The Directors of the Company present to you the 19th Annual Report of the Companytogether with the Audited Balance Sheet as at 31st March 2016 and the Statement of Profitand Loss for the year ending on 31st March 2016.
|1. FINANCIAL RESULTS || ||(in Rs. crores) |
|z || || |
|The Financial Results of the Company for the year under review is summarized below for your perusal and consideration. || || |
|Particulars ||2015-16 ||2014-15 |
|NET REVENUE ||402.20 ||678.53 |
|PROFIT BEFORE TAX AND DEPRECIATION ||(159.15) ||(147.60) |
|PROFIT /(LOSS) BEFORE TAX (PBT) ||(170.76) ||(129.30) |
|PROVISION FOR CURRENT TAX ||- ||- |
|TAX EXPENSE ||- ||- |
|PROFIT AFTER TAXES/(LOSS) (PAT) ||(172.92) ||(154.23) |
1.1 FINANCIAL PERFORMANCE
The Company has achieved Net sales of Rs. 402.20/- Crores for the year ended 31stMarch 2016 as compared to Rs.678.53/- Crores in the previous year. The Company hasincurred a Net loss of Rs. 172.92/- Crores as against a loss after taxes of Rs. 154.23/-Crores in the previous year. The losses are attributable to high input costs irregularsupply of raw materials high finance costs and unfavourable market conditions.
1.2 CORPORATE DEBT RESTRUCTURING (CDR)
The year saw progressive implementation of / compliance with the approved CDR package /conditions.
The company in spite of its constant efforts could not infuse funds as per the CDRrequirements before 1st April 2015. The company could only infuse an amount to the tune ofRs 55 Crores out of the sale of the companys Porur property. The rest of the amountwas converted into equity and has been allotted to the CDR lenders. The company as perthe approved CDR package should infuse funds to the tune of Rs.220/-crores towardsmargins reduction of debt and shoring up of working capital by 31 March 2015. The companyhas during the year infused Rs.54.45/- Crores (net of TDS). The CDR Lenders have convertedRs.82.50/- Crores of debt into Equity at Rs.3.86/- per share.
The break up of allotment is as follows
|Bank ||Amount ||No.of Shares |
|State Bank of India ||408028355 ||105706828 |
|Bank of Baroda ||178628400 ||46276787 |
|IDBI ||74355171 ||19262998 |
|ICICI ||164001170 ||42487350 |
| ||825013096 ||213733963 |
2. SHARE CAPITAL
The paid up Equity Share Capital as on 31st March 2016 is Rs. 79.70/- Crores. Duringthe year under report the Company has not issued any shares with differential votingrights nor granted stock options nor sweat equity.
Your Directors have not recommended any dividend for the financial year 2015-16 in viewof the losses incurred and the need to conserve resources of the Company.
4. MANAGEMENT DISCUSSION AND ANALYSIS CONSTRUCTION INDUSTRY OUTLOOK:
Construction Industry Overview
The demand has fallen significantly as the sudden collapse of oil prices in 2015 ledvirtually every energy company to slow down postpone or outright cancel major projectsall over the world. Commodity prices have also tumbled and the mining industry hasreduced its capital spending considerably.
The deterioration of energy and commodities markets is in large part a consequence ofthe skidding economy in China which had been a major driver of global economic activityand infrastructure projects over the past decade. Anemic and inconsistent growth indeveloped markets has been unable to make up for the Chinese shortfall and similarweaknesses in other emerging countries. Continuing global economic instability will almostcertainly drive E&C sector revenues down in 2016 compared to the year before stallingthe recovery that had followed the previous collapse in spending in the sector during the2008-09 financial crisis.
Thats not to say that there are no bright spots for E&C companies. In theU.S. construction starts were up about 15 percent in 2015 and are forecast to advanceanother 6 percent this year. Also infrastructure spending has been neglected since the2008 recession and some analysts believe that worldwide annual infrastructure spendingwill grow to more than US$9 trillion per year by 2025 from a little over $4 trillion nowthat is if the political will can be mustered to support much-needed improvements.
In addition to the fundamental economic stresses on the E&C sector establishedcompanies face intensifying competition from firms in low-cost nations which weighs onE&C profit margins and has driven many in the industry to commoditize their services.To make up for it some E&C companies have turned to a mergers and acquisitionstrategy centered on acquiring companies offering promising new sources of value in newgeographies new lines of business or both.
Indian Construction Industry Outlook
Bright prospects for construction industry in India
Increasing investments in residential construction and transport infrastructure willdrive growth in Indias construction industry over the forecast period (2016 2020)according to a study by Timetrics Construction Intelligence Centre (CIC).Consequently the average annual growth in real terms is expected to improve from of 2.95%in 2011 2015 to 5.65% during the coming five years.
Timetrics CIC forecasts the industry to rise from a value of US$428.1 billion in2015 to US$563.4 billion in 2020 measured at constant 2010 US dollar exchange rates. Dueto industrialization urbanization a rise in disposable income and population growth thedemand for construction services is set to rise. And also with the smart city projects areput in place with full swing by the Government of India in collaboration with the StateGovernments the prospects look brighter for the Infrastructure projects in the comingyears. Government efforts to improve Indias residential and transport infrastructurewill also play a vital role in supporting the growth.
Infrastructure construction to pick up
Infrastructure construction accounted for 23.0% of the total industrys value in2015. According to Timetrics CIC it will continue to expand over the forecastperiod driven by public and private sector investments in public transportinfrastructure. Consequently infrastructure construction is anticipated to be theindustrys fastest-growing market over the forecast period with a CAGR of 9.94% innominal terms to value INR9.5 trillion (US$140.1 billion) in 2020.
"The countrys expanding population and urbanisation will continue togenerate a need for infrastructure development. To improve trade competitiveness and copewith the population growth the government is focusing more on infrastructure developmentwhich is expected to result in regular investments in the maintenance and expansion ofroad infrastructure in the near future"
Residential construction to dominate the industry
Residential construction was the largest market in the Indian construction industryduring 2011-2015 and is anticipated to remain relatively sizeable over the next fiveyears with a 30.6% share of the industrys total value in 2020. Constructionactivity in the residential market will be supported by rapid urbanization populationgrowth and positive developments in regional economic conditions. Government efforts toclear slum areas by 2022 and reduce the countrys housing deficit will also help themarket grow.
Provisions for Infrastructure sector in Budget 2016-17
Road Transport and Highways: Development of infrastructure particularly the roadinfrastructure is crucial for accelerating the process of economical development of thecountry. Keeping this in view the budgetary support has been stepped to Rs. 55000 cr.This includes allocation for Special Accelerated Road Development Programme (includesallocation of Kaladan multi-modal transport project) - Rs.5000 cr. The Central Road Fund(CRF) allocation includes allocation for NHAI - investment is Rs. 12153 cr. NationalHighways(original works) Rs. 15500 cr. Special programme for development of Roadconnectivity in Left Wing Extremism(LWE) affected areas (including Rs. 400 cr. for Tribalsub-plan) - Rs. 700 cr. CRF for States/ UTs Rs. 10993 cr. State Roads of EconomicImportance (E&I) & Inter State Connectivity (ISC) - Rs.1233 cr. and for RoadTransport & Road Safety - Rs.200 cr.
Investments & Government Initiatives: International payment
Construction Development: Township Housing Built-up Infrastructure
Each phase of the construction development project would be considered as a separateproject for the purpose of FDI Policy. Construction - Development projects (which includedevelopment of townships construction of residential/commercial premises road orbridges hotels resorts hospitals educational institutes recreational facilities cityand regional level infrastructure townships) - 100% FDI through automatic route ispermitted. The conditions under this sector are:
(A) (i) The investor will be permitted to exit on completion of the project or afterdevelopment of trunk infrastructure i.e. roads water supply street lighting drainageand sewerage.
(ii) Notwithstanding anything contained at (A) (i) above a foreign investor will bepermitted to exit and repatriate foreign investment before the completion of project underautomatic route provided that a lock-in-period of three years calculated with referenceto each tranche of foreign investment has been completed. Further transfer of stake fromone non-resident to another non-resident without repatriation of investment will neitherbe subject to any lock-in period nor to any government approval.
(B) The project shall conform to the norms and standards including land userequirements and provision of community amenities and common facilities as laid down inthe applicable building control regulations bye-laws rules and other regulations of theState Government/Municipal/Local Body concerned.
(C) The Indian investee company will be permitted to sell only developed plots. For thepurposes of this policy "developed plots" will mean plots where trunkinfrastructure i.e. roads water supply street lighting drainage and sewerage have beenmade available.
(D) The Indian investee company shall be responsible for obtaining all necessaryapprovals including those of the building/layout plans developing internal andperipheral areas and other infrastructure facilities payment of development externaldevelopment and other charges and complying with all other requirements as prescribedunder applicable rules/bye-laws/regulations of the State Government/Municipal/Local Bodyconcerned.
(E) The State Government/Municipal/Local Body concerned which approves thebuilding/development plans will monitor compliance of the above conditions by thedeveloper.
(F) No minimum land area requirement in case of development of serviced plots.
(G) In case of construction-development projects minimum floor area of 20000 sq. mts.
(H) It is clarified that 100% FDI under automatic route is permitted in completedprojects for operations and management of townships malls/shopping complexes and businessconstructions.
The Government of India has recently relaxed FDI policy in 15 sectors such as raisingthe foreign investment limit for some sectors easing the conditions for others andputting many on the automatic route for approval. The sectors that benefited from therelaxation include defence real estate private banking civil aviation single brandretail and news broadcasting. The new rules provide for easier exit from investment in theconstruction sector while foreign investment limit in defence and airlines was allowed upto 49 per cent through the automatic route. Banks were allowed fungible FDI investment upto 74 per cent which means that FII investment in private banks can rise to this limit.
The Government of India plans to further simplify rules for Foreign Direct Investment(FDI) such as increasing FDI investment limits in sectors and include more sectors in theautomatic approval route to attract more investments in the country.
Risks / Current challenges in infrastructure development in India
But the progress of infrastructure development has not been smooth in the recent yearswith significant shortfalls in planned investments. This problem is compounded by the factthat many of the announced projects are yet to be completed with large time and costoverruns. Figures sourced from Government reports reveal that nearly 276 projects out of566 projects tracked by Ministry of Statistics and Programme Implementation have beendelayed. Some estimates of Ministry of Finance peg the worth of delayed projects due topending approvals at ~ INR 1 lakh Crore.
Future growth areas for the sector
The proposed investment over the next five years are ~ INR 5600000 Cr with nearlyhalf expected to come from private players. While sectors like road and power are expectedto attract a large share of the proposed investments newer opportunities are likely toappear over the next few years. One of the examples of a large planned infrastructuredevelopment is the Delhi-Mumbai Industrial Corridor envisaged to accommodate largeindustrial zones development of smart cities and creation of logistics network.Opportunities are also expected to arise in the area of urban infrastructure developmentsuch as large urban transport and water supply projects in urban cities driven by therapid pace of urbanization.
Future Outlook of the Industry Especially on Road Sector LOOKING BACK
A new contract method holds the key to renewed attempts by the government in drawingprivate players back to the highways sector. After finding it difficult to award highwaysections to private developers the government shifted from the BOT (build operatetransfer) model to the government-funded EPC (engineering procurement construction) andintroduced the new method the hybrid annuity model for projects granted from October 1.Under the new model the National Highways Authority of India will provide an initialgrant up to 40 per cent of the cost and the developer has to chip in with the rest andcomplete the project.
In August the Cabinet Committee on Economic Affairs cleared a proposal to allowinfrastructure companies to divest 100 per cent of their equity after two years ofcompletion of construction for all projects given under the BOT model irrespective ofwhen year the contract was handed out.
Data from India Ratings and Research a unit of Fitch Ratings shows that 21 highwayprojects worth Rs 26000 crore failed to attract bids over the last two fiscals. As aresult NHAI had to fall back on EPC contracts to plug the gap.
Disputes too are hampering completion of projects. Data from the road ministry shows112 cases involving Rs 25000 crore were pending under arbitration between the NHAI anddevelopers till end-April 2015. Added to this is the fact that an underdeveloped bondmarket has forced PPP road projects to mainly depend on debt from commercial banks Rs 1.67lakh crore till February 2015 up 384 % from FY08.
A challenging target for project awards through the public-private-partnership route islikely to be set for the coming fiscal at close to 5000 km of highway sections worth overRs 45000 crore. These include bids for the proposed Bharat Mala project that entails roaddevelopment along the international borders and the countrys coastline and the CharDham connectivity project that envisages linking up the religious tourism circuit.
A bigger challenge is the task of managing project risk in older projects. An estimated7500 km of highway projects have being deemed to be at high risk of not being completedincluding 5100 km under construction and 2400 km operational sections that were awardedmostly between fiscals 2010 and 2012 on the BOT format.
India has an estimated urban housing shortage of 18.8 Million dwelling units. Thehousing shortage in rural India is estimated at 47.4 Million units in 2012.
Present levels of urban infrastructure are inadequate to meet the demands of theexisting urban population. There is need for re-generation of urban areas in existingcities and the creation of new inclusive smart cities to meet the demands of increasingpopulation and migration from rural to urban areas. Future cities of India will requiresmart real estate and urban infrastructure.
The Government of India is in the process of launching a new urban development mission.This will help develop 500 cities which include cities with a population of more than100000 and some cities of religious and tourist importance. These cities will besupported and encouraged to harness private capital and expertise through Public PrivatePartnerships (PPPs) to holster their infrastructure and services in the next 10 years.
To provide quality urban services on a sustainable basis in Indian cities the need ofthe hour is that urban local bodies (ULBs) enter into partnership agreements with foreignplayers either through joint ventures private sector partners or through other models.
CCCL COMPANY SCENARIO
In an adverse environment the company has bagged new orders to the tune of Rs. 65096/-Lakhs and has successfully executed the projects.
Company began the current financial year with an order book which stood at Rs .72016/-Lakhs. The size and structure of the organisation was geared for catering to take uplarger projects but with economic slowdown and lower order booking coupled with slowerproject execution the asset base and the xed cost structure which was built up affectedthe companys profitability.
The lower turnover and operating margins in an environment of high interest costsseverely affected the Companys pro tability. In addition further litigation and nonpayments of claims adversely affected the Companys liquidity. Companys revenuegrowth and pro tability was muted in the last few quarters due to order execution-relatedissues. CCCLs revenue declined in FY 2015-2016 due to slowdown in order execution.Delay due to exogenous factors such as delay in procuring environmental approvals landacquisition and government decision making have adversely affected performance. Delayedproject execution has in turn affected payment from clients and the Companys cashows. The year under review has seen enhanced working capital requirements. This has beendue to clients delaying payments. Amounts due from clients have shot up to Rs.1001.55/-crores ( including retention of Rs.135.83/- Crores.) as the recovery has beenslow. In certain cases we have initiated legal action for recovering these dues. Dues fromclients for completed major projects to the tune of Rs.72.71/- crores has added toliquidity crunch.
The Infrastructure sector is facing strong headwinds including slowdown in orderbooking caused by shortfall in investments in the infrastructure sector increasedcommodity prices and high interest rate scenario. As a consequence of certain unexpecteddevelopments which were beyond the control of management mainly delays in decision makingby the Companys major clients and delays in settlement of claims the expected cashows have not materialized for the Company. These factors coupled with slowdown inInfrastructure industry has resulted in lower turnover lower operating margins and highinterest costs for the Company which has consequently led the Company to incur net lossfor the fifth time since its inception.
STEPS TAKEN OR PROPOSED TO BE TAKEN FOR IMPROVEMENT:
Company has taken view of all these factors seriously and to overcome the abovechallenges has proactively undertaken the following steps directed at improving itsoperational efficiencies:
Claims Realisation: Persistent efforts are being made by Company to collect duesand claims. The Company has set up a strategic senior management team to recover dues andclaims outstanding from Clients. Total outstanding as of 31st March 2016 is Rs.100155.42/-lakhs (including retention of Rs.13583/- lakhs). Over due outstanding more than 180days is Rs.16974.64/- Lakhs.
Cost optimization: Over the past 12 months Company has implemented costoptimization measures such as cutting overheads and rationalization of human resources.Reduction in Working Capital: Insistence on higher advances from customers and bettercredit terms with suppliers is being negotiated.
Monetization of assets: Company is proactively exploring monetization of assetseither at the parent level or in its subsidiaries / step down subsidiaries.
Bidding for Jobs: The Company has been careful in bidding for new jobs and istaking jobs only on a selective basis.
It is explicitly states that some of the statements in the Management Discussion andAnalysis report are likely to be forward looking and it may so happen that the actualevents or results may differ from what the Board of Directors/ Management perceive interms of the future performance and outlook due to factors having a bearing on them andwhich are beyond precise perception. Company's operations may be affected with supply anddemand situations input prices and their availability changes in government regulationsand policies tax laws and other factors such as Industrial relations fund constraintsand macro economic development.
UNLOCKING INVESTMENTS IN SUBSIDIARIES
Particulars of Loans and Advances in the nature of loans as required under ListingRegulations.
| || || |
(Rs. In Lacs)
|Name of the Company ||Balance as on ||Maximum outstanding |
| ||31.03.2016 ||31.03.2015 ||2014-16 ||2013-15 |
|A. Subsidiaries || || || || |
|Consolidated Interiors Limited ||950.29 ||948.88 ||950.29 ||948.88 |
|Noble Consolidated Glazings Limited ||1741.36 ||1660.07 ||1741.36 ||1660.07 |
|CCCL Infrastructure Limited ||1187.77 ||6711.28 ||1187.77 ||6711.28 |
|CCCL Power Infrastructure Limited ||597.73 ||597.56 ||597.73 ||597.56 |
|CCCL Pearl City Food Port SEZ Limited ||129.86 ||119.01 ||129.86 ||119.01 |
|Delhi South Extension Car Park Limited ||(-) 215.38 ||- ||(-) 215.38 ||- |
CCCL has made total investments of Rs.22.91 in its subsidiaries viz. CCCL Infra (Rs.22.91 Crores). These investments are yet to yield returns. While the investment decisionis sound the execution of these businesses have faced various bottlenecks in the form ofnon- availability of working capital un-favourable market conditions other macroeconomicissues.
These have stressed the cash flows of the parent company CCCL presently we are inadvanced discussions with various investors. Going forward it is proposed to unlock theirvalue by divesting majority equity stake in these companies.
In accordance with the General Circular issued by the Ministry of Corporate AffairsGovernment of India the Balance Sheet Statement of Profit and Loss and other documentsof the subsidiary companies are not being attached with the Balance Sheet of the Company.However the financial information of the subsidiary companies is disclosed in the AnnualReport in compliance with the said circular.
(a) Consolidated Interiors Ltd:
The focus has been to complete the jobs on hand and wait for the right opportunitiestill the market stabilizes. Due to sluggishness in the environment there is not muchheadway with the progress. However the situation is expected to improve in the nearfuture.
(b) Noble Consolidated Glazings Ltd. (NCGL)
The glazing market being a sub set of the construction industry the various factorsdiscussed above drastically affected the operations of NCGL. Completion of projects onhand and collection of receivables and optimization of costs had been the priority in2015-16. With the much awaited economic stability expected in 2016-17 and the resultantmarket improvement better days are foreseen. The Company has streamlined its operationsand expected to perform better in the near future.
(c) CCCL Infrastructure Ltd.
In view of the impetus to green power the company is looking for a strategic /financial partner to increase the capacity of solar power generation. Currently the 5 MWsolar power plant is consistent in power generation.
(c)(i) CCCL Pearl city Food port SEZ Ltd. This is the step down subsidiary of CCCLInfrastructure Ltd. The company is on the look out for a strategic / financial partner forsprucing up the operations. The much expected revival of the tax concessions to SEZ andthe general economic scene we believe shall make this viable.
(d) Delhi South Extension Car Park Ltd.
The Concession fee paid to Delhi Municipal Corporation has been refunded in view ofproject cancellation. The company has certain claims against Delhi Municipal Corporationfor the cancellation. The same is under consideration by Delhi Municipal Corporation.
(e) CCCL Power Infrastructure Limited
Though the Power sector has seen a fall in the recent years the Company has strived toperform to its full potential but due to various factors the Company struggled to performto the mark. However electricity demand in the country has increased rapidly and isexpected to rise further in the years to come. In order to meet the increasing demand forelectricity in the country massive addition to the installed generating capacity isrequired. The Government of Indias focus on attaining POWER FOR ALL hasaccelerated capacity addition in the country. At the same time the competitive intensityis increasing at both the market and supply sides The Company is eyeing a positive trendin the coming years and is optimistic of a revival to this sector.
The Company has streamlined its operations and expected to perform better in the nearfuture.
A Statement Pursuant to first proviso to sub-section (3) of section 129 read with rule5 of Companies (Accounts) Rules 2014 containing salient features of the financialstatement of subsidiaries/associate companies/joint ventures in Form AOC-1 isannexed to this report as "Annexure A".
Construction opportunities have almost doubled for this period from the infrastructureprojects lined up across various subsegments of Power Roads Railways Irrigation &water supply Ports and Airports. There is a long-term demand for quality infrastructureconstruction mainly emanating from housing transportation and urban development segmentsthat far exceed the supply even though there has been a substantial increase in thenumber of contractors and builders especially in housing and road construction segment.
7. THREAT PERCEPTION
Despite the prospects the sector continues to face challenges from land acquisitionissues adverse political and structural changes shortage of talent design andconstructability issues and rising material and labor costs. However the landacquisition and environment related issues are being addressed on war footing basis toease the constraints.
Policy bottlenecks slow clearance of projects and rising inflation have dampenedprivate sector sentiments and have stifled investments in Capital expenditure. A highlevel committee has been constituted for speedy clearance of stalled projects andmonitoring the implementation.
Working capital cycle has been elongated mainly due to stretched receivables which hasaffected the cash flow position of the companies in the sector. Many of the companies havebeen forced to draw their full limits with the Banking system or restructure thefacilities.
Lengthy dispute resolution mechanism in the sector is yet another major factoraffecting the cash flows of the construction companies.
This coupled with rising interest rates have led to a drop in the PAT margin anddeterioration of debt coverage ratios of construction companies.
8. RISK PERCEPTION
The Directors are constantly assessing the business risks pertaining to the performanceof the Company. The following are the important risks perceptions:
Quality Maintenance of the work.
Adequate availability of Raw Materials
Removal of Transport Bottlenecks
Sudden Increase in Prices of Inputs
Inadequacy of Finance Arrangement
Events Due to Unforeseen Circumstances
Volatility in domestic construction environment.
Your Directors are fully conscious of the various business risks and have takenadequate care to tackle any situation. Strict controls are enforced on all matters forsmooth operation of the projects.
9. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
The Company has a sound internal control system. All transactions are subject to properscrutiny. The Management takes immediate corrective action wherever it is being pointedout to help streamline the internal control process. The management shall ensure theeffectiveness of the working of such policy.
10. CONSOLIDATED FINANCIAL STATEMENTS
In accordance with the Accounting Standard (AS) - 21 on Consolidated FinancialStatements read with AS - 23 on Accounting for Investments in Associates and AS - 27 onFinancial Reporting of Interests in Joint Ventures the audited consolidated financialstatements is provided in the Annual Report.
11. HUMAN RESOURCES
The Management envisions trained and motivated employees as the backbone of theCompany. Special attention is given to recruit trained and experienced personnel inbusiness development finance and accounts. The Management strives to retain and improveemployee morale. The Company has total staff strength of about 710 employees.
The Company has streamlined its manpower strength at the Chennai offices including thecorporate head office. As a result of manpower rationalization exercise the monthlypayroll has been optimized. The decision for rationalization of labour has enabled thecompany to curtail fixed manpower costs. However the core technical expert team isretained to guide the Company to achieve higher and efficient level of performance.
The Directors pay special attention to ensure that the guidelines given for thecorporate governance are strictly adhered to. All possible steps are taken to adhere tothe requirements set out by SEBI Guidelines on Corporate Governance. The Company is alsoaligning itself to implement global corporate governance practices. This is ensured bytaking ethical business decisions and conducting business with a firm commitment tovalues while meeting stakeholders expectations. At CCCL it is imperative that thecompany affairs are managed in a fair and transparent manner. This is vital to gain andretain the trust of our stakeholders.
A separate report on the Corporate Governance also forms part of the Annual Report.With regard to the Business Responsibility Report the Company is not covered in the top100 listed entities based on the market capitalization at BSE & NSE in terms of SEBICircular CIR/CFD/DIL/8/2012 dated August 13 2012.
12. CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
The Board of Directors has constituted a Corporate Social Responsibility Committee (CSRCommittee) in compliance with the provisions under the Companies Act 2013. The committeecomprises of Mr.R.Sarabeswar as the Chairman Mr.S.Sivaramakrishnan Mr.Jayaram Rangan asits other members.
The said Committee has been entrusted with the responsibility of formulating andrecommending to the Board a Corporate Social Responsibility Policy (CSR Policy)indicating the activities to be undertaken by the Company monitoring the implementationof the framework of the CSR Policy and recommending the amount to be spent on CSRactivities.
Since the company is making losses for the past five years CSR spend does not apply tothe company for the financial year 2015-16. Hence submission of a report on CSR activitiesdoes not apply.
13. SEXUAL HARASSMENT POLICY
The Company had adopted the sexual harassment policy and subsequently also formed acommittee for the same.
14. DEPOSITORY SYSTEM / E-VOTING MECHANISM:
The Company has entered into a Tripartite Agreement with both the Depositories viz.National Securities Depository Limited (NSDL) and Central Depository Services (I) Ltd(CSDL) along with Registrars M/s Karvy Computershare Pvt. Ltd. for providing electronicconnectivity for dematerialization on the Companys shares facilitating the investorsto hold the shares in electronic form and trade in those shares. The shares of yourCompany are being traded now on the Bombay Stock Exchange and National Stock Exchangeunder compulsory demat form. Further in accordance with provisions stipulated underCompanies Act 2013 the facility of e-voting is also made available to all shareholdersof the Company. The instructions regarding e-voting is enclosed along with this report.All shareholders are also requested to update their email ids with the Company or our RTAM/s. Karvy Computershare Pvt. Ltd.
15. TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND
Pursuant to the provisions of Section 124 and 125 of the Companies Act 2013 relevantamounts which remained unpaid or unclaimed for a period of seven years have beentransferred by the Company from to time to time on due dates to the Investor Educationand Protection Fund. The details of the same are covered under the Corporate GovernanceReport.
M/s. ASA & Associates LLP. Chartered Accountants Chennai having firm registrationnumber 009571N/N500006 Statutory Auditor hold office up to the conclusion of the 19thAGM and are eligible for re-appointment subject to ratification of members in the eachannual general meeting.
Further the company had received letters to the effect that their re-appointment ifmade would be within the prescribed limits under Section 141(3) (g) of the Companies Act2013 and that they are not disqualified for such re-appointment. Your Board of Directorsrecommends their re-appointment as Statutory Auditors to hold office from the conclusionof the 19th AGM till the conclusion of the 20th AGM of the Company.
17. AUDITORS REPORT AND MANAGEMENTS RESPONSE TO AUDITORS OBSERVATIONS
The Auditors do not have any qualification in their report.
The Board has appointed Mr. Rengaraj an employee of the group company as the InternalAuditor of the Company pursuant to Section 138 of Companies Act 2013 and Rule No. 13 ofThe Companies (Accounts of Companies) Rules 2014 for the financial year 2016-17.
Mr. Rengaraj is a qualified Cost Accountant and Company Secretary having expertise infinance and Accounts. The Internal Audit would ensure that strong internal controlmechanism is put in place in the Company as per the recommendations and guidance of AuditCommittee.
The Board of Directors had appointed M/s SS & Associates (Firm Registration No000513) as the Cost Auditors of the Company to audit the cost accounting records of theCompany for the financial year 2016-17.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Mr. N. Balachandran Practising Company Secretary Chennai to undertake theSecretarial Audit of the Company. The report of the Secretarial Audit Report is annexedherewith as "Annexure B"
MANAGEMENTS RESPONSE TO SECRETARIAL AUDITORS OBSERVATIONS
1. Further Report that the Board of Directors of the Company is duly constituted withproper balance of Executive Directors Non-Executive Directors and in case of IndependentDirectors requires compliance.
The company is presently under CDR scheme of the bank which had necessitated theappointment of Nominee Director from lending Banks. This is having a cascading effect forappointment of Independent Director based on the revised Board composition.
The company is finding it difficult to find out an Independent Director and still thesearch is on. However the Company is on a serious look out for a suitable IndependentDirector. The Company endeavors to comply with the requirement at the earliest.
2. Further Report that the company is not regular in depositing the statutory dues/offiling periodical return as the case may be relating to Provident Fund (PF) EmployeesState Insurance ( ESI) TDS Sales Tax/ Value Added Tax (VAT) Service Tax MCA filings asrelating to applicable with the appropriate authorities during the year under audit.
Due to the delay in collection from clients the Company could not deposit itsstatutory dues on time. However except service tax the Company is currently online withall other statutory dues. Inspite of the crippled situation the Company strives to complywith the statutory obligations on time. Efforts are being made to comply on time.
The following changes have occurred in the Board of Directors during the financial year2015-2016:
18.1 INDUCTIONS/ CHANGE IN DESIGNATION
The Board appointed Mr. Ranjit Goswami as Nominee Director of the Company appointed byState Bank of India with effective from February 12 2016.
18.2 DECLARATION BY INDEPENDENT DIRECTORS
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and as per theSEBI (LODR) Regulations 2015.
There were no resignations from the Board of the Company.
In accordance with the provisions of the Companies Act 2013 and in terms of theMemorandum & Articles of Association of the Company At the ensuing 19th AnnualGeneral Meeting Shri. V.G. Janarthanam Whole Time Director of the Company is liable toretire by rotation and being eligible offer himself for re-appointment. The Boardrecommends his reappointment.
The Companies Act 2013 provides for the appointment of Independent Directors. Subsection (10) of Section 149 of the Companies Act 2013 provides that independent directorsshall hold office for a term of up to five consecutive years on the board of a company;and shall be eligible for re-appointment on passing a special resolution by theshareholders of the Company. Accordingly all Independent Directors were appointed by theshareholders at the General Meeting as required under Section 149(10) of the Companies Act2013. Further according to sub section (11) of Section 149 of the Companies Act 2013 noIndependent Director shall be eligible for appointment for more than two consecutive termsof five years. Sub section (13) states that the provisions of retirement by rotation asdefined in Sub section (6) and (7) of Section 152 of the Act shall not apply to suchindependent directors.
None of the independent directors will retire at the ensuing Annual General Meeting.
18.5 BOARD EVALUATION
Pursuant to the Regulation 17(6) (10) of SEBI (LODR) Regulations 2015 the Board shallmonitor and review the Board evaluation framework. The Companies Act 2013 states that aformal annual evaluation needs to be made by the Board of its own performance and that ofits committees and individual directors. Schedule IV of the Companies Act 2013 statesthat the performance evaluation of Independent Directors shall be done by the entire Boardof Directors excluding the director being evaluated. The Board has carried out an annualperformance evaluation of its own performance the directors individually as well as theevaluation of the working of its Audit Nomination & Remuneration and ComplianceCommittees.
18.6 TRAINING OF INDEPENDENT DIRECTORS
Every new Independent Director of the Board attends an orientation program. Tofamiliarize the new inductees with the strategy operations and functions of our Companythe executive directors/senior managerial personnel make presentations to the inducteesabout the Companys strategy operations product and service offerings marketsorganization structure finance human resources technology quality facilities and riskmanagement.
18.7 REMUNERATION POLICY
The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration. The Remuneration Policy is stated in the Corporate Governance Report. Allremuneration paid to the Directors Key Managerial Personnel and senior managementpersonnel are as per the remuneration policy of the Company.
18.8 DIRECTORS RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statement in terms ofSection 134 (3) (c) of the Companies Act 2013:
(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
(b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern basis; and
(e) the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.
(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
19 CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION
A statement containing the particulars relating to conservation of energy research anddevelopment and technology absorption as required under Section 134 (3) (m) of theCompanies Act 2013 and Rule 8 (3) (A) (3) (B) and 3 (A) (C) of The Companies (Accounts)Rules 2014 is annexed to this report as "Annexure C"
20 PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186 OFCOMPANIES ACT 2013
Details of Loan Guarantees and Investments covered under the provisions of Section 186of the Companies Act 2013 are given in the notes to financial statements.
21 PARTICULARS OF EMPLOYEES
The information required pursuant to Section 197 of the Companies Act 2013 read withRule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014in respect of the employees of the company will be provided upon request. In terms ofSection 136 of the Act the Report and Accounts are being sent to the Members and othersentitled thereto excluding the information on employees particulars which isavailable for inspection by the Members at the Registered Office of the Company duringbusiness hours on working days of the Company up to the date of the ensuing Annual GeneralMeeting. If any Member is interested in obtaining a copy thereof such Member may write tothe Company Secretary in this regard.
Your Company has not accepted any deposits from the public during the year underreview.
During the year nine Board Meetings and four Audit Committee Meetings were convened andheld. The details of which are given in the Corporate Governance Report. The interveninggap between the meetings was within the period prescribed under the Companies Act 2013.
Currently the Board of Directors of the Company pursuant to the mandatory provisionsof Companies Act 2013 has the following committees namely:
a) Audit Committee
b) Nomination & Remuneration Committee
c) Stakeholders Relationship Committee
d) Corporate Social Responsibility Committee
e) Share Transfer Committee
f) Risk Management committee
A detailed note on the Board and its committees along with the composition of thecommittees and compliances is provided under the Corporate Governance Report section inthis Annual Report.
25 AUDIT COMMITTEE
Currently the Company has an independent and qualified Audit Committee as per theprovisions of Section 177 (8) of the Companies Act 2013 and Rule 7 of The Companies(Meetings of Board and its Powers) Rules 2014 and Regulation 18 of SEBI (LODR)Regulation 2015 the following is the current composition of Audit Committee:
|Name of the Director ||Status ||Category || |
|Mr.P.Venkatesh ||Chairman ||Non-Executive ||Independent Director |
|Mr. Jayaramrangan ||Member ||Non-Executive ||Independent Director |
|Dr. P.K.Aravindan ||Member ||Non-Executive ||Independent Director |
|Mr. K.E.C.Raja Kumar ||Member || |
Non-Executive Nominee Director
|Mrs. Hastha Shivaramakrishnan ||Member ||Non-Executive ||Independent Director |
The Board has accepted all the recommendations provided by the Audit Committee.
26 VIGIL MECHANISM/WHISTLE BLOWER POLICY
The Company has a vigil mechanism/whistle blower Policy to deal with instance of fraudand mismanagement if any. The details of the vigil mechanism Policy is explained in theCorporate Governance Report and also posted on the website of the Company.
27 PARTICULARS OF CONTRACTS OR ARRAGEMENTS WITH RELATED PARTIES REFERRED TO INSECTION 188(1) OF THE COMPANIES ACT 2013:
All related party transactions that were entered into during the financial year were onan arms length basis and were in the ordinary course of business. There are nomaterially significant related party transactions made by the Company with PromotersDirectors Key Managerial Personnel or other designated persons which may have a potentialconflict with the interest of the Company at large. The Company is in the process ofdeveloping a Related Party Transactions Manual Standard Operating Procedures for purposeof identification and monitoring of such transactions. None of the Directors has anypecuniary relationships or transactions vis-a-vis the Company. Particulars of Contracts orarrangement with related parties referred to in Section 188(1) of the Companies Act 2013in the prescribed Form AOC-2 is appended as Annexure "D" to the BoardsReport.
28 ENHANCING SHAREHOLDER VALUE
Your Company believes that its Members are among its most important stakeholders.Accordingly your companys operations are committed to the pursuit of achieving highlevels of operating performance and cost competitiveness consolidating and building forgrowth enhancing the productive asset and resource base and nurturing overall corporatereputation. Your company is also committed to creating value for its other stakeholders byensuring its corporate actions positively impact the socio-economic and environmentaldimensions and contribute to sustainable growth and development.
29 EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT 9 is annexedherewith as "Annexure E".
30 GREEN INITIATIVES
During fiscal 2014-15 we started a sustainability initiative with the aim of goinggreen and minimizing our impact on the environment. This year we are publishing only thestatutory disclosures in the print version of the Annual Report. Additional information isavailable on our website www.ccclindia.com.
Electronic copies of the Annual Report 2015-16 and Notice of the 19th Annual GeneralMeeting are sent to all the members whose email addresses are registered with theCompany/Depository Participant(s). For members who have not registered their emailaddresses physical copies of the Annual Report 2016 and the Notice of 19th Annual GeneralMeeting are sent in the permitted mode. Members requiring physical copies can send arequest to the Company.
The Board of Directors of the Company wishes to express their deep sense ofappreciation and offer their sincere thanks to all the Shareholders of the Company fortheir unstinted support to the Company.
The Board also wishes to express their sincere thanks to all the esteemed Customers fortheir support to the Companys business.
The Board would also like to place on record their deep sense of gratitude to thevarious Central and State Government Departments Organizations and Agencies for thecontinued help and co-operation extended by them. The Directors also gratefullyacknowledge and thank all financial institutions and banks for their timely support inrestructuring the Companys debt under the CDR mechanism failing which the Companywould have succumbed to the recession faced by the Construction Industry.
In the end the Board would like to place on record their deep sense of appreciation toall the executives officers employees staff members and workers at the various sites.
| ||For and on behalf of the Board of Directors || |
| ||R.Sarabeswar ||S.Sivaramakrishnan |
|Place: Chennai ||Chairman ||Managing Director |
|Date: August 16 2016 ||(DIN: 00435318) ||(DIN: 00431791) |