Shriram EPC Ltd.
|BSE: 532945||Sector: Engineering|
|NSE: SHRIRAMEPC||ISIN Code: INE964H01014|
|BSE 00:00 | 13 Dec||5.37||
|NSE 00:00 | 13 Dec||5.35||
|Mkt Cap.(Rs cr)||522|
|Mkt Cap.(Rs cr)||521.71|
Shriram EPC Ltd. (SHRIRAMEPC) - Director Report
Company director report
Your Directors present the Eighteenth Annual Report together with the Audited FinancialStatements of your Company for the financial year ended 31st March 2018.
FINANCIAL RESULTS (' in Lakhs)
OPERATING RESULTS & PERFORMANCE
During the financial year ended March 312018 the company had recorded a total incomeat Rs. 615.04 Crores as against Rs. 519.69 Crores in the previous year on a standalonebasis. Profit was at Rs. 2425.90 lakhs as against a loss of Rs.22231.92 Crs. during theCorresponding period.
Profit after tax was at Rs.1076.09 crores compared to a loss in the previous year ofRs. 1509176 lakhs.
During the past year the operations of the Company showed improvement with theoverseas project at Muscat Oman showing good progress. After more than 5 years theCompany had an operating profit. The interest savings were significant. However theCompany continued to be under some stress primarily due to delays in approval and releaseof enhanced limits from Banks which affected the domestic operations and the cash flows.
During the year your company was awarded domestic orders worth approx. Rs.700crores.Significant orders include the following:
Water and Infrastructure projects
Company's Standalone Order Book was over Rs. 2081.37 crores as at March 31 2018 andthe consolidated order book Rs. 2668 crores.
This contract was awarded in December 2011 to (where the Company has a 50% Stake) MSJVfor a total contract value of 235 Mill US $. The work was withdrawn by Governate ofBasra(GOB) in February 2014 citing reasons of delay. In the Court of cessation the courtheld that the work withdrawal was due to "impossibility of implementation ofcontract" - Akin to force majeure and remanded the case to the local court todetermine compensation. Based on negotiation with the GOB the Contract has been restoredto MSJV. The Contract will be executed through a local partner.
BUSINESS RISK MANAGEMENT
Pursuant to the requirement of Regulation 21 of SEBI (Listing Obligations AndDisclosure Requirements) Regulations 2015 the Company has constituted Business RiskManagement Committee. The details of Committee and its terms of reference are set out inthe Corporate Governance Report forming part of the Directors' Report.
The Company has a robust Business Risk Management (BRM) framework to identifyevaluate treat and Report business risks. This framework seeks to create transparencyminimize adverse impact on the business objectives and enhance the Company's competitiveadvantage. The business risk framework defines the risk management approach across theenterprise at various levels including documentation and reporting. The framework hasdifferent risk models which help in identifying risks trend exposure and potential impactanalysis at a Company level as well as business segments and its mitigation plans.
The business risks identified by the Company and its mitigation plans are as under:
In the context of the projects being executed the Company reviews the risks associatedwith a project in all the following aspects but not restricted to:
Client related details such as financial closure of the projectcreditworthiness and reputation of the client before even signing of the contract.
Estimation risk like price and quantity variances contingency provision forexfluctuation on a periodic basis.
Commercial risks like taxes and duties payment terms bank guaranteerequirements
Organisational risks like availability of technical and managerial resourcesgap funding needs consortium partners roles and responsibilities.
Performance risk like achievability of guarantee parameters time schedulewarranty and defect liability obligations.
Interfacing risks like coordination with multiple agencies for approvals andclearance
Geographic risks like unfavourable weather conditions earth quake floods etc.
The above key risks are closely tracked for timely mitigation. Competition Risks:
The Infrastructure Industry is intensely competitive. To mitigate this risk thecompany is leveraging on its expertise experience to increase market share enhance brandequity / visibility and enlarge product portfolio and service offerings.
Occupational Health &Safety (OHS) Risks:
Safety of employees and workers is of utmost importance to the company. To reinforcethe safety culture in the company it has identified occupational health & safety asone of its focus areas. Various training programmes have been conducted at the sites suchas behaviour based safety training program visible safety leadership program logisticssafety program etc.
ECONOMIC SCENARIO AND OUTLOOK
Global growth is expected to be sustained over the next couple of yearsand evenaccelerate somewhat in emerging market and developing economies (EMDEs) thanks to arebound in commodity prices. Although nearterm growth could surprise on the upside theglobal outlook is still subject to substantial downside risks including the possibilityof financial stress increased protectionism and rising geopolitical tensions. Earlysigns of revival are getting visible in the form of uptick in industrial output anddeclining unemployment rate.
Your Company operates in the turnkey contracts business.
The turnkey contracts business cover the engineering procurement and constructionprojects which include renewable energy projects like biomass-based power plantsmetallurgical and process plant projects and municipal services projects like water andwastewater treatment plants water and sewer infrastructure and pipe rehabilitation.
The order backlog was over Rs. 2668 crores as on March 312018.
GREEN INITIATIVE IN CORPORATE GOVERNANCE
The Ministry of Corporate Affairs (MCA) has through Circular No.17/2011 pronounced aGreen initiative in Corporate Governance that allows Companies to send notices/ documentsto shareholders electronically. The Green Initiative endeavors to reduce consumption ofpaper in turn preventing deforestation and contributes towards a green and cleanenvironment. In support of the initiative announced by MCA your Company will send noticesconvening Annual General Meeting Audited Financial Statements Directors Report andAuditors' Report etc in electronic form in the current financial year. Your Company wouldlike to continue the Green Initiative further and requests all shareholders to opt forelectronic documents.
However on request by any member of the Company/ Statutory Authority interested inobtaining full text of the financial statements these documents will be made availablefor examination at its registered office. On personal request by any shareholder aphysical copy of the Annual Accounts need to be provided. Pursuant to this a statementsummarizing the financial results of the Subsidiary is attached to the ConsolidatedFinancial Statement.
SHRIRAM EPC FZE SHARJAH
During the year the progress of the contract execution for constructing Balance ofPlant (BoP) for 1.2 MTPA Mini Mill Project in Sohar Sultanate of Oman has beensatisfactory. Nearly 40% of the project has been completed.
HALDIA COKE & CHEMICALS PVT. LTD (HCCL)
The Company has been referred to NCLT and the plans are being drawn for settlement withthe creditors.
The Board has decided not to recommend a Dividend. SHARE CAPITAL
The authorized and paid-up capital of your Company is Rs.1050 crs and Rs.971.53 croresrespectively.
The shareholding pattern as on 31st March 2018 is as under:
The total networth of the Company as at 31st March 2018 on Standalone basis wasRs.1229.32 Crores.
DETAILS OF DEPOSITS
The Company has not accepted any Deposits covered under Section 73 of the CompaniesAct 2013 read with the Companies (Acceptance of Deposits) Rules 2014.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
The details of Loans Guarantees and Investments covered under the provisions ofSection 186 of the Companies Act 2013 are given in the notes to the Financial Statements.
DETAILS OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS
In addition to the Internal Controls on Operations the Board has laid emphasis onadequate internal financial controls to ensure that the financial affairs of the Companyare carried out with due diligence. Apart from Internal Audit function which scrutinizesall the financial transactions there are also processes laid down leading to CFO/CEOcertification to Board on the adequacy of Internal Financial Controls as well as internalcontrols over financial reporting.
APPOINTMENT OF DIRECTORS
Mr. R Sundararajan Director (DIN: 00498404) will retire by rotation pursuant toSection 152(6) of the Companies Act 2013 at the ensuing Annual General Meeting and beingeligible offers himself for re-appointment.
EVALUATION OF BOARD'S PERFORMANCE
As per the provisions of Section 134(3) (p) of the Companies Act 2013 and SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the Board has carriedout an annual performance evaluation of its own performance the directors individually aswell as the evaluation of the working of its Audit Committee Nomination &Remuneration Committee and Risk Management Committee and Stakeholders RelationshipCommittee. The manner in which the evaluation has been carried out has been explained inthe Corporate Governance Report.
FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS
The details of familiarization programmes for Independent Directors of the Companytheir roles rights responsibilities in the Company nature of the industry in which theCompany operates business model of the Company and related matters are put up on thewebsite of the Company at the following link:
DECLARATION BY INDEPENDENT DIRECTORS
The Company has received necessary declaration from each Independent Director of theCompany under Section 149(7) of the Companies Act 2013 (Act) stating that the IndependentDirectors of the Company met with the criteria of Independence laid down in Section 149(6)of the Act and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.
Pursuant to Section 178(3) of the Companies Act 2013 the Board on the recommendationof the Nomination & Remuneration Committee framed a policy for selection andappointment of Directors Key Managerial Personnel and other employees and theirremuneration.
The details of the Remuneration Policy are stated in the Corporate Governance Report.
NUMBER OF MEETINGS OF THE BOARD
During the year 2017-18 5(Five) meetings of the Board of Directors were held on 30thMay 2017 24th August 2017 13th September 2017 7th December 2017 14th February
2018.The Audit Committee had met Four (4) times on 30th May 2017 13th September 20177th December 2017 14th February 2018. The details of the said meetings are given in theCorporate Governance Report. The intervening gap between the Meetings was within theperiod prescribed under the Companies Act 2013.
DIRECTORS' RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofSection 134(3)(c) of the Companies Act 2013:
a. that in the preparation of the annual accounts for the year ended March 31 2018the applicable accounting standards had been followed along with proper explanationrelating to material departures if any;
b. that the directors had selected such accounting policies as mentioned in Note No: 2of the Financial Statements and applied them consistently and judgement and estimates thatare reasonable and prudent so as to give a true and fair view of the state of affairs ofthe company as at March 312018 and of the Profit of the Company for the year ended onthat date;
c. that the directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;
d. that 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 such internal financial controls are adequate and were operatingeffectively.
f. that the directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.
RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the financial year were onan arm's length basis and were in the ordinary course of business. There were nomaterially significant related party transactions made by the company with promotersdirectors key managerial personnel or other designated persons which may have a potentialconflict with the interest of the company at large. None of the Directors had anypecuniary relationships or transactions vis-a-vis the Company other than sitting fees andreimbursement of expenses incurred if any for attending the Board meetings.
All related party transactions are placed before the audit committee for review andapproval as per terms of the Policy for dealing with related parties. Prior omnibusapproval of the audit committee is obtained on a quarterly basis for the transactionswhich are of a foreseen and repetitive nature. The transactions entered into pursuant tothe omnibus approval so granted are audited and a statement giving details of all relatedparty transactions is placed before the audit committee and the board of directors fortheir approval on a quarterly basis.
All transactions with Related Parties entered during the financial year were in theordinary course of business and on an arm's length basis. There are no materiallysignificant related party transactions made by the Company with its Promoters DirectorsKey Managerial Personnel or their relatives which may have a potential conflict with theinterest of the Company at large. There are no contracts or arrangements entered into withRelated Parties during the year to be disclosed under Sections 188(1) and 134(h) of theCompanies Act 2013 in form AOC-2.
The policy on related party transactions as approved by the board is uploaded on thecompany's website at the following link. http://www.shriramepc.com/Companies-Act-2013-Compliance.aspx
EXPLANATIONS OR COMMENTS ON QUALIFICATIONS RESERVATIONS OR ADVERSE REMARKS ORDISCLAIMER MADE BY THE STATUTORY AUDITORS AND THE PRACTISING COMPANY SECRETARY IN THEIRREPORT
The explanations/commentsmade by the Board relating to qualification reservations oradverse remarks made by the Statutory Auditors and the Practising Company Secretary intheir respective reports are furnished below:
QUALIFICATIONS OF STATUTORY AUDITORS
Management's response to Auditors qualification
Financial Assets Loans (Non-Current) include Rs. 3677.28 Lakhs (March 31 2017 - Rs3196.96 Lakhs) (including interest accrued up to March 31 2016) and Other TradeReceivables under "Other Non-Current Financial Assets" include net amount of Rs.307.21 Lakhs (March 312017 - Rs. 267.08 Lakhs) due from Leitwind Shriram ManufacturingPvt Limited (LSML) (a related party). As part of the Corporate Debt Restructuring (CDR)package entered into by LSML with its bankers the dues to SEPC is subordinated to thedues to Bankers and hence expected to be recovered before March 2030. Considering theextended repayment period and future business potential for Wind Energy Business themanagement is confident of realizing the dues. The auditors have qualified this matter intheir report for the year ended March 312018. The same have also been qualified in theprevious year.
QUALIFICATIONS BY THE SECRETARIAL AUDITORS
Management response to point no.1
Since the Company has a networth of more than Rs.500 crores it becomes mandatoryrequirement for a CSR committee to be formed. The Company has formed the Committee on7/6/2018. The policy of the CSR Committee will be recommended by the Committee to theBoard for their approval at the next Board meeting.
Management response to point no.2
The Company has already transferred the Unpaid/ Unclaimed amounts till 2009-10 and hastaken steps to transfer the underlying shares for the above mentioned years to IEPF. Forthe year 2010-11 the Company is transferring Unpaid/ Unclaimed amounts along with theunderlying shares.
Management response to point no.3
The Company has appointed the Company Secretary as the Nodal officer at the Boardmeeting held on 7/6/2018 for the purpose of co-ordination with IEPF Authority.
Management response to point no.4
However for the purposes of quorum the Chairman's presence has not been taken intoaccount.
Management response to point no.5
The Company shall ensure henceforth that the statutory deadline is adhered to.
Management response to point no.6
The Scrutinizer Report received from Practicing Company Secretary has been corrected intune with Section 110 of the Companies Act 2013 read with Rule 22 of the Companies(Management and Administration) Rules 2014.
Management response to point no.7
The Company has noted the same and shall ensure that the name of Top 10 employees interms of remuneration drawn is disclosed in the current annual report.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION BETWEEN THE END OFTHE FINANCIAL YEAR AND THE DATE OF THE REPORT
There are no material changes or commitments affecting the financial position of theCompany between the end of the financial year and the date of this report.
COMPOSITION OF AUDIT COMMITTEE
Pursuant to Section 177 of the Companies Act 2013 during the year the AuditCommittee was reconstituted* by the Board of Directors which consists of the followingmembers:
The Board has accepted the recommendations of the Audit Committee and there were noincidences of deviation from such recommendations during the financial year under review.
The Company has devised a vigil mechanism in pursuance of provisions of Section 177(10)of the Companies Act 2013 for Directors and employees to report genuine concerns orgrievances to the Audit Committee in this regard and details whereof are available on theCompany's website.
NOMINATION AND REMUNERATION COMMITTEE
Pursuant to Section 178 of the Companies Act 2013 during the year the Board hadreconstituted the Nomination and Remuneration Committee consisting of the followingmembers:
The said committee has been empowered and authorized to exercise powers as entrustedunder the provisions of Section 178 of the Companies Act 2013. The Company had laid outthe policy on director's appointment and remuneration including criteriafordeterminingqualifications positive attributes independence of a director and other matters providedunder sub section 3 of Section 178 of the Companies Act 2013.
Policy on Criteria for Board Nomination and Remuneration is available in the website ofthe Company under the link http://
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Corporate Social Responsibility Committee is formed based on the networth of theCompany as per the Companies (Corporate Social Responsibility Policy) Rules 2014.
The CSR Policy shall be framed and recommended to the Board for their approval in theforthcoming meeting.
The CSR Committee consists of following Members :
SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS
The Company received 2 NCLT orders as mentioned below:
1. The Company received an Order No. CP/537(IB)/CB/2017 dated 10th August 2017 from theNational Company Law Tribunal Division Bench Chennai pertaining to Rio Glass Solar SA.Consequently the NCLAT on 2.11.2017 has set aside the impugned order dated 10/8/2017passed by the learned adjudicating Authority in CP/537(IB)/CB/2017.
2. The Company received an Order No. CP/714(IB)/CB/2017 dated 17th May 2018 from theNational Company Law Tribunal Division Bench Chennai pertaining to Asset Care &Reconstruction Enterprises Limited. Consequently the CIRP proceedings have been stayed bythe National Company Law Appellate Tribunal dated 31/5/2018 on the Company appeal(AT)(Ins) No.241/2018.
The Securities and Exchange Board of India (SEBI) on 2nd September 2015 issued SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 with the aim toconsolidate and streamline the provisions of the Listing Agreement for different segmentsof capital markets to ensure better enforceability. The said regulations were effectivefrom 1st December 2015 and accordingly all listed entities were required to enter intothe listing agreement within six months from the effective date. The Company entered intoListing Agreements with BSE Limited and National Stock Exchange of India Limited duringDecember 2015.
The Company's auditors M/s. MSKA & Associates (ICAI Firm Registration Number-105047W have already been appointed for a period of 5 years at the last Annual GeneralMeeting held on August 24 2017.
The ratification of their appointment pursuant to Section 139 of the Companies Act2013 is not required in terms of the recent MCA Notification dated 7-5-2018.
Pursuant to Section 148 of the Companies Act 2013 (Act) read with Rule 14 of Companies(Auditand Auditors) Rules 2014 (Rules) Mr. G Sundaresan CMA (Membership No:11733) wasappointed as Cost Auditor of the company for the financial year 2018-19 on a remunerationof Rs.50000/-. In terms of the Act and Rules referred above the remuneration payable tothe cost auditor is required to be placed before the members in a general meeting fortheir ratification.
Accordingly a resolution seeking member's ratification for the remuneration payable toMr. G Sundaresan CMA Cost Auditor is included at Item No.3 of the notice convening theannual general meeting.
Pursuant to the provisions of Section 204 of the Companies Act 2013 read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the companyhas appointed Messrs R Sridharan & Associates a firm of Company Secretaries inPractice to undertake the Secretarial Audit of the Company. The Report of the SecretarialAuditor is annexed herewith.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report for the year under review in terms ofRegulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015forms part of this Annual Report.
All material information was circulated to the directors before the meeting or placedat the meeting including minimum information required to be made available to the Boardas prescribed under Part A of Schedule II of Sub- Regulation 7 of Regulation 17 of theListing Regulations.
In terms of Regulation 34 of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 a Report on CorporateGovernance along with a Certificate from the Practicing Company Secretary confirming thecompliance with the conditions of Corporate Governance as stipulated under Part E ofSchedule V of Sub- Regulation 34(3) of the Listing Regulations is attached to this report.
ABRIDGED ANNUAL REPORT
In terms of the provision of Section 136(1) of the Companies Act 2013 Rule 10 ofCompanies (Accounts of Companies) Rules 2014 and Regulation 36 of the ListingRegulations the Board of Directors has decided to circulate the Abridged Annual Reportcontaining salient features of the balance sheet and statement of profit and loss andother documents to the shareholders for the Financial Year 2017-18 under the relevantlaws. Members who desire to obtain the full version of the Annual Report may write to theCompany Secretary at the registered office.
Full version of the Annual Report is also available on the Company's website HYPERLINK"http://www.shriramepc . com"
PROTECTION OF WOMEN AT WORK PLACE
The Company has in place an Anti Sexual Harassment Policy in line with the requirementsof The Sexual Harassment of Women at the workplace (Prevention Prohibition &Redressal) Act 2013.
Internal Complaints Committee (ICC) has been set up to redress complaints receivedregarding sexual harassment. All employees (permanent contractual temporary andtrainees) are covered under this policy.
The following is the summary of sexual harassment complaints during the year 2017-18.
No. of complaints received - Nil
No. of complaints disposed off- Not Applicable
ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withRule 8(3) of The Companies (Accounts) Rules 2014 is given below:
Earnings in Foreign Currency: Nil
Expenditure in Foreign Currency: Rs. 487.98 lakhs
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in the prescribed form MGT9 as per Section 92(3) of the Companies Act 2013 read with Rule 12 of the Companies(Management and Administration) Rules 2014 is annexed and forms part of this Report.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
In terms of the provisions of Section 197(12) of the Companies Act 2013 read with Rules5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 (including any statutory modification(s) or re- enactment(s) thereof for thetime being in force) a statement showing the names of top ten employees of the Company interms of remuneration drawn and other particulars of the employees drawing remuneration inexcess of the limits set out in said rules are givenbelow "Annexure-A"
Statement containing the particulars of employees in accordance with Rule 5(2) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 or amendmentsmade thereto:
(i) The remuneration shown above comprises salary allowances perquisites performancelinked incentive/ Exgratiamedical Company's contribution to provident fund and all otherreimbursements if any.
(ii) None of the employees is related to any director of the Company.
CONSOLIDATED FINANCIAL STATEMENTS
Pursuant to Section 129(3) of the Companies Act 2013 (Act) and SEBI ListingRegulations the consolidated financial statements prepared in accordance with the IndianAccounting Standards prescribed by the Institute of Chartered Accountants of India isprovided in the Annual Report. Pursuant to the provisions of Section 129(3) of the Actread with Rule 5 of the Companies (Accounts) Rules 2014 a statement containing salientfeatures of the financial statements of the Company's subsidiaries Associates in FormAOC-1 is attached to the financial statements of the Company.
APPRECIATION & ACKNOWLEDGEMENTS
The Directors wish to thank the bankers for their continued assistance and support. TheDirectors also wish to thank the Shareholders of the company for their continued supporteven during these testing period. Further the Directors also wish to thank the customersand suppliers for their continued cooperation and support. The Directors further wishes toplace on record their appreciation to all employees at all levels for their commitment andtheir contribution.
For and on behalf of the Board