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Notes to Accounts of Linde India Ltd.

Dec 31, 2014

1. Company overview

Linde India Limited is a public company. It is incorporated under the Companies Act, 1956 and its shares are listed on the National Stock Exchange of India Limited (NSE), Bombay Stock Exchange Limited (BSE) and Calcutta Stock Exchange Limited (CSE). The Company is primarily engaged in manufacture of industrial and medical gases and construction of cryogenic and non cryogenic air separation plants.

2. Rights, preferences and restrictions attached to equity shares

The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the Company''s residual assets. The equity shares are entitled to receive dividend as declared from time to time. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the Company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid.

On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of the Company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.

Consequent upon the offer for sale through the stock exchange mechanism on 17 May 2013 made by The BOC Group Limited, a member of The Linde Group, the promoter shareholding in the Company was reduced from 89.48% to 75% in compliance with minimum public shareholding requirement under the Listing Agreement.

* Against the above loan the Company has designated principal and interest swap contracts with a bank as hedges of foreign currency borrowing facilities aggregating Euro 82.20 million (previous year Euro 1 03.40 million) equivalent to Rs. 5,268.39 (previous year Rs. 6,632.83 ). Also refer note 42

** Against the above loan the Company has designated interest rate swap contract with banks as hedges of floating interest rate facilities. Also refer note 42

# Against the above loan the Company has designated principal and interest swap contracts with a bank as hedges of foreign currency borrowing facilities aggregating USD 41.79 million (previous year USD 16.84 million) equivalent to Rs. 2,499.99 (previous year Rs. 1,000 ). Also refer note 42

3. a) Provision for liquidated damages

Liquidated damages are provided based on contractual terms when the delivery/commissioning dates of an individual project have exceeded or are likely to exceed the delivery/commissioning dates and/or on the deviation in contractual performance as per the respective contracts. This expenditure is expected to be incurred over the respective contractual terms up to closure of the contract (including warranty period).

b) Provision for warranties

Warranty costs are provided based on a technical estimate of the costs required to be incurred for repairs, replacement, material cost, servicing and past experience in respect of warranty costs. It is expected that this expenditure will be incurred over the contractual warranty period.

c) Provision for contingencies

Provision is towards known contractual obligation, litigation cases and pending assessments in respect of taxes, duties and other levies in respect of which management believes that there are present obligations and the settlement of such obligations are expected to result in outflow of resources, to the extent provided for.

d) Provision for dismantling costs

Provision is towards estimated cost to be incurred on dismantling of plants at the customers'' site upon expiry of the tenure of the contractual agreement with the customer. Such cost has been capitalised under plant and machinery.

* Includes revaluation on building Rs. 11.46 (previous year Rs. 14.08) done by an external valuer on 30 September 1966 and 1 October 1980

** Includes borrowing costs aggregating Rs. 497.92 (previous year Rs. 1,656.49) net of interest income on surplus funds which was not immediately utilised and invested in fixed deposit Rs. Nil (previous year Rs. 39.75) Capital work in progress Includes impairment balance of Rs. 151.96 (previous year Rs. 30.10)

*** The impairment loss in the current year represents the writedown in value of certain assets to the extent of Rs. 121.85 million

# The Company had acquired business of manufacture and distribution of medical and industrial gases both in liquid and compressed form during the previous year. The assets acquired under such arrangement includes plant and machinery and vehicles aggregating to Rs. 85.90 and Rs. 2.46

## 1, 1/2% debentures of Rs. 220,930 and 16,996 ordinary shares of Rs. 10 each represents right to use flat as at the year end. Investments in such securities had been reclassified during the previous year from non current investment under note 13

4. Interest in joint venture

a) The Company does not have a subsidiary and is not required to present consolidated financial statements under Accounting Standard 21 - "Consolidated Financial Statements" prescribed by the Companies (Accounting Standards) Rules, 2006 (as amended). Interest in Joint-venture has been accounted for as a long term investment in these financial statements. The details as per Accounting Standard 27 - "Financial Reporting of Interest in Joint Ventures" as prescribed by the Companies (Accounting Standards) Rules, 2006 (as amended) are disclosed regarding the assets, liabilities, income and expenses of the joint venture company as additional information to the users of the financial statements.

5. Commitments

Estimated Capital commitments (net of advance) not provided for Rs. 903.69 (Previous Year Rs. 2,692.71)

6. Contingent liabilities not provided for

in Rupees million Year ended Year ended 31 Dec. 2014 31 Dec. 2013

a) Excise duty and service tax matters * 38.03 38.03

b) Other excise matters ** - -

c) Sales tax matters * 111.34 107.41

d) Guarantee given by the Company - 64.60

e) Sales tax liability transferred to a beneficiary *** 27.60 27.60

f) Bills discounted 59.05 34.20

g) Other claims 16.66 15.39

* Excludes disputed matters in view of favourable appellate decisions on similar issues.

** Cryogenic vessels for gases were cleared from one factory for captive installation to the other factory of the Company. The Company is contesting the Department''s allegation that the assessable value of such inter unit transfer was not calculated as per the principles of Cost Accounting Standards-4 (CAS-4). As per the view of the management based on the facts of the case and document available, the liability would not devolve on the Company.

*** Pursuant to an approved scheme of Government of Maharashtra, certain Sales Tax Liabilities of the Company had been transferred to an eligible beneficiary, at a discount, for which a bank guarantee had been provided by the beneficiary to ensure timely payment to the concerned authorities.

7. Notes:

a. The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario. In order to protect capital and optimise returns within acceptable risk parameters, the plan assets are well diversified.

b. The pension expenses and gratuity expenses have been recognised in ''contribution to Provident and other funds'' under Note 26.

c. The estimates of future salary increases, considered in actuarial valuations take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.

a) Certain plant and machineries have been made available by the Company to the customers under a finance lease arrangement. Such assets given under a finance lease arrangement have been recognised, at the inception of the lease, as a receivable at an amount equal to the net investment in the lease. The finance income arising from the lease is being allocated based on a pattern reflecting constant periodic return on the net investment in the lease.

8. Company has taken various residential and office premises under operating lease or leave and license agreements. These agreements are for a period of 11 months to 3 years, cancellable during the life of the contract at the option of both the parties and do not contain stipulation for increase in lease rentals. Minimum lease payment charged during the year to the statement of profit and loss aggregated to Rs. 71.39 (Previous year Rs. 70.44).

9. i) Provision for taxation has been recognised with reference to the taxable profit for the year ended 31 December 2014 in accordance with the provision of the Income tax Act, 1961. The ultimate tax liability for the assessment year 2015-2016 will be determined on the basis of total income for the year ending on 31 March 2015.

ii) The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under Section 92-92F of the Income tax Act, 1961. Since the law requires the existence of such information and documentation to be contemporaneous in nature, the Company is in the process of updating the documentation of the domestic and international transactions entered into with the associated enterprises during the assessment year and expects such records to be in existence latest by due date as required under law. The management is of the opinion that its domestic and international transaction are at arm''s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

iii) During the year the Company has recognised Rs. 8.14 (previous year 247.02) as MAT credit entitlement and the same has been carried forward having regard to the trend of profitability and future projections. Management is of the opinion that the Company will pay normal income tax during the period for which the MAT credit can be carried forward for set-off against the normal tax liability.

10. As explained in note 1(q) above, the Company has designated the following derivative contracts with banks: i)

a) Principal and interest swap as hedges of foreign currency borrowing facilities aggregating Euro 82.20 million (previous year Euro 103.40 million) and USD 41.79 million (previous year USD 16.84 million) equivalent to Rs. 7,768.38 (previous year Rs. 7,632.83) available to the Company at variable interest rates based on LIBOR. The principal and interest rate swap pertaining to borrowings aggregating to Rs. 3,096.27 (previous year Rs. 4,435.12), Rs. 4,745.26 (previous year Rs. 4,350.16) and Rs. 1,061.20 (previous year Rs. 1,040.57) will mature in the year 2016, 2017 and 2015 respectively, based on the remaining period as of the balance sheet date.

b) Interest swaps as hedge of floating interest rate to fixed interest on a term loan of Rs. Nil (previous year Rs. 1,000.00). The interest swap has matured in the year 2014.

c) Further the Company has entered into certain firm commitments for purchase of Euro 0.90 million (previous year Euro 8.40 million) and sale of USD Nil (previous year USD 4.56 million).

Rs. 748.78 (net of deferred tax Rs. 385.57) [Previous year Rs. 1,447.61 (net of deferred tax Rs. 745.41)] being the translation loss on foreign currency borrowings drawn down till the year-end and Rs. 772.53 (net of deferred tax Rs. 397.79) [Previous year Rs. 1,709.76 (net of deferred tax Rs. 880.39)] being the portion of gain arising from changes in fair values of the swap contracts referred to in point (a) above that are determined to be effective hedge of the aforesaid foreign currency borrowing facilities at variable interest and the related hedged transaction expected to occur in future have been recognized in translation and hedging reserve in shareholders'' funds.

Rs. Nil (net of deferred tax Rs. Nil) [previous year Rs. 0.60 (net of deferred tax Rs. 0.30)] being the portion of gain arising from changes in fair values of the swap contracts referred in point (b) above that are determined to be effective hedge of the aforesaid floating interest rate facilities and the related hedged transaction expected to occur in future have been recognized in translation and hedging reserve in shareholders'' funds.

Further, the translation loss on the forward covers for firm commitments which are determined to be effective hedge of foreign currency payables and receivables referred in point (c) above aggregating to Rs. 2.08 (net of deferred tax Rs. 1.07) [Previous year gain of Rs. 40.46 (net of deferred tax Rs. 20.93)] has been recognised in translation & hedging reserve in shareholders'' funds.

(ii) Hedged transaction aggregating to Rs. Nil [previous year Rs. 342.34 (equivalent to USD 6.29 million)] which was no longer expected to occur, the net cumulative gain or loss recognized in shareholders'' funds had been transferred to the Statement of Profit and Loss for the year aggregating to Rs. Nil (previous year Rs. 49.05).

(iii) Pursuant to the ICAI''s announcement in March 2008, the Company had opted for early adoption of Accounting Standard 30 "Financial Instruments: Recognition and Measurement" issued by the ICAI in the year ended 31 December 2009. Accordingly, the Company during the year 1 January 2014 to 31 December 2014 has recognised net loss of Rs. 426.51 under ''Translation and hedging reserves'', representing net exchange gain on borrowings aggregating to Rs. 1,058.69 and mark to market loss of Rs. 1,485.20 arising from changes in fair value of principal and interest rate swaps, forward contracts against firm commitments, which qualify for hedge accounting being effective hedges.

11.

In the previous year, the Company has sold factory land and structures situated at Ahmedabad and a profit of Rs. 502.70 arising from sale of such land has been shown as exceptional item.

12.

Segment information in accordance with Accounting Standard 17 prescribed by the Companies (Accounting Standards) Rule, 2006 (as amended).

a) Determination of segment information is based on the organisational and management structure of the Company and its internal financial reporting system. The Company business segments namely ''Gases and Related Products'' and ''Project Engineering'' have been considered as primary segments for reporting format. Segment revenue, results, assets and liabilities include the respective amounts that are directly attributable to or can be allocated on a reasonable basis to each of the segments. Revenue, expenses, assets and liabilities which relate to the enterprise as a whole and are neither attributable on a reasonable basis to each of the segments, have been disclosed as unallocable.

b) The Company operates predominantly within the geographical limits of India, accordingly secondary segments have not been considered.

c) Inter-segment revenue has been recognised at cost.

Dividend warrants of certain non-resident shareholders send to their bankers in India have been excluded.

13. Expenses are net of reimbursement received for salary, travel and other expenses aggregating Rs. 113.50 (previous year Rs. 109.65).


Dec 31, 2013

1. interest in joint venture

a) The Company does not have a subsidiary and is not required to present consolidated financial statements under Accounting Standard 21 - "Consolidated Financial Statements" prescribed by the Companies (Accounting Standards) Rules, 2006 (as amended). Interest in joint- venture has been accounted for as a long term investment in these financial statements. The details as per Accounting Standard 27 - "Financial Reporting of Interest in joint Ventures" as prescribed by the Companies (Accounting Standards) Rules, 2006 (as amended) are disclosed regarding the assets, liabilities, income and expenses of the joint venture company as additional information to the users of the financial statements.

b) The Company''s interest, as a venture, in a jointly controlled entity (incorporated joint Venture) is:

c) Company''s transactions with Belloxy, being a related party, during the year ended 31 December 2013 are disclosed under note 45.

2. Estimated Capital commitments (net of advance) not provided for Rs. 2,692.71 million (Previous Year Rs. 3,647.89 million)

3. Contingent liabilities not provided for

in Rupees million Year ended Year ended 31 Dec. 2013 31 Dec. 2012

a) Excise duty and service tax matters'' 38.03 38.03

b) Other excise matters - -

c) Sales tax matters- 107.41 54.14

d) Guarantee given by the Company 64.60 184.81

e) Sales tax liability transferred to a beneficiary- 27.60 27.60

f) Bills discounted 34.20 56.41

g) Other claims HIT 15.39 21.69

* Excludes disputed matters in view of favorable appellate decisions on similar issues.

" Cryogenic vessels for gases were cleared from one factory for captive installation to the other factory of the Company. The Company is contesting the Department''s allegation that the assessable value of such inter unit transfer was not calculated as per the principles of Cost Accounting Standards-4 (CAS-4). As per the view of the management based on the facts of the case and document available, the liability would not devolve on the Company.

*" Pursuant to an approved scheme of Government of Maharashtra, certain Sales Tax Liabilities of the Company had been transferred to an eligible beneficiary, at a discount, for which

a bank guarantee had been provided by the beneficiary to ensure timely payment to the concerned authorities.

4.a) certain plant and machineries have been made available by the Company to the customers under a finance lease arrangement. Such assets given under a finance lease arrangement have been recognised, at the inception of the lease, as a receivable at an amount equal to the net investment in the lease. The finance income arising from the lease is being allocated based on a pattern reflecting constant periodic return on the net investment in the lease.

b) Details with respect to the above leased asset under finance lease arrangements in accordance with Accounting Standard 19 -''Leases'' as prescribed by the Companies (Accounting Standards) Rules, 2006 (as amended).

5.Company has taken various residential and office premises under operating lease or lease and license agreements. These agreements are for a period of 11 months to 3 years, cancellable during the life of the contract at the option of both the parties and do not contain stipulation for increase in lease rentals. Minimum lease payment charged during the year to the statement of profit and loss aggregated to Rs. 70.44 million (Previous year Rs. 67.15 million).

6.i) Provision for taxation has been recognised with reference to the taxable profit for the year ended 31 December 2013 in accordance with the provision of the Income tax Act, 1961. The ultimate tax liability for the assessment year 2014-2015 will be determined on the bas,s of total income for the year ending on 31 March 2014.

ii) The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under Section 92-92F of the Income - Tax Act, 1961. Since the law requires the existence of such information and documentation to be contemporaneous in nature, the Company is in the process of updating the documentation of the domestic and international transactions entered into with the associated enterprises during the assessment year and expects such records to be in existence latest by due date as required under law. The management is of the opinion that its domestic and international transaction are at arm''s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

iii) During the year the company has recognised Rs. 247.02 million (previous year 211.88 million) as MAT credit entitlement and the same has been earned forward having regard to the trend of profitability and future projections. Management is of the opinion that the company will pay normal income tax during the period for which the MAT credit can be earned forward for setoff against the normal tax liability.

7.As explained in note 1(q), the Company has designated the following derivative contracts with the banks:

i)a) Principal and interest swap as hedges of foreign currency borrowing facilities aggregating Euro103.40 million (previous year Euro 115.60 million) and USD 16.84 million (previous year nil) equivalent to Rs. 7,632.83 million (previous year Rs. 7,413.83 million) available to the Company at variable interest rates based on LIBOR. The principal and interest rate swap aggregating to Rs. 4,435.12 million (previous year Rs. 4,209.30 million), Rs. 4,350.16 million (previous year Rs. 4,180.27 million) and Rs. 1,040.57 million (previous year nil) will mature in the year 2016 and 2017 and 2015 respectively, based on the remaining period as of the Balance Sheet date.

b) interest swaps as hedge of floating interest rate to fixed interest on a term loan of Rs. 1,000.00 million (previous year Rs. 1,000.00 million). The interest swap will mature in the year 2014 based on the remaining period as of the balance sheet date.

c) Further the Company has entered into certain firm commitments for purchase of Euro 8,401 thousands (previous year Euro 33,693 thousands) and USD Nil (previous year USD 1,010 thousands) and sale of USD 4,557 thousands (previous year USD 6,557 thousands).

The foreign exchange forward contracts mature between 1 - 24 months. The following table analysis of the derivative financial instruments into relevant maturity groupings based on the remaining period of the Balance Sheet date:

Rs. 1,447.61 million (net of deferred tax Rs. 745.41 million) [Previous year Rs. 659.27 million (net of deferred tax Rs. 316.63 million)] being the translation loss on foreign currency borrowings drawn down till the year- end and Rs. 1,709.76 million (net of deferred tax Rs. 880.39 million)

[Previous year Rs. 648.37 million (net of deferred tax Rs. 311.40 million)] being the portion of gam arising from changes in fair values of the swap contracts referred to in point (a) above that are determined to be effective hedge of the aforesaid foreign currency borrowing facilities at variable interest and the related hedged transaction expected to occur in future have been recognized in translation and hedging reserve in shareholders'' funds.

Rs. 0.60 million (net of deferred tax Rs. 0.30 million) [previous year (Rs 9.75 million) (net of deferred tax (Rs. 4.69 million)] being the portion of gain/(loss) arising from changes in fair values of the swap contracts referred in point (b) above that are determined to be effective hedge of the aforesaid floating interest rate facilities and the related hedged transaction expected to occur ,n future have been recognized in translation and hedging reserve in shareholders'' funds.

Further, the translation gam on the forward covers for firm commitments which are determined to be effective hedge of foreign currency payables and receivables referred in point (c) above aggregating to Rs. 40.46 million (net of deferred tax Rs. 20.93 million) [Previous year Rs. 13.32 million (net of deferred tax Rs. 6.40 million)] has been recognised in translations hedging reserve in shareholders'' funds.

i) Hedged transaction aggregating to Rs. 342.34 million (equivalent to USD 6.29 million) [previous year Rs. 148.99 million (equivalent Euro 2.15 million) which is no longer expected to occur, the net cumulative loss recognized in shareholders'' funds is now transferred to the Statement of Profit and Loss for the year aggregating to Rs. 49.05 million (previous year Rs. 8.14 million)

8.During the year, the Company has sold factory land and structures situated at Ahmadabad and a profit of Rs. 502.70 million arising from sale of such land has been shown as exceptional item. In the previous year, the Company had sold factory land situated at Vizag and Bangalore and a profit of Rs. 718.62 million arising from sale of such lands were shown as exceptional item.

9.Segment information in accordance with Accounting Standard 17 prescribed by the Companies (Accounting Standards) Rule, 2006 (as amended).

a) Determination of segment information is based on the organisational and management structure of the Company and its internal financial reporting system. The Company business segments namely ''Gases and Related Products'' and ''Project Engineering'' have been considered as pnmary segments for reporting format. Segment revenue, results, assets and liabilities include the respective amounts that are directly attributable to or can be allocated on a reasonable basis to each of the segments. Revenue, expenses, assets and liabilities which relate to the enterprise as a whole and are neither attributable to nor can be allocated on a reasonable basis to each of the segments, have been disclosed as unallowable.

b) The Company operates predominantly within the geographical limits of India, accordingly secondary segments have not been considered.

c) inter-segment revenue has been recognised at cost.

10.information in accordance with the requirements of Accounting Standard 18 on Related Party Disclosures prescribed by the Companies (Accounting Standards) Rules,2006 (as amended).

A) List of Related Parties

i) Ultimate Holding Company (entity having control over the Company) Linde AG, Germany

ii) Holding Company (entity having control over the Company)

The BOC Group Limited, United Kingdom (Wholly owned Subsidiary of Unde AG)

iii) Fellow Subsidiaries and joint Venture with whom transactions have taken place during the year

iv) Key Management Personnel of the Company

Mr. S Menon, Managing Director till 29 July 2013

Mr.M Banerjee, Managing Director from 30 July 2013

Dividend warrants of certain non -resident shareholders send to their bankers in India have been excluded.

11. Expenses are net of reimbursement received aggregating Rs. 109.65 million (previous year Rs. 59.60 million).

12. Figures for the previous year has been regrouped/rearranged where necessary.


Dec 31, 2012

Rights, preferences and restrictions attached to equity shares

The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the Compa- ny''s residual assets. The equity shares are entitled to receive dividend as declared from time to time. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid- up equity capital of the Company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid.

On winding up of the company, the holders of equity shares will be entitled to receive the residual assets of the company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.

a) Provision for liquidated damages

Liquidated damages are provided based on contractual terms when the delivery/commissioning dates of an individual project have exceeded or are likely to exceed the delivery/commissioning dates and/or on the deviation in contractual performance as per the res- pective contracts. This expenditure is expected to be incurred over the respective contractual terms up to closure of the contract (including warranty period).

Estimated amount of Liquidated Damages (LD) for the Project Enginee- ring Division are reduced from contract revenue on all ongoing contracts.

Such LDs were recorded as a charge to the Statement of Profit and Loss till year ended 31 December 2010. Accordingly provision for LD on such contracts were reversed and recorded as prior period adjustments under "liabilities written-back" with appropriate adjustment to "gross sales" and "billing in excess over cost and profit" in the previous year aggregating to Rs. 125.04 million.

LD aggregating to Rs. 157.46 million were not reduced from contract revenue on certain contracts since no corresponding contract revenue were recognised from those projects in the current and previous year.

b) Provision for warranties

Warranty costs are provided based on a technical estimate of the costs required to be incurred for repairs, replacement, material cost, servicing and past experience in respect of warranty costs. It is expected that this expenditure will be incurred over the contractual warranty period.

c) Provision for contingencies

Provision is towards known contractual obligation, litigation cases and pending assessments in respect of taxes, duties and other levies in res- pect of which management believes that there are present obligations and the settlement of such obligations are expected to result in outflow of resources, to the extent provided for.

d) Provision for dismantling costs

Provision is towards estimated cost to be incurred on dismantling of plants at the customers'' site upon expiry of the tenure of the con- tractual agreement with the customer. Such cost has been capitalised under plant and machinery.

1. Interest in joint venture

a) The Company does not have a subsidiary and is not required to pre- sent consolidated financial statements under Accounting Standard 21 - "Consolidated Financial Statements" prescribed by the Companies (Accounting Standards) Rules, 2006 (as amended). Interest in Joint- venture has been accounted for as a long term investment in these financial statements. The details as per Accounting Standard 27 - "Financial Reporting of Interest in Joint Ventures" as prescribed by the Companies (Accounting Standards) Rules, 2006 (as amended) are disclosed regarding the assets, liabilities, income and expenses of the joint venture company as additional information to the users of the financial statements.

b) Company''s transactions with Bellary oxygen limited, being a related party, during the year ended 31 December 2012 are disclosed in note 44 below.

2. Estimated capital commitments (net of advance) not provided for Rs. 3,647.89 million (previous year Rs. 536.24 million).

3. Contingent liabilities not provided for

Year ended Year ended in rupees million 31 Dec.2012 31 Dec.2011

a) Excise duty & service tax matters* 38.03 37.92

b) Other excise matters** - -

c) Sales tax matters* 54.14 31.93

d) Guarantee given by the Company 184.81 308.02

e) Sales tax liability transferred to a beneficiary*** 27.60 27.60

f) Bills discounted 56.41 11.65

g) Other claims 21.69 19.65

* Excludes disputed matters in view of favourable appellate decisions on similar issues.

" Cryogenic vessels for gases were cleared from one factory for captive installation to the other factory of the Company. The Company is contesting the Department''s allegation that the assessable value of such inter unit transfer was not calculated as per the principles of Cost Accounting Standards-4 (CA5-4). As per the view of the management based on the facts of the case and document available, the liability would not devolve on the Company.

Pursuant to an approved scheme of Government of Maharashtra, certain Sales Tax Liabilities of the Company had been transferred to an eligible beneficiary, at a discount, for which a bank guarantee had been pro- vided by the beneficiary to ensure timely payment to the concerned authorities.

Notes:

a) The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario. In order to protect capital and optimise returns within acceptable risk parameters, the plan assets are well diversified.

b) The pension expenses and gratuity expenses have been recognised in "Provident fund and employee benefit expenses" under note 26.

c) The estimates of future salary increases, considered in actuarial valuations take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.

a) Certain plant and machineries have been made available by the Company to the customers under a finance lease arrangement. Such assets given under a finance lease arrangement have been recognised, at the inception of the lease, as a receivable at an amount equal to the net investment in the lease. The finance income arising from the lease is being allocated based on a pattern reflecting constant periodic return on the net investment in the lease.

b) Details with respect to the above leased asset under finance lease arrangements in accordance with Accounting Standard 19 - "Leases" as prescribed by the Companies (accounting standards) Rules, 2006 (as amended).

Company has taken various residential and office premises under operating lease or leave and license agreements. These agreements are for a period of 11 months to 3 years, cancelable during the life of the contract at the option of both the parties and do not contain stipulation for increase in lease rent- als. Minimum lease payment charged during the year to the Statement of Profit and Loss aggregated to Rs. 67.15 million (previous year Rs. 51.29 million).

4. a) Provision for taxation has been recognised with reference to the tax- able profit for the year ended 31 December 2012 in accordance with the provision of the Income Tax Act, 1961. The ultimate tax liability for the assessment year 2013-2014 will be determined on the basis of total income for the year ending on 31 March 2013.

b) The Company has established a comprehensive system of mainte- nance of information and documents as required by the transfer pric- ing legislation under Section 92-92F of the Income Tax Act, 1961. Since the law requires the existence of such information and docu- mentation to be contemporaneous in nature, the Company is in the process of updating the documentation of the international transac- tions entered into with the associated enterprises during the assess- ment year and expects such records to be in existence latest by due date as required under law. The management is of the opinion that its international transaction are at arm''s length so that the aforesaid leg- islation will not have any impact on the financial statements, particu- larly on the amount of tax expense and that of provision for taxation.

c) During the year the company has recognised Rs. 211.88 million as MAT credit entitlement and the same has been carried forward having regard to the trend of profitability and future projections. Management is of the opinion that the company will pay normal income tax during the period for which the MAT credit can be carried forward for setoff against the normal Tax liability.

As explained in note 1 (o) above, the Company has designated the following derivative contracts with banks:

a) Principal and interest swap as hedges of foreign currency borrowing facilities aggregating EUR 115.60 million (previousyear EUR 122.00 million) equivalent to Rs. 8,389.57 million (previous year Rs. 8,380.30 million) available to the Company at variable interest rates based on LIBOR. The principaland interest rate swap aggregating to Rs. 4,209.30 million (previous year Rs. 3,984.08 million) and Rs. 4,180.27 million (previous year Rs. 4,396.22 million) will mature in the year 2016 and 2017 respectively, based on the remaining period as of the balance sheet date.

b) Interest swaps as hedge of floating interest rate to fixed interest on a term loan of Rs. 1,000.00 million (previous year Rs. Nil). The interest swap will mature in the year 2014 based on the remaining period as of the balance sheet date.

c) Further the Company has entered into certain firm commitments for purchase of EUR 33,693 thousands (previous year EUR 3,977 thousands) and USD 1,010 thousands (previous year USD Nil) and sale of USD 6,557 thousands (previous year USD 3,575 thousands).

The foreign exchange forward contracts mature between 1 -24 months. The following table analysis of the derivative financial instruments into rel- evant maturity groupings based on the remaining period of the balance sheet date:

Rs. 659.27 million (net of deferred tax Rs. 316.63 million) [previous year Rs. 386.27 million (net of deferred tax Rs. 185.52 million)] being the trans- lation loss on foreign currency borrowings drawn down till the year-end and Rs. 648.37 million (net of deferred tax Rs. 311.40 million) [previous year Rs. 397.22 mill lion (net of deferred tax Rs. 190.78 million)] being the portion of gain arising from changes in fair values of the swap contracts referred to in point a) above that are determined to be effective hedge of the afore- said foreign currency borrowing facilities at variable interest and the related hedged transaction expected to occur in future have been recognized in translation and hedging reserve in shareholders'' funds.

Rs. 9.75 million (net of deferred tax Rs. 4.69 million) (previous year Rs. Nil) being the portion of loss arising from changes in fair values of the swap con- tracts referred in point b) above that are determined to be effective hedge of the aforesaid floating interest rate facilities and the related hedged trans- action expected to occur in future have been recognized in translation and hedging reserve in shareholders'' funds.

Further, the translation gain on the forward covers for firm commitments which are determined to be effective hedge of foreign currency payables and receivables referred in point c) above aggregating to Rs. 13.32 million (net of deferred tax Rs. 6.40 million) [previous year Rs. 8.57 million (net of deferred tax Rs. 4.12 million)] has been recognised in translation & hedging reserve in shareholders'' funds.

B. Hedged transaction aggregating of Rs. 148.99 million (equivalent to EUR 2.15 million) [previous year Rs. Nil (equivalent EUR Nil) which is no longer expected to occur, the net cumulative loss recognized in shareholders'' funds is now transferred to the Statement of Profit and Loss for the year aggregating to Rs. 8.14 million (previous year Rs. Nil).

5. During the year, the Company has sold factory land situated at Vizag and Bangalore and a profit of Rs. 718.62 million arising from sale of such land has been shown as exceptional item.

6. Segment information in accordance with Accounting Standard 17 prescribed by the Companies (Accounting Standards) Rule, 2006 (as amended).

a) Determination of segment information is based on the organisational and management structure of the Company and its internal financial report- ing system. The Company business segments namely "Gases and Related Products" and "Project Engineering" have been considered as primary segments for reporting format. Segment revenue, results, assets and lia- bilities include the respective amounts that are directly attributable to or can be allocated on a reasonable basis to each of the segments. Rev- enue, expenses, assets and liabilities which relate to the enterprise as a whole and are neither attributable to nor can be allocated on a reason- able basis to each of the segments, have been disclosed as unallocable.

b) The Company operates predominantly within the geographical limits of India, accordingly secondary segments have not been considered.

c) Inter-segment revenue has been recognised at cost.

Information in accordance with the requirements of Accounting Standard 18 on Related Party Disclosures prescribed by the Companies (Accounting Standards) Rules, 2006 (as amended).

A. List of related parties

a) Ultimate Holding Company (entity having control over the Company)

Linde AG, Germany

b) Holding Company (entity having control over the Company)

The BOC Group Limited, United Kingdom (Wholly owned Subsidiary of Linde AG)

c) Fellow subsidiaries and Joint Venture with whom transactions have taken place during the year:

d) Key Management Personnel of the Company

Mr S Menon, Managing Director

Dividend warrants of certain non-resident shareholders send to their bankers in India have been excluded.

7. Expenses are net of reimbursement received aggregating Rs. 59.60 million (previous year Rs. 53.21 million).


Dec 31, 2009

(i) Interest in Joint Venture

a) The Company does not have a subsidiary and is not required to present consolidated financial statements under Accountins Standard 21 - "Consolidated Financial Statements" prescribed by the Companies (Accountins Standards) Rules, 2006. Accordinsly the Company is not required under Accountins Standard 27 - "Financial Reporting of Interest in Joint Ventures" as prescribed by the Companies (Accountins Standards) Rules, 2006 to consolidate its share of assets, liabilities, income and expenses in Joint Venture Company. Such interest has been accounted for as a Ions term investment in these financial statements. The details resardins the assets, liabilities, income and expenses of the joint venture company is being provided below as additional information to the users of the financial statements.

b) Companys transactions with Belloxy, being a related party, during the year ended 31 December 2009 are disclosed in Note (xxiv) below.

(ii) Estimated Capital commitments (net of advance) not provided for Rs. 939,240 (Previous year - Rs. 2,588,786).

(iii) Contingent Liabilities:

Claims against the Company in respect of taxes, duties etc. not acknowledged as debts are estimated as below.-

Year ended Year ended 31 Dec 2009 31 Dec 2008

a) Excise Duty matters * 41,339 65,860

b) Other Excise matters*** - -

c) Sales Tax matters * 54,862 46,432

d) Guarantees given by the Company 594,669 11,400

e) Other guarantees - 5,122

f) Sales Tax Liability transferred to a beneficiary** 27,600 27,600

g) Bills Discounted 3,834 14,030

h) Other claims 25,875 11,476

* Excludes disputed matters in view of favourable appellate decisions on similar issues.

** Pursuant to an approved scheme of Government of Maharashtra, certain Sales Tax Liabilities of the Company has been transferred to an eligible beneficiary, at a discount, for which a bank guarantee had been provided by the beneficiary to ensure timely payment to the concerned authorities.

*** The Company had cleared cryogenic vessels for gases from one factory to the other used for captive consumption. The department alleged that the assessable value of such inter unit transfer was not calculated as per the principles of Cost Accounting Standards-4 (CAS-4). The CESTAT has set aside the matter in the current year and has remanded the cases for fresh decision on the question of valuation as per CAS-4 to original authority. The Company is of the view that based on the facts of the cases and documents available with the Company, the liability would not devolve on the Company.

(iv) There are no Micro and Small Enterprises, to whom the Company owes dues, that are outstanding for more than 45 days as at 31 December, 2009. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of confirmations received from vendors, suppliers, etc in response to intimation in this regard sent by the Company to such parties.

(v) Loans and Advances recoverable in cash or in kind or for value to be received (Schedule 11) include:-

(a) Rs. 1,045 (Previous Year Rs. 1,077) being interest free loans (car loan, furniture loan and education loan) to various employees which are being recovered from their remuneration in accordance with repayment schedule contained in the relevant schemes/specific approvals.

(b) The above includes Rs Nil (Previous Year Rs. 23) due from an Officer of the Company; [Maximum amount due during the year Rs 23 (Previous Year Rs.63)].

(c) Rs 250,000 (Previous Year Rs. 250,000) being long term advance to Joint Venture company [Also refer note (xxiv) below] for purchase of gases in future.

(vi) Prepaid expenses in Schedule 10 include.- Rs. 11,880 (Previous Year Rs. 13,320) towards rent adjustable over a period of 20 years from April 1998.

(vii) a) Durins the year, certain plant and machinery have been made available by the Company to a customer under a finance lease arransement. Such assets siven under a finance lease arransement have been recognised, at the inception of the lease, as a receivable at an amount eo;ual to the net investment in the lease. Gain of Rs. 35,497 being the excess of net investment in the lease over the aggregate of written down value of leased assets Rs. 112,242, has been recognised as an exceptional item in these financial statements. The finance income arising from the lease is being allocated based on a pattern reflecting constant periodic return on the net investment in the lease. The lease arrangement is for a period of 15 years which may be extended for such further period and on such terms and conditions as the parties may mutually agree.

(viii) The Company has taken various residential and office premises under operating lease or leave and license agreements. These agreements are for a period of 11 months to 3 years, cancelable during the life of the contract at the option of both the parties and does not contain stipulation for increase in lease rentals. Minimum lease payment charged during the year to the profit and loss account aggregated to Rs. 21,088 (Previous Year Rs. 24,432).

(ix) Provision for Contingencies

(a) Excise and sales tax cases relate to those that are pending before various adjudicating Authorities for a considerable period of time and where based on decision in similar cases / counsels opinion, management believes that there are present obligations and the settlement of such obligations are expected to result in outflow of resources, to the extent provided for.

(b) Other provisions are towards various legal cases pending against the Company and contractual obligation in respect of which management believes that there are present obligations and the settlement of such obligations are expected to result in outflow of resources, to the extent provided for.

(x) Provision for tax has been recosnised with reference to the taxable profit for the year ended 31 December 2009 in accordance with the provision of the Income tax Act, 1961. The ultimate tax liability for the assessment year 2010-2011 will be determined on the basis of taxable income for the year endins on 31 March 2010.

(xi) The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricins lesislation under Sections 92-92F of the Income-tax Act, 1961. The manasement is of the opinion that its international transactions are at arms lensth so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

(xii) As explained in note (i) (m) above, the Company has designated principal and interest swap contracts with a bank as hedges of foreign currency borrowing facilities aggregating Euro 58 million (equivalent to Rs. 3,857,607) available to the Company at variable interest rates based on LIBOR.

Rs. 1,476 being the translation gain on foreign currency borrowings drawn down till the year-end and Rs. 54,094 (net of deferred tax Rs. 27,095) being the portion of loss arising from changes in fair values of the aforesaid swap contracts that are determined to be effective hedge of the aforesaid foreign currency borrowing facilities at variable interest and the related hedged transaction expected to occur in future have been recognized in Translation and Hedging Reserve in Shareholders Funds. The loss so recognized in the Translation and Hedging Reserve will be transferred to the Profit and Loss Account on occurrence of the hedged transaction.

Further ,the translation loss on the forward covers for firm commitments which are determined to be effective hedge of foreign currency payables aggregating to Rs. 111,461 (net of deferred tax Rs. 57,394) for the year ended 31 December 2009 has been recognised in translation & hedging reserve in shareholders funds. The loss so recognised in translation/ hedging reserve would be transferred to profit and loss account upon occurrence of the hedged transaction.

Had the Company continued to recognize loss arising from changes in fair values of the aforesaid swap/forward contracts and loss arising from year-end translation of foreign currency borrowings drawn down in accordance with Accounting Standard 11 - "The effects of Changes in Foreign Exchange Rates" prescribed by the Companies (Accounting Standard) Rules 2006 and notification issued by the Institute of Chartered Accountants of India on 29 March 2008 respectively, loss on foreign exchange fluctuations during the year would have been higher by Rs. 248,568 and profit after tax would have been lower by Rs. 164,079.

(xiii) Segment information in accordance with Accounting Standard 17 prescribed by the Companies ( Accounting Standards) Rule,2006.

a) Determination of segment information is based on the organisational and management structure of the Company and its internal financial reporting system. The Company business segments namely Gases and Related Products and Project Engineering have been considered as primary segments for reporting format. Segment revenue, results, assets and liabilities include the respective amounts that are directly attributable to or can be allocated on a reasonable basis to each of the segments. Revenue, expenses, assets and liabilities which relate to the enterprise as a whole and are neither attributable to nor can be allocated on a reasonable oasis to each of the segments, have been disclosed as unallocable.

b) The Company operates predominantly within the geographical limits of India, accordingly secondary segments have not been considered.

c) Inter-segment revenue has been recognised at cost.

(xiv) Information in accordance with the requirements of Accounting Standard 18 on Related Party Disclosures as prescribed by the Companies (Accounting Standards) Rules, 2006. A) List of Related Parties

i) Ultimate Holding Company (entity having control over the Company)

Linde AG

ii) Holding Company (entity having control over the Company)

The BOC Group Limited

(Wholly owned Subsidiary of Linde AG)

iii) Fellow Subsidiaries and Joint Venture with whom transactions have taken place during the year

(a) Located outside India

Fellow Subsidiary Country

BOC Australia Pty Limited Australia

BOC Bangladesh Limited Bangladesh

Chemogas N.V Belgium

Linde Electronics & Speciality Gases (Suzhou) Company Limited China

Linde Gas (Ningbo) Ltd. China

BOC China Holdings Company Limited China

Cryostar Sas France

MAPAG Valves GmbH Germany

Hong Kong Oxygen & Acetylene Co Limited Hong Kong

Linde Gas Hungary Co. Limited Hungary

Linde Electronics Gases Japan Limited Japan

BOC Kenya Limited Kenya

Mox Gases Sdn Berhad Malaysia

Consolidated Industrial Gases Inc Philippines

Linde Gas Asia Pte Limited Singapore

Linde Gas Singapore Pte. Limited Singapore

Afrox South Africa

Linde Electronics South Africa (Pty) Limited South Africa

Aga-Cryo Ab Sweden

Thai Industrial Gases Public Co Limited Thailand

BOC Limited United Kingdom

Linde Cryoplants United Kingdom

BOC Process System United Kingdom

BOC Gases, US United States of America

BOC Inc. United States of America

Spectra Gases, Inc. United States of America

Linde BOC Process Plants Lie United States of America

Linde Electronics Limited United States of America

(b) Located in India Fellow Subsidiary

Linde Global Support Services Private Limited Linde Process Technology India Private Limited Linde Engineering Private Limited

Joint Venture

Bellary Oxygen Company Private Limited

iv) Key Management Personnel of the Company

S Menon, Managing Director (with effect from 23 October 2008) K Roy, Finance Director (with effect from 23 February 2009) E R Raj Narayanan, Managing Director (till 30 April 2008)

(xv) Expenses are net of reimbursements received asgresatins Rs. 164,470 (Previous Year Rs. 129^030)

(xvi) Previous years figures have been rearranged/ regrouped where considered necessary to conform to current years presentation.

 
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