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We have pleasure in presenting the Twenty First Annual Report on the business and operations of the Company together with the audited results for the financial year ended March 31, 2016.
BUSINESS AND OPERATIONS
A. Business Overview
Sobha Limited is a public limited company with its equity shares listed on National Stock Exchange of India Limited and BSE Limited. The authorized share capital of the Company is Rs. 2,000,000,000 divided into 150,000,000 equity shares of Rs. 10 each and 5,000,000 preference shares of Rs. 100 each. The issued, subscribed and paid–up capital of the Company is Rs. 980,638,680 divided into 98,063,868 equity shares of Rs. 10 each. During the year under review, there was no change in the capital structure of the Company.
The operations of the Company can be categorised into two main verticals:
? Construction and development of residential and commercial projects
? Contractual projects
A summary of completed and ongoing projects as on March 31, 2016 has been detailed in the Management Discussion and Analysis Report titled as Management Report forming part of the Annual Report.
B. Financial Overview Standalone
During the financial year 2015–16, the Company has on a standalone basis, registered total revenues of Rs. 18,184.97 million as compared to Rs. 24,016.47 million in the previous year, a decrease of 24.28 % y–o–y. The Profit before Tax and Profit after Tax have declined by 15.99 % and 31.23 % respectively
The consolidated revenues of the Company during the financial year 2015–16 was Rs. 18,784.38 million, a decrease of 23.50 % from the previous year. The Profit before Tax was lower by 24.42% and Profit after Tax (after considering minority interest) by 35.60% as compared to the financial year 2014–15.
Transfer to Reserves
An amount of Rs. 136.92 million is proposed to be transferred out of the current profits to the General Reserve.
The Board of Directors has, subject to the approval of the shareholders in the ensuing Annual General Meeting, recommended a dividend of Rs. 2 per equity share of Rs. 10 each.
C. Operational Overview
During the year under review, the Company has executed and handed over 9 real estate projects covering an area of 5.59 Million Square Feet of developable area and 16 contractual projects covering an area of 5.51 Million Square Feet resulting in an aggregate development of 11.10 million square feet.
The Company has completed 111 real estate projects and 278 contractual projects covering about 81.64 million square feet of area since inception.
The Company currently has 40 ongoing residential projects aggregating to 41.20 million square feet of developable area. It has 27 ongoing contractual projects aggregating to 8.07 million square feet under various stages of construction.
The Company has a geographic presence in 25 cities and 13 states across India.
BUYBACK OF EQUITY SHARES
The Board of Directors at their meeting held on May 19, 2016, have approved a buyback proposal
for purchase by the Company of up to 2,275,000 shares of Rs. 10 each (representing 2.32% of total equity capital) from shareholders of the Company on a proportionate basis by way of a tender offer route at a price of Rs. 330 per equity share for an aggregate amount not exceeding Rs. 750.75 million in accordance with the provision of the Companies Act, 2013 and SEBI (Buy Back of Securities) Regulations, 1998.
CHANGES IN DIRECTORS AND KEY MANAGERIAL PERSONNEL
During the year under review, there were no changes in the directors and key managerial personnel of the Company.
CHANGES IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
During the year under review, there were no changes in subsidiaries, joint ventures and associates of the Company.
SIGNIFICANT OR MATERIAL ORDERS PASSED BY REGULATORS / COURTS
During the year under review, there were no significant or material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future.
BOARD OF DIRECTORS AND ITS COMMITTEES
A. Composition of the Board of Directors
As on date, the Board of Directors of the Company comprises of eight Directors of which five are Non Executive Independent Directors. The composition of the Board of Directors is in compliance with Clause 49 of the Listing Agreement / Regulation 17 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 149 of the Companies Act, 2013.
The Company has received necessary declarations from the Independent Directors stating that they meet the criteria of independence as specified in Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement / Regulation 16 of Listing Regulations.
During the year under review, the Board of Directors met 4 times on the following dates
? May 12, 2015
? August 07, 2015
? November 13, 2015
? February 05, 2016
In accordance with the provisions of the Companies Act, 2013, a separate meeting of the Independent Directors of the Company was held on May 11, 2015.
C. Appointment of Director
The term of office of Mr. Ravi PNC Menon, Chairman (DIN: 02070036) will cease at the close of the financial year 2016–17 and he is eligible for re–appointment. The Board of Directors based on the recommendation of Nomination, Remuneration and Governance Committee, have approved the reappointment of Mr. Ravi PNC Menon as Chairman of the Company for a further period of five years subject to the approval of the members in the ensuing Annual General Meeting.
D. Re–appointment of Director Retiring by Rotation
In terms of Section 152 of the Companies Act, 2013, Mr. J C Sharma, Vice Chairman and Managing Director (DIN: 01191608) is liable to retire by rotation at the ensuing Annual General Meeting and being eligible offers himself for re–appointment. The Board of Directors based on the recommendation of Nomination, Remuneration and Governance Committee, have recommended the re–appointment of Mr. J C Sharma, Vice Chairman and Managing Director, retiring by rotation.
The Notice convening the Annual General Meeting includes the proposals for appointment / re–appointment of the Directors. Brief resumes of the Directors proposed to be appointed / re–appointed have been provided as an Annexure to the Notice convening the Annual General Meeting. Specific information about the nature of their expertise in specific functional areas and the names of the companies in which they hold directorship
and membership / chairmanship of the Board Committees have also been included.
E. Committees of the Board
During the year under review, there were no changes in the composition of the Committees of the Board. A detailed note on the Committees of the Board of Directors is given in the Corporate Governance Report forming part of the Annual Report.
F. Performance Evaluation
Pursuant to the provisions of Section 134 (3) (p) read with Articles VII and VIII of Schedule IV of the Companies Act, 2013, the Board undertook an evaluation of itself and its committees. The Board, excluding the independent director being evaluated, also assessed the performance and the potential of each of the independent directors with a view to maximising their contribution to the Board. As contemplated by the Act, the independent directors at a meeting conducted a review of the performance of the Chairman after taking into account the views of the non–executive members of the Board. At the same meeting, the review of the executive directors was also carried out.
The process put in place by the Board, in accordance with the Companies Act, 2013 and the relevant provisions of the Listing Agreement / Listing Regulations, is aimed at improving the performance of the Board, its committees and its members.
G. Directors' Responsibility Statement
In terms of the requirements of Section 134(5) of the Companies Act, 2013, we, on behalf of the Board of Directors, hereby confirm that:
a) I n 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 of the company for that period;
c) proper and sufficient care has been taken 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) t he annual accounts has been prepared on a going concern basis; and
e) i nternal financial controls to be followed by the company has been laid down and such internal financial controls are adequate and were operating effectively.
f) proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
AUDIT RELATED MATTERS
A. Audit Committee
The powers, role and terms of reference of the Audit Committee are in consonance with the requirements mandated under Section 177 of the Companies Act, 2013 and Clause 49 of the Listing Agreement / Regulation 18 of Listing Regulations. The Audit Committee comprises of the following members:
1. Mr. R V S Rao (Independent Director) – Chairman
2. Mr.M Damodaran (Independent Director) –Member
3. Dr. S K Gupta (Independent Director) – Member
4. Mr. Anup Shah (Independent Director) – Member
5. Mr. J C Sharma (Vice Chairman and Managing Director) – Member
During the period under review, the suggestions put forth by the Audit Committee were duly considered and accepted by the Board of Directors. There were no instances of non–acceptance of such recommendations.
B. Statutory Auditors
At the Annual General Meeting of the Company held on July 11, 2014, S.R. Batliboi & Associates LLP (Firm Registration Number 101049W/E300004) were re–appointed as the Statutory Auditors of the
Company for a period of 3 years which is subject to annual ratification by the members of the Company in terms of Section 139 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014. The members may ratify the appointment of S.R. Batliboi & Associates LLP as the Statutory Auditors of the Company for the financial year 2016–17.
There are no qualifications or adverse remarks in the Statutory Auditors' Report which require any explanation from the Board of Directors. The Statutory Auditors have expressed an unmodified opinion in the audit reports in respect of the audited financial statements for the financial year ended March 31, 2016.
C. Secretarial Audit
The Secretarial Audit Report for the year ended March 31, 2016 issued by Mr. Nagendra D Rao, Practicing Company Secretary in accordance with the provisions of Section 204 of the Companies Act, 2013 is provided separately in the Annual Report. There are no qualifications or adverse remarks in the Secretarial Audit Report which require any explanation from the Board of Directors.
D. Cost Audit
The Cost Audit Report for the financial year 201415 was filed with the Ministry of Corporate Affairs, New Delhi within the due date prescribed under The Companies (Cost Records and Audit) Rules, 2014. There are no qualifications or adverse remarks in the Cost Audit Report which require any explanation from the Board of Directors.
Based on the recommendations of the Audit Committee, the Board of Directors have re–appointed M/s. Srinivas and Co, Cost Accountants (Firm Registration No: 000278) as the Cost Auditors of the Company for the financial year 2015–16. In terms of Rule 14 of the Companies (Audit and Auditors) Rules, 2014, the remuneration payable to the Cost Auditors for the financial year 2015–16 is subject to ratification by the shareholders of the Company. The Notice convening the Annual General Meeting contains the proposal for ratification of the remuneration payable to the Cost Auditors.
E. Internal Financial Controls
There are adequate internal financial controls in place with reference to the financial statements. During the year under review, these controls were tested and no significant weakness was identified either in the design or operation of the controls.
A. Nomination and Remuneration Policy
The Nomination, Remuneration and Governance Committee of the Board of Directors has formulated a Nomination and Remuneration Policy containing the criteria for determining qualifications, positive attributes and independence of a director and policy relating to the remuneration for the directors, key managerial personnel and senior management personnel of the Company. The Nomination and Remuneration Policy is available on the website of the Company at <http://www.sobha.com/investor–>relations–downloads–pol.php and relevant extracts from the Policy are reproduced in Annexure A to this report.
B. Risk Management Framework
The Company has developed and implemented a risk management framework detailing the various risks faced by the Company and methods and procedures for identification, monitoring and mitigation of such risks. The Board of Directors of the Company have constituted a Risk Management Committee which is entrusted with the task of monitoring and reviewing the risk management plan and procedures of the Company. The risk management function is complimentary to the internal control mechanism of the Company and supplements the audit function.
C. Corporate Social Responsibility Policy
The Corporate Social Responsibility Policy, as formulated by the Corporate Social Responsibility
Committee and approved by the Board of Directors is available on the website of the Company at <http://www>. sobha.com/investor–relations–downloads–pol.php.
In terms of Section 134 of the Companies Act, 2013 read with The Companies (Corporate Social
Responsibility Policy) Rules, 2014, the annual report on Corporate Social Responsibility activities of the Company is given in Annexure B to this report.
D. Vigil Mechanism
The Company has established a vigil mechanism to promote ethical behaviour in all its business activities and has in place a mechanism for employees to report any genuine grievances, illegal, unethical behaviour, suspected fraud or violation of laws, rules and regulation or conduct to the Chief Vigilance Officer and the Audit Committee of the Board of Directors. The Policy also provides for adequate protection to the whistle blower against victimisation or discriminatory practices. The Policy is available on the website of the Company at <http://www.sobha>. com/investor–relations–downloads–pol.php.
During the year under review, the Company has issued various Secured Redeemable Non–Convertible Debentures aggregating to Rs. 3,250,000,000 (Rupees Three Hundred and Twenty Five Crores) on private placement basis in multiple tranches.
The Company has not accepted any deposits in terms of Chapter V of the Companies Act, 2013 read with the Companies (Acceptance of Deposit) Rules, 2014, during the year under review and there are no outstanding deposits as on date.
C. Transfer to Investor Education and Protection Fund
In compliance of Section 205C of the Companies Act, 1956, the dividends pertaining to the financial year 2007–08 which were lying unclaimed with the Company was transferred to the Investor Education and Protection Fund during the financial year 201516. The details of unclaimed dividend transferred to the Investor Education and Protection Fund has been detailed in the Corporate Governance Report forming part of the Annual Report.
D. Human Resources
Employee relations continue to be cordial and harmonious at all levels and in all divisions of the Company. The Board of Directors would like to express their sincere appreciation to all the employees for their continued hard work and steadfast dedication.
As a part of the policy for Prevention of Sexual Harassment in the organisation, the Company has in place an Internal Complaints Committee for prevention and redressal of complaints of sexual harassment of women at work place in accordance with The Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013 and relevant rules there under. No complaints were received by the Committee during the period under review.
As on March 31, 2016, the Company has an organisational strength of 2,724 employees.
A separate section on the Employees is provided in the Annual Report.
E. Awards and Recognition
During the financial year 2015–16, the Company was bestowed with various awards and recognitions, the details of which are given in a separate section of the Annual Report.
F. Corporate Governance
A certificate from Mr. Nagendra D Rao, Practicing Company Secretary affirming compliance with the various conditions of Corporate Governance in terms of the Listing Regulations is given in Annexure C to this report.
A detailed report on Corporate Governance forms part of the Annual Report.
G. Code of Conduct
As prescribed under Clause 49 of the Listing Agreement / Regulation 17 of the Listing Regulations, a declaration signed by the Vice Chairman and Managing Director affirming compliance with the Code of Conduct by the Directors and senior management personnel of the Company for the financial year 2015–16 forms Governance Report. e Corporate
H. Management Discussion and Analysis Report
In accordance with the requirements of the Listing Agreement / Listing Regulations, the Management Discussion and Analysis Report titled as Management Report is presented in a separate section of the Annual Report.
I. Extract of Annual Return
In terms of Section 134 of the Companies Act, 2013 read with Rules 12(1) of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return of the Company for the financial year 2015–16 is provided in Annexure D to this report.
J. Particulars of Loans, Guarantees and Investments
In terms of Section 134 of the Companies Act, 2013, the particulars of loans, guarantees and investments given by the Company under Section 186 of the Companies Act, 2013 is detailed in Notes to Accounts of the Financial Statements.
K. Related Party Transactions
During the year, the Company has not entered into any contract / arrangement / transaction with a related party which can be considered as material in terms of the policy on related party transactions laid down by the Board of Directors. The related party transactions undertaken during the financial year 2015 – 16 are detailed in Notes to Accounts of the Financial Statements.
L. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo
In terms of Section 134 of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, the particulars of conservation of energy, technology absorption, and foreign exchange earnings and outgo are set out in Annexure E to this report.
M. Remuneration Details of Directors, Key Managerial Personnel and Employees
The details of remuneration of directors, key managerial personnel and the statement of employees in receipt of remuneration exceeding the limits prescribed under Section 134 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 has been provided in Annexure F to this report.
N. Financial Position and Performance of Subsidiaries, Joint Ventures and Associates
In terms of Section 134 of the Act and Rule 8(1) of the Companies (Accounts) Rules, 2014, the financial position and performance of subsidiaries are given as an Annexure to the Consolidated Financial Statements.
O. Additional Information to Shareholders
All important and pertinent investor information such as financial results, investor presentations, press releases, new launches and project updates are made available on the Company's website (www. sobha.com) on a regular basis.
The Directors would like to place on record their sincere appreciation to the Company's customers, vendors, and bankers for their continued support to the Company during the year. The Directors also wish to acknowledge the contribution made by employees at all levels for steering the growth of the organisation. We thank the Government of India, the State Governments and other government agencies for their assistance and cooperation and look forward to their continued support in future. Finally, the Board would like to express its gratitude to the members for their continued trust, co–operation and support.
For and on behalf of the Board of Directors of Sobha Limited
Ravi PNC Menon
J C Sharma
Vice Chairman & Managing Director
Date: May 19, 2016