The Board of Directors hereby submits its report on the performance of the Companyalong with the audited standalone as well as consolidated financial statements for theyear ended March 31 2019.
Financial/ Operational Highlights
Your Companys financial highlights for the year ended March 31 2019 aresummarised below:
(INR in crore)
|Particulars ||2018-19 |
| ||Standalone ||Consolidated |
|Gross turnover (Revenue from operations) ||1748 ||2781 |
|Profit before interest tax & depreciation (EBITDA) excluding exceptional items ||179 ||215 |
|Profit before tax ||117 ||110 |
|Provision for tax ||15 ||20 |
|Profit after tax attributable to owners of the parent ||102 ||105 |
India is emerging as one of the fastest growing major economies in the world and isexpected to be one of the top three economic powers of the world over the next 10-15years. India has retained its position as the third largest startup base in the world withover 4750 technology start-ups. Indias labour force is expected to touch 160-170million by 2020 based on rate of population growth increased labour force participationand higher education enrollment among other factors according to a study by ASSOCHAM andThought Arbitrage Research Institute.
Indias Gross Domestic Product (GDP) is expected to reach USD 6 trillion by FY2027 and achieve upper-middle income status on the back of digitisation globalisationfavourable demographics and reforms. Indias next target is to expand its journeyfrom being a low middle-income country to an upper middle-income country (according to theWorld Bank the range is between around USD 1000 - USD 12000 per capita income). Thefirst step in that journey is double the size of the Indian economy to around USD 5trillion. One of the most critical in the list of areas to focus on is safe drinking waterand sanitation.
The initiative and investment made by Government in Sanitation (building around 90million toilets) and providing of electricity grid connection to almost every part ofIndia have started gaining people confidence on the Government and the next big focus willbe on WATER. There is no doubt that transformative policies on sanitation and water bringfaster growth. The economic benefit of access to clean drinking water and basic sanitationwould amount to more than USD 43 billion a year or an economic gain each year of around5.2% of GDP with a benefit cost ratio of 3.2 and a payback period of 7 years.
In less than a decade there could be a transformative boost to the Indian economy justby helping its citizens access clean drinking water and sanitation. The Water Ministry inIndia has also brought some initiative to bring all departments working on water under oneroof. Providing access to clean drinking water and sanitation is around six times biggerthan the ambition of bringing electricity to every part of India. To fulfil theelectricity dream power had to be taken to a little more than 20 million householdswhereas nearly 141 million households lack piped water. But as challenging as it soundsit is a fundamental pillar to Indias USD 5 trillion dream.
(Source: IBEF IMF Blog) (Source:Fortune India Blog)
Your Company has been consistent in paying dividend to its Members since listing of itssecurities in 2010.
Pursuant to Regulation 43A of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 ("SEBI LODR") the Board approved and adoptedthe Dividend Distribution Policy and the same is available on the Companys websitewww.wabag.com.
Taking into account the present and future growth opportunities including investment tobe made by the Company for Hybrid Annuity Model projects under Namami Gange Schemes andconsidering the difficult market conditions and high cost of borrowings your Directorshave decided to conserve the funds for future and hence have not recommended any dividendfor
Your Company has a healthy order book of INR 9292 crore as on March 31 2019(including framework contracts) supportedbysignificantorder intake of INR 4879 crore
Total Consolidated and Standalone income comprising revenue from operations andother income for the year was INR 2781 crore and INR 1748 crore during the year endedMarch 31 2019 as against INR 3457 crore and INR 1856 crore respectively in theprevious year.
Consolidated & Standalone Profit After Tax for the FY 2018-19 was INR 105crore and INR 102 crore respectively.
Companys EPS was INR 18.73 for the FY 2018-19 as against INR 21.45 in theprevious year.
There were no material changes and commitments affecting the financial positionof the Company which occurred between the end of the financial year to which thisfinancial statement relate on the date of this report.
The revenue and profit is lower as compared to previous year on account of ourlarge key overseas projects like AMAS and RAPID have reached completion during the currentfiscal year and major new orders secured during the year are in early stage of execution.Revenue from new orders is expected to pick up momentum in FY 2019-20.
During the year the Company has not issued any shares or convertible securities. Theissued subscribed and paid up share capital of the Company stood at INR 10.94 crore as onMarch 31 2019 as against INR 10.93 crore in the previous year. The increase in paid upcapital was on account of allotment of equity shares of the Company to the eligibleemployees as per the Employee Stock Option Plan approved earlier by the Members of theCompany.
The number of shares and date on which such allotment towards ESOPs were made by theCompany are given below:
|Month/Day/Year ||No. of equity shares (face value of INR 2 per share) |
|Paid up Capital as on March 31 2018 ||54657390 |
|Addition during the year || |
|May 25 2018 ||3597 |
|August 10 2018 ||4981 |
|November 12 2018 ||15298 |
|February 8 2019 ||9162 |
|Paid up Capital as on March 31 2019 ||54690428 |
Unpaid/ Unclaimed Dividend - Investor Education and Protection Fund (IEPF)
Pursuant to the provisions of sections 124 and 125 of the Companies Act 2013("the Act") read with the Investor Education and Protection Fund Authority(Accounting Audit Transfer and Refund) Rules 2016 (IEPF Rules) any dividend which isunclaimed by a Member(s) for a period of 7 consecutive years have to be transferred toIEPF Authority at the expiry of 7 years within the prescribed time stipulated by the IEPFRules along with the corresponding shares held by the said Members in the respectivefinancial year for which the dividend is unclaimed. The Company has been constantlysending communication and reminder letters from time to time to the respectiveshareholders whose dividends are unclaimed and due for transfer to IEPF Authority andproviding facilitation / support to shareholders as and when required to enable them toclaim their dividend entitlements from Practicing before it is transferred to IEPFAuthority in accordance with IEPF Rules.
During the year under review unclaimed dividend for the FY 2010-11 amounting to INR42810 pertaining to 265 shareholders and 126 shares pertaining to 6 shareholders inrespect of whom dividend had remained unclaimed for seven consecutive years have beentransferred to IEPF Authority in September 2018. Unclaimed dividend for the financial yearended March 31 2012 and shares in respect of which dividend has remained unclaimed forthe last consecutive seven years or more as on due date shall become due for transfer toIEPF authority in August 2019.
The details of shareholders and their unclaimed dividend/ equity sharesentitlements/transferred/ liable to be transferred to IEPF are uploaded on theCompanys website www.wabag.com. The Shareholders are requested to approachthe Company and/or RTA for any support to claim their entitlements if any.
The Companys total paid up capital representing 54690428 equity shares as onMarch 31 2019 wherein 99.99% of equity shares are held in dematerialised form. To protectthe interest of shareholders your Company approached shareholders through various modesof communication and elucidated about dematerialisation of shares.
During the year ICRA the credit rating agency as part of their routine periodicalreview and evaluation has reaffirmed the short term rating as A1+ and rated A+(negative)for long term fund based facilities. The said revision in the rating has been disclosed tothe stock exchanges and this communication is available in the Companys websitewww.wabag.com under investor section communication.
Management Discussion and Analysis
A detailed analysis of your Companys performance is discussed in the ManagementDiscussion and Analysis Report at page no. 70 which forms part of this Annual Report.
Your Company is committed to highest standards of corporate governance in line with thelaw and had also adopted certain principles/process as part of its corporate governanceeven before mandated by law. Your Company places high emphasis on business ethics andensures best practices throughout the business cycle.
The Report on Corporate Governance for the year under review is presented in aseparate section forming part of this Annual Report.
A certificate Company Secretary confirming compliance of conditions of CorporateGovernance as stipulated under the SEBI LODR also forms part this Annual Report. ACompliance Report on applicable compliances of SEBI Circular Notifications andRegulations etc. issued by Practicing Company Secretary being filed with exchanges in theprescribed format.
Key Projects Update -
KOYEMBEDU TTRO PROJECT INDIA
Chennai is a city that has been primarily depending on groundwater and surface waterfrom reservoirs. Considering the rapid economic growth and burgeoning population in thecity coupled with acute water stress in alternative years there has been a dire need tocome up with alternative reliable and sustainable sources. This has been one of thereasons for the city being a pioneer as far as water reuse is concerned. The city set aprecedent over a decade ago by driving municipal industrial partnerships to promote waterreuse. The city has designed a water management model to ensure water security forindustries through water reuse and prioritise available freshwater sources and augment itsdesalination capacity to bridge demand supply gap as far as domestic consumption inconcerned.
Chennai Metropolitan Water Supply and Sewage Board awarded a contract to WABAG todesign and build a 45 MLD Tertiary Treatment Reverse Osmosis (TTRO) plant at Koyambedu tosupply the Tertiary Treated water to SIPCOT (State Industries Promotion Corporation ofTamil Nadu) Industries.
The secondary treated water will be drawn from existing 120 MLD Koyambedu SewageTreatment Plant (STP). The idea is to provide a sustainable water source by reuse of watergenerated by the city for industrial application thereby reducing the fresh waterconsumption.
The tertiary ultrafiltration and treatment plant and the MS transmission mainconveying the treated water to various industries are part of the scope. The project ismore than 90% Completed. The construction activities at TTRO project have been completedand pre-commissioning activities have started.
POLGHAWELA PROJECT - SRILANKA
Polgahawela project is now in advanced stage of execution. The civil workstransmission and distribution pipe laying is in progress. The manufacturing of all majorequipments are on schedule. This project is funded by the EXIM Bank of India underthe Buyers credit route.
PETRONAS RAPID ETP PROJECT MALAYSIA
The Malaysian Petronas Rapid Project is completely operational now except for thesludge management system which is under commissioning. The plant has started receivingeffluent and treating it and has achieved 99.7% progress and is expected to be completedfully during Q2 of FY 2019-20. This effluent treatment plant forms part of the largestgrass root refinery in the world and will provide significantreference for yourCompany.
AMAS STP PROJECT - BAHRAIN
The project has been commissioned during October 2018 and handed over successfully overfor Operation and Maintenance with effect from November 1 2018. This plant is a modelthat showcases an optimum solution to the wastewater treatment needs of not only Bahrainregion but also to the entire GCC region as such. The project own Distinction Award underthe Waste Water Treatment Plant of the Year 2018 at the Global Water submit held in Londonapart from other accolades from other institutions.
GENCOPROJECTS-KAKATIYA(KTPP)&RAYALASEEMA (RTPP) THERMAL POWER PROJECT - INDIA
The performance guarantee test runs (PGTR) of the 600 MW plant in Warangal Telangana(KTPP) was completed post which final accounts reconciliation was carried out. Currentlywe are awaiting the final clearance and settlement of the project accounts with thecustomer (TSGENCO). On RTPP project after achievement of Commercial operation date (COD)of the 600 MW project in Cuddapah Andhra Pradesh currently completion of peripheral workis going on. PGTR and handing over will happen progressively in the next two quarters .These critical milestones completion will enable your Company to move closer to achievingclosure of the project.
DANGOTE ETP PROJECT - NIGERIA
In the repeat order from Dangote group towards Engineering Procurement Commissioning& Testing of an Effluent Treatment Plant (ETP) with Reverse Osmosis Demineralisation(RODM) & Condensed Polishing Unit (CPU) and Raw Water Treatment Plant (RWTP) - YourCompany as part of this contract is supplying its patented BIOPUR osmosis basedtechnology for this package.
In this project Engineering is at final stage and equipment ordering is nearlycompleted. 95% GFC drawings are released for site construction. The project has achieved65% of the physical progress as on May 2019.
DUONG WTP PROJECT - VIETNAM
To ensure clean and safe drinking water for over 3 million people in Hanoi and thesurrounding provinces in Vietnam WABAG was contracted to design and build a 150000 m3/day drinking Water Treatment Plant (WTP) in October 2017. The WTP was built to treat rawwater from Duong River in a multi-stage system using WABAGs proven technologies suchas Lamella Clarifier and Dual Media Filters. The completion of this (EngineeringProcurement & Construction) EPC Contract was achieved on fast track basis.
It is indeed a matter of pride that by completing the project in a record time frame of12 months it is credited for being the "Fastest Project executed in Vietnam"This Contract also marks successful entry for WABAG into Vietnams municipal sectorfollowing the Companys foray in 2016 in the industrial sector. The successfulexecution of this project also reinforces WABAGs presence in South East Asia andvision to develop sustainable water infrastructure in the region.
KMDA HAM PROJECT - INDIA
During the year your Company secured an order under prestigious National Mission forClean Ganga (NMCG) scheme and has been entrusted with the responsibility todevelop maintain regulate Sewage Treatment facilities and associated infrastructure inKolkata West Bengal. The project will be implemented on PPP basis through a hybridannuity model. The KMDA contract from Kolkata Metropolitan Development Authority is fundedby NMCG includes Engineering Supply and Construction of new Sewage Treatment Plant (STP)renovation and up gradation of existing STP rehabilitation of pumping station and otherassociated infrastructure. Your Company has set up a separate SPV namely M/s. Ganga STPProject Private Limited to execute this project in accordance with the contract conditionsand will be initiating necessary formalities upon completion of the execution ofconcession agreement with NMCG/KMDA which is expected to be completed during June 2019.
Policies of the Company
Your Company is committed to continuously review and update statutory policies andcodes in compliance with the changes prescribed under law from time to time. During theFY 2018-19 certain statutory policies and codes were amended by the Company in line withthe changes mandated under amendment to SEBI LODR. Some of the key policies adopted by theCompany are as follows:
Name of the Policy/code and links for viewing it
Directors & Key Managerial Personnel
As on date of this report majority of the Board comprises Independent Directors.WABAG being a professionally managed Company is functioning under the overallsupervision of 5 Independent Directors including Independent Board Chairman &Independent Women Director and 2 Executive Directors.
Code of conduct for Prevention of Insider Trading POSH policy etc. are available onthe Companys intranet portal.
Retirement by rotation and subsequent re-appointment
In accordance with the provisions of the Act read with the Rules issued thereunderSEBI LODR and the Articles of Association of the Company the Independent Directors andthe Managing Director of the Company are not liable to retire by rotation.
In order to comply with the provisions of Section 152 of the Act read with rules issuedthereunder S Varadarajan (DIN: 02353065) Whole Time Director & Chief Growth Officerwho was appointed by the Members of the Company at the last
AGM held in 2018 for a period of 5 years has to be considered to retire by rotation atthe ensuing Annual General Meeting (AGM) and he being eligible offers himself forre-appointment. A brief profile of S Varadarajan is given in the notice dated May 21 2019convening the AGM of the Company. The Board of Directors of your Company recommends hisre-appointment.
The Members at the 22nd AGM held on July 27 2017 had re-appointed Sumit Chandwani(DIN: 00179100) as an Independent Director of the Company to hold office two consecutiveyears for a term up to the conclusion of the 24th AGM of the Company to be held in thecalendar year 2019. The tenure of Directorship of Sumit Chandwani will be expiring uponconclusion at the ensuing 24th AGM has been appointed for two consecutive terms under theAct for a period of 3 years and 2 years respectively and he is not eligible to bere-appointed as an Independent Director of the Company as per the provisions of the Act.The Board of Directors have placed on record its sincere appreciation for his significantcontribution particularly supporting management buyout and reverse acquisition of WABAGgroup of companies and in general for his other invaluable services extended during histenure as Director.
Your Board on the recommendation of the Nomination and Remuneration Committee held onApril 29 2019 have approved the appointment of Milin Mehta (DIN: 01297508) as anAdditional Director in the category of Independent Director of the Company up to the dateof ensuing 24th AGM and also recommended his appointment as an Independent Director forthe approval of the Members of the Company at the ensuing AGM to hold office for a periodof 3 consecutive years up to conclusion of the 27th AGM of the Company to be held in thecalendar year 2022 .
Your Company has received requisite notice in writing from the Member proposing hiscandidature. The brief profile of Milin Mehta and S Varadarajan along with other requisiteinformation have been outlined in the Notice convening the 24th AGM of the Company.
Declaration of Independence by Independent Directors
All Independent Directors of the Company have confirmed that they meet the"Independence criteria laid down under the Act and SEBI LODR in additionthey maintain their maximum limits of Directorships as required under SEBI LODR.
Key Managerial Personnel (KMP)
The KMP of your Company as on Mach 31 2019 as per Section 203 of the Act are asfollows: Rajiv Mittal Managing Director & Group CEO S Varadarajan Whole TimeDirector & CGO Pankaj Sachdeva CEO- India Cluster R Swaminathan Company SecretaryDuring the year there was no change in KMP except the resignation of Parthasarathy Gopalanwho served as Chief Financial Officer of the Company. He resigned from the services of theCompany w.e.f November 9 2018. Subsequent to the close of the FY 2018-19 Your Board onthe recommendation of the Nomination and Remuneration Committee and approval of AuditCommittee held on April 29 2019 have appointed Sandeep Agrawal as Chief FinancialOfficer of the Company with immediate effect from the said date.
The diversity and inclusiveness are embedded in the Companys culture whichreflects across each & every division in the Organisation for achieving sustainablebalanced development and long standing goal. Being a multilingual and multi culturedentity every employee of the Company is treated with dignity and respect. The Nominationand Remuneration Committee paving way out to diversify the composition of the Board ofDirectors as per the Policy on Board Diversity as covered in Companys NominationEvaluation and Remuneration Policy.
Board & Performance Evaluation
Pursuant to the provisions of the Act and the SEBI LODR the Board carried out anannual evaluation of its own performance and its Committees as well as performance of allthe Directors individually. The response was sought by way of an organised questionnairewhich covers various aspects of the functions of the Boards adequacy culture executionand delivery of performance of specific duties obligations and Governance and theevaluation was carried out based on responses received from the Directors.
A separate exercise was carried out by the Nomination and Remuneration Committee of theBoard to evaluate the performance of Individual Directors. The performance evaluation ofthe Executive Directors and the Board as a whole were carried out by the IndependentDirectors at their Meeting held during the year 2018-19. The performance evaluation of theChairman of the Board of Directors of the Company was also carried out by the IndependentDirectors as a whole taking into account the views of the Executive Directors. The Reporton Corporate Governance forming part of this Annual Report covers details of theevaluation process and other requisite information.
As part of Familiarisation programme your Company conducts various programme sessionand seminars to the Directors from time to time and update them with various aspectscovering the industry including the business process procedures laws rules andregulations as applicable for the business of the Company. A formal letter of appointmentis issued to Directors when inducting into the Company capturing their role functionduties and responsibilities and expectation of Board.
Details of the Familiarisation Programme are explained in the Report on CorporateGovernance and are also available on the Companys website at linkhttps://www.wabag.com/compliances/
Appointment of Directors
The Nomination and Remuneration Committee formulates and reviews the criteria forappointment of a Director on the Board of Directors of the Company. The Committeeformulates the criteria for determining qualifications attributes and independence of aDirector and makes necessary recommendations to the Board. The Committee also recommendsto the Board on extension or continuation of the term of appointment of IndependentDirectors on the basis of the report of performance evaluation of Directors from time totime in accordance with the law and SEBI LODR.
Board & Committees
A calendar of meetings is circulated to the Directors in advance. During the year yourBoard met 6 times on April 4 2018 May 25 2018 July 9 2018 August 9 2018 November12 2018 and February 8 2019. The details regarding composition attendance of theDirectors and other relevant details are set out in the Report on Corporate Governancewhich forms part of this Annual Report.
Your Company is maintaining the highest standards of Corporate Governance practices andare in compliance with the requirements of the relevant provisions of applicable laws andstatutes. As on March 31 2019 the Board has 6 Committees viz.
Stakeholders Relationship Committee inter alia to look into various mattersrelating to the securities of the Company
Nomination and Remuneration Committee with wider terms of reference as per thestatutory requirements Corporate Social Responsibility Committee inter alia toundertake CSR activities monitoring and reporting system for utilisation of funds for theCSR activities
Risk Management and Monitoring Committee inter alia to review and monitorthe various projects of the Company from time to time and evaluate the risks exist in thebusiness and ensure appropriate mitigation measures in a time bound manner
Overseas Direct Investment Committee inter alia to scrutinise evaluate andapprove any new/enhancement in the investment by the Company in setting up a branch/subsidiary/joint venture entities in India or overseas and periodically monitor theinvestments made in such group entities are used for such approved purpose so as to ensurethat return on investment to the Company are protected in the long run. Please refer pageno. 44 tor investment made by Company in ODI entities
The Audit Committee acts as an interface between the statutory and internalauditors the Management and the Board of Directors. It assists the Board in fulfillingits responsibilities of monitoring financial reporting processes reviewing theCompanys established systems and processes for internal financial controlsgovernance and reviews the Companys statutory and internal audit processes. Therecommendations made by the Committee are accepted by the Board. As prescribed undersection 177(8) of the Act the Audit Committee comprises three Independent Directors viz.Sumit Chandwani Chairman of the Committee B D Narang and Malay Mukherjee. positive TheMeetings of each of these Committees are convened by the respective Chairperson who alsoapprises the Board about the summary of discussions held at their Meetings. The Minutes ofthe Committee Meetings are sent to all Directors individually for their approval/ commentsas per the prescribed Secretarial Standard-1 and subject to any such comments/ approvalfrom Directors circulate the duly signed and approved Minutes to the Directors throughthe software/Email and table the same at the subsequent Board Meetings.
Directors Responsibility Statement
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statement in terms ofSection 134 of the Act: that in the preparation of the Financial Statements of theCompany the applicable accounting standards have been followed along with properexplanation relating to material departures if any; that they have selected suchaccounting policies and applied them consistently and made judgments and estimates thatare reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Company at the end of the financial year and of the profit of the Company for thatperiod;
that they have taken proper and sufficient care towards the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;that they have prepared the annual accounts on a going concern basis; they have laid downinternal financial controls which were adequate and are operating effectively; and thatthey have devised proper systems to ensure compliance with the provisions of allapplicable laws and such systems are adequate and operating effectively.
Your Company designed its remuneration policy to attract motivate and retain theDirectors Key Managerial Personnel Senior Management Personnel and other employees asper the industry practice. In accordance with the relevant provisions of the Act and SEBILODR the following Policies/ Framework have been adopted by the Board upon recommendationof the Nomination and Remuneration Committee as part of Nomination Evaluation &Remuneration Policy:
A. Board Nomination Policy
B. Policy for appointment & removal of Director Key Managerial Personnel andSenior Management Personnel
C. Board Evaluation Policy either
D. Board Diversity Policy
E. Policy related to Remuneration for the Executive Directors Key Managerial Personnel& Senior Management Personnel
The Remuneration policy is based on various evaluation criteria determined by theNomination and Remuneration Committee in line with the requirements of law. TheDirectors Commission and other matters provided in Section 178(3) of the Act hasbeen disclosed in the Report on Corporate Governance. The Nomination Evaluation andRemuneration Policy is available on the website of the Company. The overall limit ofremuneration payable to the Board Members and Managerial Personnel are governed byprovisions of Section 197 of the Act and rules made thereunder.
Remuneration of the Executive Directors consists of fixed component and a variableperformance incentive. The Nomination and Remuneration Committee makes annual appraisal ofthe performance of the Executive Directors based on a detailed performance evaluation andrecommends the compensation payable to them within the parameters approved by theshareholders to the Board for their approval.
The Non-Executive Directors are paid remuneration in the form of Commission subject tooverall ceiling limits prescribed under the Act. The Board can determine differentremuneration for different Directors on the basis of their role responsibilities dutiestime involvement etc. The Company has no pecuniary relationship with Non- ExecutiveDirectors except commission being paid for attending meetings of the Board/Committeesthereof.
KMP/ Senior Management/ Other Employees
The remuneration of Key Managerial Personnel (other than Managing Director and WholeTime Director) shall be approved by the Board and any revision thereof shall be done asper the compensation and appraisal policy of the Company which consists of fixed andvariable pay includes salary benefits perquisites provident fund etc. Managing Director& Group CEO and Whole Time Director will appraise the Board on the performanceevaluation of senior management/ other employees made by them on the basis on achievementof KPI & KRA and they will be paid remuneration/ any revision thereof.
Policy on Preservation & Archival of Documents
This policy is implemented as per Regulation 9 read with Regulation 30(8) of the SEBILODR for preservation of the documents inter alia to aid the employees in handlingthe documents in physical form or electronic efficiently form. This Policy is intended toprovide guidelines for the retention of records preservation of relevant documents forsuch duration after which the documents shall be archived and safe disposal/destruction ofthe documents. This policy is available on the Companys website www.wabag.com. Itnot only covers the various aspects on preservation but also archival of documents.
Employees stock option scheme (ESOP)
During the year 33038 options were exercised and allotted in 4 tranches to eligibleemployees under "Employees Stock Option Scheme 2010" (ESOP Scheme 2010). Duringthe FY 2018-19 there has been no change in ESOP Scheme of the Company. Further it isconfirmed that the ESOP Scheme of the Company is in compliance with SEBI (Share BasedEmployee Benefits) Regulations 2014.The validity period of ESOP Scheme 2010 has gotexpired in the months of October & November 2018 The disclosures as stipulated underSEBI (Share Based Employee Benefits) Regulations 2014 with regard to Employees StockOption Plan of the Company is enclosed as an Annexure-I to the Boards Reportand are available on the website of the Company at www.wabag.com.
Particulars of Employees
Disclosures with respect to the remuneration of Directors KMP and employees asrequired under section 197(12) of the Act 2013 read with Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are enclosed as AnnexureII to the Boards Report.
Details of employee remuneration as required under provisions of section 197(12) of theAct read with Rules 5(2) & 5(3) of Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are available to any Shareholder on request. Suchdetails are also available on the website www.wabag.com
The Company maintained healthy cordial and harmonious industrial relations at alllevels. The enthusiasm and unstinted efforts of employees have enabled the Company toremain at the leadership position in the industry. It has taken various steps to improveproductivity across organisation.
Policy on Prevention of Sexual Harassment at Workplace
Your Company is an equal opportunity provider. It continuously strives to build a workculture which promotes respect and dignity of all employees across the Organisation.
The Company has a dedicated Committee for Prevention of Sexual Harassment (POSH). Itcomprises 6 Members majority being Women Members including one external womenrepresentative. The Company has a POSH policy in place in line with the requirements ofthe Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013. All permanent consultant contractual temporary trainees are covered under thisPolicy. During the year under review there was no case of POSH complaint received andpending for disposal as on March 31 2019.
A. Statutory Auditors
M/s. Sharp & Tannan Chartered Accountants Chennai (Firm Regn No: 003792S) wasappointed by the Members of the Company at the last AGM held on August 10 2018 as theStatutory Auditors of the Company to hold office for a term of 5 years from the conclusionof the 23rd AGM until the conclusion of the 28th AGM of the Company to be held in thecalendar year 2023.
The statutory auditors of the Company have submitted their report for FY 2018-19 anddoes not contain any qualification reservation or adverse remark. The auditorsreport is enclosed with the financial statements in this Annual Report.
B. Cost Auditor
Pursuant to the provisions of the Section 148(1) of the Act your Board of Directorshad appointed K Suryanarayanan Practicing Cost Accountant (Membership No.24946) as CostAuditor of the Company for conducting the audit of costs records for the FY 2018-19. Theaudit of cost records is in progress and report will be filed with the Authority with theprescribed period in accordance with the Act and relevant rules made thereunder. Aproposal for ratification of remuneration of the Cost Auditors for the FY 2018-19 will beplaced before the Members of the Company at the ensuing AGM for ratification/approval.
The cost records as applicable to the Company are maintained in accordance with thesub-section (1) of Section 148 of the Act.
C. Secretarial Auditor
Your Board has appointed M Damodaran Practicing
Company Secretary (Membership Number 5837) to undertake the Secretarial Audit of theCompany for the FY 2018-19 The Secretarial Audit Report placed before the Board does notcontain any qualification reservation or adverse remark. The Report of the SecretarialAuditor is enclosed as Annexure III to the Boards Report.
Your Board had appointed M Damodaran of M/s. M Damodaran & Associates PracticingCompany Secretaries as Secretarial Auditor of the Company for the FY 2019-20.
D. Internal Auditors
Your Board had appointed M/s PKF Sridhar & Santhanam LLP Chartered AccountantsChennai (FRN -003990S/ S200018) as Internal Auditors of the Company to conduct theInternal Audit for the FY 2018-19. The Internal Auditors reports directly to the AuditCommittee and makes comprehensive presentations at the Audit Committee meeting(s) on theInternal Audit Report covering the business areas required by the Audit Committee fromtime to time.
Your Board had appointed M/.s PKF Sridhar & Santhanam LLP Chartered AccountantsChennai as Internal Auditor of the Company for the FY 2019-20. The Statutory AuditorsCost Auditor Secretarial Auditor Internal Auditors of the Company have not reported anyfrauds to the Audit Committee or to the Board of Directors under Section 143(12) of theAct including rules made thereunder.
Subsidiaries Joint Ventures & Associates
Your Company has 18 subsidiaries 3 associates and a joint venture entity as on March31 2019. Pursuant to Section 129(3) of the Act a statement containing the salientfeatures of the financial statement of our subsidiaries in the prescribed format AOC - 1is enclosed as Annexure IV to the Boards report.
None of the subsidiaries is a material subsidiary as per the thresholds laid down underthe SEBI LODR. Your Board of Directors has approved a Policy for "Determiningmaterial subsidiaries" in line with the SEBI LODR. The Policy has been revisedeffective from April 1 2019 in line with the amendments made to the SEBI LODR. The policyis also made available on your Companys website www.wabag.com.
Consolidated Financial Statements
The Consolidated Financial Statements of the Company for the financial year ended March31 2019 are prepared in compliance with the applicable provisions of the Act includingIndian Accounting Standards specified under Section 133 of the Act. The auditedconsolidated financial statements together with the Auditors Report thereon formpart of this Annual Report.
The Financial Statements of the subsidiaries associates and joint venture entities areavailable for inspection by the
Members at the Registered Office of the Company pursuant to the provisions of Section136 of the Act. The Company shall provide a copy of the financial statements of itssubsidiary companies to the Members upon their request. The statements are also availableon the website of the Company at www.wabag.com under Investors Section.
Related Party Transactions
During the FY 2018-19 your Company has entered into transactions with Related Partiesas defined under Section 2(76) of the Act all of which were in the ordinary course ofbusiness and on arms length basis and in accordance with the provisions of the Actread with the Rules issued thereunder and the SEBI LODR. There arenomateriallysignificantRelated Party Transactions entered into by the Company withPromoters Directors Key Managerial Personnel or other designated persons which may havea potential conflict with the interest of the Company at large. During the year ManagingDirector & Group CEO has contributed from his own funds to meet certain businessexigencies. The details of the same are given in the notes to financial Statement.
The Related party transactions were placed before the Audit Committee for their reviewconsideration and approval/ recommendation and then placed before the Board for suitablenoting/approval. Amended policy on dealing with Related Party Transactions is available onthe Companys website www.wabag.com.
The details as required to be provided under Section 134(3)(h) of the Act aredisclosed in form AOC-2 forming part of this report.
Overseas Direct Investment
WABAG over the years has expanded its global reach through Overseas Direct Investments(ODI) either through subsidiaries associate & joint venture entities. As of March31 2019 the aggregate financial investments in such ODIs amount to INR 381.88 crore asagainst INR 410.13 crore as of last year. Out of such overseas investments a verysubstantial component of investment comprises guarantees/ non-funded exposure for variousprojects which as of March 31 2019 amounted to INR 352.79 crore (92.38% of totalfinancial exposure). The funded exposure of the Company in ODI for the same periodconsists of equity investments of INR 27 crore (7 % of total financial exposure) and loansamounting to INR 2.36 crore (0.62% of total financial exposure). Your Company has notprovided any loan to its ODI entities during the year.
Your Company has been benefitted from these ODIs in the form of export/ other earnings.
The benefits generated by the Company from its overseas entities are substantialconsidering its relative meagre funded investment in such ODI entities. During the FY2018-19 the Standalone revenue of the Company included revenue from overseas projectsamounting to INR 775 crore as against INR 716 crore last year. The aggregate operationalrevenue generated by the Group during the FY 2018-19 through Companys overseasentities and exports out of India aggregated to INR 1779 crore which is 64 % of overallconsolidated revenue of INR 2781 crore. In addition to this your Company also secured anEPC project through a consortium with VA Tech Wabag GmbH Austria in the Kingdom of SaudiArabia from Marafiq.
In order to comply with the new project requirements your Company has set up thefollowing establishments during the year: 1. Branch in Qatar to execute the EPC projectreceived from Public Works Authority of Qatar (ASHGAL) 2. Branch in Tunisia to execute theDBO project received from Societe Nationale DExploitation Et De Distribution DesEaux Tunisia (SONEDE)
Corporate Social Responsibility (CSR)
Your Company allocated a limit equivalent to 2% of the average net profits of its threeimmediately preceding financial years for implementation of CSR activities as per Act.During the year under review your Company spent a sum of INR 198.98 lakhs towards CSR.
In keeping with the Companys CSR focus on water and waste water the Companyidentified various projects for implementation during the year 2018-19. The Company hadentered into arrangements with NABARD as co-financing partner for implementation of sixmulti-year watershed projects as part of CSR activities one each in - KanchipuramDistrict Tuticorin District Dindigul District and Virudunagar District besides two atCuddalore District Tamil Nadu along with five reputed local NGOs as implementingpartner(s). The estimated cost (WABAGs portion) for the six projects is over INR4.60 crore.
Furthermore your Company also entered into a Memorandum of Understanding (MoU) withBharat Rural Livelihoods Foundation (BRLF) an independent non-profit society set up bythe Government of India under the Ministry of Rural
Development for implementing watershed project in six districts in West Bengal forwhich your Company committed a sum of INR 2.50 crore spread over a period of 4 years. Outof this your Company so far paid a sum of INR 74.00 lakhs. The key objective behind thisCSR investment by WABAG is to leverage the MGNREGA funds which will have wider impact interms of end beneficiaries i.e. poor farmers and tribals in West Bengal. With thiscommitment to BRLF the total commitment approved by the CSR Committee towards watersheddevelopment multiyear projects is over INR 7 crore. Out of the overall amount unspent ason March 31 2019 your Company has already committed to spend around INR 7 crore. Inaddition to this projects around INR 4 crore are under pipeline for Committee approval.
Over and above your Company also implemented a few CSR projects i) drinkingwater facility to the school children @ Valluvar Gurukulam Chennai ii) community waterpurification plant at Telangana State and restoration of traditional irrigation system @Killai Village Cuddalore Tamil Nadu.
Your Company had undertaken rejuvenation and livelihood projects in CSR in the areas ofWater in 2018-19 thereby increasing the continued value creation. These initiativesaddress the necessities of the local communities both in Tamil Nadu and other states.
The CSR Committee of the Board has been constantly reviewing the projects and givesdirections to expedite implementation of the projects undertaken.
Your Companys CSR Committee comprises Revathi Kasturi (Chairperson) (DIN:01837477) Rajiv Mittal (DIN: 01299110) and S Varadarajan (DIN: 02353065). The Committeeis responsible for formulating and monitoring the CSR policy of the Company. This policyis available on the Companys website in the following link:https://www.wabag.com/compliances/. Pursuant to Section 135(4) of the Act the majorcontents of CSR policy include core Ideology total outlay for each financial yearallocation of resources & thrust areas and Executing Agency/Partners.
For WABAG responsible business practices include being responsible for our businessprocesses engaging in responsible relations with employees customers and the community.Hence for the Company Corporate Social Responsibility goes beyond just adhering tostatutory and legal compliances and creates social and environmental value whilesupporting the Companys business objectives and reducing operating costs and at thesame time enhancing relationships with key stakeholders and customers.
WABAGs commitment to CSR will be manifested by investing resources in one or moreof the following areas:
Eradicating hunger poverty and malnutrition promoting preventive health care &sanitation and making available safe drinking water; Promoting education includingspecial education and employment enhancing vocation skills especially among childrenwomen elderly and the differently-abled and livelihood enhancement projects;
Promoting gender equality empowering women setting up homes and hostels for women andorphans; setting up old age homes day care centers and such other facilities for seniorcitizens and measures for reducing inequalities faced by socially and economicallybackward groups;
Ensuring environmental sustainability ecological balance protection of flora andfauna animal Welfare agro-forestry conservation of natural resources and maintainingquality of soil air and Water;
Protection of national heritage art and culture including restoration of buildings andsites of historical importance and works of art; setting up public libraries; promotionand development of traditional arts and handicrafts;
Measures for the benefits of armed forces veterans war widows and their dependents;Training to promote rural sports nationally recognised sports Paralympics sports andOlympic sports;
Contribution to the Prime Ministers National Relief Fund or any other fund set upby the Central Government for socio-economic development and relief and welfare of theScheduled Castes the Scheduled Tribes other backward classes minorities and women;Contribution of funds provided to technology incubators located within academicinstitutions which are approved by the Central Government;
The annual report on our CSR activities is enclosed as Annexure V to theBoards report.
Particulars of Loans Guarantees or Investments
Details of loans guarantees and investments under the provisions of Section 186 of theAct as on March 31 2019 are given in the notes to the Financial Statements of theCompany.
Internal Control/ Audit & its adequacy
WABAG has built robust control system upon which the internal controls are built tomitigate the risks. Under the control environment; Companys policies procedures& standards are developed to uphold control across the organisation. Adequate internalcontrols are in place to commensurate with business and operating dynamics. Internalcontrols are designed to provide reasonable assurance over: a. Achieving strategicobjectives b. Efficiency and effectiveness of business operations c. Prevention anddetection of frauds and errors d. Safeguarding its assets e. Complying with applicablelaws and regulations f. Providing reliable financial information
Your Company has independent internal audit agency spearheaded by industry veterans& process experts. Audit Committee of the Board periodically reviews the auditfunction and key issues are acted upon immediately. Key controls are periodically reviewedand improvements are made to enhance the reliability of information. The Company throughits global ERP continues to align its processes and controls with industry bestpractices.
Internal Control Over Financial Reporting
The Companies Act 2013 re-emphasises the need for an effective Internal FinancialControl system in the Company which should be adequate and shall operate effectively.
1. The internal financial controls within the Company are commensurate with the sizescale and complexity of its operations.
2. Audit Committee of the Board periodically reviews the internal audit plans andobservations/recommendations of internal & statutory auditors.
3. The controls were tested during the year and no reportable material weaknesses.
4. Your Company continuously tries to automate these controls to increase itsreliability.
5. The Company follows accounting policies which are in line with the Indian Accountingstandards notified under Section 133 of the Act read with Companies (Indian AccountingStandard) Rules 2015. These are in accordance with Generally Accepted AccountingPrinciples (GAAP) in India.
6. The Companys Books of Accounts are maintained in IFS and transactions areexecuted through IFS setups to ensure correctness/ effectiveness of all transactionsintegrity and reliability of reporting.
7. The Company has a mechanism of building budgets at an integrated cross- functionallevel. The budgets are reviewed on a monthly basis so as to analyse the performance andtake corrective action wherever required.
8. Overseas subsidiaries provide required information of consolidation of accounts inthe format prescribed by the Company along with certification from respective entityauditors.
The Board has constituted a dedicated Committee viz. "Risk Management andMonitoring Committee" to review risks trends exposure its potential impact analysisand mitigation plans. The Committee consists of 5 Directors out of which 4 are IndependentDirectors. The details on the Companys risk management framework/ strategy riskassessment risk acceptance risk avoidance risk mitigation risk review etc. are formspart of Management Discussion and Analysis Section of this report.
Awards & Recognitions
During the year under review your Company received numerous awards and accoladesconferred by reputable organisations distinguished bodies and clients for achievements inCSR sustainable solutions project completion etc.
Please refer page no. 11 of the Annual Report for the details of the rewards andrecognition achieved by the Company globally during this year.
Significant and material orders passed by the regulators or courts or tribunalsimpacting the going concerns status and Company`s operations in future.
Therearenosignificant material orders passed by the regulators or courts or tribunalsimpacting the going concern status and Companys operations in future.
Deposits: During the year under review the Company has not accepted any depositwithin the meaning of Sections 73 and 74 of the Act read with the Companies (Acceptanceof Deposits) Rules 2014 (including any statutory modification(s) or re-enactment( s)thereof for the time being in force);
Contracts or Arrangements with Related Parties: Particulars of contracts orarrangements with related parties referred to in Section 188(1) of the Act in theprescribed Form AOC-2 is enclosed as Annexure VI to the Boards Report. AnnualReturn: In accordance with Section 134(3)(a) of the Act an extract of the annualreturn in the prescribed format is enclosed as Annexure VII to the BoardsReport. The said extract is also available on the Companys website in the followinglink: https://www.wabag.com/compliances/.
Secretarial Standards: The Company has complied with Secretarial Standards issuedby the Institute of Company Secretaries of India on Board and General Meetings;
Conservation of Energy: The information on conservation of energy technologyabsorption and foreign exchange earnings and outgo as stipulated under Section 134 of theAct read with the Companies (Accounts) Rules 2014 is enclosed as Annexure VIIIto the Boards Report; Differential rights: The Company has not issued equityshares with differential rights as to dividend voting or otherwise.
Nature of Business: During the year there was no change in nature of business ofthe Company or any of its subsidiaries.
Health Safety and Environmental Protection (HSE)
Your Company is committed to providing a safe healthy and conducive environment to allof its employees & associates and complied with labour related laws. The details ofquality health safety environment initiatives objectives and achievements made by theCompany are detailed in the Management Discussion and Analysis section of the AnnualReport
Sustainability is a key mantra for your Company. Globally your Company is activelyinvolved in providing sustainable solutions for the future that are eco-friendly andrenewable in nature. Your Companys contribution towards sustainability is constantlydriving in nature as is reflected throughout this report and forms an integral part of ourbusiness.
Whistle Blower Policy / Vigil Mechanism
The Company has formulated a Whistle-Blower Policy which serves as a mechanism for itsDirectors and employees to report genuine concerns about unethical behaviour actual orsuspected fraud or violation of the Code of Conduct without fear of reprisal. The vigilmechanism consists of a dedicated email-id. Any Director or employee who becomes aware ofan unethical behaviour or fraud or violation of code shall report to the Ethics Committeefor redressal as provided in the policy. The Audit Committee of the Board oversees thefunctioning of this policy. The policy is available on the website of the Companywww.wabag.com.
WABAG believes in creating a clean and green ecosystem (land air and water) around usfor the wellbeing of nature and humanity. A few examples that testify to our vision for aresource positive and sustainable future through green initiatives are: a) the 110 MLDKodungaiyur WWTP in Chennai India which has been a role model plant for the entirecountry in terms of a being a plant powered by green energy for over a decade b) the 144MLD Sanliurfa WWTP in Turkey which employs renewable power derived from solar power inits sludge drying beds c) The 36 MLD Effluent Treatment and Recycling Plant at RelianceDahej where biogas generated during the anaerobic treatment process is used as fuel gasfor plant utility purposes thus providing about 40% savings in heating costs. d) Poweroptimisation at our desalination plants by integrating energy recovery devices. Pressureenergy recovery from the high-pressure brine stream is critical to the economic viabilityand environmental sustainability.
Green Initiatives begin at home
Over 60% of the total power requirement of our headquarters in Chennai is derived fromwind energy thereby bringing down energy cost by 6% as well as becoming a part of greenenergy compliant corporate. It is in recognition of this initiative that our headquartersWABAG HOUSE has been certified as a platinum rated green building by IGBC. During theyear we have introduced E Tender process for sourcing materials in our procurementfunction as a step towards digitisation.
Moving forward on its commitment towards a Greener Planet for future generations and infurtherance of digitisation commitment to Go-Green initiative of the Government theCompany started using digital mechanism to conduct Board/ Committee Meeting(s) as per theprovisions of law and as part of this step circulating the agenda notes and othersupporting documents of the Board / Committee meetings through a secured electronicplatform for ease of access to Directors for their review and consideration therebyreducing usage of papers to a limited purpose.
Your Company took various initiatives to reduce the usage of physical Annual Reports bycontinuously persuading the shareholders to get registered their email ids with theirrespective DPs to avail the e-version of Annual Reports and providing e-voting facility toall its members to enable them to cast their votes electronically on all resolutions setforth in the Notice.
The Board of Directors place on record their sincere gratitude and appreciation to allthe employees at all levels for their hard work solidarity cooperation and dedicationduring the year. The Board conveys its appreciation to its customers shareholderssuppliers bankers business associates regulatory and government authorities for theircontinued support.
| ||For and on behalf of the Board of Directors || |
| ||B D Narang ||Rajiv Mittal |
|Chennai ||Chairman ||Managing Director & Group CEO |
|May 21 2019 ||(DIN: 00826573) ||(DIN: 01299110) |