Management Discussion & Analysis: a) Industry structure and developments Containerized cargo represents quarter of India's Export Import Trade, compared to the global average of around 70%. Containerized traffic in Indian ports increased by 7% to 7.96 million TEUs in FY 2014-15. JNPT accounted for around 55% of India's total containerized traffic by handling around 4.46 million TEUs in 201415. The country's second biggest container port at Chennai handled around 1.55 million TEUs. b) Opportunities and threats Growth of containerization in both Export-Import and domestic trade, private sector participation in ports and movement of containers by rail, liberalization of Government policies and increase in the country's foreign trade present the company with opportunities for expansion and increase in profitability. During the past few years, the Company has taken several initiatives for growth and expansion. The company has taken over Punjab State Container and Warehousing Corporation Limited's CFS at JNPT under an Operations and management agreement for a period of 15 years from February 2007. The CFS has been revitalised and renovated, adding to the Company's capacity at JNPT, which is India's premier container port. The Company continues to prune costs and augment its equipment for handling and transporting containers, which are operated by contractors. The Company also operates CFSs at the fast growing port of Kochi in joint venture with Chakiat Agencies Pvt. Ltd. and also at Chennai and Visakhapatnam through fully owned subsidiaries. The Company's rail subsidiary, Gateway Rail Freight Limited (GRFL) has expanded its business relating to operating container trains on the Indian railways network. GRFL has put in place a fleet of railway rakes / trailers and ICDs to provide end-to-end solution to customers across the country. The Company's Associate in cold chain logistics, Snowman Logistics Ltd. had its IPO during FY 2014-15 and has expanded its capacity and continues to be a premier player in this emerging business. Competition from existing and new entrants and managing the geographical / capacity expansion present the company with new challenges. c) Segment-wise / Product-wise performance The Company's entire business is from CFS. There are no other primary / secondary segments in the Company's business. d) Outlook Over the medium term, growth in port volumes & resulting increased throughput at our CFSs, increase in volume of rail movement of containers and growth in the cold chain logistics business are expected to have positive impact on the Company's long term business and profitability. Containerized EXIM trade is expected to show consistent performance at major Indian ports over the next few years. e) Risks and concerns Increase in fuel costs could result in increase in the Company's major costs of transport and handling of containers. Increase in container traffic vis-a-vis creation of infrastructure at the ports could lead to congestion at ports which would result in decline / delay in the throughput handled by the Company. The revenues of the Company are concentrated on the container volumes handled by major shipping lines and consolidators, who use its CFSs at various locations. f) Internal Control systems and adequacy The Company makes use of IT enabled solutions in its operations, accounting and for communication within its facilities and with customers and vendors. Financial and Operating guidelines are put in place to regulate the internal management. The Company's accounts and operations are subject to internal audit and review by the Audit Committee of the Board of Directors. g) Financial / Operational Performance Operations: Since Gateway Distriparks (South) Private Limited was amalgamated with the Company with effect from April1, 2014, current year results are not comparable with the previous year. Total income of the company (stand alone) from operations & other income (including dividend from subsidiaries Rs. 272 million (2013-14: Rs. Nil)) during 2014-15 was Rs. 3,077.93 million (2013-14: Rs. 2,005.58 million). The Profit before tax for 2014-15 was Rs. 1,093.83 million (2013-14: Rs. 557.17 million). The Profit after tax for 2014-15 was Rs. 806.92 million (2013-14: Rs. 370.73 million). After considering surplus on amalgamation of Gateway Distriparks (South) Private Limited Rs. 962.79 million, dividend Rs. 761.10 million, tax on dividend distribution Rs. 91.11 million (net of credit for dividend distribution tax Rs. 48.02 million on dividend received from subsidiary company), the surplus carried forward in Statement of Profit & Loss is Rs. 1,802.21 million. During the year, Excess of Book value of Investment over the Share Capital of the amalgamated Subsidiary Company Gateway Distriparks (South) Private Limited Rs. 124.38 million and Book value of Fixed Assets with expired useful life as on April 1, 2014 (net of deferred tax Rs. 9.80 million) Rs. 19.04 million were reduced from General Reserves. No amounts are proposed to be transferred to Reserves. There are no material changes and commitments affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report. Together with its subsidiary companies in the CFS business at Chennai, Visakhapatnam and Kochi, the total income from operations for FY 2014-15 was Rs. 3,437.12 million (2013-14: Rs. 2,922.77 million) and Profit after Tax for FY 2014-15 was Rs. 742.95 million (2013-14: Rs. 725.87 million). Finance: The Company has outstanding loans including loans for transport / handling equipments Rs.397.76 million with HDFC Bank Limited as on March 31, 2015. The Company has been sanctioned cash credit / overdraft facilities / Buyers credit of Rs.500 million and non-funded facilities to Rs. 770 million by HDFC Bank Limited. Yes Bank Limited has granted facilities totaling Rs. 500 million, which includes sub-limits of cash credit / working capital demand loan of Rs. 200 million each. The Company has given guarantees in respect of outstanding funded / non-funded borrowing facilities of Rs. 1,216.29 million of subsidiary company Gateway Rail Freight Limited, Rs. 22.26 million of subsidiary company Chandra CFS and Terminal Operators Private Limited and Rs. 157.50 million of subsidiary company Gateway Distriparks (Kerala) Ltd. as on 31st March, 2015. The income from interest on fixed deposits with banks and investments was Rs. 32.43 million in the current year (2013-14: Rs. 40.22 million). h) Human Resources The Company continued to have cordial and harmonious relations with its employees. Human relations policies were reviewed and upgraded in line with the Company's plans for geographical expansion. Initiatives on training and development of human resources were undertaken. After amalgamation of Gateway Distriparks (South) Private Limited with the Company, the Company has staff strength on March 31, 2015 of 238 employees (March 31, 2014: 179 employees). i) Cautionary statement Statements made in this report, particularly those which relate to Management Discussion and Analysis, describing the Company's objectives, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results might vary materially from those either expressed or implied. E. Directors The Directors record their appreciation for the services of Chairman Mr. Gopinath Pillai, who resigned as Director on April 29, 2015. The Board elected the Deputy Chairman and Managing Director Mr. Prem Kishan Gupta to be the Chairman and Managing Director. During the year, Independent Directors Mr. K J M Shetty and Mr. Kipa Ram Vij ceased to be Directors. During the year, Mr. Bhaskar Avula Reddy and Mrs. Chitra Gouri Lal were appointed as Independent Directors. Mr. Ishaan Gupta, Director retires by rotation at the ensuing Annual General Meeting of the Company and being eligible offers himself for reappointment. Your Directors recommend his re-appointment as Director. F. Corporate Governance As a listed Company, necessary measures are taken to comply with the listing agreements with the Stock Exchanges. A report on corporate governance and certificate of compliance from the Auditors are given as Annexure A of this Report. G. Listing of Equity Shares The Company's Equity shares are listed on the Bombay Stock Exchange Limited, Mumbai situated at Phiroze Jeejeebhoy Tower, Dalal Street, Mumbai - 400 001 and the National Stock Exchange of India Ltd. situated at Exchange Plaza, Bandra Kurla Complex, Mumbai - 400 051. The Company has made up-to-date payment of the listing fees. H. Auditors M/s. Price Waterhouse, Firm Registration No. FRN 301112E, Chartered Accountants, Mumbai, Statutory Auditors of the Company retire at the ensuing Annual General Meeting of the Company and being eligible have offered themselves for reappointment. The Company has received letter from M/s. Price Waterhouse, Chartered Accountants, confirming that their appointment, if made, would be within the limits prescribed under Sections 139(2) and 141of the Companies Act, 2013. Their comments on the accounts and notes to the accounts are self-explanatory. I. Statutory Information Extracts of Annual Return under Section 92(3) Particulars of Annual Report under Section 92 (3) of the Companies Act, 2013 are given in the Form MGT-9, which is annexed to this Report as Annexure B. Number of meetings of the Board of Directors During FY 2014-15, 5 meetings of the Board of Directors were held on 1 May 2014, 5 August 2014, 29 September 2014, 31 October 2014 and 29 January 2015. Directors' Responsibility Statement Pursuant to the requirements of Section 134 (5) of the Companies Act, 2013 with respect to Directors' Responsibility Statement, it is hereby confirmed that:- i. in the preparation of the annual accounts for the year ended 31st March, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures. ii. such accounting policies as mentioned in Note 1 of the Annual Accounts have been applied consistently and judgments and estimates that are reasonable and prudent made, so as to give a true and fair view of the state of affairs of the Company for the financial year ended 31st March 2015 and of the profit of the Company for that period. iii. proper and sufficient care has been taken 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. iv. the annual accounts for the year ended 31st March 2015 have been prepared on a going concern basis. v. the internal financial controls followed by the Company are adequate and operating effectively. vi. proper systems to ensure compliance with the provisions of all applicable laws are devised and such systems are adequate and operating effectively. Declaration by Independent Directors Independent Directors have given declarations that they meet the criteria of independence as provided under Section 149 (6) of the Companies Act, 2013. Policy on Directors' Appointment & Remuneration Details of Nomination and Remuneration Policy, pursuant to Section 178 (4) of the Companies Act, 2013 and Clause 49 of the Listing Agreement are annexed to this report as Annexure C. Details of Familiarisation Programme for Independent Directors and criteria for making payments to Non-Executive Directors can be accessed by clicking on the web link: <http://www.gateway-distriparks.com/investor.asp> Audit Reports There are no qualifications, reservations or adverse remarks or disclaimers in the Auditors report or Secretarial Audit report. Secretarial Audit Report from M/s. S. N. Ananthasubramanian & Co., Practising Company Secretaries, is annexed to this Report as Annexure D. Particulars of contracts or arrangements with related parties Particulars of contracts or arrangements with related parties referred to in Section 188 (1) of the Companies Act, 2013 are given in Form AOC-2, which is annexed to this Report as Annexure E. Details of policy for determining material subsidiaries and the policy for dealing with related party transactions can be accessed by clicking on the web link: <http://www.gateway-distriparks.com/investor.asp> Disclosure under Section 134 (3) (m) Conservation of Energy The Company continues to give the highest priority for conservation of energy by using a mix of technology changes, process optimization methods and other conventional methods, on an on going basis. Technology Absorption The Company continues to lay emphasis on development and innovation of in-house technological and technical skills to meet the specific customer requirements. Efforts are also being made to upgrade the existing standards and to keep pace with the advances in technological innovations. Foreign Exchange Earnings and Outgo i) Expenditure in foreign currency : Rs. 8.02 million (2013-14: Rs. 14.31 million) ii) Earnings in foreign currency : Nil Corporate Social Responsibility (CSR) Particulars of Corporate Social Responsibility (CSR) activities are given in the Form, which is annexed to this Report as Annexure F. Annual Evaluation of Board performance The performance evaluation criteria of the Board, as laid down by the Nomination, Remuneration & ESOP Committee includes include growth in Business volumes and profitability, compared to earlier periods, growth over the previous years through inorganic expansion, transparency and fairness in Board Decision making processes. The performance evaluation criteria of Individual Directors and Committees include attendance record and intensity of participation at meetings, Quality of interventions, special contributions and inter-personal relationships with other Directors and management. The exclusive meeting of Independent Directors evaluated the performance of the Board, Committees of Board, non-Independent Directors & the Chairman as excellent. The Board evaluated the performance of Independent Directors based on their attendance record, contributions, their interventions and interpersonal relationships and the Chairman expressed the Board's appreciation of their performance. The Nomination and Remuneration Committee noted that the excellent performance of the individual directors & Committees based on the high attendance record and intense participation at meetings, high quality of interventions, special contributions and excellent Inter-personal relationships with other Directors and management. The performance of the Chairman was based on notable contributions in the achievements of the Company and role in conducting Board meetings and bringing out contributions from all directors. Prevailing remuneration in similar industry / function / experience are considered for recruiting persons & while granting increases in remuneration, besides the performance of the person. The Committee noted and approved the remuneration paid to key managerial personnel and other employees. Whistle Blower Policy Details of the Whistle Blower policy (Vigil Mechanism) are annexed to this Report as Annexure G and can be accessed by clicking on the web link: <http://www.gateway-distriparks.com/investor.asp> Information under Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 Information under Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in Annexure H to this report. Subsidiaries / Associates Information about subsidiaries / Associates is given in Form AOC-1, which is annexed as Annexure I to this report. Risk Management Policy The Board of Directors has put in place a Risk Management policy for the Company, which includes business risks, market risks, event risks and IT / financial/ interest rate / liquidity, risks and the structure, infrastructure, processes, awareness and risk assessment / minimization procedures. The elements of the risk, which in severe form can threaten Company's existence, have been identified by the Board of Directors. Details of the Risk Management Policy are annexed to this Report as Annexure J. Pursuant to Section 129 of the Companies Act, 2013, the annual accounts of the subsidiary companies and the related detailed information shall be made available to shareholders seeking such information at any point of time. The annual accounts of the subsidiary companies are kept for inspection by any shareholders in the registered offices of the company and its subsidiary companies. A copy of the accounts of subsidiaries shall be made available to shareholders on request. For and on behalf of the Board of Directors Gopinath Pillai Chairman Place: New Delhi Date: April 29, 2015 |