Patel Engineering Ltd.
|BSE: 531120||Sector: Infrastructure|
|NSE: PATELENG||ISIN Code: INE244B01030|
|BSE 00:00 | 24 Apr 2020||Patel Engineering Ltd|
|NSE 05:30 | 01 Jan 1970||Patel Engineering Ltd|
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Patel Engineering Ltd. (PATELENG) - Director Report
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Company director report
To the Members of Patel Engineering Limited
The Directors hereby present the 70th Annual Report on thebusiness operations and state of affairs of the Company together with the auditedfinancial statements for the year ended March 31 2019:
Standalone and Consolidated Financial Performance
(Rs in millions)
" Refer Note No. 31 of Financial Statements
"" Refer to note (B) Other Equity under Statement of changesin Equity of Financial Statements Consolidated:
The Consolidated total income stood at Rs 25373.05 million as againstRs 25171.44 million for the previous year. The EBITDA was at Rs 5299.50 million asagainst Rs 7733.85 million for the previous year. The total comprehensive income is at Rs1544.39 million as against Rs 1025.83 million for the previous year.
On Standalone basis the total income stood at Rs 23560.96 million asagainst Rs 24202.50 million for the previous year. The EBITDA was at Rs 5632.43 millionas against Rs 8372.70 million for the previous year. The total comprehensive income is atRs 830.26 million as against Rs 568.74 million for the previous year.
To conserve funds the Directors have not recommended payment ofdividend for the financial year 2018-19.
During the year under review 7253815 Equity Shares of face value Rs1 each were allotted to Patel Engineering Employee Welfare Trust. Consequently as atMarch 31 2019 the total paid up share capital of the Company stood at Rs 164.25 milliondivided into 164248506 Equity Shares of Rs 1 each.
In total the Company from time to time has raised money throughborrowings (long and short terms NCDs OCDs and unsecured loans) and the total amountoutstanding on standalone basis as on March 31 2019 is Rs 22152.70 million.
Optionally Convertible Debentures (OCDs)
During the year under review pursuant to implementation of the DebtResolution Plan under the S4A Scheme as mandated by the Overseeing Committee of RBI withmajority of lenders approving and converting PART B (unsustainable) debt into OptionallyConvertible Debentures in terms of the Scheme 752200 OCDs in aggregate were allotted onDecember 31 2018 converting Rs 405 million NCDs and interest thereon. Rs 734.9 millionOCDs were redeemed during the year under review.
The outstanding OCDs as on March 31 2019 stands at Rs 6067 million.
Information on state of affairs of the Company
Information on the operational and financial performance among othersis given in the Management Discussion and Analysis Report which is forming part of theAnnual Report and is in accordance with the SEBI (Listing Obligation and DisclosureRequirements) Regulations 2015.
Subsidiaries & Associates
As on March 31 2019 the Company has 72 subsidiaries including stepdown subsidiaries.
ASI Australia Constructors Inc and HCP Constructors Inc ceased to bethe subsidiaries of ASI Constructors Inc w.e.f June 20 2018 and April 5 2017respectively on account of dissolution of these Companies.
Terra Land Developers Limited ceased to be an associate Company w.e.fDecember 27 2018 on account of disinvestment.
Highlights of performance of key subsidiaries/Associates
Michigan Engineers Private Limited having presence in urbaninfrastructure Projects has an order book totaling to Rs 6810.19 million. Majority ofthe orders are in the segment of Micro tunneling in Mumbai.
Raichur Sholapur Transmission Company Private Limited (RSTCPL)commissioned 765 kV single circuit transmission line between Raichur and Sholapur in July2014. Project promoted by Company along with Simplex Infrastructure Ltd and BS Ltd.Project achieved transmission line availability of 99.9% in 2014 99.9% in 2015 96.8% in2016 and 99.39% in 2017. Lenders on September 30 2017 implemented 5/25 scheme as per theRBI guidelines after obtaining approval from Independent Evaluation Committee with cutoffdate on Dec 30 2016. The project is currently under operation and the debt obligation istimely serviced by RSTCPL. The Lenders have sanctioned Term Loan to refinance the existingECB facility which is under process.
Dirang Energy Private Limited (Dirang) a Special Purpose Companyfor development of 144MW Gongri Hydroelectric Power Project in West Kameng district inArunachal Pradesh. The physical progress of the project is on halt mainly due to delay inobtaining consent from State Pollution Control Board untimely disbursement by projectlenders untimely infusion of equity. Dirang and the Company is in discussion with thelenders for resolution of outstanding debt and the same is under consideration. Dirang andthe Company has approached potential investors for equity participation in the Project.The State Government has issued a Termination Notice on 01.03.2018 against which theCompany has filed a writ petition for stay of the said notice in Guwahati High Court. TheGuwahati High Court has passed a stay order dated 29.06.2018 on the said terminationnotice and also its consequential effects. The Company has however written off itsinvestment in the project.
The Joint lenders Forum (JLF) had invoked SDR in Bellona EstateDevelopers Limited with reference date October 25 2015. Pursuant to SDR the companyallotted equity shares to Lenders to hold 51% stake. A consultant was appointed by the JLFto run the process to sell mall on as is where basis. After following due process assuggested by the Bankers the identified buyer is in process to mobilise funds for purchaseof mall as is where is basis. However due to current turmoil in the financial marketsmobilization of funds taking longer time than expected.
The status of Patel KNR Infrastructure Ltd and Patel KNRHeavy Infrastructure Limited continue to remain the same. The Company holdssubstantial stake in these road project companies. Both the NHAI annuity projects areunder operation and the respective companies are receiving the annuity on semi-annualbasis. The respective Companies are maintaining the assets as per the contract conditions.The Company and KNR Construction the promoters of these companies are looking for thedivestment in the Projects.
PBSR Developers Private Limited has received approval for theadditional floors and now the project consists of two residential towers (each towerhaving 20 floors) and one tower of serviced apartments (19 floors). The project offersresidential units comprising of 2 BHK (990 sqft) 2.5 BHK (1120 sqft) and 3 BHK (1400 sqft& 1435 sqft). These residential towers have a total of 12 flats per floor whereas theservice apartment block comprises of 11 apartments per floor. The project is meticulouslycrafted and offers a unique blend of smart
design and superior quality. The construction is substantiallycompleted and internal finishing works are going on. The company has mobilized variousagencies to expedite MEP works.
Step Down Subsidiaries of Patel Energy Resources Limited wholly ownedsubsidiary of the Company intended to build a thermal coastal power plant project of 1050MW at Nagapattinam Tamil Nadu. All the statutory clearances obtained stands elapsed andConsent for Establishment (CFE) that is mandatory for taking up Project construction worksis still pending with Government of Tamil Nadu. Pending this the Company has kept theproject currently on hold.
The Company's Mauritius subsidiary Les Salines Development Ltd.("LSDL") had Land lease Agreement with Govt. of Mauritius for a period of 99years. After termination of the project by the Govt. of Mauritius the company has nowissued a notice of arbitration to Government of Mauritius through International court ofJustice (ICJ). Arbitration tribunal has been formed by ICJ. The first procedural hearinghas taken place and a timetable has been set up for the process of arbitration.
The salient features of the financial statement of each of thesubsidiaries associates and joint ventures as required under the Companies Act 2013 isprovided in Annexure I of the Boards' Report. The financial statement of thesubsidiary companies are available on the website of the Company at the link
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 following link:
Particulars of Loans given Investment made Guarantees given andSecurities provided
The members may note that the Company is engaged in providinginfrastructural facilities and hence as per Section 186(11) of Companies Act 2013nothing 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 asrequired under Section 186(4) with regard to particulars of loan given investment made orguarantee given or security provided and the purpose for which the loan or guarantee orsecurity is proposed to be utilized by the recipient of the loan or guarantee or security.
Related Party Transactions
All the Related Party Transactions as required under Ind AS-24 arereported in the Notes to the financial statements.
In accordance with the provisions of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Company has formulated the Related PartyTransactions policy and the same is uploaded on Company's website at the link:
Directors and Key Managerial Personnel
i. Independent Director
The Board of Directors on recommendation of Nomination and RemunerationCommittee and in accordance of the Companies Act 2013 and SEBI (Listing Obligation &Disclosure Requirements) Regulations 2015 recommended re-appointment Mr. Khizer Ahmed andappointment of Mr. Ramasubramanian for second term of 1 (one) year and 5 (five) yearsrespectively. The said re-appointment and appointment have been included in the Noticeconvening the ensuing Annual General Meeting (AGM) for approval of the Members and shallbe effective from the conclusion of the 70th AGM.
In accordance with the provisions of Section 149 of the Companies Act2013 the Independent Directors have given a declaration that they meet the criteria ofindependence as provided in the said Section and in terms of the SEBI (Listing Obligations& Disclosure Requirements) Regulations 2015.
ii. Executive Director
The Board of Directors at their meeting dated August 14 2018re-appointed Mr. C. K. Singh as Whole Time Director designated as "Whole timeDirector - Operations" for a period of 5 years effective from May 30 2019. The samewas approved by the shareholders at the last AGM held on September 27 2018. Postapproval the terms of re-appointment as approved by the Board and shareholders wasrecorded in the form of an agreement.
iii. Other Directors / Key Managerial Personnel
Ms. Kavita Shirvaikar retires by rotation at the ensuing AGM and beingeligible offer herself for re-appointment.
There is no change in the Key Managerial Personnel (KMPs) during theyear under review. Some of the KMPs of the Company are also the KMPs of the subsidiaries.
Number of Board Meetings held during the financial year 2018-19
During the year ended March 31 2019 the Board met 4 (four) times.
The Company has formulated a Remuneration Policy pursuant Section 178of the Companies Act 2013 and SEBI (Listing Obligation and Disclosure Requirements)Regulations 2015. The salient features of the Policy is enclosed as Annexure II tothe Boards' Report.
Evaluation of the performance of the Board
Based on Boards' Evaluation Policy the performance of the BoardDirectors its Committees Chairman Executive Directors Independent Directors andNon-executive Directors was evaluated.
A separate meeting of the Independent Directors was held during theyear under review.
Internal Financial Controls and Risk Management
The Company has in place adequate internal financial control withreference to financial statement. The Company ensures operational efficiency protectionand conservation of resources accuracy in financial reporting and compliance with lawsand regulations. The internal control system is supported by an internal audit process.
The Board of Directors of the Company has framed and implemented RiskManagement Policy.
The Audit Committee presently comprises of:
Mr. Khizer Ahmed (as Chairman) - Independent Director Mr. S.Jambunathan- Independent Director Mrs. Geetha Sitaraman- Independent Director Mr. RupenPatel - Managing Director Whistle Blower Policy/Vigil Mechanism
The Company has a Vigil Mechanism Policy for the employee to reportgenuine concerns/grievances. The Policy is uploaded on the Company's website at the link.
The policy provides for adequate safeguards against the victimizationof the employees who use the vigil mechanism. The vigil mechanism is overseen by the AuditCommittee. There are no complaints / grievances received from any Directors or employeesof the Company under this policy.
Corporate Social Responsibility
In accordance with the provisions of Section 135 of the Companies Act2013 (the Act) the Board of Directors of the Company has constituted the Corporate SocialResponsibility Committee (CSR Committee) comprising of the following Directors as itmembers:
The terms of reference of the CSR Committee include the mattersspecified in Section 135 of the Act. The CSR Policy of the Company is uploaded on theCompany's website at the link - http://tinyurl.com/o6yczkx
Pursuant to Clause (o) of Sub-Section (3) of Section 134 of theCompanies Act 2013 and Rule 8 of Companies (Corporate Social Responsibility Rules 2014the CSR Report forms part of the Board Report as Annexure III. On account offinancial constraints the Company could not spend on CSR activities. The Board intend toutilize the allocated amount to the best extent in FY 2019-20.
At the 68th Annual General Meeting held on December 302017 the Members has appointed M/s. T. P Ostwal Associates LLP (FRN: 124444W/W100150) asAuditors of the Company for a term of 5 years to hold office until the conclusion of the73rd AGM to be held in the year 2022.
Further In accordance with the provisions of Section 139 and 143(8) ofthe Companies Act 2013 at the 68th Annual General Meeting held on December30 2017 members has appointed M/s. R. S. Parekh & Co. Chartered Accountants as theBranch Auditor to audit the Realty Division of the Company for a term of 5 years to holdoffice until the conclusion of the 73rd AGM to be held in the year 2022.
The Notes on financial statement referred to in the Auditors' Reportare self-explanatory and do not call for any further comments. The Auditors' Report doesnot contain any qualification reservation adverse remark or disclaimer.
MMJC & Associates LLP Company Secretaries were appointed as theSecretarial Auditor to conduct the Secretarial Audit for the financial year ended March31 2019. The Report of the Secretarial Auditor is provided as Annexure IV to thisReport.
With respect to one observation pertaining to delay of 1 day inintimating the record date to NSE in terms of SEBI LODR the shareholders may note thatthe same has been taken note of and the company shall take extra precaution in future toavoid such delay.
The provisions of Section 148(1) of the Companies Act 2013 areapplicable to the Company and accordingly the Company has maintained cost accounts andrecords for the year ended March 31 2019.
Prevention of sexual harassment of Women at workplace
The Company has a Policy on Prevention of Sexual Harassment of Women atWorkplace. No cases were reported during the year under review. The Company has compliedwith the provisions relating to the constitution of Internal Complaints Committee underthe Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013.
Conservation of Energy Technology Absorption and Foreign ExchangeEarnings/ Outgo
The particulars prescribed under Section 134 of the Companies Act 2013read with Rule 8 (3) of the Companies (Accounts) Rules 2014 relating to Conservation ofEnergy Technology Absorption Foreign Exchange Earnings / Outgo is provided as AnnexureV to this Report.
i. There are no material changes and commitments affecting thefinancial position of the company which have occurred between the end of the financialyear 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 Tribunalwhich can have impact on the going concern status and the Company's operations in futureduring the year under review.
iii. The Company has not accepted or renewed any amount falling withinthe 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 requirementfor furnishing of details relating to deposits covered under Chapter V of the said Act orthe details of deposits which are not in compliance with the Chapter V of the said Act isnot applicable. The Company has accepted unsecured loan from its Directors.
iv. The Company has complied with the Secretarial Standard issued bythe Institute of Company Secretaries of India.
v. No fraud has been reported by the Auditors to the Audit Committee orthe Board.
In accordance with the provisions of the Companies Act 2013 and theRules framed thereunder the Annual return in Form MGT -7 for the year 2018-19 isavailable on the website of the Company at the link:
Disclosure under Section 197 of the Companies Act 2013
The information as required under Section 197 of the Companies Act2013 (the Act) read with the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 as amended forms part of this Annual Report.
Disclosures as required under Rule 5(1) of the aforesaid Rules areprovided as Annexure VI to the Report. In terms of the provisions of Section 136the Act any member interested in obtaining a copy of information under Rule 5(2) of theaforesaid Rules may write to the Company Secretary at the Registered Office of theCompany.
Pursuant to SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Report on Corporate Governance together with the certificate issuedby M/s. T. P Ostwal Associates LLP the Statutory Auditors of the Company on compliancein this regard forms part of the Annual Report.
Employee Stock Option / General Benefits Scheme
The Company currently has two Schemes for its employees viz PatelEngineering Employee Stock Option Plan and Patel Engineering General Employee BenefitsScheme 2015
The applicable disclosure under SEBI (share Based employee Benefits)Regulations 2014 ("the ESOP Regulations") as at March 31 2019 is uploaded onthe Company's website at the link https://tinyurl.com/y3on8ym8.
A Certificate from the Auditors of the Company in terms of Regulation13 of ESOP Regulations would be placed at the ensuing AGM.
Directors' Responsibility Statement
Pursuant to Section 134 of the Companies Act 2013 the Directorsconfirm that:
i. in preparation of the annual accounts the applicable accountingstandards had been followed;
ii. such accounting policies have been applied consistently andjudgments estimates that are reasonable and prudent have been made so as to give a trueand fair view of the state of affairs of the Company and of the Profit and Loss of theCompany for the year ended March 31 2019;
iii. proper and sufficient care has been taken 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;
iv. the annual accounts have been prepared on a going concern basis;
v. internal financial controls were followed by the Company and thesame are adequate and were operating effectively; and
vi. proper systems has been devised to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.
The Board of Directors wish to place on record their appreciation forcontinued support and co-operation by Shareholders Financial Institutions BanksGovernment Authorities and other Stakeholders. Your Directors would also like to take thisopportunity to express their appreciation for the dedicated efforts of the employees ofthe Company.
Statement containing the salient features of the financial statementsof subsidiaries
(pursuant to first provision of sub section (3) of Section 129 of theCompanies Act 2013 read with rule 5 of the Company (Accounts) Rules 2014 - AOC -1)
(Rs in millions)
PART B: ASSOCIATES AND JOINT VENTURES
Annexure II - Nomination and Remuneration Policy
Patel Engineering Limited ('the Company') has adopted this Policydrafted by the Nomination and Remuneration Committee upon the recommendation of the Boardand the said Policy is in compliance with the requirements of Section 178 of the CompaniesAct 2013 and rules thereunder('the Act') and Clause 49 of the Listing Agreement (asamended).
The key objective of the policy would be:
a) To guide the Board in relation to appointment and removal ofDirectors Key Managerial Personnel and Senior Management;
b) To formulate criteria for determining qualifications positiveattributes and independence of a director and recommend to the Board
a policy relating to the remuneration of Directors key managerialpersonnel and other employees;
c) Formulation of criteria for evaluation of Independent Director andthe Board;
d) To evaluate the performance of the members of the Board and providenecessary report to the Board for further evaluation of the Board;
e) To recommend to the Board on Remuneration payable to the DirectorsKey Managerial Personnel and Senior Management;
f) To provide to Key Managerial Personnel and Senior Management rewardlinked directly to their effort performance dedication and achievement relating to theCompany's operations;
g) To retain motivate and promote talent and to ensure long termsustainability of talented managerial persons and create competitive advantage;
h) To devise a policy on Board diversity;
i) To develop a succession plan for the Board and to regularly reviewthe plan.
Scope and Applicability
The policy shall apply to
a) Directors ( Executive Non-Executive and Independent);
b) Key Managerial person;
c) Senior management personnel.
a) Term for Managing Director/Whole time Director
The Company shall appoint or re-appoint any person as its ExecutiveChairman Managing Director or Executive Director for a term not exceeding five years at atime. No re-appointment shall be made earlier than one year before the expiry of term.
b) Term for Independent Director
i) An Independent Director shall hold office for a term up to fiveconsecutive years on the Board of the Company and will be eligible for re-appointment onpassing of a special resolution by the Company and disclosure of such appointment in theBoard's report.
ii) No Independent Director shall hold office for more than twoconsecutive terms of upto maximum of 5 years each but such Independent Director shall beeligible for appointment after expiry of three years of ceasing to become an IndependentDirector. Provided that an Independent Director shall not during the said period of threeyears be appointed in or be associated with the Company in any other capacity eitherdirectly or indirectly.
iii) At the time of appointment of Independent Director it should beensured that number of Boards on which such Independent Director serves is restricted toseven listed companies as an Independent Director and three listed companies as anIndependent Director in case such person is serving as a Whole-time Director of a listedcompany or such other number as may be prescribed under the Act.
The Nomination and Remuneration Committee (the Committee) shall carryout evaluation of performance of every Director KMP and Senior Management Personnel atregular interval (yearly).
The Committee shall evaluate the performance of Directors taking intoaccount the various parameters such as:
Attendance at Board Meeting
Participation in discussion
Contribution in decision making
While evaluation is been done the Director who is been evaluated shallnot participate in the discussion. The recommendations of the Committee will be sent tothe Board for its review.
The Director/ KMP and Senior Management Personnel shall retire as perthe applicable provisions of the Act and the prevailing policy of the Company. The Boardwill have the discretion to retain the Director KMP Senior Management Personnel in thesame position/ remuneration or otherwise even after attaining the retirement age for thebenefit of the Company.
The Committee may recommend to the Board with reasons recorded inwriting removal of Director KMP or Senior Management Personnel subject to the provisionsof the Act and the rules made thereunder and all other applicable Acts Rules andRegulations if any.
Policy for Remuneration of Director/KMP/Senior Management personnel
Remuneration for Executive and Whole time Directors
The remuneration payable to the whole time directors shall bedetermined by the company as per the Articles of the company and the provisions of the Actand the rules made thereunder. The remuneration so determined shall be proposed to theboard for approval and shall be subject to the approval of the shareholders/centralgovernment as applicable wherever required.
Increments to the remuneration shall be recommended by the committee tothe board which shall be well within the slabs as approved by the shareholders for thewhole time director.
Remuneration for Non-Executive and Independent Directors
The remuneration to Non-Executive independent directors shall be as perthe provisions of the Companies Act 2013. The amount of sitting fees shall be subject toceiling/ limits as provided under Companies Act 2013 and rules made there under or anyother enactment for the time being in force.
Criteria for making payments to Non-Executive Directors:
Criteria of making payments to Non-Executive Directors will be decidedby the Board it can be on the basis of:
> Contribution during the Meeting.
> Active Participation in strategic decision making.
Remuneration to Key management personnel and Senior Managementpersonnel
The remuneration of the Key management personnel and senior managementpersonnel shall be drafted by the Human resource team of the company and shall bepresented to the committee for its perusal and approval.
The NRC committee shall have authority to modify or waive anyprocedural requirements of this policy.
The policy shall be amended as required from time to time in case ofany changes in the Revised Listing agreement or/and the Act and the rules made thereunder.
Annexure III - Annual report on Corporate Social Responsibility (CSR)Activities for the financial year 2018-19
(Pursuant to Clause (o) of Sub-Section (3) of Section 134 of theCompanies Act 2013 and Rule 8 of Companies (Corporate Social Responsibility Rules 2014)
1. A brief outline of the company's CSR policy including overview ofprojects or programs proposed to be undertaken and a reference to the web-link to the CSRpolicy and projects or programs.
CSR Policy of the Company is uploaded on the website of the Company asstated below:
2. The Composition of the CSR Committee is as under:
* inducted as member effective from August 14 2018
3. Average net profit of the Company for last three financial years: Rs1215.59 million
4. Prescribed CSR Expenditure (two per cent. of the amount as in item 3above): Rs 24.31 million.
5. Details of CSR spent during the financial year.
a) Total amount to be spent during the financial year: Rs 24.31 million
b) Amount unspent : Rs 24.31 million
c) Manner in which the amount spent during the financial year: TheCompany has not spent any amount during the financial year F.Y. 2018-2019 due to financialconstraints.
6. In case the company has failed to spend the two percent of theaverage net profit of the last three financial years or any part thereof the companyshall provide the reasons for not spending the amount in its Board report: The Company hasnot spent any amount on CSR activities due to financial constraints.
7. A responsibility statement of the CSR committee that theimplementation and monitoring of CSR policy is in compliance with CSR objectives andPolicy of the Company: We hereby declare that the implementation and monitoring of the CSRPolicy are in compliance with the CSR Objectives and Policies of the Company.
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