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Ortel Communications Ltd.

BSE: 539015 Sector: Media
NSE: ORTEL ISIN Code: INE849L01019
BSE LIVE 15:21 | 18 Aug 30.05 1.40
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NSE 14:59 | 18 Aug 29.90 1.40
(4.91%)
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OPEN 30.05
PREVIOUS CLOSE 28.65
VOLUME 31984
52-Week high 169.30
52-Week low 27.25
P/E 63.94
Mkt Cap.(Rs cr) 92
Buy Price 30.05
Buy Qty 14078.00
Sell Price 0.00
Sell Qty 0.00
OPEN 30.05
CLOSE 28.65
VOLUME 31984
52-Week high 169.30
52-Week low 27.25
P/E 63.94
Mkt Cap.(Rs cr) 92
Buy Price 30.05
Buy Qty 14078.00
Sell Price 0.00
Sell Qty 0.00

Ortel Communications Ltd. (ORTEL) - Director Report

Company director report

To the esteemed Members

Your Directors have pleasure in presenting their 21st Annual Report on the business andoperations along with the Audited Accounts of your Company for the Financial Year endedMarch 31 2016.

Financial Highlights

A summary of your Company’s financial performance is given below:

Rs. In Crores.
Particulars 2015-16 2014-15
Total Operating and other Revenue 196.29 161.12
Operating Expenses 126.00 102.20
Earnings Before Interest Depreciation 70.29 58.92
Tax & Amortization (EBIDTA)
Interest and Financial Charges 23.56 22.45
Earnings before Depreciation Tax & 46.73 36.47
Amortization (EBDTA)
Depreciation Amortization & other exceptional expenses 31.74 29.41
Earning before Tax (EBT) 14.99 7.06
Tax 3.06 1.46
Earning after tax (EAT) 11.93 5.60

State of Company’s affairs and Operational Results

The highlights of the Company’s performance are as under:

• Total revenue was Rs.196.29 Cr compared to the previous year’s totalrevenue of Rs.161.12 Cr.

• EBITDA stood at Rs.70.29 Crs compared to Rs.58.92 Cr of corresponding previousfinancial year.

• Earning before Tax (EBT) for the period was Rs. 14.99 Cr in compared to Rs.7.06Cr of last fiscal.

• Earning after Tax (EAT) stood at Rs.11.93 Cr as compared to Rs.5.60 Cr of lastfiscal.

• EPS stood at Rs.3.93 as compared to Rs.2.30 of last financial year.

The Financial Year 2015-16 has been another successful year in terms of overallprospective. The Company has achieved better result in terms of Market expansion Customerbase as well as financial numbers.

Business/ Operational Review

The year 2015-16 has been a remarkable year for the Company as the Company has managedto expand aggressively not only in its existing markets but also in many new markets. Inaddition to the existing states of Odisha Chhattisgarh Andhra Pradesh and West Bengalyour company also started its Operations in two new states; Madhya Pradesh and Telangana.By way of proactive plans and aggressive buying out of local cable operators the Companyhas been able to increase its operational locations to seventy (70) from Thirty nine (39)during the previous financial year and hope to add further going forward.

Segment wise Analysis

i) Cable TV Operation

During the year under review your Company continued to be a dominant player in theCable TV market in Odisha and has continued to consolidate its position in the states ofChhattisgarh and Andhra Pradesh.

Members will be happy to know that your Company has expanded its operation in to theState of Madhya Pradesh and Telangana.

As on 31.03.2016 the total Cable TV customer base (Analog and Digital) has beenincreased to 628710 (Previous Year: 471592) which is a whopping 33% growth over previousyear. The Digital Subscriber base has grown by 117% to 233012 as on 31st March2016 (Previous year: 107175). A total of 37.1 % of the cable TV customer base has beendigitized as on the end of year under review (previous Year: 22.7 %). We will continue todigitize the remaining analog subscriber base and also expand in select geographies toconsolidate our presence further.

With internationally acceptable "Last Mile" model implemented by your Companyand digitization of entire CATV subscribers the Company is hopeful of remarkable growthin the revenue in the future.

ii) Broadband Services Operation

In spite of stiff competition from national telecom players your Company continued tobe a significant Data service provider in its operational market.

Your Company has successfully implemented DOCSIS 3.0 high speed broadband serviceduring the year under review and is currently offering data service upto a speed of 50Mbps. The Company has also identified new markets as a part of expanding the Dataoperation and has planned to expand further in the coming financial year. Your Company isusing HFC network architecture which can easily be upgraded to FTTH topology in future.Your Company is currently undertaking trial run with FTTH for pure data usage. With theimplementation of new technology high speed data service and aggressive marketingstrategy the Company is well placed to cater to the growing demand.

The total Broadband subscriber base as on 31.03.2016 is 72482 (Previous Year: 58519)a growth of 23.86% over previous year's subscriber base. As the Company is committed toexpansion of network and development of data service the Company is hopeful of increasingthe growth trend of customer base in the coming years.

In total your Company has achieved total RGU base (Analog Digital and Data) of701192 during the year (previous year 530111) a growth of 32.27 %. It is important tonote here that in line with your Company’s philosophy of operating on "Last MileModel" 92% company's RGUs are on its own last mile network.

iii) Infrastructure leasing

Over last few years your Company has aggressively pursued as another major revenuegenerating stream by leasing out its own infrastructure to corporate clients for theircommunication requirement and has leased out to various corporates a total of 1568.82 kms(Previous Year: 761.42kms) as on 31 March 2016 a growth of 106% over the previous year.

Dividend

Though the Company has reported profits for the year no dividend is being recommendeddue to accumulated losses for the past Financial Years.

Transfer to Reserves

As no dividend is proposed so no amount is recommended to be transferred to GeneralReserve.

Share Capital

During the year under review there were no change in the Share Capital of yourCompany.

Holding Subsidiaries & Associates

Your Company does not have any holding subsidiary or associate during the period underreview.

Change in the Nature of Business if any

During the year under review there were no changes in the nature of the business ofthe Company.

Revision of financial statement

There was no revision of the financial statements for the year under review.

Extract of Annual Return

The extract of the Annual Return of your Company as on March 31 2016 as provided undersub-section (3) of Section 92 of the Companies Act 2013 in the Form MGT 9 is enclosed as 'Annexure-1'forming part of this Report.

Statutory Auditors

M/s. Haribhakti & Co. LLP Chartered Accountants Kolkata were appointed asStatutory Auditors of your Company for a period of five years with effect from 19th AnnualGeneral Meeting till the conclusion of 24th Annual General Meeting of the Company subjectto ratification of their appointment by the shareholders in the Annual General meeting ofthe Company every year if eligible.

Now Board has recommended members for ratification of said appointment of M/s.Haribhakti & Co. LLP Chartered Accountants Kolkata being eligible as the StatutoryAuditors of the Company at the ensuing Annual General Meeting.

Observations of the Auditors

Observations of the Auditors on the Annual Accounts of the Company forms part of"Auditors' Report". The observations made in their report when read togetherwith the relevant notes to the accounts are self-explanatory.

Secretarial Auditor

Pursuant to the provisions of Section 179 and 204 of the Companies Act 2013 read withthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 M/s.Kumar Suresh & Associates Gurgaon a firm of Practicing Company Secretaries wasappointed as Secretarial Auditor to conduct the Secretarial Audit of the Company for theFinancial Year 2015-16.

CS. Suresh Yadav Secretarial Auditor has given the Secretarial Audit Report in FormNo. MR-3 and the same has been annexed to the Board's Report and marked as 'Annexure -2'. There is no qualification in the Report of Secretarial Auditor which isself-explanatory.

Your Board has also appointed M/s. Kumar Suresh & Associates Gurgaon asSecretarial Auditor for FY 2016-17 who is eligible for such reappointment to conductSecretarial Audit of your Company.

Cost Auditor

Terms of M/s. NIRAN & CO. Cost Accountants Bhubaneswar Odisha who werereappointed as Cost Auditor of the Company for Financial Year 2015-16 expired on 31 March2016. Your Directors have approved their reappointment for FY 2016-17 and theirremuneration shall be ratified by the members in the ensuing Annual General meeting.

Internal Auditor

Terms of M/s. SCM & Associates Chartered Accountants Bhubaneswar Odisha who werereappointed as Internal Auditor of the Company for Financial Year 2015-16 expired on 31March 2016.

Your Directors have approved their reappointment for FY 2016-17.

Directors' Responsibility Statement

Yours Directors hereby certify

a) that in the preparation of the annual accounts the applicable accounting standardshad been followed along with proper explanation relating to material departures.

b) that the directors had selected such accounting policies and applied themconsistently and made judgment and estimates that they are reasonable and prudent so as togive a true and fair view of the state of affairs of the company at the end of thefinancial year and of the profit or loss of the company for that period.

c) that the directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act forsafeguarding the assets of the company and preventing and detecting fraud and otherirregularities.

d) that the directors had prepared the annual accounts on a going concern basis.

e) The directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.

f) The directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively

Utilization of IPO Proceeds

Against Rs.100.79 Cr of IPO proceeds (net of issue expenses) Rs. 75.78 Cr was utilizedfor the object set out in the offer document and balance amount pending utilization waskept in the Bank and fixed deposit. There was no deviation in the utilization of issueproceeds during the year under review.

Particulars of loans guarantees or investments under section 186

Your Company has not given any loans or guarantee or made any investments under Section186 of the Companies Act 2013.

Particulars of loans/ advances or investments outstanding during the financial year

Disclosure on particulars relating to loans advances and investments outstandingduring the financial year is disclosed in Note No. 4 of "Notes on Accounts"forming part of the financial statement of the Company.

Particulars of contracts or arrangements with related parties

All contracts / arrangements / transactions entered by the Company during the FinancialYear with related parties were in the ordinary course of business and on an arm's lengthbasis and were reviewed and approved by the Audit Committee and Board. During the yearthe Company has not entered into any contract / arrangement / transaction with relatedparties which could be considered material in accordance with the Company's Policy onMateriality of Related Party Transactions. All the transactions made on arm's length basisare being reported in Form No. AOC - 2 in terms of Section 134 of the Companies Act 2013read with Rule 8 of the Companies (Accounts) Rules 2014 and is annexed as 'Annexure-3'.

The policy on dealing with Related Party Transactions can be viewed athttp://www.ortelcom.com

Performance Evaluation of Board Committees and Individual Directors including ManagingDirector

In compliance with the Companies Act 2013 and Regulation 17 of the ListingRegulations the performance evaluation of the Board its Committees and individualDirectors including Managing Director were carried out during the year under review.

Independent Directors in their separate meeting evaluated performance of Board as awhole non-independent Director and Chairperson of the Board.

Further based on the appraisal report of the individual Directors both for self andother Directors Board carried out evaluation of Independent Directors Managing Directorand all its Committees.

The evaluation framework for assessing the performance of Directors were comprised ofparameters such as; Attendance of Board and Committee Meetings Contribution at meetingsGuidance/ support to Management Relationship with Board and Committees Degree ofparticipation etc.

Risk Management

Risk management has always been an integral part of the corporate strategy whichcomplements the organizational capabilities with business opportunities robust planningand execution. The Company through a process of management mechanism covering the riskmapping trend analysis risk exposure potential impact and risk mitigation practicemanages the potential risks. A detailed regular exercise is being carried out to identifyevaluate manage and monitor both business and non-business risks. A Risk ManagementCommittee of the Board periodically reviews the risks and suggests steps to be taken tocontrol and mitigate the same.

Deposits

Your Company has not accepted any deposit from public during the period under review.

Declaration given by Independent Directors

All the Independent Directors have given declaration of their independence in terms ofSection 149(7) of the Companies Act 2013 and Regulation 16(1)(b) of the SEBI (ListingObligations And Disclosure Requirements) Regulations 2015.

Number of meetings of Board of Directors

For the Financial Year 2015-16 the Company held five (05) meetings of the Board ofDirectors details of which form part of the Corporate Governance Report.

Material changes and commitments if any

There were no significant material changes and commitments affecting the financialposition of the Company which has occurred between the end of the Financial Year of theCompany to which the Financial Statement relate and the date of the report

Employee Stock Option Scheme

During the year under review the Company has neither offered/granted nor allotted anynew Stock Option either under 'Ortel Employee Stock Option Scheme 2015' ("ESOS2015") or under old Scheme ESOS 2010. As per ESOS 2015 a Ortel Employee WelfareTrust (herein after referred as "Trust") was executed by the Company to acquireshares of the Company from Secondary market for transferring them to the eligibleemployees in future as per the direction of Nomination & Remuneration Committee of theBoard. During the period under review the Trust has acquired 3095 shares of the

Company. The details of disclosure form part of the Corporate Governance.

Directors and Key Managerial Personnel

Mr. Subhrakant Panda Non-Executive Director of the Company is retiring at the ensuingAnnual General Meeting. Your Directors have recommended his reappointment in the next AGM.The detailed resume of Mr. Panda who has offered for re-appointment is annexed to thenotice of the Annual General Meeting.

There are no other changes in the constitutions of the Board of Directors and keymanagerial personnel.

Significant and material orders passed by the regulators or courts or tribunalsimpacting the going concern status and company's operations in future

No such significant and material order have been passed by any regulator/ court/tribunal against the Company which will impact the going concern status and Company'soperation in future. In those matters which are pending before various regulators orcourts or tribunal your Company has strong reasons to succeed in all the said disputedmatters.

Particulars of Employees

Information as per section 197 and Rule 5(1) & 5(2) of the Companies (Appointment& Remuneration of Managerial Personnel) Rule 2014 is provided as 'Annexure-4'.

Corporate Governance

Pursuant to SEBI Listing Regulations a report on the Corporate Governance ManagementDiscussion and Analysis Certificate regarding Compliance of conditions of CorporateGovernance and Certificate by CEO & CFO have been made part of the Annual Report asAnnexures.

Conservation of energy technology foreign exchange earnings and outgo

The Company is a Multi System Operator (MSO) and is carrying on business of interalia providing cable TV and broadband service along with other value added services.Since this does not involve any manufacturing activity most of the Information requiredto be provided under Section 134(3)(m) of the Companies Act 2013 read with the Companies(Accounts) Rules 2014 are nil / not applicable.

Further your Company being a service provider requires minimal energy consumptionand Company takes all possible measures to ensure optimal use of energy avoid wastagesand conserve energy as far as possible. Following are the energy conservation measuresbeing taken by Company over a period of time to ensure minimum energy consumption andtechnology absorption.

Conservation of Energy:

1. The steps taken or impact or conservation of energy. Conservation of RF Optical Electrical and fuel energy is being accomplished by your company in economically responsible and beneficial ways by using power efficient equipment broadband HFC network provisioning system ergonomics in the cable layout cleanest and state of art technologies.
2. The steps taken by the Company for utilizing alternate sources of energy.
3. The capital investment on energy conservation equipment. Increasing more deeper fiber by using Broadband HFC network in star structure has resulted less power consumption.
Applying the strongest feasible energy efficiency standards to network opto electronics RF products and signal quality.
Technology Absorption:
1. The efforts made towards technology absorption. Your Company is one of the MSOs in India which has started Triple Play services over Broadband HFC network. It has chosen best economical and state of art technologies.
2. The benefits derived like product improvement cost reduction product development or import substitution. Your Company uses Cable Modem technology for high speed Internet access.
3. In case of imported technology (imported during the last three years reckoned from the beginning of the financial year):- The Company is also using Metro Ethernet ("MEN") and Ethernet over Cable (EoC) technology which engages different network topology for providing high speed data service at a lower cost.
a. the details of technology imported; Your Company has also adopted digital video technology to deliver qualitative video and audio using MPEG-2 and MPEG-4 Technology. Your Company has also started HD TV services and offers HD channels to its subscribers in select markets.
b. the year of import;
c. whether the technology been fully absorbed;
d. if not fully absorbed areas where absorption has not taken place and the reasons thereof; Your Company has also introduced high speed broadband technologies such as DOCSIS 3.0 to cater to subscribers who have increased Video led Internet
e. The expenditure incurred on Research and Development Consumption. HD video content viewings as well as increased download speeds are the main benefits of DOCSIS 3.0 technology. DOCSIS 3.0 allows for a much higher through put compared to the earlier versions by using multi-channel bonding simultaneously for download/upload. This technology has been widely used in Europe and USA by leading ISPs.
Your Company is also using HFC architecture which can easily be converted or upgraded to FTTH. Your Company is currently undertaking trial with FTTH for pure data usage.

Foreign Exchange Earnings & Outgo

Details of foreign exchange earnings and outgo are disclosed in Notes No. 33 to 35 of"Notes on Accounts" forming part of the financial statement of the Company.

Certifications

Your Company has been certified and recertified by Bureau Veritas Certification (India)Pvt. Ltd. (BVQI) to confirm with ISO 9001:2008 standardization for both cable and dataservices for Bhubaneswar Cuttack Rourkela and Sambalpur operational sites.

Your Company has also received certification from BECIL (TRAI appointed CertifyingAgency) for its digital Encryption and Subscriber Management System of digital services.

Your Company is the first of its kind in India to receive such certification.

Corporate Social Responsibility

Being a responsible Corporate Citizen your company is committed to contribute towardssocial wellbeing of the communities through various corporate social responsibility("CSR") initiatives and has been undertaking various social works as part of itsCSR over a period of time. It invests in Social programs for the under privileged girlchild contributes towards their overall learning and personal growth opens employmentavenues and also it attempts to bring about significant and sustainable improvements intheir standard of living. Your Company’s flagship CSR activity known as ‘OrtelDayitwa’ provides financial support to girl children for college education. OrtelDayitwa encourages girls to pursue education after secondary education with an objectiveto reduce dropouts after secondary education and also conducts various education awarenessprograms from time to time.

After mandatory applicability of provisions of Section 135 of the Companies Act 2013to the Company in FY. 2015-16 the Company has constituted a Corporate SocialResponsibility Committee of the Board ("CSR Committee").

The Board of Directors of the Company has approved CSR Policy based on therecommendation of the CSR Committee. The CSR Policy of the Company is available on theCompany’s web-site and can be accessed in the link www.ortelcom.com Though as per thecriteria specified under Section 135 of the Companies Act 2013 ("Act") theCompany was not required to mandatorily contribute towards CSR activities but yourCompany has contributed Rs.100000/- towards education of poor and under privileged girlchild through ‘Ortel Dayitwa’ Charitable Trust. As required under Section 134 ofthe Act and Companies (Corporate Social Responsibility Policy) Rules 2014 statementcontaining the details of CSR expenditure is disclosed as ‘Annexure -5’.

The Company continues and shall continue to contribute towards social well being infuture.

Internal Financial Control

The Company has a well-placed proper and adequate internal control system whichensures that all assets are safeguarded and protected and that the transactions areauthorized recorded and reported correctly. The Internal Financial Controls withreference to financial statements as designed and implemented by the Company are adequate.During the year under review no material or serious observation has been received fromthe Internal Auditors of the Company for inefficiency or inadequacy of such controls.

The Board of Directors has appointed M/s. SCM & Associates Chartered Accountantsas the Internal Auditor of the Company. The Internal Auditors independently evaluate theadequacy of internal controls and concurrently audit the majority of the transactions invalue terms. Independence of the audit and compliance is ensured by direct reporting ofInternal Auditors to the Audit Committee of the Board. During the year the Companycontinued to implement their suggestions and recommendations to improve the controlenvironment. Internal Auditors findings are discussed at quarterly basis and suitablecorrective actions taken as per the directions of Audit Committee on an ongoing basis toimprove efficiency in operations.

The Company has also its own internal audit department commensurate with the size ofthe Company. Internal Audit team under the guidance of Head of Internal Audit conductvarious check and audit and submit their report to the management and is responsible forensuring adequacy of internal control both in terms of financial and operational control.

Policy on Prevention Prohibition and Redressal of Sexual Harassment at Workplace

The Company has zero tolerance for sexual harassment at workplace and has adopted aPolicy which aims to provide protection to employees at the workplace and prevent andredress complaints of sexual harassment and for matters connected or incidental theretowith the objective of providing a safe working environment where employees feel secure.The Company has also constituted an Internal Complaints Committee known as the Preventionof Sexual Harassment (POSH) Committee to inquire into complaints of sexual harassment andrecommend appropriate action. The Company has not received any complaint of sexualharassment during the financial year 2015-16.

Personnel & Industrial Relations

Personnel & industrial relations during the year were cordial & harmonious.

Acknowledgement

Your Directors place on record their sincere appreciation for the continued supportfrom shareholders customers suppliers government authorities banks and financialinstitutions and other business associates. A particular note of thanks to all employeesof your Company without whose contribution your Company could not have achieved theyear’s results.

On behalf of the Board of Directors
For Ortel Communications Ltd
Sd/- Sd/-
Jagi Mangat Panda Jyoti Bhusan Pany
Managing Director Director
Place: Bhubaneswar
Date: 30 April 2016