DIRECTORS' REPORT DEAR SHAREHOLDER, Your Directors present the Fifteenth Annual Report together with the accounts of your Company for the financial year ended 31st March 2015. OPERATING RESULTS & PERFORMANCE Your Directors report that during the financial year ended 31st March 2015 the Company recorded a total income at Rs. 55,868.64 Crores (12 months) as against Rs.52,186.72 Crores in the previous year (9 months) on a standalone basis. Loss before tax and extraordinary items was at Rs.25,261.56 crores. Loss after tax was at Rs.25,285.17 crores compared to a loss in the previous year of Rs.43,936.96 crores. The last 2 years figures cannot be compared directly as the current financial year is for a period of 12 months and the figure last year was for a period of 9 months. Your Company's Standalone Order Book was Rs.1600.32 crores as at March 31, 2015. BUSINESS HIGHLIGHTS Your Directors state that last year the Company had undergone difficult times due to the business environment, cash flows, delay from customers in terms of receiving payments. In view of this, the Company had approached the bankers for restructuring its debts. The Corporate Debt Restructuring Group had also accorded approval for the Company to restructure its debts by providing 2 years moratorium and the loan to be repaid in 8 years. This process had taken the entire first half of the financial year which greatly affected the business and turnover of the Company. During the year, your Company was awarded projects primarily in water worth more than Rs.96 crs and these are from: 1. M/s.City Municipal Council, Harihar- Execution of the Expansion of Sewerage system in Harihara City- Rs.62.75 crs 2. M/s.Kerala Feeds Ltd., Kerala- Design and Engineering/ Supply/ Erection, Testing and Commissioning of all Structural, Mechanical, Electrical and Instrumentation equipments / works for 500 TPD Cattle Feed Plant at Thodupuzha, Idukki. - Rs.33.33 crs ASSOCIATES HALDIA COKE & CHEMICALS PVT. LTD (HCCL) HCCL is engaged in the business of manufacturing, processing, importing, exporting, trading, buying, selling, stocking and distributing coke. The last year for HCCL has also been tough due to the general economic scenario. However, the operations at various plants have almost stabilized and we expect things to improve in the coming months. During the year 2014-15, HCCL recorded a turnover of Rs.1045.65 crs compared to Rs.454.96 crs in 2013-14. SHARE CAPITAL The paid up Equity Share Capital as on March, 2015 was Rs.86.3 Crores. During the year under review, M/s Shriram Industrial Holdings Ltd (SIHL), the holding Company infused Rs.210 crs into the Company by way of equity. As per the CDR directive, the promoters had to infuse Rs.160 crs as equity capital and the same was infused by SIHL at Rs.50/- per share inspite of the market price being Rs.33/- per share. Further an additional Rs.50 crs was infused by the promoters to repay an unsecured loan, which enabled the Company to shore up its networth. This infusion of the promoters resulted in their holding going to 69.87% on the enlarged equity share capital of the Company. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. ECONOMIC SCENARIO AND OUTLOOK Indian economic growth in 2014 rose to ~5.2% from 4.7% last year as a result of the improving macro-economic situation. The wholesale and consumer price inflation has fallen to ~4.2% and 7.4% from last year's 6.3% and 10.1% on the back of a strong base effect. Falling oil prices, lower food and commodity prices and the proactive measures taken by the Government helped in containing inflation in 2014. Contrary to expectations, agricultural growth was strong at ~4.5% in 2014. However, the slow pace of reforms, lack of impetus for infrastructure projects, high interest rates and tightening of fiscal policies adversely impacted the capital goods sector. Industrial production / output was also sluggish. The low economic growth appears to have bottomed out and a gradual increase in economic activity is expected in 2015. The medium term to long term growth prospects look positive in view of the Government's determination to bring in reforms. For the year 2015, the economy is expected to grow at a higher rate than in 2014. The long term prospects for the economy is optimistic. BUSINESS OVERVIEW Your Company operates in two main segments; turnkey contracts and wind turbines. A brief review of the business in these segments is given below. The turnkey contracts segment represents the Company's engineering, procurement and construction projects business, which include renewable energy projects like biomass-based power plants, metallurgical and process plant projects and municipal services projects like water and wastewater treatment plants, water and sewer infrastructure and pipe rehabilitation. The order book was Rs.1600.32 crores as on March 31, 2015. DIVIDEND Since the Company has made a loss for the year, the Board has decided not to recommend a Dividend. GREEN INITIATIVE IN CORPORATE GOVERNANCE The Ministry of Corporate Affairs (MCA) has through Circular Governance that allows Companies to send notices/documents to shareholders electronically. The Green Initiative endeavors to reduce consumption of paper, in turn preventing deforestation and contributes towards a green and clean environment. In support of the initiative announced by MCA, your Company will send notices convening Annual General Meeting, Audited Financial Statements, Directors Report and Auditors' Report etc in electronic form in the current financial year. Your Company would like to continue the Green Initiative further and requests all shareholders to opt for electronic documents. However, on request by any member of the Company/ Statutory Authority interested in obtaining full text of the financial statement, these documents will be made available for examination, at its registered office. Pursuant to this, a statement summarizing the financial results of the Subsidiary is attached to the Consolidated Financial Statement. No further shares were issued pursuant to exercise of options under the Shriram EPC Employee Stock Option Schemes and consequently there is no dilution of EPS during the period under consideration. DIRECTORS Mr. S Krishnamurthy, Mr. S Bapu and Mr. P D Karandikar Independent Directors are seeking election for a consecutive period of 5 years at the ensuing Annual General Meeting. The Company has appointed Ms. Chandra Ramesh on 23rd March 2015 as an additional Director to hold office till the ensuing Annual General Meeting. Ms. Chandra Ramesh being an Independent Director will seek election for a consecutive period of 5 years at the Annual General Meeting. All Independent Directors have given declarations that they meet the criteria of Independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. RE - APPOINTMENT OF MANAGING DIRECTOR & CEO AND JOINT MANAGING DIRECTOR The Board at its Meeting held on 11th August 2015 had approved, subject to the approval of shareholders, the re-appointment of Mr. T Shivaraman as the Managing Director & CEO and Mr. Amjat Shariff as the Joint Managing Director of the Company for a further period of 3 years from 20th September 2015. The shareholders' approval will be sought in the ensuing Annual General Meeting for their re-appointment on the same terms and conditions of remuneration as was paid to them earlier. The necessary Resolution for the approval of the same will be covered in the Notice convening the forthcoming Annual General Meeting. BOARD EVALUATION Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Audit, Nomination & Remuneration and Compliance Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. REMUNERATION POLICY The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report. MEETINGS A calendar of Meetings is prepared and circulated in advance to the Directors. During the year 9 Board Meetings and 4 Audit Committee Meetings were convened and held. The details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. COMMITTEES OF THE BOARD AUDIT COMMITTEE The Company has constituted an Audit Committee as per the provisions of the Companies Amendment Act, 2000 and under Section 292 A of the Companies Act, 1956 at the Board Meeting held on 5th June 2002. The present members of the Committee are as follows: 1. Mr S.R. Ramakrishnan 2. Mr R. Sundararajan 3. Mr. S Krishnamurthy 4. Mr. S Bapu The Committee has met 4 times during the year. HUMAN RESOURCES Many initiatives have been taken to support business through organizational efficiency, process change support and various employee engagement programmes which has helped the Organization achieve higher productivity levels. A significant effort has also been undertaken to develop leadership as well as technical/ functional capabilities in order to meet future talent requirement. The Company's HR processes are systemised such as hiring and on-boarding, fair transparent online performance evaluation and talent management process, state-of-the-art workmen development process, and market aligned policies. BUSINESS RISK MANAGEMENT Pursuant to the requirement of Clause 49 of the Listing Agreement, the Company has constituted a Business Risk Management Committee. The details of Committee and its terms of reference are set out in the Corporate Governance Report forming part of the Board's Report. The Company has a robust Business Risk Management (BRM) framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance the Company's competitive advantage. The business risk framework defines the risk management approach across the enterprise at various levels including documentation and reporting. The framework has different risk models which help in identifying risks trend, exposure and potential impact analysis at a Company level as also separately for business segments. The key business risks identified by the Company and its mitigation plans are as under: Project Risks: In the context of the projects being executed, the Company reviews the risks associated with a project in all the following aspects, but not restricted to • Client related details like financial closure of the project, creditworthiness and reputation of the client etc before even signing of the Contract. • Estimation risk like Price and quantity variances, contingency provision, forex fluctuation etc on a periodic basis. • Commercial Risks like Taxes and duties, Payment terms, Bank Guarantee requirements etc • Organisational Risks like availability of Quality technical Managerial resources, Gap funding needs, Consortium partners roles and responsibilities , etc • Performance Risk like clarity about scope of work, applicable standards of performance, Meeting the time schedule, LD clauses, Warranty and defect liability obligations etc, • Interfacing Risks like coordination with multiple Agencies for approval clearance etc from Design stage to Commissioning stage. • Geographical related risks like unfavourable conditions of weather, Earth quake, and Floods. Competition Risks: The Infrastructure Industry is becoming intensely competitive with the foray of new entrants and some of the existing players adopting inorganic growth strategies. To mitigate this risk, the Company is leveraging on its expertise, experience to increase market share, enhance brand equity / visibility and enlarge product portfolio and service offerings. Occupational Health & Safety (OHS) Risks: Safety of employees and workers is of utmost importance to the Company. To reinforce the safety culture in the Company, it has identified Occupational Health & Safety as one of its focus areas. Various training programmes have been conducted at the sites such as behavior based safety training program, Visible Safety Leadership program, Logistics Safety program etc. internal control systems and their adequacy The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit (IA) function is defined in the Internal Audit Charter. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board. The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company and its subsidiaries. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board RELATED PARTY TRANSACTIONS All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. All Related Party Transactions are placed before the Audit Committee as also the Board for approval. Prior omnibus approval if necessary, of the Audit Committee is obtained on a quarterly basis for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their approval on a quarterly basis. The statement is supported by a certificate from the MD & CEO and the CFO. The Company has developed a Related Party Transactions policy for purpose of identification and monitoring of such transactions. The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website. None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company. AUDITORS Statutory Auditors The Company's Auditors, Messrs Deloitte Haskins & Sells, Chartered Accountants, Chennai who retire at the ensuing Annual General Meeting of the Company are eligible for re-appointment. They have confirmed their eligibility under Section 141 of the Companies Act, 2013 and the Rules framed thereunder for reappointment as Auditors of the Company. As required under Clause 49 of the Listing Agreement, the auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. Members' attention is invited to the observation made by the Auditors under "Emphasis of Matter" appearing in the Auditors Reports. Your Directors had, on the recommendation of the Audit Committee, appointed Messrs Deloitte Haskins & Sells, Chartered Accountants, Chennai to audit the accounts of the Company for the financial year 2015 on a remuneration of X35 lakhs p.a. As required under the Companies Act, 2013, the remuneration payable to the statutory auditor is required to be placed before the Members in General Meeting for their ratification. Accordingly, a Resolution seeking Member's ratification for the remuneration payable to Messrs Deloitte Haskins & Sells, Chartered Accountants, Chennai, Statutory Auditors is included at Item No.2 of the Notice convening the Annual General Meeting. Cost Auditors Pursuant to Section 148 of the Companies Act, 2013 read with The Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company is required to be audited. Your Directors had, on the recommendation of the Audit Committee, appointed Mr. G Sundaresan, CMA to audit the cost accounts of the Company for the financial year 2015 on a remuneration of X50000 p.a. As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a General Meeting for their ratification. Accordingly, a Resolution seeking Member's ratification for the remuneration payable to Mr. G Sundaresan, CMA, Cost Auditor is included at Item No.7 of the Notice convening the Annual General Meeting. Secretarial Audit Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Messrs R Sridharan & Associates, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith. There were 4 observations made by the secretarial auditors in their aforementioned report in terms of certain procedures not followed by the Company based on the new Companies Act 2013. The management has ensured that these procedures have been complied with from the 2nd quarter of 2014-15 itself and the earlier lapses was due to ambiguity and uncertainty of the applicability of the new Companies Act provisions. As required under the Companies Act, 2013, the remuneration of X1 lakh p.a. payable to the secretarial auditor is required to be placed before the Members in a General Meeting for their ratification. Accordingly, a Resolution seeking Member's ratification for the remuneration payable to Messrs R Sridharan & Associates, a firm of Company Secretaries in Practice is included at Item No.8 of the Notice convening the Annual General Meeting. DIRECTORS' RESPONSIBILITY STATEMENT To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013:. a. that in the preparation of the annual financial statements for the year ended March 31, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; b. that such accounting policies as mentioned in Note 2 of the Notes to the Financial Statements have been selected and applied consistently and judgement and estimates have been made 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, 2015 and of the profit of the Company for the year ended on that date; c. 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; d. that the annual financial statements have been prepared on a going concern basis; e. that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively. f. that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively. REGISTRAR & SHARE TRANSFER AGENT Cameo Corporate Services Limited Subramanian Building, V Floor No. 1, Club House Road Chennai 600 002, India Tel: (91 44) 2846 0390, Fax: (91 44) 2846 0129 Email: investor@cameoindia.com Website: www.cameoindia.com Contact Person: Mr. R.D. Ramasamy, Director SEBI Registration Number: INR000003753 CORPORATE GOVERNANCE As per Clause 49 of the Listing Agreement with the Stock Exchanges, a separate section on corporate governance practices followed by the Company, together with a certificate from the Secretarial Auditors confirming compliance forms an integral part of this Report. BUSINESS RESPONSIBILITY REPORTING As per Clause 55 of the Listing Agreement with the Stock Exchanges, a separate section on Business Responsibility Reporting forms an integral part of this Report. CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements of the Company prepared in accordance with relevant Accounting Standards (AS) viz. AS 21, AS 23 and AS 27 issued by the Institute of Chartered Accountants of India form part of this Annual Report. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3) (m) of the Companies Act, 2013 read with Rule, 8 of The Companies (Accounts) Rules, 2014, is given below: Earnings in Foreign Currency: Rs.10. 35 lakhs Expenditure in Foreign Currency: Rs.11.97 crores CORPORATE SOCIAL RESPONSIBILITY (CSR) The Company has been incurring losses for the last 3 years. Hence, the Corporate Social Responsibility Committee has not been formed and no initiatives have been taken by the Company on CSR as per the Companies (Corporate Social Responsibility Policy) Rules, 2014. The Company shall comply with this requirement once this provision comes into force EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith. PARTICULARS OF EMPLOYEES The information required pursuant to Section 197 read with Rule, 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, will be provided upon request. In terms of Section 136 of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the information on employees' particulars which is available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in this regard. APPRECIATION & ACKNOWLEDGEMENTS The Directors wish to thank the bankers for their continued assistance and support. The Directors also wish to thank the Shareholders of the Company for their continued support even during these testing period. Further the Directors also wish to thank the customers and suppliers for their continued cooperation and support. The Directors further wishes to place on record their appreciation to all employees at all levels for their commitment and their contribution For and on behalf of the Board S. R. Ramakrishnan Chairman Place: Chennai Date : 28th May, 2015 |