To the Members of Patel Engineering Limited,
The Directors hereby present their 67th Annual Report on the business, operations and state of affair of the Company together with the audited financial statement for the year ended March 31, 2016:
Standalone and Consolidated Financial Performance
(Rs. in millions)
Profit before depreciation, prior period and exceptional items
Less : Depreciation
Profit before tax
Tax & Minority Interest
Add: Opening Balance in Profit & Loss A/c
Add: Reversal of Prudent Provision for Tax 1
Amount available for appropriation
a. Depreciation impact as per Schedule II
b. Surplus carried to the Balance sheet
Earnings per equity shares (face value Rs. 1)
- Basic (Rs.)
- Diluted (Rs.)
# for Exceptional Item, refer to note no.23A of Notes to Standalone Financial Statement. And note no. 51 of notes to Consolidated Financial Statement.
As on March 31, 2016, the Company on Standalone basis has Rs. 2,550 million outstanding NCDs repayable over period of 3 to 7 years out of which Rs. 1,050 million was due. The NCDs are listed on National Stock Exchange of India Limited.
In addition, the Company from time to time has raised money through borrowings (long and short terms) and the total amount outstanding on standalone basis as on March 31, 2016 is Rs. 40,297.90 million.
Strategic Debt Structuring (SDR)
Delays in successful implementation of Corrective Action Plan by the Lenders, non-availability of additional limits delayed the monetization of critical real estate projects, adverse market condition further delayed monetization of assets. Since the Company was facing severe cash crunch and challenges in debt servicing and in order to preserve the value of the company, the lender invoked SDR and May 26, 2016 was fixed as reference date. The Board at the meeting dated June 29, 2016 and the Members by postal ballot result dated August 26, 2016 and November 21, 2016 approved conversion of part of the debt of the Company to equity in one or more tranches, as it is required allowing Lenders to hold not less than 51% of the total Equity share capital of the Company post such conversion. The Company is in process of converting part of the Loan into Equity shares.
As on March 31, 2016, the Company has 83 subsidiaries including step down subsidiaries.
During the year under review, applications were made to the Registrar of Companies for striking off the names of following inoperative subsidiaries under the Fast Track Exit (FTE) mode pursuant to guidelines for Fast Track Exit mode for defunct companies under Section 560 of the Companies Act, 1956.
- Patel Urjaa Vyapaar Pvt. Ltd
- ASI Rcc India Ltd
- Laksha Infra Projects Pvt. Ltd
- Praval Developers Ltd.
- Hebe Realcon Pvt. Ltd
The performance and financial position of the subsidiaries and associates as required under the Companies Act, 2013 is provided in Annexure I of the Boards'''' Report. The financial statements of the subsidiary companies will be placed on the website of the Company www.pateleng.com. any Member interested in obtaining a copy of financial statement of the subsidiaries may write to the Company Secretary, at the registered office of the Company.
In terms of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015, the Company has formulated a policy for determining ''''material'''' subsidiaries and the same has been disclosed on Company''''s website at the link: http://tinyurl.com/nqb2o56.
Key Subsidiary/Associate updates
The Company through its wholly owned subsidiary Patel Realty (India) Ltd ("PRIL") was formed to develop 103 acres of Electronic City land in Bangalore. PRIL is developing residential project (over 24 acres of land consisting of 2,300 residential apartments. It has successfully handed over 2,000 apartments and is developing a Mall through a SPV Bellona Estate Developers Ltd (over 12 acres land for 1.20 million sq feet). During the year, SDR was invoked and 51% stake of Bellona was transferred to its lenders. PRIL has also decided to enter into Joint Development Agreement with other Developers in order to enable them to focus on core business and deleverage from initial investment requirement to commence a project.
Company''''s Mauritius subsidiary Le Salines Development Ltd (“LSDL") had Land lease Agreement with Govt. of Mauritius for a period of 99 years, however notice of termination was received on 4th of June 2015 from the Govt. of Mauritius. A notice has been sent to the Authorities and Government of Mauritius on 1st July 2016 contesting wrongful termination, violation of treaty and further moving to seek compensation under the Promotions and Protection of Investments Treaty between the Governments. Attorney General of Govt. of Mauritius has accepted receipt of notice and agreed for a meeting to mutually seek solution in the matter. The Company is confident of resolving the issue with the Govt. of Mauritius as there is no breach by LSDL and the Company.
ASI Constructors Inc, one of the key subsidiary based in USA has orders in hand of approx Rs. 11,324.73 million as on March 31, 2016. During FY 16, the Revenues of this company has increased by 48% to Rs. 11,017.70 million as compared to Rs. 7,466.40 million in the previous year.
Michigan Engineers Pvt. Ltd. wherein the Company has 51% stake, having presence in urban infrastructure Projects, have during financial year 2015-16 been awarded EPC contract of Microtunnelling for total 1372 meter by RSPL, Kanpur. Michigan has also bagged contract from MCGM for Construction of R.C.C. box drain on N. S. Hardikar Marg for Rs.12.95cr and contract for Design & Construction of Renovations & Rehabilitation including investigations, cleaning, desisting, survey, enlarged access manholes, lining & protective coating of Storm Water Drain for Rs. 433.4 Million from MCGM.
The Company through its wholly owned subsidiary Patel Energy Resources Ltd. ("PERL") intended to build a thermal coastal power plant project of 1,050 MW at Nagapattinam, Tamil Nadu. All the statutory clearances required are in place except Consent For Establishment (CFE) that is mandatory for taking up Project construction works is still pending with Government of Tamil Nadu. Pending this, the Company has kept the project currently on hold.
Company''''s Hydro power project is through the 100% subsidiary Dirang Energy Pvt. Ltd. The said subsidiary has achieved financial closure of this project. The debt for the project amounting to Rs. 9.00 billion has been tied up from consortium of banks led by IDBI Bank .Contract for execution of all the civil, HM, EM works has been awarded; contractor has mobilized man & machinery and execution of the project is in progress.
The Company along with other JV partners had bagged a BOT project from Uttar Pradesh State Highways Authority (UPSHA) in the name of ACP Tollways Pvt. Ltd. for construction of four-lane highway project in Varanasi-Shaktinagar Road, an entire length of 117.65 km at a project cost of Rs. 17.50 billion. The SPV has completed the project and based on the partial COD have started collecting tolls since October 2015.
Related Party Transactions
All the Related Party Transactions entered by the Company are on arm''''s length basis and in the ordinary course of business. All the Related Party Transactions as required under AS-18 are reported in the Notes to the financial statements.
In accordance with the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated the Related Party Transactions policy and the same is uploaded on Company''''s website at the link: http://tinyurl.com/nrqnhhs
Particulars of Loans given, Investment made, Guarantees given and Securities provided
The members may note that the Company is engaged in providing infrastructural facilities and hence, as per Section 186(11) of Companies Act, 2013, nothing in Section 186 shall apply to the Company except sub-section (1) of Section 186. Accordingly, a separate disclosure has not been given in the financial statements as required under Section 186(4) with regard to particulars of loan given, investment made or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient of the loan or guarantee or security.
Directors and Key Managerial Persons
i. Independent Director
In accordance with the provisions of Section 149 of the Companies Act, 2013, the Independent Directors have given a declaration that they meet the criteria of independence as provided in the said Section and in terms of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.
ii. Retirement by Rotation of the Directors
Mr. Rupen Patel retires by rotation at the forthcoming Annual General Meeting and, being eligible, offers himself for re-appointment.
iii. Cessation of Director
Ms. Silloo Patel, a Whole time Director on the Board of the Company, expired on November 26, 2015. The Board condoned the death of Ms. Patel and placed on record its appreciation of the valuable service rendered by her.
During the year under review, Mr. Nimish Patel and Mr. Ashwin Parmar resigned as Whole time Directors of the Company with effect from July 16, 2015 and April 4, 2016 respectively. The Board placed on record its sincere appreciation of the services rendered by Mr. Patel and Mr. Parmar during their tenure as Directors of the Company.
iv. Appointment of Director
Mr. C. K. Singh was appointed as an additional Director and Whole time Director-Operations by the Board of Directors at their meeting held on May 30, 2016.
v. Key Managerial Personnel
The following persons are the Key Managerial Personnel (KMPs) of the Company pursuant to the provisions of the Companies Act, 2013 and Rules framed there under:
a. Mr. Pravin Patel, Chairman and Whole time Director
b. Mr. Rupen Patel, Managing Director
c. Ms. Kavita Shirvaikar, Chief Financial Officer
d. Ms. Shobha Shetty, Company Secretary
e. During the year under review, Mr. Nimish Patel and Mr. Ashwin Parmar resigned as Whole time Directors effective from July 16, 2015 and April 4, 2016 respectively and therefore they were KMP till the said respective dates.
f. Ms. Silloo Patel expired on November 26, 2015 and therefore she was KMP till November 26, 2015.
g. Mr. C. K. Singh was appointed by the Board as Whole time Director of the Company at its meeting held on May 30, 2016 and therefore designated as KMP with effect from the said date.
Number of Board Meetings held during the financial year 2015-16
During the year ended March 31, 2016, the Board met five times. The details of the Board meetings and the attendance of the Directors at the meetings are provided in the Corporate Governance Report, which forms part of this Annual Report.
The Company has framed a Remuneration Policy pursuant Section 178 of the Companies Act, 2013 and SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015. This Policy is enclosed as Annexure II to the Boards'''' Report.
Evaluation of Board
Based on the criteria for evaluation of performance of the Board Directors, its Committees, Chairman, Executive Directors, Independent Directors and Non-Executive Directors, the performance was evaluated for the financial year ended March 31, 2016.
A meeting of the Independent Director was held during the year under review.
Internal Financial Controls
The Company has in place adequate internal financial control with reference to financial statement.
Directors'''' Responsibility Statement
Pursuant to Section 134 of the Companies Act, 2013, the Directors confirm that:
i. in the preparation of the annual financial statements for the year ended March 31, 2016, the applicable Accounting standards had been followed along with proper explanation relating to material departures.
ii. for the financial year ended March 31, 2016, such accounting policies as mentioned in the Notes to the financial statements have been applied consistently and judgments estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company and of the Profit and Loss of the Company for the year ended March 31, 2016.
iii. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.
iv. the annual financial statements have been prepared on a going concern basis.
v. that proper internal financial controls were followed by the Company and that such internal financial controls are adequate and were operating effectively.
vi. that proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively.
The Audit Committee of the Board of Directors of the Company comprised of the following Members:
Mr. Khizer Ahmed - Independent Director & Chairman Mr. Pravin Patel - Executive Director Mr. K. Ramasubramanian - Independent Director Mr. S. Jambunathan - Independent Director
The details about Audit Committee and its terms of reference etc. have been given in Corporate Governance Report which forms part of Annual Report.
Corporate Social Responsibility Committee
In accordance with the provisions of Section 135 of the Companies Act, 2013 (the Act), the Board of Directors of the Company has constituted the Corporate Social Responsibility Committee (CSR Committee) comprising of the following Directors as it members:
Mr. Pravin Patel - Executive Director
Mr. K. Ramasubramanian - Independent Director
Mr. Rupen Patel - Managing Director
The terms of reference of the CSR Committee include the matters specified in Section 135 of the Act. The CSR Policy of the Company is uploaded on the Company''''s website at the link http://tinyurl.com/o6yczkx.
On account of financial constraints, the Company could not spend the full amount as required in terms of Section 135 of the Companies Act, 2013A report on CSR activities is provided in Annexure III to this Report.
M/s. Vatsaraj & Co. Chartered Accountants, Mumbai bearing ICAI Registration No. 111327W who retires at the ensuing Annual General Meeting of the Company are eligible for reappointment. They have confirmed their eligibility under Section 141 of the Companies Act, 2013 and the Rules framed there under for reappointment as Auditors of the Company.
As required under Section 139 of the Companies Act, 2013, the Company has obtained written consent from M/s.Vatsaraj & Co. to such appointment and also a certificate to the effect that their appointment, if made, would be in accordance with Section 139(1) of the Companies Act, 2013 and the Rules made there under, as may be applicable.
There is no event of reporting of frauds in terms of sub-section (12) of Section 143 of the Companies Act, 2013.
Secretarial Audit Report
The Board had appointed M/s. Makarand Joshi & Co., Practicing Company Secretaries, as the Secretarial Auditor, to conduct the secretarial audit of the Company for the financial year ended March 31, 2016. The Report of Secretarial Audit Report is provided as Annexure IV to this Report.
This report contain observation on delay in filing the Consolidated Financial Statement for the Year ending March 31, 2015 to BSE/ NSE and delay in filing Annual Performance Report (APR) of few subsidiaries. The above delays were on account of delay in receipt of audited/ unaudited financials of foreign subsidiaries.
In terms of the provision of 148 of the Companies Act, 2013, read with the Companies (Cost Records and Audit) Rules, 2014, M/s D. Radhakrishnan & Co, a firm of Cost Accountants in practice (FRN: 000018) having their office at 11 A, Doverlane Flat B1/34 Calcutta 700029 was appointed as Cost Auditor of the Company for the financial year 2015-16 by the Board of Directors of the Company at a remuneration of '''' 3,50,000 per annum (excluding service tax) as recommended by the Audit Committee and approved by the Board subject to ratification by the shareholders at the ensuing Annual General Meeting of the Company.
Sexual harassment of Women at workplace
The Company has a Policy on prevention of Sexual harassment at Workplace. During the year under review no case was reported under the policy.
Conservation of Energy, Technology Absorption and Foreign Exchange Earnings/Outgo.
The particulars prescribed under Section 134 of the Companies Act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules, 2014, relating to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings/ Outgo is provided as Annexure V to this Report.
Extract of the Annual Return
In accordance with the provisions of Section 92 of the Companies Act, 2013 and the Rules framed thereunder, the extract of Annual Return in the prescribed Form MGT -9 is provided in Annexure VI to this Report.
The Board of Directors of the Company has framed and implemented a Risk Management Policy.
Whistle Blower Policy/Vigil Mechanism
The Company has a Vigil Mechanism Policy for the employee to report genuine concerns/grievances. The Policy is uploaded on the Company''''s website at the link http://tinyurl.com/pvenjtk. The policy provides for adequate safeguards against the victimization of the employees who use the vigil mechanism. The vigil mechanism is overseen by the Audit Committee. There are no complaints/grievances received from any Directors or employees of the Company under this policy.
Particulars of Employees
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 (1) and (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided as Annexure VII to this Report
Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Report on Corporate Governance together with the certificate issued by M/s. Vatsaraj & Co., the Statutory Auditors of the Company, on compliance in this regard forms part of the Annual Report.
Employee Stock Option Scheme (ESOP)
Out of the total outstanding Stock options of 60,45,000 options with Patel Engineering Employee Welfare Trust, 22,400 options were granted on May 23, 2014 to the eligible employees of the Company in terms of ESOP Plan 2007. The vesting of the Stock Options was on May 24,
2015. Out of the said 22,400 options 16,100 options were exercised during the exercise period and accordingly 16,100 shares were credited to the demat account of the respective employees. 3,000 options lapsed mainly on account of resignation. 3,300 lapsed on account of no exercise of options by employees of the Company.
The disclosure in compliance with Regulation 14 of SEBI (Share Based Employees Benefits) Regulations, 2014 is available on the website of the company by following the link: http://tinyurl.com/nkanjsm.
The Patel Engineering Employee welfare Trust, (“the Trust") has provided loans and grants to eligible employees for healthcare benefits, education and other benefits. The total amount of loan given to eligible employees is Rs. 0.48 Million and the total amount of proceeds as free grants is Rs. 0.02 Million.
The said aids given to the employees are now covered under Patel Engineering General Employee Benefits Scheme, 2015 in compliance with SEBI (Share Based Employees Benefits) Regulation, 2014. The said Scheme was approved by the Members in the last AGM. The benefits provided under this Scheme are benefits such as medical, housing and education related assistance to employee out of the funds of the Trust.
i) There are no material changes and commitments affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the Boards'''' report.
ii) No orders have been passed by any Regulator or Court or Tribunal which can have impact on the going concern status and the Company''''s operations in future during the year under review.
iii) The Company has not accepted or renewed any amount falling within the purview of provisions of Section 73 of the Companies Act 2013 read with the Companies (Acceptance of Deposit) Rules, 2014 during the year under review. Hence, the requirement for furnishing of details relating to deposits covered under Chapter V of the said Act or the details of deposits which are not in compliance with the Chapter V of the said Act is not applicable
The Board of Directors wish to place on record their appreciation for their continued support and co-operation by Shareholders, Financial Institutions, Banks, Government Authorities and other Stakeholders. The Board of Directors also acknowledges and appreciates the support extended by all the employees of the Company and for their dedicated service.
On behalf of the Board of Directors,
Patel Engineering Ltd.
Executive Chairman DIN: 00029453
Patel Estate Road,
November 11, 2016 Jogeshwari (W),
Mumbai Mumbai 400 102