Hindustan Construction Company Ltd.
|BSE: 500185||Sector: Infrastructure|
|NSE: HCC||ISIN Code: INE549A01026|
|BSE 00:00 | 17 May||9.52||
|NSE 00:00 | 17 May||9.50||
|Mkt Cap.(Rs cr)||1,440|
|Mkt Cap.(Rs cr)||1440.38|
Hindustan Construction Company Ltd. (HCC) - Director Report
Company director report
The Members of Hindustan Construction Co. Ltd.
Your Directors have presented the 93rd Annual Reporttogether with the Audited Financial Statements for the year ended March 312019.
2. Financial Highlights (As per IND AS)
Due to inadequacy of distributable profit your Directors have notrecommended any dividend for the financial year ended March 312019.
4. Strategic Development
Pursuant to the recommendation of the Audit Committee of the Board theBoard of Directors of the Company approved the proposal for monetization of an identifiedpool of arbitration awards & claims (Transaction). Under the terms of the Transactionthe Company will transfer the beneficial interest/ rights in a portfolio of identifiedawards & claims of the Company (Specified Awards & Claims) to a special purposevehicle (SPV) controlled by a consortium of Investors led by BlackRock (Investors) for aconsideration of र 1750 crore.
The Specified Awards & Claims will not be considered an asset ofHCC any longer and shall be free from all encumbrances. The Transaction does envision aclaw back of value by HCC from the SPV if the recovery of the Specified Awards &Claims assigned to the SPV were to cross certain thresholds. HCC shall continue to takerecovery measures/litigate the Specified Claims on behalf of the SPV A partial write downof the net worth of the Company as on March 31 2019 to the extent of '331.4 crore hasbeen taken on account of the same. HCC will continue to retain a material amount of awardsand claims with the Transaction being limited only to the Specified Awards & Claims.
As per the structure of the Transaction the Investor-controlled SPVwill issue Non Convertible Debentures (NCDs) which will be subscribed to by theInvestors. The money received from the Investors is to be deposited in an escrow accountand to be utilised for the purchase of the Specified Awards & Claims by the SPV fromHCC.
The consideration received by the Company will be used to prepay debtsworth र 1250 crore (comprising the entire Term Loan and a part of the OptionallyConvertible Debentures) with the balance र 500 crore to be utilized for working capitalrequirements and business growth.
The book value of the Specified Awards & Claims pegged at '2082crore is more than 50% of the net worth of the Company. As per the legal opinion taken bythe Company the proposed sale does not tantamount to the sale of undertaking in terms ofSection 180(1)(a) of the Companies Act 2013 and hence no approval of the shareholders isrequired in terms of that section.
5. Allotment of Equity Shares under HCC Right Issue
During the year the Company has allotted 497565318 Equity sharesfor cash at a price of र 10/-per equity share (including a premium of र 9/- per equityshare) on December 27 2018 aggregating to '49757 crore on a right basis to the eligibleequity shareholders of the Company in the ratio of 49 equity shares for every 100 fullypaid up equity shares held as on the record date.
Consequent to the Right Issue the paid-up Equity Share Capital of theCompany increased to र 1513028244 which comprises 1513028244 Equity Shares of facevalue र 1/- each.
The Income from Operations of the Company during the year under reviewis '4341 crore as compared to '4575 crore in the previous year.
During the year under review the Company has secured the followingmajor contracts:
Rooppur SteamTurbinebuilding BangladeshContract Value र 748crore (HCC's Share र 299 crore);
Mumbai Coastal Road Project - Package II
(Baroda Palace- Worli End) Maharashtra Contract Value '2126 crore(HCC's Share र 1169 crore)
The total balance value of work orders at hand as on March 31 2019 isर 18554 crore.
Decisions are awaited from the clients for bids submitted by theCompany for 4 tenders amounting to approx. '4529 crore (HCC share '3172 crore). Bids for13 projects worth र 18287 crore (HCC share र 13212 crore) are expected to be submittedin the near future.
Operations of Subsidiaries
i) HCC Infrastructure Company Ltd
HCC Infrastructure Company Ltd. a wholly owned subsidiary of yourCompany develops and operates 'Build Operate and Transfer' (BOT) infrastructure Assetsunder Public Private Partnership (PPP) mode with the Government of India. HCC ConcessionsLtd (HCON) a step down subsidiary of the Company develops Road Assets through SPVscreated for the purpose.
Over the last 10 years HCON has developed 6 projects of which 2projects were divested in the year 2015-16.
The two operational projects in the state of West BengalBaharampore-Farakka Highways Ltd (BFHL) and Farakka- Raiganj Highways Ltd (FRHL) earnedoperational revenue of र 122 crore and र 107 crore respectively. Both the projectswitnessed good traffic growth in first half of the year. However in second half trafficand revenue were affected due the restrictions / diversions imposed on heavy vehicles onaccount of major repair works undertaken on existing Farakka Barrage a key link for bothprojects. Towards the year end the repair works were completed and the bridge was openedfor all types of vehicles which led to normalization of traffic. In coming years both theprojects are poised to continue showing healthy growth considering the strategicimportance of NH34 for North Bengal and North-Eastern states. The balance constructionwork in these two projects is underway. In FRHL substantial work is completed and thestretch is planned to be completed in this fiscal. In BFHL barring the BaharamporeBypass where there have been considerable delays on account of delays in landacquisition rest of the works are almost completed; full completion including the bypassis planned by next year. In both projects upon full completion substantial revenuegrowth is expected due to higher toll rates attributable to the bypass section in eachproject. Apart from this both SPVs are pursuing
arbitrations for various claims/disputes related to cost overrunschange of scope etc. raised on the National Highway Authority of India (NHAI). BFHL hasfiled an execution petition for an award and counterparty NHAI has deposited '348 crore(75% of the said award) in court.
Another SPV namely Badarpur Faridabad Tollway Limited (BFTL) togetherwith its Lenders is pursuing a termination payment from NHAI after termination of itsConcession Agreement in February 2018 due to Force Majeure when the Supreme Court passedan order effectively preventing commercial vehicles from entering Delhi. The fourth SPVRaiganj-Dalkhola Highways Limited (RDHL) is actively pursuing termination and cost overrunclaims through arbitration from NHAI post termination of its Concession Agreement due to a5-year delay in land acquisition. Narmada Bridge Tollway Limited (NBTL) received anArbitration Award of र 39.19 crore during the year towards expenses incurred for repair& rehabilitation works. NHAI has deposited the 2/3rd of the award amount incourt which can be released to NBTL on submission of bank guarantee.
HCON is continuously pursuing the interest of its SPVs by rigorousfollow-ups of its claims and legitimate rights so as to preserve the value of its assets.In order to maximize shareholder value and provide for future growth HCON has signed aShare Purchase Agreement to sell 100% stake in Farakka-Raiganj Highways Ltd. to CubeHighways & Infrastructure II PTE. Ltd in September 2018.
Keeping in view HCC's long standing presence in the infrastructuresector and the road network expected to be built in the country HCC has plans toselectively bid for new PPP projects including Hybrid-Annuity-Model (HAM) projects.. TheCompany's strategy will include suitable tie-ups with strategic and financial partnerswith judicious use of capital that maximises cash flow and returns to the Group.
ii) Steiner AG Switzerland
Steiner AG one of the leading project developers totalcontractors/general contractors (TC/GC) in Switzerland offers comprehensive services inthe field of new construction refurbishment and real estate development. Steiner AG hassuccessfully completed numerous prestigious international projects and plans to undertakesimilar projects in the future. Your Company owns 100% stake in Steiner AG through itswholly owned subsidiaries; HCC Mauritius Enterprises Limited and HCC Mauritius InvestmentLimited.
Steiner AG reported revenues of CHF 831 million ('5894 crore) in thefinancial year 2018-19 as compared to CHF 806 million ('5389 crore) in the previous yearand a net profit of CHF 24.9 million (र 177 crore) as compared to a net profit of CHF 9.5million (र 64 crore) in the previous year. The Company secured fresh orders worth CHF 831million ('5896 crore). The order book stood at CHF 1.38 billion (र 9654 crore) at theend of the financial year. In addition to this the Company has secured orders for CHF 361million ('2562 crore) where contracts are yet to be signed.
Steiner India Ltd a 100% subsidiary of Steiner AG reported revenue ofर 79 crore and a loss of र 5.2 crore in financial year 2018-2019. Please refer theManagement Discussion and Analysis Report for an overview of Steiner AG & SteinerIndia businesses.
iii) Lavasa Corporation Ltd. - Integrated Urban Development &Management
During the year HCC has written off its entire investment of र 1046crore in Lavasa Corporation Ltd. (Lavasa) as a matter of prudence consequent to theadmission of its 68.7% controlled subsidiary into Corporate Insolvency Resolution Process(CIRP) by National Company Law Tribunal (NCLT) under Insolvency and Bankruptcy Code (IBC).The write-off has no impact on HCC cash flows. Furthermore HCC has fully accounted forall of its contingent liability obligations given to Lavasa lenders including CorporateGuarantees and Put options. The sum total impact of all write-offs in the quarteradjusted for tax is '1531 crore. Having comprehensively accounted for its entireexposure to Lavasa HCC expects no further impact on account of its erstwhile subsidiary.
The project had suffered a major setback after stop work notice wasissued by Environment Ministry in 2010 and was under financial stress since then. Afterthe failure to implement a financial restructuring / resolution plan duly approved by theJoint Lenders Forum (JLF) in 2015 due to a deadlock amongst lenders the JLF invokedStructured Debt Restructuring (SDR) on Lavasa on 20th September 2017 TheCompany had been actively working in conjunction with Lenders to ensure implementation ofSDR by finding a credible investor / partner who could help in reviving Lavasa. Howeverconsequent to RBI's stand on resolution of stressed assets announced in February 2018despite all efforts SDR process could not conclude as the deterrent factors were beyondLavasa's control. Thereafter an operational creditor of Lavasa filed application beforeNCLT for admission of Lavasa into CIRP under IBC and the same was admitted on 30 August2018.
Deloitte was appointed as Resolution professional (RP) for Lavasa bythe Committee of Creditors (CoC). Since it's admission into IBC the RP has taken fullcontrol of the Company and is in charge of all the assets and operations being carried outin the City. The RP invited expression of interest (EOI) from prospective resolutionapplicants on 13th November 2018 post which 3 EOIs were filed with RP
Lavasa has 10514 acres of land including 455 acres of land on lease(as on March 31 2018). Dasve town has comprehensive public infrastructure in place suchas access roads internal roads water treatment plant water distribution network sewagenetwork sewage treatment plant telecom network and services. Till date Lavasa has givenpossession of 1285 residential units and also registered 31 sub-projects with RERAthereby complying with disclosure requirements. Tourism remained the mainstay of theproject. With footfalls of over a million visitors each year the city continued to beknown as one of the favourite tourist destinations in Maharashtra for weekend retreatswater-sports conventions etc. In the hospitality space the four hotels operating withinthe city with 253 rooms have reported competitive occupancies in the micro market. The1500 plenary capacity Lavasa International Convention Centre (LICC) hosted some grandconventions and conferences. On the retail front a significant area has already beenleased to various outlets mainly in the Food & Beverage segment. The Dasve PublicSchool and Christ University are fully operational educational institutions in the city.
In view of Lavasa being referred to NCLT and consequential loss ofcontrol by HCC on Lavasa Management accounts of Lavasa which were appearing inconsolidated accounts of HCC have been de-consolidated with effect from April 012018.This was inevitable in view of no access to Lavasa accounts available and no supportprovided by RP appointed under IBC in providing requisite details.
While shareholders' interests have been written off HCC has exited theproject with the hope that its pioneering efforts to grow lavasa into a thriving smartcity will now find stewardship in the hands of a new owner enabled by NCLT.
7. Subsidiaries and Associate Companies
During the year under review Charosa Wineries ceased to be asubsidiary of company w.e.f. February 08 2019.
The list of Subsidiaries and Associates of your Company as on March312019 forms part of Form No. MGT-9 Extract of the Annual Return which is annexed atAnnexure VI to the Board's Report.
The details as required under Rule 8 of the Companies (Accounts) Rules2014 regarding the performance and financial position of each of the SubsidiariesAssociates and Joint Ventures of the Company are provided in Form AOC-1 which form partof the Consolidated Financial Statements of the Company for the financial year ended March312019.
The Company has formulated a Policy for determining materialsubsidiaries which is uploaded on the website of the Company
i.e. www.hccindia.com and can be accessed at http://www.hccindia.com/pdf/Policy_for_determining_Material_Subsidiaries.pdf
8. Public Deposits
Your Company has not accepted any deposits from the public or itsemployees during the year under review.
9. Particulars of Loans Guarantees or Investments
Particulars of Loans Guarantees and Investments made during the yearas required under the provisions of Section 186 of the Companies Act 2013 (Act') aregiven in the notes to the Financial Statements forming part of Annual Report.
Also pursuant to Paragraph A (2) of Schedule V of the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 ("SEBI Listing Regulations") particulars of Loans/Advances given toSubsidiaries have been disclosed in the notes to the Financial Statements.
10. Employee Stock Option Scheme (ESOP)
As on March 31 2019 300000 stock options are outstanding inaggregate for exercise as per the exercise schedule and are exercisable at an exerciseprice of '31.15 per stock option. Each option when exercised as per the exerciseschedule would entitle the holder to subscribe for one equity share of the Company of facevalue र 1 each.
During the year under review no options got vested in the employees ofthe Company and none were due for exercise.
The particulars with regard to ESOP as on March 31 2019 as requiredto be disclosed pursuant to the provisions of Companies (Share Capital and Debentures)Rules2014 read with SEBI Listing Regulations is set out at Annexure I to this Report.
11. Consolidated Financial Statements
In accordance with the Companies Act 2013 and implementationrequirements of Indian Accounting Standards ('IND-AS') on accounting and disclosurerequirements and as prescribed by SEBI Listing Regulations the Audited ConsolidatedFinancial Statements are provided in this Annual Report.
Pursuant to Section 129(3) of the Act a statement containing thesalient features of the Financial Statements of each of the Subsidiaries Associates andJoint ventures of the Company in the prescribed form AOC-1 is annexed to this report.
Pursuant to Section 136 of the Act the Financial Statements of thesubsidiaries are kept for inspection by the Members 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 theInvestors Section.
12. Corporate Governance
The Company is committed to maintain the highest standards of CorporateGovernance and adheres to the Corporate Governance requirements as stipulated bySecurities and Exchange Board of India (SEBI).
The report on Corporate Governance as prescribed in 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 along with a declaration signed by Group CEO & Whole-time 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 Act Mr. N. R. AcharyuluNon Executive Director of the Company is due to retire by rotation and being eligiblehas offered himself for re-appointment.
Mr. Samuel Joseph was appointed as Nominee Director on the Board ofCompany w.e.f. March 26 2019 in place of Ms. Harsha Bangari erstwhile nominee directorwhose nomination was withdrawn by EXIM Bank w.e.f. February 06 2019.
The Independent Directors of the Company viz. Mr. Ram P Gandhi Mr.Sharad M. Kulkarni and Mr. Anil C. Singhvi have furnished necessary declarations to theCompany confirming that they meet the criteria of Independence as prescribed under Section149 of the Act and Regulation 16 (1)(b) read with Regulation 25(8) of the SEBI ListingRegulations and the Board has taken on record the said declarations after undertaking dueassessment of the veracity of the same.
The term of appointment of the Independent Directors of the Companyviz. Mr. Rajas R. Doshi Mr. Anil C. Singhvi and Dr. Omkar Goswami is uptil the ensuingAnnual General Meeting of the Company.
Mr. Rajas R. Doshi and Dr. Omkar Goswami have expressed their desirenot to seek re-appointment at the upcoming Annual General Meeting. Accordingly theyretire as Directors on conclusion of the upcoming Annual General Meeting.
Mr. Anil C. Singhvi being eligible has offered himself forreappointment. Based on the performance evaluation carried out by the Board and afterreviewing the declaration submitted by Mr. Anil C. Singhvi and pursuant to therecommendation of the Nomination & Remuneration Committee the Board recommendsre-appointment of Mr. Anil C. Singhvi as an Independent Director for a second term of 3consecutive years i.e. from the conclusion of this 93rd Annual General Meetingof the Company upto the conclusion of the 96th Annual General Meeting of theCompany to be held in the calendar year 2022.
Further the Board of Directors on recommendation of the Nomination andRemuneration Committee appointed Mr. Santosh Janakiram and Mr. Mahendra Singh Mehta as anAdditional Directors to hold office as an Independent Directors w.e.f. June 17 2019 for aterm of 3 consecutive years till the conclusion of the 96th Annual GeneralMeeting of the Company to be held in the calendar year 2022. In terms of Section 161 ofthe Act Mr. Santosh Janakiram and Mr. Mahendra Singh Mehta holds office up to the date ofensuing Annual General Meeting. The Company has received requisite notice in writing frommembers proposing Mr. Santosh Janakiram and Mr. Mahendra Singh Mehta for the office ofDirectors. Accordingly the Board recommends the resolutions in relation to appointment ofMr. Santosh Janakiram and Mr. Mahendra Singh Mehta as Independent Directors for theapproval by the members of the Company.
Ms. Shalaka Gulabchand Dhawan tendered her resignation as Whole-timeDirector of the Company w.e.f. close of business hours on July 31 2019. Accordingly sheceases to be the Wholetime Director of the Company with effect from the said date.
The Company has received Form DIR-8 from all Directors pursuant toSection 164(2) and rule 14(1) of Companies (Appointment and Qualification of Directors)Rules 2014. Brief Profile of the Directors seeking appointment/re-appointment has beengiven in the Explanatory Statement to the Notice of the ensuing Annual General Meeting.
14. Key Managerial Personnel
Following persons are the Key Managerial Personnel (KMP) of the Companypursuant to Section 2(51) and Section 203 of the Act read with the Rules framedthereunder:
i. Mr. Ajit Gulabchand Chairman and Managing Director;
ii. Mr. Arjun Dhawan Group Chief Executive Officer and Whole-timeDirector;
iii. Mr. Amit Uplenchwar Chief Executive Officer- HCC E&CDivision;
iv. Mr. Praveen Sood Group Chief Financial Officer (upto December 312018);
v. Mr. Shailesh Sawa Chief Financial Officer w.e.f. February 07 2019;
vi. Mr. Venkatesan Arunachalam Company Secretary (upto November 062018);
vii. Mr. Ajay Singh Company Secretary w.e.f. February 07 2019.
The Board had placed on record its appreciation for the servicesrendered by Mr. Praveen Sood and Mr. Venkatesan Arunachalam during their respectivetenure as KMP of the Company.
15. Board Committees
The Board of Directors of your Company had constituted variousCommittees in compliance with the provisions of the Act and SEBI Listing Regulations viz.Audit Committee Nomination and Remuneration Committee Stakeholders RelationshipCommittee and CSR Committee.
The Board has also voluntarily constituted the Risk ManagementCommittee in terms of SEBI Listing Regulations.
All decisions pertaining to the constitution of Committees appointmentof members and fixing of terms of reference/role of the Committees are taken by the Boardof Directors.
Details of the role and composition of these Committees including thenumber of meetings held during the financial year and attendance at these meetings areprovided in the Corporate Governance Section of the Annual Report.
A calendar of Board Meetings Annual General Meeting and CommitteeMeetings is prepared and circulated in advance to the Directors of your Company. The Boardof Directors of your Company met 7 times during financial year 2018-19.
The meetings were held on May 03 2018 August 08 2018 September 052018 October 08 2018 November 012018 February 07 2019 and March 26 2019.The maximumtime gap between any two consecutive meetings did not exceed one hundred and twenty days.
17. Familiarization Program of Independent Directors
In compliance with the requirements of SEBI Listing Regulations theCompany has put in place a familiarization programme for Independent Directors tofamiliarise them with their role rights and responsibility as Directors the operationsof the Company business overview etc. The details of the familiarisation programme areexplained in the Corporate Governance Report and the same is also available on the websiteof the Company and can be accessed by web link
18. Independent Directors Meeting
During the year under review the Independent Directors of the Companymet on March 26 2019 inter-alia for:
Evaluation of performance of Non-Independent Directors and theBoard of Directors of the Company as a whole;
Evaluation of performance of the Chairman of the Company takinginto views of Executive and NonExecutive Directors;
Evaluation of the quality content and timelines of flow ofinformation between the Management and the Board that is necessary for the Board toeffectively and reasonably perform its duties.
19. Performance Evaluation
Pursuant to the applicable provisions of the Act and the SEBI ListingRegulations the Board has carried out an Annual Evaluation of its own performanceperformance of the Directors and the working of its Committees based on the evaluationcriteria defined by Nomination and Remuneration Committee (NRC) for performance evaluationprocess of the Board its Committees and Directors.
The Board's functioning was evaluated on various aspects includinginter-alia the Structure of the Board Meetings of the Board Functions of the BoardDegree of fulfillment of key responsibilities Establishment and delineation ofresponsibilities to various Committees Effectiveness of Board Processes information andfunctioning.
The Committees of the Board were assessed on the degree of fulfillmentof key responsibilities adequacy of Committee composition and effectiveness of meetings.The Directors were evaluated on aspects such as attendance contribution at Board/Committee Meetings and guidance/support to the Management outside Board/CommitteeMeetings.
As mentioned earlier the performance assessment of NonIndependentDirectors Board as a whole and the Chairman were evaluated in a separate meeting ofIndependent Directors. The same was also discussed in the Board meeting. Performanceevaluation of Independent Directors was done by the entire Board excluding theIndependent Director being evaluated.
20. Criteria for selection of candidates for appointment as DirectorsKey Managerial Personnel and Senior Management Personnel
The Nomination and Remuneration Committee has laid down a well-definedcriteria for selection of candidates for appointment as Directors Key ManagerialPersonnel and Senior Management Personnel in the Nomination and Remuneration Policyrecommended by them and approved by the Board of Directors in May 2014 and which wasfurther amended on May 09 2019 to bring in line with requirements of the SEBI (LODR)(Amendment) Regulations 2018.
The said Policy is available on the Company website and can be accessedby weblink http://www.hccindia.com/pdf/Nomination-and-Remuneration-Policy.pdf
21. Remuneration Policy for Directors Key Managerial Personnel andSenior Management Employees
The Nomination and Remuneration Committee has laid down the policy forremuneration of Directors Key Managerial Personnel and Senior Management Personnel in theNomination and Remuneration Policy recommended by them and approved by the Board ofDirectors. The Policy inter-alia defines Key Managerial Personnel and Senior Managementpersonnel of the Company and also prescribes the role of the Nomination and RemunerationCommittee. The Policy lays down the criteria for identification appointment andretirement of Directors and Senior Management. The Policy broadly lays down the frameworkin relation to remuneration of Directors Key Managerial Personnel and Senior Managementemployees. The policy also provides for the criteria for determining qualificationspositive attributes and Independence of Director and lays down
the framework on Board Diversity. The above Policy is available on theCompany website and can be accessed by weblink
22. CSR Policy
A brief outline of the Corporate Social Responsibility (CSR)
Policy as recommended by the CSR Committee of the Directors andapproved by the Board of Directors of the Company in May 2014 and the initiativesundertaken by the Company on CSR activities during the year are set out in Annexure II ofthis report in the format prescribed in the Companies (Corporate Social ResponsibilityPolicy) Rules 2014. The said CSR policy is also available on the Company website and canbe accessed by weblink http://www.hccindia.com/pdf/HCC_Corporate_Social_ Responsibility_Policy.pdf
23. Related Party Transactions
All the related party transactions entered during the year were in theordinary course of business and on an arm's length basis. The related party transactionsattracting the compliance under Section 177 of the Act and/or SEBI Listing Regulationswere placed before the Audit Committee for necessary approval/review.
The routine related party transactions was placed before the AuditCommittee for their omnibus approval. A statement of all related party transactionsentered was presented before the Audit Committee on a quarterly basis specifying thenature value and any other related terms and conditions of the transactions.
There are no transactions to be reported in Form AOC-2 in terms ofSection 134 of the Act read with Companies (Accounts) Rules 2014. Further the details ofthe transactions with related parties are provided in the Company's financial statementsin accordance with the Indian Accounting Standards.
The Related Party Transactions Policy approved by the Board ofDirectors of the Company as amended on May 09 2019 in line with the requirements of theSEBI (LODR) (Amendment) Regulations 2018 has been uploaded on the website of the Companyat http://www.hccindia.com/pdf/Policy-for-Related-Party-Transactions.pdf
24. Business Responsibility Statement
As per SEBI Listing Regulations a Business Responsibility Reportprepared on a voluntary basis covering the performance of the Company on the nineprinciples as per National Voluntary Guidelines (NVGs) is attached to this Annual Report.
25. Directors' Responsibility Statement
In accordance with the provisions of Section 134 of the Act yourDirectors confirm that:
(a) in the preparation of the annual accounts the applicableaccounting standards have been followed along with proper explanation relating to materialdepartures if any;
(b) the selected accounting policies were applied consistently and theDirectors made judgments and estimates that are reasonable and prudent so as to give atrue and fair view of the state of affairs of the Company as at March 31 2019 and of theloss of the Company for the year ended on that date;
(c) proper and sufficient care has been taken for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;
(d) the annual accounts have been prepared on a going concern basis;
(e) the internal financial controls have been laid down to be followedby the Company and such controls are adequate and are generally operated effectivelyduring the year;
(f) proper systems to ensure compliance with the provisions of allapplicable laws have been devised and such systems are adequate and are operatingeffectively.
Internal financial control over carrying cost of investment insubsidiaries and recoverability of dues from subsidiaries is covered under internalfinancial control.
The management is of the view that diminution in the carrying cost ofinvestment in subsidiaries if any is temporary in nature and recoverability of dues fromsubsidiaries are good. The view of the management is also supported by a third partyexpert report. This view of Management has been accepted by Auditors and they have notmodified their opinion in this behalf.
Your Auditors have opined that the Company has in all materialrespects maintained adequate internal financial controls over financial reporting(IFCoFR) and that they were operating effectively.
26. Industrial Relations
The industrial relations continued to be generally peaceful and cordialduring the year.
27. Transfer of Unclaimed Dividend and Equity Shares to InvestorEducation and Protection Fund (IEPF)
Pursuant to the applicable provisions of the Act read with the InvestorEducation and Protection Fund Authority (Accounting Audit Transfer and Refund) Rules2016 ("the IEPF Rules") all unpaid or unclaimed dividends are required to betransferred by the Company to IEPF after the completion of seven years. Further accordingto the IEPF Rules the shares on which dividend has not been paid or claimed by theshareholders for seven consecutive years or more shall also be transferred to IEPFAccordingly during the year under review the Company has transferred the unclaimeddividend for the financial year 2010-11 of र 2640390/- to IEPF and 2364340corresponding equity shares of face value र 1/- for a total face value of '2364340/- asper IEPF Rules to the IEPF account.
28. Particulars of Employees and other additional information
Disclosures with respect to the remuneration of Directors and employeesas required under Section 197 of the Act and Rule 5 (1) Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 has been set out at Annexure III to thisReport.
The information as per Rule 5(2) and 5(3) of the Companies (Appointmentand Remuneration of Managerial Personnel)
Rules 2014 will be provided upon request by any Member of
the Company. In terms of Section 136 of the Act the Annual Reportincluding the Board's Report and the Audited Financial Statements are being sent to theMembers excluding the same. Any Member interested in obtaining a copy of the same maywrite to the Company Secretary at the Registered Office of the Company. The saidinformation is available for inspection by the Members at the Registered Office of theCompany during working hours 21 days before the date of the 93rd Annual GeneralMeeting.
29. Conservation of Energy Technology Absorption and Foreign ExchangeEarnings and Outgo
The information relating to the Conservation of Energy
Technology Absorption and Foreign Exchange Earnings and Outgo asrequired to be disclosed under the Companies (Accounts) Rules 2014 is given in AnnexureIV forming part of this Report.
30. Secretarial Standards
The Company has complied with the applicable Secretarial Standardsissued by the Institute of Company Secretaries of India.
31. Statutory Auditors
The Members of the Company had at the 88th Annual GeneralMeeting ("AGM") held on June 20 2014 approved the appointment of M/s WalkerChandiok & Co. LLP Chartered Accountants Mumbai bearing ICAI Registration No.001076N as the Statutory Auditors of the Company to hold office from the conclusion ofthat AGM until the conclusion of the 6th AGM to be held thereafter.
Accordingly the first term of appointment of M/s. Walker Chandiok& Co. LLP Chartered Accountants Mumbai ('Statutory Auditors') expires at theconclusion of the 93rd Annual General Meeting.
Based on the performance review of the Statutory Auditors by the AuditCommittee the Board at its meeting held on May 9 2019 has approved and recommendedtheir re-appointment to the Members (including terms of remuneration) for a second term of5 (Five) consecutive years.
As required under Section 139 of the Companies Act 2013 the Companyhas obtained a written consent from the Auditors for their re-appointment and also acertificate from them to the effect that their re-appointment if approved by the Memberswould be in accordance with the conditions prescribed under the Companies Act 2013 andthe rules made thereunder.
The members are now requested to re-appoint M/s. Walker Chandiok &Co. LLR Chartered Accountants for a second term of 5 (five) years to hold the office fora second term of 5 (five) consecutive years commencing from the conclusion of the ensuingAGM in the year 2019 uptil the conclusion of the 6th AGM to be held thereafterin the year 2024 on an overall remuneration of र 2.55 crore plus taxes for the financialyear 2019-20.
32. Secretarial Audit
Secretarial Audit for the financial year 2018-19 was conducted by M/s.BNR & Associates Company Secretaries in Practice in accordance with the provisions ofSection 204 of the Act.
The Secretarial Auditor's Report is attached to this Report at AnnexureV
33. Cost Audit
In compliance with the provisions of Section 148 of the Act the Boardof Directors of the Company at its meeting held on August 08 2018 appointed M/s. JoshiApte & Associates Cost Accountants as Cost Auditors of the Company for the financialyear 2018-19.
In terms of the provisions of Section 148 of the Act read with TheCompanies (Audit and Auditors) Rules 2014 the remuneration of the Cost Auditors has tobe ratified by the Members. Accordingly necessary resolution is proposed at the ensuingAGM for ratification of the remuneration payable to the Cost Auditors for financial year2018-19.
The Company is maintaining the accounts and cost records as specifiedby the Central Government under sub-section (1) of Section 148 of the Act and Rules madethereunder.
34. Risk Management
The Company has established a well-documented and robust riskmanagement framework under the provisions of the Act.
The Company has constituted Risk Management Committee in place whichhas been delegated with the authority by the Board to review and monitor theimplementation of the Risk Management Policy of the Company.
Under this framework risks are identified across all businessprocesses of the Company on a continuous basis. Once identified these risks are managedsystematically by categorizing them into Enterprise Level Risk & Project Level Risk.These risks are further broken down into various subcategories of risks such asoperational financial contractual order book project cost & time overrun etc. andproper documentation is maintained in the form of activity log registers mitigationreports; and monitored by respective functional heads. Review of these risk anddocumentation is undertaken by Risk Review Committee regularly at agreed intervals but atleast once in a quarter and mainly during quarterly project reviews.
Risk Review Committee was successful in early identification offinancial risk related to borrowing structure & cash flow mismatch due to laterealization of claims lodged with clients. These risk were materially mitigated during thelast year by implementing financial restructuring scheme introduced by Reserve Bank ofIndia known as 'Scheme for Sustainable Structuring of Stressed Assets (S4A)' with lenderssuccessfully and issue of guidelines by Cabinet Committee of Economic Affairs (CCEA) forrelease of 75% of arbitration awards in favour of infrastructure companies respectively.Company has been able to realize substantial monies under CCEA guidelines from itsclients. Monies received have been used towards payments to lender thereby reducinglenders dues. There are however some difficulties in providing additional guaranteestowards interest top-up year after year under CCEA guidelines.
During the year Company has successfully infused '4976 crore asadditional capital by way of Rights Issue to support the cash flow mismatch. Proceeds ofRights Issue were used to fund its working capital requirements and for general corporatepurpose. The Company has also signed term sheet with Investors towards transfer ofbeneficial interest in certain pool of Arbitration Awards and Claims for a considerationof '1750 crore to a third party
a Special Purpose Vehicle (SPV). Consideration so received will be usedto pre-pay entire term loan and part of it Optionally Convertible Debentures (OCD's) tothe extent of र 1250 crore and balance र 500 crore will be used to fund its workingcapital requirements. This will substantially deleverage the company and recurringinterest liability on term loan will extinguish permanently. These two long terminitiatives were discussed & implemented by risk committee during the year apart fromother initiatives towards improving of operational efficiencies.
Company in its Notes to Accounts have disclosed risk managementobjectives and policies for managing financial and reporting risk (Refer Note 40 toAccounts).
35. Internal Control Systems and their adequacy
The Company has Internal Control Systems commensurate with the sizescale and complexity of its operations. The Internal Audit Department monitors andevaluates the efficacy and adequacy of internal control systems in the Company itscompliance with operating systems accounting procedures and policies within the Company.Based on the report of internal audit function process owners undertake corrective actionin their respective areas and thereby strengthen the controls Significant observations andcorrective actions thereon are presented to the Audit Committee from time to time.
36. Internal Financial Controls and their adequacy
The Company has in place adequate internal financial controlscommensurate with the size scale and complexity of its operations. The Company haspolicies and procedures in place for ensuring proper and efficient conduct of itsbusiness the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timely preparationof reliable financial information. The Company has adopted accounting policies which arein line with the Accounting Standards and the Act.
37. Whistle Blower Policy/Vigil Mechanism Policy
The Company has adopted a Whistle Blower Policy to provide a formalmechanism to the Directors and employees to report their concerns about unethicalbehavior actual or suspected fraud or violation of the Company's Code of Conduct orEthics Policy. The Policy provides for adequate safeguards against victimization ofemployees who avail of the mechanism and also provides for direct access to the Chairmanof the Audit Committee. It is affirmed that no personnel of the Company have been deniedaccess to the Audit Committee. The Whistle Blower Policy has been posted on the website ofthe Company at www.hccindia.com
38. Sexual Harassment
HCC has always believed in providing a conducive work environmentdevoid of discrimination and harassment including sexual harassment. HCC has a wellformulated Policy on Prevention & Redress of Sexual Harassment. The objective of thepolicy is to prohibit prevent and address issues of sexual harassment at the workplace.This policy has striven to prescribe a code of conduct for the employees and all employeeshave access to the Policy document and are required to strictly abide by it. The policycovers all employees irrespective of their nature of employment and also applicable inrespect of all allegations of sexual harassment made by an outsider against an employee.The Company has complied with the provision relating to the
constitution of Internal Complaints Committee under the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013. Duringthe year 2018-19 no case of Sexual Harassment was reported.
39. Reporting of Frauds
There was no instance of fraud during the year under review whichrequired the Statutory Auditors to report to the Audit Committee and / or Board underSection 143(12) of the Act and the rules made thereunder.
40. Significant and material Orders passed by the Regulators/Courts ifany
There are no significant or material orders passed by the Regulators orCourts or Tribunals which would impact the going concern status of your Company and itsfuture operations.
41. Material changes & commitment if any affecting financialposition of the Company from the end of financial year till the date of the report:
There have been no material changes and commitments affecting thefinancial position of the Company which have occurred between the end of the financialyear to which the Financial Statements relate and the date of this Report.
42. Extract of Annual Return
The details forming part of the extract of Annual Return in prescribedForm MGT 9 is set out as Annexure VI and forms a part of this Report.
43. Green Initiatives
In line with the Green Initiatives electronic copy of the Notice of 93rdAnnual General Meeting of the Company are sent to all Members whose email addresses areregistered with the Company/Depository Participant(s). For members who have not registeredtheir e-mail addresses physical copies are sent through the permitted mode.
Your Directors would like to acknowledge and place on record theirsincere appreciation to all Stakeholders Clients Financial Institutions Banks Centraland State Governments the Company's valued Investors and all other Business Partners fortheir continued co-operation and support received during the year.
Your Directors recognize and appreciate the efforts and hard work ofall the employees of the Company and their continued contribution to promote itsdevelopment.
For and on behalf of Board of Directors