Swan Energy Ltd Directors Report.

1) Your Directors are pleased to present the One Hundred Tenth (110th) Annual Report together with the Audited Financial Statements (Standalone & Consolidated) for the year ended 31st March, 2018.

2) Financial Results

For the year ended on 31.3.2018 For the year ended on 31.3.2017
(Rs. in Lakhs) (Rs. in Lakhs)
Profit before interest & depreciation 11979.79 2466.47
Less: Interest 2301.58 1549.32
Depreciation 536.66 541.86
Profit before Tax 9141.55 375.29
Less: Provision for Taxation 1866.94 207.39
Net Profit for the year 7274.61 167.90
Add: Amount of Profit & Loss Account brought forward 12641.40 12606.61
Amount available for Appropriation 19916.01 12774.51
Less: Appropriations:
Transfer to General Reserve - -
Dividend on Equity shares paid (including tax)* 220.48 133.11
Balance of Profit & Loss Account transferred to Balance sheet 19695.53 12641.40

* Pursuant to applicable provisions of Indian Accounting Standards, the dividend amount mentioned in the columns for 2017 and 2018 represents the dividend amount paid (including tax) for the financial years 2016 and 2017 respectively.

On standalone basis, revenue from operations for the financial year 2017-18 was 31,636.18 lakhs as compared to 33,080.73 lakhs in the previous year. Earning before interest, tax, depreciation and amortization (EBITDA) for the year was 11,979.79 lakhs as compared to 2,466.47 lakhs in the previous year. Profit after Tax (PAT) for the year was 7,274.61 lakhs as compared to 167.90 lakhs in the previous year.

On consolidation basis, revenue from operations for the financial year 2017-18 was 34,669.17 lakhs as compared to 35,058.62 lakhs in the previous year. Earning before interest, tax, depreciation and amortization (EBITDA) for the year was 14,525.51 lakhs as compared to 4,616.35 lakhs in the previous year. Profit after Tax (PAT) for the year was 5,469.21 lakhs as compared to 60.92 lakhs in the previous year.

3) Review of Operations LNG Port Project:

Swan Energy Limited through a special purpose vehicle company Swan LNG Private Ltd. (“SLPL) is developing Indias first Floating Storage and Regasification Unit (FSRU) based greenfield LNG Port project of 10 MMTPA. The Project comprises of development of LNG Port facilities utilizing a Floating Storage and Regasification Unit (“FSRU”) along with Floating Storage Unit (“FSU”) for LNG receipt, storage, regasification and send-out, with an initial regasification capacity of 5 MMTPA of LNG, off the Jafrabad coast in Amreli district in Gujarat (“the Project”)

The project is first of its kind, all weather greenfield port facility for LNG Import with an estimated cost of INR 4,000 Crores. The Project development includes construction of LNG Terminals, Tug Berth Breakwater, Capital Dredging and Onshore Port Infrastructure.

LNG Terminal No. 1 willbe initially operated with a five (5.0) MMTPA along with new-built FSRU and a Floating Storage Unit (“FSU"). Both FSRU and FSU will be on Long Term Bareboat Charter lease basis and connected by ship-to-ship transfer equipment.

Project development work has been started in year 2012 and during the year, many milestones, as listed below, have been achieved towards development and implementation ofthe LNG Port Project.

i- SLPL has executed Shareholders Agreement (SHA) on 17th October, 2017 with the following promoters for equity participation of SLPL. Post execution, all promoters have contributed initial contribution towards equity share capital.

The shareholding pattern of the SLPL, post execution of the above agreement and receipt of the initial contribution, is as under.

i- Swan Energy Limited (SEL) 63%
ii- Gujarat Maritime Board (GMB) 15%
iii- Gujarat State Petronet Limited (GSPL) 11%
iv- FSRU Venture India One Private Limited (FVIOPL), an affiliate of Mitsui OSK Lines (MOL), Japan 11%

FVIOPL, an affiliate company of MOL, will also be the Technical Partner for the implementation of the LNG Port Project.

MOL will be supporting the Project by leveraging its technical expertise by finalizing specifications of the FSRU vessel and supervising FSRU construction. MOL will also arrange for FSU required for the Project under a long term FSU Bare Boat Charter basis and will also provide O&M services for both the FSRU and the FSU.

MOL is a leading marine transportation company, headquartered in Tokyo, Japan and owns and operates one of the worlds largest merchant fleet. MOL group owns and operates 847 vessels. The current LNG feet of MOL includes 91 LNG carriers which includes 74 available and 17 are under construction vessels. MOL, in consortium with Shipping Corporation of India (SCI), owns and operates a LNG vessel for Petronet LNG Limited.

ii- SLPL has executed Concession Agreement (CA) with Gujarat Maritime Board (GMB) and Government of Gujarat (GoG) for developing FSRU based LNG Port Project on 18th October 2017. With execution of this agreement, SLPL gets exclusive right and authority to develop, finance, design, construct, operate, maintain and provide Port services to the users. The term of the CA is for thirty (30) years from the date of Commencement of Operations, further extendable for a period of twenty (20)years on mutually agreed terms and conditions.

iii- SLPL, as a Charterer, has executed Bare Boat Charter agreement (BBC)with Triumph Offshore Private Limited (TOPL), to charter Floating Storage and Regasification Unit (FSRU) to your company on a long term lease for a period of 20 years.

TOPL, 100% subsidiary of SEL, was incorporated as a special purpose vehicle (SPV) to purchase FSRU for the LNG Port Project. TOPL has executed a Ship Building Contract for the construction of one (1) FSRU of 1,80,000 Cubic Meter (CBM) storage capacity with M/s Hyundai heavy Industries Company Limited, South Korea (HHICL).

iv- SLPL has executed Contract Agreement worth 459 Crore for Engineering, Procurement, Construction and Commissioning (EPCC) of the LNG Terminal Topside Infrastructure for its 5 million metric tonnes per annum (5MMTPA) FSRU based LNG Port Project with M/s Black & Veatch Private Limited (BVPl).

BVPL is a subsidiary of USA company ‘Black & Veatch (BV), a global leader in engineering, procurement and construction (EPC) services for energy, water and telecommunications since 1915, having presence across the globe with over 100 offices worldwide, with decades of proven performance on more than 3000 assignments in 40 countries.

v- SLPL, along with TOPL, has executed following agreements with its Project Technical Partner, Mitsui OSK Lines, Tokyo, Japan (MOL) and its 100% subsidiary M/s Regas Venture India One Private Limited (RVIOPL) for Indias first LNG dedicated FSRU Port Project at Jafrabad, Gujarat. MOL is a well established& experienced shipping company, specialized in the Operation of LNG carriers (LNG), Floating Storage Units (FSU) and Floating Storage & Re-gasification Units (FSRU)).

a) Pre order Technical Support Agreement for FSRU, between TOPL and MOL.

b) Supervision Agreement for FSRU Construction, between SLPL, TOPL and MOL.

c) FSRU Operations & Maintenance (O&M) Agreement between SLPL and RVIOPL.

d) FSU Bareboat Charter Agreement, by and between SLPL and MOL.

e) FSU Operations & Maintenance (O&M) Agreement between SLPL and RVIOPL.

vi- In December, 2016, SLPL had executed an EPC contract for Marine and Dredging works worth 2115 crore with National Marine & Infrastructure India Private Limited (NMIIPL) for carrying out the construction of LNG terminal at Jafrabad, Gujarat, to be completed within 3 years. NMIIPL had started the construction works.

However, during the month of February 2018, NMIIPL terminated the Contract after completing 85% of the Dredging, leaving the Jetty and Breakwater Works. Thereafter, in the month of April, 2018, SLPL has awarded Letter of Award (LOA) to M/s AFCONS Infrastructure Limited (AFL) for all Jetty related EPC works at a contract price of 315 Crores. AFL has already commenced the work at site. SLPL is in the process of awarding balance works of Breakwater and left over Dredging.

At this point of time, cost and time over runs are not expected and the Project is likely to be completed during the 1st Quarter of 2020 and ready for commercial operation from April 2020.

vii- Currently, SEL is in the process of financial closure for the LNG Port Project of SLPL and ship financing of TOPL and have approached lenders for getting the necessary funding for the above. The response received from the lenders has been positive.

REAL ESTATE

Kurla Project:

Occupation Certificate (OC) for the 4thTower at Kurla project (commercial complex) has been received and the Tower has been handed over to the buyer, i.e., Equinox.

Sale of Land:

During the year, the Company has sold its land at Goa, admeasuring about 100 acres, for a consideration of 115 Crores and handed over to the buyer in the month of April 2018.

Subsidiary Companies:

A- The status of the properties owned by one of the 100% subsidiary company, Cardinal Energy & Infrastructure Pvt Ltd (CEIPL) is as under:

i- Sai Tech Park, Bangalore - It is a developed commercial property, located at the IT park of Whitefield, Bangalore. It comprises 2.96 lakhs sq.ft & three buildings, all been entirely leased out to Harman Connected Services Corporation India Private Limited (Erstwhile Symphony Teleca Corporation India Private Limited), an MNC. The annual rent of 15.47 Crores is used for payment of LRD loan from PNB Housing.

ii- Technoya Park, Hyderabad - During the year, the development of this commercial property, located at Gachibowli area of Hyderabad, was completed. Thereafter, 50% of the property was sold to another builder and the remaining 50% property, comprising 2.92 lakhs sq.ft, was leased out to Mahataa Information India Private Limited (Indian subsidiary of Google). The annual rent of 14.00 Crores is used for payment of LRD loan from HDFC.

iii- BTM, Banglore - It is a land, admeasuring 0.75 acre. The company intends to develop it as a residential property.

iv- Apart from the above, another residential project, consisting of 2 basement + GF + 20 Floors containing 113 flats in Yeshwantpur area of Bengaluru, is being developed by CEIPL under Joint Development Agreement (JDA). Commencement Certificate (CC) for the construction has been received and the Plinth Area work (2 basements + Ground Floor) is complete. The top line sale in the Project will be around Rs. 300 Crores. The Project is likely to be completed by 2020.

B- Another 100% subsidiary company, Pegasus Ventures Private Limited (PVPL) has land banks at Bangalore, Mangalore, Mysore and Chennai. The Company is exploring various options to develop these properties.

TEXTILE

During the current financial year, the Process House of the Company at Ahmedabad has posted profit before tax of 1037.72 lakhs (Previous year 1107.87 lakhs).

4) Material changes and commitments:

The company has issued a Corporate Guarantee (CG) amounting to US Dollars Two hundred and twenty four million and four hundred thousand only (US$ 224,400,000) in favour of M/s Hyundai heavy

Industries Company Limited, South Korea (HHICL) on behalf of its subsidiary TOPL, which shall expire on delivery of the FSRU Vessel to the TOPL.

5) Dividend & Reserve

Your company needs to conserve its resources for its various upcoming projects, including FSRU Project. Yet, as a investor friendly measure, your Directors have recommended payment of dividend @ 0.10 per Equity Share (10%) on 24,42,57,000 Equity Shares of 1/- each for the year ended 31st March, 2018, subject to approval of the members. The amount of dividend and the tax thereon will be 2,44,25,700/- and 49,73,073/- (tax rate being @ 20.36%) respectively.

The company has not transferred any amount to the General Reserve during the year.

6) Fixed Deposits

The Company has not accepted any fixed deposits from public during the year under review.

7) Finance

Your Company has been regular in meeting its obligation towards payment of Principal/Interest to the Banks and other institutions.

During the year under review, the Company has neither issued shares with differential voting rights nor has granted stock options/sweat equity. The paid up Equity share capital as on 31st March, 2018 was 2442.57 lakhs.

8) Statutory Disclosures :

8.1 Management Discussion and Analysis:

As required under Regulation 34(2)(e) of the SEBI (LODR) Regulations, 2015, a Management Discussion and Analysis is annexed to this Report - Annexure - A.

8.2 Corporate Governance

As required under Regulation 17(7) of the SEBI (LODR) Regulations, 2015, a report on the ‘Corporate Governance, together with a certificate of statutory auditors confirming compliance of the conditions of the Corporate Governance, is annexed to this report - Annexure B.

Further, in compliance of Regulation 17(5) of the SEBI (LODR) Regulations, 2015, your Company has adopted a ‘Code of Conduct and Ethics for its Directors and Senior Executives.

8.3 Extract of Annual Return:

An extract of the Annual Return in Form MGT - 9 is annexed to this Report - Annexure - C.

8.4 Conservation of energy, technology absorption and foreign exchange earnings and outgo:

Information under Section 134 (3) (m) of the Companies Act, 2013 (‘the Act), read with Rule 8 of the Companies (Accounts) Rules, 2014 is annexed to this Report - Annexure D.

8.5 Corporate Social Responsibility (CSR) Policy:

The Report on CSR is annexed to this Report - Annexure - E.

8.6 Particulars of Employees:

Pursuant to provisions of Section 136 (1) of the Act and as advised, the statement containing particulars of employees under Section 197 (12) of Act, read with Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 will be available for inspection at the registered office of the Company and will be made available to the shareholders on request.

8.7 Number of Board Meetings and composition of Audit Committee:

During the year under review, 11 (Eleven) Board Meetings were convened and held. The required details are given in the Corporate Governance Report forming part of this report.

8.8 Directors Responsibility Statement:

Pursuant to Section 134 (3) (c) ofthe Act, the Directors confirm that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed;

(b) appropriate accounting policies have been selected and applied consistently. Judgments and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the company as on 31st March, 2018 and of the profit of the Company for that period;

(c) proper and sufficient care has been taken 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 Annual accounts have been prepared on a going concern basis;

(e) internal financial controls have been laid down and followed by the company and that such controls are adequate and are operating effectively;

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

8.9 Statement on declaration given by independent Directors:

The Independent Directors of the Company have submitted their Declaration of Independence, as required under the provisions of Section 149(7) of the Act, stating that they meet the criteria of independence as provided in section 149(6) of the Act.

8.10 Disclosure regarding Companys policies under Companies Act, 2013:

i- Remuneration and Nomination Policy

The Board of Directors has framed a policy which lays down criteria for selection/appointment and framework in relation to remuneration of Directors, Key Managerial Personnel (KMPs) and Senior Management of the Company.

ii- Whistle Blower Policy

The Company has a Whistle Blower policy to deal with instances of fraud and mismanagement, which is posted on the website of the Company.

iii- Risk Management Policy

The Company has a structured Risk Management policy. The Risk Management process is designed to safeguard the organization from various risks through adequate and timely actions. It is designed to anticipate, evaluate and mitigate risks in order to minimize its impact on the business. The potential risks are integrated with the management process such that they receive the necessary consideration during decision making.

8.11 Particulars of loans, Guarantees or investments by Company:

Details required to be disclosed pursuant to the provisions of Section 186 of the Act are disclosed in the notes to Financial Statements.

8.12 Related Party Transactions:

All transactions entered with Related Parties for the year under review were on arms length basis and in the ordinary course of business. There are no materially significant related party transactions during the year, which may have potential conflict with the interest ofthe company at large. The details of the transactions with the related parties are disclosed in the notes to Financial Statements.

8.13 Subsidiary Company:

A statement in Form AOC - 1 pursuant to Section 129(3) of the Act, relating to subsidiary companies is attached to the Accounts. The financial statements and related documents ofthe Subsidiary companies shall be kept open for inspection at the registered office of the Company.

8.14 Significant and material orders passed by the Regulators or courts:

There were no significant and material orders passed by the Regulators or Courts or Tribunals during the year under review which would impact the going concern status of the Company and its future operations.

8.15 Directors:

At the ensuing Annual General Meeting, Mr. Navinbhai Dave, retires by rotation and being eligible, offers himself for re-appointment.

8.16 Performance evaluation of the Board:

Pursuant to the Section 134 of the Act and SEBI (LODR) Regulations 2015, the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of all the Committees of the Board.

8.17 Prevention of Sexual Harassment of Women at workplace:

The Company has a constituted Committee in compliance of the provisions of “Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013".

However, no case was reported to the Committee during the year under review.

8.18 Internal Financial Controls:

Your Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed.

9) Auditors:

9.1 Statutory Audit

M/s. N. N. Jambusaria & Co., Chartered Accountants, Mumbai (Registration No. 104030W) were appointed as Statutory auditors of the Company at the 109th AGM held on September 21,2017 for a term of five consecutive years. As per the provisions of Section 139 of the Companies Act, 2013, the appointment of Auditors was required to be ratified at every Annual General Meeting. However, in view of amendment in the Companies Act, 2013, the appointment of statutory auditors is no longer required to be ratified at every AGM and hence, no resolution is proposed in the Notice convening AGM.

9.2 Cost Audit

Pursuant to the recommendation of the Audit Committee, the Board has appointed M/s V. H. Shah & Co., Cost Accountants (Registration No. 100257) as the Cost Auditor for the financial year ended 31st March, 2019, at a remuneration of 75,000/- (Rupees Seventy Five thousand only) plus applicable taxes, who have given consent and eligibility certificate to act as a Cost Auditors of your Company. The remuneration payable is required to be ratified at the ensuing AGM.

9.3 Secretarial Audit

The Board has appointed M/s Jignesh M. Pandya & Co. (CP No. 7318), a practicing Company Secretary, to undertake the Secretarial Audit of the Company for the year ended 31st March, 2018 and their report is annexed to this Report - Annexure - F.

10) Auditors Report:

Report of the auditors, read with the notes to the financial statements, is self-explanatory and need no elaboration.

11) Industrial relations:

The relationship with all the concerned continued to remain harmonious and cordial throughout the year under review.

12) Appreciation:

The Directors place on record their appreciation for support and timely assistance from Financial Institutions, Banks, Government Authorities and above all, its Shareholders, who have extended their valuable support to the Company.

The Directors also wish to appreciate sincere and dedicated efforts and services by all the employees/ staff.

For and on behalf of the Board of Directors
Navinbhai C. Dave
Mumbai, 30th May, 2018 Chairman