BOARDS' REPORT TO THE MEMBERS OF PATEL ENGINEERING LTD., The Directors have pleasure in presenting their 66th Annual Report on the business and operations of the Company and the accounts for the Financial Year ended March 31, 2015. Consolidated The Consolidated total income which stood at Rs. 35,313.09 million lower by 7.47 % as against Rs. 38,165.10 million for the previous year. The profit before depreciation was lower by 29.19% at Rs. 961.15 million as against Rs. 1,357.41 million for the previous year. The net profit was lower by 48.14% at Rs. 84.69 million as against Rs. 163.69 million for the previous year. Standalone On Standalone basis, the total income was lower at Rs. 26,682.25 million as against Rs. 28,518.67 million for the previous year. The profit before depreciation was lower by 18.44% at Rs. 737.86 million as against Rs. 904.73 million for the previous year. The net Profit was lower by 52.46% at Rs. 118.85 million as against Rs. 249.98 million for the previous year. Dividend To conserve funds, the Board of Directors has not recommended any dividend for the financial year 2014-15. Information on state of affairs of the Company Information on the operational and financial performance, among others, is given in the Management Discussion and Analysis Report which is forming part of the Annual Report and is in accordance with Clause 49 of the Listing Agreement. Share Capital During the year, 5,61,957 Optional Convertible Preference Shares (OCPS) aggregating to Rs. 5,61,957which were outstanding as on March 31, 2014 were converted on April 15, 2014 and the Company issued and allotted 5,61,957 equity shares to the promoter entities at a price of Rs. 57.50 per share (including premium of Rs. 56.50 per share). Subsequent to the allotment, the Issued, Subscribed &Paid up Equity Share Capital of the Company increased from 6,98,27,151 Equity Shares of Rs. 1 each to 7,68,06,282 Equity Shares of Rs. 1 each. Finance Pursuant to Section 180(1)(c) of the Companies Act, 2013, members vide resolution dated September 9, 2014 passed by Postal Ballot, approved increase in the borrowing powers of the Board of Directors of the Company from Rs. 75,000 million to Rs. 90,000 million, to meet Company's growing business needs. As on March 31, 2015, the Company on Standalone basis has Rs. 3,650 million outstanding NCDs repayable over period of 3 to 10 years. The NCDs are listed on National Stock Exchange of India Limited. In addition, the Company from time to time has raised money through borrowings (long and short terms) and the total amount outstanding on standalone basis as on March 31, 2015 is Rs. 37,157.49 million. Subsidiaries The Company at present has 84 subsidiaries, 2 joint ventures and 6 associate companies. During the year ended March 31, 2015, Patel Engineering Inc, the wholly owned subsidiary of the Company in USA acquired 100% stake in ASI Global LLC, USA. The Company also increased its holding in Shreeanant Construction Pvt. Ltd from 51% to 100%. The Company's holding in Pan Realtors Private Ltd. (PAN) got reduced from 51% to 36.43 % on account of non-subscription to the Rights Issue offered by PAN. In terms of Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules 2014, a separate statement containing the salient features of the financial statement of the subsidiaries, associates and joint ventures is enclosed as Annexure I of the Boards' Report. Key Subsidiary / Associate updates The Company is developing the real estate projects through a wholly owned subsidiary Patel Realty (India) Ltd (PRIL) and its subsidiaries which exclusively focus on the real estate business of the company. Some of the projects which have been launched by PRIL include: - Development of integrated township named as Neotown on 103 acres in Bangalore. The subsidiary is currently developing residential project (over 24 acres of land consisting of over 2,300 apartments) and a Mall (over 12 acres of land comprising of 2 million sq feet of built up area). The subsidiary has successfully handed over 1,800 apartments of the aforesaid development. The subsidiary got further approval for three residential projects totalling to 2.5 million sq ft. to be monetized shortly in the current financial year. The mall structure is 80% completed. - Development of Residential Project at Gachibowli, Hyderabad named as Smondo Gachibowli on 4 acres of land comprising of 2 residential tower and a service apartment being developed by PBSR Developers Pvt. Ltd. (100% subsidiary of PRIL). The project is meticulously crafted and offers a unique blend of smart design and superior quality. The Project has commenced construction activity. - Company's Mauritius subsidiary Les Salines Development Ltd. has received termination notice from the government of Mauritius terminating the Land lease agreement for developing integrated waterfront project namely Neotown Port Louis. In terms of this agreement, the Company is eligible for compensation for all improvement made on the land. The lease of land was granted to the Mauritian subsidiary in the year 2009 and the Company has been carrying on the development of land as per the master plan approved by the Government. The details of compensation are being worked for submission. ASI Constructors Inc, one of the key subsidiary based in USA has orders in hand of approx Rs. 10,743.90 million as on March 31, 2015. During FY 15, the revenues of this company has increased by 35% in USD terms and 48% in INR terms to Rs. 7,466.40 million as compared to Rs. 5,142 million in the previous year. Michigan Engineers Pvt. Ltd. wherein the Company has 51% stake, having presence in urban infrastructure Projects, have during financial year 2014-15 been awarded Microtunnelling contract for total 6,165 meter by MCGM, Mumbai. Michigan has also bagged subcontract for Design, Planning & Construction including supply, delivery, Erection, Commissioning of Mechanical Instrumentation and Automation works of Storm Water Pumping station at Britannia outfall, Reti Bunder Bay, Reay Road, Mumbai from Unity-M&P-WPK Consortium and a subcontract from Pratibha Industries Ltd. for the work related to stabilization and dredging of required area near existing plug-in location at Modak Sagar Lake for increased hydraulic flow. The Company through its wholly owned subsidiary Patel Energy Resources Ltd. (PERL) intended to build a thermal coastal power plant project of 1,050 MW at Nagapattinam, Tamil Nadu. All the statutory clearances required are in place except Consent For Establishment (CFE) that is mandatory for taking up Project construction works is still pending with Government of Tamil Nadu. Pending this, the Company has kept the project currently on hold. Company's Hydro power project is through the 100% subsidiary Dirang Energy Pvt. Ltd. The said subsidiary has achieved financial closure of this project. The debt for the project amounting to Rs. 9.00 billion has been tied up from consortium of banks led by IDBI Bank. The contract for execution of all the civil, HM, EM works has been awarded; contractor has mobilized man & machinery and execution of the project is in progress. Company's wholly owned subsidiary Patel Engineering Lanka Pvt. Ltd. in Srilanka has in joint venture with Squanda Prefab World Pvt. Ltd has incorporated a Company in Colombo viz Patel Lanka Squanda Private Ltd. for executing the construction of 1500 dwelling Units at Colombo under the contract signed with Urban Development Authority, Govt. of Sri Lanka. The Client increased the Unit Size from 400 Sft to 500 Sft and the No. of Units from 1500 to 1672 with consequential increase in total contract price. The project work is in progress. Company's joint venture (JV) with Simplex Infrastructures Ltd. and BS Ltd. (Raichur-Sholapur Transmission Company Pvt. Ltd.) for construction of 765kV S/C Quad Transmission Line from Raichur to Sholapur (approximate route Length is 208 km) on Build, Own, Operate and Maintain (BOOM) basis for a period of 35 years has been successfully commissioned in June 2014. Company's share in the JV is 33.34% with the other two JV partners share being 33.33% each. The Company along with other JV partners had bagged a BOT project from Uttar Pradesh State Highways Authority (UPSHA)in the name of ACP Tollways Pvt. Ltd. for construction of four-lane highway project in Varanasi-Shaktinagar Road, an entire length of 117.65 km at a project cost of Rs. 17.50 billion. Financial closure for the project has been achieved in June 2012 and the construction work started in February 2013. The SPV has so far completed around 91% of work. The balance work expected to be completed and toll collection to start in December 2015. Pan Oasis - Noida, residential project of approx 3 million sqft) is being developed by PAN Realtors Pvt. Ltd., werein company holds 36.43%. The project is presently in a advanced stage of completion and expects handover of possession in a phased manner, PAN started the process of first phase of handover and expects completion by March 2016 and for Tower T, the completion by October 2017. Approx 87% of the area has been sold. Terra Land Developers Ltd., an associate of the Company has sold the development rights of a plot in Bandra Kurla Complex for Rs. 2272.50 million to retire its Non Convertible Debentures. In terms of Clause 49 V D of the Equity listing Agreement, the Company has formulated a policy for determining 'material' subsidiaries and the same has been disclosed on Company's website at the link: <http://tinyurl.com/nqb2o56>. Related Party Transactions All the transactions entered by the Company with Related Parties were in the ordinary course of Business and at arm's length basis. The Audit Committee granted omnibus approval for the transactions(which are repetitive in nature) and the same was reviewed by the Audit Committee and the Board of Directors. There were no materially significant transactions with related parties during the financial year 2014-15 which were in conflict with the interest of the Company. All the Related Party Transactions as required under AS-18 are reported in the Notes to the financial statements. In accordance with the provisions of Clause 49 of the Listing Agreement, the Company has formulated the Related Party Transactions policy and the same is uploaded on Company's website at the link:<http://tinyurl.com/nrqnhhs> Particulars of Loans given, Investment made, Guarantees given and Securities provided The members may note that the Company is engaged in providing infrastructural facilities and hence, as per Section 186(11) of Companies Act, 2013, nothing in Section 186 shall apply to the Company except sub-section (1) of Section 186. Accordingly, a separate disclosure has not been given in the financial statements as required under Section 186(4) with regard to particulars of loan given, investment made or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient of the loan or guarantee or security. Internal Financial Controls The Management continuously reviews the internal control systems and procedures for the efficient conduct of the Company's business. The Internal Auditor of the Company conducts the audit on regular basis and the Audit Committee reviews internal audit reports and effectiveness of internal control system. Directors and Key Managerial Persons i. Independent Director Mr. Kannan, the independent Director of the Company passed away in December 2014. The Board placed on records its deep appreciation for the valuable contribution made by him during his tenure as a Director of the Company. Mr. K. Ramasubramanian and Ms. Geetha Sitaraman were appointed as Additional Directors (independent) with effect from November 10, 2014 and March 26, 2015 respectively. We seek members confirmation for appointment of Mr. K. Ramasubramanian and Ms. Geetha Sitaraman as independent Directors for a term upto five consecutive years for a term up to the conclusion of the 71st Annual General Meeting of the Company in the calendar year 2020. Further, the Company has received the declarations from all the Independent Directors confirming that they meet the criterial of independence as prescribed in terms of Section 149(6) of the Companies Act 2013 and that there is no change in the status of independence. ii. Retirement by Rotation of the Directors Mr. Pravin Patel retires by rotation at the ensuing Annual General Meeting and, being eligible, offers himself for re-appointment. 1 iii. Resignation of Director Mr. Nimish Patel, Whole time Director of the Company has tendered his resignation w.e.f. July 16, 2015 and the Board has accepted it and placed on record its appreciation for the valuable contribution made by him during his tenure as Director of the Company. iv. Key Managerial Personnel The following persons are the Key Managerial Personnel (KMPs) of the Company as per the provisions of the Companies Act, 2013 (the Act) and were already in office before the commencement of the Act. Mr. Pravin Patel Whole time Director & Chairman Mr. Rupen Patel Managing Director Ms. Silloo Patel Whole time Director & CFO Ms. Shobha Shetty Company Secretary Mr. Ashwin Parmar was appointed as Whole time Director w.e.f April 1, 2014 by the members at their Extra-ordinary General Meeting held on March 19, 2014. Ms. Kavita Shirvaikar was appointed as Joint Chief Financial Officer of the Company by the Board of Directors at their meeting held on February 13, 2015. (Mr. Nimish Patel, Whole time Director (KMP) has resigned w.e.f July 16, 2015.) Number of Board Meetings held During the year ended March 31, 2015, the Board met 9 times. The details of the Board meetings and the attendance of the Directors at the meeting are provided in the Corporate Governance Report, which forms part of this Annual Report. Remuneration Policy The Company has framed a Remuneration Policy pursuant to Clause 49 of the Listing Agreement and Section 178 of the Companies Act, 2013. This Policy is enclosed as Annexure II to the Boards' Report. Evaluation of Board The Board has carried out an annual performance evaluation of its own performance, and of the directors individually, as well as the evaluation of all the committees i.e. Audit, Nomination and Remuneration, Stakeholders Relationship, Committee of Directors and CSR Committee. The Board adopted a formal evaluation mechanism for evaluating its performance and as well as that of its Committees and individual directors, including the Chairman of the Board the exercise was carried out by feedback survey from each directors covering Board functioning such as composition of Board and its Committees, experience and competencies, governance issues etc. Separate Exercise was carried out to evaluate the performance of individual directors including the Chairman of the Board who were evaluated on parameters such as attendance, contribution at the meeting etc. Directors' Responsibility Statement Pursuant to Section 134 of the Companies Act, 2013, the Directors confirm that: i. in the preparation of the annual financial statements for the year ended March 31, 2015, the applicable Accounting standards had been followed along with proper explanation relating to material departures. ii. for the financial year ended March 31, 2015, such accounting policies as mentioned in the Notes to the financial statements have been applied consistently and judgments estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company and of the Profit and Loss of the Company for the year ended March 31, 2015. iii. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. iv. the annual financial statements have been prepared on a going concern basis. v. that proper internal financial controls were followed by the Company and that such internal financial controls are adequate and were operating effectively. vi. that proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively. Audit Committee The Audit Committee of the Board of Directors of the Company comprised of the following members: Mr. Khizer Ahmed - Independent Director & Chairman Mr. Pravin Patel - Executive Director Mr. K. Ramasubramanian - Independent Director Mr. S. Jambunathan - Independent Director Corporate Social Responsibility Committee In accordance with the provisions of Section 135 of the Companies Act, 2013 (the Act), the Board of Directors of the Company have constituted the Corporate Social Responsibility Committee (CSR Committee) comprising of the following Directors as it members: Mr. Pravin Patel - Executive Director Mr. K. Ramasubramanian - Independent Director Mr. Ashwin Parmar - Executive Director The terms of reference of the CSR Committee include the matters specified in Section 135 of the Act. The CSR Policy of the Company is uploaded on the Company's website at the link <http://tinyurl.com/o6yczkx> The average net profit of the company for last three financial years is Rs. 446.57 million and the prescribed CSR expenditure required to be spend is Rs. 8.93 million. During the year ended March 31, 2015, the Company has not initiated any CSR activities on account of financial constraints. However, the Company has initiated the CSR activities in the current financial year 15-16. The implementation and monitoring of CSR Policy, is in compliance with CSR objectives and Policy of the company. Auditors M/s. Vatsaraj & Co. Chartered Accountants, Mumbai bearing ICAI Registration No. 111327W who retires at the ensuing Annual General Meeting of the Company are eligible for reappointment. They have confirmed their eligibility under Section 141 of the Companies Act, 2013 and the Rules framed thereunder for reappointment as Auditors of the Company. As required under Section 139 of the Companies Act, 2013, the Company has obtained written consent from M/s. Vatsaraj & Co. to such appointment and also a certificate to the effect that their appointment, if made, would be in accordance with Section 139(1) of the Companies Act, 2013 and the Rules made there under, as may be applicable. Secretarial Audit Report Pursuant to provisions of Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Company engaged the services of Dr. K. R. Chandratre, Practising Company Secretary to conduct the Secretarial Audit of the Company for the financial year ended March 31, 2015. The Secretarial Audit Report (in Form MR-3) is enclosed as Annexure III to the Boards' Report. This report contain observation on not filing the Consolidated Financial Statement for the Year ending March 31, 2014 within 60 days from the end of the financial year to BSE/ NSE and delay in filing Annual Performance Report (APR) of few subsidiaries. The above delays were on account of delay in receipt of audited/unaudited financials of foreign subsidiaries. Cost Auditor In terms of the provision of 148 of the Companies Act, 2013, read with the Companies (cost records and audit) Rules, 2014, M/s. D. Radhakrishnan & Co, a firm of Cost Accountants in practice (FRN: 000018) having their office at 11 A, Doverlane flat B1/34 Calcutta 700029 was appointed as Cost Auditor of the Company for the financial year 2014-15 by the Board of Directors of the Company at a remuneration of Rs. 3,50,000(excluding service tax) as recommended by the Audit Committee and approved by the Board subject to ratification by the shareholders at the ensuing Annual General Meeting of the Company. Sexual harassment of Women at workplace The Company has framed a Policy on Prevention of Sexual harassment at workplace. There were no cases reported during the year ended March 31, 2015 under this policy. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings / Outgo The particulars prescribed under Section 134 of the Companies Act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules, 2014, relating to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings/ Outgo is enclosed as Annexure IV to the Boards' Report. Extract of the Annual Return In accordance with the provisions of Section 92 of the Companies Act, 2013 and the Rules framed thereunder, the extract of Annual Return in the prescribed Form MGT -9 is enclosed as Annexure V to the Boards' Report. Risk Management The Risk Management Committee of the Board of Directors of the Company has framed and implemented a Risk Management Policy. Whistle Blower Policy / Vigil Mechanism The Company has a Vigil Mechanism Policy for the employee to report genuine concerns/grievances. The Policy is uploaded on the Company's website at the link <http://tinyurl.com/pvenjtk>. The policy provides for adequate safeguards against the victimization of the employees who use the vigil mechanism. The vigil mechanism is overseen by the Audit Committee. There are no complaints / grievances received from any Directors or employees of the Company under this policy. Particulars of Employees Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 (1) and (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed as Annexure VI to the Boards' Report Corporate Governance Pursuant to Clause 49 of the Listing Agreement, the report on Corporate Governance together with the certificate issued by M/s Vatsaraj and Co, the Auditors of the Company, on compliance in this regard forms part of the Annual Report. Employee Stock Option Scheme (ESOP) During the year ended March 31, 2015, the Company had granted 22,400 options on May 23, 2014 to eligible employees of the Company in terms of ESOP Plan 2007 out of the outstanding Stock options of 60,45,000 options with Patel Engineering Employee Welfare Trust. The vesting of the Stock Options was on May 24, 2015 ie one year period from the date of grant. The said Options was to be exercised within 2 months from the date of vesting which was further extended by the Board of Directors for another 4 months ie options to be exercised on or before November 24, 2015. No options have been exercised during the year ended March 31, 2015. The disclosure in compliance with Regulation 14 of SEBI (Share Based Employees Benefits) Regulation, 2014 is available on company's website at the link: <http://tinyurl.com/nkarjsm>. The Patel Engineering Employee welfare Trust, ("the Trust") has provided loans and grants to eligible employees for healthcare, education and other benefits. The total amount spent during the year for the welfare of the employee in form of loan is Rs. 0.55 million and grant is Rs. 0.15 million . The said benefits given to the employees are now required to be covered in the form of a scheme as required by SEBI (Share Based Employees Benefits) Regulation, 2014. As such Company proposes to introduce Patel Engineering General Employee Benefits Scheme, 2015 in terms of the SEBI's new regulation to provide welfare benefits to the employees such as medical, education related assistance and other benefits out of the income derived by the Trust. The said scheme is subject to approval of members and therefore the Board propose to place the Scheme for approval of members at the forthcoming Annual General Meeting. General i) There are no material changes and commitments affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the Boards' report. ii) No orders have been passed by any Regulator or Court or Tribunal which can have impact on the going concern status and the Company's operations in future. iii) The Company has not accepted or renewed any amount falling within the purview of provisions of Section 73 of the Companies Act 2013 read with the Companies (Acceptance of Deposit) Rules, 2014 during the year under review. Hence, the requirement for furnishing of details relating to deposits covered under Chapter V of the said Act or the details of deposits which are not in compliance with the Chapter V of the said Act is not applicable Acknowledgements The Board of Directors wish to place on record their appreciation for their continued support and co-operation by Shareholders, Financial Institutions, Banks, Government Authorities and other Stakeholders. The Board of Directors also acknowledges and appreciates the support extended by all the employees of the Company and for their dedicated service. On behalf of the Board of Directors, Pravin Patel Executive Chairman (DIN:00029453) Date : August 14, 2015 Place : Mumbai Registered Office: Patel Estate Road, Jogeshwari (W), Mumbai 400 102 |