TIDMIIP TIDMTTM
RNS Number : 5309B
Infrastructure India plc
21 September 2018
21 September 2018
Infrastructure India plc
("IIP" or the "Company" and together with its subsidiaries, the
"Group")
Annual results for the twelve months ended 31 March 2018
Infrastructure India plc, an AIM quoted infrastructure fund
investing directly into assets in India, announces its audited
annual results for the twelve months ended 31 March 2018.
Financial performance
-- Value of the Company's investments was GBP223.0 million as at
31 March 2018 (GBP261.5 million 30 September 2017; GBP296.0 million
31 March 2017).
-- Net Asset Value decreased to GBP188.8 million as at 31 March
2018 (GBP237.8 million 30 September 2017; GBP282.0 million 31 March
2017).
-- NAV per share was GBP0.28 as at 31 March 2018 (GBP0.35 September 2017; GBP0.41 March 2017).
-- Delays to completion schedules at Distribution Logistics
Infrastructure Limited ("DLI"), and the associated changes to DLI
business assumptions, together with the weakening of the Indian
Rupee (INR) against Sterling (GBP) during the period, were the
principal drivers in the reduction of NAV.
Proposed $125m financing agreement
-- IIP announced on 31 July 2018, that it had entered into
conditional proposed financing agreements for up to $125 million
with PSA International, a global port group, and Gateway Partners
(the "Proposed Financing"). The transaction includes the issue of
convertible preference shares in Distribution Logistics
Infrastructure India, DLI's parent company, for a consideration of
$75 million and the sale of 24% of DLI for a consideration of $50
million.
-- Following IIP shareholder approval of the Proposed Financing
at an extraordinary general meeting on 24 August 2018, the parties
continue to progress towards completion.
Commenting on the results Sonny Lulla, CEO of IIP, said:
"The proposed $125m financing agreement with PSA International
and Gateway Partners is a key turning point for DLI, which is our
largest investment representing 86% of the value of our fund. The
investment into DLI will enable the business to push forward with
expanding its presence in key logistics terminals and in PSA, DLI
will have one of the leading global port operators as a major
shareholder and partner."
Enquiries:
www.iiplc.com
Infrastructure India plc Via Novella
Sonny Lulla
Smith & Williamson Corporate Finance Ltd
Nominated Adviser & Joint Broker
Azhic Basirov / Ben Jeynes +44 (0) 20 7131 4000
Nplus1 Singer Advisory LLP
Joint Broker
James Maxwell - Corporate Finance
James Waterlow - Investment Fund Sales +44 (0) 20 7496 3000
Novella
Financial Public Relations
Tim Robertson / Toby Andrews +44 (0) 20 3151 7008
JOINT STATEMENT FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE
We are pleased to report Infrastructure India plc's ("IIP", the
"Company" and together with its subsidiaries the "IIP Group")
audited annual results for the year ended 31 March 2018.
Net Asset Value decreased to GBP188.8 million (GBP0.28 per
share) as at 31 March 2018 compared to 30 September 2017 (GBP237.8
million and GBP0.35 per share), principally as a result of delayed
completion schedules for Distribution Logistics Infrastructure
Limited ("DLI") and the associated change to underlying DLI
business assumptions.
During the fiscal year, funding constraints overshadowed
progress at IIP's largest asset, DLI. Without sufficient completion
capital, DLI has been unable to further progress construction at
its terminals and has instead focussed on streamlining existing
operations. The terminal at DLI's Nagpur facility, however,
continues to increase its market share and acquire new customers
but the inability to complete Phase 2 construction has held back
growth in bulk cargo, auto logistics and warehousing.
On a macro front, the Goods and Services Tax ("GST"), one of
India's most significant recent fiscal reforms, was formally
launched on 1 July 2017 and its implementation has crystallised
some anticipated volatility which is particularly evident within
the small and medium enterprise segment. The Indian Government is
taking steps to reduce the complexities and regulatory bottlenecks
of GST, including a standard rate for multimodal transportation
services, which is expected to reduce the cost of logistics.
In August 2018, the Indian Government opened a 200 km section of
the Western Dedicated Freight Corridor ("DFC"), connecting Delhi,
Haryana and Jaipur. The Western DFC will ultimately connect the
capital Delhi with the economic hub of Mumbai. The DFC project -
including Western and Eastern corridors - will provide much needed
capacity and allow higher freight throughput at greater speed. The
Government's emphasis on increasing manufacturing and exports has
made logistics and the ability to efficiently move goods a key
consideration in achieving sustained growth. DLI, with its large
rail-linked terminals is strategically well placed to benefit from
the DFC.
Subsequent to the year end, IIP entered an agreement for the
sale of its 100% interest in Indian Energy Limited, for a cash
consideration of approximately GBP3.97 million (at the prevailing
exchange rate on 27 April 2018). However, following an unduly
protracted process and attempts by ReNew to amend the agreed
contractual terms of the sale, on 14 September 2018, IIP withdrew
from the proposed transaction as the long stop date had lapsed
without the remaining conditions precedent to the SPA having been
satisfied. IIP's small hydro assets continue to perform in line
with expectations while uncertainty and legal challenges remain at
the large hydro project.
On 31 July 2018, IIP announced that it had entered into
conditional proposed financing agreements (the "Proposed
Financing") for up to $125 million with PSA International, a global
port group, and Gateway Partners. The transaction includes the
issue of convertible preference shares in Distribution Logistics
Infrastructure India ("DLII") for a consideration of $75 million
and the sale of 24% of DLI for a consideration of $50 million. The
net proceeds of the DLII convertible preference shares will be used
to provide construction and working capital to DLI.
Financial performance
The value of the IIP Group's investments held by its
subsidiaries was GBP223.0 million for the period ended 31 March
2018 (GBP261.5 million 30 September 2017 and GBP296.0 million 31
March 2017). Currency rates weakened at the end of the fiscal year
with GBP:INR rate of 90.81 as at 31 March 2018 against 87.44 in
September 2017 and 80.82 in March 2017. The risk-free rate, based
on the Indian 10-year bond, increased to 7.40% as at 31 March 2018
from 6.66% on 30 September 2017 and 6.68% on 31 March 2017.
Total investment during the full fiscal year was GBP13.6
million, all of which was advanced by the Group to DLI to fund some
construction, working capital and debt obligations during the
period.
Transport
DLI is a supply chain transportation and container
infrastructure company and one of the largest private operators in
India with a nationwide network of terminals and a quality road and
rail transportation fleet. The reported funding constraints at DLI
meant no material construction progress was achieved during the
year. This has pushed back completion schedules and resulted in
revisions to business assumptions.
Operations at Nagpur have however continued to show steady
progress and the terminal has gained significant traction in the
Export-Import ("Exim") segment. DLI has captured over 30% market
share and new marketing initiatives have stimulated further volume.
DLI management are in active discussions with importers and
manufacturers to secure both Exim and domestic cargo.
IIP has continued to provide working capital and debt service
support to DLI over the past year. The net proceeds of the DLII
convertible preference shares which will be issued on completion of
the Proposed Financing would be used to provide sufficient capital
to enable DLI to complete, commission and ramp up all of its
terminal facilities. The partnership with PSA, which is one of the
leading global port groups, would also provide DLI with the
additional expertise and know-how of an established global platform
and enhanced marketing opportunities.
Energy
India Hydropower Development Company's ("IHDC") overall
production was higher than the same period last year. This was the
result of higher water release at the Maharashtra projects and
increased generation at Birsinghpur. Subsequent to the year end,
the Raura project experienced flash floods in July 2018 which
affected roads and bridges leading to the site. The project itself
had limited damage, which is insured, but the restoration work will
push back completion. IHDC management are targeting commissioning
of the plant by the current year end.
Indian Energy Limited ("IEL") has two operating wind farms,
Theni, in Tamil Nadu, and Gadag, in Karnataka and overall energy
production remained steady over the previous year. Subsequent to
the year end, in April 2018, IIP announced the sale of IEL to ReNew
Power Services Limited ("ReNew") for a cash consideration of
approximately GBP3.97 million (at the prevailing exchange rate on
27 April 2018). However, following an unduly protracted process and
attempts by ReNew to amend the agreed contractual terms, including
a reduction in the agreed consideration, the Group withdrew from
the proposed transaction on 14 September 2018 as the long stop date
under the SPA had lapsed without the remaining conditions precedent
having been satisfied.
At SMH, litigation continues amongst the various stakeholders
with hearings being scheduled. There is no clarity or certainty of
the outcome of any of the legal petitions and IIP continues to
engage in discussions with all interested parties.
Company liquidity and financing
As at 31 March 2018, the IIP Group had cash available of GBP3.4
million.
During the fiscal year, the Company has extended the maturity
of, and enlarged the size of, the fully drawn US$17.0 million
working capital loan facility from GGIC (the "Working Capital
Loan"). A further US$4.5 million was made available to the Company
on 19 September 2017 and the fully drawn down Working Capital Loan,
now totalling US$21.5 million, is repayable, pursuant to a maturity
extension announced on 18 September 2018, with the associated
interest payment, on 18 October 2018.
On 30 June 2017, IIP entered into an US$8 million unsecured
bridging loan facility (the "Bridging Loan") with Cedar Valley
Financial, an affiliate of GGIC. The Bridging Loan was subsequently
increased to US$18.0 million in November 2017, to US$21.0 million
in January 2018, to US$23.0 million in February 2018, to US$26.0
million in March 2018, to US$28.0 million in April 2018, to US$34.0
million in May 2018, to US$40.4 million in June 2018 and to $43.4
million in August 2018. As announced by the Company on 18 September
2018, the maturity of the Bridging Loan was recently extended such
that the Bridging Loan now matures on the earlier of: (i) 15 days
following completion of the Proposed Financing; and (ii) 18 October
2018.
The Company remains in discussions with Cedar Valley and GGIC in
relation to the possible partial repayment of the Bridging Loan and
the Working Capital Loan following the completion of the Proposed
Financing and with a view to further extending the maturity of both
the Bridging Loan and the Working Capital Loan.
As discussed above, on 31 July 2018, IIP announced that it had
entered into conditional proposed financing agreements where up to
$125 million before expenses (approximately GBP95.5 million at the
prevailing exchange rate when reported), would be made available to
the Group from PSA International and Gateway Partners. The Proposed
Financing was approved by IIP shareholders at the IIP extraordinary
general meeting held on 24 August 2018.
We believe that the Proposed Financing is in the interests of
IIP shareholders and will provide much needed capital which will
enable DLI to complete construction at its terminals. The inability
to advance construction at DLI has had a negative impact on value
in recent years. Notwithstanding the positive effects of the
Proposed Financing, the resulting dilution of the Group's interest
in DLI will have a corresponding effect on future Net Asset Value.
Taking into account the $50 million IIP will receive for the
disposal of a stake in DLI, the dilution from the transaction will
represent a reduction of IIP's NAV of approximately GBP40-50
million, which will be reflected in IIP's unaudited interim report
for the six months to 30 September 2018, should the financing
conclude by then.
We look forward to updating shareholders on progress at DLI as
well as developments at the Company's other businesses in the
periods to come.
Tom Tribone & Sonny Lulla
September 2018
REVIEW OF INVESTMENTS
Distribution Logistics Infrastructure Private Limited
("DLI")
Description Supply chain transportation and container
infrastructure company with a large operational
road and rail fleet; developing four large
container terminals across India.
Promoter A subsidiary of IIP
Date of investment 3 Mar 2011 15 Oct 2011 Jan 12- Sep17
Investment amount GBP34.8m (implied) GBP58.4m (implied) GBP117.5 million
Aggregate percentage
interest 37.4% 99.9% 99.9%
Investment during the GBP13.6 million
period
Valuation as at 31 March GBP191.5 million
18
Project debt outstanding GBP74.6 million
as at 31 March 2018
Key developments * During the fiscal year, delays in funding affected
the completion schedule of the Bangalore, Palwal and
Chennai terminals.
* Operations at Nagpur have continued to show steady
progress and the terminal maintains good market
share.
* On 31 July 2018, IIP entered into conditional
proposed financing agreements ("Proposed Financing")
with PSA International and Gateway Partners for up to
$125 million.
* The transaction includes the issue of convertible
preference shares in Distribution and Logistics
Infrastructure India ("DLII"), DLI's parent company,
for a consideration of $75 million and the sale of
24% of DLI for a consideration of $50 million.
Investment details
DLI is a supply chain transportation and container
infrastructure company headquartered in Bangalore and Gurgaon with
a material presence in central, northern and southern India. DLI
provides a broad range of logistics services including rail
freight, trucking, handling, customs clearing and bonded
warehousing with terminals located in the strategic locations of
Nagpur, Bangalore, Palwal (in the National Capital Region) and
Chennai.
Developments
Implementation of GST in July 2017 has affected the sales of
goods in the small and medium enterprises segment and the sector is
yet to recover completely. DLI management expects volumes to pick
up as regulatory bottlenecks are relieved. The GST Council recently
standardised the GST rate for multimodal transportation services
and such simplifications are expected to reduce the logistics costs
for customers as well as increase the volume for multimodal
transportation service providers.
Due to delays in funding, construction work at all locations
have not made meaningful progress. However, operations at Nagpur
have continued to show steady progress and the terminal has
maintained over 30% Exim market share.
During the period IIP focussed on finalising the Proposed
Financing which was announced after the year end in July 2018. IIP
has entered into conditional agreements whereby up to $125 million
(approximately $95.5 million when reported), would be made
available to the Group. The net proceeds of the CPS will be used to
provide sufficient capital to enable DLI to complete, commission
and ramp up all of its terminal facilities.
Valuation
Revised business and construction-related assumptions used for
the valuation were based on a detailed review and update of the
budget prepared by DLI's management team. These assumptions were
discussed with the prospective investors and include assumptions
relating to project completion costs, business volume and
realisation. These assumptions are reflected in the financial model
used for the valuation.
As at 31 March 2018, the NPV of future IIP cash flows for DLI
using the above assumptions is GBP191.5 million, representing an
approximate 12% decrease on the period ending 30 September 2017.
The bulk of the impact relates to changes in business assumptions
that account for completion delays, higher funding requirements to
cover unforeseen cost overruns and slower ramp up assumptions. A
positive impact of period roll-over has been offset by depreciation
of the Indian Rupee against Sterling, the increase in the risk free
rate, and revised business assumptions. It is anticipated that post
completion of the Proposed Financing, IIP's reduced stake in DLI
will be worth between approximately GBP80 million and 110
million.
India Hydropower Development Company LLC ("IHDC")
Description IHDC develops, owns and operates small
hydropower projects with six fully operational
plants (62 MW of installed capacity),
and a further 30 MW of capacity under
development or construction.
Promoter Dodson-Lindblom International Inc. ("DLZ")
Date of investment Mar 2011 Jan 2012 May 2012
Investment amount GBP25.7 million GBP0.3 million GBP1.1 million
Aggregate % interest 50% 50% 50%
Investment during the Nil
period
Valuation as at 31 March GBP20.9 million
2018
Project debt outstanding GBP9.8 million
as at 31 Mar 2018
Key developments
* Overall generation from IHDC's projects was 144 GWh
during the period against 122.9 GWh in the prior
year.
* The increase in production is primarily a result of
higher water releases in Maharashtra and increased
generation at Birsinghpur.
* Flash floods near the Raura project are expected to
delay the commissioning of the plant, but IHDC
management are confident that operations will start
by the current year end. Preliminary assessment shows
that key project structures are not damaged.
Investment details
The IHDC portfolio has installed capacity of approximately 62 MW
across six projects - Bhandardara Power House I ("BH-I"),
Bhandardara Power House II ("BH-II") and Darna in Maharashtra;
Birsinghpur in Madhya Pradesh; and Sechi and Panwi in Himachal
Pradesh. IHDC has an additional 25 MW of capacity under development
and construction with planned capacity at three sites having been
revised upwards.
Project update
Overall generation from all of IHDC's projects was 144 GWh
during the period against 122.9 GWh in the prior year. This
increase in production is attributed to higher water release in
Maharashtra and increased generation at Birsinghpur. IHDC's
projects in Himachal Pradesh also produced higher than historical
average levels.
Panwi continues to encounter excessive silt accumulation
resulting from construction of an upstream project. IHDC has held
numerous discussions with the upstream project developer for an
equitable solution. This will involve allowing the upstream project
to utilise a portion of land allotted to Panwi to enable them to
re-design the project in a manner that minimises siltation at
Panwi.
Flash flooding near the Raura project in mid-July 2018 affected
roads and bridges leading to the site. A preliminary damage
assessment indicated that the trench weir was unaffected but
upstream and downstream protection work around the project was
washed away. The damage is insured and IHDC is in the process of
filing a claim. Raura's power house is underground and there was no
impact on the civil structures or equipment. Excavation of the
debris is underway and will be followed by restoration work which
may take an additional 30 days. IHDC management is currently
targeting commissioning by the year end.
Valuation
The IHDC portfolio was valued in accordance with the Company's
stated valuation methodology by using a composite risk premium of
3.23% over the risk-free rate of 7.40%. The composite risk premium
is computed using a MW-based weighted average of risk premia of
individual assets related to their stage of operation. Adjustments
were made to tariff estimates to account for current market data.
The value for the IHDC investment as at 31 March 2018 is GBP20.9
million (GBP24.8 million 30 September 2017; GBP29.0 million 31
March 2017).
Indian Energy Limited ("IEL")
Description An independent power producer focused
on renewable energy, with 41.3 MW installed
capacity over two operating wind farms.
Promoter IIP
Date of investment Sep 2011 Oct 2011 - Dec 2012
Investment amount GBP10.6 million GBP0.9 million
Aggregate % interest 100% 100%
Investment during the Nil
period
Valuation as at 31 March GBP4.0 million
2018
Project debt outstanding GBP9.0 million
as at 31st March 2018
Key developments
* Overall generation from IEL's two projects was steady
at 72.2 GWh during the period against 72.3 GWh in the
prior year.
* In April 2018, IIP entered an agreement for the sale
of its 100% interest in IEL to ReNew Power Services
Private Limited ("ReNew").
* The sale of IEL did not proceed, following an unduly
protracted process and attempts by ReNew to amend the
agreed contractual terms of the sale.
Investment details
IEL is an independent power producer that owns and operates wind
farms, with 41.3 MW of installed capacity across two wind farms -
Gadag and Theni - in the states of Karnataka and Tamil Nadu
respectively.
Project update
The overall generation from IEL's two projects was steady at
72.2 GWh during the period against 72.3 GWh in the prior year.
There were some delays in generator maintenance at both projects
caused by O&M service providers.
On 27 April 2018, IIP announced that it had agreed the sale of
its 100% interest in the share capital of IEL (the "Disposal") to
ReNew Power Services Private Limited ("ReNew"). The cash
consideration was INR 364 million (approximately GBP4.0 million
when reported). Following an unduly protracted process and attempts
by ReNew to seek to amend the agreed contractual terms, on 14
September 2018, following the remaining conditions precedent not
having been met by the long stop date under the SPA, the IIP Group
withdrew from the proposed transaction and the sale of IEL to ReNew
will not proceed.
Valuation
Due to the significant uncertainties surrounding the valuation
assumptions, the Directors have considered the last proposed sale
price of GBP4.0 million in order to determine the fair valuation of
the investment.
Shree Maheshwar Hydel Power Corporation Limited ("SMH")
Description 400MW hydropower project on the Narmada
River near Maheshwar in Madhya Pradesh.
Promoter Entegra Limited
Date of investment Jun 2008 Sep 2011
Investment amount GBP13.2 million GBP16.5 million
Direct and indirect %
interest 20.5% 31.2%
Investment during the Nil
period
Valuation as at 31 March GBP6.6 million
2018
Project Debt Outstanding GBP313.4 million
as at 31 March 2018
Key developments * Litigation between the promoter and the lenders
continues with hearings being scheduled.
Investment details
SMH is constructing a 400MW hydropower project (ten turbines of
40MW each) situated on the Narmada River near Maheshwar, in the
southwestern region of Madhya Pradesh. The project is intended to
produce peaking power and to supply drinking water to the city of
Indore. Civil works are largely complete with 27 gates and three of
the ten turbines installed.
Current status of the project and financing update
During the fiscal year, a number of petitions were filed and the
legal landscape for the project is currently complex. Ultimately,
this just adds to the uncertainty, but pending clarity on
litigation, there remains some scope for the project to potentially
obtain completion finance. Under these circumstances, IIP remains
cautious with regard to remaining value but will continue to act,
as appropriate, to protect its interests and remains engaged with
all parties.
Valuation
Forecast assumptions were again adjusted to account for the
continuing uncertainty on the terms and timing of project
completion and the higher risk premium of 8% was retained. The
value of IIP's investment in SMH as at 31 March 2018 was GBP6.6
million (GBP8.4 million 30 September 2017; GBP10.0 million 31 March
2017). The value of IIP's stake in the project remains largely
dictated by the actions and timelines associated in reaching a
viable plan to complete the project, and depending on the outcome
of some legal proceedings, there remains a risk that the value of
the investment could be reduced to zero.
Directors' Report
The Directors have pleasure in presenting their report and
financial statements of the Group for the year ended 31 March
2018.
Principal activity and incorporation
The Company is a closed-ended investment company, incorporated
on 18 March 2008 in the Isle of Man as a public limited company
under the 2006 Companies Act. It was admitted to the Official List
of the London Stock Exchange on 30 June 2008, and subsequently
moved to a listing on AIM, a market operated by the London Stock
Exchange on 16 November 2010.
The Company's investment objective is to provide shareholders
with both capital growth and income by investing in assets in the
Indian infrastructure sector, with particular focus on assets and
projects related to energy and transport.
Results and dividends
The Group's results for the year ended 31 March 2018 are set out
in the Consolidated Statement of Comprehensive Income.
A review of the Group's activities is set out in the Joint
Statement from the Chairman and the Chief Executive report.
The Directors do not recommend the payment of a dividend (2017:
nil).
Directors
The Directors of the Company during the year and up to the date
of this report were as follows:
Tom Tribone Chairman
Rahul Sonny Lulla Chief Executive
Timothy Walker Non-Executive Director and Audit
Committee Chairman
Robert Venerus Non-Executive Director
Madras Seshamani Ramachandran Non-Executive Director
Directors' interests in the shares of the Company are detailed
in note 14.
Company Secretary
The secretary of the Company during the year and to the date of
this report was Philip Scales.
On behalf of the Board
Sonny Lulla
Director
20 September2018
Statement of Directors' Responsibilities
In Respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report
and the Group and Parent Company financial statements in accordance
with applicable law and regulations.
The Directors are required to prepare Group and Parent Company
financial statements for each financial year. As required by the
AIM Rules of the London Stock Exchange they are required to prepare
the Group financial statements in accordance with International
Financial Reporting Standards as adopted by the EU (IFRSs as
adopted by the EU) and applicable law and have elected to prepare
the Parent Company financial statements on the same basis.
The Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state
of affairs of the Group and Parent Company and of their profit or
loss for that period. In preparing each of the Group and Parent
Company financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable, relevant and reliable;
-- state whether they have been prepared in accordance with IFRSs as adopted by the EU;
-- assess the Group and Parent Company's ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
-- use the going concern basis of accounting unless they either
intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Parent Company and enable them
to ensure that its financial statements comply with the Isle of Man
Companies Act 2006. They are responsible for such internal control
as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to safeguard the
assets of the Group and to prevent and detect fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in the Isle of Man governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
On behalf of the Board
Sonny Lulla
Director
20 September 2018
Corporate Governance Statement
The Combined Code does not directly apply to companies
incorporated within the Isle of Man but the Board of Infrastructure
India PLC has developed its internal procedures to be in line with
the recommendations of the Corporate Governance Guidelines for
Smaller Quoted Companies published by the Quoted Company Alliance
("QCA Guidelines") where appropriate and these are monitored on a
regular basis. The Directors will continue to comply with the
relevant requirements of the QCA Guidelines to the extent that they
consider it appropriate having regard to the Company's size and the
nature of its operations. The Board is not presently aware of any
respects in which it will depart from its current approach and
considers that the Company has complied with this approach to
corporate governance throughout the accounting year.
Responsibilities of the Board
The Board of Directors is responsible for the determination of
the investment policy of the Company and for its overall
supervision via the investment policy and objectives that it has
set out. The Board is also responsible for the Company's day-to-day
operations; however, since the Board members are all non-executive,
in order to fulfil these obligations, the Board has delegated
operations through arrangements with the Investment Adviser and
Administrator.
All but one of the Directors are non-executive Directors and
therefore there is no nomination committee. The Company has not
established a remuneration committee as it is satisfied that any
issues can be considered by the Board or the Audit Committee.
The Board intends to meet formally at least four times each
year. At each Board meeting the financial performance of the
Company and all other significant matters are reviewed so as to
ensure the Directors maintain overall control and supervision of
the Company's affairs. The Board receives investment reports from
the Asset Manager and Valuation and Portfolio Services Adviser and
management accounts from the Administrator. The Board maintains
regular contact with all its service providers and are kept fully
informed of investment and financial controls and any other matters
that should be brought to the attention of the Directors. The
Directors also have access where necessary to independent
professional advice at the expense of the Company.
Audit Committee
The Audit Committee is a sub-committee of the Board and it meets
formally at least twice each year. It makes recommendations to the
Board which retains the right of final decision. The Audit
Committee has primary responsibility for reviewing the financial
statements and the accounting policies, principles and practices
underlying them, liaising with the external auditors and reviewing
the effectiveness of internal controls.
The terms of reference of the Audit Committee covers the
following:
-- The composition of the Committee, quorum and who else attends meetings.
-- Appointment and duties of the Chairman.
-- Duties in relation to external reporting, including reviews
of financial statements, shareholder communications and other
announcements.
-- Duties in relation to the external auditors, including
appointment/dismissal, approval of fee and discussion of the
audit.
In addition, the Company's administrator (FIM Capital Limited)
has a number of internal control functions including a dedicated
Compliance Officer who monitors compliance with all statutory and
regulatory requirements and presents a report to the Board at each
meeting.
Report of the Independent Auditors, KPMG Audit LLC,
to the members of Infrastructure India plc for the year ended 31
March 2018
1 Disclaimer of opinion
We were engaged to audit the financial statements of
Infrastructure India plc ("the Company") for the year ended 31
March 2018 which comprise the Consolidated Statement of
Comprehensive Income, the Consolidated Statement of Financial
Position, the Consolidated Statement of Changes in Equity and the
Consolidated Statement of Cash Flows, and the related notes,
including the accounting policies in note 3. The financial
reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the EU.
We do not express an opinion on the financial statements. Due to
the significance of the possible combined effect of the
uncertainties described in the basis for disclaimer of opinion
section of our report, we have not been able to obtain sufficient
appropriate audit evidence to provide a basis for an audit
opinion.
Basis for disclaimer of opinion
In seeking to form an opinion on the financial statements, we
have considered the implications of the significant uncertainties
disclosed in the financial statements concerning the following
matters:
-- The Group had GBP3.4m cash and cash equivalents and net
current liabilities of GBP34.3m at 31 March 2018. As announced by
the Company on 31 July 2018, the Company agreed a conditional
proposed financing with PSA International and Gateway Partners
pursuant to which up to US$125m (approximately GBP95.5m), before
expenses, would be made available to the Group (the "Proposed
Funding"). The new funding would enable the Company to repay the
working capital loan and bridging loan (together totalling US$47.5m
as at 31 March 2018 and increased to US$64.9m by 23 August 2018) as
well as provide significant additional working capital and
construction capital which is required by Distribution Logistics
Infrastructure Private Ltd ("DLI") and provide for the Group's
general working capital needs. The bridging loan is repayable on
the earlier of: (i) 15 days following the completion of the
Proposed Funding; and (ii) 18 October 2018. The working capital
loan is repayable on 18 October 2018. As at the date of these
financial statements the Proposed Funding has not been finalised.
Therefore, there is significant uncertainty regarding the going
concern of the Group and the Company.
-- As stated above, DLI (valued by the Directors at GBP191.5m at
31 March 2018), the Group's largest investment, requires the
provision of significant additional working capital and
construction finance. This is planned to be provided by the
Proposed Funding. The provision of this additional finance is
critical to DLI's business mode and hence its valuation. As further
stated above, as at the date of these financial statements the
Proposed Funding has not been finalised. Therefore, there is
significant uncertainty regarding the valuation of the Group's
investment in DLI, which is dependent upon further funding being
available. In addition, the completion of the Proposed Funding will
significantly affect the relative share of the Group's interest in
DLI, leading to a significant dilution. The holding value of
GBP191.5m as at 31 March 2018 does not reflect any dilution of the
holding which will arise upon conclusion of the Proposed Funding,
but any such adjustment could have a material impact on the value
of the investment in DLI. It is not currently possible to reliably
estimate what this impact may be.
-- The valuation of the Group's other portfolio companies may
also be affected by the availability of working capital at Group
level, as such entities may require additional funding and if this
is not available their business plans may be adversely affected. In
particular, if additional funding is not provided, the Group may
need to realise certain investments on a 'quick-sale' basis.
There is potential for the uncertainties to interact with one
another such that we have not been able to obtain sufficient
appropriate audit evidence regarding the possible effect of the
uncertainties taken together.
2 Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page [A],
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the
Group and Parent Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
using the going concern basis of accounting unless they either
intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our responsibility is to conduct an audit of the company's
financial statements in accordance with International Standards on
Auditing (UK) and to issue an auditor's report. However, due to the
significance of the matter described in the basis for disclaimer of
opinion section of our report, we were not able to obtain
sufficient appropriate audit evidence to provide a basis for an
audit opinion on these financial statements.
We have fulfilled our ethical responsibilities under, are
independent of the company in accordance with, UK ethical
requirements including the FRC Ethical Standard.
3 The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the Company's members, as a body,
in accordance with Section 80(c) of the Isle of Man Companies Act
2006. Our audit work has been undertaken so that we might state to
the Company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's
members, as a body, for our audit work, for this report, or for the
opinions we have formed.
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man IM99 1HN
20 September 2018
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2018
Note 2018 2017
GBP'000 GBP'000
Interest income on bank balances - 2
Movement in fair value on investments at fair
value through profit or loss 12 (86,521) (36,764)
Foreign exchange gains/(loss) 2,416 (1,589)
Gain on disposal of investments - 2,151
Asset management and valuation services 7 (5,536) (5,612)
Other administration fees and expenses 6 (1,709) (1,019)
Operating loss (91,350) (42,831)
--------- ---------
Finance costs 8 (1,861) (1,028)
Loss before taxation (93,211) (43,859)
--------- ---------
Taxation 9 - -
--------- ---------
Loss for the year (93,211) (43,859)
========= =========
Other comprehensive income - -
--------- ---------
Total comprehensive loss (93,211) (43,859)
========= =========
Basic and diluted loss per share (pence) 10 (13.70)p (6.4)p
========= =========
The Directors consider that all results derive from continuing
activities.
The notes referred to above form an integral part of the nancial
statements.
Consolidated Statement of Financial Position
at 31 March 2018
Note 2018 2017
GBP'000 GBP'000
Non-current assets
Investments at fair value through profit
or loss 12 223,034 295,991
Total non-current assets 223,034 295,991
---------- ---------
Current assets
Debtors and prepayments 15 28
Cash and cash equivalents 3,431 1,522
---------- ---------
Total current assets 3,446 1,550
---------- ---------
Total assets 226,480 297,541
---------- ---------
Current liabilities
Trade and other payables 15 (1,585) (1,529)
Current loans and borrowings 16 (36,127) (14,033)
---------- ---------
Total current liabilities (37,712) (15,562)
---------- ---------
Total liabilities (37,712) (15,562)
---------- ---------
Net assets 188,768 281,979
========== =========
Equity
Ordinary share capital 13 6,803 6,803
Share premium 13 282,787 282,787
Retained earnings (100,822) (7,611)
---------- ---------
Total equity 188,768 281,979
========== =========
The notes referred to above form an integral part of the nancial
statements.
These financial statements were approved by the Board on 20
September 2018 and signed on their behalf by
Sonny Lulla Tim Walker
Chief Executive Director
Consolidated Statement of Changes in Equity
for the year ended 31 March 2018
Share Share Retained
capital premium earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April 2016 6,803 282,787 36,248 325,838
Total comprehensive loss for the
year
Loss for the year - - (43,859) (43,859)
--------------------------------------- --------- --------- ---------- ---------
Total comprehensive loss for the
year - - (43,859) (43,859)
--------------------------------------- --------- --------- ---------- ---------
Balance at 31 March 2017 6,803 282,787 (7,611) 281,979
======================================= ========= ========= ========== =========
Balance at 1 April 2017 6,803 282,787 (7,611) 281,979
Total comprehensive loss for the year
Loss for the year - - (93,211) (93,211)
---------- ---------
Total comprehensive loss for the year - - (93,211) (93,211)
--------------------------------------- --------- --------- ---------- ---------
Balance at 31 March 2018 6,803 282,787 (100,822) 188,768
======================================= ========= ========= ========== =========
The notes referred to above form an integral part of the nancial
statements.
Consolidated Statement of Cash Flows
for the year ended 31 March 2018
Note 2018 2017
GBP'000 GBP'000
Cash flows from operating activities
Loss for the year (93,211) (43,859)
Adjustments:
Finance Income - (2)
Finance costs 1,861 1,028
Movement in fair value on investments at
fair value through profit or loss 12 86,521 36,764
Accrued shares expense - 18
Foreign exchange loss (2,416) 1,589
Gain on disposal of investments - (2,151)
----------- ---------
(7,245) (6,613)
Increase/(decrease) in trade and other payables 54 (143)
Decrease in debtors and prepayments 13 43
----------- ---------
Net cash utilised by operating activities (4,762) (6,713)
----------- ---------
Cash flows from investing activities
Purchase of investments 12 (13,564) (18,612)
Interest received - 2
Disposal of investments 12 - 22,526
----------- ---------
Cash (utilised by)/raised from investing
activities (13,564) 3,916
----------- ---------
Cash flows from financing activities
Loans received 22,651 -
Loan interest paid 16 - (964)
----------- ---------
Net cash raised from/(utilised by) financing
activities 20,651 (964)
----------- ---------
Increase/(decrease) in cash and cash equivalents 1,909 (3,761)
Cash and cash equivalents at the beginning
of the year 1,522 5,162
Effect of exchange rate fluctuations on cash
held - 121
Cash and cash equivalents at the end of the
year 3,431 1,522
----------- ---------
The notes referred to above form an integral part of the nancial
statements.
Notes to the Financial Statements
for the year ended 31 March 2018
1. General information
The Company is a closed-end investment company incorporated on
18 March 2008 in the Isle of Man as a public limited company. The
address of its registered office is IOMA House, Hope Street,
Douglas, Isle of Man.
The Company is listed on the AIM market of the London Stock
Exchange.
The Company and its subsidiaries (together the Group) invest in
assets in the Indian infrastructure sector, with particular focus
on assets and projects related to energy and transport.
2. Basis of preparation
(a) Statement of compliance
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the EU.
The financial statements were authorised for issue by the Board
of Directors on 20 September 2018.
(b) Basis of measurement
The consolidated financial statements have been prepared on the
historical cost basis except for financial instruments at fair
value through profit or loss which are measured at fair value in
the statement of financial position.
(c) Functional and presentation currency
These financial statements are presented in Sterling, which is
the Company's functional currency. All financial information
presented in Sterling has been rounded to the nearest thousand,
unless otherwise indicated.
d) Going concern
The Group had GBP3.4 million cash and cash equivalents and net
current liabilities of GBP34.3 million at 31 March 2018. As
announced on 31 July 2018, the Company agreed a conditional
proposed financing with PSA International and Gateway Partners (the
"Proposed Funding") pursuant to which up to US$125.0 million
(approximately GBP95.5 million), before expenses, would be made
available to the Group. The new funding would enable the Company to
repay the working capital and Bridging Loans detailed in note 16 as
well as provide additional working capital and construction capital
to DLI and provide for the Group's general working capital needs.
As at the date of these financial statements, the Proposed Funding
has not been finalised. However the Directors consider the Proposed
Funding will be finalised and have therefore prepared the financial
statements on a going concern basis. However, these conditions
indicate the existence of a material uncertainty that may cast
significant doubt of over the Group's ability to continue as a
going concern. The Group may not be able to realise its assets and
discharge its liabilities in the normal course of business. The
financial statements do not include any adjustments that would
result if the Group was unable to continue as a going concern.
(e) Use of estimates and judgements
The preparation of the financial statements in conformity with
IFRSs requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
The areas involving a higher degree of judgment or complexity,
or areas where assumptions and estimates are significant to the
consolidated financial statements are disclosed in note 5.
3. Summary of significant accounting policies
3.1 Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries and subsidiary undertakings). Control is achieved
where the Company has power over an investee, exposure or rights to
variable returns and the ability to exert power to affect those
returns.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated Statement of Comprehensive
Income from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group. All intra-group
transactions, balances, income and expenses are eliminated on
consolidation.
As an investment entity under the terms of the amendments to
IFRS 10 Consolidated Financial Statements, the Company is not
permitted to consolidate its controlled portfolio entities.
The Directors consider the Company to be an investment entity as
defined by IFRS 10 Consolidated Financial Statements as it meets
the following criteria as determined by the accounting
standard:
o Obtains funds from one or more investors for the purpose of
providing those investors with investment management services;
o Commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income or both; and
o Measures and evaluates the performance of substantially all of
its investments on a fair value basis.
3.2 Segment reporting
A business segment is a group of assets and operations engaged
in providing products or services that are subject to risks and
returns that are different from those of other business segments. A
geographical segment is engaged in providing products or services
within a particular economic environment that are subject to risks
and returns that are different from those of segments operating in
other economic environments.
The Directors are of the opinion that the Group is engaged in a
single segment of business being investment in infrastructure
assets in one geographical area, being India.
3.3 Income
Dividend income from investments is recognised when the right to
receive payment has been established, normally the ex-dividend
date.
Interest income is recognised on an accrual basis using the
effective interest method.
3.4 Expenses
All expenses are recognised on an accruals basis and are
presented as revenue items except for expenses that are incidental
to the disposal of an investment which are deducted from the
disposal proceeds.
3.5 Taxation
Income tax expense comprises current and deferred tax. Current
tax and deferred tax is recognised in profit or loss except to the
extent that it relates to a business combination, or items
recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to
tax payable in respect of previous years. Current tax payable also
includes any tax liability arising from the declaration of
dividends.
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognised for:
-- temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss;
-- temporary differences related to investments in subsidiaries
and jointly controlled entities to the extent that it is probable
that they will not reverse in the foreseeable future; and
-- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, based on the
laws that have been enacted or substantively enacted by the
reporting date.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax
authority on the same taxable entity, or on different tax entities,
but they intend to settle current tax liabilities and assets on a
net basis or their tax assets and liabilities will be realised
simultaneously.
A deferred tax asset is recognised for unused tax losses, tax
credits and deductible temporary differences, to the extent that it
is probable that future taxable profits will be available against
which they can be utilised. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
3.6 Foreign currency transactions
Transactions and balances
Transactions in foreign currencies are translated to the
respective functional currencies of Group entities at exchange
rates at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies at the reporting date
are retranslated to the functional currency at the exchange rate at
that date. The foreign currency gain or loss on monetary items is
the difference between amortised cost in the functional currency at
the beginning of the year, adjusted for effective interest and
payments during the year, and the amortised cost in foreign
currency translated at the exchange rate at the end of the
year.
Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are retranslated to the
functional currency at the exchange rate at the date that the fair
value was determined. Non-monetary items in a foreign currency that
are measured in terms of historical cost are translated using the
exchange rate at the date of the transaction. Foreign currency
differences arising on retranslation are recognised in profit or
loss, except for differences arising on the retranslation of
available-for-sale equity investments, a financial liability
designated as a hedge of the net investment in a foreign operation
that is effective, or qualifying cash flow hedges, which are
recognised in other comprehensive income.
Foreign operations
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on acquisition, are
translated to Sterling at exchange rates at the reporting date. The
income and expenses of foreign operations, excluding foreign
operations in hyperinflationary economies, are translated to
Sterling at exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other
comprehensive income, and presented in the foreign currency
translation reserve (translation reserve) in equity. However, if
the operation is a non-wholly-owned subsidiary, then the relevant
proportionate share of the translation difference is allocated to
the non-controlling interests. When a foreign operation is disposed
of such that control, significant influence or joint control is
lost, the cumulative amount in the translation reserve related to
that foreign operation is reclassified to profit or loss as part of
the gain or loss on disposal. When the Group disposes of only part
of its interest in a subsidiary that includes a foreign operation
while retaining control, the relevant proportion of the cumulative
amount is reattributed to non-controlling interests. When the Group
disposes of only part of its investment in an associate or joint
venture that includes a foreign operation while retaining
significant influence or joint control, the relevant proportion of
the cumulative amount is reclassified to profit or loss.
When the settlement of a monetary item receivable from or
payable to a foreign operation is neither planned nor likely in the
foreseeable future, foreign exchange gains and losses arising from
such a monetary item are considered to form part of a net
investment in a foreign operation and are recognised in other
comprehensive income, and presented in the translation reserve in
equity.
3.7 Financial instruments
Financial assets and financial liabilities are recognised when a
Group entity becomes a party to the contractual provisions of a
financial instrument. Financial assets and financial liabilities
are offset if there is a legally enforceable right to set off the
recognised amounts and interests and it is intended to settle on a
net basis.
The Group derecognises a financial asset when the contractual
rights to the cash flows from the financial asset expire or it
transfers the financial asset and the transfer qualifies for
derecognition in accordance with IAS 39. A financial liability is
derecognised when the obligation specified in the contract is
discharged, cancelled or expired.
3.8 Investments
Investments of the Group are categorised as at fair value
through profit or loss and are measured at fair value. Unrealised
gains and losses arising from revaluation are taken to the profit
or loss.
The Group has taken advantage of an exemption in IAS 28,
Investments in Associates, which permits investments in associates
held by venture capital organisations, investment funds and similar
entities to account for such investments at fair value through
profit or loss.
The fair value of unquoted securities is estimated by the
Directors using the most appropriate valuation techniques for each
investment.
3.9 Trade and other receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
3.10 Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangement entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of
its liabilities.
Financial liabilities are initially recognised at fair value
less any directly attributable transactions costs. Subsequent to
initial recognition, these liabilities are measured at amortised
cost using the effective interest method.
Equity instruments are recorded at proceeds received net issue
costs.
3.11 Provisions
A provision is recognised when the Group has a present legal or
constructive obligation as a result of a past event, and it is
probable that an outflow of economic benefits will be required to
settle the obligation, and the obligation can be reliably measured.
If the effect is material, provisions are determined by discounting
the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, where
appropriate, the risks specific to the liability.
3.12 Share issue costs
The share issue costs of the Company directly attributable to
the Placing that would otherwise have been avoided have been taken
to the share premium account.
3.13 Dividend distribution
Dividend distribution to the Company's shareholders is
recognised as a liability in the financial statements in the period
in which the dividends are approved.
3.14 Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held
at call with banks, other short-term highly liquid investments with
original maturities of three months or less, and bank
overdrafts.
3.15 Interest expense
Interest expenses for borrowings are recognised within finance
costs in the profit or loss using the effective interest rate
method.
3.16 Impairment
Financial assets that are stated at cost or amortised cost are
reviewed at each reporting date to determine whether there is
objective evidence of impairment. If any such indication exists, an
impairment loss is recognised in the profit or loss as the
difference between the asset's carrying amount and the present
value of estimated future cash flows discounted at the financial
asset's original effective interest rate.
3.17 Standards issued but not yet adopted
There are no standards or interpretations with an effective date
on or after 1 April 2018 that are likely to have a significant
effect on the financial statements.
4. Capital and financial risk management
Capital management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
In order to maintain or adjust the capital structure, the Group
may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares, or sell assets to reduce
debt.
Consistent with others in the industry, the Group monitors
capital on the basis of the gearing ratio. This ratio is calculated
as net debt divided by total capital. Net debt is calculated as
total borrowings and other long term loans as shown in the
consolidated statement of financial position, less cash and cash
equivalents.
The following table summarises the capital of the Group:
2018 2017
GBP'000 GBP'000
------------------------------------------ -------- --------
Long and short term loans and borrowings 36,127 14,033
Less: cash and cash equivalents (3,431) (1,522)
------------------------------------------ -------- --------
Net debt 32,696 12,511
Total equity 188,768 281,979
Total capital 221,465 294,490
------------------------------------------ -------- --------
Gearing ratio 14.8% 4.2%
------------------------------------------ -------- --------
Financial risk management
The Group's activities expose it to a variety of financial
risks: market risk (including currency risk and price risk), credit
risk, liquidity risk and cash flow interest rate risk.
Risk management is carried out by the Board of Directors. The
Board identifies and evaluates financial risks in close
co-operation with the Asset Manager.
(a) Market risk
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily
with respect to the Indian Rupee ("INR"). Foreign exchange risk
arises from future commercial transactions, recognised monetary
assets and liabilities and net investments in foreign
operations.
Net assets denominated in Indian Rupee at the year-end amounted
to GBP223.0 million (2017: GBP296.0 million), representing the
Group's investments in Indian Companies. At 31 March 2018, had the
exchange rate between the Indian Rupee and Sterling increased or
decreased by 10% with all other variables held constant, the
increase or decrease respectively in net assets would amount to
approximately GBP22.3 million (2017: GBP29.6 million). This
exposure is unhedged.
Net liabilities denominated in USD at the year-end amounted to
GBP32.7 million (2017: GBP12.5 million), principally comprising
loans and borrowings less cash and cash equivalents. At 31 March
2018, had the exchange rate between the USD and Sterling increased
or decreased by 10% with all other variables held constant, the
increase or decrease respectively in net liabilities would amount
to approximately GBP3.3 million (2017: GBP1.3 million). This
exposure is unhedged.
(ii) Market price risk
The Group is exposed to market risk arising from its investment
in unlisted Indian infrastructure companies due to factors that
affect the overall performance of the financial markets. These
investments present a risk of capital loss. The Board is
responsible for the selection of investments and monitoring
exposure to market price risk. All investments are in Indian
infrastructure projects.
If the value of the Group's investment portfolio had increased
by 10%, the Group's net assets would have increased by GBP22.3
million (2017: GBP29.6 million). A decrease of 10% would have
resulted in an equal and opposite decrease in net assets.
(iii) Cash flow and fair value interest rate risk and sensitivity
The Group's cash and cash equivalents are invested at short term
market interest rates. Loans and borrowings attract fixed interest
rates as detailed in note 16.
The table below summarises the Group's exposure to interest rate
risks. It includes the Groups' financial assets and liabilities at
the earlier of contractual re-pricing or maturity date, measured by
the carrying values of assets and liabilities.
Less than 3 months Non-
1 month 0 to 1 to 1 year 1 to 5 years Over 5 interest
month years bearing Total
31 March 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial assets
Investments at fair value through
profit or loss - - - - - 223,034 223,034
Trade and prepayments - - - - - 15 15
Cash and cash equivalents 3,431 - - - - - 3,431
Total financial assets 3,431 - - - - 223,049 226,480
---------- -------- ---------- ------------- -------- --------- ---------
Financial liabilities
Trade and other payables - - - - - (1,585) (1,585)
Loans and borrowings - - (36,127) - - - (36,127)
---------- -------- ---------- ------------- -------- --------- ---------
Total financial liabilities - - (36,127) - - (1,585) (37,712)
---------- -------- ---------- ------------- -------- --------- ---------
Total interest rate sensitivity gap 3,431 - (36,127) - -
---------- -------- ---------- ------------- -------- --------- ---------
Less than 3 months Non-
1 month 0 to 1 to 1 year 1 to 5 years Over 5 interest
month years bearing Total
31 March 2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial assets
Investments at fair value through
profit or loss - - - - - 295,991 295,991
Trade and prepayments - - - - - 28 28
Cash and cash equivalents 1,522 - - - - - 1,522
Total financial assets 1,522 - - - - 296,019 297,541
---------- -------- ---------- ------------- -------- --------- ---------
Financial liabilities
Trade and other payables - - - - - (1,529) (1,529)
Loans and borrowings - - (14,033) - - - (14,033)
---------- -------- ---------- ------------- -------- --------- ---------
Total financial liabilities - - - - - (1,529) (15,562)
---------- -------- ---------- ------------- -------- --------- ---------
Total interest rate sensitivity gap 1,522 - (14,033) - -
---------- -------- ---------- ------------- -------- --------- ---------
(b) Credit risk
Credit risk may arise from a borrower failing to make required
payments on investments, cash balances and debtor balances. The
amount of credit risk is equal to the amounts stated in the
statement of financial position for each of these assets. All the
cash balances are held with various Barclays bank accounts. The
Standard & Poor's credit rating of Barclays Bank plc is A-
(Negative).
(c) Liquidity risk
Liquidity risk is the risk that the Company may be unable to
meet short term financial demands. Prudent liquidity risk
management implies maintaining sufficient cash and marketable
securities, the availability of funding through an adequate amount
of committed credit facilities and the ability to close out market
positions. The Company aims to maintain flexibility in funding.
Residual undiscounted contractual maturities of financial
liabilities:
31 March 2018 Less than 0 to 1 3 months 1 to 5 Over 5 No stated
1 month months to 1 year years years maturity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial liabilities
Trade and other - - 1,585 - - -
payables
Loans and borrowings - - 36,127 - - -
---------------------- ---------- -------- ----------- -------- -------- ----------
Total - - 37,712 - - -
====================== ========== ======== =========== ======== ======== ==========
31 March 2017 Less than 0 to 1 3 months 1 to 5 Over 5 No stated
1 month months to 1 year years years maturity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial liabilities
Trade and other - - 1,529 - - -
payables
Loans and borrowings - - 14,033 - - -
---------------------- ---------- -------- ----------- -------- -------- ----------
Total - - 15,562 - - -
====================== ========== ======== =========== ======== ======== ==========
5. Critical accounting estimates and assumptions
These disclosures supplement the commentary on financial risk
management (see note 4).
Key sources of estimation uncertainty
Determining fair values
The determination of fair values for financial assets for which
there is no observable market prices requires the use of valuation
techniques as described in accounting policy 3.8. For financial
instruments that trade infrequently and have little price
transparency, fair value is less objective, and requires varying
degrees of judgement depending on liquidity, concentration,
uncertainty of market factors, pricing assumptions and other risks
affecting the specific instrument. See also "Valuation of financial
instruments" below.
Critical judgements in applying the Group's accounting
policies
Valuation of financial instruments
The Group's accounting policy on fair value measurements is
discussed in accounting policy 3.8. The Group measures fair value
using the following hierarchy that reflects the significance of
inputs used in making the measurements:
-- Level 1: Quoted market price (unadjusted) in an active market
for an identical instrument.
-- Level 2: Valuation techniques based on observable inputs,
either directly (i.e., as prices) or indirectly (i.e., derived from
prices). This category included instruments valued using: quoted
market prices in active markets for similar instruments: quoted
market prices for identical or similar instruments in markets that
are considered less than active; or other valuation techniques
where all significant inputs are directly or indirectly observable
from market data.
-- Level 3: Valuation techniques using significant unobservable
inputs. This category includes all instruments where the valuation
technique includes inputs not based on observable data and the
unobservable inputs have a significant effect on the instrument's
valuation. This category includes instruments that are valued based
on quoted prices for similar instruments where significant
unobservable adjustments or assumptions are required to reflect
differences between the instruments.
Fair values of financial assets and financial liabilities that
are traded in active markets are based on quoted market prices or
dealer price quotations. For all other financial instruments, the
Group determines fair values using valuation techniques.
The Group holds investments in several unquoted Indian
infrastructure companies. The Directors' valuations of these
investments, as shown in note 12, are based on a discounted cash
flow methodology or recent transaction prices, prepared by the
Company's Asset Manager (Franklin Park Management). The valuations
are inherently uncertain and realisable values may be significantly
different from the carrying values in the financial statements.
The methodology is principally based on company-generated cash
flow forecasts and observable market data on interest rates and
equity returns. The discount rates are determined by market
observable risk free rates plus a risk premium which is based on
the phase of the project concerned.
The table below analyses financial instruments measured at fair
value at the end of the reporting period, by the level in the fair
value hierarchy into which the fair value measurements are
categorised:
Level Level
1 2 Level 3
GBP'000 GBP'000 GBP'000
Financial assets at fair value through
profit or loss (note 12)
Shree Maheshwar Hydel Power Corporation
Ltd - - 6,643
India Hydropower Development Company,
LLC - - 20,870
Distribution Logistics Infrastructure
Private Ltd - - 191,513
Indian Energy Limited - - 4,008
--------- --------- --------
- - 223,034
========= =================================================== ========
The following table shows a reconciliation from the beginning
balances to the ending balances for fair value measurements in
level 3 of the fair value hierarchy:
GBP'000
Fair value brought forward 295,991
Additional capital injected 13,564
Movement in fair value (86,521)
Fair value at year end 223,034
=========
If the determined discount rates were increased by 1% per annum,
the value of unlisted equity securities would fall by GBP31 million
(2017: GBP30 million).
6. Other administration fees and expenses
2018 2017
GBP'000 GBP'000
Audit fees 59 77
Legal fees 332 87
Corporate advisory fees 188 136
Consultancy fees 134 200
Other professional costs 194 6
Administration fees 147 151
Directors' fees (note 14) 180 180
Insurance costs 9 9
Loan arrangement related fees 235 -
Travel and entertaining 134 86
Other costs 97 87
1,709 1,019
======== ========
7. Investment management, advisory and valuation fees
On 14 September 2016, the Company entered into a revised and
restated management and valuation and portfolio services agreement
(the "New Management Agreement") with Franklin Park Management, LLC
("Franklin Park" or the "Asset Manager"), the Company's existing
asset manager, to effect a reduction in annual cash fees payable by
IIP to the Asset Manager. The other terms of the New Management
Agreement were unchanged from those of the prior agreement between
the parties.
Under the New Management Agreement, the Asset Manager is
entitled to a fixed annual management fee of GBP5,520,000 per annum
(the "Annual Management Fee"), payable quarterly in arrears. In
addition to the Annual Management Fee, the Asset Manager will be
issued with 605,716 new ordinary shares in the Company annually
(the "Fee Shares"). The Fee Shares will be issued free of charge,
on 1 July of each calendar year for the duration of the New
Management Agreement.
Fees for the year ended 31 March 2018 were GBP5,536,000 (31
March 2017: GBP5,612,000). The fee included GBP16,000 expense for
the accrued shares relating to the Fee Shares during the year.
The amount of management fees outstanding as at 31 March 2018
amounted to GBP1,398,000 (2017: GBP1,482,841).
8. Finance costs
2018 2017
GBP'000 GBP'000
Loan interest expense (note 16) 1,861 1,028
-------- --------
1,861 1,028
======== ========
9. Taxation
There is no liability for income tax in the Isle of Man. The
Company is subject to tax at a rate of 0%.
The Group is subject to income tax in Mauritius at the rate of
15% on the chargeable income of Mauritian subsidiaries. They are,
however, entitled to a tax credit equivalent to the higher of the
foreign tax paid and a deemed credit of 80% of the Mauritian tax on
their foreign source income. No provision has been made in the
accounts due to the availability of tax losses.
10. Basic and diluted loss per share
Basic loss per share are calculated by dividing the loss
attributable to shareholders by the weighted average number of
ordinary shares outstanding during the year.
2018 2017
Loss attributable to shareholders (GBP thousands) (93,211) (43,859)
Weighted average number of ordinary shares in issue (thousands) 680,267 680,267
--------- ---------
Basic loss per share (13.70)p (6.4) p
========= =========
There is no difference between basic and diluted loss per
share.
11. Investments in subsidiaries
Since incorporation, for efficient portfolio management
purposes, the Company has established or acquired the following
subsidiary companies, with certain companies being consolidated and
others held at fair value through profit or loss in line with the
Amendments to IFRS 10 Consolidated Financial Statements (see note
3.1):
Consolidated subsidiaries Country of Ownership
incorporation interest
Infrastructure India HoldCo Mauritius 100%
Power Infrastructure India Mauritius 100%
Roads Infrastructure India Mauritius 100%
Power Infrastructure India (Two) Mauritius 100%
Distribution and Logistics Infrastructure
India Mauritius 100%
Hydropower Holdings India* Mauritius 100%
India Hydro Investments* Mauritius 100%
Non-consolidated subsidiaries held at fair value through profit
or loss
Distribution & Logistics Infrastructure sub group:
Distribution Logistics Infrastructure
Private Limited India 99.9%
Freightstar Private Limited India 99.9%
Deshpal Realtors Private Limited India 99.8%
Bhim Singh Yadav Property Private India 99.9%
Indian Energy Limited sub group (IEL):
Indian Energy Limited Guernsey 100%
Indian Energy Mauritius Limited Mauritius 100%
Belgaum Wind Farms Pvt Limited India 100%
iEnergy Wind Farms (Theni) Pvt Limited India 74%
iEnergy Renewables Pvt Limited India 100%
India Hydropower Development Company sub
group (IHDC):
India Hydropower Development Company LLC Delaware 50%
Franklin Park India LLC Delaware 100%
12. Investments - designated at fair value through profit or
loss
At 31 March 2018, the Group held four investments in unlisted
equity securities. Three of the investments are held by the
Company's wholly owned subsidiaries in Mauritius and one is held
directly by the Company.
The investments are recorded at fair value as follows:
SMHPCL WMPITRL IHDC DLI IEL Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April 2016 9,394 20,375 26,009 266,221 12,519 334,518
Additional capital injection - - - 18,612 - 18,612
Disposal - (20,375) - - - (20,375)
Fair value adjustment 595 - 2,990 (38,390) (1,959) (36,764)
-------- --------- -------- --------- -------- ---------
Balance as at 31 March
2017 9,989 - 28,999 246,443 10,560 295,991
-------- --------- -------- --------- -------- ---------
Additional capital invested - - - 13,564 - 13,564
Fair value adjustment (3,346) - (8,129) (68,494) (6,552) (86,521)
-------- --------- -------- --------- -------- ---------
Balance as at 31 March
2018 6,643 - 20,870 191,513 4,008 223,034
======== ========= ======== ========= ======== =========
(i) Shree Maheshwar Hydel Power Corporation Ltd ("SMHPCL")
(ii) Western MP Infrastructure and Toll Road Pvt Ltd
("WMPITRL")
(iii) India Hydropower Development Company LLC ("IHDC")
(iv) Distribution Logistics Infrastructure ("DLI")
(v) Indian Energy Limited ("IEL")
The investments in SMHPCL, IHDC and DLI have been fair valued by
the Directors as at 31 March 2018 using discounted cash flow
techniques, as described in note 5. The discount rate adopted for
the investments is the risk free rate (based on the Indian
government 9-10-year bond yields) plus a risk premium of 8% for
SMHPCL, 3.2% for IHDC, and 7% for DLI. (2017: risk premium was 8%
for SMHPCL, 3.2% for IHDC, and 7% for DLI). The investment in IEL
has been fair valued based on the post year-end sales price - see
note 20.
All the investments valued using discounted cash flow techniques
are inherently difficult to value due to the individual nature of
each investment and as a result, valuations may be subject to
substantial uncertainty. SMHPCL and DLI are still in the
construction or 'ramp-up' phase. DLI requires significant
additional funding to complete its planned business model and there
is no assurance this will be available. See note 2(d) regarding the
conditional proposed financing of the Group, including additional
funding for DLI. There is no assurance that the estimates resulting
from the valuation process will reflect the actual sales price even
where such sales occur shortly after the valuation date.
As at 31 March 2018, the Company had pledged 51% of the shares
in DLI, totalling 66,677,000 shares of INR 10 each, as part of the
terms of a term loan within the underlying investment entity. In
addition, the Company had provided a non-disposal undertaking of
51% of the shares in IEL, totalling 25,508,980 shares of 1 penny
each, as part of the terms of a loan agreement within the
underlying investment entity.
13. Share capital
No. of shares Share Share premium
capital
Ordinary shares
of GBP0.01 GBP'000 GBP'000
each
---------------- --------- --------------
Balance at 31 March 2018 680,267,041 6,803 282,787
================ ========= ==============
As detailed in note 7, the Asset Manager is entitled 605,716 new
ordinary shares in the Company annually (the "Fee Shares"). The Fee
Shares will be issued free of charge, on 1 July of each calendar
year for the duration of the New Management Agreement. As at 31
March 2018, the accrued shares were 1,058,758 (including prior year
accrued Fee Shares not yet issued) and the accrued expense is
GBP34,000 (2017: 18,000).
14. Directors' fees and Directors' interests
The Directors had the following interests in the shares of the
Company at 31 March 2018:
Timothy Walker 481,667 Ordinary Shares
Sonny Lulla 1,000,000 Ordinary Shares
Details of the Directors' remuneration in the year are as
follows:
2018 2017
GBP'000 GBP'000
Timothy Walker 90 90
Madras Seshamani Ramachandran 90 90
180 180
======== ========
15. Trade and other payables
2018 2017
GBP'000 GBP'000
Trade payables 91 76
Accruals and other payables 1,494 1,453
1,585 1,529
======== ========
16. Loans and borrowings
Capital Interest Total
GBP'000 GBP'000 GBP'000
Balance as at 1 April 2017 13,546 487 14,033
Loans drawn-down 22,651 - 22,651
Interest charge for the year - 1,861 1,861
Foreign currency loss (2,329) (89) (2,418)
Balance as at 31 March 2018 33,868 2,259 36,127
======== ========= ========
On 8 April 2013, the Company entered into a working capital loan
facility agreement with GGIC Ltd ("GGIC") for up to US$ 17.0
million. The loans were originally repayable on 10 April 2017.
During the year, a further US$4.5 million was made available to,
and drawn-down on 19 September 2017, with the fully drawn-down
working capital loan now totalling US$21.5 million. Subsequent to
year-end the loan maturity has been extended to 18 October 2018
(note 20). The working capital loan has an interest rate of 7.5%
per annum, payable semi-annually during the facility period. The
Company's ultimate controlling party during the year was GGIC and
affiliated parties.
In addition, and on 30 June 2017, the Company entered into an
US$8.0 million unsecured bridging loan facility with Cedar Valley
Financial ("Cedar Valley"), an affiliate of GGIC. A further US$18.0
million was made available to, and drawn down by, the Company
during the year, with the fully drawn-down bridging loan, now
totalling US$26.0 million. Subsequent to year-end the loan maturity
has been extended to 18 October 2018 (note 20). The bridging loan
has an interest rate of 12% per annum, payable semi-annually during
the facility period. Cedar Valley's ultimate controlling party
during the year was GGIC and affiliated parties. See note 20
regarding further extensions to this facility after the
year-end.
Accrued interest relating to these loans as at the year-end
amounted to GBP2.3 million (2017: GBP0.6 million).
17. Related party transactions
Management services and Directors' fees
Franklin Park Management LLC ("FPM") is beneficially owned by
certain Directors of the Company, namely Messrs Tribone, Lulla and
Venerus, and receives fees in its capacity as Asset Manager as
described in note 7.
As detailed in note 7, fees payable to FPM in respect of
management services for the year ending 31 March 2018 amounted to
GBP5,536,000 (31 March 2017: GBP5,612,000). The fee included
GBP16,000 expense for the accrued shares relating to the Fee Shares
during the year. The amount of management fees outstanding as at 31
March 2018 amounted to GBP1,398,000 (2017: GBP1,482,841).
Loans and borrowings
See note 16 regarding loans from GGIC and Cedar Valley
Financial, including interest charged in the year and accrued at
the year-end.
Administrator
FIM Capital Limited provides administration services including
financial accounting services to the Company. The fees paid to the
Administrator for the year amounted to GBP120,000 (2017:
GBP120,000). The amount outstanding as at year end is GBP30,000
(2017: GBP30,000).
18. Net Asset Valuation (NAV) per share
The NAV per share is calculated by dividing the net assets
attributable to the equity holders of the Company at the end of the
period by the number of shares in issue.
2018 2017
GBP'000 GBP'000
Net assets (GBP'000) 188,768 281,979
Number of shares in issue (note
13) 680,267,041 680,267,041
------------ ------------
NAV per share 0.28 GBP0.41
============ ============
There is no difference between basic and diluted NAV per
share
19. Contingent Liabilities
In April 2016, Power Infrastructure India (PII) (a subsidiary
owning the Company's investment in SMHPCL) completed the transfer
in its favour of the escrowed shares, pursuant to the share escrow
and pledge agreements between PII and certain other Mauritius
entities owned by the promoter. In the aggregate, PII owns,
directly and indirectly, 31.2% of the shares of SMHPCL prior to the
dilutive effects of the lender's actions as discussed in the past
investment reports.
The escrowed shares are held in a Mauritius company with a third
party debt of GBP11.6 million. PII disputes this loan on the basis
that under the share escrow and pledge agreements, no valid,
binding or enforceable loan arrangement are capable of coming into
force in the Mauritius entity holding the escrow shares without the
consent of PII.
Therefore, Board disputes the loan in the Mauritius company and
remains fully committed to resolving the misunderstanding with the
parties concerned. The Directors do not consider it necessary to
provide for the third party debt of GBP11.6 million in the
financial statements.
20. Subsequent events
Loan extensions
Since the period end, the fully drawn down unsecured bridging
loan facility with Cedar Valley Financial, is now totalling US$43.4
million and is now repayable, together with the associated interest
payment, on the earlier:
(i) completion of the Proposed Financing; and (ii) 18 October
2018.
A further US$4.5 million of the working capital loan facility
from GGIC (the "Working Capital Loan") was made available to the
Company on 19 September 2017 and the fully drawn down Working
Capital Loan, now totalling US$21.5 million, is repayable, pursuant
to a maturity extension announced on 18 September 2018, with the
associated interest payment, on 18 October 2018.
Conditional proposed financing
As announced on 31 July 2018, the Company agreed a conditional
proposed financing with PSA International and Gateway Partners
pursuant to which up to US$125.0 million (approximately GBP95.5
million), before expenses, will be made available to the Group. The
new funding would enable the Company to repay the working capital
loan and the Bridging Loan as well as provide additional working
capital and construction capital to DLI and provide for the Group's
general working capital needs.
The proposed financing will see:
-- the issue by Distribution and Logistics Infrastructure India
Limited ("DLII"), DLI's parent company, of up to 7,500 convertible
preference shares in DLII's capital (the "DLII CPS") for an
aggregate consideration of up to US$75.0 million; and
-- the sale by the Group of existing ordinary shares in DLII
representing 24% of DLII's issued ordinary share capital ("Sale
Shares") currently held by the Group for a consideration of US$50.0
million.
IIP is currently interested in 100% of the share capital of DLI.
Following the disposal of the Sale Shares, IIP's interest in DLI
will be reduced to 76%. On conversion of the DLII CPS, which will
take place based upon an enterprise valuation of DLI at 7.5x EBITDA
for the 12 months ending 30 June 2021, IIP's interest in DLI will
be reduced to a minimum of 20% and a maximum of 49%.
However, shareholders should note that on conversion of the DLII
CPS following of the occurrence of a default under any of the
agreements, IIP's interest in DLI could be reduced to zero.
Asset sale
On 27 April 2018, IIP's wholly owned subsidiary Indian Energy
(Mauritius) Limited entered into a share purchase agreement for the
sale of Indian Energy Limited (IEL) for INR 364 million (approx.
GBP4.0 million). As at 31 March 2018, IEL's carried value is GBP4.0
million.
However, following an unduly protracted process and attempts by
the buyer to amend the agreed contractual terms, including a
reduction in the agreed consideration, the Group withdrew from the
proposed transaction on 14 September 2018 as the long stop date
under the SPA had lapsed without the remaining conditions precedent
having been satisfied.
There were no other significant subsequent events.
21. Ultimate controlling party
The ultimate controlling party during the year was GGIC and
affiliated parties.
22. Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SEMSAFFASEFU
(END) Dow Jones Newswires
September 21, 2018 04:18 ET (08:18 GMT)
Infrastructure India (LSE:IIP)
Historical Stock Chart
From Jul 2024 to Aug 2024
Infrastructure India (LSE:IIP)
Historical Stock Chart
From Aug 2023 to Aug 2024