Mar 31, 2018
1 : CORPORATE INFORMATION
A2Z Infra Engineering Limited (âA2Z or the Companyâ) was incorporated at National Capital Territory of Delhi and Haryana on January 7, 2002 for providing maintenance and engineering services. The Company commenced its business with the facility management services and entered into engineering business during the year 2005-06. The Company has also entered into collaboration with sugar mills for setting up 3 Cogeneration (Cogen) power plants on Built, Own, Operate and Transfer (BOOT) basis for a period of 15 years.
The Companyâs engineering business segment primarily includes supply, erection and maintenance of electrical transmission lines including laying and maintenance of Optic Fiber Cable (OFC) and allied services to power distribution companies.
2 : SIGNIFICANT ACCOUNTING POLICIES AND KEY ACCOUNTING ESTIMATES AND JUDGEMENTS
2.1 Statement of compliance
These financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (Ind AS) as prescribed under section 133 of the Companies act, 2013 (âThe Actâ) read with rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules 2016 issued by Ministry of Corporate Affairs (âMCAâ). All other relevant provisions of the Act, as amended, are also complied with in these financial Statements.The Company has prepared these financial statements which comprise the Balance Sheet as at March 31, 2018, the Statement of Profit and Loss, the Statement of Cash Flows and the Statement of Changes in Equity for the year ended March 31, 2018, and a summary of the significant accounting policies and other explanatory information (together hereinafter referred to as âfinancial statementsâ).
The Company has uniformly applied the accounting policies during the period presented.
2.2 Use of estimates and judgments
The preparation of financial statements in conformity with Ind AS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities at the date of these financial statements. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed at each balance sheet date. Any revision to accounting estimates and assumptions are recognised prospectively i.e. recognised in the period in which the estimate is revised and future periods affected.
In particular, information about significant judgements and areas of estimation uncertainty in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are discussed below:
Significant management judgements
The following are significant management judgements in applying the accounting policies of the Company that have the most significant effect on the financial statements.
- Recognition of deferred tax assets - The extent to which deferred tax assets can be recognized is based on an assessment of the probability of the Companyâs future taxable income against which the deferred tax assets can be utilized.
- Evaluation of indicators for impairment of assets - The evaluation of applicability of indicators of impairment of assets requires assessment of several external and internal factors which could result in deterioration of recoverable amount of the assets.
- Classification of leases - The Company enters into leasing arrangements for various assets. The classification of the leasing arrangement as a finance lease or operating lease is based on an assessment of several factors, including, but not limited to, transfer of ownership of leased asset at end of lease term, lesseeâs option to purchase and estimated certainty of exercise of such option, proportion of lease term to the assetâs economic life, proportion of present value of minimum lease payments to fair value of leased asset and extent of specialized nature of the leased asset.
Estimation uncertainty
Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different.
- Recoverability of advances/ receivables - At each balance sheet date, based on discussions with the respective counterparties and internal assessment of their credit worthiness, the management assesses the recoverability and expected credit loss of outstanding receivables and advances. Such assessment requires significant management judgement based on financial position of the counter-parties, market information and other relevant factor.
- Classification of assets and liabilities into current and non-current - The management classifies the assets and liabilities into current and non-current categories based on managementâs expectation of the timing of realisation of the assets or timing of contractual settlement of liabilities.
- Warranty provision - The management makes estimate of costs that would be incurred with respect to warranties given on products. The provision requires use of several estimates based on past data and expectations of future.
- Impairment of assets - In assessing impairment, management estimates the recoverable amounts of each asset (in case of non-financial assets) based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future cash flows and the determination of a suitable discount rate.
- Useful lives of depreciable/amortisable assets (Property, plant and equipment and intangible) - Management reviews its estimate of the useful lives of depreciable/ amortisable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical and economic obsolescence that may change the utility of certain software and other plant and equipment.
- Revenue recognition - The Company uses the percentage completion method in accounting for its revenue from construction services. The use of percentage-of-completion method requires the Company to estimate costs expended to date as a proportion of the total costs to be expended. Costs expended have been used to measure progress towards completion as there is a direct relationship between input and output.
- Contract estimates - The Company, being a part of construction industry, prepares budgets in respect of each project to compute project profitability. The two major components of contract estimate are âclaims arising during construction periodâ (described below) and âbudgeted costs to complete the contractâ. While estimating these components various assumptions are considered by the management such as (i) Work will be executed in the manner expected so that the project is completed timely (ii) Consumption norms will remain same (iii) Assets will operate at the same level of productivity as determined (iv) Wastage will not exceed the normal % as determined etc. (v) Estimates for contingencies (vi) There will be no change in design and the geological factors will be same as communicated and (vii) Price escalations etc. Due to such complexities involved in the budgeting process, contract estimates are highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
- Recoverability of claims - The Company has claims in respect of cost over-run arising due to client caused delays, suspension of projects, deviation in design and change in scope of work etc., which are at various stages of negotiation/ discussion with the clients or under arbitration. The realisability of these claims are estimated based on contractual terms, historical experience with similar claims as well as legal opinion obtained from internal and external experts, wherever necessary. Changes in facts of the case or the legal framework may impact realisability of these claims.
- Defined benefit obligation (DBO) - Managementâs estimate of the DBO is based on a number of critical underlying assumptions such as standard rates of inflation, trends, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.
- Fair value measurements - Management applies valuation techniques to determine the fair value of financial instruments (where active market quotes are not available). This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management bases its assumptions on observable data as far as possible but this is not always available. In that case management uses the best information available.
2.3 Standards issued but not yet effective
a) Appendix B to Ind AS 21, Foreign currency transactions and advance consideration
On March 28 , 2018, MCA has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. This amendment will come into force from April 1, 2018.
The Company do not expect that the adoption of the amendments to the standards will have an impact on the financial statements of the Company.
b) Ind AS 115, âRevenue from Contracts with Customersâ
On March 28, 2018, Ministry of Corporate Affairs has notified the Ind AS115, âRevenue from Contracts with Customersâ. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entityâs contracts with customers.
The standard permits two possible methods of transition:-
Retrospective approach- Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS8-Accounting Policies, Changes in Accounting Estimates and Errors
Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach)
The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018. The Company is evaluating the requirements of the amendment and its impact on the financial statements.
Note 3.1: Impairment
The management has performed impairment assessment of three cogeneration power plants set up in collaboration with certain sugar mills on Build, Own, Operate and Transfer (BOOT) basis for a period of 15 years. As at March 31, 2018, such plants have a power generation capacity of 15 MW each. The assessment has been done on the basis of assumptions of useful life of assets, discounted cash flows with significant underlying assumptions, achievement of certain operating capacity and the ability of new technology to perform on a consistent basis.
The management had filed a writ petition with the High Court of Punjab and Haryana for the extension of the concession period wherein the Honâble Court has directed the sugar mills, vide its order dated March 23, 2017, to consider the request made by the Company for the extension within a period of 3 months. Additionally, the Company has also initiated arbitration proceedings with the sugar mills for the extension. Based on the assessment and advice from an independent legal counsel on the availability of concession period, excluding the available renewal period by exercising the option for renewal/ extension of the concession period, the management, is confident, that there exists reasonable certainty that arrangement shall be extended for a term of 5 years. Management carried out an impairment assessment and has recorded an impairment of INR 3,500.00 lacs (March 31, 2017 INR 6,839.46 lacs) in carrying value of these assets during the year ended March 31, 2018. Accordingly, management believes that the estimates of the useful lives are reasonable and no further material adjustments to the carrying value of these plants are necessary.
Out of the aforementioned impairment amounting to INR 3,500.00 lacs (March 31, 2017 INR 6,839.46 lacs), INR 2,850.00 lacs (March 31, 2017 INR 5,881.21 lacs) pertains to, two power plants, which were yet to be capitalised and INR 650.00 lacs (March 31, 2017 INR 958.25 lacs) is for power plant which has already been capitalised. This has been recognised in the statement of profit and loss under the head exceptional item during the year ended March 31, 2018. The recoverable amount of INR 27,706.12 lacs as at March 31, 2018 (March 31, 2017 INR 32,091.86 lacs) of all three cogeneration power plants is based on value in use and determined at the level of the Cash Generating Unit (CGU). The CGU consisted of assets relating to the power plant, and the cash flows of the CGU are discounted at a rate of 16.28% (previous year 13.80%) on a post-tax basis.
Note 3.2: Contractual commitments
The Company does not have any outstanding contractual commitments to purchase any items of property, plant and equipment. Note 3.3: Property, plant and equipment are pledged as collateral for borrowings from banks (Refer Note 16 and Note 19).
Note 3.4: Capital work in progress
Assets under construction comprises of expenditure for the power plant in the course of construction. The amount of expenditure recognised in carrying amount of capital work in progress are as under.
Note 4.1: The Company does not have any outstanding contractual commitments to purchase any items of intangible assets.
Note 4.2: Additions do not include any internally generated assets.
Note 4.3: Intangible assets are pledged as collateral for borrowings from banks (Refer Note 16 and Note 19).
Note 5.1.1 The management has committed to provide continued operational and financial support to its subsidiaries for meeting their working capital and other financial requirements and based upon approved future projections of the subsidiaries, believes that no impairment exist in excess of the provision already created and accordingly, no further adjustment is considered necessary in respect of carrying value of investments.
Note 5.1.2 One of the lenders of A2Z Green Waste Management Limited (hereinafter referred to as AGWML), IL&FS Financial Service Limited (âIFINâ) has invoked pledge on Nil (March 31, 2017 5,455,998) equity shares of AGWML constituting Nil (March 31, 2017 23.98%) of the paid up equity share capital of AGWML and have adjusted/appropriated an amount of Nil (March 31, 2017 INR 940.07 lacs) towards interest payable by AGWML to IFIN.
Note 5.1.3 During the year ended March 31, 2017, the Company acquired 70,000 equity shares, which is 5% of total share capital of A2Z Powertech Limited. After this acquisition, total shareholding of the Company in A2Z Powertech Limited has increased from 95% to 100%.
Note 5.1.4 During the year ended March 31, 2018, the Company has sold the investments in one of its subsidiary company, i.e., Star Transformers Limited. Consequently, Star Transformers Limited has ceased to be a subsidiary of the Company.
Note 5.1.5 Investment in subsidiaries, other than in shares, represents employee stock option granted to employees of subsidiaries.
Note 5.2: The Company, as at March 31, 2018, has non-current investments amounting to INR 20,151.90 lacs (March 31, 2017 INR 19,408.80 lacs) other current financial assets (net of impairment) amounting to INR 410.73 lacs (March 31, 2017 INR 399.95 lacs) and current financial assets-loan amounting to INR 592.85 lacs in its subsidiary A2Z Green Waste Management Limited which has 100% holding in various SPVs under its fold (hereinafter A2Z Green Waste Management Limited together with its subsidiaries is referred to as A2Z Green Waste Management Group). While A2Z Green Waste Management Group has incurred losses during its initial years and consolidated net-worth as at March 31, 2018 has been completely eroded, the underlying projects are expected to achieve adequate profitability on substantial completion. Based on internal assessment and valuation report from an independent valuer, the recoverable amount from the underlying investments/assets is higher than the net worth of A2Z Green Waste Management Group. Therefore, the management believes that the realisable amount of these subsidiaries is higher than the carrying value of the non-current investments, other current financial assets and current financial assets-loans due to which these are considered as good and recoverable.
Note 5.3 The Company does not have any quoted investments.
Note 6.1 Disclosure pursuant to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 in respect of loans and advances to related parties in the nature of loans:
*Includes amount due from a director of the Company- Mr Amit Mittal 124.93 - 127.43 -
** Held as margin money against bank guarantees and letter of credit and as debt service reserve account against term loan from banks.
Note 7.1: Contract revenue in excess of billing amounting INR 8,381.36 lacs (March 31, 2017 INR 12,759.95 lacs), pertains to revenue recognized by the Company during earlier years, representing amounts billable to, and receivable from the customers towards work done on certain EPC contracts under execution by the Company in accordance with the terms implicit in the contract. The delay in billing these amounts is on account of conclusion of reconciliations with the customers, pending joint measurement/ survey of the work done till date and non-achievement of milestones as per the contractual terms. Management is in discussion with the customers and expects to bill these amounts at the earliest, and believes that whilst it may take some time to recover the amounts owing to completion of certain administrative and contractual matters, the current provision being carried in the books is adequate and no further material adjustments are considered necessary in respect of above balances.
Note 8.1: Inventories with a value of INR 334.90 lacs (March 31, 2017 INR 765.66 lacs) are carried at net realisable value, this being lower than cost. During the year ended March 31, 2018, INR 353.06 lacs (March 31, 2017 INR 440.77) is charged to the statement of profit and loss for decrease in net realisable value.
Note 8.2: Inventories are pledged as collateral for borrowings from banks (Refer Note 16 and Note 19).
Note 9.1 : Trade receivables include retention money of INR 61,188.54 lacs (March 31, 2017 INR 65,447.87 lacs) which are due on completion of erection / contracts / final acceptance by the customers. The management is confident of recovering these amounts upon erection / contract completion.
All trade receivables are short-term. The effect of any difference between the effective interest rate applied and the estimated current market rate is not significant. Allowance for credit losses has been recorded accordingly within other expenses, and is based on the expected credit loss methodology. The doubtful trade receivables are mostly due from customers in the business-to-business market that are experiencing financial difficulties.
(iv) The Company has only one class of equity shares having a par value of INR 10 per share. Each shareholder is eligible for one vote per share held. The Company declares and pays dividend in Indian rupees. The dividend proposed by the board of directors is subject to the approval of the shareholders in the ensuing annual general meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
(v) No shares have been allotted as fully paid up pursuant to contracts without payment being received in cash or as bonus shares for the period of 5 years immediately preceding March 31, 2018.
(vi) During the year ended March 31, 2017, the Company had received remaining 75% of the proceeds for the issue of 16,444,994 equity shares against share warrants. Accordingly, pursuant to the requisite approvals and board meeting held, the Company has issued equity shares against equivalent number of share warrants at an issue price of INR 21.66 each on a preferential basis to persons other than the Promoters and Promoter group.
(vii) During the year ended March 31, 2018, the Company has allotted 894,005 equity shares (March 31, 2017 1,610,495 equity shares) of face value of INR 10 each to the eligible employees of the Company who have exercised their stock options under the A2Z Employee Stock Option Plan 2013 (Tranche I and Tranche II) and Employee Stock Option Plan 2014. These shares are pari-passu with the existing equity shares of the Company, in all respects.
(viii) During the year ended March 31, 2018, the Company has alloted 30,276,384 equity shares (March 31, 2017: Nil) of face value of INR 10 each at an issue price of INR 39.80 in persuant to One Time Settlement Agreements (âOTS Agreementsâ) with certain lenders (âthe Lendersâ) on a preferential basis (Refer Note 40.2).
(ix) Shares reserved for issue under options
Information relating to Employee stock option plan, including details of options issues, exercised and lapsed during the financial year and options outstanding at the end of the reporting period, is set out in Note 26.
(x) Details of shares held by shareholders holding more than 5% equity shares of the Company:
Note 10.1: Restructuring of borrowings under Corporate Debt Restructuring Scheme (CDR Scheme):
The Corporate Debt Restructuring (CDR) proposal to re-structure the debt obligations, including interest, additional funding and other terms (hereafter referred to as âthe CDR Schemeâ) of the Company, having January 01, 2013 as the âcut-off dateâ, was approved by the CDR Cell vide its Letter of Approval (LOA) dated December 28, 2013 as further modified dated February 03, 2014. From the âcut-off dateâ the interest on the restructured debts has been recomputed and provided at the effective interest rates as per the CDR Scheme.
Details of terms of repayment for the non-current borrowings and security provided in respect of secured non-current borrowings:
Note 10.2: Term loans from banks:
1) Term loan from bank amounting to INR 8,580.00 lacs (March 31, 2017 INR 8,580.00 lacs) having an interest rate of 10.15% -10.75% per annum as per CDR Scheme is repayable in 32 quarterly instalments, first instalment was due in March 2015. During the year ended March 31, 2017, the bank had transferred/assigned its fund based outstanding amount recoverable in favour of Edelweiss Assets Reconstruction Company Limited.
The above loan is secured against
(i) First pari passu charge on both present and future current assets as well as fixed assets of the biomass based power projects situated at Fazilka, Nakodar and Morinda in the state of Punjab.
(ii) Second pari-passu charge on fixed assets and current assets on EPC business.
2) Term loan from bank amounting to INR Nil (March 31, 2017 - INR 8,006.58 lacs) having an interest rate from 12.75% - 13.25% per annum during the year is repayable in 24 quarterly instalments, first instalment was due in June 2015.
The above loan is secured against:
(i) First charge on pari - passu basis:
(a) by way of hypothecation of all current assets of the company including but not limited to receivables and inventory, relating to the projects both present and future;
(b) on all intangible assets including but not limited to goodwill pertaining to the projects (to the extent permissible by the Punjab state Co-operative sugar mills).
(ii) First charge:
(a) on all the insurance contracts with respect to the projects together with any receivables thereunder;
(b) on all the accounts (including but not limited to the project accounts) with respect to the projects
(iii) An assignment of:
(a) all rights and interest by way of first charge on pari passu basis on the book debts, operating cash flows, receivables, commissions, revenues of whatsoever nature and wherever arising, relating to the projects, present and future;
(b) the rights and interest in the project site to the extent permissible by law;
(c) all its rights and obligations under the assignment orders and memorandum of understandings and;
(d) the rights and interest by way of first charge on pari passu basis into and under each of the project documents, and all the rights under each letter of credit/ guarantee or performance bond that may be posted by any party to a project document for the Companyâs benefit and all the rights under the approvals in connection with the project (having value above INR 1,000.00 lacs) to the extent permissible by law.
(iv) Personal guarantee of Mr. Amit Mittal (Managing Director).
Pursuant to One Time Settlement (OTS) agreement entered with the bank, the loan has been settled during year. (Refer Note 40.2).
3) Term loans from banks amounting to INR 1,560.13 lacs (March 31, 2017 INR 1,712.91 lacs) having interest rate of 10.15% -10.75% per annum during the year are repayable in 28 quarterly instalments, first instalment was due in March 2016.
The above loan is secured against:
(i) First charge ranking pari passu on present and future fixed assets of the Power projects situated at Fazlika, Nakodar and Morinda in the state of Punjab.
(ii) Second charge ranking pari passu on present and future current assets of the Power projects situated at Fazlika, Nakodar and Morinda in the state of Punjab.
(iii) Second charge ranking pari passu on both present and future current assets, as well as fixed assets of Company other than assets exclusively financed to other lenders.
4) Term loans from banks amounting to INR 1,273.28 lacs (March 31, 2017 INR 1,402.66 lacs) having interest rate from 10.15% - 10.75% per annum during the year are repayable in 21 quarterly instalments, first instalment was due in March 2016.
The above loan is secured against:
(i) First charge ranking pari passu on both present and future current assets as well as fixed assets of the Company other than assets exclusively charged to other lenders.
(ii) Second charge ranking pari passu on both present and future current assets of the power projects situated at Fazilka, Nakodar and Morinda in the state of Punjab.
5) Term loans from banks amounting to INR Nil (March 31, 2017 INR 1,600.00 lacs) having interest rate from 12.75% - 13.25% per annum during the year are repayable in 28 quarterly instalments, first instalment was due in March 2016.
The above loan is secured against:
(i) First pari passu charge on present and future fixed assets of the Power projects at Fazilka, Nakodar and Morinda.
(ii) Second pari passu charge on present and future current assets of the Power projects at Fazilka, Nakodar and Morinda.
(iii) Second pari passu charge on both present and future current assets as well as fixed assets of the company other than assets exclusively charged to other lenders.
(iv) Personal Guarantee of Mr. Amit Mittal (Managing Director).
Pursuant to One Time Settlement (OTS) agreement entered with the bank, the loan has been settled during year. (Refer Note 40.2).
6) Term loans from bank amounting to INR 4,400.26 lacs (March 31, 2017 INR Nil), pertains to settlement consideration payable to the bank pursuant to One Time Settlement Arrangemennt (OTS) of cash credit facilities. The same is repayable in 12 instalments and the first instalment shall be due in July 2018, carring Nil interest rate till September 30, 2019 and 13% per annum thereafter (Refer Note 40.2)
Note 10.3: Term loans from financial institution:
1) The loan amounting to INR Nil (March 31, 2017 INR 5,000.00 lacs) is secured by a first charge by way of hypothecation and escrow of the entire retention money receivables both present and future. The interest rate is 15% per annum and the loan was repayable in April 2015.
Pursuant to One Time Settlement (OTS) agreement entered with the financial institution, the loan has been settled during year. (Refer Note 40.2).
Note 10.4 (a) : Working capital term loan:
Working capital term loans from bank amounting to INR 4,516.94 lacs (March 31, 2017 INR 4,597.26 lacs) having an interest rate of 10.15% - 10.75% per annum as per CDR Scheme are repayable in 29 quarterly instalments. First instalment was due in March 2015. The above loan is secured against:
(i) First pari passu charge on both present and future fixed assets as well as current assets of the Company or Borrower other than assets exclusively charged to other lenders.
(ii) Second pari passu charge on both present and future current assets as well as fixed assets of the Power projects situated at Fazlika, Nakodar and Morinda in the state of Punjab.
Note 10.4 (b) (i) : Funded interest term loan -1 (EPC):
Funded interest term loans from bank amounting to INR 7,913.13 lacs (March 31, 2017 INR 8,367.27 lacs) having an interest rate of 10.15% - 10.75% per annum as per CDR Scheme are repayable in 25 quarterly instalments. First instalment was due in March 2015. During the year ended March 31, 2017, the bank had transferred/assigned its fund based outstanding amount recoverable of INR 1,598.53 lacs (March 31, 2017 INR 1,598.53 lacs) in favour of Edelweiss Assets Reconstruction Company Limited.
The above loan is secured against:
(i) First charge by way of mortgage ranking pari passu on both present and future fixed assets as well as current assets of the Company other than assets exclusively charged to other lenders.
(ii) Second charge ranking pari passu on both present and future current assets as well as fixed assets of the Power projects situated at Fazlika, Nakodar and Morinda in the state of Punjab.
Note 10.4 (b) (ii) : Funded interest term loan -2 (EPC):
Funded interest term loans from bank amounting to INR 311.24 lacs (March 31, 2017 INR 311.24 lacs) as per CDR Scheme are repayable in single instalment, which will due in March 2021.
The above loan is secured against:
(i) First charge pari passu on both present and future current asset as well as fixed assets of the EPC business other than assets exclusively charged to lenders.
(ii) Second charge pari passu on both current assets and fixed assets of the 3 biomass power plant projects situated at Fazlika, Nakodar and Morinda in the state of Punjab.
(iii) Second charge pari passu on land property first charged to DBS and SCB given for term loan.
Note 10.5: The Company has defaulted in repayment of principal and interest in respect of loans from banks and financial institutions as mentioned below:
A provision is recognised for expected warranty claims, based on past experience, for expected cost of meeting obligations of rectification/replacement. It is expected that most of these costs will be incurred in the next 3 years and all would have been incurred within 5 years after the reporting date. The Company accounts for the provision for warranty on the basis of the information available with the management duly taking into account the current and past technical estimates / trends. These estimates are established using historical information on the nature and average cost of warranty claims and management estimates regarding possible future incidence based on corrective actions on product failures. The timing of outflows will vary as and when warranty claim will arise.
ii) Defined benefit plan and long term employment benefit A General description:
Gratuity [Defined benefit plan]:
Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company (Kotak Life Insurance) in the form of a qualifying insurance policy.
Leave wages [Short term employment benefit]:
The employees of the Company are entitled to leave as per the leave policy of the Company. The Company treats accumulated leave expected to be carried forward beyond twelve months, as long term employee benefit for measurement purposes. Such long term compensated absences are provided for based on actuarial valuation using the projected unit credit method at the year end. Actuarial gains or losses are recognized in Statement of Profit and Loss.
These assumptions were developed by management with the assistance of independent actuaries. Discount factors are determined close to each year-end by reference to market yields of high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension obligation. Other assumptions are based on current actuarial benchmarks and managementâs historical experience.
Sensitivity analysis
Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting year, while holding all other assumptions constant. The results of sensitivity analysis is given below:
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
There is no change in the method of valuation for the prior period.
Note 11.1: Working capital loans from banks and other secured loans
a) The working capital loans of INR 5,571.50 lacs (March 31, 2017 5,571.50 lacs) and cash credit facilities of INR 38,562.17 lacs (March 31, 2017 50,953.05 lacs) from banks are secured against whole of the assets (both current as well as fixed) of the Company, namely stock of raw material, stock in process, semi-finished and finished goods, stores and spares (consumable stores and spares), bills receivables and book debts and all other movables and fixed assets (except fixed assets exclusively financed by other lenders) both present and future stored or to be stored at the Companyâs godown, premises and division at O-116, First Floor Shopping mall, Arjun Marg, DLF City Phase - I, Gurugram or wherever else the same may be by way of first pari - passu charge amongst the consortium members. The charge is also additionally secured by first charge over Companyâs immovable properties i.e.
I) Plot No. G-1030 A having 1500 sq mtr. area situated at Industrial Area, Bhiwadi Phase-III, Bhiwadi, Rajasthan in the name of Shree Balaji Pottery Private Limited;
II) Plot No. G-1030 having 1500 sq mtr. area situated at Industrial Area, Bhiwadi Phase-III, Bhiwadi, Rajasthan in the name of Shree Hari Om Utensils Private Limited;
III) Office space on 7th Floor of a B G 7 storied commercial building on east side of LA-VIDA Mall at CK-3,4, 48, 49 Salt Lake City, Sector-II, Kolkata
IV) Mortgage of following properties :
(a) Land measuring 17 Bigha-1 Biswa, situated at village Morinda, Tehsil Chamkur Sahib, District Roop Nagar, Punjab;
(b) Land measuring about 5.309 Hectare situated at village Palsora, District Indore;
(c) Land measuring 6.065 Hectare, Village Mandela Chhota, Tehsil Fatehpur, District Seekar, Rajasthan;
(d) Land with Boundary wall, Gate No. 70, Vill Sherpur Madho urf Ghania Khera, Near India Brick Kiln, Pargana & Tehsil Bilari, District Moradabad admeasuring about 1.465 Hectare or 3.62 acre;
(e) Land with Boundary wall, at Gate No. 184, 188, 189, Vill Sherpur Madho urf Ghaniakhera, Near India Brick Kiln, Pargana & Tehsil Bilari, District Moradabad admeasuring about 2.391 Hectare or 5.91 acre;
Further secured by Corporate Guarantees of Shree Hariom Utensils Private Limited and Balaji Pottery Private Limited. The rate of interest vary from 10.15% - 13.25% per annum and these loans are repayable on demand.
b) Second charge on pari-passu basis over all rights, titles, interest, benefits, claims and demands in respect of projects and insurance contracts and over all movable and immoveable properties, accounts, plant and machinery, all other tangible moveable assets both present and future, project book debts, operating cash flows, receivables, commissions, revenues of whatsoever nature in respect of project.
Note 11.2: Other borrowings
Other borrowings amounting to INR 900.37 lacs (March 31, 2017 INR Nil) pertains to settlement consideration payable to the bank persuant to one time settlement agreement (OTS) of cash cerdit facilities.The same is repayable in 11 installments and the first installment shall due in April 2018 (Refer Note 40.2).
As per the OTS arrangement all existing securities, guarantees and legal documents shall remain in full force and effective till the discharge of the settlement amount (Refer Note 16.2.2, Note 16.2.5 and Note 19.1).
Note 11.3: The Company has defaulted in repayment of principal and interest in respect of loans from banks and financial institutions as mentioned below:
Note 12.1 Disclosures under Micro, Small and Medium Enterprises Act, 2006
The micro and small enterprises have been identified by the Company from the available information. According to such identification, the disclosures in respect to Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 is as follows:
Note 13.1: In financial year 2016-17, the Company based on the legal advice filed an application for advance ruling with the Advance Ruling Authorities (âthe Authorityâ) regarding applicability of service tax in respect of one of the projects undertaken by them. During the year ended March 31, 2018, the Company has received response to its application wherein the Authority has opined that entire project is covered within the ambit of the service tax. Accordingly, the Company has recognized the service tax liability and based on the contractual terms which stipulates that any taxes shall be borne by the customer, has also recognized amount recoverable from customer of an equivalent amount. Further, the management believes that the interest, if any, on the delayed deposit of the aforementioned service tax liability is currently unascertainable and shall be reimbursed by the customer. The Company has made submissions with the customer in this regard. Additionally, based on the independent legal advice, the Company believes that the input tax credit in respect of the aforementioned project shall be adjustable against the liability considering the entire project has now been clarified to be covered under the service tax ambit. Accordingly, no further adjustments to the books of account are considered necessary.
Note 14.1 Defined contribution plan
The Company has certain defined contribution plans. The contributions are made to provident fund in India for employees at the rate of 12% of the basic salary as per regulations. The contribution are made to registered provident fund administered by the government. The obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation the expense recognised during the year towards the defined contribution plan is INR 127.57 lacs (March 31, 2017 INR 67.30 lacs).
Note 14.2 Share-based employee remuneration
(a) A2Z Stock Option Plan 2010
During the year ended March 31, 2010, the Company had formulated Employee Stock Option Scheme referred as âA2Z Stock Option Plan 2010 (âthe planâ) for all eligible employees/ directors of the Company except an employee who is promoter or belongs to the promoter company of the Company and its subsidiaries in pursuance of the special resolution duly approved by the shareholders on March 30, 2010.
The plan shall be administered and supervised by the Remuneration-cum-Compensation Committee under the powers delegated by Board. Each option shall entitle the option grantee to apply for and be transferred equity shares of the Company. On or from the time of the listing of the equity shares of the Company, the maximum number of options that can be granted to any employee in any year under the A2Z ESOP shall be less than 5% of the issued share capital of the Company (excluding any outstanding warrants or other securities convertible into equity shares) at the time of grant of options, subject to the overall ceiling of 2,865,056 options in the aggregate.
(b) A2Z Employees Stock Option Plan, 2013 Tranche I
The members of the Company vide special resolution at the Annual General Meeting held on September 28, 2013 had approved the A2Z Employees Stock Option Plan, 2013. The ESOP Compensation Committee in its meeting held on February 3, 2014 has granted 1,695,000 stock options convertible into equivalent number of equity shares of INR 10 each to the eligible employees / directors of the Company and its subsidiary companies at the exercise price of INR 10.35 each which is NSE closing market price on January 31, 2014 (i.e. previous trading day of the grant date). The entire granted stock options shall vest and will be exercisable on the first anniversary of the grant date till completion of four years since then.
(c) A2Z Employees Stock Option Plan, 2013- Tranche II
The members of the Company vide special resolution at the Annual General Meeting held on September 28, 2013 had approved the A2Z Employees Stock Option Plan, 2013. The ESOP Compensation Committee in its meeting held on July 3, 2014 has granted 1,905,000 stock options convertible into equivalent number of equity shares of INR 10 each to the eligible employees / directors of the Company and its subsidiary companies at the exercise price of INR 19.95 each which is BSE closing market price on July 02, 2014 (i.e. previous trading day of the grant date). The entire granted stock options shall vest and will be exercisable 30% on the first anniversary, 30% on the second anniversary and 40% on the third anniversary of the grant date till completion of four years since then.
(d) A2Z Employees Stock Option Plan, 2014
The members of the Company vide special resolution at the Annual General Meeting held on September 27, 2014 had approved the A2Z Employees Stock Option Plan, 2014. The ESOP Compensation Committee in its meeting held on July 6, 2015 has granted 4,500,000 stock options convertible into equivalent number of equity shares of INR 10 each to the eligible employees / directors of the Company and its subsidiary companies at the exercise price of INR 15.50 each which is NSE closing market price on July 03, 2015 (i.e. previous trading day of the grant date). The entire granted stock options shall vest and will be exercisable 30% on the first anniversary, 30% on the second anniversary and 40% on the third anniversary of the grant date till completion of five years since then.
(e) A2Z Employees Stock Option Plan, 2013 and 2014 (Regrant)
The Nomination and remuneration Committee in its meeting held on August 17, 2017 has regranted 17,60,000 stock options (7,88,000 against stock option lapses under A2Z Employee Stock Options Plan, 2013 and 9,72,000 against stock options lapses under A2Z Employee Stock Options Plan, 2014) convertible into equivalent number of equity shares of INR 10 each to the eligible employees/directors of the Company and its subsidiary companies at the exercise price of INR 36.90 each which is NSE closing market price on August 16, 2017 (i.e. previous trading day of the grant date). The entire granted stock options shall vest and will be exercisable 30% on the first anniversary, 30% on the second anniversary and 40% on the third anniversary of the grant date till completion of five years since then.
Note 15.1: The Company has entered into various short-term cancellable lease agreements at a notice period up to three months for leased premises. Gross rental expenses aggregate to INR 182.00 lacs (March 31, 2017: INR 209.75 lacs).
Note 16 : EARNINGS PER SHARE (EPS)
Both the basic and diluted earnings per share have been calculated using the loss attributable to shareholders of the Company as the numerator, i.e. no adjustments to loss were necessary in year ended March 31, 2018 or March 31, 2017.
The reconciliation of the weighted average number of shares for the purposes of diluted earnings per share to the weighted average number of ordinary shares used in the calculation of basic earnings per share is as follows:
Note 17: Information about interest in subsidiaries and joint venture
a) Interest in subsidiaries
The Companyâs interest and share in subsidiaries including step down subsidiaries.
*With respect to A2Z Green Waste Management Limited (âAGWMLâ), although the Company owns less than one-half of the voting power, it is able to control the company by virtue of an agreement with another investor of A2Z Green Waste Management Limited i.e. Devdhar Trading and Consultants Private Limited (âDevdharâ), which provides that Devdhar shall continue to support the Company to have the control over the management of AGWML and shall continue to follow the instructions given by the Company in this regard. Accordingly, the Company, together with Devdhar controls AGWML.
A During the year ended March 31, 2018, the Company has sold the entire shareholding in its subsidiary i.e. Star Transformers Limited. Consequently Star Transformers Limited ceases to be a subsidiary of the Company.
** The Company directly holds 48% (March 31, 2017: 48%) of the share capital and 26% (March 31, 2017: 26%) indirectly through its subsidiary, A2Z Green Waste Management Limited.
*** A2Z Infraservices Limited is initial shareholder by virtue of shares subscription arrangement with A2Z Infraservices Lanka Limited and has committed to make investment in the company.
# The Company directly holds 20% (March 31, 2017: 20%) of the share capital and 80% (March 31, 2017: 80%) indirectly through its subsidiary, A2Z Green Waste Management Limited.
b) Interest in joint ventures
The Companyâs interest and share in joint ventures in the jointly controlled operations as at March 31, 2018 are as follows:
Note 17(b).1: As per joint venture agreements, the scope and value of work of each partner has been clearly defined and accepted by the clients. The Companyâs share in assets, liabilities, income and expenses are duly accounted for in the accounts of the Company in accordance with such division of work and therefore does not require separate disclosure. However, joint venture partners are jointly and severally liable to clients for any claims in these projects.
Note 17(b).2: The Company holds 60% interest in an Association of Person (AOP), formed between A2Z Infra Engineering Limited and Satya Builders, a jointly controlled entity which is involved in waste water projects at Alwar and Chittorgarh, Rajasthan.
Note 18 : RELATED PARTY DISCLOSURES
Disclosure of related parties/related party transactions pursuant to Ind AS 24 â Related Party Disclosuresâ.
A Name of the related parties and nature of the related party relationship:
1 Subsidiary companies
a) A2Z Infraservices Limited
b) A2Z Green Waste Management Limited
c) A2Z Powertech Limited
d) A2Z Powercom Limited
e) Selligence Technologies Services Private Limited
f) Mansi Bijlee & Rice Mills Limited
g) Star Transformers Limited (till June 20, 2017)
h) Chavan Rishi International Limited
i) Magic Genie Services Limited
j) A2Z Waste Management (Nainital) Private Limited
k) A2Z Maintenance & Engineering Services Limited and Satya Builders (Association of person)
2 Subsidiaries of A2Z Green Waste Management Limited. (formerly known as A2Z Infrastructure Limited):
a) A2Z Waste Management (Merrut) Limited
b) A2Z Waste Management (Moradabad) Limited
c) A2Z Waste Management (Varanasi) Limited
d) A2Z Waste Management (Aligarh) Limited
e) A2Z Waste Management (Badaun) Limited
f) A2Z Waste Management (Balia) Limited
g) A2Z Waste Management (Fatehpur) Limited
h) A2Z Waste Management (Jaunpur) Limited
i) A2Z Waste Management (Mirzapur) Limited j) A2Z Waste Management (Ranchi) Limited k) A2Z Waste Management (Sambhal) Limited
l) Green Waste Management Private Limited (formerly A2Z Waste Management (Haridwar) Private Limited) (Strike off w.e.f. September 23, 2016)
m) A2Z Waste Management (Dhanbad) Private Limited
n) A2Z Waste Management (Ludhiana) Limited
o) A2Z Waste Management (Jaipur) Limited
p) A2Z Mayo SNT Waste Management (Nanded) Private Limited
q) A2Z Waste Management (Ahmedabad) Limited
r) Earth Environment Management Services Private Limited
s) Shree Balaji Pottery Private Limited
t) Shree Hari Om Utensils Private Limited
3 Subsidiaries of A2Z Waste Management (Ludhiana) Limited
a) Ecogreen Envirotech Solutions Limited (formerly known as A2Z Waste Management (Loni) Limited) (till March 31, 2017)
b) Magic Genie Smartech Solutions Limited (w.e.f. December 18, 2017)
4 Subsidiaries of A2Z Infraservices Limited
a) Ecogreen Envirotech Solutions Limited (formerly known as A2Z Waste Management (Loni) Limited) (w.e.f. April 1, 2017)
b) A2Z Infraservices Lanka Private Limited
5 Subsidiary of Magic Genie Services Limited
a) Magic Genie Smartech Solutions Limited (Incorporated on June 24, 2016) (till December 17, 2017)
6 Joint Venture (unincorporated)
a) M/s UB Engineering Limited
b) M/s SPIC - SMO Limited
c) M/s Cobra Instalaciones Y Servicios, S.A
d) M/s Karamtara Engineering Private Limited
e) M/s Richardson & Cruddas (1972) Limited
f) M/s Linkwell Telesystems Private Limited
g) M/s Shyama Power (India) Private Limited
h) M/s Sudhir Power Projects Limited
7 Key Management Personnel (âKMPâ)
a) Mr. Amit Mittal (Managing director)
b) Mrs. Dipali Mittal (Whole time director till August 14, 2017 and Non-executive Director w.e.f. August 15, 2017)
c) Mr. Surender Kumar Tuteja (Non- executive independent director)
d) Mr. Suresh Prasad Yadav (Non- executive independent director)
e) Dr. Ashok Kumar (Non- executive independent director)
f) Mr. Rajesh Jain (Chief Executive Officer and Whole time director)
g) Dr. Ashok Kumar Saini (Whole Time Director)
h) Mr. Lalit Mohan Gulati (Chief Financial Officer) (till September 10, 2016)
i) Mr. Atul Kumar Agarwal (Company Secretary)
j) Dr. G.R. Nagendran (Chief Financial Officer) (w.e.f. September 11, 2016)
k) Mr. Gaurav Jain (Non- executive independent director till September 01, 2017)
8 Relative of Key Management Personnel
a) Mrs. Sudha Mittal (Mother of Mr. Amit Mittal)
b) Mr. Rajendra Kumar Mittal (Father of Mr. Amit Mittal)
9 Enterprise in control of relatives of Key Management Personnel
a) Mestric Consultants Private Limited
b) JIT Logistics Private Limited
c) Devdhar Trading and Consultants Private Limited
d) Mapple Solcon Private Limited
Note 19.1: In the opinion of the management, the transactions reported herein are on armsâ length basis. Note 33.2: âDetails relating to persons referred to as key managerial personnel above:
Note 19.2: Due to unexpected change in the profitability of the Company during the financial year 2012-13 and 2013-14, the managerial remuneration paid to the Managing Director exceeded the limits in terms of the provision of Section 198, 309, 310 read with schedule XIII of the erstwhile Companies Act, 1956. Subsequent to the approval by shareholders in the 13th Annual General Meeting of the Company duly held on September 27, 2014, the Company had made an application for the approval from the Central Government for the waiver of excess remuneration so paid. During the previous year, the Central Government has rejected the Companyâs application for the waiver of the excess remuneration so paid amounting to INR 189.48 lacs which is being held in trust by the Managing Director. Out of the entire excess remuneration paid INR 64.55 lacs has been received/adjusted from the Managing Director and the balance outstanding as at March 31, 2018 is INR 124.93 lacs (March 31, 2017 127.43 lacs).
Note 20 : FAIR VALUE MEASUREMENT
(i) Fair value measurement of financial instruments
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:
Level 1: Quoted prices (unadjusted) in active markets for financial instruments.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data rely as little as possible on entity specific estimates.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
(iii) Fair value of instruments measured at amortised cost
The carrying values of financial instruments measured at amortised cost is considered to be a reasonable approximation of their fair values.
(iv) Valuation process and technique used to determine fair value
The fair value of derivative liability is estimated using Black Scholes technique. The significant unobservable inputs used in the fair value measurements are as shown below:-
Note 21 : FINANCIAL RISK MANAGEMENT
(i) Financial instruments by category
For amortised cost instruments, carrying value represents the best estimate of fair value.
(ii) Risk management
The Companyâs activities expose it to market risk, liquidity risk and credit risk. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the related impact in the financial statements.
The Companyâs risk management is carried out by a central treasury department (of the company) under policies approved by the board of directors. The board of directors provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity.
A. Credit risk
Credit risk is the risk that a counterparty fails to discharge an obligation to the Company. The. Credit risk arises from cash and cash equivalents, trade receivables, investments carried at amortised cost and deposits with banks and financial institutions. The Companyâs maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date.
The Company continuously monitors defaults of customers and other counterparties, identified either individually or by the Company, and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Companyâs policy is to deal only with creditworthy counterparties.
The Companyâs receivables comprises of trade receivables. During the periods presented, the Company made no write-offs of trade receivables and it does not expect to receive future cash flows or recoveries from collection of cash flows previously written off. The Company has certain trade receivables that have not been settled by the contractual due date, as given below:
In respect of trade and other receivables, the Company is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. Trade receivables consist of a large number of customers in various industries and geographical areas. Based on historical information about customer default rates management consider the credit quality of trade receivables that are not past due or impaired to be good. The Company recognizes lifetime expected credit losses on trade receivables using a simplified approach and uses historical information to arrive at loss percentage relevant to each category of trade receivables. The Company follows a single loss rate approach and estimates expected credit loss on trade receivables to be 3%. Further, specific provision is made for any individual debtors which are considered to be doubtful and non-recoverable in part or in full. The reconciliation of expected credit losses on trade receivables is given below.
The credit risk for other financial assets is considered negligible, since the counterparties are reputable organisations with high quality external credit ratings. However, specific provision is made in case a particular receivable is considered to be non-recoverable.
B. Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the nature of the business, the Company maintains flexibility in funding by maintaining availability under committed facilities.
Management monitors rolling forecasts of the Companyâs liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company takes into account the liquidity of the market in which the entity operates. In addition, the Companyâs liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.
Maturities of financial liabilities
The tables below analyse the companyâs financial liabilities into relevant maturity groupings based on their contractual maturities for all non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
C. Market risk
(a) Interest rate risk
(i) Liabilities
The Companyâs policy is to minimise interest rate cash flow risk exposures on long-term financing. As at March 31, 2018, the Company is exposed to changes in market interest rates through bank borrowings at variable interest rates. The Companyâs investments in fixed deposits all pay fixed interest rates.
(b) Foreign exchange risk
The Company is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the US Dollar, Ugandan Shillings and Zambian Kwacha. Foreign exchange risk arises from recognised assets and liabilities denominated in a currency that is not the Companyâs functional currency.
Unhedged foreign currency exposure
The Companyâs exposure to foreign currency risk at the end of the reporting period expressed are as follows:
Note 22 : CAPITAL MANAGEMENT POLICIES AND PROCEDURES
For the purpose of the Companyâs capital management, capital includes issued equity share capital, security premium and all other equity reserves attributable to the equity holders of the Company.
The Companyâ s capital management objectives are:
- to ensure the Companyâs ability to continue as a going concern
- to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents, excluding discontinued operations.
In order to achieve this overall objective, the Companyâs capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements.
No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2018.
Note 23: SEGMENT REPORTING
Segmental information Business segments:
The Company has reported segment information as per Indian Accounting Standard 108 âOperating Segmentsâ (Ind AS 108). The Company is operating into following segments.:
(i) Engineering service (ES)
(ii) Power generation projects (âPGPâ)
(iii) Others represents trading of goods, renting of equipmentâs and providing housekeeping services
Unallocated operating income and expense mainly consist of post-employment benefits expenses. The unallocable assets includes tax receivable from Government authorities.
Finance income and costs, and fair value gains and losses on financial assets are not allocated to individual segments as the underlying instruments are managed on a company basis.
The revenue from a customer (having more than 10% of total revenue) during the year is INR 14,143.68 lacs (March 31, 2017 INR 48,014.85 lacs) arising from revenue from engineering services.
Note 24 : DISCLOSURE PURSUANT TO IND AS -11 âCONSTRCUTION CONTRACTSâ
Revenue of INR 31,298.53 lacs (March 31, 2017 INR 56,699.58 lacs) relating to construction contracts has been included in revenue for the current reporting period. The amounts recognised in the balance sheet r
Mar 31, 2016
Note 1.: The Company has only one class of equity shares having a par value of Rs 10 per share. Each shareholder is eligible for one vote per share held. The Company declares and pays dividend in Indian rupees. The dividend proposed by the board of directors is subject to the approval of the shareholders in the ensuing annual general meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
Note 2.: No shares have been allotted as fully paid up pursuant to contracts without payment being received in cash or as bonus shares for the period of 5 years immediately preceding March 31, 2016.
Note 3.: During the year, the Company has allotted 24,695,780 warrants convertible into equal number of equity shares of Rs. 10 each (exercisable in one or more tranches) at the option of the holder thereof at any time within 18 (eighteen) months after the allotment at an issue price of Rs. 21.66 each on preferential basis to persons other than the Promoters and Promoter group. In this regard, the Company had received Rs. 133,727,646 in September, 2015 being 25% of the subscription amount as per the SEBI (ICDR) Regulations, 2009. The said warrants are to be converted into equity shares on the exercise of the conversion rights by the allottees at the time of payment of remaining 75% subscription amount.
Further, the Company has received the remaining 75% of the subscription amount for 8,250,786 warrants amounting Rs 134,034,019 and have allotted 8,250,786 equity shares against these warrants.
Note 4.: During the year, The Company has allotted 8,100,000 equity shares on preferential basis to one of the banks as per SEBI (ICDR) Regulations, 2009 as amended from time to time, on the conversion of Funded Interest Term Loan (FITL) as per the Master Restructuring Agreement with the banks under the Corporate Debt Restructuring Scheme (CDR Scheme) in terms of approval granted by the shareholders of the Company by the way of postal ballot.
Note 5.: During the year, the Company has allotted 1,825,500 equity shares of face value of Rs. 10 each to the eligible employees of the Company who have exercised their stock options under the a2z Employee Stock Option Plan 2013 (Tranche I and Tranche
II). These shares are pari-passu with the existing equity shares of the Company, in all respects.
Note 6.: The Company has following stock option plans:
(a) A2Z Stock Option Plan 2010 (âthe planâ)
During the year ended March 31, 2010, the Company had formulated Employee Stock Option Scheme referred as ''A2Z Stock Option Plan 2010 (''the plan'')'' for all eligible employees/ directors of the Company except an employee who is promoter or belongs to the promoter group of the Company and its subsidiaries in pursuance of the special resolution duly approved by the shareholders on March 30, 2010.
The plan shall be administered and supervised by the Nomination & Remuneration Committee under the powers delegated by Board. Each option shall entitle the option grantee to apply for and be transferred Equity Shares of the Company. On or from the time of the listing of the Equity Shares of the Company, the maximum number of options that can be granted to any employee in any year under the A2Z ESOP shall be less than 5% of the issued share capital of the Company (excluding any outstanding warrants or other securities convertible into Equity Shares) at the time of grant of options, subject to the overall ceiling of 2,865,056 options in the aggregate.
The members of the Company vide special resolution at the Annual General Meeting held on September 28, 2013 had approved the A2Z Employees Stock Option Plan, 2013. The ESOP Compensation Committee in its meeting held on February 3, 2014 has granted 1,695,000 stock options convertible into equivalent number of equity shares of Rs 10 each to the eligible employees / directors of the Company and its subsidiary companies at the exercise price of Rs 10.35 each which is NSE closing market price on January 31, 2014 (i.e. previous trading day of the grant date). The entire granted stock options shall vest and will be exercisable on the first anniversary of the grant date till completion of five years since then;
The members of the Company vide special resolution at the Annual General Meeting held on September 28, 2013 had approved the A2Z Employees Stock Option Plan, 2013. The ESOP Compensation Committee in its meeting held on July 3, 2014 has granted 1,905,000 stock options convertible into equivalent number of equity shares of Rs 10 each to the eligible employees / directors of the Company and its subsidiary companies at the exercise price of Rs 19.95 each which is NSE closing market price on July 02, 2014 (i.e previous trading day of the grant date). The entire granted stock options shall vest and will be exercisable 30% on the first anniversary, 30% on the second anniversary & 40% on the third anniversary of the grant date till completion of four years since then;
The members of the Company vide special resolution at the Annual General Meeting held on September 27, 2014 had approved the A2Z Employees Stock Option Plan, 2014. The ESOP Compensation Committee in its meeting held on July 6, 2015 has granted 45,00,000 stock options convertible into equivalent number of equity shares of Rs 10 each to the eligible employees / directors of the Company and its subsidiary companies at the exercise price of Rs 15.50 each which is NSE closing market price on July 03, 2015 (i.e. previous trading day of the grant date). The entire granted stock options shall vest and will be exercisable 30% on the first anniversary, 30% on the second anniversary & 40% on the third anniversary of the grant date till completion of five years since then;
(e) Since the enterprise uses the intrinsic value method, the impact on the reported net profit and earnings per share by applying the fair value based method has been disclosed below:
In March 2005, the ICAI has issued a guidance note on âAccounting for Employees Share Based Paymentsâ applicable to employee based share plan, the grant date in respect of which falls on or after April 1, 2005. The said guidance note requires the proforma disclosures of the impact of the fair value method of accounting of employee stock compensation accounting in the financial statements. Applying the fair value based method defined in the said guidance note, the impact on the reported net profit and earnings per share would be as follows:
Details of terms of repayment for the long-term borrowings and security provided in respect of the secured long-term borrowings:
Note 7.: Term loans from banks:
1) Term loan from bank amounting to Rs 858,000,000 (Previous year - Rs 880,000,000) having an interest rate of 10.15% -10.75% per annum as per CDR Scheme is repayable in 32 quarterly installments, first installment was due in March 2015.
The above loan is secured against (i) First pari passu charge on both present and future current assets as well as fixed assets of the biomass based power projects situated at Fazilka, Nakodar and Morinda in the state of Punjab. (ii) Second pari-passu charge on fixed assets and current assets on EPC business.
2) Term loan from bank amounting to Rs 923,378,781 (Previous year - Rs 1,038,511,491) having an interest rate from 12.75% -13.25% per annum during the year is repayable in 24 quarterly installments, first installment was due in June 2015.
The above loan is secured against:
(a) First charge on pari - passu basis: (i) by way of hypothecation of all current assets of the Company including but not limited to receivables and inventory, relating to the projects both present and future; (ii) on all intangible assets including but not limited to goodwill pertaining to the projects (to the extent permissible by the Punjab state Co-operative sugar mills).
(b) First charge (i) on all the insurance contracts with respect to the projects together with any receivables there under; (ii) on all the accounts (including but not limited to the project accounts) with respect to the projects
(c) An assignment of: (i) all rights and interest by way of first charge on pari passu basis on the book debts, operating cash flows, receivables, commissions, revenues of whatsoever nature and wherever arising, relating to the projects, present and future; (ii) the rights and interest in the project site to the extent permissible by law; (iii) all its rights and obligations under the assignment orders and memorandum of understandings and; (iv) the rights and interest by way of first charge on pari passu basis into and under each of the project documents, and all the rights under each letter of credit/ guarantee or performance bond that may be posted by any party to a project document for the Company''s benefit and all the rights under the approvals in connection with the project (having value above Rs 100,000,000) to the extent permissible by law
(d) Personal guarantee of Mr. Amit Mittal (Managing Director).
3) Term loans from banks amounting to Rs 151,985,500 (Previous year - Rs 96,700,000) having interest rate of 10.15% - 10.75% per annum during the year are repayable in 28 quarterly installments, first installment is due in March 2016.
The above loan is secured against (i) First charge ranking pari passu on present and future fixed assets of the Power projects situated at Fazlika, Nakodar and Morinda in the state of Punjab. (ii) Second charge ranking pari passu on present and future current assets of the Power projects situated at Fazilka, Nakodar and Morinda in the state of Punjab. (iii) Second charge ranking pari passu on both present and future current assets, as well as fixed assets of Company other than assets exclusively financed to other lenders.
4) Term loans from banks amounting to Rs 139,779,185 (Previous year - Rs 13,100,000) having interest rate from 10.15% to 10.75% per annum during the year are repayable in 21 quarterly installments, first installment is due in March 2016.
The above loan is secured against (i) First charge ranking pari passu on both present and future current assets as well as fixed assets of the Company other than assets exclusively charged to other lenders. (ii) Second charge ranking pari passu on both present and future current assets of the power projects situated at Fazilka, Nakodar and Morinda in the state of Punjab.
5) Term loans from banks amounting to Rs 160,000,000 (Previous year - Rs Nil) having interest rate from 12.75%- 13.25% per annum during the year are repayable in 28 quarterly installments, first installment is due in March 2016.The above loan is secured against (i) First pari passu charge on present and future fixed assets of the Power projects at Fazilka, Nakodar and Morinda. (ii) Second pari passu charge on present and future current assets of the Power projects at Fazilka, Nakodar and Morinda. (iii) Second pari passu charge on both present and future current assets as well as fixed assets of the company other than assets exclusively charged to other lenders. (iv) Personal Guarantee of Mr. Amit Mittal.
Note 8.: Term loans from financial institution:
1) The loan amounting to Rs 500,000,000 (Previous year - Rs 500,000,000) is secured by a first charge by way of hypothecation and escrow of the entire retention money receivables both present and future. The interest rate is 15% per annum and the loan was repayable in April 2015.
2) The loans amounting to Rs Nil (Previous year - Rs 14,309,636) is secured against hypothecation of equipments acquired out of loan. The interest rate is 11.50% to 13.00% per annum and the loans are repayable in 12 quarterly and 48 monthly installments.
Note 9. (a) : Working Capital Term Loan:
Working capital term loans from bank amounting to Rs 478,466,414 (Previous year - Rs 582,103,818) having an interest rate of 10.15% - 10.75% per annum as per CDR Scheme are repayable in 29 quarterly installments. First installment was due in March 2015.The above loan is secured against (i) First pari passu charge on both present and future fixed assets as well as current assets of the Company or Borrower other than assets exclusively charged to other lenders. (ii) Second pari passu charge on both present and future current assets as well as fixed assets of the Power projects situated at Fazlika, Nakodar and Morinda in the state of Punjab.
Note 10. (b) (i) : Funded Interest Term Loan -1 (EPC):
Funded interest team loans from bank amounting to Rs 895,899,320 (Previous year - Rs 989,769,512) having an interest rate of 10.15% - 10.75% per annum as per CDR Scheme are repayable in 25 quarterly installments. First installment was due in March 2015. The above loan is secured against (i) First charge by way of mortgage ranking pari passu on both present and future fixed assets as well as current assets of the Company other than assets exclusively charged to other lenders. (ii) Second charge ranking pari passu on both present and future current assets as well as fixed assets of the Power projects situated at Fazlika, Nakodar and Morinda in the state of Punjab.
Note 11. (b) (ii) : Funded Interest Term Loan -2 (EPC):
Funded interest team loans from bank amounting to Rs 31,123,606 (Previous year - Rs Nil) having an interest rate of 10.15% -10.75% per annum as per CDR Scheme are repayable in single installment, which will due in March 2021.
The above loan is secured against (i) First charge pari passu on both present and future current asset as well as fixed assets of the EPC business other than assets exclusively charged to lenders. (ii) Second charge pari passu on both current assets and fixed assets of the 3 biomass power plant projects situated at Fazlika, Nakodar and Morinda in the state of Punjab. (iii) Second charge pari passu on land property first charged to DBS and SCB given for term loan.
Note 12.: Working capital loans from banks and other secured loans
a) The working capital loans and cash credit facilities from banks are secured against whole of the assets (both current as well as fixed) of the Company, namely stock of raw material, stock in process, semi-finished and finished goods, stores and spares (consumable stores and spares), bills receivables and book debts and all other movables and fixed assets (except fixed assets exclusively financed by other lenders) both present and future stored or to be stored at the Company''s godown, premises and division at O-116, first floor shopping mall, Arjun Marg, DLF city phase - I, Gurgaon or wherever else the same may be by way of first pari - passu charge amongst the consortium members. The charge is also additionally secured by first charge over following immovable properties i.e.
i) Plot No. G-1030 A having 1500 sq mtr. area situated at Industrial Area, Bhiwadi Phase-III, Bhiwadi, Rajasthan in the name of M/s. Balaji Pottery Private Limited;
ii) Plot No. G-1030 having 1500 sq mtr. area situated at Industrial Area, Bhiwadi Phase-III, Bhiwadi, Rajasthan in the name of M/s. Shree Hari Om Utensils Private Limited;
iii) Office space on 7th Floor of a B G 7 storied commercial building on east side of LA-VIDA Mall at CK-3,4, 48, 49 Salt Lake City, Sector-II, Kolkata
iv) Mortgage of following properties :
(i) Land measuring 17 Bigha-1 Biswa, situated at village Morinda, Tehsil Chamkur Sahib, District Roop Nagar, Punjab;
(ii) Land measuring about 5.309 Hectare situated at village Palsora, District Indore;
(iii) Village Mandela Chhota, Tehsil Fatehpur, District Seekar, Rajasthan admeasuring about 6.065 Hectare;
(iv) Land with Boundary wall, Gata No. 70, Vill Sherpur Madho urf Ghania Khera, Near India Brick Kiln, Pargana & Tehsil Bilari, District Moradabad admeasuring about 1.465 Hectare or 3.62 acre;
(v) Land with Boundary wall, at Gata No. 184, 188, 189, Vill Sherpur Madho urf Ghaniakhera, Near India Brick Kiln, Pargana & Tehsil Bilari, District Moradabad admeasuring about 2.391 Hectare or 5.91 acre.
Further secured by Corporate Guarantees of M/s. Shree Hariom Utensils Private Limited and M/s. Balaji Pottery Private Limited. The rate of interest vary from 10.15% per annum to 13.25% per annum and these loans are repayable on demand.
b) Second charge on pari-passu basis over all rights, titles, interest, benefits, claims and demands in respect of projects and insurance contracts and over all movable and immoveable properties, accounts, plant and machinery, all other tangible moveable assets both present and future, project book debts, operating cash flows, receivables, commissions, revenues of whatsoever nature in respect of project.
Note 13.: The management has performed impairment assessment of three cogeneration power plants set up in collaboration with certain sugar mills on Built, Own, Operate and Transfer (BOOT) basis for a period of 15 years. As at March 31, 2016, such plants have a power generation capacity of 15 MW each. The assessment has been done on the basis of assumptions of useful life of assets, discounted cash flows with significant underlying assumptions, achievement of certain operating capacity and the ability of new technology to perform on a consistent basis.
Based on the assessment and advice from an independent legal counsel on the availability of concession period, excluding the available renewal period by exercising the option for renewal/extension of the concession period, the management, is confident, that there exists reasonable certainty that arrangement shall be extended for a term of 5 years. The management has filed an application with the sugar mills for the appointment of an arbitrator for the extension of the concession period. The management believes that the estimates of the useful lives are reasonable and no impairment exists in the carrying value of power generation plants.
Note 14.: The management has committed to provide continued operational and financial support to its subsidiary companies for meeting their working capital and other financing requirements and based upon approved future projections of the subsidiaries, believes that the diminution (if any) is temporary in nature and accordingly, no further provision is considered necessary in respect of carrying value of investments.
Note 15.: During the year ended March 31, 2016, the Company has sold the investments in two wholly owned subsidiaries i.e. A2Z Singapore Waste Management Holdings Private Limited and A2Z Maintenance & Engineering Services (Uganda) Private Limited.
Note 16.: During the year ended March 31, 2016, one of the lenders of A2Z Green Waste Management Limited (formerly A2Z Infrastructure Limited and hereinafter referred to as AGWML), IL&FS Financial Service Limited (âIFINâ) has invoked pledge on 45,75,015 equity shares of AGWML constituting 20.11% of the paid up equity share capital of AGWML and have adjusted/appropriated an amount of Rs. 94,014,913/- (Rupees Nine Crore Forty Lacs Fourteen Thousand Nine Hundred and Thirteen only) towards interest payable from A2Z Green Waste Management Limited (Formerly A2z Infrastructure Limited) for the period from 1 April, 2015 to 30th September, 2015 & small portion of Interest for the next quarter ended 31 December, 2015.
Note 17: The Company doesn''t have any quoted investments.
Note 18: Defined Benefit Plans
The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance Company in the form of a qualifying insurance policy. The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for the respective plans.
Note 19.: The Company has a process whereby periodically long term contracts are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under the law/accounting standards for the material foreseeable losses on such long term contracts has been made in the books of accounts. The Company does not have any derivative contracts at the end of the year.
Note 20.: As the future liability for gratuity is provided on an actuarial basis for the Company as a whole, the amount pertaining to the directors are not included above.
Note 21.: Due to unexpected change in the profitability of the Company during the financial year 2012-13 and 2013-14, the managerial remuneration paid to the Managing Director exceeded the limits in terms of the provision of Section 198, 309, 310 read with schedule XIII of the erstwhile Companies Act, 1956. Subsequent to the approval by shareholders in the 13th Annual General Meeting of the Company duly held on September 27, 2014, the Company had made an application for the approval from the Central Government for the waiver of excess remuneration so paid. During the year, the Central Government has rejected the Company''s application for the waiver of the excess remuneration so paid amounting to Rs. 18,948,240 which is being held in trust by the Managing Director. Out of the entire excess remuneration paid Rs. 1,000,000 has been received from the Managing Director during the year and the balance outstanding as at March 31, 2016 is Rs 17,948,240.
Note 22.
The following are the details of loans and advances in the nature of loans given to subsidiaries and associates and firms / Companies in which directors are interested and are outstanding at the end of the year in terms of Securities and Exchange Board of India''s circular dated January 10, 2003
Note 23.(a).1:
As per joint venture agreements, the scope and value of work of each partner has been clearly defined and accepted by the clients. The Company''s share in assets, liabilities, income and expenses are duly accounted for in the accounts of the Company in accordance with such division of work and therefore does not require separate disclosure. However, joint venture partners are jointly and severally liable to clients for any claims in these projects.
Note 24.(b):
The Company holds 60% interest in an Association of Person (AOP), formed between A2Z Infra Engineering Limited (formerly known as A2Z Maintenance & Engineering Services Limited) and Satya Builders, a jointly controlled entity which is involved in waste water projects at Alwar and Chittorgarh, Rajasthan.
Note 25.: RELATED PARTY
Names of related parties Subsidiary Companies
a) A2Z Infraservices Limited
b) A2Z Green Waste Management Limited (formerly known as A2Z Infrastructure Limited)
c) A2Z Powertech Limited
d) A2Z Powercom Limited
e) Selligence Technologies Services Private Limited
f) Mansi Bijlee & Rice Mills Limited
g) Star Transformers Limited
h) Chavan Rishi International Limited
i) A2Z Maintenance & Engineering Services (Uganda) Private Limited (till March 30, 2016) j) Magic Genie Services Limited (formerly known as A2Z Water Solutions Limited)
k) A2Z Singapore Waste Management Holdings Private Limited (till March 17, 2016)
l) A2Z Waste Management (Nainital) Private Limited
m) A2Z Maintenance & Engineering Services Limited and Satya Builders (Association of person)
Subsidiaries of A2Z Green Waste Management Limited (formerly known as A2Z Infrastructure Limited):
a) A2Z Waste Management (Meerut) Limited
b) A2Z Waste Management (Moradabad) Limited
c) A2Z Waste Management (Varanasi) Limited
d) A2Z Waste Management (Aligarh) Limited
e) A2Z Waste Management (Badaun) Limited
f) A2Z Waste Management (Balia) Limited
g) A2Z Waste Management (Fatehpur) Limited
h) A2Z Waste Management (Jaunpur) Limited
i) A2Z Waste Management (Loni) Limited
j) A2Z Waste Management (Mirzapur) Limited
k) A2Z Waste Management (Ranchi) Limited
l) A2Z Waste Management (Sambhal) Limited
m) Green Waste Management Private Limited (formerly A2Z Waste Management (Haridwar) Private Limited)
n) A2Z Waste Management (Dhanbad) Private Limited
o) A2Z Waste Management (Ludhiana) Limited
p) A2Z Waste Management (Jaipur) Limited
q) A2Z Mayo SNT Waste Management (Nanded) Private Limited
r) A2Z Waste Management (Ahmedabad) Limited
s) Earth Enviornment Management Services Private Limited
t) Shree Balaji Pottery Private Limited
u) Shree Hari Om Utensils Private Limited
Joint Venture (unincorporated)
a) UB Engineering Limited
b) SPIC - SMO Limited
c) Cobra Instalaciones Y Servicios, S.A
d) Karamtara Engineering Private Limited
e) Richardson & Cruddas (1972) Limited
Key Management Personnel (âKMPâ)
a) Mr. Amit Mittal (Managing director)
b) Mrs. Dipali Mittal (Whole time director)
c) Mr. Rajesh Jain (CEO and Whole time director)
d) Dr. Ashok Kumar Saini (with effect from February 15, 2015)
Relative of Key Management Personnel
a) Mrs. Sudha Mittal (Mother of Mr. Amit Mittal)
Enterprise in control of relatives of Key Management Personnel
a) Mestric Consultants Private Limited
Mar 31, 2015
*Based on discussions with the solicitors / favorable decisions in
similar cases/legal opinions taken by the Company, the
management believes that the Company has a good chance of success in
above-mentioned cases and hence, no provision is considered necessary.
**The Income tax authorities conducted a search and survey at certain
premises of the Company under section 132 and 133 of the Income Tax
Act, 1961 in April 2012. During year ended March 31, 2015, the Company
received the Assessment Orders for the assessment years 2007-08 to
2013-14 from the Deputy Commissioner of Income Tax (DCIT). The Company
has filed Appeals with Commissioner of Income Tax (CIT) (Appeals)
challenging the Orders for last five assessment years.
Based on their assessment and upon consideration of advice from the
independent legal counsel, the management believes that the Company has
reasonable chances of succeeding before the CIT (Appeals) and does not
foresee any material liability.
Pending the final decision on the matter, no adjustment has been made
in the financial statements.
Note 34.1: The Company has a process whereby periodically long term
contracts are assessed for material foreseeable losses. At the year
end, the Company has reviewed and ensured that adequate provision as
required under the law/accounting standards for the material
foreseeable losses on such long term contracts has been made in the
books of accounts. The Company does not have any derivative contracts
at the end of the year.
Note 1: As the future liability for gratuity is provided on an
actuarial basis for the Company as a whole, the amount pertaining to
the directors are not included above.
Note 2: Due to unexpected change in the profitability of the Company
during the financial year 2012-13 and 2013-14, the managerial
remuneration being paid to the Managing Director exceeded the limits in
terms of the provision of Section 198, 309, 310 read with schedule XIII
of the erstwhile Companies Act, 1956. The shareholders in the 13th
Annual General Meeting of the Company duly held on September 27, 2014,
had approved the waiver of excess remuneration so paid during the
period from April 1, 2012 to November 30, 2013 and the Company has made
an application for the approval from the Central Government for the
waiver of excess during the staid period. Pending approval from Central
Government, the excess remuneration so paid is being held in trust by
the Managing Director.
Note 3
The following are the details of loans and advances in the nature of
loans given to subsidiaries and associates and firms / Companies in
which directors are interested and are outstanding at the end of the
year in terms of Securities and Exchange Board of India's circular
dated January 10, 2003
Note 4
As per joint venture agreements, the scope and value of work of each
partner has been clearly defined and accepted by the clients. The
Company's share in assets, liabilities, income and expenses are duly
accounted for in the accounts of the Company in accordance with such
division of work and therefore does not require separate disclosure.
However, joint venture partners are jointly and severally liable to
clients for any claims in these projects.
Note 5
The Company holds 60% interest in an Association of Person (AOP),
formed between A2Z Infra Engineering Limited and Satya Builders, a
jointly controlled entity which is involved in waste water projects at
Alwar and Chittorgarh, Rajasthan.
Note 6
Trade receivable, trade payables, advance to suppliers and advances
from customers are subject to confirmation / reconciliation as at year
end or any time during the year. As explained, the Company follows a
process of informal confirmation with its customers / suppliers and
based on such informal confirmations/ discussions, believes that amount
recoverable appearing as outstanding at year end are good of recovery,
while the amounts payable are due. The management believes that no
material adjustments are likely on formal confirmation / reconciliation
of these balances.
Note 7
Pursuant to the approval of Corporate Debt Restructuring scheme (CDR)
during the financial year ended 31st March 2014, the Company has
complied with majority of the conditions precedent and is in advanced
stages of complying with the remaining conditions. From the "cut- off
date" the interest on the restructured debts has been recomputed and
provided at the effective interest rates as per the CDR Scheme.
Interest reversal of Rs. 45,363,039 (Previous year - Rs 18,440,166)
pertaining to period from cut-off dates to March 31, 2014 have been
disclosed as an exceptional item during the year.
Note 8
Previous year figures have also been regrouped / reclassified wherever
considered necessary.
Mar 31, 2014
Note 1 : NATURE OF OPERATIONS
A2Z Maintenance & Engineering Services Limited (''A2Z or the Company'')
was incorporated at National Capital Territory of Delhi and Haryana on
January 7, 2002 for providing maintenance and engineering services. The
Company commenced its business with the facility management services
and entered into engineering business during the year 2005-06.
The Company''s engineering business segment primarily includes supply,
erection and maintenance of electrical transmission lines and allied
services to power distribution companies. The Company has also entered
into collaboration with sugar mills for setting up 3 Cogeneration
(Cogen) power plants on Built, Own, Operate and Transfer (BOOT) basis
for a period of 15 years.
Note 2: There is no movement in the number of equity shares and the
amount outstanding during the current or previous year.
Note 3. : The Company has only one class of equity shares having a par
value of Rs. 10 per share. Each shareholder is eligible for one vote
per share held. The Company declares and pays dividend in indian
rupees. The dividend proposed by the board of directors is subject to
the approval of the shareholders in the ensuing annual general meeting.
In the event of liquidation, the equity shareholders are eligible to
receive the remaining assets of the Company after distribution of all
preferential amounts, in proportion to their shareholding.
Note 4. : The Company has two stock option plans:
(a) A2Z Stock Option Plan 2010 (''the plan'')''
During the year ended March 31, 2010, the Company had formulated
Employee Stock Option Scheme referred as ''A2Z Stock Option Plan 2010
(''the plan'')'' for all eligible employees/ directors of the Company
except an employee who is promoter or belongs to the promoter group of
the Company and its subsidiaries in pursuance of the special resolution
duly approved by the shareholders on March 30, 2010.
The plan shall be administered and supervised by the
Remuneration-cum-Compensation Committee under the powers delegated by
Board. Each option shall entitle the option grantee to apply for and be
transferred Equity Shares of the Company. On or from the time of the
listing of the Equity Shares of the Company, the maximum number of
options that can be granted to any employee in any year under the A2Z
ESOP shall be less than 5% of the issued share capital of the Company
(excluding any outstanding warrants or other securities convertible
into Equity Shares) at the time of grant of options, subject to the
overall ceiling of 2,865,056 options in the aggregate.
Details of terms of repayment for the long-term borrowings and security
provided in respect of the secured long-term borrowings:
Note 5: Term loans from banks:
1) Term loan from bank amounting to Rs. 880,000,000 (Previous year -
Rs. 880,000,000) having an interest rate of 10.75% as per CDR Scheme is
repayable in 33 quarterly installments first installment being due in
March 2015.
2) Term loan from bank amounting to Rs. 1,038,511,491 (Previous year -
Rs. 840,195,594) having an interest rate of 13% per annum during the
year is repayable in 24 quarterly installments first installment being
due in June 2015.
The above loans are secured against:
(a) First charge on pari - passu basis: (i) by way of hypothecation of
all current assets of the Company including but not limited to
receivables and inventory, relating to the projects both present and
future; (ii) on all intangible assets including but not limited to
goodwill pertaining to the projects (to the extent permissible by the
Punjab state Co-operative sugar mills).
(b) First charge (i) on all the insurance contracts with respect to the
projects together with any receivables thereunder; (ii) on all the
accounts (including but not limited to the project accounts) with
respect to the projects.
(c) An assignment of: (i) all rights and interest by way of first
charge on pari passu basis on the book debts, operating cash flows,
receivables, commissions, revenues of whatsoever nature and wherever
arising, relating to the projects, present and future; (ii) the rights
and interest in the project site to the extent permissible by law;
(iii) all its rights and abligations under the assignment orders and
memorandum of understandings and; (iv) the rights and interest by way
of first charge on pari passu basis into and under each of the project
documents, and all the rights under each letter of credit/ guarantee or
performance bond that may be posted by any party to a project document
for the Company''s benefit and all the rights under the approvals in
connection with the project (having value above Rs. 100,000,000) to the
extent permissible by law.
(d) Personal guarantee of Mr Amit Mittal (Managing Director).
Note 6. : Term loans from financial institution:
1) The loan amounting to Rs. 500,000,000 (Previous year - Rs.
500,000,000) is secured by a first charge by way of hypothecation and
escrow of the entire Retention money receivables both present and
future. The interest rate is 15% per annum and the loan is repayable
after 3 years.
2) The loans amounting to Rs. 15,217,157 (Previous year - Rs.
22,510,861) is secured against hypothecation of equipments acquired out
of loan. The interest rate is 11.50% to 12.66% per annum and the loans
are repayable in 12 quarterly and 48 monthly installments.
Note 7. : Working capital and funded interest term loans from banks
The Corporate debt restructuring (CDR) proposal to re-structure
existing debt obligations, including interest, additional funding and
other terms (hereafter referred to as "the CDR Scheme") of the Company,
having January 01, 2013 as the "cut-off date", was approved by the CDR
Cell vide its Letter of Approval (LOA) dated December 28, 2013 as
further modified dated February 03, 2014. Out of seventeen lenders,
twelve lenders (herein after termed as ''CDR lenders'') agreed to be part
of the CDR scheme. On the basis of Master Restructuring Agreement (MRA)
executed with the CDR lenders, the Company has accounted for impact of
the CDR scheme (reclassifications and interest calculations) in the
financial results for the year ended March 31, 2014 up to the extent
agreed with those CDR lenders.
a) From the "cut- off date" the interest on the restructured debts has
been recomputed and provided at the effective interest rates as per the
CDR Scheme.
b) The interest due on term loan from one of the bank w.e.f. January 1,
2013 till March 31, 2014 at revised rates amounting to Rs. 117,926,028
and has been converted into Funded Interest Term Loan (FITL).
c) Letter of Credits devolved has been restructured/ reconstituted for
an amount aggregating to Rs. 414,400,000 into Working Capital Term
Loan.
d) The interest on the restructured debts / fund based working capital
loans has been recomputed w.e.f. January 1, 2013 till March 31, 2014 at
revised rates amounting to Rs. 380,219,020 and has been converted into
Funded Interest Term Loan (FITL).
Note 8. : Other Loans (Vehicle loans) Vehicle loans amounting to
2,120,866 (Previous year - Rs. 12,392,150) is secured against
hypothecation of Vehicles. The loans are having interest rate of 8.25%
- 13.84% per annum and are repayable in 35 - 60 monthly installments.
Note 9. : (i) The Company has defaulted in repayment of interest in
respect of term loan from bank as on March 31, 2014 amounting to Rs.
11,466,305 for two months and Rs. 10,356,663 for one month. (ii) The
interest on term loan from financial institution aggregate to Rs.
72,510,626 falling due in each month is unpaid for the entire financial
year. Also, the Company has defaulted in repayment of principal amount
of term loan from financial institution amouting to Rs. 6,674,922 for
nine months and Rs. 6,874,963 for six months.
Note 10: Working capital loans from banks and other secured loans
a) The working capital loans and cash credit facilities from banks are
secured against whole of the assets (both current as well as fixed) of
the Company, namely stock of raw material, stock in process,
semi-finished and finished goods, stores and spares (consumable stores
and spares), bills receivables and book debts and all other movables
and fixed assets (except fixed assets exclusively financed by other
lenders) both present and future stored or to be stored at the
Company''s godown, premises and division at O-116, first floor shopping
mall, arjun marg, DLF city phase - I, Gurgaon or wherever else the same
may be by way of first pari - passu charge amongst the consortium
members. The charge is also additionally secured by first charge over
Company''s immovable properties i.e. part of Plot / House No 740-A,
Block- B, Scheme No 40, Panki, Kanpur Nagar admeasuring 7031.56 sq mts
with 74 constructed flats. The rate of interest vary from 9.50% per
annum to 16% per annum and these loans are repayable on demand.
b) Second charge on pari-passu basis bais over all rights, titles,
interest, benefits, claims and demands in respect of projects and
insurance contracts and over all movable and immoveable properties,
accounts, plant and machinery, all other tangible moveable assets both
present and future, project book debts, operating cash flows,
receivables, commissions, revenues of whatsoever nature in respect of
project.
c) Letter of Credits devolved has been restructured/ reconstituted for
an amount aggregating to Rs. 197,583,867 into Working Capital Term Loan
as per CDR Scheme.
Note 3.1: The Company has defaulted in repayment of interest in respect
of cash credit facility as on March 31, 2014 amounting to Rs.
13,251,541 for seven months and amounting to Rs. 3,269,056 for five
months. Also, the Company has defaulted in repayment of interest in
respect of working capital loan from banks as on March 31, 2014
amounting to Rs. 1,393,166 for fifteen months and amouting to Rs.
39,551,693 for eight months.
Note 11: During the year ended March 31, 2010, the Company had
entered into three business transfer agreement to purchase the entire
business of M/s Surender Chowdhury & Brothers, M/s Mohd. Rashid
Contractors and En-Tech Engineers and Contractors for a consideration
of Rs. 20,000,000, Rs. 2,000,000 and Rs. 3,000,000 respectively. The
difference between the carrying values of Investment and value of net
assets acquired amounting to Rs. 23,961,858 was carried as goodwill.
Note 12: The above capital work in progress represents expenditure
incurred on setting up 3 cogeneration power plants of 15 MW each on
Built, Own, Operate and Transfer (BOOT) basis with the respective
cooperative sugar mills for a period of fifteen years at Fazilka,
Morinda and Nakodar in Punjab.
Note 13: Borrowing cost capitalised during the year amounting to Rs.
164,435,769 (Previous year - Rs. 342,890,208).
Note 14: The management has committed to provide continued
operational and financial support to its subsidiary Companies for
meeting their working capital and other financing requirements and
based upon approved future projections of the subsidiaries, believes
that the diminution (if any) is temporary in nature and accordingly, no
provision is required to be created except as already created.
Note 15: During the year ended March 31, 2013, pursuant to the Share
Purchase Agreement along with addendums thereto executed by and between
the Company, Weensure Asset Recovery Private Limited (formerly Sardana
Recycling Private Limited) (the "buyer"), Weensure E Waste Limited
(formerly A2Z E Waste Management Limited) and Dataserv APAC Limited
(formerly A2Z Dataserv Limited), the Company decided to dispose off the
entire shareholding in the paid up Equity and Preference Share Capital
to the buyer in multiple tranches at a total consideration of Rs.
230,000,000.
During the year ended March 31, 2014, equity shares comprising 22.81%
of total paid up equity share capital of Weensure E Waste Limited have
been transferred to the buyer and as a consequence, the Company''s
holding has reduced to 22.81% from existing 45.63% (as on March 31,
2013) in the paid up Equity Share Capital of Weensure E Waste Limited.
Accordingly, the Company has recognized a profit of Rs. 52,272,359
(previous year - Rs. 101,655,590) and classified this as an exceptional
item as per the accepted accounting principles and practices.
Note 16: During the year, the Company has incurred a loss of Rs.
63,042,251 (Previous year - Rs. 29,171,477) due to theft of material at
various project sites against which the Company has filed an insurance
claim with the insurance company. The Company has received an amount of
Rs. 12,969,907 (Previous year - Rs. 23,477,102) as insurance claim from
the insurance company during the year out of the above mentioned claim
and from the insurance claim recoverable as on March 31, 2013 and
amount of Rs. 17,991,265 (Rs. 17,170,555) has been written off /
capitalised in the books. The balance of Rs. 60,654,927 (Previous Year
- Rs. 22,521,463) has been appearing as insurance claim recoverable in
the books. The management believes that it has made reasonable judgment
and no further adjustment is expected in the financial statements.
Note 17: Defined Benefit Plans
The Company has a defined benefit gratuity plan. Every employee who has
completed five years or more of service gets a gratuity on departure at
15 days salary (last drawn salary) for each completed year of service.
The scheme is funded with an insurance Company in the form of a
qualifying insurance policy. The following tables summaries the
components of net benefit expense recognised in the statement of profit
and loss and the funded status and amounts recognised in the balance
sheet for the respective plans.
Particulars As at As at
March 31, 2014 March 31, 2013
Note 18: CONTINGENT LIABILITIES AND
COMMITMENTS NOT PROVIDED FOR:
a) The details of contingent
liabilities are as follows:
Corporate guarantees given to banks
on account of facilities granted by
said banks to subsidiaries 6,326,300,000 6,394,300,000
Right to recompense (CDR Scheme)
(Refer note 45) 396,600,000 -
Liquidated damages deducted by
customers not accepted by the Company
and pending final settlement* - 14,073,312
Open letters of credit 13,699,793 108,073,376
Litigations under workmen
compensation act** 1,177,120 1,177,120
Litigations with contractors and
others** 4,169,760 4,259,760
Sales tax demand under dispute 395,101,190 71,892,925
Total 7,137,047,863 6,593,776,493
* excludes possible liquidated damages which can be levied by customers
for delay in execution of the projects. The management believes that
there exist strong reasons why no liquidated damages shall be levied by
these customers.
**Based on discussions with the solicitors / favourable decisions in
similar cases/legal opinions taken by the Company, the management
believes that the Company has a good chance of success in
above-mentioned cases and hence, no provision is considered necessary.
b) Commitments outstanding:
(i) Estimated amount of contracts to be executed and not provided for:
Particulars For the year ended For the year ended
March 31, 2014 March 31, 2013
Other commitments 1,272,100,000 2,338,932,000
Total 1,272,100,000 2,338,932,000
(ii) The management has committed to provide continued operational and
financial support to its subsidiary companies for meeting their working
capital and other financing requirements.
Note 11 The managerial remuneration of Managing Director as approved
by shareholders in earlier year, for the year ended March 31, 2013 and
March 31, 2014 was in excess of limits prescribed under the Companies
Act, 1956. The Company''s application for the approval from Central
Government for the waiver of excess remuneration so paid was not
approved pending the requisite details from the Company. The Company is
in the process of filing the revision application with requisite
information and pending approval from Central Government, the excess
remuneration so paid is being held in trust by the Managing Director.
Note 19:
As per joint venture agreements, the scope and value of work of each
partner has been clearly defined and accepted by the clients. The
Company''s share in assets, liabilities, income and expenses are duly
accounted for in the accounts of the Company in accordance with such
division of work and therefore does not require separate disclosure.
However, joint venture partners are jointly and severally liable to
clients for any claims in these projects.
Note 20 (a):
The Company holds 60% interest in an Association of Person (AOP),
formed between A2Z Maintenance & Engineering Services Limited and Satya
Builders, a jointly controlled entity which is involved in waste water
projects at Alwar and Chittorgarh, Rajasthan.
Note 21:
Trade receivable, trade payables, advance to suppliers and advances
from customers are subject to confirmation / reconciliation as at year
end or any time during the year. As explained, the Company follows a
process of informal confirmation with its customers / suppliers and
based on such informal confirmations/ discussions, believes that amount
recoverable appearing as outstanding at year end are good of recovery,
while the amounts payable are due. The management believes that no
material adjustments are likely on formal confirmation / reconciliation
of these balances.
Note 22:
The Income tax authorities conducted a search and survey at certain
premises of the Company under section 132 and 133 of the Income Tax
Act, 1961 during the previous year. Pending receipt of further
communication from the authorities, management is of the opinion that
the income tax provision carried in the books is adequate.
Note 23:
The Company has incurred a net loss of Rs. 1,949,631,502 during the
year ended March 31, 2014 and is presently facing liquidity problems on
account of delayed realisation of trade receivables coupled with delays
in commencement of commercial production at its biomass based power
generation plants. Management is evaluating various options and in
addition to consolidation of business by focusing on core operations
and disposing off the noncore assets, had also made reference to
Corporate Debt Restructuring Cell (''CDR Cell'') for restructuring of its
existing debt obligations, including interest and other related terms
and conditions (hereinafter referred to as the ''CDR scheme'').
Management believes that the approved CDR scheme (refer note 45 for
further details on the same) of the Company and the aspects like
inviting strategic investors, disposal of non-core assets would also
bring in the additional cash flows into the system, and hence no
adjustments are required in the financial statements and accordingly,
these have been prepared on a going concern basis.
Note 24:
The Corporate debt restructuring (CDR) proposal to re-structure
existing debt obligations, including interest, additional funding and
other terms (hereafter referred to as "the CDR Scheme") of the Company,
having January 01, 2013 as the "cut-off date", was approved by the CDR
Cell vide its Letter of Approval (LOA) dated December 28, 2013 as
further modified dated February 03, 2014. Out of seventeen lenders,
twelve lenders (herein after termed as ''CDR lenders'') agreed to be part
of the CDR scheme.
One of the non CDR lenders filed a civil suit in the Hon''ble High Court
of Delhi on the Company against creation of second charge on power
plants under the CDR scheme inter alia other matters. The Hon''ble High
Court vide its Order dated March 20, 2014 has permitted the signing of
MRA keeping the hearing in the suit adjourned to August 21, 2014. Upon
execution of the Master Restructuring Agreement (MRA) with ten CDR
lenders Company started the process of fulfilling the other conditions
precedent. Pursuant to the CDR Scheme, inter alia other conditions, the
promoters were required to bring in Promoter contribution out of which
substantial contribution has been brought in. On the basis of MRA
executed with the CDR lenders, the Company has accounted for impact of
the CDR scheme (reclassifications and interest calculations) in the
financial results for the year ended March 31, 2014 up to the extent
agreed with those CDR lenders. From the "cut- off date" the interest on
the restructured debts has been recomputed and provided at the
effective interest rates as per the CDR Scheme. Interest reversal of
Rs. 18,440,166 pertaining to period from cut-off dates to March 31,
2013 has been shown as an exceptional item during the year.
Reclassification and other adjustments as recorded above are subject to
reconciliation with the lender banks. Management is confident that all
the conditions precedents are in the process of being complied with and
are at advance stage.
Mar 31, 2013
Note 1 NATURE OF OPERATIONS
A2Z Maintenance & Engineering Services Limited (ÂA2Z or the CompanyÂ)
was incorporated at National Capital Territory of Delhi and Haryana on
January 7, 2002 for providing maintenance and engineering services. The
Company commenced its business with the facility management services
and entered into engineering business during the year 2005-06.
The CompanyÂs engineering business segment primarily includes supply,
erection and maintenance of electrical transmission lines and allied
services to power distribution companies. The Company has also entered
into collaboration with sugar mills for setting up 3 Cogeneration
(Cogen) power plants on Built, Own, Operate and Transfer (BOOT) basis
for a period of 15 years.
Note 2.1 During the year, the Company has incurred a loss of Rs
29,171,477 (Previous year  Rs 38,560,431) due to theft of material at
various project sites against which the Company has fled an insurance
claim with the insurance company. The Company has received an amount of
Rs 23,477,102 (Previous year - Rs 3,287,649) as insurance claim from
the insurance company during the year out of the above mentioned claim
and from the insurance claim recoverable as on March 31, 2012 and the
non-recoverable amount of Rs 17,170,555 (Rs 10,514,805) has been
written off / capitalised in the books. The balance of Rs 22,521,463
(Previous Year  Rs 24,757,977) has been appearing as insurance claim
recoverable in the books. The management believes that it has made
reasonable judgment and no further adjustment is expected in the
fnancial statements.
Note 3 CONTINGENT LIABILITIES AND COMMITMENTS NOT PROVIDED FOR:
a) The details of contingent liabilities are as follows:
Particulars As at As at
March 31, 2013 March 31, 2012
Corporate guarantees given to banks
on account of facilities 6,394,300,000 6,269,041,842
granted by said banks to subsidiaries
Liquidated damages deducted by
customers not accepted by the 14,073,31 14,073,312
Company and pending fnal settlement*
Open letters of credit 108,073,376 883,671,986
Litigations under workmen
compensation act** 1,177,120 1,177,120
Litigations with contractors and others** 4,259,760 4,240,128
Sales tax demand under dispute 71,892,925 71,892,925
Total 6,593,776,493 7,244,097,313
* Excludes possible liquidated damages which can be levied by customers
for delay in execution of the projects. The management believes that
there exist strong reasons why no liquidated damages shall be levied by
these customers.
** Based on discussions with the solicitors / favourable decisions in
similar cases/legal opinions taken by the Company, the management
believes that the Company has a good chance of success in
above-mentioned cases and hence, no provision is considered necessary.
Note 4 RELATED PARTY
Names of related parties Subsidiary Companies
A2Z Infraservices Limited*
A2Z Infrastructure Limited
A2Z Powertech Limited
A2Z Powercom Limited
Selligence Technologies Services Private Limited
Mansi Bijlee & Rice Mills Limited
Madhya Bijlee Private Limited
Mirage Bijlee Private limited
Star Transformers Limited
Chavan Rishi International Limited
A2Z Maintenance & Engineering Services (Uganda) Private Limited
A2Z E Waste Management Limited (Till March 24, 2013)
A2Z Water Solutions Limited
A2Z Singapore Waste Management Holdings Private Limited
A2Z Disaster Management and Innovative Response Education Private
Limited
Pioneer Waste Management Private Limited
A2Z Waste Management (Nainital) Private Limited
A2Z Maintenance & Engineering Services Limited and Satya Builders
(Association of person)
*Imatek Solutions Private Limited , CNCS Facility Solutions Private
Limited, A2Z Infra Management & Services Limited have been amalgamated
with A2Z Infraservices Limited effective from August 6, 2012 (Refer
note 15.2).
Subsidiaries of A2Z Infrastructure Limited:
a) A2Z Waste Management (Merrut) Limited
b) A2Z Waste Management (Moradabad) Limited
c) A2Z Waste Management (Varanasi) Limited
d) A2Z Waste Management (Aligarh) Limited
e) A2Z Waste Management (Badaun) Limited
f) A2Z Waste Management (Balia) Limited
g) A2Z Waste Management (Basti) Limited h) A2Z Waste Management
(Fatehpur) Limited i) A2Z Waste Management (Jaunpur) Limited j) A2Z
Waste Management (Loni) Limited k) A2Z Waste Management (Mirzapur)
Limited l) A2Z Waste Management (Ranchi) Limited m) A2Z Waste
Management (Sambhal) Limited n) A2Z Waste Management (Haridwar) Private
Limited o) A2Z Waste Management (Dhanbad) Private Limited p) A2Z Waste
Management (Ludhiana) Limited
q) A2Z Waste Management (Jaipur) Limited (with effect from July 10,
2012) r) A2Z Mayo SNT Waste Management (Nanded) Private Limited (with
effect from August 7, 2012) s) A2Z Waste Management (Ahmedabad) Limited
(with effect from October 15, 2012)
Subsidiary of A2Z Singapore Waste Management Holdings Private Limited:
a) A2Z Waste Management Private Limited
Subsidiary of A2Z E Waste Management Limited (Till March 24, 2013):
a) Dataserv APAC Limited (formerly A2Z Dataserv Limited)
Subsidiary of A2Z Waste Management (Moradabad) Limited:
a) Shree Balaji Pottery Private Limited (with effect from April 30,
2012)
Subsidiary of A2Z Waste Management (Varanasi) Limited:
a) Shree Hari Om Utensils Private Limited (with effect from April 30,
2012)
Joint Venture (unincorporated)
M/s UB Engineering Limited M/s SPIC-SMO Limited M/s Shyama Power
(India) Private Limited M/s Linkwell Telesystems Private Limited M/s
Cobra Instalaciones Y Servicios, S.A M/s Karamtara Engineering Pvt. Ltd
M/s Richardson & Cruddas (1972) Ltd. M/s Satya Builders
Individual having signifcant infuence
Mr. Rakesh Radheyshyam Jhunjhunwala
Key Management Personnel (ÂKMPÂ)
Mr. Amit Mittal (Managing director) Mrs. Dipali Mittal (Whole time
director)
Relative of Key Management Personnel
Mrs. Sudha Mittal (Mother of Mr. Amit Mittal)
Mr. Manoj Gupta (SisterÂs husband of Mrs. Dipali Mittal)
Note 4 SEGMENTAL INFORMATION
Business segments
The primary reporting of the Company has been performed on the basis of
business segment. Segments have been identifed and reported based on
the nature of the products, the risks and returns, the organization
structure and the internal fnancial reporting systems. The Company is
operating into following segments  (i) Engineering Service (ES), (ii)
Power generation projects (ÂPGPÂ) and (iii) Others represents trading
of goods, renting of equipments and providing housekeeping services.
Note 5 During the year ended March 31, 2010, the Company had
formulated Employee Stock Option Scheme referred as ÂA2Z Stock Option
Plan 2010 (Âthe planÂ)Â for all eligible employees/ directors of the
Company except an employee who is promoter or belongs to the promoter
group of the Company and its subsidiaries in pursuance of the special
resolution duly approved by the shareholders on March 30, 2010.
The plan shall be administered and supervised by the
Remuneration-cum-Compensation Committee under the powers delegated by
Board. Each option shall entitle the option grantee to apply for and be
transferred Equity Shares of the Company. On or from the time of the
listing of the Equity Shares of the Company, the maximum number of
options that can be granted to any employee in any year under the A2Z
ESOP shall be less than 5% of the issued share capital of the Company
(excluding any outstanding warrants or other securities convertible
into Equity Shares) at the time of grant of options, subject to the
overall ceiling of 2,865,056 options in the aggregate.
Note 6: Trade receivable, trade payables, advance to suppliers and
advances from customers are subject to confrmation / reconciliation as
at year end or any time during the year. As explained, the Company
follows a process of informal confrmation with its customers /
suppliers and based on such informal confrmations/ discussions,
believes that amount recoverable appearing as outstanding at year end
are good of recovery, while the amounts payable are due. The
management believes that no material adjustments are likely on formal
confrmation / reconciliation of these balances.
Note 7: The Income tax authorities conducted a search and survey at
certain premises of the Company under section 132 and 133 of the Income
Tax Act, 1961 during the year. Pending receipt of further communication
from the authorities, management is of the opinion that the income tax
provision carried in the books is adequate.
Note 8: The Company has incurred a net loss of Rs. 538,104,867 for the
year ended March 31, 2013 and is presently facing acute liquidity
problems on account of delayed realisation of trade receivables coupled
with delays in commencement of commercial production at its biomass
based power generation plants. Management is evaluating various
options and in addition to consolidation of business by focusing on
core operations and disposing off the non- core assets, has also made
reference to Corporate Debt Restructuring Cell (ÂCDR CellÂ) under the
Master Circular on Corporate Debt Restructuring issued by Reserve Bank
of India for restructuring of its existing debt obligations, including
interest and other related terms and conditions pursuant to the
approval of Board of Directors in their meeting held on March 22, 2013,
the CDR cell has accepted the CompanyÂs application in the meeting held
on April 26, 2013. The Company is still in the process of complying
with the conditions precedent to the restructuring process and
obtaining the approval of the lending banks and the CDR Cell Empowered
Group.
Pending the requisite approvals from the CDR cell, no effect of the
proposed restructuring has been given in these fnancial statements.
Management believes that the Company will be able to receive the
approval of the CDR cell in the due course and in view of the proposed
restructuring of debt obligations, no adjustments are required in the
fnancial statements and accordingly, these have been prepared on a
going concern basis.
Note 9: Pursuant to the provisions of Clause 43 of listing Agreement
with the Exchanges, the utilization of the net proceeds is as follows:
# revised pursuant to the resolutions passed by Board of Directors on
July 25, 2011 and February 5, 2013 and corresponding approvals vide
postal ballot from shareholders on August 30, 2011 and March 22, 2013.
* represents share capital invested in A2Z Infrastructure Limited, a
subsidiary company. A part of the said amount is yet to be spent by A2Z
Infrastructure Limited and its subsidiaries on relevant projects. Note
10: Previous year fgures have also been regrouped / recast wherever
considered necessary.
Mar 31, 2012
A2Z Maintenance & Engineering Services Limited ('A2Z or the Company')
was incorporated at National Capital Territory of Delhi on January 7,
2002 for providing maintenance and engineering services. The Company
commenced its business with the facility management services and
entered into engineering business during the year 2005-06.
The Company's engineering business segment primarily includes supply,
erection and maintenance of electrical transmission lines and allied
services to power distribution companies. The Company has also entered
into collaboration with sugar mills for setting up 3 Cogeneration
(Cogen) power plants on Built, Own, Operate and Transfer (BOOT) basis
for a period of 15 years.
* During the previous year, the Company had made an Initial Public
Offer (IPO) and allotted 16,845,189 equity shares of face value Rs 10
each, at a premium of Rs 390 per equity share and has also allotted
31,380 equity shares of face value Rs 10 each, at a premium of Rs 370
per equity share to employees aggregating to Rs 6,750,000,000.
Consequently, the paid up Equity Share Capital and Share Premium
Account has been increased by Rs 168,765,690 and Rs 6,581,234,310
respectively. The Company's shares were listed on Bombay Stock Exchange
Limited (BSE) and National Stock Exchange Limited (NSE) on December 23,
2010.
Note 1.1: The Company has only one class of equity shares having a par
value of Rs 10 per share. Each shareholder is eligible for one vote per
share held. The Company declares and pays dividend in indian rupees.
The dividend proposed by the board of directors is subject to the
approval of the shareholders in the ensuing annual general meeting. In
the event of liquidation, the equity shareholders are eligible to
receive the remaining assets of the Company after distribution of all
preferential amounts, in proportion to their shareholding.
During the year, the amount of per share dividend recognised as
distributions to equity shareholders was Rs Nil (Previous year - Rs 2)
Note 2.1 (a) : During the previous year, the Company had incurred Rs
318,851,232 towards share issue expenses for its Initial Public Offer
(IPO). Same has been shared on pro rata basis between the Company and
the selling shareholders, who offered the shares in the offer for sale
of the Company's IPO. An amount of Rs 30,337,389 (excluding printing,
advertisement and media expenses with respect to the IPO which are
borne entirely by the Company) has been recovered from selling
shareholders as their share of share issue expenses and the balance of
Rs 288,513,843 has been adjusted against the securities premium
received on the issue of shares in terms of Section 78 of the Companies
Act, 1956.
Details of terms of repayment for the long-term borrowings and security
provided in respect of the secured long-term borrowings:
Term loans from banks:
1. Term loan from bank amounting to Rs 880,000,000 (Previous year - Rs
Nil) having an interest rate of bank base rate plus 4% per annum
(varying between 13.5% to 15.05% during the year) is repayable in 28
quarterly installments first installment being due in june 2012.
2. Term loan from bank amounting to Rs 663,904,344 (Previous year - Rs
650,000,000) having an interest rate of bank PLR less 5.5% per annum
(varying between 13% to 14.25 % per annum during the year) is repayable
in 28 quarterly installments first installment being due in June 2012.
The above loans are secured against:
(a) First charge on pari - passu basis: (i) by way of hypothecation of
all current assets of the Company including but not limited to
receivables and inventory, relating to the projects both present and
future; (ii) on all intangible assets including but not limited to
goodwill pertaining to the projects (to the extent permissible by the
Punjab state Co-operative sugar mills).
(b) First charge (i) on all the insurance contracts with respect to the
projects together with any receivables thereunder; (ii) on all the
accounts (including but not limited to the project accounts) with
respect to the projects
(c) An assignment of: (i) all rights and interest by way of first charge
on pari passu basis on the book debts, operating cash flows,
receivables, commissions, revenues of whatsoever nature and wherever
arising, relating to the projects, present and future; (ii) the rights
and interest in the project site to the extent permissible by law;
(iii) all its rights and obligations under the assignment orders and
memorandum of understandings and; (iv) the rights and interest by way
of first charge on pari passu basis into and under each of the project
documents, and all the rights under each letter of credit/ guarantee or
performance bond that may be posted by any party to a project document
for the Company's benefit and all the rights under the approvals in
connection with the project (having value above Rs 100,000,000) to the
extent permissible by law
(d) Personal guarantee of Mr Amit Mittal (Managing Director).
3. Term loan from bank amounting to Rs 21,708,320 (Previous year - Rs
66,708,320) is secured against: (i) exclusive charge by way of earmark
on commercial office at 7th Floor, Tower B, Medicity, Gurgaon; (ii)
personal guarantee of Mr Amit Mittal, Ms Dipali Mittal, Ms Suman Goel
and Mr Manoj Gupta.
The loan is having an interest rate of bench mark prime lending rate
(BPLR) less 3.75% per annum (varying between 13% to 14% during the
year) and is repayable in 16 equal quarterly installments and first
installment became due in March 2011.
Term loans from financial institution:
The loans amounting to Rs 47,296,455 (Previous year - Rs 65,615,376) is
secured against hypothecation of equipments acquired out of loan. The
interest rate is 11.50% to 12.69% per annum and the loans are repayable
in 12 quarterly and 48 monthly installments.
Note 3.1 : Secured loans from bank
The working capital loans, cash credit facilities and vendor financing
facilities from banks are secured against whole of the assets (both
current as well as fixed) of the Company, namely stock of raw material,
stock in process, semi- finished and finished goods, stores and spares
(consumable stores and spares), bills receivables and book debts and
all other movables and fixed assets (except fixed assets exclusively
financed by other lenders) both present and future stored or to be
stored at the Company's godown, premises and division at O-116, First
foor shopping mall, Arjun Marg, DLF city Phase - I, Gurgaon or wherever
else the same may be by way of first pari - passu charge amongst the
consortium members. The charge is also additionally secured by first
charge over Company's immovable properties i.e. part of Plot / House No
740-A, Block- B, Scheme No 40, Panki, Kanpur Nagar admeasuring 7031.56
sq mts with 74 constructed fats. The rate of interest vary from 11.50%
per annum to 15.75% per annum and these loans are repayable on demand.
Note 3.2 : Unsecured loan
During the year ended March 31, 2010, the Company had entered into
business transfer agreement dated May 1, 2010 to purchase, as a going
concern, the entire business of M/s Surender Chowdhury & Brothers, a
partnership frm, engaged in the business of construction of electrical
substations and railway electrification work for a consideration of Rs
20,000,000. Out of this Rs 17,500,000 was paid till March 31, 2011 and
the balance was disclosed as unsecured loan.
Note 4.1: Leasehold land represents land acquired on lease from Orissa
Industrial Infrastructure Development Corporation for the lease period
of 66 years.
Note 4.2 : Disclosure of assets given under operating leases:
a) The Company had entered into operating lease agreement for leasing
its plant and equipments set up on the leasehold land at Medinipur
(West Bengal) at a consideration of Rs. 200,000 per annum each. The
lease agreement for Medinipur (West Bengal) was terminated with effect
from July 1, 2010. The Gross rental income aggregate to Rs Nil
(Previous Year à Rs 66,667).
b) During the year, the Company has entered into operating lease
agreement for leasing its 24 Flats at Kanpur to one of its
subsidiaries, A2Z Infrastructure Limited at a consideration of Rs
100,000 per month with effect from July 1, 2011. The Gross rental
income aggregate to Rs 900,000 (Previous year à Rs Nil).
Note 5.1: During the year ended March 31, 2010, the Company had
entered into three business transfer agreement to purchase the entire
business of M/s Surender Chowdhury & Brothers, M/s Mohd. Rashid
Contractors and En-Tech Engineers and Contractors for a consideration
of Rs 20,000,000, Rs 2,000,000 and Rs 3,000,000 respectively. The
difference between the carrying values of Investment and value of net
assets acquired amounting to Rs 23,961,858 was carried as goodwill.
Note 5.1 : The management has committed to provide continued
operational and financial support to its subsidiary Companies for
meeting their working capital and other financing requirements and based
upon approved future projections of the subsidiaries, believes that the
diminution (if any) is temporary and there is no need to carry any
provision against the investments.
Note 5.2 : During the year, the Company has acquired (i) 100% stake in
A2Z Disaster Management and Innovative Response Education Private
Limited, Pioneer Waste Management Private Limited and A2Z Singapore
Waste Management Holdings Private Limited (ii) 48% stake in A2Z Waste
Management (Nainital) Private Limited, (iii) additional 20% stake in
A2Z Infraservices Limited and Imatek Solutions Private Limited and (iv)
the Company has sold its 2% stake in Star Transformers Limited.
Note 5.3 : The Board of Directors of A2Z Infraservices Limited in its
meeting held on January 21, 2012 pursuant to Section 391 & 394 of the
Companies Act, 1956 (the "Act") approved the Scheme of Arrangement for
the Amalgamation ("the Scheme") of A2Z Infra Management & Services
Limited, Imatek Solutions Private Limited and CNCS Facility Solutions
Private Limited ("Transferor Companies") with A2Z Infraservices Limited
(i.e. Transferee Company) on a going concern basis.
The Hon'ble High Court of Punjab and Haryana vide its order dated July
19, 2012 has approved the Scheme with effect from April 1, 2011 (i.e.
the appointed date). The order has been fled with Registrar of
Companies on August 6, 2012 (i.e. the effective date). As the
amalgamation was in process as on March 31, 2012, therefore, no effect
of the amalgamation has been given in these financial statements in
accordance with the Accounting Standard -14 "Accounting for
amalgamations" of the Companies (Accounting Standard) Rule 2006.
Note 20.1: Trade receivables include retention money of Rs
3,689,747,586 (Previous year- Rs 3,947,983,164) which are due on
completion of erection / contracts / final acceptance by the customers.
The management is confdent of recovering these amounts upon erection /
contract completion.
Note 6.1: The Company has outstanding recoverables of Rs. 64,381,729
and Rs. 83,071,884, being deductions proposed/ made by the respective
customers on invoices raised by Company for services rendered, price
escalations on certain supply items and certain other items. In one of
the cases, involving amount of Rs. 64,381,729, the Company had fled an
application with the High Court for appointment of arbitrator in
response to which the high court had appointed an arbitrator to settle
the dispute. In the other case, involving outstanding receivables of
Rs. 83,071,884, the Company has fled a Special leave petition with the
Hon'ble Supreme Court against the Hon'ble High Court's order for
appointment of arbitrator, accordingly the Hon'ble Supreme Court has
given stay on the proceedings of the arbitrator appointed by the
customer. In the latter case, subsequent to March 31, 2012, the Company
has recovered Rs 22,432,544 from the customer, however, no settlement
has been arrived at with the customer The management, based on legal
advice, believes that the outcome of legal matters is likely to be in
its favor and has thus classified the said amounts as recoverable in the
books and no adjustments have been made with respect of the same in the
financial statements of the Company.
Note 7.1: During the year, the Company has incurred a loss of Rs
38,560,431 (Previous Year à Rs 19,292,915) due to theft of material at
various sites of projects against which the Company has fled an
insurance claim with the insurance Company. Out of the same, the
Company has received an amount of Rs 3,287,649 and accounted for an
advance recoverable of Rs 24,757,977 (Previous Year à Rs 3,738,713) in
its books, while the balance amount of Rs 10,514,805 (Previous Year Ã
Rs 10,421,536) have been accounted for as an expense in the financial
statements. Out of the total amount of Rs 3,738,713 shown as
recoverable as on March 31, 2011, the Company has received Rs 3,219,926
from insurance Company, while an amount of Rs 518,787 has been written
off in the financial statement. The management believes that it has made
reasonable judgement and no further adjustment is expected in the
financial statements.
Note 7.2: Defined benefit plans
The Company has a defined benefit gratuity plan. Every employee who has
completed five years or more of service gets a gratuity on departure at
15 days salary (last drawn salary) for each completed year of service.
The scheme is funded with an insurance Company in the form of a
qualifying insurance policy. The following tables summaries the
components of net benefit expense recognised in the statement of Profit
and loss and the funded status and amounts recognised in the balance
sheet for the respective plans.
Note 8.1 : The Company has entered into various short-term cancellable
lease agreements at a notice period up to three months for leased
premises. Gross rental expenses aggregate to Rs 106,411,903 (Previous
Year à Rs. 82,811,354).
Note 8.2 : It includes amount paid to erstwhile auditor Rs 1,698,440
(Previous year - Rs 6,285,455).
Note 9
CONTINGENT LIABILITIES AND COMMITMENTS NOT PROVIDED FOR
a) The details of contingent liabilities are as follows:
As at As at
March 31, 2012 March 31, 2011
Corporate guarantees given to
banks on account of facilities 6,269,041,842 2,532,300,000
granted by said banks to
subsidiaries
Liquidated damages deducted by
customers not accepted by the 14,073,312 14,073,312
Company and pending final
settlement*
Open letters of credit 883,671,986 588,624,262
Litigations under workmen
compensation act** 1,177,120 1,177,120
Litigations with contractors
and others** 4,240,128 3,787,536
Sales tax / VAT demand under dispute 71,892,925 9,700,000
7,244,097,313 3,149,662,230
* Excludes possible liquidated damages which can be levied by customers
for delay in execution of the projects. The management believes that
there exist strong reasons why no liquidated damages shall be levied by
these customers.
** Based on discussions with the solicitors / favourable decisions in
similar cases/legal opinions taken by the Company, the management
believes that the Company has a good chance of success in
above-mentioned cases and hence, no provision is considered necessary.
Note 10.1: As the future liability for gratuity is provided on an
actuarial basis for the Company as a whole, the amount pertaining to
the directors are not included above.
Note 10(a).1: As per joint venture agreements, the scope and value of
work of each partner has been clearly defined and accepted by the
clients. The Company's share in Assets, Liabilities, Income and
Expenses are duly accounted for in the accounts of the Company in
accordance with such division of work and therefore does not require
separate disclosure. However, joint venture partners are jointly and
severally liable to clients for any claims in these projects.
Note 10(b): The Company holds 60% interest in an Association of Person
(AOP), formed between A2Z Maintenance and Engineering Services Limited
and Satya Builders, a jointly controlled entity which is involved in
waste water proj- ects at Alwar and Chittorgarh, Rajasthan.
Note 11
RELATED PARTY
Names of related parties
Subsidiary Companies
A2Z Infraservices Limited
A2Z Infrastructure Limited
A2Z Powertech Limited
A2Z Powercom Limited
Selligence Technologies Services Private Limited
Imatek Solutions Private Limited
Mansi Bijlee & Rice Mills Limited (formerly Mansi Bijlee & Rice Mills
Private Limited)
Madhya Bijlee Private Limited (with effect from October 18, 2010)
Mirage Bijlee Private limited (with effect from September 15, 2010)
Star Transformers Limited (formerly Star Transformers Private Limited)
(with effect from January 21, 2011)
Chavan Rishi International Limited (with effect from March 2, 2011)
A2Z Maintenance & Engineering Services (Uganda) Private Limited (with
effect from August 27, 2010)
A2Z E Waste Management Limited (with effect from February 10, 2011)
A2Z Water Solutions Limited (with effect from February 10, 2011)
A2Z Singapore Waste Management Holdings Private Limited (with effect
from September 1, 2011)
A2Z Disaster Management and Innovative Response Education Private
Limited (formerly Mithila Bijlee Private Limited) (with effect from
November 15, 2011)
Pioneer Waste Management Private Limited (formerly Mattri Bijlee
Private Limited) (with effect from November 15, 2011)
A2Z Waste Management (Nainital) Private Limited (formerly Maratha
Bijlee Private Limited) (with effect from October 28, 2011)
A2Z Maintenance & Engineering Services Limited and Satya Builders
(Association of person)
Subsidiaries of A2Z Infrastructure Limited:
a) A2Z Waste Management (Merrut) Limited
b) A2Z Waste Management (Moradabad) Limited
c) A2Z Waste Management (Varanasi) Limited
d) A2Z Waste Management (Aligarh) Limited
e) A2Z Waste Management (Badaun) Limited (with effect from November 10,
2010)
f) A2Z Waste Management (Balia) Limited (with effect from November 10,
2010)
g) A2Z Waste Management (Basti) Limited (with effect from November 10,
2010) h) A2Z Waste Management (Fatehpur) Limited (with effect from
November 10, 2010) i) A2Z Waste Management (Jaunpur) Limited (with
effect from November 9, 2010) j) A2Z Waste Management (Loni) Limited
(with effect from November 10, 2010) k) A2Z Waste Management (Mirzapur)
Limited (with effect from November 10, 2010)
l) A2Z Waste Management (Ranchi) Limited (with effect from March 1,
2011)
m) A2Z Waste Management (Sambhal) Limited (with effect from November
10, 2010)
n) A2Z Waste Management (Haridwar) Private Limited (formerly Mahrishi
Bijlee Private Limited) (with effect from November 17, 2011)
o) A2Z Waste Management (Dhanbad) Private Limited (formerly Mahanadi
Bijlee Private Limited) (with effect from October 28, 2011)
p) A2Z Waste Management (Ludhiana) Limited (with effect from July 14,
2011) Subsidiary of Imatek Solutions Private Limited:
a) CNCS Facility Solutions Private Limited
Subsidiary of A2Z Infraservices Limited:
a) A2Z Infra Management & Services Limited (formerly IL&FS Property
Management & Services Limited) (with effect from October 1, 2010)
Subsidiary of A2Z Singapore Waste Management Holdings Private Limited:
a) A2Z Waste Management Private Limited (formerly Mandakini Bijlee
Private Limited) (with effect from January 16, 2012)
Subsidiary of A2Z E Waste Management Limited:
a) A2Z Dataserv Limited (with effect from December 15, 2011)
Joint venture partners
M/s UB Engineering Limited
M/s SPIC Ã SMO Limited
M/s Shyama Power (India) Private Limited
M/s Linkwell Telesystems Private Limited
M/S Cobra Instalaciones Y Servicios, S.A
M/S Karamtara Engineering Pvt. Ltd
M/S Richardson & Cruddas (1972) Ltd.
M/S Satya Builders
Individual having significant infuence Mr. Rakesh Radheyshyam
Jhunjhunwala
Enterprise over which individual having significant infuence in the
Company have substantial control Rare Enterprises
Key Management Personnel ('KMP') Mr. Amit Mittal (Managing director)
Mrs. Dipali Mittal (Whole time director)
Relative of Key Management Personnel
Mrs. Sudha Mittal (Mother of Mr. Amit Mittal)
Mr. Manoj Gupta (Sister's husband of Mrs. Dipali Mittal)
Note 12
During the year ended March 31, 2010, the Company had formulated
Employee Stock Option Scheme
referred as 'A2Z Stock Option Plan 2010 ('the plan')' for all eligible
employees/ directors of the Company except an employee who is promoter
or belongs to the promoter group of the Company and its subsidiaries in
pursuance of the special resolution duly approved by the shareholders
on March 30, 2010.
The plan shall be administered and supervised by the
Remuneration-cum-Compensation Committee under the powers delegated by
Board. Each option shall entitle the option grantee to apply for and be
transferred Equity Shares of the Company. On or from the time of the
listing of the Equity Shares of the Company, the maximum number of
options that can be granted to any employee in any year under the A2Z
ESOP shall be less than 5% of the issued share capital of the Company
(excluding any outstanding warrants or other securities convertible
into Equity Shares) at the time of grant of options, subject to the
overall ceiling of 2,865,056 options in the aggregate.
Note 13: Trade receivable, trade payables, advance to suppliers and
advances from customers are subject to confrmation / reconciliation as
at year end or any time during the year. As explained, the Company
follows a process of informal confrmation with its customers /
suppliers and based on such informal confrmations/ discussions,
believes that amount recoverable appearing as outstanding at year end
are good of recovery, while the amounts payable are due. The management
believes that no material adjustments are likely on formal confrmation
/ reconciliation of these balances.
Note 14: The Company is executing a EPC contract for its customer at
Leh and Kargil. Material purchased specifically for the project is
invoiced to the customer basis their approved delivery instructions. In
accordance with its contract with the customer, the Company has taken a
joint insurance policy for the project value awarded by the customer.
During the previous year, Leh had a massive cloudburst and certain
inventories at site were got damaged and was lying submerged inside
pile of debris. Even though the exact quantum of loss is yet to be
assessed by the insurance Company, the management had assessed that
inventories with estimated valuation of Rs. 130,016,796 invoiced to the
customer was damaged.
Pending determination of insurance claim, the management has, in view
of the constructive obligation upon the Company to execute the project
and on account of prudence, recognised the cost of replacement material
of Rs. 130,016,796 and deferred tax credit thereon of Rs. 43,188,329,
thereby presenting net amount of Rs. 86,828,467 in the statement of
Profit and loss as an 'Extraordinary Item'.
Note 15 : Subsequent to the year ended March 31, 2012, the Income tax
authorities conducted a search and survey at certain premises of the
Company under section 132 and 133 of the Income Tax Act, 1961. Pending
receipt of further communication from the authorities, management is of
the opinion that the income tax provision carried in the books is
adequate.
Note 16: During the year ended March 31, 2012, the revised schedule VI
notified under the Companies Act 1956, has become applicable to the
company for the preparation and presentation of its financial
statements, accordingly previous year figures have also been
regrouped/recast wherever considered necessary.
Mar 31, 2011
1. Nature of Operations
A2Z Maintenance & Engineering Services Limited (formerly A2Z
Maintenance & Engineering Services Private Limited)('A2Z or the
Company') was incorporated at National Capital Territory of Delhi on
January 7, 2002 for providing maintenance and engineering services. The
Company commenced its business with the facility management services
and entered into engineering business during the year 2005-06.
The Company's engineering business segment primarily includes supply,
erection and maintenance of electrical transmission lines and allied
services to power distribution companies.The Company has also entered
into collaboration with sugar mills for setting up 3 Cogeneration
(Cogen) power plants on Built, Own, Operate and Transfer (BOOT) basis
for a period of 15 years.
During the year, the Company has acquired (i) 100% stake in Chavan
Rishi International Limited, Mansi Bijlee & Rice Mills Private Limited
(Formerly Mansi Bijlee Private Limited) and Mirage Bijlee Private
Limited (ii) 90% stake in Madhya Bijlee Private Limited and (iii) 51%
stake in Star Transformers Private Limited.
2. Business acquisitions during the year
During the year, the Company had entered into following three
acquisitions,details of which are as follows:
i) Pursuant to Business Transfer Agreement dated May 1, 2010, the
Company purchased as a going concern the entire business of M/s
Surender Chowdhury & Brothers, a partnership firm constituted pursuant
to a deed of partnership dated December 2, 2004, engaged in the
business of construction of electrical substations and railway
electrification work for a consideration of Rs 20,000,000.
a. All the assets, including goodwill, business contracts and
employees of M/s Surender Chowdhury & Brothers were transferred to the
Company and the original owners were employed by the Company.
b. The original owners have agreed not to compete with, and solicit
the employees of, the Company for a period of ten years from the date
of termination of their employment with the Company.
c. The original owners have agreed to indemnify the Company from and
against any loss and damages as a result of breach of the terms and
conditions of the business transfer agreement.
d. The difference between the carrying value of Investment in M/s
Surender Chowdhury & Brothers and value of net assets acquired of Rs
19,012,620 has been carried as goodwill.
e. Further, an amount of Rs 7,500,000 was paid on the date of
agreement, and Rs 12,500,000 was considered as an interest free
unsecured loan to be paid post completion of financial and technical DDR
in accordance with the terms of the agreement. Out of this Rs
10,000,000 has been paid, while an amount of Rs 2,500,000 has been
disclosed as unsecured loan under Schedule 4 "Unsecured Loans".
ii) Pursuant to Business Transfer Agreement dated June 10, 2010, the
Company purchased as a going concern the business of M/s Mohd. Rashid
Contractors, a partnership firm constituted pursuant to a partnership
deed dated June 10, 2003 engaged in the business of telecom cable
laying, civil works and other engineering, procurement and construction
business for a consideration of Rs 2,000,000.
a. All the assets, including goodwill, business contracts and
employees of M/s Mohd. Rashid Contractors were transferred to the
Company and the original owners were employed by the Company.
b. The original owners have agreed not to compete with, and solicit
the employees of, the Company for a period of ten years from the date
of termination of their employment with the Company.
c. The original owners have agreed to indemnify the Company from and
against any loss and damages as a result of breach of the terms and
conditions of the business transfer agreement.
d. The difference between the carrying values of Investment in M/s
Mohd. Rashid Contractors and value of net assets acquired of Rs
1,950,251 has been carried as goodwill.
iii) Pursuant to Business Transfer Agreement dated June 10, 2010, the
Company purchased as a going concern the business of En-Tech Engineers
and Contractors, a partnership firm, constituted pursuant to a
partnership deed dated June 10, 2003 engaged in the business of telecom
cable laying, civil works and other engineering, procurement and
construction business for a consideration of Rs 3,000,000.
a. All the assets, including goodwill, business contracts and
employees of En-Tech Engineers and Contractors were transferred to the
Company and the original owners were employed by the Company.
b. The original owners have agreed not to compete with, and solicit
the employees of, the Company for a period of ten years from the date
of termination of their employment with the Company.
c. The original owners have agreed to indemnify the Company from and
against any loss and damages as a result of breach of the terms and
conditions of the business transfer agreement.
d. The difference between the carrying value of Investment in En-Tech
Engineers and Contractors and value of net assets acquired of Rs
2,998,988 has been carried as goodwill.
e. Further, an amount of Rs 1,000,000 was paid on the date of
agreement, while an amount of Rs 2,000,000 was considered as an
interest free unsecured loan to be paid post completion of financial and
technical DDR in accordance with the terms of the agreement and the
entire loan amount has been paid by the Company.
These acquisitions have helped the Company to get pre-qualification to
bid for various tenders and considering long term benefits arising to
the Company by gaining eligibility for biddings,the management is of
the opinion that the goodwill is not impaired as at March 31, 2011. 5.
Disclosure of Open Contracts:
In order to hedge its exposure to commodity price risk in purchase of
fabricated steel, fabricated aluminium and fabricated copper items used
in its operations, the Company has entered into the commodity forwards
for base commodities - Steel, Aluminium and Copper during the year.
3. Contingent liabilities not provided for: The details are as
follows:
Particulars As at As at
March 31, 2011 March 31, 2010
Performance and Financial Bank
Guarantees 10,160,510,720 7,910,489,213
Outstanding amounts against counter
guarantees / corporate 2,087,334,013 684,177,858
guarantees amounting to
Rs. 2,874,246,781 (Previous Year Ã
Rs 1,391,798,302) given to Banks on
account of facilities granted by
said banks to subsidiaries
Liquidated Damages deducted by
customers not accepted by the 14,073,312 102,320,984
Company and pending final settlement*
Open Letters of Credit 588,624,262 768,970,627
Litigations under Workmen
Compensation Act** 1,177,120 1,177,120
Litigations with contractors and
others** 3,787,536 3,632,661
Sales tax demand under dispute 9,700,000 -
12,865,206,963 9,470,768,463
* excludes possible liquidated damages which can be levied by customers
for delay in execution of the projects. The management believes that
there exist strong reasons why no liquidated damages shall be levied by
these customers.
**Based on discussions with the solicitors / favourable decisions in
similar cases/legal opinions taken by the Company, the management
believes that the Company has a good chance of success in
above-mentioned cases and hence, no provision is considered necessary.
4. Capital Commitments :
Estimated amount of contracts to be executed on capital account and not
provided for (net of advances) Rs 1,137,981,618 as at March 31, 2011
(Previous Year à Rs 2,130,210,311).
5. During the year, the Company has incurred a loss of Rs 19,292,915
(Previous Yearà Rs 4,950,837) due to theft of material at various sites
of projects against which the Company has fled an insurance claim with
the Insurance Company. Out of the same, the Company has received an
amount of Rs 5,132,666 and accounted for an advance recoverable of Rs
3,738,713 (Previous Year à Rs 4,628,069) in its books, while the
balance amount of Rs 10,421,536 (Previous Year à Rs 322,768) have been
accounted for as an expense in the financial statements. Out of the
total amount of Rs 10,493,510 shown as recoverable as on March 31,
2010, the Company has received Rs 4,104,288 from insurance Company,
while an amount of Rs 6,389,222 has been written off in the financial
statement. The management believes that it has made reasonable
judgement and no further adjustment is expected in the financial
statements.
Defined Benefit Plans
The Company has a defined benefit gratuity plan. Every employee who has
completed five years or more of service gets a gratuity on departure at
15 days salary (last drawn salary) for each completed year of service.
The scheme is funded with an insurance Company in the form of a
qualifying insurance policy.The following tables summaries the
components of net benefit expense recognised in the profit and loss
account and the funded status and amounts recognised in the balance
sheet for the respective plans.
The estimates of future salary increases considered in actuarial
valuation take account of infation, seniority, promotion and other
relevant factors such as supply and demand in the employment market.
The overall expected rate of return on assets is determined based on
the actual rate of return during the current year. The Company expects
to contribute Rs 8,500,000 (Previous year- Rs 8,261,060) to gratuity
during next year.
6. Operating Leases
Company as a Lessee
The Company has entered into various short-term cancellable lease
agreements at a notice period upto three months for leased premises.
Gross rental expenses aggregate to Rs 82,811,354 (Previous Yearà Rs
42,247,502).
Company as a Lessor
The Company has entered into operating lease agreement for leasing its
plant & machinery set up on the leasehold land at Jind (Haryana) &
Cuttack (Orissa) at a consideration of Rs. 200,000 per month each and
at Giridih (Jharkhand) & Medinipur (West Bengal) at a consideration of
Rs. 200,000 per annum each. The Lease agreement for Jind (Haryana) and
Cuttack (Orissa) has been terminated with effect from April 1, 2009 and
July 1, 2009 respectively and the Lease agreement with Giridih
(Jharkhand) has been terminated with April 1, 2010. As per the
arrangement, the lessee would supply its substantial portion of
manufacture to the lessor at a price agreed between the parties from
time to time. The Gross rental income aggregate to Rs 66,667 (Previous
Year à Rs 893,972).
The gross book value, accumulated depreciation and depreciation charged
during the year of the above assets amounts to Rs 29,193,346 (Previous
Year à Rs 29,193,346), Rs 14,328,801 (Previous Year à Rs 11,214,688)
and Rs 3,114,113 (Previous year Rs 4,384,080) respectively.
7. Related Party
Names of related parties
Subsidiary Companies
A2Z Infraservices Limited (Formerly a2z Infraservices Private Limited)
A2Z Infrastructure Limited (Formerly a2z Infrastructure Private
Limited)
A2Z Powertech Limited (Formerly a2z Powertech Private Limited)
A2Z Powercom Limited (Formerly a2z Powercom Private Limited)
Selligence Technologies Services Private Limited
Imatek Solutions Private Limited
Mansi Bijlee & Rice Mills Private Limited (Formerly Mansi Bijlee
Private Limited) (with effect from July 20, 2010)
Madhya Bijlee Private Limited (with effect from October 18, 2010)
Mirage Bijlee Private limited (with effect from September 15, 2010)
Star Transformers Private Limited (with effect from January 21, 2011)
Chavan Rishi International Limited (with effect from March 2, 2011)
A2Z Maintenance & Engineering Services (Uganda) Private Limited (with
effect from August 27, 2010)
A2Z E Waste Management Limited (with effect from February 10, 2011)
A2Z Water Solutions Limited (with effect from February 10, 2011)
Subsidiaries of A2Z Infrastructure Limited:
a) A2Z Waste Management (Merrut) Limited (Formerly A2Z Waste Management
(Merrut) Private Limited)
b) A2Z Waste Management (Moradabad) Limited (Formerly A2Z Waste
Management (Moradabad) Private Limited)
c) A2Z Waste Management (Varanasi) Limited (Formerly A2Z Waste
Management (Varanasi) Private Limited)
d) A2Z Waste Management (Aligarh) Limited (Formerly A2Z Waste
Management (Aligarh) Private Limited)
e) A2Z Waste Management (Badaun) Limited (Formerly A2Z Waste Management
(Badaun) Private Limited) (w.e.f November 10, 2010)
f) A2Z Waste Management (Balia) Limited (Formerly A2Z Waste Management
(Balia) Private Limited) (w.e.f November 10, 2010)
g) A2Z Waste Management (Basti) Limited (Formerly A2Z Waste Management
(Basti) Private Limited) (w.e.f November 10, 2010)
h) A2Z Waste Management (Fatehpur) Limited (Formerly A2Z Waste
Management (Fatehpur) Private Limited) (w.e.f November 10, 2010)
i) A2Z Waste Management (Jaunpur) Limited (Formerly A2Z Waste
Management (Jaunpur) Private Limited) (w.e.f November 9, 2010)
j) A2Z Waste Management (Loni) Limited (Formerly A2Z Waste Management
(Loni) Private Limited) (w.e.f November 10, 2010)
k) A2Z Waste Management (Mirzapur) Limited (Formerly A2Z Waste
Management (Mirzapur) Private Limited) (w.e.f November 10, 2010)
l) A2Z Waste Management (Ranchi) Limited (w.e.f March 1, 2011)
m) A2Z Waste Management (Sambhal) Limited (Formerly A2Z Waste
Management (Sambhal) Private Limited) (w.e.f November 10, 2010)
Subsidiary of Imatek Solutions Private Limited:
a) CNCS Facility Solutions Private Limited Subsidiary of A2Z
Infraservices Limited:
a) IL&FS Property Management& Services Limited (w.e.f. October 1, 2010)
Joint Venture M/s UB Engineering Limited
M/s SPIC Ã SMO Limited
M/s Shyama Power (India) Private Limited
M/s Linkwell Tele systems Private Limited
M/S Cobra Instalaciones Y Servicios, S.A
M/S Karamtara Engineering Pvt. Ltd
M/S Richardson & Cruddas (1972) Ltd.
M/S Satya Builders
Individual having significant infuence
Mr. Rakesh Jhunjhunwala
Enterprise over which individual having significant infuence in the
Company have substantial control
Rare Enterprises
Relatives of Individual having significant infuence in the Company
Rajesh Kumar Jhunjhunwala Rekha Jhunjhunwala
Key Management Personnel ('KMP')
Mr. Amit Mittal
Mr. Sanjeev Sharma (Till March 30, 2010)
Mrs. Dipali Mittal
Relative of Key Management Personnel
Ms. Priya Goel Mrs. Sudha Mittal Mr. Manoj Gupta
8. During the year ended March 31, 2010, the Company has formulated
Employee Stock Option Scheme referred as 'A2Z Stock Option Plan 2010
('the plan')' for all eligible employees/ directors of the Company
except an employee who is promoter or belongs to the promoter group of
the Company and its subsidiaries in pursuance of the special resolution
duly approved by the shareholders on March 30, 2010.
The plan shall be administered and supervised by the
Remuneration-cum-Compensation Committee under the powers delegated by
Board. Each option shall entitle the option grantee to apply for and be
transferred Equity Shares of the Company. On or from the time of the
listing of the Equity Shares of the Company, the maximum number of
options that can be granted to any employee in any year under the A2Z
ESOP shall be less than 5% of the issued share capital of the Company
(excluding any outstanding warrants or other securities convertible
into Equity Shares) at the time of grant of options, subject to the
overall ceiling of 2,865,056 options in the aggregate.
9. Debtors, Advance to suppliers, Advances from customers and Sundry
Creditors are subject to confrmation / reconciliation as at year end or
any time during the year. As explained, the Company follows a process
of informal confrmation with its customers / suppliers and based on
such informal confrmations/ discussions, believes that amount
recoverable appearing as outstanding at year end are good of recovery,
while the amounts payable are due. The management believes that no
material adjustments are likely on formal confrmation / reconciliation
of these balances.
10. The following are the details of loans and advances in the nature
of loans given to subsidiaries and associates and firms / Companies in
which directors are interested and are outstanding at the end of the
year interms of Securities and Exchange Board of India's circular dated
January 10, 2003:
11. Prior period revenue reversal netted off against current years's
revenue aggregate to Rs Nil (Previous year -Rs 43,898,517) (gross tax
impact of Rs. Nil) (Previous year - Rs14,921,106).
12. The Company has, on certain contracts, undertaken additional
supplies of material basis approval by its customers and also incurred
additional cost on site erection basis the surveys undertaken by its
customers. In accordance with its contracts with the customers, the
quantity variation upto specifed thresholds have been envisaged and
accordingly, the management has reassessed the value of its contracts
and accounted for additional revenue of Rs 85,767,314 (Previous Year Ã
Rs 738,576,578) on these contracts. In respect of these contracts, the
quantities supplied have been approved by the customers before
dispatch. The management expects that these variations shall be soon
approved by these customers and no material adjustments are likely upon
such approvals.
Also, consequent to change in margin due to change in budgeted
estimated cost of a specific project, the Company has recorded
additional revenue of Rs179,261,680 during the year.
13. As at the year-end, the Company is carrying unbilled revenue of Rs
377,394,051 (Previous Year à Rs 234,305,626) against certain contracts
for over a year. The management is confdent of recovering these amounts
upon completion of surveys by the customers / third parties.
14. The Company is executing a construction contract for its customer
at Leh and Kargil. Material purchased specifically for the project is
invoiced to the customer basis their approved delivery instructions. In
accordance with its contract with the customer, the Company has taken a
joint insurance policy for the project value awarded by the customer.
During the year, Leh had a massive cloud burst and certain inventories
at site have been damaged and are presently lying submerged inside pile
of debris. Even though the exact quantum of loss is yet to be assessed
by the insurance Company, the management has assessed that inventories
with estimated valuation of Rs. 130,016,796 invoiced to the customer
have been damaged. In accordance with customers' agreement, the
responsibility of coordinating with the insurance company on behalf of
the customer has been assigned to the Company.The management expects to
recover the entire amount on behalf of its customer.
Pending determination of insurance claim, the management has, in view
of the constructive obligation upon the Company to execute the project
and on account of prudence, recognised the cost of replacement material
of Rs. 130,016,796 and deferred tax credit thereon of Rs. 43,188,329
thereby presenting net amount of Rs. 86,828,467 in the profit and loss
account as an 'Extraordinary Item'.
(d) Material Consumed
These comprise of miscellaneous items meant for execution of projects.
Since these items are of different nature and specifications,
individually being less than 10% in value, it is not practicable to
disclose the quantitative information in respect thereof. These
comprises of 100% indigenous material.
15. The Company is executing a contract for supply and erection of
existing Low Tension lines into High Voltage Distribution System.
Subsequent to introduction of Voluntary Disclosure Scheme by the
customer during the year 2009-10, there are fewer requirements of lower
rating transformers and enhanced requirement of higher rating
transformers than originally envisaged in the contract. The Company
had, basis the Delivery Instructions (DI) issued by the customer,
already purchased 3,634 No's of 6.3 KVA & 10KVA transformers at
purchase cost of Rs. 156,861,704. Based upon the discussions with the
customer, the Company has accounted for the surplus material amounting
to Rs. 156,861,704 as inventories.
Further, in respect of another contract, while processing the final
bill, the customer has identifed few items as surplus inventory and
asked the Company to take them back at purchase cost of Rs. 28,411,801.
Basis the approval of the said customer, the Company has sold inventory
of Rs. 11,346,313 at a loss of Rs. 1,143,538 during the year, while the
balance inventory of Rs. 16,023,644 has been carried at purchase price.
The management believes that these transformers and other surplus items
returned by another customers have net realisable value higher than
their cost as prices of steel & copper have gone up from the time these
items were purchased and accordingly, no adjustments are deemed
necessary to financial statements in this regard and these inventories
have been carried at cost as at March 31, 2011.
16. The Company has entered into contract for providing manpower and
consumables for cleaning services with Organising Committee of Common
Wealth Games and recognized revenue of Rs. 148,379,563 from the
contract during the year, against which there is outstanding receivable
of Rs. 87,308,652 from the Organizing Committee.
The management believes that they have adequate backups / supportings
available with them in respect of outstanding dues and thus, are
confdent of recovering these outstanding receivables and accordingly
believe that no provision is required against these receivables in the
financial statements in this regard.
17. Capital work in progress includes Rs 1,234,889,102 (Previous year
à Rs 51,697,401) represents expenditure incurred on setting up 3
Cogeneration power plants of 15 MW each on Built, Own, Operate and
Transfer (BOOT) basis with the respective cooperative sugar mills for a
period of ffiteen years at Fazilka, Morinda and Nakodar in Punjab.
18. The management has committed to provide continued operational and
financial support to its subsidiary Companies for meet their working
capital and other financing requirements and based upon approved future
projections of the subsidiaries, believes that the diminution is
temporary and there is no need to carry any provision against the
investments.
19. During the year, in accordance with Section 81(1A) of the
Companies Act, 1956, certain subsidiaries, (A2Z Infrastructure Limited,
A2Z Infraservices Limited, Imatek Solutions Private Limited, A2Z
Powercom Limited and A2Z Powertech Limited) have made preferential
allotment of around 5% to 26% of their share capital to directors and
employees of these companies, of their holding company, of their fellow
subsidiaries and certain outsiders at a fair price which has been
approved by the shareholders and Board of directors of the respective
companies. This has resulted in dilution of shareholding percentage of
the Company in these subsidiary companies.
20. During the year, the Company has made an Initial Public Offer
(IPO) and allotted 16,845,189 equity shares of face value Rs 10/-, at a
premium of Rs 390/- per equity share and has also allotted 31,380
equity shares of face value Rs 10/-, at a premium of Rs 370/- per
equity share to employees aggregating to Rs 6,750,000,000. Consequently
the paid up Equity Share Capital and Share Premium Account has been
increased by Rs 168,765,690 and Rs 6,581,234,310 respectively. The
Company's shares have been listed on Bombay Stock Exchange Limited
(BSE) and National Stock Exchange Limited (NSE) on December 23, 2010.
21. The Company has incurred Rs 318,851,232 towards share issue
expenses for its Initial Public Offer (IPO). Same has been shared on
pro rata basis between the Company and the selling shareholders, who
offered the shares in the offer for sale of the Company's IPO. An
amount of Rs 30,337,389 (excluding printing, advertisement and media
expenses with respect to the IPO which are borne entirely by the
Company) has been recovered from selling shareholders as their share of
share issue expenses and the balance of Rs 288,513,843 has been
adjusted against the securities premium received on the issue of shares
in terms of Section 78 of the Companies Act, 1956.
22. Previous year's fgures have been regrouped where necessary to
confrm to this year's classification.