Sadbhav Engineering Ltd

To,

The Members,

The Directors have the pleasure in presenting the Thirty Fourth Annual Report together with the audited financial statement for the financial year ended on March 31, 2023.

Financial Results

The Company's financial performance for the Year ended on March 31, 2023 is summarized below

Dividend:

In view of losses incurred, your Directors do not recommended any dividend for the financial year ended on 31st March, 2023. Dividend Distribution Policy:

Securities and Exchange Board of India ('SEBI'), by its notification dated 8th July, 2016, has amended the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ('Listing Regulations'), introducing new Regulation 43A and further amended the same on 5th May, 2021 mandating the top 1000 listed entities, based on market capitalization calculated as on 31st March of every financial year, to formulate a Dividend Distribution Policy and disclose the same on the website of the listed entity and a web-link shall also be provided in their annual reports.

The Company has adopted a Dividend Distribution Policy on August 20, 2016, which is available on the website of the Company at the link: https://www.sadbhavene.com/wp-content/uploads/2018/02/Dividend Distribution Policy SEL.pdf. There has been no change to the policy during the year.

Business Overview Standalone Basis

The total revenue during the year under review was Rs. 1054.16 Crores against Rs. 1322.58 Crores for the previous year.

Profit (Loss) before Finance Cost, Depreciation & amortization Expense and Tax Expense for the current year is (Rs. 109.57 Crores) (Rs.438.99 Crores in previous year). Net Profit (Loss) after tax amounted to Rs. (346.48) Crores (Rs. 716.32 Crores in previous year)

Consolidated Basis

As per the Consolidated Financial Statements, the Total Income of the Company, operating profit (PBDIT), and net loss for the year were Rs. 2176.49 Crores, Rs. 447.52 Crores and (Rs. 699.39 Crores) respectively.

Transfer to Investor Education and Protection Fund

The Company has transferred a sum of Rs. 0.23 lakhs to the Investor Education and Protection fund established by the Central Government during the financial year 2022-23, in compliance with Section 124 of the Companies Act, 2013. The said amount represents unclaimed dividend amount for the financial year 2014-15 which were lying with the Company for a period of 7 years from their due dates of payment. Prior to transferring the aforesaid sum, the Company has sent reminders to the shareholders for submitting their claims for unclaimed dividend for the financial year 2014-15.

Reserves

The Board of Directors of the Company has decided not to transfer any amount into General Reserve for the financial year ended on March 31, 2023.

Change in the Nature of Business, if any

There are no changes in the nature of business during the year.

Material changes and commitments affecting financial position between end of the financial year and date of report

There have been no material changes and commitments affecting financial position between end of the financial year and the date of the report. Information regarding potential impact of COVID-19 pandemic on your Company's business operations and financial position are provided as part of the MD&A Report.

Merger of Sadbhav Infrastructure Project Limited ("SIPL") with the Company

The Board of Directors in the meeting held on 15th October, 2022 have Withdrawal Scheme of Amalgamation filed with Hon'ble National Company Law Tribunal Ahmedabad Bench (NCLT) with regard to amalgamation of Sadbhav Infrastructure Project Limited (Transferor Company) with Sadbhav Engineering Limited (Transferee Company) under sections 230 to 232 of the Companies Act, 2013. Consequently, on application made by the Company, the NCLT vide its order dated 19th October, 2022 has allowed the withdrawal of the said application. Accordingly, the Scheme of merger stands cancelled.

Share Capital

During the year, there was no change in total equity share capital of Rs. 17,15,70,800/- (Face Value of Re. 1/- each). During the year under review, Company has not allotted any shares without differential voting rights. During the year under review, the Company has not granted any stock options or sweat equity. The Company has no scheme of provision of money for purchase of its own shares by employees or by trustees for the benefit of employees. Hence the details under rule 16 (4) of Companies (Share Capital and Debentures) Rules, 2014 are not required to be disclosed.

Debentures

During the year 2022-2023 and up to the approval of Director's Report, the Company has redeemed Listed Non-Convertible Debentures (NCDs) of Rs. 22.50 Crores on 22-06-2022 for ISIN INE226H07080 and Rs. 45.00 Crores Non-Convertible Debentures (NCDs) on 22-062023 for ISIN INE226H07098.

The aggregate Outstanding Principal amounts of Non-Convertible Debentures was Rs.100.75 crores as on 31st March, 2023.

Credit Rating

a) CARE has assigned Revised CARE BB+ / CARE A4 (CWN) (Double B Plus/ A Four) (Under Credit watch with Negative Implications) from CARE BBB / CARE A3+ (CWN) (Triple B / A Three Plus) (Under Credit watch with Negative Implications) and Withdrawn for Long Term/short Term Bank Facilities and Revised from CARE B+ (Single B Plus) and moved to ISSUER NOT COOPERATING category and removed from Credit watch with Negative Implications; Negative outlook for Non-convertible Debentures.

b) India Rating has assigned IND C/ IND D' from 'IND BB+ to Term Loan Facilities and Non- Convertible Debentures of the Company.

Subsidiaries, Joint Ventures and Associates Companies

During the year, No Companies has become/ceased to be company's subsidiaries, joint ventures or associate company.

However, Company has transferred 100% stake of the equity shares to Sadbhav Bhavnagar Highway Limited and Sadbhav UNA Highway Limited in June, 2023 and Pursuant to the binding terms, w.e.f. 1st April, 2023, for operational conveniences, the physical possession including control of the site of the SBHL has been handed over to the Purchaser.

Pursuant to Section 134 of the Companies Act, 2013 and Rule 8(1) of the Companies (Accounts) Rules, 2014 the report on performance and financial position of subsidiaries, associates and joint venture companies is attached as a part of Annual Report in Form AOC- 1 prepared under section 129(3) of the Companies Act, 2013 to the consolidated Financial Statements of the Company which forms part of this report.

Consolidated Financial Statements

In compliance with the applicable provisions of Companies Act, 2013 including the Indian Accounting Standard (Ind AS)-33 on Consolidated Financial Statements, this Annual Report also includes Consolidated Financial Statements for the financial year 20222023.

Board of Directors - Retirement by Rotation

Mr. Dwigesh B. Joshi (DIN: 09733282), is the director liable to retire by rotation at the ensuing Annual General Meeting and, being eligible, offer himself for reappointment. The director recommends his reappointment.

Declaration from Independent Directors of the Company

The terms and conditions of appointment of Independent Directors are in accordance with the applicable Regulations of the SEBI (Listing Obligations and Disclosure Regulations) Regulations, 2015 and also as per the provisions of the Companies Act, 2013 (Act) read with Schedule IV to the Act.

Your Company has received declaration from all the independent Directors of the Company as required under Sec. 149(7) confirming that they meet with the criteria of independence provided in Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and there has been no change in the circumstances which may affect their status as Independent Director during the year.

Change in Directors and KMPs

During the year 2022-23 and upto the approval of Director's Report following changes were made in Director and KMPs.

1. Mr. Arun S. Patel (DIN: 06365699), Non-Executive Independent Director of the company ceased to be a director due to expiration of his term w.e.f. 26.09.2022.

2. Mr. Nitin R. Patel (DIN: 00466330), Executive Director & CFO of the company resigned w.e.f. 21.11.2022.

3. Mr. Vasistha C. Patel Chief Executive Officer (CEO) of the company resigned w.e.f. 21.11.2022.

4. Mr. Rohit Modi was appointed as the Chief Executive Officer (CEO) of the company w.e.f. 21.11.2022 and tendered resignation from the position of CEO of the Company w.e.f. 14.02.2023.

5. Mr. Jatin Thakkar was appointed as Chief Financial Officer (CFO) of the Company in the category of Key Managerial Personnel w.e.f. 17th December, 2022 and tender resignation from the position of CFO of the Company w.e.f. 15.03.2023

6. Mr. Shashin V. Patel (DIN: 00048328) has been appointed and designated as Chairman and Managing Director of the Company in the category of Key Managerial Personnel for a period of three (3) years w.e.f. 17th December 2022 to 16th December 2025.

7. Mr. Rohit Modi was appointed as the group Chief Executive Officer (CEO) of the company w.e.f. 14.02.2023.

8. Mr. Dwigesh B. Joshi (DIN: 09733282) was appointed as an Executive Director and CFO of the company w.e.f. 15.03.2023.

9. Mr. Jatin Thakkar (DIN: 09312406) was appointed as a Non-Executive Director of the company w.e.f. 15.03.2023.

Evaluation of Board Performance

The Board adopted a formal mechanism for evaluating its performance and as well as that of its Committees and individual Directors, including the Chairman of the Board. The exercise was carried out through a structured evaluation process covering various aspects of the Boards functioning such as composition of the Board and Committees, experience and competencies, performance of specific duties and obligations, contribution at the meetings and otherwise, independent judgment, governance issues etc. At the Board Meeting that followed the above-mentioned meeting of the Independent Directors, the performance of the Board, its committees, and individual Directors was also discussed. Performance evaluation of Independent Directors was done by the entire Board, excluding the Independent Director being evaluated. More details on the same are given in the Corporate Governance Report.

Audit Committee

The Audit Committee comprises Directors namely Mr. Sandip V. Patel (Chairman), Mrs. Anjali N. Choksi and Mr. Shashin V. Patel, Dr. Tarang M. Desai. The composition of the Audit Committee is in compliance with the requirement of Section 177 of the Companies Act, 2013 and Regulation 18 of the SEBI (LODR) Regulations, 2015.

Stakeholder Relationship Committee

The Stakeholder Relationship Committee comprises Directors namely Mr. Sandip V. Patel (Chairman), Mr. Shashin V. Patel and Dr. Tarang M. Desai. The composition of the Stakeholder Relationship Committee is in compliance with the requirement of Section 178 of the Companies Act, 2013 and Regulation 20 of the SEBI (LODR) Regulations, 2015.

Risk Management Committee

Board has constitute Risk Management Committee comprises Directors namely Mr. Shashin V. Patel, Mrs. Anjali N. Choksi and Mr. Sandip V. Patel. More details on the same are given in the Corporate Governance Report.

Pursuant to the provisions of Regulation 21 of the Listing Regulations, the Company is not required to constitute a Risk Management Committee. Although not mandatory, as a measure of good governance, the Company has constituted a Risk Management Committee of the Board. The Committee reviews the Company's performance against identified risks, formulates strategies towards identifying new and emergent risks that may materially affect the Company's overall risk exposure and reviews the Risk Management Policy and structure.

Committees of Board

Details of various committees constituted by the Board of Directors along with dates of meetings and attendance of members of committees as per provisions of the Listing Regulations and Companies Act, 2013 are given in the Corporate Governance Report and forms part of this report.

As on date, the Nomination and Remuneration Committee comprises Directors namely Mrs. Anjali N. Choksi (Chairperson), Mr. Sandip V. Patel and Dr. Tarang M. Desai.

As on date, the Corporate Social Responsibility Committee comprises Directors namely Mr. Shashin V. Patel (Chairman), Mr. Sandip V. Patel and Mrs. Anjali N. Choksi..

As on date, the Finance and Investment Committee comprises Directors namely Mr. Shashin V. Patel (Chairman), Mr. Sandip V. Patel and Mrs. Anjali N. Choksi.

Independent Director's Meeting

The Independent Directors met on 14th February ,2023, without the attendance of Non-Independent Directors and members of the management. The Independent Directors reviewed the performance of Non-Independent Directors, the Committees and the Board as a whole along with the performance of the Chairman of the Company, taking into account the views of Executive Director and assessed the quality, quantity and timeliness of flow of information between the management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

Disclosures as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company has zero tolerance for sexual harassment at workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules made thunder and no complaint has been received on sexual harassment during the financial year 2022-23. Further Company has complied with the provisions relating to the constitution of Internal Complaint Committee under the Sexual Harassment of Woman at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

The Company periodically conducts sessions for employees across the organization to build awareness about the Policy and the provisions of Prevention of Sexual Harassment Act.

Nomination and Remuneration Policy

The policy on Director 's appointment and remuneration including criteria for determining qualifications, positive attributes, independence of Director, and also remuneration for Key Managerial Personnel and other employees has been provided under Corporate Governance Report. The weblink for the same is https://www.sadbhaveng.com/wp-content/uploads/2018/02/ REMUNERATION-POLICY.pdf

Whistle Blower Policy

The Company has a vigil mechanism named Whistle Blower Policy for directors and employees to report to the management instances of unethical behavior, actual or suspected, fraud or violation of the Company's code of conduct or ethics policy. The details of the said Policy is explained in the Corporate Governance Report and also posted on the website of the Company. The weblink for the same is https://www.sadbhavene.com/wp-content/uploads/2018/02/Whistle Blower Policy-1.pdf

Development and implementation of Risk Management Policy

In accordance with the Regulation 17 of SEBI (LODR) Regulations, 2015, the Board formally adopted steps for framing, implementing and monitoring the risk management plan for the Company by way of Risk Management Policy.

Board of Directors of the Company has identified the risks in two categories i.e. (1) Internal and Business Risk and (2) External Risk. The Management has also envisaged the minimization procedure and its perception in respect of each identified risk.

Further, the Company identifies risks with its degree and control systems are instituted to ensure that the risks in business process are mitigated. The Board provides oversight and reviews the Risk Management Policy periodically. In the opinion of the Board there has been no identification of elements of risk that may threaten the existence of the Company.

Meetings of Board

During the year, Nine (9) Board Meetings were held on May 30, 2022, June 20, 2022, August 10, 2022, October 15, 2022, November 14, 2022, November 21, 2022, December 17, 2022, February 14, 2023 and March 15, 2023. The details of attendance of Directors is mentioned in Corporate Governance Report which forms part of this report.

Directors' Responsibility Statement

Pursuant to the requirement in section 134(3) (c) of the Companies Act, 2013, the Directors state that:

a) in the preparation of the annual accounts for the year ended March 31, 2023, the applicable accounting standards had been followed and there are no material departures from the same;

b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at March 31, 2023 and of the profit and loss of the Company for the year ended on that date;

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

d) the directors had prepared the annual accounts on a going concern basis;

e) that the directors had laid down internal financial controls to be followed by the company and that the financial controls are adequate and are operating effectively; and

f) that the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Statutory Auditors

Statutory Auditor of the company is M/s. Manubhai & Shah LLP, Chartered Accountants, Ahmedabad (Firm Registration No. 106041W/ W100136).

M/s. Manubhai & Shah LLP, Chartered Accountants (Firm Registration Number: 106041W/W100136), Statutory Auditors of the Company to hold office for the first term of five years from the conclusion of the Thirty First (31st) Annual General Meeting held on September, 29, 2020 until the conclusion of the Thirty Sixth (36th) Annual General Meeting of the Company to be held in the year 2025.

Qualifications, reservations or adverse remarks made by Statutory Auditors in their report for the Financial Year ended on March 31,

2023 are given in the Standalone and Consolidated Independent Auditor's Report.

Explanation or Comments on Qualifications, Reservations or Adverse remarks or disclaimers made by the auditors and the practicing company secretary in their reports

The Statutory Auditors' Report contain following qualification on Standalone and Consolidated Results.

Qualification 1: We draw attention to Note 49 to the accompanying Standalone Financial Results with respect to termination of concession agreement by Rohtak Panipat Tollway Private Limited step-down subsidiary of the Company. The said step-down subsidiary has issued notice of termination of concession agreement to National Highway Authority of India (NHAI) on account of Force Majeure Event as per concession agreement. As explained in the said note, the Company has carried out impairment assessment of outstanding balance in this step-down subsidiary duly considering the expected payment arising out of aforesaid termination and other claims filed with NHAI and based on the above assessment, management has concluded that no impairment / adjustment to the carrying value of the loan and other receivables balance is necessary as at March 31, 2023.

However, we have not been able to corroborate the management's contention of realizing the carrying value of loan and other receivables of Rs. 14,865.37 Lakhs as on the reporting date, related to the said step-down subsidiary.

Accordingly, we are unable to comment on appropriateness of the carrying value of such loan and the consequential impact on the financial results and financial position of the Company as at reporting date and for the quarter and year ended on March 31, 2023.

Reply to qualification 1: The Company has outstanding loan and other receivable of Rs. 14865.38 lakhs given to Rohtak Panipat Tollway Private Limited (RPTPL), a step-down subsidiary company which is engaged in construction, operation and maintenance of road projects under concession agreement with National Highways Authorities of India (NHAI). The net worth of RPTPL has fully eroded.

Further, the toll collection by RPTPL was forcefully suspended due to agitation and protest held by farmers and other unions against agri-marketing laws from December 25, 2020. Accordingly, RPTPL could not collect toll user fees from December 25, 2020. RPTPL had sent various communications to NHAI for such forceful suspension of toll. RPTPL has issued notice for termination of concession agreement on July 27, 2021 considering the above event as Force Majeure Event in terms of concession agreement. RPTPL has filed claim amounting to Rs. 395784.40 lakhs relating to termination payments, O&M cost due to force majeure, Covid claim & demonetization etc. with NHAI in terms of concession agreement. In respect of such claims, NHAI has approached to the RPTPL for settlement of all these claims by way of conciliation proceedings, which has been consented by it.

Considering the management assessment of probability and tenability of receiving above claims from NHAI as per the terms of concession agreement, which is backed by legal opinion and communications from NHAI for conciliation, the management has assessed that there is no impairment in the value of loan given to RPTPL and consequently no provision/adjustment to the carrying value of loan and other receivable as at March 31, 2023 is considered necessary.

Qualification 1: The Company's internal financial control system towards estimating the carrying value of loan and other dues receivables in the step down subsidiary company, as explained in Note 49 to the standalone financial statements were not operating effectively which could potentially lead to not providing adjustments, if any, that may be required to the carrying values of loan and other dues recoverable from such step down subsidiary and its consequential impact on the earnings, other equity and related disclosures in the standalone financial statements.

Reply to Qualification 1: The Company has outstanding loan and other receivable of Rs. 14865.38 lakhs given to Rohtak Panipat Tollway Private Limited (RPTPL), a step-down subsidiary company which is engaged in construction, operation and maintenance of road projects under concession agreement with National Highways Authorities of India (NHAI). The net worth of RPTPL has fully eroded.

Further, the toll collection by RPTPL was forcefully suspended due to agitation and protest held by farmers and other unions against agri-marketing laws from December 25, 2020. Accordingly, RPTPL could not collect toll user fees from December 25, 2020. RPTPL had sent various communications to NHAI for such forceful suspension of toll. RPTPL has issued notice for termination of concession agreement on July 27, 2021 considering the above event as Force Majeure Event in terms of concession agreement. RPTPL has filed claim amounting to Rs. 395784.40 lakhs relating to Termination payments, O&M cost due to force majeure, Covid claim & demonetization etc. with NHAI in terms of concession agreement. In respect of such claims, NHAI has approached to the RPTPL for settlement of all these claims by way of conciliation proceedings, which has been consented by it.

Considering the management assessment of probability and tenability of receiving above claims from NHAI as per the terms of concession agreement, which is backed by legal opinion and communications from NHAI for conciliation, the management has assessed that there is no impairment in the value of loan given to RPTPL and consequently no provision/adjustment to the carrying value of loan and other receivable as at March 31, 2023 is considered necessary.

Qualification 2: There was weakness in operating effectiveness over system of creation and issuance of purchase order, goods receipt note, accounting of consumption and processing of invoices which could result into possible adjustments of transactions / balances.

Reply to Qualification 2: The company has adequate system of creation and issuance of purchase order, goods receipt note, accounting of consumption and processing. In few cases due to man power resource constraint there were some delay on few occasion in creation and issuance of purchase order, goods receipt note, accounting of consumption and processing of invoices. However, company has proper system of maker checker for processing of PO, GRN and consumption and No GRN and consumption will take place without creation of purchase order. Further management is taking steps to ensure that system operate effectively so that such instances do not occur. On the basis of above there were no material misstatement due to the weakness in operating effectiveness over system of creation and issuance of purchase order, goods receipt note, accounting of consumption and processing of invoices.

Qualification 3: In our opinion, the Company's system for processing of journal entries into accounting software does not have maker checker system which could result into possible effect to the processing of transactions and its consequential effect on balances.

Reply to Qualification 3: The company has adequate system of manual approval of processing of journal entries in accounting software and journal entries are also verified by the internal auditor. Company are in process of incorporating the maker checker process in accounting software for processing of journal entries.

It may be noted that there were no material misstatements of account balances due to the weakness in system for processing of journal entries in accounting software due to absence of maker checker system.

The Statutory Auditors have provided following qualification in their audit report -

1. As detailed in Note 66 & 67 of the accompanying Consolidated Financial Results, with respect to Rohtak Panipat Tollway Private Limited (RPTPL) and Rohtak Hisar Tollway Private Limited (RHTPL), step down subsidiaries of the Group in which interest on rupee term loan from banks and financial institutions as well as unsecured loans from group companies have not been accounted considering the fact that both subsidiaries have issued termination notices and lenders of both step down subsidiaries have classified all the secured borrowings as non-performing assets. This has resulted in the understatement of finance cost and the related interest liability and corresponding understatement of losses, amount of which is unascertained.

The auditors of RPTPL and RHTPL have expressed qualified opinion on the financial statement of RPTPL and RHTPL for the year ended March 31, 2023 vide their report dated May 25, 2023.

2. As detailed in Note 68 of the accompanying statement, with respect to Sadbhav Vidarbha Highway Limited (Concessionaire or SVHL), step down subsidiary of the group in which case lenders of SVHL has exercised right of substitution of concessionaire in the month of February, 2023. The Concessionaire vide its letter dated May 5, 2023 had recommended National Highway Authority of India (NHAI), Harmonious substitution of concessionaire. The approval of NHAI is awaited. As mentioned in the said note, no adjustment to the carrying value of assets and liabilities have been made in the financial statements of SVHL and the financial statements of SVHL is prepared on going concern basis. Owing to the uncertainty of outcome of substitution proceedings and lack of other alternate audit evidence, we are unable to comment about adjustment that may be required to the carrying value of assets and liabilities and their consequential impact on the financial position of the Group as on March 31, 2023.

3. As detailed in Note 69 of the accompanying statement, with respect to Sadbhav Nainital Highway Limited (Concessionaire or SNHL), step down subsidiary of the group in which case National Highway Authority of India (NHAI) vide its letter dated April 17, 2023 has given In-Principal approval for harmonious substitution of concessionaire. As mentioned in the said note, no adjustment to the carrying value of assets and liabilities have been made in the financial statements of SNHL and the financial statements of SNHL is prepared on going concern basis pending finalization of substitution.

The auditors of SNHL have expressed qualified opinion on the financial statement of SNHL for the year ended March 31, 2023 vide their report dated May 26, 2023.

4. As detailed in Note 70(a) of the accompanying Consolidated Financial Results, with respect to Sadbhav Bangalore Highway Private Limited (SBGHPL), subsidiary of the group in which Tax credit receivables are carried in the Balance sheet at Rs. 4,267.40 Lakhs under the Other Current assets. However, during financial year 2022-2023, the SBGHPL does not have any business activity nor are we informed about the management plan for taking up other business activity. Hence we are unable to comment about utilization / realisation of such tax credit receivables.

5. As detailed in Note 71(a) of the accompanying Consolidated Financial Results, with respect to Sadbhav Jodhpur Ring Road Private Limited (SJRRPL), subsidiary of the group in which Tax credit receivables are carried in the Balance sheet at Rs. 1,554.50 Lakhs under Other Current assets. However, during financial year 2022-2023, the SJRRPL does not have any business activity nor are we informed about the management plan for taking up other business activity, nor are we informed about the management plan for taking up other business activity.

The auditors of SJRRPL have expressed qualified opinion on the financial statement of SJRRPL for the year ended March 31, 2023 vide their report dated May 26, 2023 mentioning that they are unable to comment about the utilization of tax credits in foreseeable future.

Reply to qualification 1: Finance cost includes Interest expenses in respect of two step down subsidiary companies namely Rohtak Hissar Tollways Private Limited (RHTPL) and Rohtak Panipat Tollways Private Limited (RPTPL) amounting to Rs. 12280.90 lakhs and Rs. 10269.40 lakhs reversed during the quarter ended March 31, 2023 which were provided in earlier period where Financials of RPTPL & RHTPL are prepared on non going concern basis due to issue of termination notice to NHAI by RPTPL & RHTPL.

Reply to qualification 2: In case of Sadbhav Vidarbha Highway Limited (Concessionaire or SVHL), step down subsidiary where lenders of SVHL have exercised right of substitution of concessionaire in the month of February, 2023. The Concessionaire vide its letter dated May 5, 2023 had recommended National Highway Authority of India (NHAI), Harmonious substitution of concessionaire. The approval of NHAI is awaited. The SIPL and SVHL are in active discussion with Gawar Construction Limited for executing endorsement/ settlement agreement. Owing to the uncertainty of outcome of substitution proceeding note, no adjustment is made to the carrying value of assets and liabilities in the financial statements of SVHL and the financial statements of SVHL is prepared on going concern basis.

Reply to qualification 3: In case of Sadbhav Nainital Highway Limited (Concessionaire or SNHL), step down subsidiary where National Highway Authority of India (NHAI) vide its letter dated April 17, 2023 has given In-Principal approval for harmonious substitution of concessionaire. The SIPL and SNHL are in active discussion with Gawar Construction Limited for executing endorsement/settlement agreement. As per the Binding Term Sheet, the recoverability of the amount invested by SIPL as Equity and Sub-debt is substantially certain and hence as per management estimate, no provision is required to be made to the carrying value of assets and liabilities in the financial statements of SNHL and the financial statements of SNHL is prepared on going concern basis.

Reply to qualification 4: Sadbhav Banglore Highway Private Limited (SBGHPL), step down subsidiary in which Tax credit receivables are carried in the Balance sheet at Rs. 4267.40 lakhs under the Other Current assets. Presently, the SBGHPL does not carry out any business activity. However, management of SBGHPL is evaluating various option for utilising above mention credit and is confident about the utilization of the credit. For which the statutory auditors have expressed qualified opinion on financial results in this regards.

Reply to qualification 5: Sadbhav Jodhpur Ring Road Private Limited (SJRRPL), subsidiary in which Tax credit receivables are carried in the Balance sheet at Rs. 1554.50 lakhs under the Other Current assets. Presently, SJRRPL does not carry out any business activity. However, management of SJRRPL is evaluating various option for utilising above mention credit and is confident about the utilization of the credit. For which the statutory auditors have expressed qualified opinion on financial results in this regards.

Qualification 1: There was weakness in operating effectiveness over system of creation and issuance of purchase order, goods receipt note, accounting of consumption and processing of invoices of the Holding Company which could result into possible adjustments of transactions / balances.

Reply to Qualification 1: The Holding Company has adequate system of creation and issuance of purchase order, goods receipt note, accounting of consumption and processing. In few cases due to man power resource constraint there were some delay on few occasion in creation and issuance of purchase order, goods receipt note, accounting of consumption and processing of invoices. However, Holding Company has proper system of maker checker for processing of PO, GRN and consumption and No GRN and consumption will take place without creation of purchase order. Further management is taking steps to ensure that system operate effectively so that such instances do not occur. On the basis of above there were no material misstatement due to the weakness in operating effectiveness over system of creation and issuance of purchase order, goods receipt note, accounting of consumption and processing of invoices.

Qualification 2: In our opinion, the Holding Company's system for processing of journal entries into accounting software does not have maker checker system which could result into possible effect to the processing of transactions and its consequential effect on balances.

Reply to Qualification 2: The Holding Company has adequate system of manual approval of processing of journal entries in accounting software and journal entries are also verified by the internal auditor. Holding Company are in process of incorporating the maker checker process in accounting software for processing of journal entries.

It may be noted that there were no material misstatements of account balances due to the weakness in system for processing of journal entries in accounting software due to absence of maker checker system.

Qualification 3: SIPL, one of the subsidiary Company's internal processes with regards to the confirmation and reconciliation of trade payables, trade receivables, other incidental balances pertaining to the said trade payables and trade receivables are not operating effectively which could result into possible adjustments of balances.

The auditor of SIPL have expressed qualified opinion on the internal financial controls over financial reporting for the year ended March 31, 2023 vide their report dated May 28, 2023.

Reply to Qualification 3: SIPL, one of the subsidiary company's has adequate system for balance confirmation of trade payable and receivables. The SIPL is reconciling the outstanding balance of trade payables and receivables on regular intervals. The SIPL has an internal audit system which is commensurate with the size and nature of its business and there is no weakness in recognition of income and expenses Further as part of internal audit scope such balances are also reviewed by them and hence possibility of misstatement is not there.

Qualification 4: SIPL, one of the subsidiary Company's system for processing of journal entries into accounting software does not have maker checker system which could result into possible effect to the processing of transactions and its consequential effect on balances.

The auditor of SIPL have expressed qualified opinion on the internal financial controls over financial reporting for the year ended March 31, 2023 vide their report dated May 28, 2023.

Reply to Qualification 4: SIPL, one of the subsidiary company's has adequate system of manual approval of processing of journal entries in accounting software and journal entries are also verified by the internal auditor. The SIPL has an internal audit system which is commensurate with the size and nature of its business. SIPL are in process of incorporating the maker checker process in accounting software for processing of journal entries.

It may be noted that there were no material misstatements due to the weakness in system for processing of journal entries in accounting software due to absence of maker checker system.

Secretarial Auditors

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the rules made thereunder, the Company had appointed M/s. Ravi Kapoor and Associates, Practicing Company Secretaries, Ahmedabad to undertake the Secretarial Audit for the financial year 2022-23. The Secretarial Audit Report is annexed herewith as 'Annexure 1' to this Report. The adverse remarks by Secretarial auditor and management reply are given below:

Secretarial Audit Report contains following observations and Board of Directors of the Company submitted responses for the same as follows.

1. Regulation 17 (1) (c) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 requires that the Board of directors of the top 2000 listed entities shall comprise of not less than six directors. Minimum Directors requirement was not fulfilled by the Company for a period of 80 days. Accordingly, Company was in default of Regulation 17(1)(c) for a period of 80 days from 25th December 2022 till 14th March 2023. To that extent Company has not complied with the said provisions of SEBI LODR Regulations.

2. Pursuant to Section 405 of the Companies Act, 2013 the Central Government made it necessary for all the "Specified Companies" to furnish the Form MSME-1, Half Yearly return about the payment to micro and small enterprise suppliers. However, the Company has not filed the said form for the period ended on 30th September, 2022 and on 31st March, 2023 respectively with Ministry of Corporate Affairs and to that extent not complied with the provisions of the Act.

3. Pursuant to Regulation 31 (1) (b) of SEBI LODR Regulations, the listed entity shall submit to the stock exchange(s) a statement showing holding of securities and shareholding pattern separately for each class of securities, in the format specified by the Board from time to time on a quarterly basis, within twenty-one days from the end of each quarter. There was a delay in Filing of Shareholding Pattern for the Quarter ended June 2022 by 20 days which is in violation of Regulation 31 (1) (b). Thus, Company has not complied with the said provisions of SEBI LODR Regulations to that extent.

4. Pursuant to SEBI Circular no. SEBI/HO/CFD/CMD1/CIR/P/2019/140 dated November 21, 2019, the Company was required to make disclosure with the Stock Exchange(s) with respect to default in payment of interest/repayment of principle amount on loans from Banks/Financial Institutions. However, Information with respect to payment of interest/repayment of principle amount on loans from Banks/Financial Institutions, including delay made if any, is not available and accordingly we are not in a position to identify the deviation, if any on Compliance of SEBI Circular no. SEBI/HO/CFD/CMD1 /CIR/P/2019/140 dated November 21, 2019.

Reply of Directors with respect to qualifications / Observations raised by Secretarial Auditors are as under:

1. Reply to qualification No. 1: During the period from 25th December 2022 till 14th March 2023 the Company was in process of identifying the suitable candidate to fill the vacancy created due to expiry of the term of Mr.

Arun S. Patel, Independent Director w.e.f. 25th September, 2022. The Board of Directors of Sadbhav Engineering Limited (the Company) in its meeting held on 15th March, 2023 has considered and approved appointment of

Mr. Dwigesh Joshi (DIN: 09733282) as an additional Executive Director of the Company for a period of three (3) years with effect from 15th March, 2023 to 14th March 2026 (both days inclusive) and; Mr. Jatin Thakkar (DIN:09312406) as an additional Non-Executive Director of the Company with effect from 15th March, 2023.

Hence, the composition of Board has been complied pursuant to Regulation 17(1)(c) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and other applicable provisions.

And Appointment of above mentioned Directors also approved by the shareholders of the Company through Postal Ballot.

Company has also made payment of Rs. 37,800/- after deduction of TDS Rs. 3,500/- through NEFT on 7th March, 2023 towards fines / penalties.

2. Reply to qualification No. 2: Due to Unavailability of required information from the MSME Vendors, Company was not able to file the Half yearly return of MSME-1 during the year with the Ministry of Corporate Affairs. No Vendor has declared that they have registered with MSME.

3. Reply to qualification No. 3: Due to Inadvertent circumstances, there was a delay of 20 days in Filing of Shareholding Pattern for the quarter ended 30-06-2023. However, the Company have submitted the Shareholding Pattern to the Stock Exchange after 20 days. Also Company has paid Rs. 47,200/- each to BSE Limited and National Stock Exchange of India Limited through NEFT on 02nd September, 2022 towards fines / penalties for non-submission of shareholding pattern within time period under regulations 31 (1) (b) of SEBI LODR Regulations.

4. Reply to qualification No. 4: This matter is strictly confidential & being reported by the Internal Auditor to the Board of Directors but all the issues are merely operational and not having any material adverse impact on the company.

Cost Auditors

The Board had, on the recommendation of the Audit Committee, appointed M/s Rajendra Patel & Associates, Cost Accountants, Ahmedabad to audit the cost records of the Company for the financial year 2022-2023 on a remuneration of Rs. 75,000/-p.a. The Cost Audit Report for the year 2022-2023 will be filed before the due date with the Ministry of Corporate Affairs. As required under the Act and Rules made thereunder, the remuneration payable to the Cost Auditors is required to be placed before the Members in a general meeting for ratification. Accordingly, a resolution seeking ratification by members for the remuneration payable to M/s.Rajendra Patel & Associates is included at Item No. 3 of the Notice convening 34th Annual General Meeting.

Compliance with Secretarial Standards

The Company is in compliance with the Secretarial Standards on Meeting of the Board of Directors (SS-1) and General Meetings (SS-2) issued by the Institute of Company Secretaries of India and approved by the Central Government.

Reporting of Frauds by Auditors

During the year under review, the Statutory Auditors, Cost Auditors and Secretarial Auditor have not reported any instances of fraud committed against your Company by its officers or employees to the Audit Committee or the Board, under Section 143(12) of the Act.

Corporate Governance

As per Regulation 27 of SEBI (LODR) Regulations, 2015, a separate section on Corporate governance practices followed by the Company, together with a certificate from M/s. Ravi Kapoor & Associates, Practicing Company Secretaries, Ahmedabad, confirming compliance conditions of Corporate Governance forms an integral part of this Report.

Management Discussion and Analysis (MDA)

MDA, for the year under review, as stipulated under Regulation 34(2)(e) of SEBI (LODR) Regulations, 2015 with the Stock Exchanges is presented in a separate section, which forms a part of the Annual Report.

Corporate Social Responsibility

The Annual Report on CSR activities is annexed as Annexure-2 to this Report. The CSR policy is available on the https://www. sadbhaveng.com/wp-content/uploads/2021/09/Corporate-Social-Responsibilitv-Policv.pdf

Particulars of Employees and related disclosures

In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules is attached as 'Annexure - 3' which forms part of this report.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as 'Annexure 4' which forms part of this report.

Energy Conservation, Technology Absorption and Foreign Exchange Earning and Outgo

The rules regarding conservation of Energy and Technology Absorption are not applicable to the Company. However, details of Foreign Exchange Earnings and Outgo are mentioned below:

Foreign Exchange Earnings: Nil

Foreign Exchange Outgo: Nil

Particulars of Loans, Guarantees or Investments

The provisions of Section 186 (except sub-section) of the Companies Act, 2013, with respect to a loan, guarantee or security is not applicable to the Company as the Company is engaged in providing infrastructural facilities. The details of investment made during the year under review are disclosed in the financial statements.

Contracts and 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 an arm's length basis. Particulars of contract / arrangement / transaction entered into by the Company with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions forms integral part of this report in form AOC-2 as per 'Annexure - 4'.

The Company in terms of Regulation 23 of SEBI (LODR) Regulations, 2015, submits within 15 days from the date of publication of its standalone and consolidated financial results for the half year, disclosures of related party transactions on a consolidated basis for the half yearly period upto March 31, 2023, in the format specified in the relevant accounting standards for annual results to the stock exchanges. The said disclosures can be accessed on the website of the Company at www.sadbhaveng.com.

The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company 's website at the link: https://www.sadbhavene.com/wp-content/uploads/2021/09/RELATED-PARTY- TRANSACTION-POLICY.pdf Your Directors draw attention of the members to notes no.46 to the Standalone Financial Statements which sets out related party disclosures.

Annual Return

Pursuant to the provisions of Section 92 (3) of the Companies Act, 2013, read with Companies (Management and Administration) Rules, 2014, Company has placed Annual Return in Form MGT-7 for the financial year ended on March 31, 2023 on the website of the Company at www. sadbhavene. com and the same can be addressed at weblink

https://www.sadbhaveng.com/investors/#aem-egm-documents

Internal Financial Controls

The Company has designed and implemented a process driven framework for Internal Financial Controls [IFC] within the meaning of the explanation to section 134[5][e] of the Act. For the year ended on March 31, 2023, the Board is of the opinion that the Company has sound IFC commensurate with the size, scale and complexity of its business operations. The IFC operates effectively and no material weakness exists. The Company has a process in place to continuously monitor the same and identify gaps, if any, and implement new and/ or improved controls whenever the effect of such gaps would have a material effect on the Company's operations.

Business Responsibility and Sustainability Reporting

As our Company does not fall in one thousand listed entities based on market capitalization as on 31st March, 2022, therefore, Business Responsibility and Sustainability Reporting does not applicable to our company.

Fixed Deposit

During the year under review, your Company has not accepted any fixed deposits from the public Pursuant to Section 73 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014. Thus, as on 31st March, 2023, there were no deposits which were unpaid or unclaimed and due for repayment.

Code for Prevention of Insider Trading

Your Company has adopted a Code of Conduct to regulate, monitor and report trading by designated persons and their immediate relatives as per the requirements under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015. This Code of Conduct also includes code for practices and procedures or fair disclosure of unpublished price sensitive information which has been made available on the Company's website at www.sadbhaveng.com.

The details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year alongwith their status as at the end of the financial year

Insolvency Proceedings to which Company is/was Respondent mentioned below:

# Till the date of this report the matter has been settled and disposed off.

The Details of difference between amount of the valuation done at the time of one time settlement and the valuation done while taking loan from the banks or financial institutions along with the reasons thereof Not Applicable during the year under review.

General

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend, voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme.

4. Neither the Managing Director nor the Whole-time Directors of the Company receive any commission from the Company and not disqualified from receiving any remuneration or commission from any of subsidiaries of the Company.

5. All properties and insurable interests of the company to the extent required have been adequately insured.

6. No significant and material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and the Company's future operations.

Industrial Relations

The Company maintained healthy, cordial and harmonious industrial relations at all levels. The enthusiasm and unstinting efforts of employees have enabled the Company to remain at the leadership position in the industry and the Management appreciates the employees of all cadres for their dedicated services to the Company.

Acknowledgments

Your Directors place on record their gratitude to the Ministry of Corporate Affairs, BSE Limited, National Stock Exchange of India Limited, Securities and Exchanges Board of India, Central Government, State Governments and Company's Bankers for the assistance, co-operation and encouragement they extended to the Company. Your Directors also wish to place on record their sincere thanks and appreciation for the continuing support and unstinting efforts of investors, vendors, supplier, sub-contractors, business associates and employees in ensuring an excellent all around operational performance.