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Notes to Accounts of Eicher Motors Ltd.

Mar 31, 2017

1. CORPORATE INFORMATION

Eicher Motors Limited (“the Company”) is a public company domiciled and incorporated under the provisions of the Companies Act, 1956. The Company is engaged in the manufacturing and selling of motorised two-wheelers, spare parts and related services. The Company has its registered office at New Delhi, India and its corporate office at Gurugram, Haryana, India. The Company has its primary listings on the BSE Limited and National Stock Exchange of India Limited.

2. BASIS OF PREPARATION AND PRESENTATION

2.1 Statement of compliance

The financial statements have been prepared in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015.

Upto the year ended March 31, 2016, the Company prepared its financial statements in accordance with the requirements of previous GAAP, which includes Standards notified under the Companies (Accounting Standards) Rules, 2006. These are Company’s first Ind AS financial statements. The date of transition to Ind AS is January 1, 2015. Refer Note 3.21 for the details of first-time adoption exemptions availed by the Company.

2.2 Accounting convention

The financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

2.3 Operating cycle

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

3.CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Company accounting policies, which are described in note 3, the management of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the areas of estimation uncertainty and critical judgements that the management has made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements:-

Recoverability of intangible asset

Capitalisation of cost in intangible assets and intangible assets under development is based on management’s judgement that technological and economic feasibility is confirmed and asset under development will generate economic benefits in future. Based on evaluations carried out, the Company’s management has determined that there are no factors which indicates that these assets have suffered any impairment loss.

Provision and contingent liability

On an ongoing basis, Company reviews pending cases, claims by third parties and other contingencies. For contingent losses that are considered probable, an estimated loss is recorded as an accrual in financial statements. Loss contingencies that are considered possible are not provided for but disclosed as Contingent liabilities in the financial statements. Contingencies the likelihood of which is remote are not disclosed in the financial statements. Gain contingencies are not recognised until the contingency has been resolved and amounts are received or receivable.

Useful lives of depreciable assets

Management reviews the useful lives of depreciable assets at each reporting. As at March 31, 2017 management assessed that the useful lives represent the expected utility of the assets to the Company. Further, there is no significant change in the useful lives as compared to previous year.

Investment in equity instruments of subsidiary and joint venture companies

During the year, the Company assessed the investment in equity instrument of subsidiary and joint venture companies carried at cost for impairment testing. Some of these companies are at early stage of their operations and are expected to generate positive cash flows in the future years. Detailed analysis has been carried out on the future projections and the Company is confident that the investments do not require any impairment.

4.INVESTMENT PROPERTY

FAIR VALUE OF THE INVESTMENT PROPERTY

The fair value of the Company’s investment properties as at March 31, 2017, March 31, 2016 and January 1, 2015 have been arrived at on the basis of valuation carried out on the respective dates by Purshotam Khandelwal, independent valuers not related to the Company. Purshotam Khandelwal is a registered valuer with the authority which governs the valuers in India, and they have appropriate qualifications and experience in the valuation of properties in the relevant location.

For the building located in Jaipur, India, the fair value of structure as on January 1, 2015 was determined based on S.O. No.X-3/2011 dated 24/04/2011 of State P.W.D. B&R issued by Chief Engineer, PWD Building and Roads, Government of Rajasthan, Jaipur with suitable adjustments for rise in cost index since April 2011 to average mean period of construction. The items not covered under Standing Order No. X-3/2011 have been valued on the rates of State PWD BSR. The fair value of structure as on March 31, 2016 and March 31, 2017 was determined based on S.O. No. X-3/2015 dated 15/07/2015 of State P.W.D.B&R issued by Chief Engineer, PWD Building and Roads, Government of Rajasthan, Jaipur with suitable adjustments for rise in cost index since July 2015 to average mean period of construction. The items not covered under Standing Order No. X-3/2015 have been valued on the rates of State PWD BSR.

5. Inventories

(At lower of cost and net realisable value)

- The cost of inventories recognised as an expense during the year was Rs 4,140.86 crores (previous period Rs 3,880.64 crores).

- The cost of inventories recognised as an expense includes Rs.5.60 crores (during January 1, 2015 to March 31, 2016 Rs.10.87 crores) in respect of write-downs of inventory to net realisable value, and has been reduced by Rs.7.69 crores (during January 1, 2015 to March 31, 2016 Rs.0.58 crores) in respect of the reversal of such write-downs. Previous writedowns have been reversed as a result of material consumed/sold.

- Inventories of Rs 6.27 crores (March 31, 2016 Rs 5.83 crores and January 1, 2015 Rs 1.18 crores) are expected to be recovered after more than 12 months.

- The mode of valuation of inventories has been stated in Note no. 3.13.

6. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 397.57 crores (Rs. 96.92 crores).

The Company has other commitments, for purchase/sales orders which are issued after considering requirements per operating cycle for purchase/sale of goods and services, employees’ benefits including union agreement in normal course of business. The Company does not have any long-term commitments or material non-cancellable contractual commitments/ contracts, which might have material impact on the financial statements.

7. Research and development expenses:

Revenue expenditure on research and development incurred and expensed off during the year/period through the appropriate heads of account aggregate Rs. 36.78 crores (previous period Rs. 32.20 crores). The capital expenditure incurred during the year/period for research and development purposes aggregate Rs. 91.29 crores (previous period Rs. 59.33 crores). The details of capital expenditure and revenue expenditure are as below:

All the above matters other than guarantee given by the Company are subject to legal proceedings in the ordinary course of business. The legal proceeding when ultimately concluded will not, in the opinion of management, have a material effect on the result of operations or the financial position of the Company.

8. EMPLOYEE BENEFIT PLANS

The details of various employee benefits provided to employees are as under:

A. Defined Contribution Plans

Out of the total contribution made for employees’ provident fund, Rs. 2.59 crores (Rs. 2.28 crores) is made to Eicher Executive Provident Fund Trust, while the remainder contribution is made to government-administered provident fund.

The total plan liabilities under the Eicher Executive Provident Fund Trust as at March 31, 2017 is Rs. 154.36 crores as against the total plan assets of Rs. 155.97 crores. The funds of the trust have been invested under various securities as prescribed under the rules of the trust.

B. Defined benefit plans:

The Defined benefit plan of the Company includes entitlement of gratuity for each year of service until the retirement age.

This plan typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.

The most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out as at March 31, 2017 by Mr. K.K. Dharni (FIAI M. No. 00051), Fellow of the Institute of Actuaries of India. The present value of the defined benefit obligation, and the related current service cost, were measured using the projected unit credit method.

The fair values of the above instruments are determined based on quoted market prices in active market. The actual return on plan assets was Rs. 1.27 crores for the year ended March 31, 2017.

Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have been determined based on reasonable possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

- If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by Rs. 0.62 crore (increase by Rs. 0.68 crore) (as at March 31, 2016: Decrease by Rs. 0.46 crore (increase by Rs. 0.51 crore))(as at January 1, 2015: Decrease by Rs. 0.29 crore (increase by Rs. 0.32 crore)).

- If the expected salary growth increases (decreases) by 50 basis points, the defined benefit obligation would increase by Rs. 0.68 crore (decrease by Rs. 0.62 crore) (as at March 31, 2016: Increase by Rs. 0.51 crore (decrease by Rs. 0.46 crore))(as at January 1, 2015: increase by Rs. 0.32 crore (increase by Rs. 0.30 crore)).

Sensitivities due to change in mortality rate and change in withdrawal rate are not material and hence impact of such change is not calculated.

Sensitivity Analysis

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of reporting period, which is same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.

9. SEGMENT REPORTING DISCLOSURE

The Company primarily operates in the automotive segment. The automotive segment includes all activities related to development, design, manufacture, assembly and sale of two-wheelers as well as sale of related parts and accessories.

As defined in Ind AS 108, the chief operating decision maker (CODM), evaluates the Company’s performance, allocate resources based on the analysis of the various performance indicator of the Company as a single unit. Therefore, there is no reportable segment for the Company as per the requirement of Ind AS 108 “Operating Segments”.

Geographical information

The “Geographical Segments” comprises of domestic segment which includes sales to customers located in India and the overseas segment includes sales to customers located outside India.

a) Domestic segment includes sales and services to customers located in India.

b) Overseas segment includes sales and services rendered to customers located outside India.

c) Non-current segment assets include property, plant and equipment, non-current financial assets and other noncurrent assets.

d) The accounting policies adopted for segment reporting are in conformity with the accounting policies adopted for the Company. Revenue have been identified to segments on the basis of their relationship to the operating activities of the segment.

Information about major customers

No customer individually accounted for more than 10% of the revenue.

10. FINANCIAL INSTRUMENTS

Capital Management

The Company manages its capital to ensure that the Company will be able to continue as going concern, while maximising the return to stakeholders through efficient allocation of capital towards expansion of business, optimisation of working capital requirements and deployment of surplus funds into various investment options. The Company does not have any debt to meet its capital requirement and uses the operational cash flows and equity to meet its capital requirements.

The Company is not subject to any externally imposed capital requirements.

The management of the Company reviews the capital structure of the Company on regular basis. As part of this review, the management of the Company considers risks associated with the movement in the working capital.

The following table summarises the capital of the Company:

10.1 Fair value measurements

The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instruments by valuation techniques.

The following is the basis for categorising the financial instruments measured at fair value into Level 1 to Level 3 :

Level 1: This level includes financial assets that are measured by reference to quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: This level includes financial assets and liabilities, measured using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

Level 3: This level includes financial assets and liabilities measured using inputs that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part, using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.

Fair value of the Company’s financial assets that are measured at fair value on a recurring basis:

There are certain Company’s financial assets which are measured are fair value at the end of each reporting period. Following table gives information about how the fair values of these financial assets are determined:

Fair value of the Company’s financial assets and financial liabilities that are not measured at fair value (but fair value disclosures are required)

Except as detailed out in the following table, the management considers that the carrying amounts of financial assets and financial liabilities recognised in the standalone financial statements approximate their fair values.

The fair value of the financial assets and liabilities are included at the amount that would be received to sell an asset and paid to transfer a liability in an orderly transaction between market participants. The following methods and assumptions were used to estimate the fair values:

- Investments traded in active markets are determined by reference to quotes from the financial institutions; for example: Net asset value (NAV) for investments in mutual funds declared by mutual fund house.

- The fair value of bonds is based on quoted prices and market observable inputs.

- Trade receivables, cash and cash equivalents, other bank balances, loans, other current financial assets, current borrowings, trade payables and other current financial liabilities: Approximate their carrying amounts largely due to the short-term maturities of these instruments.

- Management uses its best judgment in estimating the fair value of its financial instruments. However, there are inherent limitations in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented above are not necessarily indicative of all the amounts that the Company could have realised or paid in sale transactions as of respective dates. As such, the fair value of the financial instruments subsequent to the respective reporting dates may be different from the amounts reported at each year/period end.

- There were no transfers between Level 1 and Level 2 during the year.

11. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

Financial risk management objectives

The Company’s management monitors and manages the financial risks relating to the operations of the Company. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The management reviews cash resources, implements strategies for foreign currency exposures and ensuring market risk limit and policies.

The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

Market risk

Market risk is the risk of any loss in future earnings, in realisable fair values or in future cash flows that may result from a change in the price of a financial instrument. The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates risk/liquidity risk which impact returns on investments. Market risk exposures are measured using sensitivity analysis.

Foreign currency risk management

The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:

Foreign currency sensitivity

The following table details the Company’s sensitivity to a 5% increase and decrease in the Rs. against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 5% change in foreign currency rates. A positive number below indicates an increase in profit or equity where the Rs. strengthens 5% against the relevant currency. For a 5% weakening of the Rs. against the relevant currency, there would be a comparable impact on the profit or equity, and the balances below would be negative.

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.

Financial instruments that are subject to concentrations of credit risk, principally consist of balance with banks, investments in debt instruments/bonds, trade receivables, loans and advances. None of the financial instruments of the Company result in material concentrations of credit risks.

Balances with banks were not past due or impaired as at the year end. In other financial assets that are not past dues and not impaired, there were no indication of default in repayment as at the year end.

The age analysis of trade receivables as of the balance sheet date have been considered from the due date and disclosed in the Note no. 16 above.

The Company has used a practical expedient by computing the expected loss allowance for financial assets based on historical credit loss experience and adjustments for forward looking information.

Other price risks including interest rate risk

The Company has deployed its surplus funds into various financial instruments including units of mutual funds, bonds, etc. The Company is exposed to NAV (net asset value) price risks arising from investments in these funds. The value of these investments is impacted by movements in interest rates , liquidity and credit quality of underlying securities.

NAV price sensitivity analysis

The sensitivity analysis below have been determined based on the exposure to NAV price risks at the end of the reporting period. If NAV prices had been 1% higher/lower:

• profit for the year ended March 31, 2017 would increase/decrease by Rs. 31.97 crores (for the fifteen months ended March 31, 2016: increase/decrease by Rs. 18.08 crores).

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rate. Since the Company’s borrowings which are affected by interest rate fluctuation is very insignificant to the size and operations of the Company, therefore, a change in interest rate risk does not have a material impact on the Company’s financial statements in relation to fair value of financial instruments.

Liquidity risk

The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

The surplus funds with the Company and operational cash flows will be sufficient to dispose the financial liabilities within the maturity period..

12. SHARE-BASED PAYMENTS

Employee share option plan of the Company

Eicher Employee Stock Option Plan is applicable to all permanent and full-time employees (as defined in the Plan), excluding promoters of the Company. The eligibility of employees to receive grants under the Plan has to be decided by the Nomination and Remuneration Committee from time to time at its sole discretion.

Each employee share option converts into one equity share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry.

Details of the employee share option plan of the company

The following share-based payment arrangements were in existence during the current and prior years :

Fair value of share options granted in the year

The weighted average fair value of the share options granted during the financial year is Rs. 22,751.16 (previous period:

Rs. 15,599.37). Options were priced using a binomial option pricing model. Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects of non-transferability, exercise restrictions (including the probability of meeting market conditions attached to the option), and behavioral considerations. Expected volatility is based on the historical share price volatility over the past 3 years.

13. DISCLOSURE IN RESPECT OF OPERATING LEASES

(A) Assets taken on lease:

The Company has taken certain premises under various operating lease agreements. The total lease rental recognised as expense aggregate to Rs. 28.40 crores (Rs. 27.93 crores).

Future minimum lease payments under non-cancellable operating leases in the aggregate and for each of the following year/period:

(B) Assets given on lease:

The Company has given assets under operating lease agreement to its joint venture company “Eicher Polaris Private Limited” . The total lease rental recognised as income aggregate to Rs. 2.78 crores (Rs. 3.28 crores).

Future minimum lease payments under non-cancellable operating leases in the aggregate and for each of the following year:

14. The details of disputed excise duty, sales tax, service tax and income tax dues as on March 31, 2017 which have not been deposited or deposited under protest are as follows:

15. The figures for the current year are for twelve months from April 1, 2016 to March 31, 2017, whereas the corresponding previous period figures are for fifteen months from January 1, 2015 to March 31, 2016. As such corresponding figures for the previous period are not directly comparable with those of current year.

16. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

17. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.


Dec 31, 2014

1. Share capital

The Company has only one class of equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amount, in proportion to their shareholding.

(iii) The Company has not issued shares for consideration other than cash and has not bought back shares during five years immediately preceding the reporting date, December 31, 2014.

(iv) Employee stock option plan

a. 1,77,000 (1,77,000) options on September 30, 2006, exercisable over a period of seven years after vesting on October 1, 2009 at an exercise price of Rs. 297 (including premium of Rs. 287) per option, out of which Nil (Nil) options are outstanding at year end. During the year, Nil (6,400) equity shares were issued and allotted as fully paid up at an exercise price of Rs. 297 (including premium of Rs. 287 each) per equity share.

b. 2,08,900 (2,08,900) options on October 22, 2007, exercisable over a period of seven years after vesting on October 23, 2010 at an exercise price of Rs. 462 (including premium of Rs. 452) per option, out of which 29,500 (32,000) options are outstanding at year end. During the year, 2,500 (31,500) equity shares were issued and allotted as fully paid up at an exercise price of Rs. 462 (including premium of Rs. 452 each) per equity share.

c. 40,000 (40,000) options on April 29, 2010, exercisable over a period of seven years after vesting on April 29, 2011 at an exercise price of Rs. 695 (including premium of Rs. 685) per option are outstanding as at year end.

d. 15,400 (15,400) options on November 8, 2010, exercisable over a period of seven years after vesting on November 8, 2013 at an exercise price of Rs. 1,411 (including premium of Rs. 1,401) per option out of which Nil (15,400) options are outstanding at year end. During the year, 15,400 (Nil) equity shares were issued and allotted as fully paid up at an exercise price of Rs. 1,411 (including premium of Rs. 1,401 each) per equity share.

e. 1,08,200 (1,08,200) options on May 6, 2011, exercisable over a period of seven years after vesting on May 6, 2014 at an exercise price of Rs. 1,162 (including premium of Rs. 1,152) per option out of which 60,200 (1,08,200) options are outstanding at year end. During the year, 48,000 (Nil) equity shares were issued and allotted as fully paid up at an exercise price of Rs. 1,162 (including premium of Rs. 1,152 each) per equity share. During the year, Nil (24,000) options were forfeited.

f. 5,400 (5,400) options on February 11, 2012, exercisable over a period of seven years after vesting on February 11, 2015 at an exercise price of Rs. 1,770 (including premium of Rs. 1,760) per option are outstanding as at year end. During the year, Nil (7,200) options were forfeited.

g. 5,000 (5,000) options on December 16, 2013, exercisable over a period of seven years after vesting on December 15, 2016 at an exercise price of Rs. 4,915 (including premium of Rs. 4,905) per option are outstanding as at year end.

h. 22,500 (Nil) options on August 11, 2014, exercisable over a period of seven years after vesting on August 11, 2017 at an exercise price of Rs. 8,477.50 (including premium of Rs. 8,467.50) per option are outstanding as at year end.

i. 5,400 (Nil) options on November 12, 2014, exercisable over a period of seven years after vesting on November 12, 2017 at an exercise price of Rs. 12,993.65 (including premium of Rs. 12,983.65) per option are outstanding as at year end.

j. Each option entitles the holders thereof to apply for and be allotted one equity share of the face value of Rs. 10 each.

2. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 139.79 crores (Rs. 62.49 crores).

The Company has other commitments, for purchase/sales orders which are issued after considering requirements per operating cycle for purchase /sale of goods and services, employee''s benefits including union agreement in normal course of business. The Company does not have any long term commitments or material non-cancellable contractual commitments/contracts, which might have material impact on the financial statements.

3. Research and development expenses:

Revenue expenditure on research and development incurred and expensed off during the year through the appropriate heads of account aggregate Rs. 19.26 crores (Rs. 20.88 crores). The capital expenditure incurred during the year for research and development purposes aggregate Rs. 14.75 crores (Rs 10.89 crores). The details of capital expenditure and revenue expenditure are as below:

4. Contingent liabilities not provided for:

Rs. in crores

Particulars As at As at December 31, 2014 December 31, 2013

a) In respect of following:

- Excise duty matters 54.98 54.98

- Sales tax matters 5.06 6.87

- Service tax matters 0.39 0.40

- Income tax matters 4.26 6.79

b) Claims against the Company not acknowledged as debts 6.13 5.51

All the above matters are subject to legal proceedings in the ordinary course of business. The legal proceeding when ultimately concluded will not, in the opinion of management, have a material effect on the result of operations or the financial position of the Company.

5. Disclosures under Accounting Standard 15 (Revised):

The details of various employee benefits provided to employees are as under:

a. Employee plans

Out of the total contribution made for employees'' provident fund, Rs. 1.44 crores (Rs. 1.14 crores) is made to Eicher Executive Provident Fund Trust, while the remainder contribution is made to government administered provident fund.

The total plan liabilities under the Eicher Executive Provident Fund Trust as at March 31, 2014 is Rs. 78.21 crores as against the total plan assets of Rs. 78.90 crores. The funds of the trust have been invested under various securities as prescribed under the rules of the trust.

* includes Rs. 0.07 crore (Rs. Nil) capitalised during the year and Rs. 0.05 crore (Rs. 0.03 crore) considered in pre-operative expenditure (pending allocation).

6. Segment reporting:

As the Company''s business activities falls within a single primary business segment viz. “Automobile products and related components" and is a single geographical segment, the disclosure requirements of Accounting Standard - 17 “Segment Reporting" notified under the Companies (Accounting Standards) Rules, 2006 are not applicable.

7. Disclosure in respect of operating leases:

(A) Assets taken on lease:

The Company has taken certain premises under various operating lease agreements. The total lease rental recognize as expense aggregate to Rs. 12.59 crores (Rs. 10.60 crores).

Future minimum lease payments under non-cancellable operating leases in the aggregate and for each of the following year:

(B) Assets given on lease:

The Company has given assets under operating lease agreement to its joint venture company "Eicher Polaris Private Limited" . The total lease rental recognize as income aggregate to Rs. 2.49 crores (Rs. 1.20 crores).

Future minimum lease payments under non-cancellable operating leases in the aggregate and for each of the following year:

8. The Company has a joint venture with Polaris Industries, Inc., U.S.A., Eicher Polaris Private Limited (EPPL) with an investment of Rs. 130.50 crores (including advance for equity Rs. 25.00 crores) (investment of Rs. 55.00 crores (including advance for equity Rs. 30.00 crores)) as at December 31, 2014, representing 50% shareholding in EPPL.

9. Figures in brackets represent previous year''s figures.

10. Previous year''s figures have been recast/regrouped, wherever necessary to confirm the current year''s presentation.


Dec 31, 2013

1. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 318.63 crores (Rs. 361.43 crores) (includes share of joint venture Rs. 27.52 crores (Rs. Nil)). The Company has other commitments, for purchase/sales orders which are issued after considering requirements per operating cycle for purchase /sale of goods and services, employee''s benefits including union agreement in normal course of business. The Company does not have any long term commitments or material non-cancellable contractual commitments/contracts, which might have material impact on the financial statements.

2. Research and development expenses: Revenue expenditure on research and development incurred and expensed off during the year through the appropriate heads of account aggregate Rs. 90.69 crores (Rs. 90.83 crores). The capital expenditure incurred during the year for research and development purposes aggregate Rs. 129.75 crores (Rs 137.34 crores).

3. Contingent liabilities not provided for in respect of:

Rs. in crores

Particulars As at December 31, 2013 As at December 31, 2012

a) In respect of demands contested by the Company :

- Excise duty matters 54.98 54.99

- Sales tax matters 6.87 10.43

- Service tax matters 0.40 0.77

- Income tax matters 6.79 8.80

b) Claims against the Company not acknowledged as debts 5.51 5.00

All the above matters other than bills discounted are subject to legal proceedings in the ordinary course of business. The legal proceeding when ultimately concluded will not, in the opinion of management, have a material effect on the result of operations or the financial position of the Company.

4. Segment reporting:

As the Company''s, its subsidiaries'' and joint venture business'' activities falls within a single primary business segment viz. "Automobile products and related components" and is a single geographical segment, the disclosure requirements of Accounting Standard – 17 "Segment Reporting" notified under the Companies (Accounting Standards) Rules, 2006 are not applicable.

5. Pursuant to revised Schedule VI to the Companies Act, 1956, being applicable on the Company from the previous year ended on December 31, 2012, Dividend for the year ended December 31, 2012 declared by its subsidiary company i.e. VE Commercial Vehicles Limited (VECVL) after the date of balance sheet has been recognised in the current year when the right to receive dividends was established as per AS-9 ''Revenue Recognition''. However, Dividend declared by VECVL for the year ended December 31, 2011 was recognised as Dividend income in the year ended December 31, 2011 itself per requirement of Old Schedule VI to the Companies Act 1956. This has resulted into no Dividend income being recognised in the previous year ended December 31, 2012.

6. Figures in brackets represent previous year''s figures.

7. Previous year''s figures have been recast/regrouped, wherever necessary to confirm the current year''s presentation.


Dec 31, 2012

(i) Employee stock option plan

a. I,77,000 (I,77,000) options on september 30, 2006, exercisable over a period of seven years after vesting on October 1, 2009 at an exercise price of Rs.297 (including premium of Rs 287) per option, out of which 6,400 (6,400) options are outstanding at year end. during the year, Nil (8,000) equity shares were issued and allotted as fully paid up at an exercise price of Rs. 297 (including premium of Rs. 287 each) per equity share.

b. 2,08,900 (2,08,900) options on October 22, 2007, exercisable over a period of seven years after vesting on October 23, 20I0 at an exercise price of Rs.462 (including premium of Rs. 452) per option, out of which 63,500 (7I,900) options are outstanding at year end. during the year, 8,400 (46,800) equity shares were issued and allotted as fully paid up at an exercise price of Rs. 462 (including premium of Rs. 452 each) per equity share.

c. 40,000 (40,000) options on April 29, 20I0, exercisable over a period of seven years after vesting on April 29, 20II at an exercise price of Rs. 695 (including premium of Rs. 685) per option are outstanding as at year end.

d. 15,400 (I5,400) options on November 8, 20I0, exercisable over a period of seven years after vesting on November 8, 20I3 at an exercise price of Rs.I,4II (including premium of Rs. I,40I) per option are outstanding as at year end.

e. 1,32,200 (I,35,200) options on May 6, 20II, exercisable over a period of seven years after vesting on May 6, 20I4 at an exercise price of Rs. I,I62 (including premium of Rs. I,I52) per option are outstanding as at year end. during the year, 3,000 (Nil) equity shares were forfeited.

f. 12,600 (Nil) options on February II, 20I2, exercisable over a period of seven years after vesting on February II, 20I5 at an exercise price of Rs. I,770 (including premium of Rs.I,760) per option are outstanding as at year end.

g. Each option entitles the holders thereof to apply for and be allotted one equity share of the face value of Rs. I0 each.

2. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 3I.95 crores (Rs. 26.50 crores).

The company has other commitments, for purchase/sales orders which are issued after considering requirements per operating cycle for purchase/sale of goods and services, employee''s benefits including union agreement in normal course of business. The company does not have any long term commitments or material non-cancellable contractual commitments/ contracts, which might have material impact on the financial statements.

3. Research and development expenses:

Revenue expenditure on research and development incurred and expensed off during the year through the appropriate heads of account aggregate Rs. I6.75 crores (Rs. I0.45 crores). The capital expenditure incurred during the year for research and development purposes aggregate Rs. 3.95 crores (Rs. 5.55 crores). The details of capital expenditure and revenue expenditure are as below:

4. contingent liabilities not provided for in respect of: Rs. in crores

Particulars As at As at December 31, 2012 December 31, 2011

a) in respect of demands contested by the company:

- Excise duty matters 54.99 54.99

- sales tax matters 10.43 10.38

- service tax matters 0.77 0.76

- income tax matters 8.80 14.15

b) claims against the company not acknowledged as debts 5.00 4.59

c) Guarantees given to:

A subsidiary, for certain receivables transferred - 0.06 pursuant to Business Purchase Agreement signed by the company with subsidiary company

All the above matters other than guarantees are subject to legal proceedings in the ordinary course of business. The legal proceeding when ultimately concluded will not, in the opinion of management, have a material effect on the result of operations or the financial position of the company.

Out of the total contribution made for employees'' provident fund, Rs. 0.69 crores (Rs. 0.34 crores) is made to Eicher Executive Provident Fund Trust, while the remainder contribution is made to government administered provident fund. The total plan liabilities under the Eicher Executive Provident Fund Trust as at March 3I, 20I2 is Rs. 45.50 crores as against the total plan assets of Rs. 45.64 crores. The funds of the trust have been invested under various securities as prescribed under the rules of the trust.

5. Segment reporting:

As the company''s business activities falls within a single primary business segment viz. ''Automobile products and related components" and is a single geographical segment, the disclosure requirements of Accounting standard - I7 "segment Reporting" notified under the companies (Accounting standards) Rules, 2006 are not applicable.

6. The company has taken certain premises under various operating lease agreements. The total lease rental recognize as expense aggregate to Rs. 6.69 crores ( Rs. 3.59 crores).

7. Hitherto in terms of Old schedule Vi to the companies Act, I956, the company was recognising income from dividend declared by its subsidiary company, i.e. VE commercial Vehicles Limited (VEcVL) even after the date of the Balance sheet if they were pertaining to the period on or before the Balance sheet date. This requirement no longer exists in the Revised schedule Vi. Accordingly, the company as per As - 9 ''Revenue Recognition'' has decided to recognise dividend from subsidiary companies as income only when the right to receive dividends is established as on the Balance sheet date. Had the company recognised dividend from VEcVL as income as per Old schedule Vi, the profit for the year would have been higher by Rs. 40.80 crores.

8. Figures in brackets represent previous year''s figures.

9. The revised schedule Vi has become effective for the accounting year commencing on or after I April, 20II for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year''s figure have been regrouped/reclassified wherever necessary to correspond with the current year''s classification/disclosure.


Dec 31, 2010

1. In 2008, the Commercial Vehicles business along with Components (including Gears) and Engineering Design Services business of the Company together with related assets, the discontinued operations (collectively hereinafter referred to as "CV Business") had been transferred by way of a Slump Sale as defi ned under Section 2(42C) of Income Tax Act, 1961 on a "going concern" basis to VE Commercial Vehicle Limited (VECVL, subsidiary of the Company) as per the Business Purchase Agreement (BPA) signed between VECVL and the Company.

2. The Composite Scheme of Arrangement ("the Scheme") between Eicher Goodearth Investment Limited (EGIL) and Eicher Goodearth Private Limited (EGPL) and Eicher Motors Limited (the Company) under section 391 to section 394 of the Companies Act, 1956, was approved by the High Court of Delhi vide its order dated October 27, 2009, and had become effective on November 12, 2009 on fi ling of certifi ed copy of the Order of High Court in the office of Registrar of Companies, NCT of Delhi. Consequent to effectuation of the Scheme in the previous year, the investment held by Residual EGIL in the equity share capital of the Company stood cancelled and accordingly the issued, subscribed and paid up share capital of the Company stood reduced to the extent of Rs. 140.3 millions being the face value of 14032762 equity shares held by Residual EGIL in the Company as on the appointed date. Further, since the shares had not been allotted till December 31, 2009, an amount of Rs.140.3 millions representing the aggregate nominal value of such shares had been included in the previous year under the head "Capital suspense" in the balance sheet. During the year, on January 5, 2010, the Company has issued and allotted 14032764 shares of Rs. 10 each (rounded off to the nearest integer in terms of the Scheme) aggregating Rs.140.3 millions to the members of Residual EGIL in the proportion in which they held equity shares in Residual EGIL.

3. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 56.0 millions (Rs. 67.0 millions).

4. Contingent liabilities not provided for in respect of:

Rs. in millions

Particulars As at As at December 31, 2010 December 31, 2009

a) In respect of demands contested by the Company:

Sales tax matters 111.0 115.3

Excise duty matters 585.6 580.1

Income tax matters 88.8 56.7

Service tax matters 9.5 9.5

b) Claims against the Company not acknowledged as debts 9.2 9.5

c) Guarantees given to:

VECVL, a subsidiary, for certain receivables transferred pursuant to BPA signed by the 2.1 12.3 Company with VECVL (refer note 2 above)

All the above matters other than guarantees are subject to legal proceedings in the ordinary course of business. The legal proceedings when ultimately concluded will not, in the opinion of management, have a material effect on the result of operations or the financial position of the Company.

5. Segment reporting:

As the Companys business activities falls within a single primary business segment viz. "Automobile products and related components" and is a single geographical segment, the disclosure requirements of Accounting Standard - 17 "Segment Reporting" notifi ed under the Companies (Accounting Standards) Rules, 2006 are not applicable.

6. Related party disclosure:

a. Name of related parties and their relationship

Name of related party Nature of relationship

VE Commercial Vehicles Ltd. (VECVL) Subsidiary Company

Eicher Engineering Solutions, Inc., U.S.A. (EES, Inc.) Subsidiary Company of VECVL

Hoff Automotive Design (Beijing) Co. Ltd (Hoff Beijing) 100% subsidiary company of EES, Inc.

Hoff Auto Design (Shanghai) Co. Ltd. (Hoff Shanghai) 100% subsidiary company of EES, Inc.

Eicher Goodearth Investment Limited* (EGIL) Part for which the Company is Associate

* Ceased to exist w.e.f. January 1, 2009 (refer to note 3 above).

b. Key management personnel

Mr. Siddhartha Lal Managing Director

Transactions with the above key management personnel:

Refer to note 9 for managerial remuneration in respect of the above personnel

7. Excise duty on sales has been deducted from gross sales on the face of profit and loss account. Increase / (decrease) in excise duty on finished goods has been shown under the head Materials consumed in schedule 10.

8. a) Figures in brackets represent previous years figures. b) Previous years figures have been recast/ regrouped where necessary.

9. Schedules 1 to 12 and the statement of additional information form an integral part of the accounts.


Dec 31, 2009

1. a) During the previous period, the Commercial Vehicles business along with Components (including Gears) and Engineering Design Services business of the Company together with related assets (collectively hereinafter referred to as “CV Business”) has been transferred by way of a Slump Sale as defi ned under Section 2(42C) of Income Tax Act, 1961 on a “going concern” basis to VE Commercial Vehicles Limited (VECVL, subsidiary of the Company) as per the Business Purchase Agreement (BPA) signed between

b) Expenses for contractual liability represent indemnifi ed loss on account of certain receivables pertaining to erstwhile Commercial Vehicle business.

2. Pursuant to the Composite Scheme of Arrangement (“the Scheme”) between Eicher Goodearth Investment Limited (EGIL) and Eicher Goodearth Private Limited (EGPL) and Eicher Motors Limited (the Company) under section 391 to section 394 of the Companies Act, 1956, approved by the High Court of Delhi vide its order dated October 27, 2009, which became effective on November 12, 2009 on fi ling of certifi ed copy of the Order of High Court in the offi ce of Registrar of Companies, NCT of Delhi:

ii) Consequent to effectuation of the Scheme;

a) the investment held by residual EGIL in the equity share capital of the Company stands cancelled and accordingly the issued and paid up share capital of the Company stands reduced to the extent of Rs. 140.3 millions being the face value of 14032762 equity shares held by Residual EGIL in the Company as on the appointed date;

b) the Company, subsequent to the year end, on January 5, 2010, has issued and allotted 14032764 shares of Rs. 10 each (round- ed off to the nearest integer in terms of the Scheme) aggregating Rs.140.3 millions to the members of residual EGIL in the proportion in which they held equity shares in Residual EGIL. Since the shares had not been allotted till December 31, 2009, an amount of Rs.140.3 millions representing the aggregate nominal value of such shares has been included in these accounts as ‘Capital suspense’ under the head ‘Shareholders fund’;

c) in accordance with Accounting Standard (AS) – 14 “Accounting for Amalgamations”, the merger of Residual EGIL with the Company has been accounted for under the ‘Pooling of interest’ method. In terms of the Scheme, all the assets and liabilities, including reserves and profi t and loss of Residual EGIL have vested in the Company at their book values as appearing in the books of account of Residual EGIL;

d) the excess of net assets (after adjusting for the cancellation of investments held in the Company) of Residual EGIL over the value of share capital to be issued to the shareholders of Residual EGIL amounting to Rs. 0.4 million has been credited to General reserve account in schedule 2 ‘ Reserves and surplus’.

3. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 67.0 millions (Rs. 30.7 millions).

4. Contingent liabilities not provided for in respect of:

Rs. in millions

Particulars As at December As at December 31, 2009 31, 2008

a) In respect of demands contested by the Company:

- Sales tax matters 115.3 93.7

- Excise duty matters 580.1 558.2

- Income tax matters 56.7 42.1

- Service tax matters 9.5 4.8

b) Claims against the Company not acknowledged as debts 9.5 10.1

c) Guarantees given:

i) to certain finance companies and banks for recovery of their 350.0 360.0 dues against auto finance business of VECVL, a subsidiary

- Dues outstanding in the books of VECVL - 3.4

(ii) to VECVL, a subsidiary, for certain receivables transferred 12.3 183.8 pursuant to BPA signed by the Company with VECVL

All the above matters other than guarantees are subject to legal proceedings in the ordinary course of business. The legal proceedings when ultimately concluded will not, in the opinion of management, have a material effect on the result of operations or the fi nancial position of the Company.

5. Segment reporting

As the Company’s business activities falls within a single primary business segment viz. “Automobile products and related components” and is a single geographical segment, the disclosure requirements of Accounting Standard – 17 “Segment Reporting” specifi ed in the Companies (Accounting Standards) Rules, 2006 are not applicable.

6. Related party disclosure:

a. Name of related parties and their relationship:

Name of related party Nature of relationship

Eicher Goodearth Investments Limited* (EGIL) Party for which the Company is Associate

VE Commercial Vehicles Ltd. (VECVL) Subsidiary Company

Eicher Engineering Solutions, Inc., U.S.A. (EES, Inc.) Subsidiary Company of VECVL

Royal Enfield Motorcycles Limited (REML) Significant influence of key management personnel

ECS Limited** (ECS) Significant influence of key management personnel

Eicher Goodearth Private Limited (EGPL) Significant influence of key management personnel

* Ceased to exist w.e.f January 1, 2009. (refer to note 3 above)

** Ceased to be a related party w.e.f December 24, 2008

b. Key management personnel:

Mr. Siddhartha Lal Managing Director

Transactions with the above key management personnel:

Refer to note 9 for managerial remuneration in respect of the above personnel

7. ‘Excise duty’ on sales has been deducted from gross sales on the face of profi t and loss account. ‘Increase/ (decrease) in excise duty on fi nished goods’ has been shown under the head ‘Materials consumed’ in schedule 10.

8. In terms of shares buy back scheme approved by the shareholders of the Company on December 28, 2008 to buy back upto 1408969 equity shares of its own fully paid up equity shares of Rs.10 each from its existing shareholders on a proportionate basis through ‘Tender Offer Route’ at a fi xed price of Rs.691.68 (including premium of Rs. 681.68) per share from March 12, 2009 to March 26, 2009, the Company has completed the buy back of 1408969 equity shares at the mentioned price on April 16, 2009.

9. The figures for the current year are for a period of twelve months from January 1, 2009 to December 31, 2009, whereas the corresponding previous period fi gures are for a period of nine months from April 1, 2008 to December 31, 2008. Further, the previous period fi gures included fi gures upto June 30, 2008 of CV Business which was transferred under a slump sale (refer note 2 above). As such, corresponding fi gures for the previous period are not comparable with those of current year.

10. a) Figures in brackets represent previous year’s figures.

b) Previous year’s figures have been recast/regrouped where necessary.

11. Schedule 1 to 12 and the statement of additional information form an integral part of the accounts.

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