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Sadbhav Engineering Ltd.
|BSE: 532710||Sector: Infrastructure|
|NSE: SADBHAV||ISIN Code: INE226H01026|
|BSE 09:55 | 18 Feb||166.30||
|NSE 09:49 | 18 Feb||165.80||
|Mkt Cap.(Rs cr)||2,854|
|Mkt Cap.(Rs cr)||2853.71|
Sadbhav Engineering Ltd. (SADBHAV) - Director Report
Company director report
The Directors have the pleasure in presenting the Twenty Eighth Annual Report togetherwith the audited financial statement for the year ended March 31 2017
The Company's financial performance for the Year ended on March 31 2017 is summarizedbelow:
(Rs. in crores)
Directors are pleased to recommend dividend of 75% (Re 0.75 per equity share of Re 1each) for the financial year ended March 31 2017 (P.Y. 70%) for approval of theshareholders. The final dividend if approved will result in cash payout of Rs. 12.01Crores and dividend tax of Rs 2.45 Crores.
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 mandating the top 500 listedentities based on market capitalization calculated as on 31st March of every financialyear to formulate a Dividend Distribution Policy and disclose the same in their AnnualReports and on their websites.
Accordingly the Board of the Company has adopted a Dividend Distribution Policy whichis available on the website of the Company at the link: http://sadbhavene.com/wp-content/uploads/2016/01/DividendDistribution Policy SEL.pdf
Transfer to Investor Education and Protection Fund
The Company has transferred a sum of Rs. 0.29 lacs to the Investor Education andProtection fund established by the Central Government during the financial year 2016-17in compliance with Section 205A(5) of the Companies Act 1956. The said amount representsunclaimed dividend amount for the financial year 2008-2009 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 2008-2009.
Company has transferred a sum of Rs. 10.00 Crores into General Reserve during theperiod under review.
The total revenue during the year under review was Rs. 3407.84 Crores against Rs.3283.26 Crores for the previous year resulting the Increase of 3.79%. Profit beforeFinance Cost Depreciation & amortization Expense and Tax Expense for the current yearis Rs 443.16 Crores ( Rs. 431.80 Crores in previous year) thereby resulting the increaseof 2.63%. Net Profit after tax amounted to Rs. 187.85 Crores ( Rs. 132.01 Crores inprevious year) thereby resulting increase of 42.30%. There has been no change in thenature of business of the Company during the applicable financial year.
As per the Consolidated Financial Statements the Total Revenue of the companyoperating profit (PBDIT) and net loss for the year were Rs. 4654.18 Rs. 1346.37 and Rs.54.03 Crores respectively.
Change in the Nature of Business if any
There are no material 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.
The following major works are under execution and the same are progressingsatisfactorily. ( Rs. in crores)
The Company's order book (pending execution) shows work on hand amounting to Rs.7683.42 crores as on the March 31 2017. BOT Projects under Implementation
BOT Projects Partial Implementation
SEL: Sadbhav Engineeing Limited
SIPL: Sadbhav Infrastructure Project Limited
Revenue Generating BOT Project
* In respect of MBHPL - In accordance with the share purchase agreement dated November03 2014 our company to Sell 74.00% of the outstanding equity interest to SIPL. Howeversaid transfer is subject to approval from the Government authority.
** In terms of Memorandum of Understanding (MOU) dated January 17 2017 between theCompany and Sadbhav Infrastructure Project Limited (SIPL) SEL reduced its commitment tosell investment in MBCPNL to third party from 22% to 9% and resultantly transferred such13% ownership/beneficial ownership in MBCPNL to the SIPL raising SIPL holding to 91%. SELreaffirms that consideration received by it aggregating to INR 280.13 Million is towardstransfer of entire ownership of 91% in MBCPNL and hence no further payment is requiredto be made by SIPL to SEL. The procedural formalities for transfer of equity shares werein progress as on the date of balance sheet.
A By virtue MOU pending transfer from Sadbhav Engineering Limited to SadbhavInfrastructure Project Limited.
Employee Stock Option Scheme
The Company implemented the Sadbhav Employee Stock Option Scheme 2008 (ESOS Scheme2008). The Nomination and Remuneration Committee administers and monitors the Scheme.
The applicable disclosures as stipulated under applicable Rules and Regulations as onMarch 31 2017 with regard to Employee Stock Option Plan are provided in 'Annexure 1'forming part of this report.
Company has received certificate from Auditors of Company confirming that scheme hasbeen implemented in accordance with SEBI Regulations and resolution passed byShareholders. Auditor's certificate would be placed at Annual General Meeting forinspection by members.
During the year the total paid-up equity share capital of the company has beenincreased from Rs. 171533800 - to Rs. 171570800/- on account of allotment of 37000equity shares of Re. 1/- each at a premium of Rs. 49 per share to the employees of theCompany under Sadbhav Employee Stock Option Scheme 2008 (ESOS Scheme 2008).
The Company raised an amount of Rs. 320 Crores by way of issue of Non-ConvertibleDebentures on private placement basis. The said Non-Convertible Debentures are listed onthe BSE Ltd. The aggregate Non-Convertible Debentures Outstanding amounts to 255.89 croresas on 31st March 2017.
Rating agency Credit Analysis & Research Ltd. (CARE) assigned CARE A1+ (A One plus)to additional Short-term Bank facilities of Rs. 20 Crores and reaffirmed CARE A+; stable(Single A plus; Outlook: Stable) to additional Long-term Bank facilities of Rs. 110Crores.
Instruments with this rating are considered to have adequate degree of safety regardingtimely servicing of financial obligations. Such instruments carry low credit risk.
Subsidiaries Joint Ventures and Associates Companies
During the year the Following Companies has become/ceased to be company'ssubsidiaries joint ventures or associate company.
Note: Between the end of the financial year 2016-17 and the date of this report twonew wholly owned subsidiary companies i.e. Sadbhav Vidarbha Highway Private Limited andSadbhav Udaipur Highway Private Limited were incorporated with an object to executehighway projects as per the concessions agreements signed with NHAI.
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 Annexure in Form AOC 1 preparedunder section 129(3) of the Companies Act 2013 to the consolidated Financial Statementsof the Company which forms part of this report.
The Company will keep the separate audited financial statements in respect of each ofsubsidiaries at the Corporate Office of the Company and its subsidiaries and make themavailable upon the request by any shareholder of Company. The said financial statementsare also available on the website of your Company at http://www.sadbhavene.com/investors. The Policy for determining material subsidiaries as approved may be accessed on theCompany's website at the link: http://www.sadbhaveng.com/wp-content/uploads/2016/01/MATERIAL SUBSIDIARY.pdf.
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 2016-17.
Board of Directors and Key Managerial Personnel
Retirement by Rotation
Mr. Nitin R. Patel and Mr. Vipul H. Patel are the directors liable to retire byrotation at the ensuing Annual General Meeting and being eligible offer themselves forreappointment. The directors recommend their reappointment.
The Board on recommendation of Nomination & Remuneration Committee and subject toapproval of members in ensuing Annual General Meeting appointed/reappointed thefollowings:
1. Reappointed Mr. Arun S. Patel as Independent Director of the Company on expiring ofhis first term as Independent Director to hold office for further 5 (five) consecutiveyears for a second term from 26/09/2017 to 25/09/2022 under the Companies Act 2013 andSEBI (LODR) 2015.
2. Appointed Mr. Shashin V. Patel as Chairman and Managing Director of the Company andKey Managerial Personnel for period of 3 years w.e.f. 01.07.2017.
3. Reappointed Mr. Nitin R. Patel as Whole-time Director designated as an ExecutiveDirector of the Company for further period of 3 years w.e.f. 01.07.2017.
4. Reappointed Mr. Vasistha C. Patel as Whole-time Director designated as an ExecutiveDirector of the Company for further period of 3 years w.e.f. 01.10.2017.
5. Reappointed Mr. Vikram R. Patel as Whole-time Director designated as an ExecutiveDirector of the Company for further period of 3 years w.e.f. 01.10.2017.
Pursuant to section 168 of the Companies Act 2013 Mr. Vishnubhai M. Patel Chairman andManaging Director of the Company resigned due to Health Condition w.e.f. 03-03-2017. TheBoard at its meeting held on 03-03-2017 had Conferred the honorary title of "ChairmanEmeritus" to Mr. Vishnubhai M. Patel for his valuable service to the company sinceits incorporation.
Mr. Sandip A. Sheth Independent Director resigned from the company w.e.f .01-06-2017due to pre-occupancy of his professional. The Board places on record its deep sense ofappreciation on valuable contribution made by outgoing director during his tenure on theBoard.
Criteria of independence as mentioned under Section 149 (6) of the Companies Act 2013
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) Regulation 2015 and there has been nochange in the circumstances which may affect their status as Independent Director duringthe year.
Evaluation of Board Performance
In compliance to the provisions of the Companies Act 2013 and Regulation 27 of SEBI(LODR) Regulations 2015 the annual performance evaluation of Board and its Committee wascarried out during the year under review. More details on the same are given in theCorporate Governance Report.
The Audit Committee comprises Directors namely Mr. Sandip V. Patel (Chairman) Mr.Nitin R. Patel Mr. Atul N. Ruparel and Mr. Arun S. Patel. The composition of the AuditCommittee is in compliance with the requirement of Section 177 of the Companies Act andRegulation 18 of the SEBI (LODR) Regulations 2015.
Committees of Board
Details of various committees constituted by the Board of Directors as per provisionsof the Listing Regulations and Companies Act 2013 are given in the Corporate GovernanceReport and forms part of this report.
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 and no complaint has been received onsexual harassment during the financial year 2016-17.
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.
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.
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 Seven Board Meetings were held and the details of which are given inthe Corporate Governance 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 2017 theapplicable accounting standards have been followed and there are no material departuresfrom the same;
(b) the directors have 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 31 2017 and of the profitand loss of the Company for the year ended on that date;
(c) the directors have 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 have prepared the annual accounts on a going concern basis;
(e) that the directors have 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 have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and operatingeffectively.
As per Section 139 and Section 142 of the Companies Act 2013 read with the Companies(Audit and Auditors) Rules 2014 the term of M/s. Surana Maloo & Co. CharteredAccountants Ahmedabad having Firm Registration No. 112171W as the Statutory Auditors ofthe Company expires at the conclusion of the ensuing Annual General Meeting (AGM) of theCompany. The Board of Directors of the Company at its meeting held on August 14 2017 onthe recommendation of the Audit Committee and subject to approval of the members hasappointed M/s. Dhirubhai Shah & Doshi Chartered Accountants (Firm Registration No102511W) as the Statutory Auditors of the Company from the conclusion of 28th AGM of theCompany till the conclusion of 29th AGM to be held in the Calendar year 2018.
The Company has received a certificate that they satisfy the criteria provided underSection 141 of the Companies Act 2013 and that the appointment if made shall be inaccordance with the applicable provisions of the Companies Act 2013 and rules framedthereunder.
There are no qualifications reservations or adverse remarks made by Statutory Auditorsin their report for the Financial Year ended March 31 2017.
Details in respect of frauds reported by auditors under sub-section (12) of Section 143other than those which are reported to the central government.
During the year under consideration there was no such instances.
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 2016-17.The Secretarial Audit Report is annexed herewith as 'Annexure 2' to this Report. The Boardis of the opinion that the Secretarial Audit Report does not contain any qualificationreservation or adverse remark.
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 2017-18 on a remuneration of Rs. 150000/-p.a. The CostAudit Report for the year 2015-2016 was 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. 14of the Notice convening 28th Annual General Meeting.
As per Regulation 27 of SEBI (LODR) Regulations 2015 a separate section on Corporategovernance practices followed by the Company together with a certificate from theCompany's Auditors confirming compliance 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 to this Report. The CSR policy isavailable on the http://sadbhavene.com/wp-content/ uploads/2016/01/CORPORATE SOCIALRESPONSIBILITY.pdfof the Company. The CSR activities is annexed herewith as 'Annexure3'.
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 4' 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 5' 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 are given in the notes no. 55 to theStandalone Financial Statements.
Particulars of Loans Guarantees or Investments
Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are given in the notes no. 7 17 & 58 to the StandaloneFinancial 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 6'.
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: http://sadbhavene.com/wp-content/uploads/2016/01/RELATED PARTY TRANSACTIONS1.pdf.Your Directors draw attention of the members to notes no. 52 to the Standalone FinancialStatements which sets out related party disclosures.
Extract of Annual Return
Extract of Annual Return of the Company is annexed herewith as 'Annexure 7' to thisReport.
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[e] of theAct. For the year ended on March 31 2017 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
As per Regulation 34[f] of the Listing Regulations 2015 a separate section onBusiness Responsibility Reporting forms a part of this Annual Report.
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 save and except ESOS referred to in this report.
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.
The Company enjoyed cordial relations with the employees during the year under reviewand the Management appreciates the employees of all cadres for their dedicated services tothe Company.
The Directors wish to express their appreciation for the support and co-operation ofthe Central and State Government Bankers Financial Institutions Suppliers VendorsAssociates Subcontractors and Shareholders during the year under review. Your Directorswish to place on record their appreciation for the employees of the Company at all levelsfor their commitment dedication and continued support to the Company.