entegra ltd Management discussions

Your Company was an early players in the renewable energy business and was the first in the private sector to be awarded a hydro electric project on a built-operate-and-own basis in the state of Madhya Pradesh. Entegra Limited achieved completion of the 3 turbines of Rs 40 MW each of the 400 MW Maheshwar Project in November 2010. But as the management of your Company at the outset wants to express our sincere and heartfelt apologies to you for the following material events which had happened to Your Company:

(a) suspension of our project activities in totality;

(b) failure in our Compliances norms and to comply with the Corporate Governance standards;

(c) breach of the Listing Regulations and compliances with CompaniesAct, 2013 etc.,

(d) panic driven resignations by our Directors and employees due to uncertain future, financial crisis and nerve-rackingdays;

(e) break down in every system in the company etc.

In the year 2005, with the initiative of the Governments of India and Madhya Pradesh ("GOMP"), Power Finance Corporation ("PFC") took total management control of SMHPCL. The expectation was that under their management, without any involvement of the promoters (including additional financing), the management team of "four nominated Directors of Lenders," the Managing Director and Director Finance selected by PFC, the project will be commissioned by March 2010.

Unfortunately, the heavy mismanagement and diversion of project funds from TRA Bank (which was under control of PFC), caused time and cost over-runs, despite the promoters arranging directly or indirectly after 2005 Rs 1029 crores. The unplanned forced funding by the promoters forced all other activities in the group to a stand still causing huge financial losses.

The management team of PFC illegally transferred in favor of PFC and six other lenders ownership of 51% of the paid-up Capital in SMHPCL by a combination of transfer of pledged shares with PFC and conversion of part of PFCssub-debt on June 1, 2016.

The promoters approached the ROC, Gwalior, with complaints of oppression and mismanagement. On the direction of MCA, the ROC marked SMHPCL as "Management Disputed" and completed their inspection of SMHPCL u/s 206(1) / (4) of the Act. Fearing punitive actions against PFC and its Officials on several counts, PFC blocked release of the Inspection Report by the MCA/ROC and filed, in January 2017, Petition against us u/s 241,242 and 244 of the Act before the Honble NCLT, Ahmedabad ("NCLT"), alleging oppression and mismanagement from 2005 apart from levying many unsubstantiated allegations. PFC also sought many reliefs including immunity from punishments for violations of laws of the country by PFC and its officials.

The NCLT dismissed the petition on June 15, 2017 as not bona fide and refused to grant a single relief prayed and directed PFC to arrive at amicable resolution with promoters in view of the National importance of the Hydro project.

But PFC chose to appeal before the Honble NCLAT ("NCLAT") for dismissal of NCLT Order in July 2017. NCLAT, on March 12, 2018 dismissed PFCs appeal and passed several strictures against PFC and upheld in totality the Order passed by the NCLT. The Central Government and the GOMP were directed to find a way forward for early completion of the project.

Out of panic, PFC in February 2018, approached the NCLT u/s 7 of the IBC, Code against SMHPCL, in January 2018 which is yet to be admitted. Your Company had in August 2017 filed petition before NCLT u/s 241, 242, 244 and 59 of theAct along with claim for damages of Rs16,607 crores.

PFC refused to abide by the Order of NCLAT and filed an appeal on May 10, 2018 before the Honble

Supreme Court if India, for setting aside the Order of NCLAT. The Supreme Court, on May 18, 2018 dismissed the appeal without admission and upheld the Order of the NCLAT.

But PFC disrespecting the Order of the highest Court which upheld the NCLAT Order, PFC and the KMPs of SMHPCL refuse to implement the judgement of NCLAT and are indulging in serious contraventions of Companies Act, 2013 subjecting themselves to serious punishments. Illegally PFC classified SMHPCL as an Associate Company in their financial statements since March 2017 while the ROC has declared SMHPCL as a Subsidiary of PFC from 2005 and in fact opined that SMHPCL has become a Government Company. Thus, the relationship has unnecessarily been complicated and confused. PFC and the KMPs of SMHPCL who act at the behest of PFC are already guilty of contempt of NCLAT/Supreme Court Orders for not revers in gallille galacts including rein statement of the Original shareholding of promoters-58.43% so that the AOA of SMHPCL can be made Company Law compliant etc. Based on the discussions the promoters have been having with prospective investors, SMHPCL can commission three Turbines within one year of vesting control of management from PFC.

On September 26, 2018, the MCA, has requested PFC to take appropriate actions in compliance with the Order of NCLAT. Despite passage of several months since the NCLAT Order, PFC had failed to restore the control of SMHPCL to us. Now with the intervention of the Ministry of Corporate Affairs (MCA) and the Government of Madhya Pradesh (GOMP) we are happy to state that a high level Task Force has been formed with the primary objective of resolution between PFC and us , the promoters, so that the Project can start soon. Pursuant to the efforts of the Task Force a Memorandum of Understanding (MOU) was executed between Power Finance Corporation (PFC), Shree Maheshwar Hydel Power Corporation Limited (SMHPCL) and us (Entegra Limited). As per the terms of the MOU we have already nominated Mr M.L. Gupta as the Chairman and Managing Director on the Board of SMHPCL and PFC has also handed over their shares which were converted by them back to the Company. With this positive development we are hopeful that our investments in the project would yield good results soon. Even now several investors are interested in SMHPCLs project and as soon as we acquire management control of SMHPCL, we would be in a position to kick-start the project.

During these years of hardships, Your Company which until till 2015 was complying with every Listing Conditions and Provisions of Companies Act 2013, had to contravene many requirements due to circumstances beyond control of the Promoters as already explained above.

The company received Notice for Delisting for non-compliances including arrears of payments due to the Stock Exchange. While, the compliances have been regularized by taking extra time, the company has sought more time for clearance of the dues to the Exchange only because of the problems of raising funds when in view of the delay caused in gaining control of SMHPCL despite the Courts Orders. The promoters are also working on monetization of assets to liquidate dues of many creditors including the Stock Exchange.

Pursuant to the delisting order, the NSE called the company representatives for a personal hearing after which they have agreed to reconsider the delisting of the Company giving time till September 30 for the payment of their outstanding fees and the SEBI SOP fines. The Company has made a representation to both SEBI and the NSE for granting time till March 2020 for the above payments, which is under their due consideration.