TIDMIIP TIDMTTM
RNS Number : 9775C
Infrastructure India plc
23 October 2020
23 October 2020
Infrastructure India plc
("IIP" or the "Company" and together with its subsidiaries, the
"Group")
Annual results for the twelve months ended 31 March 2020
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 2020.
Financial performance
-- Value of the Company's investments was GBP262.0 million as at
31 March 2020 (GBP259.2 million 30 September 2019; GBP179.4 million
31 March 2019).
-- Net Asset Value decreased to GBP124.1 million as at 31 March
2020 (GBP149.1 million 30 September 2019; GBP106.0 million 31 March
2019).
-- NAV per share was 18.2p as at 31 March 2020 (21.9p September 2019; 15.6p March 2019).
-- Movement in the value of the Company's investments as at 31
March 2020 was driven by favourable changes in the Indian tax
regime and a decrease in the yield of benchmark Indian government
10-year bonds, which serves as the risk-free rate in asset
valuations. These positive impacts were offset by a weakening of
the Indian Rupee against Sterling towards the end of the period and
by revisions, as a result of the impact of COVID-19, to business
assumptions and completion schedules on both construction and
operations at IIP's largest asset, Distribution Logistics
Infrastructure Limited ("DLI"). Net asset value as at 31 March 2020
also reflects the accrual of interest on the Company's debt
facilities.
Commenting on the results Sonny Lulla, CEO of IIP, said:
"The Covid-19 pandemic in India resulted in a national lockdown
followed by localised restrictions which has had a material impact
on all industrial activity in the country. It is likely that there
will be ongoing volatility in all markets as demand, which is
currently depressed, improves and container bottlenecks unwind.
This has understandably had a negative impact on trading for IIP's
investee companies. However, for IIP's assets, in particular DLI,
the lower corporation tax and monetary initiatives announced by the
Government of India will be beneficial for future cash flows which
have helped underpin valuations. Despite the extraordinary
upheaval, we remain confident that the longer term fundamentals and
prospects of the logistics market in India remain strong."
Enquiries:
www.iiplc.com
Infrastructure India plc Via Novella
Sonny Lulla
Cenkos Securities plc
Nominated Adviser & Joint Broker
Ben Jeynes / Katy Birkin +44 (0) 20 7397 8900
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 / Fergus Young +44 (0) 20 3151 7008
JOINT STATEMENT FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE
We are pleased to report Infrastructure India plc's ("IIP" or
the "Company" and together with its subsidiaries the "Group")
audited annual results for the year ended 31 March 2020.
Net asset value ("NAV") and net asset value per share decreased
to GBP124.1 million and 18.2p respectively as at 31 March 2020 when
compared to GBP149.1 million and 21.9p as at 30 September 2019
(GBP106.0 million and 15.6p as at 31 March 2019). The primary
drivers of the movement in NAV were tax reforms, including cuts to
corporate tax, and a lower risk-free rate. These positive impacts
were offset by a weakening of the Indian Rupee against Sterling and
revisions to business assumptions and completion schedules to
reflect the impact of COVID-19 on both construction and operations
at Distribution Logistics Infrastructure Limited ("DLI").
The fiscal year commenced with IIP announcing an agreed debt
facility of US$105 million with IIP Bridge Facility (the
"Financing"), an affiliate of GGIC, Ltd. The Financing is a secured
four-year term loan provided to IIP's wholly owned Mauritian
subsidiary, Infrastructure India Holdco, and matures on 1 April
2023. The fully drawn Financing was arranged to provide sufficient
capital to enable DLI to commission, ramp up and complete all of
its existing terminal facilities as well as to meet other DLI
lender requirements and to provide additional working capital to
the Group. The deployment of capital during the first half of the
fiscal year allowed steady construction progress to be made at
DLI.
DLI was performing well during the first quarter of the current
calendar year, with increased revenue, lower quarter on quarter
costs and timely project completion. Construction at Nagpur was
completed, including a Private Freight Terminal and additional
warehousing, and operations at the new facilities had begun to ramp
up. Works also progressed at Bangalore and Palwal. In March 2020,
when the COVID-19 coronavirus outbreak was declared a global
pandemic, the reduced movements of goods and raw materials between
China and India had already begun to impact some of DLI's
customers' inventories and therefore production and shipping. In
addition to lower volumes, the changes in the balance of movements
of goods resulted in bottlenecks as empty containers needed
repositioning to meet domestic and export shipments. The lack of
available empty containers had an impact on Indian hinterland
exporters.
On 24 March 2020, the Government of India ordered a complete
national lockdown of non-essential activity in an effort to slow
the spread of COVID-19. This action had immediate and significant
consequences for all businesses in India. For DLI, all construction
activities at its terminals ceased and while freight movement was
essential, movement of cargo was limited due to closures across the
supply chain. On 8 June 2020, following more than two months of
national lockdown, the Government of India commenced a phased
reopening of economic activities and adopted a cluster containment
strategy.
Although activity recommenced, operations have remained at low
capacity across most industrial sectors. This is due to both lower
demand and critical shortages of labour and raw materials. Freight
volumes - export, import and bulk cargo - remain depressed and are
unlikely to pick up in the near term. Consequently, there has been
aggressive discounting amongst operators in the logistics
sector.
In May 2020, Prime Minister Modi announced a stimulus package
aimed at improving liquidity, particularly for small and medium
enterprises, increasing demand as well as long-term reforms related
to land and labour. Although welcome, the package is largely viewed
as beneficial in the long term. The Reserve Bank of India reduced
the benchmark interest rate by 75 basis points and extended a
moratorium on debt obligations by 6 months.
In an effort to provide fiscal stimulus to support investment
and boost growth, the Government of India announced sweeping tax
reforms with cuts to corporate tax with effect from fiscal year
2019-2020. For DLI in particular, the adoption of the new tax
methodology is expected to materially improve long-term cash flows.
The tax changes are also expected to benefit all of IIP's portfolio
companies.
IIP's hydro assets are performing as expected with some
disruption to administrative functions and localised delays, but
overall the impact of COVID-19 has been limited with all sites
accessible and fully staffed. The impact at Indian Energy Limited
("IEL") was greater, with one wind farm project, Theni, which sells
power under a Group Captive Scheme to manufacturing and retail
customers, experiencing lower consumption of power particularly
during lockdown. In response, IEL has begun diversifying its
customer base.
In June 2020, border tension increased with China in the
northern Himalayan Galwan Valley, with a clash between military
personnel. Although India and China expressed their intention to
resolve the conflict diplomatically, both countries have maintained
a military presence in the area. In response to the border
conflict, both Indian and Chinese customs officials have been
holding up consignments from the respective countries and these
actions created a backlog at the ports and airports and therefore
more bottlenecks for logistics operators.
Financial performance
The gross value of the Group's investments was GBP262.0 million
as at 31 March 2020 (GBP259.2 million as at 30 September 2019;
GBP179.4 million as at 31 March 2019). Currency exchange rates
weakened at the end of the Company's financial year with GBP: INR
exchange rate of 92.48 as at 31 March 2020 against 86.92 as at 30
September 2019 and 90.28 as at 31 March 2019. The risk-free rate of
return, based on the benchmark Indian government 10-year bonds,
decreased to 6.17% as at 31 March 2020 from 6.68% as at 30
September 2019 and 7.35% as at 31 March 2019.
Total investment during the year ended 31 March 2020 was GBP32.5
million, all of which was advanced by the Group to DLI to fund
construction work, working capital and debt servicing obligations
during the period.
Transport
DLI is a supply chain transportation and container
infrastructure company and one of the largest private operators in
its sector in India with a nationwide network of terminals and a
quality road and rail transportation fleet. During the first half
of the fiscal year, DLI was performing well, with construction
progress and a steady and sustained trend of improvement in overall
revenues and margins. The interruption to the business from
COVID-19 in March 2020 and the subsequent lockdown had a profound
impact on DLI and the wider logistics sector.
Following more than two months of national lockdown, the
Government of India adopted a cluster containment strategy. Each
state was divided in three zones - red, orange and green - with red
being a 'hot spot' of the disease with restricted entry and
movement. Each of DLI's terminals sat within designated red zones
as a result of their location proximity to large cities and/or
industrial centres. As essential services, Nagpur maintained a
limited volume of freight movement, however this was hampered by
closures across the supply chain and container bottlenecks.
The closure of administrative offices in cities during lockdown
meant delays to regulatory approvals and many of these remain in
backlog. Work at the terminal in Bangalore is materially complete,
however the outstanding work and approvals continue at a slow pace.
Work in the NCR and at Chennai are on hold due to local
restrictions. At Nagpur, all Phase II work is complete and DLI
awaits a regulatory clearance. The Nagpur terminal has been
operating throughout lockdown.
Following the lockdown and worker migration to their home towns,
there has been a critical shortage of labour. Imports, which were
almost at a standstill during lockdown, have led to congestions at
ports as well as inland terminals and shortages of raw materials.
Although manufacturing activities have resumed, capacity is low
reflecting demand and lack of labour. DLI management expect volumes
to remain slack in some segments but gradually improve in the
coming months.
Revised completion schedules are still being considered
primarily due to labour shortages. Palwal, for example, is expected
to commence initial operations several weeks after workers are on
site and construction is again underway. The company is therefore
taking a conservative view of timing.
A projected global economic slowdown is likely to affect DLI
volumes, with the impact being dependent on the extent and duration
of the slowdown. As a result, DLI initiated overhead expense
reductions and has identified alternative revenue opportunities. A
grace period on loan repayments has been welcome and DLI is
reviewing and discussing existing facilities with lenders.
Energy
India Hydropower Development Company's ("IHDC") overall
production was lower than the same period last year largely as a
result of inconsistent monsoon inflows and lower production at the
Bhandadara projects due to a regional drought in Maharashtra.
During the pandemic, IHDC has been operating as expected with
limited disturbance to operations despite the lockdowns and
continued restrictions. There was some administrative disruption
due to office closures and localised delays, such as the pace of
replacement of defective runners at Raura and slowing of residual
construction at the Raura site. Overall however, there was little
impact on operations and plants were operating and fully staffed.
The irrigation dams upstream of the Darna project are now complete
and IHDC expects improved production at the plant in 2021.
Indian Energy Limited ("IEL") has two operating wind farms,
Theni, in Tamil Nadu, and Gadag, in Karnataka, and overall energy
production was marginally lower than the previous year. During the
first half of the fiscal year, both of IEL's projects were impacted
by issues with O&M contractors and timely maintenance and
replacement of parts. IEL signed a new O&M vendor for Gadag
which should result in both timely maintenance and cost savings.
With the onset of the pandemic, the Theni project, which sells
power under a Group Captive Scheme to manufacturing and retail
customers, experienced lower consumption of power particularly
during lockdown. In response, IEL has begun diversifying its
customer base.
At Shree Maheshwar Hydel Power Corporation Limited ("SMH"), in
July 2019, the SMH board approved entry into a memorandum of
understanding between SMH, the project's lead lender and the
project promoter. The project promoter was given management control
of SMH, deemed to be required to provide funding to meet the most
immediate needs of SMH. The lenders provided the project promoter
with 6 months to propose, and a further 6 months to implement, an
agreeable settlement with the lenders and to secure appropriate
financing to complete the project.
The promoter has not secured the required funding and SMH
received a termination order with regard to the historically
entered Power Purchase Agreement ("PPA") and Resettlement &
Rehabilitation Agreement ("R&R Agreement") from M.P. Power
Management Company Limited, a company owned by the Government of
Madya Pradesh. The PPA was signed in 1994 and amended in 1996 and
the R&R Agreement was signed in 1997. Without a valid PPA and
visibility into availability of completion financing, it is
impossible to prepare reasonable forecasts. Although IIP retains
legal options to extract value for its investment, until further
clarity emerges, it is assumed that SMH has no contribution to
IIP's valuation.
Company liquidity and financing
As at 31 March 2020, the Group had gross cash resources of
GBP38.3 million.
IIP announced on 2 April 2019 that it had entered an agreement
with IIP Bridge Facility LLC, for a US$105 million secured
four-year term loan provided to IIP's wholly owned Mauritian
subsidiary, Infrastructure India Holdco, and maturing on 1 April
2023. The fully drawn Financing was arranged to provide sufficient
capital to enable DLI to commission, ramp up and complete all of
its existing terminal facilities as well as to meet other DLI
lender requirements and to provide additional working capital to
the Group. The deployment of capital during the first half of the
fiscal year allowed steady construction progress to be made at
DLI.
Alongside the Financing, and during the period, the Company
extended the maturity of the working capital loan facility provided
to the Company by GGIC Ltd. ("GGIC") (the "Working Capital Loan")
and extended and enlarged the unsecured bridging loan facility
provided to the Company by Cedar Valley Financial, an affiliate of
GGIC (the "Bridging Loan").
The Working Capital Loan was originally provided to the Company
in April 2013 by GGIC in an amount of US$17 million and increased
to US$21.5 million in September 2017. The Working Capital Loan
carried an interest rate of 7.5% per annum on its principal amount.
The Company and GGIC agreed to extend the maturity of the Working
Capital Loan to 30 June 2023 and increase its interest rate to 15%
per annum from 1 April 2019.
The Bridging Loan was originally provided to the Company in June
2017 by Cedar Valley Financial in an amount of US$8.0 million and
was subsequently increased in multiple tranches to US$64.1 million
in March 2019. The Bridging Loan carried an interest rate of 12.0%
per annum on its principal. The Company and Cedar Valley Financial
agreed to extend the maturity of the Bridging Loan which will now
mature on 30 June 2023 and increase its interest rate to 15% per
annum from 1 April 2019. IIP utilised US$7.5 million of the funds
from the Financing to repay the Cedar Valley Financial bridging
loan (together with accrued interest) in accordance with its terms
such that the remaining principal under the bridging loan
(following this partial repayment) including capitalised interest
of US$ 6.5 million amounts to US$ 63.1 million.
In March 2020, the economic landscape changed dramatically. It
remains difficult to predict when the wider market will return to
normal levels, but the IIP Board believes the individual portfolio
company management teams have responded well to the crisis and that
the Company is well positioned to effectively navigate current
market conditions.
Given the continued impact of the pandemic, the Group has
carried out sensitivity analysis to assess the implications of
different scenarios on future cash flows. The moderation in volumes
and margins at DLI to reflect the potential impact of COVID 19 has
resulted in an associated DLI 'COVID' valuation negative impact of
approximately GBP15 million, which has been more than offset by the
positive impacts of other factors described below.
We will continue to update shareholders as the COVID-19
situation unfolds further and on progress at DLI as well as
developments across IIP's portfolio of assets in the period
ahead.
Tom Tribone & Sonny Lulla
October 2020
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- Sep 2019
Investment amount GBP34.8m (implied) GBP58.4m (implied) GBP168.2 million
Aggregate percentage
interest 37.4% 99.9% 99.9%
Investment during the GBP9.7 million
period
Valuation as at 31 March GBP231.4 million
2020
Project debt outstanding GBP74.8 million
as at 31 March 2020
Key developments * Following more than two months of national lockdown
due to COVID-19 has posed additional challenges for
the already slowing economic conditions before the
lockdown began in March 2020.
* In India, various research agencies have issued their
initial estimate of 10%-15% drop in volumes across
the logistic sector during fiscal year 2021.
* The lockdown meant all construction at terminals
ceased. Since restrictions were listed in June, DLI
has managed to make some progress, particularly at
Bangalore, but it is slow and regulatory approvals
are backlogged. DLI has had to revise completion
dates at all the facilities.
* DLI management has undertaken overhead cost
reductions and sought additional revenue streams.
* Discussions have been initiated with DLI's existing
lenders to restructure its debt and has proposed a
2-year moratorium and lower interest rate.
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
On 24 March, the Government of India ordered a complete national
lockdown of non-essential activity in an effort to slow the spread
of COVID-19. The states of Maharashtra, Tamil Nadu, and Delhi are
the most affected states accounting for more than 50% of the total
cases in India. DLI's terminals are located in each of these states
and the restrictions in place have hindered construction progress
as well as regulatory approvals with office closures. DLI's
Bangalore terminal is located on the border of Karnataka and Tamil
Nadu which saw a surge in cases and additional restrictions. The
economic impact of lockdown and continued local restrictions is
still difficult to measure but market consensus for India's economy
indicates a contraction to the end of the fiscal year, followed by
low single digit growth next fiscal year. This takes account of the
softening seen prior to COVID-19.
On 8 June, the Government of India commenced a phased reopening
of economic activities and adopted a cluster container strategy.
There was resumption of domestic air travel, restaurants, shopping
malls, religious places, construction and industrial activities.
However, each sector has various restrictions imposed, such as
reduced capacity and social distancing measures. Although economic
activity has been gradually picking up, it has been hampered by
labour shortages, lower consumer footfall and demand, availability
of raw materials and disruptions to supply chains. For the
logistics sector in India, various research agencies have estimated
a drop of at least 10% in volumes to the end of the fiscal year.
These estimates may change however as the pace of recovery becomes
more apparent in the coming months.
Prior to the global pandemic, DLI was performing well during the
first quarter of the current calendar year, with increased revenue
and lower quarter on quarter costs and timely project completion.
Construction at Nagpur was completed, including a Private Freight
Terminal and additional warehousing and operations at the new
facilities had begun to ramp up. Works also progressed at Bangalore
and Palwal.
The closure of administrative offices in cities during lockdown
meant delays to regulatory approvals and many of these remain in
backlog. Work at the terminal in Bangalore is materially complete,
however the outstanding work and approvals continue at a slow pace.
Work in the NCR and at Chennai are on hold due to local
restrictions. At Nagpur, all Phase II work is complete and DLI
awaits a regulatory clearance. The Nagpur terminal has been
operating throughout lockdown. Revised completion schedules are
still being considered primarily due to labour shortages. Palwal,
for example, is expected to commence initial operations several
weeks after workers are on site and construction is again underway.
A conservative view of timing is therefore being taken.
In an effort to provide fiscal stimulus to support investment
and boost growth, the Government of India announced sweeping tax
reforms with cuts to corporate tax with effect from fiscal year
2019-2020. For DLI in particular, the adoption of the new tax
methodology is expected to materially improve long-term cash flows.
DLI management have undertaken cost reductions in overhead
expenses, resource optimisation and explored additional revenue
streams. DLI is also reviewing and renegotiating vendor agreements
to streamline all operations. In addition, the team are exploring
restructuring and refinancing to extend the moratorium on debt
obligations to two years and lower interest rates. Discussions are
ongoing and DLI expects lenders to be broadly supportive of such
proposals in the current circumstances.
Valuation
The valuation reflects revised business and construction
assumptions, based on a detailed review of the budget prepared by
DLI's management team following the onset of COVID-19. New tax
calculations reflecting the changes to the Indian tax regime have
also been applied. The adoption of the new tax methodology will
improve the cash flows significantly for DLI, leading to an
increase of approximately GBP31 million in the DLI valuation.
As at 31 March 2020, the net present value ("NPV") of future IIP
cash flows for DLI using the above assumptions is GBP231.4 million
at a discount rate of 13.17%. The discount rate is based on a
stated methodology of a risk free rate based on the Indian 10-year
bond with a risk premium of 6% for construction. For this period, a
risk free rate of 6.17% with a risk premium of 7% was applied,
which is considered by the Board to be an appropriate discount rate
for the period, with the impact of COVID-19 having been applied
directly to business assumptions. The positive impact of revised
tax assumptions and a lower risk-free rate were partially offset by
a depreciation of the Indian Rupee against Sterling and a
moderation of volumes and margins resulting from the global
pandemic.
India Hydropower Development Company LLC ("IHDC")
Description IHDC develops, owns and operates small hydropower
projects with seven fully operational plants
(74 MW of installed capacity), and a further
18 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 GBP23.5 million
2020
Project debt outstanding GBP14.8 million
as at 31 March 2020
Key developments
* Overall generation from IHDC's projects was lower
than the corresponding period last year, largely as a
result of inconsistent monsoon inflows, lower
production at the Bhandardara projects in Maharashtra
and, during the first half of the year, an upstream
landslide at Panwi causing silt.
* The plant at Raura was commissioned in September 2019
and IHDC are currently selling the power into the
wholesale market whilst in discussions with various
private off-takers for a PPA.
* IHDC had limited disruption from COVID-19, other than
some administrative functions and localised delays at
Raura.
Investment details
The IHDC portfolio has installed capacity of approximately 74 MW
across seven projects - Bhandardara Power House I ("BH-I"),
Bhandardara Power House II ("BH-II"), Darna in Maharashtra;
Birsinghpur in Madhya Pradesh; and Sechi, Panwi and Raura in
Himachal Pradesh. IHDC has an additional 18 MW of capacity under
development and construction with planned capacity at two sites
having been revised upwards.
Project update
Overall generation from IHDC's projects was 124 GWh during the
fiscal year against 164 GWh the previous year. Lower production was
largely a result of inconsistent monsoon inflows, lower production
at the Bhandadara projects from regional drought in Maharashtra and
silting at Panwi following an upstream landslide.
The Raura plant was commissioned on 9 September 2019 and IHDC is
currently selling Raura's power into the wholesale market while
exploring options for a longer term PPA with private offtakers.
There were some localised delays at Raura due to COVID-19
lockdowns, such as the pace of replacement of the defective runners
and slowing of residual construction at the site. Overall however,
there was little impact from the pandemic on IHDC operations and
plants were operating and fully staffed.
The irrigation dams upstream of the Darna project are now
complete and IHDC expects improved production at the plant in 2021.
The team are making progress in addressing the silting issue at
Panwi and are confident that this will be resolved in the current
fiscal year.
Valuation
The IHDC portfolio was valued in accordance with the Company's
stated valuation methodology by using a composite risk premium of
2% over the risk free rate of 6.17%. 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
and revised business assumptions to accommodate delays at Raura.
The reduced taxation and lower risk-free rate had a favourable
impact on the valuation. The value for the IHDC investment as at 31
March 2020 is GBP23.5 million.
Indian Energy Limited ("IEL")
Description An independent power producer 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 GBP7.1 million
2020
Project debt outstanding GBP6.8 million
as at 31 March 2020
Key developments
* Overall generation from IEL's two projects was
marginally lower than the previous period.
* During the year, both projects have been impacted by
issues with O&M contractors and timely maintenance
and replacement of parts.
* The offtake at Theni - which has a Group Captive
Scheme with commercial customers - has been affected
by lower customer demand particularly during the
period of national lockdown.
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
Overall generation from IEL's two projects was 66 GWh during the
full fiscal year against 68 GWh in the previous year. This marginal
reduction was a result of lower wind resource over the season and
some delays in generator maintenance caused by O&M service
providers. The company has since signed a new O&M contract with
a vendor at Gadag which should result in more timely maintenance as
well as cost savings.
With the onset of COVID-19 and the subsequent national lockdown,
the Theni project, which sells power under a Group Captive Scheme
to manufacturing and retail customers, experienced lower
consumption of power. In responses, IEL has begun diversifying its
customer base. The team are also in discussions with lenders to
restructure long-term debt to reduce debt service and improve cash
flows.
Valuation
Adjustments were made to operating expenses, tax treatment and a
reduction in debt. The NPV of future cash flows for IIP, after
accounting for these adjustments, was GBP7.08 million as at 31
March 2020. The savings in operating expenses, reduced taxation,
lower debt and lower risk-free rate were the principal drivers of
IEL's valuation for the fiscal year .
Directors' Report
The Directors have pleasure in presenting their report and
financial statements of the Group for the year ended 31 March
2020.
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 2020 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 (2019:
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 (resigned Non-Executive Director and Audit Committee
31/03/2020) Chairman
-------------------------------------------
Robert Venerus Non-Executive Director
-------------------------------------------
Madras Seshamani Ramachandran Non-Executive Director
-------------------------------------------
Graham Smith (appointed on Non-Executive Director
21/04/2020)
-------------------------------------------
Directors' interests in the shares of the Company are detailed
in note 17.
Company Secretary
The secretary of the Company during the year and to the date of
this report was Grainne Devlin.
On behalf of the Board
Sonny Lulla
Director
22 October 2020
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 financial statements in accordance with applicable law and
regulations and have elected to prepare the financial statements in
accordance with International Financial Reporting Standards
("IFRSs"), as adopted by the European Union ("EU").
The financial statements are required to give a true and fair
view of the state of affairs of the Group and of the profit or loss
of the Group for that year.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company and Group
will continue in business.
The Directors are responsible for keeping proper accounting records that are sufficient to
show and explain the Group's transactions and disclose with reasonable accuracy at any time
its financial position. They 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; the work carried out by the auditors does not
involve the consideration of these matters and, accordingly, the
auditors accept no responsibility for any changes that may have
occurred in the accounts since they were initially presented on the
website. Legislation governing the preparation and dissemination of
financial statements may differ from one jurisdiction to
another.
Each of the Directors confirm that, to the best of their
knowledge:
-- the financial statements, prepared in accordance with
International Financial Reporting Standards as adopted by the EU,
give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Group;
-- the director's report includes a fair review of the
development and performance of the business and the position of the
Group, together with a description of the principal risks and
uncertainties that they face.
By Order of the Board
Sonny Lulla
Director
22 October 2020
Corporate Governance Statement
Introduction from the Chairman
The Board of Infrastructure India plc fully endorses the
importance of good corporate governance and applies the QCA
Corporate Governance Code, published in April 2018 by the Quoted
Companies Alliance (the "QCA Code"), which the Board believes to be
the most appropriate recognised governance code for a company of
the Company's size with shares admitted to trading on the AIM
market of the London Stock Exchange. This is a practical,
outcome-oriented approach to corporate governance that is tailored
for small and mid-size quoted companies in the UK and which
provides the Company with the framework to help ensure that a
strong level of governance is maintained.
As Chairman, I am responsible for leading an effective board,
fostering a good corporate governance culture, maintaining open
communications with the major shareholders and ensuring appropriate
strategic focus and direction for the Company.
Notwithstanding the Board's commitment to applying the QCA Code,
we will not seek to comply with the QCA Code where strict
compliance in the future would be contrary to the primary objective
of delivering long-term value for IIP's shareholders and
stakeholders. However, we do consider that following the QCA Code,
and a framework of sound corporate governance and an ethical
culture, is conducive to long-term value creation for IIP
shareholders.
All members of the Board believe strongly in the importance of
good corporate governance to assist in achieving objectives and in
accountability to IIP's stakeholders. In the statements that
follow, the Company explains its approach to governance in more
detail.
QCA Code - Governance Principles
The QCA code is constructed around 10 broad principles of
corporate governance. These principles are as follows:
Deliver Growth
1. Establish a strategy and business model which promote long
term value for shareholders.
2. Seek to understand and meet shareholder needs and expectations
3. Take into account wider stakeholder and social
responsibilities and their implications for long- term success
4. Embed effective risk management, considering both
opportunities and threats, throughout the organisation
Maintain a dynamic management framework
5. Maintain the board as a well-functioning, balanced team led by the chair
6. Ensure that between them the directors have the necessary
up-to-date experience, skills and capabilities
7. Evaluate board performance based on clear and relevant
objectives, seeking continuous improvement
8. Promote a corporate culture that is based on ethical values and behaviours
9. Maintain governance structures and processes that are fit for
purpose and support good decision-making by the board
Build Trust
10. Communicate how the Company is governed and is performing by
maintaining a dialogue with shareholders and other relevant
stakeholders
Principle 1 Establish a strategy and business model which
promote long-term value for shareholders
IIP is an AIM quoted closed end investment company investing in
core economic infrastructure. It is the only AIM-traded investment
company with exposure to both transport and energy assets in
India.
The Company's Investment Strategy is as follows:
The Company will invest at the asset level or through specific
holding companies (not by investing in other funds or in the equity
of non-specific parent companies) in infrastructure projects in
India. Such investments are to be focused on the broader sectors
of:
-- Energy - including assets involved in electricity generation,
transmission and distribution; infrastructure assets related to oil
and gas, service provision and transmission; renewable fuel
production and renewable energy assets; and
-- Transport - including investment in roads, rail, ports and
airport assets, and associated transport interchanges and
distribution hubs.
Additionally, the Company may make investments in other economic
and social infrastructure sectors within India where opportunities
arise and which the Board considers offer similar risk and return
characteristics to those found within the energy and transport
sectors.
In common with other investing companies in the sector, access
to projects and valuable assets is competitive and challenging but
the Board is confident of its ability and that of its investment
manager, to continue to source attractive investment opportunities
given close relationships with a number of companies and their
management teams, and recognition of the Board's experience and
strong network.
Status of the Company's Portfolio
Details of the Company's portfolio are contained on the
Company's website at https://www.iiplc.com/portfolio/current -
portfolio/ a nd a full update of the investments including
investment details, a description of investments, key developments
and valuations are included in investment report section above.
Principle 2 Seek to understand and meet shareholder needs and
expectations
The Company is committed to engaging and communicating openly
with its shareholders to ensure that its strategy, business model
and performance are clearly understood. All Board members have
responsibility for shareholder liaison but queries are primarily
delegated to the Company's Advisors in the first instance or the
Company's CEO. Contact details for the Company's advisors are
contained on the Company's website https://
www.iiplc.com/contact/.
Copies of the annual and interim reports are sent to all
shareholders and copies can be downloaded from the Company website
https: //ww w.iiplc.com/investor - relations/financial - reports/ a
lternatively, they are available on request by writing to the
Company Secretary at 55 Athol Street, Douglas, Isle of Man IM 1
1LA. Other Company information for shareholders is also available
on the website.
The Company also engages with shareholders at its AGM in each
year, which gives investors the opportunity to enter into dialogue
with the Board and for the Board to receive feedback and take
action if and when necessary. The results of the AGM are
subsequently announced via RNS and published on the Company's
website. Feedback from, and engagement with, substantial
shareholders has historically been successful in ensuring, for
example, material transactions are suitably structured with
shareholder considerations in mind.
The current strategy of financing and the restructuring of
existing loans was communicated to investors via a circular in
April 2019 , this was also announced via RNS and subsequently
uploaded to the Company's website
https://www.iiplc.com/news/regulatory - news/ .
The company secretary is also available for shareholders to
contact on matters of governance and investor relations.
Principle 3 Take into account wider stakeholder and social
responsibilities and their implications for long-term success.
The Board is aware that engaging with IIP's stakeholders
strengthens relationships, assists the Board in making better
business decisions and ultimately promotes the long-term success of
IIP. The group's stakeholders include shareholders, members of
staff of investee companies and of Advisors and other service
providers, suppliers, auditors, lenders, regulators, industry
Bodies and the surrounding communities of where its investments are
located.
The Board as a whole are responsible for reviewing and
monitoring the parties contracted to the Company, including their
service terms and conditions. The audit committee supports Board
decisions by considering and monitoring the risks to the
Company.
The Company's portfolio consists of Distribution Logistics
Infrastructure Private Limited (DLI), Shree Maheshwar Hydel Power
Corporation Limited, India Energy Limited and India Hydropower
Development Company LLC (together the Portfolio).
The Board is regularly updated on wider stakeholder views and
issues concerning the Portfolio both formally at Board meetings and
informally through ad hoc updates. Representatives involved with
the investment portfolio are invited to join Board meetings and
provide a report to the Board. Engagement in this manner enables
the Board to receive feedback and equips them to make decisions
affecting the business.
The Board recognises the importance of its social
responsibilities concerning its investment decisions. The Company
has made investments in infrastructure projects that seek to make a
contribution to the development of communities in which they are
located.
As detailed in the Company's Admission document, a full analysis
of the Company's social responsibility and ways to address issues
was undertaken. The Admission Document (dated 11 February 2011) is
available on the Company's website:
https://www.iiplc.com/investor-relations/downloads/
The Board adheres to the Company's Corporate Social
Responsibility policy, an extract of which is summarised as
follows:
The Enlarged Group will ordinarily make investments in
infrastructure projects that seek to make a contribution to the
development of communities in which they are located. In planning
its activities, the Board will give consideration to evaluating the
social impact of proposed developments with a view to promoting
where possible local employment and the delivery of other local
benefits, and mitigating negative impacts to the extent possible.
The Company intends to establish a community projects trust (the
"Trust") and will contribute to the Trust up to 2 per cent. of the
net realised gains derived from the re-financing of operational
projects and of the net profit derived from any disposal of equity
interests in operational projects. It is intended that the Trust
will support community based education, training and employment
initiatives designed to foster social inclusion in communities
where the Group is active.
The Company is committed to continuing engagement with all
stakeholders.
Principle 4 Embed effective risk management, considering both
opportunities and threats, throughout the organisation.
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 interest rate risk.
Risk is monitored and assessed by the Audit Committee who aim to
meet at least twice annually and are responsible for ensuring that
the financial performance of the Company is properly monitored and
reported. This process includes reviews of annual and interim
accounts, results announcements, internal control systems,
procedures and accounting policies.
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 and the key risk factors for
the Company are contained in note 4 to the Financial Statements for
the year ended 31 March 2020.
Principle 5 Maintain the board as a well-functioning, balanced
team led by the chair.
The Board has five members, three of which are non-executive.
Tim Walker resigned from the Board with effect from 31 March 2020
and was replaced by Graham Smith on 20 April 2020.
Tom Tribone is the Company's Chairman, Sonny Lulla is the
Company's Chief Executive and Rob Venerus, Graham Smith and M.S.
Ramachandran are the Company's three Non-Executive Directors. M.S.
Ramachandran is considered an independent director. Graham Smith is
also considered to be an independent director, notwithstanding the
fact that FIM Capital Limited, of which he is Chief Executive
Officer, provides administration and accounting services to the
Company.
The Board is supported by an audit committee which is made up of
two non-executive directors. Following the resignation of Tim
Walker, one of the seats on the committee is vacant, the other
member being M.S. Ramachandran. Whilst Graham Smith can support the
Audit Committee, he is not eligible to fulfil the role of a
committee member because of his position in FIM Capital Limited.
The Company intends to appoint an additional Independent
Non-Executive Director to the Board in due course, who will also
serve on the Audit Committee. Until such time as the appointment is
made, the Board as a whole will deal with matters normally reserved
for the Audit Committee.
The Board receives detailed reports from FIM Capital Limited,
the administrator and Company Secretary to the Company covering
updates to relevant legalisation and rules to ensure they remain
fully informed and able to make informed decisions.
All the Directors biographies are published on the Company's
website and outlined below: https://www.iiplc.com/team/board - of -
directors/
The Directors devote sufficient time to ensure the Company's
affairs are managed as efficiently as possible. The Board aims to
hold at least 4 meetings each year with further ad hoc meetings
held as required. The Audit Committee meets at least 2 times
annually.
The Directors devote sufficient time to ensure the Company's
affairs are managed as efficiently as possible. During the last
financial year the Board met twice formally, and held four Ad hoc
Board meetings requiring the attendance of the Independent
Directors only. The Ad hoc meetings held were to consider and
approve the periodic loan increases, which being related party
transactions were restricted in attendance to the independent
directors. The Audit Committee met twice.
Board Meetings Attendance
Board Meetings Date R Venerus T Tribone S Lulla MS Ramachandran T Walker
1 01.04.2019 - - Alternate x x
appointed
(Ad-hoc meeting)
---------------------- ---------- ---------- ----------- ---------------- ---------
2 11.04.2019 - - Alternate x x
appointed
(Ad-hoc meeting)
---------------------- ---------- ---------- ----------- ---------------- ---------
3 24.04.2019 x x x x x
(written resolution)
---------------------- ---------- ---------- ----------- ---------------- ---------
4 20.06.2019 - - - x x
(Ad-hoc meeting)
---------------------- ---------- ---------- ----------- ---------------- ---------
5 09.08.2019 - - Alternate x x
appointed
(Ad-hoc meeting)
---------------------- ---------- ---------- ----------- ---------------- ---------
6 25.09.2019 - x x x x
---------------------- ---------- ---------- ----------- ---------------- ---------
7 24.03.2020 x x x x x
---------------------- ---------- ---------- ----------- ---------------- ---------
Audit Committee Meetings Attendance
Board Meetings Date MS Ramachandran T Walker
1 25.09.19 X x
--------- ---------------- ---------
2 11.12.19 X X
--------- ---------------- ---------
Principle 6 Ensure that between them the directors have the
necessary up-to-date experience, skills and capabilities.
The Directors have extensive experience in infrastructure fund
management and a strong track record of value creation.
The Board believes it has the correct balance of skills,
reflecting a broad range of commercial and professional skills
across geographies and industries that is necessary to ensure the
Company is equipped to deliver its investment objective.
Additionally, each Director has experience in public markets.
The Directors and their roles and key personnel are displayed on
the Company's website https:// www.iiplc.com/team/board - of -
directors/ a nd a statement of the Directors responsibilities is
also included in the Statement of Directors' Responsibilities.
The Directors receive an ad hoc guidance on certain matters
concerning, for example, the AIM Rules for Companies from the
Company's Nominated Adviser and Broker as well as receiving updates
on the regulatory environment from FIM, who provide specialist fund
administration services to a variety of closed ended funds and
collective investment schemes.
The role and responsibilities of the Directors are set out in
Statement of Directors' Responsibilities and the Terms of Reference
of the Audit Committee are summarised at the foot of this
document.
All Directors are able to take independent professional advice
in the furtherance of their duties, if necessary, at the Company's
expense.
Principle 7 Evaluate board performance based on clear and
relevant objectives, seeking continuous improvement.
Board evaluations will take place periodically, whereby Board
members will be asked to complete and return an effectiveness
questionnaire across a variety of criteria, then return these to
the Company Secretary, who, where necessary, would seek
clarification on any responses given. Responses will then be
recorded anonymously to enable the Board to have open follow-up
discussions on the aggregated evaluation data.
The criteria against which the Board complete periodic
self-evaluations of performance will be based on externally
determined guidelines appropriate to the composition of the Board
and the Company's operation, including Board sub-committees. The
scope of the self-evaluation exercise will be re-assessed in each
instance to ensure appropriate depth and coverage of the Board's
activities consistent with corporate best practice.
The Board effectiveness questionnaire underlying the board
evaluation process assesses the composition, processes, behaviours
and activities of the board through a range of criteria, including
board size and independence, mix of skills (for example corporate
governance, financial, industry and regulatory) and experience, and
general corporate governance considerations in line with the QCA
code.
All Board appointments have been made after consultation with
advisers and with major shareholders in some cases. Detailed due
diligence is carried out on all new potential board candidates. The
Board will consider using external advisers to review and evaluate
the effectiveness of the Board and Directors in future to
supplement internal evaluation processes. Additionally, the Board
will consider the need to undertake formal and periodic succession
planning.
The Independent Directors have remained independent throughout
their office, and due to the close- knit working environment and
size of the Board, performance evaluations will be on an ongoing
and ad-hoc basis to ensure that they are committed to the progress
and success of the Company and that their contribution is
effective.
When the Board wishes to complete a periodic evaluation process,
the relevant materials and guidance in respect of this process,
following current best practice at the time of the evaluation, is
available from and provided by FIM.
Given the stage of the Company's maturity and its contracted
external management, the responsibilities of a nomination committee
are delegated to the Board, and there are no formal succession
planning processes in place. The Board intends to keep this under
review in the future.
Principle 8 Promote a corporate culture that is based on ethical
values and behaviours.
The Corporate Governance Statement is detailed above. The Board
is mindful that the tone and culture set by the Board will impact
many aspects of the Company and the way that stakeholders behave
and form views.
The Board welcomes the views of all stakeholders who can contact
the Directors and / or the Company Secretary by email / telephone
and ensures that the Company has the means to determine that
ethical values and behaviours are met through the adoption of
appropriate company-wide policies.
As stated earlier the Company has extensively considered its
wider social responsibilities and the steps taken to actively
address these. Details are contained in the Company's Admission
Document, https://www.iiplc.com/investor-relations/downloads/ In
particular, the Company will ordinarily make investments in
infrastructure projects that seek to make a contribution to the
development of communities in which they are located. In planning
its activities the Board will give consideration to evaluating the
social impact of proposed developments with a view to promoting
where possible local employment and the delivery of other local
benefits, and mitigating negative impacts to the extent
possible.
The Company promotes and supports the rights and opportunities
of all people to seek, obtain and hold employment without
discrimination. It is our policy to make every effort to provide a
working environment free from bullying, harassment, intimidation
and discrimination on the basis of disability, nationality, race,
sex, sexual orientation, religion or belief.
The Company is also committed to being honest and fair in all
its dealings with partners, contractors and suppliers. Procedures
are in place to ensure that any form of bribery or improper
behaviour is prevented from being conducted on the Company's behalf
by investee companies, contractors and suppliers. The Company also
closely guards its information entrusted to it by investee
companies, contractors and suppliers, and seeks to ensure that it
is never used improperly.
In order to comply with legislation or regulations aimed at the
prevention of money laundering the Fund has adopted anti-money
laundering and anti-bribery procedures.
Principle 9 Maintain governance structures and processes that
are fit for purpose and support good decision-making by the
board.
A description of each board member and their experience, the
role of the Audit Committee and that neither a Nomination or
Remuneration Committee exists are displayed on the website at
https:// www.iiplc.com/team/board - of - directors/ .
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. In order to fulfil these obligations, the Board has
delegated operations through arrangements with the Investment
Adviser and Administrator.
The Company has not established nomination and remuneration
committees 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.
The Chairman, is responsible for leading an effective board,
fostering a good corporate governance culture, maintaining open
communications with the major shareholders and ensuring appropriate
strategic focus and direction.
The Chief Executive Officer has overall responsibility for
managing the day to day operations of the Company and the Board as
a whole is responsible for implementing the Company's strategy.
In addition to these, the Directors review and approve the
following matters:
-- Strategy and management
-- Policies and procedures
-- Financial reporting and controls
-- Capital structure
-- Contracts
-- Shareholder documents / Press announcements
-- Adherence to Corporate Governance and best practice procedures
Principle 10 Communicate how the Company is governed and is
performing by maintaining a dialogue with shareholders and other
relevant stakeholders.
The Company communicates with shareholders through the Annual
Report and Financial statements, full-year and half-year
announcements, the Annual General Meeting and investors can email
the Directors and Company Secretary with any queries they may
have.
The website includes information in relation to the outcome of
shareholder voting under the regulatory news section pursuant to
the AIM rules.
If a significant proportion of independent votes were to be cast
against a resolution at any general meeting, the Board's policy
would be to engage with the shareholders concerned in order to
understand the reasons behind the voting results. Following this
process, the Board would make an appropriate public statement via
this website regarding any different action it has taken, or will
take, as a result of the vote.
Historical information is available on the website:
The Company's financial reports for the last five years can be
found here
https://www.iiplc.com/investor-relations/financial-reports/
Notices of General Meetings of the Company for the last five
years can be found here
https://www.iiplc.com/investor-relations/downloads/
Committees
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, FIM 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.
As stated in Principle 5 above, the Company intends to appoint
an additional Independent Non-Executive Director to the Board in
due course, who will also serve on the Audit Committee. Until such
time as the appointment is made, the Board as a whole will deal
with matters normally reserved for the Audit Committee.
Remuneration Committee and Nomination Committee
As stated in principle 9, there is no Remuneration Committee or
Nomination Company in existence.
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.
Details of the directors' remuneration can be found on note 17
to the Financial Statements for the year ended 31 March 2020 and
the production of a remuneration committee report will be
considered in the future.
Independent Auditor's Report to the Members of Infrastructure
India Plc
Opinion
We have audited the financial statements of Infrastructure India
Plc (the 'parent company') and its subsidiaries (the 'group') for
the year ended 31 March 2020 which comprise the consolidated and
parent company Statement of Comprehensive Income, the consolidated
and parent company Statement of Financial Position, the
consolidated and parent company Statement of Changes in Equity, the
consolidated and parent company Statement of Cash Flows and the
notes to the financial statements, including a summary of
significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
In our opinion the financial statements:
-- give a true and fair view of the state of the group's and
parent company's affairs as at 31 March 2020, and of the group's
and parent company's results for the year then ended;
-- have been properly prepared in accordance with IFRSs as adopted by the European Union;
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the group
and parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK,
including the FRC's Ethical Standard, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our
opinion.
Key audit matters
Key audit matters are those matters that, in the auditor's
professional judgement, were of most significance in the audit of
the financial statements of the current period.
These matters were addressed in the context of the audit of the
financial statements as a whole,
and in forming the auditor's opinion thereon, and the auditor
does not provide a separate opinion
on these matters.
Valuation of investments at fair value
As described in accounting policy note 3.8, management have
elected to value investments in subsidiaries at fair value through
profit and loss. The fair value has been determined based on a
valuation model as discussed in notes 5 and 13. The fair value
model estimates the present fair value of the investments using a
discounted cashflow analysis, based on assumptions about the future
performance of the investments.
Fair value models that are based on discounted future cashflow
analyses are inherently subjective and feature high estimation
uncertainty. They are based on estimates and include, especially in
light of the ongoing COVID-19 pandemic, risks and uncertainties
relating to events occurring in the future. Consequently, the
actual figures may differ from estimates and may have a significant
impact on the valuations.
It is not always possible to test every assumption or
substantiate the veracity or integrity of those assumptions in
relation to forward-looking financial information.
Valuation of investments was determined to be a key audit matter
as it represents 87.2% of total assets (211.1% of net assets),
attracts a higher assessed risk of material misstatement and
involves significant management judgement, including accounting
estimates that have high estimation uncertainty.
Audit approach
Our approach to the audit of investments has been to appoint an
independent auditor's expert, located in India where the group's
operation activities are based, to undertake an independent review
of the valuation of the portfolio companies of the group.
Audit procedures undertaken included:
- understanding of the various valuation methods used by
management and analysing the reasonableness of the principal
assumptions made for estimating the fair values and various other
data used while arriving at the fair value measurement;
- assessing the valuation methodology and evaluating and
challenging the reasonableness of the assumptions used, in
particular those relating to forecast revenue growth and royalty
rates;
- performing sensitivity analysis on the assumptions noted above
and considering the adequacy of disclosures in respect of the
investments;
- reviewing the appropriateness of management's basis to identify relevant business;
- evaluating the appropriateness of the discount rates applied, which included comparing the weighted-average cost of capital with sector averages for the relevant markets in which the investment companies operate;
- evaluating the appropriateness of the assumptions applied to
key inputs such as sales, operating costs, inflation and long-term
growth rates;
- performing our own sensitivity analysis, which included
assessing the effect of reasonably possible reductions in growth
rates and forecast cashflows to evaluate the impact on the
currently estimated headroom; and
- evaluating the adequacy of the consolidated financial
statement disclosures, including disclosures of key assumptions,
judgments and sensitivities.
Key audit matter conclusion
In conjunction with the auditor's expert we have determined that
the valuation models for DLI, IEL and IHDC (valued at GBP231.4m,
GBP7.1m and GBP23.5m respectively) are, in all material respects,
fairly presented and suitable for inclusion in these financial
statements.
They are, however, subject to high estimation uncertainty and we
draw your attention to the disclosures made in notes 5 and 13 and
to the sensitivity analyses presented in note 13.
In respect of the high estimation uncertainty we note that the
auditor's independent expert reported that, owing to the
forward-looking nature of the projections and the lack of past
performance history and financial information, they were unable to
corroborate certain key unobservable inputs in the projections,
such as expected start date of commercial operations, market size,
market share, price points, forecast annual growth rates and EBITDA
margins and operational efficiency estimates. These projections are
based on management estimates and actual results could therefore
differ materially from the amounts presented in the financial
statements.
The auditor's independent expert also noted that management have
determined the discount rate applicable to the projections on a
'build-up' basis by taking the market risk-free rate and applying a
risk premium to reflect the execution risk associated with the
timely implementation of the business plan.
The auditor's expert has considered an alternative method of
calculating the discount rate using the cost of equity method
(calculated using the capital asset pricing model). This model is
considered to be more widely used and is determined by reference to
factors associated with the business and industry in which the
business operates. The auditor's expert has then recommended an
additional temporary additional risk premium of 1% to allow for the
impact of COVID-19 and a specific risk premium of 2% for specific
factors such as the non-operational nature of certain assets, the
risk attaching to the projections and reliance on unobservable
inputs.
DLI represents the largest component of the group at GBP231.4m
(or 88.3% of the investments). Management's build-up discount rate
for DLI is included at 13.17% which compares to the auditor's
expert's cost of equity rate of 16.32%. Using the higher rate would
result in a reduction in the value of the investment in DLI from
GBP231.4m to GBP162.5m.
For IHDC management have used a discount rate of 9.19% compared
to an auditor's expert cost of equity rate of 11.50%. Using the
cost of equity rate would result in a reduction in the value of the
investment in IHDC from GBP23.5m to GBP18.4m.
For IEL management have used a discount rate of 8.17% compared
to an auditor's expert cost of equity rate of between 11.20% and
13.10% depending on the underlying component. Using the cost of
equity rate would result in a reduction in the value of the
investment in IEL from GBP7.1m to GBP4.8m.
Selection of an appropriate discount rate is a subjective
judgement estimate and we draw attention to the sensitivity
analyses presented in note 13.
The realisation of the values assigned to the investments is
dependent on future conditions and as such the actual value may
differ materially from the amounts presented in the financial
statements. Our opinion is not qualified in this respect.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
-- the directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the group's or the parent company's ability to continue
to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are
authorised for issue.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
In the light of our knowledge and understanding of the group and
the parent company and their environment obtained in the course of
the audit, we have not identified material misstatements in the
directors' report.
Responsibilities of directors
As explained more fully in the directors' responsibilities
statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group's and the 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 the directors 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 for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with ISAs (UK), we exercise
professional judgment and maintain professional scepticism
throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the group's or the parent company's
internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the directors.
-- Conclude on the appropriateness of the directors' use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the group's or the
parent company's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to
draw attention in our auditor's report to the related disclosures
in the financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor's report. However,
future events or conditions may cause the group or the parent
company to cease to continue as a going concern.
Auditor's responsibilities for the audit of the financial
statements (continued)
-- Evaluate the overall presentation, structure and content of
the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
-- Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for
our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements
of the current period and are therefore the key audit matters. We
describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with the terms of our engagement letter. 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.
Baker Tilly Isle of Man LLC
Chartered Accountants
P O Box 95
2a Lord Street
Douglas
Isle of Man
IM99 1HP
Date: 22 October 2020
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2020
Group Company
Note 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Movement in fair value on
investments in subsidiaries 11 - - (25,655) (35,416)
Impairment loss on loans
to Group companies 12 - - 56,965 (44,755)
Movement in fair value on
investments at fair value
through profit or loss 13 50,794 (65,061) - -
Foreign exchange (loss)/gains (5,756) (2,939) (3,356) (2,935)
Asset management and valuation
services 7 (5,552) (5,531) - -
Other administration fees
and expenses 6 (3,293) (3,960) (1,108) (1,369)
--------- --------- --------- ---------
Operating loss 36,193 (77,491) 26,846 (84,475)
--------- --------- --------- ---------
Dividend income - - 207 -
Finance income 12 - - 1,228 6,984
Finance costs 8 (18,159) (5,249) (10,247) (5,249)
--------- --------- --------- ---------
Profit/(loss) before taxation 18,034 (82,740) 18,034 (82,740)
--------- --------- --------- ---------
Taxation 9 - - - -
--------- --------- --------- ---------
Profit/(loss) for the year 18,034 (82,740) 18,034 (82,740)
--------- --------- --------- ---------
Other comprehensive income - - - -
--------- --------- --------- ---------
Total comprehensive profit/(loss) 18,034 (82,740) 18,034 (82,740)
--------- --------- --------- ---------
Basic and diluted earnings/(loss) (12.16)
per share (pence) 10 2.64p 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 and Company Statement of Financial Position
at 31 March 2020
Group Company
Note 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Investments in subsidiaries 11 - - 191,646 -
Loans to Group companies 12 - - 12,861 177,984
Investments at fair value
through profit or loss 13 262,001 179,376 - -
---------- ---------- ---------- ----------
Total non-current assets 262,001 179,376 204,507 177,984
---------- ---------- ---------- ----------
Current assets
Debtors and prepayments 96 98 15 17
Cash and cash equivalents 38,257 1,652 956 1,551
---------- ---------- ---------- ----------
Total current assets 38,353 1,750 971 1,568
---------- ---------- ---------- ----------
Total assets 300,354 181,126 205,478 179,552
---------- ---------- ---------- ----------
Current liabilities
Trade and other payables 14 (1,831) (1,751) (214) (177)
Current loans and borrowings 15 - - - -
---------- ---------- ---------- ----------
Total current liabilities (1,831) (1,751) (214) (177)
---------- ---------- ---------- ----------
Long-term liabilities
Long term loans & borrowings 15 (174,422) (73,347) (81,163) (73,347)
---------- ---------- ---------- ----------
Total current liabilities (174,422) (73,347) (81,163) (73,347)
---------- ---------- ---------- ----------
Total liabilities (176,253) (75,098) (81,377) (73,524)
---------- ---------- ---------- ----------
Net assets 124,101 106,028 124,101 106,028
---------- ---------- ---------- ----------
Equity
Ordinary share capital 16 6,821 6,803 6,821 6,803
Share premium 16 282,808 282,787 282,808 282,787
Retained earnings (165,528) (183,562) (165,528) (183,562)
---------- ---------- ---------- ----------
Total equity 124,101 106,028 124,101 106,028
---------- ---------- ---------- ----------
The notes referred to above form an integral part of the nancial
statements.
These financial statements were approved by the Board on 22
October 2020 and signed on their behalf by
Sonny Lulla Graham Smith
Chief Executive Director
Consolidated and Company Statement of Changes in Equity
for the year ended 31 March 2020
Group
Share Retained
Share capital premium earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April 2018 6,803 282,787 (100,822) 188,768
Total comprehensive loss for
the year
Loss for the year - - (82,740) (82,740)
------------------------------ -------------- --------- ---------- ---------
Total comprehensive loss for
the year - - (82,740) (82,740)
Balance at 31 March 2019 6,803 282,787 (183,562) 106,028
------------------------------ -------------- --------- ---------- ---------
Balance at 1 April 2019 6,803 282,787 (183,562) 106,028
Share issue 18 21 - 39
Total comprehensive income
for the year
Profit for the year - - 18,034 18,034
------------------------------ -------------- --------- ---------- ---------
Total comprehensive income
for the year 18 21 18,034 18,073
Balance at 31 March 2020 6,821 282,808 (165,528) 124,101
------------------------------ -------------- --------- ---------- ---------
Company
Retained
Share capital Share premium earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April 2018 6,803 282,787 (100,822) 188,768
Total comprehensive loss for
the year
Loss for the year - - (82,740) (82,740)
------------------------------ -------------- -------------- ---------- ---------
Total comprehensive loss for
the year - - (82,740) (82,740)
Balance at 31 March 2019 6,803 282,787 (183,562) 106,028
------------------------------ -------------- -------------- ---------- ---------
Balance at 1 April 2019 6,803 282,787 (183,562) 106,028
Share issue 18 21 - 39
Total comprehensive income
for the year
Profit for the year - - 18,034 18,034
------------------------------ -------------- -------------- ---------- ---------
Total comprehensive income
for the year 18 21 18,034 18,073
Balance at 31 March 2020 6,821 282,808 (165,528) 124,101
------------------------------ -------------- -------------- ---------- ---------
The notes referred to above form an integral part of the nancial
statements.
Consolidated and Company Statement of Cash Flows
for the year ended 31 March 2020
Group Company
Note 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit/(loss) for the year 18,034 (82,740) 18,034 (82,740)
Adjustments:
Finance costs 18,159 5,249 10,247 5,249
Movement in fair value on investments
at fair value through profit or
loss 11/13 (50,794) 65,061 -
Movement in fair value on investments
in subsidiaries - - 25,655 35,416
(Reversal of)/Impairment loss
on loans to Group companies - (56,965) 44,755
Finance income - - (1,228) (6,984)
Share based payment 39 - 39 -
Foreign exchange loss 5,756 2,939 3,356 2,935
--------- --------- --------- ---------
(8,806) (9,491) (862) (1,369)
Increase in trade and other payables 80 166 37 21
Decrease/(increase) in debtors
and prepayments 2 (83) 2 (5)
--------- --------- --------- ---------
Net cash utilised by operating
activities (8,724) (9,408) (823) (1,353)
--------- --------- --------- ---------
Cash flows from investing activities
Share redemption in subsidiary - - 1,138 -
Loan received 82,848 - 4,898 (24,707)
Equity addition in subsidiaries (31,831) - - (4,547)
Loans received - 28,959 - 28,959
Purchase of investments 13 - (21,403) - -
--------- --------- --------- ---------
Cash utilised by investing activities 51,017 7,556 6,036 (295)
--------- --------- --------- ---------
Cash flows from financing activities
Loans repaid (5,781) - (5,781) -
Interest paid - - - -
--------- --------- --------- ---------
Net cash raised from financing
activities (5,781) - (5,781) -
--------- --------- --------- ---------
Increase/(decrease) in cash and
cash equivalents 36,512 (1,852) (578) (1,648)
Cash and cash equivalents at the
beginning of the year 1,652 3,431 1,551 3,121
Effect of exchange rate fluctuations
on cash held 93 73 (27) 78
--------- --------- --------- ---------
Cash and cash equivalents at the
end of the year 38,257 1,652 956 1,551
--------- --------- --------- ---------
The notes referred to above form an integral part of the nancial
statements.
Infrastructure India plc
Notes to the Financial Statements for the year ended 31 March
2020
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 55 Athol 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 22 October 2020.
(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
As at 31 March 2020, the Group had GBP38.3 million cash and cash
equivalents and total liabilities of GBP176.3 million, which mature
on 30 June 2023. The financing, most of which was arranged in April
2019 provides sufficient capital to enable DLI to commission, ramp
up and complete all of its existing terminal facilities as well as
to meet other DLI lender requirements and to provide additional
working capital to the Group. The deployment of capital during the
year allowed steady construction progress to be made at DLI.
The carrying value of the Group assets have been assessed in
light of the COVID-19 pandemic and the long-term impacts that this
will have on the investments of the Group. as a result of the
impact of COVID-19, to business assumptions and completion
schedules on both construction and operations at IIP's largest
asset, Distribution Logistics Infrastructure Limited ("DLI"). The
Group has carried out sensitivity analysis to assess the
implications of different scenarios on future cash flows. The
moderation in volumes and margins to reflect the potential impact
of COVID 19 reduced the valuation by approximately GBP15
million.
Whilst it remains difficult to predict when the wider market
will return to normal levels, the Board believes the individual
portfolio company management teams have responded well to the
crisis and that the Company is well positioned to effectively
navigate current market conditions.
Accordingly, the Directors have a reasonable expectation that
the Group has adequate resources to continue in operational
existence for the foreseeable future. Thus, they continue to adopt
the going concern basis of accounting in preparing the financial
statements.
(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:
-- Obtains funds from one or more investors for the purpose of
providing those investors with investment management services;
-- Commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income or both; and
-- 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's 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 Changes in accounting policies
The following standards, interpretations and amendments were
adopted by the Group during the year:
-- IFRS 16 - Leases (effective 1 January 2019)
-- Amendments to IFRS 2 - classification and measurement of
share based payments transactions (effective 1 January 2019)
-- Interpretation to IFRIC 23 - Uncertainty over Income Tax
Treatments (effective 1 January 2019)
-- Annual improvements to IFRS Standards 2015-2017 Cycle (effective 1 January 2019)
The transition to these standards had no material impact on the
Group. There were no long term operating leases in the Group as at
the transition date for IFRS 16; as such no adjustments were made
under this standard. Payments associated with short-term leases (12
months or less) and all leases of low value assets are recognised
on a straight line basis as an expense in profit or loss.
Standards, amendments and interpretations to published standards
not yet effective
At the date of authorisation of these financial statements, the
following standards and interpretations, were in issue but not yet
effective, and have not been early adopted by the Group:
-- Amendments to References to the Conceptual Framework in IFRS
Standards (effective 1 January 2020)
-- IFRS 3 (amendments) Definition of a Business (effective 1 January 2020)
-- IAS 1 and IAS 8 (amendments) Definition of material (effective 1 January 2020)
-- IAS 1 (amendments) Classification of liabilities as current
or non-current (effective 1 January 2022)
The Directors have reviewed the IFRS standards in issue which
are effective for annual accounting years ending on or after the
stated effective date. In their view, none of these standards would
have a material impact on the financial statements of the
Group.
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:
2020 2019
GBP'000 GBP'000
------------------------------------------ --------- --------
Long and short term loans and borrowings 174,422 73,347
Less: cash and cash equivalents (38,257) (1,652)
------------------------------------------ --------- --------
Net debt 136,165 71,695
Total equity 124,101 106,028
Total capital 260,266 177,723
------------------------------------------ --------- --------
Gearing ratio 52.32% 40.30%
------------------------------------------ --------- --------
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 GBP262.0 million (2019: GBP179.4 million), representing the
Group's investments in Indian Companies. At 31 March 2020, 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 GBP26.2 million (2019: GBP17.9 million). This
exposure is unhedged.
Total liabilities denominated in US$ at the year-end amounted to
GBP176.3 million (2019: GBP75.1 million), principally comprising
loans and borrowings less cash and cash equivalents. At 31 March
2020, had the exchange rate between the US$ and Sterling increased
or decreased by 10% with all other variables held constant, the
increase or decrease respectively in total liabilities would amount
to approximately GBP17.6 million (2019: GBP7.5 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 GBP26.2
million (2019: GBP17.9 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 15.
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 1 to 3 to 1 1 to 5 Over 5 interest
month months year years years bearing Total
31 March 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial assets
Investments at fair value
through profit or loss - - - - - 262,001 262,001
Trade and prepayments - - - - - 96 96
Cash and cash equivalents 38,257 - - - - - 38,257
---------- -------- --------- ---------- -------- --------- ----------
Total financial assets 38,257 - - - - 262,097 300,354
---------- -------- --------- ---------- -------- --------- ----------
Financial liabilities
Trade and other payables - - - - - (1,831) (1,831)
Loans and borrowings - - - (174,422) - - (174,422)
---------- -------- --------- ---------- -------- --------- ----------
Total financial
liabilities - - - (174,422) - (1,831) (176,253)
---------- -------- --------- ---------- -------- --------- ----------
Less than 3 months Non-
1 1 to 3 to 1 1 to 5 Over 5 interest
month months year years years bearing Total
31 March 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial assets
Investments at fair value
through profit or loss - - - - - 179,376 179,376
Trade and prepayments - - - - - 98 98
Cash and cash equivalents 1,652 - - - - - 1,652
---------- -------- --------- ---------- -------- --------- ------------
Total financial assets 1,652 - - - - 179,474 181,126
---------- -------- --------- ---------- -------- --------- ------------
Financial liabilities
Trade and other payables - - - - - (1,751) (1,751)
Loans and borrowings - - - (73,347) - - (73,347)
---------- -------- --------- ---------- -------- --------- ------------
Total financial
liabilities - - - (73,347) - (1,751) (75,098)
---------- -------- --------- ---------- -------- --------- ------------
(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 2020 Less than 1 to 3 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 - - - - -
payables 1,831
Loans and borrowings - - 174,422 - -
----------------------- ----------- --------- ----------- -------- -------- ----------
Total - - 1,831 174,422 - -
======================= =========== ========= =========== ======== ======== ==========
31 March 2019 Less than 1 to 3 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 - - - - -
payables 1,751
Loans and borrowings - - - 73,347 - -
----------------------- ----------- --------- ----------- -------- -------- ----------
Total - - 1,751 73,347 - -
----------------------- ----------- --------- ----------- -------- -------- ----------
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 13, 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 13)
India Hydropower Development Company,
LLC - - 23,522
Distribution Logistics Infrastructure
Private Ltd - - 231,400
Indian Energy Limited - - 7,079
--------- --------- --------
Fair value at year end - - 262,001
--------- --------- --------
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 179,376
Additional capital injected 31,831
Movement in fair value 50,794
--------
Fair value at year end 262,001
--------
If the determined discount rates were increased by 1% per annum,
the value of unlisted equity securities would fall by GBP31 million
(2019: GBP30 million).
6. Other administration fees and expenses
Group Company
------------------ ------------------
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Audit fees 87 69 53 34
Legal fees 108 180 106 180
Corporate advisory fees 369 201 163 201
Other professional costs 1,828 2,534 32 7
Administration fees 180 164 120 120
Directors' fees (note 17) 208 180 208 170
Insurance costs 10 9 10 9
Loan arrangement related fees 209 463 209 463
Travel and entertaining 179 109 142 109
Other costs 115 51 65 76
-------- -------- -------- --------
3,293 3,960 1,108 1,369
-------- -------- -------- --------
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 2020 were GBP5,552,000 (31
March 2019: GBP5,531,000). The amount of management fees
outstanding as at 31 March 2020 amounted to GBP1,398,000 (2019:
GBP1,398,000).
8. Finance costs
Group Company
------------------ ------------------
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Loan interest expense
(note 15) 18,159 5,249 10,247 5,249
-------- -------- -------- --------
18,159 5,249 10,247 5,249
-------- -------- -------- --------
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 earnings/(loss) per share
Basic learnings/(loss) per share are calculated by dividing the
loss attributable to shareholders by the weighted average number of
ordinary shares outstanding during the year.
2020 2019
Profit/(Loss) attributable to shareholders (GBP thousands) 18,034 (82,740)
Weighted average number of ordinary shares in issue (thousands) 681,882 680,267
-------- ----------
Basic earnings/(loss) per share 2.64 p (12.16) p
-------- ----------
There is no difference between basic and diluted earnings/(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%
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%
The following table shows a reconciliation from the beginning
balances to the ending balances for investments in
subsidiaries:
2020 2019
GBP'000 GBP'000
Balance as at 1 April 2019 - 30,869
Loan to equity conversion 218,439 -
Share redemption in Infrastructure India
HoldCo (1,138)
Addition during the year - 4,547
Movement in fair value on investments
in subsidiaries (25,655) (35,416)
--------- ----------
Balance as at 31 March 2020 191,646 -
--------- ----------
12. Loans to Group companies
Capital Interest Total
GBP'000 GBP'000 GBP'000
Balance as at 1 April 2019 161,277 16,707 177,984
Addition 1,380 - 1,380
Reversal of impairment provision
on the loans 50,926 6,039 56,965
Loan repaid (6,283) - (6,283)
Interest charge for the period - 1,228 1,228
Capitalised loan capital and interest (201,125) (17,314) (218,439)
FX movement 26 - 26
---------- --------- ----------
Balance as at 31 March 2020 6,201 6,660 12,861
---------- --------- ----------
13. Investments - designated at fair value through profit or loss
At 31 March 2020, 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:
SMH IHDC DLI IEL Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April 2019 5,115 20,959 147,870 5,432 179,376
Additional capital injection - - 31,831 - 31,831
Fair value adjustment (5,115) 2,563 51,699 1,647 50,794
----------- ---------- --------- ---------- ---------
Balance as at 31 March 2020 - 23,522 231,400 7,079 262,001
----------- ---------- --------- ---------- ---------
(i) Shree Maheshwar Hydel Power Corporation Ltd ("SMH")
(ii) India Hydropower Development Company LLC ("IHDC")
(iii) Distribution Logistics Infrastructure ("DLI")
(iv) Indian Energy Limited ("IEL")
As noted in the Joint Statement from the Chairman and the Chief
Executive, the promoter of SMH has not secured the required funding
and SMH received a termination order with regard to the
historically entered Power Purchase Agreement ("PPA") and
Resettlement & Rehabilitation Agreement ("R&R Agreement")
from M.P. Power Management Company Limited, a company owned by the
Government of Madya Pradesh. The PPA was signed in 1994 and amended
in 1996 and the R&R Agreement was signed in 1997. Without a
valid PPA and visibility into availability of completion financing,
it is impossible to prepare reasonable forecasts. Although IIP
retains legal options to extract value for its investment, until
further clarity emerges, it is assumed that SMH has no contribution
to IIP's valuation.
The investments in IHDC, IEL and DLI have been fair valued by
the Directors as at 31 March 2020 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 3.02% for
IHDC, 2.00% for IEL and 7% for DLI. (2019: risk premium was 8% for
SMH, 3.36% for IHDC, 2.00% for IEL and 7% for DLI).
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. SMH and DLI are still in the construction
or 'ramp-up' phase.
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 2020, 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.
The following table shows the sensitivities of the valuations to
discount rates and exchange rates:
IHDC Discount Rate
8.19% 8.69% 9.19% 9.69% 10.19%
------ ------ ------ ------ -------
INR/GBP Exchange
Rate 96.5 25.2 23.8 22.5 21.4 20.3
94.5 25.7 24.3 23.0 21.8 20.7
92.5 26.3 24.8 23.5 22.3 21.2
90.5 26.9 25.4 24.0 22.8 21.6
88.5 27.5 26.0 24.6 23.3 22.1
----- ------ ------ ------ ------ -------
DLI Discount Rate
12.2% 13.2% 14.2% 15.2% 16.3%
------ ------ ------ ------ ------
INR/GBP Exchange
Rate 96.5 260.3 221.8 189.5 164.3 141.8
94.5 265.8 226.5 193.5 167.8 144.8
92.5 271.6 231.4 197.7 171.4 147.9
90.5 277.6 236.5 202.1 175.2 151.2
88.5 283.9 241.9 206.6 179.2 154.6
----- ------ ------ ------ ------ ------
IEL Discount Rate
--------------------------------------------
6.17% 7.17% 8.17% 9.17% 10.17%
----------- ------ ------ ------ -------
INR/GBP Exchange
Rate 96.5 8.2 7.4 6.8 6.2 5.7
94.5 8.4 7.6 6.9 6.3 5.8
92.5 8.5 7.8 7.1 6.5 5.9
88.4 8.9 8.1 7.4 6.8 6.2
86.4 9.1 8.3 7.6 6.9 6.3
----- ---- ------ ------ ------ -------
14. Trade and other payables
Group Company
------------------ ------------------
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 271 204 210 131
Accruals and other payables 1,560 1,547 4 46
-------- -------- -------- --------
1,831 1,751 214 177
-------- -------- -------- --------
15. Loans and borrowings
Group Capital Interest Total
GBP'000 GBP'000 GBP'000
Balance as at 1 April 2019 65,668 7,679 73,347
Loans drawn-down 82,849 - 82,849
Interest charge for the year - 18,159 18,159
Capitalised loan interest 5,002 (5,002) -
Loans repaid (5,781) - (5,781)
Loan interest paid - (36) (36)
Foreign currency loss 5,146 738 5,884
-------- --------- --------
Balance as at 31 March 2020 152,884 21,538 174,422
-------- --------- --------
Company Capital Interest Total
GBP'000 GBP'000 GBP'000
Balance as at 1 April 2019 65,668 7,679 73,347
Interest charge for the year - 10,246 10,246
Capitalised loan interest 5,002 (5,002) -
Loans repaid (5,781) - (5,781)
Loan interest paid - (36) (36)
Foreign currency loss 3,290 97 3,387
-------- --------- --------
Balance as at 31 March 2020 68,179 12,984 81,163
-------- --------- --------
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 increased to US$21.5 million in September 2017.
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 and the loan was
subsequently increased in multiple tranches to US$64.1 million. 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.
The Company arranged further debt facility of up to US$105
million (approximately GBP80.2 million) with IIP Bridge Facility
LLC (the "Lender"), an affiliate of GGIC on 2 April 2019. The Loan
is a secured four-year term loan provided to the Company's wholly
owned Mauritian subsidiary, Infrastructure India Holdco, and
matures on 1 April 2023. The loan carries an interest rate of 15%
(increasing to 18% per annum in the event of default) and payable
at maturity, and is secured on all assets of Infrastructure India
Holdco, including 100% of the issued share capital of Distribution
Logistics Infrastructure India ("DLII"), DLI's Mauritian parent
company.
At 31 March 2020, the US$105 million loan facility had been
fully drawn down. US$7.5 million of the drawn down proceeds was
applied towards the repayment the Cedar Valley loan.
In accordance with the requirements of the loan above maturity
of both the GGIC loan and have been extended to 30 June 2023 and
will carry an interest rate of 15% per annum from 2 April 2019.
16. Share capital
No. of shares Share Share
capital premium
Ordinary shares
of GBP0.01 GBP'000 GBP'000
each
---------------- --------- ---------
Balance at 31 March 2020 682,084,189 6,821 282,808
---------------- --------- ---------
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.
During the year, the Company issued a total of 1,817,148
ordinary shares to the Asset Manager including shares that had
accrued up to 1 July 2019.
As at 31 March 2020, the accrued shares were 454,702 and the
accrued share based payment expense for the 454,702 is GBP5,456 at
31 March 2020 share price.
17. Directors' fees and Directors' interests
The Directors had the following interests in the shares of the
Company at 31 March 2020:
Timothy Walker (resigned 31/03/2020) 981,667 Ordinary Shares
Sonny Lulla 1,500,000 Ordinary Shares
Details of the Directors' remuneration in the year are as
follows:
2020 2019
GBP'000 GBP'000
Timothy Walker (resigned 31/03/2020) 90 90
Madras Seshamani Ramachandran 90 90
-------- --------
180 180
-------- --------
18. 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 2020 amounted to
GBP5,552,000 (31 March 2019: GBP5,531,000). The amount of
management fees outstanding as at 31 March 2020 amounted to
GBP1,380,000 (2020: GBP1,398,000).
Loans and borrowings
See note 15 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 (2019:
GBP120,000). The amount outstanding as at year end is GBP30,000
(2019: GBP30,000).
19. 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.
2020 2019
Net assets (GBP'000) 124,101 106,028
Number of shares in issue
(note 16) 682,084,189 680,267,041
------------ ------------
NAV per share 18.2p 15.6p
------------ ------------
There is no difference between basic and diluted NAV per
share.
20. Subsequent events
Board appointment
On 21 April 2020, the Board appointed announced the appointment
of Graham Smith as a Non-Executive Director of the Company.
Covid-19
The COVID-19 pandemic has developed rapidly in 2020. The
resulting impact of the virus on the operations and measures taken
by various governments to contain the virus is likely to negatively
affect the Group's results in the future reporting periods.
As outlined in note 2.d, the Group is continuing to report on a
going concern basis, and while on site activity has been suspended,
staff and consultants are working on desktop studies and planning
stage exploration activity to include the ongoing feasibility
study. The Group's response to the outbreak is described in the
Chairman's Statement. The unknown length of the outbreak is a
source of uncertainty and the Board will continue to monitor events
and to provide updates as the situation develops.
The carrying value of the Group assets have been assessed in
light of the COVID-19 pandemic and the long-term impacts that this
will have on the investments of the Group. as a result of the
impact of COVID-19, to business assumptions and completion
schedules on both construction and operations at IIP's largest
asset, Distribution Logistics Infrastructure Limited ("DLI"). Cash
planning and management is in place for all businesses, which have
been stress tested based on a number of scenarios.
The COVID-19 pandemic continues to evolve and further actions
that alter our business operations may be required in the coming
months. The Group continues to monitor the situation very closely,
with a primary focus on the health, wellbeing and safety of all its
employees and local communities. If this changes the Group will of
course provide an update accordingly.
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.
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END
FR FEEFWEESSESS
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