DIRECTORSTo The Members Your Directors have pleasure in presenting the Seventeenth Annual Report on thebusiness and operations of the Company together with the Audited Accounts for the yearended March 31, 2010. CONSOLIDATED FINANCIAL RESULTS | | | Rs. Millions | | Year ended 31st March, | | | 2010 | 2009 | Change (%) | | INCOME | | | | | Sales, Operating and Other Income | 82,914.99 | 61,262.04 | 35 | | Less: Elimination of Unrealised Profit on Transactions with Associate Companies | 755.31 | 647.59 | 17 | | Total | 82,159.68 | 60,614.45 | 36 | | EXPENDITURE | | | | | Construction, Generation and Operating Expenses | 61,493.77 | 49,075.83 | 25 | | Administrative and Other Expenses | 4,311.48 | 2,750.21 | 57 | | Interest and Finance Charges | 3,554.11 | 2,184.90 | 63 | | Depreciation | 3,478.80 | 1,073.39 | 224 | | Total | 72,838.16 | 55,084.33 | 32 | | Profit Before Taxation, Minority Interest and Share of Profits of Associates | 9,321.52 | 5,530.12 | 69 | | Provision for Taxation | | | | | - Current Tax | 2,658.53 | 1,651.46 | 61 | | - Relating to Previous Years | 151.97 | 16.76 | 807 | | - Fringe Benefit Tax [including Rs. 4.12 Million (2009: Nil) relating to previous year] | 4.12 | 20.49 | (80) | | - Deferred Tax | 828.22 | 1.69 | 48,831 | | Net Profit after Taxation, before Minority Interest and Share of Profits of Associates | 5,678.69 | 3,839.72 | 48 | | Less: Share of Minority Interest | 915.24 | 1,040.83 | (12) | | Add: Share of Profits of Associates | (177.97) | 4.68 | (3,904) | | Net Profit after Taxation, Minority Interest and Share of Profits of Associates | 4,585.48 | 2,803.57 | 64 | | Surplus brought forward | 7,795.53 | 5,297.87 | 47 | | Less: Exchange Fluctuation Gain netted in Fixed Assets relating to earlier year | - | 183.90 | (100) | | Profit Available for Appropriation | 12,381.01 | 7,917.54 | 56 | | Transfer (from) / to Debenture Redemption Reserve | (24.23) | (17.99) | 35 | | Transferred to General Reserve | 190.00 | 140.00 | 36 | | Balance Carried to Consolidated Balance Sheet | 12,215.24 | 7,795.53 | 57 | STANDALONE FINANCIAL RESULTS | | | Rs. Millions | | Year ended 31st, March | | | 2010 | 2009 | Change (%) | | INCOME | | | | | Operating Income & Other Income | 59,982.14 | 40,976.47 | 46 | | Total | 59,982.14 | 40,976.47 | 46 | | EXPENDITURE | | | | | Construction and Operating Expenses | 46,433.08 | 32,900.92 | 41 | | Administrative and Other Expenses | 3,770.92 | 2,253.83 | 67 | | Interest and Finance charges | 1,979.40 | 1,386.12 | 43 | | Depreciation | 597.71 | 405.26 | 47 | | Total | 52,781.11 | 36,946.13 | 43 | | Profit Before Taxation | 7,201.03 | 4,030.34 | 79 | | Provision for Taxation | | | | | Current Tax | | | | | For the year | 2,441.91 | 1,342.26 | 82 | | Earlier years | 19.57 | 15.16 | 29 | | Deferred Tax | (124.27) | 7.12 | (1,845) | | Fringe Benefit Tax | - | 17.12 | (100) | | Profit after Taxation | 4,863.82 | 2,648.68 | 84 | | Balance of Profit brought forward | 5,853.82 | 3,205.14 | 83 | | Balance of profit Carried to Balance Sheet | 10,717.64 | 5,853.82 | 83 | OPERATIONS REVIEW On a Consolidated basis your Company has reported Gross Revenues of Rs.82,159.68Millions as against Rs.60,614.45 Millions of Revenues registered in the Previous Year upby 36%. Total Expenditure for the Year was Rs.72,838.15 Millions as against Rs.55,084.33Millions in the Previous Year an increase of 32% on the back of increased executionactivities of various projects. The Earnings Before Interest, Tax, Depreciation andAmortization (EBITDA) amounted to Rs.16,354.44 Millions while the same was Rs.8,788.41Million for the Previous Year i.e. an increase of 86%. The Profit Before Taxation stood atRs.9,321.53 Millions, an increase of 69% as compared to Rs.5,530.12 Millions in the LastYear. The Net Profit After Tax after adjustment of Minority Interest and Share of Profits ofAssociates was Rs.4,585.48 Millions as against Rs.2,803.57 Millions for the Previous Year,increase by 64%. Gross Interest and Finance charges on consolidated basis amounted to Rs.3,554.11Millions in comparison to Rs.2,184.90 Millions due to increase in loans and WorkingCapital Requirements for Project Execution. A detailed discussion on the results of the operations and the financial condition isincluded in the Management Discussion and Analysis section placed at Annexure-II to thisreport. BUSINESS REVIEW A detailed business review is being given in the Management Discussion and AnalysisSection of the Annual Report. SUBSIDIARY COMPANIES During the Year – (1) Coral Orchids Private Limited, (2) Cressida PropertiesPrivate Limited, (3) Jupiter Infratech Private Limited, (4) Leda Properties PrivateLimited, (5) Thebe Properties Private Limited, (6) Uranus Infratech Private Limited, (7)Lanco Enterprise Pte. Limited, Singapore, (8) Lanco Infratech (Mauritius) Limited and (9)Pt. Lanco Indonesia Energy have become Subsidiaries of the Company. During the year, the names of the following Subsidiaries have been changed. (1) Lanco Power Trading Limited (Formerly Lanco Electric Utility Limited), (2) LancoAmarkantak Power Limited (Formerly Lanco Amarkantak Power Private Limited), (3) LancoVidarbha Thermal Power Limited (Formerly Lanco Mahanadi Power Private Limited). HEALTH, SAFETY AND ENVIRONMENT The Group’s concern for environment was recognized, as Aban Power Company Limited,a Subsidiary of the Company, won Teri Corporate Award for "Excellence in Environmentand CSR Activities" in June, 2009. The Group is consciously making forays inRenewable Energy Sector, into Solar Power Projects in addition to the on-going HydroProjects. The coveted certification like OHSAS 18001 in respect of Environment ManagementSystem was bestowed, in recognition of the commitment of the Group in respect of issues ofHealth, Safety & Environment. DIRECTORS In accordance with the Provisions of the Companies Act, 1956 and the Articles ofAssociation of the Company Mr. L. Madhusudhan Rao, Mr. L. Sridhar and Mr. G. VenkateshBabu, Directors, retire by rotation and being eligible offer themselves forre-appointment. Mr. D.V. Rao, Joint Managing Director, resigned to his position from the Board witheffect from 7th August, 2009. DEPOSITS Your Company has not accepted deposits falling within the provisions of Section 58A ofthe Companies Act, 1956 read with Companies (Acceptance of the Deposits) Rules, 1975during the year under review. AUDITORS Brahmayya & Co., Chartered Accountants, and Price Waterhouse, CharteredAccountants, Auditors of the Company, will retire at the conclusion of the Annual GeneralMeeting. Price Waterhouse, Chartered Accountants, vide their Letter Dated 11th June, 2010,conveyed their inability to be considered for re-appointment as Auditors. Special Notices, under Section 190 of the Companies Act, 1956, were received, proposingan Ordinary Resolution to appoint S.R. Batliboi & Associates, Chartered Accountants, and Brahmayya & Co., Chartered Accountants, asAuditors from the conclusion of the Annual General Meeting to the conclusion of the nextAnnual General Meeting, in place of the retiring Auditors. S.R. Batliboi & Associates, Chartered Accountants, conveyed their willingness toaccept appointment and confirmed their eligibility under Section 224(1-B) of the CompaniesAct, 1956. Brahmayya & Co., Chartered Accountants, conveyed their willingness to acceptappointment and confirmed their eligibility under Section 224(1-B) of the Companies Act,1956. DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTIONAND FOREIGN EXCHANGE EARNINGS AND OUTGO: We present the abridged accounts under Section 219 of the Companies Act, 1956. Pursuantto the Companies (Central Government’s) General Rules & Forms, 1956 read withSection 219 of the Companies Act, 1956, the Particulars of Conservation of Energy,Technology Absorption and Foreign Exchange Earnings and Outgo as required by Section 217(1) (e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in theReport of Board of Directors) Rules, 1988 have not been provided. However, theseparticulars are available for inspection at the Registered Office of the Company and uponwritten request from a shareholder, we will arrange to mail these details. DISCLOSURE ON COMPANY’S EMPLOYEES STOCK OPTION PLAN-2006 The Employee Stock Option Plan-2006 was approved by a Special Resolution passed by theShareholders in the Extraordinary General Meeting held on 7th June, 2006. The required information relating to the said scheme pursuant to Clause 12 of the SEBI(ESOS/ESPS ) Guidelines,1999, is enclosed as an Annexure-I. PARTICULARS OF EMPLOYEES We present the abridged accounts under Section 219 of the Companies Act, 1956. Pursuantto the Companies (Central Government’s) General Rules & Forms, 1956 read withSection 219 of the Companies Act, 1956, the Particulars of Employees as required bySection 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars ofEmployee) Rules, 1975 have not been provided. However, these particulars are available forinspection at the Registered Office of the Company and upon written request from ashareholder, we will arrange to mail these details. MANAGEMENT DISCUSSION AND ANALYSIS The Management Discussion and Analysis as required under Clause-49 (IV)(f)is enclosedas Annexure-II. CORPORATE GOVERNANCE The Report on Corporate Governance is given separately in this Annual Report. TheCertificate of Practising Company Secretary certifying compliance in this regard isannexed to this report. Note on Particulars required as per Section 212 of the Companies Act, 1956 As perSection 212 of the Companies Act, 1956, we are required to attach the directors’report, balance sheet, and profit and loss account of the subsidiaries. We had applied tothe Government of India for an exemption from such attachment as we present the auditedconsolidated financial statements in the annual report. We believe that the consolidatedaccounts present a full and fair picture of the state of affairs and the financialcondition and is accepted globally. The Government of India has granted exemption fromcomplying with Section 212. Accordingly, the annual report does not contain the financialstatements of these subsidiaries. The Annual Accounts of the Subsidiary Companies and therelated detailed information will be made available to the Holding and SubsidiaryCompanies’ investors seeking such information at any point of time and will be put onthe Website of the Company at www. lancogroup.com. The Annual Accounts of the Subsidiary Companies will also be kept forinspection by any investor at our Registered Office and that of Subsidiary Companiesconcerned. DIRECTORS’ RESPONSIBILITY STATEMENT As required under Section 217(2AA) of the Companies Act, 1956, the Directors herebyconfirm that : (i) In the preparation of the annual accounts, the applicable accounting standards havebeen followed and that no material departures are made from the same; (ii) We have selected such accounting policies and applied them consistently and madejudgements and estimates that are reasonable and prudent so as to give true and fair viewof the state of affairs of the Company at the end of the financial year and of the profitsof the Company for the period; (iii) We have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956, forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities; and (iv) We have prepared the annual accounts on a going concern basis. INFORMATION ON OBSERVATIONS IN ANNEXURE TO AUDITORS’ REPORT In Item No. 21 of the Annexure to the Auditors’ Report, the facts are statedgiving fullest information and are self explanatory. It is confirmed that systems havebeen further strengthened to exercise better control to prevent such instances in future. DEVELOPMENTS DURING THE YEAR On 7th August, 2009, 1,84,18,587 (One Crore Eighty Four Lakhs Eighteen Thousand FiveHundred and Eighty Seven) Equity Shares of Face Value of Rs.10/- each were allotted at anIssue Price of Rs.394.90 Per Equity Share (including Rs.384.90 Per Equity Share towardsShare Premium) under the Qualified Institutions Placement. One Equity Share of the Company of face value of Rs.10/- each fully paid-up wassub-divided into 10 (Ten) Equity Shares of Re.1/- each face value as fully paid-up,pursuant to the resolutions passed through Postal Ballot on 14th December, 2009, therecord date being 5th January, 2010. Approval was accorded to the Board of Directors pursuant to Section 293(1)(a) of theCompanies Act, 1956, through Postal Ballot on 19th March, 2010 to Sell, Transfer and/ordispose of the whole or substantially whole of the Investments held by the Company inSubsidiaries, Associates and other Group Companies in the Power Segment to any WhollyOwned Subsidiary of the Company in the Power Segment. ACKNOWLEDGEMENT AND APPRECIATION The Directors take this opportunity to thank the Shareholders, Financial Institutions,Banks, Customers, Suppliers and Regulatory & Governmental Authorities for theircontinued support to the Company. Further, the Directors wish to place on record theirappreciation of Employees at all levels for their hard work, dedication and commitment. FOR AND ON BEHALF OF THE BOARD | Dr. P. KOTAIAH | G. VENKATESH BABU | | Director | Managing Director | Place: Gurgaon, Date: 11.06.2010. Annexure I – FORMING PART OF THE DIRECTORS’ REPORT Disclosure in compliance with Clause 12 of the SEBI (Employee Stock Option Scheme) and(Employee Stock Purchase Scheme) Guidelines, 1999 as amended | Description | Employees Stock Options Plan 2006 | | 1 Total Number of Options under the plan | 111,180,960 | | 2 Options granted during the year | 9,242,090 | | 3 Pricing Formula | The options issued by the ESOP Trust shall be at Par Value subject to the adjustments for corporate actions such as Bonus, Consolidation and Split. | | 4 Options vested as of March 31, 2010 | 26,342,870 | | 5 Options Exercised during the year | 18,724,360 | | 6 The total number of shares arising as a result of exercise of option ( As of March 31, 2010) | 20,548,980 | | 7 Options lapsed during the year | 4,277,500 | | 8 Variation of Terms of options upto March 31, 2010 | Nil | | 9 Money realised by exercise of Options | Rs.4,550,019 | | 10 Total Number of options in force as on March 31, 2010 | 75,424,480 | | 11 Employee wise details of options granted to | | | (i) Senior Management during the Year | List enclosed as annexure (I) (a) | | (ii) Employees holding 5% or more of the total number of options granted during the year | List enclosed as annexure (I) (b) | | (iii) Identified employees who were granted option during any one year, equal to or exceeding 1% of the issued capital (excluding warrants and convesrsions) of the Company at the time of grant. | Nil | | 12 Diluted Earnings Per Share pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 | Rs. 2.14 | | 13 Where the Company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognised if it had used the fair value of the options. The impact of the difference on profits and on EPS of the Company. | Since these options were graned at a nominal exercise price, intrinsic value on the date of grant approximates the fair value of options. | | 14 Weighted average exercise prices and weighted average fair values of options seperately for options whose exercise price either equals or exceeds or is less than the market price of the stock. | Exercise Price Rs.0.243 Per Option, Fair Value Rs. 39.29 as on 29.07.2009 and Rs.51.34 as on 27.01.2010. | | 15 A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted average information: | Since these options were granted at a nominal exercise price, intrinsic value on the date of grant approximates the fair value of options. | | (a) risk free interest rate | 8% | | | (b) expected life | 7 Years | | | (c) expected volatility | 30% | | | (d) Expected dividends, and | Nil | | | (e) the price of the underlying share in market at the time of option grant. | (i) For Grant of 29.07.2009 - Rs.43.24 | | | (ii) For Grant of 27.01.2010 - Rs.49.55 | | Note - For the sake of Consistency and uniformity, the options have been shown as ofthe Face Value of Re.1/- each (though the Face Value was Rs.10/- till January 5, 2010) Annexure – (I) (a) Employee wise details of Options Granted to Senior Management during the Year 2009-10 | Name of the Employee | Number of Options Granted | | 1 Mr. G. Venkatesh Babu | 500,000 | | 2 Mr. P. Panduranga Rao | 400,000 | | 3 Mr. K. Raja Gopal | 210,000 | | 4 Mr. Pradeep Lenka | 210,000 | | 5 Mr. S. Pochender | 210,000 | | 6 Mr. S. M. Roy | 158,350 | | 7 Mr. S. C. Manocha | 460,000 | | 8 Mr. Sanjay Kumar Mittal | 255,000 | | 10 Mr. V. Saibaba | 301,050 | | 11 Mr. K. K. V. Naga Prasad | 255,000 | | 12 Mr. J. Suresh Kumar | 340,000 | | 13 Mr. Kamat S.V | 113,350 | | 14 Mr. V. Ravindran | 37,500 | | 15 Mr. K. K. Panda | 24,350 | | 16 Mr. V. K. Reddy | 36,700 | | 17 Mr. E. Ravi Keshav | 28,000 | | 18 Mr. M. N. Ravi Shankar | 21,900 | | 19 Mr. B. K. Sharada | 29,400 | | 20 Mr. Vinod Kumar Kapoor | 39,150 | | 21 Mr. Rakesh Kumar Gupta | 41,100 | | 22 Mr. Satyendra Kumar | 28,300 | | 23 Mr. Gadde Ramesh | 23,850 | | 24 Mr. Brijendra Sharma | 19,550 | | 25 Mr. B. Narsinga Rao Mohan | 18,200 | | 26 Mr. S. Venkata Rama Reddy | 37,500 | | 27 Mr. Philip Chacko | 80,000 | | 28 Mr. K. Krishna Babu | 16,800 | | 29 Mr. V. Srinivas | 31,500 | | 30 Mr. L.Yugandhara Babu | 26,900 | | 31 Mr. B. Dharma Teja | 50,150 | | 32 Mr. B. Manohar | 50,150 | | 33 Mr. Sanjay Divakar Joshi | 38,250 | | 34 Mr. R. A. Mulla | 29,000 | | 35 Mr. Basavaraj Gurappa Hooli | 51,000 | | 36 Mr. A. K. Singh | 12,900 | | 37 Mr. R. R. Nair | 24,400 | | 38 Mr. Ashok Kumar Sood | 17,000 | | 39 Mr. T. V. Rao | 16,050 | | 40 Mr. Mohan Jacob | 26,250 | | 41 Dr. K. P. Kumar | 26,250 | | 42 Mr. T. Adi Babu | 31,350 | | 43 Mr. D. Krishna Rao | 28,150 | | 44 Mr. T. C. Upreti | 30,500 | | 45 Mr. T. N. Subramaniyan | 22,900 | | 46 Mr. D. Venkata Giridhar | 10,050 | | 47 Mr. M. C. S. Reddy | 30,500 | | 48 Mr. Rajesh Suri | 26,100 | | 49 Mr. Naresh Kumar Khanna | 15,850 | | 50 Mr. Krishnaswamy Ramesh | 21,250 | | 51 Mr. Vishwanaath T. | 22,850 | | 52 Mr. S. V. Ramana Rao | 12,550 | | 53 Mr. B. K. Ojha | 5,050 | | 54 Mr. A. Srinivasa Rao | 9,800 | | 55 Mr. R. Parthasarathy | 11,900 | | 56 Mr. L. Uma Maheswara Rao | 26,665 | | 57 Mr. Manoj Kumar Agarwal | 69,555 | | 58 Mr. Vinod Kumar Rajora | 40,580 | | 59 Mr. M. Pavan Kumar | 55,555 | Annexure – (I) (b) Employees holding 5% or more of the total number of options granted during the year2009-10. | Name of the Employee | Number of Options Granted | | 1 Mr. G. Venkatesh Babu | 500,000 |
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