As on: Oct 26, 2025 10:05 AM
The Members
IL&FS Transportation Networks Limited
Your Directors have pleasure in presenting the Nineteenth Annual Report alongwith the Audited Standalone Financial Statements for the year ended March 31, 2019
FINANCIAL RESULTS
The Financial performance highlights of the Company are as under:
The Company's financial statements have been prepared in accordance with the provisions of the Companies Act, 2013 and the Indian Accounting Standards (“Ind AS”) notified under the Companies (Indian Accounting Standards) Rules, 2015 read with Section 133 of the Companies Act, 2013 (as amended from time to time).
As a result of the various events during the financial year 2018-19 which are more fully discussed in the notes to the Financial Statements, there was significant uncertainty around the recoverable amounts and valuations, and related provisions for impairment, of the various investments made and loans, trade and other receivables of the Company from its group companies.
Your Board in consultation with the operating management has performed an assessment to determine the recoverability of the carrying amounts of the investments, loans, trade and other receivables from its group companies following a detailed approach as specified in Note 1.12 of the attached Financial Statements
Your Board has followed a conservative approach by making prudent provisions to the best of its judgement with a view to ensure that the Financial Statements reflect the asset values close to the recoverable values. Accordingly, the Board has made a provision on account of credit risk and impairment of investments, resulting into loss during the year. The actual realisable values may differ from the estimates assumed.
DIVIDEND
As your Company has been defaulting in servicing its debt obligations since June 30, 2018 and that a resolution process is being implemented for your Company in proceedings pending before the Hon'ble National Company Law Tribunal, Mumbai Bench (“NCLT”) and the Hon'ble National Company Law Appellate Tribunal (“NCLAT”) under Sections 241-242 of the Companies Act, 2013, your Company is unable to pay dividend to preference and equity shareholders until the satisfaction of all its dues. Considering the magnitude of loss incurred in the financial year, the Board does not recommend any dividend for the year ended March 31, 2019.
SHARE CAPITAL
During the year under review, the Authorized Share Capital was increased from existing 1500 Crores comprising of Equity Share Capital of 500 Crores divided into 50,00,00,000 Equity shares of 10/- each and Preference Share Capital of 1000 Crores divided into 100,00,00,000 Preference Shares of 10 each to 2500 Crores comprising of Equity Share Capital of 2000 Crores divided into 200,00,00,000 Equity Shares of 10 each and Preference Share Capital of 500 Crores divided into 50,00,00,000 Preference Shares of Rs. 10 each by reclassifying the un-issued Authorized Preference Share Capital of the Company to the extent of 500 Crores divided into 50,00,00,000 Preference Shares of 10 each as Equity Share Capital by way of cancellation of the said Authorized Preference Share Capital and by further creation of additional capital of 117,10,39,973 Equity Shares of 10/- each.
The Company has redeemed 2,00,00,000 Cumulative Redeemable Preference Shares of 10/- each on May 31, 2018
GENERAL RESERVE
During the year under review, the Company has incurred a net loss of 17,000.32 Crore. As a result, the Company has not transferred any amount to the General Reserve for the Financial Year ended March 31, 2019.
ISSUE OF DEBENTURES / BONDS
During the year under review, the Company had issued Redeemable Non-Convertible Debentures each having a face value of 10,00,000 aggregating to 199,00,00,000 on a private placement basis.
As on the date, the Debentures/Bonds issued and outstanding is 4,475.70 Crore. The Company has not been servicing the same with respect to repayment of the principal amounts and interest due thereon since October 1, 2018.
SIGNIFICANT DEVELOPMENTS
The financial year 2018-19 witnessed some very significant developments in the Company. The operating environment continued to be very challenging from the Company's perspective. During first half of the year, the Company made efforts to progress on construction of its under-implementation projects. However, the liquidity constraints faced by the Company and its inability to achieve financial closure in 3 of these under implementation projects due to reluctance of banks to lend to the Company and its projects and the banks' existing exposure limit, prevented the Company to make any significant progress. The Company therefore, suspended construction activity on all under-implementation projects in second quarter of the year until liquidity situation improved. The Company however continued to carry out Operations and Maintenance services on its Operational Projects.
The Company has witnessed considerable cost overruns and delays in its projects. In some cases, claims and compensation has been sought from the respective Authorities; the realization of which is subject to view points of Authorities as well as significant procedural requirements. Many projects of the Company, have not been able to generate adequate revenue to support and service all their obligations, resulting in their looking up to the Company for providing liquidity support to them. These issues coupled with lack of financial closure in 3 projects, affected the already stressed cash flows of the Company.
Efforts were made by the Company to mobilise financial resources through external as well as group sources. The erstwhile Management Board of the Group also tried to raise resources through third parties including vendors of the Company. The erstwhile management had issued certain letters of awareness to a fellow subsidiary in connection with finances raised by third parties including vendors of the Company from that fellow subsidiary. The Company and its group entities had received loans during the same period from these parties. As part of claim management process, some of the vendors have now represented that they had given financial support to the company by borrowing funds from the fellow subsidiary. The transactions are being investigated by various regulatory authorities. Appropriate disclosures have been made in financial statements in this respect
Due to its deteriorating financial condition, the Company found it very challenging to raise further resources. Consequently, the Company reported default on its bank borrowing obligations on June 30, 2018, followed by defaults in servicing NCDs on October 1, 2018. As a result, the credit rating agencies downgraded the ratings of the Company to ‘D' (lowest grade).
The Company had tried to raise resource from its existing shareholders and the Board of Directors passed a resolution on July 27, 2018 to launch a Rights issue. The same however could not be achieved due to lack of investor interest
The Company embarked on divestment of its entire road portfolio in the second quarter of the year and efforts were made by erstwhile management with various institutional investors and market intermediaries to seek their interest for individual asset or on portfolio basis.
Key Corporate Developments since October 1, 2018
However, by end of first half of the year, the overall financial situation of IL&FS Group had worsened with defaults reported by fellow subsidiaries as well as IL&FS, the parent Company. Therefore, pursuant to a report filed by the Registrar of Companies, Mumbai ("RoC") under Section 208 of the Companies Act, 2013, the Ministry of Corporate Affairs (“MCA”) vide its Order dated September 30, 2018, directed that the affairs of the IL&FS and its subsidiaries including the Company be investigated by the Serious Fraud Investigation Office ("SFIO").
On October 1, 2018 Union of India (“UOI”) (acting through the MCA) filed a petition with Hon'ble NCLT seeking immediate suspension of the Board of Directors of IL&FS and appointment of a new Board of Directors, amongst others, on the grounds of mismanagement and compromise in corporate governance norms and risk management by the erstwhile Board of the Company and that the affairs of the Company being conducted in a manner prejudicial to the public interest. The Hon'ble NCLT vide its Order dated October 1, 2018 allowed the UOI's petition and vide its Orders dated October 1, 2018, October 3, 2019 and December 21, 2018 appointed new Directors to the Board of IL&FS on the recommendations of UOI. Accordingly, a New Board consisting of 8 Directors was appointed at IL&FS.
Pursuant to the above developments, the New Board also initiated reconstitution of the Board of Directors of the Company as detailed below:
*Mr. Ravi Parthasarathy, Director had resigned from the Board effective July 21, 2018.
The current composition of the Board of Directors is thus as follows:
(i) Mr. Vineet Nayyar
(ii) Mr. Chandra Shekhar Rajan
(iii) Mr. Nand Kishore
(iv) Mr. Bijay Kumar
The changes in constitution of Key Managerial Personnel of the Company are as given below:
Additionally, the Hon'ble NCLAT passed an Order on October 15, 2018 (the “Interim Order”) pursuant to which it stayed various proceedings and actions against the Company and its Group Companies including the Company (until further Orders). The Interim Order enabled value preservation of the IL&FS Group's assets and provides time to the New Board to evaluate, prepare and implement a resolution plan for IL&FS and its group companies in an orderly manner, keeping in mind the interest of the various stakeholders.
The New Board of IL&FS has been working on the Resolution Plan of the IL&FS Group, which has multiple, complex and diverse entities under varied operating structures. At the time of its appointment, the New Board was directed by the Hon'ble NCLT to submit a roadmap for resolution of the IL&FS Group within a month and accordingly, the New Board submitted the First Progress Report to the MCA on October 30, 2018 (the “First Progress Report”) setting out the way forward for the IL&FS Group (which in turn was filed by the MCA with the Hon'ble NCLT on October 31, 2018). In the First Progress Report, the New Board, based on its initial assessment, amongst others outlined:
(i) key challenges facing the IL&FS Group; and
(ii) options which were and could be considered for resolution of the IL&FS Group.
Taking into account the various challenges facing the IL&FS Group, including the complexity posed by its structure, width of operating business, scale, group-wide levels of leverage, public interest, financial stability, legality, various stakeholder interests (including interests of the joint venture partners) and commercial feasibility, the New Board has put in place a resolution framework to have a timely resolution process, which is fair and transparent and incorporates well established legal principles and seeks to address concerns of all stakeholders of the IL&FS Group. The implementation of the resolution framework is presently under way and the Company has initiated the divestment processes in relation to various group entities.
The assessment of the New Board, based on analysis of the current position of and challenges facing the IL&FS group, is that an Asset Level Resolution Approach serves the best interest of all stakeholders to achieve final resolution. Additionally, NCLAT vide its orders dated February 04, 2019 and February 11, 2019 has directed the appointment of Hon'ble Justice D K Jain (Retd Justice of the Supreme Court of India) to supervise the resolution process for the IL&FS group.
The New Board has submitted five Progress Reports from time to time to the Union of India who in turn has filed them with the NCLT.
The External Resolution Consultant has conducted a cash flow solvency test based on a ‘12 month look-forward' testing period (“Testing Period”) based on which 150 entities (incorporated in India) of the IL&FS Group have been classified into Green, Amber and Red.
The Company has been classified as a "Red" entity indicating that it is not able to meet all obligations (financial and operational) including payment obligations to its senior secured financial creditors. Accordingly, under the resolution mechanism, the Company is permitted to make only those payments necessary to maintain and preserve a going concern status.
An order received from NCLT dated January 01, 2019 has allowed a petition by the Union of India for reopening of the books of accounts and recasting of the financial statements under Section 130 of the Companies Act for the five financial years between 2013-14 to 2017-18 of IL&FS and its Subsidiaries including the Company. Accordingly, the NCLT has appointed firms to carry out the re-opening and recasting of financial statements which is under progress. The company will make the required adjustments once the recasting process is completed.
The Company has not submitted quarterly/yearly financial statements from the quarter ended September 30, 2018 onwards. In view thereof, the stock exchanges have initiated action by transferring the equity shares of the Company to “Z” category (‘BZ' series) wherein trades shall take place on ‘Trade for Trade' basis and have also levied penalties. However, the Company has from time to time has submitted reasons in detail for such non-compliance to the stock exchanges and requested to not take any coercive/pecuniary actions against the Company on account of the circumstances mentioned therein and also the moratorium granted by the National Company Law Appellate Tribunal to the IL&FS Group including the Company.
ACQUISITION & DIVESTMENT
During the year under review, the Company infused additional capital in following project entities:
During the year under review, the Company divested its equity stakes in N.A.M. Expressway Limited at an aggregate consideration of 60.00 Crore. The details of the transaction are mentioned in Note No.4 (a) in the standalone Ind AS Financial Statements for the year ended March 31, 2019. In addition, the Company also acquired 50% equity stake in Jorabat Shillong Expressway Limited and 51% equity stake in Srinagar Sonmarg Tunnelway Limited from the JV partners at a consideration of . 16.80 Crore and 5.91 Crore respectively.
Divestments initiated by the New Board
Pursuant to the Report on Progress and Way Forward dated October 30, 2018 (“Report”) submitted by IL&FS to the Ministry of Corporate Affairs, Government of India, which in turn was filed with the Hon'ble NCLT, a publicly solicited bid process for certain assets in the domestic roads vertical was initiated on December 18, 2018 (with public advertisements being published in the Economic Times dated December 18, 2018 and the Maharashtra Times dated December 18, 2018), and expressions of interest (“EOI”) were sought for a potential acquisition of IL&FS Group's (including of the Company's) equity stake(s) / interest(s) in the following assets/ businesses.
(a) 7 operating annuity-based road projects in various parts of India;
(b) 8 operating toll-based road projects in various parts of India;
(c) 4 under construction road projects in various parts of India; and
(d) 3 other assets and businesses, which includes engineering, procurement and construction business, operations and maintenance business in connection with infrastructure projects (Elsamex Maintenance Services Limited) and operation and management of a sports complex (Karyavattom Sports Facilities Limited).
In response to the above advertisement, the IL&FS Group received EOIs from 34 applicants out of which 32 applicants were considered eligible after technical evaluation as per eligibility criteria set forth in the EOIs (“Eligible Applicants”). Subsequently, the eligible applicants were, after receipt of an executed non-disclosure undertaking, provided access to a virtual data room containing required information about these projects/ assets. The request for proposal was also subsequently issued by the IL&FS Group to the Eligible Applicants, seeking binding bids in respect of these assets. The process was on-going as on March 31, 2019.
MATERIAL CHANGES & COMMITMENTS AFFECTING THE FINANCIAL POSITION BETWEEN THE END OF FINANCIAL YEAR AND DATE OF REPORT
I. Pursuant to defaults in obligations in terms of servicing its debts, the credit rating of the Company has been downgraded to “D” rating during the year, and consequent to loss incurred during the year, the networth of the Company has been substantially eroded.
II. The New Board as part of the resolution process, has submitted several progress reports to the NCLT. This includes framework for a resolution plan and process, steps undertaken for monetization of assets, appointment of consultants, and classification of group entities based on their abilities to meet various financial and operational obligations, measures for cost optimization and protocol for making payments beyond certain limits. The resolution plan seeks a fair and transparent resolution for the Company while keeping in mind larger public interest, financial stability, various stakeholders' interest, compliance with legal framework and commercial feasibility. It is proposed to have a timely resolution process which in turn mitigate the fallout on the financial markets of the country and restore investor confidence in the financial markets thereby serving larger public interest. The Company being a holding company of transportation vertical of IL&FS having projects through various group entities, depends on its group entities to continue operating as a going concern. The resolution plan and processes for various verticals are under way and options of restructuring business, as well as exits are planned. The plan of the management is to sell/exit from assets at the group entity as a going concern.
The assessment of the New Board, based on analysis of the current position of and challenges facing the IL&FS group, is that an Asset Level Resolution Approach serves the best interest of all stakeholders to achieve final resolution.
III. Update on Progress made post March 31, 2019 on the resolution process:
1. Binding bids were received on August 30, 2019 (i.e. the binding bid due date) for 10 special purpose vehicles of the Company, of which for the following 5 SPVs, the sale process is currently ongoing in accordance with the Resolution Framework:
(a) Jharkhand Infrastructure Implementation Company Limited;
(b) Chenani Nashri Tunnelway Limited;
(c) Jorabat Shillong Expressway Limited;
(d) Hazaribagh Ranchi Expressway Limited and
(e) Pune Sholapur Road Development Company Limited
2. For the following 5 SPVs, the respective bids were significantly lower than the average ‘fair market value', obtained by the New Board for the relevant SPV of the Company in the manner as contemplated in the Resolution Framework:
(a) Moradabad Bareilly Expressway Limited;
(b) Jharkhand Road Projects Implementation Company Limited;
(c) Baleshwar Kharagpur Expressway Limited;
(d) Road Infrastructure Development Company of Rajasthan Limited; and
(e) Sikar Bikaner Highway Limited.
3. No binding bids were received for the following 4 SPVs:
(a) West Gujarat Expressway Limited;
(b) East Hyderabad Expressway Limited;
(c) Thiruvananthapuram Road Development Company Limited; and
(d) Barwa Adda Expressway Limited.
4. No bids were also received for engineering, procurement and construction business of the Company and operations and maintenance business carried out by Elsamex Maintenance Services Ltd.
5. For Karyavattom Sports Facilities Limited (which operates a stadium complex), binding bids have been received and are under evaluation by the New Board.
6. For the 9 SPVs (mentioned in paragraph II and III above), after careful evaluation of alternate resolution options, the New Board has given its in-principle approval to establish an infrastructure investment trust (“InvIT”) under the Securities and Exchange Board of India (Infrastructure and Investment Trusts) Regulation 2014. The proposal envisages establishment of an InvIT for holding the equity and other receivables from the relevant SPVs in consideration of units to be issued by the InvIT.
7. In furtherance of the same, the following steps have been undertaken:
(i) the Company has incorporated a wholly owned subsidiary to act as the Sponsor to the proposed InvIT; and
(ii) the application for registration of the InvIT has been made to the Securities and Exchange Board of India, which is under consideration.
The Company expects to complete the setup of the InvIT and transfer of the projects to the said InvIT in financial year 2021.
8. Hon'ble NCLAT vide its judgement dated March 12, 2020, has approved the revised Resolution Framework submitted by New Board along with its amendments and also directed IL&FS and the Union of India to conclude the resolution process for all IL&FS Group entities preferably within 90 days. Subsequently, vide its order dated March 30, 2020, the NCLAT clarified that lock down/shut down period as ordered by the Central Government and State Government will be excluded for the calculation of aforementioned 90 days.
9. International Operations / Subsidiaries
The Company has initiated steps toward divestment and resolution of its direct and indirect international subsidiaries and the progress achieved in respect of key subsidiaries is as under:
(i) Binding bid has been received in respect of 49% stake held in Chongqing Yuhe Expressway Limited, China by ITNL International Pte Ltd (IIPL), a wholly owned subsidiary of the Company and the divestment process is expected to be completed by Q2 FY 20
(ii) In case of Dubai operations of IIPL carried out through its subsidiaries namely, ITNL International DMCC (IIDMCC) and ITNL Infrastructure Developers LLC (IIDL), the divestment process for Dubai Supreme Court Project being executed by IIDL through a SPV could not progress due to lack of interest. The Board of the Company has therefore resolved to file application for insolvency of the IIDL and IIDMCC and necessary steps are being taken in this respect
(iii)IIPL operations in US have been closed and the Company is in the process of filing an application for dissolution
(iv) The Board of Elsamex S.A.U., Spain, a subsidiary of IIPL, after evaluating all available options for resolution of the Company has resolved to file an application for voluntary insolvency of the Company. The process has been delayed due to declaration of State of alarm by the State in Spain. In the meanwhile, one of the creditors of Elsamex S.A.U has filed an application for mandatory insolvency of the Company. Due to non-functioning of the Courts in Spain, the application has not been considered as yet.
In view of the aforementioned, the Company has prepared its financial statements on a going concern basis based on its plans for resolution discussed above.
OPERATIONAL PERFORMANCE
In view of various developments described hereinabove, construction activities at all the ongoing projects have been suspended/terminated post September 2018. The Company through its various SPVs has also initiated discussions with the respective Concession Authorities for foreclosure/ termination of incomplete / partially incomplete projects. In order to maintain going concern status of the SPVs for which Operation and Maintenance (“O&M”) activities are carried out by the Company, it has continued to perform its obligations with respect to the said activities post September 2018 and O&M activities are carried out uninterrupted. Due to reluctance of various SPV lenders in releasing O&M payment to the Company and insistence of paying the O&M vendors directly, the Company in consultation with these lenders, with effect from January 1, 2019, novated O&M contracts with 10 SPVs in favor of Elsamex Maintenance Services Limited, a wholly owned subsidiary of the Company.
ENVIRONMENTAL, HEALTH & SAFETY
The Environmental and Social Policy Framework (ESPF) adopted by the Company helps to identify and mitigate Environmental and Social concerns relating to all projects. During the year under review, Quality, Environment, Health & Safety (EHS) Management systems were implemented and monitored at all the implementation and O&M sites. Further, all sites have started maintaining records related to environment, safety and health.
For continual improvement and to ensure implementation and adherence to the Management System and Safety standards, the standardized documents related to Tool Box Talks topics and guidelines & digests related to IS standards were issued to all sites.
PERFORMANCE OF THE SUBSIDIARIES, JOINT VENTURES & ASSOCIATE COMPANIES
The Company has been facing capacity issues due to loss of key employees while meeting the need for servicing information requirements and providing clarifications to multiple investigating agencies, providing information to enable the ongoing asset monetization and restructuring activities and meeting ‘going concern' requirements. In view of the above, there was a considerable delay in preparation and presentation of Standalone Financial Statements of the Company as well as receipt of Financial Statements of the Subsidiaries and the
Company is in the process of preparing its Consolidated Financial Statement and the same would be presented separately. Accordingly the Company is unable to provide its Consolidated Financial Statement and salient features of the Financial Statements of the Company's Subsidiaries and Joint Ventures in Form AOC-1 as required under Section 129(3) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014. An application has been made to the competent authority seeking an exemption for the Company from presenting its consolidated financial statement.
STATUTORY AUDITORS
SRBC & Co. LLP, Chartered Accountants, were appointed as the Statutory Auditors of the Company for a term of five consecutive years at the 17th Annual General Meeting held on August 29, 2017. In accordance with the Companies Amendment Act, 2017, effective May 7, 2018 by the Ministry of Corporate Affairs (MCA), the appointment of Statutory Auditors is not required to be ratified at every Annual General Meeting.
The Management Representation on the qualifications/ observations/ remarks of Statutory Auditor pertaining to year ended March 31, 2019 are as under:
COST AUDITOR AND COST AUDIT REPORT
Your Company is required to maintain the cost records under sub-section (1) of section 148 of the Companies Act, 2013 and accordingly all such accounts and records are duly made and maintained by the Company. Pursuant to Section 148 of the Companies Act, 2013 and the Companies (Cost Records and Audit) Rules, 2014 framed thereunder, the Board of Directors had appointed M/s. Chivilkar Solanki & Associates, Cost Accountants as Cost Auditors for FY 2018-19.
M/s. Chivilkar Solanki & Associates have conveyed their consent and confirmed their eligibility for appointment as Cost Auditors. The Board has recommended to the Members, for seeking approval to the remuneration payable to the Cost Auditors for FY 2019-20.
SECRETARIAL AUDIT & SECRETARIAL AUDIT REPORT
M/s. Mehta & Mehta, Practicing Company Secretaries were appointed by the Board to carry out the Secretarial Audit of the Company pursuant to the provisions of Section 204 of the Companies Act, 2013 for FY 2018-19. The report of the Secretarial Auditor is set out herewith as Annexure I to this report.
The Management Representation on the qualifications/ observations/ remarks of Secretarial Auditor pertaining to year ended March 31, 2019 are as under:
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return as on March 31, 2019 in Form MGT - 9 in accordance with Section 92(3) of the Companies Act, 2013 read with Companies (Management and Administration) Rules, 2014, are set out herewith as Annexure II to this report.
SIGNIFICANT AND MATERIAL ORDERS
The summary of significant and material orders passed by the Regulators or courts or tribunals impacting the going concern status and the Company's operations in future is enclosed as Annexure VI to this report.
POLICY ON DIRECTOR'S APPOINTMENT AND REMUNERATION
The Board has adopted a Policy on appointment and remuneration of Directors which includes the criteria for determining qualifications, positive attributes, independence of a director and other matters, as required under Sub-section (3) of Section 178 of the Companies Act, 2013 and Regulation 19 of the SEBI (LODR) Regulations, 2015. The Policy is available on the website of the Company: www.itnlindia.com. The remuneration paid to the Directors and Senior Management personnel is as per Managerial Remuneration Policy of the Company. Brief details of the Managerial Remuneration Policy are provided in the Corporate Governance Report
As a consequence of the losses reported for the year ended March 31, 2019, the same has resulted in the excess payment of remuneration to Mr. K Ramchand (erstwhile Managing Director) and Mr. Mukund Sapre (erstwhile Executive Director) amounting to 0.70 Crore and 0.13 Crore respectively aggregating to 0.83 Crore. The Company has initiated action for recovering the excess remuneration paid to them.
DECLARATION BY INDEPENDENT DIRECTORS
All the erstwhile Independent Directors had provided the declarations that they met the criteria of independence as provided under section 149(6) of the Companies Act, 2013
PERFORMANCE EVALUATION OF THE BOARD, COMMITTEES AND DIRECTORS
In accordance with the provisions of the Companies Act, 2013 and Regulation 4(2)(f) of the SEBI (LODR) Regulations, 2015, the erstwhile Board of Directors had laid down the criteria for performance evaluation of erstwhile Independent, Non-Independent & Executive Directors. The evaluation of the performance of the erstwhile individual Directors, Committees and the erstwhile Board was noted at the Meeting of the erstwhile Board of Directors of the Company held on May 25, 2018.
CORPORATE GOVERNANCE
A Report on Corporate Governance is enclosed and forms part of this Report. A certificate from the Statutory Auditor on compliance with the provisions of Corporate Governance is also annexed to this Report
The details of the meetings of the Board and its Committees including its composition & terms of reference are provided in the Report on Corporate Governance which forms part of this Report
POLICY ON DIVIDEND DISTRIBUTION
In accordance with Regulation 43A of the SEBI (LODR) Regulations, 2015, the Company has formulated a Dividend Distribution Policy setting out the parameters and circumstances for consideration of the Board in determining the distribution of dividend to the Shareholders. The Policy is available on the website of the Company. The same can be viewed through the link: http://www.itnlindia.com/application/web_directory/Company%20Policies/2017/Dividend% 20Distribution%20Policy.pdf
TRANSFER OF UNPAID/UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND AUTHORITY:
In terms of Section 125 of the Companies Act, 2013 and Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (the Rules), unclaimed/unpaid dividend for FY 2010-11 and FY 2011-12 lying in the Company's bank account for a consecutive period of seven years amounting to 1,90,229/- and 1,87,900/- respectively was transferred to the Investor Education and Protection Fund (IEPF) on November 05, 2018 and December 02, 2019. Accordingly, the underlying 514 equity shares for FY 2010-11 and 3953 equity shares for FY 2011-12 were also transferred to the demat account of IEPF, the details of which are available on the weblink: http://www.itnlindia.com/invrelation.aspx?page_ID=24&Sec_ID=5.
The Members may lodge their claim for the shares/dividend transferred to IEPF by making an application to IEPF in Form IEPF-5 as per the IEPF Rules. The said form is available on the website of IEPF viz. http://www.iepf.gov.in/IEPFA/ corporates.html The dividend for FY 2012-13, which has remained unpaid/unclaimed for a consecutive period of seven years is also due for transfer to IEPF Account on September 14, 2020. The underlying Equity Shares would also be transferred to the demat account of IEPF on the said date. Members who have not claimed the dividend as yet is requested send request for claiming the dividend to RTA immediately. The details are available on the weblink:http://www.itnlindia.com/pdffiles/DV/StatementofUnclaimeddividendamountconsec utivelyfor 7years_2018.pdf
RELATED PARTY TRANSACTIONS
The erstwhile Management had developed a Related Party Transactions Policy & Framework which was reviewed and recommended by the then Audit Committee and approved by the erstwhile Board which is uploaded on the Company's website and is available on the link: http://www.itnlindia.com/application/web_directory/Company%20Policies/2019/RPT%20Pol icy%20(Amended).pdf
All Related Party Transactions that were entered into during the Financial Year were on an arm's length basis and were in the ordinary course of business. During the year under review, few material transactions were entered into with the Promoter as disclosed in Form AOC-2 annexed as Annexure VII.
It should be noted that the nature of related party transactions undertaken during the year, prior to October 1, 2018 under the erstwhile management, are under review as part of various internal and external investigations that have been initiated.
POLICY FOR PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
The Company has provided a safe and dignified work environment for its employees which are free of discrimination, intimidation and abuse. The Company has adopted a Policy for Prevention of Sexual Harassment of Women and constituted Internal Complaints Committee as per the requirement 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. No complaints with allegations of any sexual harassment were reported during the year under review
WHISTLE BLOWER POLICY
In accordance with the provisions of Section 177 (10) of the Companies Act, 2013 and Regulation 22 of the SEBI (LODR) Regulations, 2015, 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
Two complaints were received via the Whistle Blower Mechanism during the year under review and have been duly addressed by the Company.
The Whistle Blower Policy adopted by the Company is available on the website of the Company. The same can be viewed through the link: http://www.itnlindia.com/application/web_directory/Company%20Policies/Whistle%20Blow er%20Policy.pdf
RISK MANAGEMENT
Your Company had a risk management framework and compliance systems including the risk management policy adopted by the erstwhile management. Given the circumstances in which the New Board was appointed on October 1, 2018, the New Board has reviewed and put in place a revised and updated risk management framework which takes into account the complexity of IL&FS Group structure and the situation with respect to operations/liquidity management. It has also implemented certain key initiatives to protect interests of the stakeholders in order to mitigate the risks being faced by the Company (and the IL&FS Group), which are as follows: Engagement of expert agencies to assist the New Board in the ongoing resolution of the Company and of the IL&FS Group. External Resolution Consultant, Financial and Transaction Advisors, Claims Management Advisor and Legal Advisors have been appointed. Constitution of an ‘Operating Committee' to work on a day to day basis to ensure coordination among group companies and maintain uniformity in the decisions taken across the IL&FS Group. Constitution of an ‘Asset Sale Committee' to undertake all necessary actions and take decisions in relation to the asset monetization process (being undertaken in line with the Resolution Framework Report). Introduction of new position, Chief Operating Officer (“COO”). The COO is responsible for oversight of day to day operations of the IL&FS Group and providing hands-on leadership for and oversight of the asset monetization efforts. The COO is part of the Operating Committee and the Asset Sale Committee. Institution of a group-wide payment protocol. One of the most pressing challenges which the New Board faced immediately upon taking over was the significant liquidity constrains being faced by the IL&FS Group, including the fact that (as highlighted in the First Report) there was no suitably empowered central financial control function that maintained information and accuracy at the group level. With an aim to manage liquidity, ensuring statutory compliance, preserving value and maintaining ‘going concern' status, the New Board, based on discussions with the External Resolution Consultant instituted a payment protocol for the entire IL&FS Group (“Payment Protocol”). The Payment Protocol ensures that no selective payment is made to creditors which could prejudice interests of other stakeholders (i.e. the risk of being classified as a 'preferential payment'). The External Resolution Consultant has been assisting the New Board in periodically monitoring and reviewing the liquidity position of key entities in the IL&FS Group, including conducting the following key oversight functions:
(i) Preparing monthly cash budget: Preparation of a budget by the respective entity's management based on forecast of collections from customers, prioritization of payments based on the Payment Protocol and cash available, actual cash flows in the previous period etc.;
(ii) Reviewing operational issues: Discussion and mitigation of key operational issues faced by the entities, such as delay in collections from customers, stoppage of supply by specific vendors / service providers, termination of projects, lenders not permitting ‘going concern' payments etc.;
(iii) Tracking key liquidity parameters: Periodic collation and review of cash balances across entities, amount of cash deployed in interest bearing instruments, tracking overdue salaries / statutory liabilities etc.; and
(iv) Identifying avenues for cash generation/ preservation: Identification of entities with significant cash gap and determining focus areas for the respective managements such as following up on claims/ old receivables, releasing funds lien marked by lenders, cost reduction, sale of non-core assets etc. The External Resolution Consultant also conducted a cash flow solvency test based on a ‘12 month look-forward' testing period (“Testing Period”) based on which 150 entities (incorporated in India) of the IL&FS Group have been classified into one of the following categories:
(a) “Green” entities i.e. those entities where there is no payment default/overdues subsisting currently and cash flows to be generated by that entity in the Testing Period from its operations and available cash balances are sufficient to meet all payment obligations of that entity (both operational and financial, secured as well as unsecured) as and when such payment obligations fall due in the Testing Period. These entities also do not rely upon other IL&FS Group entities for any financial support to service its debt obligations (financial and operational);
(b) “Amber” entities i.e. those entities which are not able to meet all their respective obligations (financial and operational) during the Testing Period but can only meet operational payment obligations and payment obligations to senior secured financial creditors (financial creditors whose financial debt is secured by a first charge over the assets of the relevant IL&FS Group entity) during the Testing Period [1]; and
(c) “Red” entities i.e. those entities which cannot meet their respective payment obligations towards even senior secured financial creditors as and when they fall due in the Testing Period[2].
You Company has been classified as Red Entity and is permitted to make only payments necessary to maintain and preserve the ‘going concern' status.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Particulars of investments, loans and guarantees form part of Note no. 4, 5 and 38 respectively to the financial statements provided in the Annual Report
DEPOSITS
Your Company has not accepted any Fixed Deposits under the Companies Act, 2013 during the year under review
1 For the purposes of determining the categorization as “Amber”, in addition to ability of making payment to senior secured creditors of such companies as and when they fall due, the cash flow sufficiency to meet current operational payments (post September 30, 2018) has been considered 2 Where the relevant “Red” IL&FS Group entity does not have senior secured financial debt, the unsecured (operational and financial) debt of that IL&FS Group Entity has been considered, which also cannot be fully paid as and when it falls due
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Since the Company does not own any manufacturing facility, there is nothing to report under the Energy Conservation and Technology Absorption particulars in the Companies (Accounts) Rules, 2014
During the year under review, your Company's foreign exchange earnings and expenditure was Nil & 0.37 Crore respectively
PARTICULARS OF EMPLOYEES
In terms of the provisions of Section 197(12) of the Companies Act, 2013, (“the Act”) read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, particulars of the employees drawing remuneration in excess of the limits specified therein forms part of this Report as Annexure III
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 forms part of this Report as Annexure IV
CORPORATE SOCIAL RESPONSIBILITY
The CSR Policy of the Company was approved by the erstwhile Board at its meeting held on May 13, 2014. The CSR Policy was effective from April 1, 2014.
Details of the CSR expenditure during the first six months of the year under review are given in Annexure V enclosed to the report.
DIRECTORS' RESPONSIBILITY STATEMENT
(1) On October 01, 2018, based on a petition by Union of India (“UOI”), the erstwhile Board of Directors of Infrastructure Leasing and Financial Services Limited (IL&FS) was suspended by the Hon'ble NCLT and New Board of Directors was appointed.
(2) The New Board of IL&FS thereafter, pursuant to the authority granted by the Hon'ble NCLT, nominated the appointment of Directors on the Board of the Company. Accordingly, at the First Board Meeting of the Company held thereafter on October 25, 2018, 2 Directors (Mr Vineet Nayyar and Mr C S Rajan) representing the New Board were appointed on the Board of the Company. Subsequent thereto, 2 more Directors (Mr Nand Kishore and Mr Bijay Kumar) were nominated by the New Board of IL&FS and inducted on the Board of the Company. Accordingly, in respect of the period prior to October 25, 2018, the Directors nominated by the New Board of IL&FS are unable to and do not confirm the compliance with the requirements of the provisions of the Companies Act 2013.
(3) The Board of the Company has on a best effort basis and after considering the complexity of the operations, including challenges in implementing the resolution plan, put in place a framework for preparation of financial statements, selection of accounting policies, maintenance of accounting records and prevention and detection of frauds for periods subsequent to their appointment. The Company has also faced several challenges in obtaining financial information and in being able to prepare its financial statements for the year ended March 31, 2019 in view of severe resource and other constraints. Having regard to these matters, the Company has applied judgments and estimates for several matters on applying prudence and conservatism for accounting and has tried to reflect substance over form in respect of transactions and balances in order to derive the business sense from the transactions and events and to present them in a manner that best reflects their true essence based on current estimates. These estimates may change due to subsequent events and are subject to the internal and external investigations that have been initiated.
(4) The Company's accounts for the 5 financial years ended 2017-18 are undergoing the process of reopening and restatement, pursuant to an order of the Hon'ble NCLT. The SFIO and the IL&FS Board have also initiated their respective, independent investigations on various matters in relation to the Company, for past years and for the current financial year up to September 30, 2018. The possible outcomes of these matters and their effects are currently not determinable.
(5) Section 134(3)(c) of the Companies Act, 2013, requires the Board of Directors to provide a statement to the Members of the Company in connection with maintenance of books, records, and preparation of Annual Accounts in conformity with accepted accounting standards and past practices followed by the Company.
(6) Pursuant to the foregoing and to the best of the knowledge and belief of the current Board of Directors of the Company, on the basis of representations received from the operating management and after due enquiry and having regard to the matters discussed previously and subject to the various limitations due to the extenuating circumstances, it is confirmed that.
(a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures. Such departures, which are stated in the relevant notes to the financial statements, have been done having regard to the prevailing conditions under which the Company is operating currently as more fully explained in paragraphs 1-4 above;
(b) the Directors 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 loss of the Company for that period, having regard to the prevailing conditions under which the Company is operating currently;
(c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the applicable Regulations for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities, from the period from which the members of the Board have been appointed. The directors have put in place controls and processes in respect of resolution processes / transactions from October 25, 2018 to March 31, 2019;
(d) the Directors have prepared the annual accounts on a going concern basis;
(e) the Directors have laid down internal financial controls to be followed by the Company in respect of the period from October 25, 2018 from which date the new members of the Board have been appointed and that such internal financial controls were adequate and were operating effectively as at year end, except that due to the prevailing conditions under which the Company is operating currently, and having regard to the matters stated;
(f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively, commencing from the period from October 25, 2018, having regard to the various matters discussed earlier that have resulted in the current status of the Company.
ACKNOWLEDGMENTS
The Board of Directors place on record their appreciation for the continued support and co-operation received from the Government and its various Authorities including National Highways Authority of India, Banks, Financial Institutions and Members of the Company
The Board of Directors expresses their grateful and sincere appreciation for the contribution and commitment of the employees