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Lanco Infratech Ltd.

BSE: 532778 Sector: Others
NSE: LITL ISIN Code: INE785C01048
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VOLUME 686555
52-Week high 4.60
52-Week low 0.75
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Mkt Cap.(Rs cr) 272
Buy Price 0.82
Buy Qty 15685.00
Sell Price 0.00
Sell Qty 0.00
OPEN 0.82
CLOSE 0.81
VOLUME 686555
52-Week high 4.60
52-Week low 0.75
P/E
Mkt Cap.(Rs cr) 272
Buy Price 0.82
Buy Qty 15685.00
Sell Price 0.00
Sell Qty 0.00

Lanco Infratech Ltd. (LITL) - Director Report

Company director report

Dear Members

Your Directors are pleased to present the Twenty Third Annual Report on the Businessand Operations of the Company together with the Audited Accounts for the year ended March31 2016.

FINANCIAL RESULTS

(Rs. Crores)

CONSOLIDATED

STANDALONE

PARTICULARS

Year ended March 31

Year ended March 31

2016 2015 2016 2015
INCOME
Revenue from operations and other income 8227.56 9510.75 2744.94 1530.71
Profit Before Taxation (481.24) (2218.06) (444.91) (717.63)
Provision for Taxation (229.98) (117.05) 0.09 (45.40)
Net Profit after Taxation (251.26) (2101.01) (445.00) (672.23)
Less: Prior period items (20.31) 42.52 - -
Add: Share of Profit/(Loss) of Associates (0.34) (3.29) - -
Less: Elimination of Unrealized Profit on Transactions with Associate Companies 0.31 (9.76) - -
Less: Share of Minority Interest 34.00 (100.32) - -
Net Profit/ (Loss) after Taxation Minority Interest and Share of Profit/ (Loss) of Associates (Balance Carried to Balance Sheet) (265.60) (2036.74) (445.00) (672.23)
Surplus brought forward (3938.44) (1891.65) (161.37) 519.11
Depreciation Transitional Adjustment - 10.05 - 8.25
Balance carried to Balance Sheet (4204.04) (3938.44) (606.37) (161.37)

FINANCIAL PERFORMANCE AND THE STATE OF THE COMPANY’S AFFAIRS

During the reporting period in April 2015 your Company sold Udupi Power CorporationLimited (UPCL) Subsidiary of the Company. The consolidated results for the FY16 waswithout UPCL results whereas FY15 was with UPCL results. Therefore the results of FY16 arenot comparable with the results of FY15.

On a Consolidated basis your Company has reported Gross Revenues of Rs. 8227.56Crores for FY16 as against Rs. 9510.75 Crores of Revenues registered in the previousyear. Total Expenditure for the Year was Rs. 8484.16 Crores as against Rs.11851.96 Crores in the previous year. The Earnings before Interest Tax Depreciation andAmortization (EBITDA) amounted to Rs. 2260.51 Crores while the same was Rs. 1832.75Crores for the previous year i.e. an increase of 45%. The Profit before tax stood at Rs.(481.24) Crores an increase of 78.30% as compared to Rs. (2218.06) Crores in theprevious year.

The Net Profit/(Loss) after Tax after adjustment of Minority Interest and Share ofProfits of Associates was Rs. (265.60) Crores as against Rs. (2036.74) Crores forthe previous year.

The comparison of consolidated results without including UPCL results shows the realperformance of the Company. The comparison shows that the consolidated revenues for FY16was Rs. 8227 Crores against the FY15 revenue of Rs. 6839 Crores a growth of 20%.

Gross Interest and Finance charges on consolidated basis amounted to Rs. 2513.95Crores in comparison to Rs. 3060.21 Crores of previous year a decrease due to sale ofUdupi Power Corporation Limited.

A detailed discussion on the result of the operations financial condition and businessreview is included in the Management Discussion and Analysis Report placed at Annexure-1to this Report. There are no material changes and commitments affecting the financialposition of the Company which have occurred after March 31 2016 till the date of thisReport.

There are no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and Company’s operations in future.

CDR AND LONG TERM WORKING CAPITAL LOAN

The implementation of the CDR Package was delayed due to delay in getting the approvalfrom the Lenders. Due to delay most of the Priority Loan sanctioned under CDR Package wasused to address the interest dues of the Lenders thereby the revival of EPC Operations waspartial. To bring the EPC operations to full scale Company approached the Lenders with aproposal for Long Term Working Capital Loan (LTWCL) of Rs. 1500 Crores for FY16 which wasapproved at the Joint Lenders Forum of the Company.

The LTWCL sanction and release by the Lenders again got delayed and the restoration ofthe EPC Operations could not be fully achieved. Company is in discussions with Lenders towork out a suitable scheme to address the debt servicing and completion of the underconstruction projects.

RESOLUTIONS PASSED THROUGH POSTAL BALLOT

During the reporting period your Company had obtained members approval by passing of aspecial resolution through Postal Ballot for issue of Compulsorily Convertible Debenturesto IDFC Bank Limited. The results of the Postal Ballot were announced on February 282016. The details of the resolution passed through Postal Ballot forms part of the Reporton Corporate Governance annexed to this report.

AMENDMENT TO MEMORANDUM AND ARTICLES OF ASSOCIATION

During the period under review the Articles of Association of the Company was amendedto increase the number of Directors from 15 (fifteen) to 16 (sixteen) as approved by themembers in the Annual General Meeting held on September 28 2015.

INCREASE OF PAID-UP EQUITY SHARE CAPITAL

On September 30 2015 your Company allotted 265174603 (Twenty Six Crores Fifty OneLakhs Seventy Four Thousand Six Hundred and Three only) Equity Shares of face value of Rs.1/- each at Rs. 6.30 Per Equity Share (including Rs. 5.30 Per Equity Share towards SharePremium) to Lanco Group Limited Promoter of the Company under the CDR Package approvedfor the Company.

In view of the above corporate action the Paid-up Capital of the Company increasedfrom Rs. 248.42 Crores to Rs. 274.93 Crores.

COMPULSORILY CONVERTIBLE DEBENTURES (CCDs)

Pursuant to the approval of members received through Postal Ballot on February 282016 your Company on March 14 2016 allotted 321453885 (Thirty Two Crores FourteenLakhs Fifty Three Thousand Eight Hundred and Eighty Five only) Compulsorily ConvertibleDebentures (CCDs) to IDFC Bank Limited at a price of Rs. 10/- per CCD having face value ofRs. 10/- each aggregating to Rs. 3214538850 (Rupees Three Hundred Twenty One CroresForty Five Lakhs Thirty Eight Thousand Eight Hundred and Fifty only) on preferentialbasis against the conversion of outstanding loan and interest accrued thereon payable toIDFC Bank Limited. These CCDs carry a Coupon Rate of 10.50% per annum and have a term of12 months from the date of allotment. The CCDs along with the interest thereon shall beconverted into Equity Share Capital of the Company after the term of 12 months.

DIVIDEND

Your Directors have not recommended dividend for the year ended March 31 2016.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report as required under Regulation 34 ofSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 ("Listing Regulations") is enclosed as Annexure-1 tothis Report.

SUBSIDIARY COMPANIES

During the reporting period Lanco Kanpur Power Limited Lanco Energy Private Limited(Formerly known as Spica Thermal Power Private Limited) Lanco Property Management CompanyPrivate Limited and Newton Solar Private Limited had become Subsidiaries of the Company.

Further Lanco Teesta Hydro Power Limited Omega Solar Projects Private Limited andLanco IT P.V. Investments B.V. had ceased to be Subsidiaries of the Company.

The Company’s Policy on Material Subsidiaries of the Company has been provided inthe following link: http://www.lancogroup.com/pdf/financials/Policies/Policy_on_Material_Subsidiaries.pdf Report on the performance andfinancial position of each of the Subsidiaries Associates and Joint Venture Companies hasbeen provided in Form AOC-1 which forms part of this Annual Report.

RISK MANAGEMENT POLICY

The Company had adopted the Standard Operating Procedures to standardise the RiskManagement Process across all Business units in terms of process formats documentationreporting identification of elements of risk and monitoring Risk Mitigation plans aspart of the Risk Management Policy developed and implemented by the Company. Furtherdetails are provided in Management Discussion and Analysis Report placed at Annexure-1to this Report.

INTERNAL FINANCIAL CONTROLS

Your Company had put in place adequate Internal Financial Controls commensurate withthe size of the Company with reference to the Financial Statements.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. G. Bhaskara Rao and Mr. G. Venkatesh Babu Directors retire by rotation at theensuing Annual General Meeting and being eligible offer themselves for appointment. Mr.Hiranmoy Biswas was appointed as Nominee Director of IDBI Bank Limited with effect fromOctober 27 2015. Dr. Rajesh Kumar Yaduvanshi was appointed as Nominee Director of PunjabNational Bank with effect from January 01 2016.

Mr. K. Raja Gopal was appointed as Non-Executive Director with effect from April 012016.

Mr. Rengaraj Viswanathan and Dr. Jaskiran Arora were appointed as Additional Directorsin the Category of Independent Director for 5 (five) years with effect from June25 2016.

Mr. L. Madhusudhan Rao was re-appointed as Executive Chairman for a period of 3 (three)years with effect from April 01 2016. Mr. G. Bhaskara Rao was re-appointed asExecutive Vice-Chairman for a period of 1 (one) year with effect from April 01 2016.Mr.RajKumarRoywasappointedasWhole-timeDirectorforaperiodof 3 (three) years with effectfrom April 01 2016. Mr. G. Venkatesh Babu was re-appointed as Managing Director for aperiod of 3 (three) years with effect from June 24 2016.

Mr. L. Madhusudhan Rao Executive Chairman and Mr. G. Bhaskara Rao ExecutiveVice-Chairman refunded the excess remuneration of Rs.20.95 Lakhs and Rs.27.92 Lakhsrespectively in line with the approvals received from the Ministry of Corporate Affairs(MCA) for FY 2014-15. The Company is awaiting the approval from the MCA for theappointment and payment of remuneration to Mr. S.C. Manocha for the period from August 142015 to March 15 2016.

The Independent Directors have given a declaration to the Company under Section 149(7)of the Companies Act 2013 and Regulation 16 of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 regarding meeting the criteria of independence prescribedunder Section 149(6) of the Companies Act 2013.

Mr. Yashpal Gupta Mr. S. C. Manocha and Smt. L. Ramalakshmamma resigned as Directorsof the Company with effect from October 01 2015 March 15 2016 and March 23 2016respectively. Your Directors place on record their appreciations for the valuablecontribution by Mr. Yashpal Gupta Mr. S. C. Manocha and Smt. L. Ramalakshmamma duringtheir tenure as Directors.

We report with grief the sad demise of Mr. Dariyai Lal Rawal Independent Director whopassed away on January 28 2016. The Board of Directors places on record its appreciationtowards the significant contribution and valuable services rendered by Late Mr.Dariyai Lal Rawal during his tenure as Independent Director.

Mr. G. Venkatesh Babu Managing Director Mr. T. Adi Babu Chief Financial Officer andMr. A. Veerendra Kumar Company Secretary represent the Key Managerial Personnel (KMP) ofyour Company.

During the FY16 9 (nine) Board Meetings were held. These meetings were held on April04 2015 May 29 2015 July 29 2015 August 13 2015 September 28 2015 November 222015 December 30 2015 February 11 2016 and March 15 2016. The maximum intervalbetween any two meetings did not exceed 120 days.

The Nomination and Remuneration Committee had devised the criteria and the process forperformance evaluation of the Non-Independent Directors the Board as a whole and itsCommittees. In terms of Section 178(2) of the Companies Act 2013 the Committee carriedout evaluation of every Director’s performance on various parameters as set-out inthe performance evaluation policy of the Company and found that all Directors have fullymet the expectations.

A separate meeting of Independent Directors was held on February 11 2016 without thepresence of non-Independent Directors and members of the management.

The details of Familiarization Programme for Independent Directors of the Company isdisclosed on the Company’s website at http://www.lancogroup.com/pdf/financials/Policies/Familiarization_Programme_for_Independent_Directors.pdf

COMPANY’S POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION

The Nomination and Remuneration Committee had recommended to the Board a Policyrelating to the Appointment and Remuneration of Directors Key Managerial Personnel andother Employees. The Nomination and Remuneration Policy forms part of this Report as Annexure-2.

CODE OF CONDUCT FOR DIRECTORS AND SENIOR MANAGEMENT PERSONNEL

The Board has laid down separate Code of Conduct for Directors and Senior ManagementPersonnel of the Company and the same is posted on the Company’s Website. AllDirectors and Senior Management Personnel have affirmed compliance with the Code ofConduct. The Managing Director has also confirmed and certified the same. Thecertification forms part of the Report on Corporate Governance.

DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY TECHNOLOGY ABSORPTIONAND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information pursuant to Section 134(3)(m) of the Companies Act 2013 read with Rule 8of The Companies (Accounts) Rules 2014 is as below:

Conservation of Energy and Technology Absorption

The following are the measures and technologies being implemented by the Company:

(i) Selection of equipment that consume minimum energy and adoption of integratedenergy management system to measure monitor and take corrective action for minimizingauxiliary power consumption.

(ii) Selection and adoption of technologies for SNCR/SCR and FGD to control NOx and SOxemission parameters meeting the new Environmental standards as per MOEF guidelines.

(iii) Ash utilization in earth filling.

(iv) Increased use of bricks and cement made from power plant ash.

(v) Best project management practices for optimally utilizing available resources tohelp reduce project execution time.

(vi) Improved fire safety by adopting simple methods of increased gravel fill in oilcollection pits in transformer yards and cables supported on isolated structures in coalhandling plants.

(vii) Adoption of zero liquid discharge schemes to prevent water pollution.

(viii) Electro chlorination instead of gas chlorination to avoid hazards while handlingchlorine containers.

(ix) Development of green buildings reducing the electricity consumption.

(x) Development of buildings with focus on design and architecture maximising the useof natural light and natural air ventilation thus reducing the electricity consumption.

(xi) Development of Green belt and water harvesting contributing to environmentprotection.

Foreign Exchange Earnings and Outgo:

(Rs. Crores)
Particulars Year ended March 31 2016
Foreign Exchange Earnings 28.20
Foreign Exchange outgo (including Capital imports) 13.91

DISCLOSURE ON COMPANY’S EMPLOYEES STOCK OPTION PLANS

The Employees Stock Option Plan - 2006 and the Employees Stock Option Plan–2010were approved by members by passing Special Resolutions in the Extraordinary GeneralMeeting held on June 07 2006 and Annual General Meeting held on July 31 2010respectively.

There were no grants made under the Employees Stock Option Plans of the Company duringthe FY16.

The required information pursuant to SEBI ESOP Guidelines is enclosed as Annexure-3to this Report.

PARTICULARS OF EMPLOYEES AND REMUNERATION

As required under Section 197 (12) of the Companies Act 2013 read with Rules 5(2) and5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014as amended the details of the remuneration drawn by the employees in excess of the limitsprescribed forms part of this Report.

Pursuant to Section 136 of the Companies Act 2013 the Annual Report is being sent tothe members after excluding the aforesaid details. The same is available for inspection atthe Registered Office of the Company during Office hours and any member desirous of thesaid information may write to the Company Secretary at the Registered Office of theCompany.

Disclosure of the information pursuant to Section 197(12) of the Companies Act 2013read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 as amended forms part of this Report as Annexure-4.

RELATED PARTY TRANSACTIONS

All the Related Party Transactions entered by the Company during the reporting periodwere at arm’s length basis and in the ordinary course of business. Therefore thedisclosure of particulars in Form No. AOC-2 is not applicable to the Company. UnderListing Regulations the Material Related Party Transaction entered by the Company onbehalf of its Subsidiary forms part of the Notice of Annual General Meeting (AGM).

In line with the requirements of the Companies Act 2013 and Listing Regulations theCompany has formulated a ‘Policy on Related Party Transactions’ and the same isuploaded on the Company’s website athttp://www.lancogroup.com/pdf/CS/LITL_Policy_on_Related_ Party_Transactions.pdf

DEPOSITS

During the year under review your Company has not accepted deposits from Public.

LOANS GUARANTEES SECURITIES AND INVESTMENTS

The granting of loans and giving of guarantee and providing of security by your Companyis exempted in terms of Section 186(11) (a) of the Companies Act 2013 as the Company isproviding infrastructural facilities specified in Schedule VI of the Companies Act 2013.Pursuant to Section 186 of Companies Act 2013 read with Schedule V and the ListingRegulations disclosure on particulars relating to loans advances guarantees andinvestments are provided as part of the financial statements.

EXTRACT OF ANNUAL RETURN

Pursuant to Section 92 of the Companies Act 2013 and Rule 12 of The Companies(Management and Administration) Rules 2014 the extract of Annual Return in Form MGT-9is provided as Annexure-5 to this Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The CSR Committee comprises of Dr. Uddesh Kumar Kohli Independent Director Mr. R.M.Premkumar Independent Director Mr. G. Bhaskara Rao Executive Vice-Chairman and Mr. G.Venkatesh Babu Managing Director as its Members. Dr. Uddesh Kumar Kohli IndependentDirector is the Chairperson of the CSR Committee.

Members can access the CSR Policy on the website of the Company athttp://www.lancogroup.com/pdf/LITL(CSR)Policy.pdf

There are no net profits for the Company made during the previous three financialyears. Hence there is no requirement of spending specific funds towards CSR activities bythe Company during the year under review.

Details of CSR activities by the group companies is included in Management Discussionand Analysis Report as Annexure - 1 to this report.

AUDITORS

The Members are requested to ratify the appointment of Brahmayya & Co. CharteredAccountants (Firm Registration No. 000511S) as Auditors of the Company for the FY 17.

COST AUDITORS

DZR & Co. Cost and Management Accountants have been appointed as the Cost Auditorsfor the year ending March 31 2015. The Cost Audit Report for the year ended March 312015 was filled on October 21 2015.

DZR & Co. have been appointed as Cost Auditors of the Company for the FY17 basedon the recommendation of Audit Committee.

SECRETARIAL AUDIT REPORT

M/s. dvmgopal & associates Company Secretaries were appointed as SecretarialAuditors to conduct Secretarial Audit of records and documents of the Company for theFY16. The Secretarial Audit Report is given as Annexure-6 to this Report.

CORPORATE GOVERNANCE

In compliance with the conditions of Corporate Governance pursuant ListingRegulations the Report on Corporate Governance with the Certificate from a PracticingCompany Secretary certifying compliance in this regard forms part of this Report as Annexure-7.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

With a view to implement the highest ethical standards in the course of business theCompany has formed and adopted a whistle blower policy which provides a platform forreporting concerns about unethical behaviour actual or suspected fraud or violation ofthe Company’s Code of Conduct. Directors employees vendors or any person havingdealings with the Company may report non-compliance to the Chairperson of AuditCommittee who reviews the report. Confidentiality is maintained of such reporting and itis ensured that the whistle blowers are not subjected to any discrimination.

POLICY ON PREVENTION OF SEXUAL HARASSMENT AGAINST WOMEN AT WORK PLACE OF THE COMPANY

Pursuant to The Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013 your Company had adopted the "Policy on Prevention of SexualHarassment against Women at workplace" inter alia to seek to protect womenfrom sexual harassment at their place of work. There were no complaints relating to sexualharassment during the reporting period.

DIRECTORS’ RESPONSIBILITY STATEMENT

As required by Section 134(5) of the Companies Act 2013 your Directors hereby confirmthat:

(a). In the preparation of the annual accounts for the year ended March 31 2016 theapplicable accounting standards have been followed and that no material departures aremade from the same;

(b). The Company have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of Affairs of the Company at the end of the FY16 and of the Profitand loss of the Company for that period;

(c). The Company have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;

(d). The annual accounts have been prepared on a going concern basis;

(e). The Company had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively and

(f). The Company have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

INFORMATION ON AUDITOR QUALIFICATIONS

The information and explanations of your Directors on the qualifications by the Auditoron the Consolidated Financial Statements for the FY16 are as follows:

• Qualification on Capitalization of Borrowing cost by step down subsidiary

The step down subsidiary which is implementing gas based power project expansionPhase III could not complete commissioning activities of phase III until August 11 2015for III A and January 09 2016 for III B due to non-availability of required resourcesand fuel which are beyond the control of Lanco Kondapalli Power Limited (LKPL). During thependency of these activities the plants could not be tested for capability andsuitability of its intended use of the plant. The assets are therefore eligible tocapitalise their borrowing costs till commissioning. The lenders of the project approvedthe above interest during construction as a part of the project cost. The Companycapitalised the interest during these periods which was Qualified by the Auditor. LKPLhas re-approached Ministry of Corporate Affairs (MCA) to seek clarification on theapplicability of provisions of AS 16 to continue the capitalization of borrowing costs.The management is of the view that the interest capitalization is as per AS 16.

However the step down subsidiary completed the commissioning activities of phase IIIand also declared Commercial Operation Date (COD) on August 11 2015 for III A and January09 2016 for III B. From the COD interest is being charged to P&L account.

• Qualification on Unaudited financials of Subsidiaries in Consolidation

As per local GAAP applicable to subsidiaries of Lanco Resources International Pte.Limited (LRIPL) fair valuation of assets is mandatory from the external valuer at the endof every year. During the year ended March 31 2016 valuation of those foreignsubsidiaries assets was under progress and due to that auditors of LRIPL subsidiariescould not complete their audit. As a consequential impact LRIPL and other subsidiary i.e.Lanco International Pte. Limited (LIPL) could not complete their audit. Hence thefinancial statements prepared by the management have been considered in consolidation. TheAuditor Qualified the Consolidation of financials with the Management financials insteadof Audited financials of LRIPL. The qualification by the Auditor is not about deviationfrom the Accounting Standards but on the consolidation of the un-audited financials ofsome of the foreign subsidiary companies as on the reporting date.

The management is not expecting any material differences between Management financialsand Audited financials.

ACKNOWLEDGEMENT AND APPRECIATION

Your Directors take this opportunity to thank all the stakeholders including MembersBanks Financial Institutions Customers Suppliers Service Providers and Regulatory andGovernmental Authorities for their consistent co-operation. Your Directors also wish toplace on record the sincere appreciation of the hard work dedication and commitment ofEmployees at all levels. Your Directors look forward to your continued support in thefuture as well.

For and on behalf of the Board
L. Madhusudhan Rao G. Venkatesh Babu
Executive Chairman Managing Director
DIN - 00074790 DIN - 00075079
Place: Gurgaon
Date: August 12 2016