The Members of
Patel Engineering Limited
The Directors hereby present their 67th Annual Report on the businessoperations and state of affair of the Company together with the audited financialstatement for the year ended March 31 2016:
Standalone and Consolidated Financial Performance
| || |
|Particulars || |
| ||2015-16 ||2014-15 ||2015-16 ||2014-15 |
|Total Income ||41932.57 ||35313.09 ||28444.62 ||26682.25 |
|Total expenditure ||42788.99 ||35149.52 ||28591.12 ||26463.56 |
|Profit before depreciation prior period and exceptional items ||(306.64) ||961.35 ||300.84 ||737.87 |
|Less : Depreciation ||549.78 ||797.78 ||447.34 ||519.18 |
|Exceptional Item" ||(1292.09) ||153.31 ||189.99 ||- |
|Profit before tax ||(2148.51) ||316.88 ||(336.49) ||218.69 |
|Tax & Minority Interest ||281.94 ||232.19 ||(149.58) ||99.83 |
|Net Profit ||(1866.57) ||84.69 ||(186.91) ||118.86 |
|Add: Opening Balance in Profit & Loss A/c ||6845.91 ||5770.36 ||5934.09 ||5219.52 |
|Add: Reversal of Prudent Provision for Tax ** ||- ||600.64 ||- ||600.64 |
|Amount available for appropriation ||4970.37 ||6850.83 ||5747.18 ||5939.01 |
|Less Appropriations: || || || || |
|a. Depreciation impact as per Schedule II ||- ||4.92 ||- ||4.92 |
|b. Surplus carried to the Balance sheet ||4970.37 ||6845.91 ||5747.18 ||5934.09 |
|Earnings per equity shares (face value Rs.1) || || || || |
|- Basic (') ||(24.30) ||1.10 ||(2.43) ||1.55 |
|- Diluted (') ||(24.30) ||1.10 ||(2.43) ||1.55 |
# for Exceptional Item refer to note no23A of Notes to Standalone FinancialStatement And note no. 51 of notes to Consolidated Financial Statement
** for reversal of Prudent Provision for Tax refer to note no 25(ii) of notes toStandalone Financial Statement. And note no 24(ii) of Notes to Consolidated FinancialStatements
The Consolidated total income which stood at Rs.41932.57 million increased by 18.75%as against Rs.35313.09 million for the previous year. The profit before depreciation waslower by 137.52% at Rs.(360.64) million as against Rs.961.15 million for the previousyear. The net loss is at Rs.1866.57 million as against profit of Rs.84.69 million for theprevious year.
On Standalone basis the total income stood at Rs.28444.66 million as againstRs.26682.25 million for the previous year. The profit before depreciation was lower atRs.300.84 million as against Rs.737.86 million for the previous year. The Company hasincurred Net Loss of Rs.186.91 million as against the profit of Rs.118.86 million for theprevious year.
Due to operating losses your Directors have not recommended payment of dividend forthe financial year 2015-16.
Information on state of affairs of the Company
Information on the operational and financial performance among others is given in theManagement Discussion and Analysis Report which is forming part of the Annual Report andis in accordance with Regulation 34 of SEBI (Listing Obligation and DisclosureRequirements) Regulations 2015.
As on March 31 2016 the Company on Standalone basis has Rs.2550 million outstandingNCDs repayable over period of 3 to 7 years out of which Rs.1050 million was due. The NCDsare listed on National Stock Exchange of India Limited.
In addition the Company from time to time has raised money through borrowings (longand short terms) and the total amount outstanding on standalone basis as on March 31 2016is Rs.40297.90 million.
Strategic Debt Structuring (SDR)
Delays in successful implementation of Corrective Action Plan by the Lendersnon-availability of additional limits delayed the monetization of critical real estateprojects adverse market condition further delayed monetization of assets. Since theCompany was facing severe cash crunch and challenges in debt servicing and in order topreserve the value of the company the lender invoked SDR and May 26 2016 was fixed asreference date. The Board at the meeting dated June 29 2016 and the Members by postalballot result dated August 26 2016 and November 21 2016 approved conversion of part ofthe debt of the Company to equity in one or more tranches as it is required allowingLenders to hold not less than 51% of the total Equity share capital of the Company postsuch conversion. The Company is in process of converting part of the Loan into Equityshares.
As on March 31 2016 the Company has 83 subsidiaries including step down subsidiaries.
During the year under review applications were made to the Registrar of Companies forstriking off the names of following inoperative subsidiaries under the Fast Track Exit(FTE) mode pursuant to guidelines for Fast Track Exit mode for defunct companies underSection 560 of the Companies Act 1956.
- Patel Urjaa Vyapaar Pvt. Ltd
- ASI Rcc India Ltd
- Laksha Infra Projects Pvt. Ltd
- Praval Developers Ltd.
- Hebe Realcon Pvt. Ltd
The performance and financial position of the subsidiaries and associates as requiredunder the Companies Act 2013 is provided in Annexure I of the Boards' Report. Thefinancial statements of the subsidiary companies will be placed on the website of theCompany www.pateleng.com. any Member interested in obtaining a copy of financial statementof the subsidiaries may write to the Company Secretary at the registered office of theCompany.
In terms of SEBI (Listing Obligation and Disclosure Requirements) Regulations 2015the Company has formulated a policy for determining 'material' subsidiaries and the samehas been disclosed on Company's website at the link: http://tinyurl.com/nqb2o56.
Key Subsidiary/Associate updates
The Company through its wholly owned subsidiary Patel Realty (India) Ltd ("PRIL")was formed to develop 103 acres of Electronic City land in Bangalore. PRIL is developingresidential project (over 24 acres of land consisting of 2300 residential apartments. Ithas successfully handed over 2000 apartments and is developing a Mall through a SPV BellonaEstate Developers Ltd (over 12 acres land for 1.20 million sq feet). During the yearSDR was invoked and 51% stake of Bellona was transferred to its lenders. PRIL has alsodecided to enter into Joint Development Agreement with other Developers in order to enablethem to focus on core business and deleverage from initial investment requirement tocommence a project.
Company's Mauritius subsidiary Le Salines Development Ltd ("LSDL") hadLand lease Agreement with Govt. of Mauritius for a period of 99 years however notice oftermination was received on 4th of June 2015 from the Govt. of Mauritius. A notice hasbeen sent to the Authorities and Government of Mauritius on 1st July 2016contesting wrongful termination violation of treaty and further moving to seekcompensation under the Promotions and Protection of Investments Treaty between theGovernments. Attorney General of Govt. of Mauritius has accepted receipt of notice andagreed for a meeting to mutually seek solution in the matter. The Company is confident ofresolving the issue with the Govt. of Mauritius as there is no breach by LSDL and theCompany.
ASI Constructors Inc one of the key subsidiary based in USA has orders in hand ofapprox Rs.11324.73 million as on March 31 2016. During FY 16 the Revenues of thiscompany has increased by 48% to Rs.11017.70 million as compared to Rs.7466.40 million inthe previous year.
Michigan Engineers Pvt. Ltd. wherein the Company has 51% stake having presence inurban infrastructure Projects have during financial year 2015-16 been awarded EPCcontract of Microtunnelling for total 1372 meter by RSPL Kanpur. Michigan has also baggedcontract from MCGM for Construction of R.C.C. box drain on N. S. Hardikar Marg forRs.12.95cr and contract for Design & Construction of Renovations & Rehabilitationincluding investigations cleaning desilting survery enlarged access manholes lining& protective coating of Storm Water Drain for Rs.433.4 Million from MCGM.
The Company through its wholly owned subsidiary Patel Energy Resources Ltd. ("PERL")intended to build a thermal coastal power plant project of 1050 MW at Nagapattinam TamilNadu. All the statutory clearances required are in place except Consent For Establishment(CFE) that is mandatory for taking up Project construction works is still pending withGovernment of Tamil Nadu. Pending this the Company has kept the project currently onhold.
Company's Hydro power project is through the 100% subsidiary Dirang Energy Pvt. Ltd.The said subsidiary has achieved financial closure of this project. The debt for theproject amounting to Rs.9.00 billion has been tied up from consortium of banks led by IDBIBank .Contract for execution of all the civil HM EM works has been awarded; contractorhas mobilized man & machinery and execution of the project is in progress.
The Company along with other JV partners had bagged a BOT project from Uttar PradeshState Highways Authority (UPSHA) in the name of ACP Tollways Pvt. Ltd. forconstruction of four-lane highway project in Varanasi-Shaktinagar Road an entire lengthof 117.65 km at a project cost of Rs.17.50 billion. The SPV has completed the project andbased on the partial COD have started collecting tolls since October 2015.
Related Party Transactions
All the Related Party Transactions entered by the Company are on arm's length basis andin the ordinary course of business. All the Related Party Transactions as required underAS-18 are reported in the Notes to the financial statements.
In accordance with the provisions of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company has formulated the Related Party Transactionspolicy and the same is uploaded on Company's website at the link:http://tinyurl.com/nrqnhhs
Particulars of Loans given Investment made Guarantees given and Securities provided
The members may note that the Company is engaged in providing infrastructuralfacilities and hence as per Section 186(11) of Companies Act 2013 nothing in Section186 shall apply to the Company except sub-section (1) of Section 186. Accordingly aseparate disclosure has not been given in the financial statements as required underSection 186(4) with regard to particulars of loan given investment made or guaranteegiven or security provided and the purpose for which the loan or guarantee or security isproposed to be utilized by the recipient of the loan or guarantee or security.
Directors and Key Managerial Persons
i. Independent Director
In accordance with the provisions of Section 149 of the Companies Act 2013 theIndependent Directors have given a declaration that they meet the criteria of independenceas provided in the said Section and in terms of the SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015.
ii. Retirement by Rotation of the Directors
Mr. Rupen Patel retires by rotation at the forthcoming Annual General Meeting andbeing eligible offers himself for re-appointment.
iii. Cessation of Director
Ms. Silloo Patel a Whole time Director on the Board of the Company expired onNovember 26 2015. The Board condoned the death of Ms. Patel and placed on record itsappreciation of the valuable service rendered by her.
During the year under review Mr. Nimish Patel and Mr. Ashwin Parmar resigned as Wholetime Directors of the Company with effect from July 16 2015 and April 4 2016respectively. The Board placed on record its sincere appreciation of the services renderedby Mr. Patel and Mr. Parmar during their tenure as Directors of the Company.
iv. Appointment of Director
Mr. C. K. Singh was appointed as an additional Director and Whole timeDirector-Operations by the Board of Directors at their meeting held on May 30 2016.
v. Key Managerial Personnel
The following persons are the Key Managerial Personnel (KMPs) of the Company pursuantto the provisions of the Companies Act 2013 and Rules framed thereunder:
a. Mr. Pravin Patel Chairman and Whole time Director
b. Mr. Rupen Patel Managing Director
c. Ms. Kavita Shirvaikar Chief Financial Officer
d. Ms. Shobha Shetty Company Secretary
e. During the year under review Mr. Nimish Patel and Mr. Ashwin Parmar resigned asWhole time Directors effective from July 16 2015 and April 4 2016 respectively andtherefore they were KMP till the said respective dates.
f. Ms. SUIoo Patel expired on November 26 2015 and therefore she was KMP till November26 2015.
g. Mr. C. K. Singh was appointed by the Board as Whole time Director of the Company atits meeting held on May 30 2016 and therefore designated as KMP with effect from the saiddate.
Number of Board Meetings held during the financial year 2015-16
During the year ended March 31 2016 the Board met five times. The details of theBoard meetings and the attendance of the Directors at the meetings are provided in theCorporate Governance Report which forms part of this Annual Report.
The Company has framed a Remuneration Policy pursuant Section 178 of the Companies Act2013 and SEBI (Listing Obligation and Disclosure Reguirements} Regulations 2015. ThisPolicy is enclosed as Annexure II to the Boards' Report.
Evaluation of Board
Based on the criteria for evaluation of performance of the Board Directors itsCommittees Chairman Executive Directors Independent Directors and Non-ExecutiveDirectors the performance was evaluated for the financial year ended March 31 2016.
A meeting of the Independent Director was held during the year under review.
Internal Financial Controls
The Company has in place adeguate internal financial control with reference tofinancial statement.
Directors' Responsibility Statement
Pursuant to Section 134 of the Companies Act 2013 the Directors confirm that:
i. in the preparation of the annual financial statements for the year ended March 312016 the applicable Accounting standards had been followed along with proper explanationrelating to material departures.
ii. for the financial year ended March 31 2016 such accounting policies as mentionedin the Notes to the financial statements have been applied consistently and judgmentsestimates that are reasonable and prudent have been made so as to give a true and fairview of the state of affairs of the Company and of the Profit and Loss of the Company forthe year ended March 31 2016.
iii. that proper and sufficient care has been taken for the maintenance of adeguateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.
iv. the annual financial statements have been prepared on a going concern basis.
v. that proper internal financial controls were followed by the Company and that suchinternal financial controls are adeguate and were operating effectively.
vi. that proper systems to ensure compliance with the provisions of all applicable lawswere in place and that such systems were adeguate and operating effectively.
The Audit Committee of the Board of Directors of the Company comprised of the followingMembers:
Mr. Khizer Ahmed - Independent Director & Chairman Mr. Pravin Patel - ExecutiveDirector Mr. K. Ramasubramanian - Independent Director Mr. S. Jambunathan - IndependentDirector
The details about Audit Committee and its terms of reference etc. have been given inCorporate Governance Report which forms part of Annual Report.
Corporate Social Responsibility Committee
In accordance with the provisions of Section 135 of the Companies Act 2013 (the Act}the Board of Directors of the Company has constituted the Corporate Social ResponsibilityCommittee (CSR Committee} comprising of the following Directors as it members:
Mr. Pravin Patel - Executive Director
Mr. K. Ramasubramanian - Independent Director
Mr. Rupen Patel - Managing Director
The terms of reference of the CSR Committee include the matters specified in Section135 of the Act. The CSR Policy of the Company is uploaded on the Company's website at thelink http://tinyurl.com/o6yczkx.
On account of financial constraints the Company could not spend the full amount asrequired in terms of Section 135 of the Companies Act 2013A report on CSR activities isprovided in Annexure III to this Report.
M/s. Vatsaraj & Co. Chartered Accountants Mumbai bearing ICAI Registration No.111327W who retires at the ensuing Annual General Meeting of the Company are eligible forreappointment. They have confirmed their eligibility under Section 141 of the CompaniesAct 2013 and the Rules framed there under for reappointment as Auditors of the Company.
As required under Section 139 of the Companies Act 2013 the Company has obtainedwritten consent from M/s. Vatsaraj & Co. to such appointment and also a certificate tothe effect that their appointment if made would be in accordance with Section 139(1) ofthe Companies Act 2013 and the Rules made there under as may be applicable.
There is no event of reporting of frauds in terms of sub-section (12) of Section 143 ofthe Companies Act 2013.
Secretarial Audit Report
The Board had appointed M/s. Makarand Joshi & Co. Practicing Company Secretariesas the Secretarial Auditor to conduct the secretarial audit of the Company for thefinancial year ended March 31 2016. The Report of Secretarial Audit Report is provided asAnnexure IV to this Report.
This report contain observation on delay in filing the Consolidated Financial Statementfor the Year ending March 31 2015 to BSE/ NSE and delay in filing Annual PerformanceReport (APR) of few subsidiaries. The above delays were on account of delay in receipt ofaudited/ unaudited financials of foreign subsidiaries.
In terms of the provision of 148 of the Companies Act 2013 read with the Companies(Cost Records and Audit) Rules 2014 M/s D. Radhakrishnan & Co a firm of CostAccountants in practice (FRN: 000018) having their office at 11 A Doverlane Flat B1/34Calcutta 700029 was appointed as Cost Auditor of the Company for the financial year2015-16 by the Board of Directors of the Company at a remuneration of Rs.350000 perannum (excluding service tax) as recommended by the Audit Committee and approved by theBoard subject to ratification by the shareholders at the ensuing Annual General Meeting ofthe Company.
Sexual harassment of Women at workplace
The Company has a Policy on prevention of Sexual harassment at Workplace. During theyear under review no case was reported under the policy.
Conservation of Energy Technology Absorption and Foreign Exchange Earnings/Outgo.
The particulars prescribed under Section 134 of the Companies Act 2013 read with Rule8 (3) of the Companies (Accounts) Rules 2014 relating to Conservation of EnergyTechnology Absorption Foreign Exchange Earnings/ Outgo is provided as Annexure V to thisReport.
Extract of the Annual Return
In accordance with the provisions of Section 92 of the Companies Act 2013 and theRules framed thereunder the extract of Annual Return in the prescribed Form MGT -9 isprovided in Annexure VI to this Report.
The Board of Directors of the Company has framed and implemented a Risk ManagementPolicy.
Whistle Blower Policy/Vigil Mechanism
The Company has a Vigil Mechanism Policy for the employee to report genuineconcerns/grievances. The Policy is uploaded on the Company's website at the linkhttp://tinyurl.com/pvenjtk. The policy provides for adequate safeguards against thevictimization of the employees who use the vigil mechanism. The vigil mechanism isoverseen by the Audit Committee. There are no complaints/grievances received from anyDirectors or employees of the Company under this policy.
Particulars of Employees
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5 (1) and (2) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is provided as AnnexureVII to this Report
Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015the Report on Corporate Governance together with the certificate issued by M/s. Vatsaraj& Co. the Statutory Auditors of the Company on compliance in this regard forms partof the Annual Report.
Employee Stock Option Scheme (ESOP)
Out of the total outstanding Stock options of 6045000 options with Patel EngineeringEmployee Welfare Trust 22400 options were granted on May 23 2014 to the eligibleemployees of the Company in terms of ESOP Plan 2007. The vesting of the Stock Options wason May 24 2015. Out of the said 22400 options 16100 options were exercised during theexercise period and accordingly 16100 shares were credited to the demat account of therespective employees. 3000 options lapsed mainly on account of resignation. 3300 lapsedon account of nonexercise of options by employees of the Company.
The disclosure in compliance with Regulation 14 of SEBI (Share Based EmployeesBenefits} Regulations 2014 is available on the website of the company by following thelink: http://tinyurl.com/nkanjsm.
The Patel Engineering Employee welfare Trust ("the Trust"} has providedloans and grants to eligible employees for healthcare benefits education and otherbenefits. The total amount of loan given to eligible employees is Rs.0.48 Million and thetotal amount of proceeds as free grants is Rs.0.02 Million.
The said aids given to the employees are now covered under Patel Engineering GeneralEmployee Benefits Scheme 2015 in compliance with SEBI (Share Based Employees Benefits}Regulation 2014. The said Scheme was approved by the Members in the last AGM. Thebenefits provided under this Scheme are benefits such as medical housing and educationrelated assistance to employee out of the funds of the Trust.
i) There are no material changes and commitments affecting the financial position ofthe company which have occurred between the end of the financial year of the company towhich the financial statements relate and the date of the Boards' report.
ii) No orders have been passed by any Regulator or Court or Tribunal which can haveimpact on the going concern status and the Company's operations in future during the yearunder review.
iii) The Company has not accepted or renewed any amount falling within the purview ofprovisions of Section 73 of the Companies Act 2013 read with the Companies (Acceptance ofDeposit) Rules 2014 during the year under review. Hence the reguirement for furnishingof details relating to deposits covered under Chapter V of the said Act or the details ofdeposits which are not in compliance with the Chapter V of the said Act is not applicable
The Board of Directors wish to place on record their appreciation for their continuedsupport and co-operation by Shareholders Financial Institutions Banks GovernmentAuthorities and other Stakeholders. The Board of Directors also acknowledges andappreciates the support extended by all the employees of the Company and for theirdedicated service.
| ||On behalf of the Board of Directors |
| ||Patel Engineering Ltd. |
| ||Pravin Patel |
| ||Executive Chairman |
| ||DIN: 00029453 |
| ||Registered Office: |
| ||Patel Estate Road |
|November 11 2016 ||Jogeshwari (W) |
|Mumbai ||Mumbai 400 102 |
Conservation of Energy Technology Absorption and Foreign Exchange Earnings/Outgo
Information as per section 134 read with Rule 8 of the Companies (Accounts) Rules 2014for the financial year ended March 31 2016.
(A) Conservation of Energy
Company is continuing with the following steps towards energy saving measures alongwith utilization of alternate source of energy.
- Optimum energy efficient ventilation design through Variable Flexible Drive (VFD)starting system for all ventilation fans and EOT/ Gantry cranes adoption of largerdiameter flexible duct use of customized shape of ventilation duct etc.
- Use of Automatic Power Factor Controller (APFC) panels improving power factor andsaving energy.
- Limiting the use of DG power and prioritizing utilization of grid power thusreducing CO2 emission.
- Centralized & synchronized DG units with high voltage transmission adopted forload sharing and efficient power utilization.
- Staggered start-up times for eguipment with large starting currents to minimize loadpeaking.
- Disconnect primary power to transformers that do not serve any active loads.
- Upgradation of machineries modernization and introduction of sophisticated controlsystem for conservation of energy.
- Selection of energy efficient appliances/new machineries during purchasing process.
- Close monitoring of preventive maintenance of machineries through ERP system whichhas helped in reducing fuel consumption.
- Installation of float switches in pumps thereby saving energy consumption.
- Use of transparent sheet at roof of workshop/stores enabling use of natural sunlightinstead of electric light.
- Encouraging use of solar for water heater lighting and charging of batteries withsunlight etc.
- Implementation of energy saving lighting system at the Head Office Workshops andSites.
- Independent power pack provision for probe drilling thus drilling without startingTBM power.
- Arranging energy saving awareness sessions amongst employees to save energy (liketurn of lights & computer monitors whenever not used; use of LED lights use ofadvanced SpeedStep power management etc).
(B) Technology Absorption
Efforts made towards technology absorption during last three years.
i. Research and Development (R&D)
R&D is a continuous process and the company has benefitted immensely though it isdifficult to assess the benefits in direct monetary terms. Some of the efforts on R&Dundertaken during the period related are as follows.
- The construction methods have been continuously revised keeping abreast withstate-of-art technology through New Austrian Tunneling Method (NATM).
- Optimization of structures through application of Finite Element Method (FEM)technigue.
- Use of Earth Pressure Balancing Tunnel Boring Machine (TBM) for tunneling.
- Improving blasting pattern reguiring less explosives.
- Designing efficient pumping systems use of piping networks which reguires lowmaintenance and low frictional losses so as to have more energy efficient system.
- Controlled guarrying and crushing for production of aggregate and sand. Use ofproperly processed wastage resulting from crushing of aggregates to have minimalenvironmental impact.
ii. Benefits derived from technology absorption
- Optimization of structures leading to improved progress thus saving time and cost.
- Improved efficiency
- Enhanced Quality
- Deployment of optimum number of machines
iii. Technology absorption
- Use of FEM technigue for optimized design of various project components at twoprojects viz (a) Shongtong-Karcham Hydroelectric Project and (b) Parnai HydroelectricProject since 2013 - ongoing technology being adapted.
- Tunneling with Earth Pressure Balancing TBM at Sleemanabad Carrier Canal & TunnelProject since 2011 - ongoing technology being adapted.
Foreign exchange earnings and outgo
Foreign exchange earnings and outgo during the year under review were '395.99 Million(previous year Rs.137.93 Million) and Rs.68.36 Million (previous year Rs.37.74 Million)respectively.