Jun 30, 2023
Nature and purpose of reserve:
Securities premium reserve
Securities Premium reserve is used to record the premium on issue of shares. This reserve is utilised in accordance with provisions of the Act.
Share based compensation reserve
This reserve relates to share based compensation received by the employees of the Company from Kennametal Inc., USA the ultimate holding company, net of cross charge received. The reserve is used to recognise grant date fair value of awards issued to the employees (refer note 29).
General reserve
The General reserve is created by way of transfer of profits from retained earnings for appropriation purposes. This reserve is utilised in accordance with the provisions of the Act.
Retained earnings
Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to shareholders.
Provision is made for estimated warranty claims in respect of products sold which are still under warranty at the end of the reporting period. These claims are expected to be settled in the next financial year for Hard Metal Tooling segment and 15 to 24 months in Machining Solutions Group segment. Management estimates the provision based on historical warranty claim information and any recent trends that may suggest future claims could differ from historical amounts.
(b) Disputed taxes and duties:
Provision for disputed taxes and duties is towards service tax and excise duty that are expected to materialise.
The estimates of future increase in salary, considered in the actuarial valuation, have been taken on account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.
The discount rate is based on the prevailing market yield of India, Government securities as at the Balance sheet for the estimated terms of the obligation.
Expected contributions to benefit plans for the year ending June 2024 are '' 50.
Valuations are performed on certain basic set of pre-determined assumptions and other regulatory framework which may vary overtime. Thus, the Company is exposed to various risks in providing the above benefit which are as follows:
The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability as shown in Financial Statements.
Salary escalation risk
The present value of the defined benefit plan is calculated with the assumption of salary increase rate of employees in future. Deviation in the increase in salary used to determine the present value of obligation will have a bearing on the plan''s liability.
Demographic risk
The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
Liquidity risk
The Company does not perceive any liquidity risk as the Company has investments in Government Securities and Corporate Bonds offers the best returns over the long term, within an acceptable level of risk.
The leave obligation cover the Company''s liability for sick and earned leave. The amount of the provision of '' 133 (June 30, 2022: '' 140) is presented as current, since the Company does not have an unconditional right to defer settlement for any of these obligations.
(a) Primarily relates to transfer pricing adjustments/ disallowances relating to information technology (IT) cross charge, research and development expenditure and additions made on account of manufacturing margins by the Income Tax Department ("ITD") for the tax assessment years 200708 to 2011-12, 2014-15, 2017-18 and 2018-19, which is disputed by the Company and the said matters are lying under appeal with the Income Tax Appellate Tribunal, Bengaluru/ the Commissioner of Income Tax (Appeals) LTU, Bengaluru/ the Dispute Resolution Panel, Bengaluru. In connection with the disputed matters related to IT cross charge, the Company has remitted the tax "under protest" aggregating to '' 208 (June 30, 2022: '' 208), which is recorded as income tax asset in Note 8. Further, for other tax assessment years, no payments have been made, but refund claims have been withheld by ITD, which covers the tax amounts being litigated and as such there may be no additional cash outflow as per management''s assessment. The Company is contesting the demands and management believes that its position, supported by external tax
advice, will likely be upheld in the appellate process. Further, considering the facts and the nature of the disallowances, management believes that the final outcome of the disputes should likely be in favour of the Company and so it may not have a material adverse effect on the financial position and results of operations.
(b) The Supreme Court of India passed a judgement in February 2019 in relation to inclusion of certain allowances within the scope of âbasic wagesâ for the purposes of determining contribution to provident fund under the Employeesâ Provident Funds and Miscellaneous Provisions Act, 1952. The management, based on legal advice, is of the view that the applicability of the judgement to the Company, with respect to the period and the nature of allowances to be covered due to interpretation challenges, and resultant impact on the past provident fund liability, cannot be reasonably ascertained.
(c) It is not practicable for the Company to estimate the timings of the cash outflows if any in respect of the above pending resolution of the respective proceedings.
(d) The Company does not expect any reimbursements in respect of the above contigent liabilities.
Restricted Stock Units (RSUs) are granted to certain senior management employees of the Company under the long-term incentive plan in relation to the share based compensation plan of Kennametal Inc. USA, the ultimate holding company.
Restricted stock units (RSUs)
RSUs are stock awards granted to employees that entitle the holder to shares of common stock as the award vests, over 2 or 3 years depending on the scheme and year of grant. The RSUs granted under the plan have a graded vesting over a period of two or three years, which are immediately exercised on the vesting date. All the RSUs granted under the plan are equity settled.
The fair value of time vesting stock units is determined and fixed on the grant date based on the Kennametal Inc.âs stock price adjusted for the exclusion of dividend equivalents.
The Company recognises stock-based compensation expense for RSUs over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional service (substantive vesting period).
The fair value of trade receivables, trade payables and other current financial assets and liabilities is considered to be equal to the carrying amounts of these items due to their short-term nature. The carrying amounts of trade receivables, cash and cash equivalents, bank deposits with more than 12 months maturity, trade payables, items falling under other financial assets and financial liabilities are considered to be the same as their fair values.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The Company''s activities expose it to market risk, liquidity risk and credit risk. The Company''s risk management is carried out by the Management under the policies approved of the Board of Directors that help in identification, measurement, mitigation and reporting all risks associated with the activities of the Company. These risks are identified on a continuous basis and assessed for the impact on the financial performance. Information on risks and the response strategy is escalated in a timely manner to facilitate timely decision making. Risk response strategy is formulated for key risks by Management.
Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks with high credit ratings as signed by international and domestic credit rating agencies.
Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in India, Germany, US and China. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The provision for expected credit loss takes into account available external and internal credit risk factors including the credit ratings of the various customers and Company''s historical experience for customers. The Company applies the simplified approach to provide for expected credit losses prescribed by Ind AS 109, which permits the use of lifetime expected loss provision for all the trade receivables. The Company measures the expected credit loss of trade receivables based on historical trend, industry.
Financial assets that are past due but not impaired
There is no other class of financial assets that is past due but not impaired except for receivables of ''7 and ''8 as at 30 June 2023 and 30 June 2022 respectively. The Companyâs credit period generally ranges from 60-180 days from invoicing date. The aging analysis of the receivables has been considered from the date the invoice falls due.
No expected credit loss provision has been created for Loans, i.e., security deposits on leased premises and advances given to employees, as the Company considers the life time credit risk of these financial assets to be very low.
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the dynamic nature of the underlying businesses, Company''s treasury maintains flexibility in funding by maintaining availability of required funds.
Management monitors rolling forecasts of the Company''s liquidity position and cash and cash equivalents on the basis of expected cash flows. Maturities of financial Liabilities
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
(i) Foreign currency risk
The Company is exposed to foreign currency exchange risk arising from foreign currency transactions. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the companies functional currency (Rupees).
The risk is measured through a forecast of highly probable foreign currency on cash flows. To mitigate the risk of changes in exchange rates on foreign currency exposures, the Company has natural hedge between export receivable and import payables.
As per transfer pricing legislation under Sections under 92-92F of the Income Tax Act, 1961, the Company is required to use certain specific methods in computing arm''s length price of international transactions with associated enterprises and maintain adequate documentation in this respect. As the law requires maintenance of such information and documentation to be contemporaneous in nature, the Company updates the transfer pricing study documentation every year to ensure that the transactions with associated enterprises undertaken are at an "arms length basis". The Company has carried out a detailed transfer pricing study for the period April 1,2021 to March 31,2022, which did not envisage any additional tax liability. Similar to prior years, the Company is in the process of updating the transfer pricing documentation for the period April 1,2022 to March 31,2023 and the subsequent period up to June 30, 2023. Accordingly, these financial statements do not include the effect of the transfer pricing implications, if any However, based on the analysis of transactions and margins, the Company does not envisage any additional tax liability for the year ended June 30, 2023.
A. Description of segments and principal activities
The Company is in the business of manufacturing and trading of hard metal products and manufacturing of machine tools (also known as machining solutions), which are sold in domestic and export markets. The Board of Directors of the Company has been identified as the Chief operating decision maker (CODM). The Board examines the Company''s performance and has identified two reportable segments in its business:
(i) Machining solutions: Machining solutions segment manufactures and sells customised capital intensive machines. Company specialises in providing end to end solution, i.e., from design to manufacture and after sales service. The sales comprise of machines, fixtures, sale of spares and after sales service.
(ii) Hard metal products: Hard metal products segment deals in metal and metal cutting tools. The sales of this segment comprise of manufactured and traded goods.
39 Regulatory information required by Schedule III (cont)
(b) Others
(i) Details of benami property held
The Company does not hold any benami property. No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.
(ii) Borrowing secured against current assets
The Company has no borrowings from banks and financial institutions on the basis of security of current assets.
(iii) Wilful defaulter
The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.
(iv) Relationship with struck off companies
The Company did not have any material transactions with companies struck off under Section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956 during the financial year.
(v) Registration of charges or satisfaction with Registrar of Companies
There are no charges or satisfaction which are yet to be registered with the Registrar of Companies beyond the statutory period.
(vi) Compliance with number of layers of companies
The Company does not have any subsidiaries and hence compliance with section 2(87) of the Companies Act, 2013, read with the Companies (Restriction on number of Layers) Rules, 2017 (''layering rules'') is not applicable to the Company.
(vii) Utilisation of borrowed funds and share premium
(A) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the group (Ultimate Beneficiaries) or
b. provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries
(B) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
b. provide any guarantee, security or the like on behalf of the ultimate beneficiaries.
(viii) Undisclosed income
There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of accounts of the Company.
(xi) Details of crypto currency or virtual currency
The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.
(xii) Valuation of property, plant &equipment, right-of-use assets, intangible asset and investment property
The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.
40 Compliance with approved scheme of arrangements
a) The Board of Directors at its meeting held on December 4, 2020, approved a Scheme of Arrangement (the âSchemeâ) between the Company and Widia India Tooling Private Limited, the erstwhile wholly owned subsidiary (the âtransferor companyâ), under Sections 230 to 232 of the Companies Act, 2013 (the âActâ) and other provisions of the Act for merger of the transferor company into the Company, subject to necessary approvals, with an âappointed dateâ of April 1,2021. The National Company Law Tribunal, Bengaluru bench (âNCLTâ) vide its order delivered dated October 17, 2022 (received on November 16, 2022) sanctioned the Scheme and upon filing of the certified copy of the NCLT order with the Registrar of Companies, the Scheme became effective on December 7, 2022. The transferor company did not carry on any business since January 1,2021. However, the merger has been accounted for in the books of the Company in accordance with âpooling of interestsâ method as prescribed under âAppendix C, Business combinations of entities under common controlâ of Ind AS 103 âBusiness Combinationsâ as specified in clause 12.1 of the Scheme.
b) Pursuant to the accounting treatment prescribed in the Scheme, the Company has accounted for the merger, including net assets amounting to ''144 (June 30, 2022: Nil) in the books of the Company from the date required under "Appendix C, Business combinations of entities under common controlâ of Ind AS 103 âBusiness Combinationsâ as specified in clause 12.1 of the Scheme, which is the beginning of the preceding period presented (i.e., July 1,2021). Accordingly, the comparatives information presented in the Statement of Profit and Loss and Statement of Cash Flows for the year ended June 30, 2022 and Balance Sheet as at June 30, 2022 have been restated.
Jun 30, 2022
(ix) Risk exposure
Valuations are performed on certain basic set of pre-determined assumptions and other regulatory framework which may vary overtime. Thus, the Company is exposed to various risks in providing the above benefit which are as follows:
(a) Interest rate risk
The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability as shown in Standalone Financial Statements.
(b) Salary escalation risk
The present value of the defined benefit plan is calculated with the assumption of salary increase rate of employees in future. Deviation in the rate of interest in future for employees from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan''s liability.
(c) Demographic risk
The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
(d) Liquidity risk
The Company does not perceive any liquidity risk as the Company has investments in Government Securities and Corporate Bonds offers the best returns over the long term, within an acceptable level of risk.
e) Compensated absences
The leave obligation cover the Company''s liability for sick and earned leave. The amount of the provision of 140 million (June 30, 2021: 128
million) is presented as current, since the Company doesn''t have an unconditional right to defer settlement for any of these obligations.
a) Primarily relates to transfer pricing adjustments/ disallowances relating to IT cross charge, research and development expenditure and additions made on account of manufacturing margins by the Income Tax Department for the tax assessment years 2007-08 to 2011-12, 2014-15, 2017-18 and 2018-19 which is disputed by the Company and the said matters are lying under appeal with the Income Tax Appellate Tribunal, Bengaluru/ the Commissioner of Income Tax (Appeals) LTU, Bengaluru/The Dispute Resolution Panel, Bengaluru, respectively. For the matters concerning the transfer pricing cross charge, the Company has made paid the amounts contested and the same is recorded as an income tax related asset. Further in other years, there has been no payments made, however there are refund claims withheld which cover for the tax amounts being litigated and as such there may not be any additional cash outflow warranted.
The Company is contesting the above mentioned demands and the management believes that its position will likely be upheld in the appellate process. Further, considering the facts and the nature of the disallowances, the management believes that the final outcome of the disputes should be in favour of the Company and will not have any material adverse effect on the financial position and results of operations.
b) The Honourable Supreme Court, has passed a decision on February 28, 2019 in relation to inclusion of certain allowances within the scope of âBasic wagesâ for the purpose of determining contribution to provident fund under the Employeesâ Provident Funds and Miscellaneous Provisions Act, 1952. The management, based on legal advice, is of the view that the applicability of the judgement to the Company, with respect to the period and the nature of allowances to be covered due to interpretation challenges, and resultant impact on the past provident fund liability, cannot be reasonably ascertained.
This pertains to the Restricted Stock Units (RSUs) which are granted to certain senior management employees of the Company under the long-term incentive plan in relation to the share based compensation plan of Kennametal Inc. USA, the ultimate holding Company.
Restricted stock units (RSUs)
RSUs are stock awards granted to employees that entitle the holder to shares of common stock as the award vests, over 2 or 3 years depending on the scheme and year of grant. The options granted under the plan have a graded vesting over a period of two or three years, which are immediately exercised on the vesting date. All the options granted under the plan are equity settled.
The fair value of time vesting stock units is determined and fixed on the grant date based on the Kennametal Inc.âs stock price adjusted for the exclusion of dividend equivalents.
The Company recognises stock-based compensation expense for restricted stock units over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional service (substantive vesting period).
The management assessed that the fair value of cash and cash equivalents, trade receivables, loans, other financial assets, trade payables and other financial liabilities approximate the carrying amount largely due to short-term maturity of these instruments. The carrying amounts of trade receivables, cash and cash equivalents, bank deposits with more than 12 months maturity, trade payables, items falling under other financial assets and financial liabilities are considered to be the same as their fair values.
The fair value of investment in loans and security deposits are determined based on discounted cash flows calculated using deposit rates for similar terms and credit risk at the inception. There are no significant changes in fair value of such assets during the year.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
ii) Fair value hierarchy
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:
Level 1: Quoted prices (unadjusted) in active markets for financial instruments.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data rely as little as possible on entity specific estimates.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
There are no transfers between the levels during the year. iii) Valuation process:
The finance department of the Company includes people capable of performing valuation of financial assets and liabilities required for financial reporting purposes, including level 3 fair values. The significant level 3 inputs for determining the fair values of security deposits and loan to employees are discount rates using a long term bank deposit rate to calculate a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.
The Company''s activities expose it to market risk, liquidity risk and credit risk. The Company''s risk management is carried out by the Management under the policies approved of the Board of Directors that help in identification, measurement, mitigation and reporting all risks associated with the activities of the Company. These risks are identified on a continuous basis and assessed for the impact on the financial performance. Information on risks and the response strategy is escalated in a timely manner to facilitate timely decision making. Risk response strategy is formulated for key risks by Management.
The below note explains the sources of risk which the Company is exposed to and how the Company manages the risk in the Standalone Financial Statements:
Credit risk arises from cash and cash equivalents, security deposits carried at amortised cost and deposits with banks and financial institutions, as well as credit exposures to customers including outstanding receivables.
Credit risk refers to the risk of default on its obligation by the counter party resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to '' 1368 as of June 30, 2022 [June 30, 2021: '' 1131].
Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks with high credit ratings as signed by international and domestic credit rating agencies.
Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in India, Germany and US. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, Financial Instruments,
Financial assets that are past due but not impaired
"There is no other class of financial assets that is past due but not impaired except for receivables of '' 7 million and '' 6 million as at June 30, 2022 and June 30, 2021 respectively. The Companyâs credit period generally ranges from 60-180 days from invoicing date. The ageing analysis of the receivables has been considered from the date the invoice falls due.
No expected credit loss provision has been created for Loans i.e. security deposits on leased premises and advances given to employees, since the Company considers the life time credit risk of these financial assets to be very low. "
34 Financial risk management (cont''d)
B Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the dynamic nature of the underlying businesses, Company''s treasury maintains flexibility in funding by maintaining availability of required funds.
Management monitors rolling forecasts of the Company''s liquidity position and cash and cash equivalents on the basis of expected cash flows. Maturities of financial Liabilities
"The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant."
(i) Foreign currency risk
The Company is exposed to foreign currency exchange risk arising from foreign currency transactions. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the companies functional currency (Rupees).
Interest rate risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of changes in market interest rates. In order to optimize the Companyâs position with regards to interest income and interest expenses and to manage the interest ate risk, treasury performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.
35 Capital Management Risk management
The Company''s objectives when managing capital is to:
i) safeguard their ability to continue as going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and;
ii) maintain an optimal capital structure to reduce the cost of capital.
A. Description of segments and principal activities
The Company is in the business of manufacturing and trading of hard metal products and manufacturing of machine tools (also known as machining solutions), which are sold in domestic and export markets. The Managing Director of the Company has been identified as the Chief operating decision maker (CODM). Managing Director examines the Company''s performance both from product and geographic perspective and has identified two reportable segments in its business:
(i) Machining solutions: Machining solutions segment manufactures and sells customised capital intensive machines. The Company specialises in providing end to end solution i.e. from design to manufacture and after sales service. The sales comprise of machines, fixtures, sale of spares and after sales service.
(ii) Hard metal products: Hard metal products segment deals in metal and metal cutting tools. The sales of this segment comprise of manufactured and traded goods.
39 Status of scheme of amalgamation
The Board of Directors at its meeting held on December 4, 2020 had approved a Scheme of Amalgamation (''Scheme'') for the merger of its wholly owned subsidiary, WIDIA India Tooling Private Limited (âWITPLâ) with its Holding Company, Kennametal India Limited (''KILâ or âCompanyâ). Pursuant to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has furnished the Scheme details to the Bombay Stock Exchange. The appointed date of the Scheme was April 1, 2021. Further, the Company has received approval for the said Scheme from the shareholders and unsecured creditors of the Company at its meeting held on April 12, 2021 convened by Hon''ble NCLT, Bengaluru bench and the petition to that effect was filed with NCLT on April 29, 2021. There were multiple dates of hearing some of which were non effective and the last hearing date was scheduled on August 2, 2022 which was also not heard due to paucity of time. The Company awaits for the next date of hearing.
As per transfer pricing legislation under sections under 92-92F of the Income Tax Act, 1961, the Company is required to use certain specific methods in computing arm''s length prices of international transactions with associated enterprises and maintain adequate documentation in this respect. Since law requires existence of such information and documentation to be contemporaneous In nature, the Company updates the transfer pricing study every year to ensure that the transactions with associate enterprises undertaken are at ""arms length basis"". Management is of the opinion that the Company''s international transactions are at arm''s length as there is no significant change in assumptions or terms of contract. The Company has carried out a detailed transfer pricing study for the period April 1, 2020 to March 31, 2021 and is in the process of updating the transfer pricing documentation for the period April 1,2021 to March 31,2022. In the opinion of the management, the same would not have an impact on these financial statements. Accordingly, these financial statements do not include the effect of the transfer pricing implications, if any.
42 Disclosure Of Transactions With Struck Off Companies
The Company did not have any material transactions with companies struck off under Section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956 during the financial year.
43 No transactions to report against the following disclosure requirements as notified by MCA pursuant to amended Schedule III:
(a) Crypto Currency or Virtual Currency
(b) Benami Property held under Benami Transactions (Prohibition) Act, 1988 (45 of 1988)
(c) Registration of charges or satisfaction with Registrar of Companies
(d) Relating to borrowed funds:
i. Wilful defaulter
ii. Utilisation of borrowed funds & share premium
iii. Borrowings obtained on the basis of security of current assets
iv. Discrepancy in utilisation of borrowings
v. Current maturity of long term borrowings
44 No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities (âIntermediariesâ) with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries).
The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company (âUltimate Beneficiariesâ) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
45 Previous period comparitives
Prior year amounts have been regrouped/ reclassified wherever necessary, to conform to current year''s presentation.
Jun 30, 2021
Primarily relates to transfer pricing adjustments/ disallowances relating to IT cross charge, research and development expenditure and additions made on account of manufacturing margins by the Income Tax Department for the tax assessment years 2007-08, 2008-09, 2009-10, 2010-11,201112,2013-14,2014-15 and 2016-17 which is disputed by the Group and the said matters are lying under appeal with The Income Tax Appellate Tribunal, Bengaluru/ The Commissioner of Income Tax (Appeals) LTU, Bengaluru/The Dispute Resolution Panel, Bengaluru. The Group has paid f 213 million (refer note 8) under protest (net of provision) towards above taxdemand and recorded the same under non-current income-tax assets.
The sales tax assessment for the period FY 2015-16 was completed with a demand off 2 million. The demand primarily relates to the disallowance of ITC on account of non furnishing of invoices relating to the ITC claimed. The Group has subsequently Fled an appeal and is in possession of all the relevant documentation in relation to the disallowance and based on the available documentation, reasonably believes that the appellate body will rule the case in favour of the Group and accordingly no provision has been made in the books in this regard. In addition to this, there is a contingency of f 1 million towards sales tax litigation of FY 2010-11 relating to interchange of VAT and CSTTurnover erroneously.
The Group is contesting the above mentioned demands and the management believes that its position will likely be upheld in the appellate process. Further, considering the facts and the nature of the disallowances, the management believes that the final outcome of the disputes should be in favour of the Group and will not have any material adverse effect on the financial position and results of operations.
The Honourable Supreme Court, has passed a decision on February 28, 2019 in relation to inclusion of certain allowances within the scope of âBasic wagesâ for the purpose of determining contribution to provident fund under the Employeesâ Provident Funds and Miscellaneous Provisions Act, 1952. The management, based on legal advice, is of the view that the applicability of the judgement to the Group, with respect to the period and the nature of allowances to be covered due to interpretation challenges, and resultant impact on the past provident fund liability, cannot be reasonably ascertained.
Shared based payment
This pertains to the Restricted Stock Units (RSUs) which are granted to certain senior management employees of the Group under the long-term incentive plan in relation to the share based compensation plan of Kennametal Inc. USA, the ultimate holding company.
Restricted stock units (RSUs)
RSUs are stock awards granted to employees that entitle the holder to shares of common stock as the award vests, over 2 or 3 years depending on the scheme and year of grant. The options granted under the plan have a graded vesting over a period of two or three years, which are immediately exercised on the vesting date. All the options granted under the plan are equity settled.
The fair value of time vesting stock units is determined and fixed on the grant date based on the Kennametal Inc.âs stock price adjusted for the exclusion of dividend equivalents.
The Group recognises stock-based compensation expense for restricted stock units over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional service (substantive vesting period).
The management assessed that the fair value of cash and cash equivalents, trade receivables, loans, other financial assets, trade payables and other financial liabilities approximate the carrying amount largely due to short-term maturity of these instruments. The carrying amounts of trade receivables, cash and cash equivalents, bank deposits with more than 12 months maturity, trade payables, items falling under other financial assets and financial liabilities are considered to be the same as their fair values.
The fair value of investment in loans and security deposits are determined based on discounted cash flows calculated using deposit rates for similar terms and credit riskat the inception. There are no significant changes in fair value of such assets during the year.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in aforced or liquidation sale.
Fair value hierarchy
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of afair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:
Level 1: Quoted prices (unadjusted) in active markets for financial instruments.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data rely as little as possible on entity specific estimates.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
There are no transfers between the levels during the year.
Valuation process:
The finance department of the Group includes people capable of performing valuation of financial assets and liabilities required for financial reporting purposes, including level 3 fair values. The significant level 3 inputs for determining the fair values of security deposits and loan to employees are discount rates using a long term bank deposit rate to calculate a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.
i Transfer Pricing
As per transfer pricing legislation under sections under 92-92F of the Income Tax Act, 1961, the Group is required to use certain specific methods in computing arm''s length prices of international transactions with associated enterprises and maintain adequate documentation in this respect. Since law requires existence of such information and documentation to be contemporaneous In nature, the Group updates the transfer pricing study every year to ensure that the transactions with associate enterprises undertaken are at "arms length basis". Management is of the opinion that the Group''s international transactions are at arm''s length as there is no significant change in assumptions or terms of contract. The Group has carried out adetailed transfer pricing study for the period April 1,2019 to March 31,2020 and is in the process of updating the transfer pricing documentation for the period April 1,2020 to March 31,2021. In the opinion of the management, the same would not have an impact on these consolidated financial statements. Accordingly, these consolidated financial statements do not include the effect of the transfer pricing implications, if any.
3 Segment Information
Description of segments and principal activities
The Group is in the business of manufacturing and trading of hard metal products and manufacturing of machine tools (also known as machining solutions), which are sold in domestic and export markets. The Managing Director of the Group has been identified as the Chief operating decision maker (CODM). Managing Director examines the Group''s performance both from product and geographic perspective and has identified two reportable segments in its business:
Machining solutions: Machining solutions segment manufactures and sells customised capital intensive machines. Group specialises in providing end to end solution i.e. from design to manufacture and after sales service. The sales comprise of machines, fixtures, sale of spares and after sales service.
) Hard metal products: Hard metal products segment deals in metal and metal cutting tools. The sales of this segment comprise of manufactured and traded goods.
Status of Scheme of Amalgamation
The Board of Directors had approved a Scheme of Amalgamation (Scheme1) for the merger of the wholly owned subsidiary, WIDIA India Tooling Private Limited (âWITPLâ) at its meeting held on December 4, 2020. Pursuant to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Group had furnished the Scheme details to the Bombay Stock Exchange Limited. The appointed date of the Scheme is April 1,2021. The Group has received approval for the said Scheme from the shareholders and unsecured creditors through its meeting held on on April 12, 2021 convened by Honourable National Company LawTribunal ("NCLT"), Bengaluru bench and the petition to that effect was filed with the NCLT on April 29, 2021. The Group is awaiting the approval from the NCLT for the next course of action (also refer note 1.2)
Impact of COVID-19 Pandemic
"The Covid 19 pandemic is unprecedented and measures to control it has caused significant disturbances and slowdown of economic activity. The Group operations and financial results for the year have been partially impacted due to localized lockdowns / micro containment zones, supply chain constraints, shortage of workforce and various safety measures have been taken across all areas of operations."
The operations have revived at a better pace as the year progressed. The Group has relied on the available information and assumptions, as at the date of approval of these financial results, to arrive at its estimates. The Group continues to monitor the economic effects of the pandemic while taking steps to improve its execution efficiencies and the financial outcome.
Previous period comparatives
Prioryear amounts have been regrouped/ reclassified wherever necessary, to conform to current year''s presentation.
Additional disclosures
Additional information as required under Schedule III to the Act to the extent either "nil" or "not applicable"has not been furnished
Jun 30, 2018
1. General information
Kennametal India Limited (âthe Companyâ) incorporated under the Companies Act, 1956, is in the business of manufacturing and trading of hard metal products and manufacturing of machine tools. The Company has its manufacturing facility in Bangalore sells its product and services through sales and support offices. The Company is a public limited company incorporated and domiciled in India and has its registered office at 8/9th Mile, Tumkur Road, Bengaluru 560 073. The Company is listed on the Bombay Stock Exchange (BSE). The financial statements were approved for issue by Companyâs board of director on August 23, 2018.
Leased assets
The Company has given office facilities on operating lease. The lease arrangements are over a period of eleven months and are cancellable by notice of 30 days by either side. Most of the leases are renewable for further period on mutually agreeable terms and also include escalation clauses.
Contractual obligations
Refer note 28 for contractual commitments for the acquisition of property, plant and equipment.
Note:
a) Fair Value Estimation of fair value
The best evidence of fair value is current prices in an active market for similar properties. The Company considers current prices in an active market for properties of different nature or recent prices of similar properties in less active markets, adjusted to reflect those differences.
The fair values of investment properties have been determined with reference to Bengaluru Municipal authority guidance value and Mehesana Municipal authority, Kalol district, Gujrat with certain restriction on the Companyâs ability to use or sell these investment properties. The fair value estimate for investment properties are included in level 2.
b) There is no rental income derived from investment properties. Further, no direct operating expenses have been incurred to maintain the investment property.
c) The Company has no restriction on the realisability of the investment property, and no contractual obligation to purchase, construct or develop investment properties or for repair, maintenance and enhancement.
Note:
Pursuant to a global decision to divest the âExtrude Honeâ business, an agreement was entered into with Madison Industrial Solutions Corporation, USA on October 30, 2015 (with effective date of November 30, 2015) by Kennametal Inc., USA, the ultimate holding company. In line with the Board of Directors approval in the meeting held on November 9, 2015, the Company has given effect to the above divestiture disclosed under âAssets held for saleâ. As part of the sale proceeds, the Company has received INR. NIL (2017: Nil, 2016: Rs.48 lakhs) from the ultimate holding company.
(b) Rights, preferences and restrictions attached to 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 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, if any, in proportion to their shareholding.
* 1660140 (June 30, 2017: 1637641, July 1, 2016: 1596805) shares are held by Reliance Equity Opportunities Fund comprising 7.55% (June 30, 2017: 7.45%, July 1, 2016: 7.26%) of the shareholding and 479881 (June 30, 2017: 480687, July 1, 2016: 480687) shares are held by Reliance Tax Saver (ELSS) Fund comprising 2.18% (June 30, 2017: 2.19%, July 1, 2016: 2.19%) of the shareholding.
(e) During five years immediately preceeding June 30, 2018 there are no shares alloted as fully paid up pursuant to contracts without payment being received in cash, shares alloted as fully paid up by way of bonus shares or shares bought back.
(f) There are no shares of the Company reserved for issue under any option, contracts, commitments for the sale of share or disinvestment.
Nature and purpose of reserve:
Securities premium reserve
Securities Premium reserve is used to record the premium on issue of shares. This reserve is utilised in accordance with provisions of the Act.
Share based compensation reserve
This reserve relates to share based compensation received by the employees of the Company from Kennametal Inc., USA the ultimate holding company, net of cross charge received. The reserve is used to recognise grant date fair value of awards issued to the employees (refer note 30).
a) Product support
Provision is made for estimated warranty claims in respect of products sold which are still under warranty at the end of the reporting period. These claims are expected to be settled in the next financial year. Management estimates the provision based on historical warranty claim information and any recent trends that may suggest future claims could differ from historical amounts.
b) Disputed taxes and duties:
Provision for disputed taxes and duties is in respect of duties and taxes paid under protest.
The Company also has certain defined contribution plans as specified above. Contributions are made to the funds above at the specified rate of basic salary as per regulations. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the period towards defined contribution plan is Rs.497 (June 30, 2017: Rs.500).
Provident fund for certain eligible employees is managed by Company through the âKENNAMETAL INDIA LIMITED EMPLOYEESâ PROVIDENT FUND TRUSTâ in line with the Provident Fund and Miscellaneous Provisions Act, 1952. The plan guarantees interest at the rate notified by the Provident Fund Authorities. The contribution by the employer and the employee together with the interest accumulated there on are payable to the employees at the time of their separation from the Company or retirement, whichever is earlier. The benefits vests immediately on rendering of the services by the employee. The Company currently does not have any unfunded plans. The Board of trustees is responsible for the administration of the Plan assets and investment strategy.
Note:
The Provident fund expenses other than contribution is not recognised in Statement of Profit and Loss as the fair value of plan assets exceeds the present value of obligation. Accordingly, the excess of plan assets over present value of obligation has not been recorded in financial statements.
Provident fund expenses recognised in the books for the year ended June 30, 2018 amount to Rs.483 (June 30, 2017: Rs.490).
B) Defined benefit obligation (Gratuity - Funded)
The Company operates a gratuity plan through the âKENNAMETAL INDIA LIMITED EMPLOYEESâ GRATUITY TRUSTâ. Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972. The same is payable at time of separation from the Company or retirement, whichever is earlier. The benefits vest after 5 years of continuous service. The Board of trustees is responsible for the administration of the Plan assets and investment strategy.
vii) Sensitivity analysis Gratuity
Gratuity is a lumpsum plan and the cost of providing these benefits is typically less sensitive to small changes in demographic assumptions. The actuarial assumptions to which the benefit obligations results are particularly sensitive to are discount rate, salary escalation rate, attrition rate and mortality rate. The following table summerises impact on the reported defined benefit obligation arising on account of an increase or decrease in the reported assumptions.
These sensitivities have been calculated to show the movement in defined benefit obligation in isolation assuming there are no other changes in market condition as at the balance sheet date.
viii) The weighted average duration of the defined benefit obligation is 6 years (June 30, 2017: 8 years). The expected maturity analysis of undiscounted gratuity is as below:
ix) Risk exposure
Valuations are performed on certain basic set of pre-determined assumptions and other regulatory framework which may vary overtime. Thus, the Company is exposed to various risks in providing the above benefit which are as follows:
a) Interest rate risk
The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability as shown in financial statements.
b) Salary escalation risk
The present value of the defined benefit plan is calculated with the assumption of salary increase rate of employees in future. Deviation in the rate of interest in future for employees from the rate of increase in salary used to determine the present value of obligation will have a bearing on the planâs liability.
c) Demographic risk
The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
d) Liquidity risk
The Company does not perceive any liquidity risk as the Company has investments in Government Securities and Corporate Bonds offers the best returns over the long term, within an acceptable level of risk.
Note:
The information has been given in respect of such suppliers to the extent they could be identified as âMicroâ or âSmallâ enterprises on the basis of information available with the Company.
a) Primarily relates to transfer pricing adjustments/disallowances relating to Research and Development expenditure made by the Income Tax Department for the tax assessment years 2007-08, 2008-09, 2009-10, 2010-11, 2011-12, 2013-14 and 2014-15 which is disputed by the Company and the matter is lying under appeal with The Income Tax Appellate Tribunal, Bangalore/The Commissioner of Income Tax (Appeals) LTU, Bangalore/The Dispute Resolution Panel, Bangalore.
b) The Company has filed an appeal for Rs.159 with the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Bangalore pertaining to the Customs Duty dispute (disputed demand Rs.111 and interest Rs.48) wherein the department contested that the Company has paid short duty due to non-inclusion of the Fuel Surcharge(FSC), Security Surcharge (SSC) in the assessable value. The Company has paid Rs.159 under protest towards above tax demands and charged the same in earlier years Statement of Profit and Loss.
The Company is contesting the above mentioned demands and the management believes that its position will likely be upheld in the appellate process. Accordingly, no tax expense has been accrued in the financial statements for the year ended June 30, 2018, for the tax demands raised. Considering the facts and nature of demand, the Company believes that the final outcome of the disputes should be in favour of the Company and will not have any more material adverse effect on the financial position and results of operations.
c) First loss default guarantee represents financial guarantee given to a banker for providing channel financing scheme to distributors.
2 Shared based payment
Managing Director and certain senior management employees of the Company under the long-term incentive plan are granted Restricted Stock Units (RSUs) in a share based compensation plan of Kennamental Inc. USA, the ultimate holding Company.
Restricted stock units (RSUs)
RSUs are stock awards granted to employees that entitle the holder to shares of common stock as the award vests, over 3 or 4 years depending on the scheme and year of grant. The options granted under the plan have a graded vesting over a period of three or four years, which are immediately exercised on the vesting date. All the options granted under the plan are equity settled.
The fair value of time vesting stock units is determined and fixed on the grant date based on the Kennametal Inc.âs stock price adjusted for the exclusion of dividend equivalents.
The Company recognises stock-based compensation expense for restricted stock units over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional service (substantive vesting period).
3 Fair value measurements
i) Financial instruments by category
The carrying value and fair value of financial instruments by categories as at June 30, 2018 are as follows:
ii) Financial instruments by category (contâd)
The management assessed that the fair value of cash and cash equivalents, trade receivables, loans, other financial assets, trade payables and other financial liabilities approximate the carrying amount largely due to short-term maturity of these instruments. The carrying amounts of trade receivables, cash and cash equivalents, bank deposits with more than 12 months maturity, trade payables, items falling under other financial assets and financial liabilities are considered to be the same as their fair values.
The fair value of investment in government securities, loans and security deposits are determined based on discounted cash flows calculated using deposit rates for similar terms and credit risk at the inception. There are no significant changes in fair value of such assets during the year.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
iii) Fair value hierarchy
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:
Level 1: Quoted prices (unadjusted) in active markets for financial instruments.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data rely as little as possible on entity specific estimates.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
There are no transfers between the levels during the year.
iv) Valuation process:
The finance department of the Company includes people capable of performing valuation of financial assets and liabilities required for financial reporting purposes, including level 3 fair values. The significant level 3 inputs for determining the fair values of security deposits and loan to employees are discount rates using a long term bank deposit rate to calculate a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.
4 Financial risk management
The Companyâs activities expose it to market risk, liquidity risk and credit risk. The Companyâs risk management is carried out by the Management under the policies approved of the Board of Directors that help in identification, measurement, mitigation and reporting all risks associated with the activities of the Company. These risks are identified on a continuous basis and assessed for the impact on the financial performance. Information on risks and the response strategy is escalated in a timely manner to facilitate timely decision making. Risk response strategy is formulated for key risks by Management.
The below note explains the sources of risk which the Company is exposed to and how the Company manages the risk in the financial statements:
A Credit Risk
Credit risk arises from cash and cash equivalents, security deposits carried at amortised cost and deposits with banks and financial insititutions, as well as credit exposures to customers including outstanding receivables.
Credit risk refers to the risk of default on its obligation by the counter party resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to Rs.12635 as of June 30, 2018 [30 June 2017: Rs.11015; July 1, 2016: Rs.11939].
Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks with high credit ratings as signed by international and domestic credit rating agencies.
Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in India and US. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, Financial Instruments, the Company uses expected credit loss model to assess the impairment loss or gain. The provision for expected credit loss takes into account available external and internal credit risk factors including the credit ratings of the various customers and Companyâs historical experience for customers. The Company applies the simplified approach to provide for expected credit losses prescribed by Ind AS 109, which permits the use of lifetime expected loss provision for all the trade receivables. The Company measures the expected credit loss of trade receivables based on historical trend, industry.
Financial assets that are past due but not impaired
There is no other class of financial assets that is past due but not impaired except for receivables of Rs.145, Rs.98 and Rs.138 as at 30 June 2018, 30 June 2017 and July 1, 2016, respectively. The Companyâs credit period generally ranges from 60-180 days from invoicing date. The aging analysis of the receivables has been considered from the date the invoice falls due.
No expected credit loss provision has been created for Loans i.e. security deposits on leased premises and advances given to employees, since the company considers the life time credit risk of these financial assets to be very low.
B Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the dynamic nature of the underlying businesses, Companyâs treasury maintains flexibility in funding by maintaining availability of required funds.
Management monitors rolling forecasts of the Companyâs liquidity position and cash and cash equivalents on the basis of expected cash flows. Maturities of financial Liabilities
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
Sensitivity
A reasonably possible strengthening (weakening) of the â, foreign currency against all other currencies at 30th June, would have affected the measurement of financial instruments denominated in a foreign currency and affected profit or loss by the amount shown below. This analysis assumes that all other variables remain constant and ignores any impact of forecast sales and purchases.
C. Market Risk
(i) Foreign currency risk
The Company is exposed to foreign currency exchange risk arising from foreign currency transactions. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the companies functional currency (Rupees).
The Company managed its foreign currency exposure by entering into forward exchange contract to hedge its firm commitments as at July 1st, 2016. Thereafter, the risk is measured through a forecast of highly probable foreign currency on cash flows. To mitigate the risk of changes in exchange rates on foreign currency exposures, the company has natural hedge between export receivable and import payables.
The Company exposure to foreign currency risk at the end of the reporting period expressed in â as follows:
5 Capital Management Risk management
The Companyâs objectives when managing capital is to:
i) safeguard their ability to continue as going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and;
ii) maintain an optimal capital structure to reduce the cost of capital.
The Company does not have any exposure towards debt. The Management regularly monitors rolling forecasts of liquidity position and cash on the basis of expected cash flows. In addition, the Company projects cash flows in major currencies and considers the level of liquid assets necessary to meet them.
6 Dividends
The Company declares and pays dividends in Indian rupees. Company may, before the declaration of any dividend, transfer a percentage of its profits for that financial year as it may consider appropriate to the reserves.
The interim dividend and the dividend distribution tax on the dividend for the year ended June 30, 2018 and June 30, 2017 is as below:
7 Segment Information
A. Description of segments and principal activities
The Company is in the business of manufacturing and trading of hard metal products and manufacturing of machine tools (also known as machining solutions), which are sold in domestic and export markets. The Managing Director of the Company has been identified as the Chief operating decision maker (CODM). Managing Director examines the companyâs performance both from product and geographic perspective and has identified two reportable segments in its business:
(i) Machining solutions: Machining solutions segment manufactures and sells customised capital intensive machines. Company specialises in providing end to end solution i.e. from design to manufacture and after sales service. The sales comprise of machines, fixtures, sale of spares and after sales service.
(ii) Hard metal products: Hard metal products segment deals in metal and metal cutting tools. The sales of this segment comprise of manufactured and traded goods.
C. Geographical Information:
The Companyâs operations are predominantly restricted to the domestic market (within India). However, the Company exports goods to Germany, USA, China and others. Accordingly, geographical information are given below:
D. Notes:
(i) The segment-wise revenue, results, assets and liabilities relate to the respective amounts directly identifiable to each of the segments.
(ii) The segment revenue is measured in the same way as in the statement of profit and loss.
(iii) No customer individually account for more than 10% of the revenue in the year ended June 30, 2018 and June 30, 2017.
(iv) The expenses that are not directly attributable and that canât be allocated to an operating segment on a reasonable basis are shown as unallocated corporate expenses.
(v) Segment assets include all operating assets used by the segment and consists primarily of property, plant and equipment and current assets. Segment liabilities comprise of liabilities which can be directly allocated against respective segments. Assets and liabilities that have not been allocated between segments are shown as part of unallocated corporated assets and liabilities respectively.
(vi) Post implementation of Goods and Service Tax (âGSTâ) with effect from July 1, 2017, revenue from operations is disclosed net of GST. Revenue from operations for the earlier periods included excise duty which is now subsumed in GST. Accordingly, revenue from operations for the quarter and year ended June 30, 2018 is not comparable with the quarter and year ended June 30, 2017.
8 Related party disclosures
A) Names of related parties and description of relationship:
a) Parties where control exists:
(i) Ultimate holding company Kennametal Inc., USA
(ii) Immediate holding company Meturit A.G. Zug, Switzerland
(iii) Enterprises holding, directly or indirectly, substantial interest in immediate holding company Widia GmbH, Germany
Kennametal Holding GmbH, Germany Kennametal Europe GmbH, Switzerland Kennametal Luxembourg Holding S.A.R.L Kennametal Holdings , LLC, Luxembourg S.C.S Kennametal Holdings Europe Inc., USA
b) Parties under common control with whom transactions have taken place during the year:
Fellow Subsidiaries Kennametal Australia Pty Ltd, Australia
Kennametal Produktions GmbH & Co. KG, Germany
Kennametal UK Ltd.,United Kingdom
Kennametal (Singapore) PTE. Ltd., Singapore
Kennametal Korea Co., Ltd., Korea
Kennametal Japan Ltd., Japan
Kennametal Do Brasil LTDA, Brazil
Kennametal Hard Point (Shanghai) Ltd., China
Kennametal Distribution Services Asia PTE. Ltd., Singapore
Kennametal Shared Services Pvt. Ltd., India
Kennametal (China) Co Ltd., China
Hanita Metal Works Ltd. (P.), Israel
Kennametal Shared Services, GmbH, Germany *
Kennametal (Xuzhou) Co. Ltd., China
Kennametal (Malaysia) Sdn. Bhd., Malaysia
Kennametal Stellite L.P. USA
Kennametal Stellite Inc., Canada
Kennametal Asia China Management Company, Shanghai
PT. Kennametal Indonesia Services, Indonesia
Kennametal (Thailand) Co., Ltd., Thailand
c) Key Management Personnel
Managing Director Bhagya Chandra Rao
* No transaction during the year
Note: i) The above information has been determined to the extent such parties have been identified on the basis of information available with the Company.
ii) The above does not include related party transactions with retiral funds, as management personnel of the Company who are trustees of funds cannot individually exercise significant influence on the retiral funds transactions.
9 Operating lease (Ind AS 17)
As a Lessee:
The Company has taken certain office facilities and motor vehicles on operating lease. These lease arrangements range for a period of 11 months to 5 years and are renewable for further period on mutually aggreable terms.
The total future minimum lease rentals receivable at the Balance Sheet date is as under:
10 First-time adoption of Ind AS
These financial statements, for the year ended 30 June 2018, are the first financial statements the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 30 June 2017, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 201 4 (Previous GAAP).
Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on June 30, 2018, together with the comparative period data as at and for the year ended June 30, 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Companyâs opening balance sheet was prepared as at July 1, 2016, the Companyâs date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at July 1, 2016 and the financial statements as at and for the year ended June 30, 2017.
A. Exemptions and exceptions availed
Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.
A.1 Ind AS optional exemptions :
A.1.1 Deemed cost
Ind AS 101, First-time adoption of Indian Accounting Standards, also permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as on the date of transition after making necessary adjustments for de-commissioning liabilities. Accordingly, the Company has elected to measure all of its property, plant and equipment, intangible assets and investment properties at their previous GAAP carrying value and used that as deemed cost as on the date of transition.
A.1.2 Share based payment
Ind AS 101 permits a first time adopter to not consider the number of options / RSUs, that have already vested as on the date of transition, for fair valuation. Accordingly, the Company has elected to measure only those options/ RSUs that are unvested as on the date of transition.
A.1 .3 Leases
Appendix C to Ind AS 17, Leases, requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. Ind AS 101 provides an option to make this assessment on the basis of facts and circumstances existing at the date of transition to Ind AS, except where the effect is expected to be not material.
The Company has no such arrangements or contract existing as at date of transition.
A.2 Ind AS mandatory exemptions :
A.2.1 Estimates
In accordance with Ind AS, as at the date of transition to Ind AS an entityâs estimates shall be consistent with the estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.
Ind AS estimates as at July 1, 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP except for impairment of financial assets based on ECL as these were not required as per previous GAAP.
A.2.2 Derecognition of financial assets and liabilities
Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109, Financial Instruments, prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirements in Ind AS 109 retrospectively from a date of the Companyâs choosing, provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognised as a result of past transactions was obtained at the time of initially accounting for those transactions.
The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.
A.2.3 Classification and measurement of financial assets
The classification and measurement of financial assets will be made considering whether the conditions as per Ind AS 109 are met based on facts and circumstances existing at the date of transition.
Financial assets can be measured using effective interest method by assessing its contractual cash flow characteristics only on the basis of facts and circumstances existing at the date of transition and if it is impracticable to assess elements of modified time value of money i.e. the use of effective interest method, fair value of financial asset at the date of transition shall be the new carrying amount of that asset. The measurement exemption applies for financial liabilities as well.
Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so. It is impracticable to apply the changes retrospectively if:
a) The effects of the retrospective application or retrospective restatement are not determinable; or
b) The retrospective application or restatement requires assumptions about what managementâs intent would have been in that period; or
c) The retrospective application or retrospective restatement requires significant estimates of amounts and it is impossible to distinguish objectively information about those estimates that existed at that time.
B Reconciliation between Previous GAAP and Ind AS
Ind AS 101, First-time Adoption of Indian Accounting Standards, requires an entity to reconcile equity, total comprehensive income and cash flows for prior periods. The following tables represent the reconciliations from previous GAAP to Ind AS as at the periods specified below.
Notes to first time adoption C 1 Defined benefit obligation
Under previous GAAP, actuarial gains and losses were recognized in the Statement of Profit and Loss, and interest cost was recognized under employee benefit expense. Under Ind AS, the actuarial gain and loss form part of remeasurement of net defined benefit liability/asset which is recognised in other comprehensive income in the respective periods. Interest cost on defined benefit obligations is presented under finance cost in the Statement of Profit and Loss.
C 2 Employee share-based payments
Under the previous GAAP, the cost of group equity settled employee share-based plan were recorded based on cross charge from ultimate holding company. Under Ind AS, the cost of equity settled share based transactions is recognised based on fair value as at the grant date. Consequently, a provision amount of Rs.11 was reversed in share based payment expense for the year ended June 30, 2017 due to excess provision provided under the previous GAAP. The profit for the year ended 30 June, 2017 increased by Rs.11. As a result, total equity has increased by Rs.2 due to reversal of liability for share based payment as at 30 June, 2017 with a corresponding impact to retained earnings.
C 3 Income tax
Under previous GAAP, deferred tax was accounted using the income statement approach, on the timing differences between the taxable profit and accounting profits for the period. Under Ind AS 12, Income tax, deferred taxes are recognized following the balance sheet approach on the temporary differences between the carrying amount of asset or liability in the balance sheet and its tax base. The application of Ind AS 12, has resulted in recognition of deferred tax on new temporary differences which was not required under previous GAAP primarily relating to transactional adjustments pertaining to Ind AS. Deferred tax adjustments are recognised in co-relation to the underlying transaction either in retained earnings or a separate component of equity.
C 4 Other equity
Adjustments to retained earnings and other comprehensive income has been made in accordance with Ind AS, for the above mentioned line items.
11 Previous year comparatives
Previous years figures have been regrouped/reclassified wherever necessary, to conform to this yearâs classification.
Jun 30, 2017
1. SEGMENT REPORTING
The Company is in the business of manufacturing and trading of hard metal products and manufacturing of machine tools (also known as machining solutions), which have been identified as separate business segments for primary segment reporting as envisaged in AS I7 âSegment Reportingâ. The Company''s products are sold in the domestic and export markets, which have been identified as geographic segments for secondary segment reporting.
The Guidance Note on implementation of AS I5 -" Employee Benefits" issued by the Institute of Chartered Accountants of India states that Provident Fund set up by employers that guarantee a specified rate of return and which require interest shortfall to be met by employer would be a defined benefit plan in accordance with the requirements of para (26b) of AS I5. Pursuant to the Guidance Note, the liability in respect of shortfall of interest earned by the Fund, if any, is determined on the basis of an independent actuarial valuation carried out as at June 30,
20I7 and ascertained to be Nil (20I6: Nil).
i) The discount rate is based on the prevailing market yield on Government securities as at the balance sheet date for the estimated term of obligations.
ii) The expected return on plan assets is determined considering several applicable factors mainly the composition of plan assets held, assessed risk of asset management, historical results of the return on plan assets, and the Company''s policy for plan asset management.
iii) The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.
2. Disclosure for leases in accordance with AS I9 â âLeasesâ is as follows:
As a Lessee:
Operating Leases:
The Company has operating leases for motor vehicles and office facilities. These lease arrangements range for a period between eleven months and five years, which include both cancellable and non-cancellable leases. Non-cancellable lease arrangements are for periods of up to 36 months. Cancellable leases are generally with options of renewal against increased rent and premature termination of agreement through notice period of I to 3 months.
As a Less or:
Operating Leases:
The Company has given office facilities and plant and machinery on operating lease. These lease arrangements are over a period of eleven months and are cancellable by notice of 30 days by either side. Most of the leases are renewable for further period on mutually agreeable terms and also include escalation clauses.
3. RELATED PARTY DISCLOSURES
A) Names of related parties and description of relationship:
a) Parties where control exists:
(i) Ultimate holding company Kennametal Inc, USA
(ii) Intermediate holding companies Widia GmbH, Germany
Kennametal Holding GmbH, Germany Kennametal Europe GmbH, Switzerland Kennametal Luxembourg Holding S.A.R.L, Germany Kennametal Holdings, LLC, Luxembourg S.C.S, Germany
Kennametal Holdings Europe Inc, USA
(iii) Immediate holding company Meturit A.G. Zug, Switzerland
b) Parties under common control with whom transactions have taken place during the year:
Fellow Subsidiaries Kennametal Australia Pty Ltd, Australia
Kennametal Produktions GmbH & Co. KG, Germany
Kennametal Asia China Management Company, China
Kennametal Widia Produktions GmbH & Co. KG, Germany*
Kennametal (Singapore) Pte. Ltd., Singapore
Kennametal Korea Ltd., Korea
Kennametal Japan Ltd.,Japan
Kennametal Do Brasil LTDA, Brazil
Kennametal Hard Point (Shanghai) Co. Ltd., China
Kennametal Distribution Services Asia Pte. Ltd.,
Singapore
Kennametal Shared Services Pvt Ltd., India Kennametal (China) Co Ltd., China Hanita MetalWorks Ltd., Israel Kennametal Shared Services GmbH, Germany Kennametal Extrude Hone Corporation, USA# Kennametal Extrude Hone Ltd., England# Kennametal Extrude Hone GmbH, Germany# Extrude Hone Shanghai Co. Ltd., China#
Kennametal (Xuzhou) Company Ltd., China Kennametal Deutschland GmbH., Germany* Kennametal (Malaysia) Sdn. Bhd., Malaysia Kennametal (Thailand) Co., Ltd.,Thailand Kennametal Stellite GmbH, Germany*
Kennametal Stellite India Pvt. Ltd., India## Kennametal Stellite L.P, USA Kennametal Italia S.P.A, Italy*
c) Key Management Personnel
Managing Director Bhagya Chandra Rao
# No transaction during the year
# Relation with party ceased on November 30, 20I5
# # Relation with party ceased on July 22, 20I5
Notes:
a) The Company sets up and maintains provisions for trade and other demands relating to products sold when a reasonable estimate can be made. These provisions are made based on estimates made by Management that are reviewed annually. These matters involve settlements not exceeding a period of two to three years in most cases.
b) Relates to provision towards disputed taxes and duties. Considering the very nature of such disputes, the timing of cash outflow is not readily ascertainable.
c) Figures in brackets relate to prior year.
* Amount is below the rounding off norm adopted by the Company,
b) Particulars of unhedged foreign currency exposures:
* Amount is below the rounding off norm adopted by the Company.
4. The Company does not have a scheme for grant of stock options to employees for the shares issued in India. However, the Managing Director and certain senior management employees of the Company under the long term incentive plan are granted restricted stock units (RSUs) in a share based compensation plan of Kennametal Inc. USA, the ultimate holding company. The RSUs vests over 3 years or 4 years depending on the scheme and year of grant. With respect to the RSUs the ultimate holding company has recharged stock compensation expense amounting to Z 62 (20I6: Z 42 [net]) for all the open RSUs. These plans are assessed, managed and administered by the ultimate holding company and the information to the extent available has been disclosed here as envisaged in the Guidance Note on Accounting for Employee Shared Based Payments issued by the Institute of Chartered Accountants of India.
5. Prior year''s figures have been reclassified/ regrouped, wherever necessary.
Jun 30, 2016
1. Rights, preferences and restrictions attached to shares
The Company has only 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 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, if any, in proportion to their shareholding.
2. Mainly relates to transfer pricing adjustments made by the Income Tax Department for the tax assessment years 2007-08, 200809, 2009-10, 2010-11 and 2011-12, which is disputed by the Company and the matter is lying under appeal with The Income Tax Appellate Tribunal, Bangalore/ The Commissioner of Income Tax (Appeals) LTU, Bangalore. The Company has paid âunder protestâ an aggregate of Rs.2779 (2015: Rs.2271) to the Income Tax Department in this regard.
3. There are certain non-quantifiable disputes pending before labour tribunal/ court under labour laws.
4. Considering the very nature of the above contingent liabilities, the estimate/ timing of cash outflow, if any, is not readily ascertainable.
5. EMPLOYEE BENEFITS
a) T he Company operates defined benefit plans in the nature of post-employment gratuity, which is funded, and in the post retirement provident fund (which is managed by a Trust set up by the Company) where interest shortfall, if any, is met by the Company. The disclosure as per AS-15 âEmployee Benefitsâ is given below:
The Guidance Note on implementation of AS 15 -" Employee Benefits" issued by the Institute of Chartered Accountants of India states that Provident Fund set up by employers that guarantee a specified rate of return and which require interest shortfall to be met by employer would be a Defined Benefit plan in accordance with the requirements of para(26b) of AS 15. Pursuant to the Guidance Note, during the year the liability in respect of the shortfall of interest earning by the Fund if any is determined on the basis of actuarial valuation carried out as at June 30, 2016 and ascertained to be Nil (20l5:Nil).
6. The discount rate is based on the prevailing market yield on Government securities as at the balance sheet date for the estimated term of obligations.
7. The expected return on plan assets is determined considering several applicable factors mainly the composition of plan assets held, assessed risk of asset management, historical results of return on plan assets, and the company''s policy for plan asset management.
8. The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.
9. The Company has recognized in the Statement of Profit and Loss for the year ended June 30, 2016 an amount of Rs.435 (2015: Rs. 412) as follows :
10.. SEGMENT REPORTING
The Company is in the business of manufacturing and trading of hard metal products and machine tools, which have been identified as separate business segments for primary segment reporting as envisaged in AS 17 âSegment Reportingâ. The Companyâs products are sold in the domestic and export markets, which have been identified as geographic segments for secondary segment reporting.
11. Secondary Segment Reporting
Secondary segment disclosures are based on geographical location of customers, which includes the domestic market (India), Europe (comprising Germany), USA and Rest of the World.
12. Disclosure for leases in accordance with AS 19 â âLeasesâ is as follows:
As a Lessee:
Operating Leases:
The Company has operating leases for premises, motor vehicles and office facilities. These lease arrangements range for a period between eleven months and five years, which include both cancellable and non-cancellable leases. Non-cancellable lease arrangements are for periods of up to 36 months. Cancellable leases are generally with options of renewal against increased rent and premature termination of agreement through notice period of 1 to 3 months.
As a Lessor:
Operating Leases:
The Company has given premises and plant and machinery on operating lease. These lease arrangements are over a period of eleven months are cancellable by notice of 30 days by either side. Most of the leases are renewable for further period on mutually agreeable terms and also include escalation clauses.
13. The Company sets up and maintains provisions for trade and other demands when a reasonable estimate can be made. These provisions are made based on estimates made by Management that are reviewed annually. These matters involve settlements not exceeding a period of two to three years in most cases.
14. Relates to provision toward disputed taxes and duties. Considering the very nature of such disputes, the timing of cash outflow is not readily ascertainable.
15. Figures in brackets relate to prior year.
In accordance with the Institute of Chartered Accountants of India announcement dated March 28, 2008 on ''Accounting for Derivatives'' the Company has accounted for mark -to-market losses on forward contracts taken on firm commitments.
16. The Company does not have a scheme for grant of stock options to employees for the shares issued in India. However, the Managing Director and certain senior management employees of the Company under the long term incentive plan are granted restricted stock units (RSU''s) in a share based compensation plan of Kennametal Inc. USA, the ultimate holding company. The RSU''s vests over 4 years or 3 years depending on the scheme and year of grant. With respect to the RSU''s granted up to June 30, 2015, there was no recharge of costs to the Company. However, the ultimate holding company has recharged stock compensation expense pertaining to current year, amounting to Rs. 42 [net] (2015: Nil) for all the open RSU''s. These plans are assessed, managed and administered by the ultimate holding company and the information to the extent available has been disclosed here as envisaged in the Guidance Note on Accounting for Employee Shared Based Payments issued by the Institute of Chartered Accountants of India.
17. Pursuant to a global decision to divest the âExtrude Honeâ business, an agreement was entered into with Madison Industrial Solutions Corporation, USA on Oct 30, 2015 (with effective date of November 30, 2015) by Kennametal Inc, USA, the ultimate holding company. In line with the Board of Directors approval in the meeting held on November 9, 2015, the Company has given effect to the above divestiture and identified certain assets for sale relating to the aforesaid business (which was part of the Hard Metal Products segment), which has been disclosed under âAssets held for saleâ. As part of the sale proceeds, the Company has received Rs.48 (2015: Nil) from the ultimate holding company, and the resultant loss on account of this divestiture amounting to Rs.100 (2015: Nil) has been disclosed under Other Expenses in Note 25.
Jun 30, 2015
1. GENERAL INFORMATION
Kennametal India Limited ("the Company") incorporated under The
Companies Act, 1956, is in the business of manufacturing and trading of
hard metal products and machine tools. The Company has its registered
office and manufacturing facility at Bangalore and sells its products
and services through sales and support offices. The Company is a public
limited company listed on the Bombay Stock Exchange (BSE).
2. Rights, preferences and restrictions attached to shares
The Company has only 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
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, if any, in
proportion to their shareholding.
3. DEFERRED TAX ASSETS (NET)
The major components of Deferred Tax assets and liabilities arising on
account of timing difference are as follows:
4. CAPITALAND OTHER COMMITMENTS:
Capital Commitments (net of advances) Rs 1005 (2014: Rs 263)
5. CONTINGENT LIABILITIES
Nature of Contingent Liability 2015 2014
Income Tax matters [Note (a)] 2804 2294
Excise Duty/ Service Tax matters under dispute 101 101
Sales Tax matters under dispute [Note (b)] 65 65
6. Notes:
a) Mainly relates to transfer pricing adjustments made by the Income
Tax Department for the tax assessment years 2008-09, 2009-10, 2010-11
and 2011-12, which is disputed by the Company and the matter is lying
under appeal with The Income Tax Appellate Tribunal, Bangalore/ The
Commissioner of Income Tax, (Appeals), Bangalore. The Company has paid
"under protest" an aggregate of Rs 2271 (2014: Rs 1774) to the Income
Tax Department in this regard.
b) There are certain non-quantifiable disputes pending before labour
tribunal/ court under labour laws.
c) Considering the very nature of the above contingent liabilities, the
estimate/ timing of cash outflow, if any, is not readily ascertainable.
7. EMPLOYEE BENEFITS
a) The Company operates defined benefit plans in the nature of
post-employment gratuity, which is funded, and in the nature of post
retirement provident fund (which is managed by a Trust set up by the
Company) where interest shortfall, if any, is met by the Company. The
disclosure as per AS-15 "Employee Benefits".
8. The Provident Fund expense other than contribution is not recognised
in Statement of Profit and Loss as the Fair Value of Plan Assets
exceeds the PresentValue of Obligation.
9. The Guidance Note on implementation of AS I5 Employee Benefits"
issued by the Institute of Chartered Accountants of India states that
Provident Fund set up by employers that guarantee a specified rate of
return and which require interest shortfall to be met by employer would
be a defined benefit plan in accordance with the requirements of para
(26b) of AS I5. Pursuant to the Guidance Note, during the year, the
liability in respect of the shortfall of interest earned by the Fund is
determined on the basis of actuarial valuation carried out as at June
30, 2015 is Rs Nil (2014:Rs Nil).
i) The discount rate is based on the prevailing market yield on
Government securities as at the balance sheet date for the estimated
term of obligation.
ii) The expected return on plan assets is determined considering
several applicable factors mainly the composition of plan assets held,
assessed risk of asset management, historical results of the return on
plan assets, and the Company's policy for plan asset management.
iii) The estimates of future salary increases, considered in actuarial
valuation, take account of inflation, seniority, promotion and other
relevant factors such as supply and demand factors in the employment
market.
10. segment reporting.
The Company is in the business of manufacturing and trading of hard
metal products and machine tools, which have been identified as
separate business segments, for primary segment reporting as envisaged
in AS 17 "Segment Reporting". The Company's products are sold in the
domestic and export markets, which have been identified as geographic
segments for secondary segment reporting.
11. Secondary Segment Reporting
Secondary segment disclosures are based on geographical location of
customers, which includes the domestic market (India), Europe
(comprising Germany), USA and Rest of the World.
12. Operating Leases:
The Company has operating leases for premises, motor vehicles and
office facilities. These lease arrangements range for a period between
eleven months and five years, which include both cancellable and
non-cancellable leases. Non-canceilable lease arrangements are up to a
period of 36 months. Cancellable leases are generally with options of
renewal against increased rent and premature termination of agreement
through notice period of I to 3 months.
A) Names of related parties and description of relationship:
a) Parties where control exists:
(i) Ultimate holding company Kennametal Inc, USA
(ii) Intermediate holding companies Kennametal Widia GmbH Co. KG,
Germany
Kennametal Holding GmbH, Germany
Kennametal Europe GmbH,
Switzerland
Kennametal Luxembourg Holding
S.A.R.L
Kennametal Holdings , LLC,
Luxembourg S.C.S
Kennametal Holdings Europe Inc,USA
(iii) Immediate holding company Meturit A.G. Zug, Switzerland
b) Parties under common control with whom transactions have taken place
during the year:
Fellow Subsidiaries Kennametal Australia Pty Ltd,
Australia
Kennametal Produktions GmbH &
Co. KG, Germany
Kennametal Ltd., Canada
Kennametal (Baotou) Co. Ltd, China
Kennametal Widia Produktions GmbH
& Co. KG, Germany
Kennametal (Singapore) Pte. Ltd.,
Singapore
Kennametal Korea Ltd., Korea
Kennametal Japan Ltd., Japan
Kennametal South Africa
(Proprietary) Ltd., South Africa
Kennametal (Thailand) Co., Ltd.,
Thailand
Kennametal Do Brasil LTDA, Brazil
Kennametal Hard Point (Shanghai)
Co. Ltd., China
Kennametal Distribution Services
Asia Pte. Ltd., Singapore
Kennametal Shared Services Pvt
Ltd., India
Kennametal (China) Co Ltd., China
Hanita Metal Works Ltd. (P), Israel
Kennametal Shared Services GmbH,
Germany
Kennametal Extrude Hone
Corporation, USA
Kennametal Extrude Hone Ltd.,
England
Extrude Hone Shanghai Co. Ltd.,
China
Kennametal (Xuzhou) Company Ltd.,
China
Kennametal Stellram SARL, Italy
Kennametal Stellite GmbH, Germany
Kennametal Stellite India Pvt.
Ltd., India
c) Key Management Personnel:
Managing Directors Bhagya Chandra Rao
Santanoo Medhi (upto
September 17, 2012)
Notes;
i) The above information has been determined to the extent such parties
have been identified on the basis of information available with the
Company.
ii) The above does not include related party transactions with retiral
funds, as management personnel of the Company who are trustees of funds
cannot individually exercise significant influence on the retiral funds
transactions.
13. In accordance with AS 29 on "Provisions, Contingent Liabilities and
Contingent Assets'', the disclosure with respect to certain classes of
provisions are as under;
Notes:
a) The Company sets up and maintains provisions for trade and other
demands when a reasonable estimate can be made. These provisions are
made based on estimates made by the management that are reviewed
annually. These matters involve settlements not exceeding a period of
two to three years in most cases.
b) Relates to provision toward disputed taxes and duties. Considering
the very nature of such disputes, the timing/ uncertainties of cash
outflow is not readily ascertainable.
c) Addition and utilisation is shown at gross as against net in the
prior year. Figures in brackets relate to prior year.
14. Remittance in foreign currency during the year on account of
dividends to non-resident shareholders:
In accordance with the Institute of Chartered Accountants of India
announcement dated March 28, 2008 on 'Accounting for Derivatives' the
Company has accounted for mark-to-market losses on forward contracts
taken on firm commitments.
15. The Company does not have a scheme for grant of stock options
either to the Executive Directors or employees for the shares issued in
India. However, the Managing Director and certain senior management
employees of the Company are granted stock options in a share based
compensation plan of Kennametal Inc. USA, the ultimate holding
company.These plans are assessed, managed and administered by the
ultimate holding company and no cross charges/ debits have been made on
the Company.Accordingly, disclosures as envisaged in the Guidance Note
on Accounting for Employee Share Based Payments issued by Institute of
Chartered Accountants of India is not applicable.
16. Prior year's figures have been reclassified/ regrouped, wherever
necessary.
Jun 30, 2014
1. CONTINGENT LIABILITIES
Nature of Contingent Liability 2014 2013
Income Tax matters [Note (a)] 2294 1763
Excise Duty/ Service Tax matters under dispute 101 111
Sales Tax matters under dispute 65 86
Notes:
a) Mainly relates to transfer pricing adjustments made by the Income
Tax Department for the tax assessment years 2007-08, 2008-09, 2009-10
and 2010-11, which is disputed by the Company and the matter is lying
under appeal with The Income Tax Appellate Tribunal, Bangalore/ The
Commissioner of Income Tax, Appeals, Bangalore. The Company has paid
"under protest" an aggregate of Rs. 1774 (2013: Rs.1489) to the Income Tax
Department in this regard.
b) There are certain non-quantifable industrial disputes pending before
various judicial authorities.
c) Considering the very nature of the above contingent liabilities, the
estimate/ timing of cash outflow, if any, is not readily ascertainable.
Note: The above excludes reimbursement of expenses from related parties
Rs. 140 (2013: Rs.117)
Note: The above disclosure is based on requirements stipulated by the
Department of Scientifc & Industrial Research (DSIR), Ministry of
Science and Technology, Government of India.
* Amount is below the rounding of norm adopted by the Company.
Note: The information has been given in respect of such suppliers to
the extent they could be identifed as "Micro" or "Small" enterprises on
the basis of information available with the Company.
2. EMPLOYEE BENEFITS
a) The Company operates Defined benefit plans in the nature of
post-employment gratuity, which is funded, and in the nature of post
retirement provident fund (which is managed by a Trust set up by the
Company) where interest shortfall, if any, is met by the Company. The
disclosure as per AS-15 "Employee benefits" is given below
* The Provident Fund expense other than contribution is not recognised
in Statement of Profit and Loss as the Fair Value of Plan Assets exceeds
the Present Value of Obligation.
(All amounts in Rs. Lakhs unless otherwise stated) *The Guidance Note on
implementation of AS 15 -" Employee benefits" issued by the Institute of
Chartered Accountants of India states that Provident Fund set up by
employers that guwarantee a specifed rate of return and which require
interest shortfall to be met by employer would be a Defined benefit plan
in accordance with the requirements of para(26b) of AS 15. Pursuant to
the Guidance Note,during the year the liability in respect of the
shortfall of interest earning by the Fund if any is determined on the
basis of actuarial valuation carried out as at June 30th, 2014 and
ascertained to be Nil (2013:Nil).
i) The discount rate is based on the prevailing market yield on
Government securities as at the balance sheet date for the estimated
term of obligations.
ii) The expected return on plan assets is determined considering
several applicable factors mainly the composition of plan assets held,
assessed risk of asset management, historical results of the return on
plan assets, and the company''s policy for plan asset management.
iii) The estimates of future salary increases, considered in actuarial
valuation, take account of infation, seniority, promotion and other
relevant factors such as supply and demand factors in the employment
market.
b) The Company has recognised in the Statement of Profit and Loss for
the year ended June 30, 2014 an amount of Rs. 410 (2013: Rs. 408) as
follows:
3. SEGMENT REPORTING
The Company is in the business of manufacturing and trading of hard
metal and hard metal products, and machine tools, which have been
identifed as separate business segments, for primary segment reporting
as envisaged in AS 17 "Segment Reporting". The Company''s products are
sold in the domestic and export markets, which have been identifed as
geographic segments for secondary segment reporting.
B. Secondary Segmental Reporting
Secondary segment disclosures are based on geographical location of
customers, which includes the domestic market (India), Europe
(comprising Germany), USA and Rest of the World.
4. Accounting and disclosure for leases has been made in accordance
with the AS 19 as follows:
Operating Lease:
The Company has operating leases for premises, motor vehicles and offce
facilities. These lease arrangements range for a period between 9
months and 5 years, which include both cancellable and non-cancellable
leases. Cancellable leases are generally with options of renewal
against increased rent and premature termination of agreement through
notice period of 1 to 3 months.
B) Names of related parties and description of relationship:
a) Parties where control exists:
(i) Ultimate Holding Company Kennametal Inc, USA
(ii) Enterprises holding, directly Kennametal Widia GmbH Co. KG,
or indirectly, substantial interest
in Meturit A.G. Zug Germany(Formerly Widia GmbH,
Germany) Kennametal Holding GmbH,
Germany Kennametal Europe GmbH,
Switzerland
(iii) Immediate holding company Meturit A.G. Zug, Switzerland
b) Parties under common control with whom transactions have taken place
during the year:
Fellow Subsidiaries Kennametal Australia Pty Ltd, Australia
Kennametal Produktions GmbH & Co. KG, Germany
Kennametal Widia Produktions GmbH & Co. KG,
Germany
Kennametal (Singapore) PTE. Ltd., Singapore
Kennametal Korea Co., Ltd., Korea
Kennametal Japan Ltd., Japan
Kennametal South Africa (Pty) Ltd., South Africa
Kennametal (Thailand) Co., Ltd., Thailand
Kennametal Do Brasil LTDA, Brazil
Kennametal Hard Point (Shanghai) Ltd., China
Kennametal Distribution Services Asia PTE. Ltd., Singapore
Kennametal Shared Services Pvt Ltd., India
Kennametal (China) Co Ltd., China
Hanita Metal Works Ltd. (P), Israel
Kennametal Shared Services, GmbH, Germany
Kennametal Extrude Hone Corporation, USA
Kennametal Extrude Hone Ltd., England
Kennametal Extrude Hone Ltd, Ireland
Kennametal Extrude Hone GmbH, Germany
Extrude Hone Shangai Co. Ltd., China
Kennametal (Xuzhou) Co. Ltd., China
Kennametal (Malaysia) Sdn. Bhd., Malaysia
Kennametal Logistics GmbH, Germany
Kennametal Stellram, USA
Kennametal Stellram SARL, Switzerland
Kennametal Stellite GmbH, Germany
Kennametal Stellite India P. Ltd., India
c) Key Management Personnel:
Managing Directors
Bhagya Chandra Rao
Santanoo Medhi (upto September 17, 2012)
Notes:
i) The above information has been determined to the extent such parties
have been identifed on the basis of information available with the Company.
ii) The above does not include related party transactions with retiral
funds, as management personnel of the Company who are trustees of funds
cannot individually exercise signifcant infuence on the retiral funds
transactions.
Notes:
a) The Company sets up and maintains provisions for trade and other
demands when a reasonable estimate can be made. These provisions are
made based on estimates made by the management that are reviewed
annually. These matters involve quick settlements not exceeding a
period of two to three years in most cases.
b) Relates to provision toward disputed taxes and duties. Considering
the very nature of such disputes, the timing/ uncertainties of cash
outflow is not readily ascertainable.
c) Figures in brackets relate to prior year.
5. The Company does not have a scheme for grant of its stock options
either to the Executive Directors or employees for the shares issued in
India. However, the Managing Director and certain senior management
employees of the Company are granted stock options in a share based
compensation plan of Kennametal Inc. USA, the ultimate holding
company.
These plans are assessed, managed and administered by the ultimate
holding company and no cross charges/ debits have been made on the
Company.
Jun 30, 2013
1. GENERAL INFORMATION
Kennametal India Limited ("the Company") is incorporated under The
Companies Act 1956. The Company is in the business of manufacturing and
trading of hard metal and hard metal products, and machine tools. The
Company has its registered offce and a manufacturing facility at
Bangalore and sells its products and services through sales and support
offces. The Company is a public limited company listed on the Bombay
Stock Exchange (BSE).
2. CAPITAL AND OTHER COMMITMENTS: Capital Commitments (net of
advances) Rs. 186 (2012: Rs. 905)
3. Accounting and disclosure for leases has been made in accordance
with the Accounting Standard 19 as follows:
Operating Lease: Company as Lessee:
The Company has various operating leases for motor vehicles, offce
facilities, residential premises for employees, etc. Such leases are
generally with options of renewal against increased rent and premature
termination of agreement through notice period of 1 to 3 months. The
particulars of these leases are as follows:
4. The Company has paid remuneration to its Managing Director in
excess of limits stipulated under Schedule XIII of the Companies Act
1956. The excess remuneration of Rs. 30 has been approved by the
Remuneration Committee and is proposed to be approved by the
shareholders in the ensuing Annual General Meeting. The excess
remuneration has been disclosed as Advance to Managing Director in note
18 above
5. In accordance with Accounting Standard 29 on "Provisions,
Contingent Liabilities and Contingent Assets" the disclosure with
respect to certain classes of provisions are as under:
6. The Company does not have a scheme for grant of its stock options
either to the Executive Directors or employees for the shares issued in
India. However, the Managing Director and certain senior management
employees of the Company are granted stock options in a share based
compensation plan of Kennametal Inc. USA, the ultimate holding company.
These plans are assessed, managed and administered by the ultimate
holding company and no cross charges/ debits have been made on the
Company.
7. Previous year''s fgures have been reclassifed / regrouped, wherever
necessary
Jun 30, 2012
Notes:
1. The Cash Flow Statement has been compiled from and is based on the
Balance Sheet as at June 30,2012and the related Statement of Profit and
Loss for the year ended on that date.
2. The Cash Flow Statement has been prepared under the indirect method
as set out in the Accounting Standard 3 on Cash flow Statement as
notified under Section 211(3C) of the Companies Act, 1956 and
reallocation required forthis purpose are as made by the Company.
* Current Investments in debt based Mutual Funds are readily
convertible into cash and having insignificant risk of changes of value
have been included in Cash and Cash Equivalents
4. Figuresin bracket indicate cash outgo, except foradjustments for
operating activities.
5. Previous year's figures have been reclassified / regrouped,
wherever necessary.
1. GENERAL INFORMATION
Kennametal India Limited ("the Company") is incorporated under The
Companies Act 1956. The Company is in the business of manufacturing and
trading of hard metal and hard metal products, and machine tools. The
Company has its registered office and a manufacturing facility at
Bangalore and sells its products and services through sales and support
offices. The Company is a public limited company listed on the Bombay
Stock Exchange (BSE).
(a) Rights, preferences and restrictions attached to shares
The Company has only 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
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, if any, in pro
portion to their shareholding.
2. CAPITAL AND OTHER COMMITMENTS:
2.1 Capital Commitments (net of advances) Rs.905 (2011: Rs.2100)
3. CONTINGENT LIABILITIES
Nature of Contingent Liability 2012 2011
Income Tax matters [Note (a)] 1259 654
Excise Duty /Service Tax matters under dispute 93 70
Sales Tax matters under dispute 48 24
Notes:
a) Relates to transfer pricing adjustments made by the Income Tax
Department for the assessment years 2007-08 and 2008-09 which is
disputed by the Company and the matter is lying under appeal with The
Income Tax Appellate Tribunal, Bangalore, and The Commissioner of
Income Tax, Appeals, Bangalore respectively. The Company has paid
"under protest" Rs.1237 (2011: Nil) to the Income Tax Department in
this regard.
b)Thereare certain non-quantifi able industrial disputes pending before
various judicial authorities.
Note: The above disclosure of tangible fixed assets categories is based
on Department of Scientific & Industrial Research (DSIR), Ministry of
Science and Technology, Government of India requirements.
* The Guidance Note on implementation of AS15 " Employee Benefits"
issued by the Institute of Chartered Accountants of India states that
Provident Fund set up by employers that guarantee a specified rate of
return and which require interest shortfall to be met by employer would
be a Defined Benefit plan in accordance with the requirements of para
(26b) of AS15. Pursuant to the Guidance Note, the liability in respect
of the shortfall of interest determined on the basis of an independent
actuarial valuation [carried out as per the Guidance Note (GN29) issued
by Institute of Actuaries of India effective fromApril 1,2011], as at
June30,2012is Nil.
i) The discount rate is based on the prevailing market yield on
Government securities as at the balance sheet date for the estimated
term of obligations.
ii) The expected return on plan assets is determined considering
several applicable factors mainly the composition of plan assets held,
assessed risk of asset management, historical results of the return on
plan assets, and the company's policy for plan asset management.
iii) The estimates of future salary increases, considered in actuarial
valuation, take account of inflation, seniority, promotion and other
relevant factors such as supply and demand factors in the employment
market.
4. SEGMENT REPORTING
The Company is in the business of manufacturing and trading of hard
metal and hard metal products, and machine tools, which have been
identified as business segment, for primary segment reporting. The
Company's products are sold in domestic and export markets, which have
been identified as geographicsegmentsforsecondary segment reporting.
Note: Revenue from export sales is below threshold set out in
Accounting Standard 17 "Segment Reporting" and accordingly,
disclosure of revenue by geographical location of the customer and
carrying amount of segment assets by geographical location is
notapplicable.
5. Accounting and disclosure for leases has been made in accordance
with the Accounting Standard 19 as follows:
Operating Lease:
I) Company as Lessee:
The Company has various operating leases for motor vehicles, office
facilities, residential premises for employees, etc. Such leases are
generally with options of renewal against increased rent and premature
termination of agreement through notice period of 1 to 3 months. The
particulars of these leases are as follows:
Notes:
a) The Company sets up and maintains provisions for trade and other
demands when a reasonable estimate can be made. These provisions are
made based on estimates made by the management that are reviewed
annually. These matters involve quick settlements not exceeding a
period of two to three years in most cases.
b) Relates to provision toward disputed taxes. Considering the very
nature of such disputes, the timing/ uncertainties of cash outflow is
not readily ascertainable.
c) Figures in brackets relate to prioryear.
6. The Company does not have a scheme for grant of its stock options
either to the Executive Directors or employees for the shares issued in
India. However, the Managing Director and certain senior management
employees of the Company are granted stock options in a share based
compensation plan of Kennametal Inc. USA, the ultimate holding company.
These plans are assessed, managed and administered by the ultimate
holding company and no cross charges/ debits have been made on the
Company.
7. The financial statements for the year ended June 30, 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 June 30, 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 princi pies followed fo r pre paration of fi nancial
statements.
Jun 30, 2011
1. Commitments
Capital Commitments (net of advances) Rs. 210,020 (2010: Rs. 30,442)
2. Contingent Liabilities
Nature of Contingent Liability (Claims
against Company not 2011 2010
Acknowledged as Debts)
Income Tax 65,392 -
Excise Duty / Service Tax 7,021 2,319
Sales Tax 2,428 157
Total 74,841 2,476
Note: There are certain non-quantifiable industrial disputes pending
before various judicial authorities.
3. Segment Reporting
The Company is manufacturing
(i) Hard metal and hard metal products and
(ii) Machine Tools
for the domestic and export markets. Accordingly, the primary segmental
reporting is based on the products manufactured while the secondary
segmental reporting is restricted to the domestic sales and exports.
4. Accounting for Lease has been made in accordance with the
Accounting Standard - 19 notified under section 211 (3C) of the
Companies Act, 1956 and the relevant provisions of the Companies Act
1956.
B) Names of related parties and description of relationship: a) Parties
where control exists:
(i) Holding Company Meturit A.G. Zug, Switzerland
(ii) Ultimate Holding Company Kennametal Inc, USA
(iii) Enterprises holding, directly or indirectly,
substantial interest in Meturit A.G. Zug
Kennametal Widia GmbH Co. KG, Germany *
(Formerly Widia GmbH, Germany)
Kennametal Europe Holding GmbH, Germany *
Kennametal Hertel Europe Holding GmbH, Germany*
Kennametal Holding GmbH, Germany *
Kennametal Europe GmbH , Germany
Kennametal Europe L.P., Bermuda *
Kennametal Holdings Europe Inc, USA *
Kennametal Widia Produktions GmbH & Co. KG*
b) Parties under common control with whom transactions have taken place
during the year:
Fellow Subsidiaries
Kennametal Australia Pty Ltd
Kennametal Produktions GmbH & Co. KG
Kennametal (Singapore) Pte. Ltd.
Kennametal Korea Co., Ltd.
Kennametal Japan Ltd.
Kennametal Ltd.
Kennametal South Africa (Pty) Ltd.
Kennametal Engineered Products B.V.
Kennametal (Thailand) Co., Ltd.*
Kennametal (Malaysia) SDN. Bhd.
Kennametal DO Brasil LTDA
Kennametal Hard Point (Shanghai) Ltd
Kmt Distribution Services Asia Pte. Ltd.,
Kennametal Shared Services Pvt Ltd. (KSSPL)
Kennametal (China) Co Ltd
Kennametal AMSG GmbH
Hanita Metal Works Ltd.
Kennametal Shared Services GmbH
Hanita-1 P G*
Kennametal Extrude Hone Corporation
c) Key Management Personnel Santanoo Medhi - Managing Director
* No transaction during the year
Note: The above information has been determined to the extent such
parties have been identified on the basis of information provided by
the company. The above does not include related party transactions
witli retiral funds, as management personnel who are trustees of funds
cannot individually exercise significant influence on the retiral funds
transactions.
5. Company does not have a scheme for grant of its Stock options
either to the Executive Directors or Employees for the shares issued in
India. However the Managing Director and certain senior management
employees of the company are granted stock options in a share based
compensation plan of Kennametal Inc., the ultimate holding company.
These plans are assessed, managed and administered by the ultimate
holding company and no cross charges/debits have been made on the
company.
6. The company had obtained licenses under the EPCG scheme for
importing capital goods at a concessional rate of custom duty. The
scheme required the company to manufacture and export goods equivalent
to eight times the duty saved within a period of 8 years from the date
of respective Licenses. During the previous year, after evaluating
various options, the company was of the opinion that it will not be
able to meet the said export obligation within the stipulated time
period and decided to close the pending licenses on payment of duty
saved and interest.
Accordingly during the year the company has paid duty saved amount of Rs.
57,313 [Customs duty Rs. 22,072 and Counter Vailing Duty of Rs. 35,241] and
interest of Rs. 47,585 and discharged all the pending export obligation.
Such Customs Duty paid is capitalized and Cenvat Credit availed on the
Counter Vailing Duty. Interest to the extent of Rs. 45,241 was provided
during previous year and the balance of Rs. 2,344 charged during the
year.
7. During the year, Company has changed the rate of Depreciation
charged on Computers, forming part of Data Processing Equipments under
Plant and Machinery, from 20% to 33.33% with retrospective effect,
resulting in additional depreciation charge for the year by Rs. 4,122 and
decrease in the profit for the year to the same extent.
8. Previous year's figures have been reclassified / regrouped,
wherever necessary.
Jun 30, 2010
1. Commitments
There exists Capital Commitments (net of advances) Rs.30,442 (2009: Rs.
43,381)
2. Contingent Liabilities
(a)
Nature of Contingent Liability 2010 2009
Excise Duty 2,319 20,684
Sales Tax (Includes differential tax
liability on account of
pending declaration forms) 53,415 60,557
Total 55,734 81,241
(b) The company has obtained licenses under the EPCG scheme for
importing capital goods at a concessional rate of custom duty. The
scheme requires the Company to manufacture and export goods equivalent
to eight times the duty saved within a period of 8 years from the date
of respective Licenses.
Accordingly the Company is required to manufacture and export the
committed licensed products and fulfill the export obligation of Rs
762,142 (2009: Rs.1,295,600) to be met over a period ending in 2013,
based on block periods. In case of non-fulfillment of export obligation
the Company is liable to pay total duty saved of Rs.45,501 (2009:
Rs.58,268) [(Customs duty Rs.17,413 (2009: Rs.22,575) and Counter
Vailing duty of Rs.28,088 (2009: Rs. 35,693)] and interest . Such
Customs duty paid will be capitalized and Cenvat credit will be availed
on the Counter Vailing duty.
Company during the year, after evaluating various options, is of the
opinion that it will not be able to meet the said export obligation
within the stipulated time period and has decided to close the licenses
on payment of duty saved and interest. Accordingly interest of Rs
45,241 (2009: Rs.Nil) has been provided during the year.
Note: There are certain non-quantifiable industrial disputes pending
before various judicial authorities.
Notes:
(i) The capacities specified under ÃLicensed Capacityà are the
capacities as per the carry on business licenses, registration letters
and industrial licenses, issued under the Industries (Development and
Regulation) Act 1951. However, licensing of products of the Company has
since been discontinued.
(ii) The Installed Capacity has been certified by the CompanyÃs
management and relied upon by the Auditors, this being a technical
matter.
(iii) Production has been arrived at on the basis of opening stock plus
purchases less sales and closing stock after adjustment towards
shortage/excess, write off, etc.
(iv) Figures in brackets relate to previous year.
a) Note: Figures in brackets relate to previous year
b) Includes Trial and Development related materials consumption
amounting to Rs.24,467 (2009:Rs.29,105) included under miscellaneous
expenses [Refer Schedule 14]
Note:
a. The value of raw material consumed (Note 5) and stores and spare
parts consumed (Note 6) has been arrived at on the basis of opening
stock plus purchases less closing stock.
b. Consumption therefore includes adjustment for shortage/ excess,
write-off/(back) and provision for old/ damaged/ obsolete inventory of
Rs. (3,367) (2009: Rs. 12,409)
Note:
a. Excludes provision for leave encashment and gratuity.
b. Includes remuneration of
Mr. Dinakar A for the period July 1, 2009 to September 4, 2009 as
Managing Director.Mr. Sarathy D for the period September 5, 2009 to
April 23, 2010 as Manager u/s 2(24)of the Companies Act, 1956. Mr.
Santanoo Medhi for the period April 24, 2010 to June 30, 2010 as
Managing Director
c. Mr. Santanoo Medhi was appointed as Managing Director on April 24,
2010 and the Company has applied for approval from the Central
Government as per Part 1(e) of Schedule XIII of the Companies Act, 1956
and the approval is awaited. The above said appointment is subject to
approval from the Shareholders in the ensuing annual general meeting.
Note: The information has been given in respect of such suppliers to
the extent they could be identifed as ÃMicro and Smallà enterprises on
the basis of information available with the Company and this has been
relied upon by the auditors.
Note: Units sold includes units cumulated upto the date of sale.
3. Employee Benefits
i) The Company has recognised, in the profit and loss account for the
year ended June 30, 2010 an amount of Rs. 23,433 (2009: Rs. 23,426)
expenses under defined contribution plans
The Companys Provident Fund is exempted under Section 17 of Employees
Provident Fund Act, 1952. Conditions for grant of exemption stipulates
that the employer shall make good deficiency, if any, in the interest
rate declared by Trust over statutory limit. Having regard to the
assets of the Fund and the return on the investments, the Company does
not expect any deficiency in the foreseeable future.
i) The discount rate is based on the prevailing market yield on
Government securities as at the balance sheet date for the estimated
term of obligations.
ii) The expected return on plan assets is determined considering
several applicable factors mainly the composition of plan assets held,
assessed risk of asset management, historical results of the return on
plan assets, and the Companys policy for plan asset management.
iii) The estimates of future salary increases, considered in actuarial
valuation, take account of inflation, seniority, promotion and other
relevant factors such as supply and demand factors in the employment
market.
4. Segment Reporting
The Company is manufacturing
(i) Hard metal and hard metal products and
(ii) Machine Tools
for the domestic and export markets. Accordingly, the primary segmental
reporting is based on the products manufactured while the secondary
segmental reporting is restricted to the domestic sales and exports.
5. Taxation
i. Transfer Pricing
For the year ended March 31, 2010 the Company is in the process of
complying with the Transfer Pricing regulations.
ii. Accounting for taxes on income disclosure as per AS-22.
Major components of Deferred Tax Assets and Liabilities on account of
timing difference as at June 30, 2010 are:
6. Accounting for Lease has been made in accordance with the
Accounting Standard à 19 notified under section 211(3C) of the
Companies Act, 1956 and the relevant provisions of the Companies Act
1956.
Operating Lease:
The Company has various operating leases for motor vehicles,
equipments, office facilities, residential premises for employees etc.
Such leases are generally with options of renewal against increased
rent and premature termination of agreement through notice period of 1
to 3 months. The particulars of these leases are as follows:
B) Names of related parties and description of relationship:
a) Parties where control exists:
(i) Holding Company Meturit A.G. Zug, Switzerland
(ii) Ultimate Holding Company Kennametal Inc, USA
(iii) Enterprises holding,
directly or indirectly, Kennametal Widia
GmbH Co. KG, Germany *
substantial interest in
Metruit A.G. Zug (Formerly Widia GmbH, Germany)
Kennametal Europe Holding GmbH,
Germany *
(Formerly Widia Holding GmbH,
Germany)
Kennametal Hertel Europe Holding
GmbH, Germany
Kennametal Holding GmbH, Germany *
Kennametal Widia Holdings
Inc, USA *
Kennametal Europe GmbH , Germany
Kennametal Europe L.P., Bermuda *
Kennametal Holdings Europe
Inc, USA *
Kennametal Widia Produktions
GmbH & Co. KG
b) Parties under common control with whom transactions have taken place
during the year:
Fellow Subsidiaries Kennametal South Africa (Pty)
Ltd., South Africa
Kennametal (Malaysia) Sdn.Bhd,
Malaysia
Kennametal Hardpoint (Shanghai)
Ltd., China
Kennametal (Singapore) Pte. Ltd.,
Singapore
KennametalJapan Ltd., Japan
Hanita Metal Works Ltd., Israel
Kennametal Korea Ltd., Korea
Kennametal Australia Pty. Ltd.,
Australia
Kennametal (Thailand) Co. Ltd.,
Thailand *
Kennametal Engg ProdHardenburg,
Nederland
KMT Distribution Services Asia Pte.
Kennametal Shared Services Private
Limited
Conforma Clad *
Extrude Hone Corporation
Kennametal Do Brasil Limited
Clapp Dico Corporation
Kennametal (China) Co. Ltd
Breakthrough Engineering
Components *
Kennametal Logistics GmbH
Kennametal Shared Services, GmbH
IPG - Hanita, Cleveland
Kennametal Ltd, Canada
Kennametal Technologies GmbH
Kennametal Italia S.P.A.
Kennametal HTM AG (HTM), Switzerland
c) Key Management Personnel ** Dinakar A. - Managing Director
D. Sarathy - Manager
Santanoo Medhi - Managing Director
d) Director related entities Nil
* No transaction during the year ** Refer Note 7A (b) and (c) above
Note: The above information has been determined to the extent such
parties have been identifed on the basis of information provided by the
Company which has been relied upon by the auditors. The above does not
include related party transactions with retiral funds, as Management
personnel who are trustees of funds cannot individually exercise
signifcant infuence on the retiral funds transactions.
7. In accordance with Accounting Standard 29 on ÃProvisions,
Contingent liabilities and Contingent assetsà as notifed under section
211(3C) of the Companies Act, 1956 and the relevant provisions of the
Companies Act 1956, certain classes of liabilities have been identifed
as under:
Note:Figures in bracket relates to previous year
The Company sets up and maintains provisions for trade and other
demands when a reasonable estimate can be made. These provisions are
made based on estimates made by the management that are reviewed
annually. These demands/ issues involved quick settlements not
exceeding a period of two to three years in most cases.
8. Remittance in Foreign currency during the year on account of
Dividends to Non-Resident Shareholders.
9. Company does not have a scheme for grant of its Stock options
either to the Executive Directors or Employees for the shares issued in
India. However the Managing Director and certain senior management
employees of the Company are granted stock options in a share based
compensation plan of Kennametal Inc., the ultimate holding Company.
These Plans are assessed, managed and administered by the ultimate
holding Company and no cross charges/debits have been made on the
Company
10. Previous years fgures have been reclassified/ regrouped, wherever
necessary.
Notes:
1 The Cash flow statement has been compiled from and is based on the
Balance sheet as at June 30, 2010 and the related Profit and Loss
account for the year ended on that date.
2 The Cash flow statement has been prepared under the indirect method
as set out in the Accounting Standard 3 on Cash flow statement as
notified under section 211(3C) of the Companies Act, 1956 and
reallocation required for this purpose are as made by the Company.
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