Guj Pipavav Port Director Discussions


To

The Members,

Gujarat Pipavav Port Limited

The Directors of Gujarat Pipavav Port Limited (‘the Company) have pleasure in submitting their 31st Annual Report to the Members of the Company together with the Audited Standalone and Consolidated Statement of Accounts for the financial year ended 31 March 2023.

1. FINANCIAL STATEMENTS & RESULTS: a. STANDALONE FINANCIAL RESULTS:

(INR Million)

Particulars

For the year ended 31 March 2023 For the year ended 31 March 2022
Operating Income 9,169.50 7,413.65
Less: Total Operating Expenditure 4,148.09 3,309.78
Operating Profit 5,021.41 4,103.87
Add: Other Income 510.00 307.60
Profit before Interest, Depreciation, Tax and Exceptional Item 5,531.41 4,411.47
Less: Interest 79.55 47.66
Less: Depreciation 1,161.54 1,292.71
Profit before exceptional items and tax 4,290.32 3,071.10
Less: Exceptional items 371.67 46.09
Profit Before Tax 3,918.65 3,025.01
Less: Taxes 1,000.85 1,092.64
Profit for the year after Tax 2,917.80 1,932.37
Total comprehensive income for the year 2,924.50 1,935.97

b. OPERATIONS:

The Company is engaged in Port Development and Operations at Pipavav Port, in Saurashtra Region of Gujarat State. It has a 30-year Concession vide Agreement dated 30 September 1998 from Gujarat Maritime Board (GMB). The Port located in Southwest of Gujarat handles Containers, Dry Bulk, Liquid, and RORO vessels. The performance details are as follows:

Particulars

For the year ended 31 March 2023 For the year ended 31 March 2022
Dry Bulk Cargo (Mn MT) 3.91 4.19
Liquid Cargo (Mn MT) 1.03 0.81
Containers (In TEUs) 764,034 627,747
RORO (No. of Cars) 40,237 23,874

The improvement in Container volume is primarily driven by addition of new service to the Middle East, during the year. The Liquid Cargo volume is seeing good traction with rail evacuation of LPG working well economically for the customers. The Company has added new customer in RoRo for car exports, resulting into improvement in the volume. In the case of Dry Bulk cargo, with the captive jetty in the neighbourhood getting operational, the volume is back to the pre-covid and pre-cyclone levels.

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

The Company holds 38.8% shares in Pipavav Railway Corporation Limited (PRCL) and the salient features in Form AOC-1 are mentioned in Annexure B. 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, the Company is required to consolidate PRCLs annual accounts with its own accounts. The

Companys share of Net Profit in PRCL is based on Management representation numbers in view of pending finalisation of accounts and completion of PRCLs statutory audit. A snapshot of the Consolidated Accounts is as follows: (INR Million)

Particulars

For the year ended 31 March 2023 For the year ended 31 March 2022
Operating Income 9,169.50 7,413.65
Less: Total Operating Expenditure 4,148.09 3,309.78
Operating Profit 5,021.41 4,103.87
Add: Other Income 510.00 307.60
Profit before Interest, Depreciation, Tax and Exceptional Item 5,531.41 4,411.47
Less: Interest 79.55 47.66
Less: Depreciation 1,161.54 1,292.71
Profit before share of net profits of investments 4,290.32 3,071.10
Add: Share of Net Profit of Associate Company accounted for using the Equity Method 213.62 40.92
Profit before exceptional items and tax 4,503.94 3,112.02
Less: Exceptional items 371.67 46.09
Profit before tax 4,132.27 3,065.93
Less: Taxes 1,000.85 1,092.64
Profit for the year after Tax 3,131.42 1,973.29
Total comprehensive income for the year 3,138.15 1,976.85

d. DIVIDEND:

The Board of Directors in their Meeting held on 9th November 2022 declared Interim Dividend of Rs. 2.70 per share and it has been paid. The Board is pleased to recommend a Final Dividend of Rs. 3.40 per share on the Companys outstanding Equity Share Capital.

The Dividend is subject to the approval by the Members at the Annual General Meeting to be held on 4 August 2023 and will be paid on 10 August 2023, within the stipulated time limit to all Members whose Names appear in the Register of Members, as of the close of business hours on 26 July 2023. The final dividend if approved by the Members would involve a cash outflow of Rs. 1,643.69 million. The Dividend Distribution Tax, if applicable, would be borne by the Member.

The Company has a Dividend Distribution Policy, which is available on the website https://www.apmterminals.com/en/pipavav/investors/governance

e. TRANSFER TO RESERVES:

The Board of Directors have not recommended any transfer of profit to reserves during the year 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 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 Companys financial position, have occurred between the end of the financial year 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 considering the nature of its business and the scale of operations. During the year under review, no material or serious observation has been made by the Statutory Auditors and the Internal Auditors of the Company regarding inefficiency or inadequacy of such controls. Wherever suggested by the auditors, the control measures have been further strengthened and implemented.

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 Companys status as a Going Concern and on its future operations.

k. PARTICULARS OF CONTRACT 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 the ordinary course of business and at arms length. Therefore, they are exempt from the provisions of Section 188 of the Companies Act, 2013. But all such transactions have prior approval of the Audit Committee as per the requirement under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The related party transaction with Maersk A/S regarding Income from Port Operations is a material transaction as per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Contract with Maersk A/S has been approved by the shareholders by way of Postal Ballot on 16th March 2020, pursuant to Regulation 23(4) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The details of Related Party Transactions are mentioned in Note 34(b) of the financial statements. The link for the Policy on Related Party Transactions is https://www.apmterminals.com/en/pipavav/investors/governance

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

The Company has neither provided nor accepted any loans, guarantees and securities. The Company does not have any investments except 38.8% shareholding in its 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 included in the report.

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 the provisions of Section 54(1)(d) of the Act read with Rule 8(13) of the Companies (Share Capital and Debenture) Rules, 2014 are not applicable.

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

The Company does not have any Employees Stock Option Scheme and hence the provisions of Section 62(1)(b) of the Act read with Rule 12(9) of the Companies (Share Capital and Debenture) Rules, 2014 are not applicable.

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:

The World Health Organisation has declared Covid-19 is no longer a global health emergency. Though it also mentions that the virus is evolving and remains a global health threat but at a lower level of concern. This is good news and a much needed relief for the global trade considering the challenges the vessels and its crew had to face during the pandemic and should also help the shipping lines bring reliability to their sailing schedules.

Considering the potential fall out of the continuing Russia- Ukraine conflict on the inflationary pressures in Europe, the EU provided large budgetary support measures to help the households weather the energy crisis. But the non-Russian LNG deliveries and a mild winter led to oil and gas prices trending downwards from their peak in mid- 2022. Also, India one of the largest importers of crude oil in the international crude market, has been fulfilling its crude oil requirement through much cheaper crude oil imports from Russia post the economic sanctions imposed by the Western countries. Indias imports from Saudi Arabia and Iraq reduced substantially thus leading to reduction in the crude oil prices in the international markets.

The interest rate hike by the advanced economies succeeded in cooling the demand towards the end of Year 2022 but the failure of a few banks in the US triggered a sharp decline in global banking stocks. In order to prevent impacting other banks, several Central Banks intervened to provide extraordinary liquidity and to calm the situation, the Governments sent a message to depositors about safety of their deposits. The central banks of the advanced economies are trying to balance between taming inflation, sustaining economic growth and maintain financial stability. All these events have resulted into a somewhat rocky and turbulent recovery for some of the economies around the world.

The Commodity prices have moderated since last year, the debt levels of the countries remain high but the recent financial turmoil has caused uncertainty in the growth outlook. The IMF estimates the global output growth to be at 2.8% for the Year 2023, down from 3.4% during the Year 2022. Within that the advanced economies are slated for a strong decline at 1.3% from 2.6% and the growth is likely to be driven by the emerging economies.

India recorded 6.6% GDP growth in FY 2022-23 and is likely to be impacted by the decline in Exports to the advanced economies. Hence the GDP for FY 2023-24 is likely to drop to 5.7% and then is likely to sharply increase to 7% in FY 2024-25 as per the OECD estimates. Government of India has been expanding the infrastructure spend in the country by constructing highways and dedicated rail freight corridors. The gross direct tax collections for the FY 2022-23 have reported a strong increase of 20.33% year on year. The net direct tax collections (after paying refunds) increased by 17.63% year on year. As per the reports, this buoyancy in tax collections is the highest ever in last 15 years mainly driven by higher profitability of companies, more number of companies opting for the standard tax rates after completing their tax holidays and improved overall tax compliance. Also, increased digitisation has brought a bigger share of the economy under the tax administration. With China opening up and inflation impacting the western economies, the situation of port congestion has eased, and global supply chain has stabilised. The availability of containers has changed from shortage to excess supply. The ocean freight rates for the shipping lines have been on a downward trend as compared to last two years but they remain high as compared to the pre-covid days. As per the estimates of World Trade Organisation, the global trade is likely to be at 1.7% in the year 2023 lower than its 12-year average of 2.7% due to high inflation, monetary tightening and financial uncertainty but it is likely to sharply improve in the year 2024 to 3.2%.

The Container volume on the West Coast of India saw an increase of 4% during the year at 14.56 million TEUs as compared to 13.95 million TEUs in the previous year. The increase is driven mainly by the imports into the country while the Export volume to the Western countries have been impacted. As for the Company, with the shipping line calls stabilising, the container volume has shown an increase of about 21% compared to previous year. Considering the economic situation in the western countries, the Exports from India to the US and Europe are likely to remain under pressure in short term. But the Exports to the Middle East and to the Far East are likely to remain steady. The Imports into India are likely to see improvement with the consumption economy continuing to do well.

As far as the Dry Bulk volume is concerned, during last year the Company commissioned additional warehouse of 10,000 sq. mtrs. for storage of fertiliser. In order to increase the rake loading capacity and to enable faster evacuation of fertiliser cargo, the Company has now commissioned two additional wagon loading equipment on the rail line. It will also provide operational flexibility in simultaneously handling different types of fertiliser cargo for loading on rakes.

As far as the Liquid Cargo business is concerned, the Company has upgraded its existing Liquid berth for handling partially loaded Very Large Gas Carriers (VLGCs). The work has been completed and necessary application has been submitted to the government authorities seeking approval for handling partially loaded VLGCs.

The Company has been consistently investing in Port infrastructure and for development on the waterfront as well as on the land side, as per the requirement of the trade from time to time. Based on the discussions with the business partners and considering the potential growth opportunities for handling higher liquid cargo volume, the Company proposes to construct an additional Liquid Berth at an estimated cost of USD 90 million subject to regulatory approvals. Once completed, it will increase the Liquid cargo handling capacity at Pipavav from 2 million MT to 5.2 million MT.

The Car exports from Pipavav have shown consistent improvement with addition of new customer automobile companies. The Company along with its business partner continues to explore new opportunities in RoRo.

In an endeavour to improve the local ecosystem around the port, the Company has entered into an agreement for hiring of a warehouse on a long-term lease at the Multi Modal Logistics Park being developed outside the port. It will help in providing warehousing solutions to the local cargo customers from immediate hinterland.

3. RISKS AND AREAS OF CONCERN:

While the macro indicators for India are positive, the consumption story of the country is holding strong, the Exports from India into the Western economies need to grow. The sectors like textiles, apparels, handicrafts, leather goods are high employment generating sectors and the increase in their share of exports into the global trade will have a multiplier effect on Indias growth. The western economies are under pressure due to the prevailing inflation. If India has to increase its share in global trade, then the countrys exports need to become competitive in the fiercely competitive international market. In that context, along with the Government of India, the respective State Governments have an equally important role in providing necessary support to industries, facilitate seamless end to end logistics and remove inefficiencies in the system.

4. MATTERS RELATED TO DIRECTORS AND KEY MANAGERIAL PERSONNEL:

a. BOARD OF DIRECTORS & KEY MANAGERIAL PERSONNEL:

Mrs. Hina Shah (DIN: 06664927) has her second consecutive tenure as an Independent Director upto 29 July 2023. Mr. Tejpreet Singh Chopra (DIN: 00317683) has his second consecutive tenure as an Independent Director upto 29 July 2025. Mr. Samir Chaturvedi (DIN: 08911552) has been appointed as an Independent Director upto 11 November 2025. Ms. Monica Widhani (DIN: 07674403) has been appointed as an Independent Director upto 11 August 2026. Ms. Matangi Gowrishankar (DIN: 01518137) has been appointed as an Independent Director upto 2 August 2027. The Company has obtained Shareholders approval by way of Remote E-voting for her appointment.

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.

Pursuant to the provisions of Section 152 of the Companies Act, 2013, Mr. Keld Pedersen (DIN: 07144184) and Mr. Jonathan Richard Goldner (DIN: 09311803) are liable to retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. Your Directors recommend their re-appointment.

b. DECLARATION BY INDEPENDENT DIRECTORS:

The Company has received declaration from all Independent Directors under Section 149(6) of the Companies Act, 2013 confirming that they continue to fulfil the criteria of independence as required under Section 149 of the Companies Act, 2013 and Regulation 16 of the Listing Regulations. There has been no change in the circumstances affecting their status as Independent Director of the Company. The details regarding the appointment of Independent Directors and their tenure have been mentioned hereinabove.

The Company has been regularly conducting Familiarisation Programmes for its Independent Directors and has posted its details on the website https://www.apmterminals.com/en/pipavav/investors/independent-directors In the opinion of the Board, the Independent Directors possess integrity, requisite expertise and experience for acting as an Independent Director of the Company.

The Independent Directors of the Company are exempt from undertaking the online proficiency test as required under Rule 6(4) of the Companies (Appointment and Qualification of Directors) Rules, 2014.

5. DISCLOSURES RELATED TO BOARD, COMMITTEES AND POLICIES:

a. BOARD MEETINGS:

The Board of Directors met four times during the year ended 31 March 2023 in accordance with the provisions of the Companies Act, 2013 and rules made thereunder. The particulars of the meetings held and attended by each Director during the financial year 2023 are given in the Corporate Governance Report which forms part of this Annual Report.

b. DIRECTORS 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 31 March 2023, the Board of Directors hereby confirm that: a. in preparation of the annual accounts, the applicable accounting standards have 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 31 March 2023 and of the profit of the Company for that period; c. proper and sufficient care was taken for 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 operating effectively; f. proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

c. NOMINATION AND REMUNERATION COMMITTEE:

The Nomination and Remuneration Committee, a Sub-committee of Directors has been constituted by the Board in accordance with the requirements of Section 178 of the Act. The composition of the Committee is as follows:

1. Mr. Samir Chaturvedi, Chairman, Independent Director

2. Mr. Tejpreet Singh Chopra, Independent Director;

3. Ms. Matangi Gowrishankar, Independent Director; and

4. Mr. Jonathan Richard Goldner, Non-Executive 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 the remuneration for Directors, Key Managerial Personnel and other members of Senior Management.

Major criteria defined in the policy framed for appointment of and payment of remuneration to the Directors of the Company, is 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 Companys 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 an open mind.

e) While determining the remuneration of Executive Directors, Key Managerial Personnel and members of Senior Management, 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 Performance Bonus and value of the perquisites, shall not exceed the permissible limits as 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 from the Company. However, Non-Executive Independent Directors 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. The Non-Executive Non-Independent Director representing Gujarat Maritime Board shall be eligible for sitting fee for attending the Board Meeting and for reimbursement of out of pocket expenses for attending the Meeting.

d. AUDIT COMMITTEE:

The Audit Committee, a Sub-committee of Directors was constituted by the Board 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. Samir Chaturvedi, Chairman, Independent Director

2. Mrs. Hina Shah, Independent Director

3. Ms. Monica Widhani, Independent Director

4. Mr. Maarten Degryse, Non-Executive Non- Independent Director

The scope and terms of reference of the Audit Committee is in accordance with the Companies Act, 2013 and it reviews the information as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

During the year under review, there were no instances of recommendation by the Audit 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 Stakeholders Relationship Committee comprised the following Directors:

1. Mr. Tejpreet Singh Chopra, Chairman, Independent Director

2. Mrs. Hina Shah, Independent Director

3. Mr. Girish Aggarwal, Managing Director

The Company Secretary acts as 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 and the link of the policy on the website is https://www.apmterminals.com/en/pipavav/investors/governance The Policy provides a formal mechanism for all employees of the Company to make disclosure about suspected fraud. It 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 Companys Code of Conduct, the Code for Prevention of Insider Trading or fraud or any unethical behaviour. In case the concerned person is not comfortable in reporting the matter to his/her Manager or to the Managers Manager or to the Head of HR, he/she can report to the Chief Compliance Officer of the parent Company. The policy also provides direct access to the Chairman of Audit Committee through his personal email id. During the year under review, no complaints have been reported for any fraud.

As part of APM Terminals, the Company shares the distinctive set of the Groups Purpose and 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, to the Groups 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 Companys businesses. It defines a structured approach to manage uncertainty and to make use of these in decision making pertaining to the business and corporate functions. Key business risks and their mitigation is considered in the annual/strategic business plans and in periodic management reviews. The Company has Risk Management Committee, a sub-committee of Directors comprising:

1. Mr. Julian Bevis, Chairman, Non-Executive Non- Independent Director

2. Mr. Soren Brandt, Non-Executive Non- Independent Director

3. Mr. Samir Chaturvedi, Independent Director

4. Mr. Girish Aggarwal, Managing Director

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, a sub-committee of Directors comprising:

1. Mrs. Hina Shah, Chairperson, Independent Director

2. Mr. Soren Brandt, Non-Executive Non- Independent Director

3. Mr. Julian Bevis, Non-Executive Non- Independent Director

4. Mr. Girish Aggarwal, 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 and the details are presented in Annexure A.

The CSR Policy of the Company is available on the web-site https://www.apmterminals.com/en/pipavav/investors/governance

During the year ended 31 March 2023 the Company was required to spend Rs. 67.21 million towards the CSR activities and the Company has spent the entire budget amount. The Companys focus area of CSR activities are Education, Health, Safety & Environment, Women Empowerment, Skill Development and Rural Development Projects.

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 members attendance, participation and contribution of his expertise was evaluated. All Independent Directors were present for the Meeting. The Board also carried out the evaluation of each individual Director and various Board Committees did their respective Committee evaluation.

The Board also evaluated the quality, content and timeliness of the information flow between the Board and the Management including the board papers and other documents.

j. INTERNAL CONTROL SYSTEMS:

The Company has adequate internal control systems commensurate to the size of its business, the nature of business and its complexities and these controls are operating satisfactorily. The adequacy and functioning of these internal controls is reviewed by the Internal Auditors from time to time and wherever necessary the corrective measures are taken. The Internal Auditors report directly to the Audit Committee of the Company.

Internal control systems consisting of policies and procedures are designed to ensure reliability of financial reporting, timely feedback of 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 protected adequately.

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 Employees Remuneration of the Company is Rs. 2.48 million. The Managing Directors remuneration was Rs. 56.66 million. The ratio of Managing Directors remuneration to Median Remuneration of employees is 22.85 The percentage increase in remuneration of the Key Managerial Personnel (KMPs) i.e. Managing Director, Chief Financial Officer and Company Secretary is 0.3%, 8% and 8% respectively. The average increase for KMPs works out to approximately 5%.

The percentage increase in the median remuneration of employees in the financial year is 10.1%. The Company has a total of 460 permanent employees on its rolls.

The Company follows the global practice of its parent regarding the Performance Appraisal System. The Groups HR has introduced a tool of constant engagement with our colleagues. It is mainly focused on Team conversation between the colleagues and People Leaders. The Company is shifting from Performance Ratings to Performance Conversations and from merit matrices and percentage increase guidance to a holistic people centred approach based around the Groups Rewards Principles.

The Companys Market Capitalization increased by ~52% based on the closing price as of 31 March 2023 compared to 31 March 2022. The Net Worth is Rs. 20,783 million compared to Rs. 20,324.20 million as of the previous year.

The Annual Report as per Section 136 of the Companies Act, 2013 is 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 Companys forthcoming Annual General Meeting.

The Company has paid Commission of Rs. 4.13 million to its Independent Directors pursuant to the shareholders approval obtained in the Annual General Meeting held on 13 August 2021.

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

The Directors are not paid remuneration/commission from any other Company.

m. DIVIDED DISTRIBUTION POLICY:

Dividend is the Companys primary distribution of profits to its Shareholders. The Companys objective is to sustain a steady and consistent distribution of profits, by way of Dividend, to its Shareholders while considering the following:

(a) The circumstances under which the shareholders can or cannot expect dividend

The Company shall endeavour to pay Dividend to its shareholders in a steady and consistent manner except the following circumstances:

(i) During no growth or weak growth in the trade requiring the Company to retain its earnings to be able to absorb unfavourable market conditions and for meeting the business requirements;

(ii) To meet its funding requirements for expansion and growth;

(iii) The Companys Joint Venture with Indian Railways, Pipavav Railway Corporation Limited requires equity infusion from its shareholders.

During such times the Company may decide to retain the earnings instead of distributing to the shareholders. The distribution of Dividend can be by way of Interim Dividend and/or by way of Final Dividend.

(b) The financial parameters that will be considered while declaring dividend

The Company shall consider the following parameters while declaring dividend: a. Current years profit:

i. after setting off carried over previous losses, if any;

ii. after providing for depreciation in accordance with the provisions of Schedule II of the Act;

iii. after transferring to reserves such amount as may be prescribed or as may be otherwise considered appropriate by the Board at its discretion. b. The profits for any previous financial year(s):

i. after providing for depreciation in accordance with law;

ii. remaining undistributed; or c. out of (i) or (ii) or both.

In computing the above, the Board may at its discretion, subject to provisions of the law, exclude any or all of

(i) extraordinary and exceptional income, generated from activities other than regular business

(ii) extraordinary charges

(iii) exceptional charges

(iv) one off charges on account of change in law or rules or accounting policies or accounting standards

(v) provisions or write offs on account of impairment in investments (long term or short term)

(vi) noncash charges pertaining to amortization or ESOP or resulting from change in accounting policies or accounting standards.

(c) Internal and External factors that would be considered for declaration of dividend

The Companys Board shall always consider various Internal and External factors while considering the quantum for declaration of dividend such as the overall Economic scenario of the country, the Export Import trade of the country, the statutory and regulatory provisions, the Companys own performance, its profitability, its growth plans, the performance and funding requirements of its joint venture Rail Company and such other factors as may be deemed fit by the Board.

(d) Policy as to how the retained earnings will be utilised

The retained earnings would mainly be utilised for the purpose of the Companys growth plans, the funding requirements of its joint venture Rail Company and for all such activities that in the Boards opinion shall enhance the shareholders value.

(e) Provisions with regard to various classes of shares

The Company currently has only one class of shares namely Equity shares. In case the Company issues any other class of shares, this Policy shall be modified suitably for stipulating the parameters for distribution of dividend to all classes of shares.

The link for the Dividend Policy on the Company website is https://www.apmterminals.com/en/pipavav/investors/governance

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 31 MARCH 2023:

There are no Audit Observations on the Standalone Financial Statements of the Company for the year ended 31 March 2023. But the Consolidated Financial Statements carry an Audit Observation as follows: In our opinion and to the best of our information and according to the explanations given to us, except for the indeterminate effect of the matter described in the Basis of Qualified section, the aforesaid consolidated financial statements give the information required by the Companies Act, 2013 (‘the Act) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the consolidated state of affairs of the Company and its associate as at March 31, 2023, and consolidated total comprehensive income (comprising of profit and other comprehensive income), consolidated changes in equity and its consolidated cash flows for the year then ended.

The Basis for qualified opinion:

The consolidated financial statements include the Companys share of total comprehensive income (comprising of profit and other comprehensive income) of INR 213.66 million, based on unaudited financial statements as at and for the year ended March 31, 2023, in respect of its associate company. Our opinion on the consolidated financial statements in so far as it relates to the amounts and disclosures included for the year ended on March 31, 2023, in respect of this associate company is based solely on such unaudited financial statements of the associate company for the year ended on March 31, 2023, as furnished to us by the Management of the Company. In absence of availability of audited financial statements we are unable to comment on additional adjustments and/disclosures that are required to be made to these consolidated financial statements.

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under Section 143(10) of the Act. Our responsibilities under those Standards are further described in the "Auditors Responsibilities for the Audit of the Consolidated Financial Statements" section of our report. We are independent of the Company and its associate in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in India in terms of the Code of Ethics issued by the Institute of Chartered Accountants of India and the relevant provisions of the Act, 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.

Report on IFCFR

Basis for Qualified Opinion

1. According to the information and explanations given to us and based on our audit, material weakness has been identified in the operating effectiveness of the Companys internal financial controls with reference to consolidated financial statements as at March 31, 2023 as the Companys period end financial controls related to ensuring that the financial information of the associate company i.e., Pipavav Railway Corporation Limited (PRCL), included in the consolidated financial statements of the Company, is in accordance with the audited consolidated financial statements of the associate company, did not operate effectively. This could result in material misstatement in the consolidated financial statements.

2. A ‘material weakness is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the companys annual or interim financial statements will not be prevented or detected on a timely basis.

Qualified Opinion

In our opinion, the Company and its associate company have, in all material respects, an adequate internal financial controls system with reference to consolidated financial statements based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note issued by the ICAI, and except for the possible effects of the material weakness described in the ‘Basis for Qualified Opinion section above on the achievement of the objectives of the control criteria, the Companys internal financial controls with reference to consolidated financial statements were operating effectively as of March 31, 2023.

We have considered the material weakness identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements of the Company for the year ended March 31, 2023, and the material weakness affects our opinion on the consolidated financial statements of the Company and we have issued a qualified audit opinion on the consolidated financial statements. [Refer paragraph 3 of our audit report on consolidated financial statements] The response of the Board of Directors to the audit observation is that the financial statements of the Associate Company Pipavav Railway Corporation Limited (PRCL), are Management representation numbers in view of pending finalisation of accounts and completion of PRCLs statutory audit.

b. SECRETARIAL AUDIT REPORT FOR THE YEAR ENDED 31 MARCH 2023:

Provisions of Section 204 read with Section 134(3) of the Companies Act, 2013, mandates to obtain Secretarial Audit Report from a Practicing Company Secretary. Accordingly, M/s Rathi and Associates, Company Secretaries have issued the Secretarial Audit Report for the year ended 31 March 2023.

c. STATUTORY 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 (Firm Regn. No. 012754N/N-500016) are Re-appointed as Statutory Auditors of the Company for a period of five years in the Annual General Meeting held on 6 August 2020.

d. COST AUDITORS:

The Company is engaged in providing Port Services and as per Notification dated 31 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.

e. DISCLOSURES UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013:

The Company has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace and has also established an Internal Complaints Committee, as stipulated by The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules thereunder. During the year under review, one complaint in relation to sexual harassment at workplace was reported. It has been addressed suitably and closed.

f. FRAUD REPORTING:

During the year under review, there were no instances of material or serious fraud falling under Rule 13(1) of the Companies (Audit and Auditors) Rules, 2014, by officers or employees reported by the Statutory Auditors of the Company during the course of the audit.

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. 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.

As mentioned in the Annual Report of previous year, the Company as part of its Green Initiative has installed solar panels over its new warehouse of 10,000 sq. mtrs. The facility is commissioned. Additionally, the Company is in discussion with a Renewable Energy supplier for entering into a Power Purchase Agreement for purchase of green power. After the signing of the Power Purchase Agreement and the supply commences, the Company will be sourcing about 45% of its Power requirement through Green Energy.

The foreign exchange earning was Rs. 2,227.58 million and outgo was Rs. 319.03 million during the period under review.

b. CHANGE IN SHARE CAPITAL:

The Company has not made any issue of shares during the year and its Share Capital for the year ended 31 March 2023 remains unchanged.

c. ABSTRACT OF ANNUAL RETURN ON THE WEBSITE:

Pursuant to the provisions of Section 134(3)(a) of the Companies Act, 2013, the Annual Return for the year ended 31st March 2023 is available on https://www.apmterminals.com/en/pipavav/investors/financial-results

d. SERVICE OF DOCUMENTS THROUGH ELECTRONIC MEANS

Subject to the applicable provisions of the Companies Act, 2013, all documents, including the Notice and Annual Report shall be sent through electronic transmission in respect of members whose email IDs are registered in their demat account or have been provided by the members. The physical copy of annual report will be dispatched only to shareholders with a specific request for the physical copy of the report.

e. COMPLIANCE WITH SECRETARIAL STANDARDS

The Company is in compliance with the mandatory Secretarial Standards.

f. UNCLAIMED AND UNPAID DIVIDENDS, AND TRANSFER OF SHARES TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

The Members who have not yet received/claimed their dividend entitlements are requested to contact the Companys Registrar and Transfer Agents KFin Technologies Limited.

Pursuant to Section 124 of the Companies Act, 2013 read with the Investor Education Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 ("Rules"), all dividends remaining unpaid or unclaimed for a period of seven years and also the shares in respect of which the dividend has not been claimed by the shareholders for seven consecutive years or more are required to be transferred to Investor Education Protection Fund in accordance with the procedure prescribed in the Rules. The Company had declared dividend for the financial year 2015-16 in the Annual General Meeting held on 11th August 2016. The unclaimed amount of dividend is due for transfer to IEPF during the financial year ending 31st March 2024 and the amount will be transferred within the stipulated timelines. Meanwhile, the concerned shareholders are being sent an intimation on their last known address regarding the proposed transfer of unpaid/ unclaimed dividend and the shares pertaining to those amounts into IEPF.

g. CORPORATE GOVERNANCE

The report on Corporate Governance along with the report by the Statutory Auditors regarding compliance with the conditions of Corporate Governance has been furnished and forms part of the Annual Report.

h. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis report has been separately furnished and forms part of the Annual Report.

i. BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORTING

In compliance with the Regulation 34(2)(f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Business Responsibility and Sustainability Report for the financial year ended 31st March, 2023 forms part of the Annual Report. j. The provisions of Insolvency and Bankruptcy Code, 2016 are not applicable. The provisions of one time settlement are not applicable.

8. ACKNOWLEDGEMENT AND APPRECIATION:

The Board of Directors of the Company thank the Customers, the Shareholders, the Vendors, the Companys Bankers, Business Partners/ Associates for their continued support and the Central Government, State Government and Gujarat Maritime Board for their encouragement to the Company. Your Directors wish to place on record their sincere appreciation of the strong commitment and enthusiasm of all employees and for their invaluable contribution.

For and on behalf of the Board

TEJPREET SINGH CHOPRA CHAIRMAN

DIN: 00317683

Date: 24 May 2023

Place: Mumbai

Registered Office Pipavav Port,

At Post Rampara-2 via Rajula

District Amreli 365560

CIN L63010GJ1992PLC018106

Tel No. 02794 242400

Fax No. 02794 242413

Email investorrelationinppv@apmterminals.com

Website www.pipavav.com