REPORT OF DIRECTORS AND MANAGEMENT DISCUSSION & ANALYSIS To The Members Your Directors present the Twenty Seventh Annual Report, together with the Audited Accounts of the Company for the year ended 31st March 2015 Review of Operations During the year under review, the company's sales and other income was Rs.2047.67 lakhs. The entire revenue is achieved from the Optical Fibre Unit. Overall the market condition of OFC was not encouraging during this year also and the order booking status was not as expected. As reported during the previous year, though BBNL has issued APO for supply of 5800 KMs of 24F OFC with accessories worth Rs.31.90 Cr. during February 2014, PO was issued for only 50% equivalent to 2900 KMs in April 2014. Out of this BBNL has issued consignee details for around 1788 KMs. only and the Company has executed 1789.616 KMs during the year. This is the only big order executed during the year. Others are of small quantum only. BBNL has not issued the consignee details for the balance of around 1112 KMs. Orders for balance 50% also is awaited. Your company is continuously struggling hard to survive in the price war by implementing various cost-cutting and value engineering measures in the manufacturing operations. Your Company successfully executed two new design cables of 24F ADSS OFC for hilly and rural applications and 12F Uni tube ADSS OFC with double sheath. In the diversification front, though your Company has successfully executed assembly, validation and supply of Tablet PCs in small quantum during the earlier years, could not get further orders during the year under review. You are aware that BIFR has issued a Sanctioned Scheme to the Company on 21.07.2010. As per the Sanctioned Scheme the Board of Directors had issued 1,54,32,700 equity shares of Rs.10 each to M/s. Telecommunications Consultants India Limited (TCIL), 42,47,500 equity shares of Rs.10 each to State Bank of India, 20,70,600 equity shares of Rs.10 each to Andhra Bank and 12,65,200 equity shares of Rs.10 each to Punjab National Bank by converting part of the loans into equity during 2010-11. The shares in physical format were issued on 14.09.2010. Out of the bridge loan of Rs.12.50 crores from TCIL as per the Sanctioned Scheme of BIFR, the Company had availed Rs.11.66 crores during 2010-11 towards OTS to consortium bankers and towards the Tamilnadu Government land in possession of the Company. With the above restructuring the net worth became positive during 2010-11. However from 2010-11 onwards, the desired results as projected in the Scheme couldn't be achieved due to OFC market conditions. The OFC market from 2010-11 was not as projected and the order booking status was not encouraging. You are aware that the big order from BSNL during 2010-11 also could not materialize due to non availability of one of the critical Raw Material Nylon 12. Due to this, the Net worth has again eroded during 2011-12 and became negative. The year under review was also not encouraging due to lack of required level of executable orders. Though there was good scope to execute BBNL's APO of 5800 KMs worth Rs.31.90 Cr. during the year, the same could not be achieved due to the above mentioned reasons. Hence this has again resulted in accumulation of losses and thereby the Networth has further eroded. Your Company is looking forward for getting better improvements in the diversification front in future, in the field of Tablet PC and FTTH components manufacturing. There are huge requirement of OFC in the country. Hence the company is hopeful of improvement in OFC market conditions. However hectic competition is prevailing in this field. The company could not succeed in the e-reverse auction of BSNL for supply of 24000 KMs of 24F OFC, due to such competition. Since the OFC market is picking up and the Company is also exploring successful diversification project, a Modified Draft Rehabilitation Scheme shall be prepared at appropriate time for submission to BIFR through the Monitoring Agency. Market Scenario and Outlook Though the OFC market condition in India was not encouraging from 2010-11 onwards, considering the NOFN project and the improving OFC market conditions, the OFC market is expected to pick up again and will grow further in future. Since the execution of NOFN project all over the country is delaying, now the execution seems to be decentralized for execution by the states. Allready Andhra Pradesh & Tamilnadu have initiated action on this front. In view of this, it is expected that the NOFN project of the government will move fast in future. Procurement of cables may be expected after second quarter of 2015-16. MTNL and BSNL are both focusing on Fibre Termination to Home (FTTH) deployment as this gained momentum across the Globe. The demand for data services is increasing. The company expects that of telecom cables sector to increase in volumes in the back-drop of the increased plan of BSNL for deployment of high fibre count OFC for inter exchange links and long-haul projects is likely to provide the much needed fillip for Ribbon type Optical Fibre Cables. This may reinforce and add to the competitive strength of the company which is one of the few players equipped to manufacture Ribbon type of OFC in India. The industry also expects the advent of Conditional Access System (CAS) and broadband applications to spur the growth of optical fibre cable networks in the coming years. In power sector ADSS cable applications are increasing day by day. The optic fibre industry at home is also poised for a period of significant growth and the demand is expected to surpass the current manufacturing facility in the months to come. This favourable trend is expected to continue at least over the next few years. The company continues to take all initiatives to retain the competitive edge and be in a position to meet the requirements of the market. The medium / long-term prospects will augur well for the company. The company continues to emphasize on cost cutting through enhanced productivity, reduction in logistics and other costs. The company will continue its efforts to further prune all its fixed costs including administrative and discretionary overheads. The Company is also exploring the possibilities for diversification in the related areas like manufacturing and supply of FTTH components, OFC accessories, tablet PCs etc. Though the Company has successfully executed assembling, validation and supply of Tablet PCs during 201213 under TCIL's CSR project, could not get further orders. For implementation of any of this successful venture after feasibility study, the vacant land available with the Company will be utilized for this project by having tie up arrangement with suitable Joint Venture partner. Efforts are being taken to study the market and to identify a suitable JV partner to proceed further. Efforts are being taken through TIDCO also. On finalizing a successful project, action for executing in big volume will be considered after taking all relevant approvals including from BIFR. Cautionary Statement Statements in the Directors' Report and Management Discussion & Analysis contain forward looking statements. Actual results, performances or achievements may vary materially from those expressed or implied, depending upon economic conditions, Government policies, subsequent developments and other incidental factors. Risk & Concern The industry is facing challenging cost pressures as the cost of major raw materials are varying because the market is volatile. The variations in exchange rate fluctuation are also a threat towards cost of production. The competition within OFC business is becoming fierce due to emerging new technologies and frequent new product introductions in Optical fibre products which command competitive prices and preference in the market. 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 Articles 79 & 80 of the Articles of Association of the company, Shri. Vimal Wakhlu and Shri B.Elangovan, will retire from the Directorship of the company by rotation and being eligible, offers themselves for re-appointment. .Directors' Responsibility Statement As required under Section 134(5) of the Companies Act, 2013, the Directors of the Company hereby state and confirm that - a) In the preparation of the annual accounts the applicable accounting standards had been followed. b) They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2015, and the loss of the Company for the year ended on that date. c) They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets 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 the comparative growth in OFC market, future prospects of the Company with the support of TCIL & TIDCO. e) They have laid down internal financial control to be followed by the company and that such internal financial control are adequate and were operating effectively. f) They have devised proper system to ensure compliance with all provision of all applicable laws and that systems were adequate and operating effectively. Extracts of The Annual Return Pursuant section 92(3) of the Companies Act,2013 and Rule 12(1)of the Companies (Management And Administration) Rules,2014, the extract of the Annual Return in Form MGT-9 has been attached to form part of the Board's Report. Corporate Governance A report on Corporate Governance with the Practicing Company Secretaries Certificate on compliance with conditions of the Corporate Governance has been attached to form part of the Annual Report. Clarification on Practicing Company Secretaries observations is given below: The Company has not complied with Clause 49 (I) (A) (ii) in terms of minimum number of Independent Directors in the Board The Company is Joint sector Govt. Company with 49% of its shares held by TCIL, a Govt. of India Enterprise and 14.63% held by TIDCO, a Govt of Tamilnadu Enterprise. The Board as well as management control of the Company lies with TCIL. Being a Govt. Company, action already taken for induction of Independent Directors in the Board of the Company through TCIL with the Dept. of Telecommunications, Ministry of Telecommunications & IT. The same is being followed up through TCIL for early appointment.. Energy, Technology and Foreign Exchange Particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo as required under Sec.134(3)(m) of the Companies Act, 2013 are enclosed as part of the Report. Details of Director or Key Managerial Personnel who were appointed or have resigned during the year (i) Smt. GLatha IAS, Deputy Secretary to Govt. of Tamilnadu, Industries Department has been appointed as Director with effect from 22.12.2014, as nominated by TIDCO. (ii) Shri M. K Jain, Director, Nominee of Dept. of Telecommunications (DOT) vacated office of the Director from the Board of Tamilnadu Telecommunications Limited pursuant to Section 167(1)(b) of the Companies Act,2013, with effect from 26.03.2015. Intimated DOT for filling the vacancy. (iii) Shri V. Mohan, GGM (Finance) cum Co. Secretary, holding dual role of CFO and Secretary has been relived from the position of Secretary with effect from 26.03.2015. Personnel The Managing Director and the Key Managerial Personnel (CFO & Secretary) were on deputation from the Promoter Company TCIL which is a Govt. of India Enterprise, holding 49% stake in the Company and controlling the composition of the Board of Directors. Hence their remuneration were as per the scales applicable to their cadre in the promoter company. The existing Managing Director's salary applicable as above has been approved by the members in the 23rd AGM. Hence, being on deputation from a Govt. of India Enterprise, the ratio as well as percentage increase not determined. Under KMP, the CFO was holding the position of Secretary also. The number of permanent employees as on 31.03.2015 was 69 excluding three officials on deputation from the promoter company. None of the employees drew remuneration of Rs.60, 00,000/ - or more per annum / Rs.5,00,000/- or more per month during the year. This information is furnished as required under 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 very cordial. TTL has designated and implemented a large number of initiatives to build and improve knowledge base and competencies of employees at all levels. TTL has been encouraging its employees to come out with innovative suggestions, which will pave way for significant cost savings as well as overall development of the company. Quality Management Systems Your Directors are happy to report that as a commitment in meeting global quality standards, your company already has IS/ISO 9001:2008 quality management systems certification from Bureau of Indian Standards. During the year licence renewal has been obtained and is valid from 23.02.2015 to 22.02.2018. The Company is also having ISO 14001:2004 Certificate from Guardian Independent Certification Ltd (Registered in England and accredited by Member of the IAF MLA) valid up to 28.05.2016. Internal Control System TTL has adequate internal control procedures in respect of all its operations. It has laid down internal control procedures to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and transactions are authorized, recorded and reported correctly. Internal Audit is being carried out by Independent Audit Firm of Chartered Accountants on an ongoing basis and it recommends appropriate improvements apart from ensuring adherence in company policies as well as regulatory compliance. The Audit Committee periodically reviews the audit findings. Corporate Social Responsibility Since the Company is continuously incurring losses, no CSR policy has been devised. Auditors In terms of Section 139 of the Companies Act, 2013, the Comptroller and Auditor General of India (CAG) had appointed M/s. S.VENKATRAM & CO, Chartered Accountants as the Auditors of the company for the year 2014-15 at a remuneration of Rs. 1,00,000/- besides reimbursement of traveling and out-of-pocket expenses at actuals, subject to the other items and conditions as specified by the CAG. Independent Auditor's Report Clarification on Auditors observations is given below: 'Emphasis of Matter' of the Independent Auditor's Report: Without qualifying our conclusion, we draw, attention to S.N-3-Note -25- Notes to Accounts. As at 31st March 2015, the Company's accumulated losses of Rs.9400.69 Lakhs has eroded the Net Worth of the Company, indicating the existence of material uncertainty that may cast a doubt about the Company's ability to continue as a going concern. The Company has incurred a loss of Rs.857.49 Lakhs for the year under audit. Based on the mitigating factors discussed in the said note, the Management believes that the Going Concern assumption is appropriate. As mentioned in Note no. 3, the company has already executed the entire quantity for which BBNL has provided the consignee details against their PO for 2900 KMs.Consinee details for balance 1112 KMs as well as PO for balance 2900 KMs (50%) are expected during 2015-16. The requirement of OFC in the country is huge, however the delay in procurement is due to various procedural matters/issues in execution of big projects by the Government Clients. The Company is hoping to get continuous orders from 2015-16 onwards regularly since the OFC market is picking up. The order booking position is expected to be continuously good. Considering the scope during the immediate future and TCIL's continuous financial support, the accounts have been prepared on going concern basis. 'Other Matter' of the Independent Auditor's Report: The Deferred Tax Asset amounts to Rs.1465.16 Lakhs, as on 31st March 2015, considering all eligible carried forward losses, as per AS 22 - Accounting for Taxes on Income. The same has not been provided for, in the books of account, considering the absence of virtual certainty of earning profits and prudence concept. The Company has disclosed the facts of non-provisioning for deferred tax assets / liabilities vide Note no. 6(b) under "25 .Notes to Accounts". Item No. (vii)(a) of the Annexure to the Independent Auditor's Report The Company has been generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Income Tax, Sales tax, Wealth Tax Service tax, Excise Duty, Customs Duty, Value added Tax, Cess and other material statutory dues with the appropriate authorities during the year as applicable to it except the Property tax amounting to Rs.32,27,400/-.We are informed by the Company that efforts are made to get exemption being a sick Company. We are also informed that there are no employees who are eligible to be covered under Employees State Insurance scheme. With reference to clause 11.5.3 of the Sanctioned Scheme issued to the company by BIFR, the company had requested and continuously insisting the concerned authority for waiver of the Property Tax of the past and during the rehabilitation period. No positive reply from the authority is received. However provision has been made in the books of accounts every year and part amount remitted during the year under review. Continuously pursuing for waiver of the balance dues. On waiver, the liability will be reversed accordingly. Item No.(viii) of the Annexure to the Independent Auditor's Report The accumulated losses of the company as at 31st March 2015 is more than 50% of its Net Worth. The Company has incurred Cash loss of Rs 826.59 lakhs during the financial year covered by our audit. The Company has incurred cash loss in the immediately preceding financial year. The OFC market condition from the year 2010-11 onwards was not as projected due to various reasons beyond the control of the OFC manufacturers. Lack of executable orders is the major reason for such performance, which was experienced by all the OFC manufacturers. However, the OFC market is improving and is expected to grow from the year 2015-16 onwards and the Company is confident of avoiding cash loss. On identification of successful diversification project and based on the expected OFC orders, a modified DRS shall be prepared and submitted at appropriate time to BIFR through the Monitoring Agency. Cost Auditors: During the previous year 2013-14, M/s. SBK Associates, Cost Accountants of Chennai were appointed as Cost Auditors and they had conducted the Cost Audit and the relevant reports have been filed with MCA on 25.09.2014, within the due date. As per the provisions of the Companies (Cost Records and Audit) Rules, 2014, the operation of the company is not falling within the scope of cost audit. Hence cost auditor was not appointed for the financial year 2014-15. Secretarial Audit Report Clarification on Secretarial audit observations is given below: (i) Number of Independent Directors in the Company is below the minimum numbers prescribed under section 149(4) of the Companies Act, 2013. The Company is Joint sector Govt. Company with 49% of its shares held by TCIL, a Govt. of India Enterprise and 14.63% held by TIDCO, a Govt of Tamilnadu Enterprise. The Board as well as management control of the Company lies with TCIL. Being a Govt. Company, action already taken for induction of Independent Directors in the Board of the Company through TCIL with the Dept. of Telecommunications, Ministry of Telecommunications & IT. The same is being followed up through TCIL for early appointment. (ii) The Company has not constituted The Nomination and Remuneration Committee as per section 178(1) of the Companies Act, 2013. Due to Company's sickness, only the BIFR Nominee Director is being paid sitting fees for attending the meetings. Managing Director, being on deputation from TCIL, A Govt. of India Enterprise, his salary is fixed as per TCIL's norms applicable to his cadre. The Directors of TCIL and TIDCO, A Govt. of Tamilnadu Enterprise are also paid salary by their own Organization, applicable as per their cadre in their Organization. Only the travelling expenses and local conveyance for attending the meetings are incurred by the Company. In view of above, no separate Committee was constituted. After appointment of Independent Directors by the Govt., necessary action will be taken for constituting the Committee.. (iii) The Company has appointed Company Secretary as per section 203 (1) of the Companies act, 2013 read with Rule 8 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and is also handling the additional role of CFO. As reported, the officer in charge was heading both Finance and Secretarial Divisions during the year up to 26.03.2015. With reference to section 203(11) of the Companies Act, 2013 read with Rule 8 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014,actions were taken to have separate CFO and Company Secretary. For engaging Company Secretary, advertisements were placed in Company's website and in the notice board of SIRC of the Institute of Company Secretaries of India. But there were no proper response due to the Company's status. However, the Company has engaged an exclusive Company Secretary during June'15. Presently the Company has complied with the provisions of the Companies Act,2013 (iv) The Company has not conducted a separate meeting of Independent Directors as per Schedule IV (CODE FOR INDEPENDENT DIRECTORS) of the Companies act, 2013. As replied in observation (i) above, since sufficient number of independent Directors were not available, separate meeting could not be held. Case being followed up with the Ministry through TCIL for early appointment of independent Directors in the Board. Meetings shall be conducted after induction of required number of Independent Directors. ANNEXURE TO THE DIRECTORS' REPORT Disclosure of particulars as per Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988. A. CONSERVATION OF ENERGY a) Measure taken for Energy Conservation: Maintaining power factor at optimum level, reducing loads whenever the machines are not running, saving light energy etc had been followed vigorously. However due to the shortage of power in the state and due to reduction of capacity by the Tamilnadu Electricity Board, the Company has to incur additional cost for usage during peak hours, power cuts etc., B. TECHNOLOGY ABSORPTION Efforts made in technology absorption are given in prescribed FORM-B as annexed. C. FOREIGN EXCHANGE EARNINGS AND OUTGO a) Activities relating to exports: Initiatives are taken to increase exports, developments of new exports markets for products and services and export plans. Continuous efforts are being made to procure export orders through TCIL as well as directly. A major thrust is being given to tap the export market. However, during the year under review, the export market was not encouraging as expected and there were no exports. The particulars in respect of conservation of energy in the prescribed form are not applicable to the company and hence it is not furnished. Comments of the Comptroller and Auditor General The Comments of the Comptroller and Auditor General of India under Section 143(6)(b) of the Companies Act, 2013 for the year ended 31st March 2015 are enclosed as part of the Report. Acknowledgements The Directors wish to place on record their sincere appreciation for the encouragement, assistance, support and co-operation given by Government of India, Government of Tamilnadu and the Promoters. The Directors appreciate your whole hearted efforts during the year and solicit your continued support and co-operation. Your Directors acknowledge the continued trust and confidence you have reposed in this company. They also wish to place on record their appreciation for the hard work put in by the employees at all levels. For and on behalf of the Board V.S.Parameswaran (DIN: 03559930) Managing Director B.Elangovan DIN: 00133452) Director Place : Chennai Date : 26-08-2015 |