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Tamil Nadu Telecommunications Ltd.

BSE: 523419 Sector: Engineering
NSE: TNTELE ISIN Code: INE141D01018
BSE 00:00 | 22 Oct 9.02 0.10
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NSE 00:00 | 22 Oct 9.05 0.10
(1.12%)
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OPEN 9.30
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VOLUME 2599
52-Week high 21.20
52-Week low 1.15
P/E
Mkt Cap.(Rs cr) 41
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 9.30
CLOSE 8.92
VOLUME 2599
52-Week high 21.20
52-Week low 1.15
P/E
Mkt Cap.(Rs cr) 41
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Tamil Nadu Telecommunications Ltd. (TNTELE) - Director Report

Company director report

To

The Members

The Board of Directors hereby submits the thirty second Annual

Report of the Company with Audited Financial Statements for the period from 1st April2019 to 31st March 2020 along with the Auditors Report.

FINANCIAL HIGHLIGHTS

The financial performance of your company is as given below:-

(Rs. in Lakhs)

2019-20 2018-19
Revenue from operations - -
Other Income (Net) 2.41 5.46
Total Revenue 2.41 5.46
Total Expenditure 477.78 649.43
Finance Charges 903.15 896.65
Extraordinary / Exceptional items - -
Gross Profit / (Loss) after interest before De - preciation & Tax (1378.52) (1540.62)
Depreciation and Amortization Expense 29.46 29.93
Provision for Taxation / Deferred Tax - -
Net Profit / (Loss) (1407.98) (1570.55)
Other Comprehensive Income /(Loss):Item that will not be reclassified to Profit and Loss (53.54) (22.91)
Total Comprehensive Income/(Loss) for the Period (1461.52) (1593.46)

The net loss after Tax is Rs. (1461.52) lakhs against net loss of Rs. (1593.46) lakhsmade during the previous year.

Review of Operations

During the year under review the company's other income was Rs.2.41 lakhs. Due tonon-availability of raw fiber there is no operation in the company.

Market Scenario and Outlook

Millions of Indians stayed home during lock-down. In the subsequent unlock phases workfronts opened up gradually though Education IT sectors are still continuing in remotework mode. In the opened up activities also people are working maintaining socialdistancing from their colleagues and with most of the work on e-files/ e-mails. Usage oflaptops/desktops and mobile devices for official work personal transactions andcommercial activities has increased mani-fold. Table below summarizes the percentage ofpeople aged 16 to 65 spending more time on Connected Devices in April-2020 after Outbreakof Covid-19 Pandemic [Source ITU-D]

Sl. No. Description % of People Using the devices
1. Smart phone or mobile phone 76%
2. Laptop 45%
3. Desktop 32%
4. Tablet device 22%
5. Smart or media streaming device 34%
6. Games console 17%
7. Smart speaker 11%
8. Smart watch 6.3%

Even the Government turned to the telecommunications sector to spread awareness as wellas to trace and track infected persons in a bid to break the chain of transmission.Covid-19 pandemic showed the world just how closely technology is linked to businesssecurity in the modern world. The telecom sector rallied to implement business continuityplans quickly to ensure smooth operations. For helping deliver awareness messages totelemedicine and online classes the telecom sector has a vital role to play in thecountry's growth and development and it cannot afford to be disrupted by unprecedentedevents.

According to CII Report issued in April-2020 Broadband penetration has grown at animpressive CAGR of 35 per cent in India over the past three years (2017-2020). It standsat 51% overall however in rural areas it is still 29.1 per cent penetration and inhouseholds fixed broadband penetration in India is still low @ 7.5% only. This implies agrowth opportunity in the very near future.

Indian economy faced challenge in the growth due to Covid-19 pandemic followed bylock-down and unprecedented reverse migration of workforce. According to Global MacroOutlook and World Bank predictions GDP is likely to slip by 8.9%. Global economy is alsofacing similar challenges. New initiatives from Govt of India viz. Atmanirbhar Bharatsector-wise revival packages relief to MSMEs etc. are expected to halt the fall and makethe economy look-up again once the pandemic situation eases out.

Considering the above Telcos are increasingly focusing on the new opportunities andrevenue streams and business models that will drive greater profitability for them andinclusive growth for the country. The number of mobile users in the country has seen asharp upswing in recent years coupled with significant increase in data usage. Accordingto Cellular Operators

Association of India report data usage would touch 25 Gbps/ user/month in the next2-years.

As demand for technology fueled solutions across diverse sectors increase mobilephones will play a crucial role in delivering tech enabled services to the furthestcorners of the country. This can only be achieved with a 5G network and 5G enabledservices. From smart cities and smart factories to smart education smart healthcare andsmart banking 5G holds the key to India's smart future and now is the right time to pushfor the launch of 5G in India.

Looking forward private telecom players would work in closer collaboration with theGovernment to bridge this chasm and bring every Indian into the digital fold. Frombuilding the necessary infrastructure to extending plans services for rural and remoteregions the Indian telecom sector has its work cut out because only a connected Indiacan be a truly developed and inclusive India.

Cautionary Statement

Statements in the Boards' Report contain forward looking statements. Actual resultsperformances or achievements may vary materially from those expressed or implieddepending upon economic conditions Government policies subsequent developments and otherincidental factors.

Risk & Concern

The industry is facing challenging cost pressures as the cost of major raw materialsare going up due to shortage & increase in oil prices. The variations in exchange ratefluctuation are also a threat towards cost of production. The competition within OFCbusiness is becoming fierce due to emerging new technologies and frequent new productintroductions in Optical fiber products which command competitive prices preference in themarket. The market price of cables is also varying due to competition.

Directors

In accordance with Sec.152 (6) and (7) of the Companies Act 2013 read with Articles79 & 80 of the Articles of Association of the company Shri. B. Ramakrishnan (DIN00182214) and Shri. Kamendra Kumar (DIN 07578257) will retire from the directorship ofthe company by rotation and being eligible offer themselves for re-appointment.

Directors' Responsibility Statement

As required under Section 134(5) of the Companies Act 2013 the Directors of theCompany hereby state and confirm that

a) In the preparation of the annual accounts the applicable accounting standards hadbeen followed.

b) They have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as at 31st March 2020 and the loss of the Companyfor the year ended on that date.

c) They have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities.

d) They have prepared the annual accounts on a going concern basis considering thecomparative growth in OFC market future prospects of the Company with the support ofTCIL.

e) They have laid down internal financial control to be followed by the company andthat such internal financial control is adequate and was operating effectively.

f) They have devised proper system to ensure compliance with all provision of allapplicable laws and that systems were adequate and operating effectively.

Extracts of the Annual Return

Pursuant section 92(3) of the Companies Act 2013 and Rule12(1) of the Companies(Management And Administration) Rules 2014 the extract of the Annual Return in FormMGT-9 has been attached as to form part of the Report.

Corporate Governance

A report on Corporate Governance with the Practicing  Company SecretariesCertificate on compliance with conditions of the Corporate Governance has been attached asto form part of the Report.

Clarification on Practicing Company Secretaries observations is given below:

1. Due to non-appointment of Independent Directors the Company has not compliedwith Regulations 17(1) (b) 18 (1) 19(1) and 25 (3) of the Securities and Exchange Boardof India (Listing Obligations and Disclosure Requirements) Regulations 2015 in terms ofminimum number of Independent Directors in the Board Constitution of Audit Committee andconducting a separate meeting of Independent Directors respectively.

Company's reply:

Points No (1) : The Company is Joint sector Govt. Company with 49% of its sharesheld by TCIL a Govt. of India Enterprise and 14.63% held by TIDCO a Govt. of TamilnaduEnterprise. Being a Govt. Company action has already been taken for induction ofIndependent Directors Constitution of Audit Committee as per 18 (1) and Constitution ofNomination and Remuneration Committee as per regulation 19(1) of SEBI LODR and separateIndependent Directors Meeting as per 25 (3) of SEBI LODR shall be conducted afterappointment of required number of Independent Directors by the Ministry ofTelecommunications.

Energy Technology and Foreign Exchange

Particulars relating to conservation of energy technology absorption and foreignexchange earnings and outgo as required under Sec.134 (3)(m) of the Companies Act 2013are enclosed as part of the Report.

Details of director or Key Managerial Personnel who were appointed or have resignedduring the year.

(i) Shri A.V.V. Krishnan Director (TCIL) has resigned from Board on 30.04.2019 oncompletion of his superannuation.

(ii) Mrs. Shivalini Sinha appointed as woman director on 30.05.2019

(iii) Shri P.V.Sreekanth appointed as Managing Director on 14.11.2019 in place of ShriS.K.Kesari on his cessation on 13.11.2019.

(iv) Shri V. Arun Roy Director (TIDCO) and Shri Rajiv Gupta Director (TCIL) hasresigned from Board on 14.11.2019.

Personnel

The Managing Director the Key Managerial Personnel (CFO) and Company Secretary were ondeputation from the Promoter Company TCIL which is a Govt. of India Enterprise holding49% stake in the Company. Hence their remuneration was as per the scales applicable totheir cadre in the promoter company.

The number of permanent employees as on 31.03.2020 was 67 excluding three officials ondeputation from the promoter company.

None of the employees drew remuneration of Rs.6000000/- or more per annum /Rs.500000/- or more per month during the year. This information is furnished as requiredunder Rule 5(2)(i) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014.

Human Resources

Your company is glad to announce that the industrial relations continue to be verycordial. During the year employees were given training on lying of Optical cable OFCsplicing OFC construction work etc. TTL has been encouraging its employees to come outwith innovative suggestions which will pave way for significant cost savings as well asoverall development of the company.

During the year 2018-19 M/s. Telecommunications Consultants India Limited decided tohelp TTL employees by taking them on deputation to work in their various projects in Indiawhich helps the employees to acquire new skill and experience in services of communicationindustry. Out of 67 numbers of employees 60 employees have joined TCIL on deputation asof 31st March 2020.

Quality Management Systems

Your Directors are happy to report that as a commitment in meeting global qualitystandards your company already has IS/ISO 9001:2015 quality management systemscertification from Bureau of Indian Standards. The license is valid up to 22.02.2021.

Internal Control System

TTL has adequate internal control procedures in respect of all its operations. It haslaid down internal control procedures to ensure that all assets are safeguarded andprotected against loss from unauthorized use or disposition and transactions areauthorized recorded and reported correctly. Internal Audit is being carried out byIndependent Audit Firm of Chartered Accountants on an ongoing basis and it recommendsappropriate improvements apart from ensuring adherence in company policies as well asregulatory compliance. The Audit Committee periodically reviews the audit findings.

Transfer to reserves

During the year under review no amount is being transferred to General Reserve Account.

Dividend

In a view of the losses your Directors have not declared any dividend during the yearunder review.

Deposits

During the year under section 73 and the rules may be called the Companies (Acceptanceof Deposits) Rules 2014 the Company has neither accepted nor renewed any deposits frompublic during the year under review.

Corporate Social Responsibility

Since the Company is continuously incurring losses no CSR policy has been devised.

Related Party Transactions

There was no contract or arrangements made with related parties as defined undersection 188 (1) of the Companies Act 2013 during the year under review.

Research & Development (R&D)

The information as required under the Companies (Disclosure of Particulars in theReport of Board of Directors) Rules 1988 with respect to R&D are not applicable toyour Company.

Particulars of Loans guarantees or investments made under section 186 of the CompaniesAct 2013

There were no loans guarantees or investments made by the company exceeding the limitsspecified under Section 186 of the Companies Act 2013 during the year under review andhence the said provision is not applicable.

Unsecured Loan

The unsecured loan amounting to Rs 119.81 crores as on 30.06.2020 is from related partyi.e. holding company has been taken on long term basis without any stipulation forrepayment and other terms.

Information under section 197 of the Companies Act 2013 read with rule 5(2) of thecompanies (appointment and remuneration of managerial personnel) rules 2014 regardingemployee's remuneration.

Information as per Section 197 of the Companies Act 2013 read with Rule 5(2) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is notapplicable to your company as there is no employee on the rolls of the Company.Accordingly there was no employee of the Company who received remuneration in excess ofthe limits prescribed under of the Companies Act.

Statement under section 134(3)(p) of the Companies Act 2013 regarding formal annualevaluation made by board of its performance and that of its committees and individualdirectors.

In terms of the notification dated 05.06.2015 issued by Ministry of Corporate Affairsthe company has been exempted from the above provision and hence the disclosure is nolonger required.

Material changes and commitments if any affecting the financial position of thecompany which have occurred between the end of the financial year to which the financialstatements relates and the date of the report

None

Information under section 134(3)(n) of the Companies Act 2013 concerning developmentand implementation of risk management policy

The company's operations are completely stopped only limited assistance being given bythe holding company which has a well-defined risk management policy. Your company has notdeveloped and/or implemented the Risk management policy on its own.

Vigil Mechanism under section 177(9) of the Companies Act 2013

Your Company is in process of making the Whistle Blower Policy/ vigil mechanism fordirectors and employees to report concerns about unethical behavior actual or suspectedfraud or violation of your Company's Code of Conduct. Adequate safeguards are providedagainst victimization to those who avail of the mechanism will be provided soon.

Auditors

In terms of Section 139 of the Companies Act 2013 the Comptroller and Auditor Generalof India (CAG) had appointed M/s. R.BUPATHY & CO Chartered Accountants as theAuditors of the company for the year 2019-20 at a remuneration of Rs.100000/- besidesreimbursement of traveling and out-of-pocket expenses at actual subject to the otheritems and conditions as specified by the CAG.

Independent Auditor's Report

Clarification on Auditors observations is given below:

Basis for Adverse Opinion

1. The Company's financial statements have been prepared using going concern assumptionof accounting. However the company's accumulated losses of Rs. 1625137896/-(including a loss of Rs. 146151719/- incurred during the FY 2019-20) has eroded the NetWorth of the Company's ability to continue as a Going Concern. The Company has notoperated its factory since 2017 and No sales effected for more than two years. It is alsopertinent to note that power connections in the factory are disabled. Further asrepresented by the company the machineries would involve major overhauling cost to resumeoperations and the company is also unable to obtain support for supply of major rawmaterial required for manufacture from its supplier. Also the company has not bagged anynew orders to substantiate the going concern assumption.

As per Standard on Auditing (5A) 570 "It the financial statements have beenprepared using the going concern basis of accounting but in the auditor's judgmentmanagement's use of the going concern basis of accounting in the financial statements isinappropriate the requirement in paragraph 21 for the auditor to express an adverseopinion applies regardless of whether or not the financial statements include disclosureof the inappropriateness of management's use of the going concern basis ofaccounting." Hence considering the cumulative effect of the factors detailed in theabove paragraph in the revival of the company we conclude that the Going Concernassumption of the management in preparation of financial statements is inappropriate

2. The Company has not recognised the following financial liability/asset at Fair Valuein terms of IndAS 109(including comparative figures as of 31st March 2019) and impact ofthe same on the financial statements is not ascertainable.

(i) Amounts due to M/s. Fujikura Limited amounting to Rs. 20003590/- (previous yearRs. 19378840/-) (ii) Trade Receivables (considered good) amounting to Rs. 71410295/-(previous year Rs. 71257092/-) (iii) Unsecured Trade Payables amounting toRs.34409374/- (previous year Rs. 33107285/-)

Emphasis of Matter

1) We draw attention to Note No.28(SL.No. 22) of the explanatory notes to the financialstatements which states the reason for non-recognition of amounts due to the holdingcompany viz. Telecommunications Consultants India Limited amounting toRs.1174917114/- (previous year Rs. 1083968014/-) at Fair Value in accordance withIndAS 109 and impact of the same on the financial statements is not ascertainable and Ouropinion is not modified in respect of this matter.

2) Attention is invited to Note Nos. 3581415 of the notes to financial statementswhere the balances carried in the debtors creditors advances & deposits payable /recoverable are subject to confirmation from all parties (other than TelecommunicationsConsultants India Limited) as stated in Note No.28(Sl. No. 2). The impact if any onfinancial statements is not ascertainable and our opinion is not modified in this respect.

3) Attention is invited to Note No.28 (Sl. No.19) of the explanatory notes to thefinancial statements which states that the Company has not received information fromvendors regarding their status under the Micro Small and Medium Enterprises DevelopmentAct 2006. Hence the disclosure relating to amounts unpaid as at the year ended togetherwith interest paid/payable under this Act could not be ascertained. Our opinion is notmodified in this respect.

Company's Reply to Basis of Adverse Opinion Para 1 of Going Concern Assumption

The requirement of OFC in the country is huge. Resolution has been passed in the 162ndboard meeting held on 30.05.2019 to support TTL by the promoters company TCIL and TIDCO byproviding orders on nomination basis as both TCIL and

Tamilnadu state government have huge orders to implement the Bhartnet projects. Effortsare being made to obtain Preferential orders from Tamil Nadu Fibrenet Corporation(TANFINET) State PSU for supplying Optical Fiber Cable in Tamilnadu. The proposal oftaking over the company by BSNL has been initiated. DOT discussed in the meeting held on07.03.2019 with regard to takeover of TTL by BSNL it is suggested by Ministry to BSNL toutilise the capacity of TTL since BSNL requirement is 100000 km per annum against TTLcapacity of 10000 km per annum. Therefore the order booking position is expected to begood in the near future. Considering the likely order in the near future and with thepromoter's financial support the accounts have been prepared on Going

Concern Basis.

Company's Reply to Para 2 of Adverse Opinion & Para 1 of Emphasis ofmatter-non-recognition of financial liability/asset at Fair Value in terms of IndAS 109.

As mentioned in our financials TTL is regularly borrowing from our holding companyTCIL for its raw material support and working capital support for running day to dayoperations.

The balances of current liabilities and trade payable pertaining to related party / ourholding company TCIL as on 31/03/2020 are given below:

(i) Current liabilities short term borrowing
(a) Bridge Loan : Rs. 116573000
(b) Working capital support loan : Rs. 160960293
(ii) Trade payable Sundry creditors for raw material support : Rs. 588476700
(iii) Other current liabilities interest accrued : Rs. 308907122

Amounts due to Fujikura Limited amounting to Rs. 20003590 Trade Receivables(considered good) amounting to Rs. 71410295.

Unsecured Trade Payables amounting to Rs. 34409374 This is to state that the aboveitems are reviewed and monitored on day to day basis in both TTL and TCIL. The balancesare periodically reconciled with TCIL and also approved by board of directors of TTL.

It may not be out of place to mention that all the realizations from TTL clients arerouted through Escrow account which is auto credited to TCIL's Account for which standinginstructions have been given to bank. Moreover charge has been created in favour of TCILagainst fixed assets and current assets of TTL for all the TCIL loans advances andliabilities towards raw material supply. The loans are repayable on demand basis. Ind AS109 requires all financial assets/liabilities to be recognised initially at fair value andsubsequently at amortised cost it satisfies the criteria with reference to Ind As 32 Para11 and para 4.2.1 of Ind As 109. Since these financial assets/ liabilities are current innature there is immaterial finance cost/ income involved therefore as a generalpractice demand deposits are carried at cost and not at fair value/amortised cost.

In view of the commitment to pay to TCIL the holding company / related party on demandbasis and the company is taking a conservative approach management assume book value ofcurrent liabilities at a amortized cost i.e instead to book profit by discountingliabilities the company prefers to go and disclose liabilities with full amount under lawof prudence. Company's Reply to Para 2 of Emphasis of Matter regarding balances carried inthe debtors creditors advances & deposits payable / recoverable are subject toconfirmation from all parties (other than Telecommunications Consultants India Limited)

Wherever possible the Company is getting confirmation. Since TTL does not have fund topay to the Creditor including M/s. Fujikura the company does not ask for balanceconfirmation from any Creditors which will trigger to make payment.

Company's Reply to Para 3 of Emphasis of Matter regarding

Company has not received information from vendors regarding their status under theMicro Small and Medium Enterprises Development Act 2006.

As stated in Notes to Accounts No.19 the Company has not received information from thevendors regarding their status under the Micro Small and Medium Enterprises DevelopmentAct 2006.

Cost Auditors:

As per the provisions of the Companies (Cost Records and

Audit) Rules 2014 the operation of the company is not falling within the scope ofcost audit. Hence cost auditor was not appointed for the financial year 2019-20.

Secretarial Audit Report

Clarification on Secretarial audit observations is given

 

I. Due to non-appointment of Independent Directors the Company has not complied withSection 149(4) 177(1) 178(1) and Schedule IV of the Companies Act 2013 as well as withRegulations 17(1) (b) 18 (1) 19(1) and 25 (3) of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 in terms ofminimum number of Independent Directors in the Board Constitution of Audit CommitteeNomination and Remuneration Committee and conducting a separate meeting of IndependentDirectors respectively.

Management reply to the observation :

Point No (i) The Company is Joint sector Govt. Company with 49% of its shares heldby TCIL a Govt. of India Enterprise and 14.63% held by TIDCO a Govt of TamilnaduEnterprise. Being a Govt. Company action has already been taken for induction ofIndependent Directors Constitution of Audit Committee as per 18 (1) and Constitution ofNomination and Remuneration Committee as per regulation 19(1) of SEBI LODR and separateIndependent Directors Meeting as per 25 (3) of SEBI LODR shall be conducted afterappointment of required number of Independent Directors by the Ministry ofTelecommunications.

Acknowledgements

The Directors wish to place on record their sincere appreciation for the encouragementassistance support and co-operation given by Government of India Government of Tamilnaduand the Promoters. The Directors appreciate your whole hearted efforts during the year andsolicit your continued support and co-operation. Your Directors acknowledge the continuedtrust and confidence you have reposed in this company

.