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Notes to Accounts of Bharati Defence and Infrastructure Ltd.

Mar 31, 2015

1 Corporate Information:

Bharati Shipyard Limited is a listed public company incorporated on 22nd June, 1976. The company is primarily engaged in manufacturing of Ships, Non Propelled Vessels, Cranes, Rigs, off shore structures, ship repairing and related activities.

2. Term Loan from Bank (Other than DBS term Loan) and Term Loan taken over by EARC ;

The Company has taken loans from the Consortium Banks with State Bank of India (SBI) as lead bankers. These loans were restructured under the Corporate Debt Restructuring Scheme (CDR Scheme) approved on 25th June 2012. As part of CDR Scheme, the Company had alloted 26,926,175 Compulsory Convertible Debentures (CCD) carrying coupon rate of 1% p.a to the 18 secured lenders. The company, during the tenure of CDR scheme has not adhered to the repayment and other terms of CDR scheme and accordingly the CDR scheme was revoked by the Lenders as on 21th August, 2014. The company is in continous default in repayment of its Banks loans, CCD, debentures , interest and other dues thereon from date of revokation of CDR scheme till the balance sheet date.

Upon revokation of CDR Scheme, out of 23 bank Lenders, 11 bank Lenders have assigned their outstanding loans including interest and other dues along with respective rights and securities to Edelweiss Assets Reconstruction Company Limited (EARC). Further6 lenders have sent recall notice for recovery of outstanding dues from the Company and balance 5 lenders have classified the said outstanding loans including interest and other dues as Non Performing Assets (NPA). Considering the continuing default in repayment of these loans and revokation of CDR Scheme by the Lenders, all the outstanding loans have become payable on demand and accordingly have been classified as "Current Maturities of long term loan" under the head "Current Liabilities".

Upon referral to CDR Scheme, the Company has executed the Indenture of Mortagage deed dated 28th June, 2013 for mortagage of securities in favour of SBICAP Trustee Company Limited in its capacity as "Security Trustee" for the benefit of all secured parties of the Scheme. Details of securities offered to security trustee for outstanding loan, CCD including interest and other dues are as follows:

1. All Movable and Immovable assets of all the locations of the Company ;

2. Residential flats of Managing Directors ;

3. All the Shares of the Company held by the Promoters of the Company ;

4. 24% of unencumbered shares of GOL Offshore Limited held by the promoter / Group Company ;

5. Shares and Corporate Guarantees of Subsidiary Companies : Dhanashree Properties Pvt Ltd, Natural Power Ventures Pvt Ltd and Nirupam Energy Projects Pvt Ltd ;

6. Shares of Bharati Infratech Pvt Ltd, Bharati Maritime Services Pvt Ltd and Harsha Infrastructure Pvt Ltd held in Bharati Shipyard Ltd ;

7. Personal Guarantees of the Promoters and ;

3. Unsecured Loan and advances from Related Parties are repayable over the period of 2 to 3 years.

4. Disclosure of default in repayment of Bank Loans, Financial Institution, Debentures , interest and other dues:

(a) The company is in continous default in repayment of its Bank loans, CCD , interest and other dues thereon from date of revokation of CDR scheme till the balance sheet date. Upon revocation of CDR scheme, in absence of requisite information from EARC and other banks covered under CDR scheme with respect to terms of repayment, the specific information in respect of period of delays of default in repayment of Loan and interest cannot be ascertained and hence said information is not given.

5. Refer note 5.2 and 5.5 for securities and default in repayment of Loans repayable on demand from Banks and

6. Unsecured Loans from others are repayable in within 12 months.

7. Contingent liabilities and commitments not provided in respect of: (Rs. in Lakhs)

As at As at Particular 31st March, 2015 March 31, 2014

a. Contingent Liabilities:

i. Tax/Duties that may arise in respect of which appeal is pending :

Income Tax 1,992.22 1,615.97

Service Tax 2,558.04 2,871.00

Custom Duty 5,019.84 5,017.92

Excise 1,354.04 1,354.04

ii. Letter of Credit outstanding - 7.20

iii. Demurrage Charges 2,857.43 -

iv. Suits filed against the Company 2,580.99 -

v. Claims against the Company not acknowledged 6,484.89 -

vi. Bank Guarantees

-Performance Guarantee 2,835.13 2,835.13

-Advance Guarantee 22,905.52 50,909.07

-Others 609.63 11,747.47

b. Commitments - -

Total 49,197.73 76,357.80

The Company is contesting 5 winding up petitions under section 433 and 434 of the Companies Act 1956 before the Honourable High Court of Mumbai and this includes petition filed by LIC of India, one of the secured creditors. All above winding up petitions are pending for disposal as on date.

8. As per the approval of the shareholders by postal ballot vide resolution 6 dated 18th September, 2012, the Company has allotted preferential issue of 26,926,175 Compulsory Convertible Debentures (CCD) to the signatories of CDR. The above Compulsory convertible debentures are convertible into one equity share of Rs. 10/- each on preferential basis pursuant to Section 81(1A) of the Companies Act, 1956, at a conversion price of Rs. 79.12/- including premium of Rs. 69.12/- per equity share of the company, the pricing of which is arrived in accordance with the SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations.

Post expiry of 18 months from the date of allotment of CCD and revocation of CDR Scheme, the Company has not converted CCD to Equity shares till date. As on the Balance Sheet date, the Company has disclosed CCD of Rs 20,135.42 Lakhs under current liabilities in the financial statement under the account head " Current Maturities of Long Term Debts" for the year ended 31st March 2015.

9. Explanatory note on Financial Restructuring:

The Company has incurred Net Loss of Rs. 86,458.24 Lakhs after considering exceptional items of Rs. 53,695.48 Lakhs during the year ended 31st March, 2015. As of this date, the Company's total liabilities exceed its total assets by Rs. 106,878.36 Lakhs and its net-worth has been fully eroded. During the year, 5 winding up petitions were filed by various creditors against the Company including LIC of India, one of the secured creditors.

The Company is also implementing various long-term measures to improve its cash flow and revival of the operations of the Company. During the financial year 12 secured lenders including Lead Bank "State Bank of India" have assigned their debts to Edelweiss Asset Reconstruction Company (EARC). As part of restructuring efforts the Company, EARC with other lenders completed and realised sale of its non-core assets worth of Rs. 5,517 Lakhs and these proceeds were utilised during the year to meets its operational cost and production. The Company with the help of EARC is in constant dialogue with its lenders through Joint lenders meetings on regular interval for restructuring of the Company by way of fresh infusion of funds and to bring current debt at sustainable level so that the Company will be able to service its secured and unsecured creditors. EARC is also proposing to come up with various stage wise restructuring plans for debts including reference made to BIFR on 10th April, 2015 to curtail the financial burden of the business cash flows in addition to business operation and management strategy. Upon revival, the Company will be able to make optimum utilisation of its green field facilities, renegotiate its contracts and complete the under construction vessels to generate future cash flows. The Company believes that these measures will not only generate cash flows for revival but will also result in future orders and consequently sustainable cash flows.

In view of the foregoing, the Company's financial statements have been prepared on a going concern basis whereby the realization of assets and discharge of liabilities are expected to occur in the normal course of business.

10. Deferred Tax Assets created during current financial year:

The company is having accumulated business losses (including accumulated depreciation) of Rs. 1,07,694 Lakhs (P.Y. Rs 75,026 Lakhs) and its networth is completly eroded as on 31st March 2015.The company has recognized deferred tax asset (net) of Rs. 29,998 Lakhs on accumulated losses (including unabsorbed depreciation), interest expenses (including Funded Interest Term Loan (FITL)), Disallowances of Expenses, Gratuity and Compensated absences. The Company is confident of financial restructuring and reviving the operations to achieve optimum utilization of its infrastructure and believes that there would be sufficient future taxable profits against which the accumulated losses would be set off.

11. Bank Guarantee Invocation by Customers on cancellation of vessels contracts:

The Company is currently constructing various vessels ordered from international customers as well as domestic customers including Government of India-Ministry of Defence. As per the international trade practice, the company has issued the refund bank guarantees to customers against various advance stage payments received by the Company. Further, several of these customers had cancelled the ship building contracts entered into with the Company and demanded money from the banks under the refund bank guarantees issued by them. The Company believed these cancellations to be in violation of the terms of agreement entered into with these Customers. Accordingly, the Company had referred the matter for arbitration as provided into these Contracts. As per the terms of the refund bank guarantees, in the event of pending arbitration or other legal proceedings, the banks are not required to make payments under the said guarantees till the outcome of legal proceedings is finalised. The banks have made payments aggregating to Rs. 96,632.71 Lakhs (P.Y. Rs. 73,041 Lakhs) on account of such refund bank guarantees invoked by the Customers along with Interest of Rs. 30,245.42 Lakhs ( P.Y. Rs. 22,846 Lakhs) and foreign exchange variation of Rs. 32,843.42 Lakhs (P.Y. Rs. 28,737 Lakhs). Further, the banks have also charged interest of Rs. 9,027 Lakhs (P.Y. Rs. 1,522 Lakhs) on the aforementioned payments made in respect of such invoked bank guarantees considering the said payments as overdraft facility to the Company. The Company is of the opinion that the payments under the refund bank guarantees are made by the banks without following due process of law. Further, the Company has filed a suit before Hon'ble City Civil Court, Mumbai against such banks which is pending for disposal. Pending the legal proceedings in the above matter, the company has not given effect to the above payments made by the banks to the Customers under the refund bank guarantees in books of accounts. The company continues to reflect advances received from customers under the said Contracts, even in cases wherein the payments have been made by banks under the refund bank guarantees. These amounts are shown by the Company as Current Liability in the Balance Sheet under the head "Other Current liabilities - " Income received in advance".

12. Subsidy Receivable from Government of India under Shipbuilding Subsidy scheme:

The Government of India had announced Shipbuilding Subsidy Scheme for private and public shipyards in India in 2002 for all eligible shipbuilding orders entered into between Nov-2002 till Aug-2007. The Subsidy was provided at the rate of 30% of the contract value subject to fulfilment of various conditions. In case of private shipyards, disbursement of the subsidy amount was provided post delivery of the vessel and subject to fulfilment of other conditions of the scheme. According to the subsidy scheme and based on accounting principles, the company has credited subsidy on vessels under construction in respect of which substantial work has been carried out on the vessel. The Company has recognised for subsidy of Rs. 66,059.92 Lakhs under Ship Building Subsidy Scheme in earlier years and has already received Rs. 1,267.15 Lakhs from Government of India upto 31st March 2015 and the balance subsidy receivable from Government of India Rs. 64,792.77 Lakhs as on 31st March 2015 is shown as trade receivables. The Company has been complying with the terms of the said scheme and has already received part of the Subsidy on vessels delivered by the Company. Further, in respect of vessels delivered, the Government of India has retained a part of the subsidy amount to be released at a future date subject to certain compliances. The company is of the opinion that on completion of the various vessels under construction, the Government of India will release the subsidy amount as well as the retention amounts upon completion of compliances. Further, as detailed in note no. 30 of the statement, the Company is confident of financial restructuring and reviving the operations and completing the vessels under construction in respect of which the aforementioned Subsidy is receivable and according the management is of the opinion that Subsidy amount is fully recoverable.

13 a) The Company had given loans and advances of Rs. 91,048.18 Lakhs to its subsidiaries namely Dhanshree Properties Ventures Private Limited and Natural Power Ventures Private Limited , which in turn jointly hold 49.72% Shareholding in GOL Offshore Ltd (GOL). As per the Audited Financial Results of GOL as on 31st March 2015, there are continuing defaults in repayment of loans including invocation of some of the corporate guarantees and in some cases recovery proceedings have been initiated. However GOL is making all efforts for early settlement of dues by taking various corrective initiatives and continuous negotiation with bankers for restructuring of its debts. No provision is made for the said Loan and Advances being fully recoverable as investment made in through subsidiaries in GOL is considered as strategic, long term and diminution in value of investment is temporary in nature.

b) The Company had given loans and advances of Rs. 8,497.86 Lakhs to its subsidiary Nirupam Energy Projects Private Limited, which in turn hold 53.79% Shareholding in Tebma Shipyard Limited(TSL). TSL has been incurring cash losses and its net worth is eroded and its cash flows are under stress. No provision is made for the said Loan and Advances being fully recoverable as Investment made in through subsidiary in TSL is considered as strategic, long term and and diminution in value of investment is temporary in nature.

c) The Company is holding 45.01% shareholding in Bengal Shipyard Limited (Bengal) as joint venture partner and also given loans and advances aggregating to Rs. 3,184.86 Lakhs. Bengal is yet to start its business operations and is in process of acquisition of lands and construction of assets. Even though there is delay in commencement of business operations, Bengal is confident of future cash flows of the business. No provision, however, have been made in respect of diminution in the value of Investment which is considered strategic, long term and temporary in nature and loans and advances which in the opinion of management are fully recoverable.

14. Non - Availability of balance confirmation from banks and EARC and provision for interest and other dues:

The Company has requested all lenders/banks/EARC (Edelweiss Asset Reconstruction Company) for the balance confirmations. However, due to non service of interest and instalment due, some of the lenders/banks and EARC have not provided balance confirmations as on 31st March 2015 and the books of accounts are finalised based on latest available bank/loan statements. The Company has not provided interest on outstanding secured loans including bank guarantee and other debt facility, if any (funded as well as funded) assigned to EARC and secured bank loans for which company has received recall notices from the date of assignment and/or receipt of recall notices from banks and NPA Loan accounts for which it has not received recall notice or any statement from lenders. In respect of other bank loans, interest have been accounted for as per statement received from lenders.

15. Non - Availability of certain Margin Deposit confirmation:

The company is in the co ordination with banks for obtaining confirmation/ account statements as at year end with respect to Margin deposits with banks. However, due to non service of interest and instalment due, some of the banks have not provided balance confirmations as on 31st March 2015. In the opinion of the management, carrying amount of the margin deposit is fully recoverable and the difference, if any, upon reconciliation with bank confirmations would not have any material impact on audited standalone financial statements. Further, due to unavailability of the confirmations, the Company has accounted for the interest income on the Margin Money Deposits with Banks based on external evidences to the extent available.

16. Internal control System:

Company is in the process of strengthening Internal control system in relation to timely and proper recording of the revenue and expenses. In view of the management, delay if any, in recording the revenue or expenses is not having any material impact on the

17. Reconciliation of accounts:

Company is in the process of reconciliation of accounts at reasonable intervals and obtaining balance confirmation as at year end with respect to its Trade Receivables, Loan and Advances, Trade Payables and Other Liabilities. The balances of Trade Receivables, Loans and Advances ,Trade Payables and Other Liabilities are subject to confirmation and reconciliation. In the opinion of the management, the carrying amount of Trade receivables, Loans and Advances, Trade Payable and Other Liabilities are approximately of the value as stated, if realised/ paid in the ordinary course of business.

18 Exceptional items includes :

(a) Writing off excess value of Work in Progress ("WIP") amounting to Rs. 54,177.02 Lakhs, based on the valuation report of an Independent Chartered Engineers. The written off in value of WIP is on account of Price variation, Provision for Liquidation damages and redoing/ replacement cost and other factors.

(b) Sale of Wind Turbines having total capacity of 15 MV (Windmill Business) on 31st July, 2014 as a part of restructuring process, resulting in net gain of Rs. 481.54 Lakhs.

19 Related party disclosure

Related Party disclosure as required by Accounting Standard - 18 as notified under section 133 of Companies Act 2013 is as follows: 43.1 List of related parties and relationships, where control exists:

a. Subsidiary Companies

Advitiya Urja Private Limited Dhanshree Properties Private Limited Natural Power Venturers Pvt. Ltd Nirupam Energy Projects Pvt. Ltd.

Nishita Mercantile Pvt. Ltd.

Pinky Shipyard Private Limited Premila Mercantile Pvt. Ltd.

Vishudh Urja Pvt. Ltd.

b. Subsidiary of Subsidiary Company

Tebma Shipyard Limited

c. Joint Venture

Bengal Shipyard Limited

d. Associated Companies / Concerns

GOL Offshore Limited

GOL Ship Repair Limited (Subsidiary of Associate Company)

e. Key Management Personnel (KMP)

Mr. P. C. Kapoor Managing Director

Mr. Vijay Kumar Managing Director

f. Relatives of Key Management Personnel Relative of Mr. P. C. Kapoor

Mrs. Madhu Kapoor Wife

Mrs. Radhika Mehra Daughter

Relative of Mr. Vijay Kumar

Mrs. Ashraf G. Kumar Wife

Mrs. Sukriti V. Kumar Daughter

g. Enterprises influenced by Key Management Personnel and their relatives

Bharati Infratech Projects Pvt. Ltd.

Bharati Marine Construction and Engineering Pvt Ltd Bharati Maritime Services Pvt.Ltd.

Bharati Shipping and Dredging Co Private Limited

Harsha Infrastructure Pvt Ltd

Portside Shipping Pvt Ltd

Seasplice Shipping Pvt Ltd

Sharven Multitrade P. Ltd.

Shipace Shipping Private Limited Swati Silk Mills Pvt. Ltd.

Usha Silk Mills Pvt. Ltd.

Vayuraj Energy Projects Pvt. Ltd.

Vayutatva Energy Projects Pvt. Ltd.

Mutual Industries Pvt. Ltd.

Oceanic Shipyard Limited

20. Discontinued Operation:

i. In Continuation of Business Transfer Agreement dated 18th March 2014, a Sales Agreement has been executed to transfer Windmill Power Business situated at Brahmanvel site in Dhule District, Maharashtra on 'As is where is basis' for an aggregating consideration of Rs. 5,517 Lakhs to Ghatge Patil Industries Ltd.

ii. Windmill Power Business is reported as business segment as per AS 17.

iii. Amounts of revenue and expense in respect of the ordinary activities attributable to the discontinued operation during the current financial reporting period are Rs. 414.31 Lakhs (P.Y. 1,170.36 Lakhs) and Rs 65.54 Lakhs (P.Y. Rs. 724.75 Lakhs) respectively.

v. During the year, the sale of Wind Mill Power Business is concluded and the gain of Rs. 481.54 Lakhs is booked as exceptional items in the statement of profit and loss.

21. The figures for the previous year have been arranged/rearranged/regrouped wherever considered necessary, to conform to this year's classification.


Mar 31, 2014

1 Corporate information:

Bharati Shipyard Limited is a listed public company incorporated in June 26, 1976. The company is primarily engaged in manufacturing of ocean going vessels.

2. Contingent liabilities and commitments not provided in respect of:

(Rs. in lakhs)

Particulars As at March 31,2014 As at March 31, 2013

a. Contingent Liability:

(i) Tax/Duties that may arise in respect of which appeal is pending:

Income Tax 1,615.97 -

Service Tax 2,871.00 -

Custom Duty 5,017.92 62.61

Excise 1,354.04 -

(ii) Letter of Credit outstanding 7.20 4,904.06

Bank Guarantees

-Performance Guarantee 2,835.13 3,976.28

-Advance Guarantee 50,909.07 129,278.05

-Others 11,747.47 25,184.80

b. Commitments

Total 76,357.80 163,405.80

3. Convertible share warrants and debentures:

As per the approval of the shareholders by postal ballot vide resolution 5 dated September 18, 2012, the company has alloted preferential issue of 32,000,000 warrants to Promoter Group, carrying right to subscribe to one equity share of Rs. 10/- each, pursuant to Section 81(1A) of the Companies Act, 1956, at a conversion price of Rs. 79.12/- including premium of Rs. 69.12/- per equity share of the Company, arrived at in accordance with the SEBI Guidelines. The details of proposed allottees are as follows:

3.2 As per the approval of the shareholders by postal ballot vide resolution 6 dated 18th September, 2012, the Company has allotted preferential issue of 26,926,175 Compulsory Convertible Debentures to the signatories of CDR. The above Compulsory Convertible Debentures are convertible into one one equity share of Rs. 10/- each on preferential basis pursuant to section 81(1A) of the Companies Act, 1956 at a conversion price of Rs. 79.12/- including premium of Rs. 69.12/- per equity share of the company, the pricing of which is arrived in accordance with SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations.

4. Note on Financial Restructuring:

The Company has incurred Net Loss of Rs. 84,273 lakhs after considering one time exceptional items of Rs. 29,127 lakhs during the year ended March 31, 2014. The Company is implementing various long-term measures to improve its cash flow and revival of the operations of the Company. The Company is exploring multiple options of financial restructuring and is in discussions with lenders and other institutions to raise finance for revival of its operations. Upon revival, the Company will be able to make optimum utilisation of its green field facilities, renegotiate its contracts and complete the under construction vessels to generate future cash flows. The Company believes that these measures will not only generate cash flows for revival but will also result in future orders and consequently sustainable cash flows.

The promoters also continue to be committed to providing the required operational and financial support to Company in the foreseeable future. During the year, the Promoters have converted 1,18,46,602 warrants into equity shares of the Company thereby infusing additional equity of Rs. 7,030 lakhs into the Company. In view of the foregoing, the Company''s financial statements have been prepared on a going concern basis whereby the realization of assets and discharge of liabilities are expected to occur in the normal course of business.

5. Explanatory Statement on WIP:

The valuation of the vessels under construction is carried out by the management on quarterly basis to evaluate the stage of completion of vessels in order to ascertain the carrying value of Work in Progress (WIP). During the year, the company has made efforts to revive its operations but progress of construction of the vessels was affected due to factors such as unavailability of working capital finance resulting into labour issues, non availability of required materials, reduced production levels at various yards, etc. The management had appointed an Independent Chartered Engineer to carry out valuation of the vessels at the year end. As per the report submitted by the Independent Chartered Engineer, the WIP as on Balance Sheet date was valued at Rs. 326,442 lakhs which is lower by Rs. 36,607 lakhs compared to the book value of WIP of Rs. 363,049 lakhs. The Independent Chartered Engineer arrived at such reduced valuation of the WIP on account of reworking and replacement costs, obsolescence of material, delay in procurements leading to delay in construction and consequential increase in costs, liquidation damages due to delay in construction and other such expenditure. The Management of the Company believes that the value of WIP as reflected in the financial statements is fair and reasonable considering the improving market conditions. The management is of the opinion that considering the stabilising business situations and the revival of the global economy resulting into higher requirement for vessels, the reduction in the value of the WIP is only temporary in nature. The Management is confident that upon completion of the vessels under construction, the above mentioned assumption of the Independent Chartered Engineer of perceived reduction in revenue and increased cost would be recovered on account of increased market price of the vessels. Furthermore, the management is constantly reviewing the market conditions and has also consulted some of the International Offshore Ship-Brokers to ascertain the demand for the vessels under construction by the company in the future. Based on the same, the Management is of the opinion that the under construction vessels will be sold at price higher than their carrying value. In view of the same, the Company is of the firm belief that the carrying value of WIP of the vessels under consideration is not required to be reduced due to the temporary reduction in its valuation. This statement should be considered as explanation to the qualification made by auditors in their audit report for the year ending March 31, 2014 for the above matter.

6. Explanatory note on Deferred Tax Assets created during current financial year:

During the year, the company has incurred losses on account of high operational and financial costs and a reduction in production and consequently turnover of the company. This has resulted into carried forward losses (including accumulated depreciation) of Rs. 75,026 lakhs as on balance sheet date. As per prudence accounting policy and considering ongoing developments, the company has created deferred tax asset on the above accumulated losses of Rs. 23,183 lakhs in the current financial year. Further, company has also created deferred tax asset of Rs. 23,848 lakhs on outstanding Funded Interest Term Loan, Interest, Gratuity and Leave encashment. Accordingly, total deferred tax asset as on March 31, 2014 stands at Rs. 47,031 lakhs. The Management of the Company is confident of financial restructuring and reviving the operations to achieve optimum utilization of its infrastructure. Accordingly, the Management believes that there would be sufficient future taxable profits against which the accumulated losses would be set off and keeping in view the same, the above deferred tax asset has been created by the Company. This statement should be considered as explanation to the qualification made by auditors in their audit report for the year ending March 31, 2014 for the above matter.

7. Explanatory note on Bank Guarantee Invocation by Customers on cancellation of vessel contracts:

The Company is currently constructing various vessels ordered from international customers as well as domestic customers including Government of India-Ministry of Defence. As per the international trade practice, the company has issued the refund bank guarantees to customers against various advance stage payments received by the Company. Further, several of these international customers had cancelled the ship building contracts entered into with the Company and demanded money from the banks under the refund bank guarantees issued by them. The Company believed these cancellations to be in violation of the terms of agreement entered into with these Customers. Accordingly, the Company had referred the matter for arbitration as provided into these Contracts. As per the terms of the refund bank guarantees, in the event of pending arbitration or other legal proceedings, the banks are not required to make payments under the said guarantees till the outcome of legal proceedings is finalised. During the current financial year, the banks have made payments aggregating to Rs. 73,041 lakhs on account of such refund bank guarantees invoked by the Customers along with Interest of Rs. 22,846 lakhs and foreign exchange variation of Rs.28,737 lakhs. Further, the banks have also charged interest of Rs. 7,467 lakhs on the aforementioned payments made in respect of such invoked bank guarantees considering the said payments as overdraft facility to the Company. The Company is of the opinion that the payments under the refund bank guarantees are made by the banks without following due process of law. Further, the Company has filed a suit before Hon''ble City Civil Court, Mumbai against such banks which is pending for disposal. Pending the legal proceedings in the above matter, the company has not given effect to the above payments made by the banks to the Customers under the refund bank guarantees. The company continues to reflect advances received from customers under the said Contracts, even in cases wherein the payments have been made by banks under the refund bank guarantees. These amounts are shown by the Company as Current Liability in the Balance Sheet under the head "Other Current liabilities : (c) Income received in advance". This statement should be considered as explanation to the qualification made by auditors in their audit report for the year ending March 31, 2014 for the above matter.

8. Explanatory note on Subsidy Receivable from Government of India under Shipbuilding Subsidy scheme:

The Government of India had announced Shipbuilding Subsidy Scheme for private and public shipyards in India in 2002 for all eligible shipbuilding orders entered into between Nov-2002 till Aug-2007. The Subsidy was provided at the rate of 30% of the contract value subject to fulfilment of various conditions. In case of private shipyards, disbursement of the subsidy amount was provided post delivery of the vessel and subject to fulfilment of other conditions of the scheme. According to the subsidy scheme and based on accounting principles, the company has credited subsidy on vessels under construction in respect of which substantial work has been carried out on the vessel. As on March 31, 2014 total subsidy booked by the company is Rs. 84,178 lakhs against which the company has already received amount of Rs.18,114 lakhs from Government of India and balance Rs. 66,060 lakhs is shown as trade receivables. The Company has been complying with the terms of the said scheme and has already received part of the Subsidy on vessels delivered by the Company. However, as explained in Note no. 31 above, the company has not been able to complete and deliver vessels under construction. Due to delay in delivery of existing vessels eligible for subsidy, the company has not received a large portion of the subsidy booked. Further, in respect of vessels delivered, the Government of India has retained a part of the subsidy amount to be released at a future date subject to certain compliances. The company is of the opinion that on completion of the various vessels under construction, the Government of India will release the subsidy amount as well as the retention amounts upon completion of compliances. Further, as detailed in Note no. 30 of the statement, the Company is confident of financial restructuring and reviving the operations and completing the vessels under construction in respect of which the aforementioned Subsidy is receivable. Consequently, the Company is of the opinion that it would receive the Subsidy amount reflected in the accounts. This statement should be considered as explanation to the qualification made by auditors in their audit report for the year ending March 31, 2014 for the above matter.

9. Exceptional Items Capital Work in Progress:

Exceptional items represents write off of Capital Work in Progress amounting to Rs. 29,127 lakhs due to impairment of assets. As per the originally approved CDR scheme in June 2012, the company was allowed a further capex of ~ Rs. 19,600 lakhs to be incurred over two financial years out of which lenders had sanctioned priority term loan of ~ Rs.15,500 lakhs. This capex was mainly for capacity augmentation of Greenfield yards (Dabhol and Mangalore) which is critical for completion of existing order book within the projected timelines and to cater to the future order book as well. Further, this capex was also required to improve efficiency and productivity of yards so that the company can achieve optimum utilisation of under construction facilities. However, this capex is not incurred due to various reasons including non-release of funds by the lenders. This has resulted into incomplete construction of various infrastructure facilities exposed to corrosive environment and their unavailability for production of existing order book. After taking into consideration totality of facts, and various other events occurred during the current year, the company had decided to carry out valuation of all manufacturing facilities at various yards. The Independent Valuer has carried out detailed valuation of the facilities at all yards. Based on the valuation report, which is carried out in line with principles of Accounting Standard-28 (Impairment of Assets) book value of the various facilities of the company are higher by Rs. 29,127 lakhs as compared to recoverable amount of the assets as per valuation report. Accordingly, the company has written off an amount of Rs. 29,127 lakhs pertaining to under construction facilities reflected under the head Capital Work in Progress.

10. Balances of trade receivables, trade payables and loans and advances are subject to confirmation.

11. In the opinion of the Management, Current Assets and Loans and Advances have the value at which they are stated in the Balance Sheet if realised in the ordinary course of business. The provision for all known liabilities is adequate and not in excess of the amount reasonably necessary. The same is considering the fact that in case of various debts owed to various Banks, there are certain differences of opinion between the Company and the Banks w.r.t certain technical clauses of the restructuring scheme which are in turn giving rise to differences between the amount of debt and interest as charged by the Bank and as calculated/estimated by the Company. The Company is in a continuous process of reconciliation of such amounts and for finalising the accounts, it has recorded the amounts as worked out by the Banks. Further, the State Bank of India has not made the payment of taxes to the tune of Rs. 100 lakhs which were transferred from TRA Account and same has not been confirmed. The State Bank of India has also reversed an amount of Rs. 40 lakhs in Cash Credit Account and accordingly there are no CCD due to State Bank of India.

12. Retirement benefits:

The required disclosure under the Revised Accounting Standard 15 is given below: Brief description: The type of Defined Benefit plans is as follows :

a) Gratuity:

The Employee''s Gratuity Fund Scheme managed by SBI Life Insurance is a Defined Benefit plan. The present value obligation is determined based on actuarial valuation using projected unit credit method.

13. Segment Reporting

The Company has disclosed business segment as the primary segment. The Company is collectively organised into following business segments namely:

a. Ship Manufacturing

b. Windmill Power.

Segments have been identified and reported taking into account the nature of the product and services, the organisational structure and internal financial reporting system.

Segment Revenue, Results, Assets and Liabilities include the respective amounts identifiable to each of the segments and amount allocated on a reasonable basis.

Since the business of Wind Mill is not significant, all assets, liabilities and expenses other than specifically related to Wind Mill Power, are allocated to Ship Manufacturing Business. Hence, there are no un-allocable assets, liabilities and expenses.

14 Related party disclosure

The Company has entered into the following related party transactions. Such parties and transactions have been identified as per Accounting Standard - 18 "Related Party Disclosure" issued by the Institute of Chartered Accountants of India. Related Parties are identified by the management and relied upon by the auditor.

14.1 List of related parties and relationships, where control exists:

a. Subsidiary Companies Advitiya Urja Private Limited Dhanshree Properties Private Limited Natural Power Venturers Pvt. Ltd Nirupam Energy Projects Pvt. Ltd. Nishita Mercantile Pvt. Ltd.

Pinky Shipyard Private Limited Premila Mercantile Pvt. Ltd. Vishudh Urja Pvt. Ltd.

b. Subsidiary of Subsidiary Company - Tebma Shipyard Limited

c. Joint Venture

Bengal Shipyard Limited

d. Associated Companies / Concerns - GOL Offshore Limited

e. Key Management Personnel (KMP) Name of the Person

Mr. P. C. Kapoor Managing Director

Mr. Vijay Kumar Managing Director

f. Relatives of Key Management Personnel Name of the Person

Relative of Mr. P. C. Kapoor

Mrs. Madhu Kapoor Wife

Mrs. Radhika Mehra Daughter

Relative of Mr. Vijay Kumar

Mrs. Ashraf G. Kumar Wife

Mrs. Sukriti V. Kumar Daughter

g. Enterprises influenced by Key Management Personnel and their relatives Name of the Entity

Bharati Infratech Projects Pvt. Ltd.

Bharati Marine Construction & Engineering Pvt Ltd

Bharati Maritime Services Pvt.Ltd.

Bharati Shipping & Dredging Co Private Limited

Harsha Infrastructure Pvt Ltd

Portside Shipping Pvt Ltd

Seasplice Shipping Pvt Ltd

Sharven Multitrade P. Ltd.

Shipace Shipping Private Limited

Swati Silk Mills Pvt. Ltd.

Usha Silk Mills Pvt. Ltd.

Vayuraj Energy Projects Pvt. Ltd.

Vayutatva Energy Projects Pvt. Ltd.

Note : Figures in Bold and Italics relates to Previous Year

15. Earnings per share

Basic Earnings per share are calculated by dividing the Net Profit for the year attributable to Equity Shareholders by the weighted average number of Equity shares outstanding during the year.

For the purpose of calculating Diluted Earnings per share, the weighted average numbers of shares outstanding are adjust- ed for the effects of all dilutive potential equity shares from the exercise of options on un-issued share capital.

16 Accounting for interest in joint venture

i Income on investment in Jointly Controlled Entities is recognised when the right to receive the same is established. ii Investment in such Joint Venture is carried at cost after providing for any permanent diminution in value.

16.1 Interests in Joint Venture

The Company has an equity stake of 45.01% (Current and Previous Year), as Venturer, in Bengal Shipyard Limited which is an Indian incorporated jointly controlled entity.

The Company''s interest in this Joint Venture is reported as Long Term Investment and stated at cost. However, the Company''s share of each Asset, Liability, Income & Expenses, etc. related to its interest in this Joint Venture is as follows:

17 Discontinuing Operation:

i. The company has entered into Business Transfer Aggreement (BTA) on 18th March, 2014 for sale of its Windmill Power Business situated at Brahmanvel site in Dhule District, Mahrashtra on an ''A s is where is basis'' for an aggregate consideration of Rs. 5,517 lakhs.

ii. Windmill Power Business is reported as business segment as per AS

iii. Amounts of revenue and expense in respect of the ordinary activities attributable to the discontinuing operation during the current financial reporting period are Rs. 1,170.36 lakhs and Rs. 724.75 lakhs.

iv. Carrying amount Rs. 5,028.29 lakhs of total assets to be disposed.

v. Amount of Profit attributable to discontinuing operation is Rs. 445.61 lakhs.

18 Details on derivative instruments and unhedged foreign currency exposures:

The Company has been export oriented since long and the contracts entered into by the Company with its Customers are also in foreign currencies. Similarly, a significant costs and expenses of the Company are in foreign currency. Fluctuations in exchange rates may affect company''s earnings and outgo. However, the mix of revenues and expenses both in foreign currencies provide a natural hedge to the Company to the extent the same are proportionate.

19 Disclosure for Operating Leases under Accounting Standard 19 - "Leases":

Details of leasing arrangements

The Company has entered into agreements for taking on lease various vessels and office premises under operating lease arrangements. The leases are non-cancellable and are ranging for a period of 11 months to 5 years and may be renewed for a further period based on mutual agreement between the parties. The lease agreements provide for an increase in the lease payments by 0 to 2 % every year.

20 The figures for the previous year have been arranged/rearranged/ regrouped wherever considered necessary, to conform to this year''s classification.


Mar 31, 2013

1. Contingent Liabilities not provided in respect of

(Rs. in Lakhs)

Particulars 2012-13 2011-2012

Claims against company not acknowledge as debt - 1,279.41

Tax/Duties that may arise in respect of which appeal is pending 62.61 480.80

Letter of Credit outstanding 4,904.06 43,611.57

Liabilities arising out of unexecuted Contract (Net of Advances) - 84,079.79

Bank Guarantees

-Performance Guarantee 3,976.28 3,691.51

-Advance Guarantee 129,278.05 1,95,856.00

-Others 25,184.80 8,673.17

Total 163,405.80 3,37,672.25

2. Note on Convertible Share Warrants and Debenture

As per the approval of shareholders by postal ballot vide resolution 5 dated 18th September,2012, the Company has allotted preferential issue of 320,00,000 warrants to Promoter Group, carrying the right to subscribe to one one equity share of Rs. 10/- each at a price of Rs. 79.12/- including premium of Rs. 69.12/- allotment. The details of proposed allottees are as follows:

3. Corporate Debt Restructuring:

As mentioned above, the Company''s case has been referred to the CDR Cell for restructuring its debt. The Master Restructuring Agreement being the fundamental legal document for the process of implementation of the scheme was executed in September, 2012. Some of the salient features of the scheme were as follows:

a. Granting a moratorium period of 18 months from the cut-off Date of 1st October, 2011.

b. Rescheduling the repayment schedule of the term debt and extending it over a period of 10 years from the cut off date.

c. Funding of interest accruing on term debt during such moratorium period.

d. Conversion of 10% of the outstanding term debt into 1% Compulsorily Convertible Debentures.

e. Concessional Interest rates on all the loan facilities.

f. Conversion of certain devolved Letters of Credit and Bank Guarantees into Working Capital Term Loan repayable in installments.

g. Granting of a two new loan facilities for facilitating the Company in completion of its Yard and Vessel Construction activity.

h. Promoters to infuse into the Company 15% of the amount sacrificed by the Banks and 25% of the new loan facilities as margin money in the form of equity.

The process of the restructuring was initiated by referring the case to the CDR Cell in Dec''11 and was envisaged to be completed in form and in substance by March''12. Since the time schedule as envisaged could not be adhered to, a need was felt to suitably modify the scheme to make up for the loss of time which had in turn delayed the Company''s process of revival and resulted into loss of revenues and profits.

Accordingly, the revised agreement was formally adopted in February, 2013.

Some of the salient features of the review were as follows:

i. Granting a moratorium period till June''12 for facilities other than term debt.

j. Funding of interest accruing on certain facilities other than term debt till June''12.

k. Immediate release of funds to the Company via new loan facilties as envisaged in the original scheme.

l. Besides the same, to extend fresh fund based Working Capital to the Company by carving out a limited amount of its unutilized Non Fund Based Limits of Bank Guarantees and Letters of Credit.

Till the time of finalizing the accounts, the revised scheme has yet to be completely implemented in substance. The significance of such an action for finalization of accounts has been previously discussed in Point 1(a) Basis of Preparation.

4. Balance of Sundry Debtors, Creditors, Loans and Advances and Personal Accounts are subject to confirmation.

5. In the opinion of the Directors, Current Assets and Loans and Advances have the value at which they are stated in the Balance Sheet if realized in the ordinary course of business. The provision for all known liabilities is adequate and not in excess of the amount reasonably necessary. The same is considering the fact that in case of various debts owed to various Banks, there are certain differences of opinion between the Company and the Banks w.r.t certain technical clauses of the restructuring scheme which are in turn giving rise to differences between the amount of debt and interest as charged by the Bank and as calculated/estimated by the Company. The Company is in a continuous process of reconciliation of such amounts and for finalizing the accounts, it has recorded the amounts as worked out by the Banks.

6. Outstanding foreign currency monetary assets and liabilities which are backed by letter of credit are not translated at the exchange rate prevailing on the balance sheet date.

7. Micro, Small and Medium Enterprises

The Company has not received any information from its supplier regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 which came into effect from 2nd October, 2006, and hence disclosure, if any, relating to amounts unpaid as on 31st March, 2013 together with interest paid/payable as required under the Act, have not been given.

8. Retirement Benefits

The required disclosure under the Revised Accounting Standard 15 is given below Brief description : The type of Defined Benefit plans is as follows.

a) Leave Encashment:

The Company has made provision of Rs. 70 lacs towards leave encashment on the basis of leave records available. It is in the process of getting actuarial valuation for the same.

b) Gratuity:

The Employee''s Gratuity Fund Scheme managed by SBI Life Insurance is a Defined Benefit plan. The present value obligation is determined based on actuarial valuation using projected unit credit method.

9. Earnings Per Share Calculation:

Basic Earnings per share are calculated by dividing the Net Profit for the year attributable to Equity Shareholders by the weighted average number of Equity shares outstanding during the year.

For the purpose of calculating Diluted Earnings per share, the weighted average numbers of shares outstanding are adjusted for the effects of all dilutive potential equity shares from the exercise of options on un-issued share capital.

10. Details of stock and turnover of major class of goods & services

The Sales reflected in Note no. 16 of the Financial Statements comprise of 6 (amounting to Rs. 1,27,057.67 Lakhs) and 4 (amounting to Rs. 27,589.49 Lakhs) Ocean going vessels for the Current and Previous Year respectively.

FOB Value of Exports Rs. 125,383.67 Lakhs (Previous Year. Nil)

11. Accounting for Interest in Joint Venture

1. Income on investment in Jointly Controlled Entities is recognized when the right to receive the same is established.

2. Investment in such Joint Venture is carried at cost after providing for any permanent diminution in value.

Interests in Joint Venture

The Company has an equity stake of 45.01% (Current and Previous Year), as Venturer, in Bengal Shipyard Limited which is an Indian incorporated jointly controlled entity.

The Company''s interest in this Joint Venture is reported as Long Term Investment and stated at cost. However, the Company''s share of each Asset, Liability, Income & Expenses, etc. related to its interest in this Joint Venture is as follows:

12. The figures for the previous year have been arranged /rearranged /regrouped wherever considered necessary.


Mar 31, 2012

Note 1 : Contingent Liabilities not provided in respect of

Particulars F.Y. 2011- 2012 F.Y. 2010- 2011

Claims against company not acknowledge as debt 1,279.41 931.83

Tax/Duties that may arise in respect of which appeal is pending 480.80 140.00

Corporate Guarantee given to Bank - 1,106.28

Letter of Credit outstanding 43,611.57 16,476.67

Liabilities arising out of unexecuted Contract (Net of Advances) 84,079.79 85,297.50 Bank Guarantees

- Performance Guarantee 3,691.51 4,196.85

- Advance Guarantee 1,95,856.00 1,91,531.10

- Others 8,673.17 553.75

Total 3,37,672.25 3,00,233.98

Note 2 : Note on Convertible Share Warrants

As per the approval of shareholders in the Annual General Meeting held on 29th September, 2009, the Company has allotted 13,78,464 convertible warrants to Promoter Directors entitling them to apply for and obtain allotment of one equity share at a price of Rs. 200/- per share against each such warrant at any time after the date of allotment but before the expiry of 18 months from the date of allotment in one or more tranches. All the above 13,78,464 convertible warrants are converted into equity shares of Rs. 10/- each at a price of Rs. 200/- per share including premium of Rs. 190/- per share on 01.07.2011.

Note 3 : Balance of Sundry Debtors, Creditors, Loans and Advances and Personal Accounts are subject to confirmation.

Note 4 : In the opinion of the Directors, Current Assets and Loans and Advances have the value at which they are stated in the Balance Sheet if realized in the ordinary course of business. The provision for all known liabilities is adequate and not in excess of the amount reasonably necessary.

Note 5 : Outstanding foreign currency monetary assets and liabilities which are backed by letter of credit are not translated at the exchange rate prevailing on the balance sheet date.

Note 6 : Micro, Small and Medium Enterprises

The Company has not received any information from its supplier regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 which came into effect from 2nd October, 2006, and hence disclosure, if any, relating to amounts unpaid as on 31st March, 2012 together with interest paid/payable as required under the Act, have not been given.

Note 7 : Retirement Benefits

The required disclosure under the Revised Accounting Standard 15 is given below :-

Brief description: The type of Defined Benefit plans is as follows.

a) Leave Encashment:

The Company has made provision of Rs. 88 lakhs towards leave encashment on the basis of leave records available. It is in the process of getting actuarial valuation for the same.

b) Gratuity:

The Employee's Gratuity Fund Scheme managed by SBI Life Insurance is a Defined Benefit plan. The present value obligation is determined based on actuarial valuation using projected unit credit method.

The gross due from customers reflects the net amount for all contracts in progress for which cost incurred plus recognized profit(Less recognized Losses) exceeds progress billing.

The gross due to customers reflects the net amount for all contracts in progress where progress billing exceeds cost incurred plus recognized profit (Less recognized Losses) .

During the year, advances from customers to the extent of work done amounting to Rs 2,95,421.62 lakhs is adjusted against Work in Progress in note 13. Advance received in excess of work done and advances pending against commencement of work are disclosed in Current Liabilities under advance from customer in note 7.

Note 8 : Earning Per Share Calculation of EPS Per Share

Basic Earnings per share are calculated by dividing the Net Profit for the year attributable to Equity Shareholders by the weighted average number of Equity shares outstanding during the year.

For the purpose of calculating Diluted Earnings per share, the weighted average numbers of shares outstanding are adjusted for the effects of all dilutive potential equity shares from the exercise of options on un-issued share capital.

Note 9 : Accounting for Interest in Joint Venture

i. Income on investment in Jointly Controlled Entities is recognized when the right to receive the same is established.

ii. Investment in such Joint Venture is carried at cost after providing for any permanent diminution in value.

Interests in Joint Venture

The Company's interest, as Venturer, in jointly controlled entities (Incorporated as Joint Venture) is

The Company's interest in this Joint Venture is reported as Long Term Investment and stated at cost. However, the Company's share of each Asset, Liability, Income & Expenses, etc. related to its interest in this Joint Venture is as follows:

Note 10 : The figures for the previous year have been arranged /rearranged /regrouped wherever considered necessary.

 
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