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Notes to Accounts of Hatsun Agro Products Ltd.

Mar 31, 2015

1. Basis of preparation, presentation and disclosure of financial statements

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act 2013 (‘the Act'), read together with paragraph 7 of the Companies (Accounts) Rules 2014. The financial statements have been prepared on an accrual basis and under the historical cost convention. The accounting policies adopted in the preparation of financial statements are consistent with those of previous year except the change in accounting policy explained below

2. Terms/Rights attached to Equity shares

The Company has only one class of equity shares having par value of Re.1 per share(March 31, 2014 - Re.1/-). Each holder of equityshares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees.

During the year ended March 31, 2015, the amount of per share dividend recognised as distributions to equity shareholders was Rs. 1.80/-(March 31, 2014: Rs. 2.50/-).

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential payments . The distribution will be in proportion to the number of equity shares held by the shareholders.

(All amounts arc in lakhs of Indian Rupees unless otherwise stated)

3. Details of shareholders holding more than 5% shares in the Company

Particulars March 31, 2015 March 31, 2014

Nos. %Holding Nos. %Holding

Equity shares of Re. 1/- each (March 31, 2014 : Re. 1/- each) fully paid

Mr. Chandramogan 62,628,622 57.62 62,371,279 57.92 R G

Mr. Sathyan C 10,142,236 9.33 10,072,237 9.35

As per the records of the Company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

4.CONTINGENT LIABILITIES

Claims made against the Company not acknowledged as debts in respect of income tax matters

Income tax matters

a. In connection with the search proceeding under Income Tax Act, the Company has filed Income Tax returns for financial year 2007-08 to financial year 2012-13 in response to the notice under section 153A of Income Tax Act from Income Tax Department, returning the same income as was returned in the original return of the Company for the respective years. The proceedings are in progress. The Company is of the opinion that its tax positions will likely to be upheld and accordingly, no additional provision for tax expense is considered necessary in the financial statements.

b. The Company has a pending litigation at Honourable Madras High Court relating to an income tax demand aggregating Rs.150 lakhs relating to financial year 1995-96. The Company has made provision for the same in the previous year.

Operating Lease

The Company has entered into operating leases for operating its corporate office. These leases have a non cancellable period of five years with an option to renew the contracts for a further period of four years. There are no restrictions placed upon the Company by entering into these leases. The lease payments are escalated at the rate of 10% once in two year, over the life of the lease.

5. GRATUITY

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy for employees.

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 gratuity plan.

Net employee benefit expense (recognised in Personnel Expenses)

The fund is 100% administered by Life Insurance Corporation of India ("LIC”). The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the year over which the obligation is to be settled.

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

6. SEGMENT INFORMATION Primary segment

The Company's operations predominantly relate to manufacture and sale of milk, milk products and ice cream and this is the only primary reportable segment.

Geographical segment

The Company's secondary segment is the geographic distribution of activities. Revenue and receivables are specified by location of customers while the other geographic information is specified by location of the assets. The following tables present revenue, expenditure and certain asset information regarding the company's geographical segments:

7. During the previous year, the Company had acquired the dairy business from Jyothi Dairy Private Limited ("JDPL") having net asset value of Rs. 3,764.60 lakhs for a consideration of Rs.5,129.60 lakhs.

8. Expenditure on Corporate Social Responsibility (CSR)

For the year ended March 31, 2015 the Company has incurred expenditure of Rs. Nil as compared to expenditure required to be spent under section 135 of the Act of Rs. 113.61 lakhs resulting in a shortfall of Rs. 113.61 lakhs.

9. Previous year figures

Previous year figures have been regrouped/reclassified, where necessary, to conform to this year's classification.


Mar 31, 2013

1. Basis of preparation, presentation and disclosure of financial statements

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India {Indian GAAP).The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006, {as amended) and the relevant provisions of the Companies Act, 1956. The accounting policies adopted In the preparation of financial statements are consistent with those of previous year.

2. Contingent Liabilities

Claims made against the Company not acknowledged as debts in respect of sates tax and income tax matters

Income tax matters (Refer note ft) below) 150.00 150.00

Sales tax matters - 452

The Company has imported certain items at concessional rates of customs duty under the Export Promotion Capital Goods Scheme (EPCG). As at the Balance Sheet date, total Export Obligations under the EPCG Scheme is USD 380-86 lakhs [Rs. 20,714.96} [(March 31, 2012; USD 375.91 lakhs (Rs, 19,230,41)] which is to be fulfilled over a period of eight years from the date of the licenses, As at March 31,2013, the Company has fulfilled Export Obligations amounting to USD 372,02 lakhs (Rs. 20,233,63) [(March 31,2012: USD 321.85 lakhs (Rs. T 6,464.79)]and has outstanding Export Obligation of USD 8,85 lakhs {Rs. 48118) [(March 31,2012: USD 54.05 lakhs (Rs. 2,765.62),

The Company''s duty liability, ft the same is not fuelled, will amount to Rs,70,59 (March 31,2012: Rs. 405.66).The Company is confident that it wiJI fulfill the obligation under the EPCG Scheme and accordingly no provision for liability has been recognized in the financial statements,

Note; (i) ; In respect of the Income tax assessment year 1996-1997, the Company''s claim for deduction towafds non-compete fees of Rs 400 was disallowed by the Income tax Assessing Officer. The Commissioner of Income tax (Appeals) ruled in favour of the Company. However, the Income tax Appellate Tribunal has upheld the disallowance of the aforesaid expenditure and the Company has filed an appeal in the High Court of Judicature, Madras, Management''s estimate of the tax impact of such disallowance is Rs.150 (including estimated interest but excluding penalties etc, if any). The Company has been advised by its legal counsel that it is possible, but not probable, the action will succeed and accordingly no provision for liability has been recognized in the financial statements,

3. EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equfty shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per sharer the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. Potential equity shares with anti-dilutive effects are not considered for calculating diluted earnings per share*

4 GRATUITY

The Company has a defined benefit gratuity plan, Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy for employees.

The following tables summarise the components of net benefit expense recognised in the profit and toss account and the funded status and amounts recognfsed in the balance sheet for the gratuity plan.

5.The Company has a centralized treasury function where all the term loans and other borrowings in addition to the cash generated from operations are pooled through common bank accounts to optimally use funds and reduce the interest cost to the Company. During the year, the Company has used funds raised on short term basis from banks and others to purchase certain fixed assets aggregating to Rs, 1,739.45 (March 31,2012 - Rs. 6,230.24). Most of the short term loans with interest advantage have been in the nature of being rolled over long term. As the Company generates better profits, the long term - short term mismatch wili come down substantially,

6. SEGMENT INFORMATION Primary segment

The Company''s operations predominantly relate to manufacture and sale of milk, milk products and ice cream and this rs the only primary reportable segment.The Company primarily operates only In one geographical segment, since income is predominantly derived from goods sold in India.

7. SUBSEQUENT EVENTS

On May 1,2013F there was a fire in the Company''s plant at Salem, Tamil NaduThere was no loss of Me or human injury,The management estimates a loss of Rs.500 due to loss of inventory and other assets which is fuKy recoverable from the insurer. There has been no significant disruption in the flow of distribution on account of the accident,

The above events have not been recognised as these do not represent a condition existing at the Balance Sheet date,

8. PREVIOUS YEAR FIGURES

Previous year figures have been regrouped/ reclassified, where necessary, to conform to this year''s classification.


Mar 31, 2012

A. Terms/ Rights attached to Equity shares

The Company has only one class of equity shares having par value of Re.1/- per share ( March 31, 2011 - Rs.2/-). Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The final dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

During the year ended 31 March 2012, the amount of per share dividend recognized as distributions to equity shareholders was Rs.1.30 (31 March 2011: Rs.1.10).

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential payments. The distribution will be in proportion to the number of equity shares held by the shareholders.

Secured short term loan has been availed from Yes Bank Limited and is secured by exclusive charge on unencumbered plant and machinery to the extent of Rs.2,000. The facility has been personally guaranteed by Managing Director. Further, shares aggregating to1.5 times of the loan amount has been pledged by the Managing Director.

Cash credit facility has been availed from State Bank of India and is secured by a first charge on all the current assets and pari-passu first charge with ICICI Bank Limited over existing fixed assets of the Company pertaining to Salem, Kanchipuram and Belgaum locations. Further, this facility has been personally guaranteed by Managing Director and his spouse.

Note : There are no overdue amounts payable to Micro and Small Enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006 based on information available with the Company. Further, the Company has not paid any interest to any Micro and Small Enterprises during the year ended March 31, 2012 and March 31, 2011.

1. Other disclosures

a. Contingencies

Particulars As at As at March 31, 2012 March 31, 2011

Claims made against the Company not acknowledged as debts in respect of sales tax and income tax matters

- Income tax matters (Refer note (i) and (ii) below) 150.00 410.92

- Sales tax matters (Refer note (iii) below) 4.52 9.32

Export obligations:

The Company has imported certain items at concessional rates of customs duty under the Export Promotion Capital Goods Scheme (EPCG). As at the Balance Sheet date, total Export Obligations under the EPCG Scheme is USD 375.91 lakhs (March 31, 2011: USD 375.91 lakhs) which is to be fulfilled over a period of eight years from the date of the licenses. As at March 31, 2012, the Company has fulfilled Export Obligations amounting to USD 321.85 lakhs (March 31, 2011: USD 317.79 lakhs) and has outstanding Export Obligation of USD 54.06 lakhs (March 31, 2011: USD 58.12 lakhs).

The Company is confident that it will fulfill the obligation under the EPCG Scheme.

Note (i) : In respect of the Income tax assessment year 1996-1997, the Company's claim for deduction towards non-compete fees of Rs.400 was disallowed by the Income tax Assessing Officer. The Commissioner of Income tax (Appeals) ruled in favour of the Company. However, the Income tax Appellate Tribunal has upheld the disallowance of the aforesaid expenditure and the Company has filed an appeal in the High Court of Judicature, Madras. Management's estimate of the tax impact of such disallowance is Rs.150 (including estimated interest but excluding penalties etc, if any). Based on the expert advice, the management believes that the Company has strong case and hence, no provision and consequential adjustments, if any for such disputed amount have been considered in the financial statements.

Note (ii) : Contingent liabilities relating to income tax matters of previous year includes Rs.260.92 (includes Rs.50 paid under protest) relating to financial year 2007-08 due to disallowance of certain sales promotion expenses and interest expense. During the current year, the Company has obtained a favourable order relating to this dispute. Further, the Company had received income tax demand aggregating Rs.123.14 on same issues as described above, for the financial year 2008-09. Considering the favourable order obtained by the Company on these issues for financial year 2007-08, the Management believes that the tax exposure for the financial year 2008-09 to be remote.

Note (iii) : The Company had made an application under Samadhan Scheme and has paid an amount of Rs.4.80 (gross tax amount is Rs.9.32) towards the full settlement of the liability. The Company is yet to receive the orders from the Sales Tax department.

b. Segment Information Primary segment

The Company's operations predominantly relate to manufacture and sale of milk, milk products and ice cream and this is the only primary reportable segment. The Company primarily operates only in one geographical segment, since income is predominantly derived from goods sold in India.

The Company has closed its rural retail operations during the previous year. The same was disclosed as "others" segment during the previous year.

c. Earnings per share

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. Potential equity shares with anti-dilutive effects are not considered for calculating diluted earnings per share.

d. Employee Benefits

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with LIC in the form of a qualifying insurance policy.

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.

e. The Company has a centralized treasury function where all the term loans and other borrowings in addition to the cash generated from operations are pooled through common bank accounts to optimally use funds and reduce the interest cost to the Company. During the year, the Company has used funds raised on short term basis from banks and others to purchase certain fixed assets aggregating to Rs.6,230.24 (March 31, 2011 - Rs.7,280). During the year 2011-12, the Company has raised long term loan for Rs.7,900 from ICICI Bank to narrow down the short term and long term mismatch. Most of the short term loans with interest advantage have been in the nature of being rolled over long term. As the Company generates better profits, the long term - short term mismatch will come down substantially.

f. Till the year ended March 31, 2011, the Company was using pre-revised Schedule VI to the Companies Act 1956, for preparation and presentation of its financial statements. During the year ended March 31, 2012, the revised Schedule VI notified under the Companies Act 1956, has become applicable to the Company. The Company has reclassified previous year figures to conform to current year's classification.


Mar 31, 2010

A. Capital commitments and contingencies

As at As at Particulars March 31, 2010 March 31, 2009

(i) Estimated amount of contracts remaining to be executed on capital account (net of capital advances) and not provided for 107,055 487,366

(ii) Claims made against the Company not acknowledged as debts in respect of sales tax and income tax matters 15,932 15,932

(iii) In respect of the Income tax assessment year 1996-97, the Companys claim for deduction towards non- compete fees of 40,000 was disallowed by the Income tax Assessing Officer. The Commissioner of Income tax (Appeals) ruled in favour of the Company. However, the Income tax Appellate Tribunal has upheld the disallowance of the aforesaid expenditure and the Company has filed an appeal in the High Court of Judicature, Madras. Managements estimate of the tax impact of such disallowance is 15,000 (including estimated interest but excluding penalties etc, if any). Based on the expert advice, the management believes that the Company has strong case and hence, no provision and consequential adjustments, if any for such disputed amount have been considered in the financial statements.

b. Export obligations

The Company has imported certain items at concessional rates of customs duty under the Export Promotion Capital Goods Scheme (EPCG). As at the Balance Sheet date, total Export Obligations under the EPCG Scheme is USD 37,558,353 (March 31, 2009, USD 35,083,658) which is to be fulfilled over a period of eight years from the date of the licenses. As at March 31, 2010, the Company has fulfilled Export Obligations amounting to USD 14,788,088 (March 31, 2009 USD 8,749,730) and has outstanding Export Obligation of USD 22,770,245 (March 31, 2009 USD 26,333,928). The Company is confident that it will fulfill obligations under the EPCG scheme.

c. Managerial remuneration

As at As at

Particulars March 31, 2010 March 31, 2009

Salaries and allowances 9,000 9,000

Contribution to provident and other funds 308 308 Other perquisites or benefits including medical expenses reimbursement and car facility provided 315 315

Total 9,623 9,623

The Chairman and Managing Director and other Whole-time directors are covered under the Companys leave encashment policy and group gratuity scheme along with other employees of the Company. As the future liability for gratuity is provided on an actuarial basis for the Company as a whole, the amount pertaining to the directors is not ascertainable and, therefore, not included above.

d. Auditors remuneration (included under Miscellaneous expenses)

As at As at

Particulars March 31, 2010 March 31, 2009

(i) As auditor

(a) For statutory audit; 2,125 1,600

(b) For limited review of quarterly results 375 375 (ii) As adviser, or in any other capacity, in respect of

(a) Taxation matters; - -

(b) Company law matters: - -

(c) Management services; and - - (iii) In any other manner

(a) Out of pocket expenses 15 10

Total 2,515 1,985

e. Segment information

The Companys operations predominantly relate to manufacture and sale of milk and milk products and ice creams and others. Accordingly, business segments comprise the primary basis of segmental information set out in these financial statements. Secondary segment reporting is made on the basis of the geographical location of customers. Business (primary) segments of the Company are:

a) Milk and milk products; and

b) Others

o. There are no overdue amounts payable to Micro, Small and Medium Enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006 based on information available with the Company. Further, the Company has not paid any interest to any Micro, Small and Medium Enterprises during the current year.

f. Earnings per share

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. Potential equity shares with anti-dilutive effects are not considered for calculating diluted earnings per share.

During the year, the Company has issued 6% Unsecured Compulsorily Convertible Debentures as discussed in Note 1(k) of this schedule. These debentures have anti - dilutive effect to the earnings per share in the current year and hence are ignored for the purposes of computing diluted earnings per share. These debentures may have dilutive effect on earnings per share in the future periods.

g. Employee Benefits

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with LIC in the form of a qualifying insurance policy.

Reconciliation of opening and closing balances of the present value of defined benefit obligation

The fund is 100% administered by Life Insurance Corporation of India ("LIC"). The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the year over which the obligation is to be settled.

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.

h. Subsequent events

On April 30, 2010, there was a fire in the Companys plant at Kancheepuram, Tamil Nadu. There was no loss of life or human injury. The management estimates a loss of 25,000 due to loss of inventory and other assets which is fully recoverable from the insurer. There has been no significant disruption in the flow of distribution on account of the accident.

The above events have not been recognised as these do not represent a condition existing at the Balance Sheet date.

i. Previous year comparatives have been regrouped wherever necessary to conform to current year classification.

 
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