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AIESL AIR INDIA ENGINEERING SERVICES LIMITED
AIESL
AIR INDIA ENGINEERING
SERVICES LIMITED
AIESL
CONTENTS
Page No.
1. Board of Directors 1
2. Chairman’s Message 2
3. Directors’ Report 6
4. Comments of the Comptroller & Auditor General of India 36
5. Independent Auditors’ Report 37
6. Balance Sheet as at 31 March 2016 49
7. Statement of Profit & Loss for the year ended 31 March 2016 50
8. Cash Flow Statement 51
9. Notes forming part of the Financial Statements for the year ended 31 March 2016 52
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BOARD OF DIRECTORS (as on 28 DECEMBER 2016)
Shri Ashwani Lohani Chairman
Shri Vinod Hejmadi Director
Smt. Gargi Kaul Director
Shri B S Bhullar Director
Chief Executive Officer
Shri H.R. Jagannath
Chief Financial Officer
Smt. C.N. Hemalatha
Auditors
M/s. Jhawar Mantri & Associates
Chartered Accountants
Registered Office
Airlines House
113 Gurudwara Rakabganj Road
New Delhi 110 001
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CHAIRMAN'S MESSAGE
Dear Shareholders,
It gives me great pleasure to present to you the 11th Annual Report of the Company for the year 2015-16.
Air India Engineering Services Ltd. is leading MRO service provider in the country providing both Line Maintenance and Major Maintenance for various type of aircraft in AI's fleet, Third party Airlines as well as in the Defence forces. The engineering activities of AI were hived off to the company following the implementation of a Turnaround / Financial Restructuring Plan of AI. In terms of the MoU, the parent company viz. AI shall transfer the movable assets (Workshop, Plant & Machinery and Tools etc.) to the company at its written down value (WDV) on the transfer date which shall form & constitute equity investment by AI. As per the MoU, the Company was also expected to receive Equity from AI to the extent of Rs 375 Crs. in the first three years of its operation in order to support its Capital acquisition program.
During the financial year 2014-15, the company got the DGCA approval CAR 145 as an MRO effective 1st January, 2015 and the movable engineering assets were transferred from AI at the beginning of the financial year which constituted the Equity investment of AI in AIESL.
MRO IN INDIA – Opportunity and Challenges
India, with its growing aircraft fleet size, strategic location advantage, rich pool of engineering expertise, and lower labour costs has huge potential to be a global MRO hub.
At present, Airlines operating in India get nearly 90% of their MRO work done abroad, mainly due to cost advantages resulting from the comparatively high tax burden, cumbersome operating procedures, and the inadequate MRO service facilities available in India.
India's current MRO market size is estimated to be around USD 750 million. As per Boeing itself, the market is expected to grow at 7% CAGR for the next 7 years to reach USD 1.2 billion by 2020. With the fleet size likely to double by 2020, the need for a strong domestic MRO industry is critical.
A strong MRO industry could achieve the following benefits in next 10 years:
§ Create thousands of Jobs for Aerospace engineers and other professionals.
§ Save and earn foreign exchange by attracting national and international carriers to Indian MROs.
§ Reduce dependency of Indian carriers on other countries for their MRO requirements.
§ With the induction of more aircraft in India every year and the existing ones getting aged, the opportunities for employment, saving in foreign exchange, and the revenue earned by taxes will increase every year.
§ Make India an attractive MRO hub in this part of the world.
At present Domestic scheduled carriers outsource most of their MRO activity to third-party service providers outside the country. It's a matter of major concern that Indian carriers find it more cost effective to fly empty aircrafts and crew to overseas MRO hubs for maintenance of their fleet. At present, Indian MROs are mainly equipped for Line maintenance. We need to build more sophisticated facilities and upskill our workforce to do the heavy maintenance work which is mostly outsourced now.
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In the absence of a well-developed MRO base in India, there are currently around 40 overseas MRO providers approved by the Directorate General of Civil Aviation (DGCA) to conduct work on Indian-registered aircrafts, in locations such as the UK, Germany, France, Romania, Jordan, Israel, the UAE, Sri Lanka, China, Singapore, Malaysia and Australia, while the plans by some of the large global MRO players to set up base in India are yet to materialize.
NEW CIVIL AVIATION POLICY & MRO SCENARIO
The Ministry of Civil Aviation (MoCA), Government of India released the National Civil Aviation Policy 2016 (NCAP 2016).
As per the new Civil Aviation Policy, the MRO business of Indian Carriers is around Rs. 5000 crores and approx 90 % of this is currently spent outside India. The government is keen to develop India as an MRO hub in Asia, attracting business from foreign Airlines.
A number of provisions have been made in Budget announcements for 2016-17 which includes
l Custom Duty exemption for tools and tool kits used by MRO
l One time certification by approved Quality Managers in MRO for clearance of parts from client airlines
l Foreign aircraft brought for MRO work allowed to stay for longer period
Additionally, for ease of doing business, following steps are also being proposed by the govt:
l Prompt visa for foreign MRO / OEM experts
l Temporary Landing permits to foreign pilots for servicing aircraft at Indian MRO
l State govt to be persuaded for Zero rated VAT on MRO activities
l Airport royalty and additional charges not to be levied for MRO service providers for certain years.
PERFORMANCE OF THE COMPANY DURING THE YEAR
The company has made concerted efforts and spent on the infrastructure facilities, overheads and the manpower cost for its capabilities to acquire the DGCA approval CAR145. The expenditure of Rs. 271.38 Crs. incurred for practically making ready the MRO set up for obtaining DGCA License for its planned activities / work considered as directly attributable to DGCA License for future economic benefits was capitalized as Intangible Assets during 2014-15 based on the opinion of the Tax Consultants. As there is no impairment of the Intangible Assets so capitalized, no amortization of the same has been considered during 2015-16.
The MRO is a Capital Intensive industry with high competitive environment with low returns and there is a long payback / cost absorption period in view of the fixed overheads on infrastructure facilities and high wage costs due to licensed manpower. Besides this, the Company has to depend on internally generated AI's business for substantial portion of its Revenue. However, with the expected growth in third party business and the incentives expected from GOI for the MRO industry, it is anticipated that AIESL will be operationally profitable in next few years.
Due to the high labour and Capital costs of setting up the various facilities , the company incurred a Net Loss after Tax amounting to Rs. 558.62 crores for the year 2015-16 i.e. the second year of start of its commercial activities.
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FUTURE PLANS
The company is planning to establish its footprints overseas also. In a first step towards that AIESL is in the process of establishing the first overseas branch at Sharjah, UAE. Based on the experience and backed by cost benefit analysis, the opportunity to expand to other international stations will also be explored. I am confident in the years to come with the increase in business and recovery of fixed capital and manpower costs the Company will be able to steer its way to profitability.
ACKNOWLEDGEMENT
I take this opportunity to thank Air India Limited, Airline Allied Services Ltd., Air India Charters Limited, Ministry of Civil Aviation and vendors for their unstinted support. I also acknowledge the support extended by all other authorities including banks and regulatory agencies. I would like to thank my colleagues on the Board for their valuable guidance.
I would like to thank all employees of the company for their support in making this Company profitable in the future.
On behalf of the Board, I seek your continued support, as always.
� � � (Ashwani Lohani)Chairman
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VISION
To provide best in class and timely quality services to the customers by maintaining highest standards of regulatory and safety compliance.�
MISSION
CUSTOMER
l Maintaining all aircraft of the captive work load of the fleet of Air India in a continuous state of airworthiness by the system of preventive and corrective maintenance to secure a high level of safety.
l Provide a “One Stop” solution to the customer.
l Faster Turn Around Time.
l To capture maximum Third Party work from in and around India.
PROCESS
l To get DGCA approval under CAR 147 approval.
l To obtain FAA and EASA approval for all its establishment and facilities.
l Aggressive Marketing policy for more and more third party work.
l It needs to Department centric so, every Departmental Heads need to be responsible for the deliverables so as to fulfill the overall vision.
l Continuous monitoring of Quality through quality audit etc.
l Constant endeavor to upgrade the services, delivering highest customer satisfaction in terms of Quality, Service and Cost effective and ensuring long term strategic relationship.
l All-out effort to be the world class MRO without compromising the quality standard.
l Updating and enhancing the capability through training of the personnel and equipment of latest technology.
l Multiskilling of the personnel through cross training to enhance the productivity.
l Optimising operational cost.
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DIRECTORS’ REPORT
To,The Members,Air India Engineering Services Ltd.
Your Directors have pleasure in presenting their Twelfth Annual Report on the business and operations of the Company and the accounts for the Financial Year ended March 31, 2016.
1.1.� FINANCIAL SUMMARY AND HIGHLIGHTS
The Company's financial performance is given hereunder:
(Rs. in crore)
Particulars Financial Year Financial Year ended 31.03.2016 ended 31.03.2015
Sales & other income 620.27 142.01
Profit before tax -558.62 -242.57
Less Provision of Tax
Profit after tax -558.62 -242.57
Balance of profit brought forward from previous year -242.57 0
Balance carried to Balance Sheet -801.19 -242.57
1.2.� DETAILS OF REVISION OF FINANCIAL STATEMENTS OR BOARD'S REPORT
The Company has not revised its Financial Statements or Board's Report in respect of any of the three preceding financial years as mentioned in Section 131 (1) of the Companies Act, 2013.
1.3.� AMOUNT WHICH THE BOARD PROPOSES TO CARRY TO RESERVES.
The Board of the company has decided/proposed to carry NIL amount to its reserves.
1.4.� DIVIDEND
The directors are not recommending any dividend as the company has not earned any profits.
1.5.� MAJOR EVENTS DURING THE YEAR
1.5 (a)� State of the company's affairs
Fleet details handled by AIESL
AIESL maintained fleet of 135 aircraft of Air India, the parent airline and its subsidiary airlines Alliance Air and Air India Express. The fleet details as on 31-March-2016:
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- B747 powered by PW 4056 engines� � � -� 5
- B777-200LR powered by GE90-110 engines � -� 3
- B777-300ER powered by GE90-115 engines � -� 12
- B787-8 powered by GEnx engines � � � -� 21
- A319 powered by CFM56-5B engines�� -� 22
- A320 powered by CFM56-5B/ V2500 engines � -� 24
- A321 powered by CFM56-5V engines � � -� 20
- ATR-42 powered by PW121 engines� � � -� 3
- ATR-72 powered by PW127 engines � � � -� 5
- CRJ powered by CFM34-8 engines� � � -� 3
- B737-800 powered by CFM56-7B engines� � -� 17
- Network� � � � � � -� 135
rd3 Party Business
l Besides the captive MRO work load of Air India and its subsidiaries, AIESL aggressively pursuing to tap the overwhelming growth in aviation industry in Domestic and Global MRO market. Several initiatives were taken like Dedicated Marketing Team(for which expert from open market were taken), Quicker response to market conditions, adopting best world practices, Induction of new workforce on new terms & conditions to suit market dynamics, strengthen Line Maintenance, Base Maintenance, Cabin Maintenance, more customer focused business approach etc.
l Acquired new third Party Business.
l Business from Defense (Air Force and Navy) is also being taken up.
l During 2015-16 AIESL added new customers namely M/s Kenya Airways, CEBS Defense services, Island Aviation Services, Max MRO services, Sentinel Aerospace, Quickjet cargo aviation, Futura Travels Ltd, SCOOT Singapore, Air Asia and ST Aerospace Engines. Recently fresh contract signed with Jet Airways, and Spice Jet.
l Some of the other customers are: Vistara, Silk Air, Kuwait Airways, Qatar Airways, Nepal Airlines, Jet Airways, Go Air, Ethiad, Singapore Airlines, SIA cargo etc.
Utilization/ TDR achieved
AIESL maintained the Technical Dispatch Regularity(TDR) and Utilisation compared to Global Aviation Standard. The fleet wise TDR and Utilisation are as under:
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Fleet Type Daily Utilization TDR
A319 9.75 99.02
A320 9.22 98.01
A321 11.16 99.04
B747-400 2.97 96.80
B777-200LR 6.89 97.60
B777-300ER 11.78 98.20
B787-8 12.07 97.90
The details of No of engines ( Type Wise) produced in JEOC from April 2015 to March 2016, April 2016 to till date is as follow :
Month / Year JT8D V2500 CFM Total
Apr – 15 to Mar-16 0 15 27 42
Apr – 16 to Jan – 17 1 10 24 35
Total 1 25 51 77
Status of Nagpur MRO
l It has 2 Wide Body Hangars and 18 Back Shops. The Nagpur Airframe MRO is approved by DGCA to carry out heavy maintenance checks on B777 fleet. Currently all the major checks of B777 including “D” checks are being carried out in this facility.
l AIESL, Nagpur facility is approved by DGCA, to carry out base maintenance of A320 fleet.
l State of art Engine MRO is nearing completion at Nagpur. Test facility for GE90 will be ready by 2017. The full Overhaul shop for GE(90) and Genx would be completed by 2018. This is one of the six such GE branded facility in the world for carrying out GE90 and GEnx engine overhaul.
Status of Hyderabad MRO
l This facility is also performing Major check of A319 / A320 from CCU / DEL.
l Hyderabad also has capability to do major check of all A320 family aircraft.
l This facility is equipped with all the accessory shops for independent operation.
l Hyderabad is gearing up for ATR-72 Major check and ATR components servicing facility. Awaiting regulatory approval.
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l M/s Emberer authorized Service Centre (EASC), OEM facility is under consideration at Hyderabad.
Status of Kolkata Facility
� RECENT CAPABILITY ENHANCEMENT AT KOLKATTA
l Acquired approval to carry out 12 yrs check on A319 aircraft
l Acquired approval to carry out 36000 FC check check on ATR 42 aircraft
l Omniscan for wing top skin inspection
l Aircraft Weighing
l Existing A320 classic APU (GTCP36300A) Test Cell has been upgraded indigenously.
Inhouse correlation run completed on two APUs. Awaiting correlation and certification by HONEYWELL in March ,2017.
l Commissioning of Fuel Nozzle Cleaning Rig in APU Centre, Module II
l Servicing of Heat Exchangers of A320 family fleet (complete capability)
a) Primary Heat Exchangers P/N 753A0000XX,753C0000XX
b) Main Heat Exchangers P/N 754A0000XX,754C0000XX,754D0000XX
c) Reheater P/N 755A0000XX,755C0000XX
d) Condenser P/N 756A0000XX
l TESTING of A320 family Air Cycle Machine (ACM) P/N 1814A0000XX, 1263A0000XX.
l Servicing of High Speed Oven (P/N : 3G9009999xxx).
l Servicing of Hot cup (P/N : JD034006) and Hot Jug (P/N : JA003028).
l Complete servicing of APU starter Motor (P/N 2704506x).
l Complete servicing of APU starter Motor (P/N 27045062) FAA and EASA approved facility
As of 31-Mar-2016, AIESL has maintained the accreditation of AIESL facility from Federal Aviation Administration (FAA) and European Aviation Safety Agency (EASA)
Boeing fleet have the following FAA facilities
Engine Overhaul (PW4056 /CFM56 engine Overhaul, Limited approval on GE90 and GEnx engines)
COD:Landing Gear, Wheels and brakes
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BMD: Hangar 3 for 777 up to C ck
AOD: (Engine Acc)
TRV: NDT,wheels Brakes
Maintenance Training Organization approval from DGCA
Air India Engineering Services obtained DGCA approval as MTO (Maintenance Training Organisation) approved under CAR 147 in September 2015. AIESL has its Training set up located at Mumbai, Delhi, Trivandrum, Hyderabad.
Details of VVIP flights for PM/ President
15 extra section flights were configured and maintained for Hon’able Prime Minister, President and Vice President.
1.5 (b)� Future Plans
l To capture the MRO business of the airlines within the flying distance of 5 hours, offering a very competitive rate in line with Global market.
l Reducing TAT (Turn Around Time) for Aircraft and Engine.
rdl More 3 party job for aircraft engines as AIESL possess the well- equipped facility at
Delhi, Mumbai and Nagpur, which are unique in India.
l Completion of GEnx Engine facility at Nagpur.
l Completion of Centralised APU test facility at Kolkata.
l OEM facility for M/s Emberer at Hyderabad for ATR-72
2.� GENERAL INFORMATION
th The Board of Directors of Air India Limited, the parent company, at its meeting held on 7 August, 2010
approved the hiving off of Air India Engineering Services Limited (AIESL) as wholly owned subsidiary of Air India and a separate Profit Centre to cater the service towards Maintenance, Repair and Overhaul
rd(MRO) activities of the captive load of Air India and it's other subsidiaries besides the workload from 3 Party Customer of domestic and international market. Accordingly Cabinet Approval was obtained on
th6 September, 2012 for operationalization of AIESL. After complying, the requirements of the various Statutory and Regulatory Authorities, final approval was obtained from DGCA to operate as an independent MRO under CAR 145, on January, 2015.
3.� CAPITAL STRUCTURE - Details of equity shares issued
The authorised Share Capital of the company during the year was Rs. 1000 crores divided in to 100 crore equity shares of Rs. 10 each.
During the financial year, the company allotted 16,66,16,500 (Sixteen Crore Sixty Six Lac Sixteen Thousand Five Hundred ) Equity Shares of Rs. 10/- each at par aggregating to Rs. 166,61,65,000/- to Air India Ltd., towards transfer of assets by Air India, ranking pari passu in all respect with the existing Equity Shares of the Company, on rights basis.
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Accordingly, Paid-up Share capital of the company was increased from Rs. 5,00,000 to Rs.1,66,66,65,000.
4.� MANAGEMENT
4.1� DIRECTORS AND KEY MANAGERIAL PERSONNEL
The following changes have occurred in the constitution of directors of the company during the FY 2015-16.
S.No Name Designation Date of appointment Date of cessation
1. Ms. Gargi Kaul Director 06.05.2015 -
2. Shri Rohit Nandan Chairman - 31.08.2015
3. Shri Ashwani Lohani Chairman 31.08.2015 -
4. Shri S Venkat Director - 31.10.2015
5. Shri Vinod S. Hejmadi Director 07.12.2015 -
4.2� NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS
During the Financial Year 2015-16, the Company held four meetings of the Board of Directors as per Section 173 of Companies Act, 2013 which is summarized below.
S. No. Date of Meeting Board Strength No. of Directors Present
1 28.07.2015 4 4
2 29.10.2015 4 4
3 26.02.2016 4 4
4 31.03.2016 4 3
4.3� COMPOSITION OF COMMITTEES AND DETAILS OF CHANGES, IF ANY
AUDIT COMMITTEE
The constitution of Audit Committee as required under the Companies Act, 2013 was approved by the nd st stBoard of Directors in its 42 Meeting held on 31 March 2016 and following were its members as on 31
March, 2016:
1) Ms. Gargi Kaul�� � -� Chairman2) Shri B S Bhullar� � -� Member3) Shri Vinod Hejmadi� � -� Member4) Shri Ashwani Lohani� � -� Permanent Invitee
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NOMINATION, REMUNERATION AND STAKEHOLDERS RELATIONSHIP COMMITTEE
As there was no Independent Director on the Board of AIESL, the matter was taken up with the Ministry of Civil Aviation by Air India Limited.
The Constitution of Nomination and Remuneration Committee shall be taken up after the appointment of Independent Directors by Holding company/Administrative Ministry.
4.4� COMPANY'S POLICY ON DIRECTOR'S APPOINTMENT AND REMUNERATION
APPOINTMENT POLICY
AIESL is a wholly owned Subsidiary of Air India Limited. As per the provisions of 97 Article of the Articles of Association of the Company, the number of Directors of the Company shall not be less than three and not more than fifteen all of whom shall be appointed by Air India Limited, who will prescribe the period for which they will hold office as director and may remove them and appoint others in their places and fill in any vacancy that may occur.
REMUNERATION POLICY
Section 197 in respect of remuneration to directors of the Company is not applicable to AIESL being a Government Company Vide Notification No. Dated 5th June, 2015.G.S.R.463(E)
4.5� BOARD EVALUATION
It is not applicable to AIESL being a Government Company Vide Notification No.G.S.R.463(E)dated 5th June, 2015.
4.6� REMUNERATION RECEIVED BY MANAGING / WHOLE TIME DIRECTOR FROM HOLDING OR SUBSIDIARY COMPANY
There was no whole time director on the Board of the company during FY 2015-16.
4.7� DIRECTORS' RESPONSIBILITY STATEMENT
The Board of Directors of the Company confirm:-
(a) In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;
(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 of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;
(c) The Directors have 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;
(d) The Directors have prepared the Annual Accounts on a going concern basis;
(e) Company being unlisted sub clause (e) of section 134(3) is not applicable.
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(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.
4.8� INTERNAL FINANCIAL CONTROLS
The Company has adequate internal financial controls for ensuring the orderly and efficient conduct of its business, including adherence to the Company's policies; the safeguarding of its assets; the prevention and detection of frauds and errors; the accuracy and completeness of the accounting records; and the timely preparation ofreliable financial information, which is commensurate with the operations of the Company.
The Company has appointed M/S Sanjay Gupta & Associates as Internal Auditors for the financial year 2015-16. The Internal Auditor has carried out an extensive audit, including internal financial controls.
The Company has also appointed M/S K Vaidyanath Iyer & Co to carry out the evaluation of the adequacy of the existing Internal Financial Control Over Financial Reporting (IFC-FR) for the financial year 2015-16.
The statutory auditors are also required to issue the Independent Auditor's Report on the Internal Financial Controls of the Company under Clause (i) of Sub-Section 3 of Section 143 of the Companies Act 2013 from the current financial year. The report issued thereupon has been attached alongwith the standalone and consolidated Financial Statements respectively.
4.9� DISCLOSURE REGARDING FRAUDS
There are no frauds reported by the Auditor to the Audit Committee or to the Board.
5.� DISCLOSURES RELATING TO SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
Company does not have any Subsidiary, Joint venture or Associate Company.
6.� DETAILS OF DEPOSITS
st The Company has not accepted any public deposit during the year ended 31 March, 2016 as covered
under the provisions of Section 76 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014.
7.� PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS
Particulars of loans, guarantees and investment have been disclosed in the financial statement.
8.� PARTICULARS OF CONTRACTS OR 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 arm's length basis.
9.� DISCLOSURES PERTAINING TO CORPORATE SOCIAL RESPONSIBILITY
Provisions of Section 135 of Companies Act, 2013 relating to Corporate Social Responsibility is not applicable to the Company as the company has not earned any profits during the year.
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10.� DETAILS OF REMUNERATION OF EMPLOYEES
Section 197 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company is not applicable to AIESL being a Government Company Vide Notification No. Dated 5th June, 2015.G.S.R.463(E)
11.� CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
(A)� The company has made all efforts wherever possible for conservation of non renewable sources of energy and utilizing the alternative sources of energy.
(B)� Foreign exchange earnings and Outgo
(Rs. in Crores)
Earnings NIL
Outgo NIL
12.� RISK MANAGEMENT
The Company does not have any Risk Management Policy as the element of risk threatening the Company's existence is very minimal.
13.� MATERIAL ORDERS OF REGULATORS
No significant and material orders have been passed by the regulators or courts or Tribunals impacting the going concern status and company's operation in future during the year.
14.� DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM
Provisions of Section 177(9) relating to establishment of Vigil Mechanism for directors and employees, to report a genuine concern, are not applicable to the Company.
15.� AUDITORS
The Comptroller & Auditor General of India (CAG), has appointed M/s. Jhawar Mantri & Associates, Chartered Accountants as Statutory Auditors of the Company for FY 2015-16.
Qualifications or adverse remarks in the Auditors' Report which require any clarification/ explanation along with reply of management thereto are attached herewith as Annexure.
The Notes on financial statements are self-explanatory, and needs no further explanation.
COMMENTS OF COMPTROLLER AND AUDITOR GENERAL OF INDIA
The comment dated 25.04.2017 of the Comptroller and Auditor General of India (C&AG) under Section st
143(6)(a) of the Companies Act, 2013 on the accounts of the Company for the year ended 31 March 2016 is attached herewith as Annexure .
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16.� SECRETARIAL AUDIT REPORT
The company had appointed Mr. Jiwan Prakash Saini, Practicing Company Secretary as Secretarial Auditor to conduct the Secretarial Audit for FY 2015-16 and the Secretarial Audit Report (Form No. MR.3) is attached at Annexure .
The explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report is attached at Annexure.
17.� COMPLIANCE WITH SECRETARIAL STANDARDS
The Secretarial Standards issued by ICSI under Section 118(10) of Companies Act, 2013 have been compiled with by the company.
18.� EXTRACT OF ANNUAL RETURN
In compliance with the provisions of Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, extract of Annual Return is attached at Annexure .
19.� DISCLOSURES UNDER THE SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013
The Committee for Prevention of Sexual Harassment of women at workplace was not formed in AIESL during 2015-16.
No complaints of sexual harassment were received during the year 2015-16.
20.� COMPLIANCE WITH THE RTI ACT, 2005
Air India Engineering Services Limited has successfully ensured compliance with the provisions of Right to Information Act for providing information to the citizens.
The company has decentralized its structure to deal with the applications / appeals received under RTI Act.
During 2015-16, 23 Requests / Appeals were received and disposed off.
ACKNOWLEDGEMENTS
The Board sincerely acknowledges the support and guidance received from the, Ministry of Civil Aviation, Comptroller and Auditor General of India, Ministry of Corporate Affairs and other agencies.
For and on behalf of the Board of DirectorsPlace : Delhi
Date : 04.07.2017 Chairman
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MANAGEMENT DISCUSSION & ANALYSIS REPORT (2015-16)
1.� Analysis of Financial Performance
� Revenue
v Total revenue earned during the year was Rs. 620,27,18,323/- (12 months) as against Rs. 142,00,60,809/- (3 months) during 2014-15.
Expenditure
v The total expenditure incurred during the year was Rs. 1180,00,82,834/- (12 months) as compared to the previous year's figure of Rs. 384,57,36,540/- (3 months).
2.� Future Outlook
AIESL presently provides MRO services to fleet of 135 aircraft of Air India Limited and its Subsidiary Companies viz. Air India Charters Ltd. and Airlines Allied Services Limited and few third party Airlines. MRO services are proposed to be provided to all the airlines and aircraft within the flying distance of 5 hours from the facility.
Third party revenue in 2015-16 was Rs. 59.96 crores which is likely to increase due various marketing initiatives taken by the company like signing of MOU with various airlines.
AIESL is also carrying out Defence MRO activities wherever AIESL is having the capability to do. Presently, the company is carrying out maintenance activity on IAF 737-200 Aircraft and Indian Navy's P8I Aircraft and their Engines and components.
Following promotional activities have been taken by the company to increase its business:
th th • AIESL Participated in India MRO Aerospace & Defence Conference in December 12 & 13 , 2016, supported by Ministry of Civil Aviation.
• AIESL is the only service provider in India with one-stop solution for all MRO activities and the same is highlighted by an online brochure on AIR INDIA website.
• The AIESL brochure has been brought out, highlighting the capabilities of AIESL at:-
a) Delhi (NR & JEOC) b) Mumbai (WB & NB) c) Hyderabad & Thiruvananthapuram (TRV) d) Kolkata (NB)
Following initiatives are planned to be undertaken by the company
• Updation of Airline Database of all International Airlines flying to India.
• Introducing AIESL along with services and capabilities to potential customers.
• Tracking the tenders of MRO Business for AIESL
• Representation by AIESL at various Air Shows and Exhibitions of aviation sector.
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• Renewing the existing agreements with different airlines and exploring additional requirement with them.
• Establishing MRO setup at foreign stations to save cost and improve quality of service and to reduce SAFA findings.
• Listing the services of AIESL on various website to increase the visibility.
• Creating short films (2 to 3 Minutes),highlighting the capabilities of AIESL for international marketing through online and social media(Youtube).
• Creation of micro websites and linking the same to the url of Govt.of India, Ministry of Civil Aviation, Make in India & Incredible India.
• Creation of social media platform and promoting AIESL through sameWith the above initiatives, AIESL operations along with financials will continue to achieve higher trajectory growth in the coming years.
3.� Going Concern
With the National Civil Aviation Policy-2016 coming into effect, it is expected that MRO sector will rd
develop significantly increasing the size of the 3 Party services.
As per Boeing, the market is expected to grow at 7% CAGR for the next 7 years to reach USD 1.2 billion by 2020.
As per the new Civil Aviation Policy, the MRO business of Indian Carriers is around Rs. 5000 crore.
4.� RISK MITIGATION STRATEGIES
The Company continuously monitors the risk perceptions and takes preventive action for mitigation of risks on various fronts.
5.� INTERNAL CONTROL SYSTEMS
The Company has appointed M/S Sanjay Gupta & Associates as Internal Auditors for the financial year 2015-16. The Internal Auditor has carried out an extensive audit, including internal financial controls.
The Company has also appointed M/S K Vaidyanath Iyer & Co to carry out the evaluation of the adequacy of the existing Internal Financial Control Over Financial Reporting (IFC-FR) for the financial year 2015-16.
AIESL
18
REPORT ON CORPORATE GOVERNANCE
BOARD OF DIRECTORS
As per Articles of Association of the Company, the number of Directors shall not be less than three and not more than fifteen. All of whom shall be appointed by Air India Ltd.
BOARD OF DIRECTORS AS ON 31 MARCH 2016
I) Shri Ashwani Lohani Chairman CMD, Air India Ltd.
ii) Shri Vinod Hejmadi, Nominee of Holding Co. Nominee Director Director Finance, Air India Ltd.
iii) Ms Gargi Kaul, Nominee of Govt. Govt. Director (Admin Ministry)
iv) Shri B S Bhullar, Nominee of Govt. Govt. Director (Admin Ministry)
Shri Ashwani Lohani was appointed as Chairman of the Company vice Shri Rohit Nandan who ceased to be Chairman with effect from 31 August 2015.
Shri Vinod Hejmadi was appointed as AI Nominee Director on the Board of the Company w.e.f. 07.12.2015 vice Shri S Venkat who ceased to be Director with effect from 31 October 2015.
The Board places on record its appreciation of the valuable services rendered by Shri Rohit Nandan as Chairman and Shri S Venkat as Director of the Company.
During the year, all Meetings of the Board and the Annual General Meeting were chaired by the Chairman.
Details regarding the Board Meetings, Annual General Meeting, Directors' Attendance thereat, Directorships and Committee positions held by the Directors are as under:
BOARD MEETINGS
During the Financial Year 2015-16, the Company held Four meetings of the Board of Directors as per Section 173 of Companies Act, 2013 which are summarized below.
S No. Date of Meeting Board Strength No. of Directors Present
1 28.07.2015 4 4
2 29.10.2015 4 4
3 26.02.2016 4 4
4 31.03.2016 4 3
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19
Particulars of Directors including their attendance at the Board Meetings during the financial year 2015-16:
Name of the
Director
Academic
Qualifications
Attendance out of 4Board
Meetings held during
the year
Details of Directorships held in
other Companies
Memberships held in Committees
Shri Rohit NandanChairman(upto 31 August 2015)
Shri S VenkatDirector (Fin), Air India Limited(upto 31 October 2015)
Post Graduation in History & MBA from UK
1
2B.Com., FCA, FCWA, FCS & CPA (US)
ChairmanAir India LimitedAir India Charters LimitedAir India Air Transport Services Limited Airlines Allied Services LimitedHotel Corporation of India LimitedDirectorAir India SATS Airport Services Pvt LtdAir Mauritius LtdAir Mauritius Holdings Ltd
DirectorAir India LtdAir India Charters LtdAirline Allied Services LtdHotel Corporation of India LtdAir India Air Transport Services LimitedAir India SATS Airport Services Pvt Ltd
ChairmanFinance Committee, AILHR Committee, AILStrategic Committee, AILPermanent InviteeAudit Committee, AILMemberCorporate Social Responsibility and Sustanability Committee,AILNomination & Remuneration Committee, AILAudit Committee – Hotel Corporation of India LtdAudit Committee – Air India Charters LtdAudit Committee- Air India Air Transport Services Limited
MemberFinance Committee, AILSpecial InviteeAudit Committee, AILCo-opted MemberStrategic Committee, AILMemberAudit Committee,Hotel Corporation of India LtdAudit Committee, Air India Charters Ltd
Audit Committee-
Air India Air Transport
Services Limited
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20
Name of the
Director
Academic
Qualifications
Attendance out of 4Board
Meetings held during
the year
Details of Directorships held in
other Companies
Memberships held in Committees
Ms Gargi KaulJt Secretary & Financial Advisor, Ministry of Civil Aviation(effective 6 May 2015)
Shri Ashwani Lohani(effective 31 August 2015)
Shri Balwinder Singh BhullarJt Secretary, Ministry of Civil Aviation
Shri Vinod Hejmadi(effective 7 December 2015)
Post Graduation in Business Administration
Mechanical Engineer & Fellow of Chartered Institute of Logistic & Transport
B.Com, ACA
GovernmentDirectorAir India LimitedAir India Air Transport Services LimitedHotel Corporation of India Limited
ChairmanAir India LimitedAir India Charters LimitedAir India Air Transport Services LimitedAirlines Allied Services LimitedHotel Corporation of India LimitedDirectorAir India SATS Airport Services Pvt LtdAir Mauritius LtdAir Mauritius Holdings Ltd
Government DirectorAir India LimitedAir India Air Transport Services LimitedHotel Corporation of India Ltd.
DirectorAir India LtdAir India Charters LtdAirline Allied Services LtdHotel Corporation of India LtdAir India Air Transport Services LimitedAir India SATS Airport Services Pvt Ltd
MemberAudit Committee, AILStrategic Committee, AILFinance Committee, AILCSR Committee, AIATSLChairpersonAudit Committee, Air India Air Transport Services Ltd.
ChairmanFinance Committee, AILHR Committee, AILStrategic Committee, AILPermanent InviteeAudit Committee, AILMemberCorporate Social Responsibility and Sustainability Committee, AILNomination & Remuneration Committee, AILAudit Committee – Hotel Corporation of India LtdAudit Committee – Air India Charters Ltd
MemberNomination & Remuneration Committee, AILHR Committee, AILStrategic Committee, AILCSR Committee, AIATSL
MemberFinance Committee, AILSpecial InviteeAudit Committee, AILCo-opted MemberStrategic Committee, AILMemberAudit Committee,Hotel Corporation of India LtdAudit Committee,Air India Charters Ltd Audit Committee- Air India Air Transport Services Limited
4
4
3
2
M. Phil
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21
BOARD COMMITTEES
AUDIT COMMITTEE
As part of the Corporate Governance and in compliance with the provisions of the Companies Act, 2013 and nd DPE Guidelines, the company constituted the Audit Committee of the Board in its 42 Board Meeting held on
st st31 March 2016 and following were its members as on 31 March, 2016, in their ex-officio capacity:
Ms.Gargi Kaul - ChairpersonGovt Nominee Director
Shri B S Bhullar - MemberGovt. Nominee Director
Sh. Vinod S. Hejmadi - MemberNominee of Holding company
Sh. Ashwani Lohani - Permanent InviteeChairman
The terms of reference of this Committee were as under:
i. To recommend for appointment, remuneration and terms of appointment of auditors of the company;
ii. To review and monitor the auditor's independence and performance, and effectiveness of audit process;
iii. To examine the financial statement and the auditors' report thereon;
iv. To approve or any subsequent modification of transactions of the company with related parties;
v. To scrutiny of inter-corporate loans and investments;
vi. Valuation of undertakings or assets of the company, wherever it is necessary;
vii. To evaluate of internal financial controls and risk management systems;
viii. To monitor the end use of funds raised through public offers and related matters.”
Annual General Meetings (AGM) during the last three years:
AGM Number Date and time of the Meeting Venue
th 11 AGM 30.12.2016 at 1700 Hrs Airlines House,113 Gurudwara Rakabganj Road, New Delhi 110 001
th 10 AGM 28.12.2015 at 1630 Hrs Airlines House,113 Gurudwara Rakabganj Road, New Delhi 110 001
th 9 AGM 27.12.2014 at 1015 Hrs Airlines House,113 Gurudwara Rakabganj Road, New Delhi 110 001
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22
SECRETARIAL AUDIT REPORTFOR THE FINANCIAL YEAR ENDED 31ST MARCH, 2016
(Pursuant to Section 204 (1) of the Companies Act, 2013 and rule No.9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014)
To,The Members,Air India Engineering Services LimitedAirlines House, 113, Gurudwara Rakabganj Road, New Delhi – 110001.
I have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by Air India Engineering ServicesLimited (CIN:U74210DL2004GOI125114) (hereinafter called the Company or AIESL). Secretarial Audit was conducted in a manner that provided me a reasonable basis for evaluating the corporate conducts / statutory compliances and expressing my opinion thereon.
Based on my verification of the Air India Engineering Services Limited's books, papers, minute books, forms and returns filed and other records maintained by the company and also the information provided by the company, its officers, agents and authorised representatives during the conduct of secretarial audit and as per the explanations given to me and the representations made by the Management, I hereby report that in my opinion, the Company has, during the audit period covering the financial year ended on 31st March, 2016 generally complied with the statutory provisions listed hereunder and also that the Company has proper Board processes and compliance mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:
A. I have examined the books, papers, minute books, forms and returns filed and other records made available to me and maintained by the company for the financial year ended on 31st March, 2016 according to the applicable provisions of:
(i) The Companies Act, 2013 ('the Act') and the rules made there under;
During the period under review the Company has complied with the provisions of Companies Act, 2013, ('the Act') and the rules made thereunder, as applicable, subject to the following observations:
a) There were few instance of delay in filing of e-forms under the Act and the rules made thereunder, but they were regularised by payment of additional fees under the Act.
b) Company has not appointed Independent directors pursuant to sub-section 4& 5 of section 149 of Companies Act, 2013 , hence no meeting of independent directors could be held during the period under audit. Since, the company has not appointed independent directors , the company has not complied with the provisions of section 177(2) and 178 of Companies Act, 2013 read with Rule 6 of Companies( Meetings of Board and its Power) Rules, 2014 as regard the appointment of Independent directors in composition of the Audit Committee.
c) Company has not constituted Remuneration and Nomination Committee of the Board pursuant to 178of Companies Act, 2013 read with Rule 6 of Companies( Meetings of Board and its Power) Rules, 2014 as it meets the prescribe criteria as mentioned in Rule 6.
AIESL
23
d) Company was required to appoint a company secretary under the provisions of section 203 of the Act as the paid up capital of the company has increased to Rs. 1,666,665,000/- on 31.03.2016.
Queries raised by Statutory auditors of the company in Audit Observations in relation to compliance of Companies Act, 2013 which has been replied by the Management in Directors Report have not been reproduced here.
(ii) The Securities Contracts (Regulation) Act, 1956 ('SCRA') and the rules made thereunder;( Not applicable to the company).
(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder; ( Not applicable to the company).
(iv) Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings; ( Not applicable to the company).
(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 ('SEBI Act'):
(a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulation, 2011; ( Not applicable to the company)
(b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992; (c) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009; ( Not applicable to the company).
(d) The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999; ( Not applicable to the company).
(e) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008; ( Not applicable to the company).
(f) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client; ( Not applicable to the company).
(g) The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; ( Not applicable to the company) and
(h) The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998; ( Not applicable to the company)
(vi) In aviation sector, following laws are specifically applicable to the Company:
l Aircraft Act, 1934
l� Civil Aviation Requirements issued by DGCA
AIESL
24
AIESL is approved by the DGCA under CAR 145, and CAR 147, both issued by the DGCA. Both these regulations have been issued under Rule 133B of Indian Aircraft Rule 1937. Besides that, any person certifying the aircraft needs to hold a license issued under the provision of CAR 66, which is a regulation under Rule 61.
For the compliance of the mentioned Regulations:
a) AIESL had made the policy documents called "Maintenance Organisation Exposition (MOE)" and "Maintenance Training Organisation Exposition (MTOE)". These Documents are approved by the DGCA. Any amendment also needs to be approved by the DGCA.
b) AIESL Quality system needs to carry out frequent internal audits to ensure that each of the sections is in compliance of the regulations and the provision of MOE/MTOE.
c) DGCA conducts yearly scheduled audits. DGCA also carries out spot-checks, and other surprise audits.
d) AIESL is audited by agencies getting work done by AIESL, like the Air India and a number of other airlines.
e) AIESL is also subject to audits by foreign regulators, where AIESL is certifying the aircraft registered in their respective countries.
f) AIESL is also approved by many foreign regulators like EASA and FAA, who carry out surveillance audits.
AIESL needs to
a) Submit regular evidences regarding the CAR compliances.
b) Submit CAR compliance report, whenever any of the existing CARs is amended.
c) Any time asked for by the regulator.
Besides that, all regulatory audits need to be closed within stipulated time frame.
DGCA has issued Civil Aviation Requirements ( CAR ) under section 4 of Aircraft Act, 1934 read with Rule 133A of Aircraft Rules, 1937 and the company is required to comply such requirements under DGCA check systems . While the broad principles of law are contained in the Aircraft Rules, 1937, Civil Aviation Requirements are issued to specify the detailed requirements and compliance procedures.
I further report, that the company is generally regular in compliance of aforesaid CAR under aviation laws and the compliance by the Company of such aviation laws have not been reviewed in this Audit which have been subject to review by DGCA and other designated professionals/authorities.
I have also examined compliance with the applicable clauses of the following:
(i) Secretarial Standards issued by The Institute of Company Secretaries of India. and
AIESL
25
I have examined the framework, processes and procedures of compliance with respect to following laws applicable to the company on test basis.
Apprentices Act, 1961; Employees State Insurance Act, 1948; Payment of Wages Act,1948; Minimum Wages Act, 1948; Industrial Disputes Act, 1947; Payment of Bonus Act, 1965; Payment of Gratuity Act, 1972; Contract Labour (Regulation and Abolition) Act, 1970; Maternity Benefit Act, 1961; The Child Labour (Prohibition&Regulation) Act, 1986; Equal RemunerationAct,1976; The Employment Exchange (Compulsory Notification of Vacancies) Act,1956,
The Company contributes to Air India and its subsidiary airlines Employees Provident Fund Trusts under the Provident Fund Act, which governs the Provident Fund Plans for eligible employees. The Company as well as the employees contributes 10% of the PF Pay to the Fund out of which Provident Fund is paid to the employees.
Sexual Harassment of Women at Workplace( Prevention, Prohibition and Regulation ) Act, 2013: The Company has in place an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment.
In connection with aforesaid laws, adequate systems and processes are in place to monitor and ensure compliance with such laws .
During the audit , it is observed that the Compliance Management System needs to be further strengthen by taking the following actions:
a) To establish Corporate Compliance Committee and designate a Chief Compliance officer and maintain centralised mechanism to ensure compliance with all applicable laws;
b) To establish and maintain effective co-ordination of functional units and the compliance department under the overall supervision of the Board;
c) To establish mechanisms to prevent, detect, report and to respond to non-compliances;
d) To present Quarterly compliance Report to the Board;
e) Identification and classification of various compliance risks;
f) Organisation of compliance Check list, Audit, feed back, remedies.
I further report, that the compliance by the Company of applicable financial laws, like direct and indirect tax laws, has not been reviewed in this Audit since the same have been subject to review by statutory financial audit and other designated professionals.
During the period under review and as per the explanations and clarifications given to me and there presentations made by the Management, the Company has generally complied with the provisions of the Act, Rules, Regulations, Guidelines, etc. mentioned above subject to the observation made therein.
I further report that:
The Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Nominee Directors. The changes in the composition of the Board of
AIESL
26
Directors that took place during the period under review were carried out in compliance with the provisions of the Act.
Adequate notice is given to all directors to schedule the Board Meetings at least seven days in advance and where the Board meetings are called at shorter notice ,presence of at least one Nominee director is ensured, agenda and detailed notes on agenda were sent and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.
Decisions at the Board Meetings, as represented by the management, were taken unanimously.
I further report that as per the explanations given to me and the representations made by the Management and relied upon by me there are adequate systems and processes in the Company commensurate with the size and operations of the Company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines. It is informed that the Company has responded to notices for demands, claims, penalties etc. levied by various statutory / regulatory authorities and initiated actions for corrective measures, wherever necessary.
I further report that during the audit period the company has:
i) During the financial year, the company has allotted 16,66,16,500Equity Shares of Rs. 10/- each at par, aggregating to Rs. 166,61,65,000 to Air India Ltd vide Board Meeting dated31.03.2016.
(Jiwan Parkash Saini)Company Secretary
in practiceMarch14, 2017FCS No: 3671 CP No: 2100
Note-1:Specific non compliances / observations / audit qualification, reservation or adverse remarks has been reported in respect of the above at appropriate place .
Note-2:This Report is to be read with my letter of even date which is annexed as Annexure A and forms an integral part of this report.
'Annexure A’
To,The Members,Air India Engineering Services LimitedAirlines House, 113, Gurudwara Rakabganj Road, New Delhi – 110001
My report of even date is to be read along with this letter.
1. Maintenance of Secretarial record is the responsibility of the management of the Company. My responsibility is to express an opinion on these secretarial records based on my audit.
2. I have followed the audit practices and process as were appropriate to obtain reasonable assurance about the correctness of the contents of the Secretarial records. The verification was done on test basis to ensure that correct facts are reflected in Secretarial records. I believe that the process and practices, we followed provide a reasonable basis for my opinion.
3. I have not verified the correctness and appropriateness of financial records and Books of Accounts of the Company.
4. Where ever required, I have obtained the Management representation about the Compliance of laws, rules and regulations and happening of events etc.
5. The Compliance of the provisions of Corporate and other applicable laws, rules, regulations, standards is the responsibility of management. My examination was limited to the verification of procedure on test basis.
6. The Secretarial Audit report is neither an assurance as to the future viability of the Company nor of the efficacy or effectiveness with which the management has conducted the affairs of the Company.
(Jiwan Parkash Saini)Company Secretary
in practiceMarch 14, 2017
FCS No: 3671 CP No: 2100
AIESL
27
AIESL
28
REPLY TO SECRETARIAL AUDITOR REPORT FOR FY 2015-16
Observations Management’s Replay
a) There were few instance of delay in filing of e-forms under the Act and the rules made there under, but they were regularised by payment of additional fees under the Act.
b) Company has not appointed Independent directors pursuant to sub-section 4 & 5 of section 149 of Companies Act, 2013, hence no meeting of independent directors could be held during the period under audit. Since, the company has not appointed independent directors, the company has not complied with the provisions of section 177(2) and 178 of Companies Act, 2013 read with Rule 6 of Companies (Meetings of Board and its Power) Rules, 2014 as regard the appoint-ment of Independent Director in composition of the Audit Committee.
c) Company has not constituted Remuneration and Nomination Committee of the Board pursuant to 178 of Companies Act, 2013 read with Rule 6 of Companies( Meetings of Board and its Power) Rules, 2014 as it meets the prescribe criteria as mentioned in such Rule 6.
d) Company was required to appoint a company secretary under the provisions of Section 203 of the Act as the paid up capital of the com-pany has increased to Rs. 1,666,665,000/- on 31.03.2016.
Statement of Fact.
Some of the forms got delayed for filing, which were filed with additional / late filing fee. The provisions of Act were thus complied with.
Audit Committee was constituted by the Board in its meeting held on 31-03-2016 comprising of three members, with Govt Nominee Directors forming a majority, pending the appointment of Independent Directors.
In terms of provisions of Article of Association, the appointment of Independent Directors will be done by Holding Company / Administrative Ministry.
As there was no Independent Director on the Board of AIESL, the matter was taken up with the Ministry of Civil Aviation by Air India Limited ,Holding Company.
The Audit Committee shall be reconstituted and the Nomination and Remuneration Committee shall be constituted upon appointment of Independent Directors.
As per reply in 'b' above.
The necessary steps for appointment of Company Secretary are being taken by the Company
AIESL
29
Annexure to Directors' Report for the year 2015-16 Annexure
FORM NO. MGT 9 EXTRACT OF ANNUAL RETURN
As on financial year ended on 31.03.2016 Pursuant to Section 92 (3) of the Companies Act, 2013 and rule 12(1) of the Companies
(Management & Administration) Rules, 2014.
I. REGISTRATION & OTHER DETAILS:
II. PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY (All the business activities contributing 10 % or more of the total turnover of the company shall be stated) -
1.
CIN U74210DL2004GOI125114
2.
Registration Date 11/03/2004
3.
Name of the Company AIR-INDIA ENGINEERING SERVICES LIMITED (AIESL)
4. Category/Sub category of the Company
Company Limited by shares/Union Government Company
5. Address of the Registered office & contact details
AIRLINES HOUSE, 113 GURUDWARA RAKABGANJ ROA
No
D, NEW DELHI –110001, Ph.No : 011-.23422109
6 Whether listed company
7. Name, Address & contact details of the Registrar & Transfer Agent, if any.
N.A.
Sr No
Name and Description of main products / services NIC Code
of
the Product/
service
% to total
turnover of the
company
1
Technical Handling, MRO and other Services
9987
100%
III.
PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANY:
Sr. No.
Name and Address of the Company
CIN/GIN
Holding / Subsidiary / Associate
% of
Shares Applicable
Section
1
Air India Limited
113, Airlines House, Gurudwara Rakabganj Road, New Delhi, 110 001.
U62200DL2007GOI161431
Holding
100%
2 (46)
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IV. SHARE HOLDING PATTERN (Equity Share Capital Breakup as percentage of Total Equity) : Category-wise Share Holding
Category of Shareholders
No. of Shares held at the
beginning of the year
[As on 01-04-2015]
No. of Shares held at the end of the year [As on 31-03-2016]
% Change during
the year
Demat
Physical During
the year
% of Total
Shares Demat Physical Total
% of Total
Shares
A. Promoters
(1) Indian
a)
Individual/ HUF
b)
Central Govt
c)
State Govt(s)
d)
Bodies Corp.
-
50,000
50,000
100
-
166,666,500
166,666,500
166,666,500
166,666,500
100
0.00
e)
Banks / FI
f)
Any other
Total shareholding of Promoter (A)
50,000
50,000
100
-
100
0.00
B. Public Shareholding Not Applicable
1.
Institutions
a)
Mutual Funds/UTI
b)
Banks / FI
c)
Central Govt.
d)
State Govt.(s)
e)
Venture Capital
Funds
f)
Insurance
Companies
g)
FIIs
h)
Foreign Venture
Capital Funds
i)
Others (specify)
Foreign Banks
Sub-total (B)(1):-
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
AIESL
31
Category of Shareholders
No. of Shares held at the beginning of the year [As on 01-04-2015]
No. of Shares held at the end of the year [As on 31-03-2016]
% Change during
the year
Demat
Physical
Total
% of Total
Shares
Demat
Physical
Total
% of Total
Shares
2. Non-Institutions Not Applicable
a) Bodies Corp.
(Market Maker +
LLP)
i) I Indian ii) Overseas b)
Individuals
i)
Individual
shareholders
holding nominal
share capital upto
Rs. 1 lakh
ii)
Individual
shareholders
holding nominal
share capital in
excess of Rs.
1 lakh
c)
Others (specify)
i)
Non Resident
Indians
ii)
Non Resident
Indians -
Non
Repatriable
iii)
Office Bearers
iv)
Directors
v)
HUF
vi)
Overseas
Corporate Bodies
vi)
Foreign Nationals
vii)
Clearing
Members
viii)
Trusts
ix)
Foreign Bodies -
D R
Sub-total (B)(2):-
-
-
-
-
-
-
-
-
-
Total Public Shareholding (B) = (B)(1)+ (B)(2)
-
-
-
-
-
-
-
-
-
C.
Shares held by
Custodian for
GDRs & ADRs
-
-
-
-
-
-
-
-
-
Grand Total (A+B+C)
50,000
50,000
100
-
100
0.00
166,666,500 166,666,500
AIESL
32
B) Shareholding of Promoter-
C)
Change in Promoters' Shareholding (please specify, if there is no change)
Sr
No. Particulars
Shareholding at the
beginning of the year Cumulative Shareholding
at end of the year
No. of shares
% of total
shares of the company
No. of shares
% of total
shares of the company
At the beginning of the year
Air India Limited
50000
100%
At the end of the year
Air India Limited
166,666,500
100%
D)
Shareholding Pattern of top ten Shareholders: (Other than Directors, Promoters
and Holders of GDRs and ADRs):
Sr.
No. Shareholder's
Name
Shareholding at the beginning
of the year Shareholding at the end
of the year % change
In
Share-
holding
during
the
year
No. of
Shares
% of total
Shares
of the
company
% of Shares
Pledged /
Encum-
bered to
total shares
No. of
Shares
% of total
Shares
of the
company
% of Shares
Pledged /
Encum-bered
to total shares
1 Air India Limited
along with
its
nominees
50,000
100
NIL
166,666,500
100
NIL
0.00
Sr No
For Each of the Top 10 Shareholders
Shareholding at thebeginning of the year
Cumulative Shareholdingat end of the year
No. of shares
% of total shares of
the company
No. of shares
% of total shares of
the company
1
NOT APPLICABLE
2345
67
89
10
AIESL
33
E) Shareholding of Directors and Key Managerial Personnel:
S. No.
Shareholding of each Directors and each Key Managerial Personnel
Shareholding at the beginning of the year
Cumulative Shareholdingat end of the year
No. of shares
% of total shares of
the company
No. of shares
% of total shares of
the company
NIL(Shares Held by Nominees of Air India only,which includes directors also)
Total
V. INDEBTEDNESS -Indebtedness of the Company including interest outstanding/accrued but not due for payment.
(In Rs Crore)
Secured Loans
excluding deposits
Unsecured Loans
Deposits Total
Indebtedness
Indebtedness at the beginning of the financial year
i) Principal Amount
ii) Interest due but not paid
iii) Interest accrued but not due
Total (i+ii+iii)
Change in Indebtedness during the financial year
* Addition
* Reduction
Net Change
Indebtedness at the end of the financial year
i) Principal Amount
ii) Interest due but not paid
iii) Interest accrued but not due
Total (i+ii+iii)
- 62,897,979 - 62,897,979
- - - -
- - - -
- 62,897,979 - 62,897,979
- 2,149,146,778 - 2,149,146,778
- - - -
- 2,149,146,778 - 2,149,146,778
- 2,212,044,757 - 2,212,044,757
- - - -
- - - -
- 2,212,044,757 - 2,212,044,757
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VI. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL A. Remuneration to Managing Director, Whole-time Directors and/or Manager:
(In figures)
Sr No
Particulars of Remuneration Name of MD/WTD/ Manager Total
Amount
1 Gross salary - - - - - -
(a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961
(b)Value of perquisites u/s 17(2) Income-tax Act, 1961
(c)Profits in lieu of salary under section 17(3) Income- tax Act, 1961
2 Stock Option
3 Sweat Equity
4 Commission as % of profit others, specify.
5 Others : (PF, DCS, House Perks tax etc)
Total (A) - - - - - -
Ceiling as per the Act - - - - - -
*There are no Managing, Whole Time Directors in the Company. B. Remuneration to other directors
Sr No.
Particulars of Remuneration Name of Directors Total
Amount
1 Independent Directors - - - - - -
Fee for attending board committee meetings
- - - - - -
Commission - - - - - - Others, please specify (Fees for attending Board Sub Committee Meetings)
- - - - - -
Total(1) - - - - - - 2 Other Non-Executive Directors - - - - - -
Fee for attending board committee meetings
- - - - - -
Commission - - - - - - Others, please specify - - - - - -
Total (2) - - - - - Total (B)=(1+2) - - - - - - Total Managerial Remuneration - - - - - -
Overall Ceiling as per the Act - - - - - -
- - - - - -
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C. REMUNERATION TO KEY MANAGERIAL PERSONNEL OTHER THAN MD/MANAGER/WTD
( figures in Rs)
Sr. No.
Particulars of Remuneration Key Managerial Personnel
CEO CS CFO Total
1 Gross salary -
(a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961
- 21,06,931
-
21,06,931
-
(b) Value of perquisites u/s 17(2)
Income-tax Act, 1961 - -
(c) Profits in lieu of salary under section
17(3) Income-tax Act, 1961 - - -
2 Stock Option - - -
3 Sweat Equity - - -
4 Commission - - -
- as % of profit - - -
Others, specify. - - -
5 Others: (PF, DCS, House Perks tax etc) - - -
Total
-
-
-
-
-
-
-
-
-
-
-
-
VII.
PENALTIES / PUNISHMENT/ COMPOUNDING OF OFFENCES:
Type
Section of the
Companies Act
Brief Description
Details of Penalty /
Punishment/ Compounding fees
imposed
Authority [RD / NCLT/
COURT]
Appeal made, if
any (give Details)
A. COMPANY NIL
NIL
NIL
Penalty
-
-
-
-
-
Punishment
-
-
-
-
-
Compounding
-
-
-
-
-
B. DIRECTORS
Penalty
-
-
-
-
-
Punishment
-
-
-
-
-
Compounding
-
-
-
-
-
C. OTHER OFFICERS IN DEFAULT
Penalty
-
-
-
-
-
Punishment
-
-
-
-
-
Compounding
-
-
-
-
-
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COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b) OF THE COMPANIES ACT, 2013 ON THE FINANCIAL STATEMENT S OF AIR INDIA ENGINEERING SERVICES LIMITED FOR THE YEAR ENDED 31 MARCH 2016.
The preparation of financial statement of AIR INDIA ENGINEERING SERVICES LIMITED for the ended 31 March 2016 in accordance with the financial reporting framework prescribed under the Companies Act, 2013 (Act) is the responsibility of the Management of the Company. The Statutory Auditor appointed by the Comptroller and Auditor General of India under section 139(5) of the Act is responsible for expressing opinion on the financial statements under Section 143 of the Act based on independent audit in accordance with the Standards on auditing prescribed under section 143(10) of the Act. This is stated to have been done by them vide their Audit Report dated 16 March 2017.
I, on the behalf of the Comptroller and Auditor General of India, have decided not to conduct the supplementary audit of the financial statements of AIR INDIA ENGINEERING SERVICES LIMITED for the year ended 31 March 2016 under section 143(6)(a) of the Act.
For and on behalf of theComptroller and Auditor General of India
Sd/-(Neelesh Kumar Sah)
Principal Director of Commercial Audit& Ex-officio Member, Audit Board-I,
New Delhi.
Place : New DelhiDate : 25.4.2017
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF AIR INDIA ENGINEERING SERVICES LTD.
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of Air India Engineering Services Limited ('the st
Company') which comprises the Balance Sheet as at 31 March 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.
MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The Company's Board of Directors are responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation and presentation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes 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 frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implement-ation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
AUDITOR'S RESPONSIBILITY
Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.
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BASIS FOR QUALIFIED OPINION
Attention is drawn to the point no. 1 of “Annexure A” to our audit report wherein intangible asset is not amortized as per applicable Accounting Standard.
QUALIFIED OPINION
In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matters described in the Basis for Qualified Opinion paragraph above, the aforesaid financial statements give the information by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2016, and its loss and its cash flows for the year ended on that date.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by the Companies (Auditor's Report) Order, 2016 ('the Order'), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the “Annexure B”, a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. We are enclosing our report in terms of section 143(5) of the Act, on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explan-ations given to us, we give in the “Annexure C” on the directions issued by the Comptroller and Auditor General of India.
3. As required by section 143(3) of the Act, we report that :
a. We have sought and, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;
b. Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
c. The Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account;
d. Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion the aforesaid financial state-ments comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Account) Rules, 2014;
e. The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the company.
f. Being a Government Company, Section 164(2) of the Companies Act, 2013 is not applicable to the Company;
g. The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above; and
h. As informed to us, the Company has appointed a separate auditor for audit of internal finance control and based on the audit report of the same we have opinion that except for the
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effects/possible effects of the material weaknesses as described in auditor's report the company has adequate internal finance control system in place and are operating effectively.
i. With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
i) The Company does not have any pending litigations which would impact its financial position.
ii) The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses; and
iii) There has not been an occasion in case of the Company during the year under report to transfer any sums to the Investor Education and Protec-tion Fund. The question of delay in transferring such sums does not arise.
For Jhawar Mantri & Associates Chartered Accountants
(Firm Regn. No. 113221W)
Place: New Delhi B. P. Mantri
Date : 16.03.2017 Partner
M. No. 045701
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“ANNEXURE A” TO THE INDEPENDENT AUDITOR'S REPORT
1. OTHER INTANGIBLE ASSETS
During the last year the Company has capitalized assets under the head “Other Intangible Assets” for an amount of Rs. 271,38,28,069/- (Rupees Two hundred seventy one crores thirty eight lacs twenty eight thousand sixty nine only) which constitutes the apportionment of Payroll Expenses, Staff Expenses, Gratuity & Leave Salary expenses and other general expenses (e.g. Rent, Repair & Maintenance, Electricity & Heating Charges etc) incurred during the period from October 2014 to December 2014 towards obtaining CAR – 145 (License from DGCA for carrying out MRO services).
As per our opinion as set out in last year audit report capitalisation of “Other Intangible Assets” was not in accordance with the accounting standards, basic accounting assumptions and principles. Consequently expenses and losses were understated in Profit & Loss Account and Fixed Assets are overstated to the extent of amount of Rs. 271,38,28,069/- (Rupees Two hundred seventy one crores thirty eight lacs twenty thousand sixty nine only) in the Balance Sheet in last year.
Consequential effect in current year of the same is that Fixed Assets are overstated to the extent of amount of Rs. 271,38,28,069/- (Rupees Two hundred seventy one crores thirty eight lacs twenty thousand sixty nine only) and reserve and surplus being accumulated losses understated to that extent.
Further as per accounting policy adopted for depreciation/amortisation “Intangible assets which have a useful economic life are amortised over the estimated useful life”. However the company has not amortised any amount during current year as well as previous year out of such intangible assets created, which clearly indicates departure from the significant accounting policies as adopted by the company as well as provision of Accounting Standard 26 of “Intangible Assets”.
Provision of Para 63 of Accounting Standard 26 of “Intangible Assets” requires “The depreciable amount of an intangible asset should be allocated on a systematic basis over the best estimate of its useful life. There is a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. Amortisation should commence when the asset is available for use.”
MANAGEMENT COMMENTS:
stDGCA Licence for CAR-145 certification for the MRO was received on 1 Jan 2015. The expenditure incurred in stcreating this asset was capitalised in the books of the Company as of 31 March 2015, based on this license,
the Company has also applied for other certifications like FAA, EASA approval for its facilities. The Company therefore believes that there has been no diminution in the value of the asset as of date. Since the license was issued by DGCA for an indefinite period of time, and has not been suspended at any point of time since its issue, no impairment loss has been recognised by the Company for the year under review.
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“ANNEXURE B” TO INDEPENDENT AUDITOR'S REPORT
The Annexure referred to in our Independent Auditor's Report to the members of the Company on the stfinancial statements for the year ended 31 March 2016, we report that:
1. (a) The Company has maintained proper records of fixed assets showing full particulars including quantitative situation of Fixed Assets in the SAP system.
(b) As informed to us the physical verification of fixed assets has been conducted by the parent company over a biennial period. However no physical verification report was made available to us. Hence we can't comments on any discrepancies, if found, have been properly dealt in or not.
(c) The Company does not hold any immovable property. Therefore, paragraph c(I) of the Order is not applicable.
2. The Company is not carrying on any trading or manufacturing activities. Accordingly clause relating to inventory is not applicable.
3. As informed to us, the Company has not granted any loans, secured or unsecured to the companies, firms and other parties covered in the register maintained under section 189 of the Companies Act, 2013.
(a) Since there are no such loans, question of regular in repaying the principal or interest amounts as stipulated does not arise.
(b) There are no overdue amounts of more than rupees one lakh in respect of the loans granted to the body corporate, firm and other parties listed in the register maintained under section 189 of the Act.
4. The Company has not provided any loans, investments, guarantees, security or advances to any of its Directors or any of their related person or entity. Therefore, provisions of section 185 and 186 of the Companies Act, 2013 are not applicable for the Company.
5. The Company has not accepted any deposits from the public covered under section 73 to 76 of the Companies Act, 2013.
6. The Central Government has not prescribed the maintenance of cost records under section 148(1) of the Act, for of the goods and services dealt in by the Company.
7. (a) The Company is not regular in depositing undisputed statutory dues including provident fund, employee state insurance, income tax, sales tax, service tax and any other statutory dues with the appropriate authorities.
As per information and explanations, undisputed statutory liabilities outstanding for more than 6 months as on March 31, 2016 are as under:
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Sr. GL Account Code Nature of Statutory Dues Amount Outstanding No. for more than 6 months as on 31-Mar-2016 1 1110002325 Provident Fund Payable 5,64,66,690 2 1110003100 TDS on Salary 35,93,31,988 3 1110003110 TDS on Contractor 1,31,939 4 1110003115 TDS on Rent 23,676 5 1110003151 TDS u/s 194 Old 11,39,870 6 Various Ledger Service Tax Payable 3,03,13,749 7 1110004030 AAI Levy 20,88,333
As informed to us, provident fund dues are remitted by the Parent Company, AIL, however the accounting entries are not passed/reconciled, hence it is showing as outstanding in the books of accounts of the Company.
(b) According to the information and explanations given to us, there are no dues of income tax,
sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax or cess which have not been deposited with the appropriate authorities on account of any dispute.
8. The Company has not defaulted in repayment of dues to financial institution or bank or debenture holders.
9. The Company did not raise money by way of initial public offer or further public offer (including debt instruments) or term loans during the year. Accordingly, paragraph (ix) of the Order is not applicable.
10. To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the company was noticed or reported during the year.
11. The Company has neither provided nor paid managerial remuneration.
12. In our opinion and according to the information and explanations given to us, the company is not a Nidhi company. Accordingly, paragraph (xii) of the Order is not applicable.
13. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with Section 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the Note No. 23.8 of Notes to the Financial Statements as required by the applicable accounting standards.
14. According to the information and explanations given to us and based on our examination of the records of the Company, the company has not made any preferential allotment or private placement of shares or fully or partly convertible debenture during theyear.
15. According to the information and explanations given to us and based on our examination of the records of the Company, the company has not entered into any non-cash transaction with directors or person connected with directors in compliance with section 192 of the Act.
16. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.
For Jhawar Mantri & Associates Chartered Accountants
(Firm Regn. No. 113221W)
Place: New Delhi B. P. Mantri
Date : 16.03.2017 Partner
M. No. 045701
“ANNEXURE C” TO THE INDEPENDENT AUDITORS' REPORT
Annexure referred to in our report of even date to the members of Air India Engineering Services Limited on the
accounts for the year ended 31st March 2016
Directions under Section 143(5)of Companies Act 2013
S.No.
Auditor’s Comment Impact onFinancialStatement
1 If the Company has been selected for disinvestment, a complete status report in terms of valuation of Assets (including intangible assets and land) and Liabilities ( inc lud ing Commi t ted & Genera l Reserves) may be examined including the mode and present stage of disinvestment process
2 Please report whether there are any cases of waiver/ write off of debts/loans/interest etc., if yes, the reasons there for and the amount involved.
3 Whether proper records are maintained for inventories lying with third parties & assets received as gift from Govt. or other authorities.
4 A report on age-wise analysis of pending legal/ arbitration cases including the reasons of pendency and existence/ effectiveness of a monitoring mechanism for expenditure on all legal cases(foreign and local) may be given.
The Company has not been selected for disinvestment.
According to information and explan-ations given to us, there are no cases of waiver/write off of debts/ loans/interest etc.
According to information and explan-ations given to us, there is no inventory lying with third parties and there is no assets received as gift from Govt. or other authorities.
According to information and explan-ations given to us, there are no legal/arbitration cases pending against the Company or filed by the Company.
Not Applicable
Nil
Nil
Nil
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For Jhawar Mantri & Associates
Chartered Accountants (Firm Regn. No. 113221W)
Place: New Delhi B. P. Mantri
Date : 16.03.2017 Partner
M. No. 045701
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MANAGEMENT REPLIES TO THE INDEPENDENT AUDITOR’S REPORTS ON THE FINANCIAL STATEMENT OF AIR INDIA ENGINEERING SERVICES LIMITED FOR THE FINANCIAL YEAR 2015-2016
Audit Observations Management’s Comment
Report on the Financial Statements
We have audited the accompanying financial statements of Air India Engineering Services Limited ('the Company') which comprises the
stBalance Sheet as at 31 March 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
The Company's Board of Directors are responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation and presentation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes 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 frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implement-ation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report
This is a Statement of Fact.
This is a Statement of Fact.
This is a Statement of Fact.
Audit Observations Management’s Comment
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under the provisions of the Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.
Basis for Qualified Opinion
Attention is drawn to the point no. 1 of “Annexure A” to our audit report wherein intangible asset is not amortized as per applicable Accounting Standard.
Qualified Opinion
In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matters described in the Basis for Qualified Opinion paragraph above, the
Intangible assets created for obtaining the DGCA licence for CAR-145 MRO with certification has not been depreciated /amortised during 2015-16 as there is no impairment of the same.
Audit Comments are noted.
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Audit Observations Management’s Comment
aforesaid financial statements give the information by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2016, and its loss and its cash flows for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2016 ('the Order'), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the “Annexure B”, a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. We are enclosing our report in terms of section 143(5) of the Act, on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explan-ations given to us, we give in the “Annexure C” on the direct ions issued by the Comptroller and Auditor General of India.
3. As required by section 143(3) of the Act, we report that :
a. We have sought and, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;
b. Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
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Audit Observations Management’s Comment
c. The Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account;
d. Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion the aforesaid financial state-ments comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Account) Rules, 2014;
e. The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the company.
f. Being a Government Company, Section 164(2) of the Companies Act, 2013 is not appl icable to the Company;
g. The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above; and
h. As informed to us, the Company has appointed a separate auditor for audit of internal finance control and based on the audit report of the same we have opinion that except for the effects/possible effects of the material weaknesses as described in auditor's report the company has adequate internal finance control system in place and are operating effectively.
i. With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
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Audit Observations Management’s Comment
i) The Company does not have any pending litigations which would impact its financial position.
ii) The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses; and
iii) There has not been an occasion in case of the Company during the year under report to transfer any sums to the Investor Education and Protec-tion Fund. The question of delay in transferring such sums does not arise.
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(Amount in Rupees)
Particulars Note No.
Significant Accounting Policies 1
Notes forming part of the Financial Statement 2-23
As per our report of even date attached
As at March 31, 2015As at March 31, 2016
BALANCE SHEET AS AT 31ST MARCH 2016
For and on Behalf of For and on behalf of the Board
Sd/- Sd/- Sd/-Jhawar Mantri & Associates Ashwani Lohani V.S. HejmadiChartered Accountants Chairman Director-FinanceFRN : 113221W Sd/- Sd/- Sd/-B.P Mantri C.N. Hemalatha H.R. JagannathPartner Chief of Finance Chief Executive OfficerM.No. 045701
Place : New Delhi Date : 16 March 2017
EQUITY AND LIABILITIES :Shareholders' Fundsa) Share Capital 2 1,666,665,000 500,000 b) Reserves and Surplus 3 (8,012,918,413) (2,426,709,080) (6,346,253,413) (2,426,209,080)Share Application Money Pending Allotment 4 - 1,666,165,000
Non-current Liabilitiesa) Long Term Borrowings 5 2,212,044,757 62,897,979b) Deferred Tax Liabilities (Net)c) Other Long Term Liabilitiesd) Long Term Provisions 6 4,347,167,881 4,223,733,048 6,559,212,638 4,286,631,027
Current Liabilitiesa) Short Term Borrowings - - b) Trade Payables 7 56,881,302 15,232,643 c) Other Current Liabilities 8 3,985,996,115 1,735,688,022 d) Short Term Provisions 9 931,493,477 7,019,251 4,974,370,894 1,757,939,916
TOTAL 5,187,330,120 5,284,526,863
ASSETS :Non-current Assetsa) Fixed Assets (i) Tangible Assets 10 1,221,621,683 1,485,339,841 (ii) Intangible Assets 10 2,713,828,069 2,713,828,069 (iii) Capital Work-in-Progress - - (iv) Intangible Assets under development - - 3,935,449,752 4,199,167,910 b) Non-Current Investments - - c) Deferred Tax Assets (net) - - d) Long Term Loans and Advances 11 20,428,566 517,572,180 e) Other Non-Current Assets 14 - 20,428,566 517,572,180Current Assetsa) Current Investments - - b) Inventories - - c) Trade Receivables 12 779,706,883 160,551,316 d) Cash and Bank Balances 13 440,591,603 407,129,517 e) Short Term Loans and Advances - - f) Other Current Assets 14 11,153,316 105,940 1,231,451,802 567,786,773
TOTAL 5,187,330,120 5,284,526,863
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(Amount in Rupees)
Note No. 2015-16 2014-15 Particulars
STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31ST MARCH 2016
Significant Accounting Policies 1
Notes forming part of the Financial Statement 2-23
As per our report of even date attached
For and on Behalf of For and on behalf of the Board
Sd/- Sd/- Sd/-Jhawar Mantri & Associates Ashwani Lohani V.S. HejmadiChartered Accountants Chairman Director-FinanceFRN : 113221W
Sd/- Sd/- Sd/-B.P Mantri C.N. Hemalatha H.R. JagannathPartner Chief of Finance Chief Executive OfficerM.No. 045701
Place : New Delhi Date : 16 March 2017
RevenueI Revenue from Operation 15 6,202,713,779 1,420,058,830II Other Income 16 4,544 1,979
III Total Reveune (I+II) 6,202,718,323 1,420,060,809
IV Expenses Cost of Material Consumed - - Purchase of Stock in trade - - Change in inventories - - Employee Benefit Expenses 17 10,309,267,545 2,940,208,061 Finance Costs 18 56,390,370 - Depreciation and Amortization Expense 19 372,305,985 209,489,043 Other Expenses 20 1,062,118,933 696,039,436
Total Expenditure 11,800,082,834 3,845,736,540
Prior Period Adjustments (Net) 21 (11,155,179) -
Total Expenditure After Prior Period Adj 11,788,927,655 3,845,736,540
V Profit/ (Loss) before Exceptional and Extraordinary (5,586,209,333) (2,425,675,731) Items and Tax (III-IV)
VI Exceptional Items - -
VII Profit/ (Loss) before Extraordinary Items and Tax (V+VI) (5,586,209,333) (2,425,675,731)
VIII Extra Ordinary Items (Net) - -
IX Profit/ (Loss) before Tax (VII+VIII) (5,586,209,333) (2,425,675,731)
X Tax Expenses : - - i) Current Tax ii) Tax Adjustment relating to earlier year - - iii) Deferred Tax - -XI Profit/ (Loss) after Tax for the period (IX-X) (5,586,209,333) (2,425,675,731)XII Earning per Share of Rs. 10 each Basic 22 (11,056.63) (48,513.51) Diluted 22 (11,056.63) (48,513.51)
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(Amount in Rupees)
Particulars
Notes
As at March 31, 2016 As at March 31, 2015
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2016
1. The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting Standard 3 (AS-3) on “Cash Flow Statements” and present cash flows by operating, investing and financing activities.
As per our report of even date attached
For and on Behalf of For and on behalf of the Board
Sd/- Sd/- Sd/-Jhawar Mantri & Associates Ashwani Lohani V.S. HejmadiChartered Accountants Chairman Director-FinanceFRN : 113221W
Sd/- Sd/- Sd/-B.P Mantri C.N. Hemalatha H.R. JagannathPartner Chief of Finance Chief Executive OfficerM.No. 045701
Place : New Delhi Date : 16 March 2017
A. CASH FLOW FROM OPERATING ACTIVITIES
Net (Loss) / Profit Before Taxes: (5,586,209,333) (2,425,675,731) Adjustment for :
Depreciation and amortisation 372,305,985 209,489,043
Provision for Employee Benefits 123,434,833 4,223,733,048
495,740,818 4,433,222,091 Operating (Loss) / Profit Before Working Capital Changes (5,090,468,514) 2,007,546,360 Adjustments for :
(Increase) / Decrease in Trade and Other Receivables (133,059,329) (678,229,436)
Increase / (Decrease) in Trade and Other Payables 5,365,577,756 1,756,887,021
5,232,518,428 1,141,555,564 Net Cash Flow (used in)/ from Operating Activities 142,049,913 3,149,101,924
B. CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of fixed assets (108,587,827) (4,408,656,953)
Acquisition of other non current assets -
Net Cash Flow used in Investing Activities (108,587,827) (4,408,656,953)
C. CASH FLOW FROM FINANCING ACTIVITIES
Issue of Shares, incl Share application money
pending allotment - 1,666,165,000
Net Cash Flow from/(used in) Financing Activities - 1,666,165,000
Net increase/ (Decrease) in Cash and Cash equivalents 33,462,086 406,609,971
Cash and Cash equivalents (Opening balance) 407,129,517 519,546
Cash and Cash equivalents (Closing balance) 440,591,603 407,129,517
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NOTES FORMING PART OF THE FINANCIAL STATEMENT FOR THE YEAR ENDED MARCH 31, 2016
NOTE “1”
A. CORPORATE INFORMATION
The company secured DGCA approval for providing MRO services effective 01 January 2015. The MOUs entered into by the Company with its parent company, Air India Ltd and subsidiary companies of Air India Ltd, viz. 'Air India Charters Ltd' and 'Airline Allied Services Ltd' for rendering their aircraft engineering related services.
B. ACCOUNTING CONVENTION
i. These financial statements are prepared under historical cost convention on going concern concept on accrual basis and in accordance with the mandatory accounting standards prescribed under Section 133 of the Companies Act, 2013 ('Act') read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Institute of Chartered Accountants of India to the extent applicable.
ii. The preparation of financial statements in conformity with generally accepted accounting principles in India requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Differences between the actual results and estimates are recognized in the period in which results are known / materialized.
iii. The Company being in service sector, there is no specific operating cycle; 12 months period has been adopted as “the Operating Cycle” in-terms of the provisions of Schedule III to the Companies Act 2013.
C. SIGNIFICANT ACCOUNTING POLICIES
1. FIXED ASSETS
A) TANGIBLE ASSETS: Fixed Assets are stated at cost including incidental costs incurred pertaining to the acquisition and bringing them to the location for use and interest on loans borrowed where applicable, upto the date of putting the concerned asset to use.
B) INTANGIBLE ASSETS: DGCA License – all expenses incurred including man power cost prior to three months from the date of obtaining the License and directly attributable to DGCA License for CAR-145 MRO with certification has been capitalized.
2. DEPRECIATION / AMORTIZATION
a) Depreciation is provided on all assets on straight-line method over the useful life of assets as provided in Part C of Schedule II of the Companies Act 2013, keeping a residual value of 5% of the original cost.
b) Depreciation on additions to “Other Fixed Assets” is provided for the full year in the year of acquisition and no depreciation is provided in the year of disposal.
c) Intangible asset which have a useful economic life are amortized over the estimated useful life.
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3. REVENUE RECOGNITION
a) Revenue is recognized only when it can be reliably measured and it is reasonable to expect ultimate collection. Revenue from operations includes technical handling revenue, MRO services revenue, & other servicing revenue.
b) Other servicing revenue is recognized on the basis of budgeted rate per block hours multiplied by actual block hours. MRO services revenue & Technical Handling Revenue are recognized as shared by Holding company & other group companies and in some of the cases bills are raised directly by AIESL after completion of services as agreed.
c) Other operating revenue is related to training charges recovered from trainees and recognized as and when right to receive arises.
d) Income from Interest is recognized on a time proportion basis.
e) Gain or loss arising out of sale/scrap of Fixed Assets over the net depreciated value is taken to Statement of Profit & Loss as Non-Operating Revenue or Other Expenses.
4. EMPLOYEE BENEFITS
a) Short term employee benefits: All employee benefits falling due wholly within twelve months of rendering the services are classified as short term employee benefits. The benefits like salaries, wages, and short term compensated absences etc. and the expected cost of bonus, ex-gratia are recognized in the period in which the employee renders the related services.
b) Post-employment benefits:
Defined Contribution Plans consist of contributions to Employees Provident Fund and Employees State Insurance Scheme. The Parent Company, viz Air India Ltd, and subsidiary airlines of Air India Ltd, viz. 'Air India Charters Ltd' and 'Airline Allied Services Ltd' have created separate Trusts to administer Provident Fund contributions to which contributions are made regularly. ESI dues are regularly deposited with government authorities.
Defined Benefit Plans, which are not funded, consist of Gratuity, Leave Encashment including Sick Leave and other benefits.
The liability for Gratuity and Leave Encashment is actuarially determined under the Projected Unit Credit Method at the end of the financial year.
5. IMPAIRMENT OF ASSETS
At each Balance Sheet date, the carrying amount of assets is tested for impairment in terms of AS-28 so as to determine:
a) the provision for impairment loss, if any; and
b) the reversal of impairment loss recognized in previous periods, if any,
Impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount.
6. TAXES ON INCOME
Provision for current tax, if any, is made in accordance with the provisions of Income Tax Act, 1961.
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Deferred tax is recognised on timing differences between book and taxable profit using the tax rates and laws that have been enacted or substantively enacted as on the Balance Sheet date. The Deferred tax assets are recognised and carried forward to the extent that there is a virtual certainty that the assets will be realised in the future.
7. PROVISIONS, CONTINGENT LIABILITIES & CONTINGENT ASSETS
a) Provisions involving a substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources.
b) Contingent liabilities exceeding Rs.1,00,000/- in each case are disclosed in respect of possible obligations that may arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.
c) Contingent Assets are neither recognized nor disclosed in the financial statements.
8. PREPAID EXPENSES/LIABILITY FOR EXPENSES
Pre-paid expenses / Liabilities for expenses recognized – Rs10,000/- and above in each case.
9. INVESTMENTS
Current investments are carried at lower of cost and quoted/fair value, computed category wise. Long Term Investments are stated at cost. Provision for diminution in the value of long-term investments is made only if such a decline is other than temporary.
NOTE "2" : SHARE CAPITAL(Amount in Rupees)
Particulars As at March 31, 2015
As at March 31, 2016
c) Reconciliation of number of shares :(Number of Shares) (Share Value Rupees)
Particulars As at March
31, 2016 As at March
31, 2015 As at March
31, 2016 As at March
31, 2015
a) AUTHORISED 1000,000,000 Equity Shares (Previous Year : 100,00,000) of Rs.10 each 10,000,000,000.00 100,000,000.00
10,000,000,000.00 100,000,000.00
b) ISSUED, SUBSCRIBED AND FULLY PAID-UP SHARES 1666,66,500 Equity Shares of Rs. 10 each 1,666,665,000.00 500,000.00 1,666,665,000.00 500,000.00
Equity Shares at the beginning of the year 50,000 50,000 500,000 500,000
Add : Equity Shares Allotted during the year 166,616,500 - 1,666,165,000 -
Equity Shares at the end of the year 166,666,500 50,000 1,666,665,000 500,000
d) Rights Preferences and restriction attached to equity shares
The company has single class of shares i.e. Equity Shares having a par value of Rs. 10 per share as per. Each holder of equity shares is entitled to one vote per share.
In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
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e) Details of Shares held by the Holding Company, Subsidiary & Associates
f) Details of Shareholders holding more than 5%
Shares held by Holding CompanyAir India Limited 166,666,500 50,000 100% 100%
( % of Share Holding)(Number of Shares)
Particulars As at March
31, 2016 As at March
31, 2015 As at March
31, 2016 As at March
31, 2015
Air India Limited 166,666,500 50,000 100% 100%
( % of Share Holding)(Number of Shares)
Particulars As at March
31, 2016 As at March
31, 2015 As at March
31, 2016 As at March
31, 2015
g) Details of Shares Issued & Allotted as fully paid up pursuant to contract without payment being received in cash (Value)(Number of Shares)
Particulars As at March 31, 2016 As at March 31, 2015
NOTE "3" : RESERVES AND SURPLUS(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
TOTAL
NOTE "4" : SHARE APPLICATION MONEY PENDING ALLOTMENT(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
- 1,666,165,000
-
Share Application Money Pending Allotment(Share application money amount represents WDV of engineering assets transferred by the Holding Company Air India Limited as on 1st April 2014 towards capital infusion in terms of MoU entered between Air India Limited & Air India Engineering Services Limited dated 05th April, 2013)
(Also refer point no. 10(a) of Note 21)
Company will issue 16,66,16,500 equity shares of having face value of Rs. 10/- each at par.
Shares to be alloted tentatively byThe company has increased its authorised capital from Rs. 10 crore to Rs. 1,000 crore subsequent to balance sheet date towards allotment of shares against application money received as above.
1666,16,500 Equity Shares of Rs. 10 each were allotted 166,616,500 1,666,165,000 towards the WDV of engineering assets transferred by the Holding Company Air India Limited as on 1st April 2014 towards capital infusion in terms of clause 5 (a) MoU entered between Air India Limited & Air India Engineering Services Limited dated 05th April, 2013)
Surplus / (Deficit) as per Statement of Profit & LossOpening Balance (2,426,709,080) (1,033,349)Profit / (Loss) for the year (5,586,209,333) (2,425,675,731)
Closing Balance (8,012,918,413) (2,426,709,080)
(8,012,918,413) (2,426,709,080)
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NOTE "5" : LONG TERM BORROWINGS
TOTAL
NOTE "6" : LONG TERM PROVISIONS
TOTAL
NOTE "7" : TRADE PAYABLES
TOTAL
NOTE "8" : OTHER CURRENT LIABILITIES
TOTAL
(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
Advance towards EMD 3,300,000 600,000 Advance from Customers 2,184,518 - Statutory Dues 1,860,714,454 596,951,921 Other Payables 2,119,797,143 1,138,136,101 3,985,996,115 1,735,688,022
Due to Micro and Small Enterprises - - Others 56,881,302 15,232,643 (Refer Point no. '13' of Note No. 21) 56,881,302 15,232,643
Provision for Employee Benefitsa) Gratuity 2,491,103,638 2,367,422,020 b) Leave Encashment 1,856,064,243 1,856,311,028 (In absence of proper details full amount of provision is classified as long term) 4,347,167,881 4,223,733,048
Loans & advances from related partiesUnsecuredFrom Holding Company - Air India Limited 1979482863(As per MOU, Holding Company AIL shall provide support forcapital & operational expinditure, No Repayment Terms are mention in MOU)
UnsecuredFrom Group Company - Air India Air Transport Services Limited 80,916,138 (Terms of Repayment are not entered)
UnsecuredFrom Group Company - Alliance Air Services Limited 151,645,756 62,897,979 (Terms of Repayment are not entered)
(Since no terms & conditions for repayment / interestare specified, question of default doesn't arise)
2,212,044,757 62,897,979
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NOTE "10" : FIXED ASSETS(Amount in Rupees)
Sr. Particulars
No. As at Additions Deductions / As at As at For Deductions/ Total Upto As at As atApril 01, 2015 Adjustments March 31, 2016 April 01, 2015 the year Adjustments March 31, 2016 March 31, 2016 March 31, 2015
GROSS BLOCK DEPRECIATION NET BLOCK
Note:1. As per MOU entered between Air India Limited (AIL) & Air India Engineering Services Limited (AIESL) dated 5th April, 2013 Air India Limited shall transfer all its movable assets such as machinery, equipment etc. pertaining to MRO unit of AIL to AIESL at a written down value of such moveable assets as on 01-04-2014. It was clarified by MOU that written down value of movable assets transferred from AIL to AIESL shall be the cost of these assets transferred and shall form part of initial equity contribution.
(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
NOTE "11" : LONG TERM LOANS AND ADVANCES
TOTAL (A+B+C+D)
NOTE "9" : SHORT TERM PROVISIONS
TOTAL
(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
Provision for Employee Benefitsa) Gratuity 422,630,996 2,926,483 b) Leave Encashment 506,747,984 1,802,546 c) Other Benefits 2,114,497 2,290,222
931,493,477 7,019,251
TANGIBLE ASSETS :
a) Land - - - - - - - - - -
b) Buildings - - - - - - - - - -
c) Plant & Equipment
Workshop Equipment, Instruments, 1,584,941,145 112,996,385 9,455,259 1,688,482,271 191,639,016 366,380,331 (5,046,702) 552,972,645 1,135,509,626 1,393,302,129
Machinery and Plants 109,887,739 - 109,887,739 17,850,027 5,925,655 - 23,775,682 86,112,057 92,037,712
d) Furniture & Fixtures - - - - - - - - - -
e) Vehicles - - - - - - - - - -
f) Office Equipment - - - - - - - - - -
TOTAL FOR TANGIBLE ASSETS 1,694,828,884 112,996,385 9,455,259 1,798,370,010 209,489,043 372,305,985 (5,046,702) 576,748,327 1,221,621,683 1,485,339,841
INTANGIBLE ASSETS :
a) Goodwill - - - - - - - - - -
b) Brands/trademarks - - - - - - - - - -
c) Computer Software - - - - - - - - - -
d) Licenses & Franchise 2,713,828,069 - - 2,713,828,069 - - - - 2,713,828,069 2,713,828,069
TOTAL FOR INTANGIBLE ASSETS 2,713,828,069 - - 2,713,828,069 - - - - 2,713,828,069 2,713,828,069
TOTAL ASSETS 4,408,656,953 112,996,385 9,455,259 4,512,198,079 209,489,043 372,305,985 (5,046,702) 576,748,327 3,935,449,752 4,199,167,910
PREVIOUS YEAR - 4,408,656,953 - 4,408,656,953 - 209,489,043 - 209,489,043 4,199,167,910 -
A Loans & advance to related parties Secured Considered Good - Unsecured Considered Good 515,861,423 Doubtful - 515,861,423 B Loans and Advances to Employees Secured Considered Good 912 - Unsecured Considered Good 14,428,680 1,710,757 Doubtful - - 14,429,592 1,710,757C Advance Recoverable in Cash or Kind Secured Considered Good Unsecured Considered Good 5,798,975 - Doubtful - - 5,798,975 -D Security Deposits with DGCA 200,000 - 200,000 - 20,428,566 517,572,180
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NOTE "12" : TRADE RECEIVABLES
Total (A + B)
NOTE : "13" : CASH AND BANK BALANCES
TOTAL
NOTE : "14" : OTHER CURRENT ASSETS
TOTAL (A+B)
(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
A Due for more than six months Secured, Considered Good - - Unsecured, Considered Good 159,946,115 -
Doubtful
159,946,115 -
B Other Receivables
Secured, Considered Good - - Unsecured, Considered Good 619,760,768 160,551,316 Doubtful - -
619,760,768 160,551,316
779,706,883 160,551,316
Cash and Cash Equivalents
1 Balances with Banks
a) In Current Accounts 440,028,060 407,077,538
b) In Deposit Accounts (Maturity less than12 months) - 1,979
2 Cheques, Drafts on Hand 500,000 -
3 Cash on Hand (as certified by the Management) 7,020 -
4 Margin Money/Security Deposit 56,523 50,000
440,591,603 407,129,517
A Balances with Revenue Authorities
TDS Receivable 10,883,566 105,940
B Interest Accrued on Loans to Staff -
C Prepaid Expenses 269,750
11,153,316 105,940
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NOTE "15" : REVENUE FROM OPERATION(Amount in Rupees)
Sr. No. Particulars 2015-16 2014-15
NOTE "16" : OTHER INCOME(Amount in Rupees)
Sr. No. Particulars 2015-16 2014-15
TOTAL
NOTE "17" : EMPLOYEE BENEFIT EXPENSES(Amount in Rupees)
Sr. No. Particulars 2015-16 2014-15
TOTAL
NOTE "18" : FINANCE COST(Amount in Rupees)
Sr. No. Particulars 2015-16 2014-15
1 Interest Expenses 56,390,370 -
TOTAL 56,390,370 -
1 Sales of Services Technical Handling Services Reveune 34,570,653 1,351,319,149 MRO Services Revenue
Other Servicing Revenue 6,146,649,216 67,962,269
6,181,219,869 1,419,281,418
2 Other Operating Revenue
Engineering Training Reveune 20,347,206 777,412
20,347,206 777,412
3 Incidental Revenue 1,146,703 -
1,146,703 -
Total reveune from operation 6,202,713,779 1,420,058,830
1 Interest Income from Bank 4,544 1,979
2 Dividend Income - -
3 Profit on Sale of Assets/Scrap -
4,544 1,979
1 Salaries and Wages 7,793,815,412 1,752,007,495
2 Contribution to Provident and Other Funds 348,649,757 74,089,112
3 Staff Welfare Expenses 442,104,339 370,557,420
4 Provision for Gratuity 940,399,631 402,120,708
5 Provision for Leave Encashment 784,298,406 341,433,326
10,309,267,545 2,940,208,061
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NOTE "19" : DEPRECIATION AND AMORTIZATION EXPENSE(Amount in Rupees)
Sr. No. Particulars 2015-16 2014-15
1 Depreciation of Tangible Assets 372,305,985 209,489,043 2 Amortization of Intangible Assets - -
TOTAL 372,305,985 209,489,043
NOTE "20" : OTHER EXPENSES(Amount in Rupees)
Sr. No. Particulars 2015-16 2014-15
TOTAL
1 Insurance Expenses 104,716 2,491,630
2 Outside Repairs-Aircraft 516,967 -
3 Communication Charges 1,717,766 2,724,717
4 Travelling Expenses 180,733,425 127,173,754
5 Rent 213,231,680 162,370,374
6 Rates and Taxes 34,009,299 801,054
7 Conveyance Expenses 797,008 2,780,074
8 Repair Maintenance:
i) Buildings 28,002,742 1,667,378 ii) Others 62,460,961 78,030,292
9 Hire of Transport 25,105,271 7,224,257
10 Hire of Manpower 43,763,548 11,263,759
11 Fees to DGCA 4,301,165 1,593,592
12 Electricity & Heating Charges 375,203,036 274,034,917
13 Consumption of Gas & Fuel 12,901,350 3,147,524
14 Water Charges 7,331,289 468,680
15 Printing and Stationery 360,245 155,347
16 Professional & Legal Charges 7,679,713 2,275,145
17 Auditors' Remuneration and Expenses
i) Audit Fees 200,000 200,000 ii) Other Expenses 50,000 50,000
18 Bank Charges 38,168 4,175
19 Other Expenses 62,988,573 17,582,769
20 Exchange Variation 316,155 -
21 Loss on Sale of Assets/Scrap 305,855 -
1,062,118,933 696,039,436
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NOTE "22" : EARNING PER SHARE
Disclosure of Earnings Per Share (EPS) computation as per Accounting Standard -20 of the Instituteof Chartered Accountants of India:
2015-16 2014-15
Profit available for appropriation as per Profit & LossAccount
Weighted average No. of equity shares outstanding during the year
Basic and Diluted EPS
Face value per equity share
(5,586,209,333)
505,236
(11,056.63)
10
(2,425,675,731)
50,000
(48,513.51)
10
NOTE "21" : PRIOR PERIOD ADJUSTMENTS (NET)(Amount in Rupees)
Sr. No. Particulars 2015-16 2014-15
1 Prior Period Revenue (11,155,179) -
TOTAL (11,155,179)
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NOTE 23
NOTES TO ACCOUNTS-
1. Contingent Liabilities not provided for: Claims against the Company not acknowledged as debts (excluding interest and penalty wherever likely to be applicable) and being contested to the extent ascertainable and quantifiable.
Estimated Claim of Employees: Based on the Justice Dharamadhikari Committee recommendations, the Revised Basic Pay (RBP) has been implemented for all the categories of employees, however the total amount payable, to all categories of employee cannot be worked out. The amount disclosed as contingent in last year's account was based on the working done by the AIL on rough estimate basis; hence the same has been omitted.
Capital Commitments are in respect of estimated amount of contracts remaining to be executed on Capital Account: Nil
2. Fixed Assets
a) In terms of MoU, the moveable engineering assets pertaining to 'Workshop Equipment' and 'Plant & Machinery' have been transferred from Air India at Written Down Value (WDV) of Rs 166,61,65,000/-as on 01 April, 2014 i.e. Gross block along with accumulated depreciation. The assets with WDV of Rs. 2,86,63,884/- during 2014-15 and Rs.5,88,73,802/- during 2015-16 have also been identified & transferred subsequently from AI which does not form part of the share capital.
b) The Fixed Assets detail (quantity / location / date of original purchase) available as per AI records have been transferred to AIESL Fixed Assets record in SAP-ERP.
3. Accounting Practices Followed
a) In line with the consistent practice being followed by the Parent Company, the claims for reimbursements from employees availing medical, educational and other leave without pay, claims of interest from suppliers / other parties, if any, are accounted for on cash basis due to uncertainties involved. Other staff claims are recognized on cash basis.
b) Liability for amounts payable towards expenses are recognized to the extent of claims/ invoices received.
4. Confirmations/Reconciliations
a) The process of identification of unmatched receivables and payables is under the process of matching/reconciliation. Impact, if any, of consequential adjustment arising out of reconciliation will be dealt with in the year of completion of reconciliation.
b) The company has not sought the confirmation of balances receivables and payables as majority of the same was owed by/for AIL. Hence confirmation for only AIESL related receivables and payables couldn't be ascertained.
c) The Service Tax including Input credit to be availed, Tax Deducted at source (TDS), Refunds to be received in respect of Income Tax, VAT, Employee Provident Fund (EPF), Employee State Insurance Scheme (ESIS), Profession Tax, Airport Tax and Revenue Related taxes are being in reconciliation process in line with the Returns filed/ statutory records maintained.
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5. Internal Control
The Company is in the process of strengthening the internal control process in the company so as to ensure the coverage of all the areas as envisaged and ensure effective internal controls at stations, regional offices, user departments.
6. Revenue Related Matters:
Third party revenue includes revenue invoiced and collected by Air India and its associated companies and transferred to the Company during the year.
7. Segment Reporting :
The company is engaged in MRO (Maintenance, Repair & Overhaul of aircraft, engines & components) related business, which is its primary business segment.
8. Related Party Transactions:
“Related Party Disclosures” as required by Accounting Standard (AS-18) are given below:
st th Key Management Personnel & Relatives: (From 1 Apr 2015 to 15 December 2016)
Sr.No. Name Position on Board Designation
1 Mr. Ashwani Lohani Chairman CMD Air India Ltd. (Appointed w.e.f. 31/08/2015)
2 Mr. Rohit Nandan Chairman CMD Air India Ltd. (Ceased to be CMD w.e.f. 31/08/2015)
3 Mr. S. Venkat Director Director Finance Air India Ltd. (Ceased to be Director w.e.f. 31/10/2015)
4 Mr. B. S. Bhullar Director Joint Secretary, Ministry of Civil Aviation (Appointed w.e.f. 03/02/2015)
5 Ms. Gargi Kaul Director JS & FA, Ministry of Civil Aviation (Appointed w.e.f. 06/05/2015)
6 Mr. Vinod Hejmadi Director Director Finance Air India Ltd. (Appointed w.e.f. 07/12/2015)
No loans or credit transactions were outstanding with Directors or Officers of the Company or their relatives at the end of the year which is required to be disclosed in accounts under the Companies Act, 2013.
The parent company and its subsidiaries are State Controlled enterprise as defined under AS-18 and hence transactions undertaken by the company with the parent company and its subsidiaries do not fall within the definition of related party transactions.
(a) AIESL was able to commence its commercial operations w.e.f. 1st Jan'15 since the DGCA certification was issued only effective on this day. Air India has entered into separate
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agreements defining the service level quality (SLA) and the rates to be paid for the services to be rendered by the Company. These rates have been determined taking into account the market rates as well as the cost of rendering these services. The principle of arms length transactions has been reckoned by determining these rates. These rates will be reviewed on a yearly basis in order to align them with the market rates.
(b) Third party revenue includes revenue invoiced and collected by Air India and its associated companies and transferred to the Company during the year and the applicable taxes have also been invoiced on third party by them.
Parent and its Subsidiary Companies
a) Air India Ltd
During the year 2013-14, the company entered into a Memorandum of Understanding (MoU) with its parent company viz. Air India Ltd. (AI) regarding the services to be provided on maintenance and repair and overhaul facilities to Air India. The MoU inter-alia also includes the following:-
1. AI has decided to transfer its MRO business (including infrastructure) to AIESL.
2. AIESL shall obtain all necessary approvals / licenses etc. from all concerned statutory and regulatory authorities / agencies including DGCA of India to carry out & perform MRO activities.
3. AI shall provide AIESL a total equity of Rs. 375 Cr. during first three years and support required for Capital expenditure to the extent of Rs.974 crores till FY 2017.
4. AI shall transfer all its movable assets pertaining to MRO and the value of movable assets to be transferred by AI to AIESL to constitute & form part of the initial equity / investment in AIESL, which will be over and above the cash infusion of Rs 375 Cr. as above.
5. AIESL to share 20% of its labour revenue from third parties from the fourth year of operations or as mutually agreed.
Following transactions relating to the company have been transferred by Parent Company, Air India Limited as follows:
i) Staff Welfare Expenses of Rs. 44,21,04,339/- (Previous Year Rs. 37,05,57,420/-) and majority of other expenses of Rs. 106,53,96,043/- (Previous Year 69,60,39,436/-) have been accounted as transferred by Parent Company Air India Limited.
ii) Out of total addition to fixed assets of Rs. 10,88,93,683/-, Rs. 5,88,73,802/- was transferred by AIL during the financial year 2015-16 which was omitted to be transferred in financial year 2014-15 and the same doesn't form part of equity contribution as set out in MOU.
iii) Servicing Revenue of Rs. 477,80,88,439/- (Previous Year 111,78,78,250/-)
iv) An amount of Rs 198,27,59,973/- Payable (Previous Year : Rs.48,35,91,505 /- Receivable) is due by the company to AIL as on 31st March 2016.
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b) Airline Allied Services Limited (AASL)
An MoU has also been entered into with Airline Allied Services Ltd. (AASL), a w h o l l y o w n e d subsidiary of Air India Ltd during 2013-14, wherein AASL has d ecided to transfer its MRO activities (including infrastructure) to AIESL and A ASL agreed to commit its fleet in entirety for all MRO work to AIESL.
As per this MOU, AASL shall transfer its MRO business to AIESL besides transfer of engineering related assets & manpower and other supports etc. However, assets & employees continued in AASL books of accounts. AASL has billed / debited the company for its engineering manpower for the year 2015-16 pending transfer of its engineering personnel to the company, besides other expenditure.
Servicing Revenue of Rs. 15,40,72,819/- (Previous Year 3,11,45,772/-)
An amount of Rs 15,16,45,756/- (Previous Year : Rs.6,28,97,979/-) is payable by the company to AASL as on 31st March 2016.
c) Air India Charter Ltd (AICL)
An MoU has also been entered into during 2014-15 with Air India Charters Ltd. (AICL), a wholly owned subsidiary of Air India Ltd, wherein AICL has decided to transfer its MRO activities (including infrastructure) to AIESL and AICL agrees to commit its fleet in entirety for all MRO work to AIESL.
Consequent to the cabinet approval to operationlize AIESL as independent e n t i t y f o r M R O services, an MOU has been signed between AICL and AIESL on 07.08.2014 to formalise the relationship. As per this MOU, AICL shall transfer its MRO business to AIESL besides transfer of engineering related assets & manpower and other supports etc. However, assets & employees continued in AICL books of accounts. AICL has billed / debited the company for its engineering manpower for the year 2015-16 pending transfer of its engineering personnel to the company, besides other expenditure.
Servicing Revenue of Rs. 46,17,63,892/- (Previous Year 16,50,41,100/-)
d) Air India Air Transport Services Ltd (AIATSL)
An amount of Rs 8,09,16,138/- Payable (Previous Year : Rs.3,22,69,918/- Receivable) is due by the company to AIATSL as on 31st March 2016.
9. Employee Benefits
(A) General description of Defined Benefit Plan
a) Gratuity: Gratuity is payable to all eligible employees of the Company on superannuation, death, or permanent disablement, in terms of the provisions of the Payment of Gratuity Act.
b) Privilege Leave Encashment: Privilege Leave Encashment is payable to all eligible employees at the time of retirement upto a maximum of 300 days and can encash every year upto 30 days.
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c) Sick Leave Encashment: Sick Leave encashment is payable to all eligible employees at the time of retirement upto a maximum of 120 days subject to the condition that the employee should have at least 60 days of Sick Leave to his credit. It was also decided by the parent company that sick leave standing to the credit of all existing employees as on 01.07.2012 shall stand frozen and the employee would be allowed to encash the same only at the time of retirement provided that he/she has not exhausted that leave by the time of retirement. Further, it was decided by AI that encashment of sick leave which has accrued beyond 01.07.12 will not be allowed and the employee has to avail the same or the same will lapse.
(B) Defined Contribution Plan
Employees Provident Fund: The Company contributes to Air India and its subsidiary airlines Employees Provident Fund Trusts under the Provident Fund Act, which governs the Provident Fund Plans for eligible employees. The Company as well as the employees contributes 10% of the PF Pay to the Fund out of which Provident Fund is paid to the employees.
10. Deferred Tax Assets
In view of the recent losses of the Company and no virtual certainty that sufficient future taxable income will be available against which the deferred tax assets can be realized, the same have not been accounted for in the books.
11. The Micro, Small and Medium Enterprises Development Act
The data related to Micro Small and Medium Enterprises is not available and is in process of compilation/ updating masters in SAP. However payments (due, if any) to such undertakings covered under the Micro, Small and Medium Enterprises Development Act (to the extent identified) have been made within the prescribed time limit/date agreed upon with the supplier and hence no interest is payable for delayed payments. In other cases, necessary compliance/disclosure will be ensured in due course.
12. The parent company has implemented ERP-SAP in AIESL and the regular A MC expenses have been prorated to AIESL.
13. Previous Year figures have been re-grouped/re-arranged wherever considered necessary to be compatible with the Schedule III of the C ompanies Act 2013, to the extent of information being available and practicable of compilation.
Signatures to the schedules forming part of the Balance Sheet and Statement of Profit and Loss and to the above notes.
For and on Behalf of For and on behalf of the Board
Sd/- Sd/- Sd/-Jhawar Mantri & Associates Ashwani Lohani V.S. HejmadiChartered Accountants Chairman Director-FinanceFRN : 113221W Sd/- Sd/- Sd/-B.P Mantri C.N. Hemalatha H.R. JagannathPartner Chief of Finance Chief Executive OfficerM.No. 045701
Place : New Delhi Date : 16 March 2017
