SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation
The financial statements of Patel Engineering Limited ("the Company or PEL") have been prepared to comply in all material respects with the accounting standards notified by the Companies (Accounting Standards) Rules, read with rule 7 to the Companies (Accounts) Rules 2014 in respect of section 133 to the Companies Act, 2013. The financial statements are prepared under the historical cost convention, on an accrual basis of accounting. The accounting policies applied are consistent with those used in the previous year.
(b) Use of estimates
The preparation of financial statements, in conformity with Generally Accepted Accounting Principles, requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as at the date of the financial statements and the result of operation during the reported period. Although these estimates are based upon management''''s best knowledge of current events and actions, actual results could differ from these estimates which are recognized in the period in which they are determined.
(c) Fixed asset
i) Tangible fixed assets :
Fixed assets are stated at cost of acquisition including attributable interest and finance costs till the date of acquisition/ installation of the assets and improvement thereon less accumulated depreciation and accumulated impairment losses, if any.
ii) Intangible assets:
Intangible assets are stated at cost of acquisition net of recoverable taxes less accumulated depreciations / amortization and impairment loss, if any. Fixed Assets costing '''' 5,000 or less are not capitalised and charged to the Statement of Profit and Loss."
As per the Schedule II of the Companies Act 2013, effective 1st April 2014, the management has internally reassessed the useful lives of assets to compute depreciation wherever necessary, to conform to the requirements of the Companies Act, 2013 which is:
Assets Estimated useful life Tangible Assets:
Factory Building/ Building 28/60 years
Machinery/ Ship 8 V2 years
Motor Cars/ Motor Truck 8 years Furniture/ Electrical Equipments 6 years
Office Equipments 5 years
Computer / Software 3 years
(e) Impairment of assets
The carrying amount of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized in the statement of profit and loss whenever the carrying
amount of an asset or cash generating unit exceeds its recoverable amount. The recoverable amount of the assets (or where applicable, that of cash generating unit to which the asset belongs) is estimated as the higher of its net selling price and its value in use. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.
Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as non-current investments.
Current investments are carried in the financial statements at lower of cost or fair value determined on an individual investment basis. Non-current investments are carried at cost and provision for diminution in value is made to recognize a decline other than temporary in the value of the investments. On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
The stock of construction materials, stores, spares and embedded goods and fuel is valued at cost (on weighted average basis), or net realizable value, whichever is lower and Work-in-progress of construction contracts at contract rate as per AS-7. Work in Progress in respect of project development and Buildings held as stock-in-trade are valued at cost or net realizable value, whichever is lower.
Project Work-in-progress is valued at contract rates and site mobilization expenditure of incomplete contracts is stated at lower of cost or net realizable value.
(h) Recognition of income and expenditure
i) Accounting for construction contracts :
Revenue from contracts is recognized on the basis of percentage of completion method, based on the stage of completion at the balance sheet date, billing schedules agreed with the client on a progressive completion basis taking into account the contractual price and the revision thereto by estimating total revenue including claims / variations in terms of Accounting Standard 7 - Construction Contract and total cost till completion of the contract and the profit is recognized in proportion to the value of work done when the outcome of the contract can be estimated reliably. In case the estimated total cost of a contract based on technical and other estimate is expected to exceed the corresponding contract value, such excess is accounted for. Price/Quantity Escalation Claims and/or variations are recognized on acceptance of concerned authorities or on evidence of its final acceptability. Revenue in respect of other claims are accounted as income in the year of receipt of award. Revenue on Project Development is recognized on execution of sale agreement. Dividend income is recognized when the right to receive payment is established. Other revenues and expenses are accounted on accrual basis.
ii) Revenue from building development is recognized on the percentage completion method of accounting. Revenue is recognized, in relation to the sold areas only, on the basis of percentage of actual cost incurred thereon including cost of land as against the total estimated cost of project under execution subject to such actual cost being 30% or more of the total construction / development cost. The estimates of saleable area and costs are revised periodically
by the management. The effect of such changes to estimates is recognized in the period such changes are determined. However, if and when the total project cost is estimated to exceed the total revenue from the project, the loss is recognized in the same financial year.
iii) Revenue from sale of goods is recognized when the substantial risk and rewards of ownership is transferred to the buyer, which is generally on dispatch and the collectability is reasonably measured. Revenue from product sales are shown as net of all applicable taxes and discount.
(i) Accounting for joint venture contracts
a) Where the Joint Venture Agreement provides for execution of contracts under work sharing pattern, the Company''''s share of revenue/expenses in the works executed by it is accounted on percentage completion method as per the accounting policies followed by it in respect of contracts.
b) Where the Integrated Joint Venture Agreement provides for execution of contracts under profit sharing arrangement, Company''''s share in the profit /loss is accounted for as and when determined. The services rendered to joint Ventures are accounted as income, on accrual basis. The contribution to joint venture along with share of profit/ loss accumulated in the Joint Venture is reflected as investments or loans & advances or current liabilities as per the nature of the transaction.
(j) Foreign currency transaction/translations
Transactions in foreign currency including acquisition of fixed assets are recorded at the prevailing exchange rates on the date of the transaction. All monetary assets and monetary liabilities in foreign currencies are translated at the relevant rates of exchange prevailing at the year-end. Exchange differences arising out of payment/restatement of long term liabilities relating to Fixed Assets are capitalized and in other cases amortized over the balance period of such long term monetary items. The unamortized balance is carried in the Balance Sheet as " Foreign Currency Monetary items Translation Difference Account" as a separate line item under " Reserve and Surplus Account".
Revenue transactions at the Foreign Branch/projects are translated at average rate. Fixed Assets are translated at rate prevailing on the date of purchase. Net exchange rate difference is recognized in the Profit and Loss Account. Depreciation is translated at rates used for respective assets.
(k) Financial derivative & hedging transactions
In respect of Financial Derivative & Hedging Contracts, gain / loss are recognized on Mark-to-Market basis and charged to Statement of Profit and Loss along with underlying transactions.
(l) Retirement and other employee benefits
Contribution to Provident/Family Pension/Gratuity Funds are made to recognized funds and charged to the Statement of Profit and Loss. Provision for incremental liability in respect of Gratuity and Leave encashment is made as per independent Actuarial valuation at the year-end.
Provision for current tax is recognized based on the estimated tax liability computed after taking credit for allowances and exemptions in accordance with the Income Tax Act, 1961.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to timing differences between the financial statements1 carrying amount of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates or tax rates that are substantively enacted at the balance sheet dates. The effect on the deferred tax assets and liabilities of a change in tax rate is recognized in the period that includes the enactment date. Deferred tax assets are recognized only to the extent there is virtual certainty of realization in future.
(n) Provisions, contingent liabilities and contingent assets
The Company recognizes a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation.
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation that the likelihood of outflow of resources is remote, no provision or disclosure is made.
Contingent Assets are neither recognized nor disclosed in the financial statements.
(o) Employees stock option plan
Compensation expenses under “Employee Stock Option Plan" representing excess of market price of the shares on the date of grant of option over the exercise price of option is amortized on a straight-line basis over the vesting period.
(p) Borrowing cost
Borrowing costs directly attributable and identifiable to the acquisition or construction of qualifying assets are capitalized till the date such qualifying assets are ready to be put to use. Other Borrowing costs are charged to statement of profit and loss as incurred.
Leases, where the lesser effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as expense in the statement of profit and loss on a straight line basis over the lease term.
f) The Patel Engineering Employee Welfare Trust, (“the Trust") holds 60,45,000 shares of the Company and administers Company''''s Employee Stock Option Schemes 2007 on behalf of the Company. The Trust on May 23, 2014 have granted 22,400 options to 159 eligible employees of the Company and the subsidiaries. Out of the 22,400 options so granted, 16,100 options have been vested and exercised during the year at an exercise price of '''' 1 per share.
g) The allotment committee at its meeting on March 21, 2014 allotted 69,79,131 optionally convertible preference shares(OCPS) to the promoters of the Company. On March 31, 2014, out of the said OCPS, 64,17,174 OCPS were converted into 64,17,174 Equity shares of Rs. 1 and allotted @ Rs. 57.5 (including premium of Rs. 56.5). On April 15, 2014, the balance 5,61,957 OCPS were converted into 5,61,957 Equity shares of Rs.1 and allotted @ Rs. 57.5 (including premium of Rs. 56.5) in terms of Chapter VII of SEBI (ICDR) Regulation 2009.
a) 11.30% Secured Redeemable Non Convertible Debentures were allotted on September 17, 2012 for a period of 10 years. These debentures have a face value of Rs. 1.0 Million each aggregating to Rs. 1,500.00 Million (P.Y. Rs. 1,500.00 Million) and are to be redeemed on September 17, 2022. The same is secured against charge on land held as stock in trade of the Company and its subsidiaries.
b) 9.80% Secured Redeemable Non Convertible Debentures were allotted on July 20, 2009 for a period of 7 years. These debentures have a face value of Rs. 1.0 Million each aggregating to Rs. 550 Million (P.Y. Rs. 550 Million) repayable in a single installment, with a put / call option available and exercisable at par at the end of 5th year from the date of allotment. The same are secured against land held as stock in trade of the Company and its subsidiaries. Interest rate has been revised to 13.32% p.a. (P.Y.13.16% p.a.) for IDBI w.e.f 19th September 2014 and in case of others it is 13.16% p.a. (P.Y. 13.16% p.a.) w.e.f. July, 2014.
c) 11.40% Secured Redeemable Non Convertible Debentures were allotted on July 11, 2011 for a period of 5 years. These debentures have a face value of Rs. 0.10 Million each aggregating to Rs. 500 Million (P.Y. Rs. 1,000 Million). These debentures will be redeemed as follows: July 11, 2016 - Rs. 500 Million. The same is secured against land held as stock in trade of the Company and its subsidiaries. Interest rates on the same has been revised at 13% p.a. (P.Y. 13% p.a.)
d) 10.75% Secured Redeemable Non Convertible Debentures was allotted on 3 March, 2011 for a period of 5 years. These debentures have a face value of Rs. 0.10 Million each aggregating to Rs. 200 Million (P.Y. Rs. 350 Million). These debentures would be redeemed as follows - March 3, 2016- Rs. 100 Million having interest rate at 13% p.a. (P.Y. 13% p.a.) and Rs. 100 Million (P.Y. Rs. 100 Million) having interest rate at 10.75% p.a. (P.Y. 10.75% p.a.). The same is secured against land held as stock in trade and subservient charge on all the fixed asset of the Company. The same is disclosed under the head "Other Payable" in note no. 9 (b)
e) 9.55% Secured Redeemable Non Convertible Debentures were allotted on April 26, 2010 for a period of 5 years. These debentures have a face value of Rs. 1.0 Million each aggregating to Rs. Nil (P.Y. Rs. 400 Million). The same are secured against immovable property and subservient charge on all the fixed assets of the Company. Interest rate on the same has been at 9.55% p.a. (P.Y. 9.55% p.a.).
The above debentures are listed on The National Stock Exchange of India.
As per Section 71 of the Companies Act, 2013 the Company has created adequate debenture redemption reserve for the above series of Secured Redeemable Non Convertible Debenture issued during the year. Further, in terms section 71 read with Rule 18(7)(c) of Companies Share Capital and Debentures Rules, 2014, the Company has failed to deposit/invest a sum of Rs. 187.50 Millions before April 30, 2015 to secure the repayments of debentures maturing during the year 2015-16. The debentures due to mature during the financial year 2015-16 amounted to Rs. 1,250 million including debentures stated at point no. 1(d) above, out of which debenture aggregating to Rs. 1,050 Million were repaid. The interest on NCD due and outstanding within 0-30 days of Rs. 43.66 Million.
2Term loan from banks
a) Term loans also include the loans taken from Standard Chartered Bank in form of FCNR loan. Outstanding amount out of the same is Rs. 95.01 Million (P.Y. Rs.128.97 Million) which was due before 20th January 2016 and rate of interest on the same has been LIBOR 400 i.e. 4.23% p.a.
b) The Term loans are secured by first charge on the specific assets acquired out of the term loan along with specifically identified unencumbered assets & guarantees. The rates of Interest for these loans vary between 10%-13% (floating) linked to monitoring institution''''s base rate, with a repayment period of 5-7 years respectively. Term loan includes Working Capital Term Loan (WCTL) secured by a First pari passu charge on the receivables more than 180 days, WIP, mortgage over certain lands owned by subsidiary companies, corporate guarantee and pledge of 30% shareholding of subsidiaries owning real estate lands. There is a negative lien on shareholding (up to 30% shares) of Patel Engineering Limited held by promoters. The promoters - Mr. Pravin Patel and Mr. Rupen Patel in their personal capacity and Ms. Sonal Patel,
Mr. Bhimsen Batra & Mr. Muthu Raj to the extent of the value of the property given as security, owned by them in trust for the company, has provided personal guarantees for WCTL. Also, there is a charge on escrow accounts of PRIL & PEL, wherein cash flows will be deposited from real estate projects to be developed by respective companies.
Term loan amounting to '''' 117.52 Million were due and outstanding as on 31/03/2016 comprises of '''' 22.50 Million due within 0-30 days, Rs. 12.39 Million due within 60-90 days and Rs. 82.62 Million due for more 90 days. Interest on the term loans outstanding of Rs. 82.13 Million as on 31/03/2016 comprises of Rs. 8.33 Million due within 0-30 days, Rs. 72.60 Million due within 30-60 days, Rs. 0.30 Million due within 60-90 days and Rs. 0.90 Million due for more than 90 days.
3 From Others
Includes funds from Financial Institutions on Equipments, secured against the said Equipments. These loans carry an interest rate of average between 13%-14% on an average, with a repayment period of 3-5 years respectively. This Term Loan also includes Inter Corporate Deposits with an average rate of interest of 14%-15% with maturity period of 1-3 yrs. Principle due and outstanding on equipment loan of Rs. 13.13 Million as on 31/03/2016 comprises of Rs. 4.42 Million due within 0-30 days, 4.38 Million due within 30-60 days and Rs. 4.34 Million due within 60-90 days. Interest due and outstanding on equipment loan of Rs. 3.20 Million as on 31/03/2016 comprises of Rs. 1.03 Million due within 0-30 days, Rs. 1.07 Million due within 30-60 days and Rs. 1.10 Million due within 60-90 days.
1Short term loan
Includes loans by earmarking from bank guarantee limits and short term loans from various banks against various immovable properties of company at Interest rate of 12-13% p.a (PY 12-13% p.a) payable within a year. Principle amount due and outstanding of Rs. 685.77 Million as on 31/03/2016 comprises of Rs. 279.56 million due within 0-30 days and Rs. 406.21 Million due within 30-60 days. Interest outstanding on short term loans of Rs. 80.61 Million as on 31/03/2016 comprises of Rs. 12.09 Million due within 0-30 days, Rs. 68.40 Million due within 30-60 days and Rs. 0.11 Million due within 60-90 days.
2Loans repayable on demand
Includes cash credit and working capital demand loan from various banks. These loans have been given against hypothecation of stocks, spare parts, book debts, work in progress & guarantees;
Terms of repayment:
Cash credit- yearly renewal, Rate of interest ranges between 12.50%-15% p.a. (PY 12.50%-15% p.a.)
It includes short term loans from banks of Rs. 98.40 Million as on 31/03/2016 comprises of Rs. 73.39 Million due within 0-30 days, Rs. 25 Million due within 30-60 days.
The Company has Rs. 4.66 Million (PY Rs. 5.15 Million) due to suppliers under the Micro Small and Medium Enterprise Development Act, 2006, as at March 31, 2016. Principal amount due to suppliers under the Act is Rs. 2.07 Million (P.Y. Rs 3.58 Million). Interest accrued and due to the suppliers on the above amount is Rs. 0.02 Million (P.Y. Rs. 0.28 Million). Payment made to the suppliers (other than interest) beyond appointed day during the year is Rs. 4.45 Million (P.Y. Rs. 5.41 Million). Interest paid to the suppliers under the Act is Rs. 0.57 Million (P.Y. Rs. Nil). interest due and payable to the suppliers under the Act towards payments already made is Rs. 2.57 Million (P.Y. Rs. 1.3 Million). Interest accrued and remaining unpaid at the end of the accounting year is Rs. 1.47 Million (P.Y. Rs. 1.58 Million). The amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise for the purpose of disallowance as a deductible expenditure u/s 23 of the MSMED Act, 2006 is Rs. 1.12 Million (P.Y. Nil).
The above information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act 2006 and has been determined to the extent such parties had been identified on the basis of information available with the Company and relied upon by the auditors.
I. Aggregated amount of unquoted investments as at 31st March, 2016 Rs. 5,927.82 Million (P.Y. Rs. 6,055.96 Million)
II. Aggregated amount of quoted investments as at 31st March, 2016 Rs. Nil, market value Rs. 0.09 Million ( P.Y. Rs. Nil, market value Rs. 0.11 Million)
III. Includes investment in National Saving Certificates, in the name of directors, lodged with project authorities
IV. A firm AHCL - PEL having fixed capital of Rs. 75,000 (P.Y. Rs. 75,000), profit sharing has been reconstituted as follows :- the company 20% (P.Y. 20%), Ace Housing & Const. Ltd. 1% (P.Y. 1%) & Pravin Patel 79% (P.Y. 79%).A firm Patel Advance JV having nil fixed capital, partnership sharing has been as follows : the Company 26% (P.Y.27%), Advance Const. Co. Pvt. Ltd. 25% ( P.Y. 26%), Patel Realty (India) Ltd. Nil ( P.Y. 26%), Apollo Build well Pvt. Ltd. 25% (P.Y. 21%) & Advance Equipment Finance Pvt. Ltd. 24% (P.Y. Nil).
V. The Company had invested in shares of subsidiary Patel Engineering Lanka Pvt. Ltd (PELPL) for which allotment was made by the Board of PELPL and accordingly share certificates were issued. But due to some technical reasons and to comply with the Law of Sri Lanka with respect to issue of shares, the said allotment was reversed by PELPL. Hence the investment made by the Company is shown as Share Application Money.
1. Land includes Rs. 7.71 Million (P.Y. Rs. 8.29 Million) held in the name of Directors, relatives of Directors and employees for and on behalf of the Company.
2. a) Building includes Building [Gross Block -Rs. 203.70 Million (P.Y. Rs. 212.44 Million), Accumulated Depreciation Rs. 19.81 Million (P.Y. Rs. 17.54 Million)] and
Factory Building [Gross Block - Rs. 156.01 Million (P.Y. Rs. 156.01 Million), Accumulated Depreciation Rs. 40.45 Million (P.Y. Rs. 34.88 Million)]
b) Includes Rs. 0.01 Million (P.Y. Rs. 0.02 Million) being the value of 180 shares and share deposits in Co - operative Societies