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Hindustan Construction Company

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Directors Report Year End : Mar '17    Mar 16

1. Report

The Directors have presented the 91st Annual Report together with the Audited Financial Statements for the year ended March 31, 2017.

2. Financial Highlights (As per IND AS)

Standalone (Rs. In Crore)

Particulars

Year ended

Year ended

March 31, 2017

March 31, 2016

Income from Operations

4195.94

4190.89

Profit before Interest, Depreciation, Exceptional Items, Other Income and Tax

753.63

810.50

Less: Finance Costs

772.37

701.71

Depreciation

125.28

152.47

Exceptional Item

21.22

918.87

28.03

882.21

Add: Other Income

250.44

214.24

Add/Less: Exchange Gain/(Loss)

11.76

(2.11)

Profit before Tax

96.96

140.42

Less: Tax Expense

37.55

45.66

Profit/(Loss) after Tax

59.41

94.76

Add: Other Comprehensive Income

21.51

(9.04)

Total Comprehensive income carried to Other Equity

80.92

85.72

3. Dividend

Your Company has restructured its debts under the Scheme for Sustainable Structuring of Stressed Assets (S4A Scheme) and therefore, it is necessary to conserve and optimize use of resources to improve the health of the Company. Hence, your Directors have not recommended any dividend for the financial year ended March 31, 2017.

4. Operations

The Income from Operations of the Company in the year is Rs. 4195.94 crore as compared to Rs.4190.89 crore in the previous year. The profit before tax is Rs.96.96 crore as compared to Rs.140.42 crore for the previous year.

Your Directors are pleased to inform that during the year under report, the Company has secured the following major contracts:

- Mumbai Metro Line 3, Package 2, Mumbai Contract Value: Rs.2523 crore,

- Railway Tunnel T-13 & Part T-14, Jammu & Kashmir Contract Value: Rs. 1750 crore,

- Bistan Lift Irrigation Scheme, Madhya Pradesh Contract Value: Rs.375 crore,

- Anji Khad Cable Stayed Bridge, Jammu & Kashmir Contract Value: Rs.369 crore,

- Parallel Safety Tunnel ofT 12, Jiribam Imphal Railway line, Manipur Contract Value: Rs. 368 crore,

- Residential Buildings, DAE Township, Anupuram, Kalpakkam, Tamil Nadu Contract Value: Rs.182 crore,

- Residential Buildings, DAE Township, Anushaktinagar, Mumbai Contract Value: Rs.159 crore

The total balance value of works on hand as on March 31, 2017 is Rs. 20,390 crore.

Decisions are awaited from various clients for tenders submitted by the Company for 11 bids amounting to approx. Rs. 10,230 crore (HCC share Rs. 9,002 crore). Tenders for various packages for 28 projects worth Rs. 39,218 crore (HCC share Rs.26,661 crore) are expected to be submitted in the near future. The Company has also submitted prequalification bids for 16 projects worth over Rs.21,198 crore (HCC share Rs. 17,053 crore) which are under evaluation.

Operations of Subsidiaries

i) Lavasa Corporation Ltd. - Integrated Urban Development & Management

Lavasa has kept its rationale of developing a smart city for all and is tailoring partnerships and tie ups with global leaders. Partnerships are well in place and many of these projects are moving towards completion.

In the hospitality space, the Accor group is successfully running its operation with the two brands - Mercure Lavasa and the 1500 plenary capacity Lavasa International Convention Centre (LICC).

As for the existing hospitality projects, Ekaant - The Retreat and Waterfront Shaw Apartment Hotel continue to flourish. Fortune Select Dasve is in its ninth year of successful operations with occupancy at 63%, while Accor''s Mercure is in its eighth year of successful operation with occupancy at 56%. In the tourism space, Lakeshore Water sports, Neo Spark Games Arcade and Xthrill Adventure Sports & Academy are also functioning successfully. Lavasa has tied up with former Indian cricketer and former chief of the BCCI Selection Committee, Mr. Sandeep Patil for building a Sports complex including a cricket stadium for corporate tournaments.

On the retail front, Restaurants like Smokin Joe''s, Venkys Xpress, Subway, Cafe Coffee Day, Baskin Robbins, All American Diner, Granma''s Homemade Patisserie, Chor Bizarre, Oriental Eight, Past Times Pub, Tabakh, Pizzavala, Naashta Paani, Paanchi Krunchy and Indulge have commenced operations. Many other non F&B outlets such as Mapro and Charosa Wine Boutique have successfully started operations including Lavasa''s first miniplex- Fun Square Digital Cinema.

Christel House Lavasa (renamed as Dasve Public School), EHL and Christ College are fully operational. KnowledgeVistas Limited (KVL), a K-12 school, is actively looking for JV partner to commence operation. Abhinav Shiksha Sansthan, New Delhi bought 1,25,000 sq.ft of land in Mugaon and is expected to build a 62,500 sq.ft school for academic year 20192020.

Women''s special weekend at Lavasa saw a good participation on International Women''s Day. There was a performance by mentalist Akshay Lakshmanan with his mind reading session, Mukund Seshadri with his session on financial planning, Dr. Shishir Shetty session on breast cancer awareness, Zumba sessions etc. Party night was hosted by RJ Urmin of Fever 104 FM.

Lavasa hosts glamour night for film actors, directors and producers from Marathi film industry with musical & dance performance by Ajit Parab, Pushkar Shrotri, Deepali Sayed, Manasi Naik & Nirmiti Sawant. Flea market; music & performance were organized at Dasve promenade for Christmas and New Year celebrations.

Lavasa has been an ideal location for ad & movie shoots, following are the brands which were shot at Lavasa for their TV commercial or still shoot: Skoda Rapid, Mercedes Benz, Blackberry Clothing, Brand Factory Clothing, Hero Bikes, Beat Car & Lotus Sun Cream.

Lavasa continued its focus on promoting tourism; we participated to showcase tourism at Lavasa in India International Travel &Tourism & Global Panorama Showcase. Over 1000 bikers braved the rain and travelled to Lavasa in June to celebrate World Motorcycle Day. Motoring World magazine conducted the jury round of their annual car and bike awards at Lavasa resulted in a six page story all of them featuring cars and bikes shot at Lavasa. Celebrations at Lavasa on Maharashtra Day, Independence Day weekend and initiative like the Dreamcatchers Summer camp were covered by all major publications and online portals. Launch of Jetovator, Segway and news about Lavasa bagging the PATWA Award were widely publicized.

Lavasa city now has a full-fledged operational Farmer''s market known as ''Hara Bazar''; a two screen Movie theatre; it has a fully operating Post office, courier service & a Hospital with pharmacy. Lavasa has a Petrol Pump, two bank branches along with ATMs, a Public Safety Centre with Fire Engine & crew, Police outpost, Tourist Information Center with Bus facility; Multilevel Car parking facility, Nature trail, rental housing for low income groups, simulated Golf Course facilities; Water Sports facility with latest Jetovator, Adventure Sports facility, a modern Club with gym, Sports and Spa facilities and Public Transport system for citizens.

Infrastructure is a key to ensuring long-term livability; drinking water at Lavasa is fit for consumption without the need for additional filtration. Sewage is treated and is subsequently reused for irrigation and other non-potable uses. Lavasa''s power distribution grid is reliable and the young city is already on the cutting edge of urban environmental sustainability initiatives.

Around the clock Lavasa Citizen Contact Centre has been operational since 2009 and is a one-stop information source for non emergency and emergency related services. It provides a single window resolution for all customers'' needs and visitors'' requests. The CMS department meets on a monthly basis with a committee of villagers throughout the project area. The Village Committee is the first of several such citizen advisory groups that will together form a key component of the Lavasa citizen and stakeholder engagement mechanisms.

Lavasa had 10,574 acres of land including 455 acres of land on lease by the end of last financial year i.e. March 31, 2016. This is reduced to 10,515 acres because 59 acres of land in Mugaon was restored to tribals by SDO, Maval during the year.

The Environment Management Plan is being implemented regularly. Regular monitoring of environmental aspects such as air & noise quality, water quality, soil & sediment quality, DG stack & noise quality and ecological monitoring of Dasve, Mugaon and Gadle Bandhara is being carried out by MoEF approved and NABL accredited laboratory.

All reports were found to be within the consent / prescribed limits of Maharashtra Pollution Control Board (MPCB).

As per the environment clearance requirement, the Environmental Compliance Report is being submitted to MoEF once in six months. A yearly environment statement, a requirement as per the consent document of Maharashtra Pollution Control Board (MPCB), is being submitted everyyear.

Application of Geo-mat & Coir-mat with pegging of bamboo nails is being done to control soil erosion due to heavy rainfall. Stump & shrub plantation activity has been undertaken and have planted 0.10 lakhs live stumps during the first spell of rains (June 2016).

Lavasa first town, Dasve, is ready with all basic infrastructures such as access roads, internal roads, water treatment plant, water distribution network, sewage network, sewage treatment plant, telecom network and services. Till date 1250 properties are handed over to the City Management Services department for handing over to customers. The hostel block at Tower A is operational. The restoration works on major landslide affected area is in progress. Work on infrastructure & buildings for the second town of Mugaon are on hold.

Lavasa has also initiated a number of development and empowerment programs for the local community like provision of treated drinking water to 18 villages in the project area at 72 locations on a daily basis; calligraphy workshops, aptitude tests and counseling for students of Zilla Parishad (ZP) schools, creche for labor children; starting the Apollo Lavasa Primary Health Centre at Bhoini and provision of free health check up, medicines and ambulance service to villagers; monthly health and awareness camps for HIV/ AIDS, malaria, nutrition, and water borne diseases. Employment and self employment opportunities to the locals have also been provided.

ii) HCC Infrastructure Company Ltd

HCC Infrastructure Company Ltd, a wholly owned subsidiary of your Company, is actively engaged in the development & operations of road transport through its subsidiaries, namely HCC Concessions Ltd (HCON) and HCC Operations & Maintenance Ltd (HOML), respectively. HCON is focused on developing and managing BOT road assets, primarily National Highway Projects under Public Private Partnership (PPP) and HOML operates and maintains the operational assets. Another subsidiary, HCC Power Ltd, has mandate to explore opportunities in the power sector to leverage HCC''s capabilities.

HCON has developed six NHAI road assets since its inception and the current portfolio consists of four NHAI road concessions constituting an asset base of Rs. 4,900 crore. The Company has been evaluating NHAI projects under Hybrid Annuity Model (HAM), a low risk model, for future investments, besides evaluating the opportunities to engage with potential players for offering end to end services for Toll, Operate & Transfer (TOT) model.

During the last fiscal year, the management team has been meticulously working towards achieving timely commissioning of one of its road project, arranging cost overrun financing, smooth operations and maintenance of existing assets and exploring raising of capital to meet the future needs.

Current Road Portfolio

HCON''s current portfolio comprises of four toll based projects, of which 3 projects together form a contiguous stretch of 250 km on NH-34 in the state of West Bengal and the 4th project is located on NH-2 in the National Capital Region of Delhi.

HCC''s development of NH-34 is among the largest PPP highway undertakings in the country. NH-34 is the backbone of the transport system in Bengal, which is the fourth most populous state in India and home to 90 million citizens.

NH-34 provides north-south connectivity between the capital region / ports of Kolkata & Haldia to north Bengal & north eastern states of India. The west side of the highway borders Bihar and Jharkhand and the eastern side run parallel to the Bangladesh border, where considerable import and export of goods occur. NH-34 is the only viable route for commercial traffic over major rivers such as Bhagirathi, Ganga, Mahananda and Nagri in the region. Furthermore, it forms part of the critical route to neighbouring Bhutan, Bangladesh and Nepal.

Baharampore-Farakka Highways Ltd (BFHL)

The project road starts from north of Kolkata at Km 191.420 near Baharampore and ends at Farakka (before Farakka Barrage) at Km 294.680.

The concession period is 25 years, including a construction period of 30 months. The project is being implemented with an investment of Rs. 1,424 crore.

The project has witnessed traffic growth of 6.2% in the last fiscal year and the turnover for the year was Rs. 136 crore, an increase of 21% compared to the previous year.

As per the gazette notification for overloaded vehicles, BFHL has implemented the 10x tolling for overloaded vehicles on this project since August 2014 to mitigate additional maintenance costs required to be incurred due to plying of overloaded vehicles.

After demonetization of currency notes of Rs. 500 and Rs. 1,000, based on directive from Government of India, the toll collection of the project stopped from November 8, till December 2, 2016. A claim for recovery of Rs.9.35 crore on this account has been submitted to NHAI.

The final completion of the project is expected by Q2/ Q3 of financial year 2018-2019, largely due to material defaults by NHAI in providing land on a timely basis. The work on the Baharampore bypass is underway and the company is working with the authority and district administration to resolve all encumbrances along the right of way.

Farakka-Raiaani Highways Ltd (FRHL)

The Company commenced commercial operations of its Rs.1,720 crore Farakka Raiganj Highways Ltd (FRHL) in October 2016. FRHL covers the busiest section of NH-34 and passes through major towns such as Farakka, Kaliachawk, Malda, and Gajol, besides being the only link over the river Ganges in the region. The project has a concession period of 30 years, including construction period of 30 months.

The commercial operations of this project commenced on 19th Oct 2016 for 80 Km. Post that travel time for commuters in FRHL has been reduced significantly, by approximately 5-6 hours during peak hours. The construction of FRHL has involved over 130 structures including 9 Major Bridges, 22 Minor Bridges, 5 Underpasses and 2 Toll Plazas, with material coordination alongside NHAI and numerous State agencies.

The average daily toll collection has been Rs.47 lakh since start of toll collection.

After demonetization of currency notes of Rs. 500 and Rs.1,000, based on directive from Government of India, the toll collection of the project stopped from 8th Nov till 2nd Dec 2016. A claim for recovery of Rs.9.82 crore on this account has been submitted to NHAI.

The final completion of the project is expected by Q2/ Q3 of FY18. Entire land has been made available by NHAI and the work is progressing well.

Raiaani-Dalkhola Highway Ltd (RDHL)

This is the north-most section of NH-34 and connects to NH-31 at Dalkhola.

Land acquisition delay of about 6 years led to substantial increase of project cost. RDHL has filed its claims of Rs.615 crore against NHAI The Company made its best efforts to arrange cost overrun financing in order to restart the project. In spite of prolonged delay in land acquisition and defaulting on crucial requirements of Concession Agreement, NHAI was not ready to acknowledge the increase in project cost for termination benefits due to which lenders consortium has expressed their inability to fund the cost overrun. NHAI took a stand of terminating the project and has issued notice on March 31, 2017.

The Company is evaluating all options either to revive the project or to recover its dues from NHAI either through Arbitration or amicable settlement.

Delhi Faridabad Elevated Expressway (dfskvwav™)

The Delhi Faridabad Elevated Expressway (dfskyway™) is a six lane 4.4 km elevated highway connecting Delhi and Haryana at Badarpur.

The Company''s revenues have been falling short of its projections due to the existence of toll free local road, which is being used by the long distance commercial vehicles to escape paying toll charges and violates the spirit of the Concession Agreement.

BFTL also suffered a material impact due to a Supreme Court order for collecting Environmental Compensation Charge (ECC) from commercial vehicles entering New Delhi (thereby discouraging their entry into the capital), resulting in a substantial dip of ~40% in commercial vehicles. This has unfortunately caused a devastating impact and political event by permanently curtailing revenues.

In parallel, BFTL had discussions with its lenders to find a long term sustainable solution to the cash flow issues of the project. Consortium of Lenders invoked Strategic Debt Restructuring (SDR) in the project. However, the SDR process could not be completed due to pending final approvals from a couple of Banks and NOC from NHAI.

After demonetization of currency notes of '' 500 and '' 1,000, based on directive from Government of India the toll collection of the project stopped from November 8, 2016 till December 2, 2016. A claim of Rs.4.21 crore has been submitted to NHAI for the same.

To bring long lasting solution to the project, the Company, after seeking consensus from lenders, is ready for going ahead with option of either terminating the project and pursue claims through Arbitration or mutually foreclose the project in discussion with NHAI.

iii) Steiner AG, Switzerland

Steiner AG (Steiner), one of the leading project developers, total and general contractors (TC/GC) in Switzerland, offers comprehensive services in the fields of new constructions, refurbishment and real estate development. Since 2010, Steiner has been part of the your Company. HCC owns 100% stake in Steiner AG through HCC Mauritius Enterprises Limited and HCC Mauritius Investment Limited, Wholly Owned Subsidiaries.

Steiner, established in 1915, has completed more than 1,500 residential construction projects, and have built nearly 600 commercial properties, over 45 hotels, around 200 infrastructure facilities, among them universities, schools, hospitals, nursing homes, rehabilitation facilities, retirement homes and prisons. Steiner ranks among the market leaders in Switzerland and aims for excellence in its environmental, health and safety performance. Its client and process orientation is driven by the focus on quality and on providing cost-effective solutions. Steiner fulfils current quality management criteria and is certified as confirming to ISO 9001, ISO 14001 and OHSAS 18001. Steiner''s head office is in Zurich and it has branches in Basel, Berne, Geneva, Tolochenaz, Lucerne and St. Gall.

Its subsidiary, Steiner India Ltd, markets Swiss knowhow for the emerging real estate market from its base in Mumbai.

Steiner AG has registered a revenue of CHF 820.6 million (Rs. 5,580 crore) compared to CHF 636.8 million (Rs. 4255 crore) in the previous year and a net profit of CHF 3.2 million (Rs. 21.7 crore) compared to a loss of CHF 4.9 million (Rs. 33 crore) in the previous year. The Company secured fresh orders worth CHF 927 million (Rs. 5,977 crore). The order backlog was CHF 1.43 billion (Rs. 9,200 crore) at the end of the year. In addition to this, the company has secured orders for CHF 700.0 million (Rs. 4,515.7 crore), where the contracts are yet to be signed. The closing cash balance of the company was CHF 95.6 million (Rs. 617 crore) reflecting the company''s steady financial performance and strong liquidity position.

Steiner India Ltd, 100% subsidiary of Steiner AG, had a revenue of Rs.51 crore and loss of Rs.2.9 crore in financial year 2016-2017

5. Subsidiaries and Associate Companies

During the year under review, the following changes have taken place with respect to Subsidiary Companies and Associate Companies, as the case may be applicable :

a) Kart Racers Limited, a step-down subsidiary Company, has ceased to be a wholly owned subsidiary of Lavasa Corporation Limited w.e.f. June 3, 2016 and continues to be a subsidiary of Lavasa Corporation Limited.

b) Highbar Technologies FZ LLC, a step-down subsidiary Company, was de-registered w.e.f. July 31, 2016.

c) HighbarTechnocrat Limited (previously known as Osprey Hospitality Limited),a step-down subsidiary of the Company, has ceased to be subsidiary of Lavasa Corporation Limited with effect from August 8, 2016. It has become an Associate Company of Highbar Technologies Limited w.e.f. December 12, 2016 wherein 49% of its shareholding is held by Highbar Technologies Ltd.

d) Warasgaon Lakeview Hotels Limited, a step-down subsidiary Company, has ceased to be an Associate Company of Lavasa Corporation Limited w.e.f. March 14, 2017 and the consequent shareholding of Lavasa Corporation Limited in the said Company has reduced to 19.2%.

e) During the year under review SNC Valleiry Route de Bloux. wholly owned subsidiary of Steiner Leman SAS, got merged with Steiner Leman SAS, a step-down subsidiary of the Company, as part of restructuring process.

As on March 31, 2017, the list of Subsidiaries and Associate Companies of your Company is as follows:-

Subsidiary Companies

1. Western Securities Ltd

2. HCC Aviation Ltd

3. HCC Construction Ltd

4. Highbar Technologies Ltd

5. HCC Mauritius Enterprises Limited

6. HCC Mauritius Investment Limited

7. Steiner AG

8. Steiner Promotions et Participations SA

9. VM ST AG

10. Eurohotel SA

11. Steiner (Deutschland) GmbH

12. Steiner Leman SAS

13. Steiner India Ltd

14. HCC Infrastructure Company Ltd

15. Dhule Palesner Operations & Maintenance Ltd

16. HCCPowerLtd

17. HCC Energy Ltd

18. HCCOperations&MaintenanceLtd

19. HCC Real Estate Ltd

20. HRL Township Developers Ltd

21. HRL (Thane) Real Estate Ltd

22. NashikTownshipDevelopersLtd

23. Maan Township Developers Ltd

24. Charosa Wineries Ltd

25. Powai Real Estate Developers Ltd

26. HCC Realty Ltd

27. *Pune-Paud Toll Road Company Ltd

28. Panchkutir Developers Ltd

29. Lavasa Corporation Ltd

30. Lavasa Hotel Ltd

31. Lakeshore Watersports Company Ltd

32. Dasve Convention Centre Ltd

33. Dasve Business Hotel Ltd

34. Dasve Hospitality Institutes Ltd

35. LakeviewClubsLtd

36. Dasve Retail Ltd

37. Full Spectrum Adventure Ltd

38. Lavasa Bamboocrafts Ltd

39. My City Technology Ltd

40. Reasonable Housing Ltd

41. Future City Multiservices SEZ Ltd

42. Rhapsody Commercial Space Ltd

43. Valley View Entertainment Ltd

44. Warasgaon Tourism Ltd

45. Our Home Service Apartments Ltd

46. Warasgaon Power Supply Ltd

47. Sahyadri City Management Ltd

48. Hill City Service Apartments Ltd

49. Warasgaon Infrastructure Providers Ltd

50. Nature Lovers Retail Ltd

51. Warasgaon Valley Hotels Ltd

52. Rosebay Hotels Ltd

53. Mugaon Luxury Hotels Ltd

54. Warasgaon Assets Maintenance Ltd

55. Hill View Parking Services Ltd

56. Verzon Hospitality Ltd

57. Kart Racers Limited

58. HCC Concessions Ltd

59. Narmada Bridge Tollway Ltd

60. Badarpur Faridabad Tollway Ltd

61. Baharampore - Farakka Highways Ltd

62. Farakka - Raiganj Highways Ltd

63. Raiganj - Dalkhola Highways Ltd

64. Spotless Laundry Services Ltd

65. Green Hill Residences Ltd

66. Whistling Thrush Facilities Services Ltd

67. Ecomotel Hotel Limited

Associate Companies

1. Knowledge Vistas Limited

2. Evostate AG

3. Projektentwicklungsges, Parking KunstmuseumAG.

4. MCR Managing Corp. Real Estate AG

5. Highbar Technocrat Limited

6. Nirmal BOT Limited

7. Andromeda Hotels Limited

8. Bona Sera Hotels Limited

9. Apollo Lavasa Health Corporation Ltd

10. Starlit Resort Ltd

* A scheme of Amalgamation has been filed jointly by HCC Infrastructure Co. Ltd and Pune-Paud Toll Road CompanyLtd (PPTRCL) foramalgamation ofPPTRCL with HCC Infrastructure Co. Ltd, before the National Company Law Tribunal at Mumbai, vide Company Application on March 31, 2017 as per Section 230 to Section 232 of the Companies Act, 2013 and the same is pending for admission.

The details as required under Rule 8 of the Companies (Accounts) Rules, 2014 regarding the performance and financial position of each of the Subsidiaries, Associates and Joint Venture Companies of the Company forms part of the Consolidated Financial Statements of the Company for the financial year ended March 31, 2017.

The Company has formulated a Policy for determining material subsidiaries, which is uploaded on the website of the Company i.e. www.hccindia.com and can be accessed at http://www.hccindia.com/pdf/HCC_Policy_for_ determining_Material_Subsidiaries.pdf

6. S4A Scheme Implementation /Increase in Share Capital

The Company had availed certain financial facilities (Facilities) under the Reserve Bank of India Corporate Debt Restructuring (CDR) mechanism whereby the debt obligations of the Company were restructured on the terms and conditions set out in the Master Restructuring Agreement dated June 29, 2012 executed amongst the ICICI Bank (as the Monitoring Institution), the Lenders and the Company (CDR MRA).

Despite availing the restructuring of the Facilities under the CDR mechanism, the Company was facing liquidity issues and challenges in debt servicing due to inter alia slower than envisaged recovery in the economy and infrastructure sector and increased interest cost for the Company due to increase in the working capital requirement and non-realization of claims / receivables. This has resulted in a gap of cash flow timing mismatch between claims realization (including interest) and debt servicing. If such cash gap is left unaddressed, the Company will face challenges in the execution of its order book and also in servicing of its debt.

Accordingly, in order to bridge the aforementioned cash flow timing mismatch, the Lenders deliberated various solutions to address the aforementioned liquidity issues and recommended the Scheme for Sustainable Structuring of Stressed Assets (S4A Scheme) introduced by the Reserve Bank of India (RBI) pursuant to its circulars dated June 13, 2016 and as amended further on November 10, 2016 (S4A Circulars).

The Lenders in their Joint Lender''s Forum meeting (JLF) held on July 8, 2016 deliberated on the various options and agreed to explore the recommendation of the Monitoring Committee for implementing the S4A Scheme for the Company. Pursuant to the JLF held on July 12, 2016, the Lenders decided to adopt the S4A Scheme with the Reference Date as July 12, 2016 and at the JLF held on September 7, 2016 they agreed to convert part of their entire debt exposure (Part B Debt of HCC S4A Scheme) to Equity shares and Optionally Convertible Debentures (OCDs) (S4A Securities) towards implementation of the S4A Scheme and the same was approved by Overseeing Committee constituted by RBI (OC) on November4, 2016 (HCC S4A Scheme/Scheme).

Pursuant to the implementation of the S4A Scheme and in accordance with and as specified in the financing documents executed by the Company with, inter alia, the Lenders (hereinafter referred to as the S4A Agreements/ S4A Documents), the shareholders at the Extraordinary General Meeting (EGM) of the Company held on January 5, 2017 approved the offer and issue of Equity Shares representing 24.44% in aggregate of the expanded share capital of the Company and Optionally Convertible Debentures (OCDs) of face value Rs.1000 each on Preferential Basis, to the Lenders as per applicable laws and extant regulations, based on the respective Lender''s subscription for the Securities of the Company.

During the year under review, for the purpose of allotment of S4A Securities and in accordance with the shareholders approval at the EGM of the Company held on January 5, 2017, the Authorized Share Capital of the Company was increased to Rs.135,00,00,000 (Rupees One Hundred Thirty Five Crore Only) divided into 125,00,00,000 (One Hundred Twenty Five Crore) Equity Shares of Rs.1 each (Rupee One Only) and 1,00,00,000 (One Crore) Redeemable Preference Shares of Rs.10 each (Rupees Ten only),

As per the terms of the S4A Agreements executed between Company and the Lenders, in respect of Lenders who had completed the process of conversion of debt into Equity Shares and/or OCDs of the Company under the HCC S4A Scheme, and in accordance with the shareholders approval at the EGM of the Company held on January 5, 2017, the Company has issued and allotted 23,15,44,729 Equity shares of Rs.1 each, in aggregate, representing 22.91% of the Expanded Share Capital of the Company, at an issue price of Rs.34.92 per Equity Share (including premium of Rs.33.92 per Equity Share) for an amount aggregating Rs.809 crore and 1,44,14,874 Optionally Convertible Debentures (OCDs) of face value Rs.1000 each, in aggregate, for an amount aggregating Rs.1441 crore to 27 Lenders under the HCC S4A Scheme, in two tranches, on January 6 and 19, 2017, in accordance with Chapter VII of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (''SEBI ICDR Regulations) and Section 42, 62 of the Companies Act, 2013 and the rules made there under.

The S4A Scheme was successfully implemented for the Company as more than 50% of lenders by number holding more than 75% by value, participated in the Scheme and thereupon Company has made the allotment of S4A securities to the respective Lenders.

Post S4A Scheme implementation, the present paid up Equity Share Capital of the Company is Rs.101,07,03,635 which comprises 101,07,03,635 Equity shares of face value Rs.1 each.

Out of the total 30 lenders under S4A Scheme, some of the remaining Lenders who had not participated in the S4A Scheme so far, have thereafter agreed to subscribe to the S4A securities under the Scheme and accordingly with necessary shareholders approval at the forthcoming Annual General Meeting of the Company, the Company will proceed to issue and allot the corresponding S4A securities to the respective Lenders as per extant regulations in force.

7. Public Deposits

Your Company has not accepted any deposits from the public, or its employees during the year under review.

8. Particulars of Loans, Guarantees or Investments

Particulars of Loans, Guarantees and Investments made during the year as required under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

Also, pursuant to Paragraph 2 of Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirement) Regulations, 2015, particulars of Loans/Advances given to Subsidiaries have been disclosed in the notes to the Financial Statements.

9. Employee Stock Option Scheme (ESOP)

As on March 31, 2017, 1,20,180 stock options are outstanding, in aggregate, for exercise as per the exercise schedule and are exercisable at a price of Rs. 52.03 per stock option.

Each option, when exercised, as per the exercise schedule, would entitle the holder to subscribe for one equity share of the Company of face value Rs. 1 each.

During the year under review, no options got vested in the employees of the Company. 15,34,450 stock options got lapsed between April 1, 2016 and March 31, 2017.

The particulars with regard to the ESOP as on March 31, 2017 as required to be disclosed pursuant to the provisions of Rule 12 (9) of the Companies (Share Capital and Debentures) Rules, 2014, are set out in Annexure I to this Report.

10. Consolidated Financial Statements

In accordance with the Companies Act, 2013 and implementation requirements of Indian Accounting Standards (''IND-AS'') Rules on accounting and disclosure requirements, which is applicable from current year, and as prescribed by Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as SEBI Listing Regulations), the Audited Consolidated Financial Statements are provided in this Annual Report.

Pursuant to Section 129(3) of the Companies Act, 2013, a statement containing the salient features of the financial statements of each of the subsidiary and joint venture in the prescribed form AOC-1 is annexed to this annual report.

Pursuant to Section 136 of the Companies Act, 2013, the financial statements of the subsidiaries are kept for inspection by the shareholders at the Registered Office of the Company. The said financial statements of the subsidiaries are also available on the website of the Company www.hccindia.com under the Investors Section.

11. Corporate Governance

The Company is committed to maintain the highest standards of Corporate Governance and adheres to the Corporate Governance requirements as stipulated by Securities and Exchange Board of India (SEBI).

The report on Corporate Governance as prescribed in Schedule V(C) of the SEBI Listing Regulations forms an integral part of this Annual Report. The requisite certificate from the Auditors of the Company confirming compliance with the conditions of Corporate Governance along with a declaration signed by the Chairman and Managing Director stating that the members of the Board of Directors and Senior Management personnel have affirmed the compliance with code of conduct of the Board of Directors and Senior Management is attached to the report on Corporate Governance.

12. Directors

As per the provisions of Section 152 of the Companies Act, 2013, Mr. N. R. Acharyulu (DIN 02010249), Non Executive & Non Independent Director of the Company, is due to retire by rotation. Mr. N. R. Acharyulu, being eligible, offers himself for re-appointment.

Mr. Bhalchandra R. Sule, ex-Director passed away on January 31, 2017. The Board of Directors has expressed its deep regret and offered condolences on the sad demise of Mr. Sule.

Mr. Bhalchandra R. Sule was a Director in the Company for a long time from 1993 to 2006. The Board also placed on record the invaluable contribution of Late Mr. B. R. Sule, to the Board and the Company during his tenure of Directorship with the Company.

Mr. Rajgopal Nogja was the Group COO and Whole-time Director up to May 2, 2016 and thereafter was the Group CEO of the Company from May 3, 2016 to March 31, 2017.

The Board placed on record its appreciation for the valuable contribution of Mr. Rajgopal Nogja during his tenure with the Company.

Pursuant to the resignation of Mr. Rajgopal Nogja as the Group CEO with effect from March 31, 2017 and based on the recommendation of the Nomination and Remuneration Committee, the Board at its meeting held on February 2, 2017, appointed Mr. Arjun Dhawan (DIN : 1778379) as Group Chief Executive Officer (CEO) & Additional Director of the Company w.e.f. April 1, 2017 in accordance with Section 203 and Section 161 of the Companies Act, 2013 read with Article 88 of the Articles of Association of the Company respectively.

Subject to Members approval, the Board also appointed Mr. Arjun Dhawan as Group CEO & Whole-time Director of the Company for a period of 5 years w.e.f. April 1, 2017, In accordance with Section 196 of the Companies Act, 2013.

Prior to this appointment, Mr. Arjun Dhawan was the President & CEO of HCC Infrastructure since November 2009.

As an Additional Director, Mr. Arjun Dhawan shall hold office up to the date of the ensuing Annual General Meeting.

The Company has received a Notice under Section 160 of the Companies Act, 2013, from a member signifying an intention to propose Mr. Arjun Dhawan, as a candidate for the office of Director at the forthcoming Annual General Meeting.

The term of appointment of the Independent Directors of the Company viz., Mr. Ram P. Gandhi and Mr. Sharad M. Kulkarni, is uptil the ensuing Annual General Meeting of the Company. Mr. Ram P. Gandhi and Mr. Sharad M. Kulkarni have furnished necessary declarations to the Company under Section 149(7) of the Act, confirming that, they meet the criteria of Independence as prescribed for continuing as Independent Directors under Section 149(6) of the Act and Regulation 16(b) of the SEBI Listing Regulations.

Based on the performance evaluation of these Directors and after reviewing the declarations submitted by Mr. Ram P. Gandhi and Mr. Sharad M. Kulkarni, the Board of Directors were of the opinion that Mr. Ram P. Gandhi and Mr. Sharad M. Kulkarni, both continue to meet with the criteria of independence as per the provisions of Section 149(6) of the Companies Act, 2013 and rules made there under and also meet with the requirements of Regulation 16(b) of the SEBI Listing Regulations and are also independent of the management and accordingly have proposed their re-appointment as Independent Directors of the Company, for a term of three consecutive years each, up to the conclusion of the 94th Annual General meeting of the Company in the calendar year 2020, subject to the Members approval.

The Company has received a Notice under Section 160 of the Companies Act, 2013, from member(s) signifying the intention to propose Mr. Ram P. Gandhi and Mr. Sharad M. Kulkarni respectively, as candidate(s) for the office of Director at the forthcoming Annual General Meeting.

The other Independent Directors of the Company viz., Mr. Rajas R, Doshi, Mr. Anil C. Singhvi and Dr. Omkar Goswami have furnished necessary declarations to the Company under Section 149(7) of the Act, confirming that they meet the criteria of Independence as prescribed for Independent Directors under Section 149(6) of the Act and Regulation 16(b) of the SEBI Listing Regulations.

The Company has received Form DIR-8 from all Directors pursuant to Section 164(2) and Rule 14(1) of Companies (Appointment and Qualification of Directors) Rules, 2014.

Brief Profile of the Directors seeking appointment/ re-appointment has been given in the Explanatory Statement to the Notice of the ensuing Annual General Meeting.

13. Key Managerial Personnel

Following persons are the Key Managerial Personnel (KMP) of the Company pursuant to Section 2(51) and Section 203 of the Act, read with the Rules framed there under:

i) Mr. Ajit Gulabchand, Chairman and Managing Director.

ii) Mr. Rajgopal Nogja, resigned as Group CEO of the Company w.e.f. March 31, 2017.

iii) Mr. Arjun Dhawan, was appointed as the Group Chief Executive Officer and Whole-time Director of the Company with effect from April 1, 2017 and therefore he is a KMP w.e.f April 1, 2017.

iv) Mr. Arun V. Karambelkar, President & Chief Executive Officer.

v) Mr. Praveen Sood, Chief Financial Officer of the Company designated as Group CFO & EVP - HCC Group Office.

vi) After the end of the financial year under review, the contract of appointment of

Mr. Sangameshwar Iyer, Company Secretary is getting concluded and therefore he will be a KMP uptil May 8, 2017.

The Board placed on record its appreciation for the services rendered by Mr. Sangameshwar Iyer during his tenure as Company Secretary of the Company.

vii) Mr. Venkatesan Arunachalam was appointed as Company Secretary w.e.f. May 9, 2017 in place of Mr. Sangameshwar Iyer and therefore he is a KMP with effect from the said date.

Remuneration and other details of the said Key Managerial Personnel for the financial year ended March 31, 2017 are mentioned in Form MGT-9, Extract of the Annual Return which is attached as Annexure VIII to the Board''s Report.

14. Board Committees

The Board of Directors of your Company had already constituted various Committees in compliance with the provisions of the Companies Act, 2013 and SEBI Listing Regulations viz. Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and Corporate Social Responsibility (CSR) Committee.

In accordance with the provisions of the erstwhile Clause 49 of the Listing Agreement, the Board had voluntarily constituted the Risk Management Committee.

All decisions pertaining to the constitution of Committees, appointment of members and fixing of terms of reference / role of the Committees are taken by the Board of Directors.

Details of the role and composition of these Committees, including the number of meetings held during the financial year and attendance at meetings, are provided in the Corporate Governance Section of the Annual Report.

15. Meetings

A calendar of Board Meetings, Annual General Meetings and Committee Meetings is prepared and circulated in advance to the Directors of your Company.

The Board of Directors of your Company met 6 times during 2016-2017. The meetings were held on April 28, 2016, June 3, 2016, July 28, 2016, October 27, 2016, December 2, 2016 and February 2, 2017. The maximum time gap between any two consecutive meetings did not exceed one hundred and twenty days.

16. Familiarization Programme of Independent Directors

In compliance with the requirements of SEBI Listing Regulations, the Company has put in place a familiarization programme for Independent Directors to familiarize them with their role, rights and responsibility as Directors, the operations of the Company, business overview etc.

The details of the familiarization programme are explained in the Corporate Governance Report and the same is also available on the website of the Company and can be accessed by web link http://www.hccindia. com/pdf/familiarisation_program_for_independent_ directors.pdf

17. Performance Evaluation

Pursuant to the provisions of Section 134 (3) (p), 149(8) and Schedule IV of the Companies Act, 2013 and Regulation 17 of the SEBI Listing Regulations, annual performance evaluation of the Directors as well as of the Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Executive Committee of the Board and Corporate Social Responsibility (CSR) Committee has been carried out.

The performance evaluation of the Independent Directors was carried out by the entire Board and the Performance Evaluation of the Chairman and Non-Independent Directors was carried out by the Independent Directors.

18. Independent Directors Meeting

During the year under review, the Independent Directors of the Company met on March 22, 2017, inter-alia, to discuss:

i) Evaluation of performance of Non-Independent Directors and the Board of Directors of the Company as a whole.

i) Evaluation of performance of the Chairman of the Company, taking into views of Executive and Non-Executive Directors.

iii) Evaluation of the quality, content and timelines of flow of information between the Management and the Board that is necessary for the Board to effectively and reasonably perform its duties.

19. Criteria for selection of candidates for appointment as Directors, Key Managerial Personnel and Senior Management Personnel:

The Nomination and Remuneration Committee has laid down a well-defined criteria for selection of candidates for appointment as Directors, Key Managerial Personnel and Senior Management Personnel in the Nomination and Remuneration Policy recommended by them and approved by the Board of Directors in May 2, 2014, which is attached to the Board''s Report as Annexure II.

20. Remuneration Policy for Directors, Key Managerial Personnel and Senior Management Employees:

The Nomination and Remuneration Committee has laid down the policy for remuneration of Directors, Key Managerial Personnel and Senior Management Personnel in the Nomination and Remuneration Policy recommended by them and approved by the Board of Directors on May 2, 2014, which is attached to the Board''s Report as Annexure II.

21. CSR Policy:

The brief outline of the Corporate Social Responsibility (CSR) Policy as recommended by the CSR Committee of the Directors and approved by the Board of Directors of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure IV of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The CSR policy is attached to this Report as Annexure III and is available on the website of the Company i.e. www.hccindia.com

22. Related Party Transactions:

All the related party transactions entered during the year were in the ordinary course of business and on an arm''s length basis.

The related party transactions attracting the compliance under Section 177 of the Companies Act, 2013 and / or SEBI Listing Regulations were placed before the Audit Committee for necessary approval/ review.

The routine related party transactions was placed before the Audit Committee for their omnibus approval.

A statement of all related party transactions entered was presented before the Audit Committee on a quarterly basis, specifying the nature, value and any other related terms and conditions of the transactions.

There are no transactions to be reported in Form AOC-2 in terms of Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014.

Further the details of the transactions with Related parties are provided in the Company''s financial statements in accordance with the Accounting Standards read with IND AS Rules.

The Related Party Transactions Policy as approved by the Board of Directors of the Company has been uploaded on the website of the Company at http://www.hccindia.com/pdf/HCC_Policy_for_Related_Party_Transactions.pdf

23. Directors'' Responsibility Statement

In accordance with the provisions of Section 134 (5) of the Companies Act, 2013, your Directors confirm that:

a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any.

b) the selected accounting policies were applied consistently and the Directors 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, 2017 and of the profit of the Company for the year ended on that date.

c) 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.

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

e) the internal financial controls have been laid down to be followed by the Company and such controls are adequate and are generally operated effectively during the year.

Internal financial control over carrying cost of investment in subsidiaries and recoverability of dues from subsidiaries, is covered under internal financial control.

The management is of the view that diminution in the carrying cost of investment in subsidiaries, if any, is temporary in nature and recoverability of dues from subsidiaries are good. The view of the management is also supported by a third party expert report.

However, in view of the uncertainties involved, your Auditors have given a qualified opinion in their report in this regard, without quantifying the impact. Other than this, your Auditors have opined that the Company has in, all material respects, maintained adequate internal financial controls over financial reporting (IFCoFR) and that they were operating effectively.

This response by Directors is based on the management note given under Para 29 of this report.

24. Industrial Relations

The industrial relations continued to be generally peaceful and cordial during the year.

25. Transfer to Investor Education and Protection Fund (IEPF)

Your Company has, during the year under review, transferred a sum of '' 17,86,342 to Investor Education and Protection Fund, in compliance with the provisions of Section 125 of the Companies Act, 2013. The said amount represents dividend for the year 2008-09 which remained unclaimed by the members of the Company for a period exceeding 7 years from its due date of payment.

26. Particulars of Employees and other additional information.

Disclosures with respect to the remuneration of Directors and employees as required under Section 197 of Companies Act, 2013 and Rule 5 (1) Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 has been appended as Annexure V to this Report.

The information as required under Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 will be provided upon request by any member of the Company. In terms of Section 136 (1) of the Companies Act, 2013, the Report and the Accounts are being sent to the members excluding the said Annexure. Any member interested in obtaining copy of the same may write to the Company Secretary at the Registered Office of the Company.

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

The information relating to the Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo as required to be disclosed under the Companies (Accounts) Rules, 2014, is given in Annexure VI forming part of this Report.

28. Statutory Auditors

The Members of the Company had, at the 88th Annual General Meeting (AGM) held on June 20, 2014, approved the appointment of Walker Chandiok & Co. LLP, Chartered Accountants, Mumbai, bearing ICAI Registration No. 001076N as the Statutory Auditors of the Company, to hold office from the conclusion of that AGM until the conclusion of the 6th AGM held thereafter (subject to ratification of the appointment by the Members at every AGM held after the above said AGM).

Rule 3(7) of Companies (Audit and Auditors) Rules, 2014, states that appointment of the Auditor shall be subject to ratification by the members at every Annual General Meeting till the expiry of the term of the Auditor.

At the 90th AGM held on July 14, 2016, the shareholders had ratified the appointment of Walker Chandiok & Co. LLP, Chartered Accountants, Mumbai for the period covering their third year of appointment viz., from the conclusion of the last AGM held on July 14, 2016 until the conclusion of the Annual General Meeting to be held in the financial year 2017-2018.

The said existing appointment of Walker Chandiok & Co. LLP, Chartered Accountants, Mumbai covering their fourth year of appointment viz, from the conclusion of the ensuing AGM in financial year 2017-2018 until the conclusion of the next Annual General Meeting to the held in the financial year 2018-2019, has to be ratified by Members at the forthcoming AGM and accordingly the said proposal is being placed for members'' ratification.

As required under Section 139 of the Companies Act, 2013, the Company has obtained a written consent from the Auditors to such continued appointment and also a certificate from them to the effect that their appointment, if ratified, would be in accordance with the conditions prescribed under the Companies Act, 2013 and the rules made there under, as may be applicable.

29. Statutory Auditors'' Remarks

a. Statutory Auditor''s Qualification :

The Statutory Auditors'' Report to the Members on the Audited Financial Results of the Company for the financial year ended March 31, 2017 contains the following qualification(s) :

As stated in Note 33 to the standalone financial statements, the Company''s non-current investments as at March 31, 2017 include investments aggregating Rs. 630.83 crore in two of its subsidiaries; and non-current loans, other non-current financial assets and other current financial assets as at that date include dues from such subsidiaries aggregating Rs. 512.42 crore, Rs. 38.17 crore and Rs. 4.77 crore, respectively, being considered good and recoverable by the management considering the factors stated in the aforesaid note including valuation report from an independent valuer. However, these subsidiaries have accumulated losses and their net worth is fully / substantially eroded. Further, these subsidiaries are facing liquidity constraints due to which it may not be possible to realize projections made as per business plans. In the absence of sufficient appropriate evidence, we are unable to comment upon the carrying value of these investments and recoverability of the aforesaid dues and the consequential impact, if any, on the accompanying standalone financial statements. Our audit opinion on the standalone financial statements for the year ended March 31, 2016 was also qualified in respect of this matter.

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including Ind AS specified under Section 133 of the Act, of the state of affairs (financial position) of the Company as at March 31, 2017, and its profit (financial performance including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

b. Statutory Auditor''s Qualification on the Internal Financial Controls relating to the above matter:

In our opinion, according to the information and explanations given to us and based on our audit procedure performed, the following material weakness has been identified in the operating effectiveness of the Company''s IFCoFR as at March 31, 2017:

The Company''s internal financial controls in respect of supervisory and review controls over process of determining of (a) carrying value of the Company''s non-current investments in its subsidiaries; and (b) recoverability of non-current loans, other non-current financial assets and other current financial assets due from such subsidiaries were not operating effectively. Absence of aforesaid assessment in accordance with the accounting principles generally accepted in India could potentially result in a material misstatement in the carrying value of investments in such subsidiaries and the aforesaid dues from such subsidiaries and consequently, could also impact the profit (financial performance including other comprehensive income) after tax.

A ''material weakness'' is a deficiency, or a combination of deficiencies, in IFCoFR, such that there is a reasonable possibility that a material misstatement of the company''s annual or interim financial statements will not be prevented or detected on a timely basis.

In our opinion, except for the possible effects of the material weakness described above in the Basis for Qualified Opinion paragraph, the Company has, in all material respects, maintained adequate IFCoFR as at March 31, 2017, based on internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note issued by the ICAI and the Company''s IFCoFR were operating effectively as at March 31, 2017.

We have considered the material weakness identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the standalone financial statements of the Company as at and for the year ended March 31, 2017, and the material weakness has affected our opinion on the standalone financial statements of the Company and we have issued a qualified opinion on the standalone financial statements.

Management Note:

The Company, as at March 31, 2017, has (i) a noncurrent investment amounting to Rs.612.40 crore (March 31, 2016: Rs.612.40 crore; April 1, 2015: Rs.612.40 crore), non-current loans amounting to Rs.380.86 crore (March 31, 2016: Rs.327.01 crore; April 1, 2015: Rs.266.02 crore), other non-current financial assets amounting to Rs.21.72 crore (March 31, 2016: Rs.19.43 crore; April 1, 2015: Rs.25.01 crore) and other current financial assets amounting to Rs.Nil (March 31, 2016: Rs.5.07 crore; April 1, 2015: Rs.3.43 crore) in HREL, a subsidiary, which is holding 68.70% share in Lavasa Corporation Limited (LCL), a step down subsidiary, and (ii) a non-current investment amounting to Rs.18.43 crore (March 31, 2016: Rs.18.43 crore; April 1, 2015: Rs.18.43 crore), noncurrent loans amounting to Rs.131.56 crore (March 31, 2016: Rs.110.21 crore; April 1, 2015: Rs.Nil), other non-current financial assets amounting to Rs.16.45 crore (March 31, 2016: Rs.13.08 crore; April 1, 2015: Rs.14.30 crore) and other current financial assets amounting to Rs.4.77 crore (March 31, 2016: Rs.1.28 crore; April 1,2015: Rs.77.24 crore) in LCL. While such entities have incurred losses during their initial years and consolidated net-worth of both entities as at March 31, 2017 has been fully eroded, the underlying projects in such entities are in the early stages of development and are expected to achieve adequate profitability on substantial completion and/ or have current market values of certain properties which are in excess of the carrying values. The net-worth of these subsidiaries does not represent their true market value as the value of the underlying investments/ assets, based on valuation report of an independent valuer, is substantially higher. Therefore, based on certain estimates like future business plans, growth prospects and other factors, the management believes that the realizable amount of these subsidiaries is substantially higher than the carrying value of the investments, non-current loans, other non-current financial assets and other current financial assets due to which these are considered as good and recoverable.

Based on the above, management believes that the Company''s internal financial control in respect of assessment of the carrying value of investment, recoverability of loans and advances, current and non-current assets in subsidiaries were operating effectively and there is no material weakness in such controls and procedures.

30. Secretarial Audit:

Secretarial Audit for the financial year 2016-2017 was conducted by M/s. BNP &Associates, Company Secretaries in Practice in accordance with the provisions of Section 204 of the Companies Act, 2013. The Secretarial Auditor''s Report is attached to this Report as Annexure VII wherein the following observation has been made by the Secretarial Auditor:

In respect of the Listed Non - Convertible Debentures (NCDs), although the terms got restructured in accordance with the CDR package approved for the Company in 2012 whereby, inter alia, the maturity dates were rescheduled to a later date and the same was intimated to the BSE, to extend the listing for the said NCDs, there was no advise from BSE and the said NCDs got delisted on the expiry of the respective original maturity dates. In view of the delisting, respective compliances under Regulations 50 to 52 and 54 to 62 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 have not been carried out by the Company during the delisted period.

Management Note :

In respect of the Listed Non-Convertible Debentures (NCD) issued to Life Insurance Corporation of India & Axis Bank Limited in 2008 and 2011 respectively, the Company had complied with the provisions of the erstwhile Listing Agreement provisions for debt segment with BSE. The said NCDs were restructured, by extending the tenure of repayment in accordance with CDR Package dated June 29, 2012 and the same was intimated to BSE but was not recorded by them and therefore the listing of these NCDs got expired on the original maturity dates in 2014 & 2015 respectively.

The Company had taken up the matter with BSE to revive the NCDs up to the extended tenure and the same is under their due consideration.

As the NCDs got technically delisted due to reasons cited above and beyond the control of management, respective compliances under Regulations 50 to 52 and 54 to 62 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 were not applicable for the Company during the delisted period. As soon as the listing of these NCDs are revived by BSE, the Company shall carry out the compliances as required under SEBI Listing Regulations.

31. Cost Audit :

In compliance with the provisions of Section 148 of the Companies Act, 2013, the Board of Directors of the Company at its meeting held on July 28, 2016 had appointed M/s. Joshi Apte & Associates, Cost Accountants bearing (Firm Registration No. 00240). as Cost Auditors of the Company for the financial year 2016-2017. In terms of the provisions of Section 148(3) of the Companies Act, 2013 read with Rule 14(a)(ii) of The Companies (Audit and Auditors) Rules, 2014, the remuneration of the Cost Auditors has to be ratified by the members. Accordingly, necessary resolution is proposed at the ensuing AGM for ratification of the remuneration payable to the Cost Auditors for financial year 2016-2017.

32. Risk Management:

The Company has established a well-documented and robust risk management framework under the provisions of Companies Act, 2013. The Company has constituted Risk Management Committee in place, which has been delegated with the authority by the Board to review and monitor the implementation of the Risk Management Policy of the Company.

Under this framework, risks are identified across all business processes of the Company on a continuous basis. Once identified, these risks are managed systematically by categorizing them into Enterprise Level Risk & Project Level Risk. These risks are further broken down into various sub-categories of risks such as operational, financials, contractual, order book, project cost & time overrun etc. and proper documentation is maintained in the form of activity log registers, mitigation, reports; and monitored by respective functional heads. Review of these risk and documentation is undertaken by Risk Review Committee of the management, held at agreed intervals but at-least once in quarter and mainly during Quarterly project reviews.

Risk Review Committee was successful in early identification of financial risk related to borrowing structure & cash flow mismatch due to late realization of claims lodged with clients. These risk were materially mitigated during the year by implementing new financial restructuring scheme introduced by Reserve Bank of India known as ''Scheme for Sustainable Structuring of Stressed Assets (S4A)'' with lenders and issue of guidelines by Cabinet Committee of Economic Affairs (CCEA) for release of 75% of arbitration awards in favour of infrastructure companies, respectively.

On introduction & implementation of new Accounting Standard Indian Accounting Standards (''IND-AS'') under Companies Act, 2013 which is applicable from current year, company in its Notes to Accounts have disclosed risk management objectives and policies for managing financial and reporting risk. (Refer Note 40 of Standalone Financial Statements).

33. Internal Control Systems and their adequacy

The Company has Internal Control Systems, commensurate with the size, scale and complexity of its operations. The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies within the Company. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant observations and corrective actions thereon are presented to the Audit Committee from time to time.

34. Internal Financial Controls and their adequacy

The Company has in place adequate internal financial controls commensurate with the size, scale and complexity of its operations. The Company has policies and procedures in place for ensuring proper and efficient conduct of its business, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information. The Company has adopted accounting policies, which are in line with the Accounting Standards and the Companies Act 2013.

35. Vigil Mechanism Policy:

The Company has a vigil mechanism policy to deal with instances of fraud and mismanagement, if any. The vigil mechanism policy is uploaded on the website of the Company at www.hccinida.com

36. Sexual Harassment:

HCC has always believed in providing a conducive work environment devoid of discrimination and harassment including sexual harassment. HCC has a well formulated Policy on Prevention & Redress of Sexual Harassment. The objective of the policy is to prohibit, prevent and address issues of sexual harassment at the workplace. This policy has striven to prescribe a code of conduct for the employees and all employees have access to the Policy document and are required to strictly abide by it. The policy covers all employees, irrespective of their nature of employment and also applicable in respect of all allegations of sexual harassment made by an outsider against an employee. During the year 2016-2017, no case of Sexual Harassment was reported.

37. Reporting of Frauds :

There have been no instances of fraud reported by the Statutory Auditors under Section 143(12) of the Act and Rules framed there under either to the Company or to the Central Government.

38. Significant and material Orders passed by the Regulators/Courts, if any:

There are no significant or material orders passed by the Regulators or Courts or Tribunals which would impact the going concern status of your Company and its future operations.

39. Material changes & commitment if any, affecting financial position of the Company from the end of financial year till the date of the report:

There have been no material changes and commitments, if any, 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 this Report.

40. Extract of Annual Return:

The details forming part of the extract of Annual Return in prescribed Form MGT 9 is annexed hereto as Annexure VIII and forms the part of this Report.

41. Acknowledgements:

Your Directors would like to acknowledge and place on record their sincere appreciation to all stakeholders clients, Financial Institutions, Banks, Central and State Governments, the Company''s valued investors and all other business partners for their continued cooperation and excellent support received during the year.

Your Directors recognize and appreciate the efforts and hard work of all the employees of the Company and their continued contribution to its progress.

For and on behalf of Board of Directors,

AJIT GULABCHAND

Chairman & Managing Director

Registered Office:

Hincon House, Lai BahadurShastri Marg

Vikhroli (West), Mumbai 400 083

Place : Mumbai

Date : May 4, 2017

Source :
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