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Reliance Naval & Engineering Ltd.

BSE: 533107 Sector: Others
NSE: RNAVAL ISIN Code: INE542F01012
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2.95

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OPEN 2.73
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VOLUME 2951446
52-Week high 10.24
52-Week low 0.95
P/E
Mkt Cap.(Rs cr) 215
Buy Price 2.92
Buy Qty 50.00
Sell Price 2.92
Sell Qty 2.00
OPEN 2.73
CLOSE 2.81
VOLUME 2951446
52-Week high 10.24
52-Week low 0.95
P/E
Mkt Cap.(Rs cr) 215
Buy Price 2.92
Buy Qty 50.00
Sell Price 2.92
Sell Qty 2.00

Reliance Naval & Engineering Ltd. (RNAVAL) - Director Report

Company director report

DEAR SHAREOWNERS

Your Directors present the 22nd Annual Report and the audited financialstatement for the Financial Year ended March 31 2019

Financial Results

The financial performance of the Company on standalone basis for the financial yearended March 31 2019 is summarised below:

(? in Lakh)
Particulars Financial year ended March 31 2019 Financial year ended March 31 2018
Total Income 18463.04 41384.25
Profit / (Loss) before taxation (1010098.29) (116853.21)
Tax expenses (Net) (including deferred tax and tax for earlier years) (38006.43) 21245.47
Profit / (Loss) after taxation (1048104.72) (95607.74)
Other Comprehensive Income (11.96) 28.24
Total Comprehensive Income for the year (1048116.68) (95579.50)
Add: Balance of profit/(loss) brought forward (51468.68) 43427.32
Securities Premium on issue of shares - 683.50
Balance carried to Balance Sheet (1099585.36) (51468.68)

Financial Performance

During the financial year under review your Company earned an income of Rs. 18463.04lakhs against Rs. 41384.25 Lakhs in previous year. The Company incurred a loss after taxof Rs. 1048104.72 lakhs for the year as compared to Rs. 95607.74 lakhs in the previousyear.

The performance and financial position of the subsidiary companies and associatecompany are included in the consolidated financial statement of the Company and presentedin the Management Discussion and Analysis forming part of this Annual Report.

Dividend

In view of the inadequacy of profit during the year under review the Board of Directorhas not recommended dividend on the equity shares of the Company.

The Company's Dividend Distribution Policy forms part of this annual report.

Business Operations

The Company is primarily engaged into defence and commercial shipbuilding ship repairand offshore engineering activities and operates the largest dry dock in India. OurCompany's shipyard at Pipavav Gujarat has integrated state of-the-art productionfacilities.

Our Company's Shipyard at Pipavav Gujarat is certified by the US Navy for servicingof warships from the US Navy's Seventh fleet. Currently this is the only Indian Shipyardto achieve this landmark.

During the year under review our Company launched first-of-its-kind the largest nextgeneration training ship for Indian

Coast Guard (ICG) entirely designed by the Design Bureau of the Company. The trainingship has the primary role to impart sea training to cadets including an all-roundexposure to the lives of ICG officers. The vessel is 105 meters long with a capacity ofaccommodating 242 personnel. The vessel is powered by twin diesel engines of 10400KW andcan move at a speed of 20knots. The vessel is also equipped with weapons systems and iscapable of policing maritime zones of the country as well as for search and rescuemissions. The vessel's capability also includes operating a twin-engine helicopter forundertaking maritime reconnaissance.

Debt Refinancing and Resolution Plan

As on March 31 2019 the Company had outstanding fund based borrowings of Rs. 7835Crores crore (including interest) taken from banks and financial institutions. Due to longgestation period of large scale infrastructure created by our Company non-availability ofworking capital on time coupled with dearth in new orders the operations of our Companywere severely impacted during the year. The Company's business is significantly dependenton defence contracts and in absence of finalisation of any such contracts; the earnings ofthe Company were insufficient to service the debt. As a matter of fact it furtherincreased its financial stress.

The Company is under discussion with the lenders and looking forward to achieve debtresolution under the extant RBI guidelines.

During the year under review one of the lenders has filed an application before theNational Company Law Tribunal Ahmedabad seeking debt resolution under IBC process incompliance with the circular dated February 12 2018 issued by Reserve Bank of India.Further lenders have also filed application against the Company with Debts RecoveryTribunal Ahmedabad.

Management Discussion and Analysis

Management Discussion and Analysis Report for the year under review as stipulated underRegulation 34(2) of the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 (Listing Regulations) is presented in aseparate section forming part of this Annual Report.

Non-Convertible Debentures

During the year under review the Company has revoked / extinguished the 24231000Secured Redeemable Unlisted Non-Convertible Debentures of Rs. 100 each aggregating toRs. 243.31 crores issued on private placement basis to the lenders for considerationother than cash against the Right of Recompense (RoR). These debentures were issued inanticipation of lenders approving the Refinance Scheme.

Deposit

During the year under review the Company has neither accepted nor renewed any depositsfrom the public falling within the ambit of Section 73 of the Companies Act 2013(‘the Act') and the relevant Rules made there under. There are no unclaimed depositsunclaimed / unpaid interest refunds due to the deposit holders or to be deposited to theInvestor Education and

Protection Fund as on March 31 2019.

Particulars of Loans Guarantees or Investments

Pursuant to Section 186 of the Act details of the Investment made by the Company areprovided in standalone financial statement under Note no. 3.

Subsidiary Companies Associate and Joint venture

As on March 31 2019 the Company is having 6 subsidiaries under its fold and 1Associate Company.

The financial performance of each of the subsidiaries and associate companies as perthe Act is provided in the consolidated financial statement.

During the year due to non-viability of the project Mazagon Dock Pipavav DefencePrivate Limited (MDPDPL) the joint venture company between the Company and Mazagon DockShipbuilders Limited has been terminated and necessary application for strike off of thename of the joint venture company from the register of companies has been filed with theRegistrar of Companies (ROC) Maharashtra at Mumbai. Final notification by the ROC isawaited.

The Company's policy for determining material subsidiaries as approved by the Boardmay be accessed on the Company's website at the link: https://www.rnaval.co.in/web/rnaval/ corporate-governance.

Financial Statement – Application of Indian Accounting Standards (Ind AS)

The audited financial statement of the Company drawn up both on standalone andconsolidated basis for the financial year ended March 31 2019 are in the accordancewith the requirements of the Companies (Indian Accounting Standards) Rules 2015 "IndAS Rules".

Consolidated Financial Statement

The Audited Consolidated Financial Statement for the financial year ended March 312019 based on the financial statement received from subsidiaries and associate companiesas approved by their respective Board of Directors have been prepared in accordance withthe Companies (Indian Accounting Standards) Rules 2015 (‘Ind AS') prescribed underSection 133 of the Companies Act 2013 and other recognised accounting practices andpolicies.

Directors

During the year under review Shri Debashis Bir has been appointed as Whole-timeDirector of the Company w.e.f. April 01 2018 for a period of 2 years. The period of 2years will expire on March 31 2020. It is proposed to re-appoint Shri Debashis Bir asWhole-time Director of the Company for a further period of 3 years. The Nomination andRemuneration Committee of the Board has recommended appointment Shri Debashis Bir. TheBoard also recommends his re-appointment. Lt. Gen. Syed Ata Hasnain (Retd.) Shri RajeshDhingra and Shri Rahul Sarin have resigned as Directors of the Company w.e.f. August 102018.

Shri Anil D. Ambani has resigned as Director of the Company w.e.f. August 25 2018.

The IDBI Bank Limited and Life Insurance Corporation of India have withdrawn nominationof Shri Rajeev Kumar and Shri Raj Kumar as Nominee Directors from the Board of Directorsof the Company w.e.f. September 22 2018 and February 02 2019 respectively.

Ms C R Gayathri has resigned as Director of the Company w.e.f.

December 14 2018. Shri Rana Ranjit Rai Ms. Ryna Karani and Shri Sateesh Seth haveresigned as Directors of the Company w.e.f. February 02 2019.

Shri Raj Narain Bhardwaj has resigned as Director of the Company w.e.f. February 072019.

Pursuant to the provision of Section 161 of the Act Ms Ankita

Tallur has been appointed as Additional Director of the Company w.e.f. February 022019. Further Shri Pankaj Pandya was appointed as Additional Director in the capacity ofIndependent Director and Shri Venkata Rachakonda and Ms. Shiby Jobby were also appointedas Additional Directors of the Company w.e.f. March 30 2019. Ms. Ankita Tallur ShriPankaj Pandya Shri

Venkata Rachakonda and Ms. Shiby Jobby shall hold office till the conclusion of ensuingAnnual General Meeting (AGM) of the Company.

The Company has received notices in writing from a member under Section 160 of the Actproposing the candidature of

Ms. Ankita Tallur Shri Pankaj Pandya Shri Venkata Rachakonda and Ms. Shiby Jobby forthe office of Director of the Company.

The Nomination and Remuneration Committee of the Board has recommended appointment ofall the above mentioned directors. The Board also recommends appointment of Shri PankajPandya as an Independent Director for a period of five consecutive years effective fromthe date of appointment as an Additional director not being liable to retire by rotationand also appointment of Ms. Ankita Tallur Shri Venkata Rachakonda and Ms. Shiby Jobby asDirectors being liable to retire by rotation.

In the opinion of the Board the Independent Director proposed to be appointed fulfilsthe conditions specified in the Act and the rules made thereunder and that the proposedindependent director is independent of the management.

The Board places on record its appreciation for valuable contribution made by Lt. Gen.Syed Ata Hasnain (Retd.) Shri Rajesh Dhingra Shri Rahul Sarin Shri Anil D. Ambani ShriRajeev Kumar Ms. C R Gayathri Shri Raj Kumar Shri Rana Ranjit Rai Ms. Ryna KaraniShri Sateesh Seth and Shri Raj Narain Bhardwaj during their tenure as Directors of theCompany.

The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence as prescribed under the Act and theListing Regulations.

The details of programme for familiarization of Independent Directors with the Companynature of the industry in which the Company operates and related matters are uploaded onthe website of the Company at the link http://www.rnaval.co.in/web/rnaval/corporate-governance.

In term of the provisions of the Companies Act 2013 Shri Debashis Bir Whole-timeDirector and Chief Executive Officer of the Company retires by rotation and beingeligible offers himself for re-appointment at the ensuing AGM. A brief resume of ShriDebashis Bir along with requisite details as stipulated under Regulation 36(3) of theListing Regulations is given in the section on Corporate Governance Report forming part ofthis Annual Report.

Key Managerial Personnel (KMP)

During the year under review Shri Debashis Bir has been appointed as Whole-timeDirector and Chief Executive Officer and termed as KMP with effect from April 1 2018.Shri Paresh Rathod has been appointed as Company Secretary and termed as KMP with effectfrom April 1 2018

Evaluation of Directors Board and Committees

The Nomination and Remuneration Committee (NRC) of the Company has devised a policy forperformance evaluation of the individual directors Board and its Committees whichincludes criteria for performance evaluation.

Pursuant to the provisions of the Act Regulation 17(10) of the Listing Regulations andbased on the policy devised by NRC the Board has carried out an annual performanceevaluation of its own performance the directors individually as well as the evaluation ofthe working of the Committees of the Board. A separate meeting of the IndependentDirectors was also held during the financial year for the evaluation of the performance ofnon-independent Directors performance of the Board as a whole and that of the Chairman.

Policy on appointment and remuneration for Directors Key Managerial Personnel andSenior Management Employees

The Nomination and Remuneration Committee of the Board has devised a policy forselection appointment and remuneration of Directors Key Managerial Personnel and SeniorManagement Employees. The Committee has formulated the criteria for determiningqualifications positive attributes and independence of a Director which has been put upon the Company's website http://www.rnaval.co.in/web/rnaval/corporate-governance and alsois attached as Annexure - A.

Directors' Responsibility Statement

Pursuant to the requirements under Section 134(5) of the Act with respect to Directors'Responsibility Statement it is hereby confirmed that: i. In the preparation of the annualfinancial statement for the financial year ended March 31 2019 the applicable AccountingStandards had been followed along with proper explanation relating to material departuresif any; ii. The Directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as at March 31 2019 andof the loss of the Company for the year ended on that date; iii. The Directors had takenproper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting fraud and other irregularities; iv. The Directors hadprepared the annual financial statement for the financial year ended March 31 2019 on a‘going concern' basis; v. The Directors had laid down proper internal financialcontrols to be followed by the Company and such financial controls are adequate and areoperating effectively; and vi. The Directors had devised proper systems to ensurecompliance with the provisions of all applicable laws and that such systems are adequateand operating effectively.

Contracts and Arrangements with Related Parties

All contracts / arrangements / transactions entered into/by the Company during thefinancial year under review with related parties were on an arm's length basis and in theordinary course of business.

There were no materially significant related party transactions which could have apotential conflict with the interest of the Company at large.

During the year the Company had not entered in to any contract / arrangement /transaction with related parties which could be considered material in accordance with thepolicy of Company on materiality of related party transactions.

All Related Party Transactions were placed before the Audit Committee for approval.Prior omnibus approval of the Audit Committee was obtained for the transactions which wereof a repetitive nature. The transactions entered into pursuant to the omnibus approval sogranted were reviewed and statements giving details of all related party transactions wereplaced before the Audit Committee on a quarterly basis. The policy on Related

Party Transactions as approved by the Board is uploaded on the Company's website at thelink: http://www.rnaval.co.in/web/ rnaval/corporate-governance. Your Directors drawattention of the members to Note No. 39 to the Standalone Financial Statements which setsout Related Party Disclosures.

Material Changes and Commitments if any affecting the financial position of theCompany

There were no material changes and commitments affecting the financial position of theCompany which have occurred between the end of the financial year and the date of thisreport.

Meetings of the Board

A Calendar of Meetings is prepared and circulated in advance to the Directors. Duringthe financial year four Board Meetings were held details of which are given in theCorporate Governance Report forming part of this Annual Report.

Audit Committee

During the financial year Audit Committee has been re-constituted by the Board ofDirectors on April 01 2018 February 02 2019 and March 30 2019. As on March 31 2019the committee consists of majority of Independent Directors namely Shri K. Ravikumar asChairman Shri Pankaj Pandya and Shri Debashis Bir as members. During the year all therecommendations made by the Audit Committee were accepted by the Board.

Auditors and Auditor's Report

M/s. Pathak H.D. & Associates Chartered Accountants were appointed as Auditors ofthe Company for a term of 5 (five) consecutive years at the Annual General Meeting of theCompany held on September 30 2015. The Company has received confirmation from M/s. PathakH.D. & Associates Chartered Accountants that they are not disqualified fromcontinuing as Auditors of the Company.

The observations and comments given by the Auditors in their report read together withnotes on financial statements are self-explanatory and hence do not call for any furthercomments under Section 134 of the Act.

Secretarial Standards

During the year under review the Company has complied with the applicable SecretarialStandards issued by The Institute of Company Secretaries of India.

Secretarial Audit and Secretarial Compliance Report

Pursuant to the provisions of Section 204 of the Act read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directorshas appointed M/s. Ashita Kaul & Associates Practicing Company Secretaries toundertake the Secretarial Audit of the Company. There is no qualification reservation oradverse remark made by the Secretarial Auditor in the Secretarial Audit Report exceptthat the lenders have till date not provided their approval for payment of remuneration toShri Debashis Bir as Whole-time Director. The Company has appointed Shri Debashis Bir asWhole-time Director with due communication and application to the lenders. The AuditReport of the Secretarial Auditors for the financial year ended March 31 2019 is attachedas Annexure - B. Pursuant to circular No.CIR/ CFD/ CMD1/ 27/ 2019 dated February08 2019 issued by the Securities and Exchange Board of India (SEBI) the Company hasobtained Secretarial Compliance Report from a Practicing Company Secretary (PCS) oncompliance of all applicable SEBI Regulations and circulars/ guidelines issued there underand the copy of the same shall be submitted with the Stock Exchanges within the prescribeddue date.

Annual Return

As required under Section 134(3)(a) of the Act the Annual Return of the financial year2017-18 and 2018-19 is put up on the Company's website and can be accessed at the link:http:// www.rnaval.co.in/web/rnaval/AGM-2018-19.

Particulars of Employees and related disclosures

In terms of the provisions of Section 197(12) of the Act read with Rule 5(2) and 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 asamended a statement showing the names and other particulars of the employees drawingremuneration in excess of the limits set out in the said Rules are provided in theAnnexure which forms part of this Report.

Disclosures relating to the remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 as amended are also forming part of this Report.

However having regard to the provisions of first proviso to Section 136(1) of the Actthe Annual Report excluding the aforesaid information is being sent to all the members ofthe Company and others entitled thereto. The said information is available for inspectionat the registered office of the Company on all working days except Saturdays between11:00 A.M. and 1:00 P.M. up to the date of the Meeting. Any member interested in obtainingthe same may write to the Company Secretary and the same will be furnished on request.

Conservation of energy technology absorption and foreign exchange earnings and outgo

The particulars as required to be disclosed in terms of Section 134(3)(m) of the Actread with Rule 8 of the Companies (Accounts) Rules 2014 are given in Annexure - C formingpart of this Report.

Corporate Governance

The Company has adopted ‘Reliance Group– Corporate Governance Policies andCode of Conduct' which sets out the systems processes and policies confirming to theinternational standards. The report on Corporate Governance as stipulated under Regulation34(3) read with para C of Schedule V of the Listing Regulations is presented in a separatesection forming part of this Annual Report.

A certificate from M/s Ashita Kaul Practising Company Secretary conforming complianceto the conditions of Corporate Governance as stipulated under Para E of Schedule V of theListing Regulations is enclosed to this Report.

Whistle Blower Policy (Vigil Mechanism)

In accordance with Section 177 of the Act and Listing Regulations the Company hasformulated a Vigil Mechanism Policy to address the genuine concerns if any of thedirectors and employees. The details of the same have been stated in the Report onCorporate Governance and the policy can also be accessed on the Company's website at thelink: http://www. rnaval.co.in/web/rnaval/corporate-governance.

Risk Management

The Company continues to have a Risk Management Committee consisting majority of Boardof Directors. However the mandatory provisions of listing regulations are not applicableto the Company. The details of the Committee and its terms of reference etc. are set outin the Corporate Governance Report forming part of this Report.

The Company has a robust Business Risk Management (BRM) framework to identify evaluatebusiness risks and opportunities. This framework seeks to create transparency minimizeadverse impact on the business objectives and enhances Company's competitive advantage.The business risk framework defines the risk management approach across the enterprise atvarious levels including documentation and reporting. The framework has different riskmodels which help in identifying risk trend exposure and potential impact analysis at aCompany level and also separately for business segment. The risks are assessed for eachproject and mitigation measures are initiated both at the project as well as the corporatelevel. More details on Risk

Management indicating development and implementation of Risk Management policyincluding identification of elements of risk and their mitigation are covered inManagement Discussion and Analysis section which forms part of this Report.

Compliance with the provisions of Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013

The Company is committed to uphold and maintain the dignity of women employees and ithas in place a policy which provides for protection against sexual harassment of women atwork place and for prevention and redressal of such complaints. During the year underreview no such complaints were received. The Company has also constituted an InternalCompliance Committee under the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.

Corporate Social Responsibility

The Company has constituted Corporate Social Responsibility (CSR) Committee incompliance with the provisions of Section 135 of the Act read with the Companies(Corporate Social Responsibility Policy) Rules 2014. The Corporate Social ResponsibilityCommittee has formulated a Corporate Social Responsibility Policy (‘CSR policy')indicating the activities to be undertaken by the Company. The CSR policy may be accessedon the Company's website at the link: http://www.rnaval.co.in/web/rnaval/corporate-governance.

As on March 31 2019 the CSR Committee of the Board consist of Shri Pankaj Pandya asChairman Shri Debashis Bir Shri Venkata Rachakonda as members.

The disclosure with respect to CSR activities is given as Annexure - D.

Order if any passed by the Regulators or Courts or Tribunals

No orders have been passed by the Regulators or Courts or Tribunals impacting the goingconcern status of the Company and its operations.

Internal Financial Controls and their adequacy

The Company has in place adequate internal financial controls with reference tofinancial statement across the organization.

The same is subject to review periodically by the internal audit cell for itseffectiveness. During the financial year such controls were tested and no reportablematerial weaknesses in the design or operations were observed.

Acknowledgement

Your Directors would like to express their sincere appreciation for the co-operationand assistance received from shareholders Debenture holders debenture trustee bankersfinancial institutions regulatory bodies and other business constituents during the yearunder review. Your Directors also wish to place on record their deep sense of appreciationfor the commitment displayed by all executives officers and staff resulting in thesuccessful performance of the Company during the year.

For and on behalf of the Board of Directors
Shri Debashis Bir Shri K Ravikumar
Whole-time Director and CEO Chairman
Place : Mumbai
Date : May 28 2019

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