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Notes to Accounts of Honeywell Automation India Ltd.

Mar 31, 2017

NOTE 1 - CRITICAL JUDGEMENTS, ESTIMATIONS AND ASSUMPTIONS IN APPLYING ACCOUNTING POLICIES

In the application of the Company’s accounting policies, which are described in note 3, the directors of the company is required to make judgments estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

1. The preparation of financial statements involves estimates and assumptions that affect the reported amount of assets, liabilities, disclosure of contingent liabilities at the date of financial statements and the reported amount of revenues and expenses for the reporting period. Specifically, the Company estimates the probability of collection of accounts receivable by analyzing historical payment patterns, customer concentrations, customer credit-worthiness and current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required.

2. The company uses the percentage-of-completion method in accounting for its contract revenue. Use of the percentage-of-completion method requires the company to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the expected contract estimates at the reporting date.

3. The stock compensation expense is determined based on the Company’s estimate of equity instruments that will eventually vest.

4. Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which this entity operate (i.e. the “functional currency”). The financial statements are presented in Indian Rupee, the national currency of India, which is the functional currency of the Company.

5. Provision for warranty is considered based on the rolling average warranty expense incurred in the preceding 12 months, the warranty period for which ranges from 12 months to 24 months as per provisions of the contracts.

6. In case of Property, plant and equipment, The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of company’s assets are determined by management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology.

NOTE 2 - FIRST-TIME IND-AS ADOPTION RECONCILIATIONS

The company has prepared the opening balance sheet as per Ind AS as of April 1, 2015 (the transition date) by recognizing all assets and liabilities whose recognition is required by Ind AS, not recognizing items of assets or liabilities which are not permitted by Ind AS, by reclassifying items from Previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognized assets and liabilities. However, this principle is subject to the certain optional exemptions availed by the company as detailed below :

Exemptions availed

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS.

The Company has availed the following exemptions:

1. Deemed cost for property, plant and equipment and intangible assets: Property Plant and equipment, were carried in Balance sheet prepared in accordance with previous GAAP on 31st March 2015. The Company has elected to regard carrying values as at 31st March 2015 as deemed cost at the date of transition.

2. Derecognition of financial assets and liabilities: The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after April 1, 2015 ( the transition date).

3. Cumulative translation differences on foreign operations: Cumulative currency translation differences for all foreign operations are deemed to be zero as at 1 April 2015.

4. Impairment of financial assets: The Company has applied the impairment requirements of Ind AS 109 retrospectively; however, as permitted by Ind AS 101, it has used reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognized in order to compare it with the credit risk at the transition date. Further, the Company has not undertaken an exhaustive search for information when determining, at the date of transition to Ind ASs, whether there have been significant increases in credit risk since initial recognition, as permitted by Ind AS 101.

5. Determining whether an arrangement contains a lease: The Company has applied Appendix C of Ind AS 17 Determining whether an Arrangement contains a Lease to determine whether an arrangement existing at the transition date contains a lease on the basis of facts and circumstances existing at that date.

NOTE 3 - RELATED PARTY DISCLOSURE

List of related parties (as identified and certified by the Management)

i) Parties where control exists

Honeywell Asia -Pacific Inc., Holding company Honeywell International Inc., Ultimate holding company

Other related parties with whom transactions have taken place during the year:

ii) Fellow Subsidiaries

Honeywell Middle East B.V. Honeywell International (India) Private Limited

Honeywell Technology Solutions Quatar Honeywell Limited Australia

Honeywell Tianjin Limited Honeywell Limited

Honeywell Life Safety AS Honeywell Enraf Americas, Inc.

Honeywell B.V. Honeywell Measurex (Ireland) Ltd.

Honeywell & Co. Oman L.L.C. Honeywell Turki-Arabia Limited

Honeywell Pte Ltd. Honeywell Controls System Limited Honeywell Automation & Control Solutions South Africa Honeywell International Middle East Ltd.

(Pty) Ltd. MST Technology GMBH

Honeywell Kuwait KSC. Honeywell Security France S.A.

Automation and Control Solutions, S. de R.L. de C.V. Honeywell GMBH

Honeywell Europe N.V. Honeywell S.A. (Belgium)

Honeywell Systems (Thailand) Ltd. Honeywell Airport Systems Gmbh

Honeywell Ltd. ( Hong Kong) Honeywell s.r.l.

Enraf B.V. UOP India Pvt. Ltd.

Honeywell Technology Solutions Lab Pvt. Ltd. Honeywell Engineering Sdn. Bhd.

Pittway Systems Technology Group Europe Ltd. Honeywell Co., Ltd. (Korea)

Honeywell Taiwan Inc. Honeywell S.L.

HoneyweN Life Safety AS Honeywell Portugal, Automacao e Contolo, S.A.

HoneyweN Building S°luti°ns Gmbh Honeywell Automation & control Solutions Carribean Ltd.

Novar Systems Ltd. Honeywell AS Norway

Honeywell Middle East FZE Honeywell OY

Honeywell Controls International Ltd. Matrikon Middle East Co WLL

Tridium Inc. Honeywell Environmental & Combustion Controls

Honeywell Limited (New Zeland) (Tianjin) Co., Ltd.

Honeywell Austria Gesellschaft mbh Honeywell International s.a.r.l.

Honeywell A.B. Honeywell Sensing & Control China Co, Ltd.

Matrikon Pty Ltd. Honeywell Technologies SARL

Trend Control Systems Ltd. Honeywell AG

Honeywell (China) Advanced Solutions Co., Ltd. Matrikon Inc.

Honeywell Southern Africa (Proprietary) Ltd. Honeywell NV [Belgium]

Honeywell Japan Inc. Honeywell S.A.I.C.

Honeywell Angola Lda Eclipse Combustion (Pvt.) Ltd.

Honeywell E.P.E. Elster GmbH

Other related parties with whom transactions have taken place during the year:

HONEYWELL LIMITED / HONEYWELL LIMITEE Elster Metering Private Limited

Honeywell S.A. [France] Elster Solutions GmbH

HONEYWELL TEKNOLOJI A.S Energy ICT N.V.

MK Electric (Malaysia) SDN BHD Honeywell Teknoloji Anonim Sirketi (Previously:

Intermec Technologies (S) Pte Ltd Honeywell Otomasyon ve Kontrol Sistemleri Sanayi ve

Honeywell Hometown Solutions India Foundation Ticaret A.S.)

Honeywell Trading (Shanghai) Co., Ltd. Metrologic Asia (Pte) Ltd

UOP Limited Xtralis Pty Ltd

Honeywell Fire Systems LLC Honeywell International Services S.r.l.

Life Safety Germany GmbH HSM Technology LLC

Honeywell Automotive de Mexico, S.A. de C.V. Honeywell HBS Solutions LLC

Honeywell A/S (Denmark) UOP L.L.C.

Automation And Control Solutions Limited Honeywell Aerospace B.V.

PT Honeywell Indonesia Honeywell Turbo Technologies (India) Private Limited

Life Safety Distribution AG Honeywell Electrical Devices and Systems India Limited

Enraf Tanksystem AG Honeywell do Brasil Ltda.

Salisbury Electrical Safety L.L.C. Honeywell Egypt Limited

Honeywell Analytics Ltd Honeywell EOOD

Sinpoec Honeywell Tianjin Ltd. Matrikon International, Inc.

ZAO Honeywell Novar Gmbh

Maxon Corporation Honeywell Integrated Technology (China) Co Ltd.

Honeywell ASCa Inc. Ademco Asia Pacific Ltd.

Maxon Combustion Equipment (Shanghai) Co.,Ltd. Tridium Asia Pacific Pte Ltd.

Maxon International BVBA Honeywell Building Solutions SES Corporation

BW Technologies Partnership Honeywell Romania s.r.l.

Inncom International Inc Honeywell Marine SAS

Bryan Donkin RMG Gas Controls Ltd Honeywell Europe Services S.A.S.

Honeywell, S.L. [Spain] Honeywell Automation and Control Soluitons West

Honeywell Iraq LLC Africa Limited

Saia-Burgess Controls AG Honeywell Automation Controls System LLP

Honeywell spol. s.r.o. [Slovak Republic] (Kazakhstan)

Integrated Technical Innovation Company for General HoneyweN (Macau) Limited

Services & Trade KAC Alarm Company Limited

Honeywell Specialty Chemicals (Singapore) Pte. Ltd. RMG Regel Messtechnik GmbH

Honeywell Taiwan Limited HoneyweN Sp. z aa

Honeywell, S.A. de C.V. Honeywell Szabalyozastechnikai Kft.

Mercury Instruments LLC Honeywell spol. s.r.o. [Czech Republic]

RMG Messtechnik GmbH Honeywell Technology Solutions Inc.

Honeywell China co. Ltd. Matrikon Business Systems Inc.

Novar ED&S Limited

iii) Key Management Personnel

Mr. Vikas Chaddha, Managing Director [Resigned w.e.f. July 31, 2016 (close of business hours)]

Mr. Ashish Gaikwad, Managing Director [Appointed w.e.f. 1 October, 2016]

Mr. Anurag Bhagania, CFO [Resigned w.e.f. June 26, 2016 (close of business hours)]

Mr. R Ravichandran, CFO [Appointed w.e.f. June 27, 2016]

Ms. Sangeet Hunjan, Company Secretary [Resigned w.e.f. November 24, 2016 (close of business hours)]

Ms. Farah Irani, Company Secretary [Appointed w.e.f. May 16, 2017]

The Company generates a large percentage of its sales and profits from its business with the Honeywell group (Honeywell), its major shareholder. Sales to Honeywell accounted for approximately 39% and 33% of our total net sales for the year ended March 31, 2017 and year ended March 31, 2016 respectively. The Company’s ability to maintain or grow its business with Honeywell depends upon a number of performance factors. However, the Company cannot be assured that its level of sales and profits associated with its relationship with Honeywell will continue. Honeywell-specific business considerations (independent of its shareholding in the Company), including changes in Honeywell’s strategies regarding utilization of alternate opportunities available to it to source products and services currently provided by the Company (including from alternate sources which Honeywell may acquire or develop within its own group), may also reduce the level and/or mix of Honeywell’s business with the Company.

NOTE 4 - SHARE BASED PAYMENTS Employee share option plan of the company

Honeywell International Inc (HII), the ultimate holding company, may grant stock options and restricted stock awards to certain employees under its stock incentive plan.

Stock Options—The exercise price, term and other conditions applicable to each option granted under the stock plans are generally determined by the Management Development and Compensation Committee of the Board of Honeywell International Inc. The exercise price of stock options is set on the grant date and may not be less than the fair market value per share of our stock on that date. The fair value is recognized as an expense over the employee’s requisite service period (generally the vesting period of the award). Options generally vest over a four-year period and expire after ten years.

Restricted Stock Units—Restricted stock unit (RSU) awards entitle the holder to receive one share of common stock for each unit when the units vest. RSUs are issued to certain employees as compensation at fair market value at the date of grant. RSUs typically become fully vested over periods ranging from three to seven years and are payable in Honeywell common stock upon vesting.

Fair value of share options granted in the year

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on implied volatilities from traded options on common stock of HII and historical volatility of common stock of HII. Monte Carlo simulation model is used to derive an expected term which represents an estimate of the time options are expected to remain outstanding. Such model uses historical data to estimate option exercise activity and post-vest termination behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant.

A Disputed statutory matters mainly include:

a) Provision for disputed statutory matters comprises matters under litigation with Sales Tax and Local authorities.

b) The amount of provision made by the Company is based on the estimate made by the Management considering the facts and circumstances of each case.

To the extent the Company is confident that it may have a strong case that portion is disclosed under contingent liabilities.

c) The timing and the amount of cash flows that will arise from these matters will be determined by the Appellate Authorities only on settlement of these cases.

B Warranty

Provision for warranty is considered based on the rolling average warranty expense incurred in the preceding 12 months, the warranty period for which ranges from 12 months to 24 months as per provisions of the contracts.

C Provision for Estimated Cost to complete on Contracts

A provision for estimated cost to complete on construction contracts is recognized when it is probable that the total contract cost will exceed total contract revenue. The provision shall be utilized as and when the contract gets executed.

B Defined benefit plans (gratuity and other retirement benefits)

The Company also provides for gratuity, covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment.

Provident Fund contributions are made to a Trust administered by the Company for its qualifying employees. This defined benefit plans is administered by separate trust that is legally separated from the entity. The board of the trust is required by law and by its trust deed to act in the interest of the fund and of all the relevant stakeholders in the scheme; i.e. active employees, inactive employees, retirees, employers. The board of the fund is responsible for the investment policy with regard to the assets of the fund.

Note : There is a net surplus position in PF valuation and however as per the PF trust act, no surplus can be transferred to the company as it is separate from the company, the company would not be accounting for any amount in its books in this position.

Sensitivity Analysis

Sensitivity analysis indicates the influence of a reasonable change in certain significant assumptions on the outcome of the Present value of obligation (PVO) and aids in understanding the uncertainty of reported amounts.

1. Sensitivity analysis for each significant actuarial assumptions viz. Discount rate and Salary escalation rate as of the end of the reporting period, showing how the defined benefit obligation would have been affected by changes is called out in the table above.

2. The assumptions used in preparing the sensitivity analysis is Discount rate at 100 bps and- 100 bps

Salary assumption at 1 % and- 1%

3. The method used to calculate the liability in these scenarios is by keeping all the other parameters and the data same as in the base liability calculation except for the parameters to be stressed .

4. There is no change in the method from the previous period and the points/percentage by which the assumptions are stressed are same to that in the previous year.

Gratuity fund asset is managed byLife Insurance Corporation of India and the funding ratio of 60% (ie asset over liability ratio of 60% ), which is above average when compared to other companies, actuary don’t see any material risk of HAIL unable to meet the Gratuity payments. Also as the fund is set up as a trust, the monies as a part of the trust will not flow back into the company until the last employee of the trust is paid .

A note on other risks

Investment risk: The funds are invested by LIC and they provide returns basis the prevalent bond yields, LIC on an annual basis requests for contributions to the fund, while the contribution requested may not be on the same interest rate as the bond yields provided, basis the past experience it is low risk.

Interest Risk: LIC does not provide market value of assets, rather maintains a running statement with interest rates declared annually - The fall in interest rate is not therefore offset by increase in value of Bonds, hence may pose a risk.

Longevity Risk: Since the Gratuity Payment happens at the retirement age, longevity impact is very low at this age.

Financial risk management objectives

Company is exposed to foreign exchange risk on account of import risk and hedging activities; and export transactions which is monitored periodically. The Company leverages the global treasury operations of Honeywell to improve mitigation of risk relating to foreign exchange.

Foreign currency risk management

The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The carrying amounts of the companies foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:

Notes to the financial statements Credit risk management

Credit risk refers to the risks that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company deals only with credit worthy counterparties and takes appropriate measures to mitigate the risk of financial loss from defaults. Trade receivable consists of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable.

Liquidity risk management

The Company manages liquidity risk by maintaining adequate reserves, banking facility and by continuously monitoring forecasts and actual cash flows and by matching the maturity profiles of financial assets and liabilities.

NOTE 5

As set out in section 135 of the Companies Act, 2013 the Company is required to contribute/spent Rs. 348 lakhs towards Corporate Social Responsibility activities, as calculated basis 2% of its average net profits of the last three financial years. Accordingly, during the current year, the Company has spent Rs. 348 lakhs (previous year Rs. 303 lakhs) including 9 lakhs (previous year Rs.7 lakhs) toward administration cost.

NOTE 6

Income tax expense relating to earlier years represents additional tax provision for earlier years arising out of proceedings with the authorities during the current year.

NOTE 7

The Company does not maintain any cash balance at any point in time. Accordingly, the requisite disclosures as regards its holding and dealings in Specified Bank Notes as defined in the Notification S.O. 3407(E) dated the 8th November, 2016 of the Ministry of Finance, during the period from 8th November 2016 to 30th December 2016; are not made in the financial statements.

NOTE 8

Previous period’s figures have been regrouped, wherever necessary, to conform with current year’s presentation.

NOTE 9

The financial statements were approved for issue by the board of directors on May 25, 2017.


Mar 31, 2015

A. GENERAL INFORMATION:

Honeywell Automation India Limited (the ''Company'') is engaged primarily in the business of Automation & Control systems on turnkey basis and otherwise. The Company is a public limited company and is listed on the Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE).

(a) Rights, preferences and restrictions attached to the shares

Equity shares: The Company has one class of equity shares having a par value of Rs.10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

a) 6,631,142 (December 31,2013 : 6,631,142 ) Equity shares constituting 75% (December 31,2013 75%) of the paid-up capital of the Company are held by Honeywell International Inc., the ultimate holding company, through its 100% subsidiary, Honeywell Asia Pacific Inc.

b) The Company has neither allotted any shares as fully paid up bonus shares nor pursuant to contract(s) payment being received in cash during 5 years immediately preceding March 31,2015.

2 Segment Reporting:

Primary business segment:

The Company has determined its business segment as Automation & Control Systems. There are no other reportable segments.

Secondary geographical segment:

The Company has two geographical segments, viz. Domestic and Exports. Revenue from geographical segment is given below:

Fixed assets used in the Company''s business or liabilities contracted have not been identified to any segment as the fixed assets and services are used interchangeably between segments. Accordingly no disclosure relating to total segment assets and liabilities is made.

3 Related Party Disclosure :

List of related parties (as identified and certified by the Management)

i) Parties where control exists

Honeywell Asia -Pacific Inc., Holding company

Honeywell International Inc., Ultimate holding company

Other related parties with whom transactions have taken place during the year:

ii) Fellow Subsidiaries

Honeywell Middle East B.V.

Honeywell Technology Solutions Quatar

Honeywell Tianjin Limited

Honeywell Controls and Automation India Pvt. Ltd.

Honeywell B.V.

Honeywell & Co. Oman L.L.C.

Honeywell Pte Ltd.

Honeywell Automation & Control Solutions South Africa (Pty) Ltd.

Honeywell Kuwait KSC.

Automation and Control Solutions, S. de R.L. de C.V.

Honeywell Europe N.V.

Honeywell Systems (Thailand) Ltd.

Honeywell Ltd. ( Hong Kong)

Enraf B.V.

Honeywell Technology Solutions Lab Pvt. Ltd.

Pittway Systems Technology Group Europe Ltd.

Honeywell Taiwan Inc.

Callidus Technologies India Pvt. Ltd.

Honeywell Building Solutions Gmbh

Honeywell International (India) P. Ltd Honeywell Limited Australia

Honeywell Limited Honeywell Enraf Americas, Inc.

Honeywell Measurex (Ireland) Ltd.

Honeywell Turkey Arabia Ltd.

Honeywell Controls System Limited Honeywell International Middle East Ltd.

MST Technology GMBH Honeywell Security France S.A.

Honeywell GMBH Honeywell S.A. (Belgium)

Honeywell Airport Systems Gmbh Honeywell s.r.l.

UOP India Pvt. Ltd.

Honeywell Engineering Sdn. Bhd.

Honeywell Co, Ltd.

Honeywell S.L.

Honeywell Portugal, Automacao e Contolo, S.A.

Other related parties with whom transactions have taken place during the year:

Novar Systems Ltd.

Honeywell Middle East FZE Honeywell Controls International Ltd.

Tridium Inc.

Honeywell Limited (New Zealand)

Honeywell Austria Gesellschaft mbh Honeywell A.B.

Matrikon Pty Ltd.

Trend Control Systems Ltd.

Honeywell (China) Advanced Solutions Co., Ltd.

Honeywell Southern Africa (Proprietary) Ltd.

Honeywell Japan Inc.

Honeywell A/S (Denmark)

ADI-Gardiner NV Honeywell China co. Ltd.

PT Honeywell Indonesia

Life Safety Distribution AG

Honeywell Analytics Asia Pacific Co.Ltd.

Honeywell Otomasyon ve Kontrol Sistemleri Sanayi ve Ticaret A.S. Honeywell Analytics Inc,

Sinpoec Honeywell Tianjin Ltd.

ZAO Honeywell Maxon Corporation Honeywell ASCa Inc.

Maxon Combustion Equipment (Shanghai) Co.,Ltd.

Maxon International BVBA Fire Sentry Corporation Inncom International Inc Bryan Donkin RMG Gas Controls Ltd Honeywell, S.L. [Spain]

Honeywell Iraq LLC Saia-Burgess Controls AG Honeywell spol. s.r.o. [Slovak Republic]

Integrated Technical Innovation Company for General Services & Trade Honeywell NV [Belgium]

Honeywell Automation & control Solutions Carribean Ltd.

Honeywell AS Norway Honeywell OY

Matrikon Middle East Co WLL

Honeywell Environmental & Combustion Controls (Tianjin) Co., Ltd. Honeywell International s.a.r.l.

Honeywell Sensing & Control China Co, Ltd.

Honeywell Technologies SARL Honeywell AG Matrikon Inc.

Matrikon Industrial Solutions India Pvt. Ltd.

Honeywell Chile S.A.

Honeywell Aerospace B.V.

Honeywell Turbo Technologies (India) Private Limited Honeywell Electrical Devices and Systems India Limited Honeywell do Brasil Ltda.

Honeywell Egypt Limited Honeywell EOOD Matrikon International, Inc.

Novar Gmbh

Honeywell Integrated Technology (China) Co Ltd.

Ademco Asia Pacific Ltd.

Tridium Asia Pacific Pte Ltd.

Honeywell BeijingTechnology solution Honeywell Romania s.r.l.

Enraf Marine Systems S.A.S.

Honeywell Europe Services S.A.S.

Honeywell Automation and Control Solutions West Africa Limited

Honeywell Automation Controls LLP

Honeywell (Macau) Limited

KAC Alarm Company Limited

RMG Regel Messtechnik GmbH

Honeywell Sp. z o.o.

Honeywell Szabalyozastechnikai Kft.

Honeywell Life Safety AS

iii. Key Management Personnel

Mr. Vikas Chaddha, Managing Director (w.e.f. January 1,2014)

Mr. Anant Maheshwari, Managing Director (Upto December 31,2013)

The Company generates a large percentage of its sales and profits from its business with the Honeywell group (Honeywell), its major shareholder. Sales to Honeywell accounted for approximately 28% and 30% of our total net sales in the 15 months ended March 31,2015 and year ended December 31,2013 respectively. The Company''s ability to maintain or grow its business with Honeywell depends upon a number of performance factors. However, the Company cannot be assured that its level of sales and profits associated with its relationship with Honeywell will continue. Honeywell-specific business considerations (independent of its shareholding in the Company), including changes in Honeywell''s strategies regarding utilization of alternate opportunities available to it to source products and services currently provided by the Company (including from alternate sources which Honeywell may acquire or develop within its own group), may also reduce the level and/or mix of Honeywell''s business with the Company.

4 Lease Transactions:

As a Lessee in Operating Lease

Rentals for office premises, land, building under operating leases of Rs. 2,549 (''lakhs) [Previous Year Rs. 1,794 (''lakhs)] have been included under Rent Expense.

Non cancelable

The Company has hired premises under non-cancelable operating lease arrangements at stipulated rentals. The future minimum lease payments under these leases as of March 31,2015 are as follows:

5 Earning per share (EPS):

EPS is calculated by dividing the profit attributable to the equity shareholders by the average number of shares outstanding during the year. The basic and diluted earnings per share have been calculated as under:

6 a) Estimated amount of contracts remaining to be executed on capital accounts and not provided for (net of advances) - Rs. 404 (''lakhs) [Previous year Rs. 366 (''lakhs)]

b) Disclosure in accordance with Section 22 of Micro, Small and Medium Enterprises Development Act, 2006

The Company has compiled this information based on intimations received from suppliers of their status as Micro or Small enterprises and / or its registration with the appropriate authority under Micro, Small and Medium Enterprises Development Act, 2006.

7 A) Provision for taxation has been made after considering the various allowances / deductions available and after excluding profits derived from undertaking registered with Software Technology Parks of India under section 10A and unit registered under Special Economic Zone under Section 10AA of the Income Tax Act, 1961.

B) The tax year for the Company being April 1 to March 31, provision for current taxation for the period is the aggregate of the provision made for the three months ended March 31,2014 and the provision based on the figures for the remaining twelve months ended March 31,2015.

In addition to the above, the Company has entered into certain foreign currency forward contracts against highly probable forecast transactions relating to its purchases and sales. The foreign currency forward contracts in respect of highly probable forecast transactions outstanding at the balance sheet date aggregate as follows:

8 Employee Stock Option Schemes:

The Company has a Employees Stock Option Plans (Stock Options "SO" and Restricted Units "RU") in operation for certain employees, which is administered by Honeywell International Inc. the ultimate holding company. Since the payments/ issue of shares, if any, under the plan are proposed to be made directly by Honeywell International Inc without any charge back to the Company, no accounting/disclosure for the plan has been made by the Company.

9 Contingent Liabilities:

(Rupees in lakhs)

Particulars As at As at March 31, 2015 December 31, 2013

a) Income Tax claims against the Company 8,259 8,344

b) Excise duty claims against the Company 3 3

c) Sales tax refunds/claims against the Company 4,665 2,584

d) Customs duty claims against the Company 262 292

e) Claims against the Company not acknowledged as debts 1,516 1,516

Note: It is not practicable for the Company to estimate the timing of cash outflow, if any, in respect of the above pending resolutions of the respective proceedings.

A Disputed statutory matters mainly include:

a) Provision for disputed statutory matters comprises matters under litigation with Sales Tax and Local authorities.

b) The amount of provision made by the Company is based on the estimate made by the Management considering the facts and circumstances of each case.

To the extent the Company is confident that it may have a strong case that portion is disclosed under contingent liabilities.

c) The timing and the amount of cash flows that will arise from these matters will be determined by the Appellate Authorities only on settlement of these cases.

B Provision for Estimated Cost to complete on Contracts

A provision for estimated cost to complete on construction contracts is recognized when it is probable that the contract cost will exceed total contract revenue. The provision shall be utilized as and when the contract gets executed.

C Warranty

Provision for warranty is considered based on the rolling average warranty expense incurred in the preceding 12 months, the warranty period for which ranges from 12 months to 24 months from the date of handover of the project.

10 During the period ended March 31,2015, the Company determined that certain costs had been recorded to incorrect projects and conducted a review to determine the impact of the same. Following conclusion of the review, adjustments have been made in these financial statements to reduce revenue by Rs.5,450 lakhs and profit before tax by Rs.6,729 lakhs. This reduction in profit before tax includes an impact of Rs.1,279 lakhs for provision for future losses for certain projects in accordance with Accounting Standard 7 - Accounting for construction contracts.

Of the above adjustments, amounts of Rs. 4,002 Lakhs, which relate to prior years, have been disclosed as an exceptional item.

The Company is in the process of enhancing internal controls to minimize the risk of such incorrect recording of costs in the future.

11 Disclosures in accordance with Revised AS- 15 on "Employee Benefits":

A Defined contribution plans

The company has recognized the following amounts in the statement of profit and loss for the period.

Fair Value of the planned asset as at March 31, 2015 represents the balance as confirmed by the insurer managed funds.

vi. The overall expected rate of return on assets is based on the expectation of the average long term rate of return expected on investments of the Fund during the estimated term of the obligations.

vii. The actual return on plan assets is as follows

The estimates of future salary increases considered in actuarial valuation takes into account inflation, seniority, promotion and other relevant factors.

12 As set out in section 135 of the Companies Act, 2013 the Company is required to contribute Rs. 283 lakhs towards Corporate Social Responsibility activities, as calculated basis 2% of its average net profits of the last three financial years. Accordingly, during the current year, the Company has contributed Rs. 283 lakhs towards the eligible projects as mentioned in Schedule VII ( including amendments thereto) of the Companies Act, 2013.

13 Consequent to the change in the financial year of the Company from January - December to April - March with effect from the current year, the current year''s financial statements are for 15 months from January 1,2014 to March 31, 2015. The previous year''s figures relate to the 12 months ended December 31,2013. In view of the above, the current year''s figures are accordingly not comparable to those of the previous year.

14 Previous year''s figures have been regrouped, wherever necessary, to conform with current period''s presentation.


Dec 31, 2013

1. Lease Transactions:

As a Lessee in Operating Lease

Rentals for office premises under operating leases of Rs. 2,462 (''lakhs) [Previous Year Rs. 2,583 (''lakhs)] have been included under''Rent Expenses''.

2. A) Provision for taxation has been made after considering the various allowances / deductions available and after excluding profits derived from undertaking registered with Software Technology Parks of India under section 10A and unit registered under Special Economic Zone under Section 10AA of the Income Tax Act, 1961.

B) The tax year for the Company being April 1 to March 31, provision for current taxation for the year is the aggregate of the provision made for the three months ended March 31, 2013 and the provision based on the figures for the remaining nine months ended December 31, 2013, the ultimate tax liability of which will be determined on the basis of the figures for the period April 1,2013 to March 31,2014.

A. Disputed statutory matters mainly include:

a) Provision for disputed statutory matters comprises matters under litigation with Sales Tax and Local authorities.

b) The amount of provision made by the Company is based on the estimate made by the Management considering the facts and circumstances of each case.

To the extent the Company is confident that it may have a strong case that portion is disclosed under contingent liabilities.

c) The timing and the amount of cash flows that will arise from these matters will be determined by the Appellate Authorities only on settlement of these cases.

B. Provision for Estimated Cost to complete on Contracts

A provision for estimated cost to complete on construction contracts is recognized when it is probable that the contract cost will exceed total contract revenue. The provision shall be utilized as and when the contract gets executed.

C. Warranty

Provision for warranty is considered based on the rolling average warranty expense incurred in the preceding 12 months, the warranty period for which ranges from 12 months to 24 months from the date of handover of the project.

3. Previous year figures have been regrouped, wherever necessary to conform with current year''s presentation.


Dec 31, 2012

(a) Rights, preferences and restrictions attached to the shares

Equity Shares: The Company has one class of equity shares having a par value of Rs.10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

a) 6,631,142 (December 31, 2011 : 7,182,475 ) Equity Shares constituting 75% (December 31, 2011 : 81.24%) of the paid-up capital of the Company are held by Honeywell International Inc., the ultimate holding company, through its 100% subsidiary, Honeywell Asia Pacific Inc.

b) The Company has not allotted any shares as fully paid up bonus shares or pursuant to contract(s) neither payment being received in cash during 5 years immediately preceding December 31, 2012.

1 Segment Reporting

Business segment has been considered as the primary segment and geographical segment has been considered as the secondary segment. Automation & Control systems being the only business segment constitute one single primary segment in the context of Accounting Standard - 17 on Segment Reporting.

Fixed assets used in the Company''s business or liabilities contracted have not been identified to any segment as the fixed assets and services are used interchangeably between segments. Accordingly no disclosure relating to total segment assets and liabilities is made.

The Company generates a large percentage of its sales and profits from its business with the Honeywell group (Honeywell), its major shareholder. Sales to Honeywell accounted for approximately 35% and 32% of our total net sales in fiscal years 2012 and 2011 respectively. The Company''s ability to maintain or grow its business with Honeywell depends upon a number of performance factors. However, the Company cannot be assured that its level of sales and profits associated with its relationship with Honeywell will continue. Honeywell-specific business considerations (independent of its shareholding in the Company), including changes in Honeywell''s strategies regarding utilization of alternate opportunities available to it to source products and services currently provided by the Company (including from alternate sources which Honeywell may acquire or develop within its own group), may also reduce the level and/or mix of Honeywell''s business with the Company.

Cancelable

Rentals paid for computers under operating leases of Rs. NIL [Previous year Rs. 28(''lakhs)] have been included under '' Miscellaneous Expenses''.

Rentals for office premises under operating leases of Rs. 709 (''lakhs) [Previous Year Rs. 515 (''lakhs)] have been included under ''Rent Expenses''

Previous year figures are indicated in brackets.

2 Earning Per Share (EPS)

EPS is calculated by dividing the profit attributable to the equity shareholders by the average number of shares outstanding during the year. The basic and diluted earnings per share have been calculated as under:

3 a) Estimated amount of contracts remaining to be executed on capital accounts and not provided for (net of advances) - Rs. 165(''lakhs) [Previous year Rs. 148(''lakhs)]

b) Disclosure in accordance with Section 22 of Micro, Small and Medium Enterprises Development Act, 2006

The Company has compiled this information based on intimations received from suppliers of their status as Micro or Small enterprises and / or its registration with the appropriate authority under Micro, Small and Medium Enterprises Development Act, 2006.

4 A). Provision for taxation has been made after considering the various allowances / deductions available and after excluding profits derived from undertaking registered with Software Technology Parks of India under section 10A and unit registered under Special Economic Zone under Section 10AA of the Income Tax Act, 1961.

B). The tax year for the Company being April 1 to March 31, provision for current taxation for the year is the aggregate of the provision made for the three months ended March 31, 2012 and the provision based on the figures for the remaining nine months ended December 31, 2012, the ultimate tax liability of which will be determined on the basis of the figures for the period April 1, 2012 to March 31, 2013.

5 Contingent Liabilities

(Rupees in lakhs) Particulars As at As at December 31, 2012 December 31, 2011

a) Income Tax claims against the Company 6,172 5,636

b) Excise duty claims against the Company 4 15

c) Sales tax refunds/claims against the Company 2,336 1,962

d) Customs duty claims against the Company 292 36

e) Claims against the Company not acknowledged as debts 1,790 -

A Disputed statutory matters mainly include:

a) Provision for disputed statutory matters comprises matters under litigation with Sales Tax and Local authorities.

b) The amount of provision made by the Company is based on the estimate made by the Management considering the facts and circumstances of each case.

To the extent the Company is confident that it may have a strong case that portion is disclosed under contingent liabilities.

c) The timing and the amount of cash flows that will arise from these matters will be determined by the Appellate Authorities only on settlement of these cases.

B Provision for Estimated Cost to complete on Contracts

A provision for estimated cost to complete on construction contracts is recognized when it is probable that the contract cost will exceed total contract revenue. The provision shall be utilized as and when the contract gets executed.

vi The overall expected rate of return on assets is based on the expectation of the average long term rate of return expected on investments of the Fund during the estimated term of the obligations.

6 The current year charge for Corporate Overhead Allocation includes charge of Rs. 487(''lacs) (Previous Year reversal of Rs. 20 lacs) in respect of services rendered in previous year.

7 The financial statements for the year ended December 31, 2011 had been prepared as per the then applicable, pre- revised Schedule VI to the Companies Act, 1956. Consequent to the notification of Revised Schedule VI under the Companies Act, 1956, the financial statements for the year ended December 31,2012 are prepared as per Revised Schedule VI. Accordingly, the previous year figures have also been reclassified to conform to this year''s classification. The adoption of Revised Schedule VI for previous year figures does not impact recognition and measurement principles followed for preparation of financial statements.


Dec 31, 2011

1. Disclosures under Accounting Standards

i) Segment Reporting :

Business segment has been considered as the primary segment and geographical segment has been considered as the secondary segment. Automation & Control systems being the only business segment constitute one single primary segment in the context of Accounting Standard - 17 on Segment Reporting.

Fixed assets used in the Company's business or liabilities contracted have not been identified to any segment as the fixed assets and services are used interchangeably between segments. Accordingly no disclosure relating to total segment assets and liabilities is made.

The Company generates a large percentage of its sales and profits from its business with the Honeywell group (Honeywell), its major shareholder. Sales to Honeywell accounted for approximately 32% and 33% of total net sales in fiscal years 2011 and 2010 respectively. The Company's ability to maintain or grow its business with Honeywell depends upon a number of performance factors. However, the Company cannot be assured that its level of sales and profits associated with its relationship with Honeywell will continue. Honeywell- specific business considerations (independent of its shareholding in the Company), including changes in Honeywell's strategies regarding utilization of alternate opportunities available to it to source products and services currently provided by the Company (including from alternate sources which Honeywell may acquire or develop within its own group), may also reduce the level and/or mix of Honeywell's business with the Company.

iii) Lease Transactions :

As a Lessee in an Operating Lease:

Non cancellable

The Company has taken certain Office Premises under non cancellable operating leases with a lock in period ranging from 12 to 60 months generally and are usually renewable by mutual consent on agreed terms.

Rentals paid for equipments under operating leases of Rs. NIL [Previous year Rs. 4,165 ('000)] have been included under 'Rent' under Schedule 15 to Profit and Loss Account.

Rentals paid for computers under operating leases of Rs. 2,815 ('000) [Previous year Rs. 11,834('000)] have been included under 'Miscellaneous Expenses' under Schedule 15 to Profit and Loss Account.

Rentals paid for premises under operating leases of Rs. 86,372 ('000) [Previous year Rs. 89,575 ('000)] have been included under 'Rent' under Schedule 15 to Profit and Loss Account.

Previous year figures are indicated in brackets.

During the year 2011, weighted average share price for Stock Option exercised was USD 44.17 (Previous year rate USD 46.2)

During the year 2011, weighted average share price for Restricted units vested was USD 56.40 (Previous year rate USD 42.27)

There were 10,850 (Previous year: 60,410) Stock Options outstanding at the end of 2011 with exercise prices in the range USD 37.75 to 57.05 (Previous Year : USD 28.25 to USD 58.48) with a weighted average remaining contractual life of years 7.10 years(Previous Year: 8.16 years).

There were 9,852 (Previous Year: 37,775) Restricted Units at the end of 2011 with a weighted average remaining contractual life of 5.40 years (Previous Year: 4.68 years).

2. Contingent Liabilities (Rs.'000)

Particulars December December 31,2011 31,2010

a) Income tax claims against the Company 563,575 773,014

b) Excise duty claims against the Company 1,475 1,475

c) Sales tax refunds/claims against the Company 196,221 42,283

d) Customs duty claims against the Company 3,553 3,553

Note :

Bank Guarantees given to customers against performance/advance Rs. 3,616,854 ('000) [Previous Year Rs. 2,684,891 ('000)].

Notes:

The above information does not include:

a. As the future liability for gratuity and leave encashment is provided on actuarial basis for the Company as a whole, the amounts pertaining to the directors is not ascertainable and is therefore not included above.

b. Employee Stock Options, Restricted Units and Share Awards in respect of shares in Honeywell International Inc. (ultimate holding company) granted to the directors.

c. Pension aggregating Rs.720('000) [Previous Year Rs.720('000)] paid to a Non-executive director, who was previously an employee of the company.

* Not quantifiable as the size/mix of the system varies according to customers' requirements. Previous year figures are indicated in brackets.

** Not Applicable

A) Disputed statutory matters mainly include:

a) Provision for disputed statutory matters comprises matters under litigation with Sales Tax and Local authorities.

b) The amount of provision made by the Company is based on the estimate made by the Management considering the facts and circumstances of each case.

To the extent the Company is confident that it may have a strong case that portion is disclosed under contingent liabilities.

c) The timing and the amount of cash flows that will arise from these matters will be determined by the Appellate Authorities only on settlement of these cases.

B) Provision for Estimated Cost to Complete on Contracts:

A provision for estimated cost to complete on construction contracts is recognised when it is probable that the contract costs will exceed total contract revenue. The provision shall be utilised as and when the contract gets executed.

3. The current year charge for Corporate Overhead Allocation includes reversal of Rs. 2,006 ('000) (Previous Year charge of Rs.105,200 ('000)) in respect of services rendered in previous year.

4. Prior year comparatives have been re-grouped, re-classified to conform to the current year presentation, wherever applicable.


Dec 31, 2009

1. Disclosures under Accounting Standards

i) Segment Reporting :

The business segment has been considered as the primary segment and the geographical segment has been considered as the secondary segment. Automation & Control being the only business segment, necessary information has already been given in the Balance Sheet and Profit and Loss Account.

ii) Related Party Disclosures :

List of related parties (as identified and certified by the Management)

(i) Parties where control exists :

Honeywell Asia-Pacific Inc., Holding Company Honeywell International Inc., Ultimate Holding Company

Other related parties with whom transactions have taken place during the year :

(ii) Fellow subsidiaries

Callidus Technologies India P. Ltd.

Honeywell & Co Oman LLC

Honeywell A/S (Danmark)

Honeywell Ab (Sweden)

Honeywell Acs Sensing & Control

Honeywell Acs South Africa

Honeywell Ag

Honeywell Airport Systems Gmbh

Honeywell Analytics Asia Pacific Co.

Honeywell Analytics Inc.

Honeywell A/S (Norway)

Honeywell ASCA Inc.

Honeywell Austria Gmbh

Honeywell Automation & Control

Honeywell B V

Honeywell Building Solutions Gmbh

Honeywell C.A.

Honeywell China

Honeywell Co. Ltd. (Korea)

Honeywell Control Systems Limited

Honeywell Controls & Automation (India)

Honeywell Ecc (Tianjin) Co. Ltd.

Honeywell Egypt Ltd.

Honeywell Electrical

Honeywell Engineering Sdn Bhd

Honeywell Engines & Systems

Honeywell Enraf Americas, Inc.

Honeywell Enraf Marine Systems Sas

Honeywell Enraf Bv

Honeywell Environmental & Combustion

Honeywell Europe Nv

Honeywell Gmbh

Honeywell International (India) Pvt.

Honeywell International Me Ltd.

Honeywell Japan Inc.

Honeywell Kuwait Ksc

Honeywell Measurex Ireland Pvt. Ltd.

Honeywell Limited

Honeywell Ltd. (Australia)

Honeywell Ltd. (Corp-Hong Kong)

Honeywell Ltd. Singapore Gbs

Honeywell Middle East Ltd.

Honeywell N V

Honeywell New Zealand

Honeywell Otomasyon Ve

Honeywell OY

Honeywell Portugal Lda

Honeywell Process Solutions Canada

Honeywell Process Solutions Us

Honeywell Pte Ltd.

Honeywell S.R.L.

Honeywell Sa

Honeywell Safety Management

Honeywell Scanning & Mobility

Honeywell Security

Honeywell Sensing & Control

Honeywell SI

Honeywell Sp. Zo.O.

Honeywell Systems (Thailand) Ltd.

Honeywell Taiwan Ltd.

Honeywell Technology Solution Lab.

Honeywell Tianjin Ltd.

Honeywell Turbo Technologies India

Honeywell Turkey Arabia Ltd.

Honeywell Xinyao Auto. Sensor (Shan

Maxon Corporation

Novar Gmbh

Novar Projects Limited

Novar Systems Ltd.

Pittway Sys Tech Grp Eur.

Pt.Honeywell Indonesia

Trend Control Systems Ltd.

Uop Lie

Xian System Sensor Electronics

Zao Honeywell

(Mi) Key Management Personnel

Mr. Vimal Kapur, Managing Director

Mr. Harshavardhan Chitale, Executive Director upto October 14, 2008

2. Contingent Liabilities (Rs.OOO)

December December 31,2009 31,2008

a) Income tax claims against the Company 420,176 402,194

b) Excise duty claims against the Company* 1,475 1,475

c) Sales Tax refunds/claims against the Company* 173,992 84,675

d) Customs Duty claims against the Company* 3,553 4,000

* Excludes penalties, if any, relating to penalty proceedings, since the precedence indicate that the probability of levy is remote.

Note :

Bank Guarantees given to customers- against performance/advance.

Bank Guarantees issued Rs. 2,387,223 (000) [Previous Year Rs. 1,966,153 (000)] are secured by hypothecation of present and future stocks of raw materials, semi- finished goods, finished goods, stores and spares and book debts.

3. From the current year, the Company has recognised reimbursement of expenses received as a part of sales, instead of netting off against expenses. Accordingly, expenses aggregating Rs.432,031 (000s) have been included under sales for the year 2009. Further, expenses aggregating Rs.389,776 (OOOs)in respect of the year 2008 have been reclassified under sales for the year 2008.

4. With effect from previous year, the Company has accounted for corporate overhead allocation, in respect of various services rendered by Honeywell group companies. The previous year charge includes Rs. 154,862 (000s) in respect of services rendered in the year 2007.

5. Prior year comparatives have been re-grouped, re-classified to conform to the current year presentation, wherever applicable.

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