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Notes to Accounts of Blue Star Ltd.

Mar 31, 2017

In Financial Year 2015-16, the Company had discontinued manufacturing operations at Bharuch and Thane units in accordance with its manufacturing strategy. Plant and Machinery of these manufacturing units (Net Book Value : Rs.176.46 lakhs (March 31, 2016 : Rs.197.38 lakhs and April 1, 2015 : Rs.532.07 lakhs)) that are held for disposal have been disclosed separately as "Assets held for sale''. The Company has classified the assets held for sale at their carrying costs and considers the carrying amount will be recovered on sale.

For Property Plant & Equipment existing as on 1 April 2015 i.e. the date of transition to Ind AS, the company has used Indian GAAP carrying value as deemed cost.

As at 31 March 2017 and 31 March 2016, the fair value of the property is Rs.6,696.59 lakhs and ''6,304.37 lakhs respectively. The valuation is based on fair value assessment done by accredited independent valuers. A valuation model in accordance with that recommended by the International Valuation Standards Committee has been applied.

The Company has no restrictions on the realisability of its investment properties and has no contractual obligations to purchase, construct or develop investment properties or has any plans for major repairs, maintenance and enhancements. Fair Value Hierarchy disclosures for investment properties have been provided in Note 40.

Description of valuation techniques used and key inputs to valuation on investment properties

Delphi building is a commercial property located at Powai, Mumbai. As per International Valuation Standards (IVS) and guidelines of Royal Institute of Chartered Surveyors (RICS) Guidance note for secured lending in India, in respect of income yielding properties the valuation is to be undertaken using either market approach or income approach out of these prescribed approaches. Since, comparable market transactions are scarce, not transparent and subjective, market approach may not be effective and as such income (investment) approach is used. Though there are comparable instances of rents in the subject commercial project, market instances of sale are scarce. Under income approach, the rental income is capitalized over the balance economic life using the Discounted Cash Flow (DCF) technique which is a universally accepted method. The other approach, viz, cost approach does not produce a figure that relates to the sales price achievable in the event of a default by the borrower. Thus, the income approach which uses the DCF technique has been used to calculate the Fair Value.

While arriving at the fair market rent, weightages are given for factors such as availability of car parks, terrace area, terms of lease, area occupied, reputation of the company (lessee), amenities, ease of collection, sustenance of services, whole life costs and infrastructure maintenance such as DC power, Lift, Fire fighting systems, landscape lighting & maintenance, security, sewage treatment plants, water treatment plants, rain water harvesting etc. The yield and hence the year purchase (YP) is based on these factors considering the balance economic life of the structures.

While estimating the market value by income approach, the capitalization rate of interest and YP are arrived taking into consideration the type of use and the yield received. Further, the reversionary value of the proportionate land area is also taken into consideration. The net present value of the property is arrived using remunerative interest at 8.25% p.a. for office space. The accumulative rate is estimated at 3.00% for office space for the purpose of recoupment of capital. Total economic life of office space is estimated as 60 years. The YP is estimated using dual interest i.e., remunerative rate of interest and accumulative rate of interest in order to account for both remuneration as well the recouping of the capital. The building is about 12 years old and the balance economic life of office use is considered to be 48 years.

The Company launched inverter-based variable refrigerant flow (VRF) systems, chillers and wall-mounted units during Financial Year 2015- 2016. The technology cost for development of these products was is initially booked under the head "Intangible Assets under development" and have been capitalized under the head "Intangible Assets" when the recognition criteria was met as per Ind AS 38. The capitalized cost of VRF will get amortized in 6 years in line with market assessment of the use of this technology.

The Company during the current year has commenced a new project to develop higher capacity inverter VRF outdoor Units having cooling capacity of 24HP and above. The Cost related to such project is appearing in intangibles assets under development.

** During the year ended March 31, 2017, the Company''s investment in Blue Star Engineering & Electronics Ltd. (BSEEL) has increased by Rs.77.01 lakhs as the Company has recognized financial guarantee obligation at fair value Rs.77.01 lakhs with corresponding recognition of financial guarantee receivable in investment in BSEEL.

**Margin money deposits with a carrying amount of Rs.361.29 lakhs (31st March, 2016 : Rs.334.99 lakhs, 1st April, 2015 : Rs.108.49 lakhs) are subject to a first charge as security deposit with customers.

The above inventory values are net of provisions made of Rs.245.37 lakhs (March 31, 2016 : Rs.1,555.93 lakhs and April 1, 2015 : Rs.1,248.44 lakhs) for slow moving, obsolete and defective inventory.

** The Company can utilize these balances only towards settlement of the respective dividend payments.

*** Out of the above bank balances, the company can utilize balance of Rs.135.52 lakhs (March 31, 2016 : Rs.46.51 lakhs and April 1, 2015 : Rs. Nil lakhs) only for one of the projects with prior approval of the customer.

During the year ended March 31, 2016, the authorized share capital was increased by Rs.2,750.00 lakhs i.e., 13,49,00,000 Equity shares of Rs.2 each, 5,20,000 Cummulative compulsorily convertible preference shares of Rs.10 each. During the year, the increase in authorized share capital was pursuant to the merger of Blue Star Infotech Ltd (BSIL) and Blue Star Infotech Business Intelligence & Analytics Private Limited (BSIBIA) with Blue Star Infotech Ltd (BSIL)

Terms/Rights attached to Equity Shares

The company has one class of Equity Shares having par value of Rs.2 per share. Each share holder is entitled to one vote per share. The company declares and pays dividend in Indian rupees. Dividend proposed by the Board of Directors is subject to 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 the proportion of number of equity shares held by the shareholders.

Terms/Rights attached to 7.8% Cumulative Convertible Preference Shares

Each convertible preference share has a par value of ''100 and is convertible at the option of the shareholders into Equity shares on the basis of one equity share for every three preference shares held.

Preference shares confer on the holders thereof the right to receive a fixed cumulative preferential dividend at the rate of 7.8% per annum. The preference shares shall rank for the dividend in priority to the shares of the company in the event of increase in share capital or winding up of the Company up to amount of dividend or any arrears of dividend. Preference share holders will not have any further right to participate in the profits or assets of the company.

Terms/Rights attached to Cumulative Compulsorily Convertible preference shares

Each Cumulative Compulsorily Convertible Preference Share has a par value of Rs.10. These shares may be issued as per the terms approved by the Board of Directors subject to the applicable provisions of the Companies Act, 2013.

Shares reserved for issue under options

For details of shares reserved for issue under the Employee Stock Option Plan (ESOP) of the Company (refer note 35).

1 OTHER EQUITY

Securities Premium Reserve - Where the Company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the premium received on those shares shall be transferred to "Securities Premium Reserve''! The Company may issue fully paid-up bonus shares to its members out of the securities premium reserve and the Company can use this reserve for buy-back of shares.

Share Based Payment Reserve - The Company has an employee share option scheme under which options to subscribe for the Company''s shares have been granted to the key employees and directors. The share-based payment reserve is used to recognize the value of equity-settled share-based payments provided to the key employees and directors as part of their remuneration. Refer to Note 35 for further details of the scheme.

Capital Redemption Reserve - Capital Redemption Reserve was created for buy-back of shares.

Capital Subsidy Received from Government - Subsidy is an assistance given by the government for investment in the form of capital asset. The subsidy is recognized when the requirements established for receiving them are met. The subsidy was received against the factory setup in the state of Himachal Pradesh during the year ended March 31, 2009 and March 31, 2013.

General Reserve - General Reserve is created out of the profits earned by the Company by way of transfer from surplus in the statement of profit and loss. The Company can use this reserve for payment of dividend and issue of fully paid-up and not paid-up bonus shares.

a. Outstanding loans carry an average interest rate of 4.80% - 9.70% p.a. (March 31, 2016 : 6.10% - 9.63% p.a., April 1, 2015: 7% to 10.26% p.a).

b. Outstanding loans is secured by hypothecation of stock-in-trade and trade receivables.

c. Buyers'' credit are availed against imports dues and are repayable within maximum tenure of 360 days from the date of shipment and carried an average interest @ Libor plus 0.68% (March 31, 2016 : Libor plus 0.68%, April 1, 2015 : Libor plus 0.95%).

d. Commercial papers carry average interest rate @ 6.68% p.a. for the current year (March 31, 2016 : 7.78% p.a., April 1, 2015: 8.75% p.a.). These are repayable within 60 days to 91 days from the date of drawdown.

Foreign exchange forward contracts

The Company enters into foreign exchange forward contracts with the intention of reducing the foreign exchange risk of buyers credit and trade payables. These contracts are not designated in hedge relationships and are measured at fair value through profit or loss.

Terms and conditions of the above financial liabilities:

Trade payables are non-interest bearing and are normally settled on 60 day terms. Other payables are non-interest bearing and have an average term of 3 months. Interest payable is normally settled quarterly throughout the financial year.

For terms and conditions with related parties, refer Note 37.

For explanations on the Company''s credit risk management processes, refer Note 41.

Contingencies towards indemnities provided on Sale of IT business

The company has created provision for contingencies towards indemnities provided on Sale of IT business for BSIL''s IT business as per the business transfer agreement and share purchase agreements.

Provision for warranties

A provision is recognized for standard warranty claims based on turnover during the year and extended warranty on the basis of turnover for preceding two to four years as per the terms of warranty. The Company estimates the future cost of warranty based on historical experience of the level of repairs and returns. The estimates of such warranty cost are revised annually.

Loss Order

A provision for expected loss on construction contract is recognized when it is probable that the contract cost will exceed the total contract revenue. For all other contracts, loss order provisions are made when the unavoidable costs of meeting the obligation under the contract exceed the currently estimated economic benefits.

Government grants have been received for the purchase of certain items of property, plant and equipment. There are no unfulfilled conditions or contingencies attached to these grants.

# Excludes payment to auditors of Rs.62.08 lakhs payable to Statutory Auditors of BSIL and BSIBIA which was amalgamated with the Company w.e.f. April 1, 2015 (refer note 33). Such fees is included in legal and professional fees.

* includes gratuity expense of Rs. Nil lakhs (Previous Year Rs.69.70 lakhs)

** In the earlier years, the Company had made claims for additional costs incurred due to project delays and design changes for certain major projects. Based on negotiations and certification by the customers, the Company revises estimated revenue, cost and project related provisions. The consequent charge of Rs. Nil lakhs (Previous Year Rs.2,723.78 lakhs) has been recorded and disclosed as an exceptional item.

***The Company had created provision for contingencies towards indemnities provided on Sale of IT business for BSIL''s IT business as per the business transfer agreement and share purchase agreements.

* The weighted average number of shares takes into account the weighted average effect of changes in equity share transactions during the year. There have been no other transactions involving Equity shares or potential Equity shares between the reporting date and the date of authorization of these financial statements.

2 DISCONTINUING OPERATIONS

(a) During the previous year, the Company has sold BSIL and BSIBIA which were mainly engaged in the Information technology and software services business (IT business) w.e.f January 1, 2016 (refer note 33).

The following statement shows the revenue and expenditure of discontinuing operations :

(b) In the earlier year, the Board of Directors and shareholders had approved the transfer of the Company''s Professional Electronics and Industrial Systems business to Blue Star Engineering & Electronics Ltd. (BSEEL), a wholly owned subsidiary of the Company. Accordingly, the Company entered into a business purchase agreement for sale of the said business with effect from March 31, 2015. However, due to customer and contractual requirements, certain contracts of PE&IS business were also executed by Blue Star Limited and hence the same is being shown as discontinuing operations.

The following statement shows the revenue and expenditure of discontinuing operations :

3 SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS

The preparation of the Company''s financial statements requires management to make estimates and assumptions that affect the reported values of revenues, expenses, assets and liabilities, and the accompanying disclosures, and 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

Estimates and assumptions

The key assumptions concerning future and other key sources of estimating 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.

Project revenue and costs

The percentage-of-completion method places considerable importance on accurate estimates of the extent of progress towards completion and may involve estimates on the scope of deliveries and services required for fulfilling the contractually defined obligations. These significant estimates include total contract costs, total contract revenues, contract risks, including technical, political and regulatory risks, and other judgments. The Company re-assesses these estimates on periodic basis and makes appropriate revisions accordingly.

Share-based payments

The Company initially measures the cost of equity-settled transactions with employees using an appropriate valuation model to determine the fair value of the liability incurred. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 35.

Taxes

Significant management judgement is required to determine the amount of deferred tax assets (including MAT credit) that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

Employee benefit plans

The cost of defined benefit gratuity plan and other post-employment benefits 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 parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.

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 the respective countries.

Further details about gratuity obligations are given in Note 34.

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.

Intangible asset under development

The Company capitalizes intangible asset under development for a project in accordance with the accounting policy. Initial capitalization of costs is based on management''s judgement that technological and economic feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. In determining the amounts to be capitalized, management makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of benefits.

Impairment of financial assets

The impairment provision 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 the Company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.

Allowance for uncollectible trade receivables

Trade receivables do not carry interest and are stated at their nominal values as reduced by appropriate allowances for estimated irrecoverable amounts. Estimated irrecoverable amounts are based on the aging of the receivable balances and historical experiences. Individual trade receivables are written off when management deems them not be collectible.

Warranties

Provision for warranties involves a significant amount of estimation. The provision is based on the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The best estimate is determined based on the Company''s past experience of warranty claims (normally over four years) and future expectations. These estimates are revised periodically.

Rebates and discounts

The Company provides rebates and discounts to its dealers and channel partners based on an expectation of volumes achieved and other parameters such as quality of showroom etc. This involves a certain degree of estimation of whether all the parameters to provide discounts have been achieved. Provision for discount and rebates is based on the Company''s past experience of volumes achieved vis-a-vis targets etc.

4 BUSINESS COMBINATIONS AND ACQUISITION OF NON-CONTROLLING INTERESTS

Amalgamation and sale of business of Blue Star Infotech Ltd (BSIL) and Blue Star Infotech Business Intelligence & Analytics Private Limited (BSIBIA) with Blue Star Limited (the Company) in financial year 2015-16.

Pursuant to the composite Scheme of Amalgamation (''the Scheme'') of BSIL and BSIBIA with the Company under sections 391 to 394 of The Companies Act, 1956 sanctioned by the Honorable High Court of Bombay on April 16, 2016, the assets and liabilities of BSIL and BSIBIA were transferred to and vested in the Company with effect from April 1, 2015. Accordingly, the Scheme has been given effect to in previous year accounts.

The Company acquired BSIL and BSIBIA to consolidate and simplify asset and business investment ownership. BSIL and BSIBIA were mainly engaged in the information technology and software services business till December 31, 2015. BSIL operations also include leasing of immovable property which continues.

Accordingly, the accounting treatment has been given as under:

1 The assets and liabilities of BSIL and BSIBIA as at April 1, 2015 have been recognized at their fair values in the Financial Statements of the Company.

2 BSIL''s 1,08,00,000 equity shares of Rs.10 each fully paid up stands cancelled.

3 The Company has discharged the purchase consideration through issue of 53,91,383 equity shares at fair value and extinguishment of 30,98,205 shares held in BSIL by the Company. The fair value of the shares is calculated with reference to the quoted price of the shares of the date of acquisition which was Rs.320.09 each. The fair value of consideration is therefore Rs.17,257.28 lakhs Pending issue and allotment of the equity shares, the face value and premium on such shares of Rs.17,257.28 lakhs was shown under the heading "Share Suspense Account" as at March 31, 2016.

4 Assets acquired and liabilities assumed:

The fair values of the identifiable assets and liabilities of BSIL and BSIBIA as at the date of acquisition were:

The fair value of trade receivables amounts to Rs.4,468 lakhs. However, none of the trade receivables is credit impaired and it is expected that the full contractual amounts can be collected.

5 The excess of the fair value of purchase consideration over the fair value of net assets of BSIL and BSIBIA amounting to Rs.1,036 lakhs has been treated as goodwill. The Goodwill of Rs.1,036 lakhs comprises the value of expected synergies arising from acquisition and the gain on remeasurement of its previously held equity interest in the acquiree at its acquisition-date fair value Goodwill arising above has been amortized/charged off during the year. None of the goodwill is expected to be deductible for income tax purposes.

6 As per the Scheme, pending allotment of shares, dividend @ ''6.5 per share relating to 53,91,383 equity shares and amounting to Rs.350.44 lakhs was shown under other financial liabilities as dividend payable as of March 31, 2016.

7 Pursuant to a Business Transfer Agreement executed on September 29, 2015 which was approved by the Board of Directors of BSIL on that date and subsequently by the shareholders of BSIL on November 18, 2015, BSIL sold its Information

Technology business on a Slump Sale basis to Infogain India Pvt. Ltd. effective January 1, 2016 to monetise and generate substantial value for its shareholders. The business transfer involves transfer of the business, employees and all business assets and liabilities for an agreed cash consideration of Rs.7,358 lakhs.

Further, BSIL sold its investments in its three overseas subsidiaries as per the terms of individual Share Purchase Agreements entered on September 29, 2015 with Infogain Corporation, California, USA. The agreements were approved by the Board of Directors of BSIL on that date and subsequently by shareholders of BSIL on November 18, 2015 vide a postal ballot. The agreed sales consideration was as follows :

8 The Company held 30,98,025 fully paid equity shares of Rs.10 each in BSIL amounting to Rs.298 lakhs prior to acquisition. The acquisition-date fair value of the equity interest immediately before the acquisition date was Rs.6,963 lakhs. Thus the amount of gain of Rs.6,664.70 lakh was recognized, which is disclosed as exceptional item in note 29. Further, on sale of IT Business and overseas subsidiaries, the Company has recorded a gain of Rs.1,367 lakhs which has been disclosed as an exceptional item in note 29. Thus, the total gain on amalgamation of BSIL and BSIBIA and sale of IT business and overseas subsidiaries amounted to Rs.7,746 lakhs, net of contingencies towards indemnities provided on sale of IT business Rs.286 lakhs. From the date of acquisition, BSIL and BSIBIA contributed Rs.11,710.54 lakhs of revenue and Rs.1,985.60 lakhs of profit before tax from continuing operations of the Company during financial year 2015-16.

9 Figures for the previous year include figures of BSIL and BSIBIA which has been amalgamated with the Company with effect from April 1, 2015 and subsequently sold on January 1, 2016, and are therefore to that extent not comparable with those of the current year.

5 EMPLOYEE BENEFITS DISCLOSURE

I. Defined Contribution Plans

Amount of Rs.564.87 (31 March 2016 : Rs.758.59 lakhs) is recognized as an expense and included in "Employee Benefits expense" (refer note 25) in the statement of Profit and Loss.

II. Defined Benefit Plans

a. Gratuity

The Company makes annual contribution to Blue Star Employees Gratuity Fund, which is a funded final salary defined benefit plan for the qualifying employees.

The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, an employee who has completed five years of service is entitled to specific benefits. The level of benefits provided depends on the member''s length of service and salary at separation age. The fund formed by the Company manages the investments of the Gratuity fund. Market volatility, changes in inflation and interest rates, rising longetivity, plan administration expense and regulatory changes are just some of the factors that create financial risk in defined benefit plans. If not managed, defined benefit plan risk will impact credit ratings, access to capital, share prices and plans for growth, as well as divert attention and valuable resources from core business strategy. As the plan assets include investments mainly in the public sector undertakings, state government securities and investments with the approved insurance company, the company''s exposure to equity market risk is minimal.

Expected rate of return on investments is determined based on assessment made by the Company at the beginning of the year on the return expected on its existing portfolio, along with the estimated incremental investments to be made during the year. Yield on portfolio is calculated based on a suitable mark-up over the benchmark Government securities of similar maturities. The Company expects to contribute Rs.560 lakhs to gratuity fund in 2017-18 (March 31, 2016: Rs.600 lakhs).

The sensitivity analysis above have 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 year 2016-17.

The average duration of the defined benefit plan obligation at the end of the reporting year 2016-17 is 12 years.

b. Provident Fund

In accordance to IND AS 19 that provident fund set up by employers which require interest shortfall to be met by the employer, should be treated as a defined benefit plan. The actuary has provided a valuation and according thereto, there is no shortfall as at March 31, 2017. The Company''s contribution to the Employee''s Provident fund aggregates to Rs.530.72 lakhs (31 March 2016 : Rs.484.92 lakhs).

III. General Description of significant defined plans:

1. Gratuity Plan

Gratuity is payable to all eligible employees on separation/retirement based on 15 days last drawn salary for each completed years of service after continuous service for five years.

2. Additional Gratuity

Additional Gratuity is payable as per the specific rules of the Company i.e. ''5,000 for staff and ''10,000 for Managers subject to qualifying service of 15 years

6 SHARE BASED PAYMENTS

The Company provides share-based payment benefit to its employees. During the year ended 31 March 2017, an employee stock option plan (ESOP) was in existence. The relevant details of the scheme and the grant are as below:

On 18th January 2013, the Board of Directors approved the Equity Settled ESOP Scheme 2013 (ESOS 2013) for issue of stock options to key employees and directors of the company. The Scheme was also approved by the Shareholders of the Company by a special resolution passed by postal ballot dated 7th March, 2013. According to the Scheme 2013, the employees selected by the remuneration committee from time to time will be entitled to options, subject to satisfaction of the prescribed vesting conditions. The contractual life (comprising the vesting period and the exercise period) of options granted is 1 to 5 years.

The exercise price of the share options under the current grants is equal to the market price of the underlying shares on the date of grant. The fair value of the share options is estimated at the grant date using Black-Scholes model, taking into account the terms and conditions upon which the share options were granted.

The weighted average share price at the date of exercise for stock options exercised was Rs.499.35.

The weighted average contractual life for the share options outstanding as at March 31, 2017 was 1 year and 4 months. The range of exercise prices for options outstanding at the end of the year was ''290.05 to Rs.390.30.

The weighted average share price at the date of exercise for stock options exercised was Rs.351.25.

The weighted average contractual life for the share options outstanding as at March 31, 2016 was 2 years and 4 months. The range of exercise prices for options outstanding at the end of the year was Rs.290.05 to Rs.369.55.

The expected life of the stock is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may also not necessarily be the actual outcome. d) The expense recognized for employee services received during the year is shown in the following table:

7. COMMITMENTS AND CONTINGENCIES

a. Contingent liabilities

Future cash outflows in respect of matters considered disputed are determinable only on receipt of judgments/decisions pending at various forums/authorities. The management does not expect these claims to succeed and accordingly, no provision for the contingent liability has been recognized in the financial statements.

The Company''s pending litigations comprise of claims against the Company primarily by the customers and proceedings pending with tax authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a material adverse effect on the financial statements

b Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided:-

At March 31, 2017, Company had commitments of Rs.2,662.37 lakhs (March 31, 2016: Rs.1,773.35 lakhs, April 1, 2015: Rs.513.81 lakhs)

Note: As the liabilities for gratuity and leave encashment are provided on actuarial basis for the Company as a whole, the amounts pertaining to the Directors are not included above.

Terms & Conditions of Transactions with Related Party

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. For the year ended 31 March 2017, the company has not recorded any impairment of receivables relating to amounts owed by related parties (31 March 2016: ''Nil, 1 April 2015: Nil).

Loans & Corporate Guarantees to Related Parties

The company has given loans and corporate guarantees to subsidiaries and relevant joint ventures in the ordinary course of business to meet the working capital requirements of subsidiaries and joint ventures.

Transactions with key managerial personnel Other Directors'' interests

During the year ending March 31, 2016 , the company had received services from one of the directors. The company had also paid rent to one of the relatives of directors during previous year. The company had sold goods & services to two enterprises and received services from an enterprise where the director is member/director. All the above transactions were entered in on an arm''s length basis.

Directors'' interests in the Blue Star Limited Employees'' Stock Option Scheme, 2013 ("Scheme")

Share options held by executive director of the Board of Directors under the Blue Star Limited Employees'' Stock Option Scheme, 2013 ("Scheme") to purchase Equity shares have the following expiry dates and exercise prices:

8.SEGMENT INFORMATION:

A. Primary Segment Reporting (by Business Segment)

The Company''s business segments are organized around product lines as under:

a. Electro Mechanical Projects and Packaged Air-conditioning Systems includes central air-conditioning projects, Electrical Contracting business and Packaged air-conditioning businesses including manufacturing and after sales service.

b. Unitary Products includes cooling appliances, cold storage products, including manufacturing and after sales service.

c. Professional Electronics and Industrial Systems includes trading and services for testing machines, medical, analytical, test

& measuring, data communications, industrial products and systems (divested as on March 31, 2015. Refer note 31b)

d. Others constitute BSIL and BSIBIA which are mainly engaged in information technology and software services business. This business was sold to Infogain India Pvt. Ltd on December 31, 2015 (Refer note 33 and note 31b).

B. Secondary segment information:

Secondary segmental reporting is based on the geographical location of customer. The geographical segments have been disclosed based on revenues within India (sales to customers in India) and revenues outside India (sales to customer located outside India.)

9 DERIVATIVE INSTRUMENTS AND ATTACHED FOREIGN CURRENCY EXPOSURE

The Company has a well-defined forex risk management policy which ensures proactive and regular monitoring and managing of foreign exchange exposures. Financial risks relating to changes in exchange rates are hedged by forward and options contracts. The hedging strategy is used towards managing currency fluctuation risk and the Company does not use foreign exchange forward and options contract for trading or speculative purposes.

Forward and options contract are fair valued at each reporting date. The resultant gain or loss of forward and option contract is recognized in the Statement of Profit and Loss.

Commodity risk is mitigated by entering into annual rate contracts with major suppliers which is factored in pricing decisions. This approach provides sufficient mitigation against volatility in commodity rates.

10 FAIR VALUE HIERARCHY

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

Quantitative disclosures fair value measurement hierarchy as at March 31, 2017 :

There have been no transfers between Level 1 and Level 2 during the period.

11 FINANCIAL RISK MANAGEMENT OBJECTIVES & POLICIES

The Company''s principal financial liabilities comprise of short tenured borrowings, trade and other payables and financial guarantee contracts. Most of these liabilities relate to financing Company''s working capital cycle. The Company has trade and other receivables, loans and advances that arise directly from its operations. The Company also enters into hedging transactions to cover foreign exchange exposure risk.

The Company is accordingly exposed to market risk, credit risk and liquidity risk.

The Company''s senior management oversees management of these risks. The senior professionals working to manage the financial risks and the appropriate financial risk governance framework for the Company are accountable to the Board of Directors, Risk Committee and the Audit Committee. This process provides assurance that the Company''s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with Company''s policies and overall risk appetite. All foreign currency hedging activities for risk management purposes are carried out by a specialist treasury team that have the appropriate skills, experience and supervision. In addition, independent views from bankers and currency market experts are obtained periodically to validate risk mitigation decisions. It is the Company''s policy that no trading in derivatives for speculative purposes shall be undertaken.

The Risk Committee and the Audit Committee review and agree policies for managing each of these risks which are summarized below:

Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise currency rate risk and interest rate risk. Financial instruments affected by market risk include loans and borrowings, deposits, advances and derivative financial instruments.

The Company''s activities expose it to a variety of financial risks, including the effects of changes in foreign currency exchange rates and interest rate movement.

The Company uses derivative financial instruments such as foreign exchange forward contracts and options to manage its exposures to foreign exchange fluctuations.

Foreign Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company transacts business in local currency and in foreign currency, primarily US Dollars. The Company has foreign currency trade payables and receivables and is therefore, exposed to foreign exchange risk. The Company may use forward contracts or foreign exchange options towards hedging risk resulting from changes and fluctuations in foreign currency exchange rate. These foreign exchange contracts, carried at fair value, may have varying maturities varying depending upon the primary host contract requirement and risk management strategy of the company.

The Company manages its foreign currency risk by hedging appropriate percentage of its foreign currency exposure, as per its established risk management policy.

Foreign Currency Sensitivity

The following table demonstrates the sensitivity in the USD, Euro and other currencies to the functional currency of the Company, with all other variables held constant. The impact on the Company''s profit before tax is due to changes in the fair value of monetary assets and liabilities including foreign currency derivatives.

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 debt interest obligations. Further, the Company engages in financing activities at market linked rates and therefore, any changes in the domestic or global interest rates environment may impact future rates of borrowing. To manage this risk, the management maintains a robust portfolio mix of multiple borrowing products. Buyers credit is used as a financing mechanism provided the fully hedged cost of financing through this product results in cost lower than the INR cost based borrowing. In addition, the benefit of interest rate subvention under packing credit financing schemes provided by banks is also availed as appropriate. Dynamic switching between various financing products coupled with a short maturity profile of the borrowing helps mitigate the interest rate risk adequately.

Interest Rate Sensitivity of Borrowings

With all other variables held constant, the following table demonstrates the sensitivity to a reasonably possible change in the interest rates on the borrowings.

The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment

Credit Risk

Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities, primarily trade receivables and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

1. Trade receivables

Customer credit risk is managed by each business unit subject to the Company''s established policy, procedures and controls relating to customer credit risk management. Trade receivables are non-interest bearing and are generally on credit term in line with respective industry norms. Outstanding customer receivables are regularly monitored. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically. The ageing analysis of trade receivables as of the reporting date is as follows:

The requirement for impairment is analysed at each reporting date. Refer Note 8 for details on the impairment of trade receivables.

2. Financial instruments and cash deposits

Credit risk from balances with banks is managed by Company''s treasury in accordance with the Board approved policy. Investments of surplus funds, temporarily, are made only with approved counterparties, mainly mutual funds, who meet the minimum threshold requirements under the counterparty risk assessment process. The Company''s maximum exposure for financial guarantees is given in Note 36.

Liquidity Risk

Liquidity risk is the risk that the Group may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company''s objective is to, at all times maintain optimum levels of liquidity to meet it cash and collateral requirements. The Company closely monitors its liquidity position and deploys a robust cash management system. It maintains adequate sources of financing including loans, debt, and overdraft from both domestic and international banks at an optimised cost. It also enjoys strong access to domestic and international capital markets across various debt and hybrid instruments

The table below summaries the maturity profile of the Company''s financial liabilities based on contractual undiscounted payments:

12 CAPITAL MANAGEMENT

Capital includes equity attributable to the equity holders of the Company and net debt.

Primary objective of Company''s capital management is to ensure that it maintains an optimum financing structure and healthy returns in order to support its business and maximize shareholder value.

The Company manages its capital structure and makes adjustments, in light of the changes in economic conditions or business requirements.

The Company monitors capital using a gearing ratio which is net debt divided by total capital plus net debt. Net debt is calculated as loans and borrowings less cash and cash equivalents.

* Include revenue reversal of Rs. Nil (for the year ended 31st March, 2016: Rs.115.00 lakhs) disclosed as an exceptional item ** Includes reduction of Imminent loss of Rs.103.71 lakhs ( 31st March, 2016: Rs.133.12 lakhs)

*** Includes Imminent loss impact (increase) of Rs.127.32 lakhs (31st March, 2016: Rs.112.40 lakhs)

13 FIRST TIME ADOPTION OF IND-AS Exceptions and exemptions availed

These financial statements, for the year ended March 31, 2017, are the first, the Company has prepared in accordance with Ind AS. For the 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 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 its financial statements to comply with Ind AS for the year ended March 31, 2017, together with comparative date 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.

Exemptions applied

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:

1 Ind AS 103 Business Combinations has not been applied to acquisitions of subsidiaries, which are considered businesses under Ind AS that occurred before April 1, 2015. Use of this exemption means that the Indian GAAP carrying amounts of assets and liabilities, that are required to be recognized under Ind AS, is their deemed cost at the date of the acquisition. After the date of the acquisition, measurement is in accordance with respective Ind AS. The Company recognizes all assets acquired and liabilities assumed in a past business combination, except (i) certain financial assets and liabilities that were derecognized and that fall under the derecognition exception, and (ii) assets (including goodwill) and liabilities that were not recognized in the acquirer''s balance sheet under its previous GAAP and that would not qualify for recognition under Ind AS in the individual balance sheet of the acquiree. Assets and liabilities that do not qualify for recognition under Ind AS are excluded from the opening Ind AS balance sheet. The Company did not recognize or exclude any previously recognized amounts as a result of Ind AS recognition requirements.

2 Since there is no change in the functional currency, the Company has elected to continue with the carrying value for all of its property, plant and equipment, intangible assets and investment property as recognized in its Indian GAAP financial at deemed cost on the transition date.

3 The Company has opted that the previous GAAP carrying amount, of its investments in subsidiary, joint ventures or associate to be the deemed cost on the date of transition as at April 1, 2015 except in case of investment in one of its subsidiary i.e, Investment in Blue Star Engineering & Electronics Limited (BSEEL), in which the Company has opted that fair value at the Company''s date of transition to be the deemed cost.

Estimates

The estimates at April 1, 2015 and at March 31, 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from the following item where application of Indian GAAP did not require estimation:

- Impairment of financial assets based on expected credit loss model.

The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions as at the transition date i.e., April 1, 2015 and as of March 31, 2016.

A Investment Property

Investment properties are reclassified from Non Current Investments as shown in previous Indian GAAP and presented separately amounting to Rs.6,646.97 lakhs. The depreciation of Rs.366.91 lakhs has been provided for the year ended March 31, 2016. Thus, the carrying amount as on March 31, 2016 is Rs.6,280.06 lakhs.

B Financial Guarantee

The Company has issued the financial guarantee on behalf of its subsidiaries for the borrowings taken by them. As on date of transition to Ind AS, the Company has recognized financial guarantee obligation at fair value amounting to Rs.225.72 lakhs (March 31, 2016: Rs.162.53 lakhs) with corresponding recognition of financial guarantee receivable of Rs.403.69 lakhs (March 31, 2016 : Rs.403.69 lakhs) in Investments and Rs.88.25 lakhs (March 31, 2016 : Rs.78.89 lakhs) has been recognized in Loans.

There is an increase in the guarantee fee income on account of amortization of financial guarantee obligation recognized in Ind-AS. Thus, a total of Rs.53.83 lakhs is recognized as finance income.

C Trade Receivables

The Company identifies receivables which shall be recovered beyond a period of twelve months as of the reporting date and has discounted the same to its present value over the estimated tenure of the retention period. The impact of discounting aggregating Rs.844.18 lakhs (March 31, 2016: Rs.304.66 lakhs) has been adjusted to the retained earnings on transition date and Rs.539.52 lakhs has been recognized as finance income in the statement of profit and loss for the year ended March 31, 2016 on account of unwinding.

D Expected Credit Loss

Under Indian GAAP, the Company created provision for impairment of trade receivables on specific identification basis. Under Ind AS, impairment allowance has been determined based on expected credit loss model (ECL) as per Ind AS 109. This has resulted in incremental impairment provision of Rs.4,048.68 lakhs as on the transition date which has been adjusted against the retained earnings. The impact of Rs.52.07 lakhs for the year ended March 31, 2016 has been recognized in the statement of profit and loss.

E Proposed dividend

Under previous Indian GAAP, proposed dividend including dividend distribution tax, are recognized as liability in the period to which they relate, irrespective of when they are recommended by the Board of Directors. Under Ind AS, proposed dividend is recognized as a liability in the period in which it is declared by the Company, usually when approved by shareholders in a general meeting, or paid.

Therefore, the proposed dividend including dividend distribution tax amounting to Rs.5,412.27 lakhs has been derecognized and adjusted against the retained earnings as on the date of transition.

F Defined benefit obligation

Under previous Indian GAAP, the entire cost, including actuarial gains and losses on post-employment defined benefit plan is charged to the statement of profit or loss. Under Ind-AS, remeasurements comprising of actuarial gains and losses are recognized through Other Comprehensive Income. Thus, employee benefits expense is reduced by Rs.292 lakhs (Rs.190.95 lakhs net of taxes) and is recognized in Other Comprehensive Income during the year ended March 31, 2016.

G Government Grants

The Company recorded the Government Grant received for its plant and equipment by reducing the grant amount from the cost of the asset according to Indian GAAP. The Company has elected to continue with the carrying value for all of its property, plant and equipment as recognized in its Indian GAAP financials as deemed cost at the transition date. Ind AS 20 requires the Company to account for such a grant by setting up the grant as deferred income. As a consequence the Company has adjusted Rs.335.57 lakhs grant received to recognize the amount of unamortized deferred income as at the date of the transition in accordance with paragraph 10 of Ind AS 101, the corresponding adjustment should be made to the carrying amount of property, plant and equipment (net of cumulative depreciation impact) and retained earnings, respectively, as the grant is directly linked to the plant and equipment. In the year 2015-16, the Company received further grant of Rs.229.48 lakhs which has been added back to the carrying amount of plant and equipment as compared to netting it off under previous Indian GAAP. During the financial year ending March 31, 2016, the Company has recognized Rs.73.29 lakhs in the statement of profit and loss as amortization of government grant and depreciation on plant and equipment respectively.

H Assets held for sale

The Company had discontinued the manufacturing operations of Bharuch and Thane units in accordance with the manufacturing strategy in earlier years. The Plant and Machinery of these manufacturing units and other plant and machinery of factories of the company which the management assess are to be disposed off (Net Book Value : Rs.532.07 lakhs as on April 1, 2015 and Rs.197.39 lakhs as on March 31, 2016) have been disclosed separately as "Assets held for sale" in accordance with Ind AS 105 on the face of the Balance Sheet.

I Investments

The Company has elected to measure one of its investment in subsidiaries i.e., Investment in BSEEL at fair value at the date of transition to Ind AS. Hence at the date of transition to Ind AS, a decrease of Rs.2,294.50 lakhs was recognized in Investments. This amount has been recognized against retained earnings.

J Loans

The Company has fair valued its security deposits and employee loans as at the transition date. An amount of Rs.39 lakhs (March 31, 2016: 51.54) has been recognized against corresponding adjustment to Retained Earnings. Also, Rs.128.45 lakhs has been recognized as finance income on security deposits and employee loans, Rs.11 lakhs has been recognized as employee cost in employee benefit expenses, Rs.48.95 lakhs has been recognized as rent expenses in other expenses and Rs.31.91 lakhs has been recognized as interest expenses in finance cost for the year ended March 31, 2016.

K Deferred Tax

The various transitional adjustments lead to temporary differences, which the Company has to account for. Deferred tax adjustments are recognized in correlation to the underlying transaction either in retained earnings or a separate component of equity. On the date of transition, the net impact on deferred tax assets aggregating Rs.1,727.99 lakhs (March 31, 2016: Rs.1,797.74 lakhs) has been adjusted to retained earnings. Rs.60 lakhs has been recognized in the statement of profit and loss for the year ended March 31, 2016.

L Derivative Instruments

There is a difference in the fair value of forward foreign exchange contracts recognized under previous Indian GAAP and Ind AS. An amount of Rs.17.70 lakhs (March 31, 2016: Rs.36.87 lakhs) has been recognized with corresponding adjustment in retained earnings. Also, an amount of Rs.10.66 lakhs has been recognized as an expense in ''Finance Cost'' and Rs.19.51 lakhs has been recognized as an expense in ''Other Expenses'' for the year ended March 31, 2016 .

M Revenue from Operations

Under the previous Indian GAAP, sale of goods was presented net of excise duty. However, under Ind AS, sale of goods includes excise duty. Excise Duty on sale of goods is presented separately on the face of statement of profit and loss. Thus, revenue from operations under Ind AS has increased by Rs.3,179.41 lakhs with excise duty on sales shown separately. Under the previous Indian GAAP, growth bonus paid by the Company to dealers and retailers was classified under ''Other Expenses''. Ind AS requires such a bonus to be netted of from revenue. Thus, an amount of Rs.132.58 lakhs has been netted of from revenue from operations with corresponding impact in ''Other Expenses''.

N Share-based payments

Under previous Indian GAAP, the Company was using intrinsic value method for ESOP scheme for recognizing expense. As the Company granted shares at intrinsic value to the grantees, there was no expense recognized in the statement of profit and loss. Ind AS requires the fair value of share options to be determined using an appropriate pricing model recognized over the vesting period. As on the date of transition, an amount of Rs.349.89 lakhs was adjusted within ''Other Equity''. Thus, an expense of Rs.382.24 lakhs has been recognized in the statement of profit and loss for the year ended March 31, 2016.

14 LEASES:

The Company has entered into operating lease agreements for its office premises, storage locations and residential premises for its employees. There are no exceptional/restrictive covenants in the lease agreements, except in case of four premises. Lease rental expense debited to statement of Profit and Loss is Rs.5,480.73 lakhs (March 31, 2016 : Rs.4,558.31 lakhs).

The Company has leased out office premises and furniture under cancellable operating lease agreements that are renewable at the option of both the lessor and the lessee.

An amount of Rs.594.29 lakhs (Previous year: Rs.565.99 lakhs) is recognized as lease income in the statement of profit & Loss for the year ended March 31, 2017.

15 a Details of revenue expenditure directly related to Research & Development :

The above balances do not include Cash imprest balance of Rs.60. 49 lakhs as on November 08, 2016 and closing balance of Rs.59.58 lakhs as on December 30, 2016. This amount represents imprest extended to employees. The company has not accepted any receipts during the said period out of the imprest money given to employees.

16 PREVIOUS YEAR COMPARATIVES

Previous year''s figures have been regrouped where necessary to conform to this year''s classification.


Mar 31, 2015

I The company can utilize these balances only toward settlement of the respective unpaid dividend.

The transfer of Professional Electronics and Industrial Systems (Refer note 23) is a non cash transaction and hence, has no impact on the Company''s cash flow for the year.

1. Corporate information

Blue Star Limited ("The Company") is into the business of central air conditioning and commercial refrigeration. The Company is also into distribution and maintenance of imported professional electronics and industrial systems.

2. Basis of preparation

The financial statements 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 respects with the accounting standard notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The financial statements have been prepared on an accrual basis and under the historical cost convention.

The accounting policies adopted in the preparation of financial statements are consistent with those of the previous year except for change in accounting policy as explained below.

All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in Schedule III of Companies Act, 2013.

Based on the nature of business and the time between acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current/ non-current classification of assets and liabilities.

a) There is no movement in the shares outstanding at the beginning and at the end of the reporting period.

b) Terms/rights attached to equity shares

The Company has only one class of equity shares having 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.

During the year ended 31 March, 2015 the amount of per share dividend proposed as distribution to the equity shareholders is Rs.5 (31 March, 2014 : Rs.4)

c) Details of shareholders holding more than 5% shares in the Company

# these shares are held in Trust for the Promoter group who are the beneficial owners

As per records of the Company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares, except as disclosed.

d) Shares reserved for issue under options

For details of shares reserved for issue under the employee stock option (ESOP) plan of the Company, refer note :36

Provision for warranties

A provision is recognised for standard warranty claims based on turnover during the year and extended warranty on the basis of turnover for preceding two years. The Company estimates the future cost of warranty based on historical experience of the level of repairs and returns. The estimates of such warranty cost are revised annually.

Loss order

A provision for expected loss on construction contract is recognised when it is probable that the contract cost will exceed the total contract revenue. For all other contracts, loss order provisions are made when the unavoidable costs of meeting the obligation under the contract exceed the currently estimated economic benefits.

a. Outstanding Loans carry an average interest rate of 10.26% p.a. (31 March 2014: 10.12% p.a.)

b. Outstanding Loans is secured by hypothecation of stock-in-trade and trade receivables.

c. Buyers'' Credit are availed for imports payables and are repayable within maximum tenure of 360 days from the date of shipment and carried an average interest @ Libor plus 0.95%

d. Commercial Papers carry average interest rate @ 8.75% p.a. for the current year (31 March 2014: 9.62% p.a.). These are repayable within 50 days to 90 days from the date of drawdown.

1 Figures in brackets represents amounts pertaining to previous years. 2. Depreciation and Amortization Expense

3 Plant & Machinery includes asset held for sale:

Gross Block Rs.1790.02 lakhs (Previous year: Rs.Nil lakhs), Depreciation Rs.83.73 lakhs (Previous year: Rs.Nil lakhs), Accumulated Depreciation Rs.1257.90 lakhs (Previous year: Rs.Nil lakhs), Net book value Rs.532.12 lakhs (Previous year: Rs.Nil lakhs)

Until the previous year, the Company had recognised the deferred tax asset only to the extent of deferred tax liability arising from timing differences as the Company had carry forward losses. During the current year, the carry forward losses have been completely set off and there is reasonable certainty of realisation of deferred tax assets. Accordingly, deferred tax asset has been recognised on timing differences prevailing at the beginning of the year to the extent not recognised in earlier years.

Margin Money Deposits given as security

Margin money deposits with a carrying amount of Rs.108.49 lakhs (31 March 2014: Rs.84.12 lakhs) are subject to a first charge to secure the Custom claim amounting to Rs.8.73 lakhs & Security deposit with customers amounting to Rs.99.76 lakhs.

* includes gratuity expense of Rs.69.70 lakhs

** In earlier years, the Company had made claims for additional costs incurred due to project delays and design changes for certain major projects. Based on negotiations and certification by the customers, the company revises estimated revenue, cost and project related provisions. The consequent charge of Rs.5,824.89 has been recorded and disclosed as an exceptional item.

4: DISCONTINUING OPERATIONS

The Board of Directors and shareholders had approved the transfer of the Company''s Professional Electronics and Industrial Systems business to Blue Star Engineering and Electronics Ltd. (BSEEL) (erstwhile Blue Star Electro-Mechanical Ltd.), a wholly owned subsidiary of the Company. Accordingly, the Company entered into a business purchase agreement on March 13, 2015 with BSEEL for sale of the said business together with all its net assets for a consideration of Rs.11,050 Lakhs. BSEEL has issued 2,84,50,052 equity shares of Rs.2 each towards discharge of the consideration on the basis of an independent valuation. In accordance with the agreement, the transaction has been effected on March 31, 2015 and a surplus of Rs.8,334.64 lakhs has been recognised in the Statement of Profit and Loss Account of the Company as an exceptional item.

* Includes reduction of Imminent loss of Rs.151.09 (31 March 2014: Rs.370.75)

** Includes Imminent loss impact (increase) of Rs.159.16 (31 March 2014: Rs.225.74)

2014-15 2013-14 Claims against the Company not acknowledged as debts 72.18 67.16

Sales Tax matters 12,048.84 6,809.45

Excise Duty matters 127.57 105.25

Service Tax matters 1,814.79 1,017.28

Income Tax matters 4,740.21 2,505.00

Corporate Guarantee given on behalf of Joint Ventures 7,625.00 5,605.03

Corporate Guarantee given on behalf of Subsidiary and others 4,753.00 5,797.50

Future cash outflows in respect of above matters are determinable only on receipt of judgments/decisions pending at various forums/authorities. The management does not expect these claims to succeed and accordingly, no provision for the contingent liability has been recognized in the financial statements.

The Company''s pending litigations comprise of claims against the Company primarily by the customers and proceedings pending with tax authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a material adverse effect on the financial statements.

5: Estimated amount of Contracts remaining to be executed on Capital account and not provided for Rs.513.81 lakhs (31 March 2014 : Rs.1,403.22 lakhs).

6a: Project costs and Commission on sales are net of Rs.Nil (31 March 2014: Rs.228.87 lakhs) and Rs.428.37 lakhs (31 March 2014: Rs.279.77 lakhs) respectively, on account of reversal of provision no longer required.

6b: Aggregation of expenses disclosed in Project cost, Other expenses and Finance Cost vide note 17, 20 and 21 in respect of specific items is as follows:

7: DISCLOSURE PURSUANT TO ACCOUNTING STANDARD - 15 "EMPLOYEE BENEFITS" i. Defined Contribution Plans:

Amount of Rs.1255.90 lakhs (31 March 2014: Rs.1262.16 lakhs) is recognized as an expense and included in "Employee Benefits expense" (refer note 19) in the statement of Profit and Loss.

b) The Company makes annual contribution to Blue Star Employees Gratuity Fund, which is a funded defined benefit plan for qualifying employees. The fund formed by the Company manages the investments of the Gratuity fund. Expected rate of return on investments is determined based on the assessment made by the Company at the beginning of the year on the return expected on its existing portfolio, along with the estimated incremental investments to be made during the year, Yield on portfolio is calculated based on a suitable mark-up over the benchmark Government securities of similar maturities. The Company expects to contribute Rs.750 Lakhs to gratuity fund in 2015-16 (31 March 2014: Rs.170 Lakhs)

c) The estimates of future salary increases, considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors.

d) The guidance issued by the Accounting Standard Board (ASB) on implementing AS 15, Employee Benefits (revised 2005) states that provident fund set up by employers which require interest shortfall to be met by the employer, should be treated as a defined benefit plan. The actuary has provided a valuation and according thereto, there is no shortfall as at March 31,2015. The Company''s contribution to the Employee''s Provident fund aggregates to Rs.529.14 lakhs (31 March 2014: Rs.538.43 lakhs).

iii. General Description of significant defined plans:

1. Gratuity Plan

Gratuity is payable to all eligible employees on separation/retirement based on 15 days last drawn salary for each completed years of service after continuous service for five year

2 Additional Gratuity

Additional Gratuity is payable as per the specific rules of the Company i.e. Rs.5,000 for staff and Rs.10,000 for Managers subject to qualifying service of 15 years.

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable for the period over which the obligation is to be settled.

8: SEGMENT INFORMATION

A. Primary Segment Reporting (by Business Segment)

The Company''s business segments are organised around product lines as under:

a. Electro Mechanical Projects and Packaged Air-conditioning Systems includes Central air-conditioning projects, Electrical Contracting business and Packaged air-conditioning businesses including manufacturing and after sales service.

b. Cooling Products includes cooling appliances, cold storage products, including manufacturing and after sales service.

c. Professional Electronics and Industrial Systems includes trading and services for testing machines, medical, analytical, test & measuring, data communications, industrial products and systems (divested as on March 31, 2015. Refer note 23)

B. Secondary segment information:

Secondary segmental reporting is based on the geographical location of customer. The geographical segments have been disclosed based on revenues within India (sales to customers in India) and revenues outside India (sales to customer located outside India.) (''in lakhs)

9: DISCLOSURE FOR RELATED PARTY AND INTEREST IN JOINT VENTURES

a) Related Party Disclosure Names of Related parties

Name of the Related parties where control exists irrespective of whether transactions have occurred or not. Subsidiary :

Blue Star Engineering and Electronics Limited (erstwhile Blue Star Electro Mechanical Limited).

Blue Star Design and Engineering Limited

Names of other related parties with whom transactions have taken place during the year Associate

Blue Star Infotech Limited

Joint Ventures

Blue Star Qatar- WLL

Blue Star M & E Engineering (Sdn) Bhd

Key Management Personnel

Mr Suneel M. Advani (upto 31.03.2014)

Mr Satish Jamdar Mr Vir Advani

Mr B Thiagarajan (w.e.f : 13.05.2013)

Relatives of Key Management Personnel

Ms Nargis Advani

Note: As the liabilities for gratuity and leave encashment are provided on an actuarial basis for the Company as a whole, the amounts pertaining to the Directors are not included above.

The Company has given loans and corporate guarantees to subsidiaries and joint ventures in the ordinary course of business to meet the working capital requirements of subsidiaries and joint ventures.

Figures in italics are for previous year

Contingent Liabilities of the jointly controlled entity is disclosed in note 25 to the financial statements.

10: Leases

The Company has entered into operating lease agreements for its office premises, storage locations and residential premises for its employees. All leases are cancellable except one office premises. There are no exceptional/restrictive covenants in the lease agreements. Lease rental expense debited to statement of Profit and Loss is Rs.3,496.73 lakhs (31 March 2014: Rs.3,318.90 lakhs)

11: During previous years, the Company had entered into contracts, in the normal course of business, for services rendered and received for a value of Rs.41.79 lakhs with Private Limited Company in which a Director of the Company is a Director. Payment has been received and paid in accordance with the normal terms. The Company is in the process of filing necessary application for approval from the Central Government under Section 297 of the Companies Act, 1956 for the said transaction.

12: The Company provides share-based payment schemes to its employees. During the year ended 31 March 2015, an employee stock option plan (ESOP) was in existence. The relevant details of the scheme and the grant are as below.:

On 18th January 2013, the board of directors approved the Equity Settled ESOP Scheme 2013 (ESOS 2013) for issue of stock options to the key employees and directors of the Company. The Scheme was also approved by the shareholders of the Company by a special resolution passed by postal ballet dated 7th March, 2013. According to the Scheme 2013, the employees selected by the remuneration committee from time to time will be entitled to options, subject to satisfaction of the prescribed vesting conditions. The contractual life (comprising the vesting period and the exercise period) of options granted is 5 years. The other relevant terms of the grant are as below:

b) Fair Valuation

The Fair Valuation of the options used to compute proforma net profit and earning per share have been done by an independent valuer on the date of grant using Black-Scholes Mertion Formula. The key assumptions and Fair Value are as under

The expected life of the stock is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may also not necessarily be the actual outcome.

The company measures the cost of ESOP using the intrinsic value method. Had the company used the fair value model to determine compensation, its profit after tax and earnings per share as reported would have changed to the amounts indicated below: (Rs.in lakhs)

13: The Company has revised the depreciation on certain assets as per the useful life specified in the Companies Act, 2013 or re-assssed by the Company. Accordingly, carrying amount of Rs.439.83 lakhs in respect of assets whose useful life is exhausted as on April 1, 2014 net of deferred tax of Rs.148.97 lakhs thereon have been adjusted to retained earnings.

14: PREVIOUS YEAR COMPARATIVES

Previous year''s figures have been regrouped where necessary to conform to this year''s classification.


Mar 31, 2014

1. Corporate information

Blue Star Limited ("The Company") is into the business of central air conditioning and commercial refrigeration. The Company is also into distribution and maintenance of imported professional electronics and industrial systems.

2. Basis of preparation

The financial statements have been prepared to comply in all material respects with the Accounting Standard notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956, read with General Circular 8/2014 dated April 4th 2014, issued by the Ministry of Corporate Affairs. The financial statements have been prepared on an accrual basis and under the historical cost convention.

The accounting policies adopted in the preparation of financial statements are consistent with those of the previous year.

All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in Revised Schedule VI to the Companies Act, 1956.

Based on the nature of business and the time between acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current/non-current classification of assets and liabilities.

3: CONTINGENT LIABILITIES (Rs. in lakhs)

2013-14 2012-13

Claims against the Company not acknowledged as debts 67.16 70.76

Sales Tax matters 6,809.45 7,267.40

Excise Duty matters 105.25 105.25

Service Tax matters 1,017.28 672.44

Income Tax matters 2,505.00 1,763.29

Corporate Guarantee given on behalf of Joint Ventures 5,605.03 6,347.39

Corporate Guarantee given on behalf of Subsidiary and others 5,797.50 6,956.76

Future cash outflows in respect of above matters are determinable only on receipt of judgments/decisions pending at various forums/authorities. The management does not expect these claims to succeed and accordingly, no provision for the contingent liability has been recognized in the financial statements.

4 Estimated amount of Contracts remaining to be executed on Capital account and not provided for Rs.1403.22 lakhs (31 March 2013 : Rs.695.66 lakhs).

5 BSDEL is a Joint Venture of Blue Star Limited (The Company) and Synergy Realtors & Services Private Limited (SRSPL). During the year SRSPL (transferee) was amalgamated with BSDEL (transferor) pursuant to the scheme of amalgamation effective from April 1, 2012, approved by the respective honourable High Courts having jurisdiction over the Companies. In terms of the scheme, 180 fully paid up preference shares of Rs.100 each of BSDEL for every 1 fully paid up equity share of Rs.10 each of SRSPL were issued. The Investment of SRSPL in the equity share capital of BSDEL was cancelled. Consequently BSDEL has become a wholly owned subsidiary of the Company in the current year.

6 In accordance with a contract, the Company has made claims for additional costs incurred due to project delays and design changes on a customer in earlier years. Pending approval of the customer an amount of Rs.5600 lakhs (net of provisions) is included under Work in Progress - Projects, and revenue has not been recognised there against. The final certification, handing over process and negotiations with the customer are in progress and management is confident of recovery of these claims.

7 a Project costs and Commission on sales are net of Rs.228.87 lakhs (31 March 2013: Rs.217 lakhs) and Rs.626.4 lakhs (31 March 2013: 312.64 lakhs) respectively, on account of reversal of provision no longer required.

8: DISCLOSURE PURSUANT TO ACCOUNTING STANDARD - 15 "EMPLOYEE BENEFITS" i. Defined Contribution Plans:

Amount of Rs.723.73 lakhs (31 March 2013: Rs.719.11 lakhs) is recognized as an expense and included in "Employee Benefits expense" (refer note 19) in the statement of Profit and Loss.

b) The Company makes annual contribution to Blue Star Employees Gratuity Fund, which is a funded defined benefit plan for qualifying employees. The fund formed by the Company manages the investments of the Gratuity fund. Expected rate of return on investments is determined based on the assessment made by the Company at the beginning of the year on the return expected on its existing portfolio, along with the estimated incremental investments to be made during the year. Yield on portfolio is calculated based on a suitable mark-up over the benchmark Government securities of similar maturities. The Company expects to contribute Rs.170 lakhs to gratuity fund in 2014-15 (31 March 2013: Rs.280 lakhs)

c) The estimates of future salary increases, considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors.

d) The guidance issued by the Accounting Standard Board (ASB) on implementing AS 15, Employee Benefits (revised 2005) states that provident fund set up by employers which require interest shortfall to be met by the employer, should be treated as a defined benefit plan. The actuary has provided a valuation and according thereto, there is no shortfall as at March 31, 2014. The Company''s contribution to the Employee''s Provident fund aggregates to Rs.538.43 lakhs (31 March 2013: Rs.531.20 lakhs).

iii. General Description of significant defined plans:

1. Gratuity Plan

Gratuity is payable to all eligible employees on separation/retirement based on 15 days last drawn salary for each completed years of service after continuous service for five years.

2. Additional Gratuity

Additional Gratuity is payable as per the specific rules of the Company i.e. Rs.5,000 for staff and Rs.10,000 for Managers subject to qualifying service of 15 years.

9: SEGMENT INFORMATION

A. Primary Segment Reporting (by Business Segment)

The Company''s business segments are organised around product lines as under:

a. Electro Mechanical Projects and Packaged Air-conditioning Systems includes Central air-conditioning projects, Electrical Contracting business and Packaged air-conditioning businesses including manufacturing and after sales service.

b. Cooling Products includes cooling appliances, cold storage products, including manufacturing and after sales service.

c. Professional Electronics and Industrial Systems includes trading and services for testing machines, medical, analytical, test & measuring, data communications, industrial products and systems.

10: DISCLOSURE FOR RELATED PARTY AND INTEREST IN JOINT VENTURES

a) Related Party Disclosure

Names of Related parties

Name of the Related parties where control exists irrespective of whether transactions have occurred or not.

Subsidiary :

Blue Star Electro Mechanical Limited

Blue Star Design and Engineering Limited ( w.e.f : 1.04.12 )

Names of other related parties with whom transactions have taken place during the year

Associate

Blue Star Infotech Limited

Joint Ventures

Blue Star Qatar- WLL

Blue Star M & E Engineering (Sdn) Bhd

Key Management Personnel

Mr Suneel M Advani

Mr Satish Jamdar

Mr Vir Advani

Mr B Thiagarajan ( w.e.f : 13.05.13 )

Relatives of Key Management Personnel

Ms Nargis Advani

11: LEASES

The Company has entered into operating lease agreements for its office premises, storage locations and residential premises for its employees. All leases are cancellable. There are no exceptional/restrictive covenants in the lease agreements. Lease rental expense debited to statement of Profit and Loss is Rs.3,318.90 lakhs (31 March 2013: Rs.3,014.76 lakhs)

12 During the year, the Company has entered into a contract, in the normal course of business, for services rendered and received for a value of Rs.12.43 lakhs (31 March 2013 Rs.29.36 lakhs) with four (31 March 2013: two) Private Limited Companies in which a Director of the Company is a Director. Payment has been received and paid in accordance with the normal terms. The Company is in the process of filing necessary application for approval from the Central Government under Section 297 of the Companies Act, 1956 for both the years.

13 The Company has long term investment in Blue Star Electro Mechanical Limited (BSEML), a wholly owned subsidiary. BSEML has incurred losses of Rs.1,328.44 lakhs during the year ended March 31, 2014 and its net worth has fully eroded. Considering it to be a long term strategic investment and having regard to the operating plans, management does not consider diminution in value (other than temporary) as at the year end.

14 The Company was involved in an arbitration with a Customer for unpaid amount and additional claim for extra work carried out. In an earlier year the arbitration was awarded in favour of the Company against which the customer filed an application before the District Court. Subsequent to the year end, the application filed by the customer was dismissed by the District Court and accordingly the Company has recognised an income of Rs.618 lakhs

15: PREVIOUS YEAR COMPARATIVES

Previous year''s figures have been regrouped where necessary to conform to this year''s classification.


Mar 31, 2013

1. Corporate information

Blue Star Limited ("The Company") is into the business of central air conditioning and commercial refrigeration. The Company is also into distribution and maintenance of imported professional electronics and industrial systems.

2. Basis of preparation

The financial statements have been prepared to comply in all material respects with the Accounting Standard notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared on an accrual basis and under the historical cost convention. The accounting policies adopted in the preparation of financial statements are consistent with those of the previous year. All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in Revised Schedule VI to the Companies Act, 1956.

Based on the nature of business and the time between acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current/ non-current classification of assets and liabilities.

3: CONTINGENT LIABILITIES

(Rs. in lakhs)

2012-13 2011-12

Claims against the Company not acknowledged as debts 70.76 71.76

Sales Tax matters 7,267.40 5,353.93

Excise Duty matters 105.25 105.25

Service Tax matters 672.44 483.43

Income Tax matters 1,763.29 2,837.04

Corporate Guarantee given on behalf of Joint Ventures 6,347.39 1,084.25

Corporate Guarantee given on behalf of Subsidiary and others 6,956.76 7,234.49

Future cash outflows in respect of above matters are determinable only on receipt of judgments/decisions pending at various forums/authorities. The management does not expect these claims to succeed and accordingly, no provision for the contingent liability has been recognized in the financial statements.

4 Estimated amount of Contracts remaining to be executed on Capital account and not provided for Rs.695.66 lakhs (31 March 2012 : Rs.616.47 lakhs).

5 a. During the year, the Company has acquired back 390,000 shares of Rs.10/- each equivalent to 20% of paid up capital of Blue Star Design and Engineering Ltd at no cost based on the stipulated conditions in the Shareholders'' Agreement with the JV partner.

5 b. The Company has an outstanding balance of loan to its Joint Venture, Blue Star Design Engineering Limited (BSDEL) amounting to Rs.649 lakhs and interest accrued thereon of Rs.213 lakhs as at March 31, 2013. The loan is repayable on demand and the Company has not called for repayment. BSDEL has filed a scheme of amalgamation with Synergy Realtors & Services Private Limited, with the High Courts having jurisdiction over the Companies and the proposed effective date is April 1, 2012. Subsequent to the approvals by the High Courts, BSDEL would become a wholly owned subsidiary of the Company and would have income from operations, which would be utilized to repay outstanding loan and interest to the Company.

6 During the previous year, the Company had paid/provided Rs.402.47 lakhs as managerial remuneration in excess of the limits prescribed under Schedule XIII of The Companies Act, 1956. Pursuant to the application made by the Company to the Central Government, the Company has received approval for Rs.202.47 lakhs. The Company has taken necessary steps for obtaining further approval for balance Rs.200 lakhs which has been paid during the current financial year. Pending receipt of such approval, the amounts are held in trust by the said Directors.

7 a. Project costs and Commission on sales are net of Rs.217 lakhs (31 March 2012: Rs.213 lakhs) and Rs.312.64 lakhs (31 March 2012: Nil) respectively, on account of reversal of provision no longer required.

8: DISCLOSURE PURSUANT TO ACCOUNTING STANDARD - 15 "EMPLOYEE BENEFITS"

i. Defined Contribution Plans:

Amount of Rs.719.11 lakhs (31 March 2012: Rs.882.06 lakhs) is recognized as an expense and included in "Employee Benefits expense" (refer note 19) in the statement of Profit and Loss.

b) The Company makes annual contribution to Blue Star Employees Gratuity Fund, which is a funded defined benefit plan for qualifying employees. The fund formed by the Company manages the investments of the Gratuity fund. Expected rate of return on investments is determined based on the assessment made by the Company at the beginning of the year on the return expected on its existing portfolio, along with the estimated incremental investments to be made during the year, Yield on portfolio is calculated based on a suitable mark-up over the benchmark Government securities of similar maturities. The Company expects to contribute Rs.280 lakhs to gratuity fund in 2013-14 (31 March 2012: Rs.168 Lakhs)

c) The estimates of future salary increases, considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors.

d) The guidance issued by the Accounting Standard Board (ASB) on implementing AS 15, Employee Benefits (revised 2005) states that provident fund set up by employers which require interest shortfall to be met by the employer, should be treated as a defined benefit plan. The actuary has provided a valuation and according thereto, there is no shortfall as at March 31, 2013. The Company''s contribution to the Employee''s Provident fund aggregates to Rs.531.20 lakhs (31 March 2012: Rs.414.43 lakhs).

9: SEGMENT INFORMATION

A. Primary Segment Reporting (by Business Segment)

The Company''s business segments are organised around product lines as under:

a. Electro Mechanical Projects and Packaged Air-conditioning Systems includes central air-conditioning projects, Electrical Contracting business and Packaged air-conditioning businesses including manufacturing and after sales service.

b. Cooling Products includes cooling appliances, cold storage products, including manufacturing and after sales service.

c. Professional Electronics and Industrial Systems includes trading and services for testing machines, medical, analytical, test & measuring, data communications, industrial products and systems.

10: DISCLOSURE FOR RELATED PARTY AND INTEREST IN JOINT VENTURES

a) Related Party Disclosure Names of Related parties

Name of the Related parties where control exists irrespective of whether transactions have occurred or not. Subsidiary :

Blue Star Electro Mechanical Limited

Names of other related parties with whom transactions have taken place during the year Associate

Blue Star Infotech Limited

Joint Ventures

Blue Star Qatar- WLL

Blue Star M & E Engineering (Sdn) Bhd

Blue Star Design and Engineering Limited

Key Management Personnel

Mr Ashok M Advani Mr Suneel M Advani Mr Satish Jamdar Mr Vir Advani

Relatives of Key Management Personnel

Ms. Nargis Advani

11: LEASES

The Company has entered into operating lease agreements for its office premises, storage locations and residential premises for its employees. All leases are cancellable. There are no exceptional/restrictive covenants in the lease agreements. Lease rental expense debited to statement of Profit and Loss is Rs.3,014.76 lakhs (31 March 2012: Rs.3,043.82 lakhs)

12: During the year, the Company has entered into a contract, in the normal course of business, for sale of goods and services for a value of Rs.29.36 lakhs with two Private Limited Companies in which a Director of the Company is a Director. Payment has been received in accordance with the normal sales terms. The Company is in the process of filing necessary application for approval from the Central Government under Section 297 of the Companies Act, 1956.

13: The Company has long term investment in Blue Star Electro Mechanical Limited (BSEML), a wholly owned subsidiary. BSEML has incurred losses of Rs.1,594.90 lakhs during the year ended March 31, 2013 and its net worth has fully eroded. Considering it to be a long term strategic investment and having regard to the operating plans, management does not consider diminution in value (other than temporary) as at the year end.

14: The classification of current and non current debtors in previous year was done based on project specific operating cycle in case of project business. During the year ICAI issued a FAQ on revised Schedule VI. where it has been clarified that the operating cycle is to be identified for each of its businesses and not based on each of its customers. Accordingly, the Company has revised its operating cycle to twelve months for project business. Further the Company has reclassified previous year''s disclosure for debtors in line with current year''s classification.


Mar 31, 2012

1. Corporate information

Blue Star Limited ("The Company") is into the business of central air conditioning and commercial refrigeration. The Company is also into distribution and maintenance of imported professional electronics and industrial systems.

2. Basis of preparation

The financial statements have been prepared to comply in all material respects with the Accounting Standard notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made and revaluation is carried out.

The accounting policies adopted in the preparation of financial statements are consistent with those of the previous year.

a) There is no movement in the shares outstanding at the beginning and at the end of the reporting period.

b) Terms/rights attached to equity shares

The company has only one class of equity shares having par value of Rs2 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.

During the year ended 31 March, 2012 the amount of per share dividend proposed as distribution to the equity shareholders is Rs1 (31 March, 2011: Rs7)

c) Details of shareholders holding more than 5% shares in the Company

# these shares are held in Trust for the Promoter group who are the beneficial owners.

As per records of the company, including its register of shareholders/ members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.

Provision for warranties

A provision is recognised for standard warranty claims based on turnover during the year and extended warranty on the basis of turnover for preceding two years. The company estimates the future cost of warranty based on historical experience.The estimates of such warranty cost are revised annually.

Loss order

A provision for expected loss on construction contract is recognised when it is probable that the contract cost will exceed the total contract revenue. For all other contracts, loss order provisions are made when the unavoidable costs of meeting the obligation under the contract exceed the currently estimated economic benefits.

Cash credit and Buyers Credit from banks is Secured by hypothecation of stock-in-trade and trade receivables. The cash credit carries average interest @ 10.0% p.a and Buyers' credit carries average interest @ Libor plus 1.25%. Cash credit are repayable on demand and Buyers' Credit are availed for imports payables and are repayable within maximum tenure of 360 days from the date of shipment.

Commercial Papers carry average interest rate @ 9.80% p.a. for the current year. These are repayable within 45 days to 365 days from the date of drawdown.

Foreign Currency Loan carry average interest @ 7% p.a. for the current year. The loan is repayable after one year from the date of its origination.

Indian Rupee loan carry average interest @ 9.75% p.a. The loan are repayable within maximum tenure of 60 days from the date of its origination.

4: CONTINGENT LIABILITIES (Rsin lakhs)

Year Ended March 31 2012 2011

Claims against the Company not acknowledged as debts 71.76 66.44

Sales Tax matters 5,353.93 5,279.88

Excise Duty matters 105.25 80.30

Service Tax matters 483.43 483.43

Income Tax matters 2,837.04 1,684.52

Corporate Guarantee given on behalf of Subsidiary, Associates and others 8,318.74 8,141.43

Future cash outflows in respect of above matters are determinable only on receipt of judgments / decisions pending at various forums / authorities. The management does not expect these claims to succeed and accordingly, no provision for the contingent liability has been recognized in the financial statements.

5 Estimated amount of Contracts remaining to be executed on Capital account and not provided for Rs616.47 lakhs (31 March 2011: Rs1,381.21 lakhs).

6 During the year the Company has further invested a sum of Rs1,952 lakhs (March 31, 2011: Rs9,765 lakhs) in the share capital of its wholly owned subsidiary Blue Star Electro Mechanical Ltd (BSEML), for acquiring further 3,20,000 (March 31, 201 1:16,50,000) equity shares of Rs10/- each.

7 Employee benefit expenses (Note 19) include Rs594.47 lakhs paid/ provided during the year towards Director's remuneration of which Rs402.46 lakhs in excess of permissible remuneration determined under Schedule XIII of The Companies Act, 1956. The Company is seeking approval of the Central Government and the shareholders for the excess managerial remuneration paid to / provided for Directors' remuneration. Pending receipt of such approval, the amount of Rs202.47 lakhs paid to the Directors in excess of the limits prescribed under Schedule XIII of the Companies Act, 1956 is held in trust by the said Directors.

8 a. Project costs and Legal & Professional fees are net of Rs213 lakhs (31 March 2011: Rs1,128.48 lakhs) and Nil (31 March 2011:

Rs81.33 lakhs) respectively, on account of reversal of provision no longer required.

9: DISCLOSURE PURSUANT TO ACCOUNTING STANDARD - 15 "EMPLOYEE BENEFITS" i. Defined Contribution Plans:

Amount of Rs882.06 lakhs (31 March 2011: Rs867.36 lakhs) is recognized as an expense and included in "Employee Benefits expense" (see note 19) in the Profit and Loss account.

b) The Company makes annual contribution to Blue Star Employees Gratuity Fund, which is a funded defined benefit plan for qualifying employees. The fund formed by the Company manages the investments of the Gratuity fund. Expected rate of return on investments is determined based on the assessment made by the Company at the beginning of the year on the return expected on its existing portfolio, along with the estimated incremental investments to be made during the year, Yield on portfolio is calculated based on a suitable mark-up over the benchmark Government securities of similar maturities. The Company expects to contribute Rs168 lakhs to gratuity fund in 2012-13 (31 March 2011: Rs268 lakhs).

c) The estimates of future salary increases, considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors.

d) The guidance issued by the Accounting Standard Board (ASB) on implementing AS 15, Employee Benefits (revised 2005) states that provident fund set up by employers which require interest shortfall to be met by the employer, should be treated as a defined benefit plan. The Actuary Society of India has issued the final guidance for measurement of provident fund liabilities during the quarter ended December 31, 2011. The actuary has provided a valuation and according thereto, there is no shortfall as at March 31, 2012. The Company's contribution to the Employee's Provident fund aggregates to Rs414.43 lakhs (31 March 2011: Rs369.72 lakhs).

iii. General Description of significant defined plans:

1. Gratuity Plan

Gratuity is payable to all eligible employees on separation/retirement based on 15 days last drawn salary for each completed years of service after continuous service for five years.

2 Additional Gratuity

Additional Gratuity is payable as per the specific rules of the Company i.e. Rs5,000 for staff and Rs10,000 for Managers subject to qualifying service of 15 years.

10: SEGMENT INFORMATION

A. Primary Segment Reporting (by Business Segment)

The Company's business segments are organised around product lines as under:

a. Electro Mechanical Projects and Packaged Air-conditioning Systems includes central air-conditioning projects, Electrical Contracting business and Packaged air-conditioning businesses including manufacturing and after sales service.

b. Cooling Products includes cooling appliances, cold storage products, including manufacturing and after sales service.

c. Professional Electronics and Industrial Systems includes trading and services for testing machines, medical, analytical, test & measuring, data communications, industrial products and systems.

11: DISCLOSURE FOR RELATED PARTY AND INTEREST IN JOINT VENTURES

a) Related Party Disclosure Names of Related parties

Name of the Related parties where control exists irrespective of whether transactions have occurred or not. Subsidiary :

Blue Star Electro Mechanical Limited

Names of other related parties with whom transactions have taken place during the year Associate

Blue Star Infotech Limited

Joint Ventures

Blue Star Qatar- WLL

Blue Star M & E Engineering (Sdn) Bhd

Blue Star Design and Engineering Limited

Key Management Personnel

Mr Ashok M Advani

Mr Suneel M Advani

Mr Satish Jamdar

Mr Vir Advani (w.e.f. 01.07.2010)

Relatives of Key Management Personnel

Ms. Nargis Advani

Mr. Vir Advani (Upto 30.06.2010)

12: LEASES

The Company has entered into operating lease agreements for its office premises, storage locations and residential premises for its employees. All leases are cancellable. There are no exceptional / restrictive covenants in the lease agreements. Lease rental expense debited to Profit and Loss Account is Rs3,007.29 lakhs (31 March 2011: Rs2,373.10 lakhs)

13: PREVIOUS YEAR COMPARATIVES

Previous year's figures have been regrouped where necessary to conform to this year's classification.


Mar 31, 2010

I. Nature of Operations

Blue Star Limited (The Company") [s Indias leading central air conditioning and commercial refrigeration company, fulfilling the cooling requirements of large number of corporate and commercial customers. Another significant area of business interest for the Company is distribution and maintenance of imported professional electronics and Industrial systems.

2.Retirement and other Employee Benefits

a. Defined Contribution Plan

The Companys liability towards Employees Provident Fund and Superannuation scheme administered through theTrusts maintained by the Company, are considered as Defined Contribution Pfans.The Companys contributions paid/payable towards these defined contribution plans are recognised as expense In the Profit and Loss Account during the period in which the employee renders the related service.There are no other obligations other than the contributions payable to the Trusts.

b Defined Benefit Plan

In respect of certain employees covered by the Exempted Provident fund ,the contribution towards shortfall In interest rate payable as per statue and the earnings of the Provident Fund Trust is considered as Defined Benefit Plans,

Companys liabilities towards gratuity and leave encashment benefits are considered as Defined Benefit Plans, The p/esent value of the obligations towards Gratuity, leave encashment, sick leave and additional gratuity 3T& determined based on actuarial valuation using the projected unit credit method.The obligation is measured at the present value of estimated future cash flows using a discount rate that is determined by reference to market yields on Government securities at the balance Sheet date. Actuarial gains/losses are taken to profit and loss account and are not deferred. c. Voluntary Retirement Scheme

Payments made under the Voluntary Retirement Scheme are charged to the Profit and loss Account in the same year.

3. Excise Duty

Excise duty on direct sales by the manufacturing units is reduced from the sales, Excise Duty liability on closing stock of finished goods lying at the manufacturing units is accounted based on the estimated duty payable as at the close of the year.

4. Taxes on Income

Tax. expense comprises of current deferred and fringe benefit tax. Current income tax and fringe benefit tax Is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in indfa. Deferred Income taxes reflects the Impact of current year timing differences between taxable Income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date, Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by the same governing taxation laws. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

The carrying amount of deferred tax assets & liabilities ^k reviewed at each balance sheet date.

5. Segment Reporting Policies

a. identification of segments:

The Companys operating businesses a re organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets,

b. Allocation of common costs/ assets & liabilities :

Common allocable costs/assets and liabilites are consistently allocated amongst the segments on appropriate basis.

c. Unallocated items:

Includes general corporate income and expense items which are not allocated to any business segment.

d. Segment Policies :

The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the company as a whole.

6, Earning per share

Basic & Diluted earnings per share are calculated by dividing the net profit or loss for The period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

7, Provisions

A provision is recognised when the Company has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are determined based on best estimate required to settle the obligation at the balance sheet date.These are reviewed at each balance sheet date and adjusted to reflect the current best estimates,

8, Cash and Cash equivalents

Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less,

9. The Company had acquired the electrical contracting business of Naseer Electrical* Private Limited (NEPL) under a Business Purchase Agreement on a slump sate basis for Rs, 4,309.77 lakhs (including Rs. 500 lakhs held In Escrow account till the conditions stipulated in the said agreement are fulfil led J with effect from January 24,2008, Consequent upon final settlement, a sum of Rs. 221 .S3 lakhs was received back from the amount held In the Escrow account and the same has been credited to the General Reserve of the Company.

Further, In accordance with the Scheme of Arrangement approved by the shareholders and the Horible High Court at Bombay In respect of the electrical contracting business acquired from NEPL the fees and bonus of Rs. 525.96 lakhs {Previous Year Rs.3 70 lakhs) paid to the consultants in terms of the Business Purchase Agreement and its Annexure thereof, entered into with NEPL for the said acquisition has been adjusted against the General Reserve of the Company.

In the previous year a sum of Rs.335.09 lakhs (net) was adjusted against General Reserve towards earn out bonus of Rs 270 lakhs and retalnershlp fees of Rs 100 lakhs paid as per the business purchase agreement with NEPL net of a write back of Rs34.91 lakhs eariier forming part of the goodwill,

10. Exceptional Item includes profit of Rs.1,396.49 lakhs on sale of 117,600 shares In Rolastar Private Limited and 61,440 shares in Ravistar India Private Limited. The Company has further commitment to sell the balance Investment of 15350 shares in Ravistar Private Limited as part of Share Purchase agreement not later than June 30r 2010. On April 23,2010, the Company has received the consideration of Rs,48 takhs stipulated in the agreement and transferred the balance shares In favour of the purchaser.

11. The Company has given an unsecured loan to its associate company Blue Star Design and Engineering Limited (BSDEU. Considering possible non-recovery, as a matter of prudence, a provision of fls.235 takhs has been made In respect of the amounts receivable from B5DEL

12. As per requirement of Section 22 of Micro, Small & Medium Enterprises Development Act 2006 {the ActT following information is disclosed:

13. a, Gratuity and other post-employment defined benefit plans:

The Company makes annual contribution to Blue Star Employees Gratuity Fund, which Is a funded defined benefit plan for qualifying employees. The scheme provides for payment of gratuity to employees on separation/ retirement based on 15 days last drawn salary for each completed years of service after continuous service for five years.

The Company provides certain additional employment benefits to employees such as leave encashment, additional gratuity and sick leave. These benefits are unfunded.

b. Defined Contribution plan:

An amount of Rs.l,065.54 lakhs (Previous Year Rs. 1,022.95 lakhs) is recognised as an expense and included in Schedule J - Contribution to Provident fund and Superannuation In the Profit and Loss Account.

14, Segment Information:

A. Primary Segment Reporting [by Business Segment)

Tire Companys business segments are organised around product lines as under:

a. Electro Mechanical Projects and Packaged Alr-condltloning Systems Includes central alr-condltlonlng projects and packaged alr-condttionfng businesses including manufacturing and after sates service and also includes the new!/ acquired Electrical Contracting business.

b. Cooiing Products includes cooling appliances, cofd storage products, including manufacturing and after sales service.

c. Professional Electronics and Industrial Systems Includes trading and services for testing machines, medical, analytical, test & measuring, data communications, industrial products and systems,

B. Secondary segment information:

Secondary segmental reporting Is based on the geographical location of customers. The geographical segments have been disclosed based on revenues within India (sales to customers In India) and revenues outside India (sales to customer located outside- India J

15. Leases:

The Company has entered [nto operating tease agreements for Its office premises, storage locations and residential premises for Its employees. The future lease rental payments are determined on the basis of monthly lease payment terms as per the agreements. At the expiry of non cancellable lease period the option of renewal rest with the Company. Lease rental expense debited to Profit and Loss Account Is Rs. 1,711.86 lakhs (Previous year Rs. 1,769.18 lakhs).

16. Previous Year Comparatives

The figures of previous year were audited by a firm of Chartered accountants other than 5 R Batlibol & Associates. Previous years figures have been regrouped where necessary to conform to this years classification.

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