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Allcargo Logistics Ltd.

BSE: 532749 | NSE: ALLCARGO |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE418H01029 | SECTOR: Transport & Logistics

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Annual Report

For Year :
2018 2017 2016 2015 2014 2013 2012 2010 2009

Director’s Report

To,

The Members of Allcargo Logistics Limited

The Directors present their Twenty Fifth Annual Report along with the Audited Financial Statements for the financial year ended March 31, 2018.

FINANCIAL HIGHLIGHTS

(Rs. in lakhs)

Particulars

Consolidated

Standalone

2017-18

2016-17

2017-18

2016-17

Total Income

608,831

562,868

124,741

120,001

Total expenses

586,103

531,704

116,239

106,283

Profit before share of profit from associates, joint ventures, exceptional items and tax

22,728

31,164

8,502

13,718

Share of profits from associates and joint ventures

480

378

-

-

Profit before tax, exceptional item

23,208

31,542

8,502

13,718

Exceptional items

686

-

5,455

-

Profit before tax

22,522

31,542

3,047

13,718

Tax expense

- Current tax

6,028

7,886

2,186

3,888

- Deferred tax

(902)

(123)

(2,026)

(802)

Profit for the year

17,396

23,779

2,887

10,632

Other comprehensive Income

Items that will not be reclassified subsequently to Statement of Profit and Loss:

Re-measurement gain/(loss) on defined benefit plans

31

(127)

32

(50)

Gain arising on settlement of Non-controlling interests’ claims (net)

85

-

-

-

Items that will be reclassified subsequently to profit or loss:

Exchange difference on translation of foreign operations

4,873

(5,961)

-

-

Income tax effect

603

110

-

-

Other comprehensive income for the year, net of tax

5,592

(5,978)

32

(50)

Total comprehensive income for the year, net of tax

22,988

17,801

2,919

10,582

Profit attributable to:

- Equity holders of the Parent

17,135

23,182

2,887

10,632

- Non-controlling interests

261

597

-

-

Other comprehensive income attributable to:

- Equity holders of the Parent

5,635

(5,978)

-

-

- Non-controlling interests

(43)

-

-

-

Total comprehensive income attributable to:

- Equity holders of the Parent

22,770

17,204

-

-

- Non-controlling interests

218

597

-

-

Total comprehensive income attributable to owners of the equity at the beginning of the year

127,935

110,000

82,119

71,752

Total comprehensive income for the year

22,770

17,204

2,919

10,582

On account of business combination

(85)

-

-

-

Foreign exchange impact on account of re-classification

-

946

-

-

CRR created on buyback of equity shares

-

(128)

-

(128)

Less Appropriation

Expenses incurred on buyback of shares

-

(87)

-

(87)

Cash Dividend on equity shares

(4,914)

(4,914)

Tax on Dividend

(555)

-

(555)

-

Total comprehensive income attributable to owners of the equity at the end of the year

145,151

127,935

79,569

82,119

Pursuant to the provisions of the Companies Act, 2013 (the ‘Act*), the Financial Statements of the Company have been prepared in accordance with the Indian Accounting Standards (‘Ind AS*) notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time.

DIVIDEND

For the year under review, the Directors have recommended a dividend of Rs.2/- per equity share (100%) on the paid-up capital of the Company (previous year Rs.2/- each per equity share) aggregating Rs.5,924 lakhs including Dividend Distribution Tax. Rs.3,005 lakhs is being drawn from the previous years profits of the Company, not transferred to the free reserve.

The payment of the said Dividend is subject to approval of the Members at the ensuing Annual General Meeting (‘AGM’) of the Company.

The dividend payout is in accordance with the Company’s Dividend Distribution Policy. In accordance with Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the ‘Listing Regulations’), the ‘Dividend Distribution Policy’ has been hosted on the Company’s website http://www.allcargologistics.com/investors/investorservices/ corporatepolicies and the same is annexed as Annexure-1.

TRANSFER TO RESERVES

The Company proposes to keep the entire amount of Rs.2,919 lakhs in the Retained Earnings.

PERFORMANCE REVIEW

Consolidated:

The revenue from operations for FY2017-18 increased from Rs.558,336 lakhs to Rs.604,691 lakhs, an increase of 8% over the previous year. The increase in revenue was mainly on account of volume growth in Multimodal Transport Operations Business.

The Earnings before Interest, Depreciation, Tax and Amortisation (‘EBIDTA’) stood at Rs.41,625 lakhs, a decrease of 18% as compared to Rs.51,023 lakhs earned in the previous year. The Profit for the year attributable to the Members and non-controlling interest was Rs.17,396 lakhs, decreased by 27% as compared to Rs.23,779 lakhs of the previous year.

Standalone:

The revenue from operations for FY2017-18 increased from Rs.1 17,359 lakhs to Rs.119,631 lakhs, an increase of 2% over the previous year.

EBIDTA stood at Rs.20,958 lakhs, a decrease of 19% as compared to Rs.25,928 lakhs earned in the previous year.

The Profit after taxes was Rs.2,887 lakhs, decreased by 73% as compared to Rs.10,632 lakhs of the previous year.

BUSINESS OVERVIEW AND STATE OF THE COMPANY’S AFFAIRS

The Company operates mainly into three segments i.e. (i) Multimodal Transport Operations; (ii) Container Freight Stations/ Inland Container Depots and (iii) Project and Engineering Solutions. The Company is carrying out Contract Logistics business through its joint venture viz. Avvashya CCI Logistics Private Limited.

Multimodal Transport Operations

Multimodal Transport Operations (MTO’) segment of the Company involves Non Vessel Owning Common Carrier (‘NVOCC’) operations related to Less than Container Load (‘LCL’) consolidation and Full Container Load (‘FCL’) forwarding activities in India and across the world through overseas subsidiaries of ECU Worldwide Group. Allcargo is amongst the leading players in the global LCL consolidation market with a strong network across 160 countries and 300 offices covering over 4,000 port pairs across the world. The growth of this segment has come through a judicious mix of organic and inorganic growth through merger and acquisition strategies.

The Company continues to outperform world trade growth in terms of volumes handled in this segment. Special focus was put on the further development and growth of FCL segment where substantial growth was achieved and the product offering was expanded within the organization and to our customers. Given the current context and the backdrop of Industrial Revolution 4.0, where automation, big data and artificial intelligence seem set to change business dynamics, the Company endeavors to continuously brace for this massive change.

While the global network is in place, the virtual logistics in the form of technology is being upgraded to support proficient operations. The Company has taken up few initiatives with a simple goal - provide customer centricity and increase efficiency. The technology team of the Company has a single point focus of innovation. From listing on e-booking sites, to developing platforms, to supporting in-house functions and providing ease of services to customers, the agenda for the digital future has been well-defined by the Company. There is a strong focus on automating processes to increase the response and turnaround time, which will also give a cost advantage. In this year, ECU Worldwide Group has also launched a new website and a new digital platform for customers who can now benefit from more self-service options in real-time. This forms the basis for further expansion of the Company’s e-commerce offering to the customers. The initiatives to move to a single ERP system for this business globally, are gaining momentum and has made substantial progress with having currently 75% (approx.) of the global export volumes on the technology platform - TOPAZ.

These initiatives will enable the Company to sustain industry leadership globally, ensure to stay at the cutting edge, deliver the Company’s Vision, Mission and achieve aggressive growth plan.

Container Freight Stations/Inland Container Depots

The Company operates India’s widest and strongest network of Container Freight Stations (‘CFS’) and Inland Container Depots (‘ICD’). These operations cater to the handling of import and export cargo, custom clearance, warehousing and other related ancillary logistics services.

The CFS/ICD facilities are strategically located near the major ports and the Indian hinterland, supporting the EXIM trade since many years. The Company has CFS facilities in JNPT Nhava Sheva, Chennai, Mundra and recently commissioned a new CFS facility in Kolkata making it one of the largest CFS operators in India. The ICDs are located at Kheda and Dadri. These major ports collectively handle around 75% of the total container traffic of India.

The facilities are geared with the latest state-of-the-art technology and backed by experienced team who are equipped and trained to handle all import and export shipment requirements. Developing Green facilities like kitchen gardening, STP tank, solar generator system and rainwater harvesting are some of the initiatives that the Company has taken towards a sustainable and environmentally conscious business model. The Company operates its business model with unique synergies between its MTO and CFS segments - the Company leases container space with major shipping companies for its clients in MTO segment and on the other hand, it gets clients of CFS segment from the same shipping companies.

The Government initiative of Direct Port Delivery (‘DPD’) affected the volumes handled at CFS/ICD facilities in FY2017; however the volumes being handled under DPD scheme has now stabilised and will no longer cannibalise into CFS volumes. Additionally, the Company has been diversifying its product portfolio to facilitate all of the customer’s logistics needs under one roof and continuously exploring services that can synergize well with the existing set of services enabled by technology.

The future of this industry is taking a shift towards Logistics Parks, which is a freight-handling facility comprising mechanized warehouses, specialized storage solutions, facilities for mechanized material handling and inter-modal transfers container terminals, bulk/break-bulk cargo terminals. The Company plans to move to the next level of growth by building a string of logistics parks across India by capitalizing its vast experience in CFS business and combining it with scope to handle domestic and product specific cargo. In lieu of this, the Company is developing a multimodal logistics park in Jhajjar, Haryana over a span of 180 acres of land and further is developing its land bank of more than 200 acres in Hyderabad, Bengaluru and Nagpur.

Project and Engineering Solutions

India as it presently stands, has a low ‘rental penetration’, of 9%, which is a value of the total equipment sold to rental companies in India, over the value of total equipment sold in the Indian market. This itself is clear indication of the high potential of the equipment rental segment in the coming years.

In the crane and equipment rental business, the Company saw a booming demand from FY2014 right up till FY2017, followed by an unprecedented dip in FY2018, due to the absence of large projects in the core sectors and more significantly, due to a huge dip in the wind sector. In FY2017-18, the wind industry witnessed a transition from the Feed-in-Tariff (FiT) to the competitive bidding regime, hence there was a significant but temporary drop in volumes, both in commissioning and allotment of new projects. However, the Company expects the market to stabilize in 2018 and fully recover in 2019.

The industry is now on a growth trajectory and as per current estimate, on course to add 30GW of new capacity in the next three years, thereby taking the cumulative total capacity to over 60GW by FY2021. Further, the Company is witnessing a renewed revival in the EIGHT CORE sectors - coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity. These key sectors will have a significant impact on the industrial project logistics movement and also spike the demand for all related lifting and industrial equipment in the coming months.

The Company has built up a healthy project logistics order book and also intends exploring the opportunities in the neighboring countries like Sri Lanka, Myanmar, Nepal and Bangladesh.

Contract Logistics through Avvashya CCI Logistics Private Limited

Contract logistics is one of the fastest growing sub-sector of logistics in India and the Company expanded and strengthened its presence in this segment by acquiring major equity stake in Avvashya CCI Logistics Private Limited (‘ACCI’).

Currently, ACCI manages 3.5 million plus sq.ft. of warehousing space at 45 locations with significant presence in major consumption centers across India. Out of which 1 million sq.ft. for auto segment, 2 million sq.ft. for chemical and around 0.5 million sq.ft. for e-commerce segment have been utilised. With the introduction of Goods and Services Tax, ACCI is further consolidating by increasing its warehouse footprint by over 1 million sq.ft. in the next financial year through Built to Suite warehouse infrastructure. ACCI is also making adequate investment in storage technology like orbiter system, put to light system and sorter system. Further, investments are also made in state of art Warehouse Management Systems.

ACCI is one of the predominant player in this segment managing activities for key clients in Chemicals, Auto and Engineering, Pharma, Fashion, E-commerce and Retail sectors.

Detailed information on the Business overview, segment wise performance, outlook and state of the affairs of the Company is provided in the ‘Management Discussion and Analysis Report’ as required under Regulation 34 of the Listing Regulations, which forms part of the Annual Report.

CHANGES IN THE NATURE OF BUSINESS, IF ANY

The Company continued to provide integrated logistics services to its customers and hence, there was no change in the nature of business or operations of the Company which impacted the financial position of the Company during the year under review.

MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION OF THE COMPANY

There are no material changes and commitments affecting the financial position of the Company, subsequent to close of FY2017-18 till the date of this Report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

During the year under review, no significant and material orders have been passed by any Regulator or Court or Tribunal which would impact going concern status of the Company and its future operations.

FINANCE

Consolidated

The Cash flows from operations were positive Rs.30,824 lakhs (as at March 31, 2017 Rs.35,852 lakhs). Spend on capex was ‘ 7,025 lakhs. The borrowing of the Company as at March 31, 2018 stood at Rs.47,416 lakhs (as at March 31, 2017 Rs.58,964 lakhs). Cash and bank balances including investment in mutual funds stood at Rs.35,528 lakhs (as at March 31, 2017 Rs.27,245 lakhs).The Net Debt to Equity stood at 0.07 times (as at March 31, 2017 0.18 times).

Standalone

The Cash flows from operations were positive Rs.15,761 lakhs (as at March 31, 2017 Rs.17,920 lakhs). Spend on capex was Rs.3,426 lakhs. The borrowing of the Company as at March 31, 2018 stood at Rs.27,858 lakhs (as at March 31, 2017 Rs.36,334 lakhs). Cash and bank balances including investment in mutual funds stood at Rs.9,198 lakhs (as at March 31, 2017 Rs.6,124 lakhs). The Net Debt to Equity stood at 0.14 times (as at March 31, 2017 0.23 times).

CREDIT RATING

The Company continues to have credit rating which denotes high degree of safety regarding timely servicing of financial obligation. The Company has received the following credit ratings for its long term and short term credit Bank Loan facilities, Commercial Papers and proposed Non-Convertible Debentures from various credit rating agencies:

Rating Agency

Rating

Instrument / Facility

CARE

CARE A1

Commercial Paper

CRISIL

CRISIL AA-/ Positive

Long Term Bank Loan

CRISIL A1

Short Term Bank Loan

ICRA

ICRA AA (Stable)

Non-Convertible Debentures (Proposed)

CARE

CARE AA

CRISIL

CRISIL AA-/ Positive

PUBLIC DEPOSITS

During the year under review, the Company has not accepted any deposits from the public falling within the meaning of Sections 73 and 76 of the Act and the Rules framed thereunder.

SHARE CAPITAL

During the year under review there is no change in the Authorised, Issued, Subscribed and Paid-up Share Capital of the Company.

As at March 31, 2018, the Authorised Share Capital of the Company is Rs.550,000,000/- divided into 274,975,000 equity shares of Rs.2/- each and 500, 4% Cumulative Redeemable Preference Shares of Rs.100/- each.

Further, Issued, Subscribed and Paid-up Share Capital of the Company as at March 31, 2018 is Rs.491,391,048/- divided into 245,695,524 equity shares of Rs.2/- each.

Reclassification of Promoters

Approval of the Stock Exchanges viz. BSE Limited and National Stock Exchange of India Limited for reclassification of some of the Promoter Shareholders of the Company to public shareholders category under Regulation 31A of the Listing Regulations was received on April 7, 2017.

CORPORATE GOVERNANCE REPORT

The Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirements set out by the Securities Exchange Board of India (‘SEBI’).

A separate section on the Corporate Governance forming part of the Board’s Report together with requisite certificate obtained from the Practicing Company Secretary, confirming compliance with the provisions of Corporate Governance as stipulated in Regulation 34 read along with Schedule V of the Listing Regulations, is included in the Annual Report.

BOARD OF DIRECTORS

Number of meetings of the Board of Directors

During the year under review, 6 (six) Board meetings were convened and held, the details of which are provided in the ‘Corporate Governance Report’.

Committee Position

The details of the composition of the Committees, meetings held, attendance of Committee members at such meetings and other relevant details are provided in the ‘Corporate Governance Report’.

Recommendation of Audit Committee

During the year under review, there were no instances of nonacceptance of any recommendation of the Audit Committee of the Company by the Board of Directors.

Directors Re-appointment

In accordance with the Section 152 of the Act and the Articles of Association of the Company, Mr Shashi Kiran Shetty (DIN:00012754), Director of the Company, retires by rotation at ensuing AGM and being eligible, offers himself for re-appointment.

Attention of the Members is invited to the relevant item in the Notice of the 25th AGM and the explanatory statement thereto.

Independent Directors

The Company has received declarations from all Independent Directors confirming that they meet the criteria of independence as prescribed under Section 149(6) and (7) of the Act and Regulation 16 of the Listing Regulations.

BOARD EVALUATION

Pursuant to Sections 134 and 178 of the Act and Regulations 17 and 19 of the Listing Regulations, Nomination and Remuneration Committee (‘NRC’) has set the criteria for performance evaluation of the Board, its Committees, individual Directors and Chairman of the Company, the same are given in detail in the ‘Corporate Governance Report’.

Based on the criteria set by NRC, the Board has carried out annual evaluation of its own performance, its Committees and individual Directors for FY2017-18. The questionnaires on performance evaluation were prepared in line with the Guidance Note on Board Evaluation dated January 5, 2017, issued by SEBI.

The parameters for performance evaluation of Board includes the roles and responsibilities of the Board, timeliness for circulating the board papers, content and the quality of information provided to the Board, attention to the Company’s long term strategic issues, risk management, overseeing and guiding major plans of action, acquisitions etc.

The performance of the Board and individual Directors was evaluated by the Board seeking inputs from all the Directors. The performance of the Committees was evaluated by the Board seeking inputs from the Committee members. NRC reviewed the performance of individual Directors, separate meeting of the Independent Directors was also held to review the performance of Non-Independent Directors, performance of the Board as a whole and performance of the Chairman of the Company taking into accounts the views of Joint Managing Director and Non-Executive Directors. Thereafter, at the Board meeting, the performance of the Board, its Committees and individual Directors was discussed and deliberated. The Board of Directors expressed their satisfaction towards the process followed by the Company for evaluating the performance of the Directors, Board and its Committees.

KEY MANAGERIAL PERSONNEL

During the year under review, there was no change in the Key Managerial Personnel (‘KMP’’) of the Company. As at March 31, 2018, the following are the KMP of the Company:

- Mr Shashi Kiran Shetty, Chairman and Managing Director;

- Mr Adarsh Hegde, Joint Managing Director;

- Mr Jatin Chokshi, Chief Financial Officer; and

- Ms Shruta Sanghavi, Company Secretary.

Further, on recommendation of NRC, the Board at its meeting held on May 22, 2018, designated Mr Prakash Tulsiani, CEO-CFS-ICD and Capt Sandeep R Anand, CEO-Project and Engineering Solutions as KMP for their respective verticals.

REMUNERATION POLICY

NRC has framed a policy on Directors, KMP and other Senior Management Personnel appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a Director and other related matters in accordance with Section 178 of the Act and the Rules framed thereunder and Regulation 19 of the Listing Regulations. The criteria as aforesaid is given in the ‘Corporate Governance Report’. The Remuneration Policy of the Company is annexed as Annexure 2.

WHISTLE BLOWER POLICY/ VIGIL MECHANISM

The Company has adopted a Whistle Blower Policy and established the necessary Vigil Mechanism, which is in line with the Regulations 18 and 22 of the Listing Regulations and Section 177 of the Act. Pursuant to the Policy, the Whistle Blower can raise concerns relating to Reportable Matters (as defined in the Policy) such as unethical behavior, breach of Code of Conduct or Ethics Policy, actual or suspected fraud, any other malpractice, impropriety or wrongdoings, illegality, non-compliance of legal and regulatory requirements and retaliation against the Directors and employees etc. Further, the mechanism adopted by the Company encourages the Whistle Blower to report genuine concerns or grievances to the Audit Committee, and provides for adequate safeguards against victimization of Whistle Blower, who avail of such mechanism and also provides for direct access to the Chairman of the Audit Committee, in appropriate or exceptional cases. The Audit Committee oversees the functioning of the same. The Whistle Blower Policy is hosted on the Company’s website http://www.allcargologistics.com/ investors/investorservices/corporatepolicies.

During the year under review, the Company has not received any complaint through Vigil Mechanism. It is affirmed that no personnel of the Company has been denied access to the Audit Committee.

RISK MANAGEMENT POLICY

The Company is engaged in providing integrated logistics business solutions for National and International Trade, Warehousing, Transportation and handling of all kinds of Cargo, running ICD, CFS and Shipping Agents. Thus, the Company is prone to inherent business risks like any other organisation. With the objective to identify, evaluate, monitor, control, manage, minimize and mitigate identifiable business risks, the Board has formulated and implemented a Risk Management Policy.

The Company has adopted ISO 31000 framework for risk management. Under the guidance of the Board, the Chief Assurance & Risk Executive facilitates dedicated risk workshops for each business vertical and key support functions wherein risks are identified, assessed, analysed and accepted/mitigated to an acceptable level within the risk appetite of the organization. The risk registers are also maintained and reviewed from time to time for risk mitigation plans and changes in risk weightage, if any. The Audit Committee monitors risk management activities of each business vertical and key support functions. Fraud Risk Assessment is also part of overall risk assessment. In the Audit Committee meetings, Chief Assurance & Risk Executive makes the presentation on risk assessment and minimization procedures.

The purpose of risk management is to achieve sustainable business growth, protect the Company’s assets, safeguard Members investments, ensure compliance with applicable laws and regulations and avoid major surprises of risks. The Policy is intended to ensure that an effective risk management framework is established and implemented within the Company.

Although non-mandatory, the Company has constituted a Risk Management Committee at the Board meeting held on May 22, 2018 under the chairmanship of Mr Adarsh Hegde, Joint Managing Director, to oversee the risk management plan of the Company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Board has laid down Internal Financial Controls and believes that the same are commensurate with the nature and size of its business. Based on the framework of internal financial controls, work performed by the internal, statutory and external consultants, including audit of internal financial controls over financial reporting by the Statutory Auditors, and the reviews performed by the Management and the Audit Committee, the Board is of the opinion that the Company’s internal financial controls were adequate and effective during FY2017-18 for ensuring the orderly and efficient conduct of its business including adherence to the Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of accounting records and timely preparation of reliable financial disclosures.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis Report on the business outlook and performance review for the year ended March 31, 2018, as stipulated in Regulation 34 read with Schedule V of the Listing Regulations, is available as a separate section which forms part of the Annual Report.

BUSINESS RESPONSIBILITY REPORT

Pursuant to Regulation 34(2)(f) of the Listing Regulations, the Business Responsibility initiatives taken on environmental, social and governance perspective, in the prescribed format is available as a separate section in the Annual Report and also hosted on the Company’s website http://www. allcargologistics.com/investors/financials/annualreports.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The brief outline of the Corporate Social Responsibility (‘CSR’) Policy of the Company and initiatives undertaken by the Company on CSR activities during the year are set out in Annexure 3 of this Report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The CSR Policy is hosted on the Company’s website http://www.allcargologistics.com/investors/investorservices/ corporatepolicies.

CONSOLIDATED FINANCIAL STATEMENTS

A statement containing the salient features of the Financial Statements including the performance and financial position of each Subsidiaries, Joint Ventures and Associate Companies as per the provisions of the Act, is provided in the prescribed Form AOC-1 is annexed as Annexure 4.

Pursuant to Section 129 of the Act and Regulation 33 of the Listing Regulations, the attached Consolidated Financial Statements of the Company and all its Subsidiaries, Joint Ventures and Associate Companies have been prepared in accordance with the applicable Ind AS provisions.

The Company will make available the said Financial Statements and related detailed information of the subsidiary companies upon the request by any Member of the Company. These Financial Statements will also be kept open for inspection by any Member at the Registered Office of the Company during business hours on working days up to the date of the ensuing AGM.

Pursuant to the provisions of Section 136 of the Act, the Audited Standalone and Consolidated Financial Statements of the Company along with relevant documents and separate accounts in respect of subsidiaries are available on the website of the Company.

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

During the year under review, the following companies have become or ceased to be Subsidiaries, Joint Ventures and/or Associates of the Company:

Sr. No.

Name of Company

Relationship

Change

Effective Date

1

South Asia Terminals Private Limited

WOS

Acquired 49% stake

April 1, 2017

2

General Export Srl

Subsidiary

Acquired 51% stake

June 23,2017

3

Ecu Trucking INC

WOS

Incorporated

August 11, 2017

4

Cargo Freight Station S.A.

Subsidiary

Sold entire 50% stake

October 3,2017

5

Gantoni General Enterprises Ltd.

Associate

Sold entire 45% stake

November 1, 2017

6

Allcargo Multimodal Private Limited*

WOS

Incorporated

December 22, 2017

7

Ecu Worldwide CEE SRL

WOS

Incorporated

January 26, 2018

8

FMA Line SA (PTY) LTD

WOS

Incorporated

February 16, 2018

9

Ecu Worldwide (Kenya) Limited

WOS

Acquired 18% stake

February 26, 2018

10

Ecu Shipping Logistics (K) Ltd

WOS

Acquired 0.01% stake

February 26, 2018

11

Altcargo Oil & Gas Private Limited

Subsidiary

Incorporated (74%)

March 12, 2018

12

Allcargo Terminals Private Limited

WOS

Incorporated

March 20, 2018

13

Southern Terminal and Trading Private Limited

WOS

Merged#

March 31, 2018

14

AMFIN Consulting Private Limited

WOS

Merged#

March 31, 2018

WOS-Wholly owned subsidiary

*formerly known as Transindia Warehousing Private Limited #merged with AGL Warehousing Private Limited

The name of Ecu Line (India) Private Limited, WOS, was changed to Transindia Inland Park Private Limited w.e.f. January 30, 2018 and has been further changed to Allcargo Inland Park Private Limited w.e.f. April 2, 2018. ACEx Logistics Limited, WOS, is under strike off and pending for approval.

Further, Allcargo Logistics LLC, Dubai became indirect subsidiary of the Company w.e.f. September 28, 2017. CELM Logistics SA de CV and Mediterranean Cargo Center S.L., WOS, are under the process of liquidation.

The Policy for determining Material Subsidiary as approved by the Board is hosted on the Company’s website http:// www.allcargologistics.com/investors/investorservices/ corporatepolicies.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions/contracts/arrangements that were entered into by the Company during the year under review were on an arm’s length basis and in the ordinary course of business and were in compliance with applicable provisions of the Act and the Listing Regulations. There are no material significant related party transactions made by the Company with Promoters, Directors, KMP or Senior Management Personnel which may have a potential conflict with the interest of the Company at large. Also there are no material transactions with any related party that are required to be disclosed under Form AOC-2.

All related party transactions were placed before the Audit Committee for its approval and noting on quarterly basis. Prior omnibus approval of the Audit Committee is obtained for the transactions which are foreseen and of a repetitive nature. The transactions entered into with related parties are certified by the Management and the Independent Chartered Accountants stating that the same are in the ordinary course of business and at arm’s length basis.

The Policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions as approved by the Board is hosted on the Company’s website http:// www.allcargologistics.com/investors/investorservices/ corporatepolicies.

The details of related party transactions that were entered during FY2017-18 are given in the notes to the Financial Statements as per Ind AS 24, which forms part of the Annual Report.

PARTICULARS OF LOANS, GUARANTEES, SECURITIES AND INVESTMENTS

The Company is engaged in the business of providing integrated logistics services which falls under the infrastructural facilities as categorized under Schedule VI of the Act. Hence, the provisions of Section 186 of the Act are not applicable to the Company to the extent of loans given, guarantees or securities provided. However, as a good governance practice of the Company, the details of loans given, guarantees and securities provided are annexed as Annexure 5. Details of investments made are provided in the Notes to the Financial Statements.

AUDITORS

Statutory Auditors and their Report

M/s S R Batliboi & Associates LLP, Chartered Accountants (‘SRBA’), were appointed as Joint Statutory Auditors of the Company by the Members at the 22nd AGM held on August 10, 2015 to hold office upto the conclusion of 27th AGM of the Company to be held in the year 2020 subject to ratification by the Members at every AGM held thereafter. Further, M/s Shaparia Mehta & Associates LLP, Chartered Accountants, (‘SMCA’) were appointed as Joint Statutory Auditors of the Company by the Members at the 23rd AGM held on August 10, 2016 to hold office upto the conclusion of 28th AGM of the Company to be held in the year 2021 subject to ratification by the Members at every AGM held thereafter.

SMCA have expressed their unwillingness to continue as Joint Statutory Auditors of the Company due to their preoccupation in other assignments and will hold office till the conclusion of the 25th AGM. The Board places on record its appreciation for the services rendered by SMCA as the Joint Statutory Auditors of the Company.

Section 139 of the Act has been amended vide the Companies (Amendment) Act, 2017 by the Ministry of Corporate Affairs on May 7, 2018 and has done away with the requirement of seeking ratification of Members for appointment of Auditors at every AGM. Accordingly, no Resolution is being proposed for ratification of appointment of Statutory Auditors at the ensuing AGM.

SRBA have under Sections 139 and 141 of the Act and Rules framed thereunder confirmed that they are not disqualified from continuing as Statutory Auditors of the Company and furnished a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India as required under Regulation 33 of the Listing Regulations.

Further, the reports of the Joint Statutory Auditors along with the notes on the Financial Statements are enclosed to this Report. The observations made in the Auditors’ Report are self-explanatory and therefore do not call for any further comments.

The Auditors’ Reports do not contain any qualification, reservation, adverse remarks or disclaimer.

Secretarial Auditor

Pursuant to Section 204 of the Act and Rules framed thereunder, the Company has appointed M/s Parikh & Associates, Company Secretaries in practice, to undertake the Secretarial Audit of the Company for FY2017-18. The Report of Secretarial Auditor in Form MR-3 for FY2017-18 is annexed as Annexure 6.

The Secretarial Audit Report does not contain any qualification, reservation, adverse remark or disclaimer.

No instance of fraud has been reported by the Auditors.

PARTICULARS OF EMPLOYEES

The details of employees remuneration as required under Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed as Annexure 7.

The statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report. Further, in terms of Section 136 of the Act, the Annual Report and the Audited Financial Statements are being sent to the Members and others entitled thereto, excluding the aforesaid statement. The said statement is available for inspection by the Members at the Registered Office of the Company during business hours on working days up to the date of the ensuing AGM. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in this regard.

None of the employees who are posted and working in a country outside India, not being Directors or their relatives, draw remuneration more than the limits prescribed under Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

During the year under review, none of Directors of the Company has received any remuneration from the Subsidiary companies.

SAFETY, HEALTH AND ENVIRONMENT

The Company is committed towards bringing safety and environment awareness among its employees. It also believes in safety and health enrichment of its employees and committed to provide a healthy and safe workplace for all its employees. Successfully managing Health and Safety risks is an essential component of our business strategy. The Company has identified Health and Safety risk arising from its activities and has put proper systems, processes and controls mechanism to mitigate them.

The Company has been taking various initiatives and participating in programs of safety and welfare measures to protect its employees, equipments and other assets from any possible loss and/or damages. To implement such safety and welfare measures, the Company has formulated various policies such as Drug and Alcohol Policy, Occupational Health Policy, Driver and Vehicle Safety Policy, Fire Safety Policy, Mobile Telephone Policy, Smoking Policy, etc.

The Project and Equipments division of the Company has successfully renewed its OHSAS 18001:2007 Standards Certification as well as Lifting Equipment Engineers Association (‘LEEA’) Certification. It is a testimony that the Company is maintaining very high safety standards as well as ensures the use of quality equipments and follow the best Health and Safety practices as per LEEA standards.

The following safety measures are taken at various locations:

- The Company has installed state of art firefighting systems across all locations and fixed and portable firefighting systems are maintained and kept on 24*7 across all locations. Fire and Safety drills are conducted for all employees and security personnel and all Fire hydrants are monitored strictly as the preparedness for emergency.

- As a process of fire safety audit of all properties are carried out on yearly basis by an external agency who checks all electrical installation, firefighting equipments during the audit. Thermography of electrical panel is also carried out to check hotspot or uneven load at panels and distribution boxes.

- Safety Awareness Campaign, Safety week, Environment day are held/celebrated at each location to improve the awareness of employees.

- Each equipment is put through comprehensive Quality Audit and Testing to ensure strong compliance to Maintenance, Safety and Reliability aspects as per the specifications by various Original Equipment Manufacturer. All equipment are mandatorily ensured with PUC. Fitness certificates are issued based on the compliance of the safety norms.

- Regular training/skills to staff and contractors to inculcate importance of safety amongst them. Further, handling of Hazardous Material training and Terrorist Threat Awareness Training are provided to all CFS employees.

- Created checks and awareness among drivers about negatives of alcohol and drug consumptions and impact on their families. Monitoring of over speeding and harsh braking drivers through Vehicle Tracking System and also random alcohol testing of drivers, helpers and operators is being carried out through alcohol testing machine. Driver awareness created through Skit, Posters and Lectures.

- Accident prone routes identified and supervisors allocated to have control over the vehicle movement.

- OHSAS audits and Fire and Safety audits are conducted by competent agencies at regular intervals.

- Fortnightly visit by Doctors to office for medical counseling of employees. Further, Medical Health checkup of all employees are conducted at regular intervals.

Quarterly Food Quality Audit is being carried out and awareness for health care for seasonal disease has been given to all employees.

- CCTV and Safety alarms are installed at each locations.

- Green initiatives are taken at various locations to protect the environment.

- Disposal of Hazardous Waste through authorised waste management vendor.

- Cleanliness drive through “Swachh Bharat Abhiyan” implemented across all locations.

INFORMATION TECHNOLOGY

The Company’s IT Infrastructure is continuously reviewed and renewed in line with business requirements and technology enhancements. The Company has successfully taken steps to transform technology landscape and its upgradation in digitalisation of business. The Company has adopted Office 365 as a new communication and collaboration tool, launched ECU360 to provide a range of Do-It-Yourself tools to its customers, etc. The Company has implemented a cloud based HR system across all locations for its employees. Further, the newly built new business application platform viz. TOPAZ has been implemented at various countries to provide standardized processes, operational visibility for management control and decision making.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo as stipulated under Section 134(3)(m) of the Act and Rules framed thereunder, is annexed as Annexure 8.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Complaints Committee redresses the complaint received regarding sexual harassment of women at workplace. All employees (permanent, contractual, temporary, trainees) are covered under this Policy.

During the year under review, no complaints of sexual harassment were received and 3 (three) Awareness Program about Sexual Harassment Policy were conducted and held at workplace.

The Company has submitted its Annual Report on the cases of sexual harassment at workplace to District Officer, Mumbai, pursuant to Section 21 of the aforesaid Act and Rules framed thereunder.

EXTRACT OF ANNUAL RETURN

Pursuant to Section 92(3) of the Act and Rules framed thereunder, an extract of the Annual Return in Form MGT-9 is annexed as Annexure 9.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 1 34(3)(c) read with Section 134(5) of the Act, the Board to the best of their knowledge and ability confirm that -

a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b) they have selected such accounting policies and applied them consistently and 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 March 31, 2018 and of the profit for that period;

c) they have taken proper and sufficient care for the 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) they have prepared the annual accounts on a going concern basis;

e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

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

COMPLIANCE OF SECRETARIAL STANDARDS

The Company is in compliance with all applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

ACKNOWLEDGEMENTS

The Directors wish to place on record their appreciation for the continued co-operation and support extended to the Company by government authorities, customers, vendors, regulators, banks, financial institutions, rating agencies, stock exchanges, depositories, auditors, legal advisors, consultants, business associates, members, other stakeholders during the year. The Directors also convey their appreciation to employees at all levels for their contribution, dedicated services and confidence in the management.

For and on behalf of the Board of Directors

Shashi Kiran Shetty

Chairman and Managing Director

Place : Mumbai (DIN: 00012754)

Date : May 22, 2018

Director’s Report