18th Annual Report for 2012-13

Transcription

Contents
Company’s Vision & Mission …......................…………………………………… 01
Chairman’s Letter ….......................................…………………………………… 02
CEO’s Message …….....................................…………..……………………….. 04
Directors’ Profile & Corporate Information .........................................…………. 06
Directors’ Report …………………………….....................................…………… 08
Management Discussion & Analysis …………………………….......…………… 13
Corporate Governance Report……………………………................…………… 23
Auditors’ Report…………………………….......................................…………… 36
Balance Sheet ………………………………....................................……………. 40
Profit & Loss Account ……………………….....................................…………… 41
Cash Flow Statement………………………….................................…............... 42
Notes to the Financial Statements
……………………................………… 44
Statement Pursuant to Section 212……………………….................................. 66
Subsidiary’s Accounts – Shyam Internet Services Ltd. ……............................. 67
Notice of 18th Annual General Meeting ……………………............................... 82
Sistema Shyam TeleServices Limited
Chairman’s Letter
Dear Members,
It is a great pleasure for me to address all our distinguished stakeholders.
India remain one of the most competitive, promising and dynamic telecom markets in the world and will
continue to be the hub for expansion with its rapidly developing market and opportunity through its big
domestic market potential. Your Company continues to be strongly committed to India and is looking for
further growth especially with products designed for the local market. We are convinced of the strong growth
perspectives of the Indian market in the mid and long-term and therefore continue our investments into new
technology for the future.
The last financial year may be remembered as the ‘lost year’ in the history of Indian telecom. The momentum
gained over the years was arrested with a series of policy actions. Alleged corruption and mis-handling of 2G
license allocation in 2008 led to judiciary intervention, paving the way for fierce battle between government
and the telecom operators, taking their clashes to courtrooms. However, I am delighted to share with you that
business uncertainties that we have been facing over the past one year are now finally behind us. The stage is
now set for our next level of development and evolution.
The just-concluded financial year also marks the completion of the 5th year of our exciting journey. In a
little over 5 years, we have, as an organization, crossed many frontiers and have pioneered many firsts and
have established benchmarks which are now widely accepted as industry standard. Most importantly,
we have proven beyond doubt that it is possible to build a world-class organization by operating
legally, ethically and with fairness, transparency and integrity. Along the way, we have created jobs,
improved livelihoods and have greatly contributed to the development of the Indian telecom industry.
The MTS brand today in India is seen as a high-quality assurance mark of telecommunications and
innovative solutions.
However, this journey has not been easy and we have encountered obstacles along the way. Time and again,
our resilience has been put to the test. We had to overcome challenges that could have changed the fate of
our organization. Be it game-changing trends in technology, industry and business models or regulatory challenges,
we had to steer ourselves clear of turbulent waters many time. This required us to transform ourselves as an
organization — to adapt to changing business environments and also the ever changing demands of customers.
We passed through one such transformation recently wherein we acquired the spectrum for 8 telecom
circles and closed down the operations in 13 telecom circles. Today, with a footprint spread across nine
Circles, Your company services 40% of the country’s population and addresses around 60 % of the data
potential.
The uncertain times are now over for the company and what lies ahead is a sea of opportunities across all
revenue lines – be it Voice, Data and Smart phones.To take the company forward on its next phase of growth
and a part of the transition process, Dmitry Shukov has been appointed as the Whole Time Director and CEO
2
of the Company. Dmitry brings with him 20 years of work experience. He is a MTS veteran and was previously
the CEO of MTS Turkmenistan and MTS Uzbekistan. Let us extend our warm welcome and our wholehearted
support to Dmitry. I am sure under the new leadership, your Company will go all out to get back on the path
to profitability in the least possible time and will scale new heights.
Your Company is targeting to be OIBDA positive in 2014. Given the levels of hyper competition in the Indian
telecom market, it would call for absolute commitment to optimize all available resources. Let us raise the bar
and aim higher for the years ahead. The journey has just begun and it will take our constant focus on innovation,
collaboration and perseverance to step ahead and make it to the top.
I am looking towards the future with renewed optimism and high expectations. The impact of 4G is likely to
be significant on the Indian telecom market when most of the Broadband Wireless Access (BWA) license
holders will roll out LTE services across the nation. However, LTE ecosystem is still developing and enhancing
data usage would be the key challenge for the industry where close to 90% revenue comes from voice
services.
Internet traffic growth in India is the fastest globally. With more than 60 million Facebook users, around 16
million Twitter users and more than 700 million TV viewers, social media and Video-on-Demand can be the
key enablers for growth of VAS in India which can take the telecom sector to the next level of growth. Further,
smartphones have been a phenomenal success and are likely to remain so in 2013.
The mobile penetration boost, high demand for reliable mobile Internet and ever-growing requirements of
the customer pose ambitious challenges to the Company. I wish the team of MTS India to have a reliable
progress, bring into life the most adventurous innovative solutions, coin up fresh ideas and revolutionary
services to help broaden the networking horizons.
I would like to thank you, all our shareholders and Indian Joint Venture Partners, for your continued support
in our journey of delivering consistent, competitive and responsible growth. From the start of our journey, we
have successfully weathered every challenge and together as a team, we need to continue to put in the effort
and demonstrate the initiative that we have shown from the start.
We will continue to fulfill our responsibilities towards all our stakeholders and will leave no stone unturned in
doing what it takes to work with them, and for them. As we enter into another financial year, I look forward to
receiving your continued trust and support.
Warm regards.
Ron Sommer
CHAIRMAN
July 19, 2013
3
CEO’s Message
Dear Members,
It is an honor and privilege for me to address you for the first time as the CEO of the Company. I am
extremely delighted to have this wonderful opportunity to share with you the progress and performance of
the Company during the past year.
Your Company’s well planned initiatives and strong business strategy have delivered a reasonably good
performance. The challenging past financial year has set the pace for the tough battle ahead which will demand
a lot of courage and determination to set course on the growth path. Your Company is well equipped to move
from strength to strength and create future growth opportunities.
It gives me immense pleasure to inform you that in the spectrum auction conducted by Department of
Telecommunication, Govt. of India in March 2013, your Company has won spectrum in eight circles which
include Delhi, Kolkata, Gujarat, Karnataka,Tamil Nadu, Kerala, Uttar Pradesh (West) & West Bengal.The Company’s
operational footprint also includes Rajasthan Circle. The management decided to bid for these 8 circles after
a careful consideration of several variables including spectrum pricing, number of carrier slots available, levels
of competition and future data potential in the circles, etc. Consequently, the Company had to shut down its
operations in remaining circles. This has been a difficult decision to make, however, it has been made to ensure
that Company concentrates its energies and resources to execute its data centric – voice enabled strategy.
Post auction, the finalization of operational footprint marks the beginning of a new phase of growth for MTS
India. During the tough times, what came through was our camaraderie, collaborative spirit, unwavering
commitment and resilience.
It was encouraging to see Team MTS proving its mettle. Inspite of the challenging times, work continued across
all of the Company’s business lines i.e. Voice, Data and Smartphones. This approach helped your Company to
protect much of its business. The Company continued to strengthen its position amongst the top 3 Data
Service Providers in India. The Company expanded its HSD (High Speed Data) footprint, raising the count
from 200 towns at the beginning of the year to over 450 towns across the country. The Company also
expanded its smartphone portfolio and now offers 9 competitively priced Android Smartphones to customers.
In 2012, your Company also crossed the 100 TB daily data download by its customers for the first time since
the start of the MBlaze data service in November 2009. Brand MTS has also made it to the list of the top-50
Best Service Brands in India. Brand MTS is now pegged at 9th position amongst the top 10 most valuable
telecom brands globally.
All these achievements demonstrate that we have what it takes to make MTS India all the more successful in
the 9 circles where we now have an access to over 60% of the data business potential in the country. All
circles now have 3 carrier slots substantially improving our network. The worst is now behind us and we have
every reason to look into the future with renewed hope, excitement and enthusiasm.
Your Company is focusing all its energies and resources to effectively execute its data centric – voice enabled
strategy. The intent is to clearly bounce back to the fastest possible growth path in the least possible time
through optimal utilization of resources and for this we have to be proactive, nimble, innovative, customer
centric and would need to stay true to our brand mantra – “a step ahead”.
We have been working on revitalizing the business and already see recovery across all business lines. The key
focus, going forward, will have to be on developing a stronger data franchise, restarting the smartphone business
and harvesting voice business.
4
With MTS India moving into its most critical phase of growth, we need to work with redoubled commitment
and loyalty toward our customers, for it’s our customer centricity which will be our differentiator. Let us
continue to focus on providing an array of innovative products to all our customers, work towards further
improving network quality, and leading to enhanced customer experience. We need to constantly remember
that customers are at the core of our business and all through our journey it should be our constant endeavor
to offer them high class experience through innovative products and services. Let us work towards further
strengthening this trust and provide even more wow moments to our customers.
Looking into the future, I see a Company that is getting increasingly lean, that is actively tapping the data
opportunity and creating a compelling case to emerge as a leading data and voice services brand in India. I also
see MTS evolve into a future-focused organization that by migrating to LTE, will remain relevant in long term.
In the year ahead, we need to generate greater value for our shareholders through our emphasis on profitability
and the bottom-line. OIBDA breakeven is a key objective for the Company in the immediate term and the
management believes that we can achieve this by end of 2014 latest. Clearly, a lot of hard work lies ahead of us
and we have to join hands and endeavour collectively to ensure that the Company’s mission and vision—to
become India’s Number One data services provider—is achieved.
We have gone through some tough times over the last twelve months, but the doubts and the ambiguity is
now over. The uncertainties in the operating environment led us to re-evaluate our operations more thoroughly
and we now have a leaner and more fundamentally robust data-focused business in India. I am certain, 2013
will be an exciting year for all at MTS India. We have all the necessary capabilities to transform MTS India into
a stronger, better and an even more successful Company.
A new horizon awaits us all and together we must work to strengthen the Company’s position in the market.
The team’s passion and unrelenting determination has always seen us through all the challenges to deliver on
the commitments. I am sure this zeal will continue to be the key driver for the Company in the future. For
this purpose, all of us need to join hands in this exciting journey.
I would like to sincerely thank all my colleagues on the Board for their continued assistance and wise counsel.
My special thanks and appreciation go to the employees of the Company at all levels and I commend the
solidarity and faith that the team has displayed despite the uncertainty that has shadowed us since February
2012. It is you who have built MTS India against all odds. Your commitment to provide world class telecom
experience to customers has made brand MTS synonymous with innovation and quality. I call upon you, once
again, to continue the good work that you have been doing and continue to keep the MTS flag flying high.
To conclude, I express my sincere thanks to all of you, our shareholders for your unstinted support, trust and
confidence, which helped the Company to steadily rise in the Indian customer mindshare.You stood by the Company
with unwavering faith and commitment during its most challenging time. The Company is committed to work for
enhancing shareholders’ value. I look forward to your support in the months and years ahead and with renewed
focus and energy, we will deliver on our priorities for our customers, partners and all other stakeholders.
Thanking you,
Dmitry Shukov
Whole Time Director (designated as ‘CEO’)
July 19, 2013
5
DIRECTORS’ PROFILE*
Mr. Ron Sommer earned his doctorate from
University of Vienna in 1971. He began his professional
career with the Nixdorf Group in New York,
Paderborn and Paris. In 1980 he was appointed as
Managing Director of the German subsidiary of the
Sony Group. In 1986 he became Chairman of the
Management Board of Sony Deutschland and was
subsequently appointed President and Chief
Ron Sommer Operating Officer of Sony Corporation of America
Chairman
in 1990. In 1993, Mr. Sommer served at Sony Europe
in the same function. From May 1995 to July 2002 he served as Chairman of
the Management Board of Deutsche Telekom AG. He has been serving as
Chairman of the International Advisory Council of Sistema JSFC since May
2003. From May 2009 till April 2011 Mr. Sommer served as First Vice
President of Sistema JSFC, Head of Business Unit “Telecom Assets”. Presently,
Mr. Sommer is serving as Chairman on the Board of MTS OJSC, Russia, as
well as Director on the Board of Tata Consultancy Services, India and Munich
Reinsurance, Germany.
Mr. Ajay Khanna is a co-promoter of Shyam Group.He
has been instrumental in setting up all India Distribution
Network for Cable TV, which catapulted Shyam Telecom
Limited to become leading player in the Indian Cable
TV equipment Industry. Complete commercial &
operational network of SSTL’s Cellular & Basic Business
was set up under his guidance. He handles the Project
implementation, Commercial operations (Sales,
Marketing & Credit control) and HR activities of Shyam
Ajay Khanna
Director
Group. He also handles Public Relations and liaison
with Local Authorities and Statutory / Regulatory Bodies.
Mr. Alexander Gorbunov graduated in 1992 from the
Moscow Physics and Engineering Institute (MPEI). In 1999
he received an MBA from Harvard Business School. From
1994 to 2001 he served as a consultant in Moscow and
Boston offices of Bain & Company. In 2001 he was
appointed Head of Strategic Analysis and Development
Department of Sistema Telecom. From 2003 to 2006 he
served as CSO of MTS OJSC. In 2006-2007 he was Head
of Corporate Development Department of Sistema JSFC.
Alexander Gorbunov
From 2007 to 2010 he served as Vice President of
Director
Strategy and Development of Comstar - United
Telesystems. Presently, Mr. Alexander Gorbunov is serving as Executive Vice
President responsible for Telecom Assets Development of Sistema JSFC.He is also
a member on the Board of telecom company MTS OJSC, Russian media company
Sistema Mass Media and satellite TV operator KOSMOS-TV.
Mr. Alok Tandon is a Chartered Accountant by
profession. He looks after all the financial and
commercial activities of the Shyam Group. Mr. Tandon
has experience of more than 17 years in this field.
Under his guidance Shyam Telecom successfully
concluded the IPO in 1994, which was oversubscribed
by 25 times. He has been instrumental in efficiently
managing funding and investments for various group
Companies. Mr. Tandon also handles group
Alok Tandon
Director
relationships with all leading Banks, Foreign and Indian
Institutional Investors.With his efforts Shyam Telecom has been able to
smoothly manage its Equity & Debt funding requirements at the lowest
possible cost. He has been instrumental in closing several important deals of
the Shyam Group which gave group the highest ever per customer valuation
of any telecom operation in the country.
6
Mr. Vsevolod Rozanov did his graduation from
the Lomonosov Moscow State University with a
degree in Economics. He is having rich corporate
experience of more than 16 years, mainly in the
field of Management, Economics and Finance. He
has served many esteemed Multinational Companies
in senior capacity. Before joining the Company he
V. Rozanov
Dy. Chairman
was Vice President and CFO with Mobile TeleSystems
(MTS), Moscow, another Subsidiary Company of
Sistema JSFC. He is a successful professional who made a significant contribution
to consolidating MTS’s position in the telecom market. From August 2008
till May 2013, Mr. Rozanov held the position of Whole Time Director designated
as President and CEO of SSTL. Presently, he is the Deputy Chairman
of SSTL. Mr. Rozanov is also the Senior Vice President, Chief Financial
Officer and member on the Management Board of Sistema JSFC.
Mr. Andrey Terebenin graduated in 1985 from Moscow
State University of Foreign Affairs. Subsequently he held
management positions at Economicheskaya Gazeta
(Economics Gazette), Dun & Bradstreet CIS and AIG Russia.
In 2003-2006, he served as General Director and
Managing Partner of Communication Holding at R.I.M.
Porter Novelli. In 2006-2011 he held the position of Vice
President of MTS OJSC (Russia), Corporate
Andrey Terebenin Communications. Presently, Mr. AndreyTerebenin is serving
Director
as Vice President of Corporate Communications of Sistema
JSFC, member of Management Board of Sistema JSFC. He is also a member on the
Board of Russian media company Sistema Mass Media.
Mr. Anton Abugov was born on September 9, 1976. He
graduated from the Academy of National Economy under
the RF Government. In August 2006 he was appointed as
First Vice President of Sistema JSFC. During 2007 to
2009 he held position of Chairman of the Board of
Directors of various companies e.g. CJSC Sky Link, OJSC
COMSTAR-UTS, OJSC Detsky Mir Center, CJSC RWS.
Anton Abugov
Director
Presently, he is Member of the Management Board of
Sistema JSFC. He is also on the Board of telecom company
MTS OJSC, Oil company RussNeft OJSC, Transport company SG-trans OJSC, SGtrading OJSC, SMM OJSC, RZ Agro OJSC.
Mr. Bharat Patel obtained an MA in Economics from the
University of Notre Dame, South Bend, Indiana, USA and
an MBA in Marketing from the University of Michigan,
Ann Arbor, Michigan, USA. He joined Richardson Vicks
Inc., New York, as Marketing Trainee and on its merger
with Procter & Gamble (P&G) has had a long and
distinguished career at P&G in India and internationally.
He worked in various capacities at P&G, including as
Bharat V Patel Operations Director, Associate General Manager, Category
Director
Manager (UK), Country Manager (Ireland) and Executive
Vice President. He was the Chairman and Managing Director and non Executive
Chairman of P&G India Limited for six and nine years respectively. Currently he
is on the Boards of Sasken Communication Technologies Ltd, NESCO Ltd. and Birla
Sun Life Assets Management Co. Ltd.
*In alphabatical order except Chairman’s & Dy. Chairman’s Profile
Mr. Dmitry Shukov, aged 44 years, a Russian National,
is a young and dynamic Executive. Mr. Shukov
is a Telecommunications Engineer and has a rich
corporate experience of 20 years, mainly in the
field of General Management, Sales and Customer Service
Deliver y. Mr. D. Shukov has had an outstanding
career and is known for his hands-on business
experience, having worked as head of sales in Tele2,
Dmitry Shukov
Russia’s leading mobile operator. Before joining Sistema
WTD (CEO)
ShyamTeleServices Limited (SSTL) he had been rendering
his services as Managing Director of FE “Uzdunrobita LLC” (MTS Uzbekistan).
He is a successful professional who made a significant contribution to
consolidating MTS’s position in the telecom market. He is a MTS veteran and
was previously the CEO of MTS Turkmenistan as well.
Mr. Rajiv Mehrotra is a new generation technocrat
and an electronics engineer by profession. He is a
pioneer and a visionary in telecom and has a career
spanning over 35 years. He began his career with the
manufacturing of Cable TV and Satellite TVRO systems.
With his exemplary, innovative and global ideas he
diversified his activities on several fronts including
the services sector like cellular, basic telephony and
Rajiv Mehrotra GMPCS. Under his technical leadership and a highly
Director
motivated R&D team, Shyam Telecom developed a
wide range of cost effective quality telecom products, multi access radios,
Multiplexers, V-SAT systems, SCADA, Fibre Optic Terminal and DECT based
WLL systems. He launched Vihaan Networks Limited in 2004 to bring solar
powered GSM and broadband infrastructure to rural areas.
Mr. Madhukar holds a Master of Arts degree in Economics
and a Bachelor’s degree in Law. He did professional
programs in Project Management and Human Resource
Development etc. from IIM Ahmedabad, IIM Kolkata, IMI
New Delhi and he is a Certified Associate of Indian
Institute of Bankers. From 1990 to 1996 he served as
the Managing Director of the State Bank International
Limited, Mauritius. In 1997, he was appointed Senior
General Manager at SBI Capital Markets. From 1998 to
Madhukar
Director
2000, he served as the Chief General Manager, New
Delhi Circle at SBI; and in 2000 to 2001, as Managing Director of State Bank of
Bikaner & Jaipur. In 2003-2004, he was appointed Chairman & Managing Director
at the Industrial Investment Bank of India Ltd. He held concurrent charge from
2001-2004 as Chairman & Managing Director at United Bank of India. He has also
served as Whole Time Member with Securities and Exchange Board of India.
Mr. Suman Sehgal graduated from the prestigious Saint
Stephens College, New Delhi. After graduation he
completed two years of practical training in West Germany
with Fischer & Krecke following which he took over his
family factory producing paper products in India as
Managing Director. He went to Russia in 1983 and acted
as consultant to various Indian companies- Indian Tobacco
Company, Godphrey Phillips, Tata Tea, Nestle, Mcneil &
Suman Sehgal Magor, Rossell and Printers House India. Mr. Sehgal was
Director
instrumental in establishing brands such as Capstan and
Four Square in the U.S.S.R. In Post-Soviet Russia , Mr. Sehgal was the leading Indian
exporter of rice & Tea to Russia. Since 2000 , Mr. Sehgal has consulted various
Russian Enterprises including J.S.F.C Sistema , Ural Mining & Metallurgical Company,
Sberbank , Hydroenergostroy , Transmash holding & Novolipetsk Steel. He is on
the Board of SSTL since February 2008.
Mr. Vikram Kaushik earned his Master’s degree from
St. Stephen’s College in Delhi and joined Hindustan Unilever
as a Management trainee. He worked for Unilever for
more than 16 years and got wide exposure to different
product categories both in India and in Asia, Europe and
Africa.After a short stint as Managing Director of a leading
advertising agency he returned to consumer marketing as
Vice President Marketing, Sales and Exports at Britannia, a
joint venture with Groupe Danone. He moved as a Director
Vikram Kaushik
on the Board of Colgate Palmolive and was responsible
Director
for a major turnaround for the brand Colgate in India.
Thereafter, he served as the MD & CEO Tata Sky till December 2010 and played a
pioneering role in establishing the DTH industry in India. Presently, he is on the
Board of Prasar Bharati and Indian Capital Growth Fund.
CORPORATE INFORMATION
COMPANY SECRETARY
Vishal Kohli
CHIEF FINANCIAL OFFICER
Sergey Savchenko
REGISTERED OFFICE
MTS Tower, 3, Amrapali Circle,
Vaishali Nagar, Jaipur – 302021,
Rajasthan, India
Tel. : 0141-5100510
Fax : 0141-5100310
CORPORATE OFFICE
MTS India Towers, Plot No.334,
Udyog Vihar, Phase – IV,
Gurgaon – 122001,
Haryana, India
Tel. : 91-0124-4812500
Fax : 91-0124-4812825
Website : www.mtsindia.in
AUDITORS
M/s S. R. Batliboi & Associates LLP
Chartered Accountants,
Golf View, Corporate Tower B,
Sector 42, Sector Road,
Gurgaon, Haryana, India
Central Depository Services (India) Ltd.
Phiroze Jeejeebhoy Towers,
17th Floor, Dalal Street,
Mumbai – 400 001, India
Tel : 91-22-22723333-3224
Fax : 91-22-22723199/22722072
REGISTRAR & TRANSFER AGENT
Karvy Computershare Pvt. Ltd.
Plot No.17-24, Vittalrao Nagar, Madhapur,
Hyderabad 500 081, India
E-Mail : [email protected]
Tel. : 91-040-44655000
Fax : 91-040-23420814
BANKERS
ICICI Bank Ltd.
Central Bank of India
Royal Bank of Scotland
ING Vysya Bank
Bank of China
China Development Bank
Societe Generale
Deutsche Bank
Syndicate Bank
Bank of Baroda
UBS Bank
Bank of America N.A.
Raiffeisen Bank
DEPOSITORIES
National Securities Depository Ltd.
4th Floor, Trade World,
Kamla Mills Compound,
Senapati Bapat Marg,Lower Parel,
Mumbai – 400013, India
Tel : 91-22-24994200
Fax : 91-22-66608035/24976351
7
D I R E C TO R S ’ R E P O RT
Dear Members,
Your Directors have pleasure in presenting the Eighteenth (18th) Annual Report on the business and operations of the Company
together with Audited Statement of Accounts for the financial year ended 31st March 2013.
FINANCIAL HIGHLIGHTS & PERFORMANCE*
(Amount in Rs. Million)
Particulars
Current Year
31st March, 2013
Previous Year
31st March, 2012
12,043
10,689
264
913
12,307
11,602
Cost of Services (and sales)
10,135
9,039
Selling, General and Other Operating cost
10,513
12,101
20,648
21,140
Operating Loss
8,341
9,538
Finance Expenses
9,189
10,524
Depreciation and Amortization
4,344
3,134
Others including Revenue Share
1,104
983
Loss after tax for the year from discontinuing operations
5,839
7,411
-
(2)
28,817
31,588
Income
Revenue (Service and Sale of Goods)
Other Income
Total Income
Expenditure
Total Operating Expenditure
Taxes
Net Loss
*The above results are for continued operations
During the year ended March 31, 2013, your Company recorded
growth in service revenue i.e. an increase of 13% as compared
to previous year. Total Income increased to Rs.12,307 million as
against Rs.11,602 million in previous fiscal, representing year
on year increase of 6% in total revenue.
Cost optimization measures taken by the Company have resulted
in decrease in sales & marketing expenditure, personnel cost
and other general & administrative expenditure. Accordingly,
total operating expenditure for the year reduced to Rs.20,648
million as against total operating expenditure of Rs.21,140 million
during the previous fiscal year.
8
The Company closed its telecom services in 13 Telecom Circles
in consequence of the Order(s) of Honorable Supreme Court
of India. Considering the impact of discontinued operations the
financial performance of the Company is as below:
(Amt. in Rs. Mn.)
Particulars
31 March 2013
Continued
Operation
Discontinued
Operation
31 March 2012
Total
Continued
Operation
Discontinued
Operation
Total
Total Income
12,307
3,655 15,962
11,602
3,483
15,085
Total Expenses
35,285
9,494 44,779
35,779
10,894
46,673
Net Loss
22,978
5,839 28,817
24,177
7,411
31,588
Hence, your Company’s operating loss for the year ended
March 31, 2013 aggregated to Rs.8,341 million as against
Rs.9,538 million during last year and Net Loss for the year is
Rs.28,817 million against Net Loss of Rs.31,588 million during
previous fiscal.
Company assure that your Company is determined to continue
its operations in India and is committed to continue to deliver
on its “Data Focused Voice Enabled” Strategy.
DIVIDEND
In view of the losses incurred during the year under review,
your Directors do not recommend any dividend on equity shares.
Pursuant to the approval accorded by shareholders by special
resolution at the Extraordinary General Meeting held on
March 30, 2012, your Company, during the year under review,
issued and allotted 6,000,000- 0.01% Redeemable Preference
Shares of Rs.10/- each on Private Placement basis to Insitel
Services Private Limited at a premium of Rs.9,990/- per
preference share.
The BRAND Brand MTS in India continued its onward march in establishing
itself as one of the leading data brands in the country, supporting
the company’s data led voice enabled strategy. Significantly, during
FY 2012-13, MTS made an entry into the prestigious list of
Brand Equity 50 Most Trusted Service Brands in India. MTS was
placed at number 36 in this annual ranking compiled by The
Economic Times, making it one of the youngest brands to win
the trust of consumers in a short span of its existence in India.
In the data category in India, brand MTS continued to enhance
its position with sustained growth in Total Spontaneous
Awareness despite being the youngest brand in a crowded
category that saw dramatically heightened activity in the data
space from erstwhile voice-centric telecom brands. Several
product and marketing innovations contributed to this success
through the FY 2012-13 including the launch of Unlimited Social
Media data plans, MAd free call services, Mtraveler Enterprise
Solution, Vehicle Tracking Solution and others.
Globally, brand MTS improved its position in the most
authoritative rankings of brand value in the world – the Millward
Brown Brandz listing - where MTS now stands at 82nd position
with a valuation of $10.633 billion.
LICENCES & SPECTRUM
The Hon’ble Supreme Court vide its judgment dated
Feb 2, 2012 quashed all the 122 telecom licenses granted to
various Telecom Operators on or after January 10, 2008.
The cancellation of licenses was effective from the end
of duration of 4 months from date of order. These licenses also
included the license for 21 circles held by the Company. The
license for Rajasthan Circle was not covered in the said order
as the same was granted prior to January 10, 2008. The Supreme
Court by its order of April 24, 2012 extended the deadline for
cancellation of Licenses from June 2, 2012 to September 7, 2012
and directed TRAI to complete the spectrum auction process
by August 31, 2012. On an application of Central Government,
the Supreme Court by its order of August 27, 2012, extended
the timeline to complete auction to January 11, 2013 and also
directed that the telecom licenses shall continue to operate till
January 18, 2013.
SSTL filed a Review petition and a curative petition against
cancellation of its licenses, however, both review petition and
curative petition were rejected by the Hon’ble Supreme Court
of India.
Thereafter, your Company participated in spectrum auction held
in the month of March 2013 for 8 Circles and won spectrum in
all 8 circles. The Company also decided to close down
operations in 13 Circles. Your Directors/Promoters of the
SHARE CAPITAL AND COMPLIANCE OF FDI
SECTORAL POLICY
There has been no change in the issued, subscribed and paid up
equity share capital of the Company. The total paid up share
capital of the Company at the end of financial year 2012-13 is
Rs.31,999,200,000/-. The breakup of equity share capital
alongwith Foreign and Indian holding is as under:Shareholders
Sistema JSFC
No. of
Equity Shares % of Holding
1810289400
56.68
547312918
17.14
4319340
0.13
Total (Foreign)
2361921658
73.95
Indian Promoters
766575760
24.00
65417818
2.05
Total (Indian)
831998342
26.05
Total Equity
Share Capital
3193920000
100
Rosimushchestvo
(Federal Agency for State
Property Management of
Russian Federation)
Others
Others
The present foreign share holding in Company is within the
sectoral equity cap for foreign equity as approved by Foreign
Investment Promotion Board under FDI policy as in force as on
date.
STATUS OF LISTING OF SHARES AS PER SCHEME
OF ARRANGEMENT
As informed to the shareholders in the past Directors’ Reports,
the Company has been taking all adequate steps in the matter of
listing in due compliance of the order passed by Hon’ble High
Court of Jaipur to this effect on August 7, 2008. However, post
Supreme Court verdict dated Feb 2, 2012 cancelling the telecom
licenses, the Company was forced to put the IPO plan on hold
and it was decided by the Board of Directors to review the
feasibility of listing through IPO after having complete clarity on
the status of Licenses and other important regulatory issues.
During the year under review, fresh auction for allotment of
spectrum was conducted by the Department of Telecom,
Government of India. Your Company also participated in the
said spectrum auction for 800 MHz and won the spectrum for
8 telecom circles - Delhi, Gujarat, Karnataka, Kerala, Kolkata,
Tamil Nadu, West Bengal and Uttar Pradesh (West).
9
Presently, the Company is in the process of getting fresh Unified
Licenses for the 8 circles for which it has won the spectrum for
providing the telecom services. The Company is also engaged in
closing its operations in remaining circles and restructuring its
business operations across India. It is pertinent to mention that
listing of shares is also driven by market forces and commercial
mechanics as well as procedural delays which may result in
unavoidable delay, which is beyond the control of the Company.
The Company had however initiated the process of listing and
also filed an Application before the Hon’ble High Court at Jaipur
updating the Hon’ble Court on the steps taken pursuant to its
Order dated August 7, 2008.
The Company further submits that it is committed to undertake
any action necessary in the best interests of the Company and
its shareholders / investors, however in view of the regulatory
and legal uncertainties in the telecom market, delay in attaining
desired results is unavoidable and beyond control.
The Company will keep the shareholders informed about the
developments in the matter.
AWARDS & RECOGNITION
Your Company was awarded ‘Most Innovative Retail Product’
Award 2012 for its product ‘Super Zero’ at the Economic Times
Telecom Awards. The Innovative Product Award recognizes
products / services / plans which have resulted in increase in
customer base, increase in revenue (ARPU) or profitability,
reduced customer churn, changed market dynamics, etc.
Your Company also won the ‘Dataquest Technology Innovation
Award’ in the Cloud category. The Company was presented
this award for a unique industry-leading initiative that
enabled the company to derive significant business value.
Dataquest’s Technology innovation award is one of the most
coveted awards for IT professionals in the industry and SSTL
winning this award reflects the business value that SSTL is
delivering to its clients to spur their growth and productivity
through cloud computing.
MANAGEMENT DISCUSSION AND ANALYSIS
A detailed report on Management Discussion and Analysis on
Telecom Sector Growth, Indian Telecom Market, Regulatory
Developments, Discussion and Analysis of Company’s Financial
Statements and Operational Performance, Opportunities, Risks
and Threats, etc., is presented in a separate section and forms
part of this Directors’ Report.
CORPORATE GOVERNANCE
The basic philosophy of Corporate Governance in the Company
is to achieve business excellence and dedicate itself for increasing
long-term shareholders’ value. The Company is committed to
maximum transparency in all its dealings and places prominence
on business ethics.
Being an unlisted entity, the legal provisions of Corporate
Governance such as Clause 49 of Listing Agreement are not
applicable to the Company. However, the Company voluntarily
follows the standards of Corporate Governance which are, to the
extent possible, in line with the internationally accepted standards
of Best Practices. The Company is committed to establish best
practices of Corporate Governance and to this end the Board has
already approved the Company’s Corporate Governance Strategy
and the same is being implemented in a phased manner.
10
Your Company realizes the shareholders’ right to information
on the performance of the Company and hence, your Company
has voluntarily posted on the website of the Company-the
Annual Reports, Notices and Minutes of the General Meetings,
Memorandum & Articles of Association, Code of Conduct,
Director’s profile, Charters of different Committees of the
Directors and updated share holding pattern. The latest
important developments and other information of interest to
the shareholders are also posted in various forms in different
sections of the website of the Company.
In furtherance of its quest for adoption of best corporate
governance practices, your Company has taken initiatives of
voluntarily publishing reports on Corporate Governance and
Management Discussion and Analysis in the Annual Report.
These Reports are annexed and forms part of this Directors
Report.
CORPORATE SOCIAL RESPONSIBILITY
Your Company is at the forefront of Corporate Social
Responsibility and acknowledges its responsibility of playing a
key role in building social equity to safeguard the interest of
society in which it operates.The Company believes that emphasis
should not only be on maximization of revenues but also on
improving the efficiency of business processes to minimize the
environmental and social costs.
The Company has adopted Corporate Social Responsibility
Strategy to address the CSR issue effectively and to ensure that
business is conducted with an innate sense of Social
Responsibility. The objective of this strategy is to leverage the
advancement in Information and Communication Technologies
to contribute towards progressive socio-economic change in
the fields of Health and Education.
During the year under review, your Company fur ther
strengthened its partnership with ‘India Unites to End Polio
Now’ (IUEPN) campaign that aims to create awareness for Polio
eradication amongst the masses. The IUEPN campaign is an
initiative implemented by Aidmatrix Foundation, in partnership
with the Polio Eradication Programme in India, a collaborative
effort between the Ministry of Health and Family Welfare, United
Nations Children’s Fund, World Health Organization, National
Polio Surveillance Project, Rotary International, and the U.S.
Centre for Disease Control. As a part of this initiative, the
Company provided support to Polio awareness campaigns
organised in several Indian states including Delhi NCR, Haryana,
West Bengal, Uttar Pradesh, Bihar and Maharashtra.The Company
sent thousands of SMSs to its customers, notifying them about
the upcoming polio rounds.
Your Company continued its support to Smile Foundation, a
national level development organization reaching out to more
than 2 Lakh underprivileged children through various education
and health care projects across 22 states of India and completed
Phase I and Phase II of its partnership with Smile Foundation.
The Company is now in the process of rolling out the final
phase of this project. Under this unique initiative, SSTL is
providing mobile broadband support to 23 Mission Education
centers across India benefiting over 4200 underprivileged
children.
The Company also partnered with India Food Banking Network
(IFBN) to collect non-perishable food items for underserved
sections of the society. In a week long drive organised at
Company’s Corporate Office and Delhi Circle offices, the
Company managed to collect more than 6.5 tonnes of food
items. In the process, your Company became one of the highest
contributors to the food drive that featured more than 20 Indian
and multinational companies. The Company followed up the
Food Drive with an Employee Volunteerism initiative at one
of the beneficiary centers – PRAYAS, a juvenile home for
young girls. SSTL employees helped the representatives
at PRAYAS in distribution of cooked food to the residents of
the centre.
Marking the 64th Republic Day celebrations in January 2013,
Company partnered with Goonj - one of India’s most credible
NGOs in their Raahat (Relief) campaign. As part of the campaign,
your Company organised a winter clothes collection drive at
its Corporate Office in Gurgaon. Post completion of the week
long collection drive, few SSTL employees visited the Goonj
facility to handover the collected clothes and also understood
how Goonj uses the contributed items.
SUBSIDIARY COMPANY
Shyam Internet Services Limited (SISL), a wholly owned
subsidiary of your Company is having a Category B ISP license
and is providing Internet Service with brand name “Infinity” in
131 cities in the State of Rajasthan.
As required under Section 212 of the Companies Act, 1956,
Balance Sheet, Profit & Loss Account, Directors’ Report and
Auditors’ Report of SISL have been attached with the Balance
Sheet of the Company.
BOARD OF DIRECTORS
Mr. Vsevolod Rozanov resigned from the position of Whole
Time Director (designated as CEO and President) with effect
from May 31, 2013. Mr. Rozanov continues to be on the Board
as an Ordinary Director. He has also been appointed as
Deputy Chairman of the Company by the Board with effect
from June 1, 2013. Mr. Alexey Buyanov, resigned from the
directorship of the Company w.e.f. May 28, 2013.
Consequent upon the resignation of Mr. Vsevolod Rozanov,
Mr. Dmitry Shukov was inducted in the Board as Additional
Director with effect from June 1, 2013 and was also appointed
as Whole Time Director designated as Chief Executive
Officer from that date. Pursuant to the provisions of Section
269 of the Companies Act, 1956 read with Schedule XIII, the
appointment of Mr. Dmitry Shukov as Whole Time Director is
subject to the approval of the shareholders at the ensuing
18th Annual General Meeting and also subject to the approval of
the Central Govt.
Mr. Anton Abugov was inducted on the Board as Additional
Director with effect from June 1, 2013. On the same date
Mrs. Larisa Gorbatova was appointed as Alternate Director to
Mr. Vsevolod Rozanov. Both Mr. Anton Abugov and Mrs. Larisa
Gorbatova have been nominated by Sistema JSFC.
In terms of the Section 260 of the Companies Act, 1956 additional
directors will hold office upto the date of ensuing 18th Annual
General Meeting of the Company. Your directors recommend
the appointment of Mr. Shukov and Mr. Abugov as Directors
liable to retire by rotation. Necessary notices under section
257 of the Companies Act, 1956 for the candidature of the said
additional directors for their appointment as Director have
been received along with the requisite deposit.
In terms of clause 86 of Articles of Association of the Company
and as per provisions of Section 255 of the Companies Act,
1956, Mr. Alok Tandon, Mr. Ajay Khanna, Mr. Vikram Kaushik
and Mr. Bharat Patel are liable to retire by rotation at ensuing
Annual General Meeting and being eligible, offer themselves for
re-appointment.
Brief profile of Directors proposed to be appointed /
reappointed is annexed to the Notice convening the 18th Annual
General Meeting.
DIRECTORS’ RESPONSIBILITY STATEMENT
As required under the provisions of Section 217(2AA) of the
Companies Act, 1956, the Directors confirm that:
1. In the preparation of the annual accounts applicable
accounting standards have been followed.
2. Appropriate accounting policies have been selected and
applied consistently and judgment and estimates that are
reasonable and prudent have been made so as to give a true
and fair view of the state of affairs of the Company at the end
of the financial year ended March 31, 2013 and of the Losses
of the Company for the year ended on that date.
3. 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 have been taken.
4. The annual accounts have been prepared on a “going concern
basis”.
AUDITORS
The present Statutory Auditors of the Company, M/s. S.R. Batliboi
& Associates, Chartered Accountants, Gurgaon retire at the
forthcoming Annual General Meeting, and are eligible for reappointment. However, they have expressed their unwillingness
to be re-appointed as Statutory Auditors of the Company for
the Financial Year 2013-14. The Company has received a Special
Notice, in terms of Section 225 of the Companies Act, 1956,
from a member of the Company proposing the appointment of
M/s. Deloitte Haskins & Sells, Chartered Accountants, Gurgaon,
as Statutory Auditors of the Company from conclusion of the
ensuing Annual General Meeting till the conclusion of next
Annual General Meeting. M/s. Deloitte Haskins & Sells,
Chartered Accountants, Gurgaon, have expressed their
willingness to act as Statutory Auditors of the Company,
if appointed for the Financial Year 2013-2014, and have
further confirmed that the said appointment would be in
conformity with the provisions of Section 224(1B) of the
Companies Act. Therefore, the Board recommends the
appointment of M/s. Deloitte Haskins & Sells, Chartered
Accountants, as Statutory Auditors to hold office until the next
Annual General Meeting.
AUDITORS’ REPORT
The comments made by Auditors are self explanatory and
parawise management response to qualifications/ observations
made in Auditors’ Report is stated as under:
11
1. As regard emphasis of matter, the Company has discontinued
telecom services in thirteen Telecom Circles pursuant
to the Hon’ble Supreme Court of India’s Order dated
11th March 2013. As a result of such discontinuance, the Passive
Infrastructure (PI) vendors have demanded compensation
amounting to Rs.5,220 million under their contracts with the
Company due to pre-mature termination.The Company, based
on independent legal opinion, believes such demands to be
untenable, since the discontinuance of operations is a ‘Force
Majeure Act’ and not the act of the Company.While the matter
is in discussion with the vendors, the Company is confident,
based on the above legal position that no obligation/liability
would arise on the Company. Accordingly, no provision has
been made in the financial statements.
2. As regards Para No. (ix) (a) of the Annexure to the Auditors’
Report, the Company is generally regular in depositing
statutory dues with appropriate authorities with few
exceptions; appropriate steps have been taken by the
Company for strengthening of internal controls with respect
to timely deposition of statutory dues.
3. As regards Para No. (x) of the Annexure to the Auditors’
Report, the Company is an Infrastructure Company operating
in telecommunication business. As per industry practice, the
Company is making cash losses in initial years of operation
and it expects to generate operational profit after the initial
gestation period.
4. As regards Para No. (xix) of the Annexure to the Auditors’
Report, the Company has already requested the lender
to waive the condition of charge on license quashed by
Supreme Court.
5. As regards Para No. (xxi) of the Annexure to the Auditors’
Report, appropriate steps have been taken by the Company
for strengthening of internal controls with respect to
detection of frauds.
COST AUDITORS
In compliance of the Section 233 B of the Companies Act 1956,
the Company has appointed M/s. Sanjay Gupta & Associates as
the Cost Auditors for the Audit of the cost records / accounts
maintained as per the Cost Accounting Records
(Telecommunications) Rules, 2002 for the financial year ending
March 31, 2013. The Cost Audit Report for the financial year
2012-13 will be filed on or before the due date.
PARTICULARS OF CONSERVATION OF ENERGY,
TECHNOLOGY ABSORPTION AND FOREIGN
EXCHANGE EARNINGS & OUTGO
Particulars with respect to Conservation of Energy, Technology
Absorption and Foreign Exchange Earnings and Outgo, as per
Section 217(1)(e) of the Companies Act, 1956 read with the
Companies (Disclosure of Particulars) Rules, 1988 are given
below:
a) Conservation of Energy
Your Company being a telecommunication services provider
requires minimal energy consumption and every effort has
been made to ensure the optimal use of energy, avoid waste
and conserve energy as far as possible.
b) Technology Absorption, Adaptation and Innovation
The Company has not imported technical know-how. Your
Company has not established any separate R&D facilities.
12
c)
Foreign Exchange Earnings & Outgo
The details of earning and expenditures incurred in foreign
exchange are as under:
(Rupees in Million)
Earning in
Foreign Currency
(on accrual-basis)
March
31, 2013
March
31, 2012
Data Branding
0.29
-
International in roaming
1.89
-
TOTAL
2.18
-
(Rupees in Million)
Expenditure in
Foreign Currency
(on accrual-basis)
March
31, 2013
March
31, 2012
Interest
1,172
1,208
Finance set-up cost
781
459
Project Management &
Maintenance Services
209
379
Advertisement and marketing
expenses - MTS brand fee
17
14
Other Services
25
114
2,204
2,174
TOTAL
FIXED DEPOSITS
The Company does not hold or accept any deposits and as such,
no amount of principal or interest on fixed deposits was
outstanding on the date of the Balance Sheet.
PARTICULARS OF EMPLOYEES
A statement of particulars of employees as required in
accordance with the provisions of Section 217(2A) of the
Companies act, 1956 read with Companies (Particulars of
Employees) Rules, 1988 as amended from time to time is annexed
hereto and forms part of this report.
ACKNOWLEDGEMENT
Your Directors place on record their gratitude to Bankers,
Financial Institutions, Vendors, Dealers and Business Associates
for the assistance, co-operation and encouragement they have
extended to the Company.
Your Directors also wish to place on record their sincere thanks
and appreciation for the continuing support valuable assistance
received from Sistema JSFC, the Shyam group and the Russian
Federation as major Shareholders in ensuring an excellent all
around operational performance.
The Directors wish to convey their appreciation to all of the
Company’s employees for their enormous personal efforts as
well as their collective contribution to the Company’s
performance.The Directors are also thankful to the shareholders
for their continued patronage.
For and on behalf of the Board
Place : Gurgaon
Date : July 19, 2013
Sd/CHAIRMAN
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Wireless Market in India
During the financial year 2012–13 wireless industry witnessed
decrease in subscriber base by 51 million on Home Location
Register (HLR) basis. This was largely driven by clean up of
inactive subscriber base by various operators. In addition to
that, stringent new subscriber verification norms implemented
by the regulator also worked as a damper in last few months
for industry. However, during the same period, the industry
added 40 million VLR (Visitor Location Register) subscribers
taking overall VLR subscriber base to 723 million. Overall
industry VLR % increased from 74% in Mar 2012 to 83% in
Mar 2013.
Industry Subscriber Growth
Much awaited National Telecom Policy 2012 (NTP 2012) was
approved by Union Cabinet in May 2012. However, clarity is
still awaited on various objectives, policies related to M&A and
spectrum holding, etc. Among others, work has already begun
on some of the key thrust areas of NTP 2012 like implementation
of ‘One nation, one market’ policy leading to free roaming and
Mobile Number Portability (MNP) across India.
2012 was year of turmoil on regulatory front for the entire
industry. On February 2, 2012, the Honorable Supreme Court
of India cancelled 122 telecom licenses following controversy
over 2G spectrum allocation and recommended allocation of
spectrum by means of auction. Post this, TRAI proposed
extremely high reserve prices in its proposal for spectrum
auction which resulted in lukewarm response to November
2012 auctions. Subsequently, government reduced spectrum
prices based on EGoM’s recommendation; however, it failed to
excite telecom operators for March 2013 auctions as well.
Spectrum allocated through these auctions is liberalized, which
means players are free to use any technology of their choice. In
future, there is possibility of 4G\LTE rollouts on different bands
currently being used exclusively for voice services.
Industry gross revenue growth declined significantly in Q4’12
to 0.8% from 2.9% in Q1’12. During this period Average Revenue
Per User (ARPU) increased by 6% to INR 141 mainly on account
of subscriber base cleanup.
Broadband subscription reached 15 million at the end of
Mar 2013, a 9% growth over March 2012. Broadband subscribers
now account for significant proportion of internet subscribers.
This segment of the wireless industry is expected to grow
exponentially in the years to come. Severe under penetration
of the market, falling PC prices, introduction of newer devices
and desire to be connected on the move will be key growth
drivers.
India’s 3G growth story has not been good so far because of
several factors ranging from patchy network coverage to weak
financial condition of most operators and costly services. Of
the installed base of Base Tower Station (BTS) in India, only 13%
are 3G enabled. Currently, India has an estimated 18 million 3G
subscriber; however, the number of 3G users is expected to go
up significantly in near future.
After a slow start, last year industry saw some action on 4G\LTE
front. One of the large Telecom operators rolled out its 4G
service in few cities like Kolkata, Bangalore, Pune and Chandigarh
and another operator is expected to launch 4G services
sometime in 2013. Management is of the view that any large
scale 4G LTE launch will not happen in current year.
Even in 2013, regulatory uncertainties continue to be one of the
major overhangs for the industry. Issues like 3G intra circle
roaming still continue to be unsettled. There is still lack of
clarity on re-farming in 900 MHz band. Additionally, operators
have vehemently opposed one-time spectrum charge levied by
the regulator leading to fresh legal battles.
Discussion & Analysis on Financial Statement
Overview
As at March 31, 2013, the Company has created significant
infrastructure across in circles, including high speed data services
in major cities.
As at March 31, 2013, the Company has a net-worth of Rs.2,646
million.
The Company has closed telecom services in thirteen Telecom
Circles namely Assam, Andhra Pradesh, Bihar, Himachal Pradesh,
Haryana, Jammu & Kashmir, Madhya Pradesh, North East, Orissa,
Punjab, Mumbai, Maharashtra and Uttar Pradesh (East). The
closure of telecom services has been done in consequence of
the Order(s)/ judgment of Honorable Supreme Court of India
of February 2, 2012 and March 11, 2013. The Company has
participated in Spectrum Auction conducted by DoT in March
2013 and won the “Right to Use of Spectrum” in eight Telecom
Circles of India namely Delhi, Gujarat, Karnataka, Kerala, Kolkata,
Tamil Nadu, Uttar Pradesh (West) and West Bengal for a period
of 20 years at a bid price of Rs.36,395 million. The DoT has
allowed set-off of the “License Entry Fees” of Rs.16,263 million
paid by the Company on January 10, 2008 as upfront payment
13
against the bid price and allowed the balance amount of Rs.20,132
million to be paid in accordance with the deferred payment plan
opted by the Company as per terms and conditions of the
auction.
During the financial year 2012-13, Company has issued 6 million
Non-convertible Redeemable Preference Shares (“RPS”) of Rs.10
each fully paid-up at a premium of Rs.9,990 per share in multiple
tranches for long term funding.
For the year ended March 31, 2013, there is the improvement of
9% in net loss from Rs.31,588 million to Rs.28,817 million
primarily on account of 36% saving in Sales and Marketing
expenses.
Key Financial & Operational highlights for the financial
year 2012-13
Total revenues up by 6% Y-o-Y to Rs.12,307 million, Revenue
from operation for the year has been increased by 13%,
other income decreased by 71% as against decrease of 2%
in operating expenditure, resulting in improvement of
EBITDA margin by 13%.
Share of data revenue in total service revenue is increased
from 23% in 2012 to 27% in 2013.
●
●
March 31, 2013, since the spectrum was won in the auction
held by DoT in March 2013 and upfront payment was made
prior to year end. However, no amortisation charge has been
considered during current year since the Company received
the Letter of Intent (LoI) from DoT on April 30, 2013 allowing
Company the “Right to use of Spectrum” for 20 year period
from the date of LoI.
II. Results of Operations
Revenue from operations for the year has increased by 13%, as
against decrease of 2% in operating expenditure, resulting in
improvement of EBITDA margin by 13%. Total Revenues of the
Company has grown by Rs.705 million, an increase of 6% over
previous year and operating loss has been decreased from
Rs.9,538 million to Rs.8,341 million due to cost optimization
measures. Sustained growth has been maintained in spite of the
increased competition and reducing tariffs. The Company has
implemented various programs to benchmark and optimize its
costs in the areas of network maintenance, operations and
customer servicing.
I. Financial Condition
1.
Share Capital
During the financial year ended March 31, 2013, Company raised
Rs.60,000 million by the issuance of 6 million non cumulative
non convertible redeemable preference shares (“RPS’) of Rs.10
each fully paid at a premium of Rs.9,990 per share in multiple
tranches.
There has been no change in the equity share capital and as at
March 31, 2013 the Company has paid-up equity share capital of
Rs.31,939 million comprising 3,193,920,000 equity share of
Rs.10/- each.
2. Secured and Unsecured Loans
Reduction in borrowings is primarily on account of (Decrease
in Long Term by Rs.4,197 million and Short Term by Rs.20,416
million from Rs.78,163 million in previous year) is on account
of prepayment of loan of Rs.29,115 million. The company has
availed new facility of Rs.4,800 million.
3.
Deferred Payment Liabilities
Deferred Payment Liabilities of Rs.20,132 million represents
the amount payable to DOT towards the acquisition of “Right
to use of Spectrum” in eight Telecom Service Areas in the auction
carried out by DoT and Rs.1,237 million represents vendor
liabilities against network equipment supply, relating to funding
to be arranged by respective vendors and assets acquired on
deferred payment basis.
4.
Fixed Assets and Intangibles
Addition of Rs.35,262 million primarily relates to acquisition
of “Right to use of Spectrum” under intangible assets as at
14
1.
Revenues from Telecommunication Services
Revenue from operation for the year has been increased by
Rs.1,354 million.
2.
Other Income
Other income reduced to Rs.264 million (previous year Rs.913
million) mainly due to reduction in investments in fixed deposits
and lower rate of interest.
3.
Operating Expenses
The major operating expenses comprise:
i)
Network Operation costs
Network operation cost is increased by 12% from Rs.9,039
million to Rs.10,135 million on account of increase in
infrastructure sharing expenses by Rs.801 million and in repair
and maintenance expenses by Rs.217 million, however as a
percentage of revenue from operation it is constant in 2013
(84%) and in 2012 (85%).
ii) Sales and Marketing expenses
Sales & Marketing expense is reduced by 32% primarily due to
following reasons:
●
●
Reduction in Subscriber Acquisition Costs (Rs.985 million)
and Other Subscriber Acquisition Costs (Rs.70 million) by
Rs.1,055 million, due to less gross additions by 0.43 million
(voice) and reduction in average blended SAC (Subscriber
Acquisition Cost) payout.
Reduction in Advertising and marketing expenses by Rs.570
million;
●
Reduction in Sales Promotion expenses from Rs.564 million
in 2012 to Rs.234 million in 2013.
●
Reduction in Device Subsidy cost from Rs.1,216
million in 2012 to Rs.1,010 million.
iii) Employee Related Expenses
Employee cost is increased by 11% from Rs.3,565 million to
Rs.3,947 million due to increase of salary cost (including PLI) by
Rs.410 million. Employee cost as a percentage of revenue from
operation is also constant at 33%.
iv) Administrative and Other Expenses
SSTL did not participate in November 2012 spectrum auction
given the high reserve price of spectrum in 800 MHz band.
Subsequently, spectrum reserve prices were reduced by approx.
50% for this band. Post this, SSTL participated in March 2013
auctions to ensure continuity of business.
SSTL won 3 blocks of 1.25MHz each in 800 MHz spectrum band
in eight service areas and now has operations in nine service
areas. Post auctions, the new footprint covers 40% of population
and 60% of data market potential in India. Effectively, organization
managed to retain approx. 75% of its pre-auction revenues.
Management believes this reduced footprint gives faster path
towards OIBDA break-even for the business.
SSTL continues to have a data centric strategy with dongles and
smartphones as its priority focus areas. In the nine operational
circles, Company continues to provide High Speed Data (HSD)
services in approx. 350 cities and towns. Last year, SSTL launched
several new smartphones and plans to continue expansion of
its smartphones portfolio going forward in 2013. SSTL’s
subscriber base as on Mar’13 stands at 12 million; which includes
1.6 million data subscribers.
MTS India Subscriber Base
Administrative and other expense is increased by 11% from
Rs.2,746 million to Rs.3,058 million due to increase in
provisions for contingencies & fixed assets and IT support &
service expenses.
4.
Finance and Treasury Charges
Finance cost is reduced by 13% from Rs.10,524 million to
Rs.9,189 million, this reduction is primarily on account of
prepayment of short term and long terms loans.
5.
Depreciation and amortization
Total depreciation and amortization charges increased to
Rs.4344 million (previous year Rs.3,134 million).
6.
Taxes
No provision for current income tax has been made in accounts
as there were no taxable profits for the year.
7.
Net Loss
The Company’s net loss reduced to Rs.28,817 million for the
year (previous year Rs.31,588 million). Generally, it is not
uncommon for large green field infrastructure telecom projects
to incur losses during the initial few years of project
implementation.
In the financial year 2012-13, total revenue of SSTL was Rs.15.6
Billion. For this period, contribution of non-voice revenue from
data and mobile VAS was at approx. 36%. During same time,
wireless ARPU (blended for voice and data) remained flat at Rs.87.
MTS India Wireless Revenue
Discussion on Operational Performance:
FY 2012-13 was year of uncertainties and transitions for the
business. It started with cancellation of licenses in 21 circles
following the Supreme Court order of Feb’12. After that, for
few months’ business continued operations as usual. Then
several different strategies were adopted in order to conserve
cash and selectively grow data business.
15
On customer front, SSTL launched several initiatives like MBonus
for engagement and retention. In future, there are several plans
including launch of dongles with unique designs (Chrome
Dongles). SSTL was one of the first players in India to launch
special packs for social media access.
SSTL continued its focus on building a strong data brandLaunched several campaigns like AlwaysOn, to reinforce positive
association with target segment; continued association with
music and youth by means of sponsorships to programs like
NH7 weekender and sponsorship to popular reality TV shows
like Indian Idol.
In the next financial year 2013-14, the company’s strategic focus
will be to leverage its operations in nine circles in order to
build further scale and efficiencies. Organization aims to become
OIBDA positive by end of 2014. This will require successfully
meeting our strategic imperatives that includes:Further strengthen data business through competitive
products, expand devices portfolio and testing new
technologies.
●
●
Build VAS revenues and aggressively expand smartphone
portfolio
●
Aggressively focus on cost management and profitability.
Products and Services
Festival offer
During the festival period of Diwali, Christmas & New Year, the
Company launched an attractive offer of extra usage on popular
recharges. The offer was valid on medium & high value recharges
to increase upgrades from lower recharges.The offer also helped
in maintaining unique rechargers and revenues during the
extreme market scenario.
MTag Tablet:
In May 2012, Company launched first ever EVDO 7" tablet –
Mtag 7.0 on a pilot in Andhra Pradesh and Rajasthan.
Memory On Dongle: On device memory program
SSTL was the first in the world to use a portal on dongle targeted
at delivering VAS services to the consumer’s desktop – and has
been immensely successful in driving VAS penetration and
revenues in 2012-13. The concept has been nominated for the
Alexander Graham Bell awards for Innovation.
Market Differentiation with Devices
In June 2012, SSTL launched the thinnest EVDO dongle, ZTE
AC2787 which was very well accepted in the market.
Customer Experience
The company in order to give a drive usage and revenues came
with improving customer experience at various touch points,
Landing page, web recharges, Balance carry forward feature.
The Company offers Voice (Local, STD & ISD); Data and VAS.
Customized landing page
Data Business Line
Data business continued to grow and today contributes
significantly to the overall revenue of the Company. The
Company continued to expand its high speed data footprint and
currently covers over 350 towns.
The Company grew its data portfolio with launch of many
innovative products and solutions. One of the product “1 Day
unlimited” was nominated for most innovative product of the
year by ET awards. Key data initiatives included:
SSTL customized landing page was launched for the MBlaze
Data card subscribers primarily with the objective of engaging
subscribers and providing value to them, to understand the
subscribers and to create better engagement between SSTL
and its subscribers. The page acted as an integrator of the
customer’s entire web world.
The customizable portal was implemented as a completely
customized Start-up page for data card subscribers, which loads
every time the subscriber connects the data card, creating a
constant communication channel with subscribers.
Social Networking sites free access
Balance Carry Forward Feature
SSTL was first ever in the Indian market space to launch a URL
based product in Mobile broadband space based on DPI
technology. The product was a paradigm shift wherein the
Company changed the telecom ‘marketscape’ by building
differentiation based on customer usage behavior & usage
content. This was further substantiated by the various survey
facts that in India, Facebook with over 62 Million users is the
most accessed website with 97 per cent of all online individuals
using it followed by Twitter (13 Million) and LinkedIn (16 Million).
Moreover, LinkedIn has the second highest average time spent
only after Facebook. Similar product construct was also
introduced in Postpay format for a monthly rental of Rs. 555
(Service Tax extra) with 4 GB bundled usage.
As a customer delight and loyalty, SSTL launched Balance Carry
Forward feature that offers a feature to carry forward unutilized
balance of previous recharge to new recharge, which otherwise
is forfeited at the end of recharge validity.
16
VOICE BUSINESS LINE
Voice business was amply supported by the launch of innovative
products and aggressive market moves. The highlights for the
year included the launch of two key products.
Super Zero
This product offers attractive On net proposition and is available
on both Special Tariff Vouchers and Plan Vouchers. It went on to
win an award from Economic Times.
All calls at 30 paise
This product offered a tariff at 30p for all Local & STD calls,
Local & National SMS and ISD at select countries. The above
two products enabled customer to make calls both local and
national at very attractive rates.
Value added services (VAS) saw the introduction of 2 new
products - Facebook and Live Cricket streaming. Facebook
clocked a Million Subscribers within a year’s time. Both these
products became hugely popular in no time and which also
enabled growth in VAS revenues.
SMARTPHONE BUSINESS LINE
SSTL launched its foray into the Smartphone business during
FY 2012-13 to tap into the mushrooming segment in India by
targeting high revenue data using customers.
The offerings included a portfolio of 8 MTS MTag touchscreen
Smartphone devices launched during the year in the price band
of Rs. 3500 to Rs. 8500, all on the Android operating system. The
range included the launch of a MTS-Samsung Galaxy Y device
that was supported with an extensive 3600 marketing campaign
across consumer touchpoints collaboratively promoted by MTS,
Samsung and Qualcomm.
The MTag devices were bundled with a variety of twenty five
prepaid and twelve postpaid data centric tariff plans targeted to
various usage segments, including the industry benchmark
unlimited data plan.
Customer Service Operations
Financial year 2012-13 was one of the most challenging years in
the history of the Company. The decision of the Supreme Court
of India on the 2G issue had a massive impact on SSTL’s business
plans, throwing into disarray the Company’s strategies and
operations. The Supreme Court judgment also created a fear
in the minds of the Company’s existing subscribers regarding
the continuity of MTS in India.
In this tumultuous situation, the ‘Customer Suppor t
Department’ (CSD) of the Company kept the momentum going
and demonstrated its ability to always stay ‘a step ahead’. This
approach, which is in sync with our brand promise, enabled us
to not only retain existing users, but also keep them delighted
and loyal to brand MTS. It was this mind set which facilitated us
in forging long-term, mutually beneficial relationships with
customers. The CSD team began 2012 with a clearly defined
strategy to drive leadership in the data-led wireless market and
smart voice play. The aim was to help the Company focus on
two key areas - ‘Value Management’ and ‘Cost efficiency
management’.
Under Value management, SSTL ensured that customers received
Assured Services as promised and were more engaged with
brand MTS through its service offerings and initiatives.
The other important pillar of the CSD strategy ‘Cost Efficiency
Management’, saw the division focus concertedly on evaluating
all financial investments for better returns.
In line with this focus, the strategy team initiated and completed
130 projects Pan India, which helped improve the Company’s
CSAT scores and KPI performance, and enabled SSTL to realize
savings of approximately INR 940 million.
In FY 2012-13, CSD served customers with utmost care and
handled more than 48 million calls at its call centers for voice
and data. To cater to this volume efficiently, the team rolled out
a few initiatives including Tier 2 migration, where it moved its
entire North HUB to a Tier 2 location (Bhopal), thereby saving
the company around INR 2.75 million per month.
While cost remained a significant focus area for the Company, it
also paid attention to quality, strictly auditing key parameters
internally, to achieve the following:
a.
Reduce call rejection through technology improvement
from 18 percent to 0.5 percent.
b.
Reduced repeat Call by 6% in regular customer calling and
4% for higher ARPU customers.
c.
Reduction in e-Customer Relationship Module (CRM)
downtime by 20 percent during FY12 resulting in faster
solution to customers.
In 2012, CSD took a more focused approach to enhancing the
reach for High Speed Data and Smart Phone customers. Some
of the initiatives that CSD took:
●
Moving from a single contact center partner to two different
partners as a part of the Business Continuity Plan, resulted
in savings of Rs.1.5 million in Q3 as compared to Q2 of
year 12.
●
Launching ‘Simulators’ for agents to assist customers
during the call in the effective troubleshooting of problems
and faster resolution. This project has been nominated for
the ‘Global Telecom Business Innovation Awards 2013’.
●
Launching Regional Language Support in 6 different
languages apart from English and Hindi for High Speed Data
customers, to provide them with an enriched experience.
Launching Social CRM -A tool for managing Customer
perception and building positive sentiments over the Web. The
project also received industry recognition as a case study. News
about its success was published by a leading advertising and
media portal ‘AFAQS’.
Development and Automation at the CRM Center
By embracing ‘a step ahead’ approach in innovation, CSD helped
the CRM team to create an in-house e-mail Management Solution
for SSTL customers. Its unique features and functionalities
enhanced the customer experience and aided user management
by offering the following features:
17
●
Priority routing of customer calls based on previous
customer transaction.
●
Strong integration with the CRM for better resolution.
Apart from strengthening its contact center, CSD strongly
focused on its retail presence by introducing a low-cost service
rural model called ‘Mitra’. It is a virtually zero investment retail
business model with a three-pronged agenda. Its aim is to
provide:
●
Rural Market Penetration
●
Quality acquisitions and revenue enhancement
●
Quality services to the customer
The division managed to digitize more than 98% new Customer
Application Form (CAF- Mandatory document for Activating
customer number), which were made available online as per
regulatory requirement.
This approach has helped SSTL achieve 95% Score in compliance
audit conducted by Telecom Enforcement, Resource and
Monitoring cell (TERM).
Constant focus on quality has helped SSTL maintain a healthy
relationship with customers and as a result, our one month
active base as a percentage of the total base has grown from
55% in March 2012 to 67% in March, 2013. The High revenue
earning customers base stayed at the same levels, while Average
revenue earning customer base has increased with a 4% in count
and 3% on revenue through focused retention campaigns. The
Web Recharge Penetration Program for data, launched in key
Circles, has led to Web penetration going up from 18% to 27%,
resulting in additional revenue per month. The churn of active
customer base has reduced to 2% in March, 2013 from 4.4% in
April 2012.
SSTL postpaid business, which was just getting set up in 2011
saw a great spike in 2012. This was a result of several initiatives
undertaken by CSD to strengthen the business, which resulted
in the following:
Another industry first and key differentiator, -‘PickMe’ Door
step service with Loaner device support’ was introduced to
strengthen the after sales service of SSTL pan India. The service
was launched in May, 2012 to ensure:
Enhanced after sales service to smartphone Handset
subscribers.
Long-term relationships with customers in order to
enhance revenues and customer experiences with SSTL.
●
●
In FY12-13 a major change in the activation policy was ushered
in by Department of Telecommunication (DOT), instructing all
operators to change the subscriber acquisition and verification
process. The biggest challenge was to deploy the changes in our
activation process and achieve system readiness within a short
span of time. Handling the project life cycle was a gigantic task
which included industry and regulatory coordination, designing
of processes and work flows, development of the system,
training of all stake holders, pilot testing and implementation.
During the industry process creation SSTL played a vital role in
developing common manual for all the telecom operators. SSTL
was also part of the core committee member for all major
decisions in ‘ACT’. SSTL received appreciation for its processes
and compliance conducted by government agencies of respective
circles.
During FY12-13, consistent efforts were also made towards
enhancing quality through various means like bringing in
quality subscribers by creating many check points for validation
of new customer.
18
●
A reduction in bill generation time, from ten days in April
12 to five days by January 13.
●
The launch of e-bill has resulted in 16% penetration over
the year of the postpaid base with continuous drive to
cover more than 60%.
●
An improvement in Month to date collections
which increased from 80% in April, 2012 to 98% in
March, 2013.
●
Provision of Doubtful Debt (Incremental), which began the
year at 19% and ended at 6%.
TRAI metering and billing audit
TRAI’s metering and billing audit for 2011-2012 was conducted
in accordance with the schedule of the empanelled Telecom
Regulatory Authority of India (TRAI) audit agency, with the scope
including different processes for Sales, Usage and Retention,
Value Added Services, Subscriber Activation, etc.
Post the assessment and analysis, TRAI declared SSTL to be
100 % compliant on financial parameters. The agency did
however make some observations regarding which appropriate
action was taken and the issues closed on time and we saved
approx INR 600 million, which otherwise could have been
levied as penalty.
Regulatory Affairs
In response to the Writ Petition (civil) no. 423 of 2010 titled
Centre for Public Interest Litigation and others vs. Union of
India and others and writ Petition (civil) no. 10 of 2011 titled
Dr. Subramanyam Swamy vs. Union of India and others, Hon’ble
Supreme Court of India on February 2, 2012, passed a judgment
quashing 122 licenses issued during the tenure of Ex-Telecom
Minister, Mr. A. Raja. 21 licenses of SSTL were also covered
under the judgment.
SSTL filed a Review petition no. 663/664 of 2012 on
April 3, 2012, which was rejected by the Hon’ble Court. Further
SSTL filed a curative petition No. 189 of 2012 on May 4, 2012
which was also rejected by Hon’ble Supreme Court of India.
As per the directions of the Supreme Court TRAI made
recommendations for conducting the auction including Reserve
price and other terms and conditions. Based on TRAI’s
recommendation, Telecom Commission, which is the highest
body consisting of Secretary level officer of various ministries
endorsed some of the decisions with regards to the terms and
conditions for the auction, and which was further ratified by
Empowered Group of Ministers formed for this purpose and
endorsed by the Union Cabinet.
Government of India through Department of Telecommunications invited applications on September 28, 2012
from eligible participants to participate in the auction for 1800
MHz, 900 MHZ, and 800 MHz bands of spectrum.
The reserve price set for 5 MHz spectrum for 22 circles in 800
MHz was 1.3 times that of 1800 MHz spectrum. SSTL felt that
the price was too high and since there was no reason to pay
higher price than 1800 MHz spectrum, therefore the Company
boycotted the auction. However the response for the auction
was lukewarm from other companies also and only 5 companies
participated in the auction. Videocon, Uninor and Idea won 5
MHz spectrum in few circles, Vodafone won additional spectrum
of 1.25 MHz in 14 Circles and Bharti won 1.25 MHz spectrum in
Assam Circle. The balance of 167.5 MHz of Spectrum in 1800
MHz remained unsold.The Reserve Price for 1800 MHz spectrum
was set at Rs.13,999.96 Crs., and for 5 MHZ of 800 MHz spectrum
was Rs.18,199.96 Crs.
Since there were no applications for 800 MHz of spectrum,
Government did not conduct auction for 800 MHz band of spectrum.
license in 2008 and the balance of Rs.2,013.16 Crs. to be paid in
10 years with a moratorium of two years.
Consequent on winning of Licenses for 8 Circles, SSTL decided
to close down operations in 13 Circles. The closure was done
smoothly keeping into consideration the values of brand of
MTS and without any inconvenience to customers and trade.
Human Resources
At a time when the Indian telecom industry is confronted with
an uncertain regulatory environment, SSTL has remained stable
and an ‘employer of choice’. The Company continues to attract
and retain good talent by providing a challenging and exciting
work environment and growth opportunities for career seekers.
By working closely together, the business functions and HR
have enabled the Company to meet its staffing requirements
and align its employee engagement and retention through
development activities.
At SSTL, the management supports the HR function in attracting,
developing, engaging and retaining expertise within the company.
Using a participative work approach and fostering a culture of
trust and openness, professional working, freedom to think,
direct communication and performance orientation, the
Company has remained a ‘preferred workplace’.
Some of the key initiatives undertaken by SSTL during the year
are grouped around the following key themes:
Talent Acquisition:
During the period April 1, 2012 and March 31, 2013 around 450
people were added to the company’s pool of human resources.
During the period April 1, 2012 and March 31, 2013, 15 leadership
positions (Department level & above) were filled through
internal job postings which reemphasizes the organization’s
commitment to provide growth to internal talent.
The company hired a mix of junior-level and higher-level
employees.
In line with the direction of the Supreme Court to auction all
the available spectrum and looking at the response of the
industry with regards to the auction, Government decided to
reduce the reserve price for spectrum in selected manner.
As regards 1800 MHz of spectrum was concerned Government
of India decided to reduce the reserve price of Mumbai, Delhi,
Rajasthan and Karnataka by 30% and in the case of 800 MHz
Government decided to reduce the reserve price by half for all
22 Circles.
Bids were once again invited by Government of India through
Department of Telecommunications on January 30, 2013 from
eligible participants to participate in the auction for 1800 MHz,
900 MHz, and 800 MHz bands of spectrum. Auctions were
conducted on March 11, 2013.
SSTL participated in 8 Circles and won spectrum of three carriers
in all 8 circles. The total payout for 8 Circles were Rs.3,639.48
Crs. DOT allowed set off Rs.1,626.32 Crs. paid at the time of
This large talent infusion into the organization was a testimony
to SSTL being an employer of choice. A look at our demographic
profile indicates that we managed to attract highly qualified talent
19
from both telecom and non-telecom industries, to support our
goal of talent diversity.
Talent Management:
Employee productivity went up significantly during 2012-13.
Revenue per employee grew from Rs.1.16 million to Rs.2.4
million, an increase of 107%.
The Company has successfully concluded first Bi-Annual
performance assessment cycle for the year 2012. In line with
the Company’s organizational philosophy towards building a
performance driven culture, the focus has been on “Capability
review”.There has been an emphasis on competency assessment
as an integral part of appraisal process due to which the Company
has looked beyond KPI achievement and has focused on
competency demonstrated while performing the job.
Talent Development
The focus of Talent development was on increasing employee
efficiency and helps them navigate through uncertain times,
through targeted sessions such as Business Simulations, Change
Management, Business Knowledge Sessions and Finance for Non
Finance. The majority of sessions were developed and delivered
internally, so that we achieved our objective with 30% of the
projected budget. During the reporting period, the Company
conducted 668 training programs and averaged over 2.6 mandays, against budget of two man-days. The overall feedback score
increased to an all time high of 4.56 on a scale of 5.
Organization Development (include leadership
development)
For the development of a leadership pipeline and retention of
high potential employees, we launched the 2nd phase of the MTS
Leaders of Tomorrow (M-LOT) program. We targeted 5% of
the employee strength as possible HIPOs.The HIPOs underwent
a rigorous Fastrack Program, and were assigned to projects for
their functional development, based on their career aspirations.
A rigorous focus on HIPO retention and engagement helped us
to keep the HIPO attrition within a limit of 17% (annualized).
Cluster and Off Roll Manpower Management:
During the period April 1, 2012 and March 31, 2013, the Company
launched 15 new policies /processes applicable to Outsourced
Manpower along with roll out of strong monitoring framework
on cluster management. Focused emphasis was made on
enhancement of productivity of Enterprise vertical.
First time the Company introduced a structured framework of
performance assessment of off roll employees through a People
Performance Management (PPM) linked to the compensation
review. Total of 25 off roll employees were absorbed on the
rolls of SSTL thus providing the opportunity of career growth
through the performance assessment.
Enhancement of productivity was the key during the period and
3 Six Sigma project launched for bottom 3 Circles thus resulting
in enhancement of productivity of the off roll employees on a
pan India level. The Six Sigma project also resulted in significant
enhancement of productivity of cluster employees for Andhra
Pradesh, Mumbai and Maharashtra Circles.
20
The Company also focused on internal leadership development
by organizing a similar program for the Department head and
COOs. A coaching intervention was introduced for COOs, to
help them on both business and leadership issues in a time of
uncertainty. The Company received positive feedback from
COOs on the intervention and a few have requested for a
continuation of the intervention. A 360 degree feedback for
CXOs, with a feedback workshop, was also organized.
In order to strengthen the Company’s employer branding, an
internal brand statement was created.The company’s HR policies
were aligned to the Brand Statement and training for managers,
to embed the brand, has been initiated. The focus of the Brand is
to move towards a high performance, aspirational culture, and
HODs were trained on how to create and achieve aspirational
goals through their teams - leading to increased productivity.
In February, 2012, SSTL conducted a survey on Employee
engagement to measure employee participation and contribution
to the Company’s business success and corporate culture
building. There was overwhelming participation in the survey
with a 95% response rate and 78% score level. The latter is
above the 77% figure achieved by some of India’s best employers.
According to the consultants engaged for the study, this was
one of the highest scores recorded by a company merely twoand-a-half years into its existence.
We continued with the short-term Employee Exchange program
with other countries where the Company has a presence. The
idea is to enable a cross pollination of talent and understanding
of ‘Best practices”. Three people from SSTL were given an
opportunity to visit MTS Russia.
Conclusion
This is an extremely critical time for the organization, as it scales
up the business and consolidates its position. The key challenge
facing the company in this scenario of fast business growth fuelled
by expansion of new products and services, will be attracting new
talent, as well as developing a leadership pipeline.
Therefore, the future agenda of the HR function at SSTL will be
to ensure that the organization remains a great place to work
and develops a strong employer brand. For this purpose, the
company has planned a series of initiatives such as the launch of
a survey for capturing the employee value proposition with the
Corporate Leadership Council, studying the brand attributes
of MTS, and creating an employer brand that is in sync with the
MTS brand.
On the leadership development front, we are planning to
strengthen our employee development program by
institutionalizing a Coaching Culture within SSTL, designing a
Coaching Program and Process, and identifying Senior
Management employees who need to be coached and integrated
through the succession planning process.
Internal Control Systems
The Company has in place systems of internal control designed
to provide reasonable assurance with regard to the effectiveness
and efficiency of operations, reliability of financial reporting and
compliance with applicable laws and regulations.
The in-house Internal Audit department at SSTL is an
independent and objective function performing assurance and
consulting activities designed to add value and improve SSTL
operations. It helps the Company accomplish its objective by
bringing a systematic and disciplined approach to evaluate and
improve the effectiveness of risk management, control and
governance processes. The audit team maintains an independent
status within SSTL at all times.The Head of Internal Audit reports
functionally to the Chairman of the Audit Committee and
administratively to the Chief Executive Officer. The scope of
audit is extended to all of SSTL’s operations and third party
service providers. In order to supplement the audit assurance
provided by in-house team; the Company had also outsourced
some of the audit work to two third-party audit firms namely
Mehra Goel and Co. and KPMG for the financial year 2012-13 .
The deliverables of appointed audit firm are measured and
evaluated against performance KPI’s (Key Performance
Indicators) approved by the Audit Committee to ensure that
reasonable assurance is provided on the end-to-end spectrum
of the areas/processes defined in the agreed scope of work.
The audit plan for the year is prepared based on factors like
company risk profile, expected process change, cost materiality
and results of previous audits. The final audit plan is approved by
the Audit Committee and Board of Directors of the Company.
The Audit Committee does a regular review of the Audit Reports
and also reviews update on the status of critical audit issues
pending for resolution, which are submitted by the Internal
Auditors. In addition, the Audit Committee performs a half yearly
performance evaluation of internal audit department. The
Committee also meets the Company’s statutory auditors to
ascertain, inter alia, their views on the adequacy of internal
control systems in the Company and keeps the Board of
Directors informed of major observations, if any.
Apart from the audit of Company operations / activities
conducted by SSTL internal audit team, an audit of business and
administrative activities of SSTL for the period 2008-2011 was
conducted by the internal audit team of the parent company viz.
Sistema JSFC. The action plans to close imperfections identified
during this audit are tracked for closure by Management
Committee of the Company independently through Vigilance
Department, in order to ensure that adequate controls are put
in place to mitigate the risk(s) highlighted during the course of
audit.
The Internal Audit function is also involved in streamlining the
audit methodology, starting from inception, through fieldwork
to final reporting, in order to fit in the COSO (Committee of
Sponsoring Organizations of the Treadway Commission)
framework so that it is no longer incidental to the Company’s
processes but provides the foundation for all of the Company’s
audit work. Integrating COSO in this manner will add structure
to the audit process, ensure that appropriate criteria are
considered in key phases of each audit, and provide a trail to
support the conclusions reached. Therefore, an Audit
Management Process (AMP) document has been prepared to
bring clarity in terms of activities to be performed during the
conduct of audit to ensure smooth and efficient management of
all SSTL audits. This will help to identify the interfaces between
Outsourced Audit Partner, In-house audit team and SSTL & its
strategic partners at various stages during the audits. All the five
essential components of control environment, risk assessment,
control activities, information communication and monitoring
of COSO framework is considered while defining the control
objective to be audited.
The Company uses a state-of-the-art ERP system to record
data for accounting and management information purposes and
connects to different locations for efficient exchange of
information. In continuation of the Company’s effort to create
customer-centric and process-based organization the function
of Organizational Excellence (OE) has been created.The objective
of the function is to align stake holders and operations for
deriving enhanced synergy, facilitate higher internal effectiveness
and collaborate with functional teams to drive Performance
improvement projects to support Organization’s
21
Business objectives. In order to ensure standardization of
processes across circles and improve their operational
effectiveness, an online activity of best practices across various
functions has been created by OE. A snap shot of process
recommendation implemented and under implementation is
published for monitoring progress. The Company has also set
up a robust risk management framework across the organization.
This facilitates identification, assessment, communication and
management of risk(s) in an effective manner.
Opportunities
Going forward in the financial year 2013-14, industry subscriber
and revenue growth is expected to be robust. While growth in
subscriber base is expected to be driven by underpenetrated B
& C circles and rural areas, pace of growth in data revenues is
expected to outpace voice growth. The Company is well
positioned to gain ground from data revenue growth given its
focus on data business, existing coverage, reliable service,
product offerings and time-to-market advantages.
Proliferation of low-cost smartphones is expected to further
fuel the demand for mobile data services.The company is already
focusing on smartphones segment and has launched attractive
devices and offerings in order to attract smartphone users.
SSTL plans to expand smartphones portfolio significantly in
order to leverage this growth opportunity. Last year Company
managed to partner with successful smartphones makers like
Samsung. Going forward Company plans to grow its partnership
with several other established brands in this space.
Slow 3G network expansion by various operators and launch
of 4G and BWA services by only few players will allow SSTL to
strengthen its already strong position in data market. None of
the 3G player has a pan-India presence and 4G ecosystem is
expected to take time to mature. This situation offers a unique
opportunity to sell data on wholesale basis to other players in
operational circles.
Risks and Threats
Under penetration of data services, falling prices of personal
computers, introduction of newer devices, increasing awareness
and need to stay connected on the move offers huge potential
for data. However, if these key enablers do not fall in place it
could slow down growth in the data market and could negatively
impact the Company’s business.
CDMA ecosystem in entry voice is deteriorating and can potentially
affect Company’s voice business prospects. Similar challenges exist
in the smartphones business as well; however, management is of
the view that there would be sufficient demand for EVDO
smartphones globally. Also, several global operators are investing
in EVDO smartphones which is positive for the Company.
Launch of 4G data services and expansion of 3G services is
expected to further expand the overall data market which
in-turn will benefit the Company. However, it can also intensify
competition in the data market and may even trigger tariff wars
like previously seen in the voice market.
22
On the regulatory front, Company’s ability to do business and
upgrade to future generations of technology depends on the
spectrum and license. There is still lack of clarity about future
roadmap for 800 MHz band. Also, there needs to be clarity on
how government will ensure whether further allocation of
spectrum is contiguous to earlier allocation.
The implementation of Company’s projects would be materially
affected if debt facilities are not raised in a timely manner and/or
interest rates are raised significantly. Additionally, the Company’s
business is dependent on key vendors to supply critical network
equipment and services. Any change in their ability to provide
equipment and/or services also presents a risk.
Finally, while the Company continues to perform and create
value for its customers, shareholders and employees there is
execution risk involved if projects are not launched or
completed in time. Key risks lie around the Company’s ability to
launch innovative products and devices, grow distribution
network especially in new markets and enhance MTS brand
value in the market.
Future Outlook
Indian wireless market continues to be one of the most attractive
markets in the world with VLR penetration of 60% and 2.5
million active wireless subscriber addition per month in financial
year 2012-13. Going forward growth will be driven by the
underpenetrated B & C circles and rural areas. In future,
continuous drop in handset prices and affordable services are
likely to support robust growth. This would also depend on
clarity of regulatory uncertainties associated with spectrum
ownership and pricing.
In future, demand for mobile data will grow significantly and
Company is well positioned to get higher shares of this
incremental demand.Also, continuous drop in smartphone prices
is expected to result in higher penetration of these devices
which will increase demand for data on small screen devices.
Number of players in the industry is likely to go down in next
12 to 24 months. Footprint of several players in the industry
has reduced to fewer circles. Also, post NTP 2012
implementation, expectations are that M&A norms would be
eased out, paving the way for much needed consolidation in the
sector. New opportunities for strengthening the market
position can arise out of such an environment.
Cautionary Statement
Statements in the Management Discussion and Analysis Report
describing the Company’s objectives, projections, estimates,
expectations may constitute a “forward-looking statement” within
the meaning of applicable laws. Actual results could differ
materially from those expressed or implied. Important factors
that could make a difference to the Company’s operations include
economic conditions affecting demand/supply and price conditions in
the domestic markets in which the Company operates, changes in the
Government Regulations, tax laws and other statutes and other related
/ incidental factors.
REPORT ON CORPORATE GOVERNANCE
GOVERNANCE PHILOSOPHY
Corporate Governance is a methodology for upholding the highest standards of integrity, transparency and accountability in an organization. It is a
tool for maximization of value of shareholders while safeguarding and promoting the interests of other stakeholders.
Sistema Shyam TeleServices Limited (the Company) follows the highest standards of corporate governance principles and policies
which prescribe a set of systems and processes guided by the core principles of transparency, disclosure, accountability, compliances,
ethical conduct and the commitment to promote the interests of all stakeholders. Your Company believes that Corporate Governance
is a culture and derived through the mindset of the organization.
Inspite of being an unlisted entity and even without having any regulatory and statutory obligation on its part, your Company is
continuously adhering to the Corporate Governance practices as a voluntary initiative paradigm. Your Company has developed and
implemented a set of processes and procedures as a part of Corporate Governance Strategy as a committed organization to gain the
confidence of stakeholders and to promote the principles of transparency, integrity and accountability in the working and culture of the
organization. Nevertheless, new additions and updations thereto are also undertaken on a regular basis to uphold the governance level
matching with the industry standards.
I.
BOARD OF DIRECTORS
SSTL is managed through an optimum mix of Executive, Non-Executive and Independent Directors in conformance with the best
standards and practices. The Board of Directors of SSTL comprises of distinguished professionals possessing unparallel industry
experience and knowledge having diverse backgrounds and expertise in the fields of strategy, technology, finance, economics,
entrepreneurship and general management.
The Company’s Board of Directors plays a pivotal role in taking strategic decisions, analyzing the business opportunities and the
inherent risks involved. Some of them are industrialists of repute with profound knowledge of the Indian business environment and
rest are seasoned professionals who have served extensively on the Board of many renowned corporate houses. The Board reviews
its strength and composition from time to time to ensure that it remains aligned with the requirements of the business.
The Board’s composition, nature of directorship & attendance of the Directors at last Annual General Meeting alongwith the details of
their directorships in other companies during the financial year 2012-13 are given as under:
Name of the
Director
Nature of
Directorship
Date of Joining Attendance At
the Board
the Last AGM
Mr. Ron Sommer
Director
21.05.09
-
Mr. Vsevolod Rozanov
Whole-Time Director
01.10.08
Mr. Rajiv Mehrotra
Director
21.09.96
Mr. Ajay Khanna
Director
Mr. Alok Tandon
Director
Mr. Madhukar
Independent Director
Mr. Suman Sehgal
Mr. Vikram Kaushik
Mr. Bharat V Patel
Directorship
In other
Companies
Other Companies
Committee
Member
Committee
Chairman
3
2
1
Yes
-
-
-
-
16
-
-
20.04.95
Yes
9
1
-
20.04.95
Yes
8
2
-
27.03.09
-
6
1
3
11.02.08
Yes
-
-
-
13.07.11
-
2
2
1
13.07.11
-
3
3
-
Mr. Alexander Gorbunov** Director
13.07.12
Yes
4
1
-
Mr. Andrey Terebenin**
Director
13.07.12
-
1
2
-
Mr. Alexey Buyanov
Director
13.07.11
-
-
-
-
Mr. Feliks Evtushenkov^^ Director
13.07.11
N.A.
N.A.
N.A.
N.A.
Mr. Mikhail Shamolin^^
21.05.09
N.A.
N.A.
N.A.
N.A.
**
^^
Director
Appointed as Additional Directors w.e.f 13.07.2012 and regularized as Ordinary Directors liable to retire by rotation at the
17th Annual General Meeting held on 28.09.2012.
Resigned w.e.f. 13.07.2012.
23
Post March 31, 2013, following changes/restructuring has taken place in the composition of Board of Directors of the Company:
●
Mr. Vsevolod Rozanov, Whole –Time Director designated as President & Chief Executive Officer of the Company has
ceased to a be Whole-Time Director and has been re-designated as Deputy Chairman w.e.f. June 1, 2013. As a result,
June 1, 2013 onwards, he would be holding the position of Ordinary Director of the Company.
●
Mr. Dmitry Shukov, a Russian National, has been appointed as Whole-Time Director and designated as Chief Executive
Officer of the Company w.e.f. June 1, 2013. He has been nominated by the holding Company-Sistema JSFC, and was inducted
as an Additional Director of the Company pursuant to applicable provisions of the Companies Act, 1956.
●
Mr. Anton Abugov, a Russian National, nominated by the holding Company- Sistema JSFC has been inducted into the Board
as an Additional Director w.e.f. June 1, 2013 pursuant to applicable provisions of the Companies Act, 1956.
●
Mr. Alexey Buyanov has resigned from the Directorship of the Company w.e.f. May 28, 2013.
Currently, the Board of the Company comprises of 13 members. The Board comprises of 7 Indians and 6 Foreign Nationals; the
combination is in conformity with the Security conditions of Unified Access Service Licence and Press Note 3 of 2007.
A detailed profile of each Director is available on the website of the Company at www.mtsindia.in and is also published in this Annual
Report. .
Board Meetings and Attendance
During the financial year ended March 31, 2013, the Board of Directors met 8 times on the following dates and the maximum time gap
between any two meetings has been less than 3 months. Besides the regular Board Meetings, urgent important issues are decided
through circulation resolutions which are confirmed in the next Board Meeting.
Dates on which the Board Meeting(s) were held:
I.
May 22, 2012
V.
November 7, 2012
II.
July 13, 2012
VI.
December 11, 2012
III.
September 3, 2012
VII.
February 19, 2013
IV.
October 17, 2012
VIII.
March 1, 2013
The details of attendance of each Director at the Board Meetings held during the financial year 2012-13 are as under:
Ron Sommer
Vsevolod Rozanov
Ajay Khanna
Alok Tandon
Rajiv Mehrotra
Alexander Gorbunov*
7
8
8
8
7
7
Andrey Terebenin*
Alexey Buyanov
Madhukar
Suman Sehgal
Vikram Kaushik
Bharat Patel
5
4
8
8
7
6
Felix Evtushenkov**
Mikhail Shamolin**
1
-
Name of Directors
Board Meetings Attended
Name of Directors
Name of Directors
* Appointed w.e.f. 13.07.2012
** Resigned w.e.f. 13.07.2012
Information availability to the Board
The Company provides all the information in advance related to businesses of each meeting to all the members of Board for their
review and for discussions and decisions at the meeting. Such information is submitted as part of the agenda material of the meetings
well in advance and also by way of presentation during the meeting. All major agenda items are backed by comprehensive background
information to enable the Board to take erudite decisions. The information which could not be circulated in advance is tabled directly
at the meeting. The Board has absolute access to all the relevant information and also the managers of the Company. Apart from the
information made available at the time of meetings, the Board also periodically reviews various reports and information on the
progress of the Company. Such information is supplied to the Board at certain intervals and also on request from time to time.
Advance Planning of the Meetings
Planning of meetings of the Board as well as Board’s Committee is done in advance to adjudge and decide the matters and affairs which
are to be placed and reviewed before the Board members on the basis of priority and importance. Advance planning also provide an aid
to the Board members to schedule and plan their calendar events accordingly. The schedule of meetings also includes the primary
agenda for each meeting. The Board approves such calendar schedules in the last meeting of every calendar year for the Board and
Committee Meetings of next calendar year. To the extent possible and convenient to Board Members, the Board and Committees
follow the calendar schedules approved for Meetings. In addition to the planned calendar meetings, the Company also holds special
meetings to discuss the urgent business issues and the Board Members have also been very indulgent for such special meetings as is
evident from the attendance of Directors in Board Meetings. The agenda of the meeting is pre-circulated with presentations, detailed
notes, supporting documents and executive summary.
24
Board’s Self Evaluation Process
The Board Self Evaluation Process for the calendar year 2012, was initiated in the month of September 2012 and completed in
December 2012. The process is undertaken on annual basis to determine the effectiveness of the Board. The Board’s Self Evaluation
process was initiated by distributing a self assessment questionnaire to each Board Member. Based on the response to questionnaires
received from Board Members, a summary report was prepared including the results of all analyzed criteria, areas of improvement and
a certain action plan for the same. The results of the evaluation process were summarized with complete confidentiality and placed
before the Board for its review and the suggestions for the improvement in the working procedures of the Board of Directors. The
suggestions advised by the Board members are being implemented, to the maximum extent possible, with co-ordination of all
concerned.
II.
DIRECTORS’ COMMITTEES
In compliance of applicable provisions of the Companies Act, 1956 and to focus effectively on the issues and ensure expedient
resolution of the diverse matters, the Board has constituted Audit Committee, Nomination and Remuneration Committee, Share
Transfer & Investors Grievance Committee, Business Excellence Committee and Corporate Conduct and Ethics Committee. These
Committees focus on specific areas and make well-versed decisions within the authority delegated. Each Committee of the Directors
is guided by its well defined Charter, which defines the composition, scope and powers of the Committee. The Chairman of the
Committee in consultation with Company Secretary determines the frequency of the Committee meetings. The Committees also
make specific recommendations to the Board on various matters from time-to time. All observations, recommendations and decisions
of the Committees are placed before the Board for information or for approval. The Board reviews the performance of the Committees
exhaustively on annual basis and imparts necessary directions for improving the performance of the Committees.
Audit Committee
A key element in the Corporate Governance model is its Audit Committee. The Audit Committee was formed in compliance of
Section 292A of the Companies Act, 1956 with qualified members of the Board and reconstituted thereafter from time to time. The
Committee was recently re-constituted w.e.f. May 28, 2013 and presently, it comprises of Mr. Vsevolod Rozanov, Mr. Ajay Khanna,
Mr. Alok Tandon and Mr. Suman Sehgal. Mr. Igor Garshin, Head of Chairman’s Office, Sistema JSFC is Ex-Officio member. Mr. Vsevolod
Rozanov is the Chairman of the Committee. He has sound financial knowledge as well as several years of experience in the industry.
Mr. Vishal Kohli is the designated Secretary to the Committee.
In Committee Meetings, detailed discussions are held on various matters e.g. financial results, budgets, related party transactions,
internal audit and internal control, etc. The Head of the various functions and other senior management members are invited to present
their reports on the respective issues being discussed in the committee meetings and to have detailed interactions with the committee
members on all important issues. The Internal Auditors and Statutory Auditors are also invited to attend the meeting of the Audit
Committee and participate in discussions on their respective issues.
Key responsibilities of the Audit Committee
➢
Financial Reporting and Disclosure process.
➢
➢
Appointment, re-appointment or removal of the Statutory
Auditor, Internal Auditors and Cost Auditor.
Adequacy of the internal control systems and internal audit
function.
➢
Internal Audit and Cost Audit Reports and follow up action.
➢
Annual Financial Statements and all aspects related thereto
including qualification in Draft Auditors’ Report.
➢
Nature and scope of Statutory Audit.
➢
Related Party Transactions.
➢
Quarterly financial statements and Policies.
➢
➢
Cost Accounting Records of the Company.
Legal/ regulatory matters having significant impact on the
Company’s financial statements.
➢
Budgets and Business Plans of the Company and matters
related thereto.
➢
Carrying out any other function as may be related and
important in view of the Audit Committee members.
Audit Committee Meetings and Attendance
During the financial year 2012-13 the Audit Committee met 5 times i.e. on:
I.
May 21, 2012
IV.
December 11, 2012
II.
September 3, 2012
V.
March 1, 2013
III.
November 7, 2012
The details of meetings attended by each Committee Member during the financial year 2012-13 are as under:
Members
Status
No. of Meetings Attended
Alexey Buyanov
Ajay Khanna
Alok Tandon
Suman Sehgal
Chairman
Member
Member
Member
3
5
5
5
25
Nomination and Remuneration Committee
The Nomination and Remuneration Committee of Directors was recently re-constituted on May 28, 2013 and it presently comprises
of Mr. Ron Sommer, Mr. Vsevolod Rozanov, Mr. Ajay Khanna and Mr. Alexander Gorbunov. All of them are Non- Executive Directors.
Mr. Ron Sommer is the Chairman, Mr. Vlad Pozdyshev, Chief Human Resource Officer is the designated Secretary and Mr. Vishal Kohli,
Company Secretary is the Coordinator of the Committee.
Key Responsibilities of Nomination & Remuneration Committee
➢
To shortlist and select nominees on the Board and to
recommend their names to the Board of Directors for
appointment, re-appointment as Non Executive
Independent Directors.
➢
To approve the selection, appointment(s), KPIs,
performance, remuneration, promotion, resignation(s), and
termination(s) of personnel for the position of CXOs
and Circle COOs.
➢
To shortlist and select candidates for the position
of CEO and to recommend their names to Board of
Directors for appointment as CEO along with proposed
remuneration.
➢
To review the overall Remuneration structure/
Remuneration policy including Bonus, incentives, PLI
(Performance Linked Incentive) etc. framed for all
employees of the Company.
Committee Meetings and Attendance
During the financial year 2012-13 the said Committee met 5 times i.e. on:
I.
April 20, 2012
IV.
December 11, 2012
II.
September 3, 2012
V.
March 1, 2013
III.
November 7, 2012
The details of meetings attended by each Committee Member are as under:
Members
Ron Sommer
Ajay Khanna
Mikhail Shamolin
Chairman
Member
Member (upto 13.07.2012)
5
5
-
Feliks Evtushenkov
Alexander Gorbunov
Member(upto 13.07.2012)
Member(w.e.f. 13.07.2012)
1
3
Status
Members
Status
Business Excellence Committee
In order to make optimum use of experience and talent of Independent Directors, Business Excellence Committee was constituted on
July 13, 2011 and re-constituted w.e.f. June 1, 2013. Presently, the Committee members are Mr. Dmitry Shukov, Mr. Vikram Kaushik, and
Mr. Bharat V Patel. Mr. Vikram Kaushik and Mr. Bharat V Patel are Independent Directors and Mr. Dmitry Shukov is the Chairman of the
Committee. Mr. Leonid Musatov, Chief Commerce Officer is the Convener of the Committee and Mr. Vishal Kohli, Company Secretary
is the Co-ordinator of the Committee.
The Committee is responsible for review, formulation and implementation of plans, policies and Strategy for Sales and Marketing, CRM
and Product Innovation, and is also responsible for the review of the performance of the sales and marketing, strategy and business
excellence team. The functions of the Committee also involves providing suggestions, guidance, directions & advices to the management
on various matters related to the Sales, Marketing, Strategy and Business Excellence activities of the Company.
Meeting and Attendance Details
During the financial year 2012-13 the Committee met 12 times i.e. on:
I.
April 25, 2012
VII.
October 18, 2012
II.
May 22, 2012
VIII.
November 7, 2012
III.
June 29, 2012
IX.
December 11, 2012
IV.
July 13, 2012
X.
January 17, 2013
V.
August 23, 2012
XI.
February 19, 2013
VI.
September 3, 2012
XII.
March 1, 2013
26
The details of meetings attended by each Committee Member during the financial year 2012-13 are as under:
Members
Mr. Vikram Kaushik
Mr. Bharat V. Patel
Chairman
Member
Member
12
10
9
Status
Corporate Conduct & Ethics Committee
In order to develop an effective corporate conduct system and ethics standards which correspond with internationally recognized
standards, the Company had constituted a Corporate Conduct & Ethics Committee on October 18, 2011. The Committee was
re-constituted w.e.f June 1, 2013 and thereafter, it comprises of Mr. Suman Sehgal, Mr. Dmitry Shukov and Mr. Ajay Khanna as its
members. Mr. Suman Sehgal is the Chairman of the Committee. Mr. Vishal Kohli, Company Secretary is the Secretary of the Committee.
The Committee is responsible for formulation of proposal and recommendations to Board of Directors for developing and implementing
effective corporate conduct and ethics, Monitoring and supervising of functioning of executive level Disciplinary Committees as well
as disciplinary proceedings conducted by the said committees, Reviewing Code of Conduct for Board members and Senior Management
Personnel and Code of Conduct for employees and Reviewing policies, documents, processes, procedures, strategies, guidelines
relating to corporate conduct, corporate culture, ethics and disciplines. The main function of the Committee is to review the periodical
reports of the respective Executive Level Disciplinary Committee and to provide directions and suggestions thereon.
Meeting and Attendance Details
During the financial year 2012-13, the Corporate Conduct & Ethics Committee met two (2) times. The details of meetings attended by
each Committee Member are as under:
Members
Status
Mr. Suman Sehgal
Mr. Ajay Khanna
Chairman
Member
Member
2
2
2
Share Transfer and Investor Grievance Committee
The Share Transfer & Investor Grievance Committee of the Directors deals with matters relating to transfer & transmission of shares,
issue of duplicate share certificates, shares dematerialized & rematerialized, redressal of investor’s grievance and all other matters
related to the shares, share capital and investors complaints. The Board has also assigned the committee special task to examine
demands of minority shareholders and all other related aspects including holding of meetings with the minority shareholders. The
Committee meetings are held on regular intervals to consider the matter pertaining to share transfer and investors grievances.
After reconstitution of the Committee w.e.f. June 1, 2013, Mr. Bharat Patel, Mr. Anton Abugov, Mr. Madhukar, Mr. Alok Tandon and
Mr. Vikram Kaushik are its members. Mr. Igor Garshin, Head of Chairman’s Office, Sistema JSFC is Ex-Officio member and Mr. Bharat
Patel is the Chairman of the Committee. Mr. Vishal Kohli, Company Secretary is the Secretary of the Committee
III. REMUNERATION TO DIRECTORS
The Company is not making any payment to the Non Executive Directors as remuneration except sitting fee i.e Rs. 20,000/- for each
meeting of Board and Committee attended.
The total annual remuneration of Mr. Vsevolod Rozanov, erstwhile Whole Time Director designated as President & CEO for the
financial year 2012-13 was Rs.10.89 Cr. as approved by the shareholders at the 16th Annual General Meeting held on 05.09.2011
pursuant to notification no. GSR 70(E) dated 08.02.2011 issued by Ministry of Corporate Affairs, Government of India.
IV.
DISCLOSURES
A.
Compliance with Laws
The Company is complying with all applicable laws with due diligence. No penalties or strictures were imposed on the Company
by Ministry of Corporate Affairs or any statutory authority on any matter related to Corporate laws. The Audit Committee
periodically reviews compliance reports of applicable laws as prepared by the management as well as steps taken by the
Company to rectify instances of non-compliance, if any.
B.
Related Party Transactions
The Company is upholding the unique system of getting prior approval of audit committee before executing any related party
transaction. It is an advance reporting of disclosure of related party transactions wherein all the material details of each
proposed related party transactions are placed before the Audit Committee with detailed justification for its prior approval.
Further, it is also ensured that the transaction with related parties are on arms length basis with due consideration of various
business exigencies such as synergy in operation and industry specialization, etc. The established processes applicable in the
Company for all kind of procurements are also equally applied to related party transactions. This practice of securing prior
approval for related party transactions is far ahead of the standard practices of disclosure of related party transactions to the
Board/Committee generally prevalent in the corporate houses.
27
C.
Code of Conduct
In compliance with the Code of Conduct for Board Members and Senior Management Personnel adopted by the Company, all the
Board Members and Senior Management Personnel have affirmed the compliance with the ‘Code of Conduct’ for the financial
year ended March 31, 2013 by furnishing a certificate to this effect. A declaration to this effect signed by Mr. Vsevolod Rozanov,
Whole Time Director and Chief Executive Officer of the Company forms part of this report as Annexure - A.
D.
Guidelines /Policy on Board of Directors and BoD /Committee Meetings
The Board of Directors of your Company has approved “Guidelines /Policy on Board of Directors and BoD /Committee Meetings”
in their meeting held on March 1, 2013. The Guidelines have been developed with view to have pre-defined and set standards for the
affairs of the Board of Directors as well as specified procedures to call & conduct the Board and Committee meetings in efficient
manner. The Guidelines also assists in conducting the Board and Committee meetings properly and within a standard time frame as
per the regulatory and business requirements. The areas covered by the Guidelines are highlighted below:
●
Procedure for Constitution, Status, Composition, functions of Board of Directors and Board Committees.
●
General Rights, Goals, Objectives and the Powers of the Board of Directors.
●
General Functions of Chairman & Corporate Secretary.
●
Duties, Responsibilities and Obligations of Board of Directors.
●
Procedure of interaction with functions, role of different functions/offices.
●
Board Procedures & timelines for various steps involved and formats for material for conduct of the meeting of the Board
of Directors and BoD Committees.
●
Board’s terms of reference, providing mechanism for approval of different matters at Board Meetings.
D.
Other Disclosures
■
There is no Inter-se relationship between Directors of the Company.
■
During the year there are no material financial and commercial transactions of senior management, where they may have
had personal interest, and which had potential conflict with the interest of the Company at large.
■
The Independent Directors have submitted a declaration confirming that they meet the criteria of independence and do not
have any material pecuniary relationship or transaction with the Company, its Promoters, Directors, Senior Management,
Holding Company or Subsidiary Company.
V.
ENTERPRISE RISK MANAGEMENT (ERM)
Risk management has remained a focus area of the top management during the uncertain time of licensing issue. Mitigating the business
disruption risk the Company (SSTL) won the spectrum in those 8 service areas, which also carry the maximum business potential (In
past, out of 22, licenses for 21 services areas of the Company, were cancelled by Hon’ble Supreme Court of India in February 2012).
After auction the Company is able to serve 9 service areas (including Rajasthan) which cover 40% of country’s population, address over
60% of data business potential and safeguard 75% of the Company’s current revenues. The move is in line with data centric – voice
enabled strategy of the Company.
During the financial year 2012-13, Risk Management significantly assisted in strengthening controls, ensuring increased level of regulatory
compliances and assisted in analysis of other business risks. This resulted in strengthening the risk and control framework and hence
reducing the overall risk impact. To further strengthen the risk management practice at SSTL, a 3 years’ risk management strategy with
focus on risk mitigation and reduction of risk impact has been approved by the CEO and other senior management personnel.
Currently, the risk profile is being realigned with the changed focus of all the business units i.e. to reach at break-even level in all the
existing 9 operating circles by Q4 2013. The management is working together for optimizing the value of money spent and maximizing
revenues through various initiatives.
Risk Management Committee is operational and 2 meetings were conducted during the financial year 2012-13 to discuss the progress
of risk management and risk profile. Additionally, Risk management progress and strategy is deliberated at Management Committee
meetings (chaired by CEO) 4 times during the year. During the FY 2012-13, the Board of Directors of the Company was also updated
twice on the progress of the risk management implementation and the risk profile of the company.
In 2013-14, as part of aligning its risk management practice with global practices, it is also planned to move Risk management towards
automation; primarily to improve the accuracy and efficiency of data analysis and predictive modeling in order to identify risks more
precisely before its occurrence. An established Risk management tool has been procured and is in implementation phase, which is
expected to be in full operation by September 2013. In addition, certain other globally accepted risk management models i.e. ‘Risk
Balance scorecard’ and ‘Key Risk Indicators’ are being developed and automated through in-house IT development Team. Automation
of these models will help management in regular monitoring of the organizational health and effectiveness of various existing controls.
These initiatives are targeted to be rolled out as part of risk management strategy 2013-14 approved by CEO and other senior
management members.
VI.
TRAINING OF BOARD MEMBERS
The Company believes that the Board must be continuously empowered with the knowledge of the latest developments in the
Company’s business and the external environment affecting the industry as a whole. To this end, the Directors were given reports/
information/ presentations on the global business environment, as well as all business areas of the Company including business
28
strategy, risks and opportunities. Directors are also updated on changes / developments in the domestic / global corporate and industry
scenario including those pertaining to statutes / legislation and economic environment. Additionally, all new directors inducted into the
Board from time to time are given an orientation to familiarize them with the Operations, Financial Performance, Organizational
structure, Board Procedures, Code of Conduct and Process for Board’s Self Appraisal.
VII. CORPORATE GOVERNANCE VOLUNTARY GUIDELINES 2009
The Ministry of Corporate Affairs (MCA) released the Voluntary Guidelines on Corporate Governance in December 2009 and the
suggestions recommended in these Guidelines have been drawn from best practices. Although implementation of these guidelines is
voluntary in nature even in listed companies, your Company is always proactive in corporate disclosures and statutory compliances; it
is already compliant with some of the sections of these Guidelines. Regular efforts are made by your Company to comply with the
suggestions recommended in the guidelines to the extent possible.
Some of the instances, where the Company is partly or fully compliant with the Voluntary Guidelines on Corporate Governance are
Board Committees viz. Audit Committee, Remuneration & Nomination Committee, Independent Directors related requirements,
Separation of office of Chairman and Chief Executive Officer, Self Evaluation of Performance of Board of Directors, and Appointment
of Internal Auditors, etc. The Company is making its sincere efforts to adhere to the requirements as set out in the Corporate
Governance Voluntary Guidelines 2009 in its quest for maintaining highest standards and culture of Corporate Governance.
VIII. GREEN INITIATIVE IN CORPORATE GOVERNANCE (CIRCULARS NO. 17/2011 & 18/2011 ISSUED BY
MINISTRY OF CORPORATE AFAIRS)
Starting with this year, as per the circulars issued by the Ministry of Corporate Affairs in the year 2011 regarding “Green Initiative in
Corporate Governance”, your Company has sent emails and letters to all the shareholders holding shares in demat and physical form
respectively, to exercise their option of receiving various notices and documents, including Annual Report through electronic mode.
This welcome move of MCA will reduce paper consumption to a great extent and enhance corporate contribution to a greener and
safer environment. Support of all shareholders of the Company is solicited for making contribution to this initiative and thereby
reducing paper usage by opting to receive various notices and documents through electronic mode.
IX.
CEO AND CFO CERTIFICATION
The CEO and CFO Certificate on the Annual Accounts and Internal Controls of the Company for the financial year ended March 31,
2013 is appended as Annexure-B and forms an integral part of this Report. The requirement of obtaining and publishing this certificate
is applicable only for listed companies, however in its quest for establishing fair and transparent best practices the Company has
voluntarily taken this initiative.
X. GENERAL SHAREHOLDER INFORMATION
A.
Means of Communication
Good Governance can only be achieved by timely disclosure of consistent, comparable, relevant and reliable information on corporate
financial performance. The Company has established systems and procedures to disseminate relevant information to all its stakeholders.
The primary source of information regarding the operations of the Company is the corporate website: www.mtsindia.in. All official
press releases are posted on the Company’s website. An analysis of the various means of dissemination of information in the year
under review is produced hereunder:
Quarterly Financial Results
Highlights of its quarterly financial results are published in all major news papers for the
knowledge and information of the shareholders. The press releases are also published on the
corporate website: www.mtsindia.in.
Press Releases
All press releases concerning the business operations of the Company and other media news
are also displayed on the corporate website: www.mtsindia.in.
Corporate Website
The corporate website www.mtsindia.in provides comprehensive information about the
Company. Apart from the press release, the following information are also uploaded on the
website of the Company and updated from time to time:
1.
2.
3.
4.
5.
6.
Annual Report
Details of Shareholders
Shareholding Pattern
Profiles of Directors
Annual Reports
Corporate Governance Report
Code of Conduct for Board and
Senior Management Personnel
7.
8.
9.
10.
11.
Board’s Self Evaluation Process
Memorandum & Articles of Association
Charter of Audit Committee
Notices of General Meetings
Minutes of General Meetings
Annual Reports are circulated to all the members and others like Auditors, Debenture Holders,
etc. The Annual Report is also available on the website of the Company.
29
B.
Details of last 3 General Meetings
(i) Annual General Meetings
Year
Date & Time
Venue
Special Resolution Passed
2009-10
30.09.2010
12:00 Noon
Hotel Fortune Select Metropolitan,
Near Nehru Sahkar Bhawan, C-Scheme
Bais Godam Circle, Jaipur
➢
➢
➢
➢
2010-11
05.09.2011
11:00 A.M.
Hotel Marriott, Ashram Marg,
Near Jawahar Circle, Jaipur.
➢
➢
➢
➢
➢
2011-12
28.09.2012
10:00 A.M.
Bais Godam Circle, Jaipur
➢
Alteration in the Articles of Association of the Company
to increase the number of Directors upto 15.
Alteration in the main object clause of the
Memorandum of Association.
Preferential Allotment of upto 584060000 equity shares
to the Federal Agency for State Property Management
of the Russian Federation (“Rosimushchestvo”).
Offer & Issue of upto 198667200 equity shares on
right basis.
Alteration in Main Object Clause of Memorandum of
Association of the Company.
Alteration in Articles of Association of the Company.
Increase in payment of Sitting Fee payable to
Independent Directors for attending the Board and
Committee Meetings.
Appointment of Relative of Director on an office/place
of profit.
Restoration of terms and condition of remuneration
of Mr. Vsevolod Rozanov, Whole Time Director and
approval for payment of LTI.
No Special Resolution was passed.
(ii) Extraordinary General Meetings
Year
2008-09
Date & Time
22.01.2009
10:30 A.M.
Venue
Special Resolution Passed
th
Hotel Pink Pearl 10 Mile, Mahapura,
Ajmer Road, Jaipur
➢
➢
2009-10
10.12.2009
11:00 A.M.
Bais Godam Circle, Jaipur.
➢
➢
2011-12
30.03.2012
11:00 A.M.
Hotel Marriott, Ashram Marg,
Near Jawahar Circle, Jaipur.
➢
➢
C.
Change in the name of the Company from Shyam
Telelink Limited to Sistema Shyam TeleServices Limited.
Appointment of Mr. Vsevolod Rozanov as Whole Time
Director of the Company and fixation of his
remuneration.
Offer, issue and allotment on preferential allotment
basis upto 22,85,94,900 equity shares to existing
promoter companies.
Offer, issue and allotment on preferential allotment
basis upto 66,27,45,100 to Federal Agency for State
Property Management (Rosimushchestvo) of Russian
Federation.
Alteration in Articles of Association of the Company to
incorporate the power to issue Preference Shares.
Authorisation to the Board to issue upto
6,000,000,000 preference shares.
Details of ensuing Annual General Meeting
Day: Monday; Date: September 23, 2013; Time: 10:00 A.M.
Venue: Hotel Fortune Select Metropolitan, Near Nehru Sahkar Bhawan, C-Scheme, Bais Godam Circle, Jaipur-302001.
D.
Financial Calendar
Accounting Year: 1st April to 31st March.
E.
Share Capital
During the year ended March 31, 2013, the Board of Directors of your Company has allotted 6,000,000 0.01% Non Convertible
Non Cumulative Fully Redeemable Preference Shares of Rs. 10/- each at a price of Rs.10,000/- each (at a premium of
Rs.9,990/-) to INSITEL Services Private Limited. The allotment of Preference Shares was done by the Directors at the meetings
of Share Allotment Committee held from time to time, as duly authorised in this behalf.
30
F.
SHAREHOLDING PATTERN AS AT MARCH 31, 2013
EQUITY SHARE CAPITAL
Shareholding
Indian vs Foreign Shareholding
PREFERENCE SHARE CAPITAL
G.
Distribution of Shareholding as on 31.03.2013
A. Equity Share Capital
Category (Shares)
% of Total Shareholders
No. of Shares
1 - 100
No. of Shareholders
1316
7.29
57076
% of Total Shares
0.00
101 - 500
3788
20.98
1199126
0.04
501 - 1000
6067
33.60
4725470
0.15
1001 - 5000
5236
28.99
11312990
0.35
5001 - 10000
797
4.41
5648541
0.18
10001 - 20000
408
2.26
5551982
0.17
20001 - 30000
145
0.80
3447138
0.11
30001 - 40000
86
0.48
2960131
0.09
40001 - 50000
32
0.18
1427337
0.04
50001 - 100000
94
0.52
6587209
0.21
100001 - 500000
65
0.36
13452061
0.42
500001 & Above
TOTAL
25
0.14
3137550939
98.24
18059
100.00
3193920000
100.00
% of Total Shareholders
No. of Shares
% of Total Shares
B. Preference Share Capital
Category (Shares)
No. of Shareholders
1 - 6000000
1
100
6,000,000
100
TOTAL
1
100
6,000,000
100
31
H.
Categories of Shareholders as on 31.03.2013
A. Equity Share Capital
(A)
(B)
(C)
Category
PROMOTERS
Indian Promoters
Foreign Promoters
Federal Agency of State Property Management of Russian
Federation (Rosimushchestvo)
NON-PROMOTER
FIIs/NRIs/ Foreign Banks/OCBs
FIs/Mutual Funds/UTI/Banks/Body Corporates
Others
TOTAL
No. of Shares
%
766,575,760
1,810,289,400
24.00
56.68
547,312,918
17.14
4,327,557
10,164,962
55,249,403
3,193,920,000
0.14
0.32
1.73
100.00
B. Preference Share Capital
(A)
I.
Category
Body Corporate (Indian)
INSITEL Services Private Limited
TOTAL
No. of Shares
6,000,000
6,000,000
%
100.00
100.00
Physical Holding vs. Holding in Dematerialized Form:
As on March 31, 2013, 99.96% of Shares are held in dematerialized form and the rest 0.04% in physical form. The Break-up of
Physical vs. Demat shares is as listed below:
Category
PHYSICAL
DEMAT:
NSDL
CDSL
Total
J.
No. of
Shareholders
1,155
12,656
4,248
18,059
% of total
Shareholders
6.40
No. of
Shares Held
1,199,164
% of
Shareholding
0.04
70.08
23.52
100.00
3,175,963,180
16,757,656
3,193,920,000
99.44
0.52
100.00
International Security Identification Number (ISIN)
Security
ISIN
EQUITY SHARES OF RS. 10/- EACH
K.
ADDRESS FOR CORRESPONDENCE FOR SHARE RELATED MATTERS:Karvy Computershare Private Limited (Registrar & Transfer Agent)
Delhi Office:
305, New Delhi House,
27 Barakhamba Road,
Connaught Place, New Delhi-110001
Tel No. : 011-43681700
Fax No. : 011-46381710
E-mail ID: [email protected]
L.
32
INE159D01010
ADDRESS FOR INVESTORS CORRESPONDENCE:
Company Secretary and Compliance Officer
Corporate Office:
MTS India Towers, 334,
Udyog Vihar, Phase –IV,
Gurgaon -122001, Haryana
Email : [email protected]
Ph : 0124-4812500
Fax No. : 0124-4812825
Hyderabad Office:
Plot No. 17-24, Vittal Rao Nagar,
Madhapur, Hyderabad-500081
Tel No. : 040- 44655000
Fax No. : 040-23420814
Toll Free No. : 1-800-3454001
Contact person : Mr. M. Murali Krishna
E-mail ID : [email protected]
Registered Office :
MTS Tower, 3, Amrapali Circle,
Vaishali Nagar,
Jaipur-302021, Rajasthan
Email : [email protected]
Ph : 0141-5100510
Fax No. : 0141-5100310
ANNEXURE - A
ANNUAL DECLARATION BY CEO ON ADHERENCE TO THE
SSTL’S CODE OF CONDUCT
I, Dmitry Shukov, Chief Executive Officer of Sistema Shyam TeleServices Limited (“the Company”) hereby confirm that the Company
has adopted a comprehensive Code of Conduct (“Code”) for its Board members and Senior Management Personnel and the Code is
available on the Company’s website.
I hereby confirm that all the Board Members and the Senior Management Personnel of the Company have affirmed compliance with the
Code of Conduct of the Company for the financial year ended March 31, 2013 by submitting Annual Compliance Certificate as required
in terms of the Code of Conduct adopted by the Company.
Sd/Dmitry Shukov
Chief Executive Officer
Place: Gurgaon
Date: July 19, 2013
ANNEXURE - B
CEO & CFO Certification
We, Dmitry Shukov, Chief Executive Officer and Sergey Savchenko, Chief Financial Officer of Sistema Shyam TeleServices Limited
hereby certify that:
1.
We have reviewed the Financial Statements and Cash Flow Statement for the year ended March 31, 2013 and to the best
of our knowledge and belief :
a)
these statements do not contain any materially untrue statement or omit any material fact or contain statements
that might be misleading;
b)
these statements together present a true and fair view of the Company’s affairs and are in compliance with existing
Accounting Standards, applicable laws and regulations.
2.
To the best of our knowledge and belief, no transactions entered into by the Company during the year ended
March 31, 2013 are fraudulent, illegal or violative of the Company’s code of conduct.
3.
We accept responsibility for establishing and maintaining internal controls for financial reporting and we have evaluated
the effectiveness of internal control systems of the Company pertaining to financial reporting.
4.
There has not been any significant change in internal control over financial reporting during the year under reference.
5.
There has not been any significant change in accounting policies during the year requiring disclosure in the notes to the
financial statements; and
6.
We are not aware of any instance during the year of significant fraud with involvement therein of the management or any
employee having a significant role in the Company’s internal control system over financial reporting.
Sd/Dmitry Shukov
Chief Executive Officer
Sd/Sergey Savchenko
Chief Financial Officer
Place : Gurgaon
33
ANNEXURE TO DIRECTORS’ REPORT
INFORMATION AS PER SECTION 217(2A) OF THE COMPANIES ACT, 1956 READ WITH THE COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975, AS AMENDED AND FORMING
PART OF THE DIRECTORS REPORT OF SISTEMA SHYAM TELESERVICES LIMITED FOR THE FINANCIAL YEAR ENDED MARCH 31, 2013
S.
No.
Name
Age
(in
years)
Designation
Annual Gross
Earnings (Rs.)
Qualification
Experience
Date of
Commencement
of Employment
Previous
Employment
PART A : Particular of Employeees who are in employment for whole year and in receipt of Annual Remuneration of Rs. 60.00 lacs or more
1
Mr.Vsevolod Rozanov
41
PRESIDENT AND CEO
Degree in Economics
18
1-Oct-08
MTS Russia
2
Mr.T Narasimhan
58
Deputy Chief Executive Officer
125,270,006
45,666,471
PGDMM
34
1-Jan-08
Vihan Networks Ltd
3
Mr. Kozlov Valery
58
Chief Real Estate & Admin Officer
40,247,624
MBA, Moscow Electrotechnical
Institute of Communication
33
1-Jul-08
MTS, Comstar
4
Mr. Keshhav Tiwary
47
Chief Operating Officer
11,734,158
B.Sc./ M.B.A.
18
10-Jul-08
Reliance Communication Ltd
5
Mr. Nikhil Shrivastava
38
Head, Regional Network Department,
South Region
10,380,451
B.E. ( Elect. & Tel Comm)
18
22-Aug-08
NOKIA SIEMENS NETWORKS
6
Ms. Elena Peretrukhina
37
Head, KPI, MIS and Reporting Division
11,109,609
B.Sc
12
10-Dec-08
OJSC ‘MTS’ IN
7
Mr. Sergey Savchenko
55
Chief Finance Officer
90,881,413
PhD in Economics, MBA
30
5-Sep-08
Financial Group Aton””
8
Mr. Pankaj Sharma
46
West Region
10,125,572
B.E/ME
23
10-Nov-08
RELIANCE COMMUNICATION
9
Mr. Igor Kondaratskov
51
Advisor
16,778,661
B.E
28
10-Dec-08
LUKOM Agency
10
Mr. Vladislav Pozdyshev
43
Chief OE & CE Officer
41,948,405
Degree in Economics/MBA
18
20-Jan-09
MTS RUSSIA
11
Mr. Leonid Musatov
40
Chief Commerce Officer
58,844,493
Degree in Ecomonics &
Marketing/BMM
18
12-Jan-09
RVH. UK
12
Mr. Evgeny Nikitin
31
Project Manager
6,905,435
B.A.
6
4-Jan-09
Mobile Telesystem OSSC Russia RU
13
Mr.Amit Saneja
39
Program Director, Capability Management,
Sales Ops Dept
6,153,014
PGDBA
15
28-Jan-09
ICICI Prudentail IN
14
Mr. Atul Joshi
49
Chief Operating Officer, North & East Region
25,880,253
MA, MBA
23
9-Feb-09
SUBHIKSHA
15
Mr. S Suresh Kumar
44
11,261,849
16
Mr.Avijit Mukherjee
45
Head, Regional Network Department
(East Region)
17
Mr. K V Ramachandra
51
Director - Sales
18
Mr.Vladimir Antimonov
34
19
Mr. Ashwani Kumar Khillan
20
MBA
21
9-Feb-09
Bharti Airtel Ltd
B.TECH
23
20-Feb-09
Dishnet Wireless Ltd.
11,288,381
B.Com, MASTERS OF
MANAGEMENT STUDIES
28
6-Mar-09
SUBHIKSHA
Head, Project Office
31,021,571
Master in Finance
11
21-Apr-09
FILIKIOVLYA LLE
44
Chief Technology Officer
14,414,876
B.E, MBA
23
19-May-09
HUWAIE TECHOLOGIES
Mr. Maxim Shafeev
40
Head, Financial Planning & Controlling
Department
20,709,597
MBA
16
1-Jun-09
MTS Russia
21
Mr.Arkady Kochetkov
52
Chief Legal & Corporate Governance Officer
28,347,285
L.L.B.
26
20-May-09
Reebok International Ltd
22
Mr. Rajeev Batra
45
Chief Information Officer
20,231,723
BE-Electronics/ B.Sc./ P.G.D.C.A.
21
1-Jul-09
RSB CONSULTING
23
Mr. Srinivasaraghavan
Seshadri
43
Chief Operating Officer, South & West Region
29,822,402
B.Tech, MBA
16
24-Sep-09
MOTOROLA INC
24
Mr.Akshay Lamba
34
Head,Enterprise Architecture & Business
Enablement Dept
PGDBA
14
23-Sep-09
AL-FUTTAIM TECHNOLOGIES
DUBAI UA
25
Mr. Arvind Kumar
52
11,431,266
B.Com./ P.G.D.M.S.M
27
27-Aug-10
RELIANCE COMMUNICATION LTD.
26
Mr. Ashoo Sethi
43
7,694,407
B.Sc./ Diploma in Management/ P.G.
Diploma in Busin
21
21-Sep-10
VODAFONE
27
Mr. Viraj Chouhan
39
Head, Corporate Communication
B.Sc./ P.G.Diploma in Business
Administration
15
22-Sep-10
COCA COLA INDIA
28
Mr. NRKS Chakravarthy
39
Head, Business Excellence Department
29
Mr. Shankar Bali
47
30
Mr.Amitesh Rao
40
31
Mr. Yudhbir Singh
50
34
6,024,540
6,154,853
10,328,084
MBA
19
12-Nov-10
UNINOR
11,448,678
6,421,840
M.B.A.
22
5-Jan-11
Vodaphone (Srilanka)
Head, Brand & Media Department
8,626,542
M.B.A.
17
17-Jan-11
REDIFFUSION Y &R
North Region
7,487,837
B.Sc
29
1-Apr-00
SHYAM COMMUNICATION LTD.
S.
No.
Name
Age
(in
years)
Designation
Annual Gross
Earnings (Rs.)
Qualification
Experience
Date of
Commencement
of Employment
Previous
Employment
32
Mr. S Balagopal
54
Head, Supply Chain Management Department
9,288,655
PGDBA
30
9-Jan-09
INDO RAMA SYNTHETICS LTT
33
Mr. Bijender Singh Yadav
42
Head, Project Office and Network
Planning Department
8,319,504
PGDEE
21
12-May-09
ERICSSON INDIA PVT LTD
34
Mr. Tapan Tripathi
35
Head,Voice Marketing
9,019,072
M.A.
17
12-Aug-09
VODAFONE ESSAR DIGILINK
LIMITED
35
Mr. Sandeep Yadav
42
Head, Data Business Line
BHM/DHM
20
22-Sep-09
Idea Cellular Ltd.
36
Mr. Kamal Kandoi
32
Head,Accounting & Tax Department
9,370,171
C.A.
13
9-Nov-09
FAIR ISAAC
37
Mr. Ajay Kapila
50
Head, MTS Retail Business Line
8,620,170
MBA
27
15-Mar-10
Samastha Business Dev Solution
38
Mr. Manoj Shrivastava
45
Head, Integrated Technology & Governance
Department
7,693,026
PGDIT
24
30-Sep-10
RELIANCE COMMUNICATIONS
39
Ms. Neera Sharma
40
Head, Legal Department
7,509,547
MBA
16
16-Jul-08
Dishnet Wireless Ltd
40
Mr. Tarun Katyal
44
Head, Talent Acquisition & HR Operations
Department
6,594,319
MBA
20
2-Feb-10
ADITYA BIRLA RETAIL LTD.
41
Ms. Elena Sidorina
44
Head, CEO’s Office
14,434,288
MBA
20
27-Jan-09
Mobile TeleSistems
42
Mr. Sandeep Marwaha
45
7,349,260
MBA
21
18-Jul-11
VODAFONE ESSAR SOUTH LTD
43
Mr.Ashish Dindayal Bhatia
42
6,251,482
MBA
18
1-Aug-11
TATA TELE SERVICES LTD
44
Mr. Birinder Singh Jolly
45
Head, Regional Finance Department
(N&E Region)
6,125,512
MBA
24
1-Aug-11
SELF EMPLOYED
45
Mr. Ivan Komar
29
Senior Lead, Planning & Controlling
Division
7,592,166
B.Sc
8
4-Aug-11
ISFC SISTEMA MOSCOW RU
46
Mr. Harpreet Singh Syali
46
Head, Enterprise Business Line
8,579,376
MBA
22
16-Aug-11
BHARTI AIRTEL LTD
47
Mr.Ranjan Banerjee
43
Head, Strategy Function
8,283,425
PGDMM
19
21-Dec-11
TATA TELESERVICES LTD
48
Mr. Sunil K
43
Head - Smart Phone
12,010,369
M.B.A.
17
6-Apr-10
ETISALAT DB INDIA
49
Mr. Mk Sachdeva
51
B.Sc.
22
26-May-10
ETISALAT DB INDIA
11,385,092
9,655,780
PART B : Particular of Employeees who are in employment for part of the year and received monthly Remuneration of Rs. 5.00 lacs or more
1
Mr. Dmitry Anatolievich
Ronin
45
Head, Data Business Line
15,325,259
MBA
18
14-Jul-11
COMSTAR-UTS MOSCOW RU
2
Mr. Sergey Korobov
36
Head, New Product Development Department
23,650,474
Degree in Mobile Communication
& Social Science
12
13-Jan-09
MTS RUSSIA
3
Mr. Sudesh Pandit
50
11,716,041
C.A.
16
20-Oct-07
RELIANCE TELECOM LTD
4
Mr. Atul Sharma
44
Head,Talent Management Department
6,892,423
MSW
16
11-Dec-08
RELIANCE COMMUNICATION
LIMITED
5
Mr.Mohammad Mustafa Ali
39
Head, Revenue Assurance & CC Department
6,528,011
B.COM
17
6-May-10
COLT Technology Gurgaon IN
6
Mr. Aravind Santhanam
47
5,147,997
PGDBA
23
14-Jun-12
INNOVASPHERE INFOTECH
7
Mr. Dmitry Kupyshev
37
Senior Specialist
4,976,576
LLB
5
1-Jul-08
8
Mr.Ateev Chadda
37
Head, Business Development Department
6,090,462
MBA
13
1-Aug-12
RENAISSANCE CAPITAL
9
Mr. Maxim Gorokhov
47
Deputy Chief Executive Officer
B.TECH
25
17-Sep-12
D.S Holdings Moscow RU
17,112,155
Note:
1. All appointments are/were contractual in accordance with terms and conditions as per Company rules.
2. None of the above employees is a relative of any Director of the Company.
35
I N D E P E N D E N T A U D I TO R S ’ R E P O RT
To
audit to obtain reasonable assurance about whether
the
The Members of SISTEMA SHYAM TELESERVICES
financial
statements
are
free
from
material
misstatement.
LIMITED
An audit involves performing procedures to obtain audit
Report on the Financial Statements
We have audited the accompanying financial statements
of Sistema Shyam TeleServices Limited (“the Company”),
which comprise the Balance Sheet as at March 31, 2013,
and the Statement of Profit and Loss and Cash Flow
Statement for the year then ended, and a summary of
significant accounting policies and other explanatory
information.
evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to
fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the Company’s
preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate
in the circumstances. An audit also includes evaluating
Management’s Responsibility for the Financial Statements
the appropriateness of accounting policies used and
the reasonableness of the accounting estimates made by
Management is responsible for the preparation of these
financial statements that give a true and fair view of the
financial position, financial performance and cash flows of
the Company in accordance with accounting principles
management, as well as evaluating the overall presentation
of the financial statements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
generally accepted in India, including the Accounting
Standards referred to in sub-section (3C) of section 211
Opinion
of the Companies Act, 1956 (“the Act”). This responsibility
includes the design, implementation and maintenance of
internal control relevant to the preparation and presentation
of the financial statements that give a true and fair view
and are free from material misstatement, whether due to
fraud or error.
In our opinion and to the best of our information and
according to the explanations given to us, the financial
statements give the information required by the Act in
the manner so required and give a true and fair view in
conformity with the accounting principles generally accepted
in India:
Auditor’s Responsibility
Our responsibility is to express an opinion on these
financial statements based on our audit. We conducted
our audit in accordance with the Standards on
(a) in the case of the Balance Sheet, of the state of affairs
of the Company as at March 31, 2013;
(b) in the case of the Statement of Profit and Loss, of the
loss for the year ended on that date; and
Auditing issued by the Institute of Chartered Accountants
of India. Those Standards require that we comply
with ethical requirements and plan and perform the
36
(c) in the case of the Cash Flow Statement, of the cash
flows for the year ended on that date.
Emphasis of Matter
We draw attention to Note 33(d) to the financial statement
which describes the contingency with respect to the claims
made by Passive Infrastructure vendors of Rs. 5,220 million,
for premature termination of their contracts with the
Company. Our opinion is not qualified in respect of this
(b) In our opinion proper books of account as required by
law have been kept by the Company so far as appears
from our examination of those books;
(c) The Balance Sheet, Statement of Profit and Loss, and
Cash Flow Statement dealt with by this Report are
in agreement with the books of account;
matter.
(d) In our opinion, the Balance Sheet, Statement of Profit
Report on Other Legal and Regulatory Requirements
1.
As required by the Companies (Auditor’s Report)
Order, 2003 (“the Order”) issued by the Central
Government of India in terms of sub-section (4A) of
section 227 of the Act, we give in the Annexure a
statement on the matters specified in paragraphs 4 and
5 of the Order.
2.
As required by section 227(3) of the Act, we report
that:
(a) We have obtained all the information and explanations
which to the best of our knowledge and belief were
necessary for the purpose of our audit;
and Loss, and Cash Flow Statement comply with the
Accounting Standards referred to in subsection (3C)
of section 211 of the Companies Act, 1956;
(e) On the basis of written representations received from
the directors as on March 31, 2013, and taken on record
by the Board of Directors, none of the directors is
disqualified as on March 31, 2013, from being appointed
as a director in terms of clause (g) of sub-section (1)
of section 274 of the Companies Act, 1956.
For S. R. BATLIBOI & ASSOCIATES LLP
ICAI Firm Registration No. : 101049W
Chartered Accountants
Place : Narendra Nagar
Date : May 28, 2013
Sd/per Prashant Singhal
Partner
Membership No: 93283
37
ANNEXURE REFERRED TO IN PARAGRAPH 1 OF OUR REPORT OF EVEN DATE
Re: SISTEMA SHYAM TELESERVICES LIMITED
(i) (a)
The Company has maintained proper records showing
The activities of the Company do not involve purchase
full particulars, including quantitative details and
of inventory and the sale of goods. During the course
situation with respect to its fixed assets.
of our audit, we have not observed any major weakness
or continuing failure to correct any major weakness in
(b) The fixed assets are physically verified by the
the internal control system of the Company in respect
management according to a regular program designed
of these areas.
to cover all the items over a period of three years.
Pursuant to the above, a portion of fixed assets and
(v)
In our opinion, there are no contracts or arrangements
that need to be entered in the register maintained
capital work in progress has been physically verified
under Section 301 of the Companies Act, 1956.
by the management during the year, which in our opinion
Accordingly, the provisions of clause 4(v)(b) of the
is reasonable having regard to the size of the Company
Order are not applicable to the Company and hence
and nature of its assets. As informed with respect to
not commented upon.
the fixed assets, no material discrepancies were
noticed on such verification.
(vi)
The Company has not accepted any deposits from the
public.
(c)
There was no disposal of substantial part of fixed assets
during the year.
(ii)
(vii)
In our opinion, the Company has an internal audit
system commensurate with the size and nature of its
business.
The Company did not have any inventory as at and for
the year ended March 31, 2013. Therefore, the
(iii) (a)
(viii)
maintained by the Company pursuant to the rules made
not applicable to the Company.
by the Central Government for the maintenance of
cost records under section 209(1) (d) of the Companies
According to the information and explanations given
Act, 1956 and are of the opinion that prima facie, the
to us, the Company has not granted any loans, secured
prescribed accounts and records have been made and
or unsecured to the companies, firms or other parties
maintained. We have not, however, made a detailed
covered in the register maintained under section 301
examination of records with a view to determine
of the Act. Accordingly, paragraph 4 (iii) (a) to 4 (iii) (d)
whether they are accurate or complete.
of the Order are not applicable.
(ix) (a)
(b) According to the information and explanations given
to us, the Company has not taken any loans, secured
or unsecured, from companies, firms or other parties
covered in the register maintained under section 301
of the Act. Accordingly, the provisions of clause 4 (iii)
(e) to (g) of the Order are not applicable to the
Company and hence not commented upon.
(iv)
38
We have broadly reviewed the books of accounts
provisions of clause 4(ii) (a) to (c) of the Order are
The Company is generally regular in depositing with
appropriate authorities undisputed statutory dues
including provident fund, employees’ state insurance,
income-tax, service tax, custom duty, cess and other
material statutory dues applicable to it. The provisions
relating to excise duty and investor education and
protection fund are not applicable to the Company.
(b) According to the information and explanations given
In our opinion and according to the information and
to us, no undisputed dues payable in respect of
explanations given to us, there is an adequate internal
provident fund, employees’ state insurance, income-
control system commensurate with the size of the
tax, service tax, custom duty, cess and other undisputed
Company and the nature of its business, for the
statutory dues were outstanding , at the year end, for
purchase of fixed assets and for rendering of services.
a period of more than six months from the date they
became payable. The provisions relating to excise duty
applicable to the Company.
purpose for which the loans were obtained.
to us and on overall examination of the balance sheet
tax, service tax, customs duty and cess which have not
of the Company, we report that no funds raised on
been deposited on account of any dispute. The
short term basis have been used for long term
provisions relating to excise duty are not applicable to
investment.
(xviii)
During the year, the Company has not made any
The Company’s accumulated losses at the end of the financial
preferential allotment of shares to parties or
year are more than fifty percent of its net worth.The Company
companies covered in the register maintained under
has incurred cash losses during the year and immediately
section 301 of the Act.
preceding financial year.
(xii)
(xvii)
us, there are no dues of income tax, sales-tax, wealth
the Company.
(xi)
Based on the information and explanations given to us
by the management, term loans were applied for the
(c) According to the information and explanation given to
(x)
(xvi)
and investor education and protection fund are not
(xix)
In respect of debentures outstanding during the current
Based on our audit procedures and as per the
year, the Company has created charge on present and
information and explanations given by the management,
future movable assets of the Company, however, the
we are of the opinion that the Company has
charge in respect of assignment of all Unified Access Service
not defaulted in repayment of dues to a financial
License (‘UASL’) is not done due to cancellation of 21 out of
institution and banks. The Company did not have any
22 UASL. The Company has requested the Debenture
outstanding dues in respect of debenture holders
Trustee to waive the condition relating to assignment
during the year.
of UASL.
(xx)
to us and based on the documents and records
The Company has not raised any money by public issue
during the year.
produced to us, the Company has not granted loans
and advances on the basis of security by way of pledge
of shares, debentures and other securities.
(xxi)
According to the information and explanations
furnished by the management, which have been
relied upon by us, there were no frauds on or by
(xiii)
(xiv)
In our opinion, the Company is not a chit fund or a
the Company noticed or reported during the course
nidhi / mutual benefit fund / society. Therefore, the
of our audit except a few case of fraud by employees
provisions of clause 4(xiii) of the Order are not
and vendors estimated at Rs 1 million detected by
applicable to the Company.
the management for which steps were taken
In our opinion, the Company is not dealing in or trading
to strengthen controls.
in shares, securities, debentures and other investments.
Accordingly, the provisions of clause 4(xiv) of the Order
are not applicable to the Company.
(xv)
For S. R. BATLIBOI & ASSOCIATES LLP
ICAI Firm Registration No. : 101049W
According to the information and explanations
given to us, the Company has not given any guarantee
for loans taken by others from bank or financial
institutions.
Date : May 28, 2013
Partner
39
BALANCE SHEET AS AT MARCH 31, 2013
(All amounts in Rupees million, unless stated otherwise)
As at
March 31, 2013
———————
As at
March 31, 2012
———————
3
4
31,999
(29,353)
———————
2,646
31,939
(60,476)
———————
(28,537)
Non-current liabilities
Long-term borrowings
Deferred payment liabilities
Other long-term liabilities
Long-term provisions
5
5.2
6
7
53,550
21,322
169
753
———————
75,794
57,747
3,136
243
528
———————
61,654
Current liabilities
Short-term borrowings
Trade payables
Other current liabilities
Short-term provisions
8
9
10
11
6,556
7,348
1,892
———————
15,796
———————
94,236
———————
———————
20,416
8,592
5,538
1,500
———————
36,046
———————
69,163
———————
———————
Assets
Non-current assets
Fixed assets
Tangible assets
Intangible assets
Capital work-in-progress
Non-current investments
Long-term loans and advances
Other non-current assets
12
12
12
13
14
15
33,412
36,245
405
8
4,283
1,357
———————
75,710
35,640
16,669
1,021
8
1,945
2,274
———————
57,557
Current assets
Trade receivables
Cash and bank balances
Short-term loans and advances
Other current assets
16
17
18
19
300
13,667
3,683
876
———————
18,526
———————
94,236
———————
———————
616
5,268
4,995
727
———————
11,606
———————
69,163
———————
———————
Notes
———————
Equity and liabilities
Shareholders’ funds
Share capital
Reserves and surplus
TOTAL
TOTAL
Summary of significant accounting policies
The accompanying notes are an integral part of financial statements.
2.1
As per our report of even date
For S. R. Batliboi & Associates LLP
Firm Registration No. : 101049W
Partner
Date : May 28, 2013
40
For and on behalf of the Board of Directors
of Sistema Shyam TeleServices Limited
Sd/Vsevolod Rozanov
Whole Time Director - President & CEO
DIN : 02356528
Sd/Sergey Savchenko
Sd/Alok Tandon
Director
DIN : 00027563
Sd/Vishal Kohli
Company Secretary
Membership No: FCS: 4546
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2013
For the Year
ended
March 31, 2013
———————
For the Year
ended
March 31, 2012
———————
20
21
12,043
264
———————
12,307
———————
———————
10,689
913
———————
11,602
———————
———————
22
23
3,947
16,701
———————
20,648
———————
(8,341)
1,104
9,189
4,344
(22,978)
3,565
17,575
———————
21,140
———————
(9,538)
983
10,524
3,134
(24,179)
———————
———————
(22,978)
———————
———————
(2)
———————
(2)
———————
(24,177)
———————
———————
(5,839)
———————
(5,839)
———————
(28,817)
———————
———————
(7,411)
———————
(7,411)
———————
(31,588)
———————
———————
(7.19)
(9.02)
(7.57)
(9.89)
(7.19)
(9.02)
(7.57)
(9.89)
Notes
———————
CONTINUING OPERATIONS
Income
Revenue from operations (net)
Other income
Total revenue (I)
Expenses
Employee benefits expense
Other expenses
Total expenses (II)
Earnings before license fee, interest, tax, depreciation & amortisation (I-II)
Revenue share (license fee & spectrum charges)
Finance costs
24
Depreciation and amortisation expenses
12
Loss before tax
Tax expenses
Current tax
Total tax expense
Loss after tax for the year from continuing operations (A)
Discontinuing operations
Loss before tax from discontinuing operations
Tax expense of discontinuing operations
27
Loss after tax for the year from discontinuing operations (B)
Loss for the year (A+B)
Earnings per equity share [nominal value of share
Rs 10 (31 March 2012 Rs 10)]
Basic
Computed on the basis of loss from continuing operations
Computed on the basis of total loss for the year
Diluted
Computed on the basis of loss from continuing operations
Computed on the basis of total loss for the year
30
2.1
Partner
Date : May 28, 2013
Sd/Vsevolod Rozanov
DIN : 02356528
Sd/Sergey Savchenko
Sd/Alok Tandon
Director
DIN : 00027563
Sd/Vishal Kohli
Company Secretary
41
CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2013
As at
March 31, 2013
———————
As at
March 31, 2012
———————
(22,978)
(24,179)
(5,839)
———————
(28,817)
(7,411)
———————
(31,590)
Depreciation on continuing operation
4,212
2,505
Depreciation on discontinuing operation
1,109
877
Cash flow from operating activities
Net loss before tax from continuing operations
Net loss before tax from discontinuing operations
Net loss before tax
Non-cash adjustment to reconcile loss before tax to net cash flows
Unrealised foreign exchange loss, net
Amortisation of intangible assets on continuing operation
Amortisation of intangible assets on discontinuing operation
Amortisation of finance set up charges
Loss on sale of fixed assets, net
32
305
132
629
33
479
1,327
1,020
35
11
Exit cost of discontinuing operation
1,005
-
Interest expense and other finance charges
7,739
8,534
(340)
———————
(13,533)
———————
(1,178)
———————
(18,408)
———————
Interest Income
Operating loss before working capital changes
Movements in working capital
(1,831)
2,166
Increase/(decrease) in long-term provisions
Increase/(decrease) in trade payables
273
137
Increase/(decrease) in short-term provisions
702
540
(518)
1,559
Increase/(decrease) in other current liabilities
Increase/(decrease) in other long-term liabilities
(73)
9
Decrease/(increase) in trade receivables
316
(479)
(2,372)
1,167
1,944
(1,795)
(206)
———————
(15,298)
———————
(50)
———————
(15,348)
———————
84
———————
(15,020)
———————
(32)
———————
(15,052)
———————
Purchase of fixed assets, capital work in progress and capital advances
(2,609)
(7,576)
Purchase for intangible assets
(1,329)
(231)
31
-
Decrease/(increase) in long-term loans and advances
Decrease/(increase) in short-term loans and advances
Decrease/(increase) in other current assets
Cash used in Operations
Direct tax paid
Net cash flow used in operating activities (A)
Cash flow from investing activities
Proceeds from sale of intangible assets
Proceeds from sale of fixed assets
Interest received
Margin money deposit
42
15
22
318
1,578
(1,370)
CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2013
As at
March 31, 2013
———————
As at
March 31, 2012
———————
(3,857)
(11,976)
2,203
———————
(6,598)
———————
28,895
———————
10,712
———————
Investment in bank deposits (having original maturity
of more than three months)
Redemption/maturity of bank deposits (having original maturity
of more than three months)
Net cash flow from/ (used in) investing activities (B)
Cash flow from financing activities
Proceeds from issuance of preference share capital
60,000
-
Proceeds from long-term borrowings
12,814
38,108
(12,468)
(36,543)
1,195
13,564
Repayment of long-term borrowings
Proceeds from short-term borrowings
Repayment of short-term borrowings
Payment of finance setup cost
Release of debt securitisation reserve from bank
Net cash flow from financing activities (C)
Net increase in cash and cash equivalents (A+B+C)
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at the end of the year
-
(850)
(1,433)
66
715
-
(66)
(7,879)
———————
26,867
———————
4,921
(8,951)
———————
5,394
———————
1,054
4,098
———————
9,019
———————
———————
3,044
———————
4,098
———————
———————
1
3
Deposit with bank for debt securitisation reserve
Interest paid
(26,011)
Components of cash and cash equivalents
Cash on hand
Cheques/ Drafts on hand
3
3
Balances with banks in current accounts
348
1,979
Balances with banks in deposit account:
8,667
———————
9,019
———————
2,113
———————
4,098
———————
Total cash and cash equivalents (note 17)
Summary of significant accounting policies (note 2.1)
Partner
Date : May 28, 2013
Sd/Vsevolod Rozanov
DIN : 02356528
Sd/Sergey Savchenko
Sd/Alok Tandon
Director
DIN : 00027563
Sd/Vishal Kohli
Company Secretary
43
Notes to financial statement for the year ended 31 March 2013
1.
Background
(a)
Corporate Information
Sistema Shyam TeleServices Limited (the ‘Company’ or ‘SSTL’), was incorporated on 20 April 1995. During financial year 200708, Joint Stock Financial Corporation SISTEMA (‘SISTEMA’) of Russia acquired the controlling stake in the Company and the
Company became subsidiary of SISTEMA. During 2010 - 11, the Company had allotted 547,312,918 equity shares on preferential
basis to The Federal Agency for State Property Management (“Rosimushchestvo”) of Russian Federation. As at 31 March 2013,
SISTEMA’s shareholding is 56.68% and continues to be the holding company of SSTL.
The Company had entered into a license agreement with OJSC Mobile Tele Systems, to use ‘MTS’ brand in India. The Company
commenced commercial operations on 26 March 2009 under the ‘MTS’ brand name.
(b)
Licence and Spectrum
The Company was awarded Basic Telephony Service License by Department of Telecommunications (‘the DoT’) on 4 March
1998 for the Rajasthan service area. In accordance with the DoT guidelines on Unified Access (Basic and Cellular) Services
License (‘UASL’) dated 11 November 2003, the Company migrated to the UASL with effect from 14 November 2003. Further,
on 12 December 2007, the Company also acquired GSM spectrum in Rajasthan Circle under the original terms of the UASL
agreement. Effective from 25 January 2008, the Company acquired UASL for 21 telecom circles, thus becoming licensee to
provide its services across the country.
The Hon’ble Supreme Court vide its judgment dated 2 February 2012 cancelled 21 licenses allotted to the Company in January
2008. The Company participated in Spectrum Auction conducted by DoT in March 2013 and won the “ Right to Use of
Spectrum” in eight Telecom Circles of India namely Delhi, Gujarat, Karnataka, Kerala, Kolkata, Tamil Nadu, Uttar Pradesh (West)
and West Bengal for a period of 20 years at a bid price of Rs 36,395. The DoT has allowed set-off of the “License Entry Fees”
of Rs 16,263 paid by the Company on 10 January 2008 as upfront payment against the bid price and allowed the balance amount
of Rs 20,132 to be paid in accordance with deferred payment plan opted by the Company as per terms and conditions of the
auction.
Subsequent to the year end, the Company has received Letter of Intent (‘LoI’) from DoT dated 30 April 2013 earmarking the
spectrum to the Company for 20 years from date of LoI.
(c)
Scheme of arrangement
On 18 May 2006, the Hon’ble High Court of Rajasthan had approved the Scheme of Arrangement between STL, Shyam Telecom
Manufacturing Limited (‘STML’), SSTL and Shyam Basic Infrastructure Projects Private Limited (‘SBIPL’) (‘petitioner Companies’)
(hereinafter referred to as ‘the Scheme’).
As per the Scheme, on 26 October 2006, the Company had transferred the equity shares held in the Company by STL. Further
the Scheme envisaged SSTL to be listed in the Bombay Stock Exchange and National Stock Exchange (‘the stock exchanges’).
The Hon’ble High Court of Rajasthan, vide its order dated 7 August 2008, ordered that the Company shall within a maximum
period of 18 months from the date of the order initiate the process of listing the shares representing the issued capital of the
Company by adopting such route as may be permissible in law and shall carry out such compliance as may be required in law
including that of offering a specified percentage of the shares to the Public, for subscribing thereto, through book building
process, in the manner provided for under SEBI (DIP) Guidelines, 2000 and upon such steps being taken, BSE may issue such
order that may be required in law and as may be necessary for securing the said listing.
In the Board of Directors meeting held in December 2009, the Company has formed an “IPO and Listing Committee” to review
the progress, accord necessary approvals, provide guidance and directions in the matter of the listing of equity shares of the
Company and to initiate such further steps pursuant to directions issued by the Hon’ble High Court of Rajasthan on 7 August
2008 as may be necessary. Further, the Board of Directors in the meeting held on 11 March 2010, has approved the appointment
of agencies recommended by the management of the Company as first merchant bankers for IPO purposes.
On 2 February 2012, Honorable Supreme Court of India had ordered to cancel 21 licenses of the Company acquired in
January 2008, and subsequent regulatory and legal developments had led to uncertainty in Indian Telecom Sector. On
5 March 2012, the Board of Directors of the Company had reviewed the regulatory and legal developments and issues and its
impact on the IPO and listing plan of the Company. Based on their review, Board of Directors decided to put on hold the
process of listing and review the matter as and when the regulatory environment on telecom licenses and spectrum is clear and
stabilized. After the fresh spectrum auction held in 11 March, 2013, the Company has acquired the spectrum for 8 telecom
circles and the telecom services in other service areas excluding Rajasthan has been closed down. The Company is in the
process of acquiring fresh UL Licenses for spectrum assignment. Based on the changed business scenario of reduced footprint,
the Company is forced to re-draw it business plan and strategies and the Board will decide about the strategy for listing of
shares in ensuing / next year.
44
2.
Basis of preparation
The financial statements have been prepared to comply in all material respects with the notified Accounting Standard by the
Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956 (the
‘Act’). The financial statements have been prepared under the historical cost convention and on an accrual basis of accounting.
The accounting policies have been consistently applied by the Company.
2.1)
(a)
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles in India requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements and the results of operations during the reporting period end. Although these
estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these
estimates.
Fixed assets
Fixed assets are stated at cost less accumulated depreciation and impairment loss, if any. Cost comprises the purchase price
including taxes and duties (net of cenvat credit) and any attributable cost of bringing the asset to its working condition for its
intended use. Capital spares/ standby equipment are capitalised as part of the respective main assets, to which they relate to.
Any expenditure on upgradation of existing assets resulting in increase in their capacity and the benefits expected therefrom
beyond its previously assessed standard of performance is capitalised. All expenditure, including advances given and capital
inventory are shown as capital work-in-progress until the assets are ready for commercial use. Capital work-in-progress is
stated at cost.
In respect of accounting periods commencing on or after 7 December 2006 exchange differences arising on reporting of the
long term foreign currency monetary items at rates different from those at which they were initially recorded during the
period, or reported in the previous financial statements are added to or deducted from the cost of the asset and are
depreciated over the balance life of the asset, if these monetary items pertain to the acquisition of a depreciable fixed asset.
Provision for slow moving and obsolescence related to capital work-in-progress is made based upon the ageing of the capital
assets and a periodic technical evaluation undertaken by the Company.
Depreciation/amortisation
Fixed assets are depreciated pro rata from the date on which the asset is ready for commercial use (except for Wireless
Telephone Sets which are depreciated from the beginning of the month, following the month of purchase), on a straight line
method, based on the following estimated useful economic lives of assets:
(b)
(c)
(i)
Leasehold Land
Leasehold Improvements
Building
Plant and Equipment
Optical Fibre and Copper Cable Network
Network Interface Units
Computers
Furniture and Fixtures
Office Equipment
Vehicles
Useful Life (in years)
Over the period of the lease
Over the period of the lease or 10 years, whichever is lower
20
3 to 20
20
1 to 3
3
6
6
5
(ii)
Depreciation rates derived from the above are not less than the rates prescribed under Schedule XIV of the Act.
(iii)
Depreciation on the amount capitalised on upgradation of existing assets is provided over the remaining useful lives of the
original assets.
(iv)
The site restoration cost obligation capitalised is depreciated over the period of useful life of the related asset.
(v)
Fixed assets individually costing less than Rs 5 thousand are fully depreciated in the year of acquisition.
(d)
Intangible assets
Intangible assets are stated at cost less accumulated amortization and impairment loss, if any. The carrying value of intangible
asset is assessed for recoverability by reference to the estimated future discounted net cash flows that are expected to be
generated by the asset. Where this assessment indicates a deficit, the assets are written down to the market value or fair value
as computed above.
Indefeasible right to use (IRU) is amortised on straight line basis over the period of the agreement.
45
Software is capitalised on the date of installation and is amortised over a period of 5 years on straight line method.
The License Entry Fee has been recognized as an intangible asset and is amortised over the remainder of the license period of
20 years from the date of commencement of commercial operations. Fees paid for migration of the original licenses to the
UASL is amortised over the remainder of the license period of 20 years from the date of migration to UASL.
Licence fee paid for use of GSM spectrum under the existing UASL licence has been amortized over the remainder of the
original licence on straight line method.
The Right to Use Spectrum is recognized as an intangible asset and is amortised over the period of 20 years from the date of
LOI.
Revenue Share, as a percentage of Adjustable Gross Revenue (AGR) payable as per terms of the UASL is expensed off in the
Statement of profit and loss in the year in which the related income from providing Unified Access Services is recognized.
An additional revenue share towards spectrum usage charges is payable as a percentage of AGR, as defined in the Licence
Agreement earned from the customers who are provided services through the spectrum. These costs are expensed off in the
Statement of profit and loss in the year in which the related revenues are recognized.
(e)
Impairment
The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable
amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value at the pre-tax discount rate. After impairment, depreciation
is provided on the revised carrying amount of the assets over its remaining useful life.
A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the
carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation
if there was no impairment.
(f)
Inventory
Inventory is valued at the lower of cost and net realisable value. Cost is determined on weighted average basis. Net realisable
value is estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs
necessary to make the sale.
The Company provides for obsolete and slow- moving inventory based on management estimates of the usability of inventory.
(g)
Investments
Investments that are readily realizable and intended to be held for not more than a year are classified as current investments;
all other investments are classified as long-term investments. Current investments are carried at lower of cost and fair market
value determined on an individual investment basis. Long-term investments are carried at cost, except the cost of investments
acquired or partly acquired by the issue of shares or other securities, which is the sum total of the fair value of the securities
issued and other acquisition costs. Provision for diminution in value of long-term investments is made to recognize a decline
other than temporary in the value of the investments.
(h)
Cash and cash equivalents
Cash and cash equivalents for the purpose of cash flow statement comprise cash at bank and cash in hand and short term
investments with an original maturity of three months or less.
(i)
(i)
Foreign currency transactions
Initial recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange
rate between the reporting currency and the foreign currency at the date of the transaction.
(ii)
Conversion
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of
historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and nonmonetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using
the exchange rates that existed when the values were determined.
(iii)
Exchange difference
Exchange differences, in respect of accounting periods commencing on or after 7 December 2006, arising on reporting of longterm foreign currency monetary items at rates different from those at which they were initially recorded during the period, or
reported in previous financial statements, in so far as they relate to the acquisition of a depreciable capital asset, are added to
or deducted from the cost of the asset and are depreciated over the balance life of the asset, and in other cases, are accumulated
in a “Foreign Currency Monetary Item Translation Difference Account” in the Company’s financial statements and amortized
over the balance period of such long-term asset/liability.
46
Exchange differences arising on the settlement of monetary items not covered above, or on reporting such monetary items of
the Company at rates different from those at which they were initially recorded during the year, or reported in previous
financial statements, are recognized as income or as expenses in the year in which they arise.
(j)
Finance set up costs
Finance set-up cost, including financial fees and cost of arranging and restructuring loans, is amortized over the period of the
loan or five years, whichever is lower, commencing from the date of the first draw-down of the related loan, on a straight-line
basis.
(k)
(i)
Revenue recognition and receivable
Service revenue
Service Revenues are recognized as services are rendered and are net of discounts & waivers. Unbilled revenues resulting from
Unified Access Services provided from the billing cycle date to the end of month is recorded based on billing system reports.
Revenue from the sale of prepaid cards is recognised when the customer uses the services or the card expires, whichever is
earlier. Payment received from customers for sale of prepaid cards in excess of revenue recognised is deferred.
Processing fees on recharge coupons on introduction of new prepaid products, is being recognized over the estimated
customer relationship period or coupon validity period, whichever is lower.
Revenue from infrastructure services is recognized as services are rendered, in accordance with the terms of the related
contracts.
Indefeasible right of use contracts are accounted for as operating lease and revenue is recognized over the term of lease.
(ii)
Sale of goods
Revenue, net of discounts and return, from sale of goods is recognized on transfer of all significant risks and rewards and there
is no significant uncertainty towards realization of consideration.
(iii)
Interest
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable
interest rate. Interest income is included under the head “other income” in the statement of profit and loss.
(iv)
Provision for doubtful debts
Receivables are stated net of provision for doubtful debts. The Company provides for entire outstanding net of security deposit
for active subscribers whose outstanding is more than 90 days, deactivated customers or in specific cases, where management
is of the view, that the amount for certain customers are not recoverable.
For receivables due from other operators on account for lease line revenue, infrastructure revenue and interconnection usage
revenue, the Company provides for amount outstanding for more than 180 days from the date of billing net of any amounts,
payable to the operators, or in specific cases, where management is of the view that the amounts for these customers are not
recoverable.
(l)
Interconnection usage charges (IUC)
The TRAI issued Interconnection Usage Charges Regulation 2003 (as amended) (‘IUC regime’). Under the IUC regime, with the
objective of sharing of call revenues across different operators involved in origination, transit and termination of every call, the
Company pays interconnection charges for all outgoing calls originating in its network to other operators, depending on the
termination point of the call i.e. mobile, fixed line, and distance i.e. local, national long distance and international long distance. The
Company also receives certain interconnection charges from other operators for all calls terminating in its network.
Accordingly, interconnect cost is recognised as incurred on termination of calls originating from the Company’s network
and terminating on the network of other telecom operators Interconnect revenue are recognised as earned on calls
originating from another telecom operator network and terminating on the Company’s network. The interconnect revenue
and costs are recognised in the financial statement on gross basis and included in service revenue and network operating
cost, respectively.
(m)
Retirement and other employee benefits
Short-term employee benefits
(i)
Short term employee benefits are recognized in the year during which the services have been rendered.
Long-term employee benefits
Defined contribution plan
Provident fund and employees’ state insurance schemes
All employees of the Company are entitled to receive benefits under the Provident Fund, which is a defined contribution plan.
Both the employee and the employer make monthly contributions to the plan at a predetermined rate of the employees’ basic
47
salary. These contributions are made to the fund administered and managed by the Government of India. In addition, some
employees of the Company are covered under the employees’ state insurance schemes, which are also defined contribution
schemes recognized and administered by the Government of India.
The Company’s contributions to both these schemes are expensed in the statement of profit and loss. The Company has no
further obligations under these plans beyond its monthly contributions.
(ii)
Other long term employee benefit
Leave encashment
The Company has provided for the liability at year end on account of unavailed earned leave as per the actuarial valuation as per
the Projected Unit Credit Method.
Short term compensated absences are provided for based on estimates.
(iii)
Defined benefit plan
Gratuity
The Company provides for gratuity obligations through a defined benefit retirement plan (the ‘Gratuity Plan’) covering all
employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement or termination of employment
based on the respective employee salary and years of employment with the Company. The Company provides for the Gratuity
Plan based on actuarial valuations in accordance with Accounting Standard 15 (revised), “Employee Benefits”. The Company
makes annual contributions to the Life Insurance Corporation of India (LIC) for the Gratuity Plan in respect of its employees.
(iv)
Actuarial gains and losses are recognized in the P & L account as and when incurred.
(n)
Borrowing costs
Borrowing costs attributable to the acquisition or construction of those fixed asset which necessarily take substantial period
to get ready for their intended use, including interest attributable to the funding of license fees with respect to new circles up
to the date of commencement of commercial operations, are capitalized as a part of the cost of that asset. Other borrowing
costs are recognized as an expense in the period in which they are incurred.
(o)
Income taxes
Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Income Tax Act 1961. Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date.
Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income
will be available against which such deferred tax assets can be realized. If the Company has carry forward of unabsorbed
depreciation and tax losses, deferred tax assets are recognized only if there is virtual certainty that such deferred tax assets can
be realized against future taxable profits. Unrecognized deferred tax assets of earlier years are re-assessed and recognized to
the extent that it has become reasonably certain that future taxable income will be available against which such deferred tax
assets can be realized.
(p)
Earning per share
The earnings considered in ascertaining the Company’s Earnings per Share (‘EPS’) comprise the net profit / loss for the year.
The number of shares used in computing basic EPS is the weighted average number of shares outstanding during the year. The
weighted average number of equity shares outstanding during the year are adjusted for event of bonus element in a rights issue
to existing shareholders.
The number of shares used in computing diluted earning per share comprises the weighted average shares considered for
deriving basic earning per share, and also the weighted average number of shares, if any which would have been used in the
conversion of all dilutive potential equity shares.
(q)
Leases
(i)
Where the Company is lessee
Leases under which all the risks and rewards of ownership are effectively retained by the lessor are classified as operating
leases. Lease payments under operating leases are recognized as an expense in the Statement of profit and loss on a straightline basis over the lease term.
Assets acquired on ‘Finance Lease’ which transfer risk and rewards of ownership to the Company are capitalized as assets by
the Company at the lower of present value of the related lease payments or where applicable, estimated fair value of such
assets.
48
Amortization/ depreciation of capitalised leased assets is computed on the Straight Line method over the useful life of the
assets. Lease rental payable is apportioned between principal and finance charge using the internal rate of return method. The
finance charge is allocated over the lease term so as to produce a constant periodic rate of interest on the remaining balance
of liability.
(ii)
Where the Company is lessor
Assets subject to operating leases are included in fixed assets. Lease income on operating lease is recognised in the Statement
of profit and loss on a straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the
Statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the
Statement of profit and loss.
(r)
Segment reporting
Identification of segment
The Company’s operating business is organised and managed according to the nature of services. The analysis of geographical
segment is based on the area in which the Company operates.
(s)
Provisions
A provision is recognised when an enterprise has a present obligation as a result of past event and it is probable that an outflow
of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not
discounted to its present value and are determined based on best estimate required to settle the obligation at the Balance
Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
Site restoration cost obligations are capitalized when it is probable that an outflow of resources will be required to settle the
obligation and a reliable estimate of the amount can be made.
3.
Share Capital
Authorised shares
6,000,000,000 [2012 - 6,000,000,000] Equity Shares of Rs. 10/-each
6,000,000,000 [2012 - 6,000,000,000] Preference Shares of Rs. 10/-each
Issued, subscribed and fully paid-up shares
3,193,920,000 [2012-3,193,920,000] Equity Shares of Rs. 10/- each
6,000,000 [2012 - Nil] 0.01% Redeemible Non Convertible Non Cumulative
Preference Shares of Rs 10/- each
a)
31 March 2013
————————
31 March 2012
————————
60,000
60,000
————————
————————
60,000
60,000
————————
————————
31,939
31,939
60
————————
31,999
————————
————————
31,939
————————
Shares held by holding ultimate holding company and or their subsidiaries:
Out of equity and preference shares issued by the Company, shares held by its holding company and its subsidiaries are as
below:
31 March 2013
31 March 2012
————————
————————
Joint Stock Financial Corporation SISTEMA, the holding company,
1,810,289,400 [2012-1,810,289,400] equity shares of Rs 10/- each
18,103
18,103
INSITEL Services Private Limited, subsidiary of the holding company
6,000,000 [2012-Nil] 0.01% Redeemable Non Convertible Non Cumulative
Preference Shares of Rs 10/- each
b)
60
-
Details of shareholders holding more than 5% shares in the Company
Name of the Shareholders
Equity shares of Rs. 10/- each fully paid
Sistema JSFC, the holding company
Russian Federation
Intell Invofin India Pvt. Ltd.
A T Invofin India Pvt. Ltd.
Cellphone Credit & Securities India Pvt Ltd.
31 March 2013
% holding
No. millions
in the class
1,810
547
350
175
175
57
17
11
5
5
31 March 2012
% holding
No. millions in the class
1,810
547
350
175
175
57
17
11
5
5
49
Name of the Shareholders
0.01% Redeemable Non Convertible Non
Cumulative Preference Shares of Rs 10/- each
INSITEL Services Private Limited
c)
d)
6
31 March 2012
% holding
No. millions in the class
100
-
-
As per records of the Company, including its register of shareholders/ members and other declarations received from
shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.
The Company has only one class of equity shares having a par value of Rs 10/- per share. Each holder of equity Shares is entitled
to one vote per share.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the
company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares
held by the shareholders.
Reconciliation of the shares outstanding at the beginning and at the end of the reporting period.
Equity Shares
At the beginning of the period
Issued during the period
Outstanding at the end of the period
Preference Shares
At the beginning of the period
e)
31 March 2013
% holding
No. millions
in the class
31 March 2013
No. millions
Rs. millions
3,194
31,939
3,194
31,939
31 March 2012
No. millions Rs. millions
3,194
31,939
3,194
31,939
31 March 2013
No. millions
Rs. millions
6
60
6
60
31 March 2012
No. millions Rs. millions
-
Terms of redemption of Non Cumulative Non-convertible Preference Shares
During the year ended 31 March 2013, the Company issued 6 million Non Cumulative Non-convertible Redeemable Preference
Shares (“RPS”) of Rs 10 each fully paid-up at a premium of Rs 9,990 per share in multiple tranches. Non Cumulative Nonconvertible Preference Shares carry non-cumulative preferential dividend @ 0.01% p.a.
The RPS are redeemable at a premium of 9.77% per annum on the tranches of Rs 43,900 and 9.63% on the balance tranches of
Rs 16,100 upon the completion of ten years from the date of issue. Further, any variation (extension or reduction) is subject
to the mutual agreement of both parties which shall not exceed twenty years from the date of issue.
In the event of non- availability of sufficient profits with the Company on the date of redemption, the investor shall have the
right to:
a)
Initiate the liquidation of the Company; or
b)
Induce the Company to issue fresh shares and redeem the amounts payable on the RPS
In the event of change in shareholding or control of the Company at any time during the tenure of RPS, the investor shall have
the right to advance the redemption of RPS.
4)
Capital reserve (refer note 37)
Security premium account
Balance as per last financial statements
Additions during the year
Closing Balance
(Deficit) in the statement of profit and loss
Balance as per last financial statements
Loss for the year
Net (deficit) in the statement of profit and loss
Total reserve and surplus
50
31 March 2013
————————
-
31 March 2012
————————
-
21,515
59,940
81,455
21,515
21,515
(81,991)
(28,817)
(110,808)
(29,353)
(50,403)
(31,588)
(81,991)
(60,476)
Debenture redemption reserve
As required by Section 117C of the Companies Act, 1956, read together with General Circular No. 9/2002 dated 18 April 2002
issued by the Ministry of Corporate Affairs, Government of India, the Company has not created Debenture Redemption
Reserve due to insufficiency of profit during the year.
5.
Particulars
Non-Current Portion
Current Maturities
31 March 2013
31 March 2012
31 March 2013
31 March 2012
12,800
12,800
-
-
21
9,400
18,838
12,491
53,550
5,000
81
9,000
30,866
57,747
59
3,926
3,985
0
57
1,576
1,633
12,821
40,729
-
17,881
39,866
-
59
3,926
(3,985)
57
1,576
(1,633)
53,550
57,747
-
-
Debentures
15.75% Redeemable, 1,280 Non-Convertible
Debentures of Rs. 10,000,000 each (Secured)
Term Loans
Indian Rupee loans from Banks (Secured) (refer note 37)
Indian Rupee loans from Others (Secured)
Indian Rupee loans from Banks (Unsecured)
Foreign Currency loans from Banks (Unsecured)
Foreign Currency loans from Holding Company (Unsecured)
Total
Above amounts include:
Secured Borrowings
Unsecured Borrowings
Amount disclosed under the head “Other Current Liabilities”
(Refer note 10)
Net amount
5.1
Long-term loans
a)
15.75% Secured, Redeemable, Non-Convertible Debentures are redeemable at par as follows:
Period of Redemption
Amount to be Redemmed
4 equal quarterly installments commencing from 90th
day from the 5th anniversary from date of allotment
25% of the face value of Debentures
The Company has an option to redeem all of the Debentures earlier than the above stated dates; however no redemption will
take place before the end of fifth year from the date of allotment i.e. 4 January 2012. These Debentures are secured by first
priority pari passu charge and hypothecation over all of the present and future movable assets of the Company and all of the
Company’s estate, rights, title, interest, property, benefit, claim and demand in, to, under and in respect of, such movable assets.
The Debentures were to be further secured by way of assignment of all the Unified Access Service Licenses (“UAS Licenses”)
issued by the DoT. However, while the said assignment was pending, 21 out of the 22 UAS Licenses of the Company were
quashed by the judgment of the Hon’ble Supreme Court of India [Refer Note 1 (b) above]. Consequently, the Company has
requested to the Debenture Trustee to waive the condition and is confident to receive the same. [Refer note 4 for Debenture
Redemption Reserve due to insufficiency of profit.]
b)
Secured Indian Rupee Term Loans from Bank to the extent of Rs 5,000, taken during financial year 2011-12 and prepaid in full
during the year, was carrying interest rate in the range of 15.25% to 15.75% per annum. It was secured by first pari passu charge
over all present and future movable assets (Current and Fixed) and Irrevocable and Unconditional Guarantee of Sistema JSFC,
the Holding Company. Indian Rupee Term Loans from Bank to the extent of Rs 0.44, taken in earlier financial years, was secured
by way of exclusive hypothecation charge in favour of the lender.
c)
Secured Indian Rupee Loan from Others is secured against first and exclusive charge of the assets financed by the lender and
is repayable in five years in equal quarterly installments from their respective disbursement date.
51
d)
Unsecured Indian Rupee Term Loans from Banks of Rs 9,000, taken during financial year 2011-12, carried interest rate in the
range of 13.25% to 13.75% per annum. Of Rs 9,000, loan of Rs 4,400, secured by Unconditional & Irrevocable Stand By Letter
of Credit issued by a foreign bank at the request of the holding company, has been prepaid in full during the year. A unsecured
Indian Rupee Term Loan of Rs 4,800 carrying interest rate of 13% per annum taken during the year. Existing loans of Rs 4,600
and Rs 4,800 are secured by Guarantee and Unconditional & Irrevocable Stand by Letter of Credit respectively issued by
foreign banks at the request of the holding company. These loans are repayable in full in June 2014 and April 2015 respectively.
e)
Foreign Currency Loans from Banks carries interest @ 6 months LIBOR plus mark up from 1.25% to 3.50%. All the Foreign
Currency Loans are secured by Corporate Guarantee of Sistema JSFC, the Holding Company and are repayable after moratorium
period ranging from thirty to thirty six months from the first utilization date / respective facility agreement date in ten to twelve
equal half yearly installments.
f)
Unsecured Foreign Currency Loan from the holding company carries interest @ 3 months LIBOR plus mark up of 2.50% and
repayable in full in December 2014.
5.2
Amount Disclosed under ‘Other Current Liabilities’ (Refer Note 10)
31 March 2013
————————
21,369
(47)
————————
21,322
————————
31 March 2012
————————
3,380
(244)
————————
3,136
————————
a)
During March 2013, the Company acquired ‘Right to Use of Spectrum’ in eight Telecom Service Areas in the auction carried out
by DoT. As per the terms of the auction, the Company opted for deferred payment option for payment of the final bid price.
After adjusting upfront payment, the Company has recorded the balance amount payable over the deferred payment period as
deferred payment liability. The Company needs to pay interest @ 9.75% per annum over the balance amount. There shall be a
moratorium of 2 years for payment of balance amount which shall be payable in 10 equal annual installments commencing from
the third anniversary of the scheduled date of first payment. As per the terms of the deferred payment option, the Company has
issued financial bank guarantee to DoT equal to one annual installment of Rs 3,904 to secure the annual installment. The amount
payable to DoT as at 31 March, 2013 is Rs 20,132 (2012 – Nil).
b)
The Company had entered into contracts with certain vendors for supply of network equipments and rendering of services on
deferred payments terms. On transfer of title and risk of the supplies and rendering of services as per the terms of the
respective vendor contracts, the Company has recorded the liabilities payable over the respective deferred payment period as
Deferred Payment Liabilities (DPL). As per the arrangement with the vendors supplying network equipments, DPL to the
extent of Rs 1,188 (2012 – Rs 3,085) shall be paid through the buyer’s credit facilities arranged by the vendors. DPL in respect
of vendor payment do not carry any interest until converted into buyer’s credit. The amount payable to the Vendors as at
31 March, 2013 is Rs 1,237 (2012 – Rs 3,380).
6)
Other long-term liabilities
Deposits from customers
Unaccrued revenue
7)
31 March 2012
————————
150
93
————————
243
————————
31 March 2013
————————
149
35
31
140
397
1
————————
753
————————
31 March 2012
————————
105
9
45
165
203
1
————————
528
————————
Long-term provisions
Leave encashment
Gratuity
Asset retirement obligation
Lease equilisation reserve
Other employee benefits
Others
52
31 March 2013
————————
89
80
————————
169
————————
Employee Benefits:
Defined Benefit Plans
The employee’s gratuity fund scheme managed by Life Insurance Corporation of India is a defined benefit plan. The present value
of obligation is determined based on actuarial valuation using Project Unit Credit Method (PUC). The plan liability is the
actuarial present value of the projected accrued benefits as of the beginning and end of the period for active members.
Net gratuity expense recognized in contribution to provident and other funds for the year ended 31 March 2013 is as follow:
Particulars
Current service cost
Interest cost
Expected Return on plan assets
Actuarial (gain) / loss
Net Cost
Actual Return on Plan Assets
Actual Rate of Return on Plan Asset
31 March 2013
————————
38
6
(5)
3
————————
42
8.83%
31 March 2012
————————
31
5
(2)
(8)
————————
26
2
8.83%
Net leave encashment expense recognized in salaries, wages and bonus for the year ended 31 March 2013 is as follow:
Particulars
Adjustments
Interest cost
Net Cost
Actual Return on Plan Assets
Actual Rate of Return on Plan Asset
Bifurcation of PBO at the end of year
Current liability
Non-current liability
Total PBO at the end of year
31 March 2013
————————
58
10
15
————————
83
-
31 March 2012
————————
60
8
(17)
————————
51
-
31 March 2013
————————
15
149
————————
164
31 March 2012
————————
22
105
————————
127
The major categories of plan assets as a percentage of the fair value of total plan assets are as follow:
Gratuity
Investment With LIC
ii) The assumptions used to determine the benefit obligations are as follows:
Gratuity
Particulars
Discount Rate
Expected Rate of increase in compensation levels
Expected rate of return on assets
Retirement Age
Employee turnover
31 March 2013
————————
100%
31 March 2012
————————
100%
31 March 2013
————————
8.00%
8.00%
7.00%
58 years
35%
31 March 2012
————————
8.70%
8.00%
7.00%
58 years
32%
31 March 2013
————————
8.00%
8.00%
0%
58 years
35%
31 March 2012
————————
8.70%
8.00%
0%
58 years
32%
Leave Encashment
Particulars
Discount Rate
Expected Rate of increase in compensation levels
Expected rate of return on assets
Retirement Age
Employee turnover
53
The principal assumptions are discount rate & salary growth rate. The discount rate is generally based upon the market yields
available on Government bonds at the accounting date with a term that matches the liabilities and the salary growth rate takes
account of inflation, seniority, promotion and other relevant factors on long term basis.
The expected rate of return on plan assets was based on the average long-term rate of return expected to prevail over the
next 15 to 20 years on the investments made by the LIC. This was based on the historical returns suitably adjusted for
movements in long-term government bond interest rates. The discount rate is based on the average yield on government bonds
of 20 years.
iii) Reconciliation of opening and closing balances of benefit obligations and plan assets
Gratuity
Particulars
31 March 2013
————————
31 March 2012
————————
78
39
6
(5)
(2)
116
57
31
5
(5)
(10)
78
71
5
(5)
7
(1)
77
39
39
20
2
(2)
51
(5)
66
12
12
Change in Projected Benefit Obligation (PBO)
PBO at beginning of year
Interest cost
Benefits paid
Projected benefit obligation at year end
Change in plan assets:
Fair value of plan assets at beginning of year
Expected return on plan assets
Actuarial gain / (loss)
Employer contribution
Claim paid from Fund
Fair value of plan assets at year end
Net funded Status of the plan
Net amount recognised as liability
Amount for the current and previous four period are as follows:
Gratuity
Defined benefit obligation
Plan assets
Surplus/(deficit)
Experience adjustments on
Plan liabilities
Experience adjustments on
Plan assets
31 March 2013
31 March 2012
31 March 2011
31 March 2010
31 March 2009
116
77
(39)
78
67
(11)
57
20
(37)
52
(52)
14
5
(9)
3
10
(2)
(3)
-
(5)
(2)
(1)
-
-
Leave Encashments
Particulars
Change in Projected Benefit Obligation (PBO)
PBO at beginning of year
Adjustments
Interest cost
Benefits paid
Projected benefit obligation at year end
Net funded Status of the plan
Provident Fund (12% on Earned Leave)
Net amount recognized
iv)
54
31 March 2013
————————
31 March 2012
————————
127
58
10
(46)
15
164
164
164
97
60
8
(22)
(17)
126
126
126
The Company made annual contributions to the LIC of an amount advised by the LIC. The Company was not informed by
LIC of the investments made by the LIC or the break-down of plan assets by investment type.
v)
8)
Estimated contributions to be made in next financial year for gratuity is Rs 53 (2012- Rs 42) and for leave encashment
Rs 70 (2012- Rs 61).
Short-term borrowings
Unsecured Loan from Banks
31 March 2013
————————
————————
31 March 2012
————————
20,416
————————
Unsecured Indian Rupee Short Term Loans from Bank carried interest rate from 12.00% to 13.75% and secured by Unconditional
& Irrevocable Stand By Letter of Credit issued by foreign banks at the request of Holding company.
9)
Trade payables
Sundry creditors
- For capital goods
- For expenses
31 March 2013
————————
31 March 2012
————————
1,092
5,464
————————
6,556
————————
1.566
7,026
————————
8,592
————————
Details of dues to micro and small enterprises as defined under the MSMED Act, 2006
31 March 2013
————————
31 March 2012
————————
————————
————————
————————
————————
The amount of interest paid by the buyer in terms of section 16 of the
MSMED Act 2006 along with the amounts of the payment made to the
supplier beyond the appointed day during each accounting year
-
-
The amount of interest due and payable for the period of delay in making
payment (which have been paid but beyond the appointed day during the year)
but without adding the interest specified under the MSMED Act 2006
-
-
The amount of interest accrued and remaining unpaid at the end of each
accounting year
-
-
31 March 2013
———————
3,985
47
728
64
333
583
1,608
———————
7,348
———————
31 March 2012
———————
1,633
244
1,040
59
276
1,098
1,188
———————
5,538
———————
The principal amount and the interest due thereon remaining unpaid to
any supplier as at the end of each accounting year
Principal amount due to micro and small enterprises
Interest due on above
The amount of further interest remaining due and payable even in the
succeeding years, until such date when the interest dues as above are actually
paid to the small enterprise for the purpose of disallowance as a deductible
expenditure under section 23 of the MSMED Act 2006.
10)
Current maturities of long-term borrowings (refer note 5)
Current maturities of deferred payment liabilities (refer note 5.2)
Unaccrued revenue
Deposits from customers
Interest Accrued but not due on loans
Book overdraft
Statutory dues and other employee benefits
55
11)
a)
Rs 48 (2012 - Rs 48) included under deposits from customers, represents refundable security deposits received from
subscribers on activation of services and are repayable on disconnection and security deposits received from channel
partners.
b)
Un accrued revenue includes advance revenue received for dark fibre given to customers on IRU basis , unaccrued prepaid
and post-paid revenue for services yet to be availed.
Short-term provisions
31 March 2013
————————
1,837
54
1
————————
1,892
————————
Provision for contingencies
Provision for employee benefits
Wealth tax (refer note 37)
12. Tangible and intangible assets
GROSS BLOCK
PARTICULARS
Tangible assets
Freehold land
As at
1 April
2012
Additions
during
the year
31 March 2012
————————
1,476
24
————————
1,500
————————
ACCUMULATED DEPRICIATION /AMORTISATION
Deletions/
Adjustments
As at
31 March
2013
As at
1 April
2012
For the
Year
Deletions/
Adjustments
NET BLOCK
As at
31 March
2013
As at
31 March
2013
As at
31 March
2012
34
-
-
34
-
-
-
-
34
34
80
887
17
256
80
648
2
269
1
99
98
3
270
77
378
78
618
449
39,469
21
4,008
1,189
470
42,288
34
6,956
23
4,849
376
57
11,429
413
30,859
415
32,513
2,712
445
4
33
2
35
2,714
443
1,214
415
137
43
28
1,351
430
1,363
13
1,498
30
Computers
Furniture & fixtures
427
129
35
4
14
36
448
97
278
66
91
16
12
21
357
61
91
36
149
63
Office equipment
Vehicles
338
47
13
-
86
14
265
33
113
30
55
7
43
12
125
25
140
8
225
17
Leasehold land
Leasehold improvements
Buildings
Plant & equipment
Optical fibre and copper
Network interface units
Previous year
45,017
4,135
1,632
47,520
9,377
5,321
590
14,108
33,412
35,640
35,025
10,922
930
45,017
6,893
3,382
898
9,377
35,640
28,132
Intangible assets
Software
Licence entry fees
Right to use spectrum
Indefeasible right to use
472
24
-
496
470
5
-
475
21
2
18,037
-
17,392
645
2,620
64
2,361
323
322
15,417
-
35,163
-
35,163
-
-
-
-
35,163
-
1,437
75
593
919
187
96
103
180
739
1,250
16,669
19,946
35,262
17,985
37,223
3,277
165
2,464
978
36,245
Previous year
19,715
231
-
19,946
2,169
1,108
-
3,277
16,669
17,546
Total
64,963
39,397
19,617
84,743
12,654
5,486
3,054
15,086
69,657
52,309
Previous year
54,740
11,153
930
64,963
9,062
4,490
898
12,654
52,309
45,678
405
1,021
Capital work in progress
i)
Plant and Equipment includes loose tools of Rs.132 [2012 - Rs.121].
ii)
Addition to Plant and Equipment include adjustment of Rs.2,421 (loss)[2012 - Rs.2,280 (loss)] on account of exchange differences
on long term foreign currency monetary items during the year. The total unamortized balance of foreign exchange differences
capitalised in accordance with the Accounting Policy regarding Foreign Currency Transactions (refer Note 2(i) (iii) as at
31 March 2013 is Rs.3,816 (2012 – Rs.1,353).
iii)
License entry fees with the carrying amount of Rs.322 [2012- Rs.15,417] are subject to first charge and assignment to secure the
Company’s debentures. The Company has requested the Debenture Trustee to waive the condition and is confident to receive
the same.
iv)
The Company participated in Spectrum Auction conducted by Department of Telecom (‘DoT’) in March 2013 and won the “Right
to Use of Spectrum” in eight Telecom Circles of India namely, Delhi, Gujarat, Karnataka, Kerala, Kolkata, Tamil Nadu, Uttar
Pradesh (West) and West Bengal for a period of 20 years at a bid price of Rs.36,395. The DoT has allowed set-off of the “License
Entry Fees” of Rs.16,263 earlier paid by the Company on January 10, 2008 as upfront payment against the bid price and allowed
the balance amount of Rs.20,132 to be paid in accordance with deferred payment plan opted by the Company as per terms and
conditions of the auction.
56
Accordingly, the net book values of License Entry Fees’ together with the consideration payable in cash has been recorded as
“Right to use of Spectrum” under intangible assets of Rs 35,163, as at March 31, 2013, since the spectrum was won in the auction
held by DoT in March 2013 and upfront payment was made prior to year end. However, no amortisation charge has been
considered during current year since the Company received the Letter of Intent (LoI)from DoT on April 30, 2013 allowing
Company the “Right to use of Spectrum” for 20 year period from the date of LoI.
13)
Non-current investments
Trade investments valued at cost
Unquoted in subsidiary company
750,000 [2012 - 750,000] Equity shares of Rs.10 each,
fully paid up in Shyam Internet Services Limited
31 March 2013
————————
31 March 2012
————————
8
————————
8
————————
8
————————
8
————————
The Company has invested Rs.9 (including advance for share capital of Rs.1) in Shyam Internet Services Limited (‘Subsidiary
Company’), which has license for internet services for the state of Rajasthan. The accumulated losses of the Subsidiary
Company as at 31 March 2013 are Rs.42 (2012 - Rs.39) on the basis of unaudited financial statements. The subsidiary company
has been awarded ‘Letter of Intent’ on 28 March 2008 to operate Internet services for pan India. Based on the business plan of
the subsidiary company, the Company is of the view that the diminution in investment is temporary in nature and hence, has not
made any provision for diminution in the value of investment.
14)
Unsecured, considered good
31 March 2013
————————
24
548
1
3,710
————————
4,283
————————
31 March 2012
————————
59
530
34
1,322
————————
1,945
————————
Finance set up cost
Non-current bank balances (refer note 17)
31 March 2013
————————
896
461
————————
1,357
————————
31 March 2012
————————
1,293
981
————————
2,274
————————
Trade receivables
31 March 2013
————————
31 March 2012
————————
18
15
398
————————
431
(398)
————————
33
————————
16
221
————————
237
(221)
————————
16
————————
17
250
76
————————
343
(76)
————————
267
————————
300
————————
3
597
93
————————
693
(93)
————————
600
————————
616
————————
Advance for capital goods
Security deposits
Prepaid expenses
Balances with customs, excise and other authorities
15)
16)
Other non-current assets
Debts outstanding for a period exceeding six months from the date
they are due for payment
Secured and considered good
Unsecured and considered good
Unsecured and considered doubtful
Less: Provision for doubtful debts
(A)
Debts outstanding for a period less than six months from the date
they are due for payment
Secured and considered good
Unsecured and considered good
Unsecured and considered doubtful
Less: Provision for doubtful debts
(B)
Total (A+B)
57
17)
Particulars
Non-current
31 March 2013
Cash & cash equivalents
Balances with banks:
On current accounts
Deposits with original maturity of less than
three months
Cheques/Draft on hand
Cash on hand
Other bank balances
Deposits with original maturity of
more than 12 months
Deposits with original maturity of
more than 3 months but less than
12 months
Margin money deposit
Amount disclosed under non current assets
Current
31 March 2012
31 March 2013
31 March 2012
-
348
1,979
-
8,667
3
1
—————
9,019
—————
2,113
3
3
—————
4,098
—————
-
-
-
-
461
———————
461
———————
(461)
———————
———————
981
———————
981
———————
(981)
———————
———————
120
4,528
———————
4,648
———————
———————
13,667
———————
1,170
———————
1,170
———————
———————
5,268
———————
Margin money deposits
Margin money deposits of Rs 4,989 (31 March 2012- Rs 2,151) are given as security against the bank guarantees obtained from
banks.
18)
Advances recoverable in cash or kind or for value to be received:
Unsecured, considered good
Unsecured, considered doubtful
Balances with customs, excise and other authorities
Advance against equity in Shyam Internet Services Ltd.
Advance income tax
Provision for doubtful advances
19)
Interest accrued on fixed deposits
Unbilled revenue
Finance Set up cost
20)
Revenue from operations
Service revenue
21)
Other income
Interest
Miscelleneous income
58
31 March 2013
————————
31 March 2012
————————
1,608
1
1,838
1
236
————————
3,684
(1)
————————
3,683
————————
1,125
1
3,683
1
186
———————
4,996
(1)
———————
4,995
———————
31 March 2013
————————
72
287
517
————————
876
————————
31 March 2012
————————
50
81
596
————————
727
———————
31 March 2013
————————
12,043
————————
12,043
————————
31 March 2012
————————
10,689
————————
10,689
———————
31 March 2013
————————
260
4
————————
264
————————
31 March 2012
————————
907
6
————————
913
———————
22)
31 March 2013
————————
3,663
149
107
28
————————
3,947
————————
Salaries, wages and bonus
Contribution to provident and other funds
Staff welfare expenses
Recruitment and training expenses
31 March 2012
————————
3,253
127
111
74
————————
3,565
———————
During the year, the Company has recognized the following amounts in the statement of Profit and Loss
Defined Contribution Plans
#
Employer’s Contribution to Provident Fund
Employer’s Contribution to ESI (refer note 37)#
# Included in contribution to provident and other funds.
23)
Other expenses
Interconnect usage charges
Port charges and other network related costs
Power & fuel
Network
Others
Rent
Network
Others
Insurance
Network
Others
Infrastructure sharing expenses
Lease line expenses
Repair and maintenance
Network
Building
Others
Advertisement and marketing expenses
Sales commission & incentives
Sales promotion expenses
Device subsidy
Other subscriber acquisition cost
Travelling & conveyance expenses
IT support & services expenses
Customer service and call centre expenses
Legal and professional fees
Rates and taxes
Provision for doubtful debts/advances
Provision for contingencies & fixed assets
Miscellaneous expenses
Total
24)
Finance Costs
Interest on:
- Term loans
- Others
Bank charges and commission
Amortisation of finance setup costs
Exchange rate loss/(gain), net
31 March 2013
————————
142
0
31 March 2012
————————
127
1
31 March 2013
————————
2,747
89
31 March 2012
————————
2,688
127
190
122
199
59
137
174
108
160
14
10
3,808
1,218
17
12
3,007
1,299
828
23
111
1,048
1,678
234
1,010
642
195
583
433
366
10
109
578
344
————————
16,701
————————
611
26
111
1,618
2,663
564
1,216
712
270
492
404
272
24
95
477
344
————————
17,575
————————
31 March 2013
————————
31 March 2012
————————
7,605
104
130
1.327
23
————————
9,189
————————
6,717
129
158
1,020
2,500
————————
10,524
————————
59
25)
Provision for contingencies and other provisions :-
a)
The following table sets forth the movement in the provisions: The Company makes contingency provision for any unanticipated regulatory liabilities that may arise subsequent to the year end.
Description
Financial
Year
Opening
Additions
Adjustment
Amount used
Closing
Provisions for contingencies
2013
2012
1,476
935
796
541
(435)
-
-
1,837
1,476
Provisions for damaged/irrecoverable
2013
2012
1
15
-
-
(14)
1
1
Provisions for lease equalisation
reserve
2013
2012
165
132
10
33
(29)
-
(5)
-
141
165
(refer note 37)
2013
2012
45
46
1
(14)
-
(2)
31
45
b)
In accordance with its accounting policy, refer note 2.1(b), the Company makes provision for slow moving and obsolete project
material determined on the basis of ageing of material and periodic technical evaluation undertaken by the Company.
26)
Income taxes
Deferred tax
During the year ended 31 March 2013, the Company has incurred book loss of Rs.28,817 (2012 - Rs.31,588), aggregating to
accumulated losses of Rs.110,808 (2012 - Rs.81,991) as on that date, resulting into a tax loss carry forward situation. The
Company is eligible for a tax holiday under section 80IA of the Income Tax Act, 1961, beginning with the financial year in which
the Company started providing telecommunication services. Though the management is confident of generating profits in the
future, there is currently no convincing evidence of virtual certainty that the Company would reverse the tax loss carry
forwards beyond the tax holiday period. Accordingly, the Company has not recognized any deferred tax assets resulting from
the carry forward tax losses. Further, no deferred tax liabilities on account of temporary timing differences have been
recognized since they are expected to reverse in the tax holiday period.
27)
Discontinuing operation:
The Company on 21 February 2013 closed telecom services in ten Telecom Circles namely Assam, Andhra Pradesh, Bihar,
Himachal Pradesh, Haryana, Jammu & Kashmir, Madhya Pradesh, North East, Orissa and Punjab and on 11 March 2013 in three
telecom Circles namely Mumbai, Maharashtra and Uttar Pradesh (East) The closure of telecom services has been done in
consequence of the Order(s)/ judgment of Honorable Supreme Court of India of 2 February 2012 and 11 March 2013. The
Company is in the process of redeployment / disposal of assets and settlement of contractual obligation and liabilities of these
thirteen Telecom Circles.
Consequently the Company has recognized the following adjustments in financial statements
●
Provision for retrenchment compensation, amounting to Rs.300, in respect of employees whose services have been
terminated,
●
Provision/write off of fixed assets amounting to Rs.539, in respect of fixed assets that cannot be redeployed and
●
Provision for contractual obligations, amounting to Rs.166, in respect of contracts terminated.
In addition, the Company has received claims from passive infrastructure vendors, which have been discussed in Note 33 (d) to
the financial statements.
The above provisions have been disclosed as trade payables in these financial statements
60
The following statement shows the revenue and expenses of discontinuing operations:
31 March 2013
31 March 2012
————————
————————
Revenue
3,655
3,483
Expenses
7,990
9,763
———————
———————
Loss from discontinued operations
(4,335)
(6,280)
Finance costs
57
(477)
Depreciation/amortization
1,142
1,356
Revenue share (license fee & spectrum charges)
305
252
———————
———————
Loss before tax
(5,839)
(7,411)
Income-tax expense
———————
———————
Loss after tax
(5,839)
(7,411)
———————
———————
Note: The above statement does not include common corporate expenses such as marketing costs, interest on loans etc that
are not allocated to Circles.
The carrying amounts of total assets and liabilities of discontinuing operations are as follows:
Total Assets
Total Liabilities
31 March 2013
———————
10,079
3,970
31 March 2012
———————
19,238
5,259
Note: The above statement includes carrying value of assets, disclosed above, are pending redeployment / disposal,
and liabilities, pending payout, of closed Telecom Circles. The redeployment of assets is expected to be completed by
31 March 2018. Also, License Entry Fee of Rs.15,028 (including borrowing cost capitalized) as of 31 March 2013 for the
discontinued operations has been set-off in the auction price of eight Telecom Circles (Note 12 (iv)).
The net cash flows attributable to the discontinued operations are stated below:
Operating activities
Investing activities
Financing activities (refer note 37)
Net cash inflows / (outflows)
28)
(i)
(ii)
(iii)
31 March 2013
———————
(4,535)
27
(0)
(4,508)
31 March 2012
———————
(5,516)
(1,792)
(0)
(7,308)
Related party disclosures
In accordance with requirement of Accounting Standard (AS) 18 – Related Party Transaction, the names of related parties where
control exists and / or with whom transactions have taken place during the year and description of relationships as identified
and certified by the Management are:
Name of related party where control exists
Relation
Name of the related party
Holding Company
Sistema JSFC
Subsidiary Company
Shyam Internet Services Limited
Names of other related parties with whom transactions have taken place during the year
Key Management Personnel:
Relation
Name of the related party
Key Management Personnel
Vsevolod Rozanov
List of Fellow Subsidiaries is as below :
- Intracom S.A Telecom Solutions
- OJSC Intellect Telecom
- Sitronics Telecom Solutions
- OJSC Mobile Telesystems
- JSC Sitronics Telecom Solutions
- Sitronics Intracom India Private Limited
- Sitronics India Private Limited
- Insitel Services Private Ltd
61
Name of Party
JSFC Sistema
Description
Car hire charges
Sales of Car
Interest on loan
(grossed up)
Loan received /
(repaid)
Interest Outstanding
receivable/(pay able)
Loan outstanding
receivable/ (payable)
Balance receivable
/ (payable)
Shyam Internet Services Ltd.
Purchase of services
Sale of services
Balance receivable
/ payable
Intracom S.A. Telecom Solutions
Purchase of project
services
Balance receivable/
payable
OJSC Intellect Telecom
Purchase of project Service
Balance receivable/(payable)
Sitronics Telecom Solutions
Supply of equipments
IT services taken
JSC Sitronics Telecom Solutions
IT Services taken
OJSC Mobile Telesystems
Brand fees
Mr. Vsevolod Rozanav
Managerial remuneration
Balance receivable / (Payble)
Sitronics Intracom India Private Limited AMC services received
Purchase of project services
Balance receivable / (payable)
Sitronics India Private Ltd.
Supply of equipments
Purchase of Sim Card
AMC services received
Technical services-system
integration
Software purchases
Insitel Services Private Ltd
Insurance of Preference
Shares
(refer note 37)
April
Balance
April
Balance
2012 to
as on 31
2011 to
as on 31
March 2013 March 2013 March 2012 March 2012
2
2
-
4
-
-
114
-
608
-
12,482
-
(11,992)
-
-
(87)
-
-
-
(12,482)
-
-
5
23
-
3
23
-
-
43
-
2
19
-
8
165
86
12
17
130
37
35
1
18
(13)
(94)
(6)
(81)
(15)
-
3
154
125
14
93
90
79
134
11
33
(20)
5
(201)
(9)
(76)
(77)
-
7
-
(5)
10
23
-
(5)
60,000
-
-
-
-
-
-
-
The remuneration to the key managerial personnel does not include the provisions made for gratuity and leave benefits, as they are
determined on an actuarial basis for the Company as a whole.
JSFC Sistema, holding company, has given corporate guarantee to lenders for various fund and non fund facilities availed by the
Company.
62
29)
Lease commitments
a)
Where the company is a lessee
The Company has entered into various lease agreements for leased premises, which expire at various dates over the next
fifteen years. Lease rental expense for the year was Rs.397 (2012 - Rs.389).
Future lease payments under operating leases are as follows:
Payable not later than one year
Payable later than one year and not later than five years
Payable later than five years
31 March 2013
————————
295
901
288
————————
31 March 2012
————————
397
1,359
570
————————
The escalation clause includes escalation at various periodic levels ranging from 0 to 15 percent includes option of renewal
from 0 to 15 years and there are not restrictions imposed on lease arrangements.
b)
Where the company is a lessor
(i)
Indefeasible Right to Use (IRU)
During the year ended 31 March 2005, the Company has entered into Indefeasible Right of Use contract for use of optical fiber
with telecom operators for a period of 15 years. The gross carrying amount and accumulated depreciation of the optical fiber
is Rs.238 (2012- Rs.238) and Rs.118 (2012 - Rs.107). The income and depreciation recognised in the Profit and Loss for the year
is Rs.13 (2012 -Rs.13) and Rs.12 (2012 – Rs.12) respectively.
Future minimum lease receipts under operating leases are as follows:
31 March 2013
31 March 2012
————————
————————
Recoverable not later than one year
13
13
Recoverable later than one year and not later than five years
64
64
Recoverable later than five years
16
29
————————
————————
93
106
————————
————————
(ii)
The Company has also entered into an agreement to give optical fiber in exchange on IRU basis for a period of 15 years. Due
to the nature of the transaction, it is not possible to compute gross carrying amount, depreciation for the year and accumulated
depreciation of the asset given on operating lease as at 31 March 2013 and accordingly, disclosures required by AS 19 is not
provided.
(iii)
Car hire agreement
A Car hiring agreement was entered for a period of three years, which is having gross book value of Rs.4 and accumulated
depreciation of Rs.2. Car hiring income for the year is Rs.2 (2012 - Rs 4).
Future lease receipts under operating leases are as follows:
31 March 2013
31 March 2012
————————
————————
Receivable not later than one year
2
2
Receivable later than one year and not later than five years
2
Receivable later than five years
————————
————————
30)
Earnings per share (EPS)
Net loss after tax as per statement of profit and loss
Weighted average number of equity shares in calculating basic and diluted EPS
Loss per Share (equity shares, par value of Rs.10/- each)
Basic and diluted (in Rs.)
Net loss after tax as per statment of profit and loss from continuing operations
Weighted average number of equity shares in calculating basic and diluted EPS
Loss per Share (equity shares, par value of Rs.10/- each)
Basic and diluted (in Rs.)
31 March 2013
————————
(28,817)
31 March 2012
————————
(31,588)
3,193,920,000
3,193,920,000
(9.02)
(9.89)
(22,978)
(24,177)
3,193,920,000
3,193,920,000
(7.19)
————————
(7.57)
————————
63
31)
Particulars of unhedged foreign currency exposure as at 31 March 2013
Particulars
Import Creditors
Loans
Interest
Total
32)
31 March 2013
Amount in Rs. Amount in USD
1,406
26
35,255
649
266
5
36,927
680
Capital commitments
Estimated value of contracts remaining to be executed
on capital account and not provided for (net of advances)
31 March 2012
Amount in Rs. Amount in USD
3,582
70
32,442
638
162
3
36,186
711
31 March 2013
————————
31 March 2012
————————
291
————————
4,122
————————
31 March 2013
————————
31 March 2012
————————
For lease commitments, refer note 29
33)
Contingent liabilities
Claims not acknowledged as debt
-Income tax
- Entry tax
-DoT demands
-Others (Refer not (b) below)
(a)
52
31
9
3
783
489
385
————————
————————
1,333
419
————————
————————
DoT demands include demands raised for contentious matters relating to computation of license fees and spectrum charges. The
above matters are being contested by the Company and the Company does not expect any further liability relating to these matters.
(b)
During financial year 2008-2009, the Company has received demands from telecom operator aggregating to Rs 190, on account
of revision of access charges for the period from June 2001 to May 2003. On 27 April 2005 Hon’ble TDSAT has struck down the
unilateral revision in the rates of access charges by telecom operator. Telecom Operator has preferred an appeal in Hon’ble
Supreme Court against the order of TDSAT. Considering that the final decision is pending with the Hon’ble Supreme Court,
the Company has disclosed the amount under dispute of Rs 190 as contingent liability.
(c)
As at 31 March 2013, Rs 247 (2012 - Rs 247) was due by the Company to a vendor in respect of equipment supplied under a
contract (‘contract’), against which the vendor was obliged to ensure a total financing solution. As the vendor defaulted in its
contractual obligation in providing a total financing solution, it executed an agreement (‘agreement’) with Shyam Group of
Companies to subscribe to warrants aggregating 50 per cent of the value of supplies of equipment and services. Disputes have
arisen between the Company and the vendor with respect to fulfillment of obligations under the contracts and the agreement.
The vendor has also made a counter claim for an interim award of Rs 288, which has been rejected by the Arbitral Tribunal. The
management of the Company believes that the default under the contracts and the agreement primarily lies on the part of the
vendor. Since, the matter is under process for resolution with the Arbitral Tribunal and based on legal opinion from the
Company’s counsel, nothing has been provided on account of additional contingent liability in these financial statements.
(d)
The Company has discontinued telecom services in thirteen Telecom Circles pursuant to the Hon’ble Supreme Court’s of
India’s Order, dated 11 March 2013. The said Order is in consequence to an earlier judgment of Hon’ble Supreme Court of
India, dated 2 February 2012, relating to cancellation of Company’s Telecom Licenses in twenty-one Telecom Circles. The
Company has participated in the auction for spectrum and won the spectrum in eight Telecom Circles (refer Note 1 (b)), it has
discontinued operations in the balance thirteen Telecom Circles pursuant to the subsequent Court Orders. As a result of such
discontinuance, the Passive Infrastructure (PI) vendors have demanded compensation amounting to Rs. 5,220 under their
contracts with the Company due to pre-mature termination. The Company, based on independent legal opinion, believes such
demands to be untenable, since the discontinuance of operations is a ‘Force Majeure Act’ and not the act of the Company. While
the matter is in discussion with the vendors, the Company is confident, based on the above legal position that no obligation /
liability would arise on the Company. Accordingly, no provision has been made in these financial statements.
34)
Expenditure in foreign currency (on accrual basis)
Interest
Finance setup costs
Project Management & Maintenance Service
Advertisement & marketing expenses - MTS brand fee
Other Services
64
31 March 2013
————————
1,172
781
209
17
25
————————
2,204
————————
31 March 2012
————————
1,208
459
379
14
114
————————
2,174
————————
35)
Earning in foreign currency (on accrual basis)
Data branding (refer note 37)
International In Roaming
31 March 2013
————————
2
————————
2
————————
31 March 2012
————————
————————
————————
36)
Payment to auditors (excluding service tax)*
Statutory audit
Other services
Reimbursement of out of pocket expenses
31 March 2013
————————
4
4
1
————————
9
————————
31 March 2012
————————
4
3
1
————————
8
————————
37)
Details of rounded off amounts
* Included in legal and Professional fees
The financial statements are presented in Rs million. Those items which are required to be disclosed and which are not
represented in the financial statements due to rounding off to nearest million are given as follows:
Note
4
5
11
22
25
28
35
27
Description
Capital Reserve
Wealth tax
Provision for contingencies and other provisions
Related party transactions
JSFC Sistema
Balance as on 31 March 2013 :
(payable)/receivable
Insitel Services Private Ltd
Earning in foreign currency
Financing activities
31 March 2013
————————
0.006
31 March 2012
————————
0.006
0.440
0.465
0.249
0.150
0.200
0.153
0.158
0.295
(0.017)
(0.063)
38)
Segmental reporting
The primary segment reporting format is determined on the basis of business segment. The Company has only one business
segment, which is providing unified access services. Accordingly, the amounts appearing in these financial statements relate of
this primary business segment. The secondary segment reporting format is determined on the basis of geographical area in
which the Company provides services. The Company operates only in one geographical segment namely, India.
39)
The Company has appointed independent consultants for conducting Transfer Pricing study to determine whether the transactions
with associate enterprises were undertaken at “arms length prices”. Adjustments, if any arising from the transfer pricing study
shall be accounted for as and when study is completed. As per the management of the Company, all international transactions
with associate enterprises are undertaken at negotiated contracted prices on usual commercial terms.
40)
Value of imports calculated on CIF basis
Import of capital equipment and spares
41)
31 March 2013
————————
527
31 March 2012
————————
4,617
Previous years comparatives
Previous year’s comparatives have been reclassified/regrouped where necessary to conform with current year’s presentation.
Partner
Date : May 28, 2013
Sd/Vsevolod Rozanov
DIN : 02356528
Sd/Sergey Savchenko
Sd/Alok Tandon
Director
DIN : 00027563
Sd/Vishal Kohli
Company Secretary
65
STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO
SECTION 212 OF THE COMPANIES ACT, 1956
1.
Name of the Subsidiary Company
2.
Financial Year of the Subsidiary Company ended on
31st March 2013
3.
Financial Year of Holding Company ended on
31st March 2013
4.
Holding Company’s Interest as on 31.03.2013
100%
5.
Net aggregate amount of profit / (loss) of the Subsidiary
Holders of the entire issued, subscribed & paid up
Company so far as it concerns the members of Sistema Shyam
Equity share capital of 750000 shares of Rs 10 each.
TeleServices Limited.
(a) Not dealt with the accounts of Sistema Shyam TeleServices
Limited.
(i) For the subsidiary’s financial year ended on 31.03.2013
Rs (20,69,242)
(ii) For the previous subsidiary’s financial year of
Rs (39,054,857)
subsidiary’s since it became Subsidiary of Sistema
Shyam TeleServices Limited.
(b) Dealt with the accounts of Sistema Shyam TeleServices
Nil
Limited.
(i) For the subsidiary’s financial year ended on 31.03.2013
Nil
(ii) For the previous subsidiary’s financial year of
subsidiary’s since it became Subsidiary of Sistema
Shyam TeleServices Limited.
6.
Material
changes
which
have
occurred
between
the end of financial year of the Subsidiary Company
and the end of the holding company’s financial year in
respect of :
(a) Fixed Assets (including capital work in progress of the
subsidiary company)
(b) Investment of subsidiary company.
(c) Money lent by subsidiary company.
(d) Money borrowed by Subsidiary company for
any purpose other than that of meeting current
liabilities.
66
Nil
D I R E C TO R S ’ R E P O RT
Dear Members,
Meeting and being eligible offers himself for reappointment.
Your Directors are pleased to present the 13th Annual Report
During the reported period, Mr. Atul Joshi and Mr. Arkady
on the Business and the Operations of the Company together
Kochetkov resigned as Directors of the Company w.e.f. 24th
with the Audited Annual Accounts for the Financial Year ended
May 2013 & 31st May 2013 respectively. The Board places on
31st March, 2013.
record its deep sense of appreciation for the valuable services
CORPORATE REVIEW
The total income of your Company for the year under review is
Rs. 335.71 lacs as against Rs. 218.12 lacs for the previous fiscal
and it represents a considerable increase of approx. 53% in
total income on year to year basis. However, due to
corresponding increase in the operating expenses, your
Company has suffered a Net loss of Rs. 20.69 lacs.
Your Company provides internet services with the brand name
rendered by them during their tenure as Directors of the
Company.
Mr. Leonid Musatov and Ms. Neera Sharma were appointed as
Additional Directors of the Company w.e.f. 24th May 2013 and
they hold office only up to the date of the ensuing Annual General
Meeting of the Company. The Board recommends their
appointment as Director in the ensuing Annual General Meeting.
FIXED DEPOSITS
of ‘Infinity’ and is one of the reputed and well known internet
Your Company has not accepted deposits from public under
services providers providing high quality internet services in
Section 58A of the Companies Act, 1956.
the State of Rajasthan. The Company is having a Category B ISP
License and currently providing internet services in 131 cities
AUDITORS AND AUDITORS’ REPORT
of Rajasthan. The Company is equipped with world class
M/s. Mehra Goel & Co., Chartered Accountants, retiring Auditors
infrastructure, with dedicated Optic Fiber Cables, Digital
of the Company, expressed their willingness to continue as
Modems, Fully Automated Helpdesk, a Users-to-Lines Ratio
Auditors, if reappointed at the ensuing Annual General Meeting.
conforming to global standards, and the promise of a Multi
flavored Internet Access. Your Company always keeps its
infrastructure updated in accordance with latest modern
technology. Your Company is operating its services across
DIRECTORS’ RESPONSIBILITY STATEMENT
In terms of the provisions of Section 217(2AA) of the
Companies Act, 1956, your Directors confirm as under that
Rajasthan powered by its state of the art data center
commissioned at Jaipur consisting of latest of Routers, Servers,
i.
accounting standards have been followed.
Firewalls and fully redundant architecture.
As earlier reported, your Company has applied for category-A
In the preparation of the annual accounts, the applicable
ii.
Appropriate accounting policies have been selected and
ISP license for providing Internet services on different
applied consistently and judgment and estimates that are
technologies on All India basis and approval for the same is still
reasonable and prudent have been made so as to give a
awaited.
true and fair view of the state of affairs of the Company at
the end of the financial year ended March 31, 2013 and of
DIVIDEND
the Loss of the Company for the year ended on that date.
In view of losses incurred during the year under review, your
Directors regret their inability to recommend any dividend.
iii. Proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of
DIRECTORS
the Companies Act, 1956 for safeguarding the assets of the
In terms of the provisions of the Section 256 of the Companies
Company and for preventing and detecting fraud and other
Act 1956, Mr.T. Narasimhan retires at the ensuing Annual General
irregularities have been taken.
67
iv.
The annual accounts have been prepared on a “going concern
b)
basis”.
The Company has not imported technical know-how. Your
Company has not yet established any separate R&D
PARTICULARS OF EMPLOYEES
There was no employee as per the provisions of Section 217
(2A) of the Companies Act, 1956, getting a remuneration
Technology Absorption, Adaptation and Innovation
facilities.
c)
Foreign Exchange Earnings & Outgo
aggregating Rs. 60,00,000/- or more per annum if employed
During the year under review, the Company has not earned
throughout the year and Rs. 5,00,000/- per month or more if
any foreign currency but has incurred expenditure of Rs.
employed for a part of the year.
2,27,419/- during the financial year 2012-13.
PARTICULARS OF CONSERVATION OF ENERGY,
COMPLIANCE CERTIFICATE
TECHNOLOGY ABSORPTION AND FOREIGN
The Company has obtained a Compliance Certificate from
EXCHANGE EARNINGS & OUTGO
Practicing Company Secretary, pursuant to provision of section
Particulars with respect to Conservation of Energy, Technology
Absorption and Foreign Exchange Earnings and Outgo, as per
Section 217(1) (e) of the Companies Act, 1956 read with the
Companies (Disclosure of Particulars) Rules, 1988 are given
below:
a)
Conservation of Energy
Your Company, a telecommunication service provider,
383A of the Companies Act, 1956.
ACKNOWLEDGEMENT
Your Directors acknowledge with gratitude the assistance, cooperation and support received by the Company from the
Department of Telecommunication, various State and Central
Government Authorities and the Banks.
For & on behalf of the Board of Directors
requires minimal energy consumption and every effort has
been made to ensure the optimal use of energy, avoid
waste and conserve energy as far as possible.
68
Place : New Delhi
Sd/T. Narasimhan
Chairman of the Meeting
DIN : 00041112
INDEPENDENT AUDITORS’ R E P O R T
To the Members of Shyam Internet Services Limited
Report on the Financial Statements
We have audited the accompanying financial statements of the
Shyam Internet Services Limited, which comprise the Balance
Sheet as at 31st March, 2013, the Statement of Profit and Loss
and the cash flow statement for the year then ended and a
summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Financial
Statements
Management is responsible for the preparation of these financial
statements that give a true and fair view of the financial position,
financial performance and cash flows of the company in
accordance with accounting principles generally accepted in India
including Accounting Standards referred to in Section 211(3C)
of the Companies Act, 1956 (“the Act”). This responsibility
includes the design, implementation and maintenance of internal
control relevant to the preparation of the financial statements
that are free from material misstatement, whether due to fraud
or error.
Opinion
In our opinion and to the best of our information and according
to the explanations given to us, the aforesaid financial statements
give the information required by the Companies Act,1956, in
the manner so required and give a true and fair view in conformity
with the accounting principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the
Company as at 31stMarch, 2013;
(b) in the case of the Statement of Profit and Loss, of the Loss
for the year ended on that date; and
(c) in the case of the Cash Flow Statement, of cash flows for the
year ended on that date.
Report on Other Legal and Regulatory Matters
1.
As required by the Companies (Auditor’s Report) Order,
2003 (“the Order”) issued by the Central Government of
India in terms of Section 227(4A) of the Act, we give in the
Annexure a statement on the matters specified in paragraphs
4 and 5 of the Order.
2.
As required by Section 227(3) of the Act, we report that:
(a)
we have obtained all the information and explanations
which to the best of our knowledge and belief, were
necessary for the purpose of our audit.
(b)
in our opinion, proper books of account as required
by law have been kept by the Company so far as appears
from our examination of those books.
(c)
the Balance Sheet and Statement of Profit and Loss
Account dealt with by this report, are in agreement
with the books of account and the returns.
(d)
In our opinion, the Balance Sheet, Statement of Profit
and Loss and Cash Flow Statement comply with the
Accounting Standards referred to in sub-section (3C)
of section 211 of the Companies Act, 1956.
(e)
on the basis of the written representation received
from the directors and taken on record by the Board
of Directors, none of the directors is disqualified as
on 31st March, 2013 from being appointed as a director
in terms of clause (g) of subsection (1) of section 274
of the Companies Act, 1956.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in
accordance with the Standards on Auditing issued by the Institute
of Chartered Accountants of India. Those Standards require
that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers
internal control relevant to the Company’s preparation and fair
presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances. An audit
also includes evaluating the appropriateness of accounting
policies used and the reasonableness of the accounting estimates
made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
For Mehra Goel & Co.
Firm Registration No: 0517N
Place: New Delhi
Date: May 27, 2013
Sd/R.K.MEHRA
Partner
Membership No: 6102
69
ANNEXURE
(Referred To In Paragraph 3 of Our Report of Even Date)
I.
The Company has maintained proper records showing
VI.
full particulars, including quantitative details and situation
information and explanations given to us, the Company
of fixed assets. The fixed assets covering significant value
has not accepted any deposits covered under Section 58
have been physically verified by the management during
A and 58 AA of the Companies Act, 1956.
the year, which in our opinion is reasonable, having
regard to the size of the Company and the nature of its
VII.
reasonable internal audit system commensurate with
given by the management, no material discrepancies have
its size and nature of its business.
been noticed on such verification.
No substantial part of fixed assets has been disposed off
VIII.
prescribed under sec 209 (1) (d). Accordingly the
The company is in the business of providing internet
provisions of clause 4 (viii) of the order are not applicable
services. Accordingly clause 4 (ii) relating to physical
to the company.
verification of inventory is not applicable on the company.
IV.
IX.
is generally regular in depositing undisputed statutory
has not taken/granted any loans, secured/unsecured from/
dues namely Investor Education and Protection fund,
to companies, firms or other parties listed in the register
Wealth Tax, Custom Duty, Service Tax, Excise Duty, Cess
maintained under Section 301 of the Companies Act,
and any other statutory dues, where applicable with the
1956.
appropriate authorities. There were no arrears of
outstanding statutory dues at the last day of financial
year for a period of more than six months from the date
they became payable.
control procedures commensurate with the size of the
Company and the nature of its business for the purchase
Further according to the information and explanations
of machinery, equipment and other assets and for the
given by the management, there were no disputed dues
provision of the services, inventory, fixed assets and with
of sales tax, income tax, custom duty, wealth tax, excise
regard to services rendered. During the course of our
duty and Cess as on the balance sheet date.
audit, no major weakness has been noticed in the internal
controls.
X.
The company’s accumulated losses at the end of the
financial year are more than fifty percent of its net worth.
Further the company has incurred cash losses during
explanations given to us, there are no transactions made
the financial year and in the immediate preceding financial
in pursuance of contracts or arrangements entered in
year.
the register maintained under section 301 of the
companies act, 1956
70
To the best of our knowledge and according to the
explanations given to us, there are adequate internal
V.
As per information and explanations given to us, the
company is not required to maintain cost records as
during the year, which has affected the going concern.
III.
To the best of our knowledge and as per the information
and explanations given to us, the Company has a
assets. On the basis of the information and explanations
II.
XI.
In our opinion, the Company has not defaulted in
repayment of dues to Financial Institutions or banks or
XVII. According to the Cash Flow Statement and other
debenture holders.
XII.
records examined by us and information and
explanations given to us, on an overall basis, funds raised
On the basis of verification of accounts and records
on short term basis have, prima facie, not been used
maintained by the Company and to the best of our
during the year for long term investment.
knowledge & belief, the Company has not granted any
loans and advances on the basis of security by way of
XVIII. According to the information & explanations given to
pledge of shares, debentures and other securities.
XIII.
us, the Company has not made any preferential allotment
of shares during the year to parties and companies
In our opinion, and to the best of our information and
covered in the Register maintained under Section 301
according to the explanation by the management, we are
of the Companies Act, 1956.
of the opinion that the company is neither a chit fund
XIV.
nor a nidhi /mutual benefit fund/ society. Therefore the
XIX. According to the information & explanations given to
provisions of the clause 4 (xiii) of the order are not
us, the Company has not issued any debentures during
applicable to the company.
the year.
To the best of our knowledge and according to
According to the information & explanations given to
information given to us, the Company is not dealing or
us, the Company has not raised any money by Public
trading in shares, securities and other investments.
Issue during the year.
Accordingly the provisions of clause 4 (xiv) or the order
are not applicable to the company.
XV.
XX.
XXI. Based upon the audit procedure performed and
information and explanations given by the management,
we report that no fraud on or by the company has been
information and explanation given to us, the Company
noticed or reported during the year.
has not given any guarantee for loans taken by others
from Banks / Financial Institutions.
XVI. To the best of our knowledge and according to the
information and explanations given to us, Company had
not taken any term loan during the previous year.
Place: New Delhi
Date: May 27, 2013
Sd/R.K.MEHRA
Partner
Membership No: 6102
71
BALANCE SHEET AS AT 31ST MARCH, 2013
(All amounts in Rupees, unless stated otherwise)
NOTES
——————
EQUITY AND LIABILITIES
As at
March 31, 2013
(Rupees)
——————
As at
March 31, 2012
(Rupees)
——————
SHAREHOLDERS’ FUNDS
Share capital
3
7,500,000
7,500,000
4
(41,124,099)
——————
(33,624,099)
——————
(39,054,857)
——————
(31,554,857)
——————
Trade payables
5
46,269,089
40,436,127
6
10,102,699
——————
56,371,788
——————
22,747,689
——————
——————
5,524,266
——————
45,960,393
——————
14,405,536
——————
——————
7
782,482
814,642
8
3,000
——————
785,482
——————
3,000
——————
817,642
——————
Trade receivables
9
9,975,392
2,560,747
10
5,367,492
5,450,291
11
53,500
107,600
12
6,565,823
——————
21,962,207
——————
22,747,689
——————
——————
5,469,256
——————
13,587,894
——————
14,405,536
——————
——————
CURRENT LIABILITIES
TOTAL
ASSETS
NON-CURRENT ASSETS
Fixed assets
Tangible assets
CURRENT ASSETS
TOTAL
Background
1
2
Firm Registration No. 000517N
Sd/R.K. Mehra
Partner
Membership No: 6102
Place : New Delhi
Date : May 27, 2013
72
For and on behalf of the Board of Directors of Shyam Internet Services Limited
Sd/T. Narasimhan
Director
Sd/Ms. Neera Sharma
Director
STATEMENT OF PROFIT & LOSS ACCOUNT FOR THE YEAR
ENDED 31ST MARCH, 2013
For the Year
Ended
March 31, 2013
(Rupees)
——————
32,834,385
For the Year
Ended
March 31, 2012
(Rupees)
——————
21,533,309
14
736,753
——————
33,571,138
——————
——————
279,031
——————
21,812,340
——————
——————
Network operating expenses
15
33,707,644
28,547,438
Administrative and other expenses
16
1,502,939
1,800,771
Sales and marketing expenses
17
378,619
——————
35,589,202
——————
(2,018,064)
——————
——————
19,018
178,147
——————
30,526,356
——————
(8,714,016)
——————
——————
19,552
32,160
130,164
——————
(2,069,242)
——————
——————
(8,863,732)
——————
——————
(2,069,242)
——————
——————
——————
(8,863,732)
——————
——————
Basic
(2.76)
(11.82)
Diluted
(2.76)
(11.82)
Revenue from operations (net)
NOTES
——————
13
Other income
Total revenue (I)
Expenses
Total expenses (II)
Earnings before license fee, interest, tax, depreciation (I-II)
Finance costs
18
Depreciation and amortisation expenses
7
Provision for Accelerated Depreciation on CWIP
Loss before tax
Tax expenses
Loss for the year
Earnings per equity share [nominal value of
share Rs 10 (31 March 2013 Rs 10)]
19
Background
1
2
Sd/R.K. Mehra
Partner
Membership No: 6102
Sd/T. Narasimhan
Director
Sd/Ms. Neera Sharma
Director
Place : New Delhi
Date : May 27, 2013
73
CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2013
A. CASH FLOW FROM OPERATING ACTIVITIES
Net Profit before Tax and before prior period/ extra ordinary items
Adjustment for :
Depreciation
Provision for Doubtful debts
Interest Received
creditors written back
Operating profit before working capital change
Adjustment for :
(Increase)/ Decrease in Long term loan and advances
(Increase)/ Decrease in Short term loan and advances
(Increase)/ Decrease in Trade Receivables
(Increase)/ Decrease in Other current assets
Increase /(Decrease) in Trade Payable
Increase /(Decrease) in Other Current Liabilities
Cash Generated from operations
Direct Taxes refund/(paid) (Inclusive of TDS)
Cash flow before prior period items
Net Cash (used in)From Operating Activities
For the Year
Ended
March 31, 2013
(Rupees)
——————
For the Year
Ended
March 31, 2012
(Rupees)
——————
(2,069,242)
(8,863,732)
32,160
682,110
(209,994)
(526,759)
(2,091,725)
130,164
932,231
(279,031)
(8,080,368)
54,100
(8,096,755)
(54,223)
5,832,962
4,578,433
526,759
749,551
(1,042,343)
(292,792)
(292,792)
90,000
(829,888)
(693,819)
8,713,603
1,278,805
478,334
409,168
887,503
887,503
B CASH FLOW FROM INVESTING ACTIVITIES
(Purchase)/Sale of Fixed Assets
Purchase of Investment/sale of Investment
Interest Received(Net of TDS)
Net cash (used in) / from investing activities
(209,994)
209,994
-
1,734,563
257,881
1,992,444
C CASH FLOW FROM FINANCING ACTIVITIES
Net cash (used in) / from Financing Activities
Net increase/(Decrease) in cash and cash equivalents (A+B+C)
Cash and cash equivalents at beginning of the Period
Cash and cash equivalents at the end of the Period
(292,792)
3,210,598
2,917,805
2,879,947
330,651
3,210,598
Notes : 1
Cash flow statement has been prepared following the indirect method execpt in case of dividend paid/received, purchase and
sale of investment and taxes paid which have been considered on interest paid/received basis of actual movements of cash.
2
Purchase of fixed assets includes movement of Capital Work-in-progress between the beginning and end of the Year.
3
Proceeds from short term borrowing are shown net of repayments.
4
Cash and cash equivalents represent cash balance , bank balance as well as short term deposits.
Auditors’ Report
Sd/R.K. Mehra
Partner
Membership No: 6102
Place : New Delhi
Date : May 27, 2013
74
Sd/T. Narasimhan
Director
Sd/Ms. Neera Sharma
Director
NOTES FORMING PART OF THE BALANCE SHEET:
NOTE - 3
SHARE CAPITAL
A. Authorised
7,50,000 Equity Shares of Rs.10/- each.
B. Issued, Subscribed and Paid up*
7,50,000 (P.Y. 7,50,000) Equity Sharesof Rs.10/- each fully paid up
As at
As at
March 31, 2013
(Rupees)
———————
March 31, 2012
(Rupees)
———————
7,500,000
———————
7,500,000
———————
7,500,000
———————
7,500,000
———————
7,500,000
———————
7,500,000
———————
———————
7,500,000
———————
7,500,000
———————
———————
a) Terms/rights attached to Equity Shares
The Company has only one class of Equity Shares having a par value of Rs. 10 per share. Each holder of Equity shares is entiltled
to one vote per share.
b) Reconciliation of the Equity Shares outstanding at the beginning and at the end of the Reporting Period
Particulars
Outstanding at the beginning of the year
As at March 31, 2013
No. of Shares
Amount (Rs.)
No. of Shares Amount (Rs.)
750,000
7,500,000
750,000
7,500,000
750,000
7,500,000
750,000
7,500,000
c) Detail of Shareholders holding more than 5% share capital as on the balance sheet date
Particulars
Sistema Shyam Teleservices Ltd.
No. of Shares
% of Holding
No. of Shares
% of Holding
750,000
100.00
750,000
100.00
d) Shares in respect of each class held by its holding company:Out of equity shares issued by the company, shares held by its holding company are as below:
Name of Shareholders
Holding Company
NOTE - 4
RESERVES AND SURPLUS
Surplus
Opening Balance
Add:- Net Profit/(Loss) for the current Year
Closing Balance
NOTE - 5
No. of Shares
Amount (Rs.)
7,50,000
75,00,000
No. of Shares Amount (Rs.)
7,50,000
As at
March 31, 2013
(Rupees)
———————
(39,054,857)
(2,069,242)
———————
(41,124,099)
———————
———————
75,00,000
As at
March 31, 2012
(Rupees)
———————
(30,191,125)
(8,863,732)
———————
(39,054,857)
———————
———————
As at
As at
March 31, 2013
March 31, 2012
(Rupees)
(Rupees)
——————————————46,269,089
40,436,127
———————
———————
46,269,089
40,436,127
———————
———————
———————
———————
Under the Micro, Small and Medium Enterprises Development Act, 2006, certain disclosures are required to be made relating
to dues to Micro, Small and Medium enterprises. Based on the information available with the Company, there are no parties
who have been identified as micro, small and medium enterprises based on the confirmations circulated and responses
received by the management.
CURRENT LIABILITIES
TRADE PAYABLES*
From Micro and Small Enterprises
Other than Micro and Small Enterprises
*
75
NOTE - 6
OTHER CURRENT LIABILITIES
As at
March 31, 2013
(Rupees)
———————
As at
March 31, 2012
(Rupees)
———————
270,841
270,841
Security Deposit from customers
Advance received from customers
266,991
193,561
Application money received and due for refund
1,466,020
1,466,020
Unaccured Revenue
7,352,715
3,295,891
746,132
———————
10,102,699
———————
———————
297,953
———————
5,524,266
———————
———————
Other payables
NOTE - 7
FIXED ASSETS
GROSS BLOCK
S. Asset
No.
DEPRECIATION
As On
01 Apr 12
Additions
during
The Year
Sold during
The Year
As At
31 Mar 13
As On
01 Apr 12
(Rs.)
(Rs.)
(Rs.)
(Rs.)
(Rs.)
(Rs.)
14,709,598
-
-
14,709,598
13,945,819
-
218,485
NET BLOCK
During Adjustments
The Year
As at
31 Mar 13
As at
31 Mar 13
As at
31 Mar 12
(Rs.)
(Rs.)
(Rs.)
(Rs.)
12,444
-
13,958,263
751,335
763,779
167,622
19,716
-
187,338
31,147
50,863
Tangible Fixed Assets
1
Plant & Machinery
2
Computer
218,485
TOTAL
14,928,083
-
-
14,928,083
14,113,441
32,160
-
14,145,601
782,482
814,642
Previous Year
14,928,083
-
-
14,928,083
13,938,277
130,164
-
14,113,441
814,642
944,806
NOTE - 8
NON-CURRENT ASSETS
As at
March 31, 2013
(Rupees)
———————
As at
March 31, 2012
(Rupees)
———————
3,000
———————
3,000
———————
———————
3,000
———————
3,000
———————
———————
As at
March 31, 2013
(Rupees)
————————
As at
March 31, 2012
(Rupees)
————————
LONG-TERM LOAN AND ADVANCES
(Unsecured, considered good)
Security Deposit
NOTE - 9
CURRENT ASSETS
TRADE RECEIVABLES
(Unsecured, considered good unless otherwise stated )
Considered Doubtful
Outstanding Due Debts for a period Exceeding Six Months
1,614,341
Less: Provision for Doubtful Debts
1,614,341
Outstanding Due Debts for a period Less than Six Months
76
932,231
9,975,392
—————
9,975,392
—————
—————
932,231
2,560,747
—————
2,560,747
—————
—————
NOTE - 10
CASH AND BANK BALANCES
Cash and Cash Equivalants
Balances with Banks
- In Current Account
Cash on hand
Other Bank deposits (including interest accrued)
Fixed Deposits having maturity period :- 3 to 12 Months
As at
March 31, 2013
(Rupees)
————————
As at
March 31, 2012
(Rupees)
————————
2,915,946
1,859
3,204,801
5,797
2,449,687
———————
5,367,492
———————
———————
2,239,693
———————
5,450,291
———————
———————
53,500
———————
53,500
———————
———————
107,600
———————
107,600
———————
———————
98,746
3,985,885
2,429,013
52,179
———————
6,565,823
———————
———————
86,620
3,952,743
1,386,669
43,224
———————
5,469,256
———————
———————
32,834,385
———————
32,834,385
———————
———————
21,533,309
———————
21,533,309
———————
———————
209,994
526,759
———————
736,753
———————
———————
211,489
67,542
———————
279,031
———————
———————
32,815,186
677,056
214,620
782
———————
33,707,644
———————
———————
28,366,207
168,548
12,683
———————
28,547,438
———————
———————
NOTE - 11
SHORT-TERM LOAN AND ADVANCES
Security Deposit
NOTE - 12
OTHER CURRENT ASSETS
Prepaid Expenses
Cenvat Recoverable(HOLD)
Advance tax (net)
Other Recoverables
NOTE - 13
REVENUE FROM OPERATIONS
Revenue from internet services
NOTE - 14
OTHER INCOME
Interest on deposits
Interest on I.Tax Refund
NOTE - 15
NETWORK OPERATING EXPENSES
Bandwidth Charges
Licence Fee for Dot ( AGR)
I.P. Charges
Software Expenses
77
As at
As at
March 31, 2013
(Rupees)
———————
March 31, 2012
(Rupees)
———————
15,968
15,824
100,000
40,000
60,000
365,600
148,620
5,565
77,305
7,771
682,110
———————
1,502,939
———————
———————
100,000
40,000
60,000
326,750
141,564
4,200
60,152
4,308
500
115,242
932,231
———————
1,800,771
———————
———————
378,619
———————
378,619
———————
———————
178,147
———————
178,147
———————
———————
1,883
17,135
———————
19,018
———————
———————
2,731
16,821
———————
19,552
———————
———————
(2,069,242)
750,000
1,466,020
146,602
896,602
(2.76)
(2.76)
10
(8,863,732)
750,000
1,466,020
146,602
896,602
(11.82)
(11.82)
10
NOTE - 16
ADMINISTRATIVE AND OTHER EXPENSES
Insurance Expenses
Auditors Remuneration:
- Audit fee
- Tax Audit fee
- Others
Legal & Professional Charges
Office Rent
Income Tax for Earlier Year
Printing & Stationery Expenses
Office Expenses
Bank Charges
Rates And Taxes
Bad debts
Provision for Doubtful Debts
NOTE - 17
SALES AND MARKETING EXPENSES
Incentive
NOTE - 18
FINANCIAL COST
Interest Charges
Interest on TDS
Bank Guarantee Charges
NOTE - 19
EARNING PER SHARE
Profit After Tax
Weighted average number of equity shares
Advance received for Equity shares
Dilutive Potential equity shares
Number of equity shares used to compute
Basic Earning (Loss) Per Share ( Rs.)
Diluted Earning Per Share (Rs.)*
Nominal Value of Equity Shares ( Rs.)
*
Diluted Earning Per share is same as Basic Earning Per share due to decrease in loss per share after allotment of fresh equity share.
78
NOTES TO ACCOUNTS
NOTE - 1
Background
The main object of the company is providing internet services. The Company has been granted Category ‘B’ on 18th December
2003 by the department of Telecommunication for a period of 15 years for providing internet services in the State of Rajasthan. The
Company was granted LOI and has applied for Category ‘A’ license for all India operation on 10th December, 2008. The Company
is a wholly owned subsidiary of Sistema Shyam Teleservices Limited.
NOTE - 2
Significant Accounting Policies
2.1
Presentation of Financial Statements :
The financial statements have been prepared in compliance to the requirements of the Companies Act 1956, applicable
Accounting Standards and the requirements of Part-I & II of Schedule-VI (revised).
2.2
Basis of preparation:
The Financial statements have been prepared under the historical cost convention, in accordance with applicable Accounting
Standards and provisions of the Companies Act, 1956 as adopted consistently by the Company except for defined benefit
pension/other funds obligations that have been measured at fair value. The carrying value of certain monetary items
denominated in foreign currency is translated at the exchange rates applicable on the date of balance sheet.
2.3
Use of Estimates :
The preparation of financial statements require estimates and assumptions to be made that affect the reported amount of
asset and liabilities on the date of the financial statements and the reported amount of the revenue and the expenses during
the reporting period. Difference between the actual results and estimates are recognized in the period in which the results
are known / materialized.
2.4
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation and impairment loss, if any. Cost comprises the purchase price
including taxes and duties (net of cenvat credit) and any attributable cost of bringing the asset to its working condition for
its intended use. Capital spares/ standby equipment are capitalised as part of the respective main assets, to which they relate
to. Any expenditure on upgradation of existing assets resulting in increase in their capacity and the benefits expected
therefrom is capitalised..
2.5
Depreciation/Amortisation
(i) Fixed assets are depreciated on written down value method at the rates and in the manner prescribed in Schedule XIV
to the Companies Act, 1956.
(ii) Fixed assets individually costing less than Rs 5 thousand are fully depreciated in the year of purchase.
2.6
Impairment of Assets
Carrying amount of cash generating units/Fixed assets are reviewed for impairment, if events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. The excess of recoverable amount over the carrying value
of the asset is charged, as an impairment loss to the statement of profit & Loss.
2.7
Intangible Assets
All expenditure on intangible items are expensed as incurred unless it qualifies as an intangible asset as defined in Accounting
Standard 26. The carrying value of intangible asset is assessed for recoverability by reference to the estimated future
discounted net cash flows that are expected to be generated by the asset. Where this assessment indicates a deficit, the
assets are written down to the market value or fair value as computed above.
2.8
Cash and Cash Equivalents
Cash and cash equivalents for the purpose of cash flow statements comprise cash at bank and cash in hand and short term
investments with an original maturity of three months or less.
79
NOTES TO ACCOUNTS
2.9
Foreign Currency Transactions
Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of
transactions. Monetary items denominated in foreign currency outstanding at the year end are translated at exchange rate
applicable on the date of Balance Sheet. Non-monetary items denominated in foreign currency are valued at the exchange
rate prevailing on the date of transaction. Any income or expenses on account of exchange difference either on settlement
or on translation is recognized in the profit and loss account.
2.10
Revenue Recognition and Receivable
(i)
Revenue: Revenue in respect of INTERNET access services is recognized over the period in which the related services
are rendered.
(ii) Provision for doubtful debts: Receivables are stated net of provision for doubtful debts. The Company provides for
outstanding in specific cases, where management is of the view, that the amount for certain customers are not recoverable.
2.11 Tax Expenses
Current tax is provided after taking credit for allowance and exemptions using the tax rates and laws that have been enacted
or substantially enacted by the Balance Sheet date. In case of matters under appeal due to disallowance or otherwise,
provision is made when the said liabilities are accepted by the company.
Deferred tax is provided on all temporary differences at the Balance Sheet date between the tax basis of assets and liabilities
and their carrying amounts for financial reporting purposes. Deferred tax asset arising from temporary differences are
recognized to the extent there is virtual certainty of realization of asset in future.
2.12
Earning per Share
Basic Earning per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
The number of shares used in computing diluted earning per share comprises the weighted average shares considered for
deriving basic earning per share, and also the weighted average number of shares, if any which would have been used in the
conversion of all dilutive potential equity shares.
2.13 Provisions
A provision is recognised when an enterprise has a present obligation as a result of past event and it is probable that an
outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions
are not discounted to its present value and are determined based on best estimate required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
20.
DOT has issued letter no. 820-01/2006-LR (Vol-II) Pt. dated 29.06.2012 for amendment of licence fee for internet service
provider ( ISP). As per the letter ISP companies have to pay license fee w.e.f. July 1st, 2012 on the basis of Adjusted Gross
Revenue (AGR). The company has made provision/payment for the 2nd & 3rd Qtr. On October 12, 2012, Hon’ble TDSAT has
passed an Order setting aside the Order. While the matter is under litigation, the Company is confident, based on the above
order and legal opinion from the Company’s counsel that no obligation / liability would arise on the Company. Accordingly,
no provision has been made for the period from 01.01.2013 to 31.03.2013.
21.
The accumulated losses of the company exceed the paid-up capital. In view of the assurance from the parent company of
financing the operations, the going concerns status has been adopted.
22.
Presently, revenues are derived from providing internet services in the state of Rajasthan. The operation for the year under
consideration have resulted in to net loss On conversion of LOI to license on all-India basis, the revenues will increase on
extending services on all –India basis.
23.
Holding company has provided its infrastructure facilities, sharing of manpower and customer care facility for providing
internet services by the company for which no cost has been incurred by the company.
24.
Expenditure in foreign currency
Particulars
Registration and Annual Fees
80
31.3.2013
2,27,419
(Amount in Rs.)
31.3.2012
1,82,971
NOTES TO ACCOUNTS
25.
Deferred Taxes
During the year ended 31 March 2013, the Company has incurred book loss of Rs 13,03,439 (2012 - 13), aggregating to
accumulated losses of Rs 4,01,16,563 (2012–13) as on that date, resulting into a tax loss carry forward situation. Though the
management is confident of generating profits in the future, there is currently no convincing evidence of virtual certainty that
the Company would reverse the tax loss carry forward. Accordingly, the Company has not recognized any deferred tax
assets resulting from the carry forward tax losses.
26.
The company has no dealings with Micro, Small and medium Enterprises Accordingly, the information required under the
said Act is not applicable
27.
Business Segments
The company is engaged in providing internet services, which in the context of Accounting Standard (AS-17) is considered
the only primary business segment.
28.
Employee Benefits
The company has not provided retirement benefits as the company has on its rolls less than 20 persons, the minimum
for applicability of P.F. and Gratuity. The provisions of AS-15 (Revised) 2006 as notified under Companies Accounting
Standard Rules (2006) are not applicable. Hence the information & disclosures required under the said AS have not
been furnished.
29.
Related Party Disclosures
Name of Related
Relations
party
Sistema Shyam
TeleServices Ltd
(Amount in Rs.)
Nature of
Transaction
Transactions
Holding
Revenue
46,41,761/-
Company
Bandwidth
Outstanding
Outstanding
31.03.2013
31.03.2012
47,190,362
4,73,64,502
Payable
Payable
2,32,28,100/-
Charges
30. Previous Period figures have been regrouped and reclassified to make them comparable wherever considered necessary.
31. Other information pursuant to Revised Schedule VI to the Companies Act, 1956 are NIL / Not Applicable to the company.
For MEHRA GOEL & CO.
Sd/R.K. Mehra
Partner
M. No. : 6102
Sd/T. Narasimhan
Director
Sd/Ms. Neera Sharma
Director
Place: New Delhi
Date: May 27, 2013
81
NOTICE OF 18TH ANNUAL GENERAL MEETING
Notice is hereby given that the 18th Annual General Meeting of the Members of Sistema Shyam TeleServices Limited will be
held at 10:00 A. M. on Monday, the 23rd day of September 2013 at Hotel Fortune Select Metropolitan, Near Nehru Sahkar Bhawan,
C-Scheme, Bais Godam Circle, Jaipur-302001, Rajasthan, India, to transact the following businesses:
ORDINARY BUSINESS
1.
To receive, consider and adopt the Audited Balance Sheet as at 31st March 2013 and the Profit and Loss Account for the year ended
on that date together with the Directors’ Report and the Auditors’ Report thereon.
2.
To appoint a Director in place of Mr. Alok Tandon, who retires by rotation and being eligible, offers himself for re-appointment.
3.
To appoint a Director in place of Mr. Ajay Khanna, who retires by rotation and being eligible, offers himself for re-appointment.
4.
To appoint a Director in place of Mr. Vikram Kaushik, who retires by rotation and being eligible, offers himself for re-appointment.
5.
To appoint a Director in place of Mr. Bharat Patel, who retires by rotation and being eligible, offers himself for re-appointment.
WITH SPECIAL NOTICE
6.
To consider and, if thought fit, to pass with or without modification(s), the following resolution as an Ordinary Resolution:
“RESOLVED THAT pursuant to the provisions of Section 224, 225 of the Companies Act, 1956, and on the recommendation
of the Audit Committee, M/s. Deloitte Haskins & Sells, Chartered Accountants, Gurgaon, be and are hereby appointed as
Statutory Auditors of the Company in place of retiring auditors, M/s. S. R. Batliboi & Associates LLP, Chartered Accountants,
Gurgaon who have shown their unwillingness for reappointment, to hold office from the conclusion of this Annual General
Meeting to the conclusion of the next Annual General Meeting at a remuneration and actual out of pocket expenses to be decided
by the Board of Directors of the Company.”
SPECIAL BUSINESS
7.
“RESOLVED THAT Mr. Anton Abugov, whose term of office as an Additional Director expires at this Annual General Meeting
and in respect of whom the Company has received a notice in writing under Section 257 of the Companies Act, 1956 proposing
the candidature of Mr. Anton Abugov for the office of Director, be and is hereby appointed as Director of the Company whose
period of office shall be liable to determination for retirement by rotation.”
8.
“RESOLVED THAT Mr. Dmitry Shukov, whose term of office as an Additional Director expires at this Annual General Meeting
and in respect of whom the Company has received a notice in writing under Section 257 of the Companies Act, 1956 proposing
the candidature of Mr. Dmitry Shukov for the office of Director, be and is hereby appointed as Director of the Company whose
period of office shall be liable to determination for retirement by rotation.”
9.
To consider and, if thought fit, to pass with or without modification(s), the following resolution as a Special Resolution:
“RESOLVED THAT pursuant to the provisions of Sections 198, 269, 309, 314 read with Schedule XIII and other applicable
provisions, if any, of the Companies Act, 1956 (including any statutory modifications or re-enactments thereof, for time being in
force) and subject to the approval of Central Government and / or any other Government Ministry / authority / body, and such
approval(s) / sanction(s) as may be necessary in any law, approval be and is hereby accorded for the appointment of Mr. Dmitry
Shukov (Non Resident), a Russian National as “Whole Time Director” under the designation of “Chief Executive Officer” of the
Company for a period of three years with effect from 1st June, 2013 to 31st May, 2016, on the terms and conditions as set out herein
below with liberty to the Board of Directors to alter, vary and modify the terms and conditions of the said appointment, in such
manner as may be agreed to between the Board of Directors and Mr. Dmitry Shukov and as may be agreed to between the Central
Government and the Board of Directors and acceptable to Mr. Dmitry Shukov:
82
TERMS AND CONDITIONS:
The main terms and conditions of appointment of Mr. Dmitry Shukov shall be as under:
DESCRIPTION
AMOUNT IN INR
1.
FIXED ANNUAL SALARY (GRO S S )
Rs.40,000,000
2.
PERFORMANCE LINKED INCENTIVE
Up to 100% of Annual Fixed Salary, subject to Board of
Directors decision and approval.
3.
LONG TERM INCENTIVE
4.
PERQUISITES AND BENEFITS
a.
LEASED ACCOMODATION/ HOUSE
He shall be provided with paid leased accommodation
RENT ALLOWANCE
with an annual limit of Rs.3,840,000
PERSONAL LIFE INSURANCE COVERAGE
For an amount the annual premium of which does not
b.
Subject to Board of Directors approved policy
exceed Rs.900,000
c.
MEDICLAIM INSURANCE COVERAGE
For self and his family for an amount the annual premium
of which does not exceed Rs.150,000
d.
COMPANY’S CAR WITH DRIVER
Company will provide AC car with Fuel, Maintenance
and Driver for business need / official duties
e.
OTHER BENEFITS AND ALLOWANCES
He shall be entitled for all other benefits and allowances
as may be available to him as per policy of the Company.
However, the value of such benefits/allowances shall
not exceed INR 4,000,000
5.
COMPENSATION FOR INVOLUNTARY
In case the services of Mr. Dmitry Shukov are terminated
TERMINATION OF SERVICES
by the Company involuntarily before the term, he shall
be paid one time compensation equal to three months
fixed salary and PLI on pro rata basis for the completed
period.
6.
TERMINAL BENEFITS:
A.
Company’s contributions towards Provident Fund/ Superannuation Fund or annuity Fund as per PF Act and
the rules of the Company.
B.
Gratuity: in accordance with the Scheme as applicable as per the rules of the Company.
‘RESOLVED FURTHER THAT in the event of loss or inadequacy of profits in any financial year during the currency of tenure
of Mr. Dmitry Shukov, as Whole Time Director, the remuneration and perquisites as approved by the Board, from time to time,
with in the aforesaid limits be paid to him as minimum remuneration.’
‘RESOLVED FURTHER THAT the said appointment of Mr. Dmitry Shukov as Whole Time Director of the Company under the
designation of “CEO” shall be subject to security vetting from the Ministry of Home Affairs, Govt. of India pursuant to the FDI
Policy issued by Ministry of Commerce and Industry, Department of Industrial Policy and Promotion (including any statutory
modifications or re-enactments thereof, if any, for the time being in force).’
‘RESOLVED FURTHER THAT any Director or Mr. Vishal Kohli, Company Secretary of the Company, be and are hereby
authorized individually to file necessary application(s) with the Central Government, to file necessary forms, documents, returns,
etc. with the Registrar of Companies or Govt. Authorities and to take all such steps as may be necessary, proper or expedient to
give effect to the aforesaid resolution.”
83
10. To consider and, if thought fit, to pass with or without modification(s), the following resolution as a Special Resolution:
“RESOLVED THAT pursuant to the provisions of Section 309, 310, 311 of the Companies Act 1956 read with Schedule XIII of
the Companies Act 1956, as amended up to date, approval of the members of the Company be and is hereby accorded to cash
payout of Rs. 21,540,002/- and Rs. 31,200,000/- to Mr. Vsevolod Rozanov as Long Term Incentive for the year 2011 and 2012
respectively as per the provisions of the LTI Policy of the Company already approved by Board and in force as on the date of
Board Meeting.’
‘RESOLVED FURTHER THAT any of the Directors and Mr. Vishal Kohli, Company Secretary of the Company, be and are
hereby severally authorized to sign, execute, authenticate and file necessary forms, applications, declarations and to take all other
necessary steps and actions for and on behalf of the Company as may be required and as may be deemed fit and appropriate to give
effect to the aforesaid resolution.”
11. To consider and, if thought fit, to pass with or without modification(s), the following resolution as a Special Resolution:
“RESOLVED THAT pursuant to the provisions of Section 309, 310, 311 of the Companies Act 1956 read with Schedule XIII of
the Companies Act 1956, as amended up to date, approval of the members of the Company be and is hereby accorded for the
payment of PLI to Mr.Vsevolod Rozanov for the year 2012 and 2013 as per details given hereunder in excess of maximum amount
of upto 100% (Rs. 50,000,000/-) of his Gross Fixed Salary as approved by the shareholders at their meeting held on 22.01.2009
and restored at the 16th Annual General Meeting held in 05.09.2011:
Year/Period for PLI payment
PLI Amount
2012 (January 2012 to December 2012)
60,367,780/-
January 2013 to May 2013 (5 months)
22,708,333/-
‘RESOLVED FURTHER THAT any of the Directors and Mr. Vishal Kohli, Company Secretary of the Company, be and are
hereby severally authorized to sign, execute, authenticate and file necessary forms, applications, declarations and to take all other
necessary steps and actions for and on behalf of the Company as may be required and as may be deemed fit and appropriate to give
effect to the aforesaid resolution.”
By Order of the Board
For Sistema Shyam TeleServices Limited
Place : Gurgaon, India
Sd/Vishal Kohli
Company Secretary
NOTES
1.
A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO
ATTEND AND VOTE INSTEAD OF HIMSELF/HERSELF AND THE PROXY NEED NOT BE A MEMBER OF THE
COMPANY. IN ORDER TO BE EFFECTIVE, THE PROXY FORM DULY COMPLETED SHOULD BE DEPOSITED
AT THE REGISTERED OFFICE OF THE COMPANY NOT LESS THAN FORTY - EIGHT HOURS BEFORE THE
SCHEDULED TIME OF THE ANNUAL GENERAL MEETING. BLANK PROXY FORM IS ENCLOSED.
2.
The Explanatory Statements pursuant to Section 173(2) of the Companies Act, 1956 in respect of the special businesses set out
in the notice are annexed hereto.
3.
Members/Proxies are requested to produce the enclosed attendance slip duly signed as per the specimen signature recorded
with the Company for admission to the meeting hall. Members, who hold shares in Dematerialized Form, are requested to bring
their Client – ID and DP – ID numbers for easier identification of attendance at the meeting.
84
4.
Corporate Members are requested to send a duly certified copy of the Board Resolution authorizing their representative(s) to
attend and vote at the Annual General Meeting.
5.
Members desirous of getting any information from the Company are requested to send their queries to the Company at its
Registered Office well in advance so that the same may reach at least 7 days before the date of the Meeting to enable the
management to keep the required information, readily available at the Meeting.
6.
As a measure of economy, copies of the Annual Report shall not be distributed at the Meeting. Members are requested to bring
along their own copies to the meeting.
7.
Members are requested to immediately intimate the change of their address, if any, along with pin-code number to the Registered
Office of the Company quoting their Folio Numbers, and members holding shares in electronic form may inform the same to their
Depository Participants.
8.
Members are requested to:
i)
note that due to strict security reasons mobile phones, brief cases, eatables and other belongings are not allowed inside the
Auditorium/Hall.
ii)
9.
note that no gifts/coupons will be distributed at the Annual General Meeting.
The documents referred to in the Notice are open for inspection at the Registered Office of the Company, i.e. MTS Towers, 3,
Amrapali Circle, Vaishali Nagar, Jaipur, Rajasthan-INDIA during the office hours between 10:00 A.M. to 12:00 NOON on all
working days up to the date of the Annual General Meeting and shall also be available at the venue of the Meeting.
10. The Register of Directors’ Shareholding maintained under section 307 of the Companies Act, 1956 shall also be available for
inspection by members at the venue of the Meeting.
11. In case of joint holders attending the Meeting, only such joint holder who is higher in order of the names will be entitled to vote.
12. Annual Report is available at the website of the Company at www.mtsindia.in in the Investor relations section.
13. The Ministry of Corporate Affairs (vide circular nos. 17/2011 and 18/2011 dated 21st April and 29th April 2011 respectively), has
undertaken a ‘Green Initiative in Corporate Governance’ and allowed companies to share documents with its shareholders
through an electronic mode. Members are requested to support this green initiative by registering / updating their e-mail
addresses, in respect of shares held in dematerialized form with their respective Depository Participants and in respect of shares
held in physical form with Karvy Computershare Private Limited – the Company’s “Registrar and Share Transfer Agent”.
Keeping in view the theme underlying the circular issued by MCA, the Company is / will be sending documents like notice calling
for annual general meeting, audited financial statements, directors’ report, auditors’ report, etc., and other communications, in
electronic form, to e-mail addresses of those members which are available in the records of the Company. Service of notices /
documents to the members, whose e-mail addresses are not registered with the depository of the Company, will be effected by
modes of service as provided under Section 53 of the Companies Act, 1956.
Please note that these documents will also be available on the Company’s website www.mtsindia.in for download by
the shareholders. Physical copies will also be available for inspection during office hours at the Company’s Registered Office
at Jaipur.
Sd/Vishal Kohli
Company Secretary
85
ANNEXURE TO NOTICE
EXPLANATORY STATEMENT UNDER SECTION 173(2) OF THE COMPANIES ACT, 1956
Item No. 6
M/s. S. R. Batliboi & Associates LLP, Chartered Accountants, retiring Statutory Auditors, have shown their unwillingness to be
appointed as Auditors of the Company for the Financial Year 2013-14. Therefore, in compliance with the provisions of Section 224
and 225 of the Companies Act, 1956 and based on the recommendation of the Audit Committee, the Board at its meeting held on
July 19, 2013, recommended the appointment of M/s. Deloitte Haskins & Sells, Chartered Accountants, as Statutory Auditors for
the Financial Year 2013-14, in place of retiring auditors M/s. S. R. Batliboi & Associates LLP, at a remuneration and actual out of
pocket expenses to be decided by the Board of Directors of the Company. The Company has received a special notice from a
member, proposing the appointment of M/s. Deloitte Haskins & Sells as the Statutory Auditors to hold office from the conclusion
of this meeting till the conclusion of next Annual General Meeting of the Company and a certificate to the effect that their
appointment, if made, would be within the prescribed limits under Section 224(1B) of the Companies Act, 1956, has been obtained
from M/s. Deloitte Haskins & Sells.
Your Directors recommend the resolution proposed at Item No. 6 for the approval of shareholders.
None of the Directors of the Company is concerned or interested in this resolution.
Item No. 7 and 8
Mr. Dmitry Shukov and Mr. Anton Abugov were co-opted on the Board as Additional Directors at the meeting of the Board of
Directors of the Company held on 27th April 2013 and 28th May 2013 respectively. Both Mr. Shukov and Mr. Abugov were
nominated by the Holding Company-Sistema JSFC.
Pursuant to the provisions of Section 260 of the Companies Act 1956 the tenure of the above Additional Directors expires at the
date of this Annual General Meeting.
The Board considers it desirable that the appointment of Mr. Shukov and Mr. Abugov as Directors be regularized by their
appointment as ordinary Directors under Section 255 of the Companies Act, 1956 liable to retire by rotation.
The Company has received notices along with requisite deposit under Section 257 of the Companies Act, 1956 proposing the
candidature of Mr. Shukov and Mr. Abugov for their appointment as Directors of the Company.
Your Directors recommend the resolutions proposed at Item No. 7 and 8 for the approval of shareholders.
None of the Directors of the Company except the proposed appointee(s), for his respective resolution, is directly concerned or
interested in the proposed resolution.
Item No. 9
The Board of Directors of the Company, at its meeting held on 27.04.2013, appointed Mr. Dmitry Shukov as an Additional
Director of the Company with effect from June 01, 2013. Further, at the same meeting, the Board also appointed Mr. Dmitry
Shukov as Whole Time Director under designation of “Chief Executive Officer” of the Company for a period of Three years
commencing from 01.06.2013 to 31.05.2016 on the terms and conditions as set out in the resolutions given under item no. 9,
subject to the approval of Shareholders in General Meeting and the Central Government.
Information / Profile of Mr. Dmitry Shukov, Whole Time Director
Mr. Dmitry Shukov, aged 44 years, a Russian National, is a young and dynamic Executive. Mr. Shukov is a Telecommunications
Engineer and has a rich corporate experience of 20 years, mainly in the field of General Management, Sales and Customer Service
Delivery. Mr. D. Shukov has had an outstanding career and is known for his hands-on business experience, having worked as head
of sales in Tele2, Russia’s leading mobile operator. Before joining Sistema Shyam TeleServices Limited (SSTL) he had been
rendering his services as Managing Director of FE “Uzdunrobita LLC” (MTS Uzbekistan). He is a successful professional who
made a significant contribution to consolidating MTS’s position in the telecom market. He is a MTS veteran and was previously the
CEO of MTS Turkmenistan as well.
The remuneration payable to the appointee by the Company is given in the resolution, which is quite reasonable and also acceptable
to the appointee keeping in view the comparative remuneration profile in similar industry in India, Russia and elsewhere.
Mr. Shukov has directly or indirectly no pecuniary relationship with the Company and no relationship with its managerial
personnel. Moreover, Mr. Shukov does not hold any shares in the Company as a shareholder.
General and Other Information including Company Business and Growth Plan
The Supreme Court had, vide its verdict dated 2nd February 2012, cancelled the telecom licences of the Company, due to which
lot of uncertainties were prevailing in the telecom sector as a whole and the operations of the Company in particular. Subsequently,
the Company has participated in the spectrum auctions held by the Department of Telecom in March 2013 and is in the process
86
of obtaining Unified Licence (Access Services) in eight (8) circles of Delhi, Gujarat, Karnataka, Kerala, Kolkata, Tamil Nadu, UP
(West) and West Bengal for 800 MHz spectrum band. This is in addition to licence held by SSTL for Rajasthan Circle. Keeping in
view the process of allocation of Unified Licence (Access Services) for the Circles mentioned hereinabove the Company is
vigorously engaged in finalizing its new / updated strategy, Business Plan, Network Roll-out and other plans. The Company is also
engaged in re-structuring and re-organization of its operational circles and the closure of the rest of the circles. The Company is
fully engaged in providing services in the territory of India and is not engaged in export related activities.
Now, with many of the uncertainties relating to the Company’s operations having been resolved, the key focus area for Mr. Dmitry
Shukov will be to take the Company to the next level. The Company is expected to roll-out a range of strategic initiatives in line
with its data-centric voice-enabled strategy. The game plan includes further strengthening the brand’s connection with its
stakeholders, including customers, retailers, employees, etc. The Company is also looking at speeding up deliveries from its
innovation pipeline so that it stays true to its brand mantra of being “a Step Ahead”. The Company recently also made its long term
intention known in the market, i.e. to play a key role in the LTE landscape in India.
The Company is planning to invest an additional $200 million over the next six to seven years in India. Company also expects to
reduce its debt in India by 55.5 per cent to $700 million in 2013. Cash requirement for capital expense and restructuring cost
(excluding investments in LTE) is also expected to come down to $250 million from $561 million in 2014 and 2015.
The Company is also in the process of streamlining its man power (which includes specialized, skilled, semi-skilled persons) at
corporate office and the circles, which would be approx. 2000 employees after the restructuring process. In order to synchronize
all activities of various agencies involved in the restructuring process as well as to give better direction and guidance to such a big
workforce for successful implementation of Roll-out Plan within the time bound period and also to monitor the proper use of
such a huge investment, it became indispensable to appoint one competent professional who must be a member of the Board as
Chief Executive Officer of the Company. This becomes all the more necessary due to the resignation of Mr. Vsevolod Rozanov as
the Whole Time Director of the Company (designated as ‘President & CEO’). Further, it was also considered necessary to
delegate substantial powers to such Whole Time Director (‘Chief Executive Officer’) having versatile experience for monitoring
and supervision of progress of execution of Roll-out plan on day-to-day basis and provide versatile guidance to senior management
team. As Mr. Shukov is having enormous experience and expertise in field of Management, Sales and Customer Service Delivery,
therefore, it was deemed proper to entrust him with substantial powers of Management of the Company by appointing him as
Whole Time Director of the Company. Mr. Shukov has a wealth of operational experience, business acumen and inspirational
leadership needed to spearhead the Company’s next phase of growth. His knowledge will be a key contributor in taking the
Company to OIBDA-positive stage. Accordingly, the Board of Directors at its Meeting held on 27.04.2013 appointed Mr. Shukov
as an Additional Director on the Board as well as Whole Time Director of the Company designated as “Chief Executive Officer”,
subject to the approval of shareholders in General Meeting and Central Govt. of India.
Foreign Investment in Company
As on date, SISTEMA Joint Stock Financial Corporation (SISTEMA JSFC), of Russia, as a strategic investor in the business of the
Company, holds 56.68% of the aggregate paid up equity share capital of the Company.
Justification for proposed appointment
The Board of Directors believes that the Company shall be certainly benefited by the immense and versatile experience of Mr.
Dmitry Shukov, and with support of a strong team of professionals he shall be able to implement the Company’s Roll-out
successfully within the time bound period. Moreover, your Directors are confident that his appointment as Whole Time Director
under the designation of CEO will support the management team adequately in positive direction and strengthen the position of
the Company in Indian Telecommunication market. His presence at the helm of affairs of the Company would enable it to achieve
the goals successfully. He shall exercise substantial powers of management of the affairs of the Company under the supervision,
control and superintendence of the Board of Directors of the Company.
Requirement in Law
The appointment of Mr. Dmitry Shukov as Whole Time Director does not satisfy the requirement of Schedule XIII of the
Companies Act 1956 due to the following reason viz. the appointee is not Indian Resident. Therefore, the Company is making an
application to the Central Government of India for approval to his appointment as Whole Time Director of the Company on the
terms and conditions as set out in the proposed resolution.
Your Directors recommend passing of the resolution as a special resolution.
None of the Directors except Mr. Dmitry Shukov is in any way concerned or interested in the above resolution.
Item No. 10
The Company has adopted a Long Term Incentive Policy (LTI Policy) designed to reward employees from the level of Divisional
Heads to the top management level. The said LTI program was approved by the Board at its meeting held on 13th July 2011. Under
87
the said policy a specified cash payout calculated on the basis of methodology specified in the LTI Policy is paid to the eligible
employees. In terms of the said LTI Policy, Mr. Vsevolod Rozanov, who was serving the Company as Whole Time Director
(designated as President and CEO) till 31st May 2013, is also entitled for the LTI cash payout. The Board of Directors at its meeting
held on 7th November 2012 approved the LTI cash payout of Rs. 21,540,002/- to Mr. Rozanov for the year 2011 under said LTI
scheme. The Board also approved the LTI cash payout of Rs. 31,200,000/- for the year 2012 at its meeting held on 27th April 2013.
The payment of LTI cash payout to Mr. Rozanov for year 2011 and 2012 is subject to the approval of the shareholders. The amount
of cash payout has been calculated based on the methodology defined in the LTI policy.
The Cash payout received/to be received by Mr. Rozanov under the LTI Policy would be treated as additional managerial
remuneration and, therefore, requires the approval of the shareholders under the provisions of the Companies Act, 1956.
In terms of Section 268, 198, 309, 310 and 311 of the Companies Act, 1956 read with Schedule XIII and notification no. GSR 70(E)
dated 08.02.2011; the payment of above stated LTI for the year 2011 and 2012 to Mr. Vsevolod Rozanov for the services rendered
during his tenure as Whole Time Director under the designation of President and CEO requires the approval of the shareholders
by means of a special resolution to be passed at the general meeting.
Your Directors, therefore, solicit the approval of the members for payment of LTI for the year 2011 and 2012, as additional
remuneration to Mr. Rozanov and commend the resolution proposed at Item No. 10 for the approval of shareholders by way of
a Special Resolution.
None of the Directors except Mr. Vsevolod Rozanov is interested in this resolution.
Item No. 11
The shareholders, at their meeting held on 22.01.2009, approved the remuneration of Mr. Vsevolod Rozanov as Whole Time
Director. In terms of the said shareholders’ approval, Mr. Rozanov is entitled to maximum PLI of up to 100% his Gross Fixed salary.
The remuneration of Mr. Rozanov on the scale as approved by the shareholders on 22.01.2008 was again restored at the 16th AGM
held on 05.09.2011. However, Mr. Rozanov has resigned from the position of Whole Time Director with effect from 31st May 2013
and has been appointed as the Deputy Chairman of the Company with effect from 1st June 2013.
The Board of Directors, at its meeting held on 01.03.2013, approved the payment of PLI of Rs. 60,367,780/- (Rs. Six Crore Three
Lacs Sixty Seven Thousand Seven Hundred Eighty Only) for the year 2012 to Mr. Rozanov, subject to the approval of shareholders.
The payment of PLI to Mr. Rozanov was recommended by the Nomination and Remuneration Committee at its meeting held
on 01.03.2013.
Mr. Rozanov has resigned from the position of Whole Time Director and CEO of the Company with effect from 31.05.2013. The
Board of Directors, at their meeting held on July 19, 2013, approved the payment of PLI to Mr. Rozanov for the period of 5 months
of 2013 (January 2013 to May 2013) during which he has served the Company as Whole Time Director and CEO. The Board
approved the payment of PLI amount of Rs. 22,708,333/- proportionately calculated at the rate of 109% of the Annual Gross Fixed
Salary. The payment of PLI at the above mentioned scale was recommended by the Nomination and Remuneration Committee at
its meeting held on 19.07.2013.
The PLI payment of Rs. 60,367,780/- for the year 2012 and Rs. 22,708,333/- for the year 2013 (January 2013 to May 2013) is in
excess of the limit approved by the shareholders and, therefore, it will amount to increase in the remuneration of
Mr. Vsevolod Rozanov and, hence, requires the approval of the shareholders under the provisions of the Companies Act, 1956.
In terms of Section 198, 309, 310 and 311 of the Companies Act, 1956 read with Schedule XIII as amended up to date, the payment
of PLI for the year 2012 and 2013 (January 2013 to May 2013) to Mr. Vsevolod Rozanov in excess of his annual gross fixed salary
requires the approval of the shareholders by means of a special resolution to be passed at the general meeting.
Your Directors, therefore, solicit the approval of the members for payment of PLI of Rs. 60,367,780/- for the year 2012
and Rs. 22,708,333/- for the year 2013 (January 2013 to May 2013) to Mr. Rozanov and commend the resolution proposed at Item
No. 11 for the approval of shareholders by way of a Special Resolution.
None of the Directors except Mr. Vsevolod Rozanov is interested in this resolution.
88
Sd/Vishal Kohli
Company Secretary
Details of Directors retiring by rotation seeking re-election and appointment as Directors at
this Annual General Meeting:
Name of Directors
Brief Profile
Mr. Dmitry Shukov
Mr. Dmitry Shukov, aged 44 years, a Russian National, is a young and dynamic Executive. Mr. Shukov is a
Telecommunications Engineer and has a rich corporate experience of 20 years, mainly in the field of
General Management, Sales and Customer Service Delivery. Mr. D. Shukov has had an outstanding
career and is known for his hands-on business experience, having worked as head of sales in Tele2,
Russia’s leading mobile operator. Before joining Sistema Shyam TeleServices Limited (SSTL) he had
been rendering his services as Managing Director of FE “Uzdunrobita LLC” (MTS Uzbekistan). He is a
successful professional who made a significant contribution to consolidating MTS’s position in the
telecom market. He is a MTS veteran and was previously the CEO of MTS Turkmenistan as well.
Mr. Anton Abugov
Mr. Anton Abugov was born on September 9, 1976. He graduated from the Academy of National
Economy under the RF Government. Summary of his professional experience is listed below:19952002 – United Financial Group, Director, Corporate Finance.2002-2003 – Eurasia Capital Partners,
Partner. 2003-2006 – Joint-Stock Commercial Bank Rosbank, Managing Director, Corporate Finance.
1997-2006 – advisor to the TAIF Group. In 1999 – advisor to RAO UES of Russia.Appointed First Vice
President of Sistema JSFC in August 2006.2007-2008, 2009 – Chairman of the Board of Directors,
CJSC Sky Link. 2007-2008 – Chairman of the Board of Directors, OJSC COMSTAR-UTS. 2007-2009 –
Chairman of the Board of Directors, OJSC Detsky Mir Center.2008-2009 – Chairman of the Board of
Directors, CJSC RWS.Presently, he is Member of the Management Board of Sistema JSFC. He is also on
the Board of telecom company MTS OJSC, oil company RussNeft OJSC, transport company SG-trans
OJSC, SG-trading OJSC, SMM OJSC, RZ Agro OJSC.
Mr. Alok Tandon
Mr. Alok Tandon is a Chartered Accountant by profession. He looks after all the financial and commercial
activities of the Shyam Group. Mr. Tandon has experience of more than 18 years in this field. Under his
guidance Shyam Telecom successfully concluded the IPO in 1994, which was oversubscribed by 25
times. He has been instrumental in efficiently managing funding and investments for various group
Companies. Mr. Tandon also handles group relationships with all leading Banks, Foreign and Indian
Institutional Investors. With his efforts Shyam Telecom has been able to smoothly manage its Equity and
Debt funding requirements at the lowest possible cost. He has been instrumental in closing several
important deals of the Shyam Group which gave group the highest ever per customer valuation of any
telecom operation in the country.
Mr. Ajay Khanna
Mr. Ajay Khanna is a co-promoter of Shyam Group. He has been instrumental in setting up all India
Distribution Network for Cable TV, which catapulted Shyam Telecom Limited to become leading player
in the Indian Cable TV equipment Industry. Complete commercial and operational network of SSTL’s
Cellular and Basic Business was set up under his guidance. He handles the Project implementation,
Commercial operations (Sales, Marketing and Credit control) and HR activities of Shyam Group. He
also handles Public Relations and liaison with Local Authorities and Statutory / Regulatory Bodies.
Mr. Vikram Kaushik
Mr.Vikram Kaushik earned his Master’s degree from St. Stephen’s College in Delhi and joined Hindustan
Unilever as a Management trainee. He worked for Unilever for more than 16 years and got wide
exposure to different product categories both in India and in Asia, Europe and Africa. After a short stint
as Managing Director of a leading advertising agency he returned to consumer marketing as Vice
President Marketing, Sales and Exports at Britannia, a joint venture with Groupe Danone. He moved as
a Director on the Board of Colgate Palmolive and was responsible for a major turnaround for the
brand Colgate in India. Thereafter, he served as the MD & CEO of Tata Sky till December 2010 and
played a pioneering role in establishing the DTH industry in India. Presently, Mr. Kaushik consults
PricewaterhouseCoopers and the Tata Strategic Management Group, among others. He has been
nominated by the Govt. to the Board of Prasar Bharati. He has travelled widely and lectures regularly
both in India and abroad, including at the Harvard Business School.
Mr. Bharat Patel
Mr. Bharat Patel obtained an MA in Economics from the University of Notre Dame, South Bend, Indiana,
USA and an MBA in Marketing from the University of Michigan, Ann Arbor, Michigan, USA. He joined
Richardson Vicks Inc., New York, as Marketing Trainee and on its merger with Procter & Gamble (P&G)
has had a long and distinguished career at P&G in India and internationally. He worked in various
capacities at P&G, including as Operations Director, Associate General Manager, Category Manager
(UK), Country Manager (Ireland) and Executive Vice President. He was the Chairman and Managing
Director and non Executive Chairman of P&G India Limited for six and nine years respectively. Currently
he is on Boards of Sasken Communication Technologies Ltd., NESCO Ltd. and Birla Sun Life Assets
Management Co. Ltd.
89
Notes :
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
SISTEMA SHYAM TELESERVICES LIMITED
Registered Office: MTS Tower, 3, Amrapali Circle, Vaishali Nagar,
Jaipur-302021, Rajasthan, India
ATTENDANCE SLIP
(Please complete this attendance slip and hand it over at the entrance of the meeting hall)
Name & Address
Folio No.
DP ID #
Client ID #
No. of Shares Held
# Applicable for members holding shares in dematerialized form.
I / We hereby record my / our presence at the 18TH ANNUAL GENERAL MEETING of SISTEMA SHYAM
TELESERVICES LIMITED to be held at 10:00 A.M. on Monday, the 23rd September 2013, at Hotel Fortune Select
Metropolitan, Near Nehru Sahkar Bhawan, C-Scheme, Bais Godam Circle, Jaipur-302001, Rajasthan, India.
SIGNATURE OF THE MEMBER OR THE PROXY ATTENDING THE MEETING
If Member, please sign here
If Proxy, please sign here
Note: Members are requested to bring their copies of the ANNUAL REPORT and AGM Notice at the Meeting as the same will not be circulated at
the Meeting.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
SISTEMA SHYAM TELESERVICES LIMITED
Registered Office: MTS Tower, 3, Amrapali Circle, Vaishali Nagar,
Jaipur-302021, Rajasthan, India
PROXY FORM
Folio No …………….....……… DP ID………………………Client ID. ……….…....…..…...................................
Shares Held………………..........
I/We,…………………………………………….of…………………………………being a Member / Members of
SISTEMA SHYAM TELESERVICES LIMITED, hereby appoint…………………………………of................................
or failing him/her………....................................................
of………………………................................
or failing
him/her…………………………............................... of………………………………………………………
as my /our Proxy to attend and vote for me / us on my / our behalf at the 18TH ANNUAL GENERAL MEETING
of SISTEMA SHYAM TELESERVICES LIMITED to be held at 10:00 A.M. on Monday, the 23rd September 2013, at
Hotel Fortune Select Metropolitan, Near Nehru Sahkar Bhawan, C-Scheme, Bais Godam Circle, Jaipur-302001,
Rajasthan, India and at any adjournment thereof.
Signed this ................................day of ................................ 2013.
Affix
Revenue
Stamp
Note: The Proxy form duly completed must be deposited at the Registered Office of the Company, not less than
FORTY EIGHT HOURS before the time of holding the meeting. The Proxy need not be a Member of the Company.

18th Annual Report for 2012-13

Transcription

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