Professional Documents
Culture Documents
CONTENTS
Page No.
1. Board of Directors 1
2. Chairman’s Message 2
3. Directors’ Report 4
7. Statement of Prot & Loss for the year ended 31 March 2017 65
9. Notes forming part of the Financial Statements for the year ended 31 March 2017 67
AIESL
Company Secretary
Auditors
Chartered Accountants
Registered Ofce
Airlines House
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AIESL
CHAIRMAN'S SPEECH
Dear Shareholders,
It gives me great pleasure to present to you the thirteenth Annual Report of the Company for the year 2016-17.
Air India Engineering Services Ltd. is leading MRO (Maintenance, Repair and Overhaul) service provider in the
country providing both Line Maintenance and Major Maintenance for various type of aircraft in AI's eet, Third
party Airlines as well as to the Defense forces.
The engineering activities of Air India (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 transferred the
movable assets (Workshop, Plant & Machinery and Tools etc.) to the company at its written down value (WDV)
on the transfer date formed the equity investment made by AI. As per MoU, the Company was also expected to
receive Equity from AI to the extent of Rs 375 Crs. in the rst three years of its operations in order to support its
Capital acquisition program.
The MRO industry 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 xed 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
protable in next few years.
The Government of India had announced National Civil Aviation Policy in June 2016 and it is expected that this
would have an impact on the size and structure of India's MRO sector which is expected to be transformed
signicantly, increasing the requirement of third party operators for MRO services. This is the rst time that India
has a single document vision for the aviation sector as a whole including MRO sector which is a welcome
development.
MRO SCENARIO
India, with its growing aircraft eet 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 from abroad, mainly due to cost
advantages resulting from the comparatively high tax burden in India, cumbersome operating procedures and
the inadequate MRO service facilities available in India.
India's MRO market size has been estimated to be around USD 750 million. As per Boeing, the market is
expected to grow at 7% CAGR to reach USD 1.2 billion by 2020. With the eet size likely to double by 2020, the
need for a strong domestic MRO industry is critical. CAPA (Centre for Asia Pacic Aviation) had projected Indian
MRO market to reach USD 2 billion by 2020.
During 2016-17, total revenue of the Company was Rs. 740.48 crores as against total revenue of Rs. 620.27
crores during 2015-16. The total expenditure after prior period adjustments were Rs. 1245.64 crores as against
Rs. 1178.89 crores during 2015-16.
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The net loss during the year ended 31 March 2017 was Rs. 505.16 Crores as against Rs. 558.62 Crores during
2015-16.
CORPORATE GOVERNANCE
The company was in compliance with the guidelines on Corporate Governance issued by Department of Public
Enterprises (DPE), wherever applicable during the year. The evaluation of various parameters viz. Financial
as well Technical was also done in terms of targets set in the Memorandum of Understanding entered into by
the company. The aforesaid evaluation as well as report on Corporate Governance was led with the
authorities concerned.
ACKNOWLEDGEMENT
I take this opportunity to thank Air India Limited, Airline Allied Services Ltd., Air India Express Limited, Ministry of
Civil Aviation, Director General 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 operationalise and
for their efforts and team spirit towards making the company protable in the near future.
Sd/-
(Pradeep Singh Kharola)
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 eet of Air India in a continuous state of airworthiness
by the system of preventive and corrective maintenance to secure a high level of safety.
Process
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 fulll the overall vision.
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.
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DIRECTORS’ REPORT
The Directors have pleasure in presenting the Thirteenth Annual Report on the business and operations of the
Company together with the Audited accounts, Auditors' Report and comments by the Comptroller and Auditor
General of India, for the Financial Year ended March 31, 2017.
(Rs. in crore)
The Company has not revised its Financial Statements or Board's Report in respect of any of the three
preceding nancial years as mentioned in Section 131 (1) of the Companies Act, 2013.
1.3. Dividend
The directors are not recommending any dividend as the company has not earned any prots.
Since there was no unpaid / unclaimed dividend for the past years, the provisions of Section 125 of the
Companies Act, 2013 did not apply.
The Board of the company has decided/proposed to carry NIL amounts to its reserves.
1.6.1 The operations of the company have been divided into separate prot centers. The status of affairs
at these prot centers is as given below:
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I. NAGPUR MRO:
The Time Line & Capability addition at Nagpur MRO is as given below:
TH
1 As on (12 OCT. 2017) Certied 21 B777 aircrafts
II. CHENNAI :
A) The Signicant Achievements of Chennai center during the year April, 2016 to March 2017 were as
below:
Ø Engineering Certication of Client Airlines Aircraft (A320 family A/c) of M/s Silk Air, M/s Qatar
Airways, M/s Kuwait Airways, M/s Etihad Airways, M/s Air Vistara, M/s Nepal Airways and A330
A/c M/s Qatar Airways & M/s Kuwait Airways are provided at various Stations in Southern
Region as given under :
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Nepal Airlines – – 49 – – – – – 49
Air Asia — – – – – – – 86 86
TOTAL 1820 2331 2599 365 187 644 1581 295 9736
Ø At the above stations, company has provided Engineering Certication for approximately 9736
Flights during from April 2016 to March 2017, earning a revenue of approximately Rs.1261.07
Lacs.
Ø By way of providing Engineering Hangar facilities for Aircrafts of outside parties at Chennai,
company has earned a revenue of Rs.198.86 Lacs during April, 2016 to March 2017.
Ø The company has earned a revenue of approx. Rs.15.49 Lacs during April, 2016 to Mach 2017
through aircraft component servicing of outside parties at Hyderabad.
At MRO, RGIA, Shamshabad “29” A-Checks & ”1” B-Check were carried out during the period
from April 2016 to March 2017.
The company earned revenue of approx. Rs.23.83 Lacs during the period April 2016 to March
2017 by providing training facilities to outside agencies at ETS, Hyderabad.
During the April, 2016 to March 2017, the company earned a revenue of Rs.14.66 Lacs by
intake of AME trainees/On Job Trainees (6 months & 1 month On Job Training).
1) Details of FAA/EASA approval: Presently, company does not have FAA/EASA (Federal
Aviation Administration / European Aviation Safety Agency) approval for any shop/Hangar at
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Hyderabad. The process has been initiated for the same. The approval of Regulatory Authority
will enable the company, to service foreign airlines aircraft and its components at own
premises.
2) ATR-72 Project: Hyderabad Base got approved to c/out Maintenance upto and including “1”
“C” Check of ATR-72 from DAW, DGCA. Accordingly, we are in the process of undertaking
major checks of ATR-72.
5) OJT Training in collaboration with M/s Air Tech Institute: Preliminary discussions carried
out to carry out OJT training in AIESL for M/s Air Tech. The project is under process.
III. MUMBAI: The details of Mumbai base like achievements, capacity addition, and future plans are
highlighted below in brief :
A) ACHIEVEMENTS:
l Avg. OTP, Ex-BOM maintained 97-98% with number of constraints such as shortage of
manpower, nonavailability of trestles, spares, frequent changes in allotted bays,
congestion at airport etc.
l Indigenous purchase of noncritical aircraft components such as cabin, galley and toilet
spares etc., resulted in saving of INR 3 cr. (approx.) and substantial foreign currency.
l TAT of aircraft from Base Maintenance is improved due to reduced lead time in the
procurement of such spares.
l WQAR (Wireless Quick Access Recorder) modication of all 321 aircraft carried out to
comply with the regulatory requirements which also resulted into the saving of Man hours
efforts for Data Milking process.
l 115v, 400HZ power extended from SFC (static frequency converter) in base maintenance
to all Avionics overhaul shops.
l Automatic EPSU (Emergency power supply unit) battery charger fabricated in-house.
B) CAPACITY ADDITION:
Approval has been granted by the regulatory authority for the followings:
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l Testing and repair facility for MMR Rx (Receiver) P/N TLS755-01 has been enhanced
from Maintenance Level 1 to Maintenance Level 2.
l Testing and repair facility Pitot Tube Part No. 0851 HL, has been developed upto
Maintenance level-1.
l Testing and repair facility for SSFDR (Solid State Flight Data Recorder) Part No, 2100-
xxx series, has been enhanced from Maintenance level 1 to Maintenance level-2.
l Testing and repair facility for PBE Part No. E28180 serieshas been enhanced from
Maintenance level 1 to Maintenance level-2.
l In addition to this, Heavy Maintenance checks were successfully carried out to full
satisfaction of Jet Airways on four of the A330 aircraft.
l Maintenance of following aircraft components of Go-Air are being carried out on regular
basis.
2) Pressure gauges
l Maintenance of FDAU (Flight Data Acquisition unit) for Air force carried out.
D) FUTURE PLANS
l More third party workload is being planned in Base Maintenance and Overhaul shops
through dedicated team consisting of subject experts and professionals, for the optimum
utilization of existing capacity of respective work centers/activity centers.
l Discussion and details are being framed with Jet Airways for compliance of landing gear
change on A330 aircraft starting from Nov/Dec 2017 till Aug/Sept 2018 on four of A330
aircraft.
l Energy Audit will be planned on regular basis to check power consumption. Energy
conservation are being planned to reduce power consumption under the scheme of green
initiation to save environment.
l Revival and up gradation of avionics shop for 150 components allocated to WR. This will
cater to Air India and other airlines component servicing.
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5) Genx 4) Awaiting
Series training from
Engines OEM GE and
Testing OEM P&W
at Nagpur.
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IV KOLKATA:
The achievements, future plans, new capability addition and third party work to be undertaken at
Kolkata base are furnished below:
(A) EFD
Capability addition done: Commissioning of new Booster Air Compressors, Air Dryer and Air
Heater completed for augmenting capability of Pneumatic Complex (Hi Flow), NTA.
Third Party work done : Aircraft jack testing done for M/s. Thriveni Earth Movers.
l With the ongoing high ow project nearing completion, various ATA 21, ATA 36 and ATA 49
Pneumatic Valves servicing and testing can be done....that would reduce foreign
exchange drain.
l EASA approval seeking process is under way. With EASA approval accorded to shop and
the various licensing process with OEMs settled, we foresee ourselves to be one of the
leading MROs in Eastern Region to service most ATA 21, 36, 49 and 80 components of
various kinds of aircraft and engines.
l With A320 Fmly heat exchangers already being cleaned, tested and repaired, capability
enhancement process of
Upgradation of GTCP 36-300A APU Test Cell for testing of 131-9A APU is being completed,
awaiting Correlation Run and DGCA approval within 3-4 months.
Test Rig and Special Tools for serving of various Fuel components and Fuel pressure controlled
Pneumatic Components are under process.
1. Universal Fuel Nozzle Test Rig: Final negotiation with Test Rig manufacturer M/S Bauer
for supply of Test Rig and Special Tools to service Fuel Nozzles (Main Engine and APU) of
all the aircraft in our eet has been concluded. PO will be released soon.
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2. Universal Fuel and Pneumatic Test Rig: Budgetary Quote for Test Rig and Special
Tools has been received. Note sheet for approval of Financial sanction is being prepared.
This Test Rig will take care of HPTCC , LPTCC,Transient Bleed Valve and Surge Control
Valves tted on Main Engines and APU of A320 family and B737-800 a/c.
3. Universal Fuel and Accessory Test Rig: This project is under process. Request for
Budgetary Quote for Test Rig and Special Tools has been requested. This test Rig will
cater VSV act, VBV act, Main Engine Fuel Pumps (A320 Family , B737-800, B-777 and
B787), IGV actuator (A320 Family and B737-800 a/c), {Gear Motor, Ball Screw and
Master Ball screw actuator of A320 Family A/c}.
4. Universal HMU & FCU Test Rig: Under Project. Woodward is ready to provide
Tools, Training and spares support but Honeywell has declined to give such
support. Honeywell must be pursued. This test Rig will cater HMU and APU FCU for
A320 Family a/c, B737-800 and even A320 with Neo engine.
Electrical shop has successfully commissioned Starter Motor Test Rig (Dynamometer Type)
from Vendor M/s.Magtrollncorp., Buffalo, USA which is being used for testing & certication of
APU Starter Motor pertaining to A320 & A320 Family Aircraft.
The Shop has obtained new capability of carrying out level three maintenance on galley
equipment such as A320 Family Convection Oven, Hot Jug & Hot Cup.
Future Project
Electrical Overhaul Shop, Kolkata is in the process of obtaining approval and subsequently
Capability Enhancement for the components like :
Completed Twenty One work orders to service Air Force components such as A. I. Valve,
Centrifugal Switch, Ign. Exciter, Ign. Lead, Igniter Plug, Start Valve, Hot Food Oven etc.
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Completed Twenty ve work orders to service Air Force components such as Centrifugal
Switch, Ign. Exciter, Ign. Lead, Igniter Plug, N. C. Solenoid Valve, 3 Way Solenoid Valve, APU
main wiring harness etc.
Achievements :
Base maintenance, Kolkata, with the help of Engineering Facility Division could devise a chain
pulley system with indigenous method for speedy execution of Landing Gears of A320
family aircraft. In addition, it could fabricate movable lighting system for providing sufcient
light during execution of various aircraft related jobs.
Capability enhancements:
A). Capability addition to carry out 12 yearly check of Airbus A-319-112 aircraft tted with
CFM 56-5B engines
B). Capability addition to carry out checks of ATR-42-320 aircraft tted with PW 121
Engines and HS 14SF propellers up to 36000 cycles.
C). Capability addition to carry out checks of ATR-72-212A (600 version) aircraft tted
with PW127 Engines HS568F-1 Propellers up to 9A checks & 2 yearly checks.
A). Base Maintenance, Kolkata has carried out structural repair job of Dove Airlines Pvt. Ltd.
B). Base Maintenance has also started to provide its hangars on temporary hires for better
utilization of its resources.
Future Plans:
Base Maintenance Kolkata is putting its endeavours to enhance its capability further to take outside
party jobs in areas of specialized inspections such as non destructive testing and heavy
maintenance packages of A320 family aircraft in addition to present A319 aircraft capability. In fact ,
it intends to get EASA approval on A319 aircraft and feasibility study has been initiated provided
nancial constraints are mitigated.
V. DELHI JEOC:
One of the achievements of the company during the year was the in-house fault isolation and repair
of ATEC 6000 at A.T.E.C., AIESL, NR. It helped to refurbish 6 ECUs in less than 6 weeks (including
one with FAA certication). This resulted in saving of approx. USD 90000.
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The details of No of engines (Type Wise) produced in JEOC from April 2016 to March 2017, April
2017 to till date is as follows:
Apr – 16 to Mar-17 2 10 24 36
Apr – 17 to Jan – 18 1 03 21 25
Total 3 13 45 61
Future Plans
Ø Up-gradation of Aircraft Accessory Overhaul Shop: - To service chairs of ATR 42/72, EASA / FAA
certication for wheel and brake assembly; In house servicing of rotary components which are
presently sent out of India and costing more than Rs. 40 lacs on an average; Facility for Power
Transfer Unit (costing around Rs.60 lakhs per component) to obtain EASA / FAA approval.
Ø Capability Enhancement at ATEC shop to service 45 components of newly inducted A320 NEO eet.
Ø Capability Enhancement of Avionics Shops for enhanced CALC & NEO aircrafts for fast moving
components.
As AIESL does not have a dened structure for Implementation of Ofcial Language Policy of its own, the
same is done in AIESL in consultation with the Rajbhasha Section of Air India.
There were a total of 4755 (Other than deputations) employees on rolls of the company during the year
2016-17, consisting of:
1) Executives - 465
2) FTEs - 632
Relations with the work force remained cordial during the year 2016-17.
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Reservation of posts for SC/ST/OBC etc. in AIESL is done as per the Government Directives on the
subject.
2. GENERAL INFORMATION
The Board of Directors of Air India Limited, the parent company, at its meeting held on 7th August, 2010
approved the hiving off of Air India Engineering Services Limited (AIESL) as wholly owned subsidiary of
Air India and a separate Prot Centre to cater the service towards Maintenance, Repair and Overhaul
(MRO) activities of the captive load of Air India and it's other subsidiaries besides the workload from 3rd
Party Customer of domestic and international market.
Accordingly Cabinet Approval was obtained on 6th September, 2012 for operationalization of AIESL. After
complying, the requirements of the various Statutory and Regulatory Authorities, nal approval was
obtained from DGCA to operate as an independent MRO under CAR 145, on January, 2015.
3. CAPITAL STRUCTURE
The authorised Share Capital of the company during the year was Rs. 1000 crores (Rupees One
Thousand Crores) divided in to 100 (One Hundred) crore equity shares of Rs. 10 each.
The Paid-Up Share Capital of the company during the year was 166,61,65,000 divided in to 166,61,65,00
equity shares of Rs. 10 each held by Air India Ltd. through its nominees.
4. MANAGEMENT
The following changes have occurred in the constitution of Board of the company during the FY 2016-17.
During the Financial Year 2016-17, the Company held four meetings of the Board of Directors as required
under Section 173 of Companies Act, 2013 which are detailed below.
1 28.06.2016 4 4
2 16.09.2016 4 3
3 30.12.2016 4 3
4 16.03.2017 4 4
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AUDIT COMMITTEE
The constitution of Audit Committee as required under the Companies Act, 2013 was approved by the
nd st st
Board of Directors in its 42 Meeting held on 31 March 2016 and following were its members as on 31
March, 2017, in ex-ofcio capacity:
The recommendations of the committee during the year were endorsed by the Board.
As required under Section 178 of the Companies Act, 2013 the Nomination & Remuneration Committee
should consist of 3 or more Non-Executive Directors out of which not less than one half should be
Independent Directors.
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 was to be taken up after the appointment
of Independent Directors by Holding company/Administrative Ministry.
Further, AIESL is a Government Company and as per Ministry of Corporate Affairs Circular dated 5 June
2015, exemption has been given to Government Companies from the applicability of Section 178 (2) (3)
(4) pertaining to Directors.
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 fteen all of whom shall be appointed by Air India Limited, who will prescribe the period for
which they will hold ofce as director and may remove them and appoint others in their places and ll in
any vacancy that may occur.
Section 197 in respect of remuneration to directors of the Company is not applicable to AIESL being a
Government Company in terms of Notication No. G.S.R.463(E) Dated 5th June, 2015 of Ministry of
Corporate Affairs.
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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 2016-17.
(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 nancial year and of the prot and loss of the
company for that period;
(c) The Directors have taken proper and sufcient 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.
(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.
The Company has adequate internal nancial controls for ensuring the orderly and efcient 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 of reliable nancial information, which is commensurate with the operations of the
Company.
The Company has appointed M/S Sanjay Gupta & Associates as Internal Auditors for the nancial year
2016-17. The Internal Auditor has carried out an extensive audit, including internal nancial controls.
The Company has also appointed M/s S. Vaidyanath Iyer & Co to carry out the evaluation of the adequacy
of the existing Internal Financial Control Over Financial Reporting (IFC-FR) for the nancial year 2016-
17.
There are no frauds reported by the Auditor to the Audit Committee or to the Board.
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Company does not have any Subsidiary, Joint venture or Associate Company.
6. DETAILS OF DEPOSITS
The Company has not accepted any public deposit during the year ended 31st March, 2017 as covered
under the provisions of Section 76 of the Companies Act, 2013 read with the Companies (Acceptance of
Deposits) Rules, 2014.
Particulars of loans, guarantees and investment have been disclosed in the nancial statement.
The Company, during the Financial Year, entered into contracts or arrangements with related parties,
which were in the ordinary course of business and on an arm's length basis. These transactions were not
falling under the provisions of Section 188(1) of the Act.
Exemption from the rst and second proviso to sub-Section (1) of Section 188 with regard to obtaining
approval of the Company in General Meeting, has been provided to a Government Company in respect
of contracts or arrangements entered into by it with any other Government Company in terms of
notication dated 05-06-2015 of the Ministry of Corporate Affairs.
The Board in its 49th Meeting held on 27 November 2017 was informed that the company had entered into
related party transactions for approximately Rs. 525.83 Crores during the year 2016-17. Further, the
approval of Board was taken to enter into contracts / arrangements with Air India Limited and its
subsidiary companies (Government Companies) for an estimated amount of approximately Rs. 680
crores during FY 2017-18 on such terms and conditions as may be recommended by the Audit
Committee.
Provisions of Section 135 of Companies Act, 2013 relating to Corporate Social Responsibility were not
applicable to the Company as the company has not earned any prots during the year.
Section 197 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014 in respect of employees of the Company was not applicable to AIESL, being a
Government Company and in terms of the Notication No. G.S.R.463(E) dated 05 June 2015 of Ministry
of Corporate Affairs.
(A) The company has made all efforts wherever possible for conservation of non renewable sources of
energy and utilizing the alternative sources of energy.
With regards to Conservation of Energy, a 50 KW Solar Plant was commissioned in June 2016 at
A320 New Avionics Complex. This has resulted in average reduction of 200 units per day and a
saving of Rs. 8.10 lacs per annum towards electricity expenditure.
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(Rs. in Crores)
Earnings NIL
Outgo NIL
The Company did not have any Risk Management Policy during the period, as the element of risk
threatening the Company's existence is very minimal.
No signicant 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.
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.
However, the holding company i.e. Air India Ltd has a separate Vigilance department which covers AIESL
also.
The Comptroller & Auditor General of India (CAG) has appointed M/s D B KETKAR & Co, Chartered
Accountants as Statutory Auditors of the Company for FY 2016-17.
The clarications / explanations of management on the Qualications or adverse remarks in the Auditors'
Report are attached.
The Notes on nancial statements are self-explanatory, and needs no further explanation.
The comments dated 13.02.2018 of the Comptroller and Auditor General of India (C&AG) under Section
st
143(6)(b) of the Companies Act, 2013 on the accounts of the Company for the year ended 31 March
2017 along with reply of management thereto is attached.
The company had appointed Mr. Jiwan Prakash Saini, Practicing Company Secretary as Secretarial
Auditor to conduct the Secretarial Audit for FY 2016-17. Secretarial Audit Report in prescribed form is
attached .
The explanations or comments by the Board on every qualication, reservation or adverse remark or
disclaimer made by the auditor in his report is attached.
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The Secretarial Standards issued by ICSI under Section 118(10) of Companies Act, 2013 have been
compiled with by the company.
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.
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 2016-17, 30 applications & NIL Appeals were received under RTI Act and 30 applications were
disposed off.
The Committee for Prevention of Sexual Harassment of women at workplace was constituted in Northern
Region on 10.03.2017, while in Southern Region a joint committee for Air India Ltd, AIATSL and AIESL
was constituted on 02.03.2016.
No complaints of sexual harassment were received from any women employee of AIESL during the year
2016-17.
22. 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.
Chairman
Place: New Delhi
Date: 14-03-2018
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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 fteen. All of whom shall be appointed by Air India Ltd.
Shri Satyendra Kumar Mishra was appointed as Govt. Nominee Director on the Board of the Company w.e.f.
02.02.2017 vice Shri B S Bhullar who ceased to be Director w.e.f. 02.02.2017.
Shri Rajiv Bansal, CMD, AI was appointed as Chairman on the Board of AIESL, w.e.f. 23-08-2017 in place of
Shri Ashwani Lohani.
Shri Pradeep Singh Kharola, CMD, AI was appointed as Chairman on the Board of AIESL, w.e.f. 12.12.2017 in
place of Shri Rajiv Bansal who ceased to be Chairman w.e.f. 12.12.2017.
The Board placed on record its appreciation of the valuable services rendered by Shri B S Bhullar , Shri
Ashwani Lohani and Shri Rajiv Bansal.
During the year, all Meetings of the Board and the Annual General Meeting were chaired by the CMD, Air India.
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 2016-17, four meetings of the Board of Directors were held in terms of requirement of
Section 173 of Companies Act, 2013 the details of which are as below.
1 28.06.2016 4 4
2 16.09.2016 4 3
3 30.12.2016 4 3
4 16.03.2017 4 4
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Particulars of Directors including their attendance at the Board/Shareholders’ Meetings during the nancial
year 2016-17:
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BOARD COMMITTEES
Audit Committee
As part of the Corporate Governance and in compliance with the provisions of the Companies Act, 2013 and
DPE Guidelines, the company constituted the Audit Committee of the Board in its 42nd Board Meeting held on
31st March 2016 and following were its members as on 31st March, 2017, in their ex-ofcio capacity:
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 nancial statement and the auditors' report thereon;
iv. To approve or any subsequent modication of transactions of the company with related parties;
viii. To monitor the end use of funds raised through public offers and related matters.
S No. Meeting Number Date and time of the Meeting No. of Member Present
st
1 1 30.12.2016 2
nd
2 2 16.03.2017 3
24
AIESL
Annual General Meetings (AGM) /Extraordinary General Meeting (EGM) during the last three years:
th
11 AGM 30.12.2016 at 1700 Hrs Airlines House,
113 Gurudwara Rakabganj Road,
New Delhi 110 001
25
AIESL
Revenue
Total revenue earned during 2016-17 was approx Rs 740.48 crores as against Rs. 620.27 crores during
2015-16.
Third party revenue increased from approx Rs 59 crores in 2015-16 to approx Rs 85 crores in 2016-17.
Expenditure
The total expenditure incurred during the year 2016-17 was Rs. 1245.64 crores as compared to the
previous year's gure of Rs 1178.89 crores.
2. BUSINESS ANALYSIS
In the absence of a well-developed MRO base in India, there are currently around 40 overseas MRO
service 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.
In the FY 2016-17, AIESL entered into Agreements with domestic & international Airlines/ operators for
Transit certication of third Party Aircrafts across India. Domestic Airlines includes VISTARA, AIR ASIA
INDIA, GO AIR & Jet Airways. The International Airlines having SGHA with AIESL are Sri Lankan, Qatar
Airways, Silk Air, Nepal Airlines Co., Kuwait Airways, Asiana Airlines, Singapore Airlines, SIA Cargo,
Etihad Airways and Scoot PTE Ltd.
In order to further increase its client base, marketing team was recruited in the company in the beginning
of 2017 and new airlines both in Domestic and International operations were approached for MRO
business for which there was positive response.
Also, AIESL Training facilities were marketed among the Indian and International operators and the
company got favorable response from them. Company has successfully provided training to M/s Spice
Jet, Indigo and Vistara Airlines at Delhi & Mumbai.
AIESL was successful in renewal of most of the SGHA (Standard Ground Handling Agreement) with
Domestic airlines and the list of International operators has also doubled in FY 2017-18, as compared to
FY 2016-17. Negotiations & nalization of terms and conditions for some Airlines are also under process.
The present scenario of Aircraft Maintenance Training all around the world is heavily dominated by
EASA147 MTOs. Most of the domestic and international Airline Operators have to conduct their
mandatory regulation and safety training from foreign EASA approved MTOs at a heavy cost. With EASA
147 approval added to our world-class training quality, Air India can sweep the entire domestic and part of
the international market of these training.
We conduct 6 license courses by both MTO Group A and MTO group B, which can easily be increased to
7 or 8 courses by aggressive marketing. Total revenue that can be earned for license and non-license
courses to the tune of approximately $ 22,00,000 per year (approximately 14 Crores).
26
AIESL
AIESL also signed an MOU with Embraer to establish an Authorized service centre facility at HYD MRO.
An Email database of existing customers and Airlines operating into India was created, and Emails were
sent on regular intervals about AIESL capabilities.
Twitter account of AIESL has also been activated, so that international airlines and MROs can get in touch
with us for their requirements for maintenance & repair in India.
A lot of low cost international airlines are coming to Tier “B” cities in India and are looking at cost effective
Transit certication handling in India. AIESL has conducted Training approved by DGCA for CAT –A
approved LSAs (limited scope approval) certifying Engineers to cater to such requirements in FY 2017-
18.
4. FUTURE OUTLOOK
The company is planning to establish its footprints overseas also. In a rst step towards that AIESL is in
the process of establishing the rst overseas branch at Sharjah, UAE. Based on the experience and
backed by cost benet analysis, the opportunity to expand to other international stations will also be
explored.
At present, the report for Abu Dhabi, Ras Al Khaimah , Muscat has been prepared to start AIESL line
maintenance operations and achieve protability.
AIESL Marketing team is already in touch with various Airlines for FY 2017-2018, and we are hopeful to
sign up with new operators like Air Asia Berhad; Air Asia Thailand , Unitop China, Viet Jet of Vietnam,
Kalita Air, Thai Smile , CEBU Pacic Manila, Oman Air and Srilankan Airlines for additional stations in
India.
In addition to this, AIESL has also entered into Agreements with Domestic operators like Jet Airways; Go
Air , Air Asia India and SpiceJet to carry out their base maintenance work at MRO facilities of AIESL in
India.
5. GOING CONCERN
With the National Civil Aviation Policy-2016 coming into effect, it is expected that MRO sector will develop
signicantly increasing the size of the third party services.
As per Boeing, the market is expected to grow at 7% CAGR to reach USD 1.2 billion by 2020.
As per the new Civil Aviation Policy, the MRO business of Indian Carriers was around Rs. 5000 crore.
The Company continuously monitors the risk perceptions and takes preventive action for mitigation of
risks on various fronts.
27
AIESL
The Company has appointed M/s Sanjay Gupta & Associates as Internal Auditors for the nancial year
2016-17. The Internal Auditor has carried out an extensive audit, including internal nancial controls.
The Company has also appointed M/S S Vaidyanath Aiyar & Co. to carry out the evaluation of the
adequacy of the existing Internal Financial Control Over Financial Reporting (IFC-FR) for the nancial
year 2016-17.
28
AIESL
To,
The Members,
Air India Engineering Services Limited
Airlines 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 Services Limited (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 verication of the Air India Engineering Services Limited's books, papers, minute books,
forms and returns led and other records maintained by the company and also the information provided by the
company, its ofcers, 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 nancial year ended on 31st March, 2017
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 led and other records made
available to me and maintained by the company for the nancial year ended on 31st March, 2017
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 there under, as applicable, subject to the following
observations:
a) There were few instance of delay in ling 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 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.
29
AIESL
(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 specically applicable to the Company:
30
AIESL
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.
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.
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
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; 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 Benet Act, 1961; The Child Labour (Prohibition & Regulation) Act, 1986;
Equal RemunerationAct,1976; The Employment Exchange (Compulsory Notication 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.
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
31
AIESL
Complaints Committee (ICC) has been set up to redress complaints received regarding sexual
harassment.
1. Work Committee and Grievance Redressal Committee was not constituted under Industrial
Disputes Act, 1947 .
2. No register and records have been maintained under Minimum Wages Act, 1948
3. No registers and records have been maintained by the company as prescribed under The
Maternity Benet Act, 1961and also No Annual Return has been submitted by the company under
this Act.
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 ofcer 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;
I further report, that the compliance by the Company of applicable nancial laws, like direct and indirect tax
laws, has not been reviewed in this Audit since the same have been subject to review by statutory nancial audit
and other designated professionals.
During the period under review and as per the explanations and clarications 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.
Subject to observation made above, 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 Directors that took place during the period under review were carried out in
compliance with the provisions of the Act.
32
AIESL
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 clarications 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 nancial year, there are no specic event shaving a major bearing on the company's affairs in
pursuance of the above referred laws, rules, regulations, guidelines, standards, etc. referred to above.
Sd/-
(Jiwan Parkash Saini)
Company Secretary
in practice
March 06, 2018
FCS No: 3671
CP No: 2100
Note 1 : Specic non compliances / observations / audit qualication, 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.
33
AIESL
'Annexure A'
To,
The Members,
Air India Engineering Services Limited
Airlines House, 113, Gurudwara Rakabganj Road,
New Delhi – 110001
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 verication was done on test basis
to ensure that correct facts are reected in Secretarial records. I believe that the process and practices,
we followed provide a reasonable basis for my opinion.
3. I have not veried the correctness and appropriateness of nancial 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 verication 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
efcacy or effectiveness with which the management has conducted the affairs of the Company.
Sd/-
(Jiwan Parkash Saini)
Company Secretary
in practice
March 06, 2018
FCS No: 3671
CP No: 2100
34
AIESL
b) Company has not appointed Independent Audit Committee was constituted by the Board in its
directors pursuant to sub-section 4 & 5 of meeting held on 31-03-2016 comprising of three
section 149 of Companies Act, 2013, hence members, with Govt Nominee Directors forming a
no meeting of independent directors could be majority, pending the appointment of Independent
held during the period under audit. Since, the Directors.
company has not appointed independent
directors, the company has not complied with In terms of provisions of Article of Association, the
the provisions of section 177(2) and 178 of appointment of Independent Directors will be done by
Companies Act, 2013 read with Rule 6 of Holding Company / Administrative Ministry.
Companies (Meetings of Board and its
Power) Rules, 2014 as regard the appoint- As there was no Independent Director on the Board of
ment of Independent Director in composition AIESL, the matter was taken up with the Ministry of
of the Audit Committee. Civil Aviation by Air India Limited ,Holding Company.
c) Company has not constituted Remuneration In terms of provisions of Article of Association, the
and Nomination Committee of the Board appointment of Independent Directors will be done by
pursuant to Section 178 of Companies Act, Holding Company / Administrative Ministry.
2013 read with Rule 6 of Companies
(Meetings of Board and its Power) Rules, As there were no Independent Directors on the Board
2014 as it meets the prescribed criteria as of AIESL, the matter was taken up with the Ministry of
mentioned in such Rule 6. Civil Aviation by Air India Limited, Holding Company.
35
AIESL
1) Work Committee and Grievance Redressa Works Committee were existing in Air India Limited
committee was not constituted under which also covered employees of Engineering
Industrial Disputes Act, 1947. Department. However, after hiving off AIESL, steps
have been initiated to form / transfer the works
committee in AIESL across the regions / MRO.
Discussions with Dy. CLC (C) / R.L. C (C) about
modalities to be followed /worked out are in
progress.
2) No register and records have been Issue of maintenance of registers and records
maintained under Minimum Wages Act, under minimum wages act 1948 is being taken up
1948. with Dy. CLC (C) / R.L. C (C) and action will be taken
as per their advice.
3) No register and records have been In erstwhile AIL, no registers and records were
maintained by the company as prescribed being maintained and no return was sent. No
under The Maternity Benet Act, 1961 and instruction/notice was received from Labour
also No Annual Return has been submitted Enforcement Authorities in this regard. Issues
by the company under this Act. being taken up with Dy. CLC (C) / R.L. C © to nd out
modailies for compliance.
36
AIESL
1. CIN U74210DL2004GOI125114
Address of the Registered ofce & AIRLINES HOUSE, 113 GURUDWARA RAKABGANJ
5.
contact details ROAD, NEW DELHI –110001, Ph.No : 011-.23422109
II. PRINCIP AL BUSINESS ACTIVITIES OF THE COMPANY (All the business activities
contributing 10 % or more of the total turnover of the company shall be stated) -
Holding /
Sr. Name and Address of the % of Applicable
Subsidiary /
No. Company CIN/GIN Shares Section
Associate
1 Air India Limited
113, Airlines House, U62200DL2007GOI161431 Holding 100% 2 (46)
Gurudwara Rakabganj
Road, New Delhi, 110 001.
37
AIESL
IV. SHARE HOLDING PATTERN (Equity Share Capital Breakup as percentage of Total
Equity) : Category-wise Share Holding
No. of Shares held at the No. of Shares held at the end of the %
Category of beginning of the year year [As on 31-03-2017] Change
Shareholders [As on 01-04-2016] during
the
During % of % of year
Demat Physical the Total Demat Physical Total Total
year Shares Shares
A. Promoters
(1) Indian
a) Individual/ HUF - - - - - - - - -
b) Central Govt - - - - - - - - -
c) State Govt(s) - - - - - - - - -
e) Banks / FI - - - - - - - - -
f) Any other - - - - - - - - -
Total shareholding of
166,666,500 166,666,500 100 - 166,666,500 166,666,500 100 0.00
Promoter (A)
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):- - - - - - - - - -
38
AIESL
No. of Shares held at the beginning of No. of Shares held at the end of the
the year [As on 01-04-2016] year [As on 31-03-2017] %
Change
Category of
% of % of during
Shareholders Demat Physical Total Demat Physical Total
Total Total the
Shares Shares year
39
AIESL
B) Shareholding of Promoter-
% of total % of total
No. of No. of
shares of the shares of the
shares shares
company company
40
AIESL
NIL
(Shares Held by Nominees of Air India only)
T otal
Secured Loans
Unsecured Total
excluding Deposits
Loans Indebtedness
deposits
Indebtedness at the beginning of the
nancial year
41
AIESL
(In gures)
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)Prots in lieu of salary under section
17(3) Income- tax Act, 1961
2 Stock Option
3 Sweat Equity
4 Commission as % of prot 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.
42
AIESL
1 Gross salary -
(a) Salary as per provisions contained
in section 17(1) of the Income-tax 30,27,600 - - -
Act, 1961
(b) Value of perquisites u/s 17(2)
Income-tax Act, 1961 - - - -
2 Stock Option - - - -
3 Sweat Equity - - - -
4 Commission - - - -
- as % of prot - - - -
Others, specify. - - - -
5 Others: (PF, DCS, House Perks tax etc) - - - -
T otal 30,27,600 - - -
Details of
Section of Appeal
Penalty / Authority
the Brief made, if
Type Punishment/ [RD / NCLT/
Companies Description any (give
Compounding COURT]
Act Details)
fees imposed
A. COMPANY NIL
Penalty - - - - -
Punishment - - - - -
Compounding - - - - -
B. DIRECTORS NIL
Penalty - - - - -
Punishment - - - - -
Compounding - - - - -
C. OTHER OFFICERS IN DEFAULT NIL
Penalty - - - - -
Punishment - - - - -
Compounding - - - - -
43
AIESL
COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b)
OF THE COMPANIES ACT, 2013 ON THE FINANCIAL STATEMENTS OF AIR INDIA ENGINEERING
SERVICES LIMITED FOR THE YEAR ENDED 31 MARCH 2017.
The preparation of nancial statement of AIR INDIA ENGINEERING SERVICES LIMITED for the ended 31
March 2017 in accordance with the nancial 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 nancial 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 27 November 2017.
I, on the behalf of the Comptroller and Auditor General of India, have conducted a supplementary audit under
section 143(6)(a) of the Act of the nancial statements of AIR INDIA ENGINEERING SERVICES LIMITED for
the year ended 31 March 2017. This supplementary audit has been carried out independently without access
to the working papers of the statutory auditor and is limited primarily to inquiries of the statutory auditor and
company personnel and a selective examination of some of the accounting records. Based on my
supplementary audit. I would like to highlight the following signicant matters under section 143(6)(b) of the Act
which have come to my attention and which in my view are necessary for enabling a better understanding of the
nancial statements and the related audit report.
A. Comment on Protability
Statement of Prot and Loss
Revenue from Operation (Note No.15) (Rs. 740.45 crores
This included an amount of Rs.37.53 crore (Rs.22.12 crore for the year 2016-17 and Rs.15.41 crore for
the year 2015-16 invoice raised during the year 2016-17) towards the charges for Technical Services
provided by the Company to Airline Allied Services Limited (AASL) at the rate of Rs.9212 per block hour
(PBH) basis, for which no formal agreement has been signed by the Company with AASL.
Initially, considering the base rate of per block hour (PBH) as Rs.16750/- arrived for Wide Body (WB)
eet of Air India Ltd., the Air India Ltd. and the Company (AIESL), agreed for charging 55 per cent of WB
eet rate by the Company from the AASL eet i.e. Rs.9212 per block hour (i.e. 55% of Rs.16750).
Subsequently, to make the operations of AASL viable, the Chief Operating Ofcer of AASL moved
(October 2015) a proposal for reducing the rate from Rs.9212 PBH to Rs.1200 PBH, which was agreed
to by the Chairman, AASL (i.e. the Chairman of the Holding Company, Air India Ltd.). The Company,
however, continued raising the invoices on AASL at the rate of Rs.9212 PBH unilaterally, which was not
being paid by AASL.
The above accounting treatment was in contravention to the provisions of Accounting Standard 9
‘Revenue Recognition’ and the Signicant Accounting Policy 3(a) of the Company, stipulating that the
revenue is recognized only when it can be reliably measured and it is reasonable to expect ultimate
collection thereof.
In view of the above position, the Audit was unable to comment on the correctness of the amount of
revenue recognized in the accounts of the Company for the year, towards technical services rendered
to AASL.
44
AIESL
B. General
As per ‘Related Party Disclosure’ given in Note 23(8)(b) of the Notes to Accounts of AIESL, a net amount
of Rs.8.86 crore was payable to Airline Allied Services Limited (i.e. Amount payable Rs.40.42 crore -
Amount receivable Rs.31.56 crore). However, in the accounts of Airline Allied Services Limited for the
year 2016-17, an amount of Rs.58.09 crore has been shown as receivable from AIESL.
The difference requires to be reconciled between AASL and AIESL, both subsidiary companies of Air
India Limited.
Sd/-
(Neelesh Kumar Sah)
Principal Director of Commercial Audit
& Ex-ofcio Member, Audit Board-I,
New Delhi.
45
AIESL
COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b)
OF THE COMPANIES ACT, 2013 ON THE FINANCIAL STATEMENTS OF AIR INDIA ENGINEERING
SERVICES LIMITED FOR THE YEAR ENDED 31 MARCH 2017.
A. Comment on Protability
Statement of Prot and Loss
Revenue from Operation (Note No.15)
(Rs. 740.45 crores
This included an amount of Rs. 37.53 crore The company has been in discussions with AASL
(Rs.22.12 crore for the year 2016-17 and regarding the rate to be charged for the maintenance
Rs.15.41 crore for the year 2015-16 invoice of the AASL aircraft which could not be concluded.
raised during the year 2016-17) towards the
charges for Technical Services provided by the However, the matter shall be sorted out by raising the
Company to Airline Allied Services Limited issue with the higher authority during the forthcoming
(AASL) at the rate of Rs.9212 per block hour nancial year and suitable action shall be taken
(PBH) basis, for which no formal agreement accordingly.
has been signed by the Company with AASL.
46
AIESL
B. General
As per ‘Related Party Disclosure’ given in Note The difference in intercompany Account is mainly
23(8)(b) of the Notes to Accounts of AIESL, a due to the rate applied for raising invoice on AASL,
net amount of Rs.8.86 crore was payable to which is based on the rate agreed between the
Airline Allied Services Limited (i.e. Amount Company and Holding Company.
payable Rs.40.42 crore - Amount receivable
Rs.31.56 crore). However, in the accounts of However, the matter shall be sorted out by raising the
Airline Allied Services Limited for the year 2016- issue with the higher authority during the forthcoming
17, an amount of Rs.58.09 crore has been nancial year and suitable action shall be taken
shown as receivable from AIESL. accordingly.
The difference requires to be reconciled
between AASL and AIESL, both subsidiary
companies of Air India Limited.
47
AIESL
We have audited the accompanying nancial statements of Air India Engineering Services Limited (“the
Company”), which comprise the Balance Sheet as at 31st March, 2017, the Statement of Prot and Loss, the
Statement of Cash Flows for the year then ended and a summary of signicant accounting policies and other
explanatory information.
The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act,
2013 (“the Act”) with respect to the preparation of these nancial statements that give a true and fair view of the
nancial position and nancial performance of the Company in accordance with accounting principles
generally accepted in India including the Accounting Standards specied 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 judgements and estimates that are reasonable and prudent; and
design, implementation and maintenance of adequate internal nancial controls, that were operating
effectively for ensuring the accuracy and completeness of accounting records, relevant to the preparation and
presentation of the nancial 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 nancial 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 Rules made there under.
We have conducted our audit in accordance with the Standards on Auditing specied 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 nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
nancial statements. The procedures selected depend on the auditor's judgment, including the assessment of
the risks of material misstatement of the nancial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal nancial controls relevant to the Company's preparation of the
nancial 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 nancial control system over nancial reporting and the operating effectiveness of such
controls. An audit also includes evaluating the appropriateness of 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 nancial statements.
We believe that the audit evidence we have obtained is sufcient and appropriate to provide a basis for our
modied audit opinion on the nancial statements.
48
AIESL
Attention is drawn to Annexure A where we have discussed the basis of our qualied opinion
OPINION
In our opinion and to the best of our information and according to the explanations given to us, except for the
matters discussed in Annexure A to this report the nancial statements give the information required 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 31st March, 2017, and their loss and their cash ows
for the year ended on that date.
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 specied in paragraphs 3 and 4 of the Order to the extent applicable.
a) We have sought and obtained all the information and explanations which to the best of our
knowledge and belief were necessary for the purposes of our audit.
b) In our opinion, proper books of account as required by law have not been kept by the Company so far
as it appears from our examination of those books.
c) The Balance Sheet, the Statement of Prot and Loss and the Statement of Cash Flows dealt with by
this Report are in agreement with the books of account.
d) In our opinion, the Balance Sheet, the Statement of Prot and Loss and the Statement of Cash Flows
comply with the Accounting Standards specied under Section 133 of the Act, read with Rule 7 of the
Companies (Accounts) Rules, 2014 except to the extent explained by our qualied opinion.
e) On the basis of written representations received from the Directors as on 31st March, 2017, and taken
on record by the Board of Directors, none of the Directors are disqualied as on 31st March, 2017,
from being appointed as a Director in terms of Section 164(2) of the Act.
f) Having regard for adverse remarks on unreconciled balances in Annexure A, which in our opinion
are pervasive to individual accounting balances and overall presentation of the nancial statement,
the company does not have an effectively operating internal nancial control system in place.
g) 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 has disclosed the impact of pending litigation in Note 23 point 1 on its nancial
position in its nancial statements.
(ii) The Company has made a provision, as required under the applicable law or accounting
standards, for material foreseeable losses, if any, and as required on long term contracts
including derivative contracts.
49
AIESL
(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor
Education and Protection Fund.
(iv) The Company has provided requisite disclosures, in the nancial statements as to holdings as
th th
well as dealings in specied bank notes during the period from 8 November, 2016 to 30
December, 2016 based on audit procedures and relying on the management representation we
report that the disclosures are in accordance with the books of accounts maintained by the
Company and as produced to us by the management. Refer to Note 24.
N. S.Ketkar
(Partner)
Place: New Delhi Membership No.: 040521
th
Date: 27 November 2017
50
AIESL
In earlier year the Company has capitalized assets under the head “Other Intangible Assets” for an
amount of `271,38,28,069/- (Rupees Two hundred seventy one crores thirty eight lacs twenty eight
thousand sixty nine only) which is made up of entire Payroll Expenses, Staff Expenses, Gratuity & Leave
Salary expenses and other general expenses (e.g. Rent, Repair & Maintenances, 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 the opinion as set out in the audit report of nancial year 2014-15 by the then auditor, 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 Prot & 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 that year.
Consequential effect in current year of the same is that Fixed Assets are overstated to the extent of
amount of `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 signicant accounting policies as adopted by the company as
well as provision of Accounting Standard 26 of “Intangible Assets”.
We nd that the Company has not correctly stated its liability towards Air India Limited on account of
Employee Benets transferred at time of hiving off. There is no formal agreement for transfer of
employees or quantication of retirement benets attributable to their service with the Holding Company.
We are of the opinion, that the actual quantum of benet payable on the date of transfer of individual
employee should be worked out to nd out exact sum due from the Holding Company. Also, the Gratuity
and Leave Encashment Liability accruing to the Holding Company will have to be recorded as receivable
at full value as would have the employees received if employment had been terminated on the date of
transfer.
51
AIESL
The Annexure referred to in paragraph 1 of the Auditor's Report on Other Legal and Regulatory
Requirements of even date to the members of the Company on the nancial statements for the year
st
ended 31 March, 2017.
I. a. The Company has not maintained proper records showing full particulars, including quantitative
details and situation of xed assets. The assets were transferred on block basis on demerger and no
records are available for the transferred assets.
b. As explained to us, the Company has a policy of verication of xed assets on bi-annual basis.
However, though due, physical verication of xed assets was not carried by the management
during the year.
c. According to the information and explanations given to us and on the basis of our examination of the
records, the Company does not own any immovable property.
ii. The Company is a service company, primarily rendering repair services on aircrafts. Accordingly, it does
not hold any physical inventories. Thus, paragraph 3(ii) of the Order is not applicable to the Company.
iii. The Company has not granted any loans, secured or unsecured, to companies, rms, Limited Liability
Partnership or other parties covered in the register maintained under section 189 of the Act.
iv. The Company has not granted any loans or provided any guarantees or security to the parties covered
under Section 185 of the Act. The Company has complied with provisions of Section 186 of the Act in
respect of investments made or loans or guarantee or security provided to the parties covered under
Section 186.
v. The Company has not accepted any deposits from the public.
vi. The Central Government has not prescribed the maintenance of cost records under Section 148(1) of the
Act, for any of the services rendered by the Company.
vii. a. According to the information and explanation given to us and based on the records of the Company
examined by us, the Company is not regular in depositing the undisputed statutory dues, including
Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Value
Added Tax, Custom Duty, Excise Duty and other material statutory dues, as applicable, with the
appropriate authorities in India. The extent of arrears of outstanding dues are -
b. According to the information and explanation given to us and based on the records of the Company
examined by us, there are no dues of Income Tax, Wealth Tax, Service Tax, Value Added Tax,
Custom Duty and Excise Duty which have not been deposited on account of any dispute.
52
AIESL
viii. The Company does not have any loans or borrowings from any nancial institution, banks, government or
debenture holders during the year. Accordingly, paragraph 3(viii) of the Order is not applicable.
ix. The Company did not raise any money by way of initial public offer or further public offer (including debt
instruments) and term loans during the year. Accordingly, paragraph 3 (ix) of the Order is not applicable.
x. According to the information and explanations given to us, no material fraud by the Company or on the
Company by its ofcers or employees has been noticed or reported during the course of our audit.
xi. The provisions of Section 197 are not applicable to the Company. Accordingly, paragraph 3(xi) of the
Order is not applicable.
xii. In our opinion and according to the information and explanations given to us, the Company is not a nidhi
company. Accordingly, paragraph 3(xii) of the Order is not applicable.
xiii. 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 sections 177 and 188 of the Act
where applicable and details of such transactions have been disclosed in the nancial statements as
required by the applicable accounting standards.
xiv. According to the information and explanations give 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 debentures during the year.
xv. 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 non-cash transactions with directors or persons
connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable.
xvi. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.
Accordingly, paragraph 3(xvi) of the Order is not applicable.
N. S. Ketkar
(Partner)
53
AIESL
Report on the Directions under Sub-section 5 of Section 143 of the Companies Act, 2013 (“the Act”)
According to the information and explanations given to us and on the basis of our examination of the records of
the Company we give our comments as below:
3. Whether proper records are maintained The company does not have inven- Nil
for inventories lying with third parties & tories. Further no assets were received
assets received as gifts/grants from the as grants from the Government or other
Government or other Authorities. Authorities.
N. S. Ketkar
(Partner)
Place: New Delhi Membership No.: 040521
th
Date: 27 November 2017
54
AIESL
Auditor's Responsibility
55
AIESL
Attention is drawn to Annexure A where we have The comments are mentioned at Annexure A
discussed the basis of our qualied opinion
Opinion
In our opinion and to the best of our information and Audit Comments are noted.
according to the explanations given to us, except for
the matters discussed in Annexure A to this report the
nancial statements give the information required 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
56
AIESL
57
AIESL
(iii) T h e r e h a s b e e n n o d e l a y i n
transferring amounts, required to be This is a Statement of Fact.
transferred, to the Investor
Education and Protection Fund.
58
AIESL
In earlier year the Company has capitalized assets DGCA Licence for CAR-145 certication for the
under the head “Other Intangible Assets” for an MRO was received on 1st Jan 2015. The expenditure
amount of `271,38,28,069/- (Rupees Two hundred incurred in creating this asset was capitalised in the
st
seventy one crores thirty eight lacs twenty eight books of the Company as of 31 March 2015, based
thousand sixty nine only) which is made up ofentire on this license, the Company has also applied for
Payroll Expenses, Staff Expenses, Gratuity & Leave other certications like FAA, EASA approval for its
Salary expenses and other general expenses (e.g. facilities. The Company therefore believes that
Rent, Repair & Maintenances, Electricity & Heating there has been no diminution in the value of the
Charges etc) incurred during the period from asset as of date. Since the license was issued by
October 2014 to December 2014 towards obtaining DGCA for an indenite period of time, and has not
CAR – 145 (License from DGCA for carrying out been suspended at any point of time since its issue,
MRO services). no impairment loss has been recognised by the
Company for the year under review.
As per the opinion as set out in the audit report of
nancial year 2014-15 by the then auditor,
capitalisation of “Other Intangible Assets” was not in
accordance with the accounting standards, basic
accounting assumptions and principles.
59
AIESL
60
AIESL
iii. The Company has not granted any loans, This is a Statement of Fact.
secured or unsecured, to companies, rms,
Limited Liability Partnership or other parties
covered in the register maintained under
section 189 of the Act.
iv. The Company has not granted any loans or This is a Statement of Fact.
provided any guarantees or security to the
parties covered under Section 185 of the Act.
The Company has complied with provisions of
Section 186 of the Act in respect of
investments made or loans or guarantee or
security provided to the parties covered under
Section 186.
61
AIESL
v. The Company has not accepted any deposits This is a Statement of Fact.
from the public.
vi. The Central Government has not prescribed This is a Statement of Fact.
the maintenance of cost records under Section
148(1) of the Act, for any of the services
rendered by the Company.
Income Tax
Act (TDS) 192B 51,06,06,553
viii. The Company does not have any loans or This is a Statement of Fact.
borrowings from any nancial institution,
banks, government or debenture holders
during the year. Accordingly, paragraph 3(viii)
of the Order is not applicable.
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AIESL
ix. The Company did not raise any money by way This is a Statement of Fact.
of initial public offer or further public offer
(including debt instruments) and term loans
during the year. Accordingly, paragraph 3 (ix)
of the Order is not applicable.
xi. The provisions of Section 197 are not This is a Statement of Fact.
applicable to the Company. Accordingly,
paragraph 3(xi) of the Order is not applicable.
xii. In our opinion and according to the information This is a Statement of Fact.
and explanations given to us, the Company is
not a nidhi company. Accordingly, paragraph
3(xii) of the Order is not applicable.
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AIESL
Non-current Liabilities
a) Long Term Borrowings 5 6,643,142,190 2,212,044,757
b) Deferred Tax Liabilities (Net)
c) Other Long Term Liabilities
d) Long Term Provisions 6 4,492,618,667 4,347,167,881
11,135,760,857 6,559,212,638
Current Liabilities
a) Short Term Borrowings - -
b) Trade Payables 7 983,028,335 56,881,302
c) Other Current Liabilities 8 4,407,669,993 3,985,996,115
d) Short Term Provisions 9 928,867,800 931,493,477
6,319,566,128 4,974,370,894
3,689,527,745 3,935,449,752
b) Non-Current Investments - -
c) Deferred Tax Assets (net) - -
d) Long Term Loans and Advances 11 91,599,901 20,428,566
e) Other Non-Current Assets 14 -
91,599,901 20,428,566
Current Assets
a) Current Investments - -
b) Inventories - -
c) Trade Receivables 12 2,019,866,471 779,706,883
d) Cash and Bank Balances 13 117,735,729 440,591,603
e) Short Term Loans and Advances - -
f) Other Current Assets 14 138,742,834 11,153,316
2,276,345,034 1,231,451,802
64
AIESL
STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31ST MARCH 2017
(Amount in Rupees)
Particulars Note No. 2016-17 2015-16
Revenue
I Revenue from Operation 15 7,404,502,467 6,202,713,779
II Other Income 16 338,663 4,544
III Total Reveune (I+II) 7,404,841,130 6,202,718,323
IV Expenses
Cost of Material Consumed - -
Purchase of Stock in trade - -
Change in inventories - -
Employee Benet Expenses 17 10,190,601,641 10,309,267,545
Finance Costs 18 181,836,002 56,390,370
Depreciation and Amortization Expense 19 411,003,133 372,305,985
Other Expenses 20 1,595,554,746 1,062,118,933
Total Expenditure 12,378,995,522 11,800,082,834
Prior Period Adjustments (Net) 21 77,446,499 (11,155,179)
Total Expenditure After Prior Period Adj 12,456,442,022 11,788,927,655
V Prot/ (Loss) before Exceptional and Extraordinary (5,051,600,891) (5,586,209,333)
Items and Tax (III-IV)
VI Exceptional Items - -
VII Prot/ (Loss) before Extraordinary
Items and Tax (V+VI) (5,051,600,891) (5,586,209,333)
VIII Extra Ordinary Items (Net) - -
IX Prot/ (Loss) before Tax (VII+VIII) (5,051,600,891) (5,586,209,333)
X Tax Expenses : - -
i) Current Tax
ii) Tax Adjustment relating to earlier year - -
iii) Deferred Tax - -
XI Prot/ (Loss) after Tax for the period (IX-X) (5,051,600,891) (5,586,209,333)
XII Earning per Share of Rs. 10 each
Basic 22 (30.31) (11,056.63)
Diluted 22 (30.31) (11,056.63)
Signicant Accounting Policies 1
Notes forming part of the Financial Statement 2-24
As per our report of even date attached
65
AIESL
Notes
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 ows by operating, investing and nancing activities.
66
AIESL
NOTES FORMING PART OF THE FINANCIAL STATEMENT FOR THE YEAR ENDED MARCH 31, 2017
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 nancial 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 notied) and guidelines issued by the Institute of
Chartered Accountants of India to the extent applicable.
ii. The preparation of nancial 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 nancial 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 specic 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.
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 certication 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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AIESL
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 for AIL & AASL. Billing of engineering services rendered to AICL is based
on the agreed rates with them. 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.
e) Gain or loss arising out of sale/scrap of Fixed Assets over the net depreciated value is taken to
Statement of Prot & Loss as Non-Operating Revenue or Other Expenses.
4. EMPLOYEE BENEFITS
a) Short term employee benets: All employee benets falling due wholly within twelve months
of rendering the services are classied as short term employee benets. The benets 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 benets:
Dened Benet Plans, which are not funded, consist of Gratuity, Leave Encashment including
Sick Leave and other benets.
The liability for Gratuity and Leave Encashment is actuarially determined under the Projected
Unit Credit Method at the end of the nancial 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:
Impairment loss is recognized when the carrying amount of an asset exceeds its recoverable
amount.
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AIESL
6. TAXES ON INCOME
Provision for current tax, if any, is made in accordance with the provisions of Income Tax Act, 1961.
Deferred tax is recognised on timing differences between book and taxable prot 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
outow of resources.
b) Contingent liabilities exceeding Rs.1,00,000.00 in each case are disclosed in respect of
possible obligations that may arise from past events but their existence is conrmed 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 nancial statements.
8. PREPAID EXPENSES/LIABILITY FOR EXPENSES
Pre-paid expenses / Liabilities for expenses recognized – Rs10,000.00 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.
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 1,666,665,000.00
1,666,665,000.00 1,666,665,000.00
g) Details of Shares Issued & Allotted as fully paid up pursuant to contract without payment being received in cash
(Number of Shares)
Particulars As at March 31, 2017 As at March 31, 2016
1666,16,500 Equity Shares of Rs. 10 each were allotted 166,616,500 166,616,500
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)
70
AIESL
71
AIESL
TANGIBLE ASSETS :
a) Land - - - - - - - - - -
b) Buildings - - - - - - - - - -
c) Plant & Equipment
Workshop Equipment, Instruments, 1,688,482,271 143,761,371 13,005,088 1,845,248,730 552,972,645 392,733,304 17,878,976 963,584,925 881,663,805 1,135,509,626
Machinery and Plants 109,887,739 - 109,887,739 23,775,681 10,070,456 - 33,846,137 76,041,602 86,112,057
d) Furniture & Fixtures - 6,996,978 6,996,978 - 664,713 - 664,713 6,332,265 -
e) Electrical Fittings - 5,250 - 5,250 - 499 - 499 4,751 -
f) Computer System - 2,059,865 - 2,059,865 - 652,359 - 652,359 1,407,506 -
g) Vehicles - 5,754,936 5,754,936 - 186,632 - 186,632 5,568,304 -
h) Ofce Equipment - 5,804,011 5,804,011 - 1,104,093 18,475 1,122,568 4,681,443 -
TOTAL FOR TANGIBLE ASSETS 1,798,370,010 164,382,411 13,005,088 1,975,757,509 576,748,326 405,412,055 17,897,451 1,000,057,832 975,699,677 1,221,621,683
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 ASSETS 4,512,198,079 164,382,411 13,005,088 4,689,585,578 576,748,326 405,412,055 17,897,451 1,000,057,832 3,689,527,745 3,935,449,752
PREVIOUS YEAR 4,408,656,953 112,996,385 9,455,259 4,512,198,079 209,489,043 372,305,985 (5,046,702) 576,748,326 3,935,449,752
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 claried 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.
NOTE "11" : LONG TERM LOANS AND ADVANCES
(Amount in Rupees)
Particulars As at March 31, 2017 As at March 31, 2016
Loans & advance to related parties
Secured Considered Good -
Unsecured Considered Good
Doubtful
(A) - -
Loans and Advances to Employees
Secured Considered Good - 912
Unsecured Considered Good 72,949,156 14,428,680
Doubtful - -
(B) 72,949,156 14,429,592
Advance Recoverable in Cash or Kind
Secured Considered Good
Unsecured Considered Good 18,450,746 5,798,975
Doubtful - -
(C) 18,450,746 5,798,975
Security Deposits with DGCA 200,000 200,000
(D) 200,000 200,000
TOTAL (A+B+C+D) 91,599,901 20,428,566
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2016-17 2015-16
Prot available for appropriation as per Prot & Loss
Account (5,051,600,891) (5,586,209,333)
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 quantiable.
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.
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
166,61,65,000.00 as on 01 April, 2014 i.e. Gross block along with accumulated depreciation. The
assets with WDV of Rs. 2,86,63,884.00 during 2014-15 and Rs.5,88,73,802.00 during 2015-16 have
also been identied & transferred subsequently from AI which does not form part of the share capital.
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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.
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. Conrmations/Reconciliations
a) The process of identication 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 conrmation of balances receivables and payables as majority of
the same was owed by/for AIL.
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 led/ statutory records maintained.
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 ofces, user departments.
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.
“Related Party Disclosures” as required by Accounting Standard (AS-18) are given below:
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st th
Key Management Personnel & Relatives: (From 1 April 2016 to 11 November 2017)
1 Shri Rajiv Bansal Chairman CMD of Air India Limited from 23.08.2017
till date
No loans or credit transactions were outstanding with Directors or Ofcers 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 dened under AS-18 and
hence transactions undertaken by the company with the parent company and its subsidiaries do not fall
within the denition of related party transactions.
(a) AIESL was able to commence its commercial operations w.e.f. 1st Jan'15 since the DGCA
certication was issued only effective on this day. Air India has entered into separate agreements
dening 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.
During the year 2013-14, the company entered into a Memorandum of Understanding (MoU) with its
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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:-
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 rst 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 and majority of other expenses have been accounted as
transferred by Parent Company Air India Limited.
ii) Total addition to xed assets of Rs. 16,43,82,411.00, was transferred by AIL during the FY
2016-17 as the procurement and accounting action was done in AIL books and the same
does not form part of equity contribution as set out in MOU.
An MoU has also been entered into with Airline Allied Services Ltd. (AASL), a wholly owned
subsidiary of Air India Ltd during 2013-14, wherein AASL has decided to transfer its MRO activities
(including infrastructure) to AIESL and AASL agreed to commit its eet 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 2016-17 pending transfer of its engineering personnel to the company, besides other
expenditure.
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The amount due from AASL for the bills raised for Engineering services provided up to 2016-17 is Rs
31,55,61,874.30.
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 eet in entirety for all MRO work to AIESL.
Consequent to the cabinet approval to operationalize AIESL as independent entity for MRO
services, an MOU has been signed between AICL and AIESL on 07.08.2014 to formalize 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 2016-17 pending transfer of its engineering personnel to the company,
besides other expenditure.
A net amount of Rs 16,36,25,493.00 is payable to AIATSL towards the Services rendered by them to
AIESL from December 2016 to March 2017.
9. Employee Benets
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
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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.
Employee's Provident Fund: The Company contributes to Air India and its subsidiary airlines
Employees (excluding AICL, which was contributing to GPF under the PF Act for the Engineering
personnel in their Pay Rolls) 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.
In view of the recent losses of the Company and no virtual certainty that sufcient 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.
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 identied) 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 gures have been re-grouped/re-arranged wherever considered necessary to be
compatible with the Schedule III of the Companies Act 2013, to the extent of information being
available and practicable of compilation.
Note 24
During the year, the Company had specied Bank Notes or Other Denomination note as dened in the MCA
notication GSR 308 (E), dated March 31, 2017, on the details of Specied Bank Notes (SBNs) held and
th th
transacted during the period from 08 November 2016 to 30 December 2016. The denomination wise SBNs
and other notes as per the said notication is given below:
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Signature to the schedules forming part of the Balance Sheet and Statement of Prot and Loss and to the above
notes.
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