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Notes to Accounts of Bharat Forge Ltd.

Mar 31, 2023

(b) The title deeds of immovable properties (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee) are held in the name of the Company except:

a. Flat at Kalyani Nagar in possession of the Company since April 01, 1987, whose title deed is in the name of Shri Anajwala Khozema F & Smt. Anajwala Amina aggregating gross block '' 0.31 million and net block at '' 0.17 million for which exchange deed is registered at authority, however, certified true copy and index II is awaited.

b. Hangar at Lohegoan in possession of the Company since April 01, 1977 aggregating gross block of '' 0.12 million and net block of '' 0.05 million and Tenements at Kharadi- Vimannagar in possession of the Company since April 01, 1981 aggregating gross block of '' 0.16 million and net block of '' 0.01 million for which title deeds are not available with the Company.

(c) Capitalised borrowing costs:

The Company capitalises borrowing costs in the capital work-in-progress (CWIP) first. The amount of borrowing costs capitalised as other adjustments in the above note reflects the amount of borrowing cost transferred from Capital work-in-progress (CWIP) balances. The borrowing costs capitalised during the year ended March 31, 2023 was '' 20.16 million (March 31, 2022: '' 16.96 million). The capitalisation rate ranges from LIBOR 60 bps to LIBOR 100 bps p.a. and EURIBOR 60 bps to EURIBOR 95 bps p.a. refer to note 18(a)

(d) Assets include assets lying with third parties amounting to '' 406.56 Million (March 31, 2022: '' 156.40 Million)

The Company''s investment properties consist of three parcels of land situated at Pune, Satara and Chakan.

As at March 31, 2023 and March 31, 2022, the fair values of the properties are '' 1,139.56 million and '' 2,432.95 million respectively. The Company obtains independent valuations for its investment properties at least annually.

These valuations are performed by an accredited independent valuer firm and this firm is a registered valuer as defined under rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017. The best evidence of fair value is current prices in an active market for similar properties. Where such information is not available, the Company considers ready reckoner rates. The main input used is the ready reckoner rate. All resulting fair value estimates for investment properties are included in Level 2.

The Company has no restrictions (other than the land for which matter is being subjudice and for which no income has been considered) on the realisability of its investment properties and has no contractual obligations to either construct or develop investment properties or for repairs, maintenance and enhancement. Freehold land includes 25 acres of land situated at Pune, 24.13 acres of land situated at Satara and 8.40 acres of land situated at Chakan, which has been given on lease. Due to certain matters being sub-judice, the Company has not executed a lease deed with a related party for one of the said land.

The fair value reduction in the current year is on account of the change in the basis of the ready reckoner rate used for the valuation. Till earlier periods separate ready reckoner value for the industrial area was not available and hence the fair value was derived basis the relevant ready reckoner rate. In the current year, since a separate ready reckoner rate for the industrial area is available, it has been considered for the fair value for disclosure purposes. There is no other change in the basis of fair valuation disclosure.

(a) Bharat Forge Global Holding GmbH (BFGH)

Contributions to the capital reserves of BFGH as per the German Commercial Code (code), forms a part of the equity share capital and accordingly, have been considered as an investment and are redeemable subject to provisions of the code.

(b) Bharat Forge America Inc

During the current year, the Company has invested an amount of '' 826.45 million by acquiring 10,000,000 shares (USD 10.00 million) for further investment by Bharat Forge America Inc into its subsidiary, Bharat Forge Aluminium USA, Inc. The Company has also converted a loan and interest thereon of USD 24.92 million into a capital contribution amounting to '' 2,061.74 million during the current year.

During the previous year, the Company had invested an amount of '' 1,112.08 million by acquiring 15,000,000 shares (USD 15 million) for further investment by Bharat Forge America Inc into its subsidiary, Bharat Forge Aluminium USA, Inc.

(c) Kalyani Powertrain Limited (KPL)

During the current year, the Company has invested an amount of '' 270.55 million by acquiring 27,054,073 right shares of '' 10 each in Kalyani Powertrain Limited.

During the previous year, the Company had invested an amount of '' 1,223.23 million by acquiring 122,324,444 equity shares of '' 10 each for further investment into Tork Motors Private Limited, the acquisition of Kalyani Mobility Inc and other business activities.

During the previous year, the Company had invested in convertible debentures of '' 400 million in July 2021 which had been converted into 40,000,000 equity shares of '' 10 each.

(d) BF Industrial Solutions Limited (BFISL) (formerly Nouveau Power and Infrastructure Private Limited)

During the current year, the Company has invested an amount of '' 1,997.29 million by acquiring 199,729,112 equity shares of '' 10 each and an amount of '' 1,500.00 million by acquiring 150,000,000 preference shares of '' 10 each for further investment by BFISL into its subsidiary JS Auto cast Foundry India Private Limited.

During the previous year, the Company had invested '' 20.00 million by acquiring 2,000,000 equity shares of '' 10 each in BFISL.

During the previous year, the Company had invested in convertible debentures of '' 900 million which were subsequently converted into 90,000,000 equity shares of '' 10 each in that year.

The Company through its wholly owned subsidiary BFISL had acquired Sanghvi Forging & Engineering Limited (SFEL), (which was then renamed BF Industrial Technology and Solutions Limited ) along with its wholly owned subsidiary Sanghvi Europe B.V. on June 28, 2021 for a consideration of '' 770.60 million. SFEL is engaged in the manufacture of heavy forging for industrial applications. SFEL was admitted under Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 of India. The National Company Law Tribunal (NCLT) vide its order dated April 26, 2021, approved the resolution plan for acquiring a controlling stake in SFEL, pursuant to which, the Company has acquired SFEL through BFISL.

(e) Kalyani Strategic Systems Limited (KSSL)

During the current year, the company has invested an amount of '' 60.19 million by converting 12,037,892 partly paid equity shares, paid up the amount of '' 5 per share into fully paid equity shares af '' 10 each. The company has transferred its investments in ACIL and Aeron to KSSL. It has transferred ACIL for an amount of '' 46.41 million by transferring 4,640,908 equity shares of '' 10 each due to which ACIL ceased to be a subsidiary of the Company and Aeron for an amount of '' 137.18 million by transferring 13,718,250 equity shares of 10 each due to which Aeron ceased to be an associate of the Company.

During the previous year, the Company had acquired 17,695,706 fully paid up equity shares of '' 10 each and 5,898,568 partly paid up equity shares of '' 10 each in KSSL, consequent to which it had become a wholly owned subsidiary of the Company.

(f) Kalyani Lightweighting Technology Solutions Limited (KLTSL)

During the current year, the Company has invested an amount of '' 0.10 million by acquiring 1,000 equity shares of '' 10 each.

(g) BF NTPC Energy Systems Limited (BFNTPCESL)

During the earlier year, the shareholders of BFNTPCESL at their extraordinary general meeting held on October 9, 2018 decided to voluntarily liquidate the Company and engaged a liquidator to liquidate the Company under the provisions of Section 59 of Insolvency and Bankruptcy Code 2016.

(h) Avaada MHVIDARBHA Private Limited

During the current year, the Company has invested an amount of '' 113.75 million by acquiring 11,375,000 equity shares of '' 10 each for procurement of solar power.

(i) Compliance with a number of layers

The Company has invested funds in subsidiaries, associates and joint ventures directly or through its wholly owned subsidiaries. The Company has complied with the number of layers prescribed under section 2 (87) of the Companies Act, 2013 read with the Companies (Restriction on number of Layers) Rules, 2017.

(a) Gupta Energy Private Limited (GEPL)

Shares of GEPL pledged against the facility obtained by Gupta Global Resources Private Limited. This investment is carried at a fair value of '' Nil.

(b) Birlasoft Limited and KPIT Technologies Limited

The Company had invested into 613,000 equity shares of '' 2/- each of KPIT Technologies Limited. The Hon''ble National Company Law Tribunal, Mumbai Bench, had by its order approved the composite scheme of arrangement (Scheme), amongst Birlasoft (India) Limited, KPIT Technologies Limited, KPIT Engineering Limited and their respective shareholder Pursuant to the Scheme, the engineering business of KPIT Technologies Limited had been transferred to KPIT Engineering Limited.

Pursuant to the order during the earlier year, Birlasoft (India) Limited had merged with KPIT Technologies Limited and KPIT Technologies had been renamed as "Birlasoft Limited". KPIT Engineering Limited had been renamed as "KPIT Technologies Limited".

Pursuant to the Scheme, the Company had received 1 equity share of KPIT Technologies Limited of '' 10/-each for 1 equity share of Birlasoft Limited of '' 2/- each. The ratio of cost of acquisition per share of Birlasoft Limited and KPIT Technologies Limited was 56.64% to 43.36%.

(c) Investments at fair value through OCI (fully paid) reflect investment in quoted and unquoted equity securities and quoted debt securities. Refer note 48 for determination of their fair values.

(d) Investments at fair value through profit or loss (fully paid) reflect investment in quoted/unquoted equity and debt securities. Refer note 48 for determination of their fair values.

(e) Avaada MHBuldhana Private Limited [ABPL]

During the previous year, the Company had made an investment in Avaada MHBuldhan Private Limited (ABPL) of '' 20.24 million by acquiring 2,033,850 equity shares of '' 10/- each, as a pre-condition for seeking approval from MSEDCL for Open Access permission by ABPL. Hence, the said investment is made subject to, amongst other conditions, obtaining permission by ABPL from relevant government authorities for the consumption of renewable energy by the Company under open access for a solar plant of ABPL.

(f) TMJ Electric Vehicles Limited (Formerly Tevva Motors (Jersey) Limited)

The Company holds investments in Tevva Motors Limited (held through Tevva Motors (Jersey) Limited), collectively referred to as Tevva. Tevva is a start-up engaged in modular electrification system for a medium range of commercial vehicles and raised additional funding to finance its operations. Post allotment of equity shares by Tevva Motors to the new investors, Tevva has ceased to be an associate of the Group from November 8, 2021. Accordingly, the Company has classified it to be an equity instrument held through fair value through other comprehensive income. Also refer note 32.

(h) Global depository receipts

The Company had issued 3,636,500 equity shares of '' 10/- each (later sub-divided into 18,182,500 equity shares of '' 2/- each) in April 2005 represented by 3,636,500 Global Depository Receipts (GDR) (on sub division 18,182,500 GDRs) evidencing "Master GDR Certificates" at a price of USD 27.50 per GDR (including premium). GDRs outstanding as at year end are 800 (March 31, 2022: 800). The funds raised had been utilized towards the object of the issue.

Holders of GDRs will have no voting rights or other direct rights of a shareholder with respect to the shares underlying the GDR.

(a) Special capital incentive:

Special capital incentive is created during the financial year 1999-2000, amounting to '' 2.50 million under the 1988 Package Scheme of Incentives.

(b) Warrants subscription money:

The Company had issued and allotted to Qualified Institutional Buyers, 10,000,000 equity shares of '' 2/-each at a price of '' 272/- per share aggregating to '' 2,720 million on April 28, 2010, simultaneous with the issue of 1,760, 10.75% Non Convertible Debentures (NCD) of a face value of '' 1,000,000/- at par, together with 6,500,000 warrants at a price of '' 2/- each entitling the holder of each warrant to subscribe for 1 equity share of '' 2/- each at a price of '' 272/- at any time within 3 years from the date of allotment. Following the completion of three years term, the subscription money received on the issue of warrants was credited to the capital reserve as the same is not refundable/adjustable. Further the warrants had lapsed and ceased to be valid from April 28, 2013.

(c) Securities premium:

Securities premium is used to record the premium on the issue of shares. The reserve can be utilised in accordance with the provisions of the Companies Act, 2013.

(d) General reserve:

General reserve is created by way of transfer from profits for the year.

(e) Retained earnings:

Retained earnings in the statement of profit and loss represents the balanced undistributed profits of the Company as on the balance sheet date.

(c) Preshipment credit

The loan is secured against hypothecation of inventories (refer note 11) and trade receivables (refer note 12).

Preshipment credit - Rupee (secured and unsecured) is repayable within 90 days and carries interest @ 7.00% to 8.50% p.a.

Preshipment credit - foreign currency (secured and unsecured) is repayable within 90 days to 180 days and carries interest @ SOFR 55 bps to SOFR 150 bps p.a.

(d) Bill discounting with banks

The loan is secured against hypothecation of inventories (refer note 11) and trade receivables (refer note 12).

Bill discounting (secured and unsecured) with banks is repayable within 30 to 210 days.

Rupee and Foreign bill discounting (secured and unsecured) with banks carries an interest @ 7.00% p.a. to 7.75% p.a. and SOFR 55 bps to SOFR 150 bps p.a. & EURIBOR 55 bps to EURIBOR 150 bps p.a. respectively.

(e) Loans availed for a specific purpose and their utilisation for the specified purpose:

During the year ended March 31, 2023, the Company has availed an unsecured term loan and issued listed, rated, unsecured, redeemable, non-convertible debentures on a private placement basis. Proceeds from this term loan and debentures have been utilised for the intended purpose.

(f) Working capital facilities and statements filed with bank

The Company has availed working capital facilities from banks in the form of packing credit, bill discounting and cash credit. The Company has filed quarterly statements with banks with regard to the securities provided against such working capital facilities on a periodic basis. The statements filed by the respective company''s are in agreement with the books of accounts of the Company.

The Company has been sanctioned a fund-based limit of '' 34,080 million and a non-fund based limit of '' 7,250 million in respect of working capital facilities by its bankers as at March 31, 2023 and March 31, 2022.

(g) A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as ''IBOR reform''). During the current year, the Company''s working capital borrowings denominated in USD have been earmarked to a new benchmark rate i.e. SOFR. The alternative reference rate for US dollar LIBOR is the Secured Overnight Financing Rate (SOFR). As at 31 March 2023, the Company''s Foreign Currency Term loans denominated in USD are indexed to US dollar LIBOR. The Company is in process of implementing appropriate fallback clauses for all US dollar LIBOR indexed exposures in the year ended March 31, 2023. These clauses automatically switch the instrument from USD LIBOR to SOFR post June 30, 2023 as announced by the Financial Conduct Authority (FCA).

There is no material impact on the company''s finance cost consequent to such a change in the index.

(h) The Company has not been declared a wilful defaulter by any bank or financial institution or government or any government authority.

Derivative instruments at fair value through OCI reflect the negative change in the fair value of foreign exchange forward contracts, designated as cash flow hedges to hedge highly probable forecast sales in US Dollars (USD) and Euro (EUR).

Derivative instruments at fair value through profit or loss reflect the negative change in fair value of cross currency swaps, designated as fair value hedge through which the Company has converted one of its USD loans into a Euro loan to avail the benefit of the negative EURIBOR interest rates.

Terms and conditions of the above financial liabilities:

- Trade payables are non-interest bearing and are generally settled on 60 to 90 days terms.

- Other payables (under note 19 and 23) are non-interest bearing and have an average term of 90 days

- For terms and conditions with related parties, refer note 39.

The above amount of trade payables is net off certain advances given to suppliers (Related parties) amounting to '' 720 million (March 31, 2022: '' 720 million). The Company currently has a legally enforceable right to set off the advance against the respective payables. The Company intends to settle these amounts on a net basis.

For the Company''s credit risk management processes, refer note 53.

32. Exceptional items (contd.)

(a) Voluntary retirement scheme compensation (contd.)

had attained 40 years of age and had completed 10 years of service with the Company. The amount of expenditure under these schemes was disclosed as an exceptional item.

(b) Reversal of impairment and gain on the fair valuation on the loss of significant influence in Tevva Motors (Jersey) Ltd.

During the previous year, the Company''s associate viz. Tevva Motors Limited (held through Tevva Motors [Jersey] Limited), collectively referred to as "Tevva", a start-up engaged in modular electrification system for a medium range of commercial vehicles, raised additional funding to finance its operations. Post allotment of equity shares to the new investors, Tevva ceased to be an associate of the Company.

The Company''s equity investment in Tevva Motors (Jersey) Limited was earlier impaired in the financial year that ended March 31, 2020. With the global EV markets gaining traction and setting higher valuation benchmarks, reversal of impairment and gain on the fair valuation on the loss of significant influence as an associate of '' 1,057.59 million was recorded as a part of "Exceptional items" for the year ended March 31, 2022.

(c) Gain on transfer of shares of Analogic Controls India Limited to Kalyani Strategic Systems Limited

During the year, the Company has transferred shares of its subsidiary Analogic Controls India Limited to its other subsidiary, Kalyani Strategic Systems Limited. The Company has recognised a surplus on the transfer of this investment and the resultant reversal of impairment provision amounting to '' 42.81 million as an exceptional item.

(d) Loss on transfer of shares of Aeron Systems Private Limited to Kalyani Strategic Systems Limited

During the year, the Company has transferred shares of its associate Aeron Systems Private Limited to Kalyani Strategic Systems Limited at its fair value. Loss on the transfer of shares has been recorded as an exceptional item.

35. Leases

(a) Company as lessee

The Company has lease contracts for solar plant and various items of building and leasehold land, etc. used in its operations. These leases generally have lease terms between 2 and 18 years. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. Generally, the Company is restricted from assigning and subleasing the leased assets. There are several lease contracts that include extension and termination options and variable lease payments, which are further mentioned below:

The Company also has certain leases of various assets with lease terms of 12 months or less and leases of office equipment with low value. The Company applies the ''short-term lease'' and ''lease of low-value assets'' recognition exemptions for these leases.


(a) Company as lessee (contd.)

The Company had total cash outflows for leases of '' 334.55 million (March 31, 2022: '' 276.99 million). The Company also had non-cash additions to right-of-use assets and lease liabilities of '' 1,381.36 million (March 31, 2022: 311.75 million ) and '' 1,381.36 million (March 31, 2022: '' 311.75 million) respectively.

The Company has several lease contracts that include extension and termination options. These options are negotiated by the management to provide flexibility in managing the leased-asset portfolio and align with the Company''s business needs. The management exercises judgment in determining whether the extension and termination options are reasonably certain to be exercised. Refer note 52.

Below are the undiscounted potential future rental payments relating to periods following the exercise date of extension and termination options that are not included in the lease term:

Funded scheme

The Company has a defined benefit gratuity plan for its employees. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, every employee who has completed five years of service is entitled to a specific benefit. The level of benefits provided depends on the employee''s length of service and salary at retirement age. An employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn) for each completed year of service as per the provisions of the Payment of Gratuity Act, 1972. In the case of certain categories of employees who have completed 10 years of service, gratuity is calculated based on 30 days salary (last drawn) for each completed year of service and the cap for gratuity is 20 years. The scheme is funded with insurance companies in the form of qualifying insurance policies.

Risk exposure and asset-liability matching

Provision of a defined benefit scheme poses certain risks, some of which are detailed hereunder, as the company take on uncertain long term obligations to make future benefit payments.

1) Liability risks

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is succesfully neutralises valuation swings caused by interest rate movements. Hence companies are encouraged to adopt asset-liability management.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may appear minor, but they can have a significant impact on the defined benefit liabilities.

c) Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities, especially unexpected salary increases provided at management''s discretion may lead to uncertainties in estimating this increasing risk.

2) Asset risks

All plan assets are managed by the trust and are invested in various funds (majorly LIC of India). LIC has a sovereign guarantee and has been providing consistent and competitive returns over the years. The Company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The Company has no control over the management of funds and this option provides a high level of safety for the total corpus. A single account is maintained for both the investment and claim settlement and hence 100% liquidity is ensured and also interest rate and inflation risk are taken care of.

The following table summarises the components of a net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the gratuity plans.

The estimates of future compensation level increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The sensitivity analysis above has been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period.

Weighted average duration of the defined benefit plan obligation (based on discounted cash flows using mortality, withdrawal and interest rate) is 10.59 years (March 31, 2022: 10.83 years).

(b) Special gratuity

The Company has a defined benefit special gratuity plan. Under the gratuity plan, every eligible employee who has completed ten years of service gets an additional gratuity on departure which will be salary of specified months based on the last drawn basic salary. The scheme is unfunded.

1) Liability risks

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully neutralises valuation swings caused by interest rate movements. Hence companies are encouraged to adopt asset-liability management.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may appear minor, but they can have a significant impact on the defined benefit liabilities.

c) Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting

in a higher present value of liabilities, especially unexpected salary increases provided at the management''s discretion may lead to uncertainties in estimating this increasing risk.

2) Unfunded plan risk

This represents unmanaged risks and a growing liability. There is an inherent risk here that the Company may default on paying the benefits in adverse circumstances. Funding the plan removes volatility in the Company''s financial statements and also benefit risk through return on the funds made available for the plan.

(c) Provident fund

In accordance with the law, all employees of the Company are entitled to receive benefits under the provident fund. The Company operates two plans for its employees to provide employee benefits in the nature of a provident fund, viz. defined contribution plan and defined benefit plan.

Under the defined contribution plan, the provident fund is contributed to the government administered provident fund. The Company has no obligation, other than the contribution payable to the provident fund (Refer note 28)

Under the defined benefit plan, the Company contributes to the "Bharat Forge Company Limited Staff Provident Fund Trust". The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate.

The details of the defined benefit plan based on the actuarial valuation report are as follows:

1) Liability risks:

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company successfully neutralises valuation swings caused by interest rate movements. Hence companies are encouraged to adopt asset-liability management.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c) Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at the management''s discretion may lead to uncertainties in estimating this increasing risk.

2) Asset risks:

All plan assets are managed by the trust and are invested in various funds (majorly LIC of India). LIC has a sovereign guarantee and has been providing consistent and competitive returns over the years. The Company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The Company has no control over the management of funds and this option provides a high level of safety for the total corpus. A single account is maintained for both the investment and claim settlement and hence 100% liquidity is ensured and also the interest rate and inflation risk are taken care of.

38. Contingent liabilities

In '' Million

Particulars

Year ended March 31, 2023

Year ended March 31, 2022

Guarantees given by the Company''s Bankers on behalf of the Company, against the sanctioned guarantee limit of '' 7,250 million (March 31, 2022: '' 7,250 million) for contracts undertaken by the Company and secured by extension of charge by way of joint hypothecation of stock-in-trade, stores and spares, book debts, etc.

3,151.26

3,372.64

Claim against the Company not acknowledged as Debts - to the extent ascertained [(Refer note 38(a)]

306.79

344.18

Excise/Service tax demands - matters under dispute* [(Refer note 38(b)]

141.27

130.10

Customs demands - matters under dispute* [(Refer note 38(c)]

50.97

50.97

Income tax demands - matters under dispute [(Refer note 38(d)]

54.92

54.92

* Excludes interest and penalty for the previous year

(a) The Company is contesting the demands raised pertaining to property tax. It also includes claims against the Company comprising of dues with respect to personnel claims (amount unascertainable), local taxes etc.

(b) Includes amount pertaining to incentives received under Government schemes, etc.

(c) Includes amount pertaining to classification differences of products, etc.

(d) Includes amount pertaining to matters relating to the applicability of TDS

The Company is contesting the demands and the management, including its tax/legal advisors, believe that its position will likely be upheld in the appellate process. No provision has been recognised in the financial statements for the tax demand raised. The management based on its internal assessment and the advice from its legal counsel believes that it is only possible/remote, but not probable, that the action will succeed.

Note: In cases where the amounts have been accrued, they have not been included above.

Deferred payment liabilities

Sales tax deferral incentives attached to the erstwhile windmill division, which was demerged to BF Utilities Limited (BFUL) under section 392 and 394 of the erstwhile Companies Act, 1956 sanctioned by the High Court of the Judicature at Mumbai, have been passed on thereafter from year to year by the Company to the latter, under an arrangement, with all liabilities and obligations attached thereto taken over completely by BFUL. The net liability outstanding of BFUL after such pass on amounts to '' Nil million (March 31, 2022: '' 45.12 million).

(iv) Board of Directors of the Company in their meeting held on February 14, 2023 have passed the resolution for the re-appointment of Mr. B. N. Kalyani (DIN: 00089380), as the Managing Director of the Company and for being designated as Chairman and Managing Director of the Company, for a period of five (5) years with effect from March 30, 2023 up to March 29, 2028, along with the terms and conditions of the re-appointment including the remuneration payable to him. Pursuant to Section 110 of the Companies Act, 2013 read with Rule 20 and 22 of the Companies (Management and Administration) Rules, 2014, on April 14, 2023, the Company has commenced the process for postal ballot for this proposed appointment and the e-voting for the same will be completed by May 27, 2023.

(1) Transactions with related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at the year end are unsecured with a short term duration unless otherwise stated and interest free except for loans and interest-bearing advance given to supplier Saarloha Advance Material Private Limited. For the year ended March 31, 2023 the Company has not recorded any impairment of receivables relating to the amount owed by related parties other than those disclosed separately above (March 31, 2022: '' Nil). This assessment is undertaken in each financial year by examining the financial position of the related party and the market in which the related party operates.

(2) All transactions were made on normal commercial terms and conditions and at market rates.

(3) For details of guarantees given to related parties, refer note 39.

(a) The Company has issued various financial guarantees/support letters for the working capital requirements of the subsidiary companies. The management has considered the probability for the outflow of the same to be remote.

The Company, for its newly set up plant located at Mambattu, Nellore, Andhra Pradesh for Manufacture of Aluminium Casting, has imported Capital Goods under the Export Promotion Capital Goods Scheme of the Government of India, at concessional rates of duty on an undertaking to fulfill quantified exports. As at March 31, 2022 export obligation aggregates to USD 8.94 million ('' 734.93 million), this is to be satisfied over a period of 6 years (Block year 1st to 4th year - 50% and 5th to 6th year - 50%) from December 14, 2018, as specified. Non-fulfilment of such future obligations, in the manner required, if any entails options/rights to the Government to levy penalties under the above referred scheme.

41. Capital Management

For the purpose of the Company''s capital management, capital includes issued equity share capital, securities premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company''s capital management is to maximise shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a net debt-equity ratio, which is net debt divided by

(f) Details of shortfall, cumulative shortfall and reasons for shortfall

During the year ended March 31, 2023, as against the required expenditure of '' 160.5 million (March 31, 2022: '' 169.36 million), the Company has incurred an expenditure of '' 131.49 million (March 31, 2022: '' 169.36 million) and an amount of '' 29.01 million (March 31, 2022: '' 25.80 million) remained unspent due to phase wise implementation of CSR activities. The unspent amount for the year ended March 31, 2023, has been transferred to the unspent CSR account and the same shall be utilised by the Company in the next year for CSR projects undertaken by the Company.

(g) Nature of activities

Ongoing projects

As part of ongoing project for CSR, the Company has undertaken activities such as village development (water, internal roads, livelihood, health & education), promotion of sports, skill development, projects associated with community development & woman empowerment and education activities.

Other than ongoing projects

These include activities related to educational sponsorship, protection of heritage, art and culture and various rural development initiatives.

Statement of compliance

With regard to the investments made, loans given and guarantees given during the year ended March 31, 2023 as well as March 31, 2022, the Company has complied with the relevant regulatory provisions.

Particulars of the intermediaries/beneficiaries/ultimate beneficiaries1 Bharat Forge America Inc.

Registered office: 2150, Schmiede St, Surgoinville, Tennessee 37873, USA Relationship with the beneficiary: Wholly owned Subsidiary

2 Bharat Forge Aluminium USA, Inc.

Registered office: 160, Mine lake Court, Suite 200, Raleigh, North Carolina 27615, USA Relationship with the beneficiary: Step down Subsidiary

3 Kalyani Powertrain Limited

Registered office: S No 49, Industry House, Opposite Kalyani Limited, Mundhwa, Pune 411036 Relationship with the beneficiary: Wholly owned subsidiary

4 BF Industrial Solutions Limited

Registered office: S No 49, Industry House, Opposite Kalyani Limited, Mundhwa, Pune 411036 Relationship with the beneficiary: Wholly owned subsidiary

5 Tork Motors Pvt Ltd, India

Registered office: Plot No. 4/25, Sector No.10, PCNTDA, Pune 411026 Relationship with the beneficiary: Step down subsidiary

47 Details of funds advanced or loaned or invested to any other persons or entities, for lending or investing in other person or entities (Ultimate Beneficiaries) (contd.)

6 Kalyani Mobility Inc.

Registered office: 160, Mine lake Court, Suite 200, Raleigh, North Carolina 27615, USA Relationship with the beneficiary: Step down subsidiary

7 BF Industrial Technology and Solutions Limited

Registered office: 244/6&7 GIDC estate, Waghodia, Gujarat.

Relationship with the beneficiary: Step down subsidiary

The Company has not received any funds from any persons or entities, including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries

48. Fair value hierarchy

The following table provides the fair value measurement hierarchy of the Company''s assets and liabilities.

(a) Gupta Energy Private Limited (GEPL)

The Company has an investment in the equity instrument of GEPL. The same is classified as fair value through profit and loss. Over the years, GEPL has been making consistent losses. The management of the Company has made attempts to obtain the latest information for the purpose of valuation. However, such information is not available as GEPL has not filed the financial statements with the Ministry Of Corporate Affairs (MCA) since FY 2014-15. In view of the above, the management believes that the fair value of the investment is Nil as at April 1, 2015 and thereafter.

(b) KPIT Technologies Limited

The Company had invested into 613,000 equity shares of '' 2/- each of KPIT Technologies Limited. The Hon''ble National Company Law Tribunal, Mumbai Bench, has by its order approved the composite scheme of arrangement (Scheme), amongst Birlasoft (India) Limited, KPIT Technologies Limited, KPIT Engineering Limited and their respective shareholders. Pursuant to the Scheme, the engineering business of KPIT Technologies Limited has been transferred to KPIT Engineering Limited.

Pursuant to the order, Birlasoft (India) Limited has merged with KPIT Technologies Limited and KPIT Technologies has been renamed as "Birlasoft Limited". KPIT Engineering Limited has been renamed as "KPIT Technologies Limited".

Pursuant to the Scheme, the Company had received 1 equity share of KPIT Technologies Ltd. of '' 10/- each for 1 equity share of Birlasoft Ltd. of '' 2/- each. The ratio of cost of acquisition per share of Birlasoft Ltd. and KPIT Technologies Ltd. was 56.64% to 43.36%.

The investment in shares has been classified under level 1 of the fair value hierarchy as on March 31, 2023 and March 31, 2022.

(c) Avaada MHBuldhana Private Limited

The investment in equity shares of Avaada MHBuldhana Private Limited which was made on September 30, 2021 is governed by the terms of the share purchase agreement and the shares held by the Company are subject to certain restrictions in terms of the ability of the Company to sell the shares and the value at which this can be done. Considering the nature of restrictions and the overall intention of the management in relation to the equity shares, the fair value of such shares for the Company is the same as their cost i.e. the face value.

49. Financial instruments by category

Set out below is a comparison, by class, of the carrying amounts and fair value of the Company''s financial instruments as of March 31, 2023; other than those with carrying amounts that are reasonable approximates of fair values:

The management assessed that the fair value of cash and cash equivalent, trade receivables, derivative instruments, trade payables, and other current financial assets and liabilities approximate their carrying amounts largely due to the short term maturities of these instruments.

Further, the management assessed that the fair value of security deposits, trade receivables and other non-current receivables approximate their carrying amounts largely due to discounting/expected credit loss at rates which are an approximation of current lending rates.

The fair value of the financial assets and liabilities is included in the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

(i) Long-term fixed-rate and variable-rate receivables are evaluated by the Company based on parameters such as the individual creditworthiness of the customer. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.

(ii) The fair values of quoted instruments are based on price quotations at the reporting date. The fair value of unquoted instruments, loans from banks as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. In addition to being sensitive to a reasonably possible change in the forecast cash flows or the discount rate, the fair value of the equity instruments is also sensitive to a reasonably possible change in the growth rates. The valuation requires management to use unobservable inputs in the model, of which the significant unobservable inputs are disclosed in note 48. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.

(iii) The fair values of the unquoted equity shares have been estimated using a cost method (KEIPL), market method (Tevva) as well as DCF model (ASPL and AMPL). The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management''s estimate of fair value for these unquoted equity investments.

(iv) The Company enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Foreign exchange forward contracts are valued using valuation techniques, which employ the use of market observable inputs. The most frequently applied valuation techniques include forward pricing using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies and forward rate curves of the underlying. All derivative contracts are fully cash collateralised, thereby eliminating both the counterparty and the Company''s own non-performance risk. As at March 31, 2023 the marked-to-market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognised at fair value.

(v) The Company''s borrowings and loans are appearing in the books at fair value since the same are interest bearing. Hence discounting of the same is not required. The own non-performance risk as at March 31, 2023 and March 31, 2022 was assessed to be insignificant.

50. Hedging activities and derivatives Cash flow hedges

Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast sales in the US Dollar and Euro. These forecast transactions are highly probable.

The cash flow hedges of the expected future sales during the year ended March 31, 2023 were assessed to be highly effective and a net unrealised (loss)/gain of '' 1,662.18 million (March 31, 2022: '' 3,761.17 million), with a deferred tax liability of '' 418.34 million (March 31, 2022''946.61 million) relating to the hedging instruments, is included in OCI.

The amount removed from OCI during the year and included in the carrying amount of the hedged item as an adjustment for the year ended March 31, 2023 as detailed in note 33, totaling '' 1,373.62 million (gross of deferred tax) (March 31, 2022: '' 1,349.93 million). The amounts retained in OCI at March 31, 2023 are expected to mature and affect the statement of profit and loss till the year ended March 31, 2026.

Fair value hedges

At March 31, 2023 and March 31, 2022, the Company has a cross currency swap agreement in place. During the current year, the company has converted its Rupee Preshipment Credit into USD. Under the original agreement, the interest rate was fixed at 6.30% p.a. but due to cross currency swap arrangement the revised interest rate has been fixed at 4.00% p.a.

In earlier years, the Company has converted one of its USD loans into a Euro loan for interest arbitrage. Under the original agreement, the interest rate was fixed at LIBOR 67 basis points, but due to the cross currency swap arrangement, the revised interest rate has been fixed at EURIBOR 87 basis points, decreasing the corresponding interest cost on the term loan.

52. Significant accounting judgements, estimates and assumptions

The preparation of the Company''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures, including the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Judgements

In the process of applying the Company''s accounting policies, the management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

1) Leases

Determining the lease term of contracts with renewal and termination options - Company as lessee

The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

The Company has several lease contracts that include extension and termination options. The Company applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customisation to the leased asset).

Refer to Note 35 for information on potential future rental payments relating to periods following the exercise date of extension and termination options that are not included in the lease term.

Property lease classification - Company as lessor

The Company has entered into commercial property leases on its investment property portfolio. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the commercial property and the present value of the minimum lease payments not amounting to substantially all of the fair value of the commercial property, that it retains substantially all the risks and rewards incidental to ownership of these properties and accounts for the contracts as operating leases.

2) Embedded derivatives

The Company has entered into certain hybrid contracts i.e. where an embedded derivative is a component of a non-derivative host contract, in the nature of financial liability. The Company has exercised judgement to evaluate if the economic characteristics and risks of the embedded derivative are closely related to the economic characteristics and risks of the host. Based on the evaluation, the Company has concluded that, these economic characteristics and risks of the embedded derivatives are closely related to the economic characteristics and risks of the host and thus not separated from the host contract and not accounted for separately.

3) Revenue from contracts with customers

The Company applied the following judgements that significantly affect the determination of the amount and timing of revenue from contracts with customers:

a) Identifying contracts with customers

The Company enters into a Master service agreement (''MSA'') with its customers which define the key terms of the contract with customers. However, the rates and quantities to be supplied are separately agreed through purchase orders. management has exercised judgement to determine that contract with customers for the purpose of Ind AS 115 is MSA and customer purchase orders for the purpose of identification of performance obligations and other associated terms.

b) Identifying performance obligation

The Company enters into contract with customers for sale of goods and tooling income. The Company determined that both the goods and tooling income are capable of being distinct. The fact that the Company regularly sells these goods on a standalone basis indicates that the customer can benefit from it on an individual basis. The Company also determined that the promises to transfer these goods are distinct within the context of the contract. These goods are not input to a combined item in the contract. Hence, the tooling income and the sale of goods are separate performance obligations.

c) Determination of timing of satisfaction of performance obligation

The Company concluded that the sale of goods and tooling income is to be recognised at a point in time because it does not meet the criteria for recognising revenue over a period of time. The Company has applied judgement in determining the point in time when the control of the goods and tooling income is transferred based on the criteria mentioned in the standard read along with the contract with customers, applicable laws and considering the industry practices which are as follows:

(1) Sale of goods

The goods manufactured are "Build to print" as per design specified by the customer for which the tools/dies are approved before commercial production commences. Further, the dispatch of goods is made on the basis of the purchase orders obtained from the customer taking into account the just in time production model with customer.

(2) Tooling income

Tools are manufactured as per the design specified by the customer which is approved on the basis of the customer acceptance. The management has used judgement in identification of the point in time where the tools are deemed to have been accepted by the customers.

d) Litigations

The Company has various ongoing litigations, the outcome of which may have a material effect on the financial position, results of operations or cash flows. The Company''s legal team regularly analyses current information about these matters and assesses the requirement for provision for probable losses including estimates of legal expenses to resolve such matters. In making the decision regarding the need for loss provision, the management considers the degree of probability of an unfavourable outcome and the ability to make a sufficiently reliable estimate of the amount of loss. The filing of a law suit or formal assertion of a claim against the Company or the disclosure of any such suit or assertions, does not automatically indicate that a provision of a loss may be appropriate.

Considering the facts on hand and the current stage of certain ongoing litigations where it stands, the Company forsees the remote risk of any material claim arising from claims against the Company. Management has exercised significant judgement


Mar 31, 2022

3. Property, plant and equipment (contd.)

(b) The title deeds of immovable properties (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee) are held in the name of the Company except for one immovable property (Hangar at Lohegaon) aggregating gross block of ? 0.07 million and net block of ? 0.05 million as at March 31, 2022 (March 31, 2021 : Two immovable properties aggregating gross block of ? 0.51 million and net block of ? 0.43 million) for which title deeds were not available with the Company. This property is jointly held by the Company with other companies.

(c) Capitalised borrowing costs:

The Company capitalises these borrowing costs in the capital work-in-progress (CWIP) first. The amount of borrowing costs capitalised as other adjustments in the above note reflects the amount of borrowing cost transferred from Capital work-in-progress (CWIP) balances. The borrowing costs capitalised during the year ended March 31, 2022 was ? 16.96 million (March 31, 2021: ? 34.77 million).

(d) Assets include assets lying with third parties amounting to ? 156.40 million (March 31, 2021: ? 115.75 million)

(e) Capital work in progress (CWIP) Ageing Schedule

The Company''s investment properties consist of three parcels of land situated at Pune, Satara and Chakan.

As at March 31, 2022 and March 31, 2021, the fair values of the properties are ? 2,432.95 million and ?2,432.95 million respectively. The Company obtains independent valuations for its investment properties at least annually. These valuations are performed by an accredited independent valuer firm and this firm is a registered valuer as defined under rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017. The best evidence of fair value is current prices in an active market for similar properties. Where such information is not available, the Company considers ready reckoner rates. The main input used is the ready reckoner rate. All resulting fair value estimates for investment properties are included in Level 2.

The Company has no restrictions (other than the land for which matter is being subjudice and for which no income has been considered) on the realisability of its investment properties and has no contractual obligations to either construct or develop investment properties or for repairs, maintenance and enhancement. Freehold land includes 25 acres of land situated at Pune, 24.13 acres of land situated at Satara and 8.40 acres of land situated at Chakan, which has been given on lease. Due to certain matters being sub-judice, the Company has not executed lease deed with related party for one of the said land.

(a) Bharat Forge Global Holding GmbH (BFGH)

Contributions to the capital reserves of BFGH as per the German Commercial Code (code), forms a part of the equity share capital and accordingly, has been considered as an investment and is redeemable subject to provisions of the code.

During the previous year, a loan of Euro 7.00 million was granted by the Company which was subsequently converted into capital contribution to BFGH of ? 601.93 million.

(b) Bharat Forge America Inc

During the current year, the Company has invested an amount of ? 1,112.08 million by aquiring 15,000,000 shares (USD 15 million) for further investment by Bharat Forge America Inc into its subsidiary, Bharat Forge Aluminium USA, Inc.

During the previous year, a loan of USD 5.00 million was granted by the Company which was subsequently converted into capital contribution to BFA of ? 368.30 million.

(c) BF Infrastructure Limited (BFIL, India)

During the previous year, pursuant to Rights issue, the Company had made further investment in BFIL, India of ? 44.43 million by converting and acquiring 4,443,010 equity shares of ? 10/- each.

(d) Kalyani Powertrain Limited (KPL)

During the current year, the Company has made investment of ? 1,223.23 million by acquiring 122,324,444 equity shares of ? 10 each for further investment into Tork Motors Private Limited, acquisition of Kalyani Mobility Inc and other business activities.

6. Investment in subsidiaries, joint ventures and associates (contd.)

During the current year, the Company has also invested in convertible debentures of ? 400 million in July 2021 which have been converted into 40,000,000 equity shares of ? 10 each on March 28, 2022.

During the previous year, the Company has made investment in KPL of ? 0.01 million by acquiring 1,000 equity shares of ?10/- each. KPL to undertake various electric vehicle related activities by using advanced technology solutions.

(e) BF Industrial Solutions Limited (BFISL) (formerly Nouveau Power and Infrastructure Private Limited)

During the current year, the Company has made investment of ? 20.00 million by acquiring 2,000,000 equity shares of ? 10 each in BFISL.

During the current year, the Company has also invested in convertible debentures of ? 900 million in June 2021 which have been converted into 90,000,000 equity shares of ? 10 each on March 31, 2022.

The Company through its wholly owned subsidiary BFISL has acquired Sanghvi Forging & Engineering Limited (SFEL), (which was then renamed as BF Industrial Technology and Solutions Limited ) along with its wholly owned subsidiary Sanghvi Europe B.V. on June 28, 2021 for a consideration of ? 770.60 million. SFEL is engaged in the manufacture of heavy forging for industrial applications. SFEL was admitted under Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 of India. The National Company Law Tribunal (NCLT) vide its order dated April 26, 2021, approved the resolution plan for acquiring controlling stake in SFEL, pursuant to which, the Company has acquired SFEL through BFISL.

(f) Kalyani Strategic Systems Limited (KSSL)

During the current year, the Company has acquired 17,695,706 fully paid up equity shares of ? 10 each and 5,898,568 partly paid up equity shares of ? 10 each in KSSL, consequent to which it has become a wholly owned subsidiary of the Company.

(g) Kalyani Centre for Precision Technology Limited (KCPTL)

During the previous year, the Company has made investment in KCPTL of ? 490.78 million by acquiring 49,078,330 equity shares of ?10/- each.

(h) BF NTPC Energy Systems Limited (BFNTPCESL)

During the earlier year, the shareholders of BFNTPCESL at their extraordinary general meeting held on October 9, 2018 decided to voluntarily liquidate the Company and engaged liquidator to liquidate the Company under the provisions of Section 59 of Insolvency and Bankruptcy Code 2016.

(i) REFU Drive GmbH [REFU]

During the earlier year, the Company had entered into a Joint Venture Agreement with Refu Elektronik GmbH, Germany and its affiliates / Promoters (REFU) for incorporating a Joint Venture Company i.e. Refu Drive GmbH (JV), under the laws of Germany. During the previous year, the Company has made an investment of ? 892.34 million by acquiring 12,500 equity shares of ? 10/- each and balance portion pertains to transactions costs that are directly attributable to the investment.

(j) Tork Motors Private Limited (TMPL)

During the current year, the Company has transferred its entire investment in TMPL to KPL, carrying book value of ? 300.37 million (14,208 shares comprising 48.86% stake) at book value. Accordingly, it has ceased to be an associate of the Company.

(k) Tevva Motors (Jersey) Limited (TMJL)

The Company holds investments in Tevva Motors Limited (held through Tevva Motors (Jersey) Limited), collectively Refer to red to as Tevva. Tevva is a start-up engaged in modular electrification system for medium range of commercial vehicles raised additional funding to finance its operations. Post allotment of equity shares by Tevva Motors to the new investors, Tevva has ceased to be an associate of the Group. Accordingly, the Company has classified it to be an equity instrument held through fair value through other comprehensive income. Also Refer to note 7 and note 32.

(l) Compliance with number of layers

The Company has invested funds in subsidiaries, associates and joint-ventures directly or through its wholly owned subsidiaries. The Company has complied with the number of layers prescribed under section 2 (87) of the Companies Act, 2013 read with the Companies (Restriction on number of Layers) Rules, 2017.

(a) Gupta Energy Private Limited (GEPL)

Shares of GEPL pledged against the facility obtained by Gupta Global Resources Private Limited. This investment is carried at fair value of ? Nil.

(b) BirlasoftLimited and KPIT Technologies Limited

The Company had invested into 613,000 equity shares of ? 2/- each of KPIT Technologies Limited. The Hon''ble National Company Law Tribunal, Mumbai Bench, had by its order approved the composite scheme of arrangement (Scheme), amongst Birlasoft [India] Limited, KPIT Technologies Limited, KPIT Engineering Limited and their respective shareholder. Pursuant to the Scheme, the engineering business of KPIT Technologies Limited had been transferred to KPIT Engineering Limited.

Pursuant to the order during the earlier year, Birlasoft (India) Limited had merged with KPIT Technologies Limited and KPIT Technologies had been renamed as "Birlasoft Limited". KPIT Engineering Limited had been renamed as "KPIT Technologies Limited".

Pursuant to the Scheme, the Company had received 1 equity share of KPIT Technologies Limited of ? 10/- each for 1 equity share of Birlasoft Limited of ? 2/- each. The ratio of cost of acquisition per share of Birlasoft Limited and KPIT Technologies Limited was 56.64% to 43.36%.

(c) Investments at fair value through OCI (fully paid) reflect investment in quoted and unquoted equity securities and quoted debt securities. Refer note 48 for determination of their fair values.

(d) Investments at fair value through profit or loss (fully paid) reflect investment in quoted / unquoted equity and debt securities. Refer note 48 for determination of their fair values.

(e) Avaada SataraMH Private Limited [ASPL]

During the previous year, the Company has made further investment in Avaada SataraMH Private Limited (ASPL) of ? 142.44 million by acquiring 14,243,911 equity shares of ? 10/- each, as a pre-condition for seeking approval from MSEDCL for Open Access permission by ASPL. Hence, the said investment is made subject to, amongst other conditions, obtaining permission by ASPL from relevant government authorities for consumption of renewable energy by the Company under open access for solar plant of ASPL.

(f) Avaada MHBuldhana Private Limited [ABPL]

During the current year, the Company has made investment in Avaada MHBuldhana Private Limited (ABPL) of ? 20.24 million by acquiring 2,033,850 equity shares of ? 10/- each, as a pre-condition for seeking approval from MSEDCL for Open Access permission by ABPL. Hence, the said investment is made subject to, amongst other conditions, obtaining permission by ABPL from relevant government authorities for consumption of renewable energy by the Company under open access for solar plant of ABPL.

(h) Global depository receipts

The Company had issued 3,636,500 equity shares of ? 10/- each (later sub-divided into 18,182,500 equity shares of ? 2/- each) in April 2005 represented by 3,636,500 Global Depository Receipts (GDR) (on sub division 18,182,500 GDRs) evidencing "Master GDR Certificates" at a price of USD 27.50 per GDR (including premium). GDRs outstanding as at year end are 800 (March 31, 2021 :

800). The funds raised had been utilized towards the object of the issue.

Holders of GDRs will have no voting rights or other direct rights of a shareholder with respect to the shares underlying the GDR.

(a) Special capital incentive:

Special capital incentive is created during the financial year 1999-2000, amounting to ? 2.50 million under the 1988 Package Scheme of Incentives.

(b) Warrants subscription money:

The Company had issued and allotted to Qualified Institutional Buyers, 10,000,000 equity shares of ? 2/- each at a price of ? 272/- per share aggregating to ? 2,720 million on April 28, 2010, simultaneous with the issue of 1,760, 10.75% Non Convertible Debentures (NCD) of a face value of ? 1,000,000/- at par, together with 6,500,000 warrants at a price of ? 2/- each entitling the holder of each warrant to subscribe for 1 equity share of ? 2/- each at a price of ? 272/- at any time within 3 years from the date of allotment. Following the completion of the three years term, the subscription money received on issue of warrants was credited to capital reserve as the same is not refundable / adjustable. Further the warrants had lapsed and ceased to be valid from April 28, 2013.

(c) Securities premium :

Securities premium is used to record the premium on issue of shares. The reserve can be utilised in accordance with the provisions of the Companies Act, 2013.

(b) GITA R&D project loan (Secured)

The loan was secured by bank guarantee executed by the Company in favour of Global Innovation & Technology Alliance (GITA) which was repayable in 5 yearly instalments, along with interest @ 12.00% p.a. only on 67% of the principal amount and balance amount was interest free. The entire loan has been repaid during the year.

(c) Preshipment packing credit

The loan is secured against hypothecation of inventories (refer to note 11) and trade receivables (refer to note 12).

Preshipment packing credit - Rupee (secured and unsecured) is repayable within 30 days to 180 days and carries interest @ 7.50% to 8.50% p.a.

Preshipment packing credit - foreign currency (secured and unsecured) is repayable within 30 days to 180 days and carries interest @ LIBOR 60 bps to LIBOR/SOFR 125 bps p.a. and EURIBOR 45 bps to EURIBOR 70 bps p.a. respectively.

18. Borrowings (contd.)

(d) Bill discounting with banks

The loan is secured against hypothecation of inventories (refer note 11) and trade receivables (refer note 12).

Bill discounting (secured and unsecured) with banks is repayable within 30 to 210 days.

Rupee and Foreign bill discounting (secured and unsecured) with banks carries interest @ 7.50% p.a. to 8.50% p.a. and LIBOR 60 bps to LIBOR 125 bps p.a. & EURIBOR 45 bps to EURIBOR 95 bps p.a. respectively.

(e) Loans availed for specific purpose and their utilisation for specified purpose:

During the year ended March 31, 2022, the Company has not availed any fresh term loans. In earlier years, the Company had raised term loans in the form of external commercial borrowings. The unutilised balance from proceeds of these term loans were temporarily parked in term deposits with bankers till the time they were used for their intended purpose. The balance of such deposits as at March 31, 2022 is ? Nil (March 31, 2021 : ? 1,048.33 Million).

During the previous year, the Company issued listed, rated, unsecured, redeemable, non-convertible debentures on private placement basis. Proceeds from these debentures have been utilised for the intended purpose.

(f) Working capital facilities and statements filed with bank

The Company has availed working capital facilities from banks in form of packing credit, bill discounting and cash credit. The Company have filed the quarterly statements with banks with regard to the securities provided against such working capital facilities on periodic basis. The statements filed by the respective companies are in agreement with the books of accounts of the Company. Till the previous financial year, the Company used to report this information based on monthly information system.

The Company has been sanctioned a fund based limit of ? 34,080 million and non-fund based limit of ? 7,250 million in respect of working capital facilities by its bankers as at March 31, 2022 and March 31, 2021.

During the year, the Company has announced Voluntary Retirement Schemes (VRS) on June 4, 2021, October 22, 2021, December 30, 2021 and January 17, 2022 for its permanent eligible employees who have attained 40 years of age and have completed 10 years of service with the Company. The amount of expenditure under these schemes is disclosed as exceptional item.

During the year ended March 31, 2021, the Company had announced Voluntary Retirement Schemes (VRS) on March 12, 2020, July 4, 2020 and November 11, 2020 for its eligible employees who have completed 10 years of service with the Company. The amount of expenditure under said scheme is disclosed as an exceptional item for the comparative period.

(b) Reversal of impairment and gain on fair valuation on loss of significant influence in Tevva Motors (Jersey) Ltd.

During the year, the Company''s associate viz. Tevva Motors Limited (held through Tevva Motors (Jersey) Limited), collectively refer tored to as "Tevva", a start-up engaged in modular electrification system for medium range of commercial vehicles, raised additional funding to finance its operations. Post allotment of equity shares to the new investors, Tevva has ceased to be an associate of the Company. The Company''s equity investment in Tevva Motors (Jersey) Limited was earlier impaired in the financial year ended March 31, 2020. With the global EV markets gaining traction and setting higher valuation benchmarks, reversal of impairment and gain on fair valuation on loss of significant influence as an associate of ? 1,057.59 million has been recorded as a part of "Exceptional items" for the year ended March 31, 2022.

35. Leases

(a) Company as lessee

The Company has lease contracts for solar plant and various items of building and leasehold land, etc. used in its operations. These leases generally have lease terms between 2 and 18 years. The Company’s obligations under its leases are secured by the lessor’s title to the leased assets. Generally, the Company is restricted from assigning and subleasing the leased assets. There are several lease contracts that include extension and termination options and variable lease payments, which are further mentioned below:

The Company also has certain leases of various assets with lease terms of 12 months or less and leases of office equipment with low value. The Company applies the ''short-term lease’ and ''lease of low-value assets’ recognition exemptions for these leases.

The Company had total cash outflows for leases of ? 276.99 million (March 31, 2021: ? 105.83 million). The Company also had non-cash additions to right-of-use assets and lease liabilities of ? 311.75 million (March 31, 2021: 1,656.94 ) and ? 311.75 million (March 31, 2021: ? 1,656.00) respectively.

The Company has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Company’s business needs. Management exercises significant judgment in determining whether these extension and termination options are reasonably certain to be exercised. Refer note 52.

Below are the undiscounted potential future rental payments relating to periods following the exercise date of extension and terminationoptions that are not included in the lease term:

[b) Company as lessor

The Company has entered into agreements / arrangements in the nature of lease / sub-lease agreement with different lessees for the purpose of land and building. These are generally in the nature of operating lease. Period of agreements / arrangements is generally three years to twenty five years and cancellable with a notice of thirty days to six months and renewal at the options of the lessee / lessor.

36. Segment information

In accordance with paragraph 4 of notified Ind AS 108 "Operating segments", the Company has disclosed segment information only on the basis of the consolidated financial statements.

37. Gratuity and other post-employment benefit plans

(a) Gratuity plan Funded scheme

The Company has a defined benefit gratuity plan for its employees. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, every employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the employee''s length of service and salary at retirement age. An employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn) for each completed year of service as per the provisions of the Payment of Gratuity Act, 1972. In case of certain category of employees who have completed 10 years of service, gratuity is calculated based on 30 days salary (last drawn) for each completed year of service and cap for gratuity is 20 years. The scheme is funded with insurance companies in the form of qualifying insurance policies.

Risk exposure and asset-liability matching

Provision of a defined benefit scheme poses certain risks, some of which are detailed hereunder, as company take on uncertain long term obligations to make future benefit payments.

1) Liability risks

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c) Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management''s discretion may lead to uncertainties in estimating this increasing risk.

2) Asset risks

All plan assets are maintained in a trust fund managed by a public sector insurer viz. LIC of India and other insurance companies. LIC and other insurance companies have a sovereign guarantee and have been providing consistent and competitive returns over the years. The Company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The Company has no control over the management of funds but this option provides a high level of safety for the total corpus. The same account is maintained for both the investment and claim settlement and hence 100% liquidity is ensured and also interest rate and inflation risk are taken care of.

The following table summarises the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the gratuity plans.

(b) Special gratuity

The Company has a defined benefit special gratuity plan. Under the gratuity plan, every eligible employee who has completed ten years of service gets an additional gratuity on departure which will be salary of specified months based on last drawn basic salary. The schemeis unfunded.

1) Liability risks

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralise valuation swings caused by interest rate movements.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c) Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management''s discretion may lead to uncertainties in estimating this increasing risk.

2) Unfunded plan risk

This represents unmanaged risk and a growing liability. There is an inherent risk here that the Company may default on paying the benefits in adverse circumstances. Funding the plan removes volatility in the Company''s financial statements and also benefit risk through return on the funds made available for the plan.

(c) Provident fund

In accordance with the law, all employees of the Company are entitled to receive benefits under the provident fund. The Company operates two plans for its employees to provide employee benefits in the nature of provident fund, viz. defined contribution plan and defined benefit plan.

Under the defined contribution plan, provident fund is contributed to the government administered provident fund. The Company has no obligation, other than the contribution payable to the provident fund.

Under the defined benefit plan, the Company contributes to the "Bharat Forge Company Limited Staff Provident Fund Trust". The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate.

The details of the defined benefit plan based on actuarial valuation report are as follows:

1) Liability risks:

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements. Hence companies are encouraged to adopt asset-liability management.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c) Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management''s discretion may lead to uncertainties in estimating this increasing risk.

2) Asset risks:

All plan assets are maintained in a Trust fund managed by a public sector insurer viz. LIC of India and other insurance companies. LIC and other insurance companies have a sovereign guarantee and have been providing consistent and competitive returns over the years. The Company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The Company has no control over the management of funds but this option provides a high level of safety for the total corpus. The same account is maintained for both the investment and claim settlement and hence 100% liquidity is ensured and also interest rate and inflation risk are taken care of.

* Excludes interest and penatly

(a) The Company has issued various financial guarantees/support letter for working capital requirement of the subsidiary companies. The management has considered the probability for outflow of the same to be remote.

(b) The Company is contesting the demands raised pertaining to property tax. It also includes claim against the Company comprising of dues in respect to personnel claims (amount unascertainable), local taxes, etc.

(c) Includes amount pertaining to incentive received under Government schemes, etc. This amount does not include penalty and interest.

(d) Includes amount pertaining to classification differences of products, etc.

(e) Includes amount pertaining to duty demand for non-receipt of various statutory forms, etc.

(f) Includes amount pertaining to matter relating to applicability of TDS.

The Company is contesting the demands and the management, including its tax/legal advisors, believe that its position will likely be upheld in the appellate process. No provision has been recognised in the financial statements for the tax demand raised. The management based on its internal assessment and advice by its legal counsel believes that it is only possible/remote, but not probable, that the action will succeed.

Note: In cases where the amounts have been accrued, it has not been included above.

Deferred payment liabilities

Sales tax deferral incentives attached to the erstwhile windmill division, which was demerged to BF Utilities Limited (BFUL) under section 392 and 394 of the erstwhile Companies Act, 1956 sanctioned by the High Court of the Judicature at Mumbai, have been passed on thereafter from year to year by the Company to the latter, under an arrangement, with all liabilities and obligations attached thereto taken over completely by BFUL. The net liability outstanding of BFUL after such pass on amounts to ? 45.12 million (March 31, 2021: ? 45.12 million).

* Does not include gratuity and leave encashment since the same is considered for all employees of the Company as a whole.

(1) Transactions with related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at the year end are unsecured with a short term duration unless otherwise stated and interest free except for loans and interest-bearing advance given to supplier Saarloha Advance Material Private Limited. settlement occurs in cash. For the year ended March 31, 2022 the Company has not recorded any impairment of receivables relating to amount owed by related parties other than those disclosed separately above (March 31, 2021: ? Nil). This assessment is undertaken in each financial year through examining the financial position of the related party and the market in which the related party operates.

(2) All transactions were made on normal commercial terms and conditions and are at market rates.

(3) The Company has various other welfare trusts to administer the long term benefits for its employees for which no contribution is made in the previous year.

The Company, for its newly set up plant located at Mambattu, Nellore, Andhra Pradesh for Manufacture of Aluminium Casting, has imported Capital Goods under the Export Promotion Capital Goods Scheme of the Government of India, at concessional rates of duty on an undertaking to fulfill quantified exports. As at March 31, 2022 export obligation aggregates to USD 9.82 million (Rs. 734.93 million), this is to be satisfied over a period of 6 years (Block year 1st to 4th year - 50% and 5th to 6th year - 50%) from December 14, 2018, as specified. Non fulfilment of such future obligations, in the manner required, if any entails options / rights to the Government to levy penalties under the above referred scheme.

41. Deferral/Capitalisation of exchange differences

On the date of transition to Ind AS, the Company had availed the option under Ind AS 101 para D13AA for borrowings availed before April 1, 2016, continuing the policy adopted for accounting for exchange differences arising from translation of foreign currency monetary items recognised in financial statements.

44. Effect of global health pandemic relating to COVID-19

The ongoing spread of COVID-19 has impacted business in various countries including India and there have been disruptions to regular business operations due to COVID response measures undertaken in certain geographies. The Company has made assessment of liquidity, recoverable values of its financial and non-financial assets, financial and non-financial liabilities, carrying value of its subsidiaries including possible obligations arising from any ongoing negotiations with customers, vendors and regulatory exposures across businesses and geographies and has concluded that there are no material adjustments required in the financial statements. The management believes that it has assessed and taken all the possible impacts known from these events wherever the possible outcome is known. However, given the effect of these on the overall economic activity and in particular in the industry in which the Company operates, the impact assessment of COVID-19 is a continuous process, given the significant estimation and uncertainties associated with its nature, duration and outcome of any negotiations. The impact of global health pandemic might be different from that estimated as at the date of approval of these financial statements. The Company will continue to closely monitor any material changes to future economic conditions and its consequential impact on its financial statements.

(f) Details of shortfall, cumulative shoftfall and reasons for shortfall

During the year ended March 31, 2022, as against required expenditure of ? 169.36 million (March 31, 2021 : ? 225.25 million), the Company has incurred expenditure of ? 169.36 million (March 31, 2021 : ? 210.66 million). Due to the unprecedented pandemic of COVID-19 which resulted in persistant lockdowns and restrictions on mobility, the Company was unable to execute certain projects. Hence, the unspent amount of ? 25.80 million (March 31, 2021: 26.85 million) pertaining to ongoing projects has been transferred to Unspent CSR Account and the differential amount of ? Nil (March 31, 2021: ? 14.60 Million) will be transferred to such fund as specified under Schedule VII of the Act in pursuance of the CSR Amendment Rules, 2021.

Cg) Nature of activities Ongoing projects

As part of ongoing project for CSR, the Company has undertaken village development activities (water, internal roads, livelihood, health & education), COVID 19 prevention & cure, projects associated with community development & woman empowerment and education activities.

Other than ongoing projects

These include activities related to educational sponsorship, health and wellness activities and various educational initiatives.

* Receivable on demand.

! Receivable after 2 years from the date of disbursement of loan. It can be repaid earlier than the maturity, based on mutual understanding.

# Short term advance converted into a long term advance for a period of 4 years.

A Loan Tenure is 3 years from the date of disbursement of loan. Quarterly repayment is ? 2 million, ? 3 million, ? 5 million for year 1, 2 and 3 respectively.

** Receivable after 1 year, one bullet payment along with interest at the end of the term.

$ Receivable after 1 year, one bullet payment along with interest at the end of the term.

- All loans are unsecured

- Details of investments made are given in note 6 and note 7

- Guarantee given on behalf of

- Bharat Forge Kilsta AB, step down subsidiary company, of ? 1,515.78 million (March 31, 2021: ? 1,544.04 million) for working capital requirement which was renewed during the current year.

- Bharat Forge America Inc., wholly owned subsidiary company, of ? 4,581.96 million (March 31, 2021: ? 3,387.42 million) for term loan or loans towards investment in stepdown subsidiaries.

- Kalyani Strategic Systems Limited , subsidiary company, of ? 500.00 million (March 31, 2020: ? 500.00 million) for availing non-fund based credit facilities from the banks.

48. Fair value hierarchy (contd.)

(a) Gupta Energy Private Limited (GEPL)

The Company has an investment in equity instrument of GEPL. The same is classified as at fair value through profit and loss. Over the years GEPL has been making consistent losses. The management of the Company has made attempts to obtain latest information for the purpose of valuation. However, such information is not available as GEPL has not filed the financial statements with Ministry Of Corporate Affaires (MCA) since FY 2014-15. In view of the above, the management believes that the fair value of the investment is Nil as at April 1, 2015 and thereafter.

(b) KPIT Technologies Limited

The Company had invested into 613,000 equity shares of ? 2/- each of KPIT Technologies Limited. The Hon''ble National Company Law Tribunal, Mumbai Bench, has by its order approved the composite scheme of arrangement (Scheme), amongst Birlasoft (India) Limited, KPIT Technologies Limited, KPIT Engineering Limited and their respective shareholders. Pursuant to the Scheme, the engineering business of KPIT Technologies Limited has been transferred to KPIT Engineering Limited.

Pursuant to the order, Birlasoft (India) Limited has merged with KPIT Technologies Limited and KPIT Technologies has been renamed as "Birlasoft Limited". KPIT Engineering Limited has been renamed as "KPIT Technologies Limited".

Pursuant to the Scheme, the Company had received 1 equity share of KPIT Technologies Ltd. of ? 10/- each for 1 equity share of Birlasoft Ltd. of ? 2/- each. The ratio of cost of acquisition per share of Birlasoft Ltd. and KPIT Technologies Ltd. was 56.64% to 43.36%.

The investment in shares has been classified under level 1 of the fair value hierarchy as on March 31,2022 and March 31, 2021.

(c) Avaada MHBuldhana Private Limited

The investment in equity shares of Avaada MHBudhana Private Limited which was made on September 30, 2021, is governed by the terms of the share purchase agreement and the shares held by the Company are subject to certain restrictions in terms of ability of the Company to sell the shares and the value at which this can be done. Considering the nature of restrictions and overall intention of the management in relation to the equity shares, the fair value of such shares for the Company is same as it cost i.e. the face value.

* Investments do not include investments in subsidiaries, joint ventures and associates which are carried at cost and hence are not required to be disclosed as per Ind AS 107 "Financial Instruments Disclosures’.

The management assessed that the fair value of cash and cash equivalent, trade receivables, derivative instruments, trade payables, and other current financial assets and liabilities approximate their carrying amounts largely due to the short term maturities of these instruments.

Further the management assessed that the fair value of security deposits, trade receivables and other non-current receivables approximate their carrying amounts largely due to discounting/expected credit loss at rates which are an approximation of current lending rates.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

(i) Long-term fixed-rate and variable-rate receivables are evaluated by the Company based on parameters such as individual creditworthiness of the customer. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.

(ii) The fair values of quoted instruments are based on price quotations at the reporting date. The fair value of unquoted instruments, loans from banks as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. In addition to being sensitive to a reasonably possible change in the forecast cash flows or the discount rate, the fair value of the equity instruments is also sensitive to a reasonably possible change in the growth rates. The valuation requires management to use unobservable inputs in the model, of which the significant unobservable inputs are disclosed in note 48. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.

(iii) The fair values of the unquoted equity shares have been estimated using a cost method (KEIPL), market method (Tevva) as well as DCF model (ASPL). The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management’s estimate of fair value for these unquoted equity investments.

(iv) The Company enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies and forward rate curves of the underlying. All derivative contracts are fully cash collateralised, thereby eliminating both counterparty and the Company’s own nonperformance risk. As at March 31, 2022 the marked-to-market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognised at fair value.

(v) The Company’s borrowings and loans are appearing in the books at fair value since the same are interest bearing. Hence discounting of the same is not required. The own non-performance risk as at March 31, 2022 and March 31, 2021 was assessed to be insignificant.

The cash flow hedges of the expected future sales during the year ended March 31, 2022 were assessed to be highly effective and a net unrealised (loss) / gain of ? 3,761.17 million (March 31, 2021: ? 2,784.32 million], with a deferred tax liability of ? 946.61 million (March 31, 2021 ? 700.76 million ) relating to the hedging instruments, is included in OCI.

The amount removed from OCI during the year and included in the carrying amount of the hedged item as an adjustment for the year ended March 31, 2022 as detailed in note 33, totaling ? 1,349.93 million (gross of deferred tax) (March 31, 2021: ? (523.40) million). The amounts retained in OCI at March 31, 2022 are expected to mature and affect the statement of profit and loss till the year ended March 31, 2026.

Fair value hedges

At March 31, 2022 and March 31, 2021, the Company has a cross currency swap agreement in place. Through this arrangement, during the previous year, the Company has converted one of its USD loans into a Euro loan to avail the benefit of the negative EURIBOR. Under the original agreement the interest rate was fixed at LIBOR 67 basis points, but due to the cross currency swap arrangement the revised interest rate has been fixed at EURIBOR 87 basis points, decreasing the corresponding interest cost on the term loan.

Also as at March 31, 2022 the Company had certain forward contracts outstanding, which are being used to hedge the exposure to changes in fair value of its underlying trade receivables.

Notes for movement in ratios

(1) Movement in ratio is attributable to increase in revenue from operations which has been partially offset by increase in the current maturities of term loans

(2) Improvement in this ratio is attributable to increase in revenue from operations with stable operating margin

(3) Improvement in this ratio is attributable to quicker churn of the inventory due to increase in revenue from operations

(4) Though the revenue from operations has increased significantly, due to efficient working capital management, most of the trade receivables are collected. Hence this ratio has improved compared to previous year.

(5) Due to increase in operations, material cost and expenses have increased significantly. As dues to most of the trade payable have been paid in time, this ratio has improved compared to previous year.

(6) Even though the revenue from operations has increased significantly, due to efficient working capital management this increase has not resulted in higher working capital. Hence this ratio has increased compared to previous year.

52. Significant accountingjudgements, estimates and assumptions

The preparation of the Company''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures, including the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Judgements

In the process of applying the Company''s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

1) Leases

Determining the lease term of contracts with renewal and termination options - Company as lessee

The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

The Company has several lease contracts that include extension and termination options. The Company applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customisation to the leased asset).

Refer Note 35 for information on potential future rental payments relating to periods following the exercise date of extension and termination options that are not included in the lease term.

Property lease classification - Company as lessor

The Company has entered into commercial property leases on its investment property portfolio. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the commercial property and the present value of the minimum lease payments not amounting to substantially all of the fair value of the commercial property, that it retains substantially all the risks and rewards incidental to ownership of these properties and accounts for the contracts as operating leases.

2) Embedded derivatives

The Company has entered into certain hybrid contracts i.e. where an embedded derivative is a component of a non-derivative host contract, in the nature of financial liability. The Company has exercised judgement to evaluate if the economic characteristics and risks of the embedded derivative are closely related to the economic characteristics and risks of the host. Based on the evaluation, the Company has concluded that, these economic characteristics and risks of the embedded derivatives are closely related to the economic characteristics and risks of the host and thus not separated from the host contract and not accounted for separately.

3) Revenue from contracts with customers

The Company applied the following judgements that significantly affect the determination of the amount and timing of revenue from contracts with customers:

a) Identifying contracts with customers

The Company enters into Master service agreement (''MSA'') with its customers which define the key terms of the contract with customers. However, the rates and quantities to be supplied is separately agreed through purchase orders. Management has exercised judgement to determine that contract with customers for the purpose of Ind AS 115 is MSA and customer purchase orders for purpose of identification of performance obligations and other associated terms.

b) Identifying performance obligation

The Company enters into contract with customers for sale of goods and tooling income. The Company determined that both the goods and tooling income are capable of being distinct. The fact that the Company regularly sells these goods on a standalone basis indicates that the customer can benefit from it on an individual basis. The Company also determined that the promises to transfer these goods are distinct within the context of the contract. These goods are not input to a combined item in the contract. Hence, the tooling income and the sale of goods are separate performance obligations.

c) Determination of timing of satisfaction of performance obligation

The Company concluded that sale of goods and tooling income is to be recognised at a point in time because it does not meet the criteria for recognising revenue over a period of time. The Company has applied judgement in determining the point in time when the control of the goods and tooling income are transferred based on the criteria mentioned in the standard read along with the contract with customers, applicable laws and considering the industry practices which are as follows:

(1) Sale of goods

The goods manufactured are "Build to print" as per design specified by the customer for which the tools / dies are approved before commercial production commences. Further, the dispatch of goods is made on the basis of the purchase orders obtained from the customer taking into account the just in time production model with customer. Further some orders have variable considerations (including LME adjustments) for the review of prices under negotiation which are estimated based on the expected probability method and, where appropriate, they would be limited to the amount that is highly unlikely to be reversed in the future.

(2) Tooling income

Tools are manufactured as per the design specified by the customer which is approved on the basis of the customer acceptance. Management has used judgement in identification of the point in time where the tools are deemed to have been accepted by the customers.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

1) Estimating the incremental borrowing rate to measure lease liabilities

The Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Company ''would

have to pay'', which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Company estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates.

2) Impairment of non-financial assets (tangible and intangible)

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or Cash Generating Unit''s (CGU''s) fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. In determining the fair value less costs to disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.

3) Defined benefit plans

The cost of the defined benefit gratuity plan, other defined benefit plan and other post-employment plans are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, expected returns on plan assets and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The mortality rate is based on publicly available mortality tables for India. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases, discount rate and return on planned assets are based on expected future inflation rates for India. Further details about defined benefit plans are given in note 37.

4) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using different valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements and estimates include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer note 48 and 49 for further disclosures.

5) Impairment of financial assets

The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Further, the Company also evaluates risk with respect to expected loss on account of loss in time value of money which is calculated using average cost of capital for relevant financial assets.

6) Provision for inventories

Management reviews the inventory age listing on a periodic basis. This review involves comparison of the

carrying value of the aged inventory items with the respective net realizable value. The purpose is to ascertain whether a


Mar 31, 2021

As at March 31, 2021 and March 31, 2020, the fair values of the properties are ''2,432.95 million, ''2,426.11 million respectively. The Company obtains independent valuations for its investment properties at least annually. The best evidence of fair value is current prices in an active market for similar properties, where such information is not available, the Company considers ready reckoner rates. The fair values of investment properties have been determined by an independent valuer. The main input used is the ready reckoner rate. All resulting fair value estimates for investment properties are included in Level 2.

4. INVESTMENT PROPERTY [Contd.):

The Company has no restrictions ( other than the land for which matter is being subjudice and for which no income has been considered) on the realisanility of its investment properties and has no contractual obligations to either construct or develop investment properties or for repairs, maintenance and enhancement. Freehold land includes 25 acres of land situated at Pune, 24.13 acres of land situated at Satara and 8.40 acres of land situated at Chakan, which has been given on lease. Due to certain matters being sub-judice , the Company has not executed lease deed with related party for one of the said land.

(a) Bharat Forge Global Holding GmbH (BFGH)

Contributions to the capital reserves of BFGH as per the German Commercial Code (code), forms a part of the equity share capital and accordingly, has been considered as an investment and is redeemable subject to provisions of the code.

During the current year, a loan of Euro 7.00 million was granted by the Company which was subsequently converted into capital contribution to BFGH of '' 601.93 million (March 31, 2020 : Nil).

(b) Bharat Forge America Inc.

During the current year, a loan of USD 5.00 million was granted by the Company which was subsequently converted into capital contribution to BFA of '' 368.30 million (March 31, 2020 : '' Nil).

(c) BF Infrastructure Limited (BFIL, India)

During the current year pursuant to Rights issue, the Company had made further investment in BFIL, India of '' 44.43 million (March 31, 2020 : '' 727.26 million) by converting and acquiring 4,443,010 (March 31, 2020 : 72,726,400) equity shares of '' 10/- each.

(d) Kalyani Centre For Precision Technology Limited (KCPTL)

During the current year, the Company has made investment in KCPTL of '' 490.78 million by acquiring 49,078,330 equity shares of ''10/- each (March 31, 2020''200.10 million by acquiring 20,010,000 equity shares of '' 10/- each).

(e) Kalyani Powertrain Limited (KPL)

During the current year, the Company has made investment in KPL of '' 0.01 million by acquiring 1,000 equity shares of ''10/- each (March 31, 2020 '' Nil ). KPL to undertake various electric vehicle related activities by using advanced technology solutions.

(f) Kalyani Strategic Systems Limited (KSSL)

During the previous year, the Company has made an investment of '' 30.70 million by acquiring 6,139,324 equity shares of '' 10/- each on right basis by partly paying '' 5/- per Share.

6. INVESTMENT IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES CContd.):

(g) Eternus Performance Materials Private Limited (EPMPL)

During the previous year, the Company entered into a Share Subscription Agreement with Eternus Performance Materials Private Limited, India (Eternus). Pursuant to the said Agreement, the Company has made investment in EPMPL of '' 3.75 million by acquiring 83,226 equity shares of '' 10/- each at premium of '' 35/- per share.

(h) BF NTPC Energy Systems Limited (BFNTPCESL)

During the earlier year, the shareholders of BFNTPCESL at their EGM held on October 9, 2018 decided to voluntarily liquidate the Company and engaged liquidator to liquidate the Company under the provisions of Section 59 of Insolvency and Bankruptcy Code, 2016.

(i) REFu Drive GmbH [REFu]

During the previous year, the Company entered into a Joint Venture Agreement with Refu Elektronik GmbH, Germany and its affiliates / Promoters (REFU) for incorporating a Joint Venture Company i.e. Refu Drive GmbH (JV), under the laws of Germany. During the previous year, the Company has made an investment of '' 892.34 million by acquiring 12,500 equity shares of '' 10/- each and balance portion pertains transactions costs that are directly attributable to the investment.

(j) Tork Motors Private Limited (TMPL)

During the previous year, the Company has made an additional investment of '' 39.99 million by acquiring 1,895 equity shares of '' 10/- each.

(k) Tevva Motors (Jersey) Limited (TMJL)

During the earlier year, the Company had made investment in TMJL '' 892.93 million by acquiring 777,840 ordinary shares of £ 0.00001 each. During the year the Company has further extended the tenure of the convertible loan note amounting to GBP 3.50 million to December 31, 2021. The management intends to convert the said loan into equity at GBP 13.38 per share. On the revised due date, the outstanding loan amount including interest accrued thereon till the date of conversion will be converted into equivalent equity shares of Tevva Motors (Jersey) Limited as per the terms of agreement. Accordingly, such loan and interest accrued thereon till March 31, 2021 have been disclosed as investment in associates.

In the previous year the company had impaired '' 890.00 million against the same.

(l) Aeron Systems Private Limited [ASPL]

During the previous year, the Company entered into a Share Subscription Agreement with Aeron Systems Private Limited (Aeron). Pursuant to the said Agreement, the Company has made additional investment in ASPL of '' 60.00 million by acquiring 58,500 equity Shares of '' 10/- each at a premium of '' 1,015.64 per share (March 31, 2020''80.00 million by acquiring 78,000 equity shares of '' 10/- each.)

7. INVESTMENTS CContd.):

(a) Gupta Energy Private Limited (GEPL)

Shares of GEPL pledged against the facility obtained by Gupta Global Resources Private Limited. This investment is carried at fair value of '' Nil.

(b) Birlasoft Limited and KPIT Technologies Limited

The Company had invested into 613,000 equity shares of '' 2/- each of KPIT Technologies Limited. The Hon''ble National Company Law Tribunal, Mumbai Bench, had by its order approved the composite scheme of arrangement (Scheme), amongst Birlasoft (India) Limited, KPIT Technologies Limited, KPIT Engineering Limited and their respective shareholders. Pursuant to the Scheme, the engineering business of KPIT Technologies Limited had been transferred to KPIT Engineering Limited.

Pursuant to the order during the previous year, Birlasoft (India) Limited had merged with KPIT Technologies Limited and KPIT Technologies had been renamed as "Birlasoft Limited. KPIT Engineering Limited had been renamed as "KPIT Technologies Limited".

Pursuant to the Scheme, the Company had received 1 equity share of KPIT Technologies Limited of '' 10/- each for 1 equity share of Birlasoft Limited of '' 2/- each. The ratio of cost of acquisition per share of Birlasoft Limited and KPIT Technologies Limited was 56.64% to 43.36%.

(c) Investments at fair value through OCI (fully paid) reflect investment in quoted and unquoted equity securities and quoted debt securities. Refer note 47 for determination of their fair values.

(d) Investments at fair value through profit or loss (fully paid) reflect investment in quoted / unquoted equity and debt securities. Refer note 47 for determination of their fair values.

(e) Avaada SataraMH Private Limited [ASPL]

During the current year, the Company has made further investment in Avaada SataraMH Private Limited (ASPL) of '' 142.44 million (March 31, 2020: '' 0.01 million) by acquiring 14,243,911 (March 31, 2020: 1,089) equity shares of '' 10/- each, as a pre-condition for seeking approval from MSEDCL for Open Access permission by ASPL. Hence, the said investment is made subject to, amongst other conditions, obtaining permission by ASPL from relevant government authorities for consumption of renewable energy by the Company under open access for solar plant of ASPL.

* Includes prepaid expenses, sundry debit balances, etc.

No advances are due from directors or other officers of the Company, firms in which a director is a partner or private companies in which director is a director or a member either severally or jointly with any other person except as disclosed in note no 39.

For terms and conditions relating to related party receivables, refer note 39.

# Pertains to long-term advance given to Saarloha Advanced Materials Private Limited for a period of 4 years at an interest rate of 8.25% p.a. Frequency of interest payment is quarterly.

(a) Terms / rights attached to equity shares

The Company has only one class of issued equity shares having a par value of '' 2/- per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

(b) Reconciliation of equity shares outstanding at the beginning and at the end of the reporting year

In the event of liquidation of Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(c) Shares held by holding/ultimate holding company and/or their subsidiaries/associate

The Company being ultimate holding company, there are no shares held by any other holding, ultimate holding company and their subsidiaries/associates.

(g) Global depository receipts

The Company had issued 3,636,500 equity shares of '' 10/- each (later sub-divided into 18,182,500 equity shares of '' 2/- each) in April 2005 represented by 3,636,500 Global Depository Receipts (GDR) (on sub division 18,182,500 GDRs) evidencing "Master GDR Certificates" at a price of USD 27.50 per GDR (including premium). GDRs outstanding as at year end are 18,400 (March 31, 2020 : 18,400). The funds raised had been utilized towards the object of the issue.

Holders of GDRs will have no voting rights or other direct rights of a shareholder with respect to the shares underlying the GDRs.

(a) Special capital incentive:

Special capital incentive is created during the financial year 1999-2000, amounting to '' 2.50 million under the 1988 Package Scheme of Incentives.

(b) Warrants subscription money:

The Company had issued and allotted to Qualified Institutional Buyers, 10,000,000 equity shares of '' 2/- each at a price of '' 272/- per share aggregating to '' 2,720 million on April 28, 2010, simultaneous with the issue of 1,760, 10.75% Non Convertible Debentures (NCD) of a face value of '' 1,000,000/- at par, together with 6,500,000 warrants at a price of '' 2/- each entitling the holder of each warrant to subscribe for 1 equity share of '' 2/- each at a price of '' 272/- at any time within 3 years from the date of allotment. Following completion of three years term, the subscription money received on issue of warrants was credited to capital reserve as the same is not refundable / adjustable. Further the warrants had lapsed and ceased to be valid from April 28, 2013.

(c) Securities premium :

Securities premium is used to record the premium on issue of shares. The reserve can be utilised in accordance with the provisions of the Act.

(c) Preshipment packing credit

The loan is secured against hypothecation of inventories (refer note 11) and trade receivables (refer note 12).

Preshipment packing credit - Rupee (secured and unsecured) is repayable within 30 days to 180 days and carries interest @ 7.50% p.a. to 8.50% p.a.

Preshipment packing credit - foreign currency (secured and unsecured) is repayable within 30 days to 180 days and carries interest @ LIBOR 60 bps to LIBOR 125 bps p.a. and EURIBOR 45 bps to EURIBOR 70 bps p.a., respectively.

(d) Bill discounting with banks

The loan is secured against hypothecation of inventories (refer note 11) and trade receivables (refer note 12).

Bill discounting (secured and unsecured) with banks is repayable within 30 to 210 days.

Rupee and Foreign bill discounting (secured and unsecured) with banks carries interest @ 7.50% p.a. to 8.50% p.a. and LIBOR 60 bps to LIBOR 125 bps p.a. & EURIBOR 45 bps to EURIBOR 95 bps p.a., respectively.

(a) The Company offsets tax assets and tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

(b) During the year ended March 31, 2020, the Company has paid dividend to its shareholders. This has resulted in payment of Dividend Distribution Tax (DDT) to the taxation authorities. The Company believes that DDT represents additional payment to taxation authority on behalf of the shareholders. Hence, DDT paid is charged to equity.

(c) The Government of India introduced Taxation Laws (Amendment) Ordinance, 2019 (The "Ordinance") on September 20, 2019. Tax expenses for the year ended March 31, 2020 reflect changes made vide the Ordinance, as applicable to the Company.

35. LEASES

(a) Company as lessee

The Company has lease contracts for solar plant &, various items of building and leasehold land, etc. used in its operations. These leases generally have lease terms between 2 and 16 years. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. Generally, the Company is restricted from assigning and subleasing the leased assets. There are several lease contracts that include extension and termination options and variable lease payments, which are further mentioned below:

The Company also has certain leases of various assets with lease terms of 12 months or less and leases of office equipment with low value. The Company applies the ''short-term lease'' and ''lease of low-value assets'' recognition exemptions for these leases.

36. SEGMENT INFORMATION

In accordance with paragraph 4 of notified Ind AS 108 "Operating segments", the Company has disclosed segment information only on the basis of the consolidated financial statements.

37. GRATUITY AND OTHER POST-EMPLOYMENT BENEFIT PLANS

(a) Gratuity plan

Funded scheme

The Company has a defined benefit gratuity plan for its employees. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, every employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the employee''s length of service and salary at retirement age. An employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn) for each completed year of service as per the provisions of the Payment of Gratuity Act, 1972. In case of certain category of employees who have completed 10 years of service, gratuity is calculated based on 30 days salary (last drawn) for each completed year of service and cap for gratuity is 20 years. The scheme is funded with insurance companies in the form of a qualifying insurance policies.

Risk exposure and asset-liability matching

Provision of a defined benefit scheme poses certain risks, some of which are detailed hereunder, as company take on uncertain long term obligations to make future benefit payments.

37. GRATUITY AND OTHER POST-EMPLOYMENT BENEFIT PLANS CContd.):

1) Liability risks

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c) future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management''s discretion may lead to uncertainties in estimating this increasing risk.

2) Asset risks

All plan assets are maintained in a trust fund managed by a public sector insurer viz. LIC of India and other insurance companies. LIC and other insurance companies have a sovereign guarantee and have been providing consistent and competitive returns over the years. The Company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The Company has no control over the management of funds but this option provides a high level of safety for the total corpus. The same account is maintained for both the investment and claim settlement and hence, 100% liquidity is ensured and also interest rate and inflation risk are taken care of.

The following table summarises the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the gratuity plans.

37. GRATUITY AND OTHER POST-EMPLOYMENT BENEFIT PLANS CContd.):

(b) Special gratuity

The Company has a defined benefit special gratuity plan. Under the gratuity plan, every eligible employee who has completed ten years of service gets an additional gratuity on departure which will be salary of specified months based on last drawn basic salary. The scheme is unfunded.

1) Liability risks

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralise valuation swings caused by interest rate movements.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c) future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management''s discretion may lead to uncertainties in estimating this increasing risk.

2) unfunded plan risk

This represents unmanaged risk and a growing liability. There is an inherent risk here that the Company may default on paying the benefits in adverse circumstances. Funding the plan removes volatility in the Company''s financial statements and also benefit risk through return on the funds made available for the plan.

(c) Provident fund

In accordance with the law, all employees of the Company are entitled to receive benefits under the provident fund. The Company operates two plans for its employees to provide employee benefits in the nature of provident fund, viz. defined contribution plan and defined benefit plan.

Under the defined contribution plan, provident fund is contributed to the government administered provident fund. The Company has no obligation, other than the contribution payable to the provident fund.

Under the defined benefit plan, the Company contributes to the "Bharat Forge Company Limited Staff Provident Fund Trust". The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate.

The details of the defined benefit plan based on actuarial valuation report are as follows:

1) Liability risks:

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements. Hence, companies are encouraged to adopt asset-liability management.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c) Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments, resulting in a higher present value of liabilities especially unexpected salary increases provided at management''s discretion, may lead to uncertainties in estimating this increasing risk.

38. CONTINGENT LIABILITIES CContd.):

(a) The Company has issued various financial guarantees/support letter for working capital requirement of the subsidiary companies. The management has considered the probability for outflow of the same to be remote.

(b) The Company is contesting the demands raised pertaining to property tax. It also includes claim against the Company comprising of dues in respect to personnel claims (amount unascertainable), local taxes etc.

(c) Includes amount pertaining to incentive received under Government schemes, etc.

(d) Includes amount pertaining to classification differences of products, etc.

(e) Includes amount pertaining to duty demand for non-receipt of various statutory forms, etc.

(f) Includes amount pertaining to matter relating to applicability of TDS.

The Company is contesting the demands and the management, including its tax/legal advisors, believe that its position will likely be upheld in the appellate process. No provision has been recognised in the financial statements for the tax demand raised. The management based on its internal assessment and advice by its legal counsel believes that it is only possible/remote, but not probable, that the action will succeed.

Note: In cases where the amounts have been accrued, it has not been included above.

Deferred payment liabilities

Sales tax deferral incentives attached to the erstwhile windmill division, which was demerged to BF Utilities Limited (BFUL) under section 392 and 394 of the erstwhile Companies Act, 1956 sanctioned by the High Court of the Judicature at Mumbai, have been passed on thereafter from year to year by the Company to the latter, under an arrangement, with all liabilities and obligations attached thereto taken over completely by BFUL. The net liability outstanding of BFUL after such pass on amounts to '' 45.12 million (March 31, 2020: '' 97.41 million).

(1) Transactions with related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at the year end are unsecured with a short term duration unless otherwise stated and interest free except for loans and interest-bearing advance given to supplier, Saarloha Advance Materials Private Limited. settlement occurs in cash. For the year ended March 31, 2021, the Company has not recorded any impairment of receivables relating to amount owed by related parties other than those disclosed separately above (March 31, 2020 : '' Nil). This assessment is undertaken in each financial year through examining the financial position of the related party and the market in which the related party operates.

(2) All transactions were made on normal commercial terms and conditions and are at market rates.

(3) For details of guarantees given to related parties refer note 38 and 46.

(4) The Company has various other welfare trusts to administer the long term benefits for its employees for which no contribution is made in the current or previous year.

The Company, for its newly set up plant located at Mambattu, Nellore, Andhra Pradesh for Manufacture of Aluminium Casting, has imported capital Goods under the Export Promotion Capital goods Scheme of the Government of India, at concessional rates of Duty, on an undertaking to fulfill quantified exports against which remaining future obligation as on March 31, 2021 aggregates USD 9.82 million (Rs. 734.93 million), over a period of 6 years (Block year 1st to 4th year - 50% and 5th to 6th year - 50%) from December 14, 2018, while maintaining average export of USD Nil per annum, as specified. Non fulfillment of such future obligations, in the manner required, if any, entails options / rights to the Government to levy penalties under the above referred scheme.

41. DEFERRAL/CAPITALISATION OF EXCHANGE DIFFERENCES

On the date of transition to Ind AS, the Company had availed the option under Ind AS 101 para D13AA for borrowings availed before April 1, 2016, continuing the policy adopted for accounting for exchange differences arising from translation of foreign currency monetary items recognised in financial statements.

44. EFFECT OF GLOBAL HEALTH PANDEMIC RELATING TO COVID-19

The spread of COVID-19 has severely impacted business in many countries including India and there have been severe disruption to regular business operations due to lockdown and other emergency measures. This may impact the Company''s operations in certain geographies. The Company has made assessment of liquidity, recoverable values of its financial and non-financial assets, financial and non-financial liabilities, carrying value of its subsidiaries including possible obligations arising from any ongoing negotiations with customers, vendors and regulatory exposures across businesses and geographies and has concluded that there are no material adjustments required in the annual financial statements. The management believes that it has assessed and taken all the possible impacts known from these events wherever possible outcome is known. However, given the effect of these on the overall economic activity and in particular in the industry in which Company operates, the impact assessment of COVID-19 is a continuous process, given the estimation and uncertainties associated with its nature, duration and outcome of any negotiations. The impact of global health pandemic might be different from that estimated as at the date of approval of these financial results. The Company will continue to closely monitor any material changes to future economic conditions and its consequential impact on its financial results.

The management assessed that the fair value of cash and cash equivalent, trade receivables, derivative instruments, trade payables, and other current financial assets and liabilities approximate their carrying amounts largely due to the short term maturities of these instruments.

Further, the management assessed that the fair value of security deposits, trade receivables and other non-current receivables approximate their carrying amounts largely due to discounting/expected credit loss at rates which are an approximation of current lending rates.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

(i) Long-term fixed-rate and variable-rate receivables are evaluated by the Company based on parameters such as individual creditworthiness of the customer. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.

(ii) The fair values of quoted instruments are based on price quotations at the reporting date. The fair value of unquoted instruments, loans from banks as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. In addition to being sensitive to a reasonably possible change in the forecast cash flows or the discount rate, the fair value of the equity instruments is also sensitive to a reasonably possible change in the growth rates. The valuation requires management to use unobservable inputs in the model, of which the significant unobservable inputs are disclosed in note 47. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.

48. FINANCIAL INSTRUMENTS BY CATEGORY [Contd.):

(iii) The fair values of the unquoted equity shares have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management''s estimate of fair value for these unquoted equity investments.

(iv) The Company enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies and forward rate curves of the underlying. All derivative contracts are fully cash collateralised, thereby eliminating both counterparty and the Company''s own non-performance risk. As at March 31, 2021, the marked-to-market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognised at fair value.

(v) The Company''s borrowings and loans are appearing in the books at fair value since the same are interest bearing hence, discounting of the same is not required. The own non-performance risk as at March 31, 2021 and March 31, 2020 was assessed to be insignificant.

49. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Company''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures, including the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Judgements

In the process of applying the Company''s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

1) Leases

Determining the lease term of contracts with renewal and termination options - Company as lessee

The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

The Company has several lease contracts that include extension and termination options. The Company applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Company reassesses the lease term, if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customisation to the leased asset).

Refer to Note 35 for information on potential future rental payments relating to periods following the exercise date of extension and termination options that are not included in the lease term.

Property lease classification - Company as lessor

The Company has entered into commercial property leases on its investment property portfolio. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the commercial property and the present value of the minimum lease payments not amounting to substantially all of the fair value of the commercial property, that it retains substantially all the risks and rewards incidental to ownership of these properties and accounts for the contracts as operating leases.

2) Embedded derivative

The Company has entered into certain hybrid contracts i.e. where an embedded derivative is a component of a nonderivative host contract, in the nature of financial liability. The Company has exercised judgement to evaluate if the economic characteristics and risks of the embedded derivative are closely related to the economic characteristics and risks of the host. Based on the evaluation, the Company has concluded that, these economic characteristics and risks of the embedded derivatives are closely related to the economic characteristics and risks of the host and thus, not separated from the host contract and not accounted for separately.

3) Revenue from contracts with customers

The Company applied the following judgements that significantly affect the determination of the amount and timing of revenue from contracts with customers:

I. Identifying contracts with customers

The Company enters into Master service agreement (''MSA'') with its customers which define the key terms of the contract with customers. However, the rates and quantities to be supplied is separately agreed through

SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS CContd.):

purchase orders. Management has exercised judgement to determine that contract with customers for the purpose of Ind AS 115 is MSA and customer purchase orders for purpose of identification of performance obligations and other associated terms.

II. Identifying performance obligation

The Company enters into contract with customers for goods and tooling income. The Company determined that both the goods and tooling income are capable of being distinct. The fact that the Company regularly sells these goods on a standalone basis indicates that the customer can benefit from it on an individual basis. The Company also determined that the promises to transfer these goods are distinct within the context of the contract. These goods are not input to a combined item in the contract. Hence, the tooling income and the sale of goods are separate performance obligations.

III. Determination of timing of satisfaction of performance obligation for sale of products

The Company concluded that goods and tooling income is to be recognised at a point in time because it does not meet the criteria for recognising revenue over a period of time. The Company has applied judgement in determining the point in time when the control of the goods and tooling income are transferred based on the criteria mentioned in the standard read along with the contract with customers, applicable laws and considering the industry practices which are as follows:

1. Sale of goods

The goods manufactured are "Build to print" as per design specified by the customer for which the tools / dies are approved before commercial production commences. Further, the dispatch of goods is made on the basis of the purchase orders obtained from the customer taking into account the just in time production model with customer. Further, some orders have variable considerations (including LME adjustments) for the review of prices under negotiation which are estimated based on the expected probability method and, where appropriate, they would be limited to the amount that is highly unlikely to be reversed in the future.

2. Tooling income

Tools are manufactured as per the design specified by the customer which is approved on the basis of the customer acceptance. Management has used judgement in identification of the point in time where the tools are deemed to have been accepted by the customers.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

A. Estimating the incremental borrowing rate

The Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore, reflects what the Company ''would have to pay'', which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Company estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates.

B. Impairment of non-financial assets (tangible and intangible)

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or Cash Generating Unit''s (CGU''s) fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. In determining the fair value less costs to disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.

C. Defined benefit plans

The cost of the defined benefit gratuity plan, other defined benefit plan and other post-employment plans are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, expected returns on plan assets and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The mortality rate is based on publicly available mortality tables for India. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases, discount rate and return on planned assets are based on expected future inflation rates for India.

Further details about defined benefit plans are given in note 37.

D. Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using different valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements and estimates include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer note 48 for further disclosures.

E. Impairment of financial assets

The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Further, the Company also evaluates risk with respect to expected loss on account of loss in time value of money which is calculated using average cost of capital for relevant financial assets.

F. Income tax and deferred tax

Deferred tax assets are not recognised for unused tax losses as it is not probable that taxable profit will be available against which the losses can be utilised. Significant management judgement/estimate is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

Further details on taxes are disclosed in note 21.

G. Provision for Inventories

Management reviews the inventory age listing on a periodic basis. This review involves comparison of the carrying value of the aged inventory items with the respective net realizable value. The purpose is to ascertain whether an allowance is required to be made in the financial statements for any obsolete slow-moving items and net realisable value. Management is satisfied that adequate allowance for obsolete and slow-moving inventories has been made in the financial statements.

H. Current / Non-Current Classification

The Company evaluates funds requirement on the basis of internal budgets and forecasts and believes that on the basis of current scale of operations and cash realisation cycle, it would be able to generate sufficient funds from operations in order to meet such requirement in the foreseeable future of upto one year. Accordingly, the Company has classified major portion of its investment in mutual funds as non-current.

I. Litigations

The Company has various ongoing litigations, the outcome of which may have a material effect on the financial position, results of operations or cashflows. Legal team regularly analyses current information about these matters and assesses the requirement for provision for probable losses including estimates of legal expense to resolve such matters. In making the decision regarding the need for loss provision, management considers the degree of probability of an unfavourable outcome and the ability to make sufficiently reliable estimate of the amount of loss. The filing of a law suit or formal assertion of a claim against the Company or the disclosure of any such suit or assertions, does not automatically indicate that a provision of a loss may be appropriate.

Considering the facts on hand and the current stage of certain ongoing litigations where it stands, the Company foresee remote risk of any material claim arising from claims against the Company. Management has exercised significant judgement in assessing the impact, if any, on the disclosures in respect of litigations in relation to the Company.

50. hedging activities and derivatives

Cash flow hedges

Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast sales in US Dollar and Euro. These forecast transactions are highly probable.

The foreign exchange forward contract balances vary with the level of expected foreign currency sales and changes in foreign exchange forward rates.

The cash flow hedges of the expected future sales during the year ended March 31, 2021 were assessed to be highly effective and a net unrealised (loss) / gain of '' 2,784.32 million (March 31, 2020: '' (688.49) million), with a deferred tax liability of '' 700.76 million (March 31, 2020 '' 173.28 million) relating to the hedging instruments, is included in OCI.

The amount removed from OCI during the year and included in the carrying amount of the hedged item as an adjustment for the year ended March 31, 2021 as detailed in note 33, totaling '' 523.40 million (gross of deferred tax) (March 31, 2020: '' (644.90) million). The amounts retained in OCI at March 31, 2021 are expected to mature and affect the statement of profit and loss till the year ended March 31, 2025.

Fair value hedges

At March 31, 2021 and March 31, 2020, the Company has a cross currency swap agreement in place. The same contract was also outstanding as on March 31, 2020. Through this arrangement, the Company has converted one of its USD loans into a Euro loan to avail the benefit of the negative EURIBOR. Under the original agreement the interest rate was fixed at LIBOR 67 basis points, but due to the cross currency swap arrangement the revised interest rate has been fixed at EURIBOR 87 basis points, decreasing the corresponding interest cost on the term loan.

Also as at March 31, 2020 the Company had certain forward contracts outstanding, which are being used to hedge the exposure to changes in fair value of its underlying borrowings and trade receivables.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Company''s principal financial liabilities other than derivatives comprise loans and borrowings, trade payables and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company''s operations. The Company''s principal financial assets include loans, trade and other receivables and cash and cash equivalents that derive directly from its operations. The Company also holds FVTOCI and FVTPL investments and enters into derivative transactions.

The Company is exposed to market risk, credit risk and liquidity risk. The Company''s senior management oversees the management of these risks. The Company''s senior management is supported by a Finance and Risk Management Committee (FRMC) that advises on financial risks and the appropriate financial risk governance framework for the Company. The FRMC provides 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. Further, all the derivative activities for risk management purposes are carried out by experienced members from the senior management who have the relevant expertise, appropriate skills and supervision. It is the Company''s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised as below.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings, deposits, investments in mutual funds, FVTOCI investments and derivative financial instruments.

The sensitivity analysis in the following sections relate to the position as at March 31, 2021 and March 31, 2020.

The sensitivity analysis have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant and on the basis of hedge designations in place at March 31, 2021 and comparatively as at March 31, 2020.

The analysis excludes the impact of movements in market variables on the carrying values of gratuity and other post-retirement obligations and provisions.

The below assumptions have been made in calculating the sensitivity analysis:

The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2021 and March 31, 2020 including the effect of hedge accounting.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company''s exposure to the risk of changes in market interest rates relates primarily to the Company''s long-term debt obligations with floating interest rates, other than 5.97% rated unsecured non-convertible debentures which have a fixed interest rate.

The Company generally borrows in foreign currency, considering natural hedge it has against its export. Long-term and short-term foreign currency debt obligations carry floating interest rates.

The Company avails short term debt in foreign currency up to tenor of 9 months, in the nature of export financing for its working capital requirements. LIBOR or EURIBOR for the said debt obligations is fixed for the entire tenor of the debt, at the time of availment.

The Company has an option to reset LIBOR or EURIBOR either for 6 Months or 3 months for its long term debt obligations. To manage its interest rate risk, the Company evaluates the expected benefit from either of the LIBOR resetting options and accordingly decides. The Company also has an option for its long term debt obligations to enter into interest rate swaps, in which it agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount.

As at March 31 2021, the Company''s 75.85% of total long term borrowings are covered under floating rate of interest (March 31 2020: 100.00%).

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company''s exposure to the risk of changes in foreign exchange rates relates primarily to the Company''s export revenue and long term foreign currency borrowings.

The Company manages its foreign currency risk by hedging its forecasted sales up to 3 to 4 years to the extent of 25%-65% on rolling basis and the Company keep its long term foreign currency borrowings un-hedged which will be natural hedge against its un-hedged exports. The Company may hedge its long term borrowing near to the repayment date to avoid rupee volatility in short term.

The Company avails bills discounting facility in INR for some of its export receivables to avail interest subvention benefit The Company manages foreign currency risk by hedging the receivables against the said liability.

Commodity price risk

The Company is affected by the price volatility of certain commodities. Its operating activities require on-going purchase of steel. Due to significant volatility of the price of steel, the Company has agreed with its customers for pass-through of increase/decrease in prices of steel. There may be lag effect in case of such pass-through arrangements.

Commodity price sensitivity

The Company has back to back pass through arrangements for volatility in raw material prices for most of the customers. However, in few cases there may be lag effect in case of such pass through arrangements and might have some effect on the Company''s profit and equity.

Equity price risk

The Company is exposed to price risk in equity investments and classified on the balance sheet as fair value through profit and loss and through other comprehensive income. To manage its price risk arising from investments in equity, the Company diversifies its portfolio. Diversification and investment in the portfolio is done in accordance with the limits set by the Board of Directors.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CContd.):

At the reporting date, the exposure to unlisted equity securities at fair value was '' 974.23 million (March 31, 20


Mar 31, 2019

* Derivative instruments as fair value through profit or loss reflect change in fair value of those instruments that are not designated in hedge relationships, but are, nevertheless intended to reduce the level of foreign currency risk expected on repayment.

# includes unpaid due to litigation

[a] The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

[b] During the year ended March 31, 2019 and March 31, 2018, the Company has paid dividend to its shareholders. This has resulted in payment of Dividend Distribution Tax [DDT] to the taxation authorities. The Company believes that DDT represents additional payment to taxation authority on behalf of the shareholders. Hence, DDT paid is charged to equity.

[c] The Company has tax losses which arose due to capital loss of Rs, 199.60 million [March 31, 2018:Rs,148.21 million] that are available for offsetting for eight years against future taxable profits of the companies in which the losses arose. This loss will expire in eight years from the end of the respective year to which it pertains.

[d] Deferred tax assets have not been recognized in respect of the above mentioned loss as they may not be used to offset taxable profits, they have arisen on account of loss on sale of investment and there are no other evidence of recoverability in the near future. If the Company were able to recognise all unrecognized deferred tax assets, the profit would increase by Rs, 69.75 million [March 31, 2018 : Rs, 51.79 million].

1. Other liabilities (Contd.):

$ The contract liabilities primarily relate to the advance consideration received on contracts entered with customers for which performance obligations are yet to be performed, therefore, revenue will be recognized when the goods are passed on to the customers.

# Includes payable with respect to GST, LBT, Gram Panchayat Tax, Withholding taxes, provident fund etc.

* Others includes rent received in advance, rent equalization reserve and miscellaneous liabilities.

* Revenue from operations for periods up to June 30, 2017 includes excise duty. From July 01, 2017 onwards the excise duty and most indirect taxes in India have been replaced with Goods and Service Tax [GST], The Company collects GST on behalf of the Government. Hence, GST is not included in revenue from operations. In view of the aforesaid change in indirect taxes, revenue from operations for the year ended March 31, 2019 is not comparable with March 31, 2018.

# Revenue from operations net of excise duty for previous year was '' 51,585.06 million.

Sale of products includes excise duty collected from customers of Rs, Nil [March 31, 2018 : Rs, 569.80 million].

Sale of goods includes F.O.B. value of export of Rs, 36,848.84 million [March 31, 2018 : Rs,29,321.31 million].

* Includes Government grants received as part of the Packaged Scheme of Incentives for the purpose of capital investment in designated areas and also includes government grant on reshipment credit and bill discounting where the Company has availed the benefit of interest equalization scheme of the Reserve Bank of India. Interest on borrowings is accounted for on gross basis in note 30. There are no unfulfilled conditions or contingencies attached to these grants.

** Includes interest on account of unwinding of security deposits.

*** Miscellaneous income includes sundry sale, discount received, miscellaneous recovery etc.

Ca) Provision for diminution in value of investments in subsidiary and joint venture CJV), advances and expected losses

Ci) BF Infrastructure Limited CBFIL, India) - Subsidiary

BFIL had invested, as a minority partner, in two Oil Block exploration contracts awarded by the Government of India. Minimum work program [MWP] as well as testing of explored wells was completed during the previous year. Based on testing result of the wells and its techno-economic viability, BFIL had decided not to proceed beyond MWP stage and had provided for all expenditure [including intangible under development] pertaining to MWP in the previous year.

Accordingly, considering the financial position of the subsidiary, the Company had provided an amount of '' 869.84 million towards diminution in carrying cost of its investments and Rs,225.76 million towards diminution in carrying cost of its advances given in the previous year.

Further, the Company had provided for a loss of Rs,210.00 million relating to additional and final MWP payment to be made for the said oil block exploration contracts by the subsidiary.

(ii) BF NTPC Energy Systems Limited (BFNTPCESL) - JV

Considering BFNTPCESL had proceeded with liquidation of business, the Company had provided an amount of Rs, 26.45 million towards diminution in carrying cost of its investments in previous year.

2. Leases

(a) Operating leases : Company as lessee

The Company has entered into agreements in the nature of lease/leave and license agreement with different lessors/licensors for the purpose of establishment of office premises/residential accommodations etc. These are generally in the nature of operating lease/ leave and license. There are no transactions in the nature of sublease. Period of agreements is between 1 to 10 years and renewal at the options of the lessee. There are no restrictions placed upon the Company by entering into these leases.

The lease rentals charaed durina the period are as under: In '' Million

(b) Operating leases : Company as less or

The Company has entered into agreements/arrangement in the nature of lease/sub-lease agreement with different lessees for the purpose of land & building. These are generally in the nature of operating lease. Period of agreements/arrangement are generally for three years to ten years and cancellable with a notice of thirty days to six months and renewal at the options of the lessee/lessor.

3. Segment information

In accordance with paragraph 4 of notified Ind AS 108 “Operating segments", the Company has disclosed segment information only on the basis of the consolidated financial statements.

4. Gratuity and other post-employment benefit plans

(a) Gratuity plan Funded scheme

The Company has a defined benefit gratuity plan for its employees. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, every employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the employee’s length of service and salary at retirement age. Employee who has completed five years or more of service gets a gratuity on departure at 15 days salary [last drawn] for each completed year of service as per the provisions of the Payment of Gratuity Act, 1972. In case of certain category of employees who have completed 10 years of service, gratuity is calculated based on 30 days salary [last drawn] for each completed year of service and cap for gratuity is 20 years. The scheme is funded with insurance companies in the form of a qualifying insurance policies.

Risk exposure and asset-liability matching

Provision of a defined benefit scheme poses certain risks, some of which are detailed hereunder, as company take on uncertain long term obligations to make future benefit payments.

1) Liability risks

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c) Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management’s discretion may lead to uncertainties in estimating this increasing risk.

2) Asset risks

All plan assets are maintained in a trust fund managed by a public sector insurer viz. LIC of India and other insurance companies. LIC and other insurance companies has a sovereign guarantee and have been providing consistent and competitive returns over the years. The Company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The Company has no control over the management of funds but this option provides a high level of safety for the total corpus. The same account is maintained for both the investment and claim settlement and hence 100% liquidity is ensured and also interest rate and inflation risk are taken care of.

5. Gratuity and other post-employment benefit plans CContd,):

The following table summarizes the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for the gratuity plans.

The estimates of future salary increases, considered in actuarial valuation, takes account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The sensitivity analysis above has been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period.

Weighted average duration of the plan [based on discounted cash flows using mortality, withdrawal and interest rate] is 6.88 years.

(b) Special gratuity

The Company has a defined benefit special gratuity plan. Under the gratuity plan, every eligible employee who has completed ten years of service gets an additional gratuity on departure which will be salary of specified months based on last drawn basic salary. The scheme is unfunded.

1) Liability risks

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c) Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management’s discretion may lead to uncertainties in estimating this increasing risk.

2) Unfunded plan risk

This represents unmanaged risk and a growing liability. There is an inherent risk here that the Company may default on paying the benefits in adverse circumstances. Funding the plan removes volatility in the Company’s financials and also benefit risk through return on the funds made available for the plan.

(C) Provident fund

In accordance with the law, all employees of the Company are entitled to receive benefits under the provident fund. The Company operates two plans for its employees to provide employee benefits in the nature of provident fund, viz. defined contribution plan and defined benefit plan.

Under the defined contribution plan, provident fund is contributed to the government administered provident fund. The Company has no obligation, other than the contribution payable to the provident fund.

Under the defined benefit plan, the Company contributes to the “Bharat Forge Company Limited Staff Provident Fund Trust". The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate.

The details of the defined benefit plan based on actuarial valuation report are as follows:

1) Liability risks:

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements. Hence companies are encouraged to adopt asset-liability management.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c) Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management''s discretion mav lead to uncertainties in estimating this increasing risk.

[a] The Company has issued various financial guarantees/support letter for working capital requirement of the subsidiary companies. The management has considered the probability for outflow of the same to be remote.

[b] The Company is contesting the demands raised pertaining to property tax. It also includes claim against the Company comprising of dues in respect to personnel claims [amount unascertainable], local taxes etc.

[c] Includes amount pertaining to incentive received under Government scheme, etc.

[d] Includes amount pertaining to classification differences of products etc.

[e] Includes amount pertaining to duty demand for non-receipt of various statutory forms, etc.

[f] Includes amount pertaining to matter relating to applicability ofTDS.

The Company is contesting the demands and the management, including its tax/legal advisors, believe that its position will likely be upheld in the appellate process. No provision has been recognized in the financial statements for the tax demand raised. The management based on its internal assessment and advice by its legal counsel believes that it is only possible, but not probable, that the action will succeed.

Note: In cases where the amounts have been accrued, it has not been included above.

Provident Fund

There are numerous interpretative issues relating to the Supreme Court [SC] judgment on PF dated February 28, 2019. As a matter of caution, the Company has made a provision on a prospective basis from the date of the SC order.

Deferred payment liabilities

Sales tax deferral incentives attached to the erstwhile windmill division, which was demerged to BF Utilities Limited [BFUL] under section 392 and 394 of the erstwhile Companies Act, 1956 sanctioned by the High Court of the Judicature at Mumbai, have been passed on thereafter from yearto year by the Company to the latter, under an arrangement, with all liabilities and obligations attached thereto taken over completely by BFUL. The net liability outstanding of BFUL after such pass on amounts to Rs,174.97 million [March 31, 2018:Rs,277.82 million].

6. Related Party disclosures

(i) Names of the related parties and related party relationship Related parties where control exists

Subsidiaries Bharat Forge Global Holding GmbH

Bharat Forge America Inc.

BF Infrastructure Limited Kalyani Strategic Systems Limited Bharat Forge International Limited BF Elbit Advanced Systems Private Limited Analogic Controls India Limited

__Indigenous IL Limited [w.e.f. January 18, 2018]_

Step down subsidiaries Bharat Forge CDP GmbH

Bharat Forge CDP Trading Bharat Forge Holding GmbH Bharat Forge Tennessee Inc.

Bharat Forge PMTTechnologie LLC Bharat Forge Aluminiumtechnik GmbH Bharat Forge Kilsta AB Bharat Forge Hong Kong Limited Bharat Forge Daun GmbH

Kalyani Rafael Advanced Systems Private Limited __Mecanique Generale Langroise_

Related parties with whom transactions have taken place during the period_

Joint venture BF NTPC Energy Systems Limited

Joint venture of a subsidiary BF Premier Energy Systems Private Limited

Associates Tork Motors Private Limited [w.e.f. February 27, 2018]

Hospet Bellary Highways Pvt. Ltd.

Tork Motors [UK] Ltd.

Lycan Electric Pvt. Ltd.

Talbahn GmbH

Tevva Motors [Jersey] Limited [w.e.f. June 11, 2018]

Other related party Kalyani Steels Limited

BF Utilities Limited

Khed Economic Infrastructure Private Limited Kalyani Maxion Wheels Private Limited Automotive Axles Limited Institute for Prostrate Cancer United Metachem Private Limited Harmony Electoral Trust

Daimler India Commercial Vehicles Private Limited [from May 19, 2016 up to November 19, 2017]

Key management personnel Mr. B. N. Kalyani [Chairman and Managing Director]

Mr. A. B. Kalyani [Executive Director]

Mr. G. K. Agarwal [Deputy Managing Director]

Mr. B. P. Kalyani [Executive Director]

Mr. S. E. Tandale [Executive Director]

Mr. K. M. Saletore [Executive Director & CFO]

Ms. T. R. Chaudhari [Company secretary]

Related parties where control exists

Key management personnel Mr. P. G. Pawar [Independent Director]

Mr. S. M. Thakore [Independent Director]

Mrs. L. D. Gupte [Independent Director]

Mr. P. H. Ravikumar[lndependent Director]

Mr. P. C. Bhalerao [Independent Director]

Mr. N. K. Narad [Independent Director] [up to March 31, 2019]

Dr. T. Mukherjee [Independent Director] [up to March 31, 2019] Mr. V. R. Bhandari [Independent Director]

Relatives of key management personnel Smt. S. N. Kalyani

Mr. G. N. Kalyani Mrs. A. G. Agarwal Mrs. S. S. Tandale Mr. P. S. Kalyani Mrs. V. B. Kalyani

Post employment benefit trusts Bharat Forge Company Limited Staff Provident Fund

Bharat Forge Company Limited Employees Group Gratuity fund Bharat Forge Company Limited Officer’s Group Gratuity fund Bharat Forge Company Limited Officer’s Superannuation scheme Transactions and balances less than 10% of the total transactions and balances are disclosed as “Others".

** Does not include gratuity and leave encashment since the same is considered for all employees of the Company as a whole.

Outstanding balances at the year end are unsecured with a short term duration and interest free except for loans and settlement occurs in cash. For the year ended March 31, 2019, the Company has not recorded any impairment of receivables relating to amount owed by related parties other than those disclosed separately above. This assessment is undertaken in each financial year through examining the financial position of the related party and the market in which the related party operates.

All transactions were made on normal commercial terms and conditions and are at market rates.

For details of guarantees given to related parties refer note 46.

The Company has various other welfare trusts to administer the long term benefits for its employees for which no contribution is made in the current or previous year.

7. Deferral/Capitalization of exchange differences

On the date of transition to Ind AS, the Company has availed the option under Ind AS 101 para D13AA for borrowings availed before April 1, 2016, continuing the policy adopted for accounting for exchange differences arising from translation of foreign currency monetary items recognized in financial statements.

# For the loan given in FY 2010-11 for which no terms has changed thereafter.

* Receivable on demand.

- All loans are unsecured

- Details of investments made are given in Note 6 and 7

- Guaranteegivenonbehalfof

- Bharat Forge Kilsta AB, step down subsidiary company, of Rs, 1,397.74 million [March 31, 2018: Rs,1,454.73 million] for working capital requirement which was renewed during the current year.

- Bharat Forge America Inc., wholly owned subsidiary company, of Rs, 276.64 million [March 31, 2018: Rs, 260.75 million] for term loan or loans towards investment in step-down subsidiaries.

(a) Gupta Energy Private Limited (GEPL)

The Company has an investment in equity instrument of GEPL. The same is classified as fair value through profit and loss. Over the years GEPL has been making consistent losses. The management of the Company has made attempts to obtain latest information for the purpose of valuation. However, such information is not available as GEPL has not filed the financial statements with MCA since FY 2014-15. In view of the above, the management believes that the fair value of the investment is Nil as at April 1, 2015 and thereafter.

(b) KPIT Technologies Limited

The Company had invested into 613,000 equity shares of Rs, 2/- each of KPIT Technologies Limited. The Hon’ble National Company Law Tribunal, Mumbai Bench, has by its order approved the composite scheme of arrangement [Scheme], amongst Birlasoft [India] Limited, KPIT Technologies Limited, KPIT Engineering Limited and their respective shareholders. Pusuant to the Scheme, the engineering business of KPIT Technologies Limited has been transferred to KPIT Engineering Limited.

Pursuant to the order, Birlasoft [India] Limited has merged with KPIT Technologies Limited and KPIT Technologies has been renamed as “Birlasoft Limited. KPIT Engineering Limited has been renamed as “KPIT Technologies Limited".

Pursuant to the Scheme, the Company has received 1 equity share of KPIT Technologies Ltd. of Rs,10/- each for 1 equity share of Birlasoft Ltd. of Rs, 2/- each. The ratio of cost of acquisition per share of Birlasoft Ltd. and KPIT Technologies Ltd. is 56.64% to 43.36%.

Further on January 24, 2019; the resultant entity shares were delisted at'' 98.65. Subsequently the said shares were listed on April 22, 2019 with slightly higher price than on January 24, 2019. Accordingly, the investment in shares has been classified under level 1 of thefair value hierarchy.

CO Bharat Forge Infrastructure Limited CBFIL, India)

During the previous year, Preference shares of BFIL, India had been converted in to compulsorily convertible preference shares in the ratio of 1:1. Accordingly the same has been classified as investment in the nature of equity and carried at fair value on the date of conversion which is subsequently considered as its cost.

48. Financial instruments by category

Set out below is a comparison, by class, of the carrying amounts and fair value of the Company’s financial instruments as of March 31, 2019; other than those with carrying amounts that are reasonable approximates of fair values:

Further the management assessed that the fair value of security deposits, trade receivables and other non-current receivables approximate their carrying amounts largely due to discounting/expected credit loss at rates which are an approximation of current lending rates.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

[i] Long-term fixed-rate and variable-rate receivables are evaluated by the Company based on parameters such as individual creditworthiness of the customer. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.

[ii] The fair values of quoted instruments are based on price quotations at the reporting date. The fair value of unquoted instruments, loans from banks as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. In addition to being sensitive to a reasonably possible change in the forecast cash flows or the discount rate, the fair value of the equity instruments is also sensitive to a reasonably possible change in the growth rates. The valuation requires management to use unobservable inputs in the model, of which the significant unobservable inputs are disclosed in the tables below. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.

[iii] The fair values of the unquoted equity shares have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management’s estimate off-air value for these unquoted equity investments.

[iv] The Company enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies and forward rate curves of the underlying. All derivative contracts are fully cash collateralized, thereby eliminating both counterparty and the Company’s own non-performance risk. As at March 31, 2019 the marked-to-market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognized at fair value.

[v] The Company’s borrowings and loans are appearing in the books at fair value since the same are interest bearing hence discounting of the same is not required. The own nonperformance risk as at March 31, 2019 and March 31, 2018 was assessed to be insignificant.

The preparation of the Company’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures, including the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Judgments

In the process of applying the Company’s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognized in the financial statements:

1] Significant judgments is required to apply lease accounting rules under appendix C to Ind AS 17 Determining whether an arrangement contains a lease. In assessing the applicability to arrangements entered into by the Company with its various sub-contractors regarding providing of certain services, the Company has exercised judgment to evaluate the right to use the underlying assets, substance of the transaction including legally enforced arrangements, and other significant terms and conditions of the arrangement to conclude whether the arrangements meets the criteria under Appendix C to Ind AS 17. Based on the evaluation, the Company has concluded that the arrangements do not meet the definition of lease as specified under appendix C to Ind AS 17.

2] Embedded derivative - The Company has entered into certain hybrid contracts i.e. where an embedded derivative is a component of a no derivative host contract, in the nature of financial liability. The Company has exercisedjudgement to evaluate if the economic characteristics and risks of the embedded derivative are closely related to the economic characteristics and risks of the host. Based on the evaluation, the Company has concluded, that these economic characteristics and risks of the embedded derivatives are closely related to the economic characteristics and risks of the host and thus not separated from the host contract and not accounted for separately.

3] Operating lease commitments - The Company has entered into land leases on its investment property portfolio. The Company has determined, based on evaluation of the terms and conditions of the arrangements such as the lease term not continuing a major part of the economic life of the commercial property and the fair value of the asset, that it retains all the significant risk and rewards of ownership of these properties and account for the contract/arrangements as operating leases.

4] Revenue from contracts with customers

The Company applied the following judgments that significantly affect the determination of the amount and timing of revenue from contracts with customers:

I. Identifying contract with customers

The Company enters into Master service agreement [''MSA''] with its customers which define the key terms of the contract with customers. However, the rates for quantity to be supplied is separately agreed through purchase orders. Management has exercised judgment to determine that contract with customers for the purpose of Ind AS 115 is MSA and customer purchase orders for purpose of identification of performance obligations and other associated terms.

II. Identifying performance obligation

The Company enters into contract with customers for goods and tooling income. The Company determined that both the tooling income and the goods are capable of being distinct. The fact that the Company regularly sell these goods on a standalone basis indicate that the customer can benefit from it on an individual basis. The Company also determined that the promises to transfer these goods are distinct within the context of the contract. These goods are not input to a combined item in the contract. Hence, the tooling income and the sale of goods are separate performance obligations.

III. Determination of timing of satisfaction of performance obligation for sale of products

The Company concluded that tooling income and goods is to be recognized at a point in time because it does not meet the criteria for recognizing revenue over a period of time. The Company has applied judgment in determining the point in time when the control of the tooling income and goods are transferred based on the criteria mentioned in the standard read along with the contract with customers, applicable laws and considering the industry practices which are as follows:

1. Sale of goods

The goods manufactured are “Build to print" as per design specified by the customer for which the tools/dies are approved before commercial production commences. Further, the dispatch of goods is made on the basis of the purchase orders obtained from the customer taking into account the just in time production model with customer. Further some orders have variable considerations [including LME adjustments] for the review of prices under negotiation which are estimated based on the expected probability method and, where appropriate, they would be limited to the amount that is highly unlikely to be reversed in the future.

2. Tooling income

Tools are manufactured as per the design specified by the customer which is approved on the basis of the customer acceptance. Management has usedjudgment in identification of the point in time where the tools are deemed to have been accepted by the customer.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

A. Impairment of non-financial assets [tangible and intangible)

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. In determining the fair value less costs to disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.

B. Defined benefit plans

The cost of the defined benefit gratuity plan, other defined benefit plan and other post-employment plans are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, expected returns on plan assets and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The mortality rate is based on publicly available mortality tables for India. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases, discount rate and return on planned assets are based on expected future inflation rates for India.

Further details about defined benefit plans are given in Note 37.

C. Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using different valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments and estimates include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer note 48 for further disclosures.

D. Impairment of financial assets

The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on Company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Further, the Company also evaluates risk with respect to expected loss on account of loss in time value of money which is calculated using average cost of capital for relevant financial assets.

E. Income tax and deferred tax

Deferred tax assets are not recognized for unused tax losses as it is not probable that taxable profit will be available against which the losses can be utilized. Significant management judgment/estimate is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

Further details on taxes are disclosed in note 21.

F. Provision for Inventories

Management reviews the inventory age listing on a periodic basis. This review involves comparison of the carrying value of the aged inventory items with the respective net realizable value. The purpose is to ascertain whether an allowance is required to be made in the financial statements for any obsolete slow-moving items and net realizable value. Management is satisfied that adequate allowance for obsolete and slow-moving inventories has been made in the financial statements.

G. Current / Non-Current Classification

The Company evaluates funds requirement on the basis of internal budgets and forecasts and believes that on the basis of current scale of operations and cash realization cycle, it would be able to generate sufficient funds from operations in order to meet such requirement in the foreseeable future of up to one year. Accordingly, the Company has classified major portion of its investment in mutual funds as non-current.

H. Litigations

The Company has various ongoing litigations, the outcome of which may have a material effect on the financial position, results of operations or cash flows. Management regularly analyses current information about these matters and assesses the requirement for provision for probable losses including estimates of legal expense to resolve such matters. In making the decision regarding the need for loss provision, management considers the degree of probability of an unfavorable outcome and the ability to make sufficiently reliable estimate of the amount of loss. The filing of a law suit or formal assertion of a claim against the Company or the disclosure of any such suit or assertions, does not automatically indicate that a provision of a loss may be appropriate.

8. Hedging activities and derivatives Cash flow hedges

Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast sales in US Dollar and Euro. These forecast transactions are highly probable.

The foreign exchange forward contract balances vary with the level of expected foreign currency sales and changes in foreign exchange forward rates.

In '' Million

The cash flow hedges of the expected future sales during the year ended March 31, 2019 were assessed to be highly effective and a net unrealised gain of Rs,1,736.44 million [March 31, 2018: Rs,1,685.27 million], with a deferred tax liability of Rs, 606.78 million [March 31, 2018: '' 588.90 million] relating to the hedging instruments, is included in OCI.

The amount removed from OCI during the year and included in the carrying amount of the hedged item, Revenue from operations [highly probable forecast sales] as an adjustment for the year ended March 31, 2019 as detailed in Note 33, totaling Rs,1,220.61 million [gross of deferred tax] [March 31, 2018: Rs,2,132.64 million]. The amounts retained in OCI at March 31, 2019 are expected to mature and affect the statement of profit and loss till the year ended March 31, 2022.

Fair value hedges

At March 31, 2019, the Company had a cross currency swap agreement in place. The same contract was also outstanding as on March 31, 2018. Through this arrangement, the Company has converted one of its USD loans into a Euro loan to avail the benefit of the negative EURIB0R. Under the original agreement the interest rate was fixed at LIBOR 67 basis points, but due to the cross currency swap arrangement the revised interest rate has been fixed at EURIB0R 87 basis points, decreasing the corresponding interest cost on the term loan.

9. Hedging activities and derivatives (Contd.):

Also as at March 31, 2019, the Company had certain forward contracts outstanding, which are being used to hedge the exposure to changes in fair value of its underlying trade receivables. No such contracts existed as at March 31, 2018.

Derivatives not designated as hedging instruments

The Company has used foreign exchange forward contracts to manage repayment of some of its foreign currency denominated borrowings. These foreign exchange forward contracts are not designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions i.e. the repayments of foreign currency denominated borrowings.

Financial risk management objectives and policies

The Company’s principal financial liabilities other than derivatives comprise loans and borrowings, trade payables and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include loans, trade and other receivables and cash and cash equivalents that derive directly from its operations. The Company also holds FVTOCI and FVTPL investments and enters into derivative transactions.

The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The Company’s senior management is supported by a Finance and Risk Management Committee [FRMC] that advises on financial risks and the appropriate financial risk governance framework for the Company. The FRMC provides 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. Further, all the derivative activities for risk management purposes are carried out by experienced members from the senior management who have the relevant expertise, appropriate skills and supervision. It is the Company’s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized as below.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings, deposits, investment in mutual funds, FVTOCI investments and derivative financial instruments.

The sensitivity analysis in the following sections relate to the position as at March 31, 2019 and March 31, 2018.

The sensitivity analysis have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant and on the basis of hedge designations in place at March 31, 2019 and comparatively as at March 31, 2018.

The analysis excludes the impact of movements in market variables on the carrying values of gratuity and other post-retirement obligations and provisions.

The below assumptions have been made in calculating the sensitivity analysis:

The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2019 and March 31, 2018 including the effect of hedge accounting

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates.

The Company generally borrows in Foreign Currency, considering natural hedge it has against its export. Long-term and Short-term foreign currency debt obligations carry floating interest rates.

The Company avails short term debt in foreign currency up to tenor of 9 months, in the nature of export financing for its working capital requirements. LIBORorEURIBORforthesaid debt obligations is fixed for the entire tenor of the debt, at the time of a ailment.

The Company has an option to reset LIBOR or EURIB0R either for 6 Months or 3 months for its long term debt obligations. To manage its interest rate risk, the Company evaluates the expected benefit from either of the LIBOR resetting options and accordingly decides. The Company also has an option for its long term debt obligations to enter into interest rate swaps, in which it agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount.

As at March 31 2019, the Company’s entire long term borrowings are at a floating rate of interest [March 31 2018: 100%].

* During the current and previous financial year, EURIB0R was trading in negative zone and some of the Euro borrowings were floored at zero EURIB0R while others were trading at floating EURIB0R. Further Euro borrowings includes USD borrowings swapped in to EURO borrowings through cross currency swap.

10. Financial risk management objectives and policies CContd.):

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s export revenue and long term foreign currency borrowings.

The Company manages its foreign currency risk by hedging its forecasted sales up to 3 to 4 years to the extent of 25%-65% on rolling basis and the Company keep its long term foreign currency borrowings un-hedged which will be natural hedge against its un-hedged exports. The Company may hedge its long term borrowing near to the repayment date to avoid rupee volatility in short term.

The Company avails bills discounting facility in INR for some of its export receivables to avail interest subvention benefit. The Company manages foreign currency risk by hedging the receivables against the said liability.

When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of forecast transactions, the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency. The Company discloses fair value of the outstanding derivative in the financial statements. The impact on the Company’s pre-tax equity due to changes in fair value of the outstanding forward contracts as follows:

Foreign currency sensitivity

The following tables demonstrate the sensitivity to a reasonably possible change in USD and EUR exchange rates, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of un-hedged monetary assets and liabilities. The Company’s exposure to foreign currency changes for all other currencies is not material.

Commodity price risk

The Company is affected by the price volatility of certain commodities. Its operating activities require the on-going purchase of steel. Due to significant volatility of the price of the steel, the Company has agreed with its customers for pass-through of increase/decrease in prices of steel. There may be lag effect in case of such pass-through arrangement.

Commodity price sensitivity

The Company has a back to back pass through arrangements for volatility in raw material prices for most of the customers. However in few cases there may be lag effect in case of such pass through arrangements and might have some effect on the Company’s profit and equity.

Equity price risk

The Company is exposed to price risk in equity investments and classified on the balance sheet as fair value through profit or loss and through other comprehensive income. To manage its price risk arising from investments in equity, the Company diversifies its portfolio. Diversification and investment in the portfolio is done in accordance with the limits set by the Board.

At the reporting date, the exposure to unlisted equity securities at fair value was '' 812.24 million [March 31, 2018: '' 753.51 million]. Sensitivity analysis of major investments have been provided in Note 47.

At the reporting date, the exposure to listed equity securities at fair value was '' 60.46 million [March 31, 2018:Rs,132.73 million], A decrease of 10% on the NSE market index could have an impact of approximately '' 6.05 million [March 31, 2018:Rs, 13.27 million] on the OCI or equity attributable to the Company. An increase of 10% in the value of the listed securities could have impact of approximately Rs, 6.05 million [March 31, 2018: Rs, 13.27 million] on OCI and equity. These changes would not have an effect on profit or loss.

Other price risk

The Company invests its surplus funds in mutual funds and zero coupon bonds which are linked to debt markets. The Company is exposed to price risk for investments in such investments that are classified as fair value through profit or loss. To manage its price risk arising from investments in mutual funds and zero coupon bonds, the Company diversifies its portfolio. Diversification and investment in the portfolio is done in accordance with Company’s investment policy approved by the Board of Directors. Accordingly, increase/decrease in interest rates by 0.25% will have an impact of Rs, 33.27 million [March 31, 2018: Rs, 34.89 million]

Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities [primarily trade receivables] and from its financing activities, including deposits with banks and financial institutions, investment in mutual funds, other receivables and deposits, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed by the Company’s established policy, procedures and control relating to customer credit risk management. Further, Company’s customers includes marquee Original Equipment Manufacturers and Tier I companies, having long standing relationship with the Company. Outstanding customer receivables are regularly monitored and reconciled. At March 31, 2019, receivable from Company’s top 5 customers accounted for approximately 37% [March 31, 2018: 34%] of all the receivables outstanding. An impairment analysis is performed at each reporting date on an individual basis for major customers. In addition, a large number of minor receivables are grouped in to homogeneous groups and assessed for impairment collectively. The calculation is based on historical data and subsequent expectation of receipts. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note

12. The Company does not hold collateral as security except in case of few customers. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Other receivables, deposits with banks, mutual funds and loans given

Credit risk from balances with banks, financial institutions and mutual funds is managed in accordance with the Company’s approved investment policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Company’s Board of Directors on regular basis and the said limits gets revised as and when appropriate. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.

The Company’s maximum exposure to credit risk for the components of the balance sheet at March 31, 2019 and March 31, 2018 is the carrying amounts as illustrated in the respective notes except for financial guarantees and derivative financial instruments. The Company’s maximum exposure relating to financial guarantees and financial derivative instruments is noted in Note 46 and Note 50 respectively.

Liquidity risk

Cash flow forecasting is performed by Treasury function. Treasury monitors rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs. Such forecasting takes into consideration the compliance with internal cash management. The Company’s treasury invests surplus cash in marketable securities as per the approved policy, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the above-mentioned forecasts. At the reporting date, the Company held mutual funds of Rs, 13,038.94 million [March 31, 2018: Rs, 13,957.03 million] and other liquid assets of Rs, 3,929.23 million [March 31, 2018: Rs, 1,840.84 million] that are expected to readily generate cash inflows for managing liquidity risk.

As per the Company’s policy, there should not be concentration of repayment of loans in a particular financial year. In case of such concentration of repayment, the Company evaluates the option of refinancing entire or part of repayments for extended maturity. The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding and debt maturing within 12 months can be rolled over with existing lenders and the Company is also maintaining surplus funds with short term liquidity for future repayment of loans.

11. Capital Management:

For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to maximize the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a net debt equity ratio, which is net debt divided by equity. The Company’s policy is to keep the net debt equity ratio below 1.00. The Company includes within its borrowings net debt and interest bearing loans less cash and cash equivalents.

fin Rs, milhi-.nl

In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call back loans and borrowings. There have been no breaches in the financial covenants ofany interest-bearing loans and borrowing in the current period and in the year ended March 31, 2018.

No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2019 and March 31, 2018.

53. Standards issued but not yet effective Ind AS 116 Leases

Ind AS 116 Leases was notified by MCA on March 30, 2019 and it replaces Ind AS 17 Leases, including appendices thereto. Ind AS 116 is effective for annual periods beginning on or after April 1, 2019. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under Ind AS 17. The standard includes two recognition exemptions for lessees - leases of ‘low-value’ assets [e.g., personal computers etc.] and short-term leases [i.e., leases with a lease term of 12 months or less]. At the commencement date of a lease, a lessee will recognize a liability to make lease payments [i.e., the lease liability] and an asset representing the right to use the underlying asset during the lease term [i.e., the right-of-use asset]. Lessees’ will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to premeasured the lease liability upon the occurrence of certain events [e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments]. The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Less or accounting under Ind AS 116 is substantially unchanged from today’s accounting under Ind AS 17. Lessors will continue to classify all leases using the same classification principle as in Ind AS 17 and distinguish between two types of leases: operating and finance leases.

The Company intends to adopt these standards from April 1, 2019. As the Company does not have any material leases, therefore the adoption of this standard is not likely to have a material impact in its Financial Statements.

Appendix C to Ind AS 12 Uncertainty over Income Tax Treatment

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of Ind AS 12 and does not apply to taxes or levies outside the scope of Ind AS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following:

- Whether an entity considers uncertain tax treatments separately

- The assumptions an entity makes about the examination of tax treatments by taxation authorities

- How an entity determines taxable profit [tax loss], tax bases, unused tax losses, unused tax credits and tax rates

- How an entity considers changes in facts and circumstances

An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed. In determining the approach that better predicts the resolution of the uncertainty, an entity might consider, for example, [a] how it prepares its income tax filings and supports tax treatments; or [b] how the entity expects the taxation authority to make its examination and resolve issues that might arise from that examination.


Mar 31, 2018

1. Corporate information

Bharat Forge Limited (“the Company”) is a public Company domiciled in India and incorporated under the provisions of Companies Act, 1956. The Company’s shares are listed on two stock exchanges in India. The Company is engaged in the manufacturing and selling of forged and machined components for auto and industrial sector. The Company caters to both domestic and international markets. The registered office of the Company is located at Mundhwa, Pune. The Company has manufacturing facilities at Mundhwa, Baramati, Chakan and Satara locations. The Company’s CIN is L25209PN1961PLC012046. The financial statements were authorized for issue in accordance with a resolution of the board of directors on May 22, 2018.

2. Significant accounting policies

2.1 Basis of preparation

These financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time.

The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:

- Derivative financial instruments;

- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments).

In addition, the carrying values of recognized assets and liabilities designated as hedged items in fair value hedges that would otherwise be carried at amortized cost are adjusted to record changes in the fair values attributable to the risks that are being hedged in effective hedge relationships.

The Board of Directors of the Company decided to transfer and assign the lease hold rights in land which was originally acquired for a joint venture for railway projects. The Company had identified interested parties for the transfer, and had entered into a memorandum of understanding with them. The sale was completed during the current year.

Non-recurring fair value measurements

Land classified as held for sale during the reporting period was measured at the lower of its carrying amount and fair value less costs to sell at the time of the reclassification. Since the carrying amount was less, there has been no impact in the statement of profit and loss. The fair value of the land was determined using the sales comparison approach. The key input used is current prices in an active market for similar properties. This is a level 2 measurement as per the fair value hierarchy.

The Company’s investment properties consist of three parcels of land situated at Pune, Satara and Chakan.

As at March 31, 2018 and March 31, 2017, the fair values of the properties are Rs.2,425.21 million, Rs.2,425.21 million respectively. The Company obtains independent valuations for its investment properties at least annually. The best evidence of fair value is current prices in an active market for similar properties, where such information is not available, the Company considers ready reckoner rates. The fair values of investment properties have been determined by an independent valuer. The main input used is the ready reckoner rate. All resulting fair value estimates for investment properties are included in Level 2.

The Company has no restrictions (other than the land for which matter is being subjudice) on the realisability of its investment properties and no contractual obligations to either purchase, construct or develop investment properties or for repairs, maintenance and enhancements.

Freehold land includes 25 acres of land situated at Pune and 24.13 acres of land situated at Satara and 8.40 acres of land situated at Chakan, which have been given on lease. Due to certain matters being sub- judice, the Company has not executed lease deed with related party for one of the said land.

The Company had elected to continue with the carrying value of intangible assets as recognised in the financial statements as per previous GAAP and had regarded those values as the deemed cost on the date of transition (i.e. April 1, 2015). The Company has disclosed the gross cost and accumulated depreciation above, for information purpose only. The total gross cost and corresponding total accumulated depreciation as at March 31, 2018 and March 31, 2017 as disclosed above should be adjusted (atleast) by an amount of Rs.20.50 million representing accumulated depreciation as at April 01, 2015. Such adjustment will have no impact on the net block as at March 31, 2018 and March 31, 2017.

Capitalization of expenditure

The Company has capitalised the following expenses of revenue nature to the cost of Property, plant and equipment/capital work in progress(CWIP). Consequently, expenses disclosed under the respective notes are net of amounts capitalised by the Company.

(a) Bharat Forge Global Holding GmbH (BFGH)

Contributions to the capital reserves of BFGH as per the German Commercial Code (code), forms a part of the equity share capital and accordingly has been considered as an investment and is redeemable subject to provisions of the code.

During the current year, the Company has made further investment in contributions to the capital reserves of BFGH of Rs.303.00 million.

(b) Bharat Forge America Inc. (BFA)

During the previous year, the Company through BFA had completed acquisition of Walker Forge Tennessee LLC (renamed as “Bharat Forge PMT Technologie LLC”) and PMT Holdings Inc. (renamed as “Bharat Forge Tennessee Inc.”).

(c) Bharat Forge International Limited

During the previous year, the Company had purchased 64,000 ordinary shares of Bharat Forge International Limited from Bharat Forge Global Holding GmbH.

(d) BF Infrastructure Limited (BFIL)

(i) During the current year, the Company has made further investment in BFIL of Rs.294.56 million by acquiring 29,455,640 equity shares of Rs.10/- each.

Further in the current year, the Company has impaired Rs.869.84 million in investment in equity instrument of BFIL. The impairment is recognised as an exceptional item in the statement of profit and loss.

(ii) During the current year, terms of the preference shares have been changed from redeemable to compulsorily convertible preference shares. The conversion in to equity shares will take place in the ratio of 1:1 as per the terms of conversion. This investment is carried at fair value of ’ Nil, as at April 1, 2015.

(e) Analogic Controls India Limited (ACIL)

During the previous year, the Company had identified impairment of Rs.16.55 million in investment in equity instrument of ACIL. The impairment was recognised as an exceptional item in the statement of profit and loss.

During the current year, the Company has made further investment in ACIL of Rs.100.00 for acquiring 1,103,468 equity shares of Rs.10/- each.

Further 1,573,100 “0% Unsecured Compulsorily Convertible Debentures” of Rs.100/- each was converted into 15,731,000 equity shares of Rs.10/- each in accordance with the terms of issue, at fair value of Rs.3.60 million as on conversion date. Subsequently ACIL became the wholly owned subsidiary of the Company.

(f) BF Elbit Advanced Systems Private Limited

During the current year, the Company has made further investment in BF Elbit Advanced Systems Private Limited of Rs.10.00 million by acquiring 1,000,000 equity shares of Rs.10/- each.

(g) Kalyani Strategic Systems Limited

During the current year, the Company has made further investment in Kalyani Strategic Systems Limited of Rs.84.27 million (March 31, 2017: Rs.85.47 million) by acquiring 8,427,078 equity shares of Rs.10/- each.

(h) BF NTPC Energy Systems Limited (BFNTPCESL)

During the current year, the Company has made further investment in BFNTPCESL of Rs.2.89 million (March 31, 2017: Rs.7.19 million) by acquiring 289,119 equity shares of Rs.10/- each.

However at the year end, the Company has impaired Rs.26.45 million (March 31, 2017: Rs.7.19 million) in investment in equity instrument of BFNTPCESL. The impairment is recognised as an exceptional item in the statement of profit and loss.

(i) Tork Motors Private Limited

(i) During the current year, the Company has made investment in Tork Motors Private Limited of Rs.100.41 million by acquiring 4,736 equity shares of Rs.10/- each.

(ii) Further in the current year, the Company has made investment in Tork Motors Private Limited of Rs.59.98 million by acquiring 2,841 compulsority convertible preference shares of Rs.10/- each.

No trade receivable are due from directors or other officers of the Company either severally or jointly with any other person.

For terms and conditions relating to related party receivables, Refer note 39.

Trade receivables are non-interest bearing and are generally on terms of 30 to 270 days.

For details of debts due from firms or private companies in which any director is a partner, a director or a member, refer note 39.

The carrying amount of trade receivables includes receivables which are discounted with banks. The Company has transferred the relevant receivables to the discounting bank in exchange for cash. However, the Company has retained the late payment and credit risk. Accordingly, the Company continues to recognise the transferred assets in entirety in its balance sheet.

The amount repayable under the bill discounting arrangement is presented as borrowing. The relevant carrying amounts are as follows:

Bank deposits earns interest at fixed rates. Short-term deposits are generally made for varying periods between seven days to twelve months, depending on the cash requirements of the Company, and earn interest at the respective deposit rates.

Disclosure on Specified Bank Notes (SBNs)

During the previous year, the Company had specified bank notes or other denomination note as defined in the MCA notification G.S.R. 308(E) dated March 31, 2017. The details of Specified Bank Notes (SBN) held and transacted during the period from November 8, 2016 to December 30, 2016 and the denomination wise SBNs and other notes as per the notification is given below:

* For the purposes of this clause, the term ‘Specified Bank Notes’ shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated November 8, 2016.

** Permitted receipts and payments of other denomination notes disclosed above should not be construed as permitted receipts and payments as permitted by RBI from time to time pursuant to the introduction of the demonetisation scheme by the Government vide RBI circular - RBI/2016-17/112 dated November 8, 2016.

No disclosure is made for the financial year ended March 31, 2018 as it is not required.

(g) Global depository receipts [Refer note 16(c)(ii)]

The Company had issued 3,636,500 equity shares of Rs.10/- each (later sub-divided into 18,182,500 equity shares of Rs.2/- each) in April 2005 represented by 3,636,500 Global Depository Receipts (GDR) (on sub division 18,182,500 GDRs) evidencing “Master GDR Certificates” at a price of USD 27.50 per GDR (including premium). GDRs outstanding as at yearend are 18,400 (including bonus) (March 31, 2017 : 9,200). The funds raised had been utilized towards the object of the issue.

Holders of GDRs will have no voting rights or other direct rights of a shareholder with respect to the shares underlying the GDRs.

(a) Special capital incentive:

Special capital incentive is created during the financial year 1999-2000, amounting to Rs.2.50 million under the 1988 Package Scheme of Incentives.

(b) Warrants subscription money:

The Company had issued and allotted to Qualified Institutional Buyers, 10,000,000 equity shares of Rs.2/- each at a price of Rs.272/- per share aggregating to Rs.2,720 million on April 28, 2010, simultaneous with the issue of 1,760, 10.75% Non Convertible Debentures (NCD) of a face value of Rs.1,000,000/- at par, together with 6,500,000 warrants at a price of Rs.2/- each entitling the holder of each warrant to subscribe for 1 equity share of Rs.2/- each at a price of Rs.272/- at any time within 3 years form the date of allotment. Following completion of three years term, the subscription money received on issue of warrants was credited to capital reserve as the same is not refundable / adjustable. Further the warrants had lapsed and ceased to be valid from April 28, 2013.

(c) Capital redemption reserve:

(i) Capital redemption reserve was created by amount setting aside on redemption of preference shares.

(ii) During the year, the Company issued bonus shares in the proportion of 1:1 i.e. 1 (one) bonus equity share of Rs.2/- each for every 1 (one) fully paid-up equity share held (including GDR holders) which was approved by the shareholders of the Company on September 24, 2017 through Postal Ballot/e-voting. Consequently, on October 03, 2017, the Company allotted 232,794,316 Equity shares of Rs.2/- each fully paid-up, to the shareholders of the Company as at the record date by transferring equivalent amount from “Capital redemption reserve” and “Securities premium account” to “Share capital”.

(d) Securities premium account:

Securities premium account is utilised for issue of bonus equity shares. The same is utilised in accordance with the provisions of the Companies Act, 2013.

(e) Debenture redemption reserve (DRR):

Debenture redemption reserve has been created in accordance with circular No. 9/2002 dated April 18, 2002 issued by the Department of Company Affairs, Ministry of Law, Justice and Company Affairs, Government of India and Section 117(C) of the Companies Act, 1956 at 25% of the maturity amount equally over the terms of the debentures privately placed. Pursuant to MCA circular no. 04/2013 dated February 11, 2013, the Company had created reserve as per the erstwhile Companies Act, 1956.

During the previous year, the Company had reedeemed outstanding debentures and balance of DRR has been transferred to surplus in the statement of profit and loss.

(a) Foreign currency term loans

Foreign currency term loans on syndicated and bilateral basis (Unsecured)

Repayable in half yearly/yearly instalments from date of start of repayment, along with interest ranging from LIBOR 65 bps to LIBOR 225 bps and EURIBOR 95 bps.

(b) Buyers line of credit for import of goods from banks (Unsecured)

Balance outstanding USD 6.67 million (Rs.434.58 million) (March 31, 2017 : USD 13.34 million (Rs.864.80 million)).

Repayable in 3 equal yearly instalments starting from May 2016, along with interest @ LIBOR 115 bps.

(c) (i) IGSTC R&D project loan (Secured)

Balance outstanding ‘ Nil (March 31, 2017 : Rs.8.10 million)

The loan is secured by bank guarantee executed by the Company in favour of IGSTC.

Repayable in 10 half yearly instalments from January 14, 2017, along with interest @ 3.00% per annum. This loan is fully repaid during current financial year.

(c) (ii) GITA R&D project loan (Secured)

Balance outstanding Rs.3.35 million (March 31, 2017 : ‘ Nil)

The loan is secured by bank guarantee executed by the Company in favour of Global Innovation & Technology Alliance (GITA). Repayable in 5 yearly instalments from March 1, 2020, along with interest @ 12.00% per annum only on 67% and balance is interest free.

(d) Preshipment packing credit

The secured loan is secured against hypothecation of stocks of semi finished and finished goods, raw materials, finished dies and die blocks (including shown in property, plant and equipments), work-in-progress, consumable stores and spares (also refer note 3 and note 11), book debts (also refer note 12) etc.

Preshipment packing credit - foreign currency (secured and unsecured) is repayable within 30 days to 180 days and carries interest @ LIBOR 10 bps to LIBOR 45 bps.

(e) Bill discounting with banks

The secured loan is secured against hypothecation of stocks of semi finished and finished goods, raw materials, finished dies and die blocks (included in property, plant and equipments), work-in-progress, consumable stores and spares (also refer note 3 and note 11), book debts (also refer note 12) etc.

Bill discounting (secured and unsecured) with banks is repayable within 90 to 210 days and carries interest LIBOR 10 bps to LIBOR 45 bps.

(f) Cash credits (secured)

Cash credit from banks is secured against hypothecation of stocks of semi finished and finished goods, raw materials, finished dies and die blocks (included shown in property, plant and equipments), work-in-progress, consumable stores and spares (also refer note 3 and note 11), book debts (also refer note 12) etc.

Cash credit is repayable on demand and carries interest @ 9.00% to 11.50% per annum.

(a) Adjustment to general reserve represents deferred tax adjustment relating to revision of depreciation as per Schedule II of Companies Act, 2013 in earlier period.

(b) The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

(c) During the year ended March 31, 2018 and March 31, 2017, the Company has paid dividend to its shareholders. This has resulted in payment of Dividend Distribution Tax (DDT) to the taxation authorities. The Company believes that DDT represents additional payment to taxation authority on behalf of the shareholders. Hence, DDT paid is charged to equity.

(d) The Company has tax losses which arose due to capital loss of Rs.148.21 million (March 31, 2017: Rs.132.90 million) that are available for offsetting for eight years against future taxable profits of the companies in which the losses arose. This loss will expire in eight years from the end of the respective year to which it pertains.

(e) Deferred tax assets have not been recognised in respect of the above mentioned loss as they may not be used to offset taxable profits, they have arisen on account of loss on sale of investment and there are no other tax planning opportunities or other evidence of recoverability in the near future. If the Company were able to recognise all unrecognised deferred tax assets, the profit would increase by Rs.51.79 million (March 31, 2016 : Rs.45.99 million).

Terms and conditions of the above financial liabilities:

- Trade payables are non-interest bearing and are generally settled on 60 to 90 days terms.

- Other payables (under note 19 and 23) are non-interest bearing and have an average term of 90 days other than special advance from customers which are interest bearing.

- For terms and conditions with related parties, Refer note 39.

The above amount of trade payables is net off certain advances given to suppliers amounting to Rs.1,820.00 million (March 31, 2017 : Rs.1,520.00 million)

(a) Provision for expected losses, advances and diminution in value of investments in subsidiary and joint venture (JV)

(i) BF Infrastructure Limited (BFIL, India) - Subsidiary

BFIL had invested, as a minority partner, in two Oil Block exploration contracts awarded by the Government of India. Minimum work program (MWP) as well as testing of explored wells have been completed during the current financial year. Based on testing result of the wells and its techno-economic viability, BFIL has decided not to proceed beyond MWP stage and has provided all expenditure (including intangible under development) pertaining to MWP in the current financial year.

Accordingly, considering the financial position of the subsidiary, the Company has provided an amount of Rs.869.84 million towards diminution in carrying cost of its investments and Rs.225.76 million towards diminution in carrying cost of its advances given in the current year.

Further, the Company has provided for a loss of Rs.210.00 million relating to additional and final MWP payment to be made for the said oil block exploration contracts by the subsidiary.

(ii) BF NTPC Energy Systems Limited (BFNTPCESL) - JV

Considering BFNTPCESL has proceeded with liquidation of business, the Company has provided an amount of Rs.26.45 million towards diminution in carrying cost of its investments in current year.

(b) Exceptional items related to year ended March 31, 2017 includes:

(i) Provision for diminution in the value of investment in:

(1) BF NTPC Energy Systems Limited of Rs.7.19 million.

(2) Analogic Controls India Limited of Rs.16.55 million.

(ii) Provision of Rs.136.09 million for loss on fair valuation of financial instruments on account of significant decline in fair value of “0% Compulsorily Convertible Debentures” of Analogic Controls India Limited.

(iii) Gain of Rs.540.07 million on divestment in joint venture.

3. Leases

(a) Operating leases : Company as lessee

The Company has entered into agreements in the nature of lease/leave and license agreement with different lessors/licensors for the purpose of establishment of office premises/residential accommodations etc. These are generally in the nature of operating lease/ leave and license. There are no transactions in the nature of sublease. Period of agreements are generally up to three years and renewal at the options of the lessee. There are no restrictions placed upon the Company by entering into these leases.

(b) Operating leases : Company as lessor

The Company has entered into agreements/arrangement in the nature of lease/sub-lease agreement with different lessees for the purpose of land. These are generally in the nature of operating lease. Period of agreements/arrangement are generally for three years to ten years and cancellable with a notice of thirty days to six months and renewal at the options of the lessee/lessor.

4. Segment information

In accordance with paragraph 4 of notified Ind AS 108 “Operating segments”, the Company has disclosed segment information only on the basis of the consolidated financial statements.

5. Gratuity and other post-employment benefit plans

(a) Gratuity plan Funded scheme

The Company has a defined benefit gratuity plan for its employees. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, every employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the employee’s length of service and salary at retirement age. Employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn) for each completed year of service as per the provisions of the Payment of Gratuity Act, 1972. In case of certain category of employees who have completed 10 years of service, gratuity is calculated based on 30 days salary (last drawn) for each completed year of service and cap for gratuity is 20 years. The scheme is funded with insurance companies in the form of a qualifying insurance policy.

Risk exposure and asset-liability matching

Provision of a defined benefit scheme poses certain risks, some of which are detailed hereunder, as companies take on uncertain long term obligations to make future benefit payments.

1) Liability risks

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c) Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management’s discretion may lead to uncertainties in estimating this increasing risk.

2) Asset risks

All plan assets are maintained in a trust fund managed by a public sector insurer viz. LIC of India and other insurance companies. LIC and other insurance companies has a sovereign guarantee and has been providing consistent and competitive returns over the years. The Company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The Company has no control over the management of funds but this option provides a high level of safety for the total corpus. A same account is maintained for both the investment and claim settlement and hence 100% liquidity is ensured and also interest rate and inflation risk are taken care of.

The following table summarises the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the gratuity plans.

(b) Special gratuity

The Company has a defined benefit special gratuity plan. Under the gratuity plan, every eligible employee who has completed ten years of service gets an additional gratuity on departure which will be salary of five months based on last drawn basic salary. The scheme is unfunded.

1) Liability risks

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c) Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management’s discretion may lead to uncertainties in estimating this increasing risk.

2) Unfunded plan risk

This represents unmanaged risk and a growing liability. There is an inherent risk here that the Company may default on paying the benefits in adverse circumstances. Funding the plan removes volatility in the Company’s financials and also benefit risk through return on the funds made available for the plan.

(c) Provident fund

In accordance with the law, all employees of the Company are entitled to receive benefits under the provident fund. The Company operates two plans for its employees to provide employee benefits in the nature of provident fund, viz. defined contribution plan and defined benefit plan.

Under the defined contribution plan, provident fund is contributed to the government administered provident fund. The Company has no obligation, other than the contribution payable to the provident fund.

Under the defined benefit plan, the Company contributes to the “Bharat Forge Company Limited Staff Provident Fund Trust”. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate.

The details of the defined benefit plan based on actuarial valuation report are as follows:

1) Liability risks:

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements. Hence companies are encouraged to adopt asset-liability management.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c) Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management’s discretion may lead to uncertainties in estimating this increasing risk.

* The claim against the Company comprise of dues in respect to personnel claims (amount unascertainable), local taxes etc.

# The Company is contesting the demands and the management, including its tax/legal advisors, believe that its position will likely be upheld in the appellate process. No provision has been recognised in the financial statements for the tax demand raised. The management based on its internal assessment and advise by its legal counsel believe that it is only possible, but not probable, that the action will succeed.

Note:

In cases where the amounts have been accrued, it has not been included above.

Deferred payment liabilities

Sales tax deferral incentives attached to the erstwhile windmill division, which was demerged to BF Utilities Limited (BFUL) under section 392 and 394 of the erstwhile Companies Act, 1956 sanctioned by the High Court of the Judicature at Mumbai, have been passed on thereafter from year to year by the Company to the latter, under an arrangement, with all liabilities and obligations attached thereto taken over completely by BFUL. The net liability outstanding of BFUL after such pass on amounts to Rs.277.82 million (March 31, 2017: Rs.388.74 million).

6. Deferral/Capitalisation of exchange differences

The Company has availed the option under Ind AS 101 para D13AA, continuing the policy adopted for accounting for exchange differences arising from translation of foreign currency monetary items recognised in financial statements on the date of transition. Accordingly foreign exchange gain/(loss) is adjusted against:

# For the loan given in FY 2010-11

* Receivable on demand

** Receivable in 3 years from the date of origination of loan

- All advances are unsecured

- Details of investments made are given in Note 6 and 7

- Guarantee given on behalf of

- Bharat Forge Kilsta AB, step down subsidiary company, of Rs.1,454.73 million (March 31, 2017: Rs.1,244.70 million) for working capital requirement.

- Bharat Forge America Inc., wholly owned subsidiary company, of Rs.260.75 million (March 31, 2017: Rs.259.40 million) for term loan or loans.

7. Financial instruments by category

Set out below is a comparison, by class, of the carrying amounts and fair value of the Company’s financial instruments as of March 31, 2018; other than those with carrying amounts that are reasonable approximates of fair values:

The management assessed that the fair value of cash and cash equivalent, trade receivables, derivative instruments, trade payables, and other current financial assets and liabilities approximate their carrying amounts largely due to the short term maturities of these instruments.

Further the management assessed that the fair value of security deposits, trade receivables and other non-current receivables approximate their carrying amounts largely due to discounting at rates which are an approximation of current lending rates.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

(i) Long-term fixed-rate and variable-rate receivables are evaluated by the Company based on parameters such as individual creditworthiness of the customer. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.

(ii) The fair values of quoted instruments are based on price quotations at the reporting date. The fair value of unquoted instruments, loans from banks as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. In addition to being sensitive to a reasonably possible change in the forecast cash flows or the discount rate, the fair value of the equity instruments is also sensitive to a reasonably possible change in the growth rates. The valuation requires management to use unobservable inputs in the model, of which the significant unobservable inputs are disclosed in the tables below. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.

(iii) The fair values of the unquoted equity shares have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management’s estimate of fair value for these unquoted equity investments.

(iv) The Company enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies and forward rate curves of the underlying. All derivative contracts are fully cash collateralised, thereby eliminating both counterparty and the Company’s own non-performance risk. As at March 31, 2018 the marked-to-market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognised at fair value.

(v) The fair values of the Company’s interest-bearing borrowings and loans are determined by using DCF method using discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The own non performance risk as at March 31, 2018 was assessed to be insignificant.

(a) Gupta Energy Private Limited (GEPL)

The Company has an investment in equity instrument of GEPL. The same is classified as fair value through profit and loss. Over the years GEPL has been making consistent losses. The management of the Company has made attempts to obtain latest information for the purpose of valuation. However, such information is not available as GEPL has not filed the financial statements with MCA since FY 2014-15. In view of the above, the management believes that the fair value of the investment is Nil as at April 1, 2015 and thereafter.

(b) Bharat Forge Infrastructure Limited (BFIL)

During the year, Preference shares of BFIL have been converted in to compulsarily convertible preference shares in the ratio of 1:1. Accordingly the same has been classified as investment in the nature of equity and carried at fair value on the date of conversion which is subsequently considered as its cost. As at previous year end, the preference shares of BFIL were redeemable and hence classified at fair value through profit and loss.

(c) Analogic Controls India Limited (ACIL)

During the year, 1,573,100 “0% Unsecured Compulsorily Convertible Debentures” of Rs.100/- each were converted into 15,731,000 equity shares of Rs.10/- each in accordance with the terms of issue.

8. Significant accounting judgements, estimates and assumptions

The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures, including the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Judgements

In the process of applying the Company’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

1) Significant judgements is required to apply lease accounting rules under appendix C to Ind AS 17 Determining whether an arrangement contains a lease. In assessing the applicability to arrangements entered into by the Company with its various sub-contractors regarding providing of certain services, the Company has exercised judgment to evaluate the right to use the underlying assets, substance of the transaction including legally enforced arrangements, and other significant terms and conditions of the arrangement to conclude whether the arrangements meets the criteria under Appendix C to Ind AS 17. Based on the evaluation, the Company has concluded that the arrangements do not meet the definition of lease as specified under appendix C to Ind AS 17.

2) Embedded derivative - The Company has entered into certain hybrid contracts i.e. where an embedded derivative is a component of a non-derivative host contract, in the nature of financial liability. The Company has exercised judgement to evaluate if the economic characteristics and risks of the embedded derivative are closely related to the economic characteristics and risks of the host. Based on the evaluation, the Company has concluded, that these economic characteristics and risks of the embedded derivatives are closely related to the economic characteristics and risks of the host and thus not separated from the host contract and not accounted for separately.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

Impairment of non-financial assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. In determining the fair value less costs to disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.

Defined benefit plans

The cost of the defined benefit gratuity plan and other post-employment plans and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, expected returns on plan assets and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The mortality rate is based on publicly available mortality tables for India. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases, discount rate and return on planned assets are based on expected future inflation rates for India.

Further details about defined benefit plans are given in Note 37.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using different valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer note 48 for further disclosures.

Impairment of financial assets

The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Further, the Company also evaluates risk with respect to expected loss on account of loss in time value of money which is calculated using average cost of capital for relevant financial assets.

Operating lease commitments - Company as lessor

The Company has given land on lease to certain entities. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of such land and the fair value of the asset, that it retains all the significant risks and rewards of ownership of these lands and accounts for the contracts as operating leases.

Income tax and deferred tax

Deferred tax assets are not recognised for unused tax losses as it is not probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

The Company has Rs.148.21 million (March 31, 2017: Rs.132.90 million) of capital tax losses carried forward. These losses relate to loss under the head capital gain, which will expire in 8 years and may not be available to offset taxable income under the same head. On this basis, the Company has determined that it cannot recognise deferred tax assets on the tax losses carried forward.

If the Company was able to recognise all unrecognised deferred tax assets, profit and equity would have increased by Rs.51.79 million (March 31, 2017: Rs.45.99 million). Further details on taxes are disclosed in note 21.

Provision for Inventories

Management reviews the inventory age listing on a periodic basis. This review involves comparison of the carrying value of the aged inventory items with the respective net realizable value. The purpose is to ascertain whether an allowance is required to be made in the financial statements for any obsolete and slow-moving items. Management is satisfied that adequate allowance for obsolete and slow-moving inventories has been made in the financial statements.

Current / Non-current Classification

The Company evaluates funds requirement on the basis of internal budgets and forecasts and believes that on the basis of current scale of operations and cash realisation cycle, it would be able to generate sufficient funds from operations in order to meet such requirement in the forseeable future of upto one year. Accordingly, the Group has classified major portion of its investment in mutual funds as non-current.

Derivatives not designated as hedging instruments

The Company has used foreign exchange forward contracts to manage repayment of some of its foreign currency denominated borrowings. These foreign exchange forward contracts are not designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions i.e. the repayments of foreign currency denominated borrowings.

Cash flow hedges

Foreign currency risk

Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast sales in US Dollar and Euro. These forecast transactions are highly probable.

The foreign exchange forward contract balances vary with the level of expected foreign currency sales and changes in foreign exchange forward rates.

The cash flow hedges of the expected future sales during the year ended March 31, 2018 were assessed to be highly effective and a net unrealised gain of Rs.1,685.27 million (March 31, 2017: Rs.3,377.78 million), with a deferred tax liability of Rs.588.90 million (March 31, 2017: Rs.1,168.98 million) relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges of the expected future sales during the year ended March 31, 2017 were assessed to be highly effective and a net unrealised gain of Rs.3,377.78 million with a deferred tax liability of Rs.1,168.98 million was included in OCI in respect of these contracts.

The amount removed from OCI during the year and included in the carrying amount of the hedging items as a basis adjustment for the year ended March 31, 2018 is detailed in Note 33, totalling Rs.1,387.41 million (net of deferred tax) (March 31, 2017: Rs.872.70 million). The amounts retained in OCI at March 31, 2018 are expected to mature and affect the statement of profit and loss till year ended March 31, 2022.

Reclassifications to statement of profit and loss during the year included in OCI are shown in Note 33.

9. Financial risk management objectives and policies

The Company’s principal financial liabilities other than derivatives comprise loans and borrowings, trade payables and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also holds FVTOCI and FVTPL investments and enters into derivative transactions.

The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The Company’s senior management is supported by a Finance and Risk Management Committee (FRMC) that advises on financial risks and the appropriate financial risk governance framework for the Company. The FRMC provides 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. All derivative activities for risk management purposes are carried out by experienced members from the senior management who have the relevant expertise, appropriate skills and supervision.

It is the Company’s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised as below.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings, deposits, investment in mutual funds, FVTOCI investments and derivative financial instruments.

The sensitivity analysis in the following sections relate to the position as at March 31, 2018 and March 31, 2017.

The sensitivity analysis have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant and on the basis of hedge designations in place at March 31, 2018 and comparatively as at March 31, 2017.

The analysis excludes the impact of movements in market variables on: the carrying values of gratuity and other post-retirement obligations and provisions.

The following assumptions have been made in calculating the sensitivity analysis:

- The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2018 and March 31, 2017 including the effect of hedge accounting

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates.

The Company generally borrows in Foreign Currency, considering natural hedge it has against its export. Long-term and Short-term foreign currency debt obligations carry floating interest rates.

The Company avails short term debt in foreign currency up to tenor of 9 months, in the nature of export financing for its working capital requirements. LIBOR or EURIBOR for the said debt obligations is fixed for the entire tenor of the debt, at the time of availment.

The Company has an option to reset LIBOR or EURIBOR either for 6 Months or 3 months for its long term debt obligations. To manage its interest rate risk, the Company evaluates the expected benefit from either of the LIBOR resetting options and accordingly decides. The Company also has an option for its long term debt obligations to enter into interest rate swaps, in which it agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. At March 31, 2018, the Company’s entire long term borrowings are at a floating rate of interest (March 31, 2017: 100%).

Interest rate sensitivity

The Company’s total interest cost for the year ended March 31, 2018 was Rs.848.38 million and for the year ended March 31, 2017 was Rs.727.70 million. The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, with all other variables held constant, the Company’s profit before tax is affected through the impact on floating rate long term borrowings, as follows:

* During the previous financial year, EURIBOR was trading in negative zone and Euro borrowings were floored at zero, However in FY 2017-18 company has entered into USD-EUR swap for one of the long term floating rate borrowing to avail the benefit of negative EURIBOR.

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s export revenue and long term foreign currency borrowings.

The Company manages its foreign currency risk by hedging its forecasted sales up to 4 years to the extent of 25%-65% on rolling basis and Company keep its long term foreign currency borrowings un-hedged which will be natural hedge against its un-hedged exports. The Company may hedge its long term borrowing near to the repayment date to avoid rupee volatility in short term.

When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of forecast transactions the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency.

Foreign currency sensitivity

The following tables demonstrate the sensitivity to a reasonably possible change in USD and EUR exchange rates, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of un-hedged monetary assets and liabilities. The impact on the Company’s pre-tax equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges and net investment hedges. The Company’s exposure to foreign currency changes for all other currencies is not material.

Commodity price risk

The Company is affected by the price volatility of certain commodities. Its operating activities require the on-going purchase of steel. Due to significant volatility of the price of the steel, the Company has agreed with its customers for pass-through of increase/decrease in prices of steel. There may be lag effect in case of such pass-through arrangement.

Commodity price sensitivity

As the Company has a back to back pass through arrangements for volatility in raw material prices there is no impact on the profit and loss and equity of the Company.

Equity price risk

The Company is exposed to price risk in equity investments and classified on the balance sheet as fair value through profit or loss and through other comprehensive income. To manage its price risk arising from investments in equity, the Company diversifies its portfolio. Diversification and investment in the portfolio is done in accordance with the limits set by the Board.

At the reporting date, the exposure to unlisted equity securities at fair value was Rs.753.51 million (March 31, 2017: Rs.597.50 million). Sensitivity analysis of major investments have been provided in Note 48.

At the reporting date, the exposure to listed equity securities at fair value was Rs.132.73 million (March 31, 2017: Rs.79.50 million). A decrease of 10% on the NSE market index could have an impact of approximately Rs.13.27 million (March 31, 2017: Rs.7.95 million) on the OCI or equity attributable to the Company. An increase of 10% in the value of the listed securities would also impact OCI and equity. These changes would not have an effect on profit or loss.

Other price risk

The Company invests its surplus funds in mutual funds which are linked to debt markets. The Company is exposed to price risk for investments in mutual funds that are classified as fair value through profit or loss. To manage its price risk arising from investments in mutual funds, the Company diversifies its portfolio. Diversification and investment in the portfolio is done in accordance with Company’s investment policy approved by the Board of Directors. An increase/decrease in interest rates by 0.25% will have an impact of Rs.34.89 million (March 31, 2017: Rs.28.10 million).

Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, investment in mutual funds, other receivables and deposits, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed by the Company’s established policy, procedures and control relating to customer credit risk management. Further, Company’s customers includes marquee OEMs and Tier I companies, having long standing relationship with the Company. Outstanding customer receivables are regularly monitored and reconciled. At March 31, 2018, receivable from Company’s top 5 customers accounted for approximately 34% (March 31, 2017: 34%) of all the receivables outstanding. An impairment analysis is performed at each reporting date on an individual basis for major customers. In addition, a large number of minor receivables are grouped in to homogeneous groups and assessed for impairment collectively. The calculation is based on historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 12. The Company does not hold collateral as security except in case of few customers. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Other receivables, deposits with banks and loans given

Credit risk from balances with banks, financial institutions and mutual funds is managed in accordance with the Company’s approved investment policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Company’s Board of Directors on regular basis and the said limits gets revised as and when appropriate. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.

The Company’s maximum exposure to credit risk for the components of the balance sheet at March 31, 2018 and March 31, 2017 is the carrying amounts as illustrated in the respective notes except for financial guarantees and derivative financial instruments. The Company’s maximum exposure relating to financial guarantees and financial derivative instruments is noted in Note 46.

Liquidity risk

Cash flow forecasting is performed by Treasury function. Treasury monitors rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs. Such forecasting takes into consideration the compliance with internal cash management. The Company’s treasury invests surplus cash in marketable securities as per the approved policy, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the above-mentioned forecasts. At the reporting date, the Company held mutual funds of Rs.13,957.03 million (March 31, 2017: Rs.11,238.45 million) and other liquid assets of Rs.1,840.84 million (March 31, 2017: Rs.2,747.87 million) that are expected to readily generate cash inflows for managing liquidity risk.

As per the Company’s policy, there should not be concentration of repayment of loans in a particular financial year. In case of such concentration of repayment, the Company evaluates the option of refinancing entire or part of repayments for extended maturity. The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding and debt maturing within 12 months can be rolled over with existing lenders and the Company is also maintaining surplus funds with short term liquidity for future repayment of loans.

The table below summarises the maturity profile of the Company’s financial liabilities

10. Capital management

For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to maximise the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a net debt equity ratio, which is net debt divided by equity. The Company’s policy is to keep the net debt equity ratio below 1.00. The Company includes within its borrowings net debt and interest bearing loans less cash and cash equivalents.

In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call back loans and


Mar 31, 2017

1 Corporate information

Bharat Forge Limited (“the Company”) is a public Company domiciled in India and incorporated under the provisions of Companies Act, 1956. The Company’s shares are listed on two stock exchanges in India. The Company is engaged in the manufacturing and selling of forged and machined components for auto and industrial sector. The Company caters to both domestic and international markets. The registered office of the Company is located at Bharat Forge Limited, Mundhwa, Pune. Also the Company has manufacturing facilities at Mundhwa, Baramati, Chakan and Satara locations. The Company’s CIN is L25209PN1961PLC012046. The financial statements were authorized for issue in accordance with a resolution of the directors on May 24, 2017.

2 Significant accounting policies

2.1 Basis of preparation

These financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended thereafter. For all periods up to and including the year ended March 31, 2016, the Company prepared its financial statements in accordance with the accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). These financial statements for the year ended March 31, 2017 are the first the Company has prepared in accordance with Ind AS. Refer to note 53 and note 55 for information on how the Company adopted Ind AS.

The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:

- Derivative financial instruments;

- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments).

In addition, the carrying values of recognized assets and liabilities designated as hedged items in fair value hedges that would otherwise be carried at amortized cost are adjusted to record changes in the fair values attributable to the risks that are being hedged in effective hedge relationships.

3. Investment property

Information regarding income and expenditure of investment property

The Company’s investment properties consist of three parcels of land situated at Mundhwa, Satara and Chakan. Management determined that the investment properties consist of only one class of assets - free hold land - based on the nature, characteristics and risks of each property.

As at March 31, 2017, March 31, 2016 and April 1, 2015, the fair values of the properties are Rs.430.31 million, Rs.412.02 million and Rs.370.53 million respectively. The Company obtains independent valuations for its investment properties at least annually. The best evidence of fair value is current prices in an active market for similar properties. Where such information is not available, the Company considers ready reckoner rates. The fair values of investment properties have been determined by an independent valuer. The main input used is the ready reckoner rate. All resulting fair value estimates for investment properties are included in Level 2.

The Company has no restrictions on the realisability of its investment properties and no contractual obligations to either purchase, construct or develop investment properties or for repairs, maintenance and enhancements.

Freehold land includes 25 acres of land situated at Pune and 24.13 acres of land situated at Satara and 8.40 acres of land situated at chakan which have been given on lease. Due to certain matters being sub-judice, the Company has not executed lease deed with related party for one of the said land.

(a) Bharat Forge Global Holding GmbH

Contributions to the capital reserves of Bharat Forge Global Holding GmbH as per the German Commercial Code (code), forms a part of the equity share capital and accordingly has been considered as an investment and is redeemable subject to provisions of the code.

(b) Bharat Forge America Inc.

During the current year, the Company through Bharat Forge America Inc., USA, has completed acquisition of Walker Forge Tennessee LLC (renamed as “Bharat Forge PMT Technologie LLC”) and PMT Holdings Inc. (renamed as “Bharat Forge Tennessee Inc.”).

(c) Bharat Forge International Limited

During the current year, the Company has purchased 64,000 ordinay shares of Bharat Forge International Limited from Bharat Forge Global Holding GmbH.

(d) Merger of BF Infrastructure Limited (BFIL) and BF Infrastructure Ventures Limited (BFIVL) (wholly owned Subsidiaries)

The Board of Directors of BFIL and BFIVL approved a Scheme of Amalgamation (Scheme) on July 9, 2015 with BFIVL being transferor company. The Scheme is approved by Hon’ble High Court of Bombay on August 18, 2016 with appointed date April 1, 2015. Persuant to the merger shares of BFIL at fair value of Rs.110.50 million have been alloted to the shareholder of BFIVL in the ratio of 1:1.

During the Current year, the Company has made further Investment in BFIL of Rs.279.58 million by acquiring 27.958.100 shares of Rs.10/- each.

(e) Kalyani Startegic Systems Limited (KSSL)

During the Current year, the company has made further investment in KSSL of Rs.85.47 million by acquiring 8,547,600 shares of Rs.10/- each.

(f) Analogic Controls India Limited (ACIL)

During the current year, the Company has identified impairment of Rs.16.55 million in investment in equity instrument of ACIL. The impairment is recognised as an exceptional item in the statement of profit and loss.

(g) BF NTPC Energy Systems Limited (BFNTPCESL)

During the current year, the Company has made further investment in BFNTPCESL of Rs.7.19 million by acquiring 719.100 shares of Rs.10/- each.

During the current year, the Company has identified impairment of Rs.7.19 million in investment in equity instrument of BFNTPCESL. The impairment is recognised as an exceptional item in the statement of profit and loss.

(h) ALSTOM Bharat Forge Power Private Limited

During the current year the Company has divested its 49% stake in ALSTOM Bharat Forge Power Private Limited, which was formed as a JV, resulting in to net gain of Rs.540.07 million which is shown as an exceptional item in the statement of profit and loss.

(i) Kalyani Polytechnic Private Limited (KPPL)

During the current year the Company has divested its 100% of its stake in KPPL, which was a wholly owned subsidiary, resulting in to a net loss of Rs.0.15 million.

(a) Gupta Energy Private Limited

Shares of Gupta Energy Private Limited pledged against the facility obtained by Gupta Global Resources Private Limited.

(b) Khed Economic Infrastructure Private Limited

During the current year, the Company has made further investment in Khed Economic Infrastructure Private Limited of Rs.173.16 million by acquiring 17,316,308 shares of Rs.10/- each.

(c) Paragon Partners Growth Fund - I

During the current year, the The Company has made further investment in Paragon Partners Growth Fund - I of Rs.44.00 million by acquiring 440,000 units of Rs.100/- each.

(d) Investments at fair value through OCI (fully paid) reflect investment in quoted and unquoted equity securities. Refer note 47 for determination of their fair values.

(e) Investments at fair value through PL (fully paid) reflect investment in quoted and unquoted debt instruments and unquoted equity securities. Refer note 47 for determination of their fair values.

The carrying amount of trade receivables includes receivables which are discounted with banks. The Company has transferred the relevant receivables to the discounting bank in exchange for cash. However, the Company has retained the late payment and credit risk.

Accordingly, the Company continues to recognise the transferred assets in entirely in its balance sheet.

The amount repayable under the bill discounting arrangement is presented as borrowing. The relevant carrying amounts are as follows:

Bank deposits earns interest at fixed rates. Short-term deposits are generally made for varying periods between seven days to twelve months, depending on the cash requirements of the Company, and earn interest at the respective deposit rates.

Disclosure on Specified Bank Notes (SBNs)

During the year, the Company had specified bank notes or other denomination note as defined in the MCA notification G.S.R. 308(E) dated March 31, 2017. The details of Specified Bank Notes (SBN) held and transacted during the period from November 8, 2016 to December 30, 2016 and the denomination wise SBNs and other notes as per the notification is given below:

* For the purposes of this clause, the term ‘Specified Bank Notes’ shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated the November 8, 2016.

** Permitted receipts and payments of other denomination notes disclosed above should not be construed as permitted receipts and payments as permitted by RBI from time to time persuant to the introduction of the demonetisation scheme by the Government vide RBI circular-RBI/2016-17/112 dated November 8, 2016.

(a) Terms / rights attached to equity shares

The Company has only one class of issued equity shares having a par value of Rs.2/- per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees. 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 of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(b) Reconciliation of equity shares outstanding at the beginning and at the end of the reporting year

(c) Shares held by holding/ ultimate holding company and /or their subsidiaries/ associates

The Company being ultimate holding company, there are no shares held by any other holding, ultimate holding company and their subsidiaries/associates.

(d) Aggregate number of bonus shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date

There are no bonus shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date.

(e) Details of shareholders holding more than 5% shares in the Company

* The shareholding information has been extracted from the records of the Company including register of shareholders/ members and is based on legal ownership of shares.

(f) Shares reserved for issue under option

(g) Global depository receipts

The Company had issued 3,636,500 equity shares of Rs.10/- each (later sub-divided into 18,182,500 equity shares of Rs.2/- each) in April 2005 represented by 3,636,500 Global Depository Receipts (GDR) (on sub division 18,182,500 GDRs) evidencing “Master GDR Certificates” at a price of USD 27.50 per GDR (including premium). GDRs outstanding at the close of the year are 9,200 (March 31, 2016: 9,200; April 1, 2015: 9,200). The funds raised had been utilized towards the object of the issue.

Holders of GDRs will have no voting rights or other direct rights of a shareholder with respect to the shares underlying the GDRs.

(a) Special capital incentive:

Special capital incentive is created during the financial year 1999-00, amounting to Rs.2.50 million under the 1988 Package Scheme of Incentives.

(b) Capital reserves:

The Company had issued and allotted to Qualified Institutional Buyers, 10,000,000 equity shares of Rs.2/- each at a price of Rs.272/- per share aggregating to Rs.2,720 million on April 28, 2010, simultaneous with the issue of 1,760, 10.75% Non-Convertible Debentures (NCD) of a face value of Rs.1,000,000/- at par, together with 6,500,000 warrants at a price of Rs.2/- each entitling the holder of each warrant to subscribe for 1 equity share of Rs.2/- each at a price of Rs.272/- at any time within 3 years from the date of allotment. Following completion of three years term, the subscription money received on issue of warrants was credited to capital reserve as the same is not refundable / adjustable. Further the warrants had lapsed and ceased to be valid from April 28, 2013.

(c) Capital redemption reserve:

Capital redemption reserve is created by amount set aside on redemption of preference shares.

(d) Securities premium account:

Securities premium account is used to record the premium on issue of equity shares. The same is utilised in accordance with the provisions of The Companies Act, 2013.

(e) Debenture redemption reserve (DRR):

Debenture redemption reserve was created in accordance with circular No. 9/2002 dated April 18, 2002 issued by the Department of Company Affairs, Ministry of Law, Justice and Company Affairs, Government of India and Section 117(C) of the Companies Act, 1956 at 25% of the maturity amount equally over the terms of the debentures privately placed. Pursuant to MCA circular no. 04/2013 dated February 11, 2013, the Company had created reserve as per the erstwhile Companies Act, 1956.

During the current year the Company has redeemed outstanding debentures and balance of DRR has been transferred to surplus in the statement of profit and loss.

(a) Debentures (secured)

The Company has issued the following secured redeemable non-convertible debentures:

(i) Nil (March 31 2016: 2,500; April 1, 2015: 2,500) - 11.95 % Redeemable secured non-convertible debenturesc Sixteenth series) of Rs.Nil (March 31, 2016: Rs.333,400/- each; April 1, 2015: Rs.666,700/- each) redeemable at par on January 5, 2017.

Above debentures are secured by (i) First pari passu mortgage in favour of the Trustees, of all rights and interest on the Company’s immovable properties (also refer note 3 & note 4) situated at Mundhwa, Satara and Chakan with negative lien on properties situated at Jejuri and Baramati; and (ii) First pari passu charge in favour of the Trustees by way of hypothecation of movable properties, present and future both such as all plant and machinery, equipments, tools, furniture and fixtures etc.(also refer note 3), as described in Debenture Trust-cum-Mortgage Deed dated April 30, 2009 and a revised Mortgage Deed dated April 30, 2014, when the immovable property situated at Jalgaon was removed as a security.

Charge created for above loan was satisfied on February 15, 2017.

(ii) Nil (March 31, 2016: 1,760; April 1, 2015: 1,760) - 10.75 % Redeemable secured non-convertible debentures (Eighteenth series) of Rs.Nil (March 31, 2016: Rs.300,000; April 1, 2015: Rs.650,000/- each) redeemable at par on April 28, 2016.

Above debentures are secured by (i) First pari-passu mortgage in favour of Trustees, of all rights and interest on the Company’s immovable properties (also refer note 3 & 4), present and future situated at Mundhwa and Chakan, Satara with negative lien on properties situated at Jejuri and Baramati as per Debenture Trust-cum-Mortgage Deed dated June 28, 2010; and (ii) First pari-passu charge in favour of the Trustees on moveable properties (also refer note 3), present and future as described in Schedule-II as per Debenture Trust-cum-Mortgage Deed dated June 28, 2010 and a revised Mortgage Deed dated April 30, 2014, when the immovable property situated at Jalgaon was removed as a security.

Charge created for above loan was satisfied on June 17, 2016.

(b) Foreign currency term loans

Foreign currency term loans on Syndicated basis (Unsecured)

Repayable in 3 half yearly / yearly instalments from date of start of repayment, along with interest ranging from LIBOR 65 bps to LIBOR 225 bps.

(c) Buyers line of credit for import of goods from banks (Unsecured)

Balance outstanding USD 13.34 million(Rs.864.80 million) (March 31, 2016 : USD 20 million (Rs.1325.20 million), April 1, 2015: Nil) Repayable in 3 equal yearly instalments starting from May 2016, along with interest @ LIBOR 135 bps

(d) IGSTC R&D project loan (Secured)

Balance outstanding Rs.8.10 million (March 31, 2016 : Rs.6.08 million, April 1, 2015: Rs.6.08 million) The loan is secured by bank guarantee executed by the Company in favour of IGSTC. Repayable in 10 half yearly instalments from January 14, 2017, along with interest @ 3.00% per annum.

(e) Preshipment packing credit

The loan is secured against hypothecation of stocks of semi finished and finished goods, raw materials, finished dies and die blocks (included in property, plant and equipment), work-in-progress, consumable stores and spares(also refer note 3 & note 11), book debts (also refer note 9), etc.

Preshipment packing credit - foreign currency (secured & unsecured) is repayable within 180 days and carries interest @ LIBOR 10 bps to LIBOR 45 bps

(f) Bill discounting with banks

The loan is secured against hypothecation of stocks of semi finished and finished goods, raw materials, finished dies and die blocks (included in property, plant and equipment), work-in-progress, consumable stores and spares(also refer note 3 & note 11), book debts (also refer note 9) etc.

Bill discounting (secured & unsecured) with banks is repayable within 210 days and carries interest LIBOR 10 bps to LIBOR 45 bps.

(g) Cash credits (secured)

Cash credit from banks is secured against hypothecation of stocks of semi finished and finished goods, raw materials, finished dies and die blocks (included in property, plant and equipment), work-in-progress, consumable stores and spares(also refer note 3 & note 11), book debts (also refer note 9) etc.

Cash credit is repayable on demand and carries interest @ 9.45% to 14.50% per annum.

4. Income and deferred taxes :

Deferred tax

(a) Adjustment to general reserve includes deferred tax impact relating to revesion of depreciation as per Schedule II of Companies Act, 2013 in earlier period.

(b) The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

(c) During the year ended March 31, 2017 and March 31, 2016 the Company has paid dividend to its shareholders. This has resulted in payment of Dividend Distribution Tax (DDT) to the taxation authorities. The Company believes that DDT represents additional payment to taxation authority on behalf of the shareholders. Hence, DDT paid is charged to equity.

(d) The Company has tax losses which arose due to capital loss of Rs.132.90 million (March 31, 2016: Rs.17.98 million, April 1, 2015: Rs.17.98 million) that are available for offsetting for eight years against future taxable profits of the companies under the head capital gains. This loss will expire in eight years from the end of the respective year to which it pertains. Deferred tax assets have not been recognised in respect of the above mentioned loss as they may not be used to offset taxable profits, they have arisen on account of loss on sale of investment and there are no other tax planning opportunities or other evidence of recoverability in the near future. If the Company were able to recognise all unrecognised deferred tax assets, the profit would increase by Rs.45.99 million (March 31, 2016 : Rs.6.22 million).

5. Exceptional items

(a) Gain on sale of investment in joint venture (JV)

During the current year the Company has divested its 49% stake in ALSTOM Bharat Forge Power Private Limited, which was formed as a JV, resulting in a net gain of Rs.540.07 million.

(b) Provision for diminution in value of investment in subsidiary and joint venture

- Analogic Controls India Limited (ACIL) - Subsidiary

Considering the significant decline in business activities and losses incurred by ACIL, the Company has provided an amount of Rs.16.55 million towards diminution in carrying cost of its investments in current year.

- BF NTPC Energy Systems Limited (BFNTPCESL) - JV

Considering the losses from business activities carried out by BFNTPCESL, the Company has provided an amount of Rs.7.19 million towards diminution in carrying cost of its investments in current year.

(c) Loss on fair valuation of financial instruments

This includes loss on fair valuation of financial instruments amounting to Rs.136.09 million on account of significant decline in fair value of 0% compulsory Convertible Debentures of ACIL as explained above.

(d) Provision for statutory employee cost relating to earlier period

It represents certain statutory employee costs that have become applicable retrospectively from the financial year 2014-15.

(a) Operating leases : Company as lessee

The Company has entered into agreements in the nature of lease/leave and license agreement with different lessors/ licensors for the purpose of establishment of office premises/residential accommodations etc. These are generally in the nature of operating lease/leave and license. There are no transactions in the nature of sublease. Period of agreements are generally up to three years and renewal at the options of the lessee. There are no escalation clauses or restrictions placed upon the Company by entering into these leases.

The Company has entered into non-cancellable operating leases for building, with lease term 4 years. The Company has an option to extend the lease by mutual consent. The lease includes escalation clause. Future minimum rentals payable under non-cancellable operating leases as at 31 March are, as follows:

(b) Operating leases : Company as lessor

The Company has entered into agreements in the nature of lease/leave and license agreement with different lessees/ licensees for the purpose of land. These are generally in the nature of operating lease. Period of agreements are generally for three years to ten years and cancellable with a notice of thirty days to six months and renewal at the options of the lessee/lessor.

6. Segment information

In accordance with paragraph 4 of notified Ind AS 108 “Operating segments”, the Company has disclosed segment information only on the basis of the consolidated financial statements.

37. Gratuity and other post-employment benefit plans

(a) Gratuity plan

Funded scheme

The Company has a defined benefit gratuity plan for its employees. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, every employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the employee’s length of service and salary at retirement age. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn) for each completed year of service as per the provisions of the Payment of Gratuity Act, 1972. The scheme is funded with insurance companies in the form of a qualifying insurance policy.

Risk exposure and asset-liability matching

Provision of a defined benefit scheme poses certain risks, some of which are detailed hereunder, as companies take on uncertain long term obligations to make future benefit payments.

1) Liability risks

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c) Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management’s discretion may lead to uncertainties in estimating this increasing risk.

2) Asset risks

All plan assets are maintained in a trust fund managed by a public sector insurer viz. LIC of India and other insurance companies. LIC has a sovereign guarantee and has been providing consistent and competitive returns over the years. The Company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The Company has no control over the management of funds but this option provides a high level of safety for the total corpus. A single account is maintained for both the investment and claim settlement and hence 100% liquidity is ensured. Also interest rate and inflation risk are taken care of.

The following table summarises the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the gratuity plan.

Weighted average duration of the plan (based on discounted cash flows using mortality, withdrawal and interest rate) is 6.7 years.

(b) Special gratuity

The Company has a defined benefit special gratuity plan. Under the gratuity plan, every eligible employee who has completed ten years of service gets an additional gratuity on departure which will be salary of five months based on last drawn basic salary. The scheme is unfunded.

1) Liability risks

a) Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements.

b) Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c) Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management’s discretion may lead to uncertainties in estimating this increasing risk.

2) Asset risks

This represents unmanaged risk and a growing liability. There is an inherent risk here that the Company may default on paying the benefits in adverse circumstances. Funding the plan removes volatility in the Company’s financials and also helps the Company to manage the defined benefit risk through increased return on the funds made available for the plan.

(c) Provident fund

In accordance with the law, all employees of the Company are entitled to receive benefits under the provident fund. The Company operates two plans for its employees to provide employee benefits in the nature of provident fund, viz. defined contribution plan and defined benefit plan.

Under the defined contribution plan, provident fund is contributed to the government administered provident fund. The Company has no obligation, other than the contribution payable to the provident fund.

Under the defined benefit plan, the Company contributes to the “Bharat Forge Company Limited Staff Provident Fund Trust”. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate.

1) Liability risks:

a. Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities ,the company is successfully able to neutralize valuation swings caused by interest rate movements. Hence, companies are encouraged to adopt asset-liability management.

b. Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c. Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management’s discretion may lead to uncertainties in estimating this increasing risk.

* Does not include gratuity and leave encashment since the same is considered for all employees of the Company as a whole.

Outstanding balances at the year end are unsecured with a short term duration and interest free except for loans and settlement occurs in cash. For the year ended March 31, 2017 the Company has not recorded any impairment of receivables relating to amount owed by related parties (March 31, 2016 : Nil, April 1, 2015 : Nil). This assessement is undertaken in each financial year through examining the financial position of the related party & the market in which the related party operates.

All transactions were made on normal commercial terms and conditions and at market rates.

For details of guarantees given to group companies refer note 46.

The Company has various welfare trusts to administer the long term benefit for its employees. Further the Company operates defined benefit plans by way of gratuity trusts, provident fund trusts etc. For details also refer note 37.

(e) Performance guarantee:

The Company along with its joint venture partner has given an irrecoverable and unconditional joint undertakings to the customers of joint venture company - ALSTOM Bharat Forge Power Private Limited (ABFPPL), for transfer of technology, training, execution of steam turbines generator sets and auxiliary equipment and for successful performance of the projects awarded to ABFPPL.

7. Deferral/Capitalisation of exchange differences

The Company has availed the option under Ind AS 101 para D13AA, continuing the policy adopted for accounting for exchange differences arising from translation of foreign currency monetary items recognised in financial statements on the date of transition.

Accordingly foreign exchange gain/(loss) adjusted against:

# For the loan given in FY 2010-11

$ Merged with BF Infrastructure Limited w.e.f. April 1, 2015

* Receivable on demand

** Receivable in 3 years from the date of origination of loan

- All advances are unsecured

- Details of investments made are given in Note 6 & 7

- Guarantee given on behalf of

- Bharat Forge Kilsta AB, step down subsidiary company, of Rs.1,244.70 million (March 31, 2016: Rs.1,356.84 million; April 1, 2015 : Nil) for working capital requirement.

- Bharat Forge Global Holding GmbH, Wholly owned subsidiary company, of Rs.Nil (March 31, 2016: Nil; April 1, 2015: 1,314.90 million) for working capital requirement and term loan.

- Bharat Forge America Inc., wholly owned subsidiary company, of Rs.259.40 million (March 31, 2016: Nil; April 1, 2015: Nil) for term loan.

8. Financial instruments by category

Set out below is a comparison, by class, of the carrying amounts and fair value of the Company’s financial instruments as of March 31, 2017, other than those with carrying amounts that are reasonable approximates of fair values:

The management assessed that the fair value of cash and cash equivalent, trade receivables, derivative instruments, trade payables and other current financial assets and liabilities approximate their carrying amounts largely due to the short term maturities of these instruments.

Further the management assessed that the fair value of security deposits and other non current recievables approximate their carrying amounts largely due to discounting at rates which are an approximation of current lending rates.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values: .

(i) Long-term fixed-rate and variable-rate receivables are evaluated by the Company based on parameters such as individual creditworthiness of the customer. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.

(ii) The fair values of quoted instruments are based on price quotations at the reporting date. The fair value of unquoted instruments, loans from banks as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. In addition to being sensitive to a reasonably possible change in the forecast cash flows or the discount rate, the fair value of the equity instruments is also sensitive to a reasonably possible change in the growth rates. The valuation requires management to use unobservable inputs in the model, of which the significant unobservable inputs are disclosed in the tables below. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.

(iii) The fair values of the unquoted equity shares have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management’s estimate of fair value for these unquoted equity investments.

(iv) The Company enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies and forward rate curves of the underlying. All derivative contracts are fully cash collateralised, thereby eliminating both counterparty and the Company’s own non-performance risk. As at March 31, 2017 the marked-to-market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognised at fair value.

(v) The fair values of the Company’s interest-bearing borrowings and loans are determined by using DCF method using discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The own non performance risk as at March 31, 2017 was assessed to be insignificant.

Description of significant unobservable inputs to valuation:

The significant unobservable inputs used in the fair value measurements categorised within Level 3 of the fair value hierarchy, together with a quantitative sensitivity analysis as at March 31, 2017 are as shown below

(a) Gupta Energy Private Limited (GEPL)

The Company has an investment in equity instrument of GEPL. The same is classified as fair value through profit and loss. Over the years GEPL has been making consistent losses. The management of the Company has made attempts to obtain latest information for the purpose of valuation. However, such information is not availabe as GEPL has not filed the financial statements with MCA since FY 2014-15. In view of the above, the management believes that the fair value of the investment is Nil as at April 1, 2015.

(b) Bharat Forge Infrastructure Limited (BFIL)

The Company has an investment in preference shares of BFIL. The same is classified as fair value through profit and loss. These preference shares were completely provided for under previous GAAP due to permanent diminution in the value of the instrument. The management believes that the fair value of such preference shares is Nil considering the fact that BFIL is still in the initial phase and the nature of business in which it operates involves relatively longer gestation period. The said preference shares are redeemable on June 30, 2017 and the management does not believe that BFIL would be in a position to meet the repayment obligation.

9. Significant accounting judgements, estimates and assumptions

The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures, including the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Judgements

In the process of applying the Company’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

1) Significant judgement is required to apply lease accounting rules under Appendix C to Ind AS 17 determining whether an arrangement contains a lease. In assessing the applicability to arrangements entered into by the Company with its various sub-contractors regarding providing of certain services, the Company has exercised judgment to evaluate the right to use the underlying assets, substance of the transaction including legally enforced arrangements, and other significant terms and conditions of the arrangement to conclude whether the arrangements meets the criteria under Appendix C to Ind AS 17. Based on the evaluation, the Company has concluded that the arrangements do not meet the definition of lease as specified under appendix C to Ind AS 17.

2) Embedded derivative - The Company has entered into certain hybrid contracts i.e. where an embedded derivative is a component of a non-derivative host contract, in the nature of financial liability. The Company has exercised judgement to evaluate if the economic characteristics and risks of the embedded derivative are closely related to the economic characteristics and risks of the host. Based on the evaluation, the Company has concluded, that these economic characteristics and risks of the embedded derivatives are closely related to the economic characteristics and risks of the host and thus not separated from the host contract and not accounted for separately.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

Impairment of non-financial assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. In determining the fair value less costs to disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

Defined benefit plans

The cost of the defined benefit gratuity plan and other post-employment plans and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The mortality rate is based on publicly available mortality tables for India. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for India.

Further details about gratuity obligations are given in Note 37.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See Note 48 for further disclosures.

Impairment of financial assets

The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.

Operating lease commitments - Company as lessor

The Company has given land on lease to certain entities. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of such land and the fair value of the asset, that it retains all the significant risks and rewards of ownership of these lands and accounts for the contracts as operating leases.

Income tax and deferred tax

Deferred tax assets are not recognised for unused tax losses as it is not probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

The Company has Rs.132.90 million (March 31, 2016: Rs.17.98 million; April 1, 2015: Rs.17.98 million) of tax losses carried forward. These losses relate to loss under the head capital gain, which will expire in 8 years and may not be available to offset taxable income under the same head. On this basis, the Company has determined that it cannot recognise deferred tax assets on the tax losses carried forward.

If the Company was able to recognise all unrecognised deferred tax assets, profit and equity would have increased by Rs.45.99 million (March 31, 2016 : Rs.6.22 million). Further details on taxes are disclosed in note 21.

Provision for Inventories

Management reviews the inventory age listing on a periodic basis. This review involves comparision of the carrying value of the aged inventory item with the respective net realisable value. The purpose is to ascertain whether and allowance is required to be maid in the financial statements for any obsolete and slow-moving items. Management satisfied that adequate allowance for absolute and slow-moving inventories has been made in the financial statement.

10. Hedging activities and derivatives

Derivatives not designated as hedging instruments

The Company has used foreign exchange forward contracts to manage repayment of some of its foreign currency denominated borrowings. These foreign exchange forward contracts are not designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions i.e. the repayments of foreign currency denominated borrowings.

Cash flow hedges Foreign currency risk

Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast sales in US Dollar and Euro. These forecast transactions are highly probable.

The foreign exchange forward contract balances vary with the level of expected foreign currency sales and changes in foreign exchange forward rates.

The terms of the foreign currency forward contracts match the terms of the expected highly probable forecast transactions. As a result, no hedge ineffectiveness arise requiring recognition through profit or loss. Notional amounts of outstanding forward contracts are as as follows

The cash flow hedges of the expected future sales during the year ended March 31, 2017 were assessed to be highly effective and a net unrealised gain of Rs.3,377.78 million, with a deferred tax liability of Rs.1,168.98 million relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges of the expected future sales during the year ended March 31, 2016 were assessed to be highly effective and an unrealised gain of Rs.1,694.12 million with a deferred tax liability of Rs.586.30 million was included in OCI in respect of these contracts.

The amount removed from OCI during the year and included in the carrying amount of the hedging items as a basis adjustment for the year ended March 31, 2017 is detailed in Note 33, totalling Rs.872.70 million (net of deferred tax) (March 31, 2016: Rs.2,139.59 million). The amounts retained in OCI at March 31, 2017 are expected to mature and affect the statement of profit and loss till year ended March 31, 2020.

Reclassifications to profit or loss during the year gains or losses included in OCI are shown in Note 33.

The Company’s principal financial liabilities other than derivatives, comprise loans and borrowings, trade payables and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include loans, trade and other receivables and cash and cash equivalents that derive directly from its operations. The Company also holds FVTOCI and FVTPL investments and enters into derivative transactions.

The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The Company’s senior management is supported by a Finance and Risk Management Committee (FRMC) that advises on financial risks and the appropriate financial risk governance framework for the Company. The FRMC provides 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. All derivative activities for risk management purposes are carried out by experienced members from the senior management who have the relevant expertise, appropriate skills and supervision. It is the Company’s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised as below.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings, deposits, investment in mutual funds, FVTOCI investments and derivative financial instruments.

The sensitivity analysis in the following sections relate to the position as at March 31, 2017 and March 31, 2016.

The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant and on the basis of hedge designations in place as at March 31, 2017.

The analysis exclude the impact of movements in market variables on: the carrying values of gratuity and other postretirement obligations and provisions.

The following assumptions have been made in calculating the sensitivity analysis:

- The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2017 and March 31, 2016 including the effect of hedge accounting

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates.

The Company generally borrows in Foreign Currency, considering natural hedge it has against its export. Long-term and short-term foreign currency debt obligations carry floating interest rates.

The Company avails short term debt in foreign currency up to tenor of 9 months, in the nature of export financing for its working capital requirements. LIBOR or EURIBOR for the said debt obligations is fixed for the entire tenor of the debt, at the time of availment.

The Company has an option to reset LIBOR or EURIBOR either for 6 Months or 3 months for its long term debt obligations. To manage its interest rate risk, the Company evaluates the expected benefit from either of the LIBOR resetting options and accordingly decides. The Company also has an option for its long term debt obligations to enter into interest rate swaps, in which it agrees to exchange, at specified intervals, the difference between fixed and variable interest rate amounts calculated by reference to an agreed-upon notional principal amount. However, there were no interest rates swaps entered in to by the Company during any of the periods reported. At March 31, 2017, the Company’s entire long term borrowings are at a floating rate of interest (March 31, 2016: 91%).

Interest rate sensitivity

The Company’s total interest cost the year ended March 31, 2017 was Rs.727.70 million and for year ended March 31, 2016 was Rs.905.06 million. The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, with all other variables held constant, the Company’s profit before tax is affected through the impact on floating rate borrowings, as follows:

* During the year, EURIBOR was trading in negative zone and Euro borrowings were floored at zero.

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s export revenue and long term foreign currency borrowings.

The Company manages its foreign currency risk by hedging its forecasted sales up to 4 years to the extent of 25%-65% on rolling basis and Company keep its long term foreign currency borrowings un-hedged which will be natural hedge against its un-hedged exports. The Company may hedge its long term borrowing near to the repayment date to avoid rupee volatility in short term.

When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of forecast transactions the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency.

Foreign currency sensitivity

The following tables demonstrate the sensitivity to a reasonably possible change in USD and EUR exchange rates, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of un-hedged monetary assets and liabilities. The impact on the Company’s pre-tax equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges and net investment hedges. The Company’s exposure to foreign currency changes for all other currencies is not material.

Commodity price risk

Company is affected by the price volatility of certain commodities. Its operating activities require the on-going purchase of steel. Due to significant volatility of the price of the steel, the Company has agreed with its customers for pass through of increase/decrease in prices of steel. There may be lag effect in case of such pass-through arrangement.

Commodity price sensitivity

As the Company has a back to back pass through arrangements for volatility in raw material prices there is no impact on the profit and loss and equity of the Company.

Equity price risk

The Company is exposed to price risk in equity investments and classified on the balance sheet as fair value through profit or loss and through other comprehensive income. To manage its price risk arising from investments in equity, the Company diversifies its portfolio. Diversification and investment in the portfolio is done in accordance with the limits set by the Board.

At the reporting date, the exposure to unlisted equity securities at fair value was Rs.597.50 million. Sensitivity analysis of these investments have been provided in Note 48.

At the reporting date, the exposure to listed equity securities at fair value was Rs.79.50 million. A decrease of 10% on the NSE market index could have an impact of approximately Rs.7.95 million on the OCI or equity attributable to the Company. An increase of 10% in the value of the listed securities would also impact OCI and equity. These changes would not have an effect on profit or loss.

Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, investment in mutual funds, other receivables and deposits, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed by the Company’s established policy, procedures and control relating to customer credit risk management. Further, Company’s customers includes marquee OEMs and Tier I companies, having long standing relationship with the Company. Outstanding customer receivables are regularly monitored and reconciled. At March 31, 2017, receivable from Company’s top 5 customers accounted for approximately 34% (March 31, 2016: 24%) of all the receivables outstanding. An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogeneous groups and assessed for impairment collectively. The calculation is based on historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 12. The Company does not hold collateral as security except in case of few customers. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Other receivables, deposits with banks and loans given

Credit risk from balances with banks, financial institutions and mutual funds is managed in accordance with the Company’s approved investment policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Company’s Board of Directors on regular basis and the said limits gets revised as and when appropriate. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.

The Company’s maximum exposure to credit risk for the components of the balance sheet at March 31, 2017 and March 31, 2016 is the carrying amounts as illustrated in the respective notes except for financial guarantees and derivative financial instruments. The Company’s maximum exposure relating to financial guarantees and financial derivative instruments is noted in Note 46.

Liquidity risk

Cash flow forecasting is performed by Treasury function. Treasury monitors rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs. Such forecasting takes into consideration the compliance with internal cash management. The Company’s treasury invests surplus cash in marketable securities as per the approved policy, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the above-mentioned forecasts. At the reporting date, the Company held mutual funds of Rs.11,238.45 million (March 31, 2016: Rs.7,633.18 million; April 1, 2015: Rs.4,564.63 million) and other liquid assets of Rs.2,747.87 million (March 31, 2016: Rs.3,697.54 million; April 1, 2015: Rs.5,892.74 million) that are expected to readily generate cash inflows for managing liquidity risk.

As per the Company’s policy, there should not be concentration of repayment of loans in a particular financial year. In case of such concentration of repayment, the Company evaluates the option of refinancing entire or part of repayments for extended maturity. The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding and debt maturing within 12 months can be rolled over with existing lenders and the Company is also maintaining surplus funds with short term liquidity for future repayment of loans.

For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to maximise the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a net debt equity ratio, which is net debt divided by equity. The Company’s policy is to keep the net debt equity ratio below 1.00. The Company includes within its borrowings net debt and interest bearing loans less cash and cash equivalents.

In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.

No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2017 and March 31, 2016.

11. First time adoption

These financial statements, for the year ended March 31, 2017, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended March 31, 2016, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (‘Indian GAAP’).

Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on March 31, 2017, together with the comparative period data as at and for the year ended March 31, 2016, as described in the summary of significant accounting policies. In preparing these financial statements, the Company’s opening balance sheet was prepared as at April 1, 2015, the Company’s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at April 1,2015 and the financial statements as at and for the year ended March 31, 2016.

Exceptions applied

The Company has applied all the mandatory exceptions in accordance with Ind AS


Mar 31, 2014

1. Corporate information

Bharat Forge Limited ("the Company") is a public Company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on three stock exchanges in India. The Company is engaged in the manufacturing and selling of forged components.The Company caters to both domestic and international markets.The Company''s CIN is L25209PN1961PLC012046.

2. basis of preparation

These financial statements of the Company have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material aspects with accounting principles generally accepted in India, including the accounting standards notifed under the Companies Act, 1956 read with general circular 8/ 2014 dated April 4, 2014 issued by the Ministry of Corporate Afairs. The financial statements have been prepared on an accrual basis under the historical cost convention except for derivative financial instruments which have been measured at fair value.

The accounting policies adopted in the preparation of financial statements are consistent with those of previous year.

3. gratuity and other post-employment benefit plans (a) gratuity plan funded scheme

The Company has a Defined benefit gratuity plan. Under the gratuity plan, every employee who has completed at least five years of service gets a gratuity on departure at 15 days last drawn basic salary for each completed year of service. The scheme is funded with an insurance Company in the form of a qualifying insurance policy.

The following tables summarize the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the respective plan.

(c) Provident fund

In accordance with law, all employees of the Company are entitled to receive benefits under the provident fund. The Company operates two plans for its employees to provide employee benefits in the nature of provident fund, viz. Defined contribution plan and Defined benefit plan.

Under Defined contribution plan, provident fund is contributed to the government administered provident fund.The Company has no obligation, other than the contribution payable to the provident fund.

Under Defined benefit plan, the Company contributes to the "Bharat Forge Company Limited Staf Provident Fund Trust". The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notifed interest rate.

The details of the Defined benefit plan based on actuarial valuation report is as follows:

The Company has provided Rs. Nil towards shortfall in the interest payment on provident fund as per actuary report during the year ended March 31, 2014 (March 31, 2013: Rs.4.92 million).

The actuary has followed Black Scholes Option Pricing approach.

The following tables summarize the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the respective plans.

4. Leases

Operating leases: Company as lessee

The Company has entered into agreements in the nature of lease/ leave and license agreement with diferent lessors/ licensors for the purpose of establishment of ofce premises / residential accommodations etc. These are generally in nature of operating lease/ leave and license. There are no transactions in the nature of sub lease. Period of agreements are generally for three years and renewal at the option of the lessee. There are no escalation clauses or restrictions placed upon the Company by entering into these leases.

5. Segment information

In accordance with paragraph 4 of notifed Accounting Standard 17 (AS-17) "Segment Reporting", the Company has disclosed segment information only on the basis of the consolidated financial statements.

6. Related Party disclosures

(i) names of the related parties and related party relationship related parties where control exists

Subsidiaries

CDP Bharat Forge GmbH

Bharat Forge America Inc.

BF-NTPC Energy Systems Limited

Kalyani ALSTOM Power Limited

BF Infrastructure Limited

BF Infrastructure Ventures Limited

Kalyani Strategic Systems Limited (formerly known as BF Power

Equipment Limited) BF Elbit Advanced Systems Private Limited Kalyani Polytechnic Private Limited (Section 25 Company) Analogic Controls India Limited (w.e.f. May 14, 2013)

Step down subsidiaries

Bharat Forge Holding GmbH

Bharat Forge Aluminiumtechnik GmbH & Co. KG

Bharat Forge AluminiumtechnikVerwaltungs GmbH

Bharat Forge Beteiligungs GmbH

Bharat Forge Kilsta AB

Bharat Forge Scottish Stampings Limited

Bharat Forge Hong Kong Limited

FAW Bharat Forge (Changchun) Co. Limited

Bharat Forge International Limited

Bharat Forge Daun GmbH

BF New Technologies GmbH

Related parties with whom transactions have taken place during the year

Joint ventures

ALSTOM Bharat Forge Power Limited Impact Automotive Solutions Limited

Step down joint venture

David Brown Bharat Forge Gear Systems India Limited

Enterprises owned or significantly infuenced by key management personnel or their relatives

Kalyani Carpenter Special Steels Limited Kalyani Steels Limited BF Utilities Limited Automotive Axle Limited

Key management personnel

Mr. B. N. Kalyani

Mr. A. B. Kalyani

Mr. G. K. Agarwal

Mr. B. P. Kalyani

Mr. S. E. Tandale

Mr. S. K. Chaturvedi (up to December 31, 2013)

7. Capitalization of expenditure

During the year, the Company has capitalised the following expenses of revenue nature to the cost of fixed asset / capital work- in- progress (CWIP). Consequently, expenses disclosed under the respective notes are net of amounts capitalised by the Company

8. Contingent liabilities

In Rs. Million

As at As at March 31, 2014 March 31, 2013

Sales bills discounted 7,103.34 5,584.61 Of which:

Bills since realised 1,674.57 1,231.55

- Matured, overdue and outstanding since close of the period Guarantees given by the Company on behalf of other companies:

Balance Outstanding 1,457.92 1,898.71

(Maximum Amount) (1,952.14) (2,269.38)

Claims against the Company not acknowledged as Debts - to the extent ascertained * # 118.97 138.83

Excise/Service tax demands - matters under dispute # 358.51 176.39

Customs demands - matters under dispute # 50.97 50.97

* The Claim against the Company comprise of dues in respect to personnel claims (amount unascertainable), local taxes etc.

# The Company is contesting the demands and the management, including its tax/ legal advisors, believe that its position will likely be upheld in the appellate process. No tax expense has been accrued in the financial statements for the tax demand raised.

The management believes that the ultimate outcome of this proceeding will not have a material adverse efect on the Company''s financial position and results of operations

9. Capital and other commitments

(d) Performance guarantee

The Company has along with ALSTOM Power Holdings S.A. given an irrecoverable and unconditional undertaking to NTPC Limited for technology transfer, training, execution and successful performance of steam turbines generator and auxiliary equipments supplied by ALSTOM Bharat Forge Power Limited, joint venture of the Company.

Cross currency swap

On August 5, 2009, the Company had entered into a Cross Currency Swap (CCS) for a period of five years by converting a Long Term Rupee NCD liability ofRs. 250 million (out of 10.75% XVth Series NCD ofRs. 2,500 million) into an equivalent USD liability at the prevailing spot rate. Under this structure, the Company will receive a fixed interest coupon on a quarterly basis on the rupee amount swapped and will pay foating rate interest (which is subject to a cap) on the USD notional amount. On maturity of the swap, the Company will pay the contracted USD loan liability at prevailing rate and receive the original rupee amount swapped.

10. Deferral / Capitalisation of exchange diferences

The Ministry of Corporate Afairs (MCA) has issued the amendment dated December 29, 2011 to AS 11 "The Efects of Changes in Foreign Exchange Rates", to allow companies deferral/capitalization of exchange diferences arising on long-term foreign currency monetary items. In accordance with the amendment/ earlier amendment to AS 11, the Company has capitalised exchange loss, arising on long-term foreign currency loan to the cost of plant and equipments. The Company also has other long-term foreign currency monetary item, where the gain / (loss) due to fuctuation in foreign currency is accounted for as FCMITDA and disclosed under reserve and surplus.

11. (a) exchange diference gain / (loss) on account of fuctuations in foreign currency rates

The net exchange diferences gain / (losses) arising during the year on highly probable forecasted transaction relating to exports as a part of sales recognised in the statement of profit and loss is Rs. (522.37) million (March 31,2013Rs. (461.76) million).

(b) deferred payment liabilities

Sales tax deferral incentives attached to the erstwhile windmill division, which was demerged to BF Utilities Limited (BFUL) under section 392 and 394 of the Companies Act, 1956 sanctioned by the High Court of the Judicature at Mumbai, have been passed on thereafter from year to year by the Company to the latter, under an arrangement, with all liabilities and obligations attached thereto taken over completely by BFUL. The net liability outstanding of BFUL after such pass on amounts to Rs. 708 million (March 31, 2013: Rs. 775 million).

12. The financial statements are presented in Rs. million and decimal thereof except for per share information or as otherwise stated.

13. Previous year figures have been regrouped / reclassified, where necessary, to confirm to the current year''s classification.


Mar 31, 2013

1. Corporate information

Bharat Forge Limited ("the Company") is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The Company is engaged in the manufacturing and selling of forged components. The Company caters to both domestic and international markets.

2. Basis of preparation

These financial statements of the Company have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material aspects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956. These financial statements have been prepared on an accrual basis under the historical cost convention except for derivative financial instruments which have been measured at fair value.

The accounting policies adopted in the preparation of financial statements are consistent with those of previous year.

3. Gratuity and other post-employment benefit plans

(a) Gratuity plan Funded scheme

The Company has a defined benefit gratuity plan. Under the gratuity plan, every employee who has completed atleast five years of service get a gratuity on departure at 15 days last drawn basic salary for each completed year of service. The scheme is funded with an insurance Company in the form of a qualifying insurance policy.

The following tables summarize the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the respective plans.

(b) Special gratuity

The Company has a defined benefit special gratuity plan. Under the gratuity plan, every eligible employee who has completed ten years of service get an additional gratuity on departure which will be salary of five months based on last drawn basic salary. The scheme is unfunded.

The following table summarize the components of net benefit expense recognised in the statement of profit and loss and amounts recognised in the balance sheet.

(c) Provident fund

In accordance with law, all employees of the Company are entitled to receive benefits under the provident fund. The Company operates two plans for its employees to provide employee benefits in the nature of provident fund, viz. defined contribution plan and defined benefit plan.

Under defined contribution plan provident fund is contributed to the government administered provident fund. The Company has no obligation, other than the contribution payable to the provident fund.

Under defined benefit plan, the Company contributes to the "Bharat Forge Company Limited Staff Provident Fund Trust". The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate.

The details of the defined benefit plan based on actuarial valuation report is as follows:

The Company has provided Rs. 4.92 Million towards shortfall in the interest payment on provident fund as per actuary report during the year ended March 31, 2013 (March 31, 2012: Rs. Nil)

The actuary has followed Black Scholes Option Pricing approach

The following tables summarize the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the respective plans.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

Amount for the current and previous year are as follows:

Till the year ended March 31, 2011 the interest shortfalls could not be computed by the actuaries since The Institute of Actuaries of India has not issued the final guidance on valuation of the same. In the year 2011-12 The Institute of Actuaries of India has issued the guidance note for measurement of provident fund liabilities, accordingly the Company has started providing for interest shortfalls based on actuarial valuation since last year. Hence earlier years data is not available.

4. Operating leases - Company as lessee

The Company has entered into agreements in the nature of lease/leave and license agreement with different lessors/ licensors for the purpose of establishment of office premises/residential accommodations etc. These are generally in nature of operating lease/leave and license. There are no transactions in the nature of sub lease. Period of agreements are generally for three years and renewal at the options of the lessee. There are no escalation clause or restrictions placed upon the company by entering into these leases.

5. Segment information

In accordance with paragraph 4 of notified Accounting Standard 17 (AS-17) "Segment Reporting" the Company has disclosed segment information only on the basis of the consolidated financial statements.

6. Related Party Disclosures

(i) Names of the related parties and related party relationship Related parties where control exists

Subsidiaries CDP Bharat Forge GmbH

Bharat Forge America Inc.

BF-NTPC Energy Systems Limited

Kalyani ALSTOM Power Limited

BF Infrastructure Limited

BF Infrastructure Ventures Limited

BF Power Equipment Limited

BF Elbit Advanced Systems Private Limited

Kalyani Polytechnic Private Limited

Step down subsidiaries Bharat Forge Holding GmbH

Bharat Forge Aluminiumtechnik GmbH & Co. KG

Bharat Forge Aluminiumtechnik Verwaltungs GmbH

Bharat Forge Beteiligungs GmbH

Bharat Forge Kilsta AB

Bharat Forge Scottish Stampings Limited

Bharat Forge Hong Kong Limited

FAW Bharat Forge (Changchun) Co. Limited

Bharat Forge International Limited

Bharat Forge Daun GmbH

BF New Technologies GmbH

Related parties with whom transactions have taken place during the year

Associates Technica U.K. Limited (Investment through wholly owned subsidiary]

Joint Ventures ALSTOM Bharat Forge Power Limited

Impact Automotive Solutions Limited

Step down joint venture David Brown Bharat Forge Gear Systems India Limited

Enterprises owned or significantly influenced by key management personnel or their relation

Kalyani Carpenter Special Steels Limited

Kalyani Steels Limited

BF Utilities Limited

Automotive Axle Limited

Key management personnel Mr. B. N. Kalyani

Mr. A. B. Kalyani

Mr. G. K. Agarwal

Mr. P. K. Maheshwari

Mr. B. P. Kalyani

Mr. S. E. Tandale

Mr. S. K. Chaturvedi

7. Capitalization of expenditure

During the year, the Company has capitalised the following expenses of revenue nature to the cost of fixed asset/capital work-in-progress (CWIP). Consequently, expenses disclosed under the respective notes are net of amounts capitalised by the Company.

8. Deferral/Capitalisation of exchange differences

The Ministry of Corporate Affairs (MCA) has issued the amendment dated December 29, 2011 to AS 11 "The Effects of Changes in Foreign Exchange Rates", to allow companies deferral/capitalization of exchange differences arising on long-term foreign currency monetary items. In accordance with the amendment/earlier amendment to AS 11, the Company has capitalised exchange loss, arising on long-term foreign currency loan to the cost of plant and equipments. The Company also have other long-term foreign currency monetary item, where the gain/(loss) due to fluctuation in foreign currency is accounted for as FCMITDA and disclosed under reserve and surplus.

9. (a) Exchange difference gain/(loss) on account of fluctuations in foreign currency rates

The net exchange differences [gain/(losses)] arising during the year on highly probable forecasted transaction relating to exports as a part of sales recognised in the statement of profit and loss account is Rs. (461.76) Million (March 31, 2012 Rs. (173.04) Million)

(b) Deferred payment liabilities

Sales tax deferral incentives attached to the erstwhile windmill division, which was demerged to BF Utilities Limited (BFUL) under section 392 and 394 of the Companies Act, 1956 sanctioned by the High Court of the Judicature at Mumbai, have been passed on thereafter from year to year by the Company to the latter, under an arrangement, with all liabilities and obligations attached thereto taken over completely by BFUL. The net liability outstanding of BFUL after such pass on amounts to Rs. 775 Million (March 31, 2012: Rs. 821 Million).

10. The financial statements are presented in Rs. Million and decimal thereof except for per share information or as otherwise stated.

11. Previous year financial statements were audited by another firm of Chartered Accountants and previous year''s figures have been regrouped or reclassified, where necessary, to confirm to the current year''s classification.


Mar 31, 2012

1 (a) Terms / rights attached to equity shares:

The company has only one class of issued equity shares having a par value of Rs 2/- per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors and approved by the shareholders in the Annual General Meeting is paid in Indian rupees. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amount. The distribution will be in proportion to the number of equity shares held by the shareholders.

1 (b) Terms of securities convertible into equity shares:

(i) The Company issued and allotted to Qualified Institutional Buyers, 10,000,000 Equity Shares of Rs 2/- each at a price of Rs 272/- per share aggregating to Rs 2,720 million on 28th April, 2010, simultaneous with the issue of 1,760 10.75% Non Convertible Debentures (NCD) of a face value of Rs 1,000,000/- at par , together with 6,500,000 warrants at a price of Rs 2/- each entitling the holder of each warrant to subscribe for 1 equity share of Rs 2/- each at a price of Rs 272/- at any time within 3 years form the date of allotment. The subscription money received on issue of warrants has been credited to Capital Reserve as the same is not refundable / adjustable. Out of the funds raised, Rs 2,365 million has been temporarily deployed in Fixed Deposits with Banks and in Mutual Funds and the Balance has been utilised towards the object of the issue.

(ii) See Note 4(d) regarding Foreign Currency Convertible Bonds.

1 (c) Other information:

The Company had issued 3,636,500 Equity Shares of Rs 10/- each ( later sub-divided into 18,182,500 Equity Shares of Rs 2/- each) in April and May 2005 represented by 3,636,500 Global Depository Receipts (GDR) (on sub division 18,182,500 GDRs) evidencing 'Master GDR Certificates' at a price of USD 27.50 per GDR (including premium). GDRs outstanding at the close of the year are 9,200. The Funds raised has been utilised towards the object of the issue.

2 (a) Sales Tax Deferral Incentive:

The Company, upto March, 2006, had prematurely retired its obligations of the Sales Tax Deferral Incentive availed under the package scheme of Incentives 1993, thereby generating a cumulative surplus of Rs 108.63 million. Since the incentive was fundamentally provided to encourage capital investments in designated underdeveloped zones and thereby defray, to some extent, deficiencies, the same has been, as per the opinion of the 'Expert Advisory Committee', set up by the Institute of Chartered Accountants of India, credited to 'Capital Reserve' to be apportioned to 'Revenue Reserves' over the future/ balance life of the underlying investments, at the end of each financial year.

2 (b) Subsidy for setting up new Industrial Unit:

The Company's manufacturing facility at Baramati has been granted 'Mega Project' status by Government of Maharashtra and therefore is eligible for Industrial Promotion Subsidy (IPS) under Packaged Scheme of Incentive (PSI) 2007. The company has been granted Eligibility Certificate issued by the Directorate of Industries, Government of Maharashtra in this regard.

IPS consists of the following:

a. Electricity Duty exemption for the period of 7 years from the date of commencement of the project i.e. 1st April, 2009,

b. 100% exemption from payment of Stamp duty for the Leasehold land acquired for the Baramati Plant, and

c. VAT and CST payable to the State Government (before adjustment of Set-off) on sales made from Baramati plant, within a period of 7 years starting from 1st April, 2009 to 31st March, 2016.

IPS will however be restricted to 75% of the eligible fixed capital investments made from 11th May, 2005 to 10th May, 2010. The Eligibility Certificate issued allows maximum subsidy of Rs 3,198.20 million.

The Packaged Scheme of Incentive (PSI) 2007 is for intensifying and accelerating the process of dispersal of industries to the less developed regions and promoting high tech industries in the developed areas of the State coupled with the object of generating mass employment opportunities.

Further, in terms of the Accounting Standard (AS 12) 'Accounting for Government Grants' prescribed by Companies (Accounting Standards) Amendment Rules, 2006, eligible incentive is considered to be in the nature of promoters' contribution. Therefore incentive of Rs 34.08/- million received during the year (P.Y. Rs Nil) has been credited to the Capital Reserve.

2 (c) Debenture Redemption Reserve:

Debenture Redemption Reserve has been created in accordance with circular No.9/2002 dated 18th April, 2002 issued by Department of Company Affairs, Ministry of Law, Justice and Company Affairs, Government of India and Section 117(C) of the Companies Act, 1956 at 25% of the maturity amount equally over the terms of the Debentures Privately placed. Amount set aside for the year represents for full year in respect of Debentures issued in earlier years.

2 (d) Foreign Currency Monetary Item Translation Difference Account (FCMITDA):

The Accounting Standard (AS 11) 'The effects of changes in Foreign Exchange Rates' prescribed by Companies (Accounting Standards) Rules, 2006 was amended on 31st March, 2009, vide a notification dated 31st March, 2009, by the Ministry of Corporate Affairs. The said amendment offered an option to Companies to recognise Foreign Exchange Gains and Losses arising on translation of all long term monetary assets and liabilities acquired upto 31st March, 2009, retrospectively from accounting periods commencing after 7th December, 2006 ( i.e. from 1st April, 2007 for the company) upto 31st March, 2011, The Company had chosen to exercise the option in preparation of financial statements in the year ended 31st March, 2009.

The Company continues, upon the extension granted by the Ministry of Corporate Affairs, to exercise the option offered in paragraph 46 of the Accounting Standard (AS 11) relating to ''The effects of changes in foreign exchange rates'' to capitalise foreign exchange difference on translation of long term monetary liabilities to cost of Assets where used to acquire such assets and in case of other long term monetary item to Foreign Currency Monetary Item Translation Difference Account (FCMITDA). The amount so recognised as capital cost of acquisition of assets is to be depreciated over the balance life of the relevant assets. In case of the amount recognised in the FCMITDA to be amortised over the balance term of the monetary asset or liability but not beyond 31st March, 2020, aggregate Rs 28.32 million.

Accordingly Foreign exchange differences adjusted against the cost of the assets/ CWIP aggregates Rs 588.23 million (loss), amount in ''Foreign Currency Monetary Item Translation Difference Account'' (FCMITDA) aggregates Rs 66.50 million (loss) and amortised in the current year amounts to Rs 38.18 million.

2 (e) Hedge Reserve:

In order to recognise the impact of fluctuation in foreign currency rates arising out of instruments acquired to hedge highly probable forecast transactions, in appropriate accounting periods, the company applies the principles of recognition set out in the Accounting Standard 30- Financial Instruments - Recognition and Measurement (AS-30) as suggested by the Institute of Chartered Accountants of India. Accordingly, the unrealised gain/(loss) (net) consequent to foreign currency fluctuations, in respect of effective hedging instruments , represented by simple forward covers, to hedge future exports, are carried as a Hedging Reserve and ultimately set off in the Profit and Loss account when the underlying transaction arises.

The amount outstanding in the Hedge Reserve at the close of the year is Rs 381.64 Million (Debit Balance / Valuation Loss).

2(f) The Equity Shares allotted on exercise of option to convert FCCBs by the Bondholders, and the 10,000,000 equity shares of Rs 2/- each allotted as detailed in Note 2(d) and equity shares issued and allotted on conversion of warrants , if any, before the record date/ book closure for dividend would rank pari passu with the existing share capital reflected in Note 2 in all respect including dividend declared for the year. Dividend for the year has been provided for on 232,794,316 equity shares of Rs 2/- each at the rate recommended by the Board of Directors on the basis of equity shares issued and allotted up to 27th May, 2012.

However, as the Company is unable to estimate further conversions upto the record date set for determining the said eligibility, any further amounts required to be distributed as dividend will be adjusted against the balance in the Profit and Loss account carried forward to the subsequent financial year.

3 (a) Debentures:

The Company has issued the following secured redeemable non-convertible debentures:

(i) 3,500 - 10.75% Redeemable Secured Non-Convertible Debentures Seventeenth Series of Rs 1,000,000/- each redeemable @ 25.00% on 22nd March, 2015; @ 50.00% on 22nd September, 2014; & @ 25.00% on 22nd March, 2014.

Above Debentures are secured by a (i) First pari passu Mortgage in favour of the Trustees, of all rights and interest on the Company's immovable properties situated at Mundhwa, Satara, Jalgaon and Chakan with negative lien on properties situated at Jejuri and Baramati; and (ii) First pari passu charge in favour of the Trustees by way of hypothecation of movable properties, present and future both such as all plant and machinery, equipments, tools, furniture & fixtures etc., as described in Debenture Trust - cum -Mortgage Deed dated 14th December, 2009.

(ii) 1,760 - 10.75 % Redeemable Secured Non-Convertible Debentures Eighteenth Series of Rs 1,000,000/- each redeemable at 35.00% on 28th April, 2016; @ 35.00% on 28th April, 2015; & @ 30.00% on 28th April, 2014.

Above Debentures are secured by a (i) First pari-passu Mortgage in favour of Trustees, of all rights and interest on the Company's immovable properties, present and future situated at Mundhwa, Chakan, Satara and Jalgaon with negative lien on properties situated at Jejuri and Baramati as described in schedule-I as per Debenture Trust-cum-Mortgage Deed dated 28th June, 2010 and (ii) First pari-passu Charge in favour of the Trustees on moveable properties, present & future as described in Schedule-II as per Debenture Trust-cum-Mortgage Deed dated 28th June, 2010.

3 (a) Debentures (contd.):

(iii) 2,500 - 11.95 % Redeemable Secured Non-Convertible Debentures Sixteenth Series of Rs 1,000,000/- each redeemable at 33.34% on 5th January, 2017; @ 33.33% on 5th January, 2016; & @ 33.33% on 5th January, 2015.

Above Debentures are secured by a (i) First pari passu Mortgage in favour of the Trustees, of all rights and interest on the Company's immovable properties situated at Mundhwa, Satara, Jalgaon and Chakan with negative lien on properties situated at Jejuri and Baramati; and (ii) First pari passu charge in favour of the Trustees by way of hypothecation of movable properties, present and future both such as all plant and machinery, equipments, tools, furniture & fixtures etc., as described in Debenture Trust-cum - Mortgage Deed dated April 30, 2009.

3 (b) Foreign Currency Term Loans:

I. From Bank of India, London

Balance outstanding USD 2.50 million (Previous year USD 5.00 million)

Secured By (i) First charge by way of Hypothecation of the whole of the movable properties including its movable plant and machinery, machinery spares, tools and accessories and other movables, both present and future, whether installed or not and whether now lying loose or in cases or now lying or stored in or about or shall from time to time during the continuance of the security be brought into or upon or be stored or be in or about all the factories, premises and godowns situate at Mundhwa, District Pune; Chakan, District Pune; Vaduth, District Satara; Village Kusumbe, District Jalgaon, all in the state of Maharashtra or wherever else the same may be or be held by any party to the order of disposition or in the course of transit or on high seas or on order, or delivery, howsoever and wheresoever in the possession and either by way of substitution or addition except specific movable plant and machinery consisting of Wind Energy converter of 600 K.V. 7 Nos at Village Boposhi, District Satara, exclusively hypothecated to Standard Chartered Bank, as described under the Deed of Hypothecation dated 17th March, 2005 and; (ii) Equitable Mortgage by deposit of title deeds of Immovable properties situate at Village Mundhwa, Pune; Village Vaduth, Taluka and District Satara; Village Kusumbe Khurd, Taluka and District Jalgaon and Village Chakan, Pune all in the state of Maharashtra, together with all buildings and structures thereon and all Plant and Machinery attached to the earth or permanently fastened to anything attached to the earth, as described under Memorandum of Entry dated 17th March, 2005.

II. From Credit Agricole Corporate & Investment Bank, Singapore

Balance outstanding USD 50 million (Previous year USD 50 million)

Secured By First Pari passu charge over present and future movable fixed assets viz. Plant and Machinery, Computers, Furnitures and Fixtures, whether installed or not and whether now lying loose or in cases or otherwise or being on or upon or at any time, hereafter being on or upon about the premises and godowns at Mundhwa, Pune; Village Kuruli, Chakan; Taluka Khed, District Pune; Village Vaduth, Taluka & District Satara and at Baramati, Pune or anywhere else.

Repayable in 6 equal yearly installments from date of its' origination, i.e. 14th October, 2012, along with interest of 3M Libor 280 bps p.a.

3 (c) Rupee Term Loans:

From Axis Bank

Balance outstanding Rs 330.56 million (Previous year Rs 225 million)

Above loan is to be secured against (i) First pari-passu charge on the Company's immovable properties, present & future Situate at Mundhwa, Chakan, Satara and Jalgaon with negative lien on properties situated at Jejuri and Baramati and (ii) First pari-passu Charge on moveable properties, present & future including Land & Building.

Repayable in 18 equal half yearly installments from date of its' origination i.e. 20th March, 2012 along with interest of Base Rate 2% p.a.

3 (d) Foreign Currency Convertible Bonds:

The Company had issued Foreign Currency Convertible Bonds (FCCB) in two tranches aggregating USD 79.90 million, detailed in the table below, to finance Capital Expenditure and Global Acquisitions. The said bonds are optionally convertible into GDR/ Equity Shares to be exercised at any time during the exercise period at a pre determined initial price subject to adjustments upon occurrence of certain events.

However, the Company has option to redeem the balance of the above Bonds if such balance is less than 10% in aggregate of principal amount of such tranche of bonds originally issued in respect of each tranche, during the redemption exercise period in the manner specified in the offering circular at a premium so as to provide a predetermined yield to the Bondholders.

The Company also has the option to call the Bondholders of Tranche A & Tranche B to mandatorily convert the Bonds into Equity Shares if the Market Price on the specified date provided the holder a gain of at least a 30% over the Early Redemption amount.

# Tranche A of the above FCCBs amounting to USD 40.00 Million outstanding as at April 26, 2012 were redeemed on April 27, 2012 along with the redemption premium amounting to USD 17.03 Million. The premium on redemption aggregating Rs 994.06 Million, (including withholding Tax amounting to Rs 98.96 Million) since crystalised has been adjusted to securities premium account, net of deferred tax asset amounting to Rs 322.52 million, in terms of Section 78(2) (d) of the Companies Act, 1956.

Due to variables currently indeterminate, the premium on actual redemption for Tranche B is not computable and hence will be recognised if and as and when the redemption option is exercised, as a charge to the securities premium account in terms of Section 78(2)(d) of the Companies Act,1956.

The Company has been legally advised by an eminent law firm that the above mentioned Convertible Bonds issued upon terms and conditions set out in the offering circular dated 19th April, 2005, would be outside the purview of Section 117 (C) of the Companies Act, 1956 as regards creation of Debenture Redemption Reserve. The Auditors have relied upon the said legal opinion.

3 (e) Term Loans from Banks:

Foreign Currency Term Loans on Syndicated basis

Balance outstanding USD 80 million (Previous year NIL)

Repayable in 3 half yearly installments from date of its' origination i.e. 31st October, 2016, along with interest of 6M Libor 280 bps p.a.

3 (f) Deferred payment liabilities:

Sales tax deferral incentives attached to the erstwhile windmill division, which was demerged to BF Utilities Ltd. under Section 392 and 394 of the Companies Act, 1956 sanctioned by the High Court of the Judicature at Mumbai, have been passed on thereafter from year to year by the Company to the latter, under an arrangement, with all liabilities and obligations attached thereto. Consequently sales tax deferral liability represents net liability to the Company after such pass on aggregating to Rs 821 million (Previous year Rs 845 million).

NOTES:

(a) At cost, except lease hold land which is at cost less amounts written off.

(b) Buildings include premises on ownership basis in co-operative Societies Rs 32.81 million and also cost of hangar jointly owned with other Companies Rs 0.12 million.

(c) See Note 1 - clause 2 for accounting policy on Fixed Assets and Depreciation.

(d) Includes 25 acres land given on lease.

(e) Documents for the ownership premises at Sai Nagari & Surajban Apartments, Lullanagar at Pune, Antriksha Bhawan at New Delhi, Land at Keshavnager, Mundhawa and Lease deed for Land at Baramati & Jejuri still continue to be under execution.

(f) Cost incurred by the Company. Ownership vests with Maharashtra State Electricity Distribution Company Ltd.

(g) Represents amount amortised upto 31 st March, 2012

$ Refer Note 1 - Clause 6(a) for accounting policy.

@ Joint Ventures:- Company holds 50% of the Share Capital

* Company holds 5% of the share capital

# Joint Ventures:- Company holds 49% of the share capital

1 (a) Contribution to Capital Reserve Credited in favour of Bharat Forge Ltd.:

Contributions in to the Capital Reserves of CDP - Bharat Forge GmbH as per the German Commercial Code, forms a part of the Equity Share Capital and accordingly has been considered as an investment and is redeemable subject to provisions of the code.

1 (b) Bharat Forge America Inc.:

Bharat Forge America Inc. (BFA), a wholly owned subsidiary has registered losses which have substantially eroded its Net worth. The auditors of the BFA have, given current adverse conditions prevailing in the American auto industry, disclaimed expression of any opinion on the validity of the assumption of going concern, the basis on which the financial statements have been prepared. Given the uncertainties in the American economy and its further impact on the auto industries slow revival, the Company has, as a matter of prudence, tested the investment in BFA for impairment / diminution with reference to the value of assets. Accordingly the Company has provided for impairment aggregating Rs 704.16 Million during the year which has been recognised as an exceptional item in the statement of profit and loss.

2 (a) Loan to a company:

Interest free loan of Rs 309.09 million given to a Company which has given an undertaking to hold the shares solely for the purpose and obligations of the ''BFL Executives Welfare and Share Option Trust'' in terms of clause (b) of the proviso to Section 77(2) of the Companies Act, 1956, which in the opinion of an eminent Counsel, obtained by a Group Company, falls within the purview of the said proviso to the above mentioned section.

# Included in Market value at NAV as on 31st March, 2012 & 31st March, 2011 respectively, as there was no trade for the schemes, hence, quotations are not available.

* Refer Note 1 - clause 6(b) of Accounting Policy.

(Rs in Million)

As at As at

3 Contingent Liabilities not provided for in respect of : 31st March, 2012 31st March, 2011

(i) Sales Bills Discounted 7,222.08 4,911.08 Of Which:

Bills since realised 2,410.02 1,739.26

Matured, Overdue & outstanding since close of the period - -

(ii) Guarantees given by the Company on behalf of other companies Balance Outstanding 1,996.82 1,845.43

(Maximum Amount) (2,193.50) (2,025.61)

(iii) Claims against the Company not acknowledged as Debts- to the extent ascertained 140.48 142.00

(iv) Excise/Service Tax Demands - matters under dispute 180.37 184.65

(v) Customs Demands - matters under dispute 50.97 50.97

ii) On 5th August, 2009, the Company has entered into a Cross Currency Swap (CCS) for a period of five years by converting a Long Term Rupee NCD liability of Rs250 million (out of 10.75% XVth Series NCD of Rs2,500 million) into an equivalent USD liability at the prevailing spot rate. Under this structure, the Company will receive a fixed interest coupon on a quarterly basis on the rupee amount swapped and will pay floating rate interest (which is subject to a cap) on the USD notional amount. On maturity of the swap, the Company will pay the contracted USD loan liability at prevailing rate and receive the original rupee amount swapped.

4 Guarantees given by Company's Bankers on behalf of the Company, against sanctioned guarantee limit aggregating to Rs 3,250.00 million (Previous Year Rs 3,250 .00 million) for contracts undertaken by the Company and other matters are secured by extension of charge by way of joint hypothecation of stock-in-trade, stores and spares etc., book debts, subject to prior charge in their favour. Amount outstanding Rs 711.05 million (Previous Year Rs 856.83 million)

5 The Company has entered into agreements in the nature of lease / leave and license agreement with different lessors / licensors for the purpose of establishment of office premises/Residential Accommodations. These are generally in nature of operating lease / leave and license, disclosure required as per Accounting Standard 19 with regard to the above is as under:

i) Payment under operating lease / leave and license for period

1) Not later than one year Rs 4.09 million

2) Later than one year but not later than five years Rs 1.63 million

3) Later than five years Rs 0.81 million

ii) There are no transactions in the nature of sub-lease.

iii) Payments recognised in the Profit and Loss Account for the year ended 31st March, 2012 Rs 5.54 million

iv) Period of agreement is generally for three years and renewable at the option of the Lessee.

6 Segment information based on consolidated financial statements has been disclosed in a statement annexed thereto. Primary Segments have been determined by the management in light of the dominant source and nature of risks and returns of the consolidated group and relied upon by the auditors.

7 Related Party disclosures have been set out in a separate statement annexed to this Note. The related parties, as defined by Accounting Standard 18 'Related Party Disclosures' issued by The Companies Accounting Standard Amendment Rules, 2006, in respect of which the disclosures have been made, have been identified on the basis of disclosures made by the key managerial persons and taken on record by the Board.

8 Information on Joint Ventures is set out in a separate statement annexed to this Note.

9 Figures less than Rs 5,000/- have been shown at actuals in bracket as the figures have been rounded off to the nearest second decimal to millions.

10 The financial statements for the year ended 31 March, 2011 had been prepared as per the then applicable, pre-revised Schedule VI to the Companies Act, 1956. Consequent to the notification of Revised Schedule VI under the Companies Act, 1956, the financial statements for the year ended 31 March, 2012 are prepared as per Revised Schedule VI. Accordingly, the previous year figures have also been reclassified to conform to this year's classification. The adoption of Revised Schedule VI for previous year figures does not impact recognition and measurement principles followed for preparation of financial statements.


Mar 31, 2011

(Rs in Million)

As at 31st As at 31st

March, 2011 March, 2010

A. Contingent Liabilities not provided for in respect of:

(a) Sales Bills Discounted 4,911.08 3,799.81 of which:

Bills since realised 1,739.26 904.16

Matured, Overdue & outstanding since close of the period - -

(b) Guarantees given by the Company on behalf of other companies:

Balance Outstanding 1,845.43 570.09

(Maximum Amount) (2,025.61) (830.94)

(c) Claims against the Company not acknowledged as Debts - to the extent ascertained 142.00 147.49

(d) Disputed Income Tax matters - 104.32

(e) Excise/Service Tax Demands - matters under dispute 184.65 281.85

(f) Customs Demands - matters under dispute 50.97 322.15

B. The Company has imported Capital Goods under the Export Promotion Capital Goods Scheme, of the Government of India, at concessional rates of Duty on an understanding to fulfill quantified exports against which remaining future obligation aggregates USD 147.02 million, over a period of next five years, while maintaining average export of USD 159.54 million per annum. Minimum Export obligation to be fulfilled by the Company under the said scheme by 31st March, 2011, has been fulfilled. Non fulfillment of the balance of such future obligations, in the manner required, if any, entails options/ rights to the Government to confiscate Capital Goods imported under the said Licences and other penalties under the above referred scheme.

ii) On 5th August, 2009, the Company has entered into a Cross Currency Swap (CCS) for a period of five years by converting a Long Term Rupee NCD liability of Rs 250 million (out of 10.75% XVth Series NCDs of Rs 2,500 million) into an equivalent USD liability at the prevailing spot rate. Under this structure, the Company will receive a fixed interest coupon on a quarterly basis on the rupee amount swapped and will pay floating rate interest (which is subject to a cap) on the USD notional amount. On maturity of the swap, the Company will pay the contracted USD loan liability at prevailing rate and receive the original rupee amount swapped.

10. The Equity Shares allotted on exercise of option to convert to FCCBs by the Bondholders, and the 10,000,000 equity shares of Rs 2/- each allotted as detailed in footnote B(iii) to schedule ‘A’ and equity shares issued and allotted on conversion of warrants, if any, before the record date/book closure for dividend, would rank pari passu with the existing share capital reflected in Schedule ‘A’ in all respect including dividend declared for the year. Accordingly, Dividend has been provided for on 232,794,316 equity shares of Rs 2/- each at the rate recommended by the Board of Directors on the basis of equity shares issued and allotted up to 23rd May, 2011.

However, as the Company is unable to estimate further conversions upto the record date set for determining the said eligibility, any further amounts required to be distributed as dividend will be adjusted against the balance in the Profit and Loss Account carried forward to the subsequent financial year.

11. Sales tax deferral incentives attached to the erstwhile windmill division, which was demerged to BF Utilities Ltd. under section 392 and 394 of the Companies Act, 1956 sanctioned by the High Court of the Judicature at Mumbai, have been passed on thereafter from year to year by the Company to the latter, under an arrangement, with all liabilities and obligations attached thereto. Consequently, sales tax deferral liability represents net liability to the Company after such pass on aggregating to Rs 845 million (Previous year Rs 851 million).

12. (a) Non Convertible Debentures (NCDs):

(i) 11.95 % Secured Redeemable Non-Convertible Debentures (NCDs) of face value of Rs 1,000,000 each, aggregating Rs 2,500,000,000/- (Rupees Two thousand five hundred million) were issued on private placement basis to Life Insurance Corporation of India. In terms of Debenture Trust-cum-Mortgage Deed dated April 30, 2009, NCDs are to be redeemed in three Annual installments starting at the end of sixth year from the date of allotment (viz. 5th January, 2009) i.e. @ 33.33% on 5th January, 2015, @ 33.33% on 5th January, 2016, and @ 33.34% on 5th January, 2017. Above Debentures are secured by a (i) First pari passu Mortgage in favour of the Trustees, of all rights and interest on the Company’s immovable properties situated at Mundhwa, Satara, Jalgaon and Chakan with negative lien on properties situated at Jejuri and Baramati; and (ii) First pari passu charge in favour of the Trustees by way of hypothecation of movable properties, both present and future, such as all plant and machinery, equipments, tools, furniture & fixtures etc. as described in Debenture Trust-cum-Mortgage Deed dated April 30, 2009.

(ii) 10.75 % Secured Redeemable Non Convertible Debentures (NCDs) of face value of Rs 1,000,000/- each, aggregating Rs 3,500,000,000/- (Rupees Three thousand five hundred million) were issued on private placement basis to various debentureholders. In terms of Debenture Trust-cum-Mortgage Deed dated December 14, 2009, NCDs are to be redeemed in three installments starting at the end of 54th month i.e. on 22nd March, 2014, @ 25%, at the end of 60th month i.e. on 22nd September, 2014 @ 50% and at the end of 66th month i.e. 22nd March, 2015 @ 25%. Above Debentures are secured by a (i) First pari passu Mortgage in favour of the Trustees, of all rights and interest on the Company’s immovable properties situated at Mundhwa, Satara, Jalgaon and Chakan with negative lien on properties situated at Jejuri and Baramati; and (ii) First pari passu charge in favour of the Trustees by way of hypothecation of movable properties, both present and future, such as all plant and machinery, equipments, tools, furniture & fixtures etc, as described in Debenture Trust-cum-Mortgage Deed dated December 14, 2009.

(iii) 10.75 % Secured Redeemable Non Convertible Debentures (NCDs) of face value of Rs 1,000,000/- each, aggregating Rs 1,760,000,000/- (Rupees One thousand seven hundred sixty million) were issued on private placement basis to Qualified Institutional Buyers, under QIP issue. In terms of Debenture Trust-cum-Mortgage Deed dated 28th June, 2010, NCDs are to be redeemed in three annual installments starting at the end of fourth year from the date of allotment (viz.28th April, 2010) i.e. @ 35% on 28th April, 2014, @ 35% on 28th April, 2015, and @ 30% on 28th April, 2016.

Above Debentures are secured by a (i) First pari-passu Mortgage in favour of Trustees, of all rights and interest on the Company’s immovable properties, present and future situated at Mundhwa, Chakan, Satara and Jalgaon with negative lien on properties situated at Jejuri and Baramati as described in Schedule-I as per Debenture Trust-cum-Mortgage Deed dated 28th June, 2010 and (ii) First pari-passu Charge in favour of the Trustees on moveable properties, both present and future, as described in Schedule-II as per Debenture Trust-cum-Mortgage Deed dated 28th June, 2010.

(b) Foreign Currency Loans:

(i) Bank of India, London, Foreign Currency Term Loan; Balance outstanding USD 5.00 million (Previous year USD 7.50 million).

(ii) Credit Agricole Corporate & Investment Bank, Singapore, Foreign Currency Term Loan; Balance outstanding USD 50 million (Previous year USD 50 million).

The loans at Sr. No (i) above is secured by:

1. First charge by way of Hypothecation of the whole of the movable properties including its movable plant and machinery, machinery spares, tools and accessories and other movables, both present and future, whether installed or not and whether now lying loose or in cases or now lying or stored in or about or shall from time to time during the continuance of the security be brought into or upon or be stored or be in or about all the factories, premises and godowns situated at Mundhwa, District Pune; Chakan, District Pune; Vaduth, District Satara; Village Kusumbe, District Jalgaon, all in the state of Maharashtra or wherever else the same may be or be held by any party to the order of disposition or in the course of transit or on high seas or on order, or delivery, howsoever and wheresoever in the possession and either by way of substitution or addition except specific movable plant and machinery consisting of Wind Energy Converter of 600 K.V. 7 Nos. at Village Boposhi, District Satara, exclusively hypothecated to Standard Chartered Bank, as described under the Deed of Hypothecation dated 17th March, 2005 and;

2. Equitable Mortgage by deposit of title deeds of immovable properties situated at Village Mundhwa, Pune; Village Vaduth, Tal. and Dist. Satara; Village Kusumbe Khurd, Tal. and District Jalgaon and Village Chakan, Pune all in the state of Maharashtra, together with all buildings and structures thereon and all Plant and Machinery attached to the earth or permanently fastened to anything attached to the earth, as described under Memorandum of Entry dated 17th March, 2005.

The loan at Sr. No. (ii) above is secured by:

First Pari passu charge over present and future movable fixed assets viz. Plant and Machinery, Computers, Furnitures and Fixtures, whether installed or not and whether now lying loose or in cases or otherwise or being on or upon or at any time, hereafter being on or upon about the premises and godowns at Mundhwa, Pune; Village Kuruli, Chakan; Taluka Khed, Dist. Pune; Village Vaduth, Taluka & District Satara and at Baramati, Pune or anywhere else.

(c) Rupee Loans:

Axis Bank, Pune, Long Term Rupee Term Loan; Balance outstanding Rs 225 million (Previous year Rs Nil). Above loan is to be secured against (i) First pari-passu charge on the Company’s immovable properties, both present and future situated at Mundhwa, Chakan, Satara and Jalgaon with negative lien on properties situated at Jejuri and Baramati and (ii) First pari-passu Charge on moveable properties, both present & future including Land & Building.

(d) Guarantees given by Company’s Bankers on behalf of the Company, against sanctioned guarantee limit aggregating to Rs 3,250 million (Previous Year Rs 3,250 million) for contracts undertaken by the Company and other matters are secured by extension of charge by way of joint hypothecation of stock-in-trade, stores and spares etc., book debts, subject to prior charge in their favour. Amount outstanding Rs 856.83 million (Previous Year Rs 635.43 million).

13. The company has recognised Deferred Taxes, which result from timing difference between the Book Profits and Tax Profits for the year aggregating Rs 491.20 million in the Profit and Loss Account, the details of which are as under:

14. Capital Work-in-Progress includes advances for supply of Capital Goods aggregating Rs 826.57 million (Previous Year Rs 345.94 million).

15. Advances recoverable in cash or in kind or for value to be received in schedule "G" includes: Loans aggregating Rs 0.59 million (Previous year Rs 0.77 million) granted to one executive who subsequently was, appointed as Whole Time Director of the Company. Maximum balance outstanding during the year Rs 0.79 million (previous year Rs 0.79 million).

16. Interest free loan of Rs 309.09 million given to a Company which has given an undertaking to hold the shares solely for the purpose and obligations of the "BFL Executives Welfare and Share Option Trust" in terms of clause (b) of the proviso to Section 77(2) of the Companies Act, 1956, which in the opinion of an eminent Counsel, obtained by a Group Company, falls within the purview of the said proviso to the above mentioned section.

Note: The information has been given in respect of such vendors to the extent they could be identified as "Micro and Small" enterprises on the basis of information available with the Company.

18. The Company had issued Foreign Currency Convertible Bonds (FCCBs) in two tranches aggregating USD 79.90 million, detailed in the table below, to finance Capital Expenditure and Global Acquisitions. The said bonds are optionally convertible into GDRs/ Equity Shares to be exercised at any time during the exercise period at a pre determined initial price subject to adjustments upon occurrence of certain events.

However, the Company has option to redeem the balance of the above Bonds, if such balance is less than 10% in aggregate of principal amount of such tranch of bonds originally issued in respect of each tranch, during the redemption exercise period in the manner specified in the offering circular, at a premium, so as to provide a predetermined yield to the Bondholders.

The Company also has the option to call the Bondholders of Tranche A & Tranche B to mandatorily convert the Bonds into Equity Shares, if the Market Price on the specified date, provided the holder a gain of atleast a 30% over the Early Redemption amount.

Due to variables currently indeterminate, the premium on actual redemption for Tranche A & B is not computable and hence, will be recognised if and as and when the redemption option is exercised, as a charge to the securities premium account in terms of Section 78(2)(d) of the Companies Act,1956.

The Company has been legally advised by an eminent law firm that, the above mentioned Convertible Bonds issued upon terms and conditions set out in the offering circular dated 19th April, 2005, would be outside the purview of Section 117(C) of the Companies Act, 1956 as regards creation of Debenture Redemption Reserve. The Auditors have relied upon the said legal opinion. The unutilised amounts of money raised, as at 31st March, 2011 is Rs Nil.

19. Debenture Redemption Reserve has been created in accordance with circular No. 9/2002 dated 18th April, 2002 issued by Department of Company Affairs, Ministry of Law, Justice and Company Affairs, Government of India and Section 117(C) of the Companies Act,1956 at 25% of the maturity amount equally over the terms of the Debentures Privately placed. Amount set aside for the year represents for full year in respect of Debentures issued in earlier year and proportionate amount for a period of 11 months for Debentures issued during the year.

21. The Accounting Standard (AS-11) "The effects of changes in Foreign Exchange Rates" prescribed by Companies (Accounting Standards) Rules, 2006 was amended on 31st March, 2009, vide a notification dated 31st March, 2009, by the Ministry of Corporate Affairs. The said amendment offered an option to Companies to recognise Foreign Exchange Gains and Losses arising on translation of all long term monetary assets and liabilities acquired upto 31st March, 2009, retrospectively from accounting periods commencing after 7th December, 2006 (i.e. from 1st April, 2007 for the Company) upto 31st March, 2011, as capital cost of acquisition of assets where they relate to acquisition of assets or to a Translation Reserve viz. "Foreign Currency Monetary Item Translation Difference Account" (FCMITDA) in other cases. The amount so recognised as capital cost of acquisition of assets is to be depreciated over the balance life of the relevant assets and in case of the amount recognised in the FCMITDA is to be amortised, over the balance term of the monetary assets or liability, but not beyond 31st March, 2011.

The Company had chosen to exercise this option in preparation of its financial statements from the year ended 31st March, 2009. Accordingly, Foreign exchange differences adjusted against the cost of the assets/ CWIP aggregates Rs 34.88 million (gain), amount in "Foreign Currency Monetary Item Translation Difference Account " (FCMITDA) aggregates Rs 4.44 million (gain) and amortised in the current year amounts to Rs 39.20 million.

22. Bharat Forge America Inc. (BFA), a wholly owned subsidiary, has registered losses which have substantially eroded its Net worth. The Auditors of the Company have, given current adverse conditions prevailing in the American auto industry, disclaimed expression of any opinion on the validity of the assumption of going concern, the basis on which the financial statements have been prepared. In November 2010, the Management of BFA has successfully negotiated union contract resulting in considerable wage decrease for each of the next 3 years. This will help BFA in correcting the cost structure and targeting new business. Also, the Management of BFA, as at 31st December, 2010, has tested the assets for impairment, the results of which do not indicate any impairment losses and hence, the dimunition in the value of the Company’s investment in this subsidiary is not considered to be of permanent nature.

23. In order to recognise the impact of fluctuation in foreign currency rates arising out of instruments acquired to hedge highly probable forecast transactions, in appropriate accounting periods, the Company applies the principles of recognition set out in the Accounting Standard-30 - Financial Instruments - Recognition and Measurement (AS-30) as suggested by the Institute of Chartered Accountants of India. Accordingly, the unrealised gain/(loss) (net) consequent to foreign currency fluctuations, in respect of effective hedging instruments, represented by simpleforward covers, to hedge future exports, are carried as a Hedging Reserve and ultimately set off in the Profit and Loss Account when the underlying transaction arises.

The amount outstanding in the Hedge Reserve at the close of the year is Rs 13.98 million.

30. Significant accounting policies followed by the Company are as stated in the statement annexed to this schedule.

31. Figures less than Rs 5,000/- have been shown at actuals in bracket as the figures have been rounded off to the nearest second decimal to millions.

32. Previous financial year’s figures have been regrouped wherever necessary to make them comparable with those of the current year.


Mar 31, 2010

(Rs. in Million)

As at 31st As at 31st March, 2010 March, 2009

1. A. Contingent liabilities not provided for in respect of:

(a) Sales Bills discounted 3 799.81 4 575.13 of Which:

Bills since realised 904.16 1 238.09

Matured, Overdue & outstanding since close of the period - -

(b) Guarantees given by the Company on behalf of other companies:

Balance outstanding 570.09 735.28

(Maximum amount) (830.94) (1 520.33)

(c) Claims against the Company not acknowledged as Debts- to the extent ascertained 147.49 73.38

(d) Disputed Income Tax matters 104.32 104.32

(e> Excise/Service Tax Demands - matters under dispute 281.85 277.53

(f) Customs demands - matters under dispute 322.15 317.93 B. The Company has imported Capital goods under the Export Promotion Capital Goods Scheme, of the Government of India, at concessional rates of duty on an understanding to fulfi ll quantifi ed exports against which remaining future obligation aggregates USD 291.80 million, over a period of next seven years, while maintaining average export of USD 145.34 million per annum. Minimum export obligation to be fulfi lled by the Company under the said scheme by 31st March, 2010, has not been fulfi lled. Non fulfi llment of the balance of such future obligations, in the manner required, if any entails options / rights to the Government to confi scate Capital Goods imported under the said Licences and other penalties under the above referred scheme

2. The Company, upto March, 2006, had prematurely retired its obligations of the Sales Tax Deferral Incentive availed under the package scheme of Incentives 1993, thereby generating a cumulative surplus of Rs. 108.63 million. Since the incentive was fundamentally provided to encourage capital investments in designated underdeveloped zones and thereby defray, to some extent, defi ciencies, the same has been, as per the opinion of the “Expert Advisory Committee” set up by the Institute of Chartered Accountants of India, credited to “Capital Reserve“ to be apportioned to Revenue Reserves over the future/balance life of the underlying investments, at the end of each fi nancial year.

3. Sales Tax Deferral Incentives attached to the erstwhile windmill division, which was demerged to BF Utilities Ltd. under section 392 and 394 of the Companies Act, 1956, sanctioned by the High Court of the Judicature at Mumbai, have been passed on thereafter from year to year by the Company to the latter, under an arrangement, with all liabilities and obligations attached thereto. Consequently, sales tax deferral liability represents net liability to the Company after such pass on aggregating to Rs. 851 million (Previous year Rs. 851 million).

4. (a) Non Convertible Debentures:

(i) 11.95% Secured Redeemable Non-Convertible Debentures (NCDs) of face value of Rs. 1 000 000/- each, aggregating Rs. 2 500 000 000/- (Rupees two thousand fi ve hundred million) were issued on private placement basis to Life Insurance Corporation of India. In terms of Debenture Trust-cum-Mortgage Deed dated April 30, 2009, NCDs are to be redeemed in three annual instalments starting at the end of sixth year from the date of allotment (viz. 5th January, 2009) i.e 33.33% on 5th January, 2015, 33.33% on 5th January, 2016, and 33.34% on 5th January, 2017.

Above Debentures are secured by a (i) First pari passu Mortgage in favour of the Trustees, of all rights and interest on the Company’s immovable properties situated at Mundhwa, Satara, Jalgaon and Chakan with negative lien on properties situated at Jejuri and Baramati; and (ii) First pari passu charge in favour of the Trustees by way of hypothecation of movable properties, present and future both such as all plant and machinery, equipments, tools, furniture & fi xtures etc, as described in Debenture Trust-cum-Mortgage Deed dated April 30, 2009.

(ii) 10.75% Secured Redeemable Non-Convertible Debentures (NCDs) of face value of Rs. 1 000 000/- each, aggregating Rs. 3 500 000 000/- (Rupees three thousand fi ve hundred million) were issued on private placement basis to various debentureholders. In terms of Debenture Trust-cum-Mortgage Deed dated December 14, 2009 NCDs are redeemable in three instalments starting at the end of 54th month i.e on 22nd March, 2014, @25%, at the end of 60th month, i.e on 22nd September, 2014 @ 50% and at the end of 66th month, i.e 22nd March, 2015 @ 25%.

Above Debentures are secured by a (i) First pari passu Mortgage in favour of the Trustees, of all rights and interest on the Company’s immovable properties situated at Mundhwa, Satara, Jalgaon and Chakan with negative lien on properties situated at Jejuri and Baramati; and (ii) First pari passu charge in favour of the Trustees by way of hypothecation of movable properties, present and future both such as all plant and machinery, equipments, tools, furniture & fi xtures etc, as described in Debenture Trust-cum -Mortgage Deed dated December 14, 2009.

(b) Foreign Currency Loans:

(i) Bank of India, London, Foreign Currency Term Loan; Balance outstanding USD 7.50 million (Previous year USD 10.00 million).

(ii) Calyon, Singapore, Foreign Currency Term Loan; Balance outstanding USD 50 million (Previous year USD 50 million).

The loans at Sr. No (i) above is secured by:

1. First charge by way of Hypothecation of the whole of the movable properties including its movable plant and machinery, machinery spares, tools and accessories and other movables, both present and future, whether installed or not and whether now lying loose or in cases or now lying or stored in or about or shall from time to time during the continuance of the security be brought into or upon or be stored or be in or about all the factories, premises and godowns situate at Mundhwa, District Pune; Chakan, District Pune ; Vaduth, District Satara; Village Kusumbe, District Jalgaon, all in the state of Maharashtra or wherever else the same may be or be held by any party to the order of disposition or in the course of transit or on high seas or on order, or delivery, howsoever and wheresoever in the possession and either by way of substitution or addition except specifi c movable plant and machinery consisting of Wind Energy converter of 600 K .V. 7 Nos. at Village Boposhi, District Satara, exclusively hypothecated to Standard Chartered Bank, as described under the Deed of Hypothecation dated 17th March, 2005 and;

2 Equitable Mortgage by deposit of title deeds of Immovable properties situate at Village Mundhwa, Pune; Village Vaduth, Tal and Dist Satara; Village Kusumbe Khurd, Ta l and District Jalgaon and Village Chakan, Pune all in the state of Maharashtra, together with all buildings and structures thereon and all Plant and Machinery attached to the earth or permanently fastened to anything attached to the earth, as described under Memorandum of Entry dated 17th March, 2005.

The loan at Sr. No (ii) above is secured by:

First Pari passu charge over present and future movable fi xed assets, viz. Plant and Machinery, Computers, Furnitures and Fixtures, whether installed or not and whether now lying loose or in cases or otherwise or being on or upon or at any time, hereafter being on or upon about the premises and godowns at Mundhwa, Pune; Village Kuruli, Chakan; Taluka Khed, Dist. Pune; Village Vaduth, Taluka & District Satara and at Baramati, Pune or anywhere else.

(iii) Standard Chartered Bank, Mauritius, Term Loan, Balance outstanding Nil, previous year (USD 16 million). The above loan was secured by exclusive fi rst charge by way of hypothecation of Aircraft.

(c) Guarantees given by Company’s Bankers on behalf of the Company, against sanctioned guarantee limit aggregating to Rs. 3 250 million (Previous year Rs. 3 250 million) for contracts undertaken by the Company and other matters are secured by extension of charge by way of joint hypothecation of stock-in-trade, stores and spares etc., book debts, subject to prior charge in their favour. Amount outstanding Rs. 635.43 million (Previous year Rs. 453.73 million).

5. Capital Work-in-Progress includes advances for supply of Capital Goods aggregating Rs. 345.94 million (Previous year Rs. 535.90 million).

6. Advances recoverable in cash or in kind or for value to be received in schedule ‘H’ includes:

Loans aggregating Rs. 0.77 million (Previous year Rs. 0.79 million) granted to one executive who subsequently was, appointed as Whole Time Director of the Company. Maximum balance outstanding during the year Rs. 0.79 million, (previous year Rs. 10.83 million).

7. Interest free loan of Rs. 309.09 million given to a Company which has given an undertaking to hold the shares solely for the purpose and obligations of the “BFL Executives Welfare and Share Option Trust” in terms of clause (b) of the proviso to Section 77(2) of the Companies Act, 1956, which in the opinion of an eminent Counsel, obtained by a Group Company, falls within the purview of the said proviso to the above mentioned section.

8. The Company had issued Foreign Currency Convertible Bonds (FCCBs) in four tranches aggregating USD 199.90 million, detailed in the table below, to fi nance Capital Expenditure and Global Acquisitions. The said bonds are optionally convertible into GDR/Equity Shares to be exercised at any time during the exercise period at a pre determined initial price subject to adjustments upon occurrence of certain events.

However, the Company has option to redeem the balance of the above Bonds if such balance is less than 10% in aggregate of principal amount of such tranche of bonds originally issued in respect of each tranche, during the redemption exercise period in the manner specifi ed in the offering circular at a premium so as to provide a predetermined yield to the Bondholders.

The Company also has the option to call the Bondholders of Tranche A & Tranche B to mandatorily convert the Bonds into Equity Shares, if the Market Price on the specifi ed date provided the holder a gain of atleast a 30% over the Early Redemption amount.

(*) Tranche 1 & 2 of the above FCCBs amounting to USD 102.25 million outstanding as at April 20, 2010 (i.e. after conversion into equity shares through the option period) were redeemed on April 20, 2010 along with the redemption premium amounting to USD 29.24 million. The Premium on redemption aggregating Rs. 1 460.45 million, (including tax amounting to Rs. 154.92 million) since crystalised has been adjusted to securities premium account, net of deferred tax asset amounting to Rs. 485.13 million, in terms of Section 78(2)(d) of the Companies Act, 1956.

Due to variables currently indeterminate, the premium on actual redemption for Tranche A & B is not computable and hence, will be recognised if and as and when the redemption option is exercised, as a charge to the securities premium account in terms of Section 78(2)(d) of the Companies Act, 1956.

The Company has been legally advised by an eminent law fi rm that the above mentioned Convertible Bonds issued upon terms and conditions set out in the offering circular dated 19th April, 2005, would be outside the purview of Section 117(C) of the Companies Act, 1956 as regards creation of Debenture Redemption Reserve. The Auditors have relied upon the said legal opinion. The unutilised amounts, of money raised, as at 31st March, 2010 is Rs. Nil.

9. Debenture Redemption Reserve has been created in accordance with circular No. 9/ 2002 dated 18th April, 2002 issued by Department of Company Affairs, Ministry of Law, Justice and Company Affairs, Government of India and Section 117 (C) of the Companies Act, 1956 at 25% of the maturity amount equally over the terms of the Debentures privately placed. Amount set aside for the year represents for full year in respect of Debentures issued in earlier year and proportionate amount for a period of 6 months for Debentures issued during the year.

10. The Accounting Standard (AS-11) “ The effects of changes in Foreign Exchange Rates” prescribed by Companies (Accounting Standards) Rules, 2006 was amended on 31st March, 2009, vide a notifi cation dated 31st March, 2009, by the Ministry of Corporate Affairs. The said amendment offered an option to Companies to recognise Foreign Exchange Gains and Losses arising on translation of all long term monetary assets and liabilities acquired upto 31st March, 2009, retrospectively from accounting periods commencing after 7th December, 2006 (i.e from 1st April, 2007 for the Company) upto 31st March, 2011, as capital cost of acquisition of assets where they relate to acquisition of assets or to a Translation Reserve viz. “Foreign Currency Monetary Item Translation Difference Account (FCMITDA) in other cases. The amount so recognised as capital cost of acquisition of assets is to be depreciated over the balance life of the relevant assets and in case of the amount recognised in the FCMITDA is to be amortised over the balance term of the monetary asset or liability but not beyond 31st March, 2011.

11. Bharat Forge America Inc. (BFA), a wholly owned subsidiary has registered losses which have substantially eroded its Net worth. The auditors of the Company have, given current adverse conditions prevailing in the American auto industry, disclaimed expression of any opinion on the validity of the assumption of going concern, the basis of which the fi nancial statements have been prepared. However, the management of BFA, as at 31st December, 2009, has tested the assets for impairment, the results of which do not indicate any impairment losses and hence the dimunition in the value of the company’s investment in this subsidiary is not considered to be of permanent nature.

12. In order to recognise the impact of fl uctuation in foreign currency rates arising out of instruments acquired to hedge highly probable forecast transaction, in appropriate accounting periods, the company applies the principles of recognition set out in the Accounting Standard 30-Financial Instruments - Recognition and Measurement (AS-30) as suggested by the Institute of Chartered Accountants of India. Accordingly, the unrealised gain/(loss) (net) consequent to foreign currency fl uctuations, in respect of effective hedging instruments, represented by simple forward covers, to hedge future exports, are carried as a Hedging Reserve and ultimately set off in the profi t and loss account when the underlying transaction arises.

The amount outstanding in the Hedge Reserve at the close of the year is Rs.171.52 million.

13. The Company has entered into agreements in the nature of lease/leave and license agreement with different lessors/licensors for the purpose of establishment of offi ce premises/Residential Accommodations. These are generally in nature of operating lease/leave and licence, disclosure required as per Accounting Standard 19 with regard to the above is as under:

i) Payment under operating lease/leave and license for period:

1) Not later than one year Rs. 3.78 million.

2) Later than one year but not later than fi ve years Rs. 1.62 million.

ii) There are no transactions in the nature of sub-lease.

iii) Payments recognised in the Profi t and Loss Account for the year ended 31st March, 2010 Rs. 12.51 million.

iv) Period of agreement is generally for three years and renewable at the option of the Lessee.

14. Information required in terms of part IV of Schedule VI to the Companies Act, 1956 is attached.

15. Segment information based on consolidated fi nancial statements has been disclosed in a statement annexed thereto. Primary Segments have been determined by the management in light of the dominant source and nature of risks and returns of the consolidated group and relied upon by the auditors.

16. Related Party disclosures have been set out in a separate statement annexed to this schedule. The related parties, as defi ned by Accounting Standard 18 ‘Related Party Disclosures’ issued by The Companies Accounting Standard Amendment Rules 2006, in respect of which the disclosures have been made, have been identifi ed on the basis of disclosures made by the key managerial persons and taken on record by the Board.

17. The Company has during the year entered in to a Joint Venture with ALSTOM Power Holdings SA which culminated into the incorporation of ALSTOM Bharat Forge Power Ltd. and Kalyani ALSTOM Power Ltd. wherein the Company holds 49% and 51% of the total equity share capital, respectively. Since the First Financial year of the Company is for a period of 15 months ending on 31st March, 2011, no fi nancial information thereof has been disclosed herein.

18. Signifi cant accounting policies followed by the Company are as stated in the statement annexed to this schedule.

19. Figures less than Rs. 5 000/- have been shown at actuals in bracket as the fi gures have been rounded off to the nearest second decimal to millions.

20. Previous fi nancial year’s fi gures have been regrouped wherever necessary to make them comparable with those of the current year.

Note: Names of the related parties and description of relationship

Sr. No. ParticularsName of the Party

1. Subsidiary Companies CDP Bharat Forge GmbH

Bharat Forge Beteiligungs GmbH

Bharat Forge America Inc

Bharat Forge Holding GmbH

Bharat Forge Aluminiumtechnik GmbH & Co. KG

Bharat Forge Aluminiumtechnik Verwaltungs GmbH

Bharat Forge Hong Kong Ltd.

Bharat Forge Kilsta AB

Bharat Forge Scottish Stampings Ltd.

FAW Bharat Forge (Changchun) Co. Ltd.

Bharat Forge Daun GmbH

BF New Technologies GmbH

BF-NTPC Energy Systems Ltd.

Kalyani ALSTOM Power Limited

2. Associates Kalyani Carpenter Special Steels Limited

Technica U. K. Limited

ALSTOM Bharat Forge Power Limited

3. Key Management Personnel Mr. B. N. Kalyani

Mr. A. B. Kalyani Mr. G. K. Agarwal Mr. P. K. Maheshwari Mr. B. P. Kalyani Mr. S. E. Tandale Mr. S. K. Chaturvedi

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