The Directors have pleasure in presenting Seventy Eighth Annual Report of Nelco Limited(Company or Nelco) alongwith the Audited Statement of Accounts for the year ended 31stMarch 2021.
As informed in the previous year's Annual Report the Hon'ble National Company LawTribunal (NCLT) Mumbai Bench approved the Composite Scheme of Arrangement andAmalgamation (Scheme) involving the internal restructuring of the various businesses ofthe Company and its two wholly owned subsidiaries viz. Tatanet Services Limited (TNSL) andNelco Network Products Limited (NNPL). The necessary steps for obtaining approval fromDepartment of Telecommunications (DoT) for transfer of VSAT and ISP licenses from TNSL toNelco have been taken after which the Scheme will become effective.
In the first phase of the Scheme Nelco will transfer its two businesses to NNPL on agoing concern basis by way sale. These businesses are (a) ISSS and (b) sale andmaintenance of VSAT and related equipment. In the second phase TNSL will amalgamate withNelco. Post the said restructuring the VSAT Communication service business will be inNelco which is the listed parent entity and the related equipment business will be inNNPL. The VSAT license will be transferred from TNSL to Nelco.
1. Financial Results
Pending the DoT approval as aforesaid the Scheme has not been given effect to in thefinancial results for the year ended 31st March 2021.
(Rs. in lakhs)
| || |
|Particulars ||FY 2020-21 ||FY 2019-20 ||FY 2020-21 ||FY 2019-20 |
|A Continuing Operations || || || || |
|a Net Sales / Income from Other Operations ||3842 ||3833 ||22612 ||21993 |
|b Operating Expenditure ||3076 ||2947 ||18125 ||17016 |
|c Operating Profit ||766 ||886 ||4487 ||4977 |
|d Add:- Other Income ||117 ||231 ||284 ||249 |
|e Less: - Finance Cost ||277 ||508 ||953 ||1313 |
|f Profit before Depreciation and Tax ||606 ||609 ||3818 ||3913 |
|g Less: - Depreciation/Amortization/Impairment ||52 ||72 ||2230 ||2002 |
|h Less: - Minority Interest ||- ||- ||- ||- |
|i Add: - Share of Profit of Associates ||- ||- ||- ||- |
|j Net Profit/(Loss) after Minority interest and Share of Profit of Associates ||554 ||537 ||1588 ||1911 |
|k Exceptional items ||- ||564 ||- ||115 |
|l Current/Deferred Tax Expenses ||139 ||284 ||352 ||588 |
|m Net Profit/(Loss) after Tax Minority interest and Share of Profit of Associates from Continuing Operations ||415 ||817 ||1236 ||1438 |
|B Discontinuing Operations* (being transferred to Wholly Owned Subsidiary) || || || || |
|n Profit from Discontinuing operations (before exceptional item and tax) ||330 ||692 ||- ||- |
|o Add: -Exceptional Profit ||- ||- ||- ||- |
|p Tax Expenses ||27 ||141 ||- ||- |
|q Profit after Tax from Discontinuing operations ||303 ||551 ||- ||- |
|C Profit after tax from Total Operations ||718 ||1368 ||1236 ||1438 |
|r Add: Other comprehensive Income/(expenses) ||28 ||(31) ||28 ||(31) |
|s Total Comprehensive Income ||746 ||1337 ||1264 ||1407 |
* Operations that are being transferred to Nelco Network Products Ltd. (Wholly OwnedSubsidiary) as a part of internal restructuring.
In view of the ongoing Covid-19 pandemic it is necessary for the Company to conserveresources to meet unexpected operational requirements as also to invest in newer businessopportunities. Considering this the Board of Directors has recommended for FY 2020-21 adividend of Rs. 1.20/- per share i.e. 12% (previous year Rs. 1.20 per share i.e. 12%) onthe Equity Shares of the Company. If declared by the Members at the ensuing Annual GeneralMeeting (AGM') the total dividend outgo for FY 2020-21 would amount to Rs. 274lakhs (previous year Rs. 274 lakhs).
3. Financial Performance and the state of the Company's affairs 3.1 Standalone
On a Standalone basis your Company achieved revenue of Rs. 3842 Lakhs in FY 2020-21from Continuing Operations as against Rs. 3833 Lakhs in FY 2019-20. On a total operationbasis your Company achieved revenue of Rs. 13355 Lakhs in FY 2020-21 as against Rs.15073 Lakhs in FY 2019-20. In FY 2020-21 the Company earned a net profit after tax of Rs.718 Lakhs from total operations as against profit of Rs. 1368 Lakhs in FY 2019-20.This was due to reduction in sales volume in the first half of the year as a result ofnationwide lockdown and also in the previous year there was gain on sale of investment inassociate Company.
Profit from Discontinuing Operations are calculated considering the direct cost ofthose Operations and interest on identifiable loans that are being transferred under theScheme. The entire corporate overheads are considered part of Continuing Operations.
On a Consolidated basis revenue from Operations was Rs. 22612 Lakhs in FY 2020-21 asagainst Rs. 21993 Lakhs in FY
2019-20 i.e. increase by 3% over previous year.
The segment wise performance (Consolidated) from total operations for the year was asfollows:
Based on evaluation of key financial parameters the Company believes that it operatesin only one reportable segment i.e. Network Systems and accordingly the financial resultsare reported as single reportable segment from the year ended 31st March 2021.
The Company earned a net profit after tax ofRs. 1236 Lakhs from total operations asagainst profit ofRs. 1438 Lakhs in FY 2019-20. No material changes and commitments haveoccurred after the close of the year under review till the date of this Report whichaffect the financial position of the Company.
Information in detail has been given in the Management Discussion & Analysis whichforms a part of this report.
3.4 Covid-19 pandemic
The Covid-19 pandemic is redefining global health crisis in recent times and has spreadrapidly across the globe.
The bigger challenge is that it is not a mere health crisis and is having anunprecedented impact on Indian and global business environment. The Company has taken allnecessary measures in terms of mitigating impact of the challenges being faced in thebusiness due to the Covid-19 pandemic. Though the long-term directions of the Companyremain firmin light of Covid-19 and its expected impact on the operating environment theimmediate key priorities of the Company would be to closely monitor customer demandconserve cash and control fixed costs while continuing to invest in the important longterm growth areas. The Ministry of Home Affairs Government of India the first on 24thMarch2020notified ever nationwide lockdown in India to contain the outbreak ofCovid-19. Towards the end of the quarter ended March 2020 the operations were disruptedacross the country. The Company and its subsidiaries (Group) continued to provideSatellite Communication services through VSAT during the lockdown period as these are partof the essential services under "Telecommunication Internet Services Broadcastingand cable services" by obtaining the necessary permissions from the concerned Govt.authorities. The number of new VSATs deployed during this period however was lower becausethe offices of most of the customers were closed. Moreover there were restrictions onmovement in certain areas. The deployment of VSATs improved progressively as theGovernment has taken measures leading to relaxation on movement and easing of supply andservice constraints.
The Board of Directors has decided to retain the entire amount of profit for FinancialYear 2020-21 in the statement of profit and loss.
5. Subsidiary Companies
5.1 The Company has two wholly owned subsidiaries viz. Tatanet Services Ltd. (TNSL)& Nelco Network Products Ltd. (NNPL). TNSL holds the VSAT License as well as theInflight & Maritime Communication (IFMC) license issued by Department ofTelecommunication Government of India (DOT) vide its notification dated 14 th December2018. TNSL has taken the lead to provide IFMC services immediately after obtaining thelicense from DOT. During the year the Company connectivity services. The Revenue of TNSLfor FY 2020-21 was hasal ready started providing maritime and in-flight Rs. 13113 Lakhsagainst Rs. 11617 Lakhs in the previous year. The Profit after tax wasRs. 506 Lakhsagainst Rs. 564 Lakhs in the previous year.
NNPL has also obtained the IFMC license issued by DOT and commenced its businessoperations in the last quarter of FY 2020-21. The revenue of NNPL for FY 2020-21 was Rs. 4Lakhs and profit after tax wasRs. 1 Lakh and the accumulated loss since incorporation wasRs. 12 Lakhs.
5.2 The organizational and operational structure would be simplified on implementationof the Scheme of Arrangement and Amalgamation with the VSAT communication service businessvesting in the Company the flagship entity and the related hardware business vesting inNNPL. This would result in the recurring revenue from VSAT communication services being inthe Company and the revenue from sale of hardware including VSAT equipment being in NNPL.The IFMC license would remain with Nelco as well as NNPL and both the companies wouldoffer these services to appropriate customer segments. The enhanced net worth of theCompany after the Scheme is effective will improve its ability to bid for larger projectsand pursue bigger opportunities. Also there will be increase in overall efficiency interms of utilization of assets employees etc.
5.3 Pursuant to NCLT Order the Company intimated the Registrar of CompaniesMaharashtra ("RoC") about the approval of the Scheme by NCLT mentioning interalia that the Scheme would be effective only after the approval of DoT for transfer oflicenses of TNSL to Nelco which is pending. The RoC records were however got updated(pending such DoT approval) to reflect the Scheme as effective and accordingly TNSLstands "amalgamated" with the Nelco. Based on legal advice the Companyapproached NCLT to direct the RoC to amend their records to reinstate TNSL to its earlierstatus and cancel the effect of the Scheme with immediate effect. This matter is pendingfor decision before
NCLT. The Scheme will be given effect in the financial statements on receipt of allnecessary approvals.
There has been no major change in business of the aforesaid wholly owned subsidiaryCompanies.
Pursuant to the provisions of Section 129(3) of the Companies Act 2013 (Act) astatement containing the salient features of financial statements of the Company'ssubsidiaries in Form AOC-1 is attached to the financial statements of the Company.
Further pursuant to the provisions of Section 136 of the Act the financial statementsof the Company consolidated financial statements along with relevant documents andseparate audited financial statements in respect of subsidiaries are available on thewebsite of the Company https://www.nelco.in/investor-relation/financial.php.
The Policy for determining material subsidiaries of the Company has been provided inthe following link:https://www.nelco.in/pdf/Policies/Policy%20for%20determining%20Material%20Subsidiaries.pdf
6. Directors and Key Managerial Personnel
In accordance with the provisions of Section 152 of the Act and the Articles ofAssociation of the Company Mr. Anand Agarwal retires by rotation at the ensuing AGM andbeing eligible has offered himself for re-appointment.
In terms of Section 149 of the Act and SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015 (Listing Regulations) the Shareholders of the Companyappointed Mr. K. N.Murthy Dr. Lakshmi Nadkarni and Mr.
Ajay Kumar Pandey as Independent Directors for a period of 5 years from 28thJanuary 2020 to 27th January 2025. The Company has received declarations fromthem confirmingthat they meet the criteria of independence as prescribed under Section149(6) of the Act read with rules framed thereunder and Regulation 16(1) (b) of theListing Regulations. In terms of Regulations 25(8) of the Listing Regulations theIndependent Directors have confirmed that they are not aware of any circumstance orsituation which exists or may be anticipated that could impair or impact their ability todischarge their duties.
In the opinion of the Board the Independent Directors fulfil the conditions ofindependence specifiedin the Act and the Listing Regulations and are independent of themanagement. Further the Board is of the opinion that the Independent Directors of theCompany possess requisite qualifications experience (including the proficiency) andexpertise in their respective fields and that they hold highest standards of integrity.
Further the Independent Directors of the Company wherever applicable have undertakenrequisite steps towards the inclusion of their names in the data bank of IndependentDirectors maintained with the Indian Institute of Corporate Affairs in terms of Section150 of the Act read with Rule 6 of the Companies (Appointment & Qualification ofDirectors) Rules 2014.
Additional information and brief profile as stipulated under Listing Regulations andSecretarial Standards-2 on General Meetings with respect to Mr. Anand Agarwal and Mr.P.J.Nath being the Directors seeking re-appointment is annexed to the Notice of AGM.
During the year under review the non-executive directors of the Company had nopecuniary relationship or transactions with the Company other than sitting fees andreimbursement of expenses incurred by them for the purpose of attending meetings of theBoard/Committee of the Company.
Pursuant to Section 203 of the Act the Key Managerial Personnel of the Company as on31st March 2021 are:
Mr. P.J. Nath Managing Director & CEO
Mr. Uday Banerjee Chief Financial Officer
Mr. Girish Kirkinde Company Secretary & Head-Legal
Number of Board meetings
During the year under review Nine Board Meetings were held. For further detailsplease refer Report on Corporate Governance. Governance Guidelines: The Company hasadopted Governance Guidelines on Board Effectiveness. The said Guidelines cover aspectsrelated to composition and role of the Board Chairman and Directors Board diversitydefinitionof independence Director's term retirement age and Committees of the Board. Italso includes aspects relating to nomination appointment induction and development ofDirectors Director Remuneration subsidiary oversight Code of Conduct BoardEffectiveness Review and mandates of Board Committees.
7. Annual Evaluation of Board Performance and Performance of its Committees andIndividual Directors
As required under the Act and Listing Regulations the Board has carried out formalannual evaluation of the performance of the Board its Committees and of individualDirectors. The performance of the Board was evaluated by the Board after seeking inputsfrom all the Directors on the basis of criteria such as the Board composition andstructure effectiveness of board processes information and functioning etc.
The performance of the Committees was evaluated by the Board after seeking inputs fromthe Committee members on the basis of criteria such as the composition of Committeeseffectiveness of Committee meetings etc.
The above criteria are based on the Guidance Note on Board Evaluation issued by theSecurities and Exchange Board of India on January 5 2017. In a separate meeting ofIndependent Directors performance of non-Independent Directors the Board as a whole andthe Chairman of the Company was evaluated considering the views of Executive Director andnon-Executive Directors. The Board and the NRC reviewed the performance of individualDirectors on the basis of criteria such as the contribution of the individual Director tothe Board and Committee meetings like preparedness on the issues to be discussedmeaningful and constructive contribution and inputs in meetings etc.
In the Board meeting that followed the meeting of the Independent Directors and meetingof Nomination and Remuneration Committee the performance of the Board its Committeesand individual Directors was also discussed. Performance evaluation of IndependentDirectors was done by the entire Board excluding the Independent Director beingevaluated.
Based on inputs received from the Board members it emerged that the Board had a goodmix of competency experience qualifications and diversity. Each Board member contributedin his/her own manner to the collective wisdom of the Board keeping in mind his/her ownbackground and experience. There was active participation and adequate time was given fordiscussing strategy. Overall the Board was functioning very well in a cohesive andinteractive manner.
7.1 Committees of the Board
The Committees of the Board focus on certain specific areas and make informed decisionsin line with the delegated authority. The following substantive Committees constituted bythe Board function according to their respective roles and defined scope:
Audit Committee of Directors
Nominations HR and Remuneration Committee (NRC)
Stakeholders Relationship Committee
Corporate Social Responsibility Committee
Executive Committee of the Board
Details of composition terms of reference and number of meetings held for respectiveCommittees are given in the Report on Corporate Governance which forms part of the AnnualReport. Further during the year under review all recommendations made by the AuditCommittee have been accepted by the Board.
The details of the familiarization programs for Independent Directors are disclosed onthe Company's website and the web link for the same is:https://www.nelco.in/pdf/Policies/programme-for-familiarisation-development-of-board-members-fy2020-21.pdfThe Company has adopted a Code of Conduct for its Non-Executive Directors including a codeof conduct for Independent Directors which suitably incorporates the duties of IndependentDirectors as laid down in the Act. The Company has also adopted the Tata Code of Conductfor its employees including the Managing and Executive Directors. The above codes can beaccessed on the Company's website at:https://www.nelco.in/investor-relation/corporate-governance.php.
In terms of the Listing Regulations all Directors and senior management personnel haveaffirmed compliance with their respective codes. The CEO & Managing Director has alsoconfirmed and certified the same which certification is provided at the end of the Reporton Corporate Governance.
7.2 Remuneration Policy for the Directors Key Managerial Personnel and other Employees
In terms of the provisions of Section 178(3) of the Act and Regulation 19 read withPart D of Schedule II to the Listing Regulations the NRC is responsible for formulatingthe criteria for determining qualification positive attributes and independence of aDirector. The NRC is also responsible for recommending to the Board a policy relating tothe remuneration of the Directors Key Managerial Personnel and other employees. In linewith this requirement the Board has adopted the Policy on Board Diversity which isreproduced in Annexure-I forming part of this report and Remuneration Policy forDirectors Key Managerial Personnel and other employees of the Company is available on thewebsites of the Company at:https://www.nelco.in/pdf/Policies/Remuneration%20Policy%20for%20Directors%20KMP%20and%20Other%20employees.pdf.
Salient Features of this policy are as under:-
The philosophy for remuneration of Directors Key Managerial Personnel("KMP") and all other employees of Nelco Ltd. ("company") is based onthe commitment of fostering a culture of leadership with trust. The remuneration policy isaligned to this philosophy.
Independent Directors ("ID") and non-independent non-executive directors("NED") may be paid sitting fees (for attending the meetings of the Board and ofcommittees of which they may be members) and commission within regulatory limits.
Overall remuneration should be reflectiveof size of the company complexity of thesector/industry/company's operations and the company's capacity to pay the remuneration.
The NRC will recommend to the Board the quantum of commission for each director basedupon the outcome of the evaluation process which is driven by various factors includingattendance and time spent in the Board and committee meetings individual contributions atthe meetings and contributions made by directors other than in meetings.
The extent of overall remuneration to Managing Director ("MD")/ ExecutiveDirectors("ED")/ KMP/ rest of the employees should be sufficient to attract andretain talented and qualified individuals suitable for every role.
The remuneration mix for the MD/EDs is as per the contract approved by theshareholders.
In addition to the basic/fixed salary the company provides to other KMPs andperquisites allowances and benefits to enable a certain level of lifestyle and to offerscope for savings and tax optimization where possible and also performance linked bonus.
Remuneration is payable to Director for services rendered in professional capacity andwhich NRC is of the opinion that the director possesses requisite qualification for thepractice of the profession.
There is no change in the aforesaid policies during the year under review.
Except the Performance Linked Payment (PLP) which is a part of his Cost to the Company(CTC) the Managing Director & CEO has neither received any commission from theCompany nor from its Holding or Subsidiary Company.
7.3 Particulars of Employees and Remuneration
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 (Rules') is provided in Annexure - II (A) formingpart of this Report.
Statement containing particulars of top 10 employees and the employees drawingremuneration in excess of limits prescribed under Section 197 (12) of the Act read withRule 5(2) and (3) of the Rules is provided in the Annexure II (B) forming part of thisreport. None of the employees listed in the said Annexure II (B) is related to anyDirector of the Company. In terms of proviso to Section 136(1) of the Act the Report andAccounts are being sent to the shareholders excluding the aforesaid Annexure. The saidStatement is also open for inspection at the Registered Office of the Company. Any memberinterested in obtaining a copy of the same may write to the Company Secretary.
8. Significant and material Orders passed by the Regulators or Courts or Tribunal
There were no significant and material orders passed by the Regulators / Courts orTribunal which going concern status of the Company and its future operations. Further nopenalties have been levied by Regulators during the year under review.
8.1 Income Tax matters of Nelco Ltd.
Income Tax Department has reduced certain liabilities of Rs. 1893 Lakhs while computinglong term Capital Gain on a business sold under slump sale for Assessment Year 2011-12due to which a tax demand of Rs. 631 Lakhs has been raised on the Company. The saidliabilities are not directly related to the businesses sold and as such the Company hasgone in appeal against the demand. The CIT(Appeals) rejected the claims of the Company andconfirmed the tax demand. Company has filed appeal in ITAT against order of theCIT(Appeals).
8.2. Goods and Service Tax (GST) transition Input Tax Credit (ITC) of Nelco Ltd.
Upon implementation of GST from July 2017 for carry forward and set off oldservice tax input credit the Company was required to file form Trans 1. However due totechnical glitches on the web portal of GST Department the Company could not file formTrans 1. As result of this automatic carry forward and set off transition ITC of Rs. 31Lakhs was not allowed to Company. To seek remedy Company has filed writ petition beforeHon'ble High Court of Bombay. Hon'ble High Court of Bombay vide its order dated 20thMarch 2020 dismissed the petition of the Company and disallowed Company's claim. Howeverthere are judgements of various High Courts in India on the matter similar to that ofCompany which supports claim of the Company. Also based on opinion received fromindependent legal counsel Company is confident that claim of the Company will be allowed.During the year Company has filed Special Leave Petition before Hon'ble Supreme Court andhearing in this matter is awaited. Considering strong legal position Company has not madeany provision towards disallowance of transition input tax credit.
8.3. Sales Tax matters of Tatanet Services Ltd. (TNSL) Wholly Owned Subsidiary
Maharashtra Sales Tax Department (Dept.) has issued orders against TNSL demandingpayment of MVAT on the entire satellite communication services provided by TNSL claiming"The facility to use the transponders is a property is commercial in nature andgoods and therefore transaction of lease of facility to use the transponders is a deemedsale and accordingly MVAT is applicable." The orders issued are for financial year2006-07 to 2010-11 and aggregate amount under dispute is Rs. 38.36 Crores. The Companyfiled writ petition in the Hon'ble Bombay High Court for the financial year 2008-09. Thesaid Writ Petition was disposed by the Hon'ble Bombay High Court and referred MaharashtraSales Tax Tribunal (MSTT) to decide the above-mentioned matter.
MSTT in its order dated 29th April 2017 allowed the appeal of TNSL andset aside the demand of the Dept. made for financial year 2008-09. However the Dept. hasfiled appeal in the Hon'ble Bombay High Court against the passed by MSTT for the year2008-09.
Since the facts of the above matter are similar for other financial years viz.2006-07 2007-08 2009-10 and 2010-11 the Joint Commissioner of Sales Tax (JCST) haspassed order against the Company demanding payment of MVAT for these financial years also.The Company has filed Appeals to MSTT against the said orders of JCST.
8.4. Claim of Rs. 528 lakhs made by Antrix Corporation Ltd. from TatanetServices Ltd. (TNSL)
For providing satellite communication services under the VSAT ISP and IFMClicenses obtained by the Company from by Department of Telecommunication (DoT) theCompany from time to time enters into agreements with Antrix
Corporation Ltd. an entity under the administrative control of Department of Space(DOS) Govt. of India. These agreements for procuring satellite bandwidth capacity interalia contain charges to be paid for Space Segment/ leasing of Satellite TransponderCharges (Transponder Charges) to Antrix. These Agreements also contain specific clauseallowing price revision and recovery of space segment charges with retrospective effectduring the term of agreement. The Agreements expired on 30th April 2017 and theclaim for increased charges with retrospective effect was received by the Company on 31stAugust 2017 i.e. after the expiry of the Agreements.
Similar petitionshavebeenfiledby Antrix against other VSAT & telecom operators.Admittedly the term of all the aforesaid agreements expired on 31.03.2017 i.e. muchbefore the issuance of decision to levy increased/revised Transponder Charges. Thepleadings in Company's matter are complete and TDSAT hearing is awaited. Based on thelegal opinion received the Company has a strong arguable case on merit. However as anabundant caution the Company has provided in the books of account an amount of Rs. 278Lakhs towards the claim during the period from 1st April 2017 to 31stDecember 2018 and out of this Company has already paid Rs. 212 lakhs. An amount of Rs.168 Lakhs has been shown as contingent liability (refer note 36) in the books of accountstowards the claim for the period from 1st April 2016 to 31st March2017.
8.5. Goods and Service Tax (GST) transition Input Tax Credit (ITC) Tatanet ServicesLtd. (TNSL)
Upon implementation of GST from July 2017 for carry forward and set off oldservice tax input credit Company was required to file form Trans 1. However due totechnical glitches on the web portal of GST Department Company could not file form Trans1. As result of this automatic carry forward and set off transition ITC ofRs. 89 lakhswas not allowed to Company. To seek remedy Company has filed writ petition before Hon'bleHigh Court of Bombay. Hearing is going on before Hon'ble High Court of Bombay. Howeverthere are judgements of various High Courts in India on the matter similar to that ofCompany which supports claim of the Company. Also based on opinion received fromindependent legal counsel Company is confident that claim of the Company will be allowed.Considering strong legal position Company has not made any provision towards disallowanceof transition input tax credit.
Corporate Governance Management Discussion & Analysis and Business ResponsibilityReport
As per Listing Regulations the Corporate Governance Report with the Auditors'Certificate Management Discussion and Analysis are attached which forms part of thisAnnual Report.
Pursuant to Regulation 34(2)(f) of the Listing Regulations the BusinessResponsibility Report initiatives taken from an environmental social and governanceperspective in the prescribed format is attached as a separate section of this AnnualReport.
The Company believes in the conduct of the affairs of its constituents in a fairand transparent manner by adopting highest standards of professionalism honestyintegrity and ethical behaviour. In line with the Tata Code of Conduct (TCOC) any actualor potential violation howsoever insignificant or perceived as such would be a matter ofserious concern for the Company. The role of the employees in pointing out such violationsof the TCOC cannot be undermined.
Pursuant to Section 177(9) of the Act and Regulation 4(2)(d)(iv) of the ListingRegulations a Whistle-blower Policy and Vigil Mechanism was established for Directorsemployees and stakeholders to report to the Management instances of unethical behaviouractual or suspected fraud or violation of the Company's code of conduct or ethics policy.The Vigil Mechanism provides a mechanism for employees of the Company to approach theChief Ethics Counsellor (CEC)/Chairman of the Audit Committee of the Company forredressal. The Company has revised the Whistle-blower Policy to include "reporting ofincidents of leak or suspected leak of unpublished price sensitive information" interms of SEBI (Prohibition of Insider Trading) Regulations 2015 as amended from time totime. The revised Policy was approved by the Board at its meeting. The updated policy hasbeen posted on the Company's website at https://www.nelco.in/pdf/Policies/Whistle%20Blower%20Vigil%20Mechanism%20Policy.pdf. The Companyaffirms personnel have been denied access to the Audit Committee.
9. Risks and Concerns
The Company is faced with risks of different types all of which need differentapproaches for mitigation. Details of various risks faced by the Company are provided inManagement Discussion & Analysis.
9.1 Risk Management Framework and Internal Financial Controls
Risk Management framework: The Company and its Subsidiary have Risk Managementframework to inform the Audit Committee and Board members about risk assessment andminimization procedures and periodical review to ensure that Executive Management controlsrisks by means of properly designed framework.
The Company has also established a risk management policy based on which risks areidentified its businesses. The Risk Management Committee which comprises of the CEO CFOSenior Lead Business Analytics and Risk Management and key business and operations headsensures that existing and future risk exposures of the Company are identified assessedquantified minimized managed framework of risk management process provides clear basisfor informed decision making at all levels of the organization on an ongoing basis havingduly evaluated likely risks and their mitigation plans being controllable and within riskappetite of the Company. There are no elements of risk which in the opinion of the Boardmay threaten the existence of the Company.
Internal Financial Control and Systems: The Company has an internal control systemcommensurate with its size scale nature and complexity of its operations. The Companyhas appointed independent Chartered Accountant firm as Internal Auditors who auditsgovernance risks management and internal controls and processes. The Internal Auditorspresent their findings to the Audit Committee. Testing of Internal Financials Controlsalso form a part of internal audit schedule. The scope and authority of internal auditisdefinedin Audit Committee Charter adopted by the Company.
As per the Audit Committee Charter adopted by the Board and as per provisions ofSection 177 of the Companies Act 2013 (the Act) one of the responsibilities of the AuditCommittee is to review the effectiveness of the Company's Internal control systemincluding Internal Financial Controls. Internal controls have been discussed in detail inManagement Discussion & Analysis in this report.
The Company assesses the process maturity and robustness for its key functions on thefollowing:
Process documentation and workflow
Process measures and controls (manual/system driven) including maker-checker mechanisms
Performance tracking for key measures/metrics
Initiatives taken for process improvements
The Company also carries out internal audits and process deep dives through externalagencies to establish and improve efficiency and effectiveness of processes in various keyfunctions. On review of the internal audit observations and action taken on auditobservations there are no adverse observations having material impact on financialscommercial implications or material non-compliances which have not been acted thestatutory auditors carry out an audit at quarterly intervals and these reports also havenot reported any adverse findings.
10.1 Corporate Social Responsibility
Your Company has formed a CSR committee comprising of the following Directors:
Mr. R. R. Bhinge Chairman
Dr. Lakshmi Nadkarni and
Mr. P. J. Nath
As the Company has not earned net profits computed as defined required to spend on CSRactivities. However as a good corporate practice it continued the project where VSATswere installed in 4 Institutes run by Tata Power Skill Development Institute in remoteareas. These VSATs are used for downloading educational contents. The Company hasformulated the policy on CSR which is available on Company's websites:https://www.nelco.in/pdf/Policies/CSR%20Policy.pdf. The Company motivates employees totake up Voluntary activities which benefit the society through participation in TataProEngage & Tata Volunteering week.
10.2 Safety Health and Environment
The Company places utmost importance to the Safety agenda. At premises Fire EvacuationDrill is regularly conducted covering all staff working at its Mahape office to checkemergency preparedness. Existing safety policy systems roles site safety inspection andaction planning statutory compliances & records counselling to Safety Committee& safety promotional activities were taken up in consultation with OccupationalHealth Safety & Environment (OHSE) Management consultant. Training & awarenesssessions were conducted periodically on Fire Safety in emergency situation and on usage ofthe fire saving equipment. Safety standards are maintained across all office locations.
During National Safety Week safety training awareness sessions and promotioncampaigns were conducted for Nelco employees contract staff & suppliers.
While VSAT services qualified under the essential services' category Safety andHealth of the employees especially those who were into customer services roles andemployees who were visiting offices under special circumstances were taken on priority.Arrangement of essential services authorization letters were made making their traveleasier.
As travel became difficult during peak pandemic the Company arranged accommodation inhotels near office to avoid daily travel. When the nearby hotels were shut down stayarrangements were made in office converting a part of the office premises as staying area.Regular deep including thermal screening oximeter check footwear disinfectant andvehicle sanitization were done to ensure safety of the employees. Arrangement of a medicalpractitioner was made to visit the Companyoffice.Employees were made aware about thesymptoms of the infection and any person displaying such symptoms was advised to work fromhome. Wellness sessions were also organized for employees to participate along withfamilies from the comfort of their homes.
11. Human Resources
As on 31st March 2021 the Company had employee strength of 166. During theyear under review 7 employees were recruited and 16 employees were separated. Variouspeople related initiatives were undertaken by the Company during the year to enableorganizational growth through people care and development which include:
During ongoing Pandemic and lockdown Health and wellbeing of the employees had becomea major priority for the Company. Innovative and effective means were developed to engagewith the employees during these tough times. Health and wellness awareness sessions wereconducted for employees and their family members on virtual platforms. The connectmeetings gave opportunities to employees to express themselves and get solutions to theirwork matters. The Company endeavoured to establish family-connects to reassure thefamilies on safety of their members working for the Company. Counselling sessions werearranged for people to manage anxieties and fear. Pulse connect meetings were organized tokeep the morale and enthusiasm of employees high and encourage them to give their bestevery day. The Managing Director connected with employees during the crisis by addressingthem at regular intervals to give updates on the situation to encourage theircontribution during this difficult period and to reassure them. It also motivated peopleto stay committed toward the organization's goals and values.
Every year Employee Engagement Surveys are conducted to enable people to voice outtheir concerns and suggestions for making the workplace better for everyone. The companyutilises multiple platforms that encourage open communication amongst all employees andallow them to voice their opinion. Knowledge sessions and employee welfare and sportsactivities are also conducted from time to time to ensure continuous learning and goodhealth of the employees.
Reward & Recognition: In order to make recognitions an integral part of theCompany it has drafted a strong Reward & Recognition (R&R) policy. R&Rfunctions are organised throughout the year. Programmes like Appreciation Week R&Rmodule during department meeting with HR Quarterly R&R modules during Open house forrecognizing exceptional performances (both team and Individual level) and Nelco Innovistaawards for rewarding creative and innovative minds are significant platforms in thecompany.
(HoDs) Spot awards safety and bravery awards are a few more R&R activities. Duringthe pandemic employees have been recognised through virtual platforms. The committeemeetings were held on the virtual platform and the rewards were given in the form ofe-gift vouchers for their exemplary performance and contribution.
Capability Development: Company focuses on overall capability building of functionalmanagerial and behavioural skills. Innovation in working is encouraged throughcompetitions like Tata Innovista and Tata Business Leadership Awards where employeesshowcase creative ideas/actions in business process or technology. Competency gaps areassessed through comprehensive exercise and plans made for bridging the identified skillgaps through relevant training programs. Training needs are primarily sourced throughperformance appraisal discussions with respective managers. Training programmes arefacilitated by e-learning platform as well as internal and external trainers. Duringpandemic the Company has been committed towards building the skill levels of employees bythe means of organizing virtual workshops and fulfilling the training requirements throughe-learning platforms. Employees were encouraged to undergo trainings of their choice apartfrom the training needs identified by their managers. The company also arranged webinarsand learning opportunities through Tata group and helped employees manoeuvre through thecrisis.
Performance & Talent Management: Employee performance is monitored and managedthrough rigorous processes of Performance Appraisal. This is done based onachievementagainstpre-definedKey Result Areas (KRAs) for each individual which are agreedat the beginning of the year. Continuous dialogue is encouraged between managers and theirteams with focus on guiding and training first time managers through performance coaching.Talent management framework is rolled out for High-Potential employees which help themgrow in the system faster.
Succession Planning: Successors have been identified for critical positions (for N& N-1 level) in the Company to ensure business continuity. Based on the outcome ofthis process decisions to hire capable person for specific positions have also beenrecommended.
The company has an instituted Policy on Prevention of Sexual Harassment (POSH) whichseeks to govern guidelines and grievance redressal procedures as required under SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013. As perpolicy a Complaints Redressal Committee/Internal Complaints Committee has been formed inthe Company with inclusion of an external lady member. POSH theme training was conductedfor employees and allied resources. No complaints related to POSH have been receivedduring the year.
12. Credit Rating
During the year CRISIL has assigned ratings for long term and short-term bankfacilities of the Company to CRISIL A Stable and CRISIL A1 respectively.
13. Loans Guarantees Securities and Investments (LGSI)
Details of LGSI covered under the provisions of Section 186 of the Act 2013 are givenin Annexure III forming part of this report.
14. Foreign Exchange Earnings and Outgo. (Rs. in lakhs)
|Particulars Standalone ||Year ended 31st March 2021 ||Year ended 31st March 2020 |
|Foreign Exchange Earnings ||38 ||33 |
|Foreign Exchange Outflow ||2472 ||3981 |
Members of the Company at the AGM held on 13th August 2020 approved theappointment of S.R. Batliboi & Associates LLP Chartered Accountants (ICAI FirmRegistration No. 101049W /E300004) as the statutory auditors of the Company for a periodof 5 years commencing from the conclusion of the 77th AGM held on 13thAugust 2020 until the conclusion of 82nd AGM of the Company to be held in theyear 2025.
16. Auditors' Report
The standalone and the consolidated financial statements of the Company have beenprepared in accordance with applicable Indian Accounting Standards (Ind AS) notified underSection 133 of the Act. The Statutory Auditor's report does not contain anyqualifications reservations adverse remarks or disclaimers. The Notes to the Accountsreferred to in the Auditors' report are self-explanatory and therefore do not call for anyfurther clarification under section 134(3)(f) of the Act.
During the year under review neither the statutory auditors nor the secretarialauditors has reported to the Audit committee under Section 143 (12) of the Companies Act2013 any instances of fraud committed against the Company by its officers or employeesthe details of which would need to be mentioned in the Board's report.
17. Maintenance of cost records
As specified by the Central Government under sub-section (1) of section 148 of theCompanies Act 2013 the Company has maintained cost accounts and records.
18. Secretarial Audit Report
In terms of Section 204 of the Act and Rules made thereunder M/s. Bhandari &Associates Practicing Company Secretaries were appointed as Secretarial Auditors of theCompany to carry out the secretarial audit for FY 2020-21. The report of the SecretarialAuditors for FY 2020-21 is enclosed as Annexure- IV forming part of this Report. There hasbeen no qualification reservation adverse remark or disclaimer given by the SecretarialAuditors in their Report.
The Company has devised proper systems to ensure compliance with the provisions of allapplicable Secretarial Standards issued by the Institute of Company Secretaries of Indiaand that such systems are adequate and operating effectively.
As per the requirements of the Listing Regulations the secretarial audit for FY21 ofTatanet Services Ltd. material subsidiary of the Company was undertaken by PracticingCompany Secretaries. The Audit Report confirms that the material subsidiary has generallycomplied with the provisions of the Act Rules Regulations and Guidelines etc.
19. Conservation of Energy and Technology Absorption
The information on conservation of energy and technology absorption stipulated underSection 134 (3) (m) of the Act read with Rule 8 of The Companies (Accounts) Rules 2014is given in Annexure V forming part of this report.
20. Related Party Transactions
In line with the requirements of the Act and the Listing Regulations the Company hasformulated a Policy on Related Party Transactions and the same is available on theCompany's website:https://www.nelco.in/pdf/Policies/Related%20Party%20Transaction%20Policy.pdf
All related party transactions entered during the year under review were on an arm'slength basis and were in the ordinary course of business. All transactions with relatedparties were reviewed and approved by the Audit Committee. Prior omnibus approval isobtained for related party transactions which are of repetitive nature and entered in theordinary course of business and on an arm's length basis. There were no other materiallysignificant related party transactions made by the Company with Promoters Directors KeyManagerial Personnel and Body Corporate(s) which had a potential conflict with theinterest of the Company at large. Accordingly the disclosure of these Related PartyTransactions as required under Section 134 (3) (h) of the Act in Form AOC 2 is notapplicable for the year under review.
The details of the transactions with related parties are provided in the accompanyingFinancial Statements.
The Company has not accepted any deposits from public and as such no amount on accountof principal or interest on deposits from public was outstanding as on the date of theBalance Sheet.
22. Extract of Annual Return
Pursuant to Section 92 of the Act read with the appliable Rules the Annual Return forthe year ended 31st March 2021 can be accessed on the Company's website at thefollowing link:https://www.nelco.in/pdf/disclosure-of-events/annual-return-2020-21-nelc.pdf
23. Directors' Responsibility Statement controls and compliance Based on the framework of internal financial systems established and maintained by the Company workperformed by the internal statutory cost auditors secretarial auditors and externalconsultants including the audit of internal financial controls over financial reporting bythe statutory auditors and the reviews performed by Management and the relevant BoardCommittees including the Audit Committee the Board believes the Company's internalfinancial controls were adequate and effective during the period under review.
Accordingly pursuant to Section 134(5) of the Companies Act 2013 the Board ofDirectors to the best of their knowledge and ability confirm that:
a) in the preparation of the annual accounts for the period ended 31st March2021 the applicable accounting standards had been followed along with proper explanationrelating to material departures.
b) they have in the selection of the accounting policies consulted the StatutoryAuditors and have applied them consistently and made judgments and estimates that arereasonable and prudent to give a true and fair view of the Company for the period ended 31stMarch 2021 and of the profit of the Company for that period;
c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.
d) they have prepared the accounts for the period under review on a going concernbasis.
e) they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively.
f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
The Board of Directors thank the Company's shareholders customers vendors businesspartners bankers and financial institutions for their continuous support.
The Directors also thank the Government of India Dept. of Telecommunications Dept. ofSpace various Ministries Regulatory Authorities and their departments for theirco-operation. We appreciate and value the contributions made by all our employees.
On behalf of the Board of Directors
Mumbai 28th April 2021