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Sadbhav Engineering Ltd.

BSE: 532710 Sector: Infrastructure
NSE: SADBHAV ISIN Code: INE226H01026
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VOLUME 69754
52-Week high 40.90
52-Week low 10.30
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Mkt Cap.(Rs cr) 221
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OPEN 13.55
CLOSE 13.50
VOLUME 69754
52-Week high 40.90
52-Week low 10.30
P/E
Mkt Cap.(Rs cr) 221
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Sadbhav Engineering Ltd. (SADBHAV) - Director Report

Company director report

To

The Members

The Directors have the pleasure in presenting the Thirty Third Annual Report togetherwith the audited financial statement for the financial year ended on March 31 2022.

Financial Results

The Company's financial performance for the Year ended on March 31 2022 is summarizedbelow:

Rs in Crores

Standalone Consolidated
Particulars Current Year 2021-2022 Previous Year 2020-2021 Current Year 2021-2022 Previous Year 2020-2021
Total Income 1322.58 1717.10 2827.74 2597.28
Profit (Loss) before Finance Cost Depreciation & amortization Expense and Tax Expense (438.99) 304.85 572.53 952.13
Less : Finance Cost 187.88 189.51 975.43 1003.45
Depreciation and amortization Expense 69.20 94.21 166.87 211.01
Profit /(Loss) before Exceptional Item and Tax (696.07) 21.13 (569.77) (262.33)
Exceptional Item (Net of expenses) (13.65) (19.58) (165.17) 23.46
Profit /(Loss) Before Tax 709.73 1.55 (734.94 (238.87)
Less : Tax Expenses (25.00) (16.70) 9.92 (9.28)
Less:-Deferred tax liability /(asset)(Including MAT Credit) 31.59 (22.79) (16.48) 7.86
and short (Excess) provision for taxation for earlier years
Profit /(Loss) for the period from continuing Operations (716.32) 41.04 (728.38) (237.45)
Add:- Share of Loss Transferred to Minority Interest - - (4.69) (82.54)
Net Profit for the period after tax (716.32) 41.04 (723.70) (154.91)
Balance brought forward from last year 1286.02 1244.98 172.21 327.99
Loss of Subsidiary for earlier year transferred (net)
Other Comprehensive Income (OCI) 1.68 0.35 2.20 0.38
Amount available for Appropriations 569.70 1286.02 (551.49) 173.08
Appropriations
Dividend & Tax paid thereon 0.00 0.00 - -
Adjustment on account of acquisition 0.00 0.00 - -
of non controlling interest
Equity Transactions / Share Issue Expenses 0.00 0.00 0.83 0.83
Loss of Subsidiary for previous year 0.00 0.00 0.04 0.04
Transfer to Debenture Redemption Reserves 0.00 0.00 - -
Closing Balance in Retain earnings 569.02 1286.02 (551.49) 172.21

Dividend:

In view of losses incurred your Directors do not recommended any dividend for thefinancial year ended on 31st March 2022.

Dividend Distribution Policy

Securities and Exchange Board of India ('SEBI') by its notification dated 8th July2016 has amended the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 ('Listing Regulations') introducing new Regulation 43A and further amended the sameon 5th May 2021 mandating the top 1000 listed entities based on market capitalizationcalculated as on 31st March of every financial year to formulate a Dividend DistributionPolicy and disclose the same on the website of the listed entity and a web-link shall alsobe provided in their annual reports.

The Company has adopted a Dividend Distribution Policy on August 20 2016 which isavailable on the website of the Company at the link:https://www.sadbhaveng.com/wp-content/uploads/2018/02/Dividend Distribution Policy SEL.pdfThere has been no change to the policy during the year.

Business Overview

Standalone Basis

The total revenue during the year under review was Rs. 1322.58 Crores against Rs.1717.11 Crores for the previous year. Profit (Loss) before Finance Cost Depreciation& amortization Expense and Tax Expense for the current year is (Rs. 438.99 Crores)(Rs. 304.85 Crores in previous year). Net Profit (Loss) after tax amounted to Rs. (716.32)Crores (Rs. 41.04 Crores in previous year)

Consolidated Basis

As per the Consolidated Financial Statements the Total Income of the Companyoperating profit (PBDIT) and net loss for the year were Rs. 2827.74 Crores Rs. 572.53Crores and Rs. 728.38 Crores respectively.

Transfer to Investor Education and Protection Fund

The Company has transferred a sum of Rs. 0.41 lakhs to the Investor Education andProtection fund established by the Central Government during the financial year 2021-22in compliance with Section 124 of the Companies Act 2013. The said amount representsunclaimed dividend amount for the financial year 2013-2014 which were lying with theCompany for a period of 7 years from their due dates of payment. Prior to transferring theaforesaid sum the Company has sent reminders to the shareholders for submitting theirclaims for unclaimed dividend for the financial year 2013-2014.

Reserves

The Company has not transferred any amount into General Reserve during the period.

Change in the Nature of Business if any

There are no changes in the nature of business during the year.

Material changes and commitments affecting financial position between end of thefinancial year and date of report

There have been no material changes and commitments affecting financial positionbetween end of the financial year and the date of the report. Information regardingpotential impact of COVID-19 pandemic on your Company's business operations and financialposition are provided as part of the MD&A Report.

Merger of Sadbhav Infrastructure Project Limited ("SIPL") with the Company

With respect to merger with Our Subsidiary Company i.e. Sadbhav Infrastructure ProjectLimited ("SIPL") the next date of hearing of National Company Law Tribunal (NCLT) will be 05th September 2022.

Share Capital

During the year there was no change in total equity share capital of Rs.171570800/- (Face Value of Re. 1/- each). During the year under review Company has notallotted any shares without differential voting rights. During the year under review theCompany has not granted any stock options or sweat equity. The Company has no scheme ofprovision of money for purchase of its own shares by employees or by trustees for thebenefit of employees. Hence the details under rule 16 (4) of Companies (Share Capital andDebentures) Rules 2014 are not required to be disclosed.

Debentures

During the year 2021-2022 the Company has raised an amount of Rs. 55.00 crores by wayof issue of Secured Unrated Unlisted Redeemable Non-convertible Debentures on aPrivate Placement Basis.

During the year 2021-2022 and up to the approval of Director's Report the Company hasredeemed Rs.9.30 crores Non-Convertible Debentures (NCDs) on 30-09-2021 and Rs.1.80 croresNon-Convertible Debentures (NCDs) on 23-12-2021.

The aggregate Non-Convertible Debentures Outstanding amounts to Rs.222.50 crores as on31st March 2022.

Credit Rating

a) CARE has assigned CARE BB+ / CARE A4 (CWN) (Double B Plus/ A Four) (Under Creditwatch with Negative Implications) to Long term/short term bank facilities and CARE BB+(Double B Plus CWN) (Continue to be on Credit watch with Negative Implications) to Non-Convertible Debentures of the Company.

b) India Rating has assigned IND BB+/RWN/IND A4+ (Double BB Plus: Outlook; Negative[Single A Four Plus]) to Fund based & Non Fund based working capital Facilities andIND BB+/RWN (Double BB Plus; Outlook: Negative) to Term Loan Facilities and NonConvertibleDebentures of the Company.

Subsidiaries Joint Ventures and Associates Companies

During the year No Companies has become/ceased to be company's subsidiaries jointventures or associate company.

Sadbhav Infrastructure Project Limited (SIPL) and Adani Road Transport Limited (ARTL)executed Share Purchase Agreement (SPA) on August 16 2021 (Amended and restated onJanuary 27 2022) for sale of equity shares of Maharashtra Border Check Post NetworkLimited (MBCPNL) a subsidiaries of SIPL out of which 49% shares have been transferred toARTL during the year ended March 31 2022.

Pursuant to Section 134 of the Companies Act 2013 and Rule 8(1) of the Companies(Accounts) Rules 2014 the report on performance and financial position of subsidiariesassociates and joint venture companies is attached as a part of Annual Report in Form AOC-1 prepared under section 129(3) of the Companies Act 2013 to the consolidated FinancialStatements of the Company which forms part of this report.

Consolidated Financial Statements

In compliance with the applicable provisions of Companies Act 2013 including theIndian Accounting Standard (Ind AS)-33 on Consolidated Financial Statements this AnnualReport also includes Consolidated Financial Statements for the financial year 20212022.

Board of Directors and Key Managerial Personnel Retirement by Rotation

Mr. Shashin V. Patel is the director liable to retire by rotation at the ensuingAnnual General Meeting and being eligible offer himself for reappointment. The directorrecommend his reappointment.

Declaration from Independent Directors of the Company

The terms and conditions of appointment of Independent Directors are in accordance withthe applicable Regulations of the SEBI (Listing Obligations and Disclosure Regulations)Regulations 2015 and also as per the provisions of the Companies Act 2013 (Act) readwith Schedule IV to the Act.

Your Company has received declaration from all the independent Directors of the Companyas required under Sec. 149(7) confirming that they meet with the criteria of independenceprovided in Section 149(6) of the Companies Act 2013 and Regulation 16(1)(b) of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 and there has been nochange in the circumstances which may affect their status as Independent Director duringthe year.

Change in Directors and KMPs

During the year 2021-22 and upto the approval of Director's Report following changesmade in Director KMPs:

1. Mrs. Purvi S. Parikh (DIN: 07071155) Independent Director has resigned from w.e.f.May 05 2021.

2. Mrs. Anjali Nirav Choksi (DIN No. 08074336) was appointed as a Director in thecategory of Non-Executive Independent Director ("Woman Director") for the periodof Five (5) years with effect from August 10 2021.

There being no changes in Key Managerial Personnel during the year.

Evaluation of Board Performance

The Board adopted a formal mechanism for evaluating its performance and as well as thatof its Committees and individual Directors including the Vice Chairman of the Board. Theexercise was carried out through a structured evaluation process covering various aspectsof the Boards functioning such as composition of the Board and Committees experience andcompetencies performance of specific duties and obligations contribution at the meetingsand otherwise independent judgment governance issues etc. At the Board Meeting thatfollowed the above mentioned meeting of the Independent Directors the performance of theBoard its Committees and individual Directors was also discussed. Performance evaluationof Independent Directors was done by the entire Board excluding the Independent Directorbeing evaluated. More details on the same are given in the Corporate Governance Report.

Audit Committee

The Audit Committee comprises Directors namely Mr. Sandip V. Patel (Chairman) Mr.Nitin R. Patel and Mr. Arun S. Patel. The composition of the Audit Committee is incompliance with the requirement of Section 177 of the Companies Act 2013 and Regulation18 of the SEBI (LODR) Regulations 2015.

Stakeholder Relationship Committee

The Stakeholder Relationship Committee comprises Directors namely Mr. Arun S. Patel(Chairman) Mr. Sandip V. Patel Mr. Nitin R. Patel and Dr. Tarang M. Desai. Thecomposition of the Stakeholder Relationship Committee is in compliance with therequirement of Section 178 of the Companies Act 2013 and Regulation 20 of the SEBI (LODR)Regulations 2015.

Risk Management Committee

Board constitute Risk Management Committee comprises Directors namely Mr. Shashin V.Patel Mr. Nitin R. Patel and Mr. Sandip V. Patel. More details on the same are given inthe Corporate Governance Report.

Pursuant to the provisions of Regulation 21 of the Listing Regulations the Company isnot required to constitute a Risk Management Committee. Although not mandatory as ameasure of good governance the Company has constituted a Risk Management Committee of theBoard. The Committee reviews the Company's performance against identified risksformulates strategies towards identifying new and emergent risks that may materiallyaffect the Company's overall risk exposure and reviews the Risk Management Policy andstructure.

Committees of Board

Details of various committees constituted by the Board of Directors along with dates ofmeetings and attendance of members of committees as per provisions of the ListingRegulations and Companies Act 2013 are given in the Corporate Governance Report and formspart of this report.

As on date the Nomination and Remuneration Committee comprises Directors namely Mr.Arun S. Patel (Chairman) Mr. Sandip V. Patel and Dr. Tarang M. Desai.

As on date the Corporate Social Responsibility Committee comprises Directors namelyMr. Shashin V. Patel (Chairman) Mr. Nitin R. Patel and Mr. Arun S. Patel.

As on date the Finance and Investment Committee comprises Directors namely Mr. ShashinV. Patel (Chairman) Mr. Nitin R. Patel and Mr. Sandip V. Patel.

Independent Director's Meeting

The Independent Directors met on 14th February 2022 without the attendance ofNon-Independent Directors and members of the management. The Independent Directorsreviewed the performance of Non-Independent Directors the Committees and the Board as awhole alongwith the performance of the Vice Chairman of the Company taking into accountthe views of Executive Director and assessed the quality quantity and timeliness of flowof information between the management and the Board that is necessary for the Board toeffectively and reasonably perform their duties.

Disclosures as per the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013

The Company has zero tolerance for sexual harassment at workplace and has adopted apolicy on prevention prohibition and redressal of sexual harassment at workplace in linewith the provisions of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 and the rules made thunder and no complaint has beenreceived on sexual harassment during the financial year 2021-22. Further Company hascomplied with the provisions relating to the constitution of Internal Complaint Committeeunder the Sexual Harassment of Woman at Workplace (Prevention Prohibition and Redressal)Act 2013.

The Company periodically conducts sessions for employees across the organization tobuild awareness about the Policy and the provisions of Prevention of Sexual HarassmentAct.

Nomination and Remuneration Policy

The policy on Director's appointment and remuneration including criteria fordetermining qualifications positive attributes independence of Director and alsoremuneration for Key Managerial Personnel and other employees has been provided underCorporate Governance Report. The weblink for the same is https://www.sadbhaveng.com/wp-content/uploads/2018/02/REMUNERATION-PQLICY.pdf

Whistle Blower Policy

The Company has a vigil mechanism named Whistle Blower Policy for directors andemployees to report to the management instances of unethical behavior actual orsuspected fraud or violation of the Company's code of conduct or ethics policy. Thedetails of the said Policy is explained in the Corporate Governance Report and also postedon the website of the Company. The weblink for the same ishttps://www.sadbhaveng.com/wp-content/uploads/2018/02/Whistle Blower Policy-1.pdf

Development and implementation of Risk Management Policy

In accordance with the Regulation 17 of SEBI (LODR) Regulations 2015 the Boardformally adopted steps for framing implementing and monitoring the risk management planfor the Company by way of Risk Management Policy.

Board of Directors of the Company has identified the risks in two categories i.e. (1)Internal and Business Risk and (2) External Risk. The Management has also envisaged theminimization procedure and its perception in respect of each identified risk.

Further the Company identifies risks with its degree and control systems areinstituted to ensure that the risks in business process are mitigated. The Board providesoversight and reviews the Risk Management Policy periodically. In the opinion of the Boardthere has been no identification of elements of risk that may threaten the existence ofthe Company.

Meetings of Board

During the year Five (5) Board Meetings were held on June 30 2021 August 14 2021August 16 2021 November 14 2021 and February 14 2022. The details of attendance ofDirectors is mentioned in Corporate Governance Report which forms part of this report.

Directors' Responsibility Statement

Pursuant to the requirement in section 134(3) (c) of the Companies Act 2013 theDirectors state that:

(a) in the preparation of the annual accounts for the year ended March 31 2022 theapplicable accounting standards had been followed and there are no material departuresfrom the same;

(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 as at March 312022 and of the profit andloss of the Company for the year ended on that date;

(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

(d) the directors had prepared the annual accounts on a going concern basis;

(e) that the directors had laid down internal financial controls to be followed by thecompany and that the financial controls are adequate and are operating effectively; and

(f) that the directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and operatingeffectively.

Statutory Auditors

Joint Statutory Auditor i.e. M/s. Dhirubhai Shah & Co LLP Chartered AccountantsAhmedabad having Firm Registration No. 102511W/W100298 would be completing their presentterm on the day of ensuing Annual General Meeting. Remaining Joint Statutory Auditor i.e.M/s. Manubhai & Shah LLP Chartered Accountants Ahmedabad (Firm Registration No.106041W/W100136) will continue as the Statutory Auditor of the Company.

M/s. Manubhai & Shah LLP Chartered Accountants (Firm Registration Number:106041W/W100136) a Statutory Auditors of the Company to hold office for the first term offive years from the conclusion of the Thirty First (31st) Annual General Meeting held onSeptember 29 2020 until the conclusion of the Thirty Sixth (36th) Annual General Meetingof the Company to be held in the year 2025.

Qualifications reservations or adverse remarks made by Statutory Auditors in theirreport for the Financial Year ended on March 31 2022 are given in the Standalone andConsolidated Independent Auditor's Report.

Secretarial Auditors

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the rules madethereunder the Company had appointed M/s. Ravi Kapoor and Associates Practicing CompanySecretaries Ahmedabad to undertake the Secretarial Audit for the financial year 2021-22.The Secretarial Audit Report is annexed herewith as 'Annexure 1' to this Report.

Explanation or Comments on Qualifications Reservations or Adverse remarks ordisclaimers made by the auditors and the practicing company secretary in their reports

The Statutory Auditors' Report contain following qualification on Standalone andConsolidated Results.

Details of Audit Qualification (Standalone):

The Statutory Auditors have provided following qualification in their audit report -

1. We draw attention to Note 49 and Note 50 to the accompanying Standalone FinancialResults with respect to termination of concession agreement by Rohtak Panipat TollwayPrivate Limited and Rohtak Hisar Tollway Private Limited step-down subsidiaries of thecompany. Both step-down subsidiaries have issued notice of termination of concessionagreement to National Highway Authority of India (NHAI) on account of Force Majeure Eventas per concession agreement. As explained in the said note the company has carried outimpairment assessment of outstanding balance in these step-down subsidiaries dulyconsidering the expected payment arising out of aforesaid termination and other claimsfiled with NHAI and based on the above assessment management has concluded that noimpairment / adjustment to the carrying value of the loan trade and other receivablebalances are necessary as at March 31 2022.

However we have not been able to corroborate the management's contention of realizingthe carrying value of loan trade and other receivables aggregating to Rs. 22612.43 Lakhsas on the reporting date related to both the step-down subsidiaries.

Accordingly we are unable to comment on appropriateness of the carrying value of suchloan trade and other receivable and their consequential impact on the financial resultsand financial position of the company as at reporting date and year ended on March 312022.

2. We draw attention to Note 52 of the accompanying Standalone Financial Results withrespect to Sadbhav Bangalore Highway Private Limited (Concessionaire or SBGHPL) step-downsubsidiary of the company where lender of SBGHPL have notified in the month of January2022 to NHAI about exercise of their right of substitution of concessionaire. Asexplained in the said note management has carried out impairment assessment of loantrade and other receivable from this step-down subsidiary duly considering the expectedpayment arising out of aforesaid substitution and based on the above assessmentmanagement has concluded that no impairment / adjustment to the carrying value of loantrade and other receivable is necessary as at March 31 2022.

However we have not been able to corroborate the management's contention of realizingthe carrying value of loan trade and other receivable balance amounting to Rs. 6946.49Lakhs as the reporting date related to SBGHPL.

Accordingly we are unable to comment on appropriateness of the carrying value of loantrade and other receivable and their consequential impact on the financial results andfinancial position of the company as at reporting date and year ended on March 31 2022.

Reply of Directors with respect to qualifications /observations raised by StatutoryAuditor's Report:

1. Reply to qualification 1: The Company has outstanding loan trade and otherreceivable aggregating to Rs. 19839.58 lakhs from Rohtak Panipat Tollway Private Limited(RPTPL) a step-down subsidiary company which is engaged in construction operation andmaintenance of road projects under concession agreement with National Highways Authoritiesof India (NHAI). The net worth of RPTPL has fully eroded.

Further the toll collection by RPTPL was forcefully suspended due to agitation andprotest held by farmers and other unions against agri-marketing laws from December 252020. Accordingly RPTPL could not collect toll user fees from December 25 2020. RPTPLhad sent various communications to NHAI for such forceful suspension of toll. RPTPL hasissued notice for termination of concession agreement on July 27 2021 considering theabove event as Force Majeure Event in terms of concession agreement. RPTPL has filed claimamounting to Rs. 395784.40 lakhs relating to termination payments O&M cost due toforce majeure Covid claim & demonetization etc. with NHAI in terms of concessionagreement. In respect of such claims NHAI has approached to the RPTPL for settlement ofall these claims by way of conciliation proceedings which has been consented by it.

Considering the management assessment of probability and tenability of receiving aboveclaims from NHAI as per the terms of concession agreement which is backed by legalopinion and communications from NHAI for conciliation the management has assessed thatthere is no impairment in the value of outstanding amount in RPTPL and consequently noprovision/adjustment to the carrying value of loan trade and other receivable as at March31 2022 is considered necessary.

2. Reply to qualification 2: The Company has outstanding outstanding loan tradeand other receivable aggregating to Rs. 2772.85 lakhs in Rohtak Hissar Tollway PrivateLimited (RHTPL) a step-down subsidiary company which is engaged in constructionoperation and maintenance of road projects under concession agreement with NationalHighways Authorities of India (NHAI). The net worth of RHTPL has fully eroded.

Further the toll collection was forcefully suspended due to agitation and protest heldby farmers and other unions against agrimarketing laws from December 25 2020.Accordingly RHTPL could not collect toll user fees from December 25 2020. RHTPL had sentvarious communications to NHAI for such forceful suspension of toll. RHTPL has issuednotice for termination of concession agreement on August 27 2021 considering the aboveevent as Force Majeure Event in terms of concession agreement. RHTPL has filed claimamounting to Rs. 149697.70 lakhs relating to termination payments O&M cost due toforce majeure Covid claim & demonetization etc. with NHAI in terms of concessionagreement.

Considering the management assessment of probability and tenability of receiving aboveclaims from NHAI as per the terms of concession agreement and communications from NHAI forconciliation the management has assessed that there is no impairment in the value ofoutstanding amount in RHTPL and consequently no provision/adjustment to the carrying valueof loan trade and other receivable as at March 31 2022 is considered necessary.

3. Reply to qualification 3: The Company has outstanding loan trade and otherreceivables aggregating to Rs. 6946.49 lakhs in Sadbhav Bangalore Highway Private Limited(SBHPL) a step-down subsidiary company which is engaged in construction operation andmaintenance of road project under concession agreement with National Highways Authoritiesof India (NHAI). The lenders of the SBHPL have notified to NHAI about exercise of theirright of substitution of concessionaire i.e. SBHPL in the month of January 2022 inresponse to the notice of intention to terminate the Concession Agreement by NHAI. Thelenders have also requested to NHAI to allow 180 days time for the substitution of theconcessionaire i.e. SBHPL. As on the date of approval of financial statements of thecompany the period of 180 days is not over. In terms of concession agreement in case ofsubstitution of the concessionaire the project of SBHPL shall be transferred to nominatedcompany selected by the lender. Considering the pending procedure for substitution noadjustment to the carrying value of loan trade and other receivable from SBHPL has beenmade in the financial statements.

Details of Audit Qualification (Consolidated):

The Statutory Auditors have provided following qualification in their audit report -

As detailed in Note 68 of the accompanying consolidated Financial Results with respectto Sadbhav Bangalore Highway Private Limited (Concessionaire or SBGHPL) a step-downsubsidiary of the group where lender of SBGHPL have notified to NHAI about exercise oftheir right of substitution of concessionaire in the month of January 2022. As mentionedin the said note no adjustment to the carrying value of assets and liabilities have beenmade in the financial statements of SBGHPL and the financial statements of SBGHPL areprepared on going concern basis. Owing to the uncertainty of outcome of substitutionproceedings and lack of other alternate audit evidence we are unable to comment aboutadjustment that may be required to the carrying value of assets and liabilities and theirconsequential impact on the financial position of the Group as on March 31 2022.

One of the joint auditors have also expressed qualified opinion on the financialstatement of SBGHPL for the year ended 31 March 2022 vide their report dated May 26 2022.

We conducted our audit of the consolidated financial statements in accordance with theStandards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the 'Auditor'sResponsibilities for the Audit of the Consolidated Financial Statements' section of ourreport. We are independent of the Group in accordance with the 'Code of Ethics' issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the financial statements under the provisions of the Actand the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for ourqualified audit opinion on the consolidated financial statements.

Reply of Directors with respect to qualifications /observations raised by StatutoryAuditor's Report:

Reply to qualification 1: Sadbhav Banglore Highway Private Limited (SBHPL) one of thestep-down subsidiary company which is engaged in construction operation and maintenanceof road project under concession agreement with NHAI the lenders of the SBHPL havenotified to NHAI about exercise of their right of substitution of concessionaire i.eSBHPL in the month of January 2022 in response to the notice of intention to terminatethe Concession Agreement by NHAI. The lenders have also requested to NHAI to allow 180days time for the substitution of the concessionaire. As on the date of approval of thesefinancial statements the period of 180 days is not over. In terms of concessionagreement in case of substitution of the concessionaire the project of the SBHPL shallbe transferred to nominated company selected by the lender. The management of SBHPL hascarried out impairment assesssment of investments of the SBHPL as at balance sheet date.Considering the pending procedure for substitution and based on the impairment assessmentno adjustment to the carrying value of assets of SBHPL have been made in the financialstatements.

Secretarial Audit Report contains following observations and Board of Directors of theCompany submitted responses for the same as follows.

1. The Company was required to make prior intimation with the Stock Exchange(s) withrespect to payment of Interest and Redemption of Debt Securities as per Regulation 60 ofSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 ("SEBI LODRRegulations"). However Company has not made prior intimation to the StockExchange(s) in respect of redemption of debentures amounting to Rs. 48.80 Crores Rs 16.40Crores and 1.20 Crores which were redeemed on 29th April2021 31st May 2021 and on 31stMay 2021 respectively. To that extent Company has not complied with the said provisions ofSEBI LODR Regulations..

2. Pursuant to Section 405 of the Companies Act 2013 the Central Government made itnecessary for all the "Specified Companies" to furnish the Form MSME-1 HalfYearly return about the payment to micro and small enterprise suppliers. However theCompany has not filed the said form for the period ended on 30th September 2021 and on31st March 2022 respectively with Ministry of Corporate Affairs and to that extent notcomplied with the provisions of the Act.

3. Pursuant to Regulation 25 (6) of SEBI LODR Regulations an Independent Director whoresigns or is removed from the Board of Directors of the listed entity shall be replacedby a new Independent Director by listed entity at the earliest but not later than theimmediate next meeting of the Board of Directors or three months from the date of suchvacancy whichever is later:

However Mrs. Purviben S. Parikh Independent Director of the Company resigned from thepost of Director with effect from 5th May 2021. Company was required to appoint WomenIndependent Director within a period of 3 months from the date of her resignation as perRegulation 25 (6) of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015. However Company has appointed Mrs. Anjali N Choksi on 10th August 2021 i.e. witha delay of 5 days from the prescribed limit of 3 months. Thus Company has not compliedwith the said provisions of SEBI LODR Regulations to that extent.

4. Pursuant to SEBI Circular no. SEBI/HO/CFD/CMD1/CIR/P/2019/140 dated November 212019 the Company was required to make disclosure with the Stock Exchange(s) with respectto default in payment of interest/repayment of principle amount on loans fromBanks/Financial Institutions. However Information with respect to payment ofinterest/repayment of principle amount on loans from Banks/Financial Institutionsincluding delay made if any is not available and accordingly we are not in a position toidentify the deviation if any on Compliance of SEBI Circular no.SEBI/HO/CFD/CMD1/CIR/P/2019/140 dated November 21 2019.

Reply of Directors with respect to qualifications / Observations raised by SecretarialAuditors are as under:

1. Reply to qualification No. 1: Considering the transaction happensinstantaneously the prior intimation could not be made. Company will take due care infuture.

2. Reply to qualification No. 2: Due to Unavailibility of required informationfrom the MSME Vendors Company was not able to file the Half yearly return of MSME-1during the year with the Ministry of Corporate Affairs.

3. Reply to qualification No. 3: After resignation of Mrs. Purvi S. Parikh asIndependent Director w.e.f. 05-05-2021 Company was in search of a qualified IndependentDirector who possess adequate skills qualification knowledge and who also understandsthe role and duties of the Independent Director very well. Board of Directors of theCompany through circular resolution passed on August 10 2021 has appointed Mrs. AnjaliNirav Choksi as an Additional Director in the category of Non-Executive IndependentDirector ("Woman Director") for the period of Five (5) years with effect fromAugust 10 2021 for which intimation to Stock Exchange has been made.

4. Reply to qualification No. 4: This matter is strictly confidential &being reported by the Internal Auditor to the Board of rectors but all the issues aremerely operational and not having any material adverse impact on the company.

Cost Auditors

The Board had on the recommendation of the Audit Committee appointed M/s RajendraPatel & Associates Cost Accountants Ahmedabad to audit the cost records of theCompany for the financial year 2022-2023 on a remuneration of Rs. 75000/-p.a. The CostAudit Report for the year 2021-2022 will be filed before the due date with the Ministry ofCorporate Affairs. As required under the Act and Rules made thereunder the remunerationpayable to the Cost Auditors is required to be placed before the Members in a generalmeeting for ratification. Accordingly a resolution seeking ratification by members forthe remuneration payable to M/s. Rajendra Patel & Associates is included at Item No. 3of the Notice convening 33rd Annual General Meeting.

Compliance with Secretarial Standards

The Company is in compliance with the Secretarial Standards on Meeting of the Board ofDirectors (SS-1) and General Meetings (SS-2) issued by the Institute of CompanySecretaries of India and approved by the Central Government.

Reporting of Frauds by Auditors

During the year under review the Statutory Auditors Cost Auditors and SecretarialAuditor have not reported any instances of fraud committed against your Company by itsofficers or employees to the Audit Committee or the Board under Section 143(12) of theAct.

Corporate Governance

As per Regulation 27 of SEBI (LODR) Regulations 2015 a separate section on Corporategovernance practices followed by the Company together with a certificate from M/s. RaviKapoor & Associates Practicing Company Secretaries Ahmedabad confirming complianceconditions of Corporate Governance forms an integral part of this Report.

Management Discussion and Analysis (MDA)

MDA for the year under review as stipulated under Regulation 34(2)(e) of SEBI (LODR)Regulations 2015 with the Stock Exchanges is presented in a separate section which formsa part of the Annual Report.

Corporate Social Responsibility

The Annual Report on CSR activities is annexed as Annexure-2 to this Report. The CSRpolicy is available on thehttps://www.sadbhaveng.com/wp-content/uploads/2021/09/Corporate-Social-Responsibilitv-Policv.pdf

Particulars of Employees and related disclosures

In terms of the provisions of Section 197(12) of the Companies Act 2013 read withRules 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 a statement showing the names and other particulars of theemployees drawing remuneration in excess of the limits set out in the said rules isattached as 'Annexure 3' which forms part of this report.

Disclosures pertaining to 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 is attached as 'Annexure 4' which forms part of thisreport.

Energy Conservation Technology Absorption and Foreign Exchange Earning and Outgo

The rules regarding conservation of Energy and Technology Absorption are not applicableto the Company. There was no earning and outgo in the foreign currency while expenditurethe particulars of the dividend in foreign currency.

Particulars of Loans Guarantees or Investments

The provisions of Section 186 (except sub-section) of the Companies Act 2013 withrespect to a loan guarantee or security is not applicable to the Company as the Companyis engaged in providing infrastructural facilities. The details of investment made duringthe year under review are disclosed in the financial statements.

Contracts and Arrangements with Related Parties

All contracts / arrangements / transactions entered by the Company during the financialyear with related parties were in the ordinary course of business and on an arm's lengthbasis. Particulars of contract / arrangement / transaction entered into by the Companywith related parties which could be considered material in accordance with the policy ofthe Company on materiality of related party transactions forms integral part of thisreport in form AOC-2 as per 'Annexure -5'.

The Company in terms of Regulation 23 of SEBI (LODR) Regulations 2015 submits within30 days from the date of publication of its standalone and consolidated financial resultsfor the half year disclosures of related party transactions on a consolidated basis inthe format specified in the relevant accounting standards for annual results to the stockexchanges. The said disclosures can be accessed on the website of the Company atwww.sadbhaveng.com.

The Policy on materiality of related party transactions and dealing with related partytransactions as approved by the Board may be accessed on the Company 's website at thelink: https://www.sadbhaveng.com/wp-content/uploads/2021/09/RELATED-PARTY-TRANSACTION-POLICY.pdf Your Directors draw attention of the members to notes no. 46 to theStandalone Financial Statements which sets out related party disclosures.

Annual Return

Pursuant to the provisions of Section 92 (3) of the Companies Act 2013 read withCompanies (Management and Administration) Rules 2014 Company has placed Annual Return inForm MGT-7 for the financial year ended on March 31 2022 on the website of the Company atwww.sadbhaveng.com and the same can be addressed at weblinkhttps://www.sadbhaveng.com/investors/#agm-egm-documents

Internal Financial Controls

The Company has designed and implemented a process driven framework for InternalFinancial Controls [IFC] within the meaning of the explanation to section 134[5][e] of theAct. For the year ended on March 31 2022 the Board is of the opinion that the Companyhas sound IFC commensurate with the size scale and complexity of its business operations.The IFC operates effectively and no material weakness exists. The Company has a process inplace to continuously monitor the same and identify gaps if any and implement new and/or improved controls whenever the effect of such gaps would have a material effect on theCompany's operations.

Business Responsibility Reporting

Regulation 34 (2) (f) of the Listing Regulations a separate section on BusinessResponsibility Reporting forms a part of this Annual Report.

Fixed Deposit

During the year under review your Company has not accepted any fixed deposits from thepublic Pursuant to Section 73 of the Act read with the Companies (Acceptance of Deposits)Rules 2014. Thus as on 31st March 2022 there were no deposits which were unpaid orunclaimed and due for repayment.

Code for Prevention of Insider Trading

Your Company has adopted a Code of Conduct to regulate monitor and report trading bydesignated persons and their immediate relatives as per the requirements under theSecurities and Exchange Board of India (Prohibition of Insider Trading) Regulations 2015.This Code of Conduct also includes code for practices and procedures or fair disclosure ofunpublished price sensitive information which has been made available on the Company'swebsite at www.sadbhaveng.com.

General

Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company underany scheme.

4. Neither the Managing Director nor the Whole-time Directors of the Company receiveany commission from the Company and not disqualified from receiving any remuneration orcommission from any of subsidiaries of the Company.

5. All properties and insurable interests of the company to the extent required havebeen adequately insured.

6. No significant and material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and the Company's future operations.

Industrial Relations

The Company maintained healthy cordial and harmonious industrial relations at alllevels. The enthusiasm and unstinting efforts of employees have enabled the Company toremain at the leadership position in the industry and the Management appreciates theemployees of all cadres for their dedicated services to the Company.

Acknowledgments

Your Directors place on record their gratitude to the Ministry of Corporate AffairsBSE Limited National Stock Exchange of India Limited Securities and Exchanges Board ofIndia Central Government State Governments and Company's Bankers for the assistanceco-operation and encouragement they extended to the Company. Your Directors also wish toplace on record their sincere thanks and appreciation for the continuing support andunstinting efforts of investors vendors supplier sub contractors business associatesand employees in ensuring an excellent all around operational performance.

For and on behalf of the Board of Directors
Shashin V. Patel N itin R. Patel
Place : Ahmedabad Director Executive Director
Date : August 10 2022 DIN No. 00048328 DIN No. 00466330

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