The Members of
A2Z Infra Engineering Ltd.
Your Directors take pleasure in presenting the 17th Annual Report togetherwith the annual audited financial statements for the year ended March 31 2018.
1. Financial summary or highlights/Performance of the Company
The highlights of financial results on Standalone and Consolidated basis for thefinancial year ended on March 31 2018 are as follows: (INR in lakh)
| ||Standalone ||Consolidated |
|Particulars ||2017-18 ||2016-17 ||2017-18 ||2016-17 |
|Revenue || || || || |
|Revenue from Operations ||35751.56 ||63455.83 ||70853.82 ||99550.84 |
|Add: Other Income ||3697.86 ||1563.48 ||4310.47 ||3773.05 |
|Total revenue ||39449.42 ||65019.31 ||75164.29 ||103323.89 |
|Expenses || || || || |
|Cost of Material Consumed ||27804.66 ||47240.91 ||35817.12 ||56340.53 |
|Purchase of Stock in Trade ||2602.17 ||4996.99 ||2602.17 ||4996.99 |
|Changes in Inventories ||- ||- ||294.55 ||(145.68) |
|Employee benefit expenses ||2219.43 ||1965.05 ||26501.06 ||25280.45 |
|Finance Cost ||12978.07 ||11967.31 ||20599.69 ||20053.32 |
|Depreciation and amortization expenses ||1284.70 ||1447.52 ||3264.75 ||4307.91 |
|Other Expenses ||5845.46 ||4501.85 ||8149.34 ||6980.62 |
|Total Expenses ||52734.49 ||72119.63 ||97228.68 ||117814.14 |
|Loss before Exceptional Items and Tax ||(13285.07) ||(7100.32) ||(22064.39) ||(14490.25) |
|Exceptional Items ||1828.89 ||(959.58) ||13557.23 ||(9877.58) |
|Loss before Tax ||(11456.18) ||(8059.90) ||(8507.16) ||(24367.83) |
|Tax expense || || || || |
|Current Tax ||22.77 ||3.67 ||190.85 ||237.67 |
|Reversal of Tax expense relating to prior years ||- ||- ||1.39 ||(3.78) |
|Deferred Tax (Net) ||(2.01) ||5855.41 ||45.01 ||5968.30 |
|Total Tax Expense ||20.76 ||5859.08 ||237.25 ||6202.19 |
|Loss for the year ||(11476.94) ||(13918.98) ||(8744.41) ||(30570.02) |
|Other Comprehensive Income || || || || |
|i) Items that will not be reclassified to profit and loss ||40.31 ||29.58 ||71.26 ||57.44 |
|ii) Income Tax relating to Items that will not be reclassified to profit and loss ||- ||- ||- ||- |
|Total Comprehensive Income ||40.31 ||29.58 ||71.26 ||57.44 |
|Total Comprehensive income (Comprising Loss and other Comprehensive Income) ||(11436.63) ||(13889.40) ||(8673.15) ||(30512.58) |
Note: The above figures are extracted from the standalone and consolidated annualfinancial statements of the Company as per Indian Accounting Standards (Ind AS).
During the year under review the Turnover of the Company has shown a decrease ascompared to that of the previous year figure by 43.66%.The Company has achieved a Turnoverof INR 35751.56 Lakh as against INR 63455.83 Lakh in the previous year. The Company hasmade net Loss after tax of INR 11436.63 Lakh whereas in the previous year Company hasmade net Loss of INR 13889.40 Lakh. The Net Worth of the Company has increased to INR61336.63 Lakh as at the end of the current year from INR 60470.49 Lakh as at the end ofthe previous year representing increase in Net Worth by 1.43%.
The Debt Equity ratio of the Company has decreased to 1.20 as at the end of the currentyear as compared to 1.59 as at the end of the previous year.
The consolidated Turnover of the Company for the current financial year is INR70853.82 Lakh as against INR 99550.84 Lakh in the previous year representing decrease inTurnover by 28.83%. The Company on consolidated basis has made a net Loss of INR 8673.15Lakh as against INR 30512.58 Lakh in the previous year.
The consolidated Net Worth of the Company has increased to INR 37195.38 Lakh as at theend of the current year from INR 35868.08 Lakh as at the end of previous yearrepresenting increase in Net Worth by 3.70 %.
The consolidated Debt Equity ratio of the Company has decreased to 3.39 as at the endof the current year compared to 4.59 as at the end of previous year.
2. Consolidated Financial Statements
The Audited Consolidated Financial Statements of your Company as on March 31 2018have been prepared in accordance with the relevant Indian Accounting Standards (Ind AS)issued by Accounting Standards Board (ASB) and Regulation 33 of Securities and ExchangeBoard of India (Listing Obligations and Disclosure Requirements) Regulations 2015 andprovisions of the Companies Act 2013.
In accordance with Section 129(3) of the Companies Act 2013 and schedule V ofSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 the Consolidated Financial Statements of the Company including thefinancial details of all the subsidiary companies of the Company forms a part of thisAnnual Report.
On account of the losses reported by the Company during the current financial year theBoard of Directors does not recommend any dividend for the financial year ended March 312018.
4. Operational highlights
The key highlights of the Company's various businesses are as follows:
Power Transmission & Distribution:
Your Company is one of the leading players in India's Engineering & UrbanInfrastructure Services sector. As part of the services the Company provides integrateddesign testing installation construction and commissioning services on a turn-key basisto its clients. The Company's projects include rural electrification railway overheadelectrification reduction of AT&C losses feeder renovation underground cablingfeeder segregation installing High Voltage Distribution System ("HVDS") and LowVoltage Distribution System ("LVDS") distribution lines and transmission lines.The Company has strong capabilities to build:
Substations & Switchyards up to 765 kV
Transmission lines up to 765 kV
11 / 33 kV distribution lines comprising of Feeder Renovation Projects HighVoltage Distribution System AT&C Loss Reduction Tube Well Connection Segregation ofDomestic and Agriculture load Augmentation of Lines Providing Laying of HT & LTAerial Bunched Cables and Offering BPL Connections.
Company has its overseas presence in Nepal Zambia Uganda and Tanzania.
Under Engineering Services segment we may pursue infrastructure projects like SewageNetwork & Treatment Plants Gas Distribution Networks and Metro projects in selectcities.
Telecom Infrastructure EPC
Telecom infrastructure projects is the main business activity of the Company. Majorofferings by Company in Telecom Infrastructure EPC are supplying laying and maintainingof Optical Fibre Cables (OFC) networks. EPC services offered by the Company under thissegment include:
Material Planning & Project Management
Radio Frequency Engineering Services
Engineering Construction & Infrastructure Services
Optical Fiber Cable NLD / Access Networking Construction & Maintenance
Telecom Infrastructure Operation & Maintenance Services Your Company issuccessfully executing orders for construction of Telecom Network Backbone on Turnkeybasis in the untapped toughest terrains of the country like Leh Ladakh and North EastIndia which will help in building the optical Network to connect each and every part ofthe Nation. We combine a proven track record and professional skills woven together with aculture of trust.
Your Company is now expanding its System Integration capabilities to build and operateData Network and Digital Transmission of Telecom Operators.
To cater the vision of developing India through Smart Cities Project your Company isalso planning to foray into the area of building and operating Surveillance NetworksAviation Sector Smart Metering for Power and Water Sector .
Waste to Energy- Power Generation Projects (PGP)
The Company being an Infrastructure Company also provides solutions for Clean and GreenEnergy. The Company is planning to build scale in Green Technology solutions in all areasof the power sector starting from generation of power to its distribution to endconsumers. The Company collaborated with sugar mills for setting up three power plants onBuilt Own Operate and Transfer (BOOT) basis for a period of 15 years in the state ofPunjab. To ensure continuous supply of RDF to the respective the Power Plants the Companyhas developed an indigenous process in its waste processing plant for running the saidPlants on Refuse Derived Fuel (RDF) from Municipal Solid Waste.
5. Change in the nature of business
There has been no change in the nature of business during the year under review.
6. Material Changes and Commitments
After the period under review and before the date of this report the followingsettlements are entered with the Lenders:
1. The Company entered into One Time Settlement (OTS) with The Hongkong and ShanghaiBanking Corporation Limited ("HSBC Bank") and has signed the SettlementAgreement with HSBC Bank on April 04 2018 to settle all the outstanding dues (includinginterest) for an amount of Rs. 2.80 Crores in terms of the said Settlement Agreement.
2. A2Z Green Waste Management Ltd. (Subsidiary of the Company) ("hereinafterreferred to as A2Z Green") has entered into a Business Transfer Agreement on 27thJuly 2018 to transfer Kanpur Project consisting of 1500 TPD of P&D Unitalong with15MW Power Plant located in Kanpur city to Earth Environment Management Services Pvt. Ltd.(EEMSPL) (a Wholly Owned Subsidiary of A2Z Green) at a consideration of Rs. 203.75 Croresby way of a slump sale on a going concern basis along with all its assets and liabilities.
7. Updates on Corporate Debt Restructuring (CDR)
Corporate Debt Restructuring (CDR) package of Company for restructuring of its debtswas approved by Corporate Debt Restructuring Empowered Group ("CDR EG") and thesame has been successfully implemented and CDR Lenders of the Company have appointedSBICAP Trustee Company Limited (SBICAP) as their Security Trustee on the terms andconditions contained in Security Trustee Agreement executed on March 27 2014 among theCompany Lenders and the Security Trustee.
Your Company is working assiduously to reduce the debt burden and in line with thisstrategy the Company has entered into One Time Settlement Agreements with various Lendersincluding SICOM Limited Edelweiss Asset Reconstruction Company Limited as representativeof EARC Trust SC 299 for the Loan assigned by Yes Bank Limited and Standard Chartered Bankduring the FY 2017-18.
8. Scheme of Arrangement / Reconstruction/ReOrganization
The Scheme of Arrangement/Reconstruction/ReOrganization ("the Scheme")between your Company and its Secured Creditors under Sections 391 to 394 of the CompaniesAct 1956 for implementation of the Corporate Debt Restructuring Package ("CDRPackage") as approved by the Corporate Debt Restructuring Empowered Group ("CDREG") on all the Secured Creditors of the Company was earlier approved by the Board ofDirectors during the F.Y. 2014-15.
The Company's Petition for first Motion has been disposed off by the Hon'ble High Courtof Punjab & Haryana at Chandigarh and the Company has filed a Petition for SecondMotion and the matter is presently sub-judice with the NCLT/ Hon'ble High Court of Punjab& Haryana at Chandigarh.
During the year under review the Company has not accepted any deposits within themeaning of Sections 2(31) and 73 of the Companies Act 2013 and the Rules framedthereunder and any re-enactments thereof and consequently there was no amount ofprincipal or interest was outstanding towards the Public deposit as on the Balance Sheetdate.
10. Significant and Material Orders passed by the Regulators or Courts or Tribunals
There are no significant material orders passed by the Regulators or Courts or Tribunalwhich would impact the going concern status of the Company and its future operations.
11. Internal Financial Controls and systems:
Your Company has in place adequate financial control system and framework in place toensure:
- The orderly and efficient conduct of its business;
- Safeguarding of its assets;
- The prevention and detection of frauds and errors;
- The accuracy and completeness of the accounting records; and
- The timely preparation of reliable financial information.
Significant observations including recommendations for improvement of the businessprocesses are reviewed by the Management before reporting to the Audit Committee. TheAudit Committee then reviews the Internal Audit reports and the status of implementationof the agreed action plan. This system of internal control facilitates effectivecompliance of Section 138 of Companies Act 2013 and the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015.
The internal auditor of the company checks and verifies the internal control andmonitors them in accordance with policy adopted by the company. The Board regularlyreviews the effectiveness of controls and takes necessary corrective actions whereweaknesses are identified as a result of such reviews. This review covers entity levelcontrols process level controls fraud risk controls. Based on this evaluation there isnothing that has come to the attention of the Directors to indicate any material breakdown in the functioning of these controls procedures or systems during the year. Therehave been no significant events during the year that have materially affected or arereasonably likely to materially affect our internal financial controls.
12. Secretarial Standard
The Company is in Compliance with the Secretarial Standards issued by the Institute ofCompany Secretaries of India (ICSI) on Meetings of the Board of Directors (SS-1) andGeneral Meetings (SS-2).
13. Share Capital
Authorised Share Capital:
During the year under review the Authorised Share Capital of the Company has beenincreased from Rs. 1600000000 (Rupees One Hundred Sixty Crore Only) divided into160000000 (Sixteen Crore) equity shares of Rs. 10/-(Rupees Ten only) each to Rs.2400000000 (Rupees Two Hundred Forty Crore Only) divided into 240000000 (Twenty FourCrore) equity shares of Rs. 10/- (Rupees Ten only) each pursuant to Ordinary Resolutionpassed by the Shareholders of Company through Postal ballot on December 17 2017
Paid up Share Capital:
During the year following allotments were made: -
1. The Nomination & Remuneration Committee of the Board of Directors of the Companyin its meeting duly held on May 29 2017 has allotted 110005 (One Lakh Ten ThousandFive) equity Shares on the conversion of the ESOP's as per Employee Stock Option Plan2013 and 15000 (Fifteen Thousand) Equity Shares on the conversion of the ESOP's as perEmployee Stock Option Plan 2014 of face value of Rs.10/- each to the eligible Employeesof the Company who have exercised their stock options under the A2Z Employee Stock OptionPlan 2013 & 2014.
2. The Nomination & Remuneration Committee of the Board of Directors of the Companyin its meeting duly held on September 21 2017 has allotted 56000 (Fifty Six Thousand)equity Shares on the conversion of the ESOP's as per Employee Stock Option Plan 2013 and415000 (Four Lakh Fifteen Thousand) Equity Shares on the conversion of the ESOP's as perEmployee Stock Option Plan 2014 of face value of Rs.10/- each to the eligible Employeesof the Company who have exercised their stock options under the A2Z Employee Stock OptionPlan 2013 & 2014.
3. The Nomination & Remuneration Committee of the Board of Directors of the Companyin its meeting duly held on February13 2018 has allotted 58000 (Fifty Eight Thousand)equity Shares on the conversion of the ESOP's as per Employee Stock Option Plan 2013 and240000 (Two Lakh Forty Thousand) Equity Shares on the conversion of the ESOP's as perEmployee Stock Option Plan 2014 of face value of Rs.10/- each to the eligible Employeesof the Company who have exercised their stock options under the A2Z Employee Stock OptionPlan 2013 & 2014.
4. Further the Board of Directors of the Company in its meeting duly held on February13 2018 pursuant to SEBI (Issue of Capital and Disclosure Requirements) Regulations2009 has allotted 17713569 (One Crore Seventy Seven Lakh Thirteen Thousand FiveHundred Sixty Nine) Equity Shares of Rs. 10/- each on Preferential Basis to the Lendersupon conversion of a part of their facilities/loans (including Interest) into EquityShares at an issue price of Rs. 39.80/- each. The details of aforesaid allotment is asfollows:
|S. No. ||Name of Allottee(s) ||No. of Shares |
|1. ||SICOM Limited ||6281408 |
|2. ||Edelweiss Asset Reconstruction Company Ltd. acting as representative of EARC Trust SC 299 ||11432161 |
5. Further the Board of Directors of the Company in its meeting duly held on February23 2018 pursuant to SEBI (Issue of Capital and Disclosure Requirements) Regulations2009 has allotted 12562815 (One Crore Twenty Five Lakh Sixty Two Thousand EightHundred Fifteen) Equity Shares of Rs. 10/- each on Preferential Basis to StandardChartered Bank (the Lender") upon conversion of a part of theirfacilities/loans (including Interest) into Equity Shares at an issue price of Rs. 39.80/-each.
Consequent to the above said allotments the paid up share capital of the Company wasincreased to Rs. 1761198580/- (Rupees One Hundred Seventy Six Crore Eleven Lakh NinetyEight Thousand Five Hundred Eighty Only) divided into 176119858 (Seventeen Crore SixtyOne Lakh Nineteen Thousand Eight Hundred Fifty Eight) Equity Shares of Rs. 10/- each as atMarch 31 2018. With respect to the above said allotments the Company filed the ListingApplication(s) for listing of the issued securities on the respective stock exchange(s)where the securities of the Company are listed and after the approval of the said listingapplication(s) the issued shares of the Company have been listed on BSE Limited andNational Stock Exchange of India Limited.
14. Subsidiaries Joint Ventures and Associate Companies
As on March 31 2018 the Company had 31 (Thirty One) direct and step down subsidiaryCompanies. Further the Company has entered into Joint Venture agreements withunincorporated JV's for bidding of tenders & contracts the details of which is givenin the note no. 32 & 33 to the standalone and note no. 34 & 35 to the consolidatedfinancial statements. Also the Company is a member of an association of person (AOP) inwhich Company is having 60% share in profits.
As per sub-section (3) of Section 129 of the Companies Act 2013 read with Rule 5 ofthe Companies (Accounts) Rules 2014 a statement containing salient features of thefinancial statements and performance of the Company's subsidiaries and associate companyfor the year ended March 31 2018 is included as per the prescribed format in this AnnualReport. The Financial Statements of these subsidiaries are uploaded on the website of theCompany in compliance with Section 136 of the Companies Act 2013. The FinancialStatements of these subsidiaries and the other related detailed information will be madeavailable to any Member of the Company/its subsidiary(ies) seeking such information at anypoint of time and are also available for inspection by any Member at the Registered Officeof the Company on all working days except Saturday and Sunday during business hours uptothe date of the Annual General Meeting.
During FY 2017-18 there has been no major change in the nature of business of yourCompany and its subsidiaries. During the year under review the Company has transferredits entire stake in Star Transformers Ltd. (a subsidiary of the Company) along withManagement Control.
In terms of the Regulation 46(2)(h) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the policy for determining material subsidiaries isplaced on the website of the Company -http://a2zgroup.co.in/pdf/Policy_on_material_subsidiary.pdf Report on the performance and financial position ofeach of the subsidiaries has been provided in Form AOC-1 and is forming part of theAnnual Report as Annexure A.
Statutory Auditors and Auditors' Report
M/s. Walker Chandiok & Co LLP (Firm Registration No. 001076N/N500013) CharteredAccountants were appointed as auditors of the Company from the conclusion of theThirteenth Annual General Meeting (AGM) of the Company held on September 27 2014 to theconclusion of the Eighteenth Annual General Meeting to be held for the Financial Year2018-19. Vide notification dated May 7 2018 issued by Ministry of Corporate Affairs therequirement of seeking ratification of appointment of statutory auditors by members ateach AGM has been done away with. Accordingly no such item has been considered in thenotice of the 17th Annual General Meeting.
The auditor's report presented by M/s Walker Chandiok & Co LLP Statutory Auditorson the accounts of the company for the financial year ended March 31 2018 isself-explanatory and requires no comments and the Management replies to the auditobservations are as under:
Explanation to Point (vii)(a) (b) & (viii) of Auditor's report on StandaloneFinancials of A2Z Infra Engineering Ltd.
In respect of auditor's observation in Standalone financial statements regardingcertain default in payment of interest and repayment of dues of banks and delay indepositing statutory dues.
It is clarified that the delay arose on account of delayed realization of tradereceivables coupled with delays in commencement of commercial production at its biomassbased power generation plants. The approved CDR package of the Company which gotimplemented in March 2015 only envisages the due payment towards statutory dues of theCompany. Further the Company has requested all its lenders to expedite the GAP fundingproposal and has also fasten its process for realization of fund from old completedprojects which will result in better cash flow position from the projects. The managementbelieves that by that way Company shall make the payments as and when the funds arereleased by the bankers.
Explanation to Para 9(a) of Auditor's report on Consolidated Financials of A2Z InfraEngineering Ltd. its subsidiaries joint ventures and associates & Para 9 (a) ofAuditor's report on Standalone Financials of A2Z Infra Engineering Ltd.
The management has performed impairment assessment of three cogeneration power plantsset up in collaboration with certain sugar mills on Built Own Operate and Transfer(BOOT) basis for a period of 15 years. As at March 31 2017 such plants have a powergeneration capacity of 15 MW each. The assessment has been done on the basis ofassumptions of useful life of assets discounted cash flows with significant underlyingassumptions achievement of certain operating capacity and the ability of new technologyto perform on a consistent basis.
Based on the assessment and advice from an independent legal counsel on theavailability of concession period including renewal period by exercising the option forrenewal/ extension of the concession period the management is confident that thereexists reasonable certainty that arrangement shall be extended for a term of five (5)years. The management believes that the estimates of the useful lives are reasonable andno impairment exists in the carrying value of power generation plants.
Explanation to para 9(b) of Auditor's report on Consolidated Financials of A2Z InfraEngineering Ltd. its subsidiaries joint ventures and associates & para 9 (b) ofAuditor's report on Standalone Financials of A2Z Infra Engineering Ltd.
Contract revenue in excess of billings amounting to INR 8381.36/- Lakh pertains torevenue recognized by the Company during earlier years representing amounts billable toand receivable from the customers towards work done on certain EPC contracts underexecution by the Company in accordance with the terms implicit in the contract. The delayin billing of these amounts is on account of conclusion of reconciliations with thecustomers pending joint measurement/ survey of the work done till date andnon-achievement of milestones as per the contractual terms. Management is in discussionswith the customers and expects to bill these amounts at the earliest and believes thatwhilst it may take some time to bill and recover the amounts owing to completion ofcertain administrative and contractual matters the current provision being carried in thebooks is adequate and no further material adjustments are considered necessary in respectof above balances.
Explanation to para 9(c) of Auditor's report on Consolidated Financials of A2Z InfraEngineering Ltd. its subsidiaries joint ventures and associates & para 9 (c) ofAuditor's report on Standalone Financials of A2Z Infra Engineering Ltd.
The Income tax authorities conducted a search and survey at certain premises of theCompany under section 132 and 133 of the Income Tax Act 1961 in April 2012. During theyear ended March 31 2015 the Company received the Assessment Orders for the assessmentyears 2009-10 to 2013-14 from the Deputy Commissioner of Income Tax (DCIT) demandingadditional tax liability of INR 1992.17 Lakh. During the year ended March 31 2015 TheCompany had filed appeals with Commissioner of Income Tax (CIT) (Appeals) challengingthese orders against which the said authority has granted partial relief to the Company.The Company has further filed appeals with Income Tax Appellate Tribunal (ITAT)challenging the Orders for these assessment years in respect of the matters where theCIT(A) has not accepted the Company's contention. Additionally the DCIT has also filedappeals with the ITAT against the matters where the relief has been given to the Company.
Further during the current year the Company has received penalty order for theAssessment year 2008-09 from CIT and for Assessment year 2011-12 and 2013-14 from DeputyCommissioner of Income Tax (DCIT) demanding additional tax liability of INR 798.63 lacsagainst which the Commissioner of Income Tax (CIT) (Appeals) had not granted relief to theCompany. The Company has filed appeals with ITAT for the Assessment Year 2008-09 and withCIT(A) for the Assessment Year 2011-12 and 2013-14 challenging the penalty orders.
Based on their assessment and upon consideration of advice from the independent legalcounsel the management believes that the Company has reasonable chances of succeedingbefore the ITAT /CIT(A) and does not foresee any material liability. Pending finaldecision on these matters no adjustment has been made in the financial statements.
Explanation to para 9(d) of Auditor's report on Consolidated Financials of A2Z InfraEngineering Ltd. its subsidiaries joint ventures and associates & para 9 (d) ofAuditor's report on Standalone Financials of A2Z Infra Engineering Ltd.
During financial year 2016-17 the Company based on the legal advice filed anapplication for advance ruling with the Advance Ruling Authorities ("theAuthority") regarding applicability of service tax in respect of one of the projectsundertaken by them. During the year ended March 31 2018 the Company has receivedresponse to its application wherein the Authority has opined that entire project iscovered within the ambit of the service tax. Accordingly the Company has recognized theservice tax liability and based on the contractual terms which stipulates that any taxesshall be borne by the customer has also recognized amount recoverable from customer of anequivalent amount. Further the management believes that the interest if any on thedelayed deposit of the aforementioned service tax liability is currently unascertainableand shall be reimbursed by the customer. The Company has made submissions with thecustomer in this regard.
Additionally based on the independent legal advice the Company believes that theinput tax credit in respect of the aforementioned project shall be adjustable against theliability considering the entire project has now been clarified to be covered under theservice tax ambit. Accordingly no further adjustments to the books of account areconsidered necessary.
Explanation to para 9(e) of Auditor's report on Consolidated Financials of A2Z InfraEngineering Ltd. its subsidiaries joint ventures and associates & para 9 (e) ofAuditor's report on Standalone Financials of A2Z Infra Engineering Ltd.
The following subsidiary companies A2Z Waste Management (Jaipur) Limited A2Z WasteManagement (Varanasi) Limited and A2Z Waste Management (Moradabad) Limited step-downsubsidiaries of the Company have incurred net loss for the year ended March 31 2018aggregating INR 109.01 lacs INR 3910.65 lacs and INR 621.62 lacs respectively and as ofthat date their accumulated losses aggregating INR 768.50 lacs INR 2582.43 lacs and INR984.76 lacs respectively resulting in complete erosion of the net worth and are presentlyfacing liquidity problems on account of non-realization of trade receivables.
Management is in the process of exploring various options to revive their business andhas initiated arbitration proceedings against the respective municipal authorities forrealization of the outstanding receivables. Based on independent legal advice themanagement believes that amount recoverable from such arbitration proceedings shall be inexcess of the aforementioned accumulated losses and shall result in the requisite cashinflow which shall resolve the liquidity issues being presently faced by the Company andsupport the management plan of revival of business. Hence the financial statements of theaforementioned subsidiaries have been prepared on the assumption of going concern and noadjustment is necessary to be made in the consolidated financial Statements.
In terms of Section 143(8) of the Companies Act 2013 read with Rule 12 of theCompanies (Audit and Auditors) Rules 2014 the audit of the accounts of the branchoffices of the Company located outside India is required to be conducted by the person(s)or firm(s) qualified to act as Branch Auditors in accordance with laws of that country.The Board of Directors seeks approval of the Members to authorize the Board of Directorsbased on the recommendation of Audit Committee to appoint Auditors for the branchoffice(s) of the Company and also to fix their remuneration. The Board of Directorsrecommends to the Members to pass the resolution as stated in Item No. 3 of the Noticeconvening the forthcoming Annual General Meeting.
In terms of the provisions of Section 204 of the Companies Act 2013 and Rule 9 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhad appointed M/s. DR Associates Company Secretaries as Secretarial Auditors to conductSecretarial Audit for the Financial Year 2017-18. The Secretarial Audit Report given byMr. Suchitta Koley a partner of M/s DR Associates Company Secretaries in practice NewDelhi is given as Annexure B (Form MR-3) which forms part of this report.
The said Secretarial Audit Report does not contain any qualification reservation oradverse remark made by the secretarial auditor.
Pursuant to the provisions of Section 148 of the Companies Act 2013 read with Rule 14of the Companies (Audit and Auditors) Rules 2014 the cost records in respect of road andconstruction activity need to be audited. In compliance to the above the Board ofDirectors upon the recommendation of the Audit Committee had appointed M/s HAM &Associates as the Cost Auditors of the Company for the Financial Year ended March 312019. In accordance with the above provisions the remuneration payable to the cost auditorshould be ratified by the Members. Accordingly the Board of Directors recommends to theMembers to pass the resolution as stated in Item No. 4 of the Notice convening theforthcoming Annual General Meeting.
16. Corporate Social Responsibility (CSR)
In accordance with the provisions of Section 135 of the Companies Act 2013 and Rulesframed thereunder the Company has constituted a Corporate Social Responsibility Committee(CSR Committee) of the Board of Directors on August 14 2014. The CSR Committee comprisesof three Directors viz. Mr. Amit Mittal Mr. Surender Kumar Tuteja and Ms. Dipali Mittalas members of the committee. The CSR Policy of the Company as recommended by the CSRCommittee and approved by the Board is placed on the website of the Company and may beaccessed via following link.-http://media.a2zgroup.co.in/pdf/CSR_Policy_A2Z.pdf Theaverage net profits calculated as per provisions of Section 198 of the Companies Act 2013of the preceding three (3) financial years being negative the Company was not under anyobligation to spend any amount on CSR.
17. DIRECTORS AND KEY MANAGERIAL PERSONNEL
Appointment & Resignation of Directors/KMP's
1. Mr. Suresh Prasad Yadav who was appointed under the category of Non-ExecutiveIndependent Director effective from February 03 2014 has resigned from his positionw.e.f. July 24 2017.
2. Mr. Gaurav Jain who was appointed under the category of Non-ExecutiveNon-Independent Director effective from September 17 2015 has resigned from his positionw.e.f September 01 2017.
3. Ms. Dipali Mittal who was appointed under the category of Whole Time Directoreffective from April 01 2005 has been re-designated as Non-Executive Non-IndependentDirector w.e.f August 14 2017.
4. Retire by Rotation
In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of the Company Ms. Dipali Mittal Director retires by rotation at theforthcoming Annual General Meeting of the Company and being eligible offers herself forreappointment.
5. Pursuant to the provisions of sub-section (51) of Section
2 and Section 203 of the Companies Act 2013 read with the Rules framed thereunder theKey Managerial Personnel (KMP) of the Company as on 31st March 2018 are:
1. Mr. Amit Mittal Managing Director
2. Mr. Rajesh Jain Whole Time Director & CEO
3. Dr. Ashok Kumar Saini Whole Time Director
4. Mr. G. R. Nagendran Chief Financial Officer
5. Mr. Atul Kumar Agarwal Company Secretary
18. Policy on Directors' appointment and Remuneration
As on March 31 2018 the Board consists of six members three of whom are Executive orWhole Time Directors one is Non-Executive and Non-Independent Woman Director and othertwo are Independent Directors.
The Policy of the Company on Directors' appointment and remuneration includingcriteria for determining qualifications positive attributes independence of a directorand other matters as required under sub section (3) of section 178 of the Companies Act2013 is also available on the Company's website. There has been no change in the policysince the last financial year. We affirm that the remuneration paid to directors is as perterms laid out in the Nomination and Remuneration Policy of the Company.
19. Declaration by Independent Director(s)
The Company has received necessary declaration from each of the Independent Directorsunder section 149(7) of the Companies Act 2013 that they meet the criteria ofindependence as laid down in section 149(6) of the Companies act 2013 and Regulation 25of SEBI (Listing Obligations and Disclosures Requirements) Regulations 2015.
20. Annual evaluation of Board Performance and Performance of its committees andIndividual Directors
The Board of Directors has carried out an annual evaluation of its own performanceBoard Committees and individual directors pursuant to the provisions of the Companies Act2013 and the corporate governance requirements as prescribed by Securities and ExchangeBoard of India ("SEBI") under SEBI (Listing Obligations and DisclosuresRequirements) Regulations 2015 and as per the guidance note issued by SEBI dated January5 2017 vide its Circular No. SEBI/HO/CFD/CMD/CIR/P/2017/004.
The performance of the Board was evaluated by the members of the Board on the basis ofthe guidance note and criteria laid down such as the Board composition and structureeffectiveness of board processes information and functioning Board culture and dynamicsquality of relationship between the Board and the Management and efficacy of communicationwith external stakeholders competence and experience of Board to conduct its affairseffectively operations are in line with strategy integrity of financial information andthe robustness of financial and other controls effectiveness of risk managementprocesses etc.
The performance of the committees was evaluated by the board after seeking inputs fromthe committee members on the basis of the guidance note and criteria laid down such as thecomposition of committees effectiveness of committee meetings committees are appropriatewith the right mix of knowledge and skills effectiveness and advantage of the Committeeindependence of the Committees etc.
The Board and the Nomination & Remuneration Committee ("NRC") reviewedthe performance of the individual directors on the basis of the criteria such as thecontribution of the individual director to the Board and committee meetings likepreparedness on the issues to be discussed meaningful and constructive contribution andinputs in meetings willingness to devote time and effort to understand the company andits business by the directors competency to take the responsibility and having adequatequalification experience and knowledge quality and value of their contributions at boardmeetings effectiveness of Leadership quality of the Chairman etc. In a separate meetingof Independent Directors performance of non-independent directors performance of theboard as a whole and performance of the Chairman was evaluated taking into account theviews of executive directors and non-executive directors. The same was discussed in theboard meeting that followed the meeting of the Independent Directors at which theperformance of the Board its committees and individual directors were also discussed.
21. Number of meetings of the Board of Directors
During the year eight meetings of the members of Board and one meeting of IndependentDirectors were held the details of which are given in Corporate Governance Report. Theprovisions of Companies Act 2013 and SEBI (Listing Obligations and DisclosuresRequirements) Regulations 2015 were adhered to while considering the time gap betweentwo consecutive meetings.
22. Disclosures Related to Committees and Policies a. Audit Committee
The Audit Committee of Directors was reconstituted by the Board of Directors of theCompany in accordance with the requirements of Section 177 of the Companies Act 2013 andRegulation 18 of the SEBI (Listing Obligations and Disclosure Requirements) Regulation2015. The Audit Committee as on 31st March 2018 comprises of:
1. Mr. Surender Kumar Tuteja Chairman
2. Dr. Ashok Kumar Member
3. Mr. Rajesh Jain Member
During the year under review the Board of Directors of the Company had accepted allthe recommendations of the Committee.
b. Nomination and Remuneration Committee
The Nomination and Remuneration Committee of Directors was reconstituted by the Boardof Directors of the Company in accordance with the requirements of Section 178 of theCompanies Act 2013 & Regulation 19 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015. The Nomination and Remuneration Committee as on 31stMarch 2018 comprises of the following directors:
1. Dr. Ashok Kumar Chairman
2. Mr. Surender Kumar Tuteja Member
3. Ms. Dipali Mittal Member
c. Stakeholders Relationship Committee
The Stakeholders Relationship Committee of Directors was reconstituted by the Board ofDirectors of the Company in accordance with the requirements of Section 178 of theCompanies Act 2013 and Regulation 20 of SEBI (Listing obligations and DisclosureRequirements) Regulations 2015. The Stakeholders Relationship Committeeas on 31stMarch 2018 comprising the following Directors:
1. Dr. Ashok Kumar Chairman
2. Mr. Surender Kumar Tuteja Member
3. Ms. Dipali Mittal Member
23. Remuneration Policy for the Directors Key Managerial Personnel and other employees
In terms of the provisions of Section 178(3) of the Act and Para A of Part D underSchedule II of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 the Nomination & Remuneration Committee is responsible for formulating thecriteria for determining qualification positive attributes and independence of aDirector. The Nomination & Remuneration Committee is also responsible for recommendingto the Board a policy relating to the remuneration of the Directors Key ManagerialPersonnel and other employees. In line with this requirement the Board has on therecommendation of the Nomination & Remuneration Committee framed a policy forselection and appointment of Directors KMP and Senior Management and their remuneration.
The Remuneration Policy of the Company can be accessed via followinglink.-http://a2zgroup.co.in/pdf/Remuneration_Policy.pdf
24. Vigil Mechanism / Whistle Blower Policy
The Board has pursuant to the provisions of Section 177(9) & (10) of the CompaniesAct 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules 2014and Regulation 22 of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 framed "Vigil Mechanism (Whistle Blower) Policy" ("the Policy")'to deal with instances of fraud and mismanagement if any. This Policy has formulated toprovide Vigil Mechanism for employees including directors of the Company to report genuineconcerns. The said policy is placed on the website of the Company and may be accessed at alink:-http://a2zgroup.co.in/pdf/Whistle_Blowe_13_Apr_2015.pdf. This vigil mechanism of theCompany is overseen by the Audit Committee and provides adequate safeguard againstvictimization of employees and directors who avail of the vigil mechanism and also providedirect access to the Chairperson of the Audit Committee in appropriate or exceptionalcircumstances.
25. Particulars of Loans Guarantees or Investments under Section 186
Company being the infrastructure Company Section 186 is not applicable on the Companyand particulars of loans guarantees investments form part of the notes to the FinancialStatements provided in this Annual Report. All the loans guarantees and investments madeare in compliance with the provisions of the Companies Act 2013 and the same aredisclosed in the Financial Statements.
26. Related Party Transactions:
Related party transactions that were entered into during the financial year were in theordinary course of business and on an arm's length basis.
The particulars of the contract or arrangements with related parties during thefinancial year 2017-18 are disclosed in Form No. AOC -2 which forms part of theAnnual Report as an Annexure C. Except as stated in the disclosure there were nomaterially significant related party transactions made by the Company with its PromotersDirectors Key Managerial Personnel or other designated persons which may have a potentialconflict with the interest of the Company at large.
The Policy on materiality of related party transactions as also dealing with relatedparty transactions as approved by the Board may be accessed on the Company's website atthe link: http://a2zgroup.co.in/pdf/Related_Party_Policy_ 13_Apr_2015.pdf.
All Related Party Transactions which were in the ordinary course of business and onarm's length basis were placed before the Audit Committee for their approval. Prioromnibus approval of the Audit Committee is obtained on annual basis for the transactionswhich are of a foreseen and repetitive nature. The transactions entered into pursuant tothe omnibus approval so granted are audited and a statement giving details of all relatedparty transactions is placed before the Audit Committee and the Board of Directors fortheir ratification on quarterly basis.
27. Employee Stock Option Plan
The Nomination & Remuneration Committee of the Board of Directors of the Companyinter alia administers and monitors the A2Z Stock Option Plan 2010 (ESOP 2010) A2ZEmployees Stock Option Plan 2013 (ESOP 2013) A2Z Employees Stock Option Plan 2014 (ESOP2014) A2Z Employees Stock Option Plan 2013 (Re-grant-I)(ESOP 2013 Re-grant I) and A2ZEmployees Stock Option Plan 2014 (Re-grant-I)(ESOP 2014 Re-grant I) of the Company inaccordance with the applicable SEBI Guidelines.
The applicable disclosures as stipulated under the SEBI Guidelines as on 31stMarch 2018 with regard to the ESOP 2010 ESOP 2013 ESOP 2014 and ESOP 2013 Re-grant I& ESOP 2014 Re-grant I are provided in Annexure D to this Report.
The certificates from the Auditors of the Company that the Schemes have beenimplemented in accordance with the SEBI Guidelines/ SEBI (Share Based Employee Benefits)regulations and the resolution passed by the members would be placed at the Annual GeneralMeeting for inspection by members.
28. Extract of Annual Return
Pursuant to the provisions of Section 134(3)(a) of the Companies Act 2013 Extract ofthe Annual Return as per Form- MGT-9 for the financial year ended March 31 2018 madeunder the provisions of Section 92(3) of the Act is attached as Annexure E whichforms part of this Report.
29. Prevention of Sexual Harassment at Workplace:
As per the requirement of the Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013 read with rules made thereunder your Company hasconstituted Internal Complaints Committee which is responsible for redressal of complaintsrelated to sexual harassment. During the year under review there were no complaintspertaining to sexual harassment.
30. Particulars of Employees and Related Disclosures
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are given in Annexure F.
31. Conservation of Energy Technology absorption Foreign Exchange Earnings and Outgo
Pursuant to provisions of Section 134 of the Companies Act 2013 read with Rule 8(3) ofthe Companies (Accounts) Rules 2014 the details of Conservation of Energy TechnologyAbsorption Foreign Exchange Earnings and Outgo are attached as Annexure G whichforms part of this report.
32. Disclosure requirements a. As per Regulation 34 read with Schedule V of theSEBI
(Listing Obligations and Disclosure Requirements) Regulations 2015 CorporateGovernance report with auditors' certificate from DR Associates thereon and ManagementDiscussion and Analysis are attached which form part of this report. b. Details of thefamiliarization program of the independent directors are available on the websiteof theCompany (URL:http://a2zgroup.co.in/pdf/Familiarization Programme for IndependentDirectors). c. In terms of Regulation 17(8) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Chief Executive officer and the Chief Financialofficer furnished a certificate to the Board of Directors in the prescribed format for theyear under review which has been reviewed by the Audit Committee and taken on record bythe Board.
The Equity Shares of the Company continue to remain listed on BSE Limited (formerly TheBombay Stock Exchange Limited) and National Stock Exchange of India Limited (NSE). Thestipulated listing fees for FY 2018-2019 have been paid to both the Stock Exchanges.
34. Risk Management Policy
Risk management forms an integral part of the business planning and review cycle. TheCompany's Risk Management Policy is designed to provide reasonable assurance thatobjectives are met by integrating management control into the daily operations byensuring compliance with legal requirements and by safeguarding the integrity of theCompany's financial reporting and its related disclosures.
Therefore in accordance with the provisions of Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the Board members wereinformed about risk assessment and minimization procedures after which the Board formallyadopted steps for framing implementing and monitoring the risk management policy for thecompany in their meeting held on November 13 2014.
The main objective of this policy is to ensure sustainable business growth withstability and to promote a pro-active approach in reporting evaluating and resolvingrisks associated with the business. In order to achieve the key objective the policyestablishes a structured and disciplined approach to Risk Management in order to guidedecisions on risk related issues.
In today's challenging and competitive environment strategies for mitigating inherentrisks in accomplishing the growth plans of the Company are imperative. The common risksinter alia are: Competition Business risk Technology obsolescence Investmentsretention of talent and expansion of facilities. Business risk inter-alia furtherincludes financial risk political risk fidelity risk legal risk. As a matter of policythese risks are assessed and steps as appropriate are taken to mitigate the same.
35. Directors' Responsibility Statement
Pursuant to Section 134(5) of the Companies Act 2013 the board of directors to thebest of their knowledge and ability confirm that:
a. In the preparation of the annual accounts for the Financial Year ended 31stMarch 2018 the applicable accounting standards have been followed along with properexplanation relating to material departures;
b. The directors have 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 March 31 2018 and of the profit andloss of the company for that period;
c. The directors have 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 have prepared the annual accounts on a going concern basis; and
e. The directors have laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.
f. The directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
36. Fraud Reporting
There was no fraud reported by the Auditors of the Company under Section 143(12) of theCompanies Act 2013 to the Audit Committee or the Board of directors during the yearunder review.
Your Directors state that no disclosure or reporting is required in respect of thefollowing items (as there were no transactions/instances on the below mentioned items)during the year under review:
1. No profits were transferred to any Reserves.
2. No Voluntary revision of Financial Statements or Board's Report.
3. No director who is in receipt of any commission from the Company and who is aManaging Director or Whole-time Director of the Company has received any remuneration orcommission from any Holding Company or Subsidiary Company of the Company.
However Mr. Amit Mittal Managing Director of the Company has been appointed asManaging Director in A2Z Infraservices Ltd. ("AISL") a material subsidiaryCompany on October 24 2015. He is in receipt of Rs. 4800000/- as remuneration in hiscapacity as Managing Director of AISL for the financial year 2017-18.
Your Directors wish to place on record the support assistance and guidance provided bythe financial institutions banks customers suppliers and other business associates. Wewould like to thank our Company's employees for their efforts and high degree ofcommitment and dedication. Your Directors especially appreciate the continuedunderstanding and confidence of the Members.
For and on behalf of Board of Directors
| ||(Surender Kumar Tuteja) |
|Date : August 14 2018 ||Chairman |
|Place : Gurugram ||DIN-00594076 |