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Aarvi Encon Ltd.

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Series: EQ | ISIN: INE754X01016 | SECTOR: Diversified

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Annual Report

For Year :
2018

Director’s Report

Dear Members,

The Directors have pleasure in presenting the Board''s Report on the affairs of the Company together with the Audited Financial Statements for the year ended on 31st March, 2018.

FINANCIAL HIGHLIGHTS/PERFORMANCE OF THE COMPANY

The financial results for the year ended on 31st March, 2018 and the corresponding figures for the previous year are as under;

1. HIGHLIGHTS

Consolidated Performance

Your Company has reported growth in revenue and significant increase in the net profit for the year ended on 31st March 2018. Revenue from operations at Rs. 173.48 Cr. as against Rs. 153.19 Cr. of previous year increased by 13.24% year on year, reflecting better results than the previous year performance in key markets and segments. Operating profit at Rs. 9.54 Cr. as against Rs. 7.11 Cr. of previous year. The Operating Profit increased by 34.17% of previous year. This was good financial year for the company.

4. STANDALONE PERFORMANCE

The Company has reported growth in revenue and significant increase in the net profit for the year ended on 31st March 2018. Revenue from operations at Rs. 168.87 Cr. as against Rs. 146.22 Cr. of previous year increased by 15.49% year on year, reflecting better results than the previous year performance in key markets and segments. Operating profit at Rs. 8.05 Cr. as against Rs. 5.27 Cr. of previous year. The Operating Profit increased by 52.75% of previous year. This was very good financial year for the company.

Standalone (Rs. in crores)

Consolidated (Rs. in crores)

Particulars

Year ended 31st March, 2018

Year ended 31st March, 2017

Year ended 31st March, 2018

Year ended 31st March, 2017

Net Revenue from Operations

168.87

146.22

173.48

153.19

Other Income

1.21

0.33

1.52

0.33

Total Income

170.09

146.55

175.01

153.53

Total Expenditure

162.03

141.28

165.47

146.41

Profit before tax

8.05

5.27

9.54

7.11

Provision for taxes

Current Tax

1.89

1.76

1.77

1.76

Profit after taxes

6.16

3.50

7.77

5.35

2. DIVIDEND

The Board of Directors of the Company has recommended a dividend @5% i.e 0.50 per fully paid-up Equity Share of Rs.10/- each of the Company subject to the approval of the Members at the ensuing Annual General Meeting, for the financial year 2017-18

3. RESERVES

The Balance in Reserves & Surplus stands at Rs. 43,74,22,882/- in comparison with the previous year balance of Rs. 30,09,64,624/-.

4. CONVERSION OF COMPANY

During the year, the Company has been converted from Private Limited Company to Public Limited Company and fresh certificate of incorporation dated 05th July, 2017 to that effect, has been issued by the Registrar of Companies, Mumbai. Consequent to the Conversion of th Company, the name of the Company has been changed from Aarvi Encon Private Ltd to Aarvi Encon Ltd.

5. SUCCESSFUL INITIAL PUBLIC ISSUE (IPO) OF THE COMPANY

Your Directors are pleased to inform you that the Initial Public Offering (IPO) of the Company was successfully completed. The company entered the capital market with its maiden initial public offering (IPO) of 39,40,000 equity shares of face value of Rs. 10/- and at a premium of Rs. 44/- per share, aggregating to Rs. 21,24,36,000/-.

The issue opened for subscription on September 21, 2017 and closed on September 26, 2017 and was oversubscribed by 1.43 times. The equity shares have been listed on the SME Emerge Platform of National Stock Exchange of India Ltd (NSE) w.e.f October 05, 2017. Consequently, the Company''s paid up capital has increased from Rs. 10,85,00,000/- to Rs. 14,78,40,000/

6. SHARE CAPITAL

The Paid-up Capital of the Company as on March 31,2017 was Rs. 3,10,00,000 /- comprising of 3,10,000 equity shares of Rs.100/- each. During the year under review, the Company has sub-divided its nominal value of equity shares of Rs. 100 each fully paid up into 10 (Ten) Equity Shares of the nominal face value of Rs. 10/each fully paid up as approved by the members in its meeting held on 28th April, 2017. The Company had also issued 77, 50,000 equity Shares of Rs. 10/- each as Bonus Shares as approved by shareholders in their meeting held on 17th July 2017 in the ratio of 5:2 and allotted to the shareholders at its'' Board Meeting held on 26th July 2017, Further the Company has issued 39,34,000 Equity Shares of Rs. 10/- Each at Premium of Rs. 44/- per share to the general public via IPO. The total paidup Share Capital of the company is 14,78,84,000/divided into 1,47,84,000/- equity shares of Rs.10/- each.

7. DEPOSITORY SYSTEM

Your Company''s equity shares are in demat form only. The Company has appointed National Securities Depository Limited and Central Depository Services India Limited as depositories to the Company.

8. DETAILS OF THE DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review, in view of the listing requirements the Company has appointed three Independent Directors i.e Mr. Devendra J Shrimanker, Mrs. Sonal N. Doshi on 03rd June, 2017 and Mrs. Padma V Devarajan on 01st February, 2018 to the Board to meet the proper composition of the Board of Directors. Apart from the Directors, the Company has appointed Mr. Jaydev V. Sanghavi as Chief financial officer (CFO) on 03rd June, 2017 and Mr. Jay H.Shah as Company Secretary cum Compliance Officer as the Key Managerial Personnel of the Company on 17th July, 2017.

Mr. P N Devarajan, an Independent Director of the Company expired on 02nd November, 2017. He was appointed on the Board of the Company in 2008, Mr. Devarajan had an experience of more than 3 decades in Chemical Industry. He has held senior positions in many organizations such as M/s. Merck Sharp and Dhome of India, Chemicals & Plastics India Limited, Shriram Chemicals & Fertilizers Limited, Reliance Industries Ltd, Essar Group , etc. and the Company immensely benefitted from his contribution, vision and leadership during his tenure. He had a great energy and contributing capacity in every human being with whom he was working. He was associated with many social work organizations in India over the past many years, his guidance and strength will be missed.

The Board has noted his valuable contribution to the Company since his appointment on the board in the year of 2008.

9. DECLARATION BY INDEPENDENT DIRECTORS

The Independent Directors of the Company, Mr. Devendra J Shrimanker, Mrs. Sonal N Doshi and Mrs. Padma V Devarajan, Independent Directors of the Company have confirmed to the board that they meet the criteria of independence as specified under section 149 (6) of the Companies Act, 2013.

The Board took note of the same.

10. BOARD COMMITTEES FORMED DURING THE YEAR

During the year under review, the following committees have been formed by the Company:

a) Audit Committee

b) Nomination and Remuneration Committee

c) Corporate Social Responsibility Committee

d) Stakeholder Relationships Committee

e) Finance and Management Committee

The details of all the Committees of the Board along with their composition and meetings held during the year are provided in the Report on Corporate Governance which forms part of this Annual Report.

11. NO. OF MEETINGS HELD

The details of the meeting of the Board along with their composition and meetings held during the year are provided in the Report on Corporate Governance which forms part of this Annual Report.

12. BOARD EVALUATION

The Companies Act, 2013 states that a formal annual performance evaluation needs to be made by the Board of its own performance, the directors individually as well as the evaluation of its Committees. As per Schedule IV of the Companies Act, 2013, the performance evaluation of independent directors, shall be done by the entire Board of Directors, excluding the director being evaluated. The evaluation of all directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board.

13. RELATED PARTY TRANSACTIONS

All related party transactions have been entered by the Company during the financial year in the ordinary course of business and at the arm''s length price. During the financial year under consideration the Company has entered into contracts / arrangements / transactions with related parties, which could be considered as material in accordance with the provisions of the Act, have been given in ''''Annexure I in Form No. AOC-2.”

14. STATUTORY AUDITOR

At the 29th AGM of the Company held on 15th July, 2017, M/s. Arvind H. Shah & Co., Chartered Accountants, having registration number (ICAI Firm Registration No. 100577W), were appointed as Statutory auditors of the Company for a term of five years i.e. till the conclusion of 34th Annual General Meeting subject to the ratification at the annual general meeting in each of the subsequent years during the aforementioned term of their appointment.

However, with the Notification dated 07th May, 2018 issued by the Ministry of Corporate Affairs (MCA), the first proviso to section 139(1) of the Companies Act, 2013 pertaining to the requirement of annual ratification of appointment of auditors by members is omitted. Accordingly, as per the Companies (Amendment) Act, 2017, ratification of the appointment of Statutory Auditors during their period of appointment will not be considered.

15. AUDITORS'' REPORT

The report of the statutory auditors on Standalone Financial statements as well as Consolidated Financial Statements forms a part of the Annual Report. There were no adverse remarks/qualified remarks given by the Statutory Auditor on the financials of the company.

16. SECRETARIAL AUDIT REPORT

In terms of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Company has appointed, M/s. Sunil Agarwal & Co., Practicing Company Secretaries, Mumbai (CP No. 3286) as a Secretarial Auditors of the Company. The report of the Secretarial Auditors is enclosed as Annexure II to this report. The report is self-explanatory and do not call for any further comments.

17. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

As per the provision of Section 138 of the Companies Act, 2013, the Company has devised a proper system to check the internal controls and functioning of the activities and recommend ways of improvement. Internal Audit is carried out timely. The internal financial controls with reference to financial statements as designed and implemented by the Company. During the year under review, no material or serious observation is received from the Internal Auditor of the Company for inefficiency and inadequacy of such controls.

18. EXTRACT OF ANNUAL RETURN

As required pursuant to section 92(3) of the Companies Act,2013 and Rule 1 2(1 ) of the Companies (Management and Administration) Rules, 2014, an extract of annual return in MGT 9 as a part of this Annual Report as Annexure - III.

19. 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 THE REPORT

1. The Company has purchased office premises no. B2/901 located at 9th Floor, Marathon Innova, Marathon Nextgen Complex, Opp. Peninsula Corporate Park, Lower Parel (West), Mumbai - 400013 admeasuring 1567 Sq. ft. (Carpet Area) for a Consideration of Rs. 5,30,00,000/-.

2. The Company has sold its office premises unit no. 101 owned by Aarvi Engineering & Consultant Private Limited, a Wholly Owned Subsidiary of the Company for a consideration of Rs. 74,25,000/- and Unit No. 102 owned by the Company for a consideration of Rs. 1,18,80,000/- in A - Wing, on the first floor in Techno city Building situated on the Plot No. X - 4/1 & X - 4/2 in the Trans Thane Creek Industrial Area, MHAPE Village, Navi Mumbai.

Apart from aforesaid transactions, there is no other material transaction occurred during the year.

20. CORPORATE SOCIAL RESPONSIBILITY

As per Section 135 of the Companies Act, 2013, the Company has formulated a Corporate Social Responsibility (CSR) Committee and recommended to the Board a CSR Policy indicating the activities to be undertaken by the Company and the same was duly approved by the Board. The CSR Policy can be accessed on the Company''s website i.e www.aarviencon.com

During the year the Company has spent Rs. 12,04,700/On CSR Activities. The Report on the CSR Activities is annexed herewith marked as Annexure IV to the _Boards Report.

21. VIGIL MECHANISM

Pursuant to the provision of Section 177(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meeting of Board and its Powers) Rules, 2014, a Vigil Mechanism Policy for Directors and Employees of the Company is in place, to report their genuine concern of any violation of legal or regulatory requirements, incorrect or misrepresentation of any financial statements and reports, unethical behavior, actual or suspected fraud or violation of the Company''s code of conduct etc. during the year under review, no such complaints were received.

The details of the Vigil Mechanism Policy are available on the website of the Company i .e www.aarviencon.com

22. THE CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO, IN SUCH MANNER AS MAY BE PRESCRIBED;

The information pertaining to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and outgo as required under Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are as stated below:

A) Conservation of Energy

1. The steps taken or impact on conservation of energy;

The Company applied strict control system to monitor day to day power consumption. The Company ensures optimal use of energy with minimum extent of wastage as far as possible. The day to day consumption is monitored in an effort to save energy.

2. The Capital Investment on Energy Conservation Equipment.

The Company has not made any capital investment on energy conservation equipment.

B) Technology Absorption:-

The Company has no activities relating to technology absorption.

c) Foreign Exchange Earnings and Outgo;

Particulars

2017 - 18

2016 - 17

Foreign Exchange Earnings

Rs. 4,22,927/-

Rs. 1,77,96,974/-

in terms of actual inflows

Foreign Exchange outgo

Rs. 15,36,828/-

Rs. 38,52,783/-

in terms of actual outflow

23. REVIEW OF SUBSIDIARY AND ASSOCIATE COMPANIES:-

As required under Companies Act, 2013, the audited consolidated financial statements of the company incorporating all its subsidiary and associate companies prepared with applicable Accounting Standards are attached.

Aarvi Engineering & Consultants Private Limited, a Wholly Owned Subsidiary of the company engaged in Consultancy Services has not performed well in the financial year 2017-18. The company is unable to acquire projects during the financial year 2017-18. The accounts of Aarvi Engineering & Consultants Private Limited are consolidated with the accounts of the company according to the provisions of Companies Act, 2013, Income Tax Act, 1961 and read with application Accounting Standard issued by ICAI.

Aarvi Encon FZE is a Wholly Owned Subsidiary of Aarvi Encon Limited. Aarvi Encon FZE has generated Rs. 4,60,79,026/- as revenue during the Financial Year under consideration. Salient features of subsidiary Companies is annexed as Annexure - V in form no.AOC-3

Apart from these the Company expects and committed to increase its presence on pan India basis. The Company is continuously exploring new avenues of business.

24. SIGNIICANT AND MATERIAL ORDERS PASSED BY REGULATORS OR COURTS OR TRIBUNALS IMPARTING THE GOING CONCERN STATUS AND COMPANY'' OPERATION IN FUTURE

There are no significant and material orders passed by regulators or courts or tribunals imparting the going concern status and Company'' operation in future.

25. DEPOSITS

Your Company did not accept/ hold/ any deposits from public/shareholders during the year under review.

26. PARTICULARS OF LOAN, GUARANTEE OR INVESTMENTS

The Company has not given any loan or guarantee covered under provision of Section 186 of the Companies Act, 2013.

27. OBLIGATION OF COMPANY UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

In accordance with Sexual Harassment of Women at Work place (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed their under, the Company has formed an Internal Complaints Committee and also framed and adopted the policy for Prevention of Sexual Harassment at Workplace. The following is the summary of Sexual Harassment complaints received and disposed off during the year 2017-18.

No. of Complaints received : NIL

No. of Complaints Disposed off : NIL

28. STATEMENT OF DEVIATION AND/OR VARIATION IN UTILIZATION OF PUBLIC ISSUE PROCEEDS PURSUANT TO REGULATION 32 OF SEBI (LISTING OBLIGATION AND DISCLOSURE REQUIREMENTS) REGULATION, 2015

As per Regulation 32 of SEBI (Listing Obligation and Disclosure Requirements) Regulation, 2015 the listed entity shall submit to the stock exchange the statement indicating deviation, if any in the use of proceeds from the objects stated in the offer document, indicating category wise variation (capital expenditure, sales and marketing, working capital etc.) between projected utilization of funds made by it in its offer document, as applicable and the actual utilization of funds.

Accordingly the Company has submitted its aforesaid statement as under;

Sr.

No.

Particulars

As per the Prospectus dated 14th September, 2017

Actual Utilization of Issue Proceeds till 31/03/2018

Unutilized Issue Proceeds till 31/03/2018

Deviation, if any.

1.

Working Capital Requirements

1078.00

1485.40

-

407.40

2.

Acquisitions and Other Strategic Initiatives

400.00

-

400.00

-

3

General Corporate Purposes

415.00

-

-

(415.00)

4.

Issue Expenses

231.36

238.96

-

7.60

Total:-

2124.36

1724.36

400.00

29. HUMAN RESOURCES

Your Company treats its human resources as one of its most important assets. Your Company continuously invest in attraction, retention and development of talent on an ongoing basis. A number of programs that provide focused people attention are currently underway. Your Company thrust is on the promotion of talent internally through job rotation and job enlargement.

30. PARTICULARS OF EMPLOYEES

The Company has no employee, who is in receipt of remuneration of Rs. 8,50,000/- per month or Rs.1,02,00,000 per annum and hence the Company is not required to give information under sub rule 2 and 3 of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

31. CREDIT RATING

Your Company''s Domestic Credit Rating is CRISIL SME Rating 1 for the long-term debt /facilities/NCDs by CRISIL. CRISIL has assigned the BBB/STABLE upgraded from BBB -/STABLE for long term borrowings and A3 upgraded from A3 for short term borrowings. The Credit Rating derive strength from the operational track record of the Company, cost competitiveness, flexibility derived from diversified services and the Company'' s effort to reduce cost and to improve cost efficiency.

32. DIRECTORS'' RESPONSIBILITY STATEMENT

The Directors'' Responsibility Statement referred to in clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, shall 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) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

(c) They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) They have prepared the annual accounts on a going concern basis;

(e) They have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively and

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

33. LISTING WITH STOCK EXCHANGES

Aarvi Encon Limited listed its shares on the SME Emerge Platform of NSE Limited on October 05, 2017.The listing fees duly paid to the exchange and annual custodial fees has been paid to CDSL and NSDL for the F.Y. 2018 -19.

34. ACKNOWLEDGEMENT

Your Directors takes this opportunity to thank all Government Authorities, Bankers, Shareholders, Registrar & Transfer Agents, Investors and other Stakeholders for their assistance and co-operation to the Company. Your Directors express their deep sense of appreciation and gratitude towards all employees and staff of the company and wish the management all the best for further growth and prosperity.

For and on behalf of the Board

Aarvi Encon Limited.

Sd/- Sd/-

Virendra D. Sanghavi Jaydev V. Sanghavi

Managing Director Executive Director

DIN: 00759176 DIN:- 00759042

Date: 19/05/2018

Place: Mumbai

Director’s Report