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Sadbhav Infrastructure Projects Ltd. Notes to Accounts, Sadbhav Infrastructure Projects Ltd. Company
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Notes to Accounts of Sadbhav Infrastructure Projects Ltd.

Mar 31, 2015

(A) Terms/rights attached to equity shares:

The Company has only one class of equity shares having a par value of Rs, 10 per share. Each holder of Equity shares is nettled to one vote per share.

In the event of liquidation of the Company, the holders of equity shares shall be nettled to receive any of the residual assets of the Company, After distribution of all preferential amounts. The amount distributed will be in proportion to the number of equity shares held by the shareholders.

(b) Terms of conversion of Compulsory Convertible Cumulative Preference Shares (CCCPS) up to Conversion of Equity Shares:

Each CCCPS shall be Convertible, at the option of the holder thereof at any time into such number of fully paid Equity Shares determined by dividing the Inital Purchase Price by the Conversion Price in effect at the time of conversion. However, each Preference Share shall automatically be converted into Equity Shares, at the then effective Conversion Price applicable to such Preference Share at the earlier of (i) the tenth anniversary of the Closing Date i.e. 23rd September 2010 and (ii) immediately prior to the closing of an inital public offering of the Equity Shares.

Each Preference Share shall enttle the holder thereof to receive, out of funds legally available, Cumulative cash dividends at the rate of 0.01% per annum of the face value. The preference share holders have waived their right to received dividend up to date of Conversion of CCCPS into equity shares.

Compulsory Convertible Cumulative Preference Shares ('CCCPs') were converted into equity shares in accordance with the terms of the agreement as per Board resolution dated October 22, 2014. Pursuant to the conversion, the Company has issued 2,262,200 equity share against 2,250,774 CCCPS.

(c) Aggregate number of Equity Shares alloted as fully paid-up for consideration other than cash during 5 years immediately preceding the date of Balance Sheet:

The Company has issued 282,693,710 equity shares of Rs, 10/- each as fully paid bonus shares in the rato of 10:1 by utilizing Rs, 2,826.94 Million from Securities Premium Account as per the resolution of Board Meeting dated October 29, 2014.

(d) Shares held by holding company:

Out of issued, subscribed and paid up equity capital 240,733,427 shares (Previous Year 21,884,856 shares) are held by Sadbhav Engineering Limited - holding company.

As per records of the company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.

Notes:

(a) 2,000 Redeemable Non-Convertible Debentures (NCD ) are Secured by:

(i) first ranking charge created on 1,071,198 Shares of the Company in the Rohtak Panipat Tollway Private Limited; (ii) the Corporate Guarantee by Sadbhav Engineering Limited (The Holding Company); (iii) first and exclusive mortgage over the Mortgaged Property, in accordance with the respective Security Documents.

(b) 1,600 Redeemable, Non Convertible debentures (NCD) are secured by:

(i) an unconditional , irrevocable and continuing Corporate guarantee from Sadbhav Engineering Limited- holding company (SEL), covering the entre redemption amount. (ii) Pledge of 10,287,215 shares of SEL by Sadbhav Fin stock Pvt. Ltd. (iii) Pledge of 67% of SPV shareholding i.e. DPTL. However, till the shares of DPTL are transferred in the name of SIPL, 56% of shares of ARRIL would be pledged. (iv) WCDL facility of to the extent of next repayment to be lien marked for the NCD to be obtained by the Company/ SEL and to be utilized only towards repayment of the NCD at least 20 days before each redemption payment date for amount which are due in next 20 days.

(c) 1,405,405 Redeemable Non Convertible debentures (NCD) are secured by:

(i) Pledge of 19.46% shareholding in the company held by Sadbhav Engineering Limited (SEL) the holding Company. (ii) Pledge of 30% shareholding of Maharashtra Border Check Post Network Limited held by the Company and SEL. (iii) Unconditonal and irrevocable corporate guarantee from SEL and personal guarantee from Promoter i.e. Mr. Vishnubhai M. Patel. (iv) Second charge by mortgage over all immovable property and hypothecaton of all movable, tangible and intangible assets, receivable, cash and liquid investment of the Company. (v) All bank account & assignment of all contract, documents, insurance, clearances and interest of the Company. NCD has been issued at discount.

(d) 11,00,950 Compulsory Convertible Debentures up to Conversion of Equity Share:

The Company had issued 1,100,950 unsecured 0.01% Compulsory Convertible Debentures (CCDs) of Rs, 681.23/- each to Sadbhav Engineering Limited (SEL) the holding company, which were Convertible as under:

Each CCDs shall be automatically converted upon the earlier of (i) the final adjustment date as per shareholder's agreements and (ii) the date of closing of an inital public offering of the Equity Shares (such date, the "Conversion Date").

0.01% 1,100,950 Compulsory Convertible Debentures of Rs, 750 Million issued to Sadbhav Engineering Limited (CCDs') have been converted into equity share as per Board Resolution dated October 22, 2014 . Pursuant to the conversion, the Company has issued 1 equity share against 1,100,950 CCDs.

(e) Term Loan from Bank is secured by:

(i) A first charge on all movable assets including intangible assets, book debts and other receivables of the company. (ii) First charge on all bank accounts of the company.

(iii) Corporate guarantee of Sadbhav Engineering Limited. The guarantee shall fall of in case the credit rating of the company remains AA- for two consecutive years.

The debenture holders at the end of Year 3 and Year 4 shall have the right to seek prepayment / early redemption of Series B and Series C debentures in whole or part or in such proportion as it may deem ft. Thereupon, the Company shall be obliged to prepay debentures in such manner that debenture holders may achieve the IRR at the rate of 11.75% on value of the

The debenture holders at the end of Year 3 and Year 4 shall have the right to seek prepayment / early redemption of Series II and Series III debentures in whole or part or in such proportion as it may deem ft. Thereupon, the Company shall be obliged to prepay debentures in such manner that debenture holders may achieve the IRR at the rate of 12.14% on the value of debentures for which the Put option is exercised.

(iii) 1,405,405 Redeemable Non Convertible debentures (NCD)

NCD is having a floating interest rate carrying from 6% to 6.33% which is linked to benchmark rate to be reset on a quarterly basis and are repayable in 6 structured installments starting from July 1, 2017 and ending on April 5, 2020.

The Company shall have an option to repay the Facility at End of 4th year and 5th year with the condition that the Minimum Yield on the entre Facility will get revised upwards by 0.50% per annum and 0.25% per annum, respectively.

(iv) Rupee Loan from ICICI Bank Limited:

The long term loan from the bank as at March 31, 2015 of Rs, 1,800 Million, (March 31, 2014 Rs, 1,800 Million) carrying a footing interest rate of 13.50%. The loan is repayable in 4 annual installments commencing After 48 months from the date of 1st disbursement i.e. 06 March 2012.

The Company has rights to pre-pay the loan amount before reset date (i.e. date falling at the end of 12 months from the date of first Disbursement and thereafter the date falling at the end of 12 months from the last Reset Date, as the case may be) along with prepayment premium. The Company needs to mandatory prepay the loan amount in case the Company receive proceeds from the (i) initial public offering of the Company, (ii) securitization of revenues of (a) the projects undertaken by the Company, and/or (b) project companies, that may be received by the Company; and (iii) disposal of assets of the projects or divestment of investments of the Company in the projects. In case of mandatory prepayment, the premium shall not be applicable if the above option is made on reset date.

(v) Interest free loan from Sadbhav Engineering Limited, Holding Company:

Pursuant to the conversion of CCCPS into equity shares, The Company has entered into a Memorandum of Understanding with SEL, whereby SEL has given a commitment to keep the loan balance of Rs, 779.56 Million in SIPL for a period of 11 years from the date of conversion of CCCPS.

Notes:

(a) Working Capital Demand Loan facility from banks is secured against Corporate guarantee of Sadbhav Engineering Limited i.e. the Holding company . The Working Capital Demand Loan is repayable within 90 days of borrowing and carrying interest of 11.65% p.a.

(b) Loan from related parts carries interest from 9.75% to 11% p.a. and is repayable on demand.

(c) Interest free loan from others is repayable on demand.

Notes:

(a) In terms of Share Purchase Agreement (SPA) dated November 3, 2014, between Sadbhav Infrastructure Project Limited ("the Company" or "SIPL") and Patel Infrastructure Private Limited ('PIPL'), SIPL has acquired 2,092,000 shares of Ahmadabad Ring Road Infrastructure Project Limited ('ARRIL') from PIPL for purchase consideration of Rs, 620 Million. As at reporting date, the Company has paid an amount of Rs, 400 Million to PIPL toward purchase consideration and has received necessary approval in terms of SPA whereby condition precedents for conclusion of transaction are complied. As both the partes have complied with terms of SPA, Company has accounted the transaction in the books as at March 31, 2015.

Subsequent to reporting date, SIPL has paid the balance purchase consideraton of Rs, 220 Million and 1,464,400 equity shares has been transferred from PIPL to the Company. The transfer formalities of 627,600 equity shares are in process as shares held by PIPL are pledged with lenders of ARRIL.

(b) In terms of Share Purchase Agreement dated September 22, 2010, between Sadbhav Infrastructure Project Limited ("the Company" or "SIPL") and Sadbhav Engineering Limited ('SEL'), SIPL has acquired 24,479,940 shares of Nagpur Seoni Expressway Limited (NSEL) from SEL. NSEL has received approval from National Highway Authority of India ('NHAI') for transfer of shares from SEL to SIPL on April 3, 2013. As at reporting date, the transfer formality of 14,400,000 Shares are in process as shares held by SEL are being pledged with lender of NSEL.

(c) The Company has pledged following equity shares from its holding in various SPVs, in favour of lenders for term loan facilities availed by the respective SPVs.

Note: As on date, the Company has deferred tax asset of Rs, 198.20 million for business lossess and unabsorbed Depreciation, however, as a mater of prudence and in the absence of virtual certainty, deferred tax assets has been recognized only to the extent of Deferred Tax Liability in the books and accordingly, deferred tax is nil as on date of balance sheet.

Note:

1.) Advance towards Shares Purchase represents payment made to the holding company, Sadbhav Engineering Limited (SEL) towards purchase of equity shares and consequential economic interest /ownership rights in Dhule Palenser Tollway Limited (DPTL) and Mumbai Nasik Express Way Limited (MNEL). The Company is in the process of obtaining regulatory / lenders approvals to get such shares transferred in its own name.

The Company has agreed to acquired 20% equity share of Mumbai Nasik Expressway Limited (MNEL) from SEL as per Share purchase agreement dated September 22, 2010. Further, the Company has executed a binding term sheet dated January 22, 2015 with SEL and Gammon Infrastructure Projects Limited, pursuant to which SEL has agreed to transfer 20% of MNEL shares to the Company, which the Company intends to sell to Gammon Infrastructure Projects Limited for an aggregate consideration of Rs, 720.00 million.

The Company has also agreed to acquire 39% equity shareholding of Dhule Palenser Tollway Limited (DPTL) from SEL as per agreement dated September 22, 2010 and November 3, 2014. As at year end, Company has paid part consideration to SEL to purchase the shareholding. Further, Subsequent to year end, the Company has agreed to acquire Additional equity share of DPTL from HCC Concessions Limited and Hindustan Construction Company Limited as per share purchase agreement dated April 16, 2015 whereby Company has agreed to acquire 100% shareholding in DPTL. The transactions are subject to lender's approval.

2.) The infrastructure project of the various SPVs have been funded through sub ordinate debt (in the nature of capital contribution) given by the Company (as a sponsor) in accordance with the Lender's Loan Agreements and Sponsor Support and Equity Contribution Agreement of the respective SPV entty. These sub-ordinate debt has been given interest free except sub-ordinate debt of Rs, 1,124 Million as at 31 March 2015 (31 March 2014: Rs, 1,124 Million) given to Dhule Palesnar Tollway Limited on which interest of Rs, 414.89 Million as at 31 March 2015 (31 March 2014: Rs, 303.62 Million) has accrued as per terms of the Loan Agreement with lenders of Dhule Palesnar Tollway Limited.

3.) The sub-ordinate debt including accrued interest is recoverable on fulfillment of financial performance/obligation as per terms and conditions of Loan Agreement with lenders of the respective SPV enters.

Notes:

(a) Interest receivable on Sub Ordinate Debts is recoverable on fulfillment of financial performance/obligation as per terms and conditions of the loan agreement with lenders of Dhule Palesnar Tollway Limited.

(b) The Company is in the process of an Inital Public Offer ('IPO') in respect of its Equity Shares. As per the offer agreement between the Company and the selling shareholders, all expenses incurred in connection to the Company's IPO will be borne by the Company and each of the selling shareholders in proportion to the Equity shares alloted by the Company in the fresh issue and transferred by each selling shareholder in Offer for Sale, respectively. Thus, the expenses incurred by the Company in connector to the IPO up to March 31, 2015, have been shown as 'Unamortsed Share Issue Expenses' in Other Current Assets. The Company will adjust the expense against the Securities premium balance in the next financial year upon the finalization of the proportion between the Company and the Selling Shareholders.

Note:

The Company has also paid Rs, 5.07 Million (previous year: Nil) to auditors for professional fee for services rendered in respect of Initial Public offering (IPO) of the Company. The Expenses is currently lying as Initial Public Issue Expenses in the Other Assets (also refer note 15).

Notes:

(i) Compulsory Convertible Cumulative Preference Shares ('CCCPs') were converted into equity shares in accordance with the terms of the agreement as per Board resolution dated October 22, 2014. Pursuant to the conversion, the Company has issued 2,262,200 equity share against 2,250,774 CCCPS.

(ii) 0.01% 1,100,950 Compulsory Convertible Debentures of Rs, 750 Million issued to Sadbhav Engineering Limited (CCDs') have been converted into one equity share as per Board Resolution dated October 22, 2014.

(iii) The Company issued 282,693,710 equity shares of Rs, 10/- each as fully paid bonus shares in the rato of 10 : 1 by utilizing Rs, 2,826.94 Million from Securities Premium Account aggregating Rs, 2,826.94 Million as per the resolution of Board Meeting dated October 29, 2014.

1. Employee Benefits :

The disclosures of employee benefits as defend in the Accounting Standard 15 are as below.

Defend Benefit Plan:

The Company has a defend benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on the termination of his employment at 15 days salary (last drawn salary) for each completed year of service. The scheme is un-funded.

* The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promoton and other relevant factors, such as supply and demand in the employment market.

2. Leases

Office space at Ahmadabad is obtained on operating leases. During the year, the Company has incurred Rs, 1.01 Million (Previous year Rs, 1.01 Million) (inclusive of service tax) towards rent for office space. There are no sub-leases and the leases are cancellable in nature. There are no restrictions imposed by the lease arrangements. There is neither any Contingent rent, nor any escalation clause in the lease agreements.

3. Segment information

The Company has disclosed Business Segment as the primary segment. Segments have been identified taking into account the nature of services, the differing risks and returns and internal reporting system.

The Company's operations predominately relates to Contract Income and Project Operations, Management & Advisory services.

Segment Revenue, Segment Results, Segment Assets and Segment Liabilities include the respective amounts identifiable to each of the segments as also amounts allocated on a reasonable basis.

The net expenses, which are not directly attributable to the Business Segment, are shown as unallocated corporate cost.

Assets and Liabilities that cannot be allocated amongst the segments are shown as part of unallocated assets and liabilities respectively.

3. Related Party disclosures

Name of Related Partes and related party relationship

(a) Related Parts where control exists

Holding Company Sadbhav Engineering Limited (SEL)

Subsidiaries Ahmadabad Ring Road Infrastructure Limited (ARRIL)

Aurangabad Jalna Toll Way Limited (AJTL) Bijapur Hungund Tollway Private Limited (BHTPL) Hyderabad Yadgiri Tollway Private Limited (HYTPL) Rohtak Panipat Tollway Private Limited (RPTPL)

Maharashtra Border Check Post Network Limited (MBCPNL) - (Through board control & contractual economic interest tll November 11, 2014) Nagpur Seoni Express Way Limited (NSEWL) Shreenathji-Udaipur Toll way Private Limited (SUTPL) Bhilwara-Rajsamand Toll way Private Limited (BRTPL) Rohtak Hissar Tollway Private Limited (RHTPL)

(b) Related partes with whom transactions have taken place during the year

Key management personnel (KMP) Mr. Vasistha C Patel, Managing Director

Enterprises over which the company Dhule Palesnar Tollway Limited (DPTL)

having significant influence

Enterprises over which holding company is Mumbai Nasik Express Way Limited (MNEL) able to exercise significant infuence

Fellow Subsidiary Mysore-Bellary Highway Pvt. Ltd. (MBHPL)

Enterprise having significant infuence Norwest Venture Partners VII-A-Mauritus (Norwest) up to 22 October,2014

under contract Xander Investment Holding XVII Limited (Xander) up to 22 October,2014

Note:

The names of the related partes and nature of the relationships where control exists are disclosed irrespective of whether or not there have been transactions between the related partes. For others, the names and the nature of relationships is disclosed only when the transactions are entered into by the Company with the related partes during the existence of the related party relationship.

Notes:

1) Term loan of Rs, 1,800 Million as at March 31, 2015 (31 March 2014: Rs, 1,800 Million) from bank is guaranteed by the corporate guarantee of Sadbhav Engineering Limited, the holding company.

2) Non Convertible debenture of Rs, 5,005.41 Million as at 31 Mar 2015 (31 March 2014: Nil) is guaranteed by the corporate guarantee of Sadbhav Engineering Limited, the holding company and personal guarantee of Mr. Vishnubhai Patel (Promoter of holding company (SEL)). Further, Sadbhav Engineering Limited has pledged 16% shareholding in the Company to the lenders.

3) Compulsory Convertible Cumulative Preference Shares ('CCCPs') were converted into equity shares in accordance with the terms of the agreement as per Board resolution dated October 22, 2014. Pursuant to the conversion, the Company has issued to Norwest and Xander 1,131,100 equity share each against 1,125,387 CCCPS.

4) Company has received a waiver from preference shareholders for dividend payable in respect of financial year up to date of Conversion of CCCPS into equity shares i.e. October 22, 2014.

* Towards service tax demand from authorities for recovery of CENVAT credit on input service availed during the financial years 2009-10 and 2010-11. In respect of said mater, the Company has preferred appeal with Tribunal, for which company has deposited Rs, 2.50 million and received stay order from tribunal for recoveries of demands. Further the mater is pending with Tribunal as at reporting date.

(iii) The BOT projects of subsidiary companies viz. ARRIL, AJTL, MBCPNL, BHTPL, HYTPL, RPTPL, NSEL, SUTPL, BRTPL and RHTPL have been funded through various credit facility agreements with banks. Against the said facilities availed by the subsidiary companies from the banks, the Company has executed agreements with respective lenders whereby the Company has committed to hold minimum shareholding and pledge of its shares in the respective subsidiary company, details of which is as follows:

* In case of ARRIL the undertaking for non disposal of shares shall be reduced to 21% on repayment of 80% of the total Loan given by lenders.

(iv) Company has agreed to acquire 74% equity shareholding of Mysore-Bellary Highway Pvt. Ltd. (MBHPL) from Sadbhav Engineering Limited (SEL) as per agreement dated November 3, 2014, subject to regulatory approvals.

(v) The Company had entered into an agreement dated September 18, 2013 to sell 9.93% equity shareholding of Maharashtra Border Check Post Network Limited (MBCPNL) to D. Thakkar Construction Private Limited, subject to lenders approvals. Further, the Company has also entered into an agreement dated November 4, 2014 with SEL to purchase 10% of equity shareholding in MBCPL. As at March 2015, Company has also outstanding unsecured loan of Rs, 110 million from D. Thakkar Construction Private Limited (refer note 7).

(vi) As regards acquisition of 20% share holding in Mumbai Nasik Expressway Limited (MNEL) in principle understanding has been reached with Gammon Infrastructure Project Limited for sale of share holding although detailed agreement is pending to be executed.

4. Disclosure in respect of Construction Contracts

Revenue from fixed price construction contracts are recognized on the percentage of completion method, measured by reference to the percentage of cost incurred up to the year end to estimated total cost for each contract.

Percentage completion method for income recognition on long term contracts involves technical estimates by engineers/ technical officials, of percentage of completion and costs to completion of each project/contract on the basis of which Profit/loss is allocated.

30 As per intimation available with the Company, there are no micro, small and medium enterprises as defned in the Micro, Small and Medium Enterprise Development Act, 2006 to whom the Company owes dues on account of principal amount together with interest and accordingly no related Additional disclosure have been made.

31 During the year 2013-14, minority shareholders of Bijapur Hungud Tollway Private Limited ('BHTPL') (a subsidiary of the Company) has fled company pet ton under Section 397 and 398 of the Companies Act, 1956 with the Company Law Board – Mumbai Bench against Sadbhav Engineering Ltd. (SEL), a holding Company and its associates/affiliates wherein the company is also defendant. The minority shareholders has pleaded that BHTPL awarded EPC and other contracts to SEL / affiliates which are prejudicial to the interest of BHTPL and hence should be terminated. The Company Law Board (CLB) passed an order in favour of the minority shareholder although Company pleaded that mater should be referred for arbitration as per terms of shareholder agreement (SHA). Against the CLB order the Company fled Special Civil Application (SCA) with Hon'ble High Court of Gujarat that mater of minority shareholder should be dealt as per SHA. Hon'ble High Court accepted SCA of the Company and granted interim relief whereby further proceeding of CLB have been stayed. Hon'ble High Court then upheld the order of the Company Law Board, vacated the interim order and dismissed the SCA. The Company had fled an appeal under Leters Petent Act (LPA) before the Division Bench of Hon'ble Gujarat High Court ("the Bench"). The Bench ordered a stay on the further proceedings of CLB. The Company, based on the representations made before the Hon'ble Gujarat High Court, has defended the mater stating that the dispute is there between the shareholders of BHTPL instead of relating to oppression and mismanagement in BHTPL. Further, it is represented that such dispute should be resolved through arbitration agreement. The LPA is pending for fnal hearing before division bench of Hon'ble Gujarat High Court. The management represents that no liability is likely to devolve in the mater on the Company.

5. During the year 2013-14, one of the Company's subsidiary i.e. Solapur Bijapur Tolllway Private Limited (SBTPL) has foreclosed the concession agreement with NHAI. Accordingly, sub-ordinate debt given by the Company to the SBTPL was waived of and provision was provided in the books in the year ended March 31, 2014, for diminution in value of Investment in the Subsidiary.

During the year, SBTPL has fled winding up petton with Registrar of the Company, Gujarat, under Section 560 of the Companies Act 1956 on November 10, 2014. Against petton, the Company has received Notice under sub Section (3) of Section 560 of The Companies Act, 1956 dated March 11, 2015, whereby it has mentioned that the name of the SBTPL will be struck of upon expiry of thirty days from the date of Notice.

Hence, the Company has written of its investment in the subsidiary during the year and adjusted against the provision.

6. During the year, the Company has accounted Contract Income towards cost escalation claim, of Rs, 72.87 Million (31 March 2014: Rs, 294.88 Million) in line with cost infaton index principles (cost escalaton formula) approved by independent consultant of the customer.

7. CSR Expenditure:

Gross amount required to be spent during the year: Rs, 4.21 million Amount spent during the year (promoting education and others) paid in cash: Rs, 5.99 million

8. Previous year figures have been regrouped/reclassified wherever necessary, to confirm this year's classification.

 
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