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Lanco Infratech Ltd. Directors Report
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Year End :2016-03 

Dear Members,

The Directors are pleased to present the Twenty Third Annual Report on the Business and Operations of the Company together with the Audited Accounts for the year ended March 31, 2016.

FINANCIAL RESULTS

(Rs,Crores)

CONSOLIDATED

STANDALONE

PARTICULARS

Year ended March 31

Year ended March 31

2016

2015

2016

2015

INCOME

Revenue from operations and other income

8,227.56

9,510.75

2744.94

1,530.71

Profit Before Taxation

(481.24)

(2,218.06)

(444.91)

(717.63)

Provision for Taxation

(229.98)

(117.05)

0.09

(45.40)

Net Profit after Taxation

(251.26)

(2,101.01)

(445.00)

(672.23)

Less: Prior period items

(20.31)

42.52

-

-

Add: Share of Profit/(Loss) of Associates

(0.34)

(3.29)

-

-

Less: Elimination of Unrealized Profit on Transactions with

0.31

(9.76)

-

-

Associate Companies Less: Share of Minority Interest

34.00

(100.32)

-

-

Net Profit/ (Loss) after Taxation, Minority Interest and

(265.60)

(2,036.74)

(445.00)

(672.23)

Share of Profit/ (Loss) of Associates (Balance Carried to Balance Sheet)

Surplus brought forward

(3,938.44)

(1,891.65)

(161.37)

519.11

Depreciation Transitional Adjustment

-

10.05

-

8.25

Balance carried to Balance Sheet

(4204.04)

(3,938.44)

(606.37)

(161.37)

FINANCIAL PERFORMANCE AND THE STATE OF THE COMPANY'S AFFAIRS

During the reporting period, in April 2015, your Company sold Udupi Power Corporation Limited (UPCL), Subsidiary of the Company. The consolidated results for the FY16 was without UPCL results whereas FY15 was with UPCL results. Therefore the results of FY16 are not comparable with the results of FY15.

On a Consolidated basis, your Company has reported Gross Revenues of Rs, 8,227.56 Crores for FY16 as against Rs, 9,510.75 Crores of Revenues registered in the previous year. Total Expenditure for the Year was Rs, 8,484.16 Crores as against Rs, 11,851.96 Crores in the previous year. The Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) amounted to Rs, 2,260.51 Crores while the same was Rs, 1,832.75 Crores for the previous year i.e. an increase of 45%. The Profit before tax stood at Rs, (481.24) Crores, an increase of 78.30% as compared to Rs, (2,218.06) Crores in the previous year.

The Net Profit/(Loss) after Tax after adjustment of Minority Interest and Share of Profits of Associates was Rs, (265.60) Crores as against Rs, (2,036.74) Crores for the previous year.

The comparison of consolidated results without including UPCL results shows the real performance of the Company. The comparison shows that the consolidated revenues for FY16 was Rs, 8,227 Crores against the FY15 revenue of Rs, 6,839 Crores, a growth of 20%.

Gross Interest and Finance charges on consolidated basis amounted to Rs, 2,513.95 Crores in comparison to Rs, 3,060.21 Crores of previous year, a decrease due to sale of Udupi Power Corporation Limited.

A detailed discussion on the result of the operations, financial condition and business review is included in the Management Discussion and Analysis Report placed at Annexure-1 to this Report.

There are no material changes and commitments, affecting the financial position of the Company which have occurred after March 31, 2016 till the date of this Report.

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future.

CDR AND LONG TERM WORKING CAPITAL LOAN

The implementation of the CDR Package was delayed due to delay in getting the approval from the Lenders. Due to delay, most of the Priority Loan sanctioned under CDR Package was used to address the interest dues of the Lenders thereby the revival of EPC Operations was partial. To bring the EPC operations to full scale, Company approached the Lenders with a proposal for Long Term Working Capital Loan (LTWCL) of Rs, 1,500 Crores for FY16 which was approved at the Joint Lenders Forum of the Company.

The LTWCL sanction and release by the Lenders again got delayed and the restoration of the EPC Operations could not be fully achieved. Company is in discussions with Lenders to work out a suitable scheme to address the debt servicing and completion of the under construction projects.

RESOLUTIONS PASSED THROUGH POSTAL BALLOT

During the reporting period, your Company had obtained members approval by passing of a special resolution through Postal Ballot for issue of Compulsorily Convertible Debentures to IDFC Bank Limited. The results of the Postal Ballot were announced on February 28, 2016. The details of the resolution passed through Postal Ballot forms part of the Report on Corporate Governance, annexed to this report.

AMENDMENT TO MEMORANDUM AND ARTICLES OF ASSOCIATION

During the period under review, the Articles of Association of the Company was amended to increase the number of Directors from 15 (fifteen) to 16 (sixteen), as approved by the members in the Annual General Meeting held on September 28, 2015.

INCREASE OF PAID-UP EQUITY SHARE CAPITAL

On September 30, 2015, your Company allotted 26,51,74,603 (Twenty Six Crores Fifty One Lakhs Seventy Four Thousand Six Hundred and Three only) Equity Shares of face value of Rs, 1/- each at Rs, 6.30 Per Equity Share (including Rs, 5.30 Per Equity Share towards Share Premium) to Lanco Group Limited, Promoter of the Company, under the CDR Package approved for the Company.

In view of the above corporate action, the Paid-up Capital of the Company increased from Rs, 248.42 Crores to Rs, 274.93 Crores.

COMPULSORILY CONVERTIBLE DEBENTURES (CCDs)

Pursuant to the approval of members received through Postal Ballot on February 28, 2016, your Company on March 14, 2016 allotted 32,14,53,885 (Thirty Two Crores Fourteen Lakhs Fifty Three Thousand Eight Hundred and Eighty Five only) Compulsorily Convertible Debentures (CCDs) to IDFC Bank Limited at a price of Rs,10/- per CCD having face value of Rs,10/- each, aggregating to Rs,321,45,38,850 (Rupees Three Hundred Twenty One Crores Forty Five Lakhs Thirty Eight Thousand Eight Hundred and Fifty only), on preferential basis against the conversion of outstanding loan and interest accrued thereon payable to IDFC Bank Limited. These CCDs carry a Coupon Rate of 10.50% per annum and have a term of 12 months from the date of allotment. The CCDs along with the interest thereon shall be converted into Equity Share Capital of the Company after the term of 12 months.

DIVIDEND

Your Directors have not recommended dividend for the year ended March 31, 2016.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report as required under Regulation 34 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations" ) is enclosed as Annexure-1 to this Report.

SUBSIDIARY COMPANIES

During the reporting period, Lanco Kanpur Power Limited, Lanco Energy Private Limited (Formerly known as Spica Thermal Power

Private Limited), Lanco Property Management Company Private Limited and Newton Solar Private Limited had become Subsidiaries of the Company.

Further Lanco Teesta Hydro Power Limited, Omega Solar Projects Private Limited and Lanco IT P.V. Investments B.V. had ceased to be Subsidiaries of the Company.

The Company's Policy on Material Subsidiaries of the Company has been provided in the following link: http://www.lancogroup.com/ pdf/financials/Policies/Policy_on_Material_Subsidiaries.pdf

Report on the performance and financial position of each of the Subsidiaries, Associates and Joint Venture Companies has been provided in Form AOC-1 which forms part of this Annual Report.

RISK MANAGEMENT POLICY

The Company had adopted the Standard Operating Procedures to standardize the Risk Management Process across all Business units in terms of process, formats, documentation, reporting, identification of elements of risk and monitoring Risk Mitigation plans, as part of the Risk Management Policy developed and implemented by the Company. Further details are provided in Management Discussion and Analysis Report placed at Annexure-1 to this Report.

INTERNAL FINANCIAL CONTROLS

Your Company had put in place adequate Internal Financial Controls commensurate with the size of the Company with reference to the Financial Statements.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. G. Bhaskara Rao and Mr. G. Venkatesh Babu, Directors retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for appointment. Mr. Hiranmoy Biswas was appointed as Nominee Director of IDBI Bank Limited, with effect from October 27, 2015. Dr. Rajesh Kumar Yaduvanshi was appointed as Nominee Director of Punjab National Bank, with effect from January 01, 2016.

Mr. K. Raja Gopal was appointed as Non-Executive Director with effect from April 01, 2016.

Mr. Rengaraj Viswanathan and Dr. Jaskiran Arora were appointed as Additional Directors in the Category of Independent Director for

5 (five) years with effect from June 25, 2016.

Mr. L. Madhusudhan Rao was re-appointed as Executive Chairman for a period of 3 (three) years with effect from April 01, 2016. Mr. G. Bhaskara Rao was re-appointed as Executive Vice-Chairman for a period of 1 (one) year with effect from April 01, 2016. Mr. Raj Kumar Roy was appointed asWhole-time Director for a period of 3 (three) years with effect from April 01, 2016. Mr. G. Venkatesh Babu was re-appointed as Managing Director for a period of 3 (three) years with effect from June 24, 2016.

Mr. L. Madhusudhan Rao, Executive Chairman and Mr. G. Bhaskara Rao, Executive Vice-Chairman refunded the excess remuneration of '20.95 Lakhs and '27.92 Lakhs respectively, in line with the approvals received from the Ministry of Corporate Affairs (MCA) for FY 2014-15. The Company is awaiting the approval from the MCA for the appointment and payment of remuneration to Mr. S.C. Manocha for the period from August 14, 2015 to March 15, 2016.

The Independent Directors have given a declaration to the Company under Section 149(7) of the Companies Act, 2013 and Regulation 16 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 regarding meeting the criteria of independence prescribed under Section 149(6) of the Companies Act, 2013.

Mr. Yashpal Gupta, Mr. S. C. Manocha and Smt. L. Ramalakshmamma resigned as Directors of the Company with effect from October 01, 2015, March 15, 2016 and March 23, 2016 respectively. Your Directors place on record their appreciations for the valuable contribution by Mr. Yashpal Gupta, Mr. S. C. Manocha and Smt. L. Ramalakshmamma during their tenure as Directors.

We report with grief the sad demise of Mr. Dariyai Lal Rawal, Independent Director who passed away on January 28, 2016. The Board of Directors places on record its appreciation towards the significant contribution and valuable services rendered by Late Mr. Dariyai Lal Rawal during his tenure as Independent Director.

Mr. G. Venkatesh Babu, Managing Director, Mr. T. Adi Babu, Chief Financial Officer and Mr. A. Veerendra Kumar, Company Secretary represent the Key Managerial Personnel (KMP) of your Company.

During the FY16, 9 (nine) Board Meetings were held. These meetings were held on April 04, 2015, May 29, 2015, July 29, 2015, August 13, 2015, September 28, 2015, November 22, 2015, December 30, 2015, February 11, 2016 and March 15, 2016. The maximum interval between any two meetings did not exceed 120 days.

The Nomination and Remuneration Committee had devised the criteria and the process for performance evaluation of the Non Independent Directors, the Board as a whole and its Committees. In terms of Section 178(2) of the Companies Act, 2013, the Committee carried out evaluation of every Director's performance on various parameters as set-out in the performance evaluation policy of the Company and found that all Directors have fully met the expectations.

A separate meeting of Independent Directors was held on February 11, 2016 without the presence of non-Independent Directors and members of the management.

The details of Familiarization Programme for Independent Directors of the Company is disclosed on the Company's website at http:// www.lancogroup.com/pdf/financials/Policies/Familiarization_ Programme_for_Independent_Directors.pdf

COMPANY'S POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION

The Nomination and Remuneration Committee had recommended to the Board a Policy relating to the Appointment and Remuneration of Directors, Key Managerial Personnel and other Employees. The Nomination and Remuneration Policy forms part of this Report as

Annexure-2. CODE OF CONDUCT FOR DIRECTORS AND SENIOR MANAGEMENT PERSONNEL

The Board has laid down separate Code of Conduct for Directors and Senior Management Personnel of the Company and the same is posted on the Company's Website. All Directors and Senior

Management Personnel have affirmed compliance with the Code of Conduct. The Managing Director has also confirmed and certified the same. The certification forms part of the Report on Corporate Governance.

DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information pursuant to Section 134(3)(m) of the Companies Act, 2013, read with Rule 8 of The Companies (Accounts) Rules, 2014, is as below:

Conservation of Energy and Technology Absorption

The following are the measures and technologies being implemented by the Company:

(i) Selection of equipment that consume minimum energy and adoption of integrated energy management system to measure, monitor and take corrective action for minimizing auxiliary power consumption.

(ii) Selection and adoption of technologies for SNCR/SCR and FGD to control NOx and SOx emission parameters meeting the new Environmental standards as per MOEF guidelines.

(iii) Ash utilization in earth filling.

(iv) Increased use of bricks and cement made from power plant ash.

(v) Best project management practices for optimally utilizing available resources to help reduce project execution time.

(vi) Improved fire safety by adopting simple methods of increased gravel fill in oil collection pits in transformer yards and cables supported on isolated structures in coal handling plants.

(vii) Adoption of zero liquid discharge schemes to prevent water pollution.

(viii) Electro chlorination instead of gas chlorination to avoid hazards while handling chlorine containers.

(ix) Development of green buildings reducing the electricity consumption.

(x) Development of buildings with focus on design and architecture maximizing the use of natural light and natural air ventilation thus reducing the electricity consumption.

(xi) Development of Green belt and water harvesting contributing to environment protection.

Foreign Exchange Earnings and Outgo:

(Rs, Crores)

Particulars

Year ended

March 31, 2016

Foreign Exchange Earnings

28.20

Foreign Exchange outgo (including Capital

13.91

imports)

DISCLOSURE ON COMPANY'S EMPLOYEES STOCK OPTION PLANS

The Employees Stock Option Plan - 2006 and the Employees Stock Option Plan-2010 were approved by members by passing Special Resolutions in the Extraordinary General Meeting held on June 07, 2006 and Annual General Meeting held on July 31, 2010, respectively.

There were no grants made under the Employees Stock Option Plans of the Company during the FY16.

The required information pursuant to SEBI ESOP Guidelines is enclosed as Annexure-3 to this Report.

PARTICULARS OF EMPLOYEES AND REMUNERATION

As required under Section 197 (12) of the Companies Act, 2013, read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended the details of the remuneration drawn by the employees in excess of the limits prescribed, forms part of this Report.

Pursuant to Section 136 of the Companies Act, 2013, the Annual Report is being sent to the members after excluding the aforesaid details. The same is available for inspection at the Registered Office of the Company during office hours and any member desirous of the said information may write to the Company Secretary at the Registered Office of the Company.

Disclosure of the information pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules,

2014, as amended forms part of this Report as Annexure-4.

RELATED PARTY TRANSACTIONS

All the Related Party Transactions entered by the Company during the reporting period were at arm's length basis and in the ordinary course of business. Therefore the disclosure of particulars in Form No. AOC-2 is not applicable to the Company. Under Listing Regulations, the Material Related Party Transaction entered by the Company on behalf of its Subsidiary forms part of the Notice of Annual General Meeting (AGM).

In line with the requirements of the Companies Act, 2013 and Listing Regulations, the Company has formulated a 'Policy on Related Party Transactions' and the same is uploaded on the Company's website at http://www.lancogroup.com/pdf/CS/LITL_Policy_on_Related_ Party_Transactions.pdf

DEPOSITS

During the year under review, your Company has not accepted deposits from Public.

LOANS, GUARANTEES, SECURITIES AND INVESTMENTS

The granting of loans and giving of guarantee and providing of security by your Company is exempted in terms of Section 186(11)

(a) of the Companies Act, 2013, as the Company is providing infrastructural facilities specified in Schedule VI of the Companies Act, 2013. Pursuant to Section 186 of Companies Act, 2013 read with Schedule V and the Listing Regulations, disclosure on particulars relating to loans, advances, guarantees and investments are provided as part of the financial statements.

EXTRACT OF ANNUAL RETURN

Pursuant to Section 92 of the Companies Act, 2013 and Rule 12 of The Companies (Management and Administration) Rules, 2014, the extract of Annual Return in Form MGT-9, is provided as Annexure-5 to this Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The CSR Committee comprises of Dr. Uddesh Kumar Kohli, Independent Director, Mr. R.M. Premkumar, Independent Director, Mr. G. Bhaskara Rao, Executive Vice-Chairman and Mr. G. Venkatesh Babu, Managing Director as its Members. Dr. Uddesh Kumar Kohli, Independent Director is the Chairperson of the CSR Committee.

Members can access the CSR Policy on the website of the Company at http://www.lancogroup.com/pdf/LITL_CSR_Policy.pdf

There are no net profits for the Company made during the previous three financial years. Hence, there is no requirement of spending specific funds towards CSR activities by the Company during the year under review.

Details of CSR activities by the group companies is included in Management Discussion and Analysis Report as Annexure - 1 to this report.

AUDITORS

The Members are requested to ratify the appointment of Brahmayya & Co., Chartered Accountants, (Firm Registration No. 000511S) as Auditors of the Company for the FY 17.

COST AUDITORS

DZR & Co., Cost and Management Accountants have been appointed as the Cost Auditors for the year ending March 31, 2015. The Cost Audit Report for the year ended March 31, 2015 was filed on October 21, 2015.

DZR & Co., have been appointed as Cost Auditors of the Company for the FY17, based on the recommendation of Audit Committee.

SECRETARIAL AUDIT REPORT

M/s. dvmgopal & associates, Company Secretaries, were appointed as Secretarial Auditors to conduct Secretarial Audit of records and documents of the Company for the FY16. The Secretarial Audit Report is given as Annexure-6 to this Report.

CORPORATE GOVERNANCE

In compliance with the conditions of Corporate Governance, pursuant Listing Regulations, the Report on Corporate Governance with the Certificate from a Practicing Company Secretary certifying compliance in this regard forms part of this Report as Annexure-7.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

With a view to implement the highest ethical standards in the course of business, the Company has formed and adopted a whistle blower policy which provides a platform for reporting concerns about unethical behavior, actual or suspected fraud or violation of the Company's Code of Conduct. Directors, employees, vendors or any person having dealings with the Company may report noncompliance, to the Chairperson of Audit Committee, who reviews the report. Confidentiality is maintained of such reporting and it is ensured that the whistle blowers are not subjected to any discrimination.

POLICY ON PREVENTION OF SEXUAL HARASSMENT AGAINST WOMEN AT WORK PLACE OF THE COMPANY

Pursuant to The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, your Company had adopted the "Policy on Prevention of Sexual Harassment against Women at workplace" inter alia to seek to protect women from sexual harassment at their place of work. There were no complaints relating to sexual harassment during the reporting period.

DIRECTORS' RESPONSIBILITY STATEMENT

As required by Section 134(5) of the Companies Act, 2013, your Directors hereby confirm that:

(a). In the preparation of the annual accounts for the year ended March 31, 2016, the applicable accounting standards have been followed and that no material departures are made from the same;

(b). The Company 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 of the state of affairs of the Company at the end of the FY16 and of the profit and loss of the Company for that period;

(c). The Company have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d). The annual accounts have been prepared on a going concern basis;

(e). The Company 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 Company have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

INFORMATION ON AUDITOR QUALIFICATIONS

The information and explanations of your Directors on the qualifications by the Auditor on the Consolidated Financial Statements for the FY16 are as follows:

- Qualification on Capitalization of Borrowing cost by step down subsidiary

The step down subsidiary, which is implementing gas based power project expansion, Phase III could not complete commissioning activities of phase III until August 11, 2015 for III A and January 09, 2016 for III B, due to non-availability of required resources and fuel which are beyond the control of Lanco Kondapalli Power Limited (LKPL). During the pendency of these activities, the plants could not be tested for capability and suitability of its intended use of the plant. The assets are therefore eligible to capitalize their borrowing costs till commissioning. The lenders of the project approved the above interest during construction as a part of the project cost. The Company capitalized the interest during these periods, which was Qualified by the Auditor. LKPL has re-approached Ministry of Corporate Affairs (MCA) to seek clarification on the applicability of provisions of AS 16 to continue the capitalization of borrowing costs. The management is of the view that the interest capitalization is as per AS 16.

However the step down subsidiary completed the commissioning activities of phase III and also declared Commercial Operation Date (COD) on August 11, 2015 for III A and January 09, 2016 for III B. From the COD interest is being charged to P&L account.

- Qualification on Unaudited financials of Subsidiaries in Consolidation

As per local GAAP applicable to subsidiaries of Lanco Resources International Pte. Limited (LRIPL), fair valuation of assets is mandatory from the external valuer at the end of every year. During the year ended March 31, 2016 valuation of those foreign subsidiaries assets was under progress and due to that auditors of LRIPL subsidiaries could not complete their audit. As a consequential impact, LRIPL and other subsidiary i.e. Lanco International Pte. Limited (LIPL), could not complete their audit. Hence the financial statements prepared by the management have been considered in consolidation. The Auditor Qualified the Consolidation of financials with the Management financials instead of Audited financials of LRIPL.

The qualification by the Auditor is not about deviation from the Accounting Standards but on the consolidation of the unaudited financials of some of the foreign subsidiary companies as on the reporting date.

The management is not expecting any material differences between Management financials and Audited financials.

ACKNOWLEDGEMENT AND APPRECIATION

Your Directors take this opportunity to thank all the stakeholders including Members, Banks, Financial Institutions, Customers, Suppliers, Service Providers and Regulatory and Governmental Authorities for their consistent co-operation. Your Directors also wish to place on record the sincere appreciation of the hard work, dedication and commitment of Employees at all levels. Your Directors look forward to your continued support in the future as well.

For and on behalf of the Board

L. Madhusudhan Rao G. Venkatesh Babu

Executive Chairman Managing Director

DIN - 00074790 DIN - 00075079

Place: Gurgaon

Date: August 12, 2016


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