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Notes to Accounts of Cosmo Films Ltd.

Mar 31, 2015

1. (i) Of the above 242,051 (Previous year 242,051) shares have been alloted to erstwhile shareholders of Gujarat Propack Limited on amalgamation.

(ii) Of the above 8,486,705 (Previous year 8,486,705) shares have been allotted as fully paid bonus shares by capitalisation of capital reserves and share premium account.

2. a) There is no movement in equity share capital during the current year and previous year.

b) Terms and rights attached to equity shares

The Company has only one class of equity shares having the par value of Rs. 10 per share. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees.

During the year ended 31 March 2015 the amount of per share dividend recognised as distributions to equity shareholders was Rs. 3.50 per share (previous year Rs. 1 per share). The dividend proposed by Board of Directors is subject to approval of shareholders in Annual General Meeting.

In the event of liquidation of the Company, the holder of equity shares will be entitled to receive remaining assets of the Company, after payment of all liabilities. The distribution will be in proportion to the number of equity shares held by the shareholders.

3. a) Foreign currency loans comprises of :

(i) Loan of USD 10,000,000 taken from ICICI Bank during the financial year 2010-11 and carries interest @ Libor 400 bps per annum. The loan is repayable in 5 equal semi annual installments of USD 2,000,000 each after moratorium of 3.5 years from the date of loan.

(ii) Loan of USD 13,272,220 taken from Landesbank Baden Wurttemberg Bank (LBBW) during the financial year 2008-09 and 2009-10 and carries interest @ Libor 37.5 bps per annum. The loan is repayable in 16 equal semi annual installments of approx. USD 832,640 each after six month from the date of start of commercial production.

(iii) Loan of USD 10,000,000 taken from IFC Bank during the financial year 2011-12 and 2013-14 and carries interest @ Libor 400 bps per annum. The loan is repayable in 17 semi-annual installments after moratrorium of 2.5 years from the date of loan.

(iv) Loan of EUR 10,367,450 taken from Landesbank Baden Wurttemberg Bank (LBBW) during the financial year 2012- 13 to 2014-15 and carries interest @ Euribor 105 bps per annum. The loan is repayable in 17 equal semi annual installments of EUR 609,850 each after six month from the signing of final acceptance certificate for start of commercial production.

(v) Loan of USD 7,000,000 taken from DBS Bank Limited during the financial year 2012-13 and carries interest @ Libor 225 bps per annum. The loan is repayable in 8 semi-annual installments from April-2015. (The loan has been fully hedged into an equivalent Rupee loan with fixed rate of interest).

b) Rupee term loans comprises of :

(i) Loan of Rs. 108,675,000 taken from Kotak Mahindra Bank during the financial year 2011-12 and carries interest @ base rate 3.75% per annum. The loan is repayable in 78 equal monthly installments of Rs. 1,393,000 alongwith interest from the date of loan. The loan has been repaid in full during the Financial Year 2014-15.

(ii) Loan of Rs. 300,000,000 taken from SBI during the financial year 2012-13 and 2013-14 and carries interest @ base rate 2.25% per annum. The loan is repayable after a moratorium of 12 month from the date of disbursement in 8 equal quarterly installments of Rs. 37,500,000.

(iii) Loan of Rs. 600,000,000 taken from SBI during the financial year 2013-14 and carries interest @ base rate 2.3% per annum. The loan is repayable after a moratorium of 24 month from the date of disbursement in 24 equal quarterly installments of Rs. 25,000,000.

(iv) Loan of Rs. 128,700,000 taken from IDBI Bank during the financial year 2014-15 and carries interest @ base rate 2.5% per annum. The loan is repayable in 10 structured half yearly installments starting from 31 March 2018.

c) Vehicle loans taken from Union Bank of India carries interest @10.5% -12% per annum. This loan is repayable in 3 years.

d) Details of security for each type of borrowings:-

(i) Foreign currency loan from ICICI Bank is secured by subservient charge on all of the Company's movable fixed assets, both present and future, save and except plant and machineries at Baska and Chikalthana and any assets charged exclusively to other lenders.

(ii) Foreign currency loan from Landesbank Baden Wurttemberg Bank (LBBW) taken in financial year 2008-09 and financial year 2009-10 is secured against hypothecation of machinery financed out of the loan amount at the Company's plant at Karjan, Vadodara.

(iii) Foreign currency loan from IFC Bank is secured by first ranking security interest over all present and future movable and immovable fixed assets except the excluded assets, ranking pari passu with the other lenders.

(iv) Foreign currency loan from Landesbank Baden Wurttemberg Bank (LBBW) taken in financial year 2012-13 and 2013-14 is secured against hypothecation of machinery financed out of the loan amount at the Company's new plant at Shendra, Aurangabad.

(v) Foreign currency loan from DBS Bank is secured by pari passu charge on the movable and immovable fixed assets both present and future of the Company, except the excluded assests.

vi) Rupee term loan from Kotak Mahindra Bank is secured against mortage by way of exclusive charge on the immovable properties being commercial properties situated at 1004-1010, 10th Floor, DLF Tower, Jasola New Delhi. The loan has been repaid and security released during Financial Year 2014-15.

vii) Corporate loan from IDBI Bank taken in financial year 2014-15 is secured against (i) DP Note (ii) first pari passu charge over the movable and immovable fixed assets of the company both present and future, excluding assets having exclusive charge (iii) second pari passu charge on current assets of the company both present and future.

(viii) Rupee term loan of Rs. 30 crores from SBI is secured against pari-passu charge with other term lenders on entire movable and immovable fixed assets of the Company, both present and future except excluded assets.

(ix) Rupee term loan of Rs. 60 crores from SBI is secured against pari-passu charge with other term lenders on entire movable and immovable fixed assets of the Company, both present and future except excluded assets.

(x) Vehicle loans from Union Bank of India are secured against hypothecation of vehicles financed out of the loan amount.

e) Current maturities of long term borrowings are disclosed under the head other current liabilites.

4. Notes:

a) Cash credits/ working capital demand loans/ export packing credits are secured/to be secured by hypothecation of inventories, trade receivable and second charge on fixed assets secured to financial institutions except assets exclusively charged.

Cash credit and working capital demand loans from the bank comprises of the following:

(i) Cash credit/working capital demand loan of Rs. 30 crores sanctioned by Export Import Bank of India is repayable on demand and carries interest rate as mutually decided.

(ii) Working capital demand loan of Rs. 20 crores sanctioned by HDFC Bank is repayable on demand and carries interest rate as mutually decided.

(iii) Cash credit/working capital demand of Rs. 15 crores sanctioned by ICICI Bank is repayable on demand and carries interest @ base rate 3.00% per annum.

(iv) Cash credit/working capital demand of Rs. 25 crores sanctioned by ING Vysya Bank is repayable on demand and carries interest @ base rate 2.35% per annum.

(v) Cash credit/working capital demand of Rs. 65 crores sanctioned by Union Bank of India is repayable on demand and carries interest @ base rate 2% per annum.

(vi) Cash credit/working capital demand of Rs. 15 crores sanctioned by YES Bank of India is repayable on demand and carries interest @ base rate 2.5% per annum.

(vii) Cash credit/working capital demand of Rs. 40 crores sanctioned by IDBI Bank is repayable on demand and carries interest @ base rate 2.0 per annum.

(viii) Cash credit of Rs. 50 crores sanctioned by State Bank of India is repayable on demand and carries interest @ base rate 1.5% per annum.

(ix) Cash credit/working capital loan/export packing credit of Rs. 20 crores sanctioned by DBS Bank is repayable on demand and carries interest as mutually agreed.

5. EXCEPTIONAL ITEMS

Exceptional items represents net loss on foreign currency transaction and translation amounting to ` 9.20 crores (previous year loss ` 20.50 crores).

6. Contingent liabilities and commitments

(i) Contingent liabilities

Particulars As at As at 31 March 2015 31 March 2014

a) Disputed demands for income tax (refer note g below) 4.83 4.83

b) Disputed demands for excise and custom duty and service tax 5.17 3.81

c) Disputed demands for labour/ employee dispute 5.09 4.15

d) Claim against the Company not acknowledged as debts 0.15 0.12

e) Discounting of export customer invoices (refer note h below) 20.34 25.14

f) Discounting of domestic customer invoices (refer note i below) 3.89 -

g) Disputed demand for income tax includes a dispute of Rs. 4.83 crores (previous year Rs. 4.83) between the Company and income tax department over computation of deduction under section 80HHC of the Income Tax Act, 1961. The Company has filed a special leave petition against the order of Hon'ble Court which has been accepted by Supreme Court and is pending. Based on the legal opinion taken from an independent expert, the management is of the view that it is more likely than not that matter will be decided in favour of the Company.

h) It represents discounted export debtors amount to Rs. 9.12 crores (previous year Rs. 12.46 crores) against letter of credit and other discounted debtors of Rs. 11.22 crores (previous year Rs. 12.68 crores) which has 90% credit insurance coverage from ECGC. All the discounted invoices have been reduced from Trade Receivables in note 15.

i) It represents discounted domestic debtors amount to Rs. 3.89 crores (previous year Rs. Nil) against letter of credit. All the discounted invoices have been reduced from Trade Receivables in note 15.

j) The Company has given corporate guarantee for term loan facility of Rs. Nil (previous year Rs. 8.41 crores) availed by its step down subsidiary.

(ii) Commitments

The Company has the following commitments :

Particulars As at As at 31 March 2015 31 March 2014

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) 10.89 4.94

Letter of credit opened for which the material has not been shipped 61.17 75.16 as on the date of the balance sheet.

iii) The following amounts are to be credited to investor education and protection fund as and when due:

Particulars As at As at 31 March 2015 31 March 2014

Unclaimed dividend 0.78 0.84

7. Employee benefits

Defined benefit plans (funded)

The Company makes contribution towards gratuity to a defined contribution retirement benefits plan for qualifying employees. The Company has taken policy with Life Insurance Corporation of India to provide for payment of retirement benefit to vested employees. The present value of obligation is determined based on the actuarial valuation.

8. Related party disclosure

In accordance with the required Accounting Standard (AS-18) on related party disclosures where control exist and where transactions have taken place and description of the relationship as identified and certified by management are as follows:

i) List of related parties and relationships:

A. Subsidiary and step-down subsidiary companies

a) CF Global Holdings Limited, Mauritius

b) Cosmo Films Inc., USA

c) CF (Netherlands) Holdings Limited BV., Netherlands

d) Cosmo Films (Singapore) Pte. Limited, Singapore

e) Cosmo Films Japan (GK)

f) Cosmo Films Korea Limited, Korea

g) CF Investment Holding Private (Thailand) Company Limited, Thiland

B. Enterprises over which Key managerial personnel of the Company and their relatives have significant influence:

a) Pravasi Enterprises Limited

b) Sunrise Manufacturing Company Private Limited

c) Cosmo foundation

C. Key management personnel

a) Mr. Ashok Jaipuria, Chairman and Managing Director

9. Notes:

i) The Company has entered into interest rate swap contract (floating rate to fixed rate) to hedge its risk associated with LIBOR fluctuations and such instruments qualify as effective hedges. In accordance with Accounting Standard 30, "Financial Instruments - recognition and measurement" the mark to market loss as on 31 March, 2015 is estimated at Rs. 0.43 crores (previous year Rs. 0.81 crores).

ii) The Company has entered into a cross currency swap agreement with DBS Bank for hedging of installment and interest rate for term loan amounting to USD 7,000,000 taken in the previous year. In accordance with Accounting Standard 30, "Financial Instruments - recognition and measurement" the mark to market gain as on 31 March 2015 is estimated at Rs. 5.25 crores (previous year loss Rs. 4.99 crores).

iii) The Company has entered into currency options to hedge two of its ECBs amounting to USD 8,000,000 and USD 4,995,838 respectively during the previous year. In accordance with Accounting Standard 30, "Financial Instruments - recognition and measurement" the mark to market gain on these options as on 31 March 2015 is estimated at Rs. 1.14 crores.

10. Building includes Rs. 0.64 crores (previous year Rs. 0.64 crores) towards cost of residential space in a Co-operative Housing Society. The Company has taken possession of the same in terms of agreement to sell. Conveyance deed is yet to be registered. Besides, the amount includes cost of shares of the said society received by the Company which are yet to be transferred in the name of the Company.

11. Per transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961, the Company is required to use certain specific methods in computing arm's length prices of international transactions with associated enterprises and maintain adequate documentation in this respect. Since law requires existence of such information and documentation to be contemporaneous in nature, the Company has appointed independent consultants for conducting a Transfer Pricing Study (the 'Study') to determine whether the transactions with associate enterprises undertaken during the financial year are on an "arms length basis". Management is of the opinion that the Company's international transactions are at arm's length and that the results of the on-going study will not have any impact on the financial statements and the independent consultants appointed have also preliminarily confirmed that they do not expect any transfer pricing adjustments.

12. Previous years figures

Previous years figures have been regrouped / rearranged wherever considered necessary.


Mar 31, 2013

1. Employee benefits

Defined benefit plans (funded)

The Company makes contribution towards gratuity to a defined contribution retirement benefits plan for qualifying employees. The Company has taken policy with Life Insurance Corporation of India to provide for payment of retirement benefits to vested employees. The present value of obligation is determined based on actuarial valuation.

2. Related party disclosure

In accordance with the required Accounting Standard (AS-18) on related party disclosures where control exist and where transactions have taken place and description of the relationship as identified and certified by management are as follows:

i) List of related parties and relationships:

A. Subsidiary and step-down subsidiary companies

a) CF Global Holdings Limited, Mauritius

b) Cosmo Films Inc., USA

c) CF (Netherlands) Holdings Limited BV., Netherlands

d) Cosmo Films (Singapore) Pte. Limited, Singapore

e) Cosmo Films Japan (GK)

f) Cosmo Films Korea Limited, Korea

B. Enterprises over which Key managerial personnel of the Company and their relatives have significant influence:

a) Pravasi Enterprises Limited

b) Sunrise Manufacturing Company Private Limited

C. Key management personnel

a) Mr. Ashok Jaipuria, Chairman and Managing Director

3 a) Building includes Rs 0.64 crores towards cost of residential space in a Co-operative Housing Society. The Company has taken possession of the same in terms of agreement to sell. Conveyance deed is yet to be registered. Besides, the amount includes cost of shares of the said society received by the Company which are yet to be transferred in the name of the Company.

b) Building includes cost of 5 shares of Rs 50 each of Pluto Appartment Co-operative Housing Society Limited paid as part of cost of flat.

4. Per transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961, the Company is required to use certain specific methods in computing arm''s length prices of international transactions with associated enterprises and maintain adequate documentation in this respect. Since law requires existence of such information and documentation to be contemporaneous in nature, the Company has appointed independent consultants for conducting a Transfer Pricing Study (the ''Study'') to determine whether the transactions with associate enterprises undertaken during the financial year are on an "arms length basis". Management is of the opinion that the Company''s international transactions are at arm''s length and that the results of the on-going study will not have any impact on the financial statements and the independent consultants appointed have also preliminarily confirmed that they do not expect any transfer pricing adjustments.

5. Previous years figures

Previous years figures have been regrouped/rearranged wherever considered necessary.


Mar 31, 2012

Notes:

(i) Of the above 242,051 shares have been alloted to erstwhile shareholders of Gujarat Propack Limited on amalgamation.

(ii) 8,486,705 shares have been allotted as fully paid bonus shares by capitalisation of capital reserves and share premium account.

(a) There is no movement in equity share capital during the current year and previous year.

(b) Terms and rights attached to equity shares

The Company has only one class of equity shares having the par value of Rs 10 per share. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees.

During the year ended 31 March, 2012 the amount of per share dividend recognised as distributions to equity shareholders was Rs 5 (previous year Rs 5 per share).

In the event of liquidation of the Company, the holder of equity shares will be entitled to receive remaining assets of the Company, after payment of all liabilities. The distribution will be in proportion to the number of equity shares held by the shareholders.

Notes:

a) Foreign currency loans comprises of :

(i) Loan of USD 10,000,000 taken from ICICI Bank during the financial year 2010-11 and carries interest @ Libor 400 bps per annum. The loan is repayable in 5 equal semi annual installments of USD 2,000,000 each after moratorium of 3.5 years from the date of loan.

(ii) Loan of USD 7,500,000 taken from HSBC PLC Bank during the financial year 2008-09 and carries interest @ Libor 150 bps per annum. The loan is repayable in 6 equal semi annual installments of USD 1,250,000 each after moratorium of 2.5 years from the date of loan.

(iii) Loan of USD 13,272,220 taken from Landesbank Baden Wurttemberg Bank (LBBW) during the financial year 2008-09 and 2009-10 and carries interest @ Libor 37.5 bps per annum. The loan is repayable in 16 equal semi annual install- ments of approx. USD 832,640 each after six month from the date of start of commercial production.

(iv) Loan of USD 5,000,000 taken from IFC Bank during the financial year 2011-12 and carries interest @ Libor 400 bps per annum. The loan is repayable in 15 equal semi-annual installments of USD 333,333 after moratrorium of 2.5 years from the date of loan.

b) Rupee term loans comprises of :

(i) Loan of Rs 108,675,000 taken from Kotak Mahindra Bank during the financial year 2011-12 and carries interest @ base rate 3.75% per annum. The loan is repayable in 78 equal monthly installments of Rs 1,393,000 alongwith interest from the date of loan.

(ii) Loan of Rs 318,159,170 taken from IDBI Bank during the financial year 2008-09 and carries interest @ base rate 2.65% per annum. The loan is repayable in 10 equal semi annual installments of Rs 31,815,917 alongwith interest from the date of loan.

c) Vehicle loans taken from Union Bank of India carries interest @10.5% -12% per annum. This loan is repayable in 3 years.

d) Details of security for each type of borrowings:-

(i) Foreign currency loan from ICICI Bank is secured by subservient charge on all of the Company's moveable fixed assets, both present and future, save and except plant and machineries at Baska and Chikalthana and any assets charged exculsively to other lenders.

(ii) Foreign currency loan from Landesbank Baden Wurttemberg Bank (LBBW) are secured against hypothecation of machinery financed out of the loan amount.

(iii) Foreign currency loan from HSBC PLC Bank is secured by first pari-passu charge over the entire fixed assets of the Company except assets exclusively charged to Landesbank Baden Wurttemberg Bank (LBBW) and other assets exempted by the security trustee from the creation of security itself.

iv) Foreign currency loan from IFC Bank is secured by first ranking security interest, ranking pari passu with the other lenders over all assets and rights subject to the security documents.

(v) Rupee term loan from Kotak Mahindra Bank is secured against mortgage by way of exclusive charge on the immov- able properties being commercial properties situated at 1004-1010, 10th floor, DLF Towers, Jasola, New Delhi.

(vi) Rupee term loan from IDBI Bank is secured against pari-passu first charge on entire fixed assets of the Company by way of extension except assets exclusively charged to Landesbank Baden Wurttemberg (LBBW).

(vii) Vehicle loans from Union Bank of India are secured against hypothecation of vehicles financed out of the loan amount.

e) Current maturities of long term borrowings are disclosed under the head other current liabilites.

Notes:

a) Cash credits/ working capital demand loans are secured by hypothecation of inventories, trade receivable and second charge on fixed assets secured to financial institutions except assets exclusively charged.

Cash credit and working capital demand loans from the bank comprises of the following:

(i) Cash credit/working capital demand loan of Rs 30 crores sanctioned by Export Import Bank of India is repayable on demand and carries interest rate @ 11.75% per annum, Libor 4.75% and 12% per anuum for PCFC INR, PCFC USD and working capital demand loan respectively.

(ii) Cash credit/working capital demand loan of Rs 15 crores sanctioned by CITI Bank is repayable on demand and carries interest as mutually decided.

(iii) Working capital demand of Rs 20 crores sanctioned by HDFC Bank is repayable on demand and carries interest rate as mutually decided.

(iv) Cash credit/working capital demand of Rs 15 crores sanctioned by ICICI Bank is repayable on demand and carries interest rate @ base rate 4% per annum.

(v) Cash credit/working capital demand of Rs 25 crores sanctioned by ING Vysya Bank is repayable on demand and carries interest rate @ base rate 3% per annum.

(vi) Cash credit/working capital demand of Rs 55 crores sanctioned by Union Bank of India is repayable on demand and carries interest rate @ base rate 3% per annum.

(vii) Cash credit/working capital demand of Rs 25 crores sanctioned by YES Bank is repayable on demand and carries interest rate as mutually decided.

(viii) Cash credit/working capital demand of Rs 20 crores sanctioned by Kotak Mahindra Bank is repayable on demand and carries interest rate as mutually decided.

(ix) Cash credit/working capital demand of Rs 30 crores sanctioned by IDBI Bank is repayable on demand and carries interest rate @ base rate 2.5% per annum.

(x) Cash credit of Rs 50 crores sanctioned by State Bank of India is repayable on demand and carries interest @ base rate 4% per annum."

b) Overdraft of Rs 5 crores from HDFC Bank are secured against pledge of the fixed deposits of the Company is repayable on demand and carries interest rate @ 11.5% per annum.

c) This comprises of unsecured portion of cash credit/working capital demand loan of Rs 25 crores sanctioned by YES Bank and is repayable on demand. This also includes unsecured portion of cash credit balance from Kotak Mahindra Bank and carries interest rate as mutually decided.

d) Short term loans of Rs 10 crores is taken from Tata Capital Financials Services Limited, is repayable after 3 months and carries interest rate @ 12% per annum.

* The Company has circulated letters to all its suppliers requesting them to confirm whether they are covered under the Micro, Small and Medium Enterprises Development Act, 2006 ('MSMED'). Certain suppliers have provided the necessary confirmation alongwith the evidence of being Micro or Small enterprises. However from the majority of the suppliers these confirmations are still awaited. On the basis of available information no principal or interest is payable at the year end to any supplier covered under MSMED.

1. EXCEPTIONAL ITEMS

Exceptional items comprises of:

a) Profit on sale of land amounting to Rs 11.38 crores (previous year Nil) consequent to effective transfer of economic benefit to the buyer under the registered agreement to sale.

b) Net loss on foreign currency transaction and translation Rs 4.48 crores (previous year gain Rs 5.10 crores).

2. CONTINGENT LIABILITIES AND COMMITMENTS

(i) Contingent liabilities

Particulars As at As at 31 March 2012 31 March 2011

a) Disputed demands for income tax (refer note h below) 11.43 22.35

b) Disputed demands for excise and custom duty and service tax 4.01 4.29

c) Disputed demands for labour/ employee dispute 0.51 -

d) Claims against the Company not acknowledged as debts 0.15 0.50

e) Bonds executed in favour of government departments - 3.51

f) Rs 7.59 crores (previous year Rs 8.94 crores) realised on discounting of letter of credits which have been reduced from debtors in these accounts.

g) Letter of credit for Rs 22.06 crores (previous year Rs 22.50 crores) have been opened for which the material has not been shipped as on the date of the balance sheet.

h) Disputed demand for income tax includes a dispute of Rs 4.83 crores (previous year Rs 4.24) between the Company and income tax department over computation of deduction under section 80HHC of the Income Tax Act, 1961. During the year ended 31 March, 2012, the Honourable High Court of Delhi has passed an order against the Company in this matter. The Company has filed a special leave petition against the this order in the Supreme Court which has also been accepted. Based on the legal opinion taken from an independent expert, the management is of the view that it is more likely than not that matter will be decided in favour of the Company.

i) The company has claimed exemption benefits under sales tax incentive scheme for the financial years from 2000-01 to 2009-10 (Upto Aug'2009), though the tax has been paid under protest for some years. The said benefits have not been allowed during assessment for the financial years 2000-01 to 2005-06 for which appeals have been filed. The company has paid and expensed Rs 6.06 Crores (Previous year Rs 6.06 Crores) for the financial year 2000-01 to 2002-03 and 2005-06 to 2006-07. In the financial years 2003-04 to 2004-05 the Company opted not to pay the sales tax by claiming the incentive, against which Company has received a demand of Rs 12.77 Crores (Previous year Rs 12.77 Crores). The company has created a provision of Rs 8.60 Crores (excluding interest and penalty) for these 2 financial years. The company has further paid and created a provision of Rs 5.89 Crores (Previous year Rs 5.89 Crores) for the financial year 2007-08 to 2009-10 (assessment is pending).

Based upon favorable decision of Hon'ble Maharashtra Sales Tax Tribunal, Mumbai for the year 2001-02 and Hon'ble High Court Judgement in a similar matter, the management is of the view that it is more likely that the matter will be decided in their favour.

The company has already expensed an amount of Rs 20.57 Crores (Previous year Rs 19.99 crores) in respect of these financial years.

j) In respect of capital goods imported under EPCG Scheme, bonds of Rs 225.93 crores has been executed in favour of the President of India for import at a concessional rate of custom duty. Export obligation of Rs 876.66 crores (previous year Rs 872.18 crores) has been completed and balance obligation is Nil (previous year Rs 4.48 crores).

k) (i) The Company has given corporate guarantee for term loan facility of USD 14 million availed by its step down subsidiary.

(ii) A step down subsidiary is to pay a sum of USD 3.65 million to ACCO Brand towards balance amount of purchase consideration for which Company has given corporate guarantee.

3. EMPLOYEE BENEFITS

Defined benefit plans (funded)

The Company makes contribution towards gratuity to a defined contribution retirement benefits plan for qualifying employees. The Company has taken policy with Life Insurance Corporation of India to provide for payment of retirement benefits to vested employees. The present value of obligation is determined based on actuarial valuation.

4. RELATED PARTY DISCLOSURE

In accordance with the required Accounting Standard (AS-18) on related party disclosures where control exist and where transactions have taken place and description of the relationship as identified and certified by management are as follows:

i) List of related parties and relationships:

A. Subsidiary and step-down subsidiary companies

a) CF Global Holdings Limited, Mauritius

b) Cosmo Films Inc., USA

c) CF (Netherlands) Holdings Limited BV., Netherlands

d) Cosmo Films (Singapore) Pte. Limited, Singapore

e) Cosmo Films Hwa Seung Co. Limited, Korea (ceased to be fellow subsidiary w.e.f. 31 December 2011)

f) Cosmo Films Korea Limited, Korea

B. Enterprises over which Key managerial personnel of the Company and their relatives have significant influence

a) Pravasi Enterprises Limited

b) Sunrise Manufacturing Company Private Limited

C. Key management personnel

a) Mr. Ashok Jaipuria Chairman and Managing Director

5. (a) Building includes Rs 0.64 crores towards cost of residential space in a Co-operative Housing Society. The Company has taken possession of the same in terms of agreement to sell. Conveyance deed is yet to be registered. Besides, the amount includes cost of shares of the said society received by the Company which are yet to be transferred in the name of the Company.

(b) Building includes cost of 5 shares of Rs 50 each of Pluto Appartment Co-operative Housing Society Limited paid as part of cost of flat.

6. Per transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961, the Company is required to use certain specific methods in computing arm's length prices of international transactions with associated enterprises and maintain adequate documentation in this respect. Since law requires existence of such information and documentation to be contemporaneous in nature, the Company has appointed independent consultants for conducting a Transfer Pricing Study (the 'Study') to determine whether the transactions with associate enterprises undertaken during the financial year are on an "arms length basis". Management is of the opinion that the Company's international transactions are at arm's length and that the results of the on-going study will not have any impact on the financial statements and the independent consultants appointed have also preliminarily confirmed that they do not expect any transfer pricing adjustments.

7. Previous years figures

Till the year ended 31 March 2011 the Company was using pre-revised schedule VI to the Companies Act 1956, for preparation and presentation of its financial statements. During the year ended 31 March 2012 the revised schedule VI notified under the Companies Act 1956, has become applicable to the Company. The Company has reclassified previous year figures to confirm to this year's classification. The adoption of revised schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, its significantly impacts presentation and disclosure made in the financial statements, particularly presentation of balance sheet.


Mar 31, 2011

Current Year Previous Year

Rs. Crores Rs. Crores

1. Estimated amount of contracts ( net of advances) remaining to be executed on capital account and not provided for 74.63 11.70

2. Contingent Liabilities not provided for in respect of

a) Bank guarantees (including deferred guarantees) 8.09 4.31

b) Disputed demands for Income tax, Sales Tax, Excise duty, etc. 26.64 15.32

c) Claims against the company not acknowledged as debts 0.50 1.68

d) Bonds executed in favour of government departments 3.51 3.51

3. The company has received Rs. 8.94 crores (previous year Rs. 5.57 crores) on discounting of letter of credits which have been reduced from debtors in these accounts.

4. The company has opened Letter of credit for Rs. 22.50 crores (Previous year Rs.19.57 crores) for which the material has not been shipped as on the date of the Balance sheet.

5. Figures for previous year have been regrouped / rearranged wherever considered necessary.

6. In respect of capital goods imported under EPCG Scheme, Bonds of Rs. 225.93 crores has been executed in favour of the President of India for import at a concessional rate of custom duty. Export obligation of Rs. 872.18 crores has been completed and balance obligation of Rs. 4.48 crores is to be completed by 28th September 2018.

7. Capital work in progress includes Rs. 4.19 crores (previous year Rs. 1.09 crores) being expenditure incurred on development of SAP ERP software. This intangible asset will be capitalized on completion and will be amortised over a period of 10 years as per Accounting Standard (AS 26) on Intangible Assets" issued by Institute of Chartered Accountants of India.

8. The company in its extra-ordinary general meeting held on 11th January, 2008 resolved to issue and allot equity shares not exceeding 1000000 in number under Employee Stock Option Scheme at such price and at such time as may be decided by the board. No equity shares have been issued or allotted.

9. a. The company has entered into interest rate swap contract

(floating rate to fixed rate) to hedge its risk associated with LIBOR fluctuations. In accordance with Accounting Standard 30, "Financial Instruments - recognition and measurement" the mark to market loss as on 31st March, 2011 is estimated at Rs. 2.27 crores (previous year Rs. 2.18 crores) on such instruments which qualify as effective hedges. The estimated loss has been provided by creating hedging reserve.


Mar 31, 2010

Current Year Previous Year

Rs. Crores Rs. Crores

1. Estimated amount of contracts (net of advances) remaining to be executed on capital account and not provided for 11.70 0.12

2. Contingent Liabilities not provided for in respect of

a) Bank guarantees (including deferred guarantees) 4.31 5.23

b) Disputed demands for Income tax, Sales Tax, Excise duty, etc. 15.3 26.55

c) Claims against the company not acknowledged as debts 1.54

3. The company has received Rs. 5.57 crores (previous year Rs. 7.86 crores) on discounting of letter of credits which have been reduced from debtors in these accounts.

4. The company has opened Letter of credit for Rs. 19.57 crores (Previous year Rs. 18.97 crores) for which the material has not been shipped as on the date of the Balance sheet.

5. Figures for previous year have been regrouped / rearranged wherever considered necessary.

6. In respect of capital goods imported under EPCG Scheme, the company has executed bonds of Rs. 224.52 crores in favour of the President of India for import at a concessional rate of custom duty. The company is under an obligation to export products for Rs. 737.43 crores (FOB) within a period of eight years from the date of issue of license i.e. 16.09.2008 for import of capital goods. The company has exported goods worth Rs. 122.84 crores (FOB) till 31.03.2010.

7. In terms of the approval of the shareholders of the company and as per the applicable statutory provisions, the company on 4th February, 2008, has issued and allotted 3100000 warrants convertible into same number of equity shares of the company of Rs. 10 each at a price of Rs. 107 (including a premium of Rs. 97) per warrant on preferential basis to the persons belonging to promoter group of the company. The warrant holders have paid Rs. 10.70 per warrant. The warrant holders have a right to apply for equity shares of the company at any time within 18 months from the date of allotment of warrants. Due to non exercise of option within the stipulated time, the company has cancelled the warrants and forfeited the amount of advance paid on warrants and credited the amount to Capital Reserve account in accordance with the generally accepted accounting principles.

8. The company in its extra-ordinary general meeting held on 11th January, 2008 resolved to issue and allot equity shares not exceeding 1000000 in number under Employee Stock Option Scheme at such price and at such time as may be decided by the board. No equity shares have been issued or allotted.

9. The company has entered into interest rate swap contract (floating rate to fixed rate) to hedge its risk associated with LIBOR fluctuations. In accordance with Accounting Standard 30, "Financial Instruments - recognition and measurement" the mark to market loss as on 31st March, 2010 is estimated at Rs. 2.18 crores on such instruments which qualify as effective hedges.

10.a.The company has given corporate guarantee for term loan facility of USD 14 million availed by its step down subsidiary.

b. A step down subsidiary is to pay a sum of USD 3.65 mn to ACCO Brand towards balance amount of purchase consideration for which company has given corporate guarantee.

11. The company has claimed/will claim 100% Deferral/ Exemption benefits under sales tax for the financial years from 1996-97 to 2009-10 on the basis of decision of the Honble First Bench of the Maharashtra Sales Tax Tribunal at Mumbai in case of M/s Pee Vee Textile Ltd. and VIP Industries Ltd. The said benefits have not been allowed to the company for the financial years 1996-97 to 2004-05 and the company has gone in appeal (for financial year 2004-05 appeal is to be filed) and for the financial years 2005-06 to 2008-09 VAT audit report has been filed and for the financial year 2009-10 quarterly returns have been filed. The company has received demand of Rs. 12.77 crores (previous year Rs. 0.07 crores) in respect of financial years for which assessment has been completed against which provision of Rs.10.12 crores (previous year Rs. 10.12 crores) is available in these accounts. Besides, provision of Rs. 4.42 crores (previous year Rs. 3.63 crores) is available in respect of financial years for which assessment is to be completed.

Based upon legal opinion received and Honble Maharashtra Sales Tax Tribunal Mumbai judgments for financial years 1996-97,1997-98 and 2001-02 setting aside the order of the first appellate authority and remanding the matter back to the first appellate authority to decide afresh the matter following Mumbai High court judgement in the case of M/s Pee Vee Textiles Ltd, the company is hopeful that the matter will be decided in its favour. Consequent upon favourable judgment, the company will be entitled to an income of Rs. 20.84 crores (including amount paid and charged to profit & loss account) which has not been considered in these accounts.

12. In pursuance of Accounting Standard on Impairment on Assets (AS-28) issued by Institute of Chartered Accountants of India the company had identified and impaired certain assets / cash generating units. There is no further impairment / reversal during the year.

13. The Company has circulated letters to all its suppliers requesting them to confirm whether they are covered under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED). Certain suppliers have provided the necessary confirmation alongwith the evidence of being Micro or small enterprises. However from the majority of the suppliers these confirmations are still awaited. On the basis of available information no principal or interest is payable at the year end to any supplier covered under MSMED. Further no interest was payable or paid during the year to any such supplier.

14. Extra ordinary item represents income tax paid for earlier years (previous year figure represents gain due to change in method of depreciation from written down value method to straight line method on plant and machinery of line IV,V and VI with retrospective effect).

15. Related Party Disclosure

(i) Names of related parties and description of relationship

(a) Subsidiary & Step-down Subsidiary Companies

- Cosmo Films, Inc., USA

- CF Global Holdings Limited, Mauritius

- CF (Netherlands) Holdings Limited B.V., Netherlands

- Cosmo Films (Singapore) Pte. Limited, Singapore

- Cosmo Films Hwa Seung Co. Limited, Korea

(b) Associates

- Cosmo Ferrites Limited

(c) Key Managerial Personnel & their relatives

- Sh. Ashok Jaipuria, Chairman & Managing Director

(d) Enterprises over which Key Managerial Personnel have significant influence

- Pravasi Enterprises Limited

(iii) Other relevant information:

(a) Related parties enlisted in (i) above are those having transaction with the company.

(b) The above excludes sitting fee of Rs. 0.06 crores (Previous year Rs. 0.05 crores) paid to non-executive directors.

(c) Previous year figures are given in brackets.

16. Employee Benefit Obligations:

The various benefits provided to employees has been classified as under :-

a) Defined Contribution Plans

The company makes contribution towards superannuation to a defined contribution retirement benefits plan for qualifying employees. The superannuation fund is administered by the Trustees of Cosmo Films Limited Superannuation Fund. The fund has taken policy with Life Insurance Corporation of India to provide for payment of retirement benefits to vested employees. During the year contribution paid to the superannuation fund Rs. 0.98 crores (previous year Rs. 0.88 crores) by the company to cover fully the benefits to be paid to the employees has been charged to the profit & loss account.

b) State Plans

Provident Fund is accrued on monthly basis in accordance with the terms of contract with the employees and is deposited with the "Statutory Provident Fund". During the year Rs. 1.39 crores (previous year Rs.1.22 crores) has been paid as contribution to the Statutory Provident Fund as employers contribution which has been charged to the profit & loss account. Besides, Employee State Insurance in respect of eligible employees is also being deposited with the statutory fund. During the year Rs. 0.03 crores (previous year Rs. 0.02 crores) have been paid to the fund as employers contribution which has been charged to the profit & loss account.

c) Defined Benefit Plans (Funded)

The company makes contribution towards gratuity to a defined contribution retirement benefits plan for qualifying employees. The gratuity fund is administered by the Trustees of Cosmo Films Limited Gratuity Fund. The fund has taken policy with Life Insurance Corporation of India to provide for payment of retirement benefits to vested employees. The present value of obligation is determined based on actuarial valuation.

d) Defined Benefit Plans (Unfunded)

In respect of leave encashment the present value of obligation is determined based on actuarial valuation by an independent actuary based on LIC 1994-96 (ultimate) mortality table. The actuarial valuation is based on terminal salary determined by assuming an appropriate annual salary rise and discounted by assuming an imputed rate of interest. The difference between the obligation at the beginning of the year Rs. 1.49 crores (previous year Rs. 1.11 crores) and at the end of the year Rs. 1.90 crores (previous year Rs.1.49 crores) together with the amount paid during the year Rs. 0.41 crores (previous year Rs. 0.24 crores) has been charged to the profit & loss account.

17. During the year 124 MT (Previous year nil) of raw material worth Rs. 3.33 crores (previous year nil) was sold. Corresponding sale price of such material was Rs. 3.32 crores (Previous year nil).

18. Information pursuant to the provision of Part II & Part IV of schedule VI of Companies Act, 1956

 
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