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ITI Ltd.

BSE: 523610 Sector: Telecom
NSE: ITI ISIN Code: INE248A01017
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VOLUME 64920
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OPEN 95.00
CLOSE 95.20
VOLUME 64920
52-Week high 137.90
52-Week low 69.40
P/E 63.74
Mkt Cap.(Rs cr) 8,405
Buy Price 93.70
Buy Qty 1500.00
Sell Price 94.90
Sell Qty 200.00

ITI Ltd. (ITI) - Director Report

Company director report

Dear Shareholders

I am delighted to present on behalf of the Board of Directors the 67th Annual Reportof your Company along with its Audited Statements of Accounts for the year ended March 312017 together with the Auditors'

Report and Comments on the Accounts by the Comptroller and Auditor General (CAG) ofIndia.

PERFORMANCE

The Company has achieved Sales of Rs.1611 Crores during the year 2016-17 againstRs.1253 Crores during the previous year 2015-16. This is remarkably the highest turnoverin the past six years. The Company could achieve this turnover in spite of the fact thatour major customers BSNL and MTNL have not placed orders like earlier years. With thegrants from the Government of India net profit for the period has increased by 21% tomark Rs.305 Crores for the year 2016-17 as against Rs. 251 Crores for the previous yearwhich is after considering a grant of Rs.360.71 Crores by the Government during2016-17 and Rs.494.02 Crores during 2015-16.

After continuous loss for the last 13 years till 2014-15 our Company has achieved itsturn around with this profit of Rs. 305 Crores for the second consecutive year taking intoaccount the grant in aid received from the Government profit/loss of the India forrevival. While considering Company without any Government grants ITI's losses havedrastically come down to Rs.56 Crores in 2016-17 from Rs.243 Crores in 2015-16 which is anincomparable organizational achievement.

The contribution (net of material cost) for the year 2016-17 is Rs.298 Crores which iscomparable for that of previous year at Rs.201 Crores. The company is making efforts toregain its strong leadership position in the telecommunications domain in the country. Thecompany has plans to keep this sustainability going on and achieve the complete turnaroundwith the support of Government of India.

IMPLEMENTATION OF REVIVAL PACKAGE OF ITI LIMITED

The Cabinet Committee on Economic Affairs (CCEA) during February 2014 has approvedthe

Revival plan of ITI by fund infusion of Rs.4156.79 Crores. This package consists ofRs.2264 Crores in the form of equity for financialassistance in all the plants of ITI forimplementation of new projects and Rs.1892.79 Crores to be financial assistance asgrant-in-aid. Out of Rs.2264 has released Rs. 192 Crores as first phase disbursement tothe Company towards capital expenditure during

2014-15 and Rs.80 Crores has been released during 2016-17. Company has alreadysubmitted proposals for new projects worth Rs.500 Crores and has been allocated Rs. 200Crores Capex in Budget estimation of 2017-18. Funds against this allocation are expectedto be released shortly from the Government. Beyond this we have put up proposals forimplementation of new projects for about Rs. 600 Crores.

For the projects planned under Rs.192 Crores plan the infrastructure up-gradation hasbeen completed in all plants of ITI . Further the projects planned under Rs.80 Crores arein final stages of implementation.

This support from the Government has helped ITI to enter into manufacturing of productsin different market domains in a big way. We are manufacturing and supplying GPONequipments for providing 2 Mbps high speed Broad band connectivity to Gram panchayatsacross India under BharatNet project to BBNL & BSNL.

Under Revival plan several projects have been already implemented at variousmanufacturing plants of ITI and some projects are under implementation. In addition totelecom products like G-PON (ITI has got orders from BBNL and BSNL for the supply of GPONequipments with C-DoT technology and is expecting orders from Railtel.) MLLN Broadbandequipments etc. Major impetus has been given for the manufacture of encryptedtelecommunication equipments required for Defence sector. We have submitted tenders forEncryption equipments for Defence and we are confident of getting orders in the comingmonths. ITI has also ventured in to diversified products like Products / solutions underIOT verticals etc. Solar panel manufacturing line for 18MW capacity is being installedat ITI Naini. Our existing Data Center is being expanded further to augment 1200 racks.ITI has already established 3 lines of HDPE manufacturing at Rae Bareli plant. In view ofhuge requirement to enhance the capacity one more line of HDPE pipe manufacturing hasbeen commissioned at Palakkad unit.

ITI is in the process of installing one manufacturing line for Optical Fibre Cable(OFC) at Rae Bareli unit. manufacturing infrastructure is also being planned atFurtheroptical

Bangalore unit. ITI has taken TOT for manufacture and supply of Li-Ion batteriesfocussing for Telecom applications Wi-fi solutions Low power BTS with C DOT technologyContract manufacturing activities for VSSC and other PSUs.. A 3-D printing facility hasbeen commissioned at Bangalore unit. Other products identified for manufacture areAntenna Radio modems CLIP Phones Smart Jammers Anti intrusion systems Set top boxHand Held Terminals/devices Smart energy meters component screening facility Mini PCetc.

The revival package provided to ITI has boosted our manufacturing strengths to a newheight and we are confident of manufacturing various telecom and allied products to caterfor domestic market demands under make in India vision of Government of India.

HIGHLIGHTS

The turnover for the year 2016-17 is mainly constituted from Network For Spectrum (NFS)project ROs and CCOs Services AMC for ASCON Defense Business and it's AMC MLLN andSSTP Projects and it's

AMC National Population Register (NPR) NGN AMC for GSM-SZ GSM-WZ AMC for OCBGPON

Data Centre and IT and IOT Solutions.

The Company has been working on very important projects National Importance. ITI hasbagged turnkey orders for Supply Installation Commissioning and Maintenance of GPONEquipments covering about 38000 villages from BBNL & BSNL. This project will extendthe High Speed broad band services on GPON platform to rural masses. Company has baggedpurchase orders from BBNL for Rs. 205 Crores and from BSNL for Rs 130 Crores during theyear 2016-17.

GPON is a prestigious project of national importance which is being executed by ITIagainst the "BharatNet Project" under the scheme of "Digital India".ITI is presently executing G-PON order of BBNL with C-DOT technology. The ONT OLTSplitters Accessories and IT equipments are being supplied by ITI Raebareli Plant ONTbeing supplied by Mankapur Plant also and Solar Power Equipements are being supplied byITI Naini Plant. ITI Bangalore plant is also ready to supply GPON equipments and afull-fledged repair centre is being setup at ITI Bangalore for catering the repairservices.

ITI has deployed 400 teams for Installation and Commissioning of this nationwidenetwork penetrating to the uncovered Gram Panchayats in the hinterland of remote RuralIndia. ITI is also discussing on the phase II of "BharatNet Project" and expectmore orders from this mega project. This project provides Broadband connectivity to 2.5Lakhs Grama Panchayats in India.

The other important project being executed is the NFS (Network For Spectrum) projectworth Rs. 2985 Crores for the defense forces of India which involves Procurement SupplyTrenching Laying Installation Testing and Maintenance of Optical Fiber Cable PLB Ductand accessories for construction of exclusive Optical NLD backbone and Optical accessroutes on turnkey basis with AMC in the Eastern and North- Eastern region of the country.ITI has won the order for these 2 zones for deployment of optical

Out of the total of 13500 kms cable laying nearly 9000 kms have been laid in both Fand G Packages. So ITI has already completed 70% of the work and will be completing theentire project by this year end.

This year ITI have achieved another height as ITI Palakkad plant was part of the recentrocket launch of the ISRO. Palakkad plant has contributed to the manufacturing ofelectronic assembly for ISRO's

Geosynchronous Satellite Launch Vehicle (GSLV) Mark III one of the prestigiousmissions of

ISRO. The electronic packages fabricated at ITI Palakkad plant were part of thesuccessful launch on June 5 2017.

On the defense front the Company has participated in the mega tender of ASCON Phase IVproject and awaiting opening of the commercial bid. ITI has recently won a contract fromBSNL for encryption products of the NFS project. We are expecting an order for Rs. 90Crores from the defense for the supply of encryption products. We have also bid forthe ASCON encryption tender and hoping to get good orders. In addition ITI has orders forMIL PCM and other projects for defense.

The overall performance of the Company is as follows:

(Rs. in Crore)

2016-17 2015-16
Products/Projects
(Including ED & ST) (Including ED & ST)
1 NFS Project 700.16 535.28
2 ROs/ CCOs/ IT/ IOT 190.00 145.03
3 Defence / ASCON 181.35 117.93
4 MLLN / MLLN AMC/SSTP 154.85 42.64
5 GSM WZ Projects / AMC 81.11 88.43
6 GSM - SZ AMC 76.25 65.11
7 NPR / SECC Projects (Data Collection) 70.59 104.63
8 NGN / C5 / Ph2 35.86 63.22
9 OCB AMC Business 32.86 31.46
10 GPON 22.51 6.66
11 Misc. Services 19.77 29.50
12 Data Centre 19.13 13.96
13 Banking / Div. Prod./Cont.Mfg 11.23 0.00
14 SMPS & Repairs 5.73 6.77
15 SATCOM & PCM MUX & TELESET 5.24 0.48
16 GSM – MTNL 2.44 2.16
17 NPR - Smart Card 1.61 0.00
18 WLL- CDMA Infra 0.00 0.08
Total 1610.69 1253.34

PROJECTS EXECUTED DURING THE YEAR 2016-17

Next Generation Network (NGN)

ITI Bangalore plant successfully executed the purchase order worth Rs.35.86 Crores forNGN products received from BSNL.

National Population Registration (NPR) /Aadhaar Seeding and Socio Economic&Caste Census(SECC) projects

ITI is one among the consortium of three PSUs (other two PSUs being M/s BEL and M/sECIL) for the execution of prestigious National Population Register (NPR) Projectunder Ministry of Home Affairs (MHA).

The job involves collection of citizen data including biometrics.

The Aadhaar seeding work of Kerala has also been awarded to ITI and the work started inJuly 2016 ITI has seeded nearly 330 Lakhs Aadhaar Numbers to the NPR data base at 75Centers in 14 districtof Kerala. The Projects was completed in all centers during December2016. The above consortium is also executing SECC Projects for the Ministry of RurualDevelopment (MORD). ITI Palakkad has executed total purchase orders worth Rs.70.59Crores during the year.

GSM

ITI has implemented GSM Projects in BSNL West Zone and MTNL-Mumbai in technologyalliance with M/s Alcatel-Lucent and in South Zone in technology alliance with M/sHuawei. The Annual Maintenance Contract related works have been carried out in these zonesfor total value of Rs.159.80 Crores.

Defence projects

ITI is the leader in supplying encryption equipments for the secured communication inthe Defence networks. In the year 2016-17 ITI had executed orders worth Rs.76.20 Croresfrom Defence sector for IP encryptors NGN

(BU) 5C telephone instruments etc.

Fiber Cable Laying for Network for Spectrum (NFS)

ITI Limited is executing the NFS Cable laying Project in Eastern and North Easternstates of the Country. Cable Laying and services worth Rs.395.91 Crores by Raebareli Unitand Rs.304.25 Crores by Mankapur unit have been completed during the year 2016-17.

MLLN and SSTP Projects & AMC

MLLN equipment provides dedicated path between two points which carry voice data andvideo and BSNL is providing leased circuits to banks and other organizations using MLLN.Palakkad Plant has received order for Rs.134 Crores during 2016-17. Palakkad has alsoimplemented Hardware upgrade of SSTP equipment to overcome the obsolescence of some cardsused in the equipment Capacity upgrade of Mobile Number Portability functions andSoftware upgrade to match the global levels for future addition of features. PalakkadPlant has executed the orders received from BSNL for MLLN and SSTP Projects and its AMCfor total value of Rs.154.85 Crores during the year.

Giga-bit Passive Optical Network (GPON)

ITI Rae Bareli Plant has executed order worth Rs.14.26 Crores and NainiPlant hasexecuted order for Rs.8.25 Crores during the year.

Switch Mode Power Supply (SMPS)

ITI Rae Bareli Plant is manufacturing SMPS systems and executing the orders from BSNL /MTNL.

Order value worth Rs.5.73 Crores has been executed by Raebareli Unit.

Data Center & IT Projects

ITI has already established Tier 3+ state-of- art Datacenter at Bangalore on PPP model.Presentlythis

Data Center is fully booked for co-location services. ITI is also playing a major rolein implementing IT projects.

The Government is pursuing E-Governance projects for taking the benefitof IT to theVillage Panchayats and a substantial budget provision has been made by theGovernment for the same. ITI is aggressively pursuing

this market segment. ITI has executed SWAN (State Wide Area Network) projects ofMizoram. ITI is also executing Accelerated Power Development and Reform Programme(APDRP) of Tamil Nadu state.

Maintenance Contracts for ASCON and OCB Projects

ITI had earlier established the ASCON network for Indian Army. ASCON AMC order worth Rs105.15

Crores has been executed by NSU. ITI was also the major supplier of fixedline switchesto BSNL and MTNL. Currently ITI has been extending maintenance assistance to to BSNL andMTNL for OCB exchanges OCB order worth Rs.32.86 Crores has been executed duringthe year.

E-Tendering Business Network Management CCTV Surveillance Orders

Regional Offices of ITI have executed various orders viz. E-Tendering Business NetworkManagement CCTV Surveillance Orders Video Audio Infra WiFi establishment and othrmiscellaneous orders for total value of Rs.190 Crores during the year.

FINANCE

The performance of the Company for the year 2016-17 as compare to the previous year isas follows

(Rs. in Crs)

Particulars 2016-17 2015-16
i Sales including services 1611 1253
ii Value of Production 1629 1253
iii Loss/Profit before tax 305 251
iv Loss/Profit after tax 305 251
v Financing Expenses 153 157
vi Depreciation 17 13
Capital Employed (Net Fixed
vii Assets + working capital) 1812 460
viii R&D Expenditure 16 16

SHARE CAPITAL

The Cabinet Committee on Economic Affairs (CCEA) on 24th February 2014 has approvedfinancial assistance based on the recommendations of Board for Reconstruction of PublicSector Enterprises

(BRPSE) to an extent of Rs. 4156.79 Crores for the revival of the Company. The fundinfusion will be capital grant of Rs.2264 Crores in the form of equity and the balanceamount of Rs.1892.79 Crores in the form of grant-in-aid.

The Company has received Rs.192 Crores during February 2015 and Rs.80 Crores duringNovember 2016 and Rs. 100 Crores during July 2017 from Ministry of Communications and ITfor meeting the expenditure towardsCAPEX implementation of various projects in its variousplants. The Company has allotted 272000000 equity shares of Rs. 10 each at par toPresident of India.

Accordingly the paid up Equity Share Capital as on 31st March 2017 was Rs.5600000000. Government of India vide letter no. 20-36/2012- FAC-II dated 20-07-2016 hascommunicated the approval of Cabinet Committee on Economic Affairs to transfer requisitenumber of shares of President of India to Special

National Investment Fund to meet SEBI's 10% Minimum Public Shareholding requirement.Accordingly 27200000 equity shares of Rs 10 each are to be transferred from Presidentof India to Special National

Investment Fund (SNIF) for maintenance of SEBI's 10% minimum Public shareholding

During the year under review the Company has not granted stock options or sweatequity. As on 31st March 2017 none of the Directors of the Company hold any sharesof the Company.

DIVIDEND

AsyourCompanystillhaveaccumulatedlossestheDirectorsarenotinapositiontorecommendanydividendfor the year 2016-2017.

HIGHLIGHTS OF THE PRODUCTION PLANTS AND SERVICE UNITS BANGALORE PLANT

Bangalore plant achieved a turnover of Rs.217.60 Crores (with ED & service tax)during the year 2016-17 registering a profit of Rs.6.22 Crores.

Major Projects / Orders completed in FY 2016-17

The supply consisted of NGN supplies worth Rs.35.86 Crores under the Government'sprestigious Digital

India Initiative. Under services the unit executed GSM-SZ AMC of Rs.76.25 CroresDefence AMC of

Rs.13.65 Crores and generated revenue of Rs.19.13 Crores from Data Centre Business.

The Unit also supplied Defence Equipments worth Rs.62.55 Crores ISAT for CRPF –Rs.1.57 CroresTelephones for Defence and BSNL worth Rs.0.79 Crores; Primary MUX for BSNLfor Rs.2.58 Crores Contract Manufacturing and Reliability Lab services Rs. 0.78 Croresand Spares Rs.0.01 Crores. Revenue of Rs.10.38 Lakhs earned by way of in-plant Trainingduring the Financial Year.

Under the revival plan Phase I 6 projects viz Legacy secrecy projects 1 Gigabitencryptor Multichannel Encryption Unit PSU Business SCADA MUX Telephone Data Centreand IT Projects are implmented. All the manufacturing areas viz. IGI Component Test LabsPCB Plant SMT Line Central Machine Shop Coil Winding Injection Moulding Inspectionand Testing Material Handling Reliability Chambers Air conditioning Plants Powerbackups like UPS DG sets Safety Equipments Servers Desktops Laptops etc. wereupgraded with modern equipments to take care of latest technology in ElectronicsManufacturing. Similarly R&D upgraded the research facilities by inductin latestdevelopment tools for future requirements. R&D took on development of Multi channelEncryption Units (MCEU) Gigabit Encryptor Optical transport Unit (OTU1 & OTU2) 1G& 10 G Interface for NFS secrecy etc.

Future Outlook

Under new revival projects establishment of Data Centres at Bangalore & NainiDevelopment of Radio

Modem CLIP phones Antenna Manufacturing Creation of EMI/EMC Chamber Poly jet 3DPrinter etc. are under implementation. Demo samples are being validated for offering toTSEC certification to BSNL. ITI is also venturing into new smart city / IOT project.

PMKVY

Bangalore plant has set up a state of art skill development scheme called the PradhanMantri Kausal Vikas Yojna (PMKVY) to cater to the skill development for the needy toimpart Hands on Training GE certified course at the Centre of Excellence CoE. 70 studentshave been trained so far on the OFC technique and it is matter of pride that all thestudents who attended the online test have cleared the exam.

IoT

Under Centre of Excellence (CoE) Bangalore plant has set up a centre where ITI willdevelop solutions and showcase of Internet of Things (IoT) namely Smart Environment Smart Lighting Smart Home / Office Smart

Health Intelligent Transport System SCADA Solutions in Water Gas & ElectricityRFID Based solutions Content Filtering Solutions for ISP Education Sector etc. ITI hasentered into teaming agreement with number of IoT companies including somestart-ups firms and plan to showcase the smart solutions from these companies in thisfacility. ITI has tied up with many technology providers for offering various solutionsbased on IoT which go into building smart infrastructure for smart cities and also foraugmenting the Digital India initiative of Government of India. Exploring business fromvarious Government bodies like MoUD & State Government Agricultural Board PollutionControl Board Water Supply Board Municipal Authorities etc.

3D printing

3D printing is a revolutionar y manufacturing method by which we can create varioustypes of

Three Dimensional (Solid) parts using a CAD file with a single machine Bangalore Planthas procured

Fortis 450 3D printer and installed.

Data Centre

ITI is setting up a Data Centre with a rack space of 24000 Sq ft at Bangalore Plant.There are lot of scopes to get good orders from Government agencies. The plan is to set upthe Tier III + Data Centre (Uptime 99.982%) at Bangalore with a DR site at Naini and viceversa. ITI Data Center is an endeavor to provide customer-centric services to GovernmentOrganizations and Corporate entities. The expected potential customers are BanksFinancial services and Insurance (BFSI) sector Government organizations / PSUs DefenseMinistry and Defense Organizations Medium Small and Micro Scale Enterprises (MSME)

Educational Institutions. 1000 racks Data Center at Bangalore and 200 racks Data Centerat Naini has been planned. Data Center with First 300 Racks is planned to be put live byOctober-2017.

TAG – ITI Wallet

This is a cashless secure payment service under Digital India initiative of Governmentof India "Mera Mobile – Mera Bank". This is called TAG-ITI MOBILE WALLETwhich has a huge popularity especially after the Demonetization move. All the transactionsare executed and monitored by our Data Centre in Bangalore plant. ITI is the firstmanufacturing PSU to have entered into cashless transaction with this "TAG-ITI".

Aadhaar Based Authentication Services on SaaS Model

With the ‘Digital India' initiative gaining ground and the increase in demand forAadhaar based authentication services ITI has ventured into the business ofproviding Aadhaar based authentication services based on Software as a Service (SaaS)model to address various segments. Till date over 98 Crores Aadhaar numbers have beengenerated by UIDAI and 97% of Adult population has

Aadhaar Number.

ITI shall be playing the role of providing ASA (Authentication Service Agency) &KSA (KYC Service Agency) services to the concerned departments of Government. of Gujaratwho sign up with UIDAI as AUAs (Authentication User Agency) and KUAs (KYC User Agency).Similarly ITI will provide support for the AUA/KUA entities to integrate Aadhaarservices in their core plaform based on the business requirements. The ITI ASA /KSA solution / platform will be hosted in ITI

Data Center in Bangalore.

ITI is also focusing on ICT projects under Digital India. We have bagged many ordersfor various services like

AADHAAR authentication e-signature e-KYC under different projects like e-mitrae-gram from various

State Governments and nationalized banks.

PCB Plant

A state of art PCB manufacturing plant has been set up in Bangalore plant andinaugurated by DDG-SU on the 18th January 2017.

MoUs signed during the year

Bangalore Plant has signed about 4 MoUs for development manufature and supply of RadioModem CLIP phones Antenna and Ruggedised MUX equipment.

Tender Addressed

GSM 2G IP Encryptors BEU PCM MUX ETS04 Contract manufacturing for BHEL CDACCDoT LRDEBEL ISRO etc.

Measures taken for energy conservation

Energy Consumption for the year is 2276456 units which is only 10% higher thanprevious year consumption inspite of the fact that upgradation of infrastructure andinstallation of various equipments under revival plan are carried out during the year2016-17.

With the upgraded infrastructure for Electronic Manufacturing in place and Rs.3000Crores worth of tenders on the anvil the plant is all set for a historic turn around.

MANKAPUR PLANT

Mankapur Plant including GSM WZ & MTNL has achieved a turnover of Rs.389.45 Crores(including ED & Service Tax) which is highest in the last eleven years.

Projects / Major orders completed during 2016-17

Prestigious NFS project for package F for construction of exclusive optical NLDbackbone and optical access route on turnkey basis for Defense network is being executedby ITI Mankapur. Additional cable colaying work is also started.

Revival Projects

The Plant has upgraded its infrastructure under revival plan during the financial year.The manufacturing for ONT 11 (GPON equipment) has commenced in February 2017 and 4104 nos.of ONT 11 have been produced and delivered to Raebareli unit against BBNL order During theyear the unit obtained for the first time orders worth Rs.33.50 Lakhs for contractmanufacturing from C-DoT Bangalore.

BBWT (Wi-Fi) PRODUCT

Wi-Fi products are emerging as a good business opportunityin the Indian communicationmarket.

Broadband Wireless Terminal (BBWT) of C-DOT is an effective solution to providebroadband services using Wi-Fi technology to rural urban and semi urban areas. It is anideal solution for railway stations schools warehouses hotels and other enterprisesneeding to extend managed wireless LANs outdoors where Ethernet cabling is not possible.It operaters in 2.4 Ghz and 5.8

Ghz license free band and supports optical and electrical Ethernet 10/100/1000 Mbpsinterface for backhaul connectivity.The Plant has installed the equipments formanufacturing of BBWT-WiFi systems.

Low Power BTS

Under USO Fund Low Power BTS of 2W and 5W capacity are to be installed in uncoveredrural/ remote areas/ villages across the country especially in North Eastern part ofIndia. The compact BTS of C-DOT is a potential solution for providing GSM Network in theseareas. The equipment for manufacturing of Low Power BTS is planned to be installed inMankapur by September 2017.

Skill Development Programme

Under the Skill Development Programme Mankapur Plant has adopted "Government.Industrial Training Institute Mankapur" in September 2016. and have impartedtraining to 371 stdents. Besides this training for skill up-gradation of Lecturers ofGovernment. Polytechnics and seminar on Management of Waste

Electrical Electronics Equipment (WEEE) was also conducted by unit HREDC during theyear.

Hospital Information System (HIS) an application to handle the services of ITIhospital has been developed in house and successfully deployed by ITI Computer Division.HIS includes service modules like OPD Referrals Emergency Common Services andRostering besides Store management Indoor management User management and Master datasetup.

Measures taken for energy conservation

a. Installation of LED street lighting in factory and colony area. – 300 Nos. b.Retrofit replacement of LED tube lights in place of conventional FTL's in factory area 300Nos. c. Surrendering contract demand of factory connection by 1300 KVA in August 2015& another by 1200 KVA in May 2016 and the present contract demand of factory is 2000KVA. d. Close monitoring of daily power consumption of factory and colony. e. The energyconservation efforts has resulted in a saving of approx. Rs. 105 lakhs in 2016-17 incomparison with 2015-16.

RAE BARELI PLANT

Rae Bareli Plant achieved a performance of Rs. 435.67 Crores during the year 2016-17by execution of NFS Project GPON equipment supplies supply of SMPS equipments and GSMFranchise business.

Major Orders received up to 31st March 2017

OutofthepurchaseordersreceivedfromBBNLtowardsGPONProjectforRs.205CroresandfromBSNLforRs 130 Crores during the year 2016-17 Purchase order value of Rs.114 Crores and Rs 47Crores respectively are allocated to ITI Raebareli for supply of ONTOLT Splitters accessories and IT equipments.

GPON Project

Giga-bit Passive Optical Network (GPON) is a family of products for high speedbroadband communication through fibre backbone. It caters to variety of services likevoice video data internet etc. Active transmission equipment in GPON network consistsmainly of Optical Line Termination (OLT) and Optical Network Unit (ONT). ITI Raebareliplant has supplied 7635 ONT and 03 OLT up to 31st March 2017.

PLB HDPE PIPE Project

PLB HDPE (Permanently Lubricated High Density Poly-ethylene) Pipe is used for laying ofoptical fiber cable (OFC) underground. ITI Raebareli had already set up one line of PLBHDPE Pipe manufacturing and obtained TSEC. Further two additional lines of PLB HDPE Pipemanufacturing have been installed. The plant has received an educational order of Rs. 48Lacs from BSNL and obtained BPC.

FUTURE OUTLOOK Li-Ion Battery Project

Lithium is a good conductor of electricity and can combine with many other metals toform alloys. Lithium ion batteries provide more and more energy in a smaller containerLithium-ion batteries have many applications like cell phones FTTX installationsremoteterminals (such as in FTTX installations) access networks BTS (Base TransceiverStations for wireless networks cable networks central offices fuel cell powered systemcars artificial pacemakers PCs laptops audio players clocks toys camerasautomobiles etc.

ITI has entered into agreement with M/s EXICOM for implementation of this project forTelecom application.

ITI will be fully responsible for marketing manufacturing installation andmaintenance support.

Optical Fiber Cable(OFC) Project

An optical fiber cable is a cable containing one or more optical fibers that are usedto carry light. The optical fiber elements are typically individually coated with plasticlayers and contained in a protective tube suitable for the environment where the cablewill be deployed. Different types of cable are used for different applications.

Fiber optic cables find many uses in a wide variety cables include MedicalDefense/Government Data Storage Telecommunications Networking Industrial/

Commercial FTT-X technology.

ITI Raebareli has ordered Machines and equipment worth Rs. 40 Crores for implementationof this project.

Optical Fiber Cable (OFC) manufacturing plant is under installation and commissioning.

PALAKKAD PLANT Performance

The Palakkad Unit has achieved a turnover of Rs.231.71 Crores. during the year 2016-17registering a profit of Rs.131.29 Crores. The Palakkad unit has set an ambitiousproduction target of Rs.307 Crores for the year 2017-18 for which the entire Palakkad teamis making all out efforts.

Major Projects / orders completed in Financial Year 2016-17

The unit has completed the prestigious identity projects such as National PopulationRegister (NPR) awarded by Office of RGI and Marine Fishers Identity Project (MFID) fromDepartment of Fisheries. The Unit has also successfully completed the work of SocioEconomic Caste Census (SECC) for the Ministry of Rural Department which helped them tohave a unified database which can be used for availing the various benefit schemes. ITIhas completed the supplies of Biometric Handheld Terminals to Office of RGI and Fisheriesdepartments for the reading and authentication supplies against NPR and MFID projects. Theunit has also completed the order of NPR Aadhaar seeding project in Kerala for the ordervalue of Rs.11.00 Crores.

ITI Palakkad also executed SSTP Upgrade Project worth Rs.37 Crores for BSNL andreceived Purchase Order of Rs.134 Crores from BSNL for MLLN Project out of which orderworth Rs.75 Crores is executed during 2016-17. AMC orders worth Rs.40 Crores of MLLN andSSTP projects were successfully executed. Excellent technical support had been provided toBSNL and MTNL for MLLN SSTP and OCB projects.

Defence / Contract Manufacturing

ThefocusedandresultorientedeffortsintheDefenceandContractmanufacturingareahadbeenmadeduringthe year 2016-17. A leap in the business activities with VSSC has been made with thefacility accreditation of SMT assembly line Conformal Coating Testing of some avionicspackages and Component Screening. Subsequently accreditation for manufacturing and testingof 21 avionics packages and screening of 2 types of components received from VSSC.Purchase Order are continuously being received and executed within the stipulated deliveryschedules.

VSSC due to their increased launch vehicle requirements are planning to outsourcevarious activities as an end to end production mode to approved work centres and ITIPalakkad is qualified as one among them.

The manpower for space quality work are trained from VSSC to meet the stringent qualitystandards for space applications. Packages manufactured and tested at ITI Palakkad aresuccessfully flown to space in various launch vehicles (PSLV & GSLV) of ISRO includingthe recent GSLV Mark III mission which was a major milestone of ISRO. ITI Palakkad is theonly approved work centre by VSSC for manufacturing of RMSA (Remote Mount Safe Arm) whichis a package used to trigger the launch vehicles in to space. To meet the requirements ofMil and flight grade bare PCBs the PCB plant is being upgraded with the state of the artmachineries and the accreditation process is in progress. Manufacturing orders alsoincreased with the enhancement of customer base with M/s BHEL M/s CDOT M/s CDAC and M/sBEL for contact manufacturing and M/s BEML for cable harnessing. Orders received againstDefence and Contract manufacturing are worth Rs.2.5 Crores which is much higher thanprevious years.

Future Outlook

As part of the revival project ITI Palakkad is in the process of getting VISA/MasterCertification against which the necessary infrastructure setting for Smart cardpersonalization surveillance requirements as per the VISA/Master specifications etc. isin progress. Once certifiedITI will be the first PSU to venture in the EMV cardpersonalization domain for supplying EMV chip cards for the banking requirements.

The unit has implemented in Phase I new projects such as Component screening Smartcards and MLLN. Against the second phase the projects such as Smart Cards Componentscreening PCB plant upgradation HDPE pipe Smart Energy meter Set top box setting upof Repair centre Handheld terminals Mini PC etc are progressing to address the marketrequirement.

The installation & commissioning of machines for HDPE pipe is in the finalstage ofcompletion and commercial production is scheduled by November 2017.

ITI has entered into an MoU with M/s CDAC Thiruvanathapuram for the Transfer ofTechnology (ToT) and manufacturing of Smart Energy Meter. ITI has signed an MoU for theToT and manufacturing of Aadhaar Authentication Terminals. ITI has also developed Mini PCunder the brand name "ITI Smaash" for which the marketing efforts are inprogress.

E-governance Project Initiatives

Against e-governance projects ITI has submitted the proposal to Kerala StateGovernment against the RFP for Fair Price Shop (ARD) automation under end-to-endcomputerization of Public Distribution System (PDS) and deployment of e-POS devices inKerala. ITI has also submitted the techno-commercial proposal to Kerala State RoadTransport Corporation (KSRTC) for Intelligent Transport Systems along with M/s CDIT

Thiruvanathapuram as the partner.

Additional Skill Acquisition Programme

Kerala Government has selected Palakkad Unit as one of their Training Service Providerof ASAP Scheme (Additional Skill Acquisition Programme) and the Unit has conductedtraining for one Batch of 29 students for Pick and Place and two batches of around 30students each for PCB Course. The Unit could generate a revenue of approximately Rs 9lakhs against this.

QMS/ EMS

The Palakkad Unit is certified with ISO 14001: 2015 for Environment Management System.The certification audit for Quality Management System and Environment Management Systemwith ISO 9001: 2015 standard is completed.

NAINI PLANT

The Plant has achieved a turnover of Rs. 8.25 Crores including ED & ST for the year2016-17 against supply of Solar equipments for GPON order received from BBNL.

During 2016-17 ITI Naini being the designated unit for Solar Panel and Transmissionequipment has geared up for addressing Solar Segment and implementation of Revival PlanProject.

Major Orders and Projects Solar Project

Against the purchase orders received from BBNL and BSNL for GPON Projects ITI NainiPlant is supplying

Solar Power equipment. ONT (Broadband Access equipment) which is part of the GPONequipment will be installed in Gram Panchayats. The Solar Power equipment which is beingproduced by ITI Naini will provide seamless power to the ONT.

ITI Naini has successfully received Type Approval Certification (TAC) for Solar PowerEquipment from BSNL-QA Bangalore. The Solar modules (60Wp) offered with the product hasbeen successfully tested by National Institute of Solar Energy (NISE) Gurugram andConformity Test Lab New Delhi as per BSNL QA test Plan.

Out of present BBNL order quantity of 20000 numbers. ITI Naini has dispatched 5012numbers of Solar Power Equipment till March 2017.

ITI also Participated in Railtel tender for supply services and AMC for SPV basedsolar systems required for GPON. ITI Naini expected to get order for SPV system for GPON.

ITI received order of Rs. 65 Lakhs from M/s L&T construction for Supply of Systemfor project & Work order is awaited which will lead to total Purchase Order value ofRs 75 Lakhs for the project. This will open a new window for Grid Connected SPV System forhigh KW/MW capacity. Efforts are being made to get similar order from other PSUs for Gridconnected Rooftop Solar Power plant.

Future Outlook

ITI Naini has initiated various activities of development of solar application basedproducts like Charge Controller LED Street Lights and other LED based lightingproducts.

The Plant has geared up for addressing the opportunity in renewable energy sector andwill supply Crystalline Solar Modules to various schemes of Ministry of New andRenewable Energy

(MNRE). ITI Naini already has 5 MWp installed capacity of Solar Panel Manufacturing

ITI make modules (from 30 Wp to 300 Wp) have beenqualifiedin stringent Test of IEC andhas been certified for IEC 61215 61730 61701) by M/s UL India Bangalore.

To meet future requirement Naini has planned under Revival Plan Phase-II to augmentmanufacturing capacity by adding 18 MWp Automatic Solar Panel Manufacturing Line.Procurement & installation of equipment for 18 MWp Manufacturing Line is inprogress. Civil Plant & other related activities are in a dvance stage of completion.Moreover Tabber- Stringer machine has been incorporated in the existing 5 MWp lineto enhance automation under Revival Plan Phase-I.

ITI is planning to participate in 1000 MWp tender for Grid connected Roof top SolarPower plant on

Government buildings floated by Solar Energy Corporation of India (SECI) a PSU underMinistry of New and Renewable Energy (MNRE). ITI is expecting for 50 MWp capacity in thetender. A consortium agreement has been signed with M/s Cambridge Energy ResourcesGurugram Haryana for this project.

Gyansetu project

ITI Naini has signed an agreement with Center for Development of Telematics (CDoT)& Center for Development of Advance Computing (CDAC) Bangalore for Transfer ofTechnology of GyanSetu Project Hybrid Solar Charge Controller suitable for Telecomapplication and On grid Solar Power Conditioning Unit (PCU) of various rating for SolarRooftop application. The Gyansetu project will extend the services of Digital India

Program in rural areas through Common Service Centers (CSC). This project will providereal time information about the Government services to citizen (PAN Card AADHARElection Card Passport) Education Health Mandi rates weather forecast Agricultureinformation Land records (Khasra/Khatauni) etc.

Carrier Ethernet

Naini unit is also exploring to address Carrier Ethernet Segment which is used forMetro/Aggregation

Network as a Revival Plan Project.

Data Center

Purchase order has been placed for design and implementation of Data Center. Buildinghas also been identified for Data Center (Disaster Recovery Site)

Quality

For Solar Manufacturing 18001 certification for Occupational Health and SafetyServices (OHSAS) and 50001 certification for energy systems are mandatory. ITI Naini hasacquired 18001 certification from

SOCOTEC in March 2017 and is valid up to March 2020.

Skill Development Training

15 days Skill Development Training Program of Solar Module Assembly Technicianconducted for 4 batches and 90 trainees were trained & revenue of approximately Rs.2.06 Lakhs generated and an amount of Rs.1.0 Lakh spent for conducting on-line exam fortrainees through TSSC. Six months specialized industrial training conducted for 80trainees.

4 to 6 weeks Vocational/summer training was conducted for 340 Degree/Diploma/MBAstudents and revenue of Rs.6.64 Lakhs generated. Five In-house training programs and 2External training program organized for total 52 training man-days with in the trainingbudget of Rs.0.35 Lakh (For In-House and External)

Energy Conservation

During the year 2016-17 12031 KVAH saving in consumption was achieved as an EnergyConservation

Measure.

SRINAGAR PLANT

The Plant is gearing up for Skill Development activitites for the benefit of localyouth employees and other sections of the Society. Some areas of the Plant is renovatedto set up Skill Development Centre.

NETWORK SYSTEMS UNIT (NSU)

This non-production Unit with core strength in Turnkey Projects execution and AnnualMaintenance works has a track record of steady growth and continuous profitability.

In the Financial year 2016-17 NSU has given better performance by achieving a turnoverof Rs.138.01 Crores and registering a profit of Rs.28.50 Crores Revenue from AMC for ASCONcontinues to be the major contributor while OCB 283 AMC for BSNL and MTNL contributed Rs.31.37 Crores For the current fiscal

OCB 283 AMC for BSNL and MTNL have been renewed and are together valued at Rs.26.74Crores Hence focus is now on generating maximum turnover under AMC for ASCON which isvalid till the end of 2019. NSU is also geared up to involve itself in a big way forInstallation and Commissioning of GPON equipments. The Unit has initiated steps to migratefrom ISO 9001-2008 to ISO 9001-2015 Certification Standards.

HIGHLIGHTS OF REGIONAL OFFICES (ROs)

Performance ofReginalOffices for the Financial Year 2016-17 is Rs.190 Crores (withService Tax) which is about 31% higher than the last fiscal with a profit of Rs.2.77Crores Sundry Debtor realization during

2016-17 is Rs.120.56 Crores which is 34% higher than the last fiscal. Orders bagged in2016-17 amounts to approximately Rs.216.13 Crores. As on 01.04.2017 Orders worth Rs.76.31Crores are one hand.

New Projects taken up in 2016-17

The following Projects were taken up by Regional offices during the year 2016-17.

1. Integrated University Management System (IUMS) for Universities of totalapproximately value

Rs.18.29 Crores - RO Delhi.

2. CCTV Surveillance Systems for Ministry of Finance (North Block) Ministry ofAgriculture (Krishi Bhawan) and HP Cooperative Bank of approximately total valueRs.17 Crores. - RO Delhi.

3. Wi Fi Zones establishment for Government Colleges in Punjab & Haryana MandiBoard of approximately value Rs.3.62 Crores.

4. Wi Fi Zones establishment at important tourist spots in the state of Uttarakhand forthe Government of Uttarakhand of approximately value Rs.19 Crores. - RO Lucknow.

5. ICT Infrastructure creation and Implementation of Hospital Management Systems forAYUSH /

AIIA of approximately total value of Rs.9 Crores. - RO Lucknow.

6. Audio Video Infra for Lucknow Development Authority (LDA) of approximately totalvalue Rs.29.50

Crores - RO Lucknow.

7. CCTV Surveillance systems for Allahabad University campus & 49 Warehouses of CWCof approximately total value Rs.4.50 Crores - RO Lucknow.

8. Integrated University Management System (IUMS) for HNBG Central University ofapproximately value Rs.2 Crores - RO Lucknow.

9. Digital Emergency Announcement & Audio Video System for UP Special Task Force ofapproximately value Rs.2 Crores - RO Lucknow

Major orders successfully completed in 2016-17

1. e Tendering business of value Rs.43 Crores - RO Delhi Bangalore Kolkata &Lucknow.

2. RO Hyderabad has successfully implemented the Network Management System (NMS)project for BSNL.

3. RO Lucknow has successfully established the Audio Video Infra for LucknowDevelopment Authority

(LDA).

4. RO Delhi has completed Integrated University Management Systems (IUMS) orders ofvalue

Rs.12.0 Crores

5. RO Delhi has completed CCTV Surveillance orders of value Rs.16.0 Crores

6. RO Delhi has completed Wi Fi Zones establishment orders of value Rs.3.62 Crores

Future Prospects

1. Ministry of Urban Development has assigned the task of implementation of an ICTbased solution to capture real time feedback from community & public toilets in12 States / Union Territories - IoT business.

2. ERP / Integrated University Management Systems for universities in Bihar.

3. GIS activities for UP Buildings & Other Construction Workers Welfare Board.

4. e Classrooms for Medical Colleges under Ministry of Health.

5. CCTV Surveillance system for District Courts in Bihar.

Puttingallouteffortstoaddress&grabthebusinessfromsegmentslikeSmartCityIoT&eMarketPlaceetc.

RATING IN MEMORANDUM OF UNDERSTANDING

The Company's rating for the year 2015-16 is "Good" with a positive score of60.72. The company has signed Memorandum of Understanding with the Administrative Ministryfor sales turnover of Rs.2000 Crores

(at Good level) for the year 2017-18.

FUTURE OUTLOOK

The following projects are planned for implementation under revival plan.

HDPE Pipe and Optical Fiber Cable Manufacturing

Laying of Optical Fiber Cable (OFC) underground is to be carried out through PLB HDPE(Permanently Lubricated High Density Poly Ethylene) Pipe only. The demand for HDPE Pipeshas quickly risen due to several Government projects like NFS ASCON BharatNet etc. Asper Government of India initiative for

"DIGITAL INDIA" programme optical fibre network is to be established forhigh speed internet access across the country Therefore there is huge demand of PLB HDPEpipes. Apart from BSNL and BBNL other service providers are also requiring such type ofPLB HDPE pipes for their teleco service. In addition to the existing one manufacturingline for HDPE two more lines have been commissioned at ITI Raebareliplant An educationalorder for 100 KMs HDPE pipe to BSNL has successfully completed by RaeBarei unit. The plantis now ready for bulk production.Considering the very huge market available for thisproduct ITI is in the process of establishing one more line at ITI's southern unit atPalakkad and will be commissioned shortly. Similar to HDPE pipes as indicated above thereis huge demand for optical fibercables also.

It is expected that the existing old copper cables used for India's Telecommunicationnetwork will be replaced with OFC in future. And also therewill be huge demand of OFC forBhartNet phase III. Looking in to OFC demand expected in the country Company is in thefinal stages of commissioning one line OFC manufacturing at Raebareli unit. Furtheroptical fibre drawing and optical fibre cable manufacturing infrastructure is also beingplanned at Bangalore unit.

? Encryption Products for Defence

The encryption products for Defence communication networks are being designed by ourR&D and manufactured and supplied by ITI for Theproducts long time. ITI has been thepioneer in this field. are evolved in tune with the evolution in the digital communicationtechnology. There are major requirements of encryption products for Defencefor their NFSnetwork ASCON network etc. ITI is expectinggood business in this year in encryptionportfolio.

? G-PON Manufacturing

ITI had participated in GPON turnkey project tenders for BharatNet project andsuccessful in getting orders from the BBNL and BSNL. Company got orders for about Rs.425Croresfor manufacturing and supply of 1500 OLT and 37300 ONTs. Further company isexpecting one more GPON order from Railtel shortly. ITI is manufacturingthese products atRaebareli and Mankapur plant from component level with C-DOT as the technology provider.The supply installation and commissioning are in progress across India. In view of hugerequirement of OFC deployment for Government of India BharatNet project phase II and IIIthere would be corresponding requirements of GPON solution also. The Company is geared upfor manufacturing using our latest established infrastructure facilities..

? Manufacture of Smart Cards

As an extension of National Population Register project which is under execution byITI as a consortium partner with BEL and ECIL ITI is looking at the huge opportunity ofmanufacturing Smart card based identity cards for the citizens in the Country. Inaddition there are opportunities regarding supply of smart cards for unorganized workersdriving licenses motor vehicle registration etc. ITI is already having smart cardmanufacturing facility at its Palakkad plant. This is being further augmented to takemanufacture of various types of identity cards.

? Manufacturing of Li-Ion Batteries

Long life low maintenance and high energy density back up power solutions using Li-Iontechnology have been proved in all fields of consumer electronics like PCs Mobile phonesTablet PCs etc. They also make inroads into other applications of Telecom industry likepowering GSM towers. ITI has taken TOT formanufactureandsupplyofLi-IonbatterieswithfocusonmeetingneedsofTelecomapplictionslikeGSMBTSsites. ITI is planning to take up assembling of Li-Ion batteries in one of its plantsspecifically for supplying to the BTS sites.

Component Screening Project

Component Screening is a Project suggested by VSSC (ISRO) for ITI Palakkad to take upfor meeting their requirement of approximately 5 Lakh screened components per year.Screened Components are required regularly for VSSC for their space missions. Basiccomponent screening facility has already been established in the plant. Further theinfrastructure upgradation is in final stages to cater for new components and also formeeting needs for component screening for defence.

? Data Center and IT Business

The Company has planned investment to address the huge growth in the service sectorrelated to Information Technology. Currently ITI has been operating one Data Center in itsBangalore plant in partnership with a private company. Looking into high demand for dataCentre business and the expected growth in India the Company is already in the process ofbuilding our own Data Centre under the revival plan. The Company is already providing ITsolutions like E-Banking Aadhaar based authentication etc. on SaaS basis from the DataCenter.

Wi-Fi products

Wi-Fi products have revolutionized the way we communicate. In addition to low powerWi-Fi products in residences Wi-Fi hot spots are coming up all around the country.Further Wi-Fi products are also expected to be part of the Digital India programme toconnect every citizen to Broadband network and also in setting up of Smart Cities. ITI isplanning to address this business opportunity in association with the technology partner.

Managed Leased Line Network (MLLN) Equipments

ITI has been the leader in supplying MLLN equipment for BSNL and MTNL since 2002-03.The existing MLLN networks of these Telecom Service Providers have been set up andmaintained by ITI till date. ITI is also getting good revenue for giving maintenancesupport to the existing networks. Company has bagged one more big order for MLLN turnkeyproject recently from BSNL. ITI hopes and gearing up to address the future MLLNrequirements on IP based technology.

Low Power BTS systems for remote villages

Low power BTS systems have been planned as a means to extend mobile connectivity tocover all the unconnected villages in the country. USOF has planned to fund suchprogrammes so that every village in the country is connected through mobile communicationnetworks. ITI is hoping to get orders for supply of equipments required for such networks.

? Business with other PSUs/Contract Manufacturing

Contract manufacturing for PSUs is an existing activity in ITI. ITI is ready executingjob works for PSUs like BHEL BEL VSSC NPOL etc. With upgradation of infrastructure inITI there is more scope for getting new business in the area of contract manufacturing.

IOT and Smart City

ITI has made foray in to Internet Of Things commonly called as "IOT" which ismaking big head wayincommonman'sdaytodaylifeacrosstheworld.ThepurposeoftheSmartCitiesMissionistodriveeconomicgrowthandimprovethequalityoflifeofpeoplebyenablinglocalareadevelopmentandharnessingtechnologyespecially technology that leads to Smart outcomes. Application of smart solutions willenable cities to use technology information and data to improve infrastructure andservices. ITI has entered in to teaming agreements with many start-ups who have developed"smart" solutions which are integral part of IOT sector. ITI is planning tooffer solutions for smart education smart health smart environment smart transport etc.As of now 90 cities find a place in the Centre's programme. smart city tenders to securebusiness in the days to come.

CONTRIBUTION TO EXCHEQUER

During the year your company has contributed Rs. 10497.99 Lakhs to the exchequertowards duties and taxes.

PUBLIC DEPOSITS

Value of deposits held by the company is NIL. Deposits aggregating to Rs. 0.24 Croreshad matured for payment but were not claimed on due dates.

REVIEW OF ACCOUNTS BY INDIAN AUDIT AND ACCOUNTS DEPARTMENT

The comments on the accounts for the year 2016-17 by the Comptroller and AuditorGeneral of India is appended.

JOINT VENTURES

INDIA SATCOM LIMITED (ISL)

ISL was incorporated in the year 1987 and the present shareholding of ITI in ISL is 49%of its share capital with M/s. Chris Tech Systems Pvt Limited holding 51% of its sharecapital. Consequent to the delay in final disposal of the case initiated by KarnatakaIndustrial Area Development Board (KIADB) which is pending before Hon'ble High Court ofKarnataka ISL could not proceed with its revival operations through land development.

There was no company which became or ceased to be a subsidiary joint venture orassociate of the Company during the year under review.

The salient features of the Joint Venture Company are furnished in form AOC -1 which isappended to this report.

QUALITY

Quality policy of ITI is to "deliver high quality secure and reliable productsservices and solutions" by empowering every employee. Quality Assurance wings arefunctioning in all the manufacturing units of ITI. The QA wings are responsible fordelivery of Quality products and services. The Units have been well equipped withnecessary test facilities and test systems for carrying out elaborate tests conductingreliability evaluations on all the products to ensure quality. This is achieved by soundand effective Quality Management System.

The five manufacturing plants at Bengaluru Palakkad Mankapur Rae-Bareli and Nainihave been accredited with ISO 9001-2008 NSU Bangalore is also accredited With ISO9001-2008. The periodical

Surveillance Audit & Recertification Audits have been conducted successfullyKeeping in tune with the Global concern for Environmental Management all the plants havealso gone in for ISO 14001-2004 EMS certifications. The guidance and support to allthe units for training implementation surveillance audits & recertification audits ofISO 9001-2008 and EMS 14001-2004 are provided by Corporate Quality Assurance .

Corporate Management has given approval to the units for upgradation to the new ISOStandards - QMS ISO 9001:2015 & EMS 14001:2015 as per the requirements.

There is a three-year transition period (Sept 2015 to Sept 2018) to upgrade to the newStandards. Suitable internal auditors training are being conducted by individual Units byutilising their Annual Training Budget allocated for 2016-17.

MANPOWER

Employee strength at the end of the year 31st March 2017 was 4052 out which 431 werefemale employees. As on 31.03.2017 there were 670 employees belonging to Scheduled Castesand 47 belonging to Scheduled Tribes.

56 Officers on Tenure basis 20 Contract Engineers 13 Contract Technicians and 10Contract Operators were recruited during the year 2016-2017.

Employees belonging to Physically Challenged Persons numbering 55 and Ex-servicemencategory numbering 12 were on the rolls of the company as at the end of thefinancial year.

INDUSTRIAL RELATIONS

The Industrial Relations scenario in the Company was cordial during the year.Employees' Union and

Officers' Association extended their co-operation and support in ensuring smooth workflow and helped to meet the Company's objective.

PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE

As per the requirement of the Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013 (‘Act') and Rules made there under theCompany has constituted Internal Complaints Committees (ICC) to redress complaintsreceived regarding Sexual Harassment at our all Units. All employees (permanentContractual Temporary trainees) are covered under this policy.

No. of complaints are received during the year 2016-2017 is NIL.

HUMAN RESOURCE DEVELOPMENT

The world of today as we know has gone through many revolutionary changes that broughtpeople even more closer than they were in the past. The world that we live and breathe intoday while benefiting ourselves with the endless possibilities that technology hasintroduced to us it brought forth a gift unparallel to any other luxury. This rapidlygrowing telecom market brings on more challenges. The lack of qualifiedhuman resource inboth technical and managerial competencies in telecommunication sector make the Governmentconfront with immense constraints in its development project expansion. The Government ofIndia hence attempts to improve the skill sets in the telecommunication industry. Thetraining and development are the key instruments to build the HR skills and capacity ofITI Limited. The sufficient investment on human capital

Training & development will produce moderate and positive impacts on employeeproductivity improvement and also organizational performance as a whole. The Learning andDevelopment had strong relationship to the company's performance and improvement. Thecorrelation of the training capacity and imparting telecom skills developmenttraining is immense. The training activity in the company is a planned process orientedtowards employee productivity development and to enable its employees to remain updated ofknowledge and skills surmounting the technological obsolescence and competitive edge inour services. The training is allied with the financial condition of the Company.

Bearing in mind the Company MoU target on HRM-Training for the financial year 2016-17the HRD initiatives were more oriented towards imparting training toExecutives/Non-Executives for knowledge/ skill development in Telecom & IT. Trainingprogrammes and workshops were organized in IoT Broadband OFC Mobile NGN CyberSecurity Communication Technologies ERP Cashless transactions GST MDP etc. towardsdigitalization and to improve computer literacy in the company both basic and advancecourse in computer skills. Training programmes in Microsoft Office were impartedthroughout the company. Training programmes were also organized in-house on Soft SkillsStress Management Safety besides organizing awareness programmes in Health EnvironmentEnergy Management and Official

Language.

ITI Limited takes up Government of India initiatives like ‘Skill India'‘Digital India' etc. to fully comply with the directives of the Government of Indiaand in HRD sphere to accelerate skill development training and its implementation. Thecompany has entered into MoUs with NSDC-Telecom Sector Skill Council

(TSSC) and Electronics Sector Skill Council of India (ESSCI) for implementation ofskill development activities and has taken initiatives. The Company is a NSDC affiliatedtraining provider to ensure delivery of NOS aligned curriculum. TSSC/ESSCI has accreditedfor imparting skill development in their QPS/ Job Rolls for the students across Indiautilizing the infrastructure facilities in the HRD/SD centres of ITI

Units. These short-courses are devised to enable students trainees to take upemployment immediately enhance the employability in association with Governmentauthorities and Skill Sector Councils and other

Training Partners in all ITI Units. Training of Trainers (ToT) programmes in OpticalFiber Splicer and Optical Fiber Technician have been organized at Bangalore for trainersof Bangalore Plant and Srinagar

Plant separately. Trainers have been prepared to start the skill delopementtrained/being trained in various job rolls like Base Station Service Engineer (BSSEngineer) OFS PCB Fabricator Circuit Image Operator (PCB) Pick & Place OperatorSolar Module Assembly Technician Field Trial Computer Peripheral (FTCP) etc.

During the financial year ITI imparted skill development training to 2480 traineesout of which 173 in TSSC/ESSCI qualifications packs/job role and 2307 have been trained inITI modules.

In respect of HRM performance indicators 59 training programmes have been organized inhouse/ sponsored outside. The company totally trained 1644 Executives / Non-Executivesachieving total 2068 mandays. ITI always achieves its targets and in fact overwhelminglysurpasses given targets of MoU with DoT. Additionally the skill gaps arising out of newertechnologies and changed product portfolio among the employees are also continuouslymonitored and effectively plugged in periodically.

Training becoming a vital part to help groom the telecom sector of today ITI Limitedhas started to take up the stance in emphasizing the need for telecom training andexecutive coaching to help their employees train better for the present as well as futurechallenges. Existing in today's ever growing market the company has to come up with manydifferent things to stay in the competition. Now this involved the managerial levelserving their companies to get a better understanding at what they are about the uprisingchallenges in the telecom industry by imparting telecom training coupled with executive ormanagerial development in collaboration with Premiere Institutes like IITs IIMs etc.Training has its importance for the managerial staff as well since they are the ones thatare responsible for getting the work done through their team. Executives / Managerialtraining brings a better understanding to them about what they need to prepare themselveswith while performing better at their job. Leadership development is also taught to peopleunder the training programme so that those with the spark to become a better leader oftomorrow can get a good insight at what they need to gear themselves up with.

OFFICIAL LANGUAGE

All Units / Offices have established "Check-points" in their departments tomake effective implementation of the Official Language Policy. Monitoring is being done bythe respective Official Language Implementation Committee(OLIC) constituted in every Unit/ Office.

The Progress of Implementation of Official Language in our Corporate Office as well asin Units / Offices is also being periodically reviewed by the OLIC of Corporate office.

In order to enhance the working knowledge of Official Language of our employees theyhave been sent to various Training Programs organized by the Government for impartingtraining in Hindi awareness Hindi typing and Hindi Stenography as per the Company'srequirement. However the Official Language Cells of the different Units / Offices havealso conducted internal training programs. Besides employees were encouraged to take partin Hindi Prabodh Praveen & Pragya examinations for which financial incentives havealso been sanctioned.

Our Units / Officesat Naini Rae Bareli Mankapur New Delhi Mumbai Lucknow &Corporate Office have been notified in the Gazette of India as per OL Rules 10 (2) &(4) 1976 after more than eighty percent (80%) of the staff working have acquired aworking knowledge of Hindi in these Units/ Offices.

After reviewing our quarterly reports regular appreciation letters have been receivedfrom Dy. Director-

OL Official Language Department DoT New Delhi as well as Dy. Director(Implementation) Regional Implementation Office Bangalore.

A Joint Hindi Fortnight Program for Bangalore based PSUs / Organisations was organizedby TOLIC (Town Official Language ImplementationCommittee) Bangalore between 11.07.2016 and10.08.2016. Various types of competitions were arranged during this period. On thisoccasion many officers/Non-officers of Bangalore based Units / Offices also participatedin these competitions and more than 03 Officers / Non-Officers have got the prizes.Valedictory function was held on 28.12.2016 and cash prizes and certificates to the winingparticipants were given by President TOLIC. "Hindi Fortnight" was celebratedand various Hindi

Workshops were organised for encouraging progressive use of Hindi during 2016-17.Bilingual (i.e. English and Hindi) website of company is being regularly updated.

VIGILANCE

During the year 2016-17 Vigilance Department focused on the preventive vigilanceactivities in order to bring more transparency and efficiency in the organization. CVCguidelines and Government policies in this regard have been strictly followed.

ToachievetheaboveobjectivesCorporatevigilanceadvisedperiodicallytotheManagementforimprovementregarding publishing of NITs and ‘Contracts concluded' in the company websiteimplementation of Rotational Transfers of Executives in Sensitive Areas implementation ofIntegrity Pact periodical review for ensuring probity and efficacy among employees.Several System Improvement Measures have also been suggested to various departments as apart of preventive vigilance.

The Company celebrated Vigilance Awareness Week from 31st October 2016 to 5thNovember 2016 in all manufacturing units business establishments and corporate office.Seminars were organized at

Vidyalaya Rae Bareli and at St. Peter School Rae Bareli to create awareness oncorruption and on the role of preventive vigilance to combat corruption. In this occasiona booklet was released by CVO-ITI on Awareness on Works Goods and Services. This bookletelaborately covers necessary guidelines to be considered for procurement and differentcheck points to be considered during the different phases of purchase procedures tenderprocess award of contracts payment of contractors back to back procedure etc. It alsorefers to the list of relevant circulars/orders issued by CVC/DoPT/Ministry.

The Vigilance department is putting emphasis on preventive vigilance likeimplementation of Integrity Pact E-procurement conducting CTE type examinationpublishing of tenders and POs in website surprise checks in sensitive departments andchecking of Annual Property Return etc.

RIGHT TO INFORMATION

During the year 2016-17 out of 393 RTI requests information was provided against 3761 request rejected and 5 requests were transferred to another Public Authority. The RTIreturns on quarterly basis is being submitted to the Ministry for forwarding the same toCentral Information Commission and the same is published on our Company website. With aview to achieve total transparency the requests and responses are being uploaded on ourwebsite by FAA/CPIO/Public Information Officers of Units under specific link given to eachUnit. All cases referred to CIC as second appeal have been successfully addressed.

AUDITORS n STATUTORY AUDITORS

M/s. Sundar Srini & Sridhar Chartered Accountants Chennai were appointed byComptroller and Auditor General of India as StatutoryAuditors for the year 2016-17.

BRANCH AUDITORS

The following firms of chartered Accountants were appointed as Branch Auditors fordifferent plants of the Company for the year 2016-17

Unit Name of Auditor
1 Bangalore Sundar Srini & Sridhar Bangalore
2 Naini Neeraj Prakash & Associates Allahabad
3 Rae Bareli Rajesh Srivastava & Associates Lucknow
4 Mankapur Sri Ram Bhuvanesh & Co Faizabad
5 Palakkad Mahadevan & Sivarajan Palakkad
6 Srinagar S D M & Co Srinagar

COST AUDITORS

M/s GNV Associates Cost Accountants Bengaluru was appointed as Cost Auditors for theyear

2016-17- for the cost audit of south-based units located at Bangalore Palakkad andalso consolidation for the Company and M/s. Aman Malviya & Associates Lucknow asBranch auditors for the Cost Audit of

North based units located at Naini Rae Bareli Mankapur and Srinagar.

SECRETARIAL AUDITOR

The Company has appointed Shri D Venkateswarlu Company Secretary in practice toundertake the

Secretarial Audit of the Company. The Secretarial Audit Report for the year 2016-17 andreply to the observations of the Secretarial Auditor are appended as an Annexure to thisReport.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The Company has constituted Corporate Social Responsibility Committee and the detailsof same are furnished in Corporate Governance report. For the year under review theCompany was not required to spend on CSR activities. However the Company has set upHospitals Schools and Playgrounds at

Townships of Manufacturing Units for the benefit of employees and the local community.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

As on 22nd August 2017 the Board of ITI comprises of Seven Directors of whom threeare Whole Time

Directors two Non Official Part Time Directors (Independent Directors) and twoOfficial Part Time Directors (Nominees of Government of India).

Ministry of Communications & IT has been requested to appoint requisite number ofindependent Directors to comply with the provisions of Companies Act 2013 and SEBI(Listing Obligations and Disclosure Requirements) Regulations

Appointment of Independent Directors

During the year the Government of India vide letter No. F.No.5-3/2016-PSA dated30.01.2017 appointed Smt Asha Kumari Jaswal as Independent Director on the Board of theCompany. Her appointment has taken effect from 06.04.2017.

ThetermsandconditionsoftheIndependentDirectorsarepostedontheweb-siteoftheCompany.IndependentDirectors shall not be liable to retire by rotation. The Independent Directors of yourCompany have given thecertificate that they meet the criteria of independence as mentionedunder Section 149 (6) of the Companies Act 2013.

Government Nominee Directors

Shri R M Agarwal DDG(SU) Department of Telecommunications Ministry of Communications& IT was appointed as Government Nominee Director vide MoC & IT letter No.F.No.5-1/2016-PSA dated 08.06.2016 in the place of Shri Srikanta Panda.

and Senior Colonel Commandant Ministry LtGeneralARPrasadVSMADCSignal Officer ofDefence was appointed as Government Nominee Director vide MoC & IT letter no.F.No.5-1/2016-PSA dated 07.11.2016 in the place of Lt General Nitin Kohli.

Changes in Functional Directors

Shri P K Gupta then Director Marketing was granted additional charge as Chairman andManaging Director in the place of Shri K K Gupta w.e.f 01.11.2015. Shri P K Guptarelinquished the position as a

Director on 31.12.2016 on attaining the age of superannuation.

Shri S.Gopu Director-HR was granted additional charge of Chairman and ManagingDirector w.e.f. 01.01.2017.

Shri K Alagesan Director- Production was granted additional charge of DirectorMarketing w.e.f. 01.01.2017.

Dr Janaki Anathakrishnan Director Officer . Mrs S ShanmugaFinance continues as ChiefFinancial

Priya continues as Company Secretary of the Company. Chief Financial Officer andCompany Secretary continues to be Key Managerial Personnel along with the FunctionalDirectors of the Company.

The Board placed on record its deep appreciation of the valuable services rendered bythe Directors whose term of office ended during the year.

Shri K Alagesan and Dr Janaki Ananthakrishnan Directors retires by rotation at theforthcoming Annual

General Meeting and being eligible offers themselves for re-appointment.

The policy on Director's appointment and remuneration and also remuneration for KeyManagerial

Personnel forms part of Corporate Governance Report of this Annual Report.

NUMBER OF MEETINGS OF BOARD

During the year 5 meetings of the Board were held on 26.05.2016 30.05.2016*27.06.2016 11.08.2016 10.11.2016 09.02.2017. * The meeting held on 26.05.2016 wasadjourned to 30.05.2016

PARTICULARS OF EMPLOYEES

There were no employees of the Company who received remuneration in excess of thelimits prescribed under

Companies Act 2013 read with Companies (Appointment & Remuneration of ManagerialPersonnel) Rules 2015.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT AND CORPORATE GOVERNANCE REPORT

AreportonCorporateGovernanceandManagementDiscussionandAnalysisReportalongwithaComplianceunder the SEBI (Listing Obligations and Disclosure Certificate Requirements) Regulations2015 is appended to this report.

EXTRACT OF ANNUAL RETURN

The extract of annual return in Form MGT 9 as required under Section 92(3) and Rule 12of the Companies (Management and Administration) Rules 2014 is appended as an Annexure tothis Report.

RELATED PARTY TRANSACTIONS

In line with the requirements of the Companies Act 2013 and Equity Listing Agreementyour Company has formulated a Policy on Related Party Transactions which is also availableon Company's website at http://www.itiltd-india.com/investor_information. ThePolicy intends to ensure that proper reporting; approval and disclosure processes are inplace for all transactions between the Company and Related Parties.

All Related Party Transactions entered during the year were in Ordinary Course of theBusiness and on Arm's Length basis. No Material Related Party Transactions i.e.transactions exceeding ten percent of the annual consolidated turnover as per the lastaudited financial statements were during the year by your Company. Accordingly thedisclosure of Related Party Transactions as required under Section 134(3) (h) of theCompanies Act 2013 in Form AOC 2 is not applicable.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that

(a) in the preparation of the annual accounts for the year ended 31st March 2017 theapplicable accounting standards had been followed along with proper explanationrelating to material departures;

(b) such accounting policies have been selected and applied consistently and judgmentsand estimates have been made that are reasonable and prudent so as to give a true and fairview of the state of affairs of the company at 31st March 2017 and of the profit ofthe company at that date;

(c) proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of Companies Act 2013 for safeguarding the assetsof the company and for preventing and detecting fraud and other irregularities;

(d) the annual financial Statements have been prepared on a going concern basis;and

(e) proper internal financial controls were in place and that the financial controlswere adequate and were operating effectively.

(f) that systems to ensure compliance with the provisions of all applicable laws werein place and that such systems were adequate and operating effectively.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

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.

ENTERTAINMENT EXPENDITURE AND FOREIGN TRAVEL

The expenditure on entertainment was Rs. -6.43 Lakhs. Expenditure on official travelabroad by the officials of the Company amounted to Rs. NIL during the year.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO

Particulars with respect to Conservation of Energy Technology Absorption and ForeignExchange Earnings and Outgo required to be disclosed under the Section 134 of theCompanies Act 2013 read with Rule 8 of

Companies (Accounts) Rules 2014 are annexed.

ACKNOWLEDGEMENT

"Your Directors place on record their deep appreciation and gratitude for thevaluable support received from all the customers and look forward to their continuedsupport and co-operation in future. The Directors also acknowledge and thank allcollaborators vendors and other service providers for their valuable assistance andcooperation extended to the Company.

The Board of Directors are highly grateful for the assistance and continued supportextended by the Ministry of Communications & IT and various other agencies in Centraland State Governments.

The Board of Directors acknowledge the constructive suggestions received from theComptroller and Auditor General of India the Statutory Auditors Branch Auditors CostAuditors and Secretarial Auditor and are highly grateful for their continued support andcooperation.

Your Directors also take this opportunity to place on record their appreciation for thededicated work put forth by the employees at all levels"

For and on behalf of the Board of Directors

(S. Gopu)

Director HR /

Addl Charge Chairman and Managing Director

Place: Bangalore Date: 22.08.2017

ADDENDUM TO THE BOARD OF DIRECTOR'S REPORT COMPANY'S REPLIES TO STATUTORY AUDITOR'SOBSERVATION IN THEIR REPORT

Point No. Statutory Auditor's Company's Remarks
Observations
Qualifications Not quantifiable: a) In view of Company's own production activities having come down substantially and slow movement in the inventory there is a need for systematic age wise segregation and analysis of the items comprised in the inventory to assess their usefulness/usability in the production & servicing activities period over which they could be used as also whether the inventory items are capable of being sold /disposed off as standalone items. Pending such an exercise we are unable to express an opinion as to the adequacy of the provision held towards non-moving and obsolete inventories and the eventual realizable amount in respect of the inventories as also the possible effect on the financial statements. Aggregate Inventories as at March 31 2017 were Rs. 17708.46 lakhs against which provision of Rs. 3479.82 lakhs has been made towards non-moving and obsolescence. Inventory available has been reviewed and provision is made after a review by the technical committee for their usefulness in each unit. The existing provision is found to be adequate
b) The Company does not have an adequate mechanism in place to review the balances in trade receivables and in our opinion there is a need for systematic age wise segregation and analysis including timely adjustment of advances received from customers. In the absence of such reviews and systematic age- wise analysis we are unable to comment on the adequacy of provision held for doubtful debts and also on the shortfall if any on the amount that would be ultimately realizable from the customers. Total Trade Receivables as on March 31 2017 were Rs. 227913.64 lakhs against which a sum of Rs. 4651.61 lakhs has been provided for doubtful debts.C The company is making provision for doubtful debts after review on a case to case basis as per company's accounting policies and the existing provision is found to be adequate. Also efforts are being made to adjust the outstanding advances against the debtors.
c) .5 in view of No provision for the permanent diminution in the value of the Investment of Rs 40.55 lakhs in the unquoted equity shares of a Joint Venture(JV) Company has been ascertained as required by Accounting Standard 13 on ‘Accounting for Investments' read with in the Significant the negative net worth and Statutory Auditors of the JV in their Report for the year ended 31.03.2016 have expressed their inability to comment on the going concern concept adopted by the said JV. The assets of the JV company (Land) which has been revalued by the SBI panel valuer carries a value very much more than the cost of the investment. Hence the investment of Rs.40.55 lakhs has been shown at cost.
d) Pending approval from the Government of India on the finalization of the lease terms & agreement rental income on the land leased out to the Bangalore Metropolitan Transport Corporation (BMTC)(to an extent of the 12.15 acres proposed to be leased out to BMTC is already in the possession of BMTC further based on the information furnished to us BMTC additionally occupies 1.85 acres) has not been recognised as income. A sum of Rs 285.00 lakhs received earlier from the BMTC under an agreement to sell is held under deposits (Refer Note 40.17); The case has been referred to DoT to get approval for leasing the property to BMTC which is yet to be finalized.
e) Non provisioning of interest payable on royalty due to C-DoT in lieu of arrears of rent from the same agency for the premises taken on lease from the Company which is being more than the royalty amount (Refer Note No. 40.23); Interest on royalty payable to C-DoT has not been provided in view of substantial dues (which are more than the royalty amount) outstanding for a long time from C-DoT on account of rent payable for the Company's premises leased out to them
f) Adequacy of the provisions made towards interest and penalty if any leviable for non remittance of statutory dues on sales accounted on provisional basis (tax incidence on such sales not recognized) and delayed/ short remittance of other statutory dues including Provident Fund Employees State Insurance and Tax deducted at source as per the provisions of Income Tax Act 1961 could not be ascertained; Where sales are accounted based on provisional prices differential sales are accounted in the year in which the prices are firmed up and the differential statutory dues are paid/ claimed. Also all known liabilities have been accounted for and there are no cases of non-deduction of TDS to the best of our knowledge.
g) Rental income on the land leased out to the Karnataka Power Transmission Corporation Limited (KPTC) (to an extent of the 5 acres proposed to be leased out to KPTC is already in the possession of KPTC) has not been recognised as income pending finalisation of lease agreement. (Refer Note No. 40.19) Efforts are being made by the company regarding the settlement of KPTC land issues at the earliest.
h) No impairment assessment has been carried out by the Company by reviewing the carrying amount of assets as at the Balance Sheet date as required by Accounting Standard 28 on ‘Impairment of Assets' read with Significant Accounting Policy No. 16 of the Company and hence identification of impairment loss and provision thereof if any has not been made. The Company has done physical verification of fixed assets and is of the opinion that there is no indication of impairment.
i) Our comments on the non-maintenance of proper fixed assets register and no physical verification of fixed assets has been carried outThe by the Company in a few units as stated in para i(a) and i(b) in the annexure A to this Report containing a statement on the matters specified in paragraphs 3 and 4 of the Companies (Auditor's Report) Order 2016. The management is in the process of building proper fixed assets register. company is not a position to conduct physical verification of fixed assets in a few units due to shortage of man power.
j) Refer Note No 3 on inventories under ‘Significant Accounting Policies'. Rawthe materials components and stores purchased for manufacturing/production activities are valued at lower of cost and net realisable value after providing for obsolescence if any. Cost is calculated on weighted average rate as at the end of the year. Total value of inventories at Naini Unit as at March 31 2017 is Rs. 1258.12 lakhs. Statutory Auditors of the said unit have qualified their report stating that they were unable to comment whether inventories were valued as per the principles laid out in Accounting Standard 2 on "Valuation of Inventories" read with the Company's Accounting Policy as detailed workings were not made available to them for verification. The inventories are above referred valued Standard as per and Accounting Company. Policy adopted by the
k) The Statutory Auditors of the Mankapur Unit have qualified their report stating that sufficient and appropriate audit evidence were not provided with respect to opening and closing balances of bank accounts trade receivables claims recoverable loans and advances inventories materials with fabricators sub- contractors/others material in transit deposits loans and other payables/receivables. Auditors have further stated that opening balances may not be free from misstatement and may have impact on current year financial statements. Due to the retirement of experienced people in the plant and in finance department and newly recruited persons could not provide necessary evidence due to lack of time
term loans l) Age wise classification and Advances amounting to Rs.1277.10 lakhs which are classified as ‘Considered Good' is not available at the Naini unit so the Statutory Auditors of the said unit were unable to comment on the old outstanding of Such advances and their provisioning in the books of accounts by the unit. Could not be produced to the auditors at the time of audit by unit finance department.
a) Qualifications quantifiable: Non provision of Rs.8853.64 lakhs towards claims doubtful of recovery comprising of (i) rent receivable of Rs.5847.90 lakhs on a premises leased out up to the period ended 31.3.2011 and no rental income for the period subsequent to 31.03.2011 for the same premises has been recognised on accrual basis due to uncertainty of realization (Refer Note No.40.23); (ii) Liquidated Damages (LD) of Rs.1049.41 lakhs on a supplier claimed by Bangalore Plant rejected by the Arbitral Tribunal and the matter is pending before High Court of Delhi. However in the absence of adequate information to support that the claims are sustainable we are unable to comment on the carrying value of this claim and the shortfall if any on the amount that would be ultimately realized by the Company; (iii) LD claimed by Mankapur Unit from MTNL Delhi and MTNL Mumbai for Rs.183.23 lakhs and Rs.82.90 lakhs respectively; (iv) Amount recoverable to an extent of Rs.1690.20 lakhs from HCL Info Systems Limited by Mankapur Unit towards conditional reimbursement as per the agreement between Company and HCL Info Systems Limited. The company has been rigorously following on with the DoT for resolving the pending issue of the rent due from C-DoT. Subsequently DoT has informed ITI to present the subject to ITI Board for perusal for the further course of action. Company is of the view that provision for Rs.5847.90 Lakhs at this juncture is not required till the issue is finally settled. As regards the LD of Rs.1049.41 Lakhs the matter is in the court. Till then it is felt that no provision is required to make. With regard to other claims amounting to Rs.1956.33 Lakhs the company is confident of recovering the same.

REPLY TO OBSERVATIONS OF SECRETARIAL AUDITOR IN HIS REPORT

Secretarial Auditors Observation Company's reply
Pursuant to Section 149 (4) of the Act every listed public Company shall have at-least one-third of the total number of Directors as Independent Directors. The Company is a Government Company and as per Articles of Association of the Company the power to appoint Directors including Independent
However the company is having only one Independent Director on its Board for the Financial Period under review. Directors vests with the President of India. The issue relating to appointment of required number of independent directors is taken up with the Ministry of Communications & IT Administrative Ministry. The appointment is in process.
The company has constituted the Audit Committee but the composition of the Committee is not in accordance with Section 177 read with Rule 6 of Companies (Meeting of Board and its Power) Rules In the absence of required number of independent directors on Board the requirements as prescribed could not be complied with.
2014 as there is only one Independent Director on the Board of the Committee not forming a majority of Independent Directors in the committee On appointment of required number of Independent Directors on Board the Committee would be reconstituted as per prescribed regulations.
The company has not consolidated financial statements with its Joint Venture viz. India Satcom Limited. (for the year ended 31st March 2016) in terms of first Proviso to Section 129 (3) of the Companies Act 2013 read with Rule 5 of Companies (Accounts) Rules 2014. The Annual Financial results of India Satcom Limited are not made available to the Company and hence consolidation could not be done.
Non maintenance of proper fixed assets register Composition of Board of Directors of the company is not in accordance with Clause 49 of the Listing Agreement and Regulation 17 of LODR as only one Independent Director is there on the Board. Noted for compliance In the absence of required number of independent directors on Board the requirements as prescribed could not be complied with. On appointment of required number of Independent Directors on Board the prescribed regulations will be complied with.

For and on behalf of the Board of Directors

(S.Gopu)

Director HR /

Addl Charge Chairman and Managing Director

Place: Bangalore Date: 22.08.2017

ANNEXURE TO THE BOARD OF DIRECTORS' REPORT

Form AOC-1

Statement containing salient features of the financial statement of Joint Ventures

Part "A": Subsidiaries –Not applicable Part "B": Associatesand Joint Ventures

Statement pursuant to Section 129 (3) of the Companies Act 2013 related to JointVenture

Name of Joint Ventures India Satcom Limited
1 Latest audited Balance Sheet Date 31.03.2016
Shares of Joint Ventures held by the company on the year end
2 Number of Shares 1621800 equity shares of Rs. 10 each
3 Amount of Investment in Associates/Joint Venture Rs. 40.55 Lacs
4 Extend of Holding% 49%
5 Description of how there is significant influence Investment in the equity to the extent of 49% paid up capital
6 Reason why the associate/joint venture is not consolidated Accounts of ISL are not yet finalised.
7 Net worth attributable to shareholding as per latest audited Balance Sheet Accounts of ISL are not yet finalised.
8 Profit/Loss for the year
i) Considered in Consolidation Accounts of ISL are not yet finalised.
ii) Not Considered in Consolidation Accounts of ISL are not yet finalised.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO

Section 134 of the Companies Act 2013 read with the Company's (Accounts) Rules 2014A. CONSERVATION OF ENERGY

(a) Energy conservation measure taken

The Company has undertaken following energy saving measures

1. Recommendations of Bureau of Energy Efficiency have been implemented from time totime.

2. Optimum usage of Plant Utilities.

3. Monitoring of power factor at regular interval.

4. Replacement of old high capacity equipments with multiple optimum size capacityenergy efficient ones.

5. Replace conventional electro-magnetic ballast fluorescent fitting with electronicballast fluorescent tri- phosphate lamp fitting.

6. Running time of various tube wells / Compressors has been rationalized.

7. Replacement of old and less energy efficient UPS by portable . small capacity UPS

8. Offloading of Central Air-conditioning plant in winter season.

9. Use of timer control devices in street lighting etc.

10. Diverting the load on single transformer to reduce no-load losses.

11. T raining Programmes /competitions among employees to create awareness on energyconservation. 12. Usage of CFL / LED Bulbs in factory and township street lighting.

13. Replacement with LED tube lights in place of conventional FTL's in factory area 14.Relocation and Merger of departments for reducing the energy consumption.

(b) Steps taken by Company for utilizing alternate sources of energy and

(c) Capital investment on energy conservation equipments.

Considering the Company'sfinancial situation Company has not been able to invest foralternate sources of energy since this requires significant amount of investment.

B. TECHNOLOGY ABSORPTION

RESEARCH & DEVELOPMENT (R&D) 2016-17

(i) Efforts made towards Technology Absorption

Specific areas of R&D work.

a) Design and Development of Secrecy products for various Defence projects.

b) Design and development of Telemetry products Wireless Telephones and IOT products

c) Development of Encryption Algorithms

d) Support for legacy secrecy products supplied and networks executed to Defence

e) Value addition of the existing products.

f) Provide Network and Security Solution designs.

(ii) Benefits derived as a result of the above R&D.

a) The following R&D Products were productionised which contributed for more thanRs.69 Crores (Rupees Sixty Nine Crores) turnover to the Company.

1) PRIMARY MUX and Spares 2) Terminal End Secrecy Device (TESD) 3) SCADA

4) FIELD TELEPHONES (Teleset 5 C )/ Nutan 5) Executive Telephone System ( ETS -04) 6)2MBps BEU b) 1 G Encryptor development completed and the product is in production line. c)10 G Encryptor for MCEU (Multi Capacity Encryption Unit) is completed and BSNL / NFSevaluation successfully conducted. Now the Product is ready for marketing. d) STM-16/64Encryptor for MCEU development completed and successfully conducted the BSNL / NFSEvaluation. Now the product is ready for marketing.

(iii) Imported Technology

Imported during last three years reckoned from the beginning of the financial year- nil

(iv) PLAN OF ACTION a) The following products are under development i) OTU -1 &OTU-2 Encryptors Development is in final stage. b) Upgradation of R&Dinfrastructure as part of ITI's Revival Plan

Procurement of Instruments and Software tools are completed. Infrastructurerenovation is in progress

c) Future Projects to be considered for Development

a) Encryption for Mobile Handset b) Electronic Voting Machine and VVPAT c) SoftwareDefined Radio (SDR) d) IRNSS Indian Regional Navigational Satellite System- Receiver e)IOT products

(v) R&D Expenditure

a) Capital Rs.16.95 Crores b) Revenue Rs.16.30 Crores

TOTAL Rs.33.25 Crores

T otal R&D Expenditure as a percentage of total turnover (Excluding Excise Duty andServices Tax) : 2.18%

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

(i) Activities relating to exports initiative taken to increase exports developmentof new Export markets for products and services and export plans;

(ii) Total Foreign Exchange earning and outgo

Earnings : NIL

Outgo : Rs.3745.30 Lakhs

For and on behalf of the Board of Directors

(S.Gopu)

Director HR /

Addl Charge Chairman and Managing Director

Date: 22.08.2017

Place: Bangalore