Optiemus Infracom Ltd Management Discussions.

In order to understand the performance of your Company during FY 17-18 better, it is important to compare it with respect to the developments in Global and Domestic economic conditions.


This has been a milestone year for the Indian economy, as it marked the successful roll out of the Goods and Service Tax Act, which will help in reducing internal barriers to trade, increase efficiency, and improve tax compliance. The economic disruptions due to the ban on high-value currency notes towards the end of 2016 and the roll out of GST in July 2017, have started to normalise and growth is expected to stabilize. After a year of disruptions and growth slowdown, the Indian economy is consolidating the gains from the recent reforms and is moving in the right direction. As per recent report released by International Monetary Fund, GDP growth in India is projected to increase from 6.7 percent in 2017 to 7.4 percent in 2018 and 7.8 percent in 2019, lifted by strong private consumption as well as fading transitory effects of the currency exchange initiative and implementation of the national goods and services tax. Over the medium term, growth is expected to gradually rise with continued implementation of structural reforms that raise productivity and incentivize private investment. The World Economic Situation and Prospects 2018 report of the United Nations also indicates that the outlook for India remains largely positive, underpinned by robust private consumption and public investment as well as ongoing structural reforms. The Union Budget for 2018-19 focused on uplifting the rural economy and strengthening of the agriculture sector, healthcare for the economically less privileged, infrastructure creation and improvement in the quality of education in the country. The Budget included various measures to provide a push to the economy, which among others, include major investments in infrastructure via all-time high allocations to rail & road sector and reduced corporate tax rates etc.

Business Segment-Telecommunication Products

The mobile phone market in India has grown exponentially in the past decade, and with the emergence of smartphones, the growth has increased substantially. The Indian economy is also affected by smartphone sales, with the smartphone market accounting for a significant portion of the GDP. The strong and rapid growth of the smartphone market has been made possible by several liberal policies of the Indian government, along with huge consumer demand. The telecom industry today is among the top five employment opportunity generators in India, creating over four million direct and indirect jobs over the next few years, according to data released by Randstad India. Increase in smartphone sales and internet usage along with the governments efforts to increase the penetration of technology in rural regions have made this possible. The IDC also predicts India to overtake the US smartphone market in a few years time.

The Rapid upheaval of technology and storming fast internet has led to enormous growth in the number of smartphone users in India to such extend that it has become second largest smartphone market in the world. Where, in 2017 alone, the countrys overall smartphone market registered 14 per cent annual growth with a total shipment of 124 million units, As per a US based Market research firm, the number of smartphone users are expected to grow by 15.6% to reach 337 million in 2018 on the back of popularity of budget phones and vendors increasing their focus to make phones as well as high value components locally. There is vast opportunity for smartphone makers as 3/4th of 1.3 billion Indian people are yet to feel the smartphone vibe. Smartphone penetration in India is bound to increase as it has become one of the most promising markets for OEMs.

Business Segment-Infrastructure

The development of a countrys infrastructure is vital to the growth of its sectors and the overall economy. The infrastructure sector primarily comprises of electricity, roads, telecommunications, railways, irrigation, ports and airports, oil and gas pipelines. The Government of India has significantly increased its infrastructure spending over the last 10 years and has also been proactively encouraging private sector investments to speed up development.

India is witnessing significant interest from international investors in infrastructure space. Government of India is taking every possible initiative to boost this sector.


Telecom Products

Increase in smartphone sales and internet usage along with the governments efforts to increase the penetration of technology in rural regions have made this possible. The IDC also predicts India to overtake the US smartphone market in a few years time.

With more than another half a billion to be added by 2020, the sheer scale of the market is attracting domestic and foreign players like and in the recent past the industry has witnessed huge inclination of mobile handsets manufacturers to manufacture phones in India. Low cost production due to cheap resource, proximity to markets and the huge market potential are the drivers to this inclination. The in-house production of mobile phones would boost the profit margin. Also, the net import/export ratio would improve drastically. The "Digital India" plan has mainly three vision areas; digital infrastructure, digital empowerment and government services on demand. And these visions can be fulfilled only by high penetration of mobile networks and low cost availability of handsets.


Infrastructure sector is a key driver for the Indian economy because infrastructure is directly proportional to the development and growth of the country. The Government of India is taking every possible initiative to boost this sector. Some of the steps taken are:

• Increased capital outlay and defence capital expenditure

• Affordable housing has been given infrastructure status

• Lock in period for long term capital gains on land and buildings has been reduced from three to two years

• Investments to improve basic urban infrastructure


Telecom Products

Regulatory and Economic Environment

The Telecommunications industry of India is one of the vast and leading industries in the world connecting different parts of the country through various modes like telephone, radio, television, satellite and internet. It has grown tremendously during the past few years owing to unprecedented growth of wireless telephony. Like all businesses, it is exposed to certain risks and concerns some of which are discussed below.


Our well planned capital investments, backed by a world class network, put us in a competitive position to meet the challenges in the telecom space. The other challenges that influence the business performance are:

i. Excessive competition

Another major concern that has come to the forefront in the recent past has been heightened competitive intensity in the industry that has correspondingly fuelled the price war between industry players. Evidently, the competition in the industry is expected to intensify further with the entry of new players, both domestic as well as foreign players.

ii. E-Commerce

With the accelerating growth of e-commerce in India, the business of distribution business is facing a lot of turbulence, which is a big challenge for the industry to be combated.

iii. Market Risks

We are subject to market risks from changes in interest and foreign currency exchange rates. In managing exposure to these fluctuations, we may engage in various hedging transactions that have been authorized according to documented internal policies and procedures.

iv. Development and Innovations

Innovations form a big part of manufacturing industry and leaving it out in the strategy can lead to big problems. A company cannot manufacture or sell the same product for decades, they need to bring constant changes for the newness of their product and also make it better and cheaper.

Infrastructure (Construction and Renting)

Infrastructure projects are associated with various types of risks:

i. Land Acquisition

Land acquisition has been the single largest roadblock for the development of infrastructure, several projects have been stalled or delayed due to land acquisition issues.

ii. Delay in Regulatory and Environmental Clearances

There are various categories of approvals required across the project cycle at every stage from multiple layers of government at central, state, local level. In most cases, there is a lack of coordination between the different agencies which seriously affects the execution of projects.


Telecom Products

As far as the mobile category is concerned, the mobile market has managed to stay away from the slowdown that the rest of the market has been experiencing which is primarily because of the technology innovation.

The organized Retail of Mobile Handsets is growing rapidly in line with the increase in market share of smart phones as customers prefer to buy smart phones from organized retail stores which offer better buying experience and understanding the functions of a smart phone. Also, the Company is moving forward with its prime focus on widening its distribution services by bringing different world class organisation under its distribution network & also trade in mobile accessories as well. Companys revenue in Telecom Products contributed Rs. 57432 lacs towards the total revenue of the Company.

Also, Optiemus has very recently joined hands with Canada based Mobile brand "Blackberry". Having signed an Exclusive licensing agreement with Blackberry, Optiemus has qualified itself to design, sell, promote and provide customer support service for blackberry mobile devices in India, Sri Lanka, Nepal & Bangladesh. Blackberry Limited will provide its unparalleled software and security solution, which will give Optiemus a new platform to keep the innovation alive in the worlds fastest growing smartphone market and create an affluence for its shareholders.

Infrastructure (Construction And Renting)

The Companys performance has been consistent in this segment, where its total revenue for the F.Y. 2017-18 was Rs. 3600 Lacs. Thus, we can see this segment growing keeping in pace with the Indian Governments move to develop the Infrastructure and involving the private participation for the same.


The Indian mobile industry is the fastest growing in the world and India continues to add more mobile connections every month than any other country in the world. The telecom boom in the country provides great opportunity to handset manufacturers and the hottest segment for these manufacturers is the entry level segment. For mobile we have 840 million-plus users, unlike many other markets, mobile is becoming the dominant device for voice, for value-added services, and increasingly for mobile Internet also.

India is already a base for worldwide quality manufacturing of mobile phones. The sale of mobile handset has increased enormously, the inflow of FDI provided in roads for many companies which started their production in India.


Broadly risk categories involved can be discussed as follows:

1. Technology Risks

Comment: The modern business world marches to the beat of technologys drum and has done so for many years. As the internet and e-mail matured in the 1990s, companies began to adapt and take up the technology. Given the importance of technology and its impact on corporates, it is vital that organisations place technology risk management at the top of corporate agenda.

Mitigation: The Company has in place sound and robust technology risk management framework. The board of directors and senior management is directly responsible to ensure effective internal controls and risk management systems to achieve security and reliability. Standardised IT Policies, standards and procedures are in place to manage technology risk and safeguard information systems.

2. Political Instability and Government Relations

Comment: The Company operates in India. Sometimes Industrial situations are affected by political instability, civil unrest and other social tensions resulting in regime uncertainties; hence, the risk of not enjoying Government support. Such conditions tend to affect the overall business climate, especially the telecom sector, which requires stable socio-economic conditions and policy stability.

Mitigation: As a responsible corporate citizen, the Company engages proactively with key stakeholders in the societies in which it operates, and continuously assesses the impact of the changing political scenario. The Company works hand in- hand with other telecom operators in jointly representing the case for policy stability. It does its best to contribute to the socio-economic growth of the countries in which it operates through high quality services to its customers, improved connectivity, providing direct and indirect employment, and contributions to the exchequer. Through the Companys CSR activities, it contributes to the countrys social and economic development, especially in the field of education.

3. Economic Uncertainties

Comment: The Companys strategy is to focus on the growth opportunities in the emerging and developing markets related to distribution and online retailing. These markets are characterised by low to medium mobile penetration, low internet penetration and relatively lower per capita incomes, thus offering more growth potential. Since the Company has borrowing, and many loans are carrying floating interest terms, it is exposed to market risks, which impact its earnings, cash flow and balance sheet.

Mitigation: As a big player in telecom sector, the Company has diversified its risks and opportunities across markets including online trading. Through a variety of services it has also spread its portfolio. The Company follows a prudent risk management policy, including hedging mechanisms to protect its cash flow. A prudent cash management policy ensures that surplus cash is up-streamed regularly to minimise the risks of blockages at times of capital controls. Finally, the Company adopts a pricing strategy that is based on twin principles of profitability and affordability, which ensures that it protects margins at times of inflation, and market shares at times of market contraction.

4. Weaknesses in Infrastructure

Comment: Several regions, particularly rural and the hinterland, are handicapped by poor quality infrastructure, such as lack of proper roads, transport, power supply, housing, labour availability, banking and security, among others. These could result in gaps, such as energy unavailability, fuel shortages, fuel theft, asset misappropriation and cash theft, among others, thereby impacting quality of its services.

Mitigation: The Companys philosophy is to share infrastructure with other operators, and enter into SLA-based outsourcing arrangements.

5. Adverse Regulatory or Taxation Developments Including Risks Related to Tax Positions Comment: Several regulatory developments in India, have posed several challenges to the telecom sector. Indias telecom sector is also a highly taxed sector with high revenue share-based license fees and spectrum charges, service taxes and corporate tax.

Mitigation: The Company has always stood for a fair, transparent and non-discriminatory Government policy on telecom regulation with regard to its business activities involving distribution and online trading. It has represented to the Government that sustainable regulatory regimes will lead to healthy growth of the telecom sector, leading to higher investments and modernisation, which in turn unleashes a growth cycle once again for all the players involved in the telecom sector.

Risk Management Framework

Company has a defined self governed risk policy and risk management frame work for all units, functional departments and project sites. This helps in identifying, assessing and mitigating the risk that could impact the Companys performance and achievement of its business objectives. The risks are reviewed on-going basis by various process owners across the organization. The risk assessment is carried out by the Management Audit and Risk Assessment Department and a risk note is prepared and presented to the Audit Committee and a risk assessment procedure is presented to the Board of Directors annually.


Optiemus has well established risk management policies and procedures to identify and assess risks across its business units and operations. The Board reviews the adequacy and effectiveness of the internal control from time to time. The Board, in consultation with the internal Auditors and audit committee monitors and controls the major financial risk exposures.

The Companys philosophy towards internal controls is based on the principle of healthy growth with a proactive approach to risk management.

The Audit Committee reviews the effectiveness of the internal control system, and also invites functional Directors and senior management personnel to provide updates on operating effectiveness and controls, from time to time. A CEO and CFO Certificate, forming part of the Corporate Governance Report, confirm the existence and effectiveness of internal controls and reiterate their responsibilities to report deficiencies to the Audit Committee and rectify the same. The Companys code of conduct requires compliance with law and Company policy, and also covers matters, such as financial integrity, avoiding conflicts of interest, work place behaviour, dealings with external parties and responsibilities to the community.

The Company, on a regular basis, stores and maintains all the relevant data and information as a back up to avoid any possible risk of losing important business data. A qualified and independent audit committee of the Board comprising of all independent directors of the Company reviews the internal audit reports, adequacy of internal controls and risk management framework.


The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013, guidelines issued by the Securities and Exchange Board of India (SEBI). Our management accepts responsibility for the integrity and objectivity of these financial statements, as well as for the various estimates and judgments used therein. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, so that the financial statements reflect in a true and fair manner the form and substance of transactions, and reasonably present our state of affairs, profits and cash flows for the year.

The Companys financial performance is given as below:

i. Revenues and operating expenses

In FY 2018, the Company earned total revenues of Rs.62,269 Lacs. The net profit after tax recorded by the Company was Rs. 2,469 Lacs. Our total expenditure stood at Rs. 58,615 Lacs.

ii. Operating profit before finance charges, depreciation and amortization and exceptional items (EBITDA).

The Company earned EBITDA of Rs. 7,977 Lacs

iii. Depreciation and amortisation

The Depreciation and amortisation charges were Rs. 1256 Lacs.

iv. Profit before/ after tax

The profit before tax was Rs. 3,654 Lacs. The net profit after tax was Rs. 2469 Lacs.


‘Humankind is the Greatest Resource

At Optiemus, people are at the core of its business strategy. The Companys endeavour has always been to build an organisation where its people are always engaged and empowered to do their best. The Companys culture is focused on customer-centricity collaborative team work, result orientation, entrepreneurial mindset and developing people. The Companys HR strategy also aims to create a future ready pool of talent across all levels.

The year 2017-18 saw a host of initiatives around talent management and development to identify and accelerate the Companys high-potential employees, as well as building the right set of capabilities for all businesses. Efforts towards developing functional capabilities across the organization continued, with the review of the Companys current skill levels and development of functional academies to build next-generation functional and domain capabilities.

Owing to the competitiveness and diversity of Indian markets, the Company strives to ensure adequate succession planning of its leadership talent pool. It is increasingly grooming and hiring talent locally and across the country. This has helped the Companys businesses keep their ears close to the ground and progressively increase their business performance. In line with the Companys focus on employee empowerment, it also designed new ‘Ways of Working to deliver high operational excellence and governance.

The Company recognizes and appreciates the contribution of all its employees in its growth path. Our Company strives to retain talent by facilitating career growth through job enrichment and empowerment, as it believes that the pool of the human resource is the biggest asset of the organization. Your Company maintains a cordial relationship with its employees through a constructive work environment in support of productive gains.


Certain statements made in the management discussion and analysis report relating to the Companys objectives, projections, outlook, expectations, estimates and others may constitute forward looking statements within the meaning of applicable laws and regulations. Actual results may differ substantially or materially from such expectations whether expressed or implied. Several factors could make significant difference to the Companys operations. These include climatic and economic conditions affecting demand and supply, government regulations and taxation, natural calamities over which the Company does not have any direct control.