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Accounting Policies of Kitply Industries Ltd. Company

Mar 31, 2014

1. Basis of preparation

The financial statements have been prepared to comply in all material respects with the Accounting Standards notified by the Companies Accounting Standards Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis. The accounting policies applied by the Company are consistent with those used in the previous year.

1.1 Summary of significant accounting policies

(a) Use of estimates

The preparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.

(b) Tangible Fixed assets

Fixed Assets are stated at cost or revalued amount, as the case may be, less accumulated depreciation/amortization and impairment losses, if any. Cost comprises the purchase price inclusive of duties (net of cenvat / VAT), taxes, incidental expenses, erection / commissioning expenses etc. up to the date, the asset is ready for its intended use. In case of revaluation of fixed assets, the original cost as written-up by the value is considered in the accounts and the differential amount is transferred to revaluation reserve.

Machinery spares which can be used only in connection with an item of fixed asset and whose use as per technical assessment is expected to be irregular, are capitalized and depreciated over the residual life of the respective assets.

(c) Depreciation / Amortization

The classification of plant and machinery into continuous and non-continuous process is done as per technical certification and depreciation thereon is provided accordingly.

Depreciation on fixed assets is provided under Straight Line Method at the rates prescribed in Schedule XIV of the Companies Act, 1956.

Depreciation on fixed assets added / disposed off during the period is provided on pro-rata basis with reference to the date of addition/disposal.

Leasehold properties are depreciated over the primary period of lease or their respective useful lives, whichever is shorter.

In case of impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.

Intangible assets are amortized on a straight line basis over the estimated useful economic life of the asset. Intangible assets being Specialized Software are amortized on a straight line basis over a period of 3 years.

(d) Fixed Assets Acquired under Lease

Finance Lease:

Assets acquired under lease agreements which effectively transfer to the company substantially all the risk and benefits incidental to ownership of the leased items, are capitalized at the lower of the fair value and present value of minimum lease payment at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and the reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of their liability. Finance charges are charged directly to the expenses account. Lease management fees, legal charges and other initial direct costs are capitalized.

Operating Lease

Leases where the less or effectively retains substantially all the risks and benefits of the ownership of the leased assets are classified as operating leases. Operating lease payments are recognized as an expense in the profit and loss account on a straight-line basis over the lease term.

(e) Borrowing costs

Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.

Borrowing costs directly attributable to the acquisition / construction of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalized as a part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.

(f) Impairment of assets

The carrying amounts of assets are reviewed at each balance sheet date to determine if there is any indication of impairment based on external/internal factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount which represents the greater of the net selling price and Value in use' of the assets. In assessing the Value in use, the estimated future cash flows are discounted to their present value using a pre tax discount rate that reflects current market assessments of the time value of money and risks specific to the assets.

(g) Government grants and subsidies

Grants and subsidies from the government are recognized when there is reasonable assurance that the grants/subsidy will be received and all attaching conditions will be complied with.

When the grant or subsidy relates to an expenses item, it is recognized as income over the periods necessary to match them on a systematic basis to the costs, which it is intended to compensate.

Where the grant or subsidy relates to an asset, its value is deducted from the gross value of the asset concerned in arriving at the carrying amount of the related asset.

Government grants of the nature of promoters' contribution are credited to capital reserve and treated as a part of shareholders' funds.

(h) Investments

Investments that are readily realizable and intended to be held for not more than a year are classified as Current investments. All other investments are classified as Non-current / long-term investments. Current investments are carried at lower of cost and market value on individual investment basis. Non-current / Long Term Investments are considered at cost, unless there is an "other than temporary" decline in value, in which case adequate provision is made for the diminution in the value of Investments.

(i) Inventories

Raw materials and stores and spares are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost of raw materials and stores and spares is determined on weighted average / FIFO basis.

Work-in-progress and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty and is determined on annual weighted average basis.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

(j) Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.

Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate.

(k) Foreign currency translation

Foreign currency transactions and balances

Initial recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction, and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

Exchange differences

Exchange differences arising on the settlement / conversion of monetary items are recognized as income or expenses in the year in which they arise.

Forward Exchange Contracts not entered for trading or speculation purpose

The premium or discount arising at the inception of forward exchange contracts is amortized as expenses or income over the life of the respective contracts. Exchange differences on such contracts are recognized in the statement of profit and loss in the period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contracts is recognized as income or expense for the year.

(l) Premium on Redemption of Debentures

Premium payable on redemption of debentures is adjusted against the Securities Premium Account, on a proportionate basis.

(m) Retirement and other employee benefits

Retirement benefit in the form of Provident Fund is a defined contribution scheme and is charged to the Statement of Profit and Loss of the year when the contributions to the fund is due. The Company has no obligations other than the contribution payable to the respective funds.

Gratuity liability, being a defined benefit obligation, is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year.

Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation which is done as per projected unit credit method at the end of each financial year.

Actuarial gains / losses are immediately taken to the statement of profit and loss and are not deferred.

(n) Income taxes

Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961. Deferred income taxes reflect the impact of current year timing differences between taxable income for the year and reversal of timing differences of earlier years.

The deferred tax for timing differences between the book and tax profits for the year is accounted for using the tax rates and laws that have been substantively enacted as of the Balance Sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by same governing taxation laws. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. If the Company has carry forward unabsorbed depreciation and tax losses, deferred tax assets are recognized only to the extent there is virtual certainty supported by convincing evidence that sufficient taxable income will be available against which such deferred tax asset can be realized.

The carrying amounts of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of deferred tax assets to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.

(o) Segment reporting

Identification of segments

The Company has identified that its business segments are the primary segments. The Company's businesses are organized and managed separately according to the nature of products/services, with each segment representing a strategic business unit that offers different product / services and serves different markets. The analysis of geographical segments is based on the areas in which the customers of the Company are located.

Allocation of common costs

Common allocable costs are allocated to each segment on case to case basis applying the ratio, appropriate to each relevant case. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segment on a reasonable basis, have been included under the head "Unallocated".

Segment accounting policies

The accounting policies adopted for segment reporting are in line with those of the Company's accounting policies.

(p) Earnings Per Share

Basic Earnings per Share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted number of equity shares outstanding during the year.

For the purpose of calculating diluted earning per share, net profit or loss for the year attributable to equity share holders and the weighted average number of shares outstanding during the year are adjusted for the effect of all dilutive potential equity shares.

(q) Provisions

A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.

Provisions made in terms of Accounting Standard 29 are not discounted to their present value and are determined based on best estimates required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates.

(r) Contingent liabilities

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.

(s) Cash and cash equivalents

Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.

(t) Excise Duty

Excise duty on finished goods stock lying at the factories is accounted for at the point of manufacture of goods and accordingly, is considered for valuation of finished goods stock lying in the factories as on the balance sheet date.

(b) Terms / rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs,10 per share. Each holder of equity shares is entitled to one vote per share.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

As per records of the Company, including its register of shareholders/members, the above shareholding represents legal ownerships of shares


Mar 31, 2013

1. Basis of preparation

The financial statements have been prepared to comply in all material respects with the Accounting Standards notified by the Companies Accounting Standards Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis. The accounting policies applied by the Company are consistent with those used in the previous year.

1.1 Summary of significant accounting policies

(a) Use of estimates

The preparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.

(b) Tangible Fixed Assets

Fixed Assets are stated at cost or revalued amount, as the case may be, less accumulated depreciation/ amortization and impairment losses, if any. Cost comprises the purchase price inclusive of duties (net of cenvat / VAT), taxes, incidental expenses, erection / commissioning expenses etc. up to the date, the asset is ready for its intended use. In case of revaluation of fixed assets, the original cost as written-up by the valuer is considered in the accounts and the differential amount is transferred to revaluation reserve.

Machinery spares which can be used only in connection with an item of fixed asset and whose use as per technical assessment is expected to be irregular, are capitalised and depreciated over the residual life of the respective assets.

(c) Depreciation / Amortization

The classification of plant and machinery into continuous and non-continuous process is done as per technical certification and depreciation thereon is provided accordingly.

Depreciation on fixed assets is provided under Straight Line Method at the rates prescribed in Schedule XIV of the Companies Act, 1956.

Depreciation on fixed assets added / disposed off during the period is provided on pro-rata basis with reference to the date of addition/disposal.

Leasehold properties are depreciated over the primary period of lease or their respective useful lives, whichever is shorter.

In case of impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.

Intangible assets are amortized on a straight line basis over the estimated useful economic life of the asset. Intangible assets being Specialized Software are amortized on a straight line basis over a period of 3 years.

(d) Fixed Assets Acquired under Lease

Finance Lease:

Assets acquired under lease agreements which effectively transfer to the company substantially all the risk and benefits incidental to ownership of the leased items, are capitalized at the lower of the fair value and present value of minimum lease payment at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and the reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of their liability. Finance charges are charged directly to the expenses account. Lease management fees, legal charges and other initial direct costs are capitalized.

Operating Lease :

Leases where the lessor effectively retains substantially all the risks and benefits of the ownership of the leased assets are classified as operating leases. Operating lease payments are recognized as an expense in the profit and loss account on a straight-line basis over the lease term.

(e) Borrowing costs

Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.

Borrowing costs directly attributable to the acquisition /construction of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalized as a part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.

(f) Impairment of assets

The carrying amounts of assets are reviewed at each balance sheet date to determine if there is any indication of impairment based on external/internal factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount which represents the greater of the net selling price and 'Value in use' of the assets. In assessing the Value in use, the estimated future cash flows are discounted to their present value using a pre tax discount rate that reflects current market assessments of the time value of money and risks specific to the assets.

(g) Government grants and subsidies

Grants and subsidies from the government are recognized when there is reasonable assurance that the grants/subsidy will be received and all attaching conditions will be complied with.

When the grant or subsidy relates to an expenses item, it is recognized as income over the periods necessary to match them on a systematic basis to the costs, which it is intended to compensate.

Where the grant or subsidy relates to an asset, its value is deducted from the gross value of the asset concerned in arriving at the carrying amount of the related asset.

Government grants of the nature of promoters' contribution are credited to capital reserve and treated as a part of shareholders' funds.

(h) Investments

Investments that are readily realizable and intended to be held for not more than a year are classified as Current investments. All other investments are classified as Non-current / Long Term investments. Current investments are carried at lower of cost and market value on individual investment basis. Non-current / Long Term Investments are considered at cost, unless there is an "other than temporary" decline in value, in which case adequate provision is made for the diminution in the value of Investments.

(i) Inventories

Raw materials and stores and spares are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost of raw materials and stores and spares is determined on weighted average / FIFO basis.

Work-in-progress and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty and is determined on annual weighted average basis.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

(j) Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.

Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate.

(k) Foreign currency translation

Foreign currency transactions and balances

Initial recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

Conversion

Foreign currency monetary items are reported using

the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction, and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

Exchange differences

Exchange differences arising on the settlement / conversion of monetary items are recognized as income or expenses in the year in which they arise.

Forward Exchange Contracts not entered for trading or speculation purpose

The premium or discount arising at the inception of forward exchange contracts is amortized as expenses or income over the life of the respective contracts. Exchange differences on such contracts are recognized in the statement of profit and loss in the period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contracts is recognized as income or expense for the year.

(l) Premium on Redemption of Debentures

Premium payable on redemption of debentures is adjusted against the Securities Premium Account, on a proportionate basis.

(m) Retirement and other employee benefits

Retirement benefit in the form of Provident Fund is a defined contribution scheme and is charged to the Statement of Profit and Loss Account of the year when an employee renders the related service. The Company has no obligations other than the contribution payable to the respective funds. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after decocting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date then exceeds is recognized as an assets to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.

Gratuity liability, being a defined benefit obligation, is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year.

Short term compensated absences are provided

for based on estimates. Long term compensated absences are provided for based on actuarial valuation which is done as per projected unit credit method at the end of each financial year.

Actuarial gains / losses are immediately taken to the statement of profit and loss and are not deferred.

(n) Income taxes

Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961. Deferred income taxes reflect the impact of current year timing differences between taxable income for the year and reversal of timing differences of earlier years.

The deferred tax for timing differences between the book and tax profits for the year is accounted for using the tax rates and laws that have been substantively enacted as of the Balance Sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by same governing taxation laws. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. If the Company has carry forward unabsorbed depreciation and tax losses, deferred tax assets are recognized only to the extent there is virtual certainty supported by convincing evidence that sufficient taxable income will be available against which such deferred tax asset can be realized.

The carrying amounts of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of deferred tax assets to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.

(o) Segment reporting

Identification of segments

The Company has identified that its business segments are the primary segments. The Company's businesses are organized and managed separately according to the nature of products/services, with each segment representing a strategic business unit that offers different product / services and serves different markets. The analysis of geographical segments is based on the areas in which the customers of the Company are located.

Allocation of common costs

Common allocable costs are allocated to each segment on case to case basis applying the ratio, appropriate to each relevant case. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segment on a reasonable basis, have been included under the head "Unallocated".

Segment accounting policies

The accounting policies adopted for segment reporting are in line with those of the Company's accounting policies.

(p) Earnings Per Share

Basic Earnings per Share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share, net profit or loss for the year attributable to equity share holders and the weighted average number of shares outstanding during the year are adjusted for the effect of all dilutive potential equity shares.

(q) Provisions

A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.

Provisions made in terms of Accounting Standard 29 are not discounted to their present value and are determined based on best estimates required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates.

(r) Contingent liabilities

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.

(s) Cash and cash equivalents

Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.

(t) Excise Duty

Excise duty on finished goods stock lying at the factories is accounted for at the point of manufacture of goods and accordingly, is considered for valuation of finished goods stock lying in the factories as on the balance sheet date.

(b) Terms / rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs,10 per share. Each holder of equity shares is entitled to one vote per share.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

Series A debentures are redeemable at a premium,on March 31, 2012 (20%) and March 31, 2013 (80%), which however is extended up to June 15, 2013 by the debenture holders. The above debentures carry interest @12.00% (10.00%).

Series B and C Debentures were proposed to be converted into equity as envisaged in the Scheme of arrangement as mentioned in note 34(a).

All the above debentures are secured as under:

(i) First Exclusive Priority Charge on Immovable property at, Margherita, Art Margherita, Long Island, Rampur and Gondia, Godown / Immovable Property at Thane, Trade mark 'Kitply', Movable and Current Assets (Inventories & Debtors), IFCI, IDBI and IIBI Financed equipments and Insurance contracts.

(ii) Third party Assets i.e. all that piece and parcel of agricultural land admeasuring 52.96 acres at Bhaiya Nagla, Muradabad.

(iii) Pledge of new promoter's shares proposed to be issued under the Scheme of Arrangement and a Second Pari Passu Charge on Third Party Assets I i.e. Office premises at 119, Park Street, Kolkata - 700 016.

Further, of the above, series A debentures amounting to Rs, 1,000,000,000 are also secured by a First Exclusive Priority Charge on Agro Immovable Property, Agro Movable assets and pledge of existing promoters shares.

Further, 5,440 Secured redeemable non-convertible debentures of the face value of Rs,10,000/- each aggregating to Rs, 54,400,000 are convertible into Equity as envisaged in the Scheme of Arrangement.

Out of above, 13,160 debentures amounting to Rs,131,600,000 are secured by a Second Pari-Passu Charge on Agro Immovable and Movable Assets and Third Exclusive Priority Charge on the Godown / Immovable Property at Thane. Further 5,440 debentures are secured by:

First Exclusive Charge on Third party Assets I i.e. premises at 119, Park Street, Kolkata - 700 016.

Second Pari-Passu Charge on pledge of existing promoter shares.

Besides, 42,680 debentures amounting to Rs,426,800,000 and 5,440 debentures amounting to Rs, 54,400,000 are further secured by:

Second exclusive priority Charge on the trade mark, Third Party Assets 1 i.e. Office premises at 119, Park Street, Kolkata - 700 016 and Third Party Asset 2 i.e. all that piece and parcel of agricultural land admeasuring 52.96 acres at Bhaiya Nagla, Muradabad. (Provided that the claim should not exceeds Rs,17.76 crores).

Second parri-Passu Charge on Movable Assets, Current Assets and Immovable property at Margherita, Art-Margherita, Long Island, Rampur, Gondia (Provided that the claim should not exceeds Rs,19.46 crores) & other current assets of the Company.

42,680 debentures are further secured by Third Exclusive Priority Charge on the Godown / Immovable property at Thane.

Further, 55,840 debentures are also secured by a personal guarantee of Mr. P. K. Goenka (Chairman & Managing Director).

(c) 31,551 secured redeemable non-convertible debentures of the face value of Rs, 10,000/- each aggregating to Rs, 315,510,000 which carry interest @6.00% (6.00%) are redeemable at par along with interest in two equal installments on 31st March, 2013 & 31st March, 2014 and are secured by:

Second Pari-Passu Charge on Agro Immovable Property, Agro movable assets and pledge of existing promoter shares.

Second Exclusive Priority Charge on the Godown / Immovable property at Thane and IDBI Financed Equipments.

(d) 8,404 secured redeemable non-convertible debentures of the face value of Rs,10,000/- each aggregating to Rs, 84,040,000 which carry interest @ 6.00% (6.00%) are redeemable at par along with interest in two equal installments of Rs, 40,485,000 31st March, 2013 & of Rs, 43,555,000 on 31st March, 2014.

400 secured redeemable non-convertible debentures valuing Rs, 4,000,000 (interest free) are redeemable at par in three yearly installments on 15th September, 2013, 15th September, 2014 & 15th September, 2015. The above debentures are secured by:

Second Pari-Passu Charge on the Movable Assets, Current Assets and Immovable property at Margherita, Art-Margherita, Gondia, Rampur & Long Island and other current assets of the Company.

Fourth Pari-Passu Charge on the Godown / Immovable property at Thane.

(e) 278 secured redeemable non-convertible debentures aggregating to Rs, 2,780,000 will be converted into equity as envisaged in Scheme of Arrangement and 1,436 secured redeemable non-convertible debentures aggregating to Rs,14,360,000 which carry interest @ 8.40% (8.40%) are redeemable at par along with interest in three yearly installments on 30th September, 2013, 30th September, 2014 & 30th September, 2015. The above debentures are secured by:

Second Exclusive Priority Charge on IFCI Financed Equipments.

Fourth Pari-Passu Charge on the Godown immovable property at Thane.

(f) 1,111 secured redeemable non-convertible debentures aggregating to Rs, 11,110,000 which carry interest @ 6.00% (6.00%) are redeemable at par along with interest in two equal installments on 31st March, 2013 & 31st March, 2014 and are secured by:

Second Pari-Passu Charge on Agro Immovable Property and Agro movable assets.

Second Exclusive Priority Charge on IIBI Financed Equipments.

(g) 166 secured redeemable non-convertible debentures aggregating to Rs, 1,660,000 will be converted into equity as envisaged in Scheme of Arrangement and 860 secured redeemable non-convertible debentures aggregating to Rs, 8,600,000 which carry interest @ 8.40% (8.40%) are redeemable at par along with interest in three yearly installments on 30th September, 2013, 30th September, 2014 & 30th September, 2015. The above debentures are secured by:

Second Pari-Passu Charge on Movable Assets, Current Assets and Immovable property at, Margherita, Art-Margherita, Gondia, Rampur, & Long Island and other current assets of the Company.

Fourth Pari-Passu Charge on the Godown/Immovable property at Thane.

B. 8,800 unsecured redeemable non-convertible debentures aggregating to Rs, 88,000,000 will be converted into equity as envisaged in Scheme of Arrangement.

C. Unsecured loan from a scheduled bank (interest free) is repayable in eight quarterly installments of Rs, 4,887,000 each starting from July 01, 2015.

D. Unsecured loans from bodies corporate includes Rs, 70,300,000 which were proposed to be converted into equity as envisaged in the Scheme of Arrangement. The lender has recalled the loan in earlier years. However, since the Company's suit against the above lender for specific performance is pending before Hon'ble Calcutta High Court as stated in Note 34 (c), the above loan has been considered as Non-current.

E. Finance lease obligations are secured by hypothecation of the assets purchased there against and carry interest @10.00% to 13.00% (10.00% to 13.00%).

F. In the absence of profit, Debenture Redemption Reserve of Rs, 452,915,275 (including Rs, 79,917,180 for the year) has not been created.

G. Period and amount of continuing default as on the balance sheet date in repayment of debentures, loans, interest and premium on debentures thereon:

(a) Debentures aggregating to Rs, 378,088,014 (including interest which has become due on 31st March, 2013, has not been paid by the Company.

(b) Debentures amounting to Rs, 4,163,934 (including interest and loans of Rs, 70,300,000 have been recalled by the lenders, but the same is disputed by the Company as stated in Notes 33, 34 (c) and accordingly, not considered as a continuing default as on the Balance Sheet date.


Mar 31, 2011

(i) Basis of Preparation

The financial statements have been prepared to comply in all material respects with the Accounting Standards notified by the Companies Accounting Standards Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis except in respect of insurance and other claims, which on the grounds of prudence or uncertainty in realization, are accounted for as and when accepted/received. The accounting policies applied by the Company are consistent with those used in the previous year.

(ii) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of financial statements and the results of operations during the reporting year end. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differ from these estimates.

(iii) Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

Revenue from sale of goods is recognized upon passage of title which generally coincides with delivery of materials to the customers.

(iv) Fixed Assets

Fixed Assets are stated at cost or revalued amount, as the case may be, less accumulated depreciation and impairment, if any. Cost comprises the purchase price inclusive of duties (net of cenvat / VAT), taxes, incidental expenses and erection / commissioning expenses etc. up to the date, the asset is ready for its intended use. In case of revaluation of fixed assets, the original cost as written-up by the valuer, is considered in the accounts and the differential amount is transferred to revaluation reserve.

Expenditure directly attributable to growth of plantations have been capitalized.

Machinery spares which can be used only in connection with an item of fixed assets and whose use as per technical assessment is expected to be irregular are capitalized and depreciated over the residual life of the respective assets.

(v) Impairment of Assets

The carrying amounts of assets are reviewed at each balance sheet date to determine if there is any indication of impairment based on external/internal factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount which represents the greater of the net selling price and ''Value in use'' of the assets. In assessing Value in use, the estimated future cash flows are discounted to their present value using a pre tax discount rate that reflects current market assessments of the time value of money and risks specific to the assets.

(vi) Depreciation / Amortization

(a) Depreciation on fixed assets is provided under Straight Line method at the rates prescribed in Schedule XIV of the Companies Act, 1956.

(b) Depreciation on revalued assets is provided at the rates specified under section 205 (2) (b) of the Companies Act, 1956. However, in case of fixed assets whose life is determined by the valuer to be less than their useful life under section 205, depreciation is provided at higher rate, to ensure the write off of these assets over their useful life.

(c) Depreciation on fixed assets added / disposed off during the year is provided on pro-rata basis with reference to the date of addition / disposal.

(d) Leasehold land is depreciated over the primary period of lease.

(e) In case of impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.

(vii) Foreign Currency Transactions

(a) Initial Recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

(b) Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction, and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

(c) Exchange Differences

Exchange differences arising on the settlement / conversion of monetary items are recognized as income or expenses in the year in which they arise.

(d) Forward Exchange Contracts not entered for trading or speculation purpose

The premium or discount arising at the inception of forward exchange contracts is amortized as expenses or income over the life of the respective contracts. Exchange differences on such contracts are recognized in the statement of profit and loss in the period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contracts is recognized as income or expense for the year.

(viii) Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as Current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and market value on individual investment basis. Long Term Investments are considered at cost, unless there is an "other than temporary" decline in value, in which case adequate provision is made for the diminution in the value of Investments.

(ix) Inventories

(a) Raw Materials, stores and spares are valued at lower of cost and net realizable value. However, these items are considered to be realizable at cost if the finished products, in which they will be used, are expected to be sold at or above cost. Cost is determined on a weighted average/FIFO basis.

(b) Work in progress and finished goods are valued at lower of cost and net realisable value. The cost comprises of conversion and other costs, based on normal operating capacity, incurred in bringing the inventories to their present location and condition. Cost of inventories is computed on annual weighted average basis.

(c) Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

(x) Government Grants and Subsidies

Grants and subsidies from the government are recognized when there is reasonable assurance that the grants/subsidy will be received and all attaching conditions will be complied with.

When the grant or subsidy relates to an expenses item, it is recognized as income over the periods necessary to match them on a systematic basis to the costs, which it is intended to compensate.

Where the grant or subsidy relates to an asset, its value is deducted from the gross value of the asset concerned in arriving at the carrying amount of the related asset.

Government grants of the nature of promoters'' contribution are credited to capital reserve and treated as a part of shareholders'' funds.

(xi) Retirement and other employee benefits

(a) Retirement benefit in the form of Provident Fund is a defined contribution scheme and is charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. The Company has no obligations other than the contribution payable to the respective funds.

(b) Gratuity liability, being a defined benefit obligation, is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year.

(c) Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation which is done as per projected unit credit method at the end of each financial year.

(d) Actuarial gains / losses are immediately taken to profit and loss account and are not deferred.

(xii) Earning per Share

Basic Earning per Share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted number of equity shares outstanding during the year.

For the purpose of calculating diluted earning per share, net profit or loss for the year attributable to equity share holders and the weighted average number of shares outstanding during the year are adjusted for the effect of all dilutive potential equity shares.

(xiii) Premium on Redemption of Debentures

Premium payable on redemption of debentures is adjusted against the Securities Premium Account, on a proportionate basis.

(xiv) Borrowing Costs

Borrowing costs relating to acquisition /construction of qualifying assets are capitalized until the time all substantial activities necessary to prepare the qualifying assets for their intended use are complete. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are charged to revenue in the period they occur.

(xv) Taxation

Tax expenses comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961. Deferred income taxes reflect the impact of current year timing differences between taxable income for the year and reversal of timing differences of earlier years.

The deferred tax for timing differences between the book and tax profits for the year is accounted for using the tax rates and laws that have been substantially enacted as of the Balance Sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by same governing taxation laws. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. If the company has carry forward unabsorbed depreciation and tax losses, all deferred tax assets are recognized only to the extent there is virtual certainty supported by convincing evidence that sufficient taxable income will be available against which such deferred tax asset can be realized.

The carrying amounts of deferred tax assets are reviewed at each balance sheet date. The company writes-down the carrying amount of deferred tax assets to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.

(xvi) Segment Reporting

a) Identification of segments:

The company has identified that its business segments are the primary segments. The Company''s businesses are organized and managed separately according to the nature of products / services, with each segment representing a strategic business unit that offers different product / services and serves different markets. The analysis of geographical segments is based on the areas in which the customers of the company are located.

b) Allocation of Common Costs:

Common allocable costs are allocated to each segment on case to case basis applying the ratio, appropriate to each relevant case. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segment on a reasonable basis, have been included under the head "Unallocated".

The accounting policies adopted for segment reporting are in line with those of the Company''s accounting policies.

(xvii) Fixed Assets Acquired under Lease

(a) Finance Lease

Assets acquired under lease agreements which effectively transfer to the company substantially all the risk and benefits incidental to ownership of the leased items, are capitalized at the lower of the fair value and present value of minimum lease payment at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and the reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of their liability. Finance charges are charged directly to the expenses account. Lease management fees, legal charges and other initial direct costs are capitalised.

(b) Operating Lease

Leases where the lessor effectively retains substantially all the risks and benefits of the ownership of the leased assets are classified as operating leases. Operating lease payments are recognized as an expense in the profit and loss account on a straight-line basis over the lease term.

(xviii) Cash and Cash equivalents

Cash and cash equivalents in the cash flow statement comprise of cash at bank and in hand and short-term investments with an original maturity of three months or less.

(xix) Provision

A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.

Provisions made in terms of Accounting Standard 29 are not discounted to its present value and are determined based on best estimates required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates.

(xx) Contingencies

Liabilities which are material and whose future outcome cannot be ascertained with reasonable certainty are treated as contingent and disclosed by way of notes to the accounts.

 
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