The Shareholders of
Gammon Infrastructure Projects Limited
Your Directors have pleasure in submitting their sixteenth Annual Report together withthe Audited Accounts of the Company for the financial year ended March 31 2017.
Pursuant to the notification dated February 16 2015 of the Ministry of CorporateAffairs (MCA) your Company has adopted the Indian Accounting Standards (Ind AS) notifiedunder section 133 of the Companies Act 2013 in preparing and presenting the Financialstatements beginning the financial year under report the figures for the previousfinancial year ended on March 31 2016 and the balances as on October 1 2014 have beenrestated accordingly in order to make them comparable.
The financial highlights of the Company on stand-alone basis and consolidated basis forthe financial year ended are as under:
| || || |
(Rs. in Lakhs)
|Particulars ||Standalone ||Consolidated |
| ||Period ended March 31 2017 ||Period ended March 31 2016 ||Period ended March 31 2017 ||Period ended March 31 2016 |
| ||(12 months) ||(18 months) ||(12 months) ||(18 months) |
|Income ||21677.96 ||46164.18 ||68585.11 ||161812.43 |
|Earnings before interest tax depreciation and amortization ||4337.54 ||12385.22 ||29045.59 ||63126.74 |
|Financial costs ||2641.72 ||8960.18 ||31223.60 ||64309.68 |
|Depreciation and amortization ||15.72 ||331.38 ||4951.03 ||9996.03 |
|Tax expenses ||45.94 ||(125.76) ||2704.58 ||4113.69 |
|Minority interest & share of profit of associates ||0.00 ||0.00 ||(1748.10) ||171.96 |
|Net profit / Loss ||1875.16 ||2327.12 ||(10405.95) ||(20541.36) |
DIVIDEND & RESERVES
The Board regrets its inability to recommend any dividend for the year under review inview of the liquidity constraints. No amounts have been transferred to any reserve.
Your Company has a basket of four projects in the Road Sector two in the Port Sectorand four in the Power Sector which are at various stages of construction and/or operationand management through project specific special purpose vehicles (SPVs).
The projects in the Road Sector are:
(a) Toll based projects:
(1) Concession for constructing and operating a four lane bridge across the GodavariRiver together with its approach roads on either side linking Rajahmundry to Kovvur inthe State of Andhra Pradesh. The Company's subsidiary Rajahmundry Godavari Bridge Ltd. isthe concessionaire for the project. The project commenced operations on 1stNovember 2015.
(2) Concession for six laning and operating the Vijayawada to Gundugolanu stretch ofNational Highway 5 including a four lane bypass to Vijayawada town in the State ofAndhra Pradesh. The Company's subsidiary Vijayawada Gundugolanu Road Project Pvt. Ltd.is the concessionaire for the project.
(3) C oncession for four laning and operating the Sidhi to Singrauli section of theNational Highway 75E in the State Madhya Pradesh. The Company's subsidiary SidhiSingrauli Road Project Ltd. is the concessionaire for the project.
(b) Annuity based projects:
(1) Concession for four laning and operating the Patna to Muzafarpur stretch of theNational Highway 77 including a bypass to the Muzafarpur town in the State of Bihar. TheCompany's subsidiary Patna Highway Projects Ltd. is the concessionaire for the project.
The Company has two active projects in the Port Sector of which one is in operation:
(1) Concession for constructing and operating two multipurpose berths in the innerharbor of the Visakhapatnam Port capable of handling upto 9 MTPA. The Company'ssubsidiary Vizag Seaport Private Ltd. (VSPL) has completed construction of both theberths of which one became operational in July 2004 and the other in September 2005.
(2) Concession for constructing and operating two offshore container berths at theMumbai harbor. The project is under construction by Indira Container Terminal Pvt. Ltd.(ICTPL) the special purpose vehicle promoted by the Company for the project.
The Energy Sector of the Company has two projects in developing stage and one projecteach in under construction and operations phase.
(1) 30 MW co-generation power project at Pravaranagar in Ahmednagar District ofMaharashtra. The Company's subsidiary Pravara Renewable Energy Ltd. is the SpecialPurpose Vehicle incorporated for development of project. The project commenced CommercialOperations from 6th November 2015 and started exporting power to MaharashtraState Electricity Distribution Company Limited and supplying steam and power to PadmashreeDr. Vitthalrao Vikhe Patil Sahakari Sakhar Karkhana Limited.
(2) Concession for setting up and operating a 66 MW hydro-electric power project inWest Sikkim District on the river Rimbhi.
The Company's subsidiary Sikkim Hydro Power Ventures Ltd. is the concessionaire forthe project.
(3) Concession for setting up and operating a 261 MW power project on the river Spitiin the State of Himachal Pradesh. The Company's subsidiary Youngthang Power VenturesLtd. is the concessionaire for the project.
(4) Concession for setting up and operating a 60 MW hydro-electric project on theTidong River (tributary of Satluj) in the Kinnaur district of Himachal Pradesh. TidongHydro Power Ltd. a special purpose vehicle promoted by the Company is the concessionairefor the project.
Status on the above projects and financial performance of respective SPVs for theseprojects are discussed and covered in the Management Discussion and Analysis Reportcovered in this Annual Report.
In addition to undertaking infrastructure development through SPVs the Companyundertakes EPC works of the underconstruction projects and operation & maintenance ofoperational road projects.
Your Company through its repository of experience in project development and operationsin multiple sector qualifies for largest projects being offered by Project authorities inRoad Port Transmission and Power sector projects.
Your Company as indeed most players in the infrastructure industry has been facing aresource crunch in the last few years. There is a sizable gap between the Company'sinternal accruals and the requirement of funds for capital investment in existing and newprojects and revenue expenditure. The ability of the Company to raise external funds hasalso been affected due to adverse market conditions. To ease the present situation theCompany is actively pushing for realization of its receivables from NHAI and other publicsector agencies. Further upon resolution of certain contractual obligations on few of thedelayed projects release of resources stalled thereof will bring back the Company intomainstream.
Going forward your Company will focus on selective opportunities which have lower riskand lower investment which will supplement our existing portfolio. The focus will be toget "almost ready" projects commissioned at the earliest and operate theprojects successfully. Your Company is confident that these projects once completed willcontribute positively to the bottom line and improve the cash position.
SHARE CAPITAL OF THE COMPANY
During the Year under review your Company has allotted 60000 equity shares of Rs. 2/-each under the GIPL Employee Stock Option Scheme 2013. Consequently the paid up sharecapital of the Company stood at Rs. 188.36 crores as at 31st March 2017comprising of 941830724 equity shares of Rs. 2/- each fully paid up.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company's internal control systems commensurate with the nature and size of itsbusiness operations. Your Company has maintained a proper and adequate system of internalcontrols. This ensures that all Assets are safeguarded and protected against loss fromunauthorized use or disposition and that the transactions are authorised recorded andreported diligently. The Management continuously reviews the internal control systems andprocedures for the efficient conduct of the Company's business.
The Company has appointed Kapadia Associates Chartered Accountants Mumbai as itsInternal Auditor. The Internal Auditor monitors and evaluates the efficacy and adequacy ofinternal control system in the Company its compliances with operating systems accountingprocedures and policies and reports the same on quarterly basis to the Audit Committee.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to section 134(5) of the Companies Act 2013 your Directors based on therepresentations received from the Operating Management and after due enquiry confirmthat:
a. in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
b. they have selected accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the Year and of the profit of theCompany for the Year ;
c. they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
d. they have prepared the annual accounts on a going concern basis;
e. they have laid down adequate Internal Financial Controls to be followed by theCompany and such Internal Financial Controls were operating effectively during the Yearended 31st March 2017; and
f. they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
The Directors express their profound sorrow on sudden and untimely demise of ChairmanMr.Naresh Chandra on July 9 2017 and place on record their deep sense of appreciationfor the invaluable services rendered by him during his association with the Company.
Mr. C.C. Dayal Independent Director has resigned with effect from 29thSeptember 2017 due to medical condition. The Board also place on record appreciation forthe invaluable services rendered by him during his association with the Company.
Mr. Sanjay Sachdev was appointed as the Additional Director on the Board effectiveNovember 9 2017 and holds office up to the date of ensuing Annual General Meeting (AGM)and proposed to be appointed as Independent Director at the AGM. Mr. Vardhan Dharkar hasbeen appointed as a director on November 20 2017 to fill up the casual vacancy caused dueto sad demise of Mr. Naresh Chandra. He holds office as Non-Executive Director liable toretire by rotation.
In accordance with the provisions of the Act and the Articles of Association of theCompany Mr. Vardhan Dharkar is liable to retire by rotation at the ensuing Annual GeneralMeeting and being eligible has offered himself for re-appointment.
Pursuant to the recommendation of Nomination and Remuneration Committee the Board inits meeting held on February 7 2017 re-appointed Mr. Kishor Kumar Mohanty as theManaging Director of the Company subject to the approval of Members at the ensuing AnnualGeneral Meeting for a period of 2 (two) years w.e.f. April 12 2017.
Independent Directors of the Company have furnished necessary declarations to theCompany under section 149(7) of the Companies Act 2013 confirming that they meet withthe criteria of Independence as prescribed for Independent Directors under section 149(6)of the Act and regulation 16(b) of the Securities and Exchange Board of India (ListingObligations & Disclosures Requirements) Regulations 2015 (hereinafter "ListingRegulations").
Key Managerial Personnel
Mr. Monesh Bhansali Chief Financial Officer of the Company resigned with effect fromApril 22 2016. Mr. Kaushik Chaudhuri was appointed as the Chief Financial Officer of theCompany with effect from May 30 2016.
Further in terms of the provisions of Section 203 of the Companies Act 2013 readwith the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 Mr.Kishor Kumar Mohanty Managing Director; Mr. Kaushik Chaudhuri Chief Financial Officer;and Ms. Renuka Matkari Company Secretary are the Key Managerial Personnel of the Company.
Ms. Renuka Matkari Company Secretary has resigned and relieved from the services ofthe Company with effect from November 10 2017.
Remuneration Policy and Board Evaluation
In compliance with the provisions of the Companies Act 2013 and Regulation 27 of theListing Regulations the Board of Directors on the recommendation of the Nomination &Remuneration Committee adopted a Policy on remuneration of Directors and SeniorManagement. The Remuneration Policy is stated in the Corporate Governance Report.
Performance evaluation of the Board was carried out during the year under review. Thedetails about the same are given in the Corporate Governance Report.
Familiarization programmes for the Independent Directors
In compliance with the requirements of Listing Regulations your Company has put inplace a familiarization programme for the Independent Directors to familiarize them withtheir role rights and responsibilities as Directors the working of the Company natureof the industry in which the Company operates business model etc. It is also availableon the Company website http://www.gammoninfra.com/secretarial_infor.html
The Board met six times during the year under review the details of which are given inthe Report on Corporate Governance. The intervening gap between the two consecutivemeetings was within the period prescribed under the Companies Act 2013 and the ListingRegulations.
EMPLOYEE STOCK OPTION SCHEME
During the year under review the Board has not granted any options to employees underthe GIPL Employee Stock Options Scheme - 2013' (Scheme'). Details of theshares issued under the Scheme as also the disclosures in compliance with SEBI (ShareBased Employee Benefits) Regulations 2014 are set out in Annexure I to this Report.
A certificate from the Statutory Auditors of the Company as required under Regulation13 of SEBI (Share Based Employee Benefits) Regulations 2014 shall be placed at theensuing Annual General Meeting for inspection by the Members.
During the Year under review the Company has not accepted any deposits within themeaning of Section 73 and 76 of the Act read with Companies (Acceptance of Deposits)Rules 2014.
PARTICULARS OF LOANS GUARANTEES INVESTMENTS AND SECURITIES
The details of loans guarantee or investment under Section 186 of the Companies Act2013 are given under Notes to Accounts of financial statements.
CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All related party transactions entered by the Company during the year were in theordinary course of business and on arm's length basis. Details of material related partytransactions are given in the prescribed Form AOC - 2 which is appended to this report asAnnexure II.
The policy on Related Party Transactions as approved by the Board is uploaded on theCompany's website and can be accessed at the Web link:http://www.gammoninfra.com/secretarial_infor.html
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO.
In view of the nature of business activities currently being carried out by theCompany your Directors have nothing to report with respect to Conservation of Energy andTechnology Absorption as required under Section 134(3)(m) read with Rule 8 of theCompanies (Accounts) Rules 2014.
Foreign exchange outgo (actual outflows): Nil
The foreign exchange earned (actual inflows): Nil
SUBSIDIARY JOINT VENTURE AND ASSOCIATE COMPANIES
Post end of year under review the following changes have taken place:
(i) Indira Container Terminal Private Limited a joint venture has become a subsidiaryof the Company w.e.f. 6th April 2017; and
(ii) Satluj Renewable Energy Private Limited has ceased to be a step down subsidiary ofthe Company w.e.f. 18th July 2017.
The Policy for determining material subsidiaries as approved by the Board is uploadedon the Company's website and can be accessed at the web linkhttp://www.gammoninfra.com/secretarial_infor.html
A statement containing salient features of the financial statement of each of thesubsidiaries associates and joint venture companies as required to be provided undersection 129(3) of the Act in Form AOC-1 forms part of this Annual Report.
Pursuant to the provisions of Section 136 of the Act the financial statements of theCompany consolidated financial statements along-with relevant documents and separateaudited accounts in respect of Subsidiaries are available on the website of the Company.
The Board has presently the following committees to assist it in its work:
(i) Audit Committee to inter-alia oversee and review the financial reporting systemand disclosures made in its financial results;
(ii) Stakeholders' Relationship Committee to inter-alia redress investor complaints;
(iii) Nomination and Remuneration Committee to inter-alia approve appointments andremuneration of executive directors and lay down nomination and remuneration policies ofthe Company;
(iv) Compensation Committee to administer employee stock option schemes';
(v) Project Committee to inter-alia advice the Company on the business opportunitiesthat arise from time to time;
(vi) Projects Review Committee to review implementation and working of projects underdevelopment and operation;
(vii) Corporate Social Responsibility Committee to formulate and implement acorporate social responsibility policy' for the Company; and
(viii) The Board has voluntarily constituted Risk Management Committee to monitor andreview the risk management plan of the Company.
The constitution of the various committees its powers and duties have been elaboratedin greater detail in the Corporate Governance Report' which is annexed to theAnnual Accounts.
TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND
Your Company does not have any amount due to be transferred to Investor Education andProtection Fund.
VIGIL MECHANISM / WHISTLE BLOWER
In terms of section 177(9) & (10) of the Companies Act 2013 a Vigil Mechanism forDirectors and employees to report genuine concerns has been established by the Board alongwith whistle blower policy. The whistle blower policy have been uploaded on the website ofthe Company and the same can be accessed at the web linkhttp://www.gammoninfra.com/secretarial_infor. html.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Since there is no average net profit for the Company for the previous three financialyears no specific funds are required to be set aside and spent by the Company during theyear under review. The Company is yet to formulate the CSR Policy.
EXTRACT OF ANNUAL RETURN
An extract of Annual Return in Form MGT 9 is appended to this Report as Annexure III.
REPORT ON CORPORATE GOVERNANCE
In terms of Regulation 34 of the Listing Regulations a Report on Corporate Governancealong with Compliance Certificate issued by Mr. Veeraraghavan. N Practising CompanySecretary (Certificate of Practice Number 4334) is attached and forms integral part ofthis Report (hereinafter "Corporate Governance Report").
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Attention of the members is invited to a separate section titled ManagementDiscussion and Analysis Report' which is covered in this Annual Report.
Based on the recommendations of the Audit Committee the Board of Directors hasrecommended the appointment of M/s. Nayan Parikh & Co. Chartered Accountants(FRN:107023W) Mumbai to be the Statutory Auditors of the Company in place of M/s.Natvarlal Vepari & Co. Chartered Accountants (Firm Registration No. 106971W) theretiring Statutory Auditors who were not eligible for appointment in terms of Section139(2) of the Companies Act 2013 to hold the office from conclusion of ensuing AGM untilthe conclusion of AGM to be held in the year 2022.
The Company has received a certificate under section 141(3) of the Act read with Rule10 of the Companies (Audit and Auditors) Rules 2014 from M/s. Nayan Parikh & Co.Chartered Accountants Mumbai confirming their eligibility and availability forappointment as the Auditors of the Company.
The Board recommends their appointment.
The Auditors have qualified their report to the members on the issue relating to theexcess managerial remuneration paid of Rs. 20449402/- and Rs. 18395890/- for theprevious periods. The Company had made an application for waiver of refund of themanagerial remuneration to the Ministry of Corporate Affairs which has been rejected bythe Ministry. The Company however has made a representation for review of the rejectionand therefore no steps for recovery have been initiated and no effects have been given forthe same. For the current period also there is an excess remuneration paid of Rs. 108.72lakhs to the Managing Director for which the Company is in the process of making anapplication to the Central Government for the waiver for recovery for the same.
Further without qualifying their opinion the Auditors have emphasized the followingmatters:
Unilateral termination and closure of concessions of Cochin Bridge Infrastructureproject which is subject to pending litigations/ arbitrations at various forums which mayimpact the carrying values of investments and loans and advances given to the subsidiary.The Company's exposure towards the said project is Rs. 2588.40 Lakhs.
Intention to exit Youngthang Power Venture project at Himachal Pradesh and seeking aclaim of an amount against the amount spent on the project. The reason for non-continuanceis on account of reasons beyond the control of the subsidiary company. The Company'sexposure towards the said project includes investment and loans and advances of Rs.7110.91 Lakhs.
Indira Container Terminal Private Limited (ICTPL) This is a JV of the Company.The project is delayed due to nonfulfillment of certain conditions by the Mumbai PortTrust (MbPT). This has resulted in the Company incurring losses and default in repaymentof debt obligation. The matter is with the MbPT under active discussions for resolving theoutstanding issues and the Project is being re-organized with change in Cargo Mix (i.e.all Clean cargo including containers). Pursuant to detailed negotiation with MbPT on theconcession agreement for the Offshore Container Terminal the parties have finally agreedin principle to enter into a joint supplementary agreement between Board of Trustees ofMbPT ICTPL and the lenders. The supplementary agreement is in the draft form and issubject to clearance from the Ministry of Shipping. The project is proposed for re-bid andthe draft agreement provides for a mix of cargo of containers steel and RORO. The JV hasa Right Of First Offer (ROFO) to match the winning bid. The draft agreement also providesfor waiver of a part of the loan of the JV. The company is hopeful that it willsuccessfully match the bid and win the concession and continue to operate the facility.The company has since the balance sheet date acquired further stake from the JV partnerand has obtained control over the JV and holds 74% of the equity of the JV company. Theexposure of the Company in the JV is Rs. 12632.78 Lakhs (funded and non-funded).
Monthly toll collections from Rajahmundry Godavari Bridge project are not sufficient toservice the interest and the resultant defaults in the loan repayment resulting in thefacility being marked NPA. In order to overcome the current situation and after duedeliberations with all the lenders the SPV has submitted a proposal under the ReserveBank of India's scheme for Sustainable Structuring of Stressed Assets (S4A) to the lendersfor their approval. The SPV is confident of the proposal being sanctioned. The Company'sexposure towards the said project is Rs. 92560 Lakhs.
Vijayawada Gundugolanu Road Project Private Limited - A Tolling Road Project in AndhraPradesh where termination notice was received from NHAI on 26th August 2016 andconsequently NHAI took over possession of toll plaza. Based on the subsequent negotiationand discussion with the grantor the grantor has agreed to revoke the termination noticevide its letter dated 16th January 2017 subject to completing offinancial closure and fulfilling other Commitments as specified in the letter within thestipulated timeframe. The Company has entered into an agreement subject to fulfillment ofcertain Gammon Infrastructure Projects Limited conditions wherein Hinduja Realty Ventureswill subscribe to equity participation of 49% in the Project as and when their conditionsare satisfied. The net exposure of the company in the SPV is Rs. 16062.44 Lakhs(including Bank guarantee of Rs. 8420.00 Lakhs). Net exposure of the Company is Rs.16062.44 Lakhs (including bank guarantee of Rs. 8420 Lakhs).
Patna Highway Projects Limited (PHPL) - The SPV will have cost overrun on account ofissues beyond the scope of the SPV and attributable to the Grantor - NHAI. This will notresult in any changes in the Annuity from NHAI. However this amount would be treatedseparately as receivable from the Grantor based on certification of delay periodattributable to the Grantor certified by the Independent Engineer.The SPV expects asizeable claim on this amount and has obtained legal support for the validity of its claimfrom an Independent Expert on claim and litigation. The SPV has also separately applied tothe lenders for Scheme for Sustainable Structuring of Stressed Assets (S4A). The exposureof the Company in the SPV is Rs. 118269.72 Lakhs including non-fund exposure.
Company's current liabilities exceeded current assets resulting in continued mismatchdespite the sale of some of the SPVs in the previous period. These conditions indicate theexistence of significant uncertainty as to timing and realization of cash flow.
It is clarified that the above matters covered in the Auditors' Report are selfexplanatory.
SECRETARIAL AUDIT REPORT
Pursuant to the provisions of section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Mr. Veeraraghavan N Practicing Company Secretary (Certificate of PracticeNumber: 4334) to undertake the Secretarial Audit of the Company.
In terms of provisions of section 204 of the Companies Act 2013 the Company hasannexed to this Board Report as Annexure IV a Secretarial Audit Report given by theSecretarial Auditor.
Observations made by the Secretarial Auditor in their Report are self explanatory anddo not need further clarification.
PARTICULARS OF EMPLOYEES
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are annexed to this Report as Annexure V. In terms ofthe provisions of Section 197(12) of the Act read with sub-rules (2) and (3) of Rule 5 ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the names and other particulars of employees drawing remuneration inexcess of the limits set out in the said Rules are provided in the Report.
However having regard to the provisions of the first proviso to Section 136(1) of theAct the details are excluded in the report sent to members. The required information isavailable for inspection at the registered office and the same shall be furnished onrequest.
INFORMATION UNDER THE SEXUAL HARRASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013
The Company has constituted a Committee under Section 4 of the Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013. During the year nocomplaint was filed before the said Committee.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANYBETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT
There were no material changes and commitments after the closure of the year till thedate of this report which affect the financial position of the Company.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS/ COURTS/ TRIBUNALS
No significant or material orders were passed by the Regulators or Courts or Tribunalswhich impacts the going concern status and Company's operations in future.
The Board wishes to place on record their appreciation of the support received by theCompany from its shareholders and employees. The Directors also wish to acknowledge theco-operation and assistance received by the Company from its business partners bankersfinancial institutions and various Government Semi Government and Local Authorities.
|For and on behalf of the Board of || |
|Gammon Infrastructure Projects Limited || |
|K.K. Mohanty ||Abhijit Rajan |
|Managing Director ||Director |
|DIN: 00080498 ||DIN: 00177173 |
|Place: Mumbai || |
|Date: November 20 2017 || |