Contents 02 Chairman’s Statement 05 Company Information 06 Board of Directors 09 Board’s Report 15 Management Discussion & Analysis Report 19 Corporate Governance Report 32 Secretarial Audit Report Financial Statements: 52 Independent Auditors’ Report 56 Balance Sheet 57 Statement of Profit & Loss 58 Cash Flow Statement 60 Notes to Financial Statements Consolidated Financial Statements: 85 Independent Auditors’ Report 90 Balance Sheet 91 Statement of Profit & Loss 92 Cash Flow Statement 94 Notes to Financial Statements Statement containing Salient Features of the 132 Financial Statements of subsidiaries/associates/ joint ventures (Form AOC-1) Spice Mobility Limited Chairman’s Statement Dear Shareholders, be addressed by the introduction of ultra-low cost smartphones with vernacular interfaces It’s a great pleasure to present our annual and content. report to you all as we close yet another eventful year for your company. Market Dynamics: Smartphones driving mobile internet economy Mobile devices drive the next wave of growth for internet in India According to the Indian Cellular Association, the Indian handset market is projected to Mobile handsets have always played reach an overall volume of over 305 million an integral role in the socio–economic handsets in 2015 and smartphone sales are development and transformation of a country, projected to touch 200 million handsets opening new channels of communication and by 2020. According to a mobile consumer transaction for the general public. Reduction survey conducted by Deloitte, almost 64% of handset prices and increased affordability of the respondents are likely to purchase a of data services have spawned a huge mobile smartphone over the next 12 months. internet population in India, thereby opening up a parallel mobile internet economy The mobile landscape in India is steadily through e-commerce and mobile apps. shifting towards smartphones, aided rapidly Apart from serving primary communication by the availability of high quality smartphones needs, mobile phones now are being used by Indian handset manufacturers and for e-commerce and banking transactions, the rollout of 3G services across India. payments, social networking, messaging and Smartphones offer a compelling user as multimedia tools. experience through access to social media, e-commerce, multimedia content, emails and As per a recent industry report, India is now internet. Entry of smartphones has diversified the third largest smartphone market in the the revenue streams for telecom players, world and the fastest growing market in Asia enhancing their data revenues significantly Pacific, slated to reach 314 million mobile over the past few years. Adoption of 3G internet users by 2017. Currently, more than services has increased exponentially in the 65% of the total internet users in India access country, with preparations underway for the the internet through their mobiles, surpassing rollout of 4G services this year. even China and United States’ mobile internet population. Even though India has the third The primary driver for the growth of largest internet population globally, the smartphones in the last few quarters has been overall internet penetration in the country an increasing proliferation of mobile apps stands at only 19%, compared to 46% in for social networking, instant messaging, China and 86.8% in the United States. This gaming, lifestyle and e-commerce. According presents a significant opportunity for growth to a Deloitte report, about 9 million apps will of mobile internet, especially in the rural be downloaded in India in 2015, more than section of the population. This segment can 5 times the number of apps downloaded in 2 | Spice Mobility Ltd. Annual Report 2014-15 | 3 Chairman’s Statement 2012. E-commerce firms are observing more services and spread across MCommerce, than half of their traffic being generated MHealth, social networking, video streaming from mobile apps, as is also the case for and enterprise VAS solutions. According to aggregator services across transport, grocery an industry report, the MVAS (Mobile VAS) delivery, healthcare etc. These fast rising market is expected to almost double to USD internet companies are driving big valuations, 9.5 Billion by 2015. confident of future market potentials aided A look at last year by the forecasted increase in mobile internet penetration in the country, forming the The company has focused strongly on backbone of their revenue models. According increasing revenues in the past one year to the report, Indians are spending an through various initiatives such as enhancing average of 3 hours and 18 minutes daily on the product portfolio in mobiles and mobile their smartphones and one third of this time retail, simplifying the distribution structure is spent on mobile apps. This growing trend is and enhancing reach across the country. likely to drive the next wave of smartphone Spice Mobiles has focused on enhancing growth across the country. the smartphone portfolio in the entry level In spite of India’s handset market growing at a segment targeting first time smartphone robust rate, almost 83% of the demand is met buyers upgrading from feature phones to via imports, while domestic production and smartphones especially in Tier II and III cities. manufacturing continues to lag behind the In recognition of our efforts, we were ranked growing demand. In view of this exponential the second most trusted Indian mobile brand growth, it has become imperative to support by the Brand Equity annual survey 2014, local manufacturing and assembly of mobile conducted by the Economic Times publication phones in order to increase job creation and also won the prestigious Golden Peacock and enhance savings on foreign exchange. award in the same year. The Government of India has launched In the last year, the company also entered an aggressive Make in India program to into a strategic partnership with Google to encourage domestic manufacturing and with launch India’s first truly Hindi Android one mobile devices playing an important role smartphone in India - Dream Uno H, focusing in achieving the dream of Digital India, it is on the large Hindi speaking population in imperative to introduce favourable policies India. The company is planning to focus and taxation regimes for local manufacturing strongly on the sub-Rs 5,000 segment to of mobile phones. enhance its market share and target first Leading VAS (Value Added Services) time smartphone buyers. The company also companies are now evolving into full-fledged announced its investment plans to set up a internet companies from the SMS and CRBT local assembly unit for mobile phones, with services offered earlier. The industry is the company currently working on plans for seeking to offer convenient and customized setting up the same in the coming year. 2 | Spice Mobility Ltd. Annual Report 2014-15 | 3 Chairman’s Statement Spice Retail continued to focus on successfully retail, online presence and VAS, we are well positioning itself as a key destination for positioned in the Indian mobile landscape to smartphones, through brand partnerships grow our business and enhance revenues and with leading mobile companies. With profitability for our shareholders. growing proliferation of online retail in the Experts are already predicting that India segment, the company has decided to adopt will soon become the largest mobile phone an Omni-channel approach by being present market in the world owing its growing across channels to serve customers as per population and young demographics. With their demands. The company is also actively a young and contemporary product range engaging customers through visible business and expansive distribution reach, we are promotion and consumer centric activities. confident of growing the company steadily Spice Digital continues to focus on growing to scale new heights. its partnerships with leading Telco players in I invite you all to join our exciting journey high growth emerging markets across India, ahead redefining the landscape of the Indian Middle East, Africa and Latin America and has mobility segment. I would like to thank all also acquired three companies in the last year our customers, employees, partners, and to enhance its service portfolio and market most importantly you, our shareholders share within the Telco services domain. for your continued support and trust in our Future Outlook company, and in our business and strategic undertakings. I look forward to an exciting The mobility sector in India is one of the and successful year ahead and thank you for fastest growing consumer segments in the your continued patronage. country and will continue to grow steadily over the next decade, thus offering a strong With Best Wishes, market opportunity and future outlook for Spice Mobility. With our integrated network Dilip Modi spanning devices, distribution, modern Chairman 4 | Spice Mobility Ltd. Annual Report 2014-15 | 5 COMPANy INFORMATION Spice Mobility Limited (Formerly S Mobility Limited) BOARD OF DIRECTORS CIN: L72900UP1986PLC008448 Registered Office Mr. Dilip Modi - Chairman S Global Knowledge Park, 19A & 19B, Sector 125, Mr. Hanif Mohamed Dahya Noida, District Gautam Budh Nagar, U.P.-201301 Ms. Preeti Malhotra Phone :0120-3355131 Mr. Subramanian Murali E-mail : [email protected] Mr. Suman Ghose Hazra Website : www.spicemobility.in Mr. Umang Das Statutory Auditors Company Secretary M/s S.R. Batliboi & Co. LLP Chartered Accountants Mr. M. R. Bothra Golf View Corporate Towers – B Sector-42, Sector Road BOARD COMMITTEES Gurgaon – 122 002 (Haryana) I) Audit Committee Mr. Suman Ghose Hazra – Chairman Internal Auditors M/s Bansal Dalmia & Co. Mr. Hanif Mohamed Dahya Chartered Accountants Mr. Subramanian Murali 210, Gupta Tower, Commercial Complex Mr. Umang Das Azadpur, Delhi - 110033 II) Nomination and Remuneration Committee Registrar & Share Transfer Agent MAS Services Ltd. Mr. Umang Das – Chairman T-34, 2nd Floor, Okhla Industrial Area Mr. Subramanian Murali Phase-II, New Delhi-110 020 Mr. Suman Ghose Hazra Phone : 011-26387281/82/83 Fax : 011-26387384 E-mail : [email protected] III) Stakeholders Relationship Committee Mr. Dilip Modi – Chairman Bankers: Mr. Subramanian Murali HDFC Bank Limited IndusInd Bank Limited IV) Corporate Social Responsibility Committee Mr. Dilip Modi – Chairman Symbol/Scrip ID at NSE /BSE Mr. Subramanian Murali NSE Symbol : SPICEMOBI Mr. Umang Das BSE Scrip ID : 517214 Chief Executive Officer Mr. Prashant Bindal Green Initiative In order to enable the Company to send various documents through electronic mode, the members of the Company are Chief Financial Officer requested to register/update their e-mail addresses with Mr. Madhusudan V. the Company in case the shares are held in Physical mode and with the concerned Depository Participant in case the shares are held in Demat mode. 4 | Spice Mobility Ltd. Annual Report 2014-15 | 5 BOARD OF DIRECTORS Mr. Dilip Modi Chairman Mr. Dilip Modi was appointed to Spice Mobiles (Leading Indian mobile manufacturer), Spice the Board on 21st August, 2006 as Hotspot (Mobile retailing), Spice Digital (Mobile Value Added Director and has been Chairman of the Services arm), Sunstone Education and Sunstone Capital. Company since 18th February, 2014. Internationally, the group includes Spice Africa, Cavu Group in Singapore and Selular Group in Indonesia. Mr. Dilip Modi is one of India’s most successful young entrepreneurs Mr. Dilip Modi has also been closely involved in industry and has pioneered several new forums and has held the position of Chairman of the Cellular technologies in the mobility and technology sector in India. As Operators Association of India (COAI) and has also had the a young entrepreneur, Mr. Modi is passionate about creating honour of being the youngest ever President of ASSOCHAM usable and affordable technologies that can help improve lives (Associated Chambers of Commerce), working on key of people across Asia and Africa. Driven by his firm belief that industry programs such as “Making Inclusive Transformation technology can become a key enabler for achieving inclusive Happen”. His efforts in the industry were duly recognized growth in the country, his group’s current business interests in as he was conferred the “Youth Icon Award” by the Gujarat the Mobility space exemplify this vision by creating affordable Chamber of Commerce and Industry. mobile internet products and services that enable the masses As an entrepreneur himself, Mr. Modi is committed to creating to access the latest technology. an inclusive society by empowering young entrepreneurs. This In the last two decades, he has created a strong portfolio of is the philosophy behind the Ek Soch Foundation, a dedicated businesses within the mobility and technology sector, starting effort to create an ecosystem for promoting inclusive growth from successfully launching India’s first mobile service – Modi through “Innovative Entrepreneurship” supported by Mr. Telstra in 1995 that also hosted the very first mobile phone Modi. The foundation offers a platform of resources and call made in India. After a successful divestment of Modi mentorship to skill local young business aspirants and scale up Telstra in the year 2000, he launched Spice Communications their potential to promote self-sustaining entrepreneurship in Punjab and Karnataka, which soon became one of the most with a social impact. valuable and enduring brands in the two highly profitable An alumnus of the prestigious Imperial College in London, mobile markets of the country. Mr. Modi completed his Master’s in Business Administration As Chairman and Group CEO of Spice Connect, Mr. Modi with a specialization in Finance. He also holds a First Class leads the group’s businesses spread across Asia and Africa Bachelor of Science Degree in Management Technology from in the mobility space. His group companies in India include Brunel University, London. Mr. Hanif Mohamed Dahya Independent Director Mr. Hanif Mohamed Dahya was Executive Director of Cellebrum Technologies Limited. appointed to the Board on 26th August, He has been Independent Non Executive Director of S i2i 2013. Limited, Singapore since August 29, 2013. Mr. Dahya served Mr. Hanif Mohamed Dahya, Wally, as a Director of New York Community Ban Corp. Inc. and serves as the Chief Executive Officer has been a Director of New York Commercial Bank. He is a of The Y Company, LLC. Mr. Dahya is Director of New York Community Bank since March 2, 2007. an Investment Banker with 14 years of experience on Wall He served as a Director of CFS Investments New Jersey, Inc., Street. He began his career with E.F. Hutton and Company, a subsidiary of CFS Bank. Inc. He served as Principal and Partner of Sandler O’Neil and Mr. Dahya holds Masters in Business Administration Degree Partners. He served as a Manager and Managing Director of of Harvard Business School, Cambridge, Massachusetts, mortgage-backed securities for Union Bank of Switzerland; USA and obtained his bachelor’s degree in technology from Head of Mortgage Finance and Managing Director of LF Loughborough University of Technology in the UK. Rothschild and Company, Inc. He was an Independent Non- 6 | Spice Mobility Ltd. Annual Report 2014-15 | 7 BOARD OF DIRECTORS Ms. Preeti Malhotra Non Executive Director Ms. Preeti Malhotra was appointed to Excellence” Award on behalf of the ICSI, from the Hon’ble the Board on 24th April, 2010. President of India- Smt. Pratibha Devsingh Patil. Ms. Preeti Malhotra is the Executive Ms. Malhotra was also a Member of the Dr. JJ Irani Expert Director with Smart Global Group Committee constituted by the Ministry of Corporate Affairs which has investments in the Mobility, (MCA), Govt. of India to advise the Government on the New Healthcare, Financial and Entertainment Company Law framed. Presently, she is the Chairperson of business segments. the National Council of Corporate Governance, CSR & Corporate Affairs of ASSOCHAM. She has also been appointed Ms. Malhotra is an accomplished Global professional in the a member of the Board of Governors of the Indian Institute of field of Corporate Governance and her opinion and advisory Corporate Affairs- the think tank, research, service delivery & has industry wide recognition. She has been the Past President capacity building arm of the MCA. of The Institute of Company Secretaries of India (ICSI). She has been the first and is still the only woman to be elected as Ms. Malhotra is a Fellow Member of the ICSI. She is a President amongst the Premier National Professional bodies Commerce (Hons.) Graduate and Law Graduate from the in India. In 2009, Ms. Malhotra received the “Recognition of University of Delhi. Mr. Subramanian Murali Non Executive Director Mr. Subramanian Murali was appointed Presently, Mr. Murali is the Group President, Finance for Smart to the Board on 7th May, 2015 as Non Ventures Group. He has been associated with the group for 7 Executive Director. years and is actively in charge for Shareholders value creation, Business planning, Corporate Finance, Capital allocation, He was associated with leading Treasury management, Management review and overall organizations such as A.F. Ferguson and productivity of all resources within the Smart Venture Group. HCL Group of companies in several senior positions. His association with the group helped in managing different business cycles ranging from Start ups, steady state growth, Over more than 30 years of experience in industries like rapid and exponential growth, slow downs and closures. IT ,Office automation, Telecom and Mobility, he has gained extensive knowledge and expertise in the areas of fund Mr. Murali is a Fellow Member of the Institute of Chartered raising, M&As, Business restructuring, Process Re-engineering, Accountants of India (“ICAI”) Business turnarounds, Corporate Finance and management. 6 | Spice Mobility Ltd. Annual Report 2014-15 | 7 BOARD OF DIRECTORS Mr. Suman Ghose Hazra Independent Director Mr. Suman Ghose Hazra was appointed He has actively issued necessary guidelines to various regions/ to the Board on 7th May, 2015 as an plant on all India basis for the compliance with the various Independent Director. statutory requirements under Indirect Taxation. He has also participated as a member in the High Powered Committee on Mr. Ghose is a former General Counsel Electronic Commerce and Taxation appointed by the Central and Executive Vice President –Legal of Board of Taxes, Department of Revenue, Ministry of Finance, HCL Infosystems Ltd. New Delhi. Mr. Hazra began his career in the year 1976 as Zonal Accounts Presently, he is a Legal Consultant and Senior Advisor to Officer of Tata Iron & Steel Co. Ltd. He specializes in area MAIT. of Taxation including Income Tax, Sales tax / VAT, Excise Tax, Service Tax, Custom Duty, Merger, Acquisition, Disinvestment Mr. Ghose is a Fellow Member of the Institute of Chartered and successfully handled CBI and FEMA/FERA cases. He has Accountants of India (“ICAI”) and a member of Institute of helped several Indian companies in the process of acquisition Cost & Work Accountants of India (“ICWA”). He is a Law and sale. Graduate also. Mr. Umang Das Independent Director Mr. Umang Das was appointed to Infrastructure of CMAI (The Communication Media and IT the Board on 7th May, 2015 as an Association of India). He is also an active member of the Independent Director. Managing Committees of CII & FICCI advising on Telecom matters. Socially, he is extremely well networked and involved In the year 2008, Mr. Das joined the in several CSR related initiatives. SREI group as Managing Director & CEO of SREI Infocomm Services Ltd., Presently, he holds the position of Chief Mentor at Viom spearheading all new business initiatives of the Group in the Networks and is actively responsible for establishing the field of Total Telecom Infrastructure enablement for mobile company’s international ventures and forays into managed operators. services. He is a Director of Viom International at both Singapore and Myanmar. He also holds the position of first After establishing the Telecom Business, he took over as the Director General of TAIPA (Tower & Infrastructure Provider Managing Director of Spice Telecom and subsequently as Association), the Industry body formed by all the tower Group President of Spice Global Businesses. companies. Mr. Das holds various prestigious positions in the industry - Mr. Das is an alumnus of the prestigious Indian Institute of Chairman of the CSC India Forum, Chairman of GSM India Management, Ahmadabad and holds a degree in Electrical and Chairman of the e-Governance and IT Committee Engineering from the Delhi College of Engineering. of ASSOCHAM, Chairman of Committee on Telecom 8 | Spice Mobility Ltd. Annual Report 2014-15 | 9