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Notes to Accounts of Accel Frontline Ltd.

Mar 31, 2015

1. General Information:

(a) Background:

Accel Frontline Limited ("Accel" or the Company) was incorporated on 8th June, 1995. The Company's principal lines of business in IT services which includes, providing system integration solutions comprising network design, hardware and software, IT infrastructure management solutions, warranty management solutions for imported and indigenous equipment, development, implementation and maintenance of software applications.

(b) Comparatives:

All amounts in the standalone financial statements are presented in Rs.. in lakhs except per share data and as otherwise stated. Figures for the previous year have been regrouped / rearranged wherever considered necessary to conform to the figures presented in the current year. The previous year figures have been audited by a firm other than Walker Chandiok & Co LLP.

2 Transfer pricing

As per the Transfer pricing norms introduced in India with effect from 1st April, 2001, the Company is required to use certain specific methods in computing arm's length price of international transactions between the associated enterprises and maintain prescribed information and documents relating to such transactions. The appropriate method to be adopted will depend on the nature of transactions/class of transactions, class of associated persons, functions performed and other factors, which have been prescribed. The Transfer pricing study for the fiscal year ended 31st March, 2015 is in progress and accordingly, the contracts may be amended subsequently and related adjustment, if any, will be quantified upon completion of this study. However, in the opinion of the Management, the outcome of the study will not have material impact on the Company's results.

3 Segment reporting

Considering the risk/return profiles of the segments between product and geography, the Company has identified business as primary segment in accordance with Accounting Standard (AS) 17 Segment Reporting. The Company does not have any secondary segment.

The Company's principal lines of business is IT services which includes, providing system integration (SI) solutions comprising network design, hardware and software, IT Infrastructure management solutions (IMS), software development and support (SS) and warranty management solutions (WMS) for imported and indigenous equipments, development, implementation and maintenance of software applications.

4 Overseas Branch Operation

During the year, the branch at Singapore in the name of "Accel Frontline Limited - Singapore Branch" continued its operation. The revenue and expenses of the said Branch have been included in the financials of the company against each line item, translated into Indian rupees, as applicable. The summary of the financials of the Branch is as follows:

5 Disclosures in respect of non-cancellable operating leases

The lease rentals charged for the years ended 31st March, 2015 and 2014 and maximum obligations on long-term, non-cancellable operating leases payable as per the rentals stated in the respective agreements are as follows: The total of future minimum lease payments for each of the following periods:

6 Prior period item includes Rs.1,433, representing revenues pertaining to certain back to back annual maintenance contracts recognised in the previous year based on the billing instead of straight lining the revenue over the period of the contract. The Company has revised the process of revenue recognition retrospectively during the year ended 31st March, 2015. Further, it includes Rs.72 relating to employee benefit expenses.

7 Commitments

The Company did not have any capital commitments as at the balance sheet date. Other commitments are cancellable at the option of the company and hence not disclosed.


Mar 31, 2014

1.01 Background

Accel Frontline Limited ("Accel" or the Company) was incorporated in Chennai in 1995. The Company''s principal lines of business in IT services includes, providing system integration solutions comprising network design, hardware and software, IT Infrastructure management solutions, warranty management solutions for imported and indigenous equipments, development, implementation and maintenance of software applications. The company has the following subsidiaries.

1.02 Contingent liabilities

2014 2013

Sales tax 8,740,588 6,071,815

Service tax 584,433 4,428,905

Income tax 103,707,400 123,884,050

Central Excise 2,431,495 -

Bank Guarantees outstanding 257,960,823 297,344,600

Provident Fund Authorities 18,417,730 -

Claims against the company 22,233,262 21,952,808 not acknowledged as debt

Note : The contingent liability with respect to Income tax as mentioned above has been shown based on the various assessment orders received by the company. However, part of the disallowances as mentioned in the said orders has already been allowed in the subsequent assessment years. The adjustments (if any) will be made in the financials after our appeals before appropriate authorities are disposed off.

During the year 2010-2011, Accel IT Resources Limited hived off its outsourcing division for a total consideration of Rs.500 lacs based on independent valuation from a Chartered Accountant pursuant to the approval of the shareholders in their meeting held on 04th February, 2011 w.e.f closing business hours of 31st March, 2011. The amount of such consideration has been included under "Income from Sale of Business" in the year 31st March, 2011. The transaction included transfer of all contracts, consents, commercial rights, know how, employees outsourced to different organizations, all rights, powers, liabilities relating to or connected with business of providing/ outsourcing IT manpower etc. There was no transfer of tangible assets of the company.

As per clause no.10.7. of the agreement for the sale of the outsourcing division of the company, dated 15th March, 2011, in the unlikely event of the business getting reduced by the Group companies, the company agrees to indemnify the purchaser an amount equivalent to the short fall in the yearly minimum service charges of Rs.1.25 crores as mentioned in clause no.10.5 of the said agreement. The shortfall amount would be paid back to the purchaser at the end of each subsequent financial year. If the short fall is not made good in the next financial year the company has the right to adjust any such refunds on any time before 31st March, 2016.


Mar 31, 2013

1.01 Background

Accel Frontline Limited ("Accel" or the Company) was incorporated in Chennai in 1995. The Company''s principal lines of business in IT services includes, providing system integration solutions comprising network design, hardware and software, IT Infrastructure management solutions, warranty management solutions for imported and indigenous equipments, development, implementation and maintenance of software applications.

2.1.1.- Rights, preferences and restrictions attached to shares

The Company has one class of equity shares having a par value of Rs.10 per share. Each share holder is eligible for one vote per share held. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the company after distribution of all preferential amounts in proportion to their share holding.

2.2.A.1 Dividend added back to reserves in the previous year include Rs.114.94 lakhs representing dividend received by Accel Frontline Services Limited from the company which got cancelled as per the merger scheme and Rs.29.16 lakhs representing write back of dividend proposed in Accel Frontline Services Limited for the year 2010-11, but, not approved later in the AGM.

2.2.A.2 To give efect to the merger scheme in the previous year, 5,747,127 shares of the company held by Accel Frontline Services Limited was cancelled. The value of these shares was Rs.2,500 lakhs, out of this, Rs.574.71 lakhs was deducted from the Issued, Subscribed & Paid up capital and the balance of Rs.1,925.29 lakhs was deducted from Proft and Loss account

2.3.1 The term loan is secured by a pari passu charge by way of hypothecation of current assets and the moveable assets of the company. The loan carries an interest rate of 14% per annum.The loan is repayable over a period of three years in ten quaterly instalments (including current maturities) in the below mentioned repayment pattern

2.3.2 Term loan from fnancial institutions include the following:

a. Rs.497.08 lakhs which is secured against the immoveable property belonging to the managing director and is repayable over a period of 5 years, out of which, Rs.78.43 lakhs is repayable within one year

b. Rs.100 lakhs which is secured against certain shares held by the holding company M/s.Accel Limited and is repayable after 2 years

2.3.3 The loans have been availed for acquiring certain fxed assets and are secured by hypothecation of specifc assets purchased out of such loans. The loans are repaid in accordance to the repayment schedule agreed with the lender.

2.3.4 This loan is availed from Life Insurance Corporation of India and is secured against the keyman insurance policy placed with them

3.1 Investments in subsidiaries

As at March 31, 2013, the Company had an aggregate investment of Rs 215,107,541 in its subsidiaries. During the current year, the company increased its investment in Accel Systems & Technologies Pte Ltd. by Rs.69,430,441 (S$1,60,000) and the percentage of shares held by the company as at 31.3.13 is 57.39%. The Company also invested Rs 863,513 (£10,000) in Accel Technologies Limited, a newly incorporated 100% subsidiary company in United Kingdom.

3.2 Sundry debtors/sundry creditors/loans & advances

a) The balances stated at their values shown under sundry debtors, sundry creditors and loans & advances are subject to confrmation

b) During the year, a provision for doubtful debts was created for Rs.4,109,530 /- (previous year Rs. 2,501,075/- ). A sum of Rs.13,050,409/- (previous year Rs. 17,288,686/-) was written of as bad debts as the management felt that these are doubtful of recovery / irrecoverable.

3.3 Contingent liabilities (In Indian Rupees)

2013 2012

Sales tax 6,071,815 6,113,923

Service tax 4,428,905 8,955,820

Income tax 123,884,050 95,160,050

Letters of credit outstanding 20,325,636

Bank Guarantees outstanding 297,344,600 314,934,395

Claims against the company 21,952,808 21,915,411 not acknowledged as debt

Note : The contingent liability with respect to Income tax as mentioned above has been shown based on the various assessment orders received by the company. However, part of the disallowances as mentioned in the said orders has already been allowed in the subsequent assessment years. The adjustments (if any) will be made in the fnancials after our appeals before appropriate authorities are disposed of.

3.4 Segment reporting

During the year under review, the company''s operations predominantly relate to IT related services and accordingly, this is the only primary reportable segment. The geographical segment is not relevant since export sales are less than 10% of the total sales.

3.5 Comparative fnancial information

The previous year''s balances have been regrouped/reclassifed wherever necessary to conform to the current year''s presentation in accordance with the Revised Schedule VI of the Companies Act 1956.


Mar 31, 2011

1.01 Background

Accel Frontline Limited ("Accel" or the Company) was incor- porated in Chennai in 1995. The Company's principal lines of business, in IT services includes, providing system integration solutions comprising network design, hardware software and website development and the sale and implementation of customized software products and IT Infrastructure manage- ment solutions,

1.02 Cash and bank balances

Cash and bank balances includes Rs.50,648,666 (Previous year Rs 49,403,191), held as Margin money for various guarantees and letters of credit issued by the company's bankers.

A balance with schedule banks in current accounts includes an amount of Rs.478,948 (previous year: Rs. 343,612) representing the balances in unclaimed dividend accounts as at March 31, 2011.

Note : Item under parenthesis represent previous year figures.

Balance in current accounts as on March 31, 2011 include an amount of Rs. 512,561 (USD 11,318 ) (PY: 63,521 (USD 1,411.46)) lying in the Exchange Earners Foreign Currency (EEFC) account maintained with State Bank of India in US Dollar account.

1.03 Secured loans

Working capital facilities from banks are secured by a pari passu charge by way of hypothecation of current assets and the moveable properties of the company. Hypothecation loans are secured by hypothecation of the respective assets acquired.

Secured loans include Rs. 904,565,253 (previous year - Rs. 40,106,917) due within one year.

1.04 Disclosures in accordance with Accounting Standard (AS) –15 on "Employee Benefits"

(a) Defined contribution plans

The Company has incurred the following amounts and charged to the Profit and Loss Account during the year

AS - 15 (Revised 2005) on "Employee Benefits" has been adopted by the Company and the disclosures as required by the said accounting standard are given hereunder:

The transition liability created out of the general reserve for compensated absence valuing Rs. 211.92 lakhs in the financial year 2007- 08 in accordance with revised AS - 15 is getting adjusted in the subsequent financial years based on the actuarial valuation report of that year through the profit and loss account.

1.05 Segment reporting

The company's operations predominantly relate to IT related services and accordingly this is the only primary reportable segment. The geographical segment is not relevant since export sales are less than 10% of the total sales.

1.06 Related party transactions

Related parties where control exists:

Name of the Party Nature of relationship

BT Frontline Pte Limited, Singapore. Controlling Company

Accel Limited, Chennai. Controlling company

ACL Systems & Technologies PTE Limited, Singapore Subsidiary Company

Accel Frontline FZE, Dubai Subsidiary Company

Network Programs USA Inc.,USA Subsidiary Company

Network Programs (Japan) Inc., USA Subsidiary Company

Network Programs Japan KK Japan Subsidiary Company

Other related parties with whom transactions have taken place during the year:

Name of the Party Nature of relationship

Accel Systems Group, Inc. USA Companies under common control

Accel Transmatic Limited, Chennai. Companies under common control

Accel Frontline Services Limited Companies under common control

Accel IT Resources Limited, Chennai Companies under common control

Key Management Personnel

Mr. N.R. Panicker Managing Director

Mr. K.R Chandrasekaran Whole time Director

Relative of Key Management Personnel

Mrs. Sreekumari Panicker Wife of the Managing Director

Mrs. Shanthi Chandrasekaran Wife of Mr. K.R Chandrasekaran

1.07 Operating leases:

The company has deposited an amount of Rs.32,338,119 (Previous year: Rs. 29,540,200/-) as interest free security deposits towards the above leases and the same has been included in the Loans and advances.

1.08 Micro small and medium Enterprise development Act 2006.

As per the stipulations and conditions referred to in the above Act, the Company is not required to register under the above Act. Further, the Company has circulated letters to its suppliers seeking information about their status as mentioned in the Act. Since the information from the suppliers has not been received, the provisioning of the interest and disclosure requirements under Schedule VI to the Companies Act, 1956 could not be complied with.

1.09 Quantitative information as per companies Act 1956

The company has not disclosed the information as required under para 3(i)(a) and 3(ii)(b) of Part II of Schedule VI pursuant to the notification released by Ministry of Corporate Affairs given vide SO 301(E) dated February 8, 2011.

1.10 Comparative financial information

The previous year's balances have been regrouped/reclassified wherever necessary to conform to the current year's presentation.


Mar 31, 2010

1.01 Background

Accel Frontline Limited ("Accel" or the Company) was incorporated in Chennai in 1995. The Companys principal lines of business, in IT services includes, providing system integration solutions comprising network design, hardware software and website development and the sale and implementation of customized software products and IT Infrastructure management solutions,

1.02 Cash and bank balances

Cash and bank balances includes Rs.49,403,191 /- (previous year Rs 63,004,677/-), held as margin money for various guarantees and letters of credit issued by the companys bankers.

A balance with schedule banks in current accounts includes an amount of Rs. 343,612/- (previous year: Rs. 345,288/-) representing the balances in unclaimed dividend accounts as at March 31, 2010.

Balances in current account as on March 31, 2010, include an amount of Rs. 115,588,121/- (US$2,568,397) PY: Rs. 22,663,923/- (US$ 434,389) lying in DBS Bank, Singapore and an amount of Rs.1,670,391/-(Sing $ 51,932) PY: Rs. 774,382/-((Sing $ 22,563) lying in DBS Bank, Singapore in the name of Accel Frontline Limited, Singapore branch.

Balance in current accounts as on March 31, 2010 include an amount of Rs.63,521 (USD 1,411) (PY: Rs.4,211,276/- (USD 80,715) lying in the Exchange Earners Foreign Currency (EEFC) account maintained with State Bank of India in US Dollar account.

1.03 Secured loans

Working capital facilities from banks are secured by a pari passu charge by way of hypothecation of current assets and the moveable properties of the company. Hypothecation loans are secured by hypothecation of the respective assets acquired.

Secured loans include Rs.440,106,917 (previous year – Rs 337, 605,378/-) due within one year.

1.04 Payment to the Managing Director & whole time Director

The managerial remuneration mentioned above does not include an amount of Rs.520,135 paid to the Managing Director as salary as per the existing agreement approved by the shareholders, but not payable due to inadequacy of profts during the fnancial year 2009-10. The company will be fling an application with the Central Government for approval of this payment after the shareholders approval in the ensuing annual general meeting of the company.

1.05 Disclosures in accordance with Accounting Standard (AS) –15 on "Employee Benefts"

1.06 Remuneration to statutory auditors

1.07 Contingent liabilities

2010 2009

Sales tax matters 8,512,404 1,425,186

ESI matters 2,758,801 2,758,801

Income tax matters * 49,000,700 6,582,000

Letters of credit outstanding 89,557,099 176,558,127

Bank Guarantees outstanding 111,364,965 259,650,185

Claims against the company not ac knowledged as debt 16,435,381 31,182,586

Service tax matters 584,433 -

Estimated amount of contracts remai ning to be

executed on capital account and not provided for (net of advances) - 5,216,180

* The Income tax matters includes a demand notice received by the company for Rs.42,418,700 from the Income Tax department for the assessment year 2007-08. The company has fled an appeal application with appellate commissioner against this demand notice.

1.08 Segment reporting

The companys operations predominantly relate to IT related services and accordingly this is the only primary reportable segment. The geographical segment is not relevant since export revenue are less than 10% of the total revenue.

1.09 Related party transactions

1.10 Leasing arrangements in the capacity of a Lessor

Finance lease

The Companys business includes leasing of computers, peripherals, and accessories on long - term non - cancellable leases which are generally in the nature of fnance leases as described in AS - 19, "Accounting for leases " issued by the ICAI. The terms of the lease agreements do not provide for any unguaranteed residual value or contingent rents. The leased assets are insured by the lessor during the contract of the lease. Initial direct costs are recognised as an expense at the commencement of the lease period.

Sundry debtors include the present value of minimum lease payments on fnance leases accounted for in accordance with AS 19 ‘Accounting for leases issued by the ICAI. Reconciliation between the gross investment and the present value of minimal lease

1.11 Operating leases:

The company has taken various offce premises on operating lease and the lease payments are amortized on a straight-line basis over the lease term. The total of minimum future lease payments for various periods are as follows:

1.12 Micro Small and Medium Enterprise Development Act 2006.

As per the stipulations and conditions referred to in the above Act, the Company is not required to register under the above Act. Further, the Company has circulated letters to its suppliers seeking information about their status as mentioned in the Act. Since the information from the suppliers has not been received, the provisioning of the interest and disclosure requirements under Schedule VI to the Companies Act, 1956 could not be complied with.

1.13 Overseas branch operation

During the year, the branch at Singapore in the name of "Accel Frontline Limited - Singapore Branch" continued its operation. The revenue and expenses of the said Branch have been included in the fnancials of the company against each line item, translated into INR, as applicable. The summary of the fnancials of the Branch is as follows:

1.14 Quantitative information as per the companies Act 1956

1.15 Expenditure in foreign currency (on payment basis)

1.16 CIF value of Imports

1.17 Amount remitted in foreign currencies towards dividend

1.18 Earnings in foreign currency

1.19 Comparative fnancial information

The previous years balances have been regrouped/reclassifed wherever necessary to conform to the current years presentation.

1.20 The previous year fgures include the results of the Warranty Management Services Division which was hived-off from January 1, 2009 and hence not comparable with the current year fgures.