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Perfect Infraengineers Ltd.

BSE: 532595 Sector: Engineering
NSE: PERFECT ISIN Code: INE925S01012
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Perfect Infraengineers Ltd. (PERFECT) - Director Report

Company director report

Dear Members

Your Directors take pleasure in presenting the 20th Annual Report together with theaudited financial statements for the financial year ended 31 March 2016. The ManagementDiscussion and Analysis has also been incorporated into this report.

FINANCIAL RESULTS

The highlights of the Standalone and Consolidated Financial Results are as under:

Particulars

Stand alone

Consolidated

31st March2016 31st March2015 31st March2016 31st March2015
Amount in Rs.
Revenue from operations 172636635 254403175 177125465 254403175
Other Income 8776988 7962606 8379138 7962606
Total Revenue 181413623 262365781 185504603 262365781
Expenses:
Cost of Materials/Services Consumed 90567067 157233959 90787742 157233959
Employee benefits expense 38161955 44453235 40637401 44453235
Finance costs 15985132 13913289 16069101 13913289
Depreciation and amortization expense 6946337 6890152 6988412 6890152
Other expenses 20160152 23020483 20014655 23020483
Total Expenses 171820643 245511119 174497311 245511119
Profit before tax 9592980 16854662 11007292 16854662
Current tax 2200000 4225000 2570000 4225000
Deferred tax 873525 444510 903387 444510
Excess Provision of Previous Year 541242 (2167.49) 541242 (2167.49)
Total Tax Expense 3614767 4667343 4014629 4667343
Minority Interest 609
Profit (Loss) for the period Earnings per equity share (FV Rs10): 5978213 12187319 6992055 12187319
Basic and Diluted 0.99 2.39 1.15 2.39
P&L A/c Opening Balance 14102036 11932647 14102036 11932647
Add: Net Profit/(Loss) for the Period 5978213 12187320 5921594 12187320
Transfer to General Reserve - - - -
Less: Depreciation Adjustment - 338227 - 338227
Less: Issue of Bonus Shares 8450750 8450750
Less: Interim Dividend Paid 3854704 1021082 3854704 1021082
Less :Dividend Distribution Tax Paid 770714 207872 770714 207872
P&L A/c Closing Balance 15454831 14102036 15398212 14102036

OVERVIEW OF COMPANY'S FINANCIAL PERFORMANCE

During the financial year under review on a standalone basis the Company recordedrevenue of Rs.18.14 cr as against Rs.26.24 cr in the previous year. Net profit for theyear stood at Rs 60 lakh as compared to Rs 122 lakh in the previous year. On aconsolidated basis the company's revenue was at Rs 18.55 cr as against Rs 26.24 cr in theprevious year and net profit amounted to Rs 70 lakh as compared to Rs 122 lakh in theprevious year.

The company's performance was largely affected due to factors beyond the control of themanagement. As you are aware fiscal 2016 was a very trying period for business and economyacross the globe. On account of economic slowdown many a client faced cash crunch duringthe year resulting in poor recoveries which forced your company to defer completion ofsignificant number of projects though the company's order book position remained healthy.Also your company consciously avoided real estate projects in view of the slow paymentprocess prevailed in the market. These temporary setbacks dragged the company's top lineconsiderably.

Whereas the volume of business got shrunk by the external factors the company'sinterest burden increased by 15% as the company augmented inventories in view of largeorders in hand. Further opportunity of bulk imports from foreign suppliers was spottedwhere the company could get competitive price. However due to slow execution of someprojects inventories could not be utilized thus disproportionately increasing financecosts.

During the year the company made an investment of Rs 1cr in the wholly ownedsubsidiary Perfect Control Panels Private Ltd from the issue proceeds. The subsidiaryhas started manufacturing electric control panels that complement the company's MEPcontracting business. The subsidiary plans to market the panels across the country and hasalready executed a standalone government order for which it has applied for CPRIcertification.

DIVIDEND

The Board of Directors recommended an interim dividend of 50 paise per share (5%) attheir meeting held on March 19 2016. The Board fixed April 4 2016 as 'Record Date' fordetermining the entitlement of the shareholders for the dividend and accordingly thedividend was paid. Even though the IPO investors came into the company's fold only inNovember 2015 they have been provided full dividend. The Board of Directors do notrecommend any final dividend.

SHARE CAPITAL

During the year under review the company issued 2604000 equity shares of Rs.10 eachat a premium of Rs.13 per share. This has enlarged the paid up capital of the company fromRs.51054080 to Rs.77094080. The movement of share capital has been annexed as "Annexure1"

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Pursuant to the provision of Section 149 and Section 161 of the Companies Act 2013 andCompanies (Appointment and Qualification of Director) Rules 2014 Mr. Vinay DeshmukhAppointed as Additional Independent Director w.e.f. 10th April 2015 and his appointmentregularized at members meeting at 21st September 2015.

Pursuant to the provision of Section 149 and Section 161 of the Companies Act 2013 andCompanies (Appointment and Qualification of Director) Rules 2014 Mr. Vipul Vora Appointedas Additional Independent Director w.e.f. 10th July 2015 and his appointment regularizedmembers meeting at 21st September 2015.

Pursuant to the provision of Section 168 of Companies Act 2013 and Companies(Appointment and Qualification of Director) Rules 2014 Mr. Hiren Mehta (AdditionalIndependent Director) resigned w.e.f 6th July 2015.

Pursuant to the provision of Section 203 205 and other applicable provision (includingany modification or re-enactment thereof) if any of the Companies Act 2013 Mrs. SudhaBalaji Company Secretary resigned w.e.f 12th August 2015 and Mr. Vijay Mulwani appointedas Company Secretary and he resigned w.e.f 15th April 2016.

Pursuant to the provision of Section 203 205 and other applicable provision (includingany modification or re-enactment thereof) if any of the Companies Act 2013 and pursuantto the recommendation of Nomination and Remuneration Committee the Board of Directors ofthe Company approved the appointment of Ms. Neeharika Shukla as Company Secretary of theCompany with effect from 21st April 2016.

Pursuant to the provisions of Section 152 of Companies Act 2013 Mrs. Sharmila Singhdirector of the Company retires by rotation at the ensuing Annual General Meeting andbeing eligible has offered herself for the re-appointment. The Board recommends herre-appointment.

The Company has received declarations from all the Independent Directors confirmingthat they meet the criteria of independence as prescribed under Section 149 (6) of theCompanies Act 2013 and Regulation 16 (1) (b) of Securities and Exchange Board of India(Listing Obligations & Disclosure Requirements) Regulations 2015.('SEBI (LODR)Regulations 2015'). As required under the provisions of SEBI (LODR) Regulations 2015 andthe Companies Act 2013 brief profile and other details of Directors being appointed/re-appointed are provided in the Notice of Annual General Meeting.

DIRECTORS' RESPONSIBILITY STATEMENT

In terms of Section 134(3)(c) of the Companies Act 2013 your Directors to the bestof their knowledge and belief and according to the information and explanations obtainedby them state that:

1. In the preparation of the annual financial statements for the year ended 31st March2016 the applicable accounting standards have been followed along with proper explanationrelating to material departures if any;

2. Such accounting policies as mentioned in the notes to the Financial Statements forthe year ended 31st March 2016 have been selected and applied consistently and judgmentsand estimates have been made that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as at 31st March 2016 and of the profit ofthe Company for the year ended on that date;

3. Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

4. The annual financial statements for the year ended 31st March 2016 have beenprepared on a going concern basis;

5. Internal financial controls to be followed by the Company have been laid down andthat the said financial controls were adequate and were operating effectively;

6. Proper systems to ensure compliance with the provisions of all applicable laws havebeen devised and such systems were adequate and are operating effectively.

NUMBER OF BOARD MEETINGS

During the year under review 13 Board Meetings were held viz on 10th April 2015 23rdMay 2015 11th June 2015 21st July 2015 17th August 2015 22nd September 2015 7thOctober 2015 19th October 2015 14th November 201525th November 2015 30th January 20165th March 2016 and 19th March 2016 the details of which are given in the annexure toBoard Report.

STATUTORY AUDITORS

At the Annual General Meeting of the Company held on 21st September 2015 M/s. GodboleBhave and Co. Chartered Accountants were appointed as Statutory Auditors of the Companyfor a period of 3 years to hold office subject to ratification by the members at eachAnnual General Meeting. The Audit Committee and the Board of Directors of the Company haverecommended to the members of the Company ratification of appointment of M/s. GodboleBhave and Co. Chartered Accountants as Statutory Auditors of the Company to hold officefrom the conclusion of the ensuing Annual General Meeting till the conclusion of the 21stAnnual General Meeting of the Company. The Company has received a letter from M/s. GodboleBhave and Co. confirming that they are eligible for ratification of their appointment.

AUDITORS' REPORT

The Auditors' Report on standalone and consolidated financial statements forms part ofthe Annual Report. The Auditors' Report does not contain any qualifications reservationsadverse remarks disclaimer or emphasis of matter except calculation of gratuity onarithmetical basis which should be done on actuarial basis but it is not affectingCompany's profit materially. The observation does not have any material impact onCompany's profitability. The Company has thereafter referred to Actuary who commented thatthe provision done on arithmetical basis was more than what was necessary as per actuarialcalculation. Notes to the Financial Statements are self-explanatory and do not call forany further comments. The Statutory Auditors of the Company have not reported any fraud asspecified under the second proviso of Section 143(12) of the Companies Act 2013(including any statutory modification(s) or re-enactment for the time being in force).

INTERNAL AUDIT

M/s. Diveyesh Shah & Co. Chartered Accountants are Internal Auditors of theCompany for Financial Year 2016-17 to 2018-19.

CONSOLIDATED FINANCIAL STATEMENTS & SUBSIDIARIES

In accordance with the provisions of Companies Act 2013 ("the Act") SEBI(LODR) Regulations 2015 and Accounting Standard (AS) - 21 on Consolidated FinancialStatements the audited Corporate Overview Management Reports Financial Statementsconsolidated financial statements form part of the Annual Report. In view of this theBalance Sheet Statement of Profit and Loss and other related documents of thesubsidiaries are attached in this Annual Report. A copy of Audited Financial Statements ofthe Subsidiary shall be made available for inspection at the Registered Office of theCompany during business hours. Any shareholder interested in obtaining a copy of separateFinancial Statements of the subsidiary shall make specific request in writing to theCompany Secretary. The Audited Financial Statements of the subsidiaries are also availableon the website www.perfectinfra.com of the Company. As on 31st March 2016 the Companyhas 1 subsidiary. The Company does not have any Associate Company pursuant to theprovisions of the Companies Act 2013. Pursuant to the provisions of Section 129(3) of theCompanies Act 2013 and Rules 5 and 8(1) of the Companies (Accounts) Rules 2014 thesalient features of financial position of subsidiary is given in Form AOC-1 annexed as "Annexure2" to this Report. The Company has framed a policy for determining materialtransaction with subsidiary.

EXTRACT OF ANNUAL RETURN

Pursuant to Section 92 (3) of the Companies Act 2013 extract of the Annual Return ofthe Company in Form MGT-9 is annexed as "Annexure 3" to this Report.Secretarial Audit Report Pursuant to the provisions of Section 204 of the Companies Act2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014the Board had appointed of Prajakta V.Padhye & Co. Practicing Company Secretary toconduct Secretarial Audit for the financial year 2015-16. The Secretarial Audit Reportissued by him is annexed as "Annexure 4" to this Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Discussion and Analysis Report for the financial year under review as stipulated underRegulation 34 of SEBI (LODR) Regulations 2015 is presented in a separate section formingpart of the Annual Report. Corporate Governance In terms of Regulation 34 of SEBI (LODR)Regulations 2015 a report on Corporate Governance along with Statutory Auditors'Certificate confirming its compliance is provided separately and forms integral part ofthis Report.

RELATED PARTY TRANSACTIONS

All related party transactions entered during the financial year under review were onan arm's length basis and in the ordinary course of business. Note No. 28 to the FinancialStatements contains details of Related Party Transactions. No related party transactionwas in conflict with the interest of the Company. As prescribed by Section 134(3)(h) ofthe Companies Act 2013 and Rule 8(2) of the Companies (Accounts) Rules 2014 particularsof contracts/arrangements with Related Parties are given in Form AOC-2 annexed as "Annexure5" to this Report. The policy on Related Party Transactions has been uploaded onthe Company's website.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS & OUTGO

Information on Conservation of Energy Technology Absorption Foreign Exchange Earningsand Outgo required under Section 134(3) (m) of the Companies Act 2013 read with Rule 8 ofthe Companies (Accounts) Rules 2014 is given in "Annexure 6" formingpart of this Report.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Pursuant to the provisions of Section 197 (12) of the Companies Act 2013("Act") read with Rule 5(2) and 5(3) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 for the year ended 31st March 2016none of the employees of the Company draws remuneration in excess of the limits set out inthe said rules. The details required as per said rules and the Disclosure pursuant toSection 197 (12) of the Companies Act 2013 read with Rule 5 (1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are given in "Annexure7" to this Report.

SEGMENT

The Company operates in multi-segments i.e. HVAC Mechanical and MEP (Supply/Testing ofAir- conditions and Electrical) and Annual Maintenance Contracts of Air-conditioning andgiving Air- conditioners on rent.

CAPACITY EXPANSION

The Company has registered with NSIC in 2016 by which it can benefit under "PublicProcurement Policy for Micro & Small Enterprises (MSEs) Order 2012" as notifiedby the Government of India Ministry of Micro Small & Medium Enterprises. Benefitsaccruing to NSIC- registered companies are as follows:

• Issue of the Tender Sets free of cost;

• Exemption from payment of Earnest Money Deposit (EMD)

• In tender participation MSEs quoting price within price band of L1+15 per centshall also be allowed to supply a portion up to 20% of requirement by bringing down theirprice to L1 Price where L1 is non-MSEs.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

Pursuant to the provisions of Section 177 (10) of the Companies Act 2013 andRegulation 22 of SEBI (LODR) Regulations 2015 the Company has established a vigilmechanism. The details of Vigil Mechanism are provided in the Corporate Governance Report.The Vigil Mechanism / Whistle Blower Policy may be accessed on the Company's website atwww.perfectinfra.com.

COMPANY'S POLICY ON APPOINTMENT AND REMUNERATION OF DIRECTORS

The Company has been following well laid down policy on appointment and remuneration ofDirectors and Key Managerial Personnel (KMP). The appointment of Directors is made by theBoard pursuant to the recommendation of Nomination and Remuneration Committee (NRC).

The remuneration of Executive Directors comprises of Basic Salary Perquisites &Allowances and Commission. The remuneration is within the limits prescribed under theCompanies Act 2013 and is recommended by Nomination and Remuneration Committee (NRC).Approval of Board Shareholders and the Central Government if required for payment ofremuneration to Executive Directors is sought from time to time.

The remuneration of Non-Executive Directors comprises of sitting fees and commission inaccordance with the provisions of Companies Act 2013. A brief extract of the RemunerationPolicy on appointment and remuneration of Directors and KMP is provided in the CorporateGovernance Report.

PERFORMANCE EVALUATION OF DIRECTORS

Criteria of performance evaluation of the Board of Directors including IndependentDirectors are laid down by Nomination and Remuneration Committee of the Company. Pursuantto the provisions of the Companies Act 2013 and Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 Board of Directorswill carry annual performance evaluation of entire board committee and all parametersspecified in CG Report in current year

OBLIGATION OF COMPANY UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013

In order to prevent sexual harassment of women at workplace the Company has adopted apolicy for prevention of Sexual Harassment of Women at workplace and has set up anInternal Complaints Committee under the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 to look into complaints relating tosexual harassment at workplace of any woman employee. During the year under review theCompany has not received any complaint under the said policy.

PARTICULARS OF LOANS GIVEN INVESTMENTS MADE GUARANTEES GIVEN AND SECURITIES PROVIDEDUNDER SECTION 186 OF THE COMPANIES ACT 2013

The Company has not granted any loan during the year under review. The details of noncurrent investment made are provided in Note No. 13 to the Standalone FinancialStatements.

INTERNAL FINANCIAL CONTROLS WITH RESPECT TO THE FINANCIAL STATEMENTS

The Company maintains adequate internal control system and procedures commensurate withits size and nature of operations. The internal control systems are designed to provide areasonable assurance over reliability in financial reporting ensure appropriateauthorisation of transactions safeguarding the assets of the Company and prevent misuse/losses and legal compliances The Internal Audit reports are periodically reviewed by themanagement and necessary improvements are undertaken if required.

RISK MANAGEMENT

The Company has in place Risk Management System which takes care of riskidentification assessment and mitigation.

DEPOSITS

During the year under review no deposits were accepted by the Company under Chapter Vof the Companies Act 2013.

UTILISATION OF ISSUE PROCEEDS

The Company had come with IPO FOR 2508000 shares of a face value of Rs.10 each atpremium of Rs. 13. Company has received Rs. 576.84 lacs (Rs. 10 + Rs. 13) per shareutilization of issue proceed has been annexed in "Annexure 8" to thisReport.

SIGNIFICANT OR MATERIAL ORDERS PASSED BY THE REGULATORS/COURTS

During the year under review no significant or material orders were passed by theRegulators or Courts or Tribunals which impact the going concern status and Company'soperations in future.

GENERAL

Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under reviewor said items are not applicable to the Company:

1. Cost Audit

2. Issue of equity shares with differential rights as to dividend voting or otherwiseor issue of sweat equity share.

There are no material changes and commitments affecting the financial position of theCompany which have occurred between the end of the financial year 2015-16 and the date ofthis report.

ACKNOWLEDGEMENTS

Our consistent growth has been made possible due to our culture of professionalismintegrity and continuous evolvement.

Your Directors take this opportunity to thank customers suppliers investors bankersthe Central and State Governments for their consistent support and co-operation to theCompany.

We place on record our appreciation of the contribution made by employees at alllevels without whose whole-hearted efforts the overall performance would not have beenpossible. Your Directors look forward to the long term future with confidence.