Reliance Naval & Engineering Ltd Directors Report.

DEAR SHAREOWNERS,

Your Directors present the 22nd Annual Report and the audited financial statement for the Financial Year ended March 31, 2019

Financial Results

The financial performance of the Company, on standalone basis, for the financial year ended March 31, 2019 is summarised below:

(र in Lakh)
Particulars Financial year ended March 31, 2019 Financial year ended March 31, 2018
Total Income 18,463.04 41,384.25
Profit / (Loss) before taxation (10,10,098.29) (1,16,853.21)
Tax expenses (Net) (including deferred tax and tax for earlier years) (38,006.43) 21,245.47
Profit / (Loss) after taxation (10,48,104.72) (95,607.74)
Other Comprehensive Income (11.96) 28.24
Total Comprehensive Income for the year (10,48,116.68) (95,579.50)
Add: Balance of profit/(loss) brought forward (51,468.68) 43,427.32
Securities Premium on issue of shares - 683.50
Balance carried to Balance Sheet (10,99,585.36) (51,468.68)

Financial Performance

During the financial year under review, your Company earned an income of Rs. 18,463.04 lakhs against Rs. 41,384.25 Lakhs in previous year. The Company incurred a loss after tax of Rs. 10,48,104.72 lakhs for the year as compared to Rs. 95,607.74 lakhs in the previous year.

The performance and financial position of the subsidiary companies and associate company are included in the consolidated financial statement of the Company and presented in the Management Discussion and Analysis forming part of this Annual Report.

Dividend

In view of the inadequacy of profit during the year under review, the Board of Director has not recommended dividend on the equity shares of the Company.

The Companys Dividend Distribution Policy forms part of this annual report.

Business Operations

The Company is primarily engaged into defence and commercial shipbuilding, ship repair and offshore engineering activities and operates the largest dry dock in India. Our Companys shipyard at Pipavav, Gujarat, has integrated state of-the-art production facilities.

Our Companys Shipyard at Pipavav, Gujarat, is certified by the US Navy for servicing of warships from the US Navys Seventh fleet. Currently, this is the only Indian Shipyard to achieve this landmark.

During the year under review, our Company launched first-of-its-kind the largest next generation training ship for Indian

Coast Guard (ICG) entirely designed by the Design Bureau of the Company. The training ship has the primary role to impart sea training to cadets, including an all-round exposure to the lives of ICG officers. The vessel is 105 meters long, with a capacity of accommodating 242 personnel. The vessel is powered by twin diesel engines of 10,400KW and can move at a speed of 20knots. The vessel is also equipped with weapons systems and is capable of policing maritime zones of the country as well as for search and rescue missions. The vessels capability also includes operating a twin-engine helicopter for undertaking maritime reconnaissance.

Debt Refinancing and Resolution Plan

As on March 31, 2019 the Company had outstanding fund based borrowings of Rs. 7,835 Crores crore (including interest) taken from banks and financial institutions. Due to long gestation period of large scale infrastructure created by our Company, non-availability of working capital on time coupled with dearth in new orders the operations of our Company were severely impacted during the year. The Companys business is significantly dependent on defence contracts and in absence of finalisation of any such contracts; the earnings of the Company were insufficient to service the debt. As a matter of fact, it further increased its financial stress.

The Company is under discussion with the lenders and looking forward to achieve debt resolution under the extant RBI guidelines.

During the year under review, one of the lenders has filed an application before the National Company Law Tribunal, Ahmedabad seeking debt resolution under IBC process in compliance with the circular dated February 12, 2018 issued by Reserve Bank of India. Further lenders have also filed application against the Company with Debts Recovery Tribunal, Ahmedabad.

Management Discussion and Analysis

Management Discussion and Analysis Report for the year under review as stipulated under Regulation 34(2) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) is presented in a separate section forming part of this Annual Report.

Non-Convertible Debentures

During the year under review, the Company has revoked / extinguished the 2,42,31,000 Secured, Redeemable, Unlisted, Non-Convertible Debentures of Rs. 100 each aggregating to Rs. 243.31 crores, issued on private placement basis to the lenders for consideration other than cash, against the Right of Recompense (RoR). These debentures were issued in anticipation of lenders approving the Refinance Scheme.

Deposit

During the year under review, the Company has neither accepted nor renewed any deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 (‘the Act) and the relevant Rules made there under. There are no unclaimed deposits, unclaimed / unpaid interest, refunds due to the deposit holders or to be deposited to the Investor Education and

Protection Fund as on March 31, 2019.

Particulars of Loans, Guarantees or Investments

Pursuant to Section 186 of the Act, details of the Investment made by the Company are provided in standalone financial statement under Note no. 3.

Subsidiary Companies, Associate and Joint venture

As on March 31, 2019 the Company is having 6 subsidiaries under its fold and 1 Associate Company.

The financial performance of each of the subsidiaries and associate companies as per the Act is provided in the consolidated financial statement.

During the year, due to non-viability of the project, Mazagon Dock Pipavav Defence Private Limited (MDPDPL), the joint venture company between the Company and Mazagon Dock Shipbuilders Limited has been terminated and necessary application for strike off of the name of the joint venture company from the register of companies has been filed with the Registrar of Companies (ROC), Maharashtra at Mumbai. Final notification by the ROC is awaited.

The Companys policy for determining material subsidiaries, as approved by the Board, may be accessed on the Companys website at the link: https:// www.rnaval.co.in/web/rnaval/ corporate-governance.

Financial Statement – Application of Indian Accounting Standards (Ind AS)

The audited financial statement of the Company drawn up, both on standalone and consolidated basis, for the financial year ended March 31, 2019, are in the accordance with the requirements of the Companies (Indian Accounting Standards) Rules, 2015 "Ind AS Rules".

Consolidated Financial Statement

The Audited Consolidated Financial Statement for the financial year ended March 31, 2019, based on the financial statement received from subsidiaries and associate companies, as approved by their respective Board of Directors have been prepared in accordance with the Companies (Indian Accounting Standards) Rules, 2015 (‘Ind AS) prescribed under Section 133 of the Companies Act, 2013 and other recognised accounting practices and policies.

Directors

During the year under review, Shri Debashis Bir has been appointed as Whole-time Director of the Company w.e.f. April 01, 2018 for a period of 2 years. The period of 2 years will expire on March 31, 2020. It is proposed to re-appoint Shri Debashis Bir as Whole-time Director of the Company for a further period of 3 years. The Nomination and Remuneration Committee of the Board, has recommended appointment Shri Debashis Bir. The Board also recommends his re-appointment. Lt. Gen. Syed Ata Hasnain (Retd.), Shri Rajesh Dhingra and Shri Rahul Sarin have resigned as Directors of the Company w.e.f. August 10, 2018.

Shri Anil D. Ambani has resigned as Director of the Company w.e.f. August 25, 2018.

The IDBI Bank Limited and Life Insurance Corporation of India have withdrawn nomination of Shri Rajeev Kumar and Shri Raj Kumar as Nominee Directors from the Board of Directors of the Company w.e.f. September 22, 2018 and February 02, 2019, respectively.

Ms C R Gayathri has resigned as Director of the Company w.e.f.

December 14, 2018. Shri Rana Ranjit Rai, Ms. Ryna Karani, and Shri Sateesh Seth have resigned as Directors of the Company w.e.f. February 02, 2019.

Shri Raj Narain Bhardwaj has resigned as Director of the Company w.e.f. February 07, 2019.

Pursuant to the provision of Section 161 of the Act, Ms Ankita

Tallur has been appointed as Additional Director of the Company w.e.f. February 02, 2019. Further, Shri Pankaj Pandya, was appointed as Additional Director in the capacity of Independent Director and Shri Venkata Rachakonda and Ms. Shiby Jobby were also appointed as Additional Directors of the Company w.e.f. March 30, 2019. Ms. Ankita Tallur, Shri Pankaj Pandya, Shri

Venkata Rachakonda and Ms. Shiby Jobby shall hold office till the conclusion of ensuing Annual General Meeting (AGM) of the Company.

The Company has received notices in writing from a member under Section 160 of the Act, proposing the candidature of

Ms. Ankita Tallur, Shri Pankaj Pandya, Shri Venkata Rachakonda and Ms. Shiby Jobby, for the office of Director of the Company.

The Nomination and Remuneration Committee of the Board, has recommended appointment of all the above mentioned directors. The Board also recommends appointment of Shri Pankaj Pandya, as an Independent Director, for a period of five consecutive years effective from the date of appointment as an Additional director, not being liable to retire by rotation and also appointment of Ms. Ankita Tallur, Shri Venkata Rachakonda and Ms. Shiby Jobby as Directors, being liable to retire by rotation.

In the opinion of the Board, the Independent Director proposed to be appointed fulfils the conditions specified in the Act and the rules made thereunder and that the proposed independent director is independent of the management.

The Board places on record its appreciation for valuable contribution made by Lt. Gen. Syed Ata Hasnain (Retd.), Shri Rajesh Dhingra, Shri Rahul Sarin, Shri Anil D. Ambani, Shri Rajeev Kumar, Ms. C R Gayathri, Shri Raj Kumar, Shri Rana Ranjit Rai, Ms. Ryna Karani, Shri Sateesh Seth and Shri Raj Narain Bhardwaj during their tenure as Directors of the Company.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under the Act and the Listing Regulations.

The details of programme for familiarization of Independent Directors with the Company, nature of the industry in which the Company operates and related matters are uploaded on the website of the Company at the link http://www.rnaval.co.in/ web/rnaval/corporate-governance.

In term of the provisions of the Companies Act, 2013 Shri Debashis Bir, Whole-time Director and Chief Executive Officer of the Company, retires by rotation and being eligible, offers himself for re-appointment at the ensuing AGM. A brief resume of Shri Debashis Bir, along with requisite details, as stipulated under Regulation 36(3) of the Listing Regulations is given in the section on Corporate Governance Report forming part of this Annual Report.

Key Managerial Personnel (KMP)

During the year under review, Shri Debashis Bir has been appointed as Whole-time Director and Chief Executive Officer and termed as KMP with effect from April 1, 2018. Shri Paresh Rathod has been appointed as Company Secretary and termed as KMP with effect from April 1, 2018

Evaluation of Directors, Board and Committees

The Nomination and Remuneration Committee (NRC) of the Company has devised a policy for performance evaluation of the individual directors, Board and its Committees, which includes criteria for performance evaluation.

Pursuant to the provisions of the Act, Regulation 17(10) of the Listing Regulations and based on the policy devised by NRC, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of the Committees of the Board. A separate meeting of the Independent Directors was also held during the financial year for the evaluation of the performance of non-independent Directors, performance of the Board as a whole and that of the Chairman.

Policy on appointment and remuneration for Directors, Key Managerial Personnel and Senior Management Employees

The Nomination and Remuneration Committee of the Board has devised a policy for selection, appointment and remuneration of Directors, Key Managerial Personnel and Senior Management Employees. The Committee has formulated the criteria for determining qualifications, positive attributes and independence of a Director, which has been put up on the Companys website http://www.rnaval.co.in/web/rnaval/corporate-governance and also is attached as Annexure - A.

Directors Responsibility Statement

Pursuant to the requirements under Section 134(5) of the Act with respect to Directors Responsibility Statement, it is hereby confirmed that: i. In the preparation of the annual financial statement for the financial year ended March 31, 2019, the applicable Accounting Standards had been followed along with proper explanation relating to material departures, if any; ii. 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 as at March 31, 2019 and of the loss of the Company for the year ended on that date; iii. The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. The Directors had prepared the annual financial statement for the financial year ended March 31, 2019, on a ‘going concern basis; v. The Directors had laid down proper internal financial controls to be followed by the Company and such financial controls are adequate and are operating effectively; and vi. The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Contracts and Arrangements with Related Parties

All contracts / arrangements / transactions entered into/by the Company during the financial year under review with related parties were on an arms length basis and in the ordinary course of business.

There were no materially significant related party transactions which could have a potential conflict with the interest of the Company at large.

During the year, the Company had not entered in to any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of Company on materiality of related party transactions.

All Related Party Transactions were placed before the Audit Committee for approval. Prior omnibus approval of the Audit Committee was obtained for the transactions which were of a repetitive nature. The transactions entered into pursuant to the omnibus approval so granted were reviewed and statements giving details of all related party transactions were placed before the Audit Committee on a quarterly basis. The policy on Related

Party Transactions as approved by the Board is uploaded on the Companys website at the link: http://www.rnaval.co.in/web/ rnaval/corporate-governance. Your Directors draw attention of the members to Note No. 39 to the Standalone Financial Statements which sets out Related Party Disclosures.

Material Changes and Commitments, if any, affecting the financial position of the Company

There were no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year and the date of this report.

Meetings of the Board

A Calendar of Meetings is prepared and circulated in advance to the Directors. During the financial year, four Board Meetings were held, details of which are given in the Corporate Governance Report, forming part of this Annual Report.

Audit Committee

During the financial year, Audit Committee has been re-constituted by the Board of Directors on April 01, 2018, February 02, 2019 and March 30, 2019. As on March 31, 2019, the committee consists of majority of Independent Directors namely Shri K. Ravikumar, as Chairman, Shri Pankaj Pandya and Shri Debashis Bir, as members. During the year, all the recommendations made by the Audit Committee were accepted by the Board.

Auditors and Auditors Report

M/s. Pathak H.D. & Associates, Chartered Accountants were appointed as Auditors of the Company for a term of 5 (five) consecutive years, at the Annual General Meeting of the Company held on September 30, 2015. The Company has received confirmation from M/s. Pathak H.D. & Associates, Chartered Accountants that they are not disqualified from continuing as Auditors of the Company.

The observations and comments given by the Auditors in their report read together with notes on financial statements are self-explanatory and hence do not call for any further comments under Section 134 of the Act.

Secretarial Standards

During the year under review, the Company has complied with the applicable Secretarial Standards issued by The Institute of Company Secretaries of India.

Secretarial Audit and Secretarial Compliance Report

Pursuant to the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors has appointed M/s. Ashita Kaul & Associates, Practicing Company Secretaries, to undertake the Secretarial Audit of the Company. There is no qualification, reservation or adverse remark made by the Secretarial Auditor in the Secretarial Audit Report, except that the lenders have till date not provided their approval for payment of remuneration to Shri Debashis Bir, as Whole-time Director. The Company has appointed Shri Debashis Bir, as Whole-time Director with due communication and application to the lenders. The Audit Report of the Secretarial Auditors for the financial year ended March 31, 2019 is attached as Annexure - B. Pursuant to circular No.CIR/ CFD/ CMD1/ 27/ 2019 dated February 08, 2019, issued by the Securities and Exchange Board of India (SEBI) the Company has obtained Secretarial Compliance Report, from a Practicing Company Secretary (PCS) on compliance of all applicable SEBI Regulations and circulars/ guidelines issued there under and the copy of the same shall be submitted with the Stock Exchanges within the prescribed due date.

Annual Return

As required under Section 134(3)(a) of the Act, the Annual Return of the financial year 2017-18 and 2018-19 is put up on the Companys website and can be accessed at the link: http:// www.rnaval.co.in/web/rnaval/AGM-2018-19.

Particulars of Employees and related disclosures

In terms of the provisions of 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, as amended, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said Rules are provided in the Annexure, which forms part of this Report.

Disclosures relating to the remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, are also forming part of this Report.

However, having regard to the provisions of first proviso to Section 136(1) of the Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. The said information is available for inspection at the registered office of the Company on all working days, except Saturdays between 11:00 A.M. and 1:00 P.M. up to the date of the Meeting. Any member interested in obtaining the same may write to the Company Secretary and the same will be furnished on request.

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

The particulars as required to be disclosed in terms of Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 are given in Annexure - C forming part of this Report.

Corporate Governance

The Company has adopted ‘Reliance Group– Corporate Governance Policies and Code of Conduct which sets out the systems, processes and policies confirming to the international standards. The report on Corporate Governance as stipulated under Regulation 34(3) read with para C of Schedule V of the Listing Regulations is presented in a separate section forming part of this Annual Report.

A certificate from M/s Ashita Kaul, Practising Company Secretary conforming compliance to the conditions of Corporate Governance as stipulated under Para E of Schedule V of the

Listing Regulations, is enclosed to this Report.

Whistle Blower Policy (Vigil Mechanism)

In accordance with Section 177 of the Act and Listing Regulations, the Company has formulated a Vigil Mechanism Policy to address the genuine concerns, if any, of the directors and employees. The details of the same have been stated in the Report on Corporate Governance and the policy can also be accessed on the Companys website at the link: http://www. rnaval.co.in/web/rnaval/corporate-governance.

Risk Management

The Company continues to have a Risk Management Committee consisting majority of Board of Directors. However, the mandatory provisions of listing regulations are not applicable to the Company. The details of the Committee and its terms of reference, etc. are set out in the Corporate Governance Report forming part of this Report.

The Company has a robust Business Risk Management (BRM) framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhances Companys competitive advantage. The business risk framework defines the risk management approach across the enterprise at various levels including documentation and reporting. The framework has different risk models which help in identifying risk trend, exposure and potential impact analysis at a Company level and also separately for business segment. The risks are assessed for each project and mitigation measures are initiated both at the project as well as the corporate level. More details on Risk

Management indicating development and implementation of Risk Management policy including identification of elements of risk and their mitigation are covered in Management Discussion and Analysis section, which forms part of this Report.

Compliance with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company is committed to uphold and maintain the dignity of women employees and it has in place a policy which provides for protection against sexual harassment of women at work place and for prevention and redressal of such complaints. During the year under review, no such complaints were received. The Company has also constituted an Internal Compliance Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Corporate Social Responsibility

The Company has constituted Corporate Social Responsibility (CSR) Committee in compliance with the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014. The Corporate Social Responsibility Committee has formulated a Corporate Social Responsibility Policy (‘CSR policy) indicating the activities to be undertaken by the Company. The CSR policy may be accessed on the Companys website at the link: http://www.rnaval.co.in/ web/rnaval/corporate-governance.

As on March 31, 2019, the CSR Committee of the Board consist of Shri Pankaj Pandya, as Chairman, Shri Debashis Bir, Shri Venkata Rachakonda, as members.

The disclosure with respect to CSR activities is given as Annexure - D.

Order, if any, passed by the Regulators or Courts or Tribunals

No orders have been passed by the Regulators or Courts or Tribunals impacting the going concern status of the Company and its operations.

Internal Financial Controls and their adequacy

The Company has in place adequate internal financial controls with reference to financial statement across the organization.

The same is subject to review periodically by the internal audit cell for its effectiveness. During the financial year, such controls were tested and no reportable material weaknesses in the design or operations were observed.

Acknowledgement

Your Directors would like to express their sincere appreciation for the co-operation and assistance received from shareholders, Debenture holders, debenture trustee, bankers, financial institutions, regulatory bodies and other business constituents during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the commitment displayed by all executives, officers and staff, resulting in the successful performance of the Company during the year.

For and on behalf of the Board of Directors
Shri Debashis Bir Shri K Ravikumar
Whole-time Director and CEO Chairman
Place : Mumbai
Date : May 28, 2019