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Patel Engineering Ltd.

BSE: 531120 Sector: Infrastructure
NSE: PATELENG ISIN Code: INE244B01030
BSE 00:00 | 22 Jun 47.40 0
(0.00%)
OPEN

47.65

HIGH

48.10

LOW

46.50

NSE 00:00 | 22 Jun 47.45 0.25
(0.53%)
OPEN

48.25

HIGH

48.25

LOW

46.50

OPEN 47.65
PREVIOUS CLOSE 47.40
VOLUME 13889
52-Week high 96.05
52-Week low 45.00
P/E 2.82
Mkt Cap.(Rs cr) 744
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 47.65
CLOSE 47.40
VOLUME 13889
52-Week high 96.05
52-Week low 45.00
P/E 2.82
Mkt Cap.(Rs cr) 744
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Patel Engineering Ltd. (PATELENG) - Chairman Speech

Company chairman speech

Dear Shareholder

It is my pleasure to present to you our performance for the fiscal year 2016-17 andmajor events after the end of the said fiscal year during which your Company has crossedone of the biggest hurdles in its history of more than 6 Decades presence in EPC sector.Over the years we have continually worked on expanding our capabilities and horizonsmoving closer every year to our vision of becoming a leader in EPC sector.

The legacy of stalled infrastructure projects due to delay in land acquisitionmandatory clearances lack of coordination between various authorities and delay inpayments to construction companies had been looming over the sector-for quite some timeand such delay had depleted the companies in the sector including yours' and made themstarve for financial liquidity to sustain day to day expenses of the large workforce andmachinery deployed all over the country coupled with debt with ever mounting interestburden making it impossible for almost all companies in the sector to sustain.

With infrastructure development being the major focus of the current government EPCsector's outlook has started to look encouraging again. India's 2016-2017. Union Budgethas provided a significant outlay for infrastructure expenditure which was further boostedin the budget for FY 2017-18. This spending is seen as a key component of the government'splans to boost India's growth levels to projections ranging between 7 and 9 percent. Theallocation of Rs.3.96 lakh crore for the sector and a newly liberalized foreign directinvestment (FDI) policy further underline the government's commitment in this regard. Theimplementation of GST consolidating Rail and Fiscal budget pushing in Make in IndiaDigital India Skill India Start-up India and Swachh Bharat Abhiyan (Clean India Mission)and the introduction of Bullet Trains etc. reflect the better quality of life thatgovernment wants for its people.

The current government has undertaken steps by giving faster clearances and removal ofhurdles by regular monitoring of projects by key officials. This outlook change by thegovernment has been reflected in NITI Aayog Initiatives where the government has takenthe initiative to address liquidity crunch by early disbursement of 75% of receivablesagainst margin free bank guarantees stuck in various legal forums even after ArbitralAwards in favour of the contractors. The amendment to Arbitration act reducing thearbitration timeline and formation of separate commercial courts are few examples ofinitiatives to bring in ease of business and much required liquidity in the sector.Measures taken by Reserve Bank of India (RBI) with Debt Restructuring schemes likeStrategic Debt Restructuring (SDR) which was introduced in the previous year and Schemefor Sustainable Restructuring of Stressed Assets (S4A) introduced in 2016 further enabledvarious companies to resolve debt repayment issues by aligning it with cash flowsgenerated from operations.

As you are aware that the lenders of the Company had invoked SDR on May 26 2016. TheCompany allotted equity shares and converted ~ Rs.418 crore of debt to equity for a 51.08%stake in the Company taken by the lenders in November 2016 as part of the said SDRScheme. The company had also undertaken to sell various non-core assets includingactionable claims real estate etc. to reduce its debt burden and hold back allinvestments in Asset Ownership projects while concentrating on the core EPC Business.

It gives me immense pleasure to inform you all that we have been successful inimplementing the above plan -

1. We have merged and amalgamated Patel Realty (India) Ltd. a wholly owned subsidiaryof the Company to reduce costs and concentrate more on core EPC business.

2. We have successfully completed transfer/assignment of certain actionable claims forvarious projects undertaken by the Company in the present and past and certain rights ofreal estate assets together with corresponding debts including debts liabilities andobligations related thereto valuing approximately Rs.2020 crore from its books to itswholly owned subsidiary viz Hitodi Infrastructure Limited whose 51% equity has been takenby an Eight Capital Group Entity and change of management has been affected in November2017.

3. Lodha Developers one of the prominent builders in Mumbai has acquired 100% equityof wholly owned subsidiary of the Company viz Patel Land Developers Limited (PLDL) towhom the company has transferred ~5 acres of Jogeshwari property along with itscorresponding liability and debt of Rs.376 crore in November 2017.

4. Apart from the above the Company has also entered into Joint Development Agreementsand sold certain other noncore land assets in Electronic City Bengaluru.

With the above transactions the total debt of the company has been reduced by morethan Rs.2500 crore.

In addition to the above transactions the Company has received approvals from majorityof lenders under JLF (as required under RBI guidelines) for its debt resolution plan underthe S4A Scheme as mandated by the overseeing committee of RBI in November 2017. Under thescheme the total debt of the company shall split into Sustainable PART A Debt~Rs.1724crore (Fund Based) and unsustainable PART B debt ~ Rs.1240 crore. Further all non-fundbased limits both current and additional limits approved under the scheme forms part ofSustainable Debt.

Under the Scheme the Part B debt is converted into Optionally Convertible Debentures(OCDs) issued to the said lenders with balance Part A debt to be serviced as per theexisting terms. After repayment of debts as mentioned above the Company has till dateissued~Rs.715 crore of OCDs with a 0.01% Coupon rate payable annually and 7% IRR payableat the time of redemption over a period of 10 years. As part of the Scheme the Promotersof the Company have also pledged Shares held by them to the extent of 10% of the totalEquity capital of the Company to a Trustee appointed by the lenders out of which pledge onshares equivalent to 3.93% of the total equity capital of the Company has been invoked andcredited to the lenders @ Re. 1 per share who have approved and signed the OCD documentsas part of the said S4A Scheme.

As part of the Scheme the promoters of the Company have also infused Rs.75 crore(first tranche) as an interest-free unsecured loan in the Company by raising a loanagainst pledge of their shares aggregating to 13.37% of the total Equity capital of theCompany held by them to bring in required liquidity in the company.

Our Company is one of the few entities to come out and stand tall after undergoing debtrestructuring schemes of SDR and S4A. With the implementation of the above the interestburden of the company is expected to reduce substantially and with an additional non-fundbased limits especially bank guarantees availability after this implementation shallboost and enable the company to bid for new projects and enhance the much required OrderBook of the Company.

- The company is already L1 with~Rs.3500 crore of work which is expected to turn intofirm orders and now the focus of the Company shall be to double the current order bookof~Rs.7415 crore by end of FY 18-19.

The Consolidated Performance of the Company: -

- The Revenues from Operations reduced by 4% from

' 4040.87 crore to Rs.3883.84 crore. The net loss of the Company for the year FY17however was Rs.102.89 crore as compared to Rs.196.19 crore in the previous year.

The performance of the company's operations out of its core engineering &construction business reflected in standalone results were as follows after implementationof Ind AS and merger of PRIL:-

- Revenue of the Company registered a growth of 5.85% where revenue increased fromRs.2764 crore in FY 2015-16 to Rs.2925.55 crore in FY 2016-17.

- PBT of the company stood at Rs.107.31 crore in FY 17 as compared to Rs.(39.14) crorein FY 16.

- PAT of the company for FY 17 was Rs.41.83 crore viz. a viz. a loss of Rs.(29.91)crore in FY 16.

As the Managing Director of the company I see a bright and glooming future ahead andwould say that with all courage and hope we look forward to grow the company back againand roaring much ahead than ever before and even if there are more hurdles we shall beable to overcome the same with the support of you all shareholders and lenders of theCompany.

Thank you all for your much needed support and co-operation.

Yours truly

Rupen Patel

Managing Director.