KNR Constructions Ltd Directors Report.

Dear Members,

Your Directors are pleased to present the Twenty Fourth Annual Report and the Companys audited financial statement for the financial year ended March 31, 2019.

FINANCIAL RESULTS

The Companys financial performance, for the year ended March 31, 2019 is summarised below:

(Rs in Lakhs)
Particulars Year Ended March 31, 2019 Year Ended March 31, 2018
Total revenue (including other income) 2,20,064.20 1,97,096.70
Profit before interest, depreciation and tax 48,780.08 42,544.07
Less: Interest and financial charges 2,910.25 2,314.42
Profit Before depreciation 45,869.83 40,229.65
Less: Depreciation and amortization 16,810.65 13,414.59
Profit before tax 29,059.18 26,815.06
Provision for tax (including Deferred Tax) 2,732.68 (394.17)
Profit after tax 26,326.50 27,209.23
Profit brought forward from previous year 97,612.78 71,249.77
Profit available for appropriation 1,23,939.28 98,459.00
Appropriations:
Dividend (562.47) (703.09)
Dividend tax (115.62) (143.13)
Balance carried forward 1,23,261.19 97,612.78
Paid Up capital 2,812.35 2,812.35
Other Equity 1,38,618.54 1,12,970.90

RESULTS OF OPERATIONS AND THE STATE OF COMPANYS AFFAIRS

The highlights ofthe Companys performance are as under: Revenue from operations Rs 2,13,725.62 Lakhs PBDIT(Excluding Other Income) increased by 10.55 % to . 42,441.50 Lakhs Profit before Tax increased by 8.37% to Rs 29,059.18 Lakhs Cash Profit increased by 5.19% to . 43,137.15 Lakhs Net Profit decreased by -3.24% to Rs 26,326.50 Lakhs The order book position as on 31st March 2019 stands at Rs 4,01,560 Lakhs.

Reserves

The Company is not proposing to transfer any amount to the General Reserves of the Company out of the profits made during the year. The total Other Equity (including securities premium Reserves, General Reserves, Surplus in statement of profit and loss and other comprehensive income) as on 31st March 2019 is Rs 138,518.54 Lakhs as against the Paid-up capital ofRs 2812.35 Lakhs

Dividend

The Board of Directors has recommended final dividend ofRs 0.40 per Equity Share ofRs 2.00 Each for the financial year ended 31st March 2019, amounting to 552.47 Lakhs subject to approval ofthe shareholders. The dividend will be paid to the members whose names appear in the Register of Members as on 23rd September 2019 in respect of shares held in the dematerialized form, it will be paid to members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited as beneficial owners as on that date. The dividend recommended by your Directors, if approved at the ensuring Annual General Meeting by the Shareholders would be paid within the stipulated time.

The dividend payout for the year under review has been formulated in accordance with the Companys policy linked with long term performance, keeping in view the companys need for capital for its growth plans and the intent to finance such plans through internal accruals to the maximum. The Dividend Distribution Policy ofthe Company is annexed herewith marked as Annexure IV to this Report. There has been no change in the policy during the year.

Management Discussion and Analysis Statement

Managements Discussion and Analysis report for the year under review as stipulated under Regulation 34(2) (e) SEBI (LODR) Regulation, 2015 of the LODR Regulations 2015 is presented in a separate section forming part of the Annual report

Transferto the Investor Education and Protection Fund

In terms of Section 125 ofthe Companies Act, 2013, an amount ofRs 57,582/- being unclaimed dividend for the Financial Year 2010-2011 was transferred to the Investor Education and Protection fund (IEPF) established by the Central Government during the year under review.

Company has transferred 8552 unclaimed equity shares to IEPF account.

Members are requested to note that dividends not encashed or remaining unclaimed for a period of 7 (seven) years from the date of transfer to the Companys Unpaid Dividend Account, shall be transferred to the Investor Education and Protection Fund ("IEPF") established by the Central Government. Further, pursuant to the provisions of Section 124 of the Act read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2015 (IEPF Rules) as amended from time to time, all shares on which dividend has not been paid or claimed for seven consecutive years or more shall be transferred to IEPF Authority as notified by the Ministry of Corporate Affairs.

The Members/Claimants whose shares, unclaimed dividend have been transferred to IEPF may claim the shares or apply for refund by making an application to IEPF Authority in Form IEPF 5 which is available on www.iepf.gov.in and on the website of the Company www.cclproducts.com along with requisite fee as decided by it from time to time.

Members who have not yet encashed the dividend warrants from the financial year ended 31st March 2010 onwards are requested to forward their claims to the Companys Registrar and Share Transfer Agents without any further delay. It is in Members interest to claim any un-encashed dividends and for future, opt for Electronic Clearing Service, so that dividends paid by the Company are credited to the Members account on time. It may be noted that once the unclaimed dividend is transferred to IEPF as above, no claim shall rest with the Company in respect of such amount. It may also be noted that the unclaimed dividend amount which were lying with the Company upto the year ended on 31st March 2011, have already been transferred to IEPF. The details of the unclaimed dividends are available on the Companys website at www.cclproducts.com and on the website of Ministry of Corporate Affairs at www.mca.gov. in. Members are requested to contact the Companys Registrar and Share Transfer Agent or the Company to claim the unclaimed/unpaid dividends.

Subsidiaries, Joint Ventures and Associate Companies

During the year under review, 4 new wholly owned subsidiaries has been incorporated by the Company for execution of HAM Projects and no company has ceased to be companys subsidiary and during the year the no new Joint Ventures were entered by the company as per the provisions of section 129 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, a separate statement containing the salient features of the financial statements of the subsidiary Companies and Joint Ventures is prepared in Form AOC-1 and it forms part of the consolidated financial statements and hence not repeated here for the sake of brevity.

The Policy for determining material subsidiaries as approved by the Board may be accessed on the Companys website: www. knrcl.com

Consolidated Financial Statements

The consolidated financial statements, in terms of Section 129 of the Companies Act, 2013 and pursuant to Regulation 33 of SEBI(LODR) Regulations 2015 and prepared in accordance with Accounting Standard 21 as specified in the Companies (Accounting Standards) Rules, 2014 forms a part of this annual report.

As per the provisions of Section 135 of the Companies Act, 2013, the Company has placed separate audited accounts of its Subsidiaries on its website www.knrcl.com and copy of separate audited accounts of its Subsidiaries will be provided to the members at their request.

Directors Responsibility Statement

Pursuant to the requirements under Section 134 (3) (c ) of the Companies Act, 2013, with respect to Directors Responsibility Statement, Your Directors hereby confirmed that:

(a) in the preparation ofthe annual accounts for the year ended March 31, 2019, 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 judgments and estimates that are reasonable and prudent so as to give a true and fair view ofthe state of affairs ofthe Company as at March 31, 2019 and ofthe profit ofthe 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 ofthe 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 standards of corporate governance and adhere to the corporate governance requirements set out by SEBI. The report on Corporate Governance as stipulated under the LODR Regulations forms an integral part of this Report. The requisite certificate from the Auditors of the Company confirming compliance with the conditions of corporate governance is attached to the report on Corporate Governance. Corporate Social Responsibility (CSR)

The Corporate Social Responsibility Committee (CSR Committee) has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board.

The CSR Policy may be accessed on the Companys website at the link: http://www.knrcl.com/images/knrcl_CSR.pdf

Name Designation Category
Shri L. B. Reddy Chairman Non-Executive and Independent Director
Shri B. V. Rama Rao Member Non-Executive and Independent Director
Shri K. Jalandhar Reddy Member Executive and Non- Independent Director

Composition ofthe CSR Committee

The Company has identified three focus areas of engagement which are as under:

1. Promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects

2. Rural development projects

3. Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups;

The Company as part of its Corporate Social Responsibility (CSR) initiative, undertook projects like promotion of education in rural areas, infrastructure and maintenance and renovation ofold age homes.

The Annual Report on CSR activities is annexed herewith as "Annexure I" to this report and CSR Policy is posted on the website of the Company and the web link is http://www.knrcl.com/images/ knrcl_CSR.pdf

Directors

In accordance with the requirements of the Companies Act, 2013 Shri K Jalandhar Reddy, Director ofthe Company is liable to retire by rotation at the Annual General Meeting and, being eligible, offer themselves for reappointment at the ensuring Annual General Meeting.

Brief resume ofthe Director proposed to be reappointed, nature of their expertise in specific functional areas, names of the companies in which they hold directorships and relationships between directors inter-se, as stipulated under LODR Regulations entered with the Stock Exchanges in India, are provided in the Report on Corporate Governance.

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 the Act and LODR Regulations entered with the Stock Exchanges.

The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which include criteria for performance evaluation of the non-executive directors and executive directors.

The Board of Directors has complete access to the information within the Company. Independent Directors have the freedom to interact with the Companys management. Interactions happen during Board / Committee meetings, when MD / ED are asked to make presentations about performance of the Company to the Board. Apart from this, they also have independent interactions with the Statutory Auditors, the Internal Auditors and external advisors appointed from time to time. Further, they meet without the presence of any management personnel and their meetings are conducted informally to enable the Independent Directors to discuss matters pertaining to the Companys affairs and put forth their combined views to the Board of Directors ofthe Company.

Statutory Auditors

M/s K P Rao & Co., Chartered Accountants, were appointed as Statutory Auditors of the Company at the 22nd Annual General Meeting held on 28th September, 2017 for a period of 5 years ie., upto conclusion of 27th AGM to be held in the year 2022. Pursuant to Notification issued by the Ministry of Corporate Affairs on 7th 2018 amending section 139 ofthe Companies Act, 2013 and the Rules framed thereunder, the mandatory requirement for ratification of appointment of Auditors by the Members at every Annual General Meeting ("AGM") has been omitted, and hence the Company is not proposing an item on ratification ofappointment ofAuditors at this AGM.

Internal Auditor & Controls

The Board of Directors based on the recommendation of the Audit Committee has re-appointed M/s. K. P. Rao Associates, Chartered Accountants, Hyderabad, as the Internal Auditors of your Company. The Internal Auditors are submitting their reports on quarterly basis. Internal Auditors findings are discussed and suitable corrective actions are taken as per the directions of Audit Committee on an on-going basis to improve efficiency in operations.

The Companys internal control systems are well established and commensurate with the nature of its business and the size and complexity of its operations. The Audit Committee reviews adequacy and effectiveness of the Companys internal control environment and monitors the implementation of audit recommendations. The recommendations/suggestions of the internal auditors are discussed in the Audit Committee meetings periodically.

Cost Auditors

In accordance with Section 141 of the Companies Act, 2013 (corresponding Section 233B of the Companies Act, 1956) and the MCA General Circular No. 15/2011 dated April 11, 2011, (as amended vide General Circular No. 36/2012 dated November 6, 2012), the Audit Committee has recommended and the Board of Directors had appointed K.K. Rao, Cost Accountants, Hyderabad, being eligible and having sought re-appointment, as Cost Auditors of the Company, to carry out the cost audit for the Company during the financial year 2019-20.

Secretarial Auditor

In accordance with Section 204 of the Companies Act, 2013 the Board has appointed M/s. VCSR & Associates, Company Secretaries, to conduct Secretarial Audit for the FY 2018-19. The Secretarial Audit Report for the financial year ended March 31, 2019 is annexed herewith marked as Annexure II to this Report.

Contracts and arrangements 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 not entered into any contract / arrangement / transaction with related parties 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 at the link: http://www.knrcl.com/images/policy_on_materiality.pdf Your Directors draw attention ofthe members to Notes to the financial statement which sets out related party transactions and disclosures.

Conservation of energy, technology absorption and foreign exchange earnings and out go:

The particulars relating to Conservation of Energy, Technology absorption, Foreign Exchange earnings and outgo as required under section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 are as follows

a) Conservation of Energy

The Company has taken suitable measures for conservation of energy. The core activity of the company is civil construction that is not an energy intensive activity.

b) Technology absorption, Adoption and Innovation There is no information to be furnished regarding Technology Absorption as your Company has not undertaken any research and development activity in any manufacturing activity nor any specific technology is obtained from any external sources, which needs to be absorbed or adopted.

I nnovation is a culture in the Company to achieve cost efficiency in the construction activity to be more and more competitive in the prevailing environment that cannot be quantified.

Foreign Exchange Earnings And Outgo Foreign Exchange Inwards - Nil Foreign Exchange outgo towards

a) Travel - Nil (PY Rs 130.30 lakhs)

b) Import of capital goods and Stores & Spares Rs 70.40 lakhs (PY Rs 1938.79 Lakhs)

c) Advance / Loan to Subsidiaries - Nil (PY Nil Lakhs)

d) Term Loan Repayment and interest - Nil (PY Nil Lakhs) Fixed Deposits

Your Company has not accepted any deposits covered by the provisions of Section 73 of the Companies Act, 2013 and the Rules framed there under.

Industrial Relations

Your Directors are happy to report that the Industrial Relations have been extremely cordial at all levels throughout the year. Your Directors record their appreciation for sincere efforts, support and co-operation of all employees being extended from time to time to accelerate the growth ofthe Company. Disclosures Audit Committee

The Audit Committee comprises majority Independent Directors namely Shri L. B Reddy (Chairman), Shri B V Rama Rao, and Shri K Jalandhar Reddy as other members. All the recommendations made by the Audit Committee were accepted by the Board.

Vigil Mechanism

The Company has a Vigil mechanism and Whistle blower policy in terms of the LODR Regulations, under which the employees are free to report violations of applicable laws and regulations and the Code of Conduct. Protected disclosures can be made by a whistle blower through a dedicated e-mail, or a letter to the Chairman of the Audit Committee. The Policy on vigil mechanism and whistle blower policy may be accessed on the Companys website at the link: http://www.knrcl.com/images/ knrcl_whistleblower.pdf Meetings of the Board

Seven meetings ofthe Board of Directors were held during the year under review. For further details, please refer report on Corporate Governance of this Annual Report.

Code of Conduct

A declaration regarding compliance with the code of conduct signed by the Companys Managing Director is published in the Corporate Governance Report which forms part ofthe annual report.

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

Particulars of loans given, investments made, guarantees given and securities provided are provided in the standalone financial statement.

Extract of Annual Return

Extract of Annual Return ofthe Company is annexed herewith as Annexure III to this Report and the same is available on the Companys website www.knrcl.com

Particulars of Employees

The information required pursuant to Section 197 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect ofemployees ofthe Company is as follows:

The percentage of increase in remuneration of each Director, Chief Financial Officer and Company Secretary during the financial year 2018-19, ratio ofthe remuneration of each Director to the median remuneration ofthe employees ofthe Company for the financial year 2018-19 and the comparison of remuneration of each Key Managerial Personnel (KMP) against the performance of the Company are as under:

Sl. No. Name of Director/KMP and Designation Remuneration of Director/KMP for financial year 2018-19 (Rs in lakhs) % increase in Remuneration in the Financial Year 2018-19 Ratio of remuneration of each Director/ to median remuneration of employees Comparison ofthe Remuneration of the KMP against the performance of the Company
1 K Narsimha Reddy Managing Director 558.00 10.71% 308 Profit before Tax and exceptional item increased by 9.32% and Profit After Tax and comprehensive income decreased by 2.79% in financial Year 2018-19
2 K Jalandhar Reddy Executive Director and CFO 372.00 10.44% 205
3 M V Venkata Rao Company Secretary 13.20 0.00% 7
4 S.Vaikuntanathan, V.P (F&A) 29.70 0.00% 16

* Remuneration is excluding Employer PF contribution and Gratuity.

During the period under review, no employee ofthe Company is employed throughout the financial year and in receipt ofRs 102.00 lakhs or more, or employed for part of the year and in receipt ofRs 8.5 lakhs or more a month or was in receipt of remuneration in excess of that drawn by the managing director or whole time director or manager and holds by himself or long with his spouse and dependent children, not less than two percent ofthe equity shares ofthe company under Rule 5(2) of Companies (Appointment and Remuneration ofManagerial Personnel) Rules, 2014.

Further details of top ten employees in terms of remuneration drawn during the financial year ended 31st March, 2019 as required under Rule 5(2) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014andas amended are :

Sl. No. Name of the Employee & Designation Age (years) Qualification *Gross Remuneration in Experience (years) Date of Commencement of Employment Previous Employment % of holding in the Company
1 Sri K. Narsimha Reddy Managing Director 71 B.A 55,800,000 50 Yrs 11.07.1995 - 32.53%
2 Sri K.Jalandhar Reddy Executive Director & CFO 48 B.E Computers 38,640,000 22 Yrs 11.07.1995 - 13.95%
3 Sri K.Shankar Reddy Vice President 48 B.Tech Civil 60,00,000 22 Yrs 01.10.1999 Rani Constructions
4 Sri Maj. T.L. Varma Sr.VicePresident - Technical 63 B.E. Civil 5,448,667 39 Yrs 12.07.2011 LANCO
5 Sri.V.Narasimha Ramana Sr.Vice President - Technical 56 M.Tech Civil 5,408,900 31 Yrs 09.06.2018 BSCPL
6 Sri V. Venugopal Reddy Director Projects 42 B.E 50,34,000 18 Yrs 21.08.2000 - 0.09%
7 Sri.E.Srinivasa Rao Vice President - Technical 55 B.E Civil 38,00,000 24 Yrs 02.12.2012 Navayuga --
8 Sri. T. Bhaskar Rao Sr.Vice President - Technical 52 M.Tech Civil 36,45,000 32 Yrs 06.08.2018 GVR Infra Projects
9 Sri. S. Vaikuntanathan Vice President (F&A) 64 FCA 29,92,688 38 Yrs 07.01.2016 Vaibhav Jyothi Power --
10 Sri.B.Phani Kumar Sr.Project Manager 53 B.Tech Civil 28,64,000 33 Yrs 14.10.2014 Balaji Rail Road Systems

• None of the above employees were relative of any Directors except Sri K Jalandhar Reddy who is son of Shri K Narsimha Reddy.

• All appointments are / were contractual in accordance with terms and conditions as per Company rules.

* Gross Remuneration includes perquisites and contribution to Provident fund by the employer.

ii) The median remuneration of employees of the Company during the financial year was Rs 1.81 lakhs;

iii) In the financial year, there was increase of 17.97% in the median remuneration ofemployees;

iv) There were 1542 employees on the rolls of Company as on March 31, 2019

v) Relationship between average increase in remuneration and company performance: - The Profit before tax and exceptional items for the financial year ended March 31, 2019 increased by 9.32% whereas the increase in median remuneration was 17.97%

vi) Comparison of Remuneration of the Key Managerial Personnel(s) against the performance ofthe Company: The total remuneration of Key Managerial Personnel was Rs 973.59 lakhs whereas the Profit before tax and after exceptional item was Rs. 29,059.18 lakhs in FY 2018-19

vii) a) Variations in the market capitalisation of the Company: The market capitalisation as on March 31, 2019 at NSE was Rs 3,64,901.89 lakhs (Rs. 3,99,353.13 lakhs as on March 31, 2018)

b) Price Earnings ratio of the Company at NSE was 13.86 as at March 31, 2019 and was 14.67 as at March 31,2018;

viii) Average percentage increase made in the salaries of employees other than the managerial personnel in the last financial year i.e. 2018-19 was 31.27% whereas the increase in the managerial remuneration for the same financial year was 10.09%

ix) The key parameters for any variable component of remuneration availed by the directors: Not applicable

x) The ratio of the remuneration of the highest paid director to that ofthe employees who are not directors but received remuneration in excess ofthe highest paid director during the year - Not Applicable; and

xi) It is hereby affirmed that the remuneration paid is as per the Remuneration Policy for Directors, Key Managerial Personnel and other Employees.

Policy on Sexual Harassment

The Company has adopted policy on Prevention of Sexual Harassment of women at Workplace in accordance with The Sexual Harassment of women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

During the year under review, the Company has not received any complaints pertaining to Sexual Harassment.

General

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend, voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOP referred to in this Report.

4. Neither the Managing Director nor the Whole-time Directors of the Company receive any remuneration or commission from any of its subsidiaries.

5. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Companys operations in future.

Appreciation and Acknowledgements Your Directors wish to place on record their gratitude to the Companys shareholders, customers, vendors and bankers for their continued support to KNRCLs growth initiatives. Your Directors also wish to place on record, their appreciation of the contribution made by employees at all levels, who through their competence, sincerity, hard work, solidarity and dedicated support, have enabled your Company to make rapid strides in its business initiatives. Your Directors also thank the Central and State Governments and their various agencies, particularly, the National Highway Authority of India and other Governmental agencies for extending their support during the year, and look forward to their continued support.

On behalfofthe Board of Directors of KNR Constructions Limited
Place: Hyderabad K Narsimha Reddy K Jalandhar Reddy
Date: 14.08.2019 Managing Director Executive Director