office premises in India, valid till 10 April 2017.
The Company''s Global Managed Services Operations Centre (MSOC) of the
Company at Chennai, all eleven data centres in India and seven data
centres at international locations (totalling eighteen) have received
ISO 20000 and ISO 27001 certifications through until 14 March 2017.
In addition, during the year, the Company has been certified to ISO
22301 Business Continuity Management (BCM) for some of its critical
operations. This provides further confidence to various stakeholders
and customers about the organization''s ability to recover from
catastrophic events and demonstrate sustainability.
Enterprise Risk Management
The Company has established an enterprise-wide risk management (ERM)
framework to optimise the identification and management of risks
globally and to comply with clause 49 of the listing agreement with
Indian stock exchanges. In line with the Company''s commitment to
delivering sustainable value, this framework aims to provide an
integrated and organised approach for evaluating and managing risks.
Risk-based Internal Audit
The risk assessments performed under the ERM exercise are a key input
for the annual internal audit programme, which covers the Company''s
various businesses and functions. This approach provides adequate
assurance to the management that the right areas are covered under the
audit plan.
CORPORATE MATTERS
Investment in Tata Teleservices Limited
Recently the Company was informed about the decision taken on 25 April
2014 by the board of directors of NTT DoCoMo, Inc. of Japan (NTT) to
exercise the Sale Option of Tata Teleservices Limited (TTSL) shares
under the terms of a legal agreement and the option is required to be
exercised by 30 June 2014. Prevailing regulations permit a company to
acquire shares from a non-resident only at a valuation based on the
prescribed method.
In terms of agreements entered into in 2008-09, the Company was
entitled to and had sold to NTT part of its stake in TTSL at Rs.116.09
per share resulting in a profit of Rs.346.65 crores in that year.
According to the sale agreement, the Company, along with other selling
shareholders of TTSL, is obliged to indemnify NTT on a proportionate
basis against claims arising from the possible failure of certain
representations to be true and from specified contingent liabilities.
The amount in the case of the former is not determinable while the
Company is liable to pay up to Rs.40.60 crores towards specified
contingent liabilities. Should NTT decide to divest its entire
shareholding in TTSL and a buyer has not been found for such shares,
the Company along with other selling shareholders of TTSL is obligated
to proportionately acquire stake from NTT at the higher of fair value
or 50 percent of the subscription purchase price subject to compliance
with applicable exchange control regulations. Should NTT decide to
divest its entire shareholding in TTSL at a lower price, then, the
Company may be obliged to proportionately indemnify any loss by way of
a monetary compensation equal to the difference between such lower sale
price and the price referred to above subject to compliance with
applicable exchange control regulations
The Agreements are governed by Indian Law.
Indian Data Centre Business
As reported last year, to bring more focus and specialization to the
IDC business and to maximize overall shareholder value, the Company was
in the process of hiving off this business segment. After obtaining
all requisite corporate and regulatory approvals, the Hon''ble Bombay
High Court approved the Scheme on 24 January 2014. The Scheme has been
made effective on 1 March 2014 and the Data Centers (IDC) business has
been transferred in its entirety to the Company''s wholly-owned
subsidiary called Tata Communications Data Centers Private Limited. The
annual accounts of the Company for financial year 2013-14 have been
prepared after taking this in to account.
Delisting from the New York Stock Exchange
As reported last year, the Company''s Board of Directors had approved
delisting the Company''s American Depositary Receipts (ADRs), from the
New York Stock Exchange (NYSE) and to terminate its ADR programme.
During the year, the American Depositary Shares ("ADSs") were delisted
from the NYSE and it''s the ADR program was terminated w.e.f 13 August
2013. The termination of the ADR program helped achieve public
shareholding of 25% as required by SEBI guidelines. The Company
continues to comply with filing and compliance requirement of NYSE till
June 2014 as part of delisting process of Security Exchange Commission
of the United States.
Despite the delisting of the ADRs, the Company remains committed to the
highest standards of corporate governance and internal controls. The
Company will continue to be subject to the comprehensive reporting and
governance requirements of the Indian Exchanges. The Company''s
decision to delist from the NYSE does not call into question the
Company''s strategic vision for the US which has been one of its core
markets in its overall global strategy and will continue to be so
moving forward.
Minimum Public Shareholding
On 4 June 2010, the Central Government amended the Securities Contracts
(Regulation) Rules, 1956 and inserted Rule 19A to the Securities
Contracts (Regulation) Rules, 1957 ("SCRR"). According to this
amendment, all listed companies (except public sector companies) are
required to maintain a minimum threshold level of public shareholding
(MPS) of 25% within a period of 3 years from the commencement of the
Securities Contracts (Regulation) (Amendment) Rules, 2010, i.e. before
3 June 2013. By inserting clause 40A, this provision was also
incorporated in the listing agreement with stock exchanges.
The Company became compliant with MPS requirement last year after the
delisting of its American Depositary Receipts and the divestment by one
of its promoters of a 1.15% stake.
Compliance under the Companies Act 2013 and additional SEBI
stipulations
The Companies Act 2013 (Act) came into force substantially from 1 April
2014. Also, SEBI in its master circular dated 17 April 2014 notified
additional requirements on corporate governance which will be effective
from 1 October 2014. The Act and the SEBI stipulations set the tone for
a more modern legislation which enables growth, greater regulation and
self-governance of India''s corporate sector. The Act and SEBI''s
requirements are expected to improve corporate governance norms,
enhance the accountability of companies and their auditors, improve
transparency and protect the interests of investors, particularly small
ones.
These requirements substantially increase the compliance requirements
for companies. The Company is taking all the necessary steps to be
compliant with the Act within the time stipulated.
PENDING MATTERS OF SIGNIFICANCE
Surplus Land
Under the terms of the share purchase and shareholders'' agreements
(SHA) signed between the Government of India (GoI) and the strategic
partner (the parties) at the time of disinvestment, it was agreed that
certain identified lands would be demerged into a separate company. It
was further provided that if, for any reason, the Company cannot hive
off or demerge the land into a separate entity, alternative courses
that were also stipulated in the SHA would be explored. A draft scheme
of demerger was presented to the Board in April 2005, which was
forwarded to the GoI with the Board''s observations. The Board/
management have been exploring other alternatives also with the GoI and
Panatone. The Company has been regularly following up the matter with
the GoI and has addressed several communications to both GoI and
Panatone highlighting the urgency for resolution and also the need for
non- debt funding.
To accomplish demerger of surplus land in accordance with such scheme
of demerger, the strategic partner formed Hemisphere Properties India
Limited (HPIL) sometime in 2005-06 to hold the surplus land as and when
demerged. In March 2014, the GoI has acquired 51.12% shares in HPIL and
HPIL has become a Government Company. It is understood that the GoI
will send its modifications to the draft scheme of arrangement of
demerger of surplus land which would be placed before the boards of the
Company and HPIL.
The land identified for demerger at different locations measured 773.13
acres, and carried a book value of Rs. 0.164 crores. As reported earlier,
32.5 acres of land situated at Padianallur was transferred in July 2009
to the VSNL Employees Cooperative Housing Society, Chennai (society) as
per the order of the Hon''ble Delhi High Court. As this land was part
of the identified surplus land, the strategic partner has written to
the GoI to exclude the 32.5 acres of land so transferred to the
society, from the 773.13 acres mentioned in the SHA as the land
identified to be demerged. The current balance of surplus land is
740.63 acres having a book value of Rs. 0.163 crores.
Delhi Metro Rail Corporation Limited (DMRC) Land Acquisition
In September 2013, DMRC conveyed that as part of the Delhi Metro work,
DMRC needs a piece of company''s land at Greater Kailash-I, New Delhi.
This land parcel admeasuring ~11622 sq meters also includes
approximately 21% surplus land. On 2 January 2014, TCL received
acquisition Notice stating award announced by Land Acquisition
Collector (LAC) on 30 December 2013 without giving any details of the
Award. The Company received the certified copy of the award on 6
February 2014 as per which, the total compensation determined by LAC is
Rs.188,80,168, based on indicative price fixed by Govt. of Delhi for
agricultural land. Aggrieved, the Company fled Reference Petition for
proper determination of the compensation with LAC based on commercial
usage of land. Simultaneously, the Company also filed a writ petition
with Hon''ble High Court of Delhi. On 24 April 2014, the High Court
directed DMRC to deposit the sum of ~Rs.247 Crores with the Court
Registrar which has since been deposited by DMRC. This amount is
approximately 80% of the estimated compensation valuation for 11622 Sq.
meters. The actual amount of compensation will depend on the land
actually acquired by DMRC. In the meantime DMRC has commenced
construction for the Delhi Metro work on the land.
Premature Termination of Monopoly and Compensation
As reported earlier, the GoI had allowed other players into the
International Long Distance (ILD) business from 1 April 2002,
terminating the Company''s exclusivity two years ahead of schedule. The
GoI gave the Company a compensation package vide communication dated 7
September 2000; wherein, the GoI also gave an assurance that it would
consider additional compensation, if found necessary, on a detailed
review when undertaken.
However, vide its letter dated 18 January 2002, issued just before the
disinvestment of the Company, the GoI issued a further dispensation and
unilaterally declared that the conditions stated in its said letter of
18 January 2002 were to be treated as full and final settlement of
every sort of claim against the premature ILD de-monopolisation. The
Company filed a claim in the Bombay High Court in 2005. The Bombay
High Court, on 7 July 2010, ruled that it did not have the jurisdiction
to entertain this suit, in view of the provisions of the Telecom
Regulatory Authority of India Act, 1997 (TRAI). Since the Company holds
a different opinion, it has preferred an appeal before a division bench
of the Bombay High Court on various grounds including that the
compensation granted was in breach of promise from the GoI, acting as a
policy maker and not as a licensor under the Indian Telegraph Act as
also the dispute did not relate to the provision of telecommunication
services as envisioned under the TRAI and the suit was not under,
pursuant to and consequent upon the license then granted to the
Company. The appeal for hearing admitted by the Bombay High Court is
yet to come up.
STATUTORY INFORMATION AND DISCLOSURES Fixed Deposits
The Company has not accepted nor does it hold any public deposits.
Non-convertible Debentures (NCDs)
The Company had Rs.550 crores of outstanding NCDs as on 31 March 2014.
The trust deeds for the debentures issued by the Company will be
available for inspection by the members at the Company''s registered
office during normal working hours, 21 days before the date of the 28th
Annual General Meeting.
The Company did not redeem any long term secured and unsecured
debentures during the year 2013-14. All debentures issued by the
Company were rated AA by CARE.
Particulars of Employees
The provisions of Section 217(2A) of the Companies Act, 1956, read with
the Companies (Particulars of Employees) Rules, 1975, require the
Company to provide certain details about the employees who were in
receipt of remuneration of not less than Rs. 0.60 crores during the year
ended 31 March 2014 or not less than Rs. 0.05 crores per month, during
any part of the said year.
The Company had 71 such employees employed during the year ended 31
March 2014. According to the provisions of section 219(1) (b) (iv) of
the Companies Act, 1956, the Directors'' Report being sent to the
shareholders does not include this annexure. The Annexure regarding the
Particulars of Employees under section 217(2A) of the Companies Act,
1956 will be available for inspection by any member at the registered
office of the Company during working hours, for 21 days before the date
of the AGM.
R & D, Technology Absorption and Foreign Exchange Earnings
The Company has invested in developing new products and services
adopting latest technologies such as content delivery network (CDN),
cloud computing, telepresence and Wimax. There are no particulars to be
disclosed pertaining to the year under review, in respect of
expenditure on Research & Development (R&D) and technology absorption
as required under Companies (Disclosure of Particulars in the Report of
the Board of Directors) Rules, 1988.
For the purpose of Form ''C under the said rules, foreign exchange
earnings were equivalent to Rs.1288.06 crores and foreign exchange outgo
was equivalent to Rs.460.88 crores.
Auditors'' Report
There are no qualifications in the report of the statutory auditors for
the year 2013-14.
Subsidiaries
The statement pursuant to section 212 of the Companies Act, 1956
containing details of the Company''s subsidiaries, forms part of the
Annual Report. The consolidated financial statements of the Company and
its subsidiaries, prepared in accordance with accounting standard 21
(AS
21) prescribed by the Institute of Chartered Accountants of India, form
part of the annual report and accounts.
The accounts statements of the subsidiaries will be provided on request
to any shareholder wishing to have a copy, on receipt of such request
addressed to the company secretary at the Company''s registered office.
These documents will also be available for inspection by any
shareholder at the Company''s registered office and will be available on
the Company''s website.
The Board of Directors
Mr. Bharat Vasani was appointed on the Board as an additional director
with effect from 16 December 2013 vice Mr. Arun Gandhi who resigned wef
15 March 2013. Mr. Vasani holds office till the AGM. The Board places
on record its deep appreciation for Mr. Gandhi''s contribution and
guidance to the Company.
In accordance with the provisions of the Companies Act, 2013, Mr.
Subodh Bhargava, Mr. Amal Ganguli and Dr. Uday B Desai, will cease to
be the independent directors on the Board at this Annual General
Meeting (AGM). On recommendations of Nomination and Remuneration
Committee the Board proposes the fresh appointment of Mr. Subodh
Bhargava and Dr. Uday B Desai on the terms and conditions to be
included in the Notice convening the AGM. In line with the policy of
maximum age to serve as a Director to be 75 years, the Nomination and
Remuneration Committee and the Board do not propose the fresh
appointment of Mr. Amal Ganguli who will attain the age of 75 years on
16 October 2014.
In accordance with the provisions of the Companies Act, 2013 and the
Company''s Articles of Association, Mr. Saurabh Tiwari and Mr. S.
Ramadorai retire by rotation at the ensuing Annual General Meeting and
being eligible, offer themselves for reappointment.
Mr. Bharat Vasani who holds office only up to date of the this Annual
General Meeting and in respect of whom a notice under the provisions of
Section 160 of the Companies Act, 2013 has been received by the Company
from a member signifying his intention to propose Mr. Bharat Vasani as
a candidate for the office of director.
None of the Company''s directors is disqualified from being appointed as
a director as specified in Section 164 of the Companies Act, 2013. For
details about the directors, please refer to point 2 of the Report on
Corporate Governance.
Corporate Governance
Pursuant to Clause 49 of the listing agreement with the stock
exchanges, the Management Discussion and Analysis, Corporate Governance
Report and Auditors'' Certificate regarding compliance with conditions
of corporate governance form part of the directors'' report.
Pursuant to Clause 55 of the listing agreement with the stock
exchanges, Business Responsibility Reports have been included elsewhere
in this Annual Report.
DIRECTORS'' RESPONSIBILITY STATEMENT
Pursuant to Section 134 of the Companies Act, 2013, the directors,
based on the representations received from the operating management,
confirm that:
In the preparation of the annual accounts, the applicable accounting
standards have been followed and there are no material departures;
They have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the company at the end of the financial year 2013- 14 and of the profit
and loss of the company for that period;
They have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of this
Act for safeguarding the assets of the company and for preventing and
detecting fraud and other irregularities;
They have prepared the annual accounts on a going concern basis;
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.
They have devised proper systems to ensure compliance with the
provisions of all applicable laws and that such systems were adequate
and operating effectively.
ACKNOWLEDGMENTS
The directors would like to thank every one of the Company''s customers,
business associates and other stakeholders globally for their valuable
contribution to the Company''s growth and success. The directors also
recognise and appreciate the passion and commitment of all the
employees of the Company around the world. The directors are also
grateful to the Company''s other stakeholders and partners including its
shareholders, promoters (strategic partner and GoI), bankers and others
for their continued support.
On behalf of the Board of Directors
Subodh Bhargava
Chairman
Dated: 13 May 2014
Registered Office:
VSB, MG Road, Fort,
Mumbai - 400001.
Mar 31, 2013
Dear Shareholders,
The directors are pleased to present the 27th annual report and audited
accounts of Tata Communications Limited (TCL) for the financial year
ended 31 Maich 20|3.
PERFORMANCE
The key financial parameters of the Company during the year under
review are given in table below:
2012-13 2012-13 2011-12 2011-12
(Rs. in
Crores) (USD in (Rs. in
Crores) (USD in
Million)* Million)*
Consolidated income 17,439.54 3,198.74 14,340.85 2,630.38
Consolidated EBIDTA 2059.72 377.79 1,791.49 328.59
Consolidated profit/
(loss) after
exceptional items and
before tax (430.71) (79.00) (718.02) (131.70)
Consolidated Profit/
(loss) after tax (623.21) (114.31) (794.65) (145.75)
Standalone total income 4,796.34 879.74 4,270.87 783.36
Standalone Profit
before tax 656.69 120.45 265.12 48.63
Standalone Profit
after tax 475.24 87.17 171.34 31.43
* All conversions from Indian rupees to US dollars in the above table
and elsewhere in this report are based on the noon buying rate in New
York City for cable transfers in foreign currencies as certified by the
Federal Reserve Bank of New York for custom purposes, which was Rs.
54.52 per USD on 31 March 2013.
The consolidated net loss includes Rs. 246.90 crores (USD 45.29
million) from the Company''s holding in Neotel Pty Ltd (Neotel), South
Africa. As a high-potential new business, Neotel needs investments to
establish its capabilities. While it has already turned profitable at
the operating level, it will require support for a while longer before
it becomes fully profitable. The consolidated net loss also includes
increase in other non-cash costs, that is, depreciation, because of
significant capitalisation done. The Company remains confident that
its current strategy and future direction are working to the best
advantage of all stakeholders. The Company expects to achieve improved
financial performance, based on the strong demand for communication
services in a globally connected world and its own ability to leverage
the extensive investments it has made over the past several years.
Dividend
The directors are pleased to recommend a dividend of Rs. 3 (USD 0.05)
per share (Rs. 2 per share dividend previous year) for the financial
year ended 31 March 2013, subject to the approval of the shareholders
at the Annual General Meeting.
OPERATIONS
Geographical Presence
In recent years, the Company has established a strong presence not just
in India, but globally. As a result, while 24% of the Company''s
revenues in 2012-13 came from India, the rest of the world contributed
76%.
Segment and Product Distribution
The Company''s revenues are now broadly diversified across its various
products and segments. During 2012-13, voice services contributed 50%
to revenues, while 39% came from data services and 11% from Neotel.
Within the data services segment, revenues are well distributed between
its two segments of service providers and enterprises, which
contributed 46% and 54% of the total respectively.
Global Voice
In the voice business, the trend of the past few years continues, as
overall volumes continue to grow, although margins are declining.
During the year, the Company''s international long distance voice
traffic grew 14% from 46.72 billion minutes in 2011-12 to 53.4 billion
minutes in 2012-13. National long distance voice traffic in India
decreased by 2.5% to 8.35 billion minutes in 2012-13. The gross
margins from the voice business fell 11% to US cents 0.003 per minute,
from US cents 0.0034 per minute in the previous year.
Global Data
The launch of cloud computing solutions in India and Asia enabled the
Company to grow its data portfolio to build the presence in this high
growth business. The global data business achieved a healthy revenue
mix between India 51% and the rest of the world 49%; and between
service providers 51% and enterprises 49%. The Company''s strategy of
expanding into managed services continues to pay off, as managed
services now contribute 29% to the global data services segment.
Neotel
Neotel, a subsidiary of the Company in South Africa, though still in
its gestation period, continues to achieve growth. During the course of
2012-13, Neotel, had several major achievements: its revenues grew 12%
year- on-year growth and it turned profitable at the operating (EBIT)
level. After achieving an EBITDA profit the year before, Neotel grew
that profit 531% during the course of 2012-13. Neotel increased its
business customers by 29% to just short of 3,000 and retail customers
by 152% to about 152,000. Neotel today employs approximately 1,000
people.
Customer Satisfaction
The Company believes that providing an excellent customer experience
generates a crucial sustainable advantage and has made this an
important focus area. In 2012-13, the Company''s customer loyalty
ratings stood at the 84th percentile of its global peer set. In order
to create a customer-centric culture, the Company is improving existing
processes for faster service deployment and support to customers,
investing in a customer portal that enables customer interaction,
initiating programmes around "Customer Voice" and acting on the
feedback received, and strengthening its people through multi- skilling
and leadership training.
HUMAN RESOURCES
The Company worldwide has a multicultural workforce, with people of
about 40 nationalities on the rolls. The Company seeks to hire, train
and retain the best talent available globally to enable efficient and
effective performance in a competitive marketplace. At Tata
Communications, employees are encouraged to live the vision and values
adopted by the Company. The compensation and employee benefit practices
of Tata Communications are designed to be competitive in the respective
geographies where we operate. Employee relations continued to be
harmonious at all our locations, through continuous dialogue and
openness.
Business Excellence
The Company continues to transform itself in tandem with market and
regulatory changes, using the framework of the Tata Business Excellence
Model (TBEM), which covers areas such as leadership, strategy, customer
and market focus, knowledge management, human resources, process
management, customer service and social responsibility. The Company
participated in the TBEM external assessment and crossed the score of
500 and bagged the Tata group award for active promotion of TBEM. The
Company has received TL 9000 certification for Quality Management for
three years, commencing 31 March 2010, for the India region and from 6
July 2011 for Singapore office. Ten out of thirteen key office premises
across India have received ISO 14001 certification for environment
management on 1 April 2011 for a period of three Veals.
Our Global Managed Services Operations Centre (MSOC) at Chennai, all
ten data centres in India and seven data centres at international
locations (totalling seventeen) have received ISO 20000 and ISO 27001
certifications until 26 March 20 14.
Compliance with SOX
Pursuant to its listing on the New York Stock Exchange, Tata
Communications has been complying with section 404 of the Sarbanes
Oxley Act, 2002 (SOX). SOX sets forth requirements for internal control
over financial reporting and its documentation. For the current fiscal
year, in addition to the management''s own assessment of the
effectiveness of such internal control, the Company''s external auditors
are also required to issue an opinion on effectiveness of internal
control over financial reporting in respect of all material aspects by
the management.
Enterprise Risk Management
The Company has established an enterprise-wide risk management (ERM)
framework to optimise the identification and management of risks
globally, as well as to comply with clause 49 of the listing agreement
with Indian stock exchanges. In line with the Company''s commitment to
delivering sustainable value, this framework aims to provide an
integrated and organised approach for evaluating and managing risks.
Risk-based Internal Audit
The risk assessments performed under the ERM exercise are a key input
for the annual internal audit programme, which covers the Company''s
various businesses and functions. This approach provides adequate
assurance to the management that the right areas are covered under the
audit plan.
Hiving-off of Indian Data Centre Business
The Company''s Board of Directors has, in its meeting held on 1 March
2013, approved a proposal to hive-off the Company''s Indian Data Centre
(IDC) business into a wholly-owned subsidiary on a ''going concern''
basis, subject to obtaining approval of the shareholders and creditors
of both the companies, and subject to receipt of necessary approval
from relevant regulatory authorities and from the Bombay High Court.
The intention of this move is to bring more focus and specialization to
the IDC business and to maximize overall shareholder value. The
proposal is now in the hands of the Bombay High Court for approval.
Delisting from The New York Stock Exchange
The Company''s Board of Directors has approved a proposal to delist its
American Depositary Receipts (ADRs), from the New York Stock Exchange
(NYSE) and to terminate its ADR programme. The Company has derived a
number of important benefits from its NYSE listing since 2000 including
the financial reporting discipline which has been implemented to comply
with U.S. reporting requirements. The Company is committed to
continuing the highest standards of corporate governance and internal
controls and will continue to be subject to the comprehensive reporting
and governance requirements of the Indian Stock Exchanges. The
Company''s decision to delist from the NYSE, deregister with the SEC and
terminate its ADR program does not call into question the Company''s
strategic vision for the US which has been one of its core markets in
its overall global strategy and will continue to be so, moving forward.
The Board reached this decision after considering the recent low
trading volume of the Company''s ADRs on the NYSE, compliance with the
Securities and Exchange Board of India''s (SEBI) mandate on minimum
public shareholding, and the associated costs of maintaining the
listing and related obligations. The Company will now concentrate all
trading of its ordinary shares on the Bombay Stock Exchange (BSE) and
the National Stock Exchange of India Limited (NSE) in India.
On 28 May 2013, the Company filed Form 25 with the U.S. Securities and
Exchange Commission confirming its intent to delist and deregister its
ADR Program. Consequent to the filing, the delisting of the ADRs from
the New York Stock Exchange has become effective at the close of
business of 7 June 2013. As a consequence of the delisting becoming
effective, termination of the Deposit Agreement under which the ADRs
were issued will become effective on 14 July 2013. Holders of the
Company''s ADRs can surrender their ADRs to the Depositary in exchange
for the underlying ordinary shares in the Company at any time prior to
13 August 20 13.
PENDING MATTERS OF SIGNIFICANCE
Minimum Public Shareholding
On 4 June 2010, the Central Government amended the Securities Contracts
(Regulation) Rules, 1956 and inserted Rule 19A to the Securities
Contracts (Regulation) Rules, 1957 ("SCRR"). Pursuant to the said
amendment, all listed companies (except public sector companies) are
required to maintain a minimum threshold level of public holding (MPS)
to the extent of 25% within a period of 3 years from the commencement
of the Securities Contracts (Regulation) (Amendment) Rules, 2010, i.e.
before 3 June 2013. This provision was incorporated in the Listing
Agreement by inserting Clause 40A in the Listing Agreement.
Consequent to completion of ADR delisting process and the promoter''s
divestment of 1.15% stake in accordance with the letter dated 29 May
2013 from Securities and Exchange Board of India (SEBI), the Company
will be fully compliant of the MPS requirement.
Surplus Land
Under the terms of the share purchase and shareholders'' agreements
(SHA) signed between the GoI and the strategic partner (the parties) at
the time of disinvestment, it was agreed that certain identified lands
would be demerged into a separate company. It was further provided that
if, for any reason, the Company cannot hive off or demerge the land
into a separate entity, alternative courses that were also stipulated
in the SHA would be explored. A draft scheme of demerger was presented
to the Board in April 2005, which was forwarded to the GoI with the
Board''s observations. The Board / management have been exploring other
alternatives also with the GoI and Panatone. The Company has been
regularly following up the matter with the GoI and has addressed
several communications to both GoI and Panatone highlighting the
urgency for resolution and also the need for non-debt funding.
To accomplish demerger of surplus land in accordance with such scheme
of demerger, the strategic partner formed Hemisphere Properties India
Limited (HPIL) sometime in 2005-06. It is understood that the agreement
for acquisition of 51.12% shares in HPIL (which will hold the
demerged/surplus land) has been finalized and on the date of the report
the agreement is awaiting execution. On execution of the agreement,
HPIL will become a Government Company. The letter also stated that the
scheme of arrangement of demerger of surplus land would be placed
shortly before the boards of the Company and HPIL.
The land identified for demerger at different locations measured 773.13
acres, and carried a book value of Rs. 0.164 crores (USD 0.04
million). As reported earlier, the VSNL Employees Cooperative Housing
Society, Chennai (Society) had moved the Hon''ble Delhi High Court in
respect of their long pending issue of the transfer of 32.5 acres of
land situated at Padianallur, Chennai, which was part of the identified
surplus land. According to the order of the Hon''ble High Court and as
per the advice of the GoI, the process of transferring the said land to
the Society was completed in July 2009. The strategic partner has
written to the GoI to exclude the 32.5 acres of land so transferred to
the society, from the 773.13 acres mentioned in the SHA as the land
identified to be demerged. The current balance of surplus land is
740.63 acres having a book value of Rs. 0.163 crores (USD 0.04
million''.
Premature Termination of Monopoly and Compensation
As reported earlier, the Government of India had allowed other players
into the International Long Distance (ILD) business from 1 April 2002,
terminating the Company''s exclusivity two years ahead of schedule. The
GoI gave the Company a compensation package vide communication dated 7
September 2000; wherein, the GoI also gave an assurance that it would
consider additional compensation, if found necessary, on a detailed
review when undertaken.
However, vide its letter dated 18 January 2002, issued just before the
disinvestment of the Company, the GoI issued a further dispensation and
unilaterally declared that the conditions stated in its said letter of
18 January 2002 were to be treated as full and final settlement of
every sort of claim against the premature ILD de-monopolisation. The
Company filed a claim in the Bombay High Court in 2005.
The Bombay High Court, on 7 July 2010, ruled that it did not have the
jurisdiction to entertain this suit, in view of the provisions of the
Telecom Regulatory Authority of India Act, 1997 (TRAI). Since the
Company holds a different opinion, it has preferred an appeal before a
division bench of the Bombay High Court on various grounds including
that the compensation granted was in breach of promise from the
Government, acting as a policy maker and not as a licensor under the
Indian Telegraph Act as also the dispute did not relate to the
provision of telecommunication services as envisioned under the TRAI
and the suit was not under, pursuant to and consequent upon the license
then granted to the Company. The appeal for hearing admitted by the
Bombay High Court, is yet to come up.
STATUTORY INFORMATION AND DISCLOSURES
Fixed Deposits
The Company has not accepted nor does it hold any public deposits.
Non-convertible Debentures (NCDs)
The Company had Rs. 550 crores (USD 100.88 million) of outstanding NCDs
as on 31 March 2013. The trust deeds for the debentures issued by the
Company will be available for inspection by the members at the
Company''s registered office during normal working hours, 21 days before
the date of the 27th Annual General Meeting.
The Company redeemed long term secured and unsecured debentures
amounting to Rs. 600 crores (USD 110.05 million) in 2012-13. All
debentures issued by the Company were rated AA .
Particulars of Employees
The provisions of Section 217(2A) of the Companies Act, 1956, read with
the Companies (Particulars of Employees) Rules, 1975, require the
Company to provide certain details about the employees who were in
receipt of remuneration of not less than Rs. 0.60 crores (USD 0.13
million) during the year ended 31 March 2013 or not less than Rs. 0.05
crores (USD 0.01 million) per month, during any part of the said year.
The Company had 51 such employees employed during the year ended 31
March 2013. According to the provisions of section 219(1)(b)(iv) of the
Companies Act, 1956, the Directors'' Report being sent to the
shareholders does not include this annexure. The Annexure regarding the
Particulars of Employees under section 217(2A) of the Companies Act,
1956 will be available for inspection by any member at the registered
office of the Company during working hours, for 21 days before the date
of the AGM.
R & D, Technology Absorption and Foreign Exchange
Earnings
The Company has invested in developing new products and services
adopting latest technologies such as content delivery network (CDN),
cloud computing, telepresence and Wimax. There are no particulars to be
disclosed pertaining to the year under review, in respect of
expenditure on Research & Development (R&D) and technology absorption
as required under Companies (Disclosure of Particulars in the Report of
the Board of Directors) Rules, 1988.
For the purpose of Form ''C'' under the said rules, foreign exchange
earnings were equivalent to Rs. 1,250.52 crores (USD 229.36 million)
and foreign exchange outgo was equivalent to Rs. 485.51 crores (USD
89.05 million).
Auditors'' Report
There are no qualifications in the report of the statutory auditors for
the year 2012-13.
Subsidiaries
The statement pursuant to section 212 of the Companies Act, 1956
containing details of the Company''s subsidiaries, forms part of the
Annual Report. The consolidated financial statements of the Company and
its subsidiaries, prepared in accordance with accounting standard 21
(AS 21) prescribed by the Institute of Chartered Accountants of India,
form part of the annual report and accounts.
The accounts statements of the subsidiaries will be provided on request
to any shareholder wishing to have a copy, on receipt of such request
addressed to the deputy company secretary at the Company''s registered
office. These documents will also be available for inspection by any
shareholder at the Company''s registered office and will be available on
the Company''s website.
The Board of Directors
Mr. Arun Gandhi, non-executive director, resigned as Director from the
Board of the Company, effective from the end of business hours of 15
March 2013. The Board of Directors of the Company at present consists
of10 directors. The Company has received a letter from Panatone
Finvest Limited which was placed before the Board of Directors in May
2013. The letter recommended appointment of Mr. Bharat Vasani on the
Board of the Company in the stead of Mr Arun Gandhi who earlier
resigned from the Board. The Board decided that as per the requirement
of the operating licences of the Company, Mr. Vasani would be appointed
on the Board as an additional director only after receiving necessary
Government clearance.
In accordance with the provisions of the Companies Act, 1956 and the
Company''s Articles of Association, Mr. Srinath Narasimhan, Mr. Subodh
Bhargava and Mr. Kishor Chaukar retire by rotation at the ensuing
Annual General Meeting and being eligible, offer themselves for
reappointment.
None of the Company''s directors is disqualified from being appointed as
a director as specified in Section 274 of the Companies Act, 1956 as
amended by the Companies (Amendment) Act, 2000. For details about the
directors, please refer to point 2 of the Report on Corporate
Governance.
Corporate Governance
Pursuant to Clause 49 of the listing agreement with the stock
exchanges, the Management Discussion and Analysis, Corporate Governance
Report and Auditors'' Certificate regarding compliance with conditions
of corporate governance form part of the directors'' report.
Pursuant to Clause 55 of the listing agreement with the stock
exchanges, Business Responsibility Reports have been included elsewhere
in this Annual Report.
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:
- In the preparation of the annual accounts, the applicable
accounting standards have been followed and there are no material
departures;
- They have consulted the Statutory Auditors in the selection of the
accounting policies and have applied them consistently and made
judgements and estimates that are reasonable and prudent so as to give
a true and fair view of the state of affairs of the Company at the end
of the financial year and of the profit of the Company for that period;
- 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 Companies Act, 1956,
for safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularites;
- They have prepared the annual accounts on a going concern basis.
- All Board members and senior management personnel have affirmed
compliance with the stipulated code of conduct.
ACKNOWLEDGMENTS
The directors would like to thank every one of the Company''s customers,
business associates and other stakeholders globally for their valuable
contribution to the Company''s growth and success. The directors also
recognise and appreciate the passion and commitment of all the
employees of the Company around the world. The directors appreciate the
support of various ministries and departments of the Government of
India, including the Department of Telecommunications and the
Information & Broadcasting Ministry, Tata Sons and its group companies;
as well as the governments and regulators of the various countries in
which Tata Communications operates. The directors are also grateful to
the Company''s other stakeholders and partners including its
shareholders, promoters (strategic partner and GoI), bankers and
solicitors for their continued support.
On behalf of the Board of Directors
Subodh Bhargava
Chairman
Dated: 30 June, 2013
Registered Office:
VSB, MG Road, Fort,
Mumbai - 400 001.
Mar 31, 2012
The directors are pleased to present the 26th annual report and audited
accounts of Tata Communications Limited (TCL) for the financial year
ended 31 March 2012.
PERFORMANCE
The key financial parameters of your Company during the year under
review are given in table below:
2011-12 2011-12 2010-11 2010-11
(Rs.in
Crores) (USD in (Rs.in
Crores) (USD in
Million)* Million)*
Consolidated income 14340.85 2818.01 12185.21 2394.42
Consolidated EBIDTA 1791.49 352.03 1225.27 240.77
Consolidated profit/
(loss) after
exceptional items
and before tax (718.02) (141.09) (706.70) (138.87)
Consolidated Profit/
(loss) after tax (794.65) (156.15) (776.90) (152.66)
Standalone total income 4270.87 839.24 3802.48 747.20
Standalone Profit
before tax 265.12 52.10 154.04 30.27
Standalone Profit
after tax 171.34 33.67 162.56 31.94
* All conversion from Indian rupees to US Dollars in the above table as
also elsewhere in this report are based on the noon buying rate in New
York City for cable transfers in foreign currencies as certified by the
Federal Reserve Bank of New York for custom purposes which was Rs50.89
per USD 1.00 on 31 March 2012.
The consolidated net loss includes Rs 737.47 Crores (USD 144.91 million)
from the Company's holding in Neotel, South Africa. Neotel is in its
gestation phase, requiring investments to establish the required
capabilities. Neotel will continue to need support for some more time
before it turns profitable. The consolidated net loss also includes
increases in other non-cash costs viz. depreciation on account of
significant capitalization done over the past two years. Your Company
remains confident that its strategy is sound and that the direction
that the Company is taking will be beneficial to the Company and its
stakeholders as we move forward.
Dividend
The directors are pleased to recommend a dividend of Rs2 (USD 0.04) per
share (Rs2 per share dividend previous year) for the financial year
ended 31 March 2012 subject to approval of the Shareholders at the
Annual General Meeting.
COMPANY STRATEGY AND DIRECTION Strategy Overview
Your Company continues to develop and execute its strategy to be a
global provider of communication solutions, predominantly targeting
business customers. Your Company's strategy continues to be focused on
creating a portfolio of communication and IT infrastructure services to
leverage the trends shaping our chosen business segments. The key
trends that we aim to address are:
- The growth of emerging new market economies, with an emphasis on
India, Asia, the Middle East and Africa;
- The growth of IP and cloud-based communication and IT solutions; and
- The shift towards managed services, which allows our client
businesses to focus on their core competencies.
Your Company has been investing in the underlying infrastructure to
support the growing role of the internet in the lives of consumers and
businesses, the increased penetration of more powerful end-user devices
such as smart-phones, tablets etc., and a more globally connected and
collaborative business environment. This infrastructure includes long
distance networks, metro networks, international submarine cables, data
centres and virtual private network nodes.
REVIEW OF OPERATIONS
Geographical presence
Your Company continues to grow its business in both India and globally.
The revenue distribution between India and the rest of the world was
24% and 76% respectively in 2011-2012.
Segment and Product Distribution
Your Company maintains a healthy blend of revenues across its various
products and segments. During 2011-12, voice services contributed 48%
to revenues, data services contributed 40% and Neotel contribution grew
considerably to 12% of the total revenue. Within the data services
segment, the contribution to revenue by the two segments i.e. service
providers and enterprises were fairly balanced with 49% and 51% of the
total respectively.
Highlights of Segment Operations
Global Voice
During the year, Tata Communications' international long distance voice
traffic grew 13.40% from 41.19 billion minutes in 2010-11 to 46.72
billion minutes in 2011-12. National long distance voice traffic in
India decreased by 18% to 8.55 billion minutes in 2011-12. However,
gross margins from voice declined 5% to US Cents 0.45 per minute, from
US Cents 0.47 per minute a year earlier.
Global Data
Tata Communications' data portfolio continued to expand during 2011-12,
and the launch of cloud computing solutions in India and Asia marked an
entry into a fast-growing market segment. Revenues from this business
segment were well-balanced between India 50% and the rest of the world
50%; and between service providers 51% and enterprises 49%. The
Company's strategy of expanding into managed services is beginning to
show results, with managed services contributing 25% to the global data
services segment.
Neotel (Proprietary) Ltd.
Neotel was set up as South Africa's (SA) Second National Operator (SNO)
in 2005-2006. The Company was selected by the South African Government
as a strategic partner to participate with a 26% effective stake and
provide best practice, cost effective telecommunication solutions to
South African businesses and consumers through the use of innovative
technologies. Over the last three years, the Company has increased its
effective stake in Neotel to 64.10% by acquiring shares from other
partners in the joint venture, thereby assuming a position of a
majority shareholder in Neotel.
Neotel today employs almost 1000 people and offers communication
services to the wholesale, enterprise and consumer segments in South
Africa. Neotel runs South Africa's first next generation network and
the country's first CDMA network. During the course of 2011-12, Neotel
had several major achievements including a 25% year on year growth in
its revenues and turning profitable at the operating (EBITDA) level.
Neotel increased its business customers by 92% to 2400 and retail
customers by 100% to about 100,000.
Customer Satisfaction
In the highly competitive Indian and global telecom markets, one of the
biggest sources of sustainable advantage is superior customer
experience. Tata Communications has made steady progress in this area,
with the Company's customer satisfaction ratings in 2011-12 standing at
the 87th percentile of the global peer set. The Company is making
ongoing investments in improving systems and processes as well as in
strengthening people training and a customer centric culture.
HUMAN RESOURCES
Tata Communications companies together employed 7954 people as on 31
March 2012 (7667 on 31 March, 2011). Of these, 2276 (2410 in the
previous year) were located outside India. With people of about 40
nationalities on the rolls, the workforce profile is diverse and
multicultural. The Company seeks to hire, train and retain the best
talent available globally to enable efficient and effective performance
in a competitive marketplace. At Tata Communications, employees are
encouraged to live the vision and values adopted by the Company. The
compensation and employee benefit practices of Tata Communications are
designed to be competitive in the respective geographies where we
operate. Employee relations continued to be harmonious at all our
locations, through continuous dialogue and openness.
AWARDS AND RECOGNITION
The Company's transformational initiatives are being recognized in
India and abroad. During the year, the Company earned several
prestigious recognitions, including:
Awards from Analysts
- Hosted Contact Center Service Provider of the Year by Frost &
Sullivan 2011 India IT & Telecom Excellence Awards
- Enterprise Data Service Provider of the Year by Frost & Sullivan
2011 India IT & Telecom Excellence Awards
- IPX framework is ranked third (tied) in innovation across all
aspects of the wholesale telecom business, first in terms of
go-to-market strategy in Ovum's Wholesale Innovation Analyzer 2011
Awards from Press and Industry
- Global Wholesale Telecommunications Award - Capacity Awards 2011;
Best Global Offering
- Best Long Distance Operator (India) Tele.net Telecom Operator
Awards 2011
- Best Wholesale International Telecom Asia Award 2011
- Best APAC Wholesale Ethernet Service, APAC 2011
- MEF Carrier Ethernet Service Provider Awards 2011
- Best Business Service, APAC 2011 - MEF Carrier Ethernet Service
Provider Awards 2011
- APAC Service Provider of the Year 2011 (Ethernet and Telepresence)
- Cisco Partner Summit 2011
CONTINUOUS IMPROVEMENT
In order to be able to respond quickly to customers, your Company
continues with various initiatives to compete effectively, and to
improve organizational flexibility and efficiency.
Business Excellence
Your Company has developed and deployed a Continuous Improvement
methodology (QUICK), designed in partnership with Tata Quality
Management Services, to serve as a model for continuous improvement.
Your Company continues to transform itself in tandem with market and
regulatory changes, using the framework of the Tata Business Excellence
Model (TBEM), which covers areas such as leadership, strategy, customer
and market focus, knowledge management, human resources, process
management, customer service and social responsibility. Your Company
participated in the TBEM external assessment and crossed the score of
500 and bagged the Tata group award for active promotion of TBEM.
Your Company has received TL 9000 certification for Quality Management
for three years, commencing 31 March 2010, for the India region and
from 6 July 2011 for its Singapore office. Ten out of thirteen key
office premises across India have received ISO 14001 certification for
environment management on 1 April 2011 for a period of three years.
Our Global Managed Services Operations Centre (MSOC) at Chennai, all
ten data centres in India and seven data centres at international
locations (totaling seventeen) have received ISO 20000 and ISO 27001
certifications through until 26 March 2014.
Compliance with SOX
Pursuant to its listing on the New York Stock Exchange, Tata
Communications has been complying with section 404 of the Sarbanes
Oxley Act, 2002 (SOX). SOX sets forth requirements for internal control
over financial reporting and its documentation. For the current fiscal
year, in addition to the management's own assessment of the
effectiveness of such internal control, the Company's external auditors
are also required to issue an opinion on effectiveness of internal
control over financial reporting in respect of all material aspects by
the management.
Enterprise Risk Management
Your Company has established an enterprise-wide risk management (ERM)
framework to optimize the identification and management of risks
globally, as well as to comply with clause 49 of the listing agreement
with Indian stock exchanges. In line with your Company's commitment to
delivering sustainable value, this framework aims to provide an
integrated and organized approach for evaluating and managing risks.
Risk-based Internal Audit
The risk assessments performed under the ERM exercise are a key input
for the annual internal audit programme, which covers the Company's
various businesses and functions. This approach provides adequate
assurance to the management that the right areas are covered under the
audit plan.
PENDING MATTERS OF SIGNIFICANCE
Premature Termination of Monopoly and Compensation
As reported earlier, the Government of India (GOI) had allowed other
players into the International Long Distance (ILD) business from 1
April 2002, terminating the Company's exclusivity two years ahead of
schedule. The GOI gave the Company a compensation package vide
communication dated 7 September 2000; wherein, the GOI also gave an
assurance that it would consider additional compensation, if found
necessary, on a detailed review when undertaken. However, vide its
letter dated 18 January, 2002, issued just before the disinvestment of
the Company, the GOI issued a further dispensation and unilaterally
declared that the conditions stated in its said letter of 18 January
2002 were to be treated as full and final settlement of every sort of
claim against the premature ILD de-monopolization. The Company filed a
claim in the Bombay High Court in 2005. The Bombay High Court, on 7
July, 2010, ruled that it did not have the jurisdiction to entertain
this suit, in view of the provisions of the Telecom Regulatory
Authority of India Act, 1997 (TRAI). Since the Company holds a
different opinion, it has preferred an appeal before a division bench
of the Bombay High Court on various grounds including that the
compensation granted was in breach of promise from the Government,
acting as a policy maker and not as a licensor under the Indian
Telegraph Act as also the dispute did not relate to the provision of
telecommunication services as envisioned under the TRAI and the suit
was not under, pursuant to and consequent upon the license then granted
to the Company. The appeal has been admitted by the Bombay High Court.
Surplus Land
Under the terms of the share purchase and shareholders' agreements
(SHA) signed between the GOI and the strategic partner (the parties) at
the time of disinvestment, it was agreed that certain identified lands
would be demerged into a separate company. It was further provided
that if, for any reason, the Company cannot hive off or demerge the
land into a separate entity, alternative courses that were also
stipulated in the SHA would be explored. A draft scheme of demerger was
presented to the board in April 2005, which was forwarded to the GOI
with the Board's observations. The Board / management have been
exploring other alternatives also with the GOI and Pan atone. The
Company has been regularly following up the matter with the GOI and has
addressed several communications to both GOI and Pan atone highlighting
the urgency for resolution and also the need for non-debt funding.
The land identified for demerger at different locations measured 773.13
acres, and carried a book value of Rs 0.164 crores (USD 0.04 million).
As reported earlier, the VSNL Employees Cooperative Housing Society,
Chennai (society) had moved the Hon'ble Delhi High Court in respect of
their long pending issue of the transfer of 32.5 acres of land situated
at Padianallur, Chennai, which was part of the identified surplus land.
According to the order of the Hon'ble High Court and as per the advice
of the GOI, the process of transferring the said land to the Society
was completed in July 2009. The strategic partner has written to the
GOI to exclude the 32.5 acres of land so transferred to the society,
from the 773.13 acres mentioned in the SHA as the land identified to be
demerged. The current balance of surplus land is 740.63 acres having a
book value of Rs 0.163 crores (USD 0.04 million).
Minimum Public Shareholding
On 4 June 2010, the Central Government amended the Securities Contracts
(Regulation) Rules, 1956 and inserted Rule 19A to the Securities
Contracts (Regulation) Rules, 1957 ("SCRR"). Pursuant to the said
amendment all listed companies (except public sector companies) are
required to maintain a minimum threshold level of public holding to the
extent of 25% within a period of 3 years from the commencement of the
Securities Contracts (Regulation) (Amendment) Rules, 2010, i.e. before
3 June 2013. This provision was incorporated in the Listing Agreement
by inserting Clause 40A in the Listing Agreement.
Under the present regulations, the 'public shareholding' as referred to
under SCRR and Listing Agreement excludes the shares held by the
promoters and promoter group as well as the equity shares held by
custodian against depositary receipts issued overseas. The public
shareholding of the Company for the purpose of SCRR and the Listing
Agreement is about 17.69% which is below the required level of 25%. The
Company is in discussion with the promoters, the Stock Exchanges and
the Securities and Exchange Board of India (SEBI) to decide on the
course to become compliant with the minimum public shareholding
requirement of SCRR and the Listing Agreement.
STATUTORY INFORMATION AND DISCLOSURES
Fixed Deposits
The Company has not accepted nor does it hold any public deposits.
Non-convertible Debentures (NCDs)
The Company had Rs1150 crores (USD 225.98 million) of outstanding NCDs
as on 31 March 2012. The trust deeds for the debentures issued by the
Company will be available for the inspection by the members at the
Company's registered office during normal working hours, 21 days before
the date of the 26th Annual General Meeting.
The Company redeemed long term secured and unsecured debentures
amounting to Rs800 crores (USD 157.20 million) in 2011-12. All
debentures issued by the Company were rated AA .
Particulars of Employees
The provisions of Section 217(2A) of the Companies Act, 1956, read with
the Companies (Particulars of Employees) Rules, 1975, require the
Company to provide certain details about the employees who were in
receipt of remuneration of not less than Rs0.60 crores (USD 0.13
million) during the year ended 31 March 2012 or not less than Rs0.05
crores (USD 0.01 million) per month, during any part of the said year.
The Company had 53 such employees employed during the year ended 31
March 2012. According to the provisions of section 219(1)(b)(iv) of the
Companies Act, 1956, the Directors' Report being sent to the
shareholders does not include this annexure. The Annexure regarding
the Particulars of Employees under section 217(2A) of the Companies
Act, 1956 will be available for inspection by any member at the
registered office of the Company during working hours, for 21 days
before the date of the AGM.
R & D, Technology Absorption and Foreign Exchange Earnings
The Company has invested in developing new products and services
adopting latest technologies such as content delivery network (CDN),
cloud computing, telepresence and wimax. There are no particulars to be
disclosed pertaining to the year under review, in respect of
expenditure on Research & Development (R&D) and technology absorption
as required under Companies (Disclosure of Particulars in the Report of
the Board of Directors) Rules, 1988. For the purpose of Form 'C' under
the said rules, foreign exchange earnings were equivalent to
Rs1036.72crores (USD 203.72 million) and foreign exchange outgo was
equivalent to Rs531.96 crores (USD 104.53 million).
Auditors' Report
There are no qualifications in the report of the statutory auditors for
the year 2011-12.
Subsidiaries
The statement pursuant to section 212 of the Companies Act, 1956
containing details of the Company's subsidiaries, forms part of the
Annual Report. The consolidated financial statements of the Company and
its subsidiaries, prepared in accordance with accounting standard 21
(AS 21) prescribed by the Institute of Chartered Accountants of India,
form part of the annual report and accounts.
The accounts statements of the subsidiaries will be provided on request
to any shareholder wishing to have a copy, on receipt of such request
addressed to the deputy company secretary at the Company's registered
office.
These documents will also be available for inspection by any
shareholder at the Company's registered office and will be available on
the Company's website.
The Board of Directors
The board of directors of the Company at present consists of 11
directors.
In accordance with the provisions of the Companies Act, 1956 and the
Company's Articles of Association, Mr. Amal Ganguli, Mr. S Ramadorai
and Dr. Ashok Jhunjhunwala retire by rotation at the ensuing annual
general meeting and being eligible, offer themselves for reappointment.
None of the Company's directors is disqualified from being appointed as
a director as specified in Section 274 of the Companies Act, 1956 as
amended by the Companies (Amendment) Act, 2000. For details about the
directors, please refer to point 2 of the Report on Corporate
Governance.
Corporate Governance
Pursuant to Clause 49 of the listing agreement with the stock
exchanges, the Management Discussion and Analysis, Corporate Governance
Report and Auditors' Certificate regarding compliance with conditions
of corporate governance form part of the directors' report.
Looking Ahead
In the coming years, your Company will continue to focus on its
strategy of providing communication solutions and IT infrastructure
services to service providers and enterprise customers, in India and
globally, with a focus on developing differentiated capabilities in
emerging new markets. It is expected that the demand for the Company's
services will remain strong, but we will continue to face increased
competition and pressure on pricing and margins. Your Company will
have to manage a two-pronged strategy of driving revenue growth from
new markets and services, while continuing to improve the cost
structure of its operations. It is expected that your Company will show
improving financial performance, based on the strength of demand for
communication services in our globally connected world and based on the
ability to leverage the sound investments made over the past several
years.
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:
- In the preparation of the annual accounts, the applicable
accounting standards have been followed and there are no material
departures;
- They have consulted the Statutory Auditors in the selection of the
accounting policies 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;
- 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 Companies Act, 1956,
for safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularities;
- They have prepared the annual accounts on a going concern basis.
- All Board members and senior management personnel have affirmed
compliance with the stipulated code of conduct.
ACKNOWLEDGMENTS
The directors would like to express their thanks to all our valued
customers, vendors and other business associates around the world for
their support and confidence in the Company and its services. The
directors also recognise, commend and thank all the employees globally
for their dedication and commitment. The directors appreciate the
support of various ministries and departments of the Government of
India, including the Department of Telecommunications and the
Information & Broadcasting Ministry as well as the governments and
regulators of the various countries in which Tata Communications
operates. The directors are also grateful to the Company's other
stakeholders and partners including its shareholders, promoters
(strategic partner and GOI), bankers and solicitors for their continued
support.
On behalf of the Board of Directors
Subodh Bhargava
Dated: 21 May 2012 Chairman
Registered Office:
VSB, MG Road, Fort,
Mumbai - 400001.
Mar 31, 2011
Dear Shareholders,
The directors are pleased to present the 25th annual report and audited
accounts of Tata Communications Limited (TCL) for the financial year
ended 31 March 2011.
PERFORMANCE
The key financial parameters of your Company during the year under
review are given in table below:
2010-11 2010-11 2009-10 2009-10
(Rs. in
Crores) (USD in (Rs. in
Crores) (USD in
Million)* Million)*
Consolidated income 12185.21 2735.79 11194.22 2513.30
Consolidated EBIDTA 1225.27 275.09 1012.36 227.29
Consolidated profit/(loss)
after exceptional items
and before tax (706.70) (158.67) (681.19) (152.94)
Consolidated Profit/(loss)
after tax (776.90) (174.43) (597.74) (134.20)
Standalone total income 3802.48 853.72 3383.46 759.65
Standalone Profit before tax 154.04 34.58 309.33 69.45
Standalone Profit after tax 162.56 36.50 483.18 108.48
* All conversion from Indian rupees to US Dollars in the above table as
also elsewhere in this report are based on the noon buying rate in New
York City for cable transfers in foreign currencies as certified by the
Federal Reserve Bank of New York for custom purposes which was Rs.
44.54 per USD 1.00 on March 31, 2011.
The consolidated net loss includes Rs. 551.02 Crores (USD 123.71
million) from the Company's holding in Neotel, South Africa, which is
still in its gestation phase, requiring investments to establish the
required capabilities. Neotel will continue to need support for some
more time before it turns profitable. The consolidated net loss also
includes increases in other non-cash costs viz. depreciation on account
of significant capitalisation done over the past two years. We remain
confident that the Company's strategy is sound and that the direction
that the Company is taking will be beneficial to the Company and its
stakeholders as we move forward.
Dividend
The directors are pleased to recommend a dividend of Rs.2 (USD 0.04)
per share (Nil dividend previous year) for the financial year ended 31
March 2011. The amount available for appropriation is Rs.2050.44 crores
(USD 460.36 million), out of which the Company has proposed a dividend
of Rs.57 crores (USD 12.80 million), (excluding dividend tax of Rs.9.25
crores (USD 2.08 million)), and also proposes to transfer Rs.12.19
crores (USD 2.74 million) to general reserves and further Rs.560.77
crores (USD 125.90 million) to the debenture redemption reserve,
leaving Rs.1411.24 crores (USD 316.85 million) to be carried forward.
Macro Economic Situation
During the year under review, the global economy recovered slightly
from the crisis of the previous year. However, the weaknesses in
developed markets continued to impact business spending and expansion
plans. Sectors like banking, financial services and manufacturing have
been the hardest hit, and have consequently shown only marginal growth
in demand.
Businesses across the world are still battling to reduce costs, while
looking to create new markets in the emerging economies / new
geographies. The biggest impact of this on your Company's business is
in the form of severe price pressures and delayed commencement of new
projects from some customers. However, your Company was able to grow
its revenues due to its capabilities in India and other emerging
markets, as well as a focus on value-added managed services.
Segmentation
Being largely a B2B (business-to-business) player, your Company serves
two segments of customers: service providers and enterprise customers.
In the service provider segment, your Company provides an integrated
set of services including wholesale voice, domestic and international
data connectivity, Internet backbone connectivity (also known as IP
transit), value-added roaming services for mobile operators and
carrier-specific business process outsourcing services.
In the enterprise segment, your Company principally offers a
comprehensive suite of connectivity, IT infrastructure and managed
solutions for businesses seeking voice, data and video connectivity
between their distributed offices, within India or globally. These
services are aimed at improving the operational efficiencies of
customers ranging from smaller enterprises to large global
multinational corporations. Your Company is also building
specialization in some industry verticals by offering customized
solutions relevant to that industry. For example, we offer managed ATM
solutions for banks and digital workflow management solutions for media
companies.
INDUSTRY SITUATION AND DEVELOPMENTS
Global Telecom Market
The landscape of the global telecom industry continues to be shaped by
the following major trends:
- Continued growth of mobile penetration, especially in developing
countries;
- Surge in mobile data traffic, enabled by adoption of 3G technology
and increased penetration of smarter end-user devices like smart
phones, tablets etc.;
- Video becoming a growing part of both consumer and business traffic;
- Businesses looking for managed services and turn-key solutions that
help improve their operational efficiency; and
- Growth in traffic, within and to emerging markets / new geographies.
The Wholesale Voice market continues to be a business of scale, with
constant pressure on prices and margins. The share of mobile
communications continues to grow in relation to fixed voice, and there
is an increasing use of Voice over Internet Protocol (VoIP). Alternate
services such as portal-based offerings on the Web are growing in
popularity and usage. The current market dynamics provide both
challenges and opportunities for your Company. The shift from
traditional to pure VoIP players creates margin pressure. However, this
margin pressure is driving operators to look for turn-key and
outsourced solutions, where your Company is well positioned due to the
scale of its business, advanced operations practices and global market
leadership.
The Wholesale Data market is also undergoing rapid changes. The growth
of the Internet on the back of growing global broadband usage,
increasing demand for multimedia services, the success of new
collaboration and communications applications and the continued
increase in the use of the web by both individuals and corporations, is
driving the demand for IP bandwidth. With the growing need for
bandwidth around the world, the demand for submarine cable capacity and
IP Transit services continues to grow. New cable projects have been
announced, or are being constructed, principally connecting the
emerging new markets in Asia, Africa and the Middle East. These cables
are largely being constructed to meet traffic growth rates of 30-40%
per annum and the need for diversity. The associated challenge with new
cable systems being built, is the price pressure it creates on
wholesale data services.
The Mobile Value Added Services market has been aided by the resilience
that the mobile industry has shown to the economic downturn. There is
some concern about revenue growth from mobile voice traffic, especially
in the established markets of Europe and North America. However, with
the increasing penetration of smart devices and the rolling out of
broadband HSPA/3G networks, mobile data is rapidly increasing its
share of overall customer usage and revenue. As operators expand their
broadband networks and subsequently their requirements for core
Internet connectivity, it creates new opportunities for your Company's
wholesale IP transit and data services. Simultaneously, as mobile
operators focus on cost reduction, there are resulting opportunities
for Value Added Services such as 'steering of roaming' and 'roaming
hubbing'.
Indian Telecom Market
Over the last decade the Indian telecom industry has changed
significantly, with all major segments being opened to competition.
There are several new entrants in areas that the Company operates in,
resulting in increasing competition from both domestic operators and
large international companies with a direct presence in the country.
The number of active players in our key service areas is shown below:
ILD (voice) 08
NLD (voice) 16
Domestic Data 12
International Data 13
Data Centre 09
The Indian telecom market grew to Rs.177719 crore (USD 40 billion) in
2011, with the addressable market for Tata Communications being Rs.
52939 crores (USD 11.90 billion). The major factors driving growth in
the Indian market are increased penetration of mobile services, growth
in consumer broadband services and increased adoption of network
services by Indian businesses.
REGULATORY DEVELOPMENTS
The past year witnessed significant regulatory developments in India,
such as the introduction of Mobile Number Portability (MNP) and license
amendments requiring the government's prior approval for telecom
equipment purchases by licensees.
Through a license amendment dated 3 December 2009, the Department of
Telecommunications (DoT) had made it mandatory for all telecom service
providers to obtain security clearances before placing purchase orders
for procuring telecom equipment/ software from manufacturers who are
not Indian owned/controlled. The associated time-consuming procedures
caused the Company to face significant delays in fulfilling customer
orders and in expanding its network infrastructure in India, which
adversely impacted the Company's revenues. On 31 May 2011, the DoT
issued an amendment to the licensing conditions, doing away with the
requirement of obtaining security clearance before placing purchase
orders for telecom equipment. Network security has now been made the
responsibility of the service providers, for which the DoT has
prescribed the requisite measures; the Company is taking all the steps
outlined.
The regulatory scenario in other geographies across the world, where
your Company operates through its subsidiaries, did not see any major
policy changes impacting the Company's business.
COMPANY STRATEGY AND DIRECTION
Strategy Overview
Your Company continues to develop and execute its strategy to be a
global provider of communication solutions, predominantly targeting
business customers. Your Company's strategy continues to be focused on
creating a portfolio of communication and IT infrastructure services to
leverage the trends shaping our chosen business segments. The key
trends that we aim to address are:
- The growth of emerging new market economies, with an emphasis on
India, Asia, the Middle East and Africa;
- The growth of IP and cloud-based communication and IT solutions; and
- The shift towards managed services, which allows our client
businesses to focus on their core competencies.
Your Company has been investing in the underlying infrastructure to
support the growing role of the Internet in the lives of consumers and
businesses, the increased penetration of more powerful end-user devices
such as smart-phones, tablets etc., and a more globally connected and
collaborative business environment. This infrastructure includes long
distance networks, metro networks, international submarine cables, data
centres and virtual private network nodes.
REVIEW OF OPERATIONS
Geographical presence
Your Company continues to grow its business in both India and globally.
The revenue distribution between India and the rest of the world was
26% and 74% respectively in 2010-2011.
Segment and Product Distribution
Your Company maintains a healthy blend of revenues across its various
products and segments. Some of the key facts in 2010-2011, reflecting
the resilience in the revenue portfolio are:
- Mix (for data services) - Service Providers 52%, Enterprises 48%
- Overall revenues: Voice 55%, Data 40%, Neotel 5%
Highlights of Segment Operations
Global Voice
- During the year, Tata Communications' international long distance
voice traffic grew 25%, from ~3200 crore minutes in 2009-10 to ~4000
crore minutes in 2010-11. National long distance voice traffic in India
grew marginally to ~1000 crore minutes in 2010-11. However, gross
margins from voice declined 23% to US Cents 0.46 per minute, from US
Cents 0.60 per minute a year earlier.
Global Data
- Tata Communications' data portfolio continued to expand during
2010-11, and the launch of cloud computing solutions in India and Asia
marked an entry into a fast-growing market segment. Revenues from this
business segment were well-balanced between India (43%) and the rest of
the world (57%); and between service providers (52%) and enterprises
(48%). The Company's strategy of expanding into managed services is
beginning to show results, with managed services contributing 21% to
the global data services segment.
Customer Satisfaction
- In the highly competitive Indian and global telecom markets, one of
the biggest sources of sustainable advantage is superior customer
experience. Tata Communications has made steady progress in this area,
with the Company's customer satisfaction ratings in 2010-11 standing at
the 87th percentile of the global peer set. The Company is making
ongoing investments in improving systems and processes as well as in
strengthening people training and a customer- centric culture.
HUMAN RESOURCES
The different corporate entities that are part of Tata Communications
together employed 7510 people as on 31 March 2011 (6457 on 31 March
2010). Of these, 2260 (1182 in the previous year) were located outside
India. With people of about 40 nationalities on the rolls, the
workforce profile is diverse and multicultural.
The Company seeks to hire, train and retain the best talent available
globally to enable efficient and effective performance in a competitive
marketplace. At Tata Communications, employees are encouraged to live
the vision and values adopted by the Company.
Your Company has recognised the need to become more flexible in the
management of its human capital, so as to be able to draw heavily on
the skills of its global workforce. The compensation and employee
benefit practices of Tata Communications are designed to be competitive
in the respective geographies where we operate. Employee relations
continued to be harmonious at all our locations, through continuous
dialogue and openness.
AWARDS AND RECOGNITION
The Company's transformational initiatives are being recognised in
India and abroad. During the year, the Company earned several
prestigious recognitions, including:
- 'Top international long distance operator' award from Voice & Data
magazine in India, consecutively for the 9th successive year since 2001
(India);
- 'Best global wholesale offering' award from Capacity magazine, a
global publication for
telecommunications carriers and service providers;
- 'Telepresence managed service provider of the year' at the European
CEO 2010 Awards;
- 'Service provider of the year' in enterprise data services and hosted
contact centre services at the Frost & Sullivan 2011 India IT & Telecom
Excellence Awards;
- 'Best service provider of the year, APAC'; and 'best ethernet
wholesale service, APAC' at the 2010 MEF Awards;
- 'APAC service provider of the year 2011 (ethernet and telepresence)'
at the Cisco Partner Summit 2011; and
- 'Best long distance operator (India)' at the Tele.net Telecom
Operator Awards 2011.
CONTINUOUS IMPROVEMENT
In order to be able to respond quickly to customers, your Company
continues with various initiatives to compete effectively, and to
improve organisational flexibility and efficiency.
Business Excellence
Your Company has developed and deployed a Continuous Improvement
methodology (QUICK), designed in partnership with Tata Quality
Management Services, to serve as a model for continuous improvement.
Your Company continues to transform itself in tandem with market and
regulatory changes, using the framework of the Tata Business Excellence
Model (TBEM), which covers areas like leadership, strategy, customer
and market focus, knowledge management, human resources, process
management, customer service and social responsibility.
Your Company has received TL 9000 certification for three years,
commencing 31 March 2010, for the India region. Nine out of thirteen
key office premises across India have received ISO 14001 certification
for environment management and we are pursuing certification for the
remaining four office premises. Our Global Managed Services Operations
Centre (MSOC) at Chennai, all eleven data centres in India and six data
centres at international locations have received ISO 20000 and ISO
27001 certifications.
Compliance with SOX
Pursuant to its listing on the New York Stock Exchange, Tata
Communications has been complying with section 404 of the Sarbanes
Oxley Act, 2002 (SOX). SOX sets forth requirements for internal control
over financial reporting and its documentation. For the current fiscal
year, in addition to the management's own assessment of the
effectiveness of such internal control, the Company's external auditors
are also required to issue an opinion on whether effective internal
control over financial reporting was maintained in respect of all
material aspects by the management.
Enterprise Risk Management
Your Company has established an enterprise-wide risk management (ERM)
framework to optimise the identification and management of risks
globally, as well as to comply with clause 49 of the listing agreement
with Indian stock exchanges. In line with your Company's commitment to
delivering sustainable value, this framework aims to provide an
integrated and organised approach for evaluating and managing risks.
Risk-based Internal Audit
The risk assessments performed under the ERM exercise are a key input
for the annual internal audit programme, which covers the Company's
various businesses and functions. This approach provides adequate
assurance to the management that the right areas are covered under the
audit plan.
PENDING MATTERS OF SIGNIFICANCE
Premature Termination of Monopoly and Compensation
As reported earlier, the Government of India (GoI) had allowed other
players into the international long distance (ILD) business from 1
April 2002, terminating the Company's exclusivity two years ahead of
schedule. The GoI gave the Company a compensation package vide
communication dated 7 September 2000; wherein, the GOI also gave an
assurance that it would consider additional compensation, if found
necessary, on a detailed review when undertaken. However, vide its
letter dated 18 January, 2002, issued just before the disinvestment of
the Company, the GoI issued a further dispensation and unilaterally
declared that the conditions stated in its said letter of 18 January,
2002 were to be treated as full and final settlement of every sort of
claim against the premature ILD de-monopolisation. The Company filed a
claim in the Bombay High Court in 2005. The Bombay High Court, on 7
July 2010, ruled that it did not have the jurisdiction to entertain
this suit, in view of the provisions of the Telecom Regulatory
Authority of India Act, 1997. Since the Company holds a different
opinion, it has preferred an appeal before a division bench of the
Bombay High Court on various grounds including:
- That the monopoly granted to the plaintiff was distinct from the
license, and that the award of compensation was in the nature of a
breach of promise from the Government, acting as a policy maker and not
as a licensor under the Indian Telegraph Act.
- That the dispute did not relate to the provision of telecommunication
services as envisioned under the TRAI Act.
- That the plaintiff's suit was not under, pursuant to and consequent
upon the license granted to the plaintiff in 1999.
The appeal has been admitted by the Bombay High Court.
Surplus Land
Under the terms of the share purchase and shareholders' agreements
(SHA) signed between the GoI and the strategic partner (the parties) at
the time of disinvestment, it was agreed that certain identified lands
would be demerged into a separate company. It was further provided
that if, for any reason, the Company cannot hive off or demerge the
land into a separate entity, alternative courses that were also
stipulated in the SHA would be explored. A draft scheme of demerger was
presented to the board in April 2005, which was forwarded to the GoI
with the Board's observations. The parties are examining the legality
and feasibility of implementing the scheme. The land identified for
demerger at different locations measured 773.13 acres, and carried a
book value of Rs.0.164 crores (USD 0.04 million). As reported earlier,
the VSNL Employees Cooperative Housing Society, Chennai (society) had
moved the Hon'ble Delhi High Court in respect of their long pending
issue of the transfer of 32.5 acres of land situated at Padianallur,
Chennai, which was part of the identified surplus land. According to
the order of the Hon'ble High Court and as per the advice of the GoI,
the process of transferring the said land to the Society was completed
in July 2009. The strategic partner has written to the GoI to exclude
the 32.5 acres of land so transferred to the society, from the 773.13
acres mentioned in the SHA as the land identified to be demerged. The
current balance of surplus land is 740.63 acres having a book value of
Rs.0.163 crores (USD 0.04 million).
STATUTORY INFORMATION AND DISCLOSURES
Fixed Deposits
The Company has not accepted nor does it hold any public deposits.
Non-convertible Debentures (NCDs)
The Company has Rs.1950 crores (USD 437.81 million) of outstanding
NCDs. The trust deeds for the debentures issued by the Company will be
available for the inspection by the members at the Company's registered
office during normal working hours, 21 days before the date of the
25THAnnual General Meeting.
During the year, the Company borrowed for its short term requirements.
The Company issued short term unsecured debentures amounting to Rs.811
crores (USD 182.08 million) in 2010-11. These unsecured debentures were
redeemed during 2010-11. All debentures issued by the Company were
rated 'P1 '.
Particulars of Employees
The provisions of Section 217(2A) of the Companies Act, 1956, read with
the Companies (Particulars of Employees) Rules, 1975, require the
Company to provide certain details about the employees who were in
receipt of remuneration of not less than Rs.0.60 crores (USD 0.13
million) during the year ended 31 March 2011 or not less than Rs.0.05
crores (USD 0.01 million) per month, during any part of the said year.
The Company had 38 such employees employed during the year ended 31
March 2011. According to the provisions of section 219(1)(b)(iv) of the
Companies Act, 1956, the Directors' Report being sent to the
shareholders does not include this annexure. The Annexure regarding
the Particulars of Employees under section 217(2A) of the Companies
Act, 1956 will be available for inspection by any member at the
registered office of the Company during working hours, for 21 days
before the date of the AGM.
R & D, Technology Absorption and Foreign Exchange Earnings
The Company has invested in developing new products and services
adopting latest technologies such as content delivery network (CDN),
cloud computing, telepresence and Wimax.
There are no particulars to be disclosed pertaining to the year under
review, in respect of expenditure on Research & Development (R&D) and
technology absorption as required under Companies (Disclosure of
Particulars in the Report of the Board of Directors) Rules, 1988. For
the purpose of Form 'C' under the said rules, foreign exchange earnings
were equivalent to Rs.885.26 crores (USD 198.76 million) and foreign
exchange outgo was equivalent to Rs.483.38 crores (USD 108.53 million).
Auditors' Report
There are no qualifications in the report of the statutory auditors for
the year 2010-11.
Subsidiaries
The statement pursuant to section 212 of the Companies Act, 1956
containing details of the Company's subsidiaries, is attached. The
consolidated financial statements of the Company and its subsidiaries,
prepared in accordance with accounting standard 21 (AS 21) prescribed
by the Institute of Chartered Accountants of India, form part of the
annual report and accounts.
The accounts statements of the subsidiaries will be provided on request
to any shareholder wishing to have a copy, on receipt of such request
by the deputy company secretary at the Company's registered office.
These documents will also be available for inspection by any
shareholder at the Company's registered office and will be available on
the Company's website.
The Board of Directors
The board of directors of the Company at present consists of
11directors. Mr. Vinod Kumar, who was a non-executive director on the
Board was appointed as the Managing Director and Group CEO w.e.f. 1
February 2011 subject to approval of shareholders and the Central
Government as may be necessary. He replaced Mr. N. Srinath and Mr.
Srinath continues to be a Director on the Board of Tata Communications
Ltd and some of its subsidiary/associate companies. Mr. H.P. Mishra,
who was nominated by the Government of India as a permanent
(non-retiring) director, has ceased to be a director on the board of
Tata Communications Limited with effect from w.e.f 1 April 2010. Mr.
Manish Sinha, Dy. Director General (LF), Department of
Telecommunications, was appointed in place of Mr. H.P. Mishra on the
board of the Company. Mr. Manish Sinha ceased to be a director on the
board of Tata Communications Limited w.e.f from 15 September 2010;
effective the same date, Mr.Shabhaz Ali, Dy. Director General (TRF &
Accounts), Department of Telecommunications, was appointed as
government nominee director on the board of the Company.
Mr. PV Kalyanasundaram and Dr. V.R.S Sampath independent directors
ceased to be a director w.e.f 20 May2011 and 2 June 2011 respectively.
Mr. AK Srivastava, then Deputy Director General (AS) and Mr.Shahbaz
Ali, Deputy Director General (TPF & Accounts) ceased to be directors
w.e.f. 9 August 2011. On the recommendation of the government, the
board has appointed Mr. Uday B. Desai as an additional director
(independent) w.e.f. 6 June 2011. W.e.f 9 August 2011, Mr. AK Mittal,
Senior Deputy Director General (AS), DoT and Mr.Saurabh Tiwari, Deputy
Director General (LF.II), DoT nominated by the Government of India were
appointed as additional directors. Mr. Uday B. Desai, Mr. AK Mittal and
Mr. Saurabh Tiwari hold office till the ensuing annual general meeting.
In accordance with the provisions of the Companies Act, 1956 and the
Company's Articles of Association, Mr. Arun Gandhi, Mr.Subodh Bhargava
and Mr. Kishor Chaukar retire by rotation at the ensuing annual general
meeting and being eligible, offer themselves for reappointment.
None of the Company's directors is disqualified from being appointed as
a director as specified in Section 274 of the Companies Act, 1956 as
amended by the Companies (Amendment) Act, 2000. For details about the
directors, please refer to point 2 of the Report on Corporate
Governance.
Corporate Governance
Pursuant to Clause 49 of the listing agreement with the stock
exchanges, the Management Discussion and Analysis, Corporate Governance
Report and Auditors' Certificate regarding compliance with conditions
of corporate governance form part of the directors' report.
Looking Ahead
In the coming years, your Company will continue to focus on its
strategy of providing communication solutions and IT infrastructure
services to service providers and enterprise customers, in India and
globally, with a focus on developing differentiated capabilities in
emerging new markets. It is expected that the demand for the Company's
services will remain strong, but we will continue to face increased
competition and pressure on pricing and margins.
Your Company will have to manage a two-pronged strategy of driving
revenue growth from new markets and services, while continuing to
improve the cost structure of its operations. It is expected that your
Company will show improving financial performance, based on the
strength of demand for communication services in our globally connected
world and based on the ability to leverage the sound investments made
over the past several years.
ACKNOWLEDGMENTS
The directors would like to express their thanks to all our valued
customers, vendors and other business associates around the world for
their support and confidence in the Company and its services. The
directors also recognise, commend and thank all the employees globally
for their dedication and commitment. The directors appreciate the
support of various ministries and departments of the Government of
India, including the Department of Telecommunications and the
Information & Broadcasting Ministry as well as the governments and
regulators of the various countries in which Tata Communications
operates. The directors are also grateful to the Company's other
stakeholders and partners including its shareholders, promoters
(strategic partner and GoI), bankers and solicitors for their continued
support.
On behalf of the Board of Directors
Subodh Bhargava
Dated: 30 August, 2011 Chairman
Registered Office:
VSB, MG Road, Fort,
Mumbai à 400001.
Mar 31, 2010
The directors present the 24th annual report and audited accounts of
Tata Communications Limited (TCL) for the financial year ended 31 March
2010.
PERFORMANCE
The year under review saw continued sluggishness in markets in which
your Company operates. Most corporates, who are the major customers of
the company, have remained cautious and focussed on reducing costs and
becoming more efficient thereby limiting the growth in our addressable
market. Despite this, your Company continued to expand and grow, and
has increased its consolidated revenues to Rs.111.94 billion (previous
year Rs. 102.07 billion) and EBIDTA was at Rs. 10.12 billion (previous
year Rs. 13.66 billion). However, consolidated profit/(loss) after
exceptional items and before tax was Rs. (6.81) billion (previous year
Rs. (4.23) billion), whereas profit/(loss) after tax was Rs. (5.98)
billion (previous year Rs. (3.16) billion).
On standalone basis, during the year under review, your Company earned
total revenue of Rs. 33.83 billion (previous year Rs. 39.81 billion).
Profit before tax for the year was Rs. 3.09 billion, (previous year
Rs.7.13 billion). Profit after tax was Rs. 4.83 billion (previous year
Rs. 5.16 billion).
The CompanyÃs profitability has been affected adversely by the global
economic conditions, nascent stage of some of its investments and due
to increases in some specific items of cost. The consolidated net loss
includes Rs. 4.64 billion in respect of the CompanyÃs holding in
Neotel, South Africa, which is still in the early growth phase and will
continue to need support for some more time before it turns profitable.
The net loss also includes increases in other non-cash costs viz.
depreciation on account of significant capitalisation done over the
past two years, and the changes in retirement provisions in India and
overseas subsidiaries. We remain confident that the CompanyÃs strategy
is sound and the direction that the Company is taking will prove
beneficial to the Company and its stakeholders in the future.
Dividend
The directors have recommended that no dividend be paid for the
financial year ended 31 March 2010. This was deemed prudent in the
light of several factors impacting your Company. The CompanyÃs revenue
has shown growth but profitability has come under pressure over the
last couple of years primarily due to sharp drop in tariffs and the
high capital expenditure to meet current and future business
requirements resulting in significantly higher depreciation and
additional interest costs and some large investments being still in
their gestation phase and will take a few more years to be profitable.
Your Company has reinvested its cash in the business to expand its
capabilities in key markets around the world, including India. However,
your Company has also been increasing its debt funding to support
growth and expansion. As a result, interest costs have been rising,
affecting adversely your CompanyÃs profitability. Therefore, as a part
of its attempts to control the debt burden on the Company, the Board
has decided to reinvest the amount available into growth investments
for the business.
The amount available for appropriation is Rs. 25.83 billion, out of
which the Company proposes to transfer Rs. 0.48 billion to general
reserves and Rs. 3.55 billion to the debenture redemption reserve,
leaving Rs. 21.79 billion to be carried forward.
Funding
During the year, the Company continued to borrow for financing its
projects and operations. The Company issued unsecured debentures
amounting to Rs. 7.00 billion in 2009-10. All debentures issued by the
Company have been rated ÃAAAÃ. The trust deeds for the debentures
issued by the Company will be available for the inspection by the
members at the CompanyÃs registered office during normal working hours,
21 days before the date of the 24th Annual General Meeting.
OVERVIEW
Over the last few years, your Company has consistently pursued its
strategy of providing a range of communication services to enhance the
reach and leadership of its customers in the wholesale, enterprise and
retail segments across different geographies. It is leveraging its
integrated wholesale capability, strong market position in India,
portfolio of managed services and its focus on emerging markets to
compete with other global service providers. The Company has
judiciously invested in key infrastructure and service delivery
capabilities to be able to meet the demands of its customers.
The CompanyÃs focused strategy has enabled it to be one of the leading
players worldwide in its major business segments, with operations in
more than 50 countries. Tata Communications remains the largest
provider of international wholesale voice services globally and one of
the largest owners and providers of submarine cable capacity in the
world. The Company is a global Tier-1 Internet Services Provider (ISP)
and is a major player in the growing global IP Transit market. Your
Company also offers telecommunication services through its subsidiary
in Sri Lanka and associates/joint ventures in Nepal and South Africa.
In the coming years, your Company will continue to focus on redefining
telecom services for Ãwholesaleà commodity and low-value operations to
a partnership-driven, value-enhancing business; on expanding networks
in India to reach the customersà premises; on rapidly growing its
global enterprise segment with catalyst services including
Telepresence, media and entertainment solutions, Ethernet and cloud
computing; and on achieving global benchmarks in customer services and
operations.
During the year under review, the enterprise customersà demand for
greater global connectivity and services continued to grow, worldwide
broadband penetration increased and demand for rich media and
interactive digital content continued to increase globally. This gave
the Company the opportunity to leverage its Tata Global Network (TGN)
of optical fibre undersea cables and Internet Protocol (IP) networks to
its advantage.
Over the last four years, Tata Communications invested over US$2
billion in building infrastructure and new service capabilities as well
as in entering new markets. In 2009-10, the Company invested nearly
US$509 million towards capital expenditure and other investments. The
Company has commissioned additional submarine cable systems and is
expanding capacity in the current year, connecting emerging markets in
Asia, the Middle East and Africa to each other and onwards to Europe
and America to meet the increasing bandwidth demand of broadband,
enterprise and wholesale customers over the next five to eight years.
Investments have also been made in new data centres and in expanding
the network and service capability in different markets globally. The
Company expects to continue investing in increasing its capabilities
and market presence.
Tata Communications has set up extensive operating framework for
servicing the specific needs of customers across various market
segments and geographies. The Company continues to focus on building
long lasting relationships with its customers and business associates
and to lead the industry in responsiveness and flexibility. The service
fulfilment, service assurance and billing functions are integrated into
a single team called Customer Services and Operations. This provides
the right focus and synergies across all Ãcustomer touch pointsà in all
stages of the service life cycle and has led to significantly enhanced
customer satisfaction across our business segments and geographies.
The Department of Telecommunications (DoT), through a license amendment
dated 3 December 2009, made it mandatory for all telecom service
providers to obtain security clearances before placing purchase orders
for procuring telecom equipment from manufacturers who are not Indian
owned/ controlled. Further notifications issued by the DoT lay down
more conditions relating to the transfer of technology requirements to
be imposed on foreign vendors, self certification regarding equipment
being free from malware, etc. Service providers and vendors are
generally finding it difficult to comply with these conditions. The
Company is facing delays in fulfilment of its customer orders and in
expanding its network infrastructure in India, which is having an
adverse effect on the CompanyÃs revenues.
The Company continues to work with the Government of India to resolve
this issue.
Premature Termination of Monopoly and Compensation
As reported earlier, the Government of India (GOI) had allowed other
players into the international long distance (ILD) business from 1
April 2002, terminating the CompanyÃs exclusivity two years ahead of
schedule. The GoI gave the Company a compensation package and had given
an assurance prior to the disinvestment of 2002 that it would consider
additional compensation, if found necessary, on a detailed review when
undertaken. However, in February 2002, just before the disinvestment of
the Company, the GoI unilaterally granted a further dispensation as
full and final settlement of every sort of claim against the premature
ILD demonopolisation.
The Company filed a claim in the Mumbai High Court in 2005 which is yet
to come up for hearing.
Surplus Land
Under the terms of the share purchase and shareholdersà agreements
signed between the GoI and the strategic partner (the parties) at the
time of disinvestment, it was agreed that certain identified lands
would be demerged into a separate company. It was further provided
that if, for any reason, the Company cannot hive off or demerge the
land into a separate entity, alternative courses as stipulated in the
share purchase and shareholdersà agreement would be explored. A draft
scheme of demerger was presented to the Board in April 2005, and the
parties are examining the legality and feasibility of implementing the
scheme. The land identified for demerger at different locations
measured 773.13 acres, and carried a book value of Rs.1.64 million.
As reported earlier, the VSNL Employees Cooperative Housing Society,
Chennai (Society) had moved the HonÃble Delhi High Court in respect of
their long pending issue of transfer of 32.5 acres of land situated at
Padianallur, Chennai, which was part of the identified surplus land.
According to the order of the HonÃble High Court, the process of
transferring the said land to the Society was completed during the
year.
HUMAN RESOURCES
Your Company invests in continuous training to enhance employee skills
and capabilities and offers ample avenues to its employees to not only
contribute but also learn and grow.
The different corporate entities that are part of Tata Communications
together employed 6,457 people as on 31 March 2010 (5,825 on 31 March
2009). Of these, 1,181 (1,050 in the previous year) were located
outside India. With people of about 40 nationalities on the rolls, the
workforce profile is diverse and multi- cultural. The Company seeks to
hire, train and retain the best talent available globally to enable
efficient and effective performance in the competitive market.
At Tata Communications, employees are encouraged to live the vision and
values adopted by the Company. Integrity is recognized and rewarded.
An employee satisfaction survey is carried out annually through an
independent global agency across all our different operating locations.
This year, more than 94% of the employees participated in this survey
and the overall employee satisfaction scores showed a healthy upward
trend in respect of all major parameters and across all geographies.
The compensation and employee benefit practices of Tata Communications
are designed to be competitive in the respective geographies where we
operate. Employee relations continued to be harmonious at all our
locations, through the process of continuous dialogue and openness to
find mutually acceptable solutions to issues.
AWARDS AND RECOGNITION
The CompanyÃs transformational initiatives are being recognised in
India and abroad. During the year, the Company earned several
prestigious recognitions, including:
Best Global Wholesale Offering Award from Capacity magazine, one of the
most important publications for telecommunications carriers and service
providers.
Global Telecoms Business Innovation Award for International Wholesale
Infrastructure Transformation and International Network Infrastructure
Transformation.
During the year, your CompanyÃs MD & CEO, Mr. N Srinath, was named as
the worldÃs eighth most influential telecom personality for the second
consecutive year by the Global Telecoms Business magazine.
European CEO announced Tata Communications as Telepresence Managed
Service Provider of the Year 2009.
Frost & Sullivan named the Company #1 Enterprise Data Services Provider
in India 2009.
In March 2010, Tata Communications entered the GartnerÃs Magic Quadrant
for Global Network Service Providers.
Frost & SullivanÃs 2009 Product Innovation award for Managed
Telepresence Service.
ÃBest service coverageà in the 2009 Optical Transmission Vision (OTV)
APAC Network Operator Awards.
CONTINUOUS IMPROVEMENT
In order to be able to respond quickly to the customers, your Company
continues with various internal initiatives to compete effectively,
improve organisational flexibility and efficiency, streamline internal
processes across all its entities globally and institutionalise a
culture of continuous improvement. The Company is developing and
deploying a Continuous Improvement methodology (QUICK) which is being
designed in partnership with Tata Quality Management Services to serve
as a model for continuous improvement. Some important initiatives are:
Business Excellence
Your Company continues to transform itself in tandem with market and
regulatory changes using the framework of the Tata Business Excellence
Model (TBEM) which covers areas like leadership, strategy, customer and
market focus, knowledge management, human resources, process
management, customer service and social responsibility.
Your Company has received TL 9000 certification for three years
commencing 31 March 2010 for the India region. Nine out of thirteen key
office premises across India have received ISO 14001 certification for
environment management. Our Global Managed
Services Operations Centre (MSOC) at Chennai, all eleven data centres
in India and six data centres at international locations have received
ISO 20000 and ISO 27001 certifications.
Compliance with SOX
Pursuant to its listing on the New York Stock Exchange, Tata
Communications has been complying with section 404 of the Sarbanes
Oxley Act, 2002 (SOX). SOX sets forth requirements for internal control
over financial reporting and its documentation. For the current fiscal
year, in addition to the managementÃs own assessment of the
effectiveness of such internal control, the CompanyÃs external auditors
are also required to issue an opinion on whether effective internal
control over financial reporting was maintained in respect of all
material aspects by the management.
Revenue Assurance
Revenue assurance aims to prevent revenue leakages to ensure robust
internal controls and IT processes that keep pace with increasing
business complexities, thus moving towards zero tolerance of revenue
leakages. Your Company has recently undertaken a Ãbenchmarkà study to
enhance revenue assurance processes and the findings will be
implemented this year.
Enterprise Risk Management
Your Company has established an enterprise-wide risk management (ERM)
framework to optimise identification and management of risks globally,
as well as to comply with clause 49 of the listing agreement with
Indian stock exchanges. In line with your CompanyÃs commitment to
deliver sustainable value, this framework aims to provide an integrated
and organised approach for evaluating and managing risks.
Risk-based Internal Audit
The risk assessments performed under the ERM exercise are a key input
for the annual internal audit programme, which covers the CompanyÃs
various businesses and functions. This approach provides adequate
assurance to the management that the right areas are covered under the
audit plan.
STATUTORY INFORMATION AND DISCLOSURES
Fixed Deposits
The Company has not accepted nor does it hold any public deposits.
Particulars of Employees
The provisions of Section 217(2A) of the Companies Act, 1956, read with
the Companies (Particulars of Employees) Rules, 1975, require the
Company to provide certain details about the employees who were in
receipt of remuneration of not less than Rs. 24 lakhs (Rs 2,400,000)
during the year ended 31 March 2010 or not less than Rs. 2 lakhs (Rs.
200,000) per month, during any part of the said year. The Company had
313 such employees employed during the year ended 31 March 2010.
According to the provisions of section 219(1)(b)(iv) of the Companies
Act, 1956, the Directorsà Report being sent to the shareholders does
not include this annexure. The Annexure regarding the Particulars of
Employees under section 217(2A) of the Companies Act, 1956 will be
available for inspection by any member at the registered office of the
Company during working hours, 21 days before the date of the AGM.
R & D, Technology Absorption and Foreign Exchange Earnings
There are no particulars to be disclosed pertaining to the year under
review, in respect of Research & Development (R&D) and technology
absorption as required under Companies (Disclosure of Particulars in
the Report of the Board of Directors) Rules, 1988. For the purpose of
Form ÃCÃ under the said rules, foreign exchange earnings were
equivalent to Rs. 8.32 billion and foreign exchange outgo was
equivalent to Rs. 5.86 billion.
The Company has invested in developing new products and services
adopting latest technologies such as content delivery network (CDN),
cloud computing, Telepresence and Wimax.
Auditorsà Report
There are no qualifications in the report of the statutory auditors for
the year 2009-10.
Subsidiaries
The statement pursuant to section 212 of the Companies Act, 1956
containing details of the
CompanyÃs subsidiaries, is attached. The consolidated financial
statements of the Company and its subsidiaries, prepared in accordance
with accounting standard 21 (AS 21) prescribed by the Institute of
Chartered Accountants of India, form part of the annual report and
accounts.
These documents will be provided on request to any shareholder wishing
to have a copy, on receipt of such request by the deputy company
secretary at the CompanyÃs registered office. These documents will also
be available for inspection by any shareholder at the CompanyÃs
registered office.
The Board of Directors
The Board of Directors of the Company consists of twelve directors. Mr.
H.P. Mishra, who was nominated by the Government of India as a
permanent (non- retiring) director, has ceased to be a director on the
Board of Tata Communications Limited with effect from 1 April 2010. Mr.
Manish Sinha, Dy. Director General (LF), Department of
Telecommunications, has been appointed in his place on the Board as a
permanent (non-retiring) director. In accordance with the provisions of
the Companies Act, 1956 and the CompanyÃs Articles of Association, Mr.
P.V. Kalyanasundaram, Dr. V.R.S. Sampath and Mr. Amal Ganguli retire
by rotation at the ensuing annual general meeting and being eligible,
offer themselves for reappointment.
None of the CompanyÃs directors are disqualified from being appointed
as a director as specified in Section 274 of the Companies Act, 1956 as
amended by the Companies (Amendment) Act, 2000.
For details about the directors, please refer to point 2 of the Report
on Corporate Governance.
Corporate Governance
Pursuant to Clause 49 of the Listing Agreement with the stock
exchanges, Management Discussion and Analysis, Corporate Governance
Report and Auditorsà Certificate regarding compliance with conditions
of corporate governance form part of the directorsà report.
ACKNOWLEDGMENTS
The directors would like to express their thanks to the various
customers and business associates of the Company around the world for
their support and confidence in the Company and the services provided
by it. The directors also recognise and commend the dedication and
commitment of all the employees globally. The directors appreciate the
support of various Ministries and departments of the Government of
India, including the Department of Telecommunications and the
Information & Broadcasting Ministry as well as the Governments and
regulators of the various countries in which Tata Communications
operates. The directors are also grateful to the CompanyÃs other
stakeholders and partners including its shareholders, bankers,
solicitors and suppliers, for their support.
On behalf of the Board of Directors
Subodh Bhargava
Dated: 5 July 2010 Chairman
Registered Office:
VSB, MG Road, Fort,
Mumbai - 400001.
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