26 March 2024

 

Infrastructure India plc

("IIP" or the "Company" and together with its subsidiaries, the "Group")

 

Annual results for the twelve months ended 31 March 2023

 

Infrastructure India plc, an AIM quoted infrastructure fund investing directly into assets in India, announces its audited annual results for the twelve months ended 31 March 2023.

 

The Company will be announcing its interim results for the six months ended 30 September 2023, together with information on the Annual General Meeting, later this week.

 

The Annual Report is  being sent to shareholders shortly and will be available to view on the Company's website www.iiplc.com.

 

Summary

 

·    Value of the Company's investments were £99.1 million as at 31 March 2023 (£194.1 million as at 30 September 2022; £168.7 million as at 31 March 2022).

 

·    Net liabilities were £184.9 million as at 31 March 2023 (against net liabilities of £85.7 million as at 30 September 2022; £46.8 million as at 31 March 2022).

 

·      The net liability position is based on preliminary terms with a third party and the ascribed consideration for the disposal of IIP's largest holding, Distribution Logistics Infrastructure Limited ("DLI") and the increase in Group net debt.

 

·    As at 31 March 2023, the Group had gross cash resources of £0.3 million. The sale of Indian Energy Limited is expected to complete imminently for total cash consideration of approximately US$4.37 million (approximately £3.39 million). IIP is also discussing preliminary terms for the sale of DLI and further announcements with regard to this will be made as and when appropriate.

 

·     The Board has been active in securing sources of financing to ensure the Group has adequate funding to continue to meet liabilities as they fall due and, as announced, this includes asset sales. As a result of this process, the Group has prepared the accounts on a basis other than going concern due to the uncertainty in relation to the timing of potential transactions, ultimate receipt of sale proceeds and the specifics of any deferred consideration. This basis was considered the most appropriate method for the reporting period.

 

Enquiries:

Infrastructure India plc Sonny Lulla	www.iiplc.com Via Novella
Strand Hanson Limited Nominated Adviser James Dance / Richard Johnson	+44 (0) 20 7409 3494
Singer Capital Markets Broker James Maxwell - Corporate Finance James Waterlow - Investment Fund Sales	+44 (0) 20 7496 3000
Novella Financial PR Tim Robertson / Safia Colebrook	+44 (0) 20 3151 7008

 

 

JOINT STATEMENT FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE

 

We would like to report Infrastructure India plc's ("IIP" or the "Company" and, together with its subsidiaries, the "Group") audited annual results for the year ended 31 March 2023.

 

The Group has prepared the accounts on a basis other than going concern due to the uncertainty in relation to the timing of potential transactions, ultimate receipt of sale proceeds and the specifics of any deferred consideration. This basis was considered the most appropriate method for the reporting period.

 

Net liabilities were £184.9 million as at 31 March 2023, (net liabilities of £85.7 million as at 30 September 2022; net liabilities of £46.7 million as at 31 March 2022). The net liability position was based on preliminary terms with a third party and the ascribed consideration for the disposal of IIP's largest holding, Distribution Logistics Infrastructure Limited ("DLI"). The increase in Group net debt was also a contributor to the net liability position.

 

The reporting period was dominated by discussions and due diligence around the sale of both DLI and Indian Energy Limited ("IEL").

 

Transport

 

DLI is a supply chain transportation and container infrastructure company and one of the largest private operators in its sector in India with a nationwide network of terminals and a quality road and rail transportation fleet. Basic operations remained steady at Nagpur, while construction, other than immediate requirements, was put on hold due to funding constraints. DLI has focused on servicing and maintaining existing customers.

 

Subsequent to the fiscal year end, on 6 September 2023, IIP announced that it, along with The DLI Group and Distribution and Logistics Infrastructure India, Mauritius, IIP's wholly-owned subsidiary ("DLI Mauritius"), had entered into a share purchase and shareholders' agreement (the "Agreement") for the conditional sale of DLI to Pristine Malwa Logistics Park Private Limited ("Pristine Malwa") (the "Transaction"). The Transaction comprised a share swap of up to 33% of Pristine Malwa's issued share capital and an upfront cash consideration of approximately US $10 million. The final equity and cash consideration payable was subject to customary adjustments based on the net current assets and indebtedness of DLI on the closing date. On 15 February 2024, IIP announced that it would not be proceeding with the Transaction. Some key areas of the Agreement were subject to final agreement, which could not be reached in a manner satisfactory to the IIP Board, in the best interests of IIP shareholders, and potentially materially undervalued DLI in the Board's view. Consequently, DLI Mauritius issued a termination notice to Pristine Malwa. Neither Pristine Malwa nor DLI had fulfilled all conditions precedent and the long stop date had expired without a mutually agreed extension.

 

Further to the announcement on 15 February 2024, the Company is in early discussions with a third party with regard to the proposed sale of DLI and is evaluating the potential transaction and related timelines, with due diligence underway, although there can be no guarantee that discussions will lead to definitive agreements for the sale of DLI. Further announcements will be made in due course.

 

Energy

 

Indian Energy Limited ("IEL") is an independent power producer that owns and operates wind farms at two sites in the states of Karnataka and Tamil Nadu, with 41.3 MW of installed capacity.

 

Subsequent to the period end, on 4 April 2023 IIP entered into a conditional agreement for the sale of IEL to FA Power Renewables Private Limited.  The sale of IEL is expected to complete imminently. The total cash consideration for IEL is approximately US $4.37 million.

 

IIP also retains its 50% interest in India Hydropower Development Company's ("IHDC"), details of which are set out in the Review of Investments further below.

 

Group liquidity

 

As at 31 March 2023, the Group had gross cash resources of £0.3 million.

 

On 31 August 2022, IIP announced that the term loan provided by IIP Bridge Facility was being increased by US$6 million to meet urgent operational overheads at DLI as well as Group working capital needs.

 

The sale of IEL is expected to complete imminently. The total cash consideration for IEL is approximately US$4.37 million. IIP is also discussing preliminary terms for the sale of DLI and further announcements with regard to this will be made as and when appropriate.

 

Financing

 

IIP has three fully drawn facilities: a secured term loan provided by IIP Bridge Facility LLC (the "Term Loan"), an unsecured working capital loan provided by GGIC, Ltd (the "Working Capital Loan") and an unsecured bridging loan provided by Cedar Valley Financial (the "Bridging Loan").

 

The Term Loan was originally provided to IIP's wholly owned Mauritian subsidiary, Infrastructure India Holdco, in April 2019, in multiple tranches totalling US$105 million on a four-year termwith an interest rate of 15% per annum and maturing on 1 April 2023. On 31 August 2022, the Term Loan was increased by US$6 million, taking the principal to US$111 million, with all other terms and conditions remaining the same. On 17 April 2023, the Term Loan was increased by US$8 million, taking the principal to US$119 million, with all other terms and conditions remaining the same. The current amount of interest accrued is approximately US$95 million.

 

In April 2019, the Group extended the maturity of the Working Capital Loan and extended and enlarged the Bridging Loan.

 

The Working Capital Loan was originally provided to the Group in April 2013 by GGIC in an amount of US$17 million and increased to US$21.5 million in September 2017. The Working Capital Loan carried an interest rate of 7.5% per annum on its principal amount. The Group and GGIC agreed to increase its interest rate to 15% per annum from 1 April 2019. The current amount of interest accrued is approximately US$31 million.

 

The Bridging Loan was originally provided to the Group in June 2017 by Cedar Valley Financial and was subsequently increased in multiple tranches to US$64.1 million in March 2019.  The Bridging Loan carried an interest rate of 12.0% per annum on its principal. The Group and Cedar Valley Financial agreed increase its interest rate to 15% per annum from 1 April 2019. The current amount of interest accrued is approximately US$71 million.

 

Post-period, the maturity for the three facilities has been extended until 15 May 2024.

 

Tom Tribone & Sonny Lulla

March 2024

 

 

 

REVIEW OF INVESTMENTS

 

 

Description	Supply chain transportation and container infrastructure company with a large operational road and rail fleet; developing four large container terminals across India.
Promoter	A subsidiary of IIP
Date of investment	Mar 2011	Oct 2011	Jan 12- Sep 2021
Investment amount	£34.8 million	£58.4 million	£181.1 million
Aggregate percentage interest	37.4%	99.9%	99.9%
Investment during the period	nil
Valuation as at 31 March 2023	£78.8 million
Project debt outstanding	£66.7 million
as at 31 March 2023
Key developments	·      Liquidity constraints at DLI throughout the period necessitated a strong focus on cost control along with maintaining efficiencies of existing operations, with the scheduled completion of work at under-construction terminals on hold. ·      The reporting period was dominated by due diligence. ·      The Group has received preliminary terms for the sale of DLI from a third party.

 

Investment details

 

DLI is a supply chain transportation and container infrastructure company headquartered in Bangalore and Gurgaon with a material presence in central, northern and southern India. DLI provides a broad range of logistics services including rail freight, trucking, handling, customs clearing and bonded warehousing with terminals located in the strategic locations of Nagpur, Bangalore, Palwal (in the National Capital Region) and Chennai.

 

Developments during the reporting period

 

Nagpur remained operational with increased export volumes but limited traction in domestic volumes due to funding constraints. Overall, liquidity constraints resulting from DLI's lenders restricting working capital disbursements, impacted DLI's ability to maintain and grow its business during the period. Construction activities at Palwal remain on hold due to financing.

 

The Eastern and Western portions of the Dedicated Freight Corridor (DFC) are expected to be completed by the end of calendar year 2024. In addition to increased freight throughput, the DFC is expected to reduce charges by Indian Railways by up to 50%.

 

Valuation

 

The reported DLI valuation of £78.8 million as at 31 March 2023 is based on preliminary terms received from a third party for the disposal of DLI, and the ascribed consideration for DLI.

 

 

 

 

Description	IHDC develops, owns and operates small hydropower projects with seven fully operational plants (74 MW of installed capacity), and a further 13 MW of capacity under development or construction.
Promoter	Dodson-Lindblom International Inc. ("DLZ")
Date of investment	Mar 2011	Jan 2012	May 2012
Investment amount	£25.7 million	£0.3 million	£1.1 million
Aggregate % interest	50%	50%	50%
Investment during the period	Nil
Valuation as at 31 March 2023	£17.3 million
Project debt outstanding as at 31 March 2023	£5.3 million
Key developments	·      Overall generation from IHDC's projects was higher than the corresponding period the previous year, largely as a result of higher generation at Sechi in Himachal Pradesh, Birsinghpur in Madhya Pradesh and Darna in Maharashtra.

 

Investment details

 

The IHDC portfolio has installed capacity of approximately 74 MW across seven projects - Bhandardara Power House I ("BH-I"), Bhandardara Power House II ("BH-II"), Darna in Maharashtra; Birsinghpur in Madhya Pradesh; and Sechi, Panwi and Raura in Himachal Pradesh. IHDC has an additional 13 MW of capacity under development and construction.

 

Project update

 

Overall generation from IHDC's projects was 46.7 GWh in the second half of the fiscal year ending 31 March 2023 against 55.4 GWh during the same period last year.

 

IHDC is working on securing a long term PPA with higher tariff on Raura. Trading of Renewable Energy Certificates ("REC") continued. The price of REC's as at 31 March 2023 was INR 1,000 per REC.

 

At Melan, the management team has maintained the necessary permits with regulatory authorities to keep the project viable while construction of the Melan project is expected to be further delayed.

 

Valuation

 

The IHDC portfolio was valued in accordance with the Group's stated valuation methodology by using a composite risk premium of 2.67% over the risk free rate of 7.29%. The composite risk premium is computed using a MW-based weighted average of risk premia of individual assets related to their stage of operations.

 

The value for IHDC investments as at 31 March 2023 is £17.3 million (30 September 2022 £18.5 million; 31 March 2022 £18.5 million). The factors which impacted the valuation were movement in the risk-free rate, changes in currency and changes in management assumptions such as the delay in projected completion for the Melan project.

Directors' Report

The Directors have pleasure in presenting their report and financial statements of the Group for the year ended 31 March 2023.

Principal activity and incorporation

The Company is a closed-ended investment company, incorporated on 18 March 2008 in the Isle of Man as a public limited company under the 2006 Companies Act. It was admitted to the Official List of the London Stock Exchange on 30 June 2008, and subsequently moved to a listing on AIM, a market operated by the London Stock Exchange on 16 November 2010.

 

The Group's investment objective is to provide shareholders with both capital growth and income by investing in assets in the Indian infrastructure sector, with particular focus on assets and projects related to energy and transport.

Results and dividends

The Group's results for the year ended 31 March 2023 are set out in the Consolidated Statement of Comprehensive Income.

 

A review of the Group's activities is set out in the Joint Statement from the Chairman and the Chief Executive report.

 

The Directors do not recommend the payment of a dividend (2022: nil).

Directors

The Directors of the Company during the year and up to the date of this report were as follows:

 

Tom Tribone	Chairman
Rahul Sonny Lulla	Chief Executive
Robert Venerus	Non-Executive Director
Madras Seshamani Ramachandran	Non-Executive Director
Graham Smith	Non-Executive Director

 

Directors' interests in the shares of the Company are detailed in note 17.

Company Secretary

The secretary of the Company during the year and to the date of this report was Grainne Devlin.

 

 

By Order of The Board

 

 

 

 

 

Sonny Lulla

Director

25 March 2024

 

 

Statement of Directors' Responsibilities

In Respect of the Annual Report and the Financial Statements

 

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations and have elected to prepare the financial statements in accordance with International Financial Reporting Standards ("IFRSs"), as adopted by the European Union ("EU").

 

The financial statements are required to give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that year.

 

In preparing these financial statements, the Directors are required to:

 

·    select suitable accounting policies and then apply them consistently;

·    make judgements and accounting estimates that are reasonable and prudent;

·    state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

·    prepare the financial statements on the going concern basis unless it is inappropriate to presume that the  Group will continue in business.

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website; the work carried out by the auditors does not involve the consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred in the accounts since they were initially presented on the website.  Legislation governing the preparation and dissemination of financial statements may differ from one jurisdiction to another.

 

·      the director's report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that they face.

 

By Order of the Board

 

 

 

 

 

Sonny Lulla

Director

25 March 2024

Corporate Governance Statement

 

Introduction from the Chairman

 

The Board of Infrastructure India plc fully endorses the importance of good corporate governance and applies the QCA Corporate Governance Code, published in April 2018 by the Quoted Companies Alliance (the "QCA Code"), which the Board believes to be the most appropriate recognised governance code for a company of the Company's size with shares admitted to trading on the AIM market of the London Stock Exchange. This is a practical, outcome-oriented approach to corporate governance that is tailored for small and mid-size quoted companies in the UK and which provides the Company with the framework to help ensure that a strong level of governance is maintained.

 

As Chairman, I am responsible for leading an effective board, fostering a good corporate governance culture, maintaining open communications with the major shareholders and ensuring appropriate strategic focus and direction for the Company.

 

Notwithstanding the Board's commitment to applying the QCA Code, we will not seek to comply with the QCA Code where strict compliance in the future would be contrary to the primary objective of delivering long-term value for IIP's shareholders and stakeholders. However, we do consider that following the QCA Code, and a framework of sound corporate governance and an ethical culture, is conducive to long-term value creation for IIP shareholders.

 

All members of the Board believe strongly in the importance of good corporate governance to assist in achieving objectives and in accountability to IIP's stakeholders. In the statements that follow, the Company explains its approach to governance in more detail.

 

QCA Code - Governance Principles

 

The QCA code is constructed around 10 broad principles of corporate governance. These principles are as follows:

 

Deliver Growth

1.           Establish a strategy and business model which promote long term value for shareholders.

2.           Seek to understand and meet shareholder needs and expectations

3.           Take into account wider stakeholder and social responsibilities and their implications for long- term success

4.           Embed effective risk management, considering both opportunities and threats, throughout the organisation

 

Maintain a dynamic management framework

5.           Maintain the board as a well-functioning, balanced team led by the chair

6.           Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

7.           Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

8.           

Promote a corporate culture that is based on ethical values and behaviours

9.            Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

Build Trust

10.          Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

 

Principle 1 Establish a strategy and business model which promote long-term value for shareholders

IIP is an AIM quoted closed end investment company investing in core economic infrastructure.

The Company's Investment Strategy is as follows:

 

The Company will invest at the asset level or through specific holding companies (not by investing in other funds or in the equity of non-specific parent companies) in infrastructure projects in India. Such investments are to be focused on the broader sectors of:

 

·      Energy - including assets involved in electricity generation, transmission and distribution; infrastructure assets related to oil and gas, service provision and transmission; renewable fuel production and renewable energy assets; and

·      Transport - including investment in roads, rail, ports and airport assets, and associated transport interchanges and distribution hubs.

Additionally, the Company may make investments in other economic and social infrastructure sectors within India where opportunities arise and which the Board considers offer similar risk and return characteristics to those found within the energy and transport sectors.

In common with other investing companies in the sector, access to projects and valuable assets is competitive and challenging but the Board is confident of its ability and that of its investment manager, to continue to source attractive investment opportunities given close relationships with a number of companies and their management teams, and recognition of the Board's experience and strong network.

Status of the Company's Portfolio

Details of the Company's portfolio are contained on the Company's website at Portfolio (iiplc.com)  and a full update of the investments including investment details, a description of investments, key developments and valuations are available through the Company's announcements which are also available on the Company's website at https://www.iiplc.com/regulatory-news/

 

 

Principle 2 Seek to understand and meet shareholder needs and expectations

The Company is committed to engaging and communicating openly with its shareholders to ensure that its strategy, business model and performance are clearly understood. All Board members have responsibility for shareholder liaison but queries are primarily delegated to the Company's Advisors in the first instance or the Company's CEO. Contact details for the Company's advisors are contained on the Company's website https://www.iiplc.com/contact/.

Copies of the annual and interim reports are sent to all shareholders and copies can be downloaded from the Company website https://www.iiplc.com/investor-relations/financial-reports/ alternatively, they are available on request by writing to the Company Secretary at 55 Athol Street, Douglas, Isle of Man IM 1 1LA. Other Company information for shareholders is also available on the website.

The Company also engages with shareholders at its AGM in each year, which gives investors the opportunity to enter into dialogue with the Board and for the Board to receive feedback and take action if and when necessary. The results of the AGM are subsequently announced via RNS and published on the Company's website. Feedback from, and engagement with, substantial shareholders has historically been successful in ensuring, for example, material transactions are suitably structured with shareholder considerations in mind.

Updates relating to the financing, restructuring of existing loans, and asset transactions is communicated to investors via RNS announcements, and circulars where appropriate. All  announcements are available on the Company's website https://www.iiplc.com/news/regulatory-news/.

The company secretary is also available for shareholders to contact on matters of governance and investor relations.

Principle 3 Take into account wider stakeholder and social responsibilities and their implications for long-term success.

The Board is aware that engaging with IIP's stakeholders strengthens relationships, assists the Board in making better business decisions and ultimately promotes the long-term success of IIP. The group's stakeholders include shareholders, members of staff of investee companies and of Advisors and other service providers, suppliers, auditors, lenders, regulators, industry Bodies and the surrounding communities of where its investments are located.

 

The Board as a whole are responsible for reviewing and monitoring the parties contracted to the Company, including their service terms and conditions. In the absence of a formal audit committee, the Board as a whole considers and monitors the risks to the Company.

 

The Company's portfolio consists of Distribution Logistics Infrastructure Private Limited (DLI), Shree Maheshwar Hydel Power Corporation Limited, India Energy Limited and India Hydropower Development Company LLC (together the Portfolio).

 

The Board is regularly updated on wider stakeholder views and issues concerning the Portfolio both formally at Board meetings and informally through ad hoc updates. Representatives involved with the investment portfolio are invited to join Board meetings and provide a report to the Board. Engagement in this manner enables the Board to receive feedback and equips them to make decisions affecting the business.

 

The Board recognises the importance of its social responsibilities concerning its investment decisions. The Company has made investments in infrastructure projects that seek to make a contribution to the development of communities in which they are located.

 

As detailed in the Company's Admission document, a full analysis of the Company's social responsibility and ways to address issues was undertaken. The Admission Document (dated 11 February 2011) is available on the Company's website: https://www.iiplc.com/investor-relations/downloads/

 

The Board adheres to the Company's Corporate Social Responsibility policy, an extract of which is summarised as follows:

 

The Enlarged Group will ordinarily make investments in infrastructure projects that seek to make a contribution to the development of communities in which they are located. In planning its activities, the Board will give consideration to evaluating the social impact of proposed developments with a view to promoting where possible local employment and the delivery of other local benefits, and mitigating negative impacts to the extent possible. The Company intends to establish a community projects trust (the "Trust") and will contribute to the Trust up to 2 per cent. of the net realised gains derived from the re-financing of operational projects and of the net profit derived from any disposal of equity interests in operational projects. It is intended that the Trust will support community based education, training and employment initiatives designed to foster social inclusion in communities where the Group is active.

 

The Company is committed to continuing engagement with all stakeholders.

 

Principle 4 Embed effective risk management, considering both opportunities and threats, throughout the organisation.

The Group's activities expose it to a variety of financial risks: market risk (including currency risk and price risk), credit risk, liquidity risk and interest rate risk.

 

Risk is monitored and assessed by the Board as a whole and are responsible for ensuring that the financial performance of the Company is properly monitored and reported. This process includes reviews of annual and interim accounts, results announcements, internal control systems, procedures and accounting policies. Risk management is carried out by the Board of Directors. The Board identifies and evaluates financial risks in close co-operation with the Asset Manager and the key risk factors for the Company are contained in the Financial Statements for the year ended 31 March 2023.

 

Principle 5 Maintain the board as a well-functioning, balanced team led by the chair.

The Board has five members, three of which are non-executive.

 

Tom Tribone is the Company's Chairman, Sonny Lulla is the Company's Chief Executive and Rob Venerus, Graham Smith and M.S. Ramachandran are the Company's three Non-Executive Directors.  M.S. Ramachandran is considered an independent director.  Graham Smith is also considered to be an independent director, notwithstanding the fact that FIM Capital Limited, of which he is a director, provides administration and accounting services to the Company.

 

There is no formal audit committee in place at this time, but the function is supported and informally carried out by independent director Graham Smith. Until suitable committee members are identified, the Board as a whole will deal with matters normally reserved for the Audit Committee.

The Board receives detailed reports from FIM Capital Limited, the administrator and Company Secretary to the Company covering updates to relevant legalisation and rules to ensure they remain fully informed and able to make informed decisions.

All the Directors biographies are published on the Company's website and outlined below: https://www.iiplc.com/team/board-of-directors/

The Directors devote sufficient time to ensure the Company's affairs are managed as efficiently as possible. The Board aims to hold at least 4 meetings each year with further ad hoc meetings held as required.

 

The Directors devote sufficient time to ensure the Company's affairs are managed as efficiently as possible.

Board Meetings Attendance

Board Meetings	Date	R Venerus	T Tribone	S Lulla	MS Ramachandran	GSmith
1	30.08.2022 (telephone call between Independent Directors)				x	x
2	20.12.2022 (telephone call between Directors)	x	x	x	x	x
3	23.03.2023 (telephone call between Independent Directors)				x	x
4	30.03.2023 (telephone call between Directors)	-	-	x	x	x
5	10.04.2023 (telephone call between Independent Directors)				x	x
6	31.05.2023 (telephone call between Independent Directors)				x	x
7	28.07.2023 (telephone call between Directors)	-	x	x	x	x

 

Principle 6 Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities.

The Directors have extensive experience in infrastructure fund management and a strong track record of value creation.

 

The Board believes it has the correct balance of skills, reflecting a broad range of commercial and professional skills across geographies and industries that is necessary to ensure the Company is equipped to deliver its investment objective. Additionally, each Director has experience in public markets.

 

The Directors and their roles and key personnel are displayed on the Company's website https://www.iiplc.com/team/board-of-directors/ and a statement of the Directors responsibilities is also included in the Statement of Directors' Responsibilities.

The Directors receive an ad hoc guidance on certain matters concerning, for example, the AIM Rules for Companies from the Company's Nominated Adviser and Broker as well as receiving updates on the regulatory environment from FIM, who provide specialist fund administration services to a variety of closed ended funds and collective investment schemes.

The role and responsibilities of the Directors are set out in the Statement of Directors' Responsibilities at the foot of this document.

All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company's expense.

 

 

Principle 7 Evaluate board performance based on clear and relevant objectives, seeking continuous improvement.

Board evaluations will take place periodically, whereby Board members will be asked to complete and return an effectiveness questionnaire across a variety of criteria, then return these to the Company Secretary, who, where necessary, would seek clarification on any responses given. Responses will then be recorded anonymously to enable the Board to have open follow-up discussions on the aggregated evaluation data.

 

The criteria against which the Board complete periodic self-evaluations of performance will be based on externally determined guidelines appropriate to the composition of the Board and the Company's operation, including Board sub-committees. The scope of the self-evaluation exercise will be re-assessed in each instance to ensure appropriate depth and coverage of the Board's activities consistent with corporate best practice.

 

The Board effectiveness questionnaire underlying the board evaluation process assesses the composition, processes, behaviours and activities of the board through a range of criteria, including board size and independence, mix of skills (for example corporate governance, financial, industry and regulatory) and experience, and general corporate governance considerations in line with the QCA code.

 

All Board appointments have been made after consultation with advisers and with major shareholders in some cases. Detailed due diligence is carried out on all new potential board candidates. The Board will consider using external advisers to review and evaluate the effectiveness of the Board and Directors in future to supplement internal evaluation processes. Additionally, the Board will consider the need to undertake formal and periodic succession planning.

 

The Independent Directors have remained independent throughout their office, and due to the close- knit working environment and size of the Board, performance evaluations will be on an ongoing and ad-hoc basis to ensure that they are committed to the progress and success of the Company and that their contribution is effective.

 

When the Board wishes to complete a periodic evaluation process, the relevant materials and guidance in respect of this process, following current best practice at the time of the evaluation, is available from and provided by FIM.

 

Given the stage of the Company's maturity and its contracted external management, the responsibilities of a nomination committee are delegated to the Board, and there are no formal succession planning processes in place. The Board intends to keep this under review in the future.

 

 

Principle 8 Promote a corporate culture that is based on ethical values and behaviours.

The Board is mindful that the tone and culture set by the Board will impact many aspects of the Company and the way that stakeholders behave and form views.

The Board welcomes the views of all stakeholders who can contact the Directors and / or the Company Secretary by email / telephone and ensures that the Company has the means to determine that ethical values and behaviours are met through the adoption of appropriate company-wide policies.

 

As stated earlier the Company has extensively considered its wider social responsibilities and the steps taken to actively address these. Details are contained in the Company's Admission Document, https://www.iiplc.com/investor-relations/downloads/ In particular, the Company will ordinarily make investments in infrastructure projects that seek to make a contribution to the development of communities in which they are located. In planning its activities the Board will give consideration to evaluating the social impact of proposed developments with a view to promoting where possible local employment and the delivery of other local benefits, and mitigating negative impacts to the extent possible.

 

The Company promotes and supports the rights and opportunities of all people to seek, obtain and hold employment without discrimination. It is our policy to make every effort to provide a working environment free from bullying, harassment, intimidation and discrimination on the basis of disability, nationality, race, sex, sexual orientation, religion or belief.

 

The Company is also committed to being honest and fair in all its dealings with partners, contractors and suppliers. Procedures are in place to ensure that any form of bribery or improper behaviour is prevented from being conducted on the Company's behalf by investee companies, contractors and suppliers. The Company also closely guards its information entrusted to it by investee companies, contractors and suppliers, and seeks to ensure that it is never used improperly.

 

In order to comply with legislation or regulations aimed at the prevention of money laundering the Fund has adopted anti-money laundering and anti-bribery procedures.

 

Principle 9 Maintain governance structures and processes that are fit for purpose and support good decision-making by the board.

 

A description of each board member and their experience, the role of the Audit Committee functions, carried out by the Board as a whole and that neither a Nomination or Remuneration Committee exists are displayed on the website at https://www.iiplc.com/team/board-of-directors/

 

Responsibilities of the Board

The Board of Directors is responsible for the determination of the investment policy of the Company and for its overall supervision via the investment policy and objectives that it has set out. The Board is also responsible for the Company's day-to-day operations. In order to fulfil these obligations, the Board has delegated operations through arrangements with the Investment Adviser and Administrator.

The Company has not established nomination and remuneration committees as it is satisfied that any issues can be considered by the Board.

The Board intends to meet formally at least four times each year. At each Board meeting the financial performance of the Company and all other significant matters are reviewed so as to ensure the Directors maintain overall control and supervision of the Company's affairs. The Board receives investment reports from the Asset Manager and Valuation and Portfolio Services Adviser and management accounts from the Administrator. The Board maintains regular contact with all its service providers and are kept fully informed of investment and financial controls and any other matters that should be brought to the attention of the Directors. The Directors also have access where necessary to independent professional advice at the expense of the Company.

The Chairman, is responsible for leading an effective board, fostering a good corporate governance culture, maintaining open communications with the major shareholders and ensuring appropriate strategic focus and direction.

 

The Chief Executive Officer has overall responsibility for managing the day to day operations of the Company and the Board as a whole is responsible for implementing the Company's strategy.

 

In addition to these, the Directors review and approve the following matters:

·        Strategy and management

·        Policies and procedures

·        Financial reporting and controls

·        Capital structure

·        Contracts

·        Shareholder documents / Press announcements

·        Adherence to Corporate Governance and best practice procedures

 

 

Principle 10 Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.

The Company communicates with shareholders through the Annual Report and Financial statements, full-year and half-year announcements, the Annual General Meeting and investors can email the Directors and Company Secretary with any queries they may have.

 

The website includes information in relation to the outcome of shareholder voting under the regulatory news section pursuant to the AIM rules.

If a significant proportion of independent votes were to be cast against a resolution at any general meeting, the Board's policy would be to engage with the shareholders concerned in order to understand the reasons behind the voting results. Following this process, the Board would make an appropriate public statement via this website regarding any different action it has taken, or will take, as a result of the vote.

 

Historical information is available on the website:

The Company's financial reports for the last five years can be found here https://www.iiplc.com/investor-relations/financial-reports/

Notices of General Meetings of the Company for the last five years can be found here https://www.iiplc.com/investor-relations/downloads/

 

 

 Committees

 

Audit Committee

 

As stated in Principle 5 above, the Company intends to appoint an additional Independent Non-Executive Director to the Board in due course, who will also serve on the Audit Committee. Until such time as the appointment is made, the Board as a whole will deal with matters normally reserved for the Audit Committee.

 

Remuneration Committee and Nomination Committee

As stated in principle 9, there is no Remuneration Committee or Nomination Company in existence.

 

The Company has not established a remuneration committee as it is satisfied that any issues can be considered by the Board as a whole.

Details of the directors' remuneration can be found in the Financial Statements for the year ended 31 March 2023.

 

 

Independent Auditor's Report to the Members of Infrastructure India Plc

 

Opinion

 

We have audited the financial statements of Infrastructure India Plc and its subsidiaries (the 'group') for the year ended 31 March 2023 which comprise the consolidated Statement of Comprehensive Income, the consolidated Statement of Financial Position, the consolidated Statement of Changes in Equity, the consolidated Statement of Cash Flows and the notes to the financial statements, including a summary of significant accounting policies.  The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

In our opinion the financial statements:

 

·      give a true and fair view of the state of the group's affairs as at 31 March 2023, and of the group's results for the year then ended;

 

·      have been properly prepared in accordance with IFRSs as adopted by the European Union;

 

Basis for Opinion

 

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements, including the FRC's Ethical Standard, 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 opinion.

 

Emphasis of matter - financial statements prepared on a basis other than going concern

 

We draw attention to note 2(d) in the financial statements which explains that for the Group to repay its loans, which are due to mature in May 2024, they are actively pursuing a sale of their investments in DLI and IEL, and therefore do not consider it to be appropriate to adopt the going concern basis of accounting in preparing the financial statements. Accordingly, the financial statements have been prepared on a basis other than going concern as described in note 2(d). Our opinion is not modified in respect of this matter.

 

Emphasis of matter - valuation of investments at fair value

 

As described in accounting policy note 3.8, management have elected to value investments in subsidiaries at fair value through profit and loss. The fair value has been determined based on a valuation model as discussed in notes 5 and 12.  The fair value model estimates the present fair value of the investments using a discounted cashflow analysis, based on assumptions about the future performance of the investments.   In the current year, the discounted cashflow analysis basis of valuation only applies to the investment in IHDC.  The fair value of DLI and IEL has been determined based on expected sales value as described in note 3.9 and those investments have been reclassified as held for sale since the prior year.

 

We have determined that the valuation model for IHDC (valued at £18.5m) is suitable for inclusion in these financial statements.  It is, however, subject to high estimation uncertainty and we draw your attention to the disclosures made in notes 5 and 12 and to the sensitivity analyses presented in note 12. 

 

In respect of the high estimation uncertainty we note that owing to the forward-looking nature of the projections and the lack of past performance history and financial information, it is not possible to corroborate certain key unobservable inputs in the projections, such as expected start date of commercial operations, market size, market share, price points, forecast annual growth rates and EBITDA margins and operational efficiency estimates.  These projections are based on management estimates and actual results could therefore differ materially from the amounts presented in the financial statements.

 

 

Capability of the audit in detecting irregularities, including fraud

 

Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:

 

·      we identified the laws and regulations applicable to the Company through discussions with Directors and other management, and from our commercial knowledge and experience of the sector;

·      we made specific requests of component auditors within the Group to determine their approach to detecting irregularities, including fraud and non-compliance with laws and regulations, and considered their findings as part of our approach;

·      we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the Company, including company law, taxation legislation, anti-bribery, environmental and health and safety legislation;

·      we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and

·      identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.

 

We assessed the susceptibility of the Company's financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:

 

·      making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud;

·      considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations; and

·      understanding the design of the Company's remuneration policies.

 

To address the risk of fraud through management bias and override of controls, we:

 

·      performed analytical procedures to identify any unusual or unexpected relationships;

·      tested journal entries to identify unusual transactions;

·      assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and

·      investigated the rationale behind significant or unusual transactions.

 

In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:

 

·      agreeing financial statement disclosures to underlying supporting documentation;

·      reading the minutes of meetings of those charged with governance;

·      enquiring of management as to actual and potential litigation and claims; and

·      reviewing correspondence with tax authorities, relevant regulators and the company's legal advisors.

 

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the Directors and other management and the inspection of regulatory and legal correspondence, if any.

 

Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.

 

Other information

 

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

 

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

 

Matters on which we are required to report by exception

 

In the light of our knowledge and understanding of the group and their environment obtained in the course of the audit, we have not identified material misstatements in the directors' report.

 

Responsibilities of directors

 

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, the directors are responsible for assessing the group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.

 

Auditor's responsibilities for the audit of the financial statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

As part of an audit in accordance with ISAs (UK), we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

 

·      Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

·      Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group's internal control.

 

·      Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

 

·      Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

·      Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

 

Use of our report

 

This report is made solely to the company's members, as a body, in accordance with the terms of our engagement letter. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

 

 

 

 

Baker Tilly Isle of Man LLC

Chartered Accountants

P O Box 95

2a Lord Street

Douglas

Isle of Man

IM99 1HP                                                                                 

 

25 March 2024