DIRECTORS' REPORT
To
The Members,
Your Directors have pleasure in submitting their 18th Annual Report of the Company together with the Audited Statements of Accounts for the financial year ended on 31st March, 2024.
FINANCIAL RESULTS
The Group's financial performances for the year under review along with previous year's figures are given hereunder:
Standalone
Consolidated
DIVIDEND
Directors do not recommend any dividend for the financial year ended on 31st March, 2024.
DIVIDEND DISTRIBUTION POLICY
The Board of Directors of the Company has adopted a Dividend Distribution Policy. The Policy, as approved by the Board, is uploaded on the Company's website at the web link: https://www.sadbhavinfra.co.in/en/pdf/dividend-distribution-policy.pdf
AMOUNT TO BE CARRIED TO RESERVES
The Company transfers entire sum of net loss incurred to Retained Earnings during the year under review.
SHARE CAPITAL
The paid up Equity Share Capital as at 31st March, 2024 is Rs. 3,52,22,52,160/-. During the year under review, the Company has not issued shares with differential voting rights nor has granted any stock options or sweat equity. The Company has no scheme of provision of money for purchase of its own shares by employees or by trustees for the benefit of employees. Hence the details under rule 16 (4) of Companies (Share Capital and Debentures) Rules, 2014 are not required to be disclosed.
DEBENTURES
The Company has following Non-convertible Debentures (NCDs) as on 31st March, 2024:
1. Series A - 39,000 (Thirty Nine Thousand) Unlisted, Unrated, Secured, Redeemable, Non-convertible Debentures of face value of Rs. 67,408/- (Rupees Sixty Seven Thousand Four Hundred and Eight only) each, aggregating up to Rs. 262,89,12,000/-(Rupees Two Hundred Sixty Two Crores Eighty Nine Lakhs and Twelve Thousand only) ("Debentures") - Series A Debentures have been repaid in full vide payment dated 18-05-2024.
2. Series B - 16,000 (Sixteen Thousand) Unlisted, Unrated, Secured, Redeemable, Non- Convertible Debentures of a face value of Rs. 1,00,000/- (Rupees One Lakh Only) each of an aggregate nominal value of up to Rs. 160,00,00,000/- (One Hundred Sixty Crores Only) ("Debentures").
REVIEW OF BUSINESS OPERATIONS AND FUTURE PROSPECTS
During the year, Company reported at standalone level, the Revenue from Operations amounting to Rs. 225.00 million as against Rs. 894.14 million in the previous year. The Net Loss reported for the year was Rs. 5,624.02 million against Net Loss of Rs. 3,575.09 million as per previous year. The Consolidated Revenue from Operations was Rs. 7,788.89 million as against Rs. 8,247.27 million in the previous year. Your Company has achieved consolidated total income of Rs. 8,773.21 million as against Rs. 10,930.85 million in the previous year.
CORPORATE GOVERNANCE
The Company has complied with the corporate governance requirements under the Companies Act, 2013, and as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. A separate section on corporate governance under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, along with the certificate from the Practicing Company Secretary confirming the compliance, is annexed and forms part of this Annual Report.
MANAGEMENT DISCUSSION AND ANALYSIS (MDA)
The Management Discussion and Analysis report, capturing your Company's performance, industry trends and other material changes with respect to your Company is presented in a separate section forming part of the Annual Report. The Report provides a consolidated perspective of economic, social and environmental aspects material to our strategy and our ability to create and sustain value to our key stakeholders and includes aspects of reporting as required by Regulation 34(2) (e) read with Schedule V of the Listing Regulations.
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:
There are no material changes and commitment if any affecting the financial position of the company occurred between the ends of the financial year to which this financial statements relate and the date of the report.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
No significant material orders have been passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company and its future operations.
RISK MANAGEMENT
Risk management comprises all the organizational rules and actions for early identification of risks in the course of doing business and the management of such risks.
Pursuant to the provisions of Regulation 21 of the Listing Regulations, the Company is not required to constitute a Risk Management Committee; however, as a measure of good governance, the Company has constituted a Risk Management Committee of the Board. The Company has laid down procedures to inform Board members about the risk assessment and minimization procedures. The Company's management systems, organizational structures, processes, standards, code of conduct, Internal Control and Internal audit methodologies and processes that governs as to how the Company conducts its business and manages associated risks. The Company also has in place a Risk Management Policy to identify and assess the key risk areas. The Members of the Audit Committee monitors and reviews the implementation of various aspects of the Risk Management Policy. This robust Risk Management framework seeks to create transparency, minimize adverse impact on business objectives and enhance the Company's competitive advantage. Major risks identified by the Company are systematically addressed through mitigating actions on a continuous basis. The Company has also adopted Risk Assessment, Minimization and Control Procedures. At present no particular risk whose adverse impact may threaten the existence of the Company is visualized.
DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS.
The Company has appropriate internal control systems for business processes with regard to its operations, financial reporting and compliance with applicable laws and regulations. It has documented policies and procedures covering financial and operating functions and processes. These policies and procedures are updated from time to time and compliance is monitored by the internal audit function as per the audit plan. The Company continues its efforts to align all its processes and controls with best practices.
Details of the internal controls system are given in the Management Discussion and Analysis Report, which forms part of the Board's Report.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
i) Changes in Directors and Key Managerial Personnel
There were following changes in the composition of Board and Key Managerial Personnel during the year under review:
1) Members of the Company has confirmed appointment of Mr. Jatin Thakkar (DIN: 09312406) appointment vide Postal Ballot resolution passed on 29-04-2023.
2) Members of the Company has confirmed appointment of Mr. Dwigesh Joshi (DIN: 09733282) appointment vide Postal Ballot resolution passed on 29-04-2023.
3) Mr. Hardik Modi, has tendered his resignation from the post of Company Secretary and Compliance Officer of the Company with effect from 30-09-2023
4) Mr. Hardik Modi, a qualified Company Secretary was appointed as Company Secretary and Compliance Officer of the Company w.e.f. 07-11-2023.
5) Mr. Dwigesh Joshi (DIN-09733282) resigned as Director of the Company w.e.f. 08-04-2024.
6) Mrs. Shefali Manojbhai Patel (DIN-07235872) was appointed as an Additional Director of the Company w.e.f. 06-07-2024 by way of circular Resolution.
7) Board of Directors at their meeting held on 12-08-2024, recommended appointment of Mr. Ambalal Patel (DIN-00037870) as a Non-executive Independent Director of the Company subject to approval of members of the Company at this General Meeting.
8) Mr. Tarang Desai (DIN-00005100) was appointed as an Additional Director of the Company w.e.f. 12-08-2024.
ii) Declaration by an Independent Director(s)
Independent Directors, hold office for a term of five years. They are not liable to retire by rotation in terms of Section 149(13) of the Act.
All Independent Directors of the Company have given declarations that they meet the criteria of independence as laid down under Section 149 (6) of the Act and Regulation 16 (1) (b) of the Listing Regulations. In the opinion of the Board, they fulfill the conditions of independence as specified in the Act and the Rules made there under and are independent of the management. There has been no change in the circumstances affecting their status as Independent Directors of the Company.
The Board is of the opinion that the Independent Directors of the Company possess requisite qualifications, experience and expertise in the fields of strategy, auditing, tax and risk advisory services, financial services, corporate governance, etc. and that they hold highest standards of integrity. The Independent Directors of the Company have undertaken requisite steps towards the inclusion of their names in the data bank of Independent Directors maintained with the Indian Institute of Corporate Affairs in terms of Section 150 of the Act read with Rule 6 of the Companies (Appointment & Qualification of Directors) Rules, 2014.
iii) Procedure for Nomination and Appointment of Directors:
The Nomination and Remuneration Committee is responsible for developing competency requirements for the Board based on the industry and strategy of the Company. Board composition analysis reflects in-depth understanding of the Company, including its strategies, environment, operations, and financial condition and compliance requirements.
The Nomination and Remuneration Committee conducts a gap analysis to refresh the Board on a periodic basis, including each time a Director's appointment or re-appointment is required. The Committee is also responsible for reviewing and vetting the CVs of potential candidate's vis-a-vis the required competencies and meeting potential candidates, prior to making recommendations of their nomination to the Board. At the time of appointment, specific requirements for the position, including expert knowledge expected, is communicated to the appointee.
iv) Criteria for Determining Qualifications, Positive Attributes and Independence of a Director:
The Nomination and Remuneration Committee has formulated the criteria for determining qualifications, positive attributes and independence of Directors in terms of provisions of Section 178 (3) of the Act and Regulation 19 read with Part D of Schedule II of the Listing Regulations.
Independence: In accordance with the above criteria, a Director will be considered as an 'Independent Director' if he/she meets with the criteria for 'Independent Director' as laid down in the Act and Regulation 16 (1) (b) of the Listing Regulations.
Qualifications: A transparent Board nomination process is in place that encourages diversity of thought, experience, knowledge, perspective, age and gender. It is also ensured that the Board has an appropriate blend of functional and industry expertise. While recommending the appointment of a Director, the Nomination and Remuneration Committee considers the manner in which the function and domain expertise of the individual will contribute to the overall skill domain mix of the Board.
Positive Attributes: In addition to the duties as prescribed under the Act, the Directors on the Board of the Company are also expected to demonstrate high standards of ethical behavior, strong interpersonal and communication skills and soundness of judgment. Independent Directors are also expected to abide by the 'Code for Independent Directors' as outlined in Schedule IV to the Act.
v) Annual Evaluation of Board Performance and Performance of its Committees and of Directors:
Pursuant to the applicable provisions of the Act and the Listing Regulations, the Board has carried out an annual evaluation of its own performance, performance of the Directors as well as the evaluation of the working of its Committees.
The Nomination and Remuneration Committee has defined the evaluation criteria, procedure and time schedule for the Performance Evaluation process for the Board, its Committees and Directors.
The Board's functioning was evaluated on various aspects, including inter alia structure of the Board, including qualifications, experience and competency of Directors, diversity in Board and process of appointment; Meetings of the Board, including regularity and frequency, agenda, discussion and dissent, recording of minutes and dissemination of information; functions of the Board, including strategy and performance evaluation, corporate culture and values, governance and compliance, evaluation of risks, grievance redressal for investors, stakeholder value and responsibility, conflict of interest, review of Board evaluation and facilitating Independent Directors to perform their role effectively; evaluation of management's performance and feedback, independence of management from the Board, access of Board and management to each other, succession plan and professional development; degree of fulfillment of key responsibilities, establishment and delineation of responsibilities to Committees, effectiveness of Board processes, information and functioning and quality of relationship between the Board and management.
Directors were evaluated on aspects such as attendance and contribution at Board/ Committee Meetings and guidance/support to the management outside Board/ Committee Meetings. In addition, the Chairman was also evaluated on key aspects of his role, including setting the strategic agenda of the Board, encouraging active engagement by all Board members and motivating and providing guidance to the Executive Chairman.
Directors were evaluated on aspects such as professional qualifications, prior experience, especially experience relevant to the Company, knowledge and competency, fulfillment of functions, ability to function as a team, initiative, availability and attendance, commitment, contribution, integrity, independence and guidance/ support to management outside Board/Committee Meetings. In addition, the Chairman was also evaluated on key aspects of his role, including effectiveness of leadership and ability to steer meetings, impartiality, ability to keep shareholders' interests in mind and effectiveness as Chairman.
Areas on which the Committees of the Board were assessed included mandate and composition; effectiveness of the Committee; structure of the Committee; regularity and frequency of meetings, agenda, discussion and dissent, recording of minutes and dissemination of information; independence of the Committee from the Board; contribution to decisions of the Board; effectiveness of meetings and quality of relationship of the Committee with the Board and management.
The performance evaluation of the Independent Directors was carried out by the entire Board, excluding the Director being evaluated. The performance evaluation of the Chairman and the Non-Independent Directors was carried out by the Independent Directors, who also reviewed the performance of the Board as a whole. The NRC also reviewed the performance of the Board, its Committees and of the Directors.
The Chairman of the Board provided feedback to the Directors on an individual basis, as appropriate. Significant highlights, learning and action points with respect to the evaluation were presented to the Board.
NUMBER OF MEETINGS OF THE BOARD
During the year, Five (5) Board meetings were convened and held on 28th May 2023, 14th August 2023, 07th November 2023, 27th December 2023 and 08th February, 2024. Details of board meetings and committee meeting 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 BOARD
In compliance with the requirements of Companies Act, 2013 and Listing Regulations, your Board had constituted various Board Committees to assist it in discharging its responsibilities. The Board has adopted charters setting forth the roles and responsibilities of each of the Committees. The Board has constituted following Committees to deal with matters and monitor activities falling within the respective terms of reference:
a) Mandatory Committees
• Audit Committee
• Nomination and Remuneration Committee
• Stakeholder's Relationship Committee
• Corporate Social Responsibility Committee
b) Non-Mandatory Committees
• Risk Management Committee
• Finance and Investment Committee
Details of the composition of the Board and its Committees and of the Meetings held and attendance of the Directors at such Meetings, are provided in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Act and the Listing Regulations.
NOMINATION AND REMUNERATION POLICY
The Company has adopted a Nomination and Remuneration Policy for the Directors, Key Managerial Personnel and other employees, pursuant to the provisions of the Act and the Listing Regulations. The philosophy for remuneration of Directors, Key Managerial Personnel and all other employees of the Company is based on the commitment of fostering a culture of leadership with trust. The Remuneration Policy of the Company is aligned to this philosophy.
The Nomination and Remuneration Committee has considered following factors while formulating Policy:
i. The level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Directors of the quality required to run the Company successfully;
ii. Relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and
iii. Remuneration to Directors, Key Managerial Personnel and Senior Management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals.
It is affiirmed that the remuneration paid to Directors, Key Managerial Personnel and all other employees is as per the Remuneration Policy of the Company.
Details of the Remuneration Policy are given in the Corporate Governance Report.
Details of Subsidiary/Joint Ventures/Associate Companies
The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with Indian Accounting Standards notified under the Companies (Indian Accounting Standards) Rules, 2015 ('Ind AS'), form part of the Annual Report and are reflected in the Consolidated Financial Statements of the Company.
The annual financial statements of the subsidiaries and related detailed information will be kept at the Registered Office of the Company, as also at the registered offices of the respective subsidiary companies and will be available to investors seeking information at any time.
The Company has adopted a Policy for determining Material Subsidiaries in terms of Regulation 16 (1) (c) of Listing Regulations. The Policy, as approved by the Board, is uploaded on the Company's website and the weblink of the same is https://www.sadbhavinfra.co.in/en/investors.html
The consolidated financial results reflect the operations of the following subsidiaries.
* Sadbhav Infrastructure Project Limited (SIPL) and Adani Road Transport Limited (ARTL) executed Share Purchase Agreement (SPA) on August 16, 2021 (Amended and restated on January 27, 2022), for sale of equity shares of Maharashtra Border Check Post Network Limited (MBCPNL) a subsidiaries of SIPL, out of which 49% shares have already transferred to ARTL.
Performance and financial position of each of the subsidiaries, associates and joint venture companies included in the consolidated financial statement
Pursuant to the provisions of Section 129, 134 and 136 of the Companies Act, 2013 read with rules made thereunder and pursuant to Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company had prepared consolidated financial statements of the Company and its subsidiaries and a separate statement containing the salient features of financial statement of subsidiaries, joint ventures and associates in Form AOC-1 attached as Annexure-1 which forms part of this Report.
Particulars of loans, guarantees or investments under section 186
The provisions of Section 186 (except sub-section [1] of Section 186) of the Companies Act, 2013, with respect to a loan, guarantee or security is not applicable to the Company as the Company is engaged in providing infrastructural facilities. The details of investment made during the year under review are disclosed in the financial statements.
FIXED DEPOSITS
During the year under review, your Company has not accepted any fixed deposits from the public falling under Section 73 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014. Thus, as on 31 March 2024, there were no deposits which were unpaid or unclaimed and due for repayment.
INSURANCE
All properties and insurable interests of the company to the extent required have been adequately insured.
Particulars of contracts or arrangements with related parties:
All the related party transactions entered into during the financial year were on arm's length basis and were in the ordinary course of business. Your Company had not entered into any transactions with related parties, which could be considered material in terms of SEBI (Listing Obligation and Disclosure Requirement) Regulation, 2015. Accordingly, the disclosure of related party transactions as required under Section 134(3) (h) of the Act in Form AOC 2 is attached as Annexure-2, which forms part of this Report.
There are no materially significant related party transactions made by the company with promoters, key managerial personnel or other designated persons, which may have potential conflict with interest of the company at large. The Company has adopted a Related Party Transactions Policy. The Policy, as approved by the Board, is uploaded on the Company's website at the web link: https://www.sadbhavinfra.co.in/en/pdf/policv-on-related-partv-transaction.pdf
DIRECTORS RESPONSIBILITY STATEMENT
Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the Internal, Statutory, Cost and Secretarial Auditors, including audit of the internal financial controls over financial reporting by the Statutory Auditors, and the reviews performed by Management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company's internal financial controls were adequate and effective during the financial year 2023-24.
Accordingly, pursuant to Section 134 (3) (c) and 134 (5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that:
i. in the preparation of the annual accounts, the applicable accounting standards had been followed and that there are no material departures;
ii. they 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;
iii. they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
iv. they had prepared the annual accounts on a going concern basis;
v. they had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively;
vi. they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF).
There is no unclaimed and unpaid dividend transferred to Investor Education and Protection Fund (IEPF) in the current financial year.
CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility (CSR) is a company's commitment to operating responsibly within its community and environment. It involves ethical behavior and contributing to economic development, fostering sustainable livelihoods. The company prioritizes fairness, transparency, and positively impacting society and the environment. In line with Section 135 of the Act and its associated rules, the company has formally adopted a CSR policy.
The Board has established a Corporate Social Responsibility Committee, chaired by Mr. Shashin Patel, Mrs. Daksha Shah and Mr. Sandip V. Patel as members. The Corporate Social Responsibility meeting was held on 14-08-2023 and 08-02-2024.
The CSR Committee's responsibilities include:
i. Formulating and recommending the CSR Policy to the Board of Directors and outlining activities to be undertaken.
ii. Recommending the expenditure for CSR activities.
iii. Monitoring CSR activities periodically.
In accordance with section 135 of the Companies Act 2013, the CSR provisions apply to the company. However, due to losses incurred during the year under review, no CSR expenditure was made as per the company's CSR Policy. The Annual Report on CSR activities is provided in the prescribed Form as "Annexure-3" to this report.
POLICY ON PREVENTION, PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORKPLACE
The Company has zero tolerance for sexual harassment at workplace and has adopted a Policy on Prevention, Prohibition and Redressal of Sexual Harassment at the Workplace, in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder. The Policy aims to provide protection to employees at the workplace and prevent and redress complaints of sexual harassment and for matters connected or incidental thereto, with the objective of providing a safe working environment, where employees feel secure.
Pursuant to provision of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, Complaint Redressal Committee has been Comprises of Mrs. Janki Shah as Chairperson, Mrs. Rajal Patel as Presiding Officer and Ms. Aakansha Shah as Member.
The Company has not received any complaint of sexual harassment during the financial year 2023-24 and No meeting of Complaint Redressal Committee was held during the year.
VIGIL MECHANISM/ WHISTLE BLOWER POLICY
The Company has adopted a Whistle Blower Policy, to provide a formal mechanism to the Directors and employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Company's Code of Conduct or ethics policy. The Policy provides for adequate safeguards against victimization of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee. It is affirmed that no personnel of the Company has made compliant under Vigil Mechanism/ Whistle Blower Mechanism.
FAMILIARIZATION PROGRAMME FOR THE INDEPENDENT DIRECTORS
In compliance with the requirements of SEBI Regulations, the Company has put in place a familiarization programme for the Independent Directors to familiarize them with their role, rights and responsibility as Directors, the working of the Company, nature of the industry in which the Company operates, business model etc. The details of the familiarization programme are explained in the Corporate Governance Report. The same is also uploaded on the Company's website i.e. https://www.sadbhavinfra.co.in/.
Auditors
i. Statutory Auditors
Pursuant to the provisions of Section 139 of the Act and the rules framed thereunder, M/s. S G D G & Associates LLP, Chartered Accountants, Ahmedabad (S G D G) (Firm Registration No. W100188) were re-appointed as Statutory Auditor of the Company from conclusion of the 17th AGM to be held in the year 2023 for further period of 5 consecutive years.
The Auditors' Report has following qualification, reservation or adverse remark on the financial statements for the financial year ended on 31st March, 2024.
For Standalone:
a) Audit Qualification (each audit qualification separately):
The Statutory Auditors have provided following qualification in their audit report -
1. We draw attention to Note 43 and Note 44 to the accompanying Standalone Financial Statements with respect to investment in (including subordinate debt), and loan & advances to Rohtak Panipat Tollway Private Limited and Rohtak Hissar Tollway Private Limited, subsidiaries of the Company. Both the subsidiaries have issued notice of termination of Concession Agreement to National Highways Authority of India (NHAI) on account of Force Majeure Event as per Concession Agreement. As explained in the said note, the Company has carried out impairment assessment of investment in these subsidiaries considering the expected payment arising out of aforesaid termination and other claims filed with NHAI and based on the above assessment, management has concluded that no impairment/adjustment to the carrying value of the investments (including subordinate debt) and loan & advances, trade and other receivables aggregating to INR 8,040.58 million are necessary as at March 31, 2024.
However, we have not been able to corroborate the management's contention of realising the carrying value of investments (including subordinate debt), loans and advances, trade and other receivables related to both subsidiaries aggregating to INR 8,040.58 million as on March 31, 2024.
Accordingly, we are unable to comment on appropriateness of the carrying value of such investment and loans and advances and their consequential impact on the Standalone Financial Statements and financial position of the Company as at and for the year ended on March 31, 2024.
Our audit report dated May 28, 2023 on the Standalone Financial Statements for the year ended 31 March 2023 was also qualified in respect of this matter.
Management's Reply:
The Company has investments of INR 217.74 million and subordinate debts of INR 4688.73 million, loans of INR 11.06 million and trade & other Receivables of INR 74.27 millions in one of the subsidiary namley Rohtak Panipat Tollway Private Limited (RPTPL) which is engaged in construction, operation and maintenance of infrastructure projects under concession agreement with National Highways Authorities of India(NHAI). The net worth of this subsidiary Company has fully eroded.
From December 25, 2020 , the toll collection was forcefully suspended due to agitation and protest held by farmers and other unions against agri-marketing laws. Accordingly, the Company was not able to collect toll user fees from December 25, 2020. The Company had sent various communications to authorities for such forceful suspension of toll including revenue loss claim. Accordingly, the Company had issued notice of termination of Concession Agreement to NHAI on July 27, 2021 under Force Majeure Event of Concession Agreement. The Termination Payment and other payments due from NHAI were pending for the long time. The Company had attempted conciliation of the issues of the Project for amicable settlement. Due to non-progress of the same, the Company vide letter dated 27.03.2023 had notified the Conciliation Committee and NHAI regarding the failure of the Conciliation Proceedings. The said matters were referred to Arbitration by the Company. The Company has lodged a total claim amounting to INR 19379.20 Million relating to termination payment, Force Majeure Costs due to Force Majeure event of Farmer's Agitation, COVID-19, & Demonetization, and NPV of extension entitled due to Force Majeure event of Farmers agitation and Covid19 .The NHAI had lodged its Counter Claims amounting to INR 6227.00 Million. The Company had submitted its reply on such counter claims The Arbitral proceedings for the same are currently ongoing.
The Arbitration matter of Competing Road was referred to Arbitration. In the said matter, the majority award was passed on May 30, 2023 in favour of NHAI setting aside claims of Company and Minority Award dated 05.06.2023 in favour of Company amounting to Rs. 8509.80 Million. The Company has challenged the Majority Award dated 30.05.2023 and filed a petition under Section 34 of Arbitration & Conciliation Act 1996 before the Hon'ble Delhi High Court to set aside the Majority Award dated 30.05.2023.
- The dispute of Claim for Additional Cost on account of ban of quarrying of stone and loss of Toll collection due to delayed issuance of Provisional Certificate was referred to Arbitration. A unanimous Award dated 06.10.2017 by Arbitral Tribunal was awarded in favour of Company amounting to Rs. 890.20 Million (amount inclusive of costs & interest pendente lite). This Award was challenged by NHAI under Section 34 before the Delhi High Court. The Delhi High Court in its Judgment dated 16.02.2023, the value of award payable by NHAI to RPTPL as on 15.10.2023 works out to Rs. 121.19 Crores. NHAI has challenged the said award under Section 37 before Division Bench of Delhi High Court which is sub-judice.
NHAI had lodged claim on RPTPL on account of negative Finished Road Level (FRL) which was referred to Arbitration. The Majority Award on 31.10.2020 by Tribunal for amount of Rs 203.40 Million was in favour of NHAI. The interest on delayed payment is awarded at 7.4% simple interest, as on 15/10/2023 works out to Rs. 247.90 Million. The dissenting note by the Minority of the Tribunal had stated to reject the claim of NHAI. The Company has challenged the said Award of Majority under Section 34 before the Delhi High Court, which is sub-judice.
Considering the management assessment of probability and tenability of receiving above claims from NHAI as per the terms of concession agreement, the management has assessed that there is no impairment in the value of investments made by the Company in the RPTPL and consequently no provision/adjustment to the carrying value of Investments and subordinate debts, loans and advances and trade and other receivables as at March 31, 2024 is considered necessary.
The statutory auditors have expressed qualified opinion on Standalone Financial Statements in respect of above as regards recoverable value of Company's investment (including subordinate debt) and loans, trade & other receivable given to RPTPL for the year ended March 31, 2024 and March 31, 2023.
The Company has investments of INR 107.68 million and subordinate debts of INR 2,893.42 million, loans of INR 39.95 million and other receivable of INR 7.73 million in one of its subsidiary namely Rohtak Hissar Tollway Private Limited (RHTPL) which is engaged in construction, operation and maintenance of infrastructure projects under concession agreement with National Highways Authorities of India. The net worth of this subsidiary Company has fully eroded.
From December 25, 2020 , the toll collection was forcefully suspended due to agitation and protest held by farmers and other unions against agri-marketing laws. Accordingly, the Company was not able to collect toll user fees from December 25, 2020. The Company had sent various communications to authorities for such forceful suspension of toll including revenue loss claim. Accordingly, the Company had issued notice of termination of Concession Agreement to NHAI on July 27, 2021 under Force Majeure Event of Concession Agreement. The Termination Payment and other payments due from NHAI were pending for the long time. The Company had attempted conciliation of the issues of the Project for amicable settlement. Due to non-progress of the same, the Company vide letter dated 27.03.2023 had notified the Conciliation Committee and NHAI regarding the failure of the Conciliation Proceedings. The said matters were referred to Arbitration by the Company. The Company has lodged a total claim amounting to INR 19287.10 Million relating to termination payment, Force Majeure Costs due to Force Majeure event of farmer's Agitation, COVID-19, & Demonetization, and NPV of extension entitled due to Force Majeure event of Farmers agitation and Covid19. The NHAI had lodged its Counter Claims amounting to Rs. 3665.80 Million. The Company had submitted its reply on such counter claims. The Arbitral proceedings for the same are currently going on.
Considering the management assessment of probability and tenability of receiving above claims from NHAI as per the terms of concession agreement and communications from NHAI for conciliation, the management has assessed that there is no impairment in the value of investments made by the Company in the RHTPL and consequently no provision/adjustment to the carrying value of Investments and subordinate debts and loans and advances as at March 31, 2024 is considered necessary.
The statutory auditors have expressed qualified opinion on Standalone Financial Statements in respect of above as regards recoverable value of Company's investment (including subordinate debt) given to and loans & other receivables from RHTPL.
2. We draw attention to Note 45 of the accompanying Standalone Financial Statements with respect to Sadbhav Udaipur Highway Limited (Concessionaire or SUDHL), subsidiary of the Company, in which case, National Highways Authority of India in the month of December 2023, at the request of the Company has given in principal approval for harmonious substitution of the Concessionaire. The Company is in the process of compliance of the conditions prescribed by National Highways Authority of India for substitution. As explained in the said note, the management has carried out impairment assessment of Investment (including subordinate debt) and other receivables in this subsidiary duly considering the expected payment arising out of aforesaid substitution and based on the above assessment, the management has concluded that no impairment/adjustment to the carrying value of investment (including subordinate debt), loans and advances, trade and other receivables of INR 1,774.09 million is considered necessary as at March 31, 2024.
However, we have not been able to corroborate the management's contention of realizing the carrying value of Investment (including subordinate debt), loans and advances and trade and other receivables balances aggregating to INR 1,774.09 million as at March 31, 2024.
Accordingly, we are unable to comment on appropriateness of the carrying value of Investment (including subordinate debt), loans and advances, trade and other receivables and their consequential impact on the Standalone Financial Statements and financial position of the Company as at and for the year ended on March 31, 2024.
The Company has investments of INR 269.66 million and subordinate debts of INR 1346.39 million and other payables of INR 128.04 million in one of its subsidiary namely Sadbhav Udaipur Highway Limited (SUDHL or concessionaire) which is engaged in construction, operation and maintenance of infrastructure project under concession agreement with National Highways Authorities of India (NHAI). The project work has been almost completed as on March 31, 2024.
The Company has requested the NHAI & Lenders to allow harmonious substitution in terms of the NHAI Policy circular through a nominated Company namely-M/S Gawar Construction Limited (Nominated Company) and the Lenders' Representative, gave its consent for allowing harmonious substitution of SUDHL.
The NHAI vide its letter dt December 27, 2023, conveyed its "InPrinciple" approval for substitution of Original Concessionaire with a new special purpose vehicle to be incorporated by the Nominated Company subject to certain conditions and final approval from the NHAI. Since the conditions precedent to the harmonious substitution is in progress, no adjustment to the carrying value of investments have been made in these Standalone Financial Statements.
The statutory auditors of the Company have expressed qualified opinion on Standalone Financial Statements in respect of above as regards recoverable value of Company's investment (including subordinate debt) and loans, trade & other receivable given to SUDHL for the year ended March 31, 2024.
3. We draw attention to Note 46 of the accompanying Standalone Financial Statements with respect to Sadbhav Rudrapur Highway Limited (SRHL), a subsidiary of the Company, in which case, NHAI in the month of January 2024, at the request of the Company has given in principal approval for harmonious substitution of the concessionaire. The Company is in the process of compliance of the conditions prescribed by NHAI for substitution. As explained in the said note, management has carried out impairment assessment of Investment (including subordinate debt) and other receivables in this subsidiary duly considering the expected payment arising out of aforesaid substitution and based on the above assessment, management has concluded that no impairment/adjustment to the carrying value of Investment (including subordinate debt) and other receivables aggregating to INR 1,196.96 million is considered necessary as at March 31, 2024.
However, we have not been able to corroborate the management's contention of realizing the carrying value of Investment (including subordinate debt) and other receivables balances aggregating to INR 1,196.96 million as at March 31, 2024.
Accordingly, we are unable to comment on appropriateness of the carrying value of Investment (including subordinate debt) and other receivables and their consequential impact on the Standalone Financial Statements and financial position of the Company as at reporting date and for the year ended on March 31, 2024.
The Company has investments of INR 10.00 million and subordinate debts of INR 915.60 million and other receivables of INR 271.36 million in one of its subsidiary namely Sadbhav Rudrapur Highway Limited (SRHL or concessionaire) which is engaged in construction, operation and maintenance of infrastructure project under concession agreement with National Highways Authorities of India (NHAI). There is delay in approval of Estimates for Shifting of Utilities, delay in approval of the GAD of ROB from Railway Department and non-availability of land for Construction of ROBs, delay in approval of Change of Scope Works, delay due to Force Majeure Event of COVID-19, etc.
Even before approval Extension of Time and resolution of other issues, NHAI had sought and received bids for the balance EPC Works of the Project in September 2022. Accordingly, NHAI had accepted bids and appointed M/s KCC Buildcon (P) Ltd. - HRY Kundu Buildtech (P) Ltd. (JV) as an EPC Contractor for balance Engineering, Procurement, and Construction (EPC) works in December 2022. Although, there was no provision in the Concession Agreement to award such balance construction works to any other agency by NHAI directly, the Concessionaire didn't object to such appointment by NHAI in the interest of completing the Project and as this was also discussed during the Project Review Meetings in August 2022. Therefore, the treatment of such appointment for EPC Contractor by NHAI under Concession Agreement was to be mutually agreed between Concessionaire and the Authority.
In order to resolve the Project related issue, the Concessionaire proposed to harmoniously substitute the Concessionaire with a new SPV to be incorporated by M/s RKCIPL-ARCPL (JV) in the interest of Project. During the quarter ended March 31, 2024, the NHAI vide its letter dt January 16, 2024, conveyed its "InPrinciple" approval for substitution of SRHL with a new special purpose vehicle to be incorporated by the Nominated Company subject to certain conditions through harmonious substitution and subject to final approval from the Authority ("Authority InPrinciple Approval"). The Authority has issued an in-principal approval for such Harmonious Substitution with the terms and conditions stated therein.
Subsequent to discussions and deliberation with Authority, the Company has also invoked through Conciliation Committees of Independent Experts (CCIEs) to resolve the said issues and the conditions precedent to the harmonious substitution is in progress, no adjustment to the carrying value of investments have been made in these Standalone Financial Statements.
The Statutory Auditor of the Company have expressed qualified opinion on Standalone Financial Statements in respect of above regards the recoverable value of Company's investments (including subordinate debts and loans), trade and other receivable, given to SRHL for the year ended March 31, 2024
Further, the Statutory Auditors have mentioned following qualifications in Report on the Internal Financial Controls with reference to standalone financial statements:
According to the information and explanations given to us and based on our audit, the following material weaknesses has been identified in the operating effectiveness of the Company's internal financial controls with reference to Standalone Financial Statements as at March 31, 2024:
The Company's internal financial controls with reference to Standalone Financial Statements as at March 31, 2024 as regards evaluation of uncertainty for realizing the carrying value of investments (including sub ordinate debt), loan and other receivables as explained in Note 43, Note 44, Note 45 and Note 46 to the Standalone Financial Statements were not operating effectively which could potentially lead to not providing adjustments, if any, that may be required to the carrying values of investments (including sub-debt), loan and other receivables from such subsidiaries and its consequential impact on the earnings, other equity and related disclosures in the Standalone Financial Statements.
The Company's internal process with regards to the confirmation and reconciliation of trade payables, trade receivables, other incidental balances pertaining to the said trade payables and trade receivables are not operating effectively which could have consequential effect on balances.
In our opinion, the Company's system of processing journal entries in accounting software does not have a maker checker system which could result in a possible effect to the processing of transaction and its consequential effect on balances.
Reply of Directors for above qualifications raised by Statutory Auditors in it's Report on the Internal Financial Controls with reference to standalone financial statements:
Company has adequate system for balance confirmation of trade payable and receivables. The Company is reconciling the outstanding balance of trade payables and receivables on regular intervals. The Company has an internal audit system which is commensurate with the size and nature of its business and there is no weakness in recognition of income and expenses. Further as part of internal audit scope such balances are also reviewed by them and hence possibility of misstatement is not there.
The company has adequate system of manual approval of processing of journal entries in accounting software and journal entries are also verified by the internal auditor. The Company has an internal audit system which is commensurate with the size and nature of its business Company are in process of incorporating the maker checker process in accounting software for processing of journal entries.
It may be noted that there were no material misstatements due to the weakness in system for processing of journal entries in accounting software due to absence of maker checker system.
For Consolidated:
1. As detailed in Note 47 & Note 48 to the accompanying Consolidated Financial Statements, with respect to Rohtak Panipat Tollway Private Limited (RPTPL) and Rohtak Hisar Tollway Private Limited (RHTPL), subsidiaries of the Group in which interest on rupee term loan from banks and financial institutions, unsecured loans from group companies as well as interest on deferred premium obligation have not been accounted considering the fact that both subsidiaries have issued termination notices and lenders of both subsidiaries have classified all the secured borrowings as non-performing assets. This has resulted in the understatement of finance cost and the related interest liability and corresponding understatement of losses, amount of which is unascertained.
The auditors of RPTPL and RHTPL have expressed qualified opinion on the financial statements of RPTPL and RHTPL for the year ended March 31, 2024 vide their Auditor's Report dated May 14, 2024.
One of the subsidiaries of the Group namely Rohtak Panipat Tollways Private Limited (RPTPL) has issued the termination notice on July 27, 2021, to National Highway Authority of India (NHAI) by exercising the criteria of "Event of Defaults" under the concession agreement. Since the project of the Company has been terminated, the management of RPTPL is of the view that going concern assumption for preparation of accounts is not appropriate and accounts have been drawn accordingly on nongoing concern basis.
The management of RPTPL has lodged a total claim amounting to INR 19379.24 Million relating to termination payment, Force Majeure Costs due to Force Majeure event of Farmer's Agitation, COVID-19, & Demonetization, and NPV of extension entitled due to Force Majeure event of Farmers agitation and Covid 19 .The NHAI had lodged its counter Claims amounting to INR 6227.00 Million. The Company had submitted its reply on such counter claims The Arbitral proceedings for the same are currently ongoing.
The dispute of Claim for Additional Cost on account of ban of quarrying of stone and loss of Toll collection due to delayed issuance of Provisional Certificate was referred to Arbitration. A unanimous Award dated 06.10.2017 by Arbitral Tribunal was awarded in favour of Company amounting to Rs. 890.20 Million (amount inclusive of costs & interest pendente lite). This Award was challenged by NHAI under Section 34 before the Delhi High Court. The Delhi High Court in its Judgment dated 16.02.2023, the value of award payable by NHAI to RPTPL as on 15.10.2023 works out to Rs. 121.19 Crores. NHAI has challenged the said award under Section 37 before Division Bench of Delhi High Court which is sub-judice.
NHAI had claimed on RPTPL a claim on account of negative FRL which was referred to Arbitration. The Majority Award on 31.10.2020 by Tribunal was in favour of NHAI amounting to Rs. 203.40 Million. The interest on delayed payment is awarded at 7.4% simple interest, as on 15.10.2023 works out to Rs. 247.90 Million. The dissenting note by the Minority of the Tribunal had stated to reject the claim of NHAI. The Company has challenged the said Majority Award under Section 34 before the Delhi High Court, which is sub-judice.
During the quarter ended on March 31, 2023, RPTPL has reversed interest of INR 1,026.94 million provided during the earlier period considering the fact that the project of RPTPL has been terminated and lenders have classified loans as Non Performing Assets.
During the year ended March 31, 2024, RPTPL has not accounted for interest on Rupee Term Loan from banks and financial institutions as well as loan from group Company since the lenders of RPTPL has classified borrowing as NPA and financial statements are prepared on non going concern basis, for which the statutory auditors of subsidiary Company have expressed qualified opinion on financial statements in this regards.
One of the subsidiaries of the group namely Rohtak Hissar Tollways Private Limited (RHTPL) has issued the termination notice on August 27, 2021, to NHAI by exercising the criteria of "Event of Defaults" under the concession agreement. Since the project of the Company has been terminated, the management of RHTPL is of the view that going concern assumption for preparation of accounts is not appropriate and accounts have been drawn accordingly on non-going concern basis.
In this regard the management of RHTPL has lodged total claim amounting to INR 19287.10 Million relating to termination payment, Force Majeure Costs due to Force Majeure event of Farmer's Agitation, COVID-19, & Demonetization, and NPV of extension entitled due to Force Majeure event of Farmers agitation and Covid19. The NHAI had lodged its Counter Claims amounting to Rs. 3665.80 Million. The Company had submitted its reply on such counter claims. The Arbitral proceedings for the same are currently ongoing.
During the quarter ended on March 31, 2023, RHTPL has reversed interest of INR 1,228.09 million provided during the earlier period considering the fact that the project of RHTPL has been terminated and lenders have classified loans as Non Performing Assets (NPA).
During the year ended March 31,2024, RHTPL has not accounted for interest on Rupee Term Loan from banks and financial institutions as well as loan from group Company since the lenders of RHTPL has classified borrowing as NPA and financial statements are prepared on non going concern basis, for which the statutory auditors of subsidiary Company have expressed qualified opinion on financial statements in this regards.
2. As detailed in Note 52 to the accompanying Consolidated Financial Statements, with respect to Sadbhav Udaipur Highway Limited (SUDHL or concessionaire), subsidiary of the Group for harmonious substitution of SUDHL as a concessionaire of the project. As mentioned in the said note, no adjustment to the carrying value of assets and liabilities have been made in the financial statements of SUDHL. Owing to the uncertainty of outcome of harmonious substitution proceedings and lack of other alternate audit evidences, the auditors of SUDHL is unable to comment about adjustment that may be required to the carrying value of assets and liabilities and their consequential impact on the financial position of the Group as on March 31, 2024.
The auditors of SUDHL have expressed qualified opinion on the Financial Statement of SUDHL for the year ended March 31, 2024 vide their report dated May 20, 2024.
In case of Sadbhav Udaipur Highway Limited (SUDHL or concessionaire),subsidiary of the group which is engaged in construction, operation and maintenance of infrastructure project under concession agreement with National Highways Authorities of India (NHAI, the project work has been almost been completed as on December 31, 2023.
However, SUDHL has requested the NHAI & Lenders to allow harmonious substitution in terms of the NHAI Policy circular vide a letter dated August 24, 2023 with the consent of Facility Agent on behalf of Senior lender through a nominated company namely — M/S Gawar Construction Limited (Nominated Company) and the Lenders' Representative to give its consent for allowing harmonious substitution of the subsidiary company.
The NHAI vide its letter dt December 27, 2023, conveyed its "InPrinciple" approval for substitution of SUDHL with a new special purpose vehicle to be incorporated by the Nominated Company subject to certain conditions and final approval from the NHAI. Since the conditions precedent to the harmonious substitution are under compliance, no adjustment to the carrying value of assets and liabilities related to this project have been made in these consolidated financial statements and the financial statements of the subsidiary company have been prepared on going concern basis, for which the stautory auditor of the subsidiary company have expressed qualified opinion on financial statements in this regards.
3. As detailed in Note 54 (b) to the accompanying Consolidated Financial Statements, with respect to Sadbhav Jodhpur Ring Road Private Limited (SJRRPL), subsidiary of the group in which Goods and Service Tax credit receivables are carried in the Balance sheet at INR 153.53 Million under Other Current assets. However, during financial year 2023-2024, the SJRRPL does not have any business activity, nor are we informed about the management plan for taking up other business activity.
Hence we are unable to comment about the utilization/realization of such tax credits in foreseeable future.
We have expressed qualified opinion on the financial statements of SJRRPL for the year ended March 31, 2024 vide our report dated May 19, 2024.
Sadbhav Jodhpur Ring Road Private Limited (SJRRPL), subsidiary of the group in which Tax credit receivables are carried in the Balance sheet at INR 153.53 Million under the Other Current assets and Carry forward losses under Income Tax act of INR 924.96 millions as per Income Tax return filed by the subsidiary company for the year ended March 31,2023. The Management of the SJRRPL is exploring various strategic option to utilise/encash the said GST Credit and also carryforward Losses under the Income Tax Act, 1961. For this purpose it is considering the options of restructuring and/or taking up some business activities. In view of this the accounts are prepared under going concern basis For which the statutory auditors of subsidiary company have expressed qualified opinion on financial statements in this regards.
4. As detailed in Note 55 (b) to the accompanying Consolidated Financial Statements, with respect to Sadbhav Bangalore Highway Private Limited (SBGHPL), subsidiary of the group in which Goods and Service Tax credit receivables are carried in the Balance sheet at INR 420.68 Million under the Other Current assets. However, during financial year 2023-2024, the SBGHPL does not have any business activity, nor are we informed about the management plan for taking up other business activity.
The auditors of SBGHPL have expressed qualified opinion on the financial statements of SBGHPL for the year ended March 31, 2024 vide their Auditor's Report dated May 19,2024 mentioning that they are unable to comment about the utilization/ realization of such tax credits in foreseeable future.
Sadbhav Bangalore Highway Private Limited (SBGHPL), subsidiary of the group in which Tax credit receivables are carried in the Balance sheet at INR 420.68 Million under the Other Current assets and Carry forward losses under Income Tax act of INR 5278.57 millions as per Income Tax return filed by the subsidiary company for the year ended March 31,2023. The Management of SBGHPL is exploring various strategic option to utilise/ encash the said GST Credit and also carryforward Losses under the Income Tax Act, 1961. For this purpose it is considering the options of restructuring and/or taking up some business activities. In view of this, the accounts are prepared under going concern basis. For which the statutory auditors of subsidiary company have expressed qualified opinion on financial statements in this regards.
5. As detailed in Note 57 to the accompanying Consolidated Financial Statements, with respect to Sadbhav Vidarbha Highway Limited (SVHL), subsidiary of the group in which Goods and Service Tax credit receivables are carried in the Balance sheet at INR 504.83 Million under the Other Current assets. However, during financial year 2023-2024, the SVHL does not have any business activity, nor are we informed about the management plan for taking up other business activity.
The auditors of SVHL have expressed qualified opinion on the financial statements of SBGHPL for the year ended March 31, 2024 vide their Auditor's Report dated May 19,2024 mentioning that they are unable to comment about the utilization/realization of such tax credits in foreseeable future.
Sadbhav Vidarbha Highway Limited (SVHL), subsidiary of the group in which Tax credit receivables are carried in the Balance sheet at INR 504.83 Million under the Other Current assets and Carry forward losses under Income Tax act of INR 1,590.84 millions as per Income Tax return filed by the subsidiary company for the year ended March 31,2023. The Management of SVHL is exploring various strategic option to utilise/ encash the said GST Credit and also carryforward Losses under the Income Tax Act, 1961. For this purpose it is considering the options of restructuring and/or taking up some business activities. In view of this, the accounts are prepared under going concern basis. For which the statutory auditors of subsidiary company have expressed qualified opinion on financial statements in this regards.
6. As detailed in Note 56 to the accompanying Consolidated Financial Statements, with respect to Sadbhav Nainital Highway Limited (SNHL), subsidiary of the group in which Goods and Service Tax credit receivables are carried in the Balance sheet at INR 118.31 Million under the Other Current assets. However, during financial year 2023-2024, SNHL does not have any business activity, nor are we informed about the management plan for taking up other business activity.
The auditors of SNHL have expressed qualified opinion on the financial statements of SNHL for the year ended March 31, 2024 vide their Auditor's Report dated May 14,2024 mentioning that they are unable to comment about the utilization/realization of such tax credits in foreseeable future.
Sadbhav Nainital Highway Limited (SNHL), subsidiary of the group in which Tax credit receivables are carried in the Balance sheet at INR 118.31 Million under the Other Current assets and Carry forward losses under Income Tax act of INR 146.08 millions as per Income Tax return filed by the subsidiary company for the year ended March 31,2023. The Management of SNHL is exploring various strategic option to utilise/ encash the said GST Credit and also carryforward Losses under the Income Tax Act, 1961. For this purpose it is considering the options of restructuring and/or taking up some business activities. For which the statutory auditors of subsidiary company have expressed qualified opinion on financial statements in this regards.
7. As detailed in Note 58 to the accompanying Consolidated Financial Statements, with respect to Sadbhav KIM Expressway Limited (SKEPL), subsidiary of the group in which Goods and Service Tax credit receivables are carried in the Balance sheet at INR 415.96 Million under the Other Current assets. However, during financial year 2023-2024, the SKEPL does not have any business activity, nor are we informed about the management plan for taking up other business activity.
The auditors of SKEPL have expressed qualified opinion on the financial statements of SKEPL for the year ended March 31, 2024 vide their Auditor's Report dated May 20,2024 mentioning that they are unable to comment about the utilization/realization of such tax credits in foreseeable future.
Sadbhav Kim Expressway Private Limited (SKEPL), subsidiary of the group in which Tax credit receivables are carried in the Balance sheet at INR 415.96 Million under the Other Current assets and Carry forward losses under Income Tax act of INR 113.55 millions as per Income Tax return filed by the subsidiary company for the year ended March 31,2023. The Management of SKEPL is exploring various strategic option to utilise/ encash the said GST Credit and also carryforward Losses under the Income Tax Act, 1961. For this purpose it is considering the options of restructuring and/or taking up some business activities. In view of this, the accounts are prepared under going concern basis. For which the statutory auditors of subsidiary company have expressed qualified opinion on financial statements in this regards.
Further, the Statutory Auditors have mentioned following qualifications in Report on the Internal Financial Controls with reference to consolidated financial statements:
According to the information and explanations given to us and based on our audit, the following material weaknesses has been identified in the operating effectiveness of the Group's internal financial controls with reference to Consolidated Financial Statements as at March 31, 2024:
The Group's internal financial control system towards estimating the carrying value of assets and liabilities of subsidiary companies as explained in Note 52, Note 54 (b), Note 55(b), Note 56, Note 57 and Note 58 to the accompanying Consolidated Financial Statements were not operating effectively which could potentially lead to not providing adjustments, if any, that may be required to the carrying values of assets and liabilities of subsidiary Companies and its consequential impact on financial performance and financial position in the Consolidated Financial Statements.
The Holding Company's internal process with regards to the confirmation and reconciliation of trade payables, trade receivables, other incidental balances pertaining to the said trade payables and trade receivables are not operating effectively which could have consequential effect on balances.
The Holding Company and based on the reports of other auditors of the subsidiary Companies has inadequate system for processing of journal entries in accounting software indicating absence of maker checker system which could results into possible effect to the processing of transaction and its consequential effect on balances.
With respect to Group's internal financial control system towards estimating the carrying value of assets and liabilities of subsidiary companies as explained in Note 52, Note 54 (b), Note 55(b), Note 56, Note 57 and Note 58 to the accompanying Consolidated Financial Statements, shareholders may refer to replies given for respective note numbers mentioned above.
i. Cost Auditors
The company has received a letter from the cost auditor M/s. J B Mistri & Co., Cost Accountants in Practice having Firm Reg. No. 101067 to the effect that their appointment, if made, would be within the prescribed limits under section 141(3) (g) of the Companies Act, 2013 and that they are not disqualified for appointment.
The board of directors of the company has appointed M/s. J B Mistri & Co. & Associates, Cost Accountants as the cost auditors of the Company to conduct the audit of cost records maintained by the Company as required by the Companies (Cost Records and Audit) Rules 2014 as amended from time to time. The Cost Audit Report for the year 2022-23 was filed with the Ministry of Corporate Affairs within stipulated time period. The members are requested to ratify the remuneration to be paid to the cost auditors of the company.
ii. Secretarial Auditors
Pursuant to the provisions of Section 204 of the Act and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company had appointed M/s. Ashish Shah & Associates, Company Secretaries in Practice to undertake the Secretarial Audit of the Company for the year ended 31st March, 2024. The Secretarial Audit Report is annexed as Annexure-4.
Qualifications to the secretarial audit report:
1. Pursuant to Section 405 of the Companies Act, 2013 the Central Government made it necessary for all the "Specified Companies" to furnish the Form MSME-1, Half Yearly return about the payment to micro and small enterprise suppliers. However, the Company has not filed the said form for the period ended on 30th September, 2023 and on 31st March, 2024 respectively with Ministry of Corporate Affairs and to that extent not complied with the provisions of the Act.
Reply by Management: The Company is in process to identify MSME registered entities and will take step to file the required Forms in upcoming half year ended.
2. Shares have been Pledged of Ahmedabad Ring Road held by SIPL with respect to Loan taken by ARRIL from UDHYA-VJ Realty Private Limited. Charge Form for the above share pledge has not been filed by the Company with ROC and to that extent there is Non-Compliance.
Reply by Management: Due to oversight of Management, charge form was not filed within due date.
3. Pursuant to Regulation 60(2) of SEBI LODR Regulations, Intimation to Stock Exchange as required by the listed entity shall give notice in advance of at least seven working days (excluding the date of intimation and the record date) to the recognised stock exchange(s) of the record date or of as many days as the stock exchange(s) may agree to or require specifying the purpose of the record date. However, The listed entity shall give notice in advance of at least seven working days to the recognised stock exchange(s) of the record date was not observed by the Company.
Reply by Management: The Company will consider to avoid such non-compliance in future.
4. Pursuant to Regulation 23(9) of SEBI LODR Regulations, 2015, Company shall submit to the Stock Exchange disclosure of related party transactions in the format as specified by the Board from time to time and publish the same on its website. However, there is delay of one day in compliance with disclosure with related party transactions on consolidated basis for the half year ended 30/09/2023 found.
SECRETARIAL STANDARDS OF ICSI
The Company is in compliance with the Secretarial Standards on Meetings of the Board of Directors (SS - 1) and General Meetings (SS - 2) issued by The Institute of Company Secretaries of India and notified by the Ministry of Corporate Affairs.
ANNUAL RETURN
As per the provisions of section 92(3) of the Companies Act, 2013, the Annual Return of the Company for the FY 2023-24 is placed on the website of the Company and weblink for the same is https://www.sadbhavinfra.co.in/en/pdf/2022- 09/SIPLFormMGT- 7-FY 2023-24.pdf
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
There was no earning and expenditure in the foreign currency.
Since the Company does not have any manufacturing activities, the other particulars required to be provided in terms of Section 134(3) (m) of the Companies Act, 2013 are not applicable.
PARTICULARS OF MANAGERIAL REMUNERATION AND EMPLOYEES
Disclosures with respect to the remuneration of Directors and employees as required under Section 197 (12) of the Act and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided separately as Annexure-5 to this Report.
Your Directors state that none of the Executive Directors of the Company receives any remuneration or commission from any of its Subsidiaries. There was no employee holding by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the Company.
THE DETAILS OF APPLICATION MADE OR ANY PROCEEDING PENDING UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016 (31 OF 2016) DURING THE YEAR ALONGWITH THEIR STATUS AS AT THE END OF THE FINANCIAL YEAR:
No IBC matters are pending as on date of this Report.
THE DETAILS OF DIFFERENCE BETWEEN AMOUNT OF THE VALUATION DONE AT THE TIME OF ONE TIME SETTLEMENT AND THE VALUATION DONE WHILE TAKING LOAN FROM THE BANKS OR FINANCIAL INSTITUTIONS ALONG WITH THE REASONS THEREOF:
Not Applicable for the year under review.
GENERAL
Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:
1. Issue of shares (including sweat equity shares) to employees of the Company under any scheme.
2. The Company does not have any scheme of provision of money for the purchase of its own shares by employees or by trustees for the benefit of employees.
3. The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Board and General Meetings.
4. The Managing Director of the Company has not received any commission from the Company and not disqualified from receiving any remuneration or commission from any of subsidiaries of the Company.
5. No fraud has been reported by the Auditors to the Audit Committee or the Board.
ACKNOWLEDGEMENTS
Your Directors thank the Central and various State Governments, Organizations and Agencies for the continued help and co-operation extended by them. The Directors also gratefully acknowledge all stakeholders of the Company viz. customers, members, dealers, vendors, banks and other business partners for the excellent support received from them during the year and look forward to their continued support in future.
Your Directors wish to place on record their sincere appreciation for the dedicated efforts and consistent contribution made by the employees at all levels, to ensure that the Company continues to grow and excel.