DIRECTORS' REPORT Dear Members, Your Directors have pleasure in presenting the 55th Annual Report of the Company together with the Audited Statement of Accounts for the year ended 31st March, 2015. 1. FINANCIAL AND OPERATIONAL OVERVIEW: During the year under review, the total income of your Company was Rs. 1,037.40 Crores on a standalone basis and Rs. 1,858.74 Crores on a consolidated basis as compared to the previous financial year's total income of Rs. 987.80 Crores on a standalone basis and Rs. 1,593.41 Crores on a consolidated basis. The net loss for the year under review, after taxation and exceptional items, stood at Rs. 175.22 Crores on a standalone basis and Rs. 180.45 Crores on a consolidated basis. b. Operational Highlights: Your Company is a leading cable television service provider in India, as well as one of the leading cable broadband service providers. Your Company offers cable television services across 160 cities and towns and highspeed cable broadband services across 20 cities. Your Company has won number of awards for Cable television services including "Best MSO" award conducted by Indian Telly Awards for a record eight times. Your Company has established 23 digital head-ends in the country. Your Company holds a PAN India ISP license and is the first cable television service provider to offer broadband internet services and currently India's largest cable broadband service provider, with approximately 2.3 million two-way broadband enabled homes passed, as on 31st March, 2015. In addition to cable television and broadband service offerings, your Company also generates advertising and airtime revenue from advertisements aired on channels such as Hathway Music channel, Hathway CCC, Hathway Shopee, H-tube, Hathway Life, Hathway Movies and Hathway Entertainment. (i) Cable TV Business: During the year under review, your Company has seeded 0.43 million Set Top Boxes (STB) cumulatively totaling to 8.5 million STB seeded. With nearly 72% subscriber base digitized, your Company became the biggest Multi System Operator (MSO) in India as far as digital subscriber base is concerned. With nearly 5,00,000 STB's in stock,your Company will continue to seed boxes at a rapid pace in near future as well. Of the total digitized subscriber base, nearly 1.8 million subscribers fall in Phase III territories. Your Company is thus amongst the best positioned in the industry to exploit the Phase III and Phase IV markets. The strategy of your Company is to roll out a "semi" prepaid business model which facilitates Local Cable Operators (LCO) to respond more quickly to customers' request for specific packages/channels on a-la-carte basis. This initiative has been received well by our LCO business partners and will be the model for a national roll out in future. LCOs have been provided a portal and an Android application to help them to ensure better customer management. We anticipate that with smarter packaging the company will be able to drive higher average rate per unit (ARPU). Your Company has received a great feedback on our new single tier HD product proposition. The proposition is priced at Rs. 150 per month in which the customer can view 34 high quality HD channels. Your Company has become the first MSO to launch HD PVR in December, 2014. The HD PVR has several features like 'Pause and Rewind LIVE TV' and 'Record program/Series' etc. that will enhance the TV viewing experience of the customers. During the year under review, your Company has reached satisfactory conclusion in contracts for royalty payments to broadcasters. Where broadcasters have moved to a Referance Interconnection Offer (RIO) structure, the format has worked well for the Company. As anticipated, placement revenues continue to play an important role at present showing little or no decline. Your Company is working with the assumption that the Government of India will stick to its deadlines for Phase III and Phase IV digitization. Your Company has planned its investments accordingly. We also believe that value added services and innovative content will give a further fillip to ARPU in the future. Your Company is almost unique in the industry in carrying a lot of original programming put together specifically for our platforms (4-5 channels). Your Company has tremendous opportunity to monetize these brands via advertising, focussing towards communities that it serves. (ii) Broadband Business: The Broadband reach of your Company is about 2.3 million homes where it can offer our services. This makes us the largest Multi System Operator providing such services in the Country. Your Company is a Category-A Internet Service Provider (ISP) and it covers both retail and corporate segments. India has around 15 million wireline broadband subscribers as on 31st December, 2014 (As per revised definition i.e.a customer having minimum speed of 512 kbps). Cable provides big potential for growth of broadband penetration in the country considering the cable universe of 106 million Cable TV homes. As of 31st March, 2015, your Company has over 4.5 Lakhs broadband subscribers, which makes us the largest MSO in the country having highest number of Broadband Subscribers, with an all India rank of being the 5th largest ISP Company in the country. With a high quality and high capacity HFC Network, your Company is well placed to garner a larger share of the growing broadband market. Your Company successfully implemented DOCSIS 3.0 high speed broadband service in many cities for Broadband business and has received a good response to the same across Mumbai, Bangalore, Pune, Hyderabad and Delhi. At present we are providing 50 Mbps speed to our DOCSIS 3.0 customers and we are further augmenting our network to provide 100 MBPS speed in future. Based on continuous customer service improvement, we could also improve customer ARPU by Rs. 200 on monthly basis. This also makes your Company business model more sustainable and gives you all a healthy return of income (ROI). Your company has also associated with International Lawn Tennis player Ms. Sania Mirza as brand ambassador. This is to ensure that there is further improvement of customer perception about our services. c) Consolidated Accounts: The consolidated financial statements of your Company for the financial year 2014-2015, are prepared in compliance with applicable provisions of the Companies Act, 2013, Accounting Standards and Listing Agreement as prescribed by the Securities and Exchange Board of India (SEBI). d) Report on performance of subsidiaries, associates and joint venture companies: A statement containing the performance and financial position of each of the subsidiaries, associates and joint venture companies for the year ended 31st March, 2015 is given, pursuant to Section 129(3) of the Companies Act, 2013 read with Rule 5 and 8 of the Companies (Accounts) Rules, 2014 in AOC-1 in Annexure - I to this report. The financial statements of the subsidiary companies and related information are available for inspection by the members at the Registered Office of your Company during business hours on all days except Saturdays, Sundays and public holidays up to the date of the Annual General Meeting (AGM) as required under Section 136 of the Companies Act, 2013. Any member desirous of obtaining a copy of the said financial statements may write to the Company Secretary at the Registered Office of your Company. e) Management Discussion and Analysis: The Management Discussion and Analysis forms an integral part of this Report and gives detail of the overall industry overview, business overview, and performance review and state of affairs of the Company in Cable Television business and Broadband business during the year under review. It also highlights the investments made in Phase I and Phase II areas relevant for Digital Addressable System (DAS), value added services and bundling, risk management and Human Resource. f) Dividend: Considering the losses incurred during the year under review, your Directors have not recommended any dividend for the financial year under review. g) Transfer to reserves: In view of losses incurred during the year under review, your Directors have not recommended transfer of any amount to reserves during the financial year under review. h) Revision of financial statement: There was no revision of the financial statements for the year under review. i) Deposits: Your Company has not accepted any public deposits during the year under review within the meaning of Sections 73 and 74 of the Companies Act, 2013 read together with the Companies (Acceptance of Deposits) Rules, 2014. j) Disclosures under section 134(3)(l) of the Companies Act, 2013: Except as disclosed elsewhere in this report, no material changes and commitments which could affect the Company's financial position, have occurred between the end of the financial year of the Company and date of this report. k) Disclosure of Internal Financial controls: The Internal Financial Controls with reference to financial statements as designed and implemented by the Company are adequate.During the year under review, no material or serious observation has been received from the Internal Auditors of the Company for inefficiency or inadequacy of such controls.The Company has planned to rollout IFC in two phases. As part of phase I, we have developed all the financial policies and documented all the financial and IT controls. Across 8 mega processes, we have identified and documented approximately 100 controls. We had appointed E&Y to compile / develop the policies and document the financial and IT controls. For each control, a test plan is also documented. These controls are being independently tested by the Management Audit Team (MAT). MAT has tested 80% of controls and no material or significant deficiency has been observed. As part of the phase II, we intend to do the following: - Document all the operational policies and controls, - Develop process notes for all the key processes, - Going forward, on an half yearly basis, MAT will perform independent testing of the controls. Based on the test results, management will take necessary corrective action. l) Particulars of loans, guarantees, investments and securities: Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient are provided in the standalone financial statement (Please refer to Note No. 4.13 to the standalone financial statement). 2. MATTERS RELATED TO DIRECTORS AND KEY MANAGERIAL PERSONNEL: a) BOARD OF DIRECTORS & KEY MANAGERIAL PERSONNEL: Ms. Ameeta Parpia (DIN: 02654277) was appointed as an Additional Independent Director of the Company on 11th February, 2015 to hold office upto the date of ensuing Annual General Meeting. Your Company has received notices from shareholders along with requisite deposits proposing the candidature of Ms. Ameeta Parpia for appointment as Director at the ensuing Annual General Meeting. None of the Directors of your Company have resigned as Director of the Company. In accordance with the provisions of the Act, none of the Independent Directors are liable to retire by rotation. As per the provisions of Section 152 of the Companies Act, 2013, Mr. Viren Raheja, Mr. Vinayak Aggarwal and Mr. Biswajit Subramaniam shall retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. Your Directors recommend the same for your approval. DECLARATIONS BY INDEPENDENT DIRECTORS: Your Company has received declarations from all the Independent Directors under Section 149(6) of the Companies Act, 2013 confirming their independence visa-vis the Company. 3. DISCLOSURES RELATED TO BOARD, COMMITTEES AND POLIcIES: BOARD MEETINGS: The Board of Directors met 10 times during the financial year ended 31st March, 2015 in accordance with the provisions of the Companies Act, 2013 and rules made thereunder. Sr. No. Date of the Board Meeting 1 29th May, 2014 2 7th August, 2014 3 12th August, 2014 4 5th September, 2014 5 9th September, 2014 6 10th September, 2014 7 10th October, 2014 8 14th October, 2014 9 13th November, 2014 10 11th February, 2015 b. DIRECTORS' RESPONSIBILITY STATEMENT: In terms of Section 134(5) of the Companies Act, 2013, in relation to the audited financial statements of the Company for the year ended 31st March, 2015, the Board of Directors hereby confirms that: a. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; b. such accounting policies have been selected and applied consistently and the Directors made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2015 and of the loss of the Company for that year; c. proper and sufficient care was taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d. the annual accounts of the Company have been prepared on a going concern basis; e. internal financial controls have been laid down to be followed by the Company and that such internal financial controls are adequate and were operating effectively; f. proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively; NOMINATION AND REMUNERATION COMMITTEE: The Nomination and Remuneration Committee was reconstituted by the Board of Directors of the Company in accordance with the requirements of Section 178 of the Act. g) The Board of Directors has in accordance with the provisions of sub-section (3) of Section 178 of the Companies Act, 2013, formulated the policy setting out the criteria for determining credentials, positive attributes, independence of a Director and policy relating to remuneration for Directors, Key Managerial Personnel and other employees. d. AUDIT COMMITTEE: The Audit Committee was reconstituted pursuant to the provisions of Section 177 of the Companies Act, 2013. The composition of the Audit Committee is in conformity with the provisions of the said section. The Audit Committee comprises of: The scope and terms of reference of the Audit Committee have been amended in accordance with the Act and the Listing Agreement entered into with the Stock Exchanges. During the year under review, the Board of Directors of the Company had accepted all the recommendations of the Committee. e. STAKEHOLDERS' RELATIONSHIP COMMITTEE: Pursuant to Section 178 of the Companies Act, 2013, the Board of Directors of the Company has reconstituted the Stakeholders' Relationship Committee, comprising of: The Company Secretary acts as the Secretary of the Stakeholders' Relationship Committee. f. VIGIL MECHANISM POLICY FOR THE DIRECTORS AND EMPLOYEES: The Board of Directors of Company has, pursuant to the provisions of Section 178(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014, framed "Vigil Mechanism Policy" for Directors and employees of the Company to provide a mechanism which ensures adequate safeguards to employees and Directors from any victimization on raising of concerns of any violations of legal or regulatory requirements, incorrect or misrepresentation of any, financial statements and reports, etc. The employees of the Company have the right/option to report their concern/grievance to the Chairman of the Audit Committee. Your Company is committed to adhere to the highest standards of ethical, moral and legal conduct of business operations. g. RISK MANAGEMENT POLICY: The Board of Directors of the Company has designed Risk Management Policy and Guidelines to avoid events, situations or circumstances which may lead to negative consequences on the Company's business, and define a structured approach to manage uncertainty and to make use of these in their decision making pertaining to all business divisions and corporate functions. Key business risks and their mitigation are considered in the annual/ strategic business plans and in periodic management reviews. h. CORPORATE SOCIAL RESPONSIBILITY POLICY: As per the provisions of Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board of Directors has constituted a Corporate Social Responsibility (CSR) Committee as under: The Board of Directors of the Company has approved CSR Policy based on the recommendation of the CSR Committee. Since the Company has no profits in preceding 3 financial years, no amount was required to be spent for corporate social responsibility activities. The CSR Policy of the Company is available on the Company's web-site and can be accessed in the link provided hereinbelow: <http://www.hathway.com/assets/InvFile/HCDL_CSR_> Policy.pdf i. ANNUAL EVALUATION OF DIRECTORS, COMMITTEE AND BOARD: The performance of the Board of Directors and its Committees, individual Directors was evaluated on annual basis in the previous meeting of the Board of Directors held on 11th February, 2015 and the same was recorded as satisfactory. j. DISCLOSURE UNDER SECTION 197(12) OF THE COMPANIES ACT, 2013 AND OTHER DISCLOSURES AS PER RULE 5(2) OF COMPANIES (APPOINTMENT & REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014: The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year under review and Statement containing the particulars of employees in accordance with Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in Annexure - II. 4. AUDITORS AND REPORTS The matters related to Auditors and their Reports are as under: a. OBSERVATIONS OF STATUTORY AUDITORS ON ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2015: The observations made by the Statutory Auditors in their report for the financial year ended 31st March, 2015 read with the explanatory notes therein are self-explanatory and therefore, do not call for any further explanation or comments from the Board under Section 134(3) of the Companies Act, 2013. b. SECRETARIAL AUDIT REPORT FOR THE YEAR ENDED 31ST MARCH, 2015: Provisions of Section 204 read with Section 134(3) of the Companies Act, 2013, mandates to obtain Secretarial Audit Report from Practicing Company Secretary. M/s Rathi and Associates, Company Secretaries has been appointed to issue Secretarial Audit Report for the financial year 2014-15. Secretarial Audit Report issued by M/s Rathi and Associates, Company Secretaries in Form MR-3 for the financial year 2014-15 forms part of this report and the same is attached as Annexure - III. The said report does not contain any observation or qualification requiring explanation or comments from the Board under Section 134(3) of the Companies Act, 2013. c. RATIFICATION OF APPOINTMENT OF AUDITORS: Pursuant to the provisions of Section 139 of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014, M/s. G. M. Kapadia & Co, Chartered Accountants, the Statutory Auditors of the Company have been appointed for a term of 3 years. However, their appointment as Statutory Auditors of the Company shall be required to be ratified by the Members at the ensuing Annual General Meeting. The Company has received a confirmation from the said Auditors that they are not disqualified to act as the Auditors and are eligible to hold the office as Auditors of the Company. Necessary resolution for ratification of appointment of the said Auditors is included in the Notice of AGM for seeking approval of members. d. COST AUDITORS: Pursuant to the provisions of Section 148 of the Companies Act, 2013 read with Notifications/Circulars issued by the Ministry of Corporate Affairs from time to time and as per the recommendation of the Audit Committee, the Board of Directors at their meeting dated 29th May 2015, appointed M/s. Ashok Agarwal & Co, Cost Accountants as the Cost Auditors of the Company for the financial year 2015-2016. The remuneration proposed to be paid to the Cost Auditor, subject to the ratification by the members at the ensuing AGM, would not be exceeding Rs. 5,00,000 (Rupees Five Lacs only) plus out of pocket expenses, if any. The Cost Audit Report will be filed within the stipulated period of 180 days from the closure of the financial year. 5. OTHER DISCLOSURES: Other disclosures as per provisions of Section 134 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 are furnished as under: a. EXTRACT OF ANNUAL RETURN: Pursuant to the provisions of Section 134(3)(a) of the Companies Act, 2013, extract of the Annual Return for the financial year ended 31st March, 2015 made under the provisions of Section 92(3) of the Companies Act, 2013 is attached as Annexure - IV which forms part of this Report. b. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO: The particulars as required under the provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 in respect of conservation of energy, technology absorption, foreign exchange earnings and outgo etc. are furnished in Annexure - V which forms part of this Report. c. RELATED PARTY TRANSACTIONS: During the financial year 2014-15, your Company has entered into transactions with related parties as defined under Section 2(76) of the Companies Act, 2013 read with Companies (Specification of Definitions Details) Rules, 2014, which were in the ordinary course of business and on arms' length basis and in accordance with the provisions of the Companies Act, 2013, Rules issued thereunder and Clause 49 of the Listing Agreement. During the financial year 2014-15, there were no transactions with related parties which qualifies as material transactions under the Listing Agreement. d.CORPORATE GOVERNANCE: (Applicable to Companies giving remuneration as per Section II of Schedule V): * Subject to achievement of various Company and personal performance targets as stipulated by the Board. 6. GENERAL: Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: 1. Issue of equity shares with differential rights as to dividend, voting or otherwiseas per provisions of Section 43(a)(ii) of the Act read with Rule 4(4) of the Companies (Share Capital and Debenture) Rules, 2014. 2. Issue of sweat equity shares to employees of the Company as per provisions of Section 54(1)(d) of the Act read with Rule 8(13) of the Companies (Share Capital and Debenture) Rules, 2014. 3. Issue of equity shares under Employees Stock Option Scheme during the year under review and hence no information as per provisions of Section 62(1 )(b) of the Act read with Rule 12(9) of the Companies (Share Capital and Debenture) Rules, 2014 4. Instances of exercising of voting rights in respect of shares purchased directly by employees under a scheme pursuant to Section 67(3) of the Act read with Rule 16(4) of Companies (Share Capital and Debentures) Rules, 2014 5. Payment of remuneration or commission from any of its Holding or subsidiary Companies to the Managing Director or the Whole-time Directors of the Company. 6. Significant or material orders passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future. 7. Cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. 7. ACKNOWLEDGEMENT AND APPRECIATION: Your Directors take this opportunity to thank the customers, shareholders, suppliers, bankers, business partners/associates, financial institutions and Central and State Government(s) for their consistent support and encouragement to the Company. For and on behalf of the Board Jagdishkumar G. Pillai Managing Director &CEO DIN 00036481 Vinayak Aggarwal DirectorDIN00007280 Date: 29/05/2015 Place: Mumbai Registered Office Rahejas, 4th Floor, Corner of Main Avenue & V. P. Road, Santacruz West, Mumbai 400054 CIN: L64204MH1959PLC011421 Tel No. 022-26001306 Fax No. 022-26001307 Email:info@hathway.net , website: www.hathway.com |