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IL&FS Engineering & Construction Co Ltd.

BSE: 532907 Sector: Infrastructure
NSE: IL&FSENGG ISIN Code: INE369I01014
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VOLUME 44033
52-Week high 6.96
52-Week low 2.81
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Mkt Cap.(Rs cr) 74
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
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IL&FS Engineering & Construction Co Ltd. (IL&FSENGG) - Director Report

Company director report

The Members

IL&FS Engineering and Construction Company Limited

Your Directors take pleasure in presenting the Thirty-first Annual Report along withthe Audited Financial Statements for the Financial Year Ended March 312020

(I) STANDALONE FINANCIAL RESULTS :

Your Company has adopted Indian Accounting Standards (Ind AS) notified under theCompanies (Indian Accounting Standards) Rules 2015 with effect from April 12017.Accordingly the Standalone and Consolidated Financial Statements along with thecomparatives for the year ended March 312020 have been prepared in accordance with Ind ASprescribed under Section 133 of the Companies Act 2013 read with Rules made thereunder.

I. FINANCIAL RESULTS : (Rs in Crore)

Particulars

STANDALONE

FY 2020 FY 2019
Revenue from Operations 562.39 1239.14
Other Income 45.50 22.08
Share of Profit in Joint Ventures accounted for using the equity method - 1.01
Total Income 607.89 1262.23
Profit / (Loss) before Interest Depreciation Exceptional Items and Tax 51.49 (58.67)
Less: Finance Cost 26.11 290.18
Profit before Depreciation Exceptional Items and Tax 25.38 (348.84)
Less: Depreciation and Amortization Expenses 32.19 36.75
Profit before Exceptional Items & Tax (6.81) (385.59)
Exceptional Item (Net) 399.45 1640.42
Profit Before Tax (406.26) (2026.01)
Provision for Tax - 10.44
Profit After Tax (406.26) (2036.45)
Other comprehensive income/(loss) for the year - 1.14
Total Comprehensive Income for the year (406.26) (2035.31)
Paid up Equity Capital 131.12 131.12
Earnings per share (in Rupees)
- Basic (30.98) (155.31)
- Diluted (30.98) (155.31)

II. FINANCIAL PERFORMANCE REVIEW :

During the year ended March 312020 your Company achieved a turnover of Rs 562.39crore on standalone basis as against Rs 1239.14 crore in FY 2019. The Net Profit/(Loss)for the year amounted to Rs. (406.26) crore as against Net Profit/(Loss) of Rs (2036.45)crore in FY 2019.

III. DIVIDEND :

Due to accumulated losses of the Company from the previous years your Directorsexpress their inability to recommend any dividend for the year on Preference as well as onEquity Shares

IV. RESERVES :

No amount is recommended for transfer to Reserves of the Company for FY 2020.

V. THE STATE OF AFFAIRS OF THE COMPANY :

During the year under review your Company has not bagged any orders. The Companyalready had orders worth Rs.1615 crore (approx.) at the beginning of the year. Out of thetotal orders in hand the unexecuted order value stands at Rs. 1370.22 crore (approx.) atthe end of the year. The detailed position on the order book and financial performance ofthe Company was provided under Management Discussions & Analysis Report

IL&FS Engineering & Construction Co. Ltd. (IECCL) is part of the InfrastructureLeasing and Financial Services Limited ("IL&FS") group. The board ofdirectors of IL&FS has been reconstituted pursuant to the orders passed by theNational Company Law Tribunal Mumbai Bench ("NCLT”) in Company Petition No.3638 of 2018 filed by the Union of India acting through the Ministry of Corporate Affairsunder Sections 241 and 242 of the Companies Act 2013 as amended ("CompaniesAct”) on the grounds of mismanagement of public funds by the erstwhile board ofIL&FS and the affairs of IL&FS being conducted in a manner prejudicial to thepublic interest.

Further the National Company Law Appellate Tribunal (“NCLAT”) by way of itsorder on October 15 2018 ("Interim Order") in the Company Appeal (AT) 346 of2018 by way of which the NCLAT after taking into consideration the nature of the caselarger public interest and economy of the nation and interest of IL&FS and its groupcompanies (including IECCL) has stayed certain coercive and precipitate actions againstIL&FS and its group companies including IECCL. IL&FS and its group companies arecurrently undergoing resolution process under the aegis of the NCLAT and NCLT

The developments at the IL&FS Group have had negative impact on IECCL and its brandequity. These developments severely impacted the ongoing projects and order book.

Your Company is having overseas Subsidiary Maytas Infra Saudi Arabia (MISA) therebeing no employees at Saudi Arabia and the other partner being in the process ofGovernment takeover the accounts could not be finalized for the last 2 years.

The Board of Directors is hopeful of securing sizeable orders in the future and isconfident of effective execution of the existing works in the order book subject toapproval of the Resolution Plan by all the stakeholders

Covid 19:

During March 2020 the COVID pandemic increased rapidly forcing Governments of mostcountries to enforce a lockdown of all activities. Heeding to the various guidelinesissued in India by the Central and State Governments and abroad by various agencies on theCovid-19 pandemic all establishments offices & factories of the Company had shutdown operations from March 25 2020. Your Company immediately took several measures toensure health and safety of its workers and other employees and thereafter steps weretaken to ensure business continuity of essential services including Security and ITlights- on operations. Special permissions were also taken for ensuring that very criticaloperations such as water supply business dewatering in Metro projects etc. continuedwith all the precautionary measures.. This response has reinforced customer confidence inIECCL and many of them have expressed their appreciation and gratitude for keeping theirbusinesses running under most challenging conditions.

VI. SHARE CAPITAL :

During the year under review there was no change in the share capital of the Company

Shares held by Directors :

None of the Directors of the Company holds any Shares or convertible instruments of theCompany.

VII. DEPOSITS :

During the year under review your Company had not accepted any deposit from publicunder Chapter V of the Companies Act 2013

VIII. DIRECTORS :

The new Board members of Infrastructure Leasing and Financial Services Limited(IL&FS) with the powers to supersede the nominated board of IECCL nominated thefollowing as Directors on the Board of IECCL

. Name of the Director Date of Appointment
1. Mr Chandra Shekhar Rajan October 25 2018
2. Mr Bijay Kumar April 4 2019
3. Mr Dilip Lalchand Bhatia December 24 2018

During the year Mr. Bijay Kumar was appointed as Additional Director on April 04 2019and all the above mentioned directors were appointed (regularized) as Non-executiveNon-Independent Director in the 30th AGM of the Company held on December 30 2019.

None of the Directors of the Company are inter-se related to each other

Status on compliance of having Independent Directors and Women Directors on the Boardof Directors of the Company

As you are aware that the newly appointed directors of IL&FS who exercise controldirectly or indirectly over the Company have been appointed by the National Company LawTribunal (“NCLT”) on the recommendation of Central Government and areperforming function similar to that of the independent directors by discharging animportant public duty of resolving the financial problems and other issues. Further NCLTvia order dated April 26 2019 (“April Order”) has granted dispensation inrelation to the requirement for appointment of independent directors and women directorsin light of the difficulties faced by the new board of IL&FS. Further please notethat in April Order NCLT has observed that the new directors nominated by the CentralGovernment/Tribunal are independent directors and there is no requirement to appointindependent director during the pendency of stay order granted on October 15 2018 byNational Company Law Appellate Tribunal (“NCLAT) on the institution or continuationof suits or any other proceedings by any party/person/bank/company etc. against‘IL&FS' and its group companies in any Court of Law/Tribunal/Arbitration Panel orArbitration Authority (“October Order”).

Accordingly furnishing the details of declarations by the Independent Directors andFamiliarization programme of Independent Directors does not arise

Non-Executive Directors :

The Non-Executive Directors are entitled for sitting fee and the details of the sameare as follows;

(i) Board Meeting : Rs 15000/- per meeting
(ii) Audit Committee Meeting : Rs 10000/- per meeting
(iii) Other Committees of the Board : Rs 5000/- per meeting

Additionally the actual out of pocket expenses incurred by the Non-Executive Directorsfor attending the meetings are also borne by the Company. Except as mentioned above noother payments were made by the Company to Non-Executive Directors and the Company doesnot have any pecuniary relationship or transactions with the Non-Executive Directors. Thedetails of amount paid to the Directors of the Company towards Sitting Fee are mentionedin the Form MGT-9 annexed to the Directors' Report as well as the Corporate GovernanceSection of this Annual Report

Performance Evaluation :

In terms of the provisions of the Companies Act 2013 and Listing Regulations theBoard of Directors of the Company had in its Meeting held on November 10 2014 approvedthe policy on Performance Evaluation of the Board of Directors which laid down thecriteria for performance evaluation of Board of Directors its Committees ExecutiveDirectors Independent Directors and Non-Executive Directors. Further in terms of theprovisions of Section 178 of the Companies Act 2013 read with Companies Amendment Act2017 the Nomination and Remuneration Committee of the Board had decided that theevaluation of performance of the Board its Committees individual directors and theChairman will be carried out by the Board of Directors as per the parameters evolved fromthe policy on Performance Evaluation of the Board of Directors. The Board of Directorsevaluated the performance of its own all its Committees and Individual Directors(excluding the Director being evaluated) as satisfactory. The policy on performanceevaluation is available on the website of the Company at http://www.ilfsengg.com/html/policies/PerformanceEvaluationPolicy.pdf

Managerial Remuneration Policy :

In terms of the provisions of Section 178 of the Companies Act 2013 read with Rulesmade thereunder and Regulation 19 of Listing Regulations the Board of Directors of theCompany had framed Managerial Remuneration Policy which includes the criteria fordetermining qualifications positive attributes independence of directors and othermatters as specified under Section 178(3) of the Companies Act 2013 and Regulation 19read with Part D of Schedule II of Listing Regulations. The policy is available on thewebsite of the Company at http://www.ilfsengg.com/html/policies.php

IX. KEY MANAGERIAL PERSONNEL :

In terms of the provisions of Section 203 of the Companies Act 2013 the Board ofDirectors have designated Mr Kazim Raza Khan Chief Executive Officer Mr Naveen KumarAgrawal Chief Financial Officer and Mr Srinivasa Kiran Sistla Company Secretary as theKey Managerial Personnel of the Company.

During the year/period the following Key Managerial Personnel have resigned from theCompany and the details of the same are as follows;

Name of the Key Managerial Personnel Effective Date of Resignation
1. Ms Saheli Banerjee - CS August 16 2019
2. Mr J Veerraju - CS January 20 2020

During the year/period the following Key Managerial Personnel were appointed and thedetails of the same are as follows;

Name of the Key Managerial Personnel Date of Appointment
1. Mr Kazim Raza Khan - CEO May 16 2019*
2. Mr J Veerraju - CS September 5 2019
3 Mr Sistla Srinivasa Kiran - CS February 06 2020

*Mr. Kazim Raza Khan who was initially appointed as Manager on December 24 2018 wasre- designated as CEO of the

Company w.e.f. May 16 2019.

(X) DIRECTORS RESPONSIBILITY STATEMENT :

In terms of Section 134 (5) of the Companies Act 2013 the Board of Directors wish tostate that:

(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis howeverIL&FS and its group companies are currently undergoing resolution process under theaegis of the NCLAT and NCLT which will impact the going concern status of the Company;

(e) the directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and

(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively

(XI) DETAILS OF CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGEEARNINGS AND OUTGO:

A) Conservation of energy
i) The steps taken or impact on conservation of energy; The conservation of energy in all the possible areas is undertaken by the Company as an important means of achieving cost reduction. Savings in electricity fuel and power consumption receive due attention of the management on a continuous basis
ii) The steps taken by the Company for utilizing alternate sources of energy; NIL
iii) The capital investment on energy conservation equipments; NIL
B) Technology absorption
i) the efforts made towards technology absorption; Timely completion of the projects as well as meeting the budgetary requirements are the two critical areas where different techniques help to a great extent. Many innovative techniques have been developed and put to effective use in the past and the efforts to develop new techniques continue unabated.
ii) the benefits derived like product improvement cost reduction product development or import substitution; NIL
iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year) - NIL
a) the details of technology imported;
b) the year of import;
c) whether the technology been fully absorbed
d) if not fully absorbed areas where absorption has not taken place and the reasons thereof; NA
(iv) The expenditure incurred on Research and Development Nil
(C) FOREIGN EXCHANGE
Foreign Exchange earned in terms of actual inflows during the year Nil
Foreign Exchange Outgo during the year in terms of actual outflows Nil

(XII) BOARD AND ITS COMMITTEES :

(a) Board of Directors :

During the year under review the Board of Directors of the Company met 7 (Seven) timeson April 04 2019 May 16 2019 July 09 2019 August 07 2019 September 09 2019November 19 2019 and February 06 2020. The attendance along with such other details asrequired of each of the Directors is mentioned in the Corporate Governance Report sectionof this Annual Report

(b) Audit Committee :

The Audit Committee of the Board of Directors of the Company currently consists ofthree Members. During the year under review there were changes in the composition of theCommittee. The dates of meetings of Audit Committee held during FY 2020 attendance ofMembers in the Meetings and other details are mentioned in the Corporate Governance Reportsection of this Annual Report

During the year under review all the recommendations of the Audit Committee wereaccepted by the Board of Directors. Further the Committee comprises of Non-ExecutiveDirectors only (the nominees of the new Board of Promoter) all of whom have the abilityto read and understand the Financial Statements

(c) Corporate Social Responsibility Committee :

The Board of Directors of the Company constituted Corporate Social Responsibility (CSR)Committee on March 18 2014 and formulated a policy on CSR which is available on thewebsite of the Company athttp://wwwilfsengg.com/html/ policies/CSR_Policy.pdf.

For details relating to composition of CSR Committee number of meetings held duringthe year under review and other details the Members are requested to refer the CorporateGovernance Report which forms part of this Annual Report

As per Section 135(5) of the Companies Act 2013 the Company was required to spend twopercent of the average net profits calculated on the basis of preceding three financialyears. However no CSR activities have been conducted during the year due to negativeaverage net profits of the Company for the preceding three financial years. The details of

CSR policy and other details as per Rule 9 of Companies (Corporate SocialResponsibility) Rules 2014 are enclosed as Annexure 1 to this Report

(d) Other Committees :

The details of composition number of Meetings and such other information as requiredregarding Nomination and Remuneration Committee Stakeholders Relationship Committee andother Committees are mentioned in the Corporate Governance section of this Annual Report

(XIII) RISK MANAGEMENT :

The Board of Directors in its Meeting held on February 11 2015 formulated a RiskManagement Policy consisting of various elements of risk and mitigation measures

The Risk Management Committee of the Company is responsible for overseeing theimplementation of the Policy. In the opinion of the Board the policy on Risk Managementaddresses the risks associated with the business including identification of elements ofrisk which may threaten the existence of the Company. The Board of Directors/AuditCommittee reviews the risk assessment and mitigation procedures across the entity fromtime to time. The critical enterprise level risks of the Company and the mitigationmeasures being taken are provided in the Management Discussion and Analysis Report.

(XIV) SUBSIDIARIES JOINT VENTURES AND ASSOCIATES :

As per Section 129 (3) of the Companies Act 2013 and Regulation 34 of the ListingRegulations the Consolidated Financial Statements of the Company forms part of thisReport. The copies of Audited Financial Statements of the Subsidiaries are available onthe website of the Company at www.ilfsengg.com and a copy of the same will be providedupon written request to the Company Secretary

SUBSIDIARY ENTITIES :

Following are the Subsidiaries of your Company:

Angeerasa Greenfields Private Limited

Ekadanta Greenfields Private Limited

Saptaswara Agro-farms Private Limited

Maytas Infra Assets Limited

Maytas Metro Limited

Maytas Vasishta Varadhi Limited; and

Maytas Infra Saudi Arabia Company (Foreign Subsidiary)

Investing party in respect of which the reporting enterprise is an associate

Infrastructure Leasing & Financial Services Limited

SBG Projects Investments Limited

IL and FS Financial Services Ltd

Joint Ventures (Association of Persons) :

NCC - Maytas (JV)

NEC - NCC - Maytas (JV)

Maytas - NCC (JV)

NCC - Maytas (JV) (Singapore Class Township)

Maytas - CTR (JV)

NCC - Maytas - ZVS (JV)

ITNL - IECCL JV

Associate :

Hill County Properties Limited

Joint Ventures (Jointly Controlled Operations) :

• Maytas KBL (JV)

• Maytas KCCPL Flow more (JV)

• Maytas MEIL KBL (JV)

• Maytas MEIL ABB AAG (JV)

• MEIL Maytas ABB AAG (JV)

• MEIL Maytas KBL (JV)

• MEIL Maytas WIPL (JV)

• MEIL Maytas AAG (JV)

• MEIL - SEW - Maytas - BHEL (JV)

• L&T KBL Maytas (JV)

• Maytas - Rithwik (JV)

• Maytas Sushee (JV)

• Maytas Gayatri (JV)

• IL&FS Engg - Kalindee (JV)

• AMR-Maytas-KBL-WEG (JV)

• ITDC-Maytas (JV)

Further none of the entities have been associated / disassociated as Joint Ventures ofyour Company during the year under review. The performance and financial position of theSubsidiaries Joint Venture and Associate Companies are enclosed as Annexure 2 to thisReport

Note: Changes in the status of Hill County Properties Limited (HCPL) as associate ismade based on the changes to group structure by the Infrastructure Leasing & FinancialServices Limited HCPL is considered as subsidiary of Infrastructure Leasing &Financial Services Limited and accordingly classified as fellow subsidiary of IECCL in theyear current year.

(XV) HOLDING COMPANY :

During the year under review in terms of the provisions of section 2 (81) (i) of theCompanies Act 2013 which says that subsidiary company means a company in which theholding company controls the composition of the Board of Directors your Company becamethe subsidiary of M/s. Infrastructure Leasing & Financial Services Ltd.

(XVI) AUDITORS AND AUDITORS' REPORT :

(a) Statutory Auditors :

In terms of the provisions of the Companies Act 2013 read with Rules made thereunderthe Members of the Company at their Annual General Meeting (AGM) held on August 28 2017appointed BSR & Associates LLP and M Bhaskara Rao & Co. Chartered Accountants asJoint Statutory Auditors of the Company to hold office for a period of 5 years. HoweverM/s. BSR & Associates LLP Chartered Accountants (Firm Registration Number:116231W/W-100024) submitted resignation letter dated July 14 2019

Accordingly on recommendation of the Audit Committee and Board the members accordedtheir approval for the appointment of M Bhaskara Rao & Co. Chartered Accountants(Firm Registration Number 000459S) in the ExtraOrdinary General Meeting of the Companyheld on Monday September 9 2019 one of the Joint Statutory Auditors of the Company asSole Statutory Auditor of the Company pursuant to the resignation of the other JointStatutory Auditor M/s. BSR & Associates LLP Chartered Accountants (Firm RegistrationNumber: 116231W/W-100024).

Pursuant to their appointment M/s. M Bhaskara Rao & Co Chartered Accountants (FirmRegistration Number: 0004595) have conducted Audit of the Company for the Financial Year2019 and 2020.

The Board noted that there were following qualifications in the Auditor's Report forthe Standalone and Consolidated Financial Statements for the Year Ended March 312020:

Standalone Financial Statements :

a. Note 52 relating to non-recognition of interest expense of Rs. 289.51 Crores (March312019: Rs 144.99 Crores) for the year on the borrowings availed by the Companyconsidering the process initiated for submission of a resolution proposal to lenders forrestructuring of existing debt.

i. Consequently interest expense and loss for the year are understated by Rs. 289.51Crores (March 312019: Rs 144.99 Crores) approximately and

ii. Retained earnings (accumulated loss) and Interest Payable is understated by Rs.434.50 Crores (March 312019: Rs 144.99 Crores) approximately.

b. Note 56 relating to deferred tax asset amounting to Rs. 242.99 Crores representsamounts recognised by the Company in earlier years. Considering the material uncertaintyrelated to going concern that exists in the Company the threshold of reasonable certaintyfor recognising the deferred tax assets as per Ind AS 12- Income Taxes has not been met.Consequently deferred tax assets are overstated and retained earnings (accumulatedlosses) are under stated by Rs. 242.99 Crores.

Consolidated Financial Statements :

Note 51 relating to non-recognition of interest expense of Rs. 289.51 Crores (March312019: Rs 144.99 Crores) for the year on the borrowings availed by the Companyconsidering the process initiated for submission of a resolution proposal to lenders forrestructuring of existing debt.

i. Consequently interest expense and loss for the year are understated by Rs. 289.51Crores (March 31 2019: Rs 144.99 Crores) approximately and

ii. Retained earnings (accumulated loss) and Interest Payable is understated by Rs.434.50 Crores (March 312019: Rs 144.99 Crores) approximately

Note 55 relating to deferred tax asset amounting to Rs. 242.99 Crores representsamounts recognised by the Company in earlier years. Considering the material uncertaintyrelated to going concern that exists in the Company the threshold of reasonable certaintyfor recognising the deferred tax assets as per Ind AS 12- Income Taxes has not been met.Consequently deferred tax assets are overstated loss for the year and retained earnings(accumulated losses) are under stated by Rs. 242.99 Crores.

Internal Financial Controls :

According to the information and explanations given to us and based on our audit amaterial weakness has been identified in the Company's internal financial controls overfinancial reporting as at 31 March 2020 relating to certain operating effectiveness insome of controls in respect of assessment of deferred tax asset and procurement ofmaterials A ‘material weakness' is a deficiency or a combination of deficienciesin internal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the Company's annual or interim financialstatements will not be prevented or detected on a timely basis.

The Board of Directors explanations on the aforementioned qualification are givenbelow:

Qualification on Standalone Financial Statements :

1. Non-recognition of interest expense

In line with the affidavit filed by the Ministry of Corporate Affairs ("MCA') withthe Hon'ble NCLAT on May 212019 the cut-off date of October 15 2018 ("Cut-OffDate") was proposed on account of inter alia the fact that the Hon'ble NCLAT hadpassed the Order on October 15 2018 which inter alia granted certain reliefs to theIL&FS group and also restricted certain coercive actions by the creditors of theIL&FS group. Further the Hon'ble NCLAT had passed the order on March 12 2020 thatinterim order will continue until further orders and cut-off date of October 15 2018 hasbeen approved for resolution.

In terms of the Resolution Framework Reports the proposal made is that liabilitiesrelating to the relevant IL&FS Group Entity including interest default interestindemnity claims and additional charges whether existing at or relating to a period afterOctober 15 2018 (the Cut-Off Date as explained in the previous paragraph) should notcontinue to accrue.

Further since a Resolution Plan in line with the above orders is in process theCompany has neither paid nor recognized as interest payable aggregating to Rs. 28951Lakhs (for the year March 312019 Rs. 14499 Lakhs) approximately (Excluding penalinterest etc.) for year ended March 31 2020 in anticipation of the approval of lendersfor concession/waivers being sought by Company in the resolution plan. Such interest hasnot been recognized as payable as at March 31 2020 aggregates to Rs 43450 Lakhs (As atMarch 31 2019 Rs 14499 lakhs) approximately (excluding penal interest etc.).

Deferred Tax Assets

Deferred tax asset amounting to Rs. 242.99 Crores as at March 312020 recognised bythe Company in earlier years. The same is being retained as the Company is in the processof finalising resolution plan which if approved and implemented is likely to generateenough profits in subsequent years which can be set-off against deferred tax asset.

ii. Qualification on Consolidated Financial Statements :

Non-recognition of interest expense

In line with the affidavit filed by the Ministry of Corporate Affairs ("MCA') withthe Hon'ble NCLAT on May 212019 the cut-off date of October 15 2018 ("Cut-OffDate") was proposed on account of inter alia the fact that the Hon'ble NCLAT hadpassed the Order on October 15 2018 which inter alia granted certain reliefs to theIL&FS group and also restricted certain coercive actions by the creditors of theIL&FS group. Further the Hon'ble NCLAT had passed the order on March 12 2020 thatinterim order will continue until further orders and cut-off date of October 15 2018 hasbeen approved for resolution.

In terms of the Resolution Framework Reports the proposal made is that liabilitiesrelating to the relevant IL&FS Group Entity including interest default interestindemnity claims and additional charges whether existing at or relating to a period afterOctober 15 2018 (the Cut-Off Date as explained in the previous paragraph) should notcontinue to accrue.

Further since a Resolution Plan in line with the above orders is in process theCompany has neither paid nor recognized as interest payable aggregating to Rs. 28951Lakhs (for the year March 312019 Rs. 14499 Lakhs) approximately (Excluding penalinterest etc.) for year ended March 31 2020 in anticipation of the approval of lendersfor concession/waivers being sought by Company in the resolution plan. Such interest hasnot been recognized as payable as at March 31 2020 aggregates to Rs 43450 Lakhs (As atMarch 31 2019 Rs 14499 lakhs) approximately (excluding penal interest etc.).

Deferred Tax Assets

Deferred tax asset amounting to Rs. 242.99 Crores as at March 312020 recognised bythe Company in earlier years. The same is being retained as the Company is in the processof finalising resolution plan which if approved and implemented is likely to generateenough profits in subsequent years which can be set-off against deferred tax asset.

iii. Internal Financial Controls :

The Company has institutionalized internal control in the form of standard operatingprocedures with an objective of orderly and efficient conduct of its businesssafeguarding the Company's assets prevention and detection of frauds accuracy andcompleteness of accounting records and compliance with applicable statutory requirements.The Company is having Oracle e-Business Suite as Enterprise Resource Planning (ERP) Systemfor recording transactions in an integrated way with complete audit trail.

The Company has also deployed an external firm of Chartered Accountants and thecombined Internal Audit team consists of technical auditors (Engineers) CharteredAccountants and Cost Accountants.

(b) Cost Auditors :

In terms of the provisions of the Section 148 of the Companies Act 2013 read with theCompanies (Cost Records and Audit) Rules 2014 as amended Company maintains cost recordsand accounts in respect of the Roads and other infrastructure projects

The Board of Directors on the recommendation of Audit Committee appointed NarasimhaMurthy& Co as the Cost Auditors of the Company for FY 2020 for conducting the CostAudit of the Company at a remuneration of Rs.500000/- was approved by the Members at theThirtieth AGM of the Company held on December 30 2019. The Cost Auditors submitted theirreport for FY 2020 to the Board of Directors.

Further on the recommendation of Audit Committee the Board of Directors in itsMeeting held on September 03 2020 reappointed Narasimha Murthy & Co Cost Accountantsas the Cost Auditors of the Company for FY 2021 at a remuneration as may be determined bythe Audit Committee in consultation with the Auditors. Necessary resolution forratification of their remuneration in terms of the provisions of the Companies Act 2013read with Rules made there under is included in the Notice of AGM for the approval of theMembers

(c) Secretarial Auditor :

In terms of the provisions of Section 204 of the Companies Act 2013 the Board ofDirectors had appointed RPR & Associates Company Secretaries to conduct theSecretarial Audit for FY 2020. The Secretarial Audit Report for the Financial Year EndedMarch 312020 is enclosed as Annexure 3 to this report. The Secretarial AuditReport contains the following qualifications and the replies thereon given below;

Qualification Reply
Annual return on Foreign Liabilities and Assets (FLA) was not submitted within the due date for the F.Y 2019-20 as on date of this report and Company is putting efforts in getting the information from its foreign subsidiary and thereafter will submit to RBI
Annual Performance Report (APR) was not filed with RBI for the year 2018-19. Company is putting efforts in getting the information from its foreign subsidiary and thereafter will submit to RBI

The Board of Directors of the Company had in its Meeting held on September 03 2020re-appointed RPR & Associates Company Secretaries as the Secretarial Auditor of theCompany for FY 2021.

(XVI) CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES :

It is the endeavor of the Company to enter its contracts/arrangements/ transactionswith the related parties in the ordinary course of business and on arms' length basis. Interms of the provisions of Section 188 of the Companies Act 2013 read with Rules madethereunder all transactions with Related Parties were in ordinary course of business andon arm's length basis. Accordingly details of related party transactions as per section188 of Companies Act 2013 in Form AOC-2 is not required. All contracts / arrangements /transactions entered by the Company were in compliance with the applicable provisions ofthe Companies Act 2013 and Listing Regulations. The details of related partrytransactions can be referred at Note No. 37 of Notes to accounts which is self explanatoryand dot not call for any further comments.

The Company had framed Related Party Transaction Policy for the purpose of approval andidentification of Related Party Transactions. All Related Party Transactions entered intoby the Company in terms of the Policy were placed before the Audit Committee for itsreview and approval from time to time. The Related Party Transaction Policy approved bythe Board of Directors is uploaded on the website of the Company at www.ilfsengg.com.

XVII. EMPLOYEE STOCK OPTION SCHEME :

The Company's Employee Stock Option Scheme 2018 (ESOP Scheme 2018) had not beenimplemented as on date and hence no Certificate from the Statutory Auditors of the Companyis required to be obtained for the FY 2020 as required by the SEBI Guidelines and theresolution passed by the Members.

The disclosure as required under SEBI (Share Based Employee Benefits) Regulations 2014relating to ESOP 2018 scheme of the Company is available on the website of the Company atwww.ilfsengg.com.

XVIII. MANAGEMENT DISCUSSION AND ANALYSIS :

A separate section titled "Management Discussion and Analysis" consisting ofdetails as required under Regulation 34 read with Schedule V of the Listing Regulationsforms part of this Annual Report.

XIX. CORPORATE GOVERNANCE:

A separate section titled "Report on Corporate Governance" including acertificate from the Practicing Company Secretary confirming compliance with theconditions of Corporate Governance as stipulated under Listing Regulations is enclosed tothe Report on Corporate Governance and forms part of this Annual Report

Further the declaration signed by the Chief Executive Officer affirming the compliancewith Code of Conduct for Board of Directors and Senior Management Personnel is alsoenclosed to the Report on Corporate Governance

XX) DISCLOSURES :

(a) Extract of Annual Return :

The extract of Annual Return as per Section 92(3) of the Companies Act 2013 and Rule12 (1) of the Companies (Management and Administration) Rules 2014 is enclosed as Annexure4 to this Report

(b) Vigil Mechanism :

In terms of the provisions of the Section 177 of the Companies Act 2013 and ListingRegulations the Company had established a Vigil Mechanism through its Whistle BlowerPolicy for directors and employees to report concerns about unethical behavioractual/suspected frauds and violation of Company's Code of Conduct. Please refer to theCorporate Governance section of the Annual Report for further details

(c) Policy on Prevention of Sexual Harassment :

In terms of the provisions of The Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 the Company had formulated and implemented a policyfor Prevention of Sexual Harassment of Women at workplace. The Company from time to timeconducts workshops or awareness programmes against sexual harassment at workplace

The Company had also constituted an Internal Committee comprising of employees of theCompany and an Independent NGO representative. The scope of the Internal Committeeencompasses all incidents / occurrences of sexual harassment which take place at theworkplace and where either of the party (aggrieved / accused) is an employee of theCompany. During the year under review the Company has not received any complaints underthe policy

Further the Company has many systems processes and policies to ensure professionalethics and harmonious working environment. The Company follows Zero Tolerance towardsCorruption and unethical conduct. These are ensured through Whistle Blower Policy SexualHarassment Policy and Redressal Guidelines

(d) Particulars of Loans guarantees or investments under Section 186 :

Your Company is into the business of providing Infrastructure Facilities. Accordinglythe provisions of Section 186 pertaining to providing Loan or Guarantee to othercorporates are exempted. All information regarding Loans Guarantees and Investments arementioned in the notes to financial statements for FY 2020 which are self-explanatory

(e) Particulars of employees and related disclosures :

The disclosures relating ratio of remuneration of each directors to the medianemployee's remuneration and other details as per Section 197 (12) of the Companies Act2013 read with Rule 5 (1) of the Companies (Appointment and remuneration of ManagerialPersonnel) Rules 2014 is enclosed as Annexure 5 to this Report

The disclosure pertaining to remuneration and other details as required under Section197 (12) of the Act read with rule 5(2) and 5(3) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is enclosed as Annexure 6 to thisReport

(f) Material changes and comments if any affecting the financial position of theCompany : Due to the latest developments in the I L&FS Group and the Company thedebt burden has increased in a manner that is not commensurate with the size of itsoperations and there has been severe stress in terms of cash flows.

(g) Reporting of Fraud : The Auditors of the Company have not reported anyinstances of fraud committed against the Company by its officers or employees as specifiedunder section 143(12) of the Companies Act 2013.

(h) Details of significant and material orders passed by the regulators or courts ortribunals impacting the going concern status of the Company : The National Company LawAppellate Tribunal (“NCLAT”) by way of its order on October 15 2018(“Interim Order”) in the Company Appeal (AT) 346 of 2018 after taking intoconsideration the nature of the case larger public interest and economy of the nation andinterest of IL&FS and its group companies (including IECCL) has stayed certaincoercive and precipitate actions against IL&FS and its group companies includingIECCL.

IL&FS and its group companies are currently undergoing resolution process under theaegis of the NCLAT and NCLT which will impact the going concern status of the Company.

(i) Details in respect of adequacy of internal financial controls : The details ofinternal financial controls and their adequacy is given in Management Discussion andAnalysis Report

(j) Business Responsibility Report (BRR) : Since your company doesn't fall underthe top 500 companies by market capitalization for the F.Y ended March 312020 it is notapplicable to your company.

XIX. ACKNOWLEDGMENTS :

Your Directors place on record their gratitude to the Bankers Media FinancialInstitutions various agencies of the State and the Central Government AuthoritiesClients Consultants Suppliers Sub-Contractors Members and the Employees for theirvaluable support and co-operation and look forward to continued enriched relationships inthe years to come.

By order of the Board

For IL&FS Engineering and Construction Company Ltd

Sd/- Sd/- Sd/-
Chandra Shekhar Rajan Bijay Kumar Dilip Lalchand Bhatia
Chairman Director Director
DIN 00126063 DIN: 07262627 DIN: 01825694
Place: Hyderabad
Date: September 03 2020

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