Directors' Report Dear Shareowners, Your Directors present the 11th Annual Report and the audited financial statement for the financial year ended March 31, 2015. Financial Performance During the year under review, your Company has earned income of Rs. 11,136 crore against Rs. 12,445 crore in the previous year. The Company has incurred a loss of Rs. 154 crore for the year as compared to profit of Rs. 730 crore in the previous year. The performance and financial position of the subsidiary companies and associate companies are included in the consolidated financial statement of the Company and presented in the Management Discussion and Analysis forming part of this Annual Report. Dividend During the year under review, the Board of Directors has not recommended any dividend on the equity shares of the Company. Business Operations The Company together with its subsidiary companies operates on a pan-India basis offers full value chain of wireless (CDMA and GSM including 3G services), wireline, national long distance, international, voice, data, video, Direct-To-Home (DTH) and internet based communications services under various business units organised into strategic geographical business units: India Operations and Global Operations. These strategic business units are supported by passive infrastructure connected to nationwide backbone of Optic Fibre Network as well as fully integrated network operation system and by the largest retail distribution and customer services facilities. The Company also owns through its subsidiary company, a global submarine cable network infrastructure and offers managed services, managed Ethernet and application delivery services. Spectrum Auction The Department of Telecommunications (DoT) conducted auction for the 800, 900, 1800 and 2100 MHz spectrum in March 2015. The Company successfully bid for its requirements in the 10 service areas and won additional/top up spectrum in 1800 MHz in Haryana, Karnataka and Punjab and in 800 MHz in Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Kolkata, Odisha, Punjab, Uttat Pradesh (West) and West Bengal service areas. The validity of the above spectrum will be for a fresh 20 year period starting from the effective date as mentioned in the Letter of Intent (LOI), which in case of spectrum blocks currently held by the existing licensees, is the date of expiry of existing licenses. The LOIs have been issued on 27/28 May, 2015. As per the payment options available, the Company has chosen the deferred payment option. Management Discussion and Analysis Management Discussion and Analysis Report for the year under review as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India is presented in a separate section forming part of this Annual Report. Share Capital / Fund Raising Programme During the year under review, the Company allotted 33,82,86,197 equity shares of Rs. 5/- each at a offer price of Rs. 142.14 per equity share (including a Share premium of Rs. 137.14 per equity share) under Qualified Institutional Placement (QIP) to Qualified Institutional Buyers on July 2, 2014 and received an amount aggregating to Rs. 4,808.40 crore. The Company had also allotted 8,66,66,667 Warrants entitling the subscribers to subscribe to equivalent number of Equity Shares of Rs. 5/- each at a price of Rs. 150/- per Warrant (including Share premium of Rs. 145/- per Equity Share) aggregating to Rs. 1,300 crore under preferential allotment to the Promoter Group entity and allotted 8,66,66,667 equity shares to the Promoter Group entity, against said Warrants on January 20, 2015. The fund raised were utilised as per the object/purpose for which it was raised. The Paid up share capital of the Company was increased from Rs. 1032.01 crore to Rs. 1244.49 crore. This was the maiden QIP and Preferential Issue of the Company. During the current financial year 2015-16, the Company issued and allotted foreign currency Senior Secured Notes on May 6, 2015 amounting to US$ 300 mn (Rs. 1,909 crore). The Notes have a tenor of 5 \ years due in November, 2020 and carry a coupon rate of 6.5 per cent per annum, payable semi annually. The Notes are listed on the Singapore Stock Exchange. Non Convertible Debentures During the year under review, the Company has not issued or redeemed any Non-Convertible Debentures. Deposits The Company has not accepted deposit from the public falling within the ambit of Section 73 of the Companies Act, 2013 ("the Act") and the Companies (Acceptance of Deposits) Rules, 2014. Particulars of Investments Pursuant to the provisions of Section 186 of the Act, the details of the Investments made are provided in the unabridged standalone financial statement under Notes No.2.11 and 2.15. Subsidiary and Associate companies During the year under review, Reliance Infra Realty Limited and Reliance Infra Projects Limited became the subsidiaries of the Company. The performance and financial position of the major subsidiary companies are presented in Management Discussion and Analysis Report forming part of this Annual Report. Also, a report on the performance and financial position of each of the subsidiary companies and associate companies as per the Act is provided in the consolidated financial statement. The Policy for determining material subsidiary companies may be accessed on the Company's website at the link http://www.rcom.co.in/Rcom/aboutus/ir/ pdf/Policy-for-determining-Material-Subsidiary.pdf. Consolidated Financial Statement The Audited Consolidated Financial Statement for the financial year ended March 31, 2015, based on the financial statement received from subsidiary companies, joint ventures and associate companies, as approved by their respective Board of Directors have been prepared in accordance with Accounting Standard (AS) - 21 on 'Consolidated Financial Statement' read with AS-23 on 'Accounting for Investments in Associates' and AS-27 on 'Financial Reporting of Interests in Joint Ventures', notified under the Act, read with the Accounting Standards Rules as applicable. Directors During the year under review, in terms of the provisions of Act, the Company appointed Prof. J. Ramachandran, Shri Deepak Shourie, Shri A. K. Purwar and Shri R. N. Bhardwaj as Independent Directors of the Company for a period of 5 years and Smt. Manjari Kacker as a Woman Director, liable to retire by rotation w.e.f. September 16, 2014. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under the Act and Clause 49 of the Listing Agreement with the Stock Exchanges. The details of programme for familiarization of Independent Directors with the Company, nature of the industry in which the Company operates and related matters are put up on the website of the Company at the link http://www.rcom.co.in/ Rcom/aboutus/ir/pdf/Directors_familiarisation.pdf. In terms of the provisions of the Companies Act, 2013, Smt. Manjari Kacker, Woman Director of the Company, retires by rotation and being eligible, offers herself for re-appointment at the ensuing Annual General Meeting (AGM). A brief resume of Smt. Manjari Kacker, Woman Director, nature of expertise in specific functional areas and names of the companies in which she holds directorship and / or membership / chairmanship of Committees of the respective Boards, shareholding and relationship between directors inter se as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is given in the section on Corporate Governance Report forming part of this Annual Report. Key Managerial Personnel During the year, Shri Vinod Sawhny, Chief Executive Officer, Shri Manikantan V., Chief Financial Officer and Shri Prakash Shenoy, Company Secretary and Manager were designated as the Key Managerial Personnel (KMP) of the Company as per requirements of the Act. Evaluation of Directors, Board and Committees The Company has devised a policy for performance evaluation of the individual directors, Board and its Committees, which includes criteria for performance evaluation. Pursuant to the provisions of the Act and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of the Committees of the Board. The Board performance was evaluated based on inputs received from all the Directors after considering criteria such as Board composition and structure, effectiveness of processes and information provided to the Board etc. A separate meeting of the Independent Directors was also held during the year for the evaluation of the performance of non-independent Directors, performance of the Board as a whole and that of the Chairman. The Nomination and Remuneration Committee has also reviewed the performance of the individual directors based on their knowledge, level of preparation and effective participation in Meetings, understanding of their roles as directors etc. Policy on appointment and remuneration for Directors, key managerial personnel and senior management employees The Nomination and Remuneration Committee of the Board has devised a policy for selection and appointment of Directors, Key Managerial Personnel and Senior Management Employees and their Remuneration. The Committee has formulated the criteria for determining qualifications, positive attributes and independence of a Director, which has been put up on the Company's website. Further, the Committee has also devised a policy relating to remuneration for Key Managerial Personnel and senior management employees, as the Company does not have any Whole-time Director/ Managing Director on its Board. The policy on the above is attached as Annexure - A. Directors' Responsibility Statement Pursuant to the requirements under Section 134(5) of the Act with respect to Directors' Responsibility Statement, it is hereby confirmed that: i. I n the preparation of the annual financial statement for the financial year ended March 31, 2015, the applicable Accounting Standards had been followed along with proper explanation relating to material departures, if any; ii. The Directors had 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 March 31, 2015 and of the loss of the Company for the year ended on that date; iii. The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. The Directors had prepared the annual financial statement for the financial year ended March 31, 2015 on a 'going concern' basis; v. The Directors had laid down internal financial controls to be followed by the Company and such financial controls are adequate and are operating effectively, and vi. The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. Contracts and Arrangements with Related Parties All contracts/ arrangements/ transactions entered into by the Company during the financial year under review with related parties were on an arm's length basis and in the ordinary course of business. There were no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons, which may have a potential conflict with the interest of the Company at large. All Related Party Transactions were placed before the Audit Committee for approval. Omnibus approval of the Audit Committee was obtained for the transactions which were of a repetitive nature. The transactions entered into pursuant to the omnibus approval so granted were reviewed and statements giving details of all related party transactions were placed before the Audit Committee for their approval on a quarterly basis. The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website at the link http://www. rcom.co.in/Rcom/aboutus/ir/pdf/Related-Party-Transactions-Policy.pdf. None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company. Material Changes and Commitments if any, affecting the financial position of the Company There was no material change and commitment which materially affect the financial position of the Company occurred between the financial year ended on March 31, 2015 and the date of this report. Meetings of the Board A calendar of Meetings is prepared and circulated in advance to the Directors. During the year, six Board Meetings were held, details of which are given in the Corporate Governance Report. Audit Committee The Audit Committee of the Board consists of Independent Directors namely Prof. J. Ramachandran, Chairman, Shri A. K. Purwar, Shri R. N. Bhardwaj, Shri Deepak Shourie and Non Independent Director Smt. Manjari Kacker as members. During the year, all the recommendations made by the Audit Committee were accepted by the Board. Auditors and Auditors' Report M/s. Chaturvedi & Shah, Chartered Accountants and M/s. B S R & Co.LLP, Chartered Accountants, the Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting (AGM) and are eligible for re-appointment. The Company has received letters from M/s. Chaturvedi & Shah,Chartered Accountants and M/s. BSR & Co. LLP, Chartered Accountants; to the effect that their appointment, if made, would be within the prescribed limits under Section 141(3) of the Act and that they are not disqualified from appointment as statutory auditors of the Company. The observations and comments given by the Statutory Auditors in their report read together with notes on financial statement are self explanatory and hence do not call for any further comments under Section 134 of the Act. Cost Auditors Pursuant to the provisions of the Act and Companies (Cost Records and Audit) Rules, 2014, the Board of Directors have appointed M/s. V. J. Talati & Co., Cost Accountants, as the Cost Auditors for conducting cost audit for the telecommunications businesses of the Company for the financial year ending March 31, 2016, subject to the remuneration being ratified by the members at the ensuing AGM of the Company. Secretarial Audit Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors had appointed M/s. Kaushik M. Jhaveri & Co., Company Secretaries in Practice to undertake the Secretarial Audit of the Company. There is no qualification, reservation or adverse remark made in their Secretarial Audit Report. The Audit Report of the Secretarial Auditor is attached herewith as Annexure - B. Extract of Annual Return Extract of the Annual Return of the Company in form MGT-9 is attached herewith as Annexure - C. Employees Stock Option Scheme During the year under review, the Company has not granted any Options to the employees of the Company. Employees Stock Option Scheme (ESOS) was approved and implemented by the Company and Options were granted to the employees under ESOS Plan 2008 and Plan 2009 in accordance with earlier guidelines applicable to ESOS. The ESOS Compensation Committee of the Board monitors the Scheme. The existing ESOS Scheme and Plans are in compliance with the Securities and Exchange Board of India (Share based employee benefits) Regulations, 2014 (SEBI Regulations). Particulars of Employees and related disclosures In terms of the provisions of Section 197 of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in the Annexure to the Directors' Report. However, having regard to the provisions of Section 136 of the Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. The said information is available for inspection at the registered office of the Company on all working days, except Saturdays between 11:00 A.M. and 1:00 P.M. up to the date of the AGM and any member interested in obtaining the same may write to the Company Secretary. Upon such request the information shall be furnished. Disclosures relating to the remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personel) Rules, 2014 are provided in Annexure - D. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo As the Company does not carry on any manufacturing activity, being a telecommunications service provider, most of the information of the Company as required under Section 134(3) (m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 are not applicable. However, the information as applicable has been given in the Annexure - E forming part of this Report. Corporate Governance The Company has adopted "Reliance Group-Corporate Governance Policies and Code of Conduct" which sets out the systems, process and policies conforming to the international standards. The report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges is presented in separate section forming part of this Annual Report. A Certificate from the auditors of the Company M/s. Chaturvedi & Shah, Chartered Accountants and M/s. BSR & Co. LLP,Chartered Accountants conforming compliance to the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement, is enclosed to this Report. Vigil Mechanism In accordance with Section 177 of the Act and the Listing Agreement, the Company has formulated a Vigil Mechanism to address the genuine concern, if any of the directors and employees. The details of the same have been stated in the Report on Corporate Governance and the policy can also be accessed on the Company's website. Risk Management Pursuant to the requirement of Clause 49 of the Listing Agreement, during the year, the Company has constituted a Risk Management Committee consisting of majority of directors and senior managerial personnel. The details of the Committee and its terms of reference etc. are set out in the Corporate Governance Report forming part of this Report. The Company has a robust Business Risk Management framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance Company's competitive advantage. The business risk framework defines the risk management approach across the enterprise at various levels including documentation and reporting. The framework has different risk models which help in identifying risks trend, exposure and potential impact analysis at a Company level as also separately for business segments. Compliance with provisions of Sexual Harassment of Women at workplace (Prevention, Prohibition and Redressal) Act, 2013 The Company is committed to uphold and maintain the dignity of woman employees and it has in place a policy which provides for protection against sexual harassment of women at work place and for prevention and redressal of such complaints. During the year no such complaints were received. Corporate Social Responsibility The Company has constituted Corporate Social Responsibility Committee in compliance with the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules 2014. The Corporate Social Responsibility Committee has formulated a Corporate Social Responsibility Policy (CSR policy) indicating the activities to be undertaken by the Company. The CSR policy may be accessed on the Company's website at the link; http://www.rcom.co.in/Rcom/ aboutus/ir/pdf/CSR-Policy.pdf. The CSR Committee consists of Smt. Manjari Kacker as Chairperson, Shri Anil D. Ambani, Prof J. Ramachandran, Shri Deepak Shourie, Shri A. K. Purwar and Shri R. N. Bhardwaj, Directors as members. The disclosures with respect to CSR activities is given in Annexure - F. Orders, if any, passed by Regulators or Courts or Tribunals No orders have been passed by the Regulators or Courts or Tribunals impacting the going concern status and the Company's operation. Internal Financial Controls and their adequacy The Company has in place adequate internal financial controls across the organisation. The same is subject to review periodically by the internal audit cell for its effectiveness. During the year, such controls were tested and no reportable material weakness in the design or operation were observed. Business Responsibility Statement SEBI vide its Circular CIR/CFD/DIL/8/2012 dated August 13, 2012, has mandated top 100 listed entities, based on market capitalisation on BSE Limited and National Stock Exchange of India Limited at March 31, 2012, to include Business Responsibility Report ("BRR") as part of the Annual Report. In view of FAQ's issued by SEBI, the BRR has been uploaded on the website of the Company at www.rcom.co.in\investor relations\ Financial Results. Any shareholder interested in obtaining physical copy of BRR may write to the Company Secretary at the Registered Office of the Company. Acknowledgement Your Directors would like to express their sincere appreciation for the co-operation and assistance received from shareholders, debenture holders, debenture trustee, bankers, financial institutions, regulatory bodies and other business constituents during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the commitment displayed by all executives, officers and staff, resulting in the successful performance of the Company during the year. For and on behalf of the Board of Directors Anil Dhirubhai Ambani Chairman Mumbai May 29, 2015 |