The Members of
Hindustan Construction Co. Ltd.
Your Directors have presented the 91st Annual Report together with theAudited Financial Statements for the year ended March 312017.
2. Financial Highlights
|(As per IND AS) || || |
| || ||Standalone (Rs. In Crore) |
|Particulars ||Year ended March 31 2017 ||Year ended March 312016 |
|Income from Operations ||4195.94 ||4190.89 |
|Profit before Interest Depreciation Exceptional Items Other Income and Tax ||753.63 ||810.50 |
|Less: Finance Costs ||772.37 ||701.71 |
|Depreciation ||125.28 ||152.47 |
|Exceptional Item ||21.22 ||28.03 |
| ||918.87 ||882.21 |
|Add: Other Income ||250.44 ||214.24 |
|Add/Less: Exchange Gain/(Loss) ||11.76 ||(2.11) |
|Profit before Tax ||96.96 ||140.42 |
|Less: Tax Expense ||37.55 ||45.66 |
|Profit/(Loss) after Tax ||59.41 ||94.76 |
|Add: Other Comprehensive Income ||21.51 ||(9.04) |
|Total Comprehensive income carried to Other Equity ||80.92 ||85.72 |
Your Company has restructured its debts under the Scheme for Sustainable Structuring ofStressed Assets ("S4A Scheme") and therefore it is necessary to conserve andoptimise use of resources to improve the health of the Company. Hence your Directors havenot recommended any dividend for the financial year ended March 31 2017.
The Income from Operations of the Company in the year is Rs. 4195.94 crore as comparedto Rs. 4190.89 crore in the previous year. The profit before tax is Rs. 96.96 crore ascompared to Rs. 140.42 crore for the previous year.
Your Directors are pleased to inform that during the year under report the Company hassecured the following major contracts:
Mumbai Metro Line 3 Package 2 Mumbai
Contract Value: Rs. 2523 crore
Railway Tunnel T-13 & Part T-14 Jammu & Kashmir
Contract Value: Rs. 1750 crore
Bistan Lift Irrigation Scheme Madhya Pradesh
Contract Value: Rs. 375 crore
Anji Khad Cable Stayed Bridge Jammu & Kashmir
Contract Value: Rs. 369 crore
Parallel Safety Tunnel ofT 12 Jiribam Imphal Railway line Manipur
Contract Value: Rs. 368 crore
Residential Buildings DAE Township Anupuram Kalpakkam Tamil Nadu
Contract Value: Rs. 182 crore
Residential Buildings DAE Township Anushaktinagar Mumbai
Contract Value: Rs. 159 crore
The total balance value of works on hand as on March 31 2017 is Rs. 20390 crore.
Decisions are awaited from various clients for tenders submitted by the Company for 11bids amounting to approx. Rs. 10230 crore (HCC share Rs. 9002 crore). Tenders forvarious packages for 28 projects worth Rs. 39218 crore (HCC share Rs. 26661 crore) areexpected to be submitted in the near future. The Company has also submittedprequalification bids for 16 projects worth over Rs. 21198 crore (HCC share Rs. 17053crore) which are under evaluation.
Operations of Subsidiaries
i) Lavasa Corporation Ltd. - Integrated Urban Development & Management
Lavasa has kept its rationale of developing a smart city for all and is tailoringpartnerships and tie ups with global leaders. Partnerships are well in place and many ofthese projects are moving towards completion.
In the hospitality space the Accor group is successfully running its operation withthe two brands - Mercure Lavasa and the 1500 plenary capacity Lavasa InternationalConvention Centre (LICC).
As for the existing hospitality projects Ekaant - The Retreat and Waterfront ShawApartment Hotel continue to flourish. Fortune Select Dasve is in its ninth year ofsuccessful operations with occupancy at 63% while Accor's Mercure is in its eighth yearof successful operation with occupancy at 56%. In the tourism space Lakeshore Watersports Neo Spark Games Arcade and Xthrill Adventure Sports & Academy are alsofunctioning successfully. Lavasa has tied up with former Indian cricketer and former chiefof the BCCI Selection Committee Mr. Sandeep Patil for building a Sports complex includinga cricket stadium for corporate tournaments.
On the retail front Restaurants like Smokin Joe's Venkys Xpress Subway Cafe CoffeeDay Baskin Robbins All American Diner Granma's Homemade Patisserie Chor BizarreOriental Eight Past Times Pub Tabakh Pizzavala Naashta Paani Paanchi Krunchy andIndulge have commenced operations. Many other non F&B outlets such as Mapro andCharosa Wine Boutique have successfully started operations including Lavasa's firstminiplex- Fun Square Digital Cinema.
Christel House Lavasa (renamed as Dasve Public School) EHL and Christ College arefully operational.
KnowledgeVistas Limited (KVL) a K-12 school is actively looking for JV partner tocommence operation. Abhinav Shiksha Sansthan New Delhi bought 125000 sq.ft of land inMugaon and is expected to build a 62500 sq.ft school for academic year 2019- 2020.
Women's special weekend at Lavasa saw a good participation on International Women'sDay. There was a performance by mentalist Akshay Lakshmanan with his mind reading sessionMukund Seshadri with his session on financial planning Dr. Shishir Shetty session onbreast cancer awareness Zumba sessions etc. Party night was hosted by RJ Urmin of Fever104 FM.
Lavasa hosts glamour night for film actors directors and producers from Marathi filmindustry with musical & dance performance by Ajit Parab Pushkar Shrotri DeepaliSayed Manasi Naik & Nirmiti Sawant. Flea market; music & performance wereorganized at Dasve promenade for Christmas and New Year celebrations.
Lavasa has been an ideal location for ad & movie shoots following are the brandswhich were shot at Lavasa for their TV commercial or still shoot: Skoda Rapid MercedesBenz Blackberry Clothing Brand Factory Clothing Hero Bikes Beat Car & Lotus SunCream.
Lavasa continued its focus on promoting tourism; we participated to showcase tourism atLavasa in India International Travel &Tourism & Global Panorama Showcase. Over1000 bikers braved the rain and travelled to Lavasa in June to celebrate World MotorcycleDay. Motoring World magazine conducted the jury round of their annual car and bike awardsat Lavasa resulted in a six page story all of them featuring cars and bikes shot atLavasa. Celebrations at Lavasa on Maharashtra Day Independence Day weekend and initiativelike the Dreamcatchers Summer camp were covered by all major publications and onlineportals. Launch of Jetovator Segway and news about Lavasa bagging the PATWAAward werewidely publicized.
Lavasa city now has a full-fledged operational Farmer's market known as 'Hara Bazar'; atwo screen Movie theatre; it has a fully operating Post office courier service & aHospital with pharmacy. Lavasa has a Petrol Pump two bank branches along with ATMs aPublic Safety Centre with Fire Engine & crew Police outpost Tourist InformationCenter with Bus facility; Multilevel Car parking facility Nature trail rental housingfor low income groups simulated Golf Course facilities; Water Sports facility with latest"Jetovator" Adventure Sports facility a modern Club with gym Sports and Spafacilities and Public Transport system for citizens.
Infrastructure is a key to ensuring long-term livability; drinking water at Lavasa isfit for consumption without the need for additional filtration. Sewage is treated and issubsequently reused for irrigation and other non-potable uses. Lavasa's power distributiongrid is reliable and the young city is already on the cutting edge of urban environmentalsustainability initiatives.
Around the clock Lavasa Citizen Contact Centre has been operational since 2009 and is aone-stop information source for non emergency and emergency related services. It providesa single window resolution for all customersRs. needs and visitorsRs. requests. The CMSdepartment meets on a monthly basis with a committee of villagers throughout the projectarea. The Village Committee is the first of several such citizen advisory groups that willtogether form a key component of the Lavasa citizen and stakeholder engagement mechanisms.
Lavasa had 10574 acres of land including 455 acres of land on lease by the end of lastfinancial year i.e. March 31 2016. This is reduced to 10515 acres because 59 acres ofland in Mugaon was restored to tribals by SDO Maval during the year.
The Environment Management Plan is being implemented regularly. Regular monitoring ofenvironmental aspects such as air & noise quality water quality soil & sedimentquality DG stack & noise quality and ecological monitoring of Dasve Mugaon and GadleBandhara is being carried out by MoEF approved and NABL accredited laboratory. All reportswere found to be within the consent / prescribed limits of Maharashtra Pollution ControlBoard (MPCB).
As per the environment clearance requirement the Environmental Compliance Report isbeing submitted to MoEF once in six months. A yearly environment statement a requirementas per the consent document of Maharashtra Pollution Control Board (MPCB) is beingsubmitted everyyear.
Application of Geo-mat & Coir-mat with pegging of bamboo nails is being done tocontrol soil erosion due to heavy rainfall. Stump & shrub plantation activity has beenundertaken and have planted 0.10 lakhs live stumps during the first spell of rains (June2016).
Lavasa first town Dasve is ready with all basic infrastructures such as access roadsinternal roads water treatment plant water distribution network sewage network sewagetreatment plant telecom network and services. Till date 1250 properties are handed overto the City Management Services department for handing over to customers. The hostel blockat Tower A is operational. The restoration works on major landslide affected area is inprogress. Work on infrastructure & buildings for the second town of Mugaon are onhold.
Lavasa has also initiated a number of development and empowerment programs for thelocal community like provision of treated drinking water to 18 villages in the projectarea at 72 locations on a daily basis; calligraphy workshops aptitude tests andcounseling for students of Zilla Parishad (ZP) schools creche for labor children;starting the Apollo Lavasa Primary Health Centre at Bhoini and provision of free healthcheck up medicines and ambulance service to villagers; monthly health and awareness campsfor HIV/ AIDS malaria nutrition and water borne diseases. Employment and selfemployment opportunities to the locals have also been provided.
ii) HCC Infrastructure Company Ltd
HCC Infrastructure Company Ltd a wholly owned subsidiary of your Company is activelyengaged in the development & operations of road transport through its subsidiariesnamely HCC Concessions Ltd (HCON) and HCC Operations & Maintenance Ltd (HOML)respectively. HCON is focused on developing and managing BOT road assets primarilyNational Highway Projects under Public Private Partnership (PPP) and HOML operates andmaintains the operational assets. Another subsidiary HCC Power Ltd has mandate toexplore opportunities in the power sector to leverage HCC's capabilities.
HCON has developed six NHAI road assets since its inception and the current portfolioconsists of four NHAI road concessions constituting an asset base of Rs. 4900 crore. TheCompany has been evaluating NHAI projects under Hybrid Annuity Model (HAM) a low riskmodel for future investments besides evaluating the opportunities to engage withpotential players for offering end to end services for Toll Operate & Transfer (TOT)model.
During the last fiscal year the management team has been meticulously working towardsachieving timely commissioning of one of its road project arranging cost overrunfinancing smooth operations and maintenance of existing assets and exploring raising ofcapital to meet the future needs.
Current Road Portfolio
HCON's current portfolio comprises of four toll based projects of which 3 projectstogether form a contiguous stretch of 250 km on NH-34 in the state of West Bengal and the4th project is located on NH-2 in the National Capital Region of Delhi.
HCC's development of NH-34 is among the largest PPP highway undertakings in thecountry. NH-34 is the backbone of the transport system in Bengal which is the fourth mostpopulous state in India and home to 90 million citizens.
NH-34 provides north-south connectivity between the capital region / ports of Kolkata& Haldia to north Bengal & north eastern states of India. The west side of thehighway borders Bihar and Jharkhand and the eastern side run parallel to the Bangladeshborder where considerable import and export of goods occur. NH-34 is the only viableroute for commercial traffic over major rivers such as Bhagirathi Ganga Mahananda andNagri in the region. Furthermore it forms part of the critical route to neighbouringBhutan Bangladesh and Nepal.
Baharampore-Farakka Highways Ltd (BFHL)
The project road starts from north of Kolkata at Km 191.420 near Baharampore and endsat Farakka (before Farakka Barrage) at Km 294.680.
The concession period is 25 years including a construction period of 30 months. Theproject is being implemented with an investment of Rs. 1424 crore.
The project has witnessed traffic growth of 6.2% in the last fiscal year and theturnover for the year was Rs. 136 crore an increase of 21% compared to the previous year.
As per the gazette notification for overloaded vehicles BFHL has implemented the 10xtolling for overloaded vehicles on this project since August 2014 to mitigate additionalmaintenance costs required to be incurred due to plying of overloaded vehicles.
After demonetization of currency notes of Rs. 500 and Rs. 1000 based on directivefrom Government of India the toll collection of the project stopped from November 8 tillDecember 2 2016. A claim for recovery of Rs. 9.35 crore on this account has beensubmitted to NHAI.
The final completion of the project is expected by Q2/ Q3 of financial year 2018-2019largely due to material defaults by NHAI in providing land on a timely basis. The work onthe Baharampore bypass is underway and the company is working with the authority anddistrict administration to resolve all encumbrances along the right of way.
Farakka-Raiaani Highways Ltd (FRHL)
The Company commenced commercial operations of its Rs. 1720 crore Farakka RaiganjHighways Ltd (FRHL) in October 2016. FRHL covers the busiest section of NH-34 and passesthrough major towns such as Farakka Kaliachawk Malda and Gajol besides being the onlylink over the river Ganges in the region. The project has a concession period of 30 yearsincluding construction period of 30 months.
The commercial operations of this project commenced on 19th Oct 2016 for 80 Km. Postthat travel time for commuters in FRHL has been reduced significantly by approximately5-6 hours during peak hours. The construction of FRHL has involved over 130 structuresincluding 9 Major Bridges 22 Minor Bridges 5 Underpasses and 2 Toll Plazas withmaterial coordination alongside NHAI and numerous State agencies.
The average daily toll collection has been Rs. 47 lakh since start of toll collection.
After demonetization of currency notes of Rs. 500 and Rs. 1000 based on directivefrom Government of India the toll collection of the project stopped from 8th Nov till 2ndDec 2016. A claim for recovery of Rs. 9.82 crore on this account has been submitted toNHAI.
The final completion of the project is expected by Q2/ Q3 of FY18. Entire land has beenmade available by NHAI and the work is progressing well.
Raiaani-Dalkhola Highway Ltd (RDHL)
This is the north-most section of NH-34 and connects to NH-31 at Dalkhola.
Land acquisition delay of about 6 years led to substantial increase of project cost.RDHL has filed its claims of Rs. 615 crore against NHAI The Company made its best effortsto arrange cost overrun financing in order to restart the project. In spite of prolongeddelay in land acquisition and defaulting on crucial requirements of Concession AgreementNHAI was not ready to acknowledge the increase in project cost for termination benefitsdue to which lenders consortium has expressed their inability to fund the cost overrun.NHAI took a stand of terminating the project and has issued notice on March 312017.
The Company is evaluating all options either to revive the project or to recover itsdues from NHAI either through Arbitration or amicable settlement.
Delhi Faridabad Elevated Expressway (dfskvwav)
The Delhi Faridabad Elevated Expressway (dfskyway) is a six lane 4.4 km elevatedhighway connecting Delhi and Haryana at Badarpur.
The Company's revenues have been falling short of its projections due to the existenceof toll free local road which is being used by the long distance commercial vehicles toescape paying toll charges and violates the spirit of the Concession Agreement.
BFTL also suffered a material impact due to a Supreme Court order for collectingEnvironmental Compensation Charge (ECC) from commercial vehicles entering New Delhi(thereby discouraging their entry into the capital) resulting in a substantial dip of~40% in commercial vehicles. This has unfortunately caused a devastating impact andpolitical event by permanently curtailing revenues.
In parallel BFTL had discussions with its lenders to find a long term sustainablesolution to the cash flow issues of the project. Consortium of Lenders invoked StrategicDebt Restructuring ("SDR") in the project. However the SDR process could not becompleted due to pending final approvals from a couple of Banks and NOC from NHAI.
After demonetization of currency notes of Rs. 500 and Rs. 1000 based on directivefrom Government of India the toll collection of the project stopped from November 8 2016till December 2 2016. A claim of Rs. 4.21 crore has been submitted to NHAI for the same.
To bring long lasting solution to the project the Company after seeking consensusfrom lenders is ready for going ahead with option of either terminating the project andpursue claims through Arbitration or mutually foreclose the project in discussion withNHAI.
iii) Steiner AG Switzerland
Steiner AG (Steiner) one of the leading project developers total and generalcontractors (TC/GC) in Switzerland offers comprehensive services in the fields of newconstructions refurbishment and real estate development. Since 2010 Steiner has beenpart of the your Company. HCC owns 100% stake in Steiner AG through HCC MauritiusEnterprises Limited and HCC Mauritius Investment Limited Wholly Owned Subsidiaries.
Steiner established in 1915 has completed more than 1500 residential constructionprojects and have built nearly 600 commercial properties over 45 hotels around 200infrastructure facilities among them universities schools hospitals nursing homesrehabilitation facilities retirement homes and prisons. Steiner ranks among the marketleaders in Switzerland and aims for excellence in its environmental health and safetyperformance. Its client and process orientation is driven by the focus on quality and onproviding cost-effective solutions. Steiner fulfils current quality management criteriaand is certified as confirming to ISO 9001 ISO 14001 and OHSAS 18001. Steiner's headoffice is in Zurich and it has branches in Basel Berne Geneva Tolochenaz Lucerne andSt. Gall.
Its subsidiary Steiner India Ltd markets Swiss know- how for the emerging real estatemarket from its base in Mumbai.
Steiner AG has registered a revenue of CHF 820.6 million (Rs. 5580 crore) compared toCHF 636.8 million (Rs. 4255 crore) in the previous year and a net profit of CHF 3.2million (Rs. 21.7 crore) compared to a loss of CHF 4.9 million (Rs. 33 crore) in theprevious year. The Company secured fresh orders worth CHF 927 million (Rs. 5977 crore).The order backlog was CHF 1.43 billion (Rs. 9200 crore) at the end of the year. Inaddition to this the company has secured orders for CHF 700.0 million (Rs. 4515.7crore) where the contracts are yet to be signed. The closing cash balance of the companywas CHF 95.6 million (Rs. 617 crore) reflecting the company's steady financial performanceand strong liquidity position.
Steiner India Ltd 100% subsidiary of Steiner AG had a revenue of Rs. 51 crore andloss of Rs. 2.9 crore in financial year 2016-2017
5. Subsidiaries and Associate Companies
During the year under review the following changes have taken place with respect toSubsidiary Companies and Associate Companies as the case may be applicable :
a) Kart Racers Limited a step-down subsidiary Company has ceased to be a wholly ownedsubsidiary of Lavasa Corporation Limited w.e.f. June 3 2016 and continues to be asubsidiary of Lavasa Corporation Limited.
b) Highbar Technologies FZ LLC a step-down subsidiary Company was de-registeredw.e.f. July 312016.
c) HighbarTechnocrat Limited (previously known as Osprey Hospitality Limited)astep-down subsidiary of the Company has ceased to be subsidiary of Lavasa CorporationLimited with effect from August 8 2016. It has become an Associate Company of HighbarTechnologies Limited w.e.f. December 12 2016 wherein 49% of its shareholding is held byHighbar Technologies Ltd.
d) Warasgaon Lakeview Hotels Limited a step- down subsidiary Company has ceased to bean Associate Company of Lavasa Corporation Limited w.e.f. March 14 2017 and theconsequent shareholding of Lavasa Corporation Limited in the said Company has reduced to19.2%.
e) During the year under review SNC Valleiry Route de Bloux. wholly owned subsidiary ofSteiner Leman SAS got merged with Steiner Leman SAS a step-down subsidiary of theCompany as part of restructuring process.
As on March 312017 the list of Subsidiaries and Associate Companies of your Companyis as follows:-
1. Western Securities Ltd
2. HCC Aviation Ltd
3. HCC Construction Ltd
4. Highbar Technologies Ltd
5. HCC Mauritius Enterprises Limited
6. HCC Mauritius Investment Limited
7. Steiner AG
8. Steiner Promotions et Participations SA
9. VM + ST AG
10. Eurohotel SA
11. Steiner (Deutschland) GmbH
12. Steiner Leman SAS
13. Steiner India Ltd
14. HCC Infrastructure Company Ltd
15. Dhule Palesner Operations & Maintenance Ltd
17. HCC Energy Ltd
19. HCC Real Estate Ltd
20. HRL Township Developers Ltd
21. HRL (Thane) Real Estate Ltd
23. Maan Township Developers Ltd
24. Charosa Wineries Ltd
25. Powai Real Estate Developers Ltd
26. HCC Realty Ltd
27. *Pune-Paud Toll Road Company Ltd
28. Panchkutir Developers Ltd
29. Lavasa Corporation Ltd
30. Lavasa Hotel Ltd
31. Lakeshore Watersports Company Ltd
32. Dasve Convention Centre Ltd
33. Dasve Business Hotel Ltd
34. Dasve Hospitality Institutes Ltd
36. Dasve Retail Ltd
37. Full Spectrum Adventure Ltd
38. Lavasa Bamboocrafts Ltd
39. My City Technology Ltd
40. Reasonable Housing Ltd
41. Future City Multiservices SEZ Ltd
42. Rhapsody Commercial Space Ltd
43. Valley View Entertainment Ltd
44. Warasgaon Tourism Ltd
45. Our Home Service Apartments Ltd
46. Warasgaon Power Supply Ltd
47. Sahyadri City Management Ltd
48. Hill City Service Apartments Ltd
49. Warasgaon Infrastructure Providers Ltd
50. Nature Lovers Retail Ltd
51. Warasgaon Valley Hotels Ltd
52. Rosebay Hotels Ltd
53. Mugaon Luxury Hotels Ltd
54. Warasgaon Assets Maintenance Ltd
55. Hill View Parking Services Ltd
56. Verzon Hospitality Ltd
57. Kart Racers Limited
58. HCC Concessions Ltd
59. Narmada Bridge Tollway Ltd
60. Badarpur Faridabad Tollway Ltd
61. Baharampore - Farakka Highways Ltd
62. Farakka - Raiganj Highways Ltd
63. Raiganj - Dalkhola Highways Ltd
64. Spotless Laundry Services Ltd
65. Green Hill Residences Ltd
66. Whistling Thrush Facilities Services Ltd
67. Ecomotel Hotel Limited
1. Knowledge Vistas Limited
2. Evostate AG
3. Projektentwicklungsges Parking KunstmuseumAG
4. MCR Managing Corp. Real Estate AG
5. Highbar Technocrat Limited
6. Nirmal BOT Limited
7. Andromeda Hotels Limited
8. Bona Sera Hotels Limited
9. Apollo Lavasa Health Corporation Ltd
10. Starlit Resort Ltd
* A scheme of Amalgamation has been filed jointly by HCC infrastructure Co. Ltd andPune-Paud Toll Road CompanyLtd (PPTRCL) foramalgamation ofPPTRCL with HCC InfrastructureCo. Ltd before the National Company Law Tribunal at Mumbai vide Company Application onMarch 31 2017 as per Section 230 to Section 232 of the Companies Act 2013 and the sameis pending for admission.
The details as required under Rule 8 of the Companies (Accounts) Rules 2014 regardingthe performance and financial position of each of the Subsidiaries Associates and JointVenture Companies of the Company forms part of the Consolidated Financial Statements ofthe Company for the financial year ended March 312017.
The Company has formulated a Policy for determining material subsidiaries which isuploaded on the website of the Company i.e. www.hccindia.com and can be accessed athttp://www.hccindia.com/pdf/HCC_Policy_for_ determining_Material_Subsidiaries.pdf
6. S4A Scheme Implementation /Increase in Share Capital
The Company had availed certain financial facilities ("Facilities") undertheReserve Bankof India Corporate Debt Restructuring ("CDR") mechanism whereby thedebt obligations of the Company were restructured on the terms and conditions set out inthe Master Restructuring Agreement dated June 29 2012 executed amongst the ICICI Bank (asthe Monitoring Institution) the Lenders and the Company ("CDR MRA").
Despite availing the restructuring of the Facilities under the CDR mechanism theCompany was facing liquidity issues and challenges in debt servicing due to inter aliaslower than envisaged recovery in the economy and infrastructure sector and increasedinterest cost for the Company due to increase in the working capital requirement andnon-realization of claims / receivables. This has resulted in a gap of cashflow timingmismatch between claims realization (including interest) and debt servicing. If such cashgap is left unaddressed the Company will face challenges in the execution of its orderbook and also in servicing of its debt.
Accordingly in order to bridge the aforementioned cashflow timing mismatch theLenders deliberated various solutions to address the aforementioned liquidity issues andrecommended the Scheme for Sustainable Structuring of Stressed Assets ("S4AScheme") introduced by the Reserve Bank of India ("RBI") pursuant to itscirculars dated June 13 2016 and as amended further on November 10 2016 ("S4ACirculars").
The Lenders in their Joint Lender's Forum meeting ("JLF") held on July 82016 deliberated on the various options and agreed to explore the recommendation of theMonitoring Committee for implementing the S4A Scheme for the Company. Pursuant to the JLFheld on July 12 2016 the Lenders decided to adopt the S4A Scheme with the Reference Dateas July 12 2016 and at the JLF held on September 7 2016 they agreed to convert part oftheir entire debt exposure ("Part B Debt of HCC S4A Scheme") to Equity sharesand Optionally Convertible Debentures (OCDs) ("S4A Securities") towardsimplementation of the S4A Scheme and the same was approved by Overseeing Committeeconstituted by RBI (OC) on November4 2016 ("HCC S4A Scheme/Scheme").
Pursuant to the implementation of the S4A Scheme and in accordance with and asspecified in the financing documents executed by the Company with inter alia the Lenders(hereinafter referred to as the "S4A Agreements/ S4A Documents") theshareholders at the Extraordinary General Meeting (EGM) of the Company held on January 52017 approved the offer and issue of Equity Shares representing 24.44% in aggregate of theexpanded share capital of the Company and Optionally Convertible Debentures (OCDs) of facevalue Rs. 1000 each on Preferential Basis to the Lenders as per applicable laws andextant regulations based on the respective Lender's subscription for the Securities ofthe Company.
During the year under review for the purpose of allotment of S4A Securities and inaccordance with the shareholders approval at the EGM of the Company held on January 52017 the Authorised Share Capital of the Company was increased to Rs. 1350000000(Rupees One Hundred Thirty Five Crore Only) divided into 1250000000 (One Hundred TwentyFive Crore) Equity Shares of Rs. 1 each (Rupee One Only) and 10000000 (One Crore)Redeemable Preference Shares of Rs. 10 each (Rupees Ten only)
As per the terms of the S4A Agreements executed between Company and the Lenders inrespect of Lenders who had completed the process of conversion of debt into Equity Sharesand/or OCDs of the Company under the HCC S4A Scheme and in accordance with theshareholders approval at the EGM of the Company held on January 5 2017 the Company hasissued and allotted 231544729 Equity shares of Rs. 1 each in aggregate representing22.91% of the Expanded Share Capital of the Company at an issue price of Rs. 34.92 perEquity Share (including premium of Rs. 33.92 per Equity Share) for an amount aggregatingRs. 809 crore and 14414874 Optionally Convertible Debentures (OCDs) of face value Rs.1000 each in aggregate for an amount aggregating Rs. 1441 crore to 27 Lenders under theHCC S4A Scheme in two tranches on January 6 and 19 2017 in accordance with Chapter VIIof the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009 ('SEBI ICDRRegulations") and Section 42 62 of the Companies Act 2013 and the rules madethereunder.
The S4A Scheme was successfully implemented for the Company as more than 50% of lendersby number holding more than 75% by value participated in the Scheme and thereupon Companyhas made the allotment of S4A securities to the respective Lenders.
Post S4A Scheme implementation the present paid up Equity Share Capital of the Companyis Rs. 1010703635 which comprises 1010703635 Equity shares of face value Rs. 1 each.
Out of the total 30 lenders under S4A Scheme some of the remaining Lenders who had notparticipated in the S4A Scheme so far have thereafter agreed to subscribe to the S4Asecurities under the Scheme and accordingly with necessary shareholders approval at theforthcoming Annual General Meeting of the Company the Company will proceed to issue andallot the corresponding S4A securities to the respective Lenders as per extant regulationsin force.
7. Public Deposits
Your Company has not accepted any deposits from the public or its employees during theyear under review.
8. Particulars of Loans Guarantees or Investments
Particulars of Loans Guarantees and Investments made during the year as required underthe provisions of Section 186 of the Companies Act 2013 are given in the notes to theFinancial Statements.
Also pursuant to Paragraph 2 of Schedule V of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirement) Regulations 2015 particulars ofLoans/Advances given to Subsidiaries have been disclosed in the notes to the FinancialStatements.
9. Employee Stock Option Scheme (ESOP)
As on March 312017 120180 stock options are outstanding in aggregate for exerciseas per the exercise schedule and are exercisable at a price of Rs. 52.03 per stock option.
Each option when exercised as per the exercise schedule would entitle the holder tosubscribe for one equity share of the Company of face value Rs. 1 each.
During the year under review no options got vested in the employees of the Company.1534450 stock options got lapsed between April 12016 and March 312017.
The particulars with regard to the ESOP as on March 312017 as required to be disclosedpursuant to the provisions of Rule 12 (9) of the Companies (Share Capital and Debentures)Rules 2014 are set out in Annexure I to this Report.
10. Consolidated Financial Statements
In accordance with the Companies Act 2013 and implementation requirements of IndianAccounting Standards ('IND-AS') Rules on accounting and disclosure requirements which isapplicable from current year and as prescribed by Regulation 33 of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 (hereinafter referred to as"SEBI Listing Regulations") the Audited Consolidated Financial Statements areprovided in this Annual Report.
Pursuant to Section 129(3) of the Companies Act 2013 a statement containing thesalient features of the financial statements of each of the subsidiary and joint venturein the prescribed form AOC-1 is annexed to this annual report.
Pursuant to Section 136 of the Companies Act 2013 the financial statements of thesubsidiaries are kept for inspection by the shareholders at the Registered Office of theCompany. The said financial statements of the subsidiaries are also available on thewebsite of the Company www.hccindia.com under the Investors Section.
11. Corporate Governance
The Company is committed to maintain the highest standards of Corporate Governance andadheres to the Corporate Governance requirements as stipulated by Securities and ExchangeBoard of India (SEBI).
The report on Corporate Governance as prescribed in Schedule V(C) of the SEBI ListingRegulations forms an integral part of this Annual Report. The requisite certificate fromthe Auditors of the Company confirming compliance with the conditions of CorporateGovernance alongwith a declaration signed by the Chairman and Managing Director statingthat the members of the Board of Directors and Senior Management personnel have affirmedthe compliance with code of conduct of the Board of Directors and Senior Management isattached to the report on Corporate Governance.
As per the provisions of Section 152 of the Companies Act 2013 Mr. N. R. Acharyulu(DIN 02010249) Non Executive & Non Independent Director of the Company is due toretire by rotation. Mr. N. R. Acharyulu being eligible offers himself forre-appointment.
Mr. Bhalchandra R. Sule ex-Director passed away on January 312017. The Board ofDirectors has expressed its deep regret and offered condolences on the sad demise of Mr.Sule.
Mr. Bhalchandra R. Sule was a Director in the Company for a long time from 1993 to2006. The Board also placed on record the invaluable contribution of Late Mr. B. R. Suleto the Board and the Company during his tenure of Directorship with the Company.
Mr. Rajgopal Nogja was the Group COO and Wholetime Director upto May 2 2016 andthereafter was the Group CEO of the Company from May 3 2016 to March 312017.
The Board placed on record its appreciation for the valuable contribution of Mr.Rajgopal Nogja during his tenure with the Company.
Pursuant to the resignation of Mr. Rajgopal Nogja as the Group CEO with effect fromMarch 312017 and based on the recommendation of the Nomination and RemunerationCommittee the Board at its meeting held on February 2 2017 appointed Mr. Arjun Dhawan(DIN : 1778379) as Group Chief Executive Officer (CEO) & Additional Director of theCompany w.e.f. April 1 2017 in accordance with Section 203 and Section 161 of theCompanies Act 2013 read with Article 88 of the Articles of Association of the Companyrespectively.
Subject to Members approval the Board also appointed Mr. Arjun Dhawan as Group CEO& Whole-time Director of the Company for a period of 5 years w.e.f. April 12017 Inaccordance with Section 196 of the Companies Act 2013.
Prior to this appointment Mr. Arjun Dhawan was the President & CEO of HCCInfrastructure since November 2009.
As an Additional Director Mr. Arjun Dhawan shall hold office upto the date of theensuing Annual General Meeting.
The Company has received a Notice under Section 160 of the Companies Act 2013 from amember signifying an intention to propose Mr. Arjun Dhawan as a candidate for the officeof Director at the forthcoming Annual General Meeting.
The term of appointment of the Independent Directors of the Company viz. Mr. Ram P.Gandhi and Mr. Sharad M. Kulkarni is uptil the ensuing Annual General Meeting oftheCompany. Mr. Ram P. Gandhi and Mr. Sharad M. Kulkarni havefurnished necessary declarationsto the Company under Section 149(7) of the Act confirming that they meet the criteria ofIndependence as prescribed for continuing as Independent Directors under Section 149(6) ofthe Act and Regulation 16(b) of the SEBI Listing Regulations.
Based on the performance evaluation of these Directors and after reviewing thedeclarations submitted by Mr. Ram P. Gandhi and Mr. Sharad M. Kulkarni the Board ofDirectors were of the opinion that Mr. Ram P. Gandhi and Mr. Sharad M. Kulkarni bothcontinue to meet with the criteria of independence as per the provisions of Section 149(6)of the Companies Act 2013 and rules made thereunder and also meet with the requirementsof Regulation 16(b) of the SEBI Listing Regulations and are also independent of themanagement and accordingly have proposed their re-appointment as Independent Directors ofthe Company for a term of three consecutive years each upto the conclusion of the 94thAnnual General meeting of the Company in the calendar year 2020 subject to the Membersapproval.
The Company has received a Notice under Section 160 of the Companies Act 2013 frommember(s) signifying the intention to propose Mr. Ram P. Gandhi and Mr. Sharad M. Kulkarnirespectively as candidate(s) for the office of Director at the forthcoming Annual GeneralMeeting.
The other Independent Directors of the Company viz. Mr. Rajas R Doshi Mr. Anil C.Singhvi and Dr. Omkar Goswami have furnished necessary declarations to the Company underSection 149(7) of the Act confirming that they meet the criteria of Independence asprescribed for Independent Directors under Section 149(6) of the Act and Regulation 16(b)of the SEBI Listing Regulations.
The Company has received Form DIR-8 from all Directors pursuant to Section 164(2) andRule 14(1) of Companies (Appointment and Qualification of Directors) Rules 2014.
Brief Profile of the Directors seeking appointment/ re-appointment has been given inthe Explanatory Statement to the Notice of the ensuing Annual General Meeting.
13. Key Managerial Personnel
Following persons are the Key Managerial Personnel (KMP) of the Company pursuant toSection 2(51) and Section 203 of the Act read with the Rules framed thereunder:
i) Mr. Ajit Gulabchand Chairman and Managing Director.
ii) Mr. Rajgopal Nogja resigned as Group CEO of the Company w.e.f. March 312017.
iii) Mr. Arjun Dhawan was appointed as the Group Chief Executive Officer andWhole-time Director of the Company with effect from April 1 2017 and therefore he is aKMP w.e.f April 12017.
iv) Mr. Arun V. Karambelkar President & Chief Executive Officer.
v) Mr. Praveen Sood Chief Financial Officer of the Company designated as Group CFO& EVP - HCC Group Office.
vi) After the end of the financial year under review the contract of appointment ofMr. Sangameshwar Iyer Company Secretary is getting concluded and therefore he will be aKMP uptil May 8 2017.
The Board placed on record its appreciation for the services rendered by Mr.Sangameshwar Iyer during his tenure as Company Secretary of the Company.
vii) Mr. Venkatesan Arunachalam was appointed as Company Secretary w.e.f. May 9 2017in place of Mr. Sangameshwar Iyer and therefore he is a KMP with effect from the saiddate.
Remuneration and other details of the said Key Managerial Personnel for the financialyear ended March 31 2017 are mentioned in Form MGT-9 Extract of the Annual Return whichis attached as Annexure VIII to the Board's Report.
14. Board Committees
The Board of Directors of your Company had already constituted various Committees incompliance with the provisions of the Companies Act 2013 and SEBI Listing Regulationsviz.Audit Committee Nomination and Remuneration Committee Stakeholders RelationshipCommittee and Corporate Social Responsibility (CSR) Committee.
In accordance with the provisions of the erstwhile Clause 49 of the Listing Agreementthe Board had voluntarily constituted the Risk Management Committee.
All decisions pertaining to the constitution of Committees appointment of members andfixing of terms of reference / role of the Committees are taken by the Board of Directors.
Details of the role and composition of these Committees including the number ofmeetings held during the financial year and attendance at meetings are provided in theCorporate Governance Section of the Annual Report.
A calendar of Board Meetings Annual General Meetings and Committee Meetings isprepared and circulated in advance to the Directors of your Company.
The Board of Directors of your Company met 6 times during 2016-2017. The meetings wereheld on April 28 2016 June 3 2016 July 28 2016 October 27 2016 December 2 2016and February 2 2017. The maximum time gap between any two consecutive meetings did notexceed one hundred and twenty days.
16. Familiarisation Programme of Independent Directors
In compliance with the requirements of SEBI Listing Regulations the Company has put inplace a familiarization programme for Independent Directors to familiarize them with theirrole rights and responsibility as Directors the operations of the Company businessoverview etc.
The details of the familiarization programme are explained in the Corporate GovernanceReport and the same is also available on the website of the Company and can be accessed byweb link http://www.hccindia . com/pdf/familiarisation_program_for_independent_directors.pdf
17. Performance Evaluation
Pursuant to the provisions of Section 134 (3) (p) 149(8) and Schedule IV of theCompanies Act 2013 and Regulation 17 of the SEBI Listing Regulations annual performanceevaluation of the Directors as well as of the Audit Committee Nomination and RemunerationCommittee Stakeholders Relationship Committee Executive Committee of the Board andCorporate Social Responsibility (CSR) Committee has been carried out.
The performance evaluation of the Independent Directors was carried out by the entireBoard and the Performance Evaluation of the Chairman and Non-Independent Directors wascarried out by the Independent Directors.
18. Independent Directors Meeting
During the year under review the Independent Directors of the Company met on March 222017 inter-alia to discuss:
i) Evaluation of performance of Non-Independent Directors and the Board of Directors ofthe Company as a whole.
ii) Evaluation of performance of the Chairman of the Company taking into views ofExecutive and Non- Executive Directors.
iii) Evaluation of the quality content and timelines of flow of information betweenthe Management and the Board that is necessary for the Board to effectively and reasonablyperform its duties.
19. Criteria for selection of candidates for appointment as Directors Key ManagerialPersonnel and Senior Management Personnel:
The Nomination and Remuneration Committee has laid down a well-defined criteria forselection of candidates for appointment as Directors Key Managerial Personnel and SeniorManagement Personnel in the Nomination and Remuneration Policy recommended by them andapproved by the Board of Directors in May 2 2014 which is attached to the Board's Reportas Annexure II.
20. Remuneration Policy for Directors Key Managerial Personnel and Senior ManagementEmployees:
The Nomination and Remuneration Committee has laid down the policy for remuneration ofDirectors Key Managerial Personnel and Senior Management Personnel in the Nomination andRemuneration Policy recommended by them and approved by the Board of Directors on May 22014 which is attached to the Board's Report as Annexure II.
21. CSR Policy:
The brief outline of the Corporate Social Responsibility (CSR) Policy as recommended bythe CSR Committee of the Directors and approved by the Board of Directors of the Companyand the initiatives undertaken by the Company on CSR activities during the year are setout in Annexure IV of this report in the format prescribed in the Companies (CorporateSocial Responsibility Policy) Rules 2014. The CSR policy is attached to this Report asAnnexure III and is available on the website of the Company i.e. www.hccindia.com
22. Related Party Transactions:
All the related party transactions entered during the year were in the ordinary courseof business and on an arm's length basis.
The related party transactions attracting the compliance under Section 177 of theCompanies Act 2013 and / or SEBI Listing Regulations were placed before the AuditCommittee for necessary approval/ review.
The routine related party transactions was placed before the Audit Committee for theiromnibus approval.
A statement of all related party transactions entered was presented before the AuditCommittee on a quarterly basis specifying the nature value and any other related termsand conditions of the transactions.
There are no transactions to be reported in Form AOC-2 in terms of Section 134 of theAct read with Rule 8 of the Companies (Accounts) Rules 2014.
Further the details of the transactions with Related parties are provided in theCompany's financial statements in accordance with the Accounting Standards readwith IND ASRules.
The Related Party Transactions Policy as approved by the Board of Directors of theCompany has been uploaded on the website of the Company athttp://www.hccindia.com/pdf/HCC_Policy_for_ Related_Party_Transactions.pdf
23. Directors' Responsibility Statement
In accordance with the provisions of Section 134 (5) of the Companies Act 2013 yourDirectors confirm that:
a) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures if any.
b) the selected accounting policies were applied consistently and the Directors madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as at March 312017 and of the profit of theCompany for the year ended on that date.
c) proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities.
d) the annual accounts have been prepared on a going concern basis.
e) the internal financial controls have been laid down to be followed by the Companyand such controls are adequate and are generally operated effectively during the year.
Internal financial control over carrying cost of investment in subsidiaries andrecoverability of dues from subsidiaries is covered under internal financial control.
The management is of the view that diminution in the carrying cost of investment insubsidiaries if any is temporary in nature and recoverability of dues from subsidiariesare good. The view of the management is also supported by a third party expert report.
However in view of the uncertainties involved your Auditors have given a qualifiedopinion in their report in this regard without quantifying the impact. Other than thisyour Auditors have opined that the Company has in all material respects maintainedadequate internal financial controls over financial reporting (IFCoFR) and that they wereoperating effectively.
This response by Directors is based on the management note given under Para 29 of thisreport.
24. Industrial Relations
The industrial relations continued to be generally peaceful and cordial during theyear.
25. Transfer to Investor Education and Protection Fund (IEPF)
Your Company has during the year under review transferred a sum of Rs. 1786342 toInvestor Education and Protection Fund in compliance with the provisions of Section 125of the Companies Act 2013. The said amount represents dividend for the year 2008-09 whichremained unclaimed by the members of the Company for a period exceeding 7 years from itsdue date of payment.
26. Particulars of Employees and other additional information.
Disclosures with respect to the remuneration of Directors and employees as requiredunder Section 197 of Companies Act 2013 and Rule 5 (1) Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 has been appended as Annexure V to thisReport.
The information as required under Rule 5 (2) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 will be provided upon request by anymember of the Company. In terms of Section 136 (1) of the Companies Act 2013 the Reportand the Accounts are being sent to the members excluding the said Annexure. Any memberinterested in obtaining copy of the same may write to the Company Secretary at theRegistered Office of the Company.
27. Conservation of Energy Technology Absorption and Foreign Exchange Earnings andOutgo.
The information relating to the Conservation of Energy Technology Absorption andForeign Exchange Earnings and Outgo as required to be disclosed under the Companies(Accounts) Rules 2014 is given in Annexure VI forming part of this Report.
28. Statutory Auditors
The Members of the Company had at the 88th Annual General Meeting("AGM") held on June 20 2014 approved the appointment of Walker Chandiok &Co. LLP Chartered Accountants Mumbai bearing ICAI Registration No. 001076N as theStatutory Auditors of the Company to hold office from the conclusion of that AGM untilthe conclusion of the 6th AGM held thereafter (subject to ratification of theappointment by the Members at every AGM held after the abovesaid AGM).
Rule 3(7) of Companies (Audit and Auditors) Rules 2014 states that appointment of theAuditor shall be subject to ratification by the members at every Annual General Meetingtill the expiry of the term of the Auditor.
At the 90th AGM held on July 14 2016 the shareholders had ratified the appointment ofWalker Chandiok & Co. LLP Chartered Accountants Mumbai for the period covering theirthird year of appointment viz. from the conclusion of the last AGM held on July 14 2016until the conclusion of the Annual General Meeting to be held in the financial year2017-2018.
The said existing appointment of Walker Chandiok & Co. LLP Chartered AccountantsMumbai covering their fourth year of appointment viz from the conclusion of the ensuingAGM in financial year 2017- 2018 until the conclusion of the next Annual General Meetingto the held in the financial year 2018-2019 has to be ratified by Members at theforthcoming AGM and accordingly the said proposal is being placed for membersRs.ratification.
As required under Section 139 of the Companies Act 2013 the Company has obtained awritten consent from the Auditors to such continued appointment and also a certificatefrom them to the effect that their appointment if ratified would be in accordance withthe conditions prescribed under the Companies Act 2013 and the rules made thereunder asmay be applicable.
29. Statutory Auditors' Remarks
a. Statutory Auditor's Qualification :
The Statutory Auditors' Report to the Members on the Audited Financial Results of theCompany for the financial year ended March 312017 contains the following qualification(s):
As stated in Note 33 to the standalone financial statements the Company's non-currentinvestments as at March 312017 include investments aggregating Rs. 630.83 crore in two ofits subsidiaries; and non-current loans other non-current financial assets and othercurrent financial assets as at that date include dues from such subsidiaries aggregatingRs. 512.42 crore Rs. 38.17 crore and Rs. 4.77 crore respectively being considered goodand recoverable by the management considering the factors stated in the aforesaid noteincluding valuation report from an independent valuer. However these subsidiaries haveaccumulated losses and their net worth is fully / substantially eroded. Further thesesubsidiaries are facing liquidity constraints due to which it may not be possible torealize projections made as per business plans. In the absence of sufficient appropriateevidence we are unable to comment upon the carrying value of these investments andrecoverability of the aforesaid dues and the consequential impact if any on theaccompanying standalone financial statements. Our audit opinion on the standalonefinancial statements for the year ended March 312016 was also qualified in respect ofthis matter.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matter described in the Basis forQualified Opinion paragraph the aforesaid standalone financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India including Ind ASspecified under Section 133 of the Act of the state of affairs (financial position) ofthe Company as at March 312017 and its profit (financial performance including othercomprehensive income) its cash flows and the changes in equity for the year ended on thatdate.
b. Statutory Auditor's Qualification on the Internal Financial Controls relating to theabove matter:
In our opinion according to the information and explanations given to us and based onour audit procedure performed the following material weakness has been identified in theoperating effectiveness of the Company's IFCoFR as at March 31 2017:
The Company's internal financial controls in respect of supervisory and review controlsover process of determining of (a) carrying value of the Company's non-current investmentsin its subsidiaries; and (b) recoverability of non-current loans other non-currentfinancial assets and other current financial assets due from such subsidiaries were notoperating effectively. Absence of aforesaid assessment in accordance with the accountingprinciples generally accepted in India could potentially result in a material misstatementin the carrying value of investments in such subsidiaries and the aforesaid dues from suchsubsidiaries and consequently could also impact the profit (financial performanceincluding other comprehensive income) after tax.
A 'material weaknessRs. is a deficiency or a combination of deficiencies in IFCoFRsuch that there is a reasonable possibility that a material misstatement of the company'sannual or interim financial statements will not be prevented or detected on a timelybasis.
In our opinion except for the possible effects of the material weakness describedabove in the Basis for Qualified Opinion paragraph the Company has in all materialrespects maintained adequate IFCoFR as at March 312017 based on internal control overfinancial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note issued by the ICAI and theCompany's IFCoFR were operating effectively as at March 312017.
We have considered the material weakness identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the standalonefinancial statements of the Company as at and for the year ended March 312017 and thematerial weakness has affected our opinion on the standalone financial statements of theCompany and we have issued a qualified opinion on the standalone financial statements.
The Company as at March 312017 has (i) a non- current investment amounting to Rs.612.40 crore (March 312016: Rs. 612.40 crore; April 1 2015: Rs. 612.40 crore)non-current loans amounting to Rs. 380.86 crore (March 31 2016: Rs. 327.01 crore; April1 2015: Rs. 266.02 crore) other non-current financial assets amounting to Rs. 21.72crore (March 312016: Rs. 19.43 crore; April 1 2015: Rs. 25.01 crore) and other currentfinancial assets amounting to Rs. Nil (March 31 2016: Rs. 5.07 crore; April 12015: Rs.3.43 crore) in HREL a subsidiary which is holding 68.70% share in Lavasa CorporationLimited (LCL) a step down subsidiary and (ii) a non-current investment amounting to Rs.18.43 crore (March 31 2016: Rs. 18.43 crore; April 1 2015: Rs. 18.43 crore) non-current loans amounting to Rs. 131.56 crore (March 312016: Rs. 110.21 crore; April12015: Rs. Nil) other non-current financial assets amounting to Rs. 16.45 crore (March312016: Rs. 13.08 crore; April 1 2015: Rs. 14.30 crore) and other current financialassets amounting to Rs. 4.77 crore (March 31 2016: Rs. 1.28 crore; April 12015: Rs.77.24 crore) in LCL. While such entities have incurred losses during their initial yearsand consolidated net-worth of both entities as at March 31 2017 has been fully erodedthe underlying projects in such entities are in the early stages of development and areexpected to achieve adequate profitability on substantial completion and/ or have currentmarket values of certain properties which are in excess of the carrying values. Thenet-worth of these subsidiaries does not represent their true market value as the value ofthe underlying investments/ assets based on valuation report of an independent valuer issubstantially higher. Therefore based on certain estimates like future business plansgrowth prospects and other factors the management believes that the realizable amount ofthese subsidiaries is substantially higher than the carrying value of the investmentsnon-current loans other non-current financial assets and other current financial assetsdue to which these are considered as good and recoverable.
Based on the above management believes that the Company's internal financial controlin respect of assessment of the carrying value of investment recoverability of loans andadvances current and non-current assets in subsidiaries were operating effectively andthere is no material weakness in such controls and procedures.
30. Secretarial Audit:
Secretarial Audit for the financial year 2016-2017 was conducted by M/s. BNP&Associates Company Secretaries in Practice in accordance with the provisions ofSection 204 of the Companies Act 2013. The Secretarial Auditor's Report is attached tothis Report as Annexure VII wherein the following observation has been made by theSecretarial Auditor:
In respect of the Listed Non - Convertible Debentures (NCDs) although the terms gotrestructured in accordance with the CDR package approved for the Company in 2012 wherebyinter alia the maturity dates were rescheduled to a later date and the same was intimatedto the BSE to extend the listing for the said NCDs there was no advise from BSE and thesaid NCDs got delisted on the expiry of the respective original maturity dates. In view ofthe delisting respective compliances under Regulations 50 to 52 and 54 to 62 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 have not been carriedout by the Company during the delisted period.
Management Note :
In respect ofthe Listed Non-Convertible Debentures (NCD) issued to Life InsuranceCorporation of India & Axis Bank Limited in 2008 and 2011 respectively the Companyhad complied with the provisions of the erstwhile Listing Agreement provisions for debtsegment with BSE. The said NCDs were restructured by extending the tenure of repayment inaccordance with CDR Package dated June 29 2012 and the same was intimated to BSE but wasnot recorded by them and therefore the listing of these NCDs got expired on the originalmaturity dates in 2014 & 2015 respectively.
The Company had taken up the matter with BSE to revive the NCDs upto the extendedtenure and the same is under their due consideration.
As the NCDs got technically delisted due to reasons cited above and beyond the controlof management respective compliances under Regulations 50 to 52 and 54 to 62 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 were not applicablefor the Company during the delisted period. Assoonasthe listingofthese NCDsarerevivedbyBSE the Company shall carry out the compliances as required underSEBI ListingRegulations.
31. Cost Audit :
In compliance with the provisions of Section 148 of the Companies Act 2013 the Boardof Directors of the Company at its meeting held on July 28 2016 had appointed M/s. JoshiApte & Associates Cost Accountants bearing (Firm Registration No. 00240). as CostAuditors of the Company for the financial year 2016-2017. In terms of the provisions ofSection 148(3) of the Companies Act 2013 read with Rule 14(a)(ii) of The Companies (Auditand Auditors) Rules 2014 the remuneration of the Cost Auditors has to be ratified by themembers. Accordingly necessary resolution is proposed at the ensuing AGM for ratificationof the remuneration payable to the Cost Auditors for financial year 2016-2017.
32. Risk Management:
The Company has established a well-documented and robust risk management frameworkunder the provisions of Companies Act 2013. The Company has constituted Risk ManagementCommittee in place which has been delegated with the authority by the Board to review andmonitor the implementation of the Risk Management Policy of the Company.
Under this framework risks are identified across all business processes of the Companyon a continuous basis. Once identified these risks are managed systematically bycategorizing them into Enterprise Level Risk & Project Level Risk. These risks arefurther broken down into various sub-categories of risks such as operational financialscontractual order book project cost & time overrun etc. and proper documentation ismaintained in the form of activity log registers mitigation reports; and monitored byrespective functional heads. Review of these risk and documentation is undertaken by RiskReview Committee of the management held at agreed intervals but at-least once in quarterand mainly during Quarterly project reviews.
Risk Review Committee was successful in early identification of financial risk relatedto borrowing structure & cash flow mismatch due to late realization of claims lodgedwith clients. These risk were materially mitigated during the year by implementing newfinancial restructuring scheme introduced by Reserve Bank of India known as 'Scheme forSustainable Structuring of Stressed Assets (S4A)Rs. with lenders and issue of guidelinesby Cabinet Committee of Economic Affairs (CCEA) for release of 75% of arbitration awardsin favour of infrastructure companies respectively.
On introduction & implementation of new Accounting Standard Indian AccountingStandards ('IND-AS') under Companies Act 2013 which is applicable from current yearcompany in its Notes to Accounts have disclosed risk management objectives and policiesfor managing financial and reporting risk. (Refer Note 40 of Standalone FinancialStatements).
33. Internal Control Systems and their adequacy
The Company has Internal Control Systems commensurate with the size scale andcomplexity of its operations. The Internal Audit Department monitors and evaluates theefficacy and adequacy of internal control systems in the Company its compliance withoperating systems accounting procedures and policies within the Company. Based on thereport of internal audit function process owners undertake corrective action in theirrespective areas and thereby strengthen the controls. Significant observations andcorrective actions thereon are presented to the Audit Committee from time to time.
34. Internal Financial Controls and their adequacy
The Company has in place adequate internal financial controls commensurate with thesize scale and complexity of its operations. The Company has policies and procedures inplace for ensuring proper and efficient conduct of its business the safeguarding of itsassets the prevention and detection of frauds and errors the accuracy and completenessof the accounting records and the timely preparation of reliable financial information.The Company has adopted accounting policies which are in line with the AccountingStandards and the Companies Act 2013.
35. Vigil Mechanism Policy:
The Company has a vigil mechanism policy to deal with instances of fraud andmismanagement if any. The vigil mechanism policy is uploaded on the website of theCompany at www.hccinida.com
36. Sexual Harassment:
HCC has always believed in providing a conducive work environment devoid ofdiscrimination and harassment including sexual harassment. HCC has a well formulatedPolicy on Prevention & Redress of Sexual Harassment. The objective of the policy is toprohibit prevent and address issues of sexual harassment at the workplace. This policyhas striven to prescribe a code of conduct for the employees and all employees have accessto the Policy document and are required to strictly abide by it. The policy covers allemployees irrespective of their nature of employment and also applicable in respect ofall allegations of sexual harassment made by an outsider against an employee. During theyear 2016-2017 no case of Sexual Harassment was reported.
37. Reporting of Frauds :
There have been no instances of fraud reported by the Statutory Auditors under Section143(12) of the Act and Rules framed thereunder either to the Company or to the CentralGovernment.
38. Significant and material Orders passed by the Regulators/Courts if any:
There are no significant or material orders passed by the Regulators or Courts orTribunals which would impact the going concern status of your Company and its futureoperations.
39. Material changes & commitment if any affecting financial position of theCompany from the end of financial year till the date of the report:
There have been no material changes and commitments if any affecting the financialposition of the Company which have occurred between the end of the financial year of theCompany to which the Financial Statements relate and the date of this Report.
40. Extract of Annual Return:
The details forming part of the extract of Annual Return in prescribed Form MGT 9 isannexed hereto as Annexure VIII and forms the part of this Report.
Your Directors would like to acknowledge and place on record their sincere appreciationto all stakeholders clients Financial Institutions Banks Central and State Governmentsthe Company's valued investors and all other business partners for their continued co-operation and excellent support received during the year.
Your Directors recognize and appreciate the efforts and hard work of all the employeesof the Company and their continued contribution to its progress.
| ||For and on behalf of Board of Directors |
| ||AJIT GULABCHAND |
| ||Chairman & Managing Director |
|Registered Office: || |
|Hincon House Lai BahadurShastri Marg || |
|Vikhroli (West) Mumbai 400 083 || |
|Place : Mumbai || |
|Date : May 4 2017 || |