pennar engineered building systems ltd Directors report

Dear Members,

Your Directors are pleased to present the 10th Annual Report and the Companys audited financial statement for the financial year ended 31st March, 2018.

Financial Results:

The Companys financial performance, for the year ended 31st March, 2018 is summarized below:

Rs in lacs

Particulars	2017-18	2016-17
Revenue from operations (Gross)	51,998	54,665
Less: Excise duty	962	4,503
Revenue from operations (Net)	51,036	50,162
Less: Total expenditure except depreciation	49,233	47,847
Profit from operations before depreciation, other income	1,803	2,315
Less: Depreciation	597	546
Profit from operations before other income	1,206	1,769
Add: Other income	1,190	541
Profit before tax	2,396	2,310
Tax Expenses	-	-
Current Tax	606	1,312
Tax pertaining to earlier years	-	-335
Deferred tax	210	-382
Profit for the year	1,580	1,715

Result of Operations and the state of Companys affairs:

The gross revenues of the Company for the current financial year are Rs. 51,998.00 Lakhs and net revenues are Rs. 51,036.00 Lakhs. EBITDA for the current financial year is Rs. 4,559 Lakhs, and profit after tax is Rs. 1,580 Lakhs.

The company has received major orders from Bridgestone India Ltd., URC Constructions, Hyundai-KIA motors, JSW Cement Ltd., Reliance Tower, Renaissance Warehouse, Hitex Exhibition Centre, CFCL, JSW Paints Pvt. Ltd., Phoenix, Ikea Retail Store, TVS Infrastructure and Shapoorji & Pallonji.

Repeat orders were received from Reliance Cash And Carry, Toyo Engineering, Shapoorji & Pallonji, KMV Projects, RKV Developers, TVS Infrastructure, Azure Power, Clean Max Solar, Reliance Tower, Asian Fabtech Limited, Hetero Drugs and Aequs Sez Ltd.

Executed projects from L&T, Shapoorji & Pallonji, Mylan Laboratories, Sterling & Wilson, Indus Projects, UTCL, Schindler, Aequs Sez Ltd., Kongavi Electronics and Hetero Drugs.

The utilisation of IPO proceeds of the Company as on March 31, 2018 is as follows:

. Particulars	Objects of the issue as per prospectus	Utilised up to March 31, 2018	Unutilised up to March 31, 2018
Repayment/prepayment, in full or part, of certain working capital facilities availed by our Company	3400	3400	-
Financing the procurement of infrastructure (including software and hardware) for the expansion of our design and engineering	800	267	533
services
General Corporate purposes	1079	1079	-
Issue related expenses *	521	517	4
Total	5800	5263	537

*Companys Share As on March 31, 2018, unutilised funds have been temporarily invested in short-term liquid scheme of mutual funds and in bank balances.

Material Changes and Commitments if any affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report

There are no material changes and commitments affecting the financial position of the Company.

Dividend, Fixed Deposits and General Reserves:

Considering future prospects of the Company to become the leading player in providing engineered building system services, and considering the investment required for future projects, the Board has not recommended any Dividend to shareholders for the financial year 2017-2018. Your Company has not accepted any fixed deposits and no amount has been carried to General Reserve during the year.

Particulars of Loans given, Investments made, Guarantees given and Securities provided:

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the Notes to the Financial Statements provided in this Annual Report.

Particulars of Subsidiary/Joint Venture/Associate Companies:

The Company holds 30% shareholding in Pennar Global INC, USA. The financial position of Pennar Global INC, as per the Companies Act, 2013 is annexed. The Policy for determining material subsidiaries may be accessed on the Companys website HREF="http://www.pebspennar/">www.pebspennar . com. The information on subsidiaries/joint venture/Associates pursuant to Section 129(3) of the Act read with rule 5 of the Companies (Accounts) Rules, 2014 is annexed herewith as Annexure - A in Form AOC - 1.

Internal Financial Controls:

The details in respect of internal financial control and their adequacy are included in the Management Discussion & Analysis, which forms part of this report.

Contract and Arrangement with Related Parties:

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arms length basis. During the year, the Company had entered into contract / arrangement / transaction with material related party which could be considered material in accordance with the policy of the Company on materiality of related party transactions. The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Companys website viz., HREF="http://www.pebspennar.com/">www.pebspennar.com .

The Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 are annexed herewith as Annexure - B in Form AOC-2.

Change in the nature of business, if any:

There is no material change in the nature of business affecting the financial position of the Company for the year ended 31st March, 2018.

Board of Directors and Key Managerial Personnel:

None of the Directors of the company are disqualified under the provisions of the Act or under the Listing Regulations.

Mr. Aditya Rao, and Mr. Eric James Brown who retire by rotation and being eligible offer themselves for re-appointment. Your Board recommends their appointment.

The Board of Directors change the designation of Mr. Eric James Brown from Independent Director to Non-Executive Director at a Board meeting held on 4th November, 2017. The said change in designation of Mr. Eric James Brown has to be ratified by the Members at the ensuing Annual General Meeting. Your Board recommends his appointment.

Pursuant to the provisions of Listing Regulations, brief particulars of the Directors who are proposed to be appointed/re-appointed are provided as an annexure to the notice convening the Annual General Meeting.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 and under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of the Non-Executive Directors and Executive Directors. The details of programmes for familiarisation of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company viz. www.pebspennar.com .

Meetings of the Board:

Five meetings of the Board of Directors were held during the year. For further details, please refer the same in Corporate Governance report in this Annual Report.

Scheme of Amalgamation

The Scheme of Amalgamation of Pennar Engineered Building Systems and Pennar Enviro Limited with Pennar Industries Limited (the Company) and their respective shareholders under section 230 to 232 of the Companies Act, 2013 and other applicable provisions of the Companies Act, 2013 and the rules framed thereunder (Scheme) was approved by the Board of Directors of the Company on 10 November 2017.

Subsequently, observation letters providing no objections were received by the Company from BSE Limited and the National Stock Exchange of India Limited on 26 April 2018.

Your company is in the process of compiling the documents and completing the other requirements to file the Scheme with the Hyderabad bench of the National Company Law Tribunal (NCLT) to obtain necessary direction from NCLT with regard to meetings of shareholders and creditors.

Directors Responsibility Statement:

Your Directors state that:

a) in the preparation of the annual accounts for the year ended 31st March, 2018, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same;

b) the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2018 and of the profit of the Company for the year ended on that date;

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

d) the Directors have prepared the annual accounts on a going concern basis;

e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Corporate Governance:

The Company is committed to maintain the highest standard of corporate governance and adhere to the corporate governance requirements set out by Securities Exchange Board of India. The Report on corporate governance as stipulated under the Listing Regulations is annexed herewith as Annexure - C. The requisite certificate from the statutory auditors confirming compliance with the conditions of corporate governance is annexed herewith as Annexure - D.

Corporate Social Responsibility (CSR):

The brief outline of the Corporate Social Responsibility (CSR) Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure - E of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The policy is available on the website of the Company.

Nomination and Remuneration Policy:

The Nomination and Remuneration Committee of the Company identifies the persons, who are qualified to become Directors of the Company / who may be appointed in Senior Management in accordance with the criteria laid down and recommend to the Board for their appointment and removal. The Committee also carries out evaluation of every Directors performance. The Committee has formulated the criteria for determining qualifications, attributes, independence of the Directors and recommend to the Board a Policy, relating to the remuneration for the Directors, Key Managerial Personnel and other employees.

Risk Management:

Pursuant to section 134 (3) (n) of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015, the company has formulated a policy on risk management. At present, the company has not identified any element of risk which may threaten the existence of the company.

Statutory Auditors:

Pursuant to the provisions of section 139 of the Act and the rules framed thereunder, M/s. B S R & Associates LLP, Chartered Accountants, were appointed as statutory auditors of the company from the conclusion of the 10th Annual General Meeting of the company held on 28th September, 2018 till the conclusion of the 15th Annual General Meeting to be held in the year 2023, subject to ratification of their appointment at every Annual General Meeting. The Notes on financial statements referred to in the Auditors Report are self-explanatory and do not call for any further comments. The Auditors Report does not contain any qualification, reservation or adverse remark.

Cost Auditors:

The Board at their meeting held on 18th May, 2018 appointed Kandikonda & Associates, Cost Accountant (Membership No. 31775) as Cost Auditors of the Company for conducting cost audit of the Company for the financial year 2018-2019. The remuneration proposed by the Board of Directors, excluding taxes and out-of-pocket expenses, shall be paid on actuals and requires ratification of the shareholders of the Company. The shareholders ratification for payment of remuneration to Cost Auditors is being sought at the ensuing AGM.

Secretarial Auditor

The Board has appointed Mr. Dwaraka Prasad Asawa, Practicing Company Secretary, to conduct Secretarial Audit for the financial year 2017-18. The Secretarial Audit Report for the financial year ended 31st March, 2018 is annexed herewith as Annexure - F. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Audit Committee:

The details pertaining to composition of audit committee are included in the Corporate Governance Report, which forms part of annual report.

Vigil Mechanism/Whistle Blower Policy:

Pursuant to Section 177 of the Companies Act, 2013 read with Rule 7 of Companies (Meetings of Board and its Powers) Rules, 2014, the Company has established a Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Whistle Blower Policy are explained in the Corporate Governance Report. The Policy on vigil mechanism and whistle blower policy may be accessed on the Companys website viz. www.pebspennar.com .

Conservation of energy, technology absorption and foreign exchange earnings and outgo:

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, is annexed herewith as Annexure - G.

Extract of Annual Return:

Extract of Annual Return of the Company is annexed herewith as Annexure - H.

Particulars of Employees and related disclosures:

The information required under section 197 of the Companies Act, 2013 read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and the Statement under Section 134 of the Companies Act 2013 read with Rule 5 (2) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed herewith as Annexure - I.

Disclosure under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013:

The Company has in place an Internal Complaints Committee which has been set up to redress complaints regarding sexual harassment. The following is the summary of sexual harassment complaints received and disposed off during the year:

i) No. of complaints received : nil

ii) No. of complaints disposed off: nil

Listing of Equity Shares:

The Companys equity shares are listed at the Bombay Stock Exchange Limited, National Stock Exchange of India Limited. Dematerialisation of Shares:

99.99% of the companys paid-up equity share capital is in dematerialized form as on 31st March, 2018 and two shares are in physical form.

Managing Director Certification under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015:

The Managing Director certification under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed herewith as Annexure-J.

Personnel / Industrial Relations:

The Company maintained cordial and harmonious relations at all levels at the offices and plant of the Company throughout the year under review.

The details of significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and companys operations in future:

In terms of sub rule 5(vii) of Rule 8 of Companies (Accounts) Rules, 2014, there are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

Management Discussion and Analysis:

The "Management Discussion and Analysis Report" highlighting the industry structure and developments, opportunities and threats, future outlook, risks and concerns etc. is furnished separately and forms part of this Boards Report.

Appreciation:

Your directors take this opportunity to express their appreciation for the co-operation to all the suppliers and customers who have been associated with the Company as partners. The Directors would also like to take this opportunity to thank the financial institutions, banks, regulatory and government authorities as well as the shareholders for their continued co-operation and support. The Directors also wish to place on record their appreciation of the devoted and dedicated services rendered by all employees of the Company. We look forward to further support.

	By Order of the Board
	for Pennar Engineered Building Systems Limited
Place : Hyderabad	Nrupender Rao
Date : 10.08.2018	Chairman