The Members

IL&FS Transportation Networks Limited

The Directors have pleasure in presenting the Eighteenth Annual Report alongwith the Audited Financial Statements for the year ended March 31, 2018

Financial Results

The Financial performance highlights of the Company are as under:

Dividend

Considering the business exigencies and requirement of funds for investments in ongoing project companies, your Directors have not recommended any dividend on Equity Shares for the year under review (Previous Year: Nil)

Your Directors had declared an interim dividend on Preference Shares of Rs. 48.74 Crore including tax on dividend of Rs. 9.92 Crore (Previous Year: Rs. 94.91 Crore including dividend tax of Rs. 16.05 Crore)

Share Capital

During the year, there was no change in the Company’s issued, subscribed and paid-up equity share capital. On March 31, 2018, it stood at Rs. 328,96,00,270 divided into 32,89,60,027 equity shares of Rs. 10 each

Of the 35,64,50,000 preference shares, outstanding as on April 1, 2017, 12,72,50,000 preference shares were redeemed during the year under review

General Reserve

The Company has not transferred any amount to General Reserve for the Financial Year ended March 31, 2018

During the year under review, Rs. 127.25 Crore was transferred from General Reserve to Capital Redemption Reserve and Rs. 212.94 Crore was transferred from Retained Earnings to Debenture Redemption Reserve

Issue of Debentures / Bonds

During the year under review, the Company raised Rs. 1,114.5 Crore by issue of Non- Convertible Debentures (NCDs) with tenor exceeding 5 years. This has helped the Company in reducing the borrowing cost and also elongate the maturity profile of borrowings by converting short term maturities to long term. The Company proposes to continue its efforts to refinance its short term borrowings through issue of long term NCDs. The previous approval is valid until August 28, 2018 and therefore fresh approval of the Members for issue of NCDs on a private placement basis to the extent of Rs. 3,500 Crore is being sought.

A proposal to this effect is being included in the Notice of the Annual General Meeting

The Company has completed the refinancing of certain special purpose vehicles, namely, Jharkhand Road Projects Implementation Company Limited and Jorabat Shillong Expressway Limited aggregating to Rs. 2,613 Crore which has resulted in reduction of interest cost by approx. 200 - 250 basis points. ITNL Offshore Pte. Ltd., a wholly owned subsidiary has also successfully priced a bond deal for CNRS.1,000 Million Senior Unsecured Notes at an annualised yield of 8% due 2021

Acquisition & Divestment

During the year under review, the Company divested its equity stake in Gujarat Road and Infrastructure Company Limited, Moradabad Bareilly Expressway Limited, Pipavav Railway Corporation Limited and Rajasthan Land Holdings Limited at an aggregate consideration of Rs. 514.93 Crore. The details of the transaction are mentioned in Note No. 4 in the Financial Statements for the year ended March 31, 2018

Further, the investments held by Elsamex SA, Spain a wholly owned subsidiary in its subsidiaries in India were acquired by the Company

Material Changes & Commitments Affecting the Financial Position Between the End of Financial year and Date of Report After the Balance Sheet Date

There were no material changes and commitments affecting the financial position of the Company between the end of financial year and the date of this report

Operational Performance

The financial year 2017-18 witnessed some very significant achievements in the road sector of the country. Ministry of Road Transport and Highways (MoRTH) set a target of constructing 41 km/per day of road and achieved about 28 km/day, less than the target but 20% higher than last fiscal. The Ministry is hopeful of achieving 40 km /day in FY 2018-19 through the awarding of 7,400 km at an estimated cost of Rs. 122 Crore during the FY 2017-18 resulting in an all-time high and a record achievement by MORTH/NHAI since its inception in 1995. Tendering and awarding has picked up due to the sanction of ambitious Bharatmala programme that involves construction of 34,800 km highways by 2022

The year also witnessed award and completion of some of the biggest projects targeted in the Indian Road Sector which includes the longest tunnel project, Chenani Nashri Tunnel Project in Jammu & Kashmir, constructed by the Company and the longest bridge project, Dhola Sadia Bridge in Assam, that were inaugurated by the Hon’ble Prime Minister. The bidding process and awards for ambitious projects such as Zojila Tunnel project, Delhi Meerut Expressway, Vadodara-Mumbai Expressway and Bangalore-Chennai Expressway were conducted during the year

The operating environment however, is challenging from the Company’s perspective. As the government’s mode of project delivery has moved from PPP to EPC and HAM models, a sector in which the Company is fairly nascent, the Company remains cautious while bidding for such projects. This shift is coupled with a significant reduction in project sizes to encourage participation, which makes such projects financially unviable for the Company. The Company has witnessed considerable cost overruns in its projects as a result of Authority default, for which appropriate claims and compensation has been sought from the respective Authorities; the realization of which is subject to significant procedural delays. The growing reluctance of the Banking sector to lend to the sector and the banks existing exposure limit has prevented the Company from achieving financial closure in 3 of its ongoing projects, stressing its existing cash flows. With its intent to overcome these hurdles, the Company will critically reassess its portfolio and take appropriate action including stake sale, divestment, refinancing and dedicatedly pursue its claims with the Authorities

The Company’s portfolio continues to stand at 33 projects, which comprises of 28 Road projects and 5 Non Road projects. Of these, 25 projects are Operational, 8 projects are under Implementation. Classifying individual projects (considering projects and sub-projects) on the basis of their current phase, the Company has 21 Road projects and 4 Non Road projects that are Operational, 7 Road projects are under Implementation and 1 Non Road project under implementation. Further, as per the Revenue model, 17 are Toll based, 11 are Annuity based and 5 are User Fee based. The total portfolio in terms of length stands at 13,493 lane-km of whicRs.11,026 lane-km are Toll based, and 2,467 lane-km is Annuity based for the reporting period

During the year under review, the Company secured the Construction, Operation and Maintenance of 2-Lane Bi-Directional Zojila Tunnel with Parallel Escape (Egress) Tunnel excluding approaches on Srinagar-Leh section connecting NH-1 at Km 95.00 and at Km 118.00 in the State of Jammu & Kashmir on EPC mode. Further, the Company in JV with IL&FS Engineering Construction Compalny Limited (IECCL) was awarded the Contract for Widening and Reconstruction of Major District roads aggregating to 160 lane-km in Madhya Pradesh (MPMDRUP Package 2) by Madhya Pradesh Road Development Corporation Limited (MPRDC). The Company closed the year with an order book of 3 EPC projects aggregating to Rs. 5,351 Crore

In one of the arbitration petition filed by a subsidiary, Pune Sholapur Road Development Company Limited (“PSRDCL”) against National Highways Authority of India (“NHAI”), the Hon’ble Arbitral Tribunal had passed an award in favour of PSRDCL entitling it to receive a payment of Rs. 547.96 Crore from NHAI

On the International front, ITNL Infrastructure Developer LLC is developing the “Dubai Court Complex and Robotic Car Park Project on PPP basis”. This is the first PPP concession awarded for Fully Automated Car Parking Project in UAE region. IIPL USA, LLC a subsidiary also completed four contracts in State of Texas and have 19 projects under operation and maintenance

Environmental, Health & Safety

The Environmental and Social Policy Framework (ESPF) adopted by the Company helps to identify and mitigate Environmental and Social concerns relating to all projects. During the year under review, upgraded Quality, Environment, Health & Safety (EHS) Management systems were implemented and integrated at all the O&M sites.

Further, the Surveillance audit for FY 2017-18 was also conducted by TUV Nord, an ISO Certification Agency EHS audits are conducted on a regular basis at the project sites to ensure implementation and adherence to the Management System and Safety standards. The EHS Committee of the Board reviews the findings of the audit and advises on improving safety aspects and mitigation measures on a quarterly basis to help achieve the EHS objectives. The Company continued to engage with the experts to study the Behavioral characteristics of road users on various road projects of the Company and suggest remedial measures to avoid accidents

Subsidiaries, Joint Ventures & Associate Companies

In terms of Section 129(3) of the Companies Act, 2013 and Regulation 34 (2) (b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (hereinafter referred to as SEBI (LODR) Regulations, 2015) the Consolidated Financial Statements of the Company forms part of this Report. The copies of Audited Financial Statements of the Subsidiaries, Joint Ventures and Associates are available on the website of the Company: www. itnlindia.com and a copy of the same will be provided upon written request to the Company Secretary

The performance and financial position of the Subsidiaries, Joint Venture and Associate companies is provided in Annexure I of this Report

A statement containing salient features of the financial statements of the Company’s Subsidiaries, JV’s and Associates is given in Form AOC 1 forming part of the Note 36 of the Consolidated Financial Statements

Statutory Auditors

SRBC & Co. LLP, Chartered Accountants, were appointed as the Statutory Auditors of the Company for a term of five consecutive years at the 17th Annual General Meeting held on August 29, 2017. They have confirmed that they are not disqualified from continuing as Auditors of the Company

Cost Auditor and Cost Audit Report

Pursuant to Section 148 of the Companies Act 2013 and the Companies (Cost Records and Audit) Rules, 2014 framed thereunder, the Board of Directors had appointed M/s. Chivilkar Solanki & Associates, Cost Accountants as Cost Auditors for FY 2018-19

M/s. Chivilkar Solanki & Associates have conveyed their consent and confirmed their eligibility for appointment as Cost Auditors.

The Board has recommended to the Members for approval of the remuneration payable to the Cost Auditors for FY 2018-19

Secretarial Audit & Secretarial Audit Report

M/s. Jayshree Dagli & Associates, Practicing Company Secretaries were appointed by the Board to carry out the Secretarial Audit of the Company pursuant to the provisions of Section 204 of the Companies Act, 2013 for FY 2017-18. The report of the Secretarial Auditor is set out herewith as Annexure II to this report. The report does not contain any qualification, reservation or adverse remarks

Extract of Annual Return

The details forming part of the extract of the Annual Return as on March 31, 2018 in Form MGT - 9 in accordance with Section 92(3) of the Companies Act, 2013 read with Companies (Management and Administration) Rules, 2014, are set out herewith as Annexure III to this report

Significant and Material Orders

There are no significant and material orders passed by the Regulators or courts or tribunals impacting the going concern status and the Company’s operations in future

Policy on Director’s Appointment and Remuneration

The Board has adopted a Policy on appointment and remuneration of Directors which includes the criteria for determining qualifications, positive attributes, independence of a director and other matters, as required under Sub-section (3) of Section 178 of the Companies Act, 2013 and Regulation 19 of the SEBI (LODR) Regulations, 2015. The Policy is available on the website of the Company at www.itnlindia.com. The remuneration paid to the Directors and Senior Management personnel is as per Managerial Remuneration Policy of the Company. Brief details of the Managerial Remuneration Policy are provided in the Corporate Governance Report

Directors

Mr. Pradeep Puri, Director resigned with effect from November 20, 2017. The Board placed on record its sincere appreciation for the valuable guidance and support during his tenure

Based on the recommendation of the Nomination and Remuneration Committee, the Board has reappointed following Directors of the Company subject to the approval of the Members at the ensuing Annual General Meeting:

(1) Mr. K. Ramchand (DIN: 00051769) as Managing Director for a period of five years from April 1, 2018 to March 31, 2023

(2) Mr. Mukund Sapre (DIN: 00051841) as Executive Director for a period of five years from April 1, 2018 to March 31, 2023

In compliance with Section 152 of the Companies Act, 2013, Mr. Arun K Saha (DIN: 00002377) was liable to retire by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for reappointment

Your Directors recommend their reappointment

Key Managerial Personnel

Pursuant to Section 203 of the Companies Act, 2013, the Board of Directors have appointed Mr. K. Ramchand, Managing Director,

Mr. Dilip Bhatia, Chief Financial Officer and Mr. Krishna Ghag, Vice President & Company Secretary as the Key Managerial Personnel of the Company

Declaration by Independent Directors

The Company has received declarations from all Independent Directors of the Company confirming that they continue to meet the criteria of independence, as prescribed under Section 149 of the Companies Act, 2013 and Regulation 25 of the SEBI (LODR) Regulations 2015. The Independent Directors have also confirmed that they have complied with the Company’s Code of Conduct

Performance Evaluation of the Board, Committees and Directors

In accordance with the provisions of the Companies Act, 2013 and Regulation 4(2)(f) of the SEBI (LODR) Regulations, 2015, the Board of Directors had laid down the criteria for performance evaluation of Independent, Non-Independent & Executive Directors. The process and manner of evaluation of Directors and the Board level Committees are given in detail in the Corporate Governance Report, which forms part of this Report

The Board evaluated its performance, that of its Committees and the Independent Directors. The Independent Directors at a separate meeting evaluated the performance of the Board, the Chairman of the Board and the non-independent Directors. The Nomination & Remuneration Committee at its meeting also evaluated the performance of all the Directors

Corporate Governance

The Company believes in adhering to good governance practices and has complied with the requirements/ disclosures that have to be made in this regard. A Report on Corporate Governance is enclosed and forms part of this Report. A certificate from the Statutory Auditor on compliance with the provisions of Corporate Governance is also annexed to this Report

The details of the meetings of the Board and its Committees including its composition & terms of reference are provided in the Report on Corporate Governance which forms part of this Report

Policy on Dividend Distribution

In accordance with Regulation 43A of the SEBI (LODR) Regulations, 2015, the Company has formulated a Dividend Distribution Policy setting out the parameters and circumstances for consideration of the Board in determining the distribution of dividend to the Shareholders. The Policy is available on the website of the Company. The same can be viewed through the link: http://www. itnlindia.com/application/web_ directory/Company%20Policies/2017/ Dividend%20Distribution%20Policy. pdf

Transfer of Unpaid/Unclaimed Dividend to Investor Education and Protection Fund Authority

In terms of Section 125 of the Companies Act, 2013 and Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (the Rules), such unclaimed / unpaid dividend lying in the Company’s bank account for a consecutive period of seven years amounting to Rs. 1,03,290/- for FY 2009-10 was transferred to Investor Education and Protection Fund (IEPF) on September 20, 2017. Accordingly, the underlying equity shares viz. 514 equity shares were also transferred to the demat account of IEPF, the details of which are available on the weblink: http://www.itnlindia.com/pdffiles/DV/ Details_of_Shareholders_dividend_ unclaimed_for_7_consecutive_ years_2017.pdf

Further, the dividend for FY 2010-11, which has remained unpaid/ unclaimed for a consecutive period of seven years are due for transfer to IEPF Account on due date viz. September 11, 2018. The underlying Equity Shares would also be transferred to demat account of IEPF Account on the due date, the details of which can be found at the weblink: http://www.itnlindia.com/pdffiles/DV/ Statement of Unclaimed dividend amountconsecutivelyfor7years_2018. pdf

Related Party Transactions

The Company has developed a Related Party Transactions Policy & Framework for the purpose of identification and approval of such transactions. All related party transactions entered into by the Company in terms of the Policy are placed before the Audit Committee every quarter for their approval. The Related Party Transactions Policy as approved by the Board has been uploaded on the Company’s website and is available on the link: http:// www.itnlindia.com/invrelation. aspx?page_ID=25&Sec_ID=5

All related party transactions entered during the year were in the ordinary course and on an arms’ length basis.

Policy for Prevention of Sexual Harassment at Workplace

The Company has provided a safe and dignified work environment for its employees which is free of discrimination, intimidation and abuse. The Company has adopted a Policy for Prevention of Sexual Harassment of Women and constituted Internal Complaints Committee as per the requirement of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The objective of this policy is to provide protection against sexual harassment of women at workplace and for redressal of complaints of any such harassment. No complaints with allegations of any sexual harassment were reported during the year under review

Whistle Blower Policy

In accordance with the provisions of Section 177 (10) of the Companies Act, 2013 and Regulation 22 of the SEBI (LODR) Regulations, 2015, the Company has established a vigil mechanism by adopting a Whistle Blower Policy to report concerns or grievances. The administration of the vigil mechanism is ensured through the Audit Committee

The Whistle Blower Policy adopted by the Company is available on the website of the Company. The same can be viewed through the link: http://www.itnlindia.com/application/ web_directory/Company%20policies/ Whistle%20Blower%20Policy.pdf

Risk Management

Your Company recognizes that risk is an integral part of business and is committed to managing the risks in a proactive and efficient manner. The Board periodically reviews the Risk Mitigation Framework laying the perceived risks and the mitigation measures to ensure that Management controls risk through means of a properly defined framework

Particulars of Loans, Guarantees or Investments

Particulars of investments, loans and guarantees form part of Note no. 4, 5 and 35 respectively to the financial statements provided in the Annual Report

Deposits

Your Company has not accepted any Fixed Deposits during the year under review

Energy Conservation, Technology Absorption And Foreign Exchange Earnings and Outgo

Since the Company does not own any manufacturing facility, there is nothing to report under the Energy Conservation and Technology Absorption particulars in the Companies (Accounts) Rules, 2014

During the year under review, your Company’s foreign exchange expenditure was Rs. 96.98 Crore

Particulars of Employees

In terms of the provisions of Section 197(12) of the Companies Act, 2013, (“the Act”) read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, particulars of the employees drawing remuneration in excess of the limits specified therein forms part of this Report as Annexure IV

Disclosures pertaining to remuneration and other details 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 forms part of this Report as Annexure V

Corporate Social Responsibility

In an effort to enhance social inclusiveness, the Company has integrated Corporate Social Responsibility (“CSR”) as a part of the project life cycle and beyond the responsibility of business operations

The Company strongly believes that the surface transportation infrastructure building should not only benefit traffic movement but should also bring direct benefit to the villages along these highways through economic and social empowerment of the community. In order to achieve these objectives, the Company launched various CSR initiatives which has so far touched the lives of 350,000 rural population across 600 villages along its road projects

The Company is firmly committed to bring prosperity to the lives of the people through its CSR programs, primarily through improved livelihood incomes by harnessing natural resources available in the region; better health and hygiene; improved education environment and creating safe villages, in an economically, socially and environmentally sustainable manner, while recognizing the interest of all its stakeholders, including partners and co-investors. The CSR Policy and Framework has been adopted by the Company and is available on the website of the Company. The same can be viewed through the link: http:// www.itnlindia.com

The Company was required to spend 2% of the average net profits of the last three financial years which worked out to Rs. 4.95 Crore. The Company had, however planned projects for a higher amount aggregating to Rs. 5.37 Crore. The actual spent during the year was Rs. 4.35 Crore. Some of the projects meant for the development of village infrastructure could not be implemented on time, during the year due to the delay in getting consensus from the local community and receipt of approvals. The same is proposed to be spent in FY 2018-19. The Report on CSR activities is annexed to this Report as Annexure VI

Directors’ Responsibility Statement

In terms of Section 134(5) of the Companies Act, 2013, (“the Act”) your Directors confirm that:

(a) in the preparation of the annual accounts for the financial year ended March 31, 2018, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(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 of the Company 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 were adequate and operating effectively

Acknowledgments

The Board of Directors place on record their appreciation for the continued support and co-operation received from the Government & its various Authorities including National Highways Authority of India, Banks, Financial Institutions and Members of the Company

The Board of Directors expresses their grateful and sincere appreciation for the contribution and commitment of the employees

By the Order of the Board

Deepak Dasgupta

Chairman

Mumbai, May 29, 2018