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Notes to Accounts of Carborundum Universal Ltd.

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.

 
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