Released: 29/07/2009
Part 2 : For preceding part double-click [nRn1c4440W]
the Isle of Man as a public limited company. The address of its registered
office is IOMA House, Hope Street, Douglas, Isle of Man.
The Company is listed on the London Stock Exchange.
The Group has no employees.
2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of the consolidated
financial statements are set out below. These policies have been consistently
applied to all the entities included in the consolidated financial statements.
2.1 Basis of preparation
The financial statements of the Company are prepared in accordance with
International Financial Reporting Standards ("IFRS"). The financial statements
have been prepared under the historical cost convention as modified by including
non-controlling investments in portfolio companies at fair value.
The preparation of financial statements in conformity with IFRS requires the use
of certain critical accounting estimates.
It also requires management to exercise its judgment in the process of applying
the Group's accounting policies. The areas involving a higher degree of
judgment or complexity, or areas where assumptions and estimates are significant
to the consolidated financial statements, are disclosed in note 4.
2.2 Basis of Consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries and
subsidiary undertakings). Control is achieved where the Company has the power to
govern the financial and operating policies of a portfolio company so as to
obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the Group. All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
2.3 Segment reporting
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment that are
subject to risks and returns that are different from those of segments operating
in other economic environments.
The Directors are of the opinion that the Group is engaged in a single segment
of business being investment in infrastructure assets in one geographical area
being India.
2.4 Income
Dividend income from investments is recognised when the Company's
right to receive payment has been established, normally the ex-dividend date.
Interest income is recognised using the effective interest method.
2.5 Expenses
All expenses are accrued for on an accruals basis and are presented
as revenue items except for expenses that are incidental
the disposal of an investment which are deducted from the disposal
proceeds.
2.6 Taxation
Income tax expense comprises current and deferred tax. Income tax expense is
recognised in profit or loss except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in equity.
(a) Current Income tax
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
(b) Deferred income tax
Deferred tax is recognised using the balance sheet method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for the following temporary differences: the
initial recognition of goodwill, the initial recognition of assets or
liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit, and differences relating to investments
in subsidiaries and jointly controlled entities to the extent that they probably
will not reverse in the foreseeable future. Deferred tax is measured at the tax
rates that are expected to be applied to the temporary differences when they
reverse, based on the laws that have been enacted or substantively enacted by
the reporting date.
2.7 Foreign currency transactions
(a) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the Currency of the primary economic environment in which the
entity operates ('the functional Currency'). The consolidated financial
statements are presented in Sterling, which is the Company's functional and
presentation Currency.
(b) Transactions and balances
Transactions in other currencies are translated at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in other currencies at the balance sheet date are translated at the
foreign exchange rate ruling at that date. Foreign exchange differences arising
on translation are recognised in the income statement. Non-monetary assets and
liabilities that are measured in terms of historical cost in a foreign currency
are translated using the exchange rate at the date of transaction. Non-monetary
assets and liabilities denominated in foreign currencies that are stated at fair
value are translated into Sterling at foreign exchange rates ruling at the dates
the fair value was determined.
2.8 Financial instruments
Financial assets and financial liabilities are recognised when a Group entity
becomes a party to the contractual provisions of a financial instrument.
Financial assets and financial liabilities are offset if there is a legally
enforceable right to set off the recognised amounts and interests and it is
intended to settle on a net basis.
2.9 Investments
Investments of the Group where the Group does not have control are categorised
as at fair value through profit or loss. They are measured at fair value.
Unrealised gains and losses arising from revaluation are taken to the income
statement.
Investments in entities over which the Group has control are consolidated in
accordance with IAS 27.
The Group has taken advantage of an exemption in IAS 28, Investments in
Associates, which permits investments in associates held by venture capital
organisations, investment funds and similar entities to account for such
investments at fair value through profit and loss.
The fair value of unquoted securities is estimated by the Directors using the
most appropriate valuation techniques for each investment.
Securities quoted or traded on a recognised stock exchange or other regulated
market are valued by reference to the last available bid price.
2.10 Other receivables
Other receivables do not carry any interest and are short-term in nature and are
accordingly stated at their nominal value as reduced by appropriate allowances
for estimated irrecoverable amounts.
2.11 Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangement entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the Company
after deducting all of its liabilities. Financial liabilities and equity
instruments are recorded at the proceeds received, net of issue costs.
2.12 Provisions
A provision is recognised in the balance sheet when the Company has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation,
and the obligation can be reliably measured. If the effect is material,
provisions are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time value of money
and, where appropriate, the risks specific to the liability.
2.13 Share issue costs
The share issue costs of the Company directly attributable to the Placing that
would otherwise have been avoided have been taken to the share premium account
2.14 Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a liability
in the Group's financial statements in the period in which the dividends are
approved.
2.15 Trade receivables
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less provision
for impairment.
2.16 Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with
banks, other short-term highly liquid investments with original maturities of
three months or less, and bank overdrafts.
2.17 Interest expense
Interest expenses for borrowings are recognised within "finance costs" in the
income statement using the effective interest rate method.
2.18 Future changes in accounting policies
IASB and IFRIC have issued the following standards and interpretations with an
effective date after the date of these financial statements:
New/Revised International Financial Reporting Standards Effective date(accounting periodscommencing on or after)
(IAS/IFRS)
IAS 1 Presentation of Financial Statements - Comprehensive 1 January 2009
revision including requiring a statement of comprehensive
income (Revised 2007)
IAS 1 Presentation of Financial Statements (Revised May 2008)* 1 January 2009
IAS 1 Presentation of Financial Statements - Amendments 1 January 2009
relating to disclosure of puttable instruments and obligations
arising on liquidation (2008)
IAS 1 Presentation of Financial Statements (Revised April 1 January 2010
2009)**
IAS 7 Statement of Cash Flows (Revised April 2009)** 1 January 2010
IAS 23 Borrowing Costs - Comprehensive revision to prohibit 1 January 2009
intermediate expensing (Amended 2007)
IAS 23 Borrowing costs (Revised May 2008)* 1 January 2009
IAS 27 Consolidated and Separate Financial Statements - 1 July 2009
Consequential amendments resulting from amendments to IFRS 3
(2008)
IAS 27 Consolidated and Separate Financial Statements - 1 January 2009
Amendment relating to cost of an investment on first-time
adoption (Revised 2008)
IAS 27 Consolidated and Separate Financial Statements (Revised 1 January 2009
May 2008)*
IAS 28 Investments in Associates - Consequential amendments 1 July 2009
resulting from amendments to IFRS 3 (2008)
IAS 28 Investments in Associates* 1 January 2009
IAS 31 Interests in Joint Ventures - Consequential amendments 1 July 2009
resulting from amendments to IFRS 3 (2008)
IAS 31 Interests in Joint Ventures (Revised May 2008)* 1 January 2009
IAS 32 Financial instruments: Presentation - Amendments 1 January 2009
relating to puttable instruments and obligations arising on
liquidation
IAS 36 Impairment of Assets (Revised May 2008)* 1 January 2009
IAS 36 Impairment of Assets** 1 January 2010
IAS 39 Financial Instruments: Recognition and Measurement 1 January 2009
(Revised May 2008)*
IAS 39 Financial Instruments: Recognition and Measurement - 30 June 2009
Amendments for embedded derivatives when reclassifying
financial instruments
IAS 39 Financial Instruments: Recognition and Measurement - 1 July 2009
Amendments for eligible hedged items
IAS 39 Financial Instruments: Recognition and Measurement 1 January 2010
(Revised April 2009)**
IAS 40 Investment Property (Revised May 2008)* 1 January 2009
IFRS 3 Business Combinations - Comprehensive revision on 1 July 2009
applying the acquisition method
IFRS 5 Non-current Assets Held for Sale and Discontinued 1 July 2009
Operations (Revised May 2008)*
IFRS 5 Non-current Assets Held for Sale and Discontinued 1 January 2010
Operations**
IFRS 7 Financial Instruments: Disclosures - Amendments 1 January 2009
enhancing disclosures about fair value and liquidity risk
(Revised March 2009)
IFRS 8 Operating Segments (Original issuance 2006) 1 January 2009
IFRS 8 Operating Segments (Revised April 2009)** 1 January 2010
IFRIC Interpretation
IFRIC13 Customer loyalty programmes 1 July 2008
IFRIC 15 Agreement for Construction of Real Estate 1 January 2009
IFRIC 16 Hedges of a Net Investment in a Foreign Operation 1 October 2008
IFRIC 17 Distributions of Non-Cash Assets to Owners 1 July 2009
IFRIC 18 Transfers of Assets from Customers 1 July 2009
*Amendments resulting from May 2008 Annual Improvements to IFRSs
**Amendments resulting from April 2009 Annual Improvements to IFRSs
IFRS 8 introduces the "management approach" to segment reporting, with
information based on internal reports. Management are currently assessing the
impact of these on the disclosures to be presented regarding segmental
reporting.
The Directors do not expect the adoption of the other standards and
interpretations to have a material impact on the Group's financial statements in
the period of initial application.
3 Financial risk management
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk, market price risk and interest rate risk), credit risk
and liquidity risk.
Risk management is carried out by the Board of Directors. The Board identifies
and evaluates financial risks in close co-operation with the Investment
Advisor.
(a) Market risk
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk
arising from various currency exposures, primarily with respect to the Indian
Rupee. Foreign exchange risk arises from future commercial transactions,
recognised monetary assets and liabilities and net investments in foreign
operations.
Net assets denominated in Indian Rupee at the period end amounted to £32
million, representing the Group's investments in Indian Companies.
At 31 March 2009, had the exchange rate between the Indian Rupee and Sterling
increased or decreased by 10% with all other variables held constant, the
increase or decrease respectively in net assets would amount to approximately
£3.2 million.
(ii) Market price risk
The Group is exposed to market risk arising from its investment in unlisted
Indian infrastructure companies. These investments present a risk of capital
loss. The Board and Investment Advisor are responsible for the selection of
investments and monitoring exposure to market risk. All investments are in
Indian infrastructure projects.
If the value of the Group's investment portfolio had increased by 5%, the
Group's net assets would have increased by £1.6 million. A decrease of 5% would
have resulted in an equal and opposite decrease in net assets.
(iii) Cash flow and fair value interest rate risk and sensitivity
The Group's cash and cash equivalents are invested at short-term market interest
rates. The weighted average interest rate on cash balances as at 31 March 2009
is 1%. There are no other financial assets and liabilities which are interest
bearing. The Group is therefore not subject to significant cash flow or fair
value interest rate risk and therefore a sensitivity analysis has not been
provided.
(b) Credit risk
The Group has no significant concentrations of credit risk. Credit risk arises
on cash balances and debtor balances. Cash transactions are limited to
high-credit-quality financial institutions.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and
marketable securities, the availability of funding through an adequate amount of
committed credit facilities and the ability to close out market positions. The
Company aims to maintain flexibility in funding.
Residual undiscounted contractual maturities of financial liabilities:
31 March 2009 Less than1 month 1-3months 3 monthsto 1 year 1-5 years Over 5years No stated maturity
£'000 £'000 £'000 £'000 £'000 £'000
Financial liabilities
Trade and other payables - - 688 - - -
The performance fee provision is payable when investments are realised.
4 Critical accounting estimates and assumptions
Estimates and judgements are continually evaluated and are based on historical
experience as adjusted for current market conditions and other factors.
The Directors make estimates and assumptions concerning the future. The
resulting accounting estimates will, bydefinition, seldom equal the related
actual
results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities
within
the next financial year are outlined below.
(a) Estimate of fair value of unquoted investments
The Group holds partial ownership interests in two unquoted Indian
infrastructure companies. The Directors'valuations of these investments, as
shown in note 11, are based on a discounted cash flow methodology, prepared by
the Company's Investment Advisor.
The methodology is principally based on company-generated cash flows and
observable market data on interest rates and equity returns. The discount rates
are determined by market observable risk free rates plus a risk premium which is
based on the phase of the project concerned.
If the determined discount rates were increased by 1% per annum, the value of
unlisted equity securities would fall by £3.5 million.
(b) Estimated performance fee (carried interest) on investments
As described in note 6, a provision has been established for performance fees.
This is based on the increases in net assets to date.
5 Other administration fees and expenses
2009£'000£'000
Audit fees *67
Legal fees - general 364
Legal fees - investment projects 472
Corporate advisory fees 225
PR 70
Consultancy fees 82
Other professional costs 738
Administration fees 117
Directors' fees **147
Insurance costs 11
Other 74
2,367
*Audit fees represent auditor's remuneration for work undertaken in connection
with the statutory audit of the Group's financial statements.
**All Directors have been appointed for an initial term of three years with 27
months remaining as at 31 March 2009. In addition, the Directors agreed a
reduction of 40% in their remuneration with effect from January 2009.
6 Investment advisor fees and performance fees
The Investment Advisor receives a management fee of 2% per annum of the amount
invested. This fee is payable
quarterly in advance.
The Investment Advisor is also entitled to a performance fee, calculated
annually at each reporting date by the Administrator.
The following key definitions apply:
The following key definitions apply:
Lower Hurdle the sum of the net placing proceeds from the Placing and any
subsequent capital raising multiplied by 10 per cent. per annum,
calculated on a daily pro rata basis, and presented at the
Accounting Date;
Upper Hurdle the sum of the net placing proceeds from the Placing and any
subsequent capital raising multiplied by 12 per cent. per annum,
calculated on a daily pro rata basis, and presented at the
Accounting Date;
Total Cash Returned ("TCR") TCR shall be the sum of all amounts received from all investments
and paid to IIHoldCo; including all dividends all income from cash
on deposit or cash equivalents, and all net cash proceeds on
realisations and/or refinancing (i.e. cash gains on principal
originally invested, following realisations) for the period from
the date of completion of the first investment to the relevant
Calculation Date.TCR shall be calculated net of:- any
interest expenses on borrowings to finance the acquisition or
development of any investment;- any expenses directly
attributable to the acquisition or disposal of Investments; and-
the Annual Advisory Fee;
TCR shall be calculated without including expenses due to the
direct operation of IIHoldCo, including: inter alia directors'
fees, treasury management, administration, brokerage fees, and
incidentals.
No performance fee will be payable for any relevant accounting period in which
the TCR is less than the Lower Hurdle. The performance fee shall equal 100 per
cent. of the TCR between the Lower Hurdle and the Upper Hurdle and 20 per cent.
of the TCR in excess of the Upper Hurdle.
The Investment Advisor Agreement is dated the 23 June 2008 and shall continue in
force for a period of five years from the date of completion of the first
investment made by the Group and thereafter unless or until terminated by either
party giving to the other party not less than twelve months' written notice to
expire at any time on or after the end of that five year period.
A management fee of £325,573 became payable in the year. A provision of
£1,559,000 has been made in respect of performance fees, being an estimate of
the performance fee which would become payable, based on the cumulative return
to date.
7 Taxation
There is no liability for income tax in the Isle of Man.
The Group is subject to income tax in Mauritius at the rate of 15% on the
chargeable income of Mauritian subsidiaries. They are, however, entitled to a
tax credit equivalent to the higher of the foreign tax paid and a deemed credit
of 80% of the Mauritian tax on their foreign source income. No provision has
been made in the accounts due to the availability of tax losses.
8 Earnings per share
Basic earnings per share is calculated by dividing the net profit attributable
to shareholders by the weighted average number of ordinary shares outstanding
during the period.
2009
Profit attributable to shareholders (thousands) £3,183
Weighted average number of ordinary shares in issue 36,700
(thousands)
Basic and diluted earnings per share (pence) 8.67p
There is no difference between basic and diluted earnings per share.
9 Investments in subsidiaries
The subsidiaries of Infrastructure India plc are recorded at cost in the
financial statements of the Company.
Name Country of Incorporation Ownershipinterest
Infrastructure India HoldCo Mauritius 100%
Power Infrastructure India Mauritius 100%
Roads Infrastructure India Mauritius 100%
Roads Infrastructure India (Two) Mauritius 100%
10 Non-cash financing activities
As detailed in note 11, the investment in SMHPCL was made prior to the placing,
funded by a loan from Kaupthing Bank hf. This loan was repaid at the date of the
placing in part by the issue of 9,750,000 ordinary shares to Kaupthing Bank hf.
11 Investments - designated at fair value through profit or loss
Investments, consisting of unlisted equity securities, are recorded at fair
value as follows:
31 March 2009 At Cost£'000 Fair value Adjustment £'000 At Fair
Value£'000
Shree Maheshwar Hydel Power Corporation Ltd 13,220 1,180 14,400
Western Madhya Pradesh Infrastructure Toll Road Pvt 11,313 6,287 17,600
Limited
24,533 7,467 32,000
The investments have been fair valued by the Directors as at 31 March 2009 using
discounted cash flow techniques, as described in note 4. The discount rate
adopted for both investments is the single "construction period" discount rate,
which consists of the risk free rate of 7% plus a risk premium of 6% for SMHPCL
and 8% for WMPTRPL.
On 9 June 2008, the Group acquired a 20.49% equity interest (which interest may
be subject to dilution as a result of the conversion of certain debts and
debentures, and the issuance, without pre-emption rights, of shares in the
investee company) in Shree Maheshwar Hydel Power Corporation Ltd ("SMHPCL"), an
Indian private company, for a total consideration of Rs 1.1 billion
(£13,220,000). The cost of this investment comprises Rs 500m used to subscribe
for shares in SMHPCL and Rs 600m paid to a co-investor in SMHPCL, by way of a
guarantee fee. The Co-investor has agreed to guarantee a minimum IRR of 15% on
the Group's total investment in connection with SMHPCL, secured on certain
shares in SMHPCL held by a subsidiary of the Co-investor which will be
transferred to the Group if the guaranteed return is not met. The Co-investor
has agreed to use Rs 500m of the guarantee fee to subscribe for shares in
SMHPCL.
The Group also acquired an option for a consideration of £250,000 to make
further investments in SMHPCL. The option has now expired and written off as an
investment loss.
On 29 September 2008, the Group acquired a 26% equity interest in Western Madhya
Pradesh Infrastructure Toll Road Pvt Limited ("WMPTRPL"), an Indian private
company, for a total consideration of Rs 960m (£11,313,000).
12 Share capital
Share capital Share premium
No. of shares £'000 £'000
Ordinary shares of £ 0.01 each 36,700,000 367 31,887
36,700,000 367 31,887
The Company was incorporated on 18 March 2008 with 1 ordinary shares of £1. The
Company has no authorised share capital.
The Company achieved a placing agreement of 36,700,000 ordinary shares of 1p
each in the capital of the Company when listed on the London Stock Exchange on
30 June 2008.
Capital management
The Board's policy is to maintain a strong capital base so as to maintain
investor, creditor and market confidence and to sustain future development of
the business. The Board manages the Group's affairs to achieve shareholder
returns through capital growth and income.
Group capital comprises share capital and reserves.
Neither the Company nor any of its subsidiaries are subject to externally
imposed capital requirements.
13 Warrants
7,340,000 warrants were issued pursuant to the initial placing (one warrant for
every five ordinary shares issued). The warrants entitle the holder to subscribe
for one Ordinary Share of one penny in the Company at any time in the five years
from the initial placing, at an exercise price of £1 each.
14 Directors' interests
The following Directors had interests in the shares of the Company at 31 March
2009:
Rupert Cottrell 25,000 Ordinary Shares
Timothy Walker 25,000 Ordinary Shares
Prodaman Sarwal 25,000 Ordinary Shares
15 Trade and other receivables
2009 2009
Group Company
£'000 £'000
Advance to Bloomsbury Asset Management Limited * 75 -
Intercompany loans - 25,840
75 25,840
* The loan is interest free, unsecured and repayable on demand.
16 Trade and other payables
2009 2009
Group Company
£'000 £'000
Trade payables 318 318
Accruals 370 348
688 666
17 Commitments
As at 31 March 2009 the Group had no capital commitments in respect of capital
expenditures contracted for at the balance sheet date but not yet incurred.
18 Related party transactions
Related parties and material related party transactions and balances and other
transactions with affiliates, including fees, commissions, no charge
transactions, purchases and sales and related amounts receivable or payable must
be disclosed.
As defined in International Accounting Standard 24, Related Party Disclosures,
parties are considered to be related if one party has the ability to control the
other party or exercise significant influence over the other party in making
financial and operating decisions. Related party transactions are transfers of
resources or obligations between related parties, regardless of whether a price
is charged.
Kaupthing Bank
On 25 April 2008 a facility letter from Kaupthing Bank hf, a significant
shareholder in the Company, was accepted by the Company, under which Kaupthing
Bank hf agreed to make available to the Company certain credit facilities
comprising a fully drawn down facility (the "Facility") of up to £14,500,000 for
a period of three months from the date of draw down and thereafter subject to
automatic renewal on each new interest period after the draw down date.
£13,350,000 of the Facility was drawn down on 10 June 2008. On draw down, the
Facility attracted a £75,000 structuring fee which was waived by Kaupthing Bank
hf. The loan was repaid with consideration of 9,750,000 ordinary shares in the
Company and cash of £3,779,500 on 25 June 2008. In addition interest payable for
the 15 days was £54,863 at an interest rate of 10%.
In addition, Kaupthing Bank hf received placing commissions, brokerage and
advisory fees of £1,929,000.
At the year end Kaupthing Bank hf was a significant shareholder in
Infrastructure India plc and also holding shares in the Fund's Investment
Advisor Bloomsbury Asset Management Limited.
Investment Advisor fees
Investment Advisor fees are disclosed in note 6.
Investment Advisor Loan
A loan to the Investment advisor is disclosed in note 15.
Administrator fees
Philip Scales is a Director of the Company and of the Administrator. The fees of
the Administrator for the period amounted to £78,750, of which £15,000 related
to the launch and initial placing.
19 Report and Financial Statements
Copies of the Report and Financial Statements will be available from
www.iiplc.com.
This information is provided by RNS
The company news service from the London Stock Exchange
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