Reliance Communications Ltd Management Discussions

Indian Telecom Industry

India continues to be the one of the largest telecommunications market in the world with 1165.49 Million subscribers. During FY 2023-24 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 1165.49 million at the end of March 2024, against 1170.73 million at the end of March 2023.? Wireless subscribers accounted for 98.71% of the overall telecom subscriber base.

? The Internet subscriber base showed growth and at the end of December 2023 the total was at 936.168 million against 794.68 million in March 2023. Wireless internet continued to remain the preferred medium of access and accounted for nearly 97% of the subscriber base.

Company Overview Business Areas

Reliance Communications Limited (RCOM) is a telecommunication service provider with businesses in India National / International Long Distance (NLD) business.

RCOM currently serve nearly 1960 Indian corporations, including, regional and domestic carriers.

India Operations 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, Enterprise Voice, Cloud Telephony, Access Number Services, Collaboration Services, Wholesale Voice & Value Added Service (VAS). The Company currently serves nearly 1,960 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.

Global Operations Overview

RCOM provide 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 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 these key areas:

? Connecting new towns with high business potential as part of "City Connect" Initiative? Identify high potential areas in large cities and expand network footprint to serve customers in these areas a. 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. b. 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 out flows 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 455 crore (US$ 54 million). The net loss after tax recorded by the Company was 101crore (US$ 12 million). Total operating expenditure stood at 394 crore (US$ 47 million).

Operating profit of the continuing operations before finance charges, depreciation and amortisation, exceptional items and provision against fixed assets (EBITDA)

EBITDA was of 61 crore (US$ 7 million). The EBITDA margin for the year was 13.32 per cent.

Depreciation and amortization

The Depreciation and Amortization charges were 127 crore (US$ 15 million).

Loss before / after tax

The Loss before exceptional item was 113 crore (US$ 14 million). Tax credit was to the tune of (-)14 crore (US$ 1.68 million). The Loss after tax was 101 crore (US$ 12 million).

Balance Sheet

As on March 31, 2024, the Company had total assets of 36,555 crore (US$ 4,383 million). Stakeholders equity was negative (-)

82,130 crore (US$ 9,847 million), while net debt (i.e. net of excluding cash and cash equivalents) was 46,845 crore (US $ 5,617 million), giving a net debt to equity ratio of (0.57) times.

Other financial information:

(i) Debtors Turnover in days – 215 (ii) Inventory Turnover – NIL (iii) Interest Coverage Ratio – NIL (iv) Current Ratio - 0.06 (v) Debt Equity Ratio – NIL

(vi) Operating Profit Margin (%) (continuing operations) : (36.07) (vii) Net Profit Margin (%) (continuing operations): (26.33) (viii) details of change in Return on Net Worth as compared to the immediately previous Financial year : ( 83,430) as compared to ( 76,204) in previous year

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, 2024 were 411 crore (US$ 49 million). The EBITDA during the same period was 41 crore (US$ 5 million), while the EBIT (Earnings before Interest and Tax) was (loss) (-) 82 crore (US$ 10 million).

2. Global Operations Overview

The Global Business Unit offers the International long-distance voice, our business segments Carrier Business units. We provide carrier voice Services.

Revenues and Profit

The Revenues for the financial year ended March 31, 2024 in this segment were 46 crore (US$ 6 million). While the EBITDA was 25 crore (US$ 3 million), the EBIT 21 crore (US$ 3 million).

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 9 crore (US$ 1 million) during the year, compared to 9 crore (US$ 1 million) for the previous year. RCIL incurred total operating expenses of 9 crore (US$ 1 million), compared to 5 crore (US$ 1 million) in the previous year.

Net Profit / (Loss)

The net loss after tax recorded by RCIL was 1 crore (US $ 0.13 million), compared to loss of 346 crore (US $42 million) in the previous year.

Balance Sheet

As on March 31, 2024, RCIL had total assets (net) of 3,617 crore (US $434million) and shareholders fund negative amounting to 2,638 crore (US $316 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 0.11 crore (US $ 0.01 million) during the year, compared to 0.19 crore (US $ 0.02million) in the previous year. RTL incurred total operating expenses of 16 crore (US $2 million), compared to 25 crore (US $3 million) in the previous year.

Net Profit / (Loss)

The net loss after tax recorded by RTL was

1195crore (US $143 million), compared to net loss of 1001crore (US $122 million) in the previous year.

Balance Sheet

As on March 31, 2024, RTL had total assets of

3,802 crore (US $456million) and shareholders fund negative amounting to 13,913 crore (US $1,668 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.

Corporate Governance

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 under went 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 2023-24.

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, 2024, comprised Smt. Manjari Kacker as Chairperson and Shri Punit Garg, Smt. Grace Thomas, Smt. Ryna Karani and Smt. Chhaya Virani as members.