Mahanagar Gas Ltd.
|BSE: 539957||Sector: Others|
|NSE: MGL||ISIN Code: INE002S01010|
|BSE LIVE 19:40 | 19 Oct||1198.60||
|NSE 19:48 | 19 Oct||1196.00||
|Mkt Cap.(Rs cr)||11,840|
|Mkt Cap.(Rs cr)||11839.77|
Mahanagar Gas Ltd. (MGL) - Director Report
Company director report
Your Directors are pleased to present you the Twenty First Annual Report of the Company(MGL) together with the Audited Statements of Accounts for the year ended March 312016.
1. Financial Performance
Your Company registered a turnover of Rs. 2079 Crores during the year 2015-16. TheProfit after Tax is Rs. 309 Crores for the year 2015-16 as compared to Rs. 301 Crores forthe year 2014-15.
The Financial results for the year ended March 31 2016 are summarized below:
Building trust of promoters - presentation of dividend cheques to GAIL (I) Ltd. BGIndia Ltd. and Government of Maharashtra
Net worth per share has increased from Rs. 157.54 in 2014-15 to Rs. 171.03 in 2015-16signifying sound return on investment coupled with sizeable amount of profit ploughed backinto the business.
2. Appropriations Dividend
In the previous year a dividend of Rs. 17.50 per equity share on face value ofRs. 10/- each (which included special dividend of Rs. 7.50 per share) was paid. For thefinancial year ended March 31 2016 your Directors are pleased to recommend a dividend ofRs. 17.50 per equity share (i.e. normal dividend of Rs. 10 per share and special dividendis Rs. 7.50 per share) on 89341600 equity shares of Rs. 10/- each (175% on the paid upvalue of each share).
The payment of dividend after your approval at the forthcoming Annual GeneralMeeting will be made in accordance with the regulations applicable at that time.
3. State of Company's Affairs
Your Company's growth is on fast track and is poised for scaling newer heights in it'schosen areas of operations. A brief summary of the operations of the Company is providedin the Management Discussion & Analysis section forming part of this report.
4. Management Discussion & Analysis
(a) Operations and Business performance:
Mumbai is a densely populated and a congested city. Building infrastructure in the cityhas always been a challenge for your Company. Furthermore as compared to other utilitieswhose infrastructure is already laid in the limited corridors available City GasDistribution (CGD) has the "last mover" disadvantage in Mumbai.
The Company has successfully continued scaling up of the infrastructure during the yearunder review in its authorised areas of operation of Greater Mumbai (GA1) and Thane city& other adjoining areas (GA2). The Company is also rapidly spreading it's distributioninfrastructure and connecting consumers in the suburban areas of Kalyan-DombivliAmbernath-Badlapur Ulhasnagar Bhiwandi Panvel Kharghar and Taloja which are alsowithin your Company's authorized Geographical Area.The PNGRB in its CGD bidding round - IVauthorised your Company to lay build expand and operate CGD network in Raigarh Districtin Maharashtra.
Growth has been maintained despite encountering complexities due to development ofinfrastructure by various other entities / authorities limited construction window periodof about six months due to monsoons and complex web of statutory permissions from multipleauthorities to build CGD infrastructure.
The table below shows growth achieved by the Company:
Continuous additions to the number of domestic connections and vehicles converted toCNG have ensured that your Company is one of the most prominent CGD companies in India interms of consumer base.
The average gas sales volume of your Company during the financial year 2015-16increased to 2.43 MMSCM per day registering a growth of over 2% during the previous fiscalyear. The highest daily gas sale volume has reached a peak of 2.76 MMSCM per day duringthe year.
During the year 2015-16 your Company has made substantial investments in networkexpansion in its existing areas of operations of laying building and developing CGDinfrastructure in the authorized areas.
During the year 2015-16 apart from domestic connections your Company has also madeprogress in adding new Commercial and Industrial consumers.
The average CNG sale during the financial year 2015-16 increased to 12.70 Lakhs Kg perday registering growth of about 4% over the previous fiscal year. The peak daily sale ofCNG reached 14.69 Lakhs Kg per day during the year. The growth in demand for CNG isexpected to continue and your Company is preparing to seize this opportunity bysignificantly investing further in the CNG infrastructure in the city of Mumbai andadjoining authorised areas during the next fiscal year.
Highlights of performance and initiatives taken up during the year are as follows:
1. Day to day efficiency in gas sourcing supply management fund management andoperations undertaken by your Company led to an overall control on costs.
2. Your Company has successfully completed re-certification of OHSAS 18001:2007 &ISO14001:2004 - Environmental Management System.
3. Your Company received 2nd Pt. Madan Mohan Malviya Award (Silver Award) for Best CSRPractices in Education 2015 for our project Rs. MGL Unnati1 5th annualGreentech CSR Award in the Gold Category in CGD sector for outstanding achievement inCorporate Social Responsibility Rashtra Vibhushan Award 2015 in Gold category in socialdevelopment for its outstanding contribution for National Economic and Social DevelopmentGolden Peacock Award for Corporate Social Responsibility 2015.
4. Your Company signed term Regasified Liquified Natural Gas (RLNG) contract (0.15 Firm+ 0.15 Fall back) for gas supplies commencing effectively from January 01 2016 and theterm is valid till December 31 2016. Firm RLNG would help security of gas supplies toyour Company and reduce its dependence on Spot RLNG having high volatility of prices.
5. Your Company has signed MoU with FuelmyGaddi. com (FMG). It provides CNG fuelingsolution for private CNG cars owners. Under this new initiative FMG drivers will pick upsubscriber's CNG car in the night ferry it to the nearest CNG pump fill it with CNG andpark the car back at subscriber's premises the next morning.
6. Your Company launched user friendly MGL Connect Mobile App for its Domestic PNG andCNG consumers.
7. Your Company successfully implemented new Web and Mobile GIS application - Rs.myWorld'for all GIS users.
(b) Development in Gas Sourcing and Pricing:
According to the "New Domestic Natural Gas Pricing Guidelines 2014" datedOctober 25 2014 notified by Government of India (GoI) in addition to providing clarityon domestic Natural Gas Pricing moderated domestic natural gas prices in line with theinternational trends which helped in maintaining competitiveness of CNG (transport) andPNG (domestic) supplied by your Company against competing liquid fuels.
Also your Company has entered into /renewed framework agreements for Spot RLNG withsuppliers available in market to source Spot RLNG in a competitive manner to cater todaily and seasonal fluctuations in gas demand and quantities required over and above totalof domestic gas allocations and firm RLNG supplies. Spot RLNG prices (delivered)fluctuated considerably during the year from low of about US$ 5.87/ MMBTU to a high of US$9.61 / MMBTU. Your Company successfully maintained its overall gross margins in allsegments in spite of considerable fluctuation in gas costs by effective implementation ofa comprehensive gas sales pricing policy.
(c) Opportunities and Challenges:
Your Company is in process of expanding the CGD network in the Geographic Area ofRaigarh District
(Maharashtra) authorized by the PNGRB with 300 months of infrastructure exclusivity and60 months of marketing exclusivity commencing w.e.f April 012015.
The decision of the Government of India (GoI) allowing supply of domestic gas upto 110%of domestic gas allocation for CNG (transport) and PNG (domestic) segments of your Companyis immensely helpful in maintaining competitiveness of CNG and PNG against competingalternate fuels. This dispensation of the Gol would enable your Company to meetfluctuation in demand and cater to most of the incremental demand in these segments fromdomestic gas supplies.
The ability to source market priced gas from all major sources through physicalconnectivity with GAIL's Dahej- Uran pipeline network and the large demand potential inthe existing authorized areas of your Company provides a tremendous scope for growth.
Hon'ble Supreme Court in its judgment dated July 01 2015 declared Regulationspertaining to determination of network tariff for city or local gas distribution networkand compression charge for CNG as ultra vires. Such verdict of Hon'ble Supreme Courtprovided respite and clarity about non applicability of retrospective impact of networktariff and compression charges if any.
A challenge before your Company would be to roll out its CGD infrastructure in a timebound manner to meet its regulatory targets in newly authorized Raigarh district coveringover 6800 Square Km area consisting of diverse topography of rocky terrain and forestland.
Another challenge before your Company would be to develop competitive skills to preparefor likely competition post exclusivity scenario in Mumbai and Greater Mumbai and Thanecity & contiguous areas retaining skilled manpower and developing more number ofvendors and competent contractors. To address such challenges your Company is focusing onupgrading its robust systems and processes strengthening manpower & skilldevelopment.
Also the outcome in the ongoing legal cases (i) in Hon'ble High Court of Delhi onnatural gas marketing exclusivity in Mumbai and its Adjoining Areas (ii) in the APTELbetween MGL & PNGRB GAIL and ONGCL on applicability of additional TransportationTariff of ONGCL's Uran Trombay Pipeline levied by GAIL may have an impact on your Company.
(d) Risk Management & Internal Control System:
MGL has established business risk management framework for identifying risks that mayhave a bearing on the organization's objectives. Risks are evaluated on the basis of theirimpact and likelihood by Business Risk Review Group (BRR Group) consisting of seniorexecutives of Company and are periodically reviewed by the Audit Committee and the Board.
The Business Risk Review Group assists the Audit Committee and the Board in itsoversight of the Company's management of key risks including strategic and operationalrisks as well as the guidelines policies and processes for monitoring and mitigatingsuch risks under the aegis of the overall business risk management framework.
MGL has put in place adequate lnternal Financial controls (IFC) commensurate with itssize and nature of its business and in conformance to Companies Act and other applicablestatutes. These have been thoroughly assessed (and augmented where needed) through one ofthe renowned expert agencies (M/s E & Y) so as to ensure that such controls areoperating effectively. Your management continuously exercises focus on strengthening itsinternal control processes through various initiatives such as setting tone from the topawareness sessions as well as periodic review. These initiatives provide a reasonableassurance in respect of providing financial and operational information complying withapplicable statutes safeguarding of assets of the Company and ensuring compliance withcorporate policies.
Policies standards and delegations of authority have been disseminated to seniormanagement to cascade within their departments. Procedures to ensure conformance to thepolicies standards and delegations of authority have been put in place covering allactivities. Interdependencies of job responsibility ensure that there are jointdiscussions and requisite approvals before any commitment is made.
The internal audit activity is performed by a reputed external professional firmcovering major business operations which ensures the effectiveness of existing processescontrols and compliances. This has been further augmented by introducing implementationreview which is aimed at ensuring that the audit findings are tracked until closure.Internal audit reports along with management comments and action plan on recommendationsas well as the findings of implementation review are presented to Audit Committee.Functioning of the auditing firm is overseen and facilitated by in-house dedicatedpersonnel.
The Company has a rigorous business planning system to set targets and parameters foroperations which are reviewed with actual performance to ensure timely initiation ofcorrective action if required.
A Strategic Management Group (SMG) consisting of Senior Executives undertakediscussions and take joint decision on all major issues.
Your Company has witnessed smooth operation of SAP R/3 ERP system as well as IT systemsduring the year. Maximum uptime of IT Infrastructure systems and services could beachieved without any loss-time of operation or information security incidents. The Companycould upgrade the SAP to one of the latest technical platform - "Enhancement Pack6" As a sequel to the technical upgrade business function activation was accomplishedwith an exclusively in-house effort for Financials where functionalities like Income Taxdepreciation and report for past periods for foreign currency valuation were achieved. Themobility implementations were enhanced and applications like the customer application onAndroid witnessed growing popularity. To further streamline processes a mobileapplication for the "Last Mile Connectivity" of domestic customers has beenrolled out which resulted in recording activities of material consumption move-in of thecustomer in SAP and payment to contractors without any time-lag and with a centralizedoperation.
In an endeavour for a paperless office and enhancing controls your organization hasdeveloped applications for safety incident tracking and automating training records forcontract engineers and plumbers.
Supervisory Control and Data Acquisition (SCADA) has been implemented to have remotecontrol of select installations.
(e) Health Safety Security & Environment (HSS&E): Safety
Your Company is in the business of supplying Piped and Compressed Natural Gas that isenvironment friendly and safe. To facilitate this your Company constructs and operatespipelines in the city of Mumbai and its adjoining towns. Whilst doing this your Companyadheres to high standards of Health Safety Environment and Security and as the Companybelieves that Rs. Outstanding Business Performance requires Outstanding HSS&EPerformance' Your Company complies with all legal and statutory requirements applicable toits operations as a minimum standard and aspires to attain recognised world classperformance.
Your Company is accredited to OHSAS 18001:2007 for Occupational Health & SafetyManagement system ISO 14001 for Environment Management System and ISO 9001:2008 forQuality Management System which are being audited regularly at par with internationalrequirements.
Your Company is committed to the health and safety of all its employees the employeesof our contractors and other stakeholders who may be affected by the Company's operations.Your Company considers its contractors as business partners and expects them to adhere tothe Company's HSSE standards. Coaching and assistance is provided to the business partnersas and when required.
As a part of your Company's drive for continuous improvement in safety various stepshave been undertaken to raise general awareness in the relevant community and operatingenvironment such as PNG awareness campaign in residential societies MGL EmergencyManagement Systems awareness for local Fire Brigade offices District Disaster ManagementCells Police personnel in various police stations CNG awareness campaign at various autostands B.E.S.T. depots and gas safety awareness programs in public schools. A campaign on"Life Saver Excellence" with a series of workshops has been conducted across theCompany in different districts to raise HSE awareness among employees and contractors.
Your Company has taken very good steps in "Occupational Safety "excellencewith the relentless implementation of Petzl System for Work at Height activitiesespecially for Riser installation at project sites continuous improvement in theCompliance to MGL Lifesavers implementation of Safety Technical Competency trainingpolicy-"NO STC NO WORK" and CNG filling policy- "NO Metal Plate NOGas" Your Company has implemented Online Action Tracking System to evaluate and closeout the recommendations related to the incidents and Senior Management Audits in amethodical way. Your Company in future is going to implement E - permit system andDefensive Driving Management system. Your Company has an Emergency Control Room with tollFree number 1800 22 99 44 which is available 24 Hours 365 days a year. Besides this"Dial-before-Dig" a continuous pipeline surveillance and mapping of entirepipeline network on Geographical Information System (GIS) also contribute to safe workingenvironment.
Your Company also expects all of its employees and contractors to report near miss andhazards which are then investigated and lessons learnt are shared with all concerned. YourCompany also takes cognisance of the lessons learnt from other oil and gas companiesacross the world. To further inculcate safe driving behaviours in addition to VehicleTracking System (VTS) your Company conducts Defensive Driving Training (DDT) for alldrivers and helpers of vehicles plying within the organization namely Light commercialVehicles (LCV) carrying CNG pool vehicles and Master Control Center (MCC) / Emergencyvehicles. Your Company has imparted DDT training to more than 600 contractors' drivers andpatrolmen driving bikes associated with MGL.
Your Company has a well-built Fire Management System in place in compliance with allnational standards. A competent firefighting workforce has been deployed at all city GateStations (CGS) and MGL offices to combat any potential fire emergency. The Fire ManagementSystem has been scrutinized by an external third party agency of international reputevalidating the effectiveness of the system.
A series of mock drills were conducted in the presence and association with the MutualAid Response Group (MARG) members to demonstrate the MGL Emergency Response and DisasterManagement Plan (ERDMP) and learn from the inputs of the MARG members for continualimprovement.
Security management as an independent support process in your Company evolved toprovide physical security assurance mechanism to its business. Ever- changing businessdynamics continual maneuver in socio-economic scenario with rapid increase in threatperspective & swift business expansion of your Company engaged the security team tocarry out thorough reassessment of the Company's security management processes throughrisk assessment & reviews specially focusing on protection of critical assets withenriched focus on pipeline network and physical security support to key processes. YourCompany has responded positively to changing security challenges by evolving and adoptingeffective security mechanism and programs into its overall business operations.
Security process sustainability of your Company is continuously put to test throughcontinuous feedback from other functions followed by review of security process andthereafter implementing the result of such reviews. These reviews include risk andvulnerability assessments threat appreciation access control mechanism securityawareness training incident management drills and exercises. Your Company SecurityManagement System is being audited periodically by reputed third party agencies foridentifying its areas of improvement.
In order to match with enthusiastic business expansion coupled rapidly diversifyingsecurity threats security as a function graduated from basic guarding function to threedistinct verticals - Surveillance Assurance Asset Protection & Security Support; eachcomplementing & reinforcing each other. Surveillance assurance process was augmentedby bringing in quantum improvements in CCTV coverage by incorporating all Company ownedCNG Retail Outlets in its CCTV network. An Rs. App- based Surveillance Mechanism System'for monitoring Patrolmen activities is in the pipeline for implementation. Implementationof this project will provide real time data related to pipeline surveillance. Steps arealso on to incorporate security guards of housing societies and other people residing inthe vicinity of gas pipelines for gaining information about pipeline throughimplementation of incentive driven plans. In order to achieve the desired results insecurity assurance process a state of the art Rs. Security Control Room' for continuoussurveillance of Pipeline VTS monitoring monitoring patrolmen activities remotemonitoring of DRS & continuous surveillance of all asset locations & major officesis planned.
The year saw new initiative in Vigilance function. Rs. Vigilance Mechanism' of theCompany was approved and implemented in the Company. A definite mechanism is at present inplace to deal with matters related to fraud & unethical practices.
The ultimate goal of the Security Management System in MGL is to achieve effectivesecurity performance. Key emphasis of the Security Management System is to provide uniformsecurity standards across your Company so as to make the security practices proactiverather than relying on reactive mechanisms.
The Environment is both a brand image as well as a core area of focus for your Company.In addition to the process and procedures your Company has in place to meet therequirements of ISO-14001 accreditation every year your Company celebrates WorldEnvironment Day wherein the employees rededicate themselves to protect the environment andpromote the benefits of natural gas to improve the environment through public awarenesscampaigns. Towards environment compliance a new initiative of landscaping and greenlanddevelopment work has also been completed at CGS Ambernath. Your Company has installedsolar panels in Administration Building to reduce collective dependence on electricity.Also use of CFL lights and gas generators working on natural gas at Offices and CGS savessignificant amount of electricity and combat greenhouse gases emissions. Your
(f) Project Monitoring:
Corporate Project Monitoring Cell (CPMC) is always in an earnest endeavour to improveupon project monitoring. Web based module designed for capturing and display ofperformance of key milestones is further advanced to assist execution departments infiguring out the areas of concern and underutilization of already laid infrastructure. Thesystem has also benefitted the Company to improve upon the accuracy and timely submissionof requisite information to stakeholders and regulators.
Further in it's ever endeavour to improve upon the projects operation and monitoringCPMC has gone ahead with the initiative of developing new "System BasedModules" essentially very effective facilitating and monitoring tools. These newmodules are:
Last Mile Connectivity (LMC) mobility Application:
On adopting this application MGL could ensure on time recording of Customersconversion date validation of Meter serial Number and genuineness of reporting of theHouse Locked cases.
Work at Height (WAH) - PTW Application: This application is at present undertrial in the areas of Mira-Bhayender and Kandivali. This system may curb the delay in workpermit issuance and idling of resources at sites which in turn may enhance theproductivity and safety at site.
(g) Asset Integrity:
Your Company has been assessed and registered as complying with the requirements ofPNGRB Notification on Integrity Management System (IMS) for City or Local Natural GasDistribution Network (CGD regulation - 2013). For upgrading the technical competencies ofyour engineering and technical personnel e-learning modules comprising animation filmshave been developed and made available through intranet. This has enabled ready access toacquiring and upgrading correct knowledge and skill to employees.
(h) Future Outlook:
Your Company has established its operations in one of the largest metro city of India.The ever expanding customer base coupled with large unserved population provides a stronggrowth opportunity. Over the next five years your Company would focus on increasing thepenetration in the current authorized geographical area through higher number of domesticconnections and more CNG stations along with expeditious rollout of CGD infrastructure inthe newly authorized Raigarh district.
Your Company is continuously screening opportunity to enter into new markets byparticipation in the bids invited by PNGRB for implementation of the CGD network acrossthe country in upcoming CGD bid rounds of the PNGRB. Also your Company is exploringvarious opportunities for inorganic growth such as equity stakes in other existing CGDentities.
Your Company also plans for new initiatives of Hybrid CNG/ Diesel vehicles CNG in twowheelers etc.
5. Automation Information Technology Metering and Customer Relationship ManagementImprovements:
(a) Automation and Information Technology:
Your Company has been successful in sustaining and enhancing its SCADA system acrossall the four City Gate Stations 109 CNG stations and 3 Sectionalising Valves (SV). Plansare in place and further work is in progress to cover an additional 60 CNG stations and 6SVs.
With the successful experience of Data logger monitoring system at 30 DistrictRegulating Stations (DRS) plans are in place for covering an additional number of 26 DRSsenabling your Company to further strengthen the safety of operations and provide improvedservices to your consumers in a more efficient manner.
Implementation of metering system in an existing District Regulating Station (DRS) andAutomated Meter Reading (AMR) of the customers installed downstream of the DRS is beingexpedited by exploring suitable suppliers and vendors and detailed feasibility is beingworked out in the first phase.
Your Company is also in the process of undertaking trials for the implementation ofpre-paid metering system for domestic customers.
These initiatives shall render the capability for remote acquisition of Meter readingsdetecting instances of Meter tampering and delivering an enhanced user experience therebyraising safety as well as revenue realisation.
Efforts were continued to maintain domestic meter reading accuracy & efficiency byupdation of customer master data as per meter readers' feedback; continuedcross-verification of at least 10% door lock images; providing list of non-functioningmeters to O&M Department for replacement etc.
As way forward following improvements to domestic meter reading android software areunder implementation which would help minimize meter readers' errors:
1. Logical grouping of standard meter reading codes.
2. Experience based enhancement of list of standard meter reading remarks.
3. Availability of standard codes and standard remarks in hindi devanagari script alongwith English.
The improvements would also involve provision to capture photographs of varioussituations prevailing in customers' premises which would facilitate back end analysis andidentification of appropriate further actions.
In CNG daily report compilation time & human effort saving was achieved byre-organizing formats of field data received from various sources.
The Interactive Voice Response System (IVRS) in the call center has been re-designedfor increasing customer convenience with various automated self-help menus and updatedcustomer information / updates. Few of the Key Features incorporated are as follows -
1. Increased self-help options.
2. Easier navigation of menu.
3. Customers who wish to avail After Sales Services (Install / Remove Meter) getpriority to speak to Customer Service Executive.
4. Data to be captured regarding callers who wish to report demolition of building sothat they may be contacted later.
Our Customer Care Helpline (Call Center) has been relocated to CBD Belapur at thevendor's location having the following advantages -
1. The inbound call taking capability has been enhanced from 20 to 54 work stations.Scalability of additional work stations at a later date can be done very easily.
2. The Call Center operation is now operative 24x7.
3. Standardization of services by the BPO has enabled MGL to position its customerservice as business differentiator in a competitive scenario leading to increase in brandvalue.
4. In the FY 15-16 there was an increase of 8.63% of registered customers. Subsequentto outsourcing of the call center activity our call receiving capability increased by 7%month on month. As a result of this improvement the call abandon significantly reduced by2.35% within a span of 8 months of commencement of operations.
Keeping in mind the ever increasing customer expectations the following CustomerAwareness initiatives were taken to create Customer Delight - Know you PNG Bill:
A bilingual document accompanying the PNG bill explaining different aspects ofthe bill:
I. The 1st PNG Bill Insert explained calculation of the bill importance of ActualMeter Reading etc.
II. The 2nd PNG Bill Insert elaborates on the various charges/amount collected undereach line item of the bill. This will be sent in the billing cycle commencing in September2016.
Both Inserts inform about customer friendly ways to provide Actual MeterReading.
6. New Initiatives
Commercial Master Sale Agreement
There are several retail chain outlets operating in our geographical areas and we havebeen registering each of their outlets as and when there was a request from them.Considering the potential sales volume from such retail chain we proposed to have amaster agreement covering all their remaining outlets where they need the PNG supply.Accordingly we successfully signed agreement with M/s Hardcastle restaurants popularlyknown as Rs. McDonalds' for 21 outlets and M/s Jubilant foods popularly known as Rs.Dominoes' for 68 outlets all across our geographical areas for a volume off-take of~28000 SCMD. Further we may sign off such agreements with Burger Kings and KFC.
Commercial Rs. A'
Commercial Rs. A' segment is one of the promising segments amongst all the segments ofPNG and CNG. We have focusing to have high penetration in this segment. In order toachieve the set target of gas volume in Commercial A category we had planned to register500 Commercial A customer in FY 15-16. We have exceeded the same by achieving 536 Nos forvolume off-take of ~15000 SCMD.
Today PNG has become preferred choice of cooking fuel irrespective of the consumerprofile in Domestic segment. Prominent builders have always showcased PNG connection asone of the amenities to attract the potential buyers. To cater to this niche market wehave reticulated policy which is win-win proposition to builders customers and MGL. Theobjective of this model was to develop the additional resources without compromising onthe targets and also facilitate builders during the construction phase of project itself.We have already executed the agreements with leading as well as small projects forsupplying PNG to over 7000 households and considering the response from the builders itis estimated that we may sign off projects having additional 12000 households over aperiod of next six months.
Fuel My GAADI
With a saturated market of public transport in CNG the promising segment left isprivate cars. The needs of this segment differ than that of the public transport segmentfor obvious reasons. Refuelling time is a critical issue which clashes with therefuelling schedule of autos and taxis due to change in shift timings of the drivers. Toease the refuelling issues for private car segment an out-of- the-box concept is beingsupported by MGL under the brand name Rs. Fuel my Gaadi' This initiative is being takenfor providing services of CNG car re-fuelling through third party agency during non-peakhours. The service provider offers hassles free CNG refilling service to private carcustomers by picking up car from customer's residence during night hours and returning CNGrefilled car at nominal charge.
Supply of PNG to MCGM Crematorium:
Of the 12 crematoriums provided by MCGCM under Phase 1 MGL has already laid the lineup to the crematorium premise for 11 of the crematoriums and for the balance one casepermission for laying is expected soon.
7. Quality Initiative
Your Company has successfully completed the periodic surveillance audit for ISO9001:2008 Quality Management System by M/s. DNV in April 2015.
As a part of continual improvement "Online Audit Management Module" forQuality Management System has been introduced. This is a paperless and green endeavor.This facilitates reporting tracking & monitoring of Internal Quality Audits and fieldquality inspections. Your Company plans to transit from ISO 9001:2008 to ISO 9001:2015 newstandard during its next re-certification audit.
8. Geographical Information System (GIS)
The Geographical Information System (GIS) established in the Company continues to beutilized to effectively manage network. The pipeline network laid/being laid is mapped inGIS on an ongoing basis which helps in regular monitoring repair and maintenance on dayto day basis as well as in the case of emergency.
The mobile GIS solution "my World" has been further enhanced by introducingthe editing functionality which enables updating the mapping of the network even fromfield.
Network data quality improvement activities like field verification of the locations ofService Regulators tallying the buildings data as well as completeness in the networkmapping have been undertaken. This will ensure reliable information from GIS especiallyduring planned outage and emergencies.
Improvements in GIS will benefit your Company in contributing to monitoring andmaintaining the pipeline network more proficiently.
9. Human Resources Development and Employee Relations
Your Company focus is in the most valuable asset "Human Resource" and hasmade all efforts to attract new talent as well as develop and enhance the skills of theexisting talent pool. Organization restructuring for growth revisiting HR policiesfacilitating congenial and safe work environment and behaviour based training programswere some of the initiatives undertaken by MGL during the year.
The organization has laid emphasis on human capital and their work life balance byimplementing the flexi time policy which is backed by technology for the purpose ofmonitoring and control. The policy is well received by the team and there was no loss ofproductivity. The organization has focused on enhancing HR capabilities by augmenting ITinterphase in HR systems and processes. An annual training calendar with a focus onplanned development activities was initiated and implemented.
As part of the new initiatives E-Learning was introduced for the first time in MGL with20 behavioural modules and 10 MGL specific modules for 100 users. Another initiative wastaken to commission an Employee Opinion Survey for further enhancement of theorganizational people processes.
In the areas of talent development and performance improvement processes; the blueprint of leadership development plan and succession planning has been formed which willsupport the organization in meeting its talent needs in time to come. Initiatives havealso been taken to bring focus of performance to create a performance driven culture bymodifying the existing performance system. Additionally the skill enhancement has alsobeen done through various training programs and workshops for employees across all thelevels by arranging around 1800 mandays of training workshops.
There was also emphasis given to develop / draft the policies which were in existencebut not documented and also to support the overall people development.
At the year end your Company had 499 employees on its rolls; 49 employees wererecruited during the year 2015-16. The attrition rate was around 6% for the Financial Year2015-16.
10. Corporate Social Responsibility Policy
Mahanagar Gas Limited being a responsible corporate citizen has been continuouslycontributing in social investments primarily in the areas of Education SkillsDevelopment Health and Sanitation Women empowerment and Environment protection.
'MGL Unnati is an intervention designed with the objective to promote verticalsocio-economic mobility through education. The project envisages coaching and mentoring ofmeritorious children of CNG auto taxi and public transport bus drivers and othereconomically weaker sections enabling them to face competitive engineering entranceexamination. Free coaching for a period of 11 months was extended to 20 students out ofwhich 14 qualified in the IIT mains and 5 students got admission in IITs / NITs. Out ofthe 20 students trained under the initiative 19 have got admissions in engineeringcolleges while one candidate has opted to undergo pilot training.
'MGL Hunar' is an intervention in lines with Kaushal Bharat - Kushal Bharat forimparting training on employment oriented trades to youths from underprivilegedbackground. MGL associated with renowned vocational training institutes for impartingtraining in various skills to unemployed youths to make them self-reliant.
MGL has been supporting slum communities in their quest for seeking better prospectsfor future generations by adopting a community center for initiatives like supplementaryeducation nutrition health soft skills training IT training and livelihoods relatedskills augmentation training to youths. It is also mentoring children from slumcommunities through sports to evolve positive attitude and sensitize them against thenegative social practices like gender discrepancy substance abuse drug addiction etc.
MGL has supported sterilization drive targeting stray animals with the objective ofreduced man-animal conflict. Facilities and infrastructure has been created to support thesterilization program. Veterinary intensive care unit has been upgraded with modernmachineries to treat diseased animals as an initiative towards animal welfare.
MGL has been reaching out to the less blessed roofless and rootless children throughits initiative Rs. MGL Komal Jivan' MGL has adopted a multidimensional effort towardsholistic development of such children who due to a complex mix of domestic economic orsocial disruption find themselves in the streets and vulnerable to multitude of abuses.MGL has also extended support for air conditioning of Bai Jerbai Wadia Hospital a gradeII-B heritage structure. MGL also extended support for training of ace shooter and anOlympic medal prospect Ms. Heena Sidhu.
MGL also partnered with various social institutions for empowering urban poor women fora dignified life through skill development and training and for providing relief to womenin distress to encourage them to cope with difficult circumstances and situations. Ascommunity welfare initiative MGL has also contributed towards psychological settlementmedical care and overall happiness of mentally challenged adults for holistic developmentof children from marginalized communities.
The Company in compliance with the provisions of the Companies Act 2013 hasconstituted a Corporate Social Responsibility Committee with Mr. Santosh Kumar as itsChairman and Independent Director Managing Director presently Mr. Rajeev Mathur as Memberand Whole Time Director Ms. Susmita Sengupta as Member. The Company has also placeddetails of Policy on the website of the Company. Further details required as per theprovisions of the Companies Act 2013 are attached to this report as Annexure - III.
11. Directors and Key Managerial Personnel
During the financial year 2015-16 Mr. Akhil Mehrotra has been appointed as anAdditional Director on the Board of the Company with effect from March 11 2016 and shallhold office upto the date of the ensuing Annual General Meeting of the Company.
Mr. Nitin Banerjee resigned from the position of Directors w.e.f. February 12 2016.The Board of Directors places on record the valuable contribution made by him to thegrowth of the Company during his tenure as Director of the Company.
c) Retirement by Rotation
The provisions of Section 152 (6) of the Companies Act 2013 and Article 87 of theArticles of Association of the Company provide for retirement of rotation of the Directorsof the Company. Accordingly Dr. Ashutosh Karnatak retires by rotation at the ensuingAnnual General Meeting and being eligible offers himself for re-appointment. Based on therecommendation of Nomination and Remuneration Committee the Board recommends hisre-appointment at the ensuing Annual General Meeting.
d) Particulars of Employees
The ratio of remuneration of each Director to the median of employees' remuneration asper Section 197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 forms part of theBoard's report (Annexure - IV).
There are no employees who are posted in India throughout the financial year and inreceipt of a remuneration of Rs. 1 Crore and Rs. 2 lakhs or more or posted for part ofthe year and in receipt of Rs. 8 lakhs and Rs. 50000 or more a month under Rule 5(2) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014.
12. Board Meetings During the Financial Year 2015 -2016
The Board of Directors met 6 (Six) times in the Financial Year 2015-16. The details ofthe Board meetings and the attendance of the Directors at the meetings are provided in theReport on Corporate Governance.
13. Directors' Responsibility Statement
In pursuance of Section 134 (5) of the Companies Act 2013 the Directors herebyconfirm that:
1. In the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
2. The Directors had 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 financial year and ofthe profit and loss of the Company for that period;
3. The Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
4. The Directors had prepared the annual accounts on a going concern basis;
5. The Directors of the Company had laid down internal financial controls to befollowed by the Company and that such internal financial controls are adequate and wereoperating effectively;
6. The Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
14. Corporate Governance & Shareholders' Information
Your Company strongly believes in adherence with good and ethical governance practicesto enable the management to direct and control the affairs of the Company in an efficientand effective manner. It believes in imbibing the good governance practices to ensure themaximization of value and goodwill for all the stakeholders of the Company. With thatbelief though not applicable before listing your Company voluntarily complied with therequirements of Regulation 17 and 27 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 as applicable to the listed Companies and has beencomplying with the aforesaid requirements of Corporate Governance post listing. A separatereport on Corporate Governance has been annexed to the Annual Report.
15. Extract of Annual Return
Extract of Annual Return as prescribed under sub - Section (3) of Section 92 and rule12(1) of the Companies
(Management and Administration) Rules 2014 in Form MGT - 9 has been annexed to thisReport as Annexure - II.
16. Particulars of Contracts or Arrangements with Related Parties
There were no Related Party Transactions (RPTs) entered into by the Company during thefinancial year which attracted the provisions of Section 188 of the Companies Act 2013.
17. Material changes and commitments if any affecting the financial position of theCompany which have occurred between the end of the financial year of the Company to whichthe financial statements relate and the date of this report:
Company got successfully listed on the BSE Limited and National Stock Exchange of IndiaLimited on 1st July 2016. The stake of the promoters GAIL (India) Limited and BG AsiaPacific Holdings Pte Limited reduced to 32.50% pursuant to Offer for Sale in the IPO.9436178 compulsorily Convertible Debentures of the Government of Maharashtra has beenconverted into 9436178 Equity shares of face value of Rs. 10/- each pursuant to terms ofthe issue.
18. Details of Significant & Material Orders Passed by the Regulators or Courts orTribunal
There are no significant and material orders passed by the Courts or tribunalsimpacting the going concern status and the Company's operation in future.
The Company has not accepted any deposits pursuant to provisions of the Companies Act2013 and rules made thereunder.
20. Declaration From Independent Directors on Annual Basis
The Company has received necessary declaration from the Independent Directors of theCompany under Section 149(7) of the Companies Act 2013 stating that they meet with thecriteria of their Independence laid down in Section 149(6) as well as Clause 49 of thelisting
agreement/ SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
21. Audit Committee
Details regarding the constitution re - constitution of the Audit Committee as per theprovisions of Companies Act 2013 and the Listing Agreement/SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 along with the dates of Meeting and the Termsof Reference have been entailed in the Report on Corporate Governance.
22. Stakeholders Relationship Committee
Details regarding the constitution re-constitution of the Stakeholders' RelationshipCommittee as per the provisions of Companies Act 2013 along with the dates of Meeting andthe Terms of Reference have been entailed in the Report on Corporate Governance.
23. Nomination & Remuneration Committee
Details regarding the constitution re-constitution of the Nomination and RemunerationCommittee (NRC) as per the provisions of Companies Act 2013 along with the dates ofMeeting and the Terms of Reference have been entailed in the Report on CorporateGovernance. The Company follows a policy on remuneration of Directors and SeniorManagement Employees. Details of the same are given in the Report on Corporate Governance.
24. Statutory Auditors
M/s Deloitte Haskins & Sells Chartered Accountants (Registration No. 117365W) theStatutory Auditors of the Company shall retire at the ensuing Annual General Meeting andbeing eligible offer themselves for reappointment and shall hold office from theconclusion of this Annual General Meeting [AGM] till the conclusion of next AGM. In thisregard Company has received a certificate from the auditors to the effect that if theyare reappointed it would be in accordance with the provisions of Companies Act 2013.
25. Secretarial Auditor
The Company had appointed M/s. Dholakia & Associates Company Secretaries inPractice as Secretarial Auditor for the Financial Year 2015-16. The Secretarial AuditReport for the financial year ended March 31 2016 is annexed herewith as Annexure - V tothis Report.
The observations and the suggestions of the Secretarial Auditor in their Report havebeen noted and the necessary returns have been submitted with the Competent Authority.
26. Cost Auditor
M/s. Dhananjay V. Joshi & Associates Cost Auditors were appointed as Cost Auditorfor the audit of cost records maintained by the Company for the financial year ended March31 2015. The Cost Audit Report was filed by the Cost Auditors on October 15 2015 withinthe due date. In respect of the Financial Year ended on March 31 2016 M/s. Dhananjay V.Joshi & Associates Cost Auditors were re-appointed. The due date for filing the CostAudit Report is September 27 2016 (within 180 days from the end of financial year).
27. Formal Annual Evaluation
Pursuant to the provisions of the Companies Act 2013 and in compliance with therequirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015the Board has carried out the annual performance evaluation of its own performance theDirectors individually as well as the evaluation of the working of its Committees. Astructured questionnaire was prepared after taking into consideration inputs received fromthe Directors covering various aspects of the Board's functioning such as adequacy of thecomposition of the Board and its Committees Board culture execution and performance ofspecific duties obligations and governance. A separate exercise was carried out toevaluate the performance of individual Directors including the Chairman of the Board. Theperformance evaluation of the Independent Directors was carried out by the entire Board.The performance evaluation of the Chairman and the Non Independent Directors was carriedout by the Independent Directors.
28. Vigil Mechanism
In Compliance with requirements of the provisions of Section 177(9) & (10) of theCompanies Act 2013 and as per Regulation 22 of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 your Board of Directors at its meeting held onMarch 26 2015 approved the establishment of Vigil Mechanism to ensure that appropriatesystems and procedures to curb opportunities for any sort of corrupt and unethicalpractices are in place.
This vigilance directive aims to set-out a structured efficient & effectivevigilance mechanism in the organization to cover both preventive and punitive approachesin this regard.
The policy on Company's Vigil Mechanism may be accessed on the Company's website at thelink https://www.mahanagargas.com/investors/Policies.aspx.
29. The Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013 Prevention Of Sexual Harassment Policy
The Company had constituted an Internal Complaints Committee in compliance withrequirements of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. The members of this committee include representatives from theCompany and external experts/NGOs.
Your Directors further state that during the year under review there were no casesfiled pursuant to the provisions of the said Act.
30. Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo
The information in accordance with the provisions of Section 134(3)(m) and Rule 8 ofCompanies (Accounts) Rules 2014 is annexed hereto as Annexure - I.
31. Appreciation and acknowledgement
Your Directors take this opportunity to place on record their appreciation and sincerethanks to the Ministry of Petroleum & Natural Gas Government of India Petroleum& Natural Gas Regulatory Board Government of Maharashtra (GOM) MunicipalCorporations of Greater Mumbai Navi Mumbai Thane Mira-Bhayander Kalyan- DombivaliRaigad other State and Central Government Authorities Mumbai Metropolitan RegionalDevelopment Authority (MMRDA) Maharashtra Industrial Development Corporation (MIDC)Police and Fire Brigade Authorities Bankers Contractors Consultants Consumers andLocal Citizens for their whole hearted support and cooperation. The Board also recordstheir appreciation to its Stakeholders - GAIL (India) Limited Shell Group BG Group andGOM for their support and to the employees of the Company for their devotion dedicationand hard work for efficient operations and implementation of projects while maintainingmomentum on your Company's growth.