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NOTES TO ACCOUNTS

Engineers India Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 6862.56 Cr. P/BV 2.92 Book Value (₹) 37.15
52 Week High/Low (₹) 129/93 FV/ML 5/1 P/E(X) 18.57
Bookclosure 26/09/2019 EPS (₹) 5.85 Div Yield (%) 3.68
Year End :2018-03 

1. NATURE OF PRINCIPAL ACTIVITIES

Engineers India Limited and (referred to as “EIL” or “the Company”) is a Government of India Enterprise under Ministry of Petroleum and Natural Gas. The Company operates into two major segments namely Consultancy & engineering projects and Turnkey projects.

2. GENERAL INFORMATION AND STATEMENT OF COMPLIANCE

The Company has its registered office situated at 1 Bhikaji Cama, New Delhi 110066, India. The shares of the Company are listed on the National Stock Exchange and the Bombay Stock Exchange.

The financial statements of the Company have been prepared in accordance with the Companies (Indian Accounting Standards) Rules 2015 (‘Ind AS’) and relevant amended rules issued thereafter. These are Company’s standalone financial statements. The Company also prepared consolidated financial statements separately.

Effective from 1 April 2016, the Company has adopted all the Ind AS standards and the adoption was carried out in accordance with Ind AS 101 “First time adoption of Indian Accounting Standards”, with 1 April 2015 as the transition date. The transition was carried out from Indian Accounting Principles generally accepted in India as prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (IGAAP), which was the previous GAAP.

The financial statements for the year ended 31 March 2018 were authorized and approved for issue by the Board of Directors on 25 May 2018.

d) Terms and rights attached to equity shares

The Company is having only one class of equity shares having par value of Rs.5 each. Each Shareholder is eligible for one vote per share held. The Dividend proposed by Board of Directors is subject to the approval of Shareholders in the ensuing Annual General Meeting except in case of Interim Dividend. In the event of Liquidation, Equity Shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amount in proportion to their shareholding.

Note : 3

Other equity

Nature and purpose of other reserves General Reserve

General Reserve is created out of the accumulated profits of the Company as per the provisions of Companies Act.

Capital Redemption Reserve

The Company has Created Capital Redemption Reserve out of free reserves, a sum equal to the nominal value of the shares purchased transferred to the capital redemption reserve account and details of such transfer disclosed in the balance sheet as per the provisions of Companies Act.

Retained Earnings

All the profits made by the Company are transferred to retained earnings from statement of profit and loss.

CSR Activity Reserve

The Company is required to create the CSR Activity Reserve for the allocation of expenses in respect of CSR activities. CSR Activity Reserve represents unspent amount, out of amounts set aside of profit earned in the past years for meeting social obligations as per Department of Public Enterprise guidelines for Corporate Social Responsibility and provisions of the Companies Act, 2013 and rules made thereunder.

Corpus for Medical Benefits for Employees retired prior to 01.01.2007

The Company has created separate corpus of medical benefits to retired employees who have retired prior to 01.01.2007 in terms of DPE guidelines

Other Comprehensive Income

Other comprehensive income represents balance arising on account of translation of foreign operation and gain/(loss) booked on re measurement of defined benefit plans.

Note : 4

Earnings per share (EPS)

Earnings per Share (“EPS”) is determined based on the net profit attributable to the shareholders’ of the Company. Basic earnings per share is computed using the weighted average number of shares outstanding during the year. Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the year including share options, except where the result would be anti-dilutive.

Pursuant to Public Announcement published on June 17, 2017 and letter of offer dated July 17, 2017, the company has bought back its 4,19,61,780 number of Equity shares of Face value of Rs.5 each fully paid up, at a buyback price of Rs.157/- per share through tender offer route under Stock Exchange Mechanism and extinguished these shares on August 16, 2017. Post buyback the company’s equity share capital as on 31 March 2018 is Rs.31595.58 lakhs comprising of fully paid up 63,19,11,420 equity share having face value of Rs.5/- each .

Note : 5

(i) Fair value hierarchy

Financial assets and financial liabilities are measured at fair value in the financial statement and are grouped into three Levels of a fair value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement, as follows:

Level 1: quoted prices (unadjusted) in active markets for financial instruments.

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: unobservable inputs for the asset or liability.

(ii) Financial assets and liabilities measured at fair value - recurring fair value measurements

(iii) Valuation technique used to determine fair value

Specific valuation techniques used to value financial instruments include - the use of net asset value for mutual funds on the basis of the statement received from investee party.

Note : 6

Financial instruments

(i) Financial instruments by category

Investment in subsidiaries, associate and joint venture are measured at cost as per Ind AS 27, ‘Separate financial statements’.

The carrying value of the amortised financial assets and liabilities approximate to the fair value on the respective reporting dates.

(ii) Risk management

The Company’s activities expose it to market risk, liquidity risk and credit risk. The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the related impact in the financial statements.

(A) Credit risk

Credit risk is the risk that a counterparty fails to discharge its obligation to the Company. The Company’s exposure to credit risk is influenced mainly by cash and cash equivalents, trade receivables and financial assets measured at amortised cost. The Company continuously monitors defaults of customers and other counterparties and incorporates this information into its credit risk controls.

a) Credit risk management

i) Credit risk rating

The Company assesses and manages credit risk of financial assets based on following categories arrived on the basis of assumptions, inputs and factors specific to the class of financial assets.

A: Low credit risk on financial reporting date

B: Moderate credit risk

C: High credit risk

The Company provides for expected credit loss based on the following:

In respect of trade receivables, the company recognises a provision for lifetime expected credit loss.

Based on business environment in which the Company operates, a default on a financial asset is considered when the counter party fails to make payments within the agreed time period as per contract. Loss rates reflecting defaults are based on actual credit loss experience and considering differences between current and historical economic conditions.

Assets are written off when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or a litigation decided against the Company. The Company continues to engage with parties whose balances are written off and attempts to enforce repayment. Recoveries made are recognised in statement of profit and loss.

ii) Concentration of trade receivables

The Company’s exposure to credit risk for trade receivables is presented as below. Loans and other financial assets majorly represents loans to employees and deposits given for business purposes.

b) Credit risk exposure

(i) Provision for expected credit losses

The Company provides for 12 month expected credit losses for following financial assets -

(B) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due.

Management monitors rolling forecasts of the Company’s liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company takes into account the liquidity of the market in which the entity operates.

Maturities of financial liabilities

The tables below analyse the Company’s financial liabilities into relevant maturity groupings based on their contractual maturities.

(C) Market risk

(i) Foreign exchange risk

The Company has international transactions and is exposed to foreign exchange risk arising from foreign currency transactions (imports and exports). Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the company’s functional currency. The Company does not hedge its foreign exchange receivables/payables.

(ii) Price risk

The Company’s exposure to price risk arises from investments held and classified as FVTPL. To manage the price risk arising from investments in mutual funds, the Company diversifies its portfolio of assets.

Sensitivity analysis

Profit or loss and equity is sensitive to higher/lower prices of instruments on the Company’s profit for the periods -

Note : 7

Capital management

The Company’s objectives when managing capital are:

- To ensure Company’s ability to continue as a going concern, and

- To provide adequate return to shareholders

The Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.

The amounts managed as capital by the Company are summarised as follows:

The Company has no outstanding debt as at the end of the respective years. Accordingly, the Company has nil capital gearing ratio as at 31 March 2018 and 31 March 2017.

A. Finance leases - lessee

The Company has taken certain lands on long-term leases ranging 60 to 99 years and certain lands on perpetual leases from government authorities. Such lands have been classified as leasehold land and are being depreciated over the tenure of the lease except for perpetual lease land.

B. Operating leases - lessee

(a) The Company has taken certain office/residential premises on operating lease which are cancellable by giving appropriate notices as per respective agreements. During the year an amount of Rs.1,055.97 Lakhs (previous year 31 March 2017: Rs.1,092.96 Lakhs) has been charged towards these cancellable operating leases.

(b) The Company has taken certain assets like car, commercial/residential premises etc. on non-cancellable operating leases. The leases carry renewal option to renew lease on with escalation in rent in range of 5-15%. During the year an amount of Rs.386.46 Lakhs has been paid (previous year 31 March 2017: Rs.898.91 Lakhs) towards these non-cancellable operating leases. The future minimum lease payments in respect of these leases are as follows:

(c) The Company has given certain office/residential premises on operating lease which are cancellable by giving appropriate notices as per respective agreements. During the year an amount of Rs.2,102.31 Lakhs (previous year 31 March 2017: Rs.554.75 Lakhs) has been accounted for as rental income in respect of these cancellable operating leases.

Note : 8

A. Contingent Liabilities:

a) Claims against the Company not acknowledged as debt.

Commercial claims including employee’s claims pending in the Courts or lying with Arbitrators amounting to Rs.22,794.93 lakhs (previous year 31 March 2017: Rs.11,778.07 lakhs).

b) Income tax/wealth tax assessments have been completed up to the assessment year 2015-16.

Income Tax Department is in appeal against tax demand of Rs.893.71 Lakhs (including interest) (previous year 31 March 2017: Rs.373.83 Lakhs) with Income Tax Appellate Tribunal, against the Commissioner of Income Tax (Appeals) Orders in Company’s favour for various assessment years detailed below:

The Company has filed an appeal with Commissioner of Income Tax (Appeals) for an amount of ‘0.66 Lakhs (including interest) (previous year 31 March 2017 : Rs.0.32 Lakhs) against the order of Assistant Commissioner of Income Tax (TDS) u/s 201(1) for the Assessment Year 2009-10.

The Company has filed an appeal against the order of Additional Commissioner (Appeal), Mathura before sales Tax Tribunal, Agra, which has been subsequently transferred to Sales Tax tribunal, Noida, for an amount of Rs.62.18 Lakhs (including interest) (previous year 31 March 2017: Rs.18.71 Lakhs) on account of entry tax for the year 1999-2000 against which company has deposited an amount of Rs.5.01 Lakhs (previous year 31 March 2017: Rs.5.01 Lakhs).

The Company has filed a writ petition before Hon’ble Andhra Pradesh High Court against the VAT Assessment Order of commercial Tax Officer dated 27 August 2016 levying tax of Rs.10,358.77 Lakhs (including interest) (previous year 31 March 2017: Rs.6,999.17 Lakhs) for the period July 2011 to March 2014.

The Company has filed a writ petition before Hon’ble Karnataka High Court against the VAT Assessment Order of Deputy Commissioner of commercial Tax dated 29 July 2016 levying tax of Rs.3,351.40 Lakhs (including interest) (previous year 31 March 2017: Rs.2,955.19 Lakhs) for the financial year 2009-10.

The Company has filed writ petition before Hon’ble Karnataka High Court against the VAT Assessment Order of Deputy Commissioner of commercial Tax dated 14 March 2017 levying tax of Rs.26,149.08 Lakhs (including interest) (previous year 31 March 2017: Rs.23,952.56 Lakhs) for the financial year 2010-11.

In respect of above contingent liabilities, it is not probable to estimate the timing of cash outflow, if any, pending the resolution of Arbitration/Appellate/Court/assessment proceedings.

B. Commitments:

a) Property, plant and equipment - estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for amount to Rs.1461.58 Lakhs (previous year 31 March 2017: Rs.1,692.70 Lakhs).

b) The Company’s estimated share in work programmes committed under production sharing contract and Field development plan in respect of oil & gas exploration blocks as on 31 March 2018 is Rs.5,638.08 Lakhs (previous year 31 March 2017: Rs.1,150.49 Lakhs)

Note : 9

a) Guarantees issued by the banks and outstanding as on 31 March, 2018: Rs.88,033.98 Lakhs (previous year 31 March 2017: Rs.79,518.82 Lakhs), against which a provision of Rs.25,606.38 Lakhs (previous year 31 March 2017: Rs.27,191.43 Lakhs) has been made in the books towards liability for performance guarantees/warranties.

b) Letter of credit outstanding as on 31 March, 2018: Rs.1,296.85 Lakhs (previous year 31 March 2017: Nil).

c) Corporate Guarantees issued by the Company on its behalf for contractual performance and outstanding as on 31 March, 2018: Rs.15,009.04 Lakhs (previous year 31 March 2017: Rs.17,473.54 Lakhs).

Note : 10

Land and buildings

i) Land and Buildings includes Rs.0.07 Lakhs (previous years: 31 March 2017: Rs.0.07 Lakhs) being amount invested as share money in Cooperative Housing Societies as detailed below:

Twintowers Premises Cooperative Society Limited, Mumbai 10 ordinary shares of Rs.50 each fully paid.

Gardenview Premises Cooperative Society Limited, Mumbai 10 ordinary shares of Rs.50 each fully paid.

Heera Panna Towers Cooperative Housing Society Limited, Vadodara 10 ordinary shares of Rs.50 each fully paid.

Suflam Cooperative Housing Society Limited, Ahmedabad 8 ordinary shares of Rs.250 each fully paid

Darshan Co-operative Society Limited, Vadodara 80 ordinary shares of Rs.50 each fully paid

ii) For the following Land and Buildings, title deed/property card/mutuations etc is yet to be executed in the favour of the company:

The fees for property card/mutation etc. for above properties, being not ascertainable has not been provided for.

* Out of above properties, one of the properties, at S. No. ii (e) consisting of plot measuring 6,826.90 square meters with three Buildings, comprising of 84 flats at Gokuldham, Goregaon (East), Mumbai. Around 4,400 s-quare meter of area only is in the Company’s possession. The Company has initiated action by filing an application for eviction under the Public Premises (Eviction of Unauthorised Occupants) Act 1971 and related proceedings under MLRC are in progress. The said property is partially presented as property, plant and equipment and partially as investment property.

The Company is primarily operating under two segments namely Consultancy and Engineering Projects and turnkey Projects. The broad heads under which income of the Company is accounted for as per provisions of Ind AS-11 (Construction Contracts) are as below:

Note : 11

Disclosure relating to construction contracts

In terms of provision of Indian Accounting Standard (Ind AS 11) “Construction Contracts”, the information in respect of Lump sum services/Turnkey Projects for contract in progress as on 31 March 2018:

a. The aggregate amount of cost incurred and recognized profit up to 31 March 2018: Rs.863,547.86 Lakhs (previous year 31 March 2017: Rs.756,339.98 Lakhs).

b. The amount of advances received Rs.2,900.81 Lakhs (previous year: 31 March 2017: Rs.4,410.71 Lakhs).

c. The amount of retention Rs.594.64 Lakhs (previous year: 31 March 2017: Rs.1,627.92 Lakhs).

d. Gross amount due to customers for contract work amounting to Rs.88,410.93 Lakhs (previous year: 31 March 2017: Rs.42,167.17 Lakhs)

e. Gross amount due from customers for contract work amounting to Rs.31,640.83 Lakhs (previous year: 31 March 2017: Rs.31,737.53 Lakhs).

f. The estimates with respect to total cost and total revenue in respect of construction contracts are reviewed and up dated periodically to ascertain the percentage completion for revenue recognition in accordance with Indian Accounting Standard (Ind AS) -11 “Construction Contracts”. However, it is impracticable to quantify the impact of change in estimates.

Note : 12

Brief description of the Company’s joint ventures a) TEIL Projects Limited (‘TEIL’)

A joint venture with Tata Projects Limited was formed in the financial year 2008-09 for pursuing projects on engineering procurement and construction basis (EPC Projects) in selected sectors such as oil and gas, fertilizers, steel, railways, power and infrastructure.

TEIL has been formed in this regard having its Registered Office at New Delhi has an Authorized capital of Rs.1,500 Lakhs and Issued, Subscribed and Paid-up capital of Rs.1,100 lakhs (Previous year 31 March 2017: Rs.1,100 lakhs).

Of the issued, subscribed and paid-up capital, 5,500,000 shares of Rs.10 each fully paid-up amounting Rs.550.00 lakhs (previous year: 31 March 2017 Rs.550.00 lakhs) are held by the Company, being 50% of paid-up capital of TEIL.

In the financial year 2015-16, it was decided to wind up TEIL and in this regard liquidator has already been appointed on 29 July 2016 and liquidation proceedings are in progress as per provisions of Companies act.

Till 31March 2017, the TEIL had negative ‘other equity’ to the tune of Rs.1,075.64 Lakhs. The Company’s share of negative ‘other equity’ Rs.537.82 Lakhs has been accounted for as impairment in value of investment.

During the current financial year 2017-18, based on liquidator statement, TEIL had a net loss of Rs.4.46 Lakhs. The Company’s share of loss of Rs.2.23 Lakhs has been recorded as impairment in value of investments.

b) Jabal Eiliot Company Limited (‘Jabal’)

A joint venture with Jabal Dhahran Company Limited Saudi Arabia and IOT Infrastructure and Engineering Services Limited, Mumbai was formed during the financial year 2011-12 for execution of contracts in Saudi Arabia in the field of oil and gas, non-ferrous metallurgy, infrastructure projects etc.

The joint venture company namely “Jabal Eiliot Company Limited” was registered with Dammam Commercial registry, Kingdom of Saudi Arabia. Jabal was formed for pursuing its business interests has an initial capital of SR. 15,000,000, out of which one third i.e. SR. 5,000,000 (Equivalent Indian Rs.599.00 Lakhs) was contributed by the Company as its share.

Till 31 March, 2017, Jabal had incurred losses to the tune of SR 5,388,789, of which the Company’s share of SR 1,669,470 (equivalent Indian Rs.202.62 Lakhs at historical conversion rate) which has been accounted for as impairment in value of investment in Company’s financial statements till 31 March 2017.

Despite all around efforts, Jabal could not secure any EPC business (except one small order of engineering) due to extremely challenging environment coupled with the preconditions of deployment of large work force in KSA to secure business.

In the absence of any business and to arrest further losses of capital the JV partners decided to dissolve Jabal and accordingly the Board of Directors of the Company in their meeting held on 30 January 2015 passed the resolution to initiate action for dissolution and liquidation of Jabal. The process of dissolution is underway.

In view of process of dissolution, the part capital of SR 3,308,713.33 (equivalent Rs.549.85 Lakhs) has already been repatriated.

c) Ramagundam Fertilizers and Chemicals Limited (‘RFCL’)

The Company has, along with National Fertilizers Limited (NFL) and Fertilizer Corporation of India Limited (FCIL) incorporated a joint venture for setting up and operation of a gas based urea and ammonia complex in February 2015 namely Ramagundam Fertilizers and Chemicals Limited (‘RFCL’) having registered office in Delhi.

The Company has Authorized share capital of Rs.150,000 Lakhs consisting 15,000 Lakhs shares of face value of Rs.10 each.

The Shareholding of the Company, on commencement of commercial production of the project shall be in the following proportion:

National Fertilizers Limited (NFL): 26%

Engineers India Limited (EIL): 26%

The Fertilizer Corporation of India Limited (FCIL): 11%

State Government of Telangana: 11%

Others: 26% (untied as on 31 March 2018)

Shareholding of 11% by FCIL is in consideration of FCIL granting concession rights in the land, opportunity cost and value of usable assets and other items on the land at Ramagundam to the Company.

RFCL has entered into concession agreement with FCIL on 23 March 2016 towards award of rights and concession to the company in regard to facility area (land admeasuring approximately 1284 acre) for financing, designing, engineering, procurement, construction, development, operation and maintenance of the project. Shareholding of 11% to FCIL is in consideration of FCIL granting concession rights in the land, opportunity cost and value of the useable assets at Ramagundam to RFCL. However, pending compliance of conditions precedent of the Concession agreement, no shares were allotted to the FCIL in the previous year.

During the year, all the conditions precedent to the concession agreement has been completed. Pursuant to which, the company has received rights in leasehold land and certain other assets from the Fertilizer Corporation of India. As per terms of the concession agreement, the Company shall be issuing equity shares equal to 11% of the total equity portion of the capital expenditure of the project at the time of commencement of commercial production (presently Rs.14,449.27 Lakhs) in phased manner. The Company has allotted 9,25,16,291 share ( Rs.9,251.63 Lakhs) against leasehold land and other assets received. Remaining shares shall be issued to FCIL in a phased manner, in proportion to contribution to be received from NFL and EIL in future.

As per Cabinet Committee on Economic Affairs (CCEA) decision, the nominated PSU (Engineers India Limited) was required to pay a commitment fee of Rs.833.00 Lakhs to Fertilizer Corporation of India (FCIL) for revival of Ramagundam fertilizer plant so that net worth of FCIL is made positive to enable it to deregister from Board for Industrial and Financial Reconstruction(BIFR). In terms of approval, post deregistration, based on sale of assets by FCIL, the amount can be returned/adjusted, if necessary.

The approval of Board of EIL was accorded in the financial year 2013-14 for release of Rs.833.00 lakhs towards commitment fee to FCIL subject to refund/adjustment in due course. Till date no amount has been disbursed to FCIL. Pending disbursement, if any, to FCIL, the amount has been disclosed as other current financial assets and a corresponding liability has been disclosed as other current financial liabilities in the financial statements of the Company.

Subsequent to deregistration of FCIL from BIFR, the Company along with National Fertilizers Limited (NFL) and Fertilizers Corporation of India (FCIL) has formed a joint venture for setting up and operation of gas based urea and ammonia complex by incorporating the Company namely Ramagundam Fertilizers and Chemicals Limited.

Note : 13

Employee benefits Defined Contribution Plan

The amount recognized as an expense in defined contribution plan is as under:

In respect of Provident Fund, the Company has a separate irrevocable PF Trust, managing the Provident Fund accumulation of employees. In this regard, Actuarial valuation as on 31 March, 2018 was carried out by the Actuary to find out value of Projected Benefit Obligation arising due to interest rate guarantee by the Company towards Provident Fund. In terms of said valuation the Company has no liability towards interest rate guarantee as on 31 March 2018 and 31 March 2017.

Defined Benefit Plan

Company is having the following Defined Benefit Plans:

- Gratuity (Funded)

- Leave encashment (Funded)

- Post-Retirement Medical Benefits (Funded)

- Long Service Awards (Unfunded)

- Other benefits on Retirement (Unfunded)

Risks associated with plan provisions

Risks associated with the plan provisions are actuarial risks. These risks are: (i) Investment risk, (ii) interest risk (discount rate risk), (iii) mortality risk and (iv) salary risk.

*Changes in Defined benefit obligation due to 1 % Increase/Decrease in Mortality Rate, if all other assumptions remain constant is negligible.

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined obligation has been calculated using the projected unit credit method at the end of the report period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the statement of financial position.

There is no change in the method of the valuation for the prior period. For change in assumption please refer to table (e) above, where assumptions for prior period, if applicable, are given.

Note : 14

The wage revision in respect of employees is due w.e.f. 01.01.2017. In terms of approval of Board of Directors of the company and Presidential Directive dated 01.02.2018 received from MoP&NG, the wage revision in respect of Board level and below Board level executives have been paid/provided for in the books of accounts. For unionized staff, wage revision liability has been provided for on estimated basis in the books of accounts.

Note : 15

The Company has entered into Production Sharing Contracts with Government of India along with other partners for Exploration and Production of Oil and Gas. The Company is a non-operator and is having following participating interest in the ventures. The Company would share Expense/Income/Assets/Liabilities of the ventures on the basis of its percentage in the production sharing contracts. The detail of the Company’s interest in blocks is as under Based on audited financial statements of Block No. CB-ONN-2010/08 and unaudited available information for CB-ONN-2010/11 the revenue expenditure and capital expenditure has been accounted for in financial statements for year ended 31 March 2018 is as follows-:

In block No. CB-ONN-2010/08 one and CB-ONN-2010/11 two of the consortium members has defaulted in its obligation towards cash calls. In accordance with joint operating agreement the lead operator has raised default cash calls and as such proportionate share amounting to Rs.791.40 Lakhs (previous year: 31 March 2017 : Rs.526.60 Lakhs) in respect of same has been paid and accounted for as other current asset.

Segment reporting

In line with Indian Accounting Standard (Ind AS108) “Operating Segments”, the Company has (segmented) identified its business activity into two business segment i.e. Consultancy and Engineering Projects and Turnkey Projects, taking into account the organizational structure and internal reporting system as well as different risk and rewards of these segments. Segment results are given below:

* Financial year 2017-18 includes expenditure on Oil and Gas exploration blocks including dry well written off amounting to Rs.2,643.14 Lakhs ( previous year : Rs.449.47 Lakhs).

Financial year 2016-17 includes Rs.9062.88 Lakhs on account of provisions for increase in gratuity ceiling from Rs.10 Lakhs to Rs.20 Lakhs with effect from 01 January 2017.

** Property Plant and Equipment and other assets used in the Company’s business or segment liabilities contracted have not been identified to any of the reportable segments, as these assets and support services are used interchangeably between segments. Accordingly, no disclosure relating to total segment assets and liabilities has been made and capital employed has been presented.

Segment revenue with major customers

During the year 31 March 2018, Rs.42,387.44 Lakhs (previous year 31 March 2017: Rs.38,754.01 Lakhs) of the Company’s revenues, each individually exceeding 10% in the consultancy and engineering projects segment was generated from two (previous year 31 March 2017: two) customers.

During the year 31 March 2018, Rs.37,959.27 Lakhs (previous year 31 March 2017: Rs.28,109.56 Lakhs) of the Company’s revenues, each individually exceeding 10% in the turnkey projects segment was generated from three (previous year 31 March 2017: four) customers.

(a) In one of the turnkey project executed by the company in previous years, the client had levied the price reduction due to delay in completion of the project and accordingly reduced contract price was recognized as revenue in terms of accounting principles. During the year, the settlement in respect of time extension has been completed with the client and accordingly revenue from operations, segment revenue from turnkey projects and profits includes an amount of Rs.3,756.98 lakhs towards settlement of price reduction.

(b) The company during the year has received change orders from two of its clients in Consultancy and engineering Projects. The cumulative impact of these change orders on turnover and operating profit during the year was Rs.7,002.66 lakhs and Rs.6,505.94 lakhs respectively.

Note : 16

The Company in the month of April 2016 terminated a contract; consequent to receipt of findings of investigating agency that certificate submitted by the contractor for qualifying the contract was bogus. The facts in this regard including lodging of claim, subsequent to termination of contract had been disclosed in the annual account of the last financial years 2015-16 and 2016-17.

Subsequent to termination of contract, the Company is completing the project at the risk and cost of contractor in terms of provisions of the contract. The contractor has gone into arbitration and has submitted its arbitration notice. Arbitral Tribunal has been constituted. Contractor has filed its statement of claim amounting to Rs.40,960.75 Lakhs. EIL has also filed its reply along with its counter claim and application to implead the parent company of contractor, arguments on which are being heard by arbitral tribunal. The Management does not consider any possible obligation on this account requiring future probable outflow of resources of the Company.

Note : 17

Disclosure relating to AOP

The Company is having investment in Petroleum India International (PII), an Association of Person (AOP). PII, since financial year 2010-11 has ceased its business activities and is in the process of dissolution.

The process of dissolution is not completed.

Since, the dissolution of PII is not completed, Management Committee of PII in their 57th Meeting held on 18 February 2016 at BPCL, Mumbai decided to return all monies forthwith except for retaining some amount to the members of PII.

Due to above decision, the Company has received till date an amount of Rs.1,350.00 Lakhs (Previous Year 31 March 2017: Rs.1,350.00 Lakhs) as its share out of total amount of Rs.14,136.00 Lakhs (Previous Year 31 March 2017: Rs.14,136.00 Lakhs) distributed to its members. It was also decided that in case there is subsequent demand received, the members shall return the money in proportion to their share.

It was also decided that corpus fund of PII shall be restored to Rs.5.00 Lakhs per member being original seed capital at the time of formation of PII.

Note : 18

In terms of Indian Accounting Standard (Ind AS 37) “Provisions, contingent liabilities and contingent assets”, the requisite disclosures are as under:

The movement in provisions are as under

Nature of provision

a) Contractual Obligations :

Contractual obligations represent provision for estimated liabilities on account of guarantees and warranties etc. in respect of consultancy and engineering services and turnkey contracts executed by the Company. The said obligation covers performance as well as defect liability period defined in the respective contracts.

For turnkey contracts, the estimated liability on account of contractual obligations is provided at 1% of revenue recognized based on risk assessment made by the management. For consultancy and engineering services contracts the estimated liability on account of contractual obligations is provided as per assessment of probable liability made by the management based on liability clauses in respective contracts.

b) Expected Losses :

For each contracts, at reporting date, total contract cost and total contract revenue are estimated. In respect of contracts, where it is probable that total estimated contract cost will exceed the estimated total contract revenue, the expected loss is recognised as an expense in the statement of Profit and Loss as per principles of Indian Accounting Standard Ind AS -11 “Construction Contracts”.

c) The disclosure in respect of contingent liabilities is given as per note no. 40.

Note : 19

Details of loans given, investment made and guarantee given covered U/S 186 (4) of the Companies Act, 2013

a) Loans given- Nil

b) Investments done are given in the joint venture note. No. 7.

Note : 20

The dues to Micro and Small Enterprises as required under the Micro, Small and Medium Enterprises Development Act 2006 to the extent information available with the company is given below:

Note : 21

Remuneration to Chairman and Managing Director and full time Directors are as per their appointment letters from the Ministry of Petroleum and Natural Gas, Government of India, New Delhi. They are also allowed to use the staff car for private journeys up to a ceiling of 1000 kms per month.

Note - 22

The statement of profit and loss account includes research and development expenditure of Rs.1,323.22 Lakhs (previous year 31 March 2017: Rs.1,267.04 Lakhs).

Note - 23

There is no impairment of cash generating assets during the year in terms of Indian Accounting Standard (Ind AS-36) “Impairment of Assets”.

Note - 24

The working capital and non-fund based facilities from banks are secured by hypothecation of stocks, book debts and other current assets of the Company, both present and future.

Note - 25

For lump-sum services and turnkey contracts, balance efforts, cost and time to complete the contract including probability of levy for liquidated damages and price reduction schedules for delay as on reporting date are assessed by the management and relied upon by the auditors.

The balances of trade receivables, loans and advances, customer’s advances, retention money, security deposits receivable/payable and trade payables are subject to confirmation and reconciliation.

Note - 26

Pursuant to Public Announcement published on June 17, 2017 and letter of offer dated July 17, 2017, the company has bought back its 41,961,780 number of Equity shares of Face value of Rs.5 each fully paid up, at a buyback price of Rs.157/- per share through tender offer route under Stock Exchange Mechanism and extinguished these shares on August 16, 2017.

Further, President of India, acting through DIPAM and Ministry of Petroleum and Natural Gas, Government of India, has sold 1,35,88,409 equity shares of the company to BHARAT 22 ETF through a New Fund Offer (NFO) in terms of Scheme framed in this regard. Pursuant to above, Government of India (Promoter) Shareholding was reduced from 57.02 % to 52.02%.

Note - 27

During the earlier years, the Company proposed to sale its old obsolete computers (‘Assets’). Some of these Assets have been sold during the financial year 2016-17. The outstanding balance has been classified as Assets held for sale.

Note - 28

Previous year’s figures have been regrouped/reclassified to make them comparable to the figures of the current year.

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