1 : CORPORATE INFORMATION
A2Z Infra Engineering 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 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 Company’s 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 (“The Act”) 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 (‘MCA’). 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 ‘financial statements’).
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 Company’s 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, lessee’s option to purchase and estimated certainty of exercise of such option, proportion of lease term to the asset’s 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 management’s 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 ‘claims arising during construction period’ (described below) and ‘budgeted costs to complete the contract’. 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) - Management’s 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, “Revenue from Contracts with Customers”
On March 28, 2018, Ministry of Corporate Affairs has notified the Ind AS115, “Revenue from Contracts with Customers”. 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 entity’s 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 Hon’ble 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 (“IFIN”) 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 (“OTS Agreements”) with certain lenders (“the Lenders”) 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 “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. 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.
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 Company’s 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 management’s 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 Company’s 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 Company’s 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 (“the Authority”) 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 ‘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 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 Company’s interest and share in subsidiaries including step down subsidiaries.
*With respect to A2Z Green Waste Management Limited (“AGWML”), 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 (“Devdhar”), 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 Company’s 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 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 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 “ Related Party Disclosures”.
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 (‘KMP’)
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 arms’ length basis. Note 33.2: ‘Details 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s policy is to deal only with creditworthy counterparties.
The Company’s 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 Company’s 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 Company’s 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 company’s 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 Company’s 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 Company’s 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 Company’s functional currency.
Unhedged foreign currency exposure
The Company’s 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 Company’s capital management, capital includes issued equity share capital, security premium and all other equity reserves attributable to the equity holders of the Company.
The Company’ s capital management objectives are:
- to ensure the Company’s 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 Company’s 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 “Operating Segments” (Ind AS 108). The Company is operating into following segments.:
(i) Engineering service (ES)
(ii) Power generation projects (‘PGP’)
(iii) Others represents trading of goods, renting of equipment’s 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 “CONSTRCUTION CONTRACTS”
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 relate to construction contracts in progress at the end of the reporting year. The amounts are calculated as the net amounts of costs incurred plus recognised profits, less recognised losses and progress billings. The carrying amounts of assets and liabilities are analysed as follows:
Note 25.1: 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.
*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.
** 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 the year ended March 31, 2015, the Company received the assessment orders for the assessment years 2009-10 to 2013-14 from the Deputy Commissioner of Income Tax (DCIT) demanding additional tax liability of INR 1,992.17 lacs. During the year ended March 31, 2015 the Company had filed appeals with Commissioner of Income Tax (CIT) (Appeals) challenging these orders against which the said authority had granted partial relief to the Company. The Company has further filed appeals with Income Tax Appellate Tribunal (ITAT) challenging the orders for these assessment years in respect of the matters where the CIT(A) has not accepted the Company’s contention. Additionally, the DCIT has also filed appeals with the ITAT against the matters where the relief has been given to the Company.
Further, during the current year, the Company has received penalty order for the Assessment year 2008-09 from CIT and for Assessment year 2011-12 and 2013-14 from Deputy Commissioner of Income Tax (DCIT) demanding additional tax liability of INR 798.63 lacs against which the Commissioner of Income Tax (CIT) (Appeals) had not granted relief to the Company. The Company has filed appeals with ITAT for the Assessment Year 2008-09 and with CIT(A) for the Assessment Year 2011-12 and 2013-14 challenging the penalty orders.
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 ITAT/CIT(A) and does not foresee any material liability. Pending the final decision on the matter, no adjustment has been made in the financial statements.
(ii) The management is committed to provide continued operational and financial support to its subsidiary companies for meeting their working capital and other financing requirements.
Note 26.1: Derivative liability written back pertains to reversal of financial guarantee (put option) given against fully convertible debenture issued by one of its subsidiaries A2Z Green Waste Management Limited (formerly A2Z Infrastructure Limited and hereinafter referred to as AGWML) to IL&FS Financial Service Limited (“IFIN”) of INR 15,000.00 lacs.
Note 26.2: During the year ended March 31, 2018, the Company has entered into One Time Settlement Agreements (“OTS Agreements”) with certain lenders (“the Lenders”) wherein they have agreed to the settlement of the outstanding principal and accrued interest of the Company and its step down subsidiaries. Pursuant to the aforementioned OTS Agreements, the Company has issued 30,276,384 equity shares to the Lenders at the rate of INR 39.80 during the quarter as preferential allotment. Additionally, the Company has paid INR 1,975.00 lacs during the period to the Lenders and shall further pay INR 5,875.00 lacs. The resultant impact of the transaction has been recognised as an exceptional item in these financial Statement.
Note 26.3: During the year ended March 31, 2018, loss on sale of investments pertains to the loss incurred on the sale of entire shareholding in one of the subsidiary company i.e. Star Transformers Limited during the year. Consequently, Star Transformers Limited ceased to be a subsidiary of the Company.
Note 27 : CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Board of Directors of the Company has constituted a Corporate Social Responsibility (CSR) Committee pursuant to Section 135 of the Companies Act, 2013 and have also formulate a CSR Policy in this regard. The Company has incurred average net loss for immediately preceding three financial years and hence the Company is not required to spend any amount towards CSR activities for the year ended March 31, 2018 and March 31, 2017.
Note 28 : POST-REPORTING DATE EVENTS
No adjusting or significant non-adjusting events have occurred between the March 31, 2018 reporting date and the date of authorisation May 29, 2018.
Note 29 : AUTHORISATION OF FINANCIAL STATEMENTS
The financial statements for the year ended March 31, 2018 (including comparatives) were approved by the board of directors on May 29, 2018.
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