DIRECTORS REPORT Dear Members, We have pleasure in presenting the 30th Annual Report on the business and operations of the Company together with the audited results for the financial year ended March 31, 2015 2. BUSINESS PERFORMANCE The company had a yet another challenging year. The difficult market conditions had contributed to the tough environment. Total Revenue for the year is at Rs. 3,10,31, 89,416 compared to Rs. 345,02,18,466 for the previous year. The company has incurred a net loss of Rs. 141, 60, 52,420 in the current year as against a net loss of Rs.44,87,55,090 in the previous year. The company has taken necessary steps to improve the performance in the next year. 3. CONSOLIDATED RESULTS Due to the drop in profitability of the standalone accounts, the consolidated profit and loss account also shows a negative growth in profitability and revenue. Consolidated Revenue of Vascon Group is Rs. 6,37,05,91,376 as compare to Rs.6,43,23,93,237 for the previous period of 12 months. Net Loss is Rs. 1,36,41,28,222 for the year. Diluted Earnings per Share (EPS) on consolidated basis is Rs. (15.97) for the year. 4. BUSINESS OPERATIONS & FUTURE OUTLOOK Company has successfully concluded the rights issue for an amount of Rs. 100 Crores at a price of Rs. 15/- per equity share of Rs. 10/- paid up. This shall definitely improve the cash flow position of the company and shall enable to improve the speed of execution of the real estate projects and bidding for higher value EPC contracts. This shall bring a new era in the history of Company with next level of Growth. Company has also established its presence in Qatar in the Gulf region and is expecting beginning of contract in the current financial year. Company is focused on acquisition of quality contracts with good margin and good clients. Company's strategy of focusing on full service contracts in select areas has started yielding results, recently the company has acquired an additional contact in Lucknow to the extent of Rs. 286 Crores and work is expected to begin shortly. In the Real Estate segment company has total ongoing projects of 2.5 million sq. ft of which company has sold 1.84 million sq. ft amounting to Rs 972 Crores; company is also planning to launch new projects in current financial year. 5. TRANSFER TO RESERVES The Company has not proposed to transfer any amount to the General Reserve. 6. DIVIDEND In view of the losses incurred in the current year, we do not recommend any dividend for the year under review. 7. SHARE CAPITAL The Company has allotted 2, 93,377 equity shares of Rs. 10/- each fully paid on December 30, 2014. Further, the Company's Rights Issue has been successful and it has allotted 6, 66, 66,666 equity shares of Rs. 10/- each fully paid on August 1, 2015. Accordingly the total paid-up share of the Company has increased to 15,74,35,970 equity shares, amounting to 157, 43, 59,700/- as on the date of this Report. Change in Capital > Increase in Authorised Capital: Pursuant to the provisions of Sections 13, 61 and 64 and any other applicable provisions, if any, of the Companies Act, 2013 (including any amendment thereto or re-enactment hereof ) and the rules framed there under as may be applicable and the Articles of Association of the Company, the existing Authorised Share Capital of the Company of Rs.150,00,00,000/- (Rupees One Hundred and Fifty Crore only) divided into 15,00,00,000 (Fifteen Crore) Equity Shares of Rs.10/- (Rupees Ten only) each, has been increased to Rs. 200,00,00,000/- (Rupees Two Hundred Crore only) divided into 20,00,00,000 (Twenty Crore) Equity Shares of Rs.10/- (Rupees Ten only) each by creation of 50,000,000 (Five Crore) Equity Shares of Rs. 10 (Rupees Ten Only) each ranking paripassu in all respects with the existing Equity Shares of the Company, vide Members resolution passed on September 15, 2014. 9. CHANGE IN THE NATURE OF BUSINESS, IF ANY During the year, there was no change in the nature of business of the Company or any of its subsidiaries. 10. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY The Company has procured an EPC contract from UP Housing and Development Board for an amount of Rs. 286 Crs, to build 13.50 lac sq. ft. consisting of 10 buildings. The Company has concluded the Rights Issue of Equity Shares to an extent of Rs. 100 Crores to the existing shareholders of the company. The company has filed a petition with the settlement commission for completing assessment of Income Tax for the Assessment years from 2007-2008 to 2014-2015 11. ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS The Board has adopted systems, policies and procedures for efficient conduct of business, operations, safeguarding its assets and prevention of frauds. This ensures accuracy and completeness of accounting records and its timely preparation. 12. SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES The Company has 13 subsidiaries and 5 joint venture companies as on March 31, 2015. During FY 2016, i.e after April 1, 2015, Angelica Properties Private Limited has become Subsidiary of Vascon. As per Section 129(3) of the Companies Act, 2013, where the Company has one or more subsidiaries, it shall, in addition to its financial statements, prepare a consolidated financial statement of the Company and of all subsidiaries in the same form and manner as that of its own and also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiaries. In accordance with the above, the consolidated financial statement of the Company and all its subsidiaries and joint ventures prepared in accordance with Accounting Standards 21 and 27 as specified in the Companies (Accounts) Rules, 2014, form part of the annual report. Further, a statement containing the salient features of the financial statement of our subsidiaries and joint ventures in the prescribed Form AOC-1, is attached as Annexure I" to the Board's Report. This statement also provides the details of the performance and financial position of each subsidiary. In accordance with Section 136 of the Companies Act, 2013, the audited financial statements and related information of the subsidiaries, where applicable, will be available for inspection during regular business hours at the Company's registered office in Mumbai, India. These will also be available on our website. 13. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS The Company makes investments or extends loans/guarantees to its wholly owned subsidiaries for their business purpose. Details of loans, guarantees and investments covered under Section 186 of the Companies Act, 2013, along with the purpose for which such loan or guarantee is proposed to be utilized by the recipient, form part of the notes to the financial statements provided in this annual report. 14. CORPORATE GOVERNANCE AND ADDITIONAL SHAREHOLDERS' INFORMATION A detailed report on the corporate governance systems and practices of the Company is given in a separately in this annual report. A certificate from the Secretarial Auditors of the Company confirming compliance with the conditions of corporate governance is attached to the report on corporate governance. 15. MANAGEMENT DISCUSSION AND ANALYSIS A detailed report on the Management Discussion and Analysis is provided as a separate chapter in the annual report. 16. BOARD OF DIRECTORS AND KEY MANAGEMENT PERSONNEL As per the provisions of Sections 149 and 152 of the Companies Act, 2013, the shareholders at their 29th Annual General Meeting held on September 15, 2014, had approved the re-appointment of all the existing Independent Directors of the Company for tenure of up to five consecutive years. None of the Independent Directors are liable to retire by rotation. In accordance with Section 149(7) of the Companies Act, 2013, each Independent Director has confirmed to the Company that he meets the criteria of independence as laid down in Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. Further, in accordance with provisions of Section 152 of the Companies Act, 2013. At the forthcoming Annual General Meeting scheduled on September 29, 2015, Mr. R. Vasudevan, Whole time Director of the Company, retires by rotation and being eligible, seeks re-appointment. A brief profile of Mr. R. Vasudevan is given in the Corporate Governance section of the annual report for reference of the shareholders. Key Managerial Personnel (KMPs) For the purposes of the provisions of section 203(1 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the following officers of the Company are hereby designated as the Key Managerial Personnel of the Company with effect from 1 April 2014: Dr. Santosh Sunderarajan, Chief Executive Officer; Mr. D. Santhanam, Chief Financial Officer; and Mr. M. Krishnamurthi, Company Secretary. These officers are in the service of the Company for more than a decade. A. BOARD EVALUATION As per provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, an evaluation of the performance of the Board of Directors and Members of the Committees was undertaken. Schedule IV of the Companies Act states that the performance evaluation of Independent Directors shall be done by the entire Board of Directors, excluding the Director being evaluated. Accordingly, the evaluation of all the Directors individually and the Board as a whole including members of Committees was conducted based on the criteria and framework adopted by the Board. The contribution and impact of individual Directors and Committee Members was reviewed through a peer evaluation, on parameters such as level of engagement and participation, flow of information, independence of judgment, conflicts resolution and their contribution in enhancing the Board's overall effectiveness. None of the Independent Directors are due for reappointment. 17. APPOINTMENT OF DIRECTORS AND REMUNERATION POLICY The assessment and appointment of members to the Board is based on a combination of criterion that includes ethics, personal and professional stature, domain expertise and specific qualification required for the position. The potential Board member is also assessed on the basis of independence criteria defined in Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. In accordance with Section 178(3) of the Companies Act, 2013, Clause 49(IV) (B) of the Listing Agreement and on recommendations of the Nomination and Remuneration Committee, the Board adopted a remuneration policy for Directors, Key Management Personnel and Senior Management. The policy is attached as an annexure to the Corporate Governance report. B. NUMBER OF BOARD MEETINGS The Board of Directors met nine times during the year, including a separate meeting of Independent Directors. Details of Board meetings are laid out in Corporate Governance report, which forms a part of this annual report. 18. AUDIT COMMITTEE The Audit Committee of the Board of Directors consists of two Independent Directors and one Whole Time Director. Presently, the Committee comprises of Mr. V. Mohan, Chairman of the Committee and Independent Director, Mr. R. Kannan, Independent Director and Mr. R. Vasudevan, Managing Director The Board has accepted all recommendations made by the Audit Committee during the year. 19. BUSINESS RISK MANAGEMENT The Company has a Risk Management Committee of the Board, consisting of two Independent Directors and one Whole Time Director. The details of the Committee and its terms of reference are set out in the Corporate Governance section, which forms a part of this Report. The Audit and Risk Management Committees review the key elements of the Company's business, finance, operations and compliance risk(s) and respective mitigation strategies. The Risk Management Committee review the risk identification and management process developed by management to confirm it is consistent with the Corporation's strategy and business plan. During FY 2015, focus areas of the management and the Board included progress on strategy execution, quality and regulatory, while process safety and health continued to remain a priority for the Company. 20. DIRECTORS' RESPONSIBILITY STATEMENT In terms of Section 134(5) of the Companies Act, 2013, your Directors state that: 1. applicable accounting standards have been followed in the preparation of the annual accounts; 2. accounting policies have been selected and applied consistently. Judgments and estimates made 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 FY 2015 and of the profit of the Company for that period; 3. proper and sufficient care has been taken to maintain adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; 4. annual accounts have been prepared on a going concern basis; 5. adequate internal financial controls for the Company to follow have been laid down and these are operating effectively; and 6. proper and adequate systems have been devised to ensure compliance with the provisions of all applicable laws and these systems are operating effectively. 21. RELATED PARTY TRANSACTIONS In accordance with Section 134(3) (h) of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contract or arrangement entered into by the Company with related parties referred to in Section 188(1) in Form AOC-2 is attached as "Annexure II". The details of related party disclosures form part of the notes to the financial statements provided in this annual report. 22. VIGIL MECHANISM / WHISTLE BLOWER POLICY The Company has Whistle-Blower policy (Whistle-Blower/ Vigil Mechanism) to report concerns. Under this policy, provisions have been made to safeguard persons who use this mechanism from victimization. An Independent member of Audit Committee is the Chief of Vigil Mechanism. The policy also provides access to the chairperson of the Audit Committee under certain circumstances. The details of the procedure are also available on the Company's website 23. AUDITORS STATUTORY AUDITORS The Members of the Company at their 29th Annual General Meeting (AGM) held on September 15, 2014, approved the appointment of M/s. Deloitte Haskins & Sells LLP, (Firm Registration no. 117366W/W-100018) Chartered Accountants, as statutory auditors of the Company, to hold office for five years, from the conclusion of the 29th AGM. In terms of first proviso of Section 139 of the Companies Act, 2013, the appointment of the auditors is subject to ratification by the shareholders at every subsequent AGM. Accordingly, the statutory auditors, M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, have confirmed their eligibility under Section 141 of the Companies Act, 2013, Rule 4 of the Companies (Audit and Auditors) Rules, 2014 and Clause 41 (I)(h) of the Listing Agreement. The Audit Committee and the Board of Directors recommend the appointment of M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, as statutory auditors of the Company from the conclusion of the 30th AGM till the conclusion of the 31st AGM, to the shareholders for ratification. SECRETARIAL AUDITOR Pursuant to Section 204 of the Companies Act, 2013 and the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, Dr. K R Chandratre, practicing Company Secretary was appointed to conduct the secretarial audit of the Company for FY 2015. The secretarial audit report for FY 2015 is attached as "Annexure III". For FY 2016, based on the consent received from K.D. Rane & Associates, practicing Company Secretary and on the recommendations of the Audit Committee, the Board has appointed K D Rane & Associates, practicing Company Secretary, as secretarial auditor of the Company for FY 2016. 24. BOARD'S RESPONSE ON AUDITORS QUALIFICATION, RESERVATION OR ADVERSE REMARK OR DISCLAIMER MADE Information and explanation on remark in the Auditor's Report: if any: Auditor's emphasis matters of the Report: (i) Preparation of Accounts on Going Concern Basis: Reply: The Company has already taken steps to augment the long term resources by issue of Rights shares to the existing shareholders of the Company. The issue has been completed and the Company is in process of clearing liabilities. (ii) Loans and Advances to Subsidiary Reply: As mentioned in the note, the management is confident of recovering advances. (ii)Auditor's comment on delay in payment of statutory dues and loans, in their Annexure to the Report Reply: The Company has increased the long term resources by issuing rights shares to the members to an extent of Rs. 100 crores. These funds along with the realization of proceeds from noncore assets shall enable company to pay the dues on time. Secretarial Auditors remarks in the Report: • The notice of book closure was published in English newspaper in English instead of in vernacular. Reply: The Board has noted this remark, and ensures Compliance in future. • The notice of e-voting was published in English language in English instead of in vernacular. Reply: The Board has noted this remark, and ensures Compliance in future. • The e-voting for the annual general meeting was not completed three days prior to the date of annual general meeting. Reply: The Board has noted this remark, and ensures Compliance in future. 25. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE COURTS/REGULATORS During FY 2015, there were no significant and/or material orders, passed by any Court or Regulator or Tribunal, which may impact the going concern status or the Company's operations in future. 26. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES Vascon has been early adopter of Corporate Social Responsibility initiatives. The Company works with Vascon Moorthy Foundation ('VMF') towards improving healthcare, supporting child education and many such activities for the welfare of the Society. As per Section 135 of the Companies Act, 2013, the Company has a Corporate Social Responsibility (CSR) Committee of its Board of Directors. Our Corporate Social Responsibility Committee comprises Mr. R. Vasudevan, Chairman of the Committee and Managing Director, Mr. V. Mohan, Independent Director, Mr. R Kannan, Independent Director. During the year, the Committee formulated and recommended a CSR policy to the Board. Our CSR policy provides a constructive framework to review and organize our social outreach programs in the areas of health, livelihood and education. The policy enables a deeper understanding of outcome focused social development through diverse collaborations. The Report on CSR activities of the Company is attached as "Annexure IV" 27. TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO IEPF Pursuant to the provisions of Section 205A(5) of the Companies Act,1956, the declared dividends, which remained unpaid or unclaimed for a period of seven years, shall be transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the said Act. 28. EMPLOYEES STOCK OPTION SCHEMES The applicable disclosures as stipulated under SEB guidelines with regard are attached as "Annexur V". PARTICULARS OF EMPLOYEES Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as "Annexure VI". In terms of Section 197(12) of the Companies Act, 2013, read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of limits set out in said rules forms part of the annual report. Considering the first proviso to Section 136(1) of the Companies Act, 2013, the Annual Report, excluding the aforesaid information, is being sent to the members of the Company and others entitled thereto. The said information is available for inspection at the registered office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. Any shareholder interested in obtaining a copy thereof, may write to the Company Secretary in this regard. 29. CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The particulars as prescribed under Section 134(3) (m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 our Company is not covered by the Schedule of Industries which are required to furnish the information in Form-A. Our Company has not imported any technology or other items, or carried on the business of export or import. Therefore, the disclosure requirements against technology absorption are not applicable to the Company 31. EXTRACT OF THE ANNUAL RETURN The details forming part of the extract of the annual return in Form MGT-9 is attached as "Annexure VII". 32. ACKNOWLEDGEMENT Your Directors place on record their sincere appreciation for the significant contribution made by our employees through their dedication, hard work and commitment, as also for the trust reposed on us by our clients. We also acknowledge the support extended to us by the analysts, bankers, government agencies, media, customers, suppliers, shareholders and investors at large. For and on behalf of the Board of Directors V. Mohan Chairman Place: Mumbai Date: August 11, 2015 |