GTL Ltd Management Discussions

At the outset, shareholders are requested to read the Management Discussion and Analysis along with other sections of the Annual Report for having a full understanding.

BUSINESS SNAPSHOT

GTL Limited ("GTL"/ "the Company"), is a Network Services Company, offering services and solutions to address the Network Life Cycle requirements of Telecom Operators and Tower Companies. Currently it has GTL Infrastructure Limited ("GIL"), an IP 1 License Category Tower Company as its Customer. Its network services portfolio includes Network Operations and Maintenance; and Energy Management as under:

Network Operations and Maintenance

GTL provides network operations and maintenance services that deliver assured network uptime and availability to its customer. These services include:

• Corrective and preventive maintenance of the network

• Capex sizing and planning services

• Remote monitoring and trouble ticketing

• Technical support and process management

Energy Management

Telecom Networks require uninterrupted access to power for seamless operation. Management of Energy (Power and Fuel) plays an important role to ensure reliable network operations at optimum costs.

GTLs Energy Management Solutions provide high availability of power to telecom sites efficiently. 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 Carbon dioxide footprint For further details on the various steps taken by the Company in implementing and operating various energy conservation measures, members are advised to refer to the write up under the head ‘Conservation of Energy in the Directors Report.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Industry Structure

Telecom Industry comprises of Telecom Equipment Suppliers, Telecom Service Providers and Telecom Infrastructure Providers.

i) Telecom Service Providers comprise of:

• Telecom Operators / Mobile Service Providers

• Broadband Service Providers.

• Internet Service Providers

• Mobile Virtual Network Operators

• Satellite Service Providers

Business Model of Telecom Service Providers

Telecom companies generate revenue via. subscription mobile services, fixed landline, wireless broadband and satellite services. These companies offer a high-speed broadband facility, wireless network and mobile security-related services to businesses.

Mobile telecom services revenue includes income earned via. mobile data usages such as SMS, mobile data access, mobile phone calls, etc. Mobility segment i.e., wireless and mobile subscription services also contribute to the revenue of telecom companies. These companies charge from big multinationals for premium services such as video conferencing and high-security private networks. Telecom companies also source revenue from other telecom companies by providing them with network connectivity. Satellite broadband, is a wireless internet connection provided through communication satellites orbiting the Earth. It, being independent of location, can be accessed from anywhere within the range of satellites providing global coverage to its users. Satellite internet is gradually gaining popularity in the world and big internet companies are entering this space to offer faster internet network.

ii) Telecom Infrastructure providers

The Telecom Infrastructure providers can be classified as under:

• Towers owned by telecom operators.

• Towers owned by government operators.

• Towers owned by independent tower companies.

Telecom towers form the backbone of wireless networks and provide last mile connectivity to subscribers. Tower requirements usually depend on Network Coverage (which, in turn, depends upon geographical area, population density and spectrum bands) and Network Capacity i.e. maturity of wireless industry, cellular and data penetration and data usage per subscriber, quantum of spectrum and wireless data technology (whether it is 2G/3G/4G/5G).

Business Model of Telecom Infrastructure Providers

As the number of tenants on a tower increase, tower companies ("TowerCos") are able to generate incremental revenue and EBITDA. The key driver of tower revenue growth is tenancy. Apart from tenancies, TowerCos revenues are also influenced by the pricing charged per tenant. Operating cost components for the tower business are site rentals, repairs and maintenance, security charges, insurance and cost of outsourced resources. As major expense items are fixed in nature, cost for additional tenant is minimal. Hence, the tenancy ramp-up results in a significant percentage of incremental revenues, ROI and cash flow. To gain market penetration and 4G + 5G network expansion at optimal cost, Telcos continued to rent towers from TowerCos, thereby considerably reducing costs while allowing them to focus on their core. Renting towers from TowerCos enabled these Telcos to go to market within a short time.

GTLs Business: As stated above, GTL currently provides Network Services namely Operations and Maintenance; and Energy Management ("OME") to GIL, a telecom infrastructure Company.

Industry Developments Telecom Industry Scenario

• Telecom Revenues

The telecom sectors revenue for FY24 reached US$ 28.70 billion (Rs 2,39,900 Crores), an 87% increase from the lowest point of FY19, shortly after Reliance Jios launch, and about 40% higher than the historical highs of FY16, before Jio began commercial operations, according to CLSA. Jio and Airtel, continuing to gain subscribers at the expense of Vodafone Idea, collectively controlled 78% of sectoral revenue, projected to rise to 83% by FY26. Vodafone Ideas revenue market share (RMS) dropped by 130 basis points in FY24 to 15.7%, with revenue flat at US$ 4.51 billion (Rs 37,700 Crores). In contrast, Bharti Airtels revenue grew by 12% YoY to US$ 10.61 billion (Rs 88,700 Crores), resulting in an RMS of 37%. In comparison, Jio saw a 10% revenue increase to US$ 11.86 billion (Rs 99,200 Crores), or an RMS of 41.4%. CLSA noted that Vodafone Ideas lower 5G spectrum holdings and delayed rollout could prompt further market share consolidation by RJio and Bharti. (Source: www.ibef.org – June 21, 2024)

• Spectrum Auction

Spectrum auction, conducted by the Department of Telecommunications (DoT) on June 25, 2024 – A total quantum of 141.4 MHz (26.5 per cent) from the balance 533.6 MHz spectrum of worth Rs 113.4 billion was sold. In 2024, auction has seen activity in 900 MHz, 1800 MHz, 2100 MHz and 2500 MHz.

All the three Telecom Service Providers (TSPs), including Bharti Airtel (Airtel), Reliance Jio Infocom Limited (Jio) and Vodafone Idea Limited (Vi) have successfully bid and taken spectrum in this auction also for growth and continuity of services. (Source: Tele.Net – June 27, 2024)

• Indian Telecommunication Act 2023

The new Indian Telecommunications Act, 2023 was passed by Parliament in December 2023. The new Act replaces the Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933. The repealed laws were enacted way back in history when communication technology was in its infancy. The Act provides legal framework for efficient utilisation of scarce spectrum through processes such as secondary assignment, sharing, trading, leasing and surrender of spectrum. It also enables the utilisation of spectrum in a flexible, liberalised and technologically neutral manner. It also empowers the government to establish an enforcement and monitoring mechanism for the purpose. Furthermore, one more aspect that is being covered in the latest notification is the focus of the government on increasing efficiency in spectrum utilisation and various modes of achieving the same like secondary assignment, sharing/trading etc. (Source: Tele.Net – July 8, 2024)

Key Developments

• Global Trend Towards 2G & 3G Shutdown

The 2G/3G shutdowns are part of a global trend. Mobile Network Operators (MNOs) and governments are determining that the older 2G and 3G technologies, as well as the spectrum allocated to them, should be phased out for faster and more efficient 4G/LTE and 5G networks. This transition is typically referred to as the "2G and 3G sunset".

The 2G network shutdown has been in talks in India for the past few years……… Any decision to shut down older technologies must be taken after considering the interest of consumers, as is being done in the case of 3G. (Source: Tele.net – March 1, 2024)

• 4G Coverage

There has been a significant change in the way telecom services are being rolled out. Earlier, there was a narrative that telecom services could never reach rural areas, but today, our 4G footprint covers close to 99 per cent of the country. Around $ 4.8 billion has been allocated to saturate the country with 4G coverage, enabling more citizens to access the benefits of high-speed internet connectivity. India has approximately 773 million 4G subscribers. This significant base highlights the extensive reach of 4G services across the country, driven by major telecom providers like Reliance Jio, Bharti Airtel, and Vodafone Idea. (Source: Tele. net – February 16, 2024 & www.ibef.org – March 27, 2024)

• 5G Coverage

India has around 159 million 5G subscribers, achieving a penetration rate of 15% of the countrys mobile user base. This number is expected to grow significantly, potentially reaching over 490 million subscribers by 2028, which would represent a 42% penetration rate. (Source: www.ibef.org – March 27, 2024 & www.business-standard.com – January 12, 2024)

• Reliance Jio and Bharti Airtel gained Subscriber

Reliance Jio and Bharti Airtel gained 2.2 million and 1.25 million subscribers respectively in May 2024. The user base of Jio and Airtel expanded to 474.62 million and 387.77 million, respectively. (Source: Tele.net – July 17, 2024)

• Satellite Communication

Telecom Regulatory Authority of India (TRAI), has reportedly noted that satellite technology will have a vital role in enhancing connectivity in remote regions. As per the Indian National Space Promotion and Authorisation Centre (IN-SPACe), all space start-ups are working on deep technologies (deeptech) and exploring new opportunities. In addition, the investment outlook is highly positive with the private space sector in India having received $135 million in investment in 2023. (Source: telecom.economictimes.indiatimes.com – June 27, 2024)

• New advances in Energy Management

Valve-regulated lead acid (VRLA) batteries have been widely used in the telecommunications industry as backup power sources, but suffer from premature capacity loss and potential thermal runaway in high-temperature environments. Lithium-ion (Li-ion) batteries offer several advantages over VRLA batteries for telecom backup applications:

- Higher energy density (2-3 times higher than VRLA)

- Smaller footprint and lighter weight

- Steady state float current independent of temperature

- Reduced risk of thermal runaway at high temperatures

- No voltage drops during discharge (no risk of premature disconnection)

- The 48V60 Li-ion battery presented in the work consists of prismatic cells with 60 Ah capacity at the 8-hour discharge rate. (Source : www.vertiv.com)

• Solarisation

The telecommunications sector is increasingly prioritizing sustainability, with solarising telecom sites emerging as a key strategy. This shift promises greener, more resilient infrastructure but comes with challenges and opportunities. Telecom towers and network infrastructure heavily rely on conventional power sources, contributing significantly to carbon emissions. Sustainable and reliable power solutions are needed to meet the growing demand for connectivity, especially in remote and off-grid areas. Solarising telecom sites is a transformative opportunity for a sustainable future, offering benefits like reduced emissions, lower operational costs, and extended connectivity. Despite the challenges, the adoption of solar energy can enhance the environmental footprint and drive growth and innovation in the telecom sector.

( Source: www.vertiv.com - April 16, 2024)

Future of the telecom industry

• IoT Integration: The Internet of Things (IoT) is another frontier that the telecom industry is poised to conquer. The interconnectivity of devices, from smart homes to industrial sensors, relies on robust telecom networks. The ability to facilitate seamless communication between devices will be a key determinant of success in the IoT era.

• AI and Automation: Artificial Intelligence (AI) and automation are reshaping how telecom services are delivered. From predictive maintenance of network infrastructure to chatbots handling customer queries, AI enhances efficiency. Telecom companies integrating AI will optimize operations and enhance customer experiences. AI has shaped the sector as demand for faster, more reliable, and efficient communication networks rises. (Source: www.linkedin.com - February 16, 2024)

• 6G Technology : The government released the Bharat 6G Vision document to design, develop and deploy 6G network technologies. The Bharat 6G Alliance, a collaborative platform of domestic industry, academia, national research institutions and standards organisations, is working towards enabling India to become a leading global supplier of intellectual property (IP), products and solutions. (Source: Tele.net – February 16, 2024)

OPPORTUNITIES AND THREATS

OPPORTUNITIES:

• Budget Allocation for 2024-2025

The Indian government has allocated 1.29 lakh Crores to the telecom sector. This allocation includes significant funding for various projects and entities under the Department of Telecommunications. Key components of this budget include:

– Bharat Net Project: A major push towards rural connectivity, ensuring broadband access in rural areas.

– Public Sector Units (PSUs): Substantial investments in public sector telecom companies such as Bharat Sanchar Nigam Limited (BSNL) and Mahanagar

Telephone Nigam Limited (MTNL), with 82,916.20

Crores specifically earmarked for BSNL.

– Technology Upgrades: Continued emphasis on the development and deployment of 5G infrastructure and other advanced telecom technologies. This funding aims to enhance digital infrastructure, promote connectivity in underserved areas, and support the modernization of the telecom sector. (Source: EY- July 23, 2024)

• BSNL and BharatNet

Around 150,000 optical fibre/broadband connections are being provided in the rural areas. As of September 2023, out of 644,131 villages in the country, approximately 616,300 villages are covered with mobile connectivity, achieving a coverage rate of 95.7 per cent. The government has planned 41,160 towers to be set up in uncovered areas to provide connectivity to over 54,000 villages, entailing an investment of Rs 413.31 billion. It plans to invest an additional $13 billion in the BharatNet project to boost connectivity and provide affordable internet services to all. About $8.5 billion has already been invested in this project, bringing the total to over Rs 1 trillion.

The progress can be attributed to the work done by Bharat Sanchar Nigam Limited (BSNL), which has now become profitable. BSNLs 4G and 5G technology stack was developed within the country, making India among the five countries across the globe to have successfully developed end-to-end telecom technology. The government has a clear commitment to ensure the growth and revival of BSNL and position it as an important market stabilising force. (Source: By Minister of Communications – Tele.net – February 16, 2024)

• Small Cell Deployment

To meet the escalating demand for connectivity in urban areas, the deployment of small cells is emerging as a prominent trend in the Telecom Towers Market. Small cells are compact, low-powered cellular stations that enhance network capacity and coverage in high-traffic locations. Integrating small cells with existing macro cell towers contributes to network densification, ensuring a more robust and reliable communication infrastructure.

• IoT Connectivity Requirements

The growing proliferation of IoT devices is influencing the design and deployment of telecom towers. The Telecom Towers Market is witnessing a surge in demand for towers capable of supporting the connectivity requirements of a myriad of IoT devices. From smart cities to industrial IoT applications, telecom towers are evolving to accommodate the diverse needs of the expanding IoT landscape.

• Autonomous and Remote Towers:

The continuous progress in technology, with a particular focus on the realms of artificial intelligence (AI) and automation, is actively laying the foundation for the emergence of autonomous and remote towers within the telecommunications landscape. This innovative paradigm allows for the monitoring, management, and maintenance of towers from remote locations, thereby significantly diminishing the necessity for physical visits and on-site maintenance interventions. This transformative trend not only contributes to heightened operational efficiency but also effectively tackles the challenges commonly linked to reaching and managing sites that are either situated in remote areas or present difficulties in accessibility. (Source: verified.com – April 16, 2024) Indias telecom tower industry stands to benefit from these trends. The rollout of 5G infrastructure, adoption of green energy solutions, and deployment of small cells in urban areas present significant growth opportunities. Embracing edge computing and tower-sharing models can optimize costs and enhance services. Addressing the connectivity needs of IoT devices and leveraging autonomous towers can further drive efficiency and innovation in the sector. By capitalizing on these trends, telecom tower Companys in India can lead the markets evolution.

THREATS:

Following challenges may be faced by telecom operators in future.

• Material theft: The Department of Telecommunications (DoT) has urged enforcement units to alert all state police departments across India to clamp down on the rampant theft of critical network gear. The theft has triggered around Rs 8 billion of losses for telcos, disrupted 4G/5G expansions and impacted quality of mobile coverage. The Reliance Jio, Bharti Airtel and Vodafone Idea Limited (Vi) sought the governments intervention, saying they were facing huge losses and heavy additional replenishment costs amid rising incidence of network gear theft across India. (Source: Tele.net – May 31, 2024)

• Regulatory Hurdles: The telecom sector in India has often grappled with regulatory challenges. Rapid changes in policies, licensing issues, and spectrum allocation complexities pose hurdles for industry players. Navigating this regulatory landscape demands agility and adaptability.

• Infrastructure Development: While urban areas enjoy robust telecom infrastructure, rural penetration remains a challenge. Building and maintaining a comprehensive network in remote areas demand significant investments. Bridging this urban-rural digital divide is crucial for the industrys sustainable growth. (Source: www.linkedin.com February 16, 2024 & netsuite.com June 12, 2024) The above challenges faced by the Telecom Operators / Tower Companies will affect the growth opportunities for the Tower Companies which will in turn adversely affect companies rendering services to them.

OUTLOOK

As reported elsewhere in the Annual Report, on account of adverse circumstances surrounding telecom and power sectors, the Company business and profitability got, resulted in admission of the Company into CDR in 2011. Subsequently, post CDR, on account of cancellation of 122 2G licenses by the Supreme Court, cancellation of 20,000 tenancies by Aircel Group (the major customer of the Company in 2014) and other related developments, realising the difficulty in adhering to the restructure proposal under the CDR, the Company submitted an OTS proposal in 2014. While the lenders were taking their time in responding to the proposal, the telecom industry got into its worst time resulting in reduction of the telecom operators from 18 to 3 private operators. Also, RBI withdrew its circulars on CDR and other restructure schemes. Under such circumstances, the Company submitted revised OTS proposal, which though accepted by the lenders in-principal could not be implemented on account of delay / non issue of sanction by some of the lenders, which resulted in filing of Application by one of the lenders before National Company Law Tribunal ("NCLT"). The said Application, which got dismissed in November 2022 is now pending before National Company Law Appellate Tribunal ("NCLAT"). In the meanwhile, in response to the proposal of the Company, the Monitoring Institution has communicated its In-principal approval for an OTS, subject to approval by individual lenders. The Company has funded agreed OTS amount (after adjusting the sale proceeds of the Assets), in an Escrow Account, out of which disbursement has been done in respect of three of the lenders based on their sanctions. The sanctions of rest of the secured lenders and solutions related to NCLAT / Debt Recovery Tribunal ("DRT") are awaited.

Having fully funded the Escrow Account, while the Company is positive in settling the dues of the secured lenders as per the OTS and coming out of the long pending problem, the delay / non issue of sanctions by individual secured lenders in the past in respect of earlier OTS, makes the Company to be more cautious in giving too much of a positive statement as regards closure of OTS.

That apart, as of now, the Company has got only one customer viz. GIL, which is also facing the financial difficulties and has pending resolutions before NCLAT / DRT. Further while GIL was part of the same group of the Company in the past, presently the shareholding of the Promoter has come down drastically and 96.68% is being held both by the Institutions and Public and hence GIL is not a part of the same group. Thus, in the given situation, the Company is not certain about the solution that could be arrived at by GIL, the outcome of which could affect the performance of the Company. Thus, while the Company would continue to take steps for early revival of the Company; track industry developments closely to align with market and customer developments; and explore new opportunities in the telecom sector, the stakeholders have to keep in mind the above developments.

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 FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Financial Analysis of the FY 2023-24 is as under:

Profit & Loss Account Items Revenue

Revenue in FY 2023-24, stood at 201.92 Crores as compared to Rs 186.41 Crores in FY 2022-23.

As GIL is the only customer for the Company and the Company has aligned its business plans with that of GIL to sustain business continuity, the Companys revenue goes along with that of GIL.

Cost of Purchases and Services Rendered

In the FY 2023-24, cost of purchases and services rendered stood at Rs 22.67 Crores as against Rs 25.06 Crores in FY 2022-23. The said reduction is largely on account of optimisation of energy costs and other services cost.

Employee Benefits Expenses

In the FY 2023-24, employee benefit expenses stood at Rs

74.83 Crores as against Rs 65.15 Crores in FY 2022-23.

Other Expenses

In the FY 2023-24, other expenses including administrative expenses, travelling, conveyance, rent, consultancy, foreign exchange variation and others stood at Rs 43.98 Crores as against Rs 115.06 Crores in FY 2022-23. The decrease in these expenses compared to previous year is on account of reduction of exchange losses due to change in USD / INR. In the previous year, the exchange loss was Rs 85.88 Crores; whereas in the current year it is Rs 16.31 Crores. These are non-cash expenses.

Finance Cost

In the FY 2023-24 Finance Cost stood at Rs 28.87 Crores as against Rs 25.66 Crores in FY 2022-23.

The Company has neither paid nor provided interest on its borrowings during the FY 2023-24 for the reasons stated in Note 22.3 and 32.1 of the Financial Statements. Had such interest been recognized, the Finance Cost for the year ended March 31, 2024 would have been more by

Rs 426.55 Crores.

Balance Sheet Items Equity Share capital

As on March 31, 2023, the equity share capital was Rs 157.30 Crores. There is no change in share capital and as such as at March 31, 2024 the share capital remains at Rs 157.30 Crores as under:

Particulars	No. of Equity Shares	Rs in Crores
Equity Share Capital as at	157,296,781	157.30
March 31, 2023
Equity Share Capital as at	157,296,781	157.30
March 31, 2024

Other Equity

Particulars	Rs in Crores
As at March 31, 2023	(6,389.28)
Movement in Other Equity	210.63
As at March 31, 2024	(6,178.65)
Net Worth
Particulars	Rs in Crores
Equity Share Capital as at March 31, 2023	157.30
Other Equity as at March 31, 2024	(6,178.65)
Total Net Worth	(6,021.35)

Borrowings

Borrowings as on March 31, 2024 were Rs 3,979.83 Crores as against Rs 4,317.13 Crores as on March 31, 2023. During the month of March 2024, the Company has received OTS sanction from one of its secured lenders and subsequently from two more of its secured lenders based on the "in principle" approval communicated by the Monitoring Institution on behalf of all secured lenders. The Company has settled them fully in accordance with the OTS proposal. Reduction in Borrowings is on account of settlement in respect of one of its secured lenders during March 2024 and appropriation of amount realised towards sale of immovable assets of the Company by lenders against the Rupee Loan.

Net Fixed Assets

As on March 31, 2024, the net fixed assets were Rs 29.97 Crores as against Rs 51.01 Crores as on March 31, 2023. The reduction in net fixed assets was mainly on account of sale of immovable assets of the Company by lenders.

Receivable & Inventory

The receivables as on March 31, 2024 were 21.43 Crores as against Rs 33.16 Crores as on March 31, 2023. The decrease in the receivables is mainly on account of realisations from customer.

The Inventory as on March 31, 2024 was Nil as against Nil as on March 31, 2023.

Contingent Liabilities and Related Party Transactions

For details thereof, please refer to Note No. 39.C & 40.2 in the Financial Statements respectively.

Significant changes in key financial ratios

Particulars	UoM	FY 2023-24	FY 2022-23
Debtors Turnover	No. of Days	49	52
Inventory Turnover (Refer Note 1)	No. of Times	N.A.	N.A.
Interest Coverage Ratio (Refer Note 2)	No. of Times	N.A.	N.A.
Debt Equity Ratio (Refer Note 3)	No. of Times	N.A.	N.A.
Return on Net Worth (Refer Note 3)	%	N.A.	N.A.

 

Particulars	UoM	FY 2023-24	FY 2022-23
Net Profit Margin (%) - Net profit / (Loss) (Before	%	17.56	(22.51)
Exceptional items) - Net Profit / (Loss) (After	%	98.88	29.73
Exceptional items and OCI) Current Ratio	No. of Times	0.03	0.03

Notes : (1) At the Financial year ended March 31, 2024 and March 31, 2023, inventory was NIL hence stated as N.A. (2) The Company has neither paid nor provided interest on its borrowings during the FY 2023-24 & 2022-23, hence stated as N.A. (3) In view of negative Net Worth, Debt / Equity Ratio and Return on Net Worth are not furnished above.

Explanation for significant changes in ratios

The debtors decreased from Rs 33.16 Crores to Rs 21.43 Crores, which in absolute terms is Rs 11.73 Crores. This decrease in receivables was on account of realisations from the customer.

The Net Profit/(Loss) (before Exceptional items) in % terms has increased mainly on account of foreign exchange loss totally amounting to Rs 16.31 Crores as against exchange loss of Rs 85.88 Crores in the previous year.

The Net Profit/(Loss) (after Exceptional items & OCI) in % terms has increased substantially in the current year. This is on account of the escalation in billing rates and the exceptional items of Rs 173.19 Crores (previous year: Rs 100.43 Crores).

The details of exceptional items are given in Note No. 35 of the Financial Statements.

The current ratio has remained steady at 0.03.

RISKS AND CONCERNS

The key risks and concerns are as under:

Strategic Risk

The telco industry is poised at a unique position with two of its leading operators looking to consolidate their respective user base and revenue streams, potentially at the expense of the third Telco. This Telco in turn itself looking to overcome its financial challenges by actively perusing much needed fund raising through various channels. If its attempts yield satisfactory result, then there would be an equal play in the industry, else there could be possibility of a duopoly. Government backed Telco notwithstanding, duopoly would mean shrinking business for Tower Companies and diminished leverage with customers regarding their business. The Company therefore stands exposed to this strategic risk which may impact its single customer, GIL.

Operational Risk

The revenue and profit of the Company have come down drastically from FY 2018-19, since its dependence on only one customer viz.GIL, which is also facing financial difficulties and pending resolutions before NCLAT / DRT. Thus, the revival and improvement of the operations of the Company depends not only in improving its financial health but also the well-being of GIL and its customer base.

The Company is in the service industry. There is an increasing trend from telco owned tower companies to outsource the tower maintenance and related services to multiple venders across circles / states. As a result, many small and large service providers have started new business to undertake these services. Since OME service is talent based and requires field experience, the Companys talent pool is under risk of being targeted by the new service providers. This presents an operational risk to the Company for its ongoing services. Adverse climatic conditions, particularly during monsoon period continue to present logistical and operational challenges to the Company and to its staff. While trying to ensure customer service delivery, different phases of monsoon across the country and different periods within the same season complicates the mitigation and resolution efforts of the Company. The Department of Telecommunications (DoT) has urged enforcement units to alert all state police departments across India to clamp down on the rampant theft of critical network gear. Tower Cos also face this threat of theft of their passive telecom assets and leading disruption of network services.

Legal & Compliance Risk

In the matter of settlement of dues of the lenders, while the petition filed by one of the lenders before NCLT got dismissed vide its order dated November 18, 2022, the said matter is pending before the National Company Law Appellate Tribunal (NCLAT), on appeal by the said lender. The Central Bureau of Investigation, Directorate of Enforcement and Serious Fraud Investigation Office, have filed FIR, carried out search and issued Notice respectively. Litigation proceedings and Arbitration proceedings against MSEDCL and GIL are pending before various forums. As regards compliance of various other regulatory requirements shareholders are requested to refer to Secretarial Audit and Compliance Report forming part of the Directors Report.

Foreign Exchange and Commodity Price Risk

Members are requested to refer note no. 43 of the Financial Statements under the head Financial Risk Management Objectives and Policies, for risk arising in respect of the above. For the reasons stated in Note no. 43.5, the question of carrying out commodity hedging activities does not arise.

Mitigation measures taken

As regards the Strategic and Operational Risk, the Company continues to monitor the developments in the industry, engage with the lenders for an amicable settlement and co-ordinate with its customer from time to time. As has been stated elsewhere, particularly under the head "Outlook", the settlement of the dues of the lenders of the Company is critical for the revival and improvement of the operations of the Company, for which the Company while defending the legal proceedings before the NCLAT is also in the process of implementing an OTS proposal. In spite of the difficulties being faced by the Company, it is extending necessary operational support to GIL to enable it to provide better service to its operators and also find a solution in respect of its proceedings before NCLAT and DRT. Depending upon the developments, the Company would be in a position to draw up a plan for cost optimisation and revenue management. On the network operations front including (in respect of adverse climatic conditions and theft of telecom assets), Company continues to proactively ensure adequate preventive and corrective measures to make sure customer network services are not severely hampered and the service level is maintained. The Company also creates backup pipeline for new talent development and taking necessary steps for talent retention so as to mitigate competition risk.

As regards the legal and compliance risk as stated above, the appeal filed by the lender before NCLAT is pending for disposal. The Company has engaged the services of senior counsels and consultants for defending its position before the NCLAT. As regards the steps taken for settlement through an OTS, stakeholders are requested to refer to write up under ‘Outlook above.

In the matter of FIR / Search / notice issued by the concerned authorities, the Company has provided / is providing appropriate legal documentation / information to defend and exonerate on its merits.

As regards, pending litigations and Arbitration matters, reference may be made to the ‘Status of legal cases given below. As regards mitigation measures in respect of Foreign Exchange, Commodity and Other Risks, Members are requested to refer to note no. 43 of Standalone Financial Statement under the head Financial Risk Management Objectives and Policies.

Status of legal cases

As on March 31, 2024, there were 42 cases against the Company, pending in various Courts and other Dispute Redressal Forums. i. In 4 out of 42 cases, the Company has been implicated as proforma defendant i.e., there are no monetary claims against the Company. In most of these cases, dispute concerns matters like loss of share certificate, title claim / ownership / transfer of the shares etc. The Companys implication in these matters is with a view to protect the interest of the lawful owners of the shares. Upon the final orders passed by the Court(s), the Company shall have to release the shares, which are presently under ‘stop transfer, in this regard to the rightful claimants. There is no direct liability or adverse impact on the business of the Company on account of the said 4 cases.

ii. Out of the balance 38 cases, 15 cases are from its earlier power business, 5 cases are from telecom related businesses and 1 case is in respect of non-allotment / non-refund of money in its IPO, which are handled by the Companys advocates, who have the necessary expertise on the subject. It is found that in most of the cases the claims are unsubstantiated and therefore the Company is resisting and defending these claims. (Out of the aforesaid 15 cases of power business, 9 cases pertain to Labour Court matter wherein the employees filed for reinstatement on termination consequent to termination of Aurangabad Distribution Franchisee Agreement of the Company. These are being settled with affected employees. The contingent liability in respect of these 9 cases is Rs 1.34 Crores and in respect of balance 6 cases is Rs 0.31 Crores. Further the contingent liability w.r.t. 5 cases related to telecom business and 1 case in respect of non-allotment / non-refund of money in its IPO is Rs 0.85 Crores. iii. There are 9 cases pertaining to arbitration matters, out of which in 5 cases, the Company has invoked arbitration proceedings against MSEDCL in respect of the DF Contract

& EPC Contract as explained below and the contingent liability towards counter claims of MSEDCL is Rs 462.90 Crores. The other four matters, are arising out of challenge on the procedural orders by the Arbitrator and are being contested in the courts by the companys advocates who have the necessary expertise on the subject. There is no contingent liability arising out of the four matters. iv. In 1 case, a bank has filed commercial suit against the Company in the Honble Bombay High Court in respect of the Companys comfort letter issued in favour of one of its Wholly Owned Subsidiaries (WOS) towards WOSs credit facilities. The contingent liability in respect of which is

Rs 237.28 Crores. v. In 1 case a Lender Bank had filed insolvency petition before the National Company Law Tribunal, Bombay Bench (Honble Tribunal) under section 7 of the IBC Code. The Honble Tribunal vide its order dated November 18, 2022 dismissed the said petition. The said matter is now pending before the National Company Law Appellate Tribunal (NCLAT), on appeal by the said lender. The contingent liability in respect of which is Rs 204.78 Crores (Net of liability in the books as at March 31, 2023 of

Rs 329.98 Crores, against the total claim of Rs 534.76 Crores). vi. In 1 case, the Department of Telecom (DoT) has raised a frivolous demand of Rs 1,509.50 Crores based on Adjusted Gross Revenue for ISP license fee pertaining to the business carried out by the Company well before the year 2009 and the relevant ISP license was surrendered to DoT in 2009 for which DoT had issued a no-dues certificate in November 2010. The Company is contesting this demand in an appropriate forum.

vii. In 1 case, IDBI Bank and other CDR lenders have filed a suit against the company in Debt Recovery Tribunal, Mumbai, claiming Rs 4,853.55 Crores. The company is contesting the claim in the DRT, Mumbai. viii. In 1 case, Employees of the staffing company have initiated legal proceedings in labour/other courts against the company. These are being contested by the company. The contingent liability of this case is Rs 0.18 Crores. ix. In the balance 3 cases, the company has been impleaded for various procedural reliefs in the courts and these matters relate and arise out of the Interim Award passed by the Arbitral Tribunal in an Arbitration matter between the Company and GTL Infrastructure Limited (as explained below) and are being contested in the courts by the companys advocates who have the necessary expertise on the subject. There is no liability to the company at this stage of litigation. As on the date there is no contingent liability. The Company has Claim / Counter Claims against Maharashtra State Electricity Distribution Company Ltd. (MSEDCL) as follows:

• As already stated in the earlier Annual Reports of the Company, the Company had the following two types of businesses with MSEDCL: (a) EPC Contracts.

(b) Aurangabad Distribution Franchisee ("DF") business.

• Under the DF business with MSEDCL under the DF agreement, the Companys role was to draw electricity from MSEDCL at designated points and to distribute the same to the consumers in the Aurangabad Urban Division 1 and Aurangabad Urban Division II.

• As the operation of DF proceeded, several issues arose on matters related to obligations of both parties as well as on financial aspects of the DFA. Disputes also arose on certain Commercial and Technical issues. The disputes could not be resolved in spite of several efforts, and consequently, the matter was submitted for resolution through arbitration proceedings.

• The Company filed its claim against MSEDCL under the DF Agreement. The claim against MSEDCL on various account aggregates to approximately Rs 2,203.60 Crores. MSEDCL has also filed counter claim against the Company aggregating to approximately Rs 256 Crores. The said arbitration is now at the stage of final hearing after having concluded recording of evidence.

• Under the EPC Contracts, the projects included supply, transport, construction, erection, testing and commissioning of distribution lines, distribution transformers of various capacities, substations and other allied works including two years of defect liability period for projects and five years guarantee period for power transformers, distribution transformers and other major equipments.

• Disputes arose amongst the Company and MSEDCL which could not be resolved despite various efforts taken and hence, was submitted for resolution through arbitration. The claims against MSEDCL arising out of 4 EPC Contracts as on date stands at Rs 159.11 Crores.MSEDCL has also filed counter claim aggregating to approximately Rs 207 Crores.

• The Company is now awaiting the outcome of the Arbitration Proceedings.

The Company has claim against GIL as follows:

• The Company has a claim against GIL in respect of operational services rendered by it. As reported in MDAR of Annual Report of FY 2019-20, on account of non-resolution of Companys claim by GIL, parties invoked arbitration, thereby claiming an amount aggregating to

Rs 890 Crores.

• The Company had also filed an application under Section 17 of the Arbitration and Conciliation Act, 1996 seeking deposits of the amount, pending the final award in the Arbitration Proceedings and to enable GTL to keep the network ongoing. The Tribunal passed interim order dated December 17, 2019 thereby directing the Company to deposit Rs 440 Crores in the manner provided in the order.

• The interim order was challenged by GIL before Delhi High Court, which failed. Then one of the lenders of GIL also challenged the interim order before Delhi High Court, then before Honble Supreme Court. The Honble Supreme Court after hearing both the parties and lenders of the Company, disposed of the said SLP filed by GILs lender and directed that "the amount shall be subject to the orders in Commercial Suit No. 87 of 2022 pending before Bombay High Court.".

• The Company is now awaiting the outcome of the Court / Arbitration Proceedings

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company is committed to ensure that its operations are carried out within a well-defined internal control frame work. Good governance, strong systems and processes, an attentive finance function and an independent internal audit function are the key for strong internal control systems. The Company understands that a strong internal controls system is an essential pre-requisite for growing its business.

The Company has an internal control system in place, commensurate to size of its operations and conducting its efficient business, including adherence to management policies, prevention and detection of error, accuracy and completeness of the accounting function and timely preparation of financial information. The internal control system comprehend financial and operational controls and statutory compliances.

There are suitable controls in place with reference to policies and procedures, risk assessment and ethics which are clearly established, communicated and monitored. Also there is system on periodical review and assessment of the relevant controls to enhance improved effectiveness, cost reduction and improve business performance.

The authority matrix, responsibility and accountability are clearly defined to take timely decisions and appropriate actions. 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, regular reporting, checks and balances, 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 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.

HUMAN RESOURCES

Nurturing of Talent

The past year has been one of the great challenges for the Companys Human Resources (HR) Department.

The Company is in the service industry. As discussed elsewhere, since OME service is talent based and requires field experience, the Companys talent pool is under risk of being targeted by the new service providers. This presents an operational risk to the Company for its ongoing services. With a view to overcome these challenges, the Company creates backup pipeline for new talent development and take necessary steps for talent retention. The Companys focus has been on attracting and retaining talent in its present conditions and fostering a supportive, inclusive, and dynamic work environment that enables every employee to reach their full potential. For mitigating the Operational Risk arising out of poaching of talent by competitors, the Company has successfully onboarded 179 new employees for strengthening its talent pool. This has been a critical task for the HR Team considering the current market situation and the challenges faced by the Company to recruit and retain good talent. The Company is going through a difficult time. Being in the service industry, the employees are its assets. The telecom industry is undergoing technological upgradation from time to time. From implementing 2G technology, the industry has caught up with other nations in implementation 5G technology. Under these circumstances, it is essential for the Company to retain trained manpower. Keeping these aspects in mind the Company remunerates its employees based on their performance. It also takes care of the employees welfare by compensating them for the increase in cost of leaving.

The Company provides Health and Term Life Insurance to all its employees. Health insurance is covered for employees and their families who have completed 2 years of service in the organization. This scheme covers the employee, his immediate family i.e wife and dependent children and parents.

As part of its employee recognition program, the Company has given spot awards to 32 number of employees thereby, acknowledging outstanding contributions and fostering a culture of appreciation.

Employee Engagement

The GTL leadership has been spending immense time in terms of building a healthy, participative, and competitive culture by visiting all locations regularly. This has provided a good platform to employees to interact and engage with leadership team and thereby addressing various challenges and proving solutions for running of the network and keeping up the desired uptime.

The Company celebrated traditional day during the festival of Navratri. The Highlights of the day were having Potluck within/ across departments for increased employees engagement, Photo booth for the employees to flaunt their Ethnic wear (Mahape) and organizing HDFC Bank Helpdesk/Service desk. Further the Company celebrated Holi Festival across all the locations and organized lunch within departments in addition to wearing Retro Theme dress code for the day.

The Company organized a Box Cricket Match for its employees and Women Throwball Match where it saw huge participation across all functions. Further the Company also celebrated Womens Day at Pan India Level.

The Company has launched Employee Suggestion Box! As part of its ongoing commitment to fostering a culture of open communication and continuous improvement and pooling of ideas.

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 the employee appropriate protection at the workplace. The Company educates its employees on HSE issues through awareness programs. 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 complaints / cases have been received in terms of the said Act and Rules made thereunder.

People Strength

In line with the developments in the India Telecom industry and its own business requirements, its human resources strength is 1,553 associates (directly or indirectly) as on March 31, 2024 as against 1,612 associates in March 31, 2023.