DIRECTORS' REPORT THE SHAREHOLDERS IL&FS Transportation Networks Limited Your Directors have pleasure in presenting the Fifteenth Annual Report alongwith the Audited Financial Statements for the year ended March 31, 2015 Dividend Your Directors have recommended payment of dividend at the rate of Rs. 4/- per share (Previous Year: Rs. 4/- per share) for the year under review. The proposed dividend, if approved at the Annual General Meeting, will absorb a sum of Rs. 1,187.79 Million including tax on dividend of Rs. 200.91 Million (Previous Year: Rs. 1,154.60 Million including dividend tax of Rs. 167.72 Million) Your Directors had declared an interim dividend of Rs. 788.63 Million including tax on dividend of Rs. 134.03 Million (Previous Year: Rs. 356.96 Million including dividend tax of Rs. 51.85 Million) for payment to the Preference Shareholders Debenture Issue During the year under review, the Company issued 6 series of Unsecured, Redeemable, Non-Convertible Debentures ("NCD's") with a face value of Rs. 1,000,000/- each for refinancing the short term loans availed by the Company, the details of which are given below: Performance Review The year under review saw the economy back on the growth track, which however failed to provide the much desired impetus to road infrastructure sector, largely owing to the bleak project award scenario. The Ministry of Road Transport and Highways (MoRT&H) alongwith the National Highways Authority of India (NHAI), had an internal target of awarding projects upto 5,500 kms for the Financial Year 2014-15, of which approximately 2,000 kms was expected through the Build Operate Transfer route. However, the Government was only able to award projects to the extent of 700 kms by March 2015. The Government has attempted to revive private sector participation by introducing measures such as rescheduling of upfront premium, easier exit norms, expediting dispute resolution and speedy clearances to enable commencement of work, amongst other initiatives. The sector continued to witness investor apathy due to liquidity constraints of the road developers, including lack of support from Lending Institutions for funding the projects The Company had submitted bids for projects that are viable with strong strategic content. The Company had evaluated 73 bids tendered by the NHAI and other State Authorities on Build, Operate Transfer (BOT) / Output Performance based Road Contract (OPRC) basis. Out of the 73 projects, 10 failed to attract even a single bidder and some were offered for rebid. After careful evaluation of all the bids, the Company submitted 27 bids (12 - BOT and 15 - OPRC), but was unable to secure any projects. In February 2015, the Company's subsidiary secured an Annuity project in Gujarat on Swiss Challenge Basis for development of 8 Rail over bridges, with a project cost of Rs. 2,500 Million At the close of the financial year, the Company's portfolio comprised of 28 projects at various stages of development and operation, aggregating 12,865 lane kms of which 8,924 lane kms are under operation, 2,978 lane kms are under implementation and 963 lane kms under development. The portfolio also includes other surface transportation projects such as the Metro Rail projects in Gurgaon, Haryana, the Border Check Post Project in Madhya Pradesh and a City Bus transport system in Nagpur, Maharashtra During the year under review, the Company commissioned 5 road projects viz. (i) Patratu Dam to Ramgarh, (ii) Chaibasa - Kandra to Chowka both in Jharkhand, (iii) Warora Chandrapur Ballarpur in Maharashtra, (iv) Moradabad to Bareilly in Uttar Pradesh and (v) Thiruvanantapuram City Roads Phase III. The Company also commissioned four Border Check Posts in Madhya Pradesh viz. (i) Seoni - Nagpur, (ii) Chhindwara-Nagpur, (iii) Kabir Chabuthara and (iv) Sagar - Kanpur On the international front, the Company emerged as the lowest bidder for 2 projects, one each in Kenya and Nepal. The Company also commenced physical operations of a project in Botswana and actively continues to pursue projects in other developed and developing markets Environmental, Health & Safety The Company follows an integrated Management System on Environment, Occupational Health and Safety (EHSMS) based on globally recognized ISO 14001:2004 and OHSAS 18001:2007 standards. The Company has a EHS Policy and framed procedures for implementation of the EHSMS across all projects. Prior to the commencement of work at any of the projects, a comprehensive assessment of all risks pertaining to environment, occupational health & safety are undertaken. Hazards are identified and actions are initiated to mitigate such risks. Dedicated EH&S Officers are appointed to monitor and implement the management system at project sites. The compliances under environmental laws and also under the Environment Management Plan are part of the construction agreements to ensure adherence by the Contractors. Regular internal audits are carried out, wherein each project is evaluated and rated on EH&S parameters. The EH&S Committee of Directors periodically review the findings of the audit reports & EHS performance reports The Company had engaged an agency to undertake studies for ascertaining the cause of accidents at the project roads based on Behaviour Architecture, which is built on the principles of cognitive neuroscience and behavioral economics, to identify key behavioral aspects of the road users, blackspots with high accident probability and suggest measures to reduce the impact & frequency of road accidents. During the year, the identified measures were implemented at some of the operational project roads, which has resulted in reduction in the number of road accidents Subsidiaries As per Section 129(3) of the Companies Act, 2013 and Clause 32 of the Listing Agreement, the Consolidated Financial Statements of the Company forms part of this Report. The copies of Audited Financial Statements of the Subsidiaries, Joint Ventures and Associates are available on the website of the Company: www.itnlindia.com and a copy of the same will be provided upon written request to the Company Secretary During the year under review, (i) ITNL Offshore Two Pte. Ltd, (ii) ITNL Offshore Three Pte. Ltd. were incorporated as wholly owned subsidiaries and (iii) Srinagar Sonamarg Tunnelway Ltd became an Associate Company. GRICL Rail Bridge Development Co. Ltd, ceased to be subsidiary and Empresas Pame sa De CV, as Associate of the Company The Performance and financial position of the Subsidiaries, Joint Venture and Associate companies is provided in Annexure I of this Report Statutory Auditors Deloitte Haskins & Sells LLP, Statutory Auditors, were appointed as the Auditors of the Company to hold office from the conclusion of the Annual General Meeting (AGM) held on August 21, 2014 till the conclusion of the 17th AGM of the Company to be held in 2017 for a period of three years, subject to ratification of their appointment by the Members at every AGM. A Certificate confirming their eligibility under Section 141 of the Companies Act, 2013 and Rules framed thereunder to continue as Auditors for FY 2015-16 has been received from the Auditors. The Members are requested to ratify the appointment of Deloitte Haskins & Sells LLP as Statutory Auditors of the Company to enable them to continue as the Statutory Auditors of the Company till the conclusion of the AGM to be held in FY 2016-17 and to authorise the Board to determine their remuneration Cost Auditor and Cost Audit Report Pursuant to Section 148 of the Companies Act 2013 and the Companies (Cost Records and Audit) Rules 2014 framed thereunder, the Board of Directors at their Meeting held on August 13, 2014 had appointed Mr. Dattatray D Chivilkar, Cost Accountant as the Cost Auditor of the Company for FY 2014-15. Mr. Chivilkar has also confirmed his eligibility for appointment for the FY 2015-16 and that he is free from any disqualifications for being appointed as Cost Auditor under the provisions of the Companies Act, 2013. The Board of Directors has recommended to the Members that the remuneration payable to Mr. Chivilkar, Cost Auditor for FY 2014-15 & FY 201516 be approved at the ensuing Annual General Meeting Secretarial Audit & Secretarial Audit Report The Board had appointed M/s. Jayshree Dagli & Associates, Company Secretaries in whole-time practice to carry out the Secretarial Audit of the Company pursuant to the provisions of Section 204 of the Companies Act, 2013 for the Financial Year 2014-15 The report of the Secretarial Auditor is enclosed as Annexure II. The report does not contain any qualification Remuneration Policy The Board has, on the recommendation of the Nomination & Remuneration Committee, framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The remuneration paid to the Directors and the Senior Management is as per the Managerial Remuneration Policy of the Company. Brief details of the Managerial Remuneration Policy are provided in the Corporate Governance Report Performance Evaluation Of The Board Upon recommendation by the Nomination & Remuneration Committee, the Board of Directors at its meeting held on November 11, 2014 had laid down criteria for performance evaluation of Independent, Non-Independent & Executive Directors The process and the manner of evaluation of Directors and the Board level Committees are given in detail in the Corporate Governance report, which forms part of the Annual Report The performance evaluation of all the Directors, Committees and the Board was carried out by the Nomination & Remuneration Committee, Independent Directors and the Board at their respective meetings held from time to time Corporate Governance The Company believes in adhering to good governance practices and has fully complied with the requirements/ disclosures that have to be made in this regard. A Report on Corporate Governance is enclosed and forms part of this Annual Report. A certificate from the Statutory Auditor on compliance with the provisions of Corporate Governance is also annexed to this Report Directors The Board of Directors had on the recommendation of the Nomination & Remuneration Committee appointed Ms. Neeru Singh as Independent Director with effect from November 11, 2014 for a period of five years Mr. Vibhav Kapoor and Mr. Pradeep Puri, Directors, are liable to retire by rotation at the forthcoming Annual General Meeting of the Company and being eligible, offer themselves for reappointment. Your Directors recommend their re-appointment Key Managerial Persons Pursuant to Section 203 of the Companies Act, 2013, the Board of Directors at its Meeting held on May 13, 2014, have appointed Mr. K. Ramchand, Managing Director, Mr. Mukund Sapre, Executive Director, Mr. George Cherian, Chief Financial Officer and Mr. Krishna Ghag, Vice President & Company Secretary as the Key Managerial Personnel of the Company Related Party Transactions All related party transactions during the year have been entered into in the ordinary course of business and on an arm's length basis and are in compliance with the applicable provisions of the Companies Act, 2013 and the Listing Agreement. There are no materially significant Related Party Transactions entered into by the Company with Promoters, Directors, Key Managerial Personnel, which may have a potential conflict with the interest of the Company at large Accordingly, there are no contracts or arrangements with related parties to be disclosed in Form AOC-2 pursuant to Clause (h) of Sub section (3) of Section 134 of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014 The Company has developed a Related Party Transactions Policy & Framework for the purpose of identification and approval of such transactions. A Statement of all related party transactions consummated as per the Related Party Transactions Policy & Framework is placed before the Audit Committee every quarter for their approval. The Related Party Transactions Policy as approved by the Board has been uploaded on the Company's website and is available on the weblink: http://www.itnlindia.com/invrelation. aspxRs.page_ID=25&Sec_ID=5 Policy for Prevention of Sexual Harassment at Workplace The Company has provided a safe and dignified work environment for its employees which is free of discrimination, intimidation and abuse. The Company has adopted a Policy for Prevention of Sexual Harassment of Women at Workplace under the provisions of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The objective of this policy is to provide protection against sexual harassment of women at workplace and for redressal of complaints of any such harassment. The Internal Complaints Committee to redress the complaints received under this Act is in place Whistle Blower Policy In accordance with the provisions of the Companies Act, 2013, the Company has established a vigil mechanism by adopting a Whistle Blower Policy to report concerns or grievances. The administration of the vigil mechanism is ensured through the Audit Committee The Whistle Blower Policy adopted by the Company is posted on the website of the Company at www.itnlindia.com Particulars of Loans, Guarantees or Investments under Section 186 During the year under review, the Company has not made any investments nor given any loans / guarantees / provided security in connection with a loan granted to any person or body corporate in terms of Section 186 of the Companies Act, 2013 Deposits Your Company has not accepted any Fixed Deposits during the year under review Energy Conservation, Technology absorption and Foreign Exchange Earnings and Outgo Since the Company does not own any manufacturing facility, the Energy Conservation and Technology Absorption particulars in the Companies (Accounts) Rules, 2014, are not applicable During the year under review, your Company's foreign exchange income and expenditure was Rs. 0.18 Million and Rs. 253.61 Million respectively Particulars of Employees In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules forms part of this Annual Report and is provided as Annexure III in this report. Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided as Annexure IV to this Report Corporate Social Responsibility In an effort to proactively add value, reduce risk and enhance sustainability in its projects, the Board of Directors of Infrastructure Leasing & Financial Services Limited ("IL&FS"), the parent company had approved an Environmental and Social Report ("ESR") as early as 1995. The objectives of the ESR were (a) to mainstream Environmental and Social ("E&S") considerations in the overall project cycle, (b) to set examples of environmentally sound and socially acceptable practices and (c) to inspire and encourage all stakeholders, including partners and co-investors The endeavor is to extend E&S efforts to the community in general and incorporate Corporate Social Responsibility ("CSR") as a part of the DNA of the organization. In order to empower the community along its road projects, the Company launched its CSR initiative in the year 2010 by the name of "Parivartan". For the Company, CSR expands beyond responsibility within business operations, to include all voluntary actions undertaken to benefit the community and the environment around the project areas. The Company strongly believes that the surface transportation infrastructure it is building and financing today will shape the communities of tomorrow CSR is, therefore, the organization's commitment to operate in an economically, socially and environmentally sustainable manner, while recognizing the interest of its stakeholders The CSR Policy and framework adopted by the Company may be accessed on the Company's website at the link <http://www.itnlindia.com/invrelation>. aspxRs.page_ID=25&Sec_ID=5 The Annual Report on CSR Activities is annexed herewith marked as Annexure V Extract of Annual Return Extract of Annual Return of the Company is annexed herewith as Annexure VI to this Report Directors' Responsibility Statement In terms of provisions of Section 134(5) of the Companies Act, 2013, your Directors confirm that: (a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (b) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit of the company for that period; (c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets 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 internal financial control to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and (f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively Acknowledgments The Directors place on record their appreciation for the continued support and co-operation received from the various Government Authorities, including National Highways Authority of India and other Regulatory Authorities, Banks, Financial Institutions and Members of the Company The Directors would also like to place on record their appreciation for the contribution and dedication of the employees of the Company at all levels By the Order of the Board DEEPAK DASGUPTA Chairman Place : Mumbai, date : May 15, 2015 |