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Notes to Accounts of Fag Bearings India Ltd.

Dec 31, 2014

1 FIXED ASSETS

(ii) Depreciation on the increase in the value of fixed assets due to revaluation is charged to the Revaluation Reserve. Consequently, the depreciation charge for the year shown in the Statement of Profit and Loss is after deducting an amount of Rs.0.6 million (Previous year:Rs. 0.6 million), representing depreciation on the increase due to revaluation of Buildings and Roads transferred from the Revaluation Reserve.

(b) Buildings and Roads include Rs.250, being cost of five ordinary shares of Rs.50 each of Nariman Bhavan Premises Co-operative Society Limited and Rs.500 being cost of ten ordinary shares of Rs.50 each of Parekh Market Premises Co-operative Society Limited, which entitle the Company to real estate.

2 CONTINGENT LIABILITIES NOT PROVIDED FOR IN RESPECT OF 31.12.2014 31.12.2013

Claims against the Company not acknowledged as debts:

(a) Em loyees and ex-employees related matters:

(i) Matters pending in Labour Court / Civil Court / High Court for reinstatement of service / recovery of salary 96.8 54.5

(ii) Applicability of provident fund on certain benefits to employees 276.0 230.0

(iii) Demand for discontinuing of contract system and for differential wages 72.7 63.9

(iv) Applicability of Employees State Insurance on certain benefits paid to the employees 9.3 8.0

454.8 356.4

3 Research and Development expenses under the respective heads aggregate to Rs.97.7 million (Previous year Rs.126.5 million) including of capital nature Rs.0.2 million (Previous year Rs.1.7 million).

4 The tax year for the Company being the year ending March 31, 2015, the provision for taxation for the year is the aggregate of the provision made for the three months ended March 31, 2014 and the provision based on the figures for the remaining nine months up to December 31, 2014, the ultimate tax liability of which will be determined on the basis of the figures for the period April 1, 2014 to March 31, 2015.

The Company''s international and domestic transactions with associated enterprises are at arm''s length as per the independent accountant''s report for the year ended March 31, 2014. The Company is in the process of updating the documentation for the international and domestic transactions entered into with the associated enterprises during the period subsequent to March 31, 2014. Management believes that the Company''s international and domestic transactions with associated enterprises post March 31, 2014 continue to be at arm''s length and that the transfer pricing legislation will not have any impact on the financial statements particularly on the amount of the tax expense for the year and the amount of the provision for taxation at the year end.

5 SEGMENT REPORTING

The business of the Company falls under a primary single segment i.e. manufacture and sale of "Ball / Roller Bearings and related components" for the purpose ofAccounting Standard (AS)-17.

6 (A) DISCLOSURE IN RESPECT OF ASSETS TAKEN ON LEASE

Operating Leases

The Company has entered into rent agreement for equipment, vehicles and leave & license agreements for certain premises (along with furniture and fixtures in certain cases). The lease typically run for a period ranging between 12 months to 48 months. These leasing arrangements are cancellable, and are renewable on a periodic basis by mutual consent on mutually accepted terms including escalation of lease rent. The agreements contain clause for restriction on sub leasing.

(B) DISCLOSURE IN RESPECT OF ASSETS GIVEN ON OPERATING LEASE

The Company has entered into lease agreement for certain portion of its factory and office premises. The said agreement does not provide for increase in rent during the tenure of the agreement and contains renewal clause. The lessee is entitled to terminate the lease by giving 3 months notice without assigning any reason. The Company may terminate the lease by giving 3 months notice only on the grounds specified in the agreement:

7 RELATED PARTY DISCLOSURES AS REQUIRED UNDER AS-18 ARE GIVEN BELOW

(1) Name and nature of relationship of the Related Party where Control exists:

FAG Kugelfischer GmbH, Germany: Holding Company holds 8,529,183 equity shares i.e. 51.33% of the equity share capital as at the year end. The ultimate control lies with INA Holding Schaeffler GmbH & Co. KG - Schaeffler Group.

(2) Names of the Related Parties having transactions with the Company during the year 2014

(a) Holding Company

FAG Kugelfischer GmbH, Germany

(b) Fellow Subsidiary / Associate Companies

Schaeffler Australia Pty. Ltd., Australia

Schaeffler Brasil Ltda., Brazil

Schaeffler (China) Co. Ltd., China

Schaeffler (Ningxia) Co. Ltd., China

Schaeffler Holding (China) Co. Ltd., China

Schaeffler Trading (Shanghai) Co. Ltd., China

Schaeffler (Nanjing) Co. Ltd., China

Schaeffler Middle East FZE, Dubai

Schaeffler France S.A.S., France

Schaeffler Technologies GmbH & Co. KG, Germany (Formerly known as Schaeffler Technologies AG & Co. KG.)

Schaeffler AG, Germany

Schaeffler Automotive Aftermarket GmbH & Co. KG, Germany

FAG Industrial Services GmbH, Germany

LuK Truckparts GmbH & Co. KG, Germany

Schaeffler Verwaltung Zwei GmbH, Germany

Schaeffler Hong Kong Company Ltd., Hong Kong

INA Bearings India Pvt. Ltd., India

FAG Roller Bearings Pvt. Ltd., India

LuK India Pvt. Ltd., India

Schaeffler Bearings Indonesia, PT, Indonesia

Schaeffler Japan Co. Ltd., Japan

Schaeffler Korea Corporation, Korea

Schaeffler Mexico, S. de R.L. de C.V., Mexico

Schaeffler Portugal S.A., Portugal

Schaeffler Philippines Inc., Philippines

(c) Key Management Personnel

Mr. Rajendra Anandpara, Managing Director 2013

(a) Holding Company

FAG Kugelfischer GmbH, Germany

(b) Fellow Subsidiary / Associate Companies

Schaeffler Australia Pty. Ltd., Australia

Schaeffler Iberia S.L.U., Barcelona

Schaeffler Brasil Ltda., Brazil

Schaeffler (China) Co. Ltd., China

Schaeffler (Ningxia) Co. Ltd., China

Schaeffler Holding (China) Co. Ltd., China

Schaeffler Trading (Shanghai) Co. Ltd., China

Schaeffler Middle East FZE, Dubai

Schaeffler Finland Oy, Finland

Schaeffler France S.A.S., France

Schaeffler Technologies AG & Co. KG, Germany

Schaeffler AG, Germany

Schaeffler Automotive Aftermarket

GmbH & Co. KG, Germany

FAG Industrial Services GmbH, Germany

WPB Water Pump Bearing GmbH & Co. KG, Germany

LuK Truckparts GmbH & Co. KG, Germany

Schaeffler Holding GmbH & Co. KG, Germany

FAG Magyarorszag Ipary KFT, Hungary

Schaeffler Hong Kong Company Ltd., Hong Kong

INA Bearings India Pvt. Ltd., India

FAG Roller Bearings Pvt. Ltd., India

LuK India Pvt. Ltd., India

Schaeffler Bearings Indonesia, PT, Indonesia

Schaeffler Japan Co. Ltd., Japan

Schaeffler Korea Corporation, Korea

Schaeffler Mexico, S. de R.L. de C.V., Mexico

SC Schaeffler Romania S.R.L., Romania

Schaeffler (Singapore) Pte. Ltd., Singapore

INA Kysuce, spol. s r.o, Slovakia

Schaeffler (Thailand) Co. Ltd., Thailand

The Barden Corporation (UK) Ltd., UK

The Barden Corporation, USA

Schaeffler Group USA Inc., USA

Schaeffler Vietnam Co. Ltd., Vietnam

Schaeffler Nederland B.V., Nederland

Schaeffler Portugal S.A., Portugal

Schaeffler Philippines Inc., Philippines

SC Schaeffler Romania S.R.L., Romania

Schaeffler (Singapore) Pte. Ltd., Singapore

INA Kysuce, spol. s r.o, Slovakia

Schaeffler South Africa (Pty.) Ltd., South Africa

Schaeffler (Thailand) Co. Ltd., Thailand

The Barden Corporation (UK) Ltd., UK

The Barden Corporation, USA

Schaeffler Group USA Inc., USA

Schaeffler Vietnam Co. Ltd., Vietnam

(c) Key Management Personnel

Mr. Rajendra Anandpara, Managing Director

5 DERIVATIVE INSTRUMENTS

The Company has entered into foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to firm commitments and highly probable transactions.

During the year the Company has adopted and applied the principles of hedge accounting as set out in Accounting Standard (AS)-30, ''Financial Instruments: Recognition and measurement'' issued by the Institute of Chartered Accountants of India with effect from August 1, 2014 to forward contracts in respect of highly probable transactions or firm commitments which were previously accounted following the principles of prudence as per AS-1, ''Disclosure of Accounting Policies'':

(a) Loss representing the loss on fair valuation of foreign currency forward covers, determined on the date of designation, amounting to Rs. 63.2 million has been debited to Statement of Profit and Loss.

(b) Loss on the fair valuation of forward covers, which qualify as effective cash flow hedge amounting to Rs.203.0 million, on the Balance Sheet date, has been recognised in the hedging reserves account.

6 EMPLOYEE BENEFITS: POST-EMPLOYMENT BENEFIT PLANS

Defined contribution plans

The Company makes contributions, determined as a specified percentage of employee salaries, in respect of qualifying employees towards Provident Fund, which is a defined contribution plan. The Company has no obligations other than to make the specified contributions. The contributions are charged to the Statement of Profit and Loss as they accrue. The amount recognised as an expense towards contribution to Provident Fund for the year aggregated to Rs.49.5 million (Previous year: Rs.41.3 million) and contribution to superannuation fund for the year aggregated to M 22.0 million (Previous year: Rs.19.2 million).

Defined benefit plans

The Company has defined benefit plans that provide gratuity benefit and provident fund for certain employees. The gratuity plan entitles an employee who has rendered at least five years of continuous service, to receive one-half month''s salary for each year of completed service at the time of retirement / exit. The scheme is funded by the plan assets.

The Company makes contributions, determined as a specified percentage of employee salaries, in respect of certain employees towards Provident Fund to a Company managed PF Trust. The contributions are charged to Statement of Profit and Loss as they accrue. Based on actuarial valuation report there is no shortfall in the Trust fund as at December 31, 2014.

The following table summarises the position of assets and obligations relating to the two plans.

7 DUES TO MICRO, SMALL AND MEDIUM ENTERPRISES

Under the Micro, Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. On the basis of the information and records available with the management, there are no outstanding dues to the Micro and Small enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006.

8 PREVIOUS YEAR FIGURES

Details of regrouping / reclassification for the previous year


Dec 31, 2013

1 Research and Development expenses under the respective heads aggregate to Rs. 126.5 million (Previous year: Rs. 107.8 million) including of Capital nature Rs. 1.7 million (Previous year: Rs. 5.0 million).

The tax year for the Company being the year ending March 31, 2014, the provision for taxation for the year is the aggregate of the provision made for the three months ended March 31, 2013 and the provision based on the figures for the remaining nine months up to December 31, 2013 the ultimate tax liability of which will be determined on the basis of the figures for the period April 1, 2013 to March 31, 2014.

The Company''s international transactions with associated enterprises are at arm''s length as per the independent accountant''s report for the year ended March 31, 2013. The Company is in the process of updating the documentation for the international and domestic transactions entered into with the associated enterprises during the period subsequent to March 31, 2013. Management believes that the Company''s international and domestic transactions with associated enterprises post March 31, 2013 continue to be at arm''s length and that the transfer pricing legislation will not have any impact on the financial statements particularly on the amount of the tax expense for the year and the amount of the provision for taxation at the year end.

2 (A) DISCLOSURE IN RESPECT OF ASSETS TAKEN ON LEASE

Operating Leases

The Company has entered into rent agreement for equipment, vehicles and leave and license agreements for certain premises (along with furniture and fixtures in certain cases). The lease typically run for period ranging between 12 months to 48 months. These leasing arrangements are cancellable, and are renewable on a periodic basis by mutual consent on mutually accepted terms including escalation of lease rent. The agreements contain clause for restriction on subleasing.

3 RELATED PARTY DISCLOSURES AS REQUIRED UNDER AS-18 ARE GIVEN BELOW

(1) Name and nature of relationship of the Related Party where Control exists:

FAG Kugelfischer GmbH, Germany: Holding Company holds 8,529,183 equity shares i.e. 51.33% of the equity share capital as at the year end. The ultimate control lies with INA Holding Schaeffler GmbH & Co. KG - Schaeffler Group.

4 EMPLOYEE BENEFITS: POST-EMPLOYMENT BENEFIT PLANS

Defined contribution plans

The Company makes contributions, determined as a specified percentage of employee salaries, in respect of qualifying employees towards Provident Fund, which is a defined contribution plan. The Company has no obligations other than to make the specified contributions. The contributions are charged to the Statement of Profit and Loss as they accrue. The amount recognised as an expense towards contribution to Provident Fund for the year aggregated to Rs. 41.3 million (Previous year: Rs. 39.5 million) and contribution to Superannuation Fund for the year aggregated to Rs. 19.2 million (Previous year: Rs. 18.4 million).

Defined benefit plans

The Company has defined benefit plans that provide Gratuity benefit and Provident Fund for certain employees. The Gratuity plan entitles an employee, who has rendered atleast five years of continuous service, to receive one-half month''s salary for each year of completed service at the time of retirement / exit. The Scheme is funded by the plan assets.

The Company makes contributions, determined as a specified percentage of employee salaries, in respect of certain employees towards Provident Fund to a Company managed PF Trust. The contributions are charged to Statement of Profit and Loss as they accrue. Based on actuarial valuation report there is no shortfall in the Trust Fund as at December 31, 2013.

5 DUES TO MICRO, SMALL AND MEDIUM ENTERPRISES

Under the Micro, Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. On the basis of the information and records available with the management, there are no outstanding dues to the Micro and Small enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006.


Dec 31, 2012

Rights, preferences and restrictions attached to equity shares

(i) The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the Company''s residual assets. The equity shares are entitled to receive dividend was declared from time to time. The voting rights of shareholders are in proportion to its share of paid up equity capital of the Company.

(ii) On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of the Company.

Capital advances are given to FAG Roller Bearings Private Limited, an associate company Rs.Nil (2011: 115.9 million). Other loans and advances comprise of loan given to INA Bearings India Private Limited, an associate company Rs.450.0 million (2011: Rs.450.0 million), secured by way of hypothecation of plant and machinery.

(ii) Depreciation on the increase in the value of fixed assets due to revaluation is charged to the Revaluation Reserve. Consequently, the depreciation charge for the year shown in the Statement of Profit and Loss is after deducting an amount of Rs.0.6 million (2011: Rs.0.6 million), representing depreciation on the increase due to revaluation of buildings and roads transferred from the Revaluation Reserve.

(b) Buildings and roads include Rs.250, being cost of five ordinary shares of Rs.50 each of Nariman Bhavan Premises Co-operative Society Limited and Rs.500 being cost of ten ordinary shares of Rs.50 each of Parekh Market Premises Co-operative Society Limited, which entitle the Company to real estate.

(c) Capital work-in-progress includes fees for technical services for Capital project Rs.21.8 million (2011: Rs.26.1 million) and allocation of manufacturing and other expenses Rs.39.0 million (2011: 28.7 million).

1. CONTINGENT LIABILITIES NOT PROVIDED FOR IN RESPECT OF:

Claims against the Company not acknowledged as debts:

(a) Employees and ex-employees related matters:

- Matters pending in labour court / civil court / high court for reinstatement of service / recovery of salary Rs.116.0 million (2011: Rs. 96.2 million);

- Applicability of Provident Fund on certain benefits to employees Rs. 190.4 million (2011: Rs.155.9 million);

- Demand for discontinuing of contract system and for differential wages Rs.102.6 million (2011: Rs. 83.0 million);

- Applicability of Employees State Insurance on certain benefits paid to the employees Rs.6.9 million (2011: Rs. 6.0 million).

(b) Sales Tax:

For non receipt of C Forms and rejection of Company''s claim of certain sales as exempt sales in respect of assessment years 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09 Rs.36.3 million (2011: Rs. 22.8 million).

(c) Excise & Service Tax:

Excise

(i) In respect of matters decided against the Company, for which the Company is in appeal with higher authorities Rs.Nil (2011: Rs.0.6 million).

Service Tax

(ii) In respect of matters where the Company has received favorable orders / partial relief from the First Appellate authorities but the Central Excise and Customs Department is pursuing further with higher Appellate authorities (excluding the matters if not ultimately allowed, would be allowed in the following assessment years) Rs.1.9 million (2011: Rs.1.8 million).

(d) Income Tax:

(i) In respect of matters decided against the Company, for which the Company is in appeal with higher authorities Rs. 82.8 million (2011: Rs. 96.8 million).

(ii) In respect of matters where the Company has received favorable orders / partial relief from the First Appellate authorities but the Income Tax Department is pursuing further with higher Appellate authorities (excluding the matters if not ultimately allowed, would be allowed in the following assessment years) Rs.159.3 million (2011: Rs. 151.8 million).

Research and Development expenses under the respective heads aggregate to M 107.8 million (2011: M 61.5 million) including of capital nature Rs. 5.0 million (2011: Rs.2.9 million).

The tax year for the Company being the year ending March 31, 2013, the provision for taxation for the year is the aggregate of the provision made for the three months ended March 31, 2012 and the provision based on the figures for the remaining nine months up to December 31, 2012 the ultimate tax liability of which will be determined on the basis of the figures for the period April 1, 2012 to March 31, 2013.

The Company''s international transactions with associated enterprises are at arm''s length as per the independent accountant''s report for the year ended March 31, 2012. The Company is in the process of updating the documentation for the international and domestic transactions entered into with the associated enterprises during the period subsequent to March 31, 2012. Management believes that the Company''s international and domestic transactions with associated enterprises post March 31, 2012 continue to be at arm''s length and that the transfer pricing legislation will not have any impact on the financial statements particularly on the amount of the tax expense for the year and the amount of the provision for taxation at the year end.

2 SEGMENT REPORTING:

The business of the Company falls under a primary single segment i.e. manufacture and sale of "Ball / Roller Bearings and related components" for the purpose of Accounting Standard (AS-17).

Assets and additions to tangible and intangible fixed assets by geographical area:

The following table shows the carrying amount of segment assets and capital expenditure during the year by geographical area in which the assets are located:

(i) Under certain agreements, refundable interest free deposits have been given.

(ii) The agreements

- contain renewal clause

- contain clause for restrictions on subleasing

Finance Lease

No asset has been taken on finance lease.

(B) DISCLOSURE IN RESPECT OF ASSETS GIVEN ON OPERATING LEASE:

The Company has entered into lease agreement for certain portion of its factory and office premises. The said agreement does not provide for increase in rent during the tenure of the agreement and contains renewal clause. The lessee is entitled to terminate the lease by giving 3 months notice without assigning any reason. The Company may terminate the lease by giving 3 months notice only on the grounds specified in the agreement.

RELATED PARTY DISCLOSURES AS REQUIRED UNDER AS-18 ARE GIVEN BELOW:

(1) Name and nature of relationship of the related party where control exists:

FAG Kugelfischer GmbH, Germany: Holding Company holds 8,529,183 equity shares i.e. 51.33% of the equity share capital as at the year end. The ultimate control lies with INA Holding GmbH & Co. KG, Germany (formerly INA Holding Schaeffler KG, Germany) - Schaeffler Group.

3 (a) Excise duty paid and collected from customers is shown separately and deducted from the Sales turnover (Gross) in the Statement of Profit and Loss.

(b) Excise duty appearing under other expenses represents (i) the difference between excise duty included in the closing stock and that in opening stock of manufactured finished goods Rs.2.8 million net credit (2011: Rs.7.4 million net debit) and (ii) the excise duty on the free sample, scrap etc. Rs.2.1 million (2011: Rs. 8.7 million).

4.DERIVATIVE INSTRUMENTS:

The Company has entered into foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to firm commitments and highly probable forecast transactions. The outstanding forward exchange contracts entered against the same and other future probable commitments and the foreign currency exposures as at December 31, 2012 are as follows:

5.EMPLOYEE BENEFITS: POST-EMPLOYMENT BENEFIT PLANS

Defined contribution plans

The Company makes contributions, determined as a specified percentage of employee salaries, in respect of qualifying employees towards Provident Fund, which is a defined contribution plan. The Company has no obligations other than to make the specified contributions. The contributions are charged to the Statement of Profit and Loss as they accrue. The amount recognized as an expense towards contribution to Provident Fund for the year aggregated to Rs.39.5 million (December 2011: Rs.35.9 million) and contribution to Superannuation Fund for the year aggregated to Rs.18.4 million (December 2011: Rs.14.2 million).

Defined benefit plans

The Company has defined benefit plans that provide gratuity benefit. The gratuity plan entitles an employee, who has rendered atleast five years of continuous service, to receive one-half month''s salary for each year of completed service at the time of retirement/exit. The scheme is funded by the plan assets.

6.dues to micro, small and medium enterprises

Under the Micro, Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. On the basis of the information and records available with the management, there are no outstanding dues to the Micro and Small enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006.

7 Consequent to the notification of Revised Schedule VI under the Act, the financial statements for the year ended December 31, 2012 are prepared as per Revised Schedule VI. Accordingly, the previous year figures have also been reclassified to conform to this year''s classification. The adoption of Revised Schedule VI for previous year figures does not impact recognition and measurement principles followed for preparation of financial statements.


Dec 31, 2010

1) Share capital:

(a) Out of the total subscribed and paid-up capital,

(i) 71,250 Equity Shares of Rs. 10 each are allotted as fully paid-up pursuant to contracts without paymenthavingbeen received in cash.

(ii) 4,523,590 Equity Shares of Rs. 10 each were allotted as fully paid-up by way of bonus shares by Capitalisation from Securities Premium Account.

(b) The total numberof shares held by the HoldingCompany FAG KugelfischerGmbH, Germany are 8,529,183.

(ii) Depreciation on the increase in the value of fixed assets due to revaluation is charged to the Revaluation Reserve. Consequently, the depreciation charge for the year shown in the Profit and Loss Account is after deducting an amount of Rs. 0.6 million (2009: Rs. 0.6 million), representing depreciation on the increase due to revaluation of Buildings and Roads transferred from the Revaluation Reserve.

(b) Buildings and Roads include Rs. 250, being cost of five ordinary shares of Rs. 50 each of Nariman Bhavan Premises Co-operative Society Limited and Rs. 500 being cost of ten ordinary shares of Rs. 50 each of Parekh Market Premises Co-operative Society Limited, which entitle the Company to real estate.

(c) Capital work-in-progress includes fees for technical services for Capital project Rs. 10.8 million (2009: Rs. Nil).

2) Loans and advances include:

(i) Unsecured loan Rs. 38.5 million to FAG Roller Bearings Pvt. Ltd. an associate Company (2009: Rs. 38.5 million).

(ii) Secured loan Rs. 450.0 million to INA Bearings India Pvt. Ltd. an associate Company (2009: Rs. 450.0 million).

3) Manufacturingand other expenses:

(a) Outside processing charges incurred duringtheyearare included in:

(i) Raw materials and components consumed Rs. 257.3 million (2009: Rs. 246.9 million). (ii) Stores, spares and tools consumed Rs. 2.8 million (2009: Rs. 2.2 million).

(b) Repairs to machinery exclude spares consumed Rs. 28.6 million (2009: Rs. 22.4 million) and payments to and provisions for employees Rs. 38.2 million (2009: Rs. 32.5 million) though related thereto.

(c) (i) Managerial remuneration fortheyear is Rs. 8.7 million (2009: Rs. 8.7 million).

4) Contingent liabilities not provided for in respect of:

a) Claims against the Company not acknowledged as debts: i) Employees and ex-employees related matters:

- Matters pending in Labour Court / Civil Court / High Court for reinstatement of service / recovery of salary Rs. 85.9 million (2009: Rs. 79.8 million);

- Applicability of provident fund on certain benefits to employees Rs. 125.8 million (2009: Rs. 100.1 million);

- Demand for discontinuing of contract system and for differential wages Rs. 73.4 million (2009: Rs. 64.4 million);

- Applicability of Employees State Insurance on certain benefits to employees etc. Rs. 5.2 million (2009: Rs. 4.5 million).

ii) Letters of Credit discounted Rs. 25.5 million (2009: Rs. 17.4 million).

b) Sales tax:

i) For interest on tax paid under the Amnesty Scheme and for non receipt of C Forms in respect of assessment years 1995-96 to 2002 Rs. Nil (2009: Rs. 10.3 million).

ii) For non receipt of C Forms and rejection of Companys claim of certain sales as exempt sales in respect of assessment years 2003, 2004, 2005-06 and 2006-07 Rs. 16.1 million (2009: Rs. 105.2 million).

c) Excise & Service Tax:

Excise Duty

(i) In respect of matters decided against the Company, for which the Company is in appeal with higher authorities Rs. 11.9 million (2009: Rs. 29.2 million).

Service Tax

(ii) In respect of matters decided againstthe Company, for which the Company is in appeal with higher authorities Rs. Nil (2009: Rs. 60.6 million).

(iii) In respect of matters where the Company has received favourable orders / partial relief from the First Appellate authorities but the Central Excise and Customs Department is pursuing further with higher Appellate authorities (excluding the matters if not ultimately allowed, would be allowed in the followingassessmentyears) Rs. 2.4 million (2009: Rs. 0.9 million).

d) IncomeTax:

i) In respect of matters decided againstthe Company, for which the Company is in appeal with higher authorities Rs. 137.7 million (2009: Rs. 48.1 million).

ii) In respect of matters where the Company has received favourable orders / partial relief from the First Appellate authorities but the Income Tax Department is pursuing further with higher Appellate authorities (excluding the matters if not ultimately allowed, would be allowed in the following assessmentyears) Rs. 202.2 million (2009: Rs. 202.2 million).

Future ultimate outflow of resources embodying economic effect in respect of matters stated above is uncertain as it depends on the final outcome of judgements / decisions on the matters involved and no effect has been taken of these matters in deciding the liabilities for the subsequent years with similar facts.

5) Spare parts and components consumed:

Spare parts and components consumed referred to in para 4-D (c) Part II of Schedule VI to the Companies Act, 1956, are assumed to be those incorporated in goods produced and not those used for the maintenance of plantand machinery.

6) Research and Development expenses under the respective heads aggregate to Rs. 37.6 million (2009: Rs. 26.3 million) includingof capital nature Rs. 2.7 million (2009: Rs. 0.1 million).

7) Exchange differences of Rs.112.1 million (Net debit) [2009: Rs. 120.7 million (Net credit)] on revenue account have been appropriately recognised in the Profitand Loss Account.

8) The tax year for the Company being the year ending March 31, 2011, the provision for taxation for the year is the aggregate of the provision made for the three months ended March 31,2010 and the provision based on the figures for the remaining nine months upto December 31,2010 the ultimate tax liability of which will be determined on the basis of the figures forthe period April 1,2010 to March 31,2011.

9) Segment reporting:

The business of the Company falls under a single segment i.e. manufacture and sale of "Ball/Roller Bearings and related components" forthe purpose of Accounting Standard (AS -17).

10) Related Party disclosures as required under AS-18 are given below:

1. Name and nature of relationship of the related party where control exists:

FAG Kugelfischer GmbH, Germany. Holding Company holds 8,529,183 equity shares i.e. 51.33% of the equity share capital as at the year end. The ultimate control lies with INA Holding GmbH & Co. KG, Germany (formerly INA Holding Schaeffler KG, Germany)-SchaefflerGroup.

11) Disclosure under Micro, Smalt and Medium Enterprises Development (MSMED) Act, 2006:

As per the information available with the Company and as certified by the management, there are no dues outstanding including interest as on December 31, 2010 to Small and Micro enterprises as defined under Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.

12) (a) Excise duty paid and collected from customers is shown separately and deducted from the sales turnover (Gross) in the ProfitandLoss Account.

(b) Excise duty appearing under manufacturing and other expenses (Schedule 13) represents (i) the difference between excise duty included in the closing stock and that in opening stock of manufactured finished goods Rs. 10.7 million Net debit (2009: Rs. 19.0 million Net credit) and (ii) the excise duty on the free samples, scrap etc. Rs. 1.7 million (2009: Rs. 2.8 million).

13) Prior period adjustments represent expenses arising on account of Sales Tax / VAT liabilities for earlieryears, Rs. 25.6 million (2009: Reversal service Income Rs. 32.1 million and expense on market support fees Rs. 83.1 million).

14) Previous years figures have been regrouped, wherever necessary, to conform to the current years classifications.


Dec 31, 2009

1) Share capital:

(a) Out of the total subscribed and paid-up capital,

(b> 71,250 Equity Shares of Rs. 10 each are allotted as fully paid-up pursuant to contracts without payment having been received in cash.

(ii) 4,5 23,590 Equity Shares of Rs. 10 each were allotted as fully paid-up by way of bonus shares by Capitalization from Securities Premium Account.

(b) The total number of shares held by the Holding Company FAG Kugelfischer GmbH, Germany are 8,529,183.

2) Fixed assets:

(ii) Depreciation on the increase in the value of fixed assets due to revaluation is charged to the Revaluation Reserve. Consequently, the depreciation charge for the year shown in the Profit and Loss Account is after deducting an amount of Rs. 0.6 million (2008: Rs.0.6 million), representing depreciation on the increase due to revaluation of buildings and roads transferred from the Revaluation Reserve.

(b) Buildings and roads include Rs. 250, being cost of five ordinary shares of Rs. 50 each of Nariman Bhavan Premises Co-operative Society Limited and Rs. 500 being cost of ten ordinary shares of Rs. 50 each of Parekh Market Premises Co-operative Society Limited, which entitle the Company to real estate.

3) Loans and advances include:

(i) Unsecured Loan Rs. 38.5 million to FAG Roller Bearings Pvt. Ltd. (2008: Rs. 38.5 million) and INA Bearings India Pvt. Ltd. Rs. Nil (2008:22.5 million), associate companies.

(ii) Secured Loan Rs. 450.0 million to INA Bearings India Pvt. Ltd. an associate company (2008: Rs. Nil).

4) Manufacturing and other expenses:

(a) Outside processing charges incurred during the year are included in:

(i) Raw materials and components consumed Rs. 246.9 million (2008: Rs. 282.6 million). (ii) Stores, spares and tools consumed Rs. 2.2 million (2008: Rs. 2.6 million).

(b) Repairs to machinery exclude spares consumed Rs. 22.4 million (2008: Rs. 26.4 million) and payments to and provisions for employees Rs. 32.5 million (2008: Rs. 35.6 million) though related thereto.

(c) (i) Managerial remuneration for the year is Rs. 8.7 million* (2008: Rs. 8.6 million).

6) Contingent liabilities not provided for in respect of:

a) Claims against the Company not acknowledged as debts: i) Employees and ex-employees related matters:

- Matters pending in Labour Court/Civil Court/High Court for reinstatement of service/recovery of salary Rs. 79.8 million (2008: Rs. 68.3 million),

- Applicability of provident fund on certain benefits to employees Rs. 100.1 million (2008:Rs. 78.6 million),

- Demand for discontinuing of contract system and for differential wages Rs. 64.4 million (2008:Rs. 57.1 million),

- Applicability of Employees State Insurance on certain benefits to employees etc. Rs. 4.5 million (2008: Rs. 3.9 million).

ii) Claims received from holding company Rs. Nil (2008: Rs. 164.2 million).

iii) Letters of Credit discounted Rs. 17.4 million (2008: Rs. 15.5 million).

iv) Others Rs. Nil (2008: Rs. 1.3 million).

b) Sales tax:

i) For interest on tax paid under the Amnesty Scheme and for non receipt of C Forms in respect of assessment years 1995-96to 2002 Rs. 10.3 million (2008: Rs. 6.5 million).

ii) For non-receipt of C Forms and rejection of Companys claim of certain sales as exempt sales in respect of assessment years 2003,2004 and 2005-06 Rs.105.2 million (2008: Rs. 106.7 million).

c) Excise & service tax:

Excise duty

i) In respect of matters decided against the Company, for which the Company is in the process of filing an appeal with higher authorities Rs. 29.2 million (2008: Rs. Nil).

Service tax

ii) In respect of matters decided against the Company, for which the Company is in appeal with higher authorities Rs. 60.6 million (2008: Rs. 54.8 million).

iii) In respect of matters where the Company has received favourable orders/partial relief from the first appellate authorities but the central excise and customs department is pursuing further with higher appellate authorities (excluding the matters if not ultimately allowed, would be allowed in the following assessment years) Rs. 0.9 million (2008: Rs. 0.9 million).

d) Income tax:

i) In respect of matters decided against the Company, for which the Company is in appeal with higher authorities Rs. 48.1 million (2008: Rs. 34.9 million).

ii) In respect of matters where the Company has received favourable orders/ partial relief from the first appellate authorities but the income tax department is pursuing further with higher appellate authorities (excluding the matters if not ultimately allowed, would be allowed in the following assessment years) Rs. 202.2 million (2008: Rs. 176.7 million).

Future ultimate outflow of resources embodying economic effect in respect of matters, stated above is uncertain as it depends on the final outcome of judgements / decisions on the matters involved and no effect has been taken of these matters in deciding the liabilities for the subsequent years with similar facts.

10) Spare parts and components consumed:

Spare parts and components consumed referred to in para 4-D (c) Part II of Schedule VI to the Companies Act, 1956, are assumed to be those incorporated in goods produced and not those used for the maintenance of plant and machinery.

11) Research and Development expenses under the respective heads aggregate to Rs. 26.3 million (2008 Rs. 31.0 million) including of capital nature Rs. 0.1 million (2008: Rs. 3.2 million).

12) Exchange differences of Rs. 120.7 million (net credit) [2008: Rs. 42.4 million (net credit)] on revenue account have been appropriately recognized in the Profitand Loss Account.

13) The tax year for the Company being the year ending March 31, 2010, the provision for taxation for the year is the aggregate of the provision made for the three months ended March 31, 2009 and the provision based on the figures for the remaining nine months upto December 31, 2009 the ultimate tax liability of which will be determined on the basis of the figures for the period April 1,2009 to March 31,2010.

14) Segment reporting:

The business of the Company falls under a single segment i.e. manufacture and sale of "Ball / Roller Bearings and related components" forthe purpose of Accounting Standard AS-17.

(B) Disclosure in respect of assets given on lease: Operating leases

The Company has entered into lease agreement for certain portion of its factory and office premises. The said agreement does not provide for increase in rent during the tenure of the agreement and contains renewal clause. The lessee is entitled to terminate the lease by giving 3 months notice without assigning any reason. The Company may terminate the lease by giving 3 months notice only on the grounds specified in the agreement.

15) Related party disclosures as required under AS-18 are given below:

1. Name and nature of relationship of the related party where control exists:

FAG Kugelfischer GmbH, Germany: Holding Company holds 8,529,183 equity shares i.e. 51.33% of the equity share capital as at the year end. The ultimate control lies with INA Holding Schaeffler KG, Germany (Schaeffler Group).

2. Names of the Related Parties having transactions with the Company during theyear:

2009 2008

a) Holding Company a) Holding Company

FAG Kugelfischer GmbH, Germany FAG Kugelfischer GmbH, Germany

b) Fellow subsidiary/associate companies b) Fellow subsidiary/associate companies

Schaeffler Australia Pty. Ltd., Australia Schaeffler Australia Pty. Ltd., Australia

Schaeffler Brasil Ltda, Brazil Schaeffler Brasil Ltda, Brazil

Schaeffler Canada Inc., Canada Schaeffler Canada Inc., Canada

Schaeffler (China) Co. Ltd., China Schaeffler (China) Co. Ltd., China

Schaeffler Holding China Co. Ltd., China Schaeffler Holding China Co. Ltd., China

Schaeffler Trading (Shanghai) Co. Ltd., China Schaeffler Trading (Shanghai) Co. Ltd., China

Schaeffler (Ningxia) Co. Ltd., China FAG Railway Bearings (Ningxia) Co. Ltd., China

Schaeffler KG, Germany Schaeffler KG, Germany

Schaeffler Automotive After market oHG, Germany Schaeffler Versicherungs-Vermittlungs GmbH, Germany

FAG Industrial Services GmbH, Germany HK Autoteile GmbH, Germany

WPB Water Pump Bearing GmbH & Co. KG, Germany LuK Aftermarket Services oHG, Germany

FAG Magyarorszag Ipary KFT, Hungary FAG Industrial Services GmbH, Germany

Schaeffler Hong Kong Company Ltd, Hongkong WPB Water Pump Bearing GmbH & Co. KG, Germany

INA Bearings India Private Ltd., India FAG Magyarorszag Ipary KFT, Hungary

FAG Roller Bearings Private Ltd., India Schaeffler Hong Kong Company Ltd., Hongkong

LuK India Private Ltd., India INA Bearings India Private Ltd., India

Schaeffler Japan Co. Ltd., Japan FAG Roller Bearings Private Ltd., India

Schaeffler Korea Corporation, Korea LuK India Private Ltd., India

LuK Aftermarket Service, S.A. de C.V., Mexico Schaeffler Japan Co. Ltd., Japan

Schaeffler Nederland B.V., Nederland Schaeffler Korea Corporation, Korea

Schaeffler Portugal S.A., Portugal LuK Aftermarket Service, S.A. de C.V., Mexico

Schaeffler (Singapore) Pte. Ltd., Singapore Schaeffler (Singapore) Pte. Ltd., Singapore

Schaeffler South Africa (Pty.) Ltd., South Africa The Barden Corporation, UK

Schaeffler (Thailand) Co. Ltd., Thailand The Barden Corporation, USA

The Barden Corporation, UK Schaeffler Group USA Inc.

The Barden Corporation, USA Schaeffler Vietnam Co. Ltd., Vietnam Schaeffler Group USA Inc.

Schaeffler Vietnam Co. Ltd., Vietnam

c) Key management personnel c) Key management personnel

Mr. Biswarup Dhar, Managing Director Mr. Biswarup Dhar, Managing Director Mr. Rajendra Anandpara, Managing Director

16) Disclosure under Micro, Small and Medium Enterprises Development (MSMED) Act, 2006:

As perthe information available with the Company and as certified by the management, there are no dues outstanding including interest as on December 31, 2009 to Small and Micro enterprises as defined under Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.

17) (a) Excise duty paid and collected from customers is shown separately and deducted from the sales turnover (Gross) in the profit and loss account.

(b) Excise duty appearing under manufacturing and other expenses (Schedule 13) represents (i) the difference between excise duty included in the closing stock and that in opening stock of manufactured finished goods Rs. 19.0 million net credit (2008: Rs. 19.5 million) and (ii) the excise duty on the free samples, scrap etc. Rs. 2.8 million (2008: Rs. 0.3 million).

18) Prior period adjustments represent expenses arising on account of reversal of service income Rs. 32.1 million (2008: Rs. 52.5 million) and expenses on account of market support fees Rs. 83.1 million (2008: Reversal of expenses for outside services Rs. 8.7 million)

19) Previous years figures have been regrouped, wherever necessary, to conform to the current years classifications.

 
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