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EREDENE CAPITAL PLC INVESTING IN INDIA’S INFRASTRUCTURE EREDENE CAPITAL PLC INVESTING IN INDIA’S INFRASTRUCTURE
ANNUAL REPORT & ACCOUNTS31 MARCH 2009
10 FINSBURY SQUARE7TH FLOOR LONDONEC2A 1AD
TEL: +44 (0)20 7448 8000
FAX: +44 (0)20 7149 9832
WWW.EREDENE.COM
Designed & Printed by Perivan 215197
215197 Eredene Cover 7/21/09 11:26 AM Page 1
DIRECTORS
Sir C J Benson
The Hon C W Cayzer
D A Coltman
A J N King
N M Naik
G D Varley
SECRETARY & REGISTERED OFFICE
G D Varley ACA
7 Pilgrim Street
London, EC4V 6LB
COMPANY NUMBER
5330839
AUDITORS
BDO Stoy Hayward LLP
55 Baker Street
London, W1U 7EU
WEBSITE
www.eredene.com
SOLICITORS
Faegre & Benson LLP
7 Pilgrim Street
London, EC4V 6LB
NOMINATED ADVISER & BROKER
Numis Securities Limited
10 Paternoster Square
London, EC4M 7LT
REGISTRARS
Neville Registrars Limited
18 Laurel Lane
Halesowen, B63 3DA
COMPANY INFORMATIONANNUAL REPORT & ACCOUNTS 2009
1 Highlights
2 Chairman’s statement
5 Investment portfolio summary
6 Review of investments
15 Board of directors
16 Report of the directors
18 Statement of directors’ responsibilities
19 Report of the independent auditors
20 Consolidated income statement
21 Consolidated balance sheet
22 Consolidated statement of changes in equity
23 Consolidated cash flow statement
24 Notes forming part of the consolidated financial statements
39 Company balance sheet
40 Notes forming part of the company financial statements
215197 Eredene Cover 7/21/09 11:26 AM Page 2
1HIGHLIGHTS
ANNUAL REPORT & ACCOUNTS 2009
• Eredene Capital PLC (“Eredene”, “Eredene Group”) reports continued progress in its nineinvestments in India
• Significant milestones achieved in transforming greenfield sites into revenue generatingbusinesses
• Three investee companies are revenue generating and a fourth is taking sales deposits
• One investee company paid its first dividend to Eredene less than two years afterconstruction began on its greenfield site
• All investee companies are forecast to be revenue generating by the end of 2010
• Cash balances of £26.2m at 31 March 2009 (2007: £48.6m)
• Cash balances equate to 10.7p per share (2007: 19.9p)
• No debt at Eredene Capital PLC level and only non-recourse to Eredene Capital PLC debt atIndian investee company level
• Loss for the 15 month period of £6.4m (2007: profit of £0.2m) includes non-cash movementof £5.1m following revaluations
• Net Asset Value attributable to equity shareholders of 21.9 pence per share as at 31 March2009 (2007: 24.1p)
215197 Eredene pp01-pp19 7/21/09 11:30 AM Page 1
2 CHAIRMAN’S STATEMENT
ANNUAL REPORT & ACCOUNTS 2009
During the period, Eredene received its first
dividend from an investment company, Sattva
Vichoor CFS, which was paid less than two
years after the start of construction. We are
confident that we have developed our
investee companies in India to a stage where
we can expect all of them to be earning
revenue by the end of 2010.
The Eredene Group specialises in investing in
India’s infrastructure, and has made
investments in three Container Freight
Stations (“CFS”), an Inland Container Depot
(“ICD”), a Third Party Logistics (“3PL”)
warehousing and distribution operation, two
Logistics Parks, an IT office infrastructure
complex and a mass low-cost housing
project.
Three of the investments are generating
revenue and a fourth is taking sales deposits.
Of the remainder, all are expected to be
revenue generating by the end of 2010.
The investment portfolio is concentrated on
the Eredene Group’s expertise in ports,
maritime services, logistics and warehousing,
but it is also diversified to a prudent degree
with urban infrastructure projects comprising
an affordable housing project and a modern IT
office infrastructure project. The portfolio is
also spread strategically across India’s major
economic centres and geographic zones.
Eredene has established strong local
partnerships in India, including an exclusive
joint venture partnership in nine eastern States
with shipping and tea conglomerate Apeejay
Surrendra Group, with whom we have made
two joint investments. The Eredene Group has
also made second investments with its
partners in Gujarat State, Contrans Logistic,
and with Eredene’s partners in Tamil Nadu
State, the Sattva Business Group – testament
to the strength of these relationships.
Looking ahead, Eredene has identified a
pipeline of additional investments, both with
its existing partners and with other potential
joint venture partners.
The Eredene Group has sufficient cash in
hand to progress all of its current investments.
Going forward, one of the options to grow
Eredene is for it to manage third party funds.
Work continues in Europe, the Gulf and Asia
to raise a second and independent private
fund which would be managed by Eredene, to
invest in the pipeline of additional investments
that have been identified and evaluated by our
team in Mumbai.
India’s political outlook is increasingly stable
following the May 2009 parliamentary
elections, which consolidated the Congress
Party coalition’s hold on power. With healthy
growth rates, India remains an attractive
investment destination in the current global
economic climate.
FINANCIAL HIGHLIGHTS
The Company changed its accounting reference
date from 31 December to 31 March during the
period. This change was made to align the
Company’s accounting reference date with
those of its subsidiaries and investee
companies in India. During the 15 month period
to 31 March 2009, Eredene made a loss of
£6.4m (2007: profit of £0.2m) representing
2.61p per share (2007: gain of 0.08p per
share). As at 31 March 2009, the Group had
cash balances of £26.2m (2007: £48.6m)
representing 10.7p per share (2007: 19.9p) and
a Net Asset Value (“NAV”) attributable to equity
shareholders of £53.7m (2007: £59.0m)
representing 21.9p per share (2007: 24.1p).
IN CHALLENGING MARKET CONDITIONS, I
AM PLEASED TO REPORT CONTINUED
PROGRESS TOWARDS ACHIEVING OUR
MEDIUM TERM GOAL OF TRANSFORMING
ALL NINE OF OUR INVESTMENTS IN INDIA
INTO REVENUE GENERATING
BUSINESSES.
215197 Eredene pp01-pp19 7/21/09 11:30 AM Page 2
3CHAIRMAN’S STATEMENT
ANNUAL REPORT & ACCOUNTS 2009
As an investment company, Eredene’s
performance is primarily judged by the change
in its net asset value per share. Eredene’s
NAV per share has fallen by 9% in the
15 months to 31 March 2009, primarily due to
unrealised fair value adjustments. Ernst &
Young India performed an independent,
fair-value valuation exercise on Eredene’s
non-consolidated investments in India as at
31 March 2009 which led to a downwards fair
value adjustment of £5.1m (2007: gain of
£1.8m). Much of that adjustment was caused
by the decline in value of Matheran Realty due
to falling land prices in Mumbai. Whilst the fall
in NAV is disappointing, it compares
favourably to the fall in indices such as the
FTSE 100 which declined by 39% over the
same period.
SIGNIFICANT MILESTONES
Although there is still much work to be done,
Eredene has achieved significant milestones in
its goal of transforming each of its
investments from green field sites into revenue
generating businesses. During the year under
review:
• The CFS at Vichoor near Chennai in Tamil
Nadu State, Eredene’s first joint venture with
the Sattva Business Group, paid its maiden
dividend in March 2009.
• Land was acquired near Ennore Port, also in
Tamil Nadu State, for a second joint venture
CFS with the Sattva Business Group.
• Eredene’s joint venture CFS at Pipavav in
Gujarat State with Contrans Logistic has been
revenue earning since mid-2008 and achieved
record traffic in March 2009.
• Land was acquired and an operating
licence granted for an Inland Container Depot
at Baroda, also in Gujarat State, a second
project with Contrans Logistic.
• Construction started at Eredene’s two
Logistics Parks in east India, both part of a
joint venture with Apeejay Surrendra Group.
First revenues are expected by the end of
2009.
• In Q3 2009, MJ Logistic is set to open the
first phase of its sophisticated 549,000 square
feet warehousing operation featuring cold
storage, automated cargo handling and
computer controlled racking at Palwal near
Delhi.
• In the first phase of Matheran’s project to
build low-cost homes near Mumbai, over
3,000 apartments are under construction of
which more than 80% have already been
pre-sold.
• A 77,000 square feet office tower in
Bangalore, a joint venture with Sribha
Infrastructure Solutions (formerly named
Symcon), is nearing completion.
ECONOMIC AND POLITICAL OUTLOOK
India’s economy has inevitably been affected
by the global economic crisis, but while much
of the world has plunged into recession,
India’s has fared far better. GDP grew at 6.7%
for the fiscal year 2008-09 while much of the
world was experiencing negative growth.
Container traffic, one of the primary profit
drivers for Eredene’s ports services
businesses, is forecast to continue to grow in
2009-10, albeit the growth rate is not
expected to be as high as in previous years.
Total cargo handling capacity of Indian ports
is forecast to increase to 1.5 billion tonnes by
2012 from the present 0.8 billion tonnes.
The Indian political landscape looks
increasingly stable following the parliamentary
elections in the world’s largest democracy in
May 2009. The Congress Party, led by
INDIA’S ECONOMY HAS INEVITABLY BEEN
AFFECTED BY THE GLOBAL ECONOMIC
CRISIS, BUT WHILE MUCH OF THE WORLD
HAS PLUNGED INTO RECESSION, INDIA’S
HAS FARED FAR BETTER. GDP GREW AT
6.7% FOR THE FISCAL YEAR 2008-09
WHILE MUCH OF THE WORLD WAS
EXPERIENCING NEGATIVE GROWTH.
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4 CHAIRMAN’S STATEMENT
ANNUAL REPORT & ACCOUNTS 2009
Dr Manmohan Singh, fought the elections on
a manifesto of development and poverty
alleviation. The result consolidated the
Congress Party’s hold on power and
increased its majority in the lower house. This
gives the Prime Minister a solid mandate for
completing his economic liberalisation and
development agenda, much of which was left
incomplete in the last Government due to the
conflicting agendas of his coalition partners.
Immediately after the elections, the new
Government announced that investment in
infrastructure and policy initiatives to
encourage private investment in infrastructure
will be among the top priorities. According to
Government estimates, India needs to invest
some $500 billion in its infrastructure by 2012
– primarily in roads, rail, ports, airports and
energy – in order to remain competitive.
Indian stocks rose in a post-election market
rally on expectations that the ruling coalition’s
decisive victory would lead to further
economic liberalisation, more privatisations,
financial sector reforms and increased
infrastructure spending.
PROJECT PIPELINE
Among possible future projects, the Eredene
Group is part of a consortium bidding to build
and operate a major new container terminal at
the southern port of Ennore. Eredene is
bidding for the project with Spain’s leading
port operator, Barcelona-based Grup Marítim
TCB SL, Spanish construction group
Obrascón Huarte Lain SA and GE Mauritius
Int Holdings, a subsidiary of America’s GE
Equipment Services. Eredene would hold a
22% interest in the consortium, if the bid is
successful.
There are four other port projects in the
pipeline, one potential airport deal, and
opportunities to invest in existing CFS
operations at two of India’s busiest ports. The
Eredene Group is also exploring several
options to invest in Logistics Parks including
one on a railway which would link into India’s
planned new rail Dedicated Freight Corridor.
As Eredene has allocated most of the funds
that it raised in 2006 to its existing
investments, an exercise is under way to raise
capital to invest in these new opportunities.
One of several options being explored is to
raise an independent second fund to finance
these and other future investments which
would be managed by Eredene.
CONCLUSION AND OUTLOOK
The year has seen a number of our
investments move into the revenue generating
stage and we were particularly pleased to
receive our first dividend from an investee
company. Sattva Vichoor CFS delivered a
dividend within two years of construction first
starting at its CFS. Looking forward, we
anticipate that by the end of 2010 all our
investee companies will be revenue
generating.
Finally, I would like to take this opportunity to
thank our shareholders for their continued
confidence in the Eredene Group, and I would
also like to convey my thanks to our
employees and advisers for their dedicated
work and loyalty during the past year.
DAVID COLTMAN
NON-EXECUTIVE CHAIRMAN
30 JUNE 2009
THE YEAR HAS SEEN A NUMBER OF OUR
INVESTMENTS MOVE INTO THE REVENUE
GENERATING STAGE AND WE WERE
PARTICULARLY PLEASED TO RECEIVE
OUR FIRST DIVIDEND FROM AN INVESTEE
COMPANY.
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ANNUAL REPORT & ACCOUNTS 2009
5
Baroda
Pipavav
Mumbai
Bangalore
Kalinganagar
Haldia
��
Chennai
Ennore
��
�
�
New Delhi
Punjab
Uttaranchal
�
Amount
Investment Portfolio Allocated Sector Location Progress
� Sattva Vichoor CFS £0.9m Container Logistics Chennai, Tamil Nadu Revenue generating & dividend paying
� Sattva Conware CFS £5.0m Container Logistics Ennore, Tamil Nadu Land acquisition phase
Contrans Logistic (formerly Box-Trans): £7.9m
� Project One: Pipavav CFS Container Logistics Pipavav, Gujarat Operational & revenue generating
� Project Two: Baroda ICD Container Logistics Baroda, Gujarat Land acquisition phase
Apeejay Infra-Logistics: £7.9m
� Project One: Haldia Logistics Park Logistics Park Haldia, West Bengal Construction phase
� Project Two: Kalinganagar Logistics Park Logistics Park Kalinganagar, Orissa Construction phase
� MJ Logistic Services £11.0m Warehousing & Third Northern India Operational & revenue generating
Party Logistics
Sribha Infrastructure Solutions £2.1m Office Infrastructure Bangalore & Chennai Construction phase
(formerly Symcon)
Matheran Realty & Gopi Resorts £16.4m Urban Development Mumbai region Construction & pre-sales phase
INVESTMENT PORTFOLIO SUMMARY
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ANNUAL REPORT & ACCOUNTS 2009
6 REVIEW OF INVESTMENTS
� Sattva Vichoor CFS
Eredene’s first investment with the Sattva
Business Group, a Container Freight Station
at Vichoor near Chennai, progressed from a
greenfield site to paying its first dividend in
less than two years.
The investee company declared a 5% interim
dividend during the period and significantly
exceeded its budget for the period, handling a
total of over 25,000 TEUs (20-foot equivalent
units) in container volume.
Sattva Vichoor provides a full range of CFS
services – 75,000 square feet of bonded
warehousing for exports and imports, secured
and paved stacking areas for containers, a
facility for assembly from kit parts, stacking
cranes, computer-driven tracking systems and
prime office facilities.
The 25-acre facility is situated in the industrial
hinterland of two large ports, 17 kilometres
from Chennai and 12 kilometres from Ennore.
A second container terminal at Chennai Port
is planned to start operations this year and
the port has also recently announced plans to
build a third container terminal. The third
terminal, called Chennai’s mega container
terminal, is planned to have a 5 million TEU
capacity with a quay length of 2 kilometres
and a berth of 22 metres, India’s deepest.
The Eredene Group has invested £850,000
for a 49% stake in Sattva CFS & Logistics Pvt
Ltd, the company operating Sattva Vichoor
CFS (www.sattva.in).
CONTAINER FREIGHT STATION NEAR CHENNAIPAYS FIRST DIVIDEND
Amount invested:£0.9m
Current ownership stake:49%
Sector:Container Logistics
Location:Chennai, Tamil Nadu, South East India
Progress to date:Revenue generating & dividend paying
Chennai �
215197 Eredene pp01-pp19 7/21/09 11:31 AM Page 6
7REVIEW OF INVESTMENTS
Sattva Conware CFS �
WORK STARTED ON NEW CONTAINER FREIGHTSTATION FOR ENNORE PORT
Eredene’s second investment with the Sattva
Business Group is another CFS in the
southern State of Tamil Nadu, which is
currently under development and will serve
the port of Ennore.
The Sattva Conware CFS is located on a
State Highway near the town of Ponneri to the
north of Ennore, with an initial area of 34
acres.
The site will serve initially as a large-scale
warehousing operation to meet existing
demand for storage and transport and it is
targeting its first open storage revenue by mid
2010. It is expected to be converted into a
fully fledged CFS and expanded to 60 acres in
time for the opening of Ennore’s new
container terminal scheduled for 2012.
Ennore Port, 24 kilometres north of Chennai,
was set up to ease the congestion at Chennai
Port. Ennore Port began operations in 2001
and a tender process is currently underway –
with the Eredene Group engaged in one of
the bids – for the construction of a new
1,000-metre container terminal with an
estimated capacity of 1.5m TEUs per annum.
The Chennai-Ennore region is the centre of
India’s automobile industry and a major
manufacturing and light industry hub. Major
global car manufacturers in the region include
BMW, Hyundai, Ford, Renault and Nissan.
The Eredene Group has allocated up to
£5 million for this investment and had a stake
of 90% as at 31 March 2009. This stake will
be reduced to 74% provided Sattva Conware
achieves certain milestones with the final
milestone being the payment of the first
dividend to Eredene.
Amount allocated to investment:£5.0m
Amount invested to 31 March 2009:£2.1m
Ownership stake at 31 March 2009:90%
Sector:Container Logistics
Location:Ennore, Tamil Nadu, South East India
Progress to date:Land acquisition phase
Ennore�
ANNUAL REPORT & ACCOUNTS 2009
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8 REVIEW OF INVESTMENTS
ANNUAL REPORT & ACCOUNTS 2009
� Contrans Logistic
Project One: Pipavav CFS
CONTAINER FREIGHT STATION AT PIPAVAV ENDSFIRST YEAR OF BUSINESS STRONGLY
The dedicated Container Freight Station at the
port of Pipavav in the western state of Gujarat
handled over 11,000 TEUs in its first financial
year to March 2009. After a slow start,
volumes have risen steadily, with a record
container throughput in March 2009.
The CFS is one of two projects being
developed with Eredene by Contrans Logistic
Pvt Ltd (formerly Box-Trans Logistics Pvt Ltd),
the other being the Baroda ICD project.
Eredene has invested £4.0m for a stake of
49% as at 31 March 2009 in the Contrans
Logistic holding company.
A total of 79 acres of land has been acquired
for the CFS on a site just 700 metres from the
port. Phase 1 of the CFS has a 96,000
square feet bonded warehouse equipped to
handle both imports and exports and a paved
container stacking yard of 21 acres.
Pipavav, located in the Saurashtra region of
Gujarat, is a major gateway to the Northern
and Western industrial regions. The Port has
good road connections and is linked to the
National Rail Network by a 380 kilometre
broad-gauge railway.
Maersk Line, which owns and operates
Pipavav, is investing in the port for aggressive
expansion, with plans to double container
volumes and triple bulk volumes in 2009-10.
The approach channel is being dredged to
accommodate larger vessels with 14.5 metre
drafts and, in April 2009, Maersk added
Pipavav to its Middle East, Mediterranean and
Europe service. Pipavav Port provides one of
the shortest sailing times to European ports
from India.
Gujarat was the first State in India to open its
ports to the private sector, with Pipavav being
the first of them, and its 1,600 kilometre
coastline, situated on the Arabian Gulf, is a
hub of development activity. Gujarat now
accounts for around 20% of India’s total
import and export activity.
Eredene’s partners in Contrans Logistic have
a successful track record in the CFS and
shipping sectors and have been operating a
CFS at the Port of Mundra in the north of
Gujarat State since 2003.
Contrans Project One:Pipavav CFS
Sector:Container Logistics
Location:Pipavav, Gujarat, North West India
Progress to date:Operational & revenue generating
Pipavav �
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9REVIEW OF INVESTMENTS
ANNUAL REPORT & ACCOUNTS 2009
Contrans Logistic �
Project Two: Baroda ICD
The second project being developed by
Contrans Logistic is an Inland Container Depot
near Baroda, also located in Gujarat State. The
planned 135-acre site is on an 800-metre wide
land corridor next to the two primary transport
routes from Delhi to Mumbai – National
Highway 8 and the main north-south rail line,
which carries the largest amount of freight
traffic in India.
The ICD licence has been granted and
logistics consultancy firm British Maritime
Technologies is working on a master plan for
the site which will include a railway siding for
loading and unloading rail freight. Indian
Railways is planning a Dedicated Freight
Corridor between Mumbai and Delhi which will
be adjacent to the Baroda ICD. More than 120
acres of land has been acquired and is in the
process of being registered by the company.
The ICD plans to open for its first customers in
2010.
An ICD provides broadly the same facilities as
a CFS – warehousing, packaging and re-
packaging, assembly from kits, customs
clearance, logistics and transport. A CFS is
normally located near a port whereas an ICD is
normally located next to a railway line.
The Eredene Group has a 49% stake in
Contrans Logistic and has allocated up to
£7.9m in total to the Contrans holding
company – which also owns and operates the
Pipavav CFS.
LAND ACQUIRED AND LICENCE GRANTED FOR NEWINLAND CONTAINER DEPOT
Contrans Project Two:Baroda ICD
Sector:Container Logistics
Location:Baroda, Gujarat, North West India
Progress to date:Land acquisition phase
Amount allocated to Contrans in total:£7.9m
Amount invested in Contrans in total to 31 March 2009:£4.0m
Ownership stake at 31 March 2009:49%
Baroda �
MASTERPLAN OF BARODAINLAND CONTAINER DEPOT
MUMBAINational
Highway 8:Delhi – Mumbai
DELHI
BARODA
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10 REVIEW OF INVESTMENTS
ANNUAL REPORT & ACCOUNTS 2009
� Apeejay Infra-Logistics
Project One: Haldia Logistics Park
CONSTRUCTION STARTS ON LOGISTICS PARK INJOINT VENTURE WITH APEEJAY SURRENDRA
Construction is underway at a new 90-acre
Logistics Park near the port of Haldia, West
Bengal, one of Eredene’s two joint ventures
with tea, shipping and hospitality conglomerate
Apeejay Surrendra Group
(www.apeejaygroup.com).
The Logistics Park, which is being built and
operated by the joint venture company Apeejay
Infra-Logistics Pvt Ltd, is planned to have eight
acres of open storage available from Q4 2009.
Apeejay Infra-Logistics, in which Eredene has a
50% stake, is also developing a second
logistics park at Kalinganagar.
Construction of the facility is underway with
more than 90% of the boundary wall
completed. The total open storage area is
expected to increase to 10 – 15 acres by the
end of 2009 and 130,000 square feet of
bonded and domestic-use racked warehousing
are due to be constructed in 2010.
Haldia, a port on the confluence of the Haldi
and Hoogly Rivers opening onto the Bay of
Bengal and 90 kilometres downstream from
Kolkata, is one of West Bengal’s fast emerging
industrial centres with a concentration of
Petroleum, Chemical and Petrochemical plants.
The Logistics Park will provide dedicated space
for storage, packaging, transport, light
processing workshops, offices and other key
support services to Haldia’s more than 350
industrial units.
The Eredene Group has allocated a total of
£7.9m to the Apeejay Infra-Logistics joint
venture to allow it to complete the construction
of the two Logistics Parks at Haldia and
Kalinganagar.
Apeejay Infra-Logistics Project One:Haldia Logistics Park
Sector:Logistics Park
Location:Haldia, West Bengal, East India
Progress to date:Construction phase
Haldia�
MASTERPLAN OF HALDIALOGISTICS PARK
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11REVIEW OF INVESTMENTS
ANNUAL REPORT & ACCOUNTS 2009
Apeejay Infra-Logistics �
Project Two: Kalinganagar Logistics Park
CONSTRUCTION UNDERWAY AT KALINGANAGARLOGISTICS PARK
Construction is also underway at Eredene’s
second project with Apeejay Surrendra Group,
a 30-acre Logistics Park to serve the
Kalinganagar industrial complex, a fast
growing steel hub in Orissa State’s Jajpur
district.
The site is being levelled and five to seven
acres of open storage facilities are expected to
be available from March 2010. A bonded and
domestic-use racked warehouse of 112,000
square feet is planned to be constructed in
2010. The park is being built and operated
by the joint venture company Apeejay
Infra-Logistics Pvt Ltd.
Orissa State, in eastern India, is undergoing
rapid industrialisation. The State Government
has identified 13 sites along its coastline for
development of various ports, and a large steel
complex is under development close to the
new Logistics Park.
The Logistics Park is expected to be the first
fully purpose-built transport and warehouse
facility to service the Kalinganagar region and it
will specifically target the in-bound and out-
bound cargo centred on the steel industry.
The location is well connected by road and rail
– 129 kilometres from the major port at
Paradip and 86 kilometres from the newly built
Dhamra Port, which will be the deepest port in
India with a draft of 18 metres when it opens
for commercial traffic in 2010. A new railway
line linking Daitari and Banshapani will enable
access from the Logistic Park to the rail
network via a proposed siding.
Apeejay Infra-Logistics Project Two:Kalinganagar Logistics Park
Sector:Logistics Park
Location:Kalinganagar, Orissa, East India
Progress to date:Construction phase
Amount allocated to ApeejayInfra-Logistics in total:£7.9m
Amount invested in Apeejay Infra-Logisticsin total to 31 March 2009:£1.9m
Ownership stake50%
Kalinganagar �
MASTERPLAN OF KALINGANAGARLOGISTICS PARK
215197 Eredene pp01-pp19 7/21/09 11:32 AM Page 11
12 REVIEW OF INVESTMENTS
� MJ Logistic Services
A brand new hub warehousing facility for MJ
Logistic’s Third Party Logistics business in
northern India is expected to open for its first
customers in Q3 2009 (www.mjlsl.com).
The state-of-the-art storage facility at Palwal,
strategically located on the Delhi-Agra
highway, will be linked in a hub-and-spoke
operation to warehouses in Punjab and
Uttaranchal to cover India’s entire northern
industrial heartland.
The first phase comprises 200,000 square
feet with computer controlled racked shelving
and 20,000 pallet positions of ambient
storage and 1.05 million cubic feet of
temperature controlled chambers from -25º to
+10º centigrade, all under one roof.
MJ Logistic Services Ltd, a 3PL solutions
provider in which Eredene has a stake that will
scale down to 74% from its current 90% in
line with agreed performance targets, is
targeting growing demand for 3PL services in
India.
On project completion, MJ Logistic is planned
to have total dry warehousing space of over
600,000 square feet and cold storage facility
of over 200,000 square feet.
Incorporated in 2005, MJ Logistic built its
business by providing storage, transportation
and distribution services in 500,000 square
feet of traditional leased warehousing to
customers such as Philips, Bosch, Colgate
and ITC.
A 2009 study by the Associated Chambers of
Commerce and Industry of India, forecast a
rapid growth in 3PL business in India as
companies seek better and more cost
effective management of their supply chain
processes.
The Eredene Group has allocated up to £11m
in MJ Logistic and had a stake of 90% as at
31 March 2009.
A STATE-OF-THE-ART 3PL BUSINESS FORNORTHERN INDIA
Amount allocated to investment:£11.0m
Amount invested to 31 March 2009:£7.9m
Ownership stake at 31 March 2009:90%
Sector:Warehousing & Third Party Logistics
Location:Delhi region, North India
Progress to date:Operational & revenue generating
New Delhi
Punjab Uttaranchal
�
ANNUAL REPORT & ACCOUNTS 2009
215197 Eredene pp01-pp19 7/21/09 11:32 AM Page 12
ANNUAL REPORT & ACCOUNTS 2009
13REVIEW OF INVESTMENTS
A HIGH-END IT OFFICE BUILDING IN BANGALORE
Sribha Tower, a 77,000 square feet high-end
office development in the southern city of
Bangalore, is nearing completion and is
scheduled to be ready for occupancy in late
2009.
The tower is one of two ‘plug and play’ IT
offices planned to be developed by Sribha
Infrastructure Solutions Company Pvt Ltd
(formerly Symcon Global Technologies) with a
second tower planned for Chennai.
Sribha’s sister company, SGT Global, a
leading provider of IT, business process
outsourcing, call centres and engineering
services, has agreed to lease approximately
half the space in the first tower
(www.sgtglobal.com).
Designed to accommodate more than 800
people, the tower is located off the
Bangalore-Hosur National Highway, adjacent
to the Electronics City IT precinct.
A second, similar development is planned in
Bangalore and also two further IT office
towers in Chennai.
The Eredene Group has invested £2.1m for a
36.5% stake in Sribha Infrastructure Solutions
Company Pvt Ltd.
Amount invested:£2.1m
Ownership stake:36.5%
Sector:Office Infrastructure
Location:Bangalore and Chennai
Progress to date:Construction phase
Sribha Infrastructure Solutions
Bangalore
215197 Eredene pp01-pp19 7/21/09 11:32 AM Page 13
ANNUAL REPORT & ACCOUNTS 2009
Matheran Realty and Gopi Resorts
A total of 73 apartment buildings with retail
and commercial units are under construction
at Matheran Realty’s mass affordable housing
project at Tanaji Malusare City, Karjat, near
Mumbai (www.tmcity.in).
The new township is being constructed by
Matheran Realty’s subsidiary Gopi Resorts
and is the first of a number of projects to
develop affordable homes on a large scale for
Mumbai’s increasingly prosperous blue collar
workers.
It is proposed to develop the township in
partnership with the Mumbai Metropolitan
Region Development Authority (MMRDA) and
a letter of intent has been received from the
MMRDA.
Work is taking place on about 80 acres with
5.7 million square feet of residential buildings,
retail and commercial units planned. The
project also includes provision of associated
infrastructure for the township, including
internal roads, water and sewage treatment
plants, street lighting, and water and electricity
supply.
The 73 buildings under construction are at
various stages of completion. At the end of
May 2009, all the foundations were laid and
35 of the buildings were at first or second
floor level. Three others were at third floor
level and one was at the fourth floor.
More than 2,500 units were sold following the
inaugural sales launch and the township is
expected to be sufficiently developed for first
residents to move in by the end of 2009.
NEW TOWNSHIP WITH LOW-COST HOUSING NEARMUMBAI
14 REVIEW OF INVESTMENTS
Amount allocated in total to MatheranRealty & Gopi Resorts:£16.4m
Amount invested in total to 31 March 2009in Matheran Realty & Gopi Resorts:£12.7m
Ownership stake at 31 March 2009:63.3% – Matheran Realty Pvt Ltd – Total
of direct & indirect stakes32.2% – Gopi Resorts Pvt Ltd (MRPL
subsidiary) – direct stake
Sector:Urban development
Location:Mumbai Region, Maharashtra, West India
Progress to date:Construction and pre-sales phase
Mumbai
215197 Eredene pp01-pp19 7/21/09 11:32 AM Page 14
ANNUAL REPORT & ACCOUNTS 2009
SIR CHRISTOPHER BENSON
NON-EXECUTIVE DIRECTOR
Sir Christopher Benson has been involved in
real estate investment and development
throughout his career. He gained significant
development experience with Arndale and
thereafter became Managing Director of
MEPC. He has been chairman of MEPC,
Royal & Sun Alliance, Boots the Chemist,
Costain and Albright & Wilson. He was also
chairman of the London Docklands
Development Corporation.
THE HON CHARLES CAYZER
NON-EXECUTIVE DIRECTOR
Charles Cayzer is an Executive Director of
Caledonia Investments plc, one of the largest
Investment Trusts listed on the London Stock
Exchange. Having gained experience of
merchant banking, commercial banking and
corporate and project finance with Baring
Brothers, Cayzer Irvine & Co and Cayzer
Limited, Charles was appointed a director of
Caledonia in 1985, where he has responsibility
for Caledonia’s real estate investments. He is
also a director of The Varun Shipping
Company Limited in India.
DAVID COLTMAN
NON-EXECUTIVE CHAIRMAN
David Coltman has over 40 years of
international experience in major and complex
logistics projects, including recently in India.
After 14 years at British Airways (BA), he
moved to British Caledonian where he
became Chief Executive. After its acquisition
by BA he moved to United Airlines, where
from 1995 to 2001 he was Chief Marketing
Officer and Executive Officer of the UAL
Corporation, based in Chicago. Mr Coltman is
the Chairman of Edinburgh Worldwide
Investment Trust plc, and the Senior
Independent Director of John Menzies plc, a
leading international logistics company with
significant interests in India.
ALASTAIR KING
CHIEF EXECUTIVE AND FOUNDER
Alastair King qualified as a solicitor and
practised in London and Central Asia with
Baker & McKenzie. From 1999 to 2002, he
held several senior positions within NewMedia
SPARK plc, an early stage technology venture
capital investor. From February 2002, he was
Managing Director of Galahad Capital plc,
then an AIM-quoted cash shell, which
completed the acquisition of Shambhala Gold
Limited in December 2003 and changed its
name to Galahad Gold plc. Mr King left the
board of Galahad Gold in December 2004. He
holds an MSc in finance from London
Business School and founded Eredene
Capital PLC in January 2005.
NIKHIL NAIK
NON-EXECUTIVE DIRECTOR
Nikhil Naik heads Eredene Capital PLC’s
advisory team in India. He was until March
2006 Regional Director of P&O in India and he
has a successful record in sourcing and
managing large infrastructure projects
throughout South Asia. An Indian national, Mr
Naik led P&O’s activities in South Asia for two
years. He was an employee of P&O for 10
years during which he held a number of senior
positions, including that of CEO of Mundra
International Container Terminal at Mundra
Port, a substantial port operator in Western
India.
GARY VARLEY
FINANCE DIRECTOR
Gary Varley is a Chartered Accountant with
board level experience in sectors including
private equity and real estate development.
He joined PricewaterhouseCoopers in 1994,
where he practised in the firm’s audit,
management consultancy and forensic
accounting divisions. As well as a number of
board level commercial roles, he was
previously a Principal with the AIM quoted
venture capital investor NewMedia SPARK plc
where he sat on the fund’s investment
committee. Prior to joining Eredene on its
formation, he was Finance Director of
Nicholas King Homes plc, a UK residential
property developer.
BOARD OF DIRECTORS 15
Sir Christopher Benson The Hon Charles Cayzer David Coltman Alastair King Nikhil Naik Gary Varley
215197 Eredene pp01-pp19 7/21/09 11:32 AM Page 15
16
ANNUAL REPORT & ACCOUNTS 2009
REPORT OF THE DIRECTORSfor the period ended 31 March 2009
The directors present their report together with the audited financial
statements for the 15 month period ended 31 March 2009.
The Company has changed its accounting reference date from
31 December to 31 March. This change has been made to align the
Company’s accounting reference date with those of its subsidiaries
and investee companies in India.
RESULTS AND DIVIDENDSThe income statement is set out on page 20 and shows the result for
the period.
The directors do not recommend the payment of a dividend
(2007: £Nil).
PRINCIPAL ACTIVITIES, REVIEW OF BUSINESS AND FUTURE
DEVELOPMENTS
Business review and principal activities
The Group invests in infrastructure projects in India, further detailed
information on which is provided in the Review of Investments on
pages 6 to 14.
The results for the Group show a loss for the period of £6.4m (2007:
profit of £0.2m). As at 31 March 2009, the Group had cash balances
of £26.2m (2007: £48.6m) and a Net Asset Value (“NAV”) attributable
to equity shareholders of £53.7m (2007: £59.0m), representing 21.9p
per share (2007: 24.1p).
As an investment company, Eredene’s performance is primarily judged
by the change in its net asset value per share. Eredene’s NAV per
share has fallen by 9% in the fifteen months to 31 March 2009. Whilst
this fall is disappointing, it compares favourably to the fall in indices
such as the FTSE 100 which has fallen by 39% over the same period.
Investing Policy
Eredene Capital PLC is an equity investor in Indian infrastructure
operating companies and holds its investments as part of an
investment portfolio. Its investment portfolio includes minority stakes
which are accounted for as investments and majority stakes which are
consolidated. It has no restrictions or maximum exposure limits on its
investments and would intend, on average, to hold its investments for
at least seven years until the underlying business reached full maturity.
Its investment policy is focused on:
• Indian infrastructure – primarily investment in Ports and Port
Services, Logistics and Warehousing, Transportation and Real
Estate sectors.
• Investment in businesses with a potential to generate substantial
capital growth providing a long-term capital appreciation and a
steady dividend yield.
• Target individual investments typically up to US$35m and equity
holdings of greater than 20%.
• Active role in investments through board participation and by
sourcing experienced and trusted local partners. The Management
Team of Eredene has significant experience in the target sectors.
• Investment in a diversified portfolio of infrastructure assets and
further diversification via balanced regional geographical exposure
within India with a range of co-investment partners.
• Gearing utilised at SPV level with the investee company raising debt
with no recourse to Eredene.
Principal risks and uncertainties
The execution of the Group’s strategy is subject to a number of risks
and uncertainties which include:
• Infrastructure and real estate investments are early stage, long-
term, illiquid investments and so the Group may not be able to exit
at the time and at the price which it had forecast. The Group seeks
to mitigate those risks by diversifying its portfolio across different
sectors, different cities in India and different partners.
• Investment in India is subject to a number of government rules and
regulations governing foreign investment and changes in those
rules may adversely affect the Group’s investments. The Group
monitors this risk by seeking advice from specialist lawyers and tax
advisors in India and by structuring its investments accordingly.
• The Group places its funds with financial institutions and so is
exposed to credit risk. The Group manages that risk by placing
funds primarily with institutions with a Standard & Poors credit
rating of AA or higher.
• The Group receives interest income on its variable rate bank
balances and fixed rate treasury deposits. A reduction in interest
rates would reduce the Group’s interest income.
• The Group invests in Indian companies and the fair value of those
investments is denominated in Indian Rupees. A movement in
foreign exchange rates would affect the carrying value of those
investments and the unrealised gain or loss.
The Board will continue to monitor and, where possible, control the
risks and uncertainties which could affect the business.
215197 Eredene pp01-pp19 7/21/09 11:32 AM Page 16
17
ANNUAL REPORT & ACCOUNTS 2009
REPORT OF THE DIRECTORSfor the period ended 31 March 2009
FINANCIAL INSTRUMENTS
Details of the use of financial instruments by the Company and its
subsidiary undertakings are contained in note 17 of the financial
statements.
POLICY AND PRACTICE ON THE PAYMENT OF CREDITORS
The Group’s policy is to settle terms of payment with suppliers when
agreeing the terms of each transaction, ensure that suppliers are
made aware of the terms of payment and abide by the terms of
payment.
The number of average days purchases of the Group represented by
trade creditors at 31 March 2009 was 24 days (2007: 18 days).
GOING CONCERN
The directors consider that the Group has adequate resources to
continue in operational existence for the foreseeable future. For this
reason, they continue to adopt the going concern basis in preparing
the financial statements.
AUDITORS
All of the current directors have taken all the steps that they ought to
have taken to make themselves aware of any information needed by
the Company’s auditors for the purposes of their audit and to
establish that the auditors are aware of that information. The directors
are not aware of any relevant audit information of which the auditors
are unaware.
BDO Stoy Hayward LLP have expressed their willingness to continue
in office and a resolution to re appoint them will be proposed at the
annual general meeting.
By order of the Board
G D VARLEY
COMPANY SECRETARY
30 JUNE 2009
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18
ANNUAL REPORT & ACCOUNTS 2009
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial
position of the Company and its subsidiaries (together referred to as
the “Group”), for safeguarding the assets of the Company, for taking
reasonable steps for the prevention and detection of fraud and other
irregularities and for the preparation of a Directors’ Report which
complies with the requirements of the Companies Act 1985.
The directors are responsible for preparing the Annual Report and the
financial statements in accordance with the Companies Act 1985. The
directors are also required to prepare financial statements for the
Group in accordance with International Financial Reporting Standards
as adopted by the European Union (IFRSs) and the rules of the
London Stock Exchange for companies trading securities on the
Alternative Investment Market. The directors have chosen to prepare
financial statements for the Company in accordance with UK
Generally Accepted Accounting Practice.
GROUP FINANCIAL STATEMENTSInternational Accounting Standard 1 requires that financial statements
present fairly for each financial year the Group’s financial position,
financial performance and cash flows. This requires the faithful
representation of the effects of transactions, other events and
conditions in accordance with the definitions and recognition criteria
for assets, liabilities, income and expenses set out in the International
Accounting Standards Board’s ‘Framework for the preparation and
presentation of financial statements’. In virtually all circumstances, a
fair presentation will be achieved by compliance with all applicable
IFRSs. A fair presentation also requires the directors to:
• consistently select and apply appropriate accounting policies;
• present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable
information; and
• provide additional disclosures when compliance with the specific
requirements in IFRSs is insufficient to enable users to understand
the impact of particular transactions, other events and conditions
on the entity’s financial position and financial performance.
PARENT COMPANY FINANCIAL STATEMENTSCompany law requires the directors to prepare financial statements for
each financial year which give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for
that period. In preparing these financial statements, the directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Company will continue in
business;
• make judgements and estimates that are reasonable and prudent;
and
• state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the
financial statements.
Financial statements are published on the Group’s website in
accordance with legislation in the United Kingdom governing the
preparation and dissemination of financial statements, which may vary
from legislation in other jurisdictions. The maintenance and integrity of
the Group’s website is the responsibility of the directors. The
directors’ responsibility also extends to the ongoing integrity of the
financial statements contained therein.
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19
ANNUAL REPORT & ACCOUNTS 2009
REPORT OF THE INDEPENDENT AUDITORS
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERSOF EREDENE CAPITAL PLCWe have audited the Group and Parent Company financial statements
(the “financial statements’’) of Eredene Capital PLC for the period
ended 31 March 2009 which comprise the consolidated income
statement, the consolidated and company balance sheets, the
consolidated cash flow statement, the consolidated statement of
changes in equity and the related notes. These financial statements
have been prepared under the accounting policies set out therein.
Respective responsibilities of directors and auditorsThe directors’ responsibilities for preparing the Annual Report and
Group financial statements in accordance with applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the
European Union and for preparing the parent company financial
statements in accordance with applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted
Accounting Practice) are set out in the statement of directors’
responsibilities.
Our responsibility is to audit the financial statements in accordance
with relevant legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements
give a true and fair view and have been properly prepared in
accordance with the Companies Act 1985 and whether the
information given in the directors’ report is consistent with those
financial statements. We also report to you if, in our opinion, the
Company has not kept proper accounting records, if we have not
received all the information and explanations we require for our audit,
or if information specified by law regarding directors’ remuneration
and other transactions is not disclosed.
We read other information contained in the Annual Report and
consider whether it is consistent with the audited financial statements.
This other information comprises only the corporate information, the
chairman’s statement, the investment strategy, the review of
investments, the board of directors, the report of the directors and the
statement of directors’ responsibilities. We consider the implications
for our review if we become aware of any apparent misstatements or
material inconsistencies with the financial statements. Our
responsibilities do not extend to any other information.
Our report has been prepared pursuant to the requirements of the
Companies Act 1985 and for no other purpose. No person is entitled
to rely on this report unless such a person is a person entitled to rely
upon this report by virtue of and for the purpose of the Companies
Act 1985 or has been expressly authorised to do so by our prior
written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we
hereby expressly disclaim any and all such liability.
Basis of audit opinionWe conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of evidence relevant to
the amounts and disclosures in the financial statements. It also
includes an assessment of the significant estimates and judgments
made by the directors in the preparation of the financial statements,
and of whether the accounting policies are appropriate to the Group’s
and Company’s circumstances, consistently applied and adequately
disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance
that the financial statements are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming our
opinion we also evaluated the overall adequacy of the presentation of
information in the financial statements.
OpinionIn our opinion:
• the Group financial statements give a true and fair view, in
accordance with IFRSs as adopted by the European Union, of the
state of the Group’s affairs as at 31 March 2009 and of its loss for
the period then ended;
• the Parent Company financial statements give a true and fair view,
in accordance with United Kingdom Generally Accepted
Accounting Practice, of the state of the Parent Company’s affairs as
at 31 March 2009;
• the financial statements have been properly prepared in
accordance with the Companies Act 1985; and
• the information given in the directors’ report is consistent with the
financial statements.
BDO STOY HAYWARD LLP
CHARTERED ACCOUNTANTSAND REGISTERED AUDITORS
LONDON
30 JUNE 2009
215197 Eredene pp01-pp19 7/21/09 11:32 AM Page 19
20 CONSOLIDATED INCOME STATEMENTfor the period ended 31 March 2009
ANNUAL REPORT & ACCOUNTS 2009
20
15 monthsended Year ended
31 March 31 December2009 2007
Note £’000 £’000
Portfolio return and revenue
Change in fair value of equity investments 12 (5,125) 1,788
Gain on disposal of subsidiary 23 – 1,142
Other portfolio income 23 –
(5,102) 2,930
Revenue from services 1,461 –
Cost of sales for services (1,326) –
Gross profit 135 –
Gross profit and net portfolio return (4,967) 2,930
Administrative expenses
Other (3,451) (2,758)
Contract termination costs 4 – (2,830)
(3,451) (5,588)
Finance income 7 2,020 2,855
(Loss)/profit before taxation 4 (6,398) 197
Taxation 8 (4) 7
(Loss)/profit after taxation (6,402) 204
Attributable to:
Equity holders of the company (6,384) 204
Minority interest (18) –
(6,402) 204
(Loss)/earnings per share
Basic and diluted 9 (2.61)p 0.08p
The notes on pages 24 to 38 form part of these financial statements.
215197 Eredene pp20-pp42 7/21/09 11:35 AM Page 20
21
ANNUAL REPORT & ACCOUNTS 2009
21
31 March 31 December2009 2007
Note £’000 £’000
Non-current assets
Property, plant and equipment 10 11,216 32
Investments held at fair value through profit or loss 12 18,279 10,158
Intangible assets 11 1,043 233
Deferred income tax asset 8 43 –
Other receivables 14 23 –
30,604 10,423
Current assets
Trade and other receivables 14 647 250
Cash and cash equivalents 26,235 48,639
26,882 48,889
Total assets 57,486 59,312
Current liabilities
Trade and other payables 15 (716) (262)
Non-current liabilities
Borrowings 16 (2,000) –
Total liabilities (2,716) (262)
Total net assets 54,770 59,050
Equity
Share capital 19 24,473 24,473
Special reserve 20 32,826 32,826
Foreign exchange reserve 20 740 –
Retained (deficit)/earnings 20 (4,361) 1,751
Capital and reserves attributable to equity shareholders of the company 53,678 59,050
Minority interest in equity 1,092 –
Total equity 54,770 59,050
The financial statements were approved by the Board of Directors and authorised for issue on 30 June 2009.
A J N KING
DIRECTOR
The notes on pages 24 to 38 form part of these financial statements.
CONSOLIDATED BALANCE SHEET at 31 March 2009
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22
ANNUAL REPORT & ACCOUNTS 2009
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the period ended 31 March 2009
ForeignShare Share Special exchange
capital premium reserve reserve£’000 £’000 £’000 £’000
Year ended 31 December 2007As at 1 January 2007 24,473 35,146 – –
Cancellation of share premium account – (35,146) 32,826 –
Profit for the year and total income and expenses
recognised for the year – – – –
Share based payment – – – –
As at 31 December 2007 24,473 – 32,826 –
Fifteen months ended 31 March 2009
As at 1 January 2008 24,473 – 32,826 –
Amounts recognised directly in equity:
Exchange differences arising on translation of
foreign operations – – – 740
Net income recognised directly in equity – – – 740
Loss for the period – – – –
Total income and expenses recognised for the period – – – 740
Share based payment – – – –
Minority interest on acquisition of subsidiary – – – –
As at 31 March 2009 24,473 – 32,826 740
Retainedearnings/ Shareholders’ Minority Total
(deficit) equity interest equity£’000 £’000 £’000 £’000
Year ended 31 December 2007As at 1 January 2007 (1,039) 58,580 – 58,580
Cancellation of share premium account 2,320 – – –
Profit for the year and total income and expenses
recognised for the year 204 204 – 204
Share based payment 266 266 – 266
As at 31 December 2007 1,751 59,050 – 59,050
Fifteen months ended 31 March 2009
As at 1 January 2008 1,751 59,050 – 59,050
Amounts recognised directly in equity:
Exchange differences arising on translation of
foreign operations (2) 738 82 820
Net income recognised directly in equity (2) 738 82 820
Loss for the period (6,384) (6,384) (18) (6,402)
Total income and expenses recognised for the period (6,386) (5,646) 64 (5,582)
Share based payment 274 274 – 274
Minority interest on acquisition of subsidiary – – 1,028 1,028
As at 31 March 2009 (4,361) 53,678 1,092 54,770
The notes on pages 24 to 38 form part of these financial statements.
215197 Eredene pp20-pp42 7/21/09 12:04 PM Page 22
23
ANNUAL REPORT & ACCOUNTS 2009
15 monthsended Year ended
31 March 31 December2009 2007
Note £’000 £’000
Cash flow from operating activities
(Loss)/profit before taxation (6,398) 197
Adjustments for:
Finance income (2,020) (2,855)
Dividend income (23) –
Profit on sale of subsidiary – (1,142)
Unrealised loss/(gain) on investments held at fair value 5,125 (1,788)
Share based payment charge 274 266
Depreciation 45 4
Amortisation 31 12
Negative goodwill (12) –
(Increase)/decrease in trade and other receivables (309) 126
Increase in trade and other payables 288 61
Decrease in provisions – (27)
Taxation paid (54) (99)
Net cash used in operating activities (3,053) (5,245)
Cash flows from investing activities
Purchase of property, plant and equipment (11,208) (36)
Purchase of intangible asset – (245)
Purchase of investments (13,245) (11,094)
Cash acquired with subsidiary net of purchase cost 156 –
Proceeds from sale of subsidiary – 12,082
Interest received 2,126 2,986
Dividends received 23 –
Net cash (used in)/generated from investing activities (22,148) 3,693
Cash flows from financing activities
Proceeds from borrowings 2,000 –
Repayment of borrowings (24) –
Net cash generated from financing activities 1,976 –
Net decrease in cash and cash equivalents (23,225) (1,552)
Cash and cash equivalents at the beginning of the period 48,639 50,191
Exchange differences on translation of foreign operations 821 –
Cash and cash equivalents at the end of the period 24 26,235 48,639
The notes on pages 24 to 38 form part of these financial statements.
CONSOLIDATED CASH FLOW STATEMENTfor the period ended 31 March 2009
215197 Eredene pp20-pp42 7/21/09 11:35 AM Page 23
NOTES FORMING PART OF THE FINANCIAL STATEMENTSfor the period ended 31 March 2009
24
ANNUAL REPORT & ACCOUNTS 2009
24
1. ACCOUNTING POLICIESEredene Capital PLC (the “Company”) is a company incorporated and
domiciled in the United Kingdom and quoted on the London Stock
Exchange’s AIM market. The consolidated financial statements of the
Company for the period ended 31 March 2009 comprise the Company
and its subsidiaries (together referred to as the “Group”).
Basis of preparationThe Group’s consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted for use in the EU (“IFRS”). The Company has elected to
prepare its parent Company financial statements in accordance with UK
GAAP. These are presented on pages 39 to 42.
The following accounting policies have been applied consistently in
dealing with items which are considered material in relation to the
Group’s financial statements.
The financial statements are presented in pounds sterling. They have
been prepared on the historical cost basis, except for the revaluation of
certain investments.
New accounting standards and changes to existing accountingstandardsi. Standards and interpretations effective in 2008:
Amendments to IAS 39 and IFRS 7: Reclassification of Financial
Instruments*
Amendments to IAS 39 and IFRS 7: Reclassification of Financial
Instruments – Effective Date and Transition*
IFRIC 11 – “IFRS 2 – Group and Treasury Share Transactions”*
The adoption of the above standards and interpretations did not have
any material effect on the group’s results or financial position
ii. Interpretations effective in 2008 but not relevant:
The following interpretations to published standards are mandatory for
accounting periods commencing on 1 January 2008 but are not
relevant to the group’s operations:
IFRIC 12 – “Service Concession Arrangements”*
IFRIC 14 – “IAS 19 – The limit on a defined benefit asset, minimum
funding requirements and their interaction”*
iii. Standards, amendments and interpretations to existing standards
that are not yet effective and have not been early adopted by the
group:
The following standards and amendments to existing standards have
been published and are mandatory for the Group’s accounting periods
commencing on or after 1 April 2009 or later periods, but they have not
been early adopted:
IAS 23 Borrowing Costs*
The Amendment removes the option of immediately recognising as an
expense borrowing costs that relate to qualifying assets (assets that
take a substantial period of time to get ready for use or sale). Instead,
an entity will be required to capitalise borrowing costs whenever the
conditions for capitalisation are met. The directors are of the opinion,
having assessed the impact, that it would have no material effect on the
consolidated balance sheet and the Income Statement if the Group had
adopted this standard early.
The impact of adopting the following would lead to presentational
changes only;
IAS 1 Presentation of Financial Statements: A Revised Presentation*
The Amendment to IAS 1 affects the presentation of owner changes in
equity and of comprehensive income. An entity will be required to
present, in a statement of changes in equity, all owner changes in
equity. All non-owner changes in equity (i.e. comprehensive income) are
required to be presented in one statement of comprehensive income or
in two statements (a separate income statement and a statement of
comprehensive income). In addition, the new requirements would
require the presentation of an opening comparative balance sheet when
there is a change in accounting policy. The standard does not change
the recognition, measurement or disclosure of specific transactions and
other events required by other IFRSs.
IFRS 7 Financial Instruments
This Amendment requires the analysis of each class of financial asset
and financial liability, into a three level fair value measurement hierarchy.
It requires additional disclosures in respect of those financial
instruments classified as Level Three (namely those that are measured
using a valuation technique which uses inputs that are not based on
observable market data). It also implements some changes to the
definition of and disclosures associated with liquidity risk.
IFRS 8 Operating Segments*
This standard requires an entity to adopt the ‘management approach’
to reporting on the financial performance of its operating segments.
Generally, the information to be reported would be what management
uses internally for evaluating segment performance and deciding how
to allocate resources to operating segments. Such information may be
different from what is used to prepare the income statement and
balance sheet. The standard also requires explanations of the basis on
which the segment information is prepared and reconciliations to the
amounts recognised in the income statement and balance sheet.
iv. Standards, amendments and interpretations to existing standards
that are not yet effective and not relevant for the group’s operations:
The following standards and amendments to existing standards have
been published and are mandatory for the groups accounting periods
commencing on or after 1 April 2009 or later periods, but are not
relevant to the group’s operations:
IFRIC 18 Transfer of Assets from Customers
IFRIC 17 Distributions of Non-cash Assets to Owners
IFRIC 16 Hedges of a Net Investment in a Foreign Operation*
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ANNUAL REPORT & ACCOUNTS 2009
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IFRIC 15 Agreements for the Construction of Real Estate
IFRIC 13 Customer Loyalty Programmes*
* - Endorsed by the EU
Basis of consolidationThe Group’s financial statements consolidate the financial statements of
the Company and its subsidiary undertakings. Subsidiaries are entities
controlled by the Company. Control exists when the Company has the
power, directly or indirectly, to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. In
assessing control, potential voting rights that presently are exercisable
or convertible are taken into account. The results of any subsidiaries
sold or acquired are included in the Group income statement up to, or
from, the date control passes. Intra-Group sales and profits are
eliminated fully on consolidation.
On acquisition of a subsidiary, all of the subsidiary’s separable,
identifiable assets and liabilities existing at the date of acquisition are
recorded at their fair values reflecting their condition at that date. On
disposal of a subsidiary, the consideration received is compared with
the carrying cost at the date of disposal and the gain or loss is
recognised in the income statement. The excess of the cost of
acquisition over the fair value of the Group’s share of the identifiable net
assets is recorded as goodwill. Intercompany transactions, balances
and unrealised gains on transactions between group companies are
eliminated. Subsidiaries’ accounting policies are amended where
necessary to ensure consistency with the policies adopted by the
Group.
GoodwillGoodwill represents the excess of the cost of an acquisition over the fair
value of the net identifiable assets of the acquired subsidiary at the date
of acquisition. Goodwill on acquisitions of subsidiaries is included in
intangible assets and allocated from the acquisition date to each of the
Group’s cash generating units (“CGU”) that are expected to benefit from
the business combination. Goodwill may be allocated to CGUs in both
the acquired business and in the existing business. Goodwill is tested
annually for impairment and carried at cost less accumulated
impairment losses.
Acquired intangible assetsIntangible assets, other than goodwill, that are acquired by the Group are
stated at cost less accumulated amortisation and impairment losses. The
pipeline of investments acquired is amortised over the period in which
gains or losses on the investments made from the pipeline are expected
to be realised of ten years. The amortisation charge for the period is
included within administrative expenses.
Impairment of intangible assets (including goodwill)Goodwill is not subject to amortisation but is tested for impairment
annually and whenever events or circumstances indicate that the carrying
amount may not be recoverable. Assets that are subject to amortisation
are tested for impairment when events or a change in circumstances
indicate that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of the
asset’s fair value less costs to sell and the value in use. For the purposes
of assessing impairments, assets are grouped at the lowest levels for
which there are identifiable cash flows (i.e. cash generating units).
Property, plant and equipmentProperty, plant and equipment is stated at cost less depreciation and
impairment. Depreciation on property plant and equipment is provided
at rates calculated to write off the cost less estimated residual value of
each asset over its expected useful life. It is calculated at the following
rates:
Fixtures and fittings – 18-20% per annum straight line &
reducing balance basis
Office equipment – 14-33% per annum straight line &
reducing balance basis
Leasehold improvements – 25% per annum reducing balance
basis
Motor vehicles – 26% per annum reducing balance
basis
Financial assets• Investments held at fair value through profit or loss
Investments in which the Group has a long-term interest and over
whose operating and financial policies it exerts significant influence,
but which are held as part of an investment portfolio, the value of
which is through their marketable value as part of a basket of
investments, are not regarded as joint ventures or associated
undertakings. The treatment adopted is in accordance with IAS 39
‘Financial Instruments: Recognition and Measurement’ and the
exemptions applying to venture capital organisations in IAS 28
‘Investments in Associates’ and IAS 31 ‘Interests in Joint Ventures’.
These investments are measured at fair value through profit or loss.
Gains and losses arising from changes in the fair value of these
investments, including foreign exchange movements, are included in
profit or loss for the period.
Unquoted investments are valued using appropriate valuation
methodologies, based on the International Private Equity and Venture
Capital Guidelines, which reflect the amount for which an asset could
be exchanged between knowledgeable, willing parties on an arm’s
length basis.
• Loans and receivablesOther receivables
Other receivables are recognised and carried at amortised cost
less an allowance for any uncollectible amounts. Unless otherwise
indicated, the carrying amount of the group’s financial assets are a
reasonable approximation to their fair value.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand
and short term deposits.
1. ACCOUNTING POLICIES (CONTINUED)
NOTES FORMING PART OF THE FINANCIAL STATEMENTSfor the period ended 31 March 2009
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• Financial liabilities held at amortised costTrade and other payables
Trade payables and other payables are recognised and carried at
amortised cost and are a short term liability of the Group.
Foreign currencyForeign currency transactions of individual companies are translated at
the rates ruling when they occurred. Foreign currency monetary assets
and liabilities are translated at the rate of exchange ruling at the balance
sheet date. Any differences are taken to the income statement.
Non-monetary assets and liabilities denominated in foreign currencies
that are stated at fair value are translated at foreign exchange rates
ruling at the date the fair value was determined.
On consolidation, the assets and liabilities of the Group’s overseas
subsidiaries are translated at exchange rates prevailing on the balance
sheet date. Income and expense items are translated at the average
exchange rates for the period. Exchange differences arising, if any, are
classified as equity and translated to a foreign exchange reserve.
Foreign exchange gain/losses resulting from the retranslation of
monetary assets and liabilities are recognised in the Income Statement.
Derivative financial instrumentsDerivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently re-measured at their fair
value. Changes in the fair value of the instruments are recognised
immediately in the income statement.
Portfolio return and revenueChange in fair value of equity investments represents revaluation gains
and losses on the Group’s portfolio of investments.
Dividends receivable from equity shares are included within other
portfolio income and recognised on the ex-dividend date or, where no
ex-dividend date is quoted, are recognised when the Group’s right to
receive payment is established.
Revenue from services comprises the fair value of the consideration
received or receivable for the sale of goods and services in the ordinary
course of the group’s activities. This is primarily the provision of storage
and transportation services, for which revenue is recognised on
provision of services and dispatch of goods. Revenue is shown net of
value-added tax, returns, rebates and discounts.
Share-based paymentsWhere share options are awarded to employees, the fair value of the
options at the date of grant is charged to the income statement over
the vesting period. Non-market vesting conditions are taken into
account by adjusting the number of equity instruments expected to vest
at each balance sheet date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of options
that eventually vest.
Where equity instruments are granted to persons other than
employees, the income statement is charged with fair value of goods
and services received. If it is not possible to identify the fair value of
these goods or services provided, the income statement is charged
with the fair value of the options granted.
Deferred taxDeferred tax expected to be payable or recoverable on differences at
the balance sheet date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes is
accounted for using the balance sheet liability method. Deferred tax
liabilities are generally recognised for all taxable temporary differences,
and deferred tax assets are recognised to the extent that it is probable
that taxable profits will be available against which deductible temporary
differences can be utilised.
Such assets and liabilities are not recognised if the temporary
differences arise from goodwill or from the initial recognition (other than
in a business combination) of other assets and liabilities in a transaction
that at the time of the transaction, affects neither the taxable profit nor
the accounting profit. Deferred tax is calculated at the rates of taxation
enacted or substantively enacted at the balance sheet date.
Pension costsThe Company contributes to directors’ and employees’ personal
money-purchase pension schemes. Contributions are charged to the
income statement in the period in which they become payable.
National Insurance on share optionsTo the extent that the share price at the balance sheet date is greater
than the exercise price on options granted under unapproved schemes,
provision for any national insurance contributions has been made
based on the prevailing rate of national insurance. The provision is
accrued over the performance period attaching to the award.
Operating leasesOperating lease rentals are charged to the income statement on a
straight-line basis over the term of the lease.
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATESThe preparation of the Group’s financial statements requires the
directors to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets
and liabilities. Estimates and judgements are continually evaluated and
are based on historical experience and other factors including
expectations of future events that are believed to be reasonable under
the circumstances. Actual results may differ from these estimates.
The directors consider that the following estimates and judgements are
likely to have the most significant effect on the amounts recognised in
the financial statements.
Value of investmentsThe Group’s investments held at fair value through profit or loss are
valued based on the International Private Equity and Venture Capital
Guidelines. An independent valuer, Ernst & Young India, was engaged
to value the investments under those Guidelines. The valuations are
1. ACCOUNTING POLICIES (CONTINUED)
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ANNUAL REPORT & ACCOUNTS 2009
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2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
(CONTINUED)made based on market conditions and information about the
investment. These estimates are subjective in nature and involve
uncertainties and matters of significant judgement (e.g interest rates,
volatility and estimated cash flows).
Impairment of goodwill The Group is required to test whether goodwill has suffered any
impairment on at least an annual basis. The recoverable amount is
determined using value in use calculations. The use of this method
requires the estimation of future cash flows and the selection of a suitable
discount rate in order to calculate the present value of these cash flows.
Share-based paymentsThe charge for share-based payments is calculated in accordance with
the analysis described in note 21. The option valuation model used
requires highly subjective assumptions to be made including the future
volatility of the Company’s share price, expected dividend yields, risk-
free interest rates and expected staff turnover. The directors draw on
external sources to aid them in the determination of the appropriate
data to use in such calculations.
3. SEGMENTAL ANALYSISThe Group’s only activity is infrastructure and real estate investment in
India. The Group’s revenue, profit before taxation and net assets are
attributable to this single activity.
4. LOSS BEFORE TAXATIONThis is arrived at after charging and (crediting):
15 months 12 monthsended ended
31 March 31 December2009 2007
£’000 £’000
Staff costs (see note 5) 1,218 795
Depreciation of tangible fixed assets 45 4
Amortisation of intangible fixed assets 31 12
Foreign exchange differences (169) 3
Hire of other assets – operating leases 2 1
Auditors’ remuneration
– audit services 57 58
– non-audit services
– tax advisory – 9
– other services 17 27
The Income Statement for the period ended 31 March 2009 includes,
for the first time, the results of the Company’s two newly acquired
Indian subsidiaries – MJ Logistic Services Ltd and Sattva Conware Pvt
Ltd. The Income Statement for the prior period does not include the
results of those subsidiaries.
The Income Statement for the prior period to 31 December 2007
includes an amount of £2,830,000 for contract termination costs,
including professional fees. These costs relate to the termination in
June 2007 of the Group’s advisory agreement with Saffron Capital
Advisers Limited (‘Saffron’), which had a term of seven years from
10 April 2006. As part of this agreed termination, Eredene paid Saffron
£2.39m and Saffron Capital Securities Limited (‘SCSL’) US$500,000,
which was set-off against a loan of US$500,000 (book value £274,000)
owed by SCSL to Eredene. These arrangements with SCSL had no
impact on Eredene’s net cash position. Under the terms of the Saffron
and SCSL agreement, all previously existing agreements between
Eredene and Saffron were terminated.
5. EMPLOYEESStaff costs (including Indian subsidiaries) consist of:
15 months 12 monthsended ended
31 March 31 December2009 2007
£’000 £’000
Wages and salaries 883 494
Equity settled share-based payments 216 256
Social security costs 70 13
Other pension costs 49 32
1,218 795
The average number of employees and directors (including Indian
subsidiaries) during the period was as follows:
15 months 12 monthsended ended
31 March 31 December2009 2007
Number Number
Management and administration 16 8
Warehouse and distribution 18 –
34 8
Staff numbers have increased following the acquisition of the Group’s
Indian subsidiary investment MJ Logistic Services Ltd (“MJ Logistic”).
MJ Logistic accounts for 8 of the management and administrative staff
and all 18 of the warehouse and distribution staff.
6. DIRECTORS' REMUNERATION
15 months 12 monthsended ended
31 March 31 December2009 2007
£’000 £’000
Directors’ emoluments 497 384
Company contributions to directors’
money purchase pension schemes 36 19
533 403
NOTES FORMING PART OF THE FINANCIAL STATEMENTSfor the period ended 31 March 2009
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ANNUAL REPORT & ACCOUNTS 2009
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6. DIRECTORS' REMUNERATION (CONTINUED)The Group made contributions to two directors’ own money purchase
pension schemes in 2009 (2007: 2).
Emoluments of the highest paid director for the 15 months ended
31 March 2009 were £227,000 (12 months ended 31 December
2007: £162,000). Company pension contributions of £21,000
(2007: £11,000) were made to a money purchase scheme on his
behalf.
Included in the directors’ emoluments figure is an amount of £44,000
(2007: £35,000) paid to Caledonia Group Services Limited for the
services of the Hon C Cayzer as a non-executive director. Caledonia
Group Services is a subsidiary of Caledonia Investments plc which is a
shareholder in the Company. The Cayzer Trust Company is a related
party to Caledonia Investments plc and is a shareholder in that
company. The Hon C Cayzer, who is a director of the Company, is a
director and has a beneficial interest in both Caledonia Investments plc
and the Cayzer Trust Company Limited.
Of the share based payment charge (see note 21), £209,000 relates to
directors (2007: £256,000). The directors are the key management
personnel of the Group.
7. FINANCE INCOME
15 months 12 monthsended ended
31 March 31 December2009 2007
£’000 £’000
Interest receivable on short term
bank deposits 2,020 2,855
8. TAXATION
15 months 12 monthsended ended
31 March 31 December2009 2007
£’000 £’000
Recognised in the income statement
Current tax expense
UK corporation tax – –
Adjustment for overprovision in prior period – (7)
Deferred tax
Movement in deferred tax asset 4 –
Income tax charge/(credit) 4 (7)
The tax assessed for the period differs from the standard rate of
corporation tax in the UK applied to the Group profit/(loss) before tax.
The differences are explained below:
15 months 12 monthsended ended
31 March 31 December2009 2007
£’000 £’000
(Loss)/profit on ordinary activities before tax (6,398) 197
(Loss)/profit on ordinary activities at the
standard rate of corporation tax in the
UK for the period of 28.4% (2007: 30%) (1,817) 59
Effects of:
Expenses not deductible for tax purposes 103 429
Capitalised expenses deductible for
tax purposes 3 –
Depreciation less than/(in excess of)
capital allowances 3 (2)
Non-taxable losses/(gains) on investments
and disposal of subsidiary 1,455 (879)
Non-UK recoverable overseas losses 300 -
Non-taxable dividend income (7) -
Tax losses (utilised)/carried forward (36) 404
Non-taxable finance income – (11)
Adjustment for overprovision in prior period – (7)
Tax charge/(credit) for period 4 (7)
The change in the tax rate applied compared to the previous year
reflects the reduction in the UK corporation tax rate from 1 April 2008.
Deferred taxNo deferred tax has been recognised on unutilised taxable losses. The
potential unrecognised asset is £1,222,000 (2007: £1,348,000).
9. LOSS PER SHARE AND NET ASSETS PER SHAREThe calculation of the basic and diluted loss per share is based on the
loss for the period attributable to equity shareholders of £6,384,000
(2007 profit: £204,000) and the weighted average number of shares in
issue during the period of 244,728,000 (2007: 244,728,000). The effect
of all potential ordinary shares under option is non-dilutive due to the loss
for the period. Details of the share options issued, which could be dilutive
in the future, are set out in note 21.
The calculation of net asset value per share is based on the net assets
attributable to equity shareholders of £53,678,000 (2007: £59,050,000)
and the number of shares in issue at the period end of 244,728,000
(2007: 244,728,000).
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10. PROPERTY, PLANT AND EQUIPMENTLand Fixtures Office
& Motor & equip-buildings Vehicles fittings ment Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2008 – – 7 29 36Additions 11,112 64 7 18 11,201Acquisition of subsidiary – – 16 13 29
Exchange differences – – 1 1 2
At 31 March 2009 11,112 64 31 61 11,268
Depreciation
At 1 January 2008 – – – 4 4Provided for in the period 2 13 12 18 45
Exchange differences – 1 1 1 3
At 31 March 2009 2 14 13 23 52
Net book value
At 31 March 2009 11,110 50 18 38 11,216
CostAdditions and at
31 December 2007 – – 7 29 36
DepreciationProvided for in the year
and at 31 December 2007 – – – 4 4
Net book value
At 31 December 2007 – – 7 25 32
11. INTANGIBLE ASSETS
AcquiredIntangible
Goodwill Asset£’000 £’000
Period ending 31 March 2009
CostAt 1 January 2008 – 245
Acquisitions 841 –
At 31 March 2009 841 245
Aggregate amortisation and impairmentAt 1 January 2008 – 12
Amortisation charge for period – 31
At 31 March 2009 – 43
Net book value
At 31 March 2009 841 202
Year ending 31 December 2007
Cost
Acquisitions and at 31 December 2007 – 245
Aggregate amortisation and impairment
Amortisation charge for year ended
31 December 2007 – 12
Net book value
At 31 December 2007 – 233
Acquired intangible assetIn June 2007, Eredene acquired Aboyne Mauritius Limited (‘Aboyne
Mauritius’) for the sum of £245,000. The assets acquired by Eredene
were a deal pipeline of potential projects involving equity commitments
of up to £100m together with the exclusive engagement of a team
headed by Mr Nikhil Naik. Since June 2007, Eredene has invested
through Aboyne Mauritius which in turn has invested in joint ventures
with developers.
The pipeline of investments acquired is amortised over the period in
which gains or losses on the investments made from the pipeline are
expected to be realised of ten years. The amortisation charge for the
period is included within administrative expenses. There were no events
or changes in circumstances during the period which indicated that the
carrying amount may not be recoverable.
GoodwillGoodwill arose on the acquisition of MJ Logistic Services Ltd on
7 January 2008. Further detail on the acquisition of MJ Logistic
Services Ltd is provided in note 23.
The recoverable value of goodwill has been determined using value in
use calculations based on cash flow projections in respect of the cash
generating unit towards which the goodwill was allocated. The goodwill
arising in the period was allocated in full towards the Group’s subsidiary,
MJ Logistic Services Ltd.
NOTES FORMING PART OF THE FINANCIAL STATEMENTSfor the period ended 31 March 2009
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The following key assumptions were used to determine value in use:
At 31 March 2009
Discount factor 16.9%
Perpetuity growth rate 4%
The assumptions used in the calculation were based on past
experience and forecasts of future performance. The cashflow
projection was based on a period which commenced on 1 April 2009
and continued for five years. The calculation of value in use determined
that there was no impairment of goodwill during the period.
The key assumptions used in the value in use calculation were:
• Revenue growth rates.
• Gross margin.
• Operating expenses.
• Discount rate.
• Growth rate used to extrapolate cash flows beyond the five year
period covered by management’s projections.
Projections were denominated in the same currency as the
denomination of the goodwill balance to eliminate the effect of
fluctuating exchange rates. Revenue growth rates used in
management’s projections are based on management’s estimate of
growth in the markets served, taking into account the current economic
uncertainties. Gross margins and operating expenses are based on
historical values and future expected values. The discount rate applied
to the cash flows is based on a risk free rate adjusted for a risk premium
to reflect both the increased risk associated with investing in equities
and the systematic risk of the specific cash-generating unit. Long term
growth rate is based upon the expected growth rate for the industry
and the Indian economy.
Sensitivity analysis has determined that no reasonably possible change
in the key assumptions used will result in significant impairment and that
there is sufficient headroom in all of the key assumptions before the
carrying value becomes impaired.
12. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR
LOSSThe Group has the following investments held at fair value through profit
or loss, all of which are incorporated in India:
Profit/ Date
Class Net (loss) of
of Assets/ before financial
shares (liabilities) tax state- % held % held
held £'000 £'000 ments 31/3/09 31/12/07
Apeejay Infra-
Logistics Pvt Ltd Ord. 1,962 – 31/3/08 50% –
Matheran Realty
Pvt Ltd A 10,485 (221) 31/3/08 63% 55%
Gopi Resorts
Pvt Ltd A & B (49) (33) 31/3/08 32% –
Contrans Logistic
Pvt Ltd Ord. 2,271 (64) 31/3/08 49% 40%
Sattva CFS &
Logistics Pvt Ltd Ord. 1,054 36 31/3/08 49% 49%
Sribha Infrastructure
Solutions Company
Pvt Ltd Ord. 303 (63) 31/3/08 37% –
The Group’s investment in Matheran Realty Pvt Ltd (“Matheran”) at
31 March 2009 is held through a direct holding of 45% in Matheran and
an indirect holding of 18% via the Group’s 44% holding in Alibante
Developments Ltd which itself held 42% of Matheran. Matheran also
has a holding of 68% in Gopi Resorts Pvt Ltd.
At 31 March 2009 the cost and valuation of the Group’s investments
was as follows:
Unrealisedgain/(loss) Fair
Cost at 1/1/08 – value at31/3/09 31/3/09 31/3/09
£’000 £’000 £’000
Apeejay Infra-Logistics Pvt Ltd 1,937 229 2,166
Matheran Realty Pvt Ltd 10,128 (5,504) 4,988
Gopi Resorts Pvt Ltd 2,542 1,748 4,290
Contrans Logistic Pvt Ltd 4,002 (1,706) 2,782
Sattva CFS & Logistics Pvt Ltd 880 611 2,430Sribha Infrastructure Solutions
Company Pvt Ltd 2,126 (503) 1,623
21,615 (5,125) 18,279
11. INTANGIBLE ASSETS (CONTINUED)
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At 31 December 2007 the cost and valuation of the Group’s
investments was as follows:
Unrealisedgain Valuation
Cost at 1/1/07 – at31/12/07 31/12/07 31/12/07
£’000 £’000 £’000
Matheran Realty Pvt Ltd 5,992 363 6,355
Sattva CFS & Logistics Pvt Ltd 647 939 1,586
Contrans Logistic Pvt Ltd 1,731 486 2,217
8,370 1,788 10,158
The investments were independently valued at 31 March 2009 by Ernst
& Young India. The investments are valued using appropriate valuation
methodologies, in accordance with the International Private Equity and
Venture Capital Guidelines endorsed by the British & European Venture
Capital Associations, which reflect the amount for which an asset could
be exchanged between knowledgeable, willing parties on an arm’s
length basis. The companies in which the Group has invested are at
various stages of development. The methodologies used in the
valuation of these investments include Earnings Multiples, Net Assets,
Discounted Cash Flow and Price of Recent Investment.
Price of Recent Investment – where the investment being valued was
itself made recently, its cost will generally provide a good indication of
fair value. Where there has been a recent investment in the investee
company then the price of that investment can provide an indication of
the valuation.
Earnings Multiple – this methodology involves the application of an
earnings multiple to the earnings of the business being valued in order
to derive a value for the business. This methodology is appropriate
where the business has an identifiable stream of continuing earnings
that can be considered to be maintainable. A number of earnings
multiples may be used including price/earnings and enterprise
value/earnings before interest, tax, depreciation and amortisation.
Net Assets – this methodology involves deriving the value of a business
by reference to the value of its assets. The assets and liabilities may be
adjusted to reflect the fair value of those assets and liabilities as at the
valuation date.
Discounted Cash Flow – this methodology involves deriving the value of
a business by calculating the present value of expected future cash
flows. The cash flows and the terminal value are those of the underlying
business rather than from the investment itself. A suitable discount rate
is estimated based on the weighted average cost of capital of the
business.
The actual methodologies used vary from investment to investment with
the independent valuers applying an appropriate methodology based
on the particular circumstances of the underlying business.
The movements in non-current investments were as follows:
£’000
Carrying value at 31 December 2006 13,882
Disposals on sale of subsidiary (13,882)
Purchases, at cost 8,370
Unrealised gains on investments 1,788
Carrying value at 31 December 2007 10,158
Purchases, at cost 13,246
Unrealised losses on investments (5,125)
Carrying value at 31 March 2009 18,279
At 31 March 2009, the Group had a commitment to invest a further
£361,000 in Contrans Logistic Pvt Ltd and that investment was
completed in April 2009.
13. INVESTMENTS IN SUBSIDIARY UNDERTAKINGS The Company had the following principal subsidiaries during the period
in which it held ordinary shares:
Country Ownership
Nature of of 31/3/ 31/12/
Company name business Incorporation 2009 2007
MJ Logistic Distribution
Services Ltd warehouse
operator India 90% –
Sattva Conware Container
Pvt Ltd freight station
operator India 90% –
Aboyne Investment
Mauritius Ltd holding co. Mauritius 100% 100%
Bandra Investment
Mauritius Ltd holding co. Mauritius 100% 100%
Coloba Investment
Mauritius Ltd holding co. Mauritius 100% 100%
Ennore Investment
Mauritius Ltd holding co. Mauritius 100% 100%
Haldia Investment
Mauritius Ltd holding co. Mauritius 100% 100%
Juhu Investment
Mauritius Ltd holding co. Mauritius 100% 100%
Pipavav Investment
Mauritius Ltd holding co. Mauritius 100% 100%
12. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR
LOSS (CONTINUED)
NOTES FORMING PART OF THE FINANCIAL STATEMENTSfor the period ended 31 March 2009
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NOTES FORMING PART OF THE FINANCIAL STATEMENTSfor the period ended 31 March 2009
32
ANNUAL REPORT & ACCOUNTS 2009
32
14. TRADE AND OTHER RECEIVABLES
31 March 31 December2009 2007£’000 £’000
Amounts falling due within one year:
Trade receivables 360 –
Other receivables 5 41
Prepayments and accrued income 64 209
Income tax receivable 112 –
Other taxes and social security receivable 106 –
647 250
Amounts falling due in more than one year:
Other receivables 23 –
23 –
15. TRADE AND OTHER PAYABLES
31 March 31 December2009 2007£’000 £’000
Trade payables 238 94
Other taxes and social security payable 61 16
Other payables 96 –
Accruals and deferred income 321 152
716 262
16. BORROWINGS
31 March 31 December2009 2007£’000 £’000
Non-current:
Bank borrowing 1,975 –
Other borrowing 25 –
2,000 –
All borrowings relate to amounts borrowed by the Group’s subsidiary
MJ Logistic Service Ltd. The debt is non-recourse to the parent
company.
17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENTThe Group finances its activities through the cash and short term
deposits generated through the placing of its shares on the London
Stock Exchange’s Alternative Investment Market. No debt funding has
been taken at the parent company level.
The Group’s financial instruments comprise investments held at fair
value through profit or loss, cash and cash equivalents and other items
such as trade and other payables and receivables which arise from its
operations. The Group does not trade in financial instruments. The
Group had no hedging transactions outstanding at the period end.
The main type of risk that the Group is exposed to is market risk.
Market risk involves the potential for losses and gains and includes
price risk, interest rate risk and currency risk.
Capital risk managementThe Group’s objectives when managing capital are to safeguard the
Group’s ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital. In
order to maintain or adjust the capital structure, the Group may adjust
the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares and increase or decrease debt.
Currency riskThe Group is exposed to currency risk as its investments may be
denominated in Indian Rupees and may be made in phased stages.
The Group hedges its pending investment commitments when it has
reasonable certainty of the timing and quantum of the transfer and
where it considers hedging is appropriate.
The Group’s investments are held in the accounts at fair value and that
fair value was determined by Ernst & Young India as part of an
independent fair valuation exercise. The value of the investments was
estimated in Indian Rupees as all the Group’s investee companies
operate in India. A 5% adverse change in the Pound Sterling/Indian
Rupee exchange rate would have led to an increase in the unrealised
fair value loss of £870,000.
At 31 March 2009
UK US IndianFinancial assets Sterling Dollars Rupees
£’000 £’000 £’000
Fair value through
income statement
Investments held at fair
value through profit
or loss – – 18,279
Loans and receivables
Other receivables due
in more than one year – – 23
Cash and cash
equivalents 14,511 10,175 1,549
Trade receivables – – 360
Other receivables due
in less than one year 2 – 3
14,513 10,175 20,214
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ANNUAL REPORT & ACCOUNTS 2009
33
At 31 December 2007
UK US IndianFinancial assets Sterling Dollars Rupees
£’000 £’000 £’000
Fair value through
income statement
Investments held at fair
value through profit
or loss – – 10,158
Loans and receivables
Cash and cash
equivalents 48,639 – –
Other receivables due
in less than one year 12 – –
48,651 – 10,158
At 31 March 2009
Financial UK US Indianliabilities Sterling Dollars Rupees
£’000 £’000 £’000
Financial liabilities held
at amortised cost
Borrowings – – 2,000
Trade payables 102 – 136
Other payables – – 96
Accruals 131 – 190
233 – 2,422
At 31 December 2007
Financial UK US Indianliabilities Sterling Dollars Rupees
£’000 £’000 £’000
Financial liabilities held
at amortised cost
Trade payables 94 – –
Accruals 152 – –
246 – –
Credit riskCredit risk is managed through the company and its direct subsidiaries
depositing funds primarily with banks with a Standard & Poor’s rating of
AA or higher. Where a bank’s credit rating is reduced to less than AA
then the Group will seek to move funds from that bank as term deposits
expire. At 31 March 2009, 79% of the Group’s cash balances were
placed with entities with a credit rating of AA or higher (31 December
2007: 100%).
The Group’s Indian subsidiaries place funds with Indian banks whose
credit rating may be less than AA. The funds placed with the BBB rated
entity were placed by MJ Logistic Services Ltd.
Cash at bank and 31 March 31 Decemberbank term deposits 2009 2007
£’000 £’000
Standard & Poors credit rating
AAA 8,791 –
AA 11,941 48,639
A 3,954 –
BBB 1,546 –
Other 3 –
26,235 48,639
Trade receivables represent amounts owed to the Group’s Indian
subsidiary MJ Logistic Services Ltd. Over 90% of the balance
outstanding at 31 March 2009 was due from entities with the highest
Standard & Poors CRISIL rating of AAA. No trade receivables were
considered impaired as at 31 March 2009 and no bad debts had been
written off in the period ended 31 March 2009.
Price riskThe Group has invested in unquoted Indian infrastructure and real
estate companies. Those investments are held at fair value and the
value of those investments may be affected by market conditions.
Management continues to monitor this risk. A 10% fall in the value of
these investments would have increased the loss for the period by
£1,828,000.
Liquidity riskAs the Group is primarily equity funded and has high cash reserves,
liquidity risk is deemed to be low. The Group’s Indian subsidiary,
MJ Logistic Services Ltd had borrowings of £2,000,000 as at
31 March 2009.
Between BetweenMaturity of Less than 1 1 and 2 2 and 5financial liabilities year years years
£’000 £’000 £’000
At 31 March 2009
Borrowings – 1,940 60
Trade payables 238 – –
Other payables 96 – –
Accruals 321 – –
655 1,940 60
At 31 December 2007
Trade payables 94 – –
Accruals 152 – –
246 – –
NOTES FORMING PART OF THE FINANCIAL STATEMENTSfor the period ended 31 March 2009
17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(CONTINUED)
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NOTES FORMING PART OF THE FINANCIAL STATEMENTSfor the period ended 31 March 2009
34
ANNUAL REPORT & ACCOUNTS 2009
34
Interest rate riskThe Group has interest bearing financial assets in the form of fixed rate
bank deposits with maturities of less than six months and floating rate
current account balances.
Non-interest Floatingbearing rate Fixed rate
financial financial financialassets assets assets£’000 £’000 £’000
At 31 March 2009
Investments held at
fair value through
profit or loss 18,279 – –
Other receivables
due in more than
one year 23 – –
Cash and cash
equivalents 324 971 24,940
Trade receivables 360 – –
Other receivables
due in less than
one year 5 – –
18,991 971 24,940
At 31 December 2007
Investments held at
fair value through
profit or loss 10,158 – –
Cash and cash
equivalents – 6,121 42,518
Other receivables
due in less than
one year 12 – –
10,170 6,121 42,518
The average rate at which the fixed rate assets were fixed in 2009 was
4.20% (2007: 5.75%) and the average period for which the assets were
fixed was 58 days (2007: 54 days).
A 5% reduction in the interest rate earned during 2009 would have
reduced the finance income for the period by approximately £101,000
(2007: £143,000).
The Group has financial liabilities in the form of fixed and floating rate
borrowings and non-interest bearing trade payables, other payables
and accruals.
Non-interest Floatingbearing rate Fixed rate
financial financial financialliabilities liabilities liabilities
£’000 £’000 £’000
At 31 March 2009
Borrowings 25 1,932 43
Trade payables 238 – –
Other payables 96 – –
Accruals 321 – –
680 1,932 43
At 31 December 2007
Trade payables 94 – –
Accruals 152 – –
246 – –
Fair value of financial assets and liabilitiesThere is no material difference between the carrying value and fair value
of the Group’s aggregate financial assets and liabilities.
18. PROVISION FOR LIABILITIES National insurance on share options
31 March 31 December2009 2007£’000 £’000
At beginning of period – 27
Released to income statement – (27)
At end of period – –
The eventual liability to National Insurance on share options is
dependent on the following factors:
• the market price of the Company’s shares at the date of exercise;
• the number of options that will be exercised; and
• the prevailing rate of National Insurance at the date of exercise.
19. CALLED UP SHARE CAPITAL
31 March 31 December2009 2007£’000 £’000
Authorised
400,000,000 (2007: 400,000,000)
ordinary shares of 10p each 40,000 40,000
Allotted, called up and fully paid
244,728,000 (2007: 244,728,000)
ordinary shares of 10p each 24,473 24,473
There were no shares issued during the period (2007: nil).
17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(CONTINUED)
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35
ANNUAL REPORT & ACCOUNTS 2009
35
Options granted under Individual Option AgreementsAt 31 March 2009 the following number of share options were
outstanding in respect of the ordinary shares as granted under
individual share option agreements:
Date of Number of Price pergrant shares Period of option share
7 February 2005 1,956,000 Expire 10/2/15 25p
10 May 2006 9,549,986 Expire 10/5/16 25p
23 June 2008 6,500,000 Expire 23/6/18 19.25p
Options granted under the approved share option planAt 31 March 2009 the following share options were outstanding in
respect of the ordinary shares as granted under the approved share
option plan.
Date of Number of Price pergrant shares Period of option share
5 October 2006 198,346 Expire 5/10/16 30.25p
Further information on share options is provided in note 21.
20. RESERVESAt the Company’s Annual General Meeting on 18 July 2007, a
resolution was passed to seek the cancellation of the Company’s share
premium account which was approved by the High Court of Justice on
21 November 2007.
The amount of the share premium account was applied firstly in
eliminating the deficit on the Company’s profit and loss account as at
31 August 2007 of £2,320,000. The balance remaining of £32,826,000
was credited to the special reserve account.
The following describes the nature and purpose of each reserve within
equity:
Share premium account – the share premium account arose on the
issue of shares by the Company at a premium to their nominal value.
Special reserve account – the special reserve account was created on
the cancellation of the share premium account balance. Subject to
undertakings given to the High Court for the protection of creditors, the
Company will be able to use the special reserve account to make
market purchases of its own shares.
Retained earnings – the retained earnings represents cumulative net
gains and losses recognised in the Group Income Statement.
Foreign exchange reserve – arises on the translation of foreign
subsidiaries from Indian Rupees to Sterling.
21. SHARE-BASED PAYMENTEredene Capital PLC has issued equity-settled share based options
under individual option agreements and under an HMRC approved
scheme.
Individual Option Agreements1,956,000 options granted in 2005 were outstanding at 31 March
2009. These options have an exercise price of 25 pence per share and
became exercisable on 10 May 2006. The options may be exercised at
any time up to 10 February 2015.
9,549,986 options granted in 2006 were outstanding at 31 March
2009. These options have an exercise price of 25 pence per share and
became exercisable in full on 10 May 2009. The options may be
exercised at any time up to 10 May 2016.
428,274 of the options issued in 2006 were to non-employees of the
Group and relate to corporate finance services rendered. Those options
represent £10,000 of the total share based payment charge for the
period.
6,500,000 options granted in 2008 were outstanding at 31 March
2009. These options have an exercise price of 19.25 pence per share.
The options become exercisable in respect of one third of the ordinary
shares over which they are granted on the first, second and third
anniversary of 23 June 2008. The options will become exercisable in
respect of all of the ordinary shares in respect of which they are granted
in the event of an offer for the Company becoming unconditional in all
respects. To the extent that an option becomes exercisable, it may be
exercised at any time up to 23 June 2018.
HMRC Approved Scheme198,346 approved options were granted in 2006. These options have
an exercise price of 30.25 pence per share. The approved options
become exercisable in respect of one third of the ordinary shares over
which they are granted on the first, second and third anniversary of
5 October 2006. To the extent that an option becomes exercisable, it
may be exercised at any time up to 5 October 2016.
Weighted Weightedaverage averageexercise exercise
price Number price Number2009 2009 2007 2007
Outstanding at the
beginning of period 25.1p 11,704,332 25.1p 13,947,672
Granted during the
period 19.3p 6,500,000 – –
Lapsed during the
period – – 25.0p (2,243,340)
Outstanding at the
end of the period 23.0p 18,204,332 25.1p 11,704,332
The weighted average contractual life of options outstanding at the end
of the period was 10 years (2007: 10 years).
Of the total number of options outstanding at the end of the period
9,134,688 (2007: 5,545,344) had vested and were exercisable at the
end of the period.
No share options were exercised during the period (2007: Nil).
NOTES FORMING PART OF THE FINANCIAL STATEMENTSfor the period ended 31 March 2009
19. CALLED UP SHARE CAPITAL (CONTINUED)
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NOTES FORMING PART OF THE FINANCIAL STATEMENTSfor the period ended 31 March 2009
36
ANNUAL REPORT & ACCOUNTS 2009
36
6,500,000 share options were granted during the period (2007: nil). The
weighted average fair value of each option granted during the period
was 1.77p.
The following information is relevant in the determination of the fair value
of options granted during the period under the equity share based
remuneration agreements entered into by the Company.
2008 Issue
Equity-settled
Option pricing model used – Black Scholes
Share price at grant date (pence) 19.25
Exercise price (pence) 19.25
Weighted average contractual life (years) 5
Expected volatility 14%
Expected dividend yield 4.69%
Risk-free interest rate 4.32%
The volatility assumption, measured at the standard deviation of
expected share price returns, is based on a market average volatility
rate.
The share-based remuneration expense comprises:
31 March 31 December2009 2007£’000 £’000
Equity-settled schemes 274 266
22. COMMITMENTSThe Group had future minimum total commitments under non-
cancellable operating leases as set out below:
31 March 31 December2009 2007£’000 £’000
Operating leases which expire:
Less than one year 7 –
Later than one year and no later
than five years 507 180
23. BUSINESS COMBINATIONSAcquisitions in periodOn 7 January 2008, the Group acquired 90% of the ordinary share
capital of MJ Logistic Services Ltd, a logistic services company
operating in North India. The acquired business contributed revenue of
£1,461,000 and net loss of £157,000 to the Group for the period from
7 January 2008 to 31 March 2009. The group’s revenue and profit
would not have been materially different if the acquisition had occurred
on 1 January 2008 rather than 7 January 2008.
Further information on MJ Logistic Services Ltd is set out on page 12.
Details of net assets acquired and goodwill are as follows:
£’000
Purchase consideration
– Cash paid 7,913
– Direct costs relating to the acquisition 30
Total purchase consideration 7,943
Fair value of net assets acquired 7,891
Less Minority Interest (10%) (789)
(7,102)
Goodwill 841
The assets and liabilities as of 7 January 2008 arising from the
acquisition are as follows. There was no material difference between the
carrying value and fair value of the acquiree’s assets and liabilities.
Acquiree’s carrying amount
£’000
Cash and cash equivalents 7,967
Property, plant and equipment 18
Investments 5
Trade and other receivables 217
Trade and other payables (173)
Borrowings (143)
Net assets 7,891
Minority interests (10%) (789)
Net assets acquired 7,102
Purchase consideration settled in cash 7,943
Cash and cash equivalents in subsidiary acquired (7,848)
Cash outflow on acquisition 95
On 3 November 2008, the Group acquired 90% of the ordinary share
capital of Sattva Conware Pvt Ltd, a special purpose vehicle company
which will develop and operate a Container Freight Station to serve the
ports of Ennore and Chennai. The acquired business contributed no
revenue and a net loss of £26,000 to the Group for the period from
3 November 2008 to 31 March 2009. The group’s revenue and profit
would not have been materially different if the acquisition had occurred
on 1 January 2008 rather than 3 November 2008 as Sattva Conware is
not yet trading.
21. SHARE-BASED PAYMENT (CONTINUED)
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37
ANNUAL REPORT & ACCOUNTS 2009
37
Further information on Sattva Conware Pvt. Ltd. is set out on page 7.
Details of net assets acquired and goodwill are as follows:
£’000
Total purchase consideration – cash paid 2,136
Fair value of net assets acquired 2,387
Less Minority Interest (10%) (239)
(2,148)
Negative goodwill 12
The assets and liabilities as of 3 November 2008 arising from the
acquisition are as follows. There was no material difference between the
carrying value and fair value of the acquiree’s assets and liabilities.
Acquiree’s carrying amount
£’000
Cash and cash equivalents 2,387
Net assets 2,387
Minority interests (10%) (239)
Net assets acquired 2,148
Purchase consideration settled in cash 2,136
Cash and cash equivalents in subsidiary acquired (2,387)
Cash inflow on acquisition 251
There were no acquisitions in the year ended 31 December 2007.
Disposal in prior periodIn June 2007, the Company sold its subsidiary Eredene Mauritius
Limited, which held its then entire investment portfolio, to K2 Property
Limited (‘K2’), a subsidiary of Yatra Capital Limited for a total
consideration of £12.25m cash.
Of this consideration, Eredene received £9.75m in respect of its interest
in the three projects in which it had invested. Eredene had invested
£8.16m in these projects at the date of disposal (excluding related deal
costs). K2 assumed the deferred consideration of £5.5m for these
projects.
The remaining balance of the £12.25m was in respect of a
reimbursement of £2.50m, for a deposit of £2.53m which Eredene paid
when it entered into a conditional term sheet to invest in a development
in Bangalore.
The profit on disposal of Eredene Mauritius Limited was as follows:
£’000 £’000
Cash proceeds 12,250
Net assets disposed of:
Investments 13,882
Other receivables 2,531
Other payables (5,473)
(10,940)
Disposal costs (168)
Profit on disposal 1,142
24. NOTES SUPPORTING THE CASH FLOW STATEMENTCash and cash equivalents for the purposes of the cash flow statement
comprises:
2009 2007£’000 £’000
Cash available on demand 1,295 6,121
Short-term deposits 24,940 42,518
26,235 48,639
25. CONTINGENCIESThe Group has received a communication threatening legal action from
a shareholder and director of one of the companies in which the Group
has invested, Matheran Realty Pvt Ltd. The shareholder has also
obtained an order from the Mumbai Company Law Board ordering that
the current shareholding pattern, composition of the board of directors
and fixed assets of Matheran Realty Pvt Ltd and Gopi Resorts Pvt Ltd
are maintained unchanged. The claims are unsubstantiated and the
directors are of the opinion, having taken advice from legal counsel, that
the likelihood of a material claim being found against the Group is
remote.
26. RELATED PARTY TRANSACTIONSThe Group has entered into an investment advisory agreement with
Eredene Infrastructure Pvt Ltd, a company owned by Mr Nikhil Naik
who is a director of the Company. Investment advisory fees totalling
£852,000 (2007: £469,000) were paid during the fifteen month period.
This amount was used to pay the operating costs of the Mumbai
advisory team including the office costs, travel costs and staff costs for
a team of six. There were no amounts payable at the period end.
During the fifteen month period, the Company charged an amount of
£151,000 (2007: £39,000) to Glendevon King Ltd (formerly King Capital
Management Ltd) relating to the use of office space at the Company’s
offices on normal commercial terms. Alastair King, a director of the
Company, is a director and the sole shareholder of Glendevon King Ltd.
NOTES FORMING PART OF THE FINANCIAL STATEMENTSfor the period ended 31 March 2009
23. BUSINESS COMBINATIONS (CONTINUED)
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38 NOTES FORMING PART OF THE FINANCIAL STATEMENTSfor the period ended 31 March 2009
ANNUAL REPORT & ACCOUNTS 2009
The group makes minority equity investments as set out in note 12.
These investments are not equity accounted for (as permitted by IAS28)
but are related parties. The total amounts included for these
investments are:
2009 2007£’000 £’000
Income statement
Change in fair value of equity investments (5,125) 1,788
Gain on disposal of subsidiary – 1,142
Other portfolio income 23 –
Balance sheet
Investments held at fair value through
profit or loss 18,279 10,158
27. POST BALANCE SHEET EVENTSThe Group invested a further £361,000 in Contrans Logistic Pvt Ltd in
April 2009 and a further £175,000 in Apeejay Infra-Logistics Pvt in June
2009. Both investments were in line with the expected phasing of
investment tranches.
26. RELATED PARTY TRANSACTIONS (CONTINUED)
215197 Eredene pp20-pp42 7/21/09 11:35 AM Page 38
39COMPANY BALANCE SHEET
at 31 March 2009
ANNUAL REPORT & ACCOUNTS 2009
31 March 31 December2009 2007
Note £’000 £’000
Fixed assets
Tangible fixed assets 5 25 32
Investments 6 37,690 15,835
37,715 15,867
Current assets
Debtors 7 59 196
Cash at bank and in hand 20,250 41,961
20,309 42,157
Creditors: amounts falling due within one year 8 (215) (247)
Net current assets 20,094 41,910
Total assets less current liabilities 57,809 57,777
Net assets 57,809 57,777
Capital and reserves
Share capital 9 24,473 24,473
Special reserve 10 32,826 32,826
Profit and loss account 10 510 478
Shareholders’ funds 11 57,809 57,777
The financial statements were approved by the Board of Directors and authorised for issue on 30 June 2009.
A J N KING
DirectorThe notes on pages 40 to 42 form part of these financial statements.
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40 NOTES FORMING PART OF THE EREDENE CAPITAL PLC COMPANY FINANCIAL STATEMENTSfor the period ended 31 March 2009
ANNUAL REPORT & ACCOUNTS 2009
1. ACCOUNTING POLICIESThe following principal accounting policies have been applied:
Basis of preparationThe financial statements have been prepared under the historical cost
convention and in accordance with UK GAAP and the Companies Act
1985.
Fixed asset investmentsInvestments in subsidiary undertakings are stated at cost less any
allowance for impairment.
Share-based paymentsWhere share options are awarded to employees, the fair value of the
options at the date of grant is charged to the profit and loss account
over the vesting period. Non-market vesting conditions are taken into
account by adjusting the number of equity instruments expected to vest
at each balance sheet date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of options
that eventually vest.
Where equity instruments are granted to persons other than
employees, the profit and loss account is charged with fair value of
goods and services received. If it is not possible to identify the fair value
of these goods or services provided, the profit and loss account is
charged with the fair value of the options granted.
The charge for share-based payments is calculated in accordance with
the analysis described in note 21 to the Group financial statements. The
option valuation model used requires highly subjective assumptions to
be made including expected volatility, dividend yields, risk-free interest
rates and expected staff turnover. The directors draw on a variety of
external sources to aid in the determination of the appropriate data to
use in such calculations.
Deferred taxDeferred tax balances are recognised in respect of all timing differences
between the recognition of gains and losses in the accounts and their
recognition for tax purposes. Deferred tax balances are not discounted.
Pension costsThe Company contributes to directors and employees personal money-
purchase pension schemes. Contributions are charged to the profit and
loss account in the period in which they become payable.
Cashflow StatementThe Company has used the exemption under FRS1 Cashflow
Statements, not to prepare a cashflow statement, as a consolidated
cashflow statement is included in the financial statements of its ultimate
holding company which are publicly available.
National Insurance on Share OptionsTo the extent that the share price at the balance sheet date is greater
than the exercise price on options granted, provision for any National
Insurance contributions has been made based on the prevailing rate of
National Insurance. The provision is accrued over the performance
period attaching to the award.
Operating leasesOperating lease rentals are charged to the profit and loss account on a
straight-line basis over the term of the lease.
Related party disclosuresThe Company has taken advantage of the exemption conferred by
Financial Reporting Standard 8 ‘Related party disclosures’, not to
disclose transactions with other group companies.
2. EMPLOYEESStaff costs (including directors) consist of:
15 months 12 monthsended ended
31 March 31 December2009 2007
£’000 £’000
Wages and salaries 638 494
Equity settled share-based payments 216 256
Social security costs 57 13
Other pension costs 49 32
960 795
The average number of employees (including directors) during the
period was as follows:
15 months 12 monthsended ended
31 March 31 December2009 2007
Management and administration 8 8
3. DIRECTORS’ REMUNERATION
15 months 12 monthsended ended
31 March 31 December2009 2007
£’000 £’000
Directors’ emoluments 497 384
Company contributions to directors’
money purchase pension schemes 36 19
533 403
The Company made contributions to two directors’ own money
purchase pension schemes in 2009 (2007: 2).
Emoluments of the highest paid director for the 15 month period were
£227,000 (2007: £162,000). Company pension contributions of
£21,000 (2007: £11,000) were made to a money purchase scheme on
his behalf.
215197 Eredene pp20-pp42 7/21/09 11:35 AM Page 40
41NOTES FORMING PART OF THE EREDENE CAPITAL PLC COMPANY FINANCIAL STATEMENTS
for the period ended 31 March 2009
ANNUAL REPORT & ACCOUNTS 2009
Included in the directors’ emoluments figure for the 15 month period is
an amount of £44,000 (2007: £35,000) paid to Caledonia Group
Services Ltd for the services of the Hon C Cayzer as a non-executive
director. Caledonia Group Services is a subsidiary of Caledonia
Investments plc which is a shareholder in the Company. The Cayzer
Trust Company is a related party to Caledonia Investments plc and is a
shareholder in that company. The Hon C Cayzer, who is a director of the
Company, is a director and has a beneficial interest in both Caledonia
Investments plc and the Cayzer Trust Company Ltd.
Of the share based payment charge, £209,000 relates to directors
(2007: £256,000).
4. LOSS FOR THE FINANCIAL PERIODThe Company has taken advantage of Section 230 of the Companies
Act 1985 and has not included its profit and loss account in these
financial statements. The loss for the period dealt with in the profit and
loss account of the Company was £242,000 (year ended 31 December
2007: loss of £2,319,000).
5. TANGIBLE FIXED ASSETS
Fixturesand Office
fittings equipment Total£’000 £’000 £’000
Cost
At 1 January 2008 7 29 36
Additions – 7 7
Disposals – – –
At 31 March 2009 7 36 43
Depreciation
At 1 January 2008 – 4 4
Charge in the period 2 12 14
At 31 March 2009 2 16 18
Net book value
At 31 March 2009 5 20 25
At 31 December 2007 7 25 32
6. FIXED ASSET INVESTMENTSInvestments in subsidiary undertakingsThe Company had the following principal subsidiaries during the period:
Class ofCountry of shares Ownership
Incorporation held 2009 2007
Aboyne Mauritius
Holding Ltd Mauritius Ordinary 100% 100%
Bandra Mauritius
Holding Ltd Mauritius Ordinary 100% 100%
Coloba Mauritius
Holding Ltd Mauritius Ordinary 100% 100%
Ennore Mauritius
Holding Ltd Mauritius Ordinary 100% 100%
Haldia Mauritius
Holding Ltd Mauritius Ordinary 100% 100%
Juhu Mauritius
Holding Ltd Mauritius Ordinary 100% 100%
Pipavav Mauritius
Holding Ltd Mauritius Ordinary 100% 100%
2009 2007£’000 £’000
Cost
At beginning of period 15,835 9,779
Additions 21,855 15,835
Disposals – (9,779)
At end of period 37,690 15,835
Additions represent subscriptions for shares in Aboyne Mauritius
Holding Ltd, Bandra Mauritius Holding Ltd, Coloba Mauritius Holding
Ltd, Ennore Mauritius Holding Ltd, Haldia Mauritius Holding Ltd, Juhu
Mauritius Holding Ltd and Pipavav Mauritius Holding Ltd.
7. DEBTORS
31 March 31 December2009 2007£’000 £’000
Other debtors due within one year 18 41
Prepayments and accrued income 41 155
59 196
3. DIRECTORS’ REMUNERATION (CONTINUED)
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42 NOTES FORMING PART OF THE EREDENE CAPITAL PLC COMPANY FINANCIAL STATEMENTSfor the period ended 31 March 2009
ANNUAL REPORT & ACCOUNTS 2009
8. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
31 March 31 December2009 2007£’000 £’000
Trade creditors 102 94
Other taxes and social security 13 16
Accruals and deferred income 100 137
215 247
9. SHARE CAPITALDetails of the share capital of the Company are included in note 19 to
the Group financial statements.
10. RESERVES
Special Profit andReserve loss account
£’000 £’000
At 1 January 2008 32,826 478
Loss for the period – (242)
Share-based payment – 274
At 31 March 2009 32,826 510
11. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’
FUNDS
2009 2007£’000 £’000
Loss for the period (242) (2,319)
Share based payment 274 266
32 (2,053)
Opening shareholders’ funds 57,777 59,830
Closing shareholders’ funds 57,809 57,777
12. COMMITMENTS UNDER OPERATING LEASESThe Company had annual commitments under non-cancellable
operating leases as set out below:
2009 2007£’000 £’000
Operating leases which expire:
Between two and five years 66 66
13. RELATED PARTY TRANSACTIONSDetails of the Company’s related party transactions are included in note
26 to the Group financial statements.
Forward-looking statementsThe following is not part of the Financial Statements. This document may contain forward-looking statements with respect to certain of the plans
and current goals and expectations relating to the future financial condition, business performance and results of Eredene Capital PLC. By their
nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that are beyond the
control of Eredene Capital PLC including, amongst other things, UK domestic and global economic and business conditions, market related risks
such as fluctuations in interest rates, foreign exchange rates, inflation, the impact of competition, delays in implementing proposals, the timing,
impact and other uncertainties of future investments, the impact of tax or other legislation and other regulations in the jurisdictions in which Eredene
Capital PLC and its affiliates operate. As a result, Eredene Capital PLC’s actual future condition, business performance and results may differ
materially from the plans, goals and expectations expressed or implied in these forward-looking statements.
215197 Eredene pp20-pp42 7/21/09 11:35 AM Page 42
DIRECTORS
Sir C J Benson
The Hon C W Cayzer
D A Coltman
A J N King
N M Naik
G D Varley
SECRETARY & REGISTERED OFFICE
G D Varley ACA
7 Pilgrim Street
London, EC4V 6LB
COMPANY NUMBER
5330839
AUDITORS
BDO Stoy Hayward LLP
55 Baker Street
London, W1U 7EU
WEBSITE
www.eredene.com
SOLICITORS
Faegre & Benson LLP
7 Pilgrim Street
London, EC4V 6LB
NOMINATED ADVISER & BROKER
Numis Securities Limited
10 Paternoster Square
London, EC4M 7LT
REGISTRARS
Neville Registrars Limited
18 Laurel Lane
Halesowen, B63 3DA
COMPANY INFORMATIONANNUAL REPORT & ACCOUNTS 2009
1 Highlights
2 Chairman’s statement
5 Investment portfolio summary
6 Review of investments
15 Board of directors
16 Report of the directors
18 Statement of directors’ responsibilities
19 Report of the independent auditors
20 Consolidated income statement
21 Consolidated balance sheet
22 Consolidated statement of changes in equity
23 Consolidated cash flow statement
24 Notes forming part of the consolidated financial statements
39 Company balance sheet
40 Notes forming part of the company financial statements
215197 Eredene Cover 7/21/09 11:26 AM Page 2
EREDENE CAPITAL PLC INVESTING IN INDIA’S INFRASTRUCTURE EREDENE CAPITAL PLC INVESTING IN INDIA’S INFRASTRUCTURE
ANNUAL REPORT & ACCOUNTS31 MARCH 2009
10 FINSBURY SQUARE7TH FLOOR LONDONEC2A 1AD
TEL: +44 (0)20 7448 8000
FAX: +44 (0)20 7149 9832
WWW.EREDENE.COM
Designed & Printed by Perivan 215197
215197 Eredene Cover 7/21/09 11:26 AM Page 1