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GTL Limited (GTL), a Global Group Enterprise, is a leading Network Services Company, offering services and solutions to address the Network Life Cycle requirements of Telecom Operators, Technology providers (OEMs) and Tower Companies.
GTL has extensive domain knowledge and experience across multiple technology platforms and OEM products. Its network services portfolio includes:
Network Operations and Maintenance
GTL is a significant provider of network operations and maintenance services that delivers assured uptime and availability of network for telecommunication services. The broad array of services are:
Remote Monitoring of network assets and uptime
Field level Corrective and Preventive Maintenance of network assets
Technical Support and Process Management
Vendor Management and Related Logistics
Managed Network Service offerings are based on Build- Operate-Manage (BOM) model that offers KPI/SLA based end-to-end services. Some of those significant offerings are :
Project Delivery Support Services
Network Planning, Design and Operations
Field Management-Active and Passive and
Remote Network Infrastructure Management Services (RNIMS).
Uninterrupted access to power is critical for Telecom Networks and forms a significant part of the operating costs. Telecom Operators and Tower Companies face challenges of maintaining power availability and associated costs due to the spread of their sites.
GTLs Energy Management Solutions provide high availability of power to telecom sites, at optimum costs. They are delivered through -
Technical audit for optimum power consumption
Monitoring utilization of sources of energy and plugging leakage thereof
Driving modernization with energy efficient equipment and
Integrating non-traditional or alternate sources of energy with reduced CO2 footprint.
Remote Monitoring Facility
GTL provides remote monitoring of telecom networks to Tower Companies and Telecom Operators. The services delivered from a Centralized Location includes incidence tracking, remote trouble shooting, advanced event detection, data analytics and reporting.
Testing of Fuel Conservation and Optimization Equipment
With focus on reduction in Fuel consumption, GTL is looking towards installation of Deep Discharge and Quick Recharge Storage (QRS) battery projects for its customers, which will also help in efficient use of energy and protection of environment on account of installing Green/Clean technology at telecom sites.
INDUSTRY STRUCTURE AND DEVELOPMENTS
India is one of the largest telecommunication markets and has the second highest number of internet users in the world. FY 2017-18 saw significant headwinds within the telecom sector on account of :
(i) Aggressive pricing by Telecom Operators;
(ii) Reduction in interconnect usage charges; and
(iii) Increasing unsustainable levels of debts of existing telecom operators.
The above factors led to profitability/cash flow impact across all participants in the sector and for many telecom operators it became unviable to continue operations as evidenced through series of transactions/announcements listed below:
(i) Vodafone India & Idea Cellular merger;
(ii) Bharti Airtel & Telenor merger;
(iii) Tata Groups decision to withdraw from the wireless space and consequent merger of Bharti Airtel & Tata Tele Services;
(iv) Sale of Sistema Shyam Teleservices (SSTL) to Reliance Communications and consequent merger of both;
(v) Reliance Communications decision to withdraw from the wireless space and consequent acquisition of certain assets by Reliance Jio Infocomm; and
(vi) Aircel Groups decision to file for voluntary insolvency. Thus the revival of Indias telecom sector is likely to be prolonged and the pressure on the cash flows of service providers might continue for few more years.
OPPORTUNITIES AND THREATS
Digital India initiative likely to benefit Telecom Sector
Government of Indias continued policy for empowering its population by making the country a digital economy requires telecom service providers to play an increasingly important role in the digital era.
The huge surge in mobile devices and internet connectivity, along with digital services will need massive networks and infrastructure, creating opportunities for Service Providers and Infrastructure Providers. Further with the government keen on involving private players in key areas such as National Optic Fiber Network (NOFN) and implementing smart cities programmes, Service Providers are in a unique position to leverage the digitization opportunity.
Internet of Things (ioT) applications
loT is the harmonization of multiple machines, applications and devices connected to the internet by multiple networks. Mobile is expected to be a key enabling technology for IoT, as central point to connect various devices and offering connectivity. The total number of connected IoT devices in India, is expected to reach more than 1 billion by the year 2020. Mobile devices and related broadband connectivity will continue to drive momentum for IoT.
GTL can extend its network services offerings into Digital India and IoT space, however, this requires additional capital, which CDR lenders have not been willing.
Consolidation in Industry- Changing business environment
There are only 3 large Private Mobile Operators and 2 Public Sector Units viz. BSNL and MTNL operating in India. Consolidation will result in optimization of tenancy and downsizing of passive infrastructure, affecting the operations and maintenance services potential for GTL.
Daily change in Fuel rate
Indian Oil Marketing companies are revising Fuel prices regularly. Even the smallest change in international oil prices is passed on to the consumers.
Therefore the energy billing mechanism to customer has to be dynamic in order to safeguard the revenue of the Company from such fluctuation.
In additional to leveraging telecom and enterprise business expertise, GTL is exploring the following:
Field manpower oriented services to move towards hybrid model utilizing high end tools
Most of GTLs current services revolve around resource centric offerings, moving forward it intends to move towards high end technology services, which offer deeper and recurring engagement with the customers.
Tapping opportunities from new customer segments
The Digital India initiative presents a gamut of opportunities for the telecom service providers and tower companies. New customer segments such as Government and other infrastructure providers are expected to emerge in the near future. GTL intends to leverage such engagement opportunity for expanding its customer base.
Industry and Regulatory Developments
The exits/consolidation is resulting in reduction in tenancy and downsizing of passive infrastructure, affecting the operations and maintenance services potential for GTL.
The Company had submitted revised settlement proposal under the Revised Resolution Framework of RBI and is awaiting the decision of the lenders.
The decision of the Companys Lenders and the developments in the Indian Telecom Industry will bear material impact on the business prospects of the Company and its survival/growth prospects.
SEGMENT WISE PERFORMANCE
The Company is engaged in the business of providing "Network Services" only. Accordingly the performance of the Company from Network Services business is presented below.
DISCUSSION ON CONSOLIDATED FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
The Financial Analysis of the FY 2017-18 are as under:
For the purpose of financial analysis, the conversion rates for conversion of Indian Rupees into US Dollar and vice versa for the FY 2017-18 and FY 2016-17 are as under :
|Particulars||FY 2017-18||FY 2016-17|
|Profit and Loss Account-1 US$ equals to INR||64.4846||66.9632|
|Balance Sheet-1 US$ equals to INR||64.8450||64.7500|
Profit & Loss Account Items Revenue
Revenue in FY 2017-18 stood at Rs.995.49 Crore (US$ 154.38 mn.) as compared to Rs.1,221.11 Crore (US$ 182.36 mn.) in FY 2016-17. The reduction in Revenue is on account headwinds in telecom sector.
Cost of Purchases and Services Rendered
In the FY 2017-18 Cost of Purchases and Services Rendered stood at Rs.780.23 crore ( US$ 120.99 mn.) as against Rs.892.05 crore (US$ 133.21 mn.) in FY 2016-17.
In the FY 2017-18 Employee Benefit expenses stood at Rs.151.40 Crore (US$ 23.48 Mn.) as against Rs.139.79 Crore (US$ 20.88 Mn.) in FY 2016-17.
In the FY 2017-18 Other Expenses including Administration, Travelling, Conveyance, Rent, Consultancy, Provision for Doubtful debts, and others stood at Rs.137.72 Crore (US$ 21.36 Mn.) as against Rs.155.72 Crore (US$ 23.25 Mn.) in FY 2016-17
In the FY 2017-18 Finance Cost stood at Rs.18.53 Crore (US$ 2.87 Mn.) as against Rs.547.12 Crore (US$ 81.70 Mn.) in FY 2016-17.
The Company has not provided and recognized interest on its borrowing during the financial year based on the in principle approval given by the lenders in respect of negotiated settlement proposal. Had such interest been recognized the Finance Cost for the year ended would have been higher by Rs.641.56 Core. (US$ 99.49 Mn.)
Balance Sheet Items Equity Share capital
As on March 31,2017 the equity share capital was Rs.157.30 Crore (US$ 24.29 Mn.). There is no change in GTLs Share Capital and as such as at March 31, 2018 the share capital remains at Rs.157.30 Crore as under :
|Particulars||No. of Equity Shares||Rs. in Crore||US$ Mn.|
|Equity Share Capital as at March 31, 2017||157,296,781||157.30||24.29|
|Equity Share Capital as at March 31, 2018||157,296,781||157.30||24.26|
Reserves and Surplus
|Particulars||Rs. in Crore||US$ Mn.|
|As at March 31,2017||(6,126.69)||(944.82)|
|Movement in Reserves & Surplus||(443.05)||(68.33)|
|As at March 31,2018||(6,569.74)||(1,013.15)|
|Particulars||Rs. in Crore||US$ Mn.|
|Equity Share Capital as at March 31,2018||157.30||24.26|
|Reserves as at March 31, 2018||(6,569.74)||(1,013.15)|
|Total Net Worth||(6,412.44)||(988.88)|
As Preference Share Capital is considered as Non-current Financial Liability, the same is not considered as part of Net Worth.
Borrowings as on March 31, 2018 were Rs.5,041.15 Crore (US$ 777.42 Mn.) as against Rs.5,162.88 Crore (US$ 797.36 Mn.) as on March 31,2017.
Net Fixed Assets
As on March 31,2018 the net fixed assets were Rs.83.40 Crore (US$ 12.86 Mn.) as against Rs.98.85 Crore (US$ 15.27 Mn.) as on March 31, 2017.
Long Term Investments
In terms of Indian Accounting Standard (Ind AS), the share in associate needs to be accounted under Equity Method as per Ind AS 28 "Accounting for Investment in Associates and Joint Venture" in the Consolidated Financials Statements.
Accordingly, investment in associate GTL Infrastructure Ltd. (GIL) post share of profit/(loss) is considered in Consolidated Financial Statements as under:
As at March 31,2018
As at March 31, 2017
|Rs. in Crore||US $ Mn||Rs. in Crore||US $ Mn|
|GTL Infrastructure Limited*||841.89||129.83||NIL||NIL|
|Chennai Network Infrastructure Limited*||NIL||NIL||416.13||64.27|
Chennai infrastructure merged with GTL infrastructure during the FY 2017-18
The receivables as on March 31,2018 were Rs.0.84 Crore (US$ 0.13 Mn.) as against Rs.77.20 Crore (US$ 11.92 Mn.) as on March 31,2017.
The decrease is on account of impairment of receivables carried out by the Company as a prudent practice in view of headwinds faced by telecom operators and the filing of bankruptcy by single largest customer Aircel Group.
Inventory as on March 31, 2018 was Rs.Nil as against Rs.5.94 Crore (US$ 0.92 Mn.) as on March 31,2017.
Contingent Liabilities and Related Party Transactions with Associates
For details please refer to Note Nos. 40.C and 41.2 in the Consolidated Financial Statements.
RISKS AND CONCERNS
The key risks and concerns are as under:
During the year under review, heightened competition amongst the Telecom Operators coupled with reduction in interconnect usage charges and increase in unsustainable levels of debts, led to exits/consolidation in the telecom industry. The intense competition is likely to be prolonged and bears an adverse impact on the growth prospects of the Company.
The developments related to telecom industry in general and Aircel Group in particular have adversely impacted the valuation of the Companys investments in GIL and has also affected its own valuation.
The closure of operations of Aircel Group and the reduction in number of tenancies of GTL Infrastructure Ltd. to 26,639 (as of March 2018) from 51,587 (as of December 2017) have resulted in loss of business for the Company.
The filing of bankruptcy by Aircel Group, have made it difficult for the Company to recover its receivables and ongoing dues from Aircel Group.
Both the winding up petitions against the Company have been disposed of based on consent terms filed.
Following the Court orders got by some of the External Commercial Borrowings (ECB) lenders earlier, some of the other ECB lenders have filled recovery suits.
On account of the post CDR adverse developments and the consequent difficulty in servicing the debts since May 2014, the Company submitted a Debt Realignment Proposal (DRP). When the DRP could not be accepted due to inter-creditor disagreements, the Company voluntarily submitted a One Time Settlement Proposal (OTS) for monetization of its assets for settlement of the dues of the lenders and simultaneously obtained the approval of the shareholders for the same in September 2014. The Company also got the approval of the Competition Commission of India for disposal of its Managed Services Division and entered into an agreement with a potential buyer. While the lenders gave their in principle approval for the OTS proposal on December 4, 2015, their individual approvals got inordinately delayed, for some reason or other. In the meanwhile, the RBI Circular dated February 12, 2018 withdrew the CDR and other Schemes and came out with the Revised Resolution Framework, under which the restructure proposal has to be completed within 180 days, failing which the accounts in which default exists are to be referred to NCLT. As per the Circular all accounts, including accounts where any of the schemes have been invoked but not yet implemented, shall be governed by the revised framework. Thus the procedural delay in implementing the decision taken on December 4, 2015 by the lenders has cost the Company heavily for no fault of the management.
Legal & Compliance Risk
During the FY 2017-18, the following landmark regulations came into force:
Goods & Services Tax Act 2017 (came into force w.e.f. July 1,2017)
Insolvency and Bankruptcy Code 2016 (Became effective in December 2016 and the first insolvency resolution order passed by NCLT on August 14, 2017).
RBI vide its circular dated February 12, 2018 decided to substitute the existing guidelines on CDR, SDR, S4A etc. with the Revised Resolution Framework, in view of the enactment of Insolvency and Bankruptcy Code, 2016
Apart from the Regulatory requirements, the Company is also governed by the various Agreements/Contracts entered into by it from time to time.
Foreign Exchange and Commodity Price Risk
The Companys business is predominantly in India. The International subsidiaries carry out their business in local currency and therefore are not exposed to fluctuations in foreign exchange rates. The business related financial risk, especially involving commodity prices, by and large, are managed contractually through price variation clauses.
Members are requested to refer Note No. 42 of Standalone Financial Statement for further details in the matter.
Mitigation measures taken
In line with the requirement of the Revised Resolution Framework as prescribed by the RBI vide its circular dated
February 12, 2018, the Company has submitted a fresh OTS proposal to the lenders vide its letters dated April 4, 2018/April 23, 2018 based on realistic scenario and is awaiting the decision of the lenders.
As recovery of outstanding dues would be utmost important for the Company for smooth business operations and/or repayment to its lenders, the Company has requested IDBI Bank Limited in its capacity as Monitoring Institution (MI) to intervene for ensuring recovery of the outstanding dues from Aircel Group as most of the bankers for the Company as well as Aircel are common.
Apart from following up with the parties, issuing notices and filing of suits before the High Court/NCLT, the Company has also carried out impairment tests and provided for impairment as required by the Accounting Standards, in respect of the advances receivable.
In respect of certain divestments, the Company has entered into agreements for sale subject to final approval of lenders of the Company and the investee companies and other necessary approvals. Pending completion of these transactions, the said Non Current Investments in the investee companies are treated as "Assets Held for Sale" in terms of AS 105.
As the recent developments in the telecom industry have affected GIL, it is learnt that GIL and their lenders are keeping the options open to right size its debts either through an ARC debt sale process initiated by its lenders or in accordance with the revised RBI guidelines dated February 12, 2018. As the outcome of its proposals would be known by August 2018, the Company proposes to enter into a new agreement with GIL, based on the outcome of its proposals.
The Company has also taken other cost control measures including rationalising its manpower.
The overall increase in the GST rate has put pressure on cash flow of the already stressed telecom sector. The proactive steps taken by GTL, in anticipation of the changes have resulted in smooth transition to the GST regime with minimal impact on the operations.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has put in place various Internal Controls for different activities so as to minimize the impact of various risks. Also, as mandated by the Companies Act, 2013, the Company has implemented the Internal Financial Control (IFC) framework to ensure proper Internal Controls over financial reporting. Apart from this, a well-defined system of Internal Audit is in place so as to independently review and strengthen these internal controls. The Audit Committee of the Company regularly reviews the reports of the internal auditors and recommends actions for further improvement of the internal controls.
Being a recognized Network Services player that leverages its Human Capital to deliver world class services, GTL regularly invests in the development of its people.
The Company follows continuous and integrated process for recruiting, training, managing, supporting, and compensating people.
To enhance the workforce capabilities, Skills and Competencies Training Need Identification (TNI) plan is followed which is derived out of the Performance Appraisals system. During FY 2017-18, 463 associates were provided training as under:
|Trainings||No. of Employees Trained|
|Health, Safety & Environment||227|
Rewards and Recognition
Excellence at GTL is recognized through a Rewards and Recognition Process. During FY 2017-18, 112 associates have been recognized for their efforts through "Passion for Action" Program and Spot Awards.
Health, Safety & Environment (HSE)
HSE objectives form an integral part of the overall corporate strategy. GTL engages its human resources in a wide range of initiatives and programs to provide them appropriate protection in the workplace. Regular trainings on awareness on HSE issues are conducted. The Company also provides in-house medical facility.
The Company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal Act, 2013 (the said Act). During the year under review, no complaint/case has been received in terms of the said Act and Rules made thereunder.
In line with the developments in Indian telecom industry and its own business requirements as mentioned elsewhere in this Report, the Company optimized its human resources strength to 2,978 associates (directly or indirectly) as on March 31,2018 as against 5,042 associates in March 31,2017.
Job losses have been due to exit/consolidation of several telecom operators and in particular filing of NCLT application by Aircel Group.
QUALITY AND PROCESS
Quality initiatives at GTL aim to achieve excellence in Business, Operations and Processes.
To maintain its high quality standards and excellence in processes, the Company recertifies for :
ISO 9001: 2015- Quality Management System (QMS)
ISO 14001:2015 Environmental Management System (EMS)
OHSAS 18001:2007 Occupational Health & Safety Assessment Series
GTLs operational excellence is a result of implementing a blend of standard processes and initiatives like site assessment, resource optimization, energy optimization, automation etc.
Staff is regularly trained for HSE standards.
CORPORATE SOCIAL RESPONSIBILITY
The Company is incurring financial losses, thus it is not under obligation to spend on Corporate Social Responsibility (CSR). However, being a responsible Corporate Citizen, it contributes towards the causes adopted by Global Foundation through employee volunteerism and non-financial means.
The social causes supported by the Foundation are in the areas of:
B. Health, Hygiene and Sanitation
D. Community Development
During FY 2017-18 Global Foundation supported the beneficiaries in the following ways:
Gyanjyot Scholarships were awarded to over 1,800 students from Pre-School to Post Graduation, helping them to continue their education.
Netra initiative empowered the visually challenged by enabling them to learn to use computers and personal grooming through the soft skills program. During the year 30 visually impaired students pursued computer education and many of them positively altered their lives forever by successfully getting employed in PSUs and Corporate.
Gyan IT initiative in the rural areas provided computer education to middle school students, while the static Computer Labs set up by the Foundation in the yesteryears continued to offer computer education to students across 52 schools.
Under Project Arogya Global Foundation organized health camps for early detection and prevention of diabetes,ophthalmic, hemoglobin and heart checkups for the communities. 6,360 people availed benefits of the 46 free health checkup camps.
In line with the Swachh Bharat Abhiyan, 32 sanitation facilities were provided in 4 schools benefiting about 1,200 girls and boys. This initiative has given encouragement to girl students in particular to attend school and prevent dropouts.
Global Foundation also supported 47 families seeking financial aid to deal with their medical exigencies, thus extending relief from the financial and medical turmoil during their times of crisis.