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Directors Report of IL&FS Engineering & Construction Company Ltd.

Mar 31, 2015

The Shareholders

IL&FS Engineering and Construction Company Limited

The Directors take pleasure in presenting the Twenty-Sixth Annual Report along with the Audited Financial Statements for the Financial Year ended March 31, 2015

I. FINANCIAL RESULTS:

Particulars 2014-15 2012-14 (12 Months) (18 Months)

Gross Income 2477.76 3427.01

(Loss)/Profit before Interest,

Depreciation, exceptional items and Tax 314.71 266.16

Interest and Finance Charges 268.31 331.82

Depreciation 43.73 85.32

(Loss)/Profit before exceptional items, tax and Prior period items 2.67 (150.98)

Exceptional items (net) - -

(Loss)/Profit before Tax and

Prior period items 2.67 (150.98)

Provision for Taxes

Less: Prior Period Expenses (net)

(Loss)/Profit after Tax 2.67 (150.98)

Paid up Equity Capital 112.12 89.79

Preference Share Capital 137.00 249.86

Reserves and Surplus 30.35 (78.61)

Net worth 279.47 261.04

Earnings per share (In Rupees)

-Basic (0.85) (19.72)

- Diluted (0.85) (19.72)

Previous year''s figures have been regrouped / rearranged to conform to those of the current year

II. DIVIDEND

Due to inadequate profits of the Company, your directors express their inability to recommend any dividend for the year to Preference as well as to Equity Shareholders

III. RESERVES

The Board of Directors do not propose to carry any amounts to Reserves of the Company for the Financial Year ended March 31,2015

IV THE STATE OF AFFAIRS OF THE COMPANY

During the year under review, your Company had bagged various orders in the Roads, Buildings & Structures, Power and Oil & Gas Sectors. The Orders received during the year under review amounted to Rs. 2,166 Crores. Also, the Company already had orders worth Rs. 10,063 Crores at the beginning of the year. Out of the total orders in hand, the unexecuted order value stands at Rs. 10,088 Crores at the end of the year

Your Company is having operations beyond the territorial limits of India and is now operating from Saudi Arabia under a separate

Joint Venture Subsidiary, and through Company''s branches in Fujairah and Abu Dhabi

The Board of Directors is hopeful of securing sizeable orders in the future and is confident of effective execution of the existing works of the order book. Also, the business support from the Promoter and Investor is facilitating entry into new market segments and in turn increasing capabilities of the Company

V SHARE CAPITAL

During the year under review, your Company had allotted 10,61,133 Equity Shares of Rs. 10 each fully paid at a price of Rs. 58.90 upon exercise of equal number of Employee Stock Options issued to Employees/ Directors/ Directors of Subsidiary Companies under ESOP 2009 Scheme, as detailed below:

Date of allotment No.of shares Amount incl. Alloted premium (in Rs)

June 07,2014 70,500 41,52,450.00

February 27,2015 4,32,206 2,54,56,933.40

March 23,2015 5,58,427 3,28,91,350.30

TOTAL 10,61,133 6,25,00,733.70

Additionally, your Company had allotted 2,12,74,442 Equity Shares of Rs. 10 each at a price of Rs. 60.50 per share on Preferential Basis to the following entities on March 13,2015:

Sl Name of the entity No.of Amount incl no the entity Shares premium

1 Infrastructure Leasing and Financial Services Limited 48,51,745 29,35,30,572.50

2 IL&FS Financial Services Limited 49,44,101 29,91,18,110.50

3 SBG Projects Investments Limited 1,14,78,596 69,44,55,058.00

TOTAL 2,12,74,442 128,71,03,741.00

Accordingly, the movement in the Paid-up Equity Share Capital of the Company is as follows:

Particulars No.of Shares Amount (in Rs)

Opening Balance as on April 01, 2014 8,97,87,243 89,78,72,430

Add: Allotment under ESOP Scheme 10,61,133 1,06,11,330

Add: Allotment under Preferential issue 2,12,74,442 21,27,44,420

Total addition by way of allotments 2,23,35,575 22,33,55,750

Closing Balance as on March 31,2015 11,21,22,818 112,12,28,180

During the year under review,an amount of Rs.3.83 Crpertaining to the expenses incurred towards Proposed Rights Issue of the Company were written off from the Securities Premium Account since, the Draft Letter of Offer filed with SEBI for Rights Issue was withdrawn by the Company. Accordingly, the Securities Premium Account stood at Rs. 171.38 Cr as on March 31, 2015. The movementinsecuritiespremiumaccountisasfollows:

Particulars Amount (in Rs.Cr)

Opening Balance as on April 01,2014 62.59

Add:Premium on issue of 10,61,133 Equity Shares under ESOP Scheme @ Rs. 48.90 5.19

Add: Premium on issue of 2,12,74,442 Equity Shares under Preferential issue @ Rs. 50.50 107.43

Less: Rights issue expenses written off (3.83)

Closing Balance as on March 31, 2015 171.38

During the year under review, your Company had redeemed certain preference shares and the movement is as shown below:

Particulars No.of 6% Amount (in Rs) No.of 6% Amount (in Rs) OCCRPS CRPS

Opening Balance as on April 01,2014 1,75,00,000 175,00,00,000 74,85,780 74,85,78,000

Less: Redemption on March 23,2015 (originally due for redemption on September 30, 2014 but extended up to March 25,2015) (50,00,000) (50,00,00,000) (3,00,000) (3,00,00,000)

Less: Redemption on March 31,2015 due for redemption on March 31, 2015 - - (59,85,780) (59,85,78,000)

Total redemption made during the year (50,00,000) (50,00,00,000)(62,85,780) (62,85,78,000)

Closing Balance as on March 31,2015 1,25,00,000 125,00,00,000 12,00,000 12,00,00,000

Shares held by Directors

Mr. Ramchand Karunakaran, Non-executive Chairman of the Company holds 40,000 Equity Shares in the Company. No other non- executive director of the Company holds any Shares or convertible instruments in the Company.

Further, Mr. MurliDhar Khattar, Managing Director of the Company holds 70,000 Equity Shares in the Company

Deposits:

Your Company has not accepted any Fixed Deposits during the year under review

VI. DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review, Mr. Ved Jain, Mr. Anil K Agarwal and Mr. Dhananjay Narendra Mungale, Ms. Alpa Ramesh Sheth and Ms. KanikaTandon Bhal were appointed as Independent Directors on August 08,2014 for a period of 5 years in terms of Listing Agreement and Section 149 of the Act. With the appointment of Ms. Alpa Ramesh Sheth and Ms. Kanika Tandon Bhal, the requirement of Women Director on the Board of the Company is complied with. The appointment of the Independent Directors is being proposed for the approval of the members in the forthcoming Annual General Meeting.

Mr. Sundaram Srinivas Ranjan, Nominee Director appointed by State Bankof India, Industrial Finance Branch, Hyderabad on behalf of CDR participating banks had resigned from his position and the same was taken on record with effect from August 23,2014.

During the year, Mr. Ahmad Dabbous, Alternate Director to Mr. El Mouhtaz El Sawaf had vacated his office since Mr. Sawaf had attended the Board Meeting on November 10, 2014. Mr. Ahmad Dabbous was appointed as Alternate Director to Mr. Sawaf in the same meeting on November 10, 2014. Mr. Akber Moawalla, Alternate Director to Mr. Saleh Mohamad Bin Laden and Mr. Ahmad Dabbous, Alternate Director to Mr, Sawaf had vacated their offices since Mr. Binladen and Mr. Sawaf had attended the Board Meeting on February 11, 2015.

Thereafter, on the same day i.e., on February 11, 2015, Mr. Akber Moawalla and Mr. Ahmad Dabbous were again appointed as Alternate Directors to Mr. Saleh MohamadBinLaden and Mr. El Mouhtaz El Sawaf respectively.

None of the directors of the Company are inter-se related to each other.

Mr. Murli Dhar Khattar who was appointed on December 26,2013 as the Managing Director of the Company continued in the same capacity throughout the year under review. Dr. Sambhu Nath Mukherjee was appointed as Chief Financial Officer of the Company within the meaning of Section 203 of the Companies Act, 2013 with effect from January 01, 2015. The Company had already appointed Mr. G. Venkateswar Reddy in the earlier years who continue to be the Company Secretary of the Company during the year under review

Independent Directors

The Independent Directors were appointed in the meeting held on August 08, 2014 for a period of 5 years subject to the approval of the members. The appointments of Independent Directors are being proposed in the ensuing Annual General Meeting for the approval of the members. None of the Independent Directors are considered for re-appointment in the ensuing Annual General Meeting.

Statement on Declaration given by Independent Directors

The Independent Directors appointed in the Board Meeting held on August 08, 2014 have given declaration of Independence in terms of sub-section (6) of Section 149.

Familiarization programme of Independent Directors

The Company had appointed two new Independent Directors and appointment of three Independent Directors already holding office of directors in the Company was formalized by issuing Appointment Letter for Independent Directors. All the Independent Directors appointed are well versed in the business of Infrastructure Development. A Separate session was conducted in the Board Meeting held on November 10,2014 and the independent directors were provided with the operations and projects of the Company as a part of familiarization programme to the Independent Directors of the Company. The details of such familiarization program have been provided under the head Corporate Governance section of the website of the Company i.e., www.ilfsengg.com

Non-executive Directors

The Non-executive directors are entitled for payment of sitting feeofRs.20,000permeetingforattendingthemeetingsofthe Board and its Committees. Additionally, the actual out of pocket expenses incurredbythemforattendingthemeetingsarealso borne by the Company. Except as mentioned above, no other payment is made by the Company to the Non-executive Directors and the Company does not have any pecuniary relationship or transactions with the Non-Executive Directors. The details of amount of Sitting Fee paid to the Directors is mentioned in the Corporate GovernanceSection of thisAnnual Report.

However, Non-executive Directors, except Independent Directors, are/were entitled to employee stock options under the Employee Stock Option Schemes of the Company subject to compliance of applicable laws Performance Evaluation

The Board has evaluated its performance during the Financial Year 2014-15 in the Meeting held on May 29, 2015. The evaluation was carried out as per the policy of the Company The Board had assured that the performance of the Board was in line with the organization strategy. The Board had further assured that the Committees of the Board have performed as per the scope attributed to them. The Independent Directors have attended most of the Meetings and have sought adequate information required for arriving at decisions.

Policies

The following policies were formulated by the Board and are placed in the Corporate Governance Section of the website of the Company i.e., www.ilfsengg.com

I. Directors Appointment and Remuneration Policy on matters specified in sub-section (3) of Section 178 of the Act

ii. Policy on Corporate Social Responsibility as per Section 135 of the Act

iii. A Policy on Performance Evaluation of the Board of Directors and Individual Directors was formulated during the year under review which consists of the annual evaluation plan , of the Board

iv Vigil Mechanism Policy

v. Policyon Material Subsidiaries

vi. Policyon dealing with Related Party Transactions

VII. DIRECTORS RESPONSIBILITY STATEMENT

In terms of Section 134 (5) of the Companies Act, 2013 (Act). the Board of Directors state that:

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordancewith the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis; and

(e) the directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Details of conservation of energy, technology absorption, foreign exchange earnings and outgo

(A) Conservation of energy

(i) The steps taken or impact on conservation of energy:

The conservation of energy in all the possible areas is undertaken as an important means of achieving cost reduction. Savings in electricity, fuel and power consumption receive due attention of the management on a continuous basis.

(ii) The steps taken by the company for utilizing alternate sources of energy; NIL

(iii) The capital investment on energy conservation equipments; NIL

(B) Technology absorption

(i) the efforts made towards technology absorption:

Timely completion of the projects as well as meeting the budgetary requirements are the two critical areas where different techniques help to a great extent. Many innovative techniques have been developed and put to effective use in the past and the efforts to develop new techniques continue unabated.

(ii) the benefits derived like product improvement, cost reduction product development or import substitution: NIL

(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)- NIL

a) the details of technology imported;

b) the year of import;

c) whether the technology been fully absorbed

(C) FOREIGN EXCHANGE

Foreign Exchange Earnings Rs. 272.48 Crores (accrual

basis)

Foreign Exchange Outgo Rs. 253.60 Crores (accrual

basis)

VIII. BOARD AND ITS COMMITTEES

a) Board of Directors :

During the year under review the Board of Directors of the Company have met five times on May 19,2014,August 08. 2014, November 10, 2014, November 28, 2014 and February 11,2015. The attendance, along with such other details as required. of each of the Directors is mentioned in the Corporate Governance section of this Annual Report

b) Audit Committee

The Audit Committee of the Company consists of 4 members and a permanent invitee. Mr. Ved Kumar Jain. Independent Director in the Company is the Chairman of the Committee. Mr. Anil Kumar Agarwal, Mr. MurliDhar Khattar and Mr. DhananjayNarendra Mungale are the members of the Audit Committee. The attendance of members to the meetings of Audit Committee and such other details are mentioned in the Corporate Governance report section of this Annual Report

All the recommendations of the Audit Committee were accepted by the Board of Directors during the year under review. The Committee comprises with majority of Independent Directors

c) Risk management policy

The Board of Directors had formulated a Risk Management Policy consisting of various elements of Risk and mitigation measures.

The Risk Management Committee of the Company is overseeing the implementation of the Policy. In the opinion of the Board, the policy on Risk Management addresses the risks associated with the business including identification of elements of risk which may threaten the existence of the Company

d) Corporate Social Responsibility Committee

The Board of Directors of the Company had constituted Corporate Social Responsibility Committee on March 18, 2014 and had formulated a policy on Corporate Social Responsibility which is available in the Corporate

Governance Section of the website of the Company i.e.. www.ilfsengg.com. The CSR Committee of the Company was constituted with Mr. Anil Kumar Agarwal as the Chairman of the Committee. Mr. MurliDhar Khattar and Mr. Sundaram Srinivas Ranjan were the members. Ms. Alpa Ramesh Sheth was inducted as member of the Committee on November 10, 2014 after the resignation of Mr. Ranjan as director of the Company. The Committee met once on February 11,2015 during the period under review.The members of the Committee are eminent persons with background in various social responsibility activities.

The Company is required to spend two per cent of the average net profits for preceding three financial years as per Section 135 (5) of the Act. However, the Company has not made any profitsduring the previous three financial years and hence.the Company could not spend any amount on CSR activities. The details of CSR policy and activities as per Rule 9 of Companies (Corporate Social Responsibility) Rules, 2014 are attached as an Annexure

e) Other Committees

The details of composition, number of meetings and such other information as required regarding Nomination and Remuneration Committee and Stakeholders Relationship Committee are mentioned in the Corporate Governance section of this Annual Report.

K. SUBSIDIARIES

As per Section 129 (3) of the Companies Act, 2013 and Clause 32 of the Listing Agreement, the consolidated financial statements of the Company forms part of this Report. The copies of Audited Financial Statements of the Subsidiaries. Joint Ventures and Associates are available on the website of the Company www.ilfsenaa.com and a copy of the same will be provided upon written request to the Company Secretary

Angeer as a Greedfields Private Limited, Ekadanta Greenfields Private Limited, SaptaswaraAgro-farms Private Limited, Maytas Infra Assets Limited, Maytas Metro Limited, Maytas Vasishta Varadhi Limited and Maytas Infra Saudi Arabia Company are the subsidiaries of your Company. A step down subsidiary namely Maytas Infra for Construction W.L.L. was incorporated as Subsidiary of Maytas Infra Saudi Arabia Company and the same was in the process of closing subsequent to Financial Year 2014-15

The performance and financial position of the Subsidiaries. Joint Venture and Associate Companies is attached as an Annexure to this Report

ASSOCIATES & JOINT VENTURES

During the year under review, the following have been associates and Joint Ventures of your Company:

Associate:

Hill County Properties Limited

Joint Ventures (Association of Persons):

NCC-Maytas(JV)

NEC-NCC-Maytas(JV)

Maytas-NCC(JV)

NCC-Maytas (JV) (Singapore Classtownship)

Maytas-CTR(JV)

NCC-Maytas-ZVS(JV)

Further, none of the entities have been associated / disassociated as Joint Ventures of your Company during the year under review:

X. AUDITORS AND AUDITORS'' REPORT

a) Statutory Auditors

M/s S. R. Batliboi & Associates LLR Chartered Accountants were appointed as Statutory Auditors of the Company to hold office from the 25th Annual General Meeting of the Company till the conclusion of 28th Annual General Meeting of the Company. The appointment of Statutory Auditors of the Company for the financial year 2015-16 is placed for ratification of the members of the Company in the ensuing 26th Annual General Meeting of the Company.

The notes on financial statements referred to in the Auditors'' Report are self explanatory and do not call for any further comments. The Auditors'' Report does not contain any qualification, reservation or adverse remark.

b) Cost Auditor

The Board has appointed M/s S Mahadevan and Co. Cost Accountants as Cost Auditors of the Company for the Financial Year 2014-15. The remuneration payable to the Cost Auditors was approved by the members in the 25th Annual General Meeting of the Company.

M/s S Mahadevan & Co are re-appointed as Cost Auditors of the Company for the Financial Year 2015-16 and the remuneration payable to them is recommended for the approval of the members in the ensuing Annual General Meeting.

c) Secretarial Auditor

The Board has appointed Mr. Y Ravi Prasada Reddy. Practising Company Secretary to conduct the Secretarial Audit for the financial year 2014-15. The Secretarial Audit Report for the financial year ended March 31, 2015 is annexed herewith marked as Annexure to this report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

XI. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm''s length basis. During the year, the Company had not entered into any contract /arrangement/transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions, except with Infrastructure Leasing and Financial Services Limited wherein the Company has entered into following agreements which together constituted as a material related party transactions.

I. Term loan of Rs. 100 Cr at an interest rate of 13% p.a. calculated at quarterly rests

ii. Term loan of Rs. 100 Cr at an interest rate of 13% p.a. calculated at quarterly rests

iii. Term Loan of Rs. 280 Cr at an interest rate of 13% p.a. calculated at quarterly rests

iv Corporate Guarantee for an amount of Rs. 123.20 Cr against Bank guarantee provided by IL&FS from its Bank Limits and commission @ 1.15% thereon

v. Corporate Guarantee for an amount of Rs.67.75 Cr against Bank guarantee provided by IL&FS from its Bank Limits and commission® 1.15% thereon

vi. To provide Letter of Comfort and / or Letter of awareness on behalf of the Company in favour of the CDR Lenders for an amount of Rs.973 Cr in the manner as may be decided by the Board in consultation with the CDR Lenders / any other lenders of the Company from time to time

vii. IL&FS agreed to CDR Banks of IECCL to keep the loan amount of Rs.400 Cr extended to IECCL as Core Funding in the Company

The a fore mentioned transactions are not falling in the list of transactions specified in Section 188of the Companies Act. 2013. However, the definition of Related Party Transaction in the Listing Agreement has awider scope and covers the aforementioned transactions with related parties

XII. EMPLOYEE STOCK OPTION SCHEME

During the year under review, the Employee Stock Option Scheme 2007 was expired since all the options granted under the scheme were lapsed. The Company has allotted 10,61,133 Equity of Rs.10/- each at a price Rs.58.90 per share (including premium) upon exercise of the same number of ESOPs under ESOP 2009 Scheme.

The Company has received a certificate from the Statutory Auditors of the Company that the ESOP scheme has been implemented in accordance with the SEBI Guidelines and the resolution passed by the members. The Certificate is mentioned elsewhere in this report and is available for inspection at the Meeting for the members. Further, the information regarding Grant I and Grant II of the Employee Stock Option Scheme 2009 are provided as an Annexure to this Report.

XIII. MANAGEMENT DISCUSSION AND ANALYSIS

A separate section titled-Management Discussionand Analysis" consisting of details incompliance with Clause 49 of the Listing Agreement is annexed here to and forms part of the Annual Report.

XIV. CORPORATE GOVERNANCE

A separate section titled "Report on Corporate Governance including a certificate from the Practising Company Secretary confirming compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is annexed here to and forms part of this Annual Report

Further, the declaration signed by the Managing Director affirming the compliance with code of conduct for Board of Directors and senior management personnel is annexed to the Report on Corporate Governance.

XV. DISCLOSURES

a) Extract of Annual Return

The extract of Annual Return as per Section 92(3) of the Companies Act, 2013 and rule 12 (1) of the Companies (Management and Administration) Rules, 2014 is appended to this Report.

b) Viail Mechanism

The Company established a Vigil Mechanism which incorporates Whistle Blower policy to identify and report fraud. Please refer to the Corporate Governance section of the Annual Report for further details.

c) Policy on Prevention of Sexual Harassment

The Company has formulated and implemented a policy for Prevention of Sexual Harassment of Women at workplace. During the year under review, the Company has not received any complaints under the policy.

The company has many systems, processes and policies to ensure professional ethics and harmonious working environment. We follow Zero Tolerance towards Corruption and unethical conduct. These are ensured through Whistle Blower Policy, Gift Policy, Sexual Harassment Policy and Redressal Guidelines.

d) Transfers to IEPF

During the year under review, the Company had transferred an amount of Rs. 3,18,780 which was unclaimed share application money, received at the time of Initial Public Offer of the Company in the year 2007.

e) particulars of Loans, guarantees or investments under Section 186

Your Company is into the business of providing Infrastructure Facilities. Accordingly, the provisions of Section 186 pertaining to providing Loan or Guarantee to other corporates are exempted. All information regarding

loans, guarantees and investments is mentioned in the notes to financial statements for the financial year ended 2014-15 which are self-explanatory. Further, your Company has made no further investments during the year 2014-15 and hence, the provisions of Section 186 are not attracted.

However, your Company is proposing to make a further investment in the shares of its Subsidiary, Maytas Infra Saudi Arabia Company in the Financial Year 2015-16. The approval under Section 186 for this investment is being sought in the ensuing Annual General Meeting

f) particulars of employees and related disclosures

The disclosures relating to particulars of employees as per Section 197 (12) of the Act read with rules 5 (2) and 5 (3) of the Companies (Appointment and remuneration of Managerial Personnel) Rules, 2014 is appended as an Annexure with this Report.

The disclosure pertaining to remuneration and other details as required under Section 197 (12) of the Act read with rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is appended as Annexure with this Report.

XVI. ACKNOWLEDGMENTS:

Your Directors place on record their gratitude to the Bankers. Financial Institutions, various Agencies of the State and the Central Government Authorities, Clients, Consultants, Suppliers, Sub-Contractors, Members and the Employees for their valuable support and co-operation and look forward to continue enriched relationships in the years to come.



By order of the Board

For IL&FS Engineering and Construction Company Ltd



Place:New Delhi Ramchand Karunakaran

Date:May 29,2015 Chairman


Mar 31, 2014

The Shareholders

IL&FS Engineering and Construction Company Limited and reduced

The Directors take pleasure in presenting the Twenty-Fifth Annual Report along with the Audited Financial Statements for the Financial Year (18 months) ended March 31, 2014

COMPANIES ACT 2013:

The Government of India had repealed the Companies Act, 1956 and promulgated the Companies Act, 2013 ("the New Act") on August 28, 2013. The majority of provisions of the New Act came in to effect by April 01, 2014. However, the Ministry of Corporate Affairs in its General Circular 08/2014 dated April 04, 2014 had clarified that the Financial Statements (and documents required to be attached thereto), Auditor''s Report thereon and Board''s Report in respect of Financial Years commencing before April 1, 2014 shall be prepared as per the provisions of the Companies Act, 1956. Accordingly, the Financial Statements, Board''s Report and the documents attached to the Financial Statements are prepared as per the provisions of Companies Act, 1956

EXTENSION OF FINANCIAL YEAR:

The previous Financial Year of your Company consisted of 18 months and ended on September 30, 2012. Your Company has extended the current Financial Year by a period of six months i.e. up to March 31, 2014 to align the Financial Year in terms of the Companies Act, 2013 and accordingly has prepared its Financial Statements for a period of 18 months i.e. from October 01, 2012 to March 31, 2014

FINANCIAL RESULTS: (Rs. in Crores)

Particulars 2012-14 2011-12 18 Months 18 Months

Gross Income 3427.01 2145.40

(Loss) / Profit before Interest, Depreciation, exceptional items and Tax 266.16 170.64

Interest and Finance Charges 331.82 213.31

Depreciation 85.32 94.00

(Loss) / Profit before exceptional

items, tax and Prior period items (150.98) (136.67)

Exceptional items (net) - (10.26)

(Loss) / Profit before Tax and Prior period items (150.98) (126.41)

Provision for Taxes - 8.90

Less: Prior Period Expenses ( net)

(Loss)/Profit after Tax (150.98) (135.31)

Adjustment as per the

Scheme of arrangement - 179.82

Profit after Adjustment as per the Scheme of arrangement (150.98) 44.51

Paid up Equity Capital 89.79 89.79

Preference Share Capital 249.86 249.86

Reserves and Surplus (78.61) 72.37

Net worth 261.04 412.02

Earnings per share (In Rupees)

-Basic (19.72) (21.80)

-Diluted (19.72) (21.80)

Previous year''s figures have been regrouped / rearranged to conform to those of the current year.

SHARE CAPITAL:

Your Company did not allot any fresh shares during the year under review.

Out of the existing 1,75,00,000; 6% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS) of Rs. 100 each, 37,50,000 OCCRPS were redeemable on September 30. 2013. Also, out of the existing 15,00,000; 6% Cumulative Redeemable Preference Shares (CRPS) of Rs. 100 each issued as Bonus Shares on OCCRPS, 2,25,000 CRPS were redeemable on September 30, 2013.

The Company had extended the period of redemption of these shares by a period of six years with an early redemption right to the Company before the extended period of six years by giving 30 days notice in writing i.e. the new redemption date for these 37,50,000 OCCRPS and 2,25,000 CRPS was fixed at September 30,2019 unless they are redeemed earlier by giving 30 days notice to the concerned shareholders

RIGHTS ISSUE:

The Board of Directors of your Company had resolved on October 9, 2013 to issue Equity Shares of Rs. 10 each for an aggregate amount of Rs. 300 Crores on Rights Basis to the existing Equity Shareholders of the Company as on the record date to be fixed later by the Board. The price of the Equity Shares shall be fixed at a later date

Your Company had filed Draft Letter of Offer (DLOF) with the Securities and Exchange Board of India (SEBI) on March 28, 2014 and also filed the DLOF with BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE) on March 31, 2014. As on May 19, 2014, your Company has received in-principle approval from BSE but is awaiting response of NSE and also comments on the DLOF from SEBI.

DIVIDEND:

Due to the absence of profit, your Directors express their inability to recommend any dividend to the Shareholders for the year. However, dividend on Preference Shares issued by the Company shall be cumulative and will accrue to the shareholders.

OVERVIEW:

During the year under review, your Company had bagged various orders in the Roads, Buildings & Structures, Power and Oil & Gas Sectors. The Orders received during the year under review amounted to Rs. 4,696 Crores. Also, the Company already had orders worth Rs. 8,400 Crores at the beginning of the year. Out of the total orders in hand, the unexecuted order value stands at Rs. 10,063 at the end of the year.

Your Company is having operations beyond the territorial limits of India and is now operating from Saudi Arabia under a separate Joint Venture Subsidiary and through Company''s branches in Fujairah and Abu Dhabi

The Board of Directors is hopeful of securing sizeable orders in the future and is confident of effective execution of the existing works of the order book. Also, the business support from the Promoter and Investor is facilitating entry into new market segments and in turn increasing capabilities of the Company.

The Industry Scenario has seen a change towards end of the year under review and is presented in detail in the Management Discussion & Analysis Section of this Annual Report.

FUTURE OUTLOOK:

With a healthy order book of Rs. 10,063 Crores on hand, the Company looks forward to increasing turnover and better performance in future.

RECOVERY OF INTER CORPORATE DEPOSITS (ICDs):

During the year, your Company continued pursuing recovery of Inter Corporate Deposits (ICDs). Your Company had a major legal battle with the then Satyam Computer Services Ltd. (SCSL) on the merger petition filed by SCSL for its proposed merger with Tech Mahindra Ltd. (TML). Though the Company could not succeed at single bench level, it had filed appeals through its Subsidiaries in Division Bench, which is still pending for hearing. Separately, your Company is pursuing civil suits for recovery of the amount. Therefore, your Company is taking necessary steps to recover ICDs through available legal means

FIXED DEPOSITS:

Your Company did not invite or accept deposits from the public during the year under review.

SUBSIDIARIES AND JOINT VENTURES:

A statement pursuant to Section 212 of the Companies Act, 1956 containing the details of the Subsidiaries together with financial data thereof, forms part of the Annual Report. The following are the Subsidiaries of the Company:

(1) Maytas Infra Assets Limited (MIAL):

MIAL was incorporated in February 2008, as a wholly owned Subsidiary, to carry on the business of infrastructure projects and for consolidation of all investments made by your Company in BOT projects. Your Company has invested an amount of Rs. 0.05 crores in Equity and paid Rs.18.96Crores towards Sub-debt and reimbursement of expenses in MIAL till March 31, 2014. No projects were secured during the year. Out of the amount advanced, Rs 11.74 Crores approximately has been considered as impaired as they are not represented by any realizable assets and therefore have been provided in full during the earlier years.

(2) Maytas Metro Limited (MML):

The Maytas Infra Limited / Nava Bharat Ventures Limited / Infrastructure Leasing & Financial Services Limited / Italian- Thai Development Public Company Limited consortium had technically qualified in the bids and won the financial bid to undertake development of the Hyderabad Metro Rail Project. Subsequently, the Consortium had formed the "MML as SPV in September 2008 to develop the Hyderabad Metro Rail Project on BOT basis and signed Concession Agreement with Government of Andhra Pradesh (GoAP) on September 19, 2008 for a period of 35 years including five years of construction period. The GoAP had cancelled the Concession Agreement on July 7, 2009 without giving any prior notice to the Company as per the terms and conditions of the Concession Agreement and invoked the security deposit of Rs.60 Crores. The Writ Petition filed by MML in High Court of Andhra Pradesh was disposed off with a direction to settle the dispute under Arbitration mechanism as available in the Concession Agreement. MML had appointed Arbitrator on its behalf in April, 2012 and GoAP had also appointed an Arbitrator on its behalf in May, 2014 The arbitration proceedings have started. Your Company has invested an amount of Rs. 0.05 Crores towards the equity and arranged funds to the extent of Rs.74. 82 crores. The investment and the amount advanced aggregating to Rs 74.87 Crores have been written off fully during the earlier years.

(3) Maytas Vasishta Varadhi Limited (MWL):

MWL, a Subsidiary of your Company, was incorporated in April 2008 for executing the construction of bridge across Godavari River at Narasapur on BOT (Annuity) Basis, awarded by Andhra Pradesh Road Development Corporation

(APRDC). Your Company has invested an amount of Rs. 0.05 Crores towards the equity and Rs 2.82 Crores as sub- debt towards project cost and reimbursement of expenses. As the project could not be taken up by MWL post-Satyam developments, assigned Coastal Projects Ltd., to take up the project and made application to the State Government for approval of new partner. The Government of Andhra Pradesh approved the entry of Coastal Projects Ltd. However, when MWL filed application with the Government for extension of time, the Government of Andhra Pradesh unilaterally cancelled the Project and invoked the Bank Guarantee submitted by MWL. MWL contested the unilateral cancellation in the Court of Law and obtained stay order against invocation of Bank Guarantee by the Government. Currently, the matter is before the Hon''ble High Court of Andhra Pradesh for its adjudication. However, as a matter of prudence, your Company has provided for an amount of Rs. 2.82 crores in earlier years.

(4) Angeerasa Greenfields Private Limited (AGPL):

Your Company had acquired AGPL in the Financial Year 2010-11. AGPL in the earlier years had advanced Rs.50 Crores in the form of Inter Corporate Deposits (ICDs) to various other Companies which ultimately had gone to the credit of the bank accounts of Satyam Computer Services Limited (SCSL). AGPL has initiated legal action for the recovery of the said deposits through the Companies to whom it had lent the monies with various Authorities and AGPL is hopeful of receiving the same in due course.

(5) Ekadanta Greenfields Private Limited (EGPL):

Your Company has acquired EGPL in the Financial Year 2010- 11. EGPL in the earlier years had advanced Rs.18.58 Crores (net of repayment of Rs. 17.92 Crores by SCSL) in the form of ICDs to SCSL. EGPL has initiated legal action for the recovery of the said deposits with various authorities and EGPL is hopeful of receiving the same in due course.

(6) Saptaswara Agro-farms Private Limited (SAPL):

Your Company has acquired SAPL in the Financial Year 2010- 11. SAPL in the earlier years had advanced Rs. 19.75 Crores (net of repayment of 15.25 Crores by SCSL) in the form of ICDs to SCSL. SAPL has initiated legal action for the recovery of the said deposits under various authorities and SAPL is hopeful of receiving the same in due course.

(7) Maytas Infra Saudi Arabia Co. (MISA):

During the previous year, your Company has incorporated Maytas Infra Saudi Arabia Co. (MISA) in Joint Venture with Saudi Bin Ladin Group in Kingdom of Saudi Arabia. Your Company owns 55% shareholding out of a total capital of SAR 50,000,000 (Indian Rupees equivalent 33.19 Crores) as on March 31, 2014 in this Joint Venture with a right to appoint 3 Director Positions out of 5 Director Positions. Accordingly, this Joint Venture became subsidiary of your Company.

CONSOLIDATED FINANCIAL STATEMENTS:

The Consolidated Financial Statements of your Company together with its Subsidiaries, Associates and Joint Venture Entities for the Financial Year ended March 31, 2014, prepared in accordance with the Accounting Standard 21. 23 and 27 notified by Companies (Accounting Standards) Rules, 2006, are attached herewith.

DIRECTORS:

The members are already aware that in the month of December 2012, Mr. Hari Sankaran was appointed as

Director of the Company and Mr. Arun Kumar Saha had resigned as Director of the Company.

Mr. Sundaram Srinivas Ranjan was appointed as Nominee Director on behalf of the lenders under Corporate Debt Restructuring (CDR) Scheme with effect from August 4,2013. He was nominated by State Bank of India to hold the office as Nominee Director for a period of two years.

On November 13, 2013, the term of office of Mr. G. Venkateswar Reddy as Manager of the Company had ended. Mr. Murli Dhar Khattar, Chief Executive Officer of the Company was appointed as Director of the Company with effect from November 14, 2013. Thereafter, in the meeting held on December 26, 2013, the Board of Directors had appointed Mr. Murli Dhar Khattar as Managing Director of the Company to hold the office for a period of three years and the appointment was approved by means of a special resolution by the members of the Company in the Extraordinary General Meeting held on March 18, 2014.

Your Company had entered into Amendatory Shareholder Agreement with Saudi Binladen Group (SBG) and as per the agreement, SBG was entitled to appoint two directors on the Board of your Company. Consequently, Mr. Akber Moawallaand Mr. Ahmad Dabbous resigned as Directors of the Company and were appointed as Alternate Directors to Mr. Saleh Moahammad BinLaden and Mr. El Mouhtaz El Sawaf respectively on March 18, 2014.

Mr. Hari Sankaran had resigned as Director of the Company on March 18, 2014. Mr. Dhananjay Narendra Mungale was appointed as Additional Director of the Company with effect from March 18, 2014. His appointment is being put up for approval of the members in the Twenty-Fifth Annual General Meeting.

The Board of Directors wishes to place on record their sincere appreciation of Mr. Arun Kumar Saha, Mr. Hari Sankaran, Mr. Akber Moawalla and Mr. Ahmad Dabbous for the contribution made by them as Directors of your Company in carrying out the business of the Company.

None of the Directors are related to each other.

CAPITAL RESTRUCTURING SCHEME:

The Members are aware of the Capital Restructuring Scheme sanctioned by the Hon''ble High Court of Andhra Pradesh and your Company has taken all steps to give effect to the sanction of the said Scheme in the previous Financial Year. However, your Company is required to use the words "and reduced" as its last words in the name up to and until the end of the Financial Year 2012-13; and in the Balance Sheet. Profit and Loss Account, and the Annexures for the said period. The Financial Year 2012-13 has been extended by a period of 6 months till March 31, 2014 and hence, the words "and reduced" are used as the last words of the name of your Company in the Financial Statements for the Financial Year ended on March 31, 2014.

REGISTERED OFFICE:

The Registered Office of your Company was shifted to Door No. 8-2-120/113/3/4F, Sanali Info Park, Cyber Towers, Road No.2, Banjara Hills, Hyderabad - 500033 on May 13, 2013.

DISCLOSURES UNDER SECTION 217(1) (D) OF THE COMPANIES ACT, 1956:

Except as disclosed elsewhere in this report, there have been no material changes and commitments which can affect the financial position of the Company occurred between the end of the financial year of the Company and date of this report.

DIRECTORS'' RESPONSIBILITY STATEMENT:

Section 217 (2AA) of the Companies Act, 1956 as amended in December 2000 requires the Board of Directors to provide a statement to the members of the Company in connection with maintenance of books, records and preparation of Annual Accounts in conformity with accepted accounting standards and past practices followed by the Company. Pursuant to the foregoing, and on the basis of representations received from operating management and after due enquiry, it is confirmed that:

(1) In the preparation of the accounts for the Financial Year ended March 31, 2014, the applicable accounting standards have been followed and that there are no material departures in the preparation of annual accounts;

(2) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2014 and of the profit of the Company for the year ended on that date;

(3) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records, in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(4) The Directors have prepared the accounts on a going concern basis.

MANAGEMENT DISCUSSION AND ANALYSIS (MDA):

A separate section titled "Management Discussion and Analysis" confirming compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is annexed hereto and forms part of this Annual Report.

CORPORATE GOVERNANCE:

A separate section titled "Report on Corporate Governance" including a certificate from the Practicing Company Secretaries confirming compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is annexed hereto and forms part of this Annual Report.

AUDITORS:

The Statutory Auditors of the Company M/s S. R. BATLIBOI & ASSOCIATES LLP, Chartered Accountants, retire at the conclusion of the forthcoming Annual General Meeting. M/s S. R. BATLIBOI & ASSOCIATES LLP, Chartered Accountants, being eligible, offer themselves for re-appointment. As per the provisions of the Companies Act 2013 read with relevant rules, S. R. BATLIBOI & ASSOCIATES LLP can be appointed for a maximum period of three years as Statutory Auditors of the Company. Therefore, S. R. BATLIBOI & ASSOCIATES LLP are proposed to be appointed as Statutory Auditors of the Company to hold office from the conclusion of this Annual General Meeting for a period of three years. The Company has received letter from them to the effect that their re- appointment, if made, would be within the limits prescribed under Section 139 of the Companies Act, 2013 read with rules thereon and that they are not disqualified for such re- appointment within the meaning of the said Act.

Replies to the Audit Qualifications:

(1) Replies to the Audit Qualifications - Standalone Financial Statements:

Clause (a) under Basis for Qualified Opinion: Recovery of Inter-Corporate Deposits

Reply: Prior to April 1, 2009 the erstwhile promoters had given certain Inter Corporate Deposits (ICDs) to various companies aggregating to Rs. 343.78 Crores Of the foregoing, documentary evidences had been established that, for an amount of Rs 323.78 Crores the then Satyam Computer Services Limited (SCSL) was the ultimate beneficiary and for which a claim together with interest receivable had been lodged by the Company. During the year, SCSL had merged into Tech Mahindra Limited (TML) pursuant to a Scheme of Arrangement u/s.391- 394 of the Companies Act 1956. As provided in the scheme and as per the judgment of Hon''ble High Court of Andhra Pradesh on the said scheme, the aforesaid amount in books of SCSL was now transferred to TML. The Company through its subsidiaries preferred an Appeal before the Division Bench of Hon''ble High Court of A.R against the single judge''s Order approving the merger scheme of SCSL which is pending as on date. TML, in its audited financial results for March 31, 2014 continued to disclose as Amounts Pending Investigation Suspense Account (Net) Rs.1,230.40 (Crores)" as disclosed by SCSL earlier. Management is of the opinion that the claim made by the Company on SCSL is included in the aforesaid amount disclosed by TML in their Audited Financial Results. Management is confident of recovering the Inter Corporate Deposits together with interest due thereon.

Clause to) under Basis for Qualified Opinion: Un-audited Financial Statements of Joint Ventures:

Reply: The qualification in respect of adoption of Unaudited Financial Statements relates to the Joint Ventures of the Company. Accounting year of the Company was from October 1, 2012 to March 31, 2014 (consisting of 18 months), and the Joint ventures being AOPs are not required to prepare audited accounts for 18 months. However, they provided Unaudited Management Accounts which have been adopted by the Company.

Clause (iii)fc) of Annexure to Audit Report: Loans granted to Companies

Reply: The loan amount of Rs.47.87 Crores pertains to an Inter Corporate Deposit given to Hill County Properties Limited (HCPL) in the Financial Year 2008-09 by the erstwhile Promoters. The Company ceased to be a Company to be covered in the Register maintained under Sec.301 of the Companies Act 1956 with effect from September 29, 2009. The Company is confident of recovering the Inter Corporate Deposit along with interest in view of acquisition of Hill County Properties Limited by IL&FS Group as per the CLB Order of January 2011 Further, during the year, the Company has entered into a restructuring arrangement with HCPL where in the loan has been converted into Funded Interest Term Loan (FITL). The maximum amount due as at March 31, 2014 is Rs. 97 Cr. Clause fix) (a) - Delays in remittance of Statutory Dues : Reply: The Company in general has been regular in remitting the statutory dues in time. The Management has taken steps to avoid delays and as a matter of internal control statutory dues are being monitored for timely remittances.

Clause (x) - Cash loss during the year and in the immediately preceding Financial Year:

Reply: The Company has started bidding for new business both in India and abroad and has been successful in bagging new projects considerably. The Company is confident of the future business performance and growth based on the following:

- Healthy Order book

- The Promoter Group continued credit facilities to the tune of Rs.958.06 Crores to support the liquidity position of the Company

- The Company has also unutilized limit of Rs. 65 Crores from Infrastructure Leasing & Financial Services Limited (IL & FS) and Rs. 45 Crores from IL&FS Financial Services Limited. The Lending Banks released additional Cash Credit facilities of Rs.113.99 Crores and non fund based limits to the extent of Rs.249.25 Crores approved by them in the previous year

- CARE has assigned BBB- and A3 ratings for long-term and short-term banking facilities of the Company respectively

- An overseas branch in Fujairah was opened to undertake works outside India

- The Company has resolved to issue further equity in the form of rights to the existing shareholders. Draft Letter of Offer (DLOF) has been filed on March 28, 2014.

(2) Replies to the Audit Qualifications - Consolidated Financial Statements :

Clause (a) under Basis for Qualified Opinion: Recovery of Inter Corporate Deposits :

Reply: Prior to April 1, 2009 the erstwhile promoters had given certain Inter Corporate Deposits (ICDs) to various companies aggregating to Rs.362.36 Crores. Of the foregoing, documentary evidences had been established that, for an amount of Rs 342.11 Crores the then Satyam Computer Services Limited (SCSL) was the ultimate beneficiary and for which a claim together with interest receivable had been lodged by the Company. During the year, SCSL had merged into Tech Mahindra Limited (TML) pursuant to a Scheme of Arrangement u/s.391- 394 of the Companies Act 1956. As provided in the scheme and as per the judgment of Hon''ble High Court of Andhra Pradesh on the said scheme, the aforesaid amount in books of SCSL was now transferred to TML. The Company through its subsidiaries preferred an Appeal before the Division Bench of Hon''ble High Court of A.R against the single judge''s Order approving the merger scheme of SCSL which is pending as on date. TML, in its audited financial results for March 31, 2014 continued to disclose the same as Amounts Pending

Investigation Suspense Account (Net) Rs.1,230.40 (Crores)1'' as disclosed by SCSL earlier. Management is of the opinion that the claim made by the Company on SCSL is included in the aforesaid amount disclosed by TML in their Audited Financial Results. Management is confident of recovering the Inter Corporate Deposits together with interest due thereon.

Clause to) under Basis for Qualified Opinion: Unaudited Financial Statements of Joint Ventures & Subsidiaries:

Reply: The Auditors have qualified their Report for the period ended March 31, 2014 stating that four Joint Ventures and two Subsidiaries have been consolidated based on the Unaudited Financial Statements. The Company has taken its share as on March 31, 2014 pursuant to extension of its Financial Year based on Unaudited Management Accounts of the Joint Ventures and subsidiaries which were provided to the Auditors. Hence, consolidation was done on the basis of accounts certified by the Management of these investee companies.

EMPLOYEES:

The relations with the employees have been cordial throughout the year under review. Your Directors place on record their sincere appreciation in respect of the services rendered by the employees of the Company at all levels.

PARTICULARS OF EMPLOYEES:

Particulars of employees as required under Section 217(2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this Report. However, in pursuance of Section 219(1) (b) (iv) of the Companies Act, 1956, this Report is being sent to all the Shareholders of the Company excluding the aforesaid information and the said particulars are made available at the Registered Office of the Company. The Members interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

ESOP 2007 and 2009

Your Company has not granted any stock options to the employees during the year under review. Further, all the stock options issued under ESOP 2007 had expired as on April 13, 2014 since the ESOP 2007 scheme is expired effective April 13, 2014

Disclosure as required by Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Stock Purchase Scheme), Guidelines, 1999, as amended, are as per the annexure enclosed

Undertaking Pursuant to General Circular No: 2 /2011 No: 51 / 12/2007-CL-lll

The Company, hereby undertake to comply with the following;

- The annual accounts of the Subsidiary Companies and the related detailed information shall be made available to shareholders of the Holding and Subsidiary Companies seeking such information at any point of time.

- The annual accounts of the Subsidiary Companies shall also be kept for inspection by any shareholders in the head office of the Holding Company and of the Subsidiary Companies concerned.

- The Company shall furnish a hard copy of details of accounts of Subsidiaries to any shareholder on demand.

ENVIRONMENTAL POLICY:

Your Company is committed to carrying out all its activities with requisite measures to protect the environment. Accordingly, your Company is committed by policy to not only abide by the prevailing legal requirements but also to have a futuristic approach in carrying out continuous improvement in this regard.

DETAILS U/S 217(1) (e) OF THE COMPANIES ACT, 1956:

Particulars as per Section 217(1) (e) of the Companies Act. 1956, read with Companies (Disclosure of particulars in the report of Board of Directors) Rules, 1988 are as under:

Conservation of Energy:

The conservation of energy in all the possible areas is undertaken as an important means of achieving cost reduction. Savings in electricity, fuel and power consumption receive due attention of the management on a continuous basis.

Technology Absorption:

Timely completion of the projects as well as meeting the budgetary requirements are the two critical areas where different techniques help to a great extent. Many innovative techniques have been developed and put to effective use in the past and the efforts to develop new techniques continue unabated.

Foreign Exchange Earnings & Outgo:

(Rs. Crores)

Earned 310.78

Outgo 320.39

ACKNOWLEDGMENTS:

Your Directors place on record their gratitude to the Bankers. Financial Institutions, various Agencies of the State and the Central Government Authorities, Clients, Consultants, Suppliers, Sub- Contractors, Members and the Employees for their valuable support and co-operation and look forward to continued enriched relationships in the years to come

By order of the Board

For IL&FS Engineering and Construction Company Ltd

and reduced

Place : New Delhi Ramchand Karunakaran

Date: May 19, 2014 Chairman


Sep 30, 2012

The Shareholders

IL&FS Engineering and Construction Company Limited and reduced

The Directors take pleasure in presenting the Twenty-Fourth Annual Report along with the Audited Accounts for the Financial Year ended September 30, 2012

EXTENSION OF FINANCIAL YEAR :

Your Company has extended its Financial Year 2011-12 by a period of six months i.e. up to September 30, 2012 to give effect to the Capital Restructuring Scheme (details provided elsewhere in this report) during the same financial year and accordingly has prepared its Financial Statements for a period of 18 months i.e. from April 1, 2011 to September 30, 2012

FINANCIAL RESULTS: (Rs. in Crores)

Particulars 2011-12 2010-11 18 Months 12 Months

Gross Income 2145.40 1067.33

(Loss) / Profit before Interest, 170.64 10.80 Depreciation, exceptional items and Tax

Interest and Finance Charges 213.31 74.36

Depreciation 94.00 56.96

(Loss) / Profit before exceptional items, tax and Prior period items (136.67) (120.52)

Exceptional items (net) (10.26) (129.08)

(Loss) / Profit before Tax and Prior period items (126.41) 8.56

Provision for Taxes 8.90 (6.07)

Less: Prior Period Expenses (net) - 11.72

(Loss) / Profit after Tax (135.31) 2.91

Adjustment as per Scheme of 179.82 - arrangement

Profit after adjustment as per the 44.51 2.91 Scheme of arrangement

Paid up Equity Capital 89.79 77.37

Preference Share Capital 249.86 307.50

Reserves and Surplus 72.37 197.18

Net worth 412.02 582.05

Earnings per share (In Rupees)

-Basic (21.80) (2.64)

-Diluted (21.80) (2.64)

Previous year''s figures have been regrouped / rearranged to conform to those of the current year

SHARE CAPITAL:

75,00,000 Optionally Convertible Cumulative Redeemable Preference Shares of Rs.100/- each (OCCRPS) were converted into 1,24,17,218 Equity Shares of Rs.10/- each at a price of Rs.60.40 per share as per the terms of issue of the said OCCRPS pursuant to the Corporate Debt Restructuring Scheme (CDR Scheme) and the same were allotted to the concerned OCCRPS holders on September 30, 2012

The Company has issued 15,00,000 and 2,36,280 6% Cumulative Redeemable Preference Shares (CRPS) as bonus CRPS on OCCRPS and CRPS respectively on September 29, 2011

Out of the above 15,00,000 6%-CRPS, 4,50,000 CRPS were due for redemption on September 30, 2012. The Company had extended the period of redemption of these shares by a period of three years with an early redemption right to the Company before the extended period of three years by giving 30 days notice period i.e. the new redemption date for these 4,50,000 CRPS shall be September 30, 2015 unless they are redeemed earlier by giving 30 days notice to the concerned shareholders

DIVIDEND:

Due to the current financial conditions faced by the Company, your Directors express their inability to recommend any dividend to the equity Shareholders for the year

However, your Directors recommend to pay 6% Preference Dividend to the Preference Shareholders for the Financial Years 2010-11 and 2011-12, as extended, on pro-rata basis for the number of days the preference shares are outstanding during the respective years from the profit arising out of Capital Restructuring Scheme, as your Company has an obligation to pay the dividend on Preference Shares

OVERVIEW:

During the year under review, your Company successfully undertaken Capital Restructuring Scheme to set off accumulated losses against the Securities Premium Account etc. which enabled the Company to declare dividends to the Shareholders as and when balance is available in Profit and Loss account of the Company. The details of the Capital Restructuring Scheme are provided elsewhere in this report

Four of Saudi Bin Ladin Group''s representatives joined the Board as Directors and are taking active role in the business operations of the Company

The Company has extended its operations beyond the territorial limits of India and are now operating from Saudi Arabia under a separate joint venture subsidiary and through its branches in Fujairah and Abu Dhabi

A new team of top officials was inducted in the Company which ensured increased efficiency in the operations of the Company

The Company has been getting good number of sizeable orders from various sectors and from both Government and Private Parties which provide better future for the Company

FUTURE OUTLOOK:

With a healthy order book of Rs.8,400 Crores on hand, the Company looks forward to increasing turnover and better performance in future.

RECOVERY OF INTER CORPORATE DEPOSITS (ICDs):

During the year, your Company continued pursuing recovery of Inter Corporate Deposits (ICDs). Your Company is taking necessary steps to recover ICDs through available legal means

FIXED DEPOSITS:

Your Company did not invite or accept deposits from the public during the year under review

SUBSIDIARIES AND JOINT VENTURES:

A statement pursuant to Section 212 of the Companies Act, 1956 containing the details of the Subsidiaries together with financials thereof, forms part of the Annual Report. The following are the Subsidiaries of the Company:

(1) Maytas Infra Assets Limited (MIAL):

MIAL was incorporated in February 2008, as a wholly owned Subsidiary, to carry on the business of infrastructure projects and for consolidation of all investments made by your Company in BOT projects. Your Company has invested an amount of Rs. 0.05 crores in Equity and paid Rs. 18.57 Crores towards Sub-debt and reimbursement of expenses in MIAL till September 30, 2012. No projects were secured during the year. Out of this amount advanced, Rs.11.28 Crores approximately has been considered as impaired as they are not represented by any realizable assets and therefore have been provided in full

(2) Maytas Metro Limited (MML):

The Maytas/Navabharat/IL&FS/ITD lead consortium had technically qualified in the bids and won the financial bid by offering highest premium to the GoAP in July 2008. Subsequently, the Consortium had formed the "MML''asSPV in September 2008 to develop the Hyderabad Metro Rail Project on BOT basis and signed Concession Agreement with Government of Andhra Pradesh (GoAP) on September 19, 2008 for a period of 35 years of concession including the five years of construction period. The GoAP had cancelled the Concession Agreement on July 7, 2009 without giving any prior notice to the Company as per the terms and conditions of the Concession Agreement and invoked the security deposit of Rs.60.00 Crores. The Writ Petition filed by MML in High Court of Andhra Pradesh was disposed off with a direction to settle the dispute under Arbitration mechanism as available in the Concession Agreement. MML has appointed arbitrator on its behalf and awaiting appointment of arbitrator by the Government of Andhra Pradesh. Your Company has invested an amount of Rs. 0.05 Crores towards the equity and arranged funds to the extent of Rs. 74.78 crores. The investment and the amount advanced aggregating to Rs. 74.83 Crores have been written off fully during the earlier years

(3) Maytas Vasishta Varadhi Limited (MVVL):

MVVL, a Subsidiary of your Company, was incorporated in April 2008 for executing the construction of bridge across Godavari River at Narasapur on BOT (Annuity) Basis, awarded by Andhra Pradesh Road Development Corporation (APRDC). Your Company has invested an amount of Rs. 0.05 Crores towards the equity and Rs 2.80 Crores towards sub-debt and reimbursement of expenses till September 2012. As the project could not be taken up by the Company post-Satyam developments, it had found out a partner M/s. Coastal Projects Ltd., to take up the project and made application to the State Government for approval of new partner. The Government of Andhra Pradesh approved the entry of M/s. Coastal Projects Ltd. However, when the Company filed application with the Government for extension of time, the Government of Andhra Pradesh unilaterally cancelled the Project and invoked the Bank Guarantee submitted by the Company. The Company contested the unilateral cancellation in the Court of Law and obtained stay order against invocation of Bank Guarantee by the Government. Currently, the matter is before the Hon''ble High Court of Andhra Pradesh for its adjudication. However, as a matter of prudence, the Company has provided for an amount of Rs.2.80 Crores during the year under review

(4) Angeerasa Greenfields Private Limited (AGPL):

Your Company has acquired AGPL in the previous Financial Year. The subsidiary in the earlier years has advanced Rs.50 Crores in the form of Inter Corporate Deposits (ICDs) to various other Companies which ultimately credited to the bank accounts of M/s Satyam Computer Services Limited (SCSL). AGPL has initiated legal action for the recovery of the said deposits through the Companies to whom it has lent the monies with various authorities and AGPL is hopeful of receiving the same in due course

(5) Ekadanta Greenfields Private Limited (EGPL):

Your Company has acquired EGPL in the previous financial year. The subsidiary in the earlier years has advanced Rs.18.58 Crores (net of repayment of Rs.17.92 Crores by SCSL) in the form of ICDs to SCSL. EGPL has initiated legal action for the recovery of the said deposits with various authorities and EGPL is hopeful of receiving the same in due course

(6) Saptaswara Agro-farms Private Limited (SAPL):

Your Company has acquired SAPL in the previous financial year. The subsidiary in the earlier years has advanced Rs.19.75 Crores (net of repayment of 15.25 Crores by SCSL) in the form of ICDs to SCSL. SAPL has initiated legal action for the recovery of the said deposits under various authorities and SAPL is hopeful of receiving the same in due course

(7) Maytas Infra Saudi Arabia Co. (MISA):

During the year, your Company has incorporated Maytas Infra Saudi Arabia Co. (MISA) in Joint Venture with Saudi Bin Ladin Group in Kingdom of Saudi Arabia. Your Company owns 55% shareholding out of a total capital of SAR 50,000,000 (Indian Rupees 33.19 Crores) in this joint venture with three director positions out of 5 director positions. Accordingly, this Joint Venture became subsidiary of your Company

CONSOLIDATED FINANCIAL STATEMENTS:

The Consolidated Financial Statements of your Company, together with its Subsidiaries, Associates and Joint Venture Entities for the Financial Year ended September 30,2012, prepared in accordance with the Accounting Standard 21,23 and 27 notified by Companies (Accounting Standards) Rules, 2006, are attached herewith

DIRECTORS:

During the year, Mr. Ravi Parthasarathy and Mr. Vimal Kishore Kaushik stepped down as Chairman and Managing Director of the Company respectively. Mr.Arun Saha has resigned as Director of the Company on December 12, 2012. Further, nominations of Mr. Ved Jain and Mr. Anil K Agarwal were withdrawn by the Government of India, with effect from September 01,2011 pursuant to completion of their term as nominee directors in terms of Order of Company Law Board. Following the cessation of their Directorship pursuant to the aforementioned withdrawal, Mr. Ved Jain and Mr. Anil K Agarwal were inducted on the Board as Independent Directors with effect from November 13, 2011. Mr. Hari Sankaran was appointed as an Additional Director on the Board of the Company with effect from December 11, 2012

Mr. Gogireddy Venkateswar Reddy was appointed as Manager of the Company for a period of two years with effect from November 14, 2011. Mr. Ramchand Karunakaran has been appointed as Chairman of the Board. Mr.MD Khattar was appointed as Chief Executive Officer of the Company

CAPITAL RESTRUCTURING SCHEME:

The Company had undertaken a Scheme of Arrangement ("the Scheme") under Sections 391 to 394 of the Companies Act, 1956 (the Act) read with Sections 78, 100 to 104 of the Act for restructuring of its Capital. The same was sanctioned by the Hon''ble High Court of Andhra Pradesh (the Court) vide its Order dated October 17, 2012, as modified by Orders dated October 19, 2012 and November 7, 2012. The said orders of the Court were registered with the Registrar of Companies on November 21, 2012. Pursuant to the said Scheme, an amount of Rs.612.24 Crores being balance in Securities Premium Account as on the appointed date i.e. July 1,2011, was adjusted with its past losses. The balance in the Statement of Profit and Loss after this adjustment was Rs.179.82 Crores as on the appointed date

The Court, while sanctioning the Scheme, laid down the following conditions:

- The Company shall within four weeks of this order, furnish an unconditional Bank Guarantee for Rs.70.02 Crores and deposit the guarantee with the Registrar (Judicial), High Court of Andhra Pradesh, to be retained to the credit of, and till the final outcome of Company Petition No.199 of 2010, or any directions passed therein. The debt due to the other two unsecured creditors, who voted against the scheme, of Rs.8.38 lakhs shall be repaid to them within four week from October 19, 2012 and proof of payment shall be filed by way of an application, supported by an affidavit, in the Company Petition

- The Company shall add to its name, as its last words "and reduced" for the period up to and until the end of the Financial Year 2012-13; and in the balance sheet, the profit and loss account, and the annexure for the said period

- The balance of Rs.179.82 Crores in the Statement of Profit and Loss arising pursuant to the Scheme of Arrangement can be utilized only for payment of dividend to the Preference Shareholders, to set-off losses, if any, from the current Financial Year onwards and for redemption of Preference Shares, but not for payment of dividend to Equity Shareholders

The Company has complied with the conditions stipulated by the Order of High Court of Andhra Pradesh referred above and has given effect to the Scheme in the Financial Statements of the Company for the Financial Year ended September 30, 2012.

DISCLOSURES UNDER SECTION 217(1) (D) OF THE COMPANIES ACT, 1956:

Except as disclosed elsewhere in this report, there have been no material changes and commitments which can affect the financial position of the Company occurred between the end of the financial year of the Company and date of this report

DIRECTORS'' RESPONSIBILITY STATEMENT:

Section 217 (2AA) of the Companies Act, 1956 as amended in December 2000 requires the Board of Directors to provide a statement to the members of the Company in connection with maintenance of books, records and preparation of Annual Accounts in conformity with accepted accounting standards and past practices followed by the Company. Pursuant to the foregoing, and on the basis of representations received from operating management and after due enquiry, it is confirmed that:

(1) in the preparation of the accounts for the Financial Year ended September 30, 2012 , the applicable accounting standards have been followed and that there are no material departures in the preparation of annual accounts;

(2) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at September 30, 2012 and of the profit of the Company for the year ended on that date;

(3) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records, in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(4) the Directors have prepared the accounts on a going concern basis

MANAGEMENT DISCUSSION AND ANALYSIS (MDA):

A separate section titled "Management Discussion and Analysis" confirming compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is annexed hereto and forms part of this Annual Report

CORPORATE GOVERNANCE:

A separate section titled "Report on Corporate Governance" including a certificate from the Practicing Company Secretaries confirming compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is annexed hereto and forms part of this Annual Report

AUDITORS:

The Statutory Auditors of the Company M/s S R Batliboi & Associates, Chartered Accountants, retire at the conclusion of the forthcoming Annual General Meeting. M/s S R Batliboi & Associates, Chartered Accountants, being eligible, offer themselves for re- appointment and are proposed to be appointed as Statutory Auditors of the Company to hold office from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting. The Company has received letters from them to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956 and that they are not disqualified for such re-appointment within the meaning of Section 226 of the said Act

Replies to the Audit Qualifications:

Replies to the Audit Qualifications - Standalone Financial Statements:

(1) Clause No5(a) & 5(b) : Non-preparation of Un-audited Financial Statements of Joint Ventures:

Reply: The qualification in respect of non-preparation of Financial Statements relates to Maytas SNC JV (presently known as SNC Power Corporation Pvt Limited) which could not produce its accounts before adoption of the accounts of the Company. Hence, the impact of Profit/(Loss) in the said Joint Venture has not been considered in the Financial Statements of the Company

The qualification in respect of adoption of Unaudited Financial Statements relates to all the Joint Ventures of the Company. Accounting year of the Company has been extended by 6 months i e upto September 30, 2012, and the Joint Ventures being AOPs do not have the practice or requirement to get their accounts audited for 18 months. Hence, they provided unaudited Management signed accounts which have been adopted by the Company

(2) Clause No.6 : Recovery of Inter-Corporate Deposits :

Reply: Prior to April 1, 2009 the erstwhile promoters had given Inter Corporate Deposits aggregating to Rs.391.64 Crores to various companies. As at September 30,2012, the outstanding balance of Inter Corporate Deposits to various companies aggregated to Rs.713.64 Crores (including Rs.369.85 Crores to Maytas Properties Limited [MPL]). Of the foregoing, documentary evidences had been established that, for an amount of Rs.323.78 Crores, Satyam Computer Services Limited (SCSL) is the ultimate beneficiary and for which a claim together with interest receivable had been lodged by the Company. SCSL had accounted Rs.1230.40 Crores as liability in its Audited Financial Statements as at March 31,2012 under the head "Amounts Pending Investigation Suspense Account (Net)". Management is of the opinion that the claim made by the Company on SCSL is included in the amount disclosed by them in their Audited Financial Statements. The Company is confident of recovering the Inter Corporate Deposits together with interest due thereon. During the earlier year and the year under review, the qualification on ICDs has been restricted to the extent of Rs.343.78 Crores in the Audit Reports in view of acquisition of MPL by IL&FS Group and the Company was confident of recovering ICD amounts of Rs.369.85 Crores from MPL along with interest

(3) Clause (iii)(c) of Annexure to Audit Report : Loans granted to Companies

Reply: The maximum amount of Rs.47.87 Crores pertains to an Inter Corporate Deposit given to Maytas Properties Limited in the Financial Year 2008-09 by the erstwhile Promoters. The Company ceased to be a Company to be covered in the Register maintained under Sec.301 of the Companies Act 1956 with effect from September 29, 2009. The Company is confident of recovering the Inter Corporate Deposit along with interest in view of acquisition of Maytas Properties Limited by IL&FS Group as per the CLB order. Further, during the year, the Company has accrued gross interest income of Rs.12.96 Crores on the said Inter Corporate Deposit

(4) Clause (ix) (a) - Delays in remittance of Statutory Dues :

Reply: The Company in general has been regular in remitting the statutory dues in time. The Management has taken steps to avoid delays and as a matter of internal control also, statutory dues are being monitored for timely remittances

(5) Clause (x) - Cash loss during the year and in the immediately preceding Financial Year:

Reply: The Company has started bidding for new business both in India and abroad and has been bagging new projects considerably. The Company is confident of the future business performance and growth based on the following:

- Healthy Order book

- The Promoter Group has extended credit facilities to the tune of Rs.676.50 Crores to support the liquidity position of the Company

- The Company has also unutilized limit of Rs.143 Crores from IL&FS

- The Company has undertaken a Capital Restructuring Scheme which was approved by Hon''ble High Court of Andhra Pradesh whereby all accumulated losses have been wiped out

- The Lender Banks had approved additional working capital facilities of Rs.399.48 Crores

Replies to the Audit Qualifications - Consolidated Financial Statements:

(1) Clause 4 (a): Unaudited Financial Statements of Joint Ventures & Subsidiaries:

Reply: The Auditors have qualified their Report for the period ended September 30, 2012 stating that six joint ventures and seven subsidiaries have been consolidated based on the Unaudited Financial Statements. The Company has taken its share as on September 30, 2012 pursuant to extension of its Financial Year based on the unaudited signed Management Accounts of the Joint Ventures and subsidiaries which were provided to the Auditors. Hence, consolidation was done on the basis of accounts certified by the Management of these investee companies

(2) Clause 4(b): Non submission of Financial Statement of Jointly Controlled Entity:

Reply: This qualification relates to Maytas SNC JV (presently known as SNC Power Corporation Pvt Limited) which could not produce its accounts before adoption of the accounts of the Company. Hence, the Company has consolidated based on the Audited Financial Statements as at and for the year ended March 31, 2010

(3) Clause 5 : Recovery of Inter Corporate Deposits :

Reply: Prior to April 1,2009 the erstwhile promoters had given Inter Corporate Deposits aggregating to Rs.391.64 Crores to various companies. As at September 30,2012, the outstanding balance of Inter Corporate Deposits to various companies aggregated to Rs.713.64 Crores (including Rs.369.85 Crores to Maytas Properties Limited [MPL]). Of the foregoing, documentary evidences had been established that, for an amount of Rs.323.78 Crores, Satyam Computer Services Limited (SCSL) is the ultimate beneficiary and for which a claim together with interest receivable had been lodged by the Company. SCSL had accounted Rs.1230.40 Crores as liability in its Audited Financial Statements as at March 31,2012 under the head "Amounts Pending Investigation Suspense Account (Net)". Management is of the opinion that the claim made by the Company on SCSL is included in the amount disclosed by them in their Audited Financial Statements. The Company is confident of recovering the Inter Corporate Deposits together with interest due thereon. During the earlier year and the year under review, the qualification on ICDs has been restricted to the extent of Rs.343.78 Crores in the Audit Reports in view of acquisition of MPL by IL&FS Group and the Company was confident of recovering ICD amounts of Rs.369.85 Crores from MPL along with interest

EMPLOYEES:

The relations with the employees have been cordial throughout the year under review. Your Directors place on record their sincere appreciation in respect of the services rendered by the employees of the Company at all levels

PARTICULARS OF EMPLOYEES:

Particulars of employees as required under Section 217(2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this Report. However, in pursuance of Section 219(1) (b) (iv) of the Companies Act, 1956, this Report is being sent to all the Shareholders of the Company excluding the aforesaid information and the said particulars are made available at the Registered Office of the Company. The Members interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company

ESOP 2007 and 2009:

Your Company has granted 28,49,984 options under ESOP 2009 Scheme as Grant - II to the employees of the Company / Directors of Subsidiaries as decided by the Remuneration Committee on June 28, 2012

Disclosure as required by Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Stock Purchase Scheme), Guidelines, 1999, as amended, are as per the annexure enclosed Undertaking Pursuant to General Circular No: 2 /2011 No: 51 / 12/2007-CL-III:

The Company, hereby undertake to comply with the following;

- The annual accounts of the subsidiary companies and the related detailed information shall be made available to shareholders of the holding and subsidiary companies seeking such information at any point of time

- The annual accounts of the subsidiary companies shall also be kept for inspection by any shareholders in the head office of the holding company and of the subsidiary companies concerned

- The Company shall furnish a hard copy of details of accounts of subsidiaries to any shareholder on demand

ENVIRONMENTAL POLICY:

Your Company is committed to carrying out all its activities with requisite measures to protect the environment. Accordingly, your Company is committed by policy to not only abide by the prevailing legal requirements but also to have a futuristic approach in carrying out continuous improvement in this regard

DETAILS U/S 217(1) (e) OF THE COMPANIES ACT, 1956:

Particulars as per Section 217(1) (e) of the Companies Act, 1956, read with Companies (Disclosure of particulars in the report of Board of Directors) Rules, 1988 are as under:

Conservation of Energy:

The conservation of energy in all the possible areas is undertaken as an important means of achieving cost reduction. Savings in electricity, fuel and power consumption receive due attention of the management on a continuous basis

Technology Absorption:

Timely completion of the projects as well as meeting the budgetary requirements are the two critical areas where different techniques help to a great extent. Many innovative techniques have been developed and put to effective use in the past and the efforts to develop new techniques continue unabated

Foreign Exchange Earnings & Outgo:

(Rs. Crores)

Earned Nil

Outgo 8.22

ACKNOWLEDGMENTS:

Your Directors place on record their gratitude to the Bankers, Financial Institutions, various Agencies of the State and the Central Government Authorities, Clients, Consultants, Suppliers, Sub- Contractors, Members and the Employees for their valuable support and co-operation and look forward to continued enriched relationships in the years to come

By order of the Board

For IL&FS Engineering and Construction Company Ltd. and reduced

Place : Dubai Ramchand Karunakaran

Date: December 22, 2012 Chairman


Mar 31, 2011

The Shareholders

IL&FS Engineering and Construction Company Limited

The Directors take pleasurein presenting the Twenty-Third Annual Report along with the Audited Accounts for the Financial Year ended March 31,2011.

FINANCIAL RESULTS:

(Rs. in Crores)

Particulars 2010-11 2009-10

Gross Income 1097.11 1003.96

(Loss) / Profit before Interest, 10.8 (46.46) Depreciation, exceptional items and Tax

Interest and Finance Charges 74.36 150.94

Depreciation 56.96 83.67

(Loss)/Profit before exceptional items, (120.52) (281.07) tax and Prior period items

Exceptional items (net) 129.08 39.48

(Loss) /Profit before Tax and Prior period items 8.56 (241.59)

Provision for Taxes (6.07) -

Less: Prior Period Expenses (net) 11.72 8.05

(Loss) / Profit after Tax 2.91 (249.64)

Transfer (from)/to General Reserves

Paid up Equity Capital 77.37 58.85

Preference Share Capital 307.50 Nil

Share application money pending Nil 354.27 allotment

Reserves and Surplus-Net of Profit 197.18 (145.41) & Loss A/c debit balance

Net worth 582.05 268.04

Earnings per share (In Rupees)

-Basic (2.64) (42.42)

-Diluted (2.64) (42.42)

Previous year's figures have been regrouped / rearranged to conform to those of the current year.

DIVIDEND:

Due to the current financial conditions faced by the Company, your Directors express their inability to recommend any dividend to the Shareholders for the year.

OVERVIEW:

During the year under review, the operations of your Company have been largely stabilized. Various new personnel were inducted in the top level management of the Company. The Company could successfully execute Master Restructuring Agreement (MRA) for restructuring of its existing debt, under Corporate Debt Restructuring (CDR) Scheme. Your Company could also successfully complete One Time Settlements with 5 other banks during the year. Your Company was able to induct Saudi Binladin Group (SBG) of Saudi Arabia as a Strategic Partner in the

Shareholders' Consortium. SBG Projects Investments Limited, a part of SBG, has executed a Shareholders' Agreement on June 19,2010 for investment of 20% in the equity share capital of your Company i.e. Rs. 301.92 crores. The Promoters of your Company, namely Infrastructure Leasing and Financial Services Ltd. (IL&FS) had lent its brand name and the name of your Company had been changed from Maytas Infra Ltd., to IL&FS Engineering and Construction Company Ltd. SBG and IL&FS had completed Open Offer to acquire up to an additional 20% from the market as per SEBI(SAST) Regulations.

The Company has proposed to issue Bonus Preference Shares to existing Preference Shareholders. The Company also proposes to undertake Capital Restructuring Scheme to set off accumulated losses against the Securities Premium Account etc. so that going forward the Company would be able to declare dividend to the Shareholders as and when balance in profit and loss account is available in the Company.

With all these measures, your Company is now confident of undertaking and meeting future obligations.

(1) Induction of SBG:

Your Company had approached the Hon'ble Company Law Board (CLB) for its permission to allow four nominee Directors of SBG Projects Investments Limited (SBG) on the Board of your Company. However, the Management Control of the Company was to remain with IL&FS Group and the IL&FS Group would also continue to hold a minimum of 26% share holding in the Company as per Order dated August 31,2009 of the Hon'ble CLB. The Hon'ble CLB vide its Order dated November 4, 2010 has approved the appointment of four nominees of SBG on the Board of the Company and further advised, the nominee directors of Central Government, that they shall ensure thatthe Management Control ofthe Company rests solely with IL & FS and in case of any apprehension to the contrary they shall approachthe CLB forthwith for appropriate directions.

(2) Change of Name of the Company:

Your Company has been renamed as 'IL&FS Engineering and Construction Company Limited' pursuant to completion of all formalities and process under the provisions of the Companies Act, 1956, and on receipt of Certificate of Incorporation dated January 7, 2011 issued by Registrar of Companies, Andhra Pradesh, Ministry of Corporate Affairs, Government of India. The Company had conducted the process of Postal Ballot pursuant to provisions of Section 192A of the Companies Act, 1956 ("the Act") for passing a Special Resolution under Section 21 ofthe Act, for change of name ofthe Company.

(3) Capital:

(a) Increase in Authorised Capital of the Company and alteration of Memorandum

During the year under review, your Company has increased its Authorised Share Capital from Rs. 75,00,00,000/- (Rupees Seventy-Five Crore only) to Rs.500,00,00,000/- (Rupees Five hundred Crore only) at the Extra-Ordinary General Meeting ofthe Members held onJuly19,2010.

(b) Allotment of Shares to SBG Projects Investments Ltd.

Pursuant to the resolution of the Shareholders at the Extra Ordinary General Meeting held on July 19,2010, the Board of Directors of the Company had allotted 1,54,59,133 equity shares of Rs. 10/- each at a premium of Rs. 185.30 per share

(c) Allotment of Shares to CDR Banks

During the year under review, your Company made allotments of shares to CDR Banks, pursuant to the MRA entered into with them, the details of which are follows:

i) 30,60,086 equity shares of Rs.10/- each at a premium of Rs.177.89/-, were allotted on November 29,2010.

II) 57,49,500 - 6% Cumulative Redeemable Preference Shares (CRPS) of Rs.100/- each at par, were allotted on December 06,2010. The CRPS are redeemable at par on March 31,2015.

ill) 2,50,00,000 - 6% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS) of Rs.100/ - each at face value, were allotted on March 31,2011. Out of the 2,50,00,000 (Two Crore Fifty Lakhs) OCCRPS of Rs. 100/- each, allotted, 30% (i.e., 75,00,000 OCCRPS of Rs. 100/- each) shall be convertible into equity on September30,2012, if opted for, by the allottees. The price at which the same shall be converted will be determined as perthe SEBI (ICDR) Regulations, 2009. Remaining 1,75,00,000 (One Crore Seventy Five Lakh) OCCRPS of Rs. 100/- each shall be redeemed in four tranches from 2013 to 2016.

(4) One Time Settlement with Banks (OTS):

The Company had completed OTS with certain Banks who were outside Corporate Debt Restructuring (CDR) Scheme. Accordingly, the Company successfully completed OTS Settlements with all Banks which were outside the purview of CDR Package.

OPEN OFFER:

SBG Projects Investments Ltd. ("SBG") along with Infrastructure Leasing and Financial Services Ltd. and IL&FS Financial Services Limited ("Acquirers"), made an Open Offer, for acquiring 20% stake from the Shareholders in the Company, at a price of Rs. 195.72/- per share, pursuant to and in compliance with Reg. 10 and 11(1) of the SEBI (SAST) Regulations, 1997. The said Open Offer had opened on March 30, 2011 and closed on April 18, 2011. The Acquirers had acquired 1,45,63,755 equity shares of Rs. 10/- each constituting 18. 82% of the paidup capital of the Company in the open offer. Post Open Offer, IL&FS and SBG hold 34.56% and 32.39% respectively of Equity Share Capital of the Company.

FUTURE OUTLOOK:

The near-normalcy of the operations of the Company was restored by active and aggressive focus on both the acquisition of new orders and effective implementation of existing projects.

YourCompany expects these efforts to bring-incomplete normalcy in the current Financial Year and return to healthy operational situation. The overseas foray has also started to yield results with mandates coming in from both Saudi Arabia and UAE.

Your Company expects the contributions of these International

Operations to gradually increase and create a geographical diversification to enable the Company to address any flip in one local geography.

With the Open Offer having been completed, your Company expects the benefit of huge experience of SBG to propel the growth of Company to larger projects which would position the Company to less-competitive niche area environment.

RECOVERY OF INTER CORPORATE DEPOSITS (ICDs):

During the year, your Company continued pursuing recovery of Inter Corporate Desposits (ICDs). Your Company is taking necessary steps to recover ICDs through available legal means.

FIXED DEPOSITS:

Your Company did not invite or accept deposits from the public during the year under review.

SUBSIDIARIES AND JOINT VENTURES:

Astatement pursuantto Section 212 of the Companies Act, 1956 containing the details of the Subsidiaries together with f inancials thereof, forms part of the Annual Report. The following are the Subsidiaries of the Company:

(1) Maytas Infra Assets Limited (MIAL):

MIALwas incorporated in February 2008, as a wholly owned Subsidiary, to carry on the business of infrastructure projects and for consolidation of all investments made byyourCompany in BOT projects. Your Company has invested an amount of Rs. 0.05 crores in Equity and paid Rs. 17.46 Crores towards Share Application Money and reimbursement of expenses in MIAL till March 31, 2011. No projects were secured during the year. Outofthisamountadvanced, Rs. 11.08 Crores approximately has been considered as impaired as they are not represented by any realizable assets and therefore have been provided in full during the year

(2) Maytas Metro Limited (MML):

The Maytas/Navabharat/IL&FS/ITD lead consortium had technically qualified in the bids and won the financial bid by offering highest premium to the GoAP in July 2008. Subsequently, the Consortium had formed the "MML as SPV in September 2008 to develop the Hyderabad Metro Rail Project on BOT basis and signed Concession Agreement with Government of Andhra Pradesh (GoAP) on September 19, 2008 for a period of 35 years of concession including the five years of construction period. The GoAP had cancelled the Concession Agreement on July 7, 2009 without giving any prior notice to the Company as perthe terms and conditions of the Concession Agreement and invoked the security deposit of Rs. 60.00 Crores. The Writ Petition filed by MML in High Court of Andhra Pradesh is pending for adjudication. Your Company has invested an amount of Rs. 0.05 Crores towards the equity and arranged funds to the extent of Rs. 74.78 crores. The investment and the amount advanced aggregating to Rs. 74.83 Crores have been provided for fully during the previous year.

(3) Maytas Vasishta Varadhi Limited (MWL):

MWL, a Subsidiary of your Company, was incorporated in April 2008 for executing the construction of bridge across Godavari River at Narasapur on BOT (Annuity) Basis, awarded

by Andhra Pradesh Road Development Corporation (APRDC). Your Company has invested an amount of Rs. 0.05 Crores towards the equity and Rs 2.70 Crores towards share application money and reimbursement of expenses till March 31,2011. As the project could not be taken up by the Company post-Satyam developments, it had found out a partner M/ s.Coastal Projects Ltd., to take up the project and made application to the State Government for approval of new partner. The Government of Andhra Pradesh approved the entry of M/ s.Coastal Projects Ltd. However, when the Company filed application with the Government for extension of time, the Government of Andhra Pradesh unilaterally cancelled the Project and invoked the Bank Guarantee submitted by the Company. The Company contested the unilateral cancellation in the Court of Law and obtained stay order against invocation of Bank Guarantee by the Government. Currently, the matter is before the Hon'ble High Court of Andhra Pradesh for its adjudication.

(4) Acquisition of new Subsidiaries:

During the Year, your Company has acquired Angeerasa Green Fields Private Limited, Ekadanta Green Fields Private Limited and Saptaswara Agro-Farms Private Limited and they became wholly owned subsidiaries of yourCompany.

Further, your Company had also closed one of its subsidiaries namely, Maytas Mineral Resources Limited under Section 560 of the Companies Act, 1956, as the same could not carry on its stated objectives.

CONSOLIDATED FINANCIAL STATEMENTS:

The Consolidated Financial Statements of your Company, together with its Subsidiaries, Associates and Joint Venture Entities for the Financial Year ended March 31, 2011, prepared in accordance with the Accounting Standard 21,23 and 27 notified by Companies (Accounting Standards) Rules, 2006, are attached herewith.

DIRECTORS:

During the year under review, there is no change in the composition of the Board of Directors of the Company. MrArun KSaha, Director and Chairman of the Executive Committee of the Board, retires by rotation at the ensuing Annual General Meeting (AGM) of the Company and being eligible offers himself for re-appointment.

DISCLOSURES UNDER SECTION 217(1)(D) OF THE COMPANIES ACT, 1956:

Except as disclosed elsewhere in this report, there have been no material changes and commitments which can affect the financial position of the Company occurred between the end of the financial year of the Company and date of this report.

DIRECTORS' RESPONSIBILITY STATEMENT:

Section 217 (2AA) of the Companies Act, 1956 as amended in December 2000 requires the Board of Directors to provide a statement to the members of the Company in connection with maintenance of books, records and preparation of Annual Accounts in conformity with accepted accounting standards and past practices followed by the Company. Pursuant to the foregoing, and on the basis of representations received from operating management and after due enquiry, it is confirmed that:

(1) in the preparation of the accounts forthe Financial Year ended March 31, 2011, the applicable accounting standards have

been followed and that there are no material departures in the preparation of annual accounts;

(2) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31,2011 and of the profit of the Company for the year ended on that date;

(3) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records, in accordance with the provisions of the Companies Act, 1956,forsafeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(4) the Directors have prepared the accounts on a going concern basis.

MANAGEMENT DISCUSSION AND ANALYSIS (MDA):

A separate section titled "Management Discussion and Analysis- confirming compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is annexed hereto and forms part of this Annual Report.

CORPORATE GOVERNANCE:

A separate section titled "Report on Corporate Governance- including a certificate from the Practicing Company Secretaries confirming compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is annexed hereto and forms part of this Annual Report.

AUDITORS:

The Statutory Auditors of the Company M/s S R Batliboi & Associates, Chartered Accountants, retire at the conclusion of the forthcoming Annual General Meeting. M/s S R Batliboi &Associates, Chartered Accountants, being eligible, offer themselves for re- appointment and are proposed to be appointed as Statutory Auditors of the Company to hold office from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting. The Company has received letters from them to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1 B) of the Companies Act, 1956 and that they are not disqualified for such re-appointment within the meaning of Section 226 of the said Act.

Replies to the Audit Qualifications:

(1) Clause No.6 : Un-audited Financial Statements of two Joint Ventures:

Reply: Auditors have qualified their Report for the year ended March 31,2011, stating that-

i) One of the integrated Joint ventures has not prepared its financial statements. This qualification relates to Maytas SNC JV (presently known as SNC Power Corporation Limited) which could not produce its accounts before adoption of the accounts of the Company. Hence impact of ProfiV(Loss) in the said Joint venture has not been considered in the Financial Statements.

ii) The Company has included its share of loss of Rs. 0.11 Crore from an Integrated Joint Venture based on its Unaudited Financial Statements. This qualification relates to NCC Maytas JV (Pocharam) whose accounts were not

audited as on the date of adoption of accounts. Certified accounts provided by the Management of this JV were provided to the auditors based on which the Company's share of loss was considered in the Financial Statements.

(2 Clause 7 - Recovery of Inter-Corporate Deposits:

Reply : Prior to April 1, 2009 the erstwhile promoters had given inter Corporate Deposits aggregating to Rs.391.64 Crores to various companies. As at March 31, 2011, the outstanding balance of Inter Corporate Deposits to various companies aggregated to Rs 415.63 Crores [including Rs. 71.85 Crores to Maytas Properties Ltd (MPL)]. Of the foregoing, documentary evidences had been established that, for an amount of Rs 323.78 Crores, Satyam Computer Services Limited (SCSL) is the ultimate beneficiary and for which a claim together with interest receivable had been lodged by the Company. SCSL had accounted certain liability in its Audited Consolidated Statement of Assets and Liabilities as at March 31,2011 as "Amounts Pending Investigation Suspense Account (Net) Rs. 1230.40 Crores ". Management is of the opinion that the claim made by the Company on SCSL is included in the amount disclosed by them in their Audited Accounts. The Company is confident of recovering the Inter Corporate Deposits together with interest due thereon. During the year, the qualification on ICDs has been restricted to the extent of Rs. 343.78 Crores in the Audit Reports in view of acquisition of MPL by IL & FS Group and the Company was confident of recovering ICD amount of Rs.71.85 Cr from MPL along with interest.

(3) Clause fflfc) of Annexure to Audit Report- Loans granted to Companies:

Reply: The maximum amount of Rs. 47.87 Crores pertains to an Inter Corporate Deposit given to Maytas Properties Limited in the Financial Year 2008-09 by the erstwhile Promoters. The Company ceased to be a Company to be covered in the Register maintained under Sec.301 of the Companies Act, 1956 with effect from September 29,2009. The Company is confident of recovering the Inter Corporate Deposit along with interest in view of acquisition of Maytas Properties Limited by IL&FS Group as per the CLB order. Further, during the year the Company has accrued gross interest income of Rs.23.59 Crores on the said Inter Corporate Deposit.

(4) Clause (x)(a) - Delays in remittance of Statutory Dues:

Reply: The Company in general has been regular in remitting the statutory dues in time. The Management has taken steps to avoid delays and as a matter of internal control also, statutory dues are being monitored for timely remittances. This is evidenced by change in the audit qualification from "serious delays" in the previous year to "delay in deposit of statutory dues have not been serious in the current year.

(5) Clause M - Cash loss during the year and in the immediately preceding Financial Year:

The Company has just come on to the revival path post unprecedented events in 2009, which led to heavy liquidity crunch effecting operations of the Company. Management has rejuvenated the operations in the projects and had negotiations with the Clients who terminated the projects for amicable settlement. Company has started bidding for new business both in India and abroad. The Company is confident of the future business performance and growth based on the following:

- Healthy Order book

- Restructuring of debt under the revised CDR package allowing additional credit facilities to the company

- Strategic alliance with SBG Projects Investments Limited who was inducted as a promoter during the year which would help in developing ourforeign operations

- Critical supportand guidancefrom Government appointed Independent Directors on the Board

(6) Clause fed) - Deafults in repayment of dues to banks which are not part of CDR :

The Company has approached the CDR cell for Corporate Debt Restructuring and the Masters Restructuring Agreement (MRA) was signed in September 2010. Certain banks have opted out of the CDR package and the Management has negotiated with them for One Time Settlement (OTS). Accordingly, the Company negotiated with 5 banks and entered into OTS with them. With these OTS, no defaults in repayment of dues to Banks with whom OTS were arrived at, were outstanding at the end of the Financial Year under review

Delay in payment of interest to CDR Banks was mainly on account of negotiation and finalization of debt restructuring scheme in the first quarter of the Financial Year which was made good subsequently. In the last quarter, the Company made payment on due date only i.e. on March 31, 2011 but the Company's account was debited April 02,2011 by banks subsequently.

Replies to the Audit Qualifications-Consolidated Financial Statements:

1. Clause 3 - Representations from Auditors of Subsidiaries/ Joint Venture entities:

Reply: Representation letters were sent by the Company to Auditors of Subsidiaries/Joint Venture entities but no response was received from the Auditors of those Subsidiaries/Joint Ventures. The Management has arranged for Audited Financial Statements in respect of these entities except as mentioned in the qualification mentioned under clause 5 (a) and (b).

2. Clause 5 (a) - Unaudited Financial Statements of three Joint Ventures

Reply : The Auditors have qualified their Report for the year ended March 31,2011 stating that three of the Joint Ventures have been consolidated based on the Unaudited Financial Statements. The qualification relates to NCC Maytas JV(Pocharam),Gulbarga Airport Developers (P) Limited and Shimoga Airport Developers (P) Limited. Audited accounts of these JVs could not be received before adoption of accounts. Hence consolidation was done on the basis of accounts certified by the Management of these Investee Companies.

3. Clause 5 (b) - Unaudited Financial Statements of three Joint Ventures

Reply : The Auditors have qualified their Report for the year ended March 31,2011 stating that the Company has consolidated a jointly controlled entity based on the Audited Financial Statements as at and for the year ended March 31, 2010. This relates to Maytas SNC JV (SNC Power Corporation Limited) whose accounts were not made available as on the date of adoption of accounts. Hence the Company has consolidated based on the Audited Financial Statements as at and for the year ended March 31,2010

4. Clause 6 - Recovery of Inter-Corporate Deposits :

Reply: Prior to April 1, 2009 the erstwhile promoters had given Inter Corporate Deposits aggregating to Rs.391.64 Crores to various Companies. As at March 31,2011, the outstanding balance of Inter Corporate Deposits to various companies aggregated to Rs 415.63 Crores [including Rs. 71.85 Crores to Maytas Properties Ltd (MPL)]. Of the foregoing, documentary evidences had been established that, for an amount of Rs 323.78 Crores, Satyam Computer Services Limited (SCSL) is the ultimate beneficiary and for which a claim together with interest receivable had been lodged by the Company. SCSL had accounted certain liability in its Audited Consolidated Statement of Assets and Liabilities as at March 31,2011 as "Amounts Pending Investigation Suspense Account (Net) Rs. 1230.40 Crores". Management is of the opinion that the claim made by the Company on SCSL is included in the amount disclosed by them in their Audited Accounts. The Company is confident of recovering the Inter Corporate Deposits together with interest due thereon. During the year, the qualification on ICDs has been restricted to the extent of Rs. 343.78 Crores in the Audit Reports in lieu of acquisition of MPL by IL & FS Group and the Company was confident of recovering ICD amount of Rs.71.85 Cr from MPL along with interest.

EMPLOYEES:

The relations with the employees have been cordial throughout the year under review. Your Directors place on record their sincere appreciation in respect of the services rendered by the employees of the Company at all levels.

PARTICULARS OF EMPLOYEES:

Particulars of employees as required under Section 217(2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this Report. However, in pursuance of Section 219(1) (b) (iv) of the Companies Act, 1956, this Report is being sent to all the Shareholders of the Company excluding the aforesaid information and the said particulars are made available at the Registered Office of the Company. The Members interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

ESOP 2007 and 2009

Disclosure as required by Clause 12 of the Securities and Exchange Board of India ( Employee Stock Option Scheme and Stock Purchase Scheme), Guidelines, 1999, as amended, areas per the annexure enclosed

Undertaking Pursuant to General Circular No: 2 /2011 No: 51 / 12/2007-CL-lll

The Company, hereby undertake to comply with the following:

>- The annual accounts of the subsidiary companies and the related detailed information shall be made available to shareholders of the holding and subsidiary companies seeking such information at any point of time.

>- The annual accounts of the subsidiary companies shall also be kept for inspection by any shareholders in the head office of the holding company and of the subsidiary companies concerned.

>- The Company shall furnish a hard copy of details of accounts of subsidiaries to any shareholder on demand.

ENVIRONMENTAL POLICY:

Your Company is committed to carrying out all its activities with requisite measures to protect the environment. Accordingly, your Company is committed by policy to not only abide by the prevailing legal requirements but also to have a futuristic approach in carrying out continuous improvement in this regard.

DETAILS U/S 217(1)(e) OF THE COMPANIES ACT, 1956 :

Particulars as per Section 217(1 )(e) of the Companies Act, 1956, read with Companies (Disclosure of particulars in the report of Board of Directors) Rules, 1988 are as under:

Conservation of Energy:

The conservation of energy in all the possible areas is undertaken as an important means of achieving cost reduction. Savings in electricity, fuel and power consumption receive due attention of the management on a continuous basis.

Technology Absorption :

Timely completion of the projects as well as meeting the budgetary requirements are the two critical areas where different techniques help to a great extent. Many innovative techniques have been developed and put to effective use in the past and the efforts to develop new techniques continue unabated.

Foreign Exchange Earnings & Outgo :

(Rs. Crores)

Earned NIL

Outgo 1.61

ACKNOWLEDGMENTS:

Your Directors place on record their gratitude to the Bankers, Financial Institutions, various Agencies of the State and the Central Government Authorities, Clients, Consultants, Suppliers, Sub- Contractors, Members and the Employees for their valuable support and co-operation and look forward to continued enriched relationships in the years to come.

By order of the Board

For IL&FS Engineering and Construction Company Ltd.

Place : Hyderabad Ravi Parthasarathy

Date : August 8, 2011 Chairman

 
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