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Sobha Ltd.

BSE: 532784 Sector: Infrastructure
NSE: SOBHA ISIN Code: INE671H01015
BSE 00:00 | 24 Apr 2020 Sobha Ltd
NSE 05:30 | 01 Jan 1970 Sobha Ltd

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OPEN 221.90
PREVIOUS CLOSE 213.75
VOLUME 18475
52-Week high 587.95
52-Week low 117.90
P/E 5.48
Mkt Cap.(Rs cr) 1,926
Buy Price 203.10
Buy Qty 100.00
Sell Price 203.10
Sell Qty 32.00
OPEN 221.90
CLOSE 213.75
VOLUME 18475
52-Week high 587.95
52-Week low 117.90
P/E 5.48
Mkt Cap.(Rs cr) 1,926
Buy Price 203.10
Buy Qty 100.00
Sell Price 203.10
Sell Qty 32.00

Sobha Ltd. (SOBHA) - Director Report


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Company director report

Dear Members

Your Directors have pleasure in presenting the Twenty Fourth Annual Report on thebusiness and operations of the Company together with the audited results for the financialyear ended March 312019.

Financial Highlights (' in million)

Particulars

Standalone

Consolidated

2018-19 2017-18 2018-19 2017-18
Total Revenue 34337.78 26496.88 35155.41 28365.81
Operating Expenditure 27142.98 21220.41 27687.89 22672.81
Earnings before Interest Depreciation and Amortisation 7194.80 5276.47 7467.57 5693.00
Depreciation and Amortisation 582.35 503.95 623.17 544.00
Finance Cost 2293.37 1948.35 2362.20 1977.60
Profit Before Tax 4319.08 2824.17 4482.20 3171.40
Tax Expenses
• Current Tax 975.20 638.05 987.47 764.46
• Deferred Tax Charge/(credit) 478.63 246.71 524.80 238.24
Profit after Tax 2865.25 1939.41 2969.93 2168.70

There have been no material changes and commitments affecting the financial position ofthe Company which have occurred between the end of the financial year to which the balancesheet relates and the date of this report.

IMPACT OF IND AS-115

Pursuant to the notification of the IND AS-115 by the Ministry of Corporate AffairsGovernment of India Revenue shall be recognized when the Company transfers the control ofgoods or services to the costumer. In other words entity shall satisfy its performanceobligations to the customer to recognize the revenue. Satisfying the performanceobligation in the context of real estate industry means completion of all obligations bythe developer and intimating the customer our readiness for handing over the unit. To giveeffect to the new standard the Company has reversed the revenue of ' 32680 millionwhich was recognized till 31st March 2018. Consequently there is reduction inthe retained earnings to the extent of ' 7570 million.

BUSINESS AND OPERATIONS

A. Business Overview

The Company is operating in the following two

segments:

• Construction and development of residential and commercial projects

• Contractual projects

A summary of completed and ongoing projects as on March 312019 has been detailed inthe Management Discussion and Analysis Report titled ‘Management Report' forming partof the Annual Report.

B. Financial Overview Standalone

During the Financial Year 2018-19 the Company has on a standalone basis earned totalrevenues of ' 34337.78 million as compared to ' 26496.88 million in the previous yearan increase of 29.59% y-o-y. The Profit before Tax during the year was ' 4319.08 millionas against ' 2824.17 million in the previous year increased by 52.93% and Profit afterTax during the year was ' 2865.25 million as against ' 1939.41 million in the previousyear that is increased by 47.74%.

Consolidated

The consolidated revenues of the Company during the financial year 2018-19 were '35155.41 million an increase of 23.94% from

the previous year. The Profit before Tax increased by 41.33% and Profit after Tax(after considering minority interest) increased by 36.95% as compared to the financialyear 2017-18.

Transfer to Reserves

Your Directors propose to transfer ' 286.53 million of the current profits to theGeneral Reserve.

Dividend

The Board of Directors subject to the approval of the shareholders at the ensuingAnnual General Meeting are pleased to recommend a dividend of ' 7 per equity share of ' 10each.

C. Operational Overview

Completed Projects

During the year under review the Company has executed and handed over 9.75 millionsquare feet real estate projects and 1.60 million square feet of contractual projectsresulting in an aggregate development of 11.35 million square feet.

The Company has completed 103.88 million square feet of area since inception.

Ongoing Projects

The Company currently has real estate projects aggregating to 41.57 million square feetof developable area. It has 8.59 million square feet of ongoing contractual projects whichare under various stages of construction.

The Company has a geographic presence in 27 cities across 14 states in India.

SHARE CAPITAL RELATED MATTERS

A. Share Capital

The authorized share capital of the Company is ' 2000000000 divided into 150000000equity shares of '10 each and 5000000 preference shares of ' 100 each. At the beginningof the year under review the Issued subscribed and fully paid up capital was '948458530 divided into 94845853 equity shares of ' 10 each. There was no change in theIssued subscribed and fully paid up share capital of the Company during the year underreview. Sobha Limited is a public limited company and its equity shares are listed onNational Stock Exchange of India Limited and BSE Limited.

B. Changes in Subsidiaries Joint Ventures and Associates

Sobha Developers (Pune) Limited a wholly owned subsidiary of the Company has duringthe year acquired the shares of Kilai Builders Private Limited a private limited Companymaking it a wholly owned subsidiary of Sobha Developers (Pune) Limited. With thisacquisition as on the date of this report the Company has five direct subsidiaries andtwo step down subsidiaries.

BOARD OF DIRECTORS AND ITS COMMITTEES

A. Composition of the Board of Directors

As on 31st March 2019 the Board of Directors of the Company comprises ofsix Directors of which four are Non-Executive Independent Directors and two are ExecutiveDirectors. The composition of the Board of Directors is in compliance with Regulation 17of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (ListingRegulations) and Section 149 of the Companies Act 2013.

The Company has received necessary declarations from the Independent Directors statingthat they meet the criteria of independence as specified in Section 149(6) of theCompanies Act 2013 and Regulation 25(8) of the Listing Regulations.

B. Changes in Directors and Key Managerial Personnel

During the year 2018-19 Dr. S.K. Gupta Independent Director resigned from the Boardof Directors with effect from closure of the business hours of March 312019.

During the year under review there were no changes in the Key Managerial Personnel ofthe Company.

The Board at its meeting held on 26th March 2019 appointed Mr. T PSeetharam as an Additional Director designated as Whole time-Director of the Companyeffective 1st April 2019. The Board recommends to the shareholders theappointment of Mr. T P Seetharam as Director designated as Whole-time Director of theCompany.

C. Meetings:

During the year under review the Board of Directors met 5 times on the followingdates:

• May 19 2018

• August 07 2018

• November 09 2018

• February 05 2019

• March 26 2019

In accordance with the provisions of the Companies Act 2013 a separate meeting of theIndependent Directors of the Company was held on May 19 2018.

D. Re-appointment of Directors Retiring by Rotation

Pursuant to the provisions of Section 152 of the Companies Act 2013 Mr. JagdishChandra Sharma Director (DIN: 01191608) designated as Vice-Chairman and Managing Directoris liable to retire by rotation at the ensuing Annual General Meeting and being eligibleoffers himself for re-appointment. The Board of Directors based on the recommendation ofNomination Remuneration and Governance Committee have recommended the re-appointment ofMr. Jagdish Chandra Sharma Director designated as Vice-Chairman and Managing Directorretiring by rotation.

The Notice convening the Annual General Meeting includes the proposal forre-appointment of Mr. Jagdish Chandra Sharma as a Director. A brief resume of Mr. JagdishChandra Sharma has been provided as an Annexure to the Notice convening the Annual GeneralMeeting. Specific information about the nature of Mr. Jagdish Chandra Sharma's expertisein specific functional areas and the names of the companies in which he holds directorshipand membership/ chairmanship of the Board Committees have also been provided in the Noticeconvening the Annual General Meeting.

E. Performance Evaluation

In terms of Section 134 (3) (p) read with Articles VII and VIII of Schedule IV of theCompanies Act 2013 the Board has carried out an annual performance evaluation of its ownperformance

and that of its statutory committees viz. Audit Committee Stakeholder RelationshipCommittee Nomination Remuneration and Governance Committee and that of the IndividualDirectors.

The Board assessed the performance and the potential of each of the IndependentDirectors with a view to maximise their contribution to the Board. As envisaged by theAct the Independent Directors reviewed the performance of the Chairman of the Board at ameeting especially called for that purpose. At the same meeting a review of the ExecutiveDirectors was also carried out.

F. Directors' Responsibility Statement

According to the information and explanations obtained your Directors hereby confirmpursuant to Section 134(5) of the Companies Act 2013 that:

a) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanations relating to material departures;

b) the directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit of the Company for that period;

c) proper and sufficient care was taken for the maintenance of adequate accountingrecords in accordance with the provisions of this Act for safeguarding the assets of theCompany and for preventing and detecting fraud and other irregularities;

d) the annual accounts have been prepared on a going concern basis;

e) internal financial controls to be followed by the Company have been laid down andsuch internal financial controls are adequate and were operating effectively; and

f) proper systems have been devised to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

AUDIT RELATED MATTERS

A. Audit Committee

The Company has a duly constituted Audit Committee. The composition of the Committee ason 31st March 2019 was:

1. Mr. R V S Rao (Independent Director) - Chairman

2. Dr. S K Gupta (Independent Director) - Member

3. Mr. Anup Shah (Independent Director) - Member

4. Mr. J C Sharma (Vice Chairman and Managing Director) - Member

The terms of reference powers role and responsibilities of the Audit Committee are inaccordance with the requirements mandated under Section 177 of the Companies Act 2013 andRegulation 18 of the Listing Regulations.

During the period under review the advice and suggestions recommended by the AuditCommittee were duly considered and accepted by the Board of Directors. There were noinstances of non-acceptance of such recommendations.

B. Statutory Auditors

At the Twenty Second Annual General Meeting held on August 04 2017 members appointedM/s. B S R & Co. LLP Chartered Accountants (Firm Registration No.101248W/W-100022)as Statutory Auditors of the Company for a period of 5 years from the conclusion of theTwenty Second Annual General Meeting until the conclusion of the Twenty Seventh AnnualGeneral Meeting.

The Statutory Auditors expressed an unmodified opinion in the audit reports in respectof the audited financial statements for the financial year ended March 312019. There areno qualifications or adverse remarks in the Statutory Auditors' Reports which require anyexplanation from the Board of Directors.

C. Secretarial Audit

Secretarial Audit of the Company for the financial year ended March 31 2019 wasconducted by Mr. Nagendra D Rao Practicing

Company Secretary. The Secretarial Audit Report issued by Mr. Nagendra D Rao inaccordance with the provisions of Section 204 of the Companies Act 2013 is providedseparately in the Annual Report (Annexure A). There are no qualifications oradverse remarks in the Secretarial Audit Report which require any explanation from theBoard of Directors.

D. Cost Audit

The Cost Audit Report for the financial year 2017-18 was filed with the Ministry ofCorporate Affairs New Delhi within the due date prescribed under the Companies (CostRecords and Audit) Rules 2014. There are no qualifications or adverse remarks in the CostAudit Report which require any explanation from the Board of Directors.

Based on the recommendations of the Audit Committee the Board of Directors havere-appointed M/s. Srinivas & Co. Cost Accountants (Firm Registration No: 000278) asthe Cost Auditors of the Company for the financial year 2018-19. In terms of Rule 14 ofthe Companies (Audit and Auditors) Rules 2014 the remuneration payable to the CostAuditors for the financial year 2018-19 is subject to ratification by the shareholders ofthe Company. The Notice convening the Annual General Meeting contains the proposal forratification of the remuneration payable to the Cost Auditors.

E. Internal Audit and Internal Financial Controls

The in-house Internal Audit team is responsible for assurance with regard to theeffectiveness accuracy and efficiency of the internal control systems and processes inthe Company. The Company's Audit team is independent designed to add value and empoweredto improve the Company's processes. It helps the Company accomplish its objectives bybringing a systematic disciplined approach to evaluate and improve the effectiveness ofrisk management control and governance processes.

There are adequate internal financial controls in place with reference to the financialstatements.

During the year under review the Internal Audit Department and the Statutory Auditorstested these controls and no significant weakness was identified either in the design oroperations of the controls. A report issued by the Statutory Auditors M/s. B S R &Co. LLP on the Internal Financial Controls forms a part of the Annual Report.

POLICY MATTERS

A. Nomination and Remuneration Policy

The Nomination Remuneration and Governance Committee of the Board of Directors isresponsible for recommending the appointment of the Directors and Senior Management to theBoard of Directors of the Company. The Company has in place a Nomination and RemunerationPolicy containing the criteria for determining qualifications positive attributes andindependence of a Director and policy relating to the remuneration for the Directors KeyManagerial Personnel and Senior Management personnel of the Company. The Committee alsopostulates the methodology for effective evaluation of the performance of IndividualDirectors Committees of the Board and the Board as a whole which should be carried out bythe Board by the Committee or by an independent external agency and reviews itsimplementation and compliance. The Nomination and Remuneration Policy is available on theCompany's website: https://www.sobha.

com/pdfsbio/153630165920180907.pdf Extracts from the policy are reproduced in AnnexureB to this report.

B. The Risk Management Framework

The Company has developed and implemented a Risk Management Framework detailing thevarious internal and external risks faced by the Company and methods and procedures foridentifying monitoring and mitigating of such risks. The Board of Directors of theCompany have constituted a Risk Management Committee which is entrusted with the task ofevaluating monitoring and reviewing the risk management plan and procedures of theCompany. The Risk Management function is supporting the internal control mechanism of theCompany and supplements the internal and statutory audit functions.

C. Corporate Social Responsibility Policy

The Company believes that its achievements do not just refer only to its growth but arealso spread to society. Accordingly under the aegis of its CSR arm Sri KurumbaEducational and Charitable Trust it has adopted three village panchayats - VadakkencheryKizhakkenchery and Kannambra in Palakkad district of Kerala to improve the lifestyle ofthe people at the grass root level.

The Corporate Social Responsibility Policy as formulated by the Corporate SocialResponsibility Committee and approved by the Board of Directors is available on theCompany's website at: https://www.sobha. com/pdfsbio/153630163520180907.pdf

In terms of Section 134 of the Companies Act 2013 read with the Companies (CorporateSocial Responsibility Policy) Rules 2014 the annual report on the Corporate SocialResponsibility activities of the Company is given in Annexure C to this report.

D. Vigil Mechanism

The Company has in place a vigil mechanism to promote ethical behaviour in all itsbusiness activities. It has established a mechanism for employees and directors to reportany genuine grievances illegal unethical behaviour suspected fraud or violation oflaws rules and regulations or conduct to the Vigilance Officer and the Audit Committee ofthe Board of Directors. The policy also provides for adequate protection to the whistleblower against victimisation or discriminatory practices. The policy is available on theCompany's website at: https://www.sobha. com/pdfsbio/153630159420180907.pdf

During the year under review the Company did not receive any complaints relating tounethical behaviour actual or suspected fraud or violation of the Company's Code ofConduct from any employee or Directors.

OTHER MATTERS A. Debentures

As on 31st March 2019 the Company has various series of outstandingSecured

Redeemable Non-Convertible Debentures aggregating to ' 1400000000 (Rupees OneHundred and Forty Crores). The Company redeemed the debentures to the tune of '1150000000 (One Hundred and Fifteen Crore) during the financial year 2018-19. Thedebentures are listed on BSE Limited. Interest on the said debentures were paid on time asper the relevant provisions of the Companies Act 2013 and Listing Regulations. Companyhas complied with all the applicable provisions of the Listing Regulations in respect ofthe said listed Debentures.

B. Deposits

The Company has not accepted any deposits in terms of Chapter V of the Companies Act2013 read with the Companies (Acceptance of Deposit) Rules 2014 during the year underreview. As such no amount of principal or interest was outstanding as on date of thisreport.

C. Transfer to Investor Education and Protection Fund

In compliance with Section 124 of the Companies Act 2013 dividend pertaining to thefinancial year 2010-11 which was lying unclaimed with the Company was transferred to theInvestor Education and Protection Fund (IEPF) during the financial year 2018-19. Thedetails of unclaimed dividend transferred to the IEPF has been detailed in the CorporateGovernance Report forming part of the Annual Report.

As required under Section 124 of the Companies Act 2013 and the Rules made thereunder1550 equity shares in respect of which dividend had not been claimed by the shareholdersfor seven consecutive years were transferred to the Investor Education and Protection Fundduring the year under review. The details of the shares and shareholders are available onthe Company's website.

D. Significant or material orders passed by Regulators/Courts

During the year under review there were no significant or material orders passed bythe regulators or courts or tribunals impacting the going concern status and Company'soperations in future.

E. Human Resources

Employee relations continued to be cordial at all levels and in all divisions of theCompany. The Board of Directors would like to express their sincere appreciation to allthe employees for their continued hard work and steadfast dedication.

As on March 31 2019 the Company has an organisational strength of 3555 employees.

Details of the Employees are provided in a separate section of the Annual Report.

F. Disclosure under the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013

The Company has adopted a policy on prevention and redressal of Sexual Harassment atthe workplace. Pursuant to the provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 the Company has in place an InternalComplaints Committee for prevention and redressal of complaints of sexual harassment ofwomen at the workplace. No complaints were received by the Company during the year underreview.

G. Awards and Recognitions

During the financial year 2018-19 the Company was conferred with various awards andrecognitions the details of which are given in a separate section of the Annual Report.

H. Corporate Governance

In accordance with Regulation 34(3) read with Schedule V of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 a separate report on CorporateGovernance forms part of this report.

A certificate from Mr. Nagendra D Rao Practicing Company Secretary affirmingcompliance with the various conditions of Corporate Governance in terms of the ListingRegulations is given in Annexure D to this report.

I. Code of Conduct

The Company has laid down a Code of Conduct for the Directors as well as for all SeniorManagement of the Company. As prescribed under Regulation 17(5) of the ListingRegulations a declaration signed by the Vice Chairman and

Managing Director affirming compliance with the Code of Conduct by the Directors andSenior Management personnel of the Company for the financial year 2018-19 forms part ofthe Corporate Governance Report.

J. Disclosure on Confirmation with Secretarial Standards

The Directors confirm that the Secretarial Standards issued by the Institute of CompanySecretaries of India to be complied pursuant to the Companies Act 2013 and rules madethereunder have been duly complied with.

K. Management Discussion and Analysis Report

In accordance with the requirements of the Listing Regulations the ManagementDiscussion and Analysis Report titled ‘Management Report' is presented in a separatesection of the Annual Report.

L. Extract of Annual Return

Pursuant to Section 92(3) of the Companies Act 2013 and Rule 12(1) of the Companies(Management and Administration) Rules 2014 an extract of the annual return for thefinancial year ended March 31 2019 in MGT 9 is attached as Annexure E to thisreport. The same is available on https://www.sobha.com/ investor-relations-downloads.php

M. Particulars of Loans Guarantees and Investments

In terms of Section 134 of the Companies Act 2013 the particulars of loansguarantees and investments made by the Company under Section 186 of the Companies Act2013 is detailed in Notes to Accounts of the Financial Statements.

N. Related Party Transactions

During the year the Company did not enter into any contract/arrangement/transactionwith a related party which can be considered as material in terms of the policy on relatedparty transactions laid down by the Board of Directors. Related party transactions ifany pursuant to the Listing Regulations were approved by the Audit Committee from time totime prior to entering into the transactions. The

related party transactions undertaken during the financial year 2018-19 are detailed inthe Notes to Accounts of the Financial Statements.

Further during the year under review there were no contracts or arrangements withrelated parties referred to in sub-section (1) of Section 188 of the Companies Act 2013.Therefore there is no requirement to report any transaction in Form AOC-2 in terms ofSection 134 of the Companies Act 2013 and the rules made thereunder.

O. Conservation of Energy Technology Absorption and Foreign Exchange Earnings andOutgo

In terms of Section 134 of the Companies Act

2013 read with Rule 8(3) of the Companies (Accounts) Rules 2014 the details of energyconservation technology absorption foreign exchange earnings and outgoings are given as AnnexureF to this report.

P. Remuneration Details of Directors Key Managerial Personnel and Employees

Details of remuneration of Directors Key Managerial Personnel and the statement ofemployees in receipt of remuneration exceeding the limits prescribed under Section 134 and197(12) of the Companies Act 2013 read with Rule 5 of the Companies (Appointment andRemuneration of Managerial Personnel) Rules

2014 is provided in Annexure G to this report.

Q. Financial Position and Performance of Subsidiaries Joint Ventures and Associates

In terms of Section 134 of the Act and Rule 8(1) of the Companies (Accounts) Rules2014 the financial position and performance of the subsidiaries are given as an annexureto the Consolidated Financial Statements.

R. Business Responsibility Report

As required under Regulation 34 of the Listing Regulations the Business ResponsibilityReport is given in Annexure H to this report.

S. Additional Information to Shareholders

All important and pertinent investor information such as financial results investorpresentations press releases new launches and project

updates are made available on the Company's website twww.sobha.com) on a regular basis.

ACKNOWLEDGEMENTS

The Directors would like to place on record their sincere appreciation to the Company'scustomers vendors and bankers for their continued support to the Company during theyear. The Directors also

wish to acknowledge the contribution made by employees at all levels for steering thegrowth of the organisation. We thank the Government of India the State Governments andother government agencies for their assistance and cooperation and look forward to theircontinued support in future. Finally the Board would like to express its gratitude to themembers for their continued trust co-operation and support.

For and on behalf of the Board of Directors of Sobha Limited
Place: Bangalore Ravi PNC Menon J C Sharma
Date: May 17 2019 Chairman Vice Chairman and Managing Director


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