Directors’ Report Dear Members, Your Directors are pleased to present the Twenty-eighth Annual Report and the Company’s audited financial statement for the financial year ended 31st March, 2016. Dividend Your Directors have recommended a dividend of Rs. 3.50 per equity share (last year Rs. 3.50 per equity share) for the financial year ended 31st March, 2016 amounting to Rs. 6.36 crore (inclusive of tax of Rs. 1.08 crore). The dividend payout is subject to approval of members at the ensuing 28th Annual General Meeting. The dividend will be paid to members whose names appear in the Register of Members of the Company as on 23rd May, 2016; in respect of shares held in dematerialised form, it will be paid to members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as the beneficial owners as on that date. Management’s Discussion and Analysis Report Results of Operations and the State of Company’s Affairs: During the year, the Company earned a total revenue of Rs. 100.89 crore, as compared to Rs. 99.94 crore in the previous year. Income from product transportation services increased marginally from Rs. 24.60 crore to Rs. 25.17 crore on a year on year basis, while income from operating construction machinery on hire decreased marginally from Rs. 33.97 crore to Rs. 33.04 crore. Income from other support services also decreased marginally from Rs. 31.52 crore to Rs. 31.48 crore. Net profit during the year was Rs. 15.36 crore, as compared to Rs. 22.07 crore of previous year. This decline was on account of increase in operating and other expenses and higher income tax outgo during the year. The Company continues to provide infrastructure support services, namely, transportation of petroleum products and water through pipelines, operating construction machinery on hire and other support services to Reliance Industries Group with a substantial portion provided to Reliance Industries Limited. No material changes and commitments have occurred after the close of the financial year till the date of this Report, which affect the financial position of the Company. Resources and Liquidity The Company’s net worth as on 31st March, 2016 stood at Rs. 273.33 crore, with accumulated reserves and surplus of Rs. 258.23 crore. The Company continues to maintain its conservative financial profile and funds its requirements largely through internal cash generation. Industry Structure, Developments, Opportunities and Outlook With the Government undertaking structural reforms and measures to improve productivity, increased thrust on development of physical infrastructure coupled with lower interest rates and its "Make in India" initiative by creating a conducive business environment, it is expected that this will spur activity in the sector. The Company will continue to keep its focus in the infrastructure sector. Challenges, Risks and Concerns Some of the challenges that hinder infrastructure progress of the economy are easy access to finance, availability of land and delays in project completion leading to cost and time overruns. However, the Government has undertaken some key reforms that include stronger co-operation between the private and public sectors, enforcing of a unified legal framework, creation of better disputeresolution mechanisms and removing bottlenecks. As a part of the overall risk management strategy, the Company consistently insures its assets and generally follows a conservative financial profile by following prudent business practices. Internal Controls The Company has robust internal control systems and procedures commensurate with its nature of business which meets the following objectives: • providing assurance regarding the effectiveness and efficiency of operations; • efficient use and safeguarding of resources; • compliance with policies, procedures and applicable laws and regulations; and • transactions being accurately recorded and promptly reported. The Company continues to have periodical audits conducted of all its functions and activities to ensure that systems and procedures are followed across all areas. The Audit Committee of Directors of the Company regularly reviews the adequacy of internal control systems through such audits. The Internal Auditor reports directly to the Audit Committee. The Company also has a budgetary control system to monitor expenditure against approved budgets on an ongoing basis. Internal Financial Controls The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation was observed. Risk Management The Company has in place a Risk Management Policy which was reviewed by the Audit Committee and approved by the Board of Directors of the Company. The Policy provides for a robust risk management framework to identify and assess risks such as operational, strategic, financial, security, property, regulatory, reputational and other risks and put in place an adequate risk management infrastructure capable of addressing these risks. Further, a risk assessment group has been constituted by the Board of Directors of the Company, comprising of functional executives/ experts to identify, monitor and report on the potential risks associated with the Company’s business and periodically keeps the Audit Committee and the Board of Directors apprised of such risks and the measures taken by the Company to mitigate such risks. Given below are significant potential risks of the Company and measures in place to mitigate them: Operational Risk: Disruptions in operating the Company’s pipelines and equipments may arise due to natural calamities, equipment failures or other unexpected or unforeseen interruptions. The Company consistently works towards monitoring the health of the pipelines and maintaining or improving operational efficiencies. Safety, Health and Environment Risks: The Company’s activities of transporting petroleum products through its pipelines are inherently hazardous. Any accident, explosion, leakages or acts of terrorism may cause property damage or bodily injury and adversely impact surrounding communities and environment which may result in litigations and disruption of operations. The Company has structured inspections of its operating facilities for identifying and mapping operational hazards, investigating root cause analysis and to eliminate any such occurrence by developing mitigation plans. Further, there is a comprehensive insurance plan in place to cover the above risks. Human Resource Development The Company has a team of able and experienced professionals. The Company believes that the quality of its employees is the key to its success in the long run. The Company continues to have cordial relations with its employees. The Company employs 109 persons and provides personal development opportunities and all round exposure to them. Consolidated Financial Statement In accordance with the Companies Act, 2013 (the “Act”) and Accounting Standard (AS)-21 on Consolidated Financial Statements read with AS-23 on Accounting for Investments in Associates, the audited consolidated financial statement is provided in the Annual Report. Subsidiary, Joint Venture and Associate Company The Company did not have any subsidiary or joint venture during the financial year. The Company has one associate company, Reliance Europe Limited. A statement containing the salient features of the financial statement of the associate company is given in Annexure-A to the consolidated financial statement. The audited financial statement including the consolidated financial statement of the Company and all other documents required to be attached thereto may be accessed on the Company’s website, www.riil.in. These documents will also be available for inspection during business hours at the registered office of the Company. Directors’ Responsibility Statement Your Directors state that: a) in the preparation of the annual accounts for the year ended 31st March, 2016, the applicable accounting standards read with requirements set out under Schedule III to the Act have been followed and there are no material departures from the same; b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2016 and of the profit of the Company for the year ended on that date; c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) the Directors have prepared the annual accounts on a ‘going concern’ basis; e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. Contracts and Arrangements with Related Parties There were no contracts / arrangements / transactions with related parties which are required to be reported in Form No. AOC-2 in terms of Section 134(3)(h) read with Section 188 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014. Your Directors draw attention of the members to Note No. 22 to the financial statement which sets out related party disclosures pursuant to Accounting Standard 18 (“AS-18”). The transactions disclosed therein are in the ordinary course of business and on an arm’s length basis arising out of subsisting contracts with Reliance Industries Limited (RIL), a related party of the Company under AS-18. Approval of the members was obtained for these contracts with RIL at the 27th Annual General Meeting of the Company held on 9th September, 2015. The Policy on Materiality of Related Party Transactions and on Dealing with Related Party Transactions as approved by the Board may be accessed on the Company’s website at the link: http:// www.riil.in/pdf/materiality_policy.pdf. Corporate Social Responsibility (CSR) The Corporate Social Responsibility Committee (CSR Committee) has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board. The CSR Policy may be accessed on the Company’s website at the link: http://www.riil.in/pdf/csr_policy.pdf. The key philosophy of the Company’s CSR initiative is to promote development through social and economic transformation. The Company has, inter-alia, identified following areas in which it may engage for its CSR activities: • Addressing identified needs of the underprivileged through initiatives directed towards promoting health, including preventive health care; • Environmental sustainability and ecological balance; • Any other activity falling within the scope of Schedule VII to the Act. During the year, the Company has spent Rs. 70 lakh (being 2.25% of the average net profits of last three financial years) on CSR activities. The Annual Report on CSR activities is annexed herewith marked as Annexure I. Directors and Key Managerial Personnel In accordance with the provisions of the Act and the Articles of Association of the Company, Shri Dilip V. Dherai, Whole-time Director of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible has offered himself for reappointment. During the year under review, there was no change in the Key Managerial Personnel of the Company. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Act and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the “Listing Regulations”). The Company has in place a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of the non-executive directors and executive directors. On the basis of the Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors, feedback was obtained from all the Directors by way of a structured questionnaire for the evaluation of the Board, its Committees and the individual directors covering, inter-alia, various aspects of their performance including composition and skills, board dynamics, understanding of Company’s operations, contribution at meetings and inter-personal skills. The responses received were evaluated by the Board. The following policies of the Company are annexed herewith marked as Annexure II and Annexure III: a) Policy for selection of Directors and determining Directors’ independence; and b) Remuneration Policy for Directors, Key Managerial Personnel and other employees. Auditors and Auditors’ Report Statutory Auditors Messrs Chaturvedi & Shah, Chartered Accountants, Statutory Auditors of the Company, hold office till the conclusion of the ensuing 28th Annual General Meeting and are eligible for reappointment. They have confirmed their eligibility to the effect that their re-appointment, if made, would be within the prescribed limits under the Act and that they are not disqualified for reappointment. The Notes on financial statement referred to in the Auditors’ Report are self-explanatory and do not call for any further comments. The Auditors’ Report does not contain any qualification, reservation, adverse remark or disclaimer. Cost Auditors In terms of the Companies (Cost Records and Audit) Rules, 2014 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the Company has maintained cost records in its books of account for financial year 2015-16 in respect of its services of transportation of petroleum products. However, in terms of the said Rules, the requirement of cost audit is not applicable to the Company for the financial year 2015-16 as the turnover of the Company from these services is below the threshold limit prescribed in the said Rules for cost audit. Secretarial Auditor The Board has appointed Dr. K. R. Chandratre, Practicing Company Secretary, to conduct Secretarial Audit for the financial year 2015- 16. The Secretarial Audit Report for the financial year ended 31st March, 2016 is annexed herewith marked as Annexure IV to this Report. The Secretarial Audit Report does not contain any qualification, reservation, adverse remark or disclaimer. Disclosures: Corporate Social Responsibility Committee The Corporate Social Responsibility Committee comprises Shri Mahesh K. Kamdar (Chairman), Shri Chandra Raj Mehta, Shri Sandeep H. Junnarkar and Shri S. C. Malhotra as other members. Two meetings of the Committee were held during the year. For further details, please refer the Corporate Governance Report forming part of the Annual Report. Audit Committee The Audit Committee comprises Shri Chandra Raj Mehta (Chairman), Shri Sandeep H. Junnarkar and Smt. Bhama Krishnamurthy as Independent Directors and Shri S. C. Malhotra as Non-Executive Non-Independent Director. Four meetings of the Committee were held during the year. For further details, please refer the Corporate Governance Report forming part of the Annual Report. All the recommendations made by the Audit Committee were accepted by the Board. Vigil Mechanism The Vigil Mechanism of the Company, which also incorporates a whistle blower policy in terms of the Listing Regulations, includes an Ethics & Compliance Task Force comprising senior executives of the Company. Protected disclosures can be made by a whistle blower through an e-mail or a letter to the Task Force or to the Chairman of the Audit Committee. The Vigil Mechanism and Whistle Blower Policy may be accessed on the Company’s website at the link: http://www.riil.in/pdf/whistleblower_policy.pdf. Meetings of the Board Four meetings of the Board of Directors were held during the year. For further details, please refer the Corporate Governance Report forming part of the Annual Report. Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act and the Companies (Accounts) Rules, 2014 are as under: A. Conservation of Energy: (i) Energy Conservation measures taken: a. Upgradation of anode beds for reducing power requirement of CP system. b. Installation of additional Diode stations for reduced power consumption in CP system. c. Installation of LED lights to reduce power consumption. (ii) Steps taken by the Company for utilising alternate sources of energy and Capital investment on energy conservation equipment: The energy requirements are mainly for the Company’s pipeline operations which are within the purview of its customer. B. Technology absorption: (i) Major efforts made towards technology absorption: a. Conversion of Gas Operated Sectionalising valves to motor operated by installing smart actuators for better reliability. b. Installation of online corrosion monitoring system on pipelines. (ii) Information regarding imported technology (Imported during the last three years): The Company has not imported any technology during the last three years. (iii) Expenditure incurred on research and development: Nil C. Foreign Exchange Earnings and Outgo: Foreign Exchange earned in terms of Actual Inflows - Nil Foreign Exchange outgo in terms of Actual Outflows - Rs. 13.87 lakh Corporate Governance The Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements set out by the Securities and Exchange Board of India (SEBI). The report on Corporate Governance as stipulated under the Listing Regulations forms an integral part of the Annual Report. The requisite Certificate from the Auditors of the Company confirming compliance with the conditions of corporate governance is annexed to this Report as Annexure V. Extract of Annual Return Extract of Annual Return of the Company is annexed herewith as Annexure VI to this Report. Particulars of Employees and related disclosures In terms of the provisions of Section 197(12) of the Act read with 36 Reliance Industrial Infrastructure Limited Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said Rules is annexed to this Report. Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annual Report. Having regard to the provisions of the first proviso to Section 136(1) of the Act and as advised, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the registered office of the Company during business hours and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request. General Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: 1. Details relating to deposits covered under Chapter V of the Act. 2. Issue of equity shares with differential rights as to dividend, voting or otherwise. 3. Issue of shares (including sweat equity shares) to the employees of the Company under any scheme. 4. There are no loans given, investments made, guarantees given or securities provided in terms of Section 186 of the Act, during the year under review. Please refer to notes in the financial statement for disclosures in this regard. 5. The Company has no holding company or subsidiary company, hence the provisions of Section 197(14) relating to receipt of remuneration or commission by the Whole-time Director from holding company or subsidiary company of the Company are not applicable to the Company. 6. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company’s operations in future. 7. No fraud has been reported by the Auditors to the Audit Committee or the Board. 8. The Company does not have any scheme of provision of money for the purchase of its own shares by employees or by trustees for the benefit of employees. Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Acknowledgement Your Directors would like to express their grateful appreciation for the assistance and co-operation received from the Government, banks, other business constituents and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services of the employees of the Company at all levels. For and on behalf of the Board of Directors Mahesh K. Kamdar Chairman Mumbai, 12th April, 2016 |