Reliance Communications
BSE: 532712 | NSE: RCOM | ISIN: INE330H01018 | Telecommunications - Service
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| Directors Report | Year End : Mar '08 |
The Directors have pleasure in presenting the fourth Annual Report and
the audited accounts for the financial year ended 31st March, 2008.
Financial Results
The performance of the Company for the financial year ended 31st March,
2008 is summarised below:
Particulars Financial Year ended Fifteen Months ended
31st March, 2008 31st March, 2007*
(Rs. in crore) US$ in (Rs. in crore) US$ in
million** million**
Total income 13,426.65 3,354.99 11,761.91 2,728.98
Gross profit before
depreciation,
amortisation and
exceptional items 4,447.75 1,111.38 4,280.87 993.24
Less:
a. Depreciation and
amortisation 1,843.66 460.68 1,836.12 426.01
b. Exceptional items
and other adjustments - - 23.90 5.55
Profit before tax 2,604.09 650.70 2,420.85 561.68
Less: Provision for:
Current tax 2.10 0.52 0.27 0.06
Fringe benefit tax 15.54 3.89 11.73 2.72
Profit after tax 2,586.45 646.29 2,408.85 558.90
Add : Balance brought
forward from previous
year 2,294.90 573.44 5.65 1.31
Profit available for
appropriation 4,881.35 1,219.73 2,414.50 560.21
Appropriations:
Proposed dividend
on equity shares 154.80 38.68 102.23 23.72
Tax on dividend 26.31 6.57 17.37 4.03
Transfer to General
Reserve 400.00 99.95 -
Balance carried to
balance sheet 4,300.24 1,074.53 2,294.90 532.46
* The previous financial year of the Company was for a period of
fifteen months, hence the figures are not comparable.
** Exchange Rate Rs. 40.02 = US$ 1 as on 31st March, 2008 (Rs.43.10=
US as on 31st March, 2007).
Financial Performance
During the year under review, your Company has earned total revenue of
Rs.13,426.65 crore (12 months period) against Rs.11,761.91 crore (15
months period) in the previous year. The Company earned net profit of
Rs.2,586.45 crore compared to Rs. 2,408.85 crore in previous year.
Shareholders equity (Networth) increased to Rs.24,840.03 crore from
Rs.20,525.54 crore in the previous year.
Dividend
Your Directors have recommended a dividend of Re. 0.75 (15%) per equity
share each of Rs. 5 for the financial year ended 31st March, 2008,
which, if approved at the ensuing Annual General Meeting, will be paid
to (i) all those equity shareholders whose names appear in the Register
of Members as on 23rd September, 2008 and (ii) to those whose names as
beneficial owners, are furnished by the National Securities Depository
Limited and Central Depository Services (India) Limited for the
purpose.
The dividend pay out as proposed is in accordance with the
Company’s policy to pay sustainable dividend linked to long term
performance, keeping in view the capital needs for the Company’s growth
plans and the intent to optimal financing of such plans through
internal accruals.
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
the Annual Report.
The Company has entered into various contracts in the areas of telecom
and value added service businesses. While benefits from such contracts
will accrue in the future years, their progress is periodically
reviewed.
Business Operations
The Company operates on a pan-India basis and offers the full value
chain of wireless, wireline, national long distance, international,
voice, data, video and internet based communications services under
various business units organised into three strategic customer-facing
business units; Wireless, Global and Broadband. These strategic
business units are supported by fully integrated network operation
system and by the largest retail distribution and customer services
facilities. The Company also owns through its subsidiary, a global
submarine cable network infrastructure and managed Ethernet and
application delivery services.
During the year under review, the Department of Telecommunications
(DOT), Government of India, had made necessary amendments to Unified
Access Service Licenses (UASL) of the Company to enable the Company to
offer GSM services in addition to existing CDMA services and made
allotment of start up spectrum to the Company for providing GSM
services in 14 Service Area. The DOT had also made necessary amendments
to Unified Access Service Licenses (UASL) of Reliance Telecom Limited
(RTL), wholly owned subsidiary of the Company, to enable RTL to offer
CDMA services in Assam and North East Service Area in addition to
existing GSM services and made allotment of start up spectrum to RTL
for providing CDMA services in Assam and North East Service Area.
Accordingly the Company together with RTL will, in due course, offer
nation wide GSM and CDMA services.
Amalgamation and Arrangement
a. Scheme of Arrangement for transfer of Passive Infrastructure
In terms of the Scheme of Arrangement amongst the Company, Reliance
Telecom Limited (RTL) and Reliance Infratel Limited (RITL) (formerly
known as Reliance Telecom Infrastructure Limited), subsidiaries of the
Company and their respective shareholders and creditors, as sanctioned
by the Hon’ble High Court of Judicature at Bombay vide order dated 16th
March, 2007, the passive infrastructure of the Company and RTL was
demerged and vested into RITL, with effect from 10th April, 2007.
b. Reorganisation of subsidiaries
During the year, the group structure involving various subsidiaries of
the Company was reorganised in terms of the various Schemes under
Sections 391 to 394 of the Companies Act, 1956 (the Act), as sanctioned
by the Hon’ble High Courts of applicable jurisdictions. Consequently,
Reliance Infoinvestments Limited and Synergy Entrepreneur Solutions
Private Limited (SESPL) amalgamated with Reliance Communications
Infrastructure Limited with effect from 23rd July, 2007 and 1st
September, 2007 respectively and Reliable Internet Services Limited
amalgamated with Reliance Telecom Limited with effect from 29th
September, 2007. FLAG Telecom USA Limited was merged with Yipes
Holdings Inc. w.e.f. 17th December, 2007.
Issue of shares upon FCCB Conversion and resultant increased paid-up
share capital
a. During the year under review, the Company had received conversion
notices for 2,03,051 (40.61%) bonds out of 5,00,000 Zero Coupon Foreign
Currency Convertible Bonds of US$ 1,000 each aggregating to US$ 500
million. The Company had allotted 1,87,44,801 equity shares of Rs. 5
each to the holders of the bonds opted for conversion.
b. During the year under review, the Company had also received
conversion notice for 100 (1.00%) bonds out of 10,000 Zero Coupon
Foreign Currency Convertible Bonds of US$ 1,00,000 each aggregating to
US$ 1,000 million. The Company had allotted 6,67,090 equity shares of
Rs. 5 each to the holder of the bonds opted for conversion.
Due to allotment of 1,94,11,891 equity shares of Rs. 5 each on
conversion of FCCBs, the equity capital of the Company increased by
Rs.9.71 crore and Share Premium Account increased by Rs.935.43 crore.
The present paid –up equity share capital of the Company is
206,40,26,881 equity shares of Rs. 5 each aggregating to Rs. 1,032.01
crore.
Subsidiary Companies
During the year under review, Reliance Tech Services Private Limited,
Reliance Big TV Limited, Yipes Holdings Inc, Reliance Globalcom
Services Inc, Yipes Systems Inc, YTV Inc, Anupam Globalsoft (U)
Limited, Lagerwood Investments Limited and Reliance Telecom
Infrastructure (Cyprus) Holdings Limited became the subsidiaries of the
Company.
Flag Projects Pte Limited, Alsign Holdings Pte. Limited and Actaram
Capital Pte. Limited which became subsidiaries during the year under
review, subsequently ceased to be subsidiaries. Reliance Telephones
Limited and Gateway Net Trading Pte. Limited also ceased to be
subsidiaries of the Company.
In terms of the approval granted by the Central Government under
section 212(8) of the Companies Act, 1956, a copy of the Balance Sheet,
Profit and Loss Account, Report of the Board of Directors and Auditors
of the subsisting subsidiaries have not been attached with the Balance
Sheet of the Company. However, these documents will be made available
upon request by any member of the Company interested in obtaining the
same. As directed by the Central Government, the financial data of the
subsidiaries have been furnished under ‘Details of Subsidiaries’, which
forms part of the Annual Report. The annual accounts of the Company
including that of subsidiaries will be kept for inspection by any
member. Further, pursuant to Accounting Standard (AS-21) issued by the
Institute of Chartered Accountants of India, Consolidated Financial
Statements presented by the Company include financial information of
its subsidiaries.
Employee Stock Option Scheme
Your Company has offered the Employee Stock Option Scheme (ESOS /
Scheme) aimed to attract, retain and motivate the Employees. Pursuant
to the approval of the Shareholders under Section 81(1A) of the
Companies Act, 1956 passed by way of postal ballot, the Company has
administered and implemented ESOS in terms of the Securities & Exchange
Board of India (Employee Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999 (Guidelines). On 9th March, 2008 the
ESOS Compensation Committee had approved to grant upto 1,75,00,000
Options exercisable into equal number of fully paid up equity shares of
the Company to eligible employees of the Company, subsidiaries and
holding company in accordance with the Scheme. The actual number of
options granted to the eligible employees including non-executive
independent director of the Company and its subsidiary was 1,49,91,185.
No employee or Director has been granted options in excess of 1% of the
issued equity share capital of the Company.
The particulars as required under Clause 12 of Guidelines are as
follows:
a. Total grant authorised by the ESOS Compensation Committee
b. Total Options granted
c. Pricing formula decided by ESOS Compensation Committee
d. Options vested
e. Options exercised
f. Total number of equity shares arising as a result of exercise of
Options
g. Options lapsed
h. Variation of terms of Options
i. Money realised by exercise of Options during the year
j. Total number of Options in force at the end of the year
k. Employee wise details of Options granted to:
i. Senior managerial personnel
ii. Employee who receives grant in any one year of option amounting to
5% or more of option granted during the year
iii. Identified employees who were granted options, during any one
year equal to or exceeding 1% of the issued capital (excluding
outstanding warrants and conversions) of the company at the time of
grant
l. Diluted Earnings Per Share (EPS) pursuant to issue of shares on
exercise of Options calculated in accordance with Accounting Standard
(AS) 20
m. The difference between employee compensation cost using intrinsic
value method and fair value of the Options and impact of this
difference on
- Profits
- EPS of the Company
n. Weighted- average exercise prices of Options granted during the
year where exercise price is less than market price
o. Weighted- average fair values of Options granted during the year
where exercise price is less than market price
p. Significant assumptions made in computation of fair value
i. risk-free interest rate,
ii. expected life,
iii. expected volatility,
iv. expected dividends (yield), and
v. the price of the underlying share in market at the time of option
grant
1,75,00,000 Options
1,49,91,185
Market Price or such other price as Board / Committee may determine.
Different Exercise price may apply to different Plan(s).
N.A.
N.A.
Subject to option exercised by the employees, not exceeding 1,49,91,185
Equity Shares.
N.A.
N.A.
N.A.
1,49,91,185
Shri Hasit Shukla, Company Secretary and Manager
1,00,000 Options.
Nil
Nil
Rs 10.21
Rs 3.48 crore Re 0.02
Rs 366.50 per option
Rs 210.25 per option
base: Black Scholes model
7.27% p.a.
1 year
37.58%
0.1386%
Rs 541.15 per share
The Company has received a certificate from the auditors of the Company
that the ESOS has been implemented in accordance with the Guidelines
and as per the resolution passed by the members of the Company
authorising issuance of ESOS.
Fixed Deposits
The Company has not accepted any fixed deposit during the year under
review.
Directors
In terms of Article 48 of the Articles of Association of the Company,
Prof. J. Ramachandran, Director of the Company retires by rotation and
being eligible offers himself for re-appointment at the ensuing Annual
General Meeting.
Shri A. K. Purwar was appointed as an Additional Director in terms of
Section 260 of the Companies Act, 1956. He holds office up to the date
of the ensuing Annual General Meeting. The Company has received a
notice in writing from a member proposing his candidature, as a
Director liable to retire by rotation.
A brief resume of the Directors retiring by rotation as well as
proposed to be appointed at the ensuing Annual General Meeting, nature
of their expertise in specific functional areas and names of companies
in which they hold directorship and/or membership/ chairmanships of
Committees of the Board, as stipulated under Clause 49 of the listing
agreement with the Stock Exchanges in India, are given in the section
on Corporate Governance forming part of the Annual Report.
Directors’ Responsibility Statement
Pursuant to the requirements under Section 217(2AA) of the Companies
Act, 1956 with respect to Directors’ Responsibility statement, it is
hereby confirmed that:
i. in the preparation of the accounts for financial year ended 31st
March, 2008, the applicable accounting standards have been followed
alongwith proper explanation relating to material departures;
ii. the Directors 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, 2008 and of the profit of the Company
for the year ended that date;
iii. the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities; and
iv. the Directors have prepared the accounts for financial year ended
31st March, 2008 on a ‘going concern’ basis.
Group
Pursuant to intimation received from the Promoters, the names of the
Promoters and entities comprising ‘group’ as defined under the
Monopolies and Restrictive Trade Practices (“MRTP”) Act, 1969 are
disclosed in the Annual Report for the purpose of the SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997.
Consolidated Financial Statements
The Audited Consolidated Financial Statements, based on the financial
statements received from subsidiaries, associates as approved by their
respective Board of Directors have been prepared in accordance with
Accounting Standard (AS21) on Consolidated Financial Statements read
with Accounting Standard (AS23) on Accounting for Investments in
Associates.
Auditors
M/s. Chaturvedi & Shah, Chartered Accountants and M/s. BSR & Co.,
Chartered Accountants, as Statutory Auditors of the Company, hold
office until the conclusion of the ensuing Annual General Meeting and
are eligible for re-appointment.
The Company has received letters from M/s. Chaturvedi & Shah, Chartered
Accountants and M/s. BSR & Co., Chartered Accountants, to the effect
that their appointment, if made, would be within the prescribed limits
under section 224(1B) of the Companies Act, 1956, and that they are not
disqualified for such appointment within the meaning of section 226 of
the Companies Act, 1956.
Particulars of Employees
In terms of the provisions of Section 217 (2A) of the Act, read with
the Companies (Particulars of Employees) Rules, 1975, the names and
other particulars of employees are set out in the Annexure to the
Directors’ Report. However, having regard to the provisions of section
219(1)(b)(iv) of the Act, the Annual Report excluding the aforesaid
information is being sent to all the members of the Company and others
entitled thereto. Any member interested in obtaining such particulars
may write to the Company Secretary at the Registered Office of the
Company
Conservation of Energy, Technology Absorption and Foreign Exchange
Earnings and Outgo
Particulars required to be furnished under the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988 are as
under:
1. Part A and B pertaining to conservation of energy and technology
absorption are not applicable to the Company
2. Total foreign exchange earnings and outgo for the financial year is
as follows
a. Total Foreign Exchange earnings : Rs. 1,314.74 crore
b. Total Foreign Exchange outgo : Rs. 946.67 crore
c. Activities relating to exports; Initiatives taken to increase
export; development of new export markets for products and services;
and export plans:
The Company has taken various initiatives for development of export
markets for its international telecom services in the countries outside
India to increase its foreign exchange earnings.
Corporate Governance
The Company has adopted “Reliance Anil Dhirubhai Ambani Group-
Corporate Governance Policies and Code of Conduct” which has set out
the systems, process and policies conforming to international
standards. The report on Corporate Governance as stipulated under
clause 49 of the listing agreement with the Stock Exchanges, forms part
of the Annual Report.
A Certificate from the Auditors of the Company M/s. Chaturved & Shah,
Chartered Accountants and M/s. BSR & Co., Chartered Accountants,
conforming compliance with conditions of Corporate Governance as
stipulated under the aforesaid clause 49, is annexed to this Report.
Acknowledgements
Your Directors would like to express their sincere appreciation of the
co-operation and assistance received from shareholders bankers,
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
Mumbai Anil D. Ambani
30th April, 2008 Chairman |
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