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Notes to Accounts of Gitanjali Gems Ltd.

Mar 31, 2015

Company Background:

The Company is engaged in the business of trading, manufacturing, import and export of Diamond Cutting and Polishing, Diamond Studded Jewellery and Plain Gold Jewellery. For this purpose the company has its own manufacturing facilities at Mumbai, Surat and Hyderabad within and outside the Special Economic zone (SEZ). The company also purchases jewellery produced by reputed manufacturers. During the year, as a part of restructuring the company has resolved to merge one of it's wholly owned subsidiary company with itself.

NOTE - 2: Share Capital

c. Shares held by Holding / Ultimate Holding and / their subsidiaries / Associates N.A N.A

d. Rights, Preferences and Restriction of Shareholders

The company has only one class of Equity shares having par value of Rs. 10/-. The equity share have rights, Preferences and restrictions which are in accordance with the provision of law, in particular the Companies Act 2013.

t. Particulars of shares issued tor consideration other than cash, shares bought back and bonus shares in ast five years :

i) Company bought back 792,883 Equity Shares in Financial Year 2009-10

ii) Issue of bonus shares -NIL.

g. There are no shares reserved for issue under options, contracts / commitments for sale of shares / disinvestments other than represented in clause (j) below.

h. Particulars of calls in arrears by directors and officers of the company - NIL

i. There are no shares forfeited during the year.

j. Security convertible into equity shares:

i. During FY 2012-13, the Company had issued 1 (one) Zero percent Fully Convertible Debentures (FCDs) having face value of Rs. 39,00,00,000/- (Rupees Thirty Nine Crore Only) on a preferential basis to D.B Corp Limited. The said FCD was compulsorily convertible into such number of equity shares with face value of Rs. 10/- each on 4th June 2014 i.e. at the end of 18 months from the date of allotment at a price determined as per SEBI (ICDR) Regulations, 2009. On completion of 18 months period as per the terms of issue ,during the year, the company issued 60,54,960 equity shares at a premium of Rs. 54.41 on conversion of the FCD. Consequently paid up Share capital increased by Rs. 605.50 lacs and security premium by Rs. 3,294.50 lacs. ii. On 22nd January 2015, the Company allotted 23,547,194 warrants on preferential basis to persons other than promoters. The said warrants carry an option / entitlement to subscribe to equivalent number of Equity Shares of Rs. 10/- each at a future date, not exceeding 18 (eighteen) months from the date of issue of such warrants at a price of Rs. 72.39 which includes a premium of Rs. 62.39 per share. The company has received Rs. 4,261.45 Lacs being 25% of issue price against the above warrants.

NOTE - 3:

Borrowings:

(a) 12% Non-Convertible Debentures issued to LIC of India

The 12% Non-convertible debentures for an aggregate amount of Rs. 125 crores were issued to LIC of India on 22nd June, 2009. The said debentures are secured by first pari passu charge over immoveable properties in Hyderabad (A.P.) belonging to Hyderabad Gems SEZ Limited, a wholly owned subsidiary.

The tenure of the debentures was five years and same were redeemable in eight equal quarterly installments with initial moratorium of three years, the last installment being due on 21st June, 2014. As per revised terms approved by LIC, the company was required to pay principle of Rs. 812.50 lacs along with arrears of interest on cutoff date of 2nd August 2014 and balance liability of Rs. 7,000.00 lacs remaining after repayment of Rs. 812.50 lacs was allowed to be repaid in sixty monthly installments of Rs. 117.00 lacs each, starting from 22nd August 2014 and ending on 22nd July 2019, last installment being for Rs. 97.00 lacs. Current maturity of Rs. 1,647.73 lacs includes overdue principal of Rs. 243.73 Lacs.

The company's business and the cash flows continued to be impacted due to the changes effected last year in RBI policy on Gold Import. In view of Cash flow constraints, the company has not created cash deposit of Rs. 211 lacs as required by Circular 4/2013 dated 11th February 2013 of GOI, MCA in respect of debentures installment maturing during the following year.

(b) Fully Convertible Debenture issued to D.B. Corp Limited for Rs. 39 crores

During FY 2012-13, the Company has issued 1 (one) Zero percent Fully Convertible Debenture (FCDs) having face value ofRs. 39,00,00,000/- (Rupees Thirty Nine Crores Only) on a preferential basis to D.B Corp Limited. The said FCD was compulsorily convertible into such number of equity shares with face value of Rs. 10/- each at the end of 18 months from the date of allotment at a price to be determined as per SEBI (ICDR) Regulations, 2009. Accordingly, the company has allotted 6,054,960 Equity Shares to D. B. Corp Limited on June 04, 2014 pursuant to conversion of 1(One) Zero Percent Fully Convertible Debenture of Rs. 3900 lacs. Consequent to said allotment, the paid up capital of the Company has increased from 92,065,491 Equity Shares of Rs. 10/- each to 98,120,451 of Rs. 10/- each. The share premium has increased by Rs. 3,294.50 lacs on account of issue of shares on conversion.

(c) External Commercial Borrowings (ECB):

During the financial year 2011-12 the company raised ECBs aggregating USD 107.19 million from the following two banks

Out of the above ECB proceeds, USD 57.19 million was utilised to redeem the outstanding Foreign Currency Convertible Bonds (FCCBs) and balance USD 50 million was utilised towards capital expenditure in SEZ unit in Hyderabad and investment in overseas subsidiaries.

Further to this on 22nd January 2012 IDBI downsold ECB of USD 10 million to Bank of Baroda. The company's request for restructuring of ECB has been approved by RBI vide its letter dated November 27, 2014 and by IDBI vide its letter dated January 6, 2015 IDBI/DIFC/LOI/37/2014-15. As per revised terms, principal will be repayable in 10 structured half yearly installments beginning from 30th September 2015, last installment being due on 31st March 2020. Interest is set at 6 months LIBOR rate 490 BPS. June 2014 being cutoff date for re-schedulement, the company has paid balance principal of USD 0.18 Million in December 2014 and overdue interest of USD 1.53 million in March 2015.

The said ECBs are secured by first pari passu charge over certain immovable properties belonging to the company's subsidiaries and second charge on the company's assets, namely, raw materials, stock in progress, finished goods, all book debts, movable plant and machinery, consumable stores and stores and spares, both present and future. During FY 2013-14, the company also provided additional security by way of properties of various subsidiaries in respect of the said ECBs.

The Company has entered into derivative contract for hedging interest rate related risk via interest rate swap agreement while availing ECB from IDBI, Dubai.

During the year there have been delays in servicing the principal and interest in respect of these ECBs. However as at 31st March, 2015 there are no over dues. Amount due in next 12 months is Rs. 8,765.17 lacs.

(d) Working Capital Borrowing - from consortium of bankers

The total outstanding balance of Working Capital Borrowing from consortium of bankers as at 31st March 2015 amounted to Rs. 4,35,743.55 Lacs. The above facility carries interest ranging from 5% to 14.5% per annum. The working capital borrowings are secured against certain immovable properties of the company and its subsidiaries and hypothecation by way of first charge on all present and future goods, movable assets, vehicles, furniture, stock in trade, fixed deposits, book debts along with the personal guarantee of the Managing Director.

In the month of May/June 2013, there have been changes in RBI Policy relating to issuance of BG/LC for purchase of gold. Due to this restriction, there has been sudden and severe impact on cashflow which started in May 2013 and continued to affect cash flows during 2014-15.

During the year there were delay in servicing the interest on working capital borrowing and repayment of principal amounts. As at 31st March 2015, the facilities are overdrawn by Rs. 7,029 Lacs mainly on account of non-servicing of interest.

In respect of rescheduling of ECB and for additional margin towards working capital borrowing, the company provided for additional security of property of various subsidiaries and second charge on certain property of the company and pledge of shares of the promoters. Further the promoter has infused unsecured loan of Rs. 6,423.14 lacs in the company. The Loan brought in by promoter is interest free and there is no stipulation as to repayment and as per the terms of revised ECB schedule the said loan cannot be repaid during currency of ECB.

Also the company has issued Fully convertible warrants on preferential basis to parties other than promoters for which it has received Rs. 4,261.45 lacs by way of subscription money towards Share warrants as elaborated in Note 26 j (ii).

(e ) Public deposits:

During FY 2013-14, the Company has accepted deposits of Rs. 227.29 Lacs from the public within the meaning of section 58Aof the Companies Act, 1956. Fixed deposit are for the period from 1 year to 3 year and carries interest ranging from 11.50% to 12.50%. The amount due within 1 year is Rs. 17.38 Lacs. The outstanding balance as on 31st March 2015 is Rs. 187.89 lacs. The company has created liquid reserve of Rs. 29.66 lacs in respect of deposit amount maturing in subsequent years. The company has not accepted any further public deposit within the meaning of Section 73 to 76 of the Companies Act 2013 and rules framed there under during the year.

NOTE 4

Proposed Merger of Wholly Owned Subsidiary

At the Meeting of Board of Directors of the Company held on April 21, 2015, the Board has approved the "Scheme of Amalgamation" [Scheme] under Section 391 to 394 of the Companies Act, 1956 and relevant Sections of the Companies Act 2013, to the extent applicable, for amalgamation of the Company's wholly owned subsidiary Gitanjali Exports Corporation Limited with it, subject to the approval of the Scheme by Shareholders, Creditors of the respective Companies, Hon. Mumbai High Court and any other statutory authorities as may be required. Once sanctioned, the Scheme will be effective from the appointed date i.e. April 1, 2014.

NOTE 5:

Contingent Liabilities not provided in respect of

Sr. No. Remark Rs. in Lacs

I. Claims against the Company not acknowledged as debt

A 4 Vendors have filed petition under section 433/434 of the Companies Act, 1956 against 74 the company for recovery of its dues. The management does not expect the petitioner's claim to succeed.

B 4 Vendors have filed suits against the company for recovery of amount due for supply of 208 Goods /Services. The management has assessed these matters and is of the view that this will not result in demand over and above provision made in the accounts.

C An Ordinary civil suit is filed against company for use of one of the trade mark by 0 a subsidiary. The management has reviewed the matter and in the opinion of the management the company possess proper legal title for the said trade mark. In the view of this the company does not expect any outgo in this matter.

II Income Tax liability that may arise in respect of which the company is in appeal with 23,140.46 CIT (A)

Assessment Year Amount in Rs. in Lacs Remark

2006- 2007 878.66 Section 143(3) r.w.s 153 A

2007- 2008 610.79 Section 143(3) r.w.s 147

2008- 2009 6,065.15 Section 143(3) r.w.s 153A

2009- 2010 1,567.22 Section 143(3) r.w.s 153A

2010- 2011 5,023.14 Section 143(3) r.w.s 153A

2011- 2012 8,995.49 Section 143(3) r.w.s 153A

The above Income Tax demands are as consequence to assessment under Section 153 A and reassessment for AY 2006-07 to AY 2011-12 and are mainly on account of additions due to disallowance of business expenses, disallowance of exemption and transfer pricing adjustment.

In respect of Assessment year 2007-08 in addition to above, there is a demand by tax authority on assessment under Section 143(3) r.w.s. 153A of Rs. 473.90 Lacs.The company has filed appeal against the said order. This orders and appeal is not likely to have effect in view of the assessment under section 143(3) r.w.s 147 and therefore is not included under above figure of disputed Income Tax.

The management has reviewed the above demands and is of the opinion that it has good chances of succeeding in the appeal.

III Tax demand for various years as per TRACES 211.10

The company is in process of filing rectification and on rectification the demand is not likely to materialise.

IV Service Tax

The Company has filed appeal against service tax assessments in respect of assessed 540.81 service tax payable on service component relating to FCCB, GDR, etc. Based on the internal assessment of the company, the demand is not likely to be crystalised.

V Corporate guarantees (CG)

CGs are given to various banks for availing working capital facility/ term loan by 375,017.46 subsidiary / Associate companies.

Except as described above, there are no pending litigations which the company believes could reasonably be expected to have a material adverse effect on the result of Operations, cash flow or the financial position of the Company.

NOTE - 6:

Fixed Assets and Schedule II implementation

In accordance with requirements prescribed under Schedule II of the Companies Act 2013, the company has assessed the estimated useful life of its assets and has adopted the useful life as prescribed in the Schedule II in respect of all assets. The depreciation charged to Statement of Profit and Loss is higher by Rs. 101.12 lacs on account of changes in estimated useful life.

During the year company has carried out physical verification of its fixed assets and has written off WDV amount of Rs. 73.12 lacs on account of comparison of physical assets with book Assets.

NOTE - 7:

Investments

a) Considering the current subdued economic scenario in gems and jewellery industry during the year, Gitanjali Jewellery Retail Ltd, a subsidiary, decided not to enhance the share capital and accordingly refunded Share Application Money of Rs. 12.50 lacs paid to it in earlier years by the company.

b) The company transferred 17,589 equity shares of MMTC Gitanjali Pvt. Limited to MMTC Employees Mutual Benefit Trust. Consequently company's interest is reduced to 73.85% from earlier 74%.

c) On December 30- 2014, e-Gitanjali limited issued and allotted 1,48,500 equity shares to others on private placement basis. Consequently, Company's interest has reduced to 40% against earlier 100% .Hence the Company which was wholly owned subsidiary till last year has become associate company effective December 2014.

d) The company, with a view to consolidate the business model , appointed reputed firm of consultants to advise on future business model and restructuring of domestic and overseas subsidiaries. Based on the recommendations, as part of restructuring of overseas subsidiaries, the company has plans of disinvestment in equity share of three of the foreign subsidiaries to it's another overseas wholly owned subsidiary namely Aston Luxury Group Ltd, Hong Kong. However the above restructuring is subject to approval by lenders and from Reserve Bank of India under FEMA. On signing off unbinding term sheet, the company has received part payment in earlier years. Pending necessary approval, the amount of USD 6.44 Million received as part consideration has been shown under Long term borrowing- Unsecured Loans & Advances from Related parties.

e) Investment during the year:

As per commitment made in previous year, the company has invested Rs. 0.85 Lacs towards subscription to 8500 equity shares of Rs. 10 each fully paid up being 17% of equity capital of newly formed company namely GEMTA Coal Mines Limited.

NOTE 8:

Purchase of Raw Material and Traded Goods:

The Company is engaged in business of trading and manufacturing of Plain Gold Jewellery, Diamond Studded Jewellery, Diamond Cutting and Polishing. For this purpose Company has its own manufacturing facility and also undertakes job work for others. The company also purchases jewelery produced by reputed manufacturers. Considering the nature of product and type of business, cost of material consumed includes value of traded goods purchased for trading.

NOTE 9:

Undisputed Statutory dues outstanding for period over 180 days as at 31st March, 2015:

As a result of change in RBI policy on gold imports, the company's cash flow was severely affected from mid May 2013 onwards and it continued to affect the cash flows of the company during FY 2014-15. For the said reason, bank working capital facilities were overdrawn on account of non serving of interest. As a result, the company could not meet some of the statutory payments in time. In respect of Self assessment tax of Rs. 2,163.32 Lacs payable on or before 30th November, 2013 for Assessment year 2013-14 (financial year 2012-13), the self assessment tax is outstanding for a period of more than six months as at 31st March, 2015.

NOTE - 35:

Interest received during the year was Rs. 785.29 Lacs (Previous Year Rs. 3,163.27 Lacs) and Tax Deducted at Source from interest income was Rs. 78.37 Lacs for the year ended 31st March 2015. (Previous Year Rs. 315.90 Lacs). Bank Interest Expense is net of Interest received.

NOTE - 10:

Trade Receivable

a) Trade Receivable as on 31st March, 2015 includes Rs. 147,083.22 Lacs (Previous Year Rs. 66,364.76 Lacs) due from group subsidiaries- domestic and overseas.

b) There are some cases where the export receivables are outstanding for more than permissible limits for which the company is in process of filing application to authorized dealer / Reserve Bank of India.

c) The receivable and payable from same party have been netted off for purpose of presentation in financial statement.

d) During the year the company has written off export receivable of Rs. 4,985.33 Lacs (Net) as Bad debts .The company is in process of filing application to authorized dealer / Reserve Bank of India in this respect.

NOTE 11:

Loans and Advances

a) Advances to suppliers includes Rs. NIL (Previous Year Rs. 7.45 Lacs) given to concerns in which Directors are interested as Directors/Members/Partners.

b) Loans & Advances to other than group companies aggregating to Rs.1,858.81 lacs (net) were considered irrecoverable and has been written off during the year.

NOTE 12:

Gratuity

Defined Benefit Plan:

The Company has applied the revised Accounting Standard AS-15 Employee Benefits - Gratuity (Non funded) & Leave Salary, notified under the Companies (Accounting Standard) Rules, 2006. Consequent to the application of the revised AS-15 the following disclosures have been made as required by the said standard.

Segment Reporting (Accounting Standard -17)

The Management of the company identifies two major reportable segments viz. Diamond Business & Jewellery Business. Activity in diamond business includes manufacturing and export of cut & polished diamonds and sales in local market. Activity in jewellery business includes manufacturing and export of plain gold and diamond studded jewellery and manufacturing and sales in local market of branded and unbranded jewellery. (Refer to Annexure I)

NOTE 13:

Related Party Transaction (Accounting Standard -18) - (Refer to Annexure - II)

NOTE 14:

Disclosure as per Accounting Standard (AS - 19) on "Leases" are given below:

i. The Company has taken various office premises and fixed assets under operating lease or leave and license agreements. These are generally non-cancelable and ranges between 11 months and 5 years under leave and license, or longer for other leases and are renewable by mutual consent on mutually agreeable terms. The Company has given refundable interest free security deposits under certain agreements.

ii. Lease payments are recognised in the Statement of Profit and Loss under 'Rent' in Note 23 and are net of recoveries from group companies.

iii. The future minimum lease payments under non-cancellable operating lease :

a. not later than one year Rs. 661.63 Lacs (Previous year : Rs. 733.10 Lacs)

b. later than one year and not later than five years Rs. 991.42 Lacs (Previous year: Rs. 1,743.29 Lacs)

c. More than five years Rs. NIL (Previous year : Rs. 2,450.45 Lacs)

a) Based on the details regarding the status of the suppliers, to the extent obtained, no supplier is covered under the Micro, Small and Medium Enterprises Development Act, 2006 (the Act). The auditors have relied on the management's information.

b) To the extent information available with the company, the company does not owe any sum to small scale industrial unit as defined in clause (j) of Section 3 of the Industrial (Development & Regulation) Act, 1951. The Auditors have relied on management's information.

NOTE 15:

There has been no delay in transferring amounts required to be transferred to Investor Education and Protection Fund by the company.

NOTE 16:

Long term Contracts and Financial Derivative Instruments :

The Company has entered into derivative contract for hedging interest rate related risk via interest rate swap agreement while availing ECB from IDBI, Dubai. The company has reviewed its long term contract including derivative contract. There are no material foreseeable losses on such contracts.

NOTE 17:

Previous year's figures have been regrouped/rearranged/reworked wherever necessary and possible so as to confirm to current year's classification.


Mar 31, 2014

NOTE – 1: Cancellation of Dividend for FY 2012-13

In the AGM held on 30th September 2013, the resolution related to proposed dividend was not approved by the shareholder''s as per poll conducted at Annual General Meeting. Accordingly the company has reversed the appropriations towards the proposed dividend for the Financial Year 2012-13 of Rs. 2,761.97 Lacs and dividend distribution tax thereon of Rs. 469.40 Lacs in current Financial year 2013-14.

NOTE–2: Borrowings:

(a) 12% Non-Convertible Debentures issued to LIC of India

The 12% Non-convertible debentures for an aggregate amount of Rs.125 crores was issued to LIC of India on 22nd June, 2009.The tenure of the debentures was five years and are redeemable in eight equal quarterly installments with initial moratorium of three years and the last installment is due on 21st June, 2014. The said debentures are secured by frst pari passu charge over immoveable properties in Hyderabad (A.P.) belonging to Hyderabad Gems SEZ Limited, a wholly owned subsidiary.

As the company''s business and the cash flows were severely affected by regulator''s order on gold import, repayment of 4 installments aggregating to Rs. 6,250 Lacs and interest due thereon of Rs.1,093.75 Lacs was overdue as at 31.03.2014. The company has approached with LIC of India for revision in repayment schedule and expects revised repayment terms and action on the above notice would be dropped.

In view of Cash fow constraints, the company has not created cash deposit as required by Circular 4/2013 dated 11th February 2013 of GOI, MCA in respect of debentures installment maturing during the following year.

(b) Fully Convertible Debenture issued to D.B. Corp Limited for Rs.39 crores

During FY 2012-13, the Company has issued 1 (one) Zero percent Fully Convertible Debenture (FCDs) having face value of Rs. 39,00,00,000/- (Rupees Thirty Nine Crores Only) on a preferential basis to D.B Corp Limited. The said FCD will be compulsorily convertible into such number of equity shares with face value of Rs. 10/- each at the end of 18 months from the date of allotment at a price to be determined as per SEBI (ICDR) Regulations, 2009.There was no conversion into equity shares as at 31st March, 2014 and last date of conversion is 4th June, 2014.

(c) External Commercial Borrowings (ECB):

During the financial year 2011-12 the company raised ECBs aggregating USD 107.19 million from the following two banks

Terms of ECB :

The above ECBs carry interest at the rate of 4.90 6 months USD LIBOR per annum and is repayable in twelve half yearly installments of which frst four installments are @ 0.667% of the principal and the remainder eight installments @ 12.167% of the principal. Repayment starts from 1st June 2013 and ends on 1st December 2018.

Out of the above ECB proceeds, USD 57.19 million was utilised to redeem the outstanding Foreign Currency Convertible Bonds (FCCBs) and balance USD 50 million was utilised towards capital expenditure in SEZ unit in Hyderabad and investment in overseas subsidiaries.

Security for ECB :

The said ECBs are secured by frst pari passu charge over certain immovable properties belonging to the company''s subsidiaries and second charge on the company''s assets, namely, raw materials, stock in progress, fnished goods, all book debts, movable plant and machinery, consumable stores and stores and spares, both present and future. During the year the company also provided additional security by way of properties of various subsidiaries in respect of the said ECBs.

There have been delays in servicing the principal and interest in respect of these ECBs. One instalment amounting to USD 1 million of ECB principal and interest of USD 1.32 million to ICICI Bank was overdue as at 31st March 2014.

(d) Working Capital Borrowing – from consortium of bankers

The total outstanding balance of Working Capital Borrowing from consortium of bankers as at 31st March 2014 amounted to Rs. 4,21,513.38 Lacs. The above facility carries interest ranging from 5% to 14.5% per annum. The working capital borrowings are secured against certain immovable properties of the company and its subsidiaries and hypothecation by way of frst charge on all present and future goods, movable assets, vehicles, furniture, stock in trade, fixed deposits, book debts along with the personal guarantee of the Managing Director.

In the month of May/June 2013, there have been changes in RBI Policy relating to issuance of BG/LC for purchase of gold. Due to this restriction, there has been sudden and severe impact on cashfow which in turn has resulted in non-payment of BG and LC liability. As at 31st March 2014, the facilities in 19 banks are overdrawn by Rs.12,739.78 Lacs mainly on account of non-servicing of interest.

(e) Public deposits:

During the year under review the Company has accepted deposits of 227.29 Lacs from the public within the meaning of section 58Aof the Companies Act, 1956. Fixed deposit are for the period from 1 year to 3 year and carries interest ranging from 11.50% to 12.50% The outstanding balance as on 31.03.14 is Rs. 227.29 lacs. The amount due within 1 year is Rs 39.45 Lacs.

NOTE–3:

Contingent Liabilities not provided in respect of

a) Corporate Guarantees given by the Company to the extent of Rs. 345,573.15 Lacs (Previous year: Rs.315,380.00 Lacs ) for Working capital facilities availed by its subsidiaries.

b) Outstanding Letter of Credit : Rs.NIL (Previous year : NIL)

c) The Company has received show cause notice from Custom department disputing the rate of custom duty in respect of import of jewelery by unrelated party, duty differential being Rs. 26.15 lacs. Since the material is not imported by the company, no duty would be payable. The company, based on tax consultant''s assessment, is confdent that the case is likely to be decided favourably.

d) Disputed Income Tax : Rs.1,352.56 lacs (Previous Year: NIL) as under:

Sr.No.Assessment years Disputed Tax (Rs. In Lacs)

1 AY 2006-07 473.90

2 AY 2007-08 878.66

The company''s income tax assessments are completed U/s. 143 of the Income Tax Act ,1961 up to AY 2007-08 with demand of Rs. 1,730.46 Lacs. The Company had fled appeals with the tribunal against the said demand. The appeals were decided in favour of the company. In the meantime , the company received notice u/s 153A of the Income Tax Act ,1961 , and on completion of assessment for 2 years, demand for 1,352.56 Lacs was received. The Company has fled appeals against the said assessment orders and appeals are pending before CIT (A).

e) The company has received notices for delayed fling of TDS returns, non-payment/ short deduction of TDS amounts demanding Rs 300.59 Lacs. . The company, in consultation with tax consultant, is attending to the above notices.

f) Disputed Service Tax : Rs. 550.77 Lacs (Previous Year : Rs. 619.90 Lacs)

The Company has replied the show cause notices and based on the internal assessment of the company, the demand is not likely to be crystalised.

GDR :

The company raised USD 180.00 million through issuance of GDR on December 14, 2007. The proceeds have been fully utilized as per objects of the issue by the end of March 31, 2013.

Investments

a) Considering the current gloomy scenario in gems and jewellery industry during the year, the following subsidiaries have refunded back advance given towards subscription to 9% Non Cummulative Redeemable Preference shares during FY 2012-13 :

b) Disinvestments in Subsidiaries:

During the year the company sold its 100% equity stake in Gitanjali Capital Private Ltd to another wholly owned subsidiary Gitanjali Lifestyle Ltd for an amount of Rs. 300 lacs. The loss on account of above sale of investment amounted to Rs.137.37 lacs and is shown as exceptional item in Statement of profit & Loss.

c) The company, with a view to consolidate the business model , appointed reputed firm of consultants to advise on future business model and restructuring of domestic and overseas subsidiaries. Based on the recommendations, as part of restructuring of overseas subsidiaries, the company has plans of disinvestment in equity share of three of the foreign subsidiaries to it''s another overseas wholly owned subsidiary namely Aston Luxury Group Ltd, Hong Kong. However the above restructuring is subject to approval by lenders and from Reserve Bank of India under FEMA. On signing off unbinding term sheet, the company has received part payment in earlier years. Pending necessary approval, the amount received of USD 6.44 Million as part consideration has been kept in Other Current liabilities.

d) Investment during the year:

The company has committed Investment of Rs. 0.85 Lacs towards subscription to 17% of equity capital of newly formed company namely GEMTA Coal Mines Limited .

NOTE – 4:

Purchase of Raw Material and Traded Goods:

The Company is engaged in business of trading and manufacturing of Plain Gold Jewellery, Diamond Studded Jewellery, Diamond Cutting and Polishing. For this purpose Company has its own manufacturing facility and also undertakes job work for others. The company also purchases jewelery produced by reputed manufacturers. Considering the nature of product and type of business, cost of material consumed includes value of traded goods purchased for trading.

NOTE – 5:

Undisputed Statutory dues:

As a result of government policy on gold imports, the company''s cash fow was severely affected from mid May 2013 onwards. There was overdrawn position in working capital bank loans also. As a result, the company could not meet the statutory payments in time. There were delays in payment of TDS leading to late fling of necessary returns with tax authorities.

The tax liability as per I.T. return for the assessment year 2013-14 (financial year 2012-13) amounted to Rs. 5,702.94 Lacs against which the total payment along with advance tax and TDS amounted to Rs. 3539.62 Lacs. The self-assessment tax of Rs.2,163.32 Lacs was payable on or before 30th November, 2013 and said amount is outstanding.

Notes:

The remuneration does not include Provision for Leave, Gratuity and Post-Retirement benefits as per revised Accounting standard-15 since the same were not ascertained for individual employees.

The computation of Net profit under section 198 / 349 of the Companies Act 1956 has not been given since no commission is paid or payable to any director during current year.

The remuneration to managing director was fixed at Rs. 60 lacs p.a. plus perquisites vide resolution passed in Annual General Meeting held on 28th September, 2012. In view of the loss incurred during the current year, the remuneration is limited to Rs. 48 lacs p.a. under the provision of schedule XIII to the Companies Act, 1956. The company is seeking legal advice regarding compliance of schedule XIII requirements, if any in this regard.

Mr. Sunil Varma resigned as Whole Time Director (WTD) of the Company on November 14, 2013. His remuneration as executive director was fixed at Rs.57.36p.a.as per resolution passed in Annual General Meeting held on 28th September, 2012. The said remuneration is exempted from the purview of limit specified under section 198, 309, Schedule XIII and other applicable provisions of Companies Act, 1956 in terms of notifcation no GSR 534(E) dated July 14, 2011 issued by ministry of corporate affairs.

NOTE – 6:

Interest received during the year was Rs.3,163.27 Lacs (Previous Year Rs. 4,197.65 Lacs) and Tax Deducted at Source from interest income was Rs.315.90 Lacs for the year ended 31st March 2014. (Previous Year Rs.513.28 Lacs). Bank Interest is net of Interest received.

NOTE – 7: Trade Receivable

a) Trade Receivable as on 31st March, 2014 includes Rs.NIL (Previous year Rs. NIL) due from concerns in which Directors are interested as Directors/Partners.

b) Trade Receivable as on 31st March, 2014 includes Rs.66,364.76 Lacs (Previous year Rs.40,522.38 Lacs) due from group subsidiaries- domestic and overseas.

c) There are some cases where the export receivables are outstanding for more than permissible limits for which the company is in process of fling application to authorized dealer / Reserve Bank of India.

d) The receivable and payable from same party have been netted off for purpose of presentation in financial statement.

e) During the year the company has written off export receivable of Rs. 6,740.43 Lacs as Bad debts which is within the permissible limit of Reserve Bank of India.

f) Debtors have been reviewed by the reputed independent firm of Chartered Accountants appointed by consortium of bankers and they have not reported any adverse comments.

NOTE – 8:

Loans and Advances

a) Advances to suppliers includes Rs. 7.45 Lacs (Previous year Rs. 15,598.08 Lacs) given to concerns in which Directors are interested as Directors/Members/Partners.

b) Advances to suppliers includes Rs. Nil (Previous year: Rs. 7.45 Lacs) given to Associates.

c) Loans & Advances to other than group companies included Rs. 4,162.62 lacs out of which Rs. 1,477.46 lacs was considered irrecoverable and written off during the year management considers the balance loans and advances as good and recoverable.

Gratuity

Defined benefit Plan:

The Company has applied the revised Accounting Standard AS-15 Employee benefits notifed under the Companies (Accounting Standard) Rules, 2006. Consequent to the application of the revised AS-15 the following disclosures have been made as required by the said standard

NOTE – 9:

Segment Reporting (Accounting Standard –17)

The Management of the company identifes two major reportable segments as Diamond business & Jewellery Business.

NOTE – 10:

Disclosure as per Accounting Standard (AS – 19) on "Leases", issued by the ICAI, are given below:

i. The Company has taken various office premises and fixed assets under operating lease or leave and license agreements. These are generally non-cancelable and ranges between 11 months and 5 years under leave and license, or longer for other leases and are renewable by mutual consent on mutually agreeable terms. The Company has given refundable interest free security deposits under certain agreements.

ii. Lease payments are recognised in the Statement of profit and Loss under ''Rent'' in Note 23 and are net of recoveries from group companies.

iii. The future minimum lease payments under non-cancelable operating lease :

a. not later than one year Rs. 733.10 Lacs (Previous year : Rs. 529.83 Lacs)

b. later than one year and not later than five years Rs. 1,743.29 Lacs (Previous year: Rs.2,083.09 Lacs)

c. More than five years Rs. 2,450.45 Lacs (Previous year : Rs. 2,450.45 Lacs)

Considering that the subsidiaries overseas and domestic have been formed for promoting company''s business, the above Loans and advances to its various subsidiaries are interest free and carry no stipulation as to repayment. The Company has not given loans & advances for a term exceeding 7 years.

The above statement excludes:

Rs. 41.33 lacs advanced to the subsidiary companies by way of trade advance.

NOTE – 11:

a) Based on the details regarding the status of the suppliers, to the extent obtained, no supplier is covered under the Micro, Small and Medium Enterprises Development Act, 2006 (the Act). The auditors have relied on the management''s information.

b) To the extent information available with the company, the company does not owe any sum to small scale industrial unit as Defined in clause (j) of Section 3 of the Industrial (Development & Regulation) Act, 1951.The Auditors have relied on management''s information.

c) There is no amount due and outstanding towards Investor Education and Protection Fund.

NOTE – 12:

Previous year''s figures have been regrouped/rearranged/reworked wherever necessary and possible so as to confirm to current year''s classifcation.

Related Party Disclosures as per AS 18.

(A) Particulars of Enterprises Controlled By The Company where there are transactions

Name of Related Party Relationship

eGitanjali Ltd.(Formerly known as Mehul Impex Ltd.) Subsidiary

Gitanjali Exports Corporation Ltd. Subsidiary

Gitanjali Brands Ltd. Subsidiary

Hyderabad Gems SEZ Ltd. Subsidiary

Gitanjali Infratech Ltd. Subsidiary

Gitanjali Lifestyle Ltd. Subsidiary

Gitanjali Jewellery Retail Ltd. Subsidiary

Nashik Multi Services SEZ Ltd. Subsidiary

Gitanjali Ventures DMCC Subsidiary

Samuels Jewelers Inc. Subsidiary

Gitanjali USA Inc. Subsidiary

MMTC Gitanjali Ltd. Subsidiary

Decent Securities & Finance Pvt. Ltd. Subsidiary

Eureka Finstock Pvt.Ltd. Subsidiary

Gitanjali Capital Pvt. Ltd. Subsidiary

N and J Finstock Pvt.Ltd. Subsidiary

Decent Investment & Finance Pvt. Ltd. Subsidiary

Aston Luxury Group Ltd. Subsidiary Tri-Star Worldwide LLC Step Down Subsidiary Shubhlavanyaa Jewel crafts Pvt.Ltd. Step Down Subsidiary

Asmi Jewellery India Ltd. Step Down Subsidiary

Gili India Ltd. Step Down Subsidiary

D''Damas Jewellery (India) Pvt.Ltd. Step Down Subsidiary Nakshatra Brands Ltd. Step Down Subsidiary Spectrum Jewellery Ltd. Step Down Subsidiary Mobilenxt Teleservices Pvt.Ltd. Step Down Subsidiary Maya Retail Ltd. Step Down Subsidiary

Diamlink Inc Step Down Subsidiary Alfred Terry Ltd. (Formerly Alfred Terry Holdings Ltd.) Step Down Subsidiary

LJOW Holdings, LLC Step Down Subsidiary

Gitanjali Resources BVBA Step Down Subsidiary

GGL Diamond LLC Step Down Subsidiary

Leading Jewels of Japan K.K. Step Down Subsidiary

Leading Singapore Jewels Pte Ltd Step Down Subsidiary

Blue SRL Step Down Subsidiary

Leading Italian Jewels SRL Step Down Subsidiary

Aston Diamond Resources SA Proprietary Ltd. Step Down Subsidiary

Abbeycrest ( Thailand) Ltd. Step Down Subsidiary

Diamlink Jewellery Inc Step Down Subsidiary

Jewelery Marketing Company LLC Step Down Subsidiary

Crown Aim Ltd. Step Down Subsidiary

(B) Particulars of Key Management Personnel

Name of Related Party Relationship

Mr. Mehul C.Choksi Managing Director

Mr. Sunil Varma Whole Time Director (Upto 14/11/2013)

Mr. Dhanesh V.Sheth Director

Mr. Sujal Shah Director (Upto 30/09/2013)

Mr. S.Krishnan Director

Mr. Nehal Modi Director

Mr. Nitin Potdar Director (Upto 14/02/2014)

Mr. M.Sundarajan Mittur Director

(C) Particulars of Enterprises Under Common Control of The Key Management Personnel where there are transactions Name of Related Party

Priyanka Gems Pvt.Ltd.

Partha Gems L.L.P.

Lustre Industries Pvt.Ltd.(Formerly known as Lustre Manufactures Pvt.Ltd.)

Rohan Diamonds Pvt. Ltd.

Evergold Jewels Pvt.Ltd.(Formerly known as Trans Expo Trade Pvt. Ltd.)

The Next Diamond Company

Mozart Trading Pvt.Ltd. (Formerly known as Mozart Investment Pvt. Ltd.)

Gitanjali Gold & Precious Ltd.

Touchstone

Diamond Creations

Diminco Diamond India Pvt.Ltd. (Formerly known as Prism Bullion Pvt.Ltd.)

Mast Jewellery Distributions Private Limited

Verite Co.Ltd.

Ivida Technologies Pvt.Ltd. (Step down subsidiary for part of the year)

(D) Particulars Of Enterprises Controlled By Relatives Of Key Management Personnel where There Are Transactions

Diminco N.V.

(E) Particulars Of Relatives Of Key Management Personnel where there are Transactions Priti M.Choksi


Mar 31, 2013

NOTE 1

Conversion of Warrants

During the previous year the company issued 943,396 warrants convertible into equal number of equity shares on preferential basis at a price of Rs. 424/- per warrant to Bennett Coleman & Co. On 4th August, 2012, the Company allotted 943,396 shares of Rs. 10/- each on conversion of Share Warrants. Consequently paid up Share Capital of the Company increased from Rs. 9,11,220,950/- to Rs. 920,654,910/- consisting of 92,065,491 equity shares of Rs. 10/- each fully paid up.

NOTE 2

Borrowings:

a. Non Convertible Debentures:

On 22nd June, 2009, the company issued 12% secured redeemable non convertible debentures of Rs. 1250.00 Million to LIC of India. The tenure of the debentures is five years (maturity date: 21 st June, 2014) and are redeemable in eight equal quarterly installments with initial moratorium of three years. The said debentures are secured by first pari passu charge over immoveable properties in Hyderabad (A.P.) belonging to one of the wholly owned subsidiary. During the year, the company has transferred Rs. 250.00 Million to Debenture Redemption Reserve (DRR) and cumulative balance in DRR account is Rs. 1000.00 Million. Balance as at 31st March, 2013 is Rs. 781.25 Million, out of which Rs. 625.00 Million is due in one year and shown under Short Term Borrowings.

b. Convertible Debentures :

The company has on 05th December, 2012 allotted 1 (one) Zero percent unsecured Fully Convertible Debentures (FCDs) having face value of Rs. 390.00 Million on a preferential basis to D.B Corp Limited. The said FCD will be compulsorily Convertible into such number of equity shares with face value of Rs. 10/- each at the end of 18 months from the date of allotment at a price determined as per SEBI (ICDR) Regulations, 2009.

c. GDR :

Unutilised GDR proceeds of USD 0.072 Million has been utilized towards investment in overseas subsidiaries during the year, as per objects of the issue.

d. External Commercial Borrowings(ECB):

In Financial year 2011-12, Company raised funds through ECBs route from banks aggregating to USD 107.19 Million.

The loans are repayable in installments spread over 5 years and carries interest ranging from 4.50% to 4.90% plus 6 months USD libor. Final repayments are due in March 2018 and December 2018.

The said ECBs are secured by first pari passu charge over certain immoveable properties of subsidiaries and second charge on the company''s assets namely raw materials, stock in progress, finished goods and all book debts, movable plant and machinery, consumable stores and store and spares both present and future.

Out of above ECB proceeds, USD 57.19 Million was utilised to redeem the outstanding FCCBs and balance USD 50 Million was utilized towards capital expenditure in SEZ unit at Hyderabad and investment in overseas subsidiaries.

e. Working capital borrowings from Banks/ Financial Institution are secured against mortgage of certain immoveable properties of the company and its subsidiaries and hypothecation by way of a first charge on all the present and future goods, movable assets, vehicles, furniture, stock-in-trade, fixed deposits, book debts alongwith personal guarantee of the Managing Director. The facility carries interest ranging from 5% to 14.50%.

Trade payable includes Rs 16,310.19 Million (Previous Year Rs. 11,401.52 Million) payable to bank under purchase arrangement for Gold. This facility is secured against Bank Guarantee to the tune of Rs 16,565.96 Million (Previous year Rs. 12,567.02 Million) and margin money. This facility carries interest ranging from 2.25% to 6.25%.

NOTE 3

Contingent Liabilities not provided in respect of

a. Corporate Guarantees given by the Company to the extent of Rs. 31,538.00 Million (Previous year: Rs.24,873.40 Million) for Working capital facilities availed by its subsidiaries.

b. Outstanding Letter of Credit : Rs.NIL (Previous year : Rs.955.48 Million)

NOTE 4

Claims against the company not acknowledged as debt:

a. Disputed Income Tax : NIL (Previous Year: Rs.173.05 Million)

The company''s income tax assessments are completed upto Ay. 2007-08. The Company had filed appeals against the assessment orders and the said appeals were decided in favour of the company. However, orders giving effect of tribunal order is yet to be received.

b. Disputed Service Tax : Rs. 61.99 Million (Previous Year : Rs.43.63 Million)

The Company has replied the show cause notices and based on the opinion received and as per the internal assessment of the company, the demand is not likely to be crystalised.

NOTE - 5:

Purchase of Raw Material and Traded Goods:

The Company is engaged in business of trading and manufacturing of Plain Gold Jewellery, Diamond Studded Jewellery, Diamond Cutting and Polishing. For this purpose Company has its own manufacturing facility and has job work manufacturing. The company also purchases jewelery produced by reputed manufacturers. Considering the nature of product and type of business, cost of material consumed includes value of traded goods purchased for trading.

NOTE - 6:

The Income Tax Department had conducted search / survey at group companies'' level during the Financial Year 2011-12. The Company has received notice u/s 153A of Income Tax Act, 1961 in consequence of search / survey. The company has in compliance with the above notice, submitted necessary documents and replies to the income tax department. However till the date of signing the financial statement, no order have been received.

NOTE - 7:

Interest received during the year was Rs.419.77 Million (Previous Year Rs. 327.78 Million) and Tax Deducted at Source from interest income was Rs.51.33 Million for the year ended 31st March 2013. (Previous Year Rs.38.99 Million). Bank Interest shown in Statement of Profit and Loss is net of Interest received.

NOTE - 8:

Trade Receivable

a. Trade Receivable as on 31st March, 2013 includes Rs.NIL (Previous year Rs.22.54 Million) due from concerns in which Directors are interested as Directors/Partners.

b. Trade Receivable as on 31st March, 2013 includes Rs.4,052.24 Million (Previous year Rs.3,168.23 Million) due from Associates.

NOTE - 9:

Loans and Advances

a. Advances to suppliers includes Rs.1,559.81 Million (Previous year Rs.470.54 Million) given to concerns in which Directors are interested as Directors/Members/Partners.

b. Advances to suppliers includes Rs.0.75 Million (Previous year: Rs.0.75 Million) given to Associates.

NOTE - 10:

Segment Reporting (Accounting Standard -17)

The Management of the company identifies two major reportable segments as Diamond business & Jewellery Business. (Refer to Annexure I)

NOTE -11:

Related Party Transaction (Accounting Standard -18) - (Refer to Annexure - II)

NOTE - 12:

Impairment of Assets

There has been no case of impairment of assets reported during the year.

NOTE - 13:

Disclosure as per Accounting Standard (AS - 19) on "Leases", issued by the ICAI, are given below:

i. The Company has taken various office premises and fixed assets under operating lease or leave and license agreements. These are generally non-cancelable and ranges between 11 months and 5 years under leave and license, or longer for other leases and are renewable by mutual consent on mutually agreeable terms. The Company has given refundable interest free security deposits under certain agreements.

ii. Lease payments are recognised in the Statement of Profit and Loss under ''Rent'' in Note 24 and are net of recoveries from group companies.

iii. The future minimum lease payments under non-cancelable operating lease :

a. not later than one year Rs. 52.98 Million (Previous year : Rs. 68.73 Million)

b. later than one year and not later than five years Rs. 208.31 Million (Previous year: Rs.283.41 Million)

c. More than five years Rs. 245.04 Million (Previous year : Rs. 216.22 Million)

NOTE - 14:

a) Based on the details regarding the status of the suppliers, to the extent obtained, no supplier is covered under the Micro, Small and Medium Enterprises Development Act, 2006 (the Act). The auditors have relied on the management''s information.

b) To the extent information available with the company, the company does not owe any sum to small scale industrial unit as defined in clause (j) of Section 3 of the Industrial (Development & Regulation) Act, 1951.The Auditors have relied on management''s information.

c) There is no amount due and outstanding towards Investor Education and Protection Fund.

NOTE - 15:

Previous year''s figures have been regrouped/rearranged/reworked wherever necessary and possible so as to confirm to current year''s classification.

 
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