MANAGEMENT DISCUSSION & ANALYSIS REPORT- Punjab Communications Limited (Puncom), a brmier Telecom and IT company was incorporated in the year 1981 by the Punjab Govt. for giving fillip to the Electronics and Telecommunication industry in the region. The company passed through a very good phase from 1981 to 1993, and came up with a public issue in October, 1994. Besides high brmium, the issue was highly oversubscribed. The company achieved a record Turnover of Rs. 157.32 Cr during the year 20012002, when its net worth was Rs. 181.77 cr. Thereafter the turnover of the company was adversely affected due to industry wide shift from landline based narrowband communication to wireless and broadband technologies promoted by major MNCs. Realising this, the company made attempts to broaden its customer and product base through tie-ups with foreign companies including Huawei Technologies of China for supply of DWDM equipment to BSNL/ MTNL and achieved a healthy turnover of Rs. 129.70 Cr. and Rs. 110.86 Cr. for the years 2008-2009 and 2009-10 respectively. For improving the bottom line, the company went about developing its core markets of railways and power sector with own products. Simultaneously the company is on look out for additional partners for new products and services for new markets. INDUSTRIAL OUTLOOK The Indian telecommunication sector has experienced phenomenal growth during the past few years and has emerged as the second largest network in the world. With urban tele-densities having already exceeded 100%, rural and semi-urban segments and broadband are new growth segments. On the back of ongoing investments flowing into infrastructure through nationwide programmes like Digital India, digital empowerment and service delivery, mobile banking and e-commerce etc, the country is projected to witness extensive penetration of Internet, broadband, and mobile subscribers and IT based digital services in the near future. Make in India programme of Government of India has progressively led to improved business and manufacturing climate in the country with reforms such as improved ease of doing business, streamlining controls, taxation and duties, increasing FDI limits in most business segments, increased public private participation and so on. This, together with India being among the largest and fastest growing markets of the world, has ensured that most MNCs and domestic companies are making aggressive plans to set up bases in India. Rapid expansion and availability of telecom and IT networks in the country has also increased demand for telecom, IT and all kinds of equipment and services from related segments like power, transport, education, defence etc for increased automation, safety & security, connectivity etc encouraging yet more MNCs like Thales, ABB, ALSTOM, Honeywell, Schneider etc in these specialized areas. In addition government's increasing stress on green technologies like solar, LEDs, is altering the power space in a major way. The future of the industry lies in broadband and mobile and constant technological innovations such as 3G/4G, smart networks, network security, IPTV etc are changing the market place. Major national projects and market segments where demand is expected to grow include: •Make in India programs for all business segments especially railways, defence, power, telecom, networking, health, security, automation •Digital India and related services • Renewable and clean energy technologies. •E-Commerce and e-governance. • 3G/4G and Video Capable Mobile Networks. • Wireless broadband and cloud • Network and Information Security. BUSINESS OUTLOOK Puncom has a diversified customer base. Though historically BSNL accounted for a major portion of its sales, however railways and power sector contribute significantly towards revenues and bottom line. The shift in demand from voice to data and from wireline to wireless, has revolutionized the very nature of telecom networks. Considering severe competition and dominance of MNCs in telecom, the company is continuously looking for diversification of its customer base as well as products. The same is being done by having a re-look at the niche segments of power sector, defence, railways etc for growth and exploring emerging business opportunities in solar, LEDs, networking, training etc. taking benefit from renewed focus on manufacturing by Indian government. Besides this, Puncom is aware of the significance of service sector and increasing penetration of newer networking and IT applications in all segments of society. Accordingly it is strengthening its value added services like turnkey projects, training, repair and maintenance. With the recent developments in the telecom sector regarding the security concerns of Indian Government, as well as following market and cost imperatives, most of the telecom companies are making efforts to set up manufacturing bases in India to Indianise their operations. The company is also making continuous efforts to add more new products to its kitty by way of techno-commercial tie-ups and/or in-house development with a view to increase the revenues. QUALITATIVE REVIEW Technology Puncom being a telecom equipment manufacturing company has to stay updated on technology front as the rate of obsolescence in this field is quite high. To keep pace with this requirement, Puncom has adopted two-pronged approach i.e., firstly through tie-ups and secondly through stepped up product engineering efforts. This helps in infusion of newer versions of products/ new technology in the existing range of company's products. Puncom provides very large spectrum of telecom solutions covering Transmission, networking, Switching, wireless, IT, training etc. under one roof. The product base is wide which provides the company with the requisite strengths to handle composite projects effectively. ISO- 9001:2008 Certification Making quality equipment & services available to its customers is the motto of Puncom. In pursuit of providing quality equipment & services, Puncom processes and procedures conform to the ISO 9001:2008 standard. These procedures and processes are audited once in three years for the recertification of the standard, followed by yearly Surveillance and quarterly Internal audits. Puncom has successfully completed Recertification Audit of ISO 9001:2008 standard in April, 2015. New ISO standard namely, ISO 9001:2015 is going to be published soon and necessary changes in the current system will be made accordingly. Transparency To bring about transparency in the working of the company at all levels, to attain smooth operations and effective coordination amongst various departments, your company has successfully established Enterprise Resource Planning (ERP) System. The ERP system, which is in place in the company, facilitates proper co-ordination of all activities in the divisions to give improved results. Due to this, the company is able to maintain absolute control over all the activities resulting in the optimum utilisation of its financial resources. Puncom being a Govt. company is subject to various audits, which reinforce 100% transparency in the working of the company including the Accounting Systems. The Company has implemented code on Insider Trading under SEBI Regulations. Through this code, Company is able to keep check on the transactions pertaining to sales and purchases of Puncom's shares by the Designated employees/connected person. This Code ensures that no insider either on his behalf or on behalf of other person, deal in securities of a company listed on any Stock exchange on the basis of Unpublished Price Sensitive Information, which is not generally known or published by Company for general information. The Company has formulated a Memorandum of Right to Information under the Right to Information Act and anybody can access the non-confidential information under the Act. This further adds to the transparency of company affairs. The company has also adopted a Code of Conduct for Board and Senior Management of Company as desired under Clause 49 of the Listing Agreement which ensures the high ethical standards of the company and transparency of important decision at higher level. Adequacy of Internal Controls Puncom has a proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from unauthorised use or disposition and those transactions are authorised, recorded and reported correctly. The company has an extensive system of internal controls which ensures optimal utilisation and protection of resources, IT security, accurate reporting of financial transaction and compliance with applicable laws and regulations as also internal policies and procedures. The internal control system is supplemented by extensive internal audits, regular reviews by management and well-documented policies and guidelines to ensure reliability of financial and all other records to brpare financial statements and other data. B) Expenditure Analysis a) Materials consumed Raw material consumed during the year under review is Rs.1223.35 lacs as against Rs 1098.96 lacs in the brvious year. Raw material consumption consists of consumption of traded goods also. b) Manufacturing, Administrative & Selling Expenses Manufacturing expenses comprising of stores and spares, power and fuel, freight and installation expenses etc., decreased from 7 228.09 Lacs to 7 175.47 Lacs in the current year. As a percentage of sales, these decreased from 10.92% in the brvious year to 7.79% in the current year. Administrative expenses mainly comprising of travelling and conveyance, repair and maintenance, office electricity & water, rent and auditors' expenses increased from 7 245.51 Lacs to 7 280.77 Lacs. However, as a percentage of sales, these increased from 11.75% in the brvious year to 12.47% in the current year. Selling & distribution expenses comprising of advertisement and publicity, sales promotion expenses, packing & forwarding expenses and customers claims and recoveries have decreased from 7 63.03 Lacs to 7 55.93 Lacs in the current year. As a percentage of sales, these decreased from 3.02% in the brvious year to 2.48% in the current year. d) Personnel cost The personnel cost increased from 7 2110.15 Lacs to 7 2218.06 Lacs. e) Finance costs & Debrciation The Financial Charges increased from 7 12.60 lacs in the brvious year to 7 14.81 lacs in the current year. Debrciation decreased from Rs 52.19 lacs to Rs.38.85 lacs during 2014-15. The reduction in amount of debrciation is due to compliance with the newly introduced provisions of Companies Act, 2013, under which the Company has revised debrciation on fixed assets as per the useful life specified in the Schedule II to the Companies Act, 2013 during the year ended 31st March, 2015. Based on the brscribed method, debrciation of Rs.16.48 lacs on account of assets whose useful life is already exhausted as on 01/04/2014 have been adjusted to Statement of Profit and Loss. Further addition in the capital expenditure was booked to the extent of Rs.8.18 lacs during the current year. f) Net Profit / Loss During the current financial year, the company has incurred Net Loss before tax of Rs.1026.16 Lacs. as against Net Loss before tax of Rs.630.78 lacs during the last year. The Net Loss before tax for the FY 201415 includes an exceptional item (expense) amounting to Rs. 167.98 lacs. g) Dividend Owing to inadequate profit, during the brvious year, the Directors of the company do not recommend any dividend for the financial year 2014-15. C) Segment reporting Puncom is engaged in the business of manufacturing of telecom products and these activities are covered by same set of risk and returns. Sales have been grouped as single segment in the accounts as per AS-17 issued by ICAI. However, interest income has been considered as a separate segment. Out of total revenue of 7 3107 lacs, 7 2112 lacs pertains to Sales, Service and other Income segment, 7 820 lacs pertains to interest segment and 7 175 lacs pertains to Rental Segment. HUMAN RESOURCE DEVELOPMENT The employees of Puncom are the backbone and this resource is very efficiently utilised. The company nurtures its employees through greater knowledge, opportunity, responsibility, accountability, innovation and discipline. Puncom is dextrous in motivating its employees to stretch out the hand of effort and hard work towards attainment of its objectives. All the policies concerning the employees are made keeping in view the fact that manpower is the most brcious resource for the company. Puncom is relatively renowned company with young employees having an average age of 43 years Puncom is equipped with qualified and professional staff. The employees are groomed through effective system of assessment, performance appraisal, training, including sharing of lectures/ knowledge base through the local area network, training files and on line testing structured manner. In addition to above, Puncom offers numerous facilities to its human resources in the form of in-house Library, Air-conditioned environment, Canteen facilities, Leased accommodation, Bill paying facility, ATM, Leave/Home travel concessions, Internet facility etc. Further, other benefits like medical allowance, conveyance loan etc. are also available to employees. Puncom frames its HR policies keeping in mind that human resource is core strength of the company. Good HR policies not only lead to contentment of employees by providing them with equal opportunities to grow but also help in achieving the laid down objectives effectively. Puncom encourages its employees to go beyond the scope of their work, undertake voluntary projects that enable them to learn and contribute innovative ideas in meeting goals of company. Industrial Relations Puncom firmly believes in the power of esprit de corpse and thus, provides its employees with congenial atmosphere to work as a cohesive team. The efforts of all the employees are synchronized and coordinated towards achieving common objectives. Further all employees are encouraged to participate in the decision making process. During the year 2014-15 the employee management relations remained cordial and positive. Safety Safety and security of the personnel, assets, and the environmental protection are on top of the agenda at Puncom. The safety procedure of Puncom includes electrical safety, inherent process safety, control of substances hazardous to health, vehicle integrity check and loading and unloading operations. Puncom is consistently reviewing its safety measures and taking steps to improve them. Environment Puncom is conscious of its responsibility towards creating, maintaining and ensuring a safe and clean environment. Strict adherence to all regulatory requirements and guidelines is maintained at all times. The company has adopted approach to create pollution free environment by adopting required measures. The company has taken tasks of planting trees and maintaining lawns to make the factory dust free. Being an electronic industry, though it does not emit any air, water or noise pollutants yet the company is committed to make the environment healthy and pollution free. Even steps have been taken to control noise pollution by putting canopy on power generator. |