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To the Members of
KEC International Limited
1.The Directors have pleasure in presenting the Eleventh Annual Report along with the Consolidated and Standalone Audited Financial Statements of the Company for the financial year ended on March 31, 2016.
In FY 2015–16, several measures were taken for improving the financial performance of the Company which yielded positive results.
On a consolidated basis, the net revenue from operations for FY 2015–16 was Rs. 8,516 Crore, a marginal growth over FY 2014–15. Revenue growth was flat primarily on account of soft commodity prices, significant depreciation of Brazilian Real and delay in conversion of some large lowest bidder (L1) positions into orders. EBITDA for FY 2015–16 was Rs. 679 Crore, a strong growth of 33 percent over FY 2014–15. EBITDA margin expanded by 200 bps in FY 2015–16. The net profit excluding the impact of asset sale in FY 2015–16 increased to 186 Crore, a strong growth of 168 percent over FY 2014–15. The net profit including the impact of sale of the asset in FY 2015–16 increased to Rs. 192 Crore, a growth of 19 percent over FY 2014–15. On a standalone basis, the net revenue from operations was Rs. 6,464 Crore and the net profit was Rs. 158 Crore, including profit on sale of Telecom Towers' business of Rs. 5 Crore.
The Company secured orders of Rs. 8,714 Crore in FY 2015–16, an increase of 6 percent over the previous year. This is notwithstanding the impact of soft commodity prices and adverse currency movement in the Company's key market Brazil. The closing order book position was at Rs. 9,449 Crore. The Company is expecting to receive significant orders in near term as it already has one of the highest L1 pipeline.
During the year under review, the Company saw a very significant improvement in the profitability. The transmission business continues to perform well both in terms of revenue and profitability. The Company's wholly owned subsidiary, SAE Towers, has turned around this year to make a profit. The Company also took necessary and rigorous steps for closing old projects in its Railway and Water businesses. However, the profitability of the Railways and Water businesses were impacted due to costs associated with project closures. The soft commodity prices resulted in under absorption of fixed costs in the Company's Cables business.
The key highlights of the Company's various businesses are as follows:
Power Transmission & Distribution – This is the Company's largest business vertical which provides end–to–end solutions for power evacuation from generating stations to consumer distribution points. During the year under review, the Company has expanded its presence into underground cabling and Substation business internationally.
The Company secured orders for Rs. 7,329 Crore in this division during the year across India, MENA, Africa, Asia and the Americas. The orders include largest ever single order in transmission business from Power Grid Corporation of India Limited (PGCIL) and one of the largest orders in Africa from Ghana Grid Company.
Building on to its business transformation exercise which the Company completed last year, it has maintained the pace of implementation in line with changing client requirements.
The successful implementation of the transformation exercise has led to reduction in execution cycles for projects across the Company's businesses and the Company has also completed some of the projects ahead of schedule. In recognition, the Company had received an appreciation letter from PGCIL for completing the Indo Bangladesh cross border line 5 months ahead of schedule. PGCIL also appreciated the Company's work by conferring upon it three of its most coveted awards for FY 2015–16 – Best Transmission Line Contractors award, award for Institutionalizing Best Safety Practices and an award for Overall Performance Demonstrated. The Company also won the Outstanding Quality award for a National Grid project in Saudi Arabia.
Last year the Company had strengthened its presence in domestic Substation business by securing large and prestigious orders for the establishment of various Gas Insulated Substations (GIS). This year the Company has further expanded this business in international markets by securing orders in Saudi Arabia, Bhutan and Afghanistan.
The Company has also started expanding on cabling projects with orders in Saudi Arabia.
The Company has also expanded its strong global EPC expertise in Americas through its wholly owned subsidiary SAE Towers. In addition to the 5 (Five) EPC projects secured earlier in Brazil, this year the Company secured one more such order.
Cables – The Cables business secured orders of Rs. 967 Crore in FY 2015–16. Cable being a commodity driven business, the impact of significant deceleration in prices of Copper and other metals impacted the revenue and the order values. The Cables business has now received complete approval for 220 kV Cables from KEMA, Netherlands which will help in expansion of the EHV Cables portfolio in international markets.
Railways – The Company secured a composite order of Rs. 288 Crore for electrification, civil works, track laying, signaling and telecommunication works in Madhya Pradesh from Rail Vikas Nigam Limited. The order sizes in traditional rail businesses have started to increase and the Company intends to participate in these projects going forward. The reduction in timelines to award a project and a strong tender pipeline is expected to drive growth in this business.
Renewables – During the year, the Company ramped up its presence in the renewables business by securing orders of Rs. 130 Crore. These orders are mainly for EPC work of Solar PV power plants.
Water – This year the Company's focus has been on completing or closing the balance Water Resource Management (WRM) projects. The Company has managed to complete most of the projects this year and remaining projects are expected to be completed in FY 2016–17. The technology projects like Waste Water Treatment (WWT) are under execution and the Company has selectively bid for these projects.
During the year under review, there was no change in the nature of business of the Company.
The Board of Directors had during the year, approved payment of interim dividend at the rate of Rs. 1/– (Rupee One only) per equity share, of face value of Rs. 2/– each, to the Members of the Company as at the closing hours on March 24, 2016, being the record date fixed by the Board of Directors for this purpose. Interim Dividend was paid on March 29, 2016. With a view to conserve the resources for future expansion and business growth, the Board does not recommend any further dividend and that the interim dividend be considered as final dividend for the financial year ended on March 31, 2016.
4. GENERAL RESERVE
The Board of Directors proposes to transfer an amount of Rs. 15.80 Crore to the General Reserve.
5. SHARE CAPITAL
The paid up Equity Share Capital of the Company as on March 31, 2016 was Rs. 51.42 Crore and remained unchanged during the financial year under review.
6. FIXED DEPOSITS
The Company has not accepted any deposits within the meaning of sub–section (31) of Section 2 and Section 73 of the Companies Act, 2013 (hereinafter referred to as "the Act") and the Rules framed thereunder.
7. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS
The loans given, investments made and guarantees and securities provided during the year under review, are in compliance with the provisions of the Act and Rules made thereunder and details thereof are given in the Notes to the Standalone Financial Statements.
8. MANAGEMENT DISCUSSION AND ANALYSIS AND CORPORATE GOVERNANCE REPORT
In terms of Clause 49 of the erstwhile Listing Agreement and Regulation 34 of the Securities and Exchange
Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as "the Listing Regulations"), a separate section on Management Discussion and Analysis and Corporate Governance Report together with a certificate from the Company's Statutory Auditors confirming compliance with Corporate Governance clauses of erstwhile Listing Agreement and Listing Regulations, are set out and forms part of this Annual Report.
9. CONSOLIDATED FINANCIAL STATEMENTS
In accordance with the provision of sub–section(3) of Section 129 of the Act and the Listing Regulations, the Consolidated Financial Statements of the Company, including the financial details of all the subsidiary companies of the Company, forms part of this Annual Report. The Consolidated Financial Statements have been prepared in accordance with the Accounting Standards prescribed under Section 133 of the Act.
10. SUBSIDIARY COMPANIES
The Company has twenty one subsidiary companies which includes step down subsidiaries as well.
During the year under review, the Company had incorporated a subsidiary Company namely KEC Bikaner Sikar Transmission Private Limited as a Special Purpose Vehicle (SPV), to execute a project awarded to the Company by Rajasthan Rajya Vidyut Prasaran Nigam Limited in the state of Rajasthan.
Jay Railway Projects Private Limited, a wholly owned subsidiary of the Company, merged with the Company on December 30, 2015, with appointed date of April 01, 2014. Further, during the year under review, SAE Towers Panama Holdings LLC and SAE Towers Panama S de RL Panama, step down subsidiaries, were dissolved.
Pursuant to the provision of sub–section (3) of Section 129 of the Act read with Rule 5 of Companies (Accounts) Rules, 2014, the salient features of the Financial Statements of each of the subsidiaries, associate and joint venture companies are set out in the prescribed Form AOC–1, which forms part of the Annual Report. The Financial Statements of these subsidiaries are uploaded on the website of the Company i.e. www.kecrpg.com <http://www.kecrpg.com> under 'Investors' tab and the same shall also be made available for inspection by any Member at the Registered Office of the Company on all working days (except Saturdays) during business hours
till the date of Annual General Meeting. A copy of these Financial Statements shall be provided to any Member of the Company, upon receipt of a written request for the same.
11. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the provisions of clause (c) of sub–section (3) and sub–section (5) of Section 134 of the Act, the Board of Directors of the Company hereby state and confirm that:
1. in the preparation of the annual accounts for the financial year ended on March 31, 2016, applicable accounting standards have been followed and no material departures have been made from the same;
2. we have selected such accounting policies and applied 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 as at March 31, 2016 and of the profit of the Company for the year ended on that date;
3. we have taken proper and sufficient care 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;
4. we have prepared the annual accounts for the financial year ended on March 31, 2016 on a going concern basis;
5. we have laid down internal financial controls and the same have been followed by the Company and that such internal financial controls are adequate and were operating effectively; and
6. we have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
12. DIRECTORS & KEY MANAGERIAL PERSONNEL
Pursuant to the provisions of Section 152 of the Act, Mr. R. D. Chandak, Director is liable to retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment. Further during the year, the Board of Directors had appointed Mr. Vimal Kejriwal as an Additional Director. Pursuant to Section 161 of the Act and Article 124 of the Articles of Association of the Company, Mr. Vimal Kejriwal holds office up to the date of the ensuing Annual General Meeting of the Company. The Company has received a notice from a Member of the Company under Section 160 of the Act, proposing the candidature of Mr. Vimal Kejriwal as Director of the Company.
In compliance with Regulation 36(3) of the Listing Regulations, brief resume, expertise and other details of all the Directors proposed to be appointed/reappointed are given in the Notice convening the ensuing Annual General Meeting.
The Board recommends the aforesaid appointment/ reappointment of the Directors.
12.2 Key Managerial Personnel (KMP)
Pursuant to the provisions of sub–section (51) of Section 2 and Section 203 of the Act read with the Rules framed thereunder, the following are Key Managerial Personnel of the Company:–
1. Mr. Vimal Kejriwal, Managing Director & CEO;
2. Mr. R. D. Chandak, Managing Director*;
3. Mr. Rajeev Aggarwal, Chief Financial Officer; and
4. Mr. Ch. V. Jagannadha Rao, Vice President–Legal and Company Secretary.
* Retired from the close of business hours on April 01, 2015.
12.3 Declaration by Independent Directors
Pursuant to provision of sub–section (6) of Section 149 of the Act and Regulation 17 of the Listing Regulations, each of the Independent Directors of the Company namely Mr. A. T. Vaswani, Mr. D. G. Piramal, Mr. G. L. Mirchandani, Ms. Nirupama Rao, Mr. S. M. Kulkarni, Mr. S. M. Trehan, Mr. S. S. Thakur and Mr. Vinayak Chatterjee have submitted a declaration that each of them continues to meet the criteria of independence as provided in the Act and Listing Regulations.
12.4 Board Evaluation
Pursuant to the provisions of the Act and the Listing Regulations, the Board has carried out an annual evaluation of its own performance, the Directors individually and also of all the Committees of the Board. The Directors were provided with an electronic platform to record their views. The reports generated out of the evaluation process were placed before the Board at its Meeting and noted by the Directors.
The performance of the Board and its Committees was evaluated by the Board after seeking inputs from the Directors on the basis of criteria such as Board composition, strategy, performance management, risk management etc. The performance of the Committees was evaluated using parameters like composition, frequency of meetings, level of participation and effectiveness of the Committees etc.
A meeting of Independent Directors was held in terms of requirement of Schedule IV of the Act and the Listing Regulations. The Directors present reviewed the performance of Non–Independent Directors, Chairman of the Company and the performance of the Board as a whole. The Directors also discussed the quality, quantity and timeliness of flow of information between the Company management and the Board, which is necessary for the Board to effectively and reasonably perform their duties. The feedback of the meeting was shared with the Chairman of the Company.
12.5 Policy on Remuneration of Directors, Key Managerial Personnel and Senior Management Personnel
In terms of the provision of sub–section (3) of Section 178 of the Act, the Board of Directors has adopted a Nomination and Remuneration Policy on appointment and remuneration of Directors, Key Managerial Personnel and Senior Management Personnel. The policy covers the appointment, including criteria for determining qualifications, positive attributes, independence and remuneration of its Directors, Key Managerial Personnel and Senior Management Personnel. The said Policy is annexed to this Report as Annexure 'A'.
12.6 Meetings of the Board of Directors
During the year under review, 5 (Five) meetings of the Board of Directors were held, the details of which are given in the Corporate Governance Report.
12.7 Meetings of Audit Committee
During the year under review, 9 (Nine) meetings of the Audit Committee were held. The details of the meetings and the composition of the Committee are given in the Corporate Governance Report. All the recommendations of the Audit Committee were accepted by the Board.
13.1 Statutory Auditors
M/s. Deloitte Haskins & Sells ("DHS"), Chartered Accountants (Firm's Registration No.: 117365W) were appointed as the Statutory Auditors of the Company, to hold office from the conclusion of the Ninth Annual General Meeting until the conclusion of the Twelfth Annual General Meeting, subject to ratification by the Members at every Annual General Meeting. The Board of Directors recommends to the Members to pass the resolution ratifying the appointment of DHS as the Statutory Auditors of the Company as stated in Item No. 4 of the Notice convening the ensuing Annual General Meeting.
The Statutory Auditors' Report does not contain any qualifications, reservations or adverse remarks.
13.2 Branch Auditors
In terms of the provision of sub–section (8) of Section 143 of the Act read with Rule 12 of the Companies (Audit and Auditors) Rules, 2014, the audit of the accounts of the branch offices of the Company located outside India is required to be conducted by the person(s) or firm(s) qualified to act as Branch Auditors in accordance with laws of that country. Approval of the Members is sought to authorise the Board of Directors/Audit Committee to appoint Branch Auditors in consultation with the Statutory Auditors for the branch offices of the Company and also to fix their remuneration. The Board of Directors recommends to the Members to pass the resolution, as stated in Item No. 5 of the Notice convening the ensuing Annual General Meeting.
13.3 Cost Auditors
Pursuant to the provisions of Section 148 of the Act read with Rule 14 of the Companies (Audit and Auditors) Rules, 2014, the cost records, in respect of manufacturing of Steel towers and Cables, need to be audited. The Board of Directors, upon the recommendation of the Audit Committee, had appointed M/s. Kirit Mehta and Associates, Cost Accountants (Firm's Registration No.: 000353) to conduct audit of the cost records of the Company for the financial years 2015–16 & 2016–17. In terms of the above provisions, the remuneration payable to the Cost Auditor is required to be ratified by the Members. Accordingly, the Board of Directors recommends the Members to pass the resolution, as stated in Item No. 7 of the Notice convening the ensuing Annual General Meeting.
The Company has filed the Cost Audit Reports for the financial year 2014–15 with the Ministry of Corporate Affairs on September 30, 2015.
13.4 Secretarial Auditors
In terms of the provisions of Section 204 of the Act and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the
Board had appointed M/s. Parikh Parekh & Associates, Practicing Company Secretaries, as Secretarial Auditors to conduct Secretarial Audit for the financial year 2015–16. The Secretarial Audit Report in the prescribed Form MR–3 is annexed to this report as Annexure 'B'. The said Secretarial Audit Report doesn't contain any qualifications, reservations, adverse remarks by the Secretarial Auditors.
14. CORPORATE SOCIAL RESPONSIBILITY
In accordance with the provisions of Section 135 read with Schedule VII of the Act, the Company, as a part of its Corporate Social Responsibility ("CSR") initiative, has adopted a CSR Policy outlining various CSR activities to be undertaken by the Company in the area of health, water, sanitation, promoting education, skill development etc. The CSR policy of the Company is available on the Company's website i.e. www.kecrpg.com under 'Investors' tab.
During the year under review, even though the Company was not mandatorily required to spend any amount on CSR activities, it has spent Rs. 93 Lacs on CSR activities. The Board has constituted a CSR Committee inter alia to recommend on the CSR projects/programs, recommend the amount on each CSR activity and to monitor such CSR activities, being undertaken by the Company. The report on CSR activities as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 is set out as Annexure 'C'.
15. POLICY ON CODE OF CONDUCT AND ETHICS
The Company has laid down a Code of Conduct and Ethics ("Code") applicable to all the Directors and employees of the Company. The Code provides for the matters related to governance, compliance, ethics and other matters. The Code also includes the policy on prevention, prohibition and redressal of sexual harassment of women at workplace in accordance with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 to effectively promote gender sensitive safe spaces and remove underlying factors that contribute towards a hostile work environment against women.
During the year, no complaints of any nature were received under the provisions of Sexual Harassment of Women at Workplace Act.
16. WHISTLE BLOWER POLICY
Pursuant to the provisions of sub–section (9) of Section 177 of the Act and the Listing Regulations, the Company has established a vigil mechanism ("Whistle Blower Policy") to facilitate its employees and Directors to voice their concerns or observations without fear, or raise reports of instance of any unethical or unacceptable business practice or event of misconduct/unethical behavior, actual or suspected fraud and violation of Company's Code of Conduct etc. to the Corporate Ethics and Governance Committee. The Policy provides for adequate safeguards to those persons who use such mechanism and also have the provision for direct access to the chairperson of the Audit Committee in appropriate or exceptional cases. The Policy can be accessed on the Company's website i.e. www.kecrpg.com under 'Investors' tab.
17. RISK MANAGEMENT POLICY
The Company has formulated a Risk Management Policy, which reflects the overall risk management philosophy, the Company's overall approach to risk management and the role and responsibilities for risk management. Risk management forms an integral part of the business planning and review cycle of the Company. The Company's Risk Management Policy is designed to provide reasonable assurances that objectives are met by integrating management control into daily operations, by ensuring compliance with legal requirements and by safeguarding the integrity of the Company's financial reporting and its related disclosures. The identification, analysis and putting in place the process for mitigation of these risks is an ongoing process. The risks faced by the Company and the measures taken by the Company to mitigate those risks are detailed in Management Discussion and Analysis section.
18. INTERNAL FINANCIAL CONTROL
Details in respect of adequacy of internal financial controls with reference to the Financial Statements are stated in Management Discussion and Analysis section.
19. RELATED PARTY TRANSACTIONS
All transactions entered into by the Company with related parties were in the ordinary course of business and at arm's length basis. The Audit Committee has reviewed and approved the related party transactions undertaken by the Company during the financial year. Disclosures as required under AS–18 have been made in Note No. 35 to the Standalone Financial Statements.
There are no materially significant related party transactions entered into by the Company with its Directors/Key Management Personnel or their respective relatives, the Company's Promoter(s), its subsidiaries/joint ventures/associate or any other related party, that may have a potential conflict with the interest of the Company at large. The policy on related party transactions, as formulated by the Board is available on the Company's website i.e. www.kecrpg.com under 'Investors' tab.
20. EXTRACT OF ANNUAL RETURN
The extract of the Annual Return as on March 31, 2016 in the prescribed Form MGT–9 is enclosed as Annexure 'D'.
21. ENVIRONMENT HEALTH AND SAFETY (EHS)
It has always been the Company's endeavor to achieve the EHS objective of accident free workplace. In order to ensure that our employees become more safety conscious and to improve the organization's approach towards prevention of loss, the Company has undertaken various EHS management processes and deployed methodologies and implemented them under the EHS system.
The Company has imparted EHS industry specific training for employees and workmen. The Company has also made improvements in reporting of unsafe acts/ conditions & its closure. These robust EHS management processes helped the Company in preventing loss of life and property damage incidents.
The Company has bagged various EHS awards and appreciation from our prestigious customers and independent agencies. The awards include "Greentech Safety Awards 2015" for its stringent Safety Standards & Credibility.
22. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under clause (m) of sub–section (3) of Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014, are provided in the prescribed format and is enclosed as Annexure 'E'.
23. PARTICULARS OF EMPLOYEES
Disclosures pertaining to the remuneration and other details as required under sub–section (12) of Section 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, are given in Annexure 'F'.
Disclosure about the information and other details on employees, as required in terms of Rule 5(2) & (3), who were in receipt of remuneration of not less than Rs. 60 Lacs during the year or Rs. 5 Lacs per month during any part of the year, forms part of this Report. In terms of Section 136 of the Act, this report is being sent to the Members and others entitled thereto, excluding the aforesaid information. The said information is available for inspection by the Members at the Registered Office of the Company during business hours on all working days (except Saturdays) upto the date of the ensuing Annual General Meeting. The said information shall also be provided to any Member of the Company, who sends a written request to the Company Secretary.
24. HUMAN RESOURCE/INDUSTRIAL RELAHONS
The Company understands that employees are vital and valuable assets. The Company recognises people as the primary source of its competitiveness and continues its focus on people development by leveraging technology and developing a continuously learning human resource base to unleash their potential and fulfill their aspirations. The strategic thrust of Human Resource has been on improvement of the performance of employees through training & development and also to identify outperformers who have potential for taking higher responsibilities.
The employee relations remained cordial throughout the year. The Company had 4,104 permanent employees on its rolls as on March 31, 2016. The Board places on record its sincere appreciation for the valuable contribution made by employees across all levels whose enthusiasm, team efforts, devotion and sense of belonging has made this Company proud.
25. OTHER DISCLOSURES
Your Directors state that no disclosures or reporting is required in respect of the following items, as the same is either not applicable to the Company or relevant transactions/events have not taken place during the year under review.
a. The Company has not issued any equity shares with differential rights as to dividend, voting or otherwise.
b. The Company has not issued shares (including sweat equity shares) to employees under any scheme.
c. The Managing Director & CEO of the Company did not receive any remuneration or commission from any of its subsidiaries.
d. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future.
Your Directors take this opportunity to thank the Central and State Government Departments, Organizations and Agencies for their continued support and co–operation. The Directors are also thankful to all valuable stakeholders viz., customers, vendors, suppliers, banks, financial institutions, joint venture partners and other business associates for their continued co–operation and excellent support provided to the Company during the year. The Directors acknowledge the unstinted commitment and valuable contribution of all employees of the Company.
Your Directors also appreciate and value the trust reposed in them by Members of the Company.
The following annexures enclosed, form part of this Report:
a. Nomination and Remuneration Policy – Annexure 'A'
b. Secretarial Audit Report in Form MR–3 – Annexure 'B'
c. Annual Report on Corporate Social Responsibility –Annexure 'C'
d. Extract of Annual Return in Form MGT–9 –Annexure 'D'
e. Conservation of Energy, Technology Absorption and Foreign Exchange earnings and outgo –Annexure 'E'
f. Information under rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 – Annexure 'F'
For and on behalf of the Board of Directors
H. V. Goenka
Date: May 06, 2016