DIRECTORS' REPORT TO THE MEMBERS, The Directors have the pleasure in presenting the Twenty Sixth Annual Report together with the audited financial statement for the year ended March 31, 2015. Dividend: The Directors are pleased to recommend for approval of the shareholders dividend of 70% (Rs. 0.70 per equity share of Re 1 each) for the financial year ended March 31, 2015. The final dividend, if approved, will result in cash payout of Rs. 12.01 Crores and dividend tax of Rs. 2.45 Crores. Reserves: Company has transferred a sum of Rs. 10.00 Crores into General Reserve during the period under review. Business Overview: Standalone Basis The total income from operations during the year under review was Rs. 2969.85 Crores against Rs. 2358.12 Crores for the previous year resulting the Increase of 25.94% Operating profit (PBDIT) for the current year is Rs. 365.78 Crores (Rs. 285.83 Crores in previous year) thereby resulting the increase of 27.97%. Net Profit after tax amounted to Rs. 113.73 Crores (Rs. 106.16 Crores in previous year) thereby resulting increase of 7.13%. There has been no change in the nature of business of the Company during the applicable financial year. Consolidated Basis As per the Consolidated Financial Statements, the income from operations of the company, operating profit (PBDIT), and net loss for the year were Rs. 3446.78, R 624.38 and Rs. 175.49 Crores respectively. Material changes and commitments affecting financial position between end of the financial year and date of report: There have been no material changes and commitments affecting financial position between end of the financial year and the date of the report. In respect of MNEL, the Company and SIPL has reached in-principle understanding with Gammon Infrastructure Projects Ltd. vide binding term sheet for sale of 1,03,99,500 equity shares of R 10 each held in MNEL constituting 19.99% of share capital of MNEL for an aggregate consideration of R 72.00 crores either by itself or through SIPL. In respect of ARRIL, pursuant to the binding MOU and definitive transaction documents entered with JV partner, SIPL is in process of transferring of remaining 6% of the share capital in ARRIL from JV Partner. In respect of NSEL, due to non-availability of land possession for 28.745 kms, actual project length has been restricted to 27.73 kms. Also, NHAI has issued Completion Certificate for the Project and matter of Annuity finalization is under consideration by NHAI. In terms of Share Purchase Agreement dated 6th May, 2011 between SIPL and Company, SIPL has acquired entire shareholding of the Company in Nagpur Seoni Expressway Limited. As at reporting date, the transfer formalities for these shares is in process. In respect of DPTL, SIPL has signed definitive Sale Purchase Agreement dated 16.04.2015 for acquisition of 60% equity stake from HCC Concessions Ltd., a group company of Hindustan Construction Company Ltd. in DPTL subject to fulfilment of certain conditions, statutory approvals and lenders approval. Post completion of acquisition from HCC Group, JLL Group and transfer of holding by SEL to SIPL, SIPL will become 100% owner of DPTL. In respect of MBCPNL, pursuant to share purchase-cum-shareholders' cum sub-ordinated debt agreement dated September 18, 2013 SEL and SIPL have agreed to sell 5,940 equity shares (11.88% of the outstanding equity interest) and 4,963 equity shares (9.93% of the outstanding equity interest) of MBCPNL respectively to D. Thakkar Construction Private Limited. Further, SEL has also entered into a share purchase agreement dated November 04, 2014 to sell 5,000 equity shares (10.00% of the outstanding equity interest) of MBCPNL to SIPL . • In respect of MBHPL - In accordance with the share purchase agreement dated November 03, 2014 our company to sell 3,36,99,560 equity shares (74.00% of the outstanding equity interest) to SIPL. Employee Stock Option Scheme: The Company implemented the Sadbhav Employee Stock Option Scheme 2008 (ESOS Scheme 2008). The Nomination and Remuneration Committee administers and monitors the Scheme. The applicable disclosures as stipulated under applicable Rules and Regulations as on March 31, 2015 with regard to Employee Stock Option Plan are provided in 'Annexure 1' forming part of this report. Company has received certificate from Auditors of Company confirming that scheme has been implemented in accordance with SEBI Regulations and resolution passed by Shareholders. Auditors certificate would be placed at Annual General Meeting for inspection by members. Warrant Conversion: Pursuant to the provisions of Section 81(1A) of the Companies Act, 1956 and subject to the provisions of Chapter VII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, the Company had allotted 80,00,000 fully convertible warrants on August 13, 2013 to one or more persons belonging to promoter and promoter group of the company entitling him for apply one equity shares against each warrants at a price of R 115.75 per warrant entitling them to exercise at any time within 18 months from the date of allotment of the warrants. Qualified Institutions Placement (QIP): During the year, the company successfully completed issue and allotment of 1,15,74,000 Equity Shares to qualified institutional buyers at the issue price of R 216 per Equity Share (including R 215 towards share premium) in accordance with provisions of Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. The QIP opened for subscription to QIBs on October 14, 2014 and closed on October 17, 2014. The amount of Rs. 250.00 Crores was received and allotment of shares was made on October 21, 2014. The entire amount so received has been utilised for as per term mentioned in Placement document dated 17.10.2014 as under: Share Capital: During the year, the total paid-up equity share capital of the company has been increased from Rs. 15,16,62,300/- to Rs. 17,15,00,800/- on account of the following: 1. Allotment of 80,00,000 equity shares of Re. 1/- each at a premium of Rs. 114.75 per share against conversion of warrants 2. Allotment of 1,15,74,000 equity shares of Re. 1/- each at a premium of Rs. 215 per share to qualified institutional buyers 3. Allotment of 2,64,500 equity shares of Re. 1/- each at a premium of Rs. 49 per share to the directors and employees of the Company under Sadbhav Employee Stock Option Scheme 2008 (ESOS Scheme 2008). Subsidiaries, Joint Ventures and Associates Companies: During the year, no company has become/ceased to be company's subsidiaries, joint ventures or associate company. Pursuant to Section 134 of the Companies Act, 2013 and Rule 8(1) of the Companies (Accounts) Rules, 2014 the report on performance and financial position of subsidiaries, associates and joint venture companies is attached as Annexure in Form AOC 1 prepared under section 129(3) of the Companies Act, 2013 to the consolidated Financial Statements of the Company which forms part of this report. The Company will keep the separate audited financial statements in respect of each of subsidiaries at the Registered Office of the Company and its subsidiaries and make them available upon the request by any shareholder of Company. The said financial statements are also available on the website of your Company at <http://www.sadbhaveng.com/investor>. The Policy for determining material subsidiaries as approved may be accessed on the Company's website at the link: <http://www.sadbhaveng.com/wp-content/> uploads/2014/11/MATERIAL SUBSIDIARY.pdf. Consolidated Financial Statements: In compliance with the applicable provisions of Companies Act, 2013 including the Accounting Standard 21 on Consolidated Financial Statements, this Annual Report also includes Consolidated Financial Statements for the financial year 2014-15. Board of Directors and Key Managerial Personnel: Retirement by Rotation Shri Shashin V. Patel and Shri Nitin R. Patel, are the directors liable to retire by rotation at the ensuing Annual General Meeting and, being eligible, offer themselves for reappointment. The directors recommend their re-appointment. Appointment In terms of Section 203 of Companies Act, 2013, Mr. Nitin R. Patel, Executive Director of the Company was appointed to hold office of Chief Financial Officer of the Company w.e.f. 01.06.2014. Pursuant to the provision of Section 161(1) of the Companies Act, 2013 and the Articles of Association of the Company, Mrs. Purvi S. Parikh was appointed as Additional Director designated as an Independent Director in category of Woman Director and she shall hold office upto the date of ensuring Annual General Meeting. The Board recommend her appointment in the ensuing Annual General Meeting. The Independent Directors of your Company have given the certificate of independence to your Company stating that they meet the criteria of independence as mentioned under Section 149 (6) of the Companies Act, 2013. The details of familiarization programme for Independent Directors, conducted during the year, have been provided under the Corporate Governance Report. Evaluation of Board Performance: In compliance to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the annual performance evaluation of Board and its Committee was carried out during the year under review. More details on the same are given in the Corporate Governance Report. Disclosures as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013: The Company has zero tolerance for sexual harassment at workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules and no complaint has been received on sexual harassment during the financial year 2014-15. Nomination and Remuneration Policy: The policy on Director's appointment and remuneration including criteria for determining qualifications, positive attributes, independence of Director, and also remuneration for Key Managerial Personnel and other employees has been provided under Corporate Governance Report. Whistle Blower Policy: The Company has a vigil mechanism named Whistle Blower Policy for directors and employees to report to the management instances of unethical behavior, actual or suspected, fraud or violation of the Company's code of conduct or ethics policy. The details of the said Policy is explained in the Corporate Governance Report and also posted on the website of the Company. Audit Committee: The Audit Committee comprises Directors namely Mr. Sandip V. Patel (Chairman), Mr. Nitin R. Patel, Mr. Atul N. Ruparel and Mr. Arun S. Patel. All the recommendations made by the Audit Committee were accepted by the Board. Development and implementation of Risk Management Policy: In accordance with the Clause 49 of the listing agreement, the Board formally adopted steps for framing, implementing and monitoring the risk management plan for the Company by way of Risk Management Policy. Board of Directors of the Company has identified the risks in two categories i.e. (1) Internal and Business Risk and (2) External Risk. The Management has also envisaged the minimization procedure and its perception in respect of each identified risk. Further, the Company identifies risks with its degree and control systems are instituted to ensure that the risks in business process are mitigated. The Board provides oversight and reviews the Risk Management Policy periodically. In the opinion of the Board there has been no identification of elements of risk that may threaten the existence of the Company. Meetings of Board: During the year, Six Board Meetings were held an the details of which are given in the Corporate Governance Report. Directors' Responsibility Statement: Pursuant to the requirement in section 134(3) (c) of the Companies Act, 2013, the Directors state that : (a) in the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards have been followed and there are no material departures from the same; (b) the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at March 31, 2015 and of the profit and loss of the Company for the year ended on that date; (c) the directors have taken proper and sufficient care 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; (d) the directors have prepared the annual accounts on a going concern basis; (e) that the directors have laid down internal financial controls to be followed by the company and that the financial controls are adequate and are operating effectively; and (f) that the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. Statutory Auditors: M/s Surana Maloo & Co., Chartered Accountants, Ahmedabad having Firm Registration No. 112171W, were appointed as Statutory Auditors of the Company with your approval at the 25th AGM to hold such office till the conclusion of the 28th AGM. The Board, in terms of Section 139 of the Act, on the recommendation of the Audit Committee, has recommended for the ratification of the Members the appointment of M/s Surana Maloo & Co., Chartered Accountants from the conclusion of the ensuing AGM till the conclusion of the 27th AGM for such a remuneration that may be determined by the Board of Directors of the Company on recommendation of Audit Committee. The Company has received the written consent from the auditor for their appointment and a certificate to the effect that the appointment if made shall be in accordance with the conditions prescribed under Rule 4 of the Companies (Audit and Auditors) Rules, 2014 and they have also satisfied the criteria provided in section 141 of Companies Act, 2013. There are no qualifications, reservations or adverse remarks made by Statutory Auditors in their report for the Financial Year ended March 31, 2015. Details in respect of frauds reported by auditors under sub-section (12) of Section 143 other than those which are reported to the central government: During the year under consideration, there was no such instances. Secretarial Auditors: M/s. Ravi Kapoor and Associates, Practicing Company Secretaries were appointed to conduct Secretarial Audit for the financial year 2014-15. The Secretarial Audit Report is annexed herewith as 'Annexure 2' to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. The Board has appointed M/s. Ravi Kapoor and Associates, Company Secretaries as secretarial auditors of the Company for the financial year 2015-16. Cost Auditors: M/s. Jitendra Soni & Co., Cost Accountants (Firm Reg. No. 35151), were reappointed as Cost Auditors for the financial year 2014-15 to conduct cost audit of the accounts maintained by the Company in respect of the services prescribed under the applicable Cost Audit Rules. The Cost Audit Report for the financial year 2014-15, in respect of the various products prescribed under relevant Cost Audit Rules shall be filed as per the requirements of applicable laws. Transfer To Investor Education and Protection Fund: The Company has transferred a sum of R 0.23 lacs to the Investor Education and Protection fund established by the Central Government during the financial year 2014-15, in compliance with Section 205A(5) of the Companies Act, 1956. The said amount represents unclaimed dividend amount for the financial year 2006-2007 which were lying with the Company for a period of 7 years from their due dates of payment. Prior to transferring the aforesaid sum, the Company has send reminders to the shareholders for submitting their claims for unclaimed dividend for the financial year 2006-2007. Corporate Social Responsibility: As part of its initiatives under Corporate Social Responsibility (CSR), the Company has undertaken projects in the areas of "promoting education". These projects are largely in accordance with Schedule VII of the Companies Act, 2013. During the year, the company has undertaken a project of conservation and renovation of government school situated at Chakkarpur, Gurgaon, Haryana The Annual Report on CSR activities is annexed herewith as 'Annexure 3'. Corporate Governance: As per Clause 49 of the Listing Agreement with the Stock Exchanges, a separate section on Corporate governance practices followed by the Company, together with a certificate from the Company's Auditors confirming compliance forms an integral part of this Report. Particulars of Employees and related disclosures: In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules is attached as 'Annexure 4' which forms part of this report. Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as 'Annexure 5' which forms part of this report. Energy Conservation, Technology Absorption and Foreign Exchange Earning and Outgo: The rules regarding conservation of Energy and Technology Absorption are not applicable to the Company. The particulars of the expenditure and earning in Foreign Currency are given in Notes to Accounts (Note No. 2.41 To 2.43). Particulars of Loans, Guarantees or Investments: Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes no. 2.12, 2.14 & 2.49 to the Financial Statements. Contracts and Arrangements with Related Parties: All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. Particulars of contract / arrangement / transaction entered into by the Company with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions forms integral part of this report in form AOC-2 as per 'Annexure 6'. The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link: <http://www.sadbhaveng.com/wp-content/uploads/2014/11/RELATED> PARTY TRANSACTIONS1.pdf. Your Directors draw attention of the members to notes no. 2.35 to the financial statement which sets out related party disclosures. Extract of Annual Return: Extract of Annual Return of the Company is annexed herewith as 'Annexure 7' to this Report. Internal Financial Controls: The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation were observed. General: Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: 1. Details relating to deposits covered under Chapter V of the Act. 2. Issue of equity shares with differential rights as to dividend, voting or otherwise. 3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOS referred to in this report. 4. Neither the Managing Director nor the Whole-time Directors of the Company receive any commission from the Company and not disqualified from receiving any remuneration or commission from any of subsidiaries of the Company. 5. No significant and material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and the Company's future operations. Industrial Relations: The Company enjoyed cordial relations with the employees during the year under review and the Management appreciates the employees of all cadres for their dedicated services to the Company. Acknowledgements: The Directors wish to express their appreciation for the support and co-operation of the Central and State Government, Bankers, Financial Institutions, Suppliers, Vendors, Associates, Subcontractors and Shareholders during the year under review. Your Directors wish to place on record their appreciation for the employees of the Company at all levels for their commitment, dedication and continued support to the Company. For and on behalf of the Board of Directors Vishnubhai M. Patel Chairman Place : Ahmedabad Date : August 10, 2015 |