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DIRECTORS’ REPORT

To The Members,

The Directors present their Thirty Ninth Annual Report and the Audited Statement of Accounts for the year ended 31st March, 2016.

(Rs, in lacs)

2. Dividend:

In view of the loss incurred during the year under review, the Board regrets its inability to recommend any dividend for the year ended 31^st March, 2016.

3. Reserves:

Since the Company has made losses during the year, no amount is being transferred to reserves.

4. Operations/ State of affairs during the year:

During the current financial year, the Company has achieved the turnover of Rs, 70,833.27 Lacs against Rs, 64,994.24 Lacs resulting into a marginal increase by 8.98 %. The Company has incurred Post Tax Loss of Rs,18,128.02 Lacs against the Loss After Tax of Rs, 5,385.89 Lacs.

Auditors' Report -Emphasis of Matters

The Company has incurred substantial losses from its operations during the current and previous year which has eroded its net-worth substantially. The Company has also incurred net operating cash loss during the current year. Further, the Company has defaulted in repayment of borrowing, defaulted in payment of statutory dues and there was loss of key management without replacement. These conditions, along with other matters set forth in Note 29, indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. However, the financial statement of the Company have been prepared on a going concern basis for the reasons stated in the said note. Our opinion is not modified in respect of these matters.

Reply to Qualification in Audit Report

The accumulated losses for the year ended 31st March, 2016 have resulted in Company's erosion of more than 50 per cent of its peak net worth during the immediately preceding four financial years. However, the management is of the opinion that subject to approval of Restructuring Scheme by banks, the Company will be able to return to profitability over the next few years and may be in position to repay Loans and pay statutory dues. Hence, the financial statements have been prepared assuming that the Company and its subsidiaries will continue as a going concern. No adjustments are hence made in the financial statements that might result from the outcome of this uncertainly.

5. Fixed Deposits:

The company has discontinued, the deposit scheme in the financial year 2014-15 and no fresh deposits have been accepted during the year. Deposits outstanding as at 31st March, 2016 are: (i) at the beginning of the year - ' 4057.81Lacs (ii) at the end of the year - ' 3824.00 Lacs. The company has been undergoing financial crisis. The Directors of the company are in the process of considering and analyzing restructuring possibilities, including for the outstanding Fixed Deposits.

6. Material changes and commitments: There have been no material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report.

7. Changes in the nature of business: There is no change in the nature of business.

8. Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future:

SEBI - Vide Order dated 5^th January, 2016 restrained the specified entities from raising capital from public and further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, in any manner, whatsoever, for the definite period for each entity individually.

9. Details of Subsidiary/Joint Ventures/Associate Companies:

Valecha Infrastructure Limited, Valecha International FZE, Professional Realtors Pvt. Ltd., Valecha LM Toll Pvt. Limited, Valecha Badwani Sendhwa Toll Ways Limited and Valecha Kachchh Toll Roads Limited are 6 subsidiaries of the Company as at 31^st March, 2016.

Except for the details given above, no other company has become or ceased to be Company's subsidiary, joint venture or associate company during the financial year

The Annual Accounts and other related information of the subsidiary companies will be made available free of cost to the members on request. The Annual Accounts of subsidiary companies are available for inspection at the registered office of the Company.

A report on the performance and the financial position of the subsidiary companies as per Companies Act, 2013 forms part of the consolidated financial statement and hence not repeated here for the sake of brevity.

10. Auditors’ Report:

There are no qualifications, reservation or adverse remark made by M/s D. M. Jani & Co., Statutory Auditors in their report for the financial year ended 31st March, 2016. Please refer item no. 4 (Supra).

The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review.

11. Re-appointment of Auditors:

M/s. D. M. Jani & Co, Chartered Accountants (Firm Registration Number: 104047W), who are Statutory Auditors of the Company will hold office till the conclusion of the ensuing Annual General Meeting and are recommended for re-appointment to audit the accounts of the Company for the Financial Year 2016-17. As required under the provisions of Section 139 of the Companies Act, 2013 the Company has obtained written confirmation from M/s. D. M. Jani & Co. that their appointment, if made, would be in conformity with the limits specified in the said section.

Audit Committee:

The composition of the Audit Committee has been mentioned in the Corporate Governance Report annexed to this report.

Cost Auditor:

Pursuant to Section 148 of the Companies Act, 2013, in terms of the Central Government's approval, the Board of Directors on the recommendation of the Audit Committee appointed M/s Darshan Vora & Co (M/36481), Cost Accountant, as the Cost Auditor of the Company for the year under review. The remuneration proposed to be paid to the Cost Auditor requires ratification of the shareholders of the Company. In view of this, ratification for payment of remuneration to the Cost Auditor is being sought at the ensuing Annual General Meeting.

M/s Darshan Vora & Co have confirmed that their appointment is within the limits of the Section 139 of the Companies Act, 2013 and has certified that they are free from any disqualifications specified under Section 148(5) and all other applicable provisions of the Companies Act, 2013.

The said auditor has given their eligibility certificate for appointment as Cost Auditor.

Secretarial Auditors and their Report:

Pursuant to the provisions of Section 204 of the Act and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company had appointed M/s Ragini Chokshi & Co, Practicing Company Secretary (Membership no.2390), a firm of Company Secretaries in practice to undertake the Secretarial Audit for the financial year ended 31^st March, 2016. Their Report is annexed as Annexure - A to this report.

In respect of comment of Secretarial Auditors, regarding Board composition, the Board of Directors have appointed two Directors viz Mr. Kailas Chandore as an Independent Director and Ms. Ashmi Sheth as an Independent Woman Director with effect from 27.09.2016.

Mr. Vijaykumar H. Modi has been appointed as a Company Secretary & Legal/ Compliance Officer with effect from 1^st October, 2016.

The Company is in the process of appointing Chief Financial Officer so as to comply with Section 203 of the Companies Act, 2013.

12. Directors:

Retirement by Rotation:

In accordance with the requirement of the Companies Act, 2013, Mr. Arvind Thakkar, Director (DIN 02208108) of the company is liable to retire by rotation at the ensuing Annual General Meeting (AGM), and being eligible, offers himself for re-appointment.

Mr. Umesh H. Valecha resigned on his own accord from the Board w.e.f. 10^th August, 2016.

The Board of Directors at its meeting on the 27^th September, 2016 have appointed Mr. Kailas Chandore (DIN:07644193) as Additional Director and Mrs. Ashmi Sheth (DIN: 07644493) as Additional Director (Woman Director) of the Company. The board, therefore, recommends their appointment as a director of the Company. A brief resume of them and other relevant information have been furnished in the notice convening the AGM.

Necessary resolutions for the aforesaid Directors for appointment/ re-appointment are being placed for approval of the members at the AGM.

The brief particulars of the concerned Directors have been provided in the Corporate Governance Report, pursuant to Clause 49 of the Listing Agreement./ SEBI (LODR) Regulations, 2015.

Declaration by Independent Directors:

Shri Arvind Maganlal Thakkar, Mr. Kailas Chandore and Mrs. Ashmi Sheth are an Independent Directors on the Board of the Company confirms that they meets the criteria of Independence as prescribed both under the Companies Act, 2013 and Clause 49 of the Listing Agreement / SEBI (LODR) Regulations, 2015

All independent directors have given declaration that they meet the criteria of independence as provided in section 149 (6) of the Act, and Regulation 16 and 25 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. There has been no change in the circumstances, which has affected their status as independent director. The non-executive directors of the company had no pecuniary relationship or transactions with the company.

In the opinion of the Board, they fulfill the conditions of independence as specified and are independent of the management.

13. Capital and Listing of Shares:

During the current year 2015-16 the Company allotted 30 Lacs shares on Preferential basis to FIIs/FPIs. Consequent upon the allotment of equity shares, the paid up share capital of the Company has been increased from Rs, 19.53 crores to 22.53 crores.

14. Code of conduct:

Your Company is committed to conducting its business in accordance with the applicable laws, rules and regulations and the highest standards of business ethics. In recognition thereof, the Board of Directors have implemented a Code of Conduct for adherence by the Directors and Senior Management Personnel of the Company. This helps in dealing with ethical issues and also in fostering a culture of accountability and integrity.

15. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo pursuant to Section 134 of the Companies Act, 2013, and Rules there under:

A. Conservation of Energy: At all the sites of the Company the consumption of power is regularly monitored and necessary measures are taken to regulate the consumption.

B. Technology absorption: During the year under review, there is no expenditure on Technology Absorption and on Research and Development.

C. Foreign Exchange Earnings & Outgo:

(Rs, in lacs)

16. Particulars of Employees:

There are no employees drawing salary pursuant to Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

17. Extract of the Annual Return:

The details forming part of the extract of the Annual Return in Form MGT - 9 as required under Section 92 of the Companies Act, 2013, is marked as Annexure - B which is annexed hereto and forms part of the DirectorsRs, Report.

18. Corporate Social Responsibility (CSR): During the year under review in view of the loss incurred, Section 135 (1) of the Companies Act, 2013 is not applicable. The infrastructure sector, as a whole, is passing through the challenging times and your company is also facing this heat. In this challenging phase, the cash flows of the company have been adversely impacted. It is submitted that the company is trying hard and undertaking several steps to successfully going through this tough time. The Company is hopeful that in the near future, it will streamline its operations and provide its due share towards the betterment of the society by making the required contribution for the Financial Year 2014-15 in respect of CSR activities envisaged by the company.

19. Number of meetings of the Board of Directors:

The details of the number of meetings of the Board held during the Financial Year 2015-16 forms part of the Corporate Governance Report.

20. Details of establishment of vigil mechanism for directors and employees:

In compliance with the provisions of Section 177(9) of the Companies Act, 2013 and Clause 49 of the Listing Agreement/SEBI (LODR) Regulations, 2015 the Company has framed a Vigil Mechanism/Whistle Blower policy to deal with unethical behavior, actual or suspected fraud or violation of the Company's code of conduct or ethics policy, if any. The Vigil Mechanism/Whistle Blower policy has also been uploaded on the website of the Company.

21. Nomination and Remuneration Committee:

The Company has a policy which lays down a framework in relation to remuneration of Directors, Key Managerial Personnel and other employees. The policy also lays down criteria for selection and appointment of Board Members. The details of this policy are given in the Corporate Governance Report.

22. Particulars of loans, guarantees or investments under Section 186:

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

23. Particulars of contracts or arrangements with related parties:

Pursuant to Section 134 of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of the contracts or arrangements entered into by the Company with Related Parties have been done at arms length and are in the ordinary course of business.

The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website.

24. Risk Management:

Details on Risk Management has been mentioned in the Corporate Governance Report annexed to this report.

25. Disclosures under Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013:

As required by Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013, the Company has formulated and implemented a policy on prevention of sexual harassment at workplace with a mechanism of lodging complaints. During the year under review, there were no cases filed pursuant to the aforesaid Act.

26. Corporate Governance:

The Company has complied with the Corporate Governance Code as stipulated under the Listing Agreement with the Stock Exchanges/ SEBI (LODR) Regulations, 2015. A separate section on Corporate Governance along with certificate from secretarial auditors confirming the compliance is annexed and forms part of the Annual Report.

27. Director’s Responsibility Statement:

As required by Section 134 (3) (c) of the Companies Act, 2013 your Directors state that:

(a) In the preparation of the annual accounts for the year ended 31^st March, 2016, the applicable accounting standards have been followed with proper explanation relating to material departures, if any;

(b) The accounting policies adopted in the preparation of the annual accounts have been applied consistently. Reasonable and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year 2015-16 and of the Loss for the year ended 31^st March, 2016.

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) The annual accounts for the year ended 31st March, 2016 have been prepared on a going concern basis.

(e) That proper internal financial controls were in place and that the financial controls were adequate and were operating effectively;

(f) That systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

28. Acknowledgements:

The Board wishes to place on record its appreciation to all employees of the Company for their continued contribution to the performance of the Company and convey their grateful thanks to Shareholders, Government and Customers for their continued support. Also our sincere thanks and gratitude to Bankers/NBFCs who are continuously supporting the Company and its group at all the times for achieving its goals.

For and on Behalf of the Board

FOR VALECHA ENGINEERING LIMITED

DINESH VALECHA JAGDISH K. VALECHA

Director Vice-Chairman-cum-Managing Director

Place : Mumbai

Date : 1^st December, 2016