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Notes to Accounts of Centum Electronics Ltd.

Mar 31, 2016

Rights, preferences and restrictions attached to equity shares

The Company has only one class of share referred to as equity share having par value of Rs.10. Each holder of the equity share, as reflected in the records of the Company as of the date of the shareholder meeting, is entitled to one vote in respect of each share held for all matters submitted to vote in the shareholders'' meeting.

The Company declares and pays dividends in Indian rupees. During the year ended 31 March 2016, the amount of per share interim dividend recognized as distributions to equity shareholders was Rs.3 (previous year: Re 1) and per share final dividend was Rs. Nil (Previous year: Rs 2). The total dividend appropriation for the year ended 31 March, 2016 amounted to Rs 37,982,754 (previous year: Rs 37,769,288) including corporate dividend tax of Rs.Nil (previous year: Rs Nil).

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

Refer note 29 for disclosure in relation to employee stock option plan.

Based on a demand notice dated 12 February 2010 received from District Registrar, Stamps and Registration Department, Karnataka, the Company has estimated and provided Rs 11,174,165 towards additional stamp duty liability against a claim of Rs 16,281,302 in the aforementioned demand notice, payable pursuant to the demerger of EMS business from Centum Electronics Limited (formerly known as Solectron Centum Electronics Limited) on 1 October 2006, as per the Scheme of Arrangement approved by the Honorable High Court of Karnataka effective 13 July 2007. The differential amount of Rs 5,107,137 has been disclosed as a contingent liability. The Company has also provided Rs 8,411,723 towards stamp duty payable pursuant to the merger of Solectron EMS India Limited with the Company.

1. During the year the Company has entered into a business transfer agreement with Centum Industries Private Limited on 1 December 2015 for the purchase of business on slump sale. As per the terms of agreement, the Company has purchased the net assets pertaining to plastic and defense and space of Centum Industries Private Limited for an aggregate consideration Rs.57,000,000, which was arrived at based on the business valuation done by an independent professional firm. The valuation ascribed to assets by an independent professional value amounting Rs 17,347,378 , resulting in a goodwill of Rs.39,652,622.

2. The following table sets out the status of the gratuity plan as required under AS 15.

Reconciliation of opening and closing balances of the present value of the defined benefit obligation:

The estimate of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market. The Company does not have any planned assets.

3. Employee stock options:

The company has two stock option plans.

Centum employee stock option plan 2007

The Centum ESOP -2007 was approved by the board of directors of the Company in October 2007 and by the shareholders in December 2007. The 2007 plan provides for the issue of 416,666 shares to the employees. The plan is administered by a compensation committee. Options will be issued to employees of the Company and also its subsidiary at an exercise price, which shall not be less than the market price immediately preceding the date of grant. The equity shares covered under these options vest over a period ranging from twelve to forty eight months from the date of grant. The exercise period is ten years from the date of vesting.

The options outstanding as at 31 March 2016 had an exercise price of Rs.64.10 and the weighted average remaining contractual life of 8.96 years.

Centum employee stock option plan 2013

The Centum ESOP -2013 was approved by the board of directors of the Company in May 2013 and by the shareholders in August 2013. The 2013 plan provides for the issue of 250,000 shares to the employees. The plan is administered by a compensation committee. Options will be issued to employees of the Company and also its subsidiary at an exercise price, which shall not be less than the market price immediately preceding the date of grant. The equity shares covered under these options vest over a period ranging from twelve to forty eight months from the date of grant. The exercise period is ten years from the date of vesting.

The options outstanding as at 31 March 2016 had an exercise price of Rs 71.25 and the weighted average remaining contractual life of 10.31 years.

The Company applies the intrinsic value method of accounting for determining compensation cost for its stock based compensation plan. The Company has therefore adopted the pro forma disclosure provisions as required by the Guidance Note on “Accounting for Employee Share Based Payments” issued by the Institute of Chartered Accountants of India with effect from 1 April 2005.

Had the compensation been determined using the fair value approach described in the aforesaid Guidance Note, the Company’s net profit and basic and diluted earnings per share as reported would have reduced to the pro forma amounts as indicated:

4. Leases

The Company has taken office facilities, car and computer under cancelable operating lease agreement. The Company intends to renew the agreement in the normal course of its business. Total lease rentals recognized in the profit and loss for the year in respect of the aforementioned lease is Rs 24,615,036 (previous year: Rs 19,130,347).

The Company has also given office facilities under cancelable operating lease agreement to its subsidiary. Total lease rental income recognized in the profit and loss for the year with respect to the above is Rs 3,032,400 (previous year: Rs 3,032,400).

5. Segment Information

The Company’s primary segment is identified as a business segment based on risk, return and nature of products and secondary segment is defined based on the geographical location of the Customers as per Accounting Standard -17. The disclosure on primary business segment reporting has been changed to a single segment called “Electronic System Design and Manufacturing (ESDM)” instead of the two segments “Products” and “Electronics Manufacturing Services” previously. The change has been made to reflect the evolved business of the company appropriately.

6. Related party disclosures

A. Parties where control exists:

Apparao V Mallavarapu (directly and indirectly exercises 59.85% voting power in the Company) Subsidiary of the company Centum Rakon India Private Limited

B. Other related parties where transactions have taken place during the year:

Parties under common control Centum Industries Private Limited

C. Key executive management personnel:

Apparao V Mallavarapu - Chairman and Managing Director S Krishnan (Director)

Rajiv C Mody (Director)

Pranav Patel (Director)

Manoj Nagrath (Director)

Swarnalatha Mallavarapu (Additional Director)

K S Desikan (Chief Financial Officer)

Ramu Akkili (Company Secretary)

7. The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the ‘Micro, Small and Medium Enterprises Development Act, 2006 (‘the Act’). Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2016 has been made in the financial statements based on information received and available with the Company. Further in view of the Management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier as at the balance sheet date.

8. Previous year''s figure including those in brackets have been regrouped and / or rearranged wherever necessary.


Mar 31, 2015

Rights, preferences and restrictions attached to equity shares

The Company has only one class of share referred to as equity share having par value of Rs.10. Each holder of the equity share, as reflected in the records of the Company as of the date of the shareholder meeting, is entitled to one vote in respect of each share held for all matters submitted to vote in the shareholder's meeting.

The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting."During the year ended 31 March 2015, the amount of per share interim dividend recognised as distributions to equity shareholders was Re.1 (previous year: Re 1) and per share final dividend was Rs.2 (previous year: Rs 1.50). The total dividend appropriation for the year ended 31 March, 2015 amounted to Rs.37,769,288 (previous year: Rs 31,108,015) including corporate dividend tax of Rs.Nil (previous year: Rs Nil).

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

Refer note 1 for disclosure in relation to employee stock option plan.

Cash credit and Packing credit from bank is secured by way of hypothecation on the inventories, book debts and other current assets of the Company. Additionally it is secured by way of collateral charge on plant and machinery and an equitable mortgage of land.

*The term loan from others represents vehicle loan taken from a non banking financial institution and secured by vehicle of the company. The term loan carries an interest rate of 10.45% per annum on the outstanding amount of the loan. The interest was payable monthly along with the principle repayment. The term loan from other was repayable in thirty five equal monthly installments commencing from 1 February 2012. The term loan has been fully repaid in the current year.

Finance lease obligation is towards laptops and computers purchased on finance lease and secured by the leased assets. The finance lease obligation is repayable in twelve quarterly installments from the date of lease of the leased assets.The finance lease obligation has been fully repaid in the current year.

There is no continuing default in the principal and repayment amount.

2. Capital commitments and contigent liabilities (Amount in Rs ) As at As at Particulars 31 March 2015 31 March 2014

Capital commitment

Estimated amount of contracts remaining to be executed on capital account and provided(net of advances) 435,582,192 49,078,476

Contingent liabilities

Claims against the Company not acknowledged as debts in respect of:

Income tax 34,015,175 54,053,780

Sales tax 10,559,633 10,559,633

Excise duty 9,988,320 9,988,320

Stamp duty [refer schedule 41] 5,107,137 5,107,137

The estimate of future salary increases, considered in actuarial valuation, takes account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.The Company does not have any planned assets.

3. Employee stock options:

The company has two stock option plans.

Centum employee stock option plan 2007

The Centum ESOP - 2007 was approved by the board of directors of the Company in October 2007 and by the shareholders in December 2007. The 2007 plan provides for the issue of 416,666 shares to the employees. The plan is administered by a compensation committee. Options will be issued to employees of the Company and also its subsidiary at an exercise price, which shall not be less than the market price immediately preceding the date of grant. The equity shares covered under these options vest over a period ranging from twelve to forty eight months from the date of grant. The exercise period is ten years from the date of vesting. Option activity during the year ended 31 March 2015 and the related weighted average exercise price of stock options under the Centum ESOP plan 2007 is presented below.

Centum employee stock option plan 2013

The Centum ESOP -2013 was approved by the board of directors of the Company in May 2013 and by the shareholders in August 2013. The 2013 plan provides for the issue of 250,000 shares to the employees. The plan is administered by a compensation committee. Options will be issued to employees of the Company and also its subsidiary at an exercise price, which shall not be less than the market price immediately preceding the date of grant. The equity shares covered under these options vest over a period ranging from twelve to forty eight months from the date of grant. The exercise period is ten years from the date of vesting. Option activity during the year ended 31 March 2015 and the related weighted average exercise price of stock options under the Centum ESOP plan 2013 is presented below.

The options outstanding as at 31 March 2015 had an exercise price of Rs 71.25 and the weighted average remaining contractual life of 11.35 years.

The Company applies the intrinsic value method of accounting for determining compensation cost for its stock based compensation plan. The Company has therefore adopted the pro forma disclosure provisions as required by the Guidance Note on "Accounting for Employee Share Based Payments" issued by the Institute of Chartered Accountants of India with effect from 1 April 2005.

Had the compensation been determined using the fair value approach described in the aforesaid Guidance Note, the Company's net profit and basic and diluted earnings per share as reported would have reduced to the pro forma amounts as indicated:

4 Leases

The Company has taken office facilities under cancelable operating lease agreement. The Company intends to renew the agreement in the normal course of its business. Total lease rentals recognised in the profit and loss for the year in respect of the aforementioned lease is Rs 19,130,347 (previous year: Rs 17,108,134).

The Company has also given office facilities under cancelable operating lease agreement to its subsidiary. Total lease rental income recognized in the profit and loss for the year with respect to the above is Rs 3,032,400 (previous year: Rs 3,032,400).

5. Segment Information

The Company operates through two divisions, products business comprising of Modules (Products segment) and Electronic Manufacturing Services (Services segment), which are considered to be the primary segments and geography as the secondary segment.

The accounting principles used in the preparation of the financial statements are also consistently applied to record income and expenditure in individual segments.

Assets, liabilities, revenues and direct expenses in relation to segments are categorised based on items that are individually identified to that segment, while other items, wherever allocable, are apportioned to the segments on appropriate basis. Certain items are not specifically allocable to individual segments as the underlying services are used interchangeably. The Company, therefore, believes that it is not practicable to provide segment disclosures relating to such items, and accordingly such items are separately disclosed as 'unallocated'.

6 Related party disclosures

A. Parties where control exists:

Apparao V Mallavarapu (directly and indirectly exercises 60.28% voting power in the Company) Subsidiary of the company Centum Rakon India Private Limited

B. Other related parties where transactions have taken place during the year:

Parties under common control Centum Industries Private Limited

C. Key executive management personnel represented on the Board:

Apparao V Mallavarapu - Chairman and Managing Director S Krishnan (Director)

Rajiv C Mody (Director)

Pranav Patel (Director)

Manoj Nagrath (Director)

Swarnalatha Mallavarapu ( Additional Director) (Appointed with effect from 26 March 2015) Dr.P Rama Rao (Director) (Resigned with effect from 1 August 2014)

K S Desikan (Chief Financial Officer)

Ramu Akkili (Company Secretary)

7. The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the 'Micro, Small and Medium Enterprises Development Act, 2006' ('the Act'). Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2015 has been made in the financial statements based on information received and available with the Company. Further in view of the Management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier as at the balance sheet date.

8. Based on a demand notice dated 12 February 2010 received from District Registrar, Stamps and Registration Department, Karnataka, the Company has estimated and provided Rs 11,174,165 towards additional stamp duty liability against a claim of Rs 16,281,302 in the aforementioned demand notice, payable pursuant to the demerger of EMS business from Centum Electronics Limited (formerly known as Solectron Centum Electronics Limited) on 1 October 2006, as per the Scheme of Arrangement approved by the Honorable High Court of Karnataka effective 13 July 2007. The differential amount of Rs 5,107,137 has been disclosed as a contingent liability [refer note 25].

The Company has also provided Rs 8,411,723 towards stamp duty payable pursuant to the merger of Solectron EMS India Limited with the Company.


Mar 31, 2013

1. Employee stock options:

Centum employee stock option plan 2007

The Centum ESOP -2007 was approved by the board of directors of the Company in October 2007 and by the shareholders in December 2007. The 2007 plan provides for the issue of 416,666 shares to the employees. The plan is administered by a compensation committee. Options will be issued to employees of the Company and also its subsidiary at an exercise price, which shall not be less than the market price immediately preceding the date of grant. The equity shares covered under these options vest over a period ranging from twelve to forty eight months from the date of grant. The exercise period is ten years from the date of vesting.

Option activity during the year ended 31 March 2013 and the related weighted average exercise price of stock options under the Centum ESOP plan 2007 is presented below. There was no new employee stock option plan during the year ended 31 March 2013.

The options outstanding as at 31 March 2013 had an exercise price of Rs 58.09 and the weighted average remaining contractual life of 10.78 years.

The Company applies the intrinsic value method of accounting for determining compensation cost for its stock based compensation plan. The Company has therefore adopted the pro forma disclosure provisions as required by the Guidance Note on "Accounting for Employee Share Based Payments" issued by the Institute of Chartered Accountants of India with effect from 1 April 2005.

2 Leases

The Company has taken office facilities under cancelable operating lease agreement. The Company intends to renew the agreement in the normal course of its business. Total lease rentals recognised in the statement of profit and loss for the year in respect of the aforementioned lease is Rs 13,916,072 (previous year: Rs 9,789,229).

The Company has also given office facilities under cancelable operating lease agreement to its subsidiary. Total lease rental income recognised in the statement of profit and loss for the year with respect to the above is Rs 3,032,400 (previous year: Rs 3,032,400).

3. Segment Information

The Company operates through two divisions, component business comprising of Modules (Products segment) and Electronic Manufacturing Services (Services segment), which are considered to be the primary segments and geography as the secondary segment.

The accounting principles used in the preparation of the financial statements are also consistently applied to record income and expenditure in individual segments.

Assets, liabilities, revenues and direct expenses in relation to segments are categorised based on items that are individually identified to that segment, while other items, wherever allocable, are apportioned to the segments on appropriate basis. Certain items are not specifically allocable to individual segments as the underlying services are used interchangeably. The Company, therefore, believes that it is not practicable to provide segment disclosures relating to such items, and accordingly such items are separately disclosed as ''unallocated''.

4 Related party disclosures

A. Parties where control exists:

Apparao V Mallavarapu (directly and indirectly exercises 61% voting power in the Company) Subsidiary of the company Centum Rakon India Private Limited

B. Other related parties where transactions have taken place during the year:

Parties under common control

Centum Industries Private Limited

C. Key executive management personnel represented on the Board:

Mr. Apparao V Mallavarapu - Chairman and Managing Director

5.The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the ''Micro, Small and Medium Enterprises Development Act, 2006'' (''the Act''). Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2013 has been made in the financial statements based on information received and available with the Company. Further in view of the Management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier as at the balance sheet date.

6. Based on a demand notice dated 12 February 2010 received from District Registrar, Stamps and Registration Department, Karnataka, the Company has estimated and provided Rs 11,174,165 towards additional stamp duty liability against a claim of Rs 16,281,302 in the aforementioned demand notice, payable pursuant to the demerger of EMS business from Centum Electronics Limited (formerly known as Solectron Centum Electronics Limited) on 1 October 2006, as per the Scheme of Arrangement approved by the Honourable High Court of Karnataka effective 13 July 2007. The differential amount of Rs 5,107,137 has been disclosed as a contingent liability [refer note 26].

The Company has also provided Rs 7,379,248 during 2010-11 towards stamp duty payable pursuant to the merger of Solectron EMS India Limited with the Company.

7. As at March 31, 2013, the Company has outstanding forward contracts amounting to USD 750,000 (As at March 31, 2012: USD Nil). These derivative instruments have been entered to hedge highly probable forecasted sales.

In accordance with the provisions of AS 30, these derivative instruments qualify for cash flow hedge accounting and have been fair valued at the balance sheet date and the resultant exchange loss has been debited to hedge reserve (Refer Note 3).

8. The comparative figures have been re-grouped/reclassified wherever necessary to conform to the current year''s presentation.


Mar 31, 2012

The company has only one class of share referred to as equity share having par value of Rs 10. Each holder of the equity share, as reflected in the records of the Company, is entitled to one vote in respect of each share held for all matters submitted to vote in the shareholders' meeting.

The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

During the year ended 31 March 2012, the amount of per share dividend recognised as distributions to equity shareholders was Re 1 (previous year: Re 1). The total dividend appropriation for the year ended 31 March 2012 amounted to Rs 14,371,125 (previous year: Rs 14,399,120) including corporate dividend tax of Rs 2,005,942 (previous year: Rs 2,050,887).

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

Refer note 30 for disclosure in relation to employee stock option plan

The term loan from others represents vehicle loan taken from a non banking financial institution and secured by vehicle of the company. The term loan carries an interest rate of 10.45% per annum on the outstanding amount of the loan. The interest is payable monthly along with the principle repayment. The term loan from other is repayable in thirtyfive equal monthly installments commencing from 1 February 2012.

Finance lease obligation is towards laptops and computers purchased on finance lease and secured by the leased assets. The finance lease obligation is repayable in twelve quarterly installments from the date of lease of the leased assets.

Cash credit from bank is secured by way of hypothecation on the inventories, book debts and other current assets of the company. Additionally it is secured by way of collateral charge on plant and machinery and an equitable mortgage of land.

Packing credit from bank is secured by way of hypothecation of inventories, book debts and fixed assets (present and future) of the company. Additionally, it is secured by way of collateral charge on plant and machinery. There is no continuing default in the repayment of the principal and interest amounts.

*Margin money is against bank guarantees issued in favour of customers and statutory authorities

* Includes an amount of Rs 11,327,466 (previous year: Rs 51,623,677) receivable from companies where directors of the company are also directors / members.

*Includes balance in unclaimed dividend account Rs. 629,519 (Previous year: Rs. 627,224). **Margin money is against bank guarantees issued in favour of customers and statutory authorities.

1.The following table sets out the status of the gratuity plan as required under AS 15.

Reconciliation of opening and closing balances of the present value of the defined benefit obligation

The estimate of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.The Company does not have any planned assets.

2. Employee stock options:

Centum employee stock option plan 2007

The Centum ESOP -2007 was approved by the board of directors of the Company in October 2007 and by the shareholders in December 2007. The 2007 plan provides for the issue of 416,666 shares to the employees. The plan is administered by a compensation committee. Options will be issued to employees of the Company and also its subsidiary at an exercise price, which shall not be less than the market price immediately preceding the date of grant. The equity shares covered under these options vest over a period ranging from twelve to forty eight months from the date of grant. The exercise period is ten years from the date of vesting.

Option activity during the year ended 31 March 2012 and the related weighted average exercise price of stock options under the Centum ESOP plan 2007 is presented below. There was no new employee stock option plan during the year ended 31 March 2012.

The weighted average share price of the options exercised as at the date of exercise was 31.60.

There were 288,319 equity shares given as options during the current year. The options outstanding as at 31 March 2012 had an exercise price of Rs 58.38 and the weighted average remaining contractual life of 10.81 years.

The Company applies the intrinsic value method of accounting for determining compensation cost for its stock based compensation plan. The Company has therefore adopted the pro forma disclosure provisions as required by the Guidance Note on "Accounting for Employee Share Based Payments" issued by the Institute of Chartered Accountants of India with effect from 1 April 2005.

Had the compensation been determined using the fair value approach described in the aforesaid Guidance Note, the Company's net profit and basic and diluted earnings per share as reported would have reduced to the pro forma amounts as indicated:

The fair value of each option under the 2007 plan is estimated by management on the date of grant using the Black - Scholes model with the following assumptions

3 Leases

The Company has taken office facilities under cancelable operating lease agreement. The Company intends to renew the agreement in the normal course of its business. Total lease rentals recognised in the profit and loss for the year in respect of the aforementioned lease is Rs 9,789,229 (previous year: Rs 10,409,541).

The Company has also given office facilities under cancelable operating lease agreement to its subsidiary. Total lease rental income recognized in the profit and loss for the year with respect to the above is Rs 3,032,400 (previous year: Rs 3,698,400).

4.Segment Information

The Company operates through two divisions, component business comprising of Modules (Products segment) and Electronic Manufacturing Services (Services segment), which are considered to be the primary segments and geography as the secondary segment.

The accounting principles used in the preparation of the financial statements are also consistently applied to record income and expenditure in individual segments.

Assets, liabilities, revenues and direct expenses in relation to segments are categorised based on items that are individually identified to that segment, while other items, wherever allocable, are apportioned to the segments on appropriate basis. Certain items are not specifically allocable to individual segments as the underlying services are used interchangeably. The Company, therefore, believes that it is not practicable to provide segment disclosures relating to such items, and accordingly such items are separately disclosed as 'unallocated'.

Geographic segments: The Company's business is organised into four geographic segments. Revenues are attributable to individual geographic segments based on the location of the customer. The Company's fixed assets are situated in India.

5 Related party disclosures

A. Parties where control exists:

Apparao V Mallavarapu (directly and indirectly exercises 61% voting power in the Company) Subsidiary of the company Centum Rakon India Private Limited

B. Other related parties where transactions have taken place during the year Parties under common control Centum Industries Private Limited

C. Key executive management personnel represented on the Board Mr. Apparao V Mallavarapu – Chairman and Managing Director

6.The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the 'Micro, Small and Medium Enterprises Development Act, 2006' ('the Act'). Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2012 has been made in the financial statements based on information received and available with the Company. Further in view of the Management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier as at the balance sheet date.

7.Based on a demand notice dated 12 February 2010 received from District Registrar, Stamps and Registration Department, Karnataka, the Company has estimated and provided Rs 11,174,165 towards additional stamp duty liability against a claim of Rs 16,281,302 in the aforementioned demand notice, payable pursuant to the demerger of EMS business from Centum Electronics Limited (formerly known as Solectron Centum Electronics Limited) on 1 October 2006, as per the Scheme of Amalgamation approved by the Honourable High Court of Karnataka effective 13 July 2007. The differential amount of Rs 5,107,137 has been disclosed as a contingent liability [refer note 26]."The Company has also provided Rs 7,379,248 during the previous year towards stamp duty payable pursuant to the merger of Solectron EMS India Limited with the Company.

8.Research and development expenditure (including depreciation) amounting to Rs 14,476,008 (previous year: Rs 17,356,873) incurred during the year has been charged to the respective heads of account in the statement of profit and loss account.

9.The financial statements for the year ended 31 March 2011 had been prepared as per the then applicable, pre-revised Schedule VI to the Companies Act, 1956. Consequent to the notification of Revised Schedule VI under the Companies Act, 1956, the financial statements for the year ended 31 March 2012 are prepared as per Revised Schedule VI. Accordingly, the previous year figures have also been reclassified to conform to this year's classification. The adoption of Revised Schedule VI for previous year figures does not impact recognition and measurement principles followed for preparation of financial statements.

Statement on subsidiary pursuant to Circular No: 51/12/2007-CL-III dt. February 8, 2011 issued by Ministry of Corporate Affairs Pursuant to the said circular, The Board of Directors of the Company has passed a resolution at its meeting held on May 25, 2012 consenting for not attaching the balance sheet of the subsidiary, Centum Rakon India Private Limited and other documents required to be attached to the balance sheet as required by law to the balance sheet of the Company.

The Company hereby undertakes that annual accounts of the subsidiary, Centum Rakon India Private Limited and the related detailed information shall be made available to shareholders of the Company and the subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiary company shall also be kept for inspection by any shareholders at the head office of the Company at 44, KHB Industrial Area, Yelahanka New Town, Bangalore -560106. The Company shall furnish a hard copy of details of accounts of subsidiary to any shareholder on demand.

The company hereby discloses in the consolidated balance sheet the following information in aggregate for its subsidiary, Centum Rakon India Private Limited


Mar 31, 2011

A) Capital commitment and contigent liabilities

Rs

As at As at

31 March 2011 31 March 2010

Capital commitment

Estimated amount of contracts remaining to be executed on capital account (net of advances) 95,505,150 50,664,967

Contingent liabilities

Claims against the Company not acknowledged as debts in respect of:

Income tax 34,015,175 33,384,502

Sales tax 5,106,330 5,106,330

Excise duty 9,988,320 9,988,320

Stamp duty [refer schedule 19(w)] 5,107,137 5,107,137

b) Amalgamation

a. Background and nature of business

Scheme of Amalgamation

A Scheme of Amalgamation (the Scheme of Amalgamation) pursuant to Sections 391 to 394 of the Companies Act, 1956 (the Act) and other applicable provisions of act was approved by the Honourable High Court of Karnataka for the merger of Solectron EMS India Limited (the transferor) with Centum Electronics Limited (the transferee).

The transferor company is engaged in the business of electronic manufacturing services (EMS), encompassing the manufacture of printed circuit boards assembly (PCBA), system assembly, repair and return business (the"EMS business").

The Scheme of Amalgamation was approved by the shareholders of the transferor and transferee companies on 26 February 2010. The Honourable High Court of Karnataka sanctioned the Scheme of Amalgamation vide its order dated 16 July 2010. The scheme became effective on 27 July 2010 on submission of the order of the High Court of Karnataka with the Registrar of Companies at Bangalore.

b. Salient features of the Scheme of Amalgamation

The salient features of the Scheme of Amalgamation are as follows:

- The appointed date of the Scheme of Amalgamation for the merger is 1 April 2009 (the appointed date).

- The transferee company shall, issue and allot to each member of the transferor company equity shares in the transferee company in the ratio of two equity shares in the transferee company of the face value of Rs 10 per equity share, credited as fully paid up, for every 3 fully paid-up equity share of Rs. 10 each held by the members in the transferor company. No fractional certificates / coupons are to be issued.

- Consequent to the issue of shares as stated above, the issued, subscribed and paid-up equity capital of the transferee company of Rs 74,000,000 comprising of 7,400,000 equity shares of the face value of Rs. 10 each, fully paid-up, shall stand increased to Rs. 123,333,330 comprising of 12,333,333 equity shares of the face value of Rs. 10 each, fully paid-up.

- The Board of Directors of the transferee company shall consolidate all fractional entitlements arising due to the issue of equity shares in terms of preceding paragraph to the shareholders of the transferor company and thereupon issue and allot equity shares in lieu thereof to a separate trust created for the purpose which shall hold the equity shares in trust for and on behalf of the members entitled to such fractional entitlements with the express understanding that such trust shall sell the same at such time or times and at such price or prices to such person or persons, as it deems fit. The said trust shall distribute such net sale proceeds to the members in the same proportion as their respective fractional entitlements bear to the consolidated fractional entitlements.

- Upon the coming into effect of the Scheme of Amalgamation, and with effect from the appointed date, the transferor company shall be deemed to have been carrying on and to be carrying on all business and activities relating to the transferor company and stand possessed of all the estates, assets, rights, title and interest of the transferor company for and on account of, and in trust for, the transferee company.

c. Accounting treatment

- The above Scheme of Amalgamation is an amalgamation in the nature of merger in accordance with the requirements of Accounting Standard 14 "Accounting for Amalgamations" and has been accounted for accordingly as per the requirements of the aforesaid standard.

- With effect from the appointed date of the Scheme of Amalgamation, the transferee company have recorded all the assets and liabilities of the transferor company at their respective book values. Further, all transactions between the transferor and the transferee post the appointed date have been eliminated on Amalgamation;

- The net assets of the transferor company acquired by the transferee company in excess of the fresh share capital issued by the transferee company to the shareholders of the transferor company after adjustments of the inter-company investment holdings and inter-company balances, if any, has been adjusted against the General Reserve account of the transferee company in accordance with the requirements of the approved Scheme of Amalgamation.

n) The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the ‘Micro, Small and Medium Enterprises Development Act, 2006 (‘the Act). Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2011 has been made in the financial statements based on information received and available with the Company. Further in view of the Management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier as at the balance sheet date.

o) Gratuity plan

The following table set out the status of the gratuity plan as required under AS 15 - Revised. Reconciliation of opening and closing balances of the present value of the defined benefit obligation:

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

The Company does not have any planned assets.

p) Segmental reporting

The Company operates through two divisions, component business comprising of Modules (Products segment) and Electronic Manufacturing Services (Services segment), which are considered to be the primary segments and geography as the secondary segment.

The accounting principles used in the preparation of the financial statements are also consistently applied to record income and expenditure in individual segments.

Assets, liabilities, revenues and direct expenses in relation to segments are categorised based on items that are individually identified to that segment, while other items, wherever allocable, are apportioned to the segments on appropriate basis. Certain items are not specifically allocable to individual segments as the underlying services are used interchangeably. The Company, therefore, believes that it is not practicable to provide segment disclosures relating to such items, and accordingly such items are separately disclosed as ‘unallocated.

Geographic segments:

The Companys business is organised into four geographic segments. Revenues are attributable to individual geographic segments based on the location of the customer. The Companys fixed assets are situated in India.

q) Stock option plans

Employee stock option plan 2007 (Centum ESOP - 2007)

The Centum ESOP -2007 was approved by the board of directors of the Company in October 2007 and by the shareholders in December 2007. The 2007 plan provides for the issue of 416,666 shares (includes 166,666 shares in pursuant to the merger of Solectron EMS India Limited with the Company) to the employees. The plan is administered by a compensation committee. Options will be issued to employees of the Company and also its subsidiary at an exercise price, which shall not be less than the market price immediately preceding the date of grant. The equity shares covered under these options vest over a period ranging from twelve to forty eight months from the date of grant. The exercise period is ten years from the date of vesting.

Pro forma accounting for stock option grants

The Company applies the intrinsic value method of accounting for determining compensation cost for its stock based compensation plan. The Company has therefore adopted the pro forma disclosure provisions as required by the Guidance Note on"Accounting for Employee Share Based Payments" issued by the Institute of Chartered Accountants of India with effect from 1 April 2005.

Had the compensation been determined using the fair value approach described in the aforesaid Guidance Note, the Companys net profit and basic and diluted earnings per share as reported would have reduced to the pro forma amounts as indicated:

r) Related party transactions

A. Parties where control exists

Apparao V Mallavarapu (directly and indirectly exercises 55.58% voting power in the Company)

Subsidiary of the Company Centum Rakon India Private Limited

s) Leases

The Company has taken office facilities under cancelable operating lease agreement. The Company intends to renew the agreement in the normal course of its business. Total lease rentals recognized in the profit and loss for the year in respect of the aforementioned lease is Rs 10,409,541 (previous year: Rs 8,448,721).

The Company has also given office facilities under cancelable operating lease agreement to its subsidiary. Total lease rental income recognized in the profit and loss for the year with respect to the above is Rs 3,698,400 (previous year: Rs 2,300,400).

The above does not include compensated absences and gratuity calculated on actuarial basis, as separate figures for directors are not available.

*Value of perquisites has been computed as per the method prescribed under Income Tax Act, 1961.

Computation of net profit in accordance with Section 198, read with Section 349 of the Companies Act, 1956, and calculation of maximum managerial remuneration (including commission) payable to the Managing Director:

*Depreciation computed based on useful lives which are lower lives as mentioned in Schedule XIV of the Companies Act, 1956.

The members of the Company on 30 July 2009 approved the remuneration payable to the managing director for a period of five years with effect from 1 August 2009 to 31 July 2014, which was in excess of the limits prescribed under section 198(4), 309(3) and Schedule XIII as amended by the Companies Act, 1956. The same has been approved by Central Government of India.

w) Provision for stamp duty charges

Based on a demand notice dated 12 February 2010 received from District Registrar, Stamps and registration Department, Karnataka, the Company has estimated and provided rs 11,174,165 towards additional stamp duty liability against a claim of Rs 16,281,302 in the aforementioned demand notice, payable pursuant to the demerger of EMS business from Centum Electronics Limited (formerly known as Solectron Centum Electronics Limited) on 1 October 2006, as per the Scheme of Amalgamation approved by the Honourable High Court of Karnataka effective 13 July 2007. The differential amount of Rs 5,107,137 has been disclosed as a contingent liability [refer schedule 19(a)].

Further, the Company has provided rs 7,379,248 during the current year towards stamp duty payable pursuant to the merger of Solectron EMS India Limited with the Company.

Statement on subsidiary pursuant to Circular No: 51/12/2007-CL-III dt. February 8, 2011 issued by Ministry of Corporate Affairs

Pursuant to the said circular, The Board of Directors of the Company has passed a resolution at its meeting held on May 26, 2011 consenting for not attaching the balance sheet of the subsidiary, Centum Rakon India Private Limited and other documents required to be attached to the balance sheet as required by law to the balance sheet of the Company.

The Company hereby undertakes that annual accounts of the subsidiary, Centum Rakon India Private Limited and the related detailed information shall be made available to shareholders of the Company and the subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiary company shall also be kept for inspection by any shareholders at the head office of the Company at 44, KHB Industrial Area, Yelahanka New Town, Bangalore -560106. The Company shall furnish a hard copy of details of accounts of subsidiary to any shareholder on demand.


Mar 31, 2010

1. Background

Centum Electronics Limited ("the Company") was incorporated as a public limited company on 8 January 1993 as Centum Electronics Limited ("Centum") and commenced commercial production in 1994.

Pursuant to the Scheme of Amalgamation [refer schedule 19(b)], Solectron EMS India Limited has been amalgamated with the Company with an appointed date of 1 April 2009.

The Company is primarily involved in

- manufacture of Advanced Microelectronics Modules and Resistor Networks catering to the communications, military, aerospace and industrial electronics markets; and

- manufacture of printed circuit board assembly (PCBA) and Repair and Return business catering to the automobile, communications and industrial electronics markets

a) Capital commitment and contigent liabilities

Rs

As at As at

31 March 2010 31 March 2009

Capital commitment

Estimated amount of contracts remaining to be

executed on capital account (net of advances) 50,664,967 350,956

Contingent liabilities

Claims against the Company not acknowledged as debts in respect of:

Income tax 33,384,502 33,384,502

Sales tax 5,106,330 6,968,273

Excise duty 9,988,320 -

Stamp duty [refer schedule 19(w)] 5,107,137 -

b) Amalgamation

a. Background and nature of business

Scheme of Amalgamation

A Scheme of Amalgamation (the Scheme of Amalgamation) pursuant to Sections 391 to 394 of the Companies Act, 1956 (the Act) and other applicable provisions of act was approved by the Honourable High Court of Karnataka for the merger of Solectron EMS India Limited (the transferor) with Centum Electronics Limited (the transferee).

The transferor company is engaged in the business of electronic manufacturing services (EMS), encompassing the manufacture of printed circuit boards assembly (PCBA), system assembly, repair and return business (the "EMS business").

The Scheme of Amalgamation was approved by the shareholders of the transferor and transferee companies on 26 February 2010. The Honourable High Court of Karnataka sanctioned the Scheme of Amalgamation vide its order dated 16 July 2010. The scheme became effective on 30 July 2010 on submission of the order of the High Court of Karnataka with the Registrar of Companies at Bangalore.

b. Salient features of the Scheme of Amalgamation

The salient features of the Scheme of Amalgamation are as follows:

• The appointed date of the Scheme of Amalgamation for the merger is 1 April 2009 (the appointed date).

- The transferee company shall, issue and allot to each member of the transferor company equity shares in the transferee company in the ratio of two equity shares in the transferee company of the face value of Rs 10 per equity share, credited as fully paid up, for every 3 fully paid-up equity share of Rs. 10 each held by the members in the transferor company. No fractional certificates / coupons are to be issued.

- Consequent to the issue of shares as stated above, the issued, subscribed and paid-up equity capital of the transferee company of Rs 74,000,000 comprising of 7,400,000 equity shares of the face value of Rs. 10 each, fully paid-up, shall stand increased to Rs. 123,333,330 comprising of 12,333,333 equity shares of the face value of Rs. 10 each, fully paid-up.

- The Board of Directors of the transferee company shall consolidate all fractional entitlements arising due to the issue of equity shares in terms of preceding paragraph to the shareholders of

the transferor company and thereupon issue and allot equity shares in lieu thereof to a separate trust created for the purpose which shall hold the equity shares in trust for and on behalf of the members entitled to such fractional entitlements with the express understanding that such trust shall sell the same at such time or times and at such price or prices to such person or persons, as it deems fit. The said trust shall distribute such net sale proceeds to the members in the same proportion as their respective fractional entitlements bear to the consolidated fractional entitlements.

- Upon the coming into effect of the Scheme of Amalgamation, and with effect from the appointed date, the transferor company shall be deemed to have been carrying on and to be carrying on all business and activities relating to the transferor company and stand possessed of all the estates, assets, rights, title and interest of the transferor company for and on account of, and in trust for, the transferee company.

c. Accounting treatment

- The above Scheme of Amalgamation is an amalgamation in the nature of merger in accordance with the requirements of Accounting Standard 14 "Accounting for Amalgamations" and has been accounted for accordingly as per the requirements of the aforesaid standard.

- With effect from the appointed date of the Scheme of Amalgamation, the transferee company have recorded all the assets and liabilities of the transferor company at their respective book values. Further, all transactions between the transferor and the transferee post the appointed date have been eliminated on Amalgamation;

- The net assets of the transferor company acquired by the transferee company in excess of the fresh share capital issued by the transferee company to the shareholders of the transferor company after adjustments of the inter-company investment holdings and inter-company balances, if any, has been adjusted against the General Reserve account of the transferee company in accordance with the requirements of the approved Scheme of Amalgamation.

The amalgamation has been accounted for in the books of the transferee company on 1 April 2009 in the following manner:

n) The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the ‘Micro, Small and Medium Enterprises Development Act, 2006 (‘the Act). Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2010 has been made in the financial statements based on information received and available with the Company. Further in view of the Management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier as at the balance sheet date.

p) Segmental reporting

The Company operates through two divisions, component business comprising of Modules (Products segment) and Electronic Manufacturing Services (Services segment), which are considered to be the primary segments and geography as the secondary segment.

The accounting principles used in the preparation of the financial statements are also consistently applied to record income and expenditure in individual segments.

Assets, liabilities, revenues and direct expenses in relation to segments are categorised based on items that are individually identified to that segment, while other items, wherever allocable, are apportioned to the segments on appropriate basis. Certain items are not specifically allocable to individual segments as the underlying services are used interchangeably. The Company, therefore, believes that it is not practicable to provide segment disclosures relating to such items, and accordingly such items are separately disclosed as ‘unallocated.

Geographic segments:

The Companys business is organised into four geographic segments. Revenues are attributable to individual geographic segments based on the location of the customer. The Companys fixed assets are situated in India.

q) Stock option plans

Employee stock option plan 2007 (Centum ESOP - 2007)

The Centum ESOP -2007 was approved by the board of directors of the Company in October 2007 and by the shareholders in December 2007. The 2007 plan provides for the issue of 250,000 shares to the employees. The plan is administered by a compensation committee. Options will be issued to employees of the Company and also its subsidiary at an exercise price, which shall not be less than the market price immediately preceding the date of grant. The equity shares covered under these options vest over a period ranging from twelve to forty eight months from the date of grant. The exercise period is ten years from the date of vesting.

Pro forma accounting for stock option grants

The Company applies the intrinsic value method of accounting for determining compensation cost for its stock based compensation plan. The Company has therefore adopted the pro forma disclosure provisions as required by the Guidance Note on "Accounting for Employee Share Based Payments" issued by the Institute of Chartered Accountants of India with effect from 1 April 2005.

Had the compensation been determined using the fair value approach described in the aforesaid Guidance Note, the Companys net profit and basic and diluted earnings per share as reported would have reduced to the pro forma amounts as indicated:

r) Related party transactions

A. Parties where control exists

Apparao V Mallavarapu (directly and indirectly exercises 55.58% voting power in the Company)

Subsidiary of the Company Centum Rakon India Private Limited

B. Other related parties where transactions have taken place during the year

Parties under common control

Centum Industries Private Limited

Solectron EMS India Limited (upto 31 March 2009)

C. Key executive management personnel represented on the Board Mr. Apparao V Mallavarapu – Managing Director

s) Leases

The Company has taken office facilities under cancelable operating lease agreement. The Company intends to renew the agreement in the normal course of its business. Total lease rentals recognized in the profit and loss for the year in respect of the aforementioned lease is Rs 8,448,721 (previous year: Rs 1,362,998).

The Company has also given office facilities under cancelable operating lease agreement to its subsidiary. Total lease rental income recognized in the profit and loss for the year with respect to the above is Rs 2,300,400 (previous year: Rs 2,300,400).

t) Deferred taxes

The composition of net deferred tax assets and liabilities of the Company as at 31 March 2010 and 31 March 2009, respectively are as under:

The above does not include compensated absences and gratuity calculated on actuarial basis, as separate figures for directors are not available.

*Value of perquisites has been computed as per the method prescribed under Income Tax Act, 1961.

Computation of net profit in accordance with Section 198, read with Section 349 of the Companies Act, 1956, and calculation of maximum managerial remuneration (including commission) payable to the Managing Director:

The members of the Company on 30 July 2009 approved the remuneration payable to the managing director for a period of five years with effect from 1 August 2009 to 31 July 2014, which was in excess of the limits prescribed under section 198(4), 309(3) and Schedule XIII as amended by the Companies Act, 1956. The same has been approved by Central Government of India.

v) Un-hedged foreign currency disclosures:

The Companys foreign currency exposure on account of foreign currency denominated payables not hedged is as follows:

w) Provision for stamp duty charges

Based on a demand notice dated 12 February 2010 received from District Registrar, Stamps and Registration Department, Karnataka, the Company has estimated and provided Rs 11,174,165 towards additional stamp duty liability against a claim of Rs 16,281,302 in the aforementioned demand notice, payable pursuant to the demerger of EMS business from Centum Electronics Limited (formerly known as Solectron Centum Electronics Limited) on 1 October 2006, as per the Scheme of Amalgamation approved by the Honourable High Court of Karnataka effective 13 July 2007. The differential amount of Rs 5,107,137 has been disclosed as a contingent liability [refer schedule 19(a)].

x) The tax liability of the Company is higher than the net profits due to the higher depreciation allowance in the books as compared with the allowance allowed under the Indian Income Tax rules. The above difference in depreciation is not fully offset by a deferred tax asset as the deferred tax asset to the extent it gets reversed during the tax holiday period is not recognized as at the current balance sheet date.

y) The Board of Directors have proposed a dividend of 10% for the year ended 31 March 2010 on the total issued capital including the equity shares to be issued pursuant to the Scheme of Amalgamation. Accordingly, the proposed dividend of Rs 12,333,333 as at 31 March 2010 includes the dividend proposed and accrued on the 4,933,333 shares which are to be issued pursuant to the Scheme of Amalgamation.

z) Previous years figures have been re-grouped/re-arranged wherever necessary to conform to current years presentation and are not strictly comparable with the current year figures [refer schedule 19(b).

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