Home  »  Company  »  Gammon India  »  Quotes  »  Notes to Account
Enter the first few characters of Company and click 'Go'

Notes to Accounts of Gammon India Ltd.

Sep 30, 2014

1 Shares reserved under options to be given

NIL (Previous Period 17,400) Equity Shares have been reserved for issue as ESOP. Refer Note No. 34 for details of the ESOP Shares and Scheme.

2 Terms / rights attached to Equity Shares

The Company has only one class of equity shares having a par value of Rs. 2/- each. Each holder of equity share is entitled to one vote per share. The distribution will be in proportion to the number of equity shares held by the shareholders.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exist currently. The distribution will be in proportion to the number of equity shares held by the shareholders.

3 Key features of the CDR proposal are as follows :

* Reschedulement of Short Term Loans & Term Loans (RTL) and NCD payable over a period of ten years.

* Repayment of Rupee Term Loans (RTL) after moratorium of 27 months from cut off date being 1 January 2013 in structured quarterly instalments commencing from April 2015.

* Conversion of various irregular / outstanding / devolved financial facilities into Working Capital Term Loan (WCTL).

* Repayment of WCTL after moratorium of 27 Months from cut off date in structured quarterly instalments commencing from April 2015, subject to mandatory prepayment obligation on realisation of proceeds from certain asset sale and capital infusion.

* Restructuring of existing and fresh fund based and non fund based financial facilities, subject to renewal and reassessment every year.

* Interest accrued but not paid on certain financial facilities till March 2014 is converted into Funded Interest Term Loan (FITL).

* Waiver of existing events of defaults, penal interest and charges etc in accordance with MRA.

* Right of Recompense to CDR Lenders for the relief and sacrifice extended, subject to provisions of CDR Guidelines and MRA.

* Contribution of Rs. 100 Crore in the Company by promoters, in lieu of bank sacrifice, in the form of Promoters Contribution which can be converted to equity.

4 Securities for Term Loans and NCD :

Rupee Term Loan (RTL) - 1 and FITL thereon -

1) 1st pari-passu charge on the entire Fixed Assets (movable and immovable), both present and future of the Company, including the pari-passu security with Non Convertible Debenture but excluding the exclusive security for Non Convertible Debenture and the Gammon House.

2) 2nd pari-passu charge on the Gammon House, entire Current Assets, Loans and Advances, Long Term Trade Receivables and other assets of the Company.

3) For Canara Bank 1st pari-passu charge on land parcel of Metropolitan Infrahousing Private Limited (MIPL) along with their NCD holders.

Rupee Term Loan (RTL) - 2 and FITL thereon -

1) 1st pari-passu charge on Gammon House.

2) 2nd pari-passu charge on the entire Fixed Assets (movable and immovable), both present and future of the Company, including the pari-passu security with Non Convertible Debenture but excluding the exclusive security for Non Convertible Debenture and the Gammon House.

3) 2nd pari-passu charge on entire Current Assets, Loans and Advances, Long Term Trade Receivables and other assets of the Company.

Rupee Term Loan (RTL) - 3 and FITL thereon -

1) 3rd pari-passu charge over the entire Fixed Assets (movable and immovable) and Current Assets of the Company excluding the Gammon House.

2) 3rd pari-passu charge on the Gammon house.

Working Capital Term Loan (WCTL) -

1) 1stpari-passu charge on the entire Fixed Assets (movable and immovable), both present and future of the Company,including the pari-passu security with Non Convertible Debenture but excluding the exclusive security for Non Convertible Debenture and the Gammon House.

2) 2nd pari-passu charge on the Gammon House, entire Current Assets, Loans and Advances, Long Term Trade Receivables and other assets of the Company.

Priority Loan -

1) 1stpari-passu charge on the entire Fixed Assets (movable and immovable), both present and future of the Company,including the pari-passu security with Non Convertible Debenture but excluding the exclusive security for Non Convertible Debenture and the Gammon House.

2) 2nd pari-passu charge on the Gammon House, entire Current Assets, Loans and Advances, Long Term Trade Receivables and other assets of the Company.

Non Convertible Debentures (NCD) and FITL thereon -

1) 1st pari-passu charge by mortgage of Gujarat Property and hypothecation over the pari-passu security with the Non Convertible Debentures.

2) 3rd pari-passu charge over the entire Fixed Assets (movable and immovable) and Current Assets of the Company excluding the Gammon House.

3) 3rd pari-passu charge on the Gammon house.

(c) Funded Interest Term Loan (FITL) -

The interest amount on RTL - 1, RTL - 2, RTL - 3 and NCDs for the initial period of 15 months i.e. from cut off date till 31 March 2014 will be converted to FITL.

5 Collateral security pari-passu with all CDR lenders

a) Pledge of entire unencumbered equity shares (present and future) of GIL held by Promoters subject to Section 19(2) & 19(3) of Banking Regulation Act including pledge of encumbered equity shares as and when such shares are released by the respective existing lenders.

b) Personal guarantee of Mr Abhijit Rajan, Chairman & Managing Director.

c) Undertaking to create pledge over the resultant shares of Metropolitan Infrahousing Private Limited (MIPL) after signing the JV agreement with developer.

d) Undertaking to create pledge over shares of GACTEL Turnkey Projects Limited (currently pledged to lenders of Gactel), as and when they are released in the future.

e) Pledge over the following shares -

23% of Deepmala Infrastructure Private Limited 100% of SEZ AdityapurLimited 24% of Ansaldocaldaie Boilers India Private Limited 100% of Transrail Lighting Limited

6 Remittance of Dividend in Foreign Currency

During the period the Company has not remitted any amount of dividend in foreign currency.

7 Foreign Venture

(a) The Company through its Special Purpose Investment Vehicle holds the following stakes :

* Franco Tosi Mecannica S.p.A, Italy (FTM)

* Sofinter S.p.A, Italy

* Sadelmi S.p.A, Italy

* SAE Power Line S.r.l, Italy

(b) The Company''s exposure towards investment in Sofinter Group is Rs. 563.62 Crore including investments, loans and guarantees towards the acquisition loan taken by the SPV, M/s Gammon International B.V. The Company has carried out valuation of Sofinter Group through an independent valuer considering business plan of all companies within the Sofinter Group, order book position and economic environment where the Company is operating. The carrying value as at September 2014 is higher compared to the valuation by Rs.159.49 Crore. The management is of the view that valuation carried out is based on current European scenario whereas growth option to various sub-continents in future cannot be ruled out. The management asserts that the valuation does not factor future growth when the world economies including those in Russia/CIS and USA improve and therefore considering the long term commitment of the management and its business plan, the management does not expect any provision towards diminution in the value of investment in Sofinter.

The Company had in 2011, issued Guarantees, including Corporate Guarantees, for an amount of USD 35.00 million on behalf of Gammon Holdings Mauritius Limited (GHML), a wholly owned subsidiary, to Guarantee its contractual commitment under a Put Option Agreement with BT Global Investors Limited (BT) who was a holder of shares and convertible bonds (the Sofinter Securities) in Sofinter S.p.A. The Put was to be exercised within February 2014 and on all the Sofinter Securities. Consequent upon the conversion of the bonds into additional shares in Sofinter on 18 December 2013, BT has become the holder of 35% shares in Sofinter, thereby diluting the holding of Gammon International B.V. in Sofinter to 32.5%. Prior to the date of this conversion, BT also exercised its Put Option on GHML for all the Sofinter securities, for an amount of USD 32.00 Million (Rs.197.16 Crore). The Put Option was duly honored by GHML by drawing on debt raised from Export Import Bank of India Limited (Exim) for USD 18.00 Million (Rs.110.90 Crore) and balance against the funded exposure by the parent Company for Rs. 93.99 Crore. Pending transfer of the shares by BT in favour of GHML, since certain pre-conditions in the bye-laws of Sofinter and the Shareholders Agreement are in the process of being fulfilled, without which the transfer cannot be recorded by Sofinter, BT has committed to pledge the Shares to Exim on behalf of GHML. Further pending the transfer of 35%, Sofinter continues to be an ''Associate Company''

Considering the valuation report issued by external agency and pending transfer of shares from BT Global increasing the stake to 67.5%, the carrying value of investment in Sofinter group will not require any impairment.

(c) i) The Board of Franco Tosi Mecanica S.p.A (FTM) filed on May 30th with the court of Milan (and with the Companies Registry)

a "preliminary" request for admission to the procedure of pre-insolvency composition agreement with creditors and restructuring debts ("concordato preventivo"), under Articles 161 Clause 6, Italian Government Publication dated 10 March 1942 No 267 - further amended in September 2012 in light of acute financial stress being faced by the Company due to several extraneous reasons.

The said application was admitted by the Court on 7 June 2013 and the court soon thereafter appointed a Judicial Commissioner to evaluate the possibility of FTM continuing its operations and, if this was established, to set out a procedure to continue and manage the Company for a period of at least two years. On 31 July 2013, the presiding Judge of the Court of Milan having received confirmation of the possibility of continuity of FTM called for bids for the lease of the business of FTM. Four bidders have submitted compliant bids for the lease.

However, instead of finalizing the lease, the commissioner announced a revised procedure by which, instead of lease of the business interested bidders will have to place an offer for the outright purchase of the operational business of FTM. One of the pre-conditions of the bidding offer is for the bidders to takeover and substitute all the bank guarantees issued by FTM in favour of its clients of its ongoing projects. The date of bid submission was fixed for 7 October 2014. Only two bids have been received by the commissioner, who after evaluation has concluded that both bids were defective. Accordingly, a fresh bid is being called to encourage large participation and the new date of submission of bid is 22 December 2014. The entire procedure is expected to be completed within 60 days thereafter.

The continuous delay in final closure has put the ongoing projects of Franco Tosi in Congo, Nicaragua and Bolivia at risk of cancellation with consequences thereof, unless immediate steps are taken to scale up the execution with intent to meet the existing project schedules.

However in light of the ongoing procedure the commissioner has not released any financial statements of the Company to date and it is expected that this will not be released until the entire process is complete.

ii) The Company''s exposure towards Franco Tosi Mecannica S.p.A group is Rs.1162.87 Crore (net of provisions and credit balances in foreign exchange translation reserve) which includes the loans and investments of Rs. 268.06 Crore and exposure of corporate guarantee towards the borrowings made by the overseas SPV through which the step down subsidiary is held of Rs. 302.94 Crore. Further there are guarantee exposures towards the non-fund based guarantees given to the projects of the said subsidiary of Rs. 591.87 Crore outstanding as at September 2014. The application for a pre-insolvency procedure filed by FTM was admitted by the court of Milan on 7 June 2013 after having received confirmation of the possibility of continuity of the Company, by calling for bids for the lease of its business. The successful bidder for the lease was foreseen to be finalized by early December 2013. However the commissioner has revised the procedure by which, instead of lease of a business the bidder will have to place an offer for outright sale of operational business to prospective bidders. The date of bid submission was to finalized as December 2014, however the same is delayed and not yet finalised. In light of the ongoing procedure no financial statements of the Company have been released to date and it is expected that this will not be released until the entire process is complete.

iii) During the period the clients of the said FTM have encashed the bank guarantees to a total amount of Rs.170.80 Crore (Euro 21.84 Million). The guarantees encashed includes an amount of (Euro 17.80 Million) Rs. 139.21 Crore relating to a project in Nicaragua of which, based on the agreement with the bankers and the client, an amount of Euro 12.00 Million would be reinstated by way of release of the amounts from the client to the bankers and hence the net exposure for Nicaragua would remain at Euro 5.80 Million for which the Company is negotiating to cancel the demand, for the remaining Euro 4.04 Million (Rs. 31.59 Crore) the Company has made a provision against the possible liability arising out of the said encashment to the Company.

(d) The Company through its step down subsidiary P. Van Eerd Beheersmaatschappij B.V., Netherlands (PVAN) held a 50% shareholding in Sadelmi S.p.A for Euro 7.50 Million, Italy (Sadelmi) with the remaining 50% held by Busi Impianti S.p.A, Italy since April 2008. Due to the economic conditions prevailing in different parts of the world where Sadelmi was present some of the projects under execution encountered serious contractual problems. Sadelmi therefore sought creditors'' protection through a Court in Italy and simultaneously, as part of scheme, applied for transferring the remaining projects and leased all references standing in its name since inception to a new Company Busi Power S.r.l wholly held by Busi Group.

The above procedure however has not yet been completed as the decision in the Court is still awaited. The delay is on account of objections raised by some creditors among other reasons.

In view of the uncertainties prevailing in Europe and the delay in the outcome of the Court process in respect of the creditors'' protection sought by M/s Sadelmi in its application in connection therewith, the Company has, on prudent basis, made full provision towards its funded exposures in connection with the Investment in Sadelmi of Rs. 25.72 Crore and has charged the same as an exceptional item. The Company has exposure in respect of Corporate Guarantee for acquisition loan by its SPV.

The Company has made provision as risks and contingencies of Rs. 69.46 Crore towards the guarantees issued to the banker of its wholly owned SPV PVAN, in respect of loans taken by the said subsidiary for making investment into Sadelmi, in accordance with AS-29 Provisions, Contingent Liabilities and Contingent Assets considering the net worth and operations of the said Sadelmi.

(e) The Auditors of M/s SAE Powerlines S.r.l, Italy (SAE), a subsidiary of the Company have expressed their inability to opine on the financial statements in view of the said SAE''s ability to operate as a going concern being at risk and the directors of the said SAE have highlighted the liquidity crisis. The total exposure of the Company in SAE and ATSL Netherlands B.V., the holding Company of SAE towards investments including guarantees towards the acquisition loan taken by SPV is Rs. 328.06 Crore. The Company has made provision for impairment of investments and loan of Rs. 110.45 Crore and provision for Rs. 88.29 Crore for risk and contingencies for corporate guarantees for acquisition loan of the SPV and the net exposure of the Company is Rs. 129.32 Crore. The management is of the opinion that considering the order book position and adequate references and strengths in international markets the provision made by it for impairment of its investment, loans and trade receivable is adequate notwithstanding the valuation carried out by an independent valuer for bankers specifying the value Rs. 72.76 Crore.

(f) Considering the losses in one of its subsidiary M/s Ansaldocaldaie Boilers India Private Limited (ACBI) of Rs. 37.15 Crore, the Company has carried out an impairment test of its investments in ACBI. On the basis of the impairment test carried out during the previous the Management has made full provision towards the impairment of its investment in ACBI of Rs. 37.15 Crore.

(g) In respect of outstanding balance of one the subsidiary, the accounts of the said subsidiary for the period up to December 2013 and later have not been finalized and therefore the balance outstanding of Rs. 29.24 Crore has not been confirmed and is subject to reconciliation thereof.

8 ESOP Scheme

Pursuant to the amalgamation of ATSL with the Company, the outstanding options of the employees of the erstwhile ATSL outstanding as on 1 April 2008 have been taken up as an obligation by the Company in accordance with the Scheme approved by the court. Accordingly the Company has accounted for the grant of 1,06,300 options to such employees at an exercise prize of Rs. 80 per share. The Company will issue two equity shares against each option in terms of the scheme of amalgamation approved by the Courts.

The options were granted by the erstwhile ATSL on 27 March 2007. The options vest in a graded manner over the period of four years and are exercisable during a period of three years from the date of vesting thereof.

Since the assets and liabilities of the erstwhile ATSL has been accounted at the book value, the accounting effect in the accounts are continued at the same value.

The fair value of the option however has been computed under the Black Scholes Method considering the data of the Company as on the date of grant of option for the purpose of disclosure as required under Guidance Note on Employee Share Based Payments detailed hereunder.

9 In respect of the projects undertaken by the Company -

i) The Company in evaluating its jobs has considered an amount of Rs. 451.56 Crore arising out of claims for work done on account of cost overruns arising due to client delays, changes of scope, escalation claims, variation orders, deviation in design and other charges recoverable from the client which are pending acceptance or certification by the client or referred the matter to the dispute resolution board / arbitration panel.

ii) In furtherance to the recommendation of the Dispute Resolution Board (DRB) and Arbitration Awards in the Company''s favour, the Company has recognized income to the extent of Rs.167.23 Crore which is part of Long Term Trade Receivable. The Company contends that such awards have reached finality for the determination of the amounts of such claims and are reasonably confident of recovery of such claims although the client has moved the court to set aside the awards. Considering the fact that the Company has received favourable awards from the DRB and the Arbitration Tribunal, the management is reasonably certain that the claims will get favourable verdict from the courts.

iii) Trade Receivables includes Rs.123.80 Crore in respect of two of its project based on advanced negotiation and discussion with the client and is confident of realising the same, pending the final revision in contract value.

10 The Company''s CDR package was approved by the CDR EG in its meeting held on 24 June 2013 and communicated to the Company vide its letter of approval dated 29 June 2013. The Company executed the Master Restructuring Agreement (MRA) with the CDR lenders on 24 September 2013. Substantial securities have been created in favour of the CDR Lenders.

Based on robust order in hand of Rs.12800.00 Crore and additional order inflow based on optimistic factors towards growth in infrastructure industry in India, the management is exploring various options to overcome the liquidity crunch such as sale of non- core and idle assets, pursuing rigorous austerity measure across all levels, downsizing its staff and actively exploring partnerships for its real estate projects. Company is also pursuing aggressively to realise non routine collection including claims and arbitration awards.

After detailed evaluation of current situation, annual operating plan, expected cash flow and implementation of CDR package towards continuous support to the Company by bankers, the management is confident about continuation of operations of the Company. In view of this assessment by the management the going concern assumption is appropriate.

11 Contingent Liability ( Rs. in Crore)

Particulars 30 Sep 2014 31 Dec 2013

a) Liability on contracts remaining to be executed on Capital Account 23.89 6.68

b) Counter Guarantees given to Bankers for Guarantees given by them and Corporate Guarantees, on behalf of 4,517.43 4,670.91 Subsidiary, erstwhile Subsidiary, Associate Companies

c) Corporate Guarantees and Counter Guarantees given to Bankers towards Company''s share in the Joint Ventures 89.22 99.92 for Guarantees given by them to the Joint Venture Project Clients

d) Disputed Sales Tax Liability for which the Company has gone into appeal 113.26 90.57

e) Claims against the Company not acknowledged as debts 220.73 126.39

f) Disputed Excise Duty Liability 0.02 0.05

g) Disputed Service Tax Liability 23.49 31.81

h) Outstanding Letters of Credit Pending Acceptance 164.77 144.16

i) On Partly Paid Shares (Refer Note 47(iii)) - -

j) In respect of Income Tax Matters of Company and its Joint Ventures 364.09 185.09

k) Commitment towards capital contribution in subsidiary under contractual obligation 47.36 47.36

l) Disputed stamp duty liability for assets acquired during amalgamation with erstwhile Associated Transrail Structures Limited 4.93 4.93

m) Right to recompense in favour of CDR Lenders in accordance with the terms of MRA 504.96 504.96

n) There is a disputed demand of UCO Bank pending since 1986, of USD 436251 i.e. Rs. 1.72 Crore. Against this, UCO Bank has unilaterally adjusted the Company''s Fixed Deposit of USD 30584 i.e. Rs. 0.12 Crore, which adjustment has not been accepted by the Company.

o) Counter Claims in arbitration matters referred by the Company - liability unascertainable.

p) The Disputed Service Tax Liability disclosed above is after considering legal advice on the probability of the liability materialising being remote.

12 Segment Reporting

The Company is engaged mainly in "Construction and Engineering" segment. During the previous years, the Company has started Real Estate Business which is a different segment of "Real Estate Development" and additionally the Company has revenue from Windmills. Revenue from such activities is not significant and accounts for less than 10% of the total revenue and total assets of the Company. Therefore no disclosure of separate segment reporting as required in terms of Accounting Standard AS -17 "Segment Reporting" is done. The Company also primarily operates under one geographical segment namely India.

13 The balance with The Freyssinet Prestressed Concrete Company Limited is as per books of accounts and subject to reconciliation.

14 Disclosure of transactions with Related Parties, as required by Accounting Standard - 18 "Related Party Disclosures" has been set out in a separate Annexure - 2.

15 The current period is from 1 January 2014 to 30 September 2014. The comparative figures for the previous period are for the period from 1 April 2013 to 31 December 2013. The figures for both these periods are therefore not strictly comparable.

16 Previous period figures are regrouped and rearranged with those of the current period.


Dec 31, 2013

1. Foreign Venture

(a) The Company through its Special Purpose Investment Vehicle holds the following stakes :

-Franco Tosi Mecannica S.p.A, Italy (FTM)

-Sofinter S.p.A, Italy

-Sadelmi S.p.A, Italy

-SAE Power Line S.r.l, Italy

(b) The Company''s exposure towards investment in Sofinter group is Rs. 560.77 Crore including Investments and guarantees towards the acquisition loan taken by the SPV The Company has carried out valuation of Sofinter group through an independent valuer considering business plan of all companies within the Sofinter group, order book position and economic environment where the Company is operating. The carrying value is higher compare to the valuation by Rs. 132.59 Crore. The management is of the view that valuation carried out is based on current European scenario whereas growth option to various sub-continents in future cannot be ruled out. The management asserts that the valuation does not factor future growth when the world economies including those in South East Asia and India improve and therefore considering the long-term commitment of the management and its business plan, the management does not expect any provision towards diminution in the value of Investment in Sofinter. The management is of the view that the diminution in the value being the difference in the carrying value of investment over the valuation carried out by the external valuer is temporary in nature and does not require provisioning. Hence, based on valuation report and management perception for future scenario, the carrying value of investment in this group does not require any impairment.

(c) The Board of FTM has approved on 29 May 2013, to go in for a procedure permitted under recently notified Italian laws to minimize the risks attributed to the Company''s legacy statutory and other debts, while at the same time seeking to ensure the timely execution of ongoing and future projects by optimizing operational cash flows. This involves restructuring the Company with approval of the court. Post restructuring, the operations of the Company are for seen to significantly turn around and bring it back to profitability.

The said application was admitted by the Court on 7 June 2013 and the court soon thereafter appointed a Judicial Commissioner to evaluate the possibility of FTM continuing its operations and, if this was established, to set out a procedure to continue and manage the Company for a period of at least two years.

In July 2013, court received the confirmation of the possibility of continuity of FTM from the Judicial Commissioner authorized him, in agreement with FTM to call for bids for the lease of the business for two years, to be followed by a sale. Four bidders have submitted compliant bids for the lease. The initial date for identifying and closing the transaction with the successful lessee was early September 2013; further postponed to October 2013. In October 2013, Court has requested Ministry to directly handle this matter. The ministry has appointed committee of 3 people, who will be meeting during end of March 2014 to take a decision on bids.

In light of the on-going procedure, the Commissioner has not released any financial statements or financial information relating to the operations of FTM for 2013 and it is expected that this will not be released until the entire process is complete.

The continuous shifting of dates thereby delaying the finalization of the lease is affecting the ongoing projects of FTM. In few cases corporate guarantee of Gammon India Limited were invoked for amount of Euro 2.20 Million. This amount is fully provided in the books of Gammon India Limited and shown under provision for risks and contingencies. There is delay in other projects as well due to the slow pace of execution for reasons mentioned above and slippage in completion dates, these projects are also at high risk of cancellation with attendant consequences thereof in respect of the Bank Guarantees.

The Company''s exposure in FTM (Net of provisions made and credit balance in Foreign Exchange Translation Reserve) is Rs. 570.42 Crore including corporate guarantee given for acquisition loan taken by its SPV.

Management is of the view that due to this restructuring there will be no impairment of its investment in the Company. Management is also hopeful that notwithstanding the difficulties and risks, these Projects will be completed with some delays but without contractual consequences. Management is in an advance stage of negotiations with intended buyer for sale of its stake in the Company, given its large intellectual property, references etc.

(d) The Company through its step down Subsidiary P. Van Eerd Beheersmaatschappij B.V., Netherlands (PVAN) held a 50% shareholding in Sadelmi S.p.A for Euro 7.50 Million, Italy (Sadelmi) with the remaining 50% held by Busi Impianti S.p.A, Italy since April 2008. Due to the economic conditions prevailing in different parts of the world where Sadelmi was present some of the projects under execution encountered serious contractual problems. Sadelmi therefore sought creditors'' protection through a Court in Italy and simultaneously, as part of scheme, applied for transferring the remaining projects and leased all references standing in its name since inception to a new Company Busi Power S.r.l wholly held by Busi Group.

The above procedure however has not yet been completed as the decision in the Court is still awaited. The delay is on account of objections raised by some creditors among other reasons.

In view of the uncertainties prevailing in Europe and the delay in the outcome of the Court process in respect of the creditors'' protection sought by M/s Sadelmi in its application in connection therewith, the Company has, on prudent basis, made full provision towards its funded exposures in connection with the Investment in Sadelmi of Rs. 25.72 Crore and has charged the same as an exceptional item. The Company has exposure in respect of Corporate Guarantee for acquisition loan by its SPV.

The Company has made provision as risks and contingencies of Rs. 69.46 Crore towards the guarantees issued to the banker of its wholly owned SPV PVAN, in respect of loans taken by the said Subsidiary for making investment into Sadelmi, in accordance with AS-29 "Provisions, Contingent liabilities and Contingent Assets" considering the net worth and operations of the said Sadelmi.

(e) The accounts of M/s SAE Power Line S.r.l (SAE), a step down Subsidiary, of the Company are not audited and are as per management prepared unaudited accounts. The Company''s exposure towards investments in SAE is Rs. 318.74 Crore including investments and guarantees towards the acquisition Loan taken by the SPV. On the basis of offer received for this business from intended buyer, the management is of the view that carrying value of investment in this business needs to be impaired considering offer price as based valuation of business. Considering the offer price, the Company has provided for Impairment of investments, loans of Rs. 110.45 Crore and provision towards risk and contingencies of Rs. 88.29 Crore towards the guarantee given for the acquisition loan taken by SPV.

(f) Considering the losses in one of its Subsidiary M/s Ansaldocaldaie Boilers India Private Limited (ACBI) of Rs. 37.15 Crore, the Company has carried out an impairment test of its investments in ACBI. On the basis of the impairment test carried out the Management has made full provision towards the impairment of its investment in ACBI of Rs. 37.15 Crore.

2. ESOP Scheme

Pursuant to the amalgamation of ATSL with the Company, the outstanding options of the employees of the erstwhile ATSL outstanding as on 1 April 2008 have been taken up as an obligation by the Company in accordance with the Scheme approved by the court. Accordingly the Company has accounted for the grant of 1,06,300 options to such employees at an exercise prize of Rs. 80 per share. The Company will issue two equity shares against each option in terms of the scheme of amalgamation approved by the Courts.

The options were granted by the erstwhile ATSL on 27 March 2007. The options vest in a graded manner over the period of four years and are exercisable during a period of three years from the date of vesting thereof.

Since the assets and liabilities of the erstwhile ATSL has been accounted at the book value, the accounting effect in the accounts are continued at the same value.

The fair value of the option however has been computed under the Black Scholes Method considering the data of the Company as on the date of grant of option for the purpose of disclosure as required under Guidance note on Employee share based payments detailed hereunder.

During the year NIL (Previous Year NIL) options were exercised by the employees against which NIL equity shares (Previous Year NIL) were allotted and NIL (Previous Year 13,090) options were lapsed during the year on account of cessation of employment. None of the 8,700 options outstanding have been forfeited during the year.

3. The Company''s CDR package was approved by the CDR EG in its meeting held on 24 June 2013 and communicated to the Company vide its letter of approval dated 29 June 2013. The Company executed the Master Restructuring Agreement (MRA) with the CDR lenders on 24 September 2013. Substantial securities have been created in favour of the CDR Lenders.

Considering the approval of the CDR package and the availability of Priority Loans under the package, the Management is confident of meeting its projections made to the lenders. The Company has received further order during the period of Rs. 4,126 Crore, it is exploring sale of non-core assets, pursuing rigorous austerity measure across all levels, downsizing its staff and actively exploring partnerships for its real estate projects. In view thereof, although there are cash losses of Rs. 311.76 Crore during the period, the Management is confident that the going concern assumption is appropriate.

4. Disclosure under Accounting Standard - 19 "Leases" of the Companies (Accounting Standards) Rule, 2006

The Company has taken various residential / godowns / offices premises (including Furniture and Fittings if any) under lease and license agreements for periods which generally range between 11 months to 3 years. These arrangements are renewable by mutual consent on mutually agreed terms. Under some of these arrangements the Company has given refundable security deposits. The lease payments are recognized in Statement of Profit and Loss Account under Rent, Rates and Taxes.

The Company has taken certain equipment on an operating lease and the future minimum committed lease rentals are given as follows on the basis of current usage-

5. Contingent Liability

(Rs. in Crore)

Particulars As at 31 Dec 2013 As at 31 Mar 2013 a Liability on contracts remaining to be executed on Capital Accounts 6.68 18.27

b Counter Guarantees given to Bankers for Guarantees given by them and Corporate 4,670.91 4,859.44 Guarantees, on behalf of Subsidiary, erstwhile Subsidiary, Associate Companies

c Corporate Guarantees and Counter Guarantees given to Bankers towards Company''s 99.92 105.08 share in the Joint Ventures for guarantees given by them to the Joint Venture Project Clients

d Disputed Sales Tax Liability for which the Company has gone into Appeal 90.57 43.45

e Claims against the Company not acknowledged as debts 126.39 68.34

f Disputed Excise Duty Liability 0.05 0.05

g Disputed Service Tax Liability 31.81 53.44

h Against bill discounting - 7.68

i Outstanding Letters of Credit Pending Acceptance 144.16 459.56

j On partly paid shares (Refer Note 46(iii)) - -

6. Segment Reporting

The Company is engaged mainly in "Construction and Engineering" segment. During the year, the Company has started Real Estate Business which is a different segment of "Real Estate Development" and additionally the Company has revenue from Windmills. Revenue from such activities is not significant and accounts for less than 10% of the total revenue and total assets of the Company. Therefore no disclosure of separate segment reporting as required in terms of Accounting Standard AS -17 - ''Segment Reporting'' is done. The Company also primarily operates under one geographical segment namely India.

7. The balance with The Freyssinet Prestressed Concrete Company Limited is as per books of accounts and subject to reconciliation.

8. Joint Venture and Operations in Oman

The Company has during the previous year suspended its operations at Oman JV and its branch office and has provided towards all receivables and assets in connection therewith. The Company has also suspended recognition of the results of the Joint Venture in its financials and does not expect any liabilities in connection therewith.

9. Disclosure of transactions with Related Parties, as required by Accounting Standard -18 ''Related Party Disclosures'' has been set out in a separate Annexure - 2.

8. In terms of the decision of the Board of Directors in their meeting held on 18 February 2014 and as noted by the CDR lenders, the Company has decided to close its financial year as at 31 December 2013. Accordingly these financial statements are for a period of 9 months from 1 April 2013 to 31 December 2013 and are not comparable with the figures for the previous year of 12 months.

9. Previous year figures are regrouped and rearranged with those of the current period.


Mar 31, 2013

1 Diminution in the Value of Investments

(a) The Company through its Special Purpose Investment Vehicle holds the following stakes :

- Franco Tosi Mecannica S.p.A., Italy (FTM)

- Sofi nter S.p.A., Italy

- Sadelmi S.p.A., Italy

- SAE S.r.l., Italy

(b) The Company has carried out an impairment test of its investments in Sofi nter and SAE Italy. Considering the business plans of these entities and the results of the tests and the fact that all these entities have an healthy order book positions and adequate references in international markets notwithstanding the turbulent market conditions in Europe, the management is of the view that there is no impairment of its investments in these companies.

(c) The Company through its step down subsidiary P. Van Eerd Beheersmaatschappij B.V., Netherlands (PVAN) held a 50% shareholding in Sadelmi S.p.A for Euro 7.5 million., Italy (Sadelmi) with the remaining 50% held by Busi Impianti S.p.A, Italy since April 2008. Due to the economic conditions prevailing in different parts of the world where Sadelmi was present some of the projects under execution encountered serious contractual problems. Sadelmi therefore sought creditors'' protection through a Court in Italy and simultaneously, as part of scheme, applied for transferring the remaining projects and leased all references standing in its name since inception to a new Company Busi Power S.r.l. wholly held by Busi Group.

The above procedure however has not yet been completed as the decision in the Court is still awaited. The delay is on account of objections raised by some creditors among other reasons.

In view of the uncertainties prevailing in Europe and the delay in the outcome of the Court process in respect of the creditors'' protection sought by M/s Sadelmi in its application in connection therewith, the Company has, on prudent basis, made full provision towards its funded exposures in connection with the Investment in Sadelmi of Rs. 25.72 Crore and has charged the same as an exceptional item. The Company has exposure of Rs. 64.78 Crore in respect of Corporate Guarantee towards which it will make provisions as and when the same translates to funded exposures

(d) The Board of FTM has approved on 29 May 2013, to go in for a procedure permitted under recently notifi ed Italian laws to minimize the risks attributed to the Company''s legacy statutory and other debts, while at the same time seeking to ensure the timely execution of ongoing and future projects by optimizing operational cash fl ows. This involves restructuring the Company with approval of the court and will be carried out within a time frame of between 60 days to 120 days. Post restructuring, the operations of the Company are forseen to signifi cantly turn around and bring it back to profi tability. Management is of the view that due to this restructuring there will be no impairment of its investment in the Company. However on a prudent basis the Company has provided as impairment of ~ Rs. 69.54 Crore (Euro 10 Mn) towards its exposure to Gammon Holdings B.V. holding Company of FTM.

(e) Considering the losses in one of its subsidiary M/s Ansaldo Caldaie Boilers India Private Limited (ACBI), the Company has carried out an impairment test of its investments in ACBI. Considering the business plans of the entity as approved by the board of ACBI and the results of the tests and the fact that the Company is in the process of executing certain jobs to be received from M/s Ansaldo Caldaie S.p.A and the jobs to be secured by it and adequate references in that context, the management is of the view that there is no permanent dimunition in the value of its investments in the Company.

2 ESOP Scheme

Pursuant to the amalgamation of ATSL with the Company, the outstanding options of the employees of the erstwhile ATSL outstanding as on 1st April 2008 have been taken up as an obligation by the Company in accordance with the Scheme approved by the court. Accordingly the Company has accounted for the grant of 1,06,300 options to such employees at an exercise prize of Rs. 80 per share. The Company will issue two equity shares against each option in terms of the scheme of amalgamation approved by the Courts.

The options were granted by the erstwhile ATSL on 27th March 2007. The options vest in a graded manner over the period of four years and are exercisable during a period of three years from the date of vesting thereof.

Since the assets and liabilities of the erstwhile ATSL has been accounted at the book value, the accounting effect in the accounts are continued at the same value.

The fair value of the option however has been computed under the Black Scholes method considering the data of the Company as on the date of grant of option for the purpose of disclosure as required under Guidance note on Employee share based payments detailed hereunder.

3 The board of directors in its meeting had decided to approach the banks through the corporate debt restructuring (CDR) process for restructuring of the Company''s debt. The CDR empowered group in its meeting held on 25th March, 2013 has admitted the Company''s proposal under the CDR which is under consideration.

4 Segment Reporting

The Company is engaged mainly in ''Construction and Engineering'' segment. During the year, the Company has started Real Estate Business which is a different segment of ''Real Estate Development'' and additionally the Company has revenue from Windmills. Revenue from such activities is not signifi cant and accounts for less than 10% of the total revenue and total assets of the Company. Therefore no disclosure of separate segment reporting as required in terms of Accounting Standard AS -17 is done. The Company also primarily operates under one geographical segment namely India.

5 Joint Venture and operations in Oman

The Company has during the year suspended its operations at Oman JV and its branch offi ce and has provided towards all receivables and assets in connection therewith. The Company has also suspended recognition of the results of the Joint Venture in its fi nancials and does not expect any liabilities in connection therewith.

6 Disclosure of transactions with Related Parties, as required by Accounting Standard - 18 ''Related Party Disclosures has been set out in a separate Annexure - 2.

7 Previous year fi gures are regrouped and rearranged with those of the current year to make them comparable.

 
Subscribe now to get personal finance updates in your inbox!