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Notes to Accounts of AIA Engineering Ltd.

Mar 31, 2017

1 Terms of repayment for External Commercial Borrowings:

External Commercial Borrowings (ECB) of US $ 1,87,00,000 is secured by hypothecation of identified plant and machineries procured from proceeds of the borrowings and installed at Moraiya Unit (M1) of the Company mentioned in Hypothecation Agreement. The Loan is repayable in 15 equal quarterly instalments of US $ 12,46,667 after a moratorium period of 18 months from the date of first draw-down i.e. 3rd October, 2012. The loan carries a floating interest rate of 285 bps 3M LIBOR to be reset at every 3 months. We have entered in to an interest rate swap to convert the loan to 4.1% fixed rate of interest. The first instalment was due on 3rd April, 2014 and the loan will be fully re-paid on 3rd October, 2017.

# Provision for Product Warranties created considering historical experience @ 0.35% of Domestic Sales

Defined Benefit Plan

The Employees’ Gratuity Fund scheme managed by a Trust is a Defined Benefit Plan. The present value of obligation is determined based on actuarial valuation using the projected unit credit method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation for leave encashment is recognized in the same manner as gratuity.

Gratuity

The benefits are governed by the Payment of Gratuity Act, 1972. The key features are as under :

Plan Features

Benefits offered 15 / 26 x Salary X Duration of Service

Salary definition Basic Salary

Benefit ceiling Benefit ceiling of Rs,10 lacs is not applied

Vesting conditions 5 years of continuous service ( Not applicable in case of death / disability)

Benefit eligibility Upon death or Resignation / Withdrawal or Retirement

Retirement age 58,60,62,65 or 70 years

Leave Encashment :

The benefits are governed by the Company’s Leave Policy.

Key Features

Salary for Encashment Basic Salary

Benefit event Death or Resignation or Retirement or A ailment

Maximum accumulation 98 Days

Benefit Formula (Leave Days ) x (Basic Salary) / ( Leave Denominator )

Leave Denominator Employee 30

Leave Credited Annually Employee 30

Retirement Age 58,60,62,65 or 70 years

The Methods and types of assumptions used in preparing the sensitivity analysis did not change compared to prior period.

Gratuity and Leave benefits liabilities of the Company are funded. There are no minimum funding requirements for Leave benefits plans in India and there is no compulsion on the part of the Company to fully pre fund the liability of the Plan. The trustees of the plan have outsourced the investment management of the fund to an insurance company. The insurance company in turn manages these funds as per the mandate provided to them by the trustees and the asset allocation which is within the permissible limits prescribed in the insurance regulations. Due to the restrictions in the type of investments that can be held by the fund, it may not be possible to explicitly follow an asset-liability matching strategy to manage risk actively in a conventional fund.

The estimates of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

The expected rate of return on plan assets is determined considering several applicable factors, mainly the composition of plan assets held, assessed risks, historical results of return on plan assets and the Company''s policy for plan assets management.

(B) Key Management Personnel:

Sr. No. Name Designation

1 Mr. Bhadresh K. Shah Managing Director

2 Mr. Yashwant M. Patel Whole-Time Director

3 Mr. Rajendra S. Shah Chairman

4 Dr. S. Srikumar Non Executive Director

5 Mr. Kunal Dilip Shah Executive Director- Finance

6 Mr. S.N.Jetheliya Company Secretary

(C) Other Related Parties:

Sr. No. Particulars Nature of Relationship

1 AIA Employees’ Gratuity Trust Fund, India Post Employment benefit plan of AIA Engineering Ltd.

2 Mrs. Giraben K. Shah

3 Mrs. Gitaben B. Shah

Relatives of Key Management Personnel

4 Mrs. Khushali Samip Solanki

5 Mrs. Bhumika Shyamal Shodhan

6 AB Tradelink Limited

7 powertec Engineering private Limited

8 Powertec Infrastructure Private Limited

9 Vee Connect Travels Private Limited Entities on which Key Management personnel have

10 Discus IT Private Limited significant influence

11 Harsha Engineers Limited

12 RNCA & Associates

2 All transactions during the year with related parties are at arm’s length and unsecured. No amount has been recognized as bad or doubtful in respect of transactions with the related parties.

3. OPERATING SEGMENTS :

(a) Information about Reportable segment:

The Company operates mainly in manufacturing of High Chrome Mill Internals (Castings) and all other activities are incidental thereto, which have similar risk and return, accordingly, there are no separate reportable Segment.

(b) Information about Geographical Segment :

The geographical information analyses the Company''s revenues and non-current assets by the company''s country of domicile (i.e. India) and other countries. In presenting the geographical information, segment revenue has been based on the geographical location of customers and segment assets have been based on the geographical location of assets.

(a) Most of the issue of litigation pertaining to Central Excise/ Service tax / Income tax are based on interpretation of the respective law & rules there under. Management has been opined by its counsel that many of the issues raised by revenue will not be sustainable in law as they are covered by judgments of respective judicial authorities which supports its contention. As such no material impact on the financials of the Company is envisaged.

(b) Sales tax / Central Sales tax related litigation / demand primarily pertains to non submission of required declaration forms in time due to non-receipt of the same from customers and / or some interpretation related issues. However in most of the cases , required documents are being filed and minor impact if any, shall be given in the year of final outcome of respective matter in appeal.

The Company enters in to derivative contracts strictly for hedging purposes and not for trading or speculation.

Note - 4.

(A) FINANCIAL RISK MANAGEMENT Objectives AND POLICIES Financial Risk Management

The Company’s business activities expose it to a variety of financial risks, namely credit risk, liquidity risk, market risk and commodity risk. The Company’s senior management has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company has constituted a Risk Management Committee which is responsible for developing and monitoring the Company’s risk management policies. The key risks and mitigating actions are also placed before the Audit Committee of the Company. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

The Risk Management Committee of the Company is supported by the Finance team and experts who provide assurance that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. The activities are designed to protect the Company’s financial results and position from financial risks, maintain market risks within the acceptable parameters while optimizing returns and protect the Company’s financial investments while maximizing returns.

Credit Risk

Credit risk arises from the possibility that the counter party may not be able to settle the obligation as agreed. To manage this, the Company periodically assesses financial reliability of customers, taking into account the financial condition, current economic trends and analysis of historical bad debts and ageing of accounts receivable. Customer wise limits are set accordingly.

The Company considers the probability of default of asset and whether there has been a significant increase in credit risk on an ongoing basis through each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of default occurring on asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forward-looking information such as:

i) Actual or expected significant adverse changes in business.

ii) Actual or expected significant changes in the operating results of the counterparty.

iii) Financial or economic conditions that are expected to cause a significant change to the counterparty’s ability to meet its obligations.

iv) Significant increase in credit risk on other financial instruments of the same counterparty.

The Company categorizes financial assets based on the assumptions, inputs and factors specific to the class of financial asset into High-quality assets, negligible credit risk; Quality assets, low credit risk; Standard assets, moderate credit risk; Substandard assets, relatively high credit risk; Low quality assets, very high credit risk; Doubtful assets, credit impaired.

Financial assets are written off when there are no reasonable expectations of recovery, such as a debtor failing to engage in a repayment plan with the Company. The Company categorizes a loan or receivable for write off when a debtor fails to make contractual payments greater than one year past due. Where loans or receivables have been written off, the Company continues engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized in profit or loss.

Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. The Company’s treasury department is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related such risks are overseen by senior management. Management monitors the Company’s net liquidity position through rolling forecasts on the basis of expected cash flows.

Market Risk-Interest Rate Risk

Interest rate risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of changes in market interest rates. In order to optimize the Company’s position with regards to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.

Market Risk-Foreign Currency Risk

The Company operates internationally and large portion of the business is transacted in several currencies. Consequently, the Company is exposed to foreign exchange risk through its sales in overseas and purchases from overseas suppliers in various foreign currencies. Exports of the Company are significantly higher in comparison to its imports. As a policy the Company does not cover the foreign exchange requirements for its imports and the same is managed from the export earnings in foreign currency. Foreign currency exchange rate exposure for exports is managed by prudent hedging policy.

Derivative financial instruments

The Company holds derivative financial instruments such as foreign currency forwards and interest rate swaps to mitigate the risk of changes in exchange rate on foreign currency exposures. The counterparty for these contracts is generally banks. These derivative financial instruments are value based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the market place.

Commodity Risk

Principal Raw Material for Company’s products is scrap and ferro chrome. Company sources its raw material requirement from domestic and international markets. Domestic market price generally remains in line with international market prices. Volatility in metal prices, currency fluctuation of rupee vis a vis other prominent currencies coupled with demand-supply scenario in the world market affect the effective price of scrap and ferrous metal. Company effectively manages availability of material as well as price volatility through:

(i) Widening its sourcing base.

(ii) Appropriate contracts and commitments.

(iii) Well planned procurement & inventory strategy.

Risk committee of the Company has developed and enacted a risk management strategy regarding commodity price risk and its mitigation.

(B) CAPITAL RISK MANAGEMENT

A. The Company''s objectives when managing capital are to:

- safeguard their ability to continue as a going concern so that they can continue to provide return for shareholders and benefits for other stakeholders.

- maintain an optimal capital structure to reduce the cost of capital.

The Company monitors capital on the basis of the following debt equity ratio

Debt includes borrowings and other financial liabilities.

Company believes in conservative leverage policy.

Company’s moderate capex plan over the medium term shall be largely funded through internal accruals and suppliers’ credit.

B. The Company follows the policy of Dividend for every financial year as may be decided by the Board considering financial performance of the Company and other internal and external factors enumerated in the Company''s dividend policy.

Company’s Dividend policy is to distribute 10-25% of its net profit as dividend (including Dividend Distribution Tax) Note - 43. FINANCIAL INSTRUMENTS :

The Company uses the following hierarchy for determining the fair value of financial instruments by valuation technique :

Level 1 : Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2 : Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3 : Techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

Note - 44. NOTE ON CORPORATE SOCIAL RESPONSIBILITY :

Based on the Guiding Notes on Accounting for Expenditure on Corporate Social Responsibility (CSR) Activities issued by the Institute of Chartered Accountants of India and Section 135 of the Companies Act, 2013 read with rules made there under, the Company has incurred the following expenditure on CSR activities during the Financial Year 2016-17:

Note - 5.

Previous Year’s figures have been regrouped / reclassified wherever necessary to confirm to current year presentation.

Note - 6. FIRST TIME ADOPTION OF IND AS

As stated in Significant Accounting Policies these are the first Financial Statements prepared in accordance with Ind AS. For the year ended 31st March, 2016 the Company had prepared its Financial Statements in accordance with the Accounting Standards specified under Section 133 of the Companies Act, 2013 ("the Act") read with rule 7 of the Companies (Accounts) Rules, 2014 and the other relevant provisions of the Act.

The accounting policies set out in Significant Accounting Policies have been applied in preparing these Financial Statements for the year ended 31st March, 2017 including the comparative information for the year ended 31st March, 2016 and the opening Ind AS Balance Sheet on the date of transition i.e 1st April, 2015.

In preparing its Ind AS Balance Sheet as at 1st April, 2015 and in presenting the comparative information for the year ended 31st March, 2016, the Company has adjusted amounts reported previously in Financial Statements prepared in accordance with IGAAP. This note explains the principal adjustments made by the Company in restating its Financial Statements prepared in accordance with IGAAP and how the transition from IGAAP to Ind AS has affected the Company’s financial position, financial performance and cash flows.

Set out below are the applicable Ind AS 101 Optional Exemptions and Mandatory Exceptions applied in the transition from IGAAP to Ind AS.

A. Optional Exemptions availed :

1 Business Combinations :

The Company has elected not to apply Ind AS 103 Business Combinations retrospectively to past business combinations that occurred before the date of transition of 1st April,2015. Consequently,

i. The Company has kept the same classification for the past business combinations as in its IGAAP Financial Statements.

ii . The Company has tested the goodwill for impairment at the date of transition based on the conditions as of the date of transition.

iii. Goodwill previously included within intangible assets under IGAAP has been recognized separately in the opening Balance Sheet in accordance with Ind AS 103.

iv. Goodwill represents the amount recognized under the IGAAP subject to specific adjustments as prescribed under Ind AS 101.

2 Deemed Cost - Property, Plant and Equipment and Intangible Assets:

As permitted by Ind AS 101, the Company has elected to continue with the carrying value of all of its property, plant and equipment and intangible assets recognized as of 1st April,2015 (date of transition) measured as per the IGAAP and used that carrying value as its deemed cost as of the date of transition.

3 Cumulative Translation Differences on foreign operations:

As per Ind AS 101, an entity may deem that the cumulative translation differences for all foreign operation to be zero as at the date of transition by transferring any such cumulative difference to retained earnings .The Company has elected to avail of this exemption.

4 Long Term Foreign Currency Monetary Items:

The Company has opted for the exemption given in para D-13 AA of Ind AS 101 in respect of long term foreign currency monetary items. The exchange differences arising on reporting of long term foreign currency items at rates different from those at which they were initially recorded during the period , or reported in previous Financial Statements, in so far as they relate to the acquisition of a depreciable capital asset are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset.

B. Mandatory Exceptions:

1 Estimates

As per Ind AS 101, an entity’s estimates in accordance with Ind AS at the date of transition to Ind AS presented in the entity’s first Ind AS Financial Statements as the case may be, should be consistent with estimates made for the same date in accordance with the IGAAP unless there is objective evidence that those estimates were in error. However, the estimates should be adjusted to reflect any differences in accounting policies.

As per Ind AS 101, where application of Ind AS requires an entity to make certain estimates that were not required under IGAAP those estimates should be made to reflect conditions that existed at the date of transition (for preparing opening Ind AS Balance Sheet) or at the end of the comparative period (for presenting comparative information as per Ind AS).

The Company’s estimates under Ind AS are consistent with the above requirements. Key estimates considered in preparation of the Financial Statements that were not required under the previous GAAP are listed below.

i. Fair valuation of financial instruments carried at FVTPL and/or FVOCI.

ii. Impairment of financial assets based on the expected credit loss model.

iii. Determination of the discounted value for financial instruments carried at amortized cost.

2 Derecognition of Financial Assets and Liabilities

As per Ind AS 101, an entity should apply the derecognition requirements in Ind AS 101, Financial Instruments, prospectively for transactions occurring on or after the date of transition to Ind AS.

However, an entity may apply the derecognition requirements retrospectively from a date chosen by it if the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognized as a result of past transactions was obtained at the time of initially accounting for those transactions.

The Company has elected to apply the derecognition principles of Ind AS 109 prospectively.

3 Classifications and Measurement of Financial Assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of facts and circumstances that exist at the date of transition to Ind AS.

*The IGAAP figures have been reclassified to conform to Ind AS presentation requirements for the purposes of this note.

Notes to first time adoption

a. Goodwill :

Under previous GAAP Goodwill had been amortized. Under Ind AS Goodwill is not amortized and is tested annually for impairment.

Accordingly, amortized amount of Goodwill is written back.

b. Investment :

Under previous GAAP investment in Mutual Funds were classified in to current Investments.Current Investment were carried at lower of cost or fair value. Under Ind AS these Investments are required to be measured at Fair Value either Through OCI (FVTOCI) or through Profit & Loss (FVTPL) .The Company has opted to Fair Value these Investments Through Profit & Loss (FVTPL). Accordingly, resulting fair value change of these Investments have been recognized in retained earnings as at the date of transition and subsequently in the Profit & Loss account for the year ended 31st March, 2016.

c. Hedging Instruments :

Under the previous GAAP Company had used principle of AS - 30 to the extent it does not conflict with Accounting Standards specified under Section 133 of Companies Act, 2013, read with Rule 7 of Companies (Accounts) Rules, 2014 i.e. AS-11. Now under Ind AS-109, all Derivatives are recognized at fair value and are re-measured at subsequent reporting dates. Hence, there is change in accounting treatment of Derivatives which had earlier been recognized under AS-11.

d. Deferred Taxes :

Under previous GAAP Deferred Taxes were recognized based on Profit & Loss approach i.e.tax impact on difference between the accounting income and taxable income. Under Ind AS, Deferred Tax is recognized by following Balance Sheet approach

i.e. tax impact on temporary difference between the carrying value of assets and liabilities in the books and their respective tax base.

e. Proposed Dividend :

Under the previous GAAP, Dividend proposed by the Board of Directors after the Balance Sheet date but before the approval of the Financial Statements were considered as subsequent events. Accordingly, provision for Proposed Dividend including Distribution Tax was recognized as liability. Under Ind AS, such Dividends are recognized when the same is approved by the shareholders in the general meeting.

f. Excise Duty :

Under the previous GAAP revenue from sale of goods was presented exclusive of Excise Duty. Under Ind AS, revenue from Sale of Goods is presented inclusive of Excise Duty. The Excise Duty paid is presented on the face of the Statement of Profit and Loss as part of expenses.

g. Remeasurement of Post Employment Benefit Obligations :

Under the previous GAAP cost relating to Post Employment Benefit Obligations including actuarial gain / losses were recognized in Profit & Loss. Under Ind AS, actuarial gain / losses on the net Defined Benefit Liability are recognized in Other Comprehensive Income instead of Profit & Loss.


Mar 31, 2015

1. Share Capital:

1.1 Rights, preferences and restrictions attached to Equity Shares:

The Company has one class of Equity Shares having a par value of Rs.2 each. Each Shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the Shareholders in the ensuing Annual General Meeting. 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 shareholding.

During the year ended 31st March, 2015, the amount of Dividend proposed by the Board of Directors of the Company to the Equity Share holders is Rs.8.00 per Share (Previous Year Rs.6 per Share)

2. Terms of repayment for Buyers Credit:

The Company has availed Buyer''s Credit of GBP 330204.10 and EURO 14840.46 are secured by first and exclusive charge over specific Plant and Machinery being imported. The Buyer''s Credit loans are repayable at 4th January, 2016 and 9th February, 2016 respectively. The Interest rates are determined as a spread over 90 /180 days LIBOR and the spread is a function of liquidity available with the Bank.The Buyer''s Credit finance arranged in this financial year has been at a spread of 150 bps over LIBOR.

3. Employee Benefits Expense:

Defined Benefit Plan:

The employees'' gratuity fund scheme managed by a Trust is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognized in the same manner as gratuity.

Company''s estimate of Contributions expected to be paid during Financial Year 2014-15 is as under:

(i) Defined Contribution Plan :

- Employer''s contribution to Provident Fund : 12% of Basic Salary

(ii) Defined Investment Plan :

(a) Gratuity Rs. in Lacs : 243.40

(b) Leave encashment : Not applicable as Leave Liability is not funded

The estimates of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

The expected rate of return on plan assets is determined considering several applicable factors, mainly the composition of plan assets held, assessed risks, historical results of return on plan assets and the Company''s policy for plan assets management.

4. Related party disclosures under Accounting Standard 18:

(i) Subsidiaries:

1. Welcast Steels Limited, Bangalore

2. Vega Industries (Middle East) FZE, U.A.E.

3. Vega Industries Ltd., U.K.

4. Vega Industries Ltd., U.S.A.

5. Vega Steel Industries (RSA) PTY Ltd., South Africa

6. Wuxi Weigejia Trade Co. Ltd., China

(ii) Relatives of Key Management Personnel:

1. Mrs. Giraben K. Shah

2. Mrs. Gitaben B. Shah

3. Mrs.Khushali Samip Solanki

4. Mrs.Bhumika Shyamal Shodhan

5. AB Tradelink Ltd.

6. Powertec Engineering Pvt. Ltd.

7. Vee Connect Travels Pvt.Ltd.

8. Discus IT Pvt Ltd.

(iii) Key Management Personnel:

1. Mr.Bhadresh K. Shah (Managing Director)

2. Mr.Yashwantbhai M. Patel (Whole-time Director)

3. Dr. S. Srikumar (Non Executive Director)

5. Based on the guiding principles given in Accounting Standard on "Segment Reporting " (AS-17) issued by the Institute of Chartered Accountants of India, the Company operates mainly in manufacturing of High Chrome Mill Internals (Castings) and all other activities are incidental thereto, which have similar risk and return, accordingly, there are no separate reportable Segment as far as Primary Segment is concerned.

6. Contingent Liabilities and Commitments (To the extent not provided for):

Particulars As at As at 31st March, 31st March, 2015 2014 Rs. Lacs Rs. Lacs

1. Contingent Liabilities:

a. Claims against the Company not acknowledged as debts

i) Central Excise & Service Tax 1,714.84 3,698.49

ii) Income Tax 5,932.31 4,977.25

iii) Sales Tax / Central Sales Tax 19.77 19.77

b. Guarantees

i) Bank Guarantees Outstanding 12,365.53 6,921.40

ii) Corporate Guarantees Outstanding to Customers 713.65 5,566.94

iii)Guarantees given by the Company on behalf of Subsidiaries 3,621.31 3,490.51

iv) Corporate Guarantees given by the Company on behalf of Subsidiaries 2,632.28 2,033.05

v) Letter of Credit (L/C) 33.55 765.58

c. Others 650.05 628.32

2. Commitments :

Estimated amount of Contracts remaining to 2,782.82 939.58 be executed on Capital Account and not provided for.

Total 30,466.11 29,040.89

6. Previous Year''s figures have been regrouped / reclassified wherever necessary to confirm to current year presentation.


Mar 31, 2014

1.1 Rights, preferences and restrictions attached to Equity Shares:

The Company has one class of Equity Shares having a par value of Rs. 2 each. Each Shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the Shareholders in the ensuing Annual General Meeting. 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 shareholding.

During the year ended 31st March, 2014, the amount of Dividend proposed by the Board of Directors of the Company to the Equity Shareholders is Rs. 6 per Share (Previous Year Rs. 4 per Share)

1.2 Aggregate number and class of shares allotted as fully paid up pursuant to contract(s) without payment being received in cash:

336,430 Equity Shares (Previous Year 336,430) of Rs. 2 each fully paid-up have been issued to the Shareholders of the Amalgamating Company i.e. Reclamation Welding Ltd. pursuant to the Scheme of Amalgamation with the Company during the Financial Year 2009-10.

1.3 Terms of repayment for External Commercial Borrowings:

External Commercial Borrowings ( ECB ) of US $ 18700000 is secured by hypothecation of Identified Plant and Machineries procured / to be procured from it and to be installed at Moraiya Unit ( M1 ) of the Company mentioned in Hypothecation Agreement. The Loan is repayable in 15 equal quarterly instalments of US$ 1246667 after a moratorium period of 18 months from the date of first draw-down i.e. 3rd October, 2012. Interest rates are reset every three months at the rate of 3 months US$ LIBOR plus 285 bps p.a.. The first Instalment will due on 3rd April, 2014 and the loan will be fully re-paid on 3rd October, 2017.

1.4 Terms of repayment for Buyers Credit:

The Company has availed Buyers Credit of GBP 330204.10 and EURO 14840.46 are secured by first and exclusive charge over specific Plant and Machinery being imported. The Buyers Credit loans are repayable at 4th January, 2016 and 9th February, 2016 respectively. The Interest rates are determined as a spread over 90 /180 days LIBOR and the spread is a function of liquidity available with the Bank. The Buyers Credit finance arranged in this financial year has been at a spread of 150 bps over LIBOR.

1.5 Terms of repayment for Buyers Credit:

The Company had availed Buyers Credit / Packing Credit of US$ 1827108.33 and US$ 5000000 respectively which are secured by Hypothecation of entire chargeable Current Assets of the Company including Stocks of Raw Materials, Stores and Spares, Work-in-progress and Receivables on pari-passu basis. The Interest rates are determined as a spread over 90 /180 days LIBOR and the spread is a function of liquidity available with the Bank. The Buyers Credit finance arranged in this financial year had been at a spread of 150 bps over LIBOR. It has been fully repaid during the year.

Defined Benefit Plan:

The employees'' gratuity fund scheme managed by a Trust is a defined benefit plan.The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognized in the same manner as gratuity.

2. Amalgamation of DCPL Foundries Ltd.

Scheme of Amalgamation of DCPL Foundries Ltd. (DCPL) with the Company, a wholly - owned Subsidiary of the Company, has been sanctioned by the Hon''able High Court of Gujarat, Ahmedabad vide its order dated 4th April, 2014 (a copy of the order received on 2nd May, 2014).

The Scheme of Amalgamation has become effective from 3rd May, 2014 and has been implemented with effect from the Appointed Date i.e. 1st April, 2013. The principal business of DCPL was to manufacture of Alloy Steel Castings. The Assets and Liabilities of the erstwhile DCPL were transferred and vested in the company with effect from the appointed date and accordingly was given effect in the accounts. DCPL being Wholly-owned Subsidiary of the Company, all the 1000000 Equity Shares of Rs. 10 each held by the Company in the erstwhile DCPL have been cancelled.

The Amalgamation has been accounted for under the "Purchase Method" as prescribed by Accounting Standard 14 (AS-14) " Accounting of Amalgamations". The difference of Rs. 76,780,684 between the value of net assets taken over and the Cost of investment of the Company in the Shares of DCPL has been debited to Goodwill Account, which will be amrortized over a period of five years.

3. Related party disclosures under Accounting Standard 18:

(i) Subsidiaries:

1 Welcast Steels Limited, Bangalore, India

2 Vega Industries (Middle East) FZE, U.A.E.

3 Vega Industries Ltd., U.K.

4 Vega Industries Ltd., U.S.A.

5 Vega Steel Industries (RSA) Proprietary Ltd., South Africa

6 Wuxi Weigejia Trade Co. Ltd., China

(ii) Relatives of Key Management Personnel:

1 Mrs. Giraben K. Shah

2 Mrs. Gitaben B. Shah

3 AB Tradelink Ltd.

4 Powertec Engineering Pvt. Ltd.

(iii) Key Management Personnel:

1 Mr. Bhadresh K. Shah (Managing Director)

2 Mr. Yashwantbhai M. Patel (Whole-time Director)

3 Dr. S. Srikumar (Non Executive Director)

4. Based on the guiding principles given in Accounting Standard on "Segment Reporting" (AS-17) issued by the Institute of Chartered Accountants of India, the Company operates mainly in manufacturing of High Chrome Mill Internals (Castings) and all other activities are incidental thereto, which have similar risk and return, accordingly, there are no separate reportable Segment as far as Primary Segment is concerned.

5. Contingent Liabilities and Commitments (To the extent not provided for):

Particulars As at As at 31st March, 2014 31st March, 2013 Rs. Lacs Rs. Lacs

1. Contingent Liabilities:

a. Claims against the Company not acknowledged as debts

i) Central Excise & Service Tax 3,698.49 1,642.65

ii) Income Tax 4,977.25 -

iii) Sales Tax / Central Sales Tax 19.77 48.21

iv) Award of Damages in Patent matter by District Court of - 3,924.02

Nashville, Tennessee, U.S.A., which is disputed by the Company (US$ 7228544.64)

v) Others 6 28.32 -

b. Guarantees

i) Bank Guarantees Outstanding 6,921.40 6,676.93

ii) Corporate Guarantees Outstanding to Customers 5,566.94 991.61

iii) Guarantees given by the Company on behalf of Subsidiaries 3,490.51 2,612.15

iv) Corporate Guarantees given by the Company on behalf of Subsidiaries 2,033.05 1,837.49

v) Letter of Credit (L/C) 765.58 2,182.39

2. Commitments :

Estimated amount of Contracts remaining to be executed on 939.58 2,633.51

Capital Account and not provided for.

Total 29,040.89 22,548.96

The Company enters in to derivative contracts strictly for hedging purposes and not for trading or speculation.The Company has voluntarily adopted Accounting Standard (AS) 30 "Financial Instruments" : Recognition and Measurement" to the extent the standard does not conflict with the Accounting Standards notified under Section 211(3C) of the Companies Act, 1956. Pursuant to the adoption, the Net Gain on foreign currency forwards and Interest rate swap of Rs. 946.45 lacs as required by AS-30 has been parked in the Cash Flow Hedging Reserve under Reserves & Surplus. This gain would be recycled in the Statement of Profit and Loss / Fixed Assets in the period during which the forecasted transactions occurs.

6. Previous Year''s figures have been regrouped / reclassified wherever necessary to confirm to current year presentation. The figures for the previous year do not include figures for the erstwhile DCPL and accordingly the current year''s figures are not comparable to those of the previous year.


Mar 31, 2013

1. Related party disclosures under Accounting Standard 18:

(i) Subsidiaries:

1 Welcast Steels Limited, Bangalore

2 DCPL Foundries Ltd., Trichy

3 Vega Industries (Middle East) FZE, U.A.E.

4 Vega Industries Ltd., U.K.

5 Vega Industries Ltd., U.S.A.

6 Vega Steel Industries (RSA) PTY Ltd., South Africa

7 Wuxi Weigejia Trade Co. Ltd., China

(ii) Relatives of Key Management Personnel:

1 Mrs. Giraben K. Shah

2 Mrs. Gitaben B. Shah

3 AB Tradelink Ltd.

4 Powertec Engineering Pvt. Ltd.

(iii) Key Management Personnel:

1 Mr.Bhadresh K. Shah (Managing Director)

2 Mr.Yashwant M. Patel (Whole time Director)

3 Dr. S. Srikumar (Non Executive Director)

2. Based on the guiding principles given in Accounting Standard on " Segment Reporting " (AS-17) issued by the Institute of Chartered Accountants of India, the Company operates mainly in manufacturing of High Chrome Mill Internals (Castings) and all other activities are incidental thereto, which have similar risk and return, accordingly, there are no separate reportable Segment as far as Primary Segment is concerned.

3. Previous Year''s figures have been regrouped / reclassified wherever necessary to confirm to current year presentation.


Mar 31, 2012

1.1 Rights, preferences and restrictions attached to Equity shares :

The company has one class of equity shares having a par value of Rs.2 each. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. 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 shareholding.

During the year ended 31st March, 2012, the amount of Dividend proposed by the Board of Directors of the Company to the Equity Share holders is Rs.3 per Share ( Previous Year Rs.3 per Share)

1.2 Aggregate number and class of shares allotted as fully paid up pursuant to contract(s) without payment being received in cash.

336,430 Equity Shares (Previous Year 336,430) of Rs.2/- each fully paid-up have been issued to the Shareholders of the Amalgamating Company i.e. Reclamation Welding Ltd. pursuant to the Scheme of Amalgamation with the Company during the Financial Year 2009-10.

* Deferred Sales tax under Package Scheme of Incentives 1993 of Maharashtra for erstwhile Paramount Centrispun Castings Pvt.Ltd.

* The Company has not received information from the Suppliers regarding their status under The Micro, Small & Medium Enterprises Development Act, 2006.Hence, disclosures, if any relating to amounts unpaid as at the balance sheet date together with interest paid or payable as per the requirement under the said Act, have not been made.

* There is no amount due to be transferred to Investor Education and Protection fund.

# Includes Statutory dues and advances from customers.

* The Company has hitherto been accounting for export benefits on receipt basis i.e. as and when utilised / sold. During the year the Company changed its method of accounting from receipts to accrual, as a consequence of this , current year export incentives and profit is higher by Rs.3,233.34 Lacs.

Defined Benefit Plan :

The employees' gratuity fund scheme managed by a Trust is a defined benefit plan.The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognised in the same manner as gratuity.

Company's estimate of Contributions expected to be paid during Financial Year 2012-13 is as under:

(i) Defined Contribution Plan :

- Employer's contribution to Provident Fund : 12% of Basic Salary (ii) Defined Investment Plan :

(a) Gratuity : Rs.94.24 Lacs

(b) Leave encashment : Not applicable as Leave Liability is not funded

The estimates of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

The expected rate of return on plan assets is determined considering several applicable factors, mainly the composition of plan assets held, assessed risks, historical results of return on plan assets and the Company's policy for plan assets management.

2. Related party disclosures under Accounting Standard 18 :

(i) Subsidiaries :

1 Welcast Steels Ltd.

2 DCPL Foundries Ltd.

3 Vega Industries (Middle East) FZE, U.A.E.

4 Vega Industries Ltd., U.K.

5 Vega Industries Ltd., U.S.A.

6 Vega Steel Industries (RSA) PTY Ltd.

7 Wuxi Weigejia Trade Co. Ltd.

(ii) Relatives of Key Management Personnel :

1 Mrs. Giraben K. Shah

2 Mrs. Gitaben B. Shah

3 AB Tradelink Pvt. Ltd.

4 Powertec Engineering Pvt. Ltd.

(iii) Key Management Personnel :

1 Mr.Bhadresh K. Shah (Managing Director)

2 Mr.Yashwant M. Patel (Whole time Director)

3 Dr. S. Srikumar (Director)

3 Based on the guiding principles given in Accounting Standard on "Segment Reporting" (AS-17) issued by the Institute of Chartered Accountants of India, the Company operates mainly in manufacturing of High Chrome Mill Internals (Castings) and all other activities are incidental thereto, which have similar risk and return, accordingly, there are no separate reportable Segment as far as Primary Segment is concerned.

Notes:

1) Geographical Segments considered for disclosures are as follows :

- Sales within India includes Sales to Customers located within India.

- Sales Outside India includes Sales to Customers located outside India.

4 Contingent Liabilities and Commitments (To the extent not provided for) :

Particulars As at As at 31st March, 2012 31st March, 2011 Rs. Lacs Rs. Lacs

1. Contingent Liabilities

a. Claims against the Company not acknowledged as debts

i) Central Excise & Service Tax 1,743.61 1,477.20

ii) Income Tax 2,506.15 1,653.09

iii)Sales Tax / Central Sales Tax 68.50 74.05

b. Guarantees

i) Bank Guarantees Outstanding 6,309.29 4,753.84

ii) Corporate Guarantees Outstanding to Customers 1,141.44 1,087.80

iii)Guarantees given by the Company on behalf of Subsidiaries 1,526.10 307.53

2. Commitments :

Estimated amount of Contracts remaining to be executed on Capital Account 1,191.39 696.36 and not provided for.

Total 14,486.48 10,049.87

5 Derivative Instruments :

a) The Company has entered into forward contracts to offset foreign currency risks arising from the amounts denominated in currencies other than the Indian Rupee. The counter parties to such forward contracts are banks.

The notional mark to market loss on these unexpired contracts as on 31-3-2012 amounting to Rs.829.86 Lacs has not been considered in the Financial Statements. The actual gain / loss could vary and be determined only on settlement of the contracts on their respective due dates.

6 Till the year ended 31st March, 2011, the Company was using Pre-revised Schedule VI to the Companies Act, 1956 for preparation and presentation of its financials Statements. During the year ended 31st March, 2012, the Revised Schedule VI notified under the Companies Act, 1956 has become applicable to the Company.The Company has reclassified previous year figures to confirm to this year's classification.

Notes referred to herein above form an integral part of Financial Statements.


Mar 31, 2011

1. Details of utilization of funds received on Qualified Institutions Placement (QIP) Money:

On 19th December, 2006, consequent to Qualified Institutions Placement (QIP), the Company issued and allotted 1020408 Equity Shares of Rs. 10/- each at a premium of Rs. 1215/- per share through Qualified Institutions Placement under Chapter XIII-A of SEBI (Disclosure & Investor Protection) Guidelines 2000 to Qualified Institutional Buyers (QIB).

2. The Company has not received information from the Suppliers regarding their status under The Micro, Small & Medium Enterprises Development Act, 2006. Hence, disclosures, if any relating to amounts unpaid as at the balance sheet date together with interest paid or payable as per the requirement under the said Act, have not been made.

Defined Benefit Plan:

The employees' gratuity fund scheme managed by a Trust is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognized in the same manner as gratuity.

The estimates of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

The expected rate of return on plan assets is determined considering several applicable factors, mainly the composition of plan assets held, assessed risks, historical results of return on plan assets and the Company's policy for plan assets management.

3. Based on the guiding principles given in Accounting Standard on "Segment Reporting" (AS-17) issued by the Institute of Chartered Accountants of India, the Company operates mainly in manufacturing of High Chrome Mill Internals (Castings) and all other activities are incidental thereto, which have similar risk and return, accordingly, there are no separate reportable Segment as far as Primary Segment is concerned.

4. Related party disclosures under Accounting Standard 18:

(i ) Subsidiaries :

1 Welcast Steels Limited, Bangalore

2 DCPL Foundries Pvt.Ltd., Trichy

3 Vega Industries (Middle East) FZE, U.A.E.

4 Vega Industries Ltd., U.K.

5 Vega Industries Ltd., U.S.A.

6 Vega Steel Industries (RSA) PTY Ltd., South Africa

7 Wuxi Weigejia Trade Co. Ltd., China

(ii) Relatives of Key Management Personnel :

1 Hotel Gulmarg

2 L.D.M. X-ray Clinic

3 K.M.Shah Nursing home

4 Mrs. Giraben K. Shah

5 Mrs. Gita B. Shah

6 AB Tradelink Pvt. Ltd.

7 Powertec Engineering Pvt. Ltd.

(iii) Key Management Personnel :

1 Mr. Bhadresh K. Shah (Managing Director)

2 Dr. S. Srikumar (Director)

8. Contingent Liabilities not provided for in Accounts :

(Rs. Millions)

As at As at

31st March 2011 31st March 2010

a Bank Guarantees Outstanding 475.38 311.48

b Corporate Guarantees Outstanding to Customers 108.78 106.08

c Guarantees given by the Company on behalf of Subsidiaries 30.75 133.87

d Estimated amount of unexecuted Capital Contracts (Net of Advances) not provided for. 69.64 35.03

e Claims against the Company / Disputed Liabilities not acknowledged as Debts

i) Central Excise & Service Tax 147.72 118.05

ii) Income Tax 165.31 17.13

iii) Sales Tax / Central Sales Tax 7.41 14.71

iv) E.S.I.C. Nil 0.12

Total 1004.99 736.47

5. Derivative Instruments :

a) The Company has entered into forward contracts to offset foreign currency risks arising from the amounts denominated in currencies other than the Indian Rupee. The counter parties to such forward contracts are banks.

6. Previous year's figures have been reworked, reclassified, regrouped and rearranged wherever necessary.

7. Secured sectioned loans are secured by paripasu charge in favour of State Bank of India and The Royal Bank of Scotland on Company's movable and immovable properties both persent and future by way of hypothecation and mortgage.


Mar 31, 2010

Cash and Cash equivalents presented in the Cash Flow Statement consist of cash on hand and demand deposits with banks.

1. Details of utilization of funds received on Qualified Institutions Placement (QIP) Money:

On 19th December 2006, consequent to Qualified Institutions Placement (QIP), the Company issued and allotted 1020408 Equity Shares of Rs.10/- each at a premium of Rs.1215/- per share through Qualified Institutions Placement under Chapter XIII-A of SEBI (Disclosure & Investor Protection) Guidelines 2000 to Qualified Institutional Buyers (QIB).

2. The Company has not received information from the Suppliers regarding their status under The Micro, Small & Medium Enterprises Development Act, 2006. Hence, disclosures, if any relating to amounts unpaid as at the balance sheet date together with interest paid or payable as per the requirement under the said Act, have not been made.

3. As per Accounting Standard 15 "Employee Benefits", the disclosures of Employee benefits as defined in the Accounting Standard are given below:

Defined Contribution Plan:

Defined Benefit Plan:

The Employees Gratuity Fund Scheme managed by a Trust is a Defined Benefit Plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognized in the same manner as Gratuity.

The estimates of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

The expected rate of return on plan assets is determined considering several applicable factors, mainly the composition of plan assets held, assessed risks, historical results of return on plan assets and the Companys policy for plan assets management.

4. Based on the guiding principles given in Accounting Standard on "Segment Reporting" (AS-17) issued by the Institute of Chartered Accountants of India, the Company operates mainly in manufacturing of High Chrome Mill Internals (Castings) and all other activities are incidental thereto, which have similar risk and return, accordingly, there are no separate reportable Segment as far as Primary Segment is concerned.

5. Contingent Liabilities not provided for in Accounts :

(Rs. in Lacs) As at As at 31st March, 2010 31st March, 2009 a Bank Guarantees Outstanding 3114.85 3133.44 b Corporate Guarantees Outstanding to Customers 1060.76 4564.74 c i Guarantees given by the Company on behalf of Subsidiaries 1338.70 821.52 d Letters of Credit NIL 265.66 e Estimated amount of unexecuted Capital Contracts (Net of Advances) not provided for 350.28 0.00 f Claims against the Company / Disputed Liabilities not acknowledged as Debts i) Central Excise & Service Tax 1180.49 901.74 ii) Income Tax 171.34 171.34 iii) Sales Tax / Central Sales Tax 147.10 110.24 iv) E.S.I.C. 1.16 1.16 Total 7364.68 9969.84

6. Derivative Instruments :

a) The Company has entered into forward contracts to offset foreign currency risks arising from the amounts denominated in currencies other than the Indian Rupee. The counter parties to such forward contracts are banks.

Consequent to the announcement issued by the Institute of Chartered Accountants of India on Accounting of Derivatives, details of derivatives contracts outstanding as on 31-3-2010 are as under:

7. During the year, the Company has implemented SAP as ERP Platform and the valuation of Inventory of Raw Materials, Stores and Spares for the year is done on the basis of Moving Weighted Average Method instead of FIFO / YTD average basis applied in the earlier years. Had the Company followed the same Previous Year Method of valuing Inventory of Raw Materials, Stores and Spares, the value of Inventory would have been less by Rs. 72.35 Lacs and consequently Profit for the year ended 31st March 2010 would have been less by Rs. 72.35 Lacs. Further, previous figures are not comparable to that extent.

8. Previous years figures have been reworked, reclassified, regrouped and rearranged wherever necessary.

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