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Sadbhav Infrastructure Project Ltd. Notes to Accounts
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You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (Rs.) 243.04 Cr. P/BV -1.11 Book Value (Rs.) -6.20
52 Week High/Low (Rs.) 9/3 FV/ML 10/1 P/E(X) 0.00
Bookclosure 30/09/2023 EPS (Rs.) 0.00 Div Yield (%) 0.00
Year End :2018-03 

1. Company information

Sadbhav Infrastructure Project Limited (the “Company or SIPL”) is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. Its shares are listed on two recognized stock exchanges in India. The registered office of the Company is located at “Sadbhav House”, Opp. Law Garden Police Chawki, Ellisbridge, Ahmedabad-380006.

The Company is engaged in development, construction as well as operation & maintenance of infrastructure projects and related consulting and advisory services. The Company undertakes infrastructure development projects directly or indirectly through Special Purpose Vehicles (SPVs) as per the concession agreements. The Company is a subsidiary of Sadbhav Engineering Limited (“SEL”), a listed company, engaged in providing engineering, procurement and construction services (“EPC”) in the road and other infrastructure projects.

The financial statements were authorized for issue in accordance with a resolution of the directors on May 08, 2018.

2. Basis of preparation

The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015 as amended.

The financial statements have been prepared on a historical cost basis, except certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments).

The financial statements are presented in INR which is also the Company’s functional currency and all values are rounded to the nearest Million (INR 000,000), except when otherwise indicated.

3. Significant accounting judgements, estimates and assumption

The preparation of the Company’s financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and the accompanying disclosure, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

Revenue and expenses of construction contracts

As described in Note 3.2, Revenue recognition using the percentage-of-completion method which involves the use of estimates of certain key elements of the construction contracts, such as total estimated contract costs, allowances or provisions related to the contract, period of execution of the contract and recoverability of the claims. As far as practicable, the company applies past experience in estimating the main elements of construction contracts and relies on objective data. Nevertheless, given the highly tailored characteristics of the construction contracts, most of the estimates are unique to the specific facts and circumstances of each contract.

Although estimates on construction contracts are periodically reviewed on an individual basis, we exercise significant judgments and not all possible risks can be specifically quantified.

Impairment of Investments

The Company reviews its carrying value of its investments carried at cost annually, or more frequently when there is indication for impairments. If the recoverable amount is less than it carrying amount, the impairment loss is accounted for.

Taxes

Deferred tax assets are recognised for unused tax credits to the extent that it is probable that taxable profit will be available against which the credits can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the budget generally covering a period of the concession agreements using long terms growth rates and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

Property, plant and equipment

Refer Note 3.3 for the estimated useful life of Property, plant and equipment. The carrying value of Property, plant and equipment has been disclosed in Note 5.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

1 The Company has elected to continue with the carrying value for all of its Property, plant and equipments as recognised in its previous GAAP (Indian accounting principle generally accepted in India as prescribed under section 133 of the Company Act, 2013 read with the Companies (Accounts) Rules, 2014), as deemed cost at the transition date i.e. April 1, 2015 as per option permitted under Ind AS 101 for the first time adoption.

2 Property, Plant and Equipments has been pledged/hypothecated against non-current borrowings in order to fulfill the collateral requirement for the Lenders (refer note 15).

Notes:

1 There is no income arising from above investment properties. Further, the company has not incurred any expenditure for above property.

2 There are three lands with the company of which two lands are situated at Kadi Gujarat and one land at Tiruvallur, Chennai. These lands have been mortgaged against noncurrent borrowings to fulfill the collateral requirements of lenders (refer note 15).

3 The Company has no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance and enhancements.

4 The fair value disclosure for investment property is not given as the property is acquired specifically for offering as security for non-current borrowings and based on the information available with the management that there are no material development in the area where land is situated and accordingly, management believes that there is no material difference in fair value and carrying value of property.

(a) Aggregate cost of unquoted investments (including sub-debts) as at March 31, 2018 INR 24,232.72 million (March 31, 2017: INR 22,565.22 million).

(b) Investment in perpetual debts in form of Sub-ordinate debts are interest free, redeemable at issuer’s option and redemption can be deferred indefinitely as per the terms of contract.

(c) The Company is having investments (including subordinate debts) of INR 6,270.86 million (March 31, 2017: 6270.86, million) to operating subsidiaries, engaged in construction, operation and maintenance of infrastructure project under concession agreement with National Highways Authorities of India. The net worth of such entities have fully eroded based on the latest financial statements.

Considering the gestation period required for break even for such infrastructure investments, expected higher cash flows based on future business projections, claims lodged, debt refinancing and the strategic nature of these investments, no provision/ adjustment to the carrying value of the said investments (including subordinate debts) as at March 31, 2018 is considered necessary by the management.

(d) In term of Memorandum of Understanding (MOU) dated January 17, 2017 between the Company and Sadbhav Engineering Limited (SEL), SEL reduced its commitment, and sold its investment in MBCPNL to third party, transferring 13% ownership/ beneficial ownership in MBCPNL to the Company, raising the Company’s holding to 91% and thereby reducing its share from 22% to 9%. The procedural formalities for transfer of equity shares were in progress as on March 31, 2017.

(e) The Company has pledged following investment in equity shares of subsidaries, in favour of lenders for term loan facilities availed by the respective SPVs:

(a) No trade or other receivable are due from directors or other officers of the Company either severally or jointly with any other person. None of the trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member.

(b) For terms and conditions relating to related party receivable, refer note 38.

(c) Trade receivables are non-interest bearing and generally on terms of 30 to 90 days.

Note

Fixed deposit is lying with the bank in the name of IL&FS Trust Company Limited (ITCL) designated account as per terms of debenture trust cum mortgage deed towards debt servicing reserve of redeemable non-convertible debentures (NCD) of INR 1,124.32 million (March 31, 2017: 1,405.41 million).

Note

The Company has granted interest bearing loans aggregating INR 4,572.54 million (March 31, 2017: INR 3,645.25 million) (including renewals on due dates) as at March 31, 2018 to its subsidiaries. The funds are advanced based on business needs of the subsidiaries company in accordance with Lender’s loan agreements and sponsor support and equity contribution agreement of the respective SPV entities.

(b) Terms/rights attached to equity shares:

The Company has only one class of equity shares having a par value of INR 10 per share. Each holder of equity shares is entitled to one vote per share held.

In the event of liquidation of the Company, the holders of equity shares shall be entitled to receive any of the residual assets of the Company, after distribution of all preferential amounts. The amount distributed will be in proportion to the number of equity shares held by the shareholders.

(c) Shares held by holding company:

Out of equity shares issued by the company, shares held by its holding company, ultimate holding company and their subsidiaries/associates are as below:

As per records of the company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.

(e) Aggregate number of equity shares allotted as fully paid-up for consideration other than cash during 5 years immediately preceding the date of balance sheet:

The Company had issued 282,693,710 equity shares of INR 10/- each as fully paid bonus shares in the ratio of 10:1 by capitalisation of INR 2,826.94 million from Securities Premium Account in the financial year 2014-15.

a Interest free loan given by Promotors (Sadbhav Engineering Limited) pursuant to the conversion of Compulsory Convertible Cumulative Preference Shares (CCCPS) into equity shares, whereby promotors have given a commitment to keep the loan balance of INR 779.56 Million in the Company for a period of 11 years from the date of conversion of CCCPS i.e. November 27, 2014.

Accordingly, this Interest free loan has been separated into liability and equity components based on the terms of the contract and equity components has been classified in the Other Equity and liability component in the Long term borrowings (refer note 15). Interest on liability component is recognised using the effective interest method. b The Company has issued redeemable non-convertible debentures (refer note 15). Accordingly, the Companies (Share capital and Debentures) Rules, 2014 (as amended), require the company to create Debenture Redemption Reserve (‘DRR’) out of profits of the company available for payment of dividend. DRR is required to be created for an amount which is equal to 25% of the value of debentures issued. DRR is required to be created over the life of debentures, and accordingly, the company has transferred INR 462.19 million to DRR. Further, the Company has created debenture redemption reserve to the extent surplus available for the purpose of creation of debenture redemtion reserve during the year.

(a) 2,000 Redeemable Non-Convertible Debentures (NCD ) are secured by:

( i) first ranking charge created on 10,71,198 Shares of the Company in the Rohtak Panipat Tollway Private Limited(RPTPL);

(ii) the Corporate guarantee by Sadbhav Engineering Limited (‘SEL’) (Holding Company); (iii) first and exclusive mortgage over the mortgaged property, in accordance with the respective security documents.

(b) 1,600 Redeemable , Non Convertible debentures (NCD) are secured by:

(i) an unconditional , irrevocable and continuing corporate guarantee from Sadbhav Engineering Limited- holding company (SEL), covering the entire redemption amount. (ii) Pledge of 10,287,215 shares of Sadbhav Engineering Limited (SEL) by Sadbhav Finstock Pvt. Ltd. (iii) Pledge of 67% shareholding of Dhule Palsner Tollway Limited (DPTL) representing 46,082,466 equity shares. However, pending for pledge of the shares of DPTL with lender, 56% of shares of Ahmedabad Ring Road Infrastructure Limited (ARRIL) representing 5,857,540 equity shares have been pledged. (iv) Working Capital Demand Loan (WCDL) facility to the extent of next repayment instalment to be lien marked for the NCD to be obtained by the Company/ SEL and to be utilised only towards repayment of the NCD at least 20 days before each redemption payment date for amount which are due in next 20 days.

(c) 1,124,324 (March 31, 2017: 1,405,405) Redeemable Non Convertible debentures (NCD) are secured by:

(i) Pledge of 19.46% shareholding of the company representing 46,846,725 equity share held by Sadbhav Engineering Limited (SEL) the holding Company. (ii) Pledge of 30% shareholding of Maharashtra Border Check Post Network Limited representing 11,673 equity shares held by the Company and SEL. (iii) Unconditional and irrevocable corporate guarantee from SEL and personal guarantee of the Promotors i.e. Vishnubhai M. Patel. (iv) Second charge by mortgage over all immovable property and hypothecation of all movable, tangible and intangible assets, receivable, cash and liquid investment of the Company. (v) All bank account & assignment of all contract, documents, insurance, clearances and interest of the company.

(d) 3,000 Redeemable , Non Convertible debentures (NCD) are secured by:

(i) Pledge of 15% shareholding of Shreenathji-Udaipur Tollway Private Limited representing 5,061,486 equity shares held by the Company. (ii) Pledge of 16% shareholding of Maharashtra Border Check Post Network Limited representing 8,000 equity shares held by the Company (iii) Pledge of 18.99% shareholding of Hyderabad Yadgiri Tollway Private Limited representing 616,663 equity shares held by the Company (iv) Pledge of 49% shareholding of Aurangabad-Jalna Tollway Limited representing 965,816 equity shares held by the Company (v) Pledge of 14% shareholding of Ahmedabad Ring Road Infrastructure Limited representing 1,464,400 equity shares held by the Company (v) A first charge over the Designated A/c-Debenture Payments and all funds and monies lying therein present & future.

The debenture holders at the end of year 3 and year 4 shall have the right to seek prepayment / early redemption of Series B and Series C debentures in whole or part or in such proportion as it may deem fit. Thereupon, the Company shall be obliged to prepay debentures in such manner that debenture holders may achieve the IRR at the rate of 11.75% on value of the debentures for which the Put option is exercised.

The debenture holders at the end of year 3 and year 4 shall have the right to seek prepayment / early redemption of Series II and Series III debentures in whole or part or in such proportion as it may deem fit. Thereupon, the Company shall be obliged to prepay debentures in such manner that debenture holders may achieve the IRR at the rate of 12.14% on the value of debentures for which the Put option is exercised.

(iii) 1,124,324 (March 31, 2017: 1,405,405) Redeemable Non Convertible debentures (NCD)

NCD is having a floating interest rate carrying from 12.74% to 11.96 % which is linked to benchmark rate to be reset on a quarterly basis and are repayable in 6 structured instalments starting from July 1, 2017 and ending on April 5, 2020.

The Company shall have an option to repay the Facility at end of 4th year and 5th year with the condition that the minimum yield on the entire facility will get revised upwards by 0.50% per annum and 0.25% per annum, respectively.

The debenture holders at the end of Year 3 shall have the right to seek prepayment / early redemption of Series III and Series IV debentures in full. Thereupon, the Company shall be obliged to pay all accrued coupon thereon and redemption premium set forth at Part B of Schedule IV of the Debenture Trust Deed.

(v) Liability component of compound financial instruments

Interest free loan given by Promotors (Sadbhav Engineering Limited) pursuant to the conversion of Compulsory Convertible Cumulative Preference Shares (CCCPS) into equity shares, whereby promotors have given a commitment to keep the loan balance of INR 779.56 Million in the Company for a period of 11 years from the date of conversion of CCCPS i.e. November 27, 2014. Accordingly, this Interest free loan has been separated into liability and equity components based on the terms of the contract and equity components has been classified in the Other Equity and liability component in the Long term borrowings (refer note 15). Interest on liability component is recognised using the effective interest method.

(vi) Debt covenants

Non current borrowings contain debt covenants relating to debt-equity ratio and total debt to net worth. The Company has satisfied all the debts covenants prescribed in the terms of respective loan agreement as at reporting date.

Notes

1 Loan from related parties carries interest of 8.75% to 11% p.a. and is repayable on demand/call notice.

2 Interest free loan from others is repayable on demand.

3 Working capital demand loan facility from banks is secured against Corporate guarantee of Sadbhav Engineering Limited (SEL) i.e. the Holding company. The working capital demand loan is repayable within 90 days of borrowing and carries interest from 10.50% to 9.10% p.a.

*As per intimation available with the Company, there are no micro, small and medium enterprises as defined in the Micro, Small and Medium Enterprise Development Act, 2006 to whom the Company owes dues on account of principal amount together with interest and accordingly no related additional disclosure have been made.

Note

1 The contractual income includes cost escalation claim, of INR 130.75 million (31 March 2017: INR 43.12 million) from Maharashtra Border Check Post Network Limited, a subsidiary, in line with cost escalation principal (cost escalation formula) recommended by Technical Evaluation Committee duly appointed by project steering committee of Maharashtra State Road Development Corporation (‘The Project Authority’), which has also been approved by Lender’s engineers of the customer.

4. Fair value disclosures for financial assets and financial liabilities

Set out below is a comparison, by class, of the carrying amounts and fair value of the Company’s financial instruments, other than those with carrying amounts that are reasonable approximations of fair values:

Notes:

a The carrying amount of financial assets and financial liabilities measured at amortised cost in the financial statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled. b The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

5. Fair value hierarchy

The following table provides the fair value measurement hierarchy of the Company’s assets and liabilities:

Quantitative disclosures fair value measurement hierarchy for financial assets as at March 31, 2018 and March 31, 2017

6. Earning Per Share (EPS)

The following reflects the income and share data used in the basic and diluted EPS computations:

7. Employee Benefits Disclosure

A Defined Contribution Plans:

The following amount recognised as expenses in statement of profit and loss on account of provident fund and other funds. There are no other obligations other than the contribution payable to the respective authorities.

B Defined benefit plans - Gratuity benefit plan:

The Company has a gratuity benefit plan. Every employee who has completed five years or more of service gets a gratuity on the termination of his employeement at 15 days salary (last draw salary) for each completed year of service. The scheme is unfunded. The present value of obligation in respect of gratuity is determind based on actuarial valuation using the Project Unit Credit Method as prescribed by the Indian Accounting Standard - 19. Gratuity has been recognised in the financial statement as per details given below:

The average future duration of the defined benefit plan obligation at the end of the reporting period is 21.83 years (March 31, 2017: 23.25 years).

C Other employee benefit:

Salaries, wages and bonus include INR 2.95 million (March 31, 2017: INR 2.62 million) towards provision made as per actual basis in respect of accumulated leave encashment/compensated absences, Bonus and leave travel allowance.

8. Disclosure in respect of Construction Contracts

Revenue from fixed price construction contracts are recognized on the percentage of completion method, measured by reference to the percentage of cost incurred up to the year end to estimated total cost for each contract.

Percentage completion method for income recognition on long term contracts involves technical estimates by engineers/technical officials, of percentage of completion and costs to completion of each project/contract on the basis of which profit/loss is allocated.

9. Segment Reporting

The segment reporting is in accordance with the internal financial reports derived from ERP system implemented from April 01, 2017 which is reviewed by Chief Operating Decision Maker (CODM). Consequently, the company has considered BOT segment as a single operating segment in accordance with Indian Accounting Standard (‘Ind AS’) 108.

10. Operating Lease:

The company has taken office space on operating leases basis. There are no sub-leases and the leases are cancellable in nature at any point of time by either of parties. There are no restrictions imposed under the lease arrangements. There is neither any contingent rent nor any escalation clause in the lease agreements. During the year, the Company has incurred INR 0.90 million (March 31, 2017: INR 0.90 million) towards rent for office space.

11. Related Party disclosures

Related party disclosures as required under the Indian Accounting Standard (Ind AS) - 24 on “Related Party Disclosures” are given below:

(a) Name of related party and nature of relationship

Related Parties where control exists:

Holding Company Sadbhav Engineering Limited (SEL)

Subsidiaries Ahmedabad Ring Road Infrastructure Limited (ARRIL)

Aurangabad Jalna Toll Way Limited (AJTL)

Bijapur Hungund Tollway Private Limited (BHTPL)

Hyderabad Yadgiri Tollway Private Limited (HYTPL)

Rohtak Panipat Tollway Private Limited (RPTPL)

Maharashtra Border Check Post Network Limited (MBCPNL)

Nagpur Seoni Express Way Limited (NSEWL)

Shreenathji-Udaipur Toll way Private Limited (SUTPL)

Bhilwara-Rajsamand Toll way Private Limited (BRTPL)

Rohtak Hissar Tollway Private Limited (RHTPL)

Dhule Palesnar Tollway Limited (DPTL)

Sadbhav Bhavnagar Highway Private Limited (SBHPL)

Sadbhav Nainital Highway Private Limited (SNHPL)

Sadbhav Rudrapur Highway Private Limited (SRHPL)

Sadbhav Una Highway Private Limited (SUHPL)

Sadbhav Banglore Highway Private Limited (SBGHPL)

Sadbhav Vidarbha Highway Private Limited (SVHPL) (w.e.f April 24, 2017) Sadbhav Udaipur Highway Private Limited (SUDHPL) (w.e.f May 23, 2017) Sadbhav Jodhpur Ring Road Private Limited (SJRRPL) (w.e.f January 3, 2018) Sadbhav Tumkur Highway Private Limited (STHPL) (w.e.f March 20, 2018)

(b) Related parties with whom transactions have taken place

Fellow Subsidiary Mysore-Bellary Highway Pvt. Ltd. (MBHPL)

Key managerial personnel (KMP) Mr. Vasistha C Patel, Managing Director

Mr. Vishnubhai M Patel, Chairman and Non-Executive Director (upto March 03, 2017)

Mr. Shashin V. Patel, Chairman and Non-Executive Director (w.e.f March 03, 2017)

Mr. Nitin R. Patel, Non-Executive Director Mr. Atul Ruparel, Independent Director Mr. Arun Kumar Patel, Independent Director Mr. Mirat Bhadlawala, Independent Director Mrs. Dakshaben Shah, Independent Director Mr. Sandip Patel, Independent Director

Late Dr. Jagdish Joshipura, Independent Director (upto November 12, 2016)

Mr. Varun Mehta, Chief Financial Officer

Mr. Hardik Modi, Company Secretary (w.e.f July 08, 2016)

Mr. Gaurav Vesasi, Company Secretary (upto May 31, 2016)

1 The transactions with related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free except short term loan and settlement occurs in cash as per the terms of the agreement.

2 Non convertible debenture of INR 7,724.32 Million as at March 31, 2018 (March 31, 2017: INR 8,005.41 million) is guaranteed by the corporate guarantee of Sadbhav Engineering Limited, the holding company and Non convertible debenture of INR 5,005.41 Million as at March 31, 2018 (March 31, 2017: INR 5,005.41 million) personal guarantee of Mr. Vishnubhai Patel (Promoter of holding company (SEL)). Further, Sadbhav Engineering Limited has pledged 16% of its shareholding in the Company to the lenders toward borrowings availed by the Company.

3 The sale of service include unearned revenue of INR 265.93 Million (March 31, 2017: INR 62.08 million) and unbilled revenue of INR 9.75 million (March 31, 2017: INR 22.21 million) accounted during the year as of the order from its subsidiaries as per the company policy.

4 During the year, the company has converted short term loan given to a subsidiary of INR 350.00 Million (March 31, 2017: INR 80.00 Million) into a sub-ordinate debts, the movement of the same disclosed under respective items.

5 The unsecured loans given to subsidaries company is based on business needs of the subsidiaries company in accordance with Lender’s Loan agreements and Sponsor Support and Equity Contribution Agreement of the respective SPV entities. The loan given to subsidaries on demand basis which carries interest of 8.30% to 11.20% based on cost of fund of respective subsidaries entities.

6 The Remuneration disclosed above given to key managerial personnel is mainly related to short term employee benfits and does not includes post employee benefits as the same is not determinable.

12. Contingent liabilities and commitments

I Contingent Liabilities

* Towards service tax demand from authorities for recovery of CENVAT credit on input service availed during the financial years 2009-10 and 2010-11. In respect of said matter, the Company has preferred appeal with Tribunal, and received stay order from tribunal for recoveries of demands against deposit of 2.50 millions. The matter is pending with Tribunal as at reporting date.

II The minority Shareholder of Bijapur Hungund Tollway Private Limited (‘BHTPL’) (a subsidiary of the Complany) has filed Company Petition under sections 397 and 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 Company, SEL (Sadbhav Group) and the past and present Directors of the BHTPL appointed by the Sadbhav Group (hereinafter referred to as “Respondents”). The Company 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, BHTPL and the Company. The said Application was dismissed by the CLB by Order dated January 8, 2014. The Company then proceeded to file a Writ Petition before the Hon’ble Gujarat High Court challenging the CLB Order dated January 8, 2014. The Writ Petition was dismissed by single judge of Honourable High Court of Gujarat by Order dated August 14, 2014. The Company has filed Letters Patent Appeal No.1070 of 2014 (LPA) before the Division Bench of the Hon’ble Gujarat High Court against the said Court Order dated August 14, 2014. The divisional bench of the Hon’ble Gujarat High Court has passed order dated November 24, 2014 for continued the interim orders passed during the pendency of the Writ Petition and further directed to CLB for the stay on proceedings till disposal of LPA. However, hearing of the LPA is pending before the Hon’ble Gujarat High Court as at reporting date. The Management represents that no liability is likely to devolve in the matter on the Company.

III Commitments

The followings are the estimated amount of contractual commitments of the company:

(iv)The Company has agreed to acquire 74% equity shareholding of Mysore-Bellary Highway Pvt.Ltd. (MBHPL) from Sadbhav Engineering Limited (SEL) as per agreement dated November 3, 2014, subject to regulatory approvals.

13. The following are the details of loans and advances in the nature of loans (includes in the nature of sub-ordinate debts) given to subsidiaries in which directors are interested in terms of regulation 53(F) read together with para A of Schedule V of SEBI (Listing Obligation and Disclosure Regulation, 2015).

14. Financial risk management objectives and policies

The Company’s principal financial liabilities comprise borrowings and trade & other payables. The main purpose of these financial liabilities is to finance the Company’s operations and to support its operations as well development and maintenance of SPVs project. The Company’s principal financial assets include Investments, other receivables and cash and bank balances which are been derived directly from its operations.

The Company’s activities expose it to market risk, credit risk and liquidity risk. The company’s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance.

The Board of Directors have overall responsibility for the establishment and oversight of the Company’s risk management framework. Risk management systems are reviewed periodically to reflect changes in market conditions and the Company’s activities. The Board of Directors oversee compliance with the Company’s risk management policies and procedures, and reviews the risk management framework.

(a) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk. Financial instruments affected by market risk include borrowings, Investments, other receivables, trade and other payables.

Within the various methodologies to analyse and manage risk, Company has implemented a system based on “sensitivity analysis” on symmetric basis. This tool enables the risk managers to identify the risk position of the entities. Sensitivity analysis provides an approximate quantification of the exposure in the event that certain specified parameters were to be met under a specific set of assumptions. The risk estimates provided here assume:

‘- a parallel shift of 25-basis points of the interest rate yield curves in all currencies

The potential economic impact, due to these assumptions, is based on the occurrence of adverse / inverse market conditions and reflects estimated changes resulting from the sensitivity analysis. Actual results that are included in the Statement of profit & loss may differ materially from these estimates due to actual developments in the global financial markets.

The analyses exclude the impact of movements in market variables on: the carrying values of gratuity and provisions.

The following assumption has been made in calculating the sensitivity analyses:

- the sensitivity of the relevant statement of profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2018 and March 31, 2017.

(i) Interest rate risk

Interest rate risk is the risk that fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Interest risk arises to the company mainly from non-current borrowings with variable rates. The Company maintains its borrowings at fixed rate using interest rate swaps to achieve this when necessary. The company manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. The company measures risk through sensitivity analysis.

The banks are now finance at variable rate only, which is the inherent business risk.

Interest rate sensitivity

The Company is not exposed to interest rate risk because its borrowings in Non convertible debenture carries fixed interest rate.

(ii) Equity price risk

The Company’s non-listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Company manages the equity price risk through diversification and by placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Company’s senior management on a regular basis. The Company’s Board of Directors reviews and approves all equity investment decisions.

(b) Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk related to operating activities (primarily trade receivables and other financial assets), financing activities including temporary Investment in mutual fund and other financial instruments.

Trade receivable mainly consist of receivable from related parties. Accordingly, the Company is not exposed to credit risk in relation to Trade receivable.

Credit risk from balances with banks and financial institutions is managed by the Company’s finance department in accordance with the Company’s policy. Investments of surplus funds are made only in accordance with company policy. The Company monitors the ratings, credit spreads and financial strength of its counterparties. Based on its on-going assessment of counterparty risk, the Company adjusts its exposure to various counterparties. The Company’s maximum exposure to credit risk from balance with bank and financial institutions as of March 31, 2018 is INR 63.13 million, March 31, 2017 is INR 56.82 million.

(c) Liquidity risk

Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company’s objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company closely monitors its liquidity position and deploys cash management system. It maintains adequate sources of financing including debt at an optimised cost.

The company measures risk by forecasting cash flows.

The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due without incurring unacceptable losses or risking damage to the Company’s reputation. The Company ensures that it has sufficient fund to meet expected operational expenses, servicing of financial obligations.

The table below summarises the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:

15. Capital Management

For the purpose of the Company’s capital management, capital consist of share capital, securities premium, other equity and all other reserves attributable to the equity holders of the Company.

The primary objective of the Company’s capital management is to ensure that it maintains an efficient capital structure and healthy capital ratios in order to support its business and maximise shareholder value.

The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions or its business requirements. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders, issue new shares. The Company monitors capital using debit equity ratio which does not exceed 2:1 which is total borrowings divided by total equity.

16. Standards issued but not yet effective

The standard issued, but not yet effective up to the date of issuance of the Company’s financial statements is disclosed below. The Company intends to adopt this standard when it becomes effective.

Ind AS 115, Revenue from Contract with Customers:

Ind AS 115 was notified on 28 March 2018 and establishes a five-step model to account for revenue arising from contracts with customers. Under Ind AS 115, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The new revenue standard will supersede all current revenue recognition requirements under Ind AS. This new standard requires revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions of the Company. Ind AS 115 is effective for the Company from April 1, 2018 using either one of two methods: (i) retrospectively to each prior reporting period presented in accordance with Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors, with the option to elect certain practical expedients as defined within Ind AS 115 (the full retrospective method); or (ii) retrospectively with the cumulative effect of initially applying Ind AS 115 recognized at the date of initial application (April 1, 2018) and providing certain additional disclosures as defined in Ind AS 115 (the modified retrospective method).

The Company continues to evaluate the available transition methods and its contractual arrangements. The ultimate impact on revenue resulting from the application of Ind AS 115 will be subject to assessments that are dependent on many variables, including, but not limited to, the terms of the contractual arrangements and the mix of business. The Company’s considerations also include, but are not limited to, the comparability of its financial statements and the comparability within its industry from application of the new standard to its contractual arrangements. A reliable estimate of the quantitative impact of Ind AS 115 on the financial statements will only be possible once the management has concluded its evaluation.

17. Events after the reporting period

The Board of Directors of the Company in their meeting held on May 08, 2018 has recommended a final dividend @ 30% i.e. INR 0.30 per equity share of INR 10/- each fully paid up for the year ended March 31, 2018 subject to approval of the members at the ensuing general meeting.

18. Previous year comparatives:

Previous year figures have been regrouped/reclassified wherever necessary, to facilitate comparability with current year’s classification.


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