IL&FS Engineering & Construction Co Ltd Directors Report.

The Members

IL&FS Engineering and Construction Company Limited

Your Directors take pleasure in presenting the Thirtieth Annual Report along with the Audited Financial Statements for the Financial Year Ended March 31, 2019

(I) STANDALONE FINANCIAL RESULTS :

Your Company has adopted Indian Accounting Standards (Ind AS) notified under the Rules, 2015 with effect from April 1, 2017. Accordingly, the Standalone and Consolidated Financial Statements along with the comparatives for the year ended March 31, 2019 have been prepared in accordance with Ind AS prescribed under Section 133 of the Companies Act, 2013 read with Rules made thereunder.

I. FINANCIAL RESULTS :

(Rs in Crore)

STANDALONE

Particulars

FY 2019

FY 2018

Revenue from Operations 1239.14 1868.76
Other Income 22.08 250.86
Companys share of profit from integrated joint ventures 1.01 32.00
Total Income 1262.23 2151.62
Profit before Interest, Depreciation, Exceptional Items and Tax (58.67) 443.78
Less: Finance Cost 290.18 396.03
Profit before Depreciation, Exceptional Items and Tax (348.84) 47.75
Less: Depreciation and Amortization Expenses 36.75 44.54
Profit before Exceptional Items & Tax (385.59) 3.21
Exceptional Item (Net) 1640.42 0.00
Profit Before Tax (2026.01) 3.21
Provision for Tax 10.44 (3.71)
Profit After Tax (2036.45) 6.92
Other comprehensive income/(loss) for the year 1.14 1.04
Total Comprehensive Income for the year (2035.31) 7.96
Paid up Equity Capital 131.12 131.12
Earnings per share (in Rupees)
- Basic (155.31) 0.53
- Diluted (155.31) 0.53

II. FINANCIAL PERFORMANCE REVIEW :

During the year ended March 31, 2019, your Company achieved a turnover of Rs 1,239.14 crore on standalone basis as against Rs 1,868.76 crore in FY 2018.The Net Profit/(Loss) for the year amounted to Rs. (2,036.45) crore as against net profit of Rs 6.92 crore in FY 2018.

III. DIVIDEND :

Due to accumulated losses of the Company from the previous years, your Directors express their inability to recommend any dividend for the year on Preference as well as on Equity Shares

IV. RESERVES :

No amount is recommended for transfer to Reserves of the Company for FY 2019

V. THE STATE OF AFFAIRS OF THE COMPANY :

The detailed position on the order book and financial performance of the Company was provided under Management Discussions & Analysis Report

IL&FS Engineering & Construction Co. Ltd. (IECCL) is part of the Infrastructure Leasing and Financial Services Limited ("IL&FS") group. The board of directors of IL&FS has been reconstituted pursuant to the orders passed by the National Company Law Tribunal, Mumbai Bench ("NCLT") in Company Petition No. 3638 of 2018 filed by the Union of India, of Corporate Affairs under Sections 241 and 242 of the Companies Act, 2013, as amended ("Companies Act") on the grounds of mismanagement of public funds by the erstwhile board of IL&FS and the affairs of IL&FS being conducted in a manner prejudicial to the public interest.

Further, the National Company Law Appellate Tribunal ("NCLAT") by way of its order on October 15, 2018 ("Interim Order") in the Company Appeal (AT) 346 of 2018 by way of which the NCLAT, after taking into consideration the nature of the case, larger public interest and economy of the nation and interest of IL&FS and its group companies (including IECCL) has stayed certain coercive and precipitate actions against IL&FS and its group companies including IECCL. IL&FS and its group companies are currently undergoing resolution process under the aegis of the NCLAT and NCLT.

The developments at the IL&FS Group has had negative impact on IECCL and its brand equity. These developments severely impacted the ongoing projects and order book.

Your Company having overseas Subsidiary, Maytas Infra Saudi Arabia (MISA), there being no employees at Saudi Arabia and the other partner being in the process of Government takeover, the accounts could not be finalized for the last 2 years.

The Board of Directors is hopeful of securing sizeable orders in the future and is confident of effective execution of the existing works in the order book, subject to approval of the Resolution Plan by all the stakeholders

VI. SHARE CAPITAL :

During the year under review, there were no change in the share capital of the Company

Shares held by Directors :

None of the Directors of the Company holds any Shares or convertible instruments of the Company, except Mr. Karunakaran Ramchand who was a Director of the Company until October 29, 2018 and who is holding 40,000 equity shares of the Company.

VII. DEPOSITS :

During the year under review, your Company had not accepted any deposit from public under Chapter V of the Companies Act, 2013

VIII. DIRECTORS :

During the year, the following Directors have resigned/ceased from the Board of Directors of the Company and the details of the same are as follows:

Sl.No. Name of the Director Date of Cessation
1. Mr Karunakaran Ramchand October 29, 2018
2. Mr Mukund Sapre November 2, 2018
3. Mr Saleh Mohammed A Binladen May 29, 2018
4. Mr Akberali Mohemedali Moawalla May 29, 2018
5. Mr Debabrata Sarkar September 26, 2018
6. Ms Sutapa Banerjee October 12, 2018
7. Mr Bhaskar Chatterjee December 6, 2018
8. Mr. Ganapathi Ramachandran December 7, 2018

The new Board of promoter of the Company (IECCL), Infrastructure Leasing and Financial Services Limited (IL&FS) with the powers to supersede the nominated board of IECCL, nominated the following as Directors on the Board of IECCL

Sl.No. Name of the Director Date of Appointment
1. Mr Chandra Shekhar Rajan October 25, 2018
2. Mr Bijay Kumar April 4, 2019
3. Mr Dilip Lalchand Bhatia December 24, 2018

None of the Directors of the Company are inter-se related to each other

Status on compliance of having Independent Directors and Women Directors on the Board of Directors of the Company

The newly appointed directors of IL&FS, who exercise control, directly or indirectly, over the Company have been appointed by the National Company Law Tribunal ("NCLT") on the recommendation of Central Government, and are performing function similar to that of the independent directors by discharging an important public duty of resolving the financial problems and other issues. Further, NCLT via order dated April 26, 2019 ("April Order") has granted dispensation in relation to the requirement for appointment of independentdirectorsandwomendirectorsinlightofthedifficultiesfaced by the new board of IL&FS. Further, in April Order, NCLT has observed that the new directors nominated by the Central Government/Tribunal are independent directors and there is no requirement to appoint independent director during the pendency of stay order granted on October 15, 2018 by National Company Law Appellate Tribunal ("NCLAT) on the institution or continuation of suits or any other proceedings by any party/person/bank/company etc. against ‘IL&FS and its group companies in any Court of Law/Tribunal/Arbitration Panel or Arbitration Authority ("October Order").

Accordingly furnishing the details of declarations by the Independent Directors and Familiarization programme of Independent Directors does not arise

Non-Executive Directors :

The Non-Executive Directors are entitled for sitting fee and the details of the same are as follows;

(i) Board Meeting : Rs 15,000/- per meeting
(ii) Audit Committee Meeting : Rs 10,000/- per meeting
(iii) Other Committees of the Board : Rs 5,000/- per meeting

Additionally, the actual out of pocket expenses incurred by the Non-Executive Directors for attending the meetings are also borne by the Company. Except as mentioned above, no other payments were made by the Company to Non-Executive Directors and the Company does not have any pecuniary relationship or transactions with the Non-Executive Directors. The details of amount paid to the Directors of the Company towards Sitting Fee are mentioned in the Form MGT-9 annexed to the Directors Report as well as the Corporate Governance Section of this Annual Report

Performance Evaluation :

In terms of the provisions of the Companies Act, 2013 and Listing Regulations, the Board of Directors of the Company had in its Meeting held on November 10, 2014 approved the policy on Performance Evaluation of the Board of Directors, which laid down the criteria for performance evaluation of Board of Directors, its Committees, Executive Directors, Independent Directors and Non-Executive Directors. Further, in terms of the provisions of Section 178 of the Companies Act, 2013 read with Companies Amendment Act, 2017, the Nomination and Remuneration Committee of the Board had decided that the evaluation of performance of the Board, its Committees, individual directors and the Chairman will be carried out by the Board of Directors as per the parameters evolved from the policy on Performance Evaluation of the Board of Directors. The Board of Directors thereafter, in its Meeting held on July 31, 2018, evaluated the performance of its own, all its Committees, and Individual Directors (excluding the Director being evaluated) as satisfactory. The policy on performance evaluation is available on the website of the Company at http://www.ilfsengg.com/html/policies/PerformanceEvaluationPolicy.pdf

Managerial Remuneration Policy :

In terms of the provisions of Section 178 of the Companies Act, 2013 read with Rules made thereunder and Regulation 19 of Listing Regulations, the Board of Directors of the Company had framed Managerial Remuneration Policy which includes the criteria for determining qualifications, positive attributes, independence of directors and other matters as specified under Section 178(3) of the Companies Act, 2013 and Regulation 19 read with Part D of Schedule II of Listing Regulations. The policy is available on the website of the Company at http://www.ilfsengg.com/html/policies.php

IX. KEY MANAGERIAL PERSONNEL :

In terms of the provisions of Section 203 of the Companies Act, 2013, the Board of Directors have designated Mr Kazim Raza Khan, Chief Executive Officer, Mr Naveen Kumar Agrawal, Chief Financial Officer and Mr Jampana Secretary as the Key Managerial Personnel of the Company

During the year/period, the following Key Managerial Personnel have resigned from the Company and the details of the same are as follows;

Sl.No. Name of the Key Managerial Personnel Effective Date of Resignation
1. Dr Sambhu Nath Mukherjee CFO December 31, 2018
2. Mr Sushil Dudeja – CS January 31, 2019
3. Ms Saheli Banerjee – CS August 16, 2019

During the year/period, the following Key Managerial Personnel were appointed and the details of the same are as follows;

Sl.No. Name of the Key Managerial Personnel Date of Appointment
1. Mr Kazim Raza Khan – Manager December 24, 2018
2. Mr Kazim Raza Khan CEO May 16, 2019*
3. Mr Naveen Kumar Agrawal CFO January 1, 2019
4. Mr J Veerraju – CS September 5, 2019

* Mr. Kazim Raza Khan who was initially appointed as Manager on December 24, 2018 was re-designated as CEO of the Company w.e.f. May 16, 2019.

(X) DIRECTORS RESPONSIBILITY STATEMENT :

In terms of Section 134 (5) of the Companies Act, 2013, the Board of Directors wish to 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) the directors had 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) the directors had 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) the directors had prepared the annual accounts on a going concern basis, however IL&FS and its group companies are currently undergoing resolution process under the aegis of the NCLAT and NCLT which will impact the going concern status of the Company;

(e) the directors had 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) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively

(XI) DETAILS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:

A) Conservation of energy
i) The steps taken or impact on conservation of energy; The conservation of energy in all the possible areas is undertaken by the Company as an important means of achieving cost reduction. Savings in electricity, fuel and power consumption receive due attention of the management on a continuous basis
ii) The steps taken by the Company for utilizing alternate sources of energy; NIL
iii) The capital investment on energy conservation equipments; NIL
B) Technology absorption
i) the efforts made towards technology absorption; Timely completion of the projects as well as meeting the budgetary requirements are the two critical areas where different techniques help to a great extent. Many innovative techniques have been developed and put to effective use in the past and the efforts to develop new techniques continue unabated.
ii) the benefits derived like product improvement, cost reduction, product development or import substitution; NIL
iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year) - NIL
a) the details of technology imported;
b) the year of import;
c) whether the technology been fully absorbed
d) if not fully absorbed, areas where absorption has not taken place, and the reasons thereof; NA
(iv) The expenditure incurred on Research and Development Nil
(C) FOREIGN EXCHANGE
Foreign Exchange earned in terms of actual inflows during the year Nil
Foreign Exchange Outgo during the year in terms of actual outflows Rs 2.60 crore

(XII) BOARD AND ITS COMMITTEES :

(a) Board of Directors :

During the year under review the Board of Directors of the Company met 6 (six) times on May 30, 2018, July 31, 2018, August 12, 2018, October 25, 2018, December 24, 2018 and March 11, 2019. The attendance, along with such other details as required, of each of the Directors is mentioned in the Corporate Governance Report section of this Annual Report

(b) Audit Committee :

The Audit Committee of the Board of Directors of the Company currently consists of three Members. During the year under review, there were changes in the composition of the Committee. The dates of meetings of Audit Committee held during FY 2019, attendance of Members in the Meetings and other details are mentioned in the Corporate Governance Report section of this Annual Report

During the year under review, all the recommendations of the Audit Committee were accepted by the Board of Directors. Further, the Committee comprises of Non-Executive Directors only (the nominees of the new Board of Promoter), all of whom have the ability to read and understand the Financial Statements

(c) Corporate Social Responsibility Committee :

The Board of Directors of the Company constituted Corporate Social Responsibility (CSR) Committee on March 18, 2014 and formulated a policy on CSR which is available on the website of the Company athttp://www.ilfsengg.com/html/ policies/CSR_Policy.pdf.

For details relating to composition of CSR Committee, number of meetings held during the year under review and other details, the Members are requested to refer the Corporate Governance Report which forms part of this Annual Report

As per Section 135(5) of the Companies Act, 2013, the Company was required to spend two percent of the average net profits calculated on the basis of preceding three financial during the year due to negative average net profits of the Company for the preceding three financial CSR policy and other details as per Rule 9 of Companies (Corporate Social Responsibility) Rules, 2014 are enclosed as Annexure1 to this Report

(d) Other Committees :

The details of composition, number of Meetings and such other information as required regarding Nomination and Remuneration Committee, Stakeholders Relationship Committee and other Committees are mentioned in the Corporate Governance section of this Annual Report

(XIII) RISK MANAGEMENT :

The Board of Directors in its Meeting held on February 11, 2015 formulated a Risk Management Policy consisting of various elements of risk and mitigation measures

The Board of Directors/Audit Committee reviews the risk assessment and mitigation procedures across the entity from time to time. The critical enterprise level risks of the Company and the mitigation measures being taken are provided in the Management Discussion and Analysis Report.

(XIV) SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES :

As per Section 129 (3) of the Companies Act, 2013 and Regulation 34 of the Listing Regulations, the Consolidated Financial Statements of the Company forms part of this Report. The copies of Audited Financial Statements of the Subsidiaries are available on the website of the Company at www.ilfsengg.com and a copy of the same will be provided upon written request to the Company Secretary

SUBSIDIARY ENTITIES :

Following are the Subsidiaries of your Company:

Angeerasa Greenfields Private Limited,

Ekadanta Greenfields Private Limited,

Saptaswara Agro-farms Private Limited,

Maytas Infra Assets Limited,

Maytas Metro Limited,

Maytas Vasishta Varadhi Limited; and

Maytas Infra Saudi Arabia Company (Foreign Subsidiary)

ASSOCIATES & JOINT VENTURES :

During the year under review, the following entities have been Associates and Joint Ventures of your Company:

Associate :

Hill County Properties Limited

Joint Ventures (Association of Persons) :

NCC-Maytas (JV)

NEC-NCC-Maytas (JV)

Maytas-NCC (JV)

NCC-Maytas (JV) (Singapore Classtownship)

Maytas-CTR (JV)

NCC-Maytas-ZVS (JV)

Joint Ventures (Jointly Controlled Operations) :

Maytas- KBL (JV)

Maytas KCCPL Flow More (JV)

Maytas MEIL KBL (JV)

Maytas MEIL ABB AAG (JV)

MEIL Maytas ABB AAG (JV)

MEIL Maytas KBL (JV)

MEIL Maytas WPIL (JV)

MEIL Maytas AAG (JV)

MEIL-SEW-Maytas-BHEL (JV)

L&T KBL Maytas (JV)

Maytas Ritwik (JV)

Maytas Sushee (JV)

Maytas Gayatri (JV)

IL&FS Engg-Kalindee (JV)

AMR-Maytas-KBL-WEG (JV)

ITDC-Maytas JV

IL&FS GPT JV

ITNL IECCL JV

Further, none of the entities have been associated / disassociated as Joint Ventures of your Company during the year under review

The performance and financial position of the Subsidiaries, Joint Venture and Associate Companies Annexure 2 to this Report

(XV) AUDITORS AND AUDITORS REPORT :

(a) Statutory Auditors :

In terms of the provisions of the Companies Act, 2013 read with Rules made thereunder, the Members of the Company at their Annual General Meeting (AGM) held on August 28, 2017, appointed BSR & Associates, LLP and M Bhaskara Rao & Co., Chartered Accountants as Joint Statutory Auditors of the Company to hold office for a period of 5 years

The Company had received resignation letter from the one of its Joint Statutory Auditors on July 15, 2019, letter dated July 14, 2019, viz. M/s. BSR & Associates LLP, Chartered Accountants (Firm Registration Number: 116231W/W-100024) stating their intent to not continue as the Statutory Auditors of the Company and tendering their resignation with immediate effect.

Accordingly, on recommendation of the Audit Committee and Board, the members accorded their approval for the appointment of M Bhaskara Rao & Co., Chartered Accountants, (Firm Registration Number 000459S) in the ExtraOrdinary General Meeting of the Company held on Monday, September 9, 2019, one of the Joint Statutory Auditors of the Company as Sole Statutory Auditor of the Company pursuant to the resignation of the other Joint Statutory Auditor, M/s. BSR & Associates LLP, Chartered Accountants (Firm Registration Number: 116231W/W-100024).

The Board noted that there were following qualifications in the Auditors Report for the Standalone and Consolidated Financial Statements for the Year Ended March 31, 2019:

Standalone Financial Statements :

1. Note 13 (a) relating to deferred tax asset amounting to Rs. 242.99 Crores as at March 31, 2019, recognised by the Company in earlier years. Considering the material uncertainty related to going concern that exists in the Company, the threshold of reasonable certainty for recognising the deferred tax assets as per Ind AS 12- Income Taxes has not been met. Consequently, deferred tax asset is overstated and loss for the year and retained earnings (accumulated loss) are understated by Rs. 242.99 Crores.

2. Note 51 relating to non-recognition of interest expense of Rs. 144.99 Crores for the year on the borrowings availed by the Company considering the process initiated for submission of a resolution proposal to lenders for restructuring of existing debt. Consequently, interest expense and loss for the year are understated by Rs. 144.99 Crores and retained earnings (accumulated loss) is understated by Rs. 144.99 Crores.

3. Note 49 regarding Inter Corporate Deposits (ICDs) amounting to Rs. 323.78 Crores. These ICDs represents advances given by the Company to other entities, which as informed to us by the management, were ultimately given by these other entities to erstwhile Satyam Computer Services Ltd, which has since merged into Tech Mahindra Ltd. In the absence of adequate and sufficient audit evidence to establish the recoverability of said advances, we are unable to express an opinion on the recoverability of the said ICDs.

4. As stated in the Note 52, relating to the provision for advance aggregating to Rs.65 Crores for purchase of cement paid during the period to a party, the Management is of the opinion that these transactions are suspicious in nature and the Board decided to initiate investigation by informing the Ministry of Corporate Affairs (MCA). In the absence of sufficient and appropriate audit evidence, we are unable to opine on the appropriateness of the recognition of the transaction, pending result of the outcome of the investigation

Consolidated Financial Statements :

1. Note 13 relating to deferred tax asset amounting to Rs. 242.99 Crores as at March 31, 2019, recognised by the Company in earlier years. Considering the material uncertainty related to going concern that exists in the Company, the threshold of reasonable certainty for recognising the deferred tax assets as per Ind AS 12- Income Taxes has not been met. Consequently, deferred tax asset is overstated and loss for the year and retained earnings (accumulated loss) are understated by Rs. 242.99 Crores.

2. Note 50 relating to non-recognition of interest expense of Rs. 144.99 Crores for the year on the borrowings availed by the Company considering the process initiated for submission of a resolution proposal to lenders for restructuring of existing debt. Consequently, interest expense and loss for the year are understated by Rs. 144.99 Crores and retained earnings (accumulated loss) is understated by Rs. 144.99 Crores.

3. Note 48 regarding Inter Corporate Deposits (ICDs) amounting to Rs. 323.78 Crores. These ICDs represents advances given by the Company to other entities, which as informed to us by the management, were ultimately given by these other entities to erstwhile Satyam Computer Services Ltd, which has since merged into Tech Mahindra Ltd. In the absence of adequate and sufficient audit evidence to establish the recoverability of said advances, we are unable to express an opinion on the recoverability of the said ICDs.

4. As stated in the Note 51, relating to the provision for advance aggregating to Rs.65 Crores for purchase of cement paid during the period to a party, the Management is of the opinion that these transactions are suspicious in nature and the Board decided to initiate investigation by informing the Ministry of Corporate Affairs. In the absence of sufficient and appropriate audit evidence, we are unable to opine on the appropriateness of the recognition of the transaction, pending result of the outcome of the investigation

Internal Financial Controls :

The following material weaknesses has been identified in the operating effectiveness of the Companys internal financial reporting as at March 31, 2019:

A material weakness has been identified in the Companys internal financial March 2019 relating to certain operating effectiveness in some of controls in respect of assessment of deferred tax asset, assessment of realisable value of inventory, assessment of recovery of contract assets, inter corporate deposits and advances and procurement of materials,

A ‘material weakness is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Companys annual or interim financial statements will not be prevented or detected on a timely basis.

The Board of Directors explanations on the aforementioned qualification are given below:

Qualification on Standalone Financial Statements :

1. Note 13 (a) relating to deferred tax asset amounting to Rs. 242.99 Crores as at March 31, 2019, recognised by the Company in earlier years. The same is being retained as the Company is in the process of finalising resolution plan which if approved and implemented is likely to generate enough profits in subsequent years which can set-off deferred tax asset

2. The Company is in discussion with the lendors for the restructuring plan Interest has been recognized only upto 15th October, 2018 in anticipation of the approval of lenders of concession/waivers being sought by company in the resolution plan

3. Based on the forensic report by Independent agency, which has been able to trace the said amount, the Company is in process of filing a petition for recovery of the said amount. It is therefore, our opinion, that ICD amount of Rs 323.78 Cr is likely to be realised.

4. An amount of advance paid to a vendor has been reported by Management to the Board. The Board is of the opinion that further investigation is required and hence we do not wish to comment further in the matter.

Material Uncertainty Related to Going Concern

The Company is currently in discussion with the lenders for carrying out a debt restructuring proposal. The ability of the Company to continue as a going concern is solely dependent on the acceptance of the debt restructuring proposal / finalisation and approval of the resolution plan, which is not wholly within the control of the Company.

The Company has accordingly prepared these Standalone Financial Statements on going concern basis based on assessment of the successful outcome of the restructuring proposal / finalisation and approval of the resolution plan.

Qualification on Consolidated Financial Statements :

1. Note 13 (a) relating to deferred tax asset amounting to Rs. 242.99 Crores as at March 31, 2019, recognised by the Company in earlier years. The same is being retained as the Company is in the process of finalising resolution plan which if approved and implemented is likely to generate enough profits in subsequent years which can set-off deferred tax asset

2. Interest has been recognised only upto 15th October, 2018 in line with the restructuring plan which is currently under discussion with the lenders. In the restructuring plan, the Company is proposing for waiver of Interest and accordingly the same has not been recognised in the books

3. Based on the forensic report by Independent agency, which has been able to trace the said amount, the Company is in process of filing a petition for recovery of the said amount. It is therefore, our opinion, that ICD amount of Rs 323.78 Cr is likely to be realised

4. Transaction of advance to vendor has been reported by Management to the Auditors and to the Board. The Board is of the opinion that further investigation is required and hence we do not wish to comment further in the matter.

(b) Cost Auditors :

In terms of the provisions of the Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 as amended, Company maintains cost records and accounts in respect of the Roads and other infrastructure projects

The Board of Directors on the recommendation of Audit Committee appointed Narasimha Murthy& Co as the Cost Auditors of the Company for FY 2019 for conducting the Cost Audit of the Company at a remuneration of Rs.5,00,000/- was approved by the Members at the Twenty Ninth AGM of the Company held on September 17, 2018. The Cost Auditors submited their report for FY 2019 to the Board of Directors.

Further, on the recommendation of Audit Committee, the Board of Directors in its Meeting held on May 16, 2019 reappointed Narasimha Murthy & Co, Cost Accountants as the Cost Auditors of the Company for FY 2020 at a remuneration as may be determined by the Audit Committee in consultation with the Auditors. Necessary resolution for ratification of their remuneration in terms of the provisions of the Companies Act, 2013 read with Rules made there under is included in the Notice of AGM for the approval of the Members

(c) Secretarial Auditor :

In terms of the provisions of Section 204 of the Companies Act, 2013, the Board of Directors had appointed RPR & Associates, Company Secretaries to conduct the Secretarial Audit for FY 2019. The Secretarial Audit Report for the Financial Year Ended March 31, 2019 is enclosed as Annexure 3 to this report. The Secretarial Audit Report contains the following qualifications and the replies thereon given below;

Qualification Reply
Non Submission of Financial Results for Q2, Q3 and Year ended March 31, 2019 Being complied

The Board of Directors of the Company had in its Meeting held on May 16, 2019, re-appointed RPR & Associates, Company Secretaries as the Secretarial Auditor of the Company for FY 2020

(XVI) CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES :

It is the endeavor of the Company to enter its contracts/arrangements/ transactions with the related parties in the ordinary course of business and on arms length basis. In terms of the provisions of Section 188 of the Companies Act, 2013 read with Rules made thereunder, all transactions with Related Parties were in ordinary course of business and on arms length basis. Accordingly, details of related party transactions as per section 188 of Companies Act, 2013 in Form AOC-2 is not required. All contracts / arrangements / transactions entered by the Company were in compliance with the applicable provisions of the Companies Act, 2013 and Listing Regulations

The Company had framed Related Party Transaction Policy for the purpose of approval and identification of Related Party Transactions. All Related Party Transactions entered into by the Company in terms of the Policy were placed before the Audit Committee for its review and approval from time to time. The Related Party Transaction Policy approved by the Board of Directors is uploaded on the website of the Company at www.ilfsengg.com.

XVII. EMPLOYEE STOCK OPTION SCHEME :

The Companys Employee Stock Option Scheme 2018 (ESOP Scheme 2018) had not been implemented as on date and hence no Certificate from the Statutory Auditors of the Company is required to be obtained for the FY 2019 as required by the SEBI Guidelines and the resolution passed by the Members.

XVIII. MANAGEMENT DISCUSSION AND ANALYSIS :

A separate section titled "Management Discussion and Analysis" consisting of details as required under Regulation 34 read with Schedule V of the Listing Regulations forms part of this Annual Report.

XIX. CORPORATE GOVERNANCE:

A separate section titled "Report on Corporate Governance" including a certificate from confirming compliance with the conditions of Corporate Governance as stipulated under Listing Regulations is enclosed to the Report on Corporate Governance and forms part of this Annual Report

Further, the declaration signed by the Chief Executive Officer affirming the compliance with Code of Conduct for Board Directors and Senior Management Personnel is also enclosed to the Report on Corporate Governance

XX) DISCLOSURES :

(a) Extract of Annual Return :

The extract of Annual Return as per Section 92(3) of the Companies Act, 2013 and Rule 12 (1) of the Companies (Management and Administration) Rules, 2014 is enclosed as Annexure 4 to this Report

(b) Vigil Mechanism :

In terms of the provisions of the Section 177 of the Companies Act, 2013 and Listing Regulations, the Company had established a Vigil Mechanism through its Whistle Blower Policy for directors and employees to report concerns about unethical behavior, actual/suspected frauds and violation of Companys Code of Conduct. Please refer to the Corporate Governance section of the Annual Report for further details

(c) Policy on Prevention of Sexual Harassment :

In terms of the provisions of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company had formulated and implemented a policy for Prevention of Sexual Harassment of Women at workplace.

The Company from time to time conducts workshops or awareness programmes against sexual harassment at workplace The Company had also constituted an Internal Committee comprising of employees of the Company and an Independent NGO representative. The scope of the Internal Committee encompasses all incidents / occurrences of sexual harassment which take place at the workplace and where either of the party (aggrieved / accused) is an employee of the Company. During the year under review, the Company has not received any complaints under the policy

Further, the Company has many systems, processes and policies to ensure professional ethics and harmonious working environment. The Company follows Zero Tolerance towards Corruption and unethical conduct. These are ensured through Whistle Blower Policy, Sexual Harassment Policy and Redressal Guidelines

(d) Particulars of Loans, guarantees or investments under Section 186 :

Your Company is into the business of providing Infrastructure Facilities. Accordingly, the provisions of Section 186 pertaining to providing Loan or Guarantee to other corporates are exempted. All information regarding Loans, Guarantees and Investments are mentioned in the notes to financial statements for FY 2018 which are self-explanatory

(e) Particulars of employees and related disclosures :

The disclosures relating ratio of remuneration of each directors to the median employees remuneration and other details as per Section 197 (12) of the Companies Act, 2013 read with Rule 5 (1) of the Companies (Appointment and remuneration of Managerial Personnel) Rules, 2014 is enclosed as Annexure 5 to this Report The disclosure pertaining to remuneration and other details as required under Section 197 (12) of the Act read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed as Annexure 6 to this Report

(f) Material changes and comments, if any, affecting the financial position of the Company : Due to the latest developments in the IL&FS Group and the Company, the debt burden has increased in a manner that is not commensurate with the size of its operations and there has been severe stress in terms of cash flows.

(g) Reporting of Fraud : The Auditors of the Company have not reported any instances of fraud committed against the Company by its officers or employees as specified under section 143(12) of the Companies Act, 2013.

(h) Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status of the Company : During the year the National Company Law Appellate Tribunal ("NCLAT") by way of its order on October 15, 2018 ("Interim Order") in the Company Appeal (AT) 346 of 2018, after taking into consideration the nature of the case, larger public interest and economy of the nation and interest of IL&FS and its group companies (including IECCL) has stayed certain coercive and precipitate actions against IL&FS and its group companies including IECCL.

IL&FS and its group companies are currently undergoing resolution process under the aegis of the NCLAT and NCLT which will impact the going concern status of the Company.

(i) Details in respect of adequacy of internal financial controls : The details of internal financial controls and their adequacy is given in Management Discussion and Analysis Report

XIX. ACKNOWLEDGMENTS :

Your Directors place on record their gratitude to the Bankers, Media, Financial Institutions, various agencies of the State and the Central Government Authorities, Clients, Consultants, Suppliers, Sub-Contractors, Members and the Employees for their valuable support and co-operation and look forward to continued enriched relationships in the years to come.

By order of the Board
For IL&FS Engineering and Construction Company Ltd
Sd/-
Chandra Shekar Rajan
Place: Mumbai Chairman
Date: November 19, 2019 DIN: 000126063