Your directors have pleasure in presenting their Seventy Fourth Annual Report on thebusiness and operations of the Company together with the Audited Statement of Accounts forthe year ended 31st March 2017.
1. Financial Results
| || || || |
(Rs. in lakhs)
| || ||Standalone ||Consolidated |
| || ||FY ||*FY ||FY ||*FY |
|Sr. No. ||Particulars ||2016-17 ||2014-16 ||2016-17 ||2014-16 |
| || ||(12 months) ||(18 months) ||(12 months) ||(18 months) |
|A ||Continuing Operations || || || || |
|a ||Net Sales / Income from Other Operations ||8939 ||13321 ||14367 ||19994 |
|b ||Operating Expenditure ||7955 ||11932 ||12554 ||17821 |
|c ||Operating Profit ||984 ||1389 ||1813 ||2173 |
|d ||Add:- Other Income ||879 ||454 ||493 ||269 |
|e ||Less:- Finance Cost ||732 ||1158 ||850 ||1309 |
|f ||Profit before Depreciation and Tax ||1131 ||685 ||1456 ||1133 |
|g ||Less :- Depreciation / Amortization/ Impairment ||464 ||707 ||802 ||1111 |
|h ||Less : Minority Interest ||- ||- ||- ||- |
|i ||Add : Share of Profit of Associates ||- ||- ||39 ||44 |
|j ||Net Profit / (Loss) after Minority interest and Share of Profit of Associates ||667 ||(22) ||693 ||66 |
|k ||Exceptional items ||- ||- ||- ||- |
|l ||Current / Deferred Tax Expenses ||- ||- ||65 ||- |
|m ||Net Profit / (Loss) after Tax Minority interest and Share of Profit of Associates from Continuing operations ||667 ||(22) ||628 ||66 |
|B ||Discontinuing Operations || || || || |
|n ||(Loss) from Discontinuing operations (before exceptional item and tax) ||- ||(7) ||- ||(7) |
|o ||Add:- Exceptional Profit ||- ||162 ||- ||162 |
|p ||Tax Expenses ||- ||- ||- ||- |
|q ||(Loss) / Profit after Tax from Discontinuing operations ||- ||155 ||- ||155 |
|C ||(Loss) / Profit after tax from Total operations ||667 ||133 ||628 ||221 |
|r ||Add : Other Comprehensive Income/ (expenses) ||(25) ||(33) ||(26) ||(32) |
|s ||Total Comprehensive Income ||642 ||100 ||602 ||189 |
*As required under the Companies Act 2013 the previous financial year was extended by6 months till 31 st March 2016. Accordingly the said financial year 2014-16was of 18 months from 1 st October 2014 to 31st March 2016.
The Company has adopted Indian Accounting Standards (Ind AS) as notified by theMinistry of Corporate Affairs with effect from 1st April 2016 with atransition date of 1st October 2014. Accordingly all Ind AS guidance andinterpretations issued and effective for the first Ind AS financial statements for theyear ended 31 st March 2017 have been applied retrospectively and consistentlyfor the previous year. As such the figures of FY 2014-16 (18 months) shown herein are alsothe redrawn figures as per Ind AS.
Due to accumulated losses the Board has not recommended dividend for the financialyear 2016-17.
3. Financial Performance and the state of the Company's affairs
On a Standalone basis your Company achieved revenue of ` 8939 Lakhs in FY 2016-17 (12months) from Continuing Operations as against Rs. 13321 Lakhs in FY 2014-16 (18 Months).On an annualized basis the revenue was higher by ` 58.00 Lakhs. While revenue fromNetwork Management segment has increased by ` 501.00 Lakhs the revenue from Automationand Control segment was lower by ` 443.00 Lakhs.
In FY 2016-17 the Company earned a net profit of ` 667.00 Lakhs from ContinuingOperations as against loss of ` 22.00 Lakhs in FY 2014-16 (18 months). This profit was dueto higher margin in service income of VSAT division reduction of losses in Automation& Control division reduction in unallocable expenses (net of income) and reduction ininterest expenses.
The segment wise performance (Standalone) for the year was as follows:
The revenue from Automation & Control segment was ` 394.00 Lakhs in FY 2016-17 (12months) as against Rs. 1256.00 Lakhs in FY 2014-16 (18 months). The segment loss was `466.00 Lakhs in FY 2016-17 (12 months) as against loss of ` 618.00 Lakhs in FY2014-16 (18 months). This segment is being operated on a restrictive mode and currentlycompleting only its existing contractual obligations. The revenue from Network Systemssegment was ` 8545.00 Lakhs in FY 2016-17(12 months) as against Rs. 12065.00 Lakhs in FY2014-16 (18 months). The segment profit was ` 2508.00 Lakhs in FY 2016-17 (12months) as against profit of ` 3259.00 Lakhs in FY 2014-16 (18 months). The Company added9053 VSATs during FY 2016-17 taking the installed base to more than 50000 as on 31stMarch 2017.
Interest cost was ` 732.00 Lakhs in FY 2016-17 (12 months) as against Rs. 1158.00 Lakhsin FY 2014-16 (18 months). Other un-allocable expenses (net of income) were ` 643.00 Lakhsin FY 2016-17 (12 months) as against un-allocable income (net of expenses) of Rs. 1505.00Lakhs in FY 2014-16 (18 months).
On a Consolidated basis revenue from Continuing Operations was Rs. 14367.00 Lakhs inFY 2016-17 (12 months) as against Rs. 19994.00 Lakhs in FY 2014-16 (18 Months). On anannualized basis the revenue was higher by 7% over previous year.
Profit before Tax from Continuing Operations increased from ` 66.00 Lakhs in FY 2014-16(18 months) to `693.00 Lakhs in FY 2016-17 (12 months).
There were no material changes and commitments affecting the financial position of theCompany which occurred between the end of the year under review and the date of thisReport.
The Consolidated revenue (% wise) from Continuing Operations segment wise was as under:
| ||FY2016-17(12 months) ||FY 2014-16 (18 months) |
|Network Systems comprising of VSAT and SATCOM business) ||97.26% ||93.72% |
|Automation & Control ||2.74% ||6.28% |
Further information in detail has been given in the Management Discussion &Analysis which forms a part of this report. In the year 2014-16 the Members as a part ofrestructuring process approved (subject to other requisite approvals) the transfer ofCompany's Unattended Ground Sensors Business ("UGS Business") which was formingpart of Automation & Control segment to The Tata Power Co. Ltd. (The Parent Company)as a "going concern" on a "slump sale" basis at a consideration of `831 Lakhs with effect from 1st October 2014. During the year 2016-17 therequired formalities for sale of UGS Business were completed and the agreed considerationwas received.
The Board of Directors has not proposed any amount for transfer to reserves for theyear ended 31st March 2017.
5. Subsidiary and Associate Company
The Company has two wholly owned subsidiaries viz. Tatanet Services Ltd. (TNSL) &Nelco Network Products Ltd. (NNPL) and one Associate Company i.e. Nelito Systems Ltd.(NSL) TNSL holds the VSAT License issued by Department of Telecommunication (DoT). TheRevenue of TNSL for FY 2016-17 was ` 7997.00 Lakhs against ` 6908.00LakhsforFY2015-16.TheProfitafter tax was ` 224.00 Lakhs against ` 339.00 Lakhs in theprevious year. The profit was reduced mainly due to increase in tax of` 65.00 Lakhs andincrease in depreciation on assets bought for setting up new VSAT Hub. During FY 2016-17the Company as a part of its business strategy incorporated another wholly ownedsubsidiary i.e. NNPL to carry on inter alia the business of VSAT based SatelliteCommunication Value Added Network (VAN) Electronic Data Interchange sales andmaintenance of Satcom equipments including VSATs etc. The Company has not commenced itsbusiness operations during the year under review.
In FY 2016-17 the Company sold 9.95% (being part of its total investment of 22.25%) inthe share capital of NSL to DTS Corporation Japan for a consideration of ` 3.79 Crores.There has been no major change in the nature of business of the aforesaid Companies. Alsonone of the existing Subsidiary(ies) or Associates of the previous year ceased to beSubsidiary/ Associate of the Company during the year under review. The report on theperformance and financial position of each of the Subsidiaries and has been provided inForm AOC-1.
The Policy for determining material subsidiaries of the Company has been provided inthe following link:http://www.nelco.in/_content/investorrelations/Policy_for_determining_Material_Subsidiaries.pdf
6. Directors and Key Managerial Personnel
In terms of Section 149 of the Companies Act 2013 ("Act") the Members at theAGM held on 28th January 2015 appointed the following Independent Directors ofthe Company till 27th January 2020:
Ms. Hema Hattangady
In accordance with the requirements of the Act and the Articles of Association of theCompany Mr. S.Ramakrishnan Director retires by rotation at the ensuing AGM and iseligible for re-appointment. Additional information and brief profile as stipulated underSEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 with respectto Mr. Ramakrishnan being a Director seeking re-appointment is annexed to the Notice ofAGM.
On the recommendation of the Nominations HR & Remuneration Committee the Board ofDirectors of the Company approved the change in designation of Mr. P. J. Nath fromExecutive Director & Chief Executive Officer' to Managing Director &Chief Executive Officer' (MD & CEO) with effect from 1 st June 2017. Mr. Nath shallhold the office as MD & CEO for remaining tenure of his current appointment i.e. upto 12th June 2018. There is no change in the terms and conditions of hisappointment and remuneration as approved by the Members on 1st March 2017 bypassing special resolution through postal ballot.
In terms of Section 203 of the Act the Board has designated the following persons asKey Managerial Personnel of your Company:
Mr. P.J. Nath Managing Director & CEO
Mr. Uday Banerjee Chief Financial Officer
Mr. Girish Kirkinde Company Secretary
During the year under review nine Board Meetings were held. For further detailsplease refer Report on Corporate Governance.
The Company has received declarations from all the Independent Directors confirmingthat they meet the criteria of independence as prescribed under the Act and SEBI (ListingObligations & Disclosure Requirements) Regulations 2015.
The Company has adopted Governance Guidelines on Board Effectiveness. The saidGuidelines covers aspects related to composition and role of the Board Chairman andDirectors Board diversity definitionof independence Director's term retirement age andCommittees of the Board. It also includes aspects relating to nomination appointmentinduction and development of Directors Director Remuneration subsidiary oversight Codeof Conduct Board Effectiveness Review and mandates of Board Committees.
7. Annual Evaluation of Board Performance and Performance of its Committees andIndividual Directors.
As required under the Act and SEBI (Listing Obligations & Disclosure Requirements)Regulations 2015 the Board has carried out an annual evaluation of its own performanceperformance of the Directors individually as well as the evaluation of the working of itsCommittees.
The following process was adopted for Board Evaluation:
Feedback was sought from each Director about his/her views on the performance of theBoard covering various criteria
Board structure and composition establishment and delineation of such as degree offulfillment responsibilities to various Committees effectiveness of Board processesinformation and functioning Board culture and dynamics quality of relationship betweenthe Board and the Management and efficacy of communication with external stakeholders. TheNominations HR and Remuneration Committee (NRC) then discussed the above feedbackreceived from all the Directors.
Based on the inputs received the Chairman of the NRC also made a presentation to theIndependent Directors at their meeting summarizing the inputs received from the Directorsas regards Board performance as a whole and of the Chairman. The performance of thenon-independent non-executive Directors and Board Chairman was also reviewed by them.
Post the meeting of the Independent Directors their collective feedback on theperformance of the Board (as a whole) was discussed by the Chairman of the NRC with theChairman of the Board. It was also presented to the Board and a plan for improvements wasagreed upon.
Every statutorily mandated Committee of the Board conducted a self-assessment of itsperformance and these assessments were presented to the Board for consideration. Areas onwhich the Committees of the Board were assessed adequacy of Committee composition andeffectiveness of meetings. included degree of fulfillment Feedback was provided to theDirectors as appropriate. Significant highlights learning and action points arising outof the evaluation were presented to the Board.
7.1 Committees of the Board
The Committees of the Board focus on certain specific areas and make informed decisionsin line with the delegated authority. The following substantive Committees constituted bythe Board function according to their respective roles and defined scope:
Audit Committee of Directors
Nominations HR and Remuneration Committee (NRC)
Stakeholders Relationship Committee
Executive Committee of the Board
Details of composition terms of reference and number of meetings held for respectiveCommittees are given in the Report on Corporate Governance which forms part of the AnnualReport.
The details of the familiarization programs for Independent Directors are disclosed onthe Company's website and the web link for the same is:http://www.nelco.in/_content/investor-relations/Familiarisation_Programme.pdf The Boardhas laid down separate Codes of Conduct for Non-Executive Directors and Senior Managementpersonnel of the Company and the same are posted on the Company's website. All BoardMembers and Senior Management personnel have affirmed compliance with the Code of Conduct.The Executive Director & CEO has also confirmed and certified the same. Thecertification is enclosed at the end of the Report on Corporate Governance.
7.2 Remuneration Policy for the Directors Key Managerial Personnel and otherEmployees.
In terms of Section 178(3) of the Act and Part D of Schedule II of SEBI (ListingObligations & Disclosure Requirements)
Regulations 2015 the NRC is responsible for formulating the criteria for determiningqualification positive attributes and independence of a Director. The NRC is alsoresponsible for recommending to the Board a policy relating to the remuneration of theDirectors Key Managerial Personnel and other employees. In line with this requirementthe Board has adopted the Policy on Board Diversity which is reproduced in Annexure-I andRemuneration Policy for Directors Key Managerial Personnel and other employees of theCompany which is reproduced in Annexure-II forming part of this report.
Except the Performance Linked Payment (PLP) which is a part of his Cost to the Company(CTC) the Executive Director & CEO has neither received any commission from theCompany nor from its Holding or Subsidiary Company. With the approval of the Board (on therecommendation of the NRC) he has received fees for rendering professional services toTNSL the wholly owned subsidiary of the Company.
7.3 Particulars of Employees and Remuneration
The information required under Section 197(12) of the Act read with Rule 5 of TheCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is providedin Annexure - III forming part of this Report.
During the year under review the Company has not employed any employee whoseparticulars are required to be disclosed in this report pursuant to Rule 5 (2) and (3) ofThe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014
8. Significant and material Orders passed by the Regulators or Courts orTribunal
There were no significant and material orders passed by the Regulators / Courts orTribunal which would impact the going concern status of the Company and its futureoperations. Further no penalties have been levied by Regulators during the year underreview.
Sales Tax matters of Tatanet Services Ltd. (TNSL) Wholly Owned Subsidiary.
Maharashtra Sales Tax Department (Dept.) has issued orders against TNSL demandingpayment of MVAT on the entire satellite communication services provided by TNSL on theground that "The facility to use the transponders is a property is commercial innature and goods and therefore transaction of lease of facility to use the transpondersis a deemed sale and accordingly MVAT is applicable." The orders issued are forfinancial year 2006-07 to 2010-11 and aggregate amount under dispute is ` 38.36 Crores.The Company filed writ petition in Bombay High Court for the financial year 2008-09. Thesaid Writ Petition was disposed by the Bombay High Court and referred the matter toMaharashtra Sales Tax Tribunal (MSTT) to decide the above mentioned matter.
MSTT in its order dated 29th April 2017 has allowed the appeal of TNSL andhas set aside the demand of the Dept. made for financial year 2008-09 . Accordingly thetax demands of` 34.09 Crores for the other financial years i.e. 2006-07 2007-08 2009-10and 2010-11 are also likely to be set aside on account of the fact that the order of theTribunal is binding upon the Joint Commissioner of Sales Tax (JCST) and Assessing Officer.
Income Tax matters of Nelco Ltd:-
Income Tax Department has reduced certain liabilities of Rs. 1893.00 Lakhs whilecomputing long term Capital Gain on a business sold under slump sale for Assessment Year2011-12 due to which a Tax demand of ` 631.00 Lakhs has been raised on the Company. Thesaid liabilities are not directly related to the businesses sold and as such the Companyhas gone in appeal against the demand. As per legal opinion sought by Company it has avery strong case. This matter is presently lying with the Commission of Appeal.
8.1 Corporate Governance
Pursuant to SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015and relevant provisions of the Act a Management Discussion and Analysis Statement Reporton Corporate Governance and Auditors' Certificate are included in the Annual Report.
8.2 Vigil Mechanism
The Company believes in the conduct of the affairs of its constituents in a fair andtransparent manner by adopting highest standards of professionalism honesty integrityand ethical behaviour. In line with the Tata Code of Conduct (TCOC) any actual orpotential violation howsoever insignificant or perceived as such would be a matter ofserious concern for the Company. The role of the employees in pointing out such violationsof the TCOC cannot be undermined.
Pursuant to Section 177(9) of the Act a vigil mechanism has been established forDirectors and employees to report to the management the instances of unethical behaviouractual or suspected fraud or violation of the Company's code of conduct or ethics policy.The Vigil Mechanism provides a mechanism for employees of the Company to approach theChief Ethics Counselor (CEC) as well as the Chairman of the Audit Committee of theCompany.
9. Risks and Concerns
The Company is faced with risks of different types all of which need differentapproaches for mitigation. Details of various risks faced by the Company are provided inManagement Discussion & Analysis.
9.1 Risk Management Framework and Internal Financial Controls
Risk Management framework: The Company and its Subsidiary have Risk Managementframework to inform the Audit Committee and Board members about risk assessment andminimization procedures and periodical review to ensure that Executive Management controlsrisks by means of properly designed framework.
The Company has also established a risk management policy based on which risks areidentified and assessed across its businesses. The Risk Management Committee whichcomprises of the CEO CFO Senior Lead Business Analytics and Risk Management andkey business and operations heads ensures that existing and future risk exposures of
Company's the Company are identified framework of risk management process providesclear basis for informed decision making at all levels of the organization on an ongoingbasis having duly evaluated likely risks and their mitigation plans being controllableand within risk appetite of the Company. There are no elements of risk which in theopinion of the Board may threaten the existence of the Company.
Internal Financial Control and Systems: The Company has an internal controlsystem commensurate with size scale and complexity of its operations. The Company hasappointed independent Internal Auditors who oversee governance risks management andinternal controls. Testing of Internal Financials Controls also form a part of internalaudit schedule.
The scope and authority of internal audit is defined in Audit Committee Charter adoptedby the Company.
As per the Audit Committee Charter adopted by the Board and as per provisions ofSection 177 of the Companies Act 2013 (the Act) one of the responsibilities of the AuditCommittee is to review the effectiveness of the Company's Internal control systemincluding Internal Financial Controls. Internal controls have been discussed in detail inManagement Discussion & Analysis in this report.
Process Robustness : The Company assesses the process maturity and robustnessfor its key functions on the following:
Process documentation and workflow
Process measures and controls (manual/system driven) including maker - checkermechanisms
Performance tracking for key measures/metrics
Initiatives taken for process improvements
The Company also carries out internal audits and process deep-dives through externalagencies to establish and improve efficiency and effectiveness of processes in various keyfunctions. In addition the statutory auditors carry out an audit at quarterly intervalsand these reports have not reported any adverse findings.
10.1 Corporate Social Responsibility
As per Section 135 of the Companies Act 2013 (Act) every Company having a net worthof ` 500.00 Crores or more or turnover of Rs. 1000 Crores or more or net profit of `5.00 Crores or more (calculated as per Section 198 of the Act ) during any financial yearshall be required to constitute Corporate Social Responsibility Committee (CSRC). Thoughyour Company has made a net profit of more than` 5.00 Crores in the year under review thesaid profit calculated as defined in Section 198 is lower than ` 5.00 Crores. As suchconstitution of CSRC is not applicable to your Company.
10.2 Safety Health and Environment:
The Company accords high priority to health safety and environment treating these asintegral part of all its activities. The operations of the Company are not of a hazardousnature. However the Company emphasizes on maintaining a healthy and safe environment inand around its facilities as well as contract sites where projects are under execution. Toensure success of safety initiatives the Company involves the line management along withcontract workforce in all initiatives rolled out from time to time. Safety Awareness isinculcated through regular Safety Awareness Programs basic fire safety training mockdrills regular Safety Committee meetings and capturing employees' voices through safetyobservation and near miss reporting. The employees working at project sites are givenrequisite training for ensuring safety during work. Periodic Safety Audits are carried outand action taken to eliminate unsafe conditions.
11. Human Resources
Some of the major human resource initiatives undertaken by the Company during the yearunder review to supplement efforts towards organizational growth include:
Manpower: As on 31st March 2017 the Company had employee strength of 140.During the year under review 23 employees were recruited and 42 employees were separated(including those transferred as part of divestment of UGS business and employees who hadopted for VRS). All the employees who were transferred were extended full benefit ofservice continuity and service conditions not less favorable than their existingemployment conditions.
The Company implemented Voluntary Retirement Scheme (VRS) for eligible employees inmanagement/ non-management cadre as defined under the said Scheme. The Board believes thatthe implementation of the VRS would be beneficial to the Company in the coming years. Thecompensation package offered under the VRS to the eligible employees/workers wasconsistent with the best industrial practices followed by the Company.
Employee Engagement: Company's employee engagement platforms are inclusive andempowering. It connects employees with leaders their peers and Human Resource function.Forums such as Open house Employee Connect meetings Skip level meetings Manager connectmeetings weekly review meetings like AHM (All Hands Meet) provide interactive platformsfor sharing information and feedback. There is also a process for conferring rewards andrecognitions to the eligible employees. Various initiatives in the field of EmployeeRecreation have also been instrumental in improving the engagement levels of theemployees. The incessant efforts towards empowering people have resulted in overallparticipation being 94% in the Employee Engagement survey conducted by an independentagency and overall satisfaction score being 76% for 2017.
Capability Development: In order to build organizational capability that will enablethe Company to sustain competitiveness in the market a comprehensive exercise wasundertaken to identify the skill development at the senior management level. The trainingprograms for the employees have been developed based on the findings of that exercise.
Talent Management: A Career counseling workshop was organized in December 2016 for allthe senior management employees where focus was given on providing career inputs for bothshort term and long term career goals and on developing functional technical andbehavioural skills to achieve career aspirations. Such workshops are conducted on aperiodic basis and are an integral part of Company's talent management strategy.
Industrial Relations: The Company maintained cordial relations with its employees atall levels during the year.
Policy for Prevention Prohibition and Redressal of Sexual Harassment at work place:The Company has in place a Policy for Prevention Prohibition and Redressal of SexualHarassment at Work Place. Appropriate reporting mechanisms are in place for ensuringprotection against Sexual Harassment and the right to work with dignity. During the yearunder review the Company has not received any complaints in this regard.
12. Credit Rating
During the year under review the rating agency CARE has assigned rating to the Companyas under :-
Long Term /Short Term Bank Facilities - Care A- and Care A2+ Term loan - Care A- andNon Fund based facilities - Care A2+
13. Loans Guarantees Securities and Investments (LGSI)
Details of LGSI covered under Sec 186 of the Act are given in Annexure - IV formingpart of this report.
14. Foreign Exchange Earnings and Outgo.
| || ||(Rs. in lakhs) |
|Particulars Standalone ||Year ended 31st March 2017 ||Period ended 31st March 2016 |
| ||(12 Months) ||(18 Months) |
|Foreign Exchange Earnings ||64.39 ||174.40 |
|Foreign Exchange Outflow ||2758.92 ||3178.44 |
Deloitte Haskins & Sells LLP (DHS LLP) who are the Statutory Auditors of yourCompany have expressed their unwillingness to continue as Auditors of the Company from theconclusion of the Annual General Meeting to be held in the year 2017. On therecommendation of the Audit Committee the Board has proposed for approval of the Membersthe appointment of Price Waterhouse Chartered Accountants LLP as Statutory Auditors fortheir firstterm of 5 (five) years and fix their remuneration.
The attention of the Members is invited to item no. 4 of the Notice of the AGM.
16. Auditors' Report
The Auditors Report does not contain any qualifications reservations or adverseremarks. The consolidated financial statements of the Company have been prepared inaccordance with Accounting Standard 21 on Consolidated Financial Statements and AccountingStandard 23 on Accounting of Investments in Associates issued by the Council of TheInstitute of Chartered Accountants of India. The Notes to the Accounts referred to in theAuditors' report are self-explanatory and therefore do not call for any furtherclarification under section 134(3)(f) of the Act.
17. Cost Auditors and Cost Audit Report
M/s. P.D. Dani & Co. Cost Accountants were appointed Cost Auditors of your Companyfor the period ended 31st March 2016 in respect of itsTelecommunication business. In accordance with the requirement of the Central Governmentand pursuant to Section 148 of the Act your Company carries out every year the costaudit. However as per amendment dated 31st December 2014 in the Act the costaudit is not applicable to your Company. Accordingly the same has been informed to MCA. Assuch the cost audit was not carried for the year ended 31st March 2017.
18. Secretarial Audit Report
M/s. Bhandari & Associates Practicing Company Secretaries were appointed asSecretarial Auditors to conduct Secretarial Audit of records and documents of the Companyfor the year ended 31st March 2017. The Secretarial Audit Report confirms thatthe Company has generally complied with the provisions of the Act Rules Regulations andGuidelines etc. The Secretarial Audit Report is given in Annexure - V forming part ofthis report. There are no remarks qualifications or reservations in the Secretarial AuditReport.
19. Conservation of Energy and Technology Absorption
The information on conservation of energy and technology absorption stipulated underSection 134 (3) (m) of the Act read with Rule 8 of The Companies (Accounts) Rules 2014is given in as Annexure VI forming part of this report.
20. Related Party Transactions
All related party transactions entered into during the year under review were on anarm's length basis and were in the ordinary course of business. There were no othermaterially significant related party transactions made by the Company with PromotersDirectors Key Managerial Personnel and Body Corporate(s) which had a potential conflictwith the interest of the Company at large. Accordingly the disclosure of these RelatedParty Transactions as required under Section 134 (3) (h) of the Act in Form AOC 2 is notapplicable for the year under review. The Directors draw attention of the Members to Noteno. 40 to the Financial Statements which sets out related party disclosures.
In line with the requirements of the Act and the SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015 the Company has formulated a Policy on RelatedParty Transactions and the same is uploaded on the Company's website:http://www.nelco.in/_content/investor-relations/Related_Party_Transaction_Policy.pdf.
The Company has not accepted any deposits from the public during the period underreview.
22. Extract of Annual Return
Pursuant to Section 92 of the Act and Rule 12 of The Companies (Management andAdministration) Rules 2014 the extract of Annual Return in Form MGT-9 is given inAnnexure-VII forming part of this report.
23. Directors' Responsibility Statement
Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the internal statutory costauditors secretarial auditors and external consultants and the reviews performed byManagement and the relevant Board Committees including the Audit Committee the Board isof the opinion that the Company's internal financial controls were adequate and effectiveduring the period under review.
Accordingly pursuant to Section 134(5) of the Companies Act 2013 the Board ofDirectors to the best of their knowledge and ability confirm that:
a) in the preparation of the annual accounts for the period ended 31st March2017 the applicable accounting standards had been followed along with proper explanationrelating to material departures;
b) they have in the selection of the accounting policies consulted the StatutoryAuditors and have applied them consistently and made judgments and estimates that arereasonable and prudent so as to give a true and fair view of the state of affairs of theCompany for the period ended 31st March 2017 and of the profit of the Companyfor that period;
c) they 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) they have prepared the accounts for the period under review on a going concernbasis;
e) they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively;
f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
On behalf of the Directors of the Company I would like to place on record our deepappreciation to our Shareholders Customers Business Partners Vendors Bankers andFinancial Institutions. The Directors are thankful to the Government of India and thevarious Ministries and Regulatory Authorities. We appreciate and value the contributionsmade by all our employees.
| ||On behalf of the Board of Directors |
| ||R.R. Bhinge |
| ||Chairman |
|Mumbai 23rd May 2017 || |
Annexure I : Board Diversity Policy
(Ref: Board's Report Section 7.2)
This Board Diversity Policy (Policy') sets out the approach to diversity on theBoard of Directors (Board') of Nelco Ltd. (Nelco').
This policy applies to the Board. It does not apply to employees generally.
3. POLICY STATEMENT
Nelco recognizes and embraces the importance of a diverse Board in success. Nelcobelieves that a truly diverse Board will leverage differences in thought perspectiveknowledge skill regional and industry experience cultural and geographical backgroundage ethnicity race and gender which will ensure that Nelco retains its competitiveadvantage.
Nelco believes that a diverse Board will contribute to the achievement of its strategicand commercial objectives including to:
- drive business results
- make corporate governance more effective
- enhance quality and responsible decision making capability
- ensure sustainable development and
- enhance the reputation of Nelco
The Nominations HR and Remuneration Committee (Committee') is responsible forreviewing and assessing the composition and performance of the Board as well asidentifying appropriately qualified persons to occupy Board positions. While allappointments to the Board will continue to be made on merit the Committee will considerthe benefits (including but not limited to the attributes listed above) in indentifyingand recommending persons for Board membership as well as in evaluating the Board and itsindividual members.
Further the Committee will ensure that no person is discriminated against on groundsof religion race gender pregnancy childbirth or related medical conditions nationalorigin or ancestry marital status age sexual orientation or any other personal orphysical attribute which does not speak to such person's ability to perform as a Boardmember.
Accordingly the Committee shall:
- access the appropriate mix of diversity skills experience and expertise required onthe Board and assess the extent to which the required skills are represented on the Board
- make recommendations to the Board in relation to the appointments and maintain anappropriate mix of diversity skills experience and expertise on the Board and
- periodically review and report to the Board requirements if any in relation todiversity on the Board.
The Board shall have an optimum combination of executive non-executive and independentdirectors in accordance with requirements of the Article of Association of Nelco theCompanies Act 2013 Listing Agreement and the statutory regulatory and contractualobligations of Nelco.
The effective implementation of this Policy requires that shareholders are able tojudge for themselves whether the Board as constituted is adequately diverse. To this endNelco shall continue to provide sufficient information to shareholders about the sizequalifications and characteristics of each Board member.
4. RESPONSIBILITY AND REVIEW
The Committee will review this Policy periodically and recommend appropriate revisionsto the Board.
Annexure-II Remuneration policy for Directors Key Managerial Personnel and otheremployees
(Ref: Board's Report Section 7.2)
The philosophy for remuneration of Directors Key Managerial Personnel("KMP") and all other employees of Nelco Ltd. ("Company") is based onthe commitment of fostering a culture of leadership with trust. The remuneration policy isaligned to this philosophy. This remuneration policy has been prepared pursuant to theprovisions of Section 178(3) of the Companies Act 2013 ("Act") and Clause49(IV)(B)(1) of the Equity Listing Agreement ("Listing Agreement"). In case ofany inconsistency between the provisions of law and this remuneration policy theprovisions of the law shall prevail and the company shall abide by the applicable law.While formulating this policy the Nominations HR and Remuneration Committee("NRC") has considered the factors laid down under Section 178(4) of the Actwhich are as under:
(a) the level and composition of remuneration is reasonable and sufficient to attractretain and motivate directors of the quality required to run the company successfully;
(b) relationship of remuneration to performance is clear and meets appropriateperformance benchmarks; and
(c) remuneration to directors key managerial personnel and senior management involvesa balance between fixed and incentive pay reflecting short and long-term performanceobjectives appropriate to the working of the company and its goals"
Key principles governing this remuneration policy are as follows:
Remuneration for independent directors and non-independent non-executive directors
o Independent directors ("ID") and non-independent non-executive directors("NED") may be paid sitting fees (for attending the meetings of the Board and ofcommittees of which they may be members) and commission within regulatory limits. o Withinthe parameters prescribed by law the payment of sitting fees and commission will berecommended by the NRC and approved by the Board.
o Overall remuneration (sitting fees and commission) should be reasonable andsufficient to attract retain and motivate directors aligned to the requirements of thecompany (taking into consideration the challenges faced by the company and its futuregrowth imperatives).
o Overall remuneration should be reflective of size of the company complexity of thesector/ industry/ company's operations and the company's capacity to pay the remuneration.
o Overall remuneration practices should be consistent with recognized best practices.
o Quantum of sitting fees may be subject to review on a periodic basis as required.
o The aggregate commission payable to all the NEDs and IDs will be recommended by theNRC to the Board based on company performance profits return to investors shareholdervalue creation and any other significant qualitative parameters as may be decided by theBoard.
o The NRC will recommend to the Board the quantum of commission for each director basedupon the outcome of the evaluation process which is driven by various factors includingattendance and time spent in the Board and committee meetings individual contributions atthe meetings and contributions made by directors other than in meetings.
o In addition to the sitting fees and commission the company may pay to any directorsuch fair and reasonable expenditure as may have been incurred by the director whileperforming his/ her role as a director of the company. This could include reasonableexpenditure incurred by the director for attending Board/ Board committee meetingsgeneral meetings court convened meetings meetings with shareholders/ creditors/management site visits induction and training (organized by the company for directors)and in obtaining professional advice from independent advisors in the furtherance of his/her duties as a director.
Remuneration for Managing Director ("MD")/ Executive Directors("ED")/ KMP/ rest of the employees1 o The extent of overallremuneration should be sufficientto attract and retain talented and qualified individualssuitable for every role. Hence remuneration should be
Market competitive (market for every role is defined as companies from which thecompany could attract talent or companies to which the company could lose talent)
Driven by the role played by the individual
Reflective of size of the company complexity of the sector/ industry/ company'soperations and the company's capacity to pay
Consistent with recognized best practices and
Aligned to any regulatory requirements.
In terms of remuneration mix or composition
o The remuneration mix for the MD/ EDs is as per the contract approved by theshareholders. In case of any change the same would require the approval of theshareholders.
o Basic/ fixed salary is provided to all employees to ensure that there is a steadyincome in line with their skills and experience.
o In addition to the basic/ fixed salary the company provides employees with certainperquisites allowances and benefits to enable a certain level of lifestyle and to offerscope for savings and tax optimization where possible company also provides all employeeswith a social security net (subject to limits) by covering medical expenses andhospitalization through re-imbursements or insurance cover and also accidental death anddismemberment through personal accident insurance.
o The company provides retirement benefits as applicable.
o In addition to the basic/ fixed salary benefits perquisites and allowances asprovided above the company provides
MD/ EDs such remuneration by way of an annual incentive remuneration/ performancelinked bonus subject to the achievement of certain performance criteria and such otherparameters as may be considered appropriate from time to time by the Board. An indicativelist of factors that may be considered for determination of the extent of this componentare:
Company performance on certain defined qualitative and quantitative parameters as maybe decided by the Board from time to time
Industry benchmarks of remuneration
Performance of the individual.
o The company provides the rest of the employees a performance linked bonus. Theperformance linked bonus would be driven by the outcome of the performance appraisalprocess and the performance of the company.
Remuneration payable to Director for services rendered in other capacity
The remuneration payable to the Directors shall be inclusive of any remunerationpayable for services rendered by such Director in any other capacity unless:
a) The services rendered are of a professional nature; and
b) The NRC is of the opinion that the Director possesses requisite qualification forthe practice of the profession
The NRC is responsible for recommending the remuneration policy to the Board. The Boardis responsible for approving and overseeing implementation of the remuneration policy.
1Excludes employees covered by any long term settlements or specific term contracts.The remuneration for these employees would be driven by the respective long termsettlements or contracts.
Annexure- III: Disclosure of Managerial Remuneration
(Ref.: Board's Report Section 7.3 )
(a) The ratio of the remuneration of each Director to the median remuneration of theemployees of the company for the financial year:
|Name of the Director ||Ratio of Director's remuneration to the median remuneration of the employees of the Company for the financial year |
|Non-Executive Directors || |
|Mr. R. R. Bhinge ||0.50 |
|Mr. K. Ramachandran ||1.02 |
|Mr. S. Ramakrishnan ||1.12 |
|Ms. Hema Hattangady ||1.07 |
|Mr. K. Raghuraman ||1.18 |
|Executive Director || |
|Mr. P. J. Nath ||16.29 |
Note: Remuneration includes sitting fees and Performance Linked Payment (PLP) whereverapplicable. The PLP for 12 months ended 31st March 2017 will be paidduring FY 2017-18.
(b) The percentage increase in remuneration of each Director Chief Financial OfficerChief Executive Officer Company Secretary or Manager if any in the financial year:
|Name of the Director and Key Managerial Personnel ||Percentage increase financial year remuneration the |
|Mr. R. R. Bhinge ||4 % |
|Mr. K. Ramachandran ||64 % |
|Mr. S. Ramakrishnan ||Nil |
|Ms. Hema Hattangady ||118% |
|Mr. K. Raghuraman ||51 % |
|Mr. P. J. Nath Executive Director & CEO ||10.4% |
|Mr. Uday Banerjee Chief Financial Officer ||8.2 % |
|Mr. Girish Kirkinde Company Secretary ||10.3% |
(c) Percentage increase in the median remuneration of employees in the Financial year2016-17: (13%)
(d) Number of permanent employees on the rolls of Company as on 31st March2017: 140.
(e) Average percentile increase already made in the salaries of employees otherthan the managerial personnel in the last financial year and its comparison with thepercentile increase in the managerial remuneration and justification thereof and point outif there are any exceptional circumstances for increase in the managerial remuneration:
| ||% change in remuneration |
|Average increase in salary of employees (other than managerial personnel) ||10.0% (annualized on CTC) |
|Average increase in remuneration of managerial personnel ||8.5% (annualized on CTC) |
(f) key parameters for any variable component of remuneration availed by the Directors:
Remuneration paid to Non-Executive Directors:
The Non-Executive Directors remuneration consists of sitting fees. The payment ofsitting fee is paid for:
Attending each meeting of the Board;
Attending each meeting of Audit Committee Nominations HR & Remuneration Committee(NRC) Stakeholder Relationship Committee and Executive Committee of the Board; and
Attending each meeting of any other Committee(s).
Remuneration paid to Executive Director & CEO:
The NRC evaluates the performance of the Executive Director & CEO by setting theKey Performance Objectives at the beginning of each financial year. The NRC recommends tothe Board the compensation of Executive Director & CEO based on the performance duringthe year vis-a-vis the Key Performance Objectives. The NRC ensures that the overallcompensation package is in accordance with applicable laws in line with the Company'sobjectives shareholders' interest industry standards and has an adequate balance betweenfixed and variable component.
(g) Affirmation that the remuneration is as per the remuneration policy of the company:
It is affirmed that the remuneration is as per the Remuneration policy forDirectors Key Managerial Personnel and other employees' adopted by the Company.
Annexure IV Details of Loans Guarantee Securities & Investment covered underSection 186 of the Act
(Ref: Board's Report Section 13) a) The Company has not given any loans during theyear. The details of investments made during the year are given hereunder:
|Sl. No ||Date of Investment ||Details of Investee ||No of Shares of Rs. 10/- each ||Amount ` ||Nature of Transactions |
|1 ||9th Jan 2017 ||Nelco Network Products Limited ||50000 ||500000 ||Unquoted trade investment in Wholly Owned Subsidiary |
b) The details of guarantees provided to Axis Bank Ltd. during the year are givenhereunder:
|Sl. No ||Date of Investment ||Details of Investee ||Amount ` ||Nature of Transactions |
|- ||- ||- ||Nil ||- |
Details of loans guarantees and investments covered under the provisions of Section186 of the Companies Act 2013 are given in the notes to the financial statements.
Annexure VI Conservation of Energy and Technology Absorption
(Ref.: Board's Report Section 19)
A. Conservation of Energy
(i) The steps taken for impact on conservation of energy: Although energy is not amajor element of the cost for the Company constant endeavors have been made to conserveenergy and consequently minimize power and diesel costs.
(ii) The steps taken by the Company for utilizing alternate sources of energy: Powerrequirement of company is too low to utilize alternate sources of energy.
(iii) The capital investment on energy conservation equipment: Nil
B. Technology Absorption
(i) Efforts made towards Technology Absorption:
The major thrust of technology absorption has been in the areas of VSAT services. TheCompany's wholly owned subsidiary Tatanet Services Ltd has set up a new VSAT Hub in itsfacility in Mahape to augment its total satellite bandwidth capacity. The new capacitiesare also obtained from a new satellite and thereby increasing diversity.
Tatanet Services Ltd. has also deployed alternate technologies for the baseband of theVSAT hub which will help in catering to more market segments.
Future plan of action: Setting up of one more VSAT hub in Tatanet Services Ltd. tofurther increase the satellite bandwidth operations which is already underimplementation. The Company is making endeavor in building expertise in variedtechnologies for satellite communication rather than getting fixed to only onetechnology.
Technology absorption adaptation and innovation: Constant endeavors are being madetowards technology absorption adaptation and innovation. The focus has been on improvingthe quality of the services as well as creating new services and solutions adapted to suitthe customers' requirements for specific industry segments.
(ii) Benefits derived:
The Company has increased its customer base in the different market segments mainlyBanking & Financial Services and Oil & Gas Exploration services using theinfrastructure created with these technologies.
(iii) Expenditure incurred on Research and Development
a. Revenue and recurring expenditure: Nil
(iv) In case of imported technology (imported during the last three years reckoned fromthe beginning of the financial year)
a. Technology imported: The Company has not imported any technology in the last 3 years
b. Year of Import: NA
c. Has technology been fully absorbed : NA
d. It not fully absorbed areas where this has not taken place reasons thereof andfuture plans of action: NA
|C. Foreign Exchange earnings and outgo (Standalone) ||` In Lakhs |
|Total foreign exchange earned: ||64.39 |
|Total foreign exchange used ||2758.92 |