DIRECTORS' REPORT

Your Directors have pleasure in presenting before you the 14th Annual Report of the Company together with Audited Statements of Accounts for the Financial Year ended 31st March, 2015:

2.Operating Result :

In the year 2014-15 performance of the Company was improved considering the economic scenario of the Country. Though the Company achieved a turnover of Rs. 655.53 cores as against the turnover of Rs. 901.42 crores in the previous financial year (2013-14), the profit (PAT) of the company has gone up i.e. Rs. 6.22 crores as against the profit (PAT) of Rs. 1.67 crores in the financial year 2013-14. The considerable increase in the profit against the previous year is due to strict adherence to cost cutting, abandonment of loss making projects and execution of projects during the year having good profit margin and proper utilization of resources. Company is also following the same policy for taking up any new project in its hand. Directors expect further improvement in the performance of the Company in the current financial year.

3.Details of Subsidiary, Joint Venture or Associates

During the year under review no companies have become or ceased to be company's subsidiary, joint ventures or associate companies. A report on the company's subsidiary, joint ventures or associate companies as per companies Act 2013 is provided hereunder:

4.Consolidated Financial Statements:

Consolidated financial statements in terms of Section 129 (3) of the Companies Act, 2013 read with rule 6 of Companies (Accounts) Rules, 2014 and accounting Standard AS 21, issued by the Institute of Chartered Accountants of India and as required by the Listing Agreements with Stock Exchange(s), could not be prepared due to dispute between the Company and one of its subsidiary namely ARSS Bus Terminal Private Limited. Accordingly the Management has moved Company Law Board against the subsidiary for oppression and mismanagement and a company petition no.183/2013 is pending before the Company Law Board for hearing.

5.Dividend:

The Board of Directors has not recommended any dividend for the year ended on 31.03.2015.

6.Reserve

No amount was proposed to be transferred to general reserve.

7.Company's working during the year/state of company's affair - order book:

Your Company has an order book of more than Rs. 2000 Crore, which includes the following major works:

a)Package - I: Civil and Railway allied works in connection with the construction of Private Railway siding for the proposed 3.0 MTPA Integrated steel plant at Nagarnar, near Jagdalpur, Chhattisgarh state on item rate basis, with a contract value of Rs.312.87 Crores.

b)Construction of Concrete Pavement in the Coal Transportation Roads of IB Coalfields of MCL (Re-tender), having a contract value of Rs. 312.80 Crores.

c)Construction of new 2 lane Highway from Km 38.00 to Km 71.00 (Length=33 Km.) in Mizoram in Phase 'A' of SARDP-NE (Package-II), with a contract value of Rs.258.22 Crores.

d)Supply and installation of track (excluding supply of rails) Signaling and overhead equipment (OHE) & associated equipment for 25 KV AC tractio, in connection with doubling of railway line between Baang - Rajatgarh (25 KM) Cuttack Barang (12KM) and 3rd line between Barabg Khurda Road (35KM) in the State of Orissa, India, with a contract value of Rs.252.83 Crores.

e)Widening to 2-lane and improvement in km 0.00 to 102.9 of Paralakhumundi -R.Udayagiri-Mohana Road (S.H.-34) under LWE Scheme, with a contract value of Rs.207.78 Crores.

f)Execution of Balance work for Construction of Roadbed, Major & Minor bridges, Track Linking (excluding supply of rails, ordinary track sleepers and thick web switches), Outdoor Signaling and Electrical (General) works in connection with Doubling of LAKHANA (Ex) - ARAND (in) section (68.936 Kms) part of RAIPUR-TITLAGARH Doubling in SAMBALPUR Division of East Cost Railway in the states of ODISHA & CHATTISGARH, India with a contract value of Rs.183.17 Crores.

g)Balance work of construction of Roadbed including Minor and Major Bridges, facilities and General Electrification for doubling of Railway line between Barang-Rajatgarh (excluding Ghantikal-Naraj Section), Cuttack- Barang and 3rd line between Barang- Bhubaneswar in the State of Orissa, India, India. With contract value of Rs.174.31 Crore.

h)Construction of BRTS Corridor and development of road Contract for Package No. IIB: Sanganer Airport to 22Godam Via Rambagh crossing including Elevated Road at Durgapura (10.50 Km). (NCSL), India with a contract value of Rs.169.00 Crores.

i)Earthwork in formation (excluding Blanket), minor bridges between Km 19.000 to Km. 47.000 and 3 nos. of Steel girder bridges, 8 nos. of Road Over Bridges between Km 19.000 to Km 67.000 in connection with Angul- Sukinda new railway BG line in the state of Odisha, India with a contract value of 43.30 Crores.

8.Listing with stock exchanges:

The Company confirms that it has paid the Annual Listing Fees for the year 2015-16 to Bombay Stock Exchange and National Stock Exchange where the Company's Shares are listed.

9.Management Discussion and Analysis Report:

As required under Clause 49 of the Listing Agreements with Stock Exchanges, the Management Discussion and Analysis Report is enclosed as a part of this report as 'Annexure -A'.

10.Corporate Governance and Shareholders Information:

Your Company has taken adequate steps to adhere to all the stipulations laid down in Clause 49 of the Listing Agreement. A report on Corporate Governance is included as a part of this Annual Report as 'Annexure -B'. Certificate from the Statutory Auditors of the company M/s. Ajay B Garg, Chartered Accountants confirming the compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is included as a part of this report.

11.The extract of the annual return as provided under sub-section (3) of section 92;

The details forming part of the extract of the Annual Return in Form MGT-9 is annexed herewith as 'Annexure -C'.

12.Number of Board Meetings:

Five Board Meetings were held during the year and the gap between two meetings did not exceed four months. The dates on which the Board Meetings were held are as follows:30th April,2014, 9th August, 2014, 11th November, 2014, 12th February,2015 and 31st March, 2015.

13.Audit Committee

The committee has in place an Audit Committee in terms of the requirements of the Companies Act, 2013 read with the rules made there under and clause 49 of the Listing Agreement. The details relating to the same are given in Annexure B' of the Board Report on the Corporate Governance forming part of this report. Members are requested to refer to point n. 4 of Corporate Governance Report attached with this annual report.

14.Dematerialization of shares:

As on 31st March, 2015, 99.91% of the company's paid up Equity Share Capital is in dematerialized form and balance 0.09% is in physical form. The Company's Registrars are Bigshare Services Private Limited having registered office at E/2, Ansa Industrial Estate, Sakivihar Road, Sakinaka Andheri (E), Mumbai- 400 072.

15.Public deposits, covered under Chapter V of the Act

Your Company has not invited any deposit from public and shareholders. So, the provisions of the Chapter V of the Companies Act, 2013 are not attracted.

16.Auditors: Statutory Auditors:

M/s. Ajay B Garg, Chartered Accountants, Statutory Auditors of the Company, holds office until the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.

The Company has received letter from them to the effect that their reappointment (for the FY 2015-16), if made, would be in accordance with the conditions as prescribed under Section 139 & 141 of the Companies Act, 2013 and Companies (Audit And Auditors) Rules, 2014.

Cost Auditors:

M/s. Ashutosh & Associates, Cost Accountants, Bhubaneswar were appointed as Cost Auditors for auditing the cost accounts of your Company for the year ended 31st March, 2015 by the Board of Directors pursuant to the Section 148 of the Companies Act, 2013 and Companies (Audit And Auditors) Rules, 2014.

Secretarial Auditors:

M/s Sunita Mohanty & Associates, Bhubaneswar were appointed as Secretarial Auditors of the Company for the financial year 2014-15 by the Board of Directors pursuant to the Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

The Secretarial Audit Report submitted by Company Secretary in Practice (M/s Sunita Mohanty & Associates, Bhubaneswar) is enclosed as a part of this report Annexure-D'. Qualifications or remarks made by the Secretarial Auditor in his Report are self explanatory.

Internal Auditors:

M/s. PR & Associates, Cost Accountants, Bhubaneswar were appointed as Internal Auditors of the Company for the financial year 2015-16 by the Board of Directors pursuant to the Section 138 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014.

17.Report of Auditors: Statutory Auditors

Our reply to the qualifications of Auditors -

a.In absence of relevant records, Contract-wise surplus/loss has neither been ascertained nor recognized in compliance with the requirements of para 34 and 35 of AS-7 "Construction Contracts" issued by the Institute of Chartered Accountants of India.

Company Reply: The company's secured debts are under Corporate Debt restructuring and the liability and interest payable does not commensurate with the turnover and cannot be justified as there is limited support from Financial Institution. During the execution period there is also escalation claim, revision of contract value, extension of completion period, etc. due to which unpredictable variation in reliable estimation of revenue and cost. Also the allocation of combine Operating overhead, Head office overhead and Financial cost is not possible due to combine use or high swapping of resources, size of the Contracts. In absence of the overheads and financial cost allocation the Company is unable to determine Contract wise surplus / deficit.

b. Interest for the year amounting to Rs. 31794 lakhs on inter corporate deposits received has not been charged to the Profit & Loss account resulting in overstatement of profit to that extent.

Company Reply: The Company has received inter corporate deposits from M/s Welspun Projects Limited which with some terms and conditions has to adjoin with revenue over the period of time. There is a dispute towards the said outstanding amount and the matter at present is sub judice. The Company while taking prudence approach postponed its revenue recognition and liability on account of interest has not been provided as it is irrational and not determinable.

c.In the absence of accounts of ARSS Balajee JV and ARSS-MVPL JV, discrepancies, if any, between the said accounts with that of the Company is not ascertainable.

Company Reply: The accounts of the JVs are under the control of respective JV partners i.e. Balajii Engicons Pvt. Ltd. and Mateshweri Vanijya Pvt. Ltd. and the same has not been yet finalized from their end. Being the unlisted entities (Balaji & MVPL) both the above mentioned companies are not required to complete their annual accounts within 60 days from the end of financial year. Hence the accounts from their end would be prepared much after the preparation and finalization of annual accounts of ARSS. However, both the JVs have become inoperative. The accounting effects of the discrepancies if any after the finalization of accounts will be given at current date.

d. No provision has been made against performance bank guarantee invoked amounting to Rs.82.83 Crores against the Company and the same is disputed by Company.

Company Reply: Our Company is in construction business and executes various contracts of government and corporate clients in individual capacity and as JV partner also. Under some of the contracts because of various reasons including lack preparedness of the clients in fulfillment of its primary obligations the work progress gets seriously affected. Resultantly, the very economy of our work execution and operation got disrupted and in the process the contracts gets terminated at company's risk and cost. Applying the terms and contract in their favour our final bill, escalation bill, security got forfeited and BGs given in support of performance guarantee were encashed for adjusting the cost effect of above termination of contract. The Company has lodged various claims against the said action taken by the contractees and the matter is under arbitration. Hence, based on recovery track of past claims and management estimation no provision is required to be made in the books of accounts.

Secretarial Auditors:

Report of the secretarial auditors as attached is self explanatory in terms of qualifications. 18. Directors /Key Managerial Personnel Appointed / Resigned During the Year;

19. Director's Responsibility Statement:

Pursuant to the section 134 sub-section (3) clause (c) Directors confirm and state that—

(a)in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b)the directors had 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 at the end of the financial year and of the profit and loss of the company for that period;

(c)the directors had 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 had prepared the annual accounts on a going concern basis; and

(e)the directors had laid down internal financial controls and such internal financial controls are adequate and are operating effectively.

(f)the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

20. Remuneration ratio of the Directors / Key Managerial Personnel (KMP) / Employees & Particulars of employees:

The information required pursuant to Section 197 (12) read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Companies (Particulars of Employees) Rules, 1975, in respect of employees of the Company and Directors is furnished hereunder:

i)The ratio of the remuneration of each Director to the median remuneration of the employees of the company for the financial year.

a)Mr. Subash Agarwal- Chairman- 1: 23

b)Mr. Rajesh Agarwal- Managing Director- 1: 18

c)Mr. S. K. Pattanaik- Ex Director (Finance)- 1: 15

ii)The percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year.- 0%

iii)The percentage increase in the median remuneration of employees in the financial year- 0%

iv)The number of permanent employees on rolls of the company. Total 806 employees as on 31st March, 2015.

v)The explanation on the relationship between average increase in remuneration and company performance.- NA

vi)Comparison of the remuneration of the Key Managerial Personnel against the performance of the company.-NA

vii)Variations in the market capitalisation of the company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over/ decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer in case of listed companies, and in case of unlisted companies, the variations in the net worth of the company as at the close of the current financial year and previous financial year;

•Variations in the market capitalization of the company: The market capitalization of the company as on 31.03.2015 was Rs. 53.36 crores and as on 31.03.2014 was Rs. 31.88 crores

•Price earnings ratio of the company: Price earnings ratio of the company as on 31.03.2015 was 8.58 and as on 31.03.2014 was 19.18.

•Percentage increase over/ decrease in the market quotations of the shares of the company as compared to the rate at which the company came out with the last public offer in the year:

The Company had come out with initial public offer (IPO) in 2010 with issue price per share of Rs. 450/-. Share price as on March 31, 2015 with NSE is Rs. 35.95/- per share indicating decrease in the market quotation of shares.

viii)Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration- 0%

ix)Comparison of the each remuneration of the Key Managerial Personnel against the performance of the company- Same response as in point vi) above .i.e. 0%.

x)The key parameters for any variable component of remuneration availed by the directors;-No Director has received any variable component of remuneration.

xi)The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year:

Mr. Subash Agarwal is the highest paid Director. No employee received remuneration higher than him.

xii)Affirmation that the remuneration is as per the remuneration policy of the company. The remuneration paid to employees is as per the remuneration policy of the Company.

As required under the provision of Section 197 (12) read with Rule 5 (2) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Companies (Particulars of Employees) Rules, 1975, as amended, there was no employees who have drawn salary or appointed under this category during the financial year 2014-15.

21. Company's Policy On Directors' Appointment and Remuneration Including Criteria For Determining Qualifications, Positive Attributes, Independence Of A Director And Other Matters Provided Under Sub-Section (3) Of Section 178;

The same has been provided in detail in the Corporate Governance Report attached with the board report.

22.Declaration given by independent directors under sub-section (6) of section 149;

The Company has complied with the definition of Independence as per Clause 49 of the Listing Agreement and according to the Provisions of section 149(6) Companies Act, 2013. The company has also obtained declarations from all the Independent Directors pursuant to section 149 (7) of the Companies Act, 2013.

23.Industrial Relation:

Employee relations continued to be cordial throughout the year. The whole-hearted support of employees and a sense of belongingness with the organization and solidarity with the management of the Company have helped to cope with the present challenges of the Company during the year.

24.Adequacy of internal financial controls with reference to the Financial Statements. -

Management has put in place effective Internal Control Systems to provide reasonable assurance for:

•Safeguarding Assets and their usage.

•Maintenance of Proper Accounting Records and

•Adequacy and Reliability of the information used for carrying on Business Operations.

Key elements of the Internal Control Systems has been provided & explained in MDA report attached with Director's report.

25.Annual Evaluation By The Board Of Its Own Performance (Including Committees and Individual Directors)

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a 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 level of engagement and contribution and independence of judgment thereby safeguarding the interest of the Company. The performance evaluation of the Independent Directors was carried out by the entire Board. The performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors. The board also carried out annual performance evaluation of the working of its Audit, Nomination and Remuneration as well as stakeholder relationship committee. The Directors expressed their satisfaction with the evaluation process.

26.Details of significant and material orders:

There are no significant and material order passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future.

27.Particulars of Loans, Guarantees or Investments Under Section 186

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

28.Particulars of Contracts or Arrangements With Related Parties Referred To In Sub-Section (1) of Section 188 In The Prescribed Form AOC-2

All related party transactions attracting compliance under Section 188 and / or Clause 49 of the Listing Agreement are placed before the Audit Committee as also before the Board for approval. Prior omnibus approval of the Audit Committee is also sought for transactions which are of a foreseen and repetitive nature.

The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board of Directors of the Company is uploaded on the website of the Company i.e www.arssgroup.in.

The particulars of contracts entered into with related parties during the year as per Form AOC-2 is enclosed as 'Annexure-E'.

29.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 report: NA

30.Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

During the year under review, the Company has taken adequate measures for conservation of energy and also has not gone for any technology absorption whatsoever in accordance with the provisions of sub - Section (3) (m) section 134 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014.

The Company has neither earned any income nor incurred any expenditure in foreign currency during the financial year ended 31st March, 2015.

31.Development and Implementation of Risk Management Policy:

The Company has established risk management framework. The Company has been addressing various risks impacting the Company. In accordance with the provisions of Clause 49 of the Listing Agreement, the Board of Directors of the Company at its Meeting held on February, 2015 has constituted a Risk Management Committee and has approved the Risk Management Policy of the company. This Committee has been delegated the authority by the Board to review and monitor the implementation of the risk management policy of the Company.

32.Corporate Social Responsibility

In terms of section 135 and Schedule VII of the Companies Act, 2013, the Board of Directors of your Company has constituted a CSR Committee. The Committee comprises of one executive director & two Independent Directors. CSR Committee of the Board has developed a CSR Policy. Additionally, the CSR Policy has been uploaded on the website of the Company at www. arssgroup.in under CSR Policy link. Since the average profit for the last three years is in negative figures, no CSR activities was performed / undertaken by the company during the year.

33.Whistle Blower Policy of the Company

In accordance with requirement of Companies Act as well as listing agreement a vigil mechanism has been adopted by the board of directors and accordingly a whistle blower policy has been formulated with a view to provide a mechanism for employees of the company to approach Internal Auditor or Chairman of the Audit Committee of the Company to report any grievance. There were no complaints under the whistle blower during the year under review. A link to such policy is also provided in the website of the company.

34.Acknowledgement:

Your Directors would like to place on record their appreciation for assistance and co-operation received from the financial institutions, banks, Government authorities, customers and members during the year under review. Your Directors also place on record their deep sense of appreciation for the committed services by the executives, employees at all levels.

For and on behalf of the Board of Directors

Sd/-(Subash Agarwal)

Chairman

Place: Bhubaneswar

Dated: 7th August, 2015