Nu Tek India Ltd Management Discussions.

INDIAN ECONOMY

Indias economic growth slowed to 6.1% in the fourth quarter ending March 2017, compared with 7.1% in the previous quarter, as the governments note ban decision slowed activity in cash-dependent sectors. Government data showed the gross domestic product grew 7.1% in the full financial year 2016-17, slower than 8% recorded in the previous year. After Novembers demonetisation drive, the government has come under criticism from opposition political parties and economists for putting a poke on Indias growth story and triggering job cuts. The demonetisation seems to have impacted the GVA in the third as well as fourth quarter of 2016-17 which slipped to 6.7% and 5.6% respectively, from 7.3% and 8.7%.

(source: Financial Express)

INDIAN TELECOM INDUSTRY CURRENT SCENARIO

India is currently the worlds second-largest telecommunications market with a subscriber base of 1.05 billion and has registered strong growth in the past decade and half. The Indian mobile economy is growing rapidly and will contribute substantially to Indias Gross Domestic Product (GDP), according to report prepared by GSM Association (GSMA) in collaboration with the Boston Consulting Group (BCG). The country is the fourth largest app economy in the world.

The liberal and reformist policies of the Government of India have been instrumental along with strong consumer demand in the rapid growth in the Indian telecom sector. The government has enabled easy market access to telecom equipment and a fair and proactive regulatory framework that has ensured availability of telecom services to consumer at affordable prices. The deregulation of Foreign Direct Investment

(FDI) norms has made the sector one of the fastest growing and a top five employment opportunity generator in the country.The Indian telecom sector is expected to generate four million direct and indirect jobs over the next five years according to estimates by Randstad

India. The employment opportunities are expected to be created due to combination of governments efforts to increase penetration in rural areas and the rapid increase in smartphone sales and rising internet usage.International Data Corporation (IDC) predicts India to overtake US as the second-largest smartphone market globally by 2017 and to maintain high growth rate over the next few years as people switch to smartphones and gradually upgrade to 4G.

Growth of Subscriber base

Growth in Tele-density

The overall Tele-density in India increased from 92.98 at the end of Mar-17 to 93.23 at the end of Apr-17.

The Urban Tele-density increased from 171.80 at the end of Mar-17 to 172.28 at the end of Apr-17, and the Rural Tele-density also increased from 56.91 at the end of Mar-17 to 57.02 at the end of Apr-17. The share of urban subscribers and rural subscribers in total number of telephone subscribers at the end of Apr-17 was 58.05% and41.95% respectively.

The following table depicts the penetration of telecom services in rural & urban areas in the country:

Tele-density as of Urban (%) Rural (%) Overall (%)
March 2017 171.80 56.91 92.98
April 2017 172.28 57.02 93.23
(Source: TRAI)

TELECOM INFRASTRUCTURE SERVICES

The Telecom infrastructure services are made up of three components:

The Telecom infrastructure services are made up of three components:

1. Passive infrastructure

Passive infrastructure includes of all the passive components of the network: steel tower/antenna mounting structures, BTS room/shelter, power supply, battery bank, invertors, DG set for power backup, air conditioner, fire extinguisher, security cabin, among others. These components are not dependent on the type of communication technology being used by the network riding atop the site, namely LTE, GSM,

CDMA, 3G, WiMax, FM Radio, digital terrestrial transmission, etc. We estimate that roughly two-third of capex for a wireless network is spent on passive infrastructure.

2. Active infrastructure

Active infrastructure constitute the electronics that power the network and includes all the active components of a wireless network such as spectrum (radio frequency), radio antenna, BTS/cell site (base transceiver station) and microwave equipment. Each cellular operator will have to own a BTS at each tower site. A tower site can have 1/2/3/4 or more cell sites, depending on the occupancy level/tenancy ratio of that tower.

3. Transmission Media

Transmission Media is the network that connects the BTS/cell site to a base station controller (BSC) that controls tens or scores of BTS in a particular area. A transmission network may work on:

Point-to-point microwave radio transmission

Point-to-multipoint microwave access technologies like LMDS, WiFi or WiMax;

Optical fiber links

Digital Subscriber Line (DSL)

Ethernet

OUR BUSINESS

We are a telecom infrastructure services company providing rollout solutions for wireless and fixed telecom networks. Our strength lies in the breadth of services we offer in the telecom infrastructure space. The business offerings include services in Turnkey Site Build, Active Equipment Implementations, Technical Support Services and Operations & Maintenance. We are also registered with Department of Telecommunication as Infrastructure Provider - Category I.

In Turnkey Site Build, we provide services right from the site identification and designing, to installation of towers and other ancillary passive equipments. This includes entire Project Planning and Management Services. In Active Equipment Implementations, we provide services like Installation, Commissioning and Integration of active telecom equipment for wireless, wire-line and optical technologies. In Technical Support Services, we provide services in high-end telecom engineering that includes Network planning, Transmission planning, Radio Network Optimization, Networks Benchmarking, and Network Auditing. We provide these services on activity/time basis. In Operations & Maintenance, we provide 24x7x365 maintenance services for passive telecom infrastructure (preventive and corrective maintenance on periodic contracts), and first-line maintenance of active infrastructure. We are also involved in creation of In-building Networks for the Wireless and Data Applications. The CDMA network on the underground section of the Delhi Metro Rail Corridor is one such example.

The client list constitutes of all the prominent players in the telecom industry that includes Third Party Infrastructure Leasing Companies (like Indus Towers, Quippo, WTTIL), Telecom operators (like Airtel, Vodafone, Idea, Reliance Communications, Aircel), and Telecom Equipment

Manufacturers (like Ericsson, Nokia Siemens Network, Huawei, ZTE, Motorola).

We have considerable expertise in rolling out projects in the most difficult of the terrains, both in India and Overseas. For our overseas clients, we provide services through Nu Tek India Ltd. and also through our subsidiary in Hong Kong, and cater to the growing needs of our clients in the Asia Pacific region and other Emerging Markets like Middle East and North Africa.

Business Performance

Financial and Operation Performance Overview

Financial Year 2016-17 was a favorable year for the company, wherein the income from operations increased by around 27.94% to reach

Rs. 3,923 Lakhs as compared to Rs. 3,067 Lakhs during the last financial year. Other income for the year also decreased by Rs. 67 Lakhs, compared to Rs. 599 Lakhs in the previous year. Operational expenses for the year were Rs. 3,897 Lakhs as compared to Rs3,775 Lakhs in previous year. Exceptional items were nil.

As a result, PBDT (Profit before Tax and Depreciation) was Rs. 28 Lakhs as against Rs. (179) Lakhs for the previous year. Consequently, PAT (Profit after Tax) was reported at Rs. 186 Lakhs as compared to Loss of Rs. (170) lakhs in last year.

Business Review and Outlook

The Indian telecommunications sector has witnessed immense growth in the last two decades and has the second largest subscriber base and internet subscribers in the world. The growth of the Indian economy is closely linked to the rise of the telecommunications sector as key sectors in the economy are inextricably linked to mobile services as a fundamental requirement for business. The users have been empowered from mere passive consumers to active participants and have benefited from low tariffs, availability of affordable smart phones and an evolving Information and communications technology infrastructure.Driven by strong adoption of data consumption on handheld devices, the total mobile services market revenue in India is expected to touch US$ 37 billion in 2017, registering a Compound

Annual Growth Rate (CAGR) of 5.2 per cent between 2014 and 2017, according to research firm IDC.

India will emerge as a leading player in the virtual world by having 700 million internet users of the 4.7 billion global users by 2025, as per a Microsoft report. Internet economy expected to touch Rs 10 trillion (US$ 155 billion) by 2018, contributing around 5 per cent to the countrys GDP. With the governments favourable regulation policies and 4G services hitting the market, the Indian telecommunication sector is expected to witness fast growth in the next few years. The Government of India also plans to auction the 5G spectrum in bands like 3,300

MHz and 3,400 MHz to promote initiatives like Internet of Things (IoT), machine-to-machine communications, instant high definition video transfer as well as its Smart Cities initiative.

SWOT Analysis Strengths

Existence for last 23 years in the Telecom industry. Having established relationship with almost all OEMs, Telecom operators, and

Infrastructure Providers.

Presence across the length and breadth of the Indian Telecom market. Experienced and skilled work force of around 1,200 people.

Overseas presence (Central America, Africa, ) to seize the business opportunities in these markets.

Weaknesses

Longer Working Capital Cycle

Client Concentration

Opportunities

India will emerge as a leading player in the virtual world by having 700 million internet users of the 4.7 billion global users by 2025, as per a Microsoft report.

All of the providers are keen to provide more content which providesgreat opportunity for content providers

Threats

Our revenues are closely aligned to the Telecom Industry. Any adverse impact on the industry would directly affect our business.

BY THE ORDER OF THE BOARD
Place: Delhi Inder Sharma
Date: 20.11.2017 Chairman & Managing Director