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Notes to Accounts of HBL Power Systems Ltd.

Mar 31, 2015

1 Current Maturities of Long Term Loans

instalments due within 12 months from the date of Balance Sheet classified as current as shown above are disclosed under " Other Current Liabilities"

2 Term Loans :

The particulars of loans drawn, nature of security, terms of repayment, rate of interest, instalments due and loan wise outstanding are as under.

3 Term Loan from IDBI and HDFC :

The capex term loan of Rs.2500 lakhs is sanctioned by IDBI Bank for setting up of Spun Concrete Poles unit with a project cost of Rs.3350 lakhs with a capacity of 100,000 poles p.a. at Narsaraopet, Guntur District, Andhra Pradesh. The loan is secured by pari passu first charge on the entire fixed assets of the company both present and future. This loan is also guaranteed by Managing Director, another Director, Smt. A. Umadevi and Smt. Kavita Prasad in their personal capacities.

4 Other Loans :

(a) HDFC Bank

The Term Loans for acquiring vehicles are secured by exclusive hypothecation of vehicles acquired through execution of D.P. Note.

5 Unsecured Loans

(a) Interest Free Sales Tax Loan (IFST):

IFST Loan of Rs. 1171.62 lakhs shown under unsecured loan represents the Sales tax payable by the Company given as Loan by A.P State Government under a scheme, to be repaid without interest after 14 years from the date of availment. The loan requires creation of a charge on the assets of the Company. Pending creation of charge, the amount is shown as 'Unsecured Loan' to be regrouped as Secured Loan as and when the charge is created.

(b) Term Loan from Hewlett-Packard Financial Services India Pvt Ltd (HPFSIPL) towards implementation of SAP Project is repayable in 20 quarterly instalments from the date of loan with interest at the rate ranging between 11% and 13%. The loan is also guaranteed by a Director of the Company.

(c) Finance Lease of Assets from Hewlett-Packard Financial Services India Pvt Ltd (HPFSIPL) for Implementation of SAP Project is repayable by way of lease rentals over a period of 5 years and is also guaranteed by a Director of the Company.

(d) Loan from Holding Company is Interest free and is repayable after a moratorium period of 10 years from the date of first with drawl.

6. There were no continuing defaults as on the Balance Sheet date in repayment of loan instalments and interest.

7 Working Capital Loans

The Working Capital Loans from the State Bank of India, State Bank of Hyderabad, IDBI Bank Ltd , ICICI Bank Ltd and Axis Bank are secured by a first charge on all the chargeable current assets and by a second charge on the fixed assets (both present and future) of the Company. Short term loan (Adhoc Cash Credit) from IDBI Bank Ltd is repayable within 90 days with interest @ 13%. All the loans are also guaranteed by Managing Director, two other Directors of the Company, and Smt. A. Uma Devi in their personal capacities.

8. Purchase Bill Discounting from Kotak Mahindra Bank Ltd. Is guaranteed by CMD and a Director of the Company in their personal capacity.

Purchase Bill Discounting from IDBI Bank Ltd. Is secured by accepted bill of exchange and post dated cheque/ standing instructions for making payment on due date

9. The facilities extended by YES Bank are secured by subservient charge on all the current and movable fixed assets of the company. Further the facilities are guaranteed by Managing Director and one other promoter director of the Company.

10. Working Capital Short Term Loan from HDFC Bank is secured by personal guarantee of CMD and is repayable within 90 days with interest @ 10.50% p.a.

11. Inter corporate deposit from holding company is repayable on demand with Interest @ 12% p.a.

12 Loan from Directors is repayable on demand with interest @ 12% p.a.

13. In pursuance of MOU entered by the company, M/s.HBL Miltrade Pte Ltd, Singapore, allotted one share (Face value – One Singapore Dollar) to the company. The company is yet to pay for the same. Pending remittance, Investment is not disclosed in the above investments.

14. The diminution in the value of the Investments, wherever considered to be permanent, in nature, has been recognised. In respect of Gulf Battery Company Limited, there has been erosion in its net-worth which is in excess of 50%. Various measures are afoot to improve its performance and thereby the net-worth, which are expected to yield positive results in the next two years. In view of this, the company is of the opinion that the said diminution is purely temporary.

15. During the financial year 2011-12, due to heavy rainfall, there was a damage to one of the factory buildings and incidental damage to Plant & Machinery and stocks in process. The assets were insured under reinstatement value policy which was in force as on the date of incident. The total cost for repairing, rebuilding the factory shed/acquiring related machinery and damaged inventory is estimated at Rs. 264.00 Lakhs. The company is in the process of restoring the damaged assets and the cost incurred in this regard upto 31.03.2015 was Rs. 95.16 Lakhs, which is included in Claims & Other Receivables. The Company has received repudiation letter from the Insurer and the company has filed a case against the Insurer. The case is expected to come up for hearing shortly.

16. During the year, severe damage was caused by Hud Hud Cyclone to stocks and assets in the Company's units at Vizianagaram and SEZ, Visakhapatnam. The Company had lodged a final claim with the Insurers towards recovery of the losses. Pending final settlement of the claim by the Insurers, actual loss incurred due to damages to Inventory (net of Salvage Value) amounting to Rs. 522.81 lakhs was expensed under exceptional item and repairs and restoration expenses on assets damaged amounting to Rs. 553.85 lakhs had been expensed in their natural heads of account. The total admissible loss assessed and recommended for payment by the Surveyors, provisionally confirmed by the Management, amounting to Rs. 738.97 lakhs is recognized as other income.

Note : 17

Contingent Liabilities not provided for and commitments:

All known and undisputed claims and liabilities where there is a present obligation as a result of past events and it is probable that there will be an outflow of resources, have been duly provided for.

18. Contingent liabilities not provided for: (Rs. In Lakhs)

Nature of Contingent Liability As on 31.03.2015 As on 31.03.2014

a) Un-expired guarantees issued on behalf of the Company by banks for which the Company gave counter guarantees 14381.47 15502.65

b) Legal undertakings (LUTs) given to Custom's Authorities for clearing the imports at Nil / Concessinal rate of duty pending fulfilment of export obligations, (net of the export obligations fulfilled of Rs. 9647.96 Lakhs (previous year Rs. 9739.41 Lakhs) for which the process of discharging the LUTs by the concerned authorities is at various stages). 2448.63 3609.72

c) Claims against the Company not acknowledged as debts towards :

Excise duty 733.76 357.84

Sales Tax 496.50 317.41

Custom duty 488.70 -

Service Tax 8.51 10.68

Income Tax Dispute for Assessment Year 2009-10 65.08 65.08

Property Tax of VSEZ unit 27.64 27.64

Fuel surcharge adjustment (FSA) to the extent billed and disputed 134.38 356.40 Enhancement of Land Cost by Haryana State Industrial

& Infrastructure Development Corporation Ltd, Manesar 168.44 108.82

Erstwhile promoters of SCIL Infracon Pvt Ltd 188.31 188.31

Others 11.50 11.50

(Rs,In Lakhs)

31 March 2015 31 March 2014

19.2Estimated amount of contracts remaining to be executed on Capital account and not provided for 122.47 184.48

20.Investments committed by the Company in other Companies: In M/s. HBL Suntech,LLP against 60% Share in LLP (net of Rs. 18.30 Lakhs contributed as on 31-03-2015) 101.70 101.70

Note : 21 Incometax and Sales Tax Assessments:

22. Income Tax:

The Company's Income Tax assessments were completed upto Financial Year 2010-11 and the tax dues as per orders were paid and charged to revenue except for disputed issues under Appeal. Tax assessments for the years 2011-12, 2012-13 and 2013-14 are pending and the tax dues as per returns filed have been fully paid. The liability, if any, in respect of such pending assessments, that may arise upon completion is not ascertainable at this stage.

23. Sales Tax:

The Company has paid/provided for VAT/CST as per the records and returns filed upto 31.03.2015 after considering the Input VAT on purchases and also on the basis of concessional Forms expected to be received from customers. The liability, if any, in respect of pending assessments including those relating to non-submission of concessional Forms ('C' Forms etc.) is not ascertainable at this stage. The company is in the process of collecting concessional Forms from customers for submission before the assessments are completed/finalised.

Note : 24 Confirmation of Balances

The Company has sent letters seeking confirmation of balances to various parties under Trade payables, Trade Receivables, Advance to suppliers and others, advance from customers. Based on the confirmations received and upon proper review, corrective actions have been initiated and accounting adjustments have been made wherever found necessary. Such confirmations are awaited from some parties most of whom are Government Departments and Public Sector Undertakings.

Note : 25

In the opinion of the Board, assets other than fixed assets and non-current investments have a value, on realisation in the ordinary course of business, which is at least equal to the amount at which they are stated in the financial statements.

Note : 26

The Board of Directors in its meeting held on 14th November 2014 approved a Scheme of Amalgamation to merge a wholly owned subsidiary, SCIL Infracon Private Limited (SIPL), with the Company in terms of the provisions of Sections 391 to 394 of the Companies Act, 1956 read with other applicable provisions of the Companies Act, 1956 and the Companies Act, 2013. The Scheme is subject to requisite regulatory and other approvals, inter-alia from the Shareholders and Creditors of the Company and sanction of the Scheme by the Honourable High Court of Judicature at Hyderabad for AP and Telangana. The Scheme, upon approval, will be effective from 1-4-2014.

Note : 27 Disclosures required to be made as per Accounting Standard (AS)

28. Disclosure as per AS-7 "Construction Contract"(for contracts in progress at the reporting date)

29. The Company recognised revenue based on Percentage completion method whereby stage of completion of a contract is determined with reference to the proportion that contract costs incurred (for work performed up to the reporting date) bear to the estimated total contract cost and wherever applicable after completion of inspection/certification of the work performed by the customers as stipulated in the contract.

(a) Gratuity obligation of the Company :

The Company has taken a Group Gratuity Policy of LIC of India to cover the employer's obligation towards Gratuity under the payment of Gratuity Act and the fund required to be maintained to cover the Present Value of past service benefit and current service cost is fully funded/provided for by the Company as per the valuation made under Projected Unit Credit method and demanded by LIC of India. Apart from the said funding, the company also paid the annual risk premium to keep the policy active and recognised it as expense for the year.

Note : 30

Previous years figures have been regrouped wherever necessary.


Mar 31, 2014

1.1 Terms/rights attached to equity shares

The company has only one class of equity shares having a par value of '' 1 per share. Each holder of equity shares is entitled to one vote per share. The company declares and pays dividends in indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

2.1 Term Loans :

The particulars of loans drawn, nature of security, terms of repayment, rate of interest, instalments due and loan wise outstanding are as under.

2.1.1 Current Maturities of Long Term Loans

Instalments due within 12 months from the date of Balance Sheet classified as current as shown above are disclosed under " Other Current Liabilities"

2.1.2 Term Loan from IDBI, SBI & SBH :

The Term Loans from IDBI, State Bank of Hyderabad and State Bank of India are secured by a first charge on the movable and immovable assets (both present and future) of the company, (save and except exclusive charges already created if any) situated (a) at Lalgadi Malakpet and Aliabad Villages, Shameerpet Mandal, Ranga Reddy Dist, (b) at Nandigaon Village, Mahbubnagar Dist, (c) at Bhootpur Village, Mahaboobnagar Dist, (d) at Kandivalasa Village, Vijayanagaram Dist, and (e) at VSEZ, Visakhapatnam Dist. The loans are also secured by a second charge on the current assets of the company. These loans are also guaranteed by Managing Director and a Director in their personal capacity.

2.1.3 Term Loan from ICICI Bank :

The term loan of Rs. 6,000 lakhs for Capex and Rs. 4,000 lakhs for working capital is secured by subservient / residual charge on all current and moveable assets of the Company both present and future. The charge is subservient to the existing lenders to the extent of all drawn and undrawn limits of term loans and working capital only. The loan is guaranteed by the Managing Director and a Director in their personal capacity.

2.2 Other Loans :

2.2.1 HDFC Bank

The Term Loans for acquiring vehicles are secured by exclusive hypothecation of vehicles acquired through execution of D.P. Note.

2.3 Unsecured Loans

2.3.1 Interest Free Sales Tax Loan (IFST):

IFST Loan of Rs. 1,491.00 lakhs shown under unsecured loan represents the Sales tax payable by the Company given as Loan by A.P State Government under a scheme, to be repaid without interest after 14 years from the date of availment. The loan requires creation of a charge on the assets of the Company. Pending creation of charge, the amount is shown as ''Unsecured Loan'' to be regrouped as Secured Loan as and when the charge is created.

2.3.2 Term Loan from Hewlett-Packard Financial Services India Pvt Ltd (HPFSIPL) towards implementation of SAP Project is repayable in 20 quarterly instalments from the date of loan with interest at the rate ranging between 11% and 13%. The loan is also guaranteed by a Director of the Company.

2.3.3 Finance Lease of Assets from Hewlett-Packard Financial Services India Pvt Ltd (HPFSIPL) for Implementation of SAP Project is repayable by way of lease rentals over a period of 5 years and is also guaranteed by a Director of the Company.

2.3.4 Loan from Holding Company is Interest free and is repayable after a moratorium period of 10 years from the date of first drawl.

2.4 There were no continuing defaults as on the Balance Sheet date in repayment of loan instalments and interest

3.1 Working Capital Loans

The Working Capital Loans from the State Bank of India, State Bank of Hyderabad, IDBI Bank Ltd , ICICI Bank Ltd and Axis Bank are secured by a first charge on all the chargeable current assets and by a second charge on the fixed assets (both present and future) of the Company. All the loans are also guaranteed by Managing Director, two other Directors of the Company, and Smt. A. Uma Devi in their personal capacities.

3.2 Purchase Bill Discounting from Kotak Mahindra Bank Ltd. is guaranteed by CMD and a Director of the Company in their personal capacity. Purchase Bill Discounting from IDBI Bank Ltd. is secured by accepted bill of exchange and post dated cheque/standing instructions for making payment on due date

3.3 The facilities extended by YES Bank are secured by subservient charge on all the current and movable fixed assets of the company. Further the facilities are guaranteed by Managing Director and one other promoter director of the Company.

3.4 Working Capital Short Term Loan from HDFC Bank is secured by personal guarantee of CMD and is repayable within 90 days with interest @10.50% p.a.

3.5 Inter Corporate Deposit from Holding Company is repayble on demand with interest @ 12% p.a.

3.6 Loan from Directors is repayable on demand with interest @ 12% p.a.

3.7 There were delays in clearing the Purchase bills discounted with IDBI Bank Limited and Kotak Mahindra Bank to the extent of Rs.355.21 Lakhs for a period of 7 days as on the Balance Sheet date (since cleared).

The outstanding balance in YES Bank Ltd current account represents facility reckoned as Cash Credit.

4.1 Investments :

4.1.1 During the year, the company had sold the entire holding of 2,73,75,200 shares in Agile Electric Sub Assembly Pvt Ltd for a sale consideration of Rs. 17506.14 Lakhs

4.2.2 During the year, the company had sold the entire holding of 20,60,482 shares in Sankhya Infotech Ltd for a sale consideration of Rs. 148.35 Lakhs

4.2.3 In pursuance of MOU entered by the company, M/s.HBL Miltrade Pte Ltd, Singapore, allotted one share (Face value - One Singapore Dollar) to the company. The company is yet to pay for the same. Pending remittance, Investment is not disclosed in the Balance Sheet.

5.1 Claims & Other Receivables

During the financial year 2011-12, due to heavy rainfall, there was a damage to one of the factory buildings and incidental damage to Plant & Machinery and stocks in process. The assets were insured under reinstatement value policy which was in force as on the date of incident. The total cost for repairing, rebuilding the factory shed/acquiring related machinery and damaged inventory is estimated at Rs. 264.00 Lakhs. The company is in the process of restoring the damaged assets and the cost incurred in this regard upto 31.03.2014 was Rs. 102.70 Lakhs, which is included in Claims & Other Receivables. The Company has received repudiation letter from the Insurer and the company is preferring to proceed legally against the Insurance company.

Note : 6 Contingent Liabilities not provided for and commitments:

All known and undisputed claims and liabilities where there is a present obligation as a result of past events and it is probable that there will be an outflow of resources, have been duly provided for.

6.1 Contingent liabilities not provided for: Nature of Contingent Liability

As on 31.03.2014 As on 31.03.2013

a) Un-expired guarantees issued on behalf of the Company by banks for which the Company gave counter guarantees 15,502.65 12,310.47

b) Corporate Guarantee issued to ICICI Bank on behalf of Igarshi Motors India Ltd (a step down subsidiary of the company) for the loan facilities sanctioned to them. - 7,600.00

c) Legal undertakings (LUTs) given to Custom''s Authorities for clearing the imports at Nil / Concessinal rate of duty pending fulfilment of export obligations, (net of the export obligations fulfilled of Rs. 9739.42 Lakhs (previous year Rs. 9780.12 Lakhs) for which the process of discharging the LUTs by the concerned authorities is at various stages). 3,609.72 4,597.14

d) Claims against the Company not acknowledged as debts towards :

Excise duty 357.84 310.50

Sales Tax 317.41 98.42

Custom duty - 33.85

Service Tax 10.68 10.68

Income Tax Dispute for Assessment Year 2009-10 65.08 65.08

Property Tax of VSEZ unit 27.64 27.64

Fuel surcharge adjustment (FSA) to the extent billed and disputed 356.40 374.73

Enhancement of Land Cost by Haryana State Industrial & Infrastructure Development Corporation Ltd, Manesar 108.82 108.82

Erstwhile promoters of SCIL Infracon Pvt Ltd 188.31 188.31

Others 11.50 17.67

6.2 Estimated amount of contracts remaining to be executed on Capital account and not provided for. 184.48 375.10

6.3 Investments committed by the Company in other Companies:

In M/s. HBL Suntech,LLP against 60% Share in LLP (net of Rs. 18.30 Lakhs contributed as on 31-03-2014) 101.70 101.70

Note : 7 Incometax and Sales Tax Assessments:

7.1 Income Tax:

The Company''s assessments were completed upto Financial Year 2010-11 and the tax dues as per orders were paid and charged to revenue except for disputed issues under Appeal. Tax assessments for the years 2011-12 and 2012-13 are pending and the tax dues as per returns filed have been fully paid. The liability, if any, in respect of such pending assessments, that may arise upon completion is not ascertainable at this stage.

7.2 Sales Tax:

The Company has paid/provided for VAT/CST as per the records and returns filed upto 31.03.2014 after considering the Input VAT on purchases and also on the basis of concessional Forms expected to be received from customers. The liability, if any, in respect of pending assessments including those relating to non-submission of concessional Forms (''C'' Forms etc.) is not ascertainable at this stage. The company is in the process of collecting concessional Forms from customers for submission before the assessments are completed/finalised.

Note :8 Confirmation of Balances

The Company has sent letters seeking confirmation of balances to various parties under Trade payables, Trade Receivables, Advance to suppliers and others, advance from customers. Based on the confirmations received and upon proper review, corrective actions have been initiated and accounting adjustments have been made wherever found necessary. Such confirmations are awaited from some parties most of whom are Government Departments and Public Sector Undertakings.

Note :9 Disclosures required to be made as per Accounting Standard (AS)

9.1 Disclosure as per AS-7 "Construction Contract"(for contracts in progress at the reporting date)

9.1.1 The Company recognised revenue based on Percentage completion method whereby stage of completion of a contract is determined with reference to the proportion that contract costs incurred (for work performed up to the reporting date) bear to the estimated total contract cost and wherever applicable after completion of inspection/certification of the work performed by the customers as stipulated in the contract.

ii) Defined Benefit Plan:

(a) Gratuity obligation of the Company :

The Company has taken a Group Gratuity Policy of LIC of India to cover the employer''s obligation towards Gratuity under the payment of Gratuity Act and the fund required to be maintained to cover the Present Value of past service benefit and current service cost is fully funded/provided for by the Company as per the valuation made under Projected Unit Credit method and demanded by LIC of India. Apart from the said funding, the company also paid the annual risk premium to keep the policy active

10.1 Disclosure as per AS-18 "Related Party Disclosure";

1 Holding Company Beaver Engineering & Holdings Pvt Ltd, Hyderabad

2 Subsidiaries

Agile Electric Sub Assembly (P) Ltd SCIL Infracon Pvt Ltd HBL Germany, GMBH HBL America

3 Joint Venture Gulf Batteries Company Ltd, Kingdom of Saudi Arabia

4 Controlled Companies Kairos Engineering Limited, Hyderabad

5 Associate

Naval Systems & Technologies Pvt Ltd Guided Missile Engineering India Pvt Ltd VARP Power Pvt Ltd

6 Companies which Directors are Interested Sankhya Infotech Ltd

7 Key Management Personnel Dr A J Prasad Chairman & Managing Director

M S S Srinath Whole Time Director Kavita Prasad Whole Time Director Ashok Nagarkatti

10.2 Disclosure as per AS-27 "Financial Reporting of Interests in Joint Ventures":

a) The Company''s interest in the above company is reported under the head Investment (Note-14) and stated at Cost.

b) Pending receipt of Audited/Unaudited financial statements of JV company for the year ending 31-03-2014, the disclosure of the company''s share of the Assets, Liabilities, Income and Expenditure is not made as required under AS-27

Note : 11

Various measures are ongoing to improve the performance of M/s.Gulf Batteries Company, M/s.SCIL Infracon Pvt Ltd and M/s.HBL Suntech LLP which would yield positive results in next two years. In view of these steps, management is of the view that no provision is warranted for (a) dimunition in value of investment or (b) dues as they are considered good and recoverable.

Note : 12

Previous years figures have been regrouped wherever necessary.


Mar 31, 2013

1.1 Investments :

1.1.1 In previous years, the Company (HBL) acquired 7,20,40,000 shares of -10/- each in the equity of M/s. Agile Electric Drives Technologies & Holdings (P) Ltd (Agile Holdings) at a cost of -11288.04 Lakhs and at the relevant time, Agile Holdings had 3 subsidiares namely Igarashi Motors India Ltd (IMIL), Agile Electric Sub Assembly (P) Ltd(AESAPL) and Igarashi Motor Sales (P) Ltd (IMSPL). During the year 2011-12, Agile Holdings was amalgamated with its subsidiary AESAPL. Pursuant to the scheme of amalgamation with was approved by Hon''ble High Court of Madras on 20.07.2012, the erstwhile Agile Holdings merged with AESAPL retrospective effect from 01.04.2011. As per the scheme of merger, against 7,20,40,000 shares held by the Comapny (HBL), 2,73,75,200 shares were issued to HBL (at a swap ratio of 38 shares for every 100 shares held by the share holders of Agile Holdings.

1.1.2 The Equity shares held by the company in Gulf Batteries Company Ltd (a Joint Venture) are pledged to Exim

Bank by way of Security for the loan to part-finance in the Equity contribution in the Joint Venture.

1.1.3 In pursuance of MOU entered by the company, M/s.HBL Miltrade Pte Ltd, Singapore, allotted one share (Face value - One Singapore Dollar) to the company. The company is yet to pay for the same. Pending remittance, Investment is not disclosed in the Balance Sheet.

Note : 2 Contingent Liabilities not provided for and commitments:

All known and undisputed claims and liabilities where there is a present obligation as a result of past events and it is probable that there will be an outflow of resources, have been duly provided for.

2.1 Contingent liabilities not provided for:

Nature of Contingent Liability 31 March 2013 31 March 2012

a) Un-expired guarantees issued on behalf of the Company by banks 12,310.47 12,241.86 for which the Company gave counter guarantees

b) Bills Discounted with Banks but not matured 3,714.24 4,061.26

c) Corporate Guarantee issued to ICICI Bank on behalf of Igarshi 7,600.00 7,600.00 Motors India Ltd (a step down subsidiary of the company) for the loan facilities sanctioned to them.

d) Legal undertakings (LUTs) given to Custom''s Authorities for 4,597.14 4,586.53 clearing the imports at Nil / Concessinal rate of duty pending fulfilment of export obligations, (net of the export obligations fulfilled of Rs. 9780.12 Lakhs (previous year Rs. 3509.74 Lakhs) for which the process of discharging the LUTs by the concerned authorities is at various stages).

3.1 Income Tax

The Company''s assessments were completed upto Financial Year 2009-10 and the tax dues as per orders were paid and charged to revenue except for disputed issues under Appeal. Tax assessments for the years 2010-11 and 2011-12 are pending and the tax dues as per returns filed have been fully paid. The liability, if any, in respect of such pending assessments, that may arise upon completion is not ascertainable at this stage.

3.2 Sales Tax:

The Company has paid/provided for VAT/CST as per the records and returns filed upto 31.03.2013 after considering the Input VAT on purchases and also on the basis of concessional Forms expected to be received from customers. The liability, if any, in respect of pending assessments including those relating to non- submission of concessional Forms (''C Forms etc.) is not ascertainable at this stage. The company is in the process of collecting concessional Forms from customers for submission before the assessments are completed/finalised.

Note : 4 Confirmation of Balances

The Company has sent letters seeking confirmation of balances to various parties under Trade payables, Trade Receivables, Advance to suppliers and others, advance from customers. Based on the confirmations received and upon proper review, corrective actions have been initiated and accounting adjustments have been made wherever found necessary. Such confirmations are awaited from few parties.

Note : 5 Disclosures required to be made as per Accounting Standard (AS)

5.1 Disclosure as per AS-7 "Construction Contract"

5.1.1 The Company recognised revenue based on Percentage completion method whereby stage of completion of a contract is determined with reference to the proportion that contract costs incurred (for work performed up to the reporting date) bear to the estimated total contract cost and wherever applicable after completion of inspection/certification of the work performed by the customers as stipulated in the contract.

5.2 Disclosure as per AS-18 "Related Party Disclosure" :

1 Holding Company : Beaver Engineering & Holdings Ltd, Hyderabad

2 Subsidiaries Agile Electric Sub Assembly (P) Ltd

SCIL Infracon Pvt Ltd HBL Germany, GMBH HBL America HBL Suntech-LLP

3 Step Down Subsidiaries of Subsidiary : Igarshi Motors India Ltd

Igarshi Motors Sales (P) Ltd

4 Joint Venture : Gulf Batteries Company Ltd, Kingdom of Saudi Arabia

5 Controlled Companies : Kairos Engineering Limited, Hyderabad

6 Associate Naval Systems & Technologies Pvt Ltd

Guided Missile Engineering India Pvt Ltd

7 Companies which Directors are Interested : Sankhya Infotech Ltd

8 Key Management Personnel : Dr A J Prasad Chairman & Managing Director

M S S Srinath Whole Time Director

Kavita Prasad Whole Time Director

Ashok Nagarkatti

Note : 6 Previous years figures have been regrouped wherever necessary.


Mar 31, 2011

1. Share Capital:

(i) Out Of 25,30,00,000 shares issued by the Company as at 31.03.2011,14,03,94,050 shares are held by the holding Company - M/s. Beaver Engineering & Holdings Ltd.

(ii) During the year 2009-10, the Company raised Equity of Rs. 3,469.51 lakhs on preferential basis including a share premium of Rs. 3,367.47 lakhs.The issue was made to finance the general corporate investments in related companies and for other general corporate purposes.

2. (i) Term Loans:

a) Term Loan from IDBI, SBI, SBH and SB Indore :

The Term Loans from IDBI, State Bank of Hyderabad, State Bank of India and State Bank of Indore (since merged with SBI), are secured by a first charge on the movable and immovable assets (both present and future of the company, (save and except book debts and exclusive charges already created if any) situated (a) at Lalgadi Malakpet and Aliabad Villages, Shameerpet Mandal, Reddy Dist, (b) at Nandigaon Village, Mahbubnagar Dist, (c) at Bhootpur Village,Mahaboobnagar Dist, (d) at Kandivalasa Village, Vizianagaram Dist, and (e) at VSEZ, Visakhapatnam Dist. The loans are also secured by a second charge on the current assets of the company. These loans are also guaranteed by Managing Director and one Director in their personal capacity.

b) Term Loan from Axis Bank (Balance on 31.03.2(311 Rs. 4,441.49 Lkahs):

TheTerm Loans from Axis Bank are secured by exclusive charge on the movable and immovable assets of the Company situated (a) at Tumkunta Village, Ranga Reddy Dist, (b) at IMT Manesar, Gurgoan, Haryana, (c) at Goverdhanpuri Colony, Yapral, GHMC, (d) at IIE, Ranipur, BHEL, Haridwar (Uttaranchal), (e) at Selaqui, Dehradun (Uttaranchal). and (Rs.) at MIDC, Navi Mumbai.These loans are also guaranteed by Managing Director and one Director in their personal capacity.

c) Term Loan from Axis Bank (Balance on 31.03.2011 Rs. 5,032.53 Lakhs):

TheTerm Loan is secured by first pari passu charge on Fixed Assets (excluding vehicles and assets exclusively charged to other term lenders) and second charge on Current Assets. Also guaranteed by the Managing Director and one Director in their personal capacity.

d) Term Loan from EXIM Bank of India:

TheTerm Loan to part finance Equity contribution in Gulf Batteries Company, a Joint Venture in Kingdom of Saudi Arabia (KSA) is secured by first pari passu charge on the entire fixed assets of the company excluding exclusive charges, if any, and pledge of Company's share holding in Joint Venture and also guaranteed by the Managing Director of the Company in his personal capacity.

e) Term Loan from ICICI Bank:

The term loan of Rs. 6,000 lakhs for Capex and Rs. 4,000 lakhs for working capital is secured by subservient/ residual charge on all current and moveable assets of the Company both present and future. The charge is subservient to the existing lenders to the extent of all drawn and undrawn limits of term loans and working capital only and the loan is guaranteed by the Managing Director and one Director in their personal capacity.

f) Short Term Loans from IDBI:

Short Term Loans from IDBI Bank for acquisition of land for setting up new facility at Mahaboobnagar District is secured by D.P Note, post dated cheques for the entire loan and undertaking to create first charge on the Assets in the event of default.

g) Term loans from HDFC:

(i) The Term Loans for acquiring Flats are secured by an exclusive charge on the Fiats acquired and also guaranteed by the Managing Director of the Company in his personal capacity.

(ii) The Term Loans for acquiring vehicles are secured by exclusive hypothecation of vehicles acquired through execution of D.P. Note.

h) Equipment Loan from First Leasing Company of India Ltd.:

The loan is secured by exclusive charge on the Equipment procured and also guaranteed by one Director in his personal capacity.

2. (ii). Working Capital Loans:

(a) The Working Capital Loans from the State Bank of India, State Bank of Hyderabad, IDBI Bank Ltd and State Bank of Indore (since merged with SBI) are secured by a first charge on all the chargeable current assets and by a second charge on the fixed assets (both present and future) of the Company. All the ioans are also guaranteed by Managing Director, two other Directors of the Company, and Smt. A. Uma Devi in their persona! capacities.

(b) Short Term Loan from Kotak Mahindra Bank Ltd:

The Short Term Working Capital Loan is secured by D.P Note and post dated cheques.

2.(iii) Term Loan Instalments and Short Term Loans due and repayable within one year from the date of Balance sheet is Rs. 9,080.00 lakhs.

3. Interest Free Sales Tax Loan (1FST):

IFST Loan of Rs. 1,678.81 lakhs shown under unsecured loan represents the Sales tax payable by the Company given as Loan by A.P State Government under a scheme, to be repaid without interest after 14 years from the date of availment. Earliest repayment is due from the year 2013-14. The loan requires creation of a charge on the assets of the Company. Pending creation of charge, the amount is shown as 'Unsecured Loan' to be regrouped as Secured Loan as and when the charge is created.

4. Contingent Liabilities not provided for:

All known and undisputed claims and liabilities where there is present obligation as a result of past events and it is probable that there will be an outflow of resources, have been duly provided for.

(i) Contingent liabilities not provided for: Nature of Contingent Liability As on As on 31.03.2011 31.03.2010 (Rs. in (Rs. in lakhs) lakhs)

a) Un-executed portion of letters of credit opened by Bank 3,975.13 4,146.49

b) Un-expired guarantees issued on behalf of the Company by banks for which the *15,521.22 14,601.19 by banks for which the Company gave counter guarantees

* includes Bank Guarantees issued to others on behalf of a Subsidiary Company Rs. 900 Lakhs

c) Legal undertakings (LUTs) given to Custom's Authorities for 2,736.36 2,534.00 clearing the imports at Nil / Concessinal rate of duty pending for fulfilment of export obligations, (net of the export obligations fulfilled of Rs. 2,302.49 lakhs (previous year Rs. 1,737.70 lakhs) for which the process of discharging the LUTs by the concerned authorities is at various stages).

d) Claims against the Company not acknowledged as debt:

- Excise duty claim 94.85 94.85

- Sales Tax claim 4.84 -

- Custom duty claim 36.67 36.67

- Property Tax claim of VSEZ unit 27.64 27.64

- Fuel surcharge adjustment (FSA) claim to the extent billed by power 97.34 - Distribution Companies of A.P

- Other claims 34.42 26.25

(iv) Income tax and Sales tax Assessments:

a. Income Tax:

The Company's assessments were completed upto Financial Year 2007-08 and the tax dues as per orders were paid and charged to revenue.

Tax assessments for the year 2008-09 and 2009-10 are pending and the tax dues as per returns filed have been fully paid. The liability, if any, in respect of such pending assessments that may arise upon completion is not ascertainable at this stage.

The Company has no taxable income for the year 2010-11 in view of the eligible exemptions and deductions as per the provisions of IT Act, 1961 including the applicable provisions for Minimum Alternate Tax (MAT) under section 115JB. Hence, no provision for current tax has been made for the year.

b. Sales Tax:

The Company has paid/provided VAT/CST as per the records and returns filed upto 31.03.2011 after considering the Input VAT on purchases and also on the basis of concessional Forms expected to be received from customers. The liability, if any, in respect of pending assessments including those relating to non-submission of concessional Forms ('C Forms etc.) is not ascertainable at this stage. The company is in the process of collecting concessional Forms from customers for submission before the assessments are completed/finalised.

5. Intangible Assets:

a) In respect of Intangible Assets where commercial activity is started, the expenditure incurred amounting to Rs. 512.81 lakhs is amortised over a period of 5 years and accordingly 3rd instalment of Rs. 102.56 lakhs is amortised and charged to profit & loss account.

b) In respect of Intangible Assets where development is completed and commercial operation are expected to be started after acceptance / approval by the customers, the expenditure incurred is carried in the books. The value of such assets as on 31.03.2011 to be amortised upon commercial operations is Rs. 393.30 lakhs (previous year Rs. 393.30 Lakhs).

6. Investments/Advance for Investments:

a) The investment of ? 225.00 lakhs held on 31.03.2010 in the Joint Venture Company, HBL Elta Avionic Systems (P) Ltd has been disposed off during the year for Rs. 1,366.22 lakhs and the resultant profit of Rs. 1,141.22 lakhs is shown as exceptional income.

b) During the year, the Company acquired 63.91% of Equity in Agile Electric Drives Technologies and Holdings (P) Ltd., Chennai for Rs. 11,288.05 lakhs and the said Company has become subsidiary of the Company.

c) During the year, the Company acquired 50% of Equity in SCIL Infracon (P) Ltd, Hyderabad for Rs. 651.63 lakhs. Further, the Company has made an advance of Rs. 117.79 lakhs to a share holder of the said company for acquiring additional 10% of Equity in the said Company and obtained shares before 31 - 03-2011. Pending transfer of shares in the name of the Company, the amount so paid is shown under Advances. The said company is considered as subsidiary company in view of controlling shares held by the company as at 31-03-2011.

d) During the year, the Company acquired 9.89% of equity in Sankhya Infotech Ltd. (a Listed Company) for Rs. 331.04 lakhs. Further, the said Company issued Share Warrants against which the Company contributed Rs. 195.38 lakhs being 50% of the issue price and the said amount is shown as advance pending conversion of warrants into Equity.

e) The Company incorporated a wholly owned subsidiary, HBL Germany GmBH, in Germany and the Company invested Rs. 14.92 lakhs as capital in the wholly owned subsidiary.

f) The Company's wholly owned subsidiary in Nepal, Bhagirath Energy Systems Ltd., Nepal, is under voluntary winding up. Against the equity of Rs. 107.60 lakhs in the wholly owned subsidiary, a provision of Rs. 29.48 lakhs was made towards fall in the value of investment which is considered adequate.

g) Based on MOU entered by the company, M/s.HBL Miltrade Pte Ltd, Singapore, allotted one share (Face value - One Singapore Dollar) to the company. The company is yet to remit the same. Pending remittance. Investment is not disclosed in the Balance Sheet.

All the Investments held by the Company as at 31-03-2011 are classified as' Permanent' and no provision is required to be made for the fall in the value of investments except in wholly owned subsidiary as stated in (f) above, as the Losses in other companies are considered to be temporary.

7. Confirmation of Balances:

The balances appearing under Sundry Debtors, Creditors for supplies/expenses, Advance to suppliers/others, advances from customers are subject to confirmation/reconciliation and consequential adjustments. The Company has sent letters to customers/vendors seeking confirmation of balances and in some cases replies have been received and the differences noticed which are not significant, are being reconciled).

8. Subsidies received from Government of A.P:

a) The Company claimed and received Rs. 118.84 lakhs towards Power Subsidy which is netted from Power Charges as the expenditure when incurred was fully charged to revenue.

b) The Company made claim for Sales Tax subsidy by way of reimbursement of VAT paid and during the year received ? 365.78 lakhs and the same is considered as Exceptional Income.

9. Fixed Deposits with Banks include Rs. 470.00 lakhs against which the Company authorised the Bank to mark lien on the deposits as security for the facility sanctioned by the Bank to M/s. Sankhya Infotech Ltd., an associate Company.

10. In the absence of eligible profits under section 349 read with section 198 of the Companies Act, 1956, for the year 2010-11 no commission is payable to the Chairman & Managing Director on the profits and the remuneration paid to him for the year 2010-11 amounting to Rs. 25.80 lakhs is subject to the approval of the members by way of special resolution as required under Schedule XIII of the Companies Act, 1956.

11. The Company has amounts dues to Micro and Small Enterprises under The Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) as at March 31, 2011.

Note: The information has been given in respect of only those suppliers who have intimated the Company that they are registered as micro, small and medium enterprises. The interest payable will be accounted as and when claimed / paid.

12. Disclosures required to be made as per Accounting Standards (AS), to the applicable, are as under:

(B) Disclosure as per AS-15 "Employee Benefits";

ii) Defined Benefit Plan:

(a) Gratuity obligation of the Company:

The Company has taken Group Gratuity Policy of LIC of India to cover the employer's obligation towards Gratuity under the payment of Gratuity Act and the fund required to be maintained to cover the P.V of past service benefit and current service cost is fully funded by the Company as per the valuation made under PUC method and demanded by LIC of India. Besides the funding, the company also paid the annual risk premium to keep the policy active and recognised as expenses for the year.

The increase in the present value is on account of increase in Gratuity Ceiling to Rs. 10.00 lakhs from Rs. 3.50 lakhs.

Representing Current service cost charged by LIC and interest credited to fund by LIC, not recognised as asset

(b) Long Term Compensated Absences:

The present value of obligation for long term compensated absences is determined on acturial valuation using Project Unit Credit method (PUC) and is charged to profit & loss account. The obligation is not funded.

Notes: (a) The Company's operations include Batteries of different types, Electronics, Railway Signalling contracts etc. Except for Batteries, the segment revenue, the segments results and the segments assets and liabilities of other activities are individually below the threshold limit of 10% as provided in AS-17 "Segment Reporting". Accordingly, Batteries segment is shown separately as reportable segment and others are included in Unallocated segments.

(b) Batteries segment consists of various types of batteries for defence , aviation , telecom and industrial application.

(c) Inter segment revenue is measured at the market prices at which the products are sold to external Customers

(D) Disclosure as per AS-18"Related Party Disclosure";

1 Holding Company Beaver Engineering & Holdings Ltd.

2 Subsidiaries Bhagirath Energy Systems Pvt Limited, Nepal

HBL Power Systems (M) SDN BHD, Malaysia

Agile Electric Drives Technologies & Holdings Pvt Ltd

HBL Germany, GMBH

SCIL Infracon Pvt Ltd

3 Joint Venture Gulf Batteries Company Ltd, Kingdom of Saudi Arabia

4 Controlled Compan Kairos Engineering Limited, Hyderabad -ies

5 Associate Naval Systems & Technologies Pvt Ltd

Guided Missile Engineering India Pvt Ltd

Auto TEC Systems (P) Ltd,

Bangalore Sankhya Infotech Ltd

6 Key Management Dr A J Prasad Chairman & Managing Director Persnnel M S S Srinath Whole Time Director

Kavita Prasad Whole Time Director J.K.Verma WholeTime Director (Up to 09th July 2010)

Ashok Nagarkatti

P Satish Kumar

(I) Disclosure as per AS-27 "Financial Reporting of Interests in Joint Ventures": (Also refer Note 6(a) above]

The Company's interest in the above company is reported under the head Investment (Schedule-8) and stated at Cost.

Pending receipt of Audited/Unaudited financial statements of JV company for the year ending 31-03-2011, the disclosure of the company's share of the Assets/Liabilities, Income and Expenses is not made as required under AS-27.

(J) Disclosure as per AS-29 "Provisions, Contingent Liabilities, Contingent Assets";

It is expected that these costs will be incurred in the next 12 to 24 months. Actual expenditure incurred during warranty period towards replacements etc is charged to revenue under respective head of expenditure.

13. Additional Information Pursuant to the requirements under Part-ll of Schedule VI of the Companies Act, 1956.

(Quantitative Information in A, B, C and D are certified by the management and relied upon by the Auditors being a technical matter)

A. Licenced and Installed Capacities

i) Installed Capacity (Qty)

Lead Acid Batteries 1640 Mil Ah

Nickel Cadmium Batteries 85 Mil Ah

Chargers / Rectifiers 3500 Nos

Lithium Thionyl Chloride Cells 11000 Nos

Others Inview of the items being manufactured as per the customers orders it is not possible to ascerrtain installed capacity

Note: In view of number of individual items of smaller value quantitative details are not furnished for certain items.

14 Previous Year's figures have been regrouped wherever necessary.

 
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