Director's Report


HFCL Ltd
BSE Code 500183 ISIN Demat INE548A01028 Book Value (₹) 19.80 NSE Symbol HFCL Div & Yield % 0.25 Market Cap ( Cr.) 7,791.22 P/E * 27.59 EPS * 2.05 Face Value (₹) 1
* Profit to Earning Ratio
* Earning Per Share

Dear Members,

Your Board of Directors has pleasure in presenting the 34th Annual Report on the business and operations of your Company together with the Audited Financial Statements for the financial year ended March 31, 2021.

FINANCIAL HIGHLIGHTS

Your Company's financial performance (standalone and consolidated) for the financial year ended March 31, 2021 is summarized below:

( Rs in Crores)
Particulars

Standalone

Consolidated

2020-21 2019-20 2020-21 2019-20
Revenue from Operations (Net) 4,105.87 3,547.30 4,422.96 3,838.91
Other Income 33.22 20.94 36.13 22.08
Total Income 4,139.09 3,568.24 4,459.09 3,860.99
Operating Expenses 3,450.75 2,961.77 3,656.77 3,158.60
Other Expenditure 186.50 158.31 216.61 186.22
Depreciation and Amortization expenses 53.59 30.13 68.63 41.95
Total Expenses 3690.84 3,150.21 3,942.01 3,386.77
Profit before Finance Cost and Tax 448.25 418.03 517.08 474.22
Finance Cost 148.25 90.10 176.09 114.82
Share of net profits of joint ventures accounted for using equity method - - - (1.05)
Exceptional Item 4.13 - 4.13 -
Profit before Tax (PBT) 295.87 327.93 336.86 358.35
Tax Expense Net of MAT Credit Entitlement 73.01 124.10 90.62 121.01
Profit after Tax (PAT) 222.86 203.83 246.24 237.34
Attributable to:
Shareholders of the Company - - 239.00 227.25
Non-Controlling Interests - - 7.24 10.09
Opening Balance of Retained Earnings 1,062.12 872.09 1,082.00 868.55
Impact on account of Change in Accounting Policy - Adoption of Ind AS-115 - (1.13) - (1.13)
Total Comprehensive Income for the year 222.87 203.83 239.00 -
Transfer to Retained Earnings (out of DRR) 124.75 2.81 124.72 2.81
Amount available for appropriation 1,160.24 1077.60 1,196.28 1,097.48
Appropriations :
Dividend on Equity Shares (Previous Year) - 15.48 - 15.48
Closing Balance of Retained Earnings 1,160.24 1,062.12 1,196.28 1,082.00

During the FY21, total Consolidated Income of your Company is

Rs4,459.09 Crores as compared to Rs3,860.99 Crores during the previous year, showing an increase of 15.49%.

Your Company has achieved Consolidated EBIDTA of Rs585.71 Crores in FY21 from Rs516.17 Crores in the previous year, recording a growth of 13.47%. Profitability, i.e., Consolidated PBT has declined by 5.9% to Rs336.86 Crores in FY21 from Rs358.35 Crores during the previous year.

In FY21, your Company has a Consolidated PAT of Rs246.24 Crores from

Rs 237.34 Crores in the previous year, recording a growth of 3.75%.

Net Worth

The net worth of your Company has increased during the year under review to Rs1,916.21 Crores from Rs1,668.44 Crores in the previous year.

Gross Debt

The consolidated Debt in FY21 stood at Rs920 Crores as against Rs712 Crores in FY20.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the provisions of Section 129 read with Schedule III to the Companies Act, 2013 (hereinafter referred to as the "Act") and the Companies (Accounts) Rules, 2014, Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as the "SEBI Listing Regulations") and applicable Indian Accounting Standards, the Audited Consolidated Financial Statements of the CompanyfortheFY21,togetherwiththeAuditors'Reportformpartofthis Annual Report.

TRANSFER TO RESERVES

The Board of Directors has decided to retain the entire amount of profits for the FY21, under Retained Earnings and has not transferred any amount to the General Reserves, during the year under review.

DIVIDEND

In the wake of COVID_19 pandemic, each of the business sectors in the economy has been affected, however despite this, your Board of Directors, at its meeting held on May 10, 2021, has recommended a Dividend @15% i.e., Rs0.15/- (Fifteen Paisa) per equity share of Rs1/- each, aggregating to Rs19.26 Crores for the financial year ended March 31, 2021, subject to approval of shareholders at the ensuing annual general meeting (AGM) of the Company. The above decision is in accordance with the Company's Dividend Distribution Policy.

The dividend shall be subject to deduction of TDS before payment to shareholders, as per applicable provisions of Income Tax Act, 1961.

Dividend Distribution Policy

As per Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2021, top 1000 listed companies based on the market capitalization, shall formulate a Dividend Distribution Policy.

Accordingly, the Policy has been adopted by the Board of Directors of the Company setting out the parameters and circumstances that will be taken into account by the Board in determining the distribution of dividend to its shareholders and/ or retaining profits earned by the Company.

The Dividend Distribution Policy is available on the Company's website at http://www.hfcl.com/wp-content/uploads/2017/05/Dividend_ Distribution_Policy.pdf.

Investor Education and Protection Fund (IEPF)

In accordance with the applicable provisions of the Companies Act, 2013 read with the Investor Education and Protection Fund (Accounting, Audit, Transfer and Refund) Rules, 2016 ("IEPF Rules"), all unclaimed dividends are required to be transferred by the Company to the IEPF, which remain unpaid or unclaimed for a period of seven years, from the date of transfer to Unpaid Dividend Account.

Further, according to IEPF Rules, the shares on which dividend has not been claimed by the shareholders for seven consecutive years or more shall be transferred to the demat account of the Investor Education and Protection Fund Authority ("IEPF Authority").

During the year under review, no amount of the unclaimed/unpaid dividend and any such share in the Company, was due to be transferred to the IEPF Authority.

The following table provides a list of years for which unclaimed dividends and their corresponding shares would become eligible to be transferred to the IEPF on the dates mentioned below:

Financial Year Dividend per Share (Rs) Date of Declaration Due Date for Transfer Amount (Rs ) (Unpaid as on March 31, 2021)
2017-18 0.06 September 29, 2018 December 04, 2025 10,36,599.60
2018-19 0.10 September 28, 2019 December 03, 2026 16,40,858.90

Details of unpaid dividend for the financial year 2017-18 and 2018-19 can be accessed from the website of the Company at www.hfcl.com and claim can be made by making request to the Company.

Details of Nodal Officer

The Company has designated Mr. Manoj Baid, Senior Vice-President (Corporate) & Company Secretary of the Company as a Nodal Officer for the purpose of IEPF.

INDIAN ACCOUNTING STANDARDS (IND-AS)

Financial Statements of your Company and its subsidiaries, for the financial year ended March 31, 2021, are prepared in accordance with Indian Accounting Standards (Ind-AS), as notified under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time.

FIXED DEPOSITS

During the FY21, your Company has not accepted any deposit within the meaning of Section 73 and 74 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014.

SHARE CAPITAL AND CHANGES IN CAPITAL STRUCTURE Authorized Share Capital

As on March 31, 2021, the Authorized Share Capital of your Company stood at Rs760 Crores (Rupees Seven Hundred Sixty Crores only) divided into 510 Crores (Five Hundred Ten Crores) equity shares of face value of

Rs1/- (Rupee One) each, aggregating to Rs510 Crores (Rupees Five Hundred Ten Crores only) and 2.50 Crores (Two Crore Fifty Lakhs) Cumulative Redeemable Preference Shares (CRPS) of Rs100/- (Rupees Hundred) each, aggregating to Rs250 Crores (Rupees Two Hundred Fifty Crores only).

Paid-up Share Capital

As on March 31, 2021, the Paid-up Equity Share Capital of your Company stood at Rs128.44 Crores comprising of 1,28,43,77,194 equity shares of face value of Rs1/- each.

Further, your Company had allotted 49,34,300 equity shares of face value of Rs1/- each, to HFCL Employees' Trust for implementing the benefits of HFCL Employees' Long Term Incentive Plan – 2017, in lieu of the vested Employee Stock Options (ESOPs) granted to eligible employees of the Company, pursuant to the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations 2014.

Consequent to the above, the paid up equity share capital stood increased from Rs128.44 Crores to Rs128.93 Crores comprising of 128,93,11,494 equity shares of face value of Rs1/- each, as on the reporting date.

There are no convertible warrants in the Company, as on the date of this Report.

Your Company has not issued equity shares with differential rights as to dividend, voting or otherwise.

MANAGEMENT DISCUSSION AND ANALYSIS (MD&A) REPORT

The Management Discussion and Analysis Report for the year under review, as stipulated under Regulation 34(2)(e) of the SEBI Listing Regulations, is presented in a separate section, forming part of this Annual Report.

CORPORATE GOVERNANCE

Your Company is committed to benchmark itself with global standards for providing good corporate governance. Your Board constantly endeavors to take the business forward in such a way that it maximizes long term value for the stakeholders. The Company has put in place an effective corporate governance system which ensures that the provisions of the SEBI Listing Regulations are duly complied with.

A detailed report on the Corporate Governance pursuant to the requirements of the SEBI Listing Regulations forms part of this Annual Report.

A Certificate from the Secretarial Auditor of the Company, confirming compliance of conditions of corporate governance as stipulated in the SEBI Listing Regulations, is provided in the Report on Corporate Governance which forms part of the Corporate Governance Report.

BUSINESS RESPONSIBILITY REPORT

As stipulated under Regulation 34(2)(f ) of the SEBI Listing Regulations, the Business Responsibility Report, describing the initiatives taken by the Company from environmental, social and governance perspective forms part of this Annual Report.

EMPLOYEES' LONG TERM INCENTIVE PLAN

In terms of the SEBI (Share Based Employee Benefits) Regulations, 2014 ("SEBI SBEB Regulations"), as amended from time to time and with the objective to promote entrepreneurial behaviour among employees of the Company, motivate them with incentives and reward their performance with ownership in proportion to the contribution made by them as well as align the interest of the employees with that of the Company, "Himachal Futuristic Communications Limited Employees' Long Term Incentive Plan–2017" ("HFCL Plan 2017") was approved by the Board of Directors of your Company on August 26, 2017, which was further approved by the members of the Company, in their 30th Annual General Meeting held on September 25, 2017.

The HFCL Plan 2017 comprises of the following three subsets:

1. Employee Stock Option Plan (ESOP) under which Options would be granted;

2. Restricted Stock Units Plan (RSUP) under which Units would be granted;

3. Employee Stock Purchase Scheme (ESPS) under which shares would be issued.

During the financial year ended March 31, 2021, your Company has not granted any ESOPs and RSUs in terms of the HFCL Plan 2017.

Further, the Company had allotted 49,34,300 equity shares of face value of Rs1/- each, to HFCL Employees' Trust for implementing the benefits of HFCL Employees' Long Term Incentive Plan – 2017, in lieu of the vested Employee Stock Options (ESOPs) granted to eligible employees of the Company, pursuant to the SEBI SBEB Regulations, on July 15, 2021 and the same have also been listed on the stock exchanges, viz. NSE and BSE.

Applicable disclosures as stipulated under the SEBI SBEB Regulations with regard to the HFCL Plan 2017, are provided as Annexure– A to this Report.

Your Company has received a Certificate from M/s Oswal Sunil & Company, Statutory Auditors (Firm Registration No. 016520N) that the HFCL Plan 2017 for grant of stock options has been implemented in accordance with the SEBI SBEB Regulations and the resolution passed by the members in their 30th Annual General Meeting held on September 25, 2017.

The said Certificate would be placed at the ensuing annual general meeting for inspection by the members.

The Nomination, Remuneration and Compensation Committee of the Board of Directors, inter-alia, administers and monitors, the HFCL Plan 2017 of your Company.

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

As on March 31, 2021, your Company had six subsidiaries viz.

1. HTL Limited,

2. Polixel Security Systems Private Limited,

3. Moneta Finance Private Limited,

4. HFCL Advance Systems Private Limited,

5. Raddef Private Limited, and

6. DragonWave HFCL India Private Limited.

The Company regularly monitors the performance of these companies.

Further, the Company has incorporated a new wholly-owned subsidiary company, namely, HFCL Technologies Private Limited, on June 26, 2021.

The Company also has an associate company, namely, Nimpaa Telecommunications Private Limited w.e.f. June 14, 2021.

There has been no material change in the nature of the business of the subsidiaries.

A statement containing the salient features of the financial statements of subsidiary companies of the Company in the prescribed Form AOC–1 forms a part of the Consolidated Financial Statements (CFS) in compliance with Section 129(3) and other applicable provisions, if any, of the Act read with Rule 5 of the Companies (Accounts) Rules, 2014, as amended.

The said Form also highlights the financial performance of each of the subsidiaries, included in the CFS of the Company, pursuant to Rule 8(1) of the Companies (Accounts) Rules, 2014.

In accordance with the provisions of Section 136 of the Act, the financial statements of the subsidiaries are available for inspection by the members at the Registered Office of the Company during business hours on all days except Saturdays, Sundays and public holidays up to the date of the ensuing AGM. Any member desirous of obtaining a copy of the said financial statements may write to the Company Secretary at HFCL Limited, 8, Commercial Complex, Masjid Moth, Greater Kailash – II, New Delhi – 110048 and the same shall be sent by post.

The financial statements including the CFS and all other documents required to be attached to this Report have been uploaded on the website of the Company at www.hfcl.com.

Material Subsidiaries

The Company has adopted a ‘Policy for determining Material Subsidiaries' as per requirements stipulated in Explanation to Regulation 16(1)(c) of the SEBI Listing Regulations.

During the year under review, there was no change in the Policy for Determining Material Subsidiaries.

The Company has amended the Policy for Determining Material Subsidiaries, in its meeting held on July 12, 2021, in line with the amendments to the SEBI Listing Regulations, notified on May 05, 2021.

The said policy may be accessed on the website of the Company at http://www.hfcl.com/wp-content/uploads/2019/06/Policy-on-Determining-Material-Subsidiaries.pdf.

The Company has one material subsidiary company viz. HTL Limited, as on March 31, 2021.

DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMPs)

Re-Appointments / Appointments

In accordance with the provisions of Section 152 of the Act and the Articles of Association of the Company, Mr. Ranjeet Mal Kastia (DIN: 00053059), Director (Non-Executive), is liable to retire by rotation at the ensuing AGM and being eligible offers himself for re-appointment. The brief resume of him and other related information are being given in the Notice convening the 34th AGM of your Company.

Your Directors recommend his re-appointment as a Non-Executive Director of your Company.

During the FY21, the Board of Directors appointed Mr. Ramakrishna Eda (DIN: 07677647) as a Nominee Director of IDBI Bank Limited w.e.f. February 22, 2021 in place of Mr. Ranjeet Anandkumar Soni. Mr. Ramakrishna Eda is proposed to be appointed as a Nominee Director (Non-Executive), liable to retire by rotation at the ensuing AGM.

The Board of Directors at its meeting held on July 12, 2021 and on the recommendation of the Nomination, Remuneration and Compensation Committee has re-appointed Mr. Mahendra Nahata as the Managing Director of the Company for a further period of 3 (three) years with effect from October 01, 2021 subject to approval of shareholders at the ensuing AGM, as his current term of office is expiring on September 30, 2021.

The Nomination, Remuneration and Compensation Committee, on the basis of performance evaluation of Independent Directors and taking into account the external business environment, the business knowledge, acumen, experience and the substantial contribution made by Mr. Surendra Singh Sirohi (DIN: 07595264) and Dr. (Ms.) Tamali Sengupta (DIN: 00358658) during their tenure, has recommended to the Board that continued association of Mr. Surendra Singh Sirohi and Dr. (Ms.) Tamali Sengupta as Independent Directors would be beneficial to the Company. Based on the above and the performance evaluation of Independent Directors, the Board recommends re-appointment of:

(i) Mr. Surendra Singh Sirohi for a second term of consecutive three years, commencing from August 27, 2021 to August 26, 2024; and

(ii) Dr. (Ms.) Tamali Sengupta for a second term of consecutive three years, commencing from December 24, 2021 to December 23, 2024;

to hold office as Independent Directors of the Company, not liable to retire by rotation on the Board of the Company. The Company has received the requisite Notices in writing under Section 160 of the Act, from Members of the Company, proposing their appointment as Directors.

Mr. Surendra Singh Sirohi and Dr. (Ms.) Tamali Sengupta have given their consent, in prescribed form DIR-2, to act as Directors and also declared that they are not disqualified to be appointed as Directors, in prescribed form DIR-8.

Mr. Surendra Singh Sirohi and Dr. (Ms.) Tamali Sengupta have registered their names in the data bank for Independent Directors maintained by the Indian Institute of Corporate Affairs (IICA), Manesar (notified under Section 150(1) of the Companies Act, 2013 as the institute for the creation and maintenance of data bank of Independent Directors) and paid requisite fee therefor.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Brief resume, nature of expertise, disclosure of relationships between directors inter-se, details of directorships and Committee membership held in other companies of the Directors proposed to be appointed/ re-appointed, along with their shareholding in the Company, as stipulated under Regulation 36 of the SEBI Listing Regulations and Secretarial Standard on General Meetings (SS-2) issued by the Institute of Company Secretaries of India, is appended as an Annexure to the Notice of the ensuing AGM.

Appropriate resolutions for re-appointment / appointment of Directors are being placed for your approval at the ensuing AGM.

Cessation

During the FY21, IDBI Bank Limited ("IDBI") vide its letter no. LCG-SSCB.53/35/ Nom.8 dated February 01, 2021 has withdrawn the nomination of Mr. Ranjeet Anandkumar Soni (DIN: 07977478) from the Board of Directors of the Company and accordingly, Mr. Ranjeet Anandkumar Soni has ceased as a Nominee Director of the Company w.e.f. February 22, 2021.

Further, Board of Directors places on record its sincere appreciation for the support and valuable guidance given by Mr. Ranjeet Anandkumar Soni during his tenure as Non-Executive Director of the Company.

Mr. Mahendra Pratap Shukla, Non-Executive Chairman of the Company, succumbed to COVID-19 and ceased to be Non-Executive Chairman of the Company w.e.f. May 04, 2021.

Your Board of Directors places on record active and sel_ess role of Mr. Mahendra Pratap Shukla in the establishment of the Company and contribution in the growth of the Company. The Company benefitted immensely from his vision and guidance during his association with the Company. The demise of Mr. Mahendra Pratap Shukla has left a void that will be impossible to fill in.

Key Managerial Personnel

During the year under review, Mr. Mahendra Nahata, Managing Director, Mr. Vijay Raj Jain, Chief Financial Officer and Mr. Manoj Baid, Senior Vice-President (Corporate) & Company Secretary, continue to be the Key Managerial Personnel of your Company, in accordance with the provisions of Section 2(51) and 203 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Declaration by the Company

The Company has issued confirmation to its Directors, confirming that it has not made any default under Section 164(2) of the Act, as on March 31, 2021.

Declaration by Independent Directors

The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the provisions of the Act, read with the Schedules and Rules issued thereunder as well as clause (b) of sub-regulation (1) of Regulation 16 of the SEBI Listing Regulations (including any statutory modification(s) or re-enactment(s) thereof for the time being in force) and that they are independent of management.

In terms of Regulation 25(8) of the SEBI Listing Regulations, the Independent Directors have confirmed that they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge their duties.

The Independent Directors have also confirmed that they have complied with the Company's Code of Conduct.

In the opinion of the Board, Independent Directors fulfil the conditions specified in the Act, Rules made thereunder and SEBI Listing Regulations and are independent of the management.

Familiarisation Programme for Independent Directors

The details of programmes for familiarization of Independent Directors with the Company, their roles, rights, responsibilities in the Company and related matters are put up on the website of the Company at the web-link: http://www.hfcl.com/wp-content/uploads/2017/04/HFCL-Familiarisation-Prog.-Idependent-Director.pdf.

Separate Meeting of Independent Directors

In terms of requirements of Schedule IV to the Act and Regulation 25 of the SEBI Listing Regulations, a separate meeting of the Independent Directors was held on March 30, 2021 for the FY21.

The meeting of the Independent Directors was attended by all the three independent directors, namely, Mr. Bharat Pal Singh, Mr. Surendra Singh Sirohi and Dr. (Ms.) Tamali Sengupta.

REMUNERATION OF DIRECTORS, KEY MANAGERIAL PERSONNEL AND PARTICULARS OF EMPLOYEES

The information required under Section 197(12) of the Act read with Rules 5(1), 5(2) & 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force) in respect of Directors/Employees of the Company is set out in Annexure–B to this Report.

The remuneration paid to the Directors is in accordance with the Remuneration Policy formulated in accordance with Section 178 of the Act and Regulation 19 of the SEBI Listing Regulations (including any statutory modification(s) or re-enactment(s) thereof for the time being in force).

Disclosure under Section 197(14) of the Companies Act, 2013

The Managing Director of your Company does not receive remuneration or commission from any of the subsidiaries of the Company.

Remuneration Policy

Pursuant to provisions of Section 178 of the Act and the SEBI Listing Regulations, the Nomination, Remuneration and Compensation Committee (‘NRC Committee') of your Board has formulated a Remuneration Policy for the appointment and determination of remuneration of the Directors including criteria for determining qualifications, positive attributes, independence of a director, Key Managerial Personnel, Senior Management Personnel and other employees of your Company.

The NRC Committee has also developed the criteria for determining the qualifications, positive attributes and independence of Directors and for making payments to Executive and Non-Executive Directors and Senior Management Personnel of the Company.

The detailed Policy is available on the Company's website at http://www.hfcl.com/wp-content/uploads/2019/06/Remuneration-Policy.pdf and the salient aspects covered in the Remuneration Policy have been outlined in the Corporate Governance Report, which forms part of this Report.

BOARD AND COMMITTEE MEETINGS

Four meetings of the Board of Directors were held during the FY21.

The intervening gap between any two consecutive meetings of the Board was within the stipulated time frame prescribed under the Act and the SEBI Listing Regulations.

Details of meetings held and attendance of directors are mentioned in Corporate Governance Report, which forms part of this Report.

Board Committees

Your Company has constituted several Committees of the Board which have been established as part of the best corporate governance practices and are in compliance with the requirements of the relevant provisions of applicable laws and statutes.

As on March 31, 2021, your Board has 05 (five) mandatory Committees, namely,

1) Audit Committee,

2) Nomination, Remuneration & Compensation (NRC) Committee;

3) Stakeholders' Relationship Committee (SRC)

4) Corporate Social Responsibility (CSR) Committee; and

5) Risk Management Committee (RMC).

The details with respect to the composition, powers, roles, terms of reference, number of meetings etc. of the Committees held during the FY21 and attendance of the Members at each Committee Meeting, are provided in the Corporate Governance Report which forms part of this Report.

All the recommendations made by the Committees of the Board including the Audit Committee were accepted by the Board.

Audit Committee

As on March 31, 2021, the Audit Committee comprises of 04 (four) members namely, Mr. Bharat Pal Singh, Mr. Surendra Singh Sirohi, Dr. (Ms.) Tamali Sengupta, Independent Directors and Mr. Arvind Kharabanda, Non-Executive Director.

Mr. Bharat Pal Singh, Independent Director is the Chairman of the Audit Committee.

All members of the Audit Committee are financially literate and have experience in financial management.

PERFORMANCE EVALUATION

The Companies Act, 2013 mandates formal annual evaluation by the Board of its own performance and that of its Committees and individual Directors. Schedule IV to the Act provides that the performance evaluation of Independent Directors shall be done by the entire Board of Directors, excluding the Directors being evaluated.

Pursuant to the provisions of the Act read with relevant rules issued thereunder, Regulation 17(10) of the SEBI Listing Regulations and the Circular issued by SEBI on January 05, 2017 with respect to Guidance Note on Board Evaluation, the evaluation of the annual performance of the Directors/ Board/ Committees was carried out for the FY21.

The parameters for the performance evaluation of the Board, inter-alia, include performance of the Board on deciding long term strategy, rating the composition and mix of Board members, discharging of governance and fiduciary duties, handling critical and dissenting suggestions, etc.

The performance of the Board was evaluated after seeking inputs from all the Directors on the basis of above parameters. The performance of the Committees was evaluated after seeking inputs from the Committee members on the basis of criteria such as the composition of Committees, effectiveness of Committee meetings, etc.

The Nomination, Remuneration and Compensation Committee reviewed the performance of the Individual Directors, the Committees of the Board and the Board as a whole. A questionnaire for the evolution of the Board, its Committees and the individual members of the Board (including the Chairperson), covering various aspects of the performance of the Board and its Committees, including composition and quality, roles and responsibilities, processes and functioning, adherence to Code of Conduct and Ethics and best practices in corporate governance was sent to the Directors.

The Board of Directors reviewed the performance of the Independent Directors. Performance Evaluation was done on the basis of criteria such as the contribution of the individual director to the Board and Committee meetings like preparedness on the agenda items, technical knowledge on the subject matter, meaningful and constructive contribution and inputs in meetings, etc.

In a separate meeting of the Independent Directors, performance of Non-Independent Directors, the Board as a whole and the Chairman of the Company was evaluated, taking into account the views of Executive Directors and Non-Executive Directors.

The Directors expressed their satisfaction with the evaluation process.

The details of the evaluation process are set out in the Corporate Governance Report which forms part of this Annual Report.

AUDITORS AND AUDITORS' REPORT Statutory Auditors & their Report

M/s S. Bhandari & Co., Chartered Accountants (FRN: 000560C) and M/s Oswal Sunil & Company, Chartered Accountants (FRN: 016520N) were appointed as Statutory Auditors for one term of 05 (five) consecutive years, at the 30th Annual General Meeting of the Company, held on September 25, 2017, for auditing the accounts of the Company from the financial year 2017-18 to 2021-22.

The requirement to place the matter relating to appointment of auditors for rati_cation by members at every AGM has been done away by the Companies (Amendment) Act, 2017 with effect from May 07, 2018. Accordingly, no resolution is being proposed for rati_cation of appointment of Statutory Auditors at the ensuing AGM and a note in respect of the same has been included in the Notice convening ensuing AGM.

The Statutory Auditors have confirmed that they are not disqualified from continuing as Statutory Auditors of the Company.

The Auditors' Report does not contain any qualification, reservation or adverse remark.

Further, there were no frauds reported by the Statutory Auditors to the Audit Committee or the Board under Section 143(12) of the Act.

Secretarial Auditors & their Report

Pursuant to provisions of Section 204 of the Act read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (as amended or re-enacted from time to time), your Company had appointed Mr. Baldev Singh Kashtwal, Company Secretary in whole-time practice, having COP No. 3169 and Membership No. F-3616, for conducting the Secretarial Audit of your Company for the FY21.

The Secretarial Audit Report in prescribed form MR-3, issued by the Secretarial Auditor is annexed herewith as Annexure–C to this Report.

The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Cost Records and Cost Audit

Your Company has maintained cost accounts and records as specified by the Central Government under sub-section (1) of Section 148 of the Act and the relevant rules made thereunder.

Requirement of Cost Audit as stipulated under the provisions of Section 148 of the Act, are not applicable for the business activities carried out by the Company.

INSOLVENCY AND BANKRUPTCY CODE, 2016

There is no application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the FY21.

VIGIL MECHANISM/ WHISTLE-BLOWER POLICY

The Board of Directors of your Company has formulated a Whistle-Blower Policy, which is in compliance with the provisions of Section 177(9) & (10) of the Act and Regulation 22 of the SEBI Listing Regulations.

The Company, through this Policy envisages to encourage the Directors and employees of the Company to report to the appropriate authorities any unethical behaviour, improper, illegal or questionable acts, deeds, actual or suspected frauds or violation of the Company's Codes of Conduct for the Directors and the Senior Management Personnel.

During FY21, no complaint was received and no individual was denied access to the Audit Committee for reporting concerns, if any.

The Policy on Vigil Mechanism / Whistle-Blower Policy may be accessed on the Company's website at the link: http://www.hfcl.com/wp-content/ uploads/2017/05/Whistle-Blower-Policy.pdf.

Brief details of establishment of Vigil Mechanism in the Company, is also provided in the Corporate Governance Report which forms part of this Report.

CREDIT RATINGS

CARE Ratings Limited, vide its letter dated December 07, 2020, has re-afirmed the credit rating for the Long Term Bank facilities of the Company to CARE A Minus; (Single A Minus) with Outlook "Negative".

The credit rating for the short term bank facilities were revised to CARE A2 (A Two) from CARE A2+ (A Two Plus).

ANNUAL RETURN

The Annual Return of the Company as on March 31, 2020, in prescribed e-form MGT-7 in accordance with Section 92(3) of the Act, read with Section 134(3)(a) of the Act, is available on the Company's website at https://www.hfcl.com/wp-content/uploads/2021/08/Annual-Retrun -2019-20.pdf.

Further the Annual Return (i.e. e-form MGT-7) for the FY21 shall be filed by the Company with the Registrar of Companies, Himachal Pradesh, within the stipulated period and the same can also be accessed thereafter on the Company's website at: http://www.hfcl.com.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Details of loans, guarantees and investments, as on March 31, 2021, as stipulated under Section 186 of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014, are as follows:-

Particulars Amount (_ in Crores)
Loans given 29.50
Guarantees given 154.16
Investments made 65.19

Loans given, Guarantees provided and Investments made during the FY21:

Name of the entity Relation Amount (_ in Crores) Particulars of Loans, Guarantees & Investments Purpose for which the Loans, Guarantees and Investments are proposed to be utilized by the recipient
Nimpaa Tele-communications Private Limited Unrelated 3.00 Loan with interest @ 10% p.a. For Capex & Opex Requirements.
HTL Limited Subsidiary 14.00 Corporate Guarantee Collateral Security for various credit facilities sanctioned by Yes Bank Limited to HTL Limited.
Nivetti Systems Private Limited Unrelated 11.96 Investment in Equity Shares Product R&D and Business Development

For more details, please refer Note No. 8.1, 18, 47(c) and 51 to the Standalone Financial Statements for FY21 of the Company.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

Your Company has adopted a "Policy on Dealing with and Materiality of Related Party Transactions", in accordance with the provisions of the Companies Act, 2013 and Regulation 23 of the SEBI Listing Regulations, inter-alia, providing a framework for governance and reporting of Related Party Transactions including material transactions and threshold limits for determining materiality.

The said Policy is also available on the website of the Company at the web-link: http://www.hfcl.com/wp-content/uploads/2019/06/Policy-on-Related-Party-Transactions-RPTs.pdf.

During the year under review, all contracts/ arrangements/ transactions entered into by the Company with related parties were in ordinary course of business and on arm's length basis.

The Company has not entered into any contracts/ arrangements/ transactions with related parties which qualify as material in accordance with the Policy of the Company on materiality of related party transactions.

Thus, there are no transaction required to be reported in prescribed Form AOC-2 pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014.

All transactions with related parties were reviewed and approved by the Audit Committee and are in accordance with the Policy on Related Party Transactions, formulated by the Company.

There are no materially significant related party transactions that may have potential conflict with interest of the Company at large.

There are no transactions with the person(s) or entities forming part of the Promoter(s) / Promoter(s) Group, which individually hold 10% or more shareholding in the Company.

The details of the related party transactions as per Indian Accounting Standards (IND-AS) - 24 are set out in Note 51 to the Standalone Financial Statements of the Company.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The details of energy conservation, technology absorption and foreign exchange earnings and outgo as required under Section 134(3)(m) of the Act read with the Rule 8 of the Companies (Accounts) Rules, 2014, are annexed herewith as Annexure - D to this Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company has been proactively carrying out CSR activities since more than two decades.

The Company is undertaking CSR activities through its Registered Society i.e. HFCL Social Services Society ("HSSS") established in the year 1996.

In compliance with requirements of Section 135 of the Act, the Company has laid down a Corporate Social Responsibility (CSR) Policy. The CSR Policy is available on the website of the Company and may be accessed at the web-link: http://www.hfcl.com/wp-content/uploads/2016/01/ CSR-Policy.pdf.

The composition of the CSR Committee, brief contents of CSR Policy, unspent amount and reason thereof if any and report on CSR activities carried out during the FY21, in the format, prescribed under Rule 9 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed herewith as Annexure - E.

For other details regarding the CSR Committee, please refer to the Corporate Governance Report, which forms part of this Report.

MATERIAL CHANGES AFFECTING THE COMPANY

A. Change in nature of business

The Company has not undergone any change in the nature of the business during the FY21.

B. Material changes and commitments, if any, affecting the financial position of the Company

There are no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the FY21 and the date of this Report.

Further, as we are aware that the outbreak of COVID_19 Pandemic has impacted businesses not only in India but to all economics in the world.

Pursuant to directives of SEBI vide Circular No. SEBI/HO/CFD/CMDI/ CIR/P/2020/84 dated May 20, 2020, the Company vide its Corporate Announcement made to stock exchanges on June 05, 2020, has already disclosed the impact of COVID-19 on business, performance and finance of the Company.

The Company has evaluated the impact of COVID-19 resulting from (i) the possibility of constraints to render supply & services which may require revision of estimations of costs to complete the contracts because of additional efforts; (ii) onerous obligations; (iii) penalties relating to breaches of service level agreements, and (iv) termination or deferment of contracts by customers. The Company has concluded that the impact of COVID-19 is not material based on these estimates. Due to the nature of the pandemic, the Company will continue to monitor developments to identify significant uncertainties relating to revenue in future periods. The Company has considered the possible effects that may result from the pandemic of COVID-19 in the preparation of the financial statements including their coverability of carrying amounts of financial and non-financial assets. Further the impact assessment does not indicate any adverse impact on the ability of the Company to continue as a going concern. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Company has, at the date of approval of the financial statements, used internal and external sources of information including credit reports and related information and economic forecasts and expects that the carrying amount of the assets will be recovered. The impact of COVID-19 on the Company's financial statements may differ from that estimated as at the date of approval of these financial statements.

The impact of COVID-19 is also mentioned at Note No. 41 to the Standalone Financial Statements for FY21.

SIGNIFICANT / MATERIAL ORDERS PASSED BY THE REGULATORS, COURTS, TRIBUNALS AFFECTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE

There is no significant / material order passed by the Regulators, Courts, Tribunals affecting the going concern status and the Company's operations in future.

PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE

The Company has in place a Policy on Prevention of Sexual Harassment at Workplace, in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 and the rules made thereunder.

Internal Complaints Committee(s) (ICCs) at each workplace of the Company, have been set up to redress complaints, if any, received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this Policy.

ICC of each workplace of the Company has also filed Annual Return for the calendar year 2020 at their respective jurisdictional office, as required under Section 21(1) of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 read with Rule 14 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Rules, 2013.

There was no complaint received from any employee of the Company during the FY21.

SIGNIFICANT DEVELOPMENTS

The Company has achieved various milestones which have already been set out in the Management Discussion and Analysis (MDA) Report forming part of the Annual Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirements under Section 134(3)(c) of the Act, the Directors confirm that:

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the Directors had 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 at the end of the financial year March 31, 2021 and of the profits of the Company for that period;

(c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the Directors had prepared the annual accounts on a going concern basis; and

(e) the Directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

(f ) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

LISTING

The equity shares of your Company are presently listed on the BSE Limited (‘BSE') and the National Stock Exchange of India Limited (‘NSE'). The Company has paid annual listing fee for the FY22 to the BSE and the NSE.

DEPOSITORY SYSTEMS

Your Company's Scrip has come under compulsory dematerialization w.e.f. November 29, 1999 for Institutional Investors and w.e.f. January 17, 2000 for all Investors. So far, 99.96% of the equity shares have been dematerialized.

The ISIN allotted to the equity shares of the Company is INE548A01028.

IMPLEMENTATION OF CORPORATE ACTION

During the year under review, the Company has not failed to implement any Corporate Action within the specified time limit.

COMPLIANCE WITH SECRETARIAL STANDARDS

Pursuant to the provisions of Section 118(10) of the Act, the Company has complied with the applicable provisions of the applicable Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI).

REPORTING PRINCIPLE

The Financial and Statutory Data presented in this Report is in line with the requirements of the Companies Act, 2013 (including the rules made thereunder), Indian Accounting Standards and the Secretarial Standards.

REPORTING PERIOD

The Financial Information is reported for the period April 01, 2020 to March 31, 2021. Some parts of the Non-Financial Information included in this Board's Report are provided as on the date of this Report.

CAUTIONARY STATEMENT

Statements in the Management Discussions & Analysis Report describing the Company's projections, estimates, expectations or predictions may be ‘forward looking statements' within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that would make a difference to the Company's operations include demand supply conditions, raw material prices, changes in government regulations, tax regimes and economic developments within the Country and abroad and such other factors.

PERSONNEL

Your Directors wish to place on record their sincere appreciation for the devoted services of all the employees and workers at all levels and for their dedication and loyalty, which has been critical for the Company's success.

ACKNOWLEDGEMENTS

Your Company's organizational culture upholds professionalism, integrity and continuous improvement across all functions as well as efficient utilization of the Company's resources for sustainable and profitable growth.

Your Directors wish to place on record their appreciation for the valuable co-operation and support received from the Government of

India, various State Governments, the Banks and other stakeholders such as, shareholders, customers and suppliers, among others.

The Directors look forward to their continued support in future.

The Directors thank the Central Government, Government of Goa, Government of Telangana, Government of Himachal Pradesh, IDBI Bank Limited, State Bank of India, Punjab National Bank, erstwhile Oriental Bank of Commerce & United Bank of India, Bank of Baroda, Union Bank of India, Yes Bank Limited, ICICI Bank Limited, Indian Bank and other Banks for all co-operations, facilities and encouragement they have extended to the Company.

Your Directors acknowledge the continued trust and confidence you have reposed in the Company.

For and on behalf of the Board

Mahendra Nahata Arvind Kharabanda
Place: New Delhi Managing Director Non-Executive Director
Date: September 3, 2021 DIN: 00052892 DIN: 00052270