TIDMIIP TIDMTTM
RNS Number : 8913U
Infrastructure India plc
08 December 2021
8 December 2021
Infrastructure India plc
("IIP" or the "Company" and together with its subsidiaries, the
"Group")
Annual results for the twelve months ended 31 March 2021
and Notice of Annual General Meeting
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 2021 (the
"Accounts") and notice of its Annual General Meeting (the
"AGM").
The AGM will be held at 10:00 a.m. (GMT) on 31 December 2021 at
the offices of FIM Capital Limited, 55 Athol St, Douglas, Isle of
Man IM1 1LA.
The Accounts, Notice of AGM and the associated Form of Proxy
will be sent to shareholders and copies will also be available on
the Company's website www.iiplc.com shortly.
Financial performance
-- Value of the Company's investments was GBP259.2 million as at
31 March 2021 (GBP254.4 million as at 30 September 2020; GBP262.0
million as at 31 March 2020).
-- The Company's Net Asset Value ("NAV") decreased to GBP93.3
million as at 31 March 2021 (GBP104.3 million as at 30 September
2020; GBP124.1 million as at 31 March 2020).
-- The Company's NAV per share was 13.7p as at 31 March 2021
(15.3p as at September 2020; 18.2p as at March 2020).
-- The decrease in NAV was principally a result of the
devaluation of Indian Rupee against Sterling and adjustments to the
risk-free rate. There continue to be Covid-19 related revisions to
business assumptions underpinning the asset valuation of
Distribution Logistics Infrastructure Limited ("DLI"), in
particular, delays to completion schedules. Net asset value as at
31 March 2021 also reflects the accrual of interest on the
Company's debt facilities.
Post period end
-- The use of capital funds for the operational and financial
support of DLI during 2020 and 2021 has resulted in significant
liquidity constraints for the Group. To realise funds within the
short term, management are in advanced discussions with regard to
the sale of Indian Energy Limited.
Commenting on the results Sonny Lulla, CEO of IIP, said:
"The Indian economy contracted by 7.3% during the fiscal year
2020-2021 due to Covid-19 and while the IMF forecasts a bounce back
in the next fiscal year with growth of 9.5%, it has been a
challenging period. Our portfolio management teams responded well,
adapting the businesses to the prevailing conditions where
possible. For DLI, in particular, availability of labour,
imbalanced container cycles and port bottlenecks severely limited
operations. These issues caused by the pandemic and protracted
discussions around financing, meant that IIP had to provide
additional support to DLI during the period which had an
unanticipated impact on Group cash flow. The Board is currently
evaluating alternative sources of financing, including asset
sales."
Enquiries:
Infrastructure India plc www.iiplc.com
Sonny Lulla Via Novella
Strand Hanson Limited
Nominated Adviser
James Spinney / James Dance +44 (0) 20 7409 3494
Singer Capital Markets
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 2021.
Net asset value ("NAV") and net asset value per share decreased
to GBP93.3 million and 13.7p, respectively as at 31 March 2021,
compared to GBP104.3 million and 15.3p as at 30 September 2020
(GBP124.1 million and 18.2p as at 31 March 2020). The primary
drivers of the movement in NAV were a devaluation of the Indian
Rupee against Sterling and adjustments to the risk-free rate. As
the Covid-19 pandemic persisted through the year and India
experienced a devastating second wave of infections, the impact on
both construction and operations at Distribution Logistics
Infrastructure Limited ("DLI") resulted in revisions to business
assumptions and completion schedules.
The fiscal year commenced in the midst of a complete national
lockdown on non-essential activity, imposed by the Government of
India on 24 March 2020, to slow the spread of Covid-19. For DLI,
all construction activities at its terminals ceased and while some
of its freight was classed as essential, movements of cargoes were
initially negligible due to closures across the supply chain in
India. The effect of an earlier lockdown in China, at the beginning
of 2020, had already had a material impact on Indian container
freight and container cycles.
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 was largely
viewed as being more beneficial in the longer term. The Reserve
Bank of India reduced the benchmark interest rate by 75 basis
points and extended a moratorium on debt obligations by six
months.
In June 2020, India commenced a phased reopening of economic
activities and adopted a cluster containment strategy. Like other
nations, India's cities and industrial centres were often the most
affected regions. DLI's terminals were all located in Covid-19 hot
spots and the restrictions in place hindered construction progress
and regulatory approvals due to closures and backlogs at Government
offices. There were - and continue to be - critical shortages of
labour. Freight volumes, including export, import and bulk cargo,
remained depressed and this resulted in aggressive discounting
amongst operators in the logistics sector.
In an effort to provide fiscal stimulus to support investment
and boost growth, the Government of India had also 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 performed as expected with some disruption to
administrative functions and localised delays, but overall the
impact of Covid-19 was reasonably limited throughout the reporting
period, with all sites accessible and fully staffed. The impact at
Indian Energy Limited ("IEL") was initially 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
diversified its customer base.
The Indian economy contracted for the first time during fiscal
year 2020-2021 by 7.3% as a direct result of Covid-19. This is
expected to recover with IMF growth estimates of 9.5% in fiscal
year 2021-2022. Container traffic is expected to have support from
recovering growth in international trade and increased public and
private investment in infrastructure including the continued
progress of the Dedicated Freight Corridor and the Delhi-Mumbai
Industrial Corridor.
Financial performance
The gross value of the Group's investments was GBP259.2 million
as at 31 March 2021 (GBP254.4 million as at 30 September 2020;
GBP262.0 million as at 31 March 2020). Currency exchange rates
weakened at the end of the Company's financial year with GBP:INR
exchange rate of 100.68 as at 31 March 2021, against 94.64 as at 30
September 2020 and 92.48 as at 31 March 2020. The risk-free rate of
return, based on the benchmark Indian government 10-year bonds,
increased slightly to 6.17% as at 31 March 2021 from 6.01% as at 30
September 2020 and 6.17% as at 31 March 2020.
Total investment during the year ended 31 March 2021 was GBP7.6
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. The pandemic has
presented serious business obstacles during the fiscal year. The
interruption to construction and terminal operations, alongside the
wider sector difficulties such as port bottlenecks and imbalanced
container cycles has been extremely challenging for the management
team. In addition to the many operational issues they faced, the
team undertook cost reductions and loan restructuring during the
period.
Throughout the fiscal year, DLI sustained delays in construction
and completion schedules, delays with regulatory approvals due to
government bottlenecks and irregular and lumpy volumes as a result
of 15 months of severe market turbulence. The most significant
challenge for construction, particularly during the second wave of
infections this year, was the reduced availability of labour.
In addition to Covid-19, the sector was impacted by increased
border tension with China during the period. In June 2020, in the
northern Himalayan Galwan Valley, there was a clash between
military personnel. In response to the border conflict, both Indian
and Chinese customs officials began 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.
Activity and freight volumes during much of calendar year 2020
were erratic, with low capacity across most industrial sectors due
to both lower demand and critical shortages of labour and raw
materials. Bottlenecks at foreign ports, in particular China, as
well as container cycles, including the relocation of empties, has
also been extremely problematic for the sector.
Following India's phased reopening in 2020, the first calendar
quarter of 2021 started well, with a rebound in consumer demand and
an overall pick up in economic activity. However, a resurgence of
Covid-19 hindered this recovery and although the disruption was
less severe than 2020 due to localised and less stringent
restrictions, the impact on demand and disrupted industrial
activity - particularly due to a shortage of labour - was
marked.
Work at the terminal in Bangalore was completed during the
fiscal year, but customs approval remains outstanding due to
current Government backlogs. Nagpur Phase II work received final
regulatory clearance from Indian Railways in calendar Q4 2020, but
market share has fluctuated due to aggressive discounting amongst
other operators. To counter this, DLI has entered into strategic
agreements with third party terminals.
Work in the NCR and at Chennai have been on hold due to local
restrictions and construction activity at Chennai is expected to
commence once financing is in place, as announced in August
2021.
The fiscal year has been overshadowed by the pandemic. DLI
focused on optimising its cost base and restructured its loans with
improved borrowing terms, including a moratorium on interest for 13
months from March 2021 and a moratorium on principal for 24 months
from December 2020, as well as reductions in interest rate from 12%
to 10%.
Energy
India Hydropower Development Company's ("IHDC") overall
production was higher than the previous fiscal year largely as a
result of the ramp up of production at Raura, with production of
42.8 GWh, up from 13.5 GWh in the prior year. Despite the Covid-19
pandemic, IHDC has been operating as expected with overall limited
disturbance to operations, notwithstanding the periodic local
lockdowns and various restrictions. There was some administrative
disruption due to office closures and localised delays, such as the
pace of replacement of defective runners at Raura, which were
finally installed in August 2020. Construction access issues for
the Melan project were resolved and IHDC renewed the required
permits, although construction estimates have been revised given
the continuing uncertainties with Covid-19.
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 as a result
of lower wind speeds and lower consumption of power at Theni, which
sells power under a Group Captive Scheme to manufacturing and
retail customers, as a result of lockdowns. IEL has since been
diversifying its customer base. Production at Theni was also
impacted by the failure of three generators and slow repairs due to
Covid restrictions. Despite the issues at Theni, IEL sold its
production in full by the year end. In addition, IEL restructured
its loans with interest rate reductions of 4.8% to 8.15% at Theni
and a reduction of 3.9% to 8% at Gadag.
Shree Maheshwar Hydel Power Corporation Limited ("SMH") remains
hampered by various legal issues, is currently lacking a valid PPA
and there is also no visibility on the availability of completion
financing, therefore 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 going concern
As at 31 March 2021, the Group had gross cash resources of
GBP13.7 million. During the fiscal year and subsequent to the
fiscal year end, DLI faced challenges that have led to delays in
the progress of its capital projects, the most significant of which
was the reduced availability of labour. The use of capital funds
for the operational and financial support of DLI during 2020 and
2021 has resulted in liquidity constraints for the Group. As at 31
October 2021, the Group had unaudited cash and cash equivalents
available of approximately GBP0.5 million and approximately US$1.2
million (GBP0.9 million) of cash receivables. This position
amounted to approximately 2 to 3 months of runway. The Company's
forecasts indicate that it does not have sufficient cash reserves
to meet creditors as they fall due beyond January 2022.
Accordingly, given the Company has significant liquidity problems
and has limited cash reserves available to support the group's
operations, a material uncertainty exists that may cast significant
doubt on the group's ability to continue as a going concern and the
Company's auditor has issued a Qualified Opinion in respect of
going concern.
The Board have been active in securing sources of financing to
ensure the Group has adequate funding to continue to meet
liabilities as they fall due. To realise funds within the short
term, management are in advanced discussions with regard to the
sale of IEL. The Group has received a Letter of Intent signed by a
third party. While the sale will likely occur at a discount to the
stated NAV, the proceeds will provide the Group with additional
runway to pursue the monetisation of other assets, in particular
through the partial or complete sale of DLI. Further announcements
will be made as and when appropriate.
Financing
IIP has three fully drawn facilities: a term loan provided by
IIP Bridge Facility LLC (the "Term Loan"), a working capital loan
provided by GGIC, Ltd (the "Working Capital Loan") and a bridging
loan provided by Cedar Valley Financial (the "Bridging Loan"). The
Term Loan was arranged to provide sufficient capital to enable DLI
to complete all of its facilities and provide additional working
capital to the Group, but the Covid-19 pandemic, which has led to
16 months of restrictions - in particular, the crippling early
lockdowns and displacement of labour - has had a substantial impact
on DLI's completion plans.
The Term Loan was originally provided to IIP's wholly owned
Mauritian subsidiary, Infrastructure India Holdco, in April 2019,
in multiple tranches totalling US$105 million, of which US$7.5
million was used to repay the Bridging Loan, in accordance with its
terms. The Term Loan is a secured four-year term loan. The loan
carries an interest rate of 15% per annum and matures on 1 April
2023.
In April 2019, the Company also extended the maturity of the
Working Capital Loan and extended and enlarged 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 unsecured Bridging Loan was originally provided to the
Company in June 2017 by Cedar Valley Financial 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. The outstanding principal which includes some
capitalised interest per the terms of the facility as at 31 March
2021 was US$78,427,837.
There remain challenges and uncertainties as a result of
Covid-19 which are difficult to predict or quantify at both a
company and sector level. As with previous periods during the
Covid-19 pandemic, the Group has carried out sensitivity analysis
to try to assess the implications of different scenarios on future
cash flows. This includes a moderation in volumes and margins at
DLI to reflect the potential continued impact of Covid-19 which, in
that scenario, could result in a negative impact to valuation of
approximately GBP6.4 million.
The Board will continue to update shareholders on discussions
around the sale of IEL as well as other developments across IIP's
portfolio of assets.
Tom Tribone & Sonny Lulla
December 2021
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 Mar 2011 Oct 2011 Jan 2012 - Mar
2021
Investment amount GBP34.8 million GBP58.4 million GBP173.2 million
Aggregate percentage
interest 37.4% 99.9% 99.9%
Investment during the GBP7.6 million
period
Valuation as at 31 March GBP227.0 million
2021
Project debt outstanding GBP69.9 million
as at 31 March 2021
Key developments
* The challenges faced by DLI during the fiscal year
were largely pandemic-related. Lockdowns and other
restrictions led to difficulties in availability of
containers, vehicles, equipment and, in particular,
labour. All of which resulted in delays to
construction work. Regulatory approvals were also
delayed due to Government backlogs.
* Despite the adversities, DLI was able to complete the
majority of the construction work at Bangalore,
including the Private Freight Terminal, and
export-import operations are expected to commence
before the end of the current fiscal year. Final
regulatory clearance was also received for Nagpur
Phase II work.
* DLI successfully restructured its existing debt at a
lower rate of interest. Cost control measures ensured
a positive EBITDA margin despite reduced industrial
activity due to Covid-19.
* Subsequent to the fiscal year end, the Group
commenced exploratory discussions with regard to the
partial or complete sale of DLI.
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
The variety and scale of restrictions to contain Covid-19 during
the fiscal year resulted in weak and lumpy economic activity.
Lockdowns imposed during the second wave of Covid-19 in India
reversed the gradual recovery seen in Q1 of the calendar year.
Global actions, including lockdowns, created a temporary but acute
shortage of empty containers with reduced manpower at ports and
additional waiting time for vessels magnifying the problem.
Although there has been improvement in container cargo volumes, the
cycle of empties has yet to fully recover.
Work at the terminal in Bangalore was completed, but customs
approval remains outstanding due to current Government backlogs.
Nagpur Phase II work received final regulatory clearance from
Indian Railways in calendar Q4 2020, while work in the NCR and at
Chennai have been on hold due to local restrictions and
construction activity at Chennai is expected to commence once
financing is in place, as announced in August 2021.
DLI faced considerable pricing pressure from other Container
Train Operators during the period and the management team
implemented several cost control measures. DLI continues to enjoy a
dominant market presence in central India and has entered into
strategic partnerships to cement its market leadership in the
region. The team will focus on building a strong market position in
the southern region with commencement of operations at Bangalore's
Private Freight Terminal towards the end of the fiscal year.
DLI successfully restructured its debt with existing lenders,
reducing it's interest rates by 200 basis points along with a
moratorium on interest and on principal repayment.
The use of capital funds for the operational and financial
support of DLI during 2020 and 2021 resulted in liquidity
constraints for IIP. Subsequent to the period end, the Group
commenced exploratory discussions with regard to the partial or
complete sale of DLI and further announcements will be made as and
when appropriate.
Valuation
DLI management undertook a detailed financial review of
projections for the second half of the fiscal year ending March
2021. The valuation reflects revised business and construction
assumptions and a moderation in volumes from the continued impact
of Covid-19.
As at 31 March 2021, the NPV of future IIP cash flows for DLI
using the above assumptions is GBP227 million (31 March 2020:
GBP231 million) . When adjusted for debt from Holdco, the valuation
is GBP208.4 million. Management maintained the use of a higher risk
premium of 7% in addition to a risk free rate of 6.17% in light of
the continued uncertainties surrounding the 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 13 MW of capacity
under development or construction.
Promoter Dodson-Lindblom International Inc. ("DLZ")
Date of investment Mar 2011 Jan 2012 May 2012
Investment amount GBP25.7 million GBP0.3 million GBP1.1 million
Aggregate % interest 50% 50% 50%
Investment during the Nil
period
Valuation as at 31 March GBP20.7 million
2021
Project debt outstanding GBP5.5 million
as at 31 March 2021
Key developments
* Overall generation from IHDC's projects was higher
than the previous fiscal year largely as a result of
the ramp-up of Raura project in Himachal Pradesh and
higher generation at both Bhandardara projects in
Maharashtra.
* Despite the pandemic, IHDC has been operating as
expected with overall limited disturbance to
operations, although PPA negotiations for Raura have
been delayed.
* The Raura project is fully operational following the
installation of replacement runners.
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 13 MW of capacity under
development and construction.
Project update
Overall generation from IHDC's projects was 185.0 GWh in the
fiscal year against 124.1 GWh during the previous year. The surge
in production was largely a result of ramp-up of Raura project in
Himachal Pradesh and increased generation at both Bhandardara
projects in Maharashtra.
During the fiscal year, the replacement runners at Raura were
installed and the project is fully operational. IHDC is currently
selling the plant's power to Himachal Pradesh State Electricity
Board, however, management is exploring options for a longer-term
PPA with higher tariff rate and is also in discussion with private
offtakers. At Melan, the management team has maintained the
necessary permits with regulatory agencies to keep the project
viable while construction estimates have been revised given the
continuing uncertainties with Covid.
Generation at Birsinghpur was 32% higher year-on-year due to
increased operations at the thermal power plant. The Darna plant
also increased generation, by 22% year-on-year, with the completion
of upstream irrigation dams. Siltation issues at Panwi have now
been resolved following the construction of an upstream dam in
early 2020.
Trading of Renewable Energy Certificates (REC) is currently on
hold due to ongoing litigation, although this is expected to be
temporary. REC's are still being accumulated on a monthly
basis.
Valuation
The IHDC portfolio was valued in accordance with the Company's
stated valuation methodology by using a composite risk premium of
3.02% 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 operations.
The value for IHDC investments as at 31 March 2021 is GBP20.7
million (31 March 2020 GBP23.5 million). The factors which impacted
the valuation are the operational delays in commissioning Melan,
delays in income from REC's, movement in the risk-free rate and
currency devaluation .
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 GBP11.5 million
2021
Project debt outstanding GBP5.8 million
as at 31 March 2021
Key developments
* Overall generation from IEL's two projects during the
fiscal year was lower than the previous year.
* Both projects suffered low wind resources during the
season and delays in repairs resulting from the
imposition of Covid-19 lockdowns.
* Grid availability improved during the period due to
measures taken by the state governments of Karnataka
and Tamil Nadu, with most improvement seen at Gadag.
* Although generation and revenue declined, IEL reduced
operating costs and restructured long term debt at
both projects, with significant rate reductions (13%
to 8.2% at Theni and 11.9% to 8.0% at Gadag), tenure
extension and moratoriums.
* Subsequent to the fiscal year end, the Group is in
advanced discussions with regard to the sale of IEL.
Investment details
IEL is an independent power producer that owns and operates wind
farms, with installed capacity of 24.8 MW in Gadag and 16.5 MW in
Theni - in the states of Karnataka and Tamil Nadu respectively.
Project update
Overall generation from IEL's two projects was 60.3 GWh during
the fiscal year against 65.6 GWh during the previous year.
Generation declined due to lower wind resource during the monsoon
months of July and August as well as generator breakdowns at Theni
and delays in repair and maintenance caused by the lockdowns and
other Covid-19 restrictions. The management team focussed on
tightening operating costs alongside repairing and upgrading the
equipment at both projects to extend the life of the assets.
At the beginning of the fiscal year, Theni, which sells power
under a Group Captive scheme to manufacturing and retail customers,
saw lower consumption particularly during lockdowns. Theni
immediately took steps to diversify its customer base. At Gadag,
there were delays in generator maintenance caused by O&M
service providers. The team has since taken proactive steps to
minimise production losses resulting in better performance and
machine availability. Despite these challenges, IEL sold its
production in full by the year end.
IEL restructured long term debt at both projects. For Theni, IEL
secured approval for restructuring of loans from the State Bank of
India with a 4.8% reduction in the interest rate to 8.15% and a
revised tenure from 24 months to 84 months, including a moratorium
of 21 months. Subsequent to the fiscal year end at Gadag, the Bank
of Baroda revised the interest rate from 11.9% to 8% and extended
tenure by 24 months.
Subsequent to the period end, management entered discussions
with regard to the sale of IEL in order for the Group to realise
funds within the short term. The Group has received a Letter of
Intent signed by a third party. While the sale will likely occur at
a discount to the stated NAV, the proceeds will provide the Group
with additional runway.
Valuation
Long term generation estimates have been revised to reflect the
historical 10-year average values which are considered more
realistic than adjusted values from wind resource studies.
Adjustments were made to account for the changes in the tariff
rates, claims for liquidated damages, extension of life for both
the projects including the expansion capital expenditure and
salvage value, and restructuring of the debt.
The extension of asset life for both projects, savings in
operating expenses and restructuring of debt were the principal
drivers of IEL's valuation. The NPV of future cash flows for IIP,
after accounting for these adjustments, was GBP11.5 million as at
31 March 2021 (31 March 2020: GBP7.1 million).
Directors' Report
The Directors have pleasure in presenting their report and
financial statements of the Group for the year ended 31 March
2021.
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 2021 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 (2020:
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
-----------------------
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 18.
Company Secretary
The secretary of the Company during the year and to the date of
this report was Grainne Devlin.
By Order of The Board
Sonny Lulla
Director
December 2021
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 adequate 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
December 2021
Corporate Governance Statement
Introduction from the Chairman
The Board of Infrastructure India plc ("IIP") 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 / a nd a full
update of the investments including investment details, a
description of investments, key developments and valuations are
included in the Review of Investments 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 IM1 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 RNS in June and
August 2021, details of which are available to view on 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 2021.
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 21 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 intends to meet 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 three times formally.The Audit
Committee met once.
Board Meetings Attendance
Board Meetings Date R Venerus T Tribone S Lulla MS Ramachandran G Smith
[1]
1 13.10.2020 X X X X x
----------- ---------- ---------- -------- ---------------- --------
2 17.12.2020 X X X X x
----------- ---------- ---------- -------- ---------------- --------
3 10.03.2021 X X X X x
----------- ---------- ---------- -------- ---------------- --------
Audit Committee Meetings Attendance
Meetings Date The Board
1 13.10.2020 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.
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 18
to the Financial Statements for the year ended 31 March 2021 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
Qualified 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 2021 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, except for the possible effects of the matter
described in the Basis for Qualified Opinion section, 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 2021, 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 Qualified Opinion
As disclosed in the Company liquidity section of the Joint
Statement from the Chairman and the Chief Executive and also in
Note 2(d) and Note 21, the Group faces significant liquidity
problems and has limited cash reserves available to support the
group's operations. As such, a material uncertainty exists that may
cast significant doubt on the group's ability to continue as a
going concern.
We are aware that management are actively seeking to address
this issue and are exploring options available to them in terms of
securing additional financing and/or selling certain assets, such
as the investment in IEL, to realise funds in the short term.
Notwithstanding management's efforts we have been unable to obtain
sufficient appropriate audit evidence to confirm that the going
concern basis of accounting is appropriate.
Management have continued to prepare the financial statements on
the going concern basis and no adjustments have been made to the
financial statements in respect of this issue.
If the Group were unable to continue as a going concern, in our
opinion there could be a significant and material reduction in the
value of investments held at fair value through profit and loss. As
described in the Key audit matters section of our report, the value
of investments has been determined by reference to a fair value
model which considers discounted future cash flows and assumes the
group's operations will continue in operation for many years. If
management are unable to secure sufficient funding to enable
operations to continue then it could be deemed inappropriate to
value investments based on future discounted cashflows and fair
value may have to be determined by reference to the realisable
value of the investments. It is not practicable to quantify the
financial effects.
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 qualified
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.
In addition to the matter described in the Basis for Qualified
Opinion section, we have determined the matters described below to
be the key audit matters to be communicated in our report.
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 93.7% of total assets (278.0% 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 GBP227.0m,
GBP11.5m and GBP20.7m 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 (and
associated delays owing to COVID-19), 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 specific risk premium 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 GBP227.0m
(or 87.6% 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 17.80%. Taking this, and all other
observations and suggestions into account, the auditor's expert
concluded that a fair value of DLI at 31(st) March 2021 on a going
concern basis is GBP140.0m.
IHDC is valued in the financial statements at GBP20.7m. For IHDC
management have used a discount rate of 9.18% compared to an
auditor's expert cost of equity rate of 10.60%. Taking this, and
all other observations and suggestions into account, the auditor's
expert concluded that a fair value of IHDC at 31(st) March 2021 on
a going concern basis is GBP13.1m.
IEL is valued in the financial statements at GBP11.5m. For IEL
management have used a discount rate of 8.17% compared to an
auditor's expert cost of equity rate of between 10.60% and 13.40%
depending on the underlying component. Taking this, and all other
observations and suggestions into account, the auditor's expert
concluded that a fair value of IEL at 31(st) March 2021 on a going
concern basis is GBP5.8m.
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.
Capability of the audit in detecting irregularities, including
fraud
Our approach to identifying and assessing the risks of material
misstatement in respect of irregularities, including fraud and
non-compliance with laws and regulations, was as follows:
-- we identified the laws and regulations applicable to the
Company through discussions with Directors and other management,
and from our commercial knowledge and experience of the sector;
-- we made specific requests of component auditors within the
Group to determine their approach to detecting irregularities,
including fraud and non-compliance with laws and regulations, and
considered their findings as part of our approach;
-- we focused on specific laws and regulations which we
considered may have a direct material effect on the financial
statements or the operations of the Company, including company law,
taxation legislation, anti-bribery, environmental and health and
safety legislation;
-- we assessed the extent of compliance with the laws and
regulations identified above through making enquiries of management
and inspecting legal correspondence; and
-- identified laws and regulations were communicated within the
audit team regularly and the team remained alert to instances of
non-compliance throughout the audit.
We assessed the susceptibility of the Company's financial
statements to material misstatement, including obtaining an
understanding of how fraud might occur, by:
-- making enquiries of management as to where they considered
there was susceptibility to fraud, their knowledge of actual,
suspected and alleged fraud;
-- considering the internal controls in place to mitigate risks
of fraud and non-compliance with laws and regulations; and
-- understanding the design of the Company's remuneration policies.
To address the risk of fraud through management bias and
override of controls, we:
-- performed analytical procedures to identify any unusual or unexpected relationships;
-- tested journal entries to identify unusual transactions;
-- assessed whether judgements and assumptions made in
determining the accounting estimates were indicative of potential
bias; and
-- investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance
with laws and regulations, we designed procedures which included,
but were not limited to:
-- agreeing financial statement disclosures to underlying supporting documentation;
-- reading the minutes of meetings of those charged with governance;
-- enquiring of management as to actual and potential litigation and claims; and
-- reviewing correspondence with tax authorities, relevant
regulators and the company's legal advisors.
There are inherent limitations in our audit procedures described
above. The more removed that laws and regulations are from
financial transactions, the less likely it is that we would become
aware of non-compliance. Auditing standards also limit the audit
procedures required to identify non-compliance with laws and
regulations to enquiry of the Directors and other management and
the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to
detect than those that arise from error as they may involve
deliberate concealment or collusion.
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.
-- 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: 2021
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2021
Group Company
Note 2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Movement in fair value
on investments in subsidiaries 11 - - (26,533) (25,655)
Reversal of impairment
provision on loans to
Group companies 12 - - - 56,965
Movement in fair value
on investments at fair
value through profit or
loss 13 (10,332) 50,794 - -
Foreign exchange (loss)/gains 15,041 (5,756) 7,673 (3,356)
Asset management and valuation
services 7 (5,960) (5,552) - -
Other administration fees
and expenses 6 (4,681) (3,293) (488) (1,108)
--------- --------- --------- ---------
Operating loss (5,932) 36,193 (19,348) 26,846
--------- --------- --------- ---------
Dividend income - - - 207
Finance income 12 - - 620 1,228
Finance costs 8 (24,916) (18,159) (12,120) (10,247)
--------- --------- --------- ---------
(Loss)/profit before taxation (30,848) 18,034 (30,848) 18,034
--------- --------- --------- ---------
Taxation 9 - - - -
--------- --------- --------- ---------
(Loss)/profit for the
year (30,848) 18,034 (30,848) 18,034
--------- --------- --------- ---------
Other comprehensive income - - - -
--------- --------- --------- ---------
Total comprehensive (Loss)/profit (30,848) 18,034 (30,848) 18,034
--------- --------- --------- ---------
Basic and diluted (loss)/
earnings per share (pence) 10 (4.52)p 2.64p
--------- ---------
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 2021
Group Company
Note 2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Investments in subsidiaries 11 - - 165,113 191,646
Loans to Group companies 12 - - 13,501 12,861
Investments at fair value
through profit or loss 13 259,236 262,001 - -
Property Plant and Equipment 14 3,607 - - -
---------- ---------- ---------- ----------
Total non-current assets 262,843 262,001 178,614 204,507
---------- ---------- ---------- ----------
Current assets
Debtors and prepayments 153 96 131 15
Cash and cash equivalents 13,656 38,257 229 956
---------- ---------- ---------- ----------
Total current assets 13,809 38,353 360 971
---------- ---------- ---------- ----------
Total assets 276,652 300,354 178,974 205,478
---------- ---------- ---------- ----------
Current liabilities
Trade and other payables 15 (1,713) (1,831) (114) (214)
Current loans and borrowings 16 - - - -
---------- ---------- ---------- ----------
Total current liabilities (1,713) (1,831) (114) (214)
---------- ---------- ---------- ----------
Long-term liabilities
Long term loans & borrowings 16 (181,686) (174,422) (85,607) (81,163)
---------- ---------- ---------- ----------
Total long-term liabilities (181,686) (174,422) (85,607) (81,163)
---------- ---------- ---------- ----------
Total liabilities (183,399) (176,253) (85,721) (81,377)
---------- ---------- ---------- ----------
Net assets 93,253 124,101 93,253 124,101
---------- ---------- ---------- ----------
Equity
Ordinary share capital 17 6,821 6,821 6,821 6,821
Share premium 17 282,808 282,808 282,808 282,808
Retained earnings (196,376) (165,528) (196,376) (165,528)
---------- ---------- ---------- ----------
Total equity 93,253 124,101 93,253 124,101
---------- ---------- ---------- ----------
The notes referred to above form an integral part of the nancial
statements.
These financial statements were approved by the Board on 2021
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 2021
Group
Share Retained
Share capital premium earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
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 - - 18,034 18,034
Balance at 31 March 2020 6,821 282,808 (165,528) 124,101
------------------------------ -------------- --------- ---------- ---------
Balance at 1 April 2020 6,821 282,808 (165,528) 124,101
Total comprehensive loss for
the year
Loss for the year - - (30,848) (30,848)
------------------------------ -------------- --------- ---------- ---------
Total comprehensive loss for
the year - - (30,848) (30,848)
Balance at 31 March 2021 6,821 282,808 (196,376) 93,253
------------------------------ -------------- --------- ---------- ---------
Company
Share Retained
Share capital premium earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
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 - - 18,034 18,034
Balance at 31 March 2020 6,821 282,808 (165,528) 124,101
------------------------------ -------------- --------- ---------- ---------
Balance at 1 April 2020 6,821 282,808 (165,528) 124,101
Total comprehensive loss for
the year
Loss for the year - - (30,848) (30,848)
------------------------------ -------------- --------- ---------- ---------
Total comprehensive loss for
the year - - (30,848) (30,848)
Balance at 31 March 2021 6,821 282,808 (196,376) 93,253
------------------------------ -------------- --------- ---------- ---------
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 2021
Group Company
Note 2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
(Loss)/profit for the year (30,848) 18,034 (30,848) 18,034
Adjustments:
Movement in fair value on
investments at fair value
through profit or loss 13 10,332 (50,794) - -
Movement in fair value on
investments in subsidiaries 11 - - 26,533 25,655
Reversal of impairment provision
on loans to Group companies - - - (56,965)
Finance costs 8 24,916 18,159 12,120 10,247
Finance income 12 - - (620) (1,228)
Share based payment - 39 - 39
Foreign exchange (gain)/loss (15,041) 5,756 (7,673) 3,356
--------- --------- --------- ---------
(10,641) (8,806) (488) (862)
(Decrease)/increase in trade
and other payables (57) 80 (116) 37
(Increase)/ decrease in debtors
and prepayments (118) 2 (100) 2
--------- --------- --------- ---------
Net cash utilised by operating
activities (10,816) (8,724) (704) (823)
--------- --------- --------- ---------
Cash flows from investing
activities
Share redemption in subsidiary - - - 1,138
Proceeds from loans received - 82,848 - 4,898
Loans advanced to subsidiaries 12 - - (20) -
Equity addition in subsidiaries - (31,831) - -
Purchase of investments 13 (7,567) - - -
Purchase of fixed assets 14 (3,607) - - -
--------- --------- --------- ---------
Cash utilised by investing
activities (11,174) 51,017 (20) 6,036
--------- --------- --------- ---------
Cash flows from financing
activities
Loans repaid - (5,781) - (5,781)
Net cash utilised by financing
activities - (5,781) - (5,781)
--------- --------- --------- ---------
(Decrease)/increase in cash
and cash equivalents (21,990) 36,512 (724) (568)
Cash and cash equivalents
at the beginning of the year 38,257 1,652 956 1,551
Effect of exchange rate fluctuations
on cash held (2,611) 93 (3) (27)
--------- --------- --------- ---------
Cash and cash equivalents
at the end of the year 13,656 38,257 229 956
--------- --------- --------- ---------
The notes referred to above form an integral part of the nancial
statements.
Notes to the Financial Statements for the year ended 31 March
2021
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 2021.
(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
In accordance with IAS1, management must assess the Group's
ability to continue as a going concern and therefore must determine
the Group's ability to meet liabilities and obligations as they
fall due for a period of 12 months from the signing of the
consolidated financial statements.
As at 31 March 2021, the Group had net assets of GBP93 million,
consisting of GBP259 million investments, GBP13.7 million cash and
cash equivalents and total liabilities of GBP183 million. Included
within the liabilities is loan financing of GBP182 million which
matures on 30 June 2023. This financing, most of which was arranged
in April 2019, was provided with the view to enable DLI to complete
its existing terminal facilities, meet other DLI lender
requirements, and provide additional working capital to the
Group.
During 2020 and 2021, DLI faced challenges that have led to
delays in the progress of its capital projects, the most
significant of which was the reduced availability of labour not
helped by the COVID-19 pandemic. The Group faces a challenge
regarding liquidity which has resulted from the use of capital
funds for the operational and financial support of DLI during 2020
and 2021. As at 31 October 2021, the Group had unaudited cash and
cash equivalents available of approximately GBP0.5 million and
approximately US$1.2 million (GBP0.9 million) of cash receivables.
This position amounted to approximately 2 to 3 months of runway for
the Group. The Company's forecasts indicate that it does not have
sufficient cash reserves to meet creditors as they fall due beyond
January 2022.
The board have been active in securing sources of financing to
ensure the Group has adequate funding to continue to meet
liabilities as they fall due. To realise funds within the short
term, management are in negotiations to sell IEL. The Group has
received a letter of intent signed by a third party. While the sale
will likely occur at a discount to the stated NAV, the Group will
be provided additional runway to pursue the monetisation of other
assets.
The sale of IEL will provide the Group with time to continue the
pursuit of realising other assets. Specifically, the realisation of
value from DLI through the partial or complete sale of the
investment.
Providing the above sequence of events can occur as laid out,
the Directors have a reasonable expectation that the Group has
adequate resources to continue 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.
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.
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.
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
i. Initial recognition and measurement
The Group initially recognises financial assets and financial
liabilities on the date in which it becomes a party to the
contractual provisions of the instrument. Financial assets or
financial liabilities are initially measured at fair value, except
for trade receivables that do not have a significant financing
component which are measured at transaction price. Transaction
costs that are directly attributable to the acquisition or issue of
financial assets and financial liabilities (other than financial
assets and financial liabilities at fair value through profit or
loss) are added to or deducted from the fair value, as appropriate,
on initial recognition. Transaction costs directly attributable to
the acquisition of financial assets or financial liabilities at
fair value through profit or loss are recognised immediately in
profit or loss.
ii. Classification and subsequent measurement
Classification of financial assets
On initial recognition, the Group classifies financial assets as
measured at amortised cost or fair value if it meets both the
following conditions;
- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
- its contractual terms give rise on specified dates to cash
flows that are solely payment of principal and interest.
A financial asset that meets the following conditions are
measured subsequently at fair value through other comprehensive
income ("FVTOCI");
- it is held within a business model whose objective is achieved
by both collecting contractual cash flows and selling the financial
assets; and
- its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
By default, all other financial assets are measured subsequently
at fair value through profit or loss ("FVTPL").
Subsequent measurement of financial assets at amortised cost
Financial assets at amortised cost are subsequently measured at
amortised cost using the effective interest method. Interest income
from these financial assets is included in finance income using the
effective interest rate method. Any gain or loss arising on
derecognition is recognised directly in profit or loss and
presented in other gains/(losses) together with foreign exchange
gains and losses. Impairment losses are presented as a separate
line item in the statement of profit or loss.
Subsequent measurement of financial assets at FVTPL
Financial assets at FVTPL are subsequently measured at fair
value. Net gains and losses, including foreign exchange gains and
losses, are recognised in the Consolidated Statement of
Comprehensive Income.
Financial liabilities - Classification, subsequent measurement
and gains and losses
Financial liabilities are classified as at FVTPL when the
financial liability is (i) contingent consideration of an acquirer
in a business combination, (ii) held for trading or (iii) it is
designated as at FVTPL. Financial liabilities at FVTPL are measured
at fair value, and net gains and losses, including any interest
expense, are recognised in profit or loss.
Other financial liabilities are subsequently measured at
amortised cost using the effective interest method. Interest
expense is recognised in profit or loss. Any gain or loss on
derecognition is also recognised in profit or loss.
iii. Fair value measurement
When available, the Group measures the fair value of an
instrument using the quoted price in an active market for that
instrument. A market is regarded as 'active' if transactions for
the asset or liability take place with sufficient frequency and
volume to provide pricing information on an ongoing basis.
Where there is no quoted price in an active market, then the
Group uses valuation techniques that maximise the use of relevant
observable inputs and minimise the use of unobservable inputs. The
chosen valuation technique incorporates all of the factors that
market participants would take into account in a pricing
transaction.
iv. Amortised cost measurement
The 'amortised cost' of a financial asset or financial liability
is the amount at which the financial asset or financial liability
is measured on initial recognition minus the principal repayments,
plus or minus the cumulative amortisation using the effective
interest method of any difference between that initial amount and
the maturity amount and, for financial assets, adjusted for any
loss allowance.
v. Impairment
Measurement of ECLs
The Group recognises loss allowances for Expected Credit Losses
("ECLs") on financial assets measured at amortised cost. Lifetime
ECLs are the ECLs that result from all possible default events over
the expected life of a financial instrument. 12-month ECLs are the
portion of ECLs that result from default events that are possible
within the 12 months after the reporting date (or a shorter period
if the expected life of the instrument is less than 12 months). The
maximum period considered when estimating ECLs is the maximum
contractual period over which the Group is exposed to credit
risk.
ECLs are a probability-weighted estimate of credit losses.
Credit losses are the present value of all cash shortfalls (i.e.
the difference between the cash flows due to the entity in
accordance with the contract and the cash flows that the Fund
expects to receive). ECLs are discounted at the effective interest
rate of the financial asset.
Credit-impaired financial assets
At each reporting date, Financial assets that are carried at
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.
vi. Derecognition
A financial asset is derecognised when the contractual rights to
the cash flows from the asset expire, or the Group transfers the
rights to receive the contractual cash flows in a transaction in
which substantially all of the risks and rewards of ownership of
the financial asset are transferred or in which the Group neither
transfers nor retains substantially all of the risks and rewards of
ownership and does not retain control of the financial asset.
On derecognition of a financial asset, the difference between
the carrying amount of the asset (or the carrying amount allocated
to the portion of the asset that is derecognised) and the
consideration received (including any new asset obtained less any
new liability assumed) is recognised in profit or loss. Any
interest in such transferred financial assets that is created or
retained by the Fund is recognised as a separate asset or
liability.
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled or expire. On
derecognition of a financial liability, the difference between the
carrying amount extinguished and the consideration paid (including
any non-cash assets transferred or liabilities assumed) is
recognised in profit or loss.
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 Changes in accounting policies
The following standards, interpretations and amendments were
adopted by the Group during the year:
-- Amendments to IFRS 3: Definition of a business
-- Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform
-- Amendments to IAS 1 and IAS 8 Definition of Material
-- Conceptual Framework for Financial Reporting issued on 29 March 2018
-- Amendments to IFRS 16 COVID - 19 Related Rent Concessions
The transition to these standards had no material impact on the
Group.
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:
-- IFRS 17 Insurance Contracts (effective on or after 1 January 2023)
-- Amendments to IAS 1: Classification of Liabilities as Current
or Non-current (effective on or after 1 January 2023) Reference to
the Conceptual Framework - Amendments to IFRS 3 (effective on or
after 1 January 2022)
-- Property, Plant and Equipment: Proceeds before Intended Use -
Amendments to IAS 16 (effective on or after 1 January 2022)
-- Onerous Contracts - Costs of Fulfilling a Contract -
Amendments to IAS 37 (effective on or after 1 January 2022)
-- IFRS 1 First-time Adoption of International Financial
Reporting Standards - Subsidiary as a first-time adopted (effective
on or after 1 January 2022)
-- IFRS 9 Financial Instruments - Fees in the '10 per cent' test
for derecognition of financial liabilities (effective on or after 1
January 2022)
-- IAS 41 Agriculture - Taxation in fair value measurements
(effective on or after 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:
2021 2020
GBP'000 GBP'000
------------------------------------------ --------- ---------
Long and short term loans and borrowings 181,686 174,422
Less: cash and cash equivalents (13,656) (38,257)
------------------------------------------ --------- ---------
Net debt 168,030 136,165
Total equity 93,253 124,101
Total capital 261,283 260,266
------------------------------------------ --------- ---------
Gearing ratio 64.31% 52.32%
------------------------------------------ --------- ---------
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 GBP259.2 million (2020: GBP262.0 million), representing the
Group's investments in Indian Companies. At 31 March 2021, 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 GBP25.9 million (2020: GBP26.2 million). This
exposure is unhedged.
Total liabilities denominated in US$ at the year-end amounted to
GBP181.7 million (2020: GBP176.3 million), principally comprising
loans and borrowings less cash and cash equivalents. At 31 March
2021, 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 GBP18.2 million (2020: GBP17.6 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 GBP25.9
million (2020: GBP26.2 million). A decrease of 10% would have
resulted in an equal and opposite decrease in net assets.
(iii) Cash flow and fair value interest rate risk and sensitivity
The Group's cash and cash equivalents are invested at short term
market interest rates. Loans and borrowings attract fixed interest
rates as detailed in note 16.
The table below summarises the Group's exposure to interest rate
risks. It includes the Groups' financial assets and liabilities at
the earlier of contractual re-pricing or maturity date, measured by
the carrying values of assets and liabilities.
Under 1 1 to 5 Over 5 Non-interest
1 month
month to 1 year years years bearing Total
31 March 2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial assets
Investments at fair value through
profit or loss - - - - 259,236 259,236
Trade and prepayments - - - - 153 153
Cash and cash equivalents 13,656 - - - - 13,656
-------- ----------- ---------- -------- ------------- ----------
Total financial assets 13,656 - - - 259,389 273,045
-------- ----------- ---------- -------- ------------- ----------
Financial liabilities
Trade and other payables - - - - (1,713) (1,713)
Loans and borrowings - - (181,686) - - (181,686)
-------- ----------- ---------- -------- ------------- ----------
Total financial liabilities - - (181,686) - (1,713) (183,399)
-------- ----------- ---------- -------- ------------- ----------
Under 1 1 to 5 Over 5 Non-interest
1 month
month to 1 year years years bearing Total
31 March 2020 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)
-------- ----------- ---------- -------- ------------- ----------
(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-1.
(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 2021 Less 1 to 3 3 months 1 to 5 Over No stated
than months to 1 year years 5 maturity
1 month years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial liabilities
Trade and other - - - - -
payables 1,713
Loans and borrowings - - - 181,686 - -
---------- --------- ----------- -------- -------- ----------
Total - - 1,713 181,686 - -
---------- --------- ----------- -------- -------- ----------
31 March 2020 Less 1 to 3 3 months 1 to 5 Over No stated
than months to 1 year years 5 maturity
1 month years
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 - -
---------- --------- ----------- -------- -------- ----------
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 Level
1 2 3
GBP'000 GBP'000 GBP'000
Financial assets at fair value through
profit or loss (note 13)
Distribution Logistics Infrastructure
Private Limited - - 226,981
India Hydropower Development Company,
LLC - - 20,739
Indian Energy Limited - - 11,516
Fair value at year end - - 259,236
--------- --------- --------
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 262,001
Additional capital injected 7,567
Movement in fair value (10,332)
---------
Fair value at year end 259,236
---------
If the determined discount rates were increased by 1% per annum,
the value of unlisted equity securities would fall by GBP32 million
(2020: GBP31 million).
6. Other administration fees and expenses
Group Company
------------------ ------------------
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Audit fees 86 87 46 53
Legal fees 131 108 20 106
Corporate advisory fees 173 369 168 163
Other professional costs 3,982 1,828 17 32
Administration fees 141 180 120 120
Directors' fees (note 17) 102 208 90 208
Insurance costs 11 10 11 10
Loan arrangement related fees - 209 - 209
Travel and entertaining 8 179 8 142
Other costs 47 115 8 65
-------- -------- -------- --------
4,681 3,293 488 1,108
-------- -------- -------- --------
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, which has an effective termination date of 30
September 2020.
Franklin Park also provide consulting services to the Group,
which fall outside the scope of the New Management Agreement, at a
cost of $150k per quarter.
Fees for the year ended 31 March 2021 were GBP5,960,000 (31
March 2020: GBP5,552,000). The amount of outstanding as at 31 March
2021 amounted to GBP1,489,000 (2020: GBP1,398,000).
8. Finance costs
Group Company
------------------ ------------------
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Loan interest expense
(note 16) 24,916 18,159 12,120 10,247
-------- -------- -------- --------
24,916 18,159 12,120 10,247
-------- -------- -------- --------
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 earnings/(loss) per share are calculated by dividing the
loss attributable to shareholders by the weighted average number of
ordinary shares outstanding during the year.
2021 2020
(Loss)/ Profit attributable to shareholders (GBP thousands) (30,848) 18,034
Weighted average number of ordinary shares in issue (thousands) 681,882 681,882
--------- --------
Basic (loss)/ earnings per share (4.52)p 2.64 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%
Indian Energy Mauritius Mauritius 100%
Non-consolidated subsidiaries held at fair value through profit
or loss
Distribution & Logistics Infrastructure sub group:
Distribution and Logistics Infrastructure
Private Limited India 100.00%
Freightstar India Private Limited India 100.00%
Freightstar Private Limited India 99.79%
Deshpal Realtors Private Limited India 99.76%
Bhim Singh Yadav Property Private India 99.86%
Indian Energy Limited sub group (IEL):
Belgaum Wind Farms Private Limited India 99.99%
iEnergy Wind Farms (Theni) Private Limited India 73.99%
iEnergy Renewables Private Limited India 99.99%
India Hydropower Development Company
sub group (IHDC):
Franklin Park India LLC Delaware 100.00%
India Hydropower Development Company
LLC Delaware 50.00%
The following table shows a reconciliation from the beginning
balances to the ending balances for investments in
subsidiaries:
2021 2020
GBP'000 GBP'000
Balance as at 1 April 191,646 -
Loan to equity conversion - 218,439
Share redemption in Infrastructure India
HoldCo - (1,138)
Movement in fair value on investments
in subsidiaries (26,533) (25,655)
--------- ---------
Balance as at 31 March 165,113 191,646
--------- ---------
12. Loans to Group companies
Capital Interest Total
GBP'000 GBP'000 GBP'000
Balance as at 1 April 2020 6,201 6,660 12,861
Additions 20 - 20
Interest charge for the period - 620 620
-------- --------- --------
Balance as at 31 March 2021 6,221 7,280 13,501
-------- --------- --------
13. Investments - designated at fair value through profit or loss
At 31 March 2021, 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 2020 - 23,522 231,400 7,079 262,001
Additions - - 7,567 - 7,567
Fair value adjustment - (2,783) (11,986) 4,437 (10,332)
--------- --------- --------- ---------- ---------
Balance as at 31 March 2021 - 20,739 226,981 11,516 259,236
--------- --------- --------- ---------- ---------
(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 2021 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 10-year bond yields) plus a risk premium of 3.02% for
IHDC, 2.00% for IEL and 7% for DLI. (2020: 3.02% 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 2021, 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
8.18% 8.68% 9.18% 9.68% 10.18%
------- ------ ------ ------ -------
INR/GBP Exchange
Rate 104.7 22.4 21.1 19.9 18.9 17.9
102.7 22.8 21.5 20.3 19.3 18.3
100.7 23.2 21.9 20.7 19.6 18.6
98.7 23.7 22.4 21.2 20.0 19.0
96.7 24.2 22.8 21.6 20.5 19.4
------ ------- ------ ------ ------ -------
DLI Discount Rate
----------------------------------------
11.2% 12.2% 13.2% 14.2% 15.2%
------- ------ ------ ------ -------
INR/GBP Exchange
Rate 104.7 300.5 254.0 218.3 190.1 167.4
102.7 306.4 259.0 222.6 193.8 170.6
100.7 312.5 264.1 227.0 197.7 174.0
98.7 318.8 269.5 231.6 201.7 177.6
96.7 325.4 275.1 236.4 205.8 181.2
------ ------- ------ ------ ------ -------
IEL Discount Rate
----------------------------------------
6.17% 7.17% 8.17% 9.17% 10.17%
------- ------ ------ ------ -------
INR/GBP Exchange
Rate 104.7 12.6 11.8 11.1 10.4 9.4
102.7 12.8 12.0 11.3 10.6 9.5
100.7 13.1 12.3 11.5 10.9 9.7
98.7 13.4 12.5 11.7 11.1 9.9
96.7 13.6 12.8 12.0 11.3 10.1
------ ------- ------ ------ ------ -------
14. Property, plant and equipment
Land
Cost/Valuation GBP'000
Balance at 1 April 2020 -
Additions 3,607
Balance at 31 March 2021 3,607
--------
The only class of items within property, plant and equipment
relate to the land purchased in the year. This land is currently
held at historical cost and is not subject to depreciation.
15. Trade and other payables
Group Company
------------------ ------------------
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 152 271 58 210
Accruals and other payables 1,561 1,560 56 4
-------- -------- -------- --------
1,713 1,831 114 214
-------- -------- -------- --------
16. Loans and borrowings
Group Capital Interest Total
GBP'000 GBP'000 GBP'000
Balance as at 1 April 2020 152,884 21,538 174,422
Interest charge for the year - 24,916 24,916
Capitalised loan interest 11,269 (11,269) -
Foreign currency gain (8,057) (9,595) (17,652)
-------- --------- ---------
Balance as at 31 March 2021 156,096 25,590 181,686
-------- --------- ---------
Company Capital Interest Total
GBP'000 GBP'000 GBP'000
Balance as at 1 April 2020 68,179 12,984 81,163
Interest charge for the year - 12,120 12,120
Capitalised loan interest 11,270 (11,270) -
Foreign currency gain 464 (8,140) (7,676)
-------- --------- --------
Balance as at 31 March 2021 79,913 5,694 85,607
-------- --------- --------
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.
In accordance with the requirements of the loan above maturity
of both the GGIC and Cedar Valley loans have been extended to 30
June 2023 and will carry an interest rate of 15% per annum from 2
April 2019.
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 accrues interest daily in a
manner that yields a 15% IRR to the Lender (increasing to 18% IRR
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 2021, 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.
17. Share capital
No. of shares Share Share
capital premium
Ordinary shares
of GBP0.01 GBP'000 GBP'000
each
---------------- --------- ---------
Balance at 31 March 2021 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 up to the
effective termination date of 30 September 2020. The Company has
issued a total of 1,817,148 ordinary shares to the Asset
Manager.
18. Directors' fees and Directors' interests
The Directors had the following interests in the shares of the
Company at 31 March 2021:
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:
2021 2020
GBP'000 GBP'000
Timothy Walker (resigned 31/03/2020) - 90
Madras Seshamani Ramachandran 90 90
-------- --------
90 180
-------- --------
19. 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 and consulting services for the year ending 31 March
2021 amounted to GBP5,960,000 (31 March 2020: GBP5,552,000). The
amount of management and consulting fees outstanding as at 31 March
2021 amounted to GBP1,489,000 (2020: GBP1,380,000).
Loans and borrowings
See note 16 regarding loans from GGIC and Cedar Valley
Financial, including interest charged in the year and accrued at
the year-end.
Administrator
FIM Capital Limited provides administration services including
financial accounting services to the Company. The fees paid to the
Administrator for the year amounted to GBP120,000 (2020:
GBP120,000). The amount outstanding as at year end is GBP30,000
(2020: GBP30,000).
20. 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.
2021 2020
Net assets (GBP'000) 93,253 124,101
Number of shares in issue
(note 17) 682,084,189 682,084,189
------------ ------------
NAV per share 13.7p 18.2p
------------ ------------
There is no difference between basic and diluted NAV per
share.
21. Subsequent events
Following the yearend, the Group received a letter of intent
signed by a third party for the sale of IEL. As described in note
3(d), the sale will likely occur at a discount to the stated NAV,
as this will provide the Group with additional runway to pursue the
monetisation of other assets.
22. Ultimate controlling party
The ultimate controlling party during the year was GGIC and
affiliated parties.
23. 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.
Company Information
Registered Office
55 Athol Street
Douglas
Isle of Man
IM1 1LA
Incorporated in the Isle of Man. Company No. 002457V
Directors
Tom Tribone (Chairman)
Rahul Sonny Lulla
Graham Smith
Robert Venerus
Madras Seshamani Ramachandran
Company Secretary
Grainne Devlin
Administrator and Registrar
FIM Capital Limited
55 Athol Street
Douglas
Isle of Man
IM1 1LA
Auditors
Baker Tilly Isle of Man LLC
2a Lord Street
Isle of Man
IM99 1HP
Asset Manager
Franklin Park Management LLC
2711 Centerville Road
Suite 400
Wilmington
DE 19808
United States of America
Nominated Adviser (NOMAD) and Financial Adviser
Strand Hanson
26 Mount Row
Mayfair
London
W1K 3SQ
United Kingdom
Joint Broker
N+1 Singer
One Bartholomew Lane
London
EC2N 2AX
Website www.iiplc.com
[1] Appointed on 21 April 2020
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END
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