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Gati Ltd.

BSE: 532345 Sector: Services
NSE: GATI ISIN Code: INE152B01027
BSE 00:00 | 25 Jun 84.25 -1.70






NSE 00:00 | 25 Jun 84.40 -1.50






OPEN 86.25
VOLUME 110037
52-Week high 154.45
52-Week low 84.00
P/E 16.78
Mkt Cap.(Rs cr) 914
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 86.25
CLOSE 85.95
VOLUME 110037
52-Week high 154.45
52-Week low 84.00
P/E 16.78
Mkt Cap.(Rs cr) 914
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Gati Ltd. (GATI) - Director Report

Company director report

Dear Members

Your Directors have great pleasure in presenting the report of the Business andOperations of your Company (‘the Company' or ‘Gati') along with the auditedfinancial statements for the financial year ended March 31 2017. The ConsolidatedPerformance of your Company and its subsidiaries has been referred to wherever required.

Financial Highlights

( Rs in mn)
Particulars Consolidated Standalone
2016-17 2015-16 2016-17 2015-16
Total Income 17041 16818 5263 4980
Profit before Finance Cost Depreciation & Amortisation Taxation & Exceptional item 1250 1456 597 560
Less: Finance cost 400 425 167 175
Depreciation and Amortisation Expenses 348 383 101 162
Profit before tax & Exceptional items 502 648 329 223
Less: Exceptional items - - - -
Profit before tax 502 648 329 223
Less: Tax expenses 129 156 31 25
Profit before Minority Interest 373 492 - -
Less: Minority Interest 78 124 - -
Profit after tax 295 368 298 198


Your Directors have recommended dividend of 40% (H0.80 per share) for the financialyear ended March 31 2017 (previous year 50%) which upon approval by the shareholders atthe ensuing Annual General Meeting will be out of the free reserves of the Company.

Review of Operations

During the year under review at consolidated level your Company achieved a revenue ofH17041 mn EBITDA of H1250 mn PBT of H502 mn and PAT of H373 mn as against a revenue of16818 mn EBITDA of H1456 mn PBT of H648 mn and PAT of H492 mn respectively in theprevious year.

At standalone level your Company recorded a revenue of H5263 mn EBITDA of H597 mnPBT of H329 mn and PAT of H298 mn as against a revenue of H4980 mn EBITDA of H560 mnPBT of H223 mn and PAT of H198 mn in the previous year.

Emphasis of matter to Independent Auditor's report

Independent Auditor has drawn attention in their report for emphasis of matter readalong with notes to financial statements Nos. 28 31 and 32 which is self explanatory.

Gati Standalone e-Commerce Performance

FY2016-17 for the e-Commerce industry proved to be quite the opposite of every longterm forecast that had been projected just a year earlier. What was seen as a norm overthe previous few years incoming fund flows into the industry experienced a sharp drop.Consequently the pace of growth of established e-tailers tempered significantly and theindustry was abuzz with talk of industry consolidation. Demonetisation further added tothe decline since Cash-On-Delivery (COD) constitutes a significant share of totale-Commerce orders. The estimated industry growth for FY2016-17 was close to 15%.

In such context Gati e-Connect the e-Commerce division of your company delivered apackage volume growth of 14% between FY2015-16 and FY2016-17 with substantial share ofgrowth (in excess of 50%) coming in the lower-weight segment. During the year underreview Gati e-Connect has recorded a revenue of INR 2140 million as against INR 2078million in the previous period. While demonetisation reforms during second-half of FY2017negatively affected the COD packages the move has given an unprecedented push to onlinetransactions with the government itself advocating a move towards a digital cashlesseconomy.

More recent growth forecasts for the domestic e-Commerce market point to a CAGR ofaround 30% over the next five years. The moderated growth indicates signs of maturity inthe industry moving from a period of frenzied valuation towards a more sustainable marketecosystem. The e-Commerce industry nevertheless continues to be the most exciting andfastest growing sectors domestically.

In November 2016 your company invested in BrownTape a cloud-based software solutionscompany aimed at building capacity and capability in the e-Commerce arena. Theacquisition forms an important part of your company's future growth strategy. GatiFulfilment Services (GFS) is a new service offering targeted at the vast vendor base inthe e-Commerce ecosystem. GFS provides a unique single-window solution to online sellersby integrating Browntape's order management platform with your company's pan-Indialogistics network. Your company is happy to report that the integrated platform went livein the last quarter of FY2016-17.


Gati-Kintetsu Express Pvt Ltd. (GKEPL)

GKEPL offers solutions in Express Distribution – Surface Rail and Air; TransportSolutions for bulk transportation; Warehousing and end-to-end Supply Chain Solutionsacross the logistics value chain. In Financial Year 2016-17 your flagship subsidiaryGKEPL contributed 65% to the consolidated business of your Company.

During the year under review GKEPL recorded a revenue of H11117 mn EBITDA of H798 mnand PAT of H329 mn against a revenue of H11416 mn EBITDA of H953 mn and PAT of H440 mnin the previous year.

FY16-17 started with quite some turbulence as your company had just pressed into actionits ambitious Shopfloor Automation (SFA) project for using Barcode Scans on each and everypackage across the pan-India network operations. The older system of manual docket dataentry and network routing was sought to be replaced with a state-of-the-art automationtechnology. There were stiff challenges to be overcome during the initial phase oflearning and stabilisation of the new technology across many operating units. As aresponsible service provider your company was in continuous touch with the entirecustomer franchise so that the technology transition was best managed without putting thecustomers to undue hardship. The new technology rollout was completely stabilised by midQ2 and with this your company is now the sole B2B Express Distribution service providerwhich proudly and confidently asserts to a hundred per cent visibility at an individualpackage level for enroute track-n-trace. Our investment in SFA is now a significantcompetitive advantage for Gati in terms of providing differentiated & enhancedcustomer experience. We can now extend SFA tool further for direct digital interface withour esteemed customers. This will help automate the booking process and thereby ensureerror-free transactions in a digitised GST India.

The technology introduction resulted in a short term pain of impacting H1 businessvolumes in both Express (Surface) and

Premium (Air) verticals; albeit the new capability is sure to deliver a long termcompetitive advantage thereby enhancing future growth prospects. The lingeringafter-effects of demonetisation further affected business volumes in H2 especially in theconsumer facing sectors of White goods Apparel and FMCG. In summary the core ExpressDistribution business had a tough year in FY2016-17 although it emerged stronger with newoperations capability critical for fulfilling customer expectations in near future.

The Transport Solutions business registered a modest growth of near 5%. There-tendering for a parcel train operation in the west-east corridor is still awaited andas this happens in the near future your company is confident of re-establishing dominancein rail parcel business.

Your company intensified its focus on the Warehousing business by creating a strongpipeline of customers needing 3PL services. These efforts are critical in a post GST erawhere the customers are expected to migrate from unorganised to organised serviceproviders and similarly from individual services providers to integrated logisticssolutions providers.

Going forward your company is encouraged by a number of factors that will contributeto the long-term growth of the GKEPL portfolio. The GST roll-out will help unlock the muchneeded efficiencies in the way businesses operate today and your company is distinctivelypositioned with the pan-India network and technology to support this transition. Yourcompany continues to evolve its relationships with its customers and is working closelywith key accounts to solve the supply chain needs of a post-GST environment.

Gati Kausar India Ltd. (GKIL)

India's cold chain sector forms the backbone of the food processing and food serviceindustry providing cold storage and refrigerated transportation for a range of businessesincluding Packaged Foods Quick Service Restaurants Pharmaceuticals Animal ProteinFresh Fruit and Vegetables. Increasing consumer demand for quality processed food;stringent regulations for food safety and focus on Good Distribution Practices (GDP) inpharmaceuticals have all helped generate greater need for high-quality cold supply chainsolutions. Gati Kausar already has a visible presence in refrigerated transportation andserves many a number of popular brands.

During the year under review Gati Kausar recorded a revenue of H441 mn EBITDA loss ofH1 mn and Loss of H104 mn against a revenue of H494 mn EBITDA of H47 mn and Loss of H40mn in the previous period.

Going forward your company endeavours to disrupt the Cold Chain market with suchquality design and differentiated services to build a proud Cold chain business. Anetwork of Refrigerated Express Distribution Centers across the country will help yourcompany provide differentiated end-to-end Cold Chain solutions to customers by providingtime-definite cold chain delivery services.

Consolidated Financial Statements (CFS)

During the year the Board of Directors reviewed the affairs of the subsidiaries. Inaccordance with Section 129(3) of the Companies Act 2013 your company has prepared theconsolidated financial statements of the company which forms part of this Annual Reportin compliance with applicable provisions of the Companies Act 2013 read with the Rulesissued thereunder applicable accounting standards and the provisions of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 (hereinafter referred to as the"Listing Regulations"). The consolidated financial statements have been preparedon the basis of audited financial statements of your Company its subsidiaries asapproved by the respective Board of Directors.

Further the statement containing the salient features of the financial statement ofour subsidiaries in prescribed format is attached to the consolidated financial statementof the Company. The statement also provides the details of performance and financialposition of each of the subsidiaries.

In accordance with Section 136 of the Companies Act 2013 the audited financialstatements including the consolidated financial statements and related information of thecompany and audited accounts of each of its subsidiaries are available on our These documents will also be available for inspection till the date ofAGM during business hours at our registered office.

Abridged Annual Accounts

Pursuant to the provisions of the first proviso to Section 136(1) of the Act and Rule10 of Companies (Accounts) Rules 2014 the abridged annual accounts are being sent to allshareholders whose e-mail id's are not registered with the Company. The full annual reportis available on the website of your Company at and available for inspectionat the registered office of the Company during working hours. Any member interested inobtaining the full annual report may write to the Company Secretary and the same will befurnished on request.

Air India and Gati Arbitration

In the year 2009 your Company discontinued Freighter Aircraft operations as per thearrangement with National Aviation Company of India Ltd (NACIL) (erstwhile Indian AirlinesLtd.) and now Air India (AI) due to continuous failure and defaults by NACIL. TheLearned Arbitral Tribunal adjudicating on the disputes between your Company and Air IndiaLimited in respect of the discontinued freighter operations of the Company has passed itsAward dated September 17 2013 whereby it has inter alia directed Air India Limited topay an amount of H26.82 crores to your Company against which an amount of H26.59 crores isincluded in the Loans and Advances being the difference between the amount of bankguarantee invoked by NACIL and claims acknowledged by the Company. Further the LearnedTribunal has directed Air India Limited to pay interest @ 18% per annum on the awardedamount.

Air India Limited took up the matter before the Honorable High Court of Delhi by filingan application for setting aside the award in which the High Court has upheld theArbitral Tribunal award except the claim for damages of H4.97 crores. Both Air India andyour Company have filed cross appeals before the division bench of the Honourable HighCourt of Delhi. The Honourable High Court has directed Air India to deposit H22.00 crores.Air India has since deposited the amount with the Court pending adjudication of appealsfiled by Air India and your company. Appeals are also scheduled for hearing shortly.Pending disposal of the said appeals the said amount of H22.00 crores having beendeposited in the court has been made over to your company pursuant to the direction of thedivision bench of the Honorable High Court of Delhi.

Future Prospects

Your company's unique portfolio of services makes it stand tall as a fully integratedmulti-modal logistics player with a comprehensive pan-India network thus giving it aviable edge in a post GST domestic market. Looking into the longer term your company willcontinue to further expand its value-driven logistics offering in response to emergingcustomer supply chain requirements and other market trends.

Global Macroeconomics

Clearly global business optimism is back in full force and this augurs well for thenext two to three years. The uptick in global merchandise trade volumes has sustainedthrough the second half of FY2016-17 and is evident in the rising cross-border air freightand ocean container throughputs.

World Bank's global outlook specifies that despite substantial policy uncertaintyglobal growth is projected at a respectable 2.7 per cent in 2017 before strengtheningfurther to 2.9 per cent in 2018-19. Although protectionist sentiments and associated traderestrictions could pose a risk to this fragile revival there is mounting evidence ofgreater business activity in multiple large Emerging Market Economies and a clear easingof recessionary trends in most Advanced Economies.

India Outlook

The optimism around global growth will play a pivotal role in sustaining the domesticeconomy. Two recent surveys covering India's Industrial Outlook and Consumer Confidencesuggest a much improved ‘general economic situation' with an expansion in domesticeconomic activity over the next one year.

The Reserve Bank of India (RBI) in its most recent monetary policy statement pegs thereal GVA growth forecast for 2017-18 at 7.3 per cent. An identified downside risk to thisgrowth projection is the uncertain geo-political atmosphere in India's trade partners.There are other lingering concerns with respect to credit growth private investmentcapital formation and Non-Performing Assets (NPAs) in the banking sector which togetherconstitute a drag on the economy. However government spending remains healthy and isexpected to mitigate the effect of inactivity in other growth components. The monsoonforecast has also created optimism for the second consecutive year in terms ofagricultural production and rural economy.

The start of the GST era is already upon us with the law coming into effect from July1 2017 onwards. This consumption based indirect tax reform will catalyse compliance inevery business chain and expand the tax base in a transparent and efficient manner whilereducing the overall tax burden. There are likely to be initial hiccups for a few monthsas large corporates and SME business across industry sectors adapt to this change.However these pain points will be short lived as the companies are expected to settle invery quickly into the new GST era.

India Logistics Sector

Over the last several years many key trends have been reshaping the domestic logisticssector and have influenced your company's product portfolio and competitive position. Byfar introduction of GST tax reforms will have the most far-reaching ramification in termsof growth of organised logistics in India. Case in point the top-three players in theDomestic express market of the United States of America command over 90% market share andthe top-five Third-Party Logistics (3PL) players in USA command over 25% of the overallContract Logistics market in USA. By contrast Indian Logistics market is much toofragmented as of today. With the introduction of GST reform in India such growth andconsolidation is a real possibility in the Indian logistics sector. India is likely towitness increased Foreign Direct Investment (FDI) and Initial Public Offering (IPO) in thelogistics sector within the short to medium term. Thus the competitive intensity is setto increase amongst organised logistics service providers and your company is uniquelypositioned and well prepared to compete and grow in such a context.

The GST is already proving to be a significant trigger for the Indian industry tomigrate from legacy supply chain models designed for optimising tax considerations tomore efficient supply chain models that optimise operational considerations such as supplychain costs and lead time to market. Interstate movement of goods has become easier withreduced procedures and restrictions at state borders. This is transforming the Indianlogistics landscape into one monolith of an expansive geography. Customer warehouses arebeginning to consolidate into larger operations to reap benefits of scale efficiency;factories are expected to follow the same trajectory over the next two to three years. Insuch context tremendous business opportunity arises for established end-to-end logisticsplayers such as your Company.

Through proactive actions over several months your company will be fully prepared forthe GST transition. Furthermore your company has undertaken a comprehensive review of itspan-India distribution network and initiated necessary actions based on the expectedchanges in warehousing requirements travel distances and load patterns. A combination ofoverall market place opportunity rigorous business preparedness and a full portfolio ofintegrated logistics services gives your company the confidence of maximising the GSTpotential in the immediate short term.

Omni-channel retailing is emerging as a niche growth segment with immense businesspotential. Customers are increasingly looking for customised integrated supply chainsolutions which help them serve varied needs covering offline and online sales B2B andB2C channels and individual piece and bulk shipment solutions. Delivering a positiveomni-channel experience requires deep Supply Chain expertise to fulfil the customerrequirement. Gati is working closely with select customers to co-create and develop thiscapability thereby establishing long term business partnerships with the particularcustomers.

Gati's Cold Chain subsidiary Gati Kausar holds immense potential for growth in thelong-term. It is crucial to generate an environment of ambition and innovation torevolutionise the cold chain sector in India. Gati Kausar endeavours to disrupt the ColdChain market with differentiated services and pioneering quality practices. The growthstrategy for cold chain operations is to complement the existing delivery capabilitieswith a GST relevant network of cold warehouses.

Overall Gati's capabilities demonstrate years of commitment towards investing innetwork technology and people for achieving its vision. The success of Gati's pan-IndiaShop Floor Automation (SFA) stands testimony to its inbuilt capabilities in effectingsuch industry-leading technology interventions. Your company will continue to invest intechnology that improves network efficiency delivers value to customers and increasesprofitability. Gatiites are constantly collaborating to innovate and provide a wider moreflexible range of customised logistics solutions. These initiatives make it simpler andeasier for our customers to manage the complexities of their own supply chain and therebyto derive maximum benefit from a long-term association with Gati.

Fixed deposits (FD)

As on March 31 2017 fixed deposits of your Company stood at H227.84 mn out of whichH13.73 mn remain unclaimed and there were no overdue deposits as on that date. During theyear under review your Company has accepted deposits to the tune of H52.11 mn. There wasno default in repayment of deposits or payment of interest thereon during the year andthere are no deposits which are in non-compliance with the requirements of the CompaniesAct 2013. The current fixed deposits carry a rating of "A Minus" issued byCredit Analysis and Research Limited (CARE).

Directors and Key Managerial Personnel (KMP)

Mr. Yoshinobu Mitsuhashi Nominee Director resigned w.e.f November

4 2016 and in his place Mr. Yasuhiro Kaneda was appointed w.e.f November 4 2016.Further Mr. Sanjeev Jain Director-Finance resigned w.e.f October 31 2016 and Mr. ManojGupta was appointed as Chief Financial Officer (CFO) of the Company effective from May 62017. In the interim period the Managing Director has overseen the financial matters ofthe Company. Your directors placed on record their sincere appreciation for the valuablecontributions made by Mr. Sanjeev Jain and Mr. Yoshinobu Mitsuhashi during their tenure.Further Mr. Amit Pathak was appointed as Company Secretary w.e.f. August 4 2016.

In accordance with the provisions of Section 152 of the Companies Act 2013 Mr.Yasuhiro Kaneda Director who retires by rotation and being eligible has offered himselffor re-appointment.

In compliance with Regulation 36(3) of Securities and Exchange Board of India (ListingObligations and Disclosure Requirement) Regulations 2015 brief resume of all theDirectors proposed to be appointed / re-appointed are attached along with the Notice ofthe ensuing Annual General Meeting.

Apart from the above there have been no changes in Directors and KMP.

Particulars of Employees and related disclosures

The remuneration paid to your Directors is in accordance with the Nomination andRemuneration Policy formulated in accordance with Section 178 of the Companies Act 2013and Regulation 19 of the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirement) Regulations 2015 (including any statutory modification(s) orre-enactment(s) for the time being in force). The salient aspects covered in theNomination and Remuneration Policy have been outlined in the Corporate Governance Reportwhich forms part of this report.

The information required under Section 197 (12) of the Act read with Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed as Annexure– A.

Declaration on Independent Directors

Pursuant to sub section (6) of Section 149 of the Companies Act 2013 and Regulation16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and DisclosureRequirement) Regulations 2015 all the Independent Directors of your Company have givendeclaration that they have met the criteria of independence as required under the Act andthe regulations.

Remuneration Policy

Your Directors have on the recommendation of the Nomination

& Remuneration Committee framed a policy for selection and appointment ofDirectors Senior Management Personnel and their remuneration. The Remuneration Policyforms part of the Corporate Governance Report.

Board Evaluation

Pursuant to the provisions of the Companies Act 2013 and the Securities and ExchangeBoard of India (Listing Obligation and Disclosure Requirements) Regulations 2015 theevaluation of all the directors and the Board as a whole was conducted based on thecriteria and framework adopted by the Board. The evaluation process has been explained inthe Corporate Governance Report. The outcome of Board evaluation for financial year2016-17 was discussed by the Nomination and Remuneration Committee and the Board at theirmeetings held on May 6 2017.

Board Committees

Detailed composition of the mandatory Board committees namely Audit CommitteeNomination and Remuneration Committee Corporate Social Responsibility Committee andStakeholders Relationship Committee number of meetings held during the year under reviewand other related details are set out in the Corporate Governance Report which forms apart of this Report.

Further your board of directors had at their meeting held on February 07 2017constituted the Foreign Currency Convertible Bonds (FCCBs) Committee of directors.

Particulars of Loans Guarantees and Investments

Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 read with the Companies (Meetings of Board and its Powers)Rules 2014 forms part of the Financial Statements.

Corporate Social Responsibility (CSR)

In terms of section 135 and Schedule VII of the Companies Act 2013 read with Companies(Corporate Social Responsibility Policy) Rules 2014 made thereunder the Board ofDirectors of your Company have constituted a CSR Committee.

The CSR Committee has framed a CSR Policy which forms part of the Annual Report on CSRannexed as Annexure – B to this report.

Gati Ltd had earmarked a budget of H1.72 mn (i.e. 2% of average net profits of theprevious 3 years) for FY2016-17 and spent H0.42 mn during the year towards CSR activitiesacross India. An amount of H1.30 mn is unspent towards the CSR expenses for the FY2016-17.

GKEPL had earmarked a budget of H12.85 mn (i.e. 2% of average net profits of theprevious 3 years) for FY2016-17 and spent H8.05 mn during the year towards CSR activitiesacross India. An amount of H4.80 mn is unspent towards the CSR expenses for the FY2016-17.

Gati Ltd and GKEPL were in the process of identifying and evaluating projects which arein line with the vision of company's CSR policy. As such all the projects would normallygo through detailed evaluation process and assessed under agreed strategy and vision.However since the project was still under the evaluation strategy the company could notspend the allocable amount. The company has plans for meeting out the objective andcompleting the identification of projects.

Related Party Transactions

Related party transactions that were entered during the financial year were on an arm'slength basis and were in the ordinary course of business. There were no materiallysignificant related party transactions with the Company's Promoters Promoter GroupDirectors Senior Management Personnel or their relatives which could have had apotential conflict with the interests of your Company. Accordingly Form AOC-2 is notapplicable to your Company.

Further all Related Party Transactions are placed before the Audit Committee forapproval. Prior omnibus approval for normal company transactions is also obtained from theAudit Committee for the related party transactions which are of repetitive nature as wellas for the normal company transactions which cannot be foreseen and accordingly therequired disclosures are made to the Committee on quarterly basis in terms of the approvalof the Committee.

Your Directors have on the recommendation of the Audit Committee adopted a policy toregulate transactions between your Company and its Related Parties in compliance with theapplicable provisions of the Companies Act 2013 the Rules made thereunder and theSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirement)Regulations 2015.

Meetings of the Board and Committees

Six Meetings of the Board of Directors were held during the year. For further detailson the meetings and the attendance of directors/ members please refer report on CorporateGovernance of this Annual Report.

Vigil Mechanism

Pursuant to the provisions of section 177(9) & (10) of the Companies Act 2013 andRegulation 22 of Securities and Exchange Board of India (Listing Obligations andDisclosure Requirement) Regulations 2015 a Vigil Mechanism for directors and employeesto report genuine concerns about any instance of any irregularity unethical practiceand/or misconduct has been established. Further the details as aforesaid isavailable on the website of your company at

Familiarisation Programme for Independent Directors

Pursuant to Securities and Exchange Board of India (Listing Obligations and DisclosureRequirement) Regulations 2015 the Company shall familiarise the Independent Directorswith the Company their roles rights responsibilities in the Company nature of theindustry in which the Company operates business model of the Company etc. throughvarious programmes.

Accordingly your Company arranged a technical session on February 7 2017 tofamiliarise the Independent Directors the details of which are disclosed on the websiteof the company at http://www.gati. com/investor-relations/familiarization-programmes/

Directors' Responsibility Statement

Pursuant to the requirement under section 134(5) of the Companies Act 2013 withrespect to the Directors' Responsibility Statement relating to the Company (Standalone)it is hereby confirmed:

1. That in the preparation of the Accounts for the financial year ended March 31 2017the applicable accounting standards and schedule III of the Companies Act 2013 (includingany statutory modification(s) or re-enactment(s) for the time being in force) have beenfollowed and there is no material departure;

2. That the Directors have selected such accounting policies and applied themconsistently and made judgments and estimates that were reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as at March 31 2017 andof the profit and loss of the Company for the financial year ended March 31 2017;

3. That proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 (includingany statutory modification(s) or re-enactment(s) for the time being in force) forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

4. That the accounts have been prepared on ‘going concern' basis for thefinancial year ended March 31 2017;

5. That the Company had laid down internal financial controls and that such internalfinancial controls are adequate and were operating effectively;

6. The directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and such systems are adequate and operating effectively.

Extract of Annual Return

The details forming part of the extract of the Annual Return in Form MGT-9 inaccordance with Section 92(3) of the Companies Act 2013 read with Companies (Managementand Administration) Rules 2014 is annexed as Annexure – C.

Development and Implementation of Risk Management Policy

Your Company has an elaborate risk Management process and has adopted systematicapproach to mitigate risk associated with accomplishment of objectives operations andrevenues etc. The details of Risk Management as practiced by your company is provided aspart of Management Discussion and Analysis Report which forms part of this Annual Report.

Internal Financial Controls

Your Company has established and maintained a framework of internal financial controlsand compliance systems. Based on the same and the work performed by the internal auditorsstatutory auditors and the reviews performed by Top Management team and the AuditCommittee your Directors are of the opinion that your Company's Internal FinancialControls were adequate and effective during the financial year 2016-17.

Further the statutory auditors of your company have also issued an attestation reporton internal control over financial reporting (as defined in section 143 of Companies Act2013) for the financial year ended March 31 2017 which forms part to the StatutoryAuditors Report.

Transfer of unclaimed dividend

Pursuant to the provisions of Companies Act 1956/2013 the unclaimed dividend amountpertaining to the financial year 2009-10 is due for transfer to Investor Education andProtection Fund (IEPF).


a) Statutory Auditors

M/s. R S Agarwala & Co. Chartered Accountants (Firm Registration No. 304045E) wereappointed as statutory auditors of the company since inception. Currently they areholding office of the auditors up to the conclusion of the 22nd AGM.

As per second proviso to Section 139(2) of the Companies Act 2013 (the Act) atransition period of three years from the commencement of the Act is provided to appoint anew auditor if the existing auditor's firm has completed two terms of five consecutiveyears.

Accordingly as per the said requirements of the Act M/s. Singhi & Co. CharteredAccountants (Firm Registration No. 302049E) are proposed to be appointed as auditors for aperiod of 5 years commencing from the conclusion of 22nd AGM till the conclusion of the27th AGM subject to ratification by shareholders every year as may be applicable inplace of M/s. R S Agarwala & Co. Chartered Accountants (Firm Registration No.304045E).

M/s. Singhi & Co. Chartered Accountants (Firm Registration No. 302049E) haveconsented to the said appointment and confirmed that their appointment if made would bewithin the limits specified under Section 141(3)(g) of the Act. They have furtherconfirmed that they are not disqualified to be appointed as statutory auditors in terms ofthe provisions of the proviso to Section 139(1) Section 141(2) and Section 141(3) of theAct and the provisions of the Companies (Audit and Auditors) Rules 2014.

The Audit Committee and the Board of Directors have recommended the appointment of M/s.Singhi & Co. Chartered Accountants (Firm Registration No. 302049E) as statutoryauditors of the Company from the conclusion of the 22nd AGM till the conclusion of 27thAGM to the shareholders.

b) Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 your Company hasappointed M/s. dvmgopal & Associates Practising Company Secretaries to undertake theSecretarial Audit of your Company. The Report of the Secretarial Audit is annexed as Annexure– D.

Further M/s. dvmgopal & Associates Practising Company Secretaries carries outReconciliation of Share Capital Audit every quarter and the report thereon is submitted tothe Stock Exchanges.

Further the present secretarial auditor M/s. dvmgopal & Associates aproprietorship concern has extended their business wing and formed a new partnership firmi.e. M/s. DVM & Associates LLP.

Accordingly your Directors at their meeting held on May 6 2017 have approved theappointment of M/s. DVM & Associates LLP as the secretarial auditors for theFY2017-18.

Conservation of Energy Technology Absorption and Foreign Exchange Earnings & Outgo

The above information as required under the Companies Act 2013 is annexed as Annexure– E.

Employees Stock Option Scheme

Details of the shares issued under Employee Stock Option Scheme (ESOS) as also thedisclosures in compliance with Section 62 of the Companies Act 2013 and Rule 12 ofCompanies (Share Capital and Debentures) Rules 2014 and Securities and Exchange Board ofIndia (Share Based Employee Benefits) Regulations 2014 as on March 31 2017 is annexedas Annexure – F to this Report.

Further the details as aforesaid is available on the website of your companyat

Change in Capital Structure and Listing at Stock Exchanges

The equity shares of your Company continue to be listed and traded on the BSE Ltd.(BSE) and National Stock Exchange of India Ltd. (NSE). During the financial year underreview 459117 equity shares were allotted on exercise of the options vested under theEmployee

Stock Option Scheme and admitted for trading on NSE and BSE. Consequently the EquityShare Capital of your Company increased from 87722937 equity shares of H2/- each to88182054 equity shares of H2/- each as on March 31 2017.

Corporate Governance

Your Company is committed to maintain the high standards of corporate governance andadhere to the corporate governance requirements set out by Securities and Exchange Boardof India. The Report on corporate governance as stipulated under Securities and ExchangeBoard of India (Listing Obligations and Disclosure Requirement) Regulations 2015 formspart of the Annual Report and is annexed as Annexure – G. The requisitecertificate from the Practicing Company Secretary confirming compliance with theconditions of corporate governance as stipulated under the aforesaid Regulations formspart of this report.

Management Discussion and Analysis (MD&A)

MD & A Report for the financial year under review as stipulated under Regulation34 of Securities and Exchange Board of India (Listing Obligations and DisclosureRequirement) Regulations 2015 is presented in a separate section and forms of the AnnualReport.


Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the financial yearunder review:

1. Issue of equity shares with differential rights as to dividend voting or otherwise.

2. Issue of shares (including sweat equity shares) to employees of your Company underany scheme save and except ESOS referred to in this Report.

3. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company's operations in future.

4. During the year under review there were no cases filed pursuant to the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.

5. During the period under review there were no frauds reported by the auditors underprovisions of the Companies Act 2013.

6. There were no material changes commitments affecting the financial position of yourCompany between the end of financial year (March 31 2017) and the date of the report (May6 2017).


Your Directors thank various departments of Central and State Government Organisationsand Agencies for the continued help and co-operation extended by them to your company.Your Directors also gratefully acknowledge all stakeholders of the Company viz. memberscustomers dealers vendors Financial Institutions banks and other business partners forthe excellent support received from them during the year. Your Directors place on recordtheir sincere appreciation to all employees of the Company for their unstinted commitmentand continued contribution to the Company.

For and on behalf of the Board
K L Chugh
Place: Hyderabad Chairman
Date: May 6 2017 DIN: 00140124