Annual Report - Container Corporation of India - 2008-2009

CONTAINER CORPORATION OF INDIA LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

To
The Shareholders

Your directors are pleased to present their report on the business and
operations of your company for the financial year ending March 31, 2009.








Financial Results:

(Rs. Crore)

Particulars 2008-09 2007-08

Income from operations 3417.16 3347.30

Profit before depreciation & tax (PBDT) 1142.15 1054.84

Profit before tax (PBT) 1026.24 948.50

Provision for tax 234.73 197.98

Profit after tax (PAT) 791.51 750.52

Profit available for appropriations 791.20 752.21

APPROPRIATIONS:

Interim Dividend 77.99 71.49

Proposed Final Dividend 103.99 97.49

Corporate tax on dividend 30.93 28.72

Transfer to general reserves 79.12 75.22

Balance carried to Balance Sheet 499.17 479.29

Earnings per share (Rs.)* 60.87 57.87

* After considering bonus issue of shares after 31.03.2008.

Dividend:

Keeping in view the company's Capex requirements, the Board recommends a
final dividend of 80% on the paid up share capital of Rs.129.98 Crores. An
interim dividend @ 60% has already been paid. The total dividend payment
for the year 2008-09 is Rs. 181.98 crore as compared to Rs. 168.98 crore
(excluding dividend tax) for the FY -2007-08.

Financial Highlights:

The operating turnover of your company registered a growth of 2.09% during
the year under review, increasing from Rs. 3347.30 crore in the previous
year to Rs. 3417.16 crore. Total expenditure increased by 1.57% & after
adjusting the expenditure of Rs 2602.01 crore as compared to Rs. 2561.83
crore in the previous year, the profit before tax works out to Rs. 1026.24
crore, which shows a growth of 8.19%. After making provisions for income
tax, prior period/tax adjustments, the net profit available for
appropriations stands at Rs 791.20 crore, which is a growth in net profit
of 5.18%. Increase in Profit After Tax (PAT) is due to growth in the
operating turnover and other income of the company.

Operational Performance:

Handling at Terminals F/Y 2008-09 F/Y 2007-08 % age growth
(In TEUs)

Exim 18,54,959 19,77,399 -6.2
Domestic 4,53,273 4,70,370 -3.63
Total 23,08,232 24,47,769 -5.70

Capital Structure:

There is no change in the capital structure, with the Government of India
continuing to hold 63.09% of the shares, the balance 36.91% being held by
the public.

Listing and Dematerialization of Concor's Shares.

CONCOR's shares are listed with the bourses i.e. Mumbai and National Stock
Exchanges. The listing fees of both the stock exchanges have been paid.

To facilitate dematerialization of shares by its shareholders, CONCOR has
signed agreements with both the Depositories (NSDL & CDSL). As per SEBI
guidelines, CONCOR's shares have been placed under 'Compulsory Demat Mode'.
Out of 4,79,82,992 shares listed on the Stock Exchange, 4,79,79,056 shares
were in Demat mode as on 31st March, 2009.

Capital Expenditure:

Capital Expenditure of Rs 413.28 crore approx. was incurred mainly on
development/expansion of terminals, acquisition of wagons, handling
equipments and IT Infrastructure etc.

New Terminal & Terminal Network Expansion:

- Madhosingh (Mirzapur) in U.P. has been commissioned on 06/10/2008. In
addition, MOU has been signed with H.P. Govt. for setting up at ICD at
Baddi.

During the year under review, construction works at Moradbad, Dronagiri,
Ratlam, Sanathnagar, Amingaon, Dadri and Kota were also taken up.

High Speed Wagons:

During the year 2008-09, 1395 high speed wagons have been added to the
existing fleet of CONCOR owned wagons, increasing the holding of high speed
wagons to 8117 nos.

CONTAINERS:

The total number of containers (owned as well as on lease) was 13,576 as on
31.03.2009.

Container Handling Equipment:

Five new Reach Stacker machines have been commissioned during the year
2008-09.

Information Technology:

Your company continued to make progress in the field of Information
Technology. The VSAT based network has been extended and now it covers 63
locations. The Terminal Management System for Domestic (DTMS), for EXIM
(ETMS), ERP for Oracle Financial, HR Payroll was implemented for the
expanded network of terminals and a Data Warehouse Module for commercial
applications on centralized architecture is running smoothly across field
locations/Regional Offices and Corporate Office. The Web enabled Customer
Interface through a dedicated Web server is running successfully providing
facilities to the customers. The Customer feedback facility system as
implemented on the website enables us to constantly evaluate our
performance and take corrective action on Customer complaints and feedback.
The Electronic-filing of documents on the Commercial system (CCLS) at ICD/
Tughlakabad has also been introduced which enables the customers to file
their documents electronically from their own offices. As part of Business
Continuity Plan, CONCOR has established Backup site for commercial
applications.

Standardisation/Certifications:

The process of ISO-9001:2008 Quality Systems Certification was taken up for
Sixteen Offices/ Terminals during the year and the Final Certification
Audit was carried out by M/s. Quality Management Services (an accredited
Certifying Agency). The Certification Process has been completed by 31st
March 2009 and ISO Certification received for all the 16 units. As on 31-
03-09, as many as 51 units out of 68 units of the Company have been ISO
certified.

Joint Ventures/Strategic Alliances:

With the changed external business environment, your company placed
emphasis on providing total logistics and transport solutions to its
customers by exploring the possibilities of expanding the presence of the
company in all the segments of the Logistics value chain in the EXIM as
well as Domestic segments. Possibilities have been explored for strategic
alliances, both for the optimal utilization of infrastructure as well as
expansion into other segments of the value chain.

Human Resource Management:

Human Resources are considered as key assets of CONCOR. The main focus of
the HR philosophy is to align with the business of the organization. The
company has succeeded in maintaining and raising job satisfaction, morale
and productivity of the employees even in the face of global recession
which is evident from the following successful HR measures taken during the
financial year to attract and manage talent in CONCOR:

1. The working strength of the company rose from 1134 to 1176. However, the
cost of staff continues to remain around 2.5% of total costs despite the
implementation of the revised pay scales as per the recommendations of the
2nd Wage Revision Committee for Public Sector Undertakings as accepted by
the Govt. Of India.

2. Skill Development of the employees was given special attention through
in-house and external training programmes. Overall 920 employees underwent
training through various development programmes.

3. CONCOR revised and rationalized some of the HR policies to boost
employee morale and encourage excellence at work. The company successfully
retained its existing human resources and attracted new talent with
attrition rate of below 2 percent.

In recognition of the HR practices of CONCOR, Amity University has awarded
CONCOR with 'Amity Best HR Practices Award for Innovations in Human
Resource Accounting' at the fifth Global HR Summit, 2008.

Industrial Relations:

Industrial relations remained harmonious and peaceful and no man-days were
lost during the financial year. The company carried out two successful
settlements with the CONCOR Employee's Union during the financial year.

Reservation Policy:

CONCOR has been following the Presidential Directives and Guidelines issued
by the Government of India from time to time regarding reservation for SCs,
STs, OBCs, Physically Handicapped and Ex-Servicemen in letter and spirit.
Liaison Officer has been appointed to ensure implementation of the
Government Directives.

Representation of SCs, STs, OBCs and PHs as on 31.03.2009:

Category No. of Employees in Reserved
Categories as on 31.03.2009

Number % of Total
Manpower

Schedule Caste 175 15.02
Schedule Tribe 41 3.51
Other Backward Classes 251 21.6
Physically Handicapped 21 1.8

Details of SC, ST, OBC, and PHs candidates who joined CONCOR during the
financial year 2008-09:

Category No. of Candidates Joined in
Reserved Categories during
the year 2008-09

Schedule Caste 08
Schedule Tribe 01
Other Backward Classes 21
Physically Handicapped 3

Special Achievements:

1. The Customer Satisfaction Index (as determined by an independent survey
by an outside agency) for the year 2008 stood at an all time high of 87.5%
as against 81% achieved during the year 2007.

2. During the year 2008-09, ISO-9000-2008 Certification was obtained for
Sixteen Terminals of CONCOR.

3. CONCOR received the prestigious Dun & Bradstreet-ROLTA Corporate Award-
2008 for being the Top Indian Company in Logistics & Transportation Sector.
The Company has received this award for the second year in succession.

FOREIGN EXCHANGE EARNINGS:

Details of total foreign exchange earnings and outgo during the year are as
under:

(Rs. in lakh)

Foreign exchange earnings -

Foreign exchange outgo:

a) Import on CIF basis Stores & Spares 23.26
b) Capital Goods/Advances 9738.82
c) Others 59.71

Presidential Directives Received From The Government:

Railway Board vide letter no. 2008PL/49/2 dated 23.03.2009 has issued
Presidential Directive under Article - 71 of Memorandum and Articles of
Association, for implementation of Revised Pay scales w.e.f. 01.01-2007 in
respect of Board Level and below Board level Executives and Nonunionized
Supervisors.

RAJBHASHA:

There has been considerable progress in the use of official language Hindi
in Official work of CONCOR. The provisions of Section 3(3) of the Official
Languages Act have been fully complied with and letters received in Hindi
were also replied in Hindi. All efforts were made to correspond with
offices situated in 'A', 'B' and 'C' regions in Hindi as per targets set by
the Department of Official Languages.

Quarterly meetings of Official Language Implementation Committee were held
regularly under the chairmanship of Managing Director to review the
progress made in promoting use of Hindi in CONCOR and the decisions taken
therein were complied with.

Hindi Pakhwara was organised from 14th to 28th Sept., 08 in which various
competitions like Essay Writing & Noting Drafting, Typing on Computer, etc.
were held. About 70 officers and staff took part in these competitions.
Managing Director gave away cash awards and certificates to all the award
winning officers and staff in a function organised on the occasion of
closing ceremony of Hindi Pakhwara 2008. A Kavi Sammelan was also organised
during the Pakhwara in which 10 poets of repute took part. 201 officers /
employees were given Cash Awards for doing their official work in Hindi
under CONCOR Rajbhasha Puraskar Yojna. CONCOR was also conferred with the
1st Prize of Narakas Rajbhasha Shield for the year 2007-08 for its
excellent performance in official language Hindi by the Town Official
Language Implementation Committee (Undertakings) Delhi. The half-yearly
Hindi magazine 'Madhubhashika' which was started last year, has been made a
quarterly magazine to promote and encourage literary talent of CONCOR
staff. Hon'ble 2nd Sub Committee of Committee of Parliament on Official
Language, visited CONCOR on 9th February 2009 to inspect the progressive
use of Hindi in official work and expressed its satisfaction on the work
done in Hindi.

Hindi books of reputed authors are kept in the Library at Corporate Office.
The Number of books in the Library has increased to 946. Leading Hindi
Newspapers as well as monthly and fortnightly magazines continue to be
subscribed.

CONCOR's website is bilingual and all the computers have the facility for
working bilingually.

Vigilance:

With a view to have systems Improvements, Vigilance Division continued its
focus on 'Preventive Vigilance' during 2008-09. Twelve Preventive/Surprise
Checks and Four Intensive Examinations of major works were conducted at
various Regional Offices/Inland Container Depots/Container Freight Stations
and Project works. In addition, 16 cases were registered/investigated on
the basis of complaints and other information.

At the instance of Vigilance Wing, a sum of Rs.1.01 Crores was recovered
from various contractors/customers during the financial year. In addition,
eight improvements in systems and procedures were recommended to various
functional divisions, on the basis of experience gained through preventive
examination and other investigations. The system improvements have been
adopted and implemented, which are aimed at improving the physical and
financial performance in various terminals.

A focus on cost effectiveness in services led to review of the requirement
and deployment of handling infrastructure, which yielded a saving of
Rs.2.90 crores from the running expenditure.

Suitable penal action was taken against the erring officials / contractors.
CONCOR was the first Railway PSU to adopt and implement the Integrity Pact.

The Vigilance Awareness Week was observed in Corporate Office as well as in
Regional Offices by undertaking various activities. Nine training
programmes, one workshop and two interactive sessions were organized in
different regions in order to create awareness about various aspect of
vigilance.

Particulars of Energy Conservation, Technology Absorption etc.:

Provisions of Section 217(1) (e) of the Companies Act, 1956 read with the
Companies (Disclosure of Particulars in the Report of Board of Directors)
Rules, 1988 regarding conservation of energy, technology absorption are not
applicable to the Company at this stage.

Directors' Responsibility Statement:

Pursuant to the requirement under Section 217(2AA) of the Companies Act,
1956 with respect to Directors Responsibility Statement, it is hereby
confirmed:

(i) That in the preparation of the annual accounts for the financial year
ended 31st March, 2009, the applicable accounting standards have been
followed along with proper explanation relating to material departures;

(ii) That the directors have selected such accounting policies and applied
them consistently and made judgments and estimates that were reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the profit or loss of the
Company for the Year under review;

(iii) That the directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956, for safeguarding the assets of the
company and for preventing and detecting fraud and other irregularities;

(iv) That the directors have prepared the accounts for the financial year
ended 31st March, 2009 on a 'going concern' basis.

Particulars of Employees:

Information in accordance with the provisions of Section 217(2A) of the
Companies Act, 1956 read with the Companies (Particulars of Employees)
Rules, 1975.

Auditors:

M/s. Hingorani M & Co., Chartered Accountants, New Delhi, were appointed as
Company's Statutory Auditors for the Financial year 2008-09.

Board Of Directors:

During the financial year 2008-09, six meetings of the Board of Directors
were held for transacting the business of the Company. Shri Shri Prakash
joined CONCOR as Chairman w.e.f. 23.10.2008. Shri Tehmuras R. Doongaji was
appointed as Director w.e.f. 04.04.2008.

The following Directors held the office till the date of Report:

- Shri Shri Prakash, Part-time Chairman;
- Shri Rakesh Mehrotra, Managing Director;
- Shri Suresh Kumar, Director (Finance);
- Shri Anil Kumar Gupta, Director (Domestic Div);
- Shri Harpreet Singh, Director (Projects & Services);
- Shri Yash Vardhan, Director (Intl. Mktg. & Ops.)
- Shri S.K. Das, Director
- Shri S. Balachandran, Director
- Shri Janat Shah, Director
- Shri V. Sanjeevi, Director
- Shri T.R. Doongaji, Director.

Retirement of Directors by Rotation:

In terms of provisions of the Companies Act, 1956, Shri Anil Kumar Gupta,
Shri Yash Vardhan and Shri S.K. Das, Directors are liable to retire by
rotation and being eligible, offer themselves for reappointment.

Code of Conduct:

The Code of Conduct has been laid down for the Board Members and senior
management. A copy of the same is available on the website of the Company.

Based on the affirmation received from Board Members and Senior Management
Personnel, it is hereby declared that all the members of the Board and
Senior Management Personnel have affirmed compliance of Code of Conduct for
the financial year ended on March 31, 2009.

Conclusion:

Your Company acknowledges the commitment and dedication of all the
employees, the support and understanding extended by the Indian Railways,
Customs, Ports and above all the customers who have continued to patronize
the services provided by your Company.

For and on behalf of the Board of Directors

(Shri Prakash)
Chairman

Date : 07.08.2009
Place : New Delhi

Addendum-I to the Directors' Report 2008-09:

Reply to the comments/qualifications in the Auditors' Report for the
financial year 2008-09:

Points in the Auditors' Report:

Point 3(i) of Auditors report.

Auditors' Qualification:

Sale/Lease Deeds in respect of Land & Buildings valuing Rs.7.93 Crore are
yet to be executed in favour of the company (Note no. 2, Schedule 3).

Reply of the Management:

The Sale/Lease deeds for assets under reference is being pursued with the
concerned authorities.

Points in the Auditors' Report:

Point 3(ii) of Auditors report.

Auditors' Qualification:

Balances of Sundry Debtors, Loans & Advances, Deposits, Sundry Creditors
(including Indian Railways) have not been confirmed/reconciled. (Note no.
13, Schedule 11).

Reply of the Management:

The balances have already been reconciled as per our books of accounts.
Confirmation/reconciliation of these balances with outside parties is being
done whenever required as an ongoing process.

Points in the Auditors' Report:

Point 3(iii) of Auditors report.

Auditors' Qualification:

We are unable to comment on the shortfall, if any, in the value of non-
moving stock of stores & spare parts. (Note no. 21, schedule 11).

Reply of the Management:

As per the accounting policy of the Company, inventories have been valued
at cost on weighted average basis. The items of inventory under reference
by their very nature are essentially required to be kept and are fit for
their intended use. As such, there is no shortfall in their value.

Points in the Auditors' Report:

Point no.(ix)(a) of the annexure to the auditors report.

Auditors' Qualification:

The company is generally regular in depositing with appropriate authorities
undisputed statutory dues including provident fund, investor education and
protection fund, Employee's state insurance, income tax, sales tax, wealth
tax, service tax, custom duty, excise duty, cess and other material
statutory dues applicable to it. According to the information and
explanations given to us, the undisputed amounts payable in respect of
outstanding statutory dues that were in arrears, as at 31st March, 2009 for
a period of more than six months from the date they became payable are
given below:

NORTHERN REGION:

- Name of the Statute : Customs Act, 1962
- Nature of the dues : Customs Duty
- Amount (Rs. in crore) : 0.90
- Period to which the amount relates : Upto 2000-01

Reply of the Management:

Demand of custom duty was raised on the pilfered goods during financial
year 2000-01 & 2002-03. This amount of custom duty is payable on the
receipt of adjudication order/confirmation of demand. The payment is being
released in cases where adjudication orders have already been received.

Auditors' Qualification:

NORTHERN REGION:

- Name of the Statute : Customs Act, 1962
- Nature of the dues : Customs Duty
- Amount (Rs. in crore) : 0.02
- Period to which the amount relates : 2002-03

Reply of the Management:

Demand of custom duty was raised on the pilfered goods during financial
year 2000-01 & 2002-03. This amount of custom duty is payable on the
receipt of adjudication order/confirmation of demand. The payment is being
released in cases where adjudication orders have already been received.

Auditors' Qualification:

NORTH WEST REGION:

- Name of the Statute : Finance Act, 1994
- Nature of the dues : Service Tax (NWR)
- Amount (Rs. in crore) : 0.10
- Period to which the amount relates : 2005-06

Reply of the Management:

The amount under reference is actually Rs.1.06 lakhs, which has already
been deposited in June, 2009.

Auditors' Qualification:

In addition the company has made provision for property tax payable in
respect of its assets at various locations amounting to Rs.11.51 crore upto
31st March 2009, on estimated basis, pending commencement/completion of
assessments by the appropriate authorities.

Reply of the Management:

Taking a conservative view, provision for property tax has been done
pending any demand or commencement/completion of assessments by the
appropriate authorities.

Points in the Auditors' Report:

Point no.(ix)(b) of the annexure to the auditors report.

Auditors' Qualification:

According to the information & explanations given to us, dues of income
tax, sales tax, wealth tax, service tax, customs duty, excise duty and cess
that have not been deposited on account of any dispute are given below:

Auditors' Qualification:

- Name of the Statute/Authority : Finance Act, 1994
- Nature of the dues : Service Tax
- Amount (Rs. in crore) : 0.01
- Period to which the amount relates : 1st May 2003 to 16th July 2003

Reply of the Management:

The matter is pending with concerned appellate authority.

Auditors' Qualification:

- Name of the Statute/Authority : Finance Act, 1994
- Nature of the dues : Service Tax
- Amount (Rs. in crore) : 0.01
- Period to which the amount relates : January 2004 to March 2004

Reply of the Management:

As per the orders of Appellate Authority, this matter has been referred to
the assessing Authority for re-assessment.

Auditors' Qualification:

- Name of the Statute/Authority : Sub-registrar, vadodara
- Nature of the dues : Additional stamp duty
- Amount (Rs. in crore) : 0.20
- Period to which the amount relates : 2003-04

Reply of the Management:

The matter is in Appeal with the concerned authorities.

Auditors' Qualification:

- Name of the Statute/Authority : Delhi Value Added Tax, 2004
- Nature of the dues : Penalty u/s 86(19)
- Amount (Rs. in crore) : 0.31
- Period to which the amount relates : 14th December 2005

Reply of the Management:

In this matter against the orders of the authorities, CONCOR has filed a
Writ Petition in May, 2006 in the Hon'ble High Court at Delhi for quashing
of various detention orders, seizing/detaining rolling stock and imposition
of penalty. The Hon'ble High Court has stayed operation of the penalty
orders passed by the authorities.

Auditors' Qualification:

- Name of the Statute/Authority : Sales Tax Act
- Nature of the dues : Sales Tax (NR)
- Amount (Rs. in crore) : 0.01
- Period to which the amount relates : Year 1997-98

Reply of the Management:

The matter is in Appeal with concerned authorities.

Auditors' Qualification:

- Name of the Statute/Authority : Sales Tax Act
- Nature of the dues : Sales Tax (NR)
- Amount (Rs. in crore) : 0.08
- Period to which the amount relates : Year 2000-01

Reply of the Management:

The matter is in Appeal with concerned authorities.

Auditors' Qualification:

- Name of the Statute/Authority : Sales Tax Act
- Nature of dues : Sales Tax (SR)
- Amount (Rs. in crore) : 0.42
- Period to which the amount relates : Year 2000-01

Reply of the Management:

A Notice of demand imposing a penalty of Rs.0.42 crore for the Assessment
year 2003-04 was received against which an appeal was made to Deputy
Commissioner, Commercial Taxes (DCCT) and a writ petition was filed before
Honb'le High Court of Kerala challenging the penalty imposed. Honb'le High
Court of Kerala has stayed the recovery proceedings and has directed DCCT
to consider & dispose the case at their end. The matter is pending with
DCCT.

Auditors' Qualification:

- Name of the Statute/Authority : Building & Other Workers
Welfare Cess Act, 1996

- Nature of the dues : Cess

- Amount (Rs. in crore) : 0.42

- Period to which the amount relates : Year 2008-09

Reply of the Management:

Refer note no.33 of Schedule 11. An amount of Rs.4.13 lakh which was due
has been deposited.

Points in the Auditors' Report:

Point no. (xiv) of the annexure to the Auditors report.

Auditors' Qualification:

In our opinion and according to the information and explanations given to
us, the company is not dealing in shares, securities and other investments.
The investments in the shares of joint ventures & subsidiary company are
held by the company in its own name and are not traded. However, letters of
allotment/Share Certificates in one joint venture Company costing Rs.0.05
Crore are not available with the company. (Note to Schedule 4).

Reply of the Management:

The matter is in Arbitration.

MANAGEMENT DISCUSSION AND ANALYSIS:

Industry Overview:

The Indian Multimodal scene has witnessed the advent of multiple container
train operators since 2006-07. Presently, 15 container train operators
(besides CONCOR) are operating in the business domain after having signed
the Concession Agreement with Indian Railways for running of Container
Trains for a period of 20 years, extendable by another 10 years. Out of
these 15 players, 13 have commenced their train services. While two of
these have an alliance with CONCOR and are operating their services from
CONCOR terminals, the remaining are operating from other facilities. While
the operations of new entrants to the business started in a limited way by
two operators in April, 2007, the number has now grown to 15 excluding
CONCOR and the volumes being carried by these operators have grown with
induction of new rakes. These operators have also been using Goods
Sheds/terminals of Indian Railways as well for their operation in the
domestic sector. With the emergence of number of new ports, viz., Mundra,
Pipavav, Vizag, Tuticorin, Vallarpadam and some other ports in Gujarat, the
hinterland movement of containers in the country will be greatly impacted.

This is likely to result in increased level of hinterland penetration of
container traffic in the near future.

With the sustained efforts of the Management and Staff of your Company, the
performance achievements during the year under review on all the
Performance Parameters have matched the targets set in the Memorandum Of
Understanding (MOU) signed with the Government. Your company expects to
achieve 'Excellent' MOU Rating even for the year 2008-09.

Exim & Domestic Business:

The unprecedented recession in the world economy impacted the EXIM &
Domestic business of the country as well. The impact of recession was more
pronounced in the second half of the year 2008-09. The first half of the
financial year witnessed a growth of 5.6% in EXIM volumes handled by the
Company as compared to the same period of last financial year. However, the
overall EXIM traffic in 2008-09 was 23,08,232 TEUs, during the period under
review as compared 24,47,769 TEUs of the last financial year. In the
Domestic business segment, the outward booking was 2,29,085 TEUs as
compared to booking of 2,31,543 TEUs in the fiscal 2007-08 and the total
handling was 4,53,273 TEUs during FY 2008-09 as compared to 4,70,370 TEUs
in the FY 2007-08.

Despite worldwide economic slowdown and competition posed by other players,
CONCOR has retained the business of its existing customers. With
continuance of the recessionary trend and the stiff competition from the
other train operators, it will be a challenge to retain our share and grow.
In order to attract more volume, your company will continue to match and
strive to surpass the services offered by other operators in terms of
quality of services and pricing.

Internal Control Systems:

CONCOR has in place well defined roles, responsibilities and authorities
for employees at various levels. This, coupled with robust internal MIS
systems, ensures appropriate information flow to facilitate effective
monitoring. Adherence to these processes is monitored through frequent
internal audits. The company has an internal audit system that requires the
internal audit firms to certify the appropriateness of internal controls in
operation.

The internal auditors are external firms directly reporting to the
management at higher level, which also ensures their independence. Reports
of the internal auditors are reviewed and compliances are ensured and the
reports along with the compliances are put up to Audit Committee
periodically.

Secured and Unsecured Loans:

No secured and unsecured loans were taken during FY 2008-09.

Fixed Assets:

(Rs. Crore)

Year ended March 31 2009 2008 %age Growth

Original Cost of Assets 2640.95 2244.24 17.68
Less Accumulated Depreciation 691.98 579.09 19.49
NET FIXED ASSETS 1948.97 1665.15 17.04

An amount to the tune of Rs. 413.28 crore was capitalized during the year.
The main additions are on accounts of construction of Terminal
Infrastructure, purchase of Wagons, Handling equipments etc.

Wagons:

During the year under review, 1395 high speed wagons have been added to the
existing fleet of CONCOR owned wagons; increasing the holding of high speed
wagons to 8117 nos.

Inventories:

The company being a service company does not have stock in trade. The
inventory is represented by stores and spares kept by the company for
maintenance of its own equipments.

Sundry Debtors:

Sundry debtors are 0.52% of the operating income of the year. Provision for
doubtful debts wherever considered necessary has been made.

Cash and Bank Balance:

The company keeps all its cash balances in short term fixed deposits with
the banks. These cash reserves have been retained for financing the
expansion plans as well as investments in JVs as per the Capex plan of the
Company.

Income:

Income from operations has grown by 2.09% over FY 2007-08. Between the two
business segments i.e. EXIM & Domestic, EXIM segment contributes the major
share of freight revenues. Increase in business volumes and successful
induction and running of High Speed Wagons have been the main reasons for
the company's growth.

Expenses:

Terminal and other service expenses have reduced by 1.76% over FY 2007-08.
The decline in direct expenses in the current year is due to marginal
growth in operating income.

Administrative Expenses:

The increase in administrative expenses is 41.16% over FY 2007-08.

Employee Remuneration:

The employee cost has grown by 46.98% over FY 2007-08 which is on account
of provision for the impact of salary revision w.e.f. 01.01.2007 and on
account of annual increments, promotion, increase in dearness allowance,
provision for performance linked pay (PLI/PRP) etc.

Taxation:

In making income tax provision, the requirements of Accounting Standard-22
are duly complied with. As detailed in the notes on accounts, this has
resulted in a deferred tax provision of Rs.20.08 Crore during the year.
Like in the previous year, in the current year also, the company has
availed tax benefit under section 80-IA of the Income Tax Act, 1961.

Outlook:

The year 2008 will go down in history as a tough year for the global
economy, and, in many ways, a challenging year for the Indian Economy. The
series of global events resulting into a meltdown/down turn, which unfolded
in the second half of the year under review, had its impact on India as
well and the outlook still appears to be uncertain. CONCOR has also been
affected adversely as its business fortunes are closely linked to India's
exportimport (EXIM) trade.

Strategy To Meet The Challenges:

Your Company has the advantage of very low fixed costs which constitute
approximately 10% of the total expenses and the remaining costs are
variable costs linked to business volumes. As such, it does not present as
big a challenge as they do to other Companies. Your Company's efforts on
the cost management front helped in reducing cost and maintaining profit
margins even in a volume decline scenario. The focus on cost management
strategies will continue so as to maintain profitability even in a
shrinking market scenario. Your Company is also alive to the competitive
scenario and has been dynamic in taking suitable pricing initiatives on
selective basis. Further, Quality of Service being one of the key
determinants for customer choice, your Company is taking all the necessary
steps to remain the market leader in terms of excellence in quality of
service and providing value for money to its customers.

For and on behalf of the Board of Directors

(Shri Prakash)
Chairman

Date : 07.08.2009
Place : New Delhi