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Notes to Accounts of Liberty Shoes Ltd.

Mar 31, 2015

CORPORATE INFORMATION

Liberty Shoes Ltd is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956 on 3rd September, 1986. The shares of the Company are listed on two stock exchanges in India i.e National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The Company is engaged in the business of manufacturing and trading of footwear and accessories through its retail and wholesale network. The Registered Office of the Company is situated at Libertypuram, Karnal, Haryana.

2.1.1 Terms/Rights attached to Equity Shares

The Company has one class of equity shares having a par value of Rs.10/- each. Each shareholder is eligible for one vote per share held in the Company. The dividend proposed by the Board of Directors of the Company, if any, is subject to approval of the members in the ensuing general meeting, except in the case of interim dividend, if declared. In the event of liquidation of the Company, equity shareholders shall be entitled to receive the remaining assets, after the distribution to preferred shareholders, if any, in proportionate of their shareholding.

During the year under consideration, no remuneration has been paid to Non-Executive Directors except professional services fees of Rs.21,00,000/- (Previous year Rs.18,00,000/-) to Sh. Satish Kumar Goel and Rs.2,70,000/- (Previous year Nil) to Sh. Ashok Kumar (Since the date of his becoming Director on the Board of the Company) and sitting fees of Rs.2,70,000/- (Previous year Rs.42,500/-) to Independent Directors.

2.1.2 In the opinion of the Board and to the best of its knowledge, the value of realization of current assets, loans and advances in the ordinary course of business would not be less than the amount at which they have been stated in the Balance Sheet.

2.1.3 The Company has taken various retail stores and warehouses under operating lease arrangements. The lease agreements generally have an escalation clause and there are no subleases. These leases are generally not non cancellable and are renewable by mutual consent on mutually agreed terms. There are no restrictions imposed by lease agreements. The aggregate lease rentals payables are charged as Rent in note 2.25.

The future minimum lease payments under non cancellable operating leases are as follows:

2.1.4 The assessment of the Company in respect of Income Tax & Wealth Tax is completed up to Assessment Year 2012-13.

2.1.5 During the year, in terms of the renewed agreements dated April 3, 2013 with Liberty Enterprises (LE) and Liberty Group Marketing Division (LGMD), the two partnership firms of the group, for further period of two years from April 1st, 2013 onwards, the exclusive use of their manufacturing facilities and fixed assets, trademarks & distribution networks was available with the Company till March 31, 2015. Further, in conformity with the requisite approvals of the Central Government obtained by the Company in this regard, the Company has paid/provided for franchise fees of Rs.115 Lacs (Previous year Rs.115 Lacs) to LE and Rs.881.67 Lacs (Previous year Rs.840 Lacs) to LGMD.

In furtherance to the Company's earlier communication, considering the enduring benefits of unlocking the shareholders' value through acquisition of the tangible and intangible assets including business rights of LE & LGMD, on March 31, 2015 the Company has entered into a Memorandum of Understanding (MOU) with these two Partnership firms for acquisition of their respective business of footwear. In terms of the said MOU, the Company has paid a sum of Rs.10 Lacs & Rs.50 Lacs to LE & LGMD respectively as an advance and the related transactions are to be completed, as per the mode/structure to be recommended by the consultants, on or before March 31, 2016 but with retrospective effect from April 1,2015

Also during the year, in terms of the renewed agreement dated April 3, 2013 with Liberty Footwear Co. (LFC), another partnership firm of the group and owner of trademark "LIBERTY", for granting exclusive rights of use of trademark "LIBERTY" to the Company for further period of fifteen years from April 1, 2013 onwards and in conformity with the requisite approvals of the Central Government obtained by the Company in this regard, the Company has paid/provided for trademark license fee of Rs.855.56 Lacs (Previous year Rs.800 Lacs) to LFC.

2.1.6 Interest to others include Rs.11,93,934/- (Previous year Rs.18,95,666/-) against short term loan from M/s Geofin Investments Private Ltd @ 12% p.a.

2.1.7 During the year the Company has capitalized the borrowing cost of Rs. Nil (Previous year Rs. Nil) as part of the cost of the qualifying assets.

2.1.8 The Company has paid the excise duty amounting to Rs.22,57,15,331/- (Previous year Rs.17,1 1,33,108/-) against the sales executed during the year.

Also, the Company has made the provision of excise duty of Rs.1,24,51,014/- (Previous Year Rs.1,53,04,343/-) against finished goods lying in stocks as on 31st March, 2015 and the difference of two has been recognized separately in the Statement of Profit & Loss.

2.1.9 During the year the registration process of certain portion of land at Libertypuram, Karnal, already in possession with the Company since beginning, has been completed and the said land has duly been registered in the name of the Company in revenue records.

2.1.10 The Company has not received any memorandum (as required to be filed by the suppliers with the notified authority under the Micro, Small & Medium Enterprise Development Act, 2006) claiming their status as on 31st March, 2015 as Micro, Small or Medium Enterprise. Consequently the amount paid/payable to these parties during the year is nil.

2.1.11 Contingent Liabilities (Amount in Rs.) Particulars 2014-15 2013-14

I) Bank Guarantees issued on behalf of the Company submitted with various 5,56,22,601 6,74,16,281 institutional customers in terms to their orders.

II) Letter of Credits 11,90,31,607 7,30,36,956

III) On account of disallowance of legitimate credit of CENVAT against Excise Duty/ 3,38,75,448 3,38,75,448

Education Cess1 for the period from November 2004 to June 2005, June 2006, May 2006 to financial year 2002-03 and 2004-05. CESTAT while admitting Company's appeal directed to deposit Rs.39 Lacs under protest & has granted stay

IV) Income Tax claims disputed by the Company relating to TDS (FY 2010-11 ) against which appeal filed by the Company - 3,11,878

V) Value Added Tax2 for the financial year 2005-06, 2006-07, 2007-08 & 2008-09 55,69,829 1,22,03,204 on account of classification of goods at different rate of tax

VI) Service Tax on GTA Services for the period from January 2005 to March 2007 5,28,598 5,28,598

VII) On account of compliance relating to obligations under EPCG licences 4,42,00,783 4,42,00,783

VIII) Third Party claims due to dispute relating to contracts 44,37,479 44,37,479

1 Including amount deposited under protest Rs.39,00,000/- (Previous year Rs.39,00,000/-)

2 Including amount deposited under protest Rs.14,25,815/- (Previous year Rs.48,82,322/-).

2.1.12 Capital commitments not provided for are estimated at Rs.30 Lacs (Previous year Rs.100 Lacs).

2.1.13 Provision for doubtful debts: During the year, the Company has considered debts for Rs.47,09,590/- (Previous year Rs.3,22,29,631/-) as doubtful debts/securities and also has withdrawn Rs.1,83,46,833/- (Previous year Rs.2,67,72,536/-) out of the provisions made in the earlier years for the same and written off as bad debts Rs.61,77,632/- (Previous year Rs.2,36,27,454/-). Further the differential of the provision made and amount withdrawn during the year, detailed as under, has been charged to Statement of Profit & Loss for the year and the balance has been carried in the balance sheet:

2.1.14 During the year, considering the non-recoverability of some of the debts, the Company has written of the debts amounting to Rs.45,39,071/- (Previous year Rs.40,78,715/-).

2.1.15 Pursuant to the enactment of the Companies Act 2013, (the 'Act'), the Company has, effective 1st April 2014, reviewed and revised the estimated useful lives of its fixed assets, in accordance to the provisions of Schedule II of the Act and the worked out unabsorbed depreciation, against assets whose useful life has expired till 31st March, 2014, amounting to Rs.6,59,32,277/- has been adjusted with the Surplus in the Statement of Profit & Loss under the head Reserves & Surplus (refer to Note 2.2.4). Further the consequential impact of the same on the depreciation for the year is Rs.44,55,243/- and same has been charged to the Statement of Profit and Loss for the year.

Further, the corresponding effect of the aforesaid unabsorbed depreciation amounting to Rs.6,59,32,277/- has been given in the Note 2.11 under Depreciation - Sales/ Adjustments during the period and break-up of the same is as under: _

2.1.16 The Board of Directors of the Company considers and maintains "Footwear" as the only business segment of the Company.

2.1.17 Basic and Diluted Earning per share: The Basic and diluted earning per share of the Company is as under: -

2.1.18 Related Party Transactions

The Company has made the following transactions with related parties as defined under the provisions of Accounting Standard 18 issued by Institute of

Chartered Accountants of India.

A) Transactions between the Company and related parties and the status of outstanding balances as at 31st March, 2015:

B) Detail of Related Parties and description of relationship:

i) Subsidiary Company:

Liberty Foot Fashion Middle East FZE

ii) Entities where Key Management Personnel/ Relative of Key Management Personnel has significant influence:

Geofin Investments Private Ltd., Liberty

Group Marketing Division, Liberty Enterprises, Liberty Footwear Co., Sanjeev Bansal

Charitable Trust, Liberty Innovative Outfits

Ltd., Little World Constructions Pvt. Ltd.,.

iii) Key Management Personnel:

1) Sh. Adesh Kumar Gupta 2) Sh. Adarsh Gupta 3) Sh. Shammi Bansal 4) Sh. Sunil

Bansal 5) Sh. Adeesh Kumar Gupta 6) Sh. Satish Kumar Goel 7) Sh. Munish Kakra (effective from 29th May, 2014)

iv) Relatives of Key Management Personnel:

S/Sh. Harish Kumar Gupta, Raman Bansal, Vivek Bansal, Anupam Bansal (Brothers of Directors)

Sh. Ayush Bansal, Sh. Manan Bansal, Sh. Pranav Gupta, Sh. Anmol Gupta (Sons of Directors)

Note: Receiving the services from Key Management Personnel and their relatives includes rent and land lease charges.

2.1.19 Detail of Employee Benefits - Gratuity

The Company has a defined gratuity plan (Defined Benefit). Every employee, on completion of continuous service of five years or more with the Company, is entitled to get the gratuity on 15 days salary, on the basis of last drawn salary, for each completed year of service. The scheme is funded with Life Insurance Corporation of India (LIC) in the form of qualifying insurance policy.

The following table summarizes the components of net benefit expense recognized in the Statement of Profit & Loss and the funded status and amounts recognized in the Balance Sheet for the respective plans:

2.1.20 For the current year, Deferred Tax liability has been calculated after considering the cumulative timing differences of Rs.6,38,37,055/- (Previous year Rs.14,27,05,764/-) mainly on account of depreciation.

2.1.21 There are no dues payable to the Investor Education and Protection Fund as at 31st March, 2015.

2.1.22 The Company has regrouped/reclassified the previous year figures in accordance with the requirements applicable in the current year. The current year and previous year figures have been rounded off to the nearest rupees.


Mar 31, 2014

CORPORATE INFORMATION

Liberty Shoes Ltd is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956 on 3rd September, 1986. The shares of the Company are listed on two stock exchanges in India i.e National Stock Exchange of India [NSE] and BSE Limited (BSE). The Company is engaged in the business of manufacturing and trading of footwear and accessories through its retail and wholesale network.

1.1.1 Terms/Rights attached to Equity Shares

The Company has one class of Equity Shares having a par value of Rs.10/- each. Each shareholder is eligible for one vote per share held in the Company. The dividend proposed by the Board of Directors of the Company, if any, is subject to approval of the members in the ensuing general meeting, except in the case of interim dividend, if declared. In the event of liquidation of the Company, Equity Shareholders shall be entitled to receive the remaining assets, after the distribution to preferred shareholders, if any, in proportion to their shareholding.

1.2.1 In the opinion of the Board and to the best of its knowledge, the value of realization of current assets, loans and advances in the ordinary course of business would not be less than the amount at which they have been stated in the Balance Sheet.

1.2.2 The Company has taken various retail stores and warehouses under operating lease arrangements. The lease agreements generally have an escalation clause and there are no subleases. These leases are generally not non cancellable and are renewable by mutual consent on mutually agreed terms. There are no restrictions imposed by lease agreements. The aggregate lease rentals payables are charged as Rent in note 2.25.

1.2.3 The assessment of the Company in respect of Income Tax & Wealth Tax is completed up to Assessment Year 2011-12.

1.2.4 During the year, in terms of the renewed agreements dated April 3, 2013 with Liberty Enterprises (LE) and Liberty Group Marketing Division (LGMD), the two partnership firms of the group, for further period of two years from April 1, 2013 onwards, the exclusive use of their manufacturing facilities and fixed assets, trademarks & distribution networks is now available with the Company till March 31, 2015. Further, in conformity with the requisite approvals of the Central Government obtained by the Company in this regard, the Company has paid/provided for franchise fees of Rs.115 Lacs (Previous year Rs.600 Lacs) to LE and Rs.840 Lacs (Previous year Rs.700 Lacs) to LGMD.

Further, considering the development in relation to resolution of long pending dispute amongst the partners of LE and innumerable benefits of unlocking the shareholders value through the acquisition of tangible and intangible assets of LE and LGMD, currently available to the Company under aforesaid arrangements, the Company has proposed the acquisition of the assets from the above firms and is presently working on the modalities to implement the same.

Also, during the year, in terms of the renewed agreement dated April 3, 2013 with Liberty Footwear Co. (LFC), another partnership firm of the group and owner of trademark "LIBERTY", for granting exclusive rights of use of trademark "LIBERTY" to the Company for further period of fifteen years from April 1, 2013 onwards and in conformity with the requisite approvals of the Central Government obtained by the Company in this regard, the Company has paid/provided for trademark license fee of Rs.800 Lacs (Previous year Rs.472.50 Lacs) to LFC.

1.2.5 Interest to others include Rs.18,95,666/- (Previous year Rs.11,50,24-6/-) against short term loan from M/s Geofin Investments Private Ltd @ 12% p.a.

1.2.6 During the year, the Company has capitalized the borrowing cost of Rs.Nil (Previous year Rs.Nil) as part of the cost of the qualifying assets.

1.2.7 The Company has paid the excise duty amounting to Rs.17,11,33,108/- (Previous year Rs.17,80,25,170/-) against the sales executed during the year.

Also, the Company has made the provision of excise duty of Rs.1,53,04,363/- (Previous Year Rs.1,35,31,086/-) against finished goods lying in stocks as on 31st March, 2014 and the difference of two has been recognized separately in the Statement of Profit & Loss.

1.2.9 The registration process of certain portion of land at Libertypuram, Kamal, already in possession with the Company since beginning, is in process of administrative compliances and is expected to be completed shortly.

1.2.10 During the year under consideration, the scheme of amalgamation of M/s Liberty Retail Revolutions Limited, a wholly owned subsidiary of the Company, with the Company has been approved by the Hon''ble High Court of Punjab & Haryana and Hon''ble High Court of Delhi. The Company has completed the necessary formalities to give effect the said amalgamation. Further, in terms of the scheme of amalgamation, the amalgamation has been approved by the Hon''ble High Courts with an appointed date of April 1, 2013, accordingly, the financials presented for the year under consideration includes the financials of the said amalgamated subsidiary as if its operations were under the Company during the year. Accordingly, the previous figures are not comparable to that extent.

As per approved Scheme of Amalgamation, the accounting for the amalgamation has been done as per the method of "Amalgamation in the nature of merger" as defined in the Accounting Standard (AS)-14 as notified under the Companies Accounting Standard Rules, 2006.

1.2.11 The Company has not received any memorandum (as required to be filed by the suppliers with the notified authority under the Micro, Small & Medium Enterprise Development Act, 2006) claiming their status as on 31st March, 2014 as Micro, Small or Medium Enterprise. Consequently the amount paid/payable to these parties during the year is nil.



2.2.1 Contingent Liabilities (Amount in Rs.)

Particulars 2013-2014 2012-2013

I) Bank Guarantees issued on behalf of the Company submitted with various 6,74,16,281 4,74,76,991 institutional customers in terms to their orders.

II) Letter of Credits 7,30,36,956 6,49,65,379

III) On account of disallowance of legitimate credit of CENVAT against Excise Duty/ 3,38,75,448 3,38,75,448 Education Cess1 for the period from November 2004 to June 2005, May 2006 to June 2006, financial year 2002-03 and 2004-05. CESTAT, while admitting Company''s appeal, directed to deposit 739 Lacs under protest and has granted stay.

IV) Invoice Funding facility - 2,50,89,315

V) Corporate Guarantee given to bank for securing working capital limits of retail - 10,00,00,000 subsidiary

VI) Income Tax claims disputed by the Company relating to TDS (FY2010-11 ) 3,11,878 - against which appeal filed by the Company

VII) Value Added Tax2 for the financial year 2005-06, 2006-07, 2007-08 & 2008-09 1,22,03,204 1,22,03,204 on account of classification of goods at different rate of tax

VIII) Service Tax on GTA Services for the period from January 2005 to March 2007 5,28,598 5,28,598

IX) On account of compliance relating to EPCG licences. 4,42,00,783 4,42,00,783

X) Third F''arty claims due to dispute relating to contracts 44,37,479 -

1 Including amount deposited under protest 739,00,000/- (Previous year 739,00,000/-) including amount deposited under protest 748,82,322/- (Previous year 748,82,322/-].

2.2.2 Capital commitments not provided for are estimated at 7100 Lacs (Previous year 730 Lacs).

2.2.3 Provision for doubtful debts: During the year, the Company has considered debts for 73,22,29,631/- (Previous year 7Nil) as doubtful debts/securities and also has withdrawn 72,67,72,536/- (Previous year 71,49,64,710/-) out of the provisions made in the earlier years for the same and written off as bad debts 72,36,27,454/- (Previous year 739,27,110/-). Further the differential of the provision made and amount withdrawn during the year, detailed as under, has been charged to Statement of Profit 8i Loss for the year and the balance has been carried in the balance sheet:

2.2.4 During the year, considering the non recoverability of some of the debts, the Company has written of the debts amounting to Rs.40,78,715/- (Previous year Rs.22,73,927/-).

2.2.5 Sales/Adjustment in the Gross Block of Fixed Assets amounting to Rs.4,94,68,628/- (Previous year Rs.84,53,380/-) includes sale of surplus Land & Building having book value for Rs.2,07,45,326/- (Previous year Rs.Nil], Machinery/Moulds, on account of replacements, for Rs.93,70,296/- (Previous year Rs.31,74,973/-), Vehicles for Rs.96,99,034/- (Previous year Rs.50,68,826/-), Office Equipments for Rs.4,99,195/- (Previous year Rs.2,09,581] and writing off of the Furniture & Fixtures at few of the retail outlets of the amalgamated Company for Rs.91,54,777/- (Previous year Rs.Nil). The Profit/(Loss) arisen on such sale/adjustments, net of accumulated depreciation, has separately been reflected in Note No. 2.26 as Exceptional Items.

2.2.6 Related Party Transactions

The Company has made the following transactions with related parties as defined under the provisions of Accounting Standard 18 issued by Institute of Chartered Accountants of India.

A) Transactions between the Company and related parties and the status of outstanding balances as at 31s'' March, 20M:

B) Detail of Related Parties and description of relationship:

i) Subsidiary Companies:

Liberty Foot Fashion Middle East FZE, Liberty Retail Revolutions Ltd (Erstwhile)

ii) Entities where Key Management Personnel/ Relative of Key Management Personnel has significant influence:

Geofin Investments Private Ltd., Liberty Group Marketing Division, Liberty Enterprises, Liberty Footwear Co., Sanjeev Bansal Charitable Trust, Liberty Innovative Outfits Ltd., Little World Constructions Pvt. Ltd.,

iii) Key Management Personnel:

1) Sh. Adesh Kumar Gupta 2) Sh. Adarsh Gupta 3) Sh. Shammi Bansal 4) Sh. Sunil Bansal 5) Sh. Adeesh Kumar Gupta 6) Sh. Satish Kumar Goel iv) Relatives of Key Management Personnel: S/Sh. Harish Kumar Gupta, Raman Bansal, Vivek Bansal, Anupam Bansal (Brothers of Directors]

Sh. Ayush Bansal, Sh. Manan Bansal, Sh. Pranav Gupta, Sh. Anmol Gupta (Sons of Directors)

Note: Receiving the services from Key Management Personnel and their relatives includes rent and land lease charges.

2.2.7 Detail of Employee Benefits - Gratuity

The Company has a defined gratuity plan (Defined Benefit). Every employee, on completion of continuous service of five years or more with the Company, is entitled to get the gratuity on 15 days salary, on the basis of last drawn salary, for each completed year of service. The scheme is funded with Life Insurance Corporation of India (LIC) in the form of qualifying insurance policy.

The following table summarizes the components of net benefit expense recognized in the Statement of Profit & Loss and the funded status and amounts recognized in the Balance Sheet for the respective plans:

2.2.8 For the current year, Deferred Tax liability has been calculated after considering the cumulative timing differences of Rs.14,27,05,764/- (Previous year Rs.15,73,09,015/-) mainly on account of depreciation.

2.2.9 There are no dues payable to the Investor Education and Protection Fund as at 31st March, 20U.

2.2.10 During the year ended March 31, 2014, preparation and presentation of financial statements have been made as per the Revised Schedule VI notified under the Companies Act 1956. The Company has regrouped/reclassified the previous year figures in accordance with the requirements applicable in the current year. The current year and previous year figures have been rounded off to the nearest rupees.


Mar 31, 2013

1.1.1 In the opinion of the Board and to the best of its knowledge, the value of realization of current assets, loans and advances in the ordinary course of business would not be less than the amount at which they have been stated in the Balance Sheet.

1.1.2 The assessment of the Company in respect of Income Tax & Wealth Tax is completed up to Assessment Year 2010-11.

1.1.3 Liberty Enterprises (LE) & Liberty Group Marketing Division (LGMD), the two partnerships firms, having established footwear business, consisting of fixed assets, personnel, trademarks, technical knowhow & distribution network, made available their business exclusively to the Company on franchise basis for the period of 10 years, against payment of the annual franchise fees vide respective agreements dated 31st March, 2003. Liberty Footwear Co. (LFC), another partnership firm and owner of the Trademark "LIBERTY", licensed exclusive rights to the Company for use of the Trademark "LIBERTY" on payment of Annual License Fees vide agreement dated 31s* March, 2003. The aforesaid agreements have since expired on 31st March, 2013. Few of the Directors of the Company were interested as Partners in the said Partnership Firm.

The Company, after analyzing the benefits and its requirements for the arrangements, has entered into agreement(s) with LGMD for use of their fixed assets for manufacturing of footwear, registered Trademarks and domestic sales network for sale of footwear for a period of 2 (two) years and with LE for use of their fixed assets and export sales network for further period of 2 (Two) years and with LFC for use of trademark "LIBERTY" on exclusive basis for further period of 15 (Fifteen) years effective from 1st April, 2013 against payment of minimum guaranteed obligation with requisite approval from the Central Government in terms of the applicable provisions of the Companies Act, 1956. The approval stipulates that the Company should seek post facto approval of the shareholders of the Company in General Meeting and therefore, the enabling resolutions seeking their approval with explanatory statements have been placed in the notice of the ensuing Annual General Meeting.

With regard to the dispute amongst the partners of LE relating to the earlier agreement, the Company has obtained expert legal opinion confirming the validity of the above arrangements executed by the Company.

During the year under consideration, in terms of the agreements and in conformity with the requisite approvals of the Central Government, the Company has made the payments (including provisions), after adjustments of the securities paid to the respective firms, amounting to X6,00,00,000/- (Previous year Rs.6,00,00,000/-), Rs.7,00,00,000/- (Previous year Rs.7,00,00,000/-) and Rs.4,72,50,000/- (Previous year Rs.4,72,50,000/-) respectively.

1.1.4 Interest to others include Rs.11,50,246/- (Previous year Rs.20,30,788/-) against short term loan @ 12% p.a. from M/s Geofin Investments Private Ltd.

1.1.5 During the year, the Company has capitalized the borrowing cost of Rs.Nil (Previous year XH\) as part of the cost of the qualifying assets.

1.1.6 The Company has paid the excise duty amounting to Rs.15,20,64,170/- (Previous year Rs.13,94,30,990/-) against the sales executed during the year.

Also, the Company has made the provision of excise duty of Rs.1,35,31,086/- (Previous Year Rs.1,80,55,539/-) against finished goods lying in stocks as on 31st March, 2013 and the difference of two has been recognized separately in the Statement of Profit & Loss.

1.1.7 The registration relating to certain portion of land at Libertypuram, Karnal are still in process because of some administrative compliance but the possession of the same is with the Company since beginning. Further the sellers have also given their confirmation ratifying the earlier sale process.

1.1.8 During the year under consideration, the Company has increased its stake to 100% (previous year 93.86%) in Liberty Retail Revolutions Ltd (LRRL), its retail subsidiary, by investing Rs.980.77 Lacs (Previous year Rs.NIL). As reported earlier also and in pursuance of the decision taken to amalgamate LRRL with the Company, the Board of Directors have approved the scheme of Amalgamation of its Wholly Owned Retail Subsidiary LRRL with the Company to be effective from 1st April, 2013 subject to sanction from the respective Hon''ble High Court(s) and approval from the Members of the Company. The necessaries formalities as required to effect the above said amalgamation have already been initiated by the Company. The Scheme is consistent with the objective of consolidating the business leading to operational synergies and efficiencies.

1.1.9 The Company has not received any memorandum (as required to be filed by the suppliers with the notified authority under the Micro, Small & Medium Enterprise Development Act, 2006) claiming their status as on 31st March, 2013 as Micro, Small or Medium Enterprise. Consequently the amount paid/payable to these parties during the year is nil.

1.1.10 Capital commitments not provided for are estimated at Rs.30 Lacs (Previous year Rs.20 Lacs).

1.1.11 Provision for doubtful debts: During the year, the Company has considered debts for Rs.Nil (Previous year Rs.3,13,51,083/-) as doubtful debts/securities and also has withdrawn Rs.72,75,172/- (Previous year Rs.3,24,29,334/-) out of the provisions made in the earlier years for the same and written off as bad debts Rs.39,27,110/- (Previous year Rs.3,24,29,334/-). Further the differential of the provision made and amount withdrawn during the year, detailed as under, has been charged to Statement of Profit & Loss for the year and the balance has been carried in the balance sheet:

1.1.12 During the year, considering the non recoverability of some of the debts, the Company has written of the debts amounting to Rs.22,73,927/- (Previous year Rs.47,27,466/-).

1.1.13 The Board of Directors of the Company considers and maintains "Footwear" as the only business segment of the Company.

1.1.14 Basic and Diluted Earning per share:

The Basic and diluted earning per share of the Company is as under: -

1.1.15 Related Party Transactions

The Company has made the following transactions with related parties as defined under the provisions of Accounting Standard 18 issued by the Institute of Chartered Accountants of India.

A) Transactions between the Company and related parties and the status of outstanding balances as at 31" March, 2013:

1.1.16 Detail of Employee Benefits - Gratuity

The Company has a defined gratuity plan (Defined Benefit). Every employee, on completion of continuous service of five years or more with the Company, is entitled to get the gratuity on 15 days salary, on the basis of last drawn salary, for each completed year of service. The scheme is funded with Life Insurance

Corporation of India (LIC) in the form of qualifying insurance policy.

The following table summarizes the components of net benefit expense recognized in the Statement of Profit & Loss and the funded status and amounts recognized in the Balance Sheet for the respective plans:

1.1.17 For the current year Deferred Tax liability has been calculated after considering the cumulative timing differences of Rs.1 5,73,09,015/- (Previous year Rs.15,56,62,180/-) on account of depreciation.

1.1.18 There are no dues payable to the '' Investor Education and Protection Fund asat3rMarch, 2013.

1.1.19 During the year ended March 31, 2013, preparation and presentation of financial statements have been made as per the Revised Schedule VI notified under the Companies Act 1956. The preparation of financial statements based on the Revised Schedule VI does not impact the recognition and measurement principles followed for preparation of the financial statements. However, it has significant impact on the presentation and disclosures made in the financial statements. The Company has regrouped/reclassified the previous year figures in accordance with the requirements applicable in the current year. The current year and previous year figures have been rounded off to the nearest rupees.


Mar 31, 2012

1. In the opinion of the Board and to the best of its knowledge, the value of realization of current assets, loans and advances in the ordinary course of business would not be less than the amount at which they have been stated in the Balance Sheet.

2. The assessment of the Company in respect of Income Tax & Wealth Tax is completed up to Assessment Year 2009-2010.

3. The Company in the year 2003, entered into an agreement with Liberty Enterprises and Liberty Group Marketing Division for taking over their footwear business on franchise basis and with Liberty Footwear Co. for use of "Liberty" trademark on exclusive basis for an initial period of 7 years. In terms of the agreements, the same have been automatically renewed for further period of 3 years. The footwear business as defined in the agreement include Fixed Assets, intellectual Properties, Know-how and Distribution Network etc. of the two Partnership Firms. Under the terms of the agreements, no ownership of assets, tangible or intangible, has been transferred to the Company. During the year, in terms of the agreements and in conformity with the requisite approvals of the Central Govt, the Company has made the payments (including provisions) amounting to Rs.6,00,00,000/- (Previous year Rs.6,00,00,000), Rs.7,00,00,000/- (Previous year Rs.7,00,00,000/-) and Rs.4,72,50,000/- (Previous year Rs.3,90,00,000/-) respectively. In terms of the respective agreements, the same have been renewed for the further period of 3 years.

The learned arbitrator while deciding the dispute amongst the Partners of Liberty Enterprises as regards to the aforesaid franchise agreement, corroborated the Company's stand by holding that the arbitrational verdict will not be having any impact on the Company as regards to such arrangements, being not a party to the dispute. However, the Company, to avoid any legal consequence at any point of time and keep its rights further protected, has filed its objections against the arbitrational award and the same is pending for adjudication with the Courts at Karnal.

Also the Company, in conformity of the respective agreement(s), has fulfilled its entire obligation including financial obligations. In view of the enduring benefits and duly considering the current periodicity of the ongoing agreements, the parties are exploring the option of renewal of the agreements on such terms and conditions as may be agreed subject to the necessary compliances.

4. Interest to others include, Rs.20,30,788/- (Previous year Rs.56,46,544/-) against short term loan @ 12% p.a. tram M/s Geofin Investments Pvt. Ltd.

5. The Company in the year 2006 has executed Corporate Guarantee of Rs.600 Lacs tor securing the credit facilities to its Joint Venture set up for the footwear retailing. During the year, due to the inability of the Joint Venture, the Company, to sustain its credit worthiness & protect its standing, has settled the bank outstanding by paying Rs. 319.46 Lacs for release of the said Corporate Guarantee. This amount paid has been charged to statement of Profit & Loss for the year, considering it as an exceptional item.

6. During the year, the Company has capitalized the borrowing cost of Rs.Nil (Previous year Rs.Nil) as part of the cost of the qualifying assets.

7. The Company has paid the excise duty amounting to Rs.13,94,30,990/- (Previous year Rs.8,35,99,748/-) against the sales executed during the year.

Also, the Company has made the provision of excise duty of n ,80,55,539/- (Previous year n,26,42,294/-) against finished goods lying in stocks as on 31st March, 2012 and the difference of two has been recognized separately in the Profit & Loss Account.

8. Under the Focus Product Scheme of Director General of Foreign Trade, Government of India, during the year, the Company has received an incentive of Rs.75,58,831/- (Previous year Rs.32,53,942/-) for foreign exchange realized against exports made during the financial years 2006-07, 2007-08, 2008-09, 2009-10 & 2010-11. Further, due to change in its accounting policy, the Company has accrued an incentive for Rs.67,30,072/- (Previous year Nil) under the said scheme and the profits for the year are higher to that extent.

9. The Company is in process of getting the registration, relating to the portion of the land situated at Liberty puram measuring 4.34 acres, done for which the other formalities have already been completed including taking the possession of the said land.

10. The Board of directors has approved in principle the Company's proposal to amalgamate Liberty Retail Revolutions Ltd. (LRRL), a retail subsidiary, with the Company.

11. The Company has not received any memorandum (as required to be filed by the suppliers with the notified authority under the Micro, Small & Medium Enterprise Development Act, 2006) claiming their status as on 31st March, 2012 as Micro, Small or Medium Enterprise. Consequently, the amount paid/payable to these parties during the year is nil.

12. Contingent Liabilities

(Amount in Rs.)

2011-12 2010-11

I) Bank Guarantees issued on behalf of the Company submitted with various 3,34,78,945 7,50,53,061 institutional customers in terms to their orders.

II) Letter of Credits for Import of Materials 4,51,02,780 -

III) On account of disallowance of legitimate credit of CENVAT against Excise Duty/ 3,70,27,048 3,55,81,366 Education Cess1 for the period from November 2004 to June 2005, May 2006 to June 2006, Financial year 2002-03 and 2004-05. CESTAT while admitting Company's appeal directed to deposit Rs.39 Lacs under protest and has granted stay.

IV) Invoice Funding facility 2,50,27,539

V) Corporate Guarantees given to banks for securing working capital limits of retail 10,00,00,000 16,00,00,000 subsidiary and joint venture company2

VI) Income Tax on account of routine assessment for the assessment year the 35,03,426 35,03,426 assessment years 1998-99 & 2003-04

VII) Value Added Tax3 for the financial year 2005-06, 2006-07, 2007-08, 82,81,568 1,48,69,568 2008-09 & 2009-10 on account of classification of goods at different rate of tax

VIII) Service Tax on GTA Services for the period from January 2005 to March 2007 5,28,598 5,28,598

IX) On Account of some administrative compliance relating to EPCG licences. 4,42,00,783 4,42,00,783

' Including amount deposited under protest Rs.39,00,000/- (Previous year Rs.39,00,000/-)

2 Includes the corporate guarantee for Rs.Nil (Previous year Rs.6,00,00,000/-) given on behalf of erstwhile joint venture company.

3 Including amount deposited under protest Rs.41,37,554/- (Previous year Rs.1,07,25,554/-).

13. Capital commitments not provided for are estimated at Rs.20 Lacs (Previous year Rs.l50 Lacs).

14. Provision for doubtful debts: During the year, the Company has considered debts for Rs.3,13,51,083/- (Previous year Rs.Nil) as doubtful debts/securities and also has withdrawn Rs.3,24,29,334/- (Previous year Rs.Nil) out of the provisions made in the earlier years for the same and written off as bad debts (Previous year Rs.Nil). Further, the differential of the provision made and amount withdrawn during the year, detailed as under, has been charged to the Statement of Profit & Loss for the year and the balance has been carried in the balance sheet:

15. During the year, considering the non-recoverability of some of the debts, the Company has written of the debts amounting to Rs.47,27,466/- (Previous year Rs.2,90,21,708/-).

16. The Board of Directors of the Company considers and maintains "Footwear" as the only business segment of the Company.

17. Related Party Transactions

The Company has made the following transactions with related parties as defined under the provisions of Accounting Standard 18 issued by the Institute of Chartered Accountants of India. A) Transactions between the Company and related parties and the status of outstanding balances as at 31st March, 2012:

B) Detail of Related Parties and description of relationship:

i) Subsidiary Companies:

Liberty Retail Revolutions Limited, Liberty Foot Fashion Middle East FZE ii) Entities where Key Management Personnel/Relative of Key Management Personnel has significant influence:

Geofin Investments Private Ltd., Liberty Group Marketing Division, Liberty Enterprises, Liberty

Footwear Co., Sanjeev Bansal Charitable Trust, Liberty Innovative Outfits Ltd.

iii) Key Management Personnel:

18. Detail of Employee Benefits - Gratuity

The Company has a defined gratuity plan (Defined Benefit). Every employee, on completion of continuous service of five years or more with the Company, is entitled to get the gratuity on 15 days salary, on the basis of last drawn salary, for each completed year of service. The scheme is funded with the Life Insurance Corporation of India (LIC) in the form of qualifying insurance policy.

The following table summarizes the components of net benefit expense recognized in the Statement of Profit & Loss and the funded status and amounts recognized in the Balance Sheet for the respective plans:

19. For the current year, Deferred Tax liability (Previous year Deferred Tax asset) has been calculated after considering the cumulative timing differences of Rs.15,56,62,180/- (Previous year Rs.16,28,92,724/-) on account of depreciation.

20. There are no dues payable to the Investor Education and Protection Fund as at 31st March, 2012.

21. During the year ended March 31, 2012, the Revised Schedule VI notified under the Companies Act 1956 has become applicable for preparation and presentation of financial statements. The preparation of financial statements based on the Revised Schedule VI does not impact the recognition and measurement principles followed for preparation of the financial statements. However, it has significant impact on the presentation and disclosures made in the financial statements. The Company has regrouped/reclassified the previous year figures in accordance with the requirements applicable in the current year. The current year and previous year figures have been rounded off to the nearest rupees.


Mar 31, 2010

During the year no remuneration has been paid to Non-Executive Directors except for the sitting fees of Rs 45,000/- (Previous Year Rs 52,500/-).

ii) In the opinion of the Board and to the best of its knowledge, the value of realization of current assets, loans and advances in the ordinary course of business would not be less than the amount at which they have been stated in the Balance Sheet.

iii) The assessment of the Company in respect of Income Tax & Wealth Tax is completed up to Assessment Year 2007-2008.

iv) The Company in the year 2003, entered into an agreement with Liberty Enterprises and Liberty Group Marketing Division for taking over their footwear business on franchise basis and with Liberty Footwear Co. for use of "Liberty" trademark on exclusive basis for an initial period of 7 years with automatic extension for further period of 3 years/with mutual consent of the parties respectively. The footwear business as defined in the agreement include Fixed Assets, intellectual Properties, Know-how and Distribution Network etc. of the two Partnership Firms. Under the terms of the agreements, no ownership of assets, tangible or intangible, has been transferred to the Company. During the year, in terms of the agreements and in conformity with the requisite approvals of the Central Govt, the Company has made the payments (including provisions) amounting to Rs 6,00,00,000/- (Previous year Rs 6,00,00,000), Rs 7,00,00,000/- (Previous year Rs 7,00,00,000/-) and Rs 3,37,50,000/- (Previous year Rs 3,22,50,000/-) respectively. In terms of the respective agreements, the same have been renewed for the further period of 3 years. Further while deciding on the dispute amongst the Partners of Liberty Enterprises as regards to the aforesaid franchise agreement, the learned arbitrator confirmed the Companys stand by holding that the arbitrational verdict will not be having any impact on the Company as regards to such arrangements being not a party to the dispute. Moreover Liberty Enterprises in addition to their confirmation to the agreement has also informed that on certain legal issues its affected partners are filing their objections before the appropriate authority and seeking order for setting aside of such award. Considering the same, the Company is also contemplating legal opinion for taking appropriate action, if required.

v) Interest to others include, Rs 93,14,647/- (Previous year Rs 1,01,22,198/-) against short term loan @ 12% p.a. from M/s Geofin Investments Pvt. Ltd.

vi) During the year the Company has capitalized the borrowing cost of Rs Nil (Previous year Rs Nil) as part of the cost of the qualifying assets.

vii) The Company has paid the excise duty amounting to Rs 5,44,61,762/- (Previous year Rs 7,08,28,579/-) against the sales executed during the year.

Also the Company has made the provision of excise duty of Rs 1,22,50,886/- (Previous Year Rs 1,02,48,087/-) against finished goods lying in stocks as on 31st March, 2010 and the difference

of two has been recognised separately in the Profit & Loss Account.

viii) Fixed Deposit receipts (including accrued interest) for value of Rs 3,07,37,476/- (Previous year Rs 4,03,82,573/-), appearing under head Cash & Bank Balances, are under lien with Banks/ respective authorities for issuance of bank guarantees/ letters of credits and as earnest money.

ix) Under the Focus Product Scheme of Director General of Foreign Trade, Government of India, during the year, the Company has received an incentive of Rs 51,99,800/- (Previous year Rs 46,42,225/-) for foreign exchange realized against exports made during the financial years 2007-08, 2008-09 & 2009-10 and the profits of the Company for the year are higher to that extent.

x) Till date the Company, out of the leasehold land comprising 42.29 acres with validity till 12th December 2008, has purchased 31.36 acres of land at Libertypuram. Out of the purchased land, 27.02 acres of land have been got registered in the name of the Company and the Company is in process of getting the necessary compliances done for the balance. The validity of the lease deed for 0.75 acres of land, belonging to promoter, has been got extended for mutually agreed terms.

xi) To further strengthen the organized retailing and to promote its own retail initiatives directly and through its Subsidiary Company M/s Liberty Retail Revolutions Ltd., during the year, the Company under its retail sales promotion policy has borne the cost of retail stores on account of rental and maintenance charges by suitably reducing the retailers margins against its sales. The same have been booked under the account head Sales Promotion Expenses.

xii) The Company has not received any memorandum (as required to be filed by the suppliers with the notified authority under the Micro, Small & Medium Enterprise Development Act, 2006) claiming their status as on 31st March, 2010 as Micro, Small or Medium Enterprise. Consequently the amount paid/payable to these parties during the year is nil.

xiii) Contingent Liabilities

(Amount in Rs)

Particulars 2009-10 2008-09

I) Bank Guarantees issued on behalf of the Company submitted with various 2,31,68,160 1,96,86,114 institutional customers in terms of their orders.

II) Excise Duty1 for the financial year 1994-95 &1995-96. CESTAT has decided this 2,78,31,534 2,78,31,534 particular matter in favour of the Company but the department has preferred their appeal with the Honble Supreme Court.

III) On account of disallowance of legitimate credit of CENVAT against Excise Duty/ 3,55,81,366 3,55,06,657 Education Cess for the period from November 2004 to June 2005, May 2006 to June 2006, Financial year 2002-03 and 2004-05. CESTAT while admitting Companys appeal directed to deposit Rs 39.00 Lacs under protest and has granted stay.

IV) Service Tax for Financial year 2002-03 on service received from outside India prior to 1,24,536 - the applicability of the related law.

V) Invoice Funding facility. 4,43,63,581 -

VI) Counter Guarantee given to banks for securing working capital limits of retail 10,88,00,000 14,80,00,000 subsidiary and joint venture Company2.

VII) Income Tax on account of routine assessment for the assessment 35,03,426 55,68,874 years 1998-99,2003-04.

VIII) Income Tax for the assessment year 2002-03, 2003-04 and 2004-05 on account of 17,86,599 17,86,599 reduction in amount of deduction u/s 80HHC in terms of Taxation Law Amendment Bill, 2005.

IX) Value Added Tax3 for the financial year 2005-06, 2006-07 and 2007-08 on account 2,96,02,499 2,96,02,499 of classification of goods at different rate of tax.

X) Service Tax4 penalty for non- payment of service tax on commission paid against - 1,36,446 exports for the period for which the Company was not legally liable to pay under the provisions of the applicable law.

XI) Due to some administrative compliance relating to EPCG licenses for which 4,42,00,783 4,42,00,783 the Company has fulfilled its export obligation.

On the basis of indemnifying clause under the agreement with the two Partnership Firms whose business has been available to the Company on franchise basis, the Company has given its undertaking to the Excise Department to pay the liabilities, if any arises, relating to the period prior to the date of the agreement.

includes the corporate guarantee for Rs 5,88,00,000/- (Previous year Rs9,80,00,000/-) given on behalf of joint venture company. However, the Company is in process of getting the same vacated.

3Including amount deposited under protest Rs60,90,487/- (Previous year Rs 55,90,487/-).

Including amount deposited under protest Rs Nil (Previous year Rs 1,36,446/-)

xiv) Capital commitments not provided for are estimated at Rs Nil (Previous year Rs 50/- Lacs).

xv) Provision for doubtful debts: During the year the Company has considered debts for Rs 3,15,58,132/- (Previous year Rs3,55,20,855/-) as doubtful debts and made the provision accordingly. Also during the year considering the un-recoverability of some of the doubtful debts, the Company has withdrawn Rs 3,03,37,030/- (Previous year Nil) out of the provisions made in the earlier years for the same and written off the bad debts (net) for Rs 2,96,31,364/-. Differential of the provision made and amount withdrawn during the year, detailed as under, has been charged to Profit & Loss Account for the year and the balance has been carried in the balance sheet:

xvi) The Board of Directors of the Company considers and maintains "Footwear" as the only business segment of the Company.

xviii) Related Party Transactions

The Company has made the following transactions with related parties as defined under the provisions of Accounting Standard 18 issued by Institute of Chartered Accountants of India. A) Transactions between the Company and related parties and the status of outstanding balances as at 31st March, 2010:

xx) For the current year Deferred Tax asset and liability has been calculated after considering the timing differences of Rs 1,66,38,968/- (Previous year Rs1,66,36,198/-) and Rs Nil (Previous year Rs 2,01,800/-) respectively on account of depreciation and expenses written off.

xxi) There are no dues payable to the Investor Education and Protection Fund as at 31 st March, 2010.

xxii) Previous year figures have been regrouped/ re-arranged wherever necessary. The current year and previous year figures have been rounded off to the nearest rupees.

 
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