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RKEC Projects Ltd.

BSE: 535017 Sector: Infrastructure
NSE: RKEC ISIN Code: INE786W01010
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RKEC Projects Ltd. (RKEC) - Director Report

Company director report

To

THE MEMBERS

RKEC PROJECTS LIMITED

Your Directors have pleasure in presenting before you the Thirteenth Annual Report ofthe Company along with audited annual financial statement for the year ended 31st March2018.

1. FINANCIAL PERFORMANCE/HIGHLIGHTS:

During the year under review the Company has earned net profit of Rs. 203539952/-.There is notable increase in profit after tax during the current year comparison to theprevious year. Your Directors look forward to improve the financial position of theCompany and are optimistic about the future growth and performance of the Company.

The summarized financial results of the Company for the period ended 31st March 2018are as follows:

Particulars

Standalone

Consolidated
2017-18 2016-17 2017-18
Revenue from operations 23972.43 19724.43 23972.43
Other Income 104.57 287.72 104.57
Total Income 24077.00 20012.16 24077.00
Less: Expenditure 20128.68 16873.06 20128.68
Profit/(loss) before Interest Depreciation and Tax 3948.32 3139.09 3948.32
Less: Finance Cost 385.47 840.43 385.47
Less: Depreciation & Amortization Cost 308.77 273.83 308.77
Prior Period Items - -
Less: Extraordinary items - -
Profit/(loss)Before Tax 3254.08 2024.82 3254.08
Less: Tax Expenses 1227.48 692.17 1227.50
Less: Deferred Tax - 8.79 40.08 - 8.79
Profit/(loss)after Tax 2035.40 1292.56 2035.37

2. DIVIDEND

During the year under review your Company has declared interim dividend of 10% (Rs1.00 per share) amounting to Rs 23990600 be paid out of the profits of the Company forthe year 2017-18 on the equity shares of Company.

Your Directors recommended a Final Dividend @ 10% i.e. Re.1.00 per Equity Share of Rs.10/- each. Aggregating to Rs. 28921938/- including dividend distribution tax of Rs.4931938/- to be appropriated from the profits of the year 2017-18 subject to theapproval of the shareholders (Members) at the ensuing 13th Annual General Meeting. TheDividend will be paid in compliance with applicable regulations.

3. CAPITAL STRUCTURE

During the year under review the paid up share capital of the Company has beenincreased from Rs. 193126000/- (Rupees Nineteen Crore Thirty One Lakh Twenty SixThousand) divided into 19312600 (One Crore Ninety Three Lakhs Twelve Thousand and SixHundred) equity shares of R s. 10 each to Rs. 239906000 (Rupees Twenty Three CroresNinety Nine Lakhs Six Thousand ) by initial public offer of 467800000 (Forty Six LakhsSeventy Eight Thousand) and Offer for Sale of 1700000 equity shares at a face value ofRs. 10/- each and a premium of Rs. 35/- each. The aforesaid Equity Shares is listed onNSE-Emerge Platform.

Further the Company has not issued shares with differential voting rights nor hasgranted any stock options or sweat equity.

4. CONSOLIDATED FINANCIAL STATENMENT

The Financial Statement of the Company for the Financial year 2017-18 are prepared incompliance with the applicable provisions of the Companies Act 2013 Accounting Standardsand as prescribed by Securities and Exchange Board of India (SEBI) (Listing Obligationsand Disclosure Requirement) Regulations 2015. The consolidated Financial Statement hasbeen prepared on the basis of the audited financial statements of the Company RKECProjects Ltd and its JV Firm as approved by the respective Board of Directors/Management.Pursuant to the provisions of Section 136 of the Act applicable rules relating toaccounting standards the Financial Statements of the Company the Consolidated FinancialStatements along with all relevant documents and Auditors report thereon form part of thisannual report.

5. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

Since there was no unpaid/unclaimed dividend the provisions of Section 125 of theCompanies Act 2013 do not apply.

6. CHANGE IN THE NATURE OF THE BUSINESS OF THE COMPANY

During the year there is no change in the nature of the business of the Company.

7. DEPOSITS

The Company has not accepted or renewed any amount falling within the purview ofprovisions of Section 73 of the Companies Act 2013 ("the Act") read with theCompanies (Acceptance of Deposit) Rules 2014 during the period under review. Hence therequirement for furnishing the details of deposits which are not in compliance withChapter V of the Act is not applicable.

8. TRANSFER OF PROFITS TO RESERVES

It is not proposed to transfer any amount to reserves from the profits of the currentyear. Hence disclosure under Section 134(3)(j) of the Companies Act 2013 is notrequired.

9. MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THECOMPANY OCCURRED BETWEEN THE ENDS OF THE FINANCIAL YEAR TO WHICH THESE FINANCIALSTATEMENTS RELATE AND THE DATE OF THE REPORT

There is no material changes and commitments affecting the financial position of thecompany have occurred between the end of the financial year of the company to which thefinancial statements relate and the date of this report.

10. STATEMENT ON FORMAL ANNUAL EVALUATION OF BOARD

Nomination and Remuneration Committee annually evaluates the performance of individualDirectors Committees and of the Board as a whole in accordance with the formal systemadopted by it. Further the Board also regularly in their meeting held for variouspurposes evaluates the performance of all the Directors committees and the Board as awhole. The Board considers the recommendation made by Nomination and RemunerationCommittee in regard to the evaluation of board members and also tries to discharge itsduties more effectively. Each board members contribution their participation wasevaluated and the domain knowledge they bring. They also evaluate the manner in which theinformation flows between the Board and the Management and the manner in which the boardpapers and other documents are prepared and furnished.

11. DISCLOSURE OF ORDERS PASSED BY REGULATORS OR COURTS OR TRIBUNAL

No orders have been passed by any Regulator or Court or Tribunal which can have impacton the going concern status and the Company's operations in future.

12. STATEMENT CONCERNING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY OFTHE COMPANY

The Company has developed and implemented risk management policy which is displayed onthe Company's website www.rkecprojects.com .

13. PARTICULARS OF ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNING AND OUTGO:

A. CONSERVATION OF ENERGY:

The steps taken or impact on conservation of energy: NA

i. The steps taken by the company for utilizing alternate sources of energy: NA

ii. The capital investment on energy conservation equipment: NA

B. TECHNOLOGY ABSORPTION:

i. The efforts made towards technology absorption: NA

i. The benefits derived like product improvement cost reduction product developmentor import substitution: NA

iii. In case of imported technology (imported during the last three years reckoned fromthe beginning of the financial year) -

a) The details of technology imported: NA

b) The year of import: N.A.

c) Whether the technology was fully absorbed: NA

d) If not fully absorbed areas where absorption has not taken place and the reasonsthereof N.A.

iv. The expenditure incurred on Research and Development: NA

C. FOREIGN EXCHANGE EARNING & OUT GO:

Foreign Exchange Earning / (Loss): (Rs. 656904/-)

Foreign Exchange Outgo: Rs.45850259.50 (US$ - 699352)

14. CORPORATE SOCIAL RESPONSIBILITY

A detailed outline of the Corporate Social Responsibility (CSR) policy of the Companyon CSR activities

DURING THE YEAR 2017-18 ARE SET OUT IN ANNEXURE - "A" OF THIS REPORTIN THE FORMAT PRESCRIBED IN THE COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY) RULES2014. THE CSR POLICY IS AVAILABLE ON THE WEBSITE OF THE COMPANY WWW.RKECPROJECTS.COM.

15. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THECOMPANIES ACT 2013

During the year the Company has made no investment falling under the provision ofSection 186 of the Companies Act 2013 read with rules made there under. The Company hasnot given loan guarantee or provided security in connection with the loan to any otherbody corporate or person. The members are requested to refer the notes to the financialstatement which forms the part of the Annual Report for detailed information.

16. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

During the year under review the Company has entered into contracts or arrangementswith related parties. The particulars of Contracts or Arrangements made with relatedparties required to be furnished under section 134(3) are disclosed in the prescribed form(Form AOC-2) which is attached to this Report as "Annexure- B".

17. BOARD OF DIRECTORS & KEY MANAGERIAL PERSONNEL

i. Composition

Name of Directors Designation Category No. of Board Meeting held during the year No. of Board Meeting attended during the Year
Shri G Radhakrishna Chairman & Managing Director Promoter Executive 7 7
Smt G Parvathi Devi Whole Time Director Promoter Executive 7 7
Smt G Sita Ratnam Director Non Executive 7 6
Vice Admiral Satish Soni PVSMAVSM NM (Retd) Independent Director Non Executive 7 5
Lt Gen P R Kumar PVSMAVSM VSM (Retd) Independent Director Non Executive 1 1
Shri Lucas Peter Thalakala (IRS) (Retd) Independent Director Non Executive 7 7

ii. Changes in Board during the year:

During the year under review Lt Gen P R Kumar (DIN: 07352541) Independent Director ofthe Company appointed on 25 Nov 2016 ceased to be the Director of the Company with effectfrom 02 June 2017.

iii. Retirement by rotation:

As per the provisions of Section 152 of the Companies Act 2013 Smt. G Parvathi Devi(DIN: 00094961) is liable to retire by rotation at the ensuing Annual General Meeting andbeing eligible offers herself for reappointment. Your Directors recommend herreappointment.

iv. Key Managerial Personnel

In pursuant to provisions of Section 203 of the Companies Act 2013 read with theapplicable rules and other applicable provisions of the Companies Act 2013 thedesignated Key Managerial Personnel (KMP) of the Company as on 31st March 2018 are asfollows:

(a) Shri G Radhakrishna (DIN: 00073080) : Managing Director

(b) Smt G Parvathi Devi (DIN: 00094961) : Whole Time Director

(c) Brig G S Narayana VSM (Retd) (PAN: AEAPG2848A) : Chief Financial Officer

(d) Ms Swapna Bansode (PAN: CAAPB2096P): Company Secretary & Compliance Officer

v. Number of Board Meetings

The Board met 7 times in the Financial Year 2017-18 viz 02 Jun 2017 03 Jul 2017 24Aug 2017 18 Sept 2017 04 Oct 2017 13 Nov 2017 12 Mar 2018.

Details of Directors as on 31 Mar 2018 and their attendance at the Board Meetings andAnnual General Meeting (AGM) during the Financial Year 2017-18 are given below:

vi. Statement on Formal Annual Evaluation of Board

Nomination and Remuneration Committee annually evaluates the performance of individualDirectors Committees and of the Board as a whole in accordance with the formal systemadopted by it. Further the Board also regularly in their meetings held for variouspurposes evaluates the performance of all the Directors committees and the Board as awhole. The Board considers the recommendation made by Nomination and RemunerationCommittee in regard to the evaluation of board members and also tries to discharge itsduties more effectively. Each Board member's contribution their participation wasevaluated and the domain knowledge they bring. They also evaluated the manner in which theinformation flows between the Board and the Management and the manner in which the boardpapers and other documents are prepared and furnished.

vii. Declarations by Independent Directors & Their Separate Meeting

All the Independent Directors of the Company have given their declarations stating thatthey meet the criteria of independence as laid down under Section 149(6) of the CompaniesAct 2013 and in the opinion of the Board the Independent directors meet the saidcriteria.

During the year under review the Independent Directors duly met pursuant to theprovisions as specified in Schedule IV of the Companies Act 2013 and the quorum waspresent throughout the meeting.

18. DIRECTORS RESPONSIBILITY STATEMENT

In terms of Section 134 (5) of the Companies Act 2013 the directors would like tostate that:

I. In the preparation of the annual accounts the applicable accounting standards havebeen followed.

II. The directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that were 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 or loss of the Company for the year under review.

III. 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.

IV. The directors had prepared the annual accounts on a going concern basis.

V. The directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.

VI. The directors had devised proper system to ensure compliance with the provisions ofall applicable laws and that such system were adequate and operating effectively.

19. DISCLOSURE OF COMPOSITION OF AUDIT COMMITTEE:

Pursuant to the provisions of section 177(8) of the Companies Act 2013 the Boardhereby discloses the composition of the Audit Committee and other relevant matters asunder:

S.No. Name of the Member Category Designation No. of Committee Meeting held during the year No. of Committee Meeting attended during the year
1. Shri Lucas Peter Thalakala (IRS) (Retd) Independent Director Chairman 4 4
2. Vice Admiral Satish Soni PVSM AVSM NM (Retd) Independent Director Member 4 4
3. Shri G Radhakrishna Managing Director Member 4 4

The Audit Committee acts in accordance with the terms of reference specified by theBoard of Directors of the Company. Further during the period under review the Board ofDirectors of the Company had accepted all the recommendations of the Committee.

During the financial year ended on 31st March 2018 the Audit Committee met Four (4)times on 02 June 2017 24 Aug 2017 13 Nov 2017 and 12 March 2018.

20. VIGIL MECHANISM POLICY FOR THE DIRECTORS AND EMPLOYEES:

Pursuant to the provisions of Section 177(9) of the Companies Act 2013 and SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the Board ofDirectors of the Company has established vigil mechanism/Whistle Blower Policy forDirectors and employees of the Company to report genuine concerns regarding unethicalbehavior actual or suspected fraud or violation of the Company's code of conduct andethics Policy. The said mechanism also provides for direct access to the Chairperson ofthe Audit Committee in appropriate or exceptional cases. The Board of Directors of theCompany frequently reviews the vigil mechanism/whistle blower policy in order to ensureadequate safeguards to employees and Directors against victimization. The said policy isalso available on the website of the Company at www.rkecprojects.com.

21. DETAILS OF INVESTOR'S GRIEVANCES/ COMPLAINTS:

The Company has received one complaint during the year which has been resolved. Thepending complaints of the Shareholders/ Investors registered with SEBI at the end of thecurrent financial year ended on 31st March 2018 are NIL.

There were no pending requests for share transfer/dematerialization of shares as on31st August 2018.

22. ADEQUACY OF INTERNAL FINANCIAL CONTROLS

The Company has placed an adequate Internal Financial Controls with reference toFinancial Statements. The Board has inter alia reviewed the adequacy and effectiveness ofthe Company's internal financial controls relating to its financial statements.

During the year such Controls were tested and no reportable material weakness wasobserved.

23. DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013

There was no complaint received during the year under the sexual harassment of womanat work place (Prevention Prohibition and Redressal) Act 2013. Further the Companyensures that there is a healthy and safe atmosphere for every women employee at theworkplace and made the necessary policies for safe and secure environment for womenemployee.

24. SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES

The Company has entered into Joint Venture with M/s. Suryadevara Engineers &Contractors Vijayawada and "Qingdao Construction Engineering Group Co. Ltd" Thestatement containing the salient feature of the JV is given as "Annexure -C".

25. AUDITORS

i. STATUTORY AUDITORS

The present Auditors of the Company M/s. Brahmananda Reddy & Associates CharteredAccountants were appointed as Statutory Auditors for a period of 5 year(s) at the AnnualGeneral Meeting held on 23rd Sept 2017 to hold the office till the conclusion of 17thAnnual General Meeting of the Company to be held in the year 2022.

In pursuant to Companies Amendment Act 2017 enforced on 7th May 2018 by Ministry ofCorporate Affairs the appointment of statutory auditor is not required to be ratified atevery annual general meeting.

There are no qualifications reservations or adverse remarks made by M/s. BramhanandaReddy & Co. Chartered Accountants the Statutory Auditors of the Company in theirreport.

ii. SECRETARIAL AUDITOR

M/s. P N Rao & Co Company Secretaries Visakhapatnam were appointed as SecretarialAuditor of the Company to conduct secretarial audit pursuant to the provisions of Section204 of the Companies Act 2013 for F.Y. 2017-18. The secretarial audit report given byM/s. P N Rao & Co Company Secretaries Secretarial Auditor of the Company forms partof this report and is marked as "Annexure-D"

There were no adverse remarks made by Secretarial Auditor of the Company except nonspending of CSR Expenditure in their report.

iii. COST AUDITORS

The Company has appointed the Shri Uppalapati Prakash as Cost Auditor as pursuant toSection 148 of the Companies Act 2013 read with the Companies (Cost Records and Audit)Amendment Rules 2014.

26. PARTICULARS OF EMPLOYEES

The information required under Section 197 of the Companies Act 2013 read with rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is provided in the Report and marked as "Annexure - E". No employee ofthe Company was in receipt of the remuneration exceeding the limits prescribed in the rule5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014.

27. ANNUAL REPORT

Pursuant to the provisions in sub section (3) of Section 92 has been placed on thewebsite of the Company. www.rkecprojects.com.

28. CORPORATE GOVERNANCE

Your Company has been complying with the principals of Corporate Governance over theyears and is committed to the highest standards of compliance. Pursuant to regulation15(2) of the SEBI (LODR) Regulations 2015 the compliance with the corporate governanceprovisions as specified in regulations 17 to 27 and clauses (b) to (i) of Regulation 46(2) and para C D and E of schedule V shall not apply to the listed entity which haslisted its specified securities on the SME Exchange. Therefore the Corporate GovernanceReport is not applicable on the Company and therefore not provided by the Board.

29. EVENT BASED DISCLOSURES

The Company has not issued any shares with differential voting rights or Sweat Equityshares or shares under ESOP The Company has not provided any money to its employees forpurchase of its own shares hence the company has nothing report in respect of Rule 4(4)Rule (13) Rule 12(9) and Rule 16 of the Companies (Share Capital & Debentures) Rules2014.

30. LISTING

The equity shares of the company are listed on SME platform of NSE (NSE EMERGE) and theCompany has paid annual listing fees for the year 2018-19.

31. IPO Proceeds Utilization:

"During the year ended 31 March 2018 the Company had completed the initial publicoffer (IPO) the proceeds from IPO was Rs. 210510000 to the company: Details ofutilization of IPO proceeds are as follows:"

a) IPO Expenses net of recovery from selling shareholders : Rs. 20831989.

b) General corporate purposes - Working capital: Rs. 189678011.

32. MANAGEMENT'S DISCUSSION AND ANALYSIS REPORT

The Management's Discussion and Analysis Report for the year under review asstipulated under Regulation 34(2) (e) of the Listing Regulations is given as an annexureto this report.

33. ACKNOWLEDGEMENTS

Your Directors place on record their sincere thanks to bankers business associatesconsultants and various Government Authorities for their continued support extended toyour Companies activities during the year under review. Your Directors also acknowledgesgratefully the shareholders for their support and confidence reposed on your Company.

BY ORDER OF THE BOARD OF DIRECTORS
FOR RKEC PROJECTS LIMITED
Sd/-
G Radhakrishna
Chairman & Managing Director Date : 31 Aug 2018
DIN (00073080) Place: Visakhapatnam

i) Industry Structure and Development

We are a construction company primarily engaged in the business of Civil Constructionsuch as construction of Highways roads and bridges. During the last decade we haveundertaken and successfully completed many construction projects in India covering statesof Andhra Pradesh Tamil Nadu Gujarat Odisha Rajasthan and Maharashtra. In addition tothem we have expanded our presence to three more states Kerala Uttar Pradesh andManipur with our ongoing projects. We have been able to achieve our targets by fusingtremendous engineering knowledge with groundbreaking skills experienced team binding anoptimum mix of men machine and materials across diverse projects.

Our core business is designing and undertaking construction projects such as BridgesPorts dams high-rise structures airports cross water roads highways Oil and gasPipelines complexes and environmental structures across India. We have attained goodreputation among our clients because of our track record experienced members and a provenstrength on delivery norms across its all spectrum of services. We have entered intoprojects for diverse range of clients including Defence sector Railways Ports AdaniPort Vedanta Ltd Rashtriya Ispat Nigam Limited and ESSAR.

i) Strengths

a) High-quality cost-effective projects delivery capabilities.

b) Good track record of on schedule completion of project.

c) Long Experience of Promoter in the construction sector.

d) Supporting motivated flexible and focused team

e) Own fleet of requisite construction equipments.

ii) Opportunities

a) Increasing Government focus on increasing reforms in the infrastructural andindustrial sector.

b) Expansion of key industry sector like power steel petrochemicals telecom andothers.

c) Infrastructural development in the Country

iii) Threats

a) Economical and Political scenario in the country.

b) Any environmental issues in the execution of the projects

vi) Internal Control system and their adequacy

The Company has adequate system of internal control commensurate with its size andoperations to ensure orderly and efficient conduct of the business. These controls ensuresafeguard of assets reduction and detection of frauds and error adequacy andcompleteness of the accounting record and timely preparation of reliable financialinformation.

v) Financial performance with respect to operational performance:

The financial performance of the Company for the year 2017-18 is described in theDirectors Report.

vi) Future Outlook:

Economic growth is projected to remain strong and India will remain the fastest-growing G20 economy.

The increase in public wages and pensions will support consumption. Private investmentwill recover gradually as excess capacity diminishes and the landmark Goods and ServicesTax and other measures to improve the ease of doing business are being implemented.However large non-performing loans and high leverage of some companies are holding backinvestment. Monetary policy is projected to remain tight as inflation expectations havestill not fully adjusted down. The need to reduce the relatively high public-debt-to-GDPratio leaves little room for fiscal stimulus.

However investing more in physical and social infrastructure is critical to raisingliving standards for all. This should be financed by a comprehensive reform of income andproperty taxes. Restoring credit discipline and cleaning up banks' balance sheets will beinstrumental to support the credit growth needed to finance more business investment.Trade openness has increased partly driven by a competitive service sector. Manufacturinghas lagged behind with limited contribution to exports and job creation leaving manyworkers in low-paid jobs. Promoting quality job creation in manufacturing would requirereducing further restrictions on FDI and trade modernizing labor regulations andproviding better education and skills. Better infrastructure transport and logisticsservices would facilitate manufacturing firms' access to global markets particularly fromremote and poorer regions. Robust consumption and a rebound in exports are boosting growthGrowth remains strong.

Private consumption has been buoyant boosted by the increase in public wages andpensions and by higher agricultural and rural incomes. The costs of the withdrawal of highdenomination notes - demonetization - in November 2016 are wearing off and sales of carsand two-wheelers have bounced back. Investment has so far failed to rebound despitegovernment efforts to develop rail road and energy infrastructure and to improve the easeof doing business. Excess capacity (e.g. in the steel sector) and the weak financialposition of some corporations combined with large non-performing loans for most publicsector banks have restrained business investment. Exports have picked up driven bystrong demand from Asia and the euro area. Higher oil prices and gold imports coupledwith a decline in remittances inflows are reflected in some deterioration in the currentaccount deficit. However the deficit remains well below its long term average. FDI netinflows have been rising steadily since 2014 and are fully financing the current accountdeficit.

viii) Material developments in Human Resources/Industrial Relations front includingthe number of people employed.

During the year under review no such initiatives and/or developments in HumanResources/Industrial Relations front has been taken by the Company.

ix) Cautionary Statement:

Statement in this Management Discussion and Analysis describing the company'sobjectives projections estimated and expectations are "forward lookingstatements" Actual results might differ materially from those anticipated because ofchanging ground realities.

BY ORDER OF THE BOARD OF DIRECTORS
FOR RKEC PROJECTS LIMITED
Sd/-
G Radhakrishna
Chairman & Managing Director Date : 31 Aug 2018
DIN (00073080) Place: Visakhapatnam