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Notes to Accounts of Mafatlal Industries Ltd.

Mar 31, 2014

Note

Particulars As at 31st March, 2014 As at 31st March, 2013

1.1 Contingent liabilities and commitments (to the extent not provided for)

(a) The Company is contingently liable for :

i Bills of exchange discounted 574.25 357.63

ii Demands of income-tax authorities disputed in appeals (mainly relate to disallowance of investment 730.85 701.32 / loan write off, claim of interest on refund of excise duty/ sales tax, disallowance of chapter VIA deductions, etc. (pending before the Income-tax Appellate Tribunal/ High Court))

iii Demands under excise and other proceedings disputed in appeals (mainly relating to matters 2,614.89 2,614.89 like differential duty on revision of assessable value of yarn captively consumed, duty on T.C. hard waste, duty on drill etc. (pending at various stages, from Assistant Commissioner to CESTAT))

iv Disputed demand notice issued by the 2,960.55 1,453.27 Commissioner of Central Excise relating to Excise and Service Tax matters (Current year: including Penalty)

v Claims against the Company not acknowledged as 113.38 113.38 debts (mainly relating to dispute on fixed water charges at Navsari Unit, disputed service tax, interest on sales tax)

vi Concessional customs duty on import of machinery 1,198.21 1,136.11 under EPCG Scheme payable subject to fulfillment of mandatory import/ export obligation. The Company has submitted a bond to the authorities of Rs. 1,000.00 lacs.

vii Claims made by workers against the Company 1,172.08 1,191.61 (mainly relating to matters like termination, compensation etc.)

viii Demands from Director General of Foreign Trade 4.79 4.79 against Advance License

ix The Company is a lessee in respect of the land on - - which Mafatlal Centre and Mafatlal Chambers is erected. In this regard:

In case of Mafatlal Centre:

a) A demand for Rs. 2,696.98 lacs (Previous year Rs. 2,712.47 lacs) for the period from 01.04.2008 to 31.03.2010 has been raised by Brihanmumbai Mahanagarpalika towards Property Taxes in respect of the properties owned by various owners for the respective floors. No demand is raised in respect of common areas / properties in the name of the Company. The demand has been challenged by owners of various floors at appropriate forum and the matter is subjudice. In case the demand is finally upheld the amount will be paid by the concerned co-owners and the Company will have no additional liability

b) Pursuant to introduction of new system of capital based assessment of Property Taxes, there is an outstanding demand for Rs. 378.21 lacs (Previous year Rs. 196.30 lacs) for the period from 01.04.2010 to 31.03.2014 in respect of the properties owned by various owners for the respective floors and in respect of common areas / properties in the name of the Company. The demand has been challenged by various owners and / or the Company before appropriate forum. The demand of Rs. 378.21 lacs will be paid by the concerned co-owners and the Company will have no liability on account of the same.

In case of Mafatlal Chambers:

a) A demand for Rs. 378.51 lacs (Previous year Rs. 378.51 lacs) for earlier years has been raised by Brihanmumbai Mahanagarpalika towards Property Taxes in respect of the properties owned by the Company for the respective floor.

b) Pursuant to introduction of new system of capital based assessment of Property Taxes, a demand for Rs. 887.80 lacs for the period from 01.04.2010 to 31.03.2014 (Previous year Rs. 576.03 lacs upto 31.03.2013) has been raised in respect of the properties owned by various owners for the respective floors and in respect of common areas / properties in the name of the Company. The demand has been challenged by various owners and / or the Company before appropriate forum. In case the demand is finally upheld, the Company will have to pay Rs. 97.01 lacs. Of this demand, Rs. 75.16 lacs has been deposited upto 31.03.2014. Balance demand of Rs. 812.64 lacs (Rs. 887.80 lacs less Rs. 75.16 lacs) will be paid by the concerned co-owners and the Company will have no liability on account of the same.

In the above matters (i) to (ix), the Company is hopeful of succeeding and as such does not expect any significant liability to crystallize.

1.2 I. MISHAPAR INVESTMENTS LIMITED (MISHAPAR):

a) During the previous year, pursuant to the Scheme of Arrangement and Amalgamation (the "Scheme"), Mishapar Investments Limited (the "Transferor Company" or "Mishapar") had merged with the Company (the "Transferee Company"), upon which the undertaking and the entire business, including all assets and liabilities of Mishapar stood transferred to and vested in the Transferee Company with effect from 1st April 2012. The Scheme became effective on 28th May, 2013 and was given effect to in the previous year. The amalgamation had been accounted under the "Purchase Method" as envisaged under the Scheme and the Accounting Standard (AS) – 14 on "Accounting for Amalgamations" notified under the Companies (Accounting Standards) Rules, 2006.

b) Since Mishapar was Wholly Owned Subsidiary of the Transferee Company, there was no consideration payable or receivable on implementation of the Scheme. The entire issued, subscribed and paid-up Share Capital had been cancelled against the corresponding investment of the Transferee Company and an amount of Rs. 3,931.71 lacs being excess of carrying value of the investments in the Transferee Company (Rs. 4,800.10 lacs) over the Net Assets acquired (Rs. 868.39 lacs) was debited to Goodwill pursuant to the Scheme approved by the Honourable High Court of Judicature at Mumbai. The Goodwill so arising was charged off to the Statement of Profit and Loss of the Transferee Company and the charge so arising was set-off in the Statement of Profit and Loss against the balance available in the Securities Premium Account. Also, 388 equity shares of Rs. 10 each held by Mishapar in the share capital of the Transferee Company stood cancelled pursuant to the Scheme.

c) Particulars of assets and liabilities taken over on amalgamation:

II. MAFATLAL DENIM LIMITED (MDL):

a) During the previous year, in terms of the Scheme of Arrangement and Amalgamation (the "Scheme"), Mafatlal Denim Limited (the "Transferor Company" or "MDL") had merged with the Company (the "Transferee Company"), upon which the undertaking and the entire business, including all the assets and liabilities of MDL stood transferred to and vested in the Transferee Company with effect from 1st April 2012. The Scheme approved by the Honourable High Court of Judicature at Gujarat, became effective on 28th May, 2013 and was given effect to in the previous year. The assets and liabilities were transferred at their respective book values under the "Pooling of Interest Method" as envisaged under the Scheme and the Accounting Standard (AS) – 14 on "Accounting for Amalgamations" notified under the Companies (Accounting Standards) Rules, 2006

b) Particulars of assets and liabilities taken over on amalgamation:

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors. The Company has not received intimation from most of the suppliers regarding the status under the Micro, Small and Medium Enterprises Development Act, 2006.

1.3 As legally advised, the Company has not recognized as income recovery of rent and other charges of Rs. 83.61 lacs upto 31st March, 2014 (Rs. 186.29 lacs upto 31st March, 2013), pending final resolution of the legal dispute with certain ex-tenants of a property in South Mumbai. The Civil Revision Applications filed by the ex-tenants has been admitted by the Hon''ble Bombay High Court and the ex-tenants have deposited Rs. 1,233.47 lacs (amount decreed by the learned trial judge alongwith interest awarded by the appeal bench of the Small Causes Court) as directed by the Hon''ble High Court while granting stay on the order issued by the Appeal Bench of the Hon''ble Small Causes Court. The Company has withdrawn the said amount of Rs. 1,233.47 lacs by providing undertakings as directed by the Hon''ble High Court to repay the amount, if the ex-tenants succeed in the civil revision applications which are pending for final disposals. Out of the said amount, Rs. 655.58 lacs has been paid to Sulakshana Securities Limited, in whom one of the premises was vested under the Company''s rehabilitation scheme which was approved by BIFR, during the pendency of the said litigation. The balance amount of Rs. 577.89 lacs has been included in Other Current Liabilities (Refer Note no. 11 and Note no. 16).

1.4 Disclosure as per Clause 32 of the Listing Agreements with the Stock Exchanges

Loans and advances in the nature of loans given to subsidiaries, associates and others and investment in shares of the Company by such parties:

1.5 The remuneration of Shri V. P. Mafatlal, Vice-Chairman and Shri Rajiv Dayal, Managing Director & Chief Executive Officer (Professional Director) was approved by the members by way of a special resolution passed at the Annual General Meeting (''AGM'') held on 31st July, 2013. Due to inadequate profits during the current year, the total managerial remuneration of Rs. 232.07 lacs (Shri V. P. Mafatlal – Rs. 114.79 lacs and Shri Rajiv Dayal – Rs. 117.28 lacs) paid to the above executive directors is in excess of the limits specified under Section 198, 349 & 350 of the Companies Act, 1956 by Rs. 78.61 lacs. As required by law, necessary application will be made to the Central Government in this regard.

1.6 In the earlier year, the Company had sold part of its leasehold land at its Mazgaon unit. The Company is required to surrender the remaining leasehold land (reserved portion admeasuring about 27,287.82 square meters) to Municipal Corporation of Greater Mumbai for the purpose of extension of V.J.B. Udyan. The Company is also required to recommence the spinning unit which can accommodate 10,000 spindles. By virtue of the agreement, the developer will construct a structure and hand it over to the Company.

1.7 Pursuant to the demerger of the Real Estate and Investment Business to Sulakshana Securities Limited (SSL) in 2002, the shareholders of the Company are to be issued one equity share of Rs. 10/- each, fully paid-up, in SSL for every 500 shares of Rs.100/- each, fully paid-up, held in the Company as consideration for the demerger, aggregating to Rs. 1.00 lac. As the shareholders of the Company would be entitled to receive only fractional shares of SSL, the rehabilitation scheme sanctioned by BIFR envisages that these shares would be acquired by Navin Fluorine International Limited (NFIL) and the shareholders of the Company would receive proportionate payment in consideration thereof. The Company has received the said amount of Rs.1.00 lac from NFIL on behalf of the shareholders, which is pending disbursement upon completion of formalities.

The Company has entered into operating lease arrangements for certain facilities and residence premises. The leases are non-cancellable and are for a period upto 9 years and may be renewed for a further period upto 3 years based on mutual agreement of the parties. The lease agreements provide for an increase in the lease payments upto 15% every 3 years. There are no sub-leases.

1.8 Segment Information

As per the Accounting standard (AS) 17 on "Segment Reporting", segment information has been provided under the Notes to Consolidated Financial Statements.

1.9 Employee benefit plans

a) Defined contribution plans

Contributions are made to Recognized Provident Fund / Government Provident Fund and Family Pension Fund which covers all regular employees. Contribution is also made in respect of executives to a Recognized Superannuation Fund. While both the employees and the Company make predetermined contributions to the Provident Fund, contribution to the Family Pension Fund and Superannuation Fund are made only by the Company. The contributions are normally based on a certain proportion of the employee''s salary. Amount recognized as expense in respect of these defined contribution plans, aggregate to Rs. 619.46 lacs (Previous year Rs. 526.66 lacs).

b) Defined benefit plans

Contributions are made to a Recognized Gratuity Fund in respect of gratuity based upon actuarial valuation done at the year end of every financial year using "Projected Unit Credit" method and it covers all regular employees. Major drivers in actuarial assumptions, typically, are years of service and employee compensation. Gains and losses on changes in actuarial assumptions are accounted for in the Statement of Profit and Loss.

The charge on account of provision for gratuity has been included in ''Employee Benefits Expense'' in the Statement of Profit and Loss.

The discount rate is based on the prevailing market yields of Government of India securities as at the Balance Sheet date for the estimated term of the obligations.

The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other relevant factors.

All the employees are eligible for compensated absences of 30 days in each financial year which can be encashed during the tenure of employment. Employees cannot carry forward any compensated absences in excess of 300 days. The provision for these absences, made on the basis of Actuarial Valuation on "Projected Unit Credit" method is Rs. 647.16 lacs (Previous year Rs. 629.24 lacs). Net charge for the year Rs. 166.78 lacs (Previous year Rs. 276.25 lacs).

1.10 Related Parties Transactions Details of Related Parties

A Subsidiary Companies

Mafatlal Services Limited

Ibiza Industries Limited (also a joint venture) (currently under liquidation)

Sunanda Industries Limited (currently under liquidation)

Mayflower Textiles Private Limited (upto 25.03.2014)

Myrtle Textiles Private Limited (upto 25.03.2014)

Repal Apparel Private Limited (upto 25.03.2014)

Mafatlal Global Apparel Limited (upto 29.09.2012)

Silvia Apparel Limited (upto 30.03.2013)

B Jointly Controlled Entity

AL Fahim Mafatlal Textiles LLC- A Joint Venture with Al Fahim Linez LLC- (UAE) (Refer Note no.31.6) C Associates

Mafatlal Global Apparel Limited (since 29.09.2012)

Mafatlal V. K. Intex Limited (upto 25.03.2014)

Mafatlal Engineering Industries Limited (currently under liquidation)

Mafatlal Limited - (Incorporated in United Kingdom) (currently under liquidation)

Sushmita Engineering and Trading Limited (upto 25.03.2014)

Repos Trading Company Limited (upto 25.03.2014) D Key Management Personnel

H. A. Mafatlal (upto 28.05.2013)

Rajiv Dayal

V. P. Mafatlal

E Relatives of Key Management Personnel

Rupal V. Mafatlal

Rekha H. Mafatlal (upto 28.05.2013)

Priyavrata H. Mafatlal (upto 28.05.2013)

F Enterprises over which key management personnel and their relatives are able to exercise significant influence NOCIL Limited

Navin Flourine International Limited Sulakshana Securities Limited Krishnadeep Housing Development Private Limited Mafatlal Impex Private Limited Mafatlal Fabrics Private Limited Myrtle Chemtex Trading Private Limited Aureole Clothing Private Limited

G Individual having significant influence

H.A. Mafatlal (since 29.05.2013)

H Relatives of Individual having significant influence

Rekha H. Mafatlal (since 29.05.2013)

Priyavrata H. Mafatlal (since 29.05.2013)

I Enterprises over which Individual having significant influence and relatives of such individual are able to exercise significant influence

Sukarma Investments Private Limited

Suremi Trading Private Limited

Altamount Product and Services Private Limited

Silvia Apparel Limited (since 31.03.2013)

Details of transactions with related parties during the year :

1.11 Details of the Company''s interest in Joint Venture having Joint Control, as per the requirements of Accounting Standard- 27 on Financial Reporting of Interests in Joint Ventures notified under the Companies (Accounting Standards) Rules, 2006 is as under:

Interest in joint ventures

The Company has interests in the following joint ventures - Jointly controlled entities (JCE):

The Joint Venture has come in to existence in the previous year.

Note: Figures in brackets relate to the previous year.

1.12 The Company has not made any remittances in foreign currencies on account of dividends during the year and does not have information as to the extent to which remittances in foreign currencies on account of dividends have been made by or on behalf of non-resident shareholders. The particulars of dividends paid to non-resident shareholders are as follows:

1.13 The Ministry of Corporate Affairs, Government of India, vide General Circular No. 2 and 3 dated 8th February 2011 and 21st February 2011 respectively has granted a general exemption from compliance with Section 212 of the Companies Act,1956, subject to fulfilment of conditions stipulated in the circular. The Company has satisfied the conditions stipulated in the circular and hence is entitled to the exemption. Necessary information relating to the subsidiaries has been included in the Consolidated Financial Statements.

1.14 Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.


Mar 31, 2013

1. Corporate Information

Mafatlal Industries Limited (the Company) is a public limited company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on the Mumbai and Ahmedabad stock exchanges. The Company belongs to the reputed industrial house of Arvind Mafatlal Group in India, established in 1905. The Company is engaged in textile manufacturing and trading, having its units at Nadiad and Navsari.

2.1 I. MISHAPAR INVESTMENTS LIMITED (MISHAPAR)

a) In terms of the Scheme of Arrangement and Amalgamation ("the Scheme”), Mishapar has been merged with the Company (Transferee Company), upon which the undertaking and the entire business, including all assets and liabilities of Mishapar stand transferred to and vested in the Transferee Company. Assets and liabilities so transferred have been recorded at their fair value as determined by the Board of Directors of the Transferee Company The amalgamation has been accounted under "Purchase Method'' as envisaged in the Accounting Standard (AS) - 14 "Accounting for Amalgamations” notified under the Companies (Accounting Standards) Rules, 2006. Mishapar was a Non-Banking Finance Company into investing and financing activity and was 100% subsidiary of the Company

b) The Scheme filed by the Company has been approved by the Honourable High Court of Judicature at Mumbai, with an appointed date of 1st April, 2012 and an effective date of 28th May 2013 (''the Effective Date''), being the date on which all the requirements under the Companies Act, 1956 have been completed

c) Since amalgamating company is Wholly Owned Subsidiary of the Transferee Company, there is no consideration payable or receivable on implementation of the Scheme. The entire issued, subscribed and paid-up Share Capital of Mishapar has been cancelled against the corresponding investments of the Transferee Company. Also, 388 equity shares of Rs. 10 each held by Mishapar in the Transferee Company stands cancelled pursuant to the Scheme.

d) Details of assets and liabilities acquired on amalgamation and treatment of the difference between the fair value of net assets acquired and carrying cost of investment by the Transferee Company in Mishapar:

II. MAFATLAL DENIM LIMITED (MDL):

a) In terms of The Scheme of Arrangement and Amalgamation ("the Scheme”), MDL has been merged with the Company (transferee company), upon which the undertaking and the entire business, including all assets and liabilities of MDL stand transferred to and vested in the Transferee Company. Assets and liabilities so transferred have been recorded in the books of Transferee Company at the book values as recorded in the books of the Transferor Company The amalgamation has been accounted under "Pooling of Interest Method” as envisaged in the Accounting Standard (AS-14) "Accounting for Amalgamations” notified under the Companies (Accounting Standards) Rules, 2006. MDL was engaged in the business of manufacturing and marketing of various denim fabrics and other products.

b) The Scheme filed by the Company has been approved by the Honourable High Court of Judicature at Gujarat, with an appointed date of 1 April, 2012 and an effective date of 28th May 2013 (''the Effective Date''), being the date on which all the requirements under the Companies Act, 1956 have been completed

c) With effect from the appointed date, all the business undertakings, assets, liabilities, rights and obligations of MDL stood transferred to and vested in the transferee company in consideration for issue of 1 equity share of Rs. 10 each in the transferee company for every 10 equity shares of Rs. 10 each held in MDL

d) The assets, liabilities and reserves of MDL as at 1st April 2012 have been taken over at their respective book values on the appointed date as follows

(i) Particulars of assets, liabilities and reserves taken over on amalgamation

(ii) The sum ofRs. 3,634.48 lacs, arrived as above, has been credited to Capital Reserve Account on account of reduction in the capital while issuing the shares to the shareholders of the transferor company as per the ratio prescribed in the Scheme.

In view of the aforesaid amalgamations with effect from 1st April, 2012, the figures for the current year are not comparable with those of the previous period

2.3 During the year 2010-2011, the Company had sold part of its leasehold land at its Mazgaon unit.

The Company is required to surrender the remaining leasehold land (reserved portion admeasuring about 27,287.82 square meters) to Municipal Corporation of Greater Mumbai for the purpose of extension of V.J.B. Udyan. The Company is also required to recommence the spinning unit which can accommodate 10,000 spindles. By virtue of the agreement, the developer will construct a structure and hand it over to the Company

2.4 Pursuant to the demerger of the Real Estate and Investment Business to Sulakshana Securities Limited (SSL), in 2007 the shareholders of the Company are to be issued one equity share of Rs. 10 each, fully paid-up, in SSL for every 500 shares of Rs. 100 each, fully paid-up, held in the Company as consideration for the demerger, aggregating toRs. 1.00 lac. As the shareholders of the Company would be entitled to receive only fractional shares of SSL, the rehabilitation scheme sanctioned by BIFR envisages that these shares would be acquired by Navin Fluorine International Limited (NFIL) and the shareholders of the Company would receive proportionate payment in consideration thereof. The Company has received the said amount of Rs. 1.00 lac from NFIL on behalf of the shareholders, which is pending disbursement upon completion of formalities.

2.5 Depreciation on fixed assets of (a) the Old Unit at Nadiad and Ahmedabad; and (b) Head Office of the Company, acquired prior to 1-4-1978, was provided on written down value basis and on all other assets, on straight-line basis, as per the provisions of the Companies Act, 1956, at the rates and in the manner specified in Schedule XIV of this Act. The Company has during the previous period changed the method of depreciation retrospectively of the above mentioned fixed assets from WDV to SLM for uniformity in the method of depreciation. Hence depreciation charge for the previous period was higher byRs. 1.93 lacs on account of change in the accounting policy.

2.6 Disclosures required under Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006:

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors. The Company has not received intimation from most of the suppliers regarding the status under the Micro, Small and Medium Enterprises Development Act, 2006

2.7 As legally advised, the Company had not recognised rent/recovery of expenses ofRs. 186.29 lacs upto 31st March, 2013 (Rs. 181.92 lacs upto 31st March, 2012) pending final resolution of the legal dispute with certain tenants/ex-tenants of a property in South Mumbai. During the financial year 2011, the Hon''ble Small Causes Court had passed Orders for payment of arrears of rent mesne profits and other charges to the Company. Being aggrieved by the said Orders, the Company and the ex-tenants had filed Appeals and Cross-Appeals respectively. During the current year, the Appeals and Cross- Appeals were heard by Appeal Bench of the Hon''ble Small Causes Court and the Company''s appeals were partially allowed. The Company was awarded Rs. 1,222.92 lacs. The Court also awarded interest @ 6% p.a. to be paid to the Company from the date of the filing of the suits till the date of the actual payment of the entire dues. Aggrieved by the above decisions, the ex-tenants filed Civil Revision applications in the Hon''ble Bombay High Court against the orders of the Appeal Bench of the Hon''ble Small Causes Court in awarding an increased amount to the Company. Subsequent to the close of the year, the Hon''ble Bombay High Court has admitted the Civil Revision applications and granted stay on the orders passed by the Appeal Bench of the Hon''ble Small Causes Court.

2.8 In the previous period, pursuant to the Scheme of Amalgamation under Section 391 to 394 of the Companies Act 1956, eight companies had merged with the erstwhile wholly owned subsidiary Mishapar Investments Limited (Mishapar) w.e.f. 1st April 2011 in terms of the Order dated 7th September, 2012 of the Hon''ble High Court of Bombay sanctioning the Scheme. The balances of loans, advances and deposits held by the Company in those amalgamating companies were transferred to Mishapar as at 1st April,2011. Upon this merger, the entire business including assets and liabilities of the amalgamating companies stood transferred to and vested in Mishapar at their book values.

Following companies were amalgamated;

(a) Vibhadeep Investments and Trading Limited

(b) Sushmita Holdings Limited

(c) Mafatlal Holdings Limited

(d) Sunanda Industrial Machinery Limited

(e) Sudas Manufacturing & Trading Limited

(f) Soushreyas Investments (I) Limited

(g) Samatva Investments Limited (h) Navlekh Investments Limited

In terms of the said scheme of amalgamation, the Company was to receive 9,00,000 13.5% Cumulative Preference shares of Rs. 100 each of Mishapar Pending issue of such shares, the amount was disclosed under Non-current Investments as preference shares suspense in the previous period. During the current year, these were converted into preference share capital and duly allotted to the Company. Pursuant to the Scheme of Amalgamation with Mishapar (Refer Note no. 30.3), these investments in preference shares were cancelled against the preference share capital in Mishapar

2.9 In the previous period, the Company had changed the method of valuation of trading goods from First -In- First- Out (FIFO) to Weighted Average Cost (WAC) method for achieving greater uniformity. The change had no impact as there was no closing stock of trading goods.

2.10 Disclosure as per Clause 32 of the Listing Agreements with the Stock Exchanges

Loans and advances in the nature of loans given to subsidiaries, associates and others and investment in shares of the Company by such parties

3.1 Segment Information

Disclosures relating to segment information have been made in the notes forming part of the Consolidated financial statements.

3.2 Employee benefit plans

a) Defined contribution plans

Contributions are made to Recognized Provident Fund / Government Provident Fund and Family Pension Fund which covers all regular employees. Contribution is also made in respect of executives to a Recognized Superannuation Fund. While both the employees and the Company make predetermined contributions to the Provident Fund, contribution to the Family Pension Fund and Superannuation Fund are made only by the Company. The contributions are normally based on a certain proportion of the employee''s salary. Amount recognized as expense in respect of these defined contribution plans, aggregate to Rs. 526.68 lacs (Previous period Rs. 355.80 lacs).

b) Defined benefit plans

Contributions are made to a Recognized Gratuity Fund in respect of gratuity based upon actuarial valuation done at the year end of every financial year using "Projected Unit Credit” method and it covers all regular employees. Major drivers in actuarial assumptions, typically, are years of service and employee compensation. Gains and losses on changes in actuarial assumptions are accounted for in the Statement of Profit and Loss.

The charge on account of provision for gratuity has been included in ''Employee Benefit Expense'' in the Statement of Profit and Loss.

3.3 Related Parties Transactions

Details of Related Parties

A Subsidiary Companies

Ibiza Industries Limited (also a joint venture) currently under liquidation

Sunanda Industries Limited (direct subsidiary since 01.04.2012) (In the previous period, subsidiary through wholly owned subsidiary, Mishapar Investments Limited) currently under liquidation.

Mayflower Textiles Private Limited (direct subsidiary since 01.04.2012) (In the previous period subsidiary through wholly owned subsidiary, Mishapar Investments Limited)

Myrtle Textiles Private Limited (direct subsidiary since 01.04.2012) (In the previous period subsidiary through wholly owned subsidiary, Mishapar Investments Limited)

Repal Apparel Private Limited (direct subsidiary since 01.04.2012) (In the previous period subsidiary through wholly owned subsidiary, Mishapar Investments Limited)

Mafatlal Services Limited

Mafatlal Global Apparel Limited (since 01.04.2011 through wholly owned subsidiary, Mishapar Investments Limited) (till 29.09.2012)

Silvia Apparel Limited (till 30.03.2013)

Mishapar Investments Limited (till 31.03.2012) (wholly owned subsidiary which amalgamated with the Company). B Jointly Controlled Entities

AL Fahim Mafatlal Textiles LLC- A Joint Venture with Al Fahim Linez LLC- (UAE) (Refer Note no. 31.6) C Associates

Mafatlal VK Intex Limited

Mafatlal Engineering Industries Limited- currently under liquidation

Mafatlal Limited - (Incorporated in United Kingdom)- currently under liquidation

Sushmita Engineering and Trading Limited

Mafatlal Global Apparel Limited (since 29.09.2012)

Repos Trading Company Limited D Key Management Personnel

Hrishikesh A. Mafatlal

Rajiv Dayal ( w.e.f. 01.04.2012) *

Vishad P. Mafatlal (w.e.f. 01.04.2012) **

* In the position of Managing Director in erstwhile Mafatlal Denim Limited, the amalgamating Company.

** In the position of Joint Managing Director in erstwhile Mafatlal Denim Limited, the amalgamating Company. E Relatives of Key Management Personnel

Priyavrata H. Mafatlal

Vishad P. Mafatlal

F Enterprises over which key management personnel and their relatives are able to exercise significant influence NOCIL Limited

Navin Fluorine International Limited

Sulakshana Securities Limited

Krishnadeep Housing Development Private Limited

Mafatlal Impex Private Limited

Mafatlal Denim Limited (till 31.03.2012, since amalgamated with the Company pursuant to the Scheme of Amagamation Refer No no. 30.3)

Myrtle Chemtex Trading Private Limited

4.1 a) Mafatlal Denim Limited (MDL), the erstwhile company which has amalgamated with the Company had re-appointed Mr.Rajiv Dayal as Managing Director & Chief Executive Officer and Mr.Vishad P.Mafatlal as Joint Managing Director of MDL with effect from April 1, 2011 for a term of 5 years. Managerial remuneration of Rs. 139.28 lacs had been paid during the year 2011-12. As stipulated by the provisions of the Companies Act, 1956 requiring the approval of the Central Government for appointment and remuneration of Managerial personnel in the case, inter alia, of a company that is in default in payment of its debts, the erstwhile MDL had made the applications to the Government on June 20, 2011 seeking approval for the re-appointment and payment of remuneration to Mr. Rajiv Dayal and Mr. Vishad P. Mafatlal.

The erstwhile MDL was technically in default to SICOM Limited, a Secured lender pending the Sanction of the Section 391 Scheme pending before the Hon''ble Gujarat High Court. SICOM declined to give their No Objection Certificate for the re- appointments for the reason that they already had their debts adjudicated by the Hon''ble Debt Recovery Tribunal, Mumbai. The Government rejected the applications of MDL on September 23, 2011 for the reason that MDL had not submitted No Objection Certificate from SICOM, one of the Secured lenders. MDL has made an application for reconsideration, as default to the secured lenders no longer exists.

Subsequently, SICOM Limited assigned the entire Debt in favour of M/s. Mishapar Investments Limited (another Company that amalgamated with the Company) on July 26, 2012. Thereafter, MDL obtained the No Objection Certificate from the said assignee and approached the MCA once again on September 5, 2012. Pursuant to the said letter, MCA advised MDL to file the applications afresh. Accordingly, MDL has filed Fresh Applications on October 25, 2012 and awaits their approval. b) An amount of Rs. 964.05 lacs waived by SICOM Limited at the time of assignment has been accounted as Reliefs and concessions on assignment of Liabilities.

4.2 Mr Rajiv Dayal and Mr Vishad P. Mafatlal have been appointed as the managing director and joint managing director respectively in the Board Meeting held on 30th May 2013. Their appointment is subject to the shareholders'' approval at the ensuing Annual General Meeting.

4.3 The Ministry of Corporate Affairs, Government of India, vide General Circular No.2 and 3 dated 8th February 2011 and 21st February 2011 respectively has granted a general exemption from compliance with Section 212 of the Companies Act,1956, subject to fulfilment of conditions stipulated in the circular. The Company has satisfied the conditions stipulated in the circular and hence is entitled to the exemption. Necessary information relating to the subsidiaries has been included in the Consolidated Financial Statements.

4.4 The figures for the financial year 2012-13, includes the figures of erstwhile Mafatlal Denim Limited and erstwhile Mishapar Investments Limited which have been amalgamated with the company with effect from 1st April 2012. The figures for the current financial year 2012-13 are for twelve months and figures for the previous period are for nine months. Hence the current year figures are not comparable with the previous period figures.

4.5 Previous period''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.


Mar 31, 2012

1. Corporate Information

Mafatlal Industries Limited (the Company) is a public limited company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on the Bombay and Ahmedabad stock exchanges. The Company belongs to the reputed industrial house of Arvind Mafatlal Group in India, established in 1905. The Company is engaged in textile manufacturing having its operating units at Nadiad and Navsari.

a.(i) Terms / rights attached to Equity shares:

The Company has only one class of equity shares having a par value of Rs.107- per share. Each equity shareholder is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

During the period ended 31st March, 2012, the amount of dividend, per share, recognized as distributions to equity shareholders is Rs. NIL (period ended 30th June, 2011 Rs. NIL).

(ii) Terms / rights attached to Preference shares:

In terms of Modified Scheme (MS) approved by BIFR. In June 2009 600,00,000 Fully Redeemable Non-Cumulative Preference Shares of Rs. 10/- each are redeemable over a period of eight years as a subordinated liability to the dues of workers, statutory agencies and the secured creditors. 50% of the shares were redeemed during the period. Upon, declaration these shares carry a rate of dividend of 1% from the financial year commencing on or after 1st January, 2014.

b. During 1987-88, 535,000 shares (of Rs. 100/- each) were allotted on rights basis subject to the result of suit nos. 3181 and 3182 of 1987 filed by three shareholders against the Company and Others in the Ahmedabad City Civil Court. The suits are pending disposal.

c. During the period of 14 months ended 31st May, 2010, in terms of Modified Scheme (MS) approved by BIFR, 300,00,000 Optionally Convertible Fully Redeemable Non-Cumulative Preference Shares of Rs. 10/- each were converted into 48.13,860 Equity Share of Rs.10/- each of the Company at a premium of Rs.52.32 per equity share.

d) Balances with earmarked accounts include deposits amounting to Rs. 2,78117 lacs (as at 30th June, 2011 Rs. Nil) and Fixed Deposits account current period Rs. Nil (as at 30th June, 2011 Rs. 33.88 lacs) which have an original maturity of more than 12 months.

(ii) Earmarked accounts

(a) includes Rs. 2.031.94 lacs in Fixed Deposit Escrow Account and Rs. 409.23 lacs in escrow current account (operated under the supervision of Monitoring Committee constituted by the Govt, of Maharashtra under Development Control Regulations, 1991) (as at 30th June, 2011 Rs. 60,616.13 lacs)

(b) Includes Rs. 2,781.77 lacs in Fixed Deposits accounts (as at 30th June, 2011 Rs. 0.83 lacs) over which the banks have Hen.

2.1 (a) During the previous period, the Company had concluded an Agreement with Gliders Buildcon LLP ('the developer'), an entity of Ajay Ptramal Group, on 17th June, 2011 for transfer of development rights in leasehold land at its Mazgaon unit, admeasuring about 30,910 square meters for a lump sum consideration of Rs. 60,580.00 lacs. The proceeds from the development agreement (to the extent pertaining to leasehold land held as stock in trade) amounting to Rs. 48,326.87 lacs for the previous period has been included in Note 21 'Revenue from Operations- Sate of Products.' The remaining proceeds (pertaining to leasehold land held as fixed assets) amounting to Rs. 12,202.86 lacs (net of book value of leasehold land amounting to Rs. 0.01 lac and portion of building amounting to Rs. 50.26 lacs on date of sale) for the previous period is included in 'Profit on sale of Fixed assets' under Note 28 'Exceptional Items (net)'. As required by the Development Control Rules, Government of Maharashtra, the utilization of sales proceeds from sale of textile mill lands is being monitored by a Monitoring Committee appointed by the Government of Maharashtra under Development Control Regulations, 1991.

2.2 (b) The Company is required to surrender the remaining leasehold land (reserved portion admeasuring about 27,287.82 square meters) to Municipal Corporation of Greater Mumbai for the purpose of extension of V.J.B. Udyan. The Company is also required to recommence the spinning unit which can accommodate 10,000 spindles. By virtue of the abovementioned agreement, the developer will construct a structure and hand it over to the Company.

2.3 In the previous period, the Board for Industrial and Financial Reconstruction (BIFR) vide its order dated 19th August, 2010 discharged the Company from the purview of Sick Industrial Companies (Special Provisions ) Act,1985 (SICA) / (BIFR) consequent to the networth of the Company turning positive.

2.4 Pursuant to the demerger of the Real Estate and Investment Business to Sulakshana Securities Limited (SSL), the shareholders of the Company are to be i issued one equity share of Rs. 10/- each, fully paid-up, in SSL for every 500 shares of Rs. 100/- each, fully paid-up, held in the Company as consideration for the demerger, aggregating to Rs. 1.00 lac. As the shareholders of the Company would be entitled to receive only fractional shares of SSL, the rehabilitation scheme sanctioned by BIFR envisages that these shares would be acquired by Navin Fluorine International Limited (NFIL) and the shareholders of the Company would receive proportionate payment in consideration thereof. The Company has received the said amount of Rs. 1.00 lac from NFIL on behalf of the shareholders, which is pending disbursement upon completion of formalities.

2.5 The Ahmedabad Unit of the Company has discontinued operations with effect from 1st March, 2003. On 21st May, 2003, the Company entered into an 'Agreement ' to Sell' with Annapurna Polymers Private Limited (APPL) for this Unit at an aggregate consideration of Rs. 677.70 lacs. The sale, after getting all approvals, was to be completed on or before 31 st December, 2003. Pending this, a separate 'Conducting Agreement' was entered with APPL, effective 1 st June, 2003, under which APPL operated the Unit on the Company's behalf. The conducting agreement was extended from time to time. The said sale was completed on 14th December, 2010 and the profit of Rs. 611.76 lacs on sale of unit and profit on sale of building of Rs. 24.31 lacs had been recognized in the previous period.

2.6 Depreciation on fixed assets of (a) the Old UnitatNadiad and Unit at Ahmedabad; and (b) Head Office of the Company, acquired prior to1-4-1978, was provided on written down value basis and on all other assets, on straight-line basis, as per the provisions of the Companies Act, 1956, at the rates and in the manner specified in Schedule XIV of this Act. The Company has during the period changed the method of depreciation retrospectively of the above mentioned fixed assets from WDV to SLM for uniformity in the method of depreciation. Depreciation for the period is higher by Rs. 1.93 lacs (Previous period Rs.NIL) on account of change in the accounting policy.

2.7 Disclosures required under Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006

The Company has not received intimation from most of the suppliers regarding the status under the Micro, Small and Medium Enterprise Development Act, 2006, and hence disclosure requirements in this regard as per Schedule VI. of the Companies Act, 1956 is not being provided. Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.

2.8 As legally advised, the Company has not recognised rent / recovery of expenses of Rs. 181.92 lacs (Rs. 178.65 lacs upto 30th June, 2011) pending final resolution of the legal dispute with certain tenants/ex-tenants of a property in South Mumbai. During the financial period 2011, the Hon'ble Court of Small Causes Court has passed Orders for payment of arrears of rent mesne profits and other charges to the Company. Being aggrieved by the said Orders, the Company and the ex-tenants have filed Appeals and Cross-Appeals respectively which have been admitted and are pending for final hearing.

2.9 Pursuant to tie scheme of Amalgamation (the Scheme) under section 391 to 394 of the Companies Act 1956 (the Act) the erstwhile following companies (Amalgamating Companies) merged with the wholly owned subsidiary Mishapar Investments Limited (Mishapar) (the Amalgamated Company) w.e.f. 1st April 2011, (the Appointed date) in tarn; of order dated 7th September, 2012 of the Hon'ble High Court of Bombay sanctioning the Scheme. The balances held in the Transferor Companies have been transferred to the Subsidiary company on the appointed date. Upon this merger the entire business including assets and liabilities of the Transferor Companies stand transferred to and vested in the Amalgamated Company at their book values. The following Companies have been Amalgamated:-

a) Vibhadeep Investments & Trading Limited

b) Sushmita Holdings Limited

c) Mafatlal Holdings Limited

d) Sunanda Industrial Machinery Limited

e) Sudas Manufacturing & Trading Limited

f) Soushreyas Investments (I) Limited

g) Samatva Investments Limited

h) Navlekh Investment Limited

In terms of the scheme, the Company is to receive 9,00,000 13.5% Cumulative Preference shares of Rs. 100/- each of Mishapar Investments Limited (the subsidary), pending issue of such shares the amount has been disclosed under Non-current Investments as preference shares suspense.

2.10 In the current period the Company has changed the method of valuation of trading goods from FIFO to weighted average cost method for achieving greater uniformity and hence changed the accounting policy. This change has no impact as there is no closing stock of trading goods.

3.1 Employee benefit plans

a) Defined contribution plans

Contributions are made to Recognized Provident Fund / Government Provident Fund and Family Pension Fund which covers all regular employees. Contribution is also made in respect of executives to a Recognized Superannuation Fund. While both the employees and the Company make predetermined contributions to the Provident Fund, contribution to the Family Pension Fund and Superannuation Fund are made only by the Company. The contributions are normally based on a certain proportion of the employee's salary. Amount recognized as expense in respect of these defined contribution plans, aggregate to Rs.355.80 lacs (Previous period Rs. 566.85 lacs).

b) Defined benefit plans

Contributions are made to a Recognized Gratuity Fund in respect of gratuity based upon actuarial valuation done at the year end of every financial year using "Projected Unit Credit" method and it covers all regular employees. Major drivers in actuarial assumptions, typically, are years of service and employee compensation. Gains and losses on changes in actuarial assumptions are accounted for in the Statement of Profit and Loss. The charge on account of provision for gratuity has been included in 'Employee Benefit Expense' in the Statement of Profit and Loss.

Compensated Absences

All the employees are eligible for compensated absences of 30 days in each financial year which can be encashed during the tenure of employment. Employees cannot carry forward any compensated absences in excess of 300 days. The provision for these absences, made on the basis of Actuarial Valuation on "Projected Unit Credit" method is Rs. 300.49 lacs (Previous period Rs. 274.24 lacs.) charge for the perio Rs.198.21 lacs (Previous period Rs. 203.30 lacs).

Note 3.2

Related Parties transactions Details of Related Parties A Subsidiary companies

Ibiza Industries Limited (also a joint venture) (Currently under Liquidation)

Mishapar Investments Limited

Sunanda Industrial Machinery Limited (till 01.04.2011)

Sudas Manufacturing & Trading Limited (till 01.04.2011)

Mafatlal Services Limited

Mafatlal Global Apparel Limited (since 01.04.2011 through wholly owned subsidiary, Mishapar Investments Limited)

Silvia Apparel Limited (since 01.04.2011 through wholly owned subsidiary, Mishapar Investments Limited)

Mayflower Textiles Private Limited (since 01.04.2011 through wholly owned subsidiary, Mishapar Investments Limited)

Mrytle Textiles Private Limited (since 01.04.2011 through wholly owned subsidiary, Mishapar Investments Limited)

Sunanda Industries Limited (since 01.04.2011 through wholly owned subsidiary, Mishapar Investments Limited)

Repal Apparel Private Limited (since 01.04.2011 through wholly owned subsidiary, Mishapar Investments Limited) B Associates Mafatlal VK Intex Limited

Sunanda Industries Limited (till 01.04.2011)

Mafatlal Holdings Limited (till 01.04.2011)

Mafatlal Engineering Industries Limited

Mafatlal Limited (Incorporated in United Kingdom)

Repal Apparel Private Limited (till 31.03.2011)

Sushmita Engineering and Trading Limited

Sumish Associates (till 01.04.2011)

Sushmita Holdings Limited (till 01.04.2011) C Enterprises over which key management personnel and their relatives are able to exercise significant influence

Ensen Holdings Limited

NOCIL Limited

Marigold International Private Limited

Navlekh Investment Limited (till 01.04.2011)

Navin Fluorine International Limited

Romago AG, Zurich

Sulakshana Securities Limited

Vibhadeep Investments & Trading Limited (till 01.04.2011)

Krishnadeep Housing Development Private Limited

Urvija Associates

Mafatlal Impex Private Limited

Eyeindia.Com Private Limited

Mafatlal Denim Limited

Sushripada Investments Private Limited

Mafatlal Fabrics Private Limited D Key managerial personnel

Hrishikesh A. Mafatlal E -Relatives of Key Management Personnel

Priyavrata H. Mafatlal (w.e.f 01.01.2011)

 
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