Valecha Engineering Ltd. - Quarterly/Annual Result Disclosures and Notes dated 31 Mar 2020
Auditor and Management Disclosures and Notes for the annual results dated 31 Mar 2020
Notes:
1. The above Audited Financial Results were reviewed and recommended by the Audit Committee and approved by the Board of Directors at the meeting held on August 20, 2020.
2. The Company is engaged in "Construction Activity" and there are no other reportable segments under Ind AS 108 "Operating Segments".
3. The accumulated losses incurred in the past years have resulted in erosion of Company's peak Net worth. However, the management is of the opinion that subject to approval of OTS / Restructuring plan by banks, cost reduction measures and participating in new business finance/ JV business, the Company will be able to earn profit over next few years and may be in position to repay restructured loans and pay statutory dues. Hence, the financial results are prepared assuming that it will continue as going concern.
4. This result has been prepared in accordance with Regulation 33 of the SEBI (Listing Obligations and Disclosures Requirement) Regulation, 2015.
5. The Company’s borrowing facilities with various banks/financial institutions and NBFC’s have continued to remain under NPA classification. The Company has not provided for regular interest estimated at Rs.22.70 crores and Rs.87.07 crores for the quarter and year ended 31st March, 2020 respectively on its various borrowings, as it expects certain relief in view of the ongoing settlement proposals with the lenders being pursued by the Management. The treatment of the above adjustment in the financial results however does not affect the lenders right to recover such regular interest and consequently the Company’s liability to pay such interests.
As stated above, since the Company expects certain reliefs, it has not provided for any penal interest, amount of which is presently not ascertainable, which may arise for default in repayment of borrowings.
Further, the Company has also not provided for interest of Rs. 2.61 Crores as on 31st March, 2020, which may arise on delayed payment of TDS.
6. The Company has similar to Financial Year 2018-19 continued not to recognize Guarantee Fees / Commissions during the period April 1, 2019 to March 31, 2020 in view of the already weak financial position of such subsidiaries and step down subsidiaries. No reversals/impairment have been done for the guarantee fees / commission already recognized upto March 31, 2018.
7. The Company has not repaid deposits (including unpaid interest provided upto March 2017 of Rs. 2.58 crores) amounting to Rs.30.73 crores as at March 31, 2020 as per the contractual terms. Pursuant to the NCLT order dated 03.04.2019, 11.06.2019, 22.08.2019, 14.11.2019,26.05.2020 and in terms of NCLAT order dated 12.02.2020 the matter has since been subjudiced. As per these orders, the proceeds from Canara Bank and refunds from Income Tax department will be exclusively utilized for repayment of deposits to deposit holders.
8. The Company has not evaluated expected credit losses for long outstanding Trade Receivables of Rs. 222.21 crores which includes Rs. 100.32 crores pertaining to additional claims raised during earlier years due to price escalation and various other reasons which are under arbitration before various authorities. The Company has booked their claims on conservative basis and management believe that they have strong case for each of the claims lodged against the client. Hence, the Board has decided not to account for expected credit losses. The Company has not evaluated impairment provisions for expected credit losses as required under Ind AS 109 "Financial Instruments" for loans extended to various related parties (other than subsidiaries, step down subsidiaries and associates of the Company) amounting to Rs. 6.57 crores and to others amounting to Rs. 139.10 crores as at 31st March, 2020.
9. Other Current Assets as at March 31, 2020 includes Rs 33.73 crores receivable towards various indirect taxes from Government Authorities which are pending for assessments. The Management is confident of ultimate recovery of such amounts.
10. The Company has sixteen project sites which have either been de-mobilized or completed or otherwise shut / non-operational. The Company could not obtain details of transactions effecting, if any, through Bank accounts previously operated through such project sites. There have been no operations in such project sites during the quarter ended 31st March, 2020. Movement in accounts of such project sites, if any, is on account of balances being written off/written back and payments / receipts being made by the Head Office division in relation to assets / liabilities of such project sites. Such Project Sites comprises total assets of Rs. 92.04 crores [including Trade Receivables Rs. 78.65 crores and loans to other parties Rs. 4.30 crores referred in point 8 above, balances with revenue authorities of Rs. 7.32 crores referred in point (h) above] and total liabilities of Rs. 42.20 crores as at the year end.
11. As per MCA Notification dated 12/09/2018, the Company has to obtain Secured Lenders approval for payment of remuneration to managing/ whole time director. The Company is in the process of one time settlement (OTS) with secured lenders and which are expected to be concluded in due course. Pending the aforesaid OTS settlement, recovery of managerial remuneration of Rs.3.08 Crores pertaining to previous years in terms of special resolution passed by the members in the Annual General meeting has been kept in abeyance.
12. The Company has previously assigned its loan amounting to Rs. 23.29 crores to its various creditors. However, the loanee company is unable to repay such creditors and hence the Company has reversed the assignment of creditors with its loan receivable and accordingly reinstated such creditors and loan receivable in its books of accounts.
13. Valecha LM Toll Private Limited (VLMTPL), a step down subsidiary of the Company and subsidiary of Valecha Infrastructure Limited (VIL) has been admitted to National Company Law Tribunal (NCLT) on 29.03.2019 in view of the insolvency petition filed by Axis Bank Limited under section 7 of the Insolvency and Bankruptcy Code, 2016 and consequently Interim Resolution Professional ('IRP') was appointed by the NCLT who was subsequently confirmed and appointed as Resolution Professional by COC.
VIL has not impaired its Non-Current Investments of Rs. 7.40 Crores in the equity shares of VLMTPL and Rs.37.31 crores in Compulsory Convertible Debentures and has consolidated the unaudited accounts of VLMTPL in view of the events explained above. Accordingly, any resultant impact which may arise as a result of such impairment and consequential impact on the impairment of Company’s investment in VIL as a result of the events explained above has not been computed. The Company has also provided Corporate guarantees amounting to Rs. 248.21 crores to the lenders of VLMTPL.
14. During the year ended 31st March, 2020, the Company has identified certain balances which are not recoverable and / or payable. The aggregate of non-recoverable balances is Rs.67.21 crores and aggregate of non-payable balances is Rs.67.88 crores. These balances have been netted and a net income of Rs.0.67 crores has been recorded as “Balances written (back)/ off (Net)”.
15. Specific notes related with Subsidiary Companies:
a) Valecha Reality Limited(VRL)
i. VRL has given a loan amounting to Rs 6.51 crores to M/s SVK Arcade LLP which is long outstanding in the Books of Accounts. VRL is not recognizing & receiving any interest on such loan and has neither made any provision for the loan amount outstanding.
ii. VRL has received loans from Valecha Engineering Limited (“VEL”) and Valecha Infrastructure Ltd (“VIL”) to the tune of Rs. 0.28 Crores and Rs. 6.52 Crores respectively. VRL has not paid any interest on the same nor has it made any provisioning of the interest payable. VEL has not recovered any interest in view of already weak financial position of VRL. Similarly, VRL has also not recovered any interest amount from VIL in view of already weak financial position of VIL.
b) Valecha Kachchh Toll Roads Limited (VKTRL)
VKTRL continues to prepare its Financial Statements on going concern basis even though it has continued to incur significant losses for the quarter ended 31st March, 2020 and in previous financial years. It has also continued to default in repayment of its financial obligation including interest and the construction of balance work is going at very slow pace, resulting in increase in cost of project mainly due to interest during construction period. However, as advised, the project had been halted due to non-availability of land and environment issues and on 13.05.2015, VKTRL has received PCOD (provisional commercial operation date) of for section 1 for which revenue is being generated. PCOD for Section 2 is likely to be completed by December 2020. VKTRL has also put a claim of Rs. 1373.70 Crores on GSRDC during the previous year and is hopeful of getting the claim in its favour after PCOD for Section 2 is complete.
The Lenders of VKTRL had appointed a forensic auditor to conduct forensic audit and the forensic auditor has submitted its report to the Lenders. VKTRL has however not received any communication or queries from the Lenders in relation to such audit.
16. Consolidated results for the quarter and year ended 31st March, 2020 and Year ended 31st March, 2019 includes results of following Subsidiaries and Associate Companies:
Sr. No. Name of Company Relation
1 Valecha Infrastructure Limited Wholly Owned Subsidiary Company
2 Professional Realtors Private Limited Wholly Owned Subsidiary Company
3 Valecha Badwani Sendhwa Tollways Limited Step-Down Subsidiary Company
4 Valecha Kachchh Toll Roads Limited Subsidiary Company
5 Valecha Realty Limited Associate Company
6 Valecha LM Toll Private Limited Step-Down Subsidiary Company
7 Valecha International (FZE) Wholly Owned Subsidiary
In case of Valecha LM Toll Private Limited, Resolution Professional has been appointed and the suspended directors are not authorised to approve the results. Consent of Resolution Professional has been obtained to include the results on a provisional basis pending the review of Resolution Professional.
In case of Valecha International FZE, Holding Company’s Management certified results have been considered for consolidation.
The Company could not consolidate financial results of “Aryavrat Tollways Private Limited”, an Associate Company, as it has not yet received its results. The Company has not consolidated financial results of this associate company in the previous year also.
17. The accounts of certain Banks, Loans & Advances given, Trade Receivables, Other Current Assets, Lenders’ liability, Trade Payables and Other liabilities are subject to confirmations, reconciliations and adjustments.
18. Effective 1 April 2019, the Company has adopted Ind AS 116, 'Leases' using the modified retrospective approach, as a result of which the comparative information is not required to be restated. On transition, the Company has recorded the lease liability at the present value of the future lease payments discounted using the incremental borrowing rate and has also chosen the practical expedient provided in the standard to measure the 'Right-of-use' asset at the same value as the lease liability. The adoption of the new standard resulted in the recognition of 'Right-of-use' asset and an equivalent lease liability as on 1 April 2019. The effect of Ind AS 116 on the Profit / (loss) before tax, Profit / (loss) for the reported periods and earnings / (loss) per share is not material.
19. The outbreak of COVID-19 pandemic had disrupted regular business operations of the Company due to the lock down restrictions and other emergency measures imposed by the Government from time to time. The business operations have recommenced on a limited scale post relaxation of lockdowns. The management has taken into account the possible impacts of known events, upto the date of the approval of these financial results, arising from COVID-19 pandemic on the carrying value of the assets and liabilities as at 31 March 2020. However, there exists significant estimation uncertainty in relation to the future impact of COVID-19 pandemic on the Company and, accordingly, the actual impact in the future may be different from those presently estimated. The Company will continue to monitor any material change to the future economic conditions and consequential impact on the financial results.
20. The previous period's figures have been re-grouped/ re-classified wherever required to conform to current period's classification. All figures of financials are stated as Rs. in Crores except otherwise stated.