Notes to Accounts of Elgi Rubber Company Ltd.

Mar 31, 2018

1 Company Overview

Elgi Rubber Company Limited (‘Company’ or ‘ERCL’) was incorporated on 16th October 2006. ERCL is leading Company providing solutions to Rubber Industry and engaged in the business of manufacture of Reclaimed rubber, Retreading machinery, and Retread rubber.

2 Basis of preparation of financial statements Statement of compliance

These financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 (‘the Act’) (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.

Basis of preparation and presentation

For all periods up to and including the year ended March 31, 2017, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).

The financial statements for the year ended March 31, 2018 are the first financial statements the Company has prepared in accordance with Ind AS with the date of transition as April 1, 2016. Refer to note 50 for information on how the Company adopted Ind AS.

The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value or revalued amount:

a) Derivative financial instruments

b) Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments)

Use of estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses and the disclosure of contingent liabilities on the date of the financial statements. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Any revision to accounting estimates is recognised prospectively in current and future periods.

Functional and presentation currency

These financial statements are presented in Indian Rupees (INR), which is the Company’s functional currency. All financial information presented in INR has been rounded to the nearest millions (up to two decimals). The financial statements are approved for issue by the Company’s Board of Directors on May 24, 2018.

2a Critical accounting estimates and management judgments

In application of the accounting policies, which are described in note 2, the management of the Company is 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 assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

Information about significant areas of estimation, uncertainty and critical judgements used in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:

Property, Plant and Equipment (PPE)

The residual values and estimated useful life of PPEs, Intangible Assets and Investment Properties are assessed by the technical team at each reporting date by taking into account the nature of asset, the estimated usage of the asset, the operating condition of the asset, past history of replacement and maintenance support. Upon review, the management accepts the assigned useful life and residual value for computation of depreciation/amortisation. Also, management judgement is exercised for classifying the asset as investment properties or vice versa.

Current tax

Calculations of income taxes for the current period are done based on applicable tax laws and management’s judgement by evaluating positions taken in tax returns and interpretations of relevant provisions of law.

Deferred tax assets

Significant management judgement is exercised by reviewing the deferred tax assets at each reporting date to determine the amount of deferred tax assets that can be retained / recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

Fair value

Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. In applying the valuation techniques, management makes maximum use of market inputs and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date.

Impairment of trade receivables

The impairment for trade receivables are done based on assumptions about risk of default and expected loss rates. The assumptions, selection of inputs for calculation of impairment are based on management judgement considering the past history, market conditions and forward looking estimates at the end of each reporting date.

Impairment of Non-financial assets (PPE/Intangible assets/Investment properties)

The impairment of non-financial assets is determined based on estimation of recoverable amount of such assets. The assumptions used in computing the recoverable amount are based on management judgement considering the timing of future cash flows, discount rates and the risks specific to the asset.

Defined benefit plans and other long term benefits

The cost of the defined benefit plan and other long term benefits, and the present value of such obligation are determined by the independent actuarial valuer. An actuarial valuation involves making various assumptions that may differ from actual developments in future. Management believes that the assumptions used by the actuary in determination of the discount rate, future salary increases, mortality rates and attrition rates are reasonable. Due to the complexities involved in the valuation and its long term nature, this obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities could not be measured based on quoted prices in active markets, management uses valuation techniques including the Discounted Cash Flow (DCF) model, to determine its fair value The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is exercised in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility.

Provisions and contingencies

The recognition and measurement of other provisions are based on the assessment of the probability of an outflow of resources, and on past experience and circumstances known at the reporting date. The actual outflow of resources at a future date may therefore vary from the figure estimated at end of each reporting period.

2b Recent accounting pronouncements

Standards issued but not yet effective

The following standards have been notified by Ministry of Corporate Affairs

a. Ind AS 115 - Revenue from Contracts with Customers (effective from April 1, 2018)

b. Ind AS 116 - Leases (effective from April 1, 2019)

The Company is evaluating the requirements of the above standards and the effect on the financial statements is also being evaluated.

3 Operating Segments

The Company’s business operation comprises of single operating segment viz., "Rubber Industry". Operating segment has been identified on the basis of nature of products and reported in a manner consistent with the internal reporting provided to Chief Operating Decision Maker.

4 Financial instruments Capital management

The Company manages its capital to ensure that entities in the Company will be able to continue as going concern, while maximising the return to stakeholders through the optimisation of the debt and equity balance.

The Company determines the amount of capital required on the basis of annual operating plans and long-term product and other strategic investment plans. The funding requirements are met through equity, long-term borrowings and other short-term borrowings.

Financial risk management objectives

The treasury function provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The Company seeks to minimise the effects of these risks by using natural hedging financial instruments and forward contracts to hedge risk exposures. The use of financial derivatives is governed by the Company''s policies approved by the board of directors, which provide written principles on foreign exchange risk, the use of financial derivatives, and the investment of excess liquidity. 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 realizable 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. The Company actively manages its currency and interest rate exposures through its finance division and uses derivative instruments such as forward contracts and currency swaps, wherever required, to mitigate the risks from such exposures. The use of derivative instruments is subject to limits and regular monitoring by appropriate levels of management.

Foreign currency risk management

The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The Company actively manages its currency rate exposures through a centralised treasury division and uses natural hedging principles to mitigate the risks from such exposures. The use of derivative instruments, if any, is subject to limits and regular monitoring by appropriate levels of management.

Foreign currency sensitivity analysis

Movement in the functional currencies of the various operations of the Company against major foreign currencies may impact the Company''s revenues from its operations. Any weakening of the functional currency may impact the Company''s cost of imports and cost of borrowings and consequently may increase the cost of financing the Company''s capital expenditures. The foreign exchange rate sensitivity is calculated for each currency by aggregation of the net foreign exchange rate exposure of a currency and a simultaneous parallel foreign exchange rates shift in the foreign exchange rates of each currency by 2%, which 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 2% change in foreign currency rates.

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.

Interest rate risk management

The Company is exposed to interest rate risk because it borrow funds at both fixed and floating interest rates. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings and by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied. Further, in appropriate cases, the Company also effects changes in the borrowing arrangements to convert floating interest rates to fixed interest rates.

Interest rate sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 25 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management''s assessment of the reasonably possible change in interest rates.

The 25 basis point interest rate changes will impact the profitability by INR 2.95 Million for the year (Previous INR 2.20 Million)

Credit risk management

Credit risk arises when a customer or counterparty does not meet its obligations under a customer contract or financial instrument, leading to a financial loss. The Company is exposed to credit risk from its operating activities primarily trade receivables and from its financing/ investing activities, including deposits with banks and foreign exchange transactions. The Company has no significant concentration of credit risk with any counterparty.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure.The maximum exposure is the total of the carrying amount of balances with banks, short term deposits with banks, trade receivables, margin money and other financial assets excluding equity investments.

(a) Trade receivables

Trade receivables are consisting of a large number of customers. The Company has credit evaluation policy for each customer and, based on the evaluation, credit limit of each customer is defined. Wherever the Company assesses the credit risk as high, the exposure is backed by either bank, guarantee/letter of credit or security deposits.

The Company does not have higher concentration of credit risks to a single customer. As per simplified approach, the Company makes provision of expected credit losses on trade receivables using a provision matrix to mitigate the risk of default in payments and makes appropriate provision at each reporting date wherever outstanding is for longer period and involves higher risk.

(b) Investments, Derivative instruments, Cash and cash equivalents and Bank deposits

Credit risk on cash and cash equivalents, deposits with the banks/financial institutions is generally low as the said deposits have been made with the banks/financial institutions, who have been assigned high credit rating by international and domestic rating agencies.

Credit risk on Derivative instruments is generally low as the Company enters into the derivative contracts with the reputed Banks.

There is no major Investments made by the Company and accordingly is not prone to any major investment risk.

Offsetting related disclosures

Offsetting of cash and cash equivalents to borrowings as per the consortium agreement is available only to the bank in the event of a default. Company does not have the right to offset in case of the counter party''s bankruptcy, therefore, these disclosures are not required.

Liquidity risk management

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company invests its surplus funds in bank fixed deposit and mutual funds, which carry minimal mark to market risks. The Company also constantly monitors funding options available in the debt and capital markets with a view to maintaining financial flexibility.

5 Retirement benefit plans Defined contribution plans

In accordance with Indian law, eligible employees of the Company are entitled to receive benefits in respect of provident fund, a defined contribution plan, in which both employees and the Company make monthly contributions at a specified percentage of the covered employees'' salary. The contributions, as specified under the law, are made to the Provident Fund.

The total expense recognised in profit or loss of '' 6.16 Million (for the year ended March 31, 2017: Rs. 0.92 Million) represents contribution paid to these plans by the Company at rates specified in the rules of the plan.

Defined benefit plans

(a) Leave obligations

The Leave obligations cover the Company''s liability for earned leave.

(b) Gratuity

Gratuity is payable as per Payment of Gratuity Act, 1972. In terms of the same, gratuity is computed by multiplying last drawn salary (basic salary including dearness Allowance if any) by completed years of continuous service with part thereof in excess of six months and again by 15/26. The Act provides for a vesting period of 5 years for withdrawal and retirement and a monetary ceiling on gratuity payable to an employee on separation, as may be prescribed under the Payment of Gratuity Act, 1972, from time to time. However, in cases where an enterprise has more favourable terms in this regard the same has been adopted.

These plans typically expose the Company to actuarial risks such as: investment risk, interest rate risk and salary risk.

Sensitivity analysis

In view of the fact that the Company for preparing the sensitivity analysis considers the present value of the defined benefit obligation which has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.

6 First-time adoption of Ind AS

Transition to Ind AS

These are the Company''s first financial statements prepared in accordance with Ind AS.

The accounting policies set out in Note 3 have been applied in preparing the financial statements for the year ended March 31, 2018, the comparative information presented in these financial statements for the year ended March 31, 2017 and in the preparation of an opening Ind AS balance sheet at April 1, 2016 (The company''s date of transition). “In preparing its opening Ind AS balance sheet, the company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards generally applicable to the Company (as amended from time to time) and other relevant provisions of the Act (previous GAAP or Indian GAAP)."

An explanation of how the transition from previous GAAP to Ind AS has affected The company''s financial position, financial performance and cash flows is set out in the following tables and notes.

A. Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

A.1 Ind AS optional exemptions

A.1.1 Deemed cost for PPE

Ind AS 101 permits a first-time adopter to elect to fair value a class of property, plant and equipment or to continue with the carrying value for all of its PPE as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities.

Accordingly, the company has elected to continue the property, plant and equipment at their previous GAAP values.

A.1.2. Deemed cost investment in subsidiaries, joint ventures and associates

A first-time adopter that subsequently measures an investment in a subsidiary, joint ventures or associate at cost, may measure such investment at cost (determined in accordance with Ind AS 27) or deemed cost (fair value or previous GAAP carrying amount) in its separate opening Ind AS balance sheet.

Accordingly, the company has elected to continue the investments in subsidiaries at their cost.

A.1.3. Designation of previously recognised financial instruments

Ind AS 101 allows an entity to designate investments in equity instruments at FVOCI or FVTPL on the basis of the facts and circumstances at the date of transition to Ind AS. The company has elected to apply this exemption for its investment in equity investments.

A.1.4. Leases

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

A.2 Ind AS mandatory exceptions

A.2.1 Estimates

An entity''s estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error. Ind AS estimates as at April 1, 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP. The company made estimates for impairment of financial assets based on expected credit loss model in accordance with Ind AS at the date of transition as these were not required under previous GAAP:

B. Notes to first-time adoption

B.1 Proposed dividends

Under Ind AS, liability to pay dividends arises only when the share holders approves the dividends recommended by the board of directors. Till such approval the proposed dividends does not meet the recognition criteria of a liability. The Company has accordingly, reversed the provisions for proposed dividends and the related taxes. Only a disclosure as required by Ind AS has been made.

B.2 Fair valuation of investments

Under Ind AS, investments in equity instruments are to be valued at fair valued through profit and loss (FVTPL) or fair valued through other comprehensive income (FVTOCI) based on the Company''s business objectives and the cash flow characteristics of the underlying financial investments. The Company has remeasured the investments at FVTPL as on the date of transition/ comparative period and the consequential impact has been given in the opening retained earnings/ profit and loss account of the comparative period.

B.3 Transaction costs in respect of financial instruments

Under the previous GAAP, transaction costs in relation to financial liabilities are charged to the profit and loss in the year in which they are incurred. As per Ind AS 109, transaction costs in relation to financial liabilities are to be reduced from the related financial liabilities and amortised over the repayment period of the said liability. The same has been considered in the opening and comparative period financial statements.

B.4 Trade receivables

As per Ind AS 109, The company is required to apply expected credit loss model for recognising the allowance for doubtful debts. Accordingly, the Company has developed an assessment for allowance for expected credit loss. The same has been considered in the opening and comparative period financial statements.

B.5 Property, Plant and Equipment

As per Ind AS 16, the company is required to remeasure the property, plant and equipment and any carry forward capital work in progress. Accordingly, the Company has remeasured the PPE with consequential adjustment in the retained earnings.

B.6 Intangibles with indefinite economic useful life

Under Ind AS, Intangible assets with indefinite economic useful life are not to be amortised and should be tested for impairment. The has remeasured such intangible assets/ related amortisation as aforesaid and accounted in the Ind AS financial statements.

B.7 Deferred tax

Under Ind AS, the deferred tax asset and liabilities are required to be accounted based on balance sheet approach. The Company has remeasured its deferred tax assets and liabilities as aforesaid and accounted in the Ind AS financial statements.

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Mar 31, 2016

1. Notes on accounts for the year ended 31st March 2016

The previous year figures have been regrouped / reclassified, wherever necessary to conform to the current year presentation.

Previous year figures are not comparable due to the fact that the current year figures are inclusive of the numbers relating to erstwhile Treadsdirect Limited and Parani Steels Private Limited, whereas, the previous year numbers are exclusively that of Elgi Rubber Company Limited prior to the scheme of amalgamation.

The Company has only one class of shares referred to as equity shares, having a par value of Rs, 1/-. Each holder of equity shares is entitled to one vote per share held.

The Company declares and pays dividend in Indian Rupees. The dividend recommended by the board of directors is subject to the approval of the shareholders in the ensuing annual general meeting.

The board of directors, in their meeting held on 30th May 2016, recommended a final dividend of Rs, 0.37 per share. The recommendation is subject to the approval of the shareholders at the annual general meeting to be held. The total dividend appropriation for the year ended March 31, 2016 amounted to Rs, 18,518,500/- and corporate dividend tax of Rs, 3,769,931/-. Dividend, if approved, is payable to the shareholders in proportion to their shareholding.

No shares have been allotted as fully paid up, by way of bonus shares during 5 years immediately preceding March 31,2016

49,550,000 equity shares of Rs, 1/- each were alloted in accordance with the scheme of amalgamation and arrangement during the year 2010-11.

Securities offered

a. Loan from ICICI Bank Limited is secured against exclusive charge by equitable mortgage on the commercial property situated at Chamiers Road, Chennai

b. Loan from Export Import Bank of India is secured by exclusive charge over the land and building located at Kovilpalayam (Mettupalayam Village), Coimbatore.

c. The facility granted by Export Import Bank of India as above is further secured by first pari passu charge over industrial/commercial land located at Trichy Road, Coimbatore and Kurichi Village Coimbatore along with Kotak Mahindra Bank Ltd.

Provision in respect of disputes represents claims against the Company on account of differential treatment given by statutory authorities/ rejection of certain claims by the Company.

Securities offered in connection with the credit facilities availed by the Company

a. Cash credit / export packing credit facility availed from State Bank of India is secured by exclusive first charge over current assets viz. raw materials, work in process, stores and spares, finished goods and receivables. Bill discounting/letter of credit and bank guarantee facilities are secured by documents to title to goods and first charge over the current assets as stipulated above.

Banking facilities referred to above are further secured by first charge over the entire fixed assets of the company exclusively (including Plant and Machinery) by way of equitable mortgage of land and building located at Kanjikode, Chengalpattu, Neelambur, Aralvaimozhi,Tirunvelveli, Palakkad and Pondicherry. The facilities are further secured by a second charge of equitable mortgage over company’s land property and factory building located at Annur, Kurichi and Hyderabad.

b. Loan against fixed deposits with State Bank of India amounting to '' 27,702,671/- ('' 23,000,000/-), is secured by a lien and pledge of fixed deposit receipts with State Bank of India and is repayable on demand.

c. Working capital short term loan facility from ICICI Bank Ltd is secured by residuary charge by way of hypothecation of the company’s entire stocks of raw material, semi finished goods, finished goods, consumable stores, spares and such other movables including book debts, bills, outstanding monies, receivables both present and future.

There are no amounts due for payment to the Investor Education and Protection Fund under the relevant provision of the Companies Act, 1956 (1 of 1956) and rules made there under, as at the year end.

Securities offered to

a. Kotak Mahindra Bank Ltd (KMBL), Coimbatore and Export Import Bank of India (EXIM), Mumbai for the facilities granted by the banks to the subsidiary companies with serial Nos.2,3 and 4,5 respectively as stated above.

By deposit of title deeds and equitable mortgage of immovable property located at Trichy Road, Coimbatore and Kurichi,Coimbatore, in favour of KMBL (in respect of the facility offered under item 2(a) above) ranking pari-passu with EXIM (in respect of the facilities offered under item 4 and 5 above). The facilities as referred to in item 2(a), 2(b) and 3 above relating to the standby letter of credit extended by KMBL is further secured by marking of lien by the bank on the fixed deposits (grouped under margin money deposits) held with them amounting to ''154.20 million.

b. State Bank of India, Coimbatore (SBI) for the credit facilities granted by State Bank of India, Antwerp to Rubber Resources B.V., The Netherlands for serial number 6 as stated above.

By exclusive first charge over the entire current assets of the company and equitable mortgage over company''s land property and factory building located at Annur,Kurichi, and Hyderabad. The facilities relating to the standby letter of credit extended by SBI is further secured by marking of lien by the bank on the fixed deposits (grouped under margin money deposits) held with them amounting to '' 83.60 million.

c. SBI for the credit facilities granted by SBI, Antwerp to Elgi Rubber Company Holdings B.V., The Netherlands for serial number 7 as stated above. By extension of securities in respect of the cash credit facilities as referred to in Note 2.05(a). The facilities relating to the standby letter of credit extended by SBI is further secured by marking of lien by the bank on the fixed deposits (grouped under margin money deposits) held with them amounting to '' 37.50 million.

2. During the year the Company has capitalized interest paid on term loans amounting to '' 4,141,287/- ('' 741,734/-) along with the immovable property which is constructed. Consequently interest amount shown in the notes is net off such expenditure capitalized.

3. Corporate Social Responsibility: As per Section 135 of the Companies Act, 2013, a CSR committee has been formed by the Company. The CSR expenditure for the year ended March 31, 2016 is contributed to a few trusts towards activities which are specified in schedule VII of the Companies Act, 2013.

4 In the opinion of board of directors, current assets, loans and advances, have at least the value as stated in the balance sheet, if realized in the ordinary course of the business.

5. Income tax assessment has been completed up to the accounting year ended 31^st March 2013.

6. No intangible / tangible asset has been generated during the year out of the research and development activity.

7. Pursuant to Accounting Standard (AS 28) - impairment of assets, the Company assessed its fixed assets for impairment as at March 31, 2016 and concluded that there has been no significant impaired fixed asset that needs to be recognized in the books of account.

8. Deferred tax asset includes a sum of Rs, 3,823,000/- (Asset) transferred from M/s Treads direct Limited, on account of the scheme of amalgamation.

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Mar 31, 2015

I. Overseas subsidiaries

Securities offered in connection with Standby Letter of Credit extended by ING Vysya Bank Limited and Export-Import Bank of India, in favour of the respective banks, which have granted credit facilities to the following Subsidiary Companies

Facilities offered

1. for the credit facilities granted by ING Bank NV, Filial De Sao Paulo, Brasil to Borrachas e Equipamentos Elgi Ltda, Brasil.

2. for the credit facilities granted by ING Bank NV, Amsterdam to Rubber Resources B.V., The Netherlands.

3. for the credit facilities granted by Export-Import Bank of India, London to Pincott International Pty Limited, Australia.

4. for the credit facilities granted by Export-Import Bank of India, London to Elgi Rubber Company LLC, USA. Securities offered By deposit of title deeds and equitable mortgage of immovable property located at Trichy Road, Coimbatore and Kurichi,Coimbatore, in favour of ING Vysya Bank Limited, Coimbatore ranking pari-passu with Export Import Bank of India, Mumbai

The facilities relating to the standby letter of credit extended by ING Vysya Bank Ltd is further secured by marking of lien by the bank on the fixed deposits (grouped under margin money deposits) held with them amounting to Rs.188.54 million, which includes margin money towards the facilities granted to Elgi Rubber Company B.V., The Netherlands amounting to EUR 0.50 million, Rubber Resources B.V.,

The Netherlands and Borrachas e Equipamentos Elgi Ltda, Brasil.

Securities offered in connection with standby letter of credit extended by State Bank of India, based on which credit facilities to the following subsidiary Company

For the credit facilities granted by State Bank of India, Antwerp to Rubber Resources B.V., The Netherlands.

Secured by exclusive first charge over the entire current assets of the company, equitable mortgage over Company's landed property and factory building located at Annur and Kurichi, Coimbatore

The facilities relating to the standby letter of credit extended by State Bank of India is further secured by marking of lien by the bank on the fixed deposits (grouped under margin money deposits) held with them amounting to Rs.36.90 million, towards the facilities granted to Rubber Resources B.V., The Netherlands for a sum of EUR 3.00 million.

1. Employee benefits

The details required under AS 15 - Employee Benefits are as follows

The Employees' Gratuity fund scheme managed by the Life Insurance Corporation of India is a defined benefit plan. The present value of the obligation is determined based on actuarial valuation using the projected unit credit method, which recognises each period of service as giving rise to additional unit of employees benefit entitlement and measures each unit separately to build up the final obligation. The obligation for Compensated absence is recognised in the same manner as gratuity.

The funds in respect of gratuity have been invested in the LIC Group Gratuity Cash Accumulation Plan and in respect of compensated abseno have been invested in the LIC Group leave encashment plan, administered by the Life Insurance Corporation of India.

2. Segment reporting

The Company is engaged primarily in one segment of providing solutions to the rubber industry and hence the segment reporting is not applicable

3. During the year the Company has capitalised interest paid on term loans amounting to Rs.741,734 along with the immovable property which is being constructed. Consequently interest amount shown in the notes is net off such expenditure capitalised.

4. Corporate Social Responsibility: As per Section 135 of the Companies Act, 2013, a CSR committee has been formed by the Company. The CSR expenditure for the year ended March 31, 2015 is contributed to a few trusts towards activities which are specified in schedule VII of the Companies Act, 2013.

5. In the opinion of board of directors, current assets, loans and advances, have atleast the value as stated in the balance sheet, if realised in the ordinary course of the business.

6. Income tax assessment has been completed upto the accounting year ended 31st March 2012.

7. No intangible / tangible asset has been generated during the year out of the research and development activity.

2.46 Pursuant to Accounting Standard (AS 28) - impairment of assets, the Company assessed its fixed assets for impairment as at March 31, 2015 and concluded that there has been no significant impaired fixed asset that needs to be recognised in the books of account.

2.47 Non current investments

a. Number of units of investment in mutual funds are rounded off to the nearest whole number.

b. All investments are fully paid up, unless otherwise stated.

c. Details of Investments

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Mar 31, 2014

The Company has only one class of shares referred to as equity shares having a par value of Re.1/-. Each holder of equity shares is entitled to one vote per share held.

The company declares and pays dividend in Indian Rupees. The dividend recommended by the board of directors is subject to the approval of the shareholders in the ensuing annual general meeting.

The board of directors, in their meeting held on 19th May 2014, recommended a final dividend of Re. 0.37 per share. The recommendation is subject to the approval of the shareholders at the annual general meeting to be held. The total dividend appropriation for the year ended March 31, 2014 amounted to Rs.18,518,500/-. Dividend, if approved, is payable to the shareholders in proportion to their shareholding.

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

Note

Neither shares are reserved for issue under options nor securities have been issued, which are convertible into equity / preference shares in future as on the date of balance sheet.

Securities offered in connection with the credit facilities availed by the Company

a. Loan against fixed deposits with State Bank of India amounting to Rs.Nil(Rs.26,500,000), with Bank of India amounting to Rs.13,500,000 (Rs.13,500,000) and with City Union Bank Limited amounting to Rs.9,000,000 (Rs.Nil) are secured by a lien and pledge of fixed deposit receipts with the State Bank of India, Bank of India and City Union Bank Limited respectively and are repayable on demand.

b. Overdraft facility against fixed deposit with HDFC Bank Ltd., is secured by a lien and pledge of fixed deposit receipts with HDFC Bank Ltd., which is repayable on demand.

c. Cash credit/ export packing credit facility availed from State Bank of India is secured by first charge over raw materials, stock in process, finished goods, receivables, and other current assets.

d. Bill discounting/letter of credit and bank guarantee facilities are secured by documents to title goods and first charge over the current assets as stipulated.

Banking facilities referred to in (c) and (d) above are further secured by first charge over the entire fixed assets of the company exclusively including equitable mortgage of land and building located at Kanjikode, Chengalpattu, Kurichi, Neelambur, Aralvaimozhi and Tirunvelveli.

1. Contingent liabilities and commitments (to the extent not provided for)

i. Claims against the company not acknowledged as debts

a. Income tax matters 667,560 2,597,600

b. Excise and Service Tax Matters 1,696,185 776,362

c. Sales tax 261,000 -

d. Stamp duty 4,368,304 4,368,304

ii. Capital commitments

a. Estimated amount of contracts remaining to be executed on capital account and not provided for 16,359,035 27,670,271

b. Uncalled liability on shares and other investments partly paid - Payable in respect of purchase of shares of Rubber Resources B.V., (RR) on achievement of milestones EUR 210,000 EUR 1,080,000

iii. Other commitments

a. The company has issued an undertaking to provide need based financial support to its following wholly owned subsidiary companies

i. Pincott International Pty Ltd., Australia AUD 577,771 AUD 577,771

USD 800,000 - ii. Borrachas e Equipamentos ELGI Ltda, Brasil BRL 9,900,000 BRL 3,900,000

iii.Elgi Rubber Company B.V., The Netherlands EUR 300,000 EUR 300,000

iv. Elgi Rubber Company LLC, USA USD 2,516,579 -

v. Rubber Resources B.V., The Netherlands EUR 2,500,000 -

b. Guarantee on account of unpaid liability on account of purchase of shares of RR as stated in column (ii) (b) above EUR 720,000 EUR 1,080,000

c. Guarantee on account of security deposits with various electricity boards, state road transport corporations and other statutory authorities 8,005,484 7,469,208

d. Letter of credit on account of import of goods USD 498,600 USD 114,580

iv. Overseas subsidiaries

Securities offered in connection with standby letter of credit extended by ING Vysya Bank Limited and Export-Import Bank of India, in favour of the respective banks, which have granted credit facilities to the following subsidiary companies

Facilities offered

1. for the credit facilities granted by ING Bank NV, Filial De Sao Paulo, Brasil to M/s Borrachas e Equipamentos Elgi Ltda, Brasil.

2. for the credit facilities granted by ING Bank NV, Amsterdam, to M/s Rubber Resources B.V., Netherlands.

3. for the credit facilities granted by Export-Import Bank of India, London to M/s Pincott International Pty., Ltd, Australia..

4. for the credit facilities granted by Export-Import Bank of India, London to M/s Elgi Rubber Company LLC, USA..

Securities offered

By deposit of title deeds and equitable mortgage of immovable property located at Trichy Road, Coimbatore and Kurichi, Coimbatore, in favour of ING Vysya Bank Ltd., Coimbatore ranking pari-passu with Export-Import Bank of India, Mumbai.

The facilities relating to the standby letter of credit extended by M/s ING Vysya Bank Ltd., is further secured by marking of lien by the bank on the fixed deposits (grouped under margin money deposits) held with them amounting to Rs.184.13 Million.

2. Employee benefits

The details required under AS 15 - Employee Benefits are as follows

The Employees'' Gratuity Fund Scheme managed by the Life Insurance Corporation of India is a defined benefit plan. The present value of the obligation is determined based on actuarial valuation using the projected unit credit method, which recognises each period of service as giving rise to additional unit of employees benefit entitlement and measures each unit separately to build up the final obligation. The obligation for Compensated absence is recognised in the same manner as gratuity.

3. Segment reporting

The Company is engaged primarily in one segment of providing solutions to the rubber industry and hence the segment reporting is not applicable.

4. In the opinion of Board of Directors, current assets, loans and advances, have atleast the value as stated in the balance sheet, if realised in the ordinary course of the business.

5. (a) Number of units of investment in mutual funds are rounded off to the nearest whole number.

(b) All investments are fully paid up, unless otherwise stated.

6. Income tax assessment has been completed in respect of erstwhile Companies viz., Elgi Rubber Company Limited upto the accounting year ended 31st March 2011.

7. No intangible / tangible asset has been generated during the year out of the research and development activity.

8. Pursuant to Accounting Standard (AS 28) - Impairment of assets, the Company assessed its fixed assets for impairment as at March 31, 2014 and concluded that there has been no significant impaired fixed asset that needs to be recognised in the books of account.

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Mar 31, 2013

1.1 Employee benefits

The details required under AS 15 - Employee Benefits are as follows

The Employees'' Gratuity Fund Scheme managed by the Life Insurance Corporation of India is a defined benefit plan. The present value of the obligation is determined based on actuarial valuation using the projected unit credit method, which recognises each period of service as giving rise to additional unit of employees benefit entitlement and measures each unit separately to build up the final obligation. The obligation for Compensated absence is recognised in the same manner as gratuity.

1.2 Segment reporting

The Company is engaged primarily in one segment of providing solutions to the rubber industry and hence the segment reporting is not applicable.

1.3 In the opinion of Board of Directors, current assets, loans and advances, have atleast the value as stated in the balance sheet, if realised in the ordinary course of the business.

1.4 (a) Number of units of investment in mutual funds are rounded off to the nearest whole number. (b) All investments are fully paid up, unless otherwise stated.

1.5 Income tax assessment has been completed in respect of erstwhile Companies viz., Elgi Rubber Company Limited and Treadsdirect Limited upto the accounting year ended 31st March 2010.

1.6 Confirmation from debtors and creditors has not been received in a few cases.

1.7 No intangible / tangible asset has been generated during the year out of the research and development activity.

1.8 Pursuant to Accounting Standard (AS 28) - Impairment of assets, the Company assessed its fixed assets for impairment as at March 31, 2013 and concluded that there has been no significant impaired fixed asset that needs to be recognised in the books of account.

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Mar 31, 2012

The previous year figures have been regrouped / reclassified, wherever necessary to conform to the current year presentation.

Previous years figures are not comparable as the previous year figures include nine months operations ending 31.12.2010 of its units located at Kovillpalayam, Puducherry and Palakkad and its retreading units located all over India, whereas the current year figures are without the operations of the said units for the whole accounting period.

The Company has only one class of shares referred to as equity shares having a par value of Re.1. Each holder of equity shares is entitled to one vote per share held.

The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the share holders in the ensuing annual general meeting.

The Board of Directors, in their meeting on 23rd May, 2012, proposed a final dividend of Re. 0.50 per share. The proposal is subject to the approval of the shareholders at the Annual General Meeting to be held. The total dividend appropriation for the year ended March 31,2012 amounted to Rs. 29,084,680 including Corporate dividend tax of Rs. 4,059,680. Dividend, if approved, is payable to the shareholders in proportion to their shareholding.

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

* No shares have been allotted as fully paid up, by way of bonus shares during 5 years immediately preceding March 31, 2012.

** 49,550,000 Equity shares of Re.1/- each were allotted in accordance with the Scheme of Arrangement and Amalgamation during the year 2010-11.

a. Loan against fixed deposits with State Bank of India amounting to Rs.45,353,527( March 31,2011- Rs.Nil) are secured by lien and pledge of fixed deposit receipts with the State Bank of India and are repayable on demand.

b. Cash credit/ Export Packing credit facility availed from State Bank of India is secured by first charge over raw materials, stock in process, finished goods, receivables and other current assets.

c. Bill discounting/Letter of credit and Bank Guarantee facilities are secured by documents to title goods and first charge over the current assets as stipulated.

Banking facilities referred to in (b) and (c) above are further secured by first charge over the entire fixed assets of the company including land and building located at Kanjikode, Chenglepattu, Kurichi, Neelambur, Aralvaimozhi and Tirunvelveli.

1.1 Contingent Liabilities and Commitments (to the extent not provided for)

Claims against the Company not acknowledged as debts

a. Income tax matters 711,290 2,940,118

b. Excise and Service Tax Matters 776,362 776,362

c. Stamp duty 4,368,304 4,368,304

1.2 Employee Benefits

The details required under AS 15 - Employee Benefits as follow

The Employees' Gratuity Fund Scheme managed by the Life Insurance Corporation of India is a defined benefit plan. The present value of the obligation is determined based on actuarial valuation using the projected unit credit method, which recognises each period of service as giving rise to additional unit of employees benefit entitlement and measures each unit separately to build up the final obligation. The obligation for compensated absence is recognised in the same manner as gratuity.

The funds have been invested in the LIC Group Gratuity (Cash Accumulation Policy), administered by the Life Insurance Corporation of

* Surplus in plan value of assets amounting to Rs. 1,078,474 over the liability has not been recognised in the Statement of Profit and Loss on a conservative basis.

1.3 Segment Reporting

The Company is engaged primarily in one segment of providing solutions to the rubber industry and hence the segment reporting is not applicable.

1.4 In the Opinion of Board of Directors, current assets, loans and advances, have atleast the value as stated in the balance sheet, if realised in the ordinary course of the business.

1.5 a. Number of units of investment in mutual funds are rounded off to the nearest whole number,

b. All investments are fully paid up, unless otherwise stated.

1.6 Income tax assessment has been completed in respect of erstwhile companies viz., Elgi Rubber Company Limited and Treadsdirect Limited upto the accounting year ended 31st March 2009.

1.7 Confirmation from debtors and creditors has not been received in a few cases.

1.8 No intangible / tangible asset has been generated during the year out of the Research and Development activity.

1.9 Pursuant to Accounting Standard (AS 28) - Impairment of assets, the Company assessed its fixed assets for impairment as at March 31, 2012 and concluded that there has been no significant impaired fixed asset that needs to be recognised in the books of account.