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Notes to Accounts of BGR Energy Systems Ltd.

Mar 31, 2015

1. COMPANY OVERVIEW

BGR Energy Systems Limited ('the company') is a public limited company incorporated under the provisions of the Companies Act, 1956. Its equity shares are listed on Bombay Stock Exchange ('BSE') and National Stock Exchange ('NSE').The company is a manufacturer of capital equipments for Power Plants, Petrochemical Industries, Refineries, Process Industries and undertakes turnkey Balance of Plant ('BOP') and Erection Procurement and Construction ('EPC') contracts for Power plants. The company has been achieving its objectives through its five business units: Power projects, Electrical projects, Oil and Gas equipment, Environmental engineering and Air Fin Coolers.

2. Terms/rights attached to equity shares

The company has one class of shares referred to as equity shares having a par value of Rs 10. Each holder of equity shares is entitled to one vote per share.

Gratuity plan

The company operates gratuity plan wherein every employee is entitled to the benefit equivalent to fifteen days salary last drawn for each completed year of service. The same is payable on termination of service or retirement whichever is earlier. The benefit vests after five years of continuous service.

Stock option granted to the employees under the stock option scheme established are evaluated as per the accounting treatment prescribed by the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The company follows the intrinsic value method of accounting for the options and accordingly, the excess of value of the stock options as determined by an independent valuer on the date of grant over the exercise price of the options, if any, is recognized as deferred employee compensation cost and is charged to the statement of profit and loss.

Employee Stock Option Scheme - 2007

Pursuant to the decision of the shareholders, at their meeting held on July 11, 2007, the company has established an 'Employee Stock Option Plan 2007' ('ESOS 2007' or 'the Scheme') to be administered by the Compensation Committee of the Board of Directors. ESOS 2007 provides for grant of options amounting to not more than 1.5% of the issued and paid up equity capital of the company outstanding at any point of time to officers, directors and key employees to purchase equity shares of face value of Rs.10 each, with such option conferring a right upon the employee to apply for one equity shares of the company, in accordance with the terms and conditions of such issue. The exercise price of the option is Rs.408

3. LEASES Operating lease

The company has taken various residential / commercial premises and land under cancellable and non-cancellable operating leases. These lease agreements are normally renewed on expiry.

4. PARTICULARS OF RELATED PARTIES List of related parties

a. Subsidiary companies

i. Progen Systems and Technologies Limited

ii. BGR Boilers Private Limited

iii. BGR Turbines Company Private Limited

iv. Sravanaa Properties Limited

b. Associate company - Nil

c. Other companies (enterprises where significant influence exists and enterprises where key management personnel have significant influence)

i. GEA Cooling Tower Technologies (India) Private Limited

ii. GEA BGR Energy System India Limited

iii. Mega Funds India Limited

iv. Sasikala Estate Private Limited

v. Schmitz India Private Limited

vi. Cuddalore Powergen Corporation Limited

vii. ANI Constructions Private Limited

viii. Nannilam Property Private Limited

ix. BGR Odisha Powergen Limited

d. Joint venture

Mecon - GEA Energy System (India) Limited (JV)

e. Key Management Personnel

i. Mr.A.Swaminathan Joint Managing Director and CEO

ii. Mr. VR. Mahadevan Joint Managing Director

iii. Ms. Swarnamugi Karthik Director - Corporate Strategy

f. Relatives of Key Management Personnel

i. Mrs. Sasikala Raghupathy (Mother of Ms.Swarnamugi Karthik)

ii. Ms. Priyadarshini Raghupathy (Sister of Ms.Swarnamugi Karthik)

iii. Ms. Vaani Raghupathy (Sister of Ms.Swarnamugi Karthik)

iv. Mr. Arjun Govind Raghupathy (Brother of Ms.Swarnamugi Karthik)

Party-wise disclosure of related party transactions:

5. Sales represent, GEA Cooling Tower Technologies (India) Private Limited Rs. 3315 lakhs ( Rs. 2736 lakhs).

6. Purchases represent, Progen Systems and Technologies Limited Rs. 955 lakhs (Rs. 260 lakhs), GEA Cooling Tower Technologies (India) Private limited Rs. 3655 lakhs (Rs.2452 lakhs), GEA BGR Energy System India Limited Rs. 142 lakhs (Rs. 41 lakhs), BGR Boilers Private Limited Rs. 80354 lakhs (Rs 17707 lakhs), BGR Turbines Company Private Limited Rs. 47430 lakhs (Rs. 492 lakhs), Schmitz India Private Limited Rs.61 lakhs (Rs.Nil)

7. Sale of Investments represent, BGR Investment Holdings Company Limited Rs. Nil (Rs. 34 Lakhs), BGR Power Limited Rs. Nil (Rs. 10 lakhs).

8. Remuneration to key management personnel represents, Mr. B.G.Raghupathy Rs. Nil (Rs. 44 lakhs), Mr. VR. Mahadevan Rs. 129 lakhs (Rs.147 lakhs), Mr. A. Swaminathan Rs. 181 lakhs (Rs. 206 lakhs), Mr. K Chandrashekhar Rs.24 lakhs (Rs. 97 lakhs), Ms. Swarnamugi Karthik Rs. 88 lakhs (Rs. 88 lakhs).

9. Remuneration to relatives of key management personnel represent, Ms.Priyadarshini Raghupathy Rs. 28 lakhs (Rs. 32 lakhs), Ms. Vaani Raghupathy Rs. 6 lakhs (Rs.8 lakhs), Mr. Arjun Govind Raghupathy Rs. 5 lakhs (Rs.4 lakhs).

10. Rent paid represents, GEA BGR Energy System India Limited. Rs. 0.30 lakhs (Rs. 0.28 lakhs), Sasikala Estate Private Limited Rs. 83 lakhs (Rs. 89 lakhs), ANI Construction Private Limited Rs. 9 lakhs (Rs. 9 lakhs). Mrs. Sasikala Raghupathy Rs. 44 lakhs (Rs. 42 lakhs), Sravanaa Properties Limited Rs. 18 lakhs (Rs. 18 lakhs).

11. Sale of fixed assets represent, Progen System and Technologies Ltd Rs. 0.12 lakhs (Rs. Nil), GEA BGR Energy System India Ltd Rs. 4 lakhs (Rs. Nil)

12. Others represent, royalty to Mr. B.G. Raghupathy Rs. Nil (Rs. 8 lakhs), Mrs. Sasikala Raghupathy Rs. 25 lakhs (Rs. 17 lakhs).

13. Advances given represent, Progen Systems and Technologies Limited Rs. 1043 lakhs (Rs. 931 lakhs), BGR Boilers Private Limited Rs. Nil (Rs. 38192 lakhs), BGR Turbines Company Private Limited Rs. Nil (Rs. 241 lakhs), GEA BGR Energy Systems India Limited Rs. 304 lakhs (Rs. 60 lakhs), GEA Cooling Tower Technologies (India) Private Limited Rs. 1247 lakhs (Rs. 474 lakhs).

14. Gurantees given represent, Progen Systems and Technologies Limited Rs. 20 lakhs (Rs. 51 lakhs), GEA Cooling Tower Technologies (India) Private limited Rs. 661 lakhs (Rs. 661 lakhs).

15. Balances outstanding (Net) represent, Progen Systems and Technologies Limited Rs. 1623 lakhs (Rs.1277 lakhs), BGR Boilers Private Limited Rs. 7580 lakhs (cr.bal) (Rs.22898 lakhs), BGR Turbines Company Private Limited Rs. 16378 lakhs (cr.bal) (Rs. 12348 lakhs), GEA Cooling Tower Technologies (India)Private Limited Rs. 595 lakhs (cr.bal) (Rs.74 lakhs), GEA BGR Energy System India Limited Rs. 240 lakhs (Rs.66 lakhs) , Cuddalore Powergen Corporation Limited Rs. 671 lakhs (Rs.671 lakhs), Nannilam Property Private Limited Rs. 508 lakhs (Rs.508 lakhs), Mega Funds India Limited Rs. 39 lakhs (Rs. 39 lakhs), Schmitz India Private Limited Rs. Nil (Rs. 60 lakhs), B.G.Raghupathy Rs. Nil (Rs. 8 lakhs (cr. bal)), Sravanaa Properties Limited Rs. 6 lakhs (Rs. 6 lakhs), Sasikala Estate Private Limited Rs. 7 lakhs (cr.bal) (Rs. 7 lakhs (cr.bal)), ANI Constructions Private Limited Rs.0.77 lakhs (cr.bal) (Rs.Nil)Mrs. Sasikala Raghupathy Rs. 36 lakhs(cr. bal)(Rs. 39 lakhs(cr. bal)).

16. CONTINGENT LIABILITIES, GUARANTEES, CAPITAL COMMITMENTS AND OTHER COMMITMENTS

Rs. in Lakhs As at As at Particulars March 31,2015 March 31,2014

A Contingent liabilities

Claims against the company not acknowledged as debt

a) On account of sales tax * 29154 4222

b) On account of income-tax 10848 10848

c) On account of service tax ** 25 25

d) On account of provident fund 521 -

e) On account of contractual obligations 2350 2350

f) On account of royalty 4547 4547

B Guarantees

Guarantees and counter guarantees given 681 712 on behalf of subsidiary and other company

C Capital commitments

"Estimated amount of contracts remaining 471 817 to be executed on capital account (net of advances)"

D Other commitments

Commitments to fund subsidiaries 5923 5681

* Sales tax includes an amount of Rs. 23740 lakhs (Rs. Nil) (excluding interest and penalty) which has been contested by the VAT authorities before the Rajasthan Tax Board.

** Service tax represents a sum of Rs. 25 lakhs (Rs. 25 lakhs) (excluding interest and penalty) which has been contested by the service tax authorities before the Customs Excise and Service Tax Appellate Tribunal.

16. IMPAIRMENT OF ASSETS

a. Cash generating units :

There is no impairment loss in cash generating units and hence no provision was made in the financial statements.

b. Other assets :

The company has made a provision of Rs. Nil (Rs. 32 lakhs) in the books of accounts towards impairment of other fixed assets based on the technicial valuation.

17. In respect to construction contracts, cost of material includes value added tax, central sales tax, works contract tax and service tax.

18. Interest income from fixed deposits have been netted off with interest expense on working capital facilities..

19. As required under Section 135 of Companies Act 2013, the company is required to spend Rs.510 lakhs towards Corporate Social Responsibility (CSR) activities. The company is in the process of identifying programmesprojects, in accordance with the policy. Hence no expense has been either incurred or provided in the books during the financial year.

20. During the current financial year, notice under section 153A of the Income-tax Act 1961 was received and accordingly the company has since filed tax returns. Due to the revision, Rs.988 lakhs income tax has been provided during the year and adjusted against MAT credit available and disclosed under tax relating to earlier years.

21. PROVISIONS

a) The company has made a provision / transfer of Rs. 2336 Lakhs (reversal) (Rs.477 Lakhs) towards warranty and contractual obligations on the products supplied / contracts executed by the company during the year. The expenses on account of provision for warranty is grouped under other administrative expenses.

22. PREVIOUS YEAR FIGURES

Figures of previous year have been regrouped / rearranged, wherever required to conform to the current year presentation.


Mar 31, 2014

A. COMPANY OVERVIEW

BGR Energy Systems Limited (''the company'') is a public limited company incorporated under the provisions of the Companies Act, 1956. Its equity shares are listed on Bombay Stock Exchange (''BSE'') and National Stock Exchange (''NSE''). The company is a manufacturer of capital equipments for Power Plants, Petrochemical Industries, Refineries, Process Industries and undertakes turnkey Balance of Plant (''BOP'') and Erection Procurement and Construction (''EPC'') contracts for Power plants. The company has been achieving its objectives through its five business units: Power projects, Electrical projects, Oil and Gas equipment, Environmental engineering and Air Fin Coolers.

ii. Contingent liabilities

The company recognizes contingent liability for disclosure in notes to accounts, if any of the following conditions is fulfilled:

a) a possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise; or

b) a present obligation that arises from past events but is not recognized because:

– it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

– a reliable estimate of the amount of the obligation cannot be made.

b. Terms/rights attached to equity shares

The company has one class of shares referred to as equity shares having a par value of Rs. 10. Each holder of equity shares is entitled to one vote per share.

c. Nil (540,00,000) shares out of the issued, subscribed and paid up share capital were alloted as bonus shares in the last five years by capitalization of profits.

a) The balance in project specific escrow accounts have been netted off against respective project''s working capital loan accounts.

b) The company has availed working capital loans on pari-passu basis from State Bank of India and State Bank of Hyderabad. These loans are secured by hypothecation of inventories, trade receivables and movable assets of the capital goods segment of the company. The loans from State Bank of India and State Bank of Hyderabad are further secured by a second charge on the fixed assets of the company.

c) The company has availed contract specific working capital loans from State Bank of India, State Bank of Hyderabad, State Bank of Travancore, State Bank of Patiala, State Bank of Bikaner & Jaipur, State Bank of Mysore, IDBI Bank, Punjab National Bank, Vijaya Bank, Indian Bank, Indian Overseas Bank, Corporation Bank, Allahabad Bank, Bank of India, Andhra Bank, Central Bank of India, Syndicate Bank, Axis Bank, ICICI Bank, ING Vysya Bank Ltd, Export Import Bank of India, Union Bank of India and The Karur Vysya Bank Limited. These loans are secured by hypothecation of inventories, trade receivables and movable current assets of the respective contracts. The participating banks share the securities on pari-passu basis.

(a) Plant and equipment include original cost of Rs. 792 lakhs (Rs. 792 lakhs), which are jointly owned along with a Joint Venture, of which the company is a member

(b) Office fixtures and office equipments includes original cost of Rs. 7 lakhs (Rs. 7 lakhs), which are jointly owned along with subsidiary companies.

(c) Buildings include original cost of Rs. 1642 lakhs (Rs. 1169 lakhs), which are constructed on lease hold land.

(d) Impairment loss recognised in the statement of profit and loss during the financial year for office equipments & furniture and fixtures is Rs. 32 lakhs (Rs. 81 lakhs) (refer Note 41).

2.1. Other Loans and advances include dues from customers and tax refund (net of provision for taxation) from the Government.

2.2. Cochin Project: The end client of Cochin Port Road Connectivity Project viz., Cochin Port Road Company Ltd., (SPV of NHAI) terminated the contract on May 28, 2007. Consequently, the end client encashed BGs for a value of Rs. 1270 lakhs furnished by the company on behalf of MECON – GEA (JV). The main contractor viz., MECON – GEA (JV) contested the termination of the contract. The disputes after having been reviewed by the Dispute Review Board are now subject to arbitration. The Arbitral Tribunal has passed preliminary order in favour of the J V, which is under challenge before the High Court of Delhi. The High Court of Delhi has passed the judgement recommending that the Arbitral Tribunal permit the NHAI to contest their disputes and to adjudicate the same on merits. The final arguments before the Arbitral Tribunal is listed for hearing in August'' 2014. The arbitral award is expected in due course of time. Based on legal opinion, the company has identified a sum of Rs. 1654 lakhs (Rs. 1654 lakhs) as at March 31, 2014 as recoverable advances from the end client through the JV and is grouped under other loans and advances.

2.3 Tuticorin Project: The end client of Tirunelveli – Tuticorin Port Connectivity Project viz., Tuticorin Port Road Company Ltd (SPV of NHAI) terminated the contract and encashed BGs for aggregate value of Rs. 2652 lakhs and the same were restituted as per orders of the High Court of Madras (Madurai Bench). The disputes, including termination of contract, after having been reviewed by the Disputes Review Board are now subject to arbitration. The proceeding before the Arbitral Tribunal are in an advanced stage. In view of these facts, the company has identified the sum of Rs. 83 lakhs (Rs. 83 lakhs) as at March 31, 2014 as recoverable advances from the end client through the JV and is grouped under other loans and advances.

3.1. Trade receivables – Others, includes retention amount of Rs. 150898 lakhs (Rs. 127332 lakhs) which, in accordance with the terms of the contracts were not due for payments as at March 31, 2014

3.2. During the year, the company and State Company for Oil Projects, Iraq (Client) terminated with mutual consent the contract for two gas development projects. In line with the mutual terms of settlement, the company has accounted a loss of Rs. 202 lakhs (net of provisions) and the same is included under trade receivables written off. (refer Note 27)

3.3. The company has sought confirmation of balances of major trade receivables. In cases where letters of confirmation have been received from parties, book balances have been reconciled and adjusted, if required. In other cases, balances in accounts of trade receivables have been taken as per books of account.

4. EMPLOYEE STOCK OPTION PLANS

Stock option granted to the employees under the stock option scheme established are evaluated as per the accounting treatment prescribed by the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Company follows the intrinsic value method of accounting for the options and accordingly, the excess of value of the stock options as determined by an independent valuer on the date of grant over the exercise price of the options, if any, is recognized as deferred employee compensation cost and is charged to the statement of profit and loss.

Employee Stock Option Scheme – 2007

Pursuant to the decision of the shareholders, at their meeting held on July 11, 2007, the company has established an ''Employee Stock Option Plan 2007'' (''ESOS 2007'' or ''the Scheme'') to be administered by the Compensation Committee of the Board of Directors. ESOS 2007 provides for grant of options amounting to not more than 1.5% of the issued and paid up equity capital of the company outstanding at any point of time to officers, directors and key employees to purchase equity shares of face value of Rs. 10 each, with such option conferring a right upon the employee to apply for one equity shares of the company, in accordance with the terms and conditions of such issue. The exercise price of the option is Rs. 408.

5. PARTICULARS OF RELATED PARTIES List of related parties

a. Subsidiary companies

i. Progen Systems and Technologies Limited ii. BGR Boilers Private Limited iii. BGR Turbines Company Private Limited iv. Sravanaa Properties Limited

b. Associate company – Nil

c. Other companies (enterprises where significant influence exists and enterprises where key management personnel have significant influence)

i. GEA Cooling Tower Technologies (India) Private Limited

ii. GEA BGR Energy System India Limited

iii. Germanischer Lloyd Industrial Services (India) Private Limited

iv. Mega Funds India Limited

v. Sasikala Estate Private Limited

vi. Schmitz India Private Limited

vii. Cuddalore Powergen Corporation Limited

viii. ANI Constructions Private Limited

ix. Nannilam Property Private Limited

x. Pragathi Computers Private Limited

xi. BGR Odisha Powergen Limited

xii. BGR Investment Holdings Company Limited

xiii. BGR Power Limited

d. Joint ventures

Mecon – GEA Energy System (India) Limited (JV)

e. Key management personnel

i. Mr. B.G.Raghupathy Chairman and Managing Director (till July 28, 2013)

ii. Mr.A.Swaminathan Joint Managing Director and CEO (Director - Sales & Marketing till September 30, 2013)

iii. Mr. V.R. Mahadevan Joint Managing Director (Director - Technologies & HR till September 24, 2013)

iv. Mr. K. Chandrashekhar Director - Projects

v. Ms. Swarnamugi Karthik Director - Corporate Strategy

f. Relatives of key management personnel

i. Ms. Priyadarshini Raghupathy (Daughter of Mr.B.G.Raghupathy and Mrs. Sasikala Raghupathy) ii. Ms. Vaani Raghupathy (Daughter of Mr.B.G.Raghupathy and Mrs. Sasikala Raghupathy) iii. Mr. Arjun Govind Raghupathy (Son of Mr.B.G.Raghupathy and Mrs. Sasikala Raghupathy)

Party-wise disclosure of related party transactions:

1. Sales represent, GEA Cooling Tower Technologies (India) Private Limited Rs. 2736 lakhs (Rs. 6454 lakhs).

2. Purchases represent, Progen Systems and Technologies Limited Rs. 260 lakhs (Rs. 21 lakhs), GEA Cooling Tower Technologies (India) Private limited Rs. 2452 lakhs (Rs. 3903 lakhs), GEA BGR Energy System India Limited Rs. 41 lakhs (Rs. 92 lakhs), BGR Boilers Private Limited Rs. 17707 lakhs (Rs. 31 lakhs), BGR Turbines Company Private Limited Rs. 492 lakhs (Rs. Nil).

3. Investments made represent, Sravanaa Properties Limited Rs. Nil (Rs. 12787 lakhs).

4. Sale of Investments represent, BGR Investment Holdings Company Limited Rs. 34 lakhs (Rs. Nil), BGR Power Limited Rs. 10 lakhs (Rs. Nil).

5. Remuneration to key management personnel represents, Mr. B.G.Raghupathy Rs. 44 lakhs (Rs. 1319 lakhs), Mr. T. Sankaralingam Rs. Nil (Rs. 95 lakhs), Mr. V.R. Mahadevan Rs. 147 lakhs (Rs. 122 lakhs), Mr. A. Swaminathan Rs. 206 lakhs (Rs. 206 lakhs), Mr. K ChandrashekharRs. 97 lakhs (Rs. 40 lakhs), Mrs. Swarnamugi KarthikRs. 88 lakhs (Rs. 13 lakhs).

6. Remuneration to relatives of key management personnel represent, Mrs. Swarnamugi Karthik Rs. Nil (Rs. 16 lakhs), Mrs.Priyadarshini Raghupathy Rs. 32 lakhs (Rs. 8 lakhs), Ms. Vaani Raghupathy Rs. 8 lakhs (Rs. 3 lakhs), Mr. Arjun Govind Raghupathy Rs. 4 lakhs (Rs. 3 lakhs).

7. Rent paid represents, GEA BGR Energy System India Limited. Rs. 0.28 lakhs (Rs. 0.34 lakhs), Sasikala Estate Private Limited Rs. 89 lakhs (Rs. 106 lakhs), ANI Construction Private Limited Rs. 9 lakhs (Rs. 9 lakhs). Mr & Mrs B G Raghupathy Rs. 42 lakhs (Rs. 45 lakhs), Sravanaa Properties Limited Rs. 18 lakhs (Rs. 5 lakhs).

8. Purchase of fixed assets represent, GEA Cooling Tower Technologies (India) Private Limited Rs. Nil (Rs. 16 lakhs).

9. Sale of fixed assets represent, BGR Boilers Private Limited Rs. Nil (Rs. 31 lakhs).

10. Others represent, royalty to Mr. B.G. RaghupathyRs. 8 lakhs (Rs. 25 lakhs), Mrs. Sasikala RaghupathyRs. 17 lakhs (Rs. Nil).

11. Advances given represent, Progen Systems and Technologies Limited Rs. 931 lakhs (Rs. 34 lakhs), BGR Boilers Private Limited Rs. 38192 lakhs (Rs. 1387 lakhs), BGR Turbines Company Private Limited Rs. 241 lakhs (Rs. 12577 lakhs), GEA BGR Energy Systems India Limited Rs. 60 lakhs (Rs. 1 lakh), GEA Cooling Tower Technologies (India) Private Limited Rs. 474 lakhs (Rs. 230 lakhs).

12. Repayment of advance given represents, Mega Funds India Limited Rs. Nil (Rs. 4 lakhs).

13. Gurantees given represent, Progen Systems and Technologies Limited Rs. 51 lakhs (Rs. 208 lakhs), GEA Cooling Tower Technologies (India) Private limited Rs. 661 lakhs (Rs. 661 lakhs).

14. Balances outstanding (Net) represent, Progen Systems and Technologies Limited Rs. 1277 lakhs (Rs. 554 lakhs), BGR Boilers Private Limited Rs. 22898 lakhs (Rs. 1688 lakhs), BGR Turbines Company Private Limited Rs. 12348 lakhs (Rs. 12599 lakhs), GEA Cooling Tower Technologies (India)Private Limited Rs. 74 lakhs (Rs. 1111 lakhs), GEA BGR Energy System India Limited Rs. 66 lakhs (Rs. 21 lakhs (cr. bal)), Cuddalore Powergen Corporation Limited Rs. 671 lakhs (Rs. 671 lakhs), Nannilam Property Private Limited Rs. 508 lakhs (Rs. 508 lakhs), Mega Funds India Limited Rs. 39 lakhs (Rs. 39 lakhs), Schmitz India Private Limited Rs. 60 lakhs (Rs. 60 lakhs), B.G.Raghupathy Rs. 8 lakhs (cr.bal.) (Rs. 3 lakhs (cr. bal)), Sravanaa Properties Limited Rs. 6 lakhs (Rs. 6 lakhs), Sasikala Estate Private Limited Rs. 7 (cr.bal) lakhs (Rs. Nil), Mrs. Sasikala RaghupathyRs. 39 lakhs(cr. bal)(Rs. Nil)

15. CONTINGENT LIABILITIES, GUARANTEES, CAPITAL COMMITMENTS AND OTHER COMMITMENTS

Rs. in lakhs Particulars As at As at March 31, 2014 March 31, 2013

A Contingent liabilities Claims against the company not acknowledged as debt

a) On account of sales tax 4222 4228

b) On account of income tax* 10848 23045

c) On account of service tax** 37 37

d) On account of contractual obligations 2350 2350

e) On account of royalty 4547 4538

B Guarantees

Guarantees and counter guarantees given on behalf of subsidiary 712 869 and other company

C Capital commitments

Estimated amount of contracts remaining to be executed on capital account (net of advances) 817 809

D Other commitments

Commitments to fund subsidiaries 5681 7180

* Income-tax demand includes a sum of Rs. Nil (Rs. 11495 lakhs) which has been contested by the IT authorities before the Income-Tax Appellate Tribunal.

** Service tax demand represents a sum ofRs. 37 lakhs (Rs. 37 lakhs) which has been contested by the service tax authorities before the Customs Excise and Service Tax Appellate Tribunal.

16. IMPAIRMENT OF ASSETS

a. Cash generating units :

There is no impairment loss in cash generating units and hence no provision was made in the financial statements.

b. Other assets :

The company has made a provision of Rs. 32 lakhs (Rs. 81 lakhs) in the books of accounts towards impairment of other fixed assets based on the technicial valuation.

17. In respect to construction contracts, cost of material includes value added tax, central sales tax, works contract tax and service tax.

18. Interest income from fixed deposits have been netted off with interest expense on working capital facilities.

19. During the last quarter, search operations under Section 132 of the Income-tax Act 1961, was carried out by the Income-tax Authorities, for which the company has provided statements and documents.

20. (a) Current tax includes Rs. Nil (Rs. 160 lakhs) being provision for income-tax in respect of earlier years. (b) MAT credit entitlement includes Rs. 395 lakhs (Rs. Nil) being MAT credit in respect of earlier years.

21. PREVIOUS YEAR FIGURES

Figures of previous year have been regrouped / rearranged, wherever required to conform to the current year presentation.


Mar 31, 2013

A. COMPANY OVERVIEW

BGR Energy Systems Limited is a public limited company incorporated under the provisions of the Companies Act, 1956. Its equity shares are listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).The company is a manufacturer of capital equipments for Power Plants, Petrochemical Industries, Refineries, Process Industries and undertakes turnkey Balance of Plant (BOP) and Erection Procurement and Construction (EPC) contracts for Power plants. The Company has been achieving its objectives through its five business units: Power projects, Electrical projects, Oil and Gas equipment, Environmental engineering and Air Fin Coolers.

1. EMPLOYEE STOCK OPTION PLANS

Stock option granted to the employees under the stock option scheme established are evaluated as per the accounting treatment prescribed by the SEBI (Employee Stock Option Scheme and Employee stock purchase scheme) Guidelines, 1999. The company follows the intrinsic value method of accounting for the options and accordingly, the excess of value of the stock options as determined by an independent valuer on the date of grant over the exercise price of the options, if any, is recognized as deferred employee compensation cost and is charged to the Statement of Profit and Loss.

Employee Stock Option Scheme - 2007

Pursuant to the decision of the shareholders, at their meeting held on July 11, 2007, the company has established an ''Employee Stock Option Plan 2007'' (''ESOS 2007'' or ''the Scheme'') to be administered by the Compensation Committee of the Board of Directors. ESOS 2007 provides for grant of options amounting to not more than 1.5% of the issued and paid up equity capital of the company outstanding at any point of time to officers, directors and key employees to purchase equity shares of face value of Rs. 10 each, with such option conferring a right upon the employee to apply for one equity shares of the company, in accordance with the terms and conditions of such issue. The exercise price of the option is Rs. 408.

2. LEASES

Operating Lease

The company has taken various residential / commercial premises and land under cancellable and non-cancellable operating leases. These lease agreements are normally renewed on expiry.

3. SEGMENT REPORTING

Primary segment information (Business segments)

Information about Business Segments (information provided in respect of revenue items for the year ended March 31, 2013 and in respect of assets / liabilities as at March 31, 2013) are furnished below:

4. PARTICULARS OF RELATED PARTIES

List of Related Parties

a. Subsidiary Companies

i. Progen Systems and Technologies Limited

ii. BGR Boilers Private Limited

iii. BGR Turbines Company Private Limited

iv. Sravanaa Properties Limited

b. Associate Company - Nil

c. Other companies (Enterprises where significant influence exists and enterprises where key management personnel have significant influence)

i. GEA Cooling Tower Technologies (India) Private Limited

ii. GEA BGR Energy System India Limited

iii. Germanischer Lloyd Industrial Services (India) Private Limited

iv. Mega Funds India Limited

v. Sasikala Estate Private Limited

vi. Schmitz India Private Limited

vii. Cuddalore Powergen Corporation Limited

viii. ANI Constructions Private Limited

ix. Nannilam Property Private Limited

x. Pragathi Computers Private Limited

xi. BGR Odisha Powergen Limited

d. Joint Ventures

Mecon - GEA Energy System (India) Limited (JV)

e. Key management personnel :

i. Mr. B.G.Raghupathy Chairman & Managing Director

ii. Mr. T.Sankaralingam Managing Director (relinquished office on 31.12.2012)

iii. Mr. V.R. Mahadevan Director - Technologies & HR

iv. Mr. A.Swaminathan Director - Sales & Marketing

v. Mr. K. Chandrashekhar Director - Projects (appointed on 01.11.2012)

vi. Ms. Swarnamugi Karthik Director - Corporate Strategy (appointed on 08.02.2013)

f. Relatives of Key Management Personnel

i. Ms. Swarnamugi Karthik (Daughter of Mr. B.G. Raghupathy and Mrs. Sasikala Raghupathy) (appointed as Director - Corporate Strategy on 08.02.2013)

ii. Ms. Priyadarshini Raghupathy (Daughter of Mr.B.G.Raghupathy and Mrs. Sasikala Raghupathy)

iii. Ms. Vaani Raghupathy (Daughter of Mr.B.G.Raghupathy and Mrs. Sasikala Raghupathy)

iv. Mr. Arjun Govind Raghupathy (Son of Mr.B.G.Raghupathy and Mrs. Sasikala Raghupathy)

5. IMPAIRMENT OF ASSETS

a. Cash Generating Units :

There is no impairment loss of cash generating assets and hence no provision was made in the financial statements.

b. Other Assets :

The company has made a provision of Rs. 81 Lakhs (Rs. 34 Lakhs) in the books of accounts towards impairment of other fixed assets based on the technical valuation.

6. In respect to construction contracts, cost of material includes value added tax, central sales tax, works contract tax and service tax.

7. Interest income from fixed deposits have been netted off with interest expense on working capital facilities.

8. PROVISIONS

a) The company has made a provision / transfer of Rs. 1776 Lakhs (Rs. 3451 Lakhs) towards Warranty and Contractual obligations on the products supplied / contracts executed by the company during the year.

b) Current tax includes Rs. 160 Lakhs ( Nil ) being provision for income tax in respect of earlier years.

9. PREVIOUS YEAR FIGURES

Figures of previous year have been regrouped / rearranged, wherever required to confirm to the current year presentation.


Mar 31, 2012

A COMPANY OVERVIEW

BGR Energy Systems Limited is a public limited company incorporated under the provisions of Companies Act, 1956. Its equity shares are lised on Bombay Stock Exchange ("BSE") and National Stock Exchange ("NSE").The company is a manufacturer of Capital Equipment for Power Plants, Petrochemical Industries, Refineries, Process Industries and undertake turnkey BOP and EPC contracts for Power plants. The Company has been achieving its objectives through its five business units: Power projects, Electrical projects, Oil and Gas equipment, Environmental engineering and Air Fin Coolers.

a. Terms/rights attached to equity shares

The company has one class of shares referred to as equity shares having a par value of Rs. 10/-. Each holder of equity shares is entitled to one vote per share.

b. 54000000 (54000000) Shares out of the issued, subscribed and paid up share capital were alloted as bonus shares in the last five years by capitalization of profits.

c. The company has reserved issuance of 291100 (335851) Equity shares of Rs. 10/- each for offering to eligible employees of the company and its subsidiary under the employee stock option scheme - 2007. (Refer Note 31)

Term Loan includes Rs. 2463 Lakhs (Rs. 2124 Lakhs) from State Bank of Travancore is secured by a first charge on fixed assets of the Company. The loan is repayable in 20 quarterly equal instalments starting from September, 2011. All the other term loans and fixed assets loans are secured against the assets purchased out of the respective loans. Fixed Assets loans are payable in monthly instalments. Fixed Assets purchased under Buyers Credit arrangements are payable on maturity.

a) The balance in project specific escrow account have been netted off against respective project's working capital loan account.

b) The Company has availed Working Capital loans on pari-passu basis from State Bank of India and State Bank of Hyderabad. These loans are secured by hypothecation of inventories, trade receivables and movable assets of the Capital goods segment of the company. The loan from State Bank of India and State Bank of Hyderabad is further secured by a second charge on the fixed assets of the company.

c) The Company has availed contract specific Working Capital loans from State Bank of India, State Bank of Hyderabad, State Bank of Travancore, State Bank of Patiala, State Bank of Bikaner & Jaipur, State Bank of Mysore, IDBI Bank, Punjab National Bank, Vijaya Bank, Indian Bank, Indian Overseas Bank, Corporation Bank, Allahabad Bank, Bank of India, Andhra Bank, Central Bank of India, Syndicate Bank, Axis Bank and The Karur Vysya Bank Limited. These loans are secured by hypothecation of inventories, trade receivables and movable current assets of the respective contracts. The participating banks share the securities on pari- passu basis.

* Both the assets are other than internally generated.

(a) Plant and Equipment include Rs. 687 Lakhss (Rs. 687 Lakhss), which are jointly owned along with a joint venture, of which the Company is a member

(b) Office Fixtures and Office Equipments includes Rs. 111 Lakhss (Nil), which are jointly owned along with subsidiary companies.

(c) Buildings includes Rs. 1169 Lakhss (Nil), which are constructed on lease hold land.

Cochin Project : The end client of Cochin Port Road Connectivity Project viz., Cochin Port Road Company Ltd., (SPV of NHAI) terminated the contract on 28.05.2007. Consequently, the end client encashed BGs for a value of Rs. 1270 Lakhs furnished by the company on behalf of MECON - GEA (JV). The main contractor viz., MECON - GEA ("JV") contested the termination of the contract. The disputes after having been reviewed by the Dispute Review Board are now subject to arbitration. The Arbitral Tribunal has passed preliminary order in favour of the JV, which is under challenge before the High Court of Delhi. The arbitral award is expected in due course of time. Based on legal opinion, the company has identified a sum of Rs. 1654 Lakhs (Rs. 1654 Lakhs) as on 31.03.2012 as recoverable advances from the end client through the JV and is grouped under loans and advances.

Tuticorin Project : The end client of Tirunelveli - Tuticorin Port Connectivity Project viz., Tuticorin Port Road Company Ltd (SPV of NHAI) has terminated the contract and encashed BGs for aggregate value of Rs. 2652 Lakhs and the same were restituted as per orders of the High Court. The disputes, including termination of contract, after having been reviewed by the Disputes Review Board are now subject to arbitration. In view of these facts, the Company has identified the sum of Rs. 83 Lakhs (Rs. 1461 Lakhs) as on 31.03.2012 as recoverable advances from the end client through the JV and is grouped under loans and advances.

1.1 Trade Receivables - Others, includes Retention amount of Rs. 120798 Lakhs (Rs. 114441 Lakhs) which, in accordance with the terms of the contracts were not due for payments as at 31st March 2012

1.2 The Company and State Company for Oil Projects, Iraq (Client) terminated with mutual consent the contract for two gas development projects in Iraq. The Company and Client agreed to settle contract claims by mutual agreement. Hence no provision or write off or write back on account of this contract is made in the books of account. The contract value is Rs. 40465 Lakhs and the revenue recognised so far is Rs. 8362 Lakhs. The balance receivable from the contractor and the amount of advance held by the Company are Rs. 4909 Lakhs and Rs. 4998 Lakhs, respectively.

2.1 Fixed deposits with banks include deposits of Rs. 42298 Lakhs (Rs. 44069 Lakhs) which are under lien to banks

2.2 Fixed deposits maintained by the company with banks, other than lien marked deposits, can be withdrawn by the company at any point without any prior notice or penalty

2.3 Bank balances of Rs. 3 Lakhs (Rs. 3 Lakhs) are subject to confirmation.

Defined Benefit Plan

The liability for gratuity is funded through a scheme administered by an insurer and provision is made based on actuarial valuation carried out as at Balance Sheet date.

Gratuity Plan

The company operates gratuity plan wherein every employee is entitled to the benefit equivalent to fifteen days salary last drawn for each completed year of service. The same is payable on termination of service or retirement whichever is earlier. The benefit vests after five years of continuous service.

The estimates of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors. The discount rate has been chosen by reference to market yields on Government Bonds. The above information is certified by an Actuary.

4. EMPLOYEE STOCK OPTION PLANS

Stock option granted to the employees under the stock option scheme established are evaluated as per the accounting treatment prescribed by the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The company follows the intrinsic value method of accounting for the options and accordingly, the excess of value of the stock options as determined by an independent valuer on the date of grant over the exercise price of the options, if any, is recognized as deferred employee compensation cost and is charged to the Statement of Profit and Loss.

Employee Stock Option Scheme - 2007

Pursuant to the decision of the shareholders, at their meeting held on July 11, 2007, the company has established an 'Employee Stock Option Plan 2007' ('ESOS 2007' or 'the Scheme') to be administered by the Compensation Committee of the Board of Directors. ESOS 2007 provides for grant of options amounting to not more than 1.5% of the issued and paid up equity capital of the company outstanding at any point of time to officers, directors and key employees to purchase equity shares of face value of Rs. 10 each, with such option conferring a right upon the employee to apply for one equity shares of the company, in accordance with the terms and conditions of such issue. The exercise price of the option is Rs. 408.

5. LEASES

Operating Lease

The company has taken various residential / commercial premises and land under cancellable and non-cancellable operating leases. These lease agreements are normally renewed on expiry.

The future minimum lease payments in respect of non-cancellable leases as at 31st March, 2012 are as follows:

6. SEGMENT REPORTING

Information about Business Segments (information provided in respect of revenue items for the year ended 31.03.2012 and in respect of assets / liabilities as at 31.03.2012) are furnished below:

7. PARTICULARS OF RELATED PARTIES

List of Related Parties

a. Subsidiary Companies

i. Progen Systems and Technologies Limited

ii. BGR Boilers Private Limited

iii. BGR Turbines Company Private Limited

b. Associate Company - Nil

c. Other Companies (Enterprises where significant influence exists and enterprises where key management personnel have significant influence)

i. GEA Cooling Tower Technologies (India) Private Limited

ii. GEA BGR Energy System India Limited

iii. Germanischer Lloyd Industrial Services (India) Private Limited

iv. Mega Funds India Limited

v. Sasikala Estate Private Limited

vi. Schmitz India Private Limited

vii. Cuddalore Powergen Corporation Limited

viii. ANI Constructions Private Limited

ix. Nannilam Property Private Limited

x. Pragati Computers Limited

xi. BGR Odisha Powergen Limited

d. Joint Ventures

Mecon - GEA Energy System (India) Limited (JV)

f. Relatives of Key Management Personnel

i. Ms. Swarnamugi Karthik (Daughter of Mr. B.G.Raghupathy and Mrs. Sasikala Raghupathy)

ii. Ms. Priyadarshini Raghupathy (Daughter of Mr. B.G.Raghupathy and Mrs. Sasikala Raghupathy)

iii. Miss. Vaani Raghupathy (Daughter of Mr. B.G.Raghupathy and Mrs. Sasikala Raghupathy)

iv. Mr. Arjun Govind Raghupathy (Son of Mr. B.G.Raghupathy and Mrs. Sasikala Raghupathy)

v. Mr. R.Prabhu (Son of Mr. S.Rathinam)

Disclosure in respect of related party transactions during the year :

1. Sales represents, GEA Cooling Tower Technologies (India) Private limited Rs. 6716 Lakhs ( Rs. 4635 Lakhs).

2. Purchase include, Progen Systems and Technologies Limited Rs. 416 Lakhs (Rs. 36 Lakhs), GEA Cooling Tower Technologies (India) Private limited Rs. 1040 Lakhs (Rs. 2709 Lakhs), GEA BGR Energy System India Limited Rs. 866 Lakhs (Rs. 466 Lakhs).

3. Purchase / Subscription of investment include, BGR Boilers Private Limited Rs. 5885 Lakhs (Rs. 3605 Lakhs), BGR Turbines Company Private Limited Rs. 4020 Lakhs (Rs. 9597 Lakhs).

4. Remuneration to Key Managament Personnel include, Mr. B.G. Raghupathy Rs. 1771 Lakhs (Rs. 2592 Lakhs), Mr. T. Sankaralingam Rs. 127 Lakhs (Rs. 127 Lakhs), Mr. S. Rathinam Rs. 94 Lakhs (Rs. 151 Lakhs), Mr. V.R. Mahadevan Rs. 91 Lakhs (Rs. 117 Lakhs), Mr. A. Swaminathan Rs. 129 Lakhs (Rs. 146 Lakhs).

5. Remuneration to relatives of Key Managament Personnel include, Ms. Swarnamugi Karthik Rs. 6 Lakhs (Rs. 3 Lakhs), Ms. Priyadarshini Raghupathy Rs. 12 Lakhs (Rs. 5 Lakhs), Miss. Vaani Raghupathy Rs. 1 Lakh (Rs. 1 Lakh), Mr.Arjun Govind Raghupathy Rs. 2 Lakhs (Rs. Nil), Mr. R. Prabhu Rs. 8 Lakhs (Rs. 5 Lakhs).

6. Rent paid include, Progen Systems and Technologies Limited Rs. 4 Lakhs (Rs. 111 Lakhs), GEA Cooling Tower Technologies (India) Private limited Rs. 24 Lakhs (Rs. Nil), GEA BGR Energy System India Limited. Rs. 0.33 Lakh (Rs. 1 Lakh), Sasikala Estate Private Limited Rs. 41 Lakhs (Rs. 40 Lakhs), ANI Construction Private Limited Rs. 9 Lakhs (Rs. 9 Lakhs). Mr. B G Raghupathy Rs. 44 Lakhs (Rs. 42 Lakhs).

7. Purchase of Fixed Assets include, Cuddalore Powergen Corporation Limited Rs. 9 Lakhs (Rs. Nil).

8. Sale of Fixed Assets include, BGR Boilers Private Limited Rs. 89 Lakhs (Rs. Nil), BGR Turbines Company Private Limited Rs. 22 Lakhs (Rs. Nil).

9. Others, include Royalty to Mr. B.G. Raghupathy Rs. 11 Lakhs (Rs. 11 Lakhs), Pragati Computers Limited Rs. 3 Lakhs (Rs. Nil) towards travel and other admin expenses.

10. Advance given include, BGR Boilers Private Limited Rs. Nil (Rs. 1084 Lakhs), BGR Turbines Company Private Limited Rs. Nil (Rs. 472 Lakhs), Nannilam Property Private Limited Rs. Nil (Rs. 1686 Lakhs), BGR Odisha Powergen Limited Rs. Nil (Rs. 21 Lakhs), GEA BGR Energy System India Limited Rs. Nil (Rs. 4 Lakhs).

11. Repayment of Advance given include, Progen Systems and Technologies Limited Rs. 2 Lakhs (Rs. Nil), BGR Boilers Private Limited Rs. 450 Lakhs (Rs. Nil), BGR Turbines Company Private Limited Rs. 783 Lakhs (Rs. Nil), BGR Odisha Powergen Limited Rs. 21 Lakhs (Rs. Nil), Nannilam Property Private Limited Rs. 1178 Lakhs (Rs. Nil), Mega Funds Limited Rs. 4 Lakhs (Rs. 7 Lakhs).

12. Balances outstanding (Net) include, Progen Systems and Technologies Limited Rs. 541 Lakhs (Rs. 590 Lakhs), BGR Boilers Private Limited Rs. 300 Lakhs (Rs. 1084 Lakhs), BGR Turbines Company Private Limited Rs. 22 Lakhs(Rs. 472 Lakhs), GEA Cooling Tower Technologies (India) Private Limited Rs. 1651 Lakhs (Rs. 408 Lakhs (cr. bal)), GEA BGR Energy System India Limited Rs. 20 Lakhs (cr. bal) (Rs. 174 Lakhs (cr. bal)), Cuddalore Powergen Corporation Limited Rs. 671 Lakhs (Rs. 671Lakhs), Nannilam Property Private Limited Rs. 508 Lakhs (Rs. 1686 Lakhs), Mega Funds India Limited Rs. 43 Lakhs (Rs. 47 Lakhs ), Schmitz India Private Limited Rs. 60 Lakhs (Rs. 60 Lakhs) BGR Odisha Powergen Limited Rs. Nil (Rs. 20 Lakhs), Mr. B.G.Raghupathy Rs. 11 Lakhs (cr. Bal) (Rs. 13 Lakhs (cr. bal),Pragati Computers Limited Rs. Nil (Rs. 3 Lakhs (cr. Bal)), Sasikala Estate Private Limited Rs. Nil (Rs. 3 Lakhs (cr. bal)), ANI Constructions Private Limited Rs. Nil (Rs. 8 Lakhs (cr. bal)).

13. Gurantees given include, Progen Systems and Technologies Limited Rs. 232 Lakhs (Rs. 83 Lakhs), GEA Cooling Tower Technologies (India) Private limited Rs. 270 Lakhs (Rs. 662 Lakhs).

8. CONTINGENT LIABILITIES, GUARANTEES & CAPITAL COMMITMENTS

Rs. in Lakhs

Particulars As at As at 31.03.2012 31.03.2011

A Contingent Liabilities

Claims against the company not acknowledged as debt

a) On account of Sales Tax 3443 161

b) On account of Income Tax* 6695 3780

c) On account of Service Tax - 42

d) On account of Contractual Obligations 2350 2350

e) On account of Royalty 2138 -

Guarantees

Guarantees and Counter Guarantees given on behalf of Subsidiary and Other 502 744 Company

B Capital Commitments

Estimated amount of contracts remaining to be executed on capital account 12172 8362

* Income Tax demand represents a sum of Rs. 6695 Lakhs (Nil) which has been contested by the IT authorities before the Income Tax

Appellate Tribunal.

9. IMPAIRMENT OF ASSETS

a. Cash Generating Units :

There is no impairment loss of cash generating assets and hence no provision was made in the financial statements.

b. Other Assets :

The company has made a provision of Rs. 34 Lakhs (Rs. 9 Lakhs) in the books of accounts towards impairment of other fixed assets based on the technicial valuation.

10. During the year, a fraud on the company has been identified and a police complaint was filed against certain employees of the Company. The sum involved as per First Information Report filed is Rs. 54 Lakhs. However, the eventual amount involved is under investigation. Pending investigation the employees are under suspension.

11. PROVISIONS

The company has made a provision / transfer of Rs. 3451 Lakhs (Rs. 9163 Lakhs) towards Warranty and Contractual obligations on the products supplied / contracts executed by the company during the year 2011-2012.

12. PREVIOUS YEAR FIGURES

Pursuant to the Notification No.447(E) dated February 28, 2011 and Notification No. 653 (E) dated March 30, 2011, issued by the Ministry of Corporate Affairs, the Company has prepared its annual financial statements as per revised Schedule VI to the Companies Act, 1956 with effect from April 1, 2011. Accordingly, the previous year periods / year's figures have been regrouped / rearranged, wherever required to align the financial statements to the revised format.


Mar 31, 2010

1. SECURED LOANS

a) Term Loan of Rs. 1380.62 lakhs from State Bank of Travancore (Rs.Nil) is secured by a first charge on fixed assets of the Company.

b) The company has availed Working Capital loan on pari-passu basis from State Bank of India and State Bank of Hyderabad. These loans are secured by hypothecation of inventories, book debts and movable current assets of the product divisions of the company. These loans are further secured by personal guarantees of two Directors of the company, including the Chairman & Managing Director of the company. The loan from State Bank of India and State Bank of Hyderabad is further secured by a second charge on the fixed assets of the company.

c) The company has availed contract specific Working Capital loans from State Bank of India, State Bank of Hyderabad, State Bank of Travancore, State Bank of Patiala, State Bank of Bikaner & Jaipur, UCO Bank, State Bank of Indore, State Bank of Mysore, IDBI Bank, Punjab National Bank, Vijaya Bank, Indian Bank, Indian Overseas Bank , Corporation Bank, Allahabad Bank, Bank of India, Andhra Bank, Central Bank of India, Syndicate Bank, Axis Bank and The Karur Vysya Bank Limited. These loans are secured by hypothecation of inventories, book debts and movable current assets of the respective contracts. The participating banks share the security on pari-passu basis. Certain specific project loans are further secured by personal guarantees of two Directors, including the Chairman & Managing Director of the company.

d) Term Loan from Corporation Bank Rs.27.89 Lakhs (Rs.259.36 Lakhs) is secured against the Fixed Assets acquired

e) Secured Loans includes Rs. 3369.92 lakhs (Rs.2222.24 lakhs) for which the respective Fixed Assets acquired under Loan are held as security.

2. CONTINGENT LIABILITIES, GUARANTEES & CAPITAL COMMITMENTS

(Rs. in Lakhs)

As at As at

Particulars 31.03.2010 31.03.2009

A CONTINGENT LIABILITIES

Claims against the company not

acknowledged as debt

a) On account of Sales Tax 178.09 156.22

b) On account of Income Tax 2915.49 -

c) On account of Service Tax 32.41 -

d) On account of Contractual Obligations 2350.25 2930.36

GUARANTEES

Guarantees and Counter Guarantees given

on behalf of Subsidiary and Other 775.83 844.00

Company

B CAPITAL COMMITMENTS

Estimated amount of contracts remaining

to be executed on capital account 1371.63 682.66

3. SUNDRY DEBTORS - Others includes Rs.74953.81 lakhs (Rs.56512.94 lakhs) which, in accordance with the terms of the contracts were not due for payments as at 31 st March 2010.

4. CASH AND BANK BALANCES

i) Deposits amounting to Rs. 44639.51 lakhs (Rs.20384.06 lakhs) are under lien to Banks.

ii) The balance of Cash and Cash equivalents includes Rs. 8.01 Lakhs (Rs.3.71 Lakhs) as at 31st March 2010 set aside for payment of Dividends.

iii) Bank balances of Rs.3.68 Lakhs (Rs.6.87 Lakhs) are subject to confirmation.

5. All the Investments held by the Company are long term in nature.

6. LOANS AND ADVANCES

Cochin Project: The end client of Cochin Port Road Connectivity Project viz., Cochin Port Road Company Ltd., (SPV of NHAI) terminated the contract on 28.05.2007. Consequently, the end client encashed BGs for an value of Rs.1270 lakhs furnished by the company on behalf of MECON - CEA (JV). The main contractor viz., MECON - CEA (JV) contested the termination of the contract and had taken steps to constitute the Disputes Review Board (DRB) in terms of the contract. The DRB has given recommendations partly allowing the claim of theJV The JV has preferred to approach the Tribunal by invoking the arbitration proceedings. The Tribunal has been constituted and proceedings will commence shortly. In anticipation of determination of the dispute and based on the legal opinion, the company has identified a sum of Rs. 1654.35 lakhs (Rs.1654.35 lakhs) as on 31.03.2010 as recoverable advances from the end client through the JV and is shown under loans and advances.

Tuticorin Project: The end client namely Tuticorin Port Road Company Ltd (SPVof NHAI) viz, Tirunelveli-Tuticorin Port Connectivity Project has terminated the contract and encashed BGs furnished by the company on behalf of MECON - CEA (JV). The main contractor viz., MECON - CEA (JV) is contesting the termination of the contract. The Company has identified a sum of Rs. 1460.72 Lakhs (Rs.1460.72 lakhs) as on 31.03.2010 as recoverable advances from the end client through the JV and is shown under loans and advances. The judgement regarding restitution of Bank Guarantees has been reserved on 08.03.2010. The same is still awaited.

7. Plant and Machinery include Rs. 686.72 lakhs (Rs.686.72 lakhs), which are jointly owned along with a Joint Venture, of which the Company is a member.

8. UTILISATION OF IPO FUNDS

The company has raised Rs.19012 Lakhs from IPO (Net of Issue Expenses) during the year 2007-2008. Rs.12500 Lakhs has been utilized towards working capital requirement, being one of the objects of the issue. The balance of Rs.6512 Lakhs, pending utilization are held as deposits in banks.

Defined Benefit Plan

The liability for gratuity is funded through a scheme administered by an insurer and provision is made based on actuarial valuation carried out as at Balance Sheet date.

Gratuity Plan

The company operates gratuity plan wherein every employee is entitled to the benefit equivalent to fifteen days salary last drawn for each completed year of service. The same is payable on termination of service or retirement whichever is earlier. The benefit vests after five years of continuous service.

The estimates of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors. The discount rate has been chosen by reference to market yields on Government Bonds. The above information is certified by the actuary.

9. PARTICULARS OF RELATED PARTIES List of Related Parties

a. Subsidiary Companies

Progen Systems and Technologies Ltd

b. Associate Company - Nil

c. Other Companies

i. GEA Cooling Tower Technologies (India) Pvt Ltd

ii. GEA BGR Energy System India Ltd

iii. Germanischer Lloyd Industrial Services (India) Pvt Ltd

iv. Mega Funds India Ltd

v. Sasikala Estate Pvt Ltd

vi. Schmitz India Pvt Ltd

vii. Cuddalore Powergen Corporation Ltd

d. Joint Ventures

Mecon - GEA Energy System (India) Limited (JV)

e. Key Management Personnel:

i. Mr. B.G. Raghupathy : Chairman & Managing Director

ii. Mr. T. Sankaralingam : Managing Director

iii. Mr. S. Rathinam : Director-Finance

iv. Mr. V.R. Mahadevan : Director - Technologies & HR

v. Mr. A. Swaminathan : Director - Sales & Marketing

f. Relatives of Key Management Personnel

i. Ms. Priyadarshini Raghupathy (Daughter of Mr. B.G. Raghupathy) ii. Ms. Vani Raghupathy (Daughter of Mr. B.G. Raghupathy) iii. Mr. R. Prabhu (Son of Mr. S. Rathinam)

10. LEASES

Finance Lease

i. Plant and Machinery amounting to Rs. 686.72 Lakhs (Rs.686.72 lakhs) on Finance Lease and the written down value of these assets as on 31.3.2010 is Rs. 357.96 lakhs (Rs.447.50 lakhs)

ii. The minimum lease rentals as at 31st March 2010 and the present value of minimum lease payments as at 31 st March 2010 in respect of assets acquired under finance lease are as follows.

The minimum lease rentals as at 31st March 2010 in respect of assets acquired under Operating lease are as follows.

i. Paid till 31.03.2010 is Rs. 137.20 Lakhs (Rs.137.20 Lakhs)

ii. Payable not later than 1 Year is Rs.NIL (Rs. NIL)

iii. Payable later than 1 year and not later than 5 Years is Rs. Nil (Rs. Nil)

11. EMPLOYEE STOCK OPTION SCHEME

Stock option granted to the employees under the stock option scheme established are evaluated as per the accounting treatment prescribed by the Employee Stock Option Scheme and Employee stock purchase scheme Guidelines, 1999 issued by Securities Exchange Board of India. The company follow the intrinsic value method of accounting for the options and accordingly, the excess of market value of the stock options on the date of grant over the excise price of the options, if any, is recognized as deferred employee compensation and is charged to the Profit and Loss Account.

Employee Stock Option Plan - 2007

Pursuant to the decision of the shareholders, at their meeting held on July 11, 2007, the company has established an Employee Stock Option Plan 2007 CESOP 2007 or the Scheme) to be administered by the Compensation Committee of the Board of Directors.

ESOP 2007 provides for grant of options amounting to not more than 1.5% of the issued and paid up equity capital of the company outstanding at any point of time to officers, directors and Key employees to purchase Equity shares of face value of Rs.10 each, with such option conferring a right upon the employee to apply for one equity shares of the company, in accordance with the terms and conditions of such issue. The excise price of the option is 85% of the issue price (Issue Price is Rs.480, 85% of Issue Price is Rs.408)

12. JOINT VENTURES

The company along with Mecon Ltd has formed an unincorporated Joint Venture namely Mecon - GEA Energy System (India) Limited (JV) (Association of Persons) for execution of two road projects.

13. IMPAIRMENT OF ASSETS

a. Cash Generating Units :

There is no impairment loss of cash generating assets and hence no provision was made in the financial statements.

b. Other Assets:

The company has made a provision of Rs.10.71 lakhs (Rs. 2.24 lakhs) in the books of accounts towards impairment of other fixed assets based on the technical valuation.

14. Previous year figures have been regrouped wherever necessary for comparative purposes and shown along side or in brackets.

 
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