ANNUAL REPORT 2011-2012
Last year was probably the toughest year that we have seen since the
inception of our business. The telecom sector in India continues to endure
a very difficult phase. The inability of the operators in this industry to
raise fresh capital in the light of high interest rates and the
unwillingness of banks to lend them due to uncertainties in the sector, has
deferred their expansion plans. This has put huge pressure on pricing for
Network Services players like us. The Supreme Court canceled 122 2G
licenses, which has resulted in slowdown in the industry as the operators
are not rolling out any new networks. The telecom sector is awaiting clear
policy guidelines that shall define a cohesive direction for development
and growth of this industry.
The increase in interest rate has put a burden on our annual interest outgo
and reduced our profit margins. The weakness in global markets and the
Indian telecom sector has prevented us from magnetizing our investments in
tower sector and use the proceeds from the same to reduce our debt.
Even, in the power franchisee business, the input costs of power and
operational costs have gone up and these are not being passed on to the end
consumer. Recently some of the state governments like Tamil Nadu, Delhi
etc. have raised the tariffs. In other major states like Rajasthan, the
power distribution companies are restructuring their loans with state
governments. The situation may improve with the increase in tariffs and
legislation to curb losses.
We had informed you about this likely negative scenario last year and as
expected it had negative impact, both on our revenue and profitability.
Business Overview & Outlook:
The Financial Highlights of the year, are as follows:
On a consolidated basis, (for the period of 9 months from July 2011 to
* Revenues of Rs. 1864.69 Crs. (US$ 371.30 Mn.)
* PBDIT of Rs. 87.08 Crs. (US$ 17.34 Mn.)
* Order visibility as on March 31, 2012 stood at Rs. 2800 Crs. (US$ 557.55
* (US$ 1 = Rs. 50.22 as on March 31, 2012)
We are providing Energy Management Solutions to telecom operators and
telecom tower companies. We have also entered into Power Management
business by winning the contract for Power Distribution Franchise in
Since these businesses are new, they are likely to generate lower margins
initially. As a result, we are likely to generate substantially lower
margins for near to medium term.
Corporate Debt Restructuring (CDR):
The Company has completed the process of restructuring debt from domestic
lenders and is waiting for certain approvals to restructure debt from ECB
and NCD lenders. Expressing confidence in the business the promoters have
also contributed Rs. 83.45 Crs. towards the equity of the company.
The highlights of the CDR are covered in the director's report on page no.
New Growth Opportunities:
Even though our industry is going through a very difficult phase, we
believe in the potential of the telecom sector, and our capability to
address them. We are sure that with the capable management team, the
Company will continue to focus on overcoming the challenges and creating
new opportunities for growth.
Extending Network Deployment Capabilities in Power Sector:
Our know how of implementation and maintenance of large telecom networks
has been extended to power sector. Power sector represents a huge
opportunity in Power Generation, Transmission and Distribution, though it
too, has challenges across several areas.
Power Management Business:
We are distributing power to Aurangabad Urban Circle(I & II)on behalf of
the local distribution company. This contract is spread over 15 years and
is likely to generate revenue of Rs. 900 Crs. in the first year and
Rs.1,000 Crs. from the next year onwards.
We will be responsible for distribution of electricity to both industrial
and residential units from the grid. We are increasing the efficiency in
distribution of electricity by cutting down Aggregate Technical and
We believe we can develop similar businesses in the near future as
Government and State Electricity Boards accelerate their efforts to
privates Power Distribution.
We are taking several initiatives like Automated Meter Reading
Infrastructure, Distribution Automation etc. that will further improve the
AT&C losses. We are making efforts to minimize the losses incurred on
account of leakage and theft of power. We are also in the process of
modernizing the distribution infrastructure that should enable us to
improve the quality of power.
Increasing Recurring Revenue:
Our Power Franchisee business along with Energy Management business for
telecom operators has helped us to build a business model that has
recurring revenue. We are now focusing on wining similar business that
shall add recurring revenues.
Phase out the low margin Network Services business in Indian telecom market
that requires higher working capital:
As Indian telecom sector is going through its toughest phase, the operators
have deferred their capital expenditure and expansion plans. In addition to
this they have reduced the pricing for Network Services players like us,
and are asking for better payment terms impacting our margins and working
capital. This has resulted into business becoming enviable. Hence we have
decided to discontinue loss making projects and continue only with those
which offer higher margins and require lower working capital. This will
result into lower revenue but will have positive impact on future working.
Introduce new services to the customers in LTE space:
Globally the telecom sector is likely to witness growth in data services
over the next few years. This growth is likely to ride on implementation of
LTE networks. GTL has begun offering new services like Bench marking the
networks, Network Design in the LTE space to the operators in USA. As the
Network evolves in the other markets similar services can be offered in
Europe and Middle east in the next two years and Africa, APAC and SAARC
over the period of three to four years.
Focus on Cost:
As we are entering into new business areas of Power Management and Energy
Management, our operating profit margins are likely to go down in the near
term. Looking at the external environment and the difficult phase we are
going through, the company has already initiated several measures that
would bring down the administration and wage costs.
Monetizing our Investments:
Although currently both the capital markets and telecom sector in India are
going through a rough phase, we believe we can monetize our investments in
telecom tower sector over a period of 3-5 years and reduce our debt.
Restructuring of our business in Indian market required churning of skill
set of our employees. As a result, our employees and contracted associates
reduced from 9,612 to 8,204 as on June 30, 2012.
Our employees have also contributed to the cost saving efforts by taking a
salary cut ranging from 10-30% and have foregone several other benefits. I
for myself have been taking a token salary of Rs. 1.
Corporate Social Responsibility:
We have focused our attention on areas like imparting education to the
underprivileged children and providing employment opportunities to women
and physically challenged people. Our employees are helping our progress
not only in terms of business but also by its impact on the community by
volunteering their free time. Our efforts in Energy Management will also
help in reducing the carbon footprint of the telecom industry in the coming
The cancellation of the 122 licenses and the uncertainty pertaining to the
telecom sector has had a substantial impact on our revenue. The impact has
not only been on the current order backlog but on the future opportunities
With the power distribution companies being in distress, the power sector
is expecting reforms like revision in tariffs by state governments. The
power sector provides recurring revenue model, but in current situation the
margins are under pressure.
Given this scenario both telecom and power sector are under pressure. As a
result, even though we may have operating profit from the business but are
likely to generate net losses post Interest and depreciation.
The past year had been a difficult year and our focus is now to stabilize
and grow the business. It would be our endeavor to bring in efficiency in
telecom networks and power distribution, being environment friendly and
creating employment in rural India.
For all that our Company has accomplished over the years, we would like to
thank all our stockholders, customers, financial institutions, partners and
employees for their unwavering interest and support and look forward for
the same in future.
Place: Mumbai Manoj G. Tirodkar
Date : July 3, 2012. Chairman & Managing Director