Statements in this Management Discussion and Analysis of Financial Conditions and Results of Operations of the Company describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Forward looking statements are based on certain assumptions and expectations of the future events.
The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company assumes no responsibility to publicly amend, modify or revise forward-looking statements, on the basis of any subsequent developments, information or events. Actual results may differ materially from those expressed in the statements. Important factors that could influence the Companys operations include interconnect usage charges, determination of tariff and such other charges and levies by the regulatory authority, changes in government regulations, tax laws, economic developments within the country and such other factors globally.
The financial statements are prepared under historical cost convention, on accrual basis of accounting, and in accordance with the provisions of the Companies Act, 2013 (the Act) and comply with the Accounting Standards notified under Section 133 of the Act. The management of Reliance Communications Limited has used estimates and judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements reflect, in a true and fair manner, the state of affairs for the year.
The following discussions on our financial conditions and results of operations should be read together with our audited consolidated financial statements and the notes to these statements included in the Annual Report.
Unless otherwise specified or the context otherwise requires, all references herein to "we", "us", "our", "the Company", "Reliance", "RCOM", "RCOM Group" or "Reliance Communications" are to Reliance Communications Limited and its subsidiary companies, joint ventures and associate companies.
The Company is currently undergoing Corporate Insolvency Resolution Process ("CIR Process" or "CIRP") under the provisions of the Insolvency and Bankruptcy Code, 2016 hence outlook, opportunity and threats, developments, risk and concerns has not been provided separately as required under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015).
Details of significant changes in Key Financial Ratios and Return on Networth
The details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in Key Financial Ratios and Return on Net worth along with detailed explanations therefore are given in Note no 2.50 to the standalone financial statement which is part of this annual report.
Indian Telecom Industry - Structure and Developments
India continues to be the one of the largest telecommunications market in the world with 1 170.73 Million subscribers. During FY 2021-22 we saw the continuation of the consolidation of the Indian mobile telecommunications market into three private players, besides the two PSUs. India has transformed from multi-player hyper competitive market to an Oligopoly and
possibly moving towards a duopoly. Given the legal and financial complications around selling of spectrum, pending AGR dues, and the ongoing tax disputes with the government authorities, the industry players balance sheet is stretched with unsustainable debt, continued hyper price competition and upcoming demands for high capex on account of 5G and fibre expansion.
The consolidation has also led to the coming of specialist B2B strengths into sharp focus. Now that Reliance Communications is a pure play B2B operator, the Company is able to better utilize its resources towards focused delivery of its services to the enterprise segment.
• Total number of telephone subscribers (Wireless and Wireline) in India is 1 170.73 million at the end of March 2022, against 1 201.20 million at the end of March 2021.
• Wireless subscribers accounted for 97.86% of the overall telecom subscriber base.
• Wireless tele-density slightly decreased to 85.03% in March 2022, compared to 86.68% at the end of March 2021.
• The Internet subscriber base showed growth and at the end of March 2022 the total was at 794.68 million against 778.09 million in March 2021. Wireless internet continued to remain the preferred medium of access and accounted for nearly 97% of the subscriber base.
Reliance Communications Limited (RCOM), together with its subsidiary Globalcom IDC Limited (GIDC), is a telecommunication service provider with businesses including India Data Center Business (IDC) and India National Long Distance (NLD) business.
RCOM currently serves nearly 5000 Indian corporations, including, regional and domestic carriers. RCOM conducts a substantial portion of its business through subsidiary companies, including Globalcom IDC Limited and Reliance Infratel Limited (RITL).
India Enterprise services
In India, RCOM provides wireline telecom services to the business and government segments. These include a comprehensive portfolio spanning Network Connectivity, Cloud Networking, Data Center Services, Enterprise Voice, Cloud Telephony, Access Number Services, Collaboration Services, Wholesale Voice & Value Added Service (VAS). The Company currently serves nearly 5000 businesses of all sizes-from multinational conglomerates to SMEs-belonging to almost every vertical: BFSI, Manufacturing, Logistics, Healthcare, IT & ITeS, OTT and New Media, to name just a few.
With nine world-class data centers spread across key business markets in India (Mumbai, Bengaluru, Chennai & Hyderabad), we are a leading provider of data center services in the region to hundreds of enterprise customers, including many of Indias marquee brands in the BFSI, FMCG, new media and e-commerce industry segments. These services cover Colocation, Shared IT Infrastructure and IT Managed Services.
Global Operations Overview
RCOM provides Wholesale Voice services to Mobile Network Operators (MNOs), Fixed Network Operators (FNOs), Tier 1 Carriers, Calling Card Companies and Over-the-Top (OTT) players across the world. Using our global Next-Generation Network (NGN), multiple international Voice PoPs, and established relationships with Carriers across the globe, we help carry Voice to almost every possible destination on the planet.
Analysis Business Strategy
a. Network Infrastructure Enhancement
We will continue to enhance our network infrastructure and data center footprint across India in order to master the combination of Cloud Orchestration, Network Ubiquity. Doing so will establish our strategic building blocks as we continue to move towards becoming the technology infrastructure company of the next decade. Our infrastructure plan will focus on three key areas:
• Data Center Centric Networks- We will continue to operate and expand distributed, focused compute and diverse compute centers at strategic locations across key markets in India.
• High-Speed Trunking between Data Centers - We have built high speed data links between data centers based on the Forward Operating Center concept.
• Commoditized Low-Cost Last Mile Access-We will further Branch Connect and low-cost UBRs and open FOCs to allow access to multiple last-mile providers. We will access carrier interconnect centers in every major market seamlessly.
b. Continue to Focus on Enhancing Products and Services Portfolio
We aim to continue to grow our revenue streams through the expansion of our portfolio of service offerings and specific sales and marketing initiatives aimed at increasing our Enterprise customer base across India and globally. Such efforts include focus on new products and enhancements of our solutions portfolio, including VPN, Next-Generation Enterprise Networking, Branch Connect, IP Centrex, SIP Trunk, and SIP Toll-Free Service.
c. Focus on Reduction of Operating Costs
In line with our growth, we also focus on cost management and margin expansion through various measures to reduce our operating costs and achieve cost optimization. We have entered into sharing agreements also to lower our regulatory cash outflows as well as future capex expansion needs.
Financial Performance - Overview
The Companys standalone financial performance is disclosed under the head Financial Performance in the Directors Report. The consolidated performance of the Company is given below:
Revenues and operating expenses
On a consolidated basis, in the continuing operations, the Company earned total revenues of 584 crore (US $77 million).
The net loss after tax recorded by the Company was 231 crore (US $ 30 million). Total operating expenditure stood at 618 crore (US $ 82 million).
Operating profit of the continuing operations before finance charges, depreciation and amortisation, exceptional items and provision against fixed assets (EBITDA)
EBITDA was (loss) of (-) 34 crore (US $ 4 million). The EBITDA margin for the year was (-) 5.82 per cent.
Depreciation and amortization
The Depreciation and Amortization charges were Rs 151 crore (US $ 20 million).
Loss before / after tax
The Loss before exceptional item was Rs 232 crore (US $ 31 million). Tax credit was to the tune of (-)Rs 1 crore (US $ 0.13 million). The Loss after tax was Rs 231 crore (US $ 30 million).
As on March 31, 2022, the Company had total assets of 47,557 crore (US $ 6,275 million). Stakeholders equity was negative (-) Rs 60,573 crore (US $ 7,992 million), while net debt (i.e. net of excluding cash and cash equivalents) was 44,703 crore (US $ 5,898 million), giving a net debt to equity ratio of (0.74) times.
1. India Operations Overview
RCOMs India Operations segment comprises the following businesses-voice, long-distance services and broadband access to enterprise customers; and managed Internet data centre services.
Revenues and Profit
The revenues for the financial year ended March 31, 2022 were Rs 563 crore (US $ 74 million). The EBITDA during the same period was loss (-) Rs 45 crore (US $ 6 million), while the EBIT (Earnings before Interest and Tax) was (loss) (-) 190 crore (US $ 25 million).
2. Global Operations Overview
The Global Business Unit offers the International longdistance voice, our business segments Carrier Business units. We provide carrier voice Services.
Revenues and Profit
The Revenues for the financial year ended March 31, 2022 in this segment were Rs 35 crore (US $5 million). While the EBITDA was Rs 11 crore (US$ 1 million), the EBIT Rs 5 crore (US $ ( 1 million).
Strategic Business Units
1 . Reliance Communications Infrastructure Limited (RCIL)
RCIL, a wholly-owned subsidiary of the Company, offers other marketing services.
Revenues and Operating Expenses
RCIL earned total revenues of Rs 6 crore (US $ 1 million) during the year, compared to Rs 9 crore (US $ 1 million) for the previous year. RCIL incurred total operating expenses of Rs 4 crore (US $ 1 million), compared to Rs 11 crore (US $ 2 million) in the previous year.
Net Profit / (Loss)
The net profit after tax recorded by RCIL was Rs 1 crore (US $ 0.13 million), compared to loss of Rs 14 crore (US $2 million) in the previous year.
As on March 31, 2022, RCIL had total assets (net) of Rs 3,947 crore (US $521 million) and shareholders fund negative amounting to Rs 2,291 crore (US $302 million).
2. Reliance Telecom Limited (RTL)
RTL, a wholly-owned subsidiary of the Company, holding telecom license in Madhya Pradesh, West Bengal, Himachal Pradesh, Odisha, Bihar, Assam, Kolkata and North East service areas.
Revenues and Operating Expenses
RTL earned total revenues of Rs 0.1 crore (US $ 0.01 million) during the year, compared to Rs 6 crore (US $ 1 million) in the previous year. RTL incurred total operating expenses of Rs 16 crore (US $2 million), compared to Rs 12 crore (US $2 million) in the previous year.
Net Profit / (Loss)
The net loss after tax recorded by RTL was Rs 873 crore (US $115 million), compared to net loss of Rs 760 crore (US $104 million) in the previous year.
As on March 31, 2022, RTL had total assets of Rs 3,822 crore (US $504 million) and shareholders fund negative amounting to Rs 11,717 crore (US $1,546 million).
3. Reliance Infratel Limited (RITL)
RITL, subsidiary of the Company, is in the business of telecom Infrastructure.
Revenues and Operating Expenses
RITL earned total revenues of Rs 1190 crore (US $157 million) during the year, compared to 1,216 crore (US $166 million) in the previous year. The Company incurred total operating expenses of 1500 crore (US $198 million), compared to 1465 crore (US $200 million) in the previous year.
Net Profit / (Loss)
The net loss after tax recorded by RITL was Rs 177 crore (US $23 million), compared to loss of Rs 189 crore (US $26 million) in the previous year.
As on March 31, 2022, RITL had total assets of Rs 13,139 crore (US $1,734 million). Shareholders fund was Rs 789 crore (US $104 million).
Adequacy of Internal Control and Systems
The Company has internal controls aimed at achieving efficiency in operations, optimum utilization of resources, effective monitoring and compliance with all applicable laws. The Management Audit Team undertakes extensive checks, process reviews and also conducts internal audits. The Audit Committee of the Board reviews major findings in the internal audit reports as well as the adequacy of internal controls.
Risk Management Framework
The Company has instituted a Risk Management framework based on identification of potential risk areas, evaluation of risk intensity, and clear-cut risk mitigation policies, plans and procedures both at the enterprise and operating levels. The framework seeks to facilitate a common organizational understanding of the exposure to various risks and uncertainties at an early stage, followed by timely and effective mitigation. The Audit Committee of the Board reviews the risk management framework at periodic intervals.
The Companys Code of Conduct policy which has set out the systems, process and policies conforming to international standards are reviewed periodically to ensure their continuing relevance, effectiveness and responsiveness to the needs of investors both local and global and all other stakeholders. We maintained the highest standards of corporate governance principles and best practices.
Human Resource and Employees Relations
In the area of HR and Talent Management, the prime focus for the company has been on development of people and process efficiencies.
Under people efficiency improvements, teams across various functions underwent in-house tailor-made trainings anchored by functional SPOCs, and team managers underwent trainings on managing performance through effective feedback process. As part of creating process efficiencies in this field, several process (both online and offline) were analyzed and revamped to make these more effective and impactful. Team structures and roles were closely analyzed and aligned in order to create efficiencies within teams. In addition, changes were made in some key policies to make these more effective and efficient.
Corporate Social Responsibility
The Company has constituted Corporate Social Responsibility Committee in compliance with the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules 2014. The Corporate Social Responsibility Committee has formulated a Corporate Social Responsibility Policy (CSR policy) indicating the activities to be undertaken by the Company. However, Section 135 of the Companies Act, 2013 and rules made there under are not applicable to the Company for the Financial year 2021-22.
The CSR policy may be accessed on the Companys website at the link; http://www.rcom.co.in/Rcom/about-us/investor- relations/corporate-governance.html.
The CSR Committee as on March 31, 2022, comprised Smt. Manjari Kacker as Chairperson and Shri Punit Garg, Shri Vishwanath Devaraja Rao, Smt. Ryna Karani and Smt. Chhaya Virani as members.