Home  »  Company  »  Carborundum Uni.  »  Quotes  »  Notes to Account
Enter the first few characters of Company and click 'Go'

Notes to Accounts of Carborundum Universal Ltd.

Mar 31, 2017

(b) Includes ''595.62 million (Previous years as at 31.03.2016: ''558.11 million and as at 01.04.2015: ''531.37 million) being cost of building on leasehold land.

(c) Includes Research & Development capital expenditure of ''11.45 million (Previous year 15-16: ''14.96 million) - Refer Note: 42 on Research & Development expenditure.

(d) Assets pledged as security

Immovable properties of the Company carry pari-passu charge in favour of the consortium of bankers, as security for banking facilities availed.

The vehicles purchased through finance lease arrangement are hypothecated to the less or.

(e) Capitalized borrowing cost

Borrowing costs capitalized on property, plant and equipment during the year 2016-17 - ''Nil (Previous year 2015-16: ''Nil).

(f) Contractual obligations

Refer Note: 31B for disclosure of Contractual commitments for the acquisition of property, plant and equipment.

a The method of valuation of inventories are stated in Note: 3.17.

b The cost of inventories recognized as an expense (consumption) during the year 2016-17 was ''6581.26 million (previous year 2015-16: ''6134.97 million) and such expense includes ''7.22 million towards reversal of write-down of inventory to net realizable value (the corresponding amount for 2015-16, was an expense of ''26.97 million). The write-down of inventory to net realizable value made in earlier years were reversed in current year as a result of increased realizations in certain markets/segments. c All the above inventories are expected to be recovered within twelve months.

a Trade receivables are generally due between 30 to 60 days. The Company’s term includes charging of interest for delayed payment beyond agreed credit days. However, the Company charges interest after considering the historical trend, business prospects, reason for delay, market conditions etc.

b Credit risk is managed at the operational segmental level. The credit limit and credit period are fixed for each customer after evaluating the financial position, past performance, business opportunities, credit references etc. The credit limit and the credit period are reviewed regularly at periodical intervals.

c Concentration risk considers significant exposures relating to industry, counterparty, geography, currency etc. The concentration of credit risk is not significant as the customer base is large and diversified.

d The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on provision matrix which takes into account the historical credit loss experience adjusted for forward looking information.

e Some trade receivable may be past due over 365 days without being impaired considering the certainty of realisation.

b) Terms / Rights attached to Equity Shares

The Company has only one class of Equity shares having a par value of ''1/- per share. Each holder of equity shares is entitled to one vote per share. Repayment of capital will be in proportion to the number of equity shares held.

c) Dividend details

An interim dividend of ''1/- per share was declared at the meeting of the Board of Directors held on February 04, 2017 and the same has been paid (previous year an interim dividend of ''1/- per share & ''0.50 per share were declared at the meetings of the Board of Directors held on February 5, 2016 & March 11, 2016 respectively and paid).

Final dividend of ''0.75 per share is proposed for the year ended March 31, 2017. The dividends proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, upon which the liability will be recorded in the books.

During the year 2000-01, the Company bought back 2,768,000 shares at the then face value of ''10 each at the price of ''115 per share from the shareholders, pursuant to the offer of buy back of shares. A sum equal to nominal value of shares so bought back was transferred to capital redemption reserve account as per Companies Act, 1956. This reserve can be used in paying up unissued shares as fully paid bonus shares to the shareholders of the Company.

1. Segment information

Carborundum Universal Limited provides solutions for following industrial manufacturing needs by developing, manufacturing and marketing products using the properties of materials known as electro minerals:

- Surface engineering (material removal, cutting, polishing ) known as Abrasives. This segment comprise of Bonded, Coated, Processed cloth, Polymers, Power tools and Coolants.

- Technical ceramics and super refractory solutions to address wear protection, corrosion resistance, electrical resistance, heat protection and ballistic protection known as Ceramics.

- Electro minerals for surface engineering, refractoriness, energy and environment. It includes fused alumina, silicon carbide, zirconia, specialty minerals and captive power generation from hydel power plant

The Business Group Management Committee headed by Managing Director (CODM) consisting of Chief financial officer, Leaders of Strategic Business Units and Human resources have identified the above three reportable business segments. It reviews and monitors the operating results of the business segments for the purpose of making decisions about resource allocation and performance assessment using profit or loss and return on capital employed.

Segment assets and liabilities:

For the purposes of monitoring segment performance and allocating resources between segments:

1. All assets other than investments, loans, current and deferred tax assets, unallowable current and non-current assets, are allocated to reportable segments.

2. All liabilities other than borrowings, current and deferred tax liabilities, and unallowable current and non-current liabilities, are allocated to reportable segments.

b. Defined benefit plans:

The Company sponsors funded defined benefit plans for employees. Under the plans, the employees are entitled to postretirement benefits amounting to 57.69% of last drawn salary for each year of completed service until the retirement age of 58. The defined benefit plans are administered by separate funds, independent of the Company..

These plans typically expose the Company to actuarial risks such as: Investment, Interest rate, longevity and salary risk:

i) Investment risk: The present value of the defined benefit obligation is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds.

ii) Interest risk: A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan’s debt investments.

iii) Longevity risk: The present value of the defined benefit obligation is calculated by reference to the best estimate of the mortality of plan participants during their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

iv) Salary escalation risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

No other post-retirement benefits are provided to the employees.

The actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out as at March 31, 2017 by a certified actuary of the Institute of Actuaries of India. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.

In the above table, positive figures indicate increase in the liability and negative figures indicate decrease in the liability.

The weighted average duration of the benefit obligation as at March 31, 2017 is 15 years (as at March 31, 2016: 15 years).

The Company expects to make a contribution of ''46.42 million (as at March 31, 2016: ''22.03 million) to the defined benefit plans during the next financial year.

2. Financial Instruments

(i) Capital management

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

The Company’s objective when managing capital are to:

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

- Maintain an optimal capital structure to reduce the weighted average cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to shareholders, return capital to shareholders, issue new shares, or sell non-core assets to reduce the debt.

Loan covenants

No covenants are applicable as of March 31, 2017, since the term loans outstanding were ''NIL.

a. Credit risk:

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

a (i) Trade receivables

Customer credit risk is managed by each business unit under the guidance of the credit policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on financial position, past performance, business/ economic conditions, market reputation, expected business etc. Based on this evaluation, credit limit and credit terms are decided. Exposure on customer receivables are regularly monitored and managed through credit lock and release. For export customers, credit insurance is generally taken.

The impairment is based on expected credit loss model considering the historical data and financial position of individual customer at each reporting period. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note: 10. The Company does not hold any collateral as security.

The Company has low concentration of risk with respect to trade receivables, as its customers are widely spread and belong to diversified industries and operate in largely independent markets.

a (ii) Financial Instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made for short-term in liquid funds of rated mutual funds and deposits with banks. The Investment limits are set out per Mutual fund and the value of total fixed deposit in Banks to minimize the concentration risk. Investments are reviewed by the Board of Directors on a quarterly basis.

The Company has no exposure to credit risk relating to these cash deposits as at: 31st March 2017, 31st March 2016 and 31st March 2015. The Corporate guarantees given by the Company to bankers on behalf of its subsidiaries are duly approved by the Board of Directors and are reviewed on a quarterly basis. The total exposure to corporate guarantees is limited to figures reported in Note: 31A.

b. Market risk

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

Market risk exposures are measured using sensitivity analysis. There has been no change in the measurement and management of the Company’s exposure to market risks .

b (i) Foreign currency risk management

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. Foreign exchange rate exposures are managed within policy parameters approved by Board of Directors. The Company manages its foreign currency risk by hedging transactions that are expected to occur within a maximum of 12 month period of forecasted receipts and payments. When a derivative is entered into for the purpose of hedging, the Company negotiates the terms of those derivatives to match with the terms of the hedged exposure. The Company hedges around 50% of the net material exposure by currency. Exposures relating to capital expenditure beyond a threshold are hedged as per Company policy at the time of commitment.

b (ii) Interest rate risk Management

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has been availing the borrowings on a fixed and variable rate of interest. These borrowings are carried at amortized cost. The borrowings on a fixed rate of interest basis are not subject to the interest rate risk as defined in Ind AS 107, since neither the carrying amount not future cash flows will fluctuate because of change in market interest rates. The borrowings on a variable rate of interest are subject to interest rate risk as defined in Ind AS 107. The Company at the end of March 2017, does not carry any loans with variable interest.

b (iii) Price risks

The Company is exposed to equity price risks arising from equity investments. Certain of the Company''s equity investments are held for strategic rather than trading purposes. The Company also holds certain other equity investments for trading purposes.

The Remuneration to Key Management Personnel is determined by the Nomination and Remuneration Committee having regard to the performance of individual and market trends.

3. Employee Stock Option Plan (ESOP)

A ESOP Scheme 2007

a. Pursuant to the approval accorded by shareholders at their Annual General Meeting held on 27th July 2007, the Nomination and Remuneration Committee of the Company formulated ‘Carborundum Universal Limited Employee Stock Option Scheme 2007’ (ESOP Scheme 2007).

b. Under the Scheme, Options not exceeding 4,667,700 were reserved to be issued to the eligible employees, with each Option conferring a right upon the employee to apply for one equity share. The Options granted under the Scheme would vest as per the following schedule (except Grant V B):

20% on expiry of one year from the date of grant;

20% on expiry of two years from the date of grant;

30% on expiry of three years from the date of grant; and 30% on expiry of four years from the date of grant.

The Options granted to the employees would be capable of being exercised within a period of three years from the date of the first vesting and six years from the date of the second, third and fourth vesting.

In respect of Grant V B, 40 per cent on expiry of one year from the date of grant and 30 per cent each on expiry of 2 and 3 years from the date of grant. The Options granted to the employees (Grant V B) can be exercised within a period of three years from the date of the vesting in respect of 50% of the first tranche and six years for the balance 50% of the first tranche and the subsequent tranches from the respective date of vesting.

c. The exercise price of the option is equal to the latest available closing market price of the shares on the stock exchange where there is highest trading volume as on the date prior to the date of the Nomination and Remuneration Committee resolution approving the grant.

d. The vesting of Options is linked to continued association with the Company and the employee achieving performance rating parameters.

e. Contractual Life The ESOP 2007 Scheme was instituted with the approval of the shareholders on 27th July 2007 and the first grant was made on 29th September 2007.

No further grants is proposed to be made under the ESOP Scheme 2007. However, Options granted under the same which are pending to be exercised will continue to be administered by the Company.

Assumptions

Stock Price: Closing price on National Stock Exchange of India Limited as on the date prior to the date of the Nomination and Remuneration Committee approving the grant has been considered.

Volatility: The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to public available information.

Risk-free rate of return: The risk-free interest rate being considered for the calculation is the interest rate applicable for a maturity equal to the expected life of the options based on the zero-coupon yield curve for Government Securities.

Exercise Price: Exercise Price of each specific grant has been considered.

Time to Maturity: Time to Maturity / Expected Life of options is the period for which the Company expects the Options to be live. Expected divided yield: Expected dividend yield has been calculated as an average of dividend yields for five financial years preceding the date of the grant

e. The Company has taken certain premises under operating leases cancellable at mutual option. Hence no disclosure in this regard is required.

4 Dividend Tax on the Interim Dividend has been paid after availing the credit amounting to ''22.65 million (Previous year -''28.89 million) in respect of the tax paid on the dividends received from three domestic subsidiaries and an overseas subsidiary. Dividend tax payable on the proposed final dividend is eligible for credit amounting to ''14.05 million (Previous year - NIL) available for set off in respect of dividend tax payable on dividends to be distributed by two domestic subsidiaries and an overseas subsidiary based on provision under sub section (1A) of Section 115O of the Income tax Act.

5. Transition to Ind AS

These financial statements, for the year ended 31 March 2017, are the first financial statements the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2016, the Company prepared its financial statements in accordance with accounting standards notified under Section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).

Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31 March 2017, together with the comparative period data as at and for the year ended 31 March 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 1 April 2015, the Company’s date of transition to Ind AS. An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s financial position, financial performance and cash flows is set out below:

(i) Transition election

(ii) Reconciliation of Other equity as previously reported under previous GAAP to Ind AS

(iii) Reconciliation of Profits as previously reported under previous GAAP to Ind AS

(iv) Reconciliation of Balance sheet as previously reported under previous GAAP to Ind AS

(v) Reconciliation of Statement of Profit and Loss account as previously reported under previous GAAP to Ind AS

(vi) Adjustments to the Statement of Cash Flows

I. Deemed Cost for property, plant and equipment, investment property, and intangible assets:

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognized in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets.

Accordingly, the Company has elected to measure all of its property, plant & equipment and intangible assets at their previous GAAP carrying value.

II. Share-based payment transactions:

A first-time adopter is encouraged, but not required, to apply Ind AS 102 Share-based Payment to equity instruments that were granted on or before the date of transition to Ind AS. However, if a first-time adopter elects to apply Ind AS 102 to such equity instruments, it may do so only if the entity has disclosed publicly the fair value of those equity instruments determined at the measurement date as defined in Ind AS 102.

Accordingly, the Company has used this option and not applied Ind AS 102 share based payment that have vested before Ind AS transition date. Refer Note: 37(h) for shares vested before transition date.

III. Investments in subsidiaries, joint controlled entities and associates in separate financial statements:

According to Ind AS 27, when an entity prepares separate financial statements, it is required to account for its investments in subsidiaries, joint ventures and associates either:

(a) at cost; or (b) in accordance with Ind AS 109.

Under the transitional provision set out in Ind AS 101, the first-time adopter can measure such an investment at cost in accordance with Ind AS 27, it shall measure that investment at one of the following amounts in its separate opening Ind AS Balance Sheet:

(a) cost determined in accordance with Ind AS 27; or

(b) deemed cost. The deemed cost of such an investment shall be its:

(i) fair value at the entity’s date of transition to Ind AS in its separate financial statements; or

(ii) previous GAAP carrying amount at that date.

A first-time adopter may choose either (i) or (ii) above to measure its investment in each subsidiary, joint venture or associate that it elects to measure using a deemed cost.

The Company has elected previous GAAP carrying amount as cost for all subsidiaries, joint ventures and associate.

IV Designation of previously recognized financial instruments:

An entity may designate an investment in an equity instrument as at fair value through other comprehensive income in accordance with Ind AS 109 on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

As per Ind AS 109, an entity can make an irrevocable election to present in Other Comprehensive Income the subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.

In accordance with Ind AS transition provision, the Company has designated the equity investment in Coromandel Engineering Limited and Murugappa Management Services Limited as fair value through Other comprehensive income.

V. Business combinations:

In accordance with Ind AS transitional provisions, the Company has elected to apply Ind AS relating to business combinations prospectively from April 01, 2015. As such, previous GAAP balances relating to business combinations entered into before that date, have been carried forward without adjustment.

VI. Fair value measurement of financial assets or financial liabilities at initial recognition:

In accordance with Ind AS transitional provisions, the Company opted to apply the provisions of day one gain or loss provisions retrospectively on transactions occurring on or after the date of transition to Ind AS.

VII. Leases:

Appendix C to Ind AS 17 requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. Ind AS 101 provides an option to make this assessment on the basis of facts and circumstances existing at the date of transition to Ind AS, except where the effect is expected to be not material.

The Company has elected to apply this exemption for such contracts/arrangements.

I. Estimates:

An entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP

Ind AS estimates as at 1 April 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:

- Investment in equity instruments carried at FVOCI;

- Investment in equity instruments carried at FVPL;

- Investment in debt instruments carried at FVPL; and

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

II. De-recognition of financial assets and liabilities:

Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirements in Ind AS 109 retrospectively from a date of the entity’s choosing, provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognized as a result of past transactions was obtained at the time of initially accounting for those transactions.

The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.

III. Classification and measurement of financial assets:

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

IV. Hedge accounting:

Hedge accounting can only be applied prospectively from the transition date, to the transactions that satisfy the hedge accounting criteria in Ind AS 109, at that date. Hedging relationships cannot be designated retrospectively, and the supporting documentation cannot be created retrospectively. As a result, only hedging relationships that satisfied the hedge accounting criteria as of 1 April 2015 are reflected as hedges in the Company’s results under Ind AS.

The Company had designated various hedging relationships as cash flow hedges under the previous GAAP On date of transition to Ind AS, the entity had assessed that all the designated hedging relationship qualifies for hedge accounting as per Ind AS 109. Consequently the Company continues to apply hedge accounting on and after the date of transition to Ind AS.

Notes:

i. Under Ind AS, dividends payable and the related corporate dividend tax are recorded as a liability in the year in which these are declared and approved by the shareholders at the general meeting. Under previous Indian GAAP dividends payable are recorded as a provision in the year to which they relate.

ii. Under previous GAAP long term investments were measured at cost less diminution in value which is other than temporary. Under IndAS, these financial assets have been classified as FVTOCI and FVTPL. On the date of transition to Ind AS, these financial assets have been measured at their fair value which is higher than cost as per previous GAAP resulting in an increase in the carrying amount of ''79.01 million as at April 01, 2015. Increase on fair value as compared to March 31, 2016 previous GAAP amounts to ''114.21 million.

During FY 15-16, effect on fair value increase on investment as of March 31, 2016 from April 01, 2015 have been recognized as below:

(a) Investment designated under Profit & loss: Through profit and loss to equity - ''0.21 million.

(b) Investment designated under OCI: Through OCI to equity - ''34.99 million.

iii. Under Ind AS, deferred tax is calculated on hedging reserve. Under previous Indian GAAP deferred tax was not created on hedging reserve.

iv. Under Ind AS the actuarial gains and losses on post retirement defined employee benefits are recognized in other comprehensive income. Under previous Indian GAAP such actuarial gains and losses were recognized in the statement of profit and loss.

v. Under Ind AS, ESOPs are to be measured at grant date fair value of the equity instruments issued. Under previous Indian GAAP such ESOPs were measured at the grant date intrinsic value of the equity instruments issued.

vi. Under Ind AS, change in fair value of derivatives designated in cash flow hedge to the extent they are effective to be presented in other comprehensive income. Under previous Indian GAAP changes were reflected in Hedging reserve.

vii. As per eligibility criterion under IndAS on Finance lease, written down value on component of Leasehold land has been reclassified to other non-current asset and current asset. Amortization component related to leasehold have been reclassified to “Other expenses”.

viii. Capital work-in-progress relating to Intangible portion classified as Intangible under development.

ix. Interest accrued on borrowing classified under other financial liabilities have been added to respective related borrowings.

x. Under the previous GAAP excise duty on sale of goods was reduced from sales to present the revenue from operations. Whereas, under Ind AS, this excise duty is included in the revenue from the operations and corresponding expenses is included as part of total expenses. The change does not affect total equity as at April 01, 2015 and March 31, 2016, profit before tax or total profit for the year ended March 31, 2016.

xi. Prompt payment discount presented under Other expenses have been netted off against sale of goods. This has no impact on equity and profit.

6. Events after the reporting period

No significant event is to be reported between the closing date and that of the meeting of Board of Directors.

7. Approval of financial statements

The financial statements were reviewed and recommended by the Audit Committee and has been approved by the Board of Directors in their meeting held on May 9, 2017.


Mar 31, 2015

1 Corporate Information

Carborundum Universal Limited (CUMI) was incorporated as a Public Limited Company in 1954 and the shares of the Company are listed in National and Bombay Stock Exchanges in India. CUMI manufactures and sells mainly Abrasives, Ceramics (Industrial Ceramics, Refractories) and Electrominerals.

2. b) Terms / Rights attached to Equity Shares

The Company has only one class of Equity shares having a par value of Rs. 1/- per share.

Each holder of equity shares is entitled to one vote per share.

For the year ended March 31,2015, Final dividend of Rs. 0.50 per share has been proposed by the Board of Directors (previous year Rs. 0.50 per share). An interim dividend of Rs. 0.75 per share was declared at the meeting of the Board of Directors held on January 29, 2015 and the same has been paid (previous year Rs. 0.75 per share).

The dividends proposed by the Board of Directors is subject to approval of the shareholders in the Annual General Meeting. Repayment of capital will be in proportion to the number of equity shares held.

Rs. million

Particulars As at As at 31.03.2015 31.03.2014

3. Contingent Liabilities and commitments:

Contingent Liabilities

a. No provision is considered necessary for disputed income tax, sales tax,service tax, excise duty and customs duty demands which are under various stages of appeal proceedings as given below :

i. Income Tax Act,1961 127.15 127.15

ii.Central Sales Tax 11.14 9.30 Act,1956 & Local Sales Tax laws of various states

iii. Central Excise 5.65 6.20 Act,1944

iv. Service Tax, 1994 3.20 3.00

b. Outstanding letters 3224.66 4431.81 of comfort / guarantee given on behalf of subsidiaries

c. Outstanding 90.06 100.83 letters of credit

d. Outstanding 7.17 0.88 bills discounted

e. Claims against the company not acknowledged as debts

i. Urban Land 4.20 3.09 Tax ii. Stamp duty 1.90 1.90

iii. Claim filed by ship liner towards 14.00 14.00 damages

iv. Claim filed before 1.00 1.00 Consumer Dispute Redressal Forum

v. Mining Royalty 42.80 42.80

63.90 62.79

f. Employees demands pending before Labour Courts - quantum not ascertainable at present In respect of the above demands disputed by the company, appeals filed are pending before respective appellate authorities. Outflows, if any, arising out of these claims would depend on the outcome of the decision of the appellate authorities and the company's rights for future appeals. No reimbursements are expected.

Commitments:

Estimated amount of contracts remaining to be executed and not provided for:

Towards capital account 76.57 90.20

4. a. Pursuant to the approval accorded by shareholders at their Annual General Meeting held on 27th July 2007, the Compensation and Nomination Committee of the Company formulated 'Carborundum Universal Limited Employee Stock Option Scheme 2007 (ESOP 2007 or the Scheme).

b. Under the Scheme, options not exceeding 4667700 have been reserved to be issued to the eligible employees, with each option conferring a right upon the employee to apply for one equity share. The options granted under the Scheme would vest as per the following schedule (except Grant V B):

20% on expiry of one year from the date of grant;

20% on expiry of two years from the date of grant;

30% on expiry of three years from the date of grant; and

30% on expiry of four years from the date of grant.

The options granted to the employees would be capable of being exercised within a period of three years from the date of the first vesting and six years from the date of the second,third and fourth vesting.

In respect of Grant V B, the above percentages should be read as : 40%, 30% and 30%.

c. The exercise price of the option is equal to the latest available closing market price of the shares on the stock exchange where there is highest trading volume as on the date prior to the date of the Compensation and Nomination Committee (curently designated as Nomination and Remuneration Committee) resolution approving the grant.

5. Related Party Disclosures a List of Related Parties

Related party relationships are as identified by the management and relied upon by the auditors.

I) Parties where control exists - Subsidiaries Direct Holding :

Net Access India Ltd [Net Access]

Southern Energy Development Corporation [Sedco] Ltd

Sterling Abrasives Ltd [Sterling]

CUMI (Australia) Pty Ltd [CAPL]

Cellaris Refractories India Limited [CRIL]

CUMI International Limited [CIL]

Holding through Subsidiary:

Volzhsky Abrasives Works [VAW]

Foskor Zirconia (Pty) Ltd [Foskor]

CUMI America Inc [CAI]

CUMI Middleeast FZE [CME]

CUMI Canada Inc [CCI]

CUMI Abrasives & Ceramics Company Limited [CACCL]

Thukela Refractories Isithebe Pty Limited [TRIL]

CUMI Europe s.r.o [CE]

II) Other related parties with whom transactions have taken place during the year Joint Ventures

Murugappa Morgan Thermal Ceramics Ltd [MMTCL]

Ciria India Ltd [Ciria]

Wendt India Ltd [Wendt]

Key Management Personnel

Mr. K Srinivasan, Managing Director [MD]

6. Provision for Dividend Tax has been made considering the credit amounting to Rs. 3.77 million (Previous year - Rs. 2.23 million) available for set off in respect of dividend tax payable on dividends to be distributed by two subsidiary companies, based on provisions under subsection (1A) of Section 115 O of the Income Tax Act. Dividend Tax on the Interim Dividend has been paid after availing the credit amounting to Rs. 26.83 million (Previous year - Rs. 2.30 million) in respect of the tax paid on the dividends received from an overseas subsidiary. Dividend tax paid on the final dividend approved during last AGM amounting to Rs. 8.91 million (previous year Rs. 12.35 million) is after considering an amount of Rs. 4.83 million (previous year Rs. 7.74 million) relating to the dividends received from an overseas subsidiary and Rs. 2.23 million (previous year Rs. 3.81 million) relating to dividends received from two (previous year three) domestic subsidiaries.

7. Disclosures in respect of Derivatives

A. The Company has entered into forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecast transactions. The company designates them as effective cash flow hedges. The company does not use derivative financial instruments for speculative purposes.

The Company has adopted the measurement principles as laid down in the AS - 30 - Financial Instruments - Recognition and Measurement with respect to above mentioned effective cash flow hedges.

Pursuant to the application of the said measurement principles, the exchange differences arising on these transactions when marked to market as on 31st March 2015 aggregating to Rs. 0.09 million has been credited to Hedging Reserve.

8. Exceptional Items:

During the year the Company has sold its immovable property in Chennai for a total consideration of Rs. 870 million. The profit arising out of the said transaction is shown as an exceptional item since it does not fall under the normal business activities of the Company.

9. Previous years figures have been regrouped, wherever necessary, to conform to current year's grouping.


Mar 31, 2014

1 Corporate information

Carborundum Universal Limited (CUMI) was incorporated as a Public Limited Company in 1954 and the shares of the Company are listed in National and Bombay Stock Exchanges in India. CUMI manufactures and sells mainly Abrasives, Ceramics (Industrial Ceramics, Refractories) and Electro minerals.

(Rs. million)

As at As at 31.03.2014 31.03.2013

2. Contingent Liabilities and commitments:

Contingent Liabilities

a. No provision is considered necessary for disputed income tax, sales tax, service tax, excise duty and customs duty demands which are under various stages of appeal proceedings as given below :

i. Income Tax Act, 1961 127.15 108.80

ii. Central Sales Ta x Act,1956 & Local Sales Ta x laws of various states 9.30 18.47

iii. Central Excise Act,1944 6.20 4.29

iv. Service Tax, 1994 3.00 2.86

v. Customs Act, 1962 0.00 0.00

b. Outstanding letters of comfort / guarantee given on behalf of subsidiaries 4431.81 2640.13

c. Outstanding letters of credit 100.83 170.19

d. Outstanding bills discounted 0.88 1.72

e. Claims against the company not acknowledged as debts

i. Urban Land Tax 3.09 3.09

ii. Stamp duty 1.90 1.90

iii. Claim fled by ship liner towards damages 14.00 14.00

iv. Claim fled before Consumer Dispute Redressal Forum 1.00 1.00

v. Mining Royalty 42.80 42.80

62.79 62.79

f. Employees demands pending before Labour Courts - quantum not ascertainable at present

In respect of the above demands disputed by the company, appeals fled are pending before respective appellate authorities. Outflows, if any, arising out of these claims would depend on the outcome of the decision of the appellate authorities and the company''s rights for future appeals. No reimbursements are expected.

Commitments :

Estimated amount of contracts remaining to be executed and not provided for: - Towards capital account 90.20 283.71

3 a) Pursuant to the approval accorded by shareholders at their Annual General Meeting held on 27th July 2007, the Compensation and Nomination Committee of the Company formulated ''Carborundum Universal Limited Employee Stock Option Scheme 2007'' (ESOP 2007 or the Scheme).

b) Under the Scheme, options not exceeding 4667700 have been reserved to be issued to the eligible employees, with each option conferring a right upon the employee to apply for one equity share. The options granted under the Scheme would vest as per the following schedule (except Grant V B):

20% on expiry of one year from the date of grant; 20% on expiry of two years from the date of grant; 30% on expiry of three years from the date of grant; and 30% on expiry of four years from the date of grant.

The options granted to the employees would be capable of being exercised within a period of three years from the date of the first vesting and six years from the date of the second, third and fourth vesting. In respect of Grant V B, the above percentages should be read as : 40%, 30% and 30%.

c) The exercise price of the option is equal to the latest available closing market price of the shares on the stock exchange where there is highest trading volume as on the date prior to the date of the Compensation and Nomination Committee resolution approving the grant.

4 a) Notes to Segmental Reporting

i) Business Segments

The Company has considered business segment as the primary segment for disclosure. The business segments are : abrasives, ceramics and Electro minerals.

Abrasive segment comprise of bonded, coated, processed cloth, polymers, Power tools and coolants. Ceramics comprise of super refractories, industrial ceramics, anti-corrosives and bioceramics. Electro minerals include abrasive / refractory grains, micro grits for the photovoltaic industry and captive power generation from hydel power plant. The above segments have been identified taking into account the organisation structure as well as the differing risks and returns of these segments.

ii) Geographical Segments

The geographical segments considered for disclosure are : India and Rest of the world. All the manufacturing facilities and sales offices are located in India. Sales to the rest of the world are also serviced by Indian sales offices.

Geographical revenues are segregated based on the location of the customer who is invoiced or in relation to which the revenue is otherwise recognised.

iii) Segmental assets includes all operating assets used by respective segment and consists principally of operating cash, debtors, inventories and fixed assets, net of allowances and provisions. Segmental liabilities include all operating liabilities and consist primarily of creditors and accrued liabilities. Segment assets and liabilities do not include income tax assets and liabilities.

5 Provision for Dividend Ta x has been made considering the credit amounting to Rs. 2.23 million (Previous year - Rs. 3.81 million) available for set off in respect of dividend tax payable on dividends to be distributed by two subsidiary companies, based on provisions under subsection (1A) of Section 115 O of the Income Ta x Act. Dividend Ta x on the Interim Dividend has been paid after availing the credit amounting to Rs. 2.30 million (Previous year - Rs NIL) in respect of the dividend tax paid on the interim dividends received from a subsidiary. Dividend tax paid on the final dividend approved during last AGM amounting to Rs. 12.35 million is after considering an amount of Rs. 7.74 million relating to the dividends received from an overseas subsidiary and Rs. 3.81 million relating to dividends received from three domestic subsidiaries.

6 Disclosures in respect of Derivatives

A. The Company has entered into forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain from commitments and forecast transactions. The company designates them as effective cash flow hedges. The company does not use derivative financial instruments for speculative purposes.

The Company has adopted the measurement principles as laid down in the AS - 30 - Financial Instruments - Recognition and Measurement with respect to above mentioned effective cash flow hedges.

Pursuant to the application of the said measurement principles, the exchange differences arising on these transactions when marked to market as on 31st March 2014 aggregating to Rs. 0.32 million has been credited to Hedging Reserve.

7. Based on the nature of the products / activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non - current.

8. Previous years figures have been regrouped, wherever necessary, to conform to current year''s grouping.


Mar 31, 2013

1 CORPORATE INFORMATION

Carborundum Universal Limited (CUMI) was incorporated as a Public Limited Company in 1954 and the shares of the Company are listed in National and Bombay Stock Exchanges in India. CUMI manufactures and sells mainly Abrasives, Ceramics (Industrial Ceramics, Refractories) and Electrominerals.

2. a. Pursuant to the approval accorded by shareholders at their Annual General Meeting held on 27th July 2007, the Compensation and Nomination Committee of the Company formulated ''Carborundum Universal Limited Employee Stock Option Scheme 2007'' (ESOP 2007 or the Scheme).

b. Under the Scheme, options not exceeding 4667700 have been reserved to be issued to the eligible employees, with each option conferring a right upon the employee to apply for one equity share. The options granted under the Scheme would vest as per the following schedule (except Grant V B):

20% on expiry of one year from the date of grant;

20% on expiry of two years from the date of grant;

30% on expiry of three years from the date of grant; and

30% on expiry of four years from the date of grant.

The options granted to the employees would be capable of being exercised within a period of three years from the date of the first vesting and six years from the date of the second, third and fourth vesting.

In respect of Grant V B, the above percentages should be read as : 40%, 30% and 30%.

c. The exercise price of the option is equal to the latest available closing market price of the shares on the stock exchange where there is highest trading volume as on the date prior to the date of the Compensation and Nomination Committee resolution approving the grant.

3 (a) Notes to Segmental Reporting

i) Business Segments

The Company has considered business segment as the primary segment for disclosure. The business segments are: abrasives, ceramics and electrominerals.

Abrasive segment comprise of bonded, coated, processed cloth, polymers, powertools and coolants.

Ceramics comprise of super refractories, industrial ceramics, anti-corrosives and bioceramics.

Electrominerals include abrasive / refractory grains, micro grits for the photovoltaic industry and captive power generation from hydel power plant.

The above segments have been identified taking into account the organisation structure as well as the differing risks and returns of these segments.

ii) Geographical Segments

The geographical segments considered for disclosure are : India and Rest of the world. All the manufacturing facilities and sales offices are located in India.

Sales to the rest of the world are also serviced by Indian sales offices.

Geographical revenues are segregated based on the location of the customer who is invoiced or in relation to which the revenue is otherwise recognised.

iii) Segmental assets includes all operating assets used by respective segment and consists principally of operating cash, debtors, inventories and fixed assets, net of allowances and provisions. Segmental liabilities include all operating liabilities and consist primarily of creditors and accrued liabilities. Segment assets and liabilities do not include income tax assets and liabilities.

4 Provision for Dividend Tax has been made considering the credit amounting to Rs.3.81 million (Previous year - Rs.6.16 million) available for set off in respect of dividend tax payable on dividends to be distributed by three subsidiary companies, based on provisions under subsection (1A) of Section 115 0 of the Income Tax Act. Dividend Tax on the Interim Dividend has been paid after availing the credit amounting to Rs NIL million (Previous year - Rs.3.16 million) in respect of the dividend tax paid on the interim dividends received from a subsidiary.

5 Disclosures in respect of Derivatives

A. The Company has entered into forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecast transactions. The company designates them as effective cash flow hedges. The company does not use derivative financial instruments for speculative purposes.

The Company has adopted the measurement principles as laid down in the AS - 30 - Financial Instruments - Recognition and Measurement with respect to above mentioned effective cash flow hedges.

Pursuant to the application of the said measurement principles, the exchange differences arising on these transactions when marked to market as on 31st March 2013 aggregating to Rs NIL has been credited to Hedging Reserve.

6 Exceptional Items

a) During the previous year, the Company sold its investments in the Equity shares of CUMI Abrasives & Ceramics Company Limited amounting to Rs.231.39 million. The loss amounted to Rs.113.71 Million had been charged to revenue under Exceptional items

The equity shares held by the Company in Laserwords Pvt. Ltd were also sold during the previous year. The profit on sale amounting to Rs. 253.02 Million had been credited to Statement of Profit and Loss under Exceptional items

b) Profit on Sale of Land and Buildings

During the previous year, a portion of land and Building was acquired by the Government under compulsory acquisition for infrastructure development and the profit on sale had been credited to Statement of Profit and Loss under Exceptional items.

c) There are no exceptional items to be reported during the current year.

7. Based on the nature of the products/activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non - current.

8. Previous years figures have been regrouped whereever necessary to conform to current year''s grouping.


Mar 31, 2012

1 CORPORATE INFORMATION

Carborundum Universal Limited (CUMI) was incorporated as a Public Limited Company in 1954 and the shares of the Company are listed in National and Bombay Stock Exchanges in India. CUMI manufactures and sells mainly Abrasives, Ceramics (Industrial Ceramics, Refractories) and Electrominerals. (Rs. million) 31.03.2012 31.03.2011

2. Contingent Liabilities and commitments: (in respect of which no provision is considered necessary)

Contingent Liabilities

a. No provision is considered necessary for disputed income tax, sales tax, service tax, excise duty and customs duty demands which are under various stages of appeal proceedings as given below :

i. Income Tax Act, 1961 119.02 108.96

ii. Central Sales Tax Act,1956 & Local Sales Tax laws of various states 12.99 29.74

iii. Central Excise Act, 1944 4.39 4.91

iv Service Tax, 1994 2.86 2.86

v. Customs Act, 1962 1.66 1.66

b. Outstanding letters of comfort / guarantee given on behalf of subsidiaries 2046.61 1549.80

c. Outstanding letters of credit 175.28 111.53

d. Outstanding bills discounted 2.15 2.45

e. Claims against the Company not acknowledged as debts :

i. Urban Land Tax 3.50 3.20

ii. Stamp duty 1.90 1.90

iii. Electricity charges 12.60 12.60

iv. Claim filed by ship liner towards damages14.00 14.00

v. Claim filed before Consumer Dispute Redressal Forum 1.00 1.00

vi. Mining Royalty 42.80 -

75.80 32.70

f. Employees demands pending before Labour Courts - quantum not ascertainable at present

Commitments:

Estimated amount of contracts remaining to be executed and not provided for:

a. Towards capital account 175.54 109.02

b. Towards others 1162.43 1650.00

3. a. Pursuant to the approval accorded by shareholders at their Annual General Meeting held on 27th July 2007, the Compensation and Nomination Committee of the Company formulated 'Carborundum Universal Limited Employee Stock Option Scheme 2007' (ESOP 2007 or the Scheme).

b. Under the Scheme, options not exceeding 9335400 have been reserved to be issued to the eligible employees, with each option conferring a right upon the employee to apply for one equity share. The options granted under the Scheme would vest as per the following schedule (except Grant V B):

20% on expiry of one year from the date of grant;

20% on expiry of two years from the date of grant;

30% on expiry of three years from the date of grant; and

30% on expiry of four years from the date of grant.

The options granted to the employees would be capable of being exercised within a period of three years from the date of vesting.

In respect of Grant V B, the above percentages should be read as : 40%, 30% and 30%.

c. The exercise price of the option is equal to the latest available closing market price of the shares on the stock exchange where there is highest trading volume as on the date prior to the date of the Compensation and Nomination Committee resolution approving the grant.

4 Related Party Disclosures a) List of Related Parties

Related party relationships are as identified by the management and relied upon by the auditors.

I) Parties where control exists - Subsidiaries

Direct Holding :

Net Access (India) Ltd [Net Access]

Southern Energy Development Corporation Ltd [Sedco]

Sterling Abrasives Ltd [Sterling]

CUMI (Australia) Pty Ltd [CAPL]

Cellaris Refractories India Limited [CRIL]

CUMI International Limited [CIL]

Holding through Subsidiary:

Volzhsky Abrasives Works [VAW]

Foskor Zirconia (Pty) Ltd [Foskor]

CUMI America Inc [CAI]

CUMI Middleeast FZE [CME]

CUMI Canada Inc [CCI]

CUMI Abrasives & Ceramics Company Limited [CACCL]

II) Other related parties with whom transactions have taken place during the year

Joint Ventures

Murugappa Morgan Thermal Ceramics Ltd [MMTCL]

Ciria India Ltd [Ciria]

Wendt (India) Ltd [Wendt]

Associate

Laserwords Pvt Ltd [Ceased to be an associate w.e.f November 2011 ] [Laserwords]

Key Management Personnel

Mr. KSrinivasan, Managing Director

5 (a) Notes to Segmental Reporting

i) Business Segments

The Company has considered business segment as the primary segment for disclosure. The business segments are : abrasives, ceramics and electrominerals.

Abrasive segment comprise of bonded, coated, processed cloth, polymers, powertools and coolants.

Ceramics comprise of super refractories, industrial ceramics, anti-corrosives and bioceramics.

Electrominerals include abrasive/ refractory grains, micro grits for the photovoltaic industry and captive power generation from hydel power plant.

The above segments have been identified taking into account the organisation structure as well as the differing risks and returns of these segments.

ii) Geographical Segments

The geographical segments considered for disclosure are : India and Rest of the world. All the manufacturing facilities and sales offices are located in India.

Sales to the rest of the world are also serviced by Indian sales offices.

Geographical revenues are segregated based on the location of the customer who is invoiced or in relation to which the revenue is otherwise recognised.

iii) Segmental assets includes all operating assets used by respective segment and consists principally of operating cash, debtors, inventories and fixed assets, net of allowances and provisions. Segmental liabilities include all operating liabilities and consist primarily of creditors and accrued liabilities. Segment assets and liabilities do not include income tax assets and liabilities.

6 Provision for Dividend Tax has been made considering the credit amounting to Rs.6.16 million (Previous year - Rs.5.34 million) available for set off in respect of dividend tax payable on dividends to be distributed by three subsidiary companies, based on provisions under subsection (1A) of Section 115 O of the Income Tax Act. Dividend Tax on the Interim Dividend has been paid after availing the credit amounting to Rs.3.16 million (Previous year - Rs.6.15 million) in respect of the dividend tax paid on the interim dividends received from a subsidiary.

7 Disclosures in respect of Derivatives

a. The Company has entered into forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecast transactions. The company designates them as effective cash flow hedges. The company does not use derivative financial instruments for speculative purposes.

The company has adopted the measurement principles as laid down in the AS 30- Financial Instruments : Recognition and Measurement with respect to above mentioned effective cash flow hedges.

Pursuant to the application of the said measurement principles, the exchange differences arising on these transactions when marked to market as on 31st March 2012 aggregating to Rs. 2.40 million [Previous year Rs.Nil million] has been credited to Hedging Reserve.

8 Exceptional Items

Profit on Sale of Long term investments (net)

During the year, the Company sold its investments in the Equity shares of CUMI Abrasives & Ceramics Company Limited amounting to Rs.231.39 million. The loss amounting to Rs.113.71 million has been charged to revenue under Exceptional items.

The equity shares held by the Company in Laserwords Pvt. Ltd were also sold during the year. The profit on sale amounting to Rs. 253.02 million has been credited to Statement of Profit and Loss under Exceptional items.

Profit on Sale of Land and Buildings

During the year, a portion of land and Building was acquired by the Government under compulsory acquisition for infrastructure development and the profit on sale has been credited to Statement of Profit and Loss under Exceptional items.

9. The Revised Schedule VI has become effective from 1 April, 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current years's classification / disclosure.


Mar 31, 2011

A. Consolidation is done based on the audited financials of the subsidiaries as on 31.03.2011. In respect of subsidiaries incorporated outside India, the audited financials were translated into Indian currency as per Accounting Standard 11 (revised) - Accounting for the effects of changes in Foreign exchange rates.

b. The consolidated financials for the current year include the financials of CUMI Abrasives & Ceramics Company Ltd, China for the period of fifteen months from 01.01.2010 to 31.03.2011.

c. Equity method of accounting in consolidation is done based on audited financials of the Associate as on 31.03.2011. In respect of Laserwords, the consolidated financials of the company include that of its subsidiaries : Laserwords US Inc., Samvit Education Services Pvt Ltd and Laserwords Learning Pte Ltd.

d. Proportionate consolidation is done based on audited financials of the Joint ventures as on 31.03.2011 and as approved by the Board of Directors of that company.

In respect of Wendt, the consolidated financials of the company with its subsidiary Wendt Grinding Technoligies Ltd, Thailand and Wendt Middle East FZE, Sharjah were considered for consolidation.

e. During the year, the shareholdings of the Parent company in three overseas entities, namely, CUMI America Inc., CUMI Middle East FZE and CUMI Canada Inc., were sold to the overseas subsidiary CUMI International Limited, Cyprus based on the valuation done by approved Investment Bankers. The Profit / Loss arising out of the sale does not have any bearing on the consolidated financials since the sale is within the Group.

2 Pending approval of the proposed dividends in the annual general meetings of the respective subsidiaries and joint ventures, the same are not considered in the consolidated accounts as proposed dividends and are included under surplus carried to balance

sheet under Reserves and Surplus.

(Rs. million)

31.03.2011 31.03.2010

4 Contingent Liabilities:

a) Bills discounted outstanding 6.07 24.27

b) Outstanding letters of credit 111.53 146.98

6 a) The Parent Company has adopted the Accounting Standard - 15 (Revised) on Employee Benefits effective from 1st April 2006. The domestic subsidiaries and domestic joint ventures has adopted the standard from the date it became mandatory.

b) The details of actuarial valuation in respect of Gratuity liability in respect of Parent Company and its domestic subsidiaries and joint ventures are given below :

c) During the year, the Parent Company and certain domestic subsidiaries and joint ventures had made provision for Longterm accumulated compensated absences on actuarial basis, consistent with previous year.

e) With respect to the Provident Fund Trust administered by the Parent Company, the Parent Company shall make good the deficiency if any in the interest rate declared by Trust below statutory limit. Having regard to the assets of the Fund and the return on the investments, the Parent Company does not expect any deficiency in the foreseeable future.

7 a) Pursuant to the approval accorded by shareholders at their Annual General Meeting held on 27th July 2007, the Compensation and Nomination Committee of the Company formulated Carborundum Universal Limited Employee Stock Option Scheme 2007 (ESOP 2007 or the Scheme).

b) Under the Scheme, options not exceeding 46,67,700 have been reserved to be issued to the eligible employees, with each option conferring a right upon the employee to apply for one equity share. The options granted under the Scheme would vest as per the following schedule (except Grant V B):

20% on expiry of one year from the date of grant; 20% on expiry of two years from the date of grant; 30% on expiry of three years from the date of grant; and 30% on expiry of four years from the date of grant.

The options granted to the employees would be capable of being exercised within a period of three years from the date of vesting.

In respect of Grant V B, the above percentages should be read as : 40%, 30% and 30%.

c) The exercise price of the option is equal to the latest available closing market price of the shares on the stock exchange where there is highest trading volume as on the date prior to the date of the Compensation and Nomination Committee resolution approving the grant.

11 (A) Notes to Segmental Reporting

a. Business Segments

The Company has considered business segment as the primary segment for disclosure. The business segments are : Abrasives, Ceramics, Electro-minerals, IT services and Power. Abrasive segment comprise of Bonded, Coated, Processed cloth, Polymers, Power tools and Coolants.

Ceramics comprise of Super Refractories, Industrial Ceramics, Bio ceramics, Ceramic Fibre products, Anti-corrosives and Calcia Stabilised Zirconia.

Electrominerals include abrasive / refractory grains, micro grits for the photovoltaic industry and captive power generation from hydel power plant.

IT services include web enabling services and digitised data capture.

Power denote the generation of power from Natural Gas.

The above segments have been identified taking into account the organisation structure as well as the differing risks and returns of these segments.

b. Geographical Segments

The geographical segments considered for disclosure are : India and Rest of the world. All the manufacturing facilities and Sales offices are located in India, USA, Australia, Canada, Middle East (RAK), Russia, South Africa and China.

Geographical revenues are segregated based on the location of the customer who is invoiced or in relation to which the revenue is otherwise recognised

c. Segmental assets includes all operating assets used by respective segment and consists principally of operating cash, debtors, inventories and fixed assets net of allowances and provisions. Segmental liabilities include all operating liabilities and consist primarily of creditors and accrued liabilities. Segment assets and liabilities do not include income tax assets and liabilities

3 Provision for Dividend Tax has been made considering the credit amounting to Rs.5.34 million (Previous year Rs.7.05 million) available for set off in respect of dividend tax payable on dividends to be distributed by three subsidiary companies, based on the provision under subsection (1A) of Section 115 O of the Income Tax Act.

Dividend Tax on the Interim Dividend has been paid after availing the credit amounting to Rs.6.15 million (Previous year - Nil) in respect of the Dividend Tax paid on the interim dividends received from a subsidiary.

4 Previous year figures have been regrouped wherever necessary to conform to current years grouping.


Mar 31, 2010

(Rs. million) 31.03.2010 31.03.2009 Notes to Balance Sheet 1 Estimated amount of contracts remaining to be executed on capital 87.29 132.68 account and not provided for. 2 Contingent Liabilities: a) Outstanding bills discounted 23.41 16.66

b) Outstanding guarantees 114.15 104.46

c) Outstanding letters of comfort /guarantee 1662.47 1608.30

d) Outstanding letters of credit 146.98 59.74

3 a) No provision is considered necessary for disputed income tax, sales tax,service tax.property tax and excise duty demands which are under various stages of appeal proceedings as given below, based on legal opinions that these demands are not sustainable in law.

4 There are no dues to Micro and Small Enterprises as per Micro, Small and Medium Enterprises Development Act, 2006 which are outstanding for more than 45 days at the Balance Sheet date, which is on the basis of such parties having been identified by the management and relied upon by the auditors.

c. With respect to the Provident Fund Trust administered by the Company, the Company shall make good the deficiency, if any, in the interest rate declared by Trust below statutory limit. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future.

5 a. Pursuant to the approval accorded by shareholders at their Annual General Meeting held on 27th July 2007, the Compensation and Nomination Committee of the Company formulated Carborundum Universal Limited Employee Stock Option Scheme 2007 (ESOP 2007 or the Scheme).

b. Under the Scheme, options not exceeding 46,67,700 have been reserved to be issued to the eligible employees, with each option conferring a right upon the employee to apply for one equity share. The options granted under the Scheme would vest as per the following schedule:

20% on expiry of one year from the date of grant; 20% on expiry of two years from the date of grant; 30% on expiry of three years from the date of grant; and 30% on expiry of four years from the date of grant.

The options granted to the employees would be capable of being exercised within a period of three years from the date of vesting.

c. The exercise price of the option is equal to the latest available closing market price of the shares on the stock exchange where there is highest trading volume as on the date prior to the date of the Compensation and Nomination Committee resolution approving the grant.

d. The vesting of options is linked to continued association with the Company and the employee achieving performance rating parameters. The details of the grants under the aforesaid scheme are as follows:

6 Related Party Disclosures

a List of Related Parties

Related party transactions are as identified by the management and relied upon by the auditors.

I) Parties where control exists - Subsidiaries

CUMI America Inc [CAI]

Net Access (India) Pvt Ltd [Net Access]

Southern Energy Development Corporation Ltd [SEDCO]

Sterling Abrasives Ltd [Sterling]

CUMI (Australia) Pty Ltd [CAPL]

CUMI Middleeast FZE [CME]

CUMI Canada Inc [CCI]

CUMI Fine Materials Limited [CFML]

CUMI Abrasives & Ceramics Company Limited [CACCL] (since 30.12.2009)

CUMI International Limited [CIL]

Volzhsky Abrasives Works [VAW] (subsidiarys subsidiary)

Foskor Zirconia (Pty) Ltd [Foskor] (subsidiarys subsidiary)

II) Other related parties with whom transactions have taken place during the year

Joint Ventures

Murugappa Morgan Thermal Ceramics Ltd [MMTCL]

Ciria India Ltd [Ciria]

Wendt India Ltd [Wendt]

JingRi-CUMI Super-Hard Materials Co., Ltd [Jingri]

(ceased to be a joint venture from 30.12.2009)

Associate

Laserwords Pvt Ltd [Laserwords]

Key Management Personnel

Mr. K Srinivasan

i) Business Segments

The Company has considered business segment as the primary segment for disclosure. The business segments are: abrasives, ceramics and electrominerals.

Abrasive segment comprises of bonded, coated, processed cloth, polymers, powertools and coolants.

Ceramics comprises of super refractories, industrial ceramics, anti-corrosives and bioceramics.

Electrominerals include abrasive / refractory grains, micro grits for the photovoltaic industry and captive power generation from hydel power plant.

The above segments have been identified taking into account the organisation structure as well as the differing risks and returns of these segments.

ii) Geographical Segments

The geographical segments considered for disclosure are : India and Rest of the world. All the manufacturing facilities and sales offices are located in India. Sales to the rest of the world are also serviced by Indian sales offices.

Geographical revenues are segregated based on the location of the customer who is invoiced or in relation to which the revenue is otherwise recognised.

iii) Segmental assets includes all operating assets used by respective segment and consists principally of operating cash, debtors, inventories and fixed assets, net of allowances and provisions. Segmental liabilities include all operating liabilities and consist primarily of creditors and accrued liabilities. Segment assets and liabilities do not include income tax assets and liabilities.

b. The unit price of stock options granted to the Employees are anti-dilutive and hence the Basic and Diluted Earnings per share remain the same.

7 Provision for Dividend Tax has been made considering the credit amounting to Rs.7.05 million (Previous year Rs.4.89 million) available for set off in respect of dividend tax payable on dividends to be distributed by three subsidiary companies, based on the provision under subsection (1 A) of Section 1150 of the Income Tax Act, 1961.

8 Disclosures in respect of Derivatives

a. The Company has entered into forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecast transactions. The company designates them as effective cash flow hedges. The company does not use derivative financial instruments for speculative purposes.

The Institute of Chartered Accountants of India (ICAI) has issued AS 30 Financial instruments: Recognition and Measurement, which contains accounting for derivatives, recommendatory from 1.4.2009 and mandatory from 1.4.2011.

Further ICAI has issued an announcement on 29th March 2008 dealing with the accounting for derivatives with emphasis on prudence. The company has adopted the measurement principles as laid down in the above standard with respect to above mentioned effective cash hedges.

Pursuant to the application of the said measurement principles, the exchange differences arising on these transactions when marked to market as on 31 st March 2010 aggregating to Rs.8.92 million [Previous year Rs.0.88 million] has been credited to Hedging Reserve which is in accordance with AS - 30.

9 Note on Investment made in Subsidiary - CUMI Canada Inc.,

The Company has investments in Equity shares of CUMI Canada Inc., amounting to Rs.48.01 million and in Preference shares of that Company amounting to Rs.38.40 million. Though there is a significant erosion in the networth of this subsidiary company, the diminution in value of investments is considered temporary in nature in view of the steps that are being taken by that Company for its turnaround and also based on its future business plans. However, on grounds of prudence, a provision of Rs.12 million has been made during the current year towards diminution in value of equity shares.

b During the year, the joint venture entity :JingRi-CUMI Super-Hard Materials Co., Ltd [Jingri], China was demerged into two separate divisions viz., Abrasives and Diamonds / Diamond tools. The Abrasives division was taken over by a wholly owned subsidiary viz., CUMI Abrasives & Ceramics Company Ltd [CACCL] on a going concern basis. Similarly the Diamonds / Diamond tools business was taken over by the Joint venture partner. The legal demerger was effected by a division agreement effective from 30.12.2009, on CACCL obtaining the Business licence on 30.12.2009. Consequently the assets and liabilities relating to the abrasives division including the share capital contributed by the Company in the erstwhile Joint venture entity got transferred and vested in CACCL with effect from 30.12.2009.

c Disclosure of financial data as per AS 27 is based on the audited financials of the jointly controlled entities.

Find IFSC