Chairman’s Speech, 24thAnnual General Meeting, December 22, 2017
Dear Shareholders,
On behalf of the Board of Directors and Resolution Professional, I extend a warm welcome to the 24th Annual General Meeting of your Company. I am thankful to each of you for the consistent co-operation, continued support and trust in the Management of your Company.
The world has been witnessing challenges in global trade due to declining demands, slowdown in Europe and China, geo-political tensions and high interest rates. The global growth in the year 2016 was weak at 3.2 percent, but estimated to grow at 3.6 percent in 2017 and at 3.7 percent in 2018.
The GDP of India grew at 7.2 percent in fiscal 2017 and is expected to grow to 7.5 percent during fiscal 2018. India continues to be the best-growing economy and is able to attract sizable foreign investments. The fundamentals of the Indian economy are considered to be strong and the various policy initiatives by the Government to broad base the economy can further strengthen the economic foundation for a rewarding long-term growth.
The reforms and process initiated by the Government is expected to result in assured and affordable supply of energy in the country and to achieve the goal to electrify all villages with 24 hours power for all by 2019, will give a good opportunity to the power sector to turn around.
The total power capacity has increased from 298 giga watt (renewable power 39 giga watt) in March 2016 to 327 giga watt (renewable power 57 giga watt) in March 2017; the contribution from renewable energy sector to the installed capacity addition during FY 17 was significant at 18 giga watt out of total 29 giga watt.
Consolidated Financial Performance
The performance of the Company in the FY 2017 is affected due to inadequate fuel supply for operation of installed capacity, regulatory approvals, lack of Power Purchase Agreement, delay in sanction and disbursement of loan by lenders and liquidity problems.
On a consolidated basis, total revenue was Rs. 7,510 Cr vs gross revenue of Rs. 8,335 Cr in the previous year. Net loss for the year 2016-17 was Rs. 2,049 Cr compared to a loss of Rs. 269 Cr in 2015-16. There was a Cash Loss of Rs. 1,068 Cr for the year with a Cash Profit of Rs. 593 Cr in the previous year.
Performance of Various Businesses
POWER BUSINESS
Your Company's installed power capacity stood at 3,465 MW generating revenue of Rs. 5,383 Cr with an EBIT of Rs. 919 Cr for the year 2016-17 compared to the previous year revenue of Rs. 6,323 Cr and EBIT of Rs. 1,869 Cr.
The Company's under construction projects capacity stand at 4,536 MW. Lanco Amarkantak 3 and 4 (1320 MW), Lanco Babandh (1320 MW), Lanco Vidarbha (1320 MW), Lanco Teesta (500 MW) and Lanco Mandakini (76 MW) are facing execution delays due to non-disbursement of funds by lenders and non-availability of equity funds. Discussions are being held with the lenders to work out a plan of action for completion of these under construction projects.
ENGINEERING, PROCUREMENT AND CONSTRUCTION (EPC)
Revenue for the year 2016-17 was Rs. 2,203 Cr compared to Rs.2,875 Cr for previous year with an EBIT of Rs. 30 Cr for the year compared to the EBIT of Rs. 472 Cr for previous year. The delay in implementation of approved CDR Package and other approved proposals by the lenders effected the restoration of EPC and Construction business of the company. The total EPC order book (including Power and Solar projects) at end of September 2017 stood at Rs. 15,710 Cr.
IDBI Bank Limited, the lead lender, based on the directions of Reserve Bank of India, referred the Company to NCLT under the Insolvency and Bankruptcy Code (IBC). NCLT initiated Corporate Insolvency Resolution Process (CIRP) for the Company on August 07, 2017. The powers of the Board of Directors are suspended due to CIRP and the said powers are currently exercised by the Resolution Professional. With a suitable Resolution Plan in place, majority of the order book can be executed in the coming years.
INFRASTRUCTURE PROJECTS
The road projects in Karnataka collected Rs. 126 Cr in toll revenue during the year 2016-17 with an EBIT of Rs. 27 Cr compared to the previous year revenue of Rs. 117 Cr and EBIT of Rs. 37 Cr.
SOLAR
Revenues during the year 2016-17 for Solar EPC were Rs. 710 Cr while EBIT was Rs. 42 Cr compared to the previous year revenue of Rs. 543 Cr and EBIT of Rs. 40 Cr. As of September 2017, the solar EPC order book was Rs. 296 Cr.
RESOURCES
Production at Griffin coal during the year 2016-17 was 2.50 MT with sales of 2.45 MT. Revenues during the year 2016-17 stood at Rs. 522 Cr while EBIT loss of Rs.138 Cr compared to the previous year revenue of Rs. 493 Cr and EBIT loss of Rs. 157 Cr. The Tasra Open cast coal Mine Development and Operations project is in the development stage.
Corporate Social Responsibility
Lanco Foundation is the CSR arm of the Lanco Group. The Foundation operates in 12 locations across 10 States in India. Lanco Foundation programs include Health, Supply of drinking water, free disability assistance, providing free education and free medical support. During the year 2016-17, Lanco group spent Rs. 4.05 Cr on CSR related activities.
Acknowledgement of Support
On behalf of the Company's Board and the Resolution Professional, I take this opportunity to thank all the stakeholders including banks, financial institutions, the central and state governments, customers, vendors and business associates for their continued co-operation and support. I express my deep gratitude to all Lanconians and my colleagues on the Board for their guidance. Also, our deepest and heartfelt thanks to all shareholders for the continued support and confidence in the Company.
Thank you,
L Madhusudhan Rao
Executive Chairman
Lanco Infratech Limited