Sterlite Technologies Limited | Annual Report 2007-08
FORWARD LOOKING STATEMENT
In this Annual Report we have disclosed forward-looking information to enable investors to comprehend our prospects and
take informed investment decisions. This report and other statements that we periodically make contain forward-looking
statements that set out anticipated results based on the management’s plans and assumptions. We have tried wherever
possible to identify such statements by using words such as ‘anticipate’, ‘estimate’, ‘expects’, ‘projects’, ‘intends’, ‘plans’, ‘believes’, and words of similar substance in connection with any discussion of future performance.
We cannot guarantee that these forward-looking statements will be realized, although we believe we have been prudent
in our assumptions. The achievement of results are subject to risks, uncertainties and estimates taken as assumptions.
Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Readers should bear this in mind.
Contents
02 VISION MISSION AND VALUES 04 FINANCIAL HIGHLIGHTS 06 HIGHLIGHTS OF 2007-08 08 VIGNETTES, 2007-08 10 STERLITE IN THE NEWS 12 AWARDS 13 CHAIRMAN’S MESSAGE 14 MESSAGE FROM THE CEO 28 INTELLECTUAL PROPERTY 30 MANAGEMENT DISCUSSION AND ANALYSIS 36 FINANCIAL ANALYSIS 44 RISK MANAGEMENT 48 HUMAN RESOURCE REPORT 50 SUSTAINABLE DEVELOPMENT REPORT 54 BOARD OF DIRECTORS 58 MANAGEMENT COMMITTEE 60 DIRECTORS’ REPORT 62 CORPORATE GOVERNANCE REPORT 70 FINANCIAL SECTION 83 LOCATIONS 139 A BRIEF INSIGHT…
SMILE. RELIEF. HAPPINESS. CARE. AFFECTION. LOVE. ELATION. WARMTH. PLEASURE. RESPECT. PRIDE. WISH. HOPE. VICTORY. WONDER. ECSTASY. NEED. JOY. CHEER. DELIGHT. GAIETY. DEMAND. EXCITEMENT. JUBILATION. SURPRISE. BLISS. ANTICIPATION. ZEAL. DESIRE. DREAMS.
WE CONNECT MINDS…
A Brief Insight‌ We are among the top three power transmission conductor manufacturers and among the top ten optical fiber manufacturers in the world.
2 |Sterlite Technologies Limited | Annual Report 2007-08
Presence Headquartered in Pune, Maharashtra. Eight manufacturing plants in various locations in India. Ten sales and marketing offices located in different parts of India, China, Thailand, Russia, U.K. and South Africa. Listed on the Bombay Stock Exchange and the
Parentage Commenced manufacturing of telecom products in 1988 as Sterlite Industries Limited. Commenced operations from July 2000 as Sterlite Optical Technologies Ltd after the demerger from Sterlite Industries Limited. Acquired the Power Transmission Business in 2006.
National Stock Exchange. The shares of the
Name changed to Sterlite Technologies Limited
Company are traded actively.
in 2007.
Business Solutions Optical Fibers under the brand name of BEND-LITE, OH-LITE, PMD-LITE, DOF-LITE, MULTI-LITE. Fiber Optic Cables marketed under the brand name of ARMOR-LITE, DROP-LITE, DUCT-LITE, FRP Armor-LITE, RIBBON-LITE. Power Transmission Conductors covering the entire range of extra-high voltage, high-voltage and power distribution conductors. Copper Telecom Cables. Structured Data Cables marketed under the brand names of DURATUBE. ADSL2+ modems under the brand name of SAM 100, SAM 200, SAM 300, SAM 400. Telecom Integration and Managed Services.
A Brief Insight‌ | 3
Vision We will be among the top three manufacturers in the world by 2010 in terms of market share for all our business lines.
Mission Based on industry and customer requirements, we strive to develop a portfolio of quality products and solutions, through the effective use of information technology, six sigma and a sustained focus on intellectual property and the environment.
Sterlite team
Commenced operations
Promoter’s holding
1988
45.11%
746
As on March 31, 2008
As on March 31, 2008
4 |Sterlite Technologies Limited | Annual Report 2007-08
Values Excellence: Strive relentlessly and constantly improve ourselves in our offerings. Creativity:
Allow
minds
to
reach
beyond
conventional and predictable solutions. Integrity: Conduct our business fairly, with honesty and transparency. Responsibility: For our words and actions. Respect: For our stakeholders, environment and community.
Rs.
15.46 For the year 2007-08
Market capitalization
Book value
Diluted earnings per share
Rs.
540
Crores
As on March 31, 2008
Rs.
1,048
Crores
As on March 31, 2008
Vision, Mission and Values | 5
Financial Highlights
Net Revenues
PAT
ROCE
(Rs. in Crores)
(Rs. in Crores)
(%)
6 |Sterlite Technologies Limited | Annual Report 2007-08
EBITDA
(Rs. in Crores)
Diluted EPS
(Rs. per Share)
Net Worth
(Rs. in Crores)
US$ in million (except per share data)
2003-04
2004-05
2005-06
2006-07
2007-08
20
73
124
265
419
EBITDA
4
11
19
26
52
PBDT
1
8
15
19
42
PBT
(5)
2
9
12
32
PAT
(4)
2
9
11
25
Capital Employed
96
93
128
230
299
(0.07)
0.04
0.16
0.17
0.38
92
327
547
1,198
1,686
(24)
256
67
119
41
19
47
83
119
211
(158)
143
76
43
77
% to Net Revenue
21
14
15
10
13
Interest
13
10
16
35
44
PBDT
7
37
67
85
168
% to Net Revenue
7
11
12
7
10
PBT
(22)
10
38
53
130
% to Net Revenue
(21)
3
4
7
8
PAT
(19)
10
41
51
101
% to Net Revenue
(21)
3
7
4
6
Net Worth
251
261
332
417
540
Capital Employed
418
408
570
1,001
1,197
(2.08)
5.07
9.53
8.45
14.31
Interest Coverage Ratio
1.51
4.55
5.16
3.45
4.85
Working Capital Ratio
2.06
1.64
2.91
3.23
3.10
Debt Equity Ratio
0.67
0.56
0.72
1.40
1.22
(3.38)
1.83
7.27
7.83
15.46
Net revenue
Diluted EPS
Rs. in Crores (except per share data) Net revenue % growth EBITDA % growth
Return on Capital Employed (%)
Diluted EPS
Financial Highlights | 7
Highlights of 2007-08
Business Performance Net revenue of Rs. 1,686 Crores, EBITDA of Rs. 211 Crores and PAT of Rs. 101 Crores. Net revenue up by 41%, EBITDA up by 77% and PAT up by 98% over the last fiscal. Diluted EPS of Rs. 15.46 (each share of Rs. 5 face value). Revenue from exports up by 75% over the previous fiscal amounts to 31% of net revenue.
Intellectual Property Four patents granted for optical fiber products and processes in the US, India and China, in addition to nine patents granted in previous years.
8 |Sterlite Technologies Limited | Annual Report 2007-08
Manufacturing Capacity Enhancements The
new
Haridwar
facility
commenced
the
manufacture of power transmission conductors, making Sterlite the largest manufacturer in India and
New Product
among the top three in the world, with capacity of
AL-59 alloy power transmission conductors
115,000 MT.
compliant with the Swedish standard
The Brownfield expansion completed at Aurangabad
SS241814, suited for high-power transfer.
takes the annual optical fiber capacity from 4 million fkm to 6 million fkm. Projected
to
double
annual
optical
fiber
manufacturing capacity to 12 million fkm by 2009, triple fiber optic cable capacity to 6 million fkm and enhance power conductor capacity to 160,000 Metric Tonnes by 2009.
Awards and Listings Deloitte Technology Fast 500 Asia Pacific and Fast 50 India Awards 2007. IMC-Ramkrishna Bajaj National Quality Award – Certificate of Merit 2007 – for manufacturing
Certifications and Approvals
(optical fiber plant).
TL 9000 quality management system for fiber-
Dun & Bradstreet Corporate Award 2007 for
optic cables facility.
telecom equipment.
Creep Test by SAG, Germany, for ACSR, ACO and
IEEMA Certificate of Appreciation – Best New
ACSR 490/65 power transmission conductors.
Product Award 2007 for AL-59 alloy conductors.
OHSAS 18001:1999 management system for
The Top Telecom Cables Company of 2007 as
fiber optic cables facility.
per the annual V&D100 survey.
Six-Sigma black belt certifications from the
Among the EFY top 100 Technology companies
American Society for Quality (ASQ).
in India.
Highlights of 2007-08 | 9
Vignettes, 2007-08 Participated in events in nine countries across four continents
55th IWCS Conference 2007, USA FTTH Council Europe Conference 2008, Paris CRU Wire & Cable Conference 2007, Paris ECOC 2007, Berlin SVIAZ ExpoComm 2007, Moscow GITEX / GULFCOMMS 2007, Dubai 10 |Sterlite Technologies Limited | Annual Report 2007-08
Middle East Electricity 2008, Dubai Telecoms World Africa 2007, Johannesburg 16th Convergence India 2008, Delhi ELECRAMA 2008, Mumbai CommunicAsia 2007, Singapore
Vignettes, 2007-08 | 11
Sterlite in the News
12 |Sterlite Technologies Limited | Annual Report 2007-08
Awards
D&B Award RBNQA Certificate of Merit IEEMA Award for AL-59 Deloitte Award / Certificate Fast 50 India V&D Top Cable Company 2007 Award
Sterlite in the News & Awards | 13
14 |Sterlite Technologies Limited | Annual Report 2007-08
“We possess a potent combination of leadership, team-spirit and technology to grow our global presence in a sustainable way across the telecom and power sectors.�
Sterlite Technologies is the Group's vehicle for participation in the growing infrastructure sectors of Telecom and Power, and remains a key part of the Group's overall vision of attaining a leadership position in all the businesses we operate in.
sustainable way across our focus sectors. In a challenging global environment, we continue to deliver telecom & power solutions at global benchmark costs and within schedules. We remain committed towards enhancing our
The global demand for telecom and power products continues
market access, while maintaining financial stability and growing
to be robust and sustainable. We are seeing a structural shift in
our business portfolio.
the demand pattern of these products from mature markets to emerging economies. This is on account of an increase in disposable incomes and living standards. These are truly exciting times and Sterlite is competitively placed to capitalize
Measured against our objectives, FY 2007-08 was a year of significant strides. We will continue to build upon these achievements and I eagerly look forward to report on our progress on various initiatives in FY 2008-09 and beyond.
on this ongoing transformation. We delivered an outstanding year with notable successes across our broad range of markets and technologies for the Telecom and Power sectors. Our businesses enjoy an established culture of knowledge, technical and operational excellence. We possess a potent combination of leadership,
Anil Agarwal
team-spirit and technology to grow our global presence in a
Chairman
Chairman’s message | 15
16 |Sterlite Technologies Limited | Annual Report 2007-08
Awarded the Deloitte Technology Fast 500 Asia Pacific and Fast 50 India Awards for third consecutive year
Global presence in power transmission conductors 27% share in the Indian power transmission conductor market 3% global share of the global power transmission market
Global presence in optical fiber 46% share of the Indian optical fiber market 4% share of the global optical fiber market
CONNECTING‌ THE WORLD At Sterlite Technologies, we believe that a global competitive edge can be sharpened only through progressive investments in key businesses in favourable as well as challenging markets. Power transmission conductors We invested in this business and today possess the only
We made business-enhancing investments in scaling
facility in India that is vertically integrated from aluminium
capacities, growing operational capacities from 4 million fkm
ingots to conductors and is poised to cater to the growing
to 6 million fkm.
demands of India and neighbouring economies.
The products were manufactured in line with norms
We achieved an annual capacity of 115,000 MT through
stipulated by International Telecom Entities like ITU resulting
timely capital investments .
in increasing global market access.
Fiber and cables
The result is that Sterlite Technologies Limited has emerged as
We possess a facility that is vertically integrated from silicon
one of world’s three leading power transmission conductor
to cables, the only one of its kind in South Asia and among
manufacturers and among the ten leading optical fiber
the few across the world.
manufacturers today.
Connecting ... the World | 17
18 |Sterlite Technologies Limited | Annual Report 2007-08
Scaling operations to meet customer demand Optical fiber 1995 Commenced operation
Received the Dun & Bradstreet Corporate Award 2007
1997 1 mn FKM
2001 4 mn FKM
2007 6 mn FKM
2009(E) 12 mn FKM
Power transmission conductors 1996 Commenced operation
2006 75,000 MT
2007 115,000 MT
2009 (E) 160,000 MT
Sole partner Sterlite was chosen as the sole supplier for over 17,000 km of ‘AAAC Conductors’ that will be installed for a World Bank-funded electrification programme in Ethiopia. Sterlite was the sole manufacturer and supplier of over 4,200 km of ‘ACSR Bermisis Conductors’ that were installed in the first 765 kV Extra High Voltage Transmission Line to be charged in India.
CONNECTING… WITH OUR CUSTOMERS We are a preferred vendor for global customers across both our businesses, resulting in repeat business across extended periods. Over the years, we have customized our business model from
Provided effective inventory management for our customers
being a supplier to growing customers through the following
comprising staggered supply and just-in-time delivery.
differentiators:
Created multiple communication channels for clients for the
Increased scale of production to reassure global clients of
prompt redressal of issues; published bi-monthly and
uninterrupted product supply that would address their
quarterly periodicals to enhance customer awareness
growing requirements.
about the latest corporate developments; revamped website
Offered an extensive product basket covering the entire
to make it more user friendly with all recent available
range of power transmission conductors and optic fiber
updates.
cables that facilitate diverse basic and critical applications.
We now have our footprint across 60 countries and count most
Engaged in active product development; over the last three
of the telecom and power companies in emerging economies
years, we have launched new products and improved existing
amongst our customer base. Our order book position as on
products across both business divisions.
March 31, 2008, was Rs. 1,020 Crores representing more than
Provided adequate client flexibility comprising the order cycle, shipment quantity and payment period – delighting customers.
6 months of production across both businesses. We were also awarded the TEMA National Telecom Award for Excellence in Exports.
Connecting ... with our customers | 19
20 |Sterlite Technologies Limited | Annual Report 2007-08
Awarded the IEEMA Certificate of Appreciation – Best New Product Award 2007 for AL-59 alloy conductors
Innovation + Insight = International acceptance The development of the AL-59 alloy power transmission conductors compliant with the Swedish standard SS241814 suited to high-power transfer. 17 new fiber optical products introduced in the last three years as per the evolving applications of the global telecommunication industry.
CONNECTING‌ THROUGH TECHNOLOGY ENHANCEMENTS We invested in a lateral mindset to extend the frontiers of existing global technology benchmarks. We achieved superior standards to exceed the prevailing
We enhanced our technology performance through a
international benchmarks across various nations.
proactive investment in stringent quality assurance
We reinforced our infrastructure to attract product
infrastructure.
guarantees from the most demanding international quality
We established our technological and infrastructural edge
assurance centers; we are among the few in the world to get
through an ISO 9001:2000 quality management system
our power conductors approved for quality from SAG
(both businesses), OHSAS 18001:1999 management system
Laboratory, Germany.
for the fiber optic cables facility and Six-Sigma black belt
We invested in cutting-edge technologies that resulted in a
certifications from the American Society for Quality (ASQ).
global acceptance of our facilities and brand; our fiber optic
The result is that 13 Sterlite Technologies patents were
cable facility received the TL9000 certification, a respected
approved globally and 110 patents have been filed by the
international telecom standard.
Company, enhancing our access to global market.
Connecting ... through technology enhancements | 21
22 |Sterlite Technologies Limited | Annual Report 2007-08
Featured among the EFY TOP 100 Technology Companies in India
Intellectual capital = Great rewards The Company’s intellectual capital comprises 5 PhDs, 153 engineers, 31 MBAs, 19 Chartered Accountants, 125 Post Graduates and 413 others with an average 4.4 person-years of experience
CONNECTING… WITH OUR PEOPLE We have created an environment that facilitates a transformation of the individual mindset - from a follower to a leader, from an implementer to a creator. Some of the Company’s ‘team-oriented’ policies that facilitated
employees working to enhance corporate intellectual
this transformation comprised the following:
property.
Incorporated the Balanced Score Card system for
Introduced suggestion schemes across units to facilitate the
transparent performance management.
implementation of new ideas.
Initiated periodical reward and recognition programs like the
Conducted movie screenings, family day out, sports day,
monthly bonus, Employee/Team of the Month, CEO Kitty
festival celebrations at individual locations. The institution of
Award, Core Values Award, Employee Stock Options and
the Sterlite Cricket Club encouraged inter-unit bonding.
Sterlite Management Incentive Scheme.
These initiatives created a robust team capable of meeting
Introduced ‘ACT-UP’, a special program to identify performers
diverse challenges and an organizational citizenship mindset.
and bring them under a business leadership group;
Our average age of 29 years represents a prudent mix of energy
introduced Platinum Club to fast-track the growth of high
and experience (4.4-person years of organizational experience).
achievers.
We grew our team by 134 to 746 in 2007-08. Average revenue
Provided financial assistance to employees to pursue a post-
per employee grew at a compounded 37% over the four years
graduate diploma in management and strengthen their skills.
leading to 2007-08, while profit per employee strengthened by
Introduced the Sterlite Innovation Award to recognize
67% across the same period.
Connecting ... with our people | 23
24 |Sterlite Technologies Limited | Annual Report 2007-08
Featured as the ‘Top Telecom Cables Company’ of 2007 as per the V&D100 survey for the fourth consecutive year
A multi-bagger An investment of Rs. 100 in the Company’s shares in 2005 had grown to Rs. 294.5 as on March 31, 2008.
CONNECTING… WITH SHAREHOLDERS We have prudently invested our resources with the objective to enhance returns for our shareholders. Our performance reflects this priority: We grew our revenues from Rs. 327 Crores in 2004-05 to
in 2007-08 and a 586 basis point increase over 8.45% in
Rs. 1,686 Crores in 2007-08 at a CAGR of 73% and a
2006-07.
revenue growth of 41% over 2006-07.
We enhanced our diluted earnings per share from Rs. 1.83
We grew our PAT from Rs. 10 Crores in 2004-05 to Rs. 101
per share in 2004-05 to Rs. 15.46 in 2007-08.
Crores in 2007-08 at a CAGR of 116% and a growth of 98% over 2006-07.
Our superior performance reflected in an increase in market capitalization from Rs. 347 Crores as on March 31, 2005 to
We grew our export revenues by 75% to Rs. 518 Crores
Rs. 1,048 Crores as on March 31, 2008. Besides, the
in 2007-08 from Rs. 296 Crores in 2006-07.
Company’s foreign holdings increased significantly from 35.24%
We reinforced our ROCE from 5.07% in 2004-05 to 14.31%
as on March 31, 2005 to 43.63% as on March 31, 2008.
Connecting... with shareholders | 25
26 |Sterlite Technologies Limited | Annual Report 2007-08
IMC Ramkrishna Bajaj National Quality Award – Certification of Merit – for manufacturing.
Socially Relevant Business Practices + Voluntary Employee Involvement = Responsible and Caring Corporate. The Company provides a healthy workplace through controlled and safe plant operations. The Company integrates environment, health and safety considerations into business planning and decision-making.
CONNECTING‌ WITH THE COMMUNITY At Sterlite Technologies, a sensitive concern for the community and the world makes our business truly sustainable. We invested in our community development through the following initiatives: Community welfare Provided a mobile dispensary and ambulance for medical assistance in the remotest villages. Organized health and nutrition camps attended by 300
and the Union Territories of Dadra and Nagar Haveli. Implemented greening initiatives to protect the environment.
Empowerment
villagers. Empowered village women through vocational training that Constructed potable water and sanitation facilities, which will
encouraged the manufacture of cottage industry products.
benefit 300 villagers. Initiated computer literacy programmes in villages.
Environment management Constructed ten check dams in drought-stricken Maharashtra
Thanks to these initiatives, entailing 1 % of its net profit, Sterlite enhanced life quality for 79,750 lives across India.
Connecting ... with the community | 27
At most of our manufacturing units, we are running at nearly 100% capacity and we have capacity expansions underway. We have decided to double our Optical Fiber capacity to 12 Million-fkm, triple our Fiber Optic Cable capacity to 6 Million-fkm and further enhance our power conductors capacity to 160,000 MT.
28 |Sterlite Technologies Limited | Annual Report 2007-08
“Through focused efforts in backward integration, development of applicationoriented solutions, a glocalized market approach & an enhanced global customer footprint, Sterlite has transformed into a truly global, market-centric organization.”
I am glad to present the Annual Report for FY 2007-08. The past year was truly exciting, and served as a springboard for Sterlite’s growth vision. The markets are growing at a consistent pace and both our business segments, Telecom and Power, have shown significant progress over the last year. Our investments, both recent and planned, have encouraged us that this is the right time to prepare for the future. With our enhanced business horizon and unanimous approval from shareholders, the name of the Company was changed to Sterlite Technologies Limited with effect from December 1, 2007. In FY 2007-08, net revenue increased to Rs. 1,686 Crores, compared with Rs. 1,198 Crores in FY 2006-07. Sterlite’s EBITDA was Rs. 211 Crores, compared to an EBITDA of Rs. 119 Crores in the last fiscal. This broadly translates to a CAGR of about 73% in net revenue and 64% in EBITDA from FY 2004-05 through FY 2007-08. Our revenues from export sales increased exponentially by 75% compared with the last fiscal and now account for 31% of our total revenues. During the year, we commenced manufacturing operations at our new Power Transmission Conductors facility at Haridwar. Thus, we now have a cumulative manufacturing capacity of 115,000 MT per annum, placing Sterlite among the Top 3 power conductor manufacturers in the world. We continued to focus on projects related to the debottlenecking of currently installed capacities, improvements in operational efficiencies and productivity. At the same time, we continue to review our capacities vis-à-vis industry demand and our global market access. At most of our manufacturing units, we are running at nearly 100% capacity and we have capacity expansions underway. We have decided to double our Optical Fiber capacity to 12 Million-fkm, triple our Fiber Optic Cable capacity to 6 Millionfkm and further enhance our power conductors capacity to 160,000 MT.
During the year, we were granted four patents in the USA, China and India, adding to our basket of nine patents granted in previous years. To date, our technology development team has filed over 100 patent applications for innovations in our products and processes and we are confident that the next fiscal would see the fruition of several more patent grants. In our quest for business excellence, we also ensure that our products comply with the ‘best-in-industry‘ standards. During the year, our Fiber Optic Cables facility has received the TL9000 certification, which is a specialized international telecom standard and the OHSAS 18001:1999 certification. Sterlite received the 'Deloitte Technology Fast 500 Asia Pacific & Fast 50 India Awards’ for the 3rd consecutive year. Other awards received include the ‘Dun & Bradstreet Corporate Award 2007 (Telecom Equipment)’, the 'IMC Ramkrishna Bajaj National Quality Award – Certificate of Merit 2007', IEEMA Best Product Award’ (for AL-59 Power Conductors) & the 'V&D 100 Top Telecom Cables Company Award 2007' Through focused efforts in backward integration, development of application-oriented solutions, a glocalized market approach & an enhanced global customer footprint, Sterlite has transformed into a truly global, market-centric organization. We are proud of the fact that our telecom and power products are integral to the daily lives of the citizens of the world - in connecting locations, connecting people, connecting countries, connecting events, connecting realities and connecting the present to the future. We believe that Sterlite has made a difference to people’s lives, and we are certain that we can do even more! The Management Team & I are confident that we possess the competitive position to make our success sustainable across the coming years. I take this opportunity to thank you, our shareholders, for your confidence in the Company and we look forward to continuing our service to you. Here's looking forward to exciting and promising times ahead!
In-house Research and Development and advancement of our Intellectual Property portfolio remains a high priority. To ensure technological enhancements of our existing product lines and to develop new products as per the evolving needs of the telecom industry, we have decided to expand the scope and dimensions of our Company.
Dr. Anand Agarwal Chief Executive Officer
CEO’s message | 29
Intellectual Property, Product Development and Process Engineering Report “As an extension of our core value of creativity, we are committed to allow minds to reach beyond conventional and predictable solutions, enhancing the intellectual capital of our Company.” Product obsolescence is inherent in technology-intensive businesses. The Sterlite management has prioritized in-house
The Company instituted the annual Sterlite Innovation Award to recognise employees who enhanced the Company’s intellectual property through the patentability, sustainability and novelty of ideas.
R&D to catalyse product development as per evolving industry requirements, technical enhancements and quality needs. As an extension of our core value of creativity, we are committed to allow minds to extend beyond conventional and predictable solutions, enhancing our intellectual capital. The R&D team comprises PhDs, engineering and science graduates from some of the best Indian and international universities. The Company emphasizes on research for product development and process improvements focusing on building long term technological differentiation and a strong portfolio of intellectual property. Distribution by academic qualification of the research / product development & IP teams
Product Development and Process Engineering Sterlite’s R&D centre in Aurangabad (India), approved by the Department of Scientific & Industrial Research (DSIR*), undertakes the following: Design of new products for evolving telecommunication standards and network applications. Develop necessary tests, procedures and methods for new products as per international certifications/standards.
30 |Sterlite Technologies Limited | Annual Report 2007-08
Introduce reliability tests for new products to meet or exceed
responsibility of searching and reviewing patents, preparing
international standards.
innovation specifications and documenting the application for
Enhance the technical parameters of existing products.
the grant of patents.
Develop new processes and technologies.
Sterlite has been granted 13 patents for optical fiber products
Re-engineer existing equipment in exchange for higher
and process innovations in the US, European Union, China and
productivity.
India; four patents were granted in FY 2007-08.
Design new equipment to manufacture new products.
The following patents were granted in FY 2007-08:
Strengthen waste engineering to produce value-added
Patent US 7209620 for dispersion optimized fiber having a
downstream products.
higher spot area, granted in the US. The patent is valid up to
In FY 2007-08, Sterlite also introduced a new product, AL-59
2024.
alloy power transmission conductor, compliant with the
Patent US7310974B2 USA for the method for producing
SS4240814 Swedish standard. AL-59 alloy conductors are
twisted optical fiber with reduced polarisation mode
used in power transmission and distribution lines for a wide –
dispersion, granted in the US. The patent is valid up to 2025.
low to extra-high - voltage range. The advantages of these
Patent CN 1317212 C for optical fiber with low attenuation
specialized conductors over the conventional AAAC and ACSR
at 1380 nm wavelength region and the method of producing
conductors include higher current carrying and power transfer
the same, granted in China. The patent is valid up to 2024.
capacity with a lower cross-sectional area, lower sag as well as evident commercial benefits (lower power loss and higher power transfer capacity).
Patent IN208147 for dispersion shifted fiber with low dispersion slope, granted in India. The patent is valid up to 2021.
This product won the IEEMA Certificate of Appreciation – Best
Our R&D team filed over 100 applications for patents and
New Product Award at ELECRAMA 2008 held in Mumbai, India.
is presently at an advanced preparation stage of several product and process patent applications due for filing during
Intellectual Property
FY 2008-09.
Patents Regional distribution of patents granted
Trademarks
(Table See below)
Sterlite made 30 applications for corporate and product
We believe that patents represent a visible manifestation of our technological edge. Our in-house patent cell has been given the
trademarks in various regions to protect its brand identity. Of these applications, seven trademarks were registered (brief summary below).
Connecting through technology enhancements | 31
Trademark
Category
China
Europe
India
USA
Middle East
AERIAL – LITE
Product – Fiber Optic Cable
–
–
TM
–
–
ARMOR – LITE
Product – Fiber Optic Cable
–
–
TM
–
–
BEND – LITE
Product – Optical Fiber
TM
TM
TM
TM
–
DOF – LITE
Product – Optical Fiber
TM
–
TM
TM
–
DUCT – LITE
Product – Fiber Optic Cable
–
–
TM
–
–
DURATUBE
Product – Structured Data Cable
–
–
TM
–
TM
Fiber Café
Technical set-up for FTTH/FTTD
–
–
TM
–
–
FiberLounge
Technical set-up for FTTH/FTTD
–
–
TM
–
–
MULTI – LITE
Product – Optical Fiber
–
®
TM
–
–
OH – LITE
Product – Optical Fiber
TM
®
®
TM
–
PMD – LITE
Product – Optical Fiber
TM
®
®
®
–
RIBBON – LITE
Product – Fiber Optic Cable
–
–
TM
–
–
SAM100
Product – ADSL2+ MODEM
–
–
TM
–
–
SAM400
Product – ADSL2+ MODEM
–
–
TM
–
–
Sterlite (Wordm)
Corporate Brand Identity
–
–
®
TM
–
Sterlite (Logo)
Corporate Brand Identity
–
–
TM
–
–
® - Registered
TM – trademark pending / advertised
Wordm – Wordmark
The Sterlite Innovation Award We aim to encourage creativity through recognition and reward. The Company instituted the annual Sterlite Innovation Award to recognise employees who enhanced the Company’s intellectual property through the patentability, sustainability and novelty of ideas.
Technical Papers and Forums During 2007-08, the Company contributed to the global knowledge pool through the publishing of white papers and participation in technical conferences and symposia across the globe. Four technical white papers chosen for presentation and publishing at the IWCS 2007 USA and Cablewire 2008, India. Figured as speaker at the CRU Wire and Cable Conference 2007 and KMI Fiberoptics Conference 2007, France.
32 |Sterlite Technologies Limited | Annual Report 2007-08
Figured as speaker at the Ariba User Group Conferences
speed fiber connectivity can be delivered to all European
2007, USA and Thailand.
citizens within the next years. Its website address is
Figured as technical discussion panelist at the International
www.ftthcouncil.eu.
Broadband Summit 2007, India.
International Cablemakers Federation (ICF): ICF was
Was nominated to the Technical Symposium Committee for
founded in 1990 with a permanent secretariat in Vienna.
IWCS 2007, USA.
Today, ICF comprises more than 100 members from more than 30 countries, representing approximately 70% of the
Industry/Committee Memberships
global manufacturing capacity of the wire and cable industry.
As an industry leader, Sterlite holds key committee
ICF’s key objectives include the promotion of the use of
memberships in various industry associations, which
cables, saving of energy, increased safety and the
consolidate industry knowledge and drive technological
improvement of recovery and re-use of cable materials. Its
excellence.
website address is www.icf.at.
Confederation of Indian Industry (CII): CII creates and
Quest Forum: Quest Forum is a unique collaboration
sustains an environment conducive to industrial growth,
of service providers and suppliers dedicated to telecom
partnering industry and government alike through advisory
supply chain quality and performance. It aims to unify the
and consultative processes. CII is a non-government, not-for-
global telecom community through the implementation of TL
profit, industry-led and industry-managed organization
9000 (telecom-specific quality standard), collaboration in
playing a proactive role in India's development. Founded over
work groups and regional hubs, emphasis on learning and
112 years ago, it is India's premier business association with
sharing industry-best practices and the creation and delivery
a direct membership of over 7,000 organizations from the
of reports and benchmarks. Its website address is
private and public sectors including SMEs and MNCs; it
www.questforum.org.
enjoys an indirect membership of over 90,000 companies from around 362 national and regional sectoral associations.
* Note: The Department of Scientific and Industrial Research (DSIR) is a part of the Ministry of Science and Technology, which was announced
Its website address is www.ciionline.org.
through a presidential notification dated January 4, 1985. The DSIR has
International Telecommunications Union (ITU): ITU is the leading UN agency for information and communication technologies. It is the global focal point for governments and the private sector; its role in helping the world communicate
a mandate to carry out the activities relating to indigenous technology promotion, development, utilization and transfer. The primary endeavour of the department is to promote R&D by the industries, support a larger cross-section of small and medium
extends across the radio communication, standardization
industrial units to develop state-of-the-art globally competitive
and development sectors. ITU is based in Geneva,
technologies
Switzerland, and its membership includes 191 member
commercialization
of
high of
commercial lab-scale
potential,
R&D,
catalyse
enhance
the
faster share
states and more than 700 sector members and associates.
of technology-intensive exports in overall exports, strengthen industrial
Its website address is www.itu.int.
consultancy and technology management capabilities and to establish
FTTH Council Europe: The FTTH Council Europe believes that
user-friendly information network to facilitate scientific and industrial research in the country.
the development and deployment of fiber-based broadband access networks will enhance the quality of life for European citizens
and
provide
European
countries
with
an
infrastructure to enhance their global effectiveness. The council’s charter is to educate European governments,
It also links scientific laboratories and industrial establishments for the transfer of technologies through the National Research Development Corporation (NRDC) and facilitates investment in R&D through the Central Electronics Limited (CEL). Source: www.dsir.nic.in
policymakers and political leaders on why and how high-
Connecting through technology enhancements | 33
Technical Article
(As contributed to Wire & Cable Technology, USA)
New Range of Alloy – Power Transmission Conductors
By G.L. Prasad GENERAL MANAGER - OPERATIONS (Power Transmission Business) Sterlite Technologies Limited 4th Floor, Godrej Millennium 9, Koregaon road, Pune- 411001 Maharashtra, India www.sterlitetechnologies.com
The product is capable of 56% higher power rating than traditional conductors
For several years, distribution and transmission lines have been designed using aluminium conductors steel reinforced (ACSR) or in some countries all aluminium alloy conductors (AAAC). Both types normally have a conductivity calculated on the total area of 53% to 54% copper. Since the mid-1970s, the cost of producing electric energy has grown rapidly, leading to an increase in the total cost of losses. An attempt to find new conductor material producing fewer losses in the network was started in Sweden at the beginning of the 1970s and led in 1979 to the release of a new conductor standard called AL-59, where 5 stands for its conductivity
New Al - 59 Alloy
(IACS).
Conductors
New Alloy Power Transmission Conductors AL-59 Alloy Conductors, which were developed by Sterlite Technologies Ltd., are manufactured from Al-Mg-Si (AluminiumMagnesium-Silica) rods. The conductor is comprised of an inner core and concentrically arranged strands forming the inner and Power Transmission Conductors
The Company has recently executed supplies valued at INR280 million (US$7million) of these specialized conductors to Sweden.
outer layers of the conductor.
ACSR Moose
AL-59 Alloy
Power Transfer Capacity
901 MW
1405 MW
Current Carrying Capacity
838 Amperes
1307 Amperes
7.47 m
6.89 m
8.2
8.9
Sag for 350 m Spans Strength-to-Weight Ratio
34 |Sterlite Technologies Limited | Annual Report 2007-08
Additionally, AL-59 Alloy Conductors have a 9% better strength-
optical fibers, and telecommunication cables launched its
to-weight ratio and 8% lower sag as compared with ACSR
range of AL-59 Alloy Power Transmission conductors compliant
conductors. Both of these characteristics provide for effective
with the Swedish standard SS4240814, suited for high power
optimization of tower designs and the future-proofing of the
transfer. The Company has recently executed supplies valued at
electrical grid.
Rs. 28 Crores (US$7million) of these specialized conductors to Sweden.
Significance of these new alloy conductors to the power industry “Power for all by the year 2012” is the vision of the Ministry of Power, Government of India. The Government of India’s Transmission Perspective Plan focuses on the creation of a National Grid in a phased manner by adding over 60,000 Km of transmission network by 2012.
Sterlite Technologies is a significant contributor to the global power sector with a complete range of power transmission conductors at extra high voltages (400-800 KV), high voltages (66-220 KV) and power distribution conductors (11-33 KV). Sterlite currently has about 3% global market share for power transmission conductors, and these products have been sold in 38 countries across Africa, the Middle-East, Asia and
Such an integrated grid is expected to evacuate additional
Europe.
70 GW by the year 2012 and carry 60% of the power generated in the country. The existing inter-regional power transfer capacity is 9000 MW, which is to be further enhanced to 37,000 MW by 2012 through creation of “Transmission Super
Sterlite Technologies currently supplies about 27% of India’s total demand for power transmission and distribution conductors.
Highways.” On a global level, ABS Research, of the UK reports that the global market for power transmission conductors was valued at about US$12.3 billion in 2006 and has a CAGR of 7% from 2004 through 2006. ABS Research also anticipates a stable demand growth in the global market from 2007 through 2010 at a CAGR of about 7%. In view of the development of new power transmission and distribution grids by global power incumbents, AL-59 Alloy Conductors would have a special significance while designing transmission line networks, as the properties of these conductors enable superior power evacuation while optimizing the cost of the entire grid.
The Manufacturer’s Contribution to the Global Power Industry In September 2007, Sterlite Optical Technologies Ltd., India’s leading global provider of power transmission conductors,
Connecting through technology enhancements | 35
Management Discussion and Analysis
The ‘always-on’ economy For most people, mobile numbers and e-mail IDs have become an extension of their personality. A day seems incomplete without sending an e-mail or receiving an SMS. Photo-upload features on Yahoo have given way to video-sharing applications on Google. MP3 downloads have been replaced by video-streaming and iTunes. 2-D social networks like Orkut and Linked-in are being substituted by 3-D virtual worlds like Second-Life and There.
Telecom and Power infrastructures are integral fundamentals that connect countries, locations, events, people, realities and the present to the future.
Cross
border
interaction
frequency
has
increased
phenomenally. Communication reach has expanded beyond national boundaries. Smaller regional players have gained access to the world’s largest markets. Families use applications like Skype and Sopcast to ‘converge’ and celebrate festivals across the world. An MIT professor is tutoring millions of physics students through Youtube. Environment groups are reaching out with new concepts like Earth Hour through search engines like Google to a global audience. There are many such stories of small innovations, resulting in big benefits in 2007-08. Video-conferencing with suppliers in Japan, mobile calls to customers in India, webcasting to investors in Europe and
36 |Sterlite Technologies Limited | Annual Report 2007-08
social-networking with schoolmates in the US. These are now a
grown by 25% from 281 million in 2006 to 350 million in 2007.
norm rather than an exception.
The technology-wise break-up for 2007 data shows that DSL
Internet-based applications are bringing about major changes in business, transportation, weather forecast, environment monitoring, health, education and governance. Tickets to airlines and movies can be bought online. Tour itineraries
accounts for 65% of broadband subscribers, while Fiber-To-TheX (FTTX) subscribers have grown to nearly 11%, driven by investments in fiber networks in Asia and North America (Source: Point-topic)
comprising the finer details of airport pick-up and hotel room
User volumes are also increasing in line with widening
reservations are being done through a single travel portal.
applications. Trends indicate a move towards high-bandwidth
Retail investors are conducting stock transactions in higher
applications and content, which has increased the bandwidth
volumes through personalized demat accounts. Payments for
per user (shown below).
electricity, phone bills and credit cards are being made through the internet. Gifts, books and flowers can be purchased from online stores like ebay and Amazon. In short, it is now possible for any physical transaction to be executed over the phone or computer from the comfort of one’s location and convenience.
Broadening of the internet band The internet now touches over 1.4 billion users directly, a penetration of 20% (Source: International Telecommunication Union). Despite Asia accounting for 40% of the global population, it suffers from a low internet penetration of only 14%. With improved standards of living and the centre of activity shifting eastwards, economic development will now be more dependent on the growth of infrastructure. Geography-wise Breakup A broadband connection is an always-on, high-speed internet connection. The number of global broadband subscribers has
Geography-wise Breakup
The result is a substantial increase in the number of minutes spent online translating into enhanced e-commerce revenues. Online retail sales in the US for 2007 were close to US$175 billion, a growth of 20% over 2006 (Source: Forrester Research). This is expected to grow as consumers will buy for two simple reasons: transparency of prices from different suppliers and convenience of shopping from one location.
India on-line and India on-call The number of Indian internet subscribers grew by 21% to 10.4 million in December 2007 (Source: TRAI), while the number of internet users rose to 46 million in 2007-08 (Source: IAMAI). Despite this growth, the country’s penetration was a mere 4%, representing an attractive scope for sustained expansion even after the incidence of broadband subscribers doubling periodically since January 2007. The optimism is derived from the fact that India is now rapidly
Penetration
(Source: ITU)
Connecting with our customers | 37
Broadband subscribers (in million)
Minimum requirement of bandwith in kbps
CAGR = 46%
(Source: ITU, TRAI, Point-topic)
(Source: ITU, TRAI, Point-topic)
embracing the internet revolution. India’s B2C commerce grew
India’s government policy is focused on network expansion,
from US$1.6 billion to well past US$2.2 billion. The online travel
rural telephony, broadband coverage, R&D and the provision of
industry accounted for over three quarters of the overall
an enabling environment, leading to a competitive sectoral
business transacted compared to 12% and 9% for online
growth. The result is an impressive forward momentum,
shopping and classified advertisements. This momentum is
resulting in growing investments, capacity expansion,
expected to accelerate as an increasing number of
technological innovations and improved telecom service
establishments go online and payment systems get more
quality.
secure. Education, e-governance, health and e-choupal-like concepts will drive widespread internet usage in India’s semiurban and rural areas.
The year 2007-08 witnessed a number of milestones: the world's lowest call rates (equivalent to 2-3 US cents a minute), the fastest subscriber growth (over 15 million in four months),
Internet growth, particularly broadband’s share in it, mirrors the
the fastest sale of a million mobile phones (a week), the world's
contribution of mobile telephony in India. India is now the
cheapest mobile handset (less than Rs. 800) and the world's
world’s second largest telecom market with a tele-density of
most affordable colour phone (less than Rs. 1,200), according
around 25%. The sector grew significantly during the year and
to the IBEF.
catalyzed the country’s resurgent economy, supported by proactive government policies and private sector investments.
Private telcos emerged as the primary driver of this industry transformation. While government telcos added 55 million
Internet and Broadband
Telephony
(Source: TRAI)
(Source: TRAI)
38 |Sterlite Technologies Limited | Annual Report 2007-08
Wireless- Value Added Services Forecast: USD 2.75 billion by 201C
(Source: Stanford University, BDA Connect)
subscribers in 1998-2007, private players added nearly 150
India's surging domestic market is also providing excellent
million subscribers. With more wireless licenses being issued
investment opportunities in other segments of the telecom
and additional spectrum being allocated to private players, the
equipment industry. TRAI estimates that the country will need
speed of growth is likely to sustain, if not bettered.
about 350,000 telecom towers by 2010 as against 125,000 in
Another first for the Indian market was the concept of being paid for incoming calls. The mobile value-added services (VAS) market grew significantly. According to a study by Stanford University and consulting firm BDA, the Indian mobile VAS market was over US$925 million in 2007 with a projected CAGR of 44% till 2010. Gartner research estimates data services to grow from 12% of total revenues in 2007 to 22% by 2010. High-quality content and heavy-data applications are increasing the bandwidth requirement per user.
2007. Communication cable companies, witnessing a period of intense activity, are cautiously optimistic.
Power, the other new fundamental need With growing urbanization and disposable incomes, India is passing through a period of unprecedented consumption. The country is the second fastest growing major economy in the world with a GDP growth of 9% in 2007-08. The result is that Indians are now talking on state-of-the-art phones, working on the sleekest laptops and watching the latest movies on bigger flat screens. Increasing per-day sales of washing machines,
Telcos, private and government, are recognizing this shift
microwaves, ACs, DVD players, among others have encouraged
towards high-bandwidth user requirements and making huge
multi-national brands to commission production facilities in
investments in network infrastructure. With aggressive
India. The Indian government is strengthening its infrastructure
government targets for 2010, innovative plans are being
to sustain investor confidence. Growing investments in SEZs,
worked out to increase mobile telephony and broadband
ports, airports and residential townships are in turn catalysing
internet penetration in India. Number portability and MVNOs will
the demand for quality power.
keep competition healthy and enhance penetration in underserved areas.
The Indian government is proposing various measures to realize its ambitious dream of ‘Power for All’ by 2012. The base
During the financial year 2007-08, investments close to US$15
demand deficits for the last few years have highlighted the
billion were made in mobile networks and backbone
urgency for capacity addition. Until 2003, the power sector was
infrastructure (Source: industry estimates). FDI inflows during
driven almost entirely through central and state undertakings;
April-December 2007 were approximately US$1 billion in
the tariff-setting function was vested entirely with the
telecom as against US$ 478 million for the whole of 2006-07,
government and not on cost-of-service or economic utility.
partly incentivized by higher profit margins. A report by Merrill
State-level transmission and distribution networks used
Lynch puts Indian telecom industry's EBITDA ahead of
medium and low voltage lines, resulting in high transmission
developed countries like the US, UK, Japan and France.
losses of around 34%, against an average of 10-13% in mature
Connecting with our customers | 39
economies. Typically, annual power shortfall was estimated
About 50% of the planned US$ 200 billion investment in the
at 8-10%.
Eleventh Plan will be in the T&D sector. The government
Following the introduction of the Electricity Act 2003, power sector regulations have been relaxed, returns for companies
projects the share of the transmission segment to be close to US$35 billion. Power companies are recognizing the
active in the sector have improved and the participation of
opportunities available over the next few years and charting
private players has increased. The country is transitioning from
growth plans accordingly. Equipment and integration
a cost-plus tariff mechanism to a market-derived structure. The
companies, including wire and cable players, are also readying
result is that operational efficiency will be rewarded, leading to
themselves for the demand surge.
the survival only of quality players over the long-term. Besides,
Wiring up for growth
the sector’s bullishness has been reinforced by measures like SEB unbundling, distribution franchise model, Accelerated Power Development Reform Programme, Ultra Mega Power Projects, open access and power trading, among others. In view of these developments, the Indian government has envisaged power sector investments of approximately US$ 200 billion over the Eleventh Five-Year Plan (2007-12). For the first time, India seeks a significant contribution from the state and private sectors in addition to usual investments by the government.
The global market for wires and cables was pegged at US$150 billion in 2007, a 7% increase over the previous year. Wires and cables now represent a mature business, having withstood several shocks over the last decade. US and European deregulation and the privatization of power utilities affected the energy cable sector adversely in the midNineties as the restructured utilities pruned fresh capex and focused singularly on cash generation, stagnating the cable market.
The immediate target for additional generation capacity is 78
The internet fiasco in 2001-02 was another setback – this time
GW by 2012. According to the Integrated Energy Policy, the
to the optical fiber and communication cable industry. Huge
installed capacity of power generation needs to rise from 130
capacities were developed by manufacturers, while networks
GW in FY2006-07 to 800 GW in FY2031-32 to achieve
were laid by telcos to accommodate demand peaks in internet
economic growth at the projected rates.
services. The burst caused the telecom cable market to
In this rapidly expanding environment, the country’s T&D network cannot lag. Following years of neglect, the country’s
collapse almost overnight due to a lack of demand and a transmission over-capacity.
transmission network has accelerated in sync with generation
The Indian copper cable market (traditionally used by BSNL and
capacity growth. There is an emphasis on the National Grid with
MTNL) experienced a downturn around the same time. A
8,000 MW of inter-regional capacity in 2005 increased to
number of power cable companies entered the jelly filled
16,200 MW by the end-2007 and a projected 37,000 MW by
telecom cables (JFTC) business encouraged by the anticipated
2012 and 52,000 MW by 2014.
growth that would arise out of the country’s enunciated telecom
Region-wise Shift in Demand for Optical Fiber
(Source: CRU)
40 |Sterlite Technologies Limited | Annual Report 2007-08
Segmental Distribution of Optical Fiber in India
Demand (million kms)
Demand for optical fiber
(Source: CRU)
(Source: Industry sources, Company)
policies. A consequent oversupply dented realizations and as
driving optical fiber connectivity between tower-to-tower, tower-
BSNL and MTNL focused more on wireless from 2001-02
to-exchange and intercity trunking.
onwards, JFTC volumes, realizations and capacity utilisation declined further. The market has remained flat since.
India will account for a sizeable share of this market. Bare optical fiber volumes increased from 3.1 mn km in 2006-07
The optical fiber industry, on the other hand, is growing
to over 5.5 million km against industry expectations of a mere
annually, the volume increases reflecting application-based
15% growth. The growth has extended from major telcos to
demand arising out of different regions.
power, gas and railway utilities. These are using their optical
Optical fiber backbone networks are being built extensively in the emerging economies of Asia (excluding Japan and South
fiber-based signalling infrastructure to generate additional revenues through the leasing of bandwidth to other operators
Korea), North and Central Africa, Brazil and Argentina. Telcos in
The scenario for power conductors in the country was slightly
France and The Netherlands are the latest developers for
different. Traditionally, Power Grid Corporation of India (PGCIL)
fiber-to-the-home networks following Verizon (US) and NTT
has been the largest buyer of aluminium conductors for T&D
DoCoMo (Japan). Fiber-to-the-Curb/Node is the preferred
projects. With 40% of the total market deregulated in 2006-07,
access network topography for telcos like AT&T and Quest in
PGCIL was expected to continue to accelerate government
the US and countries like Germany and West Russia. Wireless
projects, but funding delays resulted in a larger role for the
subscribers in India and China have also increased significantly,
private sector.
India power transmission conductors market
(Source: Industry sources, Company)
Connecting with our customers | 41
Integrators, EPC companies and IPPs helped grow the market
India is divided into five power transmission zones – North,
from 0.32 mn MT in 2006-07 to 0.35 mn MT in 2007-08
West, South, East and the Northeast – from the national grid.
resulting in Indian market growth of around 10% in 2007-08,
While generation capacities are concentrated in the East and
higher than the global growth rate of approximately 3%.
Northeast enjoying abundant hydro-power and coal supply,
With PGCIL already announcing orders and tenders in the first month of FY2008-09 and private investments also expected to rise, conductor manufacturers have commenced capacity expansions. India’s top five players contribute 60% of the country’s total capacity, the remaining 40% being supplied by smaller and region-specific manufacturers.
maximum power demand is derived from the economically developed North and West zones. Thus, power deficits are evident in the North and West, while relative surpluses prevail in the East and Northeast. To balance the scenario, new power generation capacities need to be commissioned in the regions with shortfall or power transmitted from surplus to deficit zones. The latter option is likely to be preferred as it is more
Also, transmission companies now prefer new and technically
economical to transmit power than transport fuel for power
advanced products, auguring well for the conductor industry
generation, a scenario facilitated by the National Electricity
where superior quality products are yet to enjoy the premium
Policy, 2005.
they deserve. Companies are now opting for globally benchmarked practices as well as better conductivity, power rating and other value-additive products. Hence, manufacturers with technology differentiators in a commoditized business are
This scenario indicates sustained demand for power conductors, the Ministry of Power indicating an investment of over Rs. 28 billion over the next five years for conductors and cables.
likely to emerge as partners for transmission companies. This
The Indian economy grew at 9% during the year under review,
shift in technology towards higher voltages and advanced
clocking a three-year CAGR of 9.3%. Power will play a major role
products will help reduce the demand-supply mismatch and
in sustaining this acceleration. With conductors forming the
lower T&D losses, while power is transferred from a generating
backbone of this growth, India is ready to ‘transmit’ itself into a
location to a load-centre.
powerful future.
42 |Sterlite Technologies Limited | Annual Report 2007-08
Drivers – Key Growth Initiatives in Electricity Act 2003 Generation de- licensing except for large hydro projects. Three Ultra Mega Power Projects (> 4000 MW) Awarded; six more in the pipeline.
Generation
For Rural Power Development: generation and distribution is de-licensed in rural areas.
Development of National Grid for interstate transmission and optimum utilisation between surplus/deficit regions. Open access on transmission and distribution network.
Transmission
Encouragement to FDI in transmission and distribution networks. Functional unbundling of the integrated state electricity board. Setting up of State Electricity Regulatory Commission made mandatory by states. Adequate margins and redundancy levels to be built in according to global standards and practices. Transmission tariff and pricing to move to a format based on Distribution
distance, direction and quantum of flow.
Power trading and market development are recognized. Accelerated Power Development Reform Programme (APDRP) Retail competition mandates that consumers above 1 MW can choose their suppliers. End users
Strong anti-theft and malpractice provisions; 100% metering.
(Source: CEA, Ministry of Power)
Connecting with our customers | 43
Financial Analysis
The Company delivered all-round financial growth in 2007-08, reflected in the comparative table below. 2006-07
2007-08
Growth
1,198
1,686
41%
119
211
77%
51
101
98%
EBITDA margin (%)
9.93
12.52
258 basis points
Net Profit margin (%)
4.24
5.98
173 basis points
EPS (Rs.)
8.59
16.08
87%
RONW (%)
12.2
18.7
621 basis points
ROCE (%)
8.5
14.3
571 basis points
Net Revenue (Rs. Crores) EBITDA (Rs. Crores) Net Profit (Rs. Crores)
Revenue
Profitability
It is a pleasure to report that our net revenue grew 41% from
The Company’s business segments posted a healthy growth
Rs. 1,198 Crores in 2006-07 to Rs. 1,686 Crores for the year
in profitability during the year under review. New orders
ended March 31, 2008.
generated healthy margins largely due to a judicious selection
The power transmission business with net revenue of
of project orders, adherence to a risk management process,
Rs. 1,050 Crores was the major contributor to the Company’s
improved product positioning, maintenance of high quality
net revenue of Rs. 1,686 Crores.
standards and delivery commitments. Correspondingly, net
The telecom business contributed Rs. 635 Crores to the Company’s net revenues. 44 |Sterlite Technologies Limited | Annual Report 2007-08
operating profit after tax strengthened from Rs. 51 Crores to Rs. 101 Crores as did net profit margin by 173 basis points.
EBITDA
(Rs. in Crores)
PAT
(Rs. in Crores)
Capital employed and return
Debt
The capital employed by the Company in business increased
The debt of the Company increased from Rs. 587 Crores as on
from Rs. 1,001 Crores in 2006-07 to Rs. 1,197 Crores in 2007-
March 31, 2007 to Rs. 663 Crores as on March 31, 2008 on
08. However, with increased utilization of capacities across all
account of increased capacity and revenues. The increase in
businesses the return on capital employed increased from 8.5%
shareholders’ funds during the year under review led to a
in 2006-07 to 14.3% in 2007-08. The turnover to capital
decline in the debt-equity ratio. The Company has funded its
employed ratio rose from 1.30 in 2006-07 to 1.47 in 2007-08.
capital expansion in optical fiber and power transmission
Total net worth strengthened 31% from Rs. 417 Crores as on March 31, 2007 to Rs. 540 Crores as on March 31, 2008; equity share capital was Rs. 32.23 Crores and the rest
business only by internal accruals and consequently, there is no increase in term loans of the Company.
A comparative study of debt-equity ratio
comprised reserves and surpluses. During the year under review, the remaining share warrants of Rs. 1.4 Crores outstanding in 2006-07 were converted to
Debt-equity ratio
2006-07
2007-08
1.40
1.22
equity share capital and also added Rs. 27 Crores to the share premium account. During the year under review, the
Secured debt accounted for 95% of the total debt portfolio, the
Company issued 73,680 shares to employees under the
balance being unsecured.
ESOP scheme.
The absolute interest cost for the Company increased from
Sustained efforts in integration projects, efficiency optimization and focus on technical products and solutions helped in increasing returns. ROCE
Rs. 35 Crores in 2006-07 to Rs. 44 Crores in 2007-08. However, improved profitability and increased EBITDA strengthened interest cover from 3.45 in 2006-07 to 4.85 in
(%)
2007-08.
Gross block and capital work-in-progress The strength of a manufacturing company lies in the size and quality of its gross block. The Company’s gross block grew from Rs. 793 Crores as on March 31, 2007 to Rs. 919 Crores as on March 31, 2008 following the commencement of operations at the Haridwar facility. Efficient asset utilization was reflected in an increase in the asset turnover ratio from 1.06 in 2006-07 to 1.14 in 2007-08. Besides, the capital work-in-progress stood at Rs. 36 Crores at Connecting with our customers | 45
the end of 2007-08, due to the ongoing expansion project of
amalgamation of the erstwhile Sterlite Telelink Ltd.,
the optical fiber plant in Aurangabad and power transmission
depreciation was provided on the written-down value method.
line business in Haridwar.
An increase in gross block enhanced the depreciation provision
The Company consistently followed the straight line method of asset depreciation. For all assets acquired following the
for the year under review from Rs. 32 Crores in 2006-07 to Rs. 37 Crores in 2007-08; this also provided an adequate tax shield for the Company in 2007-08.
Working capital
(Rs. Crores) March 2008
March 2007
Inventories
219.38
119.99
Sundry debtors
519.10
433.21
89.07
78.93
Loans and advances
168.91
104.38
(A)Total current assets
996.47
736.51
Current liabilities
303.53
199.76
18.22
16.75
(B)Total current liabilities
321.75
216.51
Working capital (A)-(B)
674.72
520.00
Cash and bank balances
Provisions
The working capital requirement increased consequent to the increased scale of operation. The working capital cycle stood at 121 days in 2007-08 against 124 days in 2006-07, while debtors (days) declined to 107 days over 122 days in 2006-07.
Cash flow statement
(Rs. Crores) March 2008
March 2007
13.05
46.31
65.94
130.89
(b) Investing activities
(128.41)
(269.54)
(c) Financing activities
51.82
92.79
2.42
13.05
Opening cash and cash equivalents Cash flow from: (a) Operating activities
Closing cash and cash equivalents
The cash inflow was used by the Company for the repayment of term loans from banks and as a major part of financing working capital.
Dividend The Board of Directors recommended an equity dividend of 20% i.e. Re 1 per share of Rs. 5 each. This will lead to an outflow of Rs. 7.55 Crores (including corporate dividend tax) during the year. The dividend per share payout grew by more than 33% over 2006-07.
46 |Sterlite Technologies Limited | Annual Report 2007-08
Internal Control Systems & their Adequacy
Internal control systems continue to be a prime focus area at
all data for the software modules, which currently includes
Sterlite. The Company also lays a very high importance on
Operations, Financials, Supply Chain Management, Projects &
availability of real time data, enabled through Information
Data Warehousing.
Technology (IT), on which it bases crucial operational & managerial decisions.
The ERP system is cross-functional and Company wide. All functional departments that are involved in operations or
In a unique combination of the focus areas of Internal Control
production are integrated in one system. The ERP software,
Systems & Information Technology, Sterlite implemented an
among other things, combined the data of formerly separate
advanced version of enterprise resource planning (ERP) in FY07
applications. This simplified keeping data in synchronization
and the advantages of the same were evident during FY08.
across the Company.
Sterlite’s ERP system attempts to integrate several data
Sterlite also has well defined policies and schedules of
sources and processes into a unified system. The two key
authority that are communicated through the organization. In
components of this system are a common database and a
order to ensure the adherence to these policies, periodic audits
modular software design. The common database allows every
of all functional areas are undertaken by independent audit
department to store and retrieve information in real-time. Using
firms of international repute.
a common database allows information to be more reliable, accessible, and easily shared. Sterlite’s ERP system delivers a single database that contains
The reports on audit findings and action taken are tabled at each Audit Committee meeting. The actions are taken on the basis of recommendations of the Audit Committee.
Connecting with our customers | 47
Risk Management at Sterlite
“Sterlite’s approach to Risk Management is deeply embedded in its corporate philosophy, reconciling a rich insight into business fundamentals with industry preparedness.” Risk is a tangible business reality with far-reaching commercial and material implications. At Sterlite Technologies, our overarching objective is to reinforce a culture of responsible risk management to safeguard the interests of shareholders, customers and suppliers. Due to the nature of operations and role in the industry, the Company’s risk-management framework encompasses effective processes, catalyzed by qualified professionals. As a result, business decisions balance risk and reward leading to sustainable growth.
1
Industry risk
Risk Management The Company derisked its presence in Telecom by branching into the Power Transmission Conductors segment. This allowed the Company to be present in two high-priority and highgrowth sectors – Power and Telecom; sectors which are attracting huge Indian and global investments, driving their long-term growth.
Slowdown in end-user
The Company also expanded into various geographies to manage risk arising out of dependence
sectors could impact the
on any one or two markets like India and China. Exports have grown consistently from 10% to
Company’s performance.
31% in the last four years with increasing contributions from Africa, SE Asia, other SAARC countries and Europe.
2
Product obsolescence risk
Risk Management Regular innovation and introduction of technologically improved products have allowed the Company to limit the risk arising out of product variants. Optical Fiber was introduced in India and other neighbouring markets when traditional copper cables were still pre-dominantly used. Recent launches of new products include power conductors, optical fiber and cables exceeding the most stringent specification standards.
Improved product variants
The Company enjoys good proximity with customers and research institutions allowing for a
could put at risk the
better understanding of the latest end-user requirements and trends. This knowledge is
Company’s prospects.
leveraged by the R&D team to design products and solutions, which are relatively future-proof and can keep the Company ahead of the Competition.
48 |Sterlite Technologies Limited | Annual Report 2007-08
3
Growing competition risk
Increased opportunities could grow competition.
4
Commodity prices related risk Increased prices or availability issues may influence profits.
5
Financial risk
Risk Management The Company received a large number of approvals, certifications and accredition from leading international agencies and customers after exceeding specifications and testing criteria. This allows the Company to be a preferred partner with customers. Compliance of such stringent standards act as entry barriers for new entrants. The Company’s integrated facilities and economies of scale helped widen margins and competitive strength. Limited access to technical know-how and gestation cycles for establishing green-field profitable facilities will also limit risk for the Company from new competition.
Risk Management The Company operates under business segments where cost changes of key raw material like Aluminium and Copper are fully passed through to the customer, thus limiting risks related to increased raw material prices. The Company is considered among the best vertically integrated facilities for all its product lines. Regular long-shot and sure-shot projects ensure that cost dynamics are kept within permissible limits. Sourcing and logistics arrangements with global leaders ascertain that availability of key raw material is a limited risk.
Risk Management The Company requires funds for its expansion plans. The primary sources of funding are cash accruals of the Company. In addition to the existing cash flows from operations, there are sufficient funding facilities at competitive rates, which provide liquidity to cater to short term and long term needs.
Increased cost of funds
The Company uses derivative and non-derivative financial instruments reasonably, to manage
could impact value-
its risks resulting from adverse fluctuations in commodity prices, interest rates and foreign
accretive projects.
currency exchange rates. These may include commodity pricing contracts and/or foreign currency exchange contracts. Derivative financial instruments are not used for trading or speculative purposes. Global or domestic increase in interest costs may affect the Company – this is managed through optimum use of various borrowing options available.
Connecting with our customers | 49
Human Resource Report
Our success has been our ability to recruit and retain highly qualified and motivated people in all areas of the Company.
Our success has been our ability to recruit and retain highly
We use structured, transparent and people-friendly policies that allow our employees a great deal of freedom to apply their talent, skills, knowledge and business excellence. We emphasize smart working, collaboration and team work.
qualified and motivated people. Our entire talent pool of about 750 employees possess college degrees; more than 40% hold advanced degrees like PhD, MBA, chartered accountancy and engineering. Our goal is to recruit and retain people who are the best at what they do, people who are motivated to achieve results, have high standards of quality and integrity, possess a flexible, entrepreneurial spirit and are committed to develop them to their full potential. Function-wise Distribution
Academic qualifications of Human Resource
50 |Sterlite Technologies Limited | Annual Report 2007-08
We recruit the best management talent from leading business
emphasize smart working, collaboration and team work.
schools and engineering talent from IITs and NITs. We provide a
Teamwork and collaboration: We recognise the significance
stimulating and challenging, yet supportive, environment and
and challenge of team work in achieving business goals. We
encourage
consciously encourage individual and teams striving for
self-initiatives,
peer
interaction
and
open
communication. We encourage cultural diversity in all
organizational effectiveness.
functional areas.
Delegation and accountability: To keep pace with growing
Our HR philosophy We keep our word and honour our commitments to earn the confidence of those whose lives we touch and those with whom we associate.
business complexity, we delegate appropriately and expect that those who know the work best will make sound, timely decisions, explain the decision rationale to those involved and affected, and be accountable for the outcome. Job rotation: We encourage job rotation to enhance
We maintain open and direct communication with our
employee versatility with the objective to build competencies
customers, vendors, employees, shareholders and all other
for self-development and creating multi-faceted managerial
stakeholders. We encourage new ideas and value them on
talent.
the basis of merit, not position or level. We encourage the
Internet culture: We encourage our workforce to exploit the
culture of receiving and giving feedbacks to strengthen
power of the internet beyond mere communication. We
quality of relationships and provide timely, relevant
emphasize the use of the internet as a source of knowledge
information to make informed decisions.
as well as personal and professional excellence.
We strive to build an environment where performance,
Customer focus: We are committed to develop solutions that
excitement and challenges are integral to daily activities.
meet customer needs. Our goal is to be a preferred provider based on our performance, ethics and integrity as well as our
HR guiding principles
unique ability to provide innovative solutions. We value, seek
We use structured, transparent and people-friendly policies that
and respond to our customers' input and feedback.
allow our employees a great deal of freedom to apply their
Internally, we work together to achieve operational
talent, skills, knowledge and business excellence. We
excellence in all businesses.
Connecting with our people | 51
Performance measurement system (PMS) We
have
implemented
a
scientific
and
transparent
Learning, development and career enhancement
performance measurement system administered through the
Act-up: The Accelerated Competency Tracking and Upgradation
Balanced Scorecard (BSC) methodology. The BSC is a
Programme (Act-up) is a process for all permanent employees
performance planning and measurement framework, best
where high performers are identified, nurtured and brought
characterized as a strategic management system. Balanced
under the Business Leadership Group (BLG). A special career
Scorecard comprises simple tables broken into sections
progression roadmap is charted for members in addition to
(financial, customer, internal business processes, learning and
other recognition.
growth).
Platinum Club: An exclusive club where outstanding performers
BSC at Sterlite, cascaded across hierarchies, has resulted in
are recognized and future leaders are identified. The award
the following:
recognizes
Drive strategy execution Clarify and operationalise strategies
business
achievements
as
well
as
the
demonstration of organizational values. The members of the Platinum Club are provided fast-track career growth, special increments and nomination for exclusive training programmes,
Identify and align strategic initiatives
including overseas ones.
Link budget with strategy Learning and development: Employees are trained through Align the organizational goals and objectives with strategy
various modes, depending upon the type of requirement. We
Conduct periodic strategic performance reviews for
have a mix of seminars, Company visits, classroom sessions,
knowledge and improvement
conferences, interactive workshops, on-the-job training, and
Successor planning is also covered under this process, where
knowledge sharing by internal faculty, among others. We
every manager has to identify at least two successors from
maintain an annual training and development calendar; five
his/her direct or indirect reportees.
days of training per year are earmarked for each employee,
52 |Sterlite Technologies Limited | Annual Report 2007-08
based on his training and development needs, identified during
bonus, Employee/Team of the Month Awards, CEO Kitty Award,
the half-yearly and annual appraisal process.
Core Values Award, Employee Stock Options (ESOP) and Sterlite
The executive MBA programme: The Company provides financial assistance to employees to acquire a post-graduate diploma in management, developing their professional expertise and competencies for the time they move into a general management role.
Management Incentive Scheme (SMIS) to name a few.
Induction of fresh talent We look for students from reputed campuses with the talent, aptitude and initiative. We conduct an intensive 10-12-week internship programme, providing students with a unique
Beyond business: We encourage every employee to invest time
opportunity to acquaint with our business operations. Interns
in the Company’s sustainable development initiatives, with a
participate as members of project teams in research,
clear objective of holistic development.
development,
Employee safety and health Employee safety and health is highly emphasized by the Company. Over the years, we undertook various initiatives, including the BSC five-star rating and the RoHS certification for the EU directive banning hazardous substances. We also conduct regular awareness programmes on safety, periodic ergonomics audits, medical check-ups and emergency mock drills to ensure that our workforce remains informed and alert at all times.
manufacturing
or
business
areas
that
complement their college curricula with relevant hands-on experience. Working alongside some of the most talented people in technology and telecommunications provides an excellent environment for academic and career growth.
Inclusion of the family unit Movie screenings, family day out, Sterlite sports day, celebrations for festivals and parties are some of the exciting events organized each month at individual locations. Sterlite Cricket Club is an endeavour to encourage inter-unit
Rewards and recognition
camaraderie. Akansha is a ladies’ club managed by employee
Various reward schemes are introduced to recognize
spouses and playing an active role in sustainability and
superlative performances at the workplace, such as monthly
community welfare projects initiated by the Company.
Connecting with our people | 53
Sustainable Development Report
Sterlite’s sustainable development initiatives directly impact over 79,750 lives across India.
Sterlite's commitment extends beyond business. We aim to develop
We monitor and reduce social and environmental risks, improve resource utilization, minimize pollution and forge partnerships with local communities.
our telecom and power businesses with the objective to provide attractive shareholder returns. We conduct our activities in a socially and environmentally responsible manner with the objective to enhance value for the community. The principle of sustainable development is fundamental to this approach. It requires us to monitor and reduce social and environmental risks, improve resource utilization, minimize pollution and forge partnerships with local communities. We achieve this through a balanced mix of regulatory compliances, business practices, audits, certifications and employee involvement. At all our manufacturing facilities, we ensure that operations are carried out with a key focus on the following: Implementing measures to reduce pollution, emissions, waste and energy consumption. Exploring the use of environment-friendly technologies and materials within our research, development and manufacturing processes. Preventing/minimizing impact from pollution and occupational health and safety risks. Conserving natural resources. Recycling and creating innovative recycling opportunities. Providing a safe work environment for employees and safe living conditions for our neighbours.
Regulatory compliances Sterlite ensures that its operations comply with all applicable laws,
54 |Sterlite Technologies Limited | Annual Report 2007-08
regulations and Company standards. Some of these include
integration of quality, environmental, occupational health and
national-level regulations such as Environmental Protection Act,
safety management systems. The website address is
Prevention of Water Pollution Act and Prevention of Air Pollution
www.ohsas.org.
Act. Besides, the Company ensures that it complies with and strives to exceed state-level regulations on environmental protection and pollution prevention.
Business practices Sterlite is also committed to providing a healthy work environment for employees and associates through controlled plant operations and continuous improvement in our processes, products and services.
(c) The British Safety Council’s (BSC) five-star audit is a unique service provided by the British Safety Council. The scope of the audit includes a review of the health and safety performance of businesses from the management of health and safety to the implementation of associated systems in the workplace. By applying the principles of audit to health and safety issues, organizations can improve operational performance and systematically reduce overall costs. The website address is www.britishsafetycouncil.co.uk.
Sterlite integrates environment, health and safety (EHS) considerations into business planning and decision-making. A
Employee involvement
robust integrated management system is created for process
We stimulate EHS awareness among all employees
and operational changes to assess the suitability, adequacy
and associates through periodic training programmes and
and effectiveness of our efforts on environment, health and
increasing environmental awareness within our plants
safety.
and facilities. We keep abreast with latest international
This ensures that operations are carried out under adequate supervision through the use of necessary personal protecting equipment (PPE) as well as an adherence to safety precautions. We also conduct periodic environmental audits and progress reviews.
Certifications
practices, codes and standards, which are adopted wherever applicable.
Key achievements – environmental protection Following are the special tasks, which we have completed in last year towards environment protection: 1. ISO 14001:2004 (EMS) certification – Successfully
Sterlite’s optical fiber facility has been audited by BVQi and
completed the ISO 14001:2004 certification in the month of
certified for the ISO 14001:2004 quality management system
April, 2008.
and OHSAS 18001:1999. (a) ISO 14001 specifies the actual requirements for an environmental management system, applying to those environmental aspects over which the organization exercises control. The website address is www.iso.org. (b) OHSAS specifies the requirements for an occupational health and safety (OH&S) management system to enable an organization to control its OH&S risks and improve
2. Conservation of Natural Resources – Start monitoring and control uses of electric energy and water consumption. 3. Establish the scrap disposal matrix – Safe disposal method of waste / hazardous material. 4. Awareness towards environment protection – Training program / display board has been conducted / displayed for conservation of natural resources (e.g water, electricity & depletion of resources).
performance. OHSAS 18001 has been developed to achieve
5. We have also contributed in the areas of greenbelt
compatibility with the ISO 9001 (Quality) and ISO 14001
development wherein we under took plantation of approx
(Environmental) management system standards to facilitate an
1,000 trees in our facilities.
Connecting with our community | 55
6. Abolished use of paper cups and plastic bags (Food is now being served through containers) ,
camp attended by 300 villagers. We undertook the construction of potable water and sanitation facilities, the completion of which will benefit over 300 individuals.
Enriching the community Sterlite undertakes various activities based on an assessment of needs and aspirations of the community. The Company has allocated 1% of its annual net profit towards these projects. Environment, healthcare, education and the development of the community are integral to its ideology. Our sustainable development initiatives span villages in the remotest locations in Maharashtra and the Union Territory of
We
continued
supporting
women's
empowerment. Our initiatives in training in tailoring, manufacture of cottage industry products and teaching empowered 200 underprivileged women. We formed teams at every manufacturing location to assess potential projects and ensure their implementation, monitoring and sustenance. The management and the teams remain community impact.
Some of our environment management initiatives comprise the construction of over 10 check dams in drought-stricken villages,
Expense Outlay 2005-08
which are now capable of storing about 50 TCM of water, radically changing the economic potential of the villages. Focusing on the pressing need for greening, we undertook the plantation of more than 4.5 hectares. Our health initiatives comprise the sponsorship of a mobile dispensary and ambulance, 730 cataract operations for the underprivileged and hearing aids for 100 hearing-impaired children. In addition, we also conducted a health and nutrition
Summary of community sustainable development projects Category
Type of project
Education
Tailoring course for under-privileged women Teachers’ training programme Training in the manufacture of cottage industry products Construction of check dams Reforestation plantations
Health
and
committed to the projects and we will strive towards positive
Dadra and Nagar Haveli.
Environment
education
Organising of health and nutrition camps, cataract operations Provision of hearing aids for students Provision of a mobile medical dispensary and ambulance Construction of facilities for potable water and sanitation
Sterlite’s sustainable development initiatives directly impact over 79,750 lives across India.
56 |Sterlite Technologies Limited | Annual Report 2007-08
Sustainable Development - Case Study “We were not able to grow Rabi season crops in our village for nearly 10 years due to chronic drought. However, after the construction of check dams, we are now growing vegetables and wheat.” – Tukaram Ghavate, a farmer in Karanjgaon village, Maharashtra
Tukaram Ghavate is one of 2,000 farmers in Karanjgaon,
Enhance the livelihood of rural families through the judicious
Shekta and Hasanabadwadi villages belonging to drought-
use of natural resources
prone Aurangabad (Maharashtra). In this region the average
Sterlite partnered with Dilasa Janvikas Pratishthan (a reputed
erratic annual rainfall is less than 500 mm.
NGO working on natural resource management in Maharashtra
The topography of the land does not allow for soil and water
for over 15 years) to construct three check dams with a
harvesting, resulting in a chronic shortage of water for drinking
cumulative storage capacity of 12.34 TCM in 2007-08 and a
and irrigation. As a result, the livelihood of 6,000 village
total of eight check dams of 46.95 TCM during the last two
inhabitants depends on rain-fed farming without an assurance
years.
of consistency.
The Company minimized the withdrawal of water from bore
Over the years, the excessive use of water through wells and
wells for crops requiring high water supply. No direct pumping
bore wells has caused ground water depletion. As a result,
of water was allowed from the stored water of the check dams.
limited rainwater can no longer satisfy growing population
These regulatory actions were accepted by the local community.
needs, making it imperative to recharge or create water
The construction of the check-dams have far-reaching socio-
conserving structures like check dams.
economic implications. Farmers in these villages have
Sterlite undertook the construction of check dams with the
enhanced their Rabi (winter) yield, annual family incomes have
following objectives:
increased by about Rs. 20,000 on an average and living
Conserve large-scale water in the drought-prone areas of Aurangabad Increase the groundwater table through the recharging of
standards have improved. Some quantitative results of one check dam at the Shevga village comprise the following: Water conserved was 16.50 TCM.
rainwater
There was an increase in ground water table of about five
Minimize the problem of drinking and irrigation water in rural
metres in summer.
areas
Irrigation area increased from 2.76 hectares to 9.60
Increase crop productivity by increasing the command area
hectares.
Develop an effective tool for drought proofing and
Kharif agriculture production (June-November) increased by
sustainable solution in rural areas
over 150%.
Connecting with our community | 57
Board of Directors
Anil Agarwal
Anil Agarwal founded the Sterlite Group in 1976 and has been
(Non-Executive Chairman)
overseeing its operations since its inception. Anil is the Executive Chairman of Vedanta Resources Plc, Sterlite Industries (India) Limited, Bharat Aluminium Company Limited (BALCO) and is a Director of Hindustan Zinc Limited (HZL) and Vedanta Alumina Limited. He has over 30 years of experience in business strategy, general management and commercial matters.
Navin Agarwal
Navin Agarwal has been overseeing the Sterlite Group's
(Non-Executive Director)
operations since its inception. He is the Deputy Executive Chairman of Vedanta Resources Plc, Executive Vice Chairman of Sterlite Industries (India) Limited, Chairman of Konkola Copper Mines (KCM-Zambia) and MALCO and is also a Director of Bharat Aluminum Company Limited (BALCO), Hindustan Zinc Limited (HZL) and Vedanta Alumina Limited. He has over 20 years of experience in business strategy, general management and commercial matters.
Arun Todarwal
Arun Todarwal, partner of Todarwal & Todarwal, a Mumbai-
(Non-Executive and Independent Director)
based firm of chartered accountants, holds a bachelors degree in commerce and is a member of the Institute of Chartered Accountants of India. He has a rich and varied experience spanning over two decades in finance and audit.
58 |Sterlite Technologies Limited | Annual Report 2007-08
Haigreve Khaitan
Haigreve Khaitan, partner of Khaitan & Co, a Mumbai-based
(Non-Executive and Independent Director)
firm of lawyers, holds a bachelors degree in legislative laws. He has varied experience spanning eight years in commercial and corporate laws, tax laws, mergers and acquisitions, restructuring, foreign collaboration, licensing, etc.
Pravin Agarwal
Pravin Agarwal has been closely involved with the Sterlite
(Whole-time Director)
Group's operations in India since its inception and has been instrumental in growing the telecom and power businesses. His rich experience in general management and commercial matters spans over 25 years.
A.R. Narayanaswamy
A.R. Narayanaswamy is a chartered accountant by profession,
(Non-Executive and Independent Director)
Mr. Narayanaswamy has an experience spanning over 30 years.
Anand Agarwal
Anand Agarwal joined Sterlite in 1995 and has held various
(CEO and Whole-time Director)
positions, including manufacturing, quality assurance and business development. Prior to joining Sterlite, he worked with Siemens. Anand completed his BTech in metallurgical engineering from the IIT Kanpur and was awarded Masters and PhD from the Rensselaer Polytechnic Institute, USA.
Board of Directors | 59
Management Committee
Anand Agarwal
Anand Agarwal joined Sterlite in 1995 and has held various
(CEO and Whole-time Director)
positions, including manufacturing, quality assurance and business development. Prior to joining Sterlite, he worked with Siemens. Anand completed his BTech in metallurgical engineering from the IIT Kanpur and was awarded Masters and PhD from the Rensselaer Polytechnic Institute, USA.
Anupam Jindal
Anupam Jindal joined the Sterlite Group in 1998 and has since then
(Chief Financial Officer)
worked with the Group’s aluminium foils and copper telecom cables businesses before heading finance and accounts at Sterlite’s mining operations in Australia. His key focus areas have been finance, treasury, accounts and MIS. Anupam is a chartered account from the Institute of Chartered Accountants of India.
Anuraag Rai
Anuraag Rai is responsible for the organisational development and
(Vice President, Human Resources)
effectiveness. He has been working with the Vedanta Group & Sterlite for over three years. His prior assignments include Suzlon Energy Limited, DELL International, ACC Ltd., DCL Polyester Ltd. & Eicher Good Earth Ltd. Anuraag is a law graduate from Ravi Shankar University in Raipur and holds a masters degree in personnel management from Nagpur University.
60 |Sterlite Technologies Limited | Annual Report 2007-08
K.S. Rao
K.S. Rao joined Sterlite in 1992 and has since held various
(Chief Operating Officer - Telecom)
positions in the Company’s telecom business. His key focus area has been engineering, manufacturing, product development, project management and business development. K.S. Rao holds a bachelors degree in mechanical engineering.
Rajendra Mishra
Rajendra Mishra joined Sterlite in 2008 and is responsible for the
(Chief Operating Officer - Power)
Power business. In a career spanning 18 years, Rajendra has been associated with Batliboi Ltd and RPG Cables in various marketing, sales, operations and strategic positions. He holds a bachelors degree in electrical and electronics engineering from Regional Engineering College, Surathkal.
Anil Sikka
Anil Sikka joined Sterlite in 2005 and his key focus areas have been
(Associate Vice President, Marketing
marketing and general management. In a career spanning over 20
– Power Transmission Business)
years, he has served companies like ABB India and Bahwan Engineering Company in Oman. Mr. Sikka holds a bachelor of technology degree in electrical engineering from the College of Engineering, Rourkee, and has a post-graduate diploma in marketing management from IIT Delhi.
Dharmendra Jain
Dharmendra Jain joined Sterlite in 1997 and his key focus areas
(General Manager, Finance, Banking and Treasury
are finance, treasury, taxation, commercial, accounts and MIS. A
– Power Transmission Business)
seasoned professional, having served organisations like Indian Aluminium Cable Ltd. (HDC Group), during his 16-year career, Dharmendra holds a degree for chartered accountancy from the Institute of Chartered Accountants of India
Management Committee | 61
Directors’ Report
Your Directors are pleased to present the Ninth Annual Report together with the audited accounts of the Company for the year ended March 31, 2008.
Financial Results
(Rs. in Crores)
Particulars
2007-08
2006-07
Net Revenues
1,685.79
1,198.15
211.27
119.11
Less: Interest
43.65
34.50
Less: Depreciation
37.17
31.57
130.44
53.04
14.66
6.04
0.77
-
(14.66)
(6.04)
27.88
1.72
1.07
0.46
Net Profit /(Loss) for the year after tax
100.72
50.86
Balance carried forward from previous year
250.08
208.01
Amount available for appropriation
350.80
258.87
Proposed Dividend
6.45
4.62
Provision for Tax for Dividend
1.10
0.79
335.70
250.08
Profit / (Loss) before Interest, Depreciation & Tax
Net Profit / (Loss) before taxation Provision for Taxation: Current Tax Earlier Year Tax / (Written Back) Minimum Alternative Tax eligible for Set Off Deferred Tax (Credit) Fringe Benefit Tax
Appropriations
Balance carried forward to the next year
Performance Your Company achieved net revenues of Rs. 1,686 Crores
Income from exports increased by 75%, from Rs. 296 Crores in
this year which is 41% higher than the revenues for the previous
the last year to Rs. 518 Crores in the year under review.
year. The profits of the Company after providing for tax
Currently the export sales account for 31% of our net revenues.
increased to Rs. 101 Crores as compared to the profits of
Export will be the focal point for the Company from future
Rs. 51 Crores, (after tax credit and exceptional income) in the
growth perspective and with that intent, the Company is in the
last year.
process of setting up representative offices in USA, and Russia
62 |Sterlite Technologies Limited | Annual Report 2007-08
As per the demand in the global optical fiber industry, your Company has decided to double the Optical Fiber annual manufacturing capacity to 12 Million-fkm.
in addition to the existing offices at China, Thailand, UK and
manufacturing capacity to 12 Million-fkm pa. This brown-field
South Africa.
expansion is being done at the Company’s existing facilities at
The detailed analysis of Company’s operations and segmentwise performance is covered under the report on ‘Management Discussion & Analysis’.
Aurangabad and commercial production is expected to commence by June 2009. The expanded capacity would primarily cater to the growing demand from the Indian market and also enable the Company to grow its global market share.
Expansion & Diversification
In conjunction with Optical Fiber capacity expansion, the
Your Company is operating in two verticals, which are
Company plans to expand its Fiber Optic Cable capacity to
witnessing significant growth rates. Also, most of the
6 Million-fkm from its current capacity of 2 Million-fkm.
manufacturing operations of the Company are utilizing nearly
The Company established its Integration & Managed Services
100% capacity to cater to the increased demand for Power
(IMS) business during financial year 2006-07, as its customers
Conductors and Optical Fiber. Your Company has been
required
investing in new capacities both for green field and brown field
implemented, in addition to their purchases of access products.
expansions.
As the Company is committed to facilitating the propagation of
Your Company commenced manufacturing at its new Power Transmission and Distribution Conductors facility at Haridwar in
complete
telecom
access
solutions
to
be
broadband in India, it has developed the capability to provide these solutions for the telecom and broadband sectors.
the State of Uttarakhand in August 2007. The Company now
This year, the Company’s IMS business has taken great strides
has a cumulative manufacturing capacity of 115,000 MT
with the successful implementation of MTNL’s MPLS core in
(Metric Tonnes), making it the largest manufacturer in India.
New Delhi and Mumbai. Sterlite also received a contract from
This facility includes the latest drawing and stranding machines
MTNL for deployment of a Broadband & Metro Ethernet network
capable of manufacturing standard and specialized Power
in New Delhi and Mumbai. This is a turnkey project that involves
Conductor products. The facility also has a Rolling Mill capable
design, development and implementation of the network. The
of producing specialized mechanical alloy. The Company has
network, once completed, would be capable of handling about
plans to enhance the capacity to 160,000 MT during the
half a million broadband connections in these cities.
current year.
The Company now serves as a ‘one-stop window’ for a
During the year, your Company also completed the expansion of
comprehensive suite of Telecom and Energy products that
its Optical Fiber capacity from 4 Million-fkm to 6 Million-fkm. As
would include Optical Fibers, Fiber Optic Cables, Copper
per CRU, UK, the global demand for Optical Fiber in 2007 was
Telecom Cables, Structured Data Cables, Power Transmission
127.4 Million-fkm, higher by about 25% compared with the demand in 2006. This has been the highest annual demand ever for the Optical Fiber industry. Future projections indicate robust global demand in FTTH (Fiber-to-the-Home) and a broader mix of telecom applications, including intercity backbones, metro rings, access network projects and cellular backhaul. Your Company has now decided to double the Optical Fiber
and Distribution Conductors and Integrated Telecom Solutions that include MPLS, NGN (Next Generation Network), Metro Ethernet Broadband etc.
Dividend Your Board of Directors is pleased to recommend a dividend of 20% for the financial year 2007-08. The distribution of dividend will result in payout of Rs. 6.45 Crores excluding tax on dividend.
Connecting with shareholders | 63
Preferential Allotment of equity shares to Promoters
Explanation on Auditor’s Comment
As reported in the last year, your Company had allotted
Report over Note No. 8 in Schedule 21 on Notes to Accounts
56,00,000 shares to its promoters under Preferential Allotment
regarding demand of excise duty and penalty amounting to
scheme. The Company completed preferential allotment by
Rs. 188 Crores is self-explanatory and does not require further
conversion of the second and final tranche of 28,00,000
comment.
warrants into shares. The proceeds raised from preferential
In the year 2004-05, CESTAT had upheld the demand of
allotment were utilized by the Company for capital expenditure
Rs. 188 Crores and the interest thereon against the Company
and general corporate purpose.
for alleged breach of norms pertaining to Export Oriented Unit
The remark of Auditors at Para 5 (v) & (vi) of the Auditor’s
(EOU). The Company's appeal against this order was dismissed
Employees Stock Option Scheme The Company had launched Stock Option Scheme for the employees (ESOP-2006) in June 2006. During the year, the Company extended the scheme to cover most of its employees
by the Hon'ble High Court of Mumbai during the year, on the grounds that appeal is not maintainable in the High Court, however, without prejudice to the rights of the Company.
by granting 2,61,550 fresh options. The Company allotted
The Company subsequently filed Special Leave Petition and an
73,680 shares during the year to various employees who
appeal with the Hon'ble Supreme Court, which has been
exercised their options. The details of the options granted up to
admitted by the Court. The Hon'ble Supreme Court has also
March 31, 2008 are set out in Annexure-II to this report, as
maintained the stay granted by Hon'ble High Court of Mumbai.
required under Clause 12 of the Securities and Exchange Board
Based on merits of the case and the legal opinion obtained, the
of India (Employees Stock Option Scheme and Employees Stock
Management believes that the Company has a strong case and
Purchase Scheme) Guidelines, 1999.
it has been carrying adequate provisions for contingencies in the Books of Account in this matter and does not require any
Subsidiary
further provisioning.
During the year, the Company acquired 60,00,000 equity shares of Rs. 10 each (in addition to the existing holding of
Research and Development
5,200 shares) in Sterlite Infrastructure Private Limited (SIPL) at
Product obsolescence risks are inherent in the technology
par value. With this investment, the holding of your Company in
sector businesses. The Management has accorded high priority
SIPL has increased to 58.70 %, making SIPL, a subsidiary of
to in-house Research and Development in order to ensure new
your Company.
product development as per the evolving needs of the industry
SIPL is incorporated with the objective to carry on Telecom
for technical enhancements. Your Company has set up a
business. SIPL, during the year, made application for licenses
Research and Development Centre at Aurangabad. This facility
for
Unified
Access
Services
to
the
Department
of
is approved by the Department of Scientific & Industrial
Telecommunications (DOT) to provide wireless mobile telecom
Research (DSIR) in India.
services in India. The decision of the DOT on the allotment of
The Company has focused its attention towards development of
licenses is still awaited. SIPL has not yet commenced any
products having applications in FTTH and Metro-Access
commercial activity.
Telecom Networks and Power Transmission Networks.
64 |Sterlite Technologies Limited | Annual Report 2007-08
The Company had launched Stock Option Scheme for the employees (ESOP-2006) in June 2006. During the year, the Company extended the scheme to cover most of its employees by granting 2,61,550 fresh options. Fixed Deposits
maintenance
During the year, the Company has not accepted any deposits
accordance with the provisions of the Companies Act, 1956
from the public or otherwise in terms of Section 58A of the
for safeguarding the assets of the Company and for
Companies Act, 1956, read with Companies (Acceptance of
preventing and detecting fraud and other irregularities;
Deposit) Rules, 1975.
of
adequate
accounting
records
in
iv) They have prepared the accounts on a “going concern” basis.
Directors By virtue of Section 255 of the Companies Act, 1956 and the
Group
Articles of Association of the Company, Mr. Navin Agarwal and
The Company is controlled by the Agarwal Group; being a group
Mr. Arun Todarwal retire by rotation at the ensuing Annual
as defined under the Monopolies and Restrictive Trade
General Meeting. A brief resume, expertise, shareholding in
Practices Act, 1969. The list of entities in the group is as under:
your Company and details of other directorships of these
1. Volcan Investments Limited, Bahamas
directors are given in the Corporate Governance Report.
2. Twin Star Overseas Limited, Mauritius
Management Discussion and Analysis
3. Mr. Dwarkaprasad Agarwal
The Report on Management Discussion and Analysis has been
4. Mr. Agnivesh Agarwal
attached and forms part of the Annual Report.
Auditors
Corporate Governance
M/s. S.R. Batliboi & Co., Chartered Accountants hold office till
The Report on Corporate Governance along with the Certificate
the conclusion of the forthcoming Annual General Meeting and
from the Statutory Auditors certifying the compliance of
being eligible, offer themselves for re-appointment. The
Corporate Governance enumerated in Clause 49 of the Listing
Company has received intimation to the effect that, proposed
Agreement with the Stock Exchanges is included in the Annual
re-appointment, if made, would be within the prescribed limit
Report.
under Section 224(1-B) of the Companies Act, 1956.
Directors’ Responsibility Statement
Particulars of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo
Your Directors confirm that: i)
In the preparation of the annual accounts, the applicable accounting standards have been followed;
The particulars of conservation of energy, technology absorption and foreign exchange earnings and outgo as
ii) They have selected such accounting policies and applied them consistently, and 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 March 31,
prescribed under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosures of Particulars in the Report of Directors) Rules, 1988, is given as Annexure I and forms a part of the Directors’ Report.
2008 and of the profit of the Company for the financial year ended March 31, 2008; iii) They have taken proper and sufficient care for the
Particulars of Employees The particulars of employees as required under the provisions
Connecting with shareholders | 65
of Section 217(2A) of the Companies Act, 1956 read with the
contributions made by the employees through their hard work,
Companies (Particulars of Employees) Rules, 1975 is annexed
dedication, competence, support and co-operation towards the
hereto and forms a part of this report. However, as per the
success of your Company. Last but not the least, your Directors
provisions of Section 219(1)(b)(iv) of the Companies Act, 1956,
are also thankful for consistent co-operation and assistance
the report and the Accounts are being sent to all shareholders
received from its investors, business associates, customers,
of the Company excluding the aforesaid information. Any
vendors, bankers, regulatory and government authorities.
shareholder interested in obtaining such particulars may write to the “Company Secretary� at the Registered Office of the Company.
For and on behalf of the Board of Directors
Acknowledgement It has been an encouraging year for the Company especially with the expectations of continuing with the growth it had displayed last year and of holding on to its domestic market share while at the same time expanding its global footprint.
Mumbai
Your Directors take on record their sincere appreciation to the
April 29, 2008
66 |Sterlite Technologies Limited | Annual Report 2007-08
Anil Agarwal
Chairman
Annexure I to Directors’ Report Particulars of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo as per Section 217 (1) (a) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the report of Directors) Rules, 1988 for the year ended 31 March, 2008
MM armor wire for mechanical applications. (b) Benefits derived as a result of above R&D Opportunity to compete in international market. Technology Up-gradation. Development of new designs in products.
1. Conservation of Energy The Company adopted the following measures on energy conservation – a) Installed harmonics filters at Rakholi-Power Transmission Conductor Plant b) Additional capacitor panel at Haridwar-Power Transmission Conductor Plant c) Installation of metal halide lamp in place of mercury. d) All street lights and plant lights controlled through timers. e) AHU speed & temperature control with SCADA system f) Hot water booster pump at HWF chiller in CPP Plant has been bypassed. g) Insulation Replacement in Furnaces of Sinter Machine. h) Third Stage Pressure reduction of Oxygen and Hydrogen compressors & supply of Hydrogen & Oxygen at 10 Kg pressure at Optical Fiber plant.
2. Technology Absorption A. Research and Development (a) Specific areas in which the Company carried out R&D Development of Sterlite DOF-LITE ITU-T G.655 D&E range of optical products for application in access networks and modems for broadband applications. Designed mini cable having small diameter (~4.0 mm), light weight (16 Kg/km) cables specially for FTTH applications to deploy using air blown technology in the microducts. Designed Hybrid cable for power and telecom using optical fibers for communication purpose and Aluminium conductors to provide sufficient power supply. Developed AL-59 - Alloy Power Transmission Conductor compliant with the SS4240814 Swedish Standard, which are used in transmission and distribution lines for a wide voltage range - low voltage to extra high voltage. Developed O Temper rods for cable applications and 9.27
Attaining accreditation of our products from internationally recognized bodies. (c) Future plan on R&D Ensure new product development as per evolving needs of the industry, technical enhancements and quality improvements of existing product offerings.
B. Technology Absorption, Adoption and Innovation (a) Efforts made towards technology absorption, adoption and innovation: The technology used for manufacture of various products of the Company is fully absorbed and new innovations in process control, product development, cost reduction and quality improvements are being made on a continuous basis. (b) Benefits derived as a result of the efforts i.e., product improvement, cost reduction, product development: The Company is engaged in that business where product obsolescence are inherent. The efforts made for product improvement / development help Company not only to offer better value added products to its customers but also explore new markets. (c) Information regarding technology imported during last 5 years: The Company has not imported any technology.
3. Foreign Exchange Earnings and Outgo Discussion on activities related to development of exports is covered in Directors’ Report and Management Discussion & Analysis report. Foreign Exchange Earned: Rs. 517 Crores Foreign Exchange Outgo:
Rs. 27 Crores
The Company does not fall in the list of industries which are required to give details of power and fuel consumption as per “Form A” of Companies (Disclosure of Particulars in the Report of Directors) Rules, 1998.
Connecting with shareholders | 67
Annexure II to Directors’ Report Statement as at March 31, 2008 as required under Clause 12 of the Securities and Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999.
1 Options Granted
Total 8,54,450 options were granted as on March 31, 2008 4,65,700 options were granted on June 14, 2006 1,27,200 options were granted on March 19, 2007 2,61,550 options were granted on September 28,2007
2 Pricing formula
Options vest at a nominal value i.e. Rs. 5 per option
3 Options vested
93,140
4 Options exercised
73,680
5 Total number of ordinary shares arising
73,680
as a result of exercise of Options 6 Options Lapsed
79,160
7 Variation of terms of Options
Refer Note -1
8 Money raised by exercise of Options
Rs. 3,68,400
9 Total number of Options in force
701,610
10 Number of Options granted to Senior Managerial Personnel Dr. Anand Agarwal
CEO & Whole-time Director
41,300
Mr. Anupam Jindal
Chief Financial Officer
14,000
Mr. K.S. Rao
Chief Operating Officer (Telecom)
24,700
Mr. Anil Sikka
Associated VP, Marketing (Power)
11,100
Mr. Dharmendra Jain
GM–Finance Banking & Treasary (Power)
10,100
68 |Sterlite Technologies Limited | Annual Report 2007-08
11 Identified employees who were granted Options during
None
any one year, equal to or exceeding 1% of issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant. 12 Diluted earnings per share pursuant to issue of
Rs. 15.46
ordinary shares on exercise of Options calculated in accordance with Accounting Standard {(AS) 20 “Earnings Per Share”} 13 Method of Calculation of Employee Compensation Cost
The Company has used fair market value method for calculation of compensation cost, using the Black Scholes Option Pricing Model.
14 Weighted average exercise price and weighted average fair value of Options granted for options whose exercise
Weighted Average exercise price (per option) – Rs. 5 Weighted Average Fair value (per option) – Rs. 230.71
price either equals or exceeds or is less than the market price of the stock. 15 A description of method and significant assumptions used during the year to estimate the fair values of options
The fair value of each option is estimated using the Black Scholes Option Pricing model after applying following weighted average Assumptions: Grant dated September 28, 2007
1. Risk Free Interest rate
7.20%
2. Expected Life
1.50 years
3. Expected Volatility
56.69%
4. Expected Dividend Yield
0.51%
5. The price of underlying share at the time of grant
Rs. 230.71
Note: The options granted on June 14, 2006 had vesting schedule of 30%, 30% and 40% due on June 14, 2007, June 14, 2008 and June 14, 2009 respectively. The Compensation Committee varied vesting schedule to 20%, 40% and 40% and relaxed performance criteria for the first vesting which was due on June 14, 2007.
Connecting with shareholders | 69
Corporate Governance Report
Philosophy of the Company
Strategic Supervision: The Board of Directors occupies the
Corporate Governance represents the value, ethical and moral
topmost tier in the governance structure. It plays a role of
framework under which business decisions are taken. The
strategic supervision that is devoid of involvement in the task of
investors want to be sure that not only is their capital handled
strategic management of the Company. The Board lays down
effectively and adds to the creation of wealth, but the business
strategic goals and exercises control to ensure that the
decisions are also taken in a manner which is not illegal or
Company is progressing to fulfill stakeholders’ aspirations.
involving moral hazard. The Company perceives good corporate governance practices as a key to sustainable corporate growth and long-term
Strategic Management: The Management Committee is composed of the senior management of the Company and operates upon the directions of the Board.
shareholder value creation. The primary objective is to develop
Executive Management: The function of Executive
and adhere to a corporate culture of harmonious and
Management is to execute and realize the goals laid down by
transparent functioning, increasing employee and customer
the Board and Management Committee.
satisfaction and enhancing shareholders’ wealth by developing capabilities and identifying opportunities that best serve the goal of value creation. All actions and strategic plans are directed towards delivering value to all stakeholders, as well as conform to the highest standards of corporate behavior. The five core values that drive the Company’s business are:
I. Board of Directors The Board of Directors consists of two Whole-time Directors and five Non-Executive Directors. Three Non Executive Directors are also Independent Directors. Mr. Anil Agarwal is the Chairman of the Board and the meetings of the Board of Directors are chaired by him and in his absence by Mr. Navin Agarwal. Mr.
Excellence:
Creativity:
Integrity:
Strive relentlessly and constantly improve
Anil Agarwal is a non-executive Chairman. The Company has
ourselves in our offerings
three independent directors and therefore the Company
Allow minds to reach beyond conventional
complies with the criteria of at least one-third of the Board
and predictable solutions
should comprise of Independent Directors.
Conduct our business fairly, with honesty
During financial year 2007-08, four (04) Board meetings were
and transparency
held on April 30, 2007, July 26, 2007, October 30, 2007 and
Responsibility: For our words and actions Respect:
For our employees, business partners and stakeholders
January 21, 2008. The composition of the Board of Directors, attendance of the Directors in Board Meetings and Annual General Meeting and their shareholding details in the Company are as follows:
The Company has three-tier governance structure:
70 |Sterlite Technologies Limited | Annual Report 2007-08
Name
Designation
No. of
Last
No. of
Committee
No. of shares held in
Board
AGM
Directorships
Memberships
the Company
in other
& (Chairmanships)
(including
Companies
in other Companies
family members)
Meetings attended attended Anil Agarwal
Non-Executive
Nil
No
12
Nil
Nil
04
Yes
14
03
89,200
03
Yes
03
04
115
03
No
19
10
Nil
04
No
04
03
Nil
Whole-time Director
04
Yes
01
Nil
82,962
CEO & Whole-time
04
Yes
01
Nil
20,260
Chairman Navin Agarwal
Non-Executive Director
Arun Todarwal *
Non-Executive Director
Haigreve Khaitan*
Non-Executive Director
A.R. Narayanaswamy*
Non-Executive Director
Pravin Agarwal Dr. Anand Agarwal
Director * Independent Directors as defined in Clause 49 of Listing Agreement.
Directors with Materially Significant, Pecuniary or Business Relationship with the Company
II. Committees of the Board
As required under Accounting Standard 18, transactions
The Company has the Audit Committee constituted in
with related parties are furnished under Note 17 of Schedule
accordance with the requirements of Section 292A of the
21 - Notes to the Accounts. There are no transactions of
Companies Act, 1956 and Clause 49 of the Listing Agreement
material nature with the Promoters, Directors or their relatives,
entered into with the Stock Exchanges. The primary objective of
Audit Committee
etc that may have potential conflict with the interest of the
the Audit Committee of the Board of Directors of the Company
Company.
is to discharge responsibilities relating to accounting and
Disclosures have been received from Directors and Senior
reporting of financial practices adopted by the Company and its
Management relating to the financial transactions in which they
subsidiaries, surveillance of internal controls as well as
or their relatives may have personal interest. However, none of
accounting and audit activities.
these transactions have a potential conflict with the interest of
The terms of reference of the Audit Committee include:
the Company at large.
1. Review of the Company’s financial reporting process and the
Connecting with shareholders | 71
disclosure of its financial information 2. Recommending the appointment and removal of external auditor.
2007-08 on April 30 2007, July 26, 2007, October 30, 2007 and January 21, 2008. The Composition of the Audit Committee and attendance at Committee meetings is as follows:
3. Reviewing the management, the periodical financial
Name
statements. 4. Reviewing with the management, external and internal
Category
No of Meetings
attended Arun Todarwal, Chairman Non-Executive
auditors, the adequacy of internal control systems, frequency
& Independent
03
of internal audit, significant findings by internal auditors and follow up there on.
Haigreve Khaitan
Non-Executive & Independent
03
5. Discussion with external auditors, nature and scope of audit as well as have post-audit discussions
A. R. Narayanaswamy
Non-Executive & Independent
04
6. Reviewing the Company’s financial and risk management policies.
Pravin Agarwal
Whole-time Director
04
7. Reviewing Whistle Blower Mechanism. 8. Reviewing Management Discussion and Analysis Report, Statement of significant related party transactions submitted by the management; Management letters / letters of internal control weaknesses issued by the statutory auditors, if any; Internal audit reports relating to internal control weaknesses. 9. Reviewing of financial statements and investments made by subsidiary companies.
Remuneration / Compensation Committee The Remuneration / Compensation Committee discharges Board’s responsibilities relating to compensation of Company’s Executive Directors. The Committee has overall responsibility for approving and evaluating the compensation plans, policies and programs of the Executive Directors. This Committee has also been empowered to administer Employees Stock Option
Composition and Meetings
Scheme, 2006 of the Company.
The Audit Committee comprises of four Non–Executive
Composition and Meetings
Directors, three of whom are independent. The representatives
The Committee comprises of four Non – Executive Directors,
of internal and statutory auditors are permanent invitees of the
three of whom are independent. The Chairman of the
Audit Committee meeting. Mr. Arun Todarwal, Chairman of the
Committee is a Non – Executive Independent Director.
Committee (Non–Executive Independent Director) is a Chartered Accountant and has accounting and financial expertise. The other committee members are financially literate.
The Committee met three times during the year 2007-08 on April 30, 2007, September 28, 2007 and January 21, 2008. The Composition of the Remuneration and Compensation Committee and attendance at Committee meetings is as
The Audit Committee met four times during the year
72 |Sterlite Technologies Limited | Annual Report 2007-08
follows:
Name Arun Todarwal, Chairman Haigreve Khaitan A. R. Narayanaswamy Navin Agarwal
Category attended
appointment of Mr. Pravin Agarwal is for a period of 3 years
No of Meetings
expiring on October 29, 2009. As per the terms of appointment,
Non-Executive & Independent
03
Non-Executive & Independent
02
Non-Executive & Independent
03
Non-Executive Director
02
the agreement can be terminated by giving 90 days’ notice or equivalent pay by either of the sides. Dr. Anand Agarwal, Wholetime Director is designated as Chief Executive Officer. The term of appointment of Dr. Agarwal is for a period of 3 years expiring on July 29, 2009. As per the terms of appointment, the agreement can be terminated by giving 90 days’ notice or equivalent pay by either of the sides. The Company pays sitting fees to its non-executive Directors. In addition, it also pays commission not exceeding Rs. 2.50 lakh
Details of Remuneration paid to the Directors
to its Independent Directors. The break up of remuneration
Mr. Pravin Agarwal and Dr. Anand Agarwal are the two Executive
actually paid to directors (excluding provisions, if any) during
Directors. Mr. Pravin Agarwal was appointed Whole-time
Financial Year 2007-08 is as under:
Director with effect from October 30, 2006. The term of
Director
Salary (Rs.)
Perquisites (Rs.)
Incentive (Rs.)
Sitting Fee (Rs.)
Total (Rs.)
Anil Agarwal
-
-
-
-
-
Navin Agarwal
-
-
-
1,20,000
1,20,000
Arun Todarwal
-
-
-
1,50,000
1,50,000
Haigreve Khaitan
-
-
-
1,10,000
1,10,000
A. R. Narayanaswamy
-
-
-
1,80,000
1,80,000
1,38,24,000
23,57,400
23,40,000
-
1,85,21,400
71,24,460
7,08,126
25,03,649
-
1,03,36,235
Pravin Agarwal Dr. Anand Agarwal Notes
1. Dr. Anand Agarwal has been granted 41,300 Stock options, each option convertible in one equity share of Rs. 5 each. The first tranche of 8,260 options vested in June 2007, in respect of which equal number of shares were allotted to Dr. Anand Agarwal. The remaining options may vest equally in June 2008 and June 2009 depending on vesting conditions approved by the Compensation Committee. Options can be exercised in one year after vesting. The Company has accrued an expenditure of Rs. 4.48 Crores towards total options granted till March 31, 2008, out of which Rs. 0.27 Crore is attributable to the options granted to Dr. Anand Agarwal. 2. As approved by the Board of Directors, a Commission of Rs. 2,50,000 is payable to its Non-executive Independent Directors viz. Mr. Arun Todarwal, Mr. Haigreve Khaitan and Mr. A.R. Narayanaswamy for the financial year 2007-08.
Connecting with shareholders | 73
Shareholders' /Investors' Grievances Committee
The details of Committee meetings and attendance of Directors
The Shareholders’ / Investors’ Grievances Committee oversees
are as under:
redressal of shareholders’ grievances. The Committee comprises of Mr. A.R. Narayanaswamy (Chairman), Mr. Arun
Name
Category
No. of
Todarwal and Mr. Pravin Agarwal as the members. The
Meetings attended
Company Secretary is the Compliance Officer. The Committee
during the period
met four times during the year 2007-08 on April 30, 2007,
A.R.
Non-Executive
July 26, 2007, October 30, 2007 and January 21, 2008. During
Narayanaswamy,
& Independent
the year the Company received 248 complaints for various
Chairman
matters like non-receipt of share certificates, non issue of
Arun Todarwal
duplicate certificates, rejection of demat request, etc. All the complaints were resolved by the Company to the satisfaction of
Non-Executive
04
03
& Independent Pravin Agarwal
Whole-time Director
04
investors.
III. Profile of Directors Appointed-Reappointed Mr. Navin Agarwal oversees the Sterlite Group's operations since inception. He has over 22 years of experience of general management and commercial matters. The details of Mr. Navin Agarwal and directorships in other companies are as under: Date of birth
January 11, 1961
Date of joining the Board of the Company
July 30, 2003
Shareholding in the Company either in his own name
Refer to Section I –
or in the name of others and having beneficial interest,
‘Board of Directors’ of this report
as on March 31, 2008 Directorships
Konkola Copper Mines, Plc Bharat Aluminium Company Limited Hindustan Zinc Limited Sterlite Industries (India) Limited Sterlite Paper Limited Vedanta Aluminium Limited The Madras Aluminium Company Limited Sterlite Shipping Ventures Pvt Limited Sterlite Iron and Steel Company Limited Sterlite Energy Limited Vedanta Resources Plc, UK Sterlite Infrastructure Pvt Limited Sterlite Infrastructure Holdings Pvt Limited Finsider International Limited
74 |Sterlite Technologies Limited | Annual Report 2007-08
Mr. Arun Todarwal is a senior partner of Todarwal & Todarwal, Chartered Accountants based in Mumbai and holds a Bachelors Degree in Commerce and is a member of the Institute of Chartered Accountants of India. Mr. Todarwal has rich and varied experience spanning over two decades in Finance and Accounts. The details of Mr. Arun Todarwal and directorships in other companies are as under: Date of birth
June 16, 1957
Date of joining the Board of the Company
January 25, 2003
Shareholding in the Company either in his own name
Refer to Section I – ‘Board of Directors’ of this report
or in the name of others and having beneficial interest, as on March 31, 2008 Directorships
The Madras Aluminium Company Limited Welspun India Limited Muthukumarsamy Textiles Limited
IV. Disclosures
shareholders, due to delay in receipt of the approval of the
i) Disclosures on materially significant related party
Reserve Bank of India, under FEMA in connection with
transactions
applications accepted in the open offer for HZL.
There were no transactions with the Promoters, Directors and
SOVL, SIIL and the Company had preferred an appeal against
management during the period, which would have potential
the SEBI order before Securities Appellate Tribunal (SAT). SAT
conflict with the interests of the Company at large.
has passed a final order on February 11, 2005 setting aside the
ii) Details of non compliance by the Company, Penalties and
aforesaid impugned order of SEBI.
Strictures imposed on the Company by Stock Exchange, SEBI
During the year there were no Penalties and Strictures imposed
or any Statutory Authorities or any matter related to capital
on the Company by Stock Exchange, SEBI or any Statutory
market in last three years
Authorities for any matter related to capital market.
During the process of Open Offer for acquisition of 20% shares
iii) The Company has adopted a ‘Whistleblower Policy’, which
of Hindustan Zinc Limited from the public shareholders, there
has been communicated to all the employees along with Code
was a delay in receipt of approval from the RBI and
of Business Conduct & Ethics. The Whistleblower Policy is the
consequently, delay in payment to nine non-resident
mechanism to help the employees to raise their concerns about
shareholders.
any malpractice, impropriety, abuse or wrongdoing at an early
SEBI had passed an order dated June 12, 2003 under SEBI
stage and in the right way, without fear of victimisation,
(Substantial Acquisition of Shares and Takeovers) Regulation,
subsequent discrimination or disadvantage. The Policy
1997 (“Takeover Code”) on Sterlite Opportunities and Ventures
encourages the employees to raise concerns within the
Limited (SOVL) (as acquirer), Sterlite Industries India Ltd. (SIIL)
Company than overlooking a problem. CEO, COO and CFO have
and the Company (as persons acting in concert) directing
been designated as Ombudsmen in the Policy. The Company
payment of interest at 10% per annum, for alleged delay in
has created a special email id to enable the employees to report
payment of consideration amount to NRIs/FIIs/OCBs
their concerns. The employees can even report their concerns
Connecting with shareholders | 75
to the Audit Committee directly. The Ombudsman who is responsible to submit his report to the Audit Committee does the investigation in the reported concerns. Disciplinary action, if
No person has been denied access to the Audit Committee. During the year no concern was reported under Whistleblower mechanism.
required, is determined by the Audit Committee. The reporting person can make appeal to the Board of Directors against the
iv) The Company has complied with all the mandatory
order of Audit Committee. The Whistleblower Policy also
requirements of Clause 49 of the Listing Agreements executed
contains mechanism of redressal available for an employee, if
with the Stock Exchanges. Comments on adoption of non-
he/she feels that he/she has been retaliated against due to
mandatory requirements are given at the end of this report.
disclosure of concern.
V. General Shareholder Information Details of last three Annual General Meetings Date
Location
August 9, 2005
B-10/4, Waluj MIDC Industrial Area,
Time 11.00 am
Special Resolutions Passed Nil
Aurangabad 431 136 Maharashtra, India August 18, 2006
E-1, Waluj MIDC Industrial Area,
11.00 am
Aurangabad 431 136 Maharashtra, India
Reappointment of Dr.Anand Agarwal, Whole time Director. Further issue of share capital.
July 13, 2007
E-1, Waluj MIDC Industrial Area,
11:30 am
Aurangabad 431 136 Maharashtra, India
Appointment of Pravin Agarwal, Whole-time Director. Change of Name of the Company to ‘Sterlite Technologies Limited’.
No other shareholders’ meeting was held during the year.
Means of Communication Quarterly Financial Results are published in the All-India
The Company also displays official news releases and the
Edition of The Business Standard or The Economic Times and
presentations on the website.
in the Aurangabad Edition of Sakal or Lokmat Times. Results are also posted on the Company’s website: www.sterlitetechnologies.com
76 |Sterlite Technologies Limited | Annual Report 2007-08
Management Discussion and Analysis is a part of the Annual Report.
Implementation of Code of Conduct The Company has adopted the ‘Code of Business Conduct &
Compliance with SEBI (Prohibition of Insider Trading) Regulations, 2002
Ethics’ for its employees at all levels including Senior
In pursuance of these Regulations, the Company has
Management and Directors. The Code has been effective from
formulated Insider Trading Code for the Employees and
April 1, 2005 and was circulated to all the employees and
Directors for dealing in shares of the Company. The Code was
Directors of the Company and has also been posted on the
implemented with effect from October 16, 2004. Various forms
Company’s website. The Code serves as a guide to the
have been designed to receive periodical information from the
employees of the Company to make informed and prudent
employees and the Directors of the Company, as required in
decisions and act on them. As required under Clause 49 of the
terms of these Regulations. Further, the trading window for
Listing Agreement, the affirmation of compliance with the Code
dealing in shares of the Company has been closed for the
from Directors and Senior Management personnel has been
Directors and employees of the Company as per the Insider
obtained for this financial year.
Trading Code in force in the Company.
Annual General Meeting Day, Date, Time
Friday, August 08, 2008 at 11.00 a.m.
Book Closure Dates: Friday, July 25, 2008 to Monday, July 28,
Venue
E-1, MIDC Waluj Aurangabad 431 136
2008 (both days inclusive)
Maharashtra, India
Listing of shares on Stock Exchanges
1. Adoption of Audited Accounts and
The equity shares of the Company are listed on Bombay
Agenda
other reports thereon for FY 2007-08 2. Declaration of final dividend for the financial year ended March 31, 2008. 3. Reappointment of Mr. Navin Agarwal as Director liable to retire by rotation.
Stock Exchange Limited, National Stock Exchange of India Limited. Application for delisting from Calcutta Stock Exchange is pending for approval. Annual listing fees for the financial year ended March 31, 2008 have been paid to Bombay Stock Exchange Limited and National Stock Exchange of India Limited. The Stock Codes of the Exchanges
4. Reappointment of Mr. Arun Todarwal
are as under:
as Director liable to retire by rotation. 5. Appointment of Statutory Auditors
Financial Calendar for financial year 2008-09 First Quarter Results
:
End of July, 2008
Half Yearly Results
:
End of October, 2008
Third Quarter Results
:
End of January, 2009
Fourth Quarter/ Annual Results :
Exchange
Code
BSE
532374
NSE
STRTECH
April/May, 2009
Connecting with shareholders | 77
Stock Price Data Stock Price data for the period April 1, 2007 to March 31, 2008 is as detailed below: Month
Monthly High (Rs.) NSE
Monthly Low (Rs.) NSE
Monthly High (Rs.) BSE
Monthly Low (Rs.) BSE
Apr-07
208.9
177.4
208.7
178.0
May-07
222.5
175.4
222.3
175.4
Jun-07
254.9
204.3
254.7
204.1
Jul-07
262.9
208.1
262.8
208.2
Aug-07
230.5
197.0
231.0
201.1
Sep-07
248.0
209.2
247.5
221.0
Oct-07
323.5
205.0
323.0
207.0
Nov-07
345.0
269.0
344.3
269.0
Dec-07
382.0
300.1
381.4
299.0
Jan-08
352.0
121.1
352.4
145.0
Feb-08
229.0
182.1
229.0
181.0
Mar-08
202.9
142.0
201.0
143.0
Sources: Data Compiled from BSE & NSE official website
78 |Sterlite Technologies Limited | Annual Report 2007-08
March 08
Feb 08
Jan 08
Dec 07
Nov 07
Oct 07
Oct 07
Sept 07
August 07
July 07
June 07
May 07
April 07
Indexed to 100 as on April 1, 2007
Stock Performance | The performance of the Company’s stock prices as against NSE NIFTY is given in the charts below:
Distribution of Share holding as on March 31, 2008 Range of Shares
No. of Shareholders
% of Shareholders
No. of Shares
% of Equity Capital
99,141
97.87
1,17,82,082
18.28
1,176
1.16
16,97,501
2.63
10001 to 20000
488
0.48
13,74,840
2.13
20001 to 30000
207
0.20
10,32,664
1.60
30001 to 40000
67
0.07
4,62,578
0.72
40001 to 50000
47
0.05
4,40,429
0.68
50001 to 100000
70
0.07
10,21,222
1.58
100001 & Above
98
0.10
4,66,56,931
72.37
1,01,294
100
6,44,68,247
100
1 to 5000 5001 to 10000
TOTAL
Equity holding pattern as on March 31, 2008 Category
As on March 31, 2008 No. of Shares
% of Equity Capital
2,90,83,609
45.11
Directors and their relatives
2,09,522
0.33
Life Insurance Corporation
42,58,785
6.61
2,43,865
0.38
205
0.00
Mutual Funds
38,96,827
6.04
Foreign Institutional Investors
38,25,677
5.93
7,40,609
1.15
49,86,887
7.74
79,796
0.12
170
0.00
Individuals (Public)
1,71,42,295
26.59
TOTAL
6,44,68,247
100
Promoters Group
Insurance Companies Unit Trust of India
NRI/ OCB/ Foreign Body Corporate / Foreign National Indian Bodies Corporate Banks Government Companies
Connecting with shareholders | 79
Dematerialisation of shares and liquidity
Karvy Computershare Private Limited, Hyderabad is Registrars
The Company’s equity shares are compulsorily traded in the
and Transfer Agents for both physical and electronic mode of
electronic form. As at March 31, 2008, 6,20,11,950 shares
transfer of shares. Transfer for shares held in the physical mode
representing 96.19% of total equity capital was held in
are approved on a 10 days cycle. Physical Shares sent for
electronic form. The shareholders can hold the shares in demat
transfer are duly transferred within 10-15 days of receipt of
form either through NSDL or CDSL. The ISIN number allotted to
documents, if found in order. Shares under objection are
the Company is INE089C01011.
returned within 7-10 days.
Unpaid / unclaimed dividend
Registrar & Transfer Agents
In terms of section 205A and 205C of the Companies Act,
Karvy Computershare Private Limited, Hyderabad is the
1956, the Company is required to transfer the amount of
Registrar and Transfer Agent of the Company.
dividend remaining unclaimed for a period of seven years from the date of transfer from the unpaid dividend account to the Investor Education and Protection Fund (IEPF). Unclaimed dividend(s) will be transferred to IEPF, as under:
Shareholders, beneficial owners and Depository Participants, (DPs) can send / deliver the documents / correspondence relating to the Company’s share transfer activity, etc to Karvy Computershare Private Limited at the following address:
Dividend for the year 2000-01:
November 4, 2008
Dividend for the year 2005-06:
September 24, 2013
(Unit–Sterlite Technologies Limited),
Dividend for the year 2006-07:
August 18, 2014
Plot No. 17 to 24, Vittalrao Nagar, Madhapur,
Karvy Computershare Private Limited
Hyderabad-500 081
Outstanding GDRs / ADRs / Warrants or any Convertible instruments, conversion date & likely impact on equity -
Tel: +91-40-23420818 / 828, Fax: +91-40-23420814 E-mail: einward.ris@karvy.com
There are no outstanding instruments convertible in equity as Shareholders’ correspondence should be addressed to the
on March 31, 2008.
Company’s Registrar and Transfer Agents at the above-
Share Transfer System
mentioned address. Members may also write to the Company
Two Directors and some Executives of the Company have been
Secretary at the Office of the Company as detailed below:
given powers to deal with all the matters related to transfers, transmission,
issuance
of
duplicate
share/debenture
certificates, split and/or consolidation requests. In addition, the Company Secretary and authorized officials of the Registrar and Transfer Agents of the Company have been given powers to endorse registration of transfers on share certificates.
Sandeep Deshmukh – Company Secretary Sterlite Technologies Limited 4th Floor Godrej Millennium, 9 Koregaon Road, Pune - 411 001 Maharashtra, India Phone: +91-20-30514000, Fax: +91-20-26138083 Email: sandeep.deshmukh@sterlite.com
The Company’s shares being in compulsory demat list are also transferred through the depository system. The Company
Registered Office:
has entered into agreements with both the depositories
E-1, Waluj MIDC Industrial Area, Aurangabad 431 136, Maharashtra, India.
NSDL & CDSL.
80 |Sterlite Technologies Limited | Annual Report 2007-08
Plant Locations Optical Fiber
E2, E3, MIDC, Waluj Aurangabad – 431136, India
Fiber Optic Cables
Survey No. 68/1, Rakholi Village Madhuban Dam Road, Silvassa - 396230 Union Territory of Dadra & Nagar Haveli, India
Copper Telecom Cables
Survey No. 209, Phase 2 Piparia Industrial Estate, Silvassa - 396240 Union Territory of Dadra & Nagar Haveli, India
Structured Data Cables
Survey No. 33/1/1 Waghdara Road, Dadra - 396191 Union Territory of Dadra & Nagar Haveli, India
Power Transmission Conductors
Survey No. 99, Rakholi Village Madhuban Dam Road, Silvassa - 396230 Union Territory of Dadra & Nagar Haveli, India PO Karanjwane, Nasarapur Velhe Road Off Pune Satara Highway, Taluka Velhe Pune – 412305, India Plot 2D, Sector 10 IIE SIDCUL, Haridwar – 249403, India
Non-mandatory requirements of Corporate Governance
Stock Exchanges, all Board Members and Senior Management
Mr. Anil Agarwal is the Chairman of the Board. As required
Personnel have affirmed compliance with the Code of Conduct
under non-mandatory requirements the Company has
and Business Ethics of the Company during the year ended
constituted Remuneration Committee. Further, the Company
March 31, 2008.
has adopted Whistle-blower mechanism, which has been discussed in this report. The Company’s policies as regards
For Sterlite Technologies Limited
adoption of other non-mandatory requirements shall be disclosed in this report from time to time.
Declaration
Place: Mumbai
As provided under Clause 49 of the Listing Agreement of the
Date: April 29, 2008
Dr. Anand Agarwal CEO & Whole-time Director
Connecting with shareholders | 81
Auditors’ Certificate On Corporate Governance
To The Members of Sterlite Technologies Limited We have examined the compliance of conditions of corporate governance by Sterlite Technologies Limited, for the year ended on March 31, 2008, as stipulated in clause 49 of the Listing Agreement of the said Company with stock exchanges. The compliance of conditions of corporate governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, and the representation made by Directors and the Management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the Management has conducted the affairs of the Company.
For S. R. Batliboi & Co.
Chartered Accountants
Vijay Bhatt Place: Mumbai Date: April 29, 2008
82 |Sterlite Technologies Limited | Annual Report 2007-08
Partner Membership No.: F-36647
Auditors’ Report
To The Members of Sterlite Technologies Ltd. (Formerly Known as Sterlite Optical Technologies Ltd.) 1. We have audited the attached Balance Sheet of Sterlite
1956;
Technologies Ltd. (‘the Company’) as at March 31, 2008
v. On the basis of the written representations received
and also the Profit and Loss account and the cash flow
from the directors, as on March 31, 2008, and taken on
statement for the year ended on that date annexed thereto.
record by the Board of Directors, we report that none of
These financial statements are the responsibility of the
the directors is disqualified as on March 31, 2008 from
Company’s management. Our responsibility is to express an
being appointed as a director in terms of clause (g) of
opinion on these financial statements based on our audit.
sub-section (1) of section 274 of the Companies Act,
2. We conducted our audit in accordance with auditing
1956.
standards generally accepted in India. Those Standards
vi. As stated in Note no.8 of Schedule 21, provision for
require that we plan and perform the audit to obtain
liability against excise/customs is considered adequate
reasonable assurance about whether the financial
by the management based on the current status and the
statements are free of material misstatement. An audit
legal advice received by them. In the event the decision
includes examining, on a test basis, evidence supporting
of the Hon`ble Supreme Court goes against the
the amounts and disclosures in the financial statements. An
Company on any of the grounds of appeal, additional
audit also includes assessing the accounting principles
provision against the said demand may be required.
used and significant estimates made by management, as
Pending disposal of the matter by the Hon`ble Supreme
well as evaluating the overall financial statement
Court, the amount of additional excise/customs duty, if
presentation. We believe that our audit provides a
any, is currently unascertainable.
reasonable basis for our opinion.
vii. In our opinion and to the best of our information and
3. As required by the Companies (Auditor’s Report) Order,
according to the explanations given to us, the said
2003 (as amended) issued by the Central Government of
accounts give the information required by the
India in terms of sub-section (4A) of Section 227 of the
Companies Act, 1956, in the manner so required and
Companies Act, 1956, we enclose in the Annexure a
subject to the effects of our observations given in para
statement on the matters specified in paragraphs 4 and 5
vi above give a true and fair view in conformity with the
of the said Order.
accounting principles generally accepted in India; a) in the case of the Balance Sheet, of the state of
4. Further to our comments in the Annexure referred to above,
affairs of the Company as at March 31, 2008;
we report that: i.
We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;
ii. In our opinion, proper books of account as required by
b) in the case of the Profit and Loss Account, of the Profit for the year ended on that date; and c) in the case of Cash Flow Statement, of the Cash Flows for the year ended on that date.
law have been kept by the Company so far as appears
For S.R. Batliboi & Co.
from our examination of those books;
Chartered Accountants
iii. The Balance sheet, Profit and Loss account and Cash Flow Statement dealt with by this report are in agreement with the books of account ; iv. In our opinion, the Balance sheet, Profit and Loss
per Vijay N Bhatt Place: Mumbai Date: April 29, 2008
Partner Membership No.: F-36647
account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act,
Connecting with Shareholders | 83
Annexure referred to in paragraph 3 of our report of even date Re: Sterlite Technologies Ltd. (‘the Company’) (i)
(a)
(b)
The Company has maintained proper records
of inventory and fixed assets and for the sale of goods.
showing full particulars, including quantitative details
During the course of our audit, no major weakness has
and situation of fixed assets.
been noticed in the internal control system in respect of
The Company has a program for phased physical
these areas.
verification of all its fixed assets over a period of
(v)
As informed, the Company has not entered into any
three years, which, in our opinion, is reasonable
contracts or arrangements to which the provisions of
having regard to the size of the Company and the
section 301 of the Companies Act, 1956 apply. As a result,
nature of its assets. Accordingly, certain fixed assets
provisions of paragraphs 4(v) (a) and (b) of the Companies
have been physical verified by the management
(Auditor’s Report) Order, 2003 (as amended) are not
during the year and no material discrepancies were
applicable to the Company.
noticed on such verification. (vi) The Company has not accepted any deposits from the (c)
There was no substantial disposal of fixed assets
public.
during the year. (vii) In our opinion, the Company has an internal audit system (ii)
(a)
The management has conducted physical verification
commensurate with the size and nature of its business.
of inventory at reasonable intervals during the year. (b)
The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.
(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956, and are of the opinion that prima facie, the
(c)
The Company is maintaining proper records of inventory and no material discrepancies were
prescribed accounts and records have been made and maintained.
noticed on physical verification. (ix) (a) (iii) (a)
As informed, the Company has not granted any loans,
Undisputed statutory dues including provident fund, investor
secured or unsecured to companies, firms or other
education
and
protection
fund,
or
employees’ state insurance, income tax, sales tax,
parties covered in the register maintained under
wealth tax, service tax, customs duty, excise duty,
section 301 of the Companies Act, 1956. As a result,
cess have generally been regularly deposited with
provisions of paragraphs 4(iii) (b), (c) and (d) of the
the appropriate authorities.
Companies (Auditor’s Report) Order, 2003 (as amended) are not applicable to the Company.
(b) According to the information and explanations given to us, no undisputed amounts payable in respect of
(b)
As informed, the Company has not taken any loans,
provident fund, investor education and protection
secured or unsecured from companies, firms or other
fund, employees’ state insurance, income-tax,
parties covered in the register maintained under
wealth-tax, service tax, sales-tax, customs duty,
section 301 of the Companies Act, 1956. As a result,
excise duty, cess and other undisputed statutory
provisions of paragraphs 4(iii) (f) and (g) of the
dues were outstanding, at the year end, for a period
Companies (Auditor’s Report) Order, 2003 (as
of more than six months from the date they became
amended) are not applicable to the Company. (iv) In our opinion and according to the information and
payable. (c)
According to the records of the Company, the dues
explanations given to us, there is an adequate internal
outstanding of income-tax, sales-tax, wealth-tax,
control system commensurate with the size of the
service tax, customs duty, excise duty and cess on
Company and the nature of its business, for the purchase
84 |Sterlite Technologies Limited | Annual Report 2007-08
account of any dispute, are as follows: Amount Period to which (Rs. in Crores) the amount relates
Name of the Statute
Nature of dues
Central Sales Tax Act
Sales Tax
0.59
1997-01
Sales Tax Service Tax Service Tax Custom Duty Custom Duty Excise Duty Excise Duty Excise Duty
0.69 0.35 0.45 69.60 4.92 31.75 34.07 188.67
2003-04 2001-03 1999-03 1999-03 2001-03 1994-07 1994-03 2001-02
Service Tax Customs Act, 1962 Central Excise Act, 1944
Forum where dispute is pending Sales Tax Appellate Tribunal Commissioner Commissioner CESTAT CESTAT Commissioner Commissioner CESTAT Supreme Court
The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.
(xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.
(xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a banks or financial institution. The Company continues to dispute amounts aggregating to Rs.18.87 Crores debited by one of the bankers in the earlier year, towards import consignments under Letter of Credit not accepted by the Company, owing to discrepancies in documents; at this stage we are unable to determine whether there is a default in repayment of dues to the Lender.
(xvi) Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.
(x)
(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. (xiii) In our opinion, the Company is not a chit fund or a nidhi/ mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor’s Report) Order, 2003 (as amended) are not applicable to the Company. (xiv) In respect of dealing/trading in shares, securities, debentures and other investments, in our opinion and according to the information and explanations given to us, proper records have been maintained of the transactions and contracts and timely entries have been made therein. The shares, securities, debentures and other investments have been held by the Company, in its own name.
(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment. (xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956. (xix) The Company does not have any outstanding debentures during the year. (xx) The Company has not raised any money through public issue during the year. (xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit. For S.R. Batliboi & Co. Chartered Accountants per Vijay N Bhatt Place: Mumbai Date: April 29, 2008
Partner Membership No.: F-36647
Connecting with Shareholders | 85
Balance Sheet
(Rs. in Crores)
Schedule I.
As at
As at
March 31, 2008
March 31, 2007
SOURCES OF FUNDS 1. Shareholders' Funds Share Capital
1
Upfront Payment against Share Warrants
32.23
30.80
–
2.80 1.87
Employee Stock Option Outstanding
2
5.73
Reserves & Surplus
3
501.55
381.16 539.51
416.63
2. Loan Funds Secured Loans
4
632.65
565.39
Unsecured Loans
5
30.54
21.27 663.19
586.66
38.13
10.25
1,240.83
1,013.54
3. Deferred Tax Liability (Net) (Refer Note No 3 of Schedule No.21) Total II. APPLICATION OF FUNDS 1. Fixed Assets
6
Gross Block
918.88
792.50
Less: Accumulated Depreciation & Impairment
395.00
358.04
Net Block
523.88
434.46
36.22
52.76
Capital Work-in-Progress including Capital Advances (Refer Note 32 of Schedule No. 21) 2. Investments
7
560.10
487.22
6.01
6.31
3. Current Assets, Loans & Advances Inventories
8
219.39
119.99
Sundry Debtors
9
519.10
433.21
Cash and Bank Balances
10
89.07
78.93
Loans and Advances
11
168.91
104.39
996.47
736.52
Less: Current Liabilities & Provisions: Current Liabilities
12
303.53
199.76
Provisions
13
18.22
16.75
321.75
216.51
Net Current Assets Total Notes to Accounts
674.72
520.01
1,240.83
1,013.54
21
The schedules referred to above and notes to accounts form an integral part of the Balance Sheet As per our attached report of even date
For and on behalf of the Board
For S.R. Batliboi & Co. Chartered Accountants
Pravin Agarwal Whole-time Director
Dr. Anand Agarwal CEO & Whole-time Director
Anupam Jindal Chief Financial Officer
Sandeep Deshmukh Company Secretary
Per Vijay N. Bhatt Partner Membership Number: F- 36647
Place: Mumbai Dated: April 29, 2008
86 |Sterlite Technologies Limited | Annual Report 2007-08
Profit and Loss Account
(Rs. in Crores)
Schedule I. INCOME Turnover (Gross) Less: Excise Duty Turnover (Net) Other Income
Year Ended March 31, 2008
14 Total
II. EXPENDITURE Manufacturing & other expenses Personnel Selling & Distribution Administration & General Research & Development Interest & Finance charges Provision for Amortization
15 16 17 18 19 20
Less: Pre operative expenses of projects (Refer Note 34 of schedule 21) Profit before depreciation & taxation Depreciation & Impairment (Including Rs.0.21 Crore (previous year Nil) for Impairment loss) Profit before taxation Provision for taxation - Current Tax for the year - Minimum Alternate Tax Credit Eligible for Set Off (Refer Note 7 of schedule 21) - Provision for earlier years - Deferred Tax (Net) (Refer Note 3 of schedule 21) - Fringe Benefit Tax (Includes Rs.0.15 crore for earlier year) Profit after taxation Balance brought forward from previous year Amount available for appropriations Appropriations Transfer to General Reserve Proposed Dividend on Equity Shares Rs.1.00 Per Share (Previous Year Rs.0.75 Per Share) Corporate Tax on Proposed Dividend Transfer on amalgamation of Subsidiaries Balance carried to Balance Sheet Earnings Per Share (Face value Rs.5 each) (Refer note 19 of schedule 21) Basic Diluted Notes to Accounts
Year Ended March 31, 2007
1,771.28 85.49 1,685.79 4.11 1,689.90
1,300.87 102.72 1,198.15 5.19 1,203.34
1,344.05 41.89 57.53 36.74 4.75 43.65 – 1,528.61
995.58 29.82 27.62 29.81 3.34 34.50 1.82 1,122.49
6.32 1,522.29 167.61
3.76 1,118.73 84.61
37.17 130.44
31.57 53.04
14.66 (14.66)
6.04 (6.04)
0.77 27.88 1.07 100.72 250.08 350.80
– 1.72 0.46 50.86 208.01 258.87
7.55 6.45
2.54 4.62
1.10 – 335.70 350.80
0.79 0.84 250.08 258.87
16.08 15.46
8.59 7.83
21
The schedules referred to above and notes to accounts form an integral part of the Profit and Loss Account As per our attached report of even date
For and on behalf of the Board
For S.R. Batliboi & Co. Chartered Accountants
Pravin Agarwal Whole-time Director
Dr. Anand Agarwal CEO & Whole-time Director
Anupam Jindal Chief Financial Officer
Sandeep Deshmukh Company Secretary
Per Vijay N. Bhatt Partner Membership Number: F- 36647
Place: Mumbai Dated: April 29, 2008
Connecting with Shareholders | 87
Schedules forming part of the Balance Sheet (Rs. in Crores)
As at March 31, 2008 SCHEDULE 1
As at March 31, 2007
SHARE CAPITAL
Authorized 9,00,00,000 (Previous Year 9,00,00,000) Equity Shares of Rs. 5 each.
45.00
45.00
45.00
45.00
32.23
30.80
32.23
30.80
Issued, Subscribed & Paid up 6,44,68,247 (Previous Year 6,15,94,567) Equity Shares of Rs. 5 each fully paid - up Total Of the above: 1) 5,59,12,559 (Previous Year 5,59,12,559) equity shares of Rs. 5 each were allotted to the shareholders of Sterlite Industries (I) Ltd. upon demerger pursuant to the scheme of arrangement sanctioned by the Honorable High Court of Judicature at Bombay. 2) During the year 28,00,000 (Previous Year 28,00,000) Share warrants were converted into 28,00,000 Equity Shares of Rs.5 each fully paid up. No Warrants are outstanding as on March 31, 2008 with option to exercise equity conversion. (Previous year 28,00,000 warrants) 3) During the year 73,680 (Previous Year Nil) shares were issued to employees of the Company under ESOP Scheme. 4) For Stock Options outstanding details Refer Note 10 of Schedule 21.
SCHEDULE 2
EMPLOYEE STOCK OPTION OUTSTANDING
Balance as per last Balance Sheet
1.87
–
Add: Employees Stock Option Expenses For the year
4.48
1.87
Less: Transferred to Share Premium Account
0.62
–
Total
5.73
1.87
(Refer Note 10 of schedule 21)
SCHEDULE 3
RESERVES & SURPLUS
Share Premium Balance as per last Balance Sheet Add: Transfer from Employee Stock Option Add: Received During the year (Refer Note 20 of schedule 21)
57.50
30.90
0.62
–
26.60
26.60 84.72
57.50
General Reserve Balance as per last Balance Sheet Add: Transfer from Profit and Loss account
73.54
58.04
7.55
2.54
Add: Deferred Tax Asset arised on Amalgamation of Sterlite Telelink Ltd
–
8.90
Add: Deferred Tax Asset arised on Amalgamation of Sterlite Telecom Ltd
–
3.56
Add: Transfer on Amalgamation of Sterlite Telecom Ltd
–
0.50 81.09
88 |Sterlite Technologies Limited | Annual Report 2007-08
73.54
Schedules forming part of the Balance Sheet (Rs. in Crores)
As at March 31, 2008 SCHEDULE 3
As at March 31, 2007
RESERVES & SURPLUS (Contd.)
Capital Reserve Balance as per last Balance Sheet Add: Transfer on Amalgamation of Sterlite Telelink ltd
0.04
–
–
0.04 0.04
0.04
Profit & Loss Account Surplus as per Profit & Loss Account
335.70
250.92
Add: Transfer on Amalgamation of Sterlite Telelink ltd
–
9.43
Add: Transfer on Amalgamation of Sterlite Telecom Ltd
–
(10.27)
Total
SCHEDULE 4
335.70
250.08
501.55
381.16
531.69
410.04
50.00
132.50
0.15
–
50.81
22.85
632.65
565.39
SECURED LOANS
(A) Working Capital Loans From Banks (B) Term Loans From Banks (C) Interest Accrued and Due (D) Other Loans From Banks Total Notes: A. Working capital loans and Other loans from Banks are secured by hypothecation of Raw materials, Work in Progress, Finished Goods & Sundry Debtors and further secured by second charge on all immovable and movable fixed assets of the Company both present and future. B. Term loans are secured by first charge by deposit of title deed of immovable properties of the Company and hypothecation of movable properties of the Company both present and future.
SCHEDULE 5
UNSECURED LOANS
aSales Tax Loan (Interest Free) [(Due within one year Rs. 2.20 Crores)
20.54
20.72
Others
10.00
0.55
Total
30.54
21.27
(Previous Year Rs. Nil Crore)] Short Term Loans
Connecting with Shareholders | 89
90 |Sterlite Technologies Limited | Annual Report 2007-08
15.71
– 75.90
–
–
*** Addition on Purchase of " Power Transmission line" Business.
** Addition on amalgamation of Sterlite Telelink Limited.
–
–
–
–
–
–
–
–
62.37
* Addition of Fixed assets of ICOMM Tele Limited (formerly ARM Limited)
570.16
PREVIOUS YEAR
–
–
– –
5.69
69.51
137.13
0.58
0.96
4.42
0.61
0.95
1.29
103.40
17.62
1.61
–
1.15
10.75
–
0.43
–
–
–
–
–
0.36
9.96
21.81
792.50
918.88
0.86
4.43
31.15
4.41
11.74
6.13
734.41
86.90
17.04
–
223.25
298.35
–
0.69
9.44
1.04
6.96
1.46
263.39
15.33
0.04
44.06
–
–
–
–
–
–
–
–
–
–
–
of STLL**
Amalgamation
31.57
36.96
0.14
0.42
1.38
0.21
0.95
0.38
30.49
2.87
0.12
–
Year
As at
IMPAIRMENT
–
0.53
0.21
–
0.21
–
–
–
–
–
–
–
–
298.35
335.10
0.14
0.90
10.82
1.25
7.91
1.84
293.88
18.20
0.16
–
59.69
59.69
–
–
1.14
–
–
–
58.55
–
–
As at
As at
NET BLOCK As at
(Rs. in Crores)
–
–
0.05
–
–
0.16
–
–
–
Year
–
0.21
59.69
59.90
–
–
1.14
0.05
–
–
58.71
–
–
–
434.46
523.88
0.72
3.53
19.19
3.11
3.83
4.29
381.82
68.70
16.88
21.81
434.46
0.28
3.21
16.15
2.76
3.83
3.38
309.07
54.31
25.35
16.12
the 31.03.2008 31.03.2008 31.03.2007
As at During
tions 31.03.2008 01.04.2007
Addition on For the Deduc-
DEPRECIATION/Amortization
–
792.50
TOTAL
0.28
–
–
–
–
"PTL" Business***
As at
tions 31.03.2008 01.04.2007
As at
Software/Licences
–
–
–
–
–
–
–
–
–
of STLL**
tions
Addi- Deduc-
–
3.90
26.73
3.80
–
–
–
–
–
Tele Limited*
Purchase of
Addition on
GROSS BLOCK AT COST Addition on
from ICOMM Amalgamation
Additions
INTANGIBLE ASSETS
Vehicles
Electric Fittings
Office Equipments
Equipments
10.79
4.84
Data Processing
Furniture & Fixture
69.64
631.01
Building
Plant & Machinery
16.12
25.39
Freehold Land
01.04.2007
As at
FIXED ASSETS
Leasehold land
TANGIBLE ASSETS
of Assets
Nature
SCHEDULE 6
Schedules forming part of the Balance Sheet
Schedules forming part of the Balance Sheet (Rs. in Crores)
As at March 31, 2008 SCHEDULE 7
As at March 31, 2007
INVESTMENTS
Long Term Investment (at Cost) Other than Trade (Unquoted) In Equity Shares of Subsidiary Companies
6.01
0.01
–
1.30
–
5.00
6.01
6.31
60,05,200 (Previous Year 5,200) Equity shares of Sterlite Infrastructure Private Limited of Rs.10 each fully paid up. Current Investment (at Cost or Market Value whichever is lower) In Units of Mutual Funds (Quoted) (13,01,091.153) units of Rs.10/-each of ICICI Prudential Institutional Liquid Plan of ICICI Prudential Mutual fund (50,00,000) units of Rs.10/- each of Reliance Fixed Horizon Fund II of Reliance Mutual Fund Total NOTE The following Current Investments were purchased and sold during the year :
Mutual Fund Units DBS Chola Freedom Income STP-Inst.-Cum-Org
Face Value (Rs.)
Units (Nos.)
Amount in Rs.
10
8,13,107
1,00,00,000
Reliance Liquidity fund - Daily Dividend Reinvestment Option
10
3,50,82,625
35,09,35,008
Reliance Liquid fund -Treasury Plan - Institutional Option-Growth Option
10
5,09,848
1,00,04,385
ICICI Prudential Institutional Liquid Plan - Super institutional Growth
10
6,22,72,206
69,99,70,211
JM Liquidity I P Growth
10
7,91,427
1,00,05,145
Sahara Liquid fund VP Growth
10
18,543
2,56,26,338
1,04,450
51,04,450
Retail Option-Growth
10
6,23,95,190
72,53,71,454
FIEDILITY Cash Fund - Instl - Gr
10
19,04,272
2,00,51,987
Kotak Liquid Inst premium plan - Growth
10
1,07,57,742
16,46,46,798
Birla Cash Plus - Institutional - Growth
10
6,55,93,127
88,17,06,138
Principal cash management fund Liquid option-Instl. Plan - Growth Plan
10
51,68,987
6,51,55,998
Sahara Fix income10 Templeton Floating Rate INCOME FUND Short Term Plan
Lotus India Liquid Fund - Institutional Growth
10
41,49,625
4,50,39,779
LIC MF Liquid Fund - Growth Plan
10
5,12,56,834
71,82,49,324
DWS INSTA CASH PLUS FUND - Institutional Plan - Growth
10
2,45,85,584
31,73,52,853
ABN AMRO Money Plus Fund - Institutional Plan - Growth
10
2,49,34,934
29,13,80,959
UTI Liquid Cash Plan Institutional - Growth Option
10
3,17,147
41,55,89,482
Connecting with Shareholders | 91
Schedules forming part of the Balance Sheet (Rs. in Crores)
As at March 31, 2008 SCHEDULE 8
INVENTORIES
(At cost or net realisable value, whichever is lower) Raw Materials (Including Goods in Transit Rs.16.50 Crores) (Previous Year 1.17 Crores) Work-in-Progress Finished Goods Stores, Spares, Packing Materials & Others Total
SCHEDULE 9
As at March 31, 2007
105.31 39.89 53.09 21.10 219.39
37.44 29.37 42.25 10.93 119.99
51.73 19.90 71.63 19.90 51.73 467.37 519.10
93.03 19.65 112.68 19.65 93.03 340.18 433.21
0.10
0.08
1.42 86.66 0.59 –
12.15 65.88 0.49 0.15
0.30 89.07
0.18 78.93
SUNDRY DEBTORS (Unsecured)
(a) Debts Outstanding for a period exceeding 6 months: - Considered good - Considered doubtful Less: Provision for Doubtful Debts (b) Others - Considered good Total
SCHEDULE 10 CASH & BANK BALANCES Cash in hand Balance with Scheduled Banks in (i) Current Accounts (ii) Deposit Accounts (iii) Dividend Accounts Cheques in Hand Balances with Non Scheduled Banks in (i) Current Accounts (*) Total * Balance with Non Scheduled banks is maintained with: Balance with Industrial Bank of China Rs.0.05 Crore (Previous year Rs.0.03 Crore) (Maximum Amount Outstanding During the year Rs.0.24 Crore) (Previous year Rs.0.03 Crore) Balance with Dubai Bank Rs.0.05 Crore (Previous year Rs.0.04 Crore) (Maximum Amount Outstanding During the year Rs.0.07 Crore) (Previous year Rs.0.25 Crore) Balance with Bangkok Bank PCL Rs.0.20 Crore (Previous year Rs.0.11 Crore) (Maximum Amount Outstanding During the year Rs.0.13 Crore) (Previous year Rs.0.35 Crore)
92 |Sterlite Technologies Limited | Annual Report 2007-08
Schedules forming part of the Balance Sheet (Rs. in Crores)
As at March 31, 2008
As at March 31, 2007
SCHEDULE 11 LOANS & ADVANCES (Unsecured Considered Good) To Subsidiary Companies
0.30
–
–
2.50
Advances recoverable in cash or in kind or for value to be received
71.73
65.89
Balances with Central Excise Authorities
47.48
15.33
3.90
2.46
–
8.51
23.91
9.25
4.13
0.04
17.46
0.41
168.91
104.39
1.16
40.18
–
–
234.69
103.73
Interest accrued but not due on Loans
4.59
1.49
Unclaimed Dividend
0.59
0.49
Sundry Deposits
0.35
0.26
Advance from Customers
44.13
39.83
Other Liabilities
18.02
13.78
303.53
199.76
For Contingencies
9.50
9.50
For Employee Benefits
1.17
1.84
Proposed Dividend Equity Shares
6.45
4.62
Corporate Tax on Proposed Dividend
1.10
0.79
18.22
16.75
Share Application Money (Pending allottment)
Deposits - Others Income Tax - Advance Tax and Tax Deducted at Source (Net of Provisions) Minimum Alternate Tax Credit Entitlement Interest accured on Investment Other Advances Total
SCHEDULE 12 CURRENT LIABILITIES Acceptances Sundry Creditors (i) Micro, medium and Small Enterprises (Refer note 31 of Schedule 21) (ii) Others
Total
SCHEDULE 13 PROVISIONS
Total Note :
The Company had made a provision of Rs.9.50 Crores towards contingencies in the earlier years against various disputed claims against the Company as described in Note 29 of Schedule 21, the timing and quantum of which is presently unascertainable.
Connecting with Shareholders | 93
Schedules forming part of the Profit and Loss Account (Rs. in Crores)
Year Ended March 31, 2008
Year Ended March 31, 2007
SCHEDULE 14 OTHER INCOME Income from Mutual Fund
0.78
0.04
Profit on Sale of Asset
–
0.01
Unclaimed Liablities written back
–
0.52
1.76
–
Provision no longer required
–
2.05
Gain on Prepayment of Deferred Sales tax Liablity (Refer Note 9 of Schedule 21)
–
0.35
Miscellaneous Income
1.57
2.22
Total
4.11
5.19
1,231.59
876.34
Interest on Income Tax Refund
SCHEDULE 15 MANUFACTURING & OTHER EXPENSES Raw materials consumed Decrease/ (Increase) in stock Opening Stock Work-in-Progress *
29.37
22.27
Finished Goods**
42.25
87.62
71.62
109.89
Work-in-Progress
39.89
29.37
Finished Goods
53.09
42.25
Closing Stock
92.98 Decrease/ (Increase) in stock
71.62 (21.36)
38.27
1.90
(6.41)
Stores & Spares
24.88
15.94
Power, Fuel & Water
39.97
27.37
Excise Duty on stocks
Repairs and Maintenance – Building
0.92
0.42
– Machinery
6.87
4.77
– Others
0.01
0.39
Carriage Inward
4.07
3.71
Packing Material
41.20
27.17
Other Manufacturing Expenses
14.00
7.61
1,344.05
995.58
Total
*Includes Rs.Nil (Previous Year 15.71 Crores) opening stock transfer on acqusition of "Power Transmission Line" business from Sterlite Industries (I) Ltd.and Rs.Nil (Previous Year 0.86 Crore) Opening Stock Transfer upon amalgamation of Sterlite Telelink Ltd. **Includes Rs.Nil (Previous Year 53.80 Crores) opening stock transfer on acqusition of "Power Transmission Line" business from Sterlite Industries (I) Ltd.and Rs.Nil (Previous Year 1.01 Crores) Opening Stock Transfer upon amalgamation of Sterlite Telelink Ltd.
94 |Sterlite Technologies Limited | Annual Report 2007-08
Schedules forming part of the Profit and Loss Account (Rs. in Crores)
Year Ended March 31, 2008
Year Ended March 31, 2007
SCHEDULE 16 PERSONNEL Salaries, Wages, Bonus & Commission Contribution to Provident Fund and Superannuation Funds Gratuity Expenses (Refer Note 21 of Schedule 21) Employees' Welfare & Other Amenities Employees Stock Option Expenses (Refer Note 10 of Schedule 21) Total
32.27 1.86 (0.19) 3.47 4.48 41.89
22.28 1.20 0.32 4.15 1.87 29.82
10.31 3.26 40.86 3.10 57.53
7.98 0.54 15.70 3.40 27.62
1.50 1.70 0.68 9.39 0.08 – 0.82 0.25 0.11 22.21 36.74
0.81 2.20 0.75 6.74 0.12 0.33 – – 0.05 18.81 29.81
Salaries, Wages, Bonus & Commission
0.93
0.84
Stores & Spares
0.30
0.02
Raw materials consumed
2.04
1.73
Rates & Taxes
1.06
0.38
General Expenses
0.42
0.37
Total
4.75
3.34
6.77
3.97
37.64
29.52
5.73
4.06
50.14
37.55
6.49
3.05
43.65
34.50
SCHEDULE 17 SELLING & DISTRIBUTION Sales Commission ( Other than Sole Selling Agent) Sales Promotion Carriage Outward Other Expenses Total
SCHEDULE 18 ADMINISTRATION & GENERAL Rent Insurance Rates & Taxes Conveyance & Travelling Expenses Loss on sale of Fixed Assets Loss from Management of ICOMM Tele Limited Bad Debts Written Off Provision for Doubtful Debts Directors Sitting Fee and Commission General Expenses Total
SCHEDULE 19 RESEARCH & DEVELOPMENT
SCHEDULE 20 INTEREST & FINANCE CHARGES : (Net) On Fixed Loans Others Bank charges Less: Interest Received on Customers & Fixed Deposits [Tax Deducted at Source Rs.1.49 Crores (previous year Rs.0.63 Crore)) Total
Connecting with Shareholders | 95
Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS 1.
Nature of Operations The Company is a manufacturer of Power Transmission and Telecom products in India. Telecom Business includes integrated Optical Fiber, Telecom Cables (Fiber Optic Cables, Copper Telecom Cables & Structured Data Cables), access equipments and integrated management business.
2.
Significant Accounting Policies (a) Basis of Preparation of Financial Statements The financial statements have been prepared to comply in all material respects with the notified Accounting Standards by Companies Accounting Standard Rules 2006 and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis of accounting except in case of assets for which impairment is carried out. The accounting policies have been consistently applied by the Company. (b) Use of Estimates The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting year. Difference between the actual result and estimates are recognized in the year in which the results are known/ materialized. (c) Fixed Assets Fixed Assets are stated at cost (net of Cenvat) less accumulated depreciation and impairment. Cost comprises of the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Expenditure during construction period (including financing cost relating to borrowed funds for construction or acquisition of fixed assets) incurred on projects under implementation are treated as Pre-operative expenses, pending allocation to the assets, and are included under “Capital work in Progress”. (d) Depreciation (i) Depreciation on Fixed Assets is provided on straight line method at the rates specified in Schedule XIV of the Companies Act, 1956. Depreciation on fixed assets acquired on amalgamation of the erstwhile Sterlite Telelink Limited is provided on written down value method at the rates specified in Schedule XIV of the Companies Act, 1956. (ii) Cost of leasehold land is amortized in proportion to the period of lease. (iii) Cost of acquired intangible assets is amortized over a period of five years. (e) Impairment of Assets (i) The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. (ii) After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. (iii) A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. (f) Investments Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined for category of investments. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments. (g) Inventories Inventories of raw material, packing material, work –in – process and finished goods are valued at cost or net realizable value, whichever is lower, except for scrap which is valued at net realizable value. Cost is ascertained on a weighted average cost basis. Cost of finished goods includes the cost of materials consumed, manufacturing overheads & excise duty.
96 |Sterlite Technologies Limited | Annual Report 2007-08
Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. (h) Foreign Currency Transactions (i) Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. (ii) Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. (iii) Exchange differences arising on the settlement of monetary items or on reporting Company's monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise. (iv) The premium or discount arising at the inception of forward exchange contracts is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the year in which the exchange rates change. None of the forward exchange contracts are taken for trading or speculation purpose. (i)
Borrowing Costs Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.
(j)
Revenue Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Sale of Goods Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales include excise duty, sale of scrap and are net of sales tax and quantity discount. Interest Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.
(k) Retirement and other Employee Benefits (i) Retirement benefits in the form of Provident Fund & Superannuation Fund is a defined contribution scheme and the contributions are charged to the Profit & Loss Account of the year when the contributions to the respective funds are due. The Company has no other obligation other than the contributions payable. (ii) Gratuity liability is a defined benefit obligation and are provided for on the basis of an actuarial valuation on Projected Unit Credit Method calculated at the end of each financial year. (iii) Leave encashment liability is provided for based on actuarial valuation done as per Projected Unit Credit Method calculated at the end of each financial year. (iv) Actuarial gains / losses are immediately taken to profit and loss account and are not deferred. (l)
Employee Stock Option: Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by The Institute of Chartered Accountants on India. The Company measures compensation cost relating to employee stock options using the fair value method. Compensation expense is amortized over the vesting period of the option on a straight line basis.
(m) Research and Development Revenue expenditure on research and development (R&D) is expensed as incurred. (n) Export Incentives
Connecting with Shareholders | 97
Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) Advance licences are issued to the Company under the Advance License Scheme [Duty Exemption Entitlement Certificate (DEEC Scheme)]/duty entitlement credited under the Duty Entitlement Pass Book Scheme (DEPB Scheme)/Target Plus Entitlement Scheme on export of the goods manufactured by it. Wherever export sales are made by the Company, pending receipt of imported duty-paid raw materials under the DEPB scheme, the higher cost of domestic raw materials actually consumed for the purpose of such exports is compensated and/or matched by accruing the value of the benefit under the DEPB scheme. (o) Taxes on Income Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is determined as the amount of tax payable in respect of taxable income for the year based on provisions of Income Tax Act, 1961. Deferred income tax reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In case of unabsorbed depreciation and carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits. At each balance sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realized. The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. MAT credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. In the year in which the Minimum Alternative Tax (MAT) credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the profit and loss account and shown as MAT Credit Entitlement. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal Income Tax during the specified period. (p) Expenditure on new projects and substantial expansion Expenditure directly relating to construction activity is capitalized. Indirect expenditure incurred during construction period is capitalized as part of the indirect construction cost to the extent to which the expenditure is related to construction or is incidental thereto. Income earned during construction period is deducted from the total of the indirect expenditure. (q) Operating Leases Assets taken on Lease under which all significant risks and rewards of ownership are effectively retained by the lessor are classified as Operating Leases. Lease payments under Operating Leases are recognized on straight line basis over the lease period unless another systematic basis is more representative of the time pattern of the users benefit. (r) Earnings Per Share The Company reports basic and diluted earnings per share in accordance with Notified AS 20 under the Companies (Accounting Standards) Rules, 2006 issued by The Institute of Chartered Accountants of India on ‘Earnings Per Share’. Basic earning per share is computed by dividing the net profit or loss for the period attributable to equity shareholders after deducting attributable taxes by the weighted average number of Equity shares outstanding during the period. Diluted earnings per share is computed by dividing the net profit or loss for the period by the weighted average number of equity shares outstanding during the period. Both profit for the year and weighted average number of shares are adjusted for the effects of all diluted potential equity shares except where the results are anti- dilutive.
98 |Sterlite Technologies Limited | Annual Report 2007-08
Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) (s) Cash and Cash equivalents Cash and Cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. (t) Segment Reporting Policies The Company’s operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The Company generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices. Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs. The Corporate and Other segment includes general corporate income and expense items which are not allocated to any business segment. (u) Provisions, Contingent Liabilities and Contingent Assets As per Notified AS 29 under the Companies (Accounting Standards) Rules, 2006, Provisions, Contingent Liabilities and Contingent Assets, issued by the Institute of Chartered Accountants of India, the Company recognizes provisions (without discounting to its present value) only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation as and when a reliable estimate of the amount of the obligation can be made. No provision is recognized for i) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or ii)
Any present obligation that arises from past events but is not recognized because• It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or • A reliable estimate of the amount of obligation cannot be made.
Such obligations are disclosed as Contingent Liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made. Contingent Assets are neither recognized nor disclosed in the financial statements since this may result in the recognition of income that may never be realized. (v) Commodity Hedging Transactions The Commodity Hedging Contracts are accounted on the date of their settlement and realized gain / (loss) in respect of settled Contracts are recognized in the Profit and Loss accounts.
3.
Deferred Tax a) The break-up of closing net deferred tax liability is as under: Particulars
(Rs. in Crores)
Current Year
Previous Year
Deferred Tax Liability (a) Depreciation
63.24
61.98
0.02
1.66
6.76
5.34
17.97
47.96
(c) On Employee Benefits
0.40
0.08
Net Deferred Tax Liability
38.13
10.25
(b) On export benefit Deferred Tax Assets (a) On provision for doubtful debts. (b) On unabsorbed tax depreciation and carried forward losses.
Connecting with Shareholders | 99
Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) b)
Deferred tax charged for the year
(Rs. in Crores)
Particulars
Current Year
Opening Deferred Tax Liability Add: Net Deferred Tax balances taken over upon Merger of Sterlite Telelink Ltd. & Sterlite Telecom Ltd. Less: Deferred Tax Asset arising on amalgamation of Sterlite Telelink Limited & Sterlite Telecom Limited adjusted to general reserves Subtotal Less: Closing Deferred tax liability Deferred tax charged for the year
Previous Year
10.25
18.36
–
2.62
– 10.25 38.13 27.88
(12.45) 8.53 10.25 1.72
4.
The amount of foreign exchange (gain)/loss adjusted during the year to the carrying cost of the fixed assets and capital work in progress is Rs.Nil (previous year Rs.0.20 Crore) and (credited) / debited to respective heads of accounts in Profit and Loss Account is Rs.(31.02) Crores (previous year Rs.(6.09) Crores); premium on forward exchange contract to be recognized in the Profit and Loss account of subsequent accounting period is Rs.0.61 Crores (previous year Rs.0.56 Crore).
5.
Derivative Instruments The Company has entered into the following derivative instruments: (a) The following are the outstanding Forward Exchange Contracts entered into by the Company, for hedge purpose, as on March 31, 2008 Year Current Year
Previous Year
Currency in Crore US $ 6.62 US $ 5.79 Euro 0.01 JPY 50.70 US $ 5.00 US $ 5.70 Euro 0.58 Euro 0.19
Amount (Rs. in Crores) 264.25 231.53 0.46 20.32 217.82 248.33 33.42 10.86
Buy/Sell
No of Contracts
Buy Sell Sell Buy Buy Sell Sell Buy
137 149 2 2 187 178 16 8
Options: Currency in Crore
Amount (Rs. in Crores)
Buy/Sell
No of Contracts
Current Year
US $ 0.15
6.00
Buy
1
Previous Year
US $ 0.35
15.04
Sell
9
Year
(b) The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below: i.
Amounts receivable in foreign currency on account of the following: Year Current Year
Previous Year
Particulars
(Rs. in Crores)
Currency
Amount
Export of goods
US $ 0.25
9.74
Export of goods
Euro 0.08
4.30
Advance to Suppliers
US $ 0.30
11.85
Advance to Suppliers
Euro 0.01
0.76
Advance to Suppliers
THB 0.06
0.07
Advance to Suppliers
JPY 0.21
0.07
Export of goods
US $ 3.12
135.79
Export of goods
Euro 0.19
10.89
Advance to Suppliers
Euro 0.00
0.05
Fixed Assets
Euro 0.00
0.10
100 |Sterlite Technologies Limited | Annual Report 2007-08
Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) ii.
Amounts payable in foreign currency on account of the following: Particulars Import of goods and services Import of goods and services Advance from Customers Loans payable Loans payable
Currency in Crore Current Year US$ 1.39 Euro 0.07 US$ 0.83 US $ 1.02 Euro 0.04
Amount (Rs. in Crores) Current Year 55.71 4.21 33.01 40.81 2.41
Currency in Crore Previous Year US$ 1.00 – – US$ 5.74 Euro 0.03
Amount (Rs. in Crores) Previous Year 43.49 – – 250.02 1.43
(c) Commodity Future Contract to hedge against fluctuation in commodity prices. The Following are the outstanding Futures contracts entered into by the Company as on March 31, 2008: Year Current Year Previous Year
No. of Contracts 24 105
Contracted Quantity 2,625 MT 9,975 MT
Buy/ Sell Buy Buy
6.
In terms of accounting policy (Refer Note 2 (n)) for the accrual of export incentives, estimated benefits of Rs.18.99 Crores (Previous Year Rs.2.90 Crores) have been taken into account under the DEPB / Target Plus Entitlement scheme / Duty Drawback scheme.
7.
In view of book profits and no taxable profits, as per computation of income, the provision for tax has been made as per MAT under section 115 JB of the Income Tax Act, 1961. The Company is entitled to avail Credit under section 115JAA (1A). Accordingly it has considered MAT credit entitlement as an asset as it has reversible deferred tax liability on account of depreciation.
8.
The Company had in the earlier year received an order of CESTAT upholding the demand of Rs.188 Crores (including penalties) in the pending excise/custom matters on various grounds. During the period, the Company’s appeal with the Hon’ble High Court of Mumbai was rejected on the grounds of jurisdiction. The Company preferred an appeal with the Hon’ble Supreme Court of India against the order of CESTAT which has been admitted. The Company has re-evaluated the case on admission of appeal by the Hon’ble Supreme Court. Based on their appraisal of the matter, the legal advisors/consultants are of the view that under most likely event, the provision of Rs.5 Crores made by the Company against the above demand is adequate. The management is confident of a favourable order and hence no further provision is considered against the said demand.
9.
Other Income includes Rs.Nil (Previous Year Rs.0.35 Crore) on account of the prepayment of deferral sales tax liability in accordance with the scheme framed by the Government of Maharashtra.
10. Employee Stock Option Scheme The Company has granted Employees Stock Options Plan, 2006 (ESOP) to its employees pursuant to the resolution passed by the shareholders at the Extraordinary General Meeting held on March 13, 2006.The Company has followed the fair value method (Black Scholes Options Pricing Model) for the valuation of these options. The Compensation Committee of the Company has approved three grants vide their meeting held June 14, 2006; March 19, 2007 and September 28, 2007 respectively. As per the plan, Options granted under ESOP would vest in not less than one year and not more than five years from the date of grant of such options. Vesting of options would be subject to continued employment with the Company. The plan will be equity settled plan. Other details of the options are as follows: Date of grant Number of Options granted Method of Settlement Vesting Period Exercise Period Vesting Conditions
Grant 1 14-Jun-06 465,700 Equity 3 Yrs 1 Year Business Performance
Grant 2 19-Mar-07 127,200 Equity 2.25 Yrs. 1 Year Business Performance
Grant 3 28-Sep-07 261,550 Equity 1.71 Yrs. 1 Year Business Performance
Connecting with Shareholders | 101
Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) The details of the activity under the plan have been summarized below: Current Year Previous Year Number of Weighted Average Number of Weighted Average Options Exercise Price (Rs.) Options Exercise Price (Rs.) Outstanding at the beginning of the year
5,92,900
5
–
–
Granted during the year
2,61,550
5
5,92,900
5
Nil
–
Nil
–
Forfeited during the year Exercised during the year
73,680
5
Nil
–
Expired during the year
79,160
5
Nil
–
7,01,610
5
5,92,900
5
11,620
5
Nil
–
1.17
–
2.15
–
Outstanding at the end of the year Exercisable at the end of the year Weighted average remaining contractual life (in years) Weighted average fair value of options granted
143.31
102.88
The fair value as per the Black Scholes Options Pricing Model was measured based on the following input: Date of grant
Vest 1
Vest 2
Vest 3
14-Jun-07
14-Jun-08
14-Jun-09
89.25
89.25
89.25
59.78%
58.90%
60.52%
Risk free Rate
7.07%
7.16%
7.26%
Exercise Price
5
5
5
1.5
2.5
3.5
0.57%
0.57%
0.57%
83.99
83.81
83.62
20.00%
40.00%
40.00%
June 14, 2006 Variables Weighted average Stock Price Expected Volatility (*)
Time To Maturity Dividend yield Outputs Option Fair Value Vesting Percentage Option Fair Value Date of grant
83.79
Vest 1
Vest 2
19-Jun-08
19-Jun-09
179
179
62.90%
57.75%
Risk free Rate
8.07%
8.06%
Exercise Price
5
5
March 19, 2007 Variables Weighted Average Stock Price Expected Volatility (*)
Time To Maturity
1.5
2.5
0.57%
0.57%
Option Fair Value
173.04
172.37
Vesting Percentage
60.00%
40.00%
Option Fair Value
172.77
172.77
Dividend yield Outputs
102 |Sterlite Technologies Limited | Annual Report 2007-08
Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) Date of grant
Vest 1
Vest 2
28-Sep-08
14-Jun-09
Weighted Average Stock Price
237.30
237.30
Expected Volatility (*)
September 28, 2007 Variables
56.69%
60.98%
Risk free Rate
7.20%
7.29%
Exercise Price
5.00
5.00
Time To Maturity
1.50
2.21
0.51%
0.51%
Dividend yield Option Fair Value
231.02
230.40
Vesting Percentage
50.00%
50.00%
Option Fair Value
230.71
230.71
(*)The measure of volatility used in the above model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time. The volatility periods considered above, corresponding to the respective expected lives of the different vests are prior to the grant date. The daily volatility of stock prices is considered as per the National Stock Exchange (NSE) prices over these years. 11. Estimated amount of contracts remaining to be executed in Capital Account and not provided for (Net of Advances) are Rs. 66.88 Crores (Previous Year Rs. 34.78 Crores). 12. In view of Notified AS 28 under the Companies (Accounting Standards) Rules, 2006 on Impairment of Assets (AS) – 28 issued by the Institute of Chartered Accountants of India, the Company has reviewed its fixed assets and impaired assets worth Rs.0.21 Crore during the year (Previous Year Nil) on account of impairment in addition to the provision already made in the books. 13. Loans and Advances to subsidiaries Outstanding Loans/Advance given to subsidiary Sterlite Infrastructure Private Limited is Rs.0.30 Crore (Previous Year Rs.Nil). The maximum amount outstanding from Sterlite Infrastructure Private Limited during the year is Rs.0.30 Crore (Previous year Rs.Nil). 14. There are no amounts due and outstanding to be credited to Investor Education and Protection Fund.
15. Payment To Auditors Particulars
(Rs. in Crores)
Current Year
Previous Year
a)
Audit Fees *
0.32
0.34
b)
Tax Audit Fees
0.03
0.03
c)
Other services
0.01
0.01
0.36
0.38
Total
* The payment is inclusive of Rs.Nil (Previous Year Rs.0.07 Crore) paid for previous year & exclusive of Service tax. 16. Managerial Remuneration Particulars (i)
(Rs. in Crores)
Current Year
Previous Year
Salary
2.09
1.20
(ii) Perquisites
0.60
0.23
(iii) Contribution to Superannuation fund
0.03
0.03
(iv) Contribution Provident Fund
0.16
0.07
Total
2.88
1.53
Note: As the future liability for gratuity and leave encashment is provided on an actuarial basis for the Company as a whole, the amount pertaining to the directors is not ascertainable and, therefore, not included above.
Connecting with Shareholders | 103
Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) (Rs. in Crores)
Computation of net profits in accordance with section 349 of the Companies Act, 1956 for calculation of commission payable to directors.
Current Year
Net Profit Before Tax As Per Profit & Loss Account
Previous Year
130.49
53.08
Depreciation as per books
37.17
31.57
Profit/(Loss) on sale of fixed assets (net)
(0.08)
(0.11)
Commission to Non -Executive Directors
0.08
0.02
Managerial Remuneration
2.88
1.51
Provision for Doubtful Debts
0.25
–
Depreciation under Companies Act ,1956
37.17
31.57
Net Profit for the year as per section 349
133.37
54.50
Restricted to 1 %
1.33
0.55
Comission payable to non - exceutive directors
0.08
0.02
Add:
Less :
Commission to:
17. Related Party Disclosures Related party disclosures as required by Notified AS 18 under the Companies (Accounting Standards) Rules, 2006 “Related Party Disclosures” are given below: (A) Name of related party and its relationship: (i) Subsidiary of the Company Sterlite Infrastructure Private Limited (ii) Key Management Personnel Dr. Anand Agarwal Mr. Pravin Agarwal (iii) Investing Company Twin Star Overseas Limited. (B) There are no provisions for doubtful debts or no amounts have been written off in respect of debts due to or from related parties. (C) The following transactions were carried out with the related parties:
Sr No Transaction
(Rs. in Crores)
Sterlite Infrastructure Private Limited 07-08 06-07
Twin Star Ovearseas Limited 07-08 06-07
Key Management Personnel 07-08 06-07
Transactions during the year: 1
Remuneration (*)
–
–
–
–
2.88
1.53
2
Investments during the year
6.00
–
–
–
–
–
3
Dividend
–
–
–
1.90
–
–
4
Equity Share Capital Issue
–
–
1.40
1.40
–
–
5
Equity Share Premium
–
–
26.60
26.60
–
–
6
Advance given to Subsidiary
0.30
–
–
–
–
–
Balance outstanding as at the year end: 7
Advances
0.30
–
–
–
–
–
8
Investment in Equity Share
6.01
–
–
–
–
–
* It includes payment to Dr. Anand Agarwal of Rs.1.03 Crores (Previous Year Rs.0.79 Crore) & Rs.1.85 Crores paid to Mr. Pravin Agarwal (Previous Year Rs.0.74 Crore) .
104 |Sterlite Technologies Limited | Annual Report 2007-08
Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) 18. Operating Leases Disclosures in respect of Operating Leases of office buildings as per the requirement of Notified AS 19 under the Companies (Accounting Standard) Rules, 2006 on Leases issued by The Institute of Chartered Accountants of India, is as under: (a) Lease payments recognized in the statement of Profit and Loss for the period is Rs.0.29 Crore (previous year Nil). (b) The future minimum lease payments payable over the next one-year is Rs.0.51 Crore (previous year Nil). (c) The future minimum lease payments payable later than one year but not later than five year is Rs.0.81 Crore (previous year Nil). (d) The future minimum lease payments payable later than five year is Rs.Nil (previous year Nil). 19. Earnings per Share (EPS)
(Rs. in Crores)
Current Year I
Net Profit as per Profit and Loss Account available for Equity Shareholders
II
Weighted Average Number of equity shares
Previous Year
100.72
50.86
6,26,32,181
5,92,31,827
6,26,32,181
5,92,31,827
18,36,066
51,62,740
6,71,201
5,63,098
651,39,448
6,49,57,665
Basic (On Nominal Value of Rs.5 Per Share) Rupees
16.08
8.59
Diluted (On Nominal Value of Rs.5 Per Share) Rupees
15.46
7.83
For Basic Earning Per share For Diluted Earning Per Share No. of Share for Basic EPS Add: Potential Equity Shares a)
Convertible Warrant
b)
Employee Stock Option
No of Shares for Diluted Earning Per Share III
Earning Per Share (Weighted Average)
20. The Company had allotted 56,00,000 warrants on March 29, 2006 on preferential basis, (Rs.10 per warrant had been received upfront) to Twin Star Overseas Limited. The warrant holders had an option to be allotted one equity share of Rs.5/- each at a price of Rs.100 each on the payment of balance amount. During the year, 28,00,000 Share warrants were converted into 28,00,000 Equity Shares (Previous year 28,00,000 Share warrants were converted into 28,00,000 Equity Shares). 21. The disclosures as per the Notified AS 15 under the Companies (Accounting Standards) Rules, 2006 on “Employee Benefits�, are as follows: The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with Life Insurance Corporation of India in the form of a qualifying insurance policy. The future contributions payable by the Company under the Gratuity Scheme are currently not ascertainable.
Balance Sheet Details of Provision for Gratuity: Particulars Defined Benefit Obligation Fair Value of Plan Assets Plan (Assets) / Liability Change in defined benefit obligation: Defined benefit obligation at the beginning of the year Current Service cost Interest cost Actuarial (gain) / loss on obligation Benefits paid Defined benefit obligation, end of the period
(Rs. in Crores)
Current Year
Previous Year
1.89 2.14 (0.25)
1.88 1.64 0.24
1.88 0.33 0.17 (0.32) (0.17) 1.89
1.44 0.21 0.12 0.27 (0.16) 1.88
Connecting with Shareholders | 105
Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) (Rs. in Crores)
Particulars
Current Year
Previous Year
Change in fair value of plan assets Fair value of plan assets at the beginning of the year
2.13
1.54
Expected return on plan assets
0.17
0.12
Contribution by employer
0.03
0.02
Benefits paid
(0.17)
(0.16)
Actuarial gain / (loss) on plan assets
(0.01)
0.11
2.14
1.64
Current Service cost
0.33
0.21
Interest cost on benefit obligation
0.17
0.12
Net actuarial (gain) / loss recognized in the year
(0.31)
0.16
Expected return on plan assets
(0.17)
(0.12)
0.02
0.36
Fair value of plan assets at the end of the year Net period gratuity cost
Net benefit expense
The major categories of plan assets as a percentage of the fair value of total plan asset is as follows: Particulars
Current Year %
Investment with Insurer (Life Insurance Corporation of India)
Previous Year %
100.00
100.00
Assumptions: Discount rate
8.00 %
Expected rate of return on plan assets
8.00 %
Employee Turnover
2.00 %
22. Details regarding licensed/registered, installed capacity and actual production (as certified by the Management) A. Capacity
UNIT
Copper Telecom Cables
CKM
Fiber Optic cables * Optical Fiber
Licensed /Registered Capacity Current Year Previous Year Per Annum Per Annum
Installed Capacity Current Year Previous Year Per Annum Per Annum
95,00,000
95,00,000
FKM
32,22,528
32,22,528
32,22,528
32,22,528
KM
1,20,00,000
50,00,000
60,00,000
40,00,000
15,00,000
15,00,000
10,00,000
7,20,000
N.A
N.A
147,200
75,000
UNIT
Current Year
Previous Year
Copper Telecom Cables
CKM
27,35,708
19,24,895
Fiber Optic cables
FKM
15,47,019
12,05,441
Optical Fiber*
KM
41,29,930
39,05,548
Distribution Conductor (AAC/ACSR) **
MT
85,297
58,199
Broadband Access Networks
NOS
1,29,668
60
Broadband Access Networks
NOS.
95,00,000
95,00,000
Power Transmission LineDistribution Conductor **
MT
* Based on Average FKM ** N.A.-Delicenced vide notification no 477 (E) Dated July 27, 1991. B. Production (including for captive consumption)
Power Transmission Line-
* It includes 1,629,223 KM (Previous Year 1,150,015 KM) produced for captive consumption ** Current Year 112,192 KM, (Previous Year 91,426 KM)
106 |Sterlite Technologies Limited | Annual Report 2007-08
Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) 23. Quantitative information in respect of Opening Stock, Closing Stock, Sales of Finished goods and Consumption of Raw Materials (As Certified by Management) (Rs. in Crores) Current Year Previous Year UNIT Quantity Value Quantity Value a)
Opening Stock Copper Telecom Cables
CKM
96,769
7.80
2,06,324
12.19
Fiber Optic cables
FKM
62,239
6.94
58,087
8.23
Optical Fiber
KM
4,46,485
14.65
4,14,165
13.41
2,032 KM Previous Year is 6,055 KM)
MT
1,038
12.85
4,077
53.80
Broadband Access Networks
NOS
60
–
Power Transmission Line - Distribution Conductor (AAC/ACSR) (Current year
Total b)
42.25
87.62
Closing Stock Copper Telecom Cables
CKM
1,11,717
8.67
96,769
7.80
Fiber Optic cables
FKM
53,113
4.38
62,239
6.94
Optical Fiber
KM
3,16,276
10.08
4,46,485
14.65
2,932 KM Previous Year is 2,032 KM)
MT
2,935
29.74
1,038
12.85
Broadband Access Networks
NOS
3,123
0.22
60
–
Power Transmission Line Conductor (AAC/ACSR) (Current year
Total c)
53.09
42.25
Sales Copper Telecom Cables
CKM
27,20,553
288.95
20,34,450
179.83
Fiber Optic cables
FKM
15,52,907
187.52
12,01,289
156.83
Optical Fiber
KM
26,32,767
89.28
27,23,213
97.45
MT
82,658
1,080.57
61,238
846.39
Power Transmission & Distribution Conductors AAC/ACSR Current Year 110,934 KM, Previous Year 95,449 KM) Broadband & Access Networks * Others Total
116.31
0.14
8.65
20.24
1,771.28
1,300.88
* Including Revenue of Integrated Management Services Rs.104.33 Crores (Previous Year Rs.0.14 Crore) d)
Raw Material Consumed Aluminum/ Alloy
MT
85,583
824.03
58,199
642.33
Copper Rods
MT
4,693
147.50
3,147
95.84
Polyethylene Compounds
MT
7,667
51.38
2,376
15.20
Galvanized Steel Wire/ Steel tape
MT
3,260
15.17
1,164
6.47
Resin
KG
2,06,398
12.40
2,07,974
11.19
Others Total
181.11
105.31
1,231.59
876.34
Connecting with Shareholders | 107
Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) 24. CIF Value of Imports
(Rs. in Crores)
Particulars
Current Year
Raw Material Stores Spares & Consumables Capital Goods Total
Previous Year
847.50
383.46
6.87
5.66
42.29
22.37
896.66
411.49
25. Expenditure in Foreign Currency Particulars
Current Year
Previous Year
Travel
1.00
0.92
Sales Commission
4.18
5.11
Interest
12.97
7.45
Others
9.51
5.06
27.57
18.54
Total
26. Earnings in Foreign Currency Particulars
Current Year
FOB value of Exports Others
Previous Year
517.79
296.44
0.22
–
27. Value of Raw Material Consumed Description
Current year (Rs. in Crores)
% of Total Consumption
Previous year (Rs. in Crores)
% of Total Consumption
Indigenous
394.22
32.01
527.31
60.17
Imported
837.37
67.99
349.03
39.83
1,231.59
100
876.34
100
28. Value of Components, Stores and Spare Parts Consumed Current year Description (Rs. in Crores)
% of Total Consumption
Previous year (Rs. in Crores)
% of Total Consumption
19.56
78.62
12.07
75.75
5.32
21.38
3.87
24.25
24.88
100
15.94
100
Total
Indigenous Imported Total
108 |Sterlite Technologies Limited | Annual Report 2007-08
Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) 29. Contingent Liabilities
(Rs. in Crores)
Sr. No. Descriptions 1
Current Year
Previous Year
Disputed Liabilities in Appeal a)
Sales Tax
1.28
0.59
b)
Excise Duty
65.82
32.00
c)
Customs Duty
74.52
68.21
d)
Service Tax
0.80
0.80
e)
Claims lodged by a Bank Against the Company
18.87
18.87
f)
Excise Duty Case in Supreme Court (Refer Note 8 supra) 36.57
–
558.32
397.90
2.21
2.31
215.90
388.71
–
6.78
66.88
34.78
–
19.32
2
Unexpired Letter of Credit
3
Outstanding Bank Guarantees
4
Outstanding amount of Export obligation against Advance Licence
5
Export Obligation under EPCG Scheme
6
Bond in Favour of Excise Department
7
Estimated Amount of contracts remaining to be executed on Capital account and not provided for (Net of Advances)
8
Bills Discounted
9
The Company has given Corporate Guarantee to the Income Tax Department on behalf of group companies. The outstanding amount is Rs.114.00 Crores (Previous Year Rs.114.00 Crores) on this account as at the year-end.
30. In accordance with the Notified AS 17 under the Companies (Accounting Standards) Rules, 2006 on “Segment Reporting”, issued by the Institute of Chartered Accountants of India, the Company has identified two reportable Business Segments i.e. Telecom Product and Power Transmission Business, which are regularly evaluated by the Management, in deciding the allocation of resources and assessment of performance. Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common cost. The segment performance as follows: (Rs. in Crores) (i)
Particulars
Segment Revenue
Telecom Current Previous Year Year
452.01 1,080.57
Others Current Previous Year Year
Unallocable Current Previous Year Year
Total Current Previous Year Year
848.87
–
–
–
– 1,771.28
Less: Excise
55.39
38.22
30.10
64.50
–
–
–
–
85.49
102.72
Net Revenue
635.33
413.79
1,050.46
784.36
–
–
–
–
1,685.79
1,198.15
61.86
25.56
109.42
58.44
–
(1.78)
–
2.40
171.28
84.62
Segment Results (PBIT)
690.71
Transmission Current Previous Year Year
1,300.88
Less: Interest
–
–
–
–
–
–
40.84
31.58
40.84
31.58
Profit/(Loss) Before Tax
–
–
–
–
–
–
–
–
130.44
53.04
Provision for Tax (Net)
–
–
–
–
–
–
29.72
2.18
29.72
2.18
–
100.72
50.86
109.80 1,562.59
1,246.91
–
–
–
–
–
–
–
Segment Assets
Profit/(Loss) After Tax
793.40
629.93
651.96
507.18
–
–
117.23
Segment Liabilities
202.26
135.42
111.36
76.18
–
–
51.99
33.90
365.61
245.50
Incurred
51.84
21.75
85.28
110.13
–
–
–
–
137.13
131.88
Depreciation
28.03
27.54
8.93
4.03
–
–
–
–
36.96
31.57
Impairment
0.21
–
–
–
–
–
–
–
0.21
–
–
–
–
–
–
1.82
–
–
–
1.82
Capital Expenditure
Amortisation
Connecting with Shareholders | 109
Schedules forming part of the Accounts SCHEDULE 21 NOTES FORMING PART OF THE ACCOUNTS (Contd.) (Rs. in Crores)
(ii) Particulars 1.
2.
3.
Current Year
Segment Revenue - External Turnover - Within India - Outside India Total Revenue Segment Assets - Within India - Outside India Total Assets Capital Expenditure - Within India - Outside India Total Capital Expenditure
1,253.27 518.01 1,771.28 1,467.93 94.66 1,562.59 137.13 – 137.13
Previous Year 1,004.44 296.44 1,300.88 – 1,165.85 81.06 1,246.91 – 131.88 – 131.88
31. The Company has not received any intimation from “suppliers” regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid / payable as required under the said Act have not been given. 32. Expenditure of Rs.6.49 Crores (Previous Year Rs.3.13 Crores) on account of financing cost relating to borrowed funds for construction or acquisition of fixed assets on projects under implementation is debited to “Capital work in Progress”. 33. Remittances in Foreign Currency: On account of dividend to non-resident shareholders Final Dividend: Current Year No. of Shareholders No. of Equity Shares Amount Remitted, net of tax (Rs. in Crores) Year to which it pertains
1 2,53,30,550 1.90 2006-07
Previous Year 1 2,25,30,550 1.13 2005-06
34. Pre - Operative Expenses Details of Pre – Operative Expenses are given below: Current Year Manufacturing & Other Expenses Personnel Administration & General Interest & Finance Charges
Previous Year
2.62 0.45 0.43 2.82 6.32
0.03 0.16 0.65 2.92 3.76
35. Previous Year Comparatives The Company has acquired ‘Power Transmission Line’ (PTL) Business from Sterlite Industries Limited (SIL) on going concern basis w.e.f July 1, 2006. hence, figures for current period are not comparable to figures for the previous periods. Previous Year’s figures have been regrouped where necessary to confirm to current year’s classification. The figures of previous year were audited by another firm of Chartered Accountants. As per our attached report of even date
For and on behalf of the Board
For S.R. Batliboi & Co. Chartered Accountants
Pravin Agarwal Whole-time Director
Dr. Anand Agarwal CEO & Whole-time Director
Anupam Jindal Chief Financial Officer
Sandeep Deshmukh Company Secretary
Per Vijay N. Bhatt Partner Membership Number: F- 36647
Place: Mumbai Dated: April 29, 2008
110 |Sterlite Technologies Limited | Annual Report 2007-08
Cash Flow Statement (Rs. in Crores)
Year Ended
Year Ended
March 31, 2008
March 31, 2007
A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit/(Loss) after tax as per Profit & Loss Account Adjustment for Taxation
100.72
50.86
29.72
2.22 130.44
53.08
Adjustments for : - Depreciation and Impairment
37.17
31.57
–
1.82
- Provision for Doubtful Debts
0.25
–
- Bad Debts written off
0.82
–
- Gain on prepayment of Deferred Sales Tax Liability
–
(0.35)
- Provision for debtors written back
–
(0.50)
- Interest Expenses (net)
43.65
34.46
- Exchange difference
(1.41)
(4.88)
- (Profit) / Loss on Sale of Assets
0.08
0.11
- Employees Stock Option Expenses amortized
4.48
1.87
- Provision for amortisation
85.04 Operating profit before working capital changes
215.48
117.18
Movements in working capital : - (Increase)/Decrease in Trade and other receivables - (Increase)/Decrease in Inventories - Increase/(Decrease) in Trade payables
(141.53)
(94.16)
(99.40)
126.56
99.39
(141.54)
(11.44)
Cash generated from operations
73.94
138.14
Direct taxes Paid / TDS deducted (Net of Refunds)
(7.99)
(7.24)
Net cash flow from Operating Activities
65.95
130.90
(120.58)
(98.32)
Proceed from Sale of Fixed Assets
10.45
0.31
Purchase of Investments
(3.50)
(114.93)
6.30
108.63
–
(148.51)
(20.78)
(16.72)
(0.30)
–
(128.41)
(269.54)
B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets (Including Capital Work in Progress)
Sale of Investments Purchase consideration for Power Transmission Line (PTL) Division of Sterlite Industries India Ltd Investment in Bank Fixed Deposits* Advances to Subsidiaries Net cash flow used in Investing Activities
Connecting with Shareholders | 111
Cash Flow Statement (Contd.) (Rs. in Crores)
Year Ended
Year Ended
March 31, 2008
March 31, 2007
C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds/(Repayment) of Secured Loans (net)
67.26
95.50
Proceeds/ (Repayment) of Share Capital
25.20
25.20
Proceeds/ (Repayment) of Employee Stock Options
0.04
–
Proceeds/ (Repayment) of Unsecured Loans (net)
9.26
10.02
(44.64)
(34.61)
Dividend paid on Equity Shares (Including Corporate Dividend Tax)
(5.30)
(3.33)
Net Cash flow from Financing Activities
51.82
92.78
Net Increase/(decrease) in cash and cash equivalent
(10.64)
(45.86)
Cash and cash equivalent as at beginning of year**
13.05
46.31
–
12.60
2.41
13.05
Interest paid
Cash and cash equivalent taken over on merger of subsidiaries & purchase of PTL division Cash and cash equivalent as at year end **
* Investments in Bank Fixed Deposits having maturity of more than 3 Months have been shown under the cash flows from Investing activities. ** Fixed deposits of Rs.86.66 Crores (Previous Year Rs.65.88 Crores) having maturity of more than 3 months have not been considered as Cash and cash equivalent.
As per our attached report of even date
For and on behalf of the Board
For S.R. Batliboi & Co.
Pravin Agarwal
Dr. Anand Agarwal
Chartered Accountants
Whole-time Director
CEO & Whole-time Director
Per Vijay N. Bhatt Partner
Place: Mumbai
Anupam Jindal
Sandeep Deshmukh
Membership Number: F- 36647
Dated: April 29, 2008
Chief Financial Officer
Company Secretary
112 |Sterlite Technologies Limited | Annual Report 2007-08
Balance Sheet Abstract and Company’s General Business Profile I.
Registration Details Registration No. Balance Sheet Date
1 3
1
Date
II.
III.
0
2
5
2
3
2
2
0
Month
0
5
1 1
State Code
8
Year
Capital Raised during the year (Amount in Rs. Crores) Public Issue
N
I
L
Rights Issue
N
I
L
Private Placement
N
I
L
2
4
1
Position of Mobilisation and Deployment of Funds (Amount in Rs. Crores) Total Liabilities
1
2
1
4
1
Total Assets
3
2
Share Warrants
N
I
L
6
Reserve & Surplus
5
0
2
3
3
Unsecured Loans
3
0
3
8
Sources of Funds Paid-up Equity Share Capital Employee Stock Option Outstanding 6
Secured Loans Deferred Tax Application of Funds
IV.
Net Fixed Assets
5
6
0
Investments
Net Current Assets
6
7
5
Miscellaneous Expenses
N
I
L
Accumulated Losses
N
I
L
6
8
6
Profit after Tax
1
0
1
1
3
0
Dividend Rate %
2
0
.
4
6
Total Expenditure
6
0
Performance of Company (Amount in Rs. Crores) 1
Turnover Profit before Tax Earnings Per Share in Rs.
1
5
Other Income V.
6
1
5
4
Generic Names of Three Principal Products of Company Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description
9
0 0
1
1 0 0 0
OPTICAL FIBER 9
0 0
1
1 0 0 0
OPTICAL FIBER CABLE 8
5 4
4
2 0 1 9
JELLY FILLED TELEPHONE CABLE 7
6 1 4 1 0
ALUMINIUM CONDUCTORS (AAC/ACSR) 8
5 1
7
6 2 3 0
BROADBAND ACCESS NETWORKS For and on behalf of the Board
Place: Mumbai Dated: April 29, 2008
Pravin Agarwal Whole-time Director
Dr. Anand Agarwal CEO & Whole-time Director
Anupam Jindal Chief Financial Officer
Sandeep Deshmukh Company Secretary
Connecting with Shareholders | 113
Consolidated Accounts
114 |Sterlite Technologies Limited | Annual Report 2007-08
Auditors’ Report
To The Members of Sterlite Technologies Ltd. 1. We have audited the attached consolidated Balance Sheet of Sterlite Technologies Ltd. (formerly ‘Sterlite Optical Technologies Limited’) and its subsidiary (‘the Group’), as at March 31, 2008, and also the consolidated profit and loss account and the consolidated cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Sterlite Technologies Limited's management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as
statements, issued by the Institute of Chartered Accountants of India. 5. As stated in Note no.8 of Schedule 21, provision for liability
against excise/customs is considered adequate by the management based on the current status and the legal advice received by them. In the event the decision of the Hon`ble Supreme Court goes against the Company on any of the grounds of appeal, additional provision against the said demand may be required. Pending disposal of the matter by the Hon`ble Supreme Court, the amount of additional excise/customs duty, if any, is currently unascertainable. 6. Based on our audit and on consideration of report of other auditor on separate financial statements and on the other financial information of the subsidiary, and to the best of our information and according to the explanations given to us, we are of the opinion that the attached consolidated financial statements give, subject to the effects of our
observations given in para 5 above, a true and fair view in con-formity with the accounting principles generally accepted in India:
well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. We did not audit the financial statements of subsidiary, whose financial statements reflect total assets of Rs.6.30 Crores as at March 31, 2008, the total revenue of Rs. Nil, total net loss of Rs. 0.09 Crores and net cash outflows
(a) in the case of the consolidated balance sheet, of the state of affairs of the Group as at March 31, 2008; (b) in the case of the consolidated profit and loss account, of the profits for the year ended on that date; and (c) in the case of the consolidated cash flow statement, of the cash flows for the year ended on that date.
amounting to Rs. 0.25 Crores for the year then ended. These financial statements and other financial information
For S.R. Batliboi & Co.
have been audited by other auditors whose report has been
Chartered Accountants
furnished to us, and our opinion is based solely on the report of other auditors. 4. We report that the consolidated financial statements have been prepared by the Sterlite Technologies Ltd's
per Vijay N. Bhatt Place: Mumbai Date: April 29, 2008
Partner Membership No.: F-36647
management in accordance with the requirements of Accounting Standards (AS) 21, Consolidated financial
Connecting with Shareholders | 115
Consolidated Balance Sheet
(Rs. in Crores)
As at
Schedule I.
March 31, 2008
SOURCES OF FUNDS 1. Shareholders' Funds Share Capital
1
32.23
Employee Stock Option Outstanding
2
5.73
Reserves & Surplus
3
501.49 539.45
2. Minority Interest
2.48
3. Loan Funds Secured Loans
4
632.65
Unsecured Loans
5
30.54 663.19
4. Deferred Tax Liability (Net) (Refer Note No 3 of Schedule No.21)
38.13 Total
1,243.25
II. APPLICATION OF FUNDS 1. Fixed Assets
6
Gross Block
918.88
Less: Accumulated Depreciation & Impairment
395.00
Net Block
523.88
Capital Work-in-Progress including Capital Advances
36.22
(Refer Note 21 of Schedule No. 21) 560.10 2. Goodwill (Refer Note 1(a) of Schedule 21) 3. Investments
2.43 7
6.09
4. Current Assets, Loans & Advances Inventories
8
219.39
Sundry Debtors
9
519.10
Cash and Bank Balances
10
89.18
Loans and Advances
11
168.61 996.28
Less: Current Liabilities & Provisions: Current Liabilities
12
303.53
Provisions
13
18.22 321.75
Net Current Assets
674.53
5. Miscellaneous Expenditure (to the extent not written off or adjusted) Preliminary Expenses
0.10 Total
Notes to Consolidated Accounts
1,243.25
21
The schedules referred to above and notes to accounts form an integral part of the Consolidated Balance Sheet As per our attached report of even date
For and on behalf of the Board
For S.R. Batliboi & Co. Chartered Accountants
Pravin Agarwal Whole-time Director
Dr. Anand Agarwal CEO & Whole-time Director
Anupam Jindal Chief Financial Officer
Sandeep Deshmukh Company Secretary
Per Vijay N. Bhatt Partner Membership Number: F- 36647
Place: Mumbai Dated: April 29, 2008
116 |Sterlite Technologies Limited | Annual Report 2007-08
Consolidated Profit and Loss Account
(Rs. in Crores)
Year Ended March 31, 2008
Schedule I. INCOME Turnover (Gross) Less: Excise Duty Turnover (Net) Other Income
1,771.28 85.49 1,685.79 4.31 1,690.10
14 Total
II. EXPENDITURE Manufacturing & other expenses Personnel Selling & Distribution Administration & General Research & Development Interest & Finance charges
15 16 17 18 19 20
1,344.05 41.89 57.53 37.04 4.75 43.65 1,528.91 6.32 1,522.59 167.51 37.17 130.34
Less: Pre operative expenses of projects (Refer note 22 of Schedule 21) Profit before depreciation & taxation Depreciation & Impairment (Including Rs.0.21 Crore for Impairment loss) Profit before taxation Provision for taxation - Current Tax for the year - Minimum Alternate Tax Credit Eligible for Set Off (Refer Note 7 of schedule 21) - Provision for earlier year - Deferred Tax (Net)(Refer Note No 3 of Schedule No.21) - Fringe Benefit Tax (Includes Rs.0.15 Crore for earlier year) Profit after taxation Minority Interest Profit after minority interest Balance brought forward from previous year Amount available for appropriations Appropriations Transfer to General Reserve Proposed Dividend on Equity Shares Rs.1.00 Per Share Corporate Tax on Proposed Dividend Balance carried to Balance Sheet Earnings Per Share (Face Value Rs.5 each) (Refer note 16 of schedule 21) Basic Diluted Notes to Consolidated Accounts
14.66 (14.66) 0.77 27.88 1.07 100.62 (0.04) 100.66 250.08 350.74 7.55 6.45 1.10 335.64 350.74 16.07 15.45 21
The schedules referred to above and notes to accounts form an integral part of the Consolidated Profit and Loss Account As per our attached report of even date
For and on behalf of the Board
For S.R. Batliboi & Co. Chartered Accountants
Pravin Agarwal Whole-time Director
Dr. Anand Agarwal CEO & Whole-time Director
Anupam Jindal Chief Financial Officer
Sandeep Deshmukh Company Secretary
Per Vijay N. Bhatt Partner Membership Number: F- 36647
Place: Mumbai Dated: April 29, 2008
Connecting with Shareholders | 117
Schedules forming part of the Consolidated Balance Sheet (Rs. in Crores)
As at March 31, 2008 SCHEDULE 1
SHARE CAPITAL
Authorized 9,00,00,000 Equity Shares of Rs.5 each.
45.00 45.00
Issued, Subscribed & Paid up 6,44,68,247 Equity Shares of Rs.5 each fully paid - up
32.23
Total
32.23
Of the above: 1) 5,59,12,559 equity shares of Rs.5 each were allotted to the shareholders of Sterlite Industries (I) Ltd. upon demerger pursuant to the scheme of arrangement sanctioned by the Honorable High Court of Judicature at Bombay. 2) During the year 28,00,000 Share warrants were converted into 28,00,000 Equity Shares of Rs.5 each fully paid up. No Warrants are outstanding as on March 31, 2008 with option to exercise equity conversion. 3) During the year 73,680 shares were issued to employees of the Company under ESOP Scheme. 4) For Stock Options outstanding details Refer Note 10 of Schedule 21.
SCHEDULE 2
EMPLOYEE STOCK OPTION OUTSTANDING
Balance as per last Balance Sheet
1.87
Add: Employees Stock Option Expenses For the year (Refer note 10 of Schedule 21)
4.48
Less: Transferred to Share Premium Account
0.62
Total
SCHEDULE 3
5.73
RESERVES & SURPLUS
Share Premium Balance as per last Balance Sheet Add: Transfer from Employee Stock Option Add: Received During the year (Refer note 17 of Schedule 21)
57.50 0.62 26.60 84.72
General Reserve Balance as per last Balance Sheet Add: Transfer from Profit and Loss account
73.54 7.55 81.09
Capital Reserve Balance as per last Balance Sheet
0.04 0.04
Profit & Loss Account Surplus as per Profit & Loss Account
335.64
Total
501.49
118 |Sterlite Technologies Limited | Annual Report 2007-08
Schedules forming part of the Consolidated Balance Sheet (Rs. in Crores)
As at March 31, 2008 SCHEDULE 4
SECURED LOANS
(A) Working Capital Loans From Banks
531.69
(B) Term Loans From Banks
50.00
(C) Interest Accrued and Due (D) Other Loans
0.15 50.81
From Banks Total
632.65
Notes A. Working capital loans and Other loans from Banks are secured by hypothecation of Raw materials, Work in Progress, Finished Goods & Sundry Debtors and further secured by second charge on all immovable and movable fixed assets of the Company both present and future. B. Term loans are secured by first charge by deposit of title deed of immovable properties of the Company and hypothecation of movable properties of the Company both present and future.
SCHEDULE 5
UNSECURED LOANS
Sales Tax Loan (Interest Free) [(Due within one year Rs.2.20 Crores)]
20.54
Short Term Loans Others
10.00
Total
30.54
Connecting with Shareholders | 119
120 |Sterlite Technologies Limited | Annual Report 2007-08
As at
TOTAL
Software/Licences
INTANGIBLE ASSETS
Vehicles
Electric Fittings
Office Equipments
Equipments
792.50
0.28
3.90
26.73
3.80
10.79
4.84
Data Processing
631.01
Furniture & Fixture
69.64
Building
Plant & Machinery
16.12
25.39
Leasehold land
01.04.2007
FIXED ASSETS
Freehold Land
TANGIBLE ASSETS
of Assets
Nature
SCHEDULE 6
137.13
0.58
0.96
4.42
0.61
0.95
1.29
103.40
17.62
1.61
5.69
tions
Addi-
As at
10.75
–
0.43
–
–
–
–
–
0.36
9.96
–
918.88
0.86
4.43
31.15
4.41
11.74
6.13
734.41
86.90
17.04
21.81
tions 31.03.2008
Deduc-
GROSS BLOCK AT COST
298.35
–
0.69
9.44
1.04
6.96
1.46
263.39
15.33
0.04
–
01.04.2007
As at
36.96
0.14
0.42
1.38
0.21
0.95
0.38
30.49
2.87
0.12
–
Year
For the
0.21
–
0.21
–
–
–
–
–
–
–
–
tions
Deduc-
As at
As at
335.10
0.14
0.90
10.82
1.25
7.91
1.84
293.88
18.20
0.16
–
59.69
–
–
1.14
–
–
–
58.55
–
–
–
31.03.2008 01.04.2007
DEPRECIATION/AMORTISATION
Schedules forming part of the Consolidated Balance Sheet
0.21
–
–
–
0.05
–
–
0.16
–
–
–
the Year
During
IMPAIRMENT
59.90
–
–
1.14
0.05
–
–
58.71
–
–
–
31.03.2008
As at
523.88
0.72
3.53
19.19
3.11
3.83
4.29
381.82
68.70
16.88
21.81
31.03.2008
As at
NET BLOCK
(Rs. in Crores)
Schedules forming part of the Consolidated Balance Sheet (Rs. in Crores)
As at March 31, 2008 SCHEDULE 7
INVESTMENTS
CURRENT INVESTMENT (at Cost or Market Value whichever is lower) In Units of Mutual Funds (Quoted) 60,90,000units of Rs.10 each of Reliance Fixed Horizon Fund - VI
6.09
Series 3 - Institutional Dividend Payout of Reliance Mutual Fund Total
6.09
Note The following Current Investments were purchased and sold during the year:
Mutual Fund Units
Face Value (Rs.)
Units (Nos.)
Amount in Rs.
DBS Chola Freedom Income STP-Inst.-Cum-Org
10
8,13,107
1,00,00,000
Reliance Liquidity fund - Daily Dividend Reinvestment Option
10
3,50,82,625
35,09,35,008
Reliance Liquid fund -Treasury Plan- Institutional Option - Growth Option
10
5,09,848
1,00,04,385
ICICI Prudential Institutional Liquid Plan - Super institutional Growth
10
6,22,72,206
69,99,70,211
JM Liquidity I P Growth
10
7,91,427
1,00,05,145
Sahara Liquid fund VP Growth
10
18,543
2,56,26,338
1,04,450
51,04,450
Short Term Plan Retail Option-Growth
10
6,23,95,190
72,53,71,454
FIEDILITY Cash Fund - Instl - Gr
10
19,04,272
2,00,51,987
Kotak Liquid Inst premium plan - Growth
10
1,07,57,742
16,46,46,798
Birla Cash Plus - Institutional - Growth
10
6,55,93,127
88,17,06,138
Principal cash management fund Liquid option - Instl. Plan-Growth Plan
10
51,68,987
6,51,55,998
Lotus India Liquid Fund - Institutional Growth
10
41,49,625
4,50,39,779
Sahara Fix income10 Templeton Floating Rate INCOME FUND
LIC MF Liquid Fund - Growth Plan
10
5,12,56,834
71,82,49,324
DWS INSTA CASH PLUS FUND - Institutional Plan - Growth
10
2,45,85,584
31,73,52,853
ABN AMRO Money Plus Fund - Institutional Plan - Growth
10
2,49,34,934
29,13,80,959
UTI Liquid Cash Plan Institutional - Growth Option
10
3,17,147
41,55,89,482
DWS Credit Opportunities Cash Fund - Weekly Dividend Plan
10
60,65,509
6,10,00,220 (Rs. in Crores)
As at March 31, 2008 SCHEDULE 8
INVENTORIES
(At cost or net realisable value, which ever is lower) Raw Materials (Including Goods in Transit Rs.16.50 Crores)
105.31
Work-in-Progress
39.89
Finished Goods
53.09
Stores, Spares, Packing Materials & Others
21.10
Total
219.39
Connecting with Shareholders | 121
Schedules forming part of the Consolidated Balance Sheet (Rs. in Crores)
As at March 31, 2008 SCHEDULE 9
SUNDRY DEBTORS (Unsecured)
(a) Due for a period exceeding 6 months: - Considered good - Considered doubtful Less: Provision for Doubtful Debts (b) Others - Considered good Total
51.73 19.90 71.63 19.90 51.73 467.37 519.10
SCHEDULE 10 CASH & BANK BALANCES Cash in hand Balance with Scheduled Banks in (i) Current Accounts (ii) Deposit Accounts (iii) Dividend Accounts Cheques in Hand Balances with Non Scheduled Banks in (i) Current Accounts (*) Total
0.10 1.53 86.66 0.59 – 0.30 89.18
*Balance with Non Scheduled banks is maintained with: Balance with Industrial Bank of China Rs.0.05 Crore (Maximum Amount Outstanding During the year Rs.0.24 Crore) Balance with Dubai Bank Rs.0.05 Crore (Maximum Amount Outstanding During the year Rs.0.07 Crore) Balance with Bangkok Bank PCL Rs.0.20 Crore (Maximum Amount Outstanding During the year Rs.0.13 Crore)
SCHEDULE 11 LOANS & ADVANCES (Unsecured Considered Good) Advances recoverable in cash or in kind or for value to be received Balances with Central Excise Authorities Deposits - Others Minimum Alternate Tax Credit Entitlement Interest accured on Investment Other Advances Total
122 |Sterlite Technologies Limited | Annual Report 2007-08
71.73 47.48 3.90 23.91 4.13 17.46 168.61
Schedules forming part of the Consolidated Balance Sheet (Rs. in Crores)
As at March 31, 2008 SCHEDULE 12 CURRENT LIABILITIES Acceptances Sundry Creditors (i) Micro, Medium and Small Enterprises (ii) Others Interest accrued but not due on Loans Unclaimed Dividend Sundry Deposits Advance from Customers Other Liabilities Total
1.16 – 234.69 4.59 0.59 0.35 44.13 18.02 303.53
SCHEDULE 13 PROVISIONS For Taxation (Net of Advance Tax and TDS) [Including for Wealth Tax Rs.0.03 Crore]
–
For Contingencies
9.50
For Employee Benefits
1.17
Proposed Dividend Equity Shares
6.45
Corporate Tax on Proposed Dividend
1.10
Total
18.22
Note: The Company had made a provision of Rs.9.50 Crores towards contingencies in the earlier years against various disputed claims against the Company as described in Note 8 of Schedule 21, the timing and quantum of which is presently unascertainable.
Connecting with Shareholders | 123
Schedules forming part of the Consolidated Profit and Loss Account (Rs. in Crores)
Year Ended March 31, 2008 SCHEDULE 14 OTHER INCOME Income from Mutual Fund
0.78
Interest Income on Income Tax Refund
1.76
Miscellaneous Income
1.77
Total
4.31
SCHEDULE 15 MANUFACTURING & OTHER EXPENSES Raw materials consumed
1,231.59
Decrease/ (Increase) in stock Opening Stock: Work-in-Progress
29.37
Finished Goods
42.25 71.62
Closing Stock: Work-in-Progress
39.89
Finished Goods
53.09 92.98
Decrease/ (Increase) in stock Excise Duty on stocks
(21.36) 1.90
Stores & Spares
24.88
Power, Fuel & Water
39.97
Repairs and Maintenance - Building
0.92
- Machinery
6.87
- Others
0.01
Carriage Inward
4.07
Packing Material
41.20
Other Manufacturing Expenses Total
14.00 1,344.05
SCHEDULE 16 PERSONNEL Salaries, Wages, Bonus & Commission Contribution to Provident Fund & Super annuation Fund Gratuity Expenses (Refer Note 18 of Schedule 21) Employees' Welfare & Other Amenities Employees Stock Option Expenses (Refer Note 10 of Schedule 21) TOTAL
124 |Sterlite Technologies Limited | Annual Report 2007-08
32.27 1.86 (0.19) 3.47 4.48 41.89
Schedules forming part of the Consolidated Profit and Loss Account (Rs. in Crores)
Year Ended March 31, 2008 SCHEDULE 17 SELLING & DISTRIBUTION Sales Commission (Other than Sole Selling Agent)
10.31
Sales Promotion
3.26
Carriage Outward
40.86
Other Expenses Total
3.10 57.53
SCHEDULE 18 ADMINISTRATION & GENERAL Rent
1.50
Insurance
1.70
Rates & Taxes
0.68
Conveyance & Travelling Expenses
9.52
Loss on sale of Fixed Assets
0.08
Bad Debts Written Off
0.82
Provision for Doubtful Debts
0.25
Directors Sitting Fee and Commission
0.11
General Expenses
22.38
Total
37.04
SCHEDULE 19 RESEARCH & DEVELOPMENT Salaries, Wages, Bonus & Commission
0.93
Stores & Spares
0.30
Raw materials consumed
2.04
Rates & Taxes
1.06
General Expenses
0.42
Total
4.75
SCHEDULE 20 INTEREST & FINANCE CHARGES : (Net) On Fixed Loans Others Bank charges
6.77 37.64 5.73 50.14
Less: Interest Received from customers
6.49
[Tax Deducted at Source Rs.1.49 Crores] Total
43.65
Connecting with Shareholders | 125
Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS 1.
Background & Basis of Consolidation (a) Background The Company acquired 58.70% Equity Share Capital of Sterlite Infrastructure Private limited (SIPL) on September 28, 2007, a Company incorporated to do business of infrastructure development. Consequently, SIPL has become subsidiary of the Company. At the reporting date, this has resulted in Goodwill of Rs.2.43 Crores. (b) Basis of Consolidation (a) The consolidated financial statements of the Company and its subsidiary are prepared in accordance with Accounting Standard – 21 “Consolidated Financial Statements”, issued by The Institute of Chartered Accountants of India. (b) The financial statements of the Company and its Subsidiary Company has been combined on line – by – line basis by adding together the book values of like items of assets, liabilities, income and expenses, after fully eliminating intra group balances and intra group transactions and consequent unrealized profit and losses. (c) Excess cost of acquisition over carrying value of assets acquired is treated as Goodwill. (d) The consolidate financial statements have been prepared using uniform accounting policies for like transactions and other events in similar circumstances.
2.
Significant Accounting Policies (a) Basis of Preparation of Financial Statements The financial statements have been prepared to comply in all material respects with the notified Accounting Standards by Companies Accounting Standard Rules 2006 and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis of accounting except in case of assets for which impairment is carried out. The accounting policies have been consistently applied by the Company. (b) Use of Estimates The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting year. Difference between the actual result and estimates are recognized in the year in which the results are known/ materialized. (c) Fixed Assets Fixed Assets are stated at cost (net of Cenvat) less accumulated depreciation and impairment. Cost comprises of the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Expenditure during construction period (including financing cost relating to borrowed funds for construction or acquisition of fixed assets) incurred on projects under implementation are treated as Pre-operative expenses, pending allocation to the assets, and are included under “Capital work in Progress”. (d) Depreciation (i) Depreciation on Fixed Assets is provided on straight line method at the rates specified in Schedule XIV of the Companies Act, 1956. Depreciation on fixed assets acquired on amalgamation of the erstwhile Sterlite Telelink Limited is provided on written down value method at the rates specified in Schedule XIV of the Companies Act, 1956. (ii) Cost of leasehold land is amortized in proportion to the period of lease. (iii) Cost of acquired intangible assets is amortized over a period of five years. (e) Impairment of Assets (i) The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. (ii) After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. (iii) A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However,
126 |Sterlite Technologies Limited | Annual Report 2007-08
Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. (f) Investments Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined for category of investments. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments. (g) Inventories Inventories of raw material, packing material, work –in – process and finished goods are valued at cost or net realizable value, whichever is lower, except for scrap which is valued at net realizable value. Cost is ascertained on a weighted average cost basis. Cost of finished goods includes the cost of materials consumed, manufacturing overheads & excise duty. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. (h) Foreign Currency Transactions (i) Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. (ii) Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. (iii) Exchange differences arising on the settlement of monetary items or on reporting Company's monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise. (iv) The premium or discount arising at the inception of forward exchange contracts is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the year in which the exchange rates change. None of the forward exchange contracts are taken for trading or speculation purpose. (i)
Borrowing Costs Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.
(j)
Revenue Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Sale of Goods Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales include excise duty, sale of scrap and are net of sales tax and quantity discount. Interest Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.
(k) Retirement and other Employee Benefits (i) Retirement benefits in the form of Provident Fund & Superannuation Fund is a defined contribution scheme and the contributions are charged to the Profit & Loss Account of the year when the contributions to the respective funds are due. The Company has no other obligation other than the contributions payable. (ii) Gratuity liability is a defined benefit obligation and are provided for on the basis of an actuarial valuation on Projected Unit Credit Method calculated at the end of each financial year. (iii) Leave encashment liability is provided for based on actuarial valuation done as per Projected Unit Credit Method
Connecting with Shareholders | 127
Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) calculated at the end of each financial year. (iv) Actuarial gains / losses are immediately taken to profit and loss account and are not deferred. (l)
Employee Stock Option Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by the institute of Chartered Accountants on India. The Company measures compensation cost relating to employee stock options using the fair value method. Compensation expense is amortized over the vesting period of the option on a straight line basis.
(m) Research and Development Revenue expenditure on research and development (R&D) is expensed as incurred. (n) Export Incentives Advance licences are issued to the Company under the Advance License Scheme [Duty Exemption Entitlement Certificate (DEEC Scheme)]/duty entitlement credited under the Duty Entitlement Pass Book Scheme (DEPB Scheme)/Target Plus Entitlement Scheme on export of the goods manufactured by it. Wherever export sales are made by the Company, pending receipt of imported duty-paid raw materials under the DEPB scheme, the higher cost of domestic raw materials actually consumed for the purpose of such exports is compensated and/or matched by accruing the value of the benefit under the DEPB scheme. (o) Taxes on Income Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is determined as the amount of tax payable in respect of taxable income for the year based on provisions of Income Tax Act, 1961. Deferred income tax reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In case of unabsorbed depreciation and carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits. At each balance sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realized. The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. MAT credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. In the year in which the Minimum Alternative tax (MAT) credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the profit and loss account and shown as MAT Credit Entitlement. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal Income Tax during the specified period. (p) Expenditure on new projects and substantial expansion Expenditure directly relating to construction activity is capitalized. Indirect expenditure incurred during construction period is capitalized as part of the indirect construction cost to the extent to which the expenditure is related to construction or is incidental thereto. Income earned during construction period is deducted from the total of the indirect expenditure. (q) Operating Leases
128 |Sterlite Technologies Limited | Annual Report 2007-08
Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) Assets taken on Lease under which all significant risks and rewards of ownership are effectively retained by the lessor are classified as Operating Leases. Lease payments under Operating Leases are recognized on straight line basis over the lease period unless another systematic basis is more representative of the time pattern of the users benefit. (r) Earnings Per Share The Company reports basic and diluted earnings per share in accordance with Notified AS 20 under the Companies (Accounting Standards) Rules, 2006 issued by The Institute of Chartered Accountants of India on ‘Earnings Per Share’. Basic earning per share is computed by dividing the net profit or loss for the period attributable to equity shareholders after deducting attributable taxes by the weighted average number of Equity shares outstanding during the period. Diluted earnings per share is computed by dividing the net profit or loss for the period by the weighted average number of equity shares outstanding during the period. Both profit for the year and weighted average number of shares are adjusted for the effects of all diluted potential equity shares except where the results are anti- dilutive. (s) Cash and Cash equivalents Cash and Cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. (t) Segment Reporting Policies The Company’s operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The Company generally accounts for inter-segment sales and transfers as if the sales or transfers were to third parties at current market prices. Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs. The Corporate and other segment includes general corporate income and expense items which are not allocated to any business segment. (u) Provisions, Contingent Liabilities and Contingent Assets As per Notified AS 29 under the Companies (Accounting Standards) Rules, 2006, Provisions, Contingent Liabilities and Contingent Assets, issued by the Institute of Chartered Accountants of India, the Company recognizes provisions (without discounting to its present value) only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation as and when a reliable estimate of the amount of the obligation can be made. No provision is recognized for i) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or ii)
Any present obligation that arises from past events but is not recognized because• It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or • A reliable estimate of the amount of obligation cannot be made.
Such obligations are disclosed as Contingent Liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made. Contingent Assets are neither recognized nor disclosed in the financial statements since this may result in the recognition of income that may never be realized. (v) Commodity Hedging Transactions The Commodity Hedging Contracts are accounted on the date of their settlement and realized gain / (loss) in respect of settled Contracts are recognized in the Profit and Loss accounts.
Connecting with Shareholders | 129
Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) 3.
Deferred Tax a) The break-up of closing net deferred tax liability is as under:
(Rs. in Crores)
Particulars
Current Year
Deferred Tax Liability (a) Depreciation
63.24
(b) On export benefit
0.02
Deferred Tax Assets (a) On provision for doubtful debts.
6.76
(b) On unabsorbed tax depreciation and carried forward losses.
17.97
(c) On Employee Benefits provided as per Revised AS 15
0.40
Net Deferred Tax Liability b)
38.13
Deferred tax charged for the year Particulars
Current Year
Opening Deferred Tax Liability
10.25
Less: Closing Deferred tax liability
38.13
Deferred tax charged for the year
27.88
4.
The amount of foreign exchange (gain)/loss adjusted during the year to the carrying cost of the fixed assets and capital work in progress is Rs.Nil and (credited) to respective heads of accounts in Profit and Loss Account is Rs.(31.02) Crores; premium on forward exchange contract to be recognized in the Profit and Loss Account of subsequent accounting period is Rs.0.61 Crore.
5.
Derivative Instruments The Company has entered into the following derivative instruments: (a) The following are the outstanding Forward Exchange Contracts entered into by the Company, for hedge purpose, as on March 31, 2008.
Year Current Year
Currency in Crores
Amount (Rs. in Crores)
Buy/Sell
No of Contracts
US $ 6.62
264.25
Buy
137
US $ 5.79
231.53
Sell
149
Euro 0.01
0.46
Sell
2
JPY 50.70
20.32
Buy
2
Currency in Crore
Amount (Rs. in Crores)
Buy/Sell
No of Contracts
US $ 0.15
6.00
Buy
1
Options: Year Current Year
(b) The year-end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below: i.
Amounts receivable in foreign currency on account of the following:
(Rs. in Crores)
Year
Particulars
Current Year
Export of goods
US $ 0.25
9.74
Export of goods
Euro 0.08
4.30
Advance to Suppliers
US $ 0.30
11.85
Advance to Suppliers
Euro 0.01
0.76
Advance to Suppliers
THB 0.06
0.07
Advance to Suppliers
JPY 0.21
0.07
130 |Sterlite Technologies Limited | Annual Report 2007-08
Currency
Amount
Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) ii.
Amounts payable in foreign currency on account of the following: Particulars
Currency in Crores Current Year
Amount (Rs. in Crores) Current Year
Import of goods and services
US$ 1.39
55.71
Import of goods and services
Euro 0.07
4.21
Advance from Customers
US$ 0.83
33.01
Loans payable
US $ 1.02
40.81
Loans payable
Euro 0.04
2.41
(c) Commodity Future Contract to hedge against fluctuation in commodity prices. The following are the outstanding Futures contracts entered into by the Company as on March 31, 2008: Year Current Year
No. of Contracts
Contracted Quantity
Buy/ Sell
24
2,625 MT
Buy
6.
In terms of accounting policy (Refer Note 2 (n)) for the accrual of export incentives, estimated benefits of Rs.18.99 Crores have been taken into account under the DEPB / Target Plus Entitlement scheme / Duty Drawback scheme.
7.
In view of book profits and no taxable profits, as per computation of income, the provision for tax has been made as per MAT under section 115 JB of the Income Tax Act, 1961. The Company is entitled to avail Credit under section 115JAA (1A). Accordingly it has considered MAT credit entitlement as an asset as it has reversible deferred tax liability on account of depreciation.
8.
The Company had in the earlier year received an order of CESTAT upholding the demand of Rs.188 Crores (including penalties) in the pending excise/custom matters on various grounds. During the period, the Company’s appeal with the Hon’ble High Court of Mumbai was rejected on the grounds of jurisdiction. The Company preferred an appeal with the Hon’ble Supreme Court of India against the order of CESTAT, which has been admitted. The Company has re-evaluated the case on admission of appeal by the Hon’ble Supreme Court. Based on their appraisal of the matter, the legal advisiors/consultants are of the view that under most likely event, the provision of Rs.5 Crores made by the Company against above demand is adequate. The management is confident of a favourable order and hence no further provision is considered against the said demand.
9.
Other Income includes Rs.Nil on account of the prepayment of deferral sales tax liability in accordance with the scheme framed by the Government of Maharashtra.
10. Employee Stock Option Scheme The Company has granted Employees Stock Options Plan, 2006 (ESOP) to its employees pursuant to the resolution passed by the shareholders at the Extraordinary General Meeting held on March 13, 2006.The Company has followed the fair value method (Black Scholes Options Pricing Model) for the valuation of these options. The Compensation Committee of the Company has approved three grants vide their meeting held June 14, 2006; March 19, 2007 and September 28, 2007 respectively. As per the plan, Options granted under ESOP would vest in not less than one year and not more than five years from the date of grant of such options. Vesting of options would be subject to continued employment with the Company. The plan will be equity settled plan. Other details of the options are as follows: Grant 1
Grant 2
Grant 3
14-Jun-06
19-Mar-07
28-Sep-07
465,700
127,200
261,550
Equity
Equity
Equity
Vesting Period
3 Yrs
2.25 Yrs.
1.71 Yrs.
Exercise Period
1 Year
1 Year
1 Year
Business
Business
Business
Performance
Performance
Performance
Date of grant Number of Options granted Method of Settlement
Vesting Conditions
Connecting with Shareholders | 131
Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) The details of the activity under the plan have been summarized below: Current Year Number of Weighted Average Options Exercise Price (Rs.) Outstanding at the beginning of the year
5,92,900
5
Granted during the year
2,61,550
5
Nil
–
Forfeited during the year Exercised during the year
73,680
5
Expired during the year
79,160
5
7,01,610
5
11,620
5
1.17
–
143.31
–
Outstanding at the end of the year Exercisable at the end of the year Weighted average remaining contractual life (in years) Weighted average fair value of options granted
The fair value as per the Black Scholes Options Pricing Model was measured based on the following input: Date of grant Vest 1
Vest 2
Vest 3
14-Jun-07
14-Jun-08
14-Jun-09
89.25
89.25
89.25
59.78%
58.90%
60.52%
Risk free Rate
7.07%
7.16%
7.26%
Exercise Price
5
5
5
1.5
2.5
3.5
0.57%
0.57%
0.57%
83.99
83.81
83.62
20.00%
40.00%
40.00%
June 14, 2006 Variables Weighted average Stock Price Expected Volatility (*)
Time To Maturity Dividend yield Outputs Option Fair Value Vesting Percentage Option Fair Value
83.79
Date of grant Vest 1
Vest 2
19-Jun-08
19-Jun-09
179
179
62.90%
57.75%
Risk free Rate
8.07%
8.06%
Exercise Price
5
5
March 19, 2007 Variables Weighted Average Stock Price Expected Volatility (*)
Time To Maturity
1.5
2.5
0.57%
0.57%
Option Fair Value
173.04
172.37
Vesting Percentage
60.00%
40.00%
Option Fair Value
172.77
172.77
Dividend yield Outputs
132 |Sterlite Technologies Limited | Annual Report 2007-08
Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) Date of grant Vest 1
Vest 2
28-Sep-08
14-Jun-09
Weighted Average Stock Price
237.30
237.30
Expected Volatility *
56.69%
60.98%
Risk free Rate
7.20%
7.29%
Exercise Price
5.00
5.00
Time To Maturity
1.50
2.21
0.51%
0.51%
Option Fair Value
231.02
230.40
Vesting Percentage
50.00%
50.00%
Option Fair Value
230.71
230.71
September 28, 2007 Variables
Dividend yield
(*)The measure of volatility used in the above model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time. The volatility periods considered above, corresponding to the respective expected lives of the different vests are prior to the grant date. The daily volatility of stock prices is considered as per the National Stock Exchange (NSE) prices over these years. 11. In view of Notified AS 28 under the Companies (Accounting Standards) Rules, 2006 on Impairment of Assets (AS) – 28 issued by the Institute of Chartered Accountants of India, the Company has reviewed its fixed assets and impaired assets worth Rs.0.21 Crore during the year (Previous Year Nil) on account of impairment in addition to the provision already made in the books. 12. There are no amounts due and outstanding to be credited to Investor Education and Protection Fund.
13. Payment To Auditors Particulars
(Rs. in Crores)
Current Year
a)
Audit Fees
0.32
b)
Tax Audit Fees
0.03
C)
Other services
0.01
Total
0.36
14. Related Party Disclosures Related party disclosures as required by Notified AS 18 under the Companies (Accounting Standards) Rules, 2006 “Related Party Disclosures” are given below: (A) Name of related party and its relationship: (i)
Key Management Personnel Dr. Anand Agarwal Mr. Pravin Agarwal
(ii) Investing Company Twin Star Overseas Limited. (B) There are no provisions for doubtful debts or no amounts have been written off in respect of debts due to or from related parties.
Connecting with Shareholders | 133
Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) (C) The following transactions were carried out with the related parties:
Sr No Transaction
(Rs. in Crores)
Twin Star Ovearseas Limited
Key Management Personnel
Transactions during the year: 1
Remuneration (*)
2
Equity Share Capital Issue
3
Equity Share Premium
–
2.88
1.40
–
26.60
–
* It includes payment to Dr. Anand Agarwal of Rs.1.03 Crores & Rs.1.85 Crores paid to Mr. Pravin Agarwal. 15. Operating Leases Disclosures in respect of Operating Leases of office buildings as per the requirement of Notified AS 19 under the Companies (Accounting Standard) Rules, 2006 on Leases issued by The Institute of Chartered Accountants of India, is as under: (a) Lease payments recognized in the statement of Profit and Loss for the period is Rs.0.29 Crore. (b) The future minimum lease payments payable over the next one-year is Rs.0.51 Crore. (c) The future minimum lease payments payable later than one year but not later than five year is Rs.0.81 Crore. (d) The future minimum lease payments payable later than five years is Rs.Nil.
16. Earnings per Share (EPS)
(Rs. in Crores)
Current Year I
Net Profit as per Profit and Loss Account available for Equity Shareholders
II
Weighted Average Number of equity shares For Basic Earning Per share
100.66 62,632,181
For Diluted Earning Per Share No. of Share for Basic EPS
62,632,181
Add: Potential Equity Shares a)
Convertible Warrant
b)
Employee Stock Option
No of Shares for Diluted Earning Per Share III
1,836,066 671,201 65,139,448
Earning Per Share (Weighted Average) Basic (On Nominal Value of Rs.5 Per Share) Rupees
16.07
Diluted (On Nominal Value of Rs.5 Per Share) Rupees
15.45
17. The Company had allotted 56,00,000 warrants on March 29, 2006 on preferential basis, (Rs.10 per warrant had been received upfront) to Twin Star Overseas Limited. The warrant holders had an option to be allotted one equity share of Rs.5/- each at a price of Rs.100 each on the payment of balance amount. During the year, 28,00,000 Share warrants were converted into 28,00,000 Equity Shares.
134 |Sterlite Technologies Limited | Annual Report 2007-08
Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) 18. The disclosures as per the Notified AS 15 under the Companies (Accounting Standards) Rules, 2006 on “Employee Benefits�, are as follows: The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with Life Insurance Corporation of India in the form of a qualifying insurance policy. The future contributions payable by the Company under the Gratuity Scheme are currently not ascertainable. Balance Sheet
(Rs. in Crores)
Particulars
Current Year
Details of Provision for Gratuity Defined Benefit Obligation
1.89
Fair Value of Plan Assets
2.14
Plan (Assets) / Liability
(0.25)
Change in defined benefit obligation Defined benefit obligation at the beginning of the year
1.88
Current Service cost
0.33
Interest cost
0.17
Actuarial (gain) / loss on obligation
(0.32)
Benefits paid
(0.17)
Defined benefit obligation, end of the period
1.89
Change in fair value of plan assets Fair value of plan assets at the beginning of the year
2.13
Expected return on plan assets
0.17
Contribution by employer
0.03
Benefits paid
(0.17)
Actuarial gain / (loss) on plan assets
(0.01)
Fair value of plan assets at the end of the year
2.14
Net period gratuity cost Current Service cost
0.33
Interest cost on benefit obligation
0.17
Net actuarial (gain) / loss recognized in the year
(0.31)
Expected return on plan assets
(0.17)
Net benefit expense
0.02
The major categories of plan assets as a percentage of the fair value of total plan asset is as follows: Current Year % Investment with Insurer (Life Insurance Corporation of India)
100.00
Assumptions: Discount rate
8.00 %
Expected rate of return on plan assets
8.00 %
Employee Turnover
2.00 %
Connecting with Shareholders | 135
Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) 19. Contingent Liabilities
(Rs. in Crores)
Sr. No. Descriptions 1
Current Year
Disputed Liabilities in Appeal a)
Sales Tax
b)
Excise Duty
65.82
1.28
c)
Customs Duty
74.52
d)
Service Tax
e)
Claims lodged by a Bank Against the Company
f)
Excise Duty Case in Supreme Court (Refer Note 8 supra)
0.80 18.87
2
Unexpired Letter of Credit
3
Outstanding Bank Guarantees
36.57
4
Outstanding amount of Export obligation against Advance License
5
Export Obligation under EPCG Scheme
6
Estimated Amount of contracts remaining to be executed on Capital account
7
The Company has given Corporate Guarantee to the Income Tax Department
558.32 2.21 215.90
and not provided for (Net of Advances)
66.88
on behalf of group companies. The outstanding amount is Rs.114.00 Crores on this account as at the year-end. 20. In accordance with the Notified AS 17 under the Companies (Accounting Standards) Rules, 2006 on “Segment Reporting”, issued by the Institute of Chartered Accountants of India, the Company has identified two reportable Business Segments i.e. Telecom Product and Power Transmission Business, which are regularly evaluated by the Management, in deciding the allocation of resources and assessment of performance. Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common cost. The segment performance as follows: (Rs. in Crores)
(i)
Particulars Segment review
Telecom
Transmission
Unallocable
Total
690.71
1,080.57
–
1,771.28
Less: Excise
55.39
30.10
–
85.49
Net Revenue
635.33
1,050.46
–
1,685.79
61.86
109.42
–
171.28
Less: Interest
–
–
40.84
40.84
Profit/(loss) before tax
–
–
–
130.44
Provision for Tax (Net)
–
–
29.72
29.72
Profit/(Loss) after Tax
–
–
–
100.72
Segment Assets
793.40
651.96
117.23
1,562.59
Segment Liabilities
202.26
111.36
51.99
365.61
Capital Expenditure Incurred
51.84
85.28
–
137.13
Depreciation
28.02
8.93
–
36.96
Impairment
0.21
–
–
0.21
Segment Results (PBIT)
136 |Sterlite Technologies Limited | Annual Report 2007-08
Schedules forming part of the Consolidated Accounts SCHEDULE 21 NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (Contd.) (Rs. in Crores)
(ii) Particulars 1.
Current Year
Segment Revenue - External Turnover - Within India
1,253.27
- Outside India
518.01
Total Revenue 2.
1,771.28
Segment Assets - Within India
1,467.93
- Outside India
94.66
Total Assets 3.
1,562.59
Capital Expenditure - Within India
137.13
- Outside India
–
Total Capital Expenditure
137.13
21. Expenditure of Rs.6.49 Crores on account of financing cost relating to borrowed funds for construction or acquisition of fixed assets on projects under implementation is debited to “Capital work in Progress”. 22. Pre - Operative Expenses Details of Pre – Operative Expenses are given below:
(Rs. in Crores)
Current Year Manufacturing & Other Expenses
2.62
Personnel
0.45
Administration & General
0.43
Interest & Finance Charges
2.82 6.32
23. Previous Year Comparatives Being first year of consolidation, previous year’s figures are not given.
As per our attached report of even date
For and on behalf of the Board
For S.R. Batliboi & Co.
Pravin Agarwal
Dr. Anand Agarwal
Chartered Accountants
Whole-time Director
CEO & Whole-time Director
Per Vijay N. Bhatt Partner
Place: Mumbai
Anupam Jindal
Sandeep Deshmukh
Membership Number: F- 36647
Dated: April 29, 2008
Chief Financial Officer
Company Secretary
Connecting with Shareholders | 137
Consolidated Cash Flow Statement
(Rs. in Crores)
Year Ended March 31, 2008 A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit/(Loss) after tax as per Profit & Loss Account Adjustment for Taxation
100.62 29.72 130.34
Adjustments for : - Depreciation and Impairment - Provision for Doubtful Debts - Bad Debts written off - Interest Expenses (net) - Exchange difference - (Profit) / Loss on Sale of Assets - Employees Stock Option Expenses amortized Operating profit before working capital changes Adjustments for : - (Increase)/Decrease in Trade and other receivables - (Increase)/Decrease in Inventories - Increase/(Decrease) in Trade payables Cash generation from operations Direct taxes (paid / TDS deducted)/Refund received Net cash flow from Operating Activities B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets (Including Capital Work in Progress) Proceed from Sale of Fixed Assets Purchase of Investments Sale of Investments Investment in Bank Fixed Deposits* Net cash flow used in Investing Activities C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds/(Repayment) of Secured Loans (net) Proceeds/ (Repayment) of Share Capital Proceeds/ (Repayment) of Employee Stock Options Proceeds/ (Repayment) of Unsecured Loans (net) Interest paid Dividend paid on Equity Shares (Including Corporate Dividend Tax) Share Issued Expenses Net Cash flow from Financing Activities Net Increase/(decrease) in cash and cash equivalent Cash and cash equivalent as at beginning of year** Cash and cash equivalent as at year end **
37.17 0.25 0.82 43.65 (1.41) 0.08 4.48
(141.50) (99.40) 99.39
85.04 215.38
(141.51) 73.87 (7.99) 65.88 (120.58) 10.45 (9.59) 6.30 (20.78) (134.20) 67.26 32.90 0.04 7.26 (44.64) (5.30) (0.09) 57.43 (10.89) 13.41 2.52
* Investments in Bank Fixed Deposits having maturity of more than 3 Months have been shown under the cash flows from Investing activities. ** Fixed deposits of Rs.86.66 Crores having maturity of more than 3 months have not been considered As per our attached report of even date
For and on behalf of the Board
For S.R. Batliboi & Co. Chartered Accountants
Pravin Agarwal Whole-time Director
Dr. Anand Agarwal CEO & Whole-time Director
Anupam Jindal Chief Financial Officer
Sandeep Deshmukh Company Secretary
Per Vijay N. Bhatt Partner Membership Number: F- 36647
Place: Mumbai Dated: April 29, 2008
138 |Sterlite Technologies Limited | Annual Report 2007-08
Locations CORPORATE OFFICE
REGISTERED OFFICE
4th Floor, Godrej Millennium 9, Koregaon Road, Pune - 411001 Maharashtra, INDIA Phone: +91-20-30514000 Fax: +91-20-26138083
E1, MIDC, Waluj Aurangabad - 431136 Maharashtra, INDIA Phone: +91-240-2564599 Fax: +91-240-2564598
MARKETING / SALES & REPRESENTATIVE OFFICES 601, Samarpan Complex New Link Road Chakala, Andheri (East), Mumbai - 400099 Maharashtra, INDIA Phone: +91-22-67022260 Fax: +91-22-67022265
Scope Office Complex, Core - 6 6th Floor, C/o BALCO 7 Lodhi Road New Delhi - 110003, INDIA Phone: +91-11-24366087 Fax: +91-11-24364076
1310, 13th Floor Chiranjivi Tower Nehru Place New Delhi - 110019, INDIA Phone: +91-11-66602802 Fax: +91-11-66602804
Atur Chambers 2A, Moledina Road Pune - 411001 Maharashtra, INDIA Phone: +91-20-30512700 Fax: +91-20-26124340
E1, E2, E3, MIDC, Waluj Aurangabad - 431136 Maharashtra, INDIA Phone: +91-240-2564599 Fax: +91-240-2564598
Room 1802, China Merchants Tower No 118 Jian Guo Road Chao Yang District Beijing 100022, CHINA Phone: +86-10-59233898 Fax: +86-10-59233705
B2002, Far East International Plaza 317, Xianxia Road Shanghai - 200051, CHINA Phone: +86-21-62351469 Fax: +86-21-62351470
The Meadows Church Road, Dodleston Cheshire CH4 9NG, UNITED KINGDOM Phone: +44-5601-257106 Fax: +44-1244-661189
90, bid.3 Krasnobogatyrskaya St 107076 Moscow, RUSSIA Phone: +7-495-579 2337 Fax: +7-495-579 2337
Level 27, Bangkok City Tower 179/114-116 South Sathorn Road Kwaeng Thungmahamek, Khet Sathorn Bangkok 10120, THAILAND Phone: +66-2343 1858 Fax: +66-2343 1818
PO Box 784689, Sandton 2146 377 Rivonia Boulevard Rivonia 2128, SOUTH AFRICA Phone: +27-11-2750284 Fax: +27-11-2345022
PO Box 123472, LOB04, Office 019 Jebel Ali Free Zone, Dubai UNITED ARAB EMIRATES Phone: +971-4-8817917 Fax: +971-4-8873025
Optical fiber
Fiber optic cables
Copper telecom cables
E2, E3, MIDC, Waluj Aurangabad - 431136 Maharashtra, INDIA Phone: +91-240-2564599 Fax: +91-240-2564598
Survey No. 68/1, Rakholi Village Madhuban Dam Road, - 396230 Union Territory of Dadra & Nagar Haveli, INDIA Phone: +91-260-6612000 Fax: +91-260-6612013
Survey No. 209, Phase 2 Piparia Industrial Estate, Silvassa-394240 Union Territory of Dadra & Nagar Haveli, INDIA Phone: +91-260-6612100 Fax: +91-260-6612122
MANUFACTURING LOCATIONS
Power transmission conductors + aluminium and alloy rods Survey No. 99, Rakholi Village Madhuban Dam Road, Silvassa - 396230 Union Territory of Dadra & Nagar Haveli, INDIA Phone: +91-260-6612200 Fax: +91-260-6612260
P. O. Karanjawane, Nasarapur Velhe Road Off Pune Satara Highway, Taluka Velhe Pune - 412305, Maharashtra, INDIA Phone: +91-2130-236113 / 4 Fax: +91-2130-236117
Structured data cables
Customer premise equipment
Survey No. 33/1/1 Waghdara Road, Dadra Union Territory of Dadra & Nagar Haveli, INDIA Phone: +91-260-6452959 Fax: +91-260-6612122
E1, MIDC, Waluj Aurangabad - 431136 Maharashtra, INDIA Phone: +91-240-2564599 Fax: +91-240-2564598
Plot 2D, Sector 10 IIE SIDCUL, Haridwar - 249403 Uttarakhand, INDIA Phone: +91-1334-239463 Fax: +91-1334-239375
Connecting with Shareholders | 139
140 |Sterlite Technologies Limited | Annual Report 2007-08
CORPORATE INFORMATION Annual General Meeting
Bankers
August 08, 2008, Friday at 1100 hrs
Citibank
Date , Day & Time : Venue :
E-1, MIDC, Waluj,
Aurangabad – 431 136, Maharashtra, India
Board of Directors Anil Agarwal
Navin Agarwal
Arun Todarwal
A.R.Narayanaswamy
Bank of Maharashtra Corporation Bank
HDFC Bank Limited ICICI Bank Limited
Oriental Bank of Commerce Punjab National of Bank State Bank of India
Union Bank of India Yes Bank
Haigreve Khaitan
Registered Office
Anand Agarwal
Maharashtra, India.
Pravin Agarwal
E-1, Waluj MIDC Industrial Area, Aurangabad 431 136,
Chief Financial Officer
Registrar and Transfer Agents
Company Secretary
Unit – Sterlite Technologies Limited)
Anupam Jindal
Sandeep Deshmukh
Auditors
S.R.Batliboi & Co.
Karvy Computershare Private Limited Plot No.17 to 24, Vittalrao Nagar, Madhapur, Hyderabad –500 081
Tel: +91-40-23420818 / 828 Fax: +91-40-23420814
E-mail: einward.ris@karvy.com
A Product info@trisyscom.com
www.sterlitetechnologies.com