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Notes to Accounts of Kirloskar Electric Company Ltd.

Mar 31, 2015

1.Note 35 of the financial statements:

(a) The order of the honorable High court of Karnataka according approval for the scheme of arrangement and amalgamation under sections 391 to 394 of the Companies Act, 1956 ("Scheme") was received in September 2008 with April 1,2007 as the appointed date. This scheme of arrangement and amalgamation interalia involved transfer of the operating business of Kirloskar Power Equipment Limited ("KPEL") and amalgamation of Kaytee Switchgear Limited ("KSL") with the Company. The Scheme was registered with the Registrar of Companies on October 17, 2008.

(b) Decree in Form 42 of the Companies (Court) Rules, 1949 is yet to be passed by the honorable High Court of Karnataka.

(c) Some of the assets and liabilities so transferred to the Company are continuing in the name of the respective companies. Necessary action is being taken by the Company.

2. Note 37 of the financial statements:

Confirmation of balances from parties with whom the Company had transactions are awaited in certain cases. Accounts with certain parties are under review and reconciliation. Adjustments if any, will be made on completion of review/reconciliation. In the assessment of the management, effect on revenue is not expected to be material.

3. Note 38 of the financial statements:

The customers of the Company had deducted liquidated damages and other charges for delays in delivery of goods as compared to contractual obligations. The Company has made representations to such customers explaining reasons for delays as well as impress upon them that the same were caused by various factors including those not attributable to it and as such being beyond its control. The Company had made necessary provision on an overall assessment of the likely loss where in its opinion waiver is not likely. The Company is confident that its representations will be accepted by customers and liquidated damages and other charges deducted will be waived. Impact, if any, on the financial statements will not be material.

4. Note 39 of the financial statements:

The Company has implemented SAP ECC 6 systems at its units. Certain mistakes and omissions noticed in the inventory records have been corrected to the extent identified based on physical inventory taken from time to time. The Company has made significant progress in stabilization of the systems, cleansing data and bringing the valuation in line with accounting standard 2 . The management has also formed a task force for liquidation of slow/non moving inventories. The Company is in the process of quantifying the differences adjusted/to be adjusted in the books of account on a comprehensive basis. Any further adjustments required to the financial statements is not expected to be material.

5. Note 40 of the financial statements:

Machinery purchased in prior years but currently held for sale for the past several years have been recognized at realizable value estimated by the management. Such value is consistent with quotations received from prospective buyers and anticipated shortfall in readability has been provided for in the books of accounts.

6. Note 42 of the financial statements:

During a previous year, the shareholders of the Company at the Annual General Meeting held on September 30, 2013 have approved an Employee Stock Option Scheme. However, the Company had not issued any options as at March 31, 2015 and accordingly, recognition of expense in this respect and requisite disclosures are not applicable.

7. Notes 43 of the financial statements:

DISCLOSURES AS PER ACCOUNTING STANDARD 15 "EMPLOYEE BENEFITS":

8. Note 44 of the financial statements: SEGMENT REPORTING:

The Company has not furnished segment report since same has been furnished in the Consolidated financial statements, as referred to para 4 of accounting standard 17 issued by Central Government

9. Note 45 of the financial statements: Related party transactions:

KEC North America Inc has been dissolved. The investments in and dues from the said company have not been written off, pending receipt of approvals from Reserve Bank of India. However, full provision has been made for the same. Since the said company has been dissolved, the same has not been considered for related party disclosures.

10. Note 46 of the financial statements:

FINANCE LEASE:

Finance lease arrangements relate to Plant & Machinery. The lease period is for five years with interest rates ranging from 13% to 14%per annum. The Company pays fixed lease rentals over the period of the lease whereby the net present value of the minimum lease payments amount substantially to the cost of the assets.

11. Note 47 of the financial statements:

OPERATING LEASE:

The Company has various operating leases for office facilities, guesthouse and residential premises of employees that are renewable on a periodic basis, and cancelable at its option. Rental expenses for operating leases included in the financial statements for the year are Rs.380.14 Lakhs (Previous Year Rs.291.66 Lakhs).

12. Note 48 of the financial statements:

The Company has made provisions towards wage arrears, warranty claims from the customers towards sales, short term compensated absences, stamp duty payable and contingencies. Details of the same are as under:

Foot Note:

Provision in respect of wage settlement has been made on estimated basis and differences if any will be accounted on final settlement. Further as a matter of abundant caution an estimated provision as been made for contingencies as held in respect of ongoing litigations as detailed in note 23 and certain probable liability.

13. Note 50 of the financial statements:

During the year under review, the Company promoted the following wholly owned subsidiaries: KELBUZZ Trading Private Limited ("KTPL"), SLPKG Estates Holdings Private Limited ("SEHPL"), SKG Terra Promenade Private Limited ("STPPL"), Luxguisite Parkland Private Limited ("LPPL").

14. Note 51 of the financial statements:

Lloyd Dynamo work GmbH & Co. KG, Germany (LDW), a step down subsidiary of the Company, incurred substantial losses during the previous two years, thereby eroding its net worth. The local directors of LDW filed a preliminary insolvency petition on September8,2014andonSeptember9,2014 preliminary insolvency was declared and preliminary insolvency administrator was appointed by the court in Germany.

15. Note 52 of the financial statements:

The Company has been given to understand that a South Korean company acquired all significant assets, patents, estates, orders and employees of LDW. However, relevant details of the consideration for this transfer and all other relevant information are not available with the Company, in spite of its best efforts. The Company has already filed its claim for an approximate value of Euro 3.52 million in respect of outstanding towards supplies made to LDW including dues of Kirsons B V (immediate holding company of LDW). The Company has also appointed a local legal counsel to represent its interest, prepare a case for recovering damages and file a case against the lenders of LDW and few other parties.

16. Note 53 of the financial statements:

The Company, after obtaining necessary approvals from its members has transferred its investments in Kirsons BV to LPPL at a consideration of Rs.6,063 lakhs (fair value assessed by a firm of Chartered Accountants appointed by the Company). The resultant loss of Rs.16,384.17 lakhs has been recognized in the statement of profit and loss, as an exceptional item.

17. Note 54 of the financial statements:

a) As a measure of restructuring and with the consent of the lending banks under the Joint Lender Forum (JLF) mechanism, the Company has transferred certain assets comprising of immovable properties, receivables and inventory to KTPL, STPPL and SEHPL, which will function as special purpose vehicles to hold such assets, dispose off the same and pay off certain debts transferred / to be transferred by the Company. The assets transferred are as detailed below: i) Assignment of book debts of Rs.4,759.69 lakhs , sale of certain materials of Rs.45.68 lakhs and sale of certain immovable properties of Rs.5,088 lakhs, to KTPL. ii) Assignment of books debts of Rs.4,300.07 lakhs and sale of certain immovable properties of Rs.5,518 lakhs, to SEHPL and iii) Sale of certain immovable properties amounting to Rs.3,450 lakhs to STPPL.

The fair value of all the properties have been assessed by chartered engineers appointed by the Company.

b) The above transactions between the Company and its wholly owned subsidiaries in respect of transfer of immoveable properties are subject to the approval of the members by way of special resolutions in terms of section 188 of the Companies Act, 2013, rule 15 (2) of the Companies (Meetings of Boards and its Powers), Rules, 2014 and other applicable provisions, if any. Further as a matter of abundant precaution the Company is taking steps to get the approval of the members by way of special resolution as referred above in respect of transfer of assignment of debts to its wholly owned subsidiaries.

c) The deeds conveyance immovable properties referred to earlier were executed before March 31, 2015 in respect of which, payment of stamp duty, registration charges and registration with the concerned Sub Registrars are pending for the properties valued at Rs 13,652.45 lakhs. The Company has been advised that these properties have already vested in the relevant subsidiaries on the date of execution of the concerned deeds, even though payment of stamp duty and registration will be done subsequently. Necessary provision has been recognized in the financial statements wherever applicable to the extent registration charges and stamp duty is payable by the Company.

d) The amounts outstanding and due from the said subsidiaries as at March 31, 2015 in respect of the transfer of the assets as mentioned in para 6(a) and 6(b) are KTPL Rs 5,838.48 lakhs, SEHPL Rs 9,305.49 lakhs and STPPL Rs 3,450 lakhs.

These subsidiaries are taking active steps to repay the dues of the Company, from collection of debts assigned and from disposal of assets transferred apart from debts transferred /to be transferred as referred above. These subsidiaries have been sanctioned credit facilities to an aggregate extent of Rs. 51.33 crores (net of amounts drawn).

The board of directors of the Company are confident of recovery of the entire amounts due from the said subsidiaries and accordingly the resultant profit from transfer of said assets to them aggregating to Rs. 14,001 lacs has been recognized in the Statement of Profit and Loss as exceptional income.

18. Note 55 of the financial statements:

The net worth of the group in terms of the Consolidated financial statements presented consisting of the Company, its subsidiaries and its associate is eroded. The Company and its components have initiated several measures like identification and active steps being taken for disposal of non-core assets, arrangement under JLF mechanism for restructuring of dues to banks, sanction of further non fund based limits by banks, infusion of capital by the promoters, rationalization of operation, introduction of value added products push for sales, optimization in product mix and enhanced contribution, proposed capital raising plans etc. Accordingly, your directors have prepared the financial statements of the Company on the basis that it is a going concern and that no adjustments are considered necessary to the carrying value of assets and liabilities.

19. Note 56 of the financial statements:

The Company has recognized the charge for depreciation adopting the useful life of its fixed assets other than plant and machinery/tools as prescribed in schedule II of the Companies Act, 2013. However, the charge for depreciation on plant and machinery/tools has been based on the re-evaluated useful life technically assessed which are different from the useful life prescribed in schedule 11 of the said Act. Had the company continued with the rates of depreciation adopted till March 31,2014, the charge for depreciation and loss for the year ended March 31, 2015 would have been higher by Rs. 87.79 lakhs. Further, based on transitional provisions provided in clause 7(b) of schedule II of the Companies Act, 2013, an amount of Rs. 68.87 lakhs representing the carrying value of those assets whose residual useful life is over, has been charged to the retained earnings as at April 1,2014.

20. Note 57 of the financial statements:

The company has filed before the honorable Supreme Court, special leave petition in respect of resale tax and sales tax penalty of Rs. 527 lakhs and Rs. 362 lakhs respectively, on its erstwhile subsidiary Kaytee Switchgear Limited (since merged with the company) and confirmed by the honorable High Court of Karnataka. The company believes based on legal advice / internal assessment that the outcome of this contingencies will be favorable, that losses are not probable and no provision is required to be recognized in this respect.

21. Note 58 of the financial statements:

The Income Tax Act, 1961 contains provisions for determination of arm's length price for international transactions between the Company and its associated enterprises as well as in respect of certain specified domestic transactions. The regulations envisage taxation of transactions which are not in consonance with the arms length price so determined, maintenance of prescribed documents and information including furnishing of a report from an accountant before the due date for filing the return of income. For the year ended March 31, 2015, the Company is in the process of complying with the said regulations. Management believes that such transactions have been concluded on an arm's length basis and there would be no additional tax liability for the financial year under consideration as a result of such transactions.

22. Note 59 of the financial statements:

Previous year's figures have been regrouped wherever required in conformity with current year presentation. Figures in brackets relates to previous year.


Mar 31, 2014

1. BACKGROUND:

Kirloskar Electric Company Limited ("the Company") was incorporated in the year 1946 and is a company engaged in the manufacture and sale of electric motors, alternators, generators, transformers, switchgear, DG sets etc.

2. Contingent liabilities and commitments: (Note 23 of the financial statement) (to the extent not provided for)

a) Contingent liabilities: (Rs.in Lakhs)

Sl. Particulars As at As at No. March 31,2014 March 31, 2013

i) Claims against the Company not acknowledged as debts 1 367 78 2 684 82

ii) Guarantees 4,324.93 4,973.74

i) Letters of credit 5,634.68 7,026 65

iv) Bills discounted with bank 1,864.81 1,882.36

v) Penal damages levied by the Regional Provident Fund commissioner. During the year High Nil 91.54

Court of Karnataka, Bangalore has quashed the demand and referred the matter to the original authority. An amount of Rs.46.18 lakhs paid has been included in disputed statutory due.

vi) Central excise and customs authorities have issued notices and raised certain demands, which 338.62 226.60 are pending in appeal before various authorities, not acknowledged as debt by the Company.

vii) Sales tax demanded under appeal. The Company has paid an aggregate amount of Rs.432.56 1 946 03 1 795 00 lakhs (as at March 31,2013 Rs.420.66 lakhs) against the demand which has been included in , . disputed statutory dues.

viii) The Company has filed before the honorable Supreme Court, special leave petitions inrespect 889.00 889.00 of resale tax and sales tax penalty of Rs. 527 lakhs and Rs. 362 Lakhs respectively, on its erstwhile subsidiary Kaytee Switchgear Limited (since merged with the Company)and confirmed by the honorable High Court of Karnataka. The Company believes based on legal advice / internal assessment that the outcome of these contingencies will be favorable, that losses are not probable and no provision is required to be recognized in this respect.

The Company has paid an aggregate amount of Rs.530.13 lakhs (as at March 31,2013 Rs.510.13 lakhs) against the demand which has been included in disputed statutory dues.

ix) Show cause notices raised by the Income Tax Department for short and non remittances of tax deduction at source - matter under examination. 10.22 45.99

x) Sales tax liabilities in respect of pending assessments - C forms have not been received from Not Not several customers. Continuing efforts are being made to obtain them. Significant progress has Ascertainable Ascertainable been made in the matter as compared to the previous year.

xi) Interest if any, on account of delays in payment to suppliers.

Ascertainable Ascertainable

xii) Certain industrial disputes are pending before various judicial authorities - not acknowledged Not Not by the Company. Ascertainable Ascertainable

xiii) Wage settlement of certain units have expired. However provision has been made on estimated Not Not basis and differences if any will be accounted on final Settlement. Ascertainable Ascertainable

xiv) Income tax demands under appeal. The Company has paid an amount of Rs.48.82 lakhs as at 31 March 2014 (as at March 31,2013 Rs.48.82 lakhs) against the demand which has been 398.13 64.38 included in advance payment of tax.

xv) Guarantee given to ICICI Bank in consideration of stand by letter of credit opened by them in favor of ICICI Bank,Canada as security for loan granted issued by them to Kirsons BV. SBLC 1,399.70 3,573.65 is secured by mortgage of certain immovable properties of the company and shares of Kiirsons BV

xvi) The Company had furnished a guarantee for the redemption of preference shares issued by Kirloskar Investment and Finance Ltd to an extent of Rs. 200 lakhs (as at March 31, 2012 Rs. 200 lakhs) and had obtained counter guarantee from the said Company. The preference shareholder has claimed a sum of Rs.200 lakhs along with dividends in arrears of Rs.205.60 405.60 405.60 lakhs and interest from the Company. This claim has been upheld by the Debt Recovery Tribunal (DRT). The Company has preferred an appeal before the Debt Recovery Appellate Tribunal (DRAT) to set aside the orders passed by the DRT. The DRAT directed to deposit sum of Rs.128 lakhs for further hearing the matter. On waiver of the conditions of depositing any amount, against the company, Company has filed a writ before Honorable High court of Karnataka. The Company does not acknowledge this liability.

xvii) Arrears of fixed cumulative dividends on preference shares (including tax thereon) 1,162.49 1,162.49

3. Note 35 of the financial statements:

(a) The order of the honorable High court of Karnataka according approval for the scheme of arrangement and amalgamation under sections 391 to 394 of the Companies Act, 1956 ("Scheme") was received in September 2008 with April 1, 2007 as the appointed date. This scheme of arrangement and amalgamation interalia involved transfer of the operating business of Kirloskar Power Equipments Limited ("KPEL") and amalgamation of Kaytee Switchgear Limited ("KSL") with the Company. The Scheme was registered with the Registrar of Companies on October 17, 2008.

(b) Decree in Form 42 of the Companies (Court) Rules, 1949 is yet to be passed by the honorable High Court of Karnataka, pending payment of stamp duty assessed by the appropriate authority as directed by the honorable High Court of Karnataka.

(c) Some of the assets and liabilities so transferred to the Company are continuing in the name of the respective companies. Necessary action is being taken by the Company.

4. Note 37 of the financial statements:

Confirmation of balances from parties with whom the Company had transactions are awaited in certain cases. Accounts with certain parties are under review and reconciliation. Adjustments will be made on completion of review/ reconciliation. In the assessment of the management, effect on revenue is not expected to be material.

5. Note 38 of the financial statements:

The customers of the Company have deducted liquidated damages and other charges for delays in delivery of goods as compared to contractual obligations. The Company has made/will make representations to such customers explaining reasons for delays as well as impress upon them that the same were caused by various factors including those not attributable to it and as such being beyond its control. The Company has made necessary provision on an overeall assessment of the likely loss where in its opinion waiver is not likely. The Company is confident that its representations will be accepted by customers and liquidated damages and other charges deducted will be waived. Impact, if any, on the financial statements will not be material.

6. Note 39 of the financial statements:

The Company has implemented SAP ECC 6 systems at its units. Certain mistakes and omissions noticed in the inventory records have been corrected to the extent identified based on physical inventory taken from time to time. The Company has made significant progress in stabilization of the systems, cleansing data and bringing the valuation in line with accounting standard 2 . The management has also formed a task force for liquidation of slow/non moving inventories. The Company is in the process of quantifying the differences adjusted / to be adjusted in the books of account as a comprahensive basis. Any further adjustments required to the financial statements is not expected to be material.

7. Note 40 of the financial statements:

Machinery purchased in prior years but currently held for sale for the past several years have been recognized at realizable value estimated by the management. Such value is consistent with quotations received from prospective buyers.

8. Note 41 of the financial statements:

Current assets, loans and advances include Rs.241.11 Lakhs (as at March 31,2013 Rs.243.32Lakhs) being rescheduled advances from certain companies in which certain key managerial personnel are interested. The Company is confident that these companies will fulfill their obligations and has considered these amounts as good of recovery.

9. Note 42 of the financial statements:

During the previous year, the shareholders of the Company at the Annual General Meeting held on September 30, 2013 have approved an Employee Stock Option Scheme. However, the Company had not issued any options as at March 31, 2014 and accordingly, no recognition of expense in this respect and requisite disclosures have been made/ furnished.

10. Note 44 of the financial statements:

SEGMENT REPORTING:

(i) The Company has identified the reportable segments as Power Generation & Distribution, Rotating machine group and others taking into account the nature of products and services, the different risks and returns and the internal reporting systems. The accounting policies for segment reporting are in line with the accounting policies followed by the Company.

RELATED PARTY TRANSACTIONS;

(a) List of related parties:

Sl. No. Name of the Related Party Relationship

1. Kirsons B V Wholly Owned Subsidiary

2. Lloyd Dynamowerke GmbH & Co. KG Step down subsidiary

Lloyd Beteiligungs GmbH

3. Mr. Vijay R Kirloskar Key Management Personnel and

Mrs. Meena Kirloskar their relatives ("KMP")

Ms. Janaki Kirloskar

Ms. Rukmini Kirloskar

Mr. Anuj Pattanaik (Upto February 28, 2013)

Mr. Alok Kumar Gupta (from March 15, 2013)

4. Kirloskar (Malaysia) Sdn. Bhd Associates

Electrical Machines Industries (Bahrain) W.L.L

5. Kirloskar Batteries Private Limited Enterprises over which key

Kirloskar Power Equipments Limited management personnel

Ravindu Motors Private Limited and their relatives are able

Vijay Farms Private Limited to exercise significant

Kirloskar Electric Charitable Trust influence ("Others")

Sri Vijaydurga Investments and Agencies Private Limited

Vijayjyothi Investment and Agencies Private Limited

Abhiman Trading Company Private Limited

Vimraj Investment Private Limited

Vijay Kirthi Investment and Agencies Private Limited

Kirloskar Software Services

KEC Executives & Others Officers Welfare Trust

KEC Officers & Engineers Welfare Trust

KEC Vice Presidents Welfare Trust

KEC Engineers of Mysore Unit Welfare Trust

11. Note 47 of the financial statements:

OPERATING LEASE:

The Company has various operating leases for office facilities, guest house and residential premises of employees that are renewable on a periodic basis, and cancelable at its option. Rental expenses for operating leases included in the financial statements for the year are Rs.299.66 Lakhs (Previous Year Rs.636.73 Lakhs).

12. Note 49 of the financial statements:

(a) The Company has entered into forward contracts which were outstanding as at March 31, 2014 for Nil (as at March 31, 2013: $ 1,136,045) to hedge certain trade payables.

13. Note 50 of the financial statements:

LDW has incurred substantial losses for the current and immediate previous years, thereby eroding its networth. However, LDW has sufficient orders in hand and is confident of earning profits in the subsequent years. The Company has formulated a turn around strategy for the said company, which has been progressing well. The diminution in the carrying value of the investments held by the Company in Kirsons BV (immediate holding company of LDW) is considered temporary and no provision is considered necessary. The Company had obtained an independent valuation report in August 2013 in terms of which the carrying value as at March 31, 2014 is less than the fair value assessed by the valuer.

14. Note 50 of the financial statements:

The Income Tax Act, 1961 contains provisions for determination of arm''s length price for international transactions between the Company and its associated enterprises as well as in respect of certain specified domestic transactions. The regulations envisage taxation of transactions which are not in consonance with the arms length price so determined, maintenance of prescribed documents and information including furnishing of a report from an accountant before the due date for filing the return of income. For the year ended March 31, 2014, the Company is in the process of complying with the said regulations. Management believes that such transactions have been concluded on an arm''s length basis and there would be no additional tax liability for the financial year under consideration as a result of such transactions.

15. Previous year''s figures have been regrouped wherever required in conformity with current year presentation. Figures in brackets relates to previous year.


Mar 31, 2013

1 BACKGROUND:

Kirloskar Electric Company Limited ("the Company") was incorporated in 1946 and is a company engaged in the manufacture and selling of electric motors, alternators, generators, transformers, switchgear, DG sets etc.

2. (a) The order of the honorable High court of Karnataka according approval for the scheme of arrangement and amalgamation under sections 391 to 394 of the Companies Act, 1956 ("Scheme") was received in September 2008 with April 1, 2007 as the appointed date. This scheme of arrangement and amalgamation interalia involved transfer of the operating business of Kirloskar Power Equipment Limited ("KPEL") and amalgamation of Kaytee Switchgear Limited ("KSL") with the Company. The Scheme was registered with the Registrar of Companies on October 17, 2008.

(b) Decree in Form 42 of the Companies (Court) Rules, 1949 is yet to be passed by the honorable High Court of Karnataka, pending assessment and payment of stamp duty. The Company has provisionally accounted for stamp duty liability estimated at Rs.597.06, pending finalization of the matter. Further adjustments, if any will be made as and when correct assessment of stamp duty is made.

(c) Some of the assets & liabilities so transferred to the Company are continuing in the name of the respective companies. Necessary action is being taken by the Company.

3. The Company has preferred a suit for various claims against Deutsche Bank, one of the members of the consortium of bankers for breach of trust for withholding of monies belonging to the Company and freezing sanctioned working capital limits.

4. (a) Confirmation of balances from trade receivables is awaited. Review of certain trade receivables account and advance from customer accounts is under progress and corrections have been carried out to the extent mistakes were identified. Against aggregate trade receivables outstanding as at March 31, 2013 for more than 2 years of Rs. 2,613.52 lakhs, the Company holds allowance for doubtful debts of Rs. 673.07 lakhs. Adjustments, if any will be made on completion of review/reconciliation/ identification of further doubtful debts. In the assessment of the management, effect on revenue is not expected to be material.

(b) The Company has made significant progress in reconciling balances relating to trade payables, other current liabilities and loans & advances. However, confirmation of balances from few parties is awaited and/or is under review/ reconciliation. In the assessment of the management, effect on revenue is not expected to be material.

(c) Further, on completion of above review an amount of Rs. 614.73 lakhs representing net difference in KSL and KPEL account has been written off under bad trade receivables written off in note 31 of the financial statements and an amount of Rs. 590 lakhs has been withdrawn and shown under unclaimed credit balances written back and reported under note 25 of the financial statements.

5. The Company has implemented SAP ECC 6 systems at its units. Certain mistakes and omissions noticed in the inventory records have been corrected to the extent identified based on physical inventory taken from time to time. Further, work in progress at certain units with aggregate carrying value of Rs. 5,658.81 lakhs as at March 31, 2013 includes non moving/old inventories in respect of which physical identification/ reconciliation/assessment of net realizable value is under progress. Further, the procedures for determination of cost or net realizable value in respect of work in progress is to be streamlined to bring the same in line with Accounting Standard (AS) - 2 as referred to in section 211 (3) (C) of the Companies Act, 1956. Management is taking continuing steps to cleanse data, stabilize systems, identify all old/ non moving materials and refine the procedures for determination of cost or net realizable value of work in progress in line with AS - 2. In the assessment of the management, impact on revenue for the year is not expected to be material.

6. (a) During the year, the Company has implemented SAP ECC 6 systems software in certain units. Inventory at these units as at March 31, 2013 have been based on moving weighted average and labour/ overheads absorption methods configured in the said system as against other cost basis used in the previous year. Effect of such change on the revenue for the year is not ascertained.

(b) Depreciation on additions has been calculated on monthly prorata basis instead of quarterly basis, in certain units where SAP ECC 6 system has been implemented. Effect of such change on the revenue for the year is not ascertained.

7. Assets held for sale have been recognized at realizable value estimated by the management. No external valuation or quotations from prospective buyers have been obtained.

8. Current Assets, Loans & Advances include Rs. 243.32 (as at March 31, 2012 Rs. 431.93) being rescheduled advances from certain companies in which certain key managerial personnel are interested. The Company is confident that these companies will fulfill their obligations and has considered these amounts as good of recovery. * Includes Purchases of goods/ services from Kirloskar Batteries Private Limited Rs. Nil (Previous year Rs. 51.75), Vijay Farms Private Limited Rs. 77.30 (Previous year Rs. 70.58), Sri Vijayadurga Investments and Agencies Private Limited Rs. 109.30 (Previous year Rs. 143.29), Vijayjyothi Investments and Agencies Private Limited Rs. 1.69 (Previous year Rs. 2.73), Ravindu Motors Private Limited Rs. 1.30 (Previous year Rs. 0.97), Vijaykirti Investments Private Limited Rs. 0.48 (Previous year Rs. 1.20), Abhiman Trading Company Private Limited Rs. 70.60 (Previous year Rs. 60.65) and Kirloskar Electric Charitable Trust Rs. 5.74 (Previous year Rs. 13.98).

* Represents transaction with Kirloskar (Malaysia) Sdn. Bhd.

* Includes sales to Kirloskar Power Equipments Limited Rs. 5.77 (Previous year Rs. 2.55) and Kirloskar Electric Charitable Trust Rs. Nil (Previous year Rs. 0.08).

## Includes rent paid to Kirloskar Power Equipments Limited Rs. 251.00 (Previous year Rs. 240.00) and Vijayjyothi Investments and Agencies Private Limited Rs. 156.00 (Previous year Rs. 156.00).

Investments in Kirloskar Power Equipments Limited Rs. 28.17(as at March 31, 2012 Rs. 28.17)

! Includes due from Kirloskar Power Equipments Limited Rs. 450.59 (as at March 31, 2012 Rs. 432.34), Vijay Farms Private Limited Rs. 181.87 (as at March 31, 2012 Rs. 181.90), Vijayjyothi Investments and Agencies Private Limited Rs. 111.51 (as at March 31, 2012 Rs. 111.34), Abhiman Trading Company Private Limited Rs. 69.05 (as at March 31, 2012 Rs. 69.05), Vijayadurga Investments and Agencies Private Limited Rs. 31.88 (as at March 31, 2012 Rs. 29.26), Kirloskar Batteries Private Limited Rs. 5.46 (as at March 31, 2012 Rs. 218.77) and Ravindu Motors Private Limited Rs. 2.11 (as at March 31, 2012 Rs. 4.79).

$$ includes amount due to Kirloskar Batteries Private Limited Rs. 25.89 (as at March 31, 2012 Rs. 14.36), Kirloskar Electric Charitable Trust Rs. 0.57 (as at March 31, 2012 Rs. 1.76), Kirloskar Power Equipments Limited Rs. 113.95 (as at March 31, 2012 Rs. 124.20), Vijay Farms Private Limited Rs. 11.12 (as at March 31, 2012 Rs. 8.51), Vijayjyothi Investments and Agencies Private Limited Rs. 79.84 (as at March 31, 2012 Rs. 13.06), Abhiman Trading Company Private Limited Rs. 18.64 (as at March 31, 2012 Rs. 28.25), Vijaydurga Investments and Agencies Private Limited Rs. 9.72 (as at March 31, 2012 Rs. 15.93) and Vijaykirti Investments and Agencies Private Limited Rs. Nil (as at March 31, 2012 Rs. 0.12).

$$$ Includes expenses incurred in connection of acquisition of subsidiary Rs. 909.13.

AAA Includes paid to Vijay R Kirloskar Rs. 180.79 (Previous year Rs. 208.00), Anuj Pattanaik Rs. 108.66 (Previous year Rs. 129.24), Alok Kumar Gupta Rs. 4.54 (Previous year Rs. Nil), but does not include accrued gratuity, compensated absence (since liability has been recognized for the Company as a whole) free use of company car and communication facilities. Janaki Kirloskar Rs. 2.78 (Previous year Rs. 2.72) and Rukmini Kirloskar Rs. 5.72 (Previous year Rs. 5.49), Meena Kirloskar (sitting fees) Rs. 1.22 (Previous year Rs. 0.90).

** Represents deposits renewed from Meena Kirloskar Rs. 25 (Previous year Rs. 25) and Rukmini Kirloskar Rs. 20 (Previous year Rs. 20)

*** Represents interest paid to Meena Kirloskar Rs. 2.87 (Previous year Rs. 2.88) and Rukmini Kirloskar Rs. 2.29 (Previous year Rs. 1.62)

@ Includes from KEC Executives & Other Officers Welfare Trust Rs. 10.00 (Previous year Rs. 10.00), KEC Officers & Engineers Welfare Trust Rs. 10.00 (Previous year Rs. 10.00), KEC Vice Presidents Welfare Trust Rs. 15.00 (Previous year Rs. 15.00) and KEC Engineers of Mysore Unit Welfare Trust Rs. 5.00 (Previous year Rs. 5.00)

@@ Includes paid to KEC Executives & Other Officers Welfare Trust Rs. 1.15 (Previous year Rs. 0.95), KEC Officers & Engineers Welfare Trust Rs. 1.15 (Previous year Rs. 0.95), KEC Vice Presidents Welfare Trust Rs. 1.72 (Previous year Rs. 1.32) and KEC Engineers of Mysore Unit Welfare Trust Rs. 0.57 (Previous year Rs. 0.37)

£ Recast

9. FINANCE LEASES:

Finance lease arrangements relate to Plant & Machinery. The lease period is for five years with interest rates ranging from 13% to 14% per annum. The Company pays fixed lease rentals over the period of the lease whereby the net present value of the minimum lease payments amounts substantially to the cost of the assets.

10. The Company has various operating leases for office facilities, guesthouse and residential premises of employees that are renewable on a periodic basis, and cancelable at its option. Rental expenses for operating leases included in the financial statements for the year are f 636.73 (Previous Year f 656.06).

11. The Company has paid/provided as payable remuneration to the Joint Managing Director amounting to Rs.4.54 lakhs for the period from March 15, 2013 to March 31, 2013. His appointment and remuneration so paid/provided is subject to approval of the members of the Company at the ensuing general meeting.

12. During the year, the Board of Directors of the Company has approved an Employee Stock option scheme. However, the Company had not issued any options as at March 31, 2013 and accordingly, no recognition of expense in this respect and requisite disclosures have been made/ furnished.

13. LDW has incurred substantial losses for the year even though there is a significant increase in its turnover. However, LDW has sufficient orders in hand and is confident of earning profits in the subsequent years. The diminution in the carrying value of the investments held by the Company in Kirsons BV (immediate holding company of LDW) is considered temporary and no provision is considered necessary.

14. The Income Tax Act, 1961 contains provisions for determination of arm''s length price for international transactions between the Company and its associated enterprises as well as in respect of certain specified domestic transactions. The regulations envisage taxation of transactions which are not in consonance with the arms length price so determined, maintenance of prescribed documents and information including furnishing of a report from an accountant before the due date for filing the return of income. For the year ended March 31, 2013, the Company is in the process of complying with the said regulations. Management believes that such transactions have been concluded on an arm''s length basis and there would be no additional tax liability for the financial year under consideration as a result of such transactions.

15. Previous year''s figures have been regrouped wherever required in conformity with presentation this year. Figures in brackets relates to previous year.


Mar 31, 2012

I. PREFERENCE SHARES:

a. The Company had issued cumulative preference shares of Rs 100/- each. The preference shareholders did not have voting rights.

b. Nil (as at March 31, 2011: 4,00,000) preference shares carry a cumulative dividend of 7% p.a. w.e.f October 1, 2001 payable cumulatively out of the profits of the Company. The rate of dividend can be increased to 9% p.a. by way of redemption premium subject to profitability and cashflows of the Company. These shares have been redeemed on November 9, 2011 without any premium.

c. Nil (as at March 31, 2011: 179,855) preference shares carry a cumulative dividend of 6.5% & Nil (as at March 31, 2011: 1,93,737) preference shares carry a cumulative dividend of 8%. These preference shares have been redeemed on March 31, 2012.

d. 1,176,746 Preference shares (Value Rs 1,176.75 lakhs) were allotted pursuant to a contract without consideration being received in cash. These preference shareholders were alloted to preference share holders of Kaytee Switchgear Limited as fully paid up pursuant to the Scheme of arrangement apporved by the Honourable High Court of Karnataka under sec 391 -394 of the Companies Act, 1956 without payment received in cash.

1) Terms of repayment of term loans and others

a) Finance lease

Finance lease relate to Plant & Machinery taken for a period of five years. Interest on such lease is ranging between 13% to 14% p.a. Average equated monthly instalment is Rs.18.40 lakhs per month.

b) Car Loans:

Car loans are for a period of three to five years and interest rate is ranging from 9% to 10% p.a. Average equated monthly instalment is about Rs.2.52 lakhs per month

2) Unsecured Loans:

a) Fixed deposits are taken for a period of 24 and 36 months with interest rates ranging from 11.5% to 13.5%

b) Term loan taken was with a interest rate of 12 % p.a repayable in 25 monthly instalments of Rs 1 crore each.

1 CONTINGENT LIABILITIES AND COMMITMENTS:

(to the extent not provided for)

(a) CONTINGENT LIABILITIES:

i) Claims against the Company not acknowledged as debts. The Company has made counter 2,683.09 2,564.91 claim against one of the parties amounting to Rs 129 (as at the end of the previous reporting period Rs 129)

ii) Guarantees 5,617.58 3,724.29

iii) Letters of credit 3,026.35 8,685.00

iv) Bills discounted with Bank 2,030.72 2,615.12

v) Penal damages levied by the Regional Provident Fund commissioner and subject to writ 91.54 91.54 before the High Court of Karnataka, Bangalore. An amount of Rs 46.18 lakhs paid has been included in loans and advances

vi) Central excise and customs authorities have issued notices and raised certain demands, 183.52 62.09 which are pending in appeal before various authorities, not acknowledged as debt by the Company

vii) Sales tax demanded under appeal. The Company has paid an aggregate amount of 2,237.80 2,121.94 Rs 701.94 lakhs against the demand which has been included in Loans & advances

viii) Show cause notices raised by the Income Tax Department for short and non remittances 45.99 45.99 of tax deduction at source - matter under examination

ix) Sales tax liabilities in respect of pending assessments - C forms have not been received Not Ascertainable Not Ascertain able from several customers. Continuing efforts are being made to obtain them. Significant progress has been made in the matter as compared to the previous year.

x) Interest if any, on account of delays in payment to suppliers. Not Ascertainable Not Ascertain able

xi) Sales tax on equipment procured on hire/ lease and on computer software charges is Not Ascertainable Not Ascertain able contested by the suppliers. Will be charged to revenue in the year of final claim.

xii) Certain industrial disputes are pending before various judicial authorities - not acknowledged Not Ascertainable Not Ascertain able by the Company

xiii) Wage settlement of certain units have expired. However provision has been made on Not Ascertainable Not Ascertain able estimated basis and differences if any will be accounted on final settlement

xiv) Income tax demands under appeal 174.98 93.07

xv) Guarantee given to ICICI Bank in consideration of stand by letter of credit opened by them 5,878.54 8,031.25 in favour of ICICI Bank,Canada as security for loan granted issued by them to Kirsons BV. SBLC is secured by mortgage of certain immovable properties of the company and shares of Kirsons BV

xvi) The Company had furnished a guarantee for the redemption of preference shares issued 405.60 405.60 by Kirloskar Investment and Finance Ltd to an extent of Rs 200 lakhs (as at the end of the previous reporting period Rs 200 lakhs) and had obtained counter guarantee from the said Company. The preference shareholder has claimed a sum of Rs 200 lakhs along with dividends in arrears of Rs 205.60 lakhs and interest from the Company. This claim has been upheld by the Debt Recovery Tribunal (DRT). The Company has preferred an appeal before the Debt Recovery Appellate Tribunal to set aside the orders passed by the DRT.

The Company does not acknowledge this liability.

xvii) Arrears of fixed cumulative dividends on preference shares (including tax thereon) 1,154.82 1,071.74

In respect of items above, future cash outflows in respect of contingent liabilities is determinable only on receipt of judgements pending at various forums / settlement of matter. The management believes, based on internal assessment and / or legal advice, that the probability of an ultimate adverse decision and outflow of resources of the Company is not probable and accordingly, no provision for the same is considered necessary.

2. (a) The order of the Honourable High court of Karnataka according approval for the scheme of arrangement and amalgamation under sections 391 to 394 of the Companies Act, 1956 ("Scheme") was received in September 2008 with April 1, 2007 as the appointed date. This scheme of arrangement and amalgamation interalia involved transfer of operating business of Kirloskar Power Equipments Limited ("KPEL") and amalgamation of Kaytee Switchgear Limited ("KSL") with the Company. The Scheme was registered with the Registrar of Companies on October 17, 2008.

(b) Decree in Form 42 of the Companies (Court) Rules, 1949 is yet to be passed by the Honourable High Court of Karnataka pending assessment and payment of stamp duty. The Company has provisionally accounted for stamp duty liability estimated at Rs 589.22 pending finalization of the matter. Further adjustments to the accounts will be made as and when correct assessment of stamp duty is made and settled.

(c) The assets & liabilities so transferred to the Company are continuing in the name of the respective companies. Necessary action is being taken by the company to obtain the consent/approvals of the various regulatory authorities.

3. The Company has preferred a suit for various claims against Deutsche Bank, one of the members of the consortium of bankers for breach of trust for withholding of monies belonging to the company and freezing sanctioned working capital limits.

4. (a) Confirmation of balances from sundry debtors, deposit accounts, loans and advances, certain creditors etc have not been obtained. Accounts of certain sundry debtors, loans and advances, deposits, collector of customs and creditors, are under review and reconciliation. Against aggregate debts outstanding as at March 31, 2012 for more than 2 years of Rs 2,911.29, the Company holds a provision of Rs 525.05. Adjustments, if any will be made on completion of review/reconciliation/ identification of further doubtful debts/advances. Effect on revenue is not expected to be material.

(b) The Company is in process of reconciling the balances of the Company, its erstwhile subsidiary KSL and the operating business of KPEL. The net difference to the extent identified amounting to Rs 1,116.75 and Rs 561.14 has been included in Current assets and current liabilities respectively. Necessary rectification entries will be accounted after completion of the reconciliation. However, according to the management this difference is not likely to materially affect the operating results of the Company.

5. (a) The Company has implemented SAP ECC 6 systems at certain units. Various mistakes and omissions noticed have been corrected based on physical inventory taken from time to time. Continuing steps are being taken to cleanse data and stabilize systems. The effect of unrectified mistakes and omissions is not expected to be material.

(b) The Company has initiated steps to bring the valuation of inventories in line with Accounting Standard - 2. However, the processes followed for determination of cost and net realizable value needs to be refined/improved to bring in line with the requirements of the said standards. Continuing steps are being taken by the management in this respect.

6. (a) During the year, the Company has implemented SAP ECC 6 systems software in certain units. Inventory at these units as at March 31, 2012 have been based on moving weighted average and labour/ overheads absorption methods configured in the said system as against other cost basis used in the Previous reporting Period. Effect of such change on the revenue for the year is not ascertained.

(b) Depreciation on additions has been calculated on monthly prorata basis instead of quarterly basis, in certain units where SAP ECC 6 system has been implemented. Effect of such change on the revenue for the year is not ascertained.

7. Assets held for sale have been recognized at realizable value estimated by the management. No external valuation or quotations from prospective buyers have been obtained.

8. (a) Current Assets, Loans & Advances include Rs 431.93 (as at end of Previous reporting Period Rs 236.92) being rescheduled advances from certain other Companies.

(b) All the above companies have incurred losses and their net worth is substantially eroded. Having regard to the long term association with these companies and their revival plans as communicated to the Company and other factors, these debts are considered good of recovery.

Defined Benefit Plan:

The employees' gratuity fund scheme managed by a trust is a defined benefit plan. The Present value of obligation is determined based on actuarial valuation using the projected unit credit method.

The estimates of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is as certified by the actuary.

9. SEGMENT REPORTING:

The Company has not furnished segment report since same has been furnished in the Consolidated financial statements, as referred in para 4 of accounting standard 17 issued by Central Government.

KEC North America Inc has been dissolved. The investments in and dues from the said company have not been written off, pending receipt of approvals from Reserve Bank of India. However, full provision has been made for the same. Since the said company has been dissolved, the same has not been considered for related party disclosures.

* Includes Purchases of goods/ services from Kirloskar Batteries Pvt. Ltd. Rs 51.75 (Previous reporting Period Rs 47.71), Vijay Farms Pvt. Ltd. Rs 70.58 (Previous reporting Period Rs 63.71), Sri Vijaydurga Investments and Agencies Pvt. Ltd. Rs 125.29 (Previous reporting Period Rs 86.46), Vijay Jyothi Investments and Agencies Pvt. Ltd. Rs 2.73 (Previous reporting Period Rs 2.84), Ravindu Motors Pvt. Ltd. Rs 0.97 (Previous reporting Period Rs Nil), Vijay Kirthi Investments Pvt. Ltd. Rs 1.20 (Previous reporting Period Rs Nil), Abhiman Trading Company Pvt. Ltd. Rs 60.65 (Previous reporting Period Rs 35.41) and Kirloskar Electric Charitable Trust Rs 13.98 (Previous reporting Period Rs Nil).

# Represents transaction with Kirloskar (Malaysia) Sdn Bhd.

A Includes sales to Kirloskar Power Equipment Limited Rs 2.55 (Previous reporting Period Rs Nil), Kirloskar Electric Charitable Trust Rs 0.08 (Previous reporting Period Rs Nil) and Ravindu Motors Pvt. Ltd. Rs Nil (Previous reporting Period Rs 54.86).

## Includes rent paid to Kirloskar Power Equipments Limited Rs 240.00 (Previous reporting Period Rs 222.00), Vijay Jyothi Investment and Agencies Pvt Ltd Rs 172.07 (Previous reporting Period Rs 156.00), Sri Vijaydurga Investments and Agencies Pvt. Ltd. Rs 18.00 (Previous reporting Period Rs 18.00) and Kirloskar Batteries Pvt Ltd Rs Nil (Previous reporting Period Rs 18.87).

Investments in Kirloskar Power Equipments Limited Rs 28.17 (as at March 31, 2011 Rs 28.17)

$$ includes amount due to Kirloskar Batteries Private Limited Rs Nil (as at March 31, 2011 Rs 67.46), Kirloskar Electric Charitable Trust Rs 1.76 (Previous reporting Period Nil) and Vijay Kirthi Investments and Agencies Private Limited Rs 0.12 (as at March 31, 2011 Rs Nil).

$ Represents Kirloskar Computer Services Limited

!! Includes due from Kirloskar Power Equipments Limited Rs 308.14 (as at March 31, 2011 Rs 312.46), Vijay Farms Pvt. Ltd. Rs 173.39 (as at March 31, 2011 Rs 178.48), Vijay Jyothi Investments and Agencies Pvt. Ltd. Rs 98.28 (as at March 31, 2011 Rs 44.10), Abhiman Trading Company Pvt. Ltd. Rs 40.80 (as at March 31, 2011 Rs 34.05), Vijaydurga Investments and Agencies Pvt Ltd Rs 13.33 (as at March 31, 2011 Rs 24.39), Kirloskar Batteries Pvt. Ltd. Rs 204.41 (as at March 31, 2011 Rs Nil) and Ravindu Motors Pvt. Ltd. Rs 4.79 (as at March 31, 2011 Rs 1.08).

** Represents deposits renewed/ accepted from Mrs. Meena Kirloskar Rs 25 (Previous reporting Period Rs 25) and Ms. Rukmini Kirloskar Rs 20 (Previous reporting Period Rs 10)

*** Represents interest paid to Mrs. Meena Kirloskar Rs 2.88 (Previous reporting Period Rs 3.79) and Ms. Rukmini Kirloskar Rs 1.62 (Previous reporting Period Rs 0.54)

$$$ Includes expenses incurred in connection of acquisition of subsidiary Rs 902.60.

AAA Includes paid to Mr. Vijay R Kirloskar Rs 137.16 (Previous reporting Period Rs 137.16), Mr. P S Malik Rs Nil (Previous reporting Period Rs 61.73), Mr. Anuj Pattanaik Rs 129.24 (Previous reporting Period Rs 38.76) but does not include accrued gratuity, compensated absence (since liability has been recognized for the company as a whole) free use of company car and communication facilities.

aaa Includes Mrs. Meena Kirloskar Rs 0.90 (Previous reporting Period Rs 0.73), Ms. Janaki Kirloskar Rs 2.72 (Previous reporting Period Rs 2.40) and Ms. Rukmini Kirloskar Rs 6.39 (Previous reporting Period Rs 5.60).

@ Includes received from KEC Executives & Others Officers Welfare Trust Rs 10.00 (Previous reporting Period Rs Nil), KEC Officers & Engineers Welfare Trust Rs 10.00 (Previous reporting Period Rs Nil), KEC Vice Presidents Welfare Trust Rs 15.00 (Previous reporting Period Rs Nil) and KEC Engineers of Mysore Unit Welfare Trust Rs 5.00 (Previous reporting Period Rs Nil)

@@Includes paid to KEC Executives & Others Officers Welfare Trust Rs 0.95 (Previous reporting Period Rs Nil), KEC Officers & Engineers Welfare Trust Rs 0.95 (Previous reporting Period Rs Nil), KEC Vice Presidents Welfare Trust Rs 1.32 (Previous reporting Period Rs Nil) and KEC Engineers of Mysore Unit Welfare Trust Rs 0.37 (Previous reporting Period Rs Nil)

10. The Company has various operating leases for office facilities, guesthouse and residential premises of employees that are renewable on a periodic basis, and cancelable at its option. Rental expenses for operating leases included in the financial statements for the year are Rs 656.06. (Rs 693.80).

11. The Company has paid a higher remuneration to the Deputy Managing Director amounting to Rs 92.13 for the period August 4, 2011 to March 31, 2012 which is subject to approval of the members of the Company.

12. During the year the Company has sold goods amounting to Rs 6.15 and purchases of goods amounting to Rs 0.10 to a private limited company covered under Section 297 of the Companies Act, 1956 in respect of which no prior approval of the Central Government as required under Section 297 of the Companies Act, 1956 was obtained. The Company is in the process of making an application to the Company Law Board under Section 621A of the Companies Act, 1956 for compounding of the above non-compliance. However, no adjustments have been made to the financial statements for the year ended March 31, 2012.

13. Donations of Rs 150 are subject to approval of members in their meeting under section 293 (1) (e) of the Companies Act, 1956.

14. Operating Cycle for segregation between current and non current:

Normal operating cycle of the business of the Company is assessed by management as not more than twelve months for segregation of Current and Non-Current.

15. Previous reporting period's figures have been regrouped wherever required in conformity with presentation this year. Figures in brackets relates to previous reporting period figures.


Mar 31, 2011

(Rs.. In '000's)

1(a) CONTINGENT LIABILITIES ETC As at As at

31.03.2011 31.03.2010

i) Letter of Credit, Guarantees, Corporate and Counter guarantees given on Import and Sale 1,240,929 1,507,553 contracts etc.

ii) Bills discounted with bank 261,512 200,425

iii) Central excise and customs authorities have issued notices and raised certain demands, 6,209 12,158 which are pending in appeal before various authorities, not acknowledged as debt by the Company

iv) Sales tax demanded under appeal. The Company has paid an aggregate amount of 212,194 212,544 Rs. 70,194 against the demand which has been included in Loans & advances under schedule "H (B)".

v) Claims against the Company not acknowledged as debt. The Company has made counter 256,491 241,532 claim against one of the parties amounting to Rs. 12,944 (Previous year Rs. 12,944 )

vi) The Company had furnished a guarantee for the redemption of preference shares issued 40,560 40,560 by Kirloskar Investment and Finance Ltd to an extent of Rs. 20,000 (Previous year Rs. 20,000) and had obtained counter guarantee from the said Company. The preference shareholder has claimed a sum of Rs. 20,000 along with dividends in arrears of Rs. 20,560 and interest from the Company. This claim has been upheld by the Debt Recovery Tribunal (DRT). The Company has preferred an appeal before the Debt Recovery Appellate Tribunal to set aside the orders passed by the DRT. The Company does not acknowledge this liability.

vii) Sales tax liabilities in respect of pending assessments, C forms have not been received Not Not from several customers. Continuing efforts are being made to obtain them. Ascertainable Ascertainable

viii) Interest and penalty if any, on account of delays/defaults in payment of statutory/ suppliers Not Not dues not ascertainable. The Company has made waiver petition where ever such interest / Ascertainable Ascertainable penalty has been levied.

ix) Sales tax on equipment procured on hire/ lease and on computer software charges is Not Not contested by the suppliers - amount not ascertainable and will be charged to revenue in the Ascertainable Ascertainable year of final claim.

x) Certain industrial disputes are pending before various judicial authorities - not acknowledged Amount not Amount not by the Company ascertainable ascertainable

xi) Arrears of dividend on cumulative preference shares for the period from April 1, 2004 to 107,174 95,643 March 31, 2011 (as at March 31, 2010 for the period from April 1, 2004 to March 31, 2010) (including tax thereon).

xii) Penal damages levied by the Regional Provident Fund commissioner and subject to writ 9,154 9,154 before the High Court of Karnataka, Bangalore. An amount of Rs. 4,618 paid has been included in loans and advances

xiii) Guarantee given to ICICI Bank in consideration of the stand by letter of credit (SBLC) 803,125 932,147 opened by them in favor of ICICI Bank, Canada as security for loan granted issued by them to Kirsons BV. SBLC is secured by mortgage of certain immovable properties of the Company and shares of Kirsons BV.

xiv) Wage settlement of certain units has expired. The Company is under negotiation with the Not Not workers for postponing the effective date of new settlement, due to economic slowdown. ascertained ascertained

xv) Income tax demands under appeal 9,307 Nil

xvi) Show cause notices raised by the Income Tax Department for short and non remittances of 4,599 Nil tax deduction at source - matter under examination

In respect of items above, future cash outflows in respect of contingent liabilities is determinable only on receipt of judgments pending at various forums/ settlement of matter. The management believes that, based on legal advice or internal assessment, the outcome of these contingencies will be favorable and that loss is not probable. Accordingly, no provisions have been made for the same.

2 (Note 17 of Schedule O" of financial statements)

a. The order of the honorable High court of Karnataka according approval for the scheme of arrangement and amalgamation under sections 391 to 394 of the Companies Act, 1956 ("Scheme") was received in September 2008 with April 1, 2007 as the appointed date. This scheme of arrangement and amalgamation interalia involved transfer of operating business of Kirloskar Power Equipment Limited ("KPEL") and amalgamation of Kaytee Switchgear Limited ("KSL") with the Company. The Scheme was registered with the Registrar of Companies on October 17, 2008.

b. Decree in Form 42 of the Companies (Court) Rules, 1949 is yet to be passed by the Honorable High Court of Karnataka pending assessment and payment of stamp duty. The Company has provisionally accounted for stamp duty liability estimated at Rs. 58,922 pending finalization of the matter. Further adjustments to the accounts will be made as and when correct assessment of stamp duty is made and settled.

c. The assets & liabilities so transferred to the Company are continuing in the name of the respective companies. Necessary action is being taken by the company to obtain the consent/approvals of the various regulatory authorities.

3. (Note 18 of Schedule 'O" of financial statements)

The Company has preferred a suit for various claims against Deutsche Bank, one of the members of the consortium of bankers for breach of trust for withholding of monies belonging to the company and freezing sanctioned working capital limits.

4. (Note 19 of Schedule 'O" of financial statements)

a. Rs. 28,412 (as at March 31, 2010 Rs. 33,015) due from private limited companies in which directors are interested.

b. Rs. 1,833 (as at March 31, 2010 Rs. 6,358) due from a wholly owned subsidiary of the Company.

5. (Note 21 of Schedule O" of financial statements)

a. Confirmation of balances from certain sundry debtors, deposit accounts, loans and advances, creditors etc are awaited. Accounts of certain sundry debtors, loans and advances, deposits, collector of customs and creditors, are under review and reconciliation. Against aggregate debts outstanding as at March 31, 2011 for more than 2 years of Rs. 180,346, the Company holds a provision of Rs. 116,533. Adjustments, if any will be made on completion of review/reconciliation/ identification of further doubtful debts. Effect on revenue is not expected to be material.

b. The Company is in process of reconciling the balances of the Company, its erstwhile subsidiary KSL and the operating business of KPEL. The net difference to the extent identified amounting to Rs. 52,879 has been included in Loans & Advances. Necessary rectification entries will be accounted after completion of the reconciliation. However, according to the management this difference is not likely to materially affect the operating results of the Company.

6. (Note 22 of Schedule O" of financial statements)

a. The Company has implemented SAP ECC 6 systems at certain units during the year. Various mistakes and omissions noticed during the year have been corrected based on physical inventory taken from time to time. Continuing steps are being taken to cleanse data and stabilize systems. The effect of unrectified mistakes and omissions is not expected to be material.

b. The Company has initiated steps to bring the valuation of inventories in line with Accounting Standard - 2. However, the processes followed for determination of cost and net realizable value needs to be uniform across units and refined/improved to bring it in line with the requirements of the said standard. Continuing steps are being taken by the management in this respect.

7. (Note 23 of Schedule 0" of financial statements)

a. During the year, the Company has implemented SAP ECC 6 Systems in certain units. Inventory at these units as at March 31, 2011 have been based on moving weighted average and labor/ overheads absorption methods configured in the said system as against other cost basis used in the previous year. Effect of such change on the revenue for the year is not ascertained.

b. Depreciation on additions has been calculated on monthly prorate basis instead of quarterly basis, in certain units where SAP ECC 6 system has been implemented. Effect of such change on the revenue for the year is not ascertained.

8. (Note 24 of Schedule O" of financial statements)

Assets held for sale has been recognized at realizable value estimated by the management. No external valuation or quotations from prospective buyers have been obtained.

9. (Note 25 of Schedule O" of financial statements)

a) Current Assets, Loans & Advances include Rs. 23,692 (as at March 31, 2010 Rs. 22,718) being rescheduled advances from certain other Companies.

b) The above companies have incurred losses and their net worth is partially eroded. Having regard to the long term association with these companies and their revival plans as communicated to the Company and other factors, these debts are considered good of recovery.

10. Finance Leases: (Note 31 of Schedule 0' of financial statements)

Finance lease arrangements relate to Plant & Machinery. The lease period is for five years with interest rates ranging from 13% to 14%per annum. The Company pays fixed lease rentals over the period of the lease whereby the net present value of the minimum lease payments amount substantially to the cost of the assets.

11. (Note 32 of Schedule 'O' of financial statements)

The Company has various operating leases for office facilities, guesthouse and residential premises of employees that are renewable on a periodic basis, and cancelable at its option. Rental expenses for operating leases included in the financial statements for the year are t 69,380 (Rs. 71,567).

12. (Note 36 of Schedule 0' of financial statements)

The Company has entered into forward contracts outstanding as on March 31, 2011 for Euro 250,000 to hedge future contractual obligation.

13 Figures have been rounded off to the nearest "000's" as permitted by Government of India Notification No.GSR: 14(E) dated December 23, 1978. Figures in Schedule 'O' are in Rs..000's unless otherwise stated.

26. Previous year figures have been regrouped wherever required in conformity with presentation this year. Figures in brackets represents previous year figures.

 
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