December 16, 1998

punjab communications limited

/ registered office

C-135 Phase VIII, Industrial Area, S. A. S. Nagar, P. O. Box 3,

Punjab – 160 059, India

Tel. No. 91-172-670 668 / 674 980 / 675 467 / 674 476

Fax No. 91-172-671 492 / 675 468

factory

C-134, C-135 and B-93, Phase VIII, Industrial Area, S. A. S. Nagar, Mohali, Punjab, India

history

The company was incorporated on 21^st July, 1981 at Punjab by Punjab Electronics Development & Production Corporation Limited having Company Registration Number 16-4616.

legal form

It is a Punjab State Government Undertaking Public Limited Liability company. The company’s shares are listed on the Stock Exchange.

directors

Mr. Ramesh Inder Singh, IAS	Chairman
Mr. A. Didar Singh, IAS	Vice-Chairman
Mr. A. S. Gill	Managing Director
Mr. Rajan Kashyap, IAS	Director
Mr. Y. S. Ratra, IAS	Director
Mr. V. P. Chandan	Director
Mr. Kranti Kumar	Director
Mr. Arun Kumar	Director
Mr. A. K. Bhargava`	Director
Mr. R. K. Nangia	Director

chief executive

Mr. Sanjeev Vashista

Company Secretary

business

The company is engaged in manufacturing and marketing of DTL (Chnl.), PCL (Chnls. & Terminals), Radio (Sys.), M/W Radio (TR), T MUX (TR), RAX/MAX/SBM RAX (Lines), OLTE (TR), 2 GHZ (TR) and VSAT (TR)

The company’s production status as on 31^st March, 1998 was as under :

*Particulars*	Licensed Capacity	Installed Capacity	Actual Production

DTL (Chnl.)	5,000	5,000	302
PCM (Chnls.)	30,000	11,250	240
PCM (Terminals)	1,000	375	18
Radio (Sys.)	100	100	62
M/W Radio (TR)	200	200	13
T MUX (TR)	200	200	11
RAX/MAX/SBM RAX (Lines)	170,000	120,000	107,256
OLTE (TR)	1,000	500	829
2 GHZ (TR)	50	30	0
VSAT (TR)	200	200	69

Generic Names of Principal Products of the Company are :

Item Code No. (ITC Code)	8517
Product Description	Multiplexer

Item Code No. (ITC Code)	8517
Product Description	Electronic Switching Equipments

Item Code No. (ITC Code)	8529
Product Description	DTL Systems

Item Code No. (ITC Code)	8525
Product Description	Ratio Systems

The management states in its latest audited annual report for the period ended 31^st March, 1998 that the year 1997-98 was the third consecutive year in which the telecom industry had to face the major brunt of sluggish economy coupled with tremendous pressure on the prices brought in by the mushrooming numbers of non-serious entrants in the telecom field. Despite the cut throat competition prevalant in the telecom sector seems to be clearing now after witnessing a shake out in the industry. The new players, who were aspiring to take up their share of the cake in this supposedly lucrative market by booking orders even below their cost, have now realised that price under cutting is not the right policy. The company has been subject to many other constraints for the reasons beyond its control, yet it is a matter of pride that the company has succeeded in converting these constraints into opportunities by sheer team work, firm determination to excel, strong fundamentals, intensive, R&D, cost effective measures that has made PUNCOM some force to reckon with the telecom sector.

The company has generated a gross income of Rs.912.453 millions against Rs.748.471 million in the year 1996-97 and the book value per share is Rs,111.75. The reserves of the company stand at a solid figure of Rs.1,633.685 millions. One of the salient features of 1997-98 results has been that the net cash inflow from operating activities was Rs.52.218 millions against a negative cash flow of Rs.3.438 millions during the last year 1996-97.

The steady performance of PUNCOM during the turbulent economic period of 1997-98 underlines the sound foundation of the company even as an unprecedented downturn existence in those segments in which the company operates. One of the reasons to offset the adverse impact of sluggish economy was close monitoring of the controllable expenses and concentrating on the core activities only.

The company imports Raw Materials, Components & Spare and Capital Goods from Europe and Far East against L/C terms.

The company’s fixed assets of important value includes Leasehold Land, Building, Plant & Machinery, R&D Capital Goods, Temporary Structure, Electrical Installation, Office Equipment, Furniture & Fixtures, Vehicles and Other Assets.

The company employs around 1,100 persons.

subsidiaries

K PCL Telecom Limited

bankers

K State Bank of India

K Union Bank of India

K Indusind Bank Limited

K Bank of Rajasthan Limited

auditors

K Datta Singla & Company, Chartered Accountants

financial information

The company’s latest financial information for the period ended 31^st March, 1998 is enclosed herewith.

capital structure

Authorised Capital :
19,800,000	Equity Shares of Rs.10/- each	Rs.198.000 millions
20,000	Redeemable Preference Shares of Rs.100/- each	Rs. 2.000 millions
		------------------------------
*GRAND TOTAL*		*Rs.200.000 millions*
		================

Issued, Subscribed & Paid-up Capital :
16,105,420	Equity Shares of Rs.10/- each	Rs.161.054 millions
Less :	Calls in Arrears	Rs. 0.495 millions
		------------------------------
*GRAND TOTAL*		*Rs.160.559 millions*
		================

industry overview

The basic service have recorded a sustained high growth during the last decade with a rate of growth of 16-17% per annum. Department of telecommunications and Mahanagar Telephone Nigam Limited together added 3.26 million new telephone connections during FY 98. The number of connections in the country has increased to 17.80 mil. as on 31^st March, 1998. The Ninth five plan envisages a provision of 18.50 mil. lines during 1997-2002. In cellular services, 21 city/circles are witnessing some action with total subscriber base of approximately 769074. Domestic equipment manufacturers have not been able to do well in the recent times; on account of intensified competition from imports. Private players are entering into supplier credit contracts with the international equipments suppliers which the domestic industry is finding difficult to emulate because of lack of financial strength and technical capabilities.

comments

Subject is a Punjab State Government Undertaking. Directors are highly qualified, respectable and experienced professionals. Their trade relations are fair. General financial position is satisfactory. The company’s profitability is under severe pressure. Payments are usually correct and as per commitments. Management is hopeful for the better results in the current year.

The company can be considered for any normal business dealings at usual trade terms and conditions.

Your proposed business dealings of US$ 70,000 can be considered against D/A or D/P terms.

It can be regarded as a promising business partner in a long-run.

abridged balance sheet as on 31^st March, 1998

[figures are in Rupees Millions]

*SOURCES OF FUNDS*	31.03.1998	31.03.1997

SHAREHOLDERS FUNDS
1] Share Capital	160.559	160.559
2] Reserves & Surplus	1,633.685	1,633.595

LOAN FUNDS
1] Secured Loans	22.185	56.653
2] Unsecured Loans	21.170	22.559

*GRAND TOTAL*	1,837.599	1,873.366

APPLICATION OF FUNDS

FIXED ASSETS [Net Block]	394.549	341.288
Capital work-in-progress	0.000	49.630

INVESTMENTS	212.647	242.566

CURRENT ASSETS, LOANS & ADVANCES
Inventories	369.957	372.244
Sundry Debtors	360.753	307.077
Cash & Bank Balances	261.105	164.772
Other Current Assets	30.369	18.563
Loans & Advances	275.648	474.269
*Total Current Assets*	1,297.832	1,336.925
Less :
Current Liabilities	93.985	120.367
Provisions	7.948	17.661
*Net Current Assets*	1,195.899	1,198.897

MISCELLANEOUS EXPENDITURE	34.504	40.985
[to the extent not written-off or adjusted]

*GRAND TOTAL*	1,837.599	1,873.366

important financial information for last two periods