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Your Directors have pleasure in submitting their 9th Annual Report of the Company together with the Audited Statements of Accounts for the year ended 31st March, 2015.
During the year under review, your Company has incurred loss mainly on account of higher interest and finance charges & amortization of the project cost; your Directors do not recommend any dividend to the members of the Company for the year.
REVIEW OF BUSINESS OPERATIONS AND FUTURE PROSPECTS:
The total Income during the year has increased from Rs. 3959.88 Million to Rs. 5288.87 Million i.e. approx. 33.56% over the last year. The Loss before Tax has increased from Rs. 700.09 Million to Rs. 3433.91 Million. Your directors are hopeful to get better results in the upcoming years.
CHANGE IN THE NATURE OF BUSINESS, IF ANY:
There are no material changes in the nature of business during the year.
MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT:
Change in accounting policies during the year:
(i) Contractual obligation to restore the infrastructure to a specified level of serviceability:
During the year, the Group has reassessed the accounting treatment for Contractual Obligations to periodically maintain Project Asset as per the terms of the concession agreement, from recognizing the Major Maintenance Expense in the year of actual expenditure to recognize expense at the best estimate of the expenditure required to settle the present obligation at
the Balance Sheet date, in accordance with Accounting Standard (AS) –29 "Provisions, Contingent Liabilities and Contingent Assets". The same is reviewed at each balance sheet date and adjustments if any to the carrying amount is provided for accordingly.
The change in accounting policy has resulted in increase in expenses and corresponding increase in loss for the year ended March 31, 2015 by Rs. 35.86 Million.
(ii) Additional Concession Fees Payable to National Highways Authority of India (NHAI):
Post deferment of premium in the current year, the Group has reassessed the accounting treatment on premium payment to NHAI. In order to more appropriately present the Financials Statements, total premium payable of Rs. 22,629.71 Million as per the concession agreement has been capitalized as 'Intangibles Assets–Toll Collection Rights' and amortized over the period of service concession agreement as per the method prescribed in Part A to the Schedule II to the Companies Act, 2013 and corresponding obligation for committed premium has been recognized as liabilities. The total premium payable up to March 31, 2014 of Rs. 263.70 Million was charged to Statement of Profit and Loss. Due to change in accounting policy in the current year, the amount of premium payable of Rs. 263.70 Million after adjusting Rs. 110.38 Million (Net Amount Rs. 153.32 Million) towards actual amortization, has been written back in consolidated statement of profit and loss account as exceptional item. (Refer note 38)
Due to change in accounting policy, loss before tax for the year ended March 31, 2015 has decreased by Rs. 330.61 Million.
(iii) Treatment of Ancillary Cost of Borrowing during Construction Period:
With Effect from April 1, 2014, one of the Subsidiary, viz. MBCPNL has retrospectively revised the method of amortization of its ancillary borrowing cost over tenure of loan to capitalization of ancillary borrowing as part of project cost into the intangible assets. Management believes that this change would result in a more appropriate preparation or presentation of the financial statements of the enterprise and consistent with group accounting policy. The amortization portion of operational check posts have been charged off to statement of profit & loss account till March 31, 2014 as per the earlier basis to the extent of Rs. 8.38 Million has been written back during the year ended March 31, 2015. This change in accounting policy has resulted in decrease in ancillary borrowing cost expenses and corresponding decrease in loss for the year by Rs. 8.38 Million which has been disclosed under other income.
Had the Subsidiary continued to use the earlier method to charge off amortization of ancillary borrowing cost to consolidated statement of profit & loss for operation, the Loss for the current period would have been higher by Rs. 11.2 Million.
Depreciation on fixed asset is calculated at the rates arrived at based on the useful lives estimated by the management. Further, pursuant to the notification of Schedule II of the Companies Act 2013, by the Ministry of Corporate Affairs effective 1st April 2014, the management has internally reassessed and changed, wherever necessary the useful lives and the residual value to compute depreciation, to conform to the requirements of the Companies Act, 2013 and other consideration, as applicable.
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE:
M/s. Montecarlo Ltd., the minority Shareholder of the subsidiary Company Bijapur Hungund Tollway Private Limited, has filed Company Petition No. 78 of 2013 under sections 397,398 of the Companies Act, 1956 before the Hon'ble Company Law Board (CLB), Mumbai Bench, alleging acts of oppression and mismanagement by the majority shareholders SIPL, SEL (Sadbhav Group) and the past and present Directors of the Company appointed by the Sadbhav Group. SIPL had filed an Application to stay proceedings before the CLB and refer matters to arbitration on the ground that all disputes raised in the Company Petition were arbitrable and should therefore be referred to arbitration under the arbitration clause contained in the Shareholders Agreement dated July 9, 2010 between Montecarlo, Sadbhav and the Company. The said Application was dismissed by the CLB by Order dated January 8, 2014. SIPL then proceeded to file a Writ Petition before the Hon'ble Gujarat High Court challenging the January 8 Order. The Writ Petition was dismissed by Order dated August 14, 2014. SIPL has filed Letters Patent Appeal No.1070 of 2014 before the Division Bench of the Hon'ble Gujarat High Court against the August 14 Order, The Hon'ble Gujarat High Court has by Order dated September 18, 2014 continued the interim Orders passed during the pendency of the Writ Petition and further directed that the proceedings of Company Petition No. 78 of 2013 shall not proceed any further. The LPA is, pending hearing before the Hon'ble Gujarat High Court. There is no financial impact on the company in relation to the said litigation
DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS:
Your Company has strong Internal Controls and Management systems. These systems enable the Company to comply with Internal Company policies, procedures, standard guidelines and local laws to help protect Company's Assets and Confidential information against financial losses and unauthorized use. Further, Company has appointed Internal Auditor and based on findings of internal audit report, the company further took action to strengthen control measures.
PERFORMANCE AND FINANCIAL POSITION OF EACH OF THE SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENT:
Pursuant to Section 134 of the Companies Act, 2013 and Rule 8(1) of the Companies (Accounts) Rules, 2014 the report on performance and financial position of subsidiaries, associates and joint venture companies is attached as Annexure in Form AOC 1 prepared under section 129(3) of the Companies Act, 2013 to the consolidated Financial Statements of the Company which forms part of this report.
JOINT STATUTORY AUDITORS:
Pursuant to provisions of Section 139 of the Act and rules framed thereunder,
M/s. Manubhai & Shah, Chartered Accountants, Ahmedabad, having Firm Registration No. 106041W was appointed as joint statutory auditors of the Company from the conclusion of 8th annual general meeting till the conclusion of the 12th annual general meeting to be held on in the year 2018, subject to ratification of their appointment at every annual general meeting.
M/s. S R B C & CO LLP, Chartered Accountants, Ahmedabad, having Firm Registration No. 324982E was appointed as joint statutory auditors of the Company from the conclusion of 8th annual general meeting till the conclusion of the 13th annual general meeting to be held on in the year 2019, subject to ratification of their appointment at every annual general meeting.
EXPLANATION OR COMMENTS ON QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLAIMERS MADE BY THE AUDITORS AND THE PRACTICING COMPANY SECRETARY IN THEIR REPORTS:
The Auditors' Report to the Shareholders does not contain any qualification. There were no reservations or adverse remarks made by the Auditors in their report. M/s. Ashish Shah & Asoociates, Practicing Company Secretaries, were appointed as Secretarial Auditor of the Company to conduct the secretarial audit for the FY–2014–15. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. The Secretarial Audit Report is attached as Annexure–1 to this report.
The audit committee of the Company is constituted in line with the provisions of Section 177 of the Companies Act, 2013. The composition of audit committee is given below:
1. Mr. Arun Patel
2. Mr. Sandip Patel
3. Mr. Nitin Patel
Members elect chairman in the meeting itself.
A) Issue of equity shares with differential rights
The Company has not issued any equity shares with differential rights during the year under review.
B) Issue of sweat equity shares
The Company has not issued any Sweat Equity Shares during the year under review.
C) Issue of employee stock options
The Company has not provided any Stock Option Scheme to the employees.
D) Provision of money by Company for purchase of its own shares by employees or by trustees for the benefit of employees
The Company has not bought back or provided for buyback of any of its securities during the year under review.
E) Issue of Bonus Shares
The company has issued 28,26,93,710 shares as bonus shares on 29th October, 2014.
F) Conversion of Compulsory Convertible Cumulative Preference Shares into Equity Shares
The Company has conversed 2250774 Nos. of Compulsory Convertible Cumulative Preference Shares into 2262200 Nos. of Equity Shares.
G) Conversion of Compulsory Convertible Debentures into Equity Shares
The Company has conversed 1100950 Nos. of Compulsory Convertible Debentures into 01 Equity Share.
H) Issue of Equity Shares
The company has issued 4,12,62,135 equity shares as fresh issue and an offer for sale of 3235762 Equity shares by Xander Investment Holding XVII Limited and 3235762 Equity Shares by Norwest Venture Partners VII–A–Mauritius under Initial Public Offer.
EXTRACT OF THE ANNUAL RETURN:
Extract of Annual Return of the Company in Form MGT–9 is attached as Annexure–2.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:
The particulars regarding conservation of energy, technology absorption and Foreign Exchange earnings and outgo pursuant to
Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are not applicable to the Company.
CORPORATE SOCIAL RESPONSIBILITY (CSR) (APPLICABLE TO EVERY COMPANY HAVING NET WORTH OF RUPEES FIVE HUNDRED CRORES OR MORE, OR TURNOVER OF RUPEES ONE THOUSAND CRORES OR MORE OR A NET PROFIT OF RUPEES FIVE CRORES OR MORE DURING ANY FINANCIAL YEAR):
The Company has developed and implemented the Corporate Social Responsibility initiatives during the year under review. The report on CSR activities is attached as Annexure–3.
CHANGES IN DIRECTORS AND KEY MANAGERIAL PERSONNEL:
Mr. Shashin V. Patel is liable to retire by rotation at the ensuing Annual General Meeting and being eligible to offer himself for reappointment. Mr. Vasistha C. Patel was re–appointed as Managing Director and Mr. Varun Mehta was appointed as Chief Financial Officer of the Company. Mr. Apurva Gupta, Mr. Jayant Goel, Mr. Narendra Patel and Mr. Ravi Kapoor resigned from the directorship of the company due to pre–occupation. Mr. Arun Patel, Mr. Atul Ruparel, Mr. Mirat Bhadlawala, Mrs. Daksha Shah and Mr. Jagdish Joshipura have been appointed as the Independent Directors subject to the approval of shareholders of the company in the General Meeting. Hence, the shareholders are requested to approve the appointment of above mentioned independent directors. There being no other changes in directorship during the year under review.
DIRECTORS RESPONSIBILITY STATEMENT:
In accordance with the provisions of Section 134(5) of the Companies Act, 2013 the Board hereby submits its responsibility Statement:–
(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern basis; and
(e) The Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
PARTICULARS OF EMPLOYEES:
During the year under review, there was no employee who has drawn remuneration in excess of the limits set out under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as Annexure–4.
NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS:
There were Nine (9) Board Meetings held on 8th May, 2014, 26th May, 2014, 30th May, 2014, 4th September, 2014, 13th October, 2014, 22nd October, 2014, 29th October, 2014, 15th December, 2014 and 7th January, 2015 during the financial year 2014–15.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186:
Details of Loans, Guarantees and investments covered under the provisions of Section 186 of the Companies Act 2013 are given in the notes no 11 and 13 to the Financial Statements.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:
Particulars of Contracts or arrangements with related parties are as attached Annexure–5.
The Company has established a vigil mechanism by adopting Whistle Blower Policy.
STATEMENT INDICATING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY:
In accordance with the Clause 49 of the listing agreement, the Board formally adopted steps for framing, implementing and monitoring the risk management plan for the Company by way of Risk Management Policy and constituted a Risk management Committee.
The Management has also envisaged the minimization procedure and its perception in respect of each identified risk.
Further, the Company identifies risks with its degree and control systems are instituted to ensure that the risks in business process are mitigated. The Board provides oversight and reviews the Risk Management Policy periodically. In the opinion of the Board there has been no identification of elements of risk that may threaten the existence of the Company.
The Directors wish to express their appreciation of the support and cooperation of Government of Gujarat, AUDA, Bankers and Financial Institutions. Your Directors wish to place on record their appreciation of the employees of the Company at all levels for their commitment and continued support for the Company.
For and on behalf of the Board of Directors
Sadbhav Infrastructure Project Limited
Vishnubhai M. Patel Chairman DIN: 00048287
Vasistha C. Patel Managing Director DIN:00048324
Date : November 04, 2015
Place : Ahmedabad