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ILandFS Engineering and Construction Company

BSE: 532907|NSE: IL&FSENGG|ISIN: INE369I01014|SECTOR: Construction & Contracting - Civil
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Notes to Accounts Year End : Mar '18

1. Corporate information:

IL&FS Engineering and Construction Company Limited (IECCL or the Company) is a public company domiciled in India. The Company is primarily engaged in the business of erection / construction of roads, irrigation projects, buildings, oil & gas infrastructure, railway infrastructure, power plants, power transmission & distribution lines including rural electrification and development of ports. The equity shares of the Company are listed on National Stock Exchange of India Limited (“NSE”) and BSE Limited (BSE).

2. Basis for preparation of financial statements:

A. Statement of compliance

The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under Section 133 of Companies Act, 2013 (the ‘Act’), the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.

The financial statements up to and for the year ended March 31, 2017 were prepared in accordance with the Companies (Accounting Standards) Rules, 2006 (as amended), notified under Section 133 of the Act and other relevant provisions of the Act.

As these are the Company’s first standalone financial statements prepared in accordance with Indian Accounting Standards (Ind AS), Ind AS 101, First-time Adoption of Indian Accounting Standards has been applied. An explanation of how the transition to Ind AS has affected the previously reported financial position, financial performance is provided in note 49.

The standalone financial statements were authorised for issue by the Company’s Board of Directors at its meeting held on May 30, 2018.

Details of the Company’s accounting policies are included in Note 3.

B. Functional and presentation currency

These standalone financial statements are presented in Indian Rupees (Rs.), which is also the Company’s functional currency. All amounts have been rounded-off to two decimal places to the nearest crores, unless otherwise indicated.

C. Basis of measurement

The standalone financial statements have been prepared on the historical cost basis expect for the following items:

D. Use of estimates and judgements

In preparing these standalone financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively,

Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending March 31, 2018 is included in the following notes:

- Note 35 - measurement of defined benefit obligations: key actuarial assumptions;

- Notes 13, 20 and 31 - recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources;

- Note 4 - useful life and depreciation of property, plant and equipment

- Note 5 - useful life and amortisation of intangible assets.

- Note 6 to 9 - impairment of financial assets. Judgements

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the standalone financial statements is included in the following notes:

- Note 11 and 22 - The Company uses the percentage-of-completion method (POCM) in accounting for its long term construction contracts. Use of POCM requires the Company to estimate the contract revenue and total cost to complete a contract. Changes in the factors underlying the estimation of the contract revenue and total contract cost could affect the amount of revenue recognized.

- Note 13 - Deferred tax assets are recognized for unused unabsorbed depreciation to the extent it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgement is required to determine the amount of deferred tax asset that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

- Note 7, 8, 9 and 11 - Determining the amount of expected credit loss on financial assets (including trade receivables, loans and unbilled revenue).

E. Measurement of fair values

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

- In the principal market for the asset or liability or

- In the absence of a principal market, in most advantageous market for the asset or liability

The Principal or the most advantageous market must be accessible by the Company,

The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financials statement are categories within in the fair value hierarchy described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

- Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities

- Level 2: Valuation techniques for which the lowest level inputs that is significant to the fair value measurement is directly or indirectly observable

- Level 3: Valuation techniques for which the lowest level inputs that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

External valuers are involved for valuation of significant assets, such as properties and significant liabilities, such as contingent consideration.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

Further information about the assumptions made in the measuring fair values is included in the following notes:

- Note 40 - share-based payments

- Note 48 - financial instruments.

1. Plant and machinery - construction equipment includes shuttering and scaffolding material [Rs. 51.05 (March 31, 2017 : Rs. 48.28, April 1, 2016 : Rs.33.51)].

Net block value of this shuttering and scaffolding material is Rs. 31.65 (March 31, 2017 : Rs. 37.95, April 1, 2016 : Rs. 33.51).

2. Plant and machinery - construction equipment includes equipment given on operating lease 3. Plant and machinery - construction equipment includes purchased on Finance lease

Aggregate amount of provision for diminution in value of investments is Rs.9.52 (March 31, 2017: Rs.9.52, April 1, 2016: Rs.8.78)

*Pledged in favour of Infrastructure Leasing and Financial Services Limited and IL&FS Financial Services Limited

**In the previous year, Rs.25.37 of sub-debt given to Bangalore Elevated Tollway Private Limited (BETPL) was converted into 0.001% non-covertible debentures as at March 31, 2017, which were credited into the Company’s demat account during the current year.

@ Hypothecated to Infrastructure Leasing and Financial Services Limited

* includes Inter-corporate deposits to Angeerasa Greenfields Private Limited (a subsidiary of the Company) Rs.50 (March 31, 2017 : Rs.50, April 1, 2016 : Rs. 50) (Refer note 37).

@ During the previous year, loan given to BETPL amounting to Rs.25.37 had been converted to 0.001% non-convertiable debentures as at March 31, 2017, which were credited into the Company demat account during the current year, hence classified under Investments during the year.

#Security deposit (current) for the year includes Rs.81.64 (March 31, 2017: Rs. Nil and April 1, 2016: Rs. Nil) of short-term deposits placed with related parties (Refer note 37),

225.000 (March 31, 2017 : 225,000, April 1, 2016 : 525,000) 6% cumulative redeemable preference shares (CRPS) of Rs.100 each fully paid-up total face value of Rs.2.25 (March 31, 2017 : Rs.2.25 and April 1, 2016 : Rs.5.25) are classified as financial liability (Refer note 16)

3.750.000 (March 31, 2017 : 3,750,000, April 1, 2016 : 8,750,000) 6% optionally convertible cumulative redeemable preference shares (OCCRPS) of Rs.100 each fully paid-up total face value of Rs.37.50 (March 31, 2017 : Rs.37.50 and April 1, 2016 : Rs.87.50) are classified as financial liability (Refer note 16)

(b) The Company has also issued Employee Stock Option Scheme (ESOS) plan for its employees. Terms attached to ESOS plan are described in note 40.

(c) Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distributions will be in proportion to the number of equity shares held by the shareholders.

(d) Restrictions attached to equity shares

(i) As at March 31, 2018, 28,658,253 (March 31, 2017: 55,400,884) equity shares held by the Promoters of the Company are under lock-in in terms of the provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended. The details of equity shares of the Company which are locked-in is given below:

(a) Lock-in created on April 8, 2015 for 9,795,846 equity shares upto April 29, 2018;

(b) Lock-in created on October 05, 2015 for 8,900,000 equity shares upto October 10, 2018; and

(c) Lock-in created on April 13, 2017 for 9,962,407 equity shares upto April 12, 2020

Further, lock-in created for 26,742,631 equity shares on February 22, 2017 was released on October 31, 2017.

(ii) As per the Master Restructuring Agreement (MRA) entered into by the Company with its bankers, the promoter’s shareholding would be retained at a minimum of 26% of issued equity share capital of the Company at any point of time for a maximum period of four years from the effective date i.e. September 27, 2010. Further vide letter dated September 30, 2015, Infrastructure Leasing and Financial Services Limited confirmed that the promoters will not, without the prior written consent of the Bank, dilute its equity holding in the Company below 26% of the paid up equity share capital of the Company,

(e) Terms of preference shares

For rights, preferences and restrictions attached to 6% Cumulative Redeemable Preference Shares (CRPS) and 6% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS) of Rs.100 each, classified as financial liability, (refer note 16),

Preference shares of both classes carry a preferential right as to dividend over equity shareholders. The Company declares and pays dividends in Indian Rupees. The holder of preference shares are entitled to one vote per share only on resolutions placed before the Company which directly affect their rights attached to the preference shares. In the event of liquidation of the Company during the existence of preference shares, the holders of preference shares will have priority over equity shares in the payment of dividend and repayment of capital.

(f) There were no bonus shares, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date.

Nature and purpose of other reserves

Securities premium account

Securities premium is used to record the premium received on issue of shares. Premium received is utilised in accordance with the provisions of the Companies Act, 2013.

(a) The Company had obtained an approval for the Corporate Debt Restructuring (CDR) from the CDR Empowered Group in earlier years and the impact of the CDR scheme had been given in the financial statements of the year 2009-10.

(b) Indian rupee Term loans from banks to the extent of Rs.59.62 (March 31, 2017: Rs.119.88, April 1, 2016 : Rs.179.44) carries an interest @ 11% p.a. The loan is repayable in 20 equal quarterly instalments commencing from June 30, 2014. These loans are secured by pari passu first mortgage and charge on the Company’s immovable properties both present and future and pari passu first charge by way of hypothecation of all the movable assets including movable equipments, machinery spares, tools, accessories, current assets both present and future except to the extent of assets exclusively hypothecated against vehicle loans/ finance leased assets from others.

Further, Indian rupee term loans to an extent of Rs.63.99 (March 31, 2017: Rs.109.08, April 1, 2016 : Rs.128.44) carry an interest rate of : 10.10% to 10.65% p.a. (March 31, 2017 : 10.10% p.a. to 10.60% p.a., April 1, 2016 : 10.10% p.a. to 11.15% p.a). These loans are repayable in 4 years as per the schedule given below:

These loans are secured by pari passu first mortgage and charge on the Company’s immovable properties both present and future and pari passu first charge by way of hypothecation of all the movable assets including movable equipments, machinery spares, tools, accessories, current assets both present and future except to the extent of assets exclusively hypothecated against vehicle loans/ finance leased assets from others. These loans are additionally guaranteed by letter of comfort from Infrastructure Leasing and Financial Services Limited.

(c) Vehicle loans from Non-Banking Financial Companies carry interest @ 13.50% to 16.48% p.a. (March 31, 2017 : 14.51% to 16.70%, April 1, 2016 : 13% to 18.39% p.a.). These loans are repayable in equated monthly installments over the tenure of 24 months to 60 months from the date of disbursement of loan. Vehicle loans are secured by hypothecation of vehicles purchased out of the loan taken.

(d) Secured loans from Infrastructure Leasing and Financial Services Limited, related party amounting to Rs.909.60 (March 31, 2017: Rs.1,012.86 and April 1, 2016: Rs.983.61) carry interest @ 12% to 13% p.a. These loans carry an option to reset the interest rate after every 12 months from the date of first disbursement and 12 months thereafter by giving 30 days clear notice to the Company.

Out of the above, loan to the extent of Rs.421.60 (March 31, 2017 Rs.421.60, April 1, 2016 : Rs.421.60) is repayable in three annual installments of 30%, 30% and 40% after 60 months from the date of first disbursement and is secured by way of pari passu pledge of investments in preference shares of Bangalore Elevated Tollway Private Limited, sharing of charge with IL&FS Financial Services Limited on a pari passu basis on the equity shares of Gautami Power Limited and Pass Through Certificates issued by Maytas Investment Trust and negative lien on sub-ordinate loan given to Bangalore Elevated Tollway Private Limited. Out of the above, loan of Rs.162.00 (March 31, 2017 : Rs.162.00, April 1, 2016 : Rs.162.00) is additionally secured by second charge on Inter-Corporate Deposits given to Hill County Properties Limited (HCPL) along with accumulated interest thereon and second charge on loans given to and equipment hire charges receivable from Terra Infra Limited along with accumulated interest thereon.

Loan to the extent of Rs.296.00 (March 31, 2017 : Rs.375.00, April 1, 2016 : Rs.375.00) is repayable in three annual installments of 30%, 30% and 40% after 36 months from the date of first disbursement and secured by second charge on Inter Corporate Deposits of '' 343.78 provided by the Company. Of these, loan of Rs.196.00 (March 31, 2017 : Rs.280.00, April 1, 2016 : Rs.280.00) is additionally secured by way of second charge on net receivables from a road project to the extent of Rs.40.00.

Loan to the extent of Rs.70.00 (March 31, 2017 : Rs.98.30, April 1, 2016 : Rs.98.30) is repayable in three annual installments of 30%, 30% and 40% after 36 months from the date of first disbursement and secured by way of hypothecation on second charge basis of the Loans and Advances (including interest accrued) provided by the Company to Cyberabad Expressway Limited & Pondicherry Tindivanam Tollway Private Limited and investment in Maytas Infra Saudi Arabia Company (Limited Liability Company).

Loan to the extent of Rs.122.00 (March 31, 2017 : Rs.117.96, April 1, 2016 : Rs.88.71) is repayable in three annual installments of 30%, 30% and 40% after 36 months from the date of first disbursement and secured by way of second charge on current assets of the Company. Out of the above, loan to the extent of Rs.55.00 (March 31, 2017 : Rs.55.00, April 1, 2016 : Rs.43.00) is additionally secured by way of second charge on fixed assets of the Company.

(e) Secured loans from IL&FS Financial Services Limited, related party amounting to Rs.128.40 (March 31, 2017 : Rs.188.71, April 1, 2016 : Rs.181.21) the terms of which are as follows:

(i) Loan to the extent of Rs.80.40 (March 31, 2017 : Rs.140.71, April 1, 2016 : Rs.Nil) carries interest @ 13% p.a. compounded on an annual basis and also carries an option to reset the interest rate after every 12 months from the date of first disbursement and every 12 months thereafter by giving 30 days clear notice to the Company. Loan is repayable in three annual installments of 30%, 30% and 40% after 36 months from the date of first disbursement.

(ii) Loan to the extent of Rs.48.00 (March 31, 2017 : Rs.48.00, April 1, 2016 : Rs.Nil) carries interest @ 13% p.a linked to variation in IFIN benchmark rate of 16% p.a. and is repayable at the end of 36 months from the date of first disbursement.

Loan of Rs.80.40 (March 31, 2017 : Rs.140.71, April 1, 2016 : Rs.181.21) is secured by way of pari passu pledge of investments in preference shares of Bangalore Elevated Tollway Private Limited, sharing of charge with Infrastructure Leasing and Financial Services Limited on a pari passu basis on the equity shares of Gautami Power Limited and Pass Through Certificates issued by Maytas Investment Trust and negative lien on sub-ordinate loan given to Bangalore Elevated Tollway Private Limited. Further, Rs.48.00 carries same security for which charge is yet to be created.

(f) Secured Loan from Bhopal e-Governance Limited, related party of Rs.30.60 (March 31, 2017 : Rs.30.60, April 1, 2016 : Rs.Nil) carries interest @ IFIN benchmark rate (16% p.a. currently) 0.25% p.a. This loan is repayable at the end of 36 months from the date of first disbursement and is secured by Second Pari Passu charge by hypothecation of the present and future current assets of the borrower (including but not limited to book debts, operating cash flows, receivables, loans and advances, deposits, investments, commission and revenues of whatsoever nature and whenever arising), created from the proceeds of facility and providing a cover of 1.0 x at all times during the facility.

(g) Unsecured loan from Infrastructure Leasing and Financial Services Limited, related party of Rs.438.90 (March 31, 2017 : Rs.Nil, April 1, 2016 : Rs.Nil) carries interest @ 12% p.a. which is payable quarterly in arrears. Loan is to be repaid at end of 24 months from the date of first disbursement.

(h) Unsecured loan from Rohtas Bio Energy Limited, related party of Rs.62.00 (March 31, 2017 : Rs.Nil, April 1, 2016 : Rs.Nil) carries interest at prevaling IFIN Benchmarking rate which is currently 16% p.a. which is payable quarterly in arrears. Loan is to be repaid at the end of 24 months from the date of first disbursement.

(i) Unsecured loan from others of Rs.20.00 (March 31, 2017 : Rs.Nil, April 1, 2016 : Rs.Nil) carries interest ranging from @ 16% p.a. which is payable quarterly in arrears and the interest rate, as stated above, will be linked to IFIN Benchmark rate (IBMR) which is currently at 16% p.a., i.e., at prevailing IBMR, and would vary to the extent of variation in IBMR. Loan is to be repaid at the end of 24 months from the date of first disbursement.

(j) Finance lease obligation is secured by hypothecation of plant and machinery taken on lease. The interest rate implicit in the lease is 14% p.a. The gross investment in lease, i.e., lease obligation plus interest, is payable in 4 years.

(k) Terms of 6% Cumulative Redeemable Preference Shares (CRPS)

On December 06, 2010, the Company had allotted 5,749,500 6% CRPS of Rs.100 each fully paid as per the terms of MRA entered with Bankers. CRPS carry cumulative dividend of 6% p.a. The Company had further allotted 236,280 CRPS of Rs.100 each as fully paid bonus shares to the holders of initial CRPS in the ratio of 1:24.33 (i.e. one fully paid CRPS of Rs.100 each for every 24.33 CRPS held) on September 29, 2011. The aforesaid CRPS were redeemed on the due date i.e., March 31, 2015.

The Company had also allotted 1,500,000 CRPS to the holders of OCCRPS on September 29, 2011 as fully paid bonus shares in the ratio of 1:16.67 i.e. (one fully paid CRPS of Rs.100 each for every 16.67 OCCRPS held). The redemption schedule of these bonus CRPS is 30% on September 30, 2012; 15% each on September 30, 2013 and September 30, 2015; 20% each on September 30, 2014 and September 30, 2016. The 30% bonus CRPS (450,000 CRPS of Rs.100 each) which were due for redemption on September 30, 2012 were purchased by IL&FS Financial Services Limited, on September 29, 2012. The Company had extended the redemption period of these preference shares by a period of 3 years with an early redemption right with the Company before the extended period of 3 years by giving 30 days notice period to the shareholders. These shares have been redeemed on September 30, 2015. The 15% Bonus CRPS (225,000 CRPS of Rs.100 each) which were due for redemption on September 30, 2013 were purchased by Vistra ITCL (India) Ltd (formerly IL&FS Trust Company Ltd), being the Trustee of Maytas Investment Trust, on September 30, 2013. The Company has extended the redemption period of these preference shares by a period of 6 years with an early redemption right with the Company before the extended period of 6 years by giving 30 days notice period to the shareholders. The 20% Bonus CRPS (300,000 CRPS of Rs.100 each) which were due for redemption on September 30, 2014 were redeemed by the Company on March 23, 2015, as per the terms of the issue, as amended. The 15% bonus CRPS (225,000 CRPS of ''100 each) which were due for redemption on September 30, 2015, have been redeemed on due date. The 20% bonus CRPS (300,000 CRPS of Rs.100 each) which were due for redemption on September 30, 2016 were redeemed by the Company on March 28, 2017, within the extended period for redemption granted by CRPS holders.

(l) Terms of 6% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS)

On March 31, 2011, the Company had allotted 25,000,000 OCCRPS of Rs.100 each fully paid as per the terms of MRA entered with bankers. OCCRPS carry cumulative dividend of 6%. Out of total 25,000,000 OCCRPS of Rs.100 each, 30% i.e. 7,500,000 OCCRPS of Rs.100 each have been converted into 12,417,218 equity shares on September 30, 2012, as per the terms of MRA. There is no further conversion option attached to these OCCRPS. The balance 17,500,000 OCCRPS of Rs.100 each shall be redeemed at par in four tranches from September 30, 2013 to September 30, 2016. The schedule of redemption is as below:

* The OCCRPS which were due for redemption on September 30, 2013 were purchased by Vistra ITCL (India) Ltd (formerly IL&FS Trust Company Ltd), being the Trustee of Maytas Investment Trust, on September 30, 2013. The Company has extended the redemption period of these preference shares by a period of 6 years with an early redemption right with the Company before the extended period of 6 years by giving 30 days notice period to the shareholders.

# The OCCRPS were redeemed on March 23, 2015, as per the terms of the issue, as amended.

~ The OCCRPS were redeemed on due date, as per the terms of the issue.

@ The OCCRPS were redeemed on March 28, 2017, within the extended period for redemption granted by OCCRPS holders. The Company’s expsosure to liquidity risks related to borrowings is disclosed in Note 48.

(a) Cash credit from banks are repayable on demand and carries interest @ 9% p.a. to 14% p.a. (March 31, 2017: 9% p.a. to 13.80% p.a, April 1, 2016: 9% p.a. to 14.50% p.a.). These loans are secured by pari passu first mortgage and charge on the Company’s immovable properties both present and future and pari passu first charge by way of hypothecation of all the movable assets including movable equipments, machinery spares, tools, accessories, current assets both present and future, except to the extent of assets exclusively hypothecated against vehicle loans/ finance leased assets from others.

Loans aggregating to Rs.240.62 (March 31, 2017 : Rs.244.42, April 1, 2016 : Rs.233.22) have additionally been secured by personal guarantee given by the Ex-Vice Chairman of the Company, Mr. B Teja Raju.

Loans aggregating to Rs.216.87 (March 31, 2017 : Rs.231.77, April 1, 2016 : Rs.216.15) additionally carry letter of comfort from Infrastructure Leasing and Financial Services Limited.

(b) Unsecured loan from related party Rs. Nil (March 31, 2017 : Rs. Nil, April 1, 2016 : Rs.21.01) carried interest Nil (March 31, 2017: Nil, April 1, 2016: 14% p.a. to 15% p.a.) with an original tenor of 3 months. This had been extended by 11 months until September 30, 2015 and further by 10 months until July 31, 2016. Interest on these facilities was payable at monthly rests. The loan was repaid during the year ended March 31, 2017.

(c) Unsecured loan from related party Rs.99.00 (March 31, 2017 : Rs.50.00 Nil, April 1, 2016 : Rs. Nil) carried interest ranging from @ 15.50% p.a. to 16.5% p.a. (March 31, 2017: 15.52% p.a. to 16% p.a., April 1, 2016: Nil) which is payable quartary in arrears. Loan is to be repaid at the end of 12months from the date of first disbursement

(d) Unsecured loan from others of Rs.200.00 (March 31, 2017 : Rs. Nil, April 1, 2016 : Rs. Nil) carries interest @ 10.85% p.a. which is payable monthly in arrears. Loan is to be repaid at the end of 6 months from the date of first disbursement and extendable by 2 terms of 6 months each,

The Company’s expsosure to liquidity risks related to borrowings is disclosed in Note 48,

*Includes interest of Rs. Nil (March 31, 2017: Rs.1.19, April 1, 2016: Rs.1.34) not debited by bankers in the cash credit accounts, inspite of instructions issued by the Company,

The Company’s exposure to liquidity risks related to above financial liabilities is disclosed in note 48,

A. Provision for Estimated future loss on projects

The projects in progress as at March 31, 2018 have been evaluated for future loss, if any, based on estimates relating to cost-to complete the same. Based on such evaluation, the Company has provided for estimated future losses to an extent of Rs.48.24 (March 31, 2017: Rs.51.22, April 1, 2016 : Rs.43.22) in terms of the requirements of Ind AS 11 Construction Contracts” as per the Companies (Indian Accounting Standards) Rules, 2015 notified under section 133 of the Companies Act, 2013,

B. Provision for Liquidated damages

Liquidated damages are levied as per the terms of the contract for delayed execution of works or delayed achievement of agreed milestones. For all projects in progress, the Management has estimated the probability of levy of liquidated damages, if any, based on completion date as per the contract, extension of time granted by the customer, etc,

3. Going Concern

The Company has accumulated loss of Rs.279.55 as at March 31, 2018 (as at March 31, 2017: Rs.286.47, April 1, 2016: Rs.291.50), its net worth has been substantially eroded, there are uncertainties on recovery of its investments/inter corporate deposits/ dues from customers, etc. and the Company’s current liabilities exceed its current assets as at the balance sheet date by Rs.1,086.88 (March 31, 2017: Rs.601.09, April 1, Rs.246.01). Management has taken significant steps for revival and restoration of operations of the Company. Based on the business plan and following mitigating factors, the management is confident that the Company will be able to generate profits in future years and meet its financial obligations as they arise:

(a) The Company has significant order book as at March 31, 2018.

(b) The promoter group comprising of Infrastructure Leasing and Financial Services Limited (IL&FS) and IL&FS Financial Services Limited (IFIN), has advanced loans to the tune of Rs.1,348.50 (March 31, 2017: Rs.1,012.86) and Rs.128.40 (March 31, 2017: Rs.188.71) respectively to support the liquidity position of the Company upto March 31, 2018. Further, the promoter has advanced loans to the extent of Rs.211.60 (March 31, 2017: Rs.80.60) through its group companies. The Company has an unutilized limit of Rs.47.20 (March 31, 2017: Rs.10.74) from IL&FS as at March 31, 2018. Also, there is an unutilised limit of BGs and LCs of Rs.182.74 (March 31, 2017: Rs.114.10) from IL&FS. IL&FS had provided a Letter of Comfort to the Consortium Bankers stating that it would use its best efforts to ensure that the Company would not default on any of its obligations to the bankers. Management is confident that the promoter group will continue the financial support to the Company to meet its obligation as they arise.

(c) During the year, the Company has received short-term facility from Credit Suisse AG Mumbai up to an amount of Rs.200 with a repayment schedule of 6 months (extendable by 2 terms of 6 months each). Further, based on future growth plan, the lead banker has assessed incremental fund based limit of Rs.200 and non-fund based limit of Rs.750 against which the Company has received sanctioned fund based limit of Rs.39 and non-fund based limit of Rs.262. The Company has unutilized fund based limit of Rs.78.46 (March 31, 2017: Rs.20.76) and non-fund based limit to the extent of Rs.201.88 (March 31, 2017: Rs.71.54) respectively from banks.

(d) The Company has received report from an independent Credit Rating Agency (CRA) on its long-term and short-term banking facilities, wherein the CRA has reaffirmed BBB- and A3 ratings for its long-term and short-term banking facilities respectively,

(e) The shareholders have approved issuance of Non-convertible debentures for an amount of Rs.300 on private placement basis.

(f) Based on its relationships with the lenders, management is also confident of maintaining short-term borrowings at current level and obtaining rollover of loans from group companies which are due for repayment within next 12 months.

Keeping in view, the abovementioned mitigating factors, these financial statements have been prepared on a going concern basis.

*Income tax demand mainly comprises of demand from the Income Tax authorities upon completion of their assessment upto the financial year 2010-11. The tax demands are mainly on account of classification of waiver of interest and principal amount of loan as revenue receipt which has been considered as capital receipt by the Company, disallowance of expenditure incurred towards extra works/labour cost on projects, disallowance of expenditure on which TDS is not deducted or short deducted, etc.

**The demands raised by the Sales Tax authorities and Central Excise and Service Tax authorities are mainly towards enhancement of taxable turnover due to certain disallowances, change in classification of services provided by the Company interpretation of the provisions of the Acts etc.

#Excludes Rs.6.52 (March 31, 2017: Rs.8.68, April 1, 2016: Rs.8.31) where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. All these cases are under litigation and are pending with various authorities, and the expected timing of resulting outflow of economic benefits cannot be specified.

(iv) Consequent to announcement by erstwhile Chairman of Satyam Computers Services Limited on January 7, 2009, Serious Fraud Investigation Office (SFIO) has initiated investigations on various matters pertaining to the Company which are ongoing. The SFIO has submitted its reports relating to various findings and has issued notices for prosecution for alleged violations against the Company and others for seven matters for which the Company submitted its reply with SFIO. While the Company has not accepted these violations and in order to settle these issues, the Company had filed six compounding applications for these alleged violations, for which final orders have been passed by Company Law Board (CLB) during the year ended March 31, 2016 and the Company had paid Rs.0.08 as fee for compounding towards the same. SFIO has filed appeal against the compounding order in the High Court of Hyderabad and the Company has also filed their reply against the said order,

(v) The Company had received a Show Cause Notice (SCN) on June 19, 2009 from Securities and Exchange Board of India (SEBI) alleging insider trading by the Company in the scrip of Satyam Computer Services Limited in the years 2001-2002 and 2004-2005. After the aforementioned SCN no further communication was made in this regard until February 2013 when SEBI directed the Company for a personal hearing before whole time member of SEBI. The Company had filed its detailed reply against the SCN in the earlier years and had attended a personal hearing before a whole time member of SEBI in the earlier year and accordingly filed written submissions. During the year ended March 31, 2016, SEBI had passed an order ordering the Company to disgorge an amount of Rs.59.17 along with simple interest of 12% p.a. from January 07, 2009 till the date of payment. However, SEBI order had dropped the proposal to debar the Company from accessing the capital market. Aggrieved by the disgorgement order, the Company had preferred an Appeal in Securities Appellate Tribunal (SAT) and obtained stay order against the operation of the order of SEBI. SEBI had filed its counter and the Company had filed its rejoinder. Matter is posted for arguments.

(vi) The Company formed Himachal Joint Venture (HJV) to execute an EPC project with National Hydro Power Corporation (Client). HJV subcontracted this work to SSJV Projects Private Limited (SSJV) and the work had been executed to the extent of Rs.262.45 by SSJV Due to the geographical conditions at site, work could not be done at the rates prescribed in the contract. HJV invoked arbitration clause for delays and extra-ordinary geological occurrence in executing the project. The Client encashed bank guarantees for an amount of Rs.216.40 provided by SSJV and issued winding up notice to the Company as well as other joint venture partners. The Company vide its letter dated July 29, 2013 replied to the said notice stating that the matter is disputed and subjudice and would not be legally tenable. Client had filed a winding-up petition against Company and Joint venture partner vide CP 73/2014, which was dismissed.

Based on the internal assessment and / or legal opinion, the Management is confident that for the above mentioned contingent liabilities, no provision is required to be made as at March 31, 2018.

4. Commitments:

(a) Capital Commitments:

Estimated amount of contracts (net of advances) remaining to be executed on capital account and not provided for Rs.16.60 (March 31, 2017: Rs.10.08, April 1, 2016: Rs.7.08).

(b) Other Commitments:

i. The Company has made a commitment to make additional investment of Rs.49.64 (March 31, 2017: Rs.51.88) in Maytas Infra Saudi Arabia Company Limited Liability Company,

ii. Under a sponsors’ support agreement, the Company (a co-sponsor) has obligation to the lenders’ of a Special Purpose Vehicle (SPV), whose 26.10% Equity is held by Maytas Investment Trust (MIT), until financial year ending 2027-28, to meet shortfall in Debt service coverage ratio of the SPV on a term loan of Rs.279.83 (March 31, 2017: Rs.261.27, April 1, 2016: Rs.242.85).

5. Segment reporting :

The Company’s operations fall into a single business segment Construction and Infrastructure Development and in accordance with Ind AS 108 - Operating Segments, segment information with respect to geographical segment has been given in the consolidated financial statements of the Company, therefore no separate disclosure on segment information is given in these financial statements.

6. Retirement benefits

(a) Disclosures related to defined contribution plan:

The Company makes contributions, determined as a specified percentage of employee salaries, in respect of qualifying employees towards Provident fund and Employees’ State Insurance contribution (ESI) , which are defined contribution plans. The contribution are charged to the Statement of profit and loss as they accrue. During the year, the Company has recognised Rs.10.81 (March 31, 2017: Rs.6.74) towards Provident fund and ESI contributions.

(b) Disclosures related to defined benefit plan:

The Company has a defined benefit gratuity plan. Every employe e who has completed five years or more of service gets a gratuity on departure at 15 days last drawn salary for each completed year of service. The scheme is funded with Life Insurance Corporation of India.

The present value of the defined benefit obligation and the related current service cost are measured using the projected unit credit method with actuarial valuation being carried out at the balance sheet date.

Notes :

(i) The discount rate is based on the prevailing market yield on Government Securitites as at the balance sheet date for the estimated term of obligations.

(ii) The expected return on plan assets is determined considering several applicable factors mainly the composition of the plan assets and Company’s policy for plan asset management.

(iii) The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

Due to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the Auditors.

#Excluding corporate guarantee of Rs.178.91 (March 31, 2017: Rs.178.12, April 1, 2016: Rs.181.69) given by the Company on behalf of the MISA for loan of Rs.112.03 (March 31, 2017: Rs.111.54, April 1, 2016: Rs.105.19) taken by the subsidiary. Further, the Company has made a commitment to make additional investment of ''49.64 in Maytas Infra Saudi Arabia Company Limited Liability Company, *Excluding bank guarantee/letter of credits of Rs.600.96 (March 31, 2017: Rs.511.19, April 1, 2016: Rs.267.71) given on behalf of the Company against which the Company had given corporate guarantees in the nature of counter guarantees to the extent of Rs.424.69 (March 31, 2017: Rs.430.46, April 1, 2016: Rs.190.96). The Company had also given corporate guarantee of Rs.125 (March 31, 2017: Rs.125, April 1, 2016: Rs.125) for availing Letter of Credit facilities from its bankers. Infrastructure Leasing and Financial Services Limited has provided letter of comfort to banks for cash credit facilities from banks aggregating to Rs.216.83 (March 31, 2017: Rs.231.77, April 1, 2016: Rs.216.15).

* There is no repayment schedule in respect of all the above loans. They are repayable on demand,

# The repayment schedule is not beyond 7 years,

The Company’s share in assets, liabilities, income and expenditure are duly accounted for in the accounts of the Company in accordance with such division of work as per the work sharing arrangements and therefore does not require separate disclosures. However, joint venture partners are jointly and severally liable to clients for any claims in these projects.

Finance lease: The present value of minimum lease rentals is capitalized as property, plant and equipment with corresponding amount shown as lease liability. The principal component in the lease rentals is adjusted against the lease obligation and the finance charges are charged to the statement of profit and loss as they arise. During the year the Company has purchased construction equipment under finance lease. The tenure of the lease is four years. The lease agreement provides for a fixed monthly lease rents over the period of lease term,

In case of assets given on lease:

Certain assets of the company are leased out but have no fixed lease terms. Accordingly, no disclosure regarding future minimum lease payments has been made.

7. Capital management

The Company’s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investors, creditors and market confidence and to sustain future development and growth of its business. In order to maintain the capital strucuture the Company monitors the return on capital, as well as the level of dividends to equity shareholders. The Company aims to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimise returns to all its shareholders. For the purpose of the Company’s capital management, capital includes issued capital and all other equity reserves and debt includes maturities of finance lease obligations. The Company monitors capital on the basis of the following gearing ratio

8. In the earlier years, pursuant to the Debt Restructuring Programme, the Company had settled an irrevocable trust, namely, Maytas Investment Trust (Trust). The objective of the Trust was to dispose certain underlying investments held and settle the liability towards the Pass Through Certificate (PTC), wherein the Company was also a contributory. As at March 31, 2018, the Investment of the Company includes Rs.259.67 (March 31, 2017: Rs.259.67, April 1, 2016: Rs.259.67) contributed towards these PTCs and has receivables loans and advances and investments aggregating to Rs.146.19 (March 31, 2017: Rs.141.80, April 1, 2016: 136.72) which are dependent upon recovery of capacity charges and supplies/ availability of natural gas to a gas based power generating plant, increase in traffic on road investments, final award of the claim and positive outcome of the litigations in the investee companies, etc.

Based on internal assessment, legal advice and fair valuation carried out by external experts of underlying investments held by the Trust, management does not currently envisage any diminution in the value of aforesaid assets.

9. Finanacial instruments- fair values and risk management

A. Accounting classification and fair values

The following table shows the carrying amounts and fair values of financial assets and financial liabilites as at March 31, 2018, including their levels in the fair value hierarchy.

Note 1 Investments in associate, joint venture and subsidiaries have been accounted at historical cost. Since these are scope out of Ind AS 109 for the purposes of measurement, the same have not been disclosed in the tables above. Investments in unquoted equity shares of enitities other than subsidiaries, associates and joint ventures have been designated as FVTPL.

B. Measurement of fair values

(i) Valuation techniques and significant unobservable inputs

The carrying amounts of financial assets and liabilities other than those valued at Level 1 and Level 2 are considered to be the same as their fair values due to the current and short term nature of such balances and no material differences in the values.

(ii) Levels 1, 2 and 3

Level 1 : It includes Investment in equity shares that has a quoted price and which are actively traded on the stock exchanges. It is been valued using the closing price as at the reporting period on the stock exchanges.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.

Financial risk management

The Company’s financial risk management is an integral part of how to plan and execute its business strategies. The Company’s management risk policy is set by the Managing Board. The Company’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk. The Company’s primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. A summary of the risks have been given below,

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers, unbilled revenue and loans given. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The Company assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors,

Credit risk on trade receivables, unbilled revenue and loans is limited as the customers of the company mainly consists of the Government promoted entities having a strong credit worthiness. For doubtful receivables, the Company uses a provision matrix to compute the expected credit loss allowances for trade receivables. The provision matrix takes into account ageing of accounts receivables and the Company’s historical experience with the customers and financial conditions of the customers, The Company has made a provision of Rs.176.38, Rs.178.87 and Rs.172.13 towards amounts doubtful to receive as at March 31, 2018, March 31, 2017 April 1, 2016 respectively.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet commitments associated with financial instruments that are settled by delivering cash or another financial asset. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value. The Company’s objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

The table below provides details regarding the contractual maturities of financial liabilities including estimated interest payments as at March 31, 2018:

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes. The company’s exposure to market risk is primarily on account of foreign currency exchange rate risk.

- Interest rate risk

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Company is exposed to interest rate risk on its cash and bank balances. Cash and bank balances expose the Company to cash flow interest rate risk. However, the Company does not carry any fixed interest bearing financial liabilities that are designated at fair value through profit or loss. The average interest rate on short-term bank deposits during the year was 6.40% (March 31, 2017: 6.50%).

The Company’s exposure to interest rates on financial instruments is detailed below:

The amounts included above for interest rate dependent financial assets are fixed interest bearing financial assets.

If the interest rate on INR denominated borrowings had been increased or decreased by 100 basis points, with all other variables held constant, post tax income for the year ended March 31, 2018 would have been increased/ decreased by Rs.5.12 (March 31, 2017: Rs.4.52).

- Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rate. The Company’s presentation currency is the Indian Rupees. The Company’s exposure to foreign currency arises in part when the Company holds financial assets and liabilities denominated in a currency different from the functional currency of the entity,

10. Explanation of transition to Ind AS

As stated in Note 2A, the Company has prepared its first financial statements in accordance with Ind AS. For the year ended March 31, 2017, the Company had prepared its financial statements in accordance with Companies (Accounting Standards) Rules, 2006 (as amended), notified under Section 133 of the Act and other relevant provisions of the Act.

The accounting policies set out in Note 3 have been applied in preparing the financial statements for the year ended March 31, 2018 including the comparative information for the year ended March 31, 2017 and the opening Ind AS balance sheet on the date of transition i.e. April 1, 2016.

In preparing its Ind AS balance sheet as at April 1, 2016 and in presenting the comparative information for the year ended March 31, 2017, the Company has adjusted amounts reported previously in financial statements prepared in accordance with previous GAAP This note explains the principal adjustments made by the Company in restating its financial statements prepared in accordance with previous GAAP and how the transition from previous GAAP to Ind AS has affected the Company’s financial position, financial performance and cashflows.

There were no significant reconciliation items between cash flows prepared under Indian GAAP and those prepared under Ind AS. Optional exemptions availed and mandatory exceptions

In preparing the financial statements, the Company has applied the below mentioned optional exemptions and mandatory exceptions.

A. Optional exemptions availed

a. Property, plant and equipment and intangible assets

As per Ind AS 101 an entity may elect to:

(i) measure an item of property, plant and equipment at the date of transition at its fair value and use that fair value as its deemed cost at that date

(ii) use a previous GAAP revaluation of an item of property, plant and equipment at or before the date of transition as deemed cost at the date of revaluation, provided the revaluation was, at the date of revaluation, broadly comparable to:

- fair value

- or cost or depreciated cost under Ind AS adjusted to reflect.

The elections under (i) and (ii) above are also available for intangible assets that meets the recognition criteria in Ind AS 38, Intangible Assets, (including reliable measurement of original cost); and criteria in Ind AS 38 for revaluation (including the existence of an active market).

(iii) use carrying values of property, plant and equipment and intangible assets as on the date of transition to Ind AS (which are measured in accordance with previous GAAP and after making adjustments relating to decommissioning liabilities prescribed under Ind AS 101) if there has been no change in its functional currency on the date of transition. As permitted by Ind AS 101, the Company has elected to continue with the carrying values under previous GAAP for all the items of property, plant and equipment. The same election has been made in respect of intangible assets also.

b. Investment in subsidiaries, joint venture and associates

As permitted by Ind AS 101, the Company has elected to carry investments in subsidiaries, joint venture and associates at cost as determined in accordance with Ind AS 27.

B. Mandatory exceptions

a. Estimates

As per Ind AS 101, an entity’s estimates in accordance with Ind AS at the date of transition to Ind AS at the end of the comparative period presented in the entity’s first Ind AS financial statements, as the case may be, should be consistent with estimates made for the same date in accordance with the previous GAAP unless there is objective evidence that those estimates were in error. However, the estimates should be adjusted to reflect any differences in accounting policies. As per Ind AS 101, where application of Ind AS requires an entity to make certain estimates that were not required under previous GAAP those estimates should be made to reflect conditions that existed at the date of transitition (for preparing Ind AS balance sheet) or at the end of the comparative period (for presenting comparative information as per Ind AS). The Company’s estimates under Ind AS are consistent with the above requirement. Key estimates considered in preparation of the financial statements that were not required under the previous GAAP are listed below:

- Fair valuation of financial instruments carried at FVTPL.

- Impairment of financial assets based on the expected credit loss model.

- Determination of the discounted value for financial instruments carried at amortised cost.

- Discounted value for certain financial liabilities carried at amortised cost.

- Recognition of deferred tax asset on unabsorbed depreciation.

b. Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification of financial assets on the basis of facts and circumstances existing as on the date of transition. Further, the standard permits measurement of financial assets accounted at amortised cost based on facts and circumstances existing at the date of transition if restrospective application is impracticable.

Accordingly, the Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of the financial assets accounted at amortised cost has been done retrospectively except where the same is impracticable

Notes to the reconciliation

(a) Investments

Under Indian GAAP the Company accounted for investments in subsidiaries and associates (unquoted) measured at cost less provision for other than temporary diminution in the value of investments. Under Ind AS, as of April 1, 2016 (transition date), the Company opted the deemed cost of investments in subsidiaries and associates as the carrying value as per Indian GAAP

Certain investments are carried at amortised cost under Ind AS. Difference between the amortised cost and transaction value of the investment has been reduced from retained earnings as at the transition date and subsequently in the profit or loss for the year ended March 31, 2017.

In accordance with Ind AS, financial assets representing investment in entities other than subsidiaries, associates and joint ventures as well as debt securities have been fair valued. Under the previous GAAP the application of the relevant accounting standard resulted in all these investments being carried at cost,

(b) Trade receivables, loans and unbilled revenue

Under Indian GAAP the Company measured financial assets at cost. As at the transition date, the Company recognised the provision for expected credit loss for certain financial assets as per the criteria set out in Ind AS 101,

(c) Loans

Deferred credit loans are carried at amortised cost. Difference between the amortised cost and transaction value of the loans has been reduced from retained earnings as at the transition date and subsequently in the profit or loss for the year ended March 31, 2017.

(d) Deferred tax assets (net)

The Company has recognised deferred tax assets (net) on unabsorbed depreciation, other temporary difference and on account of adjustments made on transition to Ind AS,

(e) Classification of financial instruments

''Under Ind AS, the Optionally convertible cumulative redeemable preference shares and cumulative redeemable preference shares are to be classified under financial liability, however, in the previous GAAP the same were reported under equity share capital. Hence, reclassification has been given done to give effect for the same,

(f) Financial liabilities

Adjustments include the impact of discounting of deferred consideration payable or provision for future losses which are expected to be incurred over a period of more than a year and subsequently in the profit or loss for the year ended March 31, 2017.

(g) Actuarial Gains/Losses

Under Ind AS, the measurement of net defined benefit liability, comprises of actuarial gains and losses, the return on plan assets (excluding interest) are recognised in other comprehensive income where as in the previous GAAP it was reported under employee benefits expenses. Hence, reclassification has been given done to give effect for the same.

(h) Finance cost on financial liability

Under Ind AS, the dividend on cumulative preference shares, being in the nature of financial liability, is recognised as finance cost at the coupon rate on par value of preference shares whereas in the previous GAAP to the extent of unpaid dividend, the obligation was reported under contingent liability. Also, the unpaid dividend on preference shares redeemed during the year ended March 31, 2017 has been reversed in that year.

(j) Other comprehensive income

Under Ind AS, all items of income and expense recognised in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the statement of profit and loss as ‘other comprehensive income’ includes remeasurements of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP

11. As at March 31, 2018, the Company had accrued proportionate revenue to the extent of percentage of completion in case of various projects of which balance as at March 31, 2018 amounts to Rs.404.77 (net of amount payable to subcontractor against aforesaid balances) (including claims of Rs.112.53 accounted during the year ended March 31, 2018) and interest of Rs.393.76 (including interest of Rs.205.29 recognised during the year ended March 31, 2018) for non-payment of project dues, delays due to handing over of the land, drawings, etc. for project execution which are in various stages of arbitration/ appeal with Hon’ble High Court of New Delhi/ advanced stages of negotiations with customers and have been recognised based on Honorable Supreme Court order/ arbitration award/ completion of arbitration proceedings/ provisions in agreement and supported by the Extension of Time recommended by the Independent Engineers.

Since these claims are technical in nature and subject to judicial process, the Company has obtained legal opinion on the recoverability of such claims including interest from independent counsel. The Company has been legally advised that the amounts are good of recovery. On the basis of expert opinion and internal assessment, the Management is of the view that the claims including interest are tenable and there exist no uncertainty as to ultimate collection. Pending outcome of the judicial process, the above amounts are being carried as recoverable.

12. As at March 31, 2018, the Company has made investment (including advance of Rs.2.58 (March 31, 2017: Rs.Nil, April 1, 2016: Rs.Nil)) of Rs.35.77 (March 31, 2017: Rs.33.19, April 1, 2016: Rs.33.19) in an overseas subsidiary. Based on the latest available management certified financial statements of the aforesaid subsidiary as on March 31, 2018, the net worth of the subsidiary is fully eroded and the Company may have potential obligation to share further liabilities of the said subsidiary, which is presently under negotiation and hence undeterminable. Management is in discussion with the other shareholder of the subsidiary on various options to restore the carrying value of the investment and on conclusion of the ongoing restructuring of their management, options to revive the operations of the subsidiary including approval of claims submitted to them is likely to be resolved and therefore no provision considered necessary for diminution in the value of such investment/potential obligations.

13. During the year, a project was terminated due to dispute with the customer. On January 8, 2018, the Hon’ble High Court of Delhi dismissed Company’s petition against which an appeal was filed before the Division bench of the High Court. The Company’s Special Leave petition (SLP) before the Supreme Court of India against dismissal of Company’s petition by Division Bench of the High Court of Delhi was also dismissed. The Company has net carrying value of assets pertaining to this site amounting to Rs.99.34 (including Bank Guarantees encashed by the customer amounting to Rs.39.97). Further, the Company has initiated Arbitration process for the recovery of these assets which are under progress. Based on legal opinion and internal assessment, Management is of the view that the aforesaid assets are fully recoverable, thus no provision is considered necessary for the same.

14. Inter-Corporate Deposits:

Prior to April 1, 2009, the erstwhile promoters had given certain Inter Corporate Deposits (ICDs) to various companies aggregating to Rs.343.78. Of the foregoing, documentary evidences had been established that, for an amount of Rs.323.78, the then Satyam Computer Services Limited (SCSL) was the ultimate beneficiary and for which a claim together with compensation receivable had been lodged by the Company. During the earlier years, SCSL had merged into Tech Mahindra Limited (TML) pursuant to a Scheme of Arrangement u/s.391-394 of the Companies Act, 1956. As provided in the Scheme and as per the Judgment of Hon’ble High Court of Andhra Pradesh on the said Scheme, the aforesaid amount in books of SCSL was transferred to TML. The Company, through its subsidiaries, preferred an Appeal before the Division Bench of Hon’ble High Court of Andhra Pradesh against the single judge’s Order approving the merger scheme of SCSL which is pending as on date. TML, in its Audited Financial Results for the year ended March 31, 2018 continued to disclose as Suspense Account (Net) Rs.1,230.40 as disclosed by SCSL earlier. Management is of the opinion that the claim made by the Company on SCSL is included in the aforesaid amount disclosed by TML in its Audited Financial Results. The Company is confident of recovering the said ICDs together with compensation due thereon from SCSL/TML.

Further, based on internal evaluation and legal opinion, documentary evidences available with the Company and in view of the observations of the Special Court in its verdict dated April 9, 2015 on the criminal case filed by the Central Bureau of Investigation, confirming that an amount of Rs.1,425 was transferred to SCSL through the intermediary companies, out of which an amount of Rs.1,230.40 continues to subsist with SCSL, Management is of the opinion that the Company’s case on the recoverability of the aforesaid amounts is ultimately certain.

15. All amounts less than Rs.0.01 have been disclosed as Rs.0.00.

Source : Dion Global Solutions Limited
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