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Patel Engineering Company Ltd.

BSE: 531120 | NSE: PATELENG |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE244B01030 | SECTOR: Construction & Contracting - Civil

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Annual Report

For Year :
2018 2017 2016 2015 2014 2013 2012 2011 2010

Director’s Report

To the Members of Patel Engineering Limited,

The Directors hereby present their 69th Annual Report on the business, operations and state of affair of the Company together with the audited financial statement for the year ended March 31, 2018:

FINANCIAL HIGHTLIGHTS

Standalone and Consolidated Financial performance (Rs. in millions)

particulars

Consolidated

Standalone

2017-18

2016-17

2017-18

2016-17

Total Income

25,171.44

41,379.53

24,202.50

32,959.12

Total expenditure

17,437.59

34,628.22

15,829.80

23,967.03

EBITDA

7,733.85

6,751.31

8,372.70

8,992.09

Depreciation

(542.73)

(780.36)

(444.65)

(460.10)

Finance Cost

4,894.23

5,792.14

5,362.40

6,379.10

Exceptional Item#

(1,361.70)

(889.78)

(2.00)

(1,079.77)

Profit before tax

935.20

(710.96)

522.60

1,073.12

Tax expenses

(112.70)

317.93

(68.20)

654.88

Net Profit after tax

1,047.89

(1,028.89)

590.80

418.23

Other comprehensive income

(22.06)

(6.91)

(22.06)

(5.79)

Total comprehensive income for the year

1,025.83

(1,035.80)

568.74

412.12

Attributable to:

Minority Interest

66.77

(441.81)

-

-

Owners of the Parent

959.06

(593.99)

-

-

Add: Opening Balance in Profit & Loss A/c

4,617.47

4,745.02

6,296.80

6,217.96

Appropriations / adjustments##

(54.43)

(459.53)

(138.70)

(339.39)

Surplus carried to the Balance sheet

5,544.16

4,617.47

6,748.90

6,296.80

Earnings per equity shares

(face value Rs. 1)

- Basic (Rs. )

6.67

(9.83)

3.76

3.99

- Diluted (Rs. )

5.28

(9.83)

3.44

3.99

# Refer Note No. 27 of Financial Statements

## Refer to note (B) Other Equity of Statement of changes in Equity of Financial Statements

Consolidated

The Consolidated total income stood at Rs. 25,171.44 million as against Rs. 41,379.53 million for the previous year. The EBITDA was at Rs. 7,733.85 million as against profit Rs. 6,751.31 million for the previous year. The total comprehensive income is at Rs. 1,025.83 million as against loss of Rs. 1,035.80 million for the previous year.

Standalone

On Standalone basis, the total income stood at Rs. 24,202.50 million as against Rs. 32,959.12 million for the previous year. The EBITDA was at Rs. 8,372.70 million as against profit of Rs. 8,992.09 million for the previous year. The total comprehensive income is at Rs. 568.74 million as against loss of Rs. 412.12 million for the previous year.

Dividend

To conserve funds, the Directors have not recommended payment of dividend for the financial year 2017-18.

Share Capital

On account of merger of Patel Realty India Limited with the Company, the Authorised Capital of the Company increased from Rs. 25,00,00,000 (Rupees Twenty five Crores) to Rs. 355,00,00,000 (Rupees Three Hundred and Fifty five Crore Only) consisting of 275,00,00,000 (Two Hundred and Seventy five Crores) Equity shares of face value Rs. 1 (Rupee One Only) each and 80 (Eighty) Zero Coupon Optionally Convertible Preference shares of Rs. 1,00,00,000 each.

Finance

As on March 31, 2018, the Company on Standalone basis has Rs. 1,600 million NCDs. The NCDs are listed on National Stock Exchange of India Limited.

In total, the Company from time to time has raised money through borrowings (long and short terms, including NCD, OCDs and unsecured loans from related party) and the total amount outstanding on standalone basis as on March 31, 2018 is Rs. 24,127.92 million.

Optionally Convertible Debentures (OCDs)

During the year under review, pursuant to implementation of the Debt Resolution Plan under the S4A Scheme as mandated by the Overseeing Committee of RBI with majority of lenders approving and converting PART B (unsustainable) debt into OCDs in terms of the Scheme, 65,85,250 OCDs in aggregate were allotted on November 24, 2017 and November 30, 2017 converting Rs. 6,585.25 million debt. 6,61,720 OCDs were redeemed during the year under review.

Further on April 30, 2018, the Company has allotted 1,26,900 OCDs converting Rs. 126.9 million debt.

The outstanding OCDs as on date stands at Rs. 6,050 million.

Information on state of affairs of the Company

Information on the operational and financial performance, among others, is given in the Management Discussion and Analysis Report which is forming part of the Annual Report and is in accordance with Regulation 34 of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015.

Subsidiaries

As on March 31, 2018, the Company has 74 subsidiaries including step down subsidiaries.

During the year under review, Patel Realty (India) Limited, the wholly owned subsidiary of the Company was amalgamated with the Company vide order of National Company Law Tribunal (NCLT), Mumbai Bench dated July 06, 2017.

The Company has assigned beneficial interest in its actionable claims, being certain claims and receivables along with certain other rights of real estate assets along with corresponding debt and liabilities aggregating to approximately Rs. 21,685.97 million for various projects undertaken by the Company to Hitodi Infrastructure Limited, a wholly owned subsidiary formed by the company where 51% equity has been taken by Eight Capital Group entity.

Further as a part debt restructuring process, the Company has also transferred the right, title, interest in approx. 5 acre land parcel in Jogeshwari Land and office building standing thereon (“Property”) along with corresponding debt of Rs. 3,833.45 million to Patel Land Developers Ltd and has sold 100% stake of the said SPV to Lodha Developers.

The Company incorporated Hampus Infrastructure Private Limited during the year under review.

During the year under review, ASI Constructors Inc (ASI) disinvested its stake in Engineering and Construction Innovation Inc (ECI) as a part of closure of operations upon substantial asset sale. ASI was not consolidated under IND AS - 110

Key Subsidiary / Associate updates

Michigan Engineers private Limited having presence in urban infrastructure Projects, has had new order wins during financial year 2017-18 totaling to Rs. 5,640 million. Majority of the new orders are in the segment of Micro tunneling in Mumbai.

Raichur Sholapur Transmission Company private Limited commissioned 765 kV single circuit transmission line between Raichur and Sholapur in July 2014. Project is promoted by Company along with Simplex Infrastructure Ltd and BS Ltd.

Project achieved transmission line availability of 99.9% in 2014, 99.9% in 2015 and 96.8% in 2016. Lenders on September 30, 2017 implemented 5/25 scheme as per the RBI guidelines after obtaining approval from Independent Evaluation Committee, with cutoff date on Dec 30, 2016. The project is under operation and the debt obligation is timely serviced by the said Company.

Dirang Energy private Limited, a Special Purpose Company for development of 144 MW Gongri Hydroelectric Power Project in West Kameng district in Arunachal Pradesh. The physical progress of the project is on halt due to various hurdles faced by the said Company, some of the reasons for delay / stoppage of work are delay in obtaining consent from State Pollution Control Board; untimely disbursement by project lenders; untimely infusion of equity. The Company is in discussion with potential investors for equity participation in the Project. The State Government has issued a Termination Notice on 01.03.2018 against which the Company has filed a writ petition for stay of the said notice in Guwahati High Court. The Guwahati High Court has passed a stay order dated 29.06.2018 on the said termination notice and also its consequential effects. The Company has however written off its investment in the project.

The Joint lenders Forum (JLF) had invoked SDR in Bellona Estate Developers Limited with reference date October 25, 2015. Pursuant to SDR, the company allotted equity shares to Lenders to hold 51% stake. A consultant was appointed by the JLF to run the process to sell the mall on as is where basis. The highest bidder has been identified and the banks are in process of final discussions with the buyer.

Patel KNR Infrastructure Ltd and patel KNR Heavy Infrastructure Limited wherein the Company holds substantial stake having road projects in Karnataka and Hyderabad respectively. Both the NHAI annuity projects are under operation and the respective companies are receiving the annuity on semi-annual basis. The respective Companies are maintaining the assets as per the contract conditions. The Company and KNR Construction, the promoters of these companies are looking for the divestment in these Projects.

PBSR Developers private Limited, has received approval for the additional floors and now the project consists of two residential towers (each tower having 20 floors) and one tower of serviced apartments (19 floors). The project offers residential units comprising of 2 BHK (990 sqft), 2.5 BHK (1120 sqft) and 3 BHK (1400 sqft & 1435 sqft). These residential towers have a total of 12 flats per floor whereas the service apartment block comprises of 11 apartments per floor. The project is meticulously crafted and offers a unique blend of smart design and superior quality. The construction of is substantially completed and internal finishing works are going on.

The Company through a step down subsidiary of its wholly owned subsidiary Patel Energy Resources Limited intended to build a thermal coastal power plant project of 1050 MW at Nagapattinam, Tamil Nadu. All the statutory clearances obtained stands elapsed and Consent For Establishment (CFE) that is mandatory for taking up Project construction works is still pending with Government of Tamil Nadu. Pending this, the Company has kept the project currently on hold.

The Company’s Mauritius subsidiary Les Salines Development Ltd (“LSDL”) had Land lease Agreement with Govt. of Mauritius for a period of 99 years. After termination of the project by the Govt. of Mauritius, the company has now issued a notice of arbitration to Government of Mauritius through International court of Justice (ICJ). Arbitration tribunal has been formed by ICJ. The first procedural hearing has taken place and a timetable has been set up for filing the claims, reply by the respondent and response by claimant. Verification of documents, production and discovery of the missing documents relevant to the case.

The performance and financial position of the subsidiaries and associates as required under the Companies Act, 2013 is provided in Annexure I of the Boards’ Report. The financial statements of the subsidiary companies will be placed on the website of the Company www.pateleng.com. Any member interested in obtaining a copy of financial statement of the subsidiaries may write to the Company Secretary, at the registered office of the Company.

In terms of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015, the Company has formulated a policy for determining ‘material’ subsidiaries and the same has been disclosed on Company’s website at the following link: http:// tinyurl.com/nqb2o56.

Related party Transactions

All the Related Party Transactions entered by the Company are on arm’s length basis and in the ordinary course of business. All the Related Party Transactions as required under Ind AS-24 are reported in the Notes to the financial statements.

In accordance with the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated the Related Party Transactions policy and the same is uploaded on Company’s website at the link: https://tinyurl.com/ yc3at55b

Particulars of Loans given, Investment made, Guarantees given and Securities provided

The members may note that the Company is engaged in providing infrastructural facilities and hence, as per Section 186(11) of Companies Act, 2013, nothing in Section 186 shall apply to the Company except sub-section (1) of Section 186. Accordingly, a separate disclosure has not been given in the financial statements as required under Section 186(4) with regard to particulars of loan given, investment made or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient of the loan or guarantee or security.

Directors and Key Managerial persons

i. Independent Director

a. In accordance with the provisions of Section 149 of the Companies Act, 2013, the Independent Directors have given a declaration that they meet the criteria of independence as provided in the said Section and in terms of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

b. The Board of Directors at their meeting held on August 14, 2018 appointed Dr. Barendra Bhoi as an Additional (independent) Director of the Company for a period of 5 years effective from August 14, 2018, subject to approval of members at the ensuing AGM.

c. Mr. K. Ramasubramanian resigned as an Independent Director of the Company w.e.f. August 06, 2018. The Board of Directors placed on record their deep appreciation for the contribution made by Mr. K. Ramasubramanian during his tenure as an Independent Director and that the Company and the board benefitted immensely from his experience and knowledge.

ii. Other Directors / Key Managerial personnel

a. Mr. Pravin Patel retired at the 68th AGM held on December 30, 2017.

b. Mr. C. K. Singh retires by rotation at the ensuing AGM and being eligible, offer himself for re-appointment.

c. The Board of Directors at their meeting held on August 14, 2018 re-appointed Mr. Rupen Patel as Managing Director for a period of 5 years effective from April 1, 2019 and re-appointment of Mr. C. K. Singh as Whole time Director for a period of 5 years effective from May 30, 2019. The said re-appointments are subject to approval of members at the ensuing AGM.

d. There is no change in the Key Managerial Personnel (KMPs) during the year under review. Some of the KMPs of the Company are also the KMPs of the subsidiaries

Number of Board Meetings held during the financial year 2017-18

During the year ended March 31, 2018, the Board met 7 times. Remuneration policy

The Company has framed a Remuneration Policy pursuant Section 178 of the Companies Act, 2013 and SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015. The salient features of the Policy is enclosed as Annexure II to the Boards’ Report. Evaluation of Board

Based on the criteria for evaluation of performance of the Board Directors, its Committees, Chairman, Executive Directors, Independent Directors and Non -executive Directors, the performance was evaluated for the financial year ended March 31, 2018.

A meeting of the Independent Director was held during the year under review.

Internal Financial Controls

The Company has in place adequate internal financial control with reference to financial statement.

Audit Committee

The Audit Committee of the Board of Directors of the Company comprises of the following Members:

Mr. Khizer Ahmed - Chairman

Mr. Rupen Patel - Member

Mr. S. Jambunathan - Member

Mrs. Geetha Sitaraman - Member

Corporate Social Responsibility Committee

In accordance with the provisions of Section 135 of the Companies Act, 2013 (the Act), the Board of Directors of the Company has constituted the Corporate Social Responsibility Committee (CSR Committee) comprising of the following Directors as it members:

Mr. Rupen Patel - Chairman

Ms. Kavita Shirvaikar - Member

Mr. Khizer Ahmed - Member

The terms of reference of the CSR Committee include the matters specified in Section 135 of the Act. The CSR Policy of the Company is uploaded on the Company’s website at the link https://tinyurl. com/yb9nel5o

On account of financial constraints, the Company could not spend the full amount as required in terms of Section 135 of the Companies Act, 2013. A report on CSR activities is provided in Annexure III to this Report.

Auditors

At the 68th Annual General Meeting held on December 30, 2018, M/s. T. P Ostwal & Associates LLP (FRN: 124444W/W100150) were appointed as Statutory Auditors to hold the office till the conclusion of the 73rd AGM to be held in the year 2022.

Further, In accordance with the provisions of Section 139 and 143(8) of the Companies Act, 2013, at the 68th Annual General Meeting held on December 30, 2018, M/s. R. S. Parekh & Co., Chartered Accountants were appointed as the Branch Auditor to audit the Realty Division of and to hold the office till the conclusion of the 73rd AGM to be held in the year 2022.

Cost Auditor

In terms of the provision of 148 of the Companies Act, 2013, read with the Companies (Cost Records and Audit) Rules, 2014, M/s. Vaibhav M Gandhi & Associates, Practicing Cost Accountant (Firm Registration No. 103617), having office at A-1 Matruchaya Building, Roshan Nagar, Chandravarkar Lane, Borivali (W), Mumbai - 92 was appointed as Cost Auditor of the Company for the financial year 2017-18 by the Board of Directors of the Company at a remuneration of Rs. 3,50,000/- (excluding applicable tax) subject to ratification of remuneration by the shareholders at the 69th Annual General Meeting of the Company.

Secretarial Audit Report

The Board had appointed Ms. Deepti Jambigi Joshi of MMJC & Associates LLP, as the Secretarial Auditor, to conduct the secretarial audit of the Company for the financial year ended March 31, 2018. The Report of Secretarial Audit Report is provided as Annexure IV to this Report.

With respect to the observations, remarks made in the Secretarial Audit Report, the same has been taken note of and the company shall take necessary step to ratify the same in compliance with the applicable law.

Sexual harassment of Women at workplace

The Company has a Policy on prevention of Sexual harassment at Workplace. During the year under review no case was reported under the policy.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings/ Outgo

The particulars prescribed under Section 134 of the Companies Act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules, 2014, relating to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings / Outgo is provided as Annexure V to this Report.

Extract of the Annual Return

In accordance with the provisions of Section 92 of the Companies Act, 2013 and the Rules framed thereunder, the extract of Annual Return in the prescribed Form MGT -9 is provided in Annexure VI to this Report.

Risk Management

The Board of Directors of the Company has framed and implemented a Risk Management Policy.

Whistle Blower policy/Vigil Mechanism

The Company has a Vigil Mechanism Policy for the employee to report genuine concerns/grievances. The Policy is uploaded on the Company’s website at the link. http://tinyurl.com/pvenjtk

The policy provides for adequate safeguards against the victimization of the employees who use the vigil mechanism. The vigil mechanism is overseen by the Audit Committee. There are no complaints / grievances received from any Directors or employees of the Company under this policy.

Disclosure under Section 197 of the Companies Act, 2013

The information as required under Section 197 of the Companies Act, 2013 (the Act) read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended, forms part of this Annual Report.

Disclosures as required under Rule 5(1) of the aforesaid Rules are provided as Annexure VII to the Report.

In terms of the provisions of Section 136 the Act, any member interested in obtaining a copy of information under Rule 5(2) of the aforesaid Rules, may write to the Company Secretary at the Registered Office of the Company.

Employee Stock Option / General Benefits Scheme

In order to motivate and reward employees, the Company instituted two Schemes viz

- Patel Engineering Employee Stock Option Plan as adopted by the Board of Directors vide resolution dated August 14, 2015. This Plan is administered by Nomination and Remuneration Committee of the Company through Patel Engineering Employees Welfare Trust.

- Patel Engineering General Employee Benefits Scheme 2015, approved under a special resolution passed by the members of the Company in the Annual General Meeting held on September 28, 2015. The Scheme is administered by Nomination and Remuneration Committee of the Company through the Patel Engineering Employees Welfare Trust.

During the year under review, 2,00,000 options were granted under Patel Engineering Employee Stock Option Plan.

The applicable disclosure under SEBI (Share Based employee Benefits) Regulations, 2014 (“the ESOP Regulations”) as at March 31, 2018 is uploaded on the Company’s website at the link https://tinyurl.com/ybtqbw7n

A Certificate from the Auditors of the Company in terms of Regulation 13 of ESOP Regulations would be placed at the ensuing AGM.

Corporate Governance

Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Report on Corporate Governance together with the certificate issued by M/s. T. P Ostwal & Associates LLP, the Statutory Auditors of the Company, on compliance in this regard forms part of the Annual Report.

General

i) There are no material changes and commitments affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the Boards’ report.

ii) No orders have been passed by any Regulator or Court or Tribunal which can have impact on the going concern status and the Company’s operations in future during the year under review.

iii) The Company has not accepted or renewed any amount falling within the purview of provisions of Section 73 of the Companies Act 2013 read with the Companies (Acceptance of Deposit) Rules, 2014 during the year under review.

Hence, the requirement for furnishing of details relating to deposits covered under Chapter V of the said Act or the details of deposits which are not in compliance with the Chapter V of the said Act is not applicable. The Company has accepted unsecured loan from its Directors.

Directors’ Responsibility Statement

Pursuant to Section 134 of the Companies Act, 2013, the Directors confirm that:

i. in preparation of the annual financial statements for the year ended March 31, 2018, the applicable Accounting standards had been followed along with proper explanation relating to material departures.

ii. for the financial year ended March 31, 2018, such accounting policies as mentioned in the Notes to the financial statements have been applied consistently and judgments estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company and of the Profit and Loss of the Company for the year ended March 31, 2018.

iii. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

iv. the annual financial statements have been prepared on a going concern basis.

v. that proper internal financial controls were followed by the Company and that such internal financial controls are adequate and were operating effectively.

vi. that proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively.

Acknowledgements

The Board of Directors wish to place on record their appreciation for their continued support and co-operation by Shareholders, Financial Institutions, Banks, Government Authorities and other Stakeholders. The Board of Directors also acknowledges and appreciates the support extended by all the employees of the Company and for their dedicated service.

On behalf of the Board of Directors,

Patel Engineering Ltd.

Rupen patel

Chairman & Managing Director

(DIN: 00029583)

Mumbai

August 14, 2018

Director’s Report