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Directors Report of Gati Ltd.

Mar 31, 2015

Dear Members,

As members are aware the Promoter family embarked upon the express distribution business way back in 1989 and incorporated a company to augment the business in 1995 which has now completed 25 years of useful existence and celebrated the silver jubilee earlier this year. Your Directors are now pleased to present the 20th Annual Report and the Audited Financial Statements of your company for the financial year ended March 31,2015.

During the financial year 2013-14, your Board of Directors changed the financial year from "July - June" to "April - March" in line with the provisions of the Companies Act, 2013. Consequently, the period under review consists of 12 months i.e. April 2014 to March 2015 and the previous financial year 2013-14 consists of 9 months i.e. July 2013 to March 2014. As such the financials of the two periods are not readily comparable.

Financial Highlights (Rs. in mn) Consolidated Particulars 2014-15 2013-14 (9 m) (9 m)

Total Income 16,627 11,272

Profit before Finance Cost, Depreciation & Amortization, Taxation 1,538 947 & Exceptional item

Less: Finance cost 419 325

Depreciation and Amortization (Net) 332 221

Profit before tax & exceptional items 787 401

Less: Exceptional items 29 0

Profit before tax 758 401

Less:Tax expenses 192 118

PAT before minority interest 566 283

Less: Minority interest 154 49

Profit after tax 412 234

Transferred to general reserve - -

Special Interim dividend* - -

Proposed dividend* - -

Balance profit transferred to surplus account - - (Rs. in mn) Standalone Particulars 2014-15 2013-14 (9 m) (9 m)

Total Income 4,546 2,626

Profit before Finance Cost, Depreciation 526 216 & Amortization, Taxation & Exceptional item

Less: Finance cost 139 47

Depreciation and Amortization (Net) 101 40

Profit before tax & exceptional items 286 129

Less: Exceptional items 29 0

Profit before tax 257 129

Less:Tax expenses 18 (77)

PAT before minority interest - -

Less: Minority interest - -

Profit after tax 239 206

Transferred to general reserve 24 21

Special Interim dividend 52 --

Proposed dividend 70 61

Balance profit transferred to 93 124 surplus account

There is no dividend distribution tax in view of set off u/s.115-O of the Income Tax Act, 1961.

Credit Rating

Due to continued strong performance of the company, Company''s credit rating has been improving over the years as reflected below.

Instrument Rating

Gati Ltd - Long Term Facilities A minus

Gati-KWE - Long Term Facilities A

Gati-KWE - Short Term Facilities A1 plus

The improved ratings has significantly reduced the effective cost of borrowing.

Change in Capital Structure and Listing at Stock Exchanges

The equity shares of your Company continue to be listed and traded on the BSE Ltd and National Stock Exchange of India Ltd. During the period under review, 2,13,450 equity shares were allotted on exercise of the options vested under the Employee Stock Option Scheme, and admitted for trading on NSE and BSE. Consequently, the Equity Share Capital of the Company increased from 8,72,64,087 equity shares of Rs 2/- each to 8,74,77,537 equity shares of Rs 2/- each.

Dividend

During the year under review, to mark the completion of 25 years in business, your Directors approved payment of special interim dividend @ 30% on equity shares of Rs.2/- each (Rs.0.60 per share). This was paid in December 2014.

The Directors have now recommended a final dividend of 40% (Rs. 0.80 per share) for the year ended March 31, 2015 (previous year 35%). This together with the special interim dividend already paid, makes a total dividend of 70% (Rs. 1.40 per share) for the financial year 2014-15 (previous year total of 35%).

Review of Operations

During the year under review, at consolidated level, your Company achieved a revenue of Rs. 16,627 mn, EBITDA of Rs. 1,538 mn, PBT of Rs. 758 mn and PAT of Rs. 566 mn as against a revenue of Rs. 11,272 mn, EBITDA of Rs. 947 mn, PBT of Rs. 401mn and PAT of Rs. 283 mn respectively in the previous period (9 months).

At standalone level, your Company recorded a revenue of Rs. 4,546 mn, PBT of Rs. 257 mn and PAT of Rs. 239 mn as against a revenue of Rs. 2,626 mn, PBT of Rs. 129 mn and PAT of Rs. 206 mn in the previous period (9 months).

e-Commerce

The e-Commerce business is growing at a CAGR of 125% over the last four years and will continue to soar for the next couple of years. During the period under review, the Company forayed into e-fulfilment centers by setting up five (5) e-fulfilment centers in major cities complemented with a spectrum of other solution offerings such as packaging, reverse logistics, and consolidation services. The comprehensive portfolio would facilitate the Company to penetrate into the E-Commerce ecosystem deeply and increase its footprint across the package delivery value chain. On the technology front, The Company has implemented bar code scanners to improve inventory control; CCTV surveillance system is built to strengthen the security and quality of service; and delivery personnel have been provided with tablets to enable real time tracing & tracking of shipments, CoD and other parameters of delivery.

With the Indian e-Commerce industry set to grow at a rapid pace, clocking 12 million orders per month by CY16 (Source: Accel Partners''), we believe that logistics service providers will realize mammoth growth opportunities. We believe that as one of the leading e-Commerce logistics service providers, we are strategically placed to benefit from the expected growth in the industry and our strategic initiatives remain to support the volume growth through investment in new facilities, infrastructure and technology.

During the year under review, e-Commerce division recorded a revenue of Rs. 1,274 mn as against a revenue of Rs. 408 mn in the previous period (9 months).

Indian Subsidiaries

Gati-Kintetsu Express Pvt Ltd. (Gati-KWE)

During the financial year under review, Gati-KWE, the flagship subsidiary, contributed 69% to the business of the Company. Gati- KWE offers solutions in Express Distribution - Road, Rail and Air; Transport Solutions for bulk transportation, e-fulfilment and Supply Chain Solutions that span end to end of the value chain. The financial year 2014-15 has been a challenging year, impacted adversely by slow growth of economy. GDP and IIP growth have been at 7.4 % and 2.8 % respectively during the year.

Gati-KWE commands leadership position in road transportation business, and second in Air cargo transportation. In Express Road category, your Company has registered a growth of 12% in (YoY). In Air Cargo space, your Company has registered healthy growth of 23% (YoY) in spite of weak growth of industry. The Transport Solutions business had a de-growth of 2% over the previous year due to operational challenges. Gati-KWE is first 3PL Company to introduce e-fulfilment services for e-commerce industry and is successfully running 5 e-fulfillment centers.

Gati-KWE understands the value of quality services. The Company has taken significant steps to improve the quality through automation of the processes like introduction of CCTV Tablets and Scanners to reduce defects and improve service efficiency levels. Gati-KWE has successfully run pilot project of bar-coding all packages and will be the first Express Cargo Company to introduce 100% barcode scanning of cargo. As a process, Gati-KWE is heading towards culture driven quality approach from initiative driven approach through continuous implementation of initiatives like 5S implementation, Service Quality standardisation.

During the year under review, Gati-KWE recorded a revenue of Rs. 11,424 mn, EBITDA of Rs. 1,160 mn and PAT of Rs. 575 mn against a revenue of Rs. 7,836 Mn, EBITDA of Rs. 837 mn and PAT of Rs. 369 mn in the previous period (9 months).

Project Udaan, a comprehensive program under implementation by Gati-KWE for enterprise transformation has yielded positive results and believe that it can drive the Company to higher levels of efficiency in the coming years. Under project Udaan various inter disciplinary initiatives have been taken on cost and revenue side to improve profitability of the Company by unlocking value and improving efficiency. Whilst in the first year, the project primarily drove short term initiatives to bring a positive change and momentum, it is also in the process of implementing structural changes around organisation structure, network design and capacity. Impact of short term initiatives is visible on efficiency and capability and are confident that the long term initiatives will enable us to become robust information driven lean and agile organisation.

Gati-KWE has grown in terms of Capacity, capabilities and overall organizational efficiencies. In the current year, Gati-KWE is poised for an exciting period of growth and expansion, as it envisages making informed structural changes based on advanced analytical tools around network & route optimization. To set new standards and excel beyond the expectations of all our stakeholders is the goal for the year, and the Company is confident achieving this goal.

Gati Kausar India Ltd. (GKIL)

Valued at Rs. 132 billion in 2012, the Indian cold chain industry is expected to grow at a CAGR of 16 percent until Fiscal 2017 (Source: Accel Partners'').Transportation is expected to grow at a higher CAGR of 18 percent as compared to storage, which is expected to grow at a CAGR of 16 percent during Fiscal 2017. With an established presence in cold chain, GKIL is well positioned and will be able to capitalize on the growth opportunity that this presents. Our growth strategy for cold chain operations, is to complement our existing delivery capabilities with future cold chain development with Pan India presence. Likewise, in past year and this year both, we will be investing ahead by strengthening our sales structure and operational processes to emerge as an integrated supply chain solution provider.

With a view to align and to seize the opportunities in the cold chain emerging market, Gati Kausar has raised Rs.1500 Mn from Mandala Capital AG Ltd. and Mandala Agribusiness Investments II Ltd. Out of the Rs.1500 Mn, Rs. 300 Mn has been invested in the form of Equity shares and Compulsory Convertible Preferential shares (CCPS) and the remaining Rs. 1200 Mn shall be invested in the form of Non- Convertible Debentures cum Bonds (Bonds). The funds raised will be utilized primarily for building a network of cold warehouses across the country over the next three years thus enabling the Company to offer integrated cold chain logistics and supply chain management, as well as value added services. With an existing fleet of 220 reefer trucks, Gati Kausar intends to build synergies for its customers by offering both reefer storage and transportation under one umbrella as the company will have strong and right mix of portfolio which will enable it to achieve its long term objectives. Multiple growth drivers exist for Gati Kausar as a cold chain solution provider which can aligned to globally fast emerging market of dairy, sea foods, pharma, meat products along with preserving, storing of agri products and thus increasing profitability to the company and returns to its investors.

During the year under review, GKIL recorded a revenue of Rs. 462 mn, EBITDA of Rs. 25 mn and Loss of Rs. 48 mn against a revenue of Rs. 358 mn, EBITDA of Rs. 34 mn and loss of Rs. 39 mn in the previous period (9 months).

Overseas Subsidiaries & Associates

During the year under review, two step down subsidiaries viz, Gati Cargo Malaysia SDN BHD, Malaysia and Gati China Holdings Limited, Mauritius have been liquidated due to unviable operations.

Gati Ship Ltd. (GSL)

In May 2014, your Company divested 12.09% stake in GSL, and GSL has since become an associate. Further, GSL has discontinued its operations and has settled all its major liabilities and exited from all major commercial contracts successfully. This has helped the Company to reduce the losses significantly and stopped further losses in future.

GSL ceased to be a subsidiary with effect from May 16, 2014 and accordingly the consolidated accounts consists of the performance of the Company till May 15, 2014.

A report on the financial position / performance of each of the subsidiaries, associates and joint ventures forms part of the consolidated financial statements.The Policy for determining material subsidiaries has been posted on the Company''s website at: http:// www.gati.com/images/pdf/investors/announcements/Policy-on- material-subsidiaries.pdf.

Special Reserve

During the year under review, the Irrecoverable advances to subsidiary Gati Ship Limited of Rs.238.44 Mn net of Rs.3.02 Mn realised on sale of 12,10,000 equity shares of Gati Ship Limited, investment in Gati Ship Limited of Rs. 1,080.10 Mn, loss on transfer of shipping division in Gati Limited during F.Y 2011-12 of Rs. 1,101.90 Mn and other losses Rs. 142.84 Mn have been adjusted against the Special Reserve in the Consolidated Balance Sheet. All the above accounting treatment is in accordance with the Scheme of Arrangement approved by the Honourable High Court of Andhra Pradesh vide their order dated March 19, 2013. The statutory auditors have drawn attention to these adjustments in their report as a matter of emphasis.

Consolidated Financial Statements (CFS)

In accordance with the Companies Act, 2013 ("the Act") and Accounting Standard (AS) - 21 on Consolidated Financial Statements read with AS - 23 on Accounting for Investments in Associates and AS - 27 on Financial Reporting of Interests in Joint Ventures, the audited consolidated financial statement is provided in the Annual Report.

The CFS should therefore be read in conjunction with the directors'' reports, financial notes, cash flow statements and the individual auditor reports of the subsidiaries.

Abridged Annual Accounts

Pursuant to the provisions of the first proviso to Section 136(1) of the Act and 10 of Companies (Accounts) Rules, 2014) the abridged annual accounts is being sent electronically to all shareholders. The full annual report is available on the website of the Company at www. gati.com and available for inspection at the registered office of the Company during working hours. Any member interested in obtaining the full annual report may write to the Company Secretary and the same will be furnished on request.

Air India and Gati Arbitration

In the year 2009, the Company discontinued Freighter Aircraft operations as per the arrangement with National Aviation Company of India Ltd (NACIL) (erstwhile Indian Airlines Ltd.,) and now Air India (AI), due to continuous failure and defaults by NACIL. The Learned Arbitral Tribunal adjudicating on the disputes between the Company and Air India Limited in respect of the discontinued freighter operations of the Company, has passed its Award dated September 17, 2013, whereby, it has inter alia directed Air India Limited to pay an amount of Rs. 26.82 mn to the Company against which an amount of Rs. 26.59 mn is included in the Loans and Advances being the difference between the amount of bank guarantee invoked by NACIL and claims acknowledged by the Company. Further, the Learned Tribunal has directed Air India Limited to pay interest @ 18% per annum on the awarded amount. Air India has preferred an application in the Delhi High Court inter alia seeking setting aside of the Award against which objection has been filed. The matter is awaiting disposal by the High Court.

Future Prospects

The new Government initiatives like "Make in India" and possible implementation of GST in the near future would give further impetus to the logistics industry and with the companies PAN India network including cold chain transportation would augment profitability to the company and improve shareholders value. The guidance for the company looks optimistic on the back of improving macro-economic outlook, rising consumer confidence levels and growth-friendly government policies.

The Company''s flagship subsidiary, Gati-KWE is poised for better growth through solution selling by integrating warehousing, distribution along with other value added services. In the e-Commerce space, your Company is uniquely placed to provide services in all weight categories and across Metros, State Capitals, Tier two and three cities, which is the growing need of the e-Commerce industry. In e-Commerce solutions, your Company is integrating supply chain solutions and distribution through e-fulfillment centres. The e-Commerce vertical has potential to register multi fold growth (YoY). The Company''s focus will be to explore and tap more e-fulfillment centres to cater growing demand of e-Com Companies.

Fixed deposits (FD)

As on March 31, 2015, fixed deposits of the Company stood at Rs. 475.81 mn out of which Rs. 10.31 mn remain unclaimed and there were no overdue deposits as on that date. During the year under review, your Company has accepted deposits to the tune of Rs. 252.58 mn. There was no default in repayment of deposits or payment of interest thereon during the year and there are no deposits which are in non-compliance with the requirements of the Companies Act, 2013.

Directors & Key Managerial Personnel (KMP)

Ms. Sheela Bhide has been appointed as an Additional Directorin the category of Woman Director and Independent director pursuant to section 149 of the Act w.e.f. August 6, 2014 in accordance with the provisions of the Companies Act, 2013 and Articles of Association of the Company, who shall hold office till the ensuing Annual General Meeting of the Company.

In accordance with the provisions of Section 152 of the Companies Act, 2013, Mr. Sanjeev Jain, Director-Finance who retires by rotation and being eligible, has offered himself for re-appointment.

The brief profiles of the directors who are to be appointed / re- appointed forms part of the notes and explanatory statement to the notice of the ensuing Annual General Meeting.

Pursuant to the provisions of Section 203 of the Companies Act, 2013the appointments of Mr. Mahendra Agarwal, Founder & CEO, Mr. Sanjeev Jain, Director Finance and Mr. VSN Raju, Company Secretary as Key Managerial Personnel of the Company was formalized

Particulars of Employees and related disclosures

The information 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 given as Annexure - A.

Declaration on Independent Directors

All the Independent Directors confirmed that they have met the criteria of independence as required under Section 149 of the Companies Act, 2013.

Remuneration Policy:

Your Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy forms part of the Corporate Governance Report.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its Audit, Nomination & Remuneration and other Committees. The manner in which the evaluation has been carried out has been explained hereunder.

A structured questionnaire was prepared after taking into consideration inputs received from the Directors, covering various aspects of the Board''s functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance.

A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as level of attendance, engagement and contribution, independence of judgement, safeguarding the interest of the Company and its minority shareholders etc. The performance evaluation of the Independent Directors was carried out by the entire Board, excluding the director being evaluated.. The performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors. The Directors expressed their satisfaction with the evaluation process.

Particulars of Loans, Guarantees & Investments

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 forms part of the Financial Statements.

Corporate Social Responsibility (CSR)

In terms of section 135 and Schedule VII of the Companies Act, 2013 read with rules made thereunder, the Board of Directors of your Company have constituted a CSR Committee.

CSR Committee of the Board has framed a CSR Policy which forms part of the Annual Report on CSR which is given as Annexure - B.

Gati-KWE has earmarked a budget of Rs. 7.67 mn (i.e. 2% of average net profits of the previous 3 years) for FY 2014-15 and spent Rs. 7.91 mn during the year towards CSR activities across India.

Related Party Transactions

Related party transactions that were entered during the financial year were on an arm''s length basis and were in the ordinary course of business. There were no materially significant related party transactions with the Company''s Promoters, Directors, Management or their relatives, which could have had a potential conflict with the interests of the Company.Transactions with related parties entered by the Company in the normal course of business are periodically placed before the Audit Committee for its approval and the particulars of contracts entered during the year as per Form AOC-2 is given as Annexure - C.

Meetings of the Board

Six Meetings of the Board of Directors were held during the year. For further details, please refer report on Corporate Governance of this Annual Report.

Vigil Mechanism

Pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a Vigil Mechanism for directors and employees to report genuine concerns has been established. The Vigil Mechanism Policy has been uploaded on the website of the Company at: http://www.gati.com/images/pdf/ investors/Gati-Vigil-Mechanism-Policy.pdf.

Familiarisation Programme for Independent Directors

Pursuant to Clause 49 of the Listing Agreement, the Company shall familiarise the Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company, etc., through various programmes.

Accordingly, the Company has arranged a technical session on December 6, 2014 to familiarize the Independent Directors about their roles, responsibilities and duties as Independent Directors. The details of the familiarisation programme has been disclosed on the website of the Company at: http://www.gati.com/images/pdf/ investors/Familiarisation-Programme-for-Independent-Directors.pdf.

Directors'' Responsibility Statement

Pursuant to the requirement under section 134(5) of the Companies Act, 2013 with respect to the Directors'' Responsibility Statement relating to the Company (Standalone), it is hereby confirmed:

1. That in the preparation of the Accounts for the period ended March 31, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures, as explained in earlier paragraph;

2. That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year under review;

3. That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. That the accounts have been prepared on a ''going concern'' basis, for the period ended March 31,2015.

5. That the Company, had laid down internal financial controls and that such internal financial controls are adequate and were operating effectively.

6. The directors have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

Extract of Annual Return

The details forming part of the extract of the Annual Return in Form MGT-9 is given as Annexure - D.

Development and Implementation of Risk Management Policy

Your company has a robust Risk Management Policy which has been implemented and placed effectively. The Company has been addressing various risks impacting the Company which includes the identification of various elements of risk impacting the company and mitigation of the same.

The details of Risk Management as practiced by the company is provided as part of Management Discussion and Analysis Report which forms part of this Annual Report.

Internal Financial Controls

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

Transfer of unclaimed dividend

Pursuant to the provisions of section 205A (5) of the Companies Act, 1956, the unclaimed dividend amount pertaining to the financial year 2006-07 was transferred by the Company to the Investor Education and Protection Fund (IEPF) and the unclaimed dividend pertaining to the financial year 2007-08 is due for transfer to IEPF.

Auditors

a) Statutory Auditors

M/s. RS Agarwala and Co, Chartered Accountants, Kolkata were appointed as the statutory auditors of the company at the 19th AGM held on August 5, 2014, for a period of three (3) years, subject to ratification at every AGM. The Company has received letter to the effect that the ratification of appointment, if made, would be within the prescribed limits under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for re-appointment. As required under Clause 49 of the Listing Agreement, the auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.

b) Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s dvm gopal & associates, a firm of Practising Company Secretaries to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is given as Annexure - E.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings & Outgo

The above information as required under the Companies Act, 2013 is given as Annexure - F.

Employees Stock Option Scheme

Details of the shares issued under Employee Stock Option Scheme (ESOS), as also the disclosures in compliance with Section 62 of Companies Act, 2013 and Rule 12 of Companies (Share Capital and Debentures) Rules, 2014 and SEBI (Share Based Employee Benefits) Regulations, 2014 and SEBI (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines,1999 as on March 31, 2015 is given as Annexure - G to this Report.

Corporate Governance

The Company is committed to maintain the high standards of corporate governance and adhere to the corporate governance requirements set out by SEBI. The Report on corporate governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report and is given as Annexure - H.

The requisite certificate from the Practicing Company Secretary confirming compliance with the conditions of corporate governance as stipulated under the aforesaid Clause 49 forms part of the report.

Management Discussion and Analysis (MDA)

MDA is provided as a separate section in the annual report.

General

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Issue of equity shares with differential rights as to dividend, voting or otherwise.

2. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOS referred to in this Report.

3. Save as provided in this report, neither the Managing Director nor the Whole-time Directors of the Company receive any remuneration or commission from any of its subsidiaries.

4. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company''s operations in future.

5. During the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

6. There were no material changes / commitments affecting the financial position of the Company between the end of financial year (March 31,2015) and the date of the report (April 28, 2015).

Acknowledgment

Your Company is grateful to the customers and business partners for their support and encouragement especially in the time of slow economic growth.Your Board is appreciative of the passion, dedication and commitment demonstrated on the job by all the employees.Your Directors wish to place on record their gratitude to the Customers, Government, Financial Institutions, Banks and Shareholders for their continuing support, guidance, and assistance over the years.

For and on behalf of the Board

Place: Hyderabad K L Chugh Date: April 28, 2015 Chairman DIN: 00140124


Jun 30, 2012

The directors take pleasure in presenting their Report for the year ended June 30,2012.

Financial Highlights (Rs. in mn)

Consolidated Standalone

Particulars 2011-12 2010-11 2011-12 2010-11

Income 12890 12113 8013 9081

Profit before Finance Cost, Depreciation & Amortization taxation & Exceptional Item 1802 1007 1697 966

Less: Finance Cost 619 516 471 520

Depreciation & Amortization (Net) 370 254 272 216

Profit before tax & exceptional items 813 237 955 229

Exceptional items (145) 0 3 0

Profit/(Loss) before tax 668 237 958 229

Less: tax expenses 253 96 238 86

Profit/(Loss) after Tax 415 141 720 143

Add: Balance in Profit and Loss brought forward (62) (139) 100 21 from previous year

Profit Balance available for appropriation 353 2 820 164 Appropriations

-Special Interim Dividend 52 0 52 0

-Proposed final dividend 43 43 43 43

-Tax on dividend 15 7 15 7

-General reserve 72 14 72 14

Balance Profit/(Loss) carried forward 171 (62) 638 100

Dividend

Consequent to restructuring of the Company, for the financial year 2011-12, your directors are pleased to have approved payment of Special (Interim) dividend @ 30% on equity share of Rs. 2/- each (Rs. 0.60 per equity share). This was paid in the month of July, 2012.

Further, your directors recommend a final dividend of 25% on the share capital of Rs. 173 mn forthe year ended June 30,2012.

This along with the special interim dividend, takes the total dividend to 55% (Rs. 1. 10 per share) for the financial year 2011-12 absorbingasumofRs. 11 Omn including dividend tax ofRs. I5mn.

Review of Operations

During the year under review, at consolidated level, your Company achieved a turnover ofRs. 12,890 mn as against Rs. 12,113 mn in the previous year showing a growth of 6.41 % and EBIDTA of Rs. 1802 mn as against Rs. 1007 mn in the previous year, on consolidated basis. Your company has recorded a profit before tax ofRs.668 mn and profit after tax ofRs. 415 mn as against Rs.237 mn andRs. 141 mn respectively in the previous year.

At standalone level, your Company recorded a turnover of Rs. 8,013 mn as against Rs. 9081 mn in the previous year. Further profit before tax was Rs. 958 mn and profit after tax was Rs. 720 mn as againstRs. 229 mn and Rs. 143 mn respectively in the previous year.

Express Distribution and Supply Chain (EDSC)

In order to strengthen Gati's leadership position in India and establish its global foot print and to create more value to the shareholders, your directors have been exploring opportunities for some time now. To achieve this, during the year, your company has signed a strategic joint venture with Kintetsu World Exress (KWE). KWE is listed on Tokyo Stock Exchange and is a global provider of a logistic services and solutions to its worldwide clients. Established in the year 1970 KWE today has a total of 308 offices in 194 cities in 32 countries.

Consequently, your Company formed a subsidiary Company namely Gati-Kintetsu Express Pvt. Ltd. (jV Company) and transfered substantial part of its 'Express Distribution and Supply Chain'division. The division was transferred to JV company under a Business Transfer Agreement (BTA) on a going concern basis, along with associated assets, liabilities, employees and debts amounting to Rs. 3305 mn with effect from March 31,2012. KWE through its affiliates invested Rs. 2,677 mn to acquire 30% stake in the JV Company through primary subscription and acquiring shares held by Gati Ltd. in the JV Company. The alliance brought together the Company's market leadership position in EDSC solutions in India and KWE's large base of global logistics customers and expertise in meeting the supply chain requirements of global corporations. Your Company now holds 70% and KWE and its affiliates holds 30% stake in the JV Company. Mr. Mahendra Agarwal, Founder and CEO of the Company would continue to provide leadership to the JV Company also.

The alliance with Kintetsu World Express will benefit from the synergies of being associated with a globally recognized brand in the industry and has strong compatibility in culture and core values of both organizations. It opens up the global customer base and network of KWE for the JV company which has been formed just in time to take full advantage of opening up of FDI in retail sector. Many Japanese companies have recently increased the pace of Investments in India to benefit from Indian consumer growth story. This strategic investment is longterm in nature seeking to provide exceptional service to those companies who are in the process of establishing manufacturing and trading bases in India.

Consequent to the transfer of EDSC division into the JV Company with effect from March 31,2012, the revenues pertaining to the last quarter of the Financial Year 2011 -12 were not accounted in the books (standalone) of the Company.

Coast-to-Coast

The company's Shipping division continued to face challenges on business and operational fronts due to poor economic conditions and sector specific business environment leading to unsatisfactory performance for this year as well. During the year under review, the Company's shipping division recorded a revenue of Rs. 180 mn and loss from operations ofRs. 288 mn against Rs. 923 mn and Rs. 162 mn respectively in the previous year.

In order to turn around the Division, your company restructured the shipping business into a wholly owned subsidiary -Gati Ship Private Limited, as a going concern basis with effect from March 31, 2012 pursuant to the approval of the shareholders of the Company. Your directors now strategise to induct a strategic partner to raise required capital to grow the shipping business profitably.

Gati International and Subsidiaries

Gati International, the global wing of Gati Ltd. is one of the leading providers of end to end freight forwarding services, specializing in air freight and ocean freight shipments and associated supply chain value added services.

During the year under review, the International division recorded revenue ofRs. 756 mn with operating margins ofRs. 70 mn as againstRs. 639 mn &Rs. 59 mn respectively in the previous year.

With a view to focus only on growth markets in APAC, your company is consolidating its position in China, Hongkong, Thailand & Singapore.

During the year under review, considering the business potentiality, your company has re-structured its investment in international subsidiaries to control them through the Singapore subsidiary company i.e. Gati Asia Pacific Pte Ltd., (GAP) and closed Gati Holdings Ltd., (GHL) Mauritius, the erstwhile direct subsidiary.

Accordingly, GAP became the direct wholly owned subsidiary of your company (earlier step down) and all the step down subsidiaries of GHL have now become the step down subsidiaries of GAP.

Accounts of Subsidiaries

The Ministry of Corporate Affairs, New Delhi vide its notification no. 2/2011 dated February 8,2011 granted subject to fulfillment of certain conditions, general exemption from attaching the annual accounts and other reports of Company's subsidiaries, as required under section 212 of the Companies Act, 1956. Copies of these annual accounts and related information will be made available on the Company's website atwww.gati.com and also on request. The annual accounts of the subsidiary companies will be made available at the registered office of the company and also at the venue during the Annual General Meeting. The financial information as required in the above referred notification for each subsidiary is published at the end of the consolidated financial statements in the Annual Reportforthe year 2011-12.

Abridged Annual Accounts

As in the last year and in accordance with the SEBI Guidelines and the Companies Act, 1956, abridged standalone and consolidated annual accounts for the year ended June 30,2012 are being circulated while detailed accounts will be made available on request and also at the venue of the Annual General Meeting.

Foreign Currency Convertible Bonds ("FCCBs")

During the year, your Company had successfully refinanced and repaid FCCBs issued in 2006 through afresh issue of FCCBs for an aggregate US$ 22.18 mn on favorable terms. The new FCCBs are due for repayment in 2016.

Al-Gati Arbitration

Your Company has initiated Arbitration Proceeding with the National Aviation Company of India Limited ("NACIL") in respect of certain disputes that had arisen between your Company and NACIL arising out of the Wet Lease Agreement that your Company had entered into with NACIL in the year 2007 wherein NACIL had invoked the Bankguarantee ofRs. 300 mn. Your Company had objected to the wrongful invocation of the Bankguarantee and raised claims on NACIL in respect of the continuous breaches committed by it during the tenure of the Wet Lease Agreement. NACIL has in turn raised certain counter claims on the Company in the proceedings. The disputes are pending before the Arbitral Tribunal. No orders have been passed against the Company nor have any claims been adjudicated in the matter as on date. In the opinion of the Company's Attorneys, no provision is considered necessary at this stage. The Auditors in their report have stated their inability to express an opinion in the matter.

Future Prospects

Having successfully completed business restructuring and capital infusion, your Company would now focus more on the profitable growth of e-Commerce, Cold Chain and International Freight Forwarding businesses apart from providing strategic direction to all its subsidiaries and management of portfolios of investments. Growth in the e-Commerce area is expected to touch Rs. 200 billion by 2020 as an Industry. This channel of distribution has picked up pace in the last year and faces challenges in its supply chain to provide cash on delivery services to residential locations across the country. In the E-Commerce space, your company is uniquely placed to provide services in Metros, Capitals, Tier 2 and 3 cities which will add to the growth of consumption through tele shopping and the internet. Your company is therefore increasing its capacity to cater to this industry with high quality, value, and branded product delivery. Cold chain is also a high growth future business where growth is expected to be fuelled by fiscal incentives and sector friendly government policies.

Despite modest growth in the last quarter, your Company remains optimistic of economic improvement and tap into consumption driven industries.

Accounting Policy

Your company has exercised the option under Companies (Accounting Standard) Amendment Rules 2009 relating to AS 11 and accordingly, appropriate adjustments have been made in the value of fixed assets and also the treatment of exchange gain/loss. The net impact of such changes have been disclosed in the financial statements.

Equity Share Capital

Your company has allotted 5,77,387 Equity Shares of Rs.2/- each pursuant to exercise of options vested under Employee Stock Option Scheme (ESOS). Consequently, as on 30th June, 2012, the company's share capital stood at Rs. 173 mn comprising of 8,65,82,287 equity shares of Rs.2/- each fully paid up as compared to Rs. 172 mn comprising of8,60,04,900 equity shares ofRs.2/- each in the previous year.

Fixed deposits

As on June 30, 2012, fixed deposits from the public and shareholders stood at Rs. 224 mn out of which Rs. 2.20 mn remained unclaimed. There were no overdue deposits.

Directors

During the year, your Board co-opted Mr.Yoshinobu Mitsuhashi and Mr. Sanjeev Kumar Jain as Additional Directors of the Company with effect from June 29, 2012 and July 1, 2012 respectively. Mr. Yoshinobu Mitsuhashi is an Independent and Non- Executive Director and Mr. Sanjeev Kumar Jain is a Whole Time Director designated as "Director - Finance". As per the provisions of Section 260 of the Act, both the Directors hold the office up to the date of the forthcoming Annual General Meeting (AGM) of the Company and are eligible for appointment as Directors. Resolutions seeking approval of the members for the appointment of Mr. Yoshinobu Mitsuhashi and Mr. Sanjeev Kumar Jain as Directors of the Company will be in the forthcoming AGM for your approval.

As per Section 256 of Companies Act, 1956 and in terms of Article 115 of the Articles of Association of the Company Mr. K L Chugh and Dr. P S Reddy retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment in terms of Article 115 of the Articles of Association of the company.

The brief profile of the directors who are to be appointed/re-appointed forms part of the notes to the notice of the ensuing Annual General Meeting.

The remuneration paid to the Managing Director for the year ended June 30, 2012, turned out to be excess due to inadequate profits. The Board of Directors noted the foregoing and considering the comparative industry standards and significant role played by the Managing Director in turning around and bringing back the Company into track, the Board felt that the remuneration paid to him was in line with his long experience and expertise and accordingly ratified, confirmed and approved, subject to the approval of the Shareholders and of the Central Government, the payment of remuneration, in excess of the limits prescribed under Schedule XIII of the Act and decided to waive the recovery of the excess remuneration paid to him, subject to approval of the Central Government in this regard. Post your approval, an application in this regard, will be made to Central Government for seeking its approval for waiver of the requirement for recovery of excess remuneration paid to the Managing Director.

Transfer of unclaimed dividend

Pursuant to the provisions of section 205A (5) of the Companies Act, 1956, the unclaimed dividend amount pertaining to the financial year 2003-04 was transferred by the Company to the Investor Education and Protection Fund (IEPF) and the unclaimed dividend pertaining to the financial year 2004-05 is due for transfer to IEPF. The dividend once transferred to Investor Education and Protection Fund cannot be claimed.

Directors' Responsibility Statement

Pursuant to the requirement under section 2I7(2AA) of the Companies Act, 1956 with respect to the Directors' Responsibility Statement, it is hereby confirmed:

1. That in the preparation of the Accounts for the Financial Year ended 30th June, 2012, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

2. That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year under review;

3. That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. That the Directors have prepared the accounts for the financial year ended 30th June, 2012 on a 'going concern' basis. Auditors

The Statutory Auditors of the company M/s. R S Agarwala & Co, Chartered Accountants, Kolkataand M/s. B K Agarwal & Co, as Branch Auditor who shall retire at the conclusion of the ensuing Annual General Meeting and are eligible for reappointment as statutory and branch auditors respectively for the financial year 2012-13. They have furnished a confirmation to the effect that their proposed re-reappointment, if made, would be within the limit prescribed under section 224( IB) of the Companies Act, 1956, and that they are not disqualified for such re-appointment within the meaning of Section 226 of the Companies Act, 1956.

The Auditors in their report have observed that they are unable to express an opinion in regard to the Management's view that no provision presently required pending resolution of the Air India Arbitration. The reason therefore has been given in the financial notes to the accounts and is also covered in their report.

Personnel

Particulars of employees pursuant to section 217(2A) of the Companies Act, 1956 are part of the report and are available to any member on request.

Energy, Technology and Foreign Exchange

The information required under the Companies Act (Disclosure of particulars in the report of Board of Directors) Rules, 1988 is given in the Annexure -1.

Employees Stock Option Scheme

During the year under review, 1,64,000 options were granted and accepted under Employee Stock Option Scheme of the Company. The disclosure as required pursuant to SEBIESOS guidelines is enclosed as Annexure - II.

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement, a report on Corporate Governance is enclosed as Annexure-lll. Acknowledgement

We thank our customers, vendors, investors, bankers, Government authorities and shareholders for their continued support during the year. We place on record our appreciation of the contribution made by employees at all levels. For and On behalf of the Board

Secunderabad, K. L. Chugh

August 9,2012 Chairman

 
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