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Notes to Accounts of IFB Agro Industries Ltd.

Mar 31, 2013

1. Background and nature of operations

IFB Agro Industries Limited (the "Company") is engaged in the business of manufacturing alcohol, bottling of branded alcoholic beverages as well as processed and packed marine foods both for domestic and export markets. The Company is listed in BSE and NSE.

2. The Company has discontinued the IMFL bottling business in West Bengal during the year and has entered into an arrangement with a bottling unit ("tie-up unit") in West Bengal for production and marketing of its own IMFL brands. Similar tie up arrangements exist in other states, namely Assam and Orissa .The production in the premises of tie-up units under the said arrangements, wherein each party''s obligations are stipulated, is carried out under close supervision of the Company. The marketing is entirely the responsibility of the Company. The Company is also required to ensure adequate finance to the tie-up units wherever required. Though under the agreements, the production and sale are accounted for by and in the books of the tie-up units, the Company promotes its brands through these arrangements. Accordingly, it is considered appropriate to disclose the following quantitative and value information for the year, as furnished by the tie-up units:

i) Profit from tie-up operations detailed as under is included in ''Other operating revenue''.

3. Related Party Disclosures

As per Accounting Standard-18 issued by the Institute of Chartered Accountants of India, disclosures in respect of "Related Parties" are as follows:- A. List of Related Parties: Associates:

Nurpur Gases Private Limited Travel Systems Limited

IFBAutomotive Private Limited IFB Industries Limited

Asansol Bottling & Packaging Co. Private Limited Special Drinks Private Limited

CPL Industries Limited Zenith Investments Limited CPL Projects Limited

Management Personnel:

Mr. Bijon Nag, Chairman

Mr. Bikram Nag, Joint Executive Chairman

Mr. A.K. Banerjee, Managing Director

Mr. Indroneel Goho, President & COO

Dr. J A. Gore, President - Distillery

Mr. Rahul Choudhary, Vice President Finance & Company Secretary

Mr. Santanu Ghosh, GM Operations - Distillery

Mr. S. K Bayen, AVP- Projects & Diversification- Distillery

Mr. Rana Chaterjee, Chief Financial Officer (Distillery)

Mr. R Purkayastha, GM Finance & Commercial - IMFL Operations

Mr. Dhiman Saha, AVP - IMFL Operations

Mr. A K Palit, GM - IMFL Sales

Mr. Pratap Mukherjee, COO - Marine Business

Mr. D Deb, Sr Manager - Head EXIM Desk

Mr. Abhijit Banerjee, Business Head - Marine Foods

Mr. Soumen Basu Chowdhury, Sr Manager - Marine Feed

Mr. Debojyoti Bandopadhyay, Head-IMFL Operations & Safety-Dankuni Plant

Mr. Debasish Ghosh, Head Bottling Plants (Division 1)

Mr. Saptarshi Bhattacharya, Business Head - Panagarh Plant

Mr. Kanak Ghose, AVP-HR

Tax Act 1956 for 2005-06 and 2007-08 and under West Bengal VAT Act 2003 for the year 2005-06, 2006-07, 2007-08 and 2008-09 for payment of duty including interest and penalty not acknowledged by the Company being not sustainable in the Company''s considered view. Matter pending under appeal with West Bengal Commercial Taxes Appellate and Revisional Board/ Additional Commissioner of Commercial Taxes , West Bengal

4. Estimated amount of capital contracts remaining to be executed and not provided for (net of advances) Rs 1,255 lacs (previous year Rs 14.99 lacs).

5. Previous year''s amounts have been regrouped/rearranged to conform to the classification of the current year, wherever considered necessary.


Mar 31, 2012

1.1 The Company announced a Voluntary Retirement Scheme (VRS) for the employees of one of the units during the year. A sum of Rs. 285.95 Lakh (Previous year Rs. Nil) has been paid under VRS during the year and is included in "Salaries, Wages & Bonus"

Notes:

1. The Company's operations are diversified into two main business segments, namely :

a) Spirit, Liquor and Spirituous Beverages comprising of Rectified Spirit, Country Liquor and Indian Made Foreign Liquor.

b) Marine division comprising of Marine products processing & exports, domestic selling and Marine Feed trading.

2. Segments have been identified and reported in accordance with Accounting Standard 17 Segment Reporting.

3. Segment Revenue in each of the above domestic Business Segments primarily includes sales, processing charges and export incentives in the respective segments.

4. Segment Revenue, Results, Assets and Liabilities include the respective amounts identifiable to each of the segment and amounts allocated on a reasonable basis.

2. The Company has entered into arrangements with certain bottling units ("tie -up units") in Assam, Orissa & Bihar for production and marketing of its own IMFL brands. The production in the premises of tie-up units under the said arrangements, wherein each party's obligations are stipulated, is carried out under the Company's close supervision. The marketing is entirely the responsibility of the Company. The Company is also required to ensure adequate finance to the tie-up units, whenever required. Though under the agreements, the production and sale are accounted for by and in the books of the tie-up units, the Company promotes its brands through these arrangements. Accordingly, it is considered appropriate to disclose the following quantitative and value information for the year, as furnished by the tie-up units:

iii) The balance due from tie-up units, of Rs. 572.52 Lacs (31.03.2011: Rs. 402.36 Lacs) is included under "Advances" (Note 18). This is on account of the financing by the company of inventories, debtors and other current assets net of current liabilities on behalf of the units.

3. Contingent Liabilities and Commitments (to the extent not provided for)

(Rs. in Lacs)

31.03.12 31.03.11

Contingent Liabilities:

A) Claims against the company not acknowledged as debts

i) Show Cause Notice issued by Customs Department against the Marine Division 210.53 210.53 of the Company. The Company had filed suitable reply and also faced personal hearing. The adjudication order is still awaited. The Company is of the considered view that the demand is not sustainable.

ii) Demand raised by Excise Department for payment of duty not acknowledged by 10.95 10.95 the company, being not sustainable in the Company's considered view. Matter pending with Commissioner of Excise, Government of West Bengal.

iii) Demand raised by Sales Tax Department under West Bengal Sales Tax Act 1994 2564.88 906.47 for the years 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09, Central Sales Tax Act 1956 for 2005-06 and 2007-08 and under West Bengal VAT Act, 2003 for the years 2005-06, 2006-07, 2007-08 and 2008-09 for payment of duty including interest and penalty, not acknowledged by the company being not sustainable in the Company's considered view. Matters pending under appeal with West Bengal Commercial Taxes Appellate and Revisional Board/Additional Commissioner of Commercial Taxes, West Bengal

Total 2,786.36 1,127.95

B) Other moneys for which the company is contingently liable

i) Letters of Credit issued by Bankers 1.60 114.91

ii) ESI liability for the period April 1997 - March 2011, pending renewal - 15.97 of exemption at Noorpur Factory

Total 1.60 130.88

C) Disputed income tax demand outstanding for the Assessment year 2009-10 is Rs. 914.46 Lacs (31.03.2011: Rs. Nil) which is not acknowledged as debt by the Company and the appeal is pending for adjudication before CIT (Appeals). Based on certain decisions of the appellate authorities and the interpretation of the relevant provisions, the company has been legally advised that the demand is likely to be either deleted or substantially reduced and accordingly no provision has been made.

Commitments:

Estimated amount of Capital Contracts remaining to be executed and not provided for (net of advances) Rs. 14.99 Lacs (previous year Rs 770.55 Lacs).

4. Trade Receivables, Advances, Deposits and Trade Payables are subject to confirmation.

5. In terms of Article 76 of the Article of Association of the Company, Mr. Bijon Nag is a permanent Director of the Company. As he does not seeks re-appointment by rotation, the Company is of the opinion that the provisions of Section 274(1)(g) of the Companies Act, 1956 are not applicable to him.

6. As notified by the Ministry of Corporate Affairs of the Government of India, revised Schedule VI under the Companies Act, 1956 is applicable to all financial statements for the financial year commencing on or after 1st April, 2011. Accordingly, the financial statements for the year ended 31st March, 2012 are prepared in accordance with the aforesaid revised Schedule VI.

7. Previous year's figures have been regrouped/reclassified to conform to the current year's classification, wherever considered necessary.


Mar 31, 2010

1. Share Capital (Schedule 1)

a) Out of the Issued and Subscribed Capital, 104,000 Equity Shares of Rs.10 each were issued as fully paid Bonus Shares by capitalisation of Reserves and Surplus in earlier years.

2. Secured Loans (Schedule 3)

a) Term Loan other than short term loan is secured by (i) exclusive first charge on existing entire fixed assets and assets to be created in the project of the Company, and (ii) second charge on the current assets of the Company, (iii) Corporate Guarantee of one Associate Company.

b) Cash Credit including FCNR loans from Banks are secured by (i) hypothecation charges ranking pari passu inter se on the Companys entire current assets, (ii) second charge ranking pari passu inter se on the Companys fixed assets and (iii) Personal Guarantee of one Director.

c) Export Packing Credits from Banks are secured by (i) hypothecation of exportable stocks (ii) Personal Guarantee of one Director.

3. Deferred Tax

The break up of net deferred tax liability as at 31st March 2010 is as under: -

31.03.2010 31.03.2009

Rs.000 Rs.000

Deferred Tax Liabilities :

Timing difference on account of

difference between Book

Depreciation and Depreciation

under

Income Tax Act. 93,948 90,473

Less: Deferred Tax Assets :

Leave Encashment (Tax Effect) 1,693 1,378

Net Deferred Tax Liability 92,255 89,095



4. Fixed Assets (Schedule 4)

a) The factory buildings at Noorpur and Dankuni, West Bengal have been constructed on land leased/rented by associate concerns.

b) Companys Marine Product Processing Plant, Kolkata has been erected on land worth Rs. 7,877 thousand, obtained under lease for ninety nine years valid upto 9th August, 2093 through license from Calcutta Metropolitan Development Authority, for which formal lease deed is yet to be executed.

c) Plant & Machinery includes electrical installation and laboratory equipment.

d) Building worth Rs. 159,499 thousand (previous year Rs. 143,436 thousand) has been constructed on leasehold land.

5. The Lease Agreement entered with Rajasthan State Electricity Board (RSEB) expired on 28th February, 2004. In terms of the said agreement, the residual value of the leased assets acquired from RSEB amounting to Rs. 24,002 thousand is required to be adjusted against the corresponding amount of interest free security deposit obtained from RSEB. As Companys appeal towards certain claims against RSEB is pending before the Jaipur High Court, adjustments as mentioned above and further income arising therefrom, have not yet been considered in these accounts.

6. Sundry Debtors, Advances, Deposits and Creditors are subject to confirmation.

7. Sale of Certified Emission Reduction (CER) has been accounted for on execution of sale contract during the year which hitherto was accounted for on cash basis in earlier years. The surplus of Rs. 36,829 thousand arising due to the fact stated above has been credited in the Profit and Loss Account.

9. The Company had entered into arrangements with distillery tie-up units in Assam, Orissa & Bihar for production and marketing of its own IMFL brands. The production in the premises of tie-up units is carried out under its close supervision. The marketing is entirely the responsibility of the Company. The Company is also required to ensure adequate finance to their tie-up units. Though

10. Pending renewal of exemption of the Employees State Insurance Scheme at its factory at Noorpur since the year 1997-98, no deduction or deposit in respect thereof has been made. (Please also refer to Note No. 13(e)).

11. Compensation received towards higher transportation cost of molasses has been recognized on a consistent basis as per procedure followed by the Government towards granting rebate on excise duty payable on matching concept basis and accounting convention followed by the Company. Accordingly, the Company has recognized and adjusted Rs. 69,761 thousand (Previous Year Rs. 2,16,246 thousand) during the year based on credit adjustment availed.

12. No supplier at the year end has intimated the company about its status as a micro, medium or small enterprise or its registration under Micro Small and Medium Enterprise Development Act, 2006.

13. According to the Company and in terms of Article 76 of the Memorandum & Articles of Association of the Company, Mr Bijon Nag is permanent Director on the Board of the Company. As this Director does not seek reappointment by rotation, the provisions of Section 274(1)(g) of the Companies Act, 1956 are not applicable to him.

1. Segments have been identified and reported taking into account, the nature of products and services, different risks and returns reporting systems.

2. Segment Revenue in each of the above domestic business segments primarily includes sales, processing charges and export incentives in the respective segments.

3. Segment Revenue, Results, Assets and Liabilities include the respective amounts identifiable to each of the segment and amounts allocated on a reasonable basis.

 
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