TO THE MEMBERS
The Directors of Petron Engineering Construction Limited are pleased topresenttheFortiethAnnual Report and the Audited Financial Statements of your Company forthe year ended 31st March 2016.
A. The Companys financial performance for the year ended 31st March 2016 issummarized below:
|Financial Results ||For The Year Ended 31st March 2016 ||For The Year Ended 31st March 2015 |
| ||(In Rupees) ||(In Rupees) |
|Income from Operations ||4219076945 ||4141828827 |
|Other Income ||68192557 ||85070836 |
|Total Income ||4287269502 ||4226899663 |
|Profit before Interest Depreciation and Taxes ||370403541 ||400199614 |
|Finance Cost ||245882611 ||283805646 |
|Profit before Depreciation and Taxes ||124520930 ||116393968 |
|Depreciation ||72814377 ||97785946 |
|Profit before Tax ||51706553 ||18608022 |
|Tax Expenses (Including Taxes of Earlier Years) ||8076891 ||12380456 |
|Profit for the Year ||43629662 ||6227566 |
B. The highlights of the Companys performance are as under:
The FY 2015-16 has been a challenging year. We have sailed through and have donereasonably good despite financial constraints.
Revenue from operations increased by 1.42% toRs. 42873 Lacs.
Profit before Depreciation and taxation increased by 6.98% toRs. 1245 Lacs.
Profit before taxes increased by 178 % toRs. 517 Lacs.
Net Profit increased byRs. 600% to Rs. 436 Lacs.
No Dividend has been recommended by the Board due to inadequate profits during the year
D. SHARE CAPITAL
The Paid-up Share Capital as on 31st March 2016 was Rs. 753.84 Lacs. During the yearunder review the Company has not issued any shares. The Company has not issued shareswith differential voting rights. It has neither issued employee stock options nor sweatequity shares and does not have any scheme to fund its employees to purchase the shares ofthe Company. As on 31st March 2016 none of the Directors of the Company hold shares ofthe Company.
MANAGEMENT DISCUSSION AND ANALYSIS
1. INDUSTRY STRUCTURE & DEVELOPMENTS
We have been seeing initiative by the Government of India. This shouldsignificantimpactof"Make India" boost the manufacturing activity and fastindustrialization. This will also create demand for construction particularly in Cementand Power Sectors.
The Govt. of India has come out with a Comprehensive Reform Program for the PowerSector called "Ujwal Discom Assurance Yojna" (UDAY) envisaging financial andoperational turn-around of Electrical Distribution Companies
This scheme is beneficialbecause it provides for affordable power to all financialturn-around to Power Companies and increases the Renewal Energy penetration.
With the concept of "Make in India" and scheme of UDAY the demand for poweris expected to rise year on year basis. We are expecting more Power Plants as well asRenewable Energy Projects coming up in the near future.
Further Thermal Power Plants which are stalled for non-availability of coal- linkageare also expected to get the coal linkage from the Government of India under the CoalAllocation Policy and therefore your Company will have immense opportunity in the PowerSector.
The construction of Roads has been accelerated and this has paved huge demand forCement and Steel and therefore your Company is expecting good amount of jobs inconstruction of cement plants in the near future.
Over a period of time your Company has developed the capabilities of executingvertical construction covering below mentioned comprehensive scope across all sectorswhich will be preferred mode of execution future contracts and multiple project executionsimultaneously.
Composite Construction Solutions are as follows:
Civil & Structural Works
Plate & Ducting Works
Equipment Erection Works
High Pressure and Low Pressure Plant Piping Works
Offsite Fabrication Works
Electrical & Instrumentation Works
Refractory & Insulation Works
2. OPERATIONS DIVISION WISE
ENGINEERING & CONSTRUCTION
During the year execution of following contracts have been completed:
- Mechanical Electrical and Instrumentation Fabrication and Erection works for theproposed cement Grinding Unit at Anakapalli Visakhapatnam of Ramco Cements LimitedChennai Tamilnadu.
- Engineering Procurement Construction and Commissioning Assistance (EPCC) of FiredHeaters for VGO-HDT AVU and NHT/CCR unit of Paradip Refinery Project for Indian OilCorporation Limited at Paradip Orissa
- Cracker Furnace Package for Petrochemical Complex II of GAIL (India) Limited atPata Uttar Pradesh
- Composite works for Gas Processing Unit(GPU) Package for Petrochemical Complex II ofGAIL (India) Limited at Pata Uttar Pradesh .
- Erection Testing Commissioning and Performance Critical Piping for Unit 1 & 2of 1320 MW (Phase-I 2 x 660MW) Kawai Thermal Power Project for Adani Infra (India)Limited at Kawai Rajasthan. Fabrication Inspection Testing Packing and supply of
- Design Engineering Manufacturing including Bank (F-9601 & E-9602) along withthe associated ducting and supporting thePlatformer-3NewConvection arrangement in twoparts Part-A and Part B (both included) for Essar Oil (UK) Ltd. Stanlow United Kingdom.
The work on the following projects substantially progressed during the year:
- Erection Testing Commissioning Performance and Guarantee Tests for Boiler andAuxiliaries Packages for Power Project (2x 660MW) Unit I & Unit II and critical pipingwork of NCC Limited at Nellore Andhra Pradesh.
- Erection of Boiler Island Boiler BOP for SEPCO Electric Power ConstructionCorporation in 3 x Plant at Nariyara Champa Chhattisgarh
- Erection testing Commissioning trial operations and handing over 2 x 600 MWBoilers for Damodar Valley Corporation Power Project as Sub-contractors to UtilityEnergytech and Engineers Raghunathpur West Bengal.
- Gas Cracker Unit (GCU) for Petrochemical Complex II of GAIL (India) Limited at PataUttar Pradesh
- Heater Package for VGO-HDT Unit FCCU Unit composite work for FCCU Unit and CivilStructural & Underground piping works of Offsite New Area for Integrated RefineryExpansion Petroleum Corporation Ltd. Kochi Refinery Kerala
- Civil Construction work at Nagpur Cement Works for UltraTech Cement Limited VillageTarsa Tehsil - Mauda Dist. Nagpur Maharashtra.
- Civil construction work of Packing Plant Extension and Fly Ash Uploading system withHandling Conveyor Belt at Bangur Cement Aurangabad of M/s. Shree Cement LimitedRajasthan - Mechanical works of LLDPE plant and other allied works in J-3 Project atReliance Industries Ltd Jamnagar
The Work on the following recently awarded projects have commenced:
- Capacity up gradation work of Line- I Cement Plant and Captive Power Plant of RamcoCements Limited at Jayanthipuram - Civil and Mechanical works in Tamilnadu .
- Civil &Structural work for JSW Cement Ltd. 2x1.2 MTPA Clinker and Slag GrindingUnit of JSW Cements Limited at Salboni Paschim Medinipur West Bengal - Installation ofBalance Mechanical electrical and instrumentation works in the Boiler # 1 & # 2 atM/s. Meenakshi Energy Pvt. Ltd. 2x350MW Power Plant Thamminapatnam Nellore DistrictAndhra Pradesh
ELECTRICAL & INSTRUMENTATION
During the year following contract has been completed:
- Electrical works for off-sites and utilities at Infrastructure India Pvt. LtdGurgaon Haryana.
- Electrical Installation Work for Purified Terepthalic Acid Plants- PTA- 5 and PTA-6at Dahej Manufacturing Complex Gujarat.
- Contract for Supply of Electrical Supply items for the Cement Grinding Unit atAnakapalli Visakhapatnam of Ramco Cements Ltd. (formerly M/s. Madras Cements Ltd.)
Presently the following Orders of the Division are under execution:
- Contract for Supply of Electrical Equipment Installation Testing Commissioning andconducting Guarantee Tests for Super Thermal Power Project Stage IV (2x500 MW) ofNational Thermal Power Corporation Vindhyachal Madhya Pradesh.
- Contract for Supply of Electrical Equipment Installation Testing Commissioning andconducting Guarantee tests for Super Thermal Power Project Stage III (2x500 MW) ofNational Thermal Power Corporation Rihand Uttar Pradesh.
- Electrical works for INDMAX (FCC) and PRU of Paradip Refinery Project for Indian OilCorporation Paradip Odisha.
- Design Engineering Procurement Manufacture Supply Inspection &Transportation Insurance Erection Testing and commissioning of Electrical Installationwork (Group 2&3 i.e. Boiler & Mill Areas and Common areas respectively) packagefor Prayagraj Thermal Power Project (3 x 660 MW) at Tehsil - Bara Allahabad UttarPradesh.
- Supply and erection Contract for Inland transportation Insurance Installationtesting conducting Guarantee tests under Electrical equipment supply & erectionThermal Power Project Stage V (1 x 500MW) for National ThermalPower Corporation Limited.
- Supply and erection Contract for Inland "Electrical equipment supply &erection Package" for Kudgi STPP stage I (3x800 MW) for National Thermal PowerCorporation Limited.
ROCKWOOL INSULATION & REFRACTORY:
During the year the division has successfully completed the following contracts:
- VGO AVU NHT / CCR Heaters & Insulation work for Indian Oil Corporation LtdParadeep Odisha.
- Insulation for Composite Works - GCU & GPU for GAIL (India) Ltd Pata UttarPradesh.
- Insulation jobs (ARC) at Essar Oil Ltd Jamnagar Gujarat.
Presently the following orders of the Division are under execution:
- Insulation & refractory work for VGO HDT & FCCU heater Bharat PetroleumCorporation Kerala.
- Insulation work for Essar Projects (India) Ltd. Jamnagar and project is expected tobe completed in September 2016.
- No major work carried out at Petrofab works during 2015-16.
Your Company has successfully completed safe manhours at GAIL India Ltd. Pata UttarPradesh Indian Oil Corporation Ltd. Paradip Orissa Reliance Industries Ltd JamnagarGujarat JBF Petro-and Bharat Petroleum Corporation Ltd. Kochi Kerala.
Your Company has also received HSE Award from Ultratech Cements Ltd. NagpurMaharashtra.
FY 2015-16 has been a tough year. However PECL booked orders aggregating Rs. 161.20Crores and the accumulatedto backlog approximately amounted to Rs. 975 Crores.
The Major Orders received are as follows:
|Sr. No. Client ||Description ||Order Value (Rs. In lacs) |
|1. M/s. Fine Tech Corporation Private Limited 3rd floor Court House Lokmanya Tilak Marg Dhobi Talao Mumbai 400 002 ||Electrical works in C2 complex at Reliance Jamnagar in plants LDPE LLDPE Utility and ASU ||1396.78 |
|2 The Ramco Cements Limited (Formerly Madras Cements Ltd.) Auras Corporate Centre V Floor 98-A Dr. Radhakrishnan Salai Mylapore Chennai - 600 004 India. ||Capacity up gradation work of Line- I Cement Plant and Captive Power Plant at Jayanthipuram - Civil and Mechanical works ||2250.00 |
|3 M/s. JSW Cement Limited JSW CENTRE Bandra Kurla Complex Bandra (East) Mumbai - 400051 ||Civil &Structural work for JSW Cement Ltd. 2x1.2 MTPA Clinker and Slag Grinding Unit at Salboni Paschim Medinipur West Bengal ||7500.00 |
|4 M/s. Cethar Limited 4 Dindigul Road Tiruchirapalli 620 001. Tamil Nadu ||Installation/erection of the Balance Mech. Elect. and Instrumentation works for Boiler #1 & Boiler # 2 2 x 350 MW Power Plant at M/s. Meenakshi Energy Pvt Ltd. Nellore Andhra Pradesh ||4750.00 |
FY 2016-17 will bring prospects for sectors like Refinery Petrochemical PowerCement and Fertilizer etc.
Cement Sector is expected to largely benefit from the development of Infrastructure& Construction of Highways which will have an immense growth potential. RoadConstruction Projects are at its peak. Therefore your Company is foreseeing tremendousopportunity in the Cement sector.
The Indian power sector is undergoing a significant change that has redefined theIndustry economic growth and "Make in India" initiative will continue to drivepower demand in India. The Government of Indias focus to attain Power ForAll has accelerated capacity addition in the country. Therefore the Power Sector isexpected to throw ample opportunities to your Company which would be the key growthdriver.
In the coming years with the growth in Agriculture Fertilizer Industry is alsoexpected to grow. Your Company is expected to undertake construction jobs in theFertilizer Industry.
The Government of India has launched a major National Program "Make InIndia" which has been designed to facilitate investment foster innovation enhancedskill development "build in best in" class manufacturing in the country as wellas protect intellectual property. The primary objective of this initiative is to attractacross the globe and strengthen Indias manufacturing sector.
The "Make in India" program is very important for the economic growth ofIndia as it aims at utilizing the existing Indian talent basecreatingadditionalemployment opportunities and empowering secondary and tertiary sector. "Make inIndia" program will be focusing on 25 sectors. These include: construction of roadshighways ports railways thermal power and renewable energy.
This would give a boost to the Construction Industry as there would be major CementProjects coming up giving an opportunity to your Company in Power & Cement sector.
Your Company though operating in midst of challenging market situation is uniquelyplaced to survive & take its business forward. This is mainly due to the range ofservices it offers and to the variety of industries it caters to as under:
India has a lot of potential for development in the Infrastructure and Constructionsector and the cement sector is expected to largely benefit from it. Cement Industry inIndia provides direct / indirect employment to a million people making it a vital part ofIndian Economy. The industry is currently in a turnaround phase trying to achieve globalstandards in production safety and energy-efficiency. On the back of growing demandsconstruction and infrastructural activities the cement sector inIndia will lead to hugeinvestments.
Major Companies are implementing expansion by awarding Turnkey/Composite constructioncontracts and therefore your Company is taking necessary steps to participate in suchcontracts. Your Company is focused to achieve considerable volume in this sector. WithCement companys trend of addingOffsiteGrinding Units Petron is constantly focusingon the same.
Oil & Gas Refineries Petrochemicals
The oil and gas sector is one of the six core industries in India. It plays a pivotalrole in influencing other important spheres of the economy. With Indias economicgrowth closely linked to energy demand the need for oil and gas is projected to growfurther rendering the sector a fertile ground for investment. The governmentsparticipation has made the oil and gas sector in the country a better target ofinvestment.
In order to meet the domestic demand and potential of exports ofrefinedproducts demandfew strategic expansions are under way in India.
Large sized Petro-chemical Projects are expected to be implemented in the coming yearsas the demand for Fibers PlasticRubber Resins and Specialty Chemicals are expected torise. Your Companys experience in Heaters Crackers and related construction areaswill result in good amount of business opportunity.
India is also poised to increase capacities in LNG terminals as an added Natural Gassupply source in some locations. Your Company with its past experience is well placed todo some business in this area as well.
Coal Gasification Coal Bed Methane (CBM) and Coal to Liquid (CTL) are also gainingfocus in India as alternative energy source to depleting Natural Gas source. Your Companywill look out for business opportunity in this Sector.
Power or Electricity is one of the most criticalcomponents of Infrastructure affectingeconomic growth and well-being of nations. The Indian power sector is one of the mostdiversified in the world. The in the country has been growing at a rapid rate and isexpected to grow further in the years to come. In order to meet the increasing requirementof electricity massive addition to the installed generating capacity in the country isrequired.
The Indian power sector is undergoing a significant change that is redefining of"Make in India" and the Governments focus to attain Power ForAll has accelerated capacity addition country.
There is a large opportunity in Power Sector as there is a huge shortage of power dueto increasing population increased industrial consumption. However due to supplyconstraints of coal and gas major projects in the area of Thermal Power are not takingoff. Major Corporates are tying up with foreign countries for their coal requirements soas to meet the power generation capacity. Your Company is looking forward to explore JointVenture opportunities to get new orders in this sector
Agriculture plays a vital role in Indias economy due to which the requirement ofFertilizer is very huge for the growth of Agriculture Sector as the consumption of foodgrains as increased due to the increased population
Normal monsoons will lead to enhanced requirement of Fertilizer and therefore thegrowth in Fertilizer Sector is expected. Your Company is well placed to execute projectsin Fertilizer sector in the coming years.
The Steel Industry reflects the overall economic growth of an economy in the long termas demand for steel is derived from other sectors like automobiles consumer durables andinfrastructure.
The Indian Steel Industry is very modern with state-of-the-art steel mills. It hasalways strived for continuous modernization and up-gradation of older plants and higherenergyefficiency levels.
India is expected to become the worlds second largest producer of crude steel.
As the Government of India is poised to bring in reforms it will bring threatsalongwith opportunities. Stiff competition from Companies in the field of hydro-carbonsteel cement and power economy is opening up for foreign direct investments.
7. CREDIT RATING
Long Term Loan and Fund Based working capital facilities of Rs. 152.47 crores have beenassigned BBB rating. AND Non-Fund Based working capital facilities of Rs. 477 crores havebeen assigned A3 rating by India Ratings & Research Private Limited.
8. HOLDING COMPANY/ SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES
|Ultimate Holding Company ||KazStroyService Global BV |
|Holding Company ||KSS Petron Pvt. Ltd. |
|Associate Companies ||KazStroyService Hungary Kft. |
| ||Kazstroy Engineering India Private Limited |
| ||KazStroyService Management Services Pte. Limited |
| ||JSC OGCC KazStroyService |
|Joint Ventures ||The Company has not entered into any Joint Ventures during the year under review. |
9. CONTRACTS AND ARRANGEMENT WITH RELATED PARTIES
All contracts / arrangements / transactions entered by the Company during the FinancialYear with related parties were in the Ordinary Course of business and on an armslength basis. During the Year the Company had not entered into any Contract orarrangement / transactions with related parties which can be considered material inaccordance with the policy of the Company on materiality of related party transactions.
The Company has got a Policy to approve the Related Party Transactions and dealingswith the Related Party by the Audit Committee / Board of Directors.
10. DIRECTORS RESPONSIBILITY STATEMENT
The Board of Directors of the Company confirms:
a. that in the preparation of annual accounts the applicable accounting has been nomaterial departure;
b. that the selected accounting policies were applied consistently and made judgmentsand estimates that are reasonable and prudent so as to give a true and fair view of thestate of affairs 31 2016 and of the Profits of the Company for the year ended on thatdate; sufficient been taken for the maintenance of adequate accounting records in
c. that proper and accordance with the provisions of the Companies Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;
d. that the annual accounts have been prepared on a going concern basis.
e. That Internal Financial Controls have been laid down to be followed by the Companyand such Internal Financial Controls are adequate and are operating effectively.
f. That proper systems have been devised to ensure compliance with the provisions ofall applicable laws and such systems are adequate and operating
11. CORPORATE GOVERNANCE
The Report on Corporate Governance pursuant to Clause C of Schedule V of the SEBI(Listing Obligations Disclosure Requirements) Reg. 2015 confirming compliance with theconditions of Corporate Governance by a Practicing Company Secretary is given in theAnnexure which forms part of the Directors Report.
12. CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY
The Company has constituted a Corporate Social Responsibility (CSR) Committee to complywith Section 135 of the Companies Act 2013. The composition of CSR Committee is as under:
Mr. Sanjay Jain Chairman
Mr. Ajay Hans Member
Mrs. Nandita Vijay Gupta Member
The Company will have CSRPolicyandaccordinglywillundertakesuchactivities which arespecified in Schedule VII of the CompaniesAct2013subjecttomeetingthe eligibilitycriteria as stated in Section 135 of the Companies Act 2013 subject to availability ofthe funds.
Since Financial Year 2012-13 the Company is making miniscule profit (Average NetProfit for F.Y. 2012-13 2013-14 2014-15 is Rs. 150 Lakhs only). The Company is alsohaving Cash Flow crunch as huge amount of money have been stuck in Receivables due tostalled projects of our clients for more than Five years. Considering this neither CSRBudget is made nor CSR activities were undertaken and no CSR Expenditures have beenincurred in F.Y. 2014-15 and 2015-16.
13. RISKS & CHALLENGES
Construction Companies are facing difficulty due to difficult market conditionsincreased inflation sporadic labour wage increase fluctuating supply of feed-stockscost overruns due to the delay in Government approvals land acquisition etc. Clients andconsultants are also adopting the Wait and Watch situation and have becomeaverse to take risky decisions due to the dynamic environment.
The cumulative effects of these conditions will have to be borne by your Company. Dueto the uncertainty in the Indian Infrastructure Industry your Company is also looking outto explore opportunities in the Middle East Far East and Africa etc.
The Company manages / monitors the principal risks and uncertainties that can impactits ability to achieve its objectives. The Companys management systemsorganizational structures code of of the Company and takes view of risks and put effortsto achieve risk mitigation through Internal Control Systems.
14. INTERNAL CONTROL SYSTEMS AND ADEQUACY
Your Company has a proper and adequate system of internal controls to ensure the timelyand accurate recording of financial transactions and adherence to applicable accountingstandards; optimum utilization compliance with applicable laws regulations listingagreements and management policies; and an effective management information system
There are well defined and documented procedures policies and authority guidelines foreach function in the Company. Your Company has in-house internal audit team who conductaudits across all locations project sites and business units of the Company throughoutthe year to test check the internal control system.
Your Company has an Audit Committee whose Chairman is an Independent Director. TheCommittee periodically with the management internal audit team and representatives of thestatutory auditors to review your Companys program of internal audits findings& recommendations made in the auditors (both internal & statutory) reportsand the follow-up & compliance status of its earlier observations.
15. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO
The Company is primarily engaged in undertaking engineering & constructionprojects the disclosure of particulars under Section134 of the Companies Act in so faras it relates to the conservation of energy and technology absorption is not applicable.Particulars with regard to foreignexchange earnings and outgo are given below:
Total Foreign Exchange used and earned:
|i) Value of Imports on CIF basis ||Rs. 513.53 Lacs |
|ii) Expenditure in Foreign Currency ||Rs. 4.54 Lacs |
|iii) Foreign Exchange earned ||Rs. 4346.14 Lacs |
Further it does not include Revenue recognized (Received / Receivables) in ForeignCurrency from one of its clients amounting toRs. 73.06 Lacs for the services rendered /job execution done in Special Economic Zone.
16. MATERIAL DEVELOPMENT IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT INCLUDINGNUMBER OF PERSONS EMPLOYED
Though the Company is passing through a challenging period due to financial constraintsincluding cash-flow problems your Companys relation with its staff / workers hasremained cordial during the year.
The Company is having 639 employees as on 31st March 2016.
17. DIRECTORS AND KEY MANAGERIAL PERSONNEL
Mr. Ajay Hans Managing Director of the Company is not liable to retire of the Company.
Mr. Sanjay Jain and Mr. Sudhir Kumar Jain are Non-Executive (Independent) Directors asper the provisions of Section 149 (6) and Section 149(13) of the view of the amendment andtheir appointment at the last 38th Annual General Meeting.
Ms. Nandita Vijay Gupta was appointed as Women Director w.e.f. 13th May 2015 who isan Independent Director and therefore is not liable for retirement by rotation.
In accordance with the provisions of Section 152(6) of the Companies Act 2013 Mr.Ravi Keswani Non-Executive Director is liable to retire by rotation. He is eligible andoffers himself for reappointment.
Details of Directors or Key Managerial Personnel who were appointed or have resignedduring the year:
None of the Key Managerial Personnel have resigned during the year.
18. AUDITORS AND THEIR REPORT
The Auditors M/s. Lodha & Co. Chartered Accountants New Delhi in their Reporthave drawn attention to Note No. 32 and 33 on the following matter:
Auditors Qualification No. 1:
In respect of certain suspended / delayed contracts as of 31st March 2016 tradereceivables of Rs. 1923 lacs (net of mobilization advance ofRs. 2934 lacs) (as at 31stDec. 2015 and 31st March 2015 Rs. 1128 lacs and Rs. 1501 lacs net of MobilizationAdvance ofRs. 4211 lacs and Rs. 4240 lacs respectively) And unbilled revenue ofRs. 6256lacs (as at 31st December 2015 and 31st March 2015 Rs. 7805 lacs and Rs. 7756 lacsrespectively) receivables from customers are pending confirmation/ negotiation; tradepayables w.r.t. these stated customers aggregatedto Rs. 819 lacs (as at 31st December2015 and 31st March 2015 Rs. 1206 lacs and Rs. 1323 lacs respectively) are subject toconfirmation where we are unable to comment on the same and its corresponding impact onprofit and liabilities as at that date.
This matter was also qualified in the report of the predecessor auditors on thefinancial statements for the quarter/ year ended 31st March 2015 and in our LimitedReview Report for the Quarter Ended 31st December 2015.
The Companys response with regard to above qualification is as under:
The matter mainly relates to a mega project (the largest private investment in theregion) which is nearly 60% complete which had hit a temporary roadblock because of thecost escalation natural disaster constraints at the clients end. In March 2015 andsubsequently in the current year the Company had meetings with the client wherein theclient has confirmed that they are in discussions with various prospective support torestart the project. Considering the recent developments the management is confidentforfinancial that the project will restart in near future. Apart from the above the samehas also been reaffirmed by the top executives of the said customer.
As commented by the auditors in their report on the realization of trade receivablesand unbilled management hereby informs that the amount outstanding in the form of tradereceivables is pending negotiations with client and the unbilled revenues are in the formof unfinished works and inventories most of which are marketable if required. Themanagement is confident of its recovery upon restart of the project.
In respect of trade receivables and unbilled revenue of other contracts the company isnegotiating with the clients and is confident of realization of those receivables. In thecurrent year the company was successful in arriving settlement with one client which hasresulted in reduction in unbilled revenue.
Further the accounts payables are subject to the reconciliation of the work performedat the said project and can be accurately ascertained after re-negotiation upon restart ofthe project or otherwise as the case may be.
Auditors Qualification No. 2
The Company has recognized revenue of Rs. 1353 lacs during earlier periods (till 31stDecember 2015Rs. 1353 lacs) (till 31st March 2015 Rs. 2555 lacs) on account of costoverruns on certain contracts pending acceptance / confirmation from customers and ourinability to comment on the amounts ultimately receivable in respect of these contractsand its impact on the reported profit for the quarter/ year ended 31st March 2016 andcorresponding assets as on date. This matter was also qualified in the report of thepredecessor auditors on the financial statements for the quarter / year ended 31st March2015 and in our Limited Review Report for the Quarter Ended 31st December 2015.
The Companys response with regard to above qualification is as under:
The contracts have provisions for issuance of change orders due to modifications inspecifications scope and methodology of execution of work escalation in rates due toprolongation of the contracts . During execution of works some of the specificationsscope methodology of executionhave undergone changes for order requests have been sent tothe respective clients. of receiving the recognized revenue after completion of pendingformalities in due The management is confident course of time.
Auditors Qualification No. 3
The Company has recognized revenues of Rs. 1621 lacs during nine months period ended31st December 2015 (till 31stMarch2015 Rs. 1301 lacs) on account of cost overruns oncertain contracts which are not in accordance with the principles set out in theAccounting Standards AS-7 Construction Contracts. Accordingly the Revenue andprofit Rs. 1621 lacs for the year ended 31st March 2016 and also balance in retainedearnings and ishigherby unbilled revenue balance as at 31st March 2016 is higher by Rs.2922 lacs (as at 31st March 2015 by Rs. 1301 lacs). This matter was also qualifiedin thereport of the predecessor auditors on the
Financial statements for the quarter/ year ended 31st March 2015 and in our LimitedReview Report for the Quarter Ended 31st December 2015.
The Companys response with regard to above qualification is as under:
There are contractual provisions in some of the contracts for claims against extendedstay at pre-determined rates per month as specifiedin the respective contracts.Accordingly the Company has lodged claims for the extended stay. Further during executionof works some of the specifications scope and undergone changes for which change orderrequests have been submitted with the respective clients.
The Company is negotiating with the Clients and is confident of realization of thoseclaims.
The Auditors have also drawn attention to the following observations:
1. Confirmation of Balance Quote
Regarding pending confirmation / reconciliation of balances of certain tradereceivable other liabilities and loan & advances as at 31st March 2016 where themanagement is confident that there will not be any material impact on confirmation /reconciliation on profit for thequarter / year.
2. System of Internal Controls over financial control
Based on the information and explanation provided in place however the Company needsto further improve in regard financial to project cost estimation process [read withpara(i) above].
The Companys response with regard to above observations is as under:
The Observations of the Auditors are self explanatory.
19. STATUTORY AUDITORS
M/s. Lodha & Co. Chartered Accountants (Registration No. 301051E) New Delhi wereappointed as Independent (Statutory) Auditors of the Company at the 39th Annual GeneralMeeting. They have been appointed as Independent Auditors from the conclusion of the 39thAnnual General Meeting until the conclusion of the 44th Annual General Meeting subject toratification by the member/ shareholders atry Annual General Meeting.eve The Company hasreceived a letter from M/s. Lodha & Co. Chartered Accountants New Delhi to theeffect that their appointment if ratified will be in accordance with the limitsprescribed under Section 139(1) of the Companies Act2013 and that they are notdisqualified within the meaningof Section 141 of the Act.
Accordingly the appointment of M/s. Lodha & Co. Chartered Accountants New Delhiis proposed for approval and ratification by the Shareholders at the 40th Annual GeneralMeeting.
20. COST AUDITORS
The Board of Directors have appointed Mr. Dilip Athavale Cost Accountant as the CostAuditor of the Company to conduct the audit of Cost Accounting records and submit CostAudit Report and Cost Compliance Report for the Financial Year 2015-16.
21. SECRETARIAL AUDITORS
The Board of Directors have appointed M/s. Pradeep Purwar and Associates PracticingCompany Secretaries as Secretarial Auditors for providing the Secretarial Audit Report interms of the provisions of Section204 of the Companies Act 2013 for the Financial Year2015-16. The Secretarial Audit Report for the Financial Year ending 31st March 2016 isannexed herewith the Directors Report (Page No. 48).
The Secretarial Audit Report has made the following observations:
Observation No. 1
Delay in appointment of Women Director.
The Companys response with regard to above observation is as under:
Women Director was appointed on 13th May 2015.
Observation No. 2
Delay in filing of Financial Results for the Year Ended 31st March 2015 and for theQuarter Ended 30th June 2015.
The Companys response with regard to above observation is as under:
Delay in filing Financial Results for the year ended 31st March 2015 is due to delayin completion Delay in filing the Financial Results for the quarter ended 30th June 2015was due to delay in completion of Audit of 31st March 2015 which impacted preparation ofFinancial Results for the Quarter ended 30th accordingly filing of Financial Result wasdelayed.
The Audit Committee comprises of Mr. Sanjay Jain Chairman who is an IndependentDirector Mr. Ravi Keswani Member who represents the Promoters Mr. Sudhir Kumar JainMember and Mrs. Nandita Vijay Gupta who are also Independent Directors. All therecommendations made by theAudit Committee were accepted by the Board.
Vigil Mechanism / Whistle Blower Policy
The Vigil Mechanism of the Company which incorporates a Whistle Blower Policy in termsof the Listing Agreement. The Whistle Blower Policy was approved by the Board of Directorson 7th November 2014. The Whistle Blower Policy may be accessed on the Companyswebsite www.petronengineering.com.
Policy on Prevention Prohibition and Redressal of Sexual Harassment at work place
The Company is also having Policy on Prevention of Sexual Harassment of Employees.
The Company has zero tolerance for Sexual Harassment at workplace and has adopted apolicy on Prevention Prohibition and Redressal of Sexual Harassment at work place inline with the provisions of Sexual Harassment of Women at work place (PreventionProhibition and Redressal) Act2013 and the Rules there under.
The Policy aims to provide protection to employees at the workplace and prevent andredress complaint of sexual harassment and/or matters connected or incidental thereto withthe objective of providing a safe working environment where women employees can feelsecure.
The Company has constituted a Committee which has got the powers to enquire into theharassment and recommend appropriate action.
Meetings of the Board
During the year under review there were five meetings of the Board of Directors. Forfurther details please refer Report on Corporate Governance on Page No. 35-47 of thisAnnual Report.
23. EXTRACT OF ANNUAL RETURN
Extract of Annual Return of the Company is annexed herewith as Annexure to thisDirectors Report.
24. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the names and other particulars the employees drawing remuneration inexcess of the limits set out in the said rules are provided in the Annual Report.
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are provided in the Annual Report.
Having regard to the provisions of the first proviso to Section excluding the aforesaidinformation is being sent to the members of the Company. The said information forinspection at the registered office of the Company during working hours and any memberinterested in obtaining such information may write to the Company Secretary and the samewill be furnished on request. The full Annual Report is being sent electronically to allthose members who have registered their email addresses and is available on theCompanys website.
25. GENERAL INFORMATION
Your Company is continuing to execute the contracts related to fabricationinstallation of Plant Machinery petrochemicals power fertilizer plants etc. It is alsocontinuing to andEquipmentsforcementrefinery execute Turnkey / Composite ConstructionProjects.
Over a period of time your Company has developed the capabilities ofexecutingverticalconstruction contracts across all sectors which will be preferred modeof executionof future contracts and multiple project execution simultaneously.
Particulars of Loans given Investments made Guarantees given and Securitiesprovided: The Company has not given any loan or made any investments or providedguarantees or securities.
The Company has not accepted public deposits during the year in terms of ChapterV. The Company does not have any deposit and therefore the provisions relating to depositsat our end in compliance with the requirements of Chapter -V of the Act is not applicable.
No significant material orders were passed by the Regulators or Courts orTribunals which would impact the going concern status or operations in future.
The Managing Director of the Company did not receive any remuneration orcommission from any of its subsidiaries or associate Companies.
26. TRANSFER OF UNPAID DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND
Pursuant to the provisions of Section 124 of the Act the declared dividend whichremained unpaid or unclaimed for a period of 7 years has been transferred by the Companyto the Investor Education and Protection Fund (IEPF) established by the Central Governmentpursuant to Section 205C of the Act.
Your Directors would like to express their sincere appreciation for the assistance andco-operation received from the bankers clients dealers vendors and members for theirsupport and confidence placed in the Company. Your Directors also wish to place on recordtheir deep sense of appreciation for committed services by the companys executivesstaff and workers at all levels for their unstinted efforts as well as theirCompanys performance.
The Directors would also like to offer its sincere thanks to the Companysshareholders bankers customers dealers suppliers and all other business associates fortheir unstintedsupport and continued confidence in the Company.
28. CAUTIONARY STATEMENTS
Statements in this report on management discussion and analysis describing theCompanys objectives or outlook opportunities expectationsandestimatesmay beforward-looking statements within the meaning of applicable laws or regulations actualresults could however differ materially from those expressed or implied.
| ||BY ORDER OF THE BOARD || |
| ||Ajay Hans ||Ravi Keswani |
|Mumbai 31st May 2016 ||Managing Director ||Director |