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Notes to Accounts of Golkonda Aluminium Extrusion Ltd.

Jun 30, 2015

Company overview

Golkonda Aluminium Extrusions Limited (Formerly known as Alumeco India Extrusion Limited) ("the Company") manufactures aluminum extrusion in India. The Company is a public limited company and is listed on Bombay Stock Exchange (BSE).

1. The Company has only one class of equity shares having a par value of Rs.10 per share. Each holder of equity share is entitled to one vote per share. In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts, if any. The distribution will be in proportion to the number of equity shares held by equity shareholders.

2. Terms and rights attached to the 10% cumulative redeemable optionally convertible preference shares: 10% Cumulative Redeemable Optionally Convertible Preference Shares (CRCPS) of Rs. 10 each had been allotted by the Company in the year 2005. As per the terms of the arrangement these preference shares including unpaid dividend could be converted into ordinary equity shares of the Company of Rs 10 each at any time after 3 years from date of allotment or could be redeemed by the Company at par in three equal installments commencing from the end of 5th, 6th and 7th year from the date of allotment. During the year 2009-10, the Company had obtained extension of redemption period by 3 years from the preference shareholders (i.e. redemption at end of 8th, 9th and 10th year from the date of allotment). Further extension of redemption period by 3 years has been obtained with all other terms remaining unaltered. Accordingly, these preference shares shall now be redeemed by the Company at par in three equal installments commencing from the end of 11th, 12th and 13th year from the date of allotment. No conversion option has been exercised so far.

3. Going concern assumption

The Company has accumulated losses of Rs. 161,161,535 (30 June 2014: Rs. 271,440,790) as on that date compared to the shareholder's funds of Rs. 160,522,805 (30 June 2014: Rs. 160,522,805). The Company was declared as a sick industrial company by the Board for Industrial and Financial Reconstruction (BIFR) on 9 February 2010 and Canara Bank has been appointed as an Operating Agency with effect from 17 December 2012 to assist in working out a rehabilitation scheme (earlier IDBI Bank). Post year end, in July 2013, the Alumeco Group (Denmark) took a commercial decision to stop extending the facility of supplying raw material on credit to the Company, as was being done in the past. This decision, coupled with the accumulated losses in the Company and the prevailing adverse business conditions (on account of liquidity crunch, labour problems, power cuts, poor order book position due to bad economic scenario, credit crunch in the market, etc.), has further strained the financial position of the Company. However, the Board of Directors and the Management of the Company are actively pursuing various available options to rehabilitate the Company under the aegis of BIFR / Operating Agency and currently believe that the Company would be in a position to continue as a going concern. Hence, these financial statements have been prepared under the going concern assumption.

4. Capital commitments and contingent liabilities

Rs.

Particulars As at As at 30 June 2015 30 June 2014

(a) Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for - -

(b) Preference share dividend 33,956,230 30,532,230

(c) Tax on preference dividend not provided for 5,561,485 4,979,577

(d) Excise matters under dispute 34,029,952 34,029,952

(e) Income Tax matters under dispute:

Relevant Income under Forum where dispute is pending Assessment Year dispute (Rs.)

1994- 95 2,03,59,259

1994 95 2,03,59,259 Honorable High Court of Andhra Pradesh 1995- 96 51,72,082

2003- 04 2,89,37,712

2004- 05 1,82,56,357

2005- 06 1,85,46,533 ITAT has redirected the case to TPO.

2006- 07 3,51,83,477 The case is pending before TPO.

2007- 08 14,61,08,591

2008- 09 12,83,00,000

2010- 11 7,22,81,070 Income Tax Appellate Tribunal

2011- 12 1,09,90,023 Commissioner of Income-Tax(Appeal)

The consequential liability if any, in respect of taxes and penalties for the subsequent assessment years is presently not determinable as the appeal filed in this regard are pending before the various authorities.

(f) For the fiscal year 2012-2013 to 2013-2014, the Company has paid sales tax at a concessional rate against 'C' Form in respect of its interstate sales for which it is required to obtain 'C' forms from its customers and submit to the sales tax department. In the event, the Company is unable to collect and submit such 'C' forms it will be required to pay the sales tax at the higher rate together with interest and penalties as applicable. As on the balance sheet signing date, the aggregate amount of 'C' forms to be collected is Rs. 25,117,522. Whilst management is confident that it will be able to collect all outstanding 'C' forms before the completion of relevant assessment and that no liability in this respect will devolve upon the Company, the aggregate additional tax in the event that none of the 'C' forms are collected would be approximately Rs. 753,526.

(g) The Company has received a letter from BSE dated 12th January, 2015 for non submission of Financial Results for two consecutive quarters i.e., June 2014 and September 2014 and BSE has also levied a penalty of Rs. 1,206,713. However, the Company has requested for waiver of penalty vide letter dated 15th January, 2015.

(h) As per Accounting Standard, 15 Employee Benefits, estimated liability for 58 retrenched workers on account of retrenchment compensation and VRS compensation is amounting to Rs. 6,490,142/- and Rs. 4,326,761/- respectively based on previous settlements.

However, the case relating to closure of unit is pending before Hon'ble High Court of Andhra Pradesh and the case filed by the workers before the Labour Court for payment of wages. The outcome of these cases cannot be determined at this stage of time.

5. (A) Related party transactions

Name of the related party Country Nature of relationship

OSI India Holding A/S ('OSI') Denmark Immediate holding company

Alumeco A/S Denmark Holding Company of OSI

H S Metalservice nr 2 ApS (HSM) Denmark Holding Company of Alumeco A/S

H S Metalservice ApS Denmark Holding Company of HSM

Alumeco Handlerservices GmbH Germany Subsidiary of Alumeco A/S

Mr. Anand Parkash India Key Management Personnel

6. Employee benefit plans

The Company had filed an application for closure of unit before the Government of Andhra Pradesh which has been rejected and subsequently the Company has filed appeal before the Hon'ble High Court of Andhra Pradesh which is pending for hearing. The workmen have been paid wages till 17-10- 2013 including the statutory 90 day notice period.

No actuarial valuation is being done, as at the end of the year, there is no employee on whom gratuity liability is to be accrued. Hence, the provision for gratuity (Rs. 4,945,334) and compensated absences (Rs. 988,708) for retrenched employees is being made on actual basis.

During the previous year, the Company has retrenched 97 workers out of which retrenchment compensation and VRS compensation was paid to 39 workers with mutual agreement on individual basis. For the balance 58 workers, the amount of retrenchment compensation and VRS compensation has been shown as contingent liability.

7. Transfer pricing

The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under Sections 92-92F of the Income-tax Act, 1961. However, during the year, there is no international transaction.

8. Segment reporting

Segments are identified in line with AS-17 "Segment Reporting". The Company is in the business of manufacturing of aluminum profiles and in view of Company's internal organisation, management structure, internal financial reporting system it has identified manufacturing of aluminum profiles as its only primary business segment. The analysis of geographical segments is based on location of major customers of the Company.

Geographical segment:

The Company sells aluminium extrusions in both, overseas and India, geographical segments. However, during the year ended June 2015, there is no revenue, since the production is closed. The following table shows revenue of the segments for the year ended 30 June 2015 and for the year ended 30 June 2014 and assets of the segments as at 30 June 2015 and as at 30 June 2014.

9. Remuneration to key managerial personnel for the year ended 30 June 2015 includes Rs. Nil (30 June 2014: Rs. Nil) representing remuneration beyond the limits specified in Schedule XIII to the Companies Act, 1956.

10. Operating leases

The Company has taken guest house under cancellable operating lease agreement. The Company intends to renew such leases in normal course of business. Total rental expense under cancellable operating leases for the current year amounts to Rs. 396,000 (30 June 2014: Rs.396,000).

11. Extraordinary Items consist of Rs. 96.46 million (excluding exchange effect) due to write back of amount payable to creditors with mutual consent.

12. Previous year comparatives

Previous year figures have been regrouped / reclassified / rearranged, wherever necessary, to conform to those of the current year.

As per our report of even date attached


Jun 30, 2014

(All amounts are in Indian Rupees except for share data or otherwise stated)

1. Terms and rights attached to the 10% cumulative redeemable optionally convertible preference shares: 10% Cumulative Redeemable Optionally Convertible Preference Shares (CRCPS) of Rs. 10 each had been allotted by the Company in the year 2005. As per the terms of the arrangement these preference shares including unpaid dividend could be converted into ordinary equity shares of the Company of Rs 10 each at any time after 3 years from date of allotment or could be redeemed by the Company at par in three equal installments commencing from the end of 5th, 6th and 7th year from the date of allotment. During the year 2009-10, the Company had obtained extension of redemption period by 3 years from the preference shareholders (i.e. redemption at end of 8th, 9th and 10th year from the date of allotment). Further extension of redemption period by 3 years has been obtained with all other terms remaining unaltered. Accordingly, these preference shares shall now be redeemed by the Company at par in three equal installments commencing from the end of 11th, 12th and 13th year from the date of allotment. No conversion option has been exercised so far.

Company overview

Alumeco India Extrusion Limited ("the Company") manufactures aluminum extrusion in India. The Company is a public limited company and is listed on Bombay Stock Exchange (BSE).

1.2 Going concern assumption

The Company has incurred a net loss of Rs. 18,914,243 (30 June 2013: Rs. 54,674,519) for the year ended 30 June 2014. It also has accumulated losses of Rs. 271,440,790 (30 June 2013: Rs. 252,526,547) as on that date compared to the shareholder''s funds of Rs. 160,522,805 (30 June 2013: Rs. 160,522,805). The Company was declared as a sick industrial company by the Board for Industrial and Financial Reconstruction (BIFR) on 9 February 2010 and Canara Bank has been appointed as an Operating Agency with effect from 17 December 2012 to assist in working out a rehabilitation scheme (earlier IDBI Bank). Post year end, in July 2013, the Alumeco Group (Denmark) took a commercial decision to stop extending the facility of supplying raw material on credit to the Company, as was being done in the past. This decision, coupled with the accumulated losses in the Company and the prevailing adverse business conditions (on account of liquidity crunch, labour problems, power cuts, poor order book position due to bad economic scenario, credit crunch in the market, etc.), has further strained the financial position of the Company. However, the Board of Directors and the Management of the Company are actively pursuing various available options to rehabilitate the Company under the aegis of BIFR / Operating Agency and currently believe that the Company would be in a position to continue as a going concern. Hence, these financial statements have been prepared under the going concern assumption.

1.3 Capital commitments and contingent liabilities

Particulars As at As at 30 June 2014 30 June 2013

(a) Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for

(b) Preference share dividend 30,532,230 27,108,230

(c) Tax on preference dividend not provided for 4,979,577 4,397,668

(d) Excise matters under dispute 34,029,952 5,011,947



(e) Income Tax matters under dispute:

Relevant Income Under Forum where dispute is pending Asessment year Dispute rs

1994-95 2,03,59,259 Honorable High Court of Andhra Pradesh

1995-96 51,72,082

2003-04 2,89,37,712

2004-05 1,82,56,357

2005-06 1,85,46,533 ITAT has redirected the case to TPO.

2006-07 3,51,83,477 The case is pending before TPO.

2007-08 14,61,08,591

2008-09 12,83,00,000

2010-11 7,22,81,070 Income Tax Appellate Tribunal

The consequential liability if any, in respect of taxes and penalties for the subsequent assessment years is presently not determinable as the appeal filed in this regard are pending before the various authorities.

(f) For the fiscal year 2012-2013 to 2013-2014, the Company has paid sales tax at a concessional rate against ''C'' Form in respect of its interstate sales for which it is required to obtain ''C'' forms from its customers and submit to the sales tax department. In the event, the Company is unable to collect and submit such ''C'' forms it will be required to pay the sales tax at the higher rate together with interest and penalties as applicable. As on the balance sheet signing date, the aggregate amount of ''C'' forms to be collected is Rs. 31,250,830. Whilst management is confident that it will be able to collect all outstanding ''C'' forms before the completion of relevant assessment and that no liability in this respect will devolve upon the Company, the aggregate additional tax in the event that none of the ''C'' forms are collected would be approximately Rs. 937,525.

(g) The Company has received a letter from BSE dated 12th January, 2015 for non submission of Financial Results for two consecutive quarters i.e., June 2014 and September 2014 and BSE has also levied a penalty of Rs. 1,206,713. However, the Company has requested for waiver of penalty vide letter dated 15th January, 2015.

1.4 Employee benefit plans

The Company had filed an application for closure of unit before the Government of Andhra Pradesh which has been rejected and subsequently the Company has filed appeal before the Hon''ble High Court of Andhra Pradesh which is pending for hearing. The workmen have been paid wages till 17-10-2013 including the statutory 90 day notice period.

No actuarial valuation is being done, as at the end of the year, there is no employee on whom gratuity liability is to be accrued. Hence, the provision for gratuity (Rs. 5,790,798) and compensated absences (Rs. 1,315,938) for retrenched employees is being made on actual basis.

During the year, the Company has retrenched 97 workers out of which retrenchment compensation and VRS compensation was paid to 34 workers with mutual agreement on individual basis. For the balance 63 workers, the amount of retrenchment compensation and VRS compensation has been shown as contingent liability.

1.5 Transfer pricing

The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under Sections 92-92F of the Income-tax Act, 1961. However, during the year, there is no international transaction.

In accordance with AS 22, "Accounting for taxes on income" prescribed by the Rules, due to brought forward losses under the taxation laws and on account of absence of virtual certainty on realisation of deferred tax assets, deferred tax assets on unabsorbed depreciation, carried forward losses and other temporary timing differences has been recognized only to the extent of deferred tax liability.

1.6. Segment reporting

Segments are identified in line with AS-17 "Segment Reporting". The Company is in the business of manufacturing of aluminum profiles and in view of Company''s internal organisation, management structure, internal financial reporting system it has identified manufacturing of aluminum profiles as its only primary business segment. The analysis of geographical segments is based on location of major customers of the Company.

Geographical segment:

The Company sells aluminium extrusions in both, overseas and India, geographical segments. However, during the year ended June 2014, total revenue comes from the Indian segment [0% from the overseas segment for the year ended 30 June 2014 (16.09% from the overseas segment for the year ended 30 June 2013)]. The following table shows revenue of the segments for the year ended 30 June 2014 and for the year ended 30 June 2013 and assets of the segments as at 30 June 2014 and as at 30 June 2013.

1.7 Remuneration to key managerial personnel for the year ended 30 June 2014 and 30 June 2013, includes Nil representing remuneration beyond the limits specified in Schedule XIII to the Companies Act, 1956.

1.8 Operating leases

The Company has taken guest house under cancellable operating lease agreement. The Company intends to renew such leases in normal course of business. Total rental expense under cancellable operating leases for the current year amounts to Rs. 396,000 (30 June 2013: Rs. 396,000).

1.9 Set out below is the movement in provision balances in accordance with Accounting Standard 29, ''Provisions, Contingent Liabilities and Contingent Assets'' prescribed by Companies (Accounting Standards) Rules, 2006, (''the Rules'')

* Reversal is on account of excise provision, which has been made by the management after obtaining views from Company''s excise consultants. The said amount of Rs. 29,532,324 has now been included as contingent liability under note 2.25(d).

1.10 Previous year comparatives

Previous year figures have been regrouped / reclassified / rearranged, wherever necessary, to conform to those of the current year.

As per our report of even date attached


Jun 30, 2013

Company overview

Alumeco India Extrusion Limited ("the Company") manufactures aluminum extrusion in India. The Company is a public limited company and is listed on Bombay Stock Exchange (BSE).

1.1 Going concern assumption

The Company has incurred a net loss ofRs. 54,674,519 (30 June 2012: Rs. 27,443,738) for the year ended 30 June 2013. It also has accumulated losses of Rs. 252,526,547 (30 June 2012: Rs. 197,852,028) as on that date compared to the shareholder''s funds of Rs. 160,522,805 (30 June 2012: Rs. 160,522,805). During the year 2009-10, the Company was declared as a sick industrial company by the Board for Industrial and Financial Reconstruction (BIFR) and Canara Bank (30 June 2012: Industrial Development Bank of India) has been appointed as an Operating Agency with effect from 17 December 2012 to assist in working out a rehabilitation scheme (earlier IDBI Bank). Post year end, in July 2013, the Alumeco Group (Denmark) took a commercial decision to stop extending the facility of supplying raw material on credit to the Company, as was being done in the past. This decision, coupled with the accumulated losses in the Company and the prevailing adverse business conditions (on account of liquidity crunch, labour problems, power cuts, poor order book position due to bad economic scenario, credit crunch in the market, etc.), has further strained the financial position of the Company. However, the Board of Directors and the Management of the Company are actively pursuing various available options to rehabilitate the Company under the aegis of BIFR / Operating Agency and currently believe that the Company would be in a position to continue as a going concern. Hence, these financial statements have been prepared under the going concern assumption.

1.2 Capital commitments and contingent liabilities

Particulars As at As at 30 June 2013 30 June 2012

(a) Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for

(b) Preference share dividend 27,108,230 23,684,230

(c) Tax on preference dividend not provided for 4,397,668 3,842,192

(d) Excise matters under dispute 5,011,947 4,489,033

(e) Sales tax matters under dispute 8,685,252

(f) The Company received an order from the Department of Income Tax under Section 92CA (3) of the Income Tax Act, 1961 disputing the method adopted by the Company in estimating the arm''s length price for international transactions with its associated parties. Consequently, the department has estimated an additional income of 7 28,937,712 and * 18,256,357 for the A.Y. 2003-04 and A.Y. 2004-05. The Company got the judgment from CIT (Appeals) in its favor but the department has filed an appeal with Income Tax Appellate Tribunal, Hyderabad (ITAT). During the current year, the ITAT has redirected the case to Transfer Pricing Officer (TPO). The Company is hopeful to get the decision in its favor.

For the A.Y. 2005-06, the department has estimated an additional income of X 33,216,328 against which the Company has gone into Appeal with CIT and the CIT Appeal has passed the order for Rs. 18,546,533 against which the Company has appealed with ITAT. During the current year, the ITAT has redirected the case to TPO.

For the A.Y. 2006-07, the TPO has added back income of Rs. 35,183,477 on account of differential in arms length prices in international transactions, against which the Company has gone into appeal before the Dispute Resolution Panel (DRP), the DRP has passed the order against the Company and the Company against its order gone into appeal before ITAT. During the current year, the ITAT has redirected the case to TPO.

For the A.Y. 2007-08, the TPO has added back income of Rs. 146,108,591 on account of differential in arms length prices in international transactions, against which the Company has gone into appeal before the DRP. The DRP has passed the order against the Company and the Company against its order has gone into appeal before ITAT. During the current year, the ITAT has redirected the case to TPO.

For the A.Y. 2008-09, the TPO has added back income of Rs. 128,300,000 on account of differential in arms length prices in international transactions, against which the Company has gone into appeal before the DRP. The DRP has passed the order against the Company and the Company against its order has gone into appeal before ITAT.

For the A.Y. 2009-10, the TPO has added back income of ^ 104,511,462 on account of differential in arms length prices in international transactions, against which the Company has gone into appeal before the DRP.

The consequential liability if any, in respect of taxes and penalties for the subsequent assessment years is presently not determinable as the appeal filed in this regard are pending before the various authorities.

(g) Further, Rs. 20,359,259 and Rs. 5,172,082 are under dispute on account of disallowance of interest on term loan, for the assessment years 1994-95 and 1995-96 respectively. The cases are lying for hearing before the Honorable High Court of Andhra Pradesh.

(c) Forthe fiscal year 2011-2012 to 2013-2014, the Company has paid sales tax at a concessional rate against ''C Form in respect of its interstate sales for which it is required to obtain ''C forms from its customers and submit to the sales tax department. In the event, the Company is unable to collect and submit such ''C forms it will be required to pay the sales tax at the higher rate together with interest and penalties as applicable. As of 30 June 2013, the aggregate amount of lC forms to be collected is Rs. 151,045,388. Whilst management is confident that it will be able to collect all outstanding ''C forms before the completion of relevant assessment and that no liability in this respect will devolve upon the Company, the aggregate additional tax in the event that none of the ''C forms are collected would be approximately Rs. 4,523,039.

1.3 Employee benefit plans

The Company has a defined benefit gratuity plan. Employees are eligible for gratuity benefits on termination or retirement in accordance with Payment of Gratuity Act, 1972.

The following tables summarise the components of net benefit expense recognised in the Statement of profit and loss and the funded status and amounts recognised in the Balance sheetforthe respective plans.

a. The following table sets forth the amount recognised in the Company''s Statement of profit and loss forthe year ended 30 June 2013 under gratuity cost:

1.4 Transfer pricing

The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under Sections 92-92F of the Income- tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company is in the process of updating the documentation for the international transactions entered into with the associated enterprise during the financial year and expects such records to be in existence latest by the end of September 2013, as required by law. The Management is of the opinion that its international transactions are at arm''s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expenses and that of provision for taxation.

1.5 The Ministry of Micro, Small and Medium Enterprises has issued an Office Memorandum dated 6 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum. Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 30 June 2013 has been made in the financial statements based on information received and available with the Company. Further in view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier underthe said Act.

1.6. Segment reporting

Segments are identified in line with AS-17 "Segment Reporting". The Company is in the business of manufacturing of aluminum profiles and In view of Company''s internal organisation, management structure, internal financial reporting system it has identified manufacturing of aluminum profiles as its only primary business segment. The analysis of geographical segments is based on location of major customers of the Company.

Geographical segment:

The Company sells aluminium extrusions in both, overseas and India, geographical segments. However, majority of the revenues comes from the Indian segment [16.09% from the overseas segment for the year ended 30 June 2013 (19.88% from the overseas segment for the year ended 30 June 2012)]. The following table shows revenue of the segments for the year ended 30 June 2013 and for the year ended 30 June 2012 and assets of the segments as at 30 June 2013 and as at 30 June 2012.

1.7 Remuneration to key managerial personnel for the year ended 30 June 2013 and 30 June 2012, includes Rs. Nil (30 June 2012: Rs. 152,669) representing remuneration beyond the limits specified in Schedule XIII to the Companies Act, 1956.

During the year ended 30 June 2012, the Company has applied to the Central Government of India for approval for the amount. During the current year, the Central Government of India has rejected the pplication and the said amount has been reversed.

1.8 Operating leases

The Company has taken guest house under cancellable operating lease agreement. The Company intends to renew such leases in normal course of business. Total rental expense under cancellable operating leases for the current year amounts to '' 396,000 (30 June 2012: '' 396,000).

1.9 Set out below is the movement in provision balances in accordance with Accounting Standard 29, ''Provisions, Contingent Liabilities and Contingent Assets'' prescribed by Companies (Accounting Standards) Rules, 2006, (''the Rules'')

1.10 Previous year comparatives

Previous year figures have been regrouped / reclassified / rearranged, wherever necessary, to conform to those of the current year.

As per our report of even date attached.


Jun 30, 2012

Notes :

1. Issued, subscribed paid-up capital includes:

a) 7,500,000 (30 June 2011: 7,500,000) equity shares held by OSI India Holding A/S, Denmark (holding company).

b) 3,424,000 (30 June 2011: 1,212,700) preference shares held by Alumeco A/S, Denmark (holding company of OSI India Holding A/S, Denmark).

1. Terms and rights attached to the equity shares:

The Company has only one class of equity shares having a par value of Rs.10 per share. Each holder of equity share is entitled to one vote per share. In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts, if any. The distribution will be in proportion to the number of equity shares held by equity shareholders.

2. Terms and rights attached to the 10% cumulative redeemable optionally convertible preference shares: "10% Cumulative Redeemable Optionally Convertible Preference Shares (CRCPS) of Rs. 10 each had been allotted to O&S Metall import GmbH, Germany and Industrialization Fund for Developing Countries by the Company in the year 2005. As per the terms of the arrangement these preference shares including unpaid dividend can be converted into ordinary equity shares of the Company of Rs. 10 each at any time after 3 years from date of allotment or can be redeemed by the Company at par in three equal installments commencing from the end of 5th, 6th and 7th year from the date of allotment. During the year 2009-10, the Company had obtained extension of redemption period by further 3 years from the preference shareholders with all other terms remaining unaltered. Accordingly, these preference shares shall be redeemed by the Company at par in three equal installments commencing from the end of 8th, 9th and 10th year from the date of allotment. No conversion option has been exercised so far.

During the current year, IFU has transferred the said holding to Alumeco A/S, Denmark along with all rights at the existing terms and conditions. During the previous year, O&S Metall import GmbH, Germany had transferred the said holding to Alumeco A/S, Denmark along with all rights at the existing terms and conditions."

Notes:

1. Terms of repayment for unsecured loan is given below: a. Loan from IFU is repayable in 2 equal half yearly installments of Euro 17,000 for the year ending 30 June 2013 and 1 half yearly installment of Euro 17,000 for the year ending 30 June 2014.

Background

Alumeco India Extrusion Limited ("the Company") manufactures aluminum extrusion in India. The Company is a public limited company and is listed on Bombay Stock Exchange (BSE).

3.1 Going concern assumption

The Company has incurred a net loss ofRs. 27,443,738 (30 June 2011: net profit Rs. 10,409,377) for the year ended 30 June 2012. It also has accumulated losses of Rs. 197,852,028 (30 June 2011: Rs. 170,408,290) as on that date compared to the shareholder's funds ofRs. 160,522,805 (30 June 2011: Rs. 160,522,805). During the year 2009-10, the Company was declared as a sick industrial company by the Board for Industrial and Financial Reconstruction (BIFR) and Industrial Development Bank of India has been appointed as an Operating Agency to assist in working out a rehabilitation scheme. The Company is hopeful of working out a rehabilitation scheme, and therefore, Management believes that the Company would be in a position to continue as a going concern for the foreseeable future and meet its financial obligations as they fall due. Accordingly, these financial statements have been prepared under the going concern assumption.

(f) The Company received an order from the Department of Income Tax under Section 92CA (3) of the Income Tax Act, 1961 disputing the method adopted by the Company in estimating the arm's length price for international transactions with its associated parties. Consequently, the department has estimated an additional income of Rs. 28,937,712 and Rs. 18,256,357 for the A.Y. 2003-04 and A.Y. 2004-05. The Company got the judgment from CIT (Appeals) in its favor but the department has filed an appeal with Income Tax Appellate Tribunal, Hyderabad (ITAT). The Company is hopeful to get the decision in its favor.

For the A.Y. 2005-06, the department has estimated an additional income of Rs. 33,216,328 against which the Company has gone into Appeal with CIT and the CIT Appeal has passed the order forRs. 18,546,533 against which the Company has appealed with ITAT.

For the A.Y. 2006-07, the Transfer Pricing Officer (TPO) has added back income of Rs.35,183,477 on account of differential in arms length prices in international transactions, against which the Company has gone into appeal before the Dispute Resolution Panel (DRP), the DRP has passed the order against the Company and the Company against its order gone into appeal before ITAT.

For the A.Y. 2007-08, TPO has added back income ofRs. 146,108,591 on account of differential in arms length prices in international transactions, against which the Company has gone into appeal before the Dispute Resolution Panel (DRP). The DRP has passed the order against the Company and the Company against its order has gone into appeal before ITAT.

For the A.Y. 2008-09, TPO has added back income of Rs. 128,300,000 on account of differential in arms length prices in international transactions, against which the Company has gone into appeal before the DRP.

The consequential liability if any, in respect of taxes and penalties for the subsequent assessment years is presently not determinable as the appeal filed in this regard are pending before the various authorities.

(g) Further, Rs. 20,359,259 and Rs. 5,172,082 are under dispute on account of disallowance of interest on term loan, for the assessment years 1994-95 and 1995-96 respectively. The cases are lying for hearing before the Honorable High Court of Andhra Pradesh.

(h) For the fiscal year 2009-2010 to 2012-2013, the Company has paid sales tax at a concessional rate against 'C' Form in respect of its interstate sales for which it is required to obtain 'C' forms from its customers and submit to the sales tax department. In the event, the Company is unable to collect and submit such 'C' forms it will be required to pay the sales tax at the higher rate together with interest and penalties as applicable. As of 30 June 2012, the aggregate amount of 'C' forms to be collected isRs. 587,583,726. Whilst management is confident that it will be able to collect all outstanding 'C' forms before the completion of relevant assessment and that no liability in this respect will devolve upon the Company, the aggregate additional tax in the event that none of the 'C' forms are collected would be approximately Rs. 12,981,201.

3.2 Employee benefit plans

The Company has a defined benefit gratuity plan. Employees are eligible for gratuity benefits on termination or retirement in accordance with Payment of Gratuity Act, 1972.

The following tables summarise the components of net benefit expense recognised in the Statement of Profit and Loss and the funded status and amounts recognised in the balance sheet for the respective plans.

Discount rate: Discount rate: The discount rate is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations.

Salary escalation rate: The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The actuary has used the Projected Unit Credit (PUC) actuarial method to assess the Plan's liabilities, including those related to death-in-service and incapacity benefits.

3.4 Transfer pricing

The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under Sections 92-92F of the Income- tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company is in the process of updating the documentation for the international transactions entered into with the associated enterprise during the financial year and expects such records to be in existence latest by the end of September 2012, as required by law. The Management is of the opinion that its international transactions are at arm's length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expenses and that of provision for taxation.

3.5 The Ministry of Micro, Small and Medium Enterprises has issued an Office Memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum. Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 30 June 2012 has been made in the financial statements based on information received and available with the Company. Further in view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier under the said Act.

In accordance with AS 22, "Accounting for taxes on income" prescribed by the Rules, due to brought forward losses under the taxation laws and on account of absence of virtual certainty on realisation of deferred tax assets, deferred tax assets on unabsorbed depreciation, carried forward losses and other temporary timing differences has been recognized only to the extent of deferred tax liability.

3.6. Segment reporting

Segments are identified in line with AS-17 "Segment Reporting". The Company is in the business of manufacturing of aluminum profiles and in view of Company's internal organisation, management structure, internal financial reporting system it has identified manufacturing of aluminum profiles as its only primary business segment. The analysis of geographical segments is based on location of major customers of the Company.

Geographical segment:

The Company sells aluminium extrusions in both, overseas and India, geographical segments. However, majority of the revenues comes from the Indian segment [20% from the overseas segment for the year ended June 30, 2012 (41% from the overseas segment for the year ended June 30, 2011)]. The following table shows revenue of the segments for the year ended June 30, 2012 and for the year ended June 30, 2011 and assets of the segments as at June 30, 2012 and as at June 30, 2011.

3.7 Remuneration to key managerial personnel for the year ended 30 June 2012 and 30 June 2011, includes Rs. 9,083 and Rs. 143,856 respectively (previous year: Rs. 143,856) representing remuneration beyond the limits specified in Schedule XIII to the Companies Act, 1956.

The Company has applied to the Central Government of India for approval for the amount, which is pending. Pending receipt of the approval, the said amount has not been paid.

3.8 Set out below is the movement in provision balances in accordance with Accounting Standard 29, 'Provisions, Contingent Liabilities and Contingent Assets' prescribed by Companies (Accounting Standards) Rules, 2006, ('the Rules')

3.9 Previous year comparatives

The Company has prepared these financial statements as per the format prescribed by Revised Schedule VI of the Companies Act, 1956 ('the Revised Schedule VI') issued by the Ministry of Corporate Affairs. Previous year's figures have been recast/ restated to conform to the classification required by the Revised Schedule VI.

As per our report of even date attached.


Jun 30, 2011

1. Going concern assumption

The Company has earned a net profit of Rs 10,409,377 (30 June 2010: Rs 11,275,897) for the year ended 30 June 2011. It also has accumulated losses of Rs 170,408,290 (30 June 2010: Rs 180,817,667) as on that date compared to the shareholder's funds of Rs 160,522,805 (30 June 2010: Rs 160,522,805). During the previous year, the Company was declared as a sick industrial company by the Board for Industrial and Financial Reconstruction (BIFR) and Industrial Development Bank of India has been appointed as an Operating Agency to assist in working out a rehabilitation scheme. The Company is hopeful of working out a rehabilitation scheme, and therefore, management believes that the Company would be in a position to continue as a going concern for the foreseeable future and meet its financial obligations as they fall due. Accordingly, these financial statements have been prepared under the going concern assumption.

2. Capital commitments and contingent liabilities

Particulars 30 June 2011 30 June 2010

(a) Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for

(b) Preference share dividend 20,260,230 16,836,230

(c) Tax on preference dividend not provided for 3,286,716 2,861,317

(d) Excise matters under dispute 2,245,401 1,722,486

(e) The Company received an order from the Department of Income Tax under Section 92CA (3) of the Income Tax Act, 1961 disputing the method adopted by the Company in estimating the arm's length price for international transactions with its associated parties. Consequently, the department has estimated an additional income of Rs 28,937,712 and Rs 18,256,357 for the A.Y. 2003-04 and A.Y. 2004-05. The Company got the judgment from CIT (Appeals) in its favor but the department has filed an appeal with Income Tax Appellate Tribunal (ITAT). The Company is hopeful to get the decision in its favor.

For the A.Y. 2005-06, the department has estimated an additional income of Rs 33,216,328 against which the Company has gone into Appeal with CIT and the CIT Appeal has passed the order for Rs 18,546,533 against which the Company has appealed with ITAT.

For the A.Y. 2006-07, the Transfer Pricing Officer (TPO) has added back income of Rs 35,183,477 on account of differential in arms length prices in international transactions, against which the Company has gone into appeal before the Dispute Resolution Panel (DRP), the DRP has passed the order against the Company and the company against its order gone into appeal before ITAT.

For the A.Y. 2007-08, TPO has added back income of Rs. 146,108,591 on account of differential in arms length prices in international transactions, against which the Company has gone into appeal before the DRP. The consequential liability if any, in respect of taxes and penalties for the subsequent assessment years is presently not determinable as the appeal filed in this regard are pending before the various authorities.

(f) Further, Rs 5,172,082 and Rs 20,359,269 are under dispute on account of disallowance of interest on term loan, for the assessment years 1994-95 and 1995-96 respectively. The cases are for hearing before the High Court.

(g) The Company for the year 2005-06 has received revision notice from Additional Commissioner of Sales Tax Department claiming defective C forms for Rs 32,572,120 and escaped turnover of Rs 118,793,462 and proposing tax on them. The Company has asked the department for certain documents. After obtaining the documents and verifying them, the Company will take appropriate action on the notice given by the department.

(h) For the fiscal year 2010-2011 to 2011-2012, the Company has paid sales tax at a concessional rate against 'C Form in respect of its interstate sales for which it is required to obtain 'C forms from its customers and submit to the sales tax department. In the event, the Company is unable to collect and submit such 'C forms it will be required to pay the sales tax at the higher rate together with interest and penalties as applicable. As of 30 June 2011 the aggregate amount of C forms to be collected is Rs 187,351,685. Whilst management is confident that it will be able to collect all outstanding 'C forms before the completion of relevant assessment and that no liability in this respect will devolve upon the Company, the aggregate additional tax in the event that none of the 'C' forms are collected would be approximately Rs 3,747,034.

3. Preference share capital

10% Cumulative Redeemable Optionally Convertible Preference Shares of Rs 10 each have been allotted to O&S Metal import GmbH, Germany and Industrialization Fund for Developing Countries by the Company in the year 2005. As per the terms of the arrangement these preference shares including unpaid dividend can be converted into ordinary equity shares of the Company of Rs 10 each at any time after 3 years from date of allotment or can be redeemed by the Company at par in three equal installments commencing from the end of 5th, 6th and 7th year from the date of allotment. During the previous year, the Company has obtained extension of redemption period by further 3 years from the preference shareholders with all other terms remaining unaltered. Accordingly, these preference shares shall be redeemed by the Company at par in three equal installments commencing from the end of 8th,9th and 10th year from the date of allotment. No conversion option has been exercised so far.

During the year O&S Metal import GmbH, Germany has transferred the said holding to Alumeco A/S, Denmark along with all rights at the existing terms and conditions.

4. Employee benefit Plans

The Company has a defined benefit gratuity plan. Employees are eligible for gratuity benefits on termination or retirement in accordance with Payment of Gratuity Act, 1972.

The following tables summarise the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the respective plans.

Salary escalation rate: The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The actuary has used the Projected Unit Credit (PUC) actuarial method to assess the Plan's liabilities, including those related to death-in-service and incapacity benefits.

5. Transfer pricing

The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under Sections 92-92F of the Income- tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company is in the process of updating the documentation for the international transactions entered into with the associated enterprise during the financial year and expects such records to be in existence latest by the end of September 2011, as required by law. The Management is of the opinion that its international transactions are at arm's length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expenses and that of provision for taxation.

6. The Ministry of Micro, Small and Medium Enterprises has issued an Office Memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum. Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 30 June 2011 has been made in the financial statements based on information received and available with the Company. Further in view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier under the said Act. ?

7. Segment reporting

Segments are identified in line with AS-17 "Segment Reporting". The Company is in the business of manufacturing of aluminum profiles and in view of Company's internal organisation, management structure, internal financial reporting system it has identified manufacturing of aluminum profiles as its only primary business segment. The analysis of geographical segments is based on location of major customers of the Company.

Geographical segment:

The Company sells aluminum extrusions in both, overseas and India, geographical segments. However, majority of the revenues comes from the Indian segment [41% from the overseas segment for the year ended June 30, 2011 (59% from the overseas segment for the year ended June 30, 2010)]. The following table shows revenue of the segments for the year ended June 30, 2011 and for the year ended June 30, 2010 and assets of the segments as at June 30, 2011 and asatJune30,2010.

8. Remuneration to key managerial personnel for the year ended 30 June 2011, includes Rs 143,856 representing remuneration beyond the limits specified in Schedule XIII to the Companies Act, 1956.

The Company has applied to the Central Government for approval for the amount, which is pending. Pending receipt of the approval, the said amount has not been paid.

9. Set out below is the movement in provision balances in accordance with Accounting ' Standard 29, Provisions, Contingent Liabilities and Contingent Assets' prescribed by Companies (Accounting Standards) Rules, 2006, ('the Rules')

Provision for excise duty and sales tax matters

This provision is towards excise duty and sales tax, which the Company has paid under protest to the respective department. This will be used in case the orders with regard to these are not in favour of the Company. The Company, however, could not estimate with reasonable certainty the period of utilization of the same.

10. Previous year comparatives

Previous year's figures have been regrouped where necessary to conform to current year's classification.


Jun 30, 2010

1. Going concern assumption

During the year, the Company was declared as a sick industrial company by the Board for Industrial and Financial Reconstruction (BIFR) and IDBI has been appointed as an Operating Agency to assist in working out a rehabilitation scheme. The Company is hopeful of working out a rehabilitation scheme, and therefore, management believes that the Company would be in a position to continue as a going concern for the foreseeable future and meet its financial obligations as they fall due. The Company has earned a net Profit of Rs. 11,275,897 for the year ended 30 June 2010. It also has accumulated losses of Rs. 180,817,667 as on that date compared to the shareholders funds of Rs. 160,522,805. Accordingly, these financial statements have been prepared under the going concern assumption.

2. Contingent liabilities

Particulars 30 June 2010 30 June 2009

(a) Arrears of dividend on cumulative 16,836,230 13,412,230 preference shares

(b) Tax on preference dividend not provided for 2,861,317 2,186,140

(c) Excise matters under dispute 1,722,486 1,199,571

(d) Sales tax matters under dispute Nil 12,554,655

(e) The Company received an order from the Department of Income Tax under Section 92CA (3) of the Income Tax Act, 1961 disputing the method adopted by the Company in estimating the arms length price for international transactions with its associated parties. Consequently, the department has estimated an additional income of Rs. 28,937,712 and Rs. 18,256,357 for the A.Y. 2003-04 and A.Y. 2004-05. The Company got the judgment from CIT (Appeals) in its favor but the department has filed an appeal with Income Tax Appellate Tribunal (ITAT). The Company is hopeful to get the decision in its favor. For the A.Y. 2005-06, the department has estimated an additional income of Rs. 33,216,328 and for A.Y. 2006-07, Rs.35,183,477 on account of differential in arms length prices in international transactions, against which the Company has gone into appeal before the CIT and Dispute Resolution Panel (DRP) for the respective years. The consequential liability if any, in respect of taxes and penalties for the subsequent assessment years is presently not determinable as the appeal filed in this regard are pending before the various authorities.

(f) Further, Rs.5,172,082 and Rs.20,359,269 are under dispute on account of disallowance of interest on term loan, for the assessment years 1994-95 and 1995-96 respectively. The cases are for hearing before the High Court.

(g) For the fiscal year 2004-2005 to 2009-2010, the Company has paid sales tax at a concessional rate against C Form in respect of its interstate sales for which it is required to obtain C forms from its customers and submit to the sales tax department. In the event, the Company is unable to collect and submit such C forms it will be required to pay the sales tax at the higher rate together with interest and penalties as applicable. As of 30 June 2010 the aggregate amount of C forms to be collected is Rs.51,130,154. Whilst management is confident that it will be able to collect all outstanding C forms before the completion of relevant assessment and that no liability in this respect will devolve upon the Company, the aggregate additional tax in the event that none of the C forms are collected would be approximately Rs. 1,002,838.

3. The Company during the year ended 30 June 2010, paid/provided for an amount of Rs.Nil (Previous year Rs.3,943,023) towards various demands raised by the sales tax authorities relating to earlieryears outstanding cases.

4. Related party transactions

Name of the related party Country Nature of relationship

OSI India Holding A/S (OSI) Denmark Immediate holding company

0 & S Metallimport GmbH(OSM) Germany Holding Company of OSI

Alumeco A/S Denmark Holding Company of OSM

H S Metalservice nr 2 ApS (HSM) Denmark Holding Company of Alumeco A/S

H S Metalservice ApS Denmark Holding Company of HSM

O&S Ratna Aluminium Fabricators India Companies over which the key

Private Limited management personnel exercise

significant influence.

O & S Metallimport Holdings Private Ltd. India Fellow Subsidiary

Alumeco Hand lerservices GmbH Germany Subsidiary of Alumeco A/S

Mr. Wolfgang Ormeloh Germany Key Managerial Personnel

Mr. M. Ratnakar India Key Managerial Personnel

Mr. Kamal Kumar India Key Managerial Personnel

Mr. N.K. Khandelwal India Key Managerial Personnel

5. Disclosure regarding Derivative Instruments

(a) There are no Derivative Contracts outstanding as on 30 June 2010.

6. Preference share capital

10% Cumulative Redeemable Optionally Convertible Preference Shares (CRCPS) of Rs. 10 each have been allotted to 0 & S Metallimport GmbH and Industrialisation Fund for Developing Countries by the Company in the year 2005. As per the terms of the arrangement these preference shares including unpaid dividend can be converted into ordinary equity shares of the Company of Rs. 10 each at any time after 3 years from date of allotment or can be redeemed by the Company at par in three equal installments commencing from the end of 5th, 6th and 7th year from the date of allotment. The Company during the year has obtained extension of redemption period by further 3 years from the preference shareholders with all other terms remaining unaltered. Accordingly, these preference shares shall be redeemed by the Company at par in three equal installments commencing from the end of 8th, 9th and 10th year from the date of allotment.

7. Employee benefit Plans

The Company has a defined benefit gratuity plan. Employees are eligible for gratuity benefits on termination or retirement in accordance with Payment of Gratuity Act, 1972.

The following tables summarise the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the respective plans.

a. The following table sets forth the amount recognised in the Companys profit and loss account for the period ended 30 June 2010 under gratuity cost.

Discount rate: The discount rate is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The actuary has used the Projected Unit Credit (PUC) actuarial method to assess the Plans liabilities, including those related to death-in-service and incapacity benefits.

The conversion of outstanding CRCPS into equity if made would have the effect of increasing profit per share for the current year, and reducing the loss per share for the year ended 30 June 2009 and would therefore be anti dilutive. Hence, such conversion has not been considered for the purpose of computing dilutive earnings per shareforthatyearended.

8. The Company has during the year sent out letters seeking confirmations from its suppliers whether they fall under the category of micro, small and medium enterprises as mentioned under the Micro, Small and Medium Enterprises Development Act, 2006. Based on the information available with the Company, the Company believes that it does not have any outstanding dues to micro, small and medium enterprises. Further, the Company has not paid any interest to the micro, small and medium enterprises.

In the absence of virtual certainty on realisation of deferred tax assets on carry forward losses, the deferred tax asset has been recorded to the extent there exists reversing temporary differences by way of deferred tax liability on fixed assets.

9. Segment reporting

Segments are identified in line with AS-17 "Segment Reporting". The Company is in the business of manufacturing of aluminum profiles and in view of Companys internal organisation, management structure, internal financial reporting system it has identified manufacturing of aluminum profiles as its only primary business segment. The analysis of geographical segments is based on location of major customers of the Company.

Geographical segment:

The Company sells aluminium extrusions in both, overseas and India, geographical segments. However, majority of the revenues comes from the overseas segment [59% for the year ended June 30, 2010 (74% for the year ended June 30, 2009)]. The following table shows revenue of the segments for the year ended June 30, 2010 and for the year ended June 30, 2009 and assets of the segments as at June 30,2010 and as at June 30,2009.

10. Previous year comparatives

Previous years figures have been regrouped where necessary to conform to current years classification.

 
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