Sadbhav Engineering Directors Report, Sadbhav Eng Reports by Directors

Directors Report	Year End : Mar '11

The Members, The Directors have the pleasure in presenting the Twenty Second Annual Report together with the audited statement of accounts for the year ended March 31, 2011. Financial Results (Rs. in crores) Current Year Previous Year 2010-2011 2009-2010 Income from Operations 2209.17 1256.93 Profit before Interest, Depreciation & Tax 245.30 154.31 Less : Interest & Finance Charges 42.69 33.09 Depreciation 26.86 23.25 Profit before Tax 175.75 97.97 Less : Provision for tax 57.56 29.70 Provision for deferred tax liability/(asset) 1.99 3.08 Profit after Tax 116.20 65.19 Add : Excess (Short) provision for taxation of earlier years 3.39 (11.35) Net Profit for the year 119.59 53.84 Balance brought forward from last year 172.56 137.05 Amount available for Appropriations 292.15 190.89 Appropriations Transfer to General Reserve 12.00 6.50 Transfer to Debenture Redemption Reserve 6.00 6.00 Proposed Dividend 8.99 5.00 Tax on Proposed Dividend 1.49 0.83 Balance carried to Balance Sheet 263.66 172.56 Dividend The Directors are pleased to recommend for approval of the shareholders dividend of 60% (Rs. 0.60 per equity share of Re 1 each) for the financial year ended March 31, 2011. The final dividend, if approved, will absorb a sum of Rs. 8.99 Crores and dividend tax of Rs 1.49 Crores. Business Overview The total income from operations during the year under review was Rs. 2209.17 Crores against Rs. 1256.93 Crores for the previous year recording the growth of 75.76% . Operating Profit (PBDIT) for the current year is Rs.245.30 Crores (Rs.154.31 Crores in previous year) thereby recording the growth of 58.96 %. Net Profit after tax is amounted to Rs.119.59 Crores (Rs 53.84 Crores in previous year ) thereby recording a growth of 122.12 %. Operations Ongoing Works The following major works are under execution and the same are progressing satisfactorily. (Rs. in crores) Sector No. of projects Work order Work done Work on hand Roads & Highways 13 7505.31 2871.18 4634.13 Irrigation 12 1457.10 324.63 1132.47 Mining Operation 9 1527.61 707.46 820.15 Total 34 10490.02 3903.27 6586.75 The Company''s order book (pending execution) shows work on hand amounting to Rs. 6586.75 Crores as on the June 30, 2011. New contracts / projects Your Company has been awarded following new contracts/projects during the year and up to the date of this report. Road Sector 1. Improvement/Upgradation Strengthening/Widening of Govindpur-Sahibganj State Road Project (Govindpur-Jamtara Contract Package No. I) by Road construction Department, Govt. of Jharkhand for contract price of Rs. 229.91 crores in joint venture with GKC Projects Ltd.-Hyderabad. Company is leading the joint venture with 50% participation share i.e. for Rs. 114.95 cores. 2. Rehabilitation and Up-gradation to 2-lane with paved shoulders and maintenance of Multai-Chhindwara-Seoni Section of NH-69A and Narsinghpur-Amarwara-Saoner Section of NH-26B in Madhya Pradesh and Maharashtra including construction and maintenance of Ring Road and connecting roads in Chhindwara Town by NHAI for price of Rs. 1411.36 cores. Irrigation Sector 1. Execution of Omkareshwar Right Bank Lift Canal including its distribution network up 40 Ha. Chak for culturable command areas (CCA) of about 29947 Ha. on Turn Keybasis from RD 51.281 to 125. Km (excluding V.R.B. at RD 51.281 Km Wasvi-Sirsodia Road) by Narmada Development Division 20, M.P. for contract value of Rs.349.30 crores in joint venture with GKC Projects Limited Hyderabad. Company is leading the joint venture with 60% participation share. 2. Execution of Omkareshwar Right Bank Lift Canal including its distribution network up 40 Ha. Chak for culturable command areas (CCA) of about 28073 Ha. on Turn Keybasis from RD 0.00 Km to 51.281. Km (including V.R.B. at RD 51.281 Km Wasvi- Sirsodia Road) by Narmada Development Division 20, M.P. for contract value of Rs. 519.93 crores in joint venture with GKC Projects Limited Hyderabad. Company is leading the joint venture with 40% participation share. 3. Work of EPC contract for construction of Radhanpur Sub Branch Canal, Manpura Sub Branch Canal, Distributaries & Minors of Radhanpur Branch Canal, RSBC & MSBC (Earthwork, lining, Structures, Service Road, CR/Escape/HR, Gates, Stop logs, Control Cabin) including Geo Tech investigation, Design of structures and Operation and maintenance for the same for five (5) years for contract price of Rs. 236.20 crores in joint venture with GKC Projects Limited Hyderabad. Company will lead the joint venture with 52% participation share. Mining Sector 1. Blast hole drilling, controlled blasting with shock tube initiation (Nonels), excavation, loading, transportation, dumping, spreading and leveling etc., of 436.50 LBCM over burden, at Manugur OC-II Extension (Phase-II) Project by The Singareni Collieries Company Limited for contract amount of Rs. 182.50 crores in joint venture with GKC Projects Limited � Hyderabad. Company is leading the joint venture with 51% participation share i.e. for Rs. 93.07 crores of which work amounting to Rs. 26.01 crores has been completed. Transfer of BOT Projects Company has entered into Agreement with M/s Norwest Venture Partners (NVP)& The Xander Group Inc (Investors) wherein over a period of time, subject to necessary approvals, consents to the extend required from various authorities shares held by Company in nine of the subsidiaries/ joint venture companies have been/ would be transferred to Sadbhav Infrastructure Project Limited (SIPL) a subsidiary of Company. Investors have invested a sum of Rs. 400.00 croes for acquiring 22.22% stake on fully diluted basis in SIPL. This re-structuring and fund raising would help Company to leverage its finance more effectively and raising funds for the new project would now be done through SIPL. Company now holds around 83% equity in SIPL and accounts of SIPL along with subsidiaries/ joint venture companies have been consolidated with the financials of Company. Brief summary of each of the Project is as under : Name of the Details of Project Cost of the Company Project (Rs. in Crores) Mumbai-Nasik Vadape-Gonde 4 Lane BOT project 794.58 Expressway Limited for widening the existing two-lane (MNEL) of 99.50 Kms to four lanes and its operation and maintenance. Ahmedabad Ring 4-laning the present 76.21 km two- 500.80 Road Infrastructure lane ring road around Ahmedabad Ltd. (ARRIL) city and its operation & maintenance Aurangabad-Jalna Widening the existing two-lane 277.00 Tollway Ltd. stretch of 65.80 kms to four lanes (AJTL) and its operation and maintenance Nagpur Seoni - Rehabilitation and upgrading to 489.70 Expressway Ltd. four lane from km. 596/750 to km. (NSEL) 653/225 on NH-7 in the state of Madhya Pradesh under North- South Corridor (NHDP Phase II) on BOT-Annuity basis. - The project is a 51:49 joint venture between the Company & its associates and SREI Infrastructure Finance Limited. Dhule Palesner - Design, Engineering, Finance, 1420.00 Tollway Ltd. Procurement, Construction, (DPTL) Operation and Maintenance of 4/6 laning of MP/ Maharashtra Border- Dhule section of NH- 3 from km 168.500 to km 265.000 in the State of Maharashtra under NHDP Phase IIIA on BOT (Toll) Basis - The project is in joint venture between the Hindustan Construction Company Ltd., John Laing Investment Ltd and Company & its associates in a ratio of 37:36:27 respectively Maharashtra Border - Modernization and computerization 1426.37 Check Post Network of integrated border check posts Ltd. (MBCPL) at 22(Twenty Two) locations in the State of Maharashtra on Build Operate and Transfer (BOT) Basis. - The project is in joint venture between Company & its associates,, SREI Infrastructure Finance Limited and SREI Sahaj e-village Limited in ratio of 90:05:05 respectively Hyderabad-Yadgiri - Design, Engineering, Construction, 480.22 Tollway Pvt. Ltd. Development, Finance, Operation and Maintenance of four laning of Hyderabad- Yadgiri Section from km 18.600 to km 54.000 of NH-202 in the state of Andhra Pradesh under NHDP Phase-III on DBFOT (Toll) Basis Package No. NHDP-III/ BOT/AP/04. - Equity component of the project shared by Sadbhav Infrastructure Project Ltd., and GKC Projects Ltd in ratio of 60:40 respectively Rohtak-Panipat Four laning of Rohtak to Panipat 1213.40 Tollway Pvt. Ltd. Section of NH-71A from km 0.000 Km 63.30 of NH-10 to km 80.858 Km 83.50 of NH-1 in the state of Haryana on BOT basis under NHDP Phase-III Bijapur-Hungund - Project consists of four laning of 1257.10 Tollway Pvt. Ltd. Bijapur � Hungund Section of NH-13 from km 102.000 to km 202.000 in the state of Karnataka on Design, Build, Finance, Operate and Transfer (DBFOT), Toll basis under NHDP Phase-III Package No. NHDP-III/BOT/KNT/05 - Equity component of the project shared by Sadbhav Infrastructure Project Ltd., and Monte Carlo Construction Ltd. in ratio of 77:23 respectively. Name of the Company Status Toll Revenue % Shareholding as on of the SEL SIPL 30/06/2011 F.Y. 2010-11 (Rs. in Crores) Mumbai-Nasik Expressway Limited (MNEL) Completed 51.26 20 - (except one ROB for which Work In Progress) Ahmedabad Ring Road Infrastructure Ltd. (ARRIL) Completed 63.42 - 80 Aurangabad-Jalna Tollway Ltd. (AJTL) Completed 23.69 - 51 (except ROB for which Work In Progress) Nagpur Seoni Expressway Ltd. (NSEL) Expenditure - 51 - to the extent of Rs. 292.89 Crore has been incurred. Project is under suspension and matter is subjudice. Dhule Palesner Tollway Ltd. (DPTL) 949.00 - 27 - (as on 15th July 2011) Maharashtra Border Check Post Network Ltd. (MBCPL) 475.39 - 63 27 Hyderabad-Yadgiri Tollway Pvt. Ltd. 232.99 - - 60 Rohtak-Panipat Tollway Pvt. Ltd. 149.12 - - 100 Bijapur-Hungund Tollway Pvt. Ltd. 790.06 - - 77 Joint Ventures The Company has the following joint ventures � SEL- GKC Joint Venture : Over and above the Road, Irrigation and Mining Projects as mentioned above, Company is executing following projects in Joint Venture with GKC Project Ltd. 1. Earth work excavation, forming embankment and construction of CD & CM works of main canal and distributory system upto water course level and CC lining to main canal and other allied works including investigation, designing and estimation of Gouravelly right side canal from km 0.000 to 47.725 and left side canal in Karimnagar District. The cost of the project is Rs. 166.88 croes of which company''s share is 52 % i.e. Rs.86.78 crores of which work amounting to Rs.36.93 crores has been completed. 2. Investigation, design and execution of Canal Network System including Earth work Excavation and Forming Embankment, Construction of CM & CD Works and lining of canals up to sub minors and formation of Field Channels including Structures to serve an ayacut of 58800 Acres in Karimnagar Dist under Kodlmial, Potharam Surampet Lachupet and New tanks at 450 and its Concerned Gravity Canals ( Canal Network Package III). The cost of project is Rs. 99.31 crores of which company''s share is 52% i.e Rs. 51.64 crores of which work amounting to Rs. 16.33 crores has been completed. 3. Investigation, Survey, Design and Construction of Bus Rapid Transit System (BRTS) corridor from Pendurthi to DRM Office (PTC Corridor) via NAD Jn, Kancharapalem, Railway Station with 2 years defect liability period under EPC(Design & Build) system. The cost of project is Rs. 165.54 crores of which company''s share is 50% i.e. Rs. 82.77 crores of which work amounting to Rs. 47.46 crores has been completed. Sub Division of Equity Shares : Pursuant to the approval of Shareholders through the process of Postal Ballot nominal value of Equity Share of Rs. 10/- has been sub-divided in to 10 Equity Shares of Re 1/- each. Right Issue : Through letter of offer dated August 04,2010 Company made Right Issue of 6,25,000 equity shares of Rs. 10 each for cash at premium of Rs. 715 per equity share aggregating Rs. 45.31 crores . As per terms of offer, allottees in Right Issue were also allotted 3 Detachable Warrants for every one equity share. Right Issue which opened for subscription on August 18,2010 closed on September 6, 2010 was oversubscribed. Allotment of 6,25,000 equity shares were made on September 16,2010. The details of utilization of fund v/s projection made in Letter of offer dated August 04, 2010 are as under : (Rs. in crores) Particulars Proposed Utilized up to Balance Utilization 31/03/ 2011 Funds Investment in projects directly or through Subsidiaries/Joint Ventures/Spvs 18.48 18.48 0.00 Margin Money/ investment for purchase of Capital Equipment 16.45 4.27 12.18 General Corporate Purposes 8.66 8.66 0.00 Issue Expenses 1.72 1.44 0.28 Total 45.31 32.85 12.46 As per the terms of offer document, untilised balance fund has been utilized towards working capital requirement. Allotment of Detachable Warrants : As per the terms of Right Issue, Company has issued and allotted 18,75,000 the Detachable Warrants convertible in to equal number of Equity Shares of Rs. 10/- each on September 16,2010, which were due for conversion into Equity Shares between December 16,2010 to March 15,2012 (Warrant Exercise Period) at an exercise price of Rs. 425/-. The said Detachable Warrants were subsequently adjusted to 1,87,50,000 Detachable Warrants convertible in to equal number of Equity Shares of Re 1/- each at price of Rs. 42.50/- per share on account of split of the face value of Equity Share from Rs. 10 each to Re 1/- per share. Thereafter as per letter of offer, on December 18, 2010, Board of Directors exercised Call Option for compulsory conversion of Detachable Warrants into Equity Shares. The details of the allotment made on exercise of conversion of the Detachable Warrants by warrant holders are as under : Particulars No. of Equity Shares Allotted Date of Allotment Voluntary Conversion- First Tranche 1278120 5/1/2011 Voluntary Conversion- Second Tranche 2524490 19/01/2011 Compulsory Conversion- Exercise of Call Option 14823190 24/02/2011 Total 18625800 No of Warrants lapsed since not applied for conversion 124200 Total 18750000 Company received Rs. 79.16 crores towards subscription of Detachable Warrants. Employee Stock Option Scheme : The Company implemented the ''Sadbhav Employee Stock Option Scheme 2008 (ESOS Scheme 2008) pursuant to the resolution passed by the members at the 19th Annual General Meeting held on September 27, 2008. The Remuneration Committee of Board at its meeting held on October 04, 2010 granted 2,50,000 Employee Stock Options exercisable into 2,50,000 Equity Shares of Rs. 10 each, to eligible employees at a price of Rs.500/- per share. The said 2,50,000 Employee Stock Options were subsequently sub-divided in to 25,00,000 to match the reduced nominal value of Re 1. Remuneration Committee administers and monitors the Scheme. The applicable disclosures as stipulated under SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999, is provided in Annexure-I forming part of this report. Company has received certificate from Auditors of Company confrming that scheme has been implemented in accordance with SEBI Guidelines and resolution passed by Shareholders. Auditors certificate would be placed at Annual General Meeting for inspection by members. Search and Seizure Operation under Income Tax Act : During the period under review search and seizure operation under section 132 of the Income Tax Act, 1961 had taken place in the premises of the Company and its Directors. During the course of search no seizure was made by the Income tax department and the Company has not disclosed any undisclosed income. No demand notice of income tax has been served on Company till date pursuant to the said search. Subsidiary Company Pursuant to the General Exemption granted by Central Government vide General Circular No. 2/2011 dated February 08, 2011 and the resolution passed by the Board of Directors on April 20, 2011, copies of Balance Sheet, Profit and Loss Account, Report of Board of Directors and the Report of the Auditors of subsidiary companies have not been attached with the Annual Accounts of the Company under Section 212 of Companies Act 1956. As required under the circular statement giving required details is enclosed with the consolidated balance sheet. The Company will keep these documents at the Registered Office of the Company and its subsidiaries and make them available upon the request by any shareholder of Company. Consolidation of Accounts Further pursuant to the Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statement presented by the Company includes the financial statement of its subsidiaries which have commenced activities. Fixed Deposit The company has not accepted any deposits as defined under Section 58A of the Companies Act, 1956 read with the Companies (Acceptance of Deposits) Rules, 1975, as amended, during the year under review. Directors Shri Atul N. Ruparel and Shri Sandip V. Patel are the directors liable to retire by rotation at the ensuing Annual General Meeting and, being eligible, offer themselves for reappointment. Directors'' Responsibility Statement Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors'' Responsibility Statement, it is hereby confrmed that � (i) in the preparation of the annual accounts, accounting standards have been followed along with proper explanation relating to material departure; (ii) such accounting policies have been selected and applied consistently and have made judgments and estimates reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at March 31, 2011 and the Profit of the Company for the year ended on that date; (iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and (iv) the accounts have been prepared on a ''going concern'' basis. Auditors : M/s. Shashikant Patel Associates, Chartered Accountants, the Statutory Auditors, retire at the ensuing Annual General Meeting and are eligible for re-appointment. Your Directors have recommended the re-appointment of M/s. Shashikant Patel Associates, Chartered Accountants as Auditor of the Company. The Auditor''s have confrmed that their appointment, if made, would be within limit prescribed under Section 224(1B) of the Companies Act, 1956 and they are not disqualified, within the meaning of Sub- sections (3) and (4) of Section 226 of the Companies Act, 1956. Auditors'' Report : The Auditors'' have not made any adverse comments / remarks which requires clarification from the Directors of Company and accordingly no further explanation has been provided by the directors in term of section 217 of the Companies Act, 1956. Corporate Governance The Company has been proactive in following the principles and practices of good corporate governance. The Company has ensured that the Corporate Governance requirements as stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges are duly complied with. A report on Corporate Governance along with a certificate from the Auditors regarding compliance of Clause 49 of Listing Agreement is annexed. Industrial Relations The Company enjoyed cordial relations with the employees during the year under review and the Management appreciates the employees of all cadres for their dedicated services to the Company. Particulars of Employees Information as per Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, is given in the Annexure-II and forms part of this Report. Energy Conservation, Technology Absorption and Foreign Exchange Earning and Outgo The rules regarding conservation of Energy and Technology Absorption are not applicable to the Company. The particulars of the expenditure in Foreign Currency and earning in Foreign Exchange are given in Notes to Accounts (Schedule 23). Acknowledgements The Directors wish to express their appreciation for the support and co-operation of the Central and State Government, Bankers, Financial Institutions, Suppliers, Vendors, Associates, Subcontractors and Shareholders during the year under review. Your Directors wish to place on record their appreciation for the employees of the Company at all levels for their commitment, dedication and continued support to the Company. For and on behalf of the Board of Directors Place : Ahmedabad Vishnubhai M. Patel Date : July 30, 2011 Chairman

Source : Dion Global Solutions Limited

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