DIRECTORS' REPORT TO, THE MEMBERS, Your Directors present their Fourteenth Annual Report and Audited Financial Statements of MEP Infrastructure Developers Limited for the Financial Year ended 31st March, 2016 DIVIDEND Your Company declared Interim Dividend of Re. 0.10 per equity share of Rs. 10/- each for the Financial Year 2015-16. It resulted into cash outflow of Rs. 1.63 Crores. The Board has recommended payment of Final Dividend of Re. 0.10 per equity share of Rs. 10/- each for the Financial Year 2015-16. TRANSFER TO RESERVES The Directors do not propose to transfer any amount to Reserve. PERFORMANCE OF THE COMPANY On standalone basis, revenue from operations and other income for the financial year under review were Rs. 74,006.31 Lakhs as against Rs. 93,287.57 Lakhs for the previous financial year registering a decrease of 20.67% mainly due to the successful completion of some short term toll collection projects. The profit before tax was Rs. 3,859.15 Lakhs and the profit after tax was Rs. 2,673.47 Lakhs for the financial year under review as against Rs. 2,505.00 Lakhs and Rs. 1,615.12 Lakhs respectively for the previous financial year. On consolidated basis, revenue from operations and other income for the financial year under review were Rs. 204,750.31 Lakhs as against Rs. 204,129.65 Lakhs for the previous financial year registering an Increase of 0.30%. The profit before tax was Rs. 4,168.76 Lakhs and the profit after tax was Rs. 2,632.66 Lakhs for the financial year under review as against Loss of Rs. 10,640.27 Lakhs and Rs. 11,533.31 Lakhs respectively for the previous financial year. There were no material changes and commitments affecting the financial position of the company, between the end of the financial year and the date of the report. OPERATION Your Company has taken another step forward and entered the projects under Hybrid Annuity Model (HAM). Under HAM, 60% of the total project cost to be contributed by Developer and balance 40% to be invested by the Government during construction period in five equal instalments linked to project milestones. The Government / NHAI will collect the toll under HAM and pay the developer annuity payments over 15 years along with interest thereon at bank rate + 3%. The developer will also receive O&M payments bi-annually along with annuity payments. All project payments are inflation indexed. The advantage of HAM projects are : O reduced initial capital outflow for Authority compared to EPC mode O Easier debt servicing by concessionaires during the initial years of project compared to BOT / OMT (Toll) projects O Additional comfort to Lenders in case of termination during construction period O Reduced equity investments by developers O Opportunities for IDFs and InvITs for long term investments in the sector post construction completion with reduced risk perception O Private Sector not required to bear the traffic risk Your Company has won 5 (five) road projects under the HAM: O Arawali Kante Road [Four-laning of NH66 (km 241.3 - 281.3) under NHDP Phase-IV] O Kante Waked Road [Four- laning of NH66 (km 281- 332) under NHDP Phase IV] O Nagpur Ring Road-Package I [Four-laning standalone Ring Road / Bypass (km 0.5- 34.0) for Nagpur city] O Nagpur Ring Road-Package II [Four-laning standalone Ring Road / Bypass (km 34.5- 62.035) for Nagpur city] O Talaja Mahuva [Four-laning of Talaja Mahuva section of NH 8E (km 53.5 - 100.1) & design chainage (km 54.9- 100.45)] Your company is in the process to form and implement an Infrastructure Investment Trust (InvIT) and shall be acting as the Sponsor for the said Infrastructure Investment Trust (InvIT). In terms of Regulation 6 (2) of The Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 (the "InvIT Regulations") has granted the Certificate of Registration as an Infrastructure Investment Trust to MEP Infrastructure Investment Trust ( MEP InvIT). Detailed information on the operations of the Company and details on the state of affairs of the Company are covered in the Management Discussion and Analysis Report. DEPOSITS The Company has not accepted any deposits during the year. DIRECTORS Mrs. Anuya J. Mhaiskar (DIN 00707650), Director of the Company, is liable to retire by rotation at the forthcoming Annual General Meeting and, being eligible, offers herself for re-appointment. Your Directors recommend her re-appointment. Mr. Khimji Pandav, Mr. Deepak Chitnis, Mr. Vijay Agarwal and Mrs. Preeti Trivedi, were appointed as Non-Executive Independent Directors of the Company for a period of 2(two) consecutive years from 9th September, 2014, and accordingly their first term will complete on 8th September, 2016. In terms of Section 149, 152 and other applicable provisions of the Companies Act, 2013, and on the recommendation of the Nomination and Remuneration Committee, the Board has recommended the extension of term of the Independent Directors considering performance evaluation of each Independent Director of the Company done by the Board at its meeting held on 9th February, 2016. A notice has been received from member proposing Mr. Pandav, Mr. Chitnis, Mr. Agarwal and Mrs. Trivedi as candidates for the office of Director of the Company. Appropriate resolutions seeking your approval for the same has already been included in the Notice of the Annual General Meeting. In the opinion of the Board, all the aforesaid Independent Directors fulfil the conditions specified in the Companies Act, 2013 and rules made there under for appointment as an Independent Director and is independent of the management. The Independent Directors have submitted the declaration of independence, as required pursuant to Section 149(7) of the Companies Act, 2013 stating that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013. DIRECTORS' RESPONSIBILITY STATEMENT As required under clause (c) of sub-section (3) of section 134 of Companies Act, 2013, Directors, to the best of their knowledge and belief, state that - (i) in the preparation of the annual accounts, the applicable Accounting Standards had been followed along with proper explanation relating to material departures; (ii) the directors had 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 and loss of the Company for that period; (iii) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) the directors had prepared the annual accounts on a going concern basis; (v) the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and (vi) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. BOARDS EVALUATION Pursuant to the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as of its Committees. The manner in which the evaluation has been carried out has been covered in the Corporate Governance Report. REMUNERATION POLICY Information regarding Remuneration Policy is provided in the Corporate Governance Report. EXTRACT OF ANNUAL RETURN The extract of annual return as provided under sub-section (3) of section 92 of the Companies Act, 2013, in the prescribed Form MGT-9 is annexed to this Report. NUMBER OF MEETINGS OF THE BOARD There were 9 (Nine) meetings of the Board held during the year. Detailed information is given in the Corporate Governance Report. AUDIT COMMITTEE The Audit Committee comprises of 2 (Two) Independent Directors and a Executive Director. Detailed information is given in the Corporate Governance Report. All the recommendations made by the Audit Committee were accepted by the Board. CORPORATE GOVERNANCE A separate section on Corporate Governance forms a part of our Report. A certificate has been received from the Secretarial Auditor of the Company regarding compliance of conditions of Corporate Governance as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. AUDITORS STATUTORY AUDITORS Pursuant to the provisions of Section 139 of the Companies Act, 2013 and the Rules made there under and in terms of the approval given by the members at the 13th AGM of the Company held on 23rd September, 2015, the Joint Statutory Auditors of the Company, M/s. B S R & Co. LLP, Chartered Accountants (Firm Registration No. 101248W/W-100022) and M/s. Gokhale & Sathe, Chartered Accountants (Firm Registration No.103264W) will hold office upto the conclusion of the ensuing Annual General Meeting. The Company has received the certificates from both the Joint Auditors expressing their willingness to be appointed as the Statutory Auditors and that their appointment, if made, at the ensuing Annual General Meeting would be in accordance with the conditions laid down under the Act and Rule 4 of Companies (Audit and Auditors) Rules, 2014. The Board of Directors on the recommendations of the Audit Committee propose appointment of M/s. B S R & Co. LLP, Chartered Accountants as the Joint Statutory Auditors of the Company to hold office for a period of 5 years and M/s. Gokhale & Sathe, Chartered Accountants as the Joint Statutory Auditors of the Company to hold office from the conclusion of this Annual General Meeting until the conclusion of next Annual General Meeting of the Company. The Statutory Audit Report contains a qualification but reply for the observation made by the Statutory Auditors are mentioned below: Clarification on Auditors' Qualifications: The Company is a 25% stakeholder in SMYR LLP (an associate concern established to operate a Toll Tax collection project at New Delhi region). The Company has a receivable of Rs. 709.27 lakhs from the SMYR LLP. The Management is confident of recovering the same. The SMYR LLP financial statements are yet under audit and the management is in the process of obtaining a confirmation for this receivable. Para vii(a) of the Auditor's Report: Our Company has generally been regular in depositing statutory dues. These amounts have subsequently been paid and the management has taken steps to avoid delays in future. COST AUDITORS Pursuant to section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment rules, 2014, the cost audit records maintained by the company in respect of its road maintenance activity is required to be audited. The Company has appointed M/s. A. B. Nawal & Associates (Firm Registration No. PROP-0046), Cost Accountants, as the Cost Auditor to audit the cost accounts records of the Company for the Financial Year 201516 and 2016-17; at a remuneration of Rs. 2,50,000/- p.a. (Rupees Two Lakh Fifty Thousand Only) and Rs. 3,00,000/- p.a. (Rupees Three Lakh Only) respectively plus service tax at the applicable rate and re-imbursement of out of pocket expenses. As required under the Companies Act 2013, the remuneration payable to the Cost Auditor is required to be placed before the members in a general meeting for their ratification. Accordingly a resolution seeking member's ratification for the remuneration payable to M/s. A. B. Nawal & Associates (Firm Registration No. PROP-0046), Cost Accountants is included in the Notice convening the Annual General Meeting. The Cost Audit Reports for the Financial Year ended 31st March, 2015 were filed on 1st October, 2015. The Cost Audit Reports for the Financial Year ended 31st March, 2016 are required to be submitted by the Cost Auditor to the Board of Directors by 27th September, 2016 and same are required to be filed by the Company with the Central Government within 30 days from the receipt of the reports. SECRETARIAL AUDITOR Pursuant to the provisions of section 204 of the Companies Act, 2013 and Rules made thereunder the Company has appointed, CS Dinesh Joshi, KANJ & Associates, (Membership No. 3752) Company Secretaries in Practice to undertake the secretarial audit of the Company for the Financial Year 2015-16. Secretarial Audit Report as issued by him in the prescribed form MR-3 is annexed to this Report. The said Secretarial Audit Report does not contain any qualification, reservation but reply for the observation made by the Secretarial Auditors are mentioned below: The Company has been prompt in filing necessary forms prescribed under the Companies Act, 2013. There were few cases, because of some technical issues while synchronizing the data pertaining to the beneficiary names, the Company filed the e-form MGT 10 with minor delay with the additional fees. The Company has now ensured that all future forms are being made diligently within prescribed time limit. RISK MANAGEMENT POLICY Your Company has implemented mechanism to identify, assess, monitor and mitigate various risks and has formulated a Risk Management Policy. The Audit Committee and the Board of Directors are informed of the Risk assessment and minimization procedures. CORPORATE SOCIAL RESPONSIBILITY Detailed information on Corporate Social Responsibility Policy developed and implemented by the Company on CSR initiatives taken during the year pursuant to section 135 of the Companies Act, 2013 is given in the annexed Report on CSR activities. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS Information regarding loans, guarantees and investments as required under the provisions of section 186 of the Companies Act, 2013 is not applicable to the Company as the Company is exempted under the category of "the companies providing infrastructure facilities". RELATED PARTY TRANSACTIONS All related party transactions during the year were on arm's length basis and were not material as per the Related Party Transaction Policy of the Company and not in conflict with the interest of the Company. The particulars of the said transactions alongwith other contracts/arrangements are also briefed in the Note/Schedule 26.10 to the financial statement which sets out related party disclosures. Considering the foregoing, disclosure in Form AOC-2 is not required. The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed through the following portal link: <http://www.mepinfra.com> CODE OF CONDUCT The Board of Directors has approved a Code of Conduct which is applicable to the Members of the Board and specified employees in the course of day to day business operations of the company. The Company believes in "Zero Tolerance" against bribery, corruption and unethical dealings / behaviour in any form and the Board has laid down certain directives to counter such acts. Such code of conduct has also been placed on the Company's website. The Code lays down the standard procedure of business conduct which is expected to be followed by the Directors and the designated employees in their business dealings and in particular on matters relating to integrity in the work place, in business practices and in dealing with stakeholders. The Code gives guidance through examples on the expected behaviour from an employee in a given situation and the reporting structure. All the Board Members and the Senior Management personnel have confirmed compliance with the Code. A declaration to this effect signed by the Vice-Chairman and Chief Executive Officer of the Company appears elsewhere in this Annual Report. VIGIL MECHANISM / WHISTLE BLOWER POLICY The Company has established a Vigil Mechanism Policy/ Whistle Blower Policy to deal with instances of fraud and mismanagement if any. Staying true to our core values of Strength, Performance and Passion and in line with our vision of being one of the most respected companies in India, the Company is committed to the high standards of Corporate Governance and Stakeholder Responsibility. The said Policy ensures that strict confidentiality is maintained in respect of whistle blowers whilst dealing with concerns and also specified that no discrimination will be meted out to any person for a genuinely raised concern. The Policy on Vigil Mechanism Policy /Whistle Blower Mechanism may be accessed through the following link: <http://www.mepinfra.com> STATUTORY DISCLOSURES A Statement containing salient features of the financial statement of subsidiaries and associates as prescribed Form AOC-1, is annexed to this Report. The audited financial statements of the said companies will be kept for inspection by any member of the Company at its registered office during business hours. The same are placed on the Company's website www.mepinfra.com Information required under the provisions of Section 197(12) of the Companies Act, 2013 read with rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, in respect of employees of the Company and details of remuneration of managerial personnel, forms part of this report. As per provisions of section 136(1) of the said Act, these particulars will be made available to any shareholder on request. A Cash Flow Statement for the year 2015-16 is attached to the Balance Sheet. Pursuant to the requirements of Section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 read with Rules thereunder, the Company has not received any complaint of sexual harassment during the year under review. The Company had formulated and adopted a Policy on Prevention of Sexual Harassment at Workplace. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The Company primarily being an Infrastructure Company and not involved in any industrial or manufacturing activities, the Company has no particulars to report regarding conservation of energy and technology absorption as required under section 134 of the Companies Act, 2013 and Rules made there under. During the year under review, the Company did not have any foreign exchange earnings, whereas the foreign exchange outgo amounted to Rs. 4,67,554/- (Rupees Four Lacs Sixty Seven Thousand Five Hundred and Fifty Four Only) towards foreign travelling expenses. ADEQUACY OF INTERNAL FINANCIAL CONTROLS Your Company has an effective internal financial control and risk-mitigation system, which are constantly assessed and strengthened with new/revised standard operating procedure. The Company's internal financial control system is commensurate with its size, scale and complexities of its operations. CAUTIONARY STATEMENT Statements in this Directors' Report and Management Discussion and Analysis describing the Company's objectives, projections, estimates, expectations or predictions may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the Company's operations include changes in the government regulations, developments in the infrastructure segment, tax regimes and economic developments within India. ACKNOWLEDGEMENTS & APPRECIATION Your Directors wish to express their grateful appreciation for the valuable support and cooperation received from lenders, business associates, banks, financial institutions, shareholders and society at large. Your Directors take this opportunity to thank Book Running Lead Managers viz. IDFC Securities Limited, Inga Capital Private Limited and IDBI Capital Market Services Limited, Registrar & Transfer Agents viz. Link Intime India Private Limited, Legal Counsels viz. erstwhile Amarchand Mangaldas & Suresh A. Shroff & Co and Luthra & Luthra Law Offices, Maharashtra State Road Development Corporation Limited, Ministry of Road Transport and Highways, National Highways Authority of India and its subsidiaries, Rajasthan State Road Development & Construction Corporation Ltd, Road Infrastructure Development Company of Rajasthan Ltd and Hoogly River Bridge Commissioner. Your Directors also thank Ministry of Corporate Affairs, stakeholders, advocates and solicitors and business associates for their continuous support and look forward to their support. Your Directors also place on record, their appreciation for the contribution, commitment and dedication of the employees of the Company and its subsidiaries at all levels. By and on behalf of the Board of Directors Chairman Place: Mumbai Date: June 28, 2016 |