gtl infrastructure ltd share price Management discussions

( August 31,2023. The cumulative debits made upto this point amount to 10,660 Mn.)

Meanwhile ITSL, has recovered 201 Mn (Previous Year i 139 Mn) by way of sale of pledged equity shares.

In view of the above, the interest on borrowings has been provided after adjusting the aforesaid amounts in principal.

As per the arrangements with the Lenders, the Company is required to comply with certain covenants and noncompliance with these covenants may give rights to the lenders to demand Repayment of the loans. Considering alleged claims of lenders and to comply with the requirement of Ind AS -1 “Presentation of Financial Statement”, the Company has classified Non-Current borrowings as Current Financial liability as an abundant precaution, which was classified for the first time in the Balance Sheet as at March 31,2019.

The Company received notices of recall of loans from EARC and IDBI Bank claiming alleged default of 38,226 Mn (US$ 465 Mn) and 2,010 Mn (US$ 24 Mn) respectively in terms of Master Restructuring Agreement dated December 31,2011 during financial year 2020-21. The Company has strongly refuted the claims and responded to said notices appropriately. Thus, in absence of directions from lenders as stated above, the Company continues to mention terms

of repayment (Refer note no 18.3) and amount of Overdue (Refer note no. 18.5) as on March 31, 2023 in terms of and in accordance with the payment schedule, terms and conditions of Strategic Debt Restructuring Scheme as approved by then lenders.

The non-current Liabilities of the Company stood at 5,933 Mn (US$ 72 Mn) as of March 31,2023 as compared to 6,580 Mn (US$ 80 Mn) as on March 31, 2022. The non-current Liabilities primarily consist of lease liabilities, provisions related to assets retirement obligation, deposits received from customers, provision for compensated absences etc.

The current assets of the Company stood at 8,526 Mn (US$ 104 Mn) as of March 31, 2023 as compared to 8,055 Mn (US$ 98 Mn) as on March 31,2022. The current assets primarily consist of trade receivables, cash and cash equivalents, Opex advances, deposits, balance with government authorities, unbilled income, tax etc.

Note : Please refer note 11 of the financial statements for further details Current Liabilities

The current liabilities of the Company were 15,783 Mn (US$ 190 Mn) as on March 31, 2023 as compared to 13,942 Mn (US$ 170 Mn) as at March 31, 2022. These Liabilities primarily consist of provision towards

arbitration claim raised by GTL (net), lease liabilities, statutory dues, Assets retirement obligation (“ARO”) and operational provisions toward site rent, energy management, security etc.

As reported from time to time, due to slowdown in telecom sector since 2010-11 coupled with constant increase in interest rates affecting profitability of entire telecom sector, the Company had undertaken Corporate Debt Restructuring (“CDR”) exercise under the aegis of CDR mechanism in July 2011. Post implementation of the CDR package, the telecom sector continued to be under stress, which had material adverse impact on the achievement of the Companys CDR projections. Some of the adverse developments, which were beyond the management control have been enumerated below:

a. Decision of cancellation of 122 2G licenses upheld by the Honble Supreme Court;

b. Aircel default on commitment of additional 20,000 tenancies to the Company;

c. Vodafone Tax Litigation;

d. Slower 3G & BWA growth;

e. Freeze on substantial expansion by telecom operators;

f. Lack of deployment of capex for modernization and replacement

As a result, in 2016 the lenders of the Company invoked Scheme of Strategic Debt Restructuring (“SDR”) as per guidelines issued by the Reserve Bank of India. The Company fully cooperated with the lenders in SDR implementation. The Company also complied with the stipulations under SDR including that of merger of Chennai Network Infrastructure Limited with the Company and steps taken towards induction of new investor and serviced outstanding debt in terms of CDR and SDR during that period.

However, various extraneous developments in telecom sector subsequently such as (i) aggressive pricing by Telcos; (ii) reduction in interconnect usage charges and

(iii) increasing unsustainable levels of debts of existing Telcos, impacted the profitability / cash flow of all participants in the sector making it unsustainable to remain viable and / or continue operations as evidenced through series of events / announcements listed below:

(i) Aircel Groups admission to National Company Law Tribunal (“NCLT”) under Insolvency & Bankruptcy Code, 2016 (“IBC”) in 2018;

(ii) Sale of Sistema Shyam Teleservices Limited to Reliance Communication Limited (“RCom”) and consequent merger of both in 2017;

(iii) RCom decision to shut down wireless business and subsequent filing of insolvency petition with NCLT under IBC in 2017;

(iv) Tata Groups decision to exit telecom business and consequent merger of Bharti Airtel Limited (“Bharti Airtel”) and Tata Teleservices Limited 2017;

(v) Bharti Airtel and Telenor (India) Communication Private Limited merger in 2017

(vi) Vodafone India Limited (“Vodafone”) and Idea Cellular Limited (“Idea”) merger in 2018;

All of these factors, which were beyond the control of the management, have had a material adverse impact on the Company and its business prospects. The following table depicts number of tenancy loss faced by the Company over the last 12-13 years, despite having long term binding contracts with Telcos:

The graph below clearly highlights the impact of aforementioned events and consequent tenancy loss on revenue and EBITDA of the Company:

Further these developments resulting in Company pursuing for its contractual claims of more than 150,000 Mn from such telecom operators (majority of claims Against Aircel) in respect of premature exits by them in lock-in period.

Thus, these extraneous developments in telecom sector especially during the last 6-7 years, once again unavoidably pushed the Company to a position from where it will require to again rebuild itself and also to realign its overall debt (including unsecured foreign currency bonds) to sustainable level with revised cash flows.

By its circular dated February 12, 2018, the Reserve Bank of India withdrew and repealed the CDR and SDR guidelines. Although the Company was regular and current in its interest and principal payments to lenders as per SDR terms, purely on technical grounds as per RBIs circular dated February 12, 2018, certain lenders downgraded the account.

Post these various adverse developments in telecom sector, the Company had proactively presented a resolution plan on April 27, 2018 (with an intent to maximize recovery of dues and to protect the equity exposure of the lenders) to the lenders who constituted a significant majority of the outstanding debt of the Company.

However, the lenders had elected to pursue sale of their debt to an Asset Reconstruction Company. The Company was informed that Edelweiss Asset Reconstruction Company

Limited, acting as a trustee on behalf of EARC - Trust SC 338 (“EARC”), emerged as the highest bidder in July, 2018 under a Swiss auction process independently run by the lenders. Till date 79.34% of the Indian Rupee Lenders have assigned their respective rights, title and interest in the financial assistance granted to the Company in favour of EARC.

In the meantime, one of the secured lenders filed petition before the NCLT, Mumbai Bench under IBC for initiation of Corporate Insolvency Resolution Process. The Honble NCLT vide its order dated November 18, 2022 dismissed the said petition. The said lender has filed an appeal against this order before the Honble National Company Law Appellate Tribunal (“NCLAT”).

In accordance with the revised guidelines, post assignment of 79.34% of secured rupee debt to EARC, the Company also presented multiple Resolution Plans starting from July 2019 for consideration of lenders consortium updating such plans from time to time after taking into account various developments in telecom sector.

Despite aforementioned extraneous development in telecom sector, adversely impacting the Company, since 2010 the Company has repaid to its lenders towards debt servicing in cash and equity conversion, details of which are as follows:

* 18,680 Mn were paid by ARC to PSU lenders under Assignment Agreement.

Based on payments made in the immediately preceding financial year, the Company believes that if debt capital is correctly sized based on a TEV study (requested by the Company from time to time), the Company would be able to continue operations despite challenges in telecom sector and could seek to participate in the forthcoming 5G implementation. This could also help in restoring equity value for the lenders.

This report, prepared in accordance with Regulation 34(3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, provides an overview of key strategic risks, the Companys risk control framework and its approach to risk management.

Shareholders and other readers are cautioned that the risks outlined here are not exhaustive and are given for information purpose only. New risks and uncertainties arise from time to time and it is impossible for us to predict these events or how they affect us.

The Company conducts Risk Management activities covering all of its operations with the aim of taking pre-emptive actions to mitigate sources of risk, that is, any factors that could potentially impede the accomplishment of business objectives.

At the Company, Risk Management is at the core of the operating structure of the Company and functions in parallel with the development and execution of management strategies. The Companys senior management and core functional officers, being Whole Time Director, Chief Financial Officer and the Legal and Secretarial teams, as a matter of routine, assess potential operating and strategic risks informally in order to ensure that the Company at all times has a mitigation plan in place. The Company believes

that by combining these two functions, it is better positioned to accomplish its business objectives and to increase its value.

The Company seeks to achieve an appropriate balance between risk and reward, and continues to build and enhance the risk management capabilities that assist in delivering the growth plans in a controlled environment. Thus, the Company seeks to control adverse variations in earnings and capital by managing risk exposures within agreed levels of risk appetite.

Revenue from existing business lines are dependent on the sustainability of the Telecom sector which in turn is dependent on several macro-economic factors, such as the growth of the Indian economy, favourable interest rates, increased transparency and certainty in the regulatory environment, the cost of spectrum and the overall stability of the Indian Telecom sector. Thus, the Company believes that factors have a significant direct impact on Compays business, results of operations and financial positions.

Based upon the spectrum auctions, the license charges paid by the Telecom Operators will continue to impact the net margins of the Telecom Operators. Hence, the increased capital charges (the interest outgo on account of debt raised for 3G, 4G and 5G network rollout, and the amortization of spectrum charges) would place additional pressure on Telecom Operators bottom lines.

The DoT amended the definition of AGR w.e.f. October 2021, to remove all non-telecom revenue. This change could help clarify that all the doubts and grey areas that have been a bone of contention between the Telecom Companies and the Government. Further, the Telecom Department has returned Bank Guarantees (“BGs”) of 150,000 Mn to Vodafone Idea (“VIL”) and 70,000 Mn to Bharti Airtel and asked the Telecom companies to refurnish BGs of an amount equal to their next payable installment 13 months. This will ease pressure on cash flows of Telecom Operators.

Bharat Sanchar Nigam Limited (BSNL) is gearing up for a fullf- ledged commercial launch of its fourth-generation or 4G services in India. Recently, the Centre has infused 8,905 Mn into BSNL as part of the third revival package, including allotment of 4G and 5G spectrum through equity infusion. The Company provides services to BSNL and its sites may attract additional tenancies from BSNL.

The Company is also optimistic about tapping the growth opportunities available from 5G rollout by major Telcos and 4G services launch from one of the key operators.

During the last few years, the Telecom Sector has been adversely affected by the general economic slowdown and various other factors, such as slower growth of 3G/4G technology, delayed spectrum auctions and inflationary power and fuel costs, resulting in a cash flow crunch. All Telecom operators are facing increased pressure on earnings and debt servicing. During last 2-3 years free voice with cheap data services and aggressive tariff structures have placed additional burden on the top-line of the Telecom Operators. This may impact payment obligations of the Telecom Operators in the short to medium term. As a vendor to these Telecom Operators, the Company is currently facing a Credit Risk in the medium term.

High investment in spectrum, equipment and low 5G tariff may further impact profitability / cash flow of Telecom Operators.

The average revenue per user in India is amongst the lowest in the world. Further, in recent years, the industry has been through a phase of hyper-competition, resulting in consolidation amongst operators, phasing out many of the incumbent players leading to loss of tenancies. The consolidation wave has reduced the number of players to about 4 from ~18 players in 2011. The consolidation of operators has resulted in co- location churn for tower companies due to consolidation and rationalization of network. The Company has been a clear victim of the continued consolidation. This consolidation has resulted in significant loss of tenancies for the Company.

The Company proposes to leverage existing contracts with operators to procure commitments for fresh towers or sites in lieu of towers or sites made redundant as a result of consolidation onslaught in the telecom sector.

The Supreme Court ordered in December 2016 that mobile towers are exigible to Property Tax. The said ruling means significant additional costs for telecom tower operators, resulting in a strain on liquidity. This issue affects all telecom infrastructure providers. The Company has agreements with some of its customers to obtain reimbursement of property tax liability and is currently negotiating similar rights with all its customers, so the Company may be in a position to recover some of the additional costs.

At this moment, it is not possible to ascertain exact amounts involved. However, the Company has challenged the various components and retrospective levy of Property Tax demands raised by the respective local statutory authority.

There is a high Concentration Risk for the Company for the following reasons:

The Company operates primarily in one sector namely, the Telecom Sector. The telecom sector moving towards an oligopolistic structure, with three players accounting for more than 90% of market share, will pose challenges for Tower companies. This will put pressure on rent revenue per tower as the number of tenants per tower would go down.

Further, the stressed financial condition of any debt-laden telecom incumbents will restrain any material hike in rentals, at least over the medium term.

Aircel was the Companys single largest customer, contributing around 45% of revenue. On March 1, 2018, Aircel Group filed for insolvency proceedings under Section 10 of the IBC, 2016 before National Company Law Tribunal, Mumbai (“NCLT”). The Company has filed its claims against Aircel Group before Resolution Professional (RP) amounting to 133,940 Mn as Financial Creditor.

The Companys Misc. Application claiming Corporate Insolvency Resolution Process (CIRP) Cost has been approved by the NCLT, Mumbai vide order dated November 27, 2019 and December 06, 2019. Resolution Professional (RP) has filed an appeal being

Company Appeal (AT) (Insolvency) No. 1410 of 2019 against Para 33 of the Order dated November 27, 2019 where CIRP Cost of the Company has been approved by NCLT and second appeal being 1503 of 2019 filed by the Resolution Professional against the order dated December 06, 2010 (which is essentially clarified and extensions of earlier order stated at Para 33 of order dated November 27, 2019). SBI and Committee of Creditors (“COC”) has also filed an appeal being Company Appeal (AT) (Insolvency) No. 26-27 of 2019 and opposing CIRP payments to the Company. The accumulated CIRP cost to the date is 9,167 Mn.

Another Misc. Application filed by Company challenging reclassification of the Company from Financial Creditor to Operational Creditor and subsequent verification of the Companys Claims as Financial Creditor has been disposed of and the Companys claim has been rejected by the NCLT on November 27, 2019. Against the said order, the Company has also filed an appeal being Company Appeal (AT) - (Insolvency) No. 08 of 2020 before National Company Law Appellate Tribunal, New Delhi (“NCLAT”) challenging that portion of the Order dated November 27, 2019 to the extent it relates to NCLT Mumbai rejecting the Companys claim as Financial Creditor.

The RP has filed an application under Section 31 before the NCLT Mumbai for approval of the Resolution Plan and the same has been approved by the NCLT on June 9, 2020. The Company has challenged the said NCLT order dated June 9, 2020 by way of an appeal being Company Appeal (AT) (Insolvency) No. 734 of 2020, filed before NCLAT New Delhi as the Companys CIRP cost approved by NCLT has not been considered in the Resolution Plan.

The Companys claim against Reliance Communication Limited and Reliance Telecom Infratel Limited including that of Sistema Shyam Teleservices Ltd. (“SSTL”) to the tune of 1,502 Mn. as Operational Creditor has been filed before IRP on May 21,2019 and moratorium period is effective. No invitation has been given to the Company for Committee of Creditors meeting, as our claim does not meet the criteria of 10% claim.

In April, 2018 State Bank of India had filed Insolvency Petition against Videocon Telecommunications Limited and the Petition was admitted by the NCLT Mumbai and IRP has been appointed. The Company has filed our claim to the tune of 654 Mn as an operational creditor and moratorium period is effective. No invitation has been given to the Company for Committee of Creditors meeting, as our claim does not meet the criteria of 10% claim.

However, since the above referred Telecom Operators are undergoing the CIRP, it remains to be seen what residual value would be left for distribution after appropriation by the secured banks / lenders, especially post recent amendments in Insolvency & Bankruptcy Code thereby bringing clarity on preference to financial creditors over operational creditors / unsecured financial creditors. There is a significant risk that there may not be any monies left after distributing proceeds to the secured banks / lenders of these Telecom Operators. Such unprecedented shutdown of network operators has led to frustration of various network improvisation measures that the Company had undertaken and also led to shrinking of cash flow.

Recovery Proceedings

The Company has experienced delays and defaults in recoveries of its dues for over six months or at times, in respect of some sites, even up to a year from one of its existing customers. The Company has invoked arbitration proceedings against the said customer before Single Arbitrator appointed by Honble Delhi High Court. The Company has filed claim of 3,652 Mn against the said customer whereas the said Customer has filed a counter claim of 5,003 Mn. The matter is posted for Cross examination of Companys witnesses.

Through ATC Telecom Private Limited (“ATC”), Company had provided Infrastructure Services to Telenor (India) Pvt. Ltd. Since Telenor got merged into Bharti Airtel Limited, consequently, exit notices were issued by ATC for its tenancies with the Company taken for its customer Telenor. ATC also owes several amounts to the Company under multiple binding agreements and the Company believes that it would be essential to proceed for recovery. As such Company has invoked arbitration proceedings against ATC for CNIL Sites before Single Arbitrator Honble Retd. Justice Manmohan Singh. The Company has filed its Statement of Claim and ATC has also filed their Statement of Defence. Issues have been framed. Companys witness cross examination has been completed and now the matter is posted for cross examination of ATCs witnesses. The Company has also filed a Summary Suit before Bombay High Court for GIL Sites and the matter is now posted for framing of the issues. The Company has a total claim of 412 Mn against ATC.

Another existing customer had given exit notices on 2,899 FPT sites, out of the said sites 1,359 FPT sites are within lock in period for which the Company has raised the exit penalty claim to the tune of 773 Mn along with interest of 380 Mn as on June 30, 2023. Post several reminder letters, the Company is in process of filing a Commercial Suit before Honble Bombay High Court. As of June 30, 2023 the total outstanding claims are approximately 2,982 Mn.

Further, initial term of the Master Service Agreement with few customers has also expired. Few Customers are also opting for exit from sites where lock-in has expired resulting in loss of tenancies for the Company.

Following table depicts claims of the Company as on June 30, 2023 against telecom operators:

* Certain operators have disputed the claims of the Company During the year, the Company managed to recover 290 Mn from Tata Teleservices, one of its customers, through the arbitration process

THEFT/DISMANTLING OF TOWERS

14 telecom customers, upon their shutdown or exit, abandoned more than 14,000 of the companys towers. This resulted in making such towers unoccupied and loss of revenue towards the Infrastructure Provisioning Fees / Rental on such towers in respect of which the Company continues to pursue contractual claims of approx. 153,822 Mn from various customers. In view of above, the rental to landlords, taxes & other dues related to unoccupied towers remained unpaid, many of which are pass through payments for the Company. Further, the Company has requested EARC, being Monitoring Institution, for payments due to the landlords of the unoccupied sites, however the same is yet to be approved. Due to non-receipt of rentals, many of landlords blocked access to Companys employee to site. Resultantly, disgruntled landlords / unknown miscreants resorted to unauthorized dismantling of the tower sites. 2,932 sites got dismantled during the year ended March 31,2023 (259 sites during the year ended March 31,2022) out of the above unoccupied sites. Further, 476 sites were stolen/ dismantled as of June 2023.

The Company, on its part, are taking various mitigation measures to protect its assets such as carrying out additional survey of its sites, discussion with landowners for convincing them for not resorting to such actions, implementation of round the clock surveillance system in the form of a dedicated Tower Vigilance Team (TVT) to effectively minimize and prevent theft of tower assets, negotiating with customers / telecom operators for getting new tenants on such unoccupied towers, requesting lenders for making rent payments, submission of proposal to lenders for unfeasible sites etc. However, there was no cooperation from lenders towards settlement of rent liability. The Company has also initiated process of taking legal actions and filing of FIR against such landowners / miscreants who have resorted to dismantling of towers.

The Company had also attempted to salvage unoccupied tower sites and accordingly resolution plans submitted by the Company to the lenders included payment of rent to landowners, settlement to vendors and employees. However, none of the resolution proposals were considered or even responded to by the lenders. Thus, there is a risk of further theft / dismantling of un-occupied / discontinued sites of the Company if the said issue remains unresolved.

RISK RELATING TO DEBT

The various extraneous developments in telecom sector as reported from time to time especially during the last 3-4 years, once again unavoidably pushed the Company to realign its overall debt (including unsecured foreign currency bonds) to sustainable level with revised cash flows. In April 2018, the Company had proactively presented a Resolution Plan (with an intent to maximize recovery of dues) to the lenders who constituted a significant majority of the outstanding debt of the Company. Instead, the lenders had elected to pursue sale of their debt to an Asset Reconstruction Company. As on date, 79.34% of the Indian Rupee Lenders have assigned their respective rights, title and interest in the financial assistance granted to the Company in favour Edelweiss Asset Reconstruction Company Limited (“EARC”), acting as a trustee on behalf of EARC - Trust SC 338.

Few lenders did not assign their respective debt. Instead, Canara Bank chose to file Insolvency Application. Initial application was dismissed following the Honble Supreme Courts decision in Dharani Sugar vs. Union of India & Ors. Fresh application was

filed before NCLT, Mumbai, once again seeking initiation of CIRP in respect of the Company.

The said petition was dismissed by Honble NCLT, Mumbai on November 18, 2022. The Honble NcLT held that the business of the Company is sustainable, it is a viable going concern under its current management and the overall financial health of the Company is not bad enough to be admitted under CIRP. Against the dismissal order of November 18, 2022 Canara Bank preferred an appeal before Honble NCLAT at New Delhi. The Company has filed its reply to the said NCLAT petition and the matter is posted for admission hearing. In the meantime, EARC who is the lead lender has also filed its intervention application in the said NCLAT appeal and in that also Company has filed its reply and the said matter is also posted for final hearing.

Based on payments made in the immediately preceding financial year, the Company believes that if debt capital is correctly sized based on a TEV study (requested by the Company from time to time), the Company would be able to continue operations despite challenges in telecom sector. This could also help in restoring equity value for the lenders.

Further, the said lender i.e., Canara Bank and also Indian Bank and Union Bank of India have filed an application against the Company for recovery of its debts before the Debt Recovery Tribunal, Chennai.

Thus, any further delay in implementation of the Resolution Plan will negatively impact the sustainability of the Company. Further any attempt to pursue a resolution plan under Insolvency and Bankruptcy Code 2016 (“IBC”) will lead to erosion of debt and equity value as there is a risk of exits by customers from lock- in agreements if the insolvency is admitted.

One of the secured lenders of GTL Limited has filed Insolvency petition against GTL before the NCLT, which is pending before NCLAT. Since Operation, Maintenance and Energy activity is critical for stability of network of the Company and is being managed by GTL, admission of GTL into NCLT may impact network significantly.

As stated in Risk Management Section of Annual Report for 202122, the trustee of Series A FCCB has filed a Commercial Suit before the Honble Bombay High Court for recovery of US$ 28 Mn.

Thus, there is a risk that in case the Commercial Suit is allowed, then, as claimed by the Trustee, the Company would be liable to pay to the trustee the outstanding amounts of US$ 27 Mn. with further default interest on the Redemption amount in terms of Acceleration Notice.

Series B2 Bonds are redeemable and have matured on October 27, 2022. The lead lender has informed the Company that till the time the entire outstanding secured debt of the secured lenders is fully paid off, no other creditor including Series B2 bondholders, which rank sub-ordinate to the secured creditors, can be paid in priority. As a result, the Company could not redeem Series B2 Bonds on its maturity. Thus, in absence of restructuring by secured lenders there is risk of action by the bondholders against the Company.

The competition is intense among the incumbent tower companies. Telecom Operators such as Bharti Airtel and Vodafone Idea have business interest and ownership in Indus Towers. Similarly, Reliance Jio has business interests in the Brookfield

owned Summit Digitel Infrastructure Pvt Ltd. It is expected that these tower companies will get preference of new sites from Bharti Airtel, Vodafone Idea and Reliance Jio respectively.

To mitigate this, the Company would continue to render SLA driven services and capitalise on its strategic foot print of radiating and non-radiating towers to make it attractive for the operators for new tenancy. However, if debt restructuring by EARC consortium is not completed in a time bound manner, there will be limited Capex available for network upgradation which will result in decline in customer demand for our towers.

The Company requires materials and services for tower upgradation and preventive maintenance of passive infrastructure. Delay in supplies of such materials and services, may impact smooth functioning of business operations resulting into penalties and claims for damages by customers.

Additionally, suppliers may tighten credit and other terms that they may be extending to the Company thereby increasing the liquidity strain on the Company and hampering its ability to deliver projects and running operations on a timely basis.

The Company faces high operational level challenges for the energy management like payment settlement issues, invoicing and addressing of concerns. In order to streamline the energy operations / assuring efficiency, the Company is focusing on renewing its energy contracts with the customers.

Over the years, exit of tenants due to shut downs or consolidation in telecom sector, the Company has implemented various cost optimization measures. The Company may face increased levels of attrition, due to inter-creditor disputes and threat of NCLT proceedings, resulting in challenges in project execution and service delivery, especially considering 5G implementation by Telecom Operators.

Network equipment such as diesel generators, battery bank, power supply equipment (“SMPS”) and air conditioner are ageing towards end of life. Improper functioning of these equipment may impact smooth functioning of business operations resulting into penalties and claims for damages by customers. Further this may also result in tenancy exits for non-maintenance of contractual SLAs.

The Company has drawn up Capex plan for upgradation of its site equipment, however cash flow constraints may restrict implementation of capex plan.

Legal, Contractual and Compliance risk may arise from occasional non-adherence to timely deliverables and Service Level Agreements (“SLA”), for the reasons mentioned above and in some cases beyond Company and management control, especially where certain operators default on their contractual obligation to pay in a timely manner and the Company is saddled with costs related to discontinued tenants.

Considering pending application before NCLT, in the event of admission of the Company under IBC the Customers may exit from sites, which may in turn result in loss of business for the Company.

The Company may also lose its right to claim lock in compensation. The Company has made lenders aware of the same.

The Central Bureau of Investigation has filed a FIR dated August 16, 2023 against the Company, unknown public servants and unknown persons as stated therein.

The Company believes that (i) the decision to assign the lenders debt to aRc, was entirely that of the lenders and the Company was no way involved in the decision-making process. This was based on lenders own commercial wisdom and on an independent process followed by the lenders; (ii) the Company has complied with all relevant sanctions, approvals and regulations.

The Company continues to operate in normal course of business and does not see any material impact on the operations of the Company.

The Company has a talented and committed legal and compliance team however several external risks related to legal, contractual and compliance keep surfacing given ever changing rules, regulations and laws.

The Company is not regulated by any regulatory agency and faces the general regulatory environment that is prevalent in the country. However, the customers in the telecom sector are regulated by

Telecom Regulatory Authority of India (“TRAI”) and the Company is IP-1 registered with Department of Telecommunications India.

The Companys assets are subject to risk from natural disasters like cyclone or external factors. The Company maintains insurance for its assets which cover for damages caused by fire, special perils and terrorist attacks. However, disruption to the Companys network from natural calamities, though temporary in nature, is always a possibility. There are some environmental concerns from citizens groups as well. Electromagnetic Field (“EMF”) radiations are the invisible electric and magnetic forces arising from the active infrastructure installed at telecom towers. In the recent past some citizens groups have raised concerns around the radiations and its ill effects. Although the risk related to EMF radiation if any, is completely attributed to the Companys customers, any litigation concerning this and resultant adverse orders, could affect tower business as well. It may be noted that EMF radiation norms in India are more stringent than in Europe and non-adherence can invite hefty fines from regulator. Also, there has been no conclusive evidence as such of the ill effect of radiations on human health. The Department of Telecommunications (“DoT”) has recognized campaigns and media articles. Also, DoT has set up TERM Cells to monitor the radiations and certify the locations.

The Company is committed to ensure that its operations are carried out within a well-defined internal control framework. Good governance, robust systems and processes, a vigilant finance function and an independent internal audit function are the foundations of the internal control systems. The Company believes that a strong internal controls framework is an essential pre-requisite of growing its business.

The Company has an internal control system in place, commensurate to its size and spread in order to achieve orderly and efficient conduct of its business, including adherence to management policies, safeguarding of assets, prevention and detection of fraud and error, accuracy and completeness of the accounting records and timely preparation of reliable financial information. The internal control system encompasses financial and operational controls and statutory compliances.

There are suitable controls with reference to policies and procedures, risk assessment, ethics that are clearly established, communicated and monitored. Also there is aperiodic review and assessment of the relevant controls to improve effectiveness, reduce cost and improve business performance.

The authority matrix, responsibility and accountability i.e., delegation of authority and segregation of duties are clearly defined such that decisions are made and actions taken at an appropriate level.

The control environment ensures commitment towards integrity and ethical values and independence of the board of directors from the management. The control activities incorporate, among others, continuous monitoring, routine reporting, checks and balances, purchase policies, authorisation and delegation procedures.

The internal audit function performs audit to monitor and evaluate the effectiveness of the Companys internal control systems and adherence to management policies and statutory requirements. It maintains a regular surveillance over the entire operations.

The audit coverage in the internal audit function of the Company is in line with the objectives of internal audit as prescribed by the Institute of Chartered Accountants of India (ICAI). The role of internal audit in the Company is as given below:

• Understanding and assessing risks and evaluating adequacies of the prevalent internal controls.

• Identifying areas for system improvement and strengthening controls.

• Ensuring optimum utilisation of the resources of the Company.

• Ensuring proper and timely identification of liabilities, including contingent liabilities of the Company.

• Ensuring compliance with internal and external guidelines and policies of the Company as well as the applicable statutory and regulatory requirements.

• Safeguarding the assets of the Company by setting up a process of every change record.

• Reviewing and ensuring adequacy of information systems security control.

• Reviewing and ensuring adequacy, relevance, reliability and timeliness of management information system.

The internal audit function is monitored by the audit committee of the Board which periodically reviews audit plans, audit observations of both internal and external audits, audit coverage, risk assessment and adequacy of internal controls. Thus effective internal control structure has been set up in the Company to enhance organizational performance and contribute towards accomplishment of its objectives.

The Company is following ISO 9001:2015 standard. The standard has helped the Company in periodically giving recommendations for achieving long-term, sustained success and focus on meeting the needs and expectations of all relevant stakeholders. As part of the continuous learning process, the Company updates its processes and quality plans, whilst reviewing the said process for suitability and sustainability. These processes are documented and maintained by the concerned process owners, and may be audited as and when required by an independent QMS team to assess the level of maturity of the different components of the system and identify and prioritize potential areas for improvement. Modifications are made to the processes where required to help the organization.

The Company educates its employees for identified needs related to HSW like electrical safety requirement, height safety training, first-aid, road safety, 4-wheeler defensive driving, absolute safety rules (ASR) and other specific trainings as may be required for delivering the job. Regular field visits are conducted by the Management teams to ensure all health and safety related matters are complied with in order to minimize the consequences of occupational hazards, accidents and injuries, and occupational and work-related accidents. The Company carries out regular assessment of conditions of occupational hygiene and factors in the organization of work which may give rise to risks for the health of workers.

Their skills, responsibilities they take, their achievements and commitment are our biggest strength. We encourage our employees to discover and realize their true potential. Acquiring diverse experiences, accomplishing challenging tasks and continually learning and upskilling is enabling them to deliver their best in very difficult situations. By identifying, developing and nurturing quality talent at every stage of the employee lifecycle, we are empowering them to become future ready and build rewarding careers.

Keeping employee wellbeing foremost, we have embraced the post-pandemic way of life and work.

With volatility rising in the external environment, a holistic approach has been adopted to proactively identify and address all potential capability gaps.

Training and Talent development though at a very minimal stage remains a focused initiative. The Training and coaching within the organization ensures that we maintain a healthy succession pipeline of critical and leadership roles.

This enables us to identify, groom and develop potential candidates across the organization.

To provide employees with growth opportunities across functions, locations and business units has always been the Managements prerogative.

Over the years, the Company philosophy has been to build trust, respect and fairness across all levels in the work force. Our work force is the most important aspect of our business and hence encouraging them to work in teams and perform to the best to their abilities, becomes the core of the Companys HR Philosophy. However, on top of all of this integrity is regarded as the ultimate asset in our individual / Company relationship.

Our HR Strategy revolves around the business strategy and the capabilities of our workforce. The HR Team along with business managers continuously work on processes and systems to continually build employee capabilities in order to ensure the corporate objectives are met.

All our HR processes have always been tuned towards equipping the work force to work smarter, rather than harder.

The HR processes are geared to enhance employee productivity and ownership in the Company.

• Talent acquisition

• Learning & development

• Performance management

• Rewards & recognition

• Employee engagement

• Work-Life balance

• Employee feedback & redressal

The Talent acquisition teams primary goal is to identify and hire the best talent to fill specific roles in the company

The Company believes in grooming internal talent, as well as sourcing capable resources from the industry. This helps the Company to challenge our internal systems as well as bring about positive changes in the Company.

The Company is looking at enhancing competencies across all functions.

HR is acquiring talent for defined key positions and ensures better customer service, organization goals and business objectives. In this financial year we focused on building the sales and network teams across to meet the customers needs.

We also stepped up recruitment in the TVT department to ensure safety of our towers.

This has helped the Company to focus on its core resulting into improved network uptime and customer satisfaction.

As on March 31, 2023, 792 were employed by the Company on a combined basis (including Associates) out of which 727 resources are on the Companys payroll.

The training initiatives taken this year within the organization were designed with one single focus which was to improve the job performance of the employees. These programs typically involve advancing the employees knowledge and skill sets and instilling greater motivation to enhance job performance.

In the last year, due to a limited training budget the Company focused on technical training, team building and statutory training (POSH).

This training equipped our employees to manage our customers effectively and provide them with good services. The Company has successfully trained approximately 492 employees across the country.

The performance management system in the Company is structured to get the best out of every employee. It revolves around -

1. Goal setting :

Employees are made to understand the Organisations short term and long term objectives through a formal communication plan. Post the communication employees fill in their individual and team objectives through an online system.

2. Reviewing and monitoring the work force performance

3. Assessing the competencies to achieve the objectives

4. Training to build capabilities

5. To reward and recognize employees

The Companys Rewards & Recognition Program is designed to encourage all employees to make a difference in their performance individually and through teams, besides assisting in creating a culture of mutual respect amongst the employees.

The program helps to recognize and promote positive behaviors that support individuals and teams, in achieving the Companys objectives.

The Company promotes a spot awards program which is created to recognize and reward employees who have significantly contributed to achieve the goals of the Company and have gone beyond their normal scope of work. Spot awards are designed to recognize specific contributions, as they occur for a specific project or task.

These awards are presented at any time and are meant to provide immediate recognition to employees.

Besides the spot awards employees are incentivized on annual basis based on their performance.

Employees are our most important asset and helping them to grow professionally is crucial to our success and well-being. The employee engagement initiatives at the Company are undertaken with an objective of shaping a positive experience that drives advocacy, productivity and profitability.

The Company has several initiatives that continue to yield positive results.

Other initiatives, besides awards include sharing key business news with employees for discussion and ideation, induction program, training, KRA week and events holding intra Company Sports Competitions .

Work life balance is about creating and maintaining supportive and healthy work environments, which will enable employees, have a balance between work and personal responsibilities and thus strengthen employee loyalty and productivity. Efforts to help employees improve work life balance can improve morale, increase job satisfaction and strengthen employees commitment to the Company. Additionally, benefits may be reaped in terms of increased productivity and reduction in absenteeism and employee turnover.

Work life balance initiatives offered to our employees are -

• flexible work arrangements such as flexi time and telecommuting

• eldercare benefits (Mediclaim Insurance)

• benefits for family members and domestic partners

• wellness program (Health Check -ups by reputed doctors/ physicians at the premises)

Employee feedback is one of the key processes conducted by the Company. The feedback comes in through:

Circle / Site visits by Senior Management on a periodical basis and an open houses on a regular basis. Open house sessions with the Core Management Team aligns company with purpose, talks to employees about benefits and reminds employees of the companys mission and values.

• We aim to improve our internal training system to ensure that each individual is equipped with requisite tools and skills to achieve individual goals which in turn ensures organization growth and success.

• To raise the performance bar by increasing the competencies of all employees.

• To overall improve productivity

DIVERSITY AND INCLUSION

The Company believes that diversity and Inclusion at the workplace helps us nurture stability, strength and innovation. By capitalising on the of opinions and perspectives coming from employees with diverse age, gender and ethnicity the Company is able to manage very effectively in very difficult situations.

The Company has organized a series of events and a few other initiatives to help create an open mind and culture.

Development of Women in the organisation has also helped with clear focus on nurturing their career journeys, to help the Company build a pipeline of diversified leaders in near future.

The Company has zero tolerance for sexual harassment at workplace and has adopted a Policy on Prevention, Prohibition and Redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules framed thereunder. Internal Complaints Committee (ICC) is in place for all works and offices of the Company to redress complaints received regarding sexual harassment. During FY 2022-23, the Company had received no complaints on sexual harassment.

Corporate Social Responsibility

The Company discharges its social responsibilities through employee volunteerism, payroll giving and other nonfinancial means by supporting the causes adopted by Global Foundation. Beneficiaries supported are from all the telecom circles of India where the Company owns and operates its towers.

For the FY 2022-23, emphasis was placed in the areas of Education, Health & Hygiene, Sanitation, Disability and Community Development. We are happy to share that Global Foundation served around 7,600 beneficiaries in FY 2022-23 against around 7,000 in FY 2021-22 as under:

• Education of 1,450 students was supported by awarding need cum merit-based Scholarships / Financial Aid.

• To bridge the digital divide and contribute to our countrys vision of “Digital India”, Computer Literacy & Skills trainings were imparted to 346 rural children.

• To ease out the financial burden medical aid was provided to 70 patients.

• Medical/health camps were organised in rural areas for preventive health check-up. These camps were attended by 6,140 people benefitting from diagnosis of illness/ ailment and referral for treatment at hospitals.

• For over two decades, Global Foundation has devotedly worked towards the advancement of the Visually impaired. As a step towards their self-sustenance Computer courses and workshops on Android technology were conducted during the year. Yoga sessions complimented for the mental well-being and personality enrichment.

• Support was extended to NGOs working for the development of mentally challenged children and female children.

To

The Members,

Your Directors are pleased to present their Twentieth Annual Report together with the Audited Financial Statements for the year ended March 31,2023.

( in Lakhs)

The Figures for the corresponding previous year have been regrouped / reclassified wherever necessary to make them comparable.

Key Highlights of the Company for the financial year ended March 31,2023 are as under:

• Total Revenue from Operations for current financial year stands at 145,786 Lakhs as against 146,273 Lakhs for the previous financial year.

• Normalized EBITDA for current financial year stands at 21,316 Lakhs as against 23,349 Lakhs for the previous financial year.

The Company has from time to time informed about various developments in Indian Telecom Sector, which were beyond the control of the Company and the management. The first set of issues included the landmark judgement of the Honble Supreme Court cancelling 122 2G telecom licenses in February 2012 (including licenses of Uninor, Videocon, Etisalat, Idea and Tata), the Vodafone Tax issues, the 3G auctions and the unsustainable debt accumulated by the telecom companies. All these factors led to mass exits of operators and significant scale down by the remaining. As a result, majority of the Companys telecom sites turned into single tenant sites.

Thereafter, the year 2017-18 has seen unprecedented shutting down of some of the major telecom operators such as Aircel Group (then largest customer of the Company), Tata Teleservices, Reliance Communication, Sistema Shyam (merged with Reliance Communication) and Telenor (merged with Airtel). The table below, clearly highlights the impact of tenancy loss the Company has faced over the last decade, despite having long term binding contracts with telecom operators:

Resultantly, these operators abandoned tower sites of the Company making more than 14,000 towers sites unoccupied, which is more than 50% of the total tower portfolio. These discontinuing operators did not make any payment of their contractual dues to the Company, including rent payable to landlords, statutory dues such as property tax, Na tax, local body tax, employees dues and vendors claims etc., many of which are pass through payments for the Company. As a result, the Company was saddled with substantial costs and liabilities including rents, vendors claims and statutory dues on such unoccupied towers without any revenue. The Company has requested Edelweiss Asset Reconstruction Company Limited (“EARC”) being Monitoring Institution, on regular basis for making payments due to the landlords of the unoccupied sites, however, the same is yet to be approved.

The Company had also attempted to salvage unoccupied tower sites and accordingly resolution plans submitted by the Company included payment of rent to landowners, settlement to vendors and employees. However, none of the resolution proposals were considered by the lenders. The lenders rather chose to appropriate 1,06,600 Lakhs till date without even addressing issues of unpaid liabilities towards unoccupied towers. Additionaly, ITSL (at the behest of lenders) realized 3,401 Lakhs by way of sale of pledged equity shares.

Due to non-receipt of the rental amounts from the discontinuing operators as per contractual arrangement, pending approval of payment requests of the Company with the Monitoring Institution and non-resolution of issue of unpaid liabilities towards unoccupied towers, the rentals to landlords for those unoccupied sites remained unpaid. Many of the landowners blocked access to our Companys employees to the sites and initiated legal actions against the Company and its directors / officials. Such disgruntled landlords / unknown miscreants resorted to unauthorized dismantling of sites.

The Company, on its part, are taking various mitigation measures to protect its assets such as carrying out additional survey of its sites, discussion with landowners for convincing them for not resorting to such actions; negotiating with customers / telecom operators for getting new tenants on such unoccupied towers, deployment of Tower Vigilance Team, submission of proposal to lenders for unfeasible sites etc.

Despite continuous efforts of the Company, its Board of Directors and the management to protect its assets, 2,932 sites got dismantled during the financial year ended March 31,2023 out of unoccupied sites. The Company continues to pursue its insurance claims and appropriate actions against the landlords / unknown miscreants including filing FIR, wherever applicable.

Post various adverse developments in telecom sector as detailed above, the Company had proactively presented a resolution plan on April 27, 2018 (with an intent to maximize recovery of dues and to protect the equity exposure of the lenders) to the lenders who constituted a significant majority of the outstanding debt of the Company.

However, the lenders on their own discretion elected to pursue sale of their debt to an Asset Reconstruction Company (ARC) and accordingly, in an independently run process by the lenders, 79.34% of the Indian Rupee Lenders assigned their respective rights, title and interest in the financial assistance granted to the Company in favour of EARC.

In the meantime, one of the secured lenders filed petition before the National Company Law Tribunal, Mumbai Bench (“NCLT”) under Insolvency & Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process (“CIRP”).