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You can view full text of the latest Director's Report for the company.

BSE: 533248ISIN: INE517F01014INDUSTRY: Ship - Docks/Breaking/Repairs

BSE   ` 142.30   Open: 142.10   Today's Range 141.55
145.25
+1.70 (+ 1.19 %) Prev Close: 140.60 52 Week Range 126.25
168.40
Year End :2017-03 

The Directors of Gujarat Pipavav Port Limited ('the Company') have pleasure in submitting their 25th Annual Report to the Members of the Company together with the Audited Standalone and Consolidated Statement of Accounts for the year ended 31st March, 2017. The Company has for the first time presented the Ind AS compliant financial statements as per the requirement under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Accordingly, the previous year's figures have been re-grouped wherever applicable.

1. FINANCIAL STATEMENTS & RESULTS:

a. FINANCIAL RESULTS:

(Rs. In Million)

Particulars

For the year ended 31st March 2017

For the year ended 31st March 2016

Operating Income

6,831.04

6,599.54

Less: Total Expenditure

2,645.14

2,838.91

Operating Profit

4,185.90

3,760.63

Add: Other Income

353.59

303.69

Profit before Interest, Depreciation, Tax and Exceptional Item

4,539.49

4,064.32

Less: Interest

4.03

1.59

Less: Depreciation

1,065.15

973.39

Profit Before Tax

3,470.31

3,089.34

Less: Taxes *

971.19

1,177.50

Profit after Tax

2,499.12

1,911.84

Balance carried forward to Balance sheet

2,498.41

1,907.36

*The Company was on a Tax Holiday under Section 80 (IA) of the Income tax Act and has Nil tax liability until 31st March 2017. However, the Company is required to pay Minimum Alternate Tax (MAT) which has been appropriately reflected in the financial statements in accordance with the Accounting Principles.

b. OPERATIONS:

The Company is engaged in the business of Port Development and Operations at Pipavav Port, Gujarat under the 30 year Concession vide Agreement dated 30th September 1998 from Gujarat Maritime Board. The Port located in Southwest Region of Gujarat handles Dry Bulk, Containers, Liquid, and RORO vessels. The performance details are as follows:

Particulars

For the year ended 31st March 2017

For the year ended 31st March 2016

Bulk Cargo Handled (In MT)

2,112,078

2,478,743

Containers Handled (In TEUs)

663,380

694,614

Liquid Handled (In MT)

685,960

706,877

RORO (No. of Cars)*

83,607

19,644*

*The Company commenced handling of RORO vessels effective August 2015

c. REPORT ON PERFORMANCE OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES:

The Company holds 38.8% shares in Pipavav Railway Corporation Limited (PRCL) and in view of the provisions of Section 2(6) of the Companies Act, 2013 ('the Act'), PRCL is an Associate Company and pursuant to the provisions of Section 129 of the Act, its accounts are to be consolidated with the Company's accounts. More than 50% of PRCL's shareholding is held by Government/ Public Sector Undertakings so PRCL is required to accomplish Statutory Audit followed with the CAG Audit. As on the date of this Report PRCL's Audited Financial Statements are not available, therefore the Company has prepared its Consolidated Financial Statement based on Unaudited financial statements provided by the PRCL Management.

d. DIVIDEND:

The Board of Directors in the Meeting held on 4th November 2016 declared and paid an Interim Dividend of Rs. 2.00 per share. The Board is pleased to recommend a Final Dividend of Rs. 1.80 per share on the Company's outstanding Equity Share Capital.

The Dividend is subject to the approval of the Members at the Annual General Meeting on 10th August 2017 and will be paid on or after 11th August 2017, within the stipulated time limit to all Members whose name appears in the Register of Members, as on the date of book closure ie. from Friday 4th August 2017 to Thursday 10th August 2017 (both days inclusive). The total dividend payout of Rs. 1.80 per equity share will aggregate to Rs. 1,047.34 Million including the Dividend Distribution Tax of Rs. 177.15 Million which will be borne by the Company.

Dividend is the Company's primary distribution of profits to its Shareholders. The Company's objective is to sustain a steady and consistent distribution of profits, by way of Dividend, to its Shareholders, supported by underlying earnings growth and subject to i) availability of profits and funding requirements, ii) future funding needs as per the Company's growth plans, iii) applicable laws and in accordance with the recommendation of the Board of Directors and approval of Shareholders.

e. TRANSFER TO RESERVES:

The Board of Directors have not recommended any transfer of profit to reserves during the period under review. Hence, the entire amount of profit has been carried forward to the Statement of Profit and Loss.

f. REVISION OF FINANCIAL STATEMENT:

The Company has not carried out any revision in its financial statements in any of the three preceding financial years as per the requirement under Section 131 of the Act.

g. DEPOSITS:

The Company has not accepted or renewed any amount falling within the purview of provisions of Section 73 of the Companies Act 2013 (“the Act”) read with the Companies (Acceptance of Deposit) Rules, 2014 during the year under review. Hence, the requirement for furnishing of details of deposits which are not in compliance with the Chapter V of the Act is not applicable.

h. DISCLOSURES UNDER SECTION 134(3)(l) OF THE COMPANIES ACT, 2013:

Except as disclosed elsewhere in this report, no material changes and commitments which could affect the Company's financial position, have occurred between the end of the financial period of the Company and date of this report.

i. DISCLOSURE OF INTERNAL FINANCIAL CONTROLS:

The Internal Financial Controls with reference to financial statements as designed and implemented by the Company are adequate. During the year under review, no material or serious observation has been made by the Statutory Auditors and the Internal Auditors of the Company for inefficiency or inadequacy of such controls. Wherever suggested by the Auditors, the improved control measures have been implemented and their functioning is reviewed from time to time.

j. DISCLOSURE OF ORDERS PASSED BY REGULATORS OR COURTS OR TRIBUNAL:

No adverse orders have been passed by any Regulator or Court or Tribunal which can have impact on the Going Concern status and on the Company's operations in future.

k. PARTICULAR OF CONTRACTS OR ARRANGEMENT WITH RELATED PARTIES:

The transactions/contracts/arrangements entered by the Company with related party(ies) as defined under the provisions of Section 2(76) of the Companies Act, 2013, during the financial year under review, are in ordinary course of business and at arms' length. Therefore they do not come within the purview of the provisions of Section 188 of the Companies Act, 2013.

All the transactions have prior approval of the Audit Committee as per the requirement under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The related party transaction with Maersk Line A/S in connection with Income from Port Operations is a material transaction. The Contract with Maersk Line A/S has been renewed for three years from 1st April 2017 to 31st March 2020. Pursuant to Regulation 23(4) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company is required to obtain Shareholders approval. A resolution to that effect is included in the Notice convening the meeting.

l. PARTICULARS OF LOANS, GUARANTEES, INVESTMENTS AND SECURITIES:

The Company has not provided any loans, guarantees and securities. The Company does not have any investments except its shareholding in the Associate Company PRCL.

Further, the Company is engaged in the business of providing infrastructural facilities and is therefore exempt from the provisions of Section 186 of the Companies Act, 2013.

m. DISCLOSURE UNDER SECTION 43(a)(ii) OF THE COMPANIES ACT, 2013:

The Company has not issued any shares with differential rights and hence no information as per provisions of Section 43(a)(ii) of the Act read with Rule 4(4) of the Companies (Share Capital and Debenture) Rules, 2014 is furnished.

n. DISCLOSURE UNDER SECTION 54(1)(d) OF THE COMPANIES ACT, 2013:

The Company has not issued any sweat equity shares during the year under review and hence no information as per provisions of Section 54(1)(d) of the Act read with Rule 8(13) of the Companies (Share Capital and Debenture) Rules, 2014 is furnished.

o. DISCLOSURE UNDER SECTION 62(1)(b) OF THE COMPANIES ACT, 2013:

The Company has not issued any equity shares under Employees Stock Option Scheme during the year under review and hence no information as per provisions of Section 62(1)(b) of the Act read with Rule 12(9) of the Companies (Share Capital and Debenture) Rules, 2014 is furnished.

p. DISCLOSURE UNDER SECTION 67(3) OF THE COMPANIES ACT, 2013:

During the year under review, there were no instances of non-exercising of voting rights in respect of shares purchased directly by employees under a scheme pursuant to Section 67(3) of the Act read with Rule 16(4) of Companies (Share Capital and Debentures) Rules, 2014.

2. OUTLOOK:

As per the estimates released by the WTO, the world GDP is likely to be at 2.7% this year and 2.8% in the next year. The Container shipping industry is expecting the global container trade to grow by 2%. In view of subdued growth in global trade, the shipping lines are expected to reduce/ rationalize the capacity in various trades to align with global supply and demand requirements.

The Container market on the West coast in India has increased by about 6% largely driven by strong imports. India is amongst the very few global markets reporting the growth numbers. The growth trend in imports is expected to continue during the current year while the exports remain under pressure.

The dry bulk cargo comprises import of Coal and Fertilizer. Coal imports have been witnessing consistent decrease in volumes due to better availability of domestic coal and also because of the Government's focus on promoting clean renewable energy through wind and solar power. The Fertilizer imports remain volatile depending upon the monsoon and the availability of the fertilizer stock in the domestic market. Moreover the compulsory Neem coating is also likely to reduce the imports.

Liquid cargo mainly LPG and RORO are the two promising areas. The Government's initiative of providing LPG connection in the rural areas is likely to increase the LPG imports. With Gujarat developing into an Auto Hub, the car exports from Gujarat has been doing well.

3. RISKS AND AREAS OF CONCERN:

The global trade is faced with two main areas of uncertainties, one the policy changes that the US Administration might implement in the near future and two the impact of UK's exit from the European Union. Any adverse movement in any of these two events is likely to impact the growth in the trade and impact the shipping lines. In India, the imports have been strong and are likely to maintain the trend. In case of below normal monsoon in the coming season, it could have an adverse impact on the consumption pattern in the rural areas.

4. MATTERS RELATED TO DIRECTORS AND KEY MANAGERIAL PERSONNEL:

a. BOARD OF DIRECTORS & KEY MANAGERIAL PERSONNEL:

Mr. Tejpreet Singh Chopra (DIN: 00317683), Ms. Hina Shah (DIN: 06664927), Mr. Pradeep Mallick (DIN: 00061256) and Mr. Pravin Laheri, IAS (Retd.)(DIN:00499080) are the Company's Independent Directors for a period of five consecutive years from the date of the Company's Annual General Meeting (AGM) held on 30th July 2015.

In accordance with the provisions of the Act, none of the Independent Directors is liable to retire by rotation. The Managing Director of the Company is also not liable to retire by rotation.

Gujarat Maritime Board (GMB) the port regulator has one seat on the Company's board. Due to the organizational changes their Nominee is yet to be advised by GMB.

The Promoter APM Terminals Mauritius Limited had nominated Mr. Ahmed Hassan (DIN: 07588595) on the Company's Board and he was appointed as Additional Director on 10th October 2016. He was appointed in place of Mr. Jan Damgaard Sorensen (DIN: 06408939) who ceased to be the Director of the Company from 16th September 2016. There has been further change in nomination by the Promoter. Mr. Hassan has resigned as the Company's Director with effect from 5th April 2017 and Mr. Sorensen is appointed as Additional Director with effect from 11th May 2017. Mr. Sorensen is seeking appointment as Director of the Company. Your Board of Directors recommend the appointment of Mr. Jan Damgaard Sorensen (DIN: 06408939) as Director of the Company.

Mr. Rizwan Soomar (DIN: 02398970) has resigned as the Company's Director with effect from 5th April 2017. The Promoter has nominated Mr. David Skov (DIN:07810539) who is appointed as Additional Director of the Company with effect from 11th May 2017. Mr. Skov is seeking appointment as Director of the Company. Your Board of Directors recommend the appointment of Mr. David Skov (DIN:07810539) as Director of the Company.

Pursuant to the provisions of Section 152 of the Companies Act, 2013, Mr. Julian Bevis (DIN:00146000) is liable to retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. Your Directors recommend the re-appointment.

Your Directors thank Mr. Rizwan Soomar and Mr. Ahmed Hassan for their valuable contribution during their tenure as Directors of the Company.

b. DECLARATIONS BY INDEPENDENT DIRECTORS:

The Company has received declarations from all the Independent Directors under Section 149(6) of the Companies Act, 2013 confirming their independence vis-a-vis the Company.

The Independent Directors were appointed in the AGM held on 30th July 2015 for a period of five years.

The Company has been regularly conducting Familiarization Programme for its Independent Directors and has posted the details on its website http://pipavav.com/independent_director.php

5. DISCLOSURES RELATED TO BOARD, COMMITTEES AND POLICIES:

a. BOARD MEETINGS:

The Board of Directors met four times during the year ended 31st March 2017 in accordance with the provisions of the Companies Act, 2013 and rules made there under.

b. DIRECTOR’S RESPONSIBILITY STATEMENT:

In terms of Section 134(5) of the Companies Act, 2013, in relation to the audited financial statements of the Company for the year ended 31st March, 2017, the Board of Directors hereby confirms that:

a. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b. such accounting policies have been selected and applied consistently and the Directors made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2017 and of the profit of the Company for that period;

c. proper and sufficient care was taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d. the annual accounts of the Company have been prepared on a going concern basis;

e. internal financial controls have been laid down by the Company and that such internal financial controls are adequate and were operating effectively;

f. proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively;

c. NOMINATION AND REMUNERATION COMMITTEE:

The Nomination and Remuneration Committee of Directors was constituted by the Board of Directors of the Company in accordance with the requirements of Section 178 of the Act.

The composition of the Committee is as under:

1. Mr. Pradeep Mallick Chairman, Independent Director

2. Mr. Pravin Laheri, IAS (Retd.) Independent Director

3. Mr. Tejpreet Singh Chopra, Independent Director; and

4. Mr. David Skov, Non Independent Director

The Board has in accordance with the provisions of sub-section (3) of Section 178 of the Companies Act, 2013, formulated the policy setting out the criteria for determining qualifications, positive attributes, independence of a Director and policy relating to remuneration for Directors, Key Managerial Personnel and other employees.

Major criteria defined in the policy framed for appointment of and payment of remuneration to the Directors of the Company, are as under:

a) While appointing a Director, it shall always be ensured that the candidate possesses appropriate skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical, operations or other disciplines related to the Company's business.

b) In case of appointment as an Executive Director, the candidate must have the relevant technical or professional qualification and experience as considered necessary based on the job description of the position. In case no specific qualification or experience is prescribed or thought necessary for the position then, while recommending the appointment, the HR Department shall provide the job description to the Committee and justify that the qualification, experience and expertise of the recommended candidate is satisfactory for the relevant position. The Committee may also call for an expert opinion on the appropriateness of the qualification and experience of the candidate for the position of the Executive Director.

c) In case of appointment as a Non-Executive Director, the candidate must have a post graduate degree, diploma or a professional qualification in the field of his practice/ profession/ service and shall have not less than five years of working experience in such field as a professional in practice, advisor, consultant or as an employee. Provided that the Board may waive the requirement of qualification and/ or experience under this paragraph for a deserving candidate.

d) The Board, while making the appointment of a Director, shall also try to assess from the information available and from the interaction with the candidate that he is a fair achiever in his chosen field and that he is a person with integrity, diligence and open mind.

e) While determining the remuneration of Executive Directors and Key Managerial Personnel, the Board shall consider following factors:

i) Criteria/ norms for determining the remuneration of such employees prescribed in the HR Policy

ii) Existing remuneration drawn

iii) Industry standards, if the data in this regard is available

iv) The job description

v) Qualifications and experience levels of the candidate

vi) Remuneration drawn by the outgoing employee, in case the appointment is to fill a vacancy on the death, resignation, removal etc. of an existing employee

vii) The remuneration drawn by other employees in the grade with matching qualifications and seniority, if applicable.

f) The remuneration payable to the Executive Directors, including the Commission and value of the perquisites, shall not exceed the permissible limits as are mentioned within the provisions of the Companies Act, 2013. They shall not be eligible for any sitting fees for attending any meetings

g) The Non-Executive Directors shall not be eligible to receive any remuneration/ salary from the Company. However, they shall be paid sitting fees for attending the meeting of the Board or committees thereof and commission, as may be decided by the Board/ Shareholders from time to time. They shall also be eligible for reimbursement of out of pocket expenses for attending Board/ Committee Meetings.

d. AUDIT COMMITTEE:

The Audit Committee of Directors was constituted pursuant to the provisions of Section 177 of the Companies Act, 2013. The composition of the Audit Committee is in conformity with the provisions of the said section. The Audit Committee comprises:

1. Mr. Pravin Laheri, IAS (Retd.) Chairman, Independent Director

2. Mr. Pradeep Mallick, Independent Director

3. Ms. Hina Shah, Independent Director

4. Mr. Jan Damgaard Sorensen, Non Independent Director

The scope and terms of reference of the Audit Committee is in accordance with the Act and it reviews the information as required under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

During the year under review, there were no instances of recommendation of the Committee not being accepted by the Board of Directors of the Company.

The Company Secretary acts as Secretary of the Committee.

e. STAKEHOLDERS RELATIONSHIP COMMITTEE:

During the year under review, pursuant to Section 178 of the Companies Act, 2013, the Board of Directors of the Company constituted the Stakeholders Relationship Committee, comprising:

1. Mr. Pradeep Mallick, Chairman, Independent Director,

2. Mr. Tejpreet Singh Chopra, Independent Director and

3. Mr. Keld Pedersen, Managing Director

The Company Secretary acts as the Secretary of the Stakeholders Relationship Committee.

f. VIGIL MECHANISM POLICY FOR THE DIRECTORS AND EMPLOYEES:

The Board of Directors of the Company has, as per the requirements under Section 178(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014, framed the Whistle Blower Policy of the Company.

The Policy provides a formal mechanism for all employees of the Company to make disclosure at the designated email id about suspected fraud or unethical behavior. It also provides a designated phone number to directly report an instance. The Policy encourages its employees to immediately raise his/her concern to the respective Manager or to Head of HR whenever they notice any contravention with the Company's Code of Conduct or fraud or any unethical behavior. In case the concerned person is not comfortable in reporting the matter to his/her Manager or to the Manager's Manager or to the Head of HR, he/she can also report to the Compliance Officer of the parent Company APM Terminals.

The policy also provides direct access to the Chairman of Audit Committee through his personal email id.

The Company has also constituted an Internal Complaints Committee as per the provisions of The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 and the Rules made there under for reporting the instances related to Sexual Harassment and deal with them in a timely manner.

As part of APM Terminals the Company shares the distinctive set of the Group's Core Values that drive the way we do business. The Company is committed to adhere to the highest standards of ethical, moral and legal conduct of business operations, the Group's commitment to the UN Global Compact and our commitment to our people, customers and communities.

g. RISK MANAGEMENT POLICY:

The Board of Directors of the Company has designed Risk Management Policy and Guidelines to avoid events, situations or circumstances which may lead to negative consequences on the Company's businesses, and define a structured approach to manage uncertainty and to make use of these in their decision making pertaining to all business divisions and corporate functions. Key business risks and their mitigation are considered in the annual/ strategic business plans and in periodic management reviews.

h. CORPORATE SOCIAL RESPONSIBILITY POLICY:

As per the provisions of Section 135 of the Act read with Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board of Directors has constituted a Corporate Social Responsibility (CSR) Committee as under:

1. Ms. Hina Shah, Chairperson, Independent Director

2. Mr. Pravin Laheri, IAS (Retd.), Independent Director and

3. Mr. Keld Pedersen, Managing Director

The Board of Directors of the Company has approved CSR Policy based on the recommendation of the CSR Committee. The Company has initiated activities in accordance with the said Policy, the details of which have been prescribed in Annexure A attached.

The CSR Policy of the Company is available on the Company's web-site and can be accessed in the link provided http://pipavav. com/csr.php

During the year ended 31st March 2017 the Company was required to spend Rs. 63.9 Million towards the CSR activities out of which Rs. 40.4 Million has been spent in the areas of Education, Health, Safety & Environment, Women Empowerment and Skill Development and the Rural Development Projects. Certain projects that have been identified are ongoing and in progress as of 31st March 2017 for which the unspent amount of Rs. 23.5 Million will get utilized. The Company is also committed to use the unspent amount from previous years of Rs. 25.6 Million and has been carried forward.

i. ANNUAL EVALUATION OF DIRECTORS, COMMITTEE AND BOARD:

The Independent Directors held their meeting to evaluate the performance of each Non Independent Director and also of the entire Board as a whole. Each Board member's attendance, participation and contribution of his expertise was evaluated. The Board also carried out the evaluation of Directors and the various Board Committees did their respective evaluation.

The Board also evaluated the manner in which the information flows between the Board and the Management and the manner in which the board papers and other documents are prepared and furnished.

j. INTERNAL CONTROL SYSTEMS:

Adequate internal control systems commensurate to the size of the Company's business and its nature of business and its complexities, are in place and have been operating satisfactorily. The adequacy and their functioning is reviewed by the Internal Auditors from time to time and wherever necessary the corrective measures are taken.

Internal control systems consisting of policies and procedures are designed to ensure reliability of financial reporting, timely feedback on achievement of operational and strategic goals, compliance with policies, procedure, applicable laws and regulations and that all assets and resources are acquired economically, used efficiently and adequately protected.

k. DISCLOSURE UNDER SECTION 197(12) OF THE COMPANIES ACT, 2013 AND OTHER DISCLOSURES AS PER RULE 5 OF COMPANIES (APPOINTMENT & REMUNERATION) RULES, 2014:

In terms of the requirement under Section 197(12) of the Act, the Median Employee's Remuneration of the Company is Rs. 371,179 and the Managing Director's remuneration is Rs. 33,592,559.

The percentage increase in remuneration of the Key Managerial Personnel (KMPs) i.e. Managing Director, Chief Financial Officer and Company Secretary is 8.50% , 6.00% and 10.00% respectively. The average increase for KMPs works out to approximately 8%.

The percentage increase in the median remuneration of employees in the financial year is 11.31%.

The Company has a total of 503 permanent employees on its rolls.

The Company follows the global practice of its parent wherein the Company's Objectives and the individual employee's objectives are set against which their actual performance is appraised which in turn determines the percentage increase in their remuneration. The Company follows the Bell Curve for the performance rating of all its employees. The remuneration of KMPs has also been determined based on their performance against their respective objectives vis-a-vis the Company's objectives.

The Company's Market Capitalization has reduced by 5.8% based on the closing price as of 31st March 2017 compared to 31st March 2016. The Net Worth as per the audited accounts is Rs. 20,101.75 Million as of 31st March 2017 compared to Rs. 19,716.16 Million as of the previous year.

The copies of Annual Report as per Section 136 of the Companies Act, 2013 are being sent to the Members excluding the information on employees' particulars under Rule 5 of the Companies (Appointment & Remuneration) Rules, 2014. Any Member who is interested in a copy of the employees' particulars may write to the Company Secretary. The details will also be available for inspection by the Members at the Registered Office of the Company during the business hours on working days upto the date of the Company's forthcoming Annual General Meeting.

The Company has paid Commission of Rs. 15 Million to all the four Independent Directors pursuant to the shareholder's approval in the previous AGM.

l. PAYMENT OF REMUNERATION / COMMISSION TO DIRECTORS FROM HOLDING OR SUBSIDIARY COMPANIES:

None of the managerial personnel of the Company are in receipt of remuneration/commission from the Holding or Subsidiary Company of the Company.

6. AUDITORS AND REPORTS:

The matters related to Auditors and their Reports are as under:

a. OBSERVATIONS OF STATUTORY AUDITORS ON ACCOUNTS FOR THE YEAR ENDED 31st MARCH 2017:

There are no Audit Observations on the Standalone Financial Statements of the Company for the year ended 31st March 2017.

The Statutory Auditors have made an observation in their Audit Report for the Consolidated Financial Statements of the Company for the year ended 31st March 2017 in Clause 7(a) and (b) of their Report as follows:

Basis for Qualified Opinion

6(a) The consolidated Ind AS financial statements include the Company's share of net profit of Rs. 361.19 million, based on unaudited Ind AS financial statements as at and for the year ended 31 March 2017 in respect of its associate company not audited by us. Further the comparative consolidated Ind AS financial information for the year ended 31 March 2016 included in these consolidated Ind AS financial statements include Ind AS financial information of the associate company not audited by us. The Ind AS financial statement as at and for the year ended 31 March 2017 and the comparative Ind AS financial information as at and for the year ended 31 March 2016 in respect of the associate company is pending audit by their auditors. Our opinion on the consolidated Ind AS financial statements insofar as it relates to the amounts and disclosures included for the year ended on 31 March 2017 in respect of this associate company is based solely on such Ind AS financial information of the associate company for the year ended on 31 March 2017, as furnished to us by the Management of the Company.

(b) Further, pending the audit of the associate company for the year ended on 31 March 2017 by their auditors, we are unable to report on the adequacy of the internal financial controls over financial reporting and operating effectiveness of such controls of the associate company incorporated in India as required to be reported by us. In this connection the Board of Directors would like to state that the Company holds 38.8% shares in Pipavav Railway Corporation Limited (PRCL) and in view of the provisions of Section 2(6) of the Companies Act, 2013, PRCL is an Associate Company. PRCL's more than 50% shareholding is held by Government/ Public Sector Undertakings. So PRCL is required to accomplish Statutory Audit followed with the CAG Audit. As on the date of this Report PRCL's audit is currently in progress and the Audited Ind AS Financial Statements are yet to be released. Therefore the Company has prepared its Consolidated Ind AS Financial Statement based on Unaudited Ind AS financial statements provided by the PRCL Management.

b. SECRETARIAL AUDIT REPORT FOR THE YEAR ENDED 31st MARCH 2017:

Provisions of Section 204 read with Section 134(3) of the Companies Act, 2013, mandates to obtain Secretarial Audit Report from Practicing Company Secretary. Accordingly M/s Rathi and Associates, Company Secretaries have issued the Secretarial Audit Report for the year ended 31st March 2017.

The Secretarial Audit Report issued in Form MR-3 forms part of this report. The said report does not contain any observation or qualification requiring explanation or comments from the Board under Section 134(3) of the Companies Act, 2013.

c. RATIFICATION OF APPOINTMENT OF AUDITORS:

Pursuant to the provisions of Section 139 of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014, M/s Price Waterhouse Chartered Accountants LLP have been appointed as the Statutory Auditors of the Company for a period of five years in the Annual General Meeting held on 30th July 2015 subject to ratification of their appointment by the Members at every Annual General Meeting.

The matter for ratification of appointment of the said Auditors is included in the Notice of AGM.

d. COST AUDITORS:

The Company is engaged in providing Port Services and as per Notification dated 31st December 2014 issued by the Ministry of Corporate Affairs pursuant to Section 148 of the Companies Act, 2013 the Company is not required to appoint Cost Auditors.

7. OTHER DISCLOSURES:

Other disclosures as per provisions of Section 134 of the Act read with Companies (Accounts) Rules, 2014 are furnished as under:

a. EXTRACT OF ANNUAL RETURN:

Pursuant to the provisions of Section 134(3)(a) of the Companies Act, 2013, Extract of the Annual Return for the year ended 31st March 2017 made under the provisions of Section 92(3) of the Act is attached as Annexure B to this Report.

b. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

The Company is engaged in the business of developing and operating a Port, Cargo handling incidental to Water Transport. Considering the nature of business activity, the particulars regarding conservation of energy and technology absorption as required under the provisions of Section 134(3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 are not applicable and have not been included.

c. REMUNERATION PAYABLE BY COMPANIES HAVING NO PROFIT OR INADEQUATE PROFIT (in terms of Section II of Schedule V):

The Company has adequate profits and therefore the provision of Section II in Schedule V regarding remuneration payable by Companies having no profit or inadequate profit without Central Government approval, is not applicable.

d. CHANGE IN SHARE CAPITAL:

The Company has not made any issue of shares during the year and its Share Capital for the year ended 31st March 2017 remains unchanged.

8. ACKNOWLEDGEMENTS AND APPRECIATION:

Your Directors thank Customers, Shareholders, Suppliers, Bankers, Business Partners/Associates and the Central and State Government and Gujarat Maritime Board for their continued support and encouragement to the Company. Your Directors also wish to place on record their sincere appreciation of the commitment and enthusiasm of all employees for their significant role in the Company's performance.

For and on behalf of the Board

CHAIRMAN

Date: 11th May 2017 DIN: 00317683

Place: Mumbai

Registered Office

Pipavav Port,

At Post Rampara-2 via Rajula

District Amreli 365560

CIN L63010GJ1992PLC018106

Tel. No. : 02794 302400 Fax No. 02794 302413

Email : investorrelationinppv@apmterminals.com

Website : www.pipavav.com