Himachal Futuristic Communications Ltd.
|BSE: 500183||Sector: Telecom|
|NSE: HFCL||ISIN Code: INE548A01028|
|BSE 15:59 | 19 Jan||32.45||
|NSE 15:50 | 19 Jan||32.50||
|Mkt Cap.(Rs cr)||4,022|
|Mkt Cap.(Rs cr)||4021.85|
Himachal Futuristic Communications Ltd. (HFCL) - Director Report
Company director report
To the Members
The Directors have pleasure in presenting the 30th Annual Report and Audited Accountsfor the financial year ended 31st March 2017. FINANCIAL RESULTS
(' in crore)
INDIAN ACCOUNTING STANDARDS (IND AS)
Your Company its subsidiaries associate and joint venture had adopted Ind AS witheffect from 1st April 2016 pursuant to Ministry of Corporate Affairs notification dated16th February 2015 notifying the Companies (Indian Accounting Standards) Rules 2015.Your Company has published Ind AS Financials for the year ended 31st March 2017 alongwith comparable as on 31st March 2016.
During the year under review the Board of Directors at its meeting held on 28thNovember 2016 has declared and paid first Interim Dividend of Rs. 3.25 per share on8050000 6.50% Cumulative Redeemable Preference Shares (CRPS) of Rs.100/- each. TheBoard of Directors at its meeting held on 10th May 2017 also declared Second InterimDividend of Rs.3.25 per share on above CRPS for financial year ended 31st March 2017. TheCompany has made the payment of Rs.5.23 crore towards Interim Dividend (excluding tax) onCRPS for financial year 2016-17.
RE-CLASSIFICATION OF PROMOTERS/PROMOTER GROUP
The Shareholders at its 29th Annual General Meeting held on 29th September2016 has approved the re-classification of the Promoters/ Promoter Group pursuant to theRegulation 31 A(2) read with Regulation 31A(7) and other relevant provisions of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 ("ListingRegulations"). BSE Limited (''BSE'') vide its letter no. LIST/COMP/ VK/04/2017-18dated 3rd April 201 7 & LIST/COMP/VK/31/2017-18 dated 20thApril 2017 & National Stock Exchange of India Limited ("NSE") vide itsletter no. NSE/LIST/01057 dated 6th April 2017 have approved Company'sapplication for re-classification of following promoter shareholders as publicshareholders under the provisions of Regulations 31A of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015.
MANAGEMENT DISCUSSION & ANALYSIS (MDA)
Management Discussion & Analysis (MDA) Report for the year under review asstipulated under Regulation 34(2)(e) of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 ("ListingRegulations") is presented in a separate section forming part of this Annual Report.
CONSOLIDATED FINANCIAL STATEMENTS
As per Regulation 33 of the Listing Regulations and applicable provisions of theCompanies Act 2013 read with the rules issued thereunder the Consolidated FinancialStatements of your Company for the financial year 2016-17 have been prepared in compliancewith the applicable Accounting Standards and on the basis of Audited Financial Statementsof the Company its subsidiaries associate company and joint venture as approved by therespective Board of Directors. The Audited Consolidated Financial Statements together withthe Auditors' report form part of this Annual Report.
SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES
M/s HTL Limited M/s Moneta Finance Private Limited and M/s HFCL Advance SystemsPrivate Limited continue to be the subsidiaries of your Company. The Company has acquired160000 equity shares of Polixel Security Systems Private Limited ("Polixel")thereby the total equity holding of the Company reached upto 94% and Polixel became thesubsidiary of the Company w.e.f 9th August 2016. The Company has further acquired 10856equity shares of the Polixel thereby the total equity holding of the Company in Polixelhas reached to 100% and accordingly Polixel has become the wholly owned subsidiary of theCompany w.e.f. 31st March 2017.
A separate statement containing the salient features of financial statements of allsubsidiaries of your Company as on 31st March 2017 forms part of consolidated financialstatements in compliance with Section 129 and other applicable provisions if any of theCompanies Act 2013. The financial statements of the subsidiary companies and relatedinformation are available for inspection by the members at the Registered Office of yourCompany during business hours on all days except Saturdays Sundays and Public Holidays upto the date of the Annual General Meeting (AGM) as required under Section 136 of theCompanies Act 2013. Any shareholder desirous of obtaining the Annual Accounts and relatedinformation of the above subsidiary companies may write to the Company Secretary at M/sHimachal Futuristic Communications Ltd. 8 Commercial Complex Masjid Moth GreaterKailash - II New
Delhi - 110048 and the same shall be sent by post. The financial statements includingthe consolidated financial statements financial statements of subsidiaries and all otherdocuments required to be attached to this report have been uploaded on the website of theCompany www.hfcl.com.
A report on the performance and financial position of each of subsidiaries associateand joint venture company as per the Companies Act 2013 is provided as"Annexure-A" to the consolidated financial statements and hence not repeatedhere for sake of brevity. The policy for determining material subsidiaries as approved bythe Board of Directors may be accessed on the Company's website at the linkhttp://www.hfcl.com/wp-content/uploads/2017/05/Policy- on-Material-Subsidiaries.pdf.
During the financial year 2016-17 your Company has not accepted any deposit within themeaning of Section 73 and 74 of the Companies Act 2013 read together with the Companies(Acceptance of Deposits) Rules 2014.
DISCLOSURE RELATING TO REMUNERATION OF DIRECTORS KEY MANAGERIAL PERSONNEL ANDPARTICULARS OF EMPLOYEES
The remuneration paid to the Directors is in accordance with the Remuneration Policyformulated in accordance with Section 178 of the Companies Act 2013 and Regulation 19 ofthe Listing Regulations (including any statutory modification(s) or reenactments) thereoffor the time being in force). The salient aspects covered in the Remuneration Policy havebeen outlined in the Corporate Governance Report which forms part of this Report.
The Managing Director of your Company does not receive remuneration from any of thesubsidiaries of the Company.
The Nomination and Remuneration Committee and Board of Directors of the Company attheir respective meetings held on 10th May 201 7 has considered the proposalof revision in remuneration payable to Shri Mahendra Nahata Managing Director for hisremaining tenure i.e. 1st April 2017 to 30th September 2018subject to the approval of Members at this Annual General Meeting. The Notice of AnnualGeneral Meeting will contain the item for the revision of remuneration payable to ShriMahendra Nahata Managing Director for his remaining tenure i.e. 1st April2017 to 30th September 2018.
The information required under Section 197 of the Companies Act 2013 read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 (includingany statutory modification(s) or re-enactment(s) thereof for the time being in force) inrespect of Directors/employees of the Company is set out in "Annexure - A" tothis Report and is also available on the website of the Company.
DIRECTORS & KEY MANAGERIAL PERSONNEL
The present term of Shri Arvind Kharabanda Whole-time Director designated as Director(Finance) had expired on 31st May 2016 and he has shown his unwillingness to continue asa Whole-time Director. However he continues to hold the position of a NonExecutiveDirector of the Company.
Shri Arvind Kharabanda Non-Executive Director is liable to retire by rotation at thisensuing Annual General Meeting (AGM) pursuant to Section 152 of the Companies Act 2013read with the Companies (Appointment and Qualification of Directors) Rules 2014 and theArticles of Association of your Company and being eligible offers himself forre-appointment. Appropriate resolution for his reappointment is being placed for yourapproval at the ensuing AGM. The Brief resume of him and other related information arebeing given in the Notice convening the 30th AGM of your Company. Your Directors recommendhis re-appointment as a Non-Executive Director of your Company.
FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS
The details of programmes for familiarisation of Independent Directors with theCompany their roles rights responsibilities in the Company and related matters are putup on the website of the Company at the link:http://www.hfcl.com/wp-content/uploads/2017/04/HFCL-Familiarisation-Prog.-Idependent-Director.pdf.
ANNUAL EVALUATION OF BOARD PERFORMANCE
Pursuant to the provisions of the Companies Act 2013 read with the Rules issuedthereunder Regulation 17(10) of the Listing Regulations and the circular issued by SEBIon 5th January 2017 with respect to Guidance Note on Board Evaluation the evaluation ofthe annual performance of the Directors/Board/Committees was carried out for the financialyear 2016-17.
The details of the evaluation process are set out in the Corporate Governance Reportwhich forms part of this Report.
KEY MANAGERIAL PERSONNEL
During the year under review Shri Mahendra Nahata Managing Director Shri V R JainCFO and Shri Manoj Baid Vice-President (Corporate) & Company Secretary remained theKey Managerial Personnel in accordance with the provisions of the Companies Act 2013 andRules made thereunder. During the year under review Shri Arvind Kharabanda Director(Finance) ceased to be a Wholetime Director of the Company with effect from 1stJune 2016 and hence also ceases to be a Key Managerial Personnel of the Company from thatdate. However Shri Arvind Kharabanda continues to be a Non-Executive Director of theCompany.
PARTICULARS OF EMPLOYEES' AND RELATED DISCLOSURES
In terms of the provisions of Section 197(12) of the Companies Act 2013 read withRules 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 (including any statutory modification(s) or re-enactment(s) thereoffor the time being in force) a statement showing the names of top ten employees of theCompany in terms of remuneration drawn and other particulars of the employees drawingremuneration in excess of the limits set out in said rules are given in"Annexure-A" annexed herewith.
NUMBER OF MEETINGS OF THE BOARD AND AUDIT COMMITTEE
The details of the number of Board and Audit Committee meetings of the Company are setout in the Corporate Governance Report which forms part of this Report.
The details pertaining to Composition of Audit Committee are included in the CorporateGovernance Report which forms part of this Report.
DECLARATION OF INDEPENDENCE
The Company has received declaration from all the Independent Directors confirming thatthey meet the criteria of independence as prescribed under the provisions of the CompaniesAct 2013 read with the Schedule and Rules issued thereunder as well as Regulation16(1)(b) of the Listing Regulations.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirements under Section 134(3)(c) of the Companies Act 2013 theDirectors confirm that:
(a) in the preparation of the annual accounts for the financial year ended 31st March2017 the applicable accounting standards and Schedule III of the Companies Act 2013have been followed and there are no material departures from the same;
(b) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at 31st March 2017 and of the profitsof the Company for the financial year ended 31st March 2017;
(c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
(d) the Directors have prepared the annual accounts on a 'going concern' basis;
(e) the Directors have laid down proper internal financial controls to be followed bythe Company and that such internal financial controls are adequate and are operatingeffectively; and
(f) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
AUDITORS AND AUDITORS' REPORT
At the 29th Annual General Meeting (AGM) of the Company Khandelwal Jain & CompanyChartered Accountants (Firm Registration No. 105049W) was appointed as the StatutoryAuditors to hold office till the conclusion of the 30th AGM of the Company.
Section 139 of the Companies Act 2013 ('the Act') was notified effective April 12014. Section 139 of the Act lays down the criteria for appointment and mandatory rotationof statutory auditors. Pursuant to Section 139 of the Act and the Rules made thereunderit is mandatory to rotate the statutory auditors on completion of two terms of fiveconsecutive years. The Rules also lay down the transitional period that can be served bythe existing auditors depending on the number of consecutive years for which an audit firmhas been functioning as auditor in the same company. The existing auditors KhandelwalJain & Co. Chartered Accountants
(Firm Registration No. 105049W) have served the Company for over 10 years before theAct was notified and will be completing the maximum number of transitional period (threeyears) at the ensuing 30th Annual General Meeting.
The Audit Committee of the Company at its meeting held on 10th August 2017 hasproposed and on 10th August 2017 the Board has recommended the appointment of S. Bhandari& Co. Chartered Accountants (Firm registration number 000560C) ('SBC') and OswalSunil & Company Chartered Accountants (Firm registration number 016520N) ('Oswal') asthe statutory auditors of the Company. SBC & Oswal will hold office for a period offive consecutive years from the conclusion of the 30th Annual General Meeting of theCompany till the conclusion of the 35th Annual General Meeting to be held in 2022. Thefirst year of audit will be of the financial statements for the year ending 31st March2018 which will include the audit of the quarterly financial statements from secondquarter onwards for the financial year ending 31st March 2018.
The Company has received consent from SBC & Oswal and certificate that they satisfythe criteria provided under Section 141 of the Companies Act 2013 and that appointment ifmade shall be in accordance with the applicable provisions of the Companies Act 2013 andrules made thereunder.
The Auditor's observations in the Standalone Auditors' Report are self-explanatory anddo not call for any further comments. The Statutory Auditors in the Annexure to theAuditors' Report has mentioned about a slight delay in deposit of statutory dues in fewcases. In future the management will make all efforts to deposit the same within time.
Information and explanations on qualifications/observations in the ConsolidatedAuditors' Report are as under:
Auditor's Observations in the main Auditors' Report:
In case of the subsidiary HTL Limited as mentioned in note no. 61 (iv)(b) in the noteforming part of CFS the subsidiary has not made the provision of interest amounting toRs.15021120/- for the year ended 31st March 2017 pending the adjustment of ETPcompensation against the interest portion of outstanding Government of India loan. Had theprovisions for the same has been made finance cost and liability as on 31.03.2017 wouldhave been higher by Rs. 15021120/- and profit for the year and total equity would havebeen lower by Rs. 15021120/-.
The provision for interest on certain borrowings has not been made by the subsidiarycompany pending the reworking of the interest on account of adjustment of one of claim ofRs.347 lakhs against the outstanding interest on certain loans the subsidiary company hasnot provided for the interest amounting to Rs.150.21 lakhs during the year. The finaladjustment for interest if any will be done by the subsidiary company once thereconciliation is agreed upon.
Though the auditor has mentioned the maximum impact of Rs.150.21 Lakhs however themanagement of the subsidiary company is discussing the matter with the concerned lenderfor the adjustment/ reversal of excess interest as the case may be. Hence the impact isnot ascertainable at present.
Pursuant to the provisions of Section 204 of the Companies Act 2013 read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 your Companyhas appointed Shri Baldev Singh Kashtwal Practicing Company Secretary having MembershipNo. F3616 and C.P. No. 3169 to conduct the Secretarial Audit of your Company for thefinancial year 2016-17. The Secretarial Audit Report is annexed herewith as "Annexure-B" to this Report. The Secretarial Audit Report does not contain any qualificationreservation or adverse remark.
EXTRACT OF ANNUAL RETURN
The details forming part of the extracts of the Annual Return in Form MGT - 9 inaccordance with Section 92(3) of the Companies Act 2013 read with the Companies(Management and Administration) Rules 2014 are set out herewith as "Annexure-C"to this Report.
RELATED PARTY TRANSACTIONS
During the financial year 2016-17 the Company has entered into transactions withrelated parties as defined under Section 2(76) of the Companies Act 2013 read withCompanies (Specification of Definitions Details) Rules 2014 which were in the ordinarycourse of business and on arms' length basis and in accordance with the provisions of theCompanies Act 2013 Rules issued thereunder and Regulation 23 of the Listing Regulations.During the year the Company has also entered into transactions with related parties whichwere at arms' length basis but not in ordinary course of business as per details givenhereunder:
Above related party transactions were entered into after obtaining approval of AuditCommittee as well as Board of Directors of the Company.
During the financial year 2016-17 there were no transactions with related partieswhich qualify as material transactions under the Listing Regulations.
The details of the related party transactions as required under Ind AS - 24 are set outin Note - 51 to the standalone financial statements forming part of this Annual Report.
The Policy on materiality of related party transactions and dealing with related partytransactions as approved by the Board may be accessed on the Company's website at the linkhttp://www.hfcl . com/wp-content/uploads/2017/05/POLICY-ON-link-PARTY- TRANSACTIONS.pdf.
LOANS GUARANTEES AND INVESTMENTS
The details of loans guarantees and investments under Section 186 of the CompaniesAct 2013 read with the Companies (Meetings of Board and its Powers) Rules 2014outstanding as at 31st March 2017 are as follows:
Loans Guarantees and Investments made during the financial year 2016-17
(' in crore)
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The brief outline of the Corporate Social Responsibility (CSR) Policy of the Companyand the initiatives undertaken by the Company on CSR activities during the financial year2016-17 are set out in "Annexure-D" of this Report in the format prescribedunder the Companies (Corporate Social Responsibility) Rules 2014. For other detailsregarding the CSR Committee please refer to the Corporate Governance Report which formspart of this Report. The CSR Policy is available on the website of the Company and may beaccessed at the URL
The Company is undertaking CSR activities through its Registered Society i.e. HFCLSocial Services Society ("HSSS") established in the year 1996.
BUSINESS RESPONSIBILITY REPORT
The Regulation 34(2) (f) of the Listing Regulations mandate the inclusion of BusinessResponsibility Report as part of Annual Report for the top 500 listed entities based onthe market capitalization. Your Company's name appear in the top 500 listed companiesbased on market capitalization as on 31st March 2016. In compliance with the ListingRegulations we have integrated maiden Business
Responsibility Report disclosures into our Annual Report. The Business ResponsibilityReport has been marked as "Annexure E".
The Board of Directors of the Company have formulated a Whistle Blower Policy which isin compliance with the provisions of Section 177(10) of the Companies Act 2013 andRegulation 22 of the Listing Regulations. The Company through this policy envisages toencourage the Directors and Employees of the Company to report to the appropriateauthorities any unethical behaviour improper illegal or questionable acts deeds actualor suspected frauds or violation of the Company's Code of Conduct for Directors and SeniorManagement Personnel. The Policy on Vigil Mechanism/ Whistle blower policy may be accessedon the Company's website at the link
The Company's scrip has come under compulsory dematerialization w.e.f. 29th November1999 for Institutional Investors and w.e.f. 17th January 2000 for all Investors. So far99.96% of the equity shares have been dematerialized. The ISIN allotted to the equityshares of the Company is INE548A01028.
In Compliance with Regulation 34 of the Listing Regulations a separate report onCorporate Governance along with certificate from the Auditors on its compliance forms anintegral part of this Report.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated under Section 134(3)(m) of the Companies Act 2013 readwith the Companies (Accounts) Rules 2014 is set out herewith as "Annexure-F" tothis Report.
SIGNIFICANT/MATERIAL ORDERS PASSED BY THE REGULATORS
There are no significant/material orders passed by the Regulators or Courts orTribunals impacting the going concern status of your Company and its operations in future.
a) Your Company has not issued equity shares with differential rights as to dividendvoting or otherwise;
b) The Company did not have any Stock Option Scheme till 31st March 2017;
c) Neither the Managing Director nor the Whole-time Director of the Company receivesany remuneration or commission from any of its subsidiaries;
d) No fraud has been reported by the Auditors to the Audit Committee or the Board ofthe Directors of the Company; and
e) Your Directors further state that during the year under review there were no casesfiled pursuant to the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013.
Statement in the Management Discussions & Analysis describing the Company'sprojections estimates expectations or predictions may be 'forward looking statements'within the meaning of applicable securities laws and regulations. Actual results coulddiffer materially from those expressed or implied. Important factors that would make adifference to the Company's operations include demand supply conditions raw materialprices changes in government regulations tax regimes and economic developments withinthe country and abroad and such other factors.
The Directors thank the Central Government Govt. of Himachal Pradesh Govt. of GoaGovt. of Telangana IDBI Bank Limited State Bank of India Oriental Bank of CommercePunjab National Bank Bank of Baroda Union Bank of India United Bank of India and otherBanks for all co-operations facilities and encouragement they have extended to theCompany. Your Directors acknowledge the continued trust and confidence you have reposed inthe Company. The Directors also place on record their appreciation for the servicesrendered by the officers staff & workers of the Company at all levels and for theirdedication and loyalty.
For and on behalf of the Board M P Shukla
Place: New Delhi Chairman
Date: 10th August 2017 DIN: 00052977
Annexure (A) to Directors' Report
Information required under Section 197 of the Companies Act 2013 read with Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 and amendments madethereto.
A. Ratio of remuneration of each director to the median remuneration of all theemployees of your Company for the financial year 2016-17 is as follows:
* Represents to Sitting Fee.
** I ncludes sitting fee of ?475000/- paid to him as Non-Executive Director w.e.f.1st June 2016. Ceased as whole-time Director designated as Director (Finance) w.e.f. 1stJune 2016 and continuing as Non-Executive Director (NED) thereafter.
1. The information provided above is on standalone basis.
2. Remuneration to Directors includes sitting fees paid to Non-executive Directors.
3. Median remuneration of the Company for all its employees is ' 641054/- for thefinancial year 2016-17.
B. Details of percentage increase in the remuneration of each Director CFO and CompanySecretary in the financial year 2016-17 are as follows:
* Represents to sitting fee.
**Includes sitting fee of ?475000/- paid to him as Non-Executive Director w.e.f. 1stJune 2016.
# Ceased as a Whole-time Director designated as Director (Finance) w.e.f. 1st June2016 and continuing as Non-Executive Director (NED) thereafter and hence increase inremuneration has not been given.
Note : The remuneration paid to Directors is within the overall limits approved by theshareholders.
C. Percentage increase in the median remuneration of all employees in the financialyear 2016-17:
E. Comparison of average percentage increase in salary of employee other than the keymanagerial personnel and the percentage increase in the key managerial remuneration:
It is hereby affirmed that the remuneration paid during the year under review is as perthe Remuneration Policy of the Company.
G. Statement containing the particulars of employees in accordance with Rule 5(2) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 oramendments made thereto:
Names of the top ten employees of the Company in terms of remuneration drawn and thenames of employees who were employed through out the financial year 2016-17 and were paidremuneration not less then '10200000/- and employees who were employed for a part offinancial year 2016-17 and were paid remuneration not less then '850000/- per month
(i) The remuneration shown above comprises salary allowances perquisites performancelinked incentive/ Ex-gratia medical Company's contribution to provident fund and allother reimbursements if any.
(ii) None of the employees is related to any director of the Company.
(iii) None of above employee draws remuneration more than the remuneration drawn byManaging Director and Whole-time Director and holds by himself or along with his spouseand dependent children not less than two percent of equity shares of the Company.