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Adani Ports & Special Economic Zone Ltd.

BSE: 532921 Sector: Others
NSE: ADANIPORTS ISIN Code: INE742F01042
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VOLUME 411652
52-Week high 451.55
52-Week low 293.95
P/E 29.43
Mkt Cap.(Rs cr) 71,789
Buy Price 0.00
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OPEN 345.55
CLOSE 345.30
VOLUME 411652
52-Week high 451.55
52-Week low 293.95
P/E 29.43
Mkt Cap.(Rs cr) 71,789
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Adani Ports & Special Economic Zone Ltd. (ADANIPORTS) - Director Report

Company director report

Dear Shareholders

Your Directors are pleased to present the 19th Annual Report along withthe audited financial statements of your Company for the financial year ended on March 312018.

Financial Performance:

The audited financial statements of the Company as on March 31 2018are prepared in accordance with the relevant applicable IND AS and Regulation 33 of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (“ListingRegulations”) and provisions of the Companies Act 2013 (“Act”).

The summarized financial highlight is depicted below:

(` in crore)

Consolidated

Standalone

Particulars

2017-18

2016-17

2017-18

2016-17

Revenue from operations

11322.96

8439.35

6533.82

4878.86

Other Income

1010.93

1040.11

1607.32

1284.67

Total Income

12333.89

9479.46

8141.14

6163.53

Operating expenses

4177.55

3024.66

2024.96

1331.81

Depreciation and Amortisation Expenses

1188.37

1160.19

470.52

540.71

Foreign Exchange (Gain) / Loss (net)

83.29

(277.44)

62.22

(200.33)

Finance Cost
- Interest and Bank Charges

1257.35

1281.24

1218.08

1103.40

- Derivative (Gain)/Loss

238.02

111.94

238.80

95.00

Total Expenditure

6944.58

5300.59

4014.58

2870.59

Profit before share of profit from joint ventures exceptional items and tax

5389.31

4178.87

4126.56

3292.94

Add/(Less):- Exceptional Items

(155.18)

-

(297.38)

-

Tax Expense (net) (Refer note below)

1544.18

286.63

1421.08

192.33

Profit after tax and before share of profit from joint ventures

3689.95

3892.24

2408.10

3100.61

Share of Profit from Joint Ventures

-

9.26

-

-

Net Profit for the year

3689.95

3901.50

2408.10

3100.61

Other Comprehensive income (net of tax)

9.85

6.67

8.61

12.33

Total Comprehensive Income for the period / year

3699.80

3908.17

2416.71

3112.94

Attributable to:
Equity holders of the parent

3683.02

3919.94

2416.71

3112.94

Non-controlling interests

16.78

(11.77)

-

-

Note: The Company was availing tax holiday under section 80IAB ofIncome Tax Act 1961 till March 31 2017 and w.e.f April 1 2017 the Company is subjectto normal tax regime.

There are no material changes and commitments affecting the financialposition of the Company between the end of the financial year and the date of this report.

Performance Highlights:

Your Company has created a milestone in Indian commercial ports historyby handling 122 MMT of cargo. Mundra Port continues to rank 1st in terms of total cargohandling and 2nd in terms of container cargo handling during the year under review. Theother ports developed and being operated by your Company at Dahej Hazira Kandla DhamraMurmugao and Kattupalli have performed well.

The key aspects of your Company's consolidated performance during thefinancialyear 2017-18 are as follows:

Handled cargo of 180 MMT a growth of 7% YOY surpassing all India cargogrowth of 4%.

Container volumes cross 5 million TEUs an increase of 20% on YOY basissurpassing all India container growth of 13%. Consolidated revenue from operationsregistered a growth of 34% from ` 8439.35 crore in FY 2016-17 to ` 11322.96 crore in FY2017-18.

Revenue up by 34% EBITDA up by 32% and PBT up by 25%.

Profit after tax for the FY 2017-18 stood at ` 3689.95 crore.Signed long term contracts for 7.7 MMT.

The detailed operational performance of the Company has beencomprehensively discussed in the Management Discussion and Analysis Report which formspart of this Report.

Dividend:

Your Directors have recommended a dividend of 100% (` 2 per equityshare of ` 2 each) on the equity shares and 0.01% dividend on 0.01% Non-CumulativeRedeemable Preference Shares of ` 10 each for the financial year 2017-18. The saiddividend if approved by the shareholders would involve a cash outflow of ` 499.33 croreincluding tax thereon.

The Board has also approved a Dividend Policy which is now linked withprofit after tax. From financial year 2018-19 the Company would pay upto 15% of profitafter tax as Dividend to Shareholders.

Transfer to Reserves:

The Company proposes to transfer ` 304.82 crore to Debenture RedemptionReserve out of the amount available for appropriation.

Status of Scheme of Arrangement:

During the year under review the Hon'ble National Company Law Tribunalhad vide its order dated August 18 2017 sanctioned the Scheme of Arrangement betweenAdani Ports and Special Economic Zone Limited (the “Company”) and The AdaniHarbour Services Private Limited (the “Transferee Company”) and their respectiveshareholders and creditors (the “Scheme”).

The Scheme with effect from April 1 2016 inter alia provided fortransfer and vesting of Marine Business Undertaking of the Company to the TransfereeCompany as a going concern on Slump Sale basis.

Fixed Deposits:

During the year under review your Company has not accepted any fixeddeposits within the meaning of Section 73 of the Act read with rules made there under.

Non-Convertible Debentures:

During the year under review your Company has issued 16000 RatedListed Secured Redeemable Non-Convertible Debentures (NCDs) of face value of ` 10 lakheach aggregating to ` 1600 crore on a private placement basis listed on the Wholesale DebtMarket Segment of BSE Limited.

Further your Company has redeemed 3667 NCDs of face value of ` 10lakh each issued on private placement basis.

Particulars of loans guarantees or investments:

The provisions of Section 186 of the Act with respect to a loanguarantee or security is not applicable to the Company as the Company is engaged inproviding infrastructural facilities which is exempted under Section 186 of the Act. Thedetails of investment made during the year under review are disclosed in the financialstatements.

Subsidiaries Joint Ventures and Associate Companies:

Your Company had 28 (direct and indirect) subsidiaries as on March 312018.

During the year under review the following changes have taken place:Mundra International Gateway Terminal Private Limited was incorporated as wholly ownedsubsidiary of the Company on May 17 2017 with an object to develop operate maintainports and related infrastructure facilities.

Adani International Terminals Pte Ltd. Singapore was incorporated aswholly owned subsidiary of the Company on June 30 2017 with an object to developoperate maintain ports and related infrastructure facilities.

No Company has become/ceased to be a joint venture/ associate duringthe financialyear 2017-18.

Adani Logistics Limited a wholly owned subsidiary of the Company hasacquired 100% stake of Blue Star Realtors Private Limited on April 26 2018.

Pursuant to the provisions of Section 129 134 and 136 of the Act readwith rules made thereunder and Regulation 33 of the Listing Regulations the Company hasprepared consolidated financial statements of the Company and its subsidiaries and aseparate statement containing the salient features of financial statement of subsidiariesjoint ventures and associates in Form AOC-1 forms part of this Annual Report.

The annual financial statements and related detailed information of thesubsidiary companies shall be made available to the shareholders of the holding andsubsidiary companies seeking such information on all working days during business hours.The financial shall also be kept for inspection by any shareholder/s during working hoursofficeand that theCompany'sregistered of the respective subsidiary companiesconcerned. In accordance with Section 136 of the Act the audited financial statementsincluding consolidated financial information of the Company and audited accounts of eachof its subsidiaries are available on website www.adaniports.com. Details of developmentsof subsidiaries of the Company are covered in the Management Discussion and AnalysisReport which forms part of this Report.

Directors and Key Managerial Personnel:

Pursuant to the requirements of the Act and Articles of Association ofthe Company Dr. Malay Mahadevia (DIN: 00064110) is liable to retire by rotation and beingeligible offers himself for re-appointment. The Board recommends the appointment of Dr.Malay Mahadevia as Director of the Company retiring by rotation.

The Company has received declarations from all the IndependentDirectors of the Company confirming that they meet with the criteria of independence asprescribed in Section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulationsand there has been no change in the circumstances which may affect their status asindependent director during the year.

During the year Mr. B. Ravi had resigned as Chief Financial Officer ofthe Company with effect from close of business hours of February 12 2018.

The Board has appointed Mr. Deepak Maheshwari as Chief FinancialOfficer and Key Managerial Personnel of the Company with effect from May 3 2018.

Brief details of Dr. Malay Mahadevia as required under Regulation 36 ofthe Listing Regulations are provided in the Notice of the Annual General Meeting.

Directors' Responsibility Statement:

Pursuant to Section 134(5) of the Act the Board of Directors to thebest of their knowledge and ability state the following:

a. that in the preparation of the annual financial statements theapplicable accounting standards have been followed along with proper explanation relatingto material departures if any;

b. that such accounting policies have been selected and appliedconsistently and judgements and estimates have been made that are reasonable and prudentso as to give a true and fair view of the state of affairs of the Company at the end ofthe financial year and of the profit of the Company for that period;

c. that proper and sufficient care has been taken for the maintenanceof adequate accounting records in accordance with the provisions of the Act forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

d. that the annual financial statements have been prepared on a goingconcern basis;

e. that proper internal financial controls were in place and that thefinancial control were adequate and were operating effectively; f. that proper systems toensure compliance with the provisions of all applicable laws were in place and wereadequate and operating effectively.

Number of Board Meetings:

The Board of Directors met 5 (five) times during the year under review.The details of board meetings and the attendance of the Directors are provided in theCorporate Governance Report which forms part of this Report.

Independent Directors' Meeting:

The Independent Directors met on March 13 2018 without the attendanceof Non-Independent Directors and members of the Management. The Independent Directorsreviewed the performance of Non-Independent Directors and the Board as a whole; theperformance of the Chairman of the Company taking into account the views of ExecutiveDirectors and Non-Executive Directors and assessed the quality quantity and timeliness offlow of information between the Company Management and the Board that is necessary for theBoard to effectively and reasonably perform their duties.

Board Evaluation:

The Board adopted a formal mechanism for evaluating its performance aswell as that of its Committees and individual Directors including the Chairman of theBoard. The exercise was carried out through a structured evaluation process coveringvarious aspects of the Boards functioning such as composition of the Board &committees experience & competencies performance of specific duties &obligations contribution at the meetings and otherwise independent judgement governanceissues etc.

All Directors participated in the evaluation survey and review wascarried out through a peer-evaluation excluding the Director being evaluated. The resultof evaluation was discussed in the Independent Director's meeting held on March 13 2018Nomination and Remuneration Committee meeting and in the Board Meeting held on May 32018.

Policy on directors' appointment and remuneration:

The Company's policy on directors' appointment and remuneration andother matters provided in Section 178(3) of the Act is available on the website of theCompany at http:// www.adaniports.com/investor/investordownload

Internal Financial control system and their adequacy:

The details in respect of internal financial control and their adequacyare included in Management Discussion and Analysis Report which forms part of this report.

Risk Management:

The Board of the Company has formed a Risk Management Committee toframe implement and monitor the risk management plan for the Company. The committee isresponsible for reviewing the risk management plan and ensuring its effectiveness. Theaudit committee has additional oversight in the area of financial risks and controls. Themajor risks identifiedby the businesses are systematically addressed through mitigationactions on a continual basis.

Committees of Board:

Details of various committees constituted by the Board of Directors asper the provisions of the Act and Listing Regulations are given in the CorporateGovernance Report which forms part of this report.

Sustainability and Corporate Social Responsibility:

The Company has constituted a Sustainability and Corporate SocialResponsibility Committee and has framed a Policy. The brief details of Committee areprovided in the Corporate Governance Report. The Annual Report on CSR activities isannexed and forms part of this report. The policy is available on the website of theCompany at http://www.adaniports.com/ sustainability/policies.

Corporate Governance and Management Discussion and Analysis Report:

A separate report on Corporate Governance compliance and a ManagementDiscussion and Analysis Report as stipulated by Listing Regulations forms part of thisAnnual Report along with the required Certificate from a Practising Company Secretaryregarding compliance of the conditions of Corporate Governance as stipulated.

In compliance with Corporate Governance requirements your Company hasformulated and implemented a Code of Business Conduct and Ethics for all Board members andsenior management personnel of the Company who have affirmed the compliance thereto.

Business Responsibility Report:

The Business Responsibility Report for the year ended March 31 2018 asstipulated under Regulation 34 of Listing Regulations is annexed which forms part of thisAnnual Report.

Prevention of Sexual Harassment at Workplace:

As per the requirement of The Sexual Harassment of Women at Workplace(Prevention Prohibition & Redressal) Act 2013 and rules made thereunder yourCompany has constituted Internal Complaints Committee which is responsible for redressalof complaints related to sexual harassment. During the year under review there were nocomplaints pertaining to sexual harassment.

Extract of Annual Return:

The details forming part of the extract of the Annual Return in FormMGT-9 is annexed to this report as Annexure-A.

Related Party Transactions:

All the related party transactions entered into during the financialyear were on an arm's length basis and were in the ordinary course of business. YourCompany had not entered into any transactions with related parties which could beconsidered material in terms of Section 188 of the Act.

During the year your Company has entered into a transaction withShanti Sagar International Dredging Private Limited wholly owned subsidiary to sell itsMaintenance Dredging Undertaking. Details of the transaction are provided in Form AOC-2is annexed to this report as Annexure-B.

Significant and material orders passed by the regulators or courts ortribunals impacting the going concern status of the Company:

There are no significant and material Regulators or Courts or Tribunalswhich would impact the going concern status and the Company's future operations.

Insurance:

Your Company has taken appropriate insurance for all assets againstforeseeable perils.

Quality Health Safety and Environment:

At Adani Ports and Special Economic Zone Limited (APSEZL) QualityHealth Safety and Environmental (QHSE) responsibilities are integral to operations. YourCompany has acquired International Standards ISO 9001:2015 ISO 14001:2004 OHSAS18001:2007 ISO 28000:2007 certifications specifying the requirements for an IntegratedManagement System (IMS) as part of its objective to improve quality health safety andenvironment in the work place.

Apart from the ISO certification your company has adopted its ownSafety Management System (SMS) which is based on the philosophy that safety is primarilyline management's responsibility. The SMS is divided into 20 elements with each elementbeing owned by an element owner who is from the line management at Port. These elementowners are accountable for implementation monitoring and sustenance of their respectiveelement.

Your company aspires to be globally admired Occupational Health andSafety (OHS) leader in infrastructure space. The lifesaving safety rules arenon-negotiable and sacrosanct.

The QHSE policy OHS vision and mission and Life Saving Rules have beencommunicated to all the stakeholders. Further to give impetus to organization's HSE &well-being messages have been issued by the senior leadership team emphasizing the SafetyFirst culture.

The Company has taken following major initiatives to advance the QHSEcommitment:

Significant Safety Initiatives:

1. Successfully completed IMS surveillance audit for Adani Ports /Terminals at Dahej Dhamra Goa Hazira and Tuna.

2. Business wide implementation of Adani Group Safety Management System(SMS). Till date total 4 Port Sites are certified as Level 1 and 3 Port Sites are Level 0certified.

3. Have clocked more than 87 million man hours inducted more than50000 workers and trained more than 36000 workers and employees.

4. Have implemented online OHS ERP solution Adani Gensuite throughwhich any employee / worker can report a safety concern using his / her mobile phone.These concerns are reviewed and addressed by respective department leads.

5. Have implemented a Behaviour Based Safety tool called SurakshaSamwaad wherein the leaders interact with the workforce regularly to engage them onsafety.

Your Company released its maiden sustainability report for FY 2015-16as per GRI-G4 guidelines and its second sustainability report for FY 2016-17 based on GRIstandard. With this the of their appointment at every AGM if required Company has becomethe leader in port sector for disclosing its sustainability performance in the country.

Your Company believes stakeholder engagement finds its place at thecore of business strategies which thrives for inclusive development therefore the Companyhas outlined its commitment in stakeholder engagement policy and developed the stakeholderengagement procedure.

Your Company ensures compliance to environment and related applicableregulations and continually improves its statements in this Annual Report. performance.

Your Company acknowledges its responsibility towards the environmentand has initiated numerous initiatives to reduce impact on environment. The Company hasdeveloped a vision for “Zero Waste to landfill” and is working towards makingAPSEZ a Zero Waste Company. As part of vision for Zero Waste your Company has takenseveral initiatives in the handling and management of hazardous and non-hazardous waste atall operating port locations by focusing on 5R principles of waste management i.e. ReduceReuse Reprocess Recycle and Recover. Major initiatives includes Reuse of treatedsewage Recycling of paper plastic metal E-waste Used oil etc. Reprocess of foodwaste STP & ETP sludge Oily cotton waste etc.

Various initiatives are implemented for reduction in water and energyconsumption footprint. Such initiatives have not only resulted in net environmentalbenefits but have also reduced the operational costs. To meet the fresh water demand seawater is utilized through desalination plant at Mundra.

Cumulative installation of rooftop solar power generation at officebuildings has reached to 3.3 MW at Mundra. Total cumulative terrestrial greenbeltdevelopment done till date is about 450 hectares across all port locations cumulativemangrove afforestation is done in an area over 2800 hectares across the coast of Gujaratand a unique pilot project of development of bio-shield for protection of coastal areas isin progress at Jambusar Gujarat. APSEZ has conducted Greenhouse Gas (GHG) emission studyfor Scope 1 and Scope 2 emissions. During the reporting period GHG emission of APSEZMundra location for Scope 1 is 89435.3 tCO2 and Scope 2 is 91569.25 tCO2.

Auditors & Auditors' Report:

Pursuant to the provisions of Section 139 of the Act read with rulesmade thereunder as amended from time to time M/s. Deloitte Haskins & Sells LLPChartered Accountants (Firm Registration No 117366W/W-100018) were appointed as statutoryauditors of the Company to hold office till the conclusion of the Annual General Meeting(AGM) of the Company to be held in the calendar year 2022 subject to ratification underlaw. Accordingly the appointment of M/s. Deloitte Haskins & Sells LLP CharteredAccountants as Statutory Auditors of the Company is placed for ratification by theShareholders. In this regard the Company has received a certificate from the auditors tothe effect that if they are re-appointed it would be in accordance with the provisions ofSection 141 of the Act.

Notes to the financial statements referred in the Auditors Report areself-explanatory and therefore do not call for any comments under Section 134 of the Act.The Auditors' Report is enclosed with the financial

Secretarial Audit Report:

Pursuant to the provisions of Section 204 of the Act read with therules made thereunder your Company had appointed Mr. Ashwin Shah Practising CompanySecretary to undertake the Secretarial Audit of the Company. The Secretarial Audit Reportfor financialyear 2017-18 is annexed which forms part of this report as Annexure-C. Therewere no qualifications reservation or adverse remarks in the Secretarial Audit Report ofthe Company.

Information Technology- an enabler for Growth:

In this digital era technology is fundamentally changing our societyand world of business. We strive to develop the ability to understand and make use of thepower of information technology to our advantage. Our strategy is to use technology toimprove our competitive position and support business transformation.

We at APSEZ have initiated to integrate the current business processeswith the new age digital technologies to transform our business into a digital business.With the aim to delight our customers we strive to use the emerging technologies likeBlock chain and provide the complete visibility of their business interests throughtimely accurate and exhaustive data services. This will help us improve our competitiveadvantage and exceed customer expectations.

With the increase of digitization and automation we are becomingmoreefficientin our service delivery and these will play a strategic role in the pursuitof sustenance and growth which can be characterized by the value drivers' viz. ImprovedProductivity Increased Efficiency Stability Optimized Resources Customer EnablementSafety and Security and Faster Decision. Our technological advancements will buildcapabilities to survive and win independent of future constraints and customer needs.

True power of technology can be leveraged only by establishing a robustcyber security. We are committed to reduce the business risk and our brand value bymanaging the cyber risk through data security network security platform security accesscontrol and monitoring.

Particulars of Employees:

The information required under Section 197 of the Act read with rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014are provided in separate annexure forming part of this Report as Annexure-D.

The statement containing particulars of employees as required underSection 197 of the Act read with rule 5(2) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 will be provided upon request. In terms of Section136 of the Act the Report and Accounts are being sent to the members and others entitledthereto excluding the information on employees' particulars which is available forinspection by the members at the Registered Office of the Company during business hours onworking days of the Company. If any member is interested in obtaining a copy thereof suchmember may write to the Company Secretary in this regard.

Conservation of Energy Technology Absorption Foreign ExchangeEarnings and Outgo:

The information on conservation of energy technology absorption andforeign exchange earnings and outgo stipulated under Section 134(3)(m) of the Act readwith rule 8 of The Companies (Accounts) Rules 2014 as amended from time to time isannexed to this Report as Annexure-E.

Acknowledgement:

Your Directors are highly grateful for all the guidance support andassistance received from the Government of India Government of Gujarat Gujarat MaritimeBoard Financial Institutions and Banks. Your Directors thank all shareholders esteemedcustomers suppliers and business associates for their faith trust and confidence reposedin the Company.

Your Directors wish to place on record their sincere appreciation forthe dedicated efforts and consistent contribution made by the employees at all levels toensure that the Company continues to grow and excel.

For and on behalf of the Board of Directors

Gautam S. Adani

Chairman and Managing Director (DIN: 00006273)

Place : Ahmedabad Date : May 3 2018