DIRECTORSDear Shareowners,
Your Directors have pleasure in presenting the sixth Annual Report and the auditedaccounts for the financial year ended 31st March, 2010.
Financial Results
The standalone performance of the Company for the financial year ended 31st March, 2010is summarised below:
| Particulars | Financial Year ended | * Financial Year ended |
| 31st March, 2010 | 31st March, 2009 |
| (Rs. in crore) | US$ in million** | (Rs. in crore) | US$ in million** |
| Total income | 12,511.72 | 2,771.76 | 13,694.66 | 2,700.05 |
| Gross profit before depreciation, amortisation and exceptional items | 2,149.06 | 476.09 | 3,288.75 | 648.41 |
| Less: | | | | |
| a. Depreciation and amortisation | 1,511.24 | 334.79 | 1,933.51 | 381.21 |
| b. Exceptional items and other adjustments | 18.35 | 4.07 | (3,459.83) | (682.14) |
| Profit before tax | 619.47 | 137.23 | 4,815.07 | 949.34 |
| Less: Provision for: | | | | |
| Current tax | 140.54 | 31.13 | — | — |
| Fringe benefit tax | — | — | 12.40 | 2.44 |
| Profit after tax | 478.93 | 106.10 | 4,802.67 | 946.90 |
| Add : Balance brought forward from previous year | 502.75 | 111.37 | 4,300.24 | 847.84 |
| Profit available for appropriation | 981.68 | 217.47 | 9,102.91 | 1,794.74 |
| Appropriations: | | | | |
| Proposed Dividend on equity shares | 175.44 | 38.87 | — | — |
| Interim Dividend paid on equity shares | — | — | 165.12 | 32.56 |
| Dividend Tax | 29.14 | 6.46 | 28.06 | 5.53 |
| Transfer to General Reserve | 40.00 | 8.86 | 8,400.00 | 1,656.15 |
| Transfer to Debenture Redemption Reserve | 74.96 | 16.61 | 6.98 | 1.38 |
| Balance carried to Balance Sheet | 662.14 | 146.67 | 502.75 | 99.12 |
* Figures of previous year have been regrouped and reclassified, wherever required.
** Exchange Rate Rs. 45.14 = US$ 1 as on 31st March, 2010 (Rs.50.72= US$1 as on 31stMarch, 2009).
Financial Performance
During the year under review, your Company has earned income of Rs.12,511.72 croreagainst Rs.13,694.66 crore in the previous year. The Company earned Profit after tax ofRs. 478.93 crore compared to Rs. 4,802.67 crore in the previous year.
Dividend
Your Directors have recommended a dividend of Re. 0.85, (17%) per equity share each ofRs. 5 for the financial year ended 31st March, 2010, which, if approved at the ensuingAnnual General Meeting, will be paid to (i) all those equity shareholders whose namesappear in the Register of Members as on 14th September, 2010, and (ii) to those whosenames appear as beneficial owners, as at the end of the business hours on 14th September,2010 as furnished by the National Securities Depository Limited and Central DepositoryServices (India) Limited for the purpose. The proposed dividend is in accordance with theCompany’s policy to pay sustainable dividend linked to long term performance, keepingin view the capital needs for the Company’s growth plans and the intent to optimalfinancing of such plans through internal accruals.
Management Discussion and Analysis
Management Discussion and Analysis Report for the year under review as stipulated underClause 49 of the listing agreement with the Stock Exchanges in India is presented in aseparate section forming part of the Annual Report.
The Company has entered into various contracts in the areas of telecom and value addedservice businesses. While benefits from such contracts will accrue in the future years,their progress is periodically reviewed.
Business Operations
The Company operates on a pan-India basis and offers the full value chain of wireless(CDMA and GSM), wireline, national long distance, international, voice, data, video,Direct-To-Home (DTH) and internet based communications services under various businessunits organised into three strategic customer-facing business segments; Wireless, Globaland Broadband. These strategic business units are supported by passive infrastructureconnected to nationwide backbone of Optic Fibre Network fully integrated network operationsystem and by the largest retail distribution and customer services facilities. TheCompany also owns through its subsidiaries, a global submarine cable networkinfrastructure and offers managed services, managed Ethernet and application deliveryservices.
During the year under review, the Company had crossed the landmark of 100 millionwireless customers. The Company ranks among top two wireless operators in the country. Themomentous achievement has been attained within seven years of the Company’s firstlaunching its pan-India mobile services in 2003, fastest ramp up of mobile customers inthe world. With this landmark achievement, the Company becomes the 4th operator in theworld to serve over 100 Million customers in a single country.
Schemes of Arrangement
(a) Scheme of Arrangement with Reliance Infratel Limited In terms of the Scheme ofArrangement between the Company and Reliance Infratel Limited (RITL), a subsidiary of theCompany and their respective shareholders and creditors, as sanctioned by the Hon’bleHigh Court of Judicature at Bombay vide order dated 18th July, 2009, the Optic FiberUndertaking of the Company was demerged and vested into RITL with effect from 15thSeptember 2009. The appointed date was 1st April 2008.
(b) Scheme of Amalgamation with Reliance Gateway Net Limited Reliance Gateway NetLimited (RGNL), a wholly owned subsidiary of the Company amalgamated with the Companyw.e.f. 13th July 2009 in terms of the Scheme of Amalgamation sanctioned by theHon’ble High Court of Judicature at Bombay vide order dated 3rd July, 2009. Theappointed date was 31st March, 2009.
Repurchase of Foreign Currency Convertible Bonds (FCCBs)
During the year under review, the Company had repurchased and cancelled 297 Zero CouponFCCBs each of US $ 1,00,000 at a discount.
The outstanding FCCBs issued by the Company, if converted into the Equity Shares of theCompany, would result in increase to the paid up Equity Share Capital of the Company by8.91 crore Equity Shares each of Rs.5/-.
Subsidiary Companies
During the year under review, Global Innovative Solutions Private Limited, RelianceWiMax D.R.C. B.V, Reliance WiMax Gambia B.V. Reliance WiMax Mauritius B.V., Reliance WiMaxMozambique B.V, Reliance WiMax Niger B.V., Reliance WiMax Zambia B.V., Access Bissau LDAbecame the subsidiaries of the Company. During the year under review, Reliance MobileLimited and Vanco (India) Private Limited ceased to be subsidiaries of the Company.
In terms of the approval granted by the Central Government under Section 212(8) of theCompanies Act, 1956, copies of the Balance Sheet, Profit and Loss Account, Report of theBoard of Directors and Auditors of the subsidiaries have not been attached with theBalance Sheet of the Company. However, these documents will be made available upon requestby any member of the Company. As directed by the Central Government, the financial data ofthe subsidiaries have been furnished under ‘Financial Information of SubsidiaryCompanies’, which forms part of the Annual Report. The annual accounts of the Companyincluding that of subsidiaries will be kept for inspection by any member. Further,pursuant to Accounting Standard (AS) -21 prescribed under the Companies (AccountingStandards) Rules, 2006, Consolidated Financial Statements presented by the Company includefinancial information of subsidiary Companies.
Employee Stock Option Scheme
During the year under review, the Company has not granted any Options to the employeesof the Company. Employees Stock Option Scheme (ESOS) was approved and implemented by theCompany and Options were granted to employees under ESOS Plan 2008 and Plan 2009 inaccordance with the Securities and Exchange Board of India (Employee Stock Option Schemeand Employee Stock Purchase Scheme) Guidelines, 1999 (‘the SEBI Guidelines’).
The particulars as required under Clause 12 of SEBI (Employee Stock Option Scheme andEmployee Stock Purchase Scheme) Guidelines, 1999 are as follows:
| Particulars | ESOS Plan 2008 | ESOS Plan 2009 |
| a) Total Options granted | 1,49,91,185 Options | 1,32,17,975 Options |
| b) No of Options surrendered | 1,32,17,975 Options | Nil |
| c) Pricing formula decided by ESOS Compensation Committee | Market Price or such other price as Board / Committee may determine. Different Exercise price may apply to different Plan(s). | Average of the weekly high and low of the closing price of the equity share of the Company at National Stock Exchange of India Limited during two weeks preceding the date of Grant i.e. 16th January 2009. |
| d) Options vested | 16,07,320 Options | 1,12,78,995 Options |
| e) Options exercised | Nil | Nil |
| f) Total number of equity shares arising as a result of exercise of Options | Subject to Option(s) exercised by the employees, not exceeding 16,07,320 | Subject to Option(s) exercised by the employees, not exceeding |
| Equity Shares. | 1,32,17,975 Equity Shares. |
| g) Options lapsed during the year | 4,85,109 Options | 19,55,780 Options |
| h) Variation of terms of Options | None | None |
| i) Money realised by exercise of Options during the year | Nil | Nil |
| j) Total number of Options in force at the end of the year | 11,22,211 Options | 93,23,215 Options |
| k) Employee wise details of Options granted to: | | |
| i. Senior managerial personnel | Nil | Shri Hasit Shukla, President, |
| (i.e. Managing Director/Whole-time Director/ | | Company Secretary and Manager |
| Manager) | | 1,00,000 Options. |
| ii. Employee who receives grant in any one year of option amounting to 5% or more of option granted during the year | Nil | 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 at the time of grant | Nil | Nil |
| l) Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of Options calculated in accordance with Accounting Standard (AS) 20 | N.A. | N.A. |
| There would not be any fresh issue of equity shares of the Company upon exercise of Options by employees | There would not be any fresh issue of equity shares of the Company upon exercise of Options by employees |
| m) The difference between employee compensation cost using intrinsic value method and fair value of the Options and impact of this difference on Profits | Rs. 3.56 crore | Rs. 12.26 crore |
| EPS of the Company | Rs. 2.22 | Rs. 2.22 |
| n) Weighted- average exercise prices of Options granted during the year where exercise price is less than market price. | Nil | Nil |
| o) Weighted- average fair values of Options granted during the year where exercise price is less than market price. | Nil | Nil |
| p) Significant assumptions made in computation of fair value | base: Black Scholes model | |
| (i) risk-free interest rate, | 8.01% p.a. | 8.12% p.a. |
| (ii) expected life, | 8 years | 9 years |
| (iii) expected volatility, | 56.26% | 56.26% |
| (iv) expected dividends (yield), and | 0.47% | 0.47% |
| (v) the price of the underlying share in market at the time of option grant. | Rs. 541.15 per share | Rs. 174 per share |
The Company has received a certificate from the auditors of the Company that the ESOSPlan 2008 and 2009 has been implemented in accordance with the Guidelines and as per theresolution passed by the members of the Company authorising issuance of ESOS.
Fixed Deposits
The Company has not accepted any fixed deposit during the year under review.
Directors
In terms of the provisions of the Companies Act, 1956, Shri Deepak Shourie, Director ofthe Company retires by rotation and being eligible, offers himself for re-appointment atthe ensuing Annual General Meeting.
A brief resume of the Director retiring by rotation at the ensuing Annual GeneralMeeting, nature of expertise in specific functional areas and names of companies in whichhe holds directorship and/or membership/chairmanships of Committees of the Board, asstipulated under Clause 49 of the listing agreement with the Stock Exchanges in India, isgiven in the section on Corporate Governance forming part of the Annual Report.
Directors’ Responsibility Statement
Pursuant to the requirements under Section 217(2AA) of the Companies Act, 1956 withrespect to Directors’
Responsibility Statement, it is hereby confirmed that: i. in the preparation of theannual accounts for financial year ended 31st March, 2010, the applicable AccountingStandards have been followed along with proper explanation relating to materialdepartures; ii. the Directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as at 31st March, 2010and of the profit of the Company for the year under review; iii. the Directors had takenproper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of the Companies Act, 1956 for safeguarding the assets ofthe Company and for preventing and detecting fraud and other irregularities; and iv. theDirectors had prepared the annual accounts for financial year ended 31st March, 2010 on a‘going concern’ basis.
Group
Pursuant to intimation received from the Promoters, the names of the Promoters andentities comprising ‘Group’ as defined under the Monopolies and RestrictiveTrade Practices Act, 1969 are disclosed in the Annual Report for the purpose of the SEBI(Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
Consolidated Financial Statements
The Audited Consolidated Financial Statements, based on the financial statementsreceived from subsidiaries and associates, as approved by their respective Board ofDirectors have been prepared in accordance with Accounting Standard (AS) -21 on‘Consolidated Financial Statements’ read with Accounting Standard (AS) -23 on‘Accounting for Investments in Associates’, notified under Section 211(3C) ofthe Companies Act, 1956 read with the Companies (Accounting Standards) Rules, 2006, asapplicable.
Auditors and Auditors’ Report
M/s. Chaturvedi & Shah, Chartered Accountants and M/s. B S R & Co., CharteredAccountants, as Statutory Auditors of the Company, hold office until the conclusion of theensuing Annual General Meeting and are eligible for re-appointment. The Company hasreceived letters from M/s. Chaturvedi & Shah, Chartered Accountants and M/s. B S R& Co., Chartered Accountants, to the effect that their appointment, if made, would bewithin the prescribed limits under Section 224(1B) of the Companies Act, 1956, and thatthey are not disqualified for such appointment within the meaning of Section 226 of theCompanies Act, 1956.
The observations and comments given by Auditors in this report read together with notesto Accounts are self explanatory and hence do not call for any further comments underSection 217 of the Companies Act, 1956.
Particulars of Employees
In terms of the provisions of Section 217(2A) of the Companies Act, 1956 read with theCompanies (Particulars of Employees) Rules, 1975, the names and other particulars ofemployees are set out in the Annexure to the Directors’ Report. However, havingregard to the provisions of Section 219(1)(b)(iv) of the
Companies Act, 1956, the Annual Report excluding the aforesaid information is beingsent to all the members of the Company and others entitled thereto. Any member interestedin obtaining such particulars may write to the Company Secretary at the Registered Officeof the Company.
Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo
The particulars as required to be disclosed pursuant to Section 217(1)(e) of theCompanies Act, 1956, read with the Companies (Disclosures of Particulars in the Report ofBoard of Directors) Rules, 1988, are given in the Annexure – A forming part of thisReport.
Corporate Governance
The Company has adopted "Reliance Anil Dhirubhai Ambani Group-Corporate GovernancePolicies and Code of Conduct" which has set out the systems, process and policiesconforming to international standards. The report on Corporate Governance as stipulatedunder Clause 49 of the listing agreement with the Stock Exchanges, forms part of theAnnual Report.
A Certificate from the Auditors of the Company M/s. Chaturvedi & Shah, CharteredAccountants and M/s. B S R & Co., Chartered Accountants, conforming compliance withconditions of Corporate Governance as stipulated under the aforesaid Clause 49, is annexedto this Report.
Acknowledgements
Your Directors would like to express their sincere appreciation of the co-operation andassistance received from shareholders, debentureholder, bankers, regulatory bodies andother business constituents during the year under review. Your Directors also wish toplace on record their deep sense of appreciation for the commitment displayed by allexecutives, officers and staff, resulting in the successful performance of the Companyduring the year.
| For and on behalf of the Board of Directors |
| Mumbai | Anil Dhirubhai Ambani |
| 15th May, 2010 | Chairman |
Annexure -A
Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo
Your Company being a telecommunications service provider does not involve in anymanufacturing activity, hence the provisions of the Section 217(1)(e) of the CompaniesAct, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board ofDirectors) Rules, 1988, is not applicable.
However, the information as applicable is given hereunder:
(a) Conservation of Energy: Company is making all efforts to conserve energy.The Company monitors energy costs and periodically reviews the consumption of energy. Italso takes appropriate steps to reduce the consumption through efficiency in usage andtimely maintenance / installation / upgradation of energy saving devices.
(b) Technology Absorption: The Company continuously makes efforts towardsresearch and developmental activities and has been constantly active in harnessing andtapping the latest and best technology in the industry.
(c) Foreign Exchange Earnings and Outgo:
Activities related to exports, initiatives taken to increase exports; development ofnew export markets for products and services; and export plans:
The Company has taken various initiatives for development of export markets for itsinternational telecom services in the countries outside India to increase its foreignexchange earnings.
Total foreign exchange earnings and outgo for the financial year is as follows:
a. Total Foreign Exchange earnings : Rs. 849.14 crore
b. Total Foreign Exchange outgo : Rs. 1,276.17 crore