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Notes to Accounts of Greaves Cotton Ltd.

Mar 31, 2014

1 General Information:

Greaves Cotton Limited (the ''Company'') is engaged in manufacturing of engines and construction equipment and trading of power tillers, motor graders etc. The Company has manufacturing facilities in the states of Maharashtra and Tamil Nadu. The products are mainly sold in India with some export to Middle East, Africa & South East Asia Region. The Company has one direct and two indirect subsidiaries having operations in India and Sharjah.

2. Defined Contribution Plans:

The amount recognised as an expense during the year ended 31st March 2014 towards Provident Fund (including admin charges), ESIC contribution and Superannuation is Rs. 7.34 crore (Previous Year Rs. 7.93 crore), Rs. 0.45 crore (Previous Year Rs. 0.60 crore) and Rs. 3.62 crore (Previous Year Rs. 3.03 crore) respectively.

3. Defined Benefit Plans:

A) Gratuity :

The Company has a defined Benefit plan (the ''Gratuity Plan''), managed by trusts. The Gratuity Plan provides for a lump sum payment to vested employees at retirement or termination of employment, whichever is earlier, based on the respective employee''s last drawn salary and years of employment with the Company. The Benefit vests after five years of continued service.

B) Compensated Absence:

The obligation for compensated absences is recognised in the same manner as gratuity and net charge to the Statement of Profit and Loss for the year is Rs. 1.17 crore (Previous Year Rs. 1.39 crore).

C) Retirement Pension Scheme:

For UK branch employees, based on actuarial valuation, the Company has recognised a charge of Rs. Nil, equivalent to GBP Nil (Previous year Rs. 1.36 crore, equivalent to GBP 157,350) towards present value of post retirement pension. The year end balance amounts to Rs. 3.35 crore, equivalent to GBP 335,800 (Previous year Rs. 3.17 crore, equivalent to GBP 381,900).

a) i) Greaves Auto Limited (GAL), wholly owned subsidiary of the Company was liquidated as at 10th April 2014 using the Fast

Track Exit Mode as prescribed in the Guidelines for Fast Track Exit Mode for defunct companies under section 560 of the Companies Act, 1956 - The liquidation loss in relation to this investment was accounted in the books of account. There were no operations in GAL since its inception.

ii) The Company''s wholly owned subsidiary, Greaves Cotton Netherlands BV (GCN), held 100% stake in Greaves Farymann Diesel GmbH (GFD). The Company had provided Corporate Guarantee on behalf of GFD in the past. To meet the conditions of such Corporate Guarantee and also to enable GFD to settle its outstanding liabilities, the Company made further investment in GCN, which in turn invested the proceeds in GFD. GCN divested its stake in GFD in October 2013 at a loss. In December 2013, liquidation proceedings for GCN were initiated, which concluded in March 2014. The management has accounted for both impairment and liquidation loss in relation to its investments in GCN in the books of account as at 31st March 2014.

b) During the year, the management of the Company carried out an exercise of rationalisation of manpower at few locations. It offered separation scheme to the employees and paid compensation for the same.

c) During the year, the Company sold two of its residential properties and earned profit thereon.

d) During the year, the Company closed its foundry. The fixed asset impairment on closure is recognised in the books by writing down the asset values to their estimated realisable value.

No amounts are written of / written back during the year except for Investment in Greaves Cotton Netherlands B.V of Rs. 67.32 crore (Previous year Rs. Nil) and Trade receivables from Greaves Farymann Diesel GmbH of Rs. 3.07 crore (Previous year Rs. Nil).

Transactions when rounded of are lower than Rs. 1 lac, are not disclosed in the above details.

IV. Key Management Personnel (KMP):

Remuneration to Managing Director Rs. 2.22 crore (Previous Year Rs. 1.90 crore).

Segment Identification:

Business segments have been Identified on the basis of the nature of products/services, the risk-return Profile of individual divisions, the organisational structure and the internal reporting system of the Company.

Reportable Segments:

Reportable segments have been Identified as per the quantitative criteria specified in Accounting Standard (AS)-17:'' Segment Reporting''

Segment Composition:

1. Engines include Agro products and Gensets.

2. Infrastructure Equipment comprises of equipment used in road construction, bridges, dams, mining, etc.

3. Others includes products traded by International and After Market Business.

Primary / secondary Segment:

1. The risk-return Profile of the Company''s business is determined predominantly by the nature of its products and services. Accordingly, the business segments constitute the primary segments for disclosure of segment information.

2. In respect of secondary segment information, the Company has Identified its geographical segments as (i) Domestic and (ii) Overseas.

The expenses and incomes which are not directly attributable to the business segments are shown as unallocable income/ expenditure. Unallocable assets mainly comprise of investments, cash and bank balances, advance tax and unallocable liabilities mainly include loan funds, tax provisions and provisions for employee retirement Benefits.

4. Details of Lease Transactions:

a) Certain properties, computers & vehicles are taken on non-cancellable operating lease. These lease agreements are normally renewed on expiry.

b) Rent expense in respect of operating lease, for year ended, 31st March 2014, was Rs. 10.39 crore (Previous Year Rs. 9.93 crore).

c) The lease agreements provide for an option to the Company to renew the lease at the end of the non-cancellable period. There are no exceptional / restrictive covenants in the lease agreements.

b) Derivative Instruments:

The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The use of foreign currency forward contracts is governed by the Company''s strategy, approved by the Board of Directors, which provides principles on the use of such forward contracts consistent with the Company''s Risk Management Policy. The Company does not use forward contracts for speculative purposes.

5. Details on Borrowing costs:

Disclosure as required by Accounting Standard (AS)-16 ''Borrowing Costs'' No borrowing costs have been capitalised during the year

6. Management has evaluated the need for impairment of assets as required by Accounting Standard (AS)-28 '' Impairment of Assets'' and on the basis of such evaluation, management has provided for necessary impairment as at 31st March 2014.

7. Figures for the previous year have been regrouped / reclassified, wherever necessary.


Mar 31, 2013

1 General Information:

Greaves Cotton Limited (the ''Company'') is engaged in manufacturing of engines and construction equipment and trading of power tillers, motor graders etc. The Company has manufacturing facilities in the states of Maharashtra and Tamil Nadu. The products are mainly sold in India with some export to Middle East, Africa & South East Asia Region. The Company has four direct and two indirect subsidiaries having operations in India, Netherlands, Germany and Sharjah.

2. Details of Lease Transactions:

a) Certain plant & machinery, computers and vehicles are taken on non-cancellable operating lease. These lease agreements are normally renewed on expiry.

b) Rent expense in respect of operating lease, for year ended, 31st March 2013, was Rs. 9.93 crore (Previous Year Rs. 8.51 crore). Contingent rent recognised in Statement of profit and loss is Rs. Nil ( Previous Year Rs. Nil).

c) The lease agreements provide for an option to the Company to renew the lease at the end of the non-cancellable period. There are no exceptional / restrictive covenants in the lease agreements.

3. Details of Derivative Instruments & Unhedged Foreign Currency Exposures:

a) The year end foreign currency exposures that were not hedged by a derivative instrument or otherwise are given below:

i) Amount receivable in foreign currency on account of the following:

b) Derivative Instruments:

The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The use of foreign currency forward contracts is governed by the Company''s strategy, approved by the Board of Directors, which provides principles on the use of such forward contracts consistent with the Company''s Risk Management Policy. The Company does not use forward contracts for speculative purposes.

4. Dues to Micro and Small Enterprises:

The information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) has been determined to the extent such parties have been identified on the basis of information available with the Company.

5. Management has evaluated the need for impairment of assets as required by Accounting Standard (AS)-28 '' Impairment of Assets'' and on the basis of such evaluation, management has provided for neccessary impairment as at 31st March 2013.

6. Figures for the previous year have been regrouped / reclassified, wherever necessary.


Mar 31, 2012

1 General Information: Greaves Cotton Limited (the 'Company') is engaged in manufacturing of engines and construction equipment and trading of power tillers, motor graders etc. The Company has manufacturing facilities in the states of Maharashtra and Tamil Nadu. The products are mainly sold in India with some export to Middle East, Africa & South East Asia Region. The Company has four direct and two indirect subsidiaries having operations in India, Netherlands, Germany and Sharjah.

As at As at 31.03.2012 31.03.2011 Rs Crore Rs Crore

2. Contingent Liabilities:

a) Sales Tax liability that may arise in respect of matters in appeal 6.41 7.44

b) Excise Duty liability that may arise in respect of matters in appeal 2.31 2.21

c) Income Tax liability that may arise in respect of matters in appeal 2.84 2.84

d) Claims made against the Company, not acknowledged as debts 14.80 13.98

e) Wage demand not acknowledged by the Company in respect of matter in appeal - 3.37

f) Bonds executed in favour of Collector of Customs/Central Excise 8.89 8.88

g) Guarantees given on behalf of a subsidiary company 13.91 13.01

Notes:

1. The Company does not expect any reimbursement in respect of the above contingent liabilities.

2. It is not practical to estimate the timing of cash outflows, if any, in respect of matters (a) to (e) above, pending resolution of the appellate proceedings.

1. Defined Contribution Plans:

The amount recognised as an expense during the year ended 31st March 2012 towards Provident Fund (including admin charges) ESIC contribution and Superannuation is Rs 6.11 crore (Previous Period Rs 4.30 crore) and Rs 0.82 crore (Previous Period Rs 0.53 crore) and Rs 2.42 crore (Previous Period Rs 1.45 crore) respectively.

2. Defined Benefit Plans:

A) Gratuity :

The Company has a defined benefit plan (the Gratuity Plan), managed by trusts.The Gratuity Plan provides for a lump sum payment to vested employees at retirement or termination of employment, whichever is earlier, based on the respective employee's last drawn salary and years of employment with the Company. The benefit vests after five years of continued service.

B. Compensated Absences:

The obligation for compensated absences is recognised in the same manner as gratuity and net charge to the statement of profit and loss for the period is Rs 0.45 crore (Previous Period Rs 0.28 crore).

C. Retirement Pension Scheme :

For UK branch employees, based on actuarial valuation , the Company had recognised liability of Rs 4.36 crore (equivalent GBP 5,92,000) in the year 2009-2010, towards present value of post retirement pension and the same is now funded appropriately.

Note:

The estimates of future increase in salary, considered in the actuarial valuation, have been derived based on expected inflation, seniority changes, promotion and other relevant factors such as demand in the employment market.

a) During the year, the Company sold land and building situated at Thoraipakkam, Tamil Nadu. Till 2008-09, the Company had its Farm Equipment Business's manufacturing facility situated there at. In 2008-09, the same was relocated to Gummidipoondi, Tamil Nadu.

b) During the year, the Company carried out an extensive exercise to identify obsolete inventory arising out of design, model and technological changes. This charge represents the consequent devaluation arising out of the said exercise.

c) The Company's subsidiary, Greaves Cotton Netherlands B.V. (GCN), holds 100% stake in Greaves Farymann Diesel GmbH (GFD).Due to losses incurred in the past, the net worth of GFD has been fully eroded. The management has detailed plans in place to increase market share of GFD using the international network of the Company and through aggressive marketing efforts. GFD expects to generate earnings, which would contribute to the net worth and the management of GFD and the Company do not expect further impairment in the investments of GCN in GFD. Accordingly, the management of the Company has decided to impair the Company's investment in GCN to the extent of 50% of GCN's corresponding investment in GFD.

Segment Identification, Reportable Segments and Segment Composition :

Segment Identification:

Business segments have been identified on the basis of the nature of products/services, the risk-return profile of individual divisions, the organisational structure and the internal reporting system of the Company.

Reportable Segments:

Reportable segments have been identified as per the quantitative criteria specified in Accounting Standard (AS)-17:'Segment Reporting'

Segment Composition:

1. Engines comprises of single and multi cylinder engines.

2. Infrastructure Equipment comprises of equipment used in road construction, bridges, dams, mining, etc.

3. Others includes Power Tillers and other products traded by International Business.

Primary / secondary Segment:

1. The risk-return profile of the Company's business is determined predominantly by the nature of its products and services. Accordingly, the business segments constitute the primary segments for disclosure of segment information.

2. In respect of secondary segment information, the Company has identified its geographical segments as (i) Domestic and

(ii) Overseas.

The expenses and incomes which are not directly attributable to the business segments are shown as unallocable income/ expenditure. Unallocable assets mainly comprise of investments, cash and bank balances, advance tax and unallocable liabilities mainly include loan funds, tax provisions and provisions for employee retirement benefits.

b) Rent expense in respect of operating lease, for year ended, 31st March 2012, was Rs 8.51 crore (Previous Period Rs 5.07 crore). Contingent rent recognised in statement of profit and loss is Rs Nil ( Previous Period Rs Nil).

c) The lease agreements provide for an option to the Company to renew the lease at the end of the non-cancellable period. There are no exceptional / restrictive covenants in the lease agreements.

3. Management has evaluated the need for impairment of assets as required by Accounting Standard (AS)-28 ' Impairment of Assets' and on the basis of such evaluation, management has provided for neccessary impairment as at 31st March 2012. (Refer Note 35)

4. Figures for the corresponding period are for a period of nine months due to change in financial year end to 31st March during the previous period and hence are not comparable with the figures of the current year. Figures for the previous period have been regrouped / reclassified, wherever necessary.


Jun 30, 2010

2009-2010 2008-2009

Rs. Crore Rs. Crore

1 Contingent Liabilities

a) Sales Tax liability that may arise in respect of matters in appeals 8.45 8.35

b) Excise Duty liability that may arise in respect of matters in appeals 0.90 0.94

c) Income Tax liability that may arise in respect of matters in appeals 2.84 3.48

d) Claims made against the Company, not acknowledged as debt 14.52 13.88

e) Bonds executed in favour of Collector of Customs/Central Excise 8.98 9.08

f) Guarantees given on behalf of a subsidiary company 11.53 16.78

g) Wage demand not acknowledged by the Company in respect of matter in appeal 2.89 - Note:

1. The Company does not expect any reimbursement in respect of the above contingent liabilities.

2. It is not practical to estimate the timing of cash outflows, if any, in respect of matters at (a) to (d) and (g) above, pending resolution of the appeallate procedings.

b) Rental expenses in respect of operating lease was ? 1.92 crore(Previous Year ? 1.92 crore). Contingent rent recognised in Profit and Loss account is ? Nil.( Previous Year ^ Nil).

c) The lease agreements provide for an option to the Company to renew the lease at the end of the non-cancellable period. There are no exceptional/restrictive covenants in the lease agreements.

2 a) The year end foreign currency exposures that were not hedged by a derivative instrument or otherwise are given below:

b) Derivative Instruments

The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The use of foreign currency forward contracts is governed by the Companys strategy approved by the Board of Directors, which provide principles on the use of such forward contracts consistent with the Companys Risk Management Policy. The Company does not use forward contracts for speculative purposes.

3 The tax year for the Company being the year ending 31st March, the provision for taxation for the financial year is the aggregate of the provision made for the nine months ended 31st March, 2010 and the provision based on the figures for the remaining three months upto 30th June, 2010, the ultimate tax liability of which will be determined on the basis of the figures for the period 1st April, 2010 to 31st March, 2011.

4 Disclosure as required by Accounting Standards (AS)-15 (Revised) Employee Benefits

a) Defined Benefit Plans

Gratuity:

b) Compensated absences :

The obligation for compensated absences is recognised in the same manner as gratuity and net charge to Profit and Loss account for the year is ? 0.66 crore (Previous Year ? 0.03 crore)

c) Retirement Pension Scheme :

In case of foreign branch employees, based on actuarial valuation, the Company has recognised liability of ? 4.36 crore (equivalent GBP 592,000), for present value of post retirement pension liability of which ? 1.79 crore (equivalent GBP 243,000) has been paid during the year. Notes:

1 The estimates of future increase in salary, considered in the actuarial valuation, have been taken on account of inflation, seniority, promotion and relevant factors such as demand in the employment market.

2 The amount shown against " Staff Expense" is net of excess of plan assets of prior year.

Business segments have been identified on the basis of the nature of products/services, the risk-return profile of individual divisions, the organisational structure and the internal reporting system of the Company.

Reportable Segments:

Reportable segments have been identified as per the quantitative criteria specified in Accounting Standard (AS)-17: Segment Reporting

Segment Composition:

1. Engines comprises of single and multi cylinder engines.

2. Infrastructure Equipments comprises of equipments used in road construction, bridges, dams, mining, etc.

3. Others includes traded products.

Primary/secondary segment reporting format:

1. The risk-return profile of the Companys business is determined predominantly by the nature of its products and services. Accordingly, the business segments constitute the primary segments for disclosure of segment information.

2. In respect of secondary segment information, the Company has identified its geographical segments as (i) Domestic and (ii) Overseas.

The expenses and incomes which are not directly attributable to the business segments are shown as unallocable income/ expenditure.

Unallocable assets mainly comprise of investments, cash bank, advance tax and unallocable liabilities include mainly loan funds, tax provisions and provision for employee retirement benefits. 20 Disclosures as required by Accounting Standard (AS)-18 Related Party Disclosures

I Relationships:

A) List of related parties over which control exists:

SI. Name of the Related Party Relationship

No.

1 Greaves Leasing Finance Limited Wholly Owned Subsidiary

2 Dee Greaves Limited Subsidiary of Greaves Leasing Finance Limited

3 Greaves Cotton Netherlands B.V. Wholly Owned Subsidiary

4 Greaves Farymann Diesel GmbH Subsidiary of Greaves Cotton Netherlands B.V.

5 Greaves Auto Limited Wholly Owned Subsidiary

B) Key Management Personnel:

Mr. Prabhakar Dev - Managing Director & CEO

C) List of related parties with whom transactions were carried out during the year and description of relatio:

Subsidiaries:

1 Greaves Leasing Finance Limited

2 Dee Greaves Limited 3 Greaves Cotton Netherlands B.V.

4 Greaves Farymann Diesel GmbH Key Management Personnel:

Mr. Prabhakar Dev - Managing Director & CEO

Other Related Parties:

1 Premium Energy Transmission Limited

2 Mr. Karan Thapar

IV Key Management Personnel (KMP):

Remuneration to Managing Director Rs. 1.04 crore (Previous year Rs. 2.53 crore, includes to former Managing Director upto 3rd May, 2009).

5 Management has evaluated impairment of assets as required by Accounting Standard (AS)-28 Impairment of Assets and on the basis of evaluation, management is of the opinion that there is no impairment of the Companies assets as at 30th June, 2010.

The Company gives warranties for its products undertaking to repair or replace the items that fail to perform satisfactorily during the warranty period. Provisions made at the year end represents the amount of expected cost of meeting such obligations of rectification / replacement. The timing of the outflows is expected to be within a period of eighteen months.

6 No borrowing costs have been capitalised during the year.

26 In case of one of the units of the Company the wage agreement with workers expired in December, 2006. The Company has appealed to the Division Bench of Madras High Court against the Tribunal Order. The Company has made the payments as per the Interim Order of the Division Bench. The Company has further recognized the liability in the books, based on the trend as existed in the industry for the location, over and above the amounts paid as per the Interim Order of the Madras High Court. Pending final order the liability is not fully ascertainable.(See schedule O, Note 1(g))

7 Sales is net of discount and includes direct sales compensation of Rs. 2.57 crore (Previous Year Rs. 1.48 crore).

8 The provision for Current Tax includes Wealth Tax Rs. 0.05 crore (Previous Year Rs. 0.06 crore) and is net of minimum alternate tax of Rs. 0.49 crore (Previous Year Rs. 3.82 crore)

9 Figures for the previous year have been regrouped/reclassified, wherever necessary.

 
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