Mar 31, 2016
(b) Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
During the year ended 31 March 2016, the amount of per share dividend recognized as distributions to equity shareholders was Rs. Nil (31 March 2015: Rs. Nil).
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
(c) Shares held by holding/ultimate holding Company and/or their subsidiaries/associates
a. Term loans from bank amounting to Rs.1,300 lacs (31 March 2015: Rs.1,950 lacs) (taken during the financial year 2012-13) carrying interest at Bank rate 2%, which is currently 12.40% p.a. The loan is repayable in 16 quarterly installments after a moratorium period of 12 months (as per the repayment schedule). The loan is secured by collateral security on Land & Building at Mahape and certain cranes. Also first pari passu charge on the fixed assets of the company excluding certain assets specifically charged to certain lenders, along with other working capital lenders and term lenders.
b. Term loans from a Non Banking Financial Company amounting to Rs.45 lacs (31 March 2015: Rs.90 lacs) (taken during the financial year 2010-11) carrying interest @ 10% to 13.75% p.a. The loans are repayable in 46 to 57 monthly installments including interest (as per the repayment schedules). The loans are secured by primary security of the assets being funded, viz. Plant & Machinery, Motor car & Cranes.
c. Term loans from a Non Banking Financial Company amounting to Rs.261 lacs (31 March 2015: Rs.702 lacs) (taken during the financial year 2012-13) carrying interest @ 15.25% p.a. (floating). The loan is repayable in 42 monthly installments including interest (as per the repayment schedules). The loan is secured by Equitable Mortgage of factory freehold land & super structure thereon, located at Pen, Maharashtra and Corporate Guarantee of KSS Petron Pvt. Ltd.
I] (a) Cash credit facilities from banks are secured by way of:
I. Tari passu charge on entire current assets including stock of raw materials, stock-in-process, semifinished & finished goods, consumables, stores, spares, book debts and all other movables both present and future.
II. Collateral securities as follows:
i. Pari passu charge by way of equitable mortgage on the following assets of the Company:
a) Office Blocks at Swastik Chambers, Chembur, Mumbai
b) Factory land and building at Dabhasa, Gujarat
ii. Pari passu charge on entire heavy plant & machinery, fixtures and certain crawler cranes
iii. Corporate guarantee by the holding company - KSS Petron Private Limited
III. T he Company has also offered the following security for project specific credit facilities from banks by way of ;
a) Exclusive charge on all current assets specific to the project contracts (including but not limited to raw material, finished goods, work in progress, receivables and the contract receipts from the obligators)
b) Exclusive charge on all monies deposited/credited or caused to be deposited/credited into the project specific bank accounts
(b) The cash credit is repayable on demand and carries interest in the range of 13.35% to 16.75%.
II] Inter corporate deposits
Inter corporate deposits are unsecured and carries interest in the range of 11.00% to 16.00% and are repayable on the expiry of the term for which it was taken. Inter corporate deposits include Rs.3,505 lacs (31 March 2015: Rs.3,941 lacs) taken from related party.
1. Buildings include:
(a) Temporary establishments at sites of gross block of Rs.1,213 lacs and net block of Rs.174 lacs (31 March 2015: Rs.1,784 lacs and Rs.195 lacs respectively), these are written off over the expected life of the project or three years whichever is earlier.
(b) Rs. 753 , being the value of unquoted fully paid shares held in Swastik Chambers Owners'' Co-operative Society Limited in connection with the ownership rights of the office.
(c) Building includes those constructed on leasehold land:
Gross block Rs.103 lacs (31 March 2015: Rs.103 lacs)
Depreciation charge for the year Rs.3 lacs (31 March 2015: Rs.0.85 lacs)
Accumulated depreciation till 31 March 2015 Rs.68 lacs (31 March 2015: Rs.62 lacs)
Net book value Rs.35 lacs (31 March 2015: Rs.40 lacs)
2. M he Company has revalued its office buildings on 31 March 1994, at the fair values determined by an independent external valuer. The valuer determined the fair value by reference to market-based evidence. The valuations performed by the valuer were based on active market prices, adjusted for any difference in the nature, location or condition of the specific property.
The historical cost of office building fair valued by the Company was Rs.61 lacs and its fair value was Rs.934 lacs. Hence, the revaluation resulted in an increase in the value of office building by Rs.873 lacs. The revaluation of the building results an additional depreciation charge of Rs.16 lacs every year. In accordance with the option given in the Guidance Note on Accounting for Depreciation in Companies, the Company recouped such additional depreciation out of revaluation reserve up to 31st March 2014.
3. Gratuity and other post employment benefit plans
Gratuity :The Company operates gratuity plan which is administered through a gratuity trust for its employees as per the provisions of the Payment of Gratuity Act, 1972 [Amended]. The gratuity plan envisages annual contribution by employer to the trust as per actuarial valuation. The payment of gratuity to the employees are payable as per the Payment of Gratuity Act, 1972 [Amended] at the time of separation from service or retirement, whichever is earlier, subject to completion of the minimum qualifying service of 5 years. The payment of gratuity to the eligible employees by the trust is guaranteed by the Company. The Guidance issued by the Accounting Standard Board - the ''ASB'' - on implementing AS-15, Employee Benefits [Revised 2005] states that employee benefits fund set up by employers which guarantee any shortfall to be made good by the employer is treated as defined benefit plan.
The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for the respective plans.
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.
4. Segment information
The Company''s operations comprise of only one business segment ""Engineering, Procurement and Construction"" in the context of reporting business / geographical segment as required under mandatory Accounting Standard AS-17 ""Segment Reporting"". The accounting policies adopted for segment reporting are in line with the accounting policies of the Company.
The geographical segment considered for disclosure are in India and Outside India.
f. Corporate guarantee given by KSS Petron Pvt. Ltd.
KSS Petron Pvt. Ltd. has given a corporate guarantee of Rs.37,000 lacs towards Cash credit and other facilities taken by the Company from banks and Rs.1,850 lacs towards term loan from a non-banking financial company.
Note: The remuneration to the key managerial personnel does not include the provisions made for gratuity and leave benefits, as they are determined on an actuarial basis for the Company as a whole.
5. Capital and other commitments
Commitment for capital expenditure is Rs. Nil (31 March 2015: Rs. Nil).
6. Legal matters
T ne of the vendor (party) has invoked arbitration proceedings which have been challenged by the Company (earlier the company has made payment of Rs.750 lacs as per the interim orded of the Hon''ble High Court of Mumbai, on winding up petition filed in earlier year for non payment of Rs.1,277 lacs to the party, pending for final decision). Due liability in this regard have been fully provided in the books. The Company believes that it has creditable case on merits in its favour and does not expect any additional liability.
7. Update on Suspended / delayed contracts
The Company had entered into three contracts aggregating to Rs.27,974 lacs with one of the customers for design, engineering, supplies and construction of refinery heater & piping packages. This is a mega project (the largest private investment in the region)-which is nearly 60% completed and which had hit a temporary road block because of cost escalation, natural disaster and financial constraint. In March 2015 the Company had a meeting with the client, wherein the client had confirmed that they are in advanced stage for tying up with an investor for financial support to restart the project. The amount outstanding in the form of trade receivables of Rs.1,267 lacs (net of mobilization advance of Rs.2,926 lacs) is pending negotiations with the customer and the unbilled revenues are in the form of unfinished works and inventories, most of which are marketable, if required. The management is confident of its recovery in due course of time, in view of re-affirmation from top executives of said client for restarting the project and recently initiative taken by the central government in this regard. Further, in the current year, the company was successful in arriving settlement with one client which has resulted in reduction.
As regards Trade payables of Rs.819 lacs (as at 31st March, 2015 Rs.1,323 Lacs)relating to the said contract, the same is subject to reconciliation of work performed and can be accurately ascertained after re-negotiation upon re-start of the project or otherwise as the case may be.
In addition to the above there are trade receivables of Rs.656 lacs (net of mobilization advance and provisions of Rs.8 lacs) pertaining to some other old / delayed contracts. The Company is negotiating with these clients for recovery and is confident of realization of these receivables.
8. Revenue recognition - Cost Overruns / Extended Stay
(a) The Company had recognized in earlies period revenue and receivables of Rs.1,353 lacs (till 31st March, 2015 Rs.2,555 lacs) on account of cost overruns arising due to design changes and delay in completion of certain contracts, in respect of which the change order /customer acceptances are awaited. The contracts have provisions for issuance of change orders due to modifications in specifications, scope and methodology of execution of work. During execution of works, some of the specifications had undergone changes for which change order requests have been sent to the respective clients.
(b) Further, the company has recognized revenue of Rs.1,621 lacs during the current year (till date '' 2,922 lacs) on account of cost overruns arising due to extended stay in certain contracts. There are contractual provisions in these contracts for claims against extended stay at pre-determined rates per month as specified in the respective contracts.
The company is currently in discussion for getting change orders issued. The management is confident of receiving the recognized revenue after completion of pending formalities in due course of time. Therefore, there will not be any impact on reported profit for the year ended 31 March 2016 and on corresponding assets as at that date.
9. Going concern
T he Company is executing certain projects which have very high back ended billing and payment terms, release of which is linked to contracts achieving certain milestones and getting approvals from clients. This temporarily affects the liquidity of the Company. To mitigate the above, the Company has also obtained funding support from its Parent Company.
In the opinion of the management, current assets, loans and advances have a realizable value in ordinary course of business at least equal to the amount at which they are stated in the Balance Sheet.
(b) The Company is contesting the above demands and does not expect any material liability in respect of above contingent items, the effect of which, if any, will be taken as and when these are settled.
(c) Bank guarantees & Inland/Foreign letters of credit issued by the banks on behalf of the Company of '' 1,890,117,125.
Apart from the above, the Company believes that there are no other balances outstanding to micro and small enterprises as defined under the MSMED Act, 2006. This has been relied upon by the auditors.
To the extent information available with the Company in respect of MSME {as defined in The Micro, Small and Medium Enterprises Development Act, 2006 (the Act)}, the management has identified such enterprises which have provided goods and services to the company and qualify under the definition of MSME. As certified by the management there is no delay/default in payment. However, the company is in the process of compiling the additional information required to be disclosed under the act; accordingly, the amount of interest paid / payable in view of the management if any, will not be material.
10. Revision of estimated revenue, cost and project related provision
(a) During the current year as per the past practice, the Company has revised the estimated revenue, cost and project related provisions on account of prolongation of the contracts'' tenure as per the requirement of the clients owing to uncertainty surrounding completion of the projects which were due to reasons beyond the Company''s control. This is being done in line with the general business practice followed in the industry, however additional steps have been initiated during the year for fair estimation of revenue and project related provisions. Accordingly, adjustments on this account and/also on cost reassessment done during the year been charged/carried out to the Statement of Profit and Loss. (read with below Note No (b).
(b) Balance of certain trade receivables, other current liabilities and loans and advances are subject to confirmation / reconciliation. Management believes that on reconciliation / confirmation, there will not be any material impact on profit for the year and also on state of affairs.
11. Depreciation adjustment
Pursuant to the Companies Act, 2013 ("the Act"), the management, based on their evaluation has reassessed the useful life of fixed assets. Consequently, where the revised residual life of the fixed assets was nil as of 1st April 2014 (at that date), after retaining the residual value, balance carring value has been adjusted against the retained earnings in the year 2014-15 by Rs.57.15 lacs (Net of Deferred Tax Rs.29.43 lacs).
12. Previous numbers have been regrouped/reclassified to meet current year classification.
The accompanying notes are an integral part of the financial statements,
Mar 31, 2015
1. Segment information
"The Company's operations comprise of only one business segment
""Engineering, Procurement and Construction"" in the context of reporting
business / geographical segment as required under mandatory Accounting
Standard AS-17 ""Segment Reporting"". The accounting policies adopted for
segment reporting are in line with the accounting policies of the
Company.
2. Corporate guarantee given by KSS Petron Pvt. Ltd.
KSS Petron Pvt. Ltd. has given a corporate guarantee of Rs. 37,000 lacs
towards Cash credit and Buyer's credit facilities taken by the Company
from banks and Rs. 1,850 lacs towards term loan from a non-banking
financial company.
Note: The remuneration to the key managerial personnel does not include
the provisions made for gratuity and leave benefits, as they are
determined on an actuarial basis for the Company as a whole.
3. Capital and other commitments
Commitment for capital expenditure is Rs. Nil (31 March 2014: Rs. Nil).
4. Legal maters
A Vendor had fled winding-up patron against the Company for non-payment
of debt due after having raised demand of Rs. 1,277 lacs on the Company.
The Division Bench of Hon'ble High Court of Bombay has passed an Order
on 26 June 2014 and directed the Company to pay Rs. 750 lacs (in 10 equal
monthly installment) w.e.f. August, 2014. Accordingly the company has
paid all the installments, the last installment was paid in May 2015.
In May 2015, the vendor has invoked proceedings which have
been challenged by the Company. Accordingly it has been considered as a
contingent liability. (Refer note 35(a)(v)).
5. Update on Suspended / delayed contracts
The Company had entered into three contracts aggregating to Rs. 27,974
lacs with one of the customers for design, engineering, supplies and
operations of refinery heater & piping packages. This is a mega project
(the largest private investment in the region)-which is nearly 60%
complete, which had hit a temporary road block because of cost
escalation, natural disaster and financial constraint. In March 2015 the
Company had a Meeting with the client, wherein the client had confirmed
that they are in advanced stage for tying up with an investor for
financial support to restart the project. Apart from the above, the same
has also been reframed by the top executives of the said customer. The
amount outstanding in the form of trade receivables of Rs. 1,267 lacs
(net of mobilization advance of Rs. 2,926 lacs) is pending negotiations with
the customer and the unbilled revenues are in the form of unfinished
works and inventories, most of which are marketable, if required. The
management is confident of its recovery in due course of time.
As regards Trade payables of Rs. 1,323 lacs relating to the said contract,
the same is subject to reconciliation of work performed and can be
accurately ascertained after re-negotiation upon re-start of the project
or otherwise as the case may be.
In addition to the above there are trade receivables of Rs. 234 lacs (net
of mobilization advance and provisions of Rs. 1,314 lacs) pertaining to
some other old / delayed contracts. The Company is negotiating with these
clients for recovery and is confident of realization of these
receivables.
6. Revenue recognition - Cost Overruns / Extended Stay
The Company had recognized revenue and receivables of Rs. 2,555 lacs
(during earlier period) on account of cost overruns arising due to
design changes and delay in completion of certain contracts, in respect
of which the change order /customer acceptances are awaited. The
contracts have provisions for issuance of change orders due to
modifications in specifications, scope and methodology of execution of work.
During execution of works, some of the specifications had undergone
changes for which change order requests have been sent to the respective
clients. Further, the company has recognized revenue of Rs. 1,301 lacs
during the current year on account of cost overruns arising due to
extended stay in certain contracts. There are contractual provisions in
these contracts for claims against extended stay at pre-determined
rates per month as specified in the respective contracts. The company is
currently in discussion for getting change orders issued. The management
is confident of receiving the recognized revenue after completion of
pending formalities in due course of time. Therefore, there will not be
any impact on reported profit for the year ended 31 March 2015 and on
corresponding assets as at that date.
7. Going concern
The Company is executing certain projects which have very high back
ended billing and payment terms, release of which is linked to
contracts achieving certain milestones and getting approvals from
clients. This temporarily affects the liquidity of the Company. To
mitigate the above, the Company has obtained funding from its Parent
Company and has also received a support letter from its Ultimate Parent
Company ensuring working capital support up to 30 June 2016.
Apart from the above, the Company believes that there are no other
balances outstanding to micro and small enterprises as defend under the
MSMED Act, 2006. This has been relied upon by the auditors.
8. Revision of estimated revenue, cost and project related provision
During the current year ended March 31, 2015, the Company has revised
the estimated revenue, cost and project related provisions on account of
prolongation of the contracts' tenure as per the requirement of the
clients owing to uncertainty surrounding completion of the projects
which were due to reasons beyond the Company's control and which relate
to earlier periods. Accordingly, the total of such earlier period
adjustments which are debited to the Statement of Profit and Loss and
impacts the profit for the year ended 31 March 2015 by Rs. 3,593 lacs. The
Company has also lodged claims corresponding to these costs. These will
be accounted as and when settled.
9. Depreciation adjustment
Pursuant to the Companies Act, 2013 ("the Act"), the management, based
on their evaluation has reassessed the useful life of fixed assets.
Consequently, the depreciation charge for the year ended March 31, 2015
would have been higher by Rs. 301.20 lacs. In accordance with the Act,
the carrying value of the fixed assets as at April 1, 2014 is
depreciated over the revised residual life of the fixed assets and where
the revised residual life of the fixed asset is nil as at that date, the
carrying value of the fixed assets, after retaining the residual value,
has been adjusted against the retained earnings. Consequently, the
retained earnings has been decreased by Rs. 57.15 lacs (Net of Deferred
Tax Rs. 29.43 lacs).
10. Previous numbers have been regrouped/reclassified to meet current
year classification.
Mar 31, 2014
1. Corporate Information
Petron Engineering Construction Limited (the Company) is a public
Company domiciled in India and incorporated on 19 th July, 1976 under
the provisions of the Companies Act, 1956 read with the General
Circular 08/2014 dated 04 April 2014 issued by the Ministry of
Corporate Affairs. The Company is primarily engaged in the business of
engineering, procurement and construction of plants for oil & gas
refineries, power, cement, petrochemical, fertiliser and other
industries. Its shares are listed on two stock exchanges in India. The
Company has mechanical fabrication and manufacturing facilities in
Maharashtra and Gujarat regions. The Company also provides electrical &
instrumentation services and insulation & refractory
application/maintenance services to above industries.
2. Basis of Preparation
The financial Statements have been prepared and presented under the
historical cost convention on accrual basis of accounting, unless
stated otherwise and comply with the mandatory Accounting Standards
(''AS'') prescribed under the Companies Act, 1956 read with the General
Circular 08/2014 dated 04 April 2014 issued by the Ministry of
Corporate Affairs, and other accounting principles generally accepted
in India. The accounting policies adopted in the preparation of
financial statements are consistent with those of the previous year.
a) Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of Rs.
10 per share. Each holder of equity shares is entitled to one vote per
share. The Company declares and pays dividend in Indian rupees. The
dividend proposed by the Board of Directors is subject to the approval
of the shareholders in the ensuing Annual General Meeting.
During the year ended 31 March 2014, the amount of per share dividend
recognized as distributions to equity shareholders was Rs. Nil (31
March 2013: Rs. Nil).
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.
Note 3(c)(i)
Petron Investment Private Limited (PIPL), Amritha Sharanya Leasing &
Investment Private Limited (ASLIPL), SRA Finance & Investments Private
Limited (SRA) have been amalgamated/merged in KSS Petron Pvt. Ltd.
(formerly known as KazStroyService Infrastructure India Pvt. Ltd.,), as
per Bombay High Court''s order dated 15th February, 2013 received by the
Company on 26th March, 2013, effective from 01.04.2013. Hence w.e.f.
01.04.2013 KSS Petron Pvt. Ltd. is the holding company of Petron
Engineering Construction Limited.
a. Term loan from bank amounting to Rs. Nii ( Previous year : Rs.
74,129,075) carried interest @ 12.35% p.a. The loan was repayable in 42
monthly installments along with interest (as per schedule laid down by
bank), from the date of loan, viz., 01 January 2011. The loan has been
completely repaid on 01 November 2013.The loan was secured by
hypothecation of plant & machinery of the Company acquired out of the
said loan.
b. Term loans from financial institution amounting to Rs. 23,155,089
(Previous year : Rs. 35,413,042) was taken during the financial year
2010-11 and carries interest @ 10 % to 13.75% p.a. The loan is
repayable in 60 monthly installments including interest (as per the
repayment schedules). The loans are secured by primary security of the
assets being funded, viz. Plant & Machinery, Motor car & Cranes.
c. Term loans from financial institution amounting to Rs. 123,053,633
(Previous year : Rs. 176,589,626) has been taken during the financial
year 2012-13 and carries interest @ 15.25% p.a. (floating). The loan is
repayable in 48 monthly installments including interest (as per the
repayment schedules). The loan is secured by Equitable Mortgage of
factory freehold land & super structure thereon, located at Pen,
Maharashtra and Corporate Guarantee of KSS Petron Pvt. Ltd.
d. Term loans from bank amounting to Rs. 260,000,000 (Previous year :
Rs. 261,180,685) has been taken during the financial year 2012-13 and
carries interest at Bank rate 2%, which is currently 13% p.a. The
loan is repayable in 16 quarterly installments after a moratorium
period of 12 months (as per the repayment schedule). The loan is
secured by collateral security on Land & Building at Mahape and certain
plant & machinery. Also first pari passu charge on the fixed assets of
the company excluding certain assets specifically charged to certain
lenders, along with other working capital lenders and term lenders.
4] a) Cash credit/Working capital demand loan & Buyer''s Credit
facilities from banks are secured by way of:
I. Pari passu charge on whole of the current assets including stock of
raw materials, stock-in-process, semi- finished & finished goods,
consumables, stores, spares, book debts and all other movables both
present and future.
II. Collateral securities as follows:
i. Pari passu charge on the following assets of the Company:
a) Office Blocks at Swastik Chambers, Chembur, Mumbai
b) Factory land and building at Dabhasa,Gujarat
ii. Pari passu charge on entire heavy plant & machinery, fixtures and
certain crawler cranes
iii. Corporate guarantee by the holding company - KSS Petron Private
Limited
III. The Company has also offered the following security for project
specific credit facilities from banks by way of ;
a) Exclusive charge on all current assets specific to the project
contracts (including but not limited to raw material, finished goods,
work in progress, receivables and the contract receipts from the
obligors)
b) Exclusive charge on all monies deposited/credited or caused to be
deposited/credited into the project accounts
b) The cash credit / working capital demand loan is repayable on demand
and carries interest in the range of 12.80% to 16.75%.
II] Inter corporate deposits
a) Inter corporate deposits carries interest in the range of 11.00% to
16.50% and are repayable on the expiry of the term for which it was
taken. Inter corporate deposits include Rs. 274,851,521 (P.Y. Rs.
134,988,118/-) taken from related parties.
Notes
5. Buildings include:
a) Temporary establishments at sites of gross block of Rs. 163,048,095
and net block of Rs. 24,615,254 ( Rs. 165,308,501 and Rs. 69,217,741
respectively), these are written off over the expected life of the
project or three years whichever is earlier.
b) Rs. 753, being the value of unquoted fully paid shares held in
Swastik Chambers Owners'' Co-operative Society Limited in connection
with the ownership rights of the office.
c) Building includes those constructed on leasehold land:
Gross block Rs. 10,266,853 (31 March 2013: Rs. 10,266,853)
Depreciation charge for the year Rs. 342,913
(31 March 2013: Rs. 342,913)
Accumulated depreciation Rs. 6,140,327 (31 March 2013: Rs. 5,797,414)
Net book value Rs. 4,126,526 (31 March 2013: Rs. 4,469,440)
6. The company has revalued its office buildings on 31 March 1994, at
the fair values determined by an independent external valuer. The
valuer determined the fair value by reference to market-based evidence.
The valuations performed by the valuer were based on active market
prices, adjusted for any difference in the nature, location or
condition of the specific property.
The historical cost of office building fair valued by the company was
Rs. 6,053,003 and its fair value was Rs. 93,429,659. Hence, the
revaluation resuited in an increase in the value of office building by
Rs. 87,376,656. The revaluation of the building results an additional
depreciation charge of Rs. 1,424,239 every year. In accordance AS 10 -
Accounting for Fixed Assets, the company recoups such additional
depreciation out of revaluation reserve.
7. Gratuity and other post employment benefit plans Gratuity
The Company operates gratuity plan which is administered through a
gratuity trust for its employees as per the provisions of the Payment
of Gratuity Act, 1972 [Amended]. The gratuity plan envisages annual
contribution by employer to the trust as per actuarial valuation. The
payment of gratuity to the employees are payable as per the Payment of
Gratuity Act, 1972 [Amended] at the time of separation from service or
retirement, whichever is earlier, subject to completion of the minimum
qualifying service of 5 years. The payment of gratuity to the eligible
employees by the trust is guaranteed by the Company. The Guidance
issued by the Accounting Standard Board - the ''ASB'' - on implementing
AS-15, Employee Benefits [Revised 2005] states that employee benefits
fund set up by employers which guarantee any shortfall to be made good
by the employer is treated as defined benefit plan.
The following tables summarize the components of net benefit expense
recognized in the statement of profit and loss and the funded status
and amounts recognized in the balance sheet for the respective plans.
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 overall expected rate of return on assets is determined based on
the market prices prevailing on that date, applicable to the period
over which the obligation is to be settled. There has been significant
change in expected rate of return on assets due to change in the market
scenario.
8. Segment information
Business segments
The Company operates in only one business segment, i.e. ''Engineering,
Procurement & Construction'' based on the nature of the services and
products, the risks and returns etc. Therefore, business segment
reporting in terms of accounting standard 17 on segmental reporting is
not required to be disclosed.
9. Capital and other commitments
Commitment for capital expenditure is Rs. Nii (31st March 2013: Rs.
3,260,499).
10. There have been major delays and cost overruns on long-term fixed
price contracts with Bharat Heavy Electricals Limited - the ''Client'' -
at Kahalgaon, Bihar - the ''project location'' - on account of the
Client''s failure to provide the front, free issue materials and
cranes/equipment. This was further aggravated by the labour unrest at
the Client''s project location. The Company had represented to the
Client for relief and compensation; however the Client unilaterally and
arbitrarily rejected the same and called the bonds for advance payments
and performance. The Company had, as per the terms of the tender
document, asked Client to appoint a Sole Arbitrator to settle various
claims which include outstanding payment of Rs. 21,503,907, which has
been fully provided. The statements of facts & claims were submitted by
the Company and Client before the Arbitrator.
11. The Company had entered into three contracts aggregating to Rs.
27,974 Lacs with one of the customers for design, engineering, supplies
and construction of refinery heater & piping packages. The progress on
these contracts was, however, badly hit because of the severe financial
crisis at the customer''s end. These warranted the Company to decelerate
the works at these projects significantly.
With reference to aforesaid contracts, Trade receivables of Rs. 1,267
lacs (net of mobilization advance of Rs. 2,926 Lacs), is confirmed by
the Customer as payable, while the unbilled revenue being receivable
from the customer amounting to Rs. 6,256 Lacs are in the form of
un-finished works and inventories, most of which are marketable, if
required.
As regards Trade payables of Rs. 1,826 Lacs relating to the said
contract is concerned, the same is subject to reconciliation of work
performed and can be accurately ascertained after re-negotiation upon
re-start of the project.
The Company has received a written communication in May, 2013 from the
customer affirming their intent to revive the subject mega project (the
largest private investment in the region) - which is nearly 60%
complete - within this year, which had hit a roadblock because of the
cost escalation, natural disaster and financial constraints. As per the
communication, the customer is persistently endeavoring to get required
equity infusion from current and/or new investors to eventually do a
financial closure. Apart from the above letter, the same has also been
reaffirmed by the top executives of the customer in discussions held
with the Company. Based on the revival plans and affirmations given by
the customer, the management is confident that it will be abie to
recover the amounts due towards trade receivables and unbilled revenue.
Accordingly no provision has been made for the same.
Further, the accounts payable shall be subject to the reconciliation of
the work performed at the said project and can be accurately
ascertained after re-negotiation upon restart of the project or
otherwise, as the case may be.
12. The Company has recognised revenue and receivables of Rs. 3,811
Lacs on certain projects arising out of design changes and/or scope
variations for which acceptances by the clients are awaited.
The Management is confident that the variations will be accepted by the
customers and PMC and of subsequently billing and recovering the such
amounts from the customers consequently no provision is required to be
made in the books as at 31st March, 2014.
13. A Vendor has filed winding-up petition against the Company for
non-payment of debt due after having raised demand on the Company to
clear its dues. Hon''ble High Court of Bombay has passed an Order on
29th April, 2014 directing the Company to deposit Rs. 1277 lacs, on or
before 30th June, 2014, failing which the Petition shall stand
admitted, without considering several other contentions of the Company
to the Petition. The Company has been advised by its legal adviser that
there is a good case for appeal before the Division Bench of the
Hon''ble High Court of Bombay and has merit to most likely succeed in
the said appeal, consequent to which no liability should accrue on the
Company, apart from the amount provided in the books of accounts, as on
31st March, 2014.
14. The Company is facing liquidity issue since some projects are
delayed beyond scheduled completion dates and some of the on-going
contracts have very high back-ended billing and payment terms, release
of which is linked to contracts achieving certain milestones and
getting approvals of respective clients. This has severely affected the
Company''s cash flows due to which it has delayed payment of certain
statutory dues, employees'' dues, banks and other stakeholders.
Restrictions on utilization of sanctioned limits by certain bankers,
has further aggravated the situation.
To mitigate the above factors, the Company is in the process of
obtaining funding from parent, raising funds from other sources and
approaching banks to utilise frozen limits. It is also working to
achieve contracted milestones in ongoing projects thereby releasing
crucial working capita which the Company''s management expects to
achieve by December 2014.The Company has also obtained a parent
support letter ensuring working capital support for next 15 months
upto June 30, 2015.
15. Contingent liabilities
31.03.2014 31.03.2013
(Amount Rs ) (Amount Rs )
a) Claims against the Company not
acknowledged as debts, comprises of;
Sales tax matters in appeal
(Sales tax matters in appeal mainly
comprises of demands made
on account of non submission of C& E
forms, disallowances 41,561,745 54,935,764
on assessments,additionai tax levied,
iate filing of returns, non
submission of original documents etc).
Excise duty matters in appeal
(Excise matters in appeal mainly
comprises of demands made on 848,900 740,954
duty paid imported goods & difference
in scheduled rates).
Service tax mattes in appeal
(Service tax matters in appeal mainly
comprises of demands made
on disallowance of input credit,
disallowing the abatement scheme 61,416,709 56,498,673
adopted by the company and penalty
for late payment etc).
Income-tax matters
(Income-tax matters comprises of demand
of tax and interest on 954,481,506 954,033,763
short deduction of tax deducted at
source).
Labour matters and other litigations 35,091,989 3,970,102
(Labour matters comprises of demand
made for labour welfare cess).
910,710,087 1,070,179,256
b) The Company is contesting the above demands and does not expect any
material liability in respect of above contingent items, the effect of
which, if any, will be taken as and when these are settled.
c) Bank guarantees & Iniand/Foreign letters of credit issued by the
banks on behalf of the Company of Rs. 3,327,930,159 (31st March 2013:
Rs. 2,994,647,404) and Rs. 177,901,980 ( Rs. 544,250,759) respectively.
d) In respect of certain contracts where the contractual completion
dates have already been expired, the Company is in the process of
getting extension of contractual completion dates. Company is of the
view that no liquidated damages for delay will be levied as delays are
mainly on part of customers obligations. The ultimate outcome of the
same will be known only after the completion of the contracts.
16. The determination of revenue as per the percentage completion
method and provision of foreseeable loss necessarily involve making
estimates by the management of the future cost, and this being
technical in nature has been relied upon by the auditors.
17. Previous numbers have been regrouped/reclassified to meet current
year classification.
Mar 31, 2013
1. Corporate information
Petron Engineering Construction Limited (the Company) is a public
Company domiciled in India and incorporated on 19th July, 1976 under
the provisions of the Companies Act, 1956. The Company is primarily
engaged in the business of engineering, procurement and construction of
plants for oil and gas refineries, power, cement, petrochemical,
fertiliser and other industries. Its shares are listed on two stock
exchanges in India. The Company has mechanical fabrication and
manufacturing facilities in Maharashtra and Gujarat regions. The
Company also provides electrical and instrumentation services and
insulation and refractory application/maintenance services to above
industries.
2. Basis of preparation
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The Company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under the Companies (Accounting Standards) Rules, 2006, (as amended)
and the relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on an accrual basis and under the
historical cost convention, except for certain building, land and plant
and machinery acquired before 31st March, 1994 which are carried at
revalued amounts. The accounting policies adopted in the preparation of
financial statements are consistent with those of previous year.
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods. Difference between the actual results
and estimates are recognised in the period in which determined.
3. Gratuity and other post employment benefit plans
Gratuity
The Company operates gratuity plan which is administered through a
gratuity trust for its employees as per the provisions of the Payment
of Gratuity Act, 1972 [Amended]. The gratuity plan envisages annual
contribution by employer to the trust as per actuarial valuation. The
payment of gratuity to the employees are payable as per the Payment of
Gratuity Act, 1972 [Amended] at the time of separation from service or
retirement, whichever is earlier, subject to completion of the minimum
qualifying service of 5 years. The payment of gratuity to the eligible
employees by the trust is guaranteed by the Company. The Guidance
issued by the Accounting Standard Board - the ''ASB'' - on implementing
AS-15, Employee Benefits [Revised 2005] states that employee benefits
fund set up by employers which guarantee any shortfall to be made good
by the employer is treated as defined benefit plan.
The following tables summarize the components of net benefit expense
recognized in the statement of profit and loss and the funded status
and amounts recognized in the balance sheet forthe respective plans.
4. Segment information
Business segments
The Company operates in only one business segment, i.e. ''Engineering,
Procurement and Construction'' based on the nature of the services and
products, the risks and returns etc. Therefore, business segment
reporting in terms of accounting standard 17 on segmental reporting is
not applicable.
Geographical segments
In respect of the secondary segment information, the Company has
identified its geographical segments as (a) within India; and (b)
outside India. The conditions prevailing in India being uniform, no
separate geographical disclosure within India is considered necessary.
Accordingly, the geographic segment information for the year ended 31st
March, 2013 has been disclosed as follows:
5. Capital and other commitments
Commitment for capital expenditure is Rs. 3,260,499 (31st March 2012: f
4,726,951).
6. There have been major delays and cost overruns on long-term
fixed price contracts with Bharat Heavy Electricals Limited - the
''Client'' - at Kahalgaon, Bihar - the ''project location'' - on account of
the Client''s failure to provide the front, free issue materials and
cranes/equipment. This was further aggravated by the labour unrest at
the Client''s project location. The Company had represented to the
Client for relief and compensation; however the Client unilaterally and
arbitrarily rejected the same and called the bonds for advance payments
and performance. The Company had, as per the terms of the tender
document, asked Client to appoint a Sole Arbitrator to settle various
claims which include outstanding payment of Rs. 21,503,907, which has
been fully provided. The statements of facts and claims were submitted
by the Company and Client before the Arbitrator.
7. The Company had entered into three contracts aggregating to Rs.
27,974 Lacs with one of the customers for design, engineering, supplies
and construction of refinery heater and piping packages. The progress
on these contracts was, however, badly hit because of the severe
financial crisis at the customer''s end. These warranted the Company to
decelerate the works at these projects significantly.
With reference to aforesaid contracts, Trade receivables of Rs. 1,278
Lacs (net of mobilization advance of - 2,926 Lacs), is confirmed by the
Customer as payable, while the unbilled revenue being receivable from
the customer amounting to Rs. 6,256 Lacs are in the form of un-finished
works and inventories, most of which are marketable, if required.
As regards Trade Payables of Rs. 1,866 Lacs relating to the said
contract is concerned, the same is subject to re-conciliation of work
performed and can be accurately ascertained after re- negotiation upon
re-start of the project.
The Company has received a written communication in May, 2013 from the
customer affirming their intent to revive the subject mega project (the
largest private investment in the region) - which is nearly 60%
complete - within this year, which had hit a temporary roadblock
because of the cost escalation, natural disaster and financial
constraints. As per the communication, the customer is persistently
endeavoring to get required equity infusion from current and/or new
investors to eventually do a financial closure. Apart from the above
letter, the same has also been reaffirmed by the top executives of the
customer in discussions.
8. Disclosure under AS-7 (revised 2002)
In terms of the disclosures required to be made under AS-7 (revised
2002), Construction Contracts, issued by the ICAI, the amounts
considered in the financial statements up to the balance sheet date are
as follows:
9. The determination of revenue as per the percentage completion
method and provision of foreseeable loss necessarily involve making
estimates by the management of the future cost, and this being
technical in nature has been relied upon by the auditors.
Mar 31, 2012
1. Corporate information
Petron Engineering Construction Limited (the Company) is a public
Company domiciled in India and incorporated on 19th July, 1976 under
the provisions of the Companies Act, 1956. The Company is primarily
engaged in the business of engineering, procurement and construction of
plants for oil & gas refineries, power, cement, petrochemical,
fertilizer and other industries. Its shares are listed on two stock
exchanges in India. The Company has mechanical fabrication and
manufacturing facilities in Maharashtra and Gujarat regions. The
Company also provides electrical & instrumentation services and
insulation & refractory application/maintenance services to above
industries.
a) Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of Rs.
10 per share. Each holder of equity shares is entitled to one vote per
share. The Company declares and pays dividend in Indian rupees. The
dividend proposed by the Board of Directors is subject to the approval
of the shareholders in the ensuing Annual General Meeting.
During the year ended 31 March 2012, the amount of per share dividend
recognized as distributions to equity shareholders was Rs. 2 (31 March
2011.Rs. 2 per share). In the event of liquidation of the Company, the
holders of equity shares will be entitled to receive remaining assets
of the Company, after distribution of all preferential amounts. The
distribution will be in proportion to the number of equity shares held
by the shareholders.
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 ownership of shares.
a. Term loan from bank amounting to Rs. 17,995,983 ( Previous year : Rs.
44,938,461) carries interestî 12.5% p.a. The loan is repayable in 36
monthly installments of 22.22 lakhs each along with interest, from the
date of loan, viz., 01 December 2009. The loan is secured by
hypothecation of plant & machinery of the Company acquired out of the
said loan.
b. Term loan from bank amounting toRs. 185,438,649 ( Previous year:Rs.
146,732,540) carries interestî 12.00% p.a. The loan is repayable in 42
monthly installments along with interest (as per schedule laid down by
bank), from the date of loan, viz., 01 January 2011 .The loan is
secured by hypothecation of plant & machinery of the Company acquired
out of the said loan.
c. Term loans from financial institution amounting to Rs. 39,085,537
(Previous year: Rs. 28,374,208) was taken during the financial year
2010-11 and carries interest @ 10 % to 13.25% p.a. The loan is
repayable in 60 monthly installments including interest ( as per the
repayment schedules). The loans are secured by primary security of the
plant and machinery funded.
(a) Cash credit/Working capital demand loan facilities from banks are
secured by way of:
I. Pari passu charge on whole of the current assets including stock of
raw materials, stock-in-process, semi- finished & finished goods,
consumables, stores, spares, book debts and all other movables both
present and future.
II. Collateral securities as follows:
i. Pari passu charge on the following assets of the Company:
a) 20 office blocksat Mumbai
b) Factory land and building at Dabhasa, Gujarat
ii. Pari passu charge on entire heavy plant & machinery, fixtures and
certain crawler cranes
iii. Corporate guarantee by the holding company- Petron Investments
Private Limited
III. The Company has also offered the following security for project
specific credit facilities from banks by way of;
a] Exclusive charge on all current assets specific to the project
contracts (including but not limited to raw material, finished goods,
work in progress, receivables and the contract receipts from the
obligors)
b] Exclusive charge on all monies deposited/credited or caused to be
deposited/credited into the project accounts
IV. The cash credit/working capita I demand loan is repayable on demand
and carries interest in the range of 11% to 16%.
b) Short term INR loan from bank
a) Term loan from bank amounting to Rs. 80,369,863 ( Previous year :Rs.
Nil) carries interest @ 13.5% p.a. The loan is repayable in 5 monthly
installments of 160 lakhs excluding interest, from the date of loan,
viz., March 2012. The loan is secured against the securities mentioned
in note 8 (a)[l.ll &III) above.
c) Intercorporate deposits
a) Inter corporate deposits amounting toRs. 69,000,000 ( Previous year
: Rs. Nil) carries interest in the range of 12 % to 16%.
Notes
1. Buildings include:
(a) Temporary establishments at sites of gross block ofRs. 128,719,159
and net block ofRs. 71,442,746 (Rs. 119,269,923 and Rs. 81,407,444
respectively), these are written off over the expected duration of
projects.
b) Rs. 753, being the value of unquoted fully paid shares held in
Swastik Chambers Owners' Co-operative Society Limited in connection
with the ownership rights of the office.
c) Building includes those constructed on leasehold land: Gross
block Rs. 10,266,853(31 March2011:Rs. 10,266,853) Depreciation charge
for the year Rs. 2,489,792 (31 March 2011:Rs. 2,489,792) Accumulated
depreciation Rs. 5,454,500 (31 March 2011: Rs. 5,111,587)
Net book valueRs.4,812,353 (31 March 2011:Rs.5,155,266)
2. The Company has revalued freehold land, office building at Swastik
Chambers and certain heavy plant & machinery as on 31 March 1994, at
the fair values determined by an independent external valuer. The
valuer determined the fair value by reference to market-based evidence.
This means that valuations performed by the valuer were based on active
market prices, adjusted for any difference in the nature, location or
condition of the specific asset. The consequential incremental value of
Rs. 213,489,876 over the written down value (original cost less
depreciation) as at 31st March, 1994 has been credited to revaluation
reserve under Reserves and Surplus. The balance in revaluation reserve
represents the above value as reduced by adjustments for sale of
revalued assets and for depreciation element on the incremental value
since the date of revaluation. The above revaluation results into an
additional depreciation charge of Rs. 1,424,239 every year. In
accordance with the option given in the Guidance Note on Accounting for
Depreciation in Companies, the Company recoups such additional
depreciation out of revaluation reserve.
*subject to first charge to secure the Company's non-fund based working
capital facilities
# Excise duty on sales amounting to Rs. 47,835,965 (31 March 2011:Rs.
39,123,436) has been reduced from sales in profit & loss account.
As per the past practice, the service tax have been included in Sales
and contracts revenue [gross]. Accordingly, gross revenue includes the
said taxes amounting to Rs. 321,055,863 I 31 March : Rs. 364,420,637)
which has no impact on the profit of the respective years.
* Purchases is accounted for closing stock plus material consumed less
opening stock as physically verified by the management.
2. GRATUITY AND OTHER POST EMPLOYMENT BENEFIT PLANS.
Gratuity :The Company operates gratuity plan which is administered
through a gratuity trust for its employees as per the provisions of the
Payment of Gratuity Act, 1972 [Amended]. The gratuity plan envisages
annual contribution by employer to the trust as per actuarial
valuation. The payment of gratuity to the employees are payable as per
the Payment of Gratuity Act, 1972 [Amended] at the time of separation
from service or retirement, whichever is earlier, subject to completion
of the minimum qualifying service of 5 years. The payment of gratuity
to the eligible employees by the trust is guaranteed by the Company.
The Guidance issued by the Accounting Standard Board - the 'ASB' - on
implementing AS-15, Employee Benefits [Revised 2005] states that
employee benefits fund set up by employers which guarantee any
shortfall to be made good by the employer is treated as defined benefit
plan.
The following tables summarize the components of net benefit expense
recognized in the statement of profit and loss and the funded status
and a mounts recognized in the balance sheet for the respective plans.
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 overall expected rate of return on assets is determined based on
the market prices prevailing on that date, applicable to the period
over which the obligation is to be settled. There has been significant
change in expected rate of return on assets due to change in the market
scenario.
3. SEGMENT INFORMATION
Business segments
The Company operates in only one business segment, i.e. 'Engineering,
Procurement & Construction' based on the nature of the services and
products, the risks and returns etc. Therefore, business segment
reporting in terms of accounting standard 17 on segmental reporting is
not applicable.
Names of related parties and related party relationship Related parties
where control exists Holding Company Ultimate holding Company
Petron Investments Private Limited KazStroy Service Global B.V
Related party with whom transactions have taken place during the year
Fellow subsidiaries
KazStroy Engineering India Private Limited KazStroy Service
Infrastructure India Private Limited KazStroy Service Management
Services Pte Limited Petron Civil Engineering Private Limited
Key management personnel
Mr. T. S. Das, Managing Director
Related party transactions
The following table provides the total amount of transactions that have
been entered into with related parties for the relevant financial year:
4. CAPITAL AND OTHER COMMITMENTS
Commitment for capital expenditure is Rs. 4,726,951 (31st March 2011:Rs.
104,199,303).
5. There have been major delays and cost overruns on long-term fixed
price contracts with Bharat Heavy Electricals Limited-the 'Client'-at
Kahalgaon, Bihar-the 'project location'-on account of the Client's
failure to provide the front, free issue materials and
cranes/equipment. This was further aggravated by the labour unrest at
the Client's project location. The Company had represented to the
Client for relief and compensation; however the Client unilaterally and
arbitrarily rejected the same and called the bonds for advance payments
and performance. The Company had, as per the terms of the tender
document, asked Client to appoint a Sole Arbitrator to settle various
claims which include outstanding payment of Rs. 21,503,907, which has
been fully provided. The statements of facts & claims were submitted by
the Company and Client before the Arbitrator.
6. The Company had entered into three contracts aggregating to Rs.
2,797,400,000 with one of the clients for design, engineering, supplies
and construction of refinery heater & piping packages. The progress on
these projects was, however, badly hit because of the severe financial
crisis at the client's end. These warranted the Company to decelerate
the works at these projects significantly. The sundry debtors,
retention money and unbilled amount on these projects are Rs.
333,328,092 [31 st March 2011:Rs. 429,343,444), Rs. 15,226,867 (31 st
March 2011:Rs. Nil] Rs. 700,476,188 (31st March 2011: Rs.258,940,319)
respectively. The Company has outstanding mobilization advances
aggregating to Rs. 295,194,971 (31 st March 2011:Rs. 371,835,474) as
per the terms of the contracts. As per various discussions held with
the executives of client and also per the media reports published
recently in the leading newspapers (in both India and abroad) confirm
restoration of the work at the project following the strategic
investment (to buy -24% equity stake) by one of the largest oil traders
in the world. As per media report it is a significant milestone for the
client as it seeks to complete construction and commissioning of its 6
million tonne p.a. oil refinery project. In view of the unreasonable
delays as above and to compensate for the consequential cost overruns,
idle charges, loss of opportunity and other incidental costs, it has
also been further discussed with the client to renegotiate the terms of
contracts with the Company. Pending outcome of the renegotiation, the
amounts are carried forward as receivable and payable at carrying
value.
7. CONTINGENT LIABILITIES
31-Mar-12 31-Mar-ll
amount Rs. amount Rs.
a) Claims against the Company not
acknowledged as debts, comprises of:
Sales tax matters in appeal 83,252,888 7,707,706
(Sales tax matters in appeal mainly
comprises of demands made on
account of non submission of C& E forms,
disallowances on assessments, additional
tax lieved, late filing of returns, non
submission of original documents etc).
Excise duty matters in appeal 690,954 690,954
(Excise matters in appeal mainly
comprises of demands made on duty paid
imported goods & difference in scheduled
rates).
Service tax matters in appeal 38,374,755 10,133,216
(Service tax matters in appeal mainly
comprises of demands made on
disallowance of input credit,
disallowing the abatement scheme adopted
by the Company and penalty for late
payment etc).
Income-tax matters 954,033,763 765,840,340
(Income - tax matters comprises of
demand of tax and interest on short
deduction of tax deducted at source).
Labour matters and other litigations 3,970,102 4,366,437
(Labour matters comprises of demand
made for labour welfare cess).
1,080,322,462 788,738,653
b) The Company is contesting the above demands and does not expect any
material liability in respect of above contingent items, the effect of
which, if any, will be taken as and when these are settled.
c) Bank guarantees & Inland/Foreign letters of credit issued by the
banks on behalf of the Company of Rs.1,341,825,376 (31st March 2011:
Rs.777,984,986) Rs. 138,156,873 (Rs. 281,858,984) respectively.
d) In respect of certain contracts where the contractual completion
dates have already been expired, the Company is in the process of
getting extention of contractual completion dates. Company is of the
view that no liquidated damages for delay will believed as delays are
mainly on part of customers obligations. The ultimate outcome of the
same will be known only after the completion of the contracts.
8. The determination of revenue as per the percentage completion
method and provision of foreseeable loss necessarily involve making
estimates by the management of the future cost, and this being
technical in nature has been relied upon by the auditors.
9. The figures of previous year were audited by a firm of Chartered
Accountants other than M/s S.R.Batliboi & Co.
10. REGROUPING & RE-CLASSIFICATION
Till the year ended 31 March 2011, the Company was using pre-revised
Schedule VI to the Companies Act 1956, for preparation and presentation
of its financial statements. During the year ended 31 March 2012, the
revised Schedule VI notified under the Companies Act 1956, has become
applicable to the Company. The Company has reclassified 31 March 2011
figures to conform to this year's classification. The adoption of
revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it significantly impacts presentation and disclosures made in the
financial statements, particularly presentation of balance sheet. The
following is a summary of the effects that revised Schedule VI had on
presentation of balance sheet of the Company for the year ended 31
March 2011:
Mar 31, 2010
1. All amounts in the financial statements are presented in Indian
Rupees except per share data, earnings per share and as otherwise
stated. Figures/information in brackets (except the serial numbers)
represent corresponding previous year figures/information in respect of
profit & loss items and in respect of balance sheet items as at the
balance sheet date of the previous year, unless specified otherwise.
Figures for the previous year have been
reworked/regrouped/rearranged/reclassified wherever considered
necessary to conform to the figures presented in the current year.
2. Secured loans
(a) Working Credit facilities from banks are secured by way of:
I. Pari passu charge on whole of the current assets including stock of
raw materials, stock-in-process, semi-finished & finished goods,
consumables, stores, spares, book debts and all other movables both
present and future.
II. Collateral securities as follows:
i. Pari passu charge on the following assets of the Company:
20 office blocks - # 15 & 16 on ground floor, # 601 to 603 & # 610 to
624 on 6th floor at Swastik Chambers, Chembur, Mumbai, Maharashtra,
India
Factory land and building at Dabhasa, district Vadodara, Gujarat, India
ii. Pari passu charge on the following plant & machinery: Entire heavy
plant & machinery and fixtures Amhoist Crawler crane model no. 11250 -
[serial no. GS 17444] Amhoist Crawler crane model no. 9310 [serial no.
GS 18442]
iii. Corporate guarantee of the holding company - Petron Investments
Private Limited
(b) Term loans from banks are secured by:
I. Hypothecation of plant & machinery of Rs.98,242,281 acquired out of
the said loan.
II. Pari passu charge on whole of the current assets including stock
of raw materials, stock-in-process, semi-finished & finished goods,
consumables, stores, spares, book debts and all other movables both
present and future.
3. Fixed Assets
(a) Revaluation of fixed assets
Based on the valuation carried out by approved valuer, certain
categories of fixed assets [freehold land, office building at Swastik
Chambers and heavy plant & machinery] have been revalued as at 31st
March, 1994. The consequential incremental value of Rs.213,489,876 over
the written down value [original cost less depreciation] as at 31st
March, 1994 has been credited to revaluation reserve under Reserves and
Surplus. The balance in revaluation reserve represents the above value
as reduced by adjustments for sale of revalued assets and for
depreciation element on the incremental value since the date of
revaluation.
(b) Details for fixed assets
I. Cost of other buildings include:
i. Temporary buildings at sites of gross block of Rs.95,240,382 and net
block of Rs.48,819,977 (Rs.79,488,501 and Rs.56,154,910 respectively).
These are written off over the expected duration of contract.
ii. Cost of investments amounting to Rs.753 being the cost of shares in
Swastik Chambers Owners Co-operative Society Limited made in
connection with the ownership rights of the office.
II. In respect of certain vehicles, acquired under hire purchase
agreements, the formalities for de- hypothecation are pending.
4. (a) Contingent liabilities not provided for [as certified by the
management]
i) ; Bank guarantees issued by the banks on behalf of the Company "æ
1,930,497,467 1,716,233,015
ii) : Inland/foreign letters of credit issued by the banks on behalf of
38,779,794 ; 121,199,132 the Company
iii) Sales tax matters in appeal 4,948,328 4,041,067
iv) Excise duty matters in appeal 690,954! 1,486,891
v) Service tax matters in appeal and in respect of pending notices ;
12,029,706 ; 11,320,763 [excluding interest etc., the amount of which
is unascertainable] ;
vi) Labour matters and other litigations 6,262,228; 5,182,232
(c) The Company has challenged the applicability of labour welfare cess
on the gross value of the contracts under the Building and Other
Construction Workers Welfare Cess Act, 1996 before the Honorable High
Court of Madhya Pradesh - the MP. On the direction of the honorable
High Court, company has filed an appeal to Appellate Authority in
Indore. The appeal was subsequently dismissed by the Appellate
Authority and being aggrieved by the said order, company is in the
process of filling fresh writ petition before the Honorable High Court
of MP. Accordingly provision of Rs.22,742,405 (Rs.15,748,000) has not
been made for levy of cess.
The Company does not expect any material liability in respect of above
contingent liabilities, the effect of which, if any, will be taken as
and when these are settled/assessed.
5. Commitment for capital expenditure is Rs.93,600,776 (Rs
62,191,742).
6. In the opinion of the management, current assets and loans &
advances have a realisable value in ordinary course of the business at
least equal to the amounts at which they are stated in the Balance
Sheet.
7. Balances of certain debtors, creditors, loans & advances [including
those at closed sites] and other liabilities are in process of
confirmation/reconciliation. The impact of consequential adjustments on
the profit and assets/ liabilities would not be material in the opinion
of the management on such confirmation/reconciliation.
8. (a) During the year certain indirect tax liabilities [service tax,
VAT, sales tax etc.] are accounted for on
accrual basis which hitherto accounted for as and when fairly
assessed/paid. Accordingly, charge to the Profit & Loss a/c is higher
by Rs.1,64,858,800 and Sales tax/works contract tax and Service tax
are stated higher by that amount.
(b) As per the past practice, sales tax and service tax have been
included in Sales and contracts revenue [gross]. Accordingly, gross
revenue includes the said taxes amounting to Rs.380,751,097
(Rs.310,534,300) which has no impact on the profit of the respective
years.
9. As per the past practice, material consumption is accounted for
opening stock plus purchases less closing physical stock as physically
verified by the management.
10. (a) There have been major delays and cost overruns on long-term
fixed price contracts with Bharat Heavy Electricals Limited - the
Client - at Kahalgaon, Bihar - the project location - on account of
the Clients failure to provide the front, free issue materials and
cranes/equipment. This was further aggravated by the labour unrest at
the Clients project location. The Company had represented to the
Client for relief and compensation; however the Client unilaterally and
arbitrarily rejected the same and called the bonds for advance payments
and performance. The Company had, as per the terms of the tender
document, asked Client to appoint a Sole Arbitrator to settle various
claims which inter alia include compensation of Rs.32,550,000 for its
assets detained having WDV [net of assets charged off] of Rs.8,542,550
(Rs.9,772,344) and outstanding payment of Rs.21,503,907. During the
year, the statements of facts & claims were submitted by the Company
and Client before the Arbitrator.
(b) The Company had also filed a petition before honorable High Court
of Calcutta u/s 9 of the Arbitration & Conciliation Act, 1996 for an
interim relief and release of Companys assets - detained by the Client
as stated in para (a) above. The honorable High Court of Calcutta
appointed a Special Officer vide its order dated 3rd February, 2010 who
made an inventory of the equipment, plant & machinery, tools, tackles
etc. so detained and the Company has forwarded Special Officers
report to the Arbitrator on 24th May, 2010 to initiate necessary
action. The matter is pending before the Arbitrator, therefore, no
provision has been considered necessary by the Company at this stage.
11. Segment reporting
(a) Business segment
The Company operates in only one business segment, i.e. Engineering,
Procurement & Construction based on the nature of the services and
products, the risks and returns etc.
12. Related party disclosures
Information regarding related party transactions as per AS-18, Related
Party Disclosures, issued by the ICAI is given below:
(a) Related parties and their relationships [as certified by the
management]
I. Enterprises having control over the Company
i. Petron Investments Private Limited - Holding Company
ii. KazStroyService Limited, U.K. - Holding Company of Petron
Investments Private LimitedA
iii. KazStroyService Holdings Limited, British Virgin Island - Holding
Company of KazStroyService Limited, U.K.*
iv. KazStroyService Infrastructure Limited, British Virgin Island -
Holding Company of KazStroyService Holdings Limited* A w.e.f. 30th
June, 2009 the beneficial ownership of shares of KazStroyService
Limited, U.K. is with KazStroy Engineering (UK) Limited
*w.e.f. 3rd January, 2008 by virtue of acquisition of controlling
interest by KazStroyService Limited in the Company
II. Fellow Subsidiaries
i. KazStroy Engineering India Private Limited
ii. Petron Civil Engineering Private Limited
iii. KazStroyService Infrastructure India Private Limited
III. Other Entities
i. Petron Engineering Construction Limited Employees Gratuity Fund
[entity over which key managerial personnel have significant influence]
IV. Key managerial personnel - the KMP
i. Mr. T S Das - Managing Director
ii. Mr. K L Swami - Director [Finance] [From 30th June, 2008 to 31 st
October, 2008]
13. In the opinion of the management there are no indications that the
assets of the Company may be impaired as at the balance sheet date.
14. Disclosures pursuant to clause 32 of the listing agreement with
stock exchanges: Nil (Nil)
For this purpose, the loans to employees as per the Companys policy,
security deposits paid towards premises taken on leave and license
basis have not been considered.
15. The determination of revenue as per the percentage completion
method and provision of foreseeable loss necessarily involve making
estimates by the management of the future cost, and this - being
technical in nature - has been relied upon by the auditors.