Sep 30, 2014
The accounting policies set out below have been applied consistently to
the periods presented in these financial statements.
a. Basis of preparation of Financial Statements
The financial statements of the Company have been prepared and
presented in accordance with the Generally Accepted Accounting
Principles ("GAAP") under the historical cost convention except in
respect of revalued fixed assets on the accrual basis. GAAP comprises
accounting standards notified by the Central Government of India under
Section 211 (3C) of the Companies Act, 1956, other pronouncements of
Institute of Chartered Accountants of India, the provisions of
Companies Act, 1956 and guidelines issued by Securities and Exchange
Board of India (SEBI), to the extent applicable.
The Company''s performance has been impacted by automotive market
slowdown, inadequate price compensation, volatile material prices,
delays in recovery of certain long pending balances and consequent
extended working capital cycles etc. As a result, the company has
accumulated losses as at September 30, 2014 that have significantly
eroded the networth. In February 2013, the Company had intimated to the
Board for Industrial and Financial Reconstruction (''BIFR'') about
erosion of more than 50% of the Company''s peak networth pursuant to
section 23 of Sick Industrial Companies (Special Provision) Act, 1985.
(''SICA''). The Company has initiated various steps to improve its
operational performance / liquidity, remove bottlenecks relating to its
projects, improve the networth including raising of capital etc. Based
on business plans, availability of short-term and long-term bank
funding arrangements, independent impairment testing, increase in
capital by way of preferential allotment and qualified institutional
placement and in view of the continued support by the promoters
including assistance in relation to certain long pending balances, the
Company believes that it would be able to realize its assets and settle
its liabilities in the normal course at their carrying values and that
no adjustments would be required in respect of the carrying value of
assets/liabilities as at September 30, 2014. Accordingly, the financial
statements have been prepared on a going concern basis.
b. Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenues
and expenses during the reporting period, reported balances of assets
and liabilities, and disclosure of contingent assets and liabilities as
at the date of the financial statements. Actual results could differ
from those estimates. Any revision to accounting estimates is
recognized prospectively in current and future periods.
c. Fixed Assets and Depreciation
Tangible fixed assets
Fixed assets are stated at cost or revalued amount less accumulated
depreciation and impairment losses, if any. Net increase in fixed
assets on account of revaluation is credited to the revaluation
reserve account.
Cost comprises the purchase price and any attributable cost of bringing
the asset to its working condition for its intended use.
Depreciation on fixed assets is provided using the straight-line method
based on useful economic life as estimated by the management or at the
rates prescribed under Schedule XIV of the Companies Act, 1956,
whichever is higher.
For the following assets the depreciation rates are higher than the
rates prescribed by Schedule XIV:
"Plant and machinery | 10.34- 33.33%
Individual assets costing Rs 5,000/- or less are depreciated in full in
the year of purchase.
The incremental depreciation on account of enhancement in the value of
major fixed assets on revaluation is charged against fixed assets
revaluation reserve.
Assets acquired under hire purchase/finance lease agreements are
capitalized and finance charges thereon are expensed over the period of
agreements.
Developmental costs relating to leasehold land is amortized over the
period of 30 years.
Assets retired from active use and held for disposal are stated at the
lower of their net book value and net realisable value and shown under
''Other current assets''.
Intangible fixed assets
Intangible fixed assets comprise of acquired goodwill, acquired
technical know-how and internally generated intangibles relating to
development of methodologies, frameworks, and processes.
Acquired goodwill and technical know-how are stated at acquisition
cost. Internally generated intangible assets are stated at cost that
can be measured reliably during the development phase and when it is
probable that future economic benefits that are attributable to the
assets will flow to the Company.
Goodwill, technical know-how fees and process know how are amortized
using the straight-line method over a period of five years.
d. Inventory
Inventories are valued at the lower of cost and net realizable value.
Cost of inventories comprises all cost of purchase, cost of conversion
and other costs incurred in bringing the inventories to their present
location and condition. Cost includes all taxes and duties, but
excludes duties and taxes that are subsequently recoverable from tax
authorities.
The methods of determining cost of various categories of inventories
are as follows:
Description Method of determining cost
Raw materials, stores and spares Moving weighted average
and bought out materials
Work in progress and finished goods Moving weighted average and
including an appropriate share of overheads
e. Borrowing Costs
Borrowing costs including amortization of ancillary borrowing cost that
are directly attributable to the acquisition or construction of
qualifying fixed assets which necessarily take a substantial period of
time to get ready for their intended use are capitalized as part of the
cost of such assets. Other borrowing costs are recognized as expense
in the period in which they are incurred.
f. Employee Benefits
Gratuity liability is a defined benefit obligation and is provided for
based on actuarial valuation performed in accordance with the projected
unit credit method, as at the balance sheet date and is funded with
Life Insurance Corporation of India (LIC).
Short term compensated absences / leave encashment are provided for
based on the eligible leave at credit on the balance sheet date and the
estimated cost is based on the terms of the employment contract. Long
term compensated absences are provided for based on actuarial valuation
as at the balance sheet date using projected unit credit method.
Eligible employees of the Company relating to Ennore unit receive
benefits from the provident fund, which is a defined benefit plan. Both
the employee and the Company make monthly contributions to the Ennore
Foundries Limited Employees'' Provident Fund Trust. The rate at which
the annual interest is payable to the beneficiaries by the Trust is
being administered by the government. The Company has an obligation to
make good the shortfall, if any, between the return from the
investments of the Trust and the notified interest rate. Such
liability, if any, is provided for based on the actuarial valuation as
at the balance sheet date.
Contributions to Provident fund (other than relating to Ennore Unit of
the Company), employee pension fund (other than relating to Ennore Unit
of the Company), Superannuation fund and cost of other benefits are
charged to the Statement of profit and loss of the year when the
contributions to the respective funds are due. The Company has no
further obligations under the plan beyond its monthly contributions.
Actuarial gains/losses are immediately taken to Statement of profit and
loss and are not deferred.
g. Revenue Recognition
Revenue comprises sale of castings and design and development of
patterns and tools. Revenue is recognised to the extent it is probable
that the economic benefits will flow to the Company and that the
revenue can be reliably measured and is expected to be received.
Revenue from the sale of castings are recognized when all significant
risks and rewards of ownership are transferred to the buyer, which
generally coincide with dispatch of goods. The amount recognized as
sale is exclusive of sales tax.
Income from design and development of patterns and tools and other
incidental works is recognised in accordance with the percentage of
completion method.
Revision in prices subsequent to sale is recognised when accepted by
the customers.
Interest income on deposits and interest bearing securities is
recognized on the time proportionate method.
Insurance claims are recognized when the amount thereof can be measured
reliably and ultimate collection is reasonably certain
h. Income Taxes
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961. Deferred income taxes reflect
the impact of current year timing differences between taxable income
and accounting income for the year and reversal of timing differences
of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. Deferred tax
assets are recognised on carry forward of unabsorbed depreciation and
tax losses only if there is virtual certainty supported by convincing
evidence that such deferred tax assets can be realized against future
taxable profits. Unrecognized deferred tax assets of earlier years are
re-assessed and recognised to the extent that it has become reasonably
/ virtually certain that future taxable income will be available
against which such deferred tax assets can be realized.
Minimum Alternative Tax (''MAT'') credit is recognised as an asset only
when and to the extent there is convincing evidence that the company
will pay normal income tax during the specified period. In the year in
which the MAT credit becomes eligible to be recognized as an asset in
accordance with the recommendations contained in Guidance Note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the Statement of profit and loss and
shown as MAT Credit Entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal Income Tax during the specified
period.
i. Foreign Currency Transactions
Foreign currency transactions are recorded at the exchange rates
prevailing on the date of the transactions or rates that approximates
the exchange rate prevailing at the date of transactions. Monetary
assets and liabilities denominated in foreign currencies as at the
balance sheet date are translated at the closing exchange rates on that
date. Exchange differences arising on foreign exchange transactions
during the year and on restatement of monetary assets and liabilities
are recognized in the Statement of profit and loss of the year.
Pursuant to the notifications of the Ministry of Corporate Affairs,
exchange fluctuations on all long term monetary items so far as they
relate to the acquisition of a depreciable capital asset, are added to
or deducted from the cost of the asset and is depreciated over the
balance life of such assets. All other exchange fluctuations on long
term monetary items are accumulated in ''foreign currency monetary item
translation difference account'' in the Company''s financial statements
and amortized over the balance period of such long term
asset/liability.
j. Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to efquity shareholders (after deducting
preference dividends and attributable taxes) by the weighted average
number of equity shares outstanding during the year. As at the
reporting date, the Company has not issued any potential equity shares,
and accordingly, the basic earnings per share and diluted earnings per
share are the same.
k. Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
i. Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication
of impairment based on internal/external factors. An impairment loss is
recognized wherever the carrying amount of an asset exceeds its
recoverable amount. The recoverable amount is the greater of the assets
net selling price and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value at
the weighted average cost of capital.
m. Expenditure on New Projects and Substantial Expansion
Expenditure directly relating to construction activity is capitalised.
Indirect expenditure incurred during construction period is capitalised
as part of the indirect construction cost to the extent to which the
expenditure is related to construction or is incidental thereto. Other
indirect expenditure (including borrowing costs) incurred during the
construction period which is neither related to the construction
activity nor is incidental thereto are charged to the Statement of
profit and loss. Income earned during construction period is deducted
from the total of the indirect expenditure.
All direct capital expenditure on expansion are capitalised. As regards
indirect expenditure on expansion, only that portion is capitalised
which represents the marginal increase in such expenditure involved as
a result of capital expansion. Both direct and indirect expenditure are
capitalised only if they increase the value of the asset beyond its
original standard of performance.
n. Leases
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of profit and loss on a straight-line basis over the
lease term.
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
capitalised.
o. Investments
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognise a decline other than temporary
in the value of the investments.
Current investments are carried at the lower of cost and fair value.
Any reductions in the carrying amount and any reversals of such
reductions are charged or credited to the Statement of profit and loss.
p. Derivative Instruments and Hedge Accounting
The Company uses derivative financial instruments such as interest rate
swaps to hedge its exposure in interest rates relating to underlying
transaction.
The Company has adopted the principles of Accounting Standard 30,
Financial Instruments: Recognition and Measurement (AS 30) issued by
ICAI except to the extent the adoption of AS 30 does not conflict with
existing accounting standards prescribed by Companies (Accounting
Standards) Rules, 2006 and other authoritative pronouncements.
In accordance with the recognition and measurement principles set out
in AS 30, changes in fair value of derivative financial instruments
designated as cash flow hedges are recognised directly in shareholders''
funds and reclassified into the profit and loss account upon the
occurrence of the hedged transaction.
Changes in fair value relating to the ineffective portion of the hedges
and derivatives that do not qualify for hedge accounting are recognised
in the statement of profit and loss.
The fair value of derivative financial instruments is determined based
on observable market inputs including yield curves etc.
q. Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, financing and
investing activities of the Company are segregated.
r. Cash and cash equivalents
Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank and in hand and short term investments with an
original maturity of three months or less.
b) Rights, preferences and restriction attached to equity shares
The Company has only one class of equity shares having a par value of
Rs 10 per share. Each equity share holder is entitled to one vote per
share.
c) Rights, preferences and restriction attached to preference shares
1,500,000 10% Redeemable non-convertible cumulative preference shares
of Rs.100 each issued to Ashok Leyland Limited on March 19,1999 were
redeemable at par during the period April 2011 to April 2013.
Redemption due on April 2011 and April 2012 was initially rescheduled
to April 2013. The Company has sought and obtained a further extension
from the preference shareholder and the redemption has been rescheduled
to April 2015.
1,000,000 6% Redeemable non-convertible cumulative preference shares of
Rs.100 each issued to Ashok Leyland Limited on November 12, 2003 were
redeemable at par during the period April 2008 to April 2010. Out of
the above, an amount of Rs.333.33 lakhs has been redeemed in April
2008. Redemption due on April 2009 and April 2010 was initially
rescheduled to April 2013. The Company has sought and obtained a
further extension from the preference shareholder and the redemption of
the balance of Rs.666.67 lakhs has been rescheduled to April 2Q15.
7,500,000 9% Redeemable non-convertible cumulative preference shares of
Rs.100 each issued to Ashok Leyland Limited on September 29, 2012 were
redeemable at par within a period of two years from the date of
allotment. The Company has sought and obtained a further extension from
the preference shareholder and the redemption has been rescheduled to
September 2016.
7,500,000 9% Redeemable non-convertible cumulative preference shares of
Rs.100 each issued to Ashok Leyland Limited on October 19, 2012 were
redeemable at par within a period of two years from the date of
allotment. The Company has sought and obtained a further extension from
the preference shareholder and the redemption has been rescheduled to
October 2016.
15,000,000 9% Redeemable non-convertible cumulative preference shares
of Rs.100 each issued to Ashok Leyland Limited on March 20, 2013 were
redeemable at par within a period of two years from the date of
allotment.
* Amount disclosed under "other current liabilities" (refer note 10)
a) The aforesaid loans are under fixed/floating rate (benchmarked to
Libor) with different bankers. As at September 30, 2014, the rate of
interest based on such arrangements ranged from 5.55% p.a. to 12.75%
p.a.
Secured
b) Term loan of Rs.15,500 Lakhs (March 31, 2013 : 21,000 Lakhs) and
Rs.950 Lakhs (March 31, 2013 : Nil) from Yes Bank is secured by
equitable mortgage and first charge over all the fixed assets of the
Company including movable properties and immovable properties (both
present and future) and second charge on the current assets of the
Company. The first said loan term is repayable in 12 quarterly
instalments commencing from March 2013 to September 2017 and the second
loan is repayable in 16 quarterly instalments commencing from December
2015 to September 2019 respectively.
c) Term loan of Rs.19,026.60 Lakhs (March 31, 2013 : Nil) from Bank of
Baroda Bank was secured by equitable mortgage and first charge over all
the fixed assets of the Company including movable properties and
immovable properties (both present and future) and second charge on the
current assets of the Company. The said loan was repayable in 12 equal
quartly instalments commencing from April 2017 to April 2019. The
company is in the process of creating charge for the securities
provided.
d) Foreign currency term loan of Rs. 8,625.89 Lakhs (March 31,2013 :
Rs.10,877.86 Lakhs) from DBS Bank is secured by first pari passu charge
over all the fixed assets of the Company including movable properties
and immovable properties (both present and future). The said loan is
repayable in 10 equal half-yearly instalments commencing from August,
2013.
e) The Company has not met some of the financial covenants as set out
in the agreements with bankers. The Company in the process of
obtaining necessary waivers from compliance with such covenants. Based
on past experience, the Company is confident of obtaining the relevent
approvals. Accordingly the loan balances have continued to be
classified as non - current to the extent they are not due to be
settled with in 12 months after the reporting date. Also refer note 2
(a).
Unsecured
f) The foreign currency loan from HSBC Bank consisted of USD 5,000,000
and USD 15,000,000 loans repectively. The said loans were repayable in
three annual instalments commencing from April 20, 2011 and May 31,
2011 respectively. The said loans have been fully repaid during the
current period.
Cash credit, overdraft and other facilities from banks are secured by a
first charge on current assets and a pari passu second charge on the
fixed assets of the company. As at September 30, 2014, the interest on
such facilities ranges from 14.00% p.a to 15.50% p.a.
Other loan repayable on demand from banks (secured) loans comprises of
ioans from DBS Bank. Such loans is secured by a first charge on current
asssets and a pari passu second charge on the fixed assets of the
company. The interest rate on such loans ranges from 13.30% p.a to
15.00% p.a.
Unsecured short-term loans represents loan from Bank of Baroda . The
interest rate on such loan was 10.25% p.a. The said loan was fully
repaid during the current period.
Buyer''s Credit was repayable on their respective due dates within next
12 months. Interest rate on such buyer''s credit ranges from 6% p.a.
5 As at March 31, 2009 the Company had revalued its entire freehold
land of manufacturing units at Ennore and Uppal. These were revalued to
reflect the current value of the same based on valuation report of
registered valuer dated May 25, 2009. The valuation has been carried
based on the present market price and/ or the guideline value. The
difference of Rs.18,573.40 lakhs between the revalued amount and book
value thereof has been credited to fixed assets revaluation reserve.
@ includes upward revaluation made on March 31,1992.
# Consequent to realignment in the rupee value on foreign exchange,
there has been an increase of Rs.338.46 lakhs (Previous year decrease
of Rs.672 lakhs) in the Company''s liability for repayment of External
Commercial Borrowings. Capital work-in-progress includes the aforesaid
exchange differences.
6 Buildings include cost : Rs. 145.37 Lakhs (previous year Rs. 145.37
lakhs) and written down value Rs. 62.67 lakhs (previous year Rs. 69.95
lakhs) in respect of expenditure incurred on capital assets, the
ownership of which does not vest in the Company.
A Electrical installations include Cost: Rs. 98.17 Lakhs (previous year
Rs. 98.17 Lakhs) and Written Down Value Rs. 20.10 lakhs (previous year
Rs. 27.10 lakhs) in respect of expenditure incurred on capital assets,
the ownership of which does not vest in the Company. ** Consequent to
realignment in the rupee value on foreign exchange, there has been an
increase of Rs.1379.41 lakhs (Previous year increase of Rs. 112.82
lakhs) in the Company''s liability for repayment of
External Commercial Borrowings. Additions to fixed assets includes the
aforesaid exchange differences and the exchange differences arising on
account of repayment of External Commercial Borrowings.
* Amount disclosed under ''Short-term loans and advances''. Refer Note 19
$ includes claim for refund of electricity tax on maximum demand
charges amounting to Rs.370.18 lakhs (March 31, 2013: Rs.370.18 lakhs)
represents electricity tax paid for the period September 1991 to
November 2009 recoverable from Tamil Nadu Electricity Board (TNEB). The
amount has been accounted based on a Supreme Court decision delivered
in May 2007 and legal opinions obtained by the Company, also refer note
2(a).
Mar 31, 2013
The accounting policies set out below have been applied consistently to
the periods presented in these financial statements.
a. Basis of preparation of Financial Statements
The financial statements of the Company have been prepared and
presented in accordance with the Generally Accepted Accounting
Principles ("GAAP") under the historical cost convention except in
respect of revalued fixed assets on the accrual basis. GAAP comprises
accounting standards notified by the Central Government of India under
Section 211 (3C) of the Companies Act, 1956, other pronouncements of
Institute of Chartered Accountants of India, the provisions of
Companies Act, 1956 and guidelines issued by Securities and Exchange
Board of India (SEBI), to the extent applicable.
The Company''s performance has been impacted due to sharp fall in demand
from the Company''s major customers; increases in power cost and
material cost not being adequately compensated by the customers. As a
result, the accumulated losses as at March 31, 2013 have significantly
eroded the net worth of the Company. The Company has intimated to the
Board for Industrial and Financial Reconstruction (''BIFR'') about
erosion of more than 50% of the Company''s peak networth pursuant to
Section 23 of Sick Industrial Companies (Special Provision) Act, 1985
(''SICA''). The Company has initiated various steps to improve its
operational performance /liquidity, remove bottlenecks relating to its
projects, improve the net worth including raising capital from the
promoters through issue of 9% redeemable non-convertible cumulative
preference shares. Based on the current business plans, availability of
banking limits and subscription of the preference share capital and
continued support by the Promoters, the Company believes that it would
be able to meet its financial requirements and no adjustments would be
required in respect of the carrying value of assets/liabilities.
Accordingly, the financial statements have been prepared on a going
concern basis.
b. Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenues
and expenses during the reporting period, reported balances of assets
and liabilities, and disclosure of contingent assets and liabilities as
at the date of the financial statements. Actual results could differ
from those estimates. Any revision to accounting estimates is
recognized prospectively in current and future periods.
c. Fixed Assets and Depreciation
Fixed assets are stated at cost or revalued amount less accumulated
depreciation and impairment losses, if any. Net increase in fixed
assets on account of revaluation is credited to the revaluation reserve
account.
Cost comprises the purchase price and any attributable cost of bringing
the asset to its working condition for its intended use.
Depreciation on fixed assets is provided using the straight-line method
based on useful economic life as estimated by the management or at the
rates prescribed under Schedule XIV of the Companies Act, 1956,
whichever is higher.
For the following assets the depreciation rates are higher than the
rates prescribed by Schedule XIV:
Individual assets costing Rs 5,000/- or less are depreciated in full in
the year of purchase.
The incremental depreciation on account of enhancement in the value of
major fixed assets on revaluation is charged against fixed assets
revaluation reserve.
Assets acquired under hire purchase/finance lease agreements are
capitalized and finance charges thereon are expensed over the period of
agreements.
Developmental costs relating to leasehold land is amortized over the
period of 33 years.
Assets retired from active use and held for disposal are stated at the
lower of their net book value and net realisable value and shown under
''Other current assets''.
Intangibles
Intangible assets comprise of acquired goodwill, acquired technical
know-how and internally generated intangibles relating to development
of methodologies, frameworks and processes.
Acquired goodwill and technical know-how are stated at acquisition
cost. Internally generated intangible assets are stated at cost that
can be measured reliably during the development phase and when it is
probable that future economic benefits that are attributable to the
assets will flow to the Company.
Goodwill, technical know-how fees and process know how are amortized
using the straight-line method over a period of five years.
d. Inventory
Inventories are valued at the lower of cost and net realizable value.
Cost of inventories comprises all cost of purchase, cost of conversion
and other costs incurred in bringing the inventories to their present
location and condition. Cost includes all taxes and duties, but
excludes duties and taxes that are subsequently recoverable from tax
authorities.
The methods of determining cost of various categories of inventories
are as follows:
e. Borrowing Costs
Borrowing costs including amortization of ancillary borrowing cost that
are directly attributable to the acquisition or construction of
qualifying fixed assets which necessarily take a substantial period of
time to get ready for their intended use are capitalized as part of the
cost of such assets. Other borrowing costs are recognized as expense in
the period in which they are incurred.
f. Employee Benefits
Gratuity liability is a defined benefit obligation and is provided for
based on actuarial valuation performed in accordance with the projected
unit credit method, as at the balance sheet date and is funded with
Life Insurance Corporation of India (LIC).
Short term compensated absences / leave encashment are provided for
based on the eligible leave at credit on the balance sheet date and the
estimated cost is based on the terms of the employment contract. Long
term compensated absences are provided for based on actuarial valuation
as at the balance sheet date using projected unit credit method.
Eligible employees of the Company relating to Ennore unit receive
benefits from the provident fund, which is a defined benefit plan. Both
the employee and the Company make monthly contributions to the Ennore
Foundries Limited Employees'' Provident Fund Trust. The rate at which
the annual interest is payable to the beneficiaries by the Trust is
being administered by the government. The Company has an obligation to
make good the shortfall, if any, between the return from the
investments of the Trust and the notified interest rate. Such
liability, if any, is provided for based on the actuarial valuation as
at the balance sheet date.
Contributions to Provident Fund (other than relating to Ennore Unit of
the Company), employee pension fund (other than relating to Ennore Unit
of the Company), Superannuation Fund and cost of other benefits are
charged to the Statement of Profit and Loss of the year when the
contributions to the respective funds are due. The Company has no
further obligations under the plan beyond its monthly contributions.
Actuarial gains/losses are immediately taken to Statement of Profit and
Loss and are not deferred.
g. Revenue Recognition
Revenue comprises sale of castings and design and development of
patterns and tools. Revenue is recognised to the extent it is probable
that the economic benefits will flow to the Company and that the
revenue can be reliably measured and is expected to be received.
Revenue from the sale of castings are recognized when all significant
risks and rewards of ownership are transferred to the buyer, which
generally coincide with dispatch of goods. The amount recognized as
sale is exclusive of sales tax.
Income from design and development of patterns and tools and other
incidental works is recognised in accordance with the percentage of
completion method.
Revision in prices subsequent to sale is recognised when accepted by
the customers.
Interest income on deposits and interest bearing securities is
recognized on the time proportionate method.
Insurance claims are recognized when the amount thereof can be measured
reliably and ultimate collection is reasonably certain
h. Income Taxes
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961. Deferred income taxes reflect
the impact of current year timing differences between taxable income
and accounting income for the year and reversal of timing differences
of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. Deferred tax
assets are recognised on carry forward of unabsorbed depreciation and
tax losses only if there is virtual certainty supported by convincing
evidence that such deferred tax assets can be realized against future
taxable profits. Unrecognized deferred tax assets of earlier years are
re-assessed and recognised to the extent that it has become reasonably
/ virtually certain that future taxable income will be available
against which such deferred tax assets can be realized.
Minimum Alternative Tax (''MAT'') credit is recognised as an asset only
when and to the extent there is convincing evidence that the company
will pay normal income tax during the specified period. In the year in
which the MAT credit becomes eligible to be recognized as an asset in
accordance with the recommendations contained in Guidance Note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the Statement of Profit and Loss and
shown as MAT Credit Entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal Income Tax during the specified
period.
i. Foreign Currency Transactions
Foreign currency transactions are recorded at the exchange rates
prevailing on the date of the transactions or rates that approximates
the exchange rate prevailing at the date of transactions. Monetary
assets and liabilities denominated in foreign currencies as at the
balance sheet date are translated at the closing exchange rates on that
date. Exchange differences arising on foreign exchange transactions
during the year and on restatement of monetary assets and liabilities
are recognized in the Statement of Profit and Loss of the year.
Pursuant to the notifications of the Ministry of Corporate Affairs,
exchange fluctuations on all long term monetary items so far as they
relate to the acquisition of a depreciable capital asset are added to
or deducted from the cost of the asset and is depreciated over the
balance life of such assets. All other exchange fluctuations on long
term monetary items are accumulated in ''foreign currency monetary item
translation difference account'' in the Company''s financial statements
and amortized over the balance period of such long term
asset/liability.
j. Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders (after deducting
preference dividends and attributable taxes) by the weighted average
number of equity shares outstanding during the year. As at the
reporting date, the Company has not issued any potential equity shares,
and accordingly, the basic earnings per share and diluted earnings per
share are the same.
k. Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
I. Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital.
m. Expenditure on New Projects and Substantial Expansion
Expenditure directly relating to construction activity is capitalised.
Indirect expenditure incurred during construction period is capitalised
as part of the indirect construction cost to the extent to which the
expenditure is related to construction or is incidental thereto. Other
indirect expenditure (including borrowing costs) incurred during the
construction period which is neither related to the construction
activity nor is incidental thereto are charged to the Statement of
Profit and Loss. Income earned during construction period is deducted
from the total of the indirect expenditure.
All direct capital expenditure on expansion are capitalised. As regards
indirect expenditure on expansion, only that portion is capitalised
which represents the marginal increase in such expenditure involved as
a result of capital expansion. Both direct and indirect expenditure are
capitalised only if they increase the value of the asset beyond its
original standard of performance.
n. Leases
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of Profit and Loss on a straight-line basis over the
lease term.
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
capitalised.
o. Investments
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognise a decline other than temporary
in the value of the investments.
Current investments are carried at the lower of cost and fair value.
Any reductions in the carrying amount and any reversals of such
reductions are charged or credited to the Statement of Profit and Loss.
p. Derivative Instruments and Hedge Accounting
The Company uses derivative financial instruments such as interest rate
swaps to hedge its exposure in interest rates relating to underlying
transaction.
The Company has adopted the principles of Accounting Standard 30,
Financial Instruments: Recognition and Measurement (AS 30) issued by
ICAI except to the extent the adoption of AS 30 does not conflict with
existing accounting standards prescribed by Companies (Accounting
Standards) Rules, 2006 and other authoritative pronouncements.
In accordance with the recognition and measurement principles set out
in AS 30, changes in fair value of derivative financial instruments
designated as cash flow hedges are recognised directly in shareholders''
funds and reclassified into the profit and loss account upon the
occurrence of the hedged transaction.
Changes in fair value relating to the ineffective portion of the hedges
and derivatives that do not qualify for hedge accounting are recognised
in the Statement of Profit and Loss.
The fair value of derivative financial instruments is determined based
on observable market inputs including yield curves etc.
q. Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, financing and
investing activities of the Company are segregated.
Mar 31, 2011
1.1.1 Basis of Preparaton
The financial statements of the Company have been prepared and presented
in accordance with the Generally Accepted Accountng Principles ("GAAP")
under the historical cost conventon except in respect of revalued fixed
assets on the accrual basis. GAAP comprises accountng standards notfed
by the Central Government of India under Secton 211 (3C) of the
Companies Act, 1956, other pronouncements of Insttute of Chartered
Accountants of India and the provisions of Companies Act, 1956, to the
extent applicable.
Accountng policies have been consistently applied except where a newly
issued accountng standard is initally adopted or a revision to existng
accountng standards requires a change in the accountng policy hitherto
in use. Management evaluates all recently issued or revised accountng
standards on an on-going basis.
1.2.2 Use of Estmates
The preparaton of the financial statements in conformity with generally
accepted accountng principles requires management to make estmates and
assumptons that afect the reported amounts of revenues and expenses
during the reportng period, reported balances of assets and liabilites,
and disclosure of contngent assets and liabilites as at the date of the
financial statements. Actual results could difer from those estmates.
Any revision to accountng estmates is recognized prospectvely in
current and future periods.
1.2.3 Fixed Assets and depreciaton
Fixed assets are stated at cost or revalued amount less accumulated
depreciaton and impairment losses, if any. Net increase in fixed assets
on account of revaluaton is credited to the Revaluaton Reserve Account.
Cost comprises the purchase price and any atributable cost of bringing
the asset to its working conditon for its intended use.
Depreciaton on fixed assets is provided using the straight-line method
based on useful economic life as estmated by the management or at the
rates prescribed under Schedule XIV of the Companies Act, 1956,
whichever is higher.
Individual assets costng Rs 5,000/- or less are depreciated in full in
the year of purchase.
The incremental depreciaton on account of enhancement in the value of
major fixed assets on revaluaton is charged against Fixed Assets
Revaluaton Reserve.
Assets acquired under Hire Purchase/Finance Lease agreements are
capitalized and fnance charges thereon are expensed over the period of
agreements.
Developmental costs relatng to Leasehold land is amortzed over the
period of 33 years.
Intangibles
Intangible assets comprise of acquired goodwill, acquired technical
know-how and internally generated intangibles relatng to development of
methodologies, frameworks, and processes.
Acquired goodwill and technical know-how are stated at acquisiton cost.
Internally generated intangible assets are stated at cost that can be
measured reliably during the development phase and when it is probable
that future economic Benefits that are atributable to the assets will
flow to the Company.
Goodwill, technical know-how fees and process know how are amortzed
using the straight-line method over a period of five years.
1.2.4 Rights issue
Consequent to the approval of the members in their meetng held on July
29, 2009, the Company ofered for subscripton 10,055,749 equity shares
of Rs.10/- each at a premium of Rs 40/- per share aggregatng to Rs.
5027.87, to the existng shareholders on a rights basis, in the rato of
7 equity shares for every 13 fully paid up equity shares. The issue was
fully subscribed and the allotment has been made during the year.
1.2.5 Inventory
Inventories are valued at the lower of cost and net realizable value.
Cost of inventories comprises all cost of purchase, cost of conversion
and other costs incurred in bringing the inventories to their present
locaton and conditon. Cost includes all taxes and dutes, but excludes
dutes and taxes that are subsequently recoverable from tax authorites.
1.2.6 Borrowing costs
Borrowing costs including amortzaton of ancillary borrowing cost that
are directly atributable to the acquisiton or constructon of qualifying
fixed assets which necessarily take a substantal period of tme to get
ready for their intended use are capitalized as part of the cost of
such assets. Other borrowing costs are recognized as expense in the
period in which they are incurred.
1.2.7 Employee Benefits
Gratuity liability is a defned benefit obligaton and is provided for
based on actuarial valuaton performed in accordance with the projected
unit credit method, as at the balance sheet date and is funded with
Life Insurance Corporaton of India (LIC).
Short term compensated absences / leave encashment are provided for
based on the eligible leave at credit on the balance sheet date and the
estmated cost is based on the terms of the employment contract. Long
term compensated absences are provided for based on actuarial valuaton
as at the balance sheet date using projected unit credit method.
Eligible employees of the Company relatng to Ennore unit receive
Benefits from the provident fund, which is a defned benefit plan. Both
the employee and the Company make monthly contributons to the provident
fund plan equal to a specifed percentage of the covered employee's
salary.
Contributons to Provident fund (other than relatng to Ennore Unit of
the Company), Employee pension fund (other than relatng to Ennore Unit
of the Company), Superannuaton fund and cost of other Benefits are
charged to the Profit and Loss Account of the year when the contributons
to the respectve funds are due. The Company has no further obligatons
under the plan beyond its monthly contributons. Actuarial gains/losses
are immediately taken to Profit and loss account and are not deferred.
1.2.8 Revenue recogniton
Revenue comprises sale of castngs and design and development of paterns
and tools. Revenue is recognised to the extent it is probable that the
economic Benefits will flow to the Company and that the revenue can be
reliably measured and is expected to be received.
Revenue from the sale of castngs are recognized when all significant
risks and rewards of ownership to the buyer, which generally coincides
with dispatch of goods. The amount recognized as sale is exclusive of
sales tax.
Income from design and development of paterns and tools and other
incidental works is recognised in accordance with the percentage of
completon method.
Revision in prices subsequent to sale is recognised when accepted by
the customers.
Interest income on deposits and interest bearing securites is
recognized on the tme proportonate method. Insurance claims are
recognized when the amount thereof can be measured reliably and ultmate
collecton is reasonably certain
1.2.9 Income Taxes
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorites in
accordance with the Income Tax Act, 1961. Deferred income taxes refect
the impact of current year tming diferences between taxable income and
accountng income for the year and reversal of tming diferences of
earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantvely enacted at the balance sheet date. Deferred tax
assets are recognised only to the extent that there is reasonable
certainty that sufcient future taxable income will be available against
which such deferred tax assets can be realized. Deferred tax assets are
recognised on carry forward of unabsorbed depreciaton and tax losses
only if there is virtual certainty supported by convincing evidence
that such deferred tax assets can be realized against future taxable
Profits. Unrecognized deferred tax assets of earlier years are
re-assessed and recognised to the extent that it has become reasonably
/ virtually certain that future taxable income will be available
against which such deferred tax assets can be realized.
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the company will pay normal income tax
during the specifed period. In the year in which the Minimum Alternatve
tax (MAT) credit becomes eligible to be recognized as an asset in
accordance with the recommendatons contained in Guidance Note issued by
the Insttute of Chartered Accountants of India, the said asset is
created by way of a credit to the Profit and loss account and shown as
MAT Credit Enttlement. The Company reviews the same at each balance
sheet date and writes down the carrying amount of MAT Credit Enttlement
to the extent there is no longer convincing evidence to the efect that
Company will pay normal Income Tax during the specifed period.
1.2.10 Foreign Currency transactons
Foreign currency transactons are recorded at the exchange rates
prevailing on the date of the transactons or rates that approximates
the exchange rate prevailing at the date of transactons. Monetary
assets and liabilites denominated in foreign currencies as at the
balance sheet date are translated at the closing exchange rates on that
date. Exchange diferences arising on foreign exchange transactons
during the year and on restatement of monetary assets and liabilites
are recognized in the Profit and loss account of the year.
Pursuant to the notfcaton G.S.R. 225(E) of the Ministry of Corporate
Afairs issued on March 31, 2009, the Company has exercised the
irrevocable opton granted under the said notfcaton. Accordingly,
exchange fuctuatons on all long term monetary items so far as they
relate to the acquisiton of a depreciable capital asset, are added to
or deducted from the cost of the asset and is depreciated over the
balance life of such assets. All other exchange fuctuatons on long term
monetary items are accumulated in 'foreign currency monetary item
translaton diference account' in the Company's financial statements and
amortzed over the balance period of such long term asset/liability but
not beyond March 31, 2011 (or such other extended period as may be
permited by law)
1.2.10 Earnings per Share
Basic earnings per share are calculated by dividing the net Profit or
loss for the year atributable to equity shareholders (afer deductng
preference dividends and atributable taxes) by the weighted average
number of equity shares outstanding during the year. As at the reportng
date, the Company has not issued any potental equity shares, and
accordingly, the basic earnings per share and diluted earnings per
share are the same.
1.2.11 Provisions
A provision is recognised when an enterprise has a present obligaton as
a result of past event; it is probable that an outlow of resources will
be required to setle the obligaton, in respect of which a reliable
estmate can be made. Provisions are not discounted to its present value
and are determined based on best estmate required to setle the
obligaton at the balance sheet date. These are reviewed at each
balance sheet date and adjusted to refect the current best estmates.
1.2.12 Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indicaton of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estmated future cash flows are discounted to
their present value at the weighted average cost of capital.
1.2.13 Expenditure on new projects and substantal expansion
Expenditure directly relatng to constructon actvity is capitalised.
Indirect expenditure incurred during constructon period is capitalised
as part of the indirect constructon cost to the extent to which the
expenditure is indirectly related to constructon or is incidental
thereto. Other indirect expenditure (including borrowing costs)
incurred during the constructon period which is neither related to the
constructon actvity nor is incidental thereto charged to the Profit and
Loss Account. Income earned during constructon period is deducted from
the total of the indirect expenditure.
All direct capital expenditure on expansion are capitalised. As regards
indirect expenditure on expansion, only that porton is capitalised
which represents the marginal increase in such expenditure involved as
a result of capital expansion. Both direct and indirect expenditure are
capitalised only if they increase the value of the asset beyond its
original standard of performance.
1.2.14 Leases
Leases where the lessor efectvely retains substantally all the risks
and Benefits of ownership of the leased item, are classifed as operatng
leases. Operatng lease payments are recognized as an expense in the
Profit and Loss account on a straight-line basis over the lease term.
Finance leases, which efectvely transfer to the Company substantally
all the risks and Benefits incidental to ownership of the leased item,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the incepton of the lease term and disclosed
as leased assets. Lease payments are apportoned between the fnance
charges and reducton of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other inital direct costs are
capitalised.
1.2.15 Investments
Long-term investments are carried at cost. However, provision for
diminuton in value is made to recognise a decline other than temporary
in the value of the investments.
1.2.16 Cash flow statement
Cash flows are reported using the indirect method, whereby Profit before
tax is adjusted for the efects of transactons of a nonÃcash nature and
any deferrals or accruals of past or future cash receipts or payments.
The cash flows from regular revenue generatng, fnancing and investng
actvites of the Company are segregated.
2.0 Claim for refund of electricity tax on maximum demand charges
amountng to Rs.407.18 lakhs represents electricity tax paid for the
period September 1991 to November 2009 recoverable from Tamil Nadu
Electricity Board (TNEB). The amount has been accounted based on a
Supreme Court decision delivered in May 2007 and legal opinions
obtained by the Company.
2.1 Insurance claim on loss of Profit amountng to Rs. 400.95 lakhs
represents losses incurred by the Company at Sriperumbuddur unit and
Ennore unit. The amount has been accounted on the basis of estmates by
the surveyor.
2.2 Tax deducted at source from conversion charges is Rs Nil Lakh
(Previous year Rs.0.34 Lakhs) and from interest income earned is Rs
7.47 Lakhs (Previous Year Rs. 12.18.Lakhs).
2.3 The management has identfed enterprises which have provided goods
and services to the Company and which qualify under the defniton of
micro and small enterprises, as defned under Micro, Small and Medium
Enterprises Development Act, 2006.
Accordingly, the disclosure in respect of the amounts payable to such
enterprises as at 31st March 2011 has been made in the financial
statements based on informaton received and available with the Company
and relied upon by auditors. Further in the view of the management, the
impact of interest, if any, that may be payable in accordance with the
provisions of the Act is not expected to be material.
Mar 31, 2010
1.1.1 Basis of Preparation
The financial statements have been prepared to comply in all material
respects with the Notified accounting standard issued by Companies
(Accounting Standards) Rules, 2006, as amended, and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the historical cost convention on accrual basis
except in case of assets which are revalued. The accounting policies
have been consistently applied by the Company and are consistent with
those used in the previous year.
1.1.2 Use of Estimates
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the period reported. Actual results could differ
from these estimates.
Management periodically assesses using external and internal sources
whether there is an indication that an asset may be impaired.
Impairment occurs where the carrying value exceeds the present value of
future cash flows expected to arise from the continuing use of the
asset and its eventual disposal. The impairment loss to be expensed is
determined as the excess of the carrying amount over the higher of the
assets net sales price or present value as determined above.
Contingencies are recorded when it is probable that a liability will be
incurred and the amount can be reasonably estimated. Actual results
could differ from those estimates.
1.1.3 Fixed Assets and depreciation
Fixed assets are stated at cost or revalued amount less accumulated
depreciation and impairment losses, if any. Net increase in fixed
assets on account of revaluation is credited to the Revaluation Reserve
account.
Cost comprises the purchase price and any attributable cost of bringing
the asset to its working condition for its intended use.
Depreciation on fixed assets is provided using the straight-line method
based on useful economic life as estimated by the management or at the
rates prescribed under Schedule XIV of the Companies Act, 1956.
Individual assets costing Rs 5,000 or less are depreciated in full in
the year of purchase. After impairment if any, depreciation is provided
on the revised carrying amount of the assets over its remaining useful
life.
The incremental depreciation on account of enhancement in the value of
major fixed assets on revaluation is charged against Fixed Assets
Revaluation Reserve.
Assets acquired under Hire Purchase/Finance Lease agreements are
capitalized and finance charges thereon are expensed over the period of
agreements.
Developmental costs relating to Leasehold land is amortized over the
period of 20 years.
Intangibles
Goodwill and technical know-how fees are amortized using the
straight-line method over a period of five years.
1.1.4 Inventory
Raw materials, stores and spares are valued at lower of cost and net
realizable value. Work-in- progress and finished goods are valued at
lower of cost and net realizable value. Cost includes material, labour
and appropriate allocated overheads based on normal operating capacity.
Cost of finished goods includes excise duty. Cost is determined on
weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
1.1.5 Borrowing costs
Borrowing costs that are directly attributable to the cost of
acquisition, construction, or production of a qualifying asset is
capitalized as part of that asset, other borrowing costs are recognized
as expense in the period in which they are incurred.
1.1.6 Employee benefits
Gratuity liability is a defined benefit obligation and is provided for
based on actuarial valuation performed in accordance with the projected
unit credit method, as at the balance sheet date and is funded with
LIC.
Short term compensated absences / leave encashment are provided for
based on the eligible leave at credit on the balance sheet date and the
estimated cost is based on the terms of the employment contract. Long
term compensated absences are provided for based on actuarial valuation
as at the balance sheet date using projected unit credit method.
Contributions to Provident fund, Employee pension fund, Superannuation
fund and cost of other benefits are charged to the Profit and Loss
Account of the year when the contributions to the respective funds are
due. The Company has no further obligations under the plan beyond its
monthly contributions.
Actuarial gains/losses are immediately taken to profit and loss account
and are not deferred.
1.1.7 Revenue recognition
Revenue including income on miscellaneous order jobs is recognised when
the significant risks and rewards of ownership of goods have been
passed to the buyer, which generally coincide with the dispatch of
goods. Revenue comprises amounts invoiced for goods sold including
excise duty but net of sales returns. Revenues are reported exclusive
of sales tax and Value Added Tax (VAT).
Revision in prices subsequent to sale is recognised when accepted by
the customers.
Sales returns are accounted on receipt of rejected materials in
Companys premise.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable.
Insurance Claims
Insurance claims are recognised when the amount thereof can be measured
reliably and ultimate collection is reasonably certain.
1.1.8 Voluntary Retirement Scheme
The compensation paid towards Voluntary Retirement Scheme (VRS) is
amortized such that no amounts are carried forward beyond March 31,
2010.
1.1.9 Income Taxes
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961. Deferred income taxes reflect
the impact of current year timing differences between taxable income
and accounting income for the year and reversal of timing differences
of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. Deferred tax
assets are recognised on carry forward of unabsorbed depreciation and
tax losses only if there is virtual certainty supported by convincing
evidence that such deferred tax assets can be realized against future
taxable profits. Unrecognized deferred tax assets of earlier years are
re-assessed and recognised to the extent that it has become reasonably
/ virtually certain that future taxable income will be available
against which such deferred tax assets can be realized.
Minimum Alternative Tax (MAT) credit is recognised as an asset only
when and to the extent there is convincing evidence that the company
will pay normal income tax during the specified period. In the year in
which the MAT credit becomes eligible to be recognized as an asset in
accordance with the recommendations contained in Guidance Note issued
by the Institute of
Chartered Accountants of India, the said asset is created by way of a
credit to the profit and loss account and shown as MAT Credit
Entitlement. The Company reviews the same at each balance sheet date
and writes down the carrying amount of MAT Credit Entitlement to the
extent there is no longer convincing evidence to the effect that
Company will pay normal Income Tax during the specified period.
1.1.10 Foreign Currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(iii) Exchange Differences
Exchange differences, in respect of accounting periods commencing on or
after 7th December, 2006, arising on reporting of long-term foreign
currency monetary items at rates different from those at which they
were initially recorded during the period, or reported in previous
financial statements, in so far as they relate to the acquisition of a
depreciable capital asset, are added to or deducted from the cost of
the asset and are depreciated over the balance life of the asset, and
in other cases, are accumulated in a "Foreign Currency Monetary Item
Translation Difference Account" in the enterprises financial
statements and amortized over the balance period of such long-term
asset/liability but not beyond accounting period ending on or before
31st March, 2011.
Exchange differences arising on the settlement of monetary items not
covered above, or on reporting such monetary items of company at rates
different from those at which they were initially recorded during the
year, or reported in previous financial statements, are recognized as
income or as expenses in the year in which they arise.
1.1.11 Earnings per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders (after deducting
preference dividends and attributable taxes) by the weighted average
number of equity shares outstanding during the year.
As at the reporting date, the Company has not issued any potential
equity shares, and accordingly, the basic earnings per share and
diluted earnings per share are the same.
1.1.12 Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
1.1.13 Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital.
1.1.14 Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity is capitalised.
Indirect expenditure incurred during construction period is capitalised
as part of the indirect construction cost to the extent to which the
expenditure is indirectly related to construction or is incidental
thereto. Other indirect expenditure (including borrowing costs)
incurred during the construction period which is neither related to the
construction activity nor incidental thereto is charged to the Profit
and Loss Account. Income earned during construction period is deducted
from the total of the indirect expenditure.
All direct capital expenditure on expansion are capitalised. As regards
indirect expenditure on expansion, only that portion is capitalised
which represents the marginal increase in such expenditure involved as
a result of capital expansion. Both direct and indirect expenditure are
capitalised only if they increase the value of the asset beyond its
original standard of performance.
1.1.15 Leases
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss account on a straight-line basis over the lease
term.
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
capitalised.
1.1.16 Investments
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognise a decline other than temporary
in the value of the investments.
1.2 Claim for refund of electricity tax on maximum demand charges
amounting to Rs.407.18 lakhs represents electricity tax paid for the
period September 1991 to November 2009 recoverable from Tamil Nadu
Electricity Board (TNEB). The amount has been accounted based on a
Supreme Court decision delivered in May 2007 and legal opinions
obtained by the Company.
1.3 Tax deducted at source from conversion charges is Rs 0.34 Lakh
(Previous year Rs.7.57 Lakhs) and interest income earned is Rs 12.18
Lakhs (Previous Year Rs. 10.38.Lakhs).
1.4 There are no 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. This information has been
determined to the extent such parties have been identified on the basis
of information available with the Company and relied upon by the
Auditors.
e) The Tamil Nadu Government has issued notification levying additional
charge on High Tension Industries, having Arc furnaces at 25% of the
power consumption effective 1st December 2001 till 15th March 2003.
Pursuant to this notification all companies which have an arc furnace
will have to pay additional surcharge on their power consumption when
these furnaces emit effluents exceeding certain thresholds. Though the
Company has not received any demand in this regard, the notification
has been challenged by the Company before the High Court of Madras. The
High Court has granted interim stay.
Subsequently, TNERC passed an order imposing 15 %Arc furnace additional
charge effective March 16, 2003. The Company also filed an affidavit
stating that it had installed in 1999, harmonic filters to contain the
harmonic levels. The Honble Madras High Court after hearing the case
on October 8, 2003, directed TNEB to verify the installation of
harmonic filters by the Company and report back the status. Though the
verification is done, TNEB has not filed the report in the High Court
and the case is yet to come up for further hearing. The Management
believes that the final impact is not ascertainable pending the receipt
of report from TNEB.
In the opinion of the management, no provision is considered necessary
forthe disputes mentioned above on the grounds that there are
reasonable chances of successful outcome of appeals.
Disclaimer: This is 3rd Party content/feed, viewers are requested to use their discretion and conduct proper diligence before investing, GoodReturns does not take any liability on the genuineness and correctness of the information in this article