Aarvi Encon Ltd Directors Report.

Dear Members,

Your Directors are pleased to present the 31st Annual Report on business and operations of the Company together with the Audited Financial Statements for the year ended on 31st March, 2019.

FINANCIAL HIGHLIGHTS/PERFORMANCE OF THE COMPANY

The financial results for the year ended on 31st March, 2019 and the corresponding figures for the previous year are as under;

BUSINESS OVERVIEW/OUTLOOK.

1. HIGHLIGHTS:-

CONSOLIDATED PERFORMANCE

Your Company has reported growth in revenue and significant increase in the net profit for the year ended on 31st March 2019. Revenue from operations at Rs. 206.03 Cr. as against Rs. 173.48 Cr. of previous year increased by 19% year on year, reflecting better results than the previous year performance in key markets and segments. Operating profit at Rs. 10.61 Cr. as against Rs. 9.54 Cr. of previous year. The Operating Profit increased by 17 % of previous year. This was good financial year for the company.

STANDALONE PERFORMANCE

The Company has reported growth in revenue and net profit for the year ended on 31st March 2019. Revenue from operations at Rs. 191.93 Cr. as against Rs. 168.87 Cr. of previous year increased by 14 % year on year, reflecting better results than the previous year performance in key markets and segments. Operating profit at Rs. 7.90 Cr. as against Rs. 8.05 Cr. of previous year.

Particulars

Standalone (Rs.in crores)

Consolidated (Rs.in crores)

Year ended 31st March, 2019 Year ended 31st March, 2018 Year ended 31st March, 2019 Year ended 31st March, 2018
Net Revenue from
Operations 191.93 168.87 206.03 173.48
Other Income 1.20 1.21 1.20 1.53
Total Income 193.13 170.09 207.24 175.01
Total Expenditure 185.23 162.03 196.62 165.47
Profit before tax 7.90 8.05 10.61 9.54
Current Tax 1.30 1.86 1.29 1.92
Deferred Tax 0.22 0.03 0.20 (0.15)
Profit after taxes 6.37 6.16 9.11 7.77

2. SHARE CAPITAL

The Total Paid-up Capital of the Company as on March 31, 2019 is Rs. 14,78,84,000/- divided into Rs.1,47,84,000/- equity shares of Rs.10/- each. There has not been any new issue of share during the year under review.

3. DIVIDEND

The Board of Directors of the Company has recommended a dividend 10% i.e Rs. 1 per fully paid- up Equity Share of the face value of Rs.10/- each of the Company subject to the approval of the Members at the ensuing Annual General Meeting, for the financial year 2018-19.

4. RESERVES

The Balance in Reserves & Surplus stands at Rs. 49,33,78,209/- in comparison with the previous year balance of Rs. 43,85,22,881/-.

5. DEPOSITORY SYSTEM

Your Companys equity shares are in demat form only. The Company has appointed National Securities Depository Limited and Central Depository Services India Limited as depositories to the Company.

6. DIRECTORS AND KEY MANAGERIAL PERSONNEL

As per the SEBI Listing Regulation, 2015 and the Companies Act, 2013, The Board has been constituted with proper balance of Executive Directors, NonExecutive Directors and Independent Directors. The Company has three Independent Directors i.e Mr. Devendra J Shrimanker, Mrs. Sonal N. Doshi, Mrs. Padma V Devarajan, Mr. Virendra Sanghavi, Managing Director & Promoter, Mr. Jaydev V. Sanghavi, Executive Director, Chief financial officer (CFO) & Promoter and Mrs. Niranjana V. Sanghavi, Non-Executive Director.

Mr. Virendra D. Sanghavi retires by rotation and being eligible, offers himself for re-appointment. A resolution seeking shareholders approval for his re-appointment forms part of the Notice of 31st AGM.

Pursuant to the provisions of Section 149 of the Act, The Independent Directors of the Company, Mr. Devendra J Shrimanker, Mrs. Sonal N Doshi and Mrs. Padma V Devarajan, Independent Directors of the Company have confirmed to the board that they meet the criteria of independence as specified under section 149 (6) of the Companies Act, 2013 along with Rules framed there under and Regulation 16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations"). There has been no change in the circumstances affecting their status as independent directors of the Company.

During the year under review, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees, commission and reimbursement of expenses incurred by them for the purpose of attending meetings of the Board/Committee of the Company.

Pursuant to the provisions of Section 203 of the Act, the Key Managerial Personnel of the Company as on March 31, 2019 are: Mr. Virendra D Sanghavi, Managing Director, Mr. Jaydev V Sanghavi, Executive Director and Chief Financial Officer (CFO) and Mr. Jay H. Shah, Company Secretary.

7. NUMBERS OF THE MEETING OF THE BOARD.

Four Meeting of the Board were held during the year under review. For details of meeting of the Board, please refer to the Corporate Governance Report, which is a part of this Report.

8. BOARD EVALUATION

The Board of Directors has carried out an annual evaluation of its own performance, board committees, and individual directors pursuant to the provisions of the Act and SEBI Listing Regulations.

The performance of the Directors was evaluated by the board after seeking inputs from all the directors on the basis of criteria such as the board composition and structure, effectiveness of board processes, information and functioning, etc.

The performance of the committees was evaluated by the board after seeking inputs from the committee members on the basis of criteria such as the composition of committees, effectiveness of committee meetings, etc.

The above criteria are based on the Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India on January 5, 2017.

In a separate meeting of independent directors, performance of non-independent directors, the board as a whole and the Chairman of the Company were evaluated, taking into account the views of executive directors and non-executive directors and the Performance evaluation of independent directors was done by the entire board, excluding the independent director being evaluated.

9. POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION AND OTHER DETAILS

The Companys policy on directors appointment and remunerationand other matters provided in Section 178(3) of the Act available on https://www.aarviencon.com.

10. RELATED PARTY TRANSACTIONS

All related party transactions have been entered by the Company during the financial year in the ordinary course of business and at the arms length price. During the financial year under consideration the Company has entered into contracts/arrangements/transactions with related parties, which could be considered as material in accordance with the provisions of the Act, have been given in "Annexure I" in Form No. AOC-2."

11. STATUTORY AUDITOR

At the 29th AGM held on 15th July, 2017, the Members approved the appointment of M/s. Arvind H. Shah & Co., Chartered Accountants, having registration number (ICAI Firm Registration No. 100577W), as Statutory auditors of the Company for a term of five years to hold the office from the conclusion of that AGM till the conclusion of 34th Annual General Meeting subject to ratification of their appointment by Members at every AGM, if so required under the Act.. The requirement to place the matter relating to appointment of auditors for ratification by Members at every AGM has been done away by the Companies (Amendment) Act, 2017 with effect from May 7, 2018. Accordingly, no resolution is being proposed for ratification of appointment of statutory auditors at the ensuing AGM.

12. AUDITORS REPORT AND SECRETARIAL AUDIT REPORT

The report of the statutory auditors on Standalone Financial statements as well as Consolidated Financial Statements forms a part of the Annual Report. There were no adverse remarks/qualification, Reservations or remarks given by the Statutory Auditor on the financials of the company.

The Secretarial Audit Report also do not contain any adverse remarks/qualified remarks except comments made by the Secretarial Auditor. The Report is enclosed as Annexure-II to this Report.

Based on the comments made by the Secretarial Auditor in his report of the Company in regards to the delayed reporting of the events to the RBI, the Board states that the Company has incorporated one subsidiary Company at UK and there were some events during the incorporation process which were reported late to the RBI. Hence the Company has filed the compounding application to make good the compliance and comply with those reporting requirements with the RBI. As such there is no material impact of the same on the financials statements of the Company or on its subsidiary Companies.

13. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

As per the provision of Section 138 of the Companies Act, 2013, the Company has devised a proper system to check the internal controls and functioning of the activities and recommend ways of improvement. Internal Audit is carried out timely. The internal financial controls with reference to financial statements as designed and implemented by the Company. During the year under review, no material or serious observation is received from the Internal Auditor of the Company for inefficiency and inadequacy of such controls.

14. ANNUAL RETURN

Pursuant to the section 92(3) of the Companies Act,2013 substituted by the Companies Amendment Act, 2017 w.e.f 31.07.2018 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, An Annual return in Form MGT 7 once prepared shall be placed on the website of the Company i.e https://www . aarviencon.com/home/announcements.

15. 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 is no material transaction occurred during the year.

16. CORPORATE SOCIAL RESPONSIBILITY

As per Section 135 of the Companies Act, 2013, the Company has formulated a Corporate Social Responsibility (CSR) Committee and recommended to the Board a CSR Policy indicating the activities to be undertaken by the Company and the same was duly approved by the Board. The CSR Policy can be accessed on the Companys website i.e www.aarviencon.com

During the year the Company has spent Rs. 10,45,490/- on CSR Activities. The Report on the CSR Activities is annexed herewith to the Boards Report.

17. VIGIL MECHANISM

Pursuant to the provision of Section 177(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meeting of Board and its Powers) Rules, 2014, a "Vigil Mechanism Policy" for Directors and Employees of the Company is in place, to report their genuine concern of any violation of legal or regulatory requirements, incorrect or misrepresentation of any financial statements and reports, unethical behavior, actual or suspected fraud or violation of the Companys code of conduct etc. during the year under review, no such complaints were received.

The details of the "Vigil Mechanism Policy" are available on the website of the Company i.e www.aarviencon. com

18. THE CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO, IN SUCH MANNER AS MAY BE PRESCRIBED;

The information pertaining to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and outgo as required under Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are as stated below:

A) Conservation of Energy

1. The steps taken or impact on conservation of energy;

The Company applied strict control system to monitor day to day power consumption. The Company ensures optimal use of energy with minimum extent of wastage as far as possible. The day to day consumption is monitored in an effort to save energy.

2. The Capital Investment on Energy Conservation Equipment.

The Company has not made any capital investment on energy conservation equipment.

B) Technology Absorption:-

The Company has no activities relating to technology absorption.

c) Foreign Exchange Earnings and Outgo;

Particulars 2018-19 2017-18
Rs. Rs.
Foreign Exchange Earnings in terms of actual inflows 3,90,550/- 4,22,927/-
Foreign Exchange outgo in terms of actual outflow 13,87,919/- 15,36,828/-

19. REVIEW OF SUBSIDIARY AND ASSOCIATE COMPANIES:-

The Company has 3 subsidiary Companies as on March, 2019, There are no associates or joint venture companies within the meaning of Section 2(6) of the Companies Act, 2013 ("Act"). There has been no material change in the nature of the business of the subsidiary companies.

As required under Companies Act, 2013, the audited consolidated financial statements of the company incorporating all its subsidiary prepared with applicable Accounting Standards are attached herewith.

Aarvi Encon FZE is a Wholly Owned Subsidiary of Aarvi Encon Limited. Aarvi Encon FZE has generated Rs. 14,10,28,806/- as revenue during the Financial Year under consideration.

Aarvi Engineering & Consultants Private Limited, a Wholly Owned Subsidiary of the company engaged in Consultancy Services had no operation during the year under review. The accounts of Aarvi Engineering & Consultants Private Limited are consolidated with the accounts of the company according to the provisions of Companies Act, 2013, Income Tax Act, 1961 and read with application "Accounting Standard" issued by ICAI.

Aarvi Encon Resources Ltd (AERL) incorporated at United Kingdom (UK), which is a wholly owned Subsidiary Company of the Company. The Company yet to start its operation. The accounts of the AERL will be consolidated with the Company.

Pursuant to the provisions of Section 129(3) of the Act, a statement containing the salient features of financial statements of the Companys subsidiaries in Form AOC-3 is attached herewith to the financial statements of the Company as Annexure-IV.

Further, pursuant to the provisions of Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited financial statements in respect of subsidiaries are available on the website of the Company https://www.aarviencon.com/home/ financial reporting.

20. SIGNIICANT AND MATERIAL ORDERS PASSED BY REGULATORS OR COURTS OR TRIBUNALS IMPARTING THE GOING CONCERN STATUS AND COMPANY OPERATION IN FUTURE

There are no significant and material orders passed by regulators or courts or tribunals imparting the going concern status and Company operation in future.

21. DEPOSITS

Your Company did not accept/ hold/ any deposits from public/shareholders during the year under review.

22. PARTICULARS OF LOAN, GUARANTEE OR INVESTMENTS

The Company has not given any loan or guarantee covered under provision of Section 186 of the Companies Act, 2013.

23. TRANSACTIONS WITH RELATED PARTIES

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 given in Annexure I in Form No. AOC-2 and the same forms part of this report.

24. OBLIGATION OF COMPANY UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

In accordance with Sexual Harassment of Women at Work place (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed their under, the Company has formed an Internal Complaints Committee and also framed and adopted the policy for Prevention of Sexual Harassment at Workplace. The following is the summary of Sexual Harassment complaints received and disposed off during the year 2017-18.

No. of Complaints received : NIL
No. of Complaints Disposed off : NIL

The Annual Report under the aforesaid Act has been filed with the Labour Commissioner, Mumbai.

25. STATEMENT OF DEVIATION AND/ OR VARIATION IN UTILIZATION OF PUBLIC ISSUE PROCEEDS PURSUANT TO REGULATION 32 OF SEBI (LISTING OBLIGATION AND DISCLOSURE REQUIREMENTS) REGULATION, 2015

As per Regulation 32 of SEBI (Listing Obligation and Disclosure Requirements) Regulation, 2015 the listed entity shall submit to the stock exchange the statement indicating deviation, if any in the use of proceeds from the objects stated in the offer document, indicating category wise variation (capital expenditure, sales and marketing, working capital etc.) between projected utilization of funds made by it in its offer document, as applicable and the actual utilization of funds.

Accordingly the Company has submitted its aforesaid statement as under;

(Rs. in lakhs)
Sr.

No.

Particulars As per the J Prospectus dated 14th September, 2017 Actual Utilization of Issue Proceeds till 31/03/2018 Unutilized Issue Proceeds till 31/03/2018 Deviation, if any.
1. Working Capital Requirements 1078.00 1485.40 - 407.40
2. Acquisitions and Other Strategic Initiatives 400.00 - 400.00 -
3. General Corporate Purposes 415.00 - - (415.00)
4. Issue Expenses 231.36 238.96 - 7.60
Total:- 2124.36 1724.36 400.00

26.HUMAN RESOURCES

Your Company treats its "human resources" as one of its most important assets. Your Company continuously invest in attraction, retention and development of talent on an ongoing basis. A number of programs that provide focused people attention are currently underway. Your Company thrust is on the promotion of talent internally through job rotation and job enlargement.

Total Employees : 3901
Total Addition in Employees During FY- 18-19 : 506
No. of Women Employees : 168

27. QUALITY INITIATIVES

In F.Y. 2019, the Company successfully completed the annual ISO surveillance audit and OHSAS Safety Audit and retained the enterprise-wide ISO certification for ISO 9001:2015 and OHSAS 18001: 2007.

28. PARTICULARS OF EMPLOYEES

The Company has no employee, who is in receipt of remuneration of Rs. 8,50,000/- per month or Rs. 1,02,00,000 per annum and hence the Company is not required to give information under sub rule 2 and

3 of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

29. CREDIT RATING

Your Companys Domestic Credit Rating is CRISIL SME Rating 1 for the long-term debt /facilities/NCDs by CRISIL. CRISIL has reaffirmed its ratings i.e BBB/ STABLE for long term borrowings and A3 + for short term borrowings. The Credit Rating derive strength from the operational track record of the Company, cost competitiveness, flexibility derived from diversified services and the Company s effort to reduce cost and to improve cost efficiency.

30. DIRECTORS RESPONSIBILITY STATEMENT

The Directors Responsibility Statement referred to in clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, shall state that :

(a) In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

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

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

(e) They have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively and

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

31. ANNUAL LISTING FEES TO THE STOCK EXCHANGES

Aarvi Encon Limited listed its equity shares on the SME Emerge Platform of NSE Limited. The listing fees duly paid to the exchange and annual custodial fees has been paid to CDSL and NSDL for the F.Y 2019 -20.

32. ACKNOWLEDGEMENT

Your Directors takes this opportunity to thank all Government Authorities, Bankers, Shareholders, Registrar & Transfer Agents, Investors and other Stakeholders for their assistance and co-operation to the Company. Your Directors express their deep sense of appreciation and gratitude towards all employees and staff of the company and wish the management all the best for further growth and prosperity.

For and on behalf of the Board,
Aarvi Encon Limited.
sd/- sd/-
Virendra D. Sanghavi Jaydev V. Sanghavi
Managing Director Executive Director
DIN: 00759176 DIN:-00759042
Date :
Place : Mumbai