DIRECTORS
Dear Members,
Your Directors' are delighted to present the 21st Annual Report on the business &
operations of the Company together with the Audited Financial Statements & Accounts
for the year ended 31st March, 2013.
1. FINANCIAL HIGHLIGHTS
The previous financial year of the Company was of 18 months ending September 30, 2012.
Consequently the current financial year of your Company was of 6 Months from October 1st,
2012 to March 31st, 2013 and accordingly the figures for the period under review is for a
period of 6 months ended on March 31st , 2013; hence not comparable with the last year's
figures.
Your Company has recorded overall revenue of Rs. 935.54 Crores for the year (6 months
period). Your Company has been facing tough times due to the current economic slowdown
& unfavourable market conditions which has globally affected industries especially in
the Telecom Industry. Increased competition & rising interest costs have further added
to the profitability. Your Company recorded a net loss of Rs. 742 Crores during the six
months ended March 31, 2013. However the cumulative retained profits still remains out to
Rs. 340.13 Crores & the Company hopes to do well & recover from the hurdles faced
in past. A brief of the financial highlights with comparison of previous year are as
follows:
|
|
(Rs. In Crs) |
| Particulars |
2012-13 |
2011-12 |
| Total Revenue |
938.54 |
4,062.51 |
| Total Operating Expenditure |
961.59 |
2,960.07 |
| Profit Before Tax |
(777.86) |
489.67 |
| Profit/(Loss) after Tax |
(742.00) |
433.21 |
| Cumulative Retained Profits |
340.13 |
1,082.14 |
Analysis of operating performance is covered under Management Discussion and Analysis
Report (MDAR).
The MDAR for the year under review, as stipulated under Clause 49 of the listing
agreement with the stock exchanges in India, on the Company's performance, industry trends
and other material changes with respect to the Company and its subsidiary, wherever
applicable, is presented in a separate section forming part of this Annual Report.
The register of members and share transfer books shall remain closed from Wednesday,
September 25, 2013 to Monday, September 30, 2013 both days inclusive.
2. CORPORATE DEBT RESTRUCTURING
Tulip Telecom Limited established in 1992, has emerged as a leading enterprise service
provider catering to the Information Technology and data connectivity requirements in
recent years. The business portfolio of Tulip includes three segments: Enterprise Data
Connectivity (EDC), Managed Services and Network Integration. The Company has established
itself as a major EDC player with significant asset base in the form of fibre optic and
wireless network. However, the Company was facing liquidity problems which ultimately
resulted in a stress in its ability to service its debt obligations. A brief portrayal of
reasons for the stressful phase is as under:
1. Due to the current economic slowdown, many enterprises have started cutting down
their IT and telecom spending, impacting the revenue growth of your Company. In order to
retain customers, Tulip had to resort to pricing discounts that had impacted the
profitability, particularly in the past quarters.
2. Your Company has undertaken a number of Government projects involving high
capex/upfront investment while the revenue is realized over a longer period. The aforesaid
model of upfront investments and staggered revenue has resulted in blockage of current
assets and liquidity constraints.
3. Rising interest cost has impacted the operating cash flows significantly.
4. On account of insufficient internal accruals and due to unfavorable capital market
conditions your Company was not able to tie up external funds. While your Company expected
conversion of FCCB into equity, which would have substantially improved the gearing,
however, a steep decline in share price has led to a situation where the same remains as
unpaid debt in Company's books.
5. Targeting high value added revenue segments and the revenue potential with respect
to the fibre optic cable network, your Company has made investments in setting up the
required infrastructure. However, the payback period of these investments is significantly
longer than the average tenure of the loans raised to fund these investments (~5years).
Most of the repayments were bunched up in next 2 years resulting in severe liquidity
crunch.
Cash flows were not sufficient to meet debt obligation as high capex, increasing
receivables, worsening revenue and profitability and high interest expenses have resulted
in decline in the cash generation which is insufficient to meet the existing debt
liabilities and payment obligations to the lenders.
In view of the problems faced, your Company has made reference to the Corporate Debt
Restructuring (CDR) Cell of RBI on December 31, 2012 which was
supported by ICICI Bank as the Monitoring Institution. The Flash Report was discussed in
CDR meetings dated January 21, 2013, February 15, 2013 and March 7, 2013. Relying on the
strong belief on the revival of the Company the lenders have acceded their approval to the
CDR proposal.
Your Director's are pleased to inform that the Company has received a formal Letter of
Acceptance for its proposal for the restructuring of its debt by the Empowered Group of
the CDR Cell dated May 8, 2013 & subsequently signed the Master Restructuring
Agreement (MRA), the salient features of which are as under:
a) A12 year door-to-door repayment plan;
b) Reduction in Interest Rates;
c) 1.5 year moratorium on Interest and 2.5 year moratorium on Principal Repayment;
d) Infusion of approximately Rs. 60 Crores by the Promoter under CDR requirement.
As mandated by the CDR package terms, the Promoters have infused the necessary
contribution by way of unsecured loans.
3. DIVIDEND & TRANSFER TO RESERVES
In the event of loss your Directors express their inability to declare any Dividend for
the Six months financial year ended March 31, 2013.
Debenture Redemption Reserve
The Company has maintained Debenture Redemption Reserve (DRR) of Rs. 93.72 Crores
during the period for Non Convertible Debentures (NCDs), amounting to Rs. 560 Crores
outstanding as on March 31st, 2013.
4. FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBS)
During the Financial year 2007-08, your Company has raised Zero Coupon Foreign Currency
Convertible Bonds (FCCBs) aggregating to USD 150 Million with a maturity period of 5
years, i.e. 26th August 2012. The company has bought back Zero Coupon Foreign Currency
Convertible Bonds (FCCBs) aggregating to USD 52.99 Millions during F.Y. 2008-09 &
2009-10, resulting in outstanding FCCB liability to USD 97 Million as on the March 31,
2013
The company has defaulted in repayment of aforesaid unsecured Foreign Currency
Convertible bonds (FCCB) amounting to approx. USD 145 million (Rs. 785 Crores approx.).
The FCCB were due for redemption in August, 2012.
Pursuant to the Master Restructuring Agreement approval of CDR lenders has been
accorded to the restructuring of the FCCB's. In order to redeem aforesaid FCCB, the
management is actively pursuing various options which includes raising of additional
finance in the form of debt and other various options.
Discussion on each of these options is in process and the management is confident that
the company will be able to arrange the required funds for its redemption shortly.
5. DEBENTURES & EXTERNAL COMMERCIAL BORROWINGS NON CONVERTIBLE DEBENTURES (NCDs)
During the period under review there has been no issue of the NCD's and there amount
remains constant to previous financial year, to the tune of Rs. 560 Crores.
EXTERNAL COMMERCIAL BORROWINGS
During the year, the External Commercial Borrowings (ECB) stands unvarying for USD 42.5
Million (approx. Rs 331.09 Crores) similar to the previous year.
6. SUBSIDIARYCOMPANIES
Your Company has four, wholly Owned Subsidiary and a Fellow Subsidiary, namely:
1. Tulip IT Services Singapore Pte. Ltd.
2. TulipTelecomlnc.USA
3. Tulip Swan IT Services Ltd.
4. Tulip Data Centre Services Pvt. Ltd.
5. Sada IT Parks Pvt. Ltd.
In accordance with the General Circular No: 2/2011 dated 8th February 2011, issued by
the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Statement of
Profit and Loss and other documents of the subsidiary companies are not being attached
with the Balance Sheet of the Company. However, the financial information of the
subsidiary companies is disclosed in the Annual Report in compliance with the said
circular.
The Company will make available the Annual Accounts of the subsidiary companies and the
related detailed information to any member of the Company who may be interested in
obtaining the same. The annual accounts of the subsidiary companies will also be kept open
for inspection at the Registered Office of the Company and that of the respective
subsidiary companies. The Consolidated Financial Statements presented by the Company
include the financial results of its subsidiary companies.
7. BOARD OF DIRECTORS
In terms of the provisions of the Companies Act, 1956 & the Articles of Association
of the Company, Mr. Chandrahas Kutty & Mr. Rajesh Gulshan will retire by rotation at
the ensuing Annual General Meeting and being eligible, offer themselves for
re-appointment. Your Directors recommend their appointment/ re-appointment at the ensuing
Annual General Meeting.
The present term of appointment of Mr. Deepinder Singh Bedi, Whole-Time Director of the
Company had expired on March 31, 2013. The Board on the recommendation of the Remuneration
committee had recommended his re-appointment for a further term of 3 (three) years to the
members, who accorded their approval on June 14, 2013 vide Postal Ballot.
Further in the event of losses faced during the period under review, the remuneration
of whole-time directors, as recommended by members earlier had exceeded the limits
prescribed under Schedule XIII, consent is sought from the members for waiver of excess
remuneration & payment of existing remuneration to the whole-time directors for the
remaining term of their appointment. Details of aforesaid directors are more particularly
mentioned in the notice of the meeting & explanatory statement annexed thereto.
Brief resume/details of the Directors, who are to be appointed /re-appointed as
mentioned herein-above have been furnished along with the Explanatory Statement to the
Notice of the ensuing Annual General Meeting. The Board recommends their
re-appointment/appointment at the ensuing Annual General Meeting.
The Constitution of Board of Directors remains properly constituted in compliance with
clause 49 of the Listing Agreement and as per provisions of the Companies Act, 1956.
8. AUDITORS
Pursuant to the covenants of the Master Restructuring Agreement the Company was
suggested by the CDR Monitoring Committee to appoint Statutory Auditors as recommended by
the CDR lenders. The Board of Directors in their meeting held on August 12, 2013 had
considered and recommended for the appointment of M/s. T.R.Chadha & Co., Chartered
Accountants, as Statutory Auditors, and considered M/s. R.Chadha & Associates,
Chartered Accountants, the retiring auditor of the Company, to act as joint auditor of the
company, after considering the recommendation of Audit Committee. Further the Company has
received a certificate from M/s. T.R.Chadha & Co., Chartered Accountants and from M/s.
R. Chadha & Associates, Charterd Accounts, to the effect that their appointments, if
made, would be in accordance with Section 224(1 B) of the Companies Act, 1956 and they are
not disqualified in terms of Section 226 of the Companies Act, 1956 from being appointed
as Statutory Auditors of the Company.
Your Directors recommend their appointment.
9. COST AUDITORS
Pursuant to the notification issued by the Ministry of Corporate Affairs (MCA) and
based on the recommendation of the Audit Committee, your Board has, subject to the
approval of the Central Government, approved the appointment of M/s H. Tara & Co.,
Cost Accountants, as the Cost Auditor of the Company for the financial year 2013-14. Your
Company has filed application with the Central Government for necessary approval in this
connection. Further as per the Cost Audit Rules your Company has submitted the Cost Audit
Report for the Financial Year 2011-12.
10. EMPLOYEE STOCK OPTION SCHEME
During the year under review your Company has not issued & allotted any Stock
Options under the ESOS Scheme. Total no of shares covered under the Scheme pursuant to
stock split remains constant as 50,00,000 Shares. Out of the 13,32,500 Options outstanding
as on previous financial year ended on September 30, 2012; Employees of the Company who
were granted options aggregating 3,50,000 have left the services of the Company before any
options could vest with them. Hence the total options granted as on March 31, 2013 are
9,82,500.
Further, the disclosures as required under Clause 12 of SEBI (Employee Stock Option
Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 are furnished as Annexure A,
forming part of this Report.
A Certificate from M/s. R. Chadha & Associates, Chartered Accountants, Statutory
Auditors, with respect to the implementation of the Company's ESOS Scheme, would be placed
before the Shareholders at the ensuing Annual General meeting, and a copy of the same
shall be available for inspection at the registered office of the Company.
11. HUMAN RESOURCES MANAGEMENT
Your Board believes that Employees are vital to the Company. Your Company has created a
favorable work environment which encourages innovation and meritocracy. The Company has
also set up scalable recruitment and human resource management process which would enable
us to attract and retain high caliber employees. The employee strength of the Company as
on March 31, 2013 is 2647.
12. DIRECTORS' RESPONSIBILITY STATEMENT
In terms of and pursuant to section 217 (2AA) of the Companies Act, 1956, your
Directors, in relation to the Annual Statement of Accounts for the Six months financial
year ended March 31, 2013, state and confirm that:
(i) the Accounts had been prepared on a ' going concern' basis and in such preparation,
the applicable accounting standards have been followed along with proper explanation
relating to material departures;
(ii) the Accounting Policies have been selected and applied and judgments and estimates
made are reasonable and prudent so as to give a true and fair view of the state of affairs
of the Company at the end of the financial period and of the
Profit of the Company for that period ;
(iii) proper and sufficient care has been taken for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act, 1956 as
amended, for safeguarding the assets of the Company and for preventing and detecting fraud
and other irregularities
13. LISTING WITH STOCK EXCHANGES
The Equity Shares of the company are listed with The BSE Ltd. (BSE) & National
Stock Exchange of India Limited (NSE).
Zero Coupon Convertible Bonds (FCCBs) which were listed on Singapore Stock Exchange
(SGX - ST) have been due for redemption during the previous financial year. Company is
evaluating all possible ventures for the restructuring of its FCCB's.
The Secured Redeemable Non Convertible Debentures (NCDs) are listed on WDM segment of
The BSE Ltd (BSE).
The annual listing fee for the year 2012-2013 have been paid within the scheduled time
to BSE, NSE, NSDL & CDSL (the Custodian's) respectively.
14. CONCURRENT AUDIT
The CDR lenders have recommended the appointment of a Concurrent Auditor for the
effective implementation of the restructured loans and other indebtedness of the Company.
Pursuant to their recommendations M/s S.S.Kothari Mehta & Co., Chartered
Accountants have been appointed as the Concurrent Auditors of the Company for the
financial year 2013-14 which was duly approved by the Audit Committee of the Company. The
scope of work of concurrent auditors includes inter-alia:
• the review of inventories;
• the review of fixed assets;
• the review on financing, legal & regulatory risk management;
• the review of existing management information and reporting system including
accounting procedures fol lowed by the Company & suggest changes, if any to improve
the effectiveness.
16. CORPORATE GOVERNANCE REPORT AND MANAGEMENT DISCUSSION AND ANALYSIS STATEMENT
As per Clause 49 of the Listing Agreement, report on Corporate Governance together with
Management Discussions and Analysis report and Certificate from Company's Statutory
Auditor are annexed elsewhere in this report.
17. PUBLIC DEPOSITS
During the year under review, your Company has not accepted any deposits under the
provisions of Section 58A of the Companies Act, 1 956 and Rules made there under.
18. AUDITCOMMITTEE RECOMMENDATION
During the year, there was no such recommendation of the Audit Committee which was not
accepted by the Board. Hence there is no need for the disclosure of the same in this
Report.
19. PARTICULARS ON CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION
Your Company, being a service provider organization, most of the information as
required under Section 217(1)(e) of the Companies Act, 1956, read with the Companies
(Disclosure of particulars in the report of the Board of Directors) Rules, 1988 as amended
from time to time, are not applicable. However, the information as required has been
provided in Annexure B to this Report.
20. QUALITY INITIATIVES
Reinforcing its commitments to high standards of quality, your Company was successfully
assessed for its ISO certifications by BSI Global for the following:
• QMS (Quality Management System) as per ISO 9001: 2005 for providing system
Integration , Network Integration, VPN Services and Managed Services.
• ITSM (Information Technology Service Management System) as per ISO 20000-1: 2005
covering the delivery of managed services to its customers for Network Operation Centre at
Mumbai Premises & Data Centre & Network Operations Centre at New Delhi premises
within the technical & organizational boundaries of your Company.
• Company was recertified for TL 9000 within the scope of provisioning and
providing customer service by TUV-SUD
21. PARTICULAR OF EMPLOYEES
Information required to be furnished in terms of section 217 (2A) of the Companies Act,
1956 read with Companies (Particulars of Employees) Rules, 1975 is required to be set out
in the Annexure to this Report. However, in terms of section 219(1)(b)(iv) of the
Companies Act, 1956 , the Report and Accounts are being sent to members excluding
aforesaid Annexure. Any member interested in obtaining a copy of the same may write to the
Company Secretary at the Registered Office of the Company. None of the employees except
Lt. Col. H.S. Bedi, VSM, Chairman & Managing Director and Mr. Deepinder Singh Bedi,
Executive Director, listed in the said Annexure are related to any Director of your
Company.
22. ACKNOWLEDGEMENTS
Your Directors would like to express their gratitude for the co-operation and support
received from Members, Bankers, Department of Telecommunications (DOT), Telecom Regulatory
Authority of India (TRAI), Wireless Planning Commission (WPC), Government of India, other
Regulatory Bodies, Customers and other business constituents during the period under
review.
Your Directors place on record their deep appreciation for exemplary contribution of
the Employees at all levels. Their dedicated efforts and enthusiasm has been integral to
your Company's impressive growth.
|
For & on behalf of the Board of Directors |
|
S/d- |
| New Delhi |
Lt. Col. H.S. Bedi, VSM |
| August 30, 2013 |
Chairman & Managing Director |
Annexure - A to the Director's Report regarding ESOS Scheme Employee Stock Option
Scheme - "TULIP ESOS -2011"
| a. Total number of shares covered under the scheme |
50,00,000 |
| b. Options Granted |
9,82,500 |
| c. Pricing Formula |
Determined by the Board of Director which is generally Current Market Price |
| d. Options Vested |
NIL |
| e. Options Exercised |
NIL |
| f. Total number of shares arising as a result of exercise of option |
NIL |
| g. Options Lapsed |
NIL |
| h. Variation in terms of options: |
NIL |
| i. Money realized by exercise of options |
NIL |
| j. Total number of options in force at the end of year |
NIL |
| k. Employee wise details of options granted to (during the year) |
|
| i.) Senior managerial personnel |
NIL |
| ii.) Any other employee who receives a grant in any one year of options amounting to
5% or more of options granted during the year. |
NIL |
| iii.) Identified employees who were granted options, during any one year, equal to or
exceeding 1% of the Issued Capital (excluding outstanding warrants and conversions) of the
Company atthe time of grant. |
NIL |
| I. Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of
options. |
NIL |
| m. In case, the employees compensation cost is calculated on the basis of intrinsic
value of Stock Option, the difference between the employees compensation of the Stock
Option cost based on intrinsic value of the Stock and the employees compensation of the
Stock Option cost based fair value forthe year ended March 31, 2011 and the impact of this
difference on profits and on EPS of the Company. |
NIL |
| n. For options whose exercise price either equals or exceeds or is less than the
market price of the stockthe following are disclosed separately: |
N.A. |
| Weighted average exercise price |
|
| b) Weighted average fair value |
|
| o. A description of the method and significant assumptions used during the yearto
estimate the fair values of options, including the following weighted average information: |
N.A. |
| (i) risk free interest rate. |
|
| (ii) expected life. |
|
| (iii) expected volatility. |
|
| (iv) expected dividends. |
|
| (v) the price of the underlying share in market atthe time of option Grant |
|
Annexure -Bto the Directors' Report as per Section 217 (1) (e) of Companies Act, 1956
Information relating to conservation of energy, technology absorption, research and
development and foreign exchange earnings and outgo forming part of Directors' Report in
terms of section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure
of Particulars in the Report of the Board of Directors) Rules, 1988 as follows:-
A. Energy conservation measures. Additional Investment & proposals and Impact of
the measures taken:
Tulip being a telecommunications service provider requires minimal energy consumption
and every endeavor has been made to avoid its wastage and optimal use and conservation of
energy as far as possible.
B. Technology Absorption
Research and Development (R & D)
i) Specific areas in which R &Dis carried out by the Company
Due to the nature of business of the company, your Company is not initiating any
specific research. However to be acquainted with the latest technology available in the
market or the future technologies, your Company is taking all necessary steps, i.e.
Employees trainings, organizing workshops, participating in seminars, conferences and
various technology forums.
ii) Benefits derived as a result of the above R&D
By virtue of the above initiatives, your Company is able to choose / adopt appropriate
technology (ies)/ product(s) for rendering better services at competitive prices.
iii) Future plan of action
The Company continues to evaluate and adopt innovative and high quality products and
technologies to meet the ever changing consumer needs, drive growth, continuous focus on
reducing costs to fund the growth and reduce the operating costs.
| iv) Expenditure onR&D |
|
| a) Capital |
|
| b) Recurring |
---------N.A.----------- |
| c) Total |
|
d) Total R&D expenditure as a percentage of total turnover
Since, your Company is not initiating any specific research due to nature of its
business operations, all the expenditures incurred for the activities mentioned in B(i)
above, are charged to the respective expenditures accounts and cannot be separately
identified.
Your Company has its own technically qualified staff in the field of computer software,
hardware and networking . No imported technology is required by your Company to carry out
its business operations.
C. Foreign Exchange Earning and Outgo
a) Activities relating to exports, initiatives taken to increase exports, development
of new export markets for products and services and export plans
As the Company is in Services Sector there is a limited scope of export promotion.
Total Foreign Exchange Earnings and Outgo during the year :-
b) Foreign Exchange earnings and outgo:
| FOB Value of Exports |
NIL |
| CIF Value of Imports |
Rs. 10.23 Crores |
| Expenditure in Foreign Currency |
Rs. 15.73 Crores |
| Foreign Exchange Earnings |
NIL |
Declaration Regarding Compliance By The Board Members And Senior Management Personnel
with the Company's Code Of Conduct.
This is to confirm that the Company has adopted a Code of Conduct for its Board Members
and the Senior Management and the same is available on the Company's website.
I confirm that the Company has in respect of the Six months financial year ended March
31, 2013, we have received from the Senior Management Team of the Company and the members
of the Board, a declaration of compliance with the Code of Conduct as applicable to them.
|
For & on behalf of the Board of Directors |
|
S/d- |
| New Delhi |
Lt. Col. H.S. Bedi, VSM |
| August12, 2013 |
Chairman & Managing Director |
|