Notes to Accounts of McNally Bharat Engineering Company Ltd.
Mar 31, 2018
1. Background
McNally Bharat Engineering Company Limited is a Company limited by shares, incorporated and domiciled in India. The registered office of the Company is located at 4, Mangoe Lane, Kolkata, 700001. The Company''s shares are listed on National Stock Exchange and Bombay Stock Exchange. The company is engaged in diversified construction activities primarily execution of Turnkey Projects.
Recent Accounting pronouncements
Appendix B to Ind AS 21, foreign currency transactions and advance considerations:
On March 28, 2018 the Ministry of Corporate Affairs (MCA) notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency.
The amendment will come into force from April 01, 2018. The Company is in the process of assessing its effect on the financial statements and do not anticipate that the application of Appendix B to Ind AS 21 will have a significant impact on the financial position and/or financial performance of the Company.
Ind AS 115, Revenue from Contract with Customers:
On March 28, 2018, the MCA notified the Ind AS 115. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or service. Further, the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity''s contracts with customers. Specifically, the standard introduces a five step approach to revenue recognition. The standard permits two possible methods of transition:
- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors.
- Modified Retrospective approach - Under this approach the standard will be applied retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (cumulative catch-up).
The effective date for adoption of Ind AS 115 is financial period beginning on or after April 01, 2018. The Company will adopt the Standard on April 01, 2018 by using the modified retrospective approach and accordingly, comparatives for the year ended March 31, 2018 will not be retrospectively adjusted. The Company is in the process of assessing its effect on the financial statements.
(i) Property, plant and equipment pledged as security
Refer to note 36 on property, plant and equipment and capital work in progress pledged as security by the company
(ii) Contractual obligations
Refer to note 28 for disclosure of contractual commitments for the acquisition of property, plant and equipment.
* McNally Sayaji Engineering Limited (MSEL) was previously listed with Delhi Stock Exchange Limited (DSEL), Ahmedabad Stock Exchange Limited (ASEL) and Vadodara Stock Exchange Limited (VSEL). VSEL and ASEL stock exchanges have undergone compulsory / voluntary exit as per relevant SEBI circulars /orders. Further, SEBI has passed order for derecognition of DSEL. Considering the fact that the listing of MSEL was with the aforesaid stock exchanges, the market value of the quoted investments excludes the market value of the investment in MSEL in absence of availability of market quote.
** The Company has pledged its equity investment as security against loan taken by the Companies belonging to the same promoter group namely Babcock Borsig Limited, Williamson Magor & Co. Limited and Williamson Financial Services Limited.
*** The Company has pledged its investment to the extent of 23,37,211 equity shares as security against loan taken by its subsidiary Company namely McNally Sayaji Engineering Limited.
(i) Refer to note 36 on investments pledged as security by the company.
(ii) One of the subsidiaries of the Company i.e. McNally Sayaji Engineering Limited issued 36,00,000 Compulsorily Convertible Preference Shares (CCPS) on March 31, 2017 at face value of Rs. 10 each and premium of Rs. 65 thus totalling Rs. 27,00 lacs. This CCPS issue was in lieu of the money''s due by the subsidiary to the Company. On February 07, 2018, the Company has converted 18,00,000 CCPS into equity shares.
(i) Earmarked balances with bank represents balances held for margin money against issue of bank guarantees.
(ii) There are no repatriation restrictions with regard to cash and cash equivalents as at the end of the reporting period and prior periods.
Terms and rights attached to equity shares :
Each equity share has a par value of Rs. 10. It entitles the holder to participate in dividends, and to share in the proceeds of winding up the company in proportion to the number of shares held and amounts paid thereon. Every holder of equity shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
Terms and rights attached to compulsorily convertible preference shares:
Each CCPS shall be compulsorily convertible into one equity share at any time within 18 months from the date of allotment. CCPS shall have priority with respect to payment of dividend or repayment of capital over equity shares of the company. The holders of CCPS would not participate in the surplus assets and profits on winding up which may remain after the entire capital has been repaid. Each CCPS would carry a dividend of 1% which would be non cumulative.
(ii) Shares of the company held by holding/ultimate holding company
The company does not have a holding company.
iii) Details of shareholders holding more than 5% of the aggregate equity shares in the company
v) Aggregate number of shares issued for consideration other than cash :
On March 26, 2018, the Company issued 1,20,00,000 Compulsorily Convertible Preference Shares (CCPS) of Rs.10 only per share at a premium of Rs. 52 per CCPS to the Promoter group Companies for part conversion of outstanding unsecured loan of Rs.7,440 lakhs. On March 31, 2018, the Company issued 3,21,51,515 Equity Shares of Rs.10 each at a premium of Rs.52 per share to the Promoter group companies pursuant to conversion of 3,21,51,515 CCPS which was allotted on March 30, 2017. Also, on March 31, 2018, the Company issued 3,70,29,273 Equity Shares of Rs.10 each at a premium of R 56 per share to Equity Shareholders and certain debenture holders of Vedica Sanjeevani Projects Private Limited (""Vedica"") pursuant to the conversion of 3,70,29,273 out of 4,16,21,273 CCPS allotted on March 30, 2017.
On March 30, 2017, the Company had issued Compulsorily Convertible Preference Shares (CCPS) at face value of Rs. 10 only per share and Rs. 56 only towards premium. CCPS totalling 4,16,66,666 numbers were issued to the promoter group companies for Rs. 27,499.99 and a further 4,16,21,273 numbers for Rs. 27,470.04 to the shareholders and debenture holders of Vedica Sanjeevani Projects Private Limited with whom the Company had entered into an agreement on February 17, 2017. Vide the same agreement entered into by the Company and Vedica Sanjeevani Projects Private Limited on February 17, 2017, the Company acquired 4,75,200 equity shares and 12,47,004 debentures of Vedica Sanjeevani Projects Private Limited.
Nature and purpose:
Securities premium reserve has arisen on issue of Equity Shares and Compulsorily Convertible Preference Shares (CCPS). The reserve will be utilised as per the provisions of the Companies Act, 2013.
Terms of repayment:
1. In case of loan having a nominal balance outstanding of Rs. 312 lakhs, repayable in 16 quarterly installments starting September 26, 2014. The last installment date being June 26, 2018.
2. In case of loan having a nominal balance outstanding of Rs. 7,000 lakhs, repayable in one prepayment installment and 12 quarterly installments starting May 15, 2017. The last installment date being February 18, 2020.
3. In case of loan having a nominal balance outstanding of USD 17.50 lakhs, repayable in 10 semi annual installments starting June 23, 2014. The last installment date being December 23, 2018.
4. In case of loan having a nominal balance outstanding of Rs. 10,000 lakhs, repayable in single bullet installment on January 7, 2019.
(ii) Leave obligations
The leave obligations cover the company''s liability for earned leave. The amount of the provision of Rs. 55.41 (March 31, 2017 â Rs. 91.05) is presented as current, since the company does not have an unconditional right to defer settlement for any of these obligations. The amount that the Company expects to fund within next 12 months is Rs. 143.
(iii) Gratuity
The company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and the company makes contributions to recognised funds in India. The company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.
The plan liabilities are calculated using a discount rate set with reference to government bonds. If the plan assets under perform this yield, this will create a deficit. The plan asset investments is with the Life Insurance Corporation of India which administers the fund. The investments are expected to earn a return in excess of the discount rate and reduce plan deficit. The maturity profile of gratuity liability is as follows:
(iv) Provident fund
The company has an obligation to fund any shortfall on the yield of the trust''s investments compared to the administered interest rates on an annual basis. These administered rates are determined annually predominantly considering the social rather than economic factors and in most cases, the actual return earned by the company has been higher in the past years. The actuary has provided a valuation for provident fund liabilities on the basis of guidance issued by the Actuarial Society of India and based on the assumptions provided below, there is no shortfall as at March 31, 2018 and March 31, 2017.
In accordance with actuarial valuation done for interest rate guarantee, the fund has sufficient assets against the defined benefit liability and hence no further liability arises for interest rate guarantee.
The plan assets have been primarily invested in government securities.
Assumptions used in determining the present value obligation of interest rate guarantee under the Deterministic approach:
The company contributed Rs. 338 lakhs and Rs. 337 lakhs during the years ended March 31, 2018 and March 31, 2017, respectively, and the same has been recognised in the Statement of Profit and Loss under the head employee benefit expenses.
Risks arising from defined benefit obligations
The defined benefit obligation plans typically expose the Company to actuarial risks i.e. investment risk, interest risk, longevity risk and salary risk.
Investment risk: The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds.
Interest risk: A decrease in bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan assets.
Longevity risk: The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.
Salary risk: The present value of defined plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan liability.
The effective tax rate and the applicable tax rates for recognition of deferred tax income is same. The applicable tax rate is based on the enacted tax rates. There is no current tax liability as the Company has incurred losses in the current year.
The Company has recognised deferred tax assets on carried forward tax losses. The Company has concluded that the deferred tax assets will be recoverable using the estimated future taxable income based on the approved business plan and budget for the Company. The Company is expected to generate taxable income from 2019-20 onwards.
Capital management
The company strives to manage its capital efficiently with a view to safeguard its ability to continue as a going concern and to bring returns to its shareholders and stakeholders. The capital structure of the company is based on management''s judgement of the appropriate balance of key elements in order to meet its strategic and day to day needs. The amount of capital in proportion to risk is considered for capital structure management in light of changes in economic conditions and the risk characteristics of the underlying assets. The company''s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future developments and growth of its business. As a matter of prudence, the management brought in place infusion of capital by way of enhancement of Equity share capital and through issue of Share Warrants and Compulsorily Convertible Preference Shares during the current financial year.
Loan covenant
Under the terms of the major borrowing facilities, the Company is required to comply with various financial covenants. The Company has not complied with some of the covenants during the current as well as the previous year.
2. RISK MANAGEMENT
The company''s activities expose it to market risk, liquidity risk and credit risk. In order to minimise any adverse effects on the financial performance of the company, derivative financial instruments, such as foreign exchange forward contracts are entered to hedge certain foreign currency risk exposures. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.
The company''s risk management is carried out by a treasury department under policies approved by the board of directors. The treasury department identifies, evaluates and hedges financial risks in close cooperation with the company''s operating units. The board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
(A) Credit Risk
Credit risk arises from cash and cash equivalents, investments and other financial assets carried at amortised cost and deposits with banks and financial institutions, as well as credit exposures to customers including outstanding receivables and due from customers.
(i) Credit risk management
The company assigns the following credit ratings to each class of financial assets based on assumptions, inputs and factors specific to the class of financial assets.
VL1: High-quality assets, negligible credit risk
VL2: Quality assets, low credit risk
VL3: Standard assets, moderate credit risk
VL4: Substandard assets, relatively high credit risk
VL5: Low quality assets, very high credit risk
VL6: Doubtful assets, credit impaired
Macroeconomic information (such as regulatory changes, market interest rate or growth rates) is incorporated as part of the internal rating model.
Financial assets are written off when there is no reasonable expectations of recovery, such as debtor failing to engage in a repayment plan with the Company or where payor/borrower does not have financial capability to repay its debts. Where loans or receivables have been written off, the Company continues to engage in enforcement activities to attempt to recover the receivable due.
ii Provision for expected credit losses
The Company provides for expected credit loss of trade receivables, due from customers and other financial assets based on historical trend, industry practices and the business environment in which the entity operates. Loss rates are based on actual credit loss experience and past trends. Wherever required, past trend is adjusted to reflect the effects of the current conditions and forecasts of future conditions that did not affect the period on which the historical data is based, and to remove the effects of the conditions in the historical period that are not relevant to the future contractual cash flows.
The gross carrying amount of trade receivables is Rs.175,199.93 (March 31, 2017: Rs.170,483.57)
During the year, the Company has made write offs of trade receivables wherein it does not expect to receive future cash flows Rs.2,652.10 (March 31, 2017: Rs.1,351.14)
During the year, the Company has made write offs of expenses recoverable wherein it does not expect to receive future cash flows Rs.2,292,17 (March 31, 2017: R NIL)
Significant estimates and judgements
Impairment of financial assets
The impairment provisions for financial assets disclosed above are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the company''s past history, industry practices, existing market conditions and business environment as well as forward looking estimates at the end of each reporting period.
(B) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close net market positions. Due to the dynamic nature of the underlying business, the Company''s treasury maintains flexibility in funding by maintaining availability under committed credit lines.
Management monitors rolling forecasts of the Company''s liquidity position (comprising the undrawn borrowing facilities as below) and cash and cash equivalents on the basis of expected cash flows. In addition, the Company''s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.
(i) Maturity of financial liability
The tables below analyse the Company''s financial liabilities into relevant maturity groupings based on their contractual maturities for: all non-derivative financial liabilities, and net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.
The amounts disclosed in the table are the contractual undiscounted cash flows, balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
(C) Market risk
(i) Foreign currency risk
The Company is exposed to foreign exchange risk arising from foreign currency transactions primarily with respect to the USD and EUR. Foreign exchange risk arises from recognised assets and liabilities denominated in a currency that is not the company''s functional currency (R). The risk is measured through the expected foreign currency cash flows based on the Company''s receipt and repayment schedule for recognised assets and liabilities denominated in a currency other than R . The objective of the hedging is to minimize the volatility of the R cash flows of such recognised assets and liabilities.
At the end of the reporting period the total notional amount of outstanding foreign currency forward contracts that the Company has committed to is USD 32.36 lakhs (March 31, 2017: USD 139.27 lakhs).
(ii) Cash flow and fair value interest rate risk
The Company''s main interest rate risk arises from long-term borrowings with variable rates, which exposes the Company to cash flow interest rate risk. During the year ended March 31, 2018 and March 31, 2017, the Company''s borrowings at variable rate were mainly denominated in INR and USD.
The Company''s borrowings are carried at amortised cost. The fixed rate borrowings are not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
(i) Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the Indian accounting standard. An explanation of each level follows underneath the table.
Level 1 : It includes financial instruments measured using quoted prices. This includes listed equity instruments and mutual funds that have net asset value calculated at the close of every day using observable inputs. The fair value of all equity instruments which are traded in stock exchange is valued using the closing price as at the reporting period.
Level 2 : The fair value of financial instruments that are not traded in the active market is determined using valuation technique which maximize the use of observable market data and rely as little as possible on entity specific estimates. If all significant inputs require to fair value an instruments are observable, the instrument is included in level 2.
Level 3 : If one or more of the significant input is not based on observable market data, the instrument is included in level
3. This is the case for unlisted equity securities and other financial instruments.
(ii) Valuation technique used to determine fair value
Specific valuation techniques used to value financial instruments include:
- the use of quoted market prices or dealer quotes for similar instruments
- the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date
(iii) Fair value of the financial assets and liabilities measured at amortised cost
Short-term financial assets and liabilities are stated at carrying value which is equal to their fair value.
The carrying amount of loans, advance to employees, cash and cash equivalents, other financial assets, trade payables, interest accrued, book overdraft in current accounts, capital creditors, employee benefits payable, security deposits, dividend accrued on preference shares, unpaid dividend and others are considered to be the same as their fair value, due to their short term nature.
The fair values for trade receivables, due from customers, security deposits and expenses recoverable are calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk.
The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.
Initial recognition of short term financial assets and liabilities are at fair value with subsequent measurement at amortised cost.
Note:
This does not include the impact of provision made on actuarial valuation of retirement benefit/ long term Schemes and provision made during the year towards Post employment benefits as the same are not separately ascertainable for individual directors.
3. DUES TO MICRO AND SMALL ENTERPRISES
The amount due to Micro and Small Enterprises as defined in the "The Micro, Small and Medium Enterprises Development Act, 2006" has been determined to the extent such parties have been identified on the basis of information available with the Company. The disclosures relating to Micro and Small Enterprises are as below:
4. EXCESS REMUNERATION PAID TO KEY MANAGEMENT PERSONNEL
(A) Excess managerial remuneration paid for which the Company is yet to seek approval from the Central Government to regularize the same in terms of section 197(3) read with Schedule V to the Companies Act,2013 amounting to Rs. 40.82 lacs paid/payable to erstwhile one whole time director for the financial year ended March 31, 2018.
(B) Excess managerial remuneration paid for which approval in terms of section 197(3) read with Schedule V to the Companies Act,2013 is pending from the Central Government amounting to Rs.220.03 lacs paid/ payable to the managing director for the financial year ended March 31, 2018 and Rs.121.87 lacs paid/ payable to two erstwhile whole time directors for the financial year ended March 31, 2017.
Sale of equipments and contract revenue in respect of construction contracts as reported in this accounts is in proportion to the actual costs incurred on such contracts to their estimated cost. Here costs represent actual costs incurred inclusive of future losses based on estimates of future costs of all on going projects made by the engineers of the company and such estimates verified independently and certified by a Chartered Engineer. Unbilled revenue represents such contract sales values less actual billing done on the basis of costs incurred.
The company has made provision, as required under the Indian Accounting Standards, for material foreseeable losses on long term contracts.
The Company has made revisions in the cost to complete certain projects during the year as part of their periodical review of cost estimates.
5. SEGMENT INFORMATION
The company is primarily engaged in the business of construction and hence no separate disclosure has been made for segment reporting under Ind AS 108.
The company has earned its substantial revenue in 2017-18 and 2016-17 from India. All non current assets of the company are located in India.
Note:
Current assets except investments are pledged under first charge for working capital loans and under residual charge for rupee term loan of RBL Bank Limited. Investments amounting to R 262.18 lakhs are put under lien for loan taken from L&T Finance Limited. Refer Note 12(a).
Non-current assets are pledged under first charge for rupee term loan and ECB from ICICI Bank Limited and as second charge for working capital loans.
Refer Note 12(a) and 12(b) for details of assets charged as security.
6. As per the Scheme of Arrangement as sanctioned by the Hon''ble High Court at Calcutta vide its Order dated July 28, 2009 which was filed with the Registrar of Companies, West Bengal , Kolkata on September 01, 2009, for reconstruction of McNally Bharat Engineering Company Limited (MBECL) and its subsidiary viz McNally Sayaji Engineering Ltd (MSEL) - the Products Division of MBECL engaged in the business of manufacture and/or procuring equipments for various engineering and infrastructure projects and having its units at Kumardhubi, in the State of Jharkhand, Asansol, in the State of West Bengal and Bangalore, in the State of Karnataka has been transferred to MSEL with effect from the appointed date, i.e. April 01, 2008. As per the scheme of arrangement the transfer and vesting of Products Division of MBECL to MSEL shall be subject to the existing charges, mortgages and encumbrances, if any, over the assets or any part thereof, provided however, that such charges, mortgages and/or encumbrances shall be confined only to the assets of MBECL or part thereof on or over which they are subsisting on transfer to and vesting of such assets in MSEL and no such charges, mortgages and/ or encumbrances shall extend over or apply to any other asset(s) of MSEL. Thus the existing charges on the assets of the Products Division for facilities enjoyed by MBECL will continue and vice versa. Accordingly, working capital demand loans, cash credit facilities, term loans and other non fund based facilities of the Company are secured by assets which include those of the Product Division of MSEL.
7. The Company had entered in September 2003 a joint venture agreement with Elsamex S.A. where officially it was appointed as a subcontractor in "West Bengal Corridor Development Project - Improvement of Gazole Hilli Section of SH 10 with a link to Balurghat from Patiram," (the project). However consequent to considerable delay in execution of the project the Public Works Department of Government of West Bengal (PWD) had unilaterally terminated the contract in January 2006. The company and Elsamex S.A. felt that such delay in execution was due to the inability of PWD to hand over the stretch of encumbrance free land for widening of road and non-availability of construction drawings on time by PWD. The company has a legitimate claim of Rs.1,517 lakhs towards receivable and Rs.1,133 lakhs on account of deposit against Performance Guarantee. Elsamex S.A. moved to arbitration and had claimed an amount of Rs.7,334 lakhs including an additional claim on consequential losses as per guidelines of "Federation Internationale Des Ingenieurs-Conseils" (FIDIC). Arbitral Board in their meeting held on October 25, 2010 has upheld Elsamex S A''s claim and has given award in favour of Elsamex S A. Under the award, a total amount of Rs. 3,535 lakhs is receivable by the Company. A claim has already been lodged with PWD. PWD has preferred to challenge the verdict of the Arbitrators and has appealed to the High Court for a stay in the matter of payment of award money.
8. There are no significant subsequent events that would require adjustments or disclosures in the Financial Statements as on the Balance Sheet date.
9. Previous year''s figures have been regrouped/ reclassified wherever necessary to correspond with the current year''s classification/ disclosure.
Mar 31, 2016
(c) Rights and restrictions attached to shares :
Equity Shares: The company has one class of equity shares having a par value of Rs.10 per share. Each shareholder is eligible for one vote per share held. The dividend if proposed by the Board of Directors is subject to the approval of the shareholders in the Annual General Meeting.
Preference Shares: The Company has cumulative, non convertible redeemable preference shares of Rs 100 each at a coupon rate of 11.50% p.a.. Tenure of these Preference Shares is 7 years from the date of issue.
(d) The company does not have a holding company.
1 As per the Scheme of Arrangement as sanctioned by the Honâble High Court at Calcutta vide its Order dated 28th July 2009 which was filed with the Registrar of Companies, West Bengal, Kolkata on 1st September 2009 , for reconstruction of McNally Bharat Engineering Company Limited (MBECL) and its subsidiary viz McNally Sayaji Engineering Ltd (MSEL) - the Products Division of MBECL engaged in the business of manufacture and/or procuring equipments for various engineering and infrastructure projects and having its units at Kumardhubi, in the State of Jharkhand and Asansol, in the State of West Bengal and Bangalore, in the State of Karnataka has been transferred to MSEL with effect from the appointed date, i.e. 01.04.2008 .As per the scheme of arrangement the transfer and vesting of Products Division of MBECL to MSEL shall be subject to the existing charges, mortgages and encumbrances, if any, over the assets or any part thereof, provided however, that such charges, mortgages and/or encumbrances shall be confined only to the assets of MBECL or part thereof on or over which they are subsisting on transfer to and vesting of such assets in MSEL and no such charges, mortgages and/ or encumbrances shall extend over or apply to any other asset(s) of MSEL. Thus the existing charges on the assets of the Products Division for facilities enjoyed by MBECL will continue and vice versa. Accordingly, working capital demand loans, cash credit facilities, term loans and other non fund based facilities of the Company are secured by assets which include those of the Product Division of MSEL.
2 The Company had entered in September 2003 a joint venture agreement with Elsamex S.A. where officially it was appointed as a subcontractor in âWest Bengal Corridor Development Project - Improvement of Gazole Hilli Section of SH 10 with a link to Balurghat from Patiram,â (the project). However consequent to considerable delay in execution of the project the Public Works Department of Government of West Bengal (PWD) had unilaterally terminated the contract in January 2006. The company and Elsamex S.A. felt that such delay in execution was due to the inability of PWD to hand over the stretch of encumbrance free land for widening of road and non-availability of construction drawings on time by PWD. The company has a legitimate claim of Rs. 1517 lacs towards receivable (included in Note No.18) and Rs.1133 lacs on account of deposit against Performance Guarantee (included in Note No.20). Elsamex S.A. moved to arbitration and had claimed an amount of Rs.7334 lacs including an additional claim on consequential losses as per guidelines of âFederation Internationale Des Ingenieurs-Conseilsâ (FIDIC). Arbitral Board in their meeting held on 25th October 2010 has upheldE Elsamex S Aâs claim and has given award in favour of Elsamex S A. Under the award, a total amount of Rs.3535 lacs is receivable by the Company. A claim has already been lodged with PWD . PWD has preferred to challenge the verdict of the Arbitrators and has appealed to the High Court for a stay in the matter of payment of award money.
3 MONEY RECEIVED AGAINST SHARE WARRANT
30 lacs convertible warrants were allotted to Williamson Magor & Company Limited, existing Promoters ofthe Company on 13.03.2015 against which the Company had received Rs.7.5 crores being the 25% upfront payment as per SEBI (Issue of Capital & Disclosure Requirement) Regulations, 2009. The Allotment Committee of the Company on 31.03.2016 has allotted 5 lacs equity shares on conversion of 5 lacs warrants to the said Williamson Magor & Co. Ltd. thereby reducing warrant application money by Rs. 1.25 cr representing 5 lakh warrants as on close of 31.03. 2016. The balance in Warrant Application Money Rs. 6.25 cr represents 25% application money for the 25 lakh warrants yet to be converted.
4 (a) Sale of MBE Coal & Minerals Technology, India Pvt. Ltd. (formerly Humboldt Wedag Minerals India Pvt. Ltd.)
During the year, the Company entered into an agreement with its subsidiary McNally Sayaji Engineering Ltd (MSEL) to sell the entire holding of 99.99% of MBE Coal Mineral Technology India Pvt. Ltd., to MSEL. The rationale behind this was to synergize the business of manufacturing products required in coal and mineral beneficiation turnkey project engineering. Subsequently, on October 23, 2015, the Board of Directors of both the Companies have approved of the sale and purchase of MBE Coal and Mineral Technology India Pvt. Ltd., at a consideration of Rs. 27 crores.
(b) Creation of Joint Venture EMC MBE Contracting Company LLC in Oman
The Company entered into a joint venture agreement on September2, 2015 with EMC Limited in a participation ratio of 50:50 and incorporated a Limited Liability Partnership Company under the name EMC MBE Contracting Company LLC in Oman. The Board of Directors of the Company had adopted the resolution towards formation of this joint venture company at its meeting held on August 13, 2015. Thereafter, investment of Rs. 152.31 lacs was made in the said LLC in Oman on December 11, 2015.
5 PROVISION FOR ONEROUS CONTRACTS
The Company is engaged in the business of executing projects on turnkey basis. Progress in some such contracts had suffered for various reasons and mostly beyond the control of the Company. Against these contracts, the Company as a measure of abundant precaution decided to make an omnibus provision of Rs. 75 Crores in 2013-14 to take care of any future losses that may arise. During the years 2014-15 and 2015-16 expenses amounting to Rs. 61 and Rs. 14 crores respectively have been incurred on these projects. Consequently, the respective project costs have increased and provision on onerous contract written back.
(ii) Sale of equipments and contract revenue as reported in this accounts is in proportion to the actual costs incurred on such contracts to their estimated cost. Here costs represent actual costs incurred inclusive of future losses based on estimates of future costs of all on going projects made by the engineers of the company and such estimates verified independently and certified by a Chartered Engineer. Unbilled revenue represents such contract sales values less actual billing done on the basis of costs incurred.
(iii) The company has made provision, as required under Accounting Standards, for material foreseeable losses on long term contracts.
C The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. The expected return on plan assets is based on actuarial expectation of the average long term rate of return expected on investment of funds during the estimated term of the obligation..
D The fair value of plan asset have been segregated between the Company and the erstwhile product division of MBECL now a part of McNally Sayaji Engineering Limited on the basis of the present value of the obligations as at the end of the year.
E Provident Fund
Provident fund for certain eligible employees is managed by the Company through the âMcNally Bharat Employees Provident Fundâ in line with the Employees Provident Fund and Miscellaneous Provisions Act, 1952. The plan guarantees interest at the rate notified by the Provident Fund Authorities. The contribution by the employer and employee together with the interest accumulated thereon are payable to employees at the time of their separation from the company or retirement, whichever is earlier. The benefits vest immediately on rendering of the services by the employee. The Guidance on Implementing AS 15, Employee Benefits (Revised 2005) issued by Accounting Standard Board (ASB) states that benefits involving employers established provident funds, which require interest shortfalls to be compensated are to be considered as defined benefit plans. The Actuarial Society of India has issued the final guidance for measurement of provident fund liabilities. The actuary has accordingly provided a valuation and there is no additional liability as at 31st March, 2016, in respect of interest rate guarantee . The Company has contributed amount of Rs. 412.88 Lacs towards Provident Fund during the year 2015-16 (2014 15 Rs. 473.42 Lacs)
6 The Board of McNally Bharat Engineering Co. Ltd., along with the respective Boards of EMC Ltd. McNally Sayaji Engineering Ltd and Kilburn Engineering Ltd in their meetings held on March 31, 2016 have decided to amalgamate all the companies into Kilburn Engineering Ltd.
The new merged entity under the scheme shall be renamed as McNally Bharat Engineering Limited and shall emerge as total Engineering Solution Provider.
The merger have been decided to achieve 1)Lesser susceptibility to economic downturn and business slump to be derived from consolidation entities and diversification of expertise under single entity, 2) combining resources to attain economies of scale, 3) increased efficiency by eliminating duplication of costs and creating common pool of resources, 4) increasing productivity through streamlining of resources and focus, 5) attaining critical size required for prequalification for bidding in large infrastructure projects, 6) create a large asset pool and increase balance sheet size to pool cash flow and improving capital raising prospect.
The required application for permission have already filed with Competition Commission of India and relevant stock exchanges. Respective secured lenders have in-principle agreed to support the scheme in the consortium meetings called by all the companies and formal application for no objection from each of the secured lenders have been made.
The scheme will be filed to the honorable High Court of Calcutta on receipt of approval from stock exchanges expected in middle of June 2016
7 SEGMENT REPORTING
The Company has considered the business segment as the primary reporting segment on the basis that the risk and returns of the Company is primarily determined by the nature of activities. There is no geographical segment.
The business segment have been identified on the basis of the nature of activity the risks and returns, internal organization and management structure and the internal performance reporting systems.
The business segment comprises of the following:
(i) Sale of Steel-Trading.
(ii) Construction Contracts.
8 Previous yearâs figures have been rearranged and / or regrouped wherever necessary to make them comparable with that of current year. Signatories to notes 1 to 52
Mar 31, 2015
1. As per the Scheme of Arrangement as sanctioned by the Hon'ble High
Court at Calcutta vide its Order dated 28th July 2009 which was filed
with the Registrar of Companies, West Bengal, Kolkata on 1st September
2009 , for reconstruction of McNally Bharat Engineering Company Limited
(MBECL) and its subsidiary viz McNally Sayaji Engineering Ltd (MSEL) -
the Products Division of MBECL engaged in the business of manufacture
and/or procuring equipments for various engineering and infrastructure
projects and having its units at Kumardhubi, in the State of Jharkhand
and Asansol, in the State of West Bengal and Bangalore, in the State of
Kamataka has been transferred to MSEL with effect from the appointed
date, i.e. 01.04.2008 .As per the scheme of arrangement the transfer
and vesting of Products Division of MBECL to MSEL shall be subject to
the existing charges, mortgages and encumbrances, if any, over the
assets or any part thereof, provided however, that such charges,
mortgages and/or encumbrances shall be confined only to the assets of
MBECL or part thereof on or over which they are subsisting on transfer
to and vesting of such assets in MSEL and no such charges, mortgages
and/ or encumbrances shall extend over or apply to any other asset(s)
of MSEL. Thus the existing charges on the assets of the Products
Division for facilities enjoyed by MBECL will continue and vice versa.
Accordingly, working capital demand loans, cash credit facilities, term
loans and other non fund based facilities of the Company are secured by
assets which include those of the Product Division of MSEL.
2. The Company had entered in September 2003 a joint venture agreement
with Elsamex S.A. where officially it was appointed as a subcontractor
in "West Bengal Corridor Development Project - Improvement of Gazole
Hilli Section of SH 10 with a link to Balurghat from Patiram," (the
project). However consequent to considerable delay in execution of the
project the Public Works Department of Government of West Bengal (PWD)
had unilaterally terminated the contract in January 2006. The company
and Elsamex S.A. felt that such delay in execution was due to the
inability of PWD to hand over the stretch of encumbrance free land for
widening of road and non-availability of construction drawings on time
by PWD. The company has a legitimate claim of Rs. 1517 lacs towards
receivable (included in Note No. 19) and Rs.1133 lacs on account of
deposit against Performance Guarantee (included in Note No.21). Elsamex
S.A. moved to arbitration and had claimed an amount of Rs.7334 lacs
including an additional claim on consequential losses as per guidelines
of "Federation Internationale Des Ingenieurs-Conseils" (FIDIC).
Arbitral Board in their meeting held on 25th October 2010 has upheld
Elsamex S As claim and has given award in favour of Elsamex S A. Under
the award, a total amount of Rs.3535 lacs is receivable by the Company.
A claim has already been lodged with PWD. PWD has preferred to
challenge the verdict of the Arbitrators and has appealed to the High
Court for a stay in the matter of payment of award money.
3. RELATED PARTY DISCLOSURES
Related party disclosures as required by Accounting Standard 18 on
"Related Party Disclosures" are given below: Relationships
(a) Subsidiaries of the Company:
(i) MBE Coal & Minerals Technology, India Pvt. Ltd. (formerly Humboldt
Wedag Minerals India Pvt. Ltd.)
(ii) McNally Sayaji Engineering Limited ( MSEL)
(iii) McNally Bharat Equipments Limited (MBEL)
(iv) McNally Bharat Infrastructure Limited (MBIL)
(v) MBE Mineral Technologies Pte Limited (formerly MBE Holdings Pte
Limited)
(vi) MBE Minerals Zambia Ltd
(vii) McNally Bharat Engineering (SA) Proprietary Ltd
(b) Subsidiaries of MBE Mineral Technologies Pte Limited : (i) MBE EWB
Technologies Kft
(ii) MBE Cologne Engineering Gmbh*
(c) Associates of MBE Mineral Technologies Pte Limited : (i) MBE Coal &
Minerals Technologies GmbH**
(d) Subsidiaries of MBE Coal & Minerals Technologies GmbH : (i) MBE
Mineral Processing Technology (Beijing) Co.Ltd . (ii) MBE Mineral
Processing of Brazil LTDA
(iii) PT MBE Coal & Minerals Technology , Indonesia
(iv) MBE Minerals S.A Pty Limited.
(v) OOO MBE OUM, Russia
(vi) Coal & Mineral Technology Holding Gmbh, Germany
(e) Key Management Personnel:
(i) Mr. Deepak Khaitan - Executive Chairman***
(ii) Mr. Prasanta Kumar Chandra - Whole-time Director & COO
(iii) Mr. Prabir Ghosh- Whole-time Director & Group CFO
* 90% stake of the subsidiary has been sold on 30th April 2014.
** 70% stake of the subsidiary has been sold on 24th March 2015.
*** Expired on 9th March 2015
4. The estimates of future salary increases, considered in actuarial
valuation, take account of inflation, seniority, promotion and other
relevant factors, such as supply and demand in the employment market.
The expected return on plan assets is based on actuarial expectation of
the average long term rate of return expected on investment of funds
during the estimated term of the obligation..
5. The fair value of plan asset have been segregated between the Company
and the erstwhile product division of MBECL now a part of McNally
Sayaji Engineering Limited on the basis of the present value of the
obligations as at the end of the year.
6. Provident Fund
Provident fund for certain eligible employees is managed by the Company
through the "McNally Bharat Employees Provident Fund" in line with the
Employees Provident Fund and Miscellaneous Provisions Act, 1952. The
plan guarantees interest at the rate notified by the Provident Fund
Authorities. The contribution by the employer and employee together
with the interest accumulated thereon are payable to employees at the
time of their separation from the company or retirement, whichever is
earlier. The benefits vest immediately on rendering of the services by
the employee. The Guidance on Implementing AS 15, Employee Benefits
(Revised 2005) issued by Accounting Standard Board (ASB) states that
benefits involving employers established provident funds, which require
interest shortfalls to be compensated are to be considered as defined
benefit plans. The Actuarial Society of India has issued the final
guidance for measurement of provident fund liabilities. The actuary has
accordingly provided a valuation and there is no additional liability
as at 31st March, 2015, in respect of interest rate guarantee . The
Company has contributed amount of Rs. 473.42 Lacs towards Provident
Fund during the year 2014-15 (2013- 14 Rs. 485.03 Lacs)
Mar 31, 2014
1 General Information
McNally Bharat Engineering Company Ltd (MBE) is a leading Engineering
Turnkey Project Execution Company in India. The Company''s shares are
listed on National Stock Exchange and Bombay Stock Exchange.
2 As per the Scheme of Arrangement as sanctioned by the Hon''ble High
Court at Calcutta vide its Order dated 28th July 2009 which was filed
with the Registrar of Companies, West Bengal, Kolkata on 1st September
2009, for reconstruction of McNally Bharat Engineering Company Limited
(MBECL) and its subsidiary viz McNally Sayaji Engineering Ltd (MSEL)
the Products Division of MBECL engaged in the business of manufacture
and/or procuring equipments for various engineering and infrastructure
projects and having its units at Kumardhubi, in the State of Jharkhand
and Asansol, in the State of West Bengal and Bangalore, in the State of
Kamataka has been transferred to MSEL with effect from the appointed
date, i.e. 01.04.2008 .As per the scheme of arrangement the transfer
and vesting of Products Division of the MBECL to MSEL shall be subject
to the existing charges, mortgages and encumbrances, if any, over the
assets or any part thereof, provided however, that such charges,
mortgages and/or encumbrances shall be confined only to the assets of
MBECL or part thereof on or over which they are subsisting on transfer
to and vesting of such assets in MSEL and no such charges, mortgages
and/ or encumbrances shall extend over or apply to any other asset(s)
of MSEL. Thus the existing charges on the assets of the Products
Division for facilities enjoyed by MBECL will continue and vice versa.
Accordingly working capital demand loans, cash credit facilities, term
loans and other non fund based facilities of the Company are secured by
assets which include those of the Product Division of MSEL.
3 There are no dues payable to Micro enterprises and Small enterprises
on the basis of information available with the company regarding Micro
and Small Enterprises under Micro, Small and Medium Enterprises
Development Act, 2006.
4 The company had entered in September 2003 a joint venture agreement
with Elsamex S.A where officially it was appointed as a subcontractor
in "West Bengal Corridor Development Project - Improvement of Gazole
Hilli Section of SH 10 with a link to Balurghat from Patiram," (the
project). However consequent to considerable delay in execution of the
project the Public Works Department of Government of West Bengal (PWD)
had unilaterally terminated the contract in January 2006. The company
and Elsamex S.A. felt that such delay in execution was due to the
inability of PWD to hand over the stretch of encumbrance free land for
widening of road and non-availability of construction drawings on time
by PWD. The company has a legitimate claim of Rs. 1517 lacs towards
receivable (included in Note No. 19) and Rs.1133 lacs on account of
deposit against Performance Guarantee (included in Note No.21). Elsamex
S.A. moved to arbitration and had claimed an amount of Rs.7334 lacs
including an additional claim on consequential losses as per guidelines
of "Federation Internationale Des Ingenieurs-Conseils" (FIDIC).
Arbitral Board in their meeting held on 25th October 2010 has upheld
Elsamex S As claim and has given award in favour of Elsamex S A. Under
the award, a total amount of Rs.3535 lacs is receivable by the company.
A claim has already been lodged with PWD PWD has preferred to challenge
the verdict of the Arbitrators and has appealed to the High Court for a
stay in the matter of payment of award money.
(All figures in Rs. Lacs, unless otherwise stated)
As at March As at March
31,2014 31,2013
5 CONTINGENT LIABILITIES
(a) Claims against the company
not acknowledged as debt 100 100
(b) Other money for which the
Company is contingently liable:
(i) Excise Duty matters pending
in appeal related to 130 130
issues of applicability and
classification
(ii) Sales Tax/VAT matters pending
in appeal relating to disputes 957 922
regarding assessable value and
exemptions claimed
(iii) Service Tax Matters pending
in appeal relating to issues
of applicability 27 21
(iv) Income Tax Matters pending in
appeal relating to disputes
regarding 1,340 -
the taxable value and the
deductions claimed
(v) Corporate guarantees given in
favour of Subsidiary
Companies 12,997 32,912
(vi) Other guarantees given 1,732 3,200
(vii) Standby letter of credit 3,252 1,670
(viii) Liquidated damages relating
to contract sales Amount not
readily Amount not
readily
ascertainable ascertainable
The probable cash outflow in respect of the above matters is not
determinable at this stage
6 PROVISION FOR ONEROUS CONTRACTS
The Company is engaged in the business of executing projects on turnkey
basis. Progress in some such contracts have suffered for various
reasons and mostly beyond the control of the Company. Against these
contracts which are now being considered as onerous in nature, the
Company as a measure of abundant precaution has decided to make an
omnibus provision of Rs. 75 Crores to take care of any future losses
that may arise.
7 RELATED PARTY DISCLOSURES
Related party disclosures as required by Accounting Standard 18 on
"Related Party Disclosures" are given below:
Relationships
(a) Subsidiaries of the Company:
(i) MBE Coal & Minerals Technologies, India Pvt. Ltd. (formerly
Humboldt Wedag Minerals India Pvt. Ltd.)
(ii) McNally Sayaji Engineering Limited ( MSEL)
(iii) McNally Bharat Equipments Limited (MBEL)
(iv) McNally Bharat Infrastructure Limited (MBIL)
(v) MBE Mineral Technologies Pte Limited (formerly MBE Holdings Pte
Limited)
(vi) MBE Minerals Zambia Ltd
(vii) McNally Bharat Engineering (SA) Proprietary Ltd
(b) Subsidiaries of MBE Mineral Technologies Pte Limited : (i) MBE Coal
& Minerals Technology GmbH
(ii) MBE Cologne Engineering GmbH (iii) MBE EWB Technologies Kft
(c) Subsidiaries of MBE Coal & Minerals Technology GmbH : (i) MBE
Mineral Processing Technology (Beijing) Co.Ltd . (ii) MBE Mineral
Processing of Brazil LTDA
(iii) PT MBE Coal & Minerals Technology, Indonesia
(iv) MBE Minerals S.A Pty Limited.
(v) OOO MBE OUM, Russia
(vi) Coal & Mineral Technology Holding Gmbh, Germany
(d) Key Management Personnel:
(i) Mr. Deepak Khaitan - Executive Chairman
(ii) Mr. Prasanta Kumar Chandra - Whole-time Director & COO
(iii) Mr. Prabir Ghosh- Whole-time Director & Group CFO
8 LEASES
As a Lessee
The company has significant operating leases for premises. These lease
arrangements include both cancellable and non-cancellable leases. Most
of the leases are renewable for further period on mutually agreeable
term. The aggregate lease rentals payable are charged as Rent under
Note No. 28. With respect to non- cancellable operating leases, the
future minimum lease payments are as follows:
Not later than one year
9 A. GRATUITY (FUNDED)
The Company operates a gratuity plan through the "McNally Bharat
Executive Staff Gratuity Fund". Every employee is entitled to a benefit
equivalent to fifteen days salary last drawn for each completed year of
service in line with the Payment of Gratuity Act, 1972. The same is
payable at the time of separation from the Company or retirement,
whichever is earlier. The benefits vest after five years of continuous
service.
10 Change in the estimate of contract revenue or contract costs have an
effect on the current period and/or subsequent periods. It is
impracticable to quantify the impact of such change in estimate.
11 RESEARCH AND DEVELOPMENT (R&D) EXPENDITURE
Expenditure on R & D - In pursuit of R & D endeavors the company is
continuously incurring R&D expenditure both on Capital and Revenue,
which has not been separately reflected but is being shown as part of
regular heads of accounts in fixed assets and in Statement of Profit
and Loss respectively. Accordingly R&D revenue expenditure incurred
during the year debited to various account heads is Rs. 143.17 Lacs
(2012-13: Rs 230.32 Lacs) and on account of capital expenditure is Rs
18.12 Lacs (2012-13: Rs. 101.63 Lacs).
12 The company has only one "Business segment" and one "Geographical
segment" as defined in Accounting Standard -17 on "Segment Reporting".
13 Previous year''s figures have been rearranged and / or regrouped
wherever necessary to make them comparable with that of current year.
Mar 31, 2013
1 General Information
McNally Bharat Engineering Company Ltd (MBE) is a leading Engineering
Turnkey Project Execution Company in India. The Company''s shares are
listed on National Stock Exchange and Bombay Stock Exchange.
2 As per the Scheme of Arrangement as sanctioned by the Hon''ble High
Court at Calcutta vide its Order dated 28th July, 2009, which was filed
with the Registrar of Companies, West Bengal, Kolkata on 1st September
2009, for reconstruction of McNally Bharat Engineering Company Limited
(MBECL) and its subsidiary viz McNally Sayaji Engineering Ltd (MSEL)
the Products Division of MBECL engaged in the business of manufacture
and/or procuring equipments for various engineering and infrastructure
projects and having its units at Kumardhubi, in the State of Jharkhand
and Asansol, in the State of West Bengal and Bangalore, in the State of
Karnataka has been transferred to MSEL with effect from the appointed
date, i.e. 01.04.2008 .As per the scheme of arrangement the transfer
and vesting of Products Division of the MBECL to MSEL shall be subject
to the existing charges, mortgages and encumbrances, if any, over the
assets or any part thereof, provided however, that such charges,
mortgages and/or encumbrances shall be confined only to the assets of
MBECL or part thereof on or over which they are subsisting on transfer
to and vesting of such assets in MSEL and no such charges, mortgages
and/ or encumbrances shall extend over or apply to any other asset(s)
of MSEL. Thus the existing charges on the assets of the Products
Division for facilities enjoyed by MBECL will continue and vice versa.
Accordingly, working capital demand loans, cash credit facilities, term
loans and other non fund based facilities of the Company are secured by
assets which include those of the Product Division of MSEL.
3 There are no dues payable to Micro enterprises and Small enterprises
on the basis of information available with the company regarding Micro
and Small Enterprises under Micro, Small and Medium Enterprises
Development Act, 2006.
4 The company had entered in September 2003 a joint venture agreement
with Elsamex S.A. where officially it was appointed as a subcontractor
in "West Bengal Corridor Development Project - Improvement of Gazole
Hilli Section of SH 10 with a link to Balurghatfrom Patiram," (the
project). However, consequent to considerable delay in execution of the
project, the Public Works Department of Government of West Bengal (PWD)
had unilaterally terminated the contract in January 2006. The company
and Elsamex S.A. felt that such delay in execution was due to the
inability of PWD to hand over the stretch of encumbrance free land for
widening of road and non-availability of construction drawings on time
by PWD. The company has a legitimate claim of Rs. 1517 lacs towards
receivable (included in Note No.19) and Rs.1133 lacs on account of
deposit against Performance Guarantee (included in Note No.21).
Elsamex S.A. moved to arbitration and had claimed an amount of Rs.7334
lacs including an additional claim on consequential losses as per
guidelines of "Federation Internationale Des Ingenieurs-Conseils"
(FIDIC). Arbitral Board in their meeting held on 25th October 2010 has
upheld Elsamex S As claim and has given award in favour of Elsamex S A.
Under the award, a total amount of Rs.3535 lacs is receivable by the
company. A claim has already been lodged with PWD . PWD has preferred
to challenge the verdict of the Arbitrators and has appealed to the
High Court for a stay in the matter of payment of award money.
(All figures in Rs. Lacs, unless otherwise stated)
As at As at
March 31, 2013 March 31, 2012
5 CONTINGENT LIABILITIES
(a) Claims against the company
not acknowledged as debt 100 100
(b) Other money for which the
Company is contingently liable:
(i) Excise Duty matters pending in
appeal related to issues 130 130
of applicability and
classification
(ii) Sales Tax/VAT matters pending
in appeal relating to disputes 922 944
regarding assessable value and
exemptions claimed
(iii) Service Tax Matters pending
in appeal relating to issues of
applicability 21 72
(iv) Corporate guarantees given in
favour of Subsidiary Companies 32,912 29,070
(v) Other guarantees given 3,200 3,200
(vi)Standby letter of credit 1,670 4,860
(vii) Liquidated damages relating
to contract sales Amount not
Amount not readily
readily
ascertainable ascertainable
The probable cash outflow in respect of the above matters is not
determinable at this stage.
6 RELATED PARTY DISCLOSURES
Related party disclosures as required by Accounting Standard 18 on
Related Party Disclosures are given below:
Relationships
(a) Subsidiaries of the Company:
(i) MBE Coal & Minerals Technologies India Pvt. Ltd. (formerly Humbolt
Wedag Minerals India Pvt. Ltd.)
(ii) McNally Sayaji Engineering Limited (MSEL)
(iii) McNally Bharat Equipments Limited (MBEL)
(iv) McNally Bharat Infrastructure Limited (MBIL)
(v) MBE Mineral Technologies Pte Limited (formerly MBE Holdings Pte
Limited)
(vi) MBE Minerals Zambia Ltd
(vii) McNally Bharat Engineering (SA) Proprietary Ltd
(b) Subsidiaries of MBE Mineral Technologies Pte Limited (i) MBE Coal &
Minerals Technologies Gmbh
(ii) MBE Cologne Engineering Gmbh (iii) MBEEWBTechnologiaiKft
(c) Associate of MBE Mineral Technologies Pte Limited (i) Hayward Tyler
Group Pic.
(d) Subsidiaries of MBE Coal & Mineral Technology GmbH
(i) MBE Mineral Processing Technology (Beijing) Co.Ltd .
(ii) MBE Mineral Processing of Brazil LTDA
(iii) PT MBE Coal & Minerals Technology, Indonesia
(iv) MBE Minerals SAPty Limited.
(v) OOO MBE OUM, Russia
(vi) Coal & Mineral Technology Holding Gmbh, Germany
(e) Key Management Personnel
(i) Mr. Deepak Khaitan - Executive Chairman
(ii) Mr. Prasanta Kumar Chandra - Whole-time Director & COO
(iii) Mr. Prabir Ghosh - Whole-time Director & Group CFO
7 Research and Development (R&D) Expenditure
Expenditure on R & D - In pursuit of R & D endeavors the company is
continuously incurring R&D expenditure both on Capital and Revenue
which has not been separately reflected but is being shown as part of
regular heads of accounts in fixed assets and in Statement of Profit
and Loss respectively. Accordingly R&D revenue expenditure incurred
during the year debited to various account heads is Rs. 230.32 Lacs
(2011-12: Rs 222.53 Lacs) and on account of capital expenditure is Rs
101.63 Lacs (2011-12: Rs. 179.55 Lacs)
8 The company has only one "Business segment" and one "Geographical
segment" as defined in Accounting Standard-17 on "Segment Reporting".
9 Previous year''s figures have been rearranged and / or regrouped
wherever necessary to make them comparable with that of current year.
Mar 31, 2012
1 General Information
McNally Bharat Engineering Company Ltd (MBE) is a leading Engineering
Turnkey Project Execution Company in India. The Company's shares are
listed on National Stock Exchange and Bombay Stock Exchange.
2 As per the Scheme of Arrangement as sanctioned bythe Hon'ble High
Court at Calcutta vide its Order dated 28th July 2009 which was filed
with the Registrar of Companies, West Bengal, Kolkata on 1st September
2009, for reconstruction of McNally Bharat Engineering Company Limited
(MBECL) and its subsidiary viz McNally Sayaji Engineering Ltd (MSEL)
the Products Division of MBECL engaged in the business of manufacture
and/or procuring equipments for various engineering and infrastructure
projects and having its units at Kumardhubi, in the State of Jharkhand
and Asansol, in the State of West Bengal and Bangalore, in the State of
Karnataka has been transferred to MSEL with effect from the appointed
date, i.e. 01.04.2008 .As per the scheme of arrangement the transfer
and vesting of Products Division of the MBECL to MSEL shall be subject
to the existing charges, mortgages and encumbrances, if any, over the
assets or any part thereof, provided however, that such charges,
mortgages and/or encumbrances shall be confined only to the assets of
MBECL or part thereof on or over which they are subsisting on transfer
to and vesting of such assets in MSEL and no such charges, mortgages
and/ or encumbrances shall extend over or apply to any other asset(s)
of MSEL. Thus the existing charges on the assets of the Products
Division for facilities enjoyed by MBECL will continue and vice versa.
Accordingly working capital demand loans, cash credit facilities, term
loans and other non fund based facilities ofthe Company are secured by
assets which include those of the Product Division of MSEL.
3 There are no dues payable to Micro enterprises and Small enterprises
on the basis of information available with the company regarding Micro
and Small Enterprises under Micro, Small and Medium Enterprises
DevelopmentAct, 2006.
4 The company had entered in September 2003 a joint venture agreement
with Elsamex S.A. where officially it was appointed as a subcontractor
in "West Bengal Corridor Development Project - Improvement of Gazole
Hilli Section ofSH 10 with a link to Balurghat from Patiram, " (the
project). However consequent to considerable delay in execution of the
project the Public Works Department of Government of West Bengal (PWD)
had unilaterallyterminated the contract in January 2006. The company
and Elsamex S.A. felt that such delay in execution was due to the
inability of PWD to hand over the stretch of encumbrance free land for
widening of road and non-availability of construction drawings on time
by PWD. The company has a legitimate claim of Rs. 1517 lacs towards
receivable (included in Note No.19) and Rs.1133 lacs on account of
deposit against Performance Guarantee (included in Note No.21). Elsamex
S.A. moved to arbitration and had claimed an amount of Rs.7334 lacs
including an additional claim on consequential losses as per guidelines
of "Federation Internationale Des Ingenieurs-Conseils" (FIDIC).
Arbitral Board in their meeting held on 25th October 2010 has upheld
Elsamex S.A's claim and has given award in favour of Elsamex S A. Under
the award, a total amount of Rs.3535 lacs is receivable bythe company.
A claim has already been lodged with PWD . PWD has preferred to
challenge the verdict of the Arbitrators and has appealed to the High
Court for a stay in the matter of payment of award money.
(All figures in Rs. Lacs, unless otherwise stated)
As at As at
March 31, 2012 March 31,2011
5 Contingent Liabilities
(a) Claims against the company
not acknowledged as debt 100 100
(b) Other money for which the
Company is contingently liable:
(i) Excise Duty matters pending
in appeal related to 130 129
issues of applicability
and classification
(ii) Sales Tax/VAT matters
pending in appeal
relating to disputes 944 980
regarding assessablevalue
and exemptions claimed
(iii) Service Tax Matters
pending in appeal relating 72 3,004
to issues of applicability
(iv) Corporate guarantees
given in favour of Subsidiary
Companies 29,070 28,814
(v) Other guarantees given 3,200 3,200
(vi) Standby letter of credit 4,860 4,236
(vii) Liquidated damages
relating to contract sales Amount not
readily Amount not
readily
ascertainable ascertainable
The probable cash outflow in respect of the above matters is not
determinable at this stage
6 Related party disclosures
Related party disclosures as required by Accounting Standard 18 on
Related Party Disclosures are given below: Relationships
(a) Subsidiaries of the Company :
(i) MBE Coal & Minerals Technologies India Pvt. Ltd. (formerly Humbolt
Wedag Minerals India Pvt. Ltd.)
(ii) McNallySayaji Engineering Limited ( MSEL )
(iii) McNally Bharat Equipments Limited (MBEL)
(iv) McNally Bharat Infrastructure Limited (MBIL)
(v) MBE Mineral Technologies Pte Limited (formerly MBE Holdings Pte
Limited)
(vi) MBE Minerals Zambia Ltd
(b) Subsidiaries of MBE Mineral Technologies Pte Limited
(i) MBE Coal & Minerals Technologies GmbH
(ii) EWB Kornyezetvedelmi Limited
(iii) MBE Cologne Engineering Gmbh
(iv) MBE Minerals ( S.A.) (Proprietory) Limited Subsidiaries of MBE
Coal & Mineral Technologies GmbH:
(v) MBE Mineral Processing Technology (Beijing) Co.Ltd .
(vi) MBE Mineral Processing of Brazil LTDA
(vii) PT MBE Coal & Minerals Technology, Indonesia (c ) Key Management
Personnel :
(i) Mr. Deepak Khaitan - Executive Chairman
(ii) Mr. Prasanta Kumar Chandra - Whole-time Director & COO
(iii) Mr. Prabir Ghosh - Whole-time Director & Group CFO
7 Change in the estimate of contract revenue or contract costs have an
effect on the current period and/or subsequent periods. It is
impracticable to quantify the impact of such change in estimate.
8 Research and Development (R&D) Expenditure
Expenditure onR&D - In pursuit ofR & D endeavors the company is
continuously incurring R&D expenditure both on Capital and Revenue
which has not been separately reflected but is being shown as part of
regular heads of accounts in fixed assets and in Statement of Profit
and Loss respectively. Accordingly R&D revenue expenditure incurred
during the year debited to various account heads is Rs. 222.53 Lacs
(2010-11: Rs 286.62 Lacs) and on account of capital expenditure is Rs
179.55 Lacs (2010-11: Rs. 107.91 Lacs)
9 The company has only one "Business segment" and one "Geographical
segment" as defined in Accounting Standard -17on "Segment Reporting".
10 The financial statements for the year ended March 31, 2011 had been
prepared as per the then applicable, pre-revised Schedule VI to the
Companies Act, 1956. Consequent to the notification of Revised Schedule
VI under the Companies Act, 1956, the financial statements for the year
ended March 31, 2012 are prepared as per Revised Schedule VI.
Accordingly, the previous year figures have also been reclassified to
conform to this year's classification. The adoption of Revised Schedule
VI for previous year figures does not impact recognition and
measurement principles followed for preparation of financial
statements.
Mar 31, 2011
1. As per the Scheme of Arrangement as sanctioned by the Hon'ble High
Court at Calcutta vide its Order dated 28th July 2009 which was filed
with the Registrar of Companies, West Bengal, Kolkata on 1st September
2009 , for reconstruction of McNally Bharat Engineering Company Limited
(MBECL) and its subsidiary viz McNally Sayaji Engineering Ltd (MSEL)
the Products Division of MBECL engaged in the business of manufacture
and/or procuring equipments for various engineering and infrastructure
projects and having its units at Kumardhubi, in the State of jharkhand
and Asansol, in the State of West Bengal and Bangalore, in the State of
Kamataka has been transferred to MSEL with effect from the appointed
date, i.e. 01.04.2008. As per the scheme of arrangement the transfer
and vesting of Products Division of the MBECL to MSEL shall be subject
to the existing charges, mortgages and encumbrances, if any, over the
assets or any part thereof, provided however, that such charges,
mortgages and/or encumbrances shall be confined only to the assets of
MBECL or part thereof on or over which they are subsisting on transfer
to and vesting of such assets in MSEL and no such charges, mortgages
and/ or encumbrances shall extend over or apply to any other asset(s)
of MSEL. Thus the existing charges on the assets of the Products
Division for facilities enjoyed by MBECL will continue and vice versa.
Accordingly working capital demand loans, cash credit facilities, term
loans and other non fund based facilities of the Company are secured by
assets which include those of the Product Division of MSEL.
2. The company had entered in September 2003 a joint venture agreement
with Elsamex S.A. where officially it was appointed as a subcontractor
in "West Bengal Corridor Development Project - Improvement of Gazole
Hilli Section of SH 10 with a link to Balurghatfrom Patiram," (the
project). However consequent to considerable delay in execution of the
project the Public Works Department of Government of West Bengal (PWD)
had terminated the contract in January 2006. The company and Elsamex
S.A. felt that such delay in execution was due to the inability of PWD
to hand over the stretch of land for widening of road and
non-availability of construction drawings on time by PWD. The company
has a legitimate claim of Rs.15,16,90,568 towards receivable and
Rs.11,33,09,901 on account of deposit against Performance Guarantee.
Elsamex S.A. moved to arbitration and had claimed an amount of
Rs.73,34,03,024 including an additional claim on consequential losses
as per guidelines of "Federation Internationale Des
Ingenieurs-Conseils" (FIDIC). Arbitral Board in their meeting held on
25th October 2010 has upheld Elsamex S.A.'s claim and has given
favourable award in favour of Elsamex S.A. Under the award, a total
amount of Rs. 35-35 crores is receivable by the company. A claim has
already been lodged with PWD. PWD has preferred to challenge the
verdict of the Arbitrators and has appealed to the High Court for a
stay in the matter of payment of award money.
3. There are no dues payable to Micro enterprises and Small
enterprises on the basis of information available with the Company
regarding Micro and Small Enterprise under Micro, Small and Medium
Enterprises Development Act, 2006.
4. The Company has leasing arrangements in respect of operating leases
for premises (residential, office, etc.). These leasing arrangements
which are not non-cancellable are for a period of 3 years, or longer,
and are usually renewable by mutual consent on mutually agreeable
terms. The aggregate lease rentals payable are charged as Rent under
Schedule 16.
Notes:
(a) The estimates of future salary increases, considered in actuarial
valuations, take account of inflation, seniority, promotion and other
relevant factors, such as supply and demand in the employment market.
The expected return on plan assets is based on actuarial expectation of
the average long term rate of return expected on investment of funds
during the estimated term of the obligation.
(b) The fair value of plan asset have been segregated between the
company and the erstwhile product division of MBECL now a part of
McNally Sayaji Engineering Limited on the basis of the present value of
the obligations as at the end of the year.
(c) Amount recognized as an expense:
(i) Contribution to Salaries, wages, bonus include charge on account of
Leave Enachment Rs.26,030,114/- (2009-10-Rs. 19,925,293/-).
(ii) Contribution to Provident and other Funds includes charge on
account of Gratuity Rs.17,809,426/- (2009-10-Rs. 13,778,311).
(iii) Contribution to Workmen and staff welfare includes charge on
account of Long Service Award of Rs. 111,921/- (2009- 10-Rs. 271,692/-)
Sick Leave of Rs. 5,968,034/- (2009-10-Rs. 10,369,023/-) and on account
of post Retriement Medical Benefit Rs. (72,130/-) (2009-10- Rs.
194,885/-).
(iv) Contribution to provident and other funds in Schedule 16 includes
Rs. 36,090,932/- (2009-10 Rs. 37,515,218/-) towards contribution to
Defined Contribution plans viz. Provident Fund, Pension Fund and
Superannuation Fund.
5. Related party disclosures as required by Accounting Standard 18 on
Related Party Disclosures are as given below:
Relationships
a) Subsidiaries of the Company
(i) EWB Kornyezetvedelmi Limited
(ii) McNally Sayaji Engineering Limited (MSEL)
(iii) McNally Bharat Equipments Limited (MBEL)
(iv) McNally Bharat Infrastructure Limited (MBIL)
(v) MBE Mineral Technologies Pte Limited (formerly MBE Holdings Pte
Limited)
(vi) MBE Minerals Zambia Ltd (w.e.f 21.07.10)
b) Subsidiary ofMBE Mineral Technologies Pte Limited
(i) MBE Coal & Minerals Technology Gmbh
(ii) MBE Cologne Engineering Gmbh
(iii) MBE Minerals (S.A.) (Proprietory) Limited
(iv) McNally Humbolt Wedag Minerals India (Private) Limited. [formerly
HumboltWedag Minerals India (Private) Limited]
Subsidiaries of MBE Coal & Mineral Technologies GmbH
(v) MBE Mineral Processing Technology (Beijing) Co. Ltd
(iv) MBE Mineral Processing of Brazil LTDA
c) Key Management Personnel:
Mr. Prasanta Kumar Chandra - Wholetime Director & COO (14.02.11 -
31.03.11)
Mr. Srinivash Singh - Managing Director (01.04.10 -17.06.10)
6. Pursuant to the Announcement on Accounting for derivatives issued
by the Institute of Chartered Accountants of India in March , 2008 ,
the company has accounted for during the year net loss amounting to Rs
3,31,00,641 (31.3.10-52,826,056) in respect of outstanding derivative
contracts at the balance sheet date by marking them to market as
indicated in Note 1 (viii) above. The aforesaid mark to market loss was
included in "Gain on Exchange Fluctuation" in Schedule 14 to accounts .
7. Expenditure on R & D - In pursuit of R & D endeavors the company
is continuously incurring R&D expenditure both on Capital and Revenue
which has not been separately reflected but is being shown as part of
regular heads of accounts in fixed assets and in Profit and Loss
account respectively. Accordingly R & D revenue expenditure incurred
during the year debited to various account heads is Rs. 28,662,473
(2009-10: Rs. 86,77,129) and on account of capital expenditure is Rs.
10,790,594 (2009-10: Rs. Nil).
8. Previous years figures have been regrouped or rearranged where
considered necessary Signatories to Schedule 1 to 19
Mar 31, 2010
1. As per the Scheme of Arrangement as sanctioned by the Honble High
Court at Calcutta vide its Order dated 28th July 2009 which was filed
with the Registrar of Companies, West Bengal, Kolkata on 1 st September
2009, for reconstruction of McNally Bharat Engineering Company Limited
(MBECL) and its subsidiary viz McNally Sayaji Engineering Ltd (MSEL)
the Products Division of MBECL engaged in the business of manufacture
and/or procuring equipments for various engineering and infrastructure
projects and having its units at Kumardhubi, in the State of jharkhand
and Asansol, in the State of West Bengal and Bangalore, in the State of
Karnataka has been transferred to MSEL with effect from the appointed
date, i.e. 01 04.2008. As per the scheme of arrangement the transfer
and vesting of Products Division of the MBECL to MSEL shall be subject
to the existing charges, mortgages and encumbrances, if any, over the
assets or any part thereof, provided however, that such charges,
mortgages and/or encumbrances shall be confined only to the assets of
MBECL or part thereof on or over which they are subsisting on transfer
to and vesting of such assets in MSEL and no such charges, mortgages
and/ or encumbrances shall extend over or apply to any other asset(s)
of MSEL. Thus the existing char|es on the assets of the Products
Division for facilities enjoyed by MBECL will continue and vice versa.
Accordingly working capital demand loans, cash credit facilities, term
loans and other non fund based facilities of the Company are secured by
assets which include those of the Product Division of MSEL.
2. The company had entered in September 2003 a joint venture agreement
with Elsamex S.A. where officially it was appointed as a subcontractor
in "West Bengal Corridor Development Project - Improvement of Gazole
Hilli Section of SH 10 with a link to Balurghat from Patiram," (the
project). However consequent to considerable delay in execution of the
project the Public Works Department of Government of West Bengal (PWD)
had terminated the contract in January 2006. The company and Elsamex
S.A. felt that such delay in execution was due to the inability of PWD
to hand over the stretch of land for widening of road and
non-availability of construction drawings on time by PWD. The company
has a legitimate claim of Rs.15,16,90,568 towards receivable and
Rs.11,33,09,901 on account of deposit against Performance Guarantee.
Elsamex S.A. has already moved to arbitration and has claimed an amount
of Rs.73,34,03,024 including an additional claim on consequential
losses as per guidelines of "Federation Internationale Des
Ingenieurs-Conseils" (FIDIC). Arbitration proceedings are almost
complete and the company is confident in recovering at least an amount
not less than the recoverable shown in its books and considers that no
provision towards such amounts recoverable is necessary at this stage.
3. There are no dues payable to Micro enterprises and Small
enterprises on the basis of information available with the Company
regarding Micro and Small Enterprise under Micro, Small and Medium
Enterprises Development Act, 2006.
4. The Company has leasing arrangements in respect of operating
leases for premises (residential, office, etc.). These leasing
arrangements which are not non-cancellable are for a period of 3 years,
or longer, and are usually renewable by mutual consent on mutually
agreeable terms. The aggregate lease rentals payable are charged as
Rent under Schedule 17.
5. Related party disclosures as required by Accounting Standard 1 8
on Related Party Disclosures are as given below: Relationships
a) Subsidiaries of the Company
(i) EWB Kornyezetvedelmi Limited
(ii) McNally Sayaji Engineering Limited (MSEL)
(iii) McNally Bharat Equipments Limited (MBEL)
(iv) McNally Bharat Infrastructure Limited (MBIL)
(v) MBE Holdings Pte Limited
b) Subsidiary of MBE Holdings Pte Limited
(i) MBE Coal & Minerals Technology Gmbh
(ii) MBE Cologne Engineering Gmbh
(iii) MBE Minerals ( S.A.) Proprietory Limited
(iv) Humbolt Wedag Minerals India ( Private) Limited
8. Pursuant to the Announcement on Accounting for derivatives issued
by the Institute of Chartered Accountants of India in March, 2008, the
company has accounted for during the year net loss amounting to Rs
52,826,056 (31.3.09-Nil) in respect of outstanding derivative contracts
at the balance sheet date by marking them to market as indicated in
Note 1 (viii) above. The aforesaid mark to market loss was included in
"Loss on Exchange Fluctuation" in schedule 17 to accounts.
9. During the year the company has set up a wholly owned subsidiary
company, MBE Holdings Pte Limited in Singapore. MBE Holdings Pte
Limited has in turn acquired the Coal and Mineral Technology division
of KHD Humboldt Wedag GmbH. The Coal and Mineral Technology division
operates through four legal entites which are subsidiaries of MBE
Holdings Pte Limited viz MBE Coal and Mineral Technologies GmbH, MBE
Calogne Engineering GmbH, MBE Minerals SA Pty Ltd. and Humboldt Wedag
Minerals India Private Limited.
10. Previous years figures have been regrouped or rearranged where
considered necessary.
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