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Notes to Accounts of Mahindra CIE Automotive Ltd.

Mar 31, 2015

1 Rights, preferences and restrictions attached to the shares

Equity shares:

The Company has one class of equity shares having a par value of Rs. 10/- per equity share held.

Each shareholder is eligible for one vote per share.

If any dividend is proposed by the board of directors, then the same is subject to approval of the shareholders in the ensuing annual general meeting except in the case of interim dividend.

On liquidation the equity shareholders are eligible to receive the residual value of assets of the company in the proportion of their shareholding in the company after all secured and unsecured creditors of the company are paid off.

2 Note:

(a) Terms loans from banks comprise of loans pertaining to the castings and magnetic product divisions (erstwhile Mahindra Hinoday Industries Limited) of the company and the composites division (erstwhile Mahindra Composites Limited ) acquired in amalgamation.

(b) The loans pertaining to composite division is repayable in equal quarterly installments commencing from November 2012 till November 2016.

The loan carries an interest rate of 12.50% p.a. and is secured by a first charge on the current and future immediate assets of the Pimpri and Mangaon factories and a second pari passu charge on the moveable assets of division

(c) The loans pertaining to castings division is repayable in monthly installments commencing from April 2012 till September 2017.

The loan carries an interest rate of Base Rate plus 1.40 % p.a. and is secured by a first charge on Urse and Bhosari units of the Company.

(d) Sales Tax deferral loan is payable in annual installments commencing from 2009 - 2010 to 2020 - 2021.

(e) Loan from CIE Automotive SA has devolved on the company due to the merger of Mahindra Gears International Limited. The same is subject to approval from Reserve Bank of India and classified as Long term.

1 Investment in Sai Wardha Power Company Limited entitles the company to obtain energy equivalent of 15MW (PY 5 MW) from the Group Captive Power Plant. This investment would be amortised over a period of 25 years. The preference shares carry a coupon rate of 0.01% per annum of the face value and is redeemable on expiry of 25 years.

2 The Company''s subsidiary, Stokes Group Limited, UK had incurred losses and the net-worth of the said subsidiary company has eroded during the earlier year and accordingly the Company has in earlier years recognised a provision for diminution in the value of the investment of Rs. 901.86 million representing the entire value of investment.

3 The Company has invested in Mahindra Forgings Europe AG (MFE AG), Germany through its wholly owned subsidiaries in Mauritius namely Mahindra Forgings International Limited (MFIL) and Mahindra Forgings Global Limited (MFGL). The management has initiated actions to improve operating efficiencies and combined with the expertise of CIE''s European Technical Team expects improvement in performance. The results have been encouraging and profitability of MFE AG has improved substantially compared to the previous year.

3 XXVI Contingent Liabilities

(Rs. in Million)

As at

31-March-15 31-March-14

Claims against the company not acknowledged as debts

a) Income Tax claims against which company has preferred an appeal. 3.8 -

b) Disallowance of certain expenses 157.4 123.8

c) Excise Cases against the Company , appealed by the Company with CESTAT 92.7 -

d) Relating to Cenvat availed on rejected goods 42.6 8.9

e) Interest on Supplementary Invoices 1.0 1.0

f) Show Cause cum Demand Notice pending with the Commissioner of Central Excise 0.7 -

g) Relating to reversal of Cenvat on shortages in inventories 9.2 8.1

h) Service Tax 56.4 -

i) Sales Tax 157.9 -

j) Water Charges (Refer Note Below) 507.4 -

k) Claims against the company not acknowledged as debt: Stamp duty & Others 81.3 -

l) Government Cess on extraction of minor mineral 10.5 -

m) During the previous year/s the Company had extended guarantee to ICICI Bank plc, UK - 413.0

for EURO 5 Million for a loan taken by step down subsidiary Mahindra Forging Europe AG Germany

n) Bill Discounting facilities availed under Bill Marketing Scheme from customers 158.7 49.5

o) The Company had imported capital goods under the Export Promotion Capital Goods 79.9 161.5 ( EPCG) scheme, of the Government of India, at concessional rates of duty on an understanding to fulfill quantified exports against future obligation

Commitment

Estimated value of contracts remaining to be executed on capital account ( net of advances) and 178.1 23.4 not provided for

The Company has an ongoing dispute pertaining to the Stamping Division of the Company (formerly known as Mahindra Ugine Steel Company Limited (MUSCO) with the Irrigation Department (Water Resource Department) in respect of levy of charge for use of water from Patalganga River, for the period from July 1991 to May 2012 for an aggregate amount of Rs. 507.4 Million including penal charge of Rs.101.9 Million and late fee charge of Rs. 223.1 Million. The Hon''ble Court of Alibag district, before whom the appeal was filed by the Irrigation Department against the Order of the Court of the Civil Judge, Senior Division Panvel, decided the appeal against the Company. Consequently the Company filed an appeal before the Hon''ble High Court of Judicature of Bombay challenging the Order of the Alibag Court. The Hon''ble Bombay High Court has admitted the appeal for the disputed period of July 1991 to March 2001, since for the period April 2001 to May 2012 there has been no agreement in force between the Company and the Irrigation department. As per the directions of the Hon''ble Bombay High Court, the Company has deposited Rs. 28.8 Million with the Hon''ble Bombay High Court, being the demand as per the Irrigation department for the said period of July 1991 to March 2001.

In respect of the demand for period from April 2001 to May 2012, the Company has filed a writ petition before the Hon''ble Bombay High Court. The Hon''ble Bombay High Court, vide Order dated 2nd July, 2012, has admitted the writ petition of the Company in relation to water charges demanded by the Irrigation Department, District - Raigad for the said period. In compliance with the conditions of the Order, the Company has paid an amount of Rs. 233.5 Million with the Irrigation Department, being the arrears of water charges for the period from July 1991 to May 2012 and has also given a bank guarantee towards penal rate charges of Rs. 101.9 Million claimed by the Irrigation Department. The High Court has also allowed the Irrigation Department to withdraw the amount of arrears of Rs. 28.8 Million deposited earlier with it in respect of disputed water charge claim for the period from July 1991 to March 2001. As per the Order, the Company is entitled to pursue the proceedings filed by it before the Hon''ble Bombay High Court and that the State of Maharashtra (Irrigation Department) shall not adopt any coercive steps for recovery of the aforesaid penal rate charges of Rs. 101.9 Million and the late fee of Rs. 223.1 Million.

4 Related Party Transactions

a) Names of the related parties Ultimate Holding company

Sr. Name of the Company No

1 CIE Automotive SA

Holding company

Sr. Name of the Company No

1 Participaciones Internacionales Autometal, DOS S.L (Holding Company since October 4, 2013)

2 Mahindra & Mahindra Limited (Holding company till 3rd October, 2013) and the investing company in respect of which the Company is an associate w.e.f. December 12, 2014

Fellow Subsidiaries (with whom the company has entered into transactions during the previous year till October 3, 2013) Sr. Name of the Company Sr. Name of the Company No. No.

1 Mahindra Ugine Steel Company Limited 7 Mahindra Vehicle Manufacturers Limited 2 Mahindra Integrated Business Solutions Private Limited 8 Mahindra Hinoday Industries Limited

3 Mahindra Logistics Limited 9 Defence Land Systems India Private Limited 4 Mahindra Trucks & Buses Limited 10 Mahindra Reva Electric Vehicles Private Limited

5 Mahindra Engineering Services Limited 11 Mahindra Sanyo Special Steels Private Limited

6 Mahindra Conveyor Systems Private Limited

Fellow Subsidiaries (with whom the company has entered into transactions during the previous year after October 4, 2013)

Sr. Name of the Company No.

1 Mahindra Hinoday Industries Limited

Subsidiary Companies Sr. Name of the Company No.

1 Stokes Group Limited

2 Stokes Forgings Dudley Limited

3 Stokes Forgings Limited

4 Mahindra Forgings International Limited

5 Mahindra Forgings Europe AG

6 Jeco Jellinghaus GmbH

7 Gesenkschmiede Schneider GmbH

8 Falkenroth Umformtechnik GmbH

9 Schonoeweiss & Co GmbH

10 Mahindra Forgings Global Limited

11 Mahindra Gears & Transmissions Private Limited

12 Mahindra Gears Global Limited

13 Metalcastello S.A.

14 Crest Geartech Private Limited Subsidiaries post merger of companies 15 CIE Galfor S.A.

16 UAB CIE LT Forge

17 CIE LEGAZPI, S.A.

Key Managerial Personnel

Sr. Name Designation No

1 Mr. K.Ramaswami Managing Director

2 Mr. Pedro Echergaray (w.e.f. October 21,2014) Executive Director

3 Mr. Sanjay Joglekar (w.e.f. December 12, 2014) C.F.O

4 Mr. Romesh Kaul (w.e.f. December 12, 2014) Head Composites

5 Mr. Ajit Lele (w.e.f. December 12, 2014) Head Stampings

6 Mr. K.Jayaprakash (April 29, 2014 to December 11, 2014) C.F.O

7 Mr. Krishnan Shankar (w.e.f. April 1,2014 pursuant to Company Secretary & Head Legal

Section 2(76) of the Companies Act, 2013)

5 Employee Stock Option Scheme

Employees'' Stock Option Scheme (ESOS) was formulated by the Remuneration/Compensation committee of directors of the Company and approved by it on 26th October, 2007. This was subject to the authority vested in it by the shareholders at the general meeting of the Company held on 25th July, 2007 in accordance with the Securities and Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999. Under this scheme, each option is entitled to one equity share of Rs.10/- each fully paid up and were granted as follows:-

i) 296,000 options to the employees of the Company at a fixed price of Rs. 197.00 per share on October 26, 2007.

ii) 391,000 options to the employees of the holding company (M&M) at a fixed price of Rs. 83 per share on February 26, 2008.

iii) 88,000 and 12,000 options to the directors of the company at a fixed price of Rs. 197.00 per share on October 26, 2007 and February 26, 2008 respectively.

iv) 250,000 options to the employees of Foreign subsidiaries at a fixed price of Rs. 151.80 per share on May 9, 2008.

v) 245,000 options to the employees of Foreign subsidiaries at a fixed price of Rs. 102.00 per share on July 29, 2008.

vi) 500,000 options to the employees of the Company at a fixed price of Rs. 109.00 per share on August 26, 2008.

vii) 93,000 options to the employees of the Company at fixed price of Rs. 97.06 per share on May 12, 2010.

viii) 2,000,000 option to the employees of the Company at fixed price of Rs. 57.00 per share on April 1,2011

ix) 589,883 option to the employees of the Company at fixed price of Rs. 44.00 per share on January 20, 2012

The equity settled options vest in 4 equal installments on the expiry of 12 months, 24 months, 36 months and 48 months respectively from the date of the grant and are exercisable on specified dates in 4 tranches within a period of 5 years from the date of vesting. The number of options exercisable in each tranche is between the minimum of 100 options and maximum of the options vested, except in case of the last date of exercise, where the employee can exercise all the options vested but not exercised / lapsed till that date.

Consequent to the amalgamation effective October 1, 2013 the Company has issued options to the employees of the amalgamating companies (See Note XXVI (4)) as follows:

206,610 options to the employees of Mahindra Ugine Steel Company Limited (MUSCO)

20,697 options to the employees of Mahindra Composites Limited (MCL)

The above options are also equity settled and the options have the following vesting and exercise periods

Options granted to MUSCO employees - The Options vest one year from the date of the grant and are exercisable on specified dates in 4 tranches within a period of 5 years from the date of each vesting. The eligible employee must exercise a minimum of 50 (Fifty only) Options or Options vested, whichever is lower; and the Options in respect of each tranche may be exercised on the date of vesting or at the end of each year from the date of each vesting, provided that at the end of five (5) years from the date of each vesting (or such extended period as may be decided by the Remuneration Committee), the eligible employee may exercise all Options vested but not exercised by him/her failing which all the unexercised Options shall lapse

Options granted to MCL employees - The options vest over a period of one to three years from the date of grant and are exercisable over a period of five years from the respective dates of vesting.

In respect of options granted the accounting value of options (equal to intrinsic value) was treated as form of employee compensation, to be amortised on a straight line basis over the vesting period. Unamortised portion is disclosed under the head Employee Stock Options outstanding in Note II (D) as deferred employee compensation expenses.

The company has adopted the intrinsic value method of accounting for determining compensation cost for its stock based compensation plan which is amortized on a straight line basis over the vesting period. Consequently, salaries, wages, bonus, etc. includes Rs. 1.8 Million (PY 10 Million) being the amortization of deferred employee compensation, after adjusting for reversals on account of options lapsed.

Had the company adopted Fair Value Method in respect of Options granted, the employee compensation cost would have been higher by Rs. 15.8 Million (PY Rs. 8.3 Million ), Profit after tax lower by Rs. 10.4 Million (PY Rs. 5.5 Million), and the basic and diluted earnings per share would have been lower by Rs. 0.04 (PY lower by Rs. 0.07 )

6 Scheme/s of Amalgamation

The Integrated Scheme of Amalgamation and the Composites Scheme of Amalgamation under Sections 391-395 of the Companies Act, 1956 for the merger of Mahindra Ugine Steel Company Limited (MUSCO), Mahindra Hinoday Industries Limited (MHIL), Mahindra Gears International Limited(MGIL), Mahindra Investment India Private Limited (MIIPL), Participaciones Internacionales Autometal Tres S.L.(PIA3) and Mahindra Composites Limited ( MCL) (collectively "the amalgamating companies") which are also engaged in a business similar to that of the company were approved by the Honorable High Court of Judicature at Bombay on October 31, 2014. The Schemes came into effect on December 10, 2014, the day on which the order was delivered to the Registrar of Companies, and pursuant thereto the entire business of the amalgamating companies has been transferred to and vested in the Company with effect from the appointed date of October 1, 2013.

The Board of Directors at its meeting held on December 12, 2014 approved the issue of equity shares to the shareholders of the Amalgamating companies as on December 24, 2014, the record date for the purpose and constituted an Allotment Committee for working out the modalities of allotment.

The Allotment committee at the meeting held on January 2, 2015 approved the issue of 229,331,464 equity shares to the shareholders of the Amalgamating companies representing their entire share capital.

Further the committee approved the allotment of 229,330,519 equity shares thereby increasing the total number of shares issued.

MCL, the transferor company had kept allotment of 1,050 equity shares in abeyance. Consequently the Allotment committee, kept in abeyance the allotment of 945 equity shares in line with the SWAP ratio.

Consequent to the issue of the equity shares the promoter and promoter group held 74.87% of the paid up capital of the Company.

Consequent to the merger becoming effective, the entire undertaking of the amalgamating companies has vested with the Company with effect from Oct 1,2013.

In accordance with Accounting Standard (AS) 14 - Accounting for Amalgamations issued by the Institute of Chartered Accountants of India the merger has been accounted for under the pooling of interests method and all the assets, liabilities and reserves of the amalgamating companies have been recorded in the books of the Company at their carrying amounts on the appointed date.

For giving effect to the merger the financial statements of the MUSCO, MHIL, MGIL,MIIPL, PIA3 and MCL audited by the auditors of those companies at the appointed date and for the period from the appointed date to March 31, 2014 have been considered. In accordance with AS 14, the difference between the amount recorded as share capital issued and the share capital of the amalgamating companies has been adjusted in the reserves by the Company.

In terms of the Scheme/s the appointed date being October 1 2013, the net profit and other changes in reserves of the amalgamating companies during the period from October 1,2013 to March 31,2014 aggregating to Rs. 1911.9 Million has been added to the surplus in the Profit & Loss account in the books of the Company.

Pursuant to the Scheme/s of amalgamation, the title deeds to the immovable properties pertaining to the amalgamating companies are pending for transfer in the name of the Company. Further the Company has initiated the name change formalities to transfer the title in respect of other properties and contracts.

Consequent to the merger, Mahindra Gear & Transmissions Private Limited (MGTPL), India, Mahindra Gears Global Limited (MGGL) , Mauritius and CIE Galfor SA (Galfor), Spain became subsidiaries of the company and Metalcastello SpA, Italy (MC) (subsidiary of MGGL), CIE Legazpi S.A., Spain (subsidiary of Galfor) and UAB CIE LT Forge, Lithuania (subsidiary of Galfor) and Crest Geartech Private Limited, India (subsidiary of MC) became step subsidiaries of the company.

7 The operations of the Company comprise a single business and geographical segment, ie automotive components manufactured in India.

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


Mar 31, 2014

Note : XXVI

1 Repayment of term loan from Bank

Sales Tax deferral loan is payable in annual installments commencing from 2009-2010 to 2020-2021.

2 Micro & Small enterprises

The identification of suppliers as micro and small enterprises covered under the "Micro Small and medium enterprises development Act, 2006" was done on the basis of the information to the extent provided by the supplier to the company. Total outstanding due to micro and small enterprises, which were outstanding for more than stipulated period are given below:

3 Contingent Liabilities

(Rs. In Lakhs) Particulars As at As at March 31, 2014 March 31, 2013

Claims against the company not acknowledged as debts

i) Income Tax claims against which company has preferred an appeal

a) Non Deduction of TDS and interest thereon - 22.98

b) Disallowance of certain expenses 1,237.59 418.14

ii) Excise Cases against the Company , appealed by the Company with CESTAT

a) Relating to Cenvat availed on rejected goods 89.28 89.28

b) Interest on Supplementary Invoices 9.59 9.59

iii) Show Cause cum Demand Notice pending with the Commissioner of Central Excise

Relating to reversal of Cenvat on shortages in inventories 8115 -

iv) Bill Discounting facilities availed under Bill Marketing Scheme from c Customers 495.26 717.59

v) During the previous year the Company has given guarantee to ICICI Bank plc, UK for EURO 5 Million for a loan taken by step down subsidiary Mahindra Forging Europe AG Germany 4,129.50 3,47450

vi) The Company had imported capital goods under the Export Promotion Capital Goods (EPCG) scheme, of the Government of India, at concessional rates of duty on an understanding to fulfill quantified exports against future obligation 1,615.17 1,519.30

vii) Estimated value of contracts remaining to be executed on capital account (net ofadvances) and not provided for 234.06 508.98

4. Employees'' Stock Option Scheme (ESOS) was formulated by the Remuneration/Compensation committee of directors of the company and approved by it on 26th October, 2007. This was subject to the authority vested in it by the shareholders at the general meeting of the company held on 25th July 2007 in accordance with the Securities and Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999. Under this scheme, options entitled to one equity share of Rs..10/- each fully paid up were granted as follows:- i 2,96,000 options to the employees of the company at a fixed price of Rs. 197.00 per share on 26th October, 2007. ii 3,91,000 options to the employees of the holding company (M&M) at a fixed price of Rs. 83 per share on 26th February, 2008

i 88,000 and 12,000 options to the directors of the company at a fixed price of Rs. 197.00 per share on 26th October, 2007 and 26th February 2008 respectively.

ii 2,50,000 options to the employees of Foreign subsidiaries at a fixed price of Rs. 151.80 per share on 9th May 2008.

iii 2,45,000 options to the employees of Foreign subsidiaries at a fixed price of Rs. 102.00 per share on 29th July 2008.

iv 5,00,000 options to the employees of the company at a fixed price of Rs. 109.00 per share on 26th August 2008.

v 93,000 options to the employees of the company at fixed price of Rs. 97.06 per share on 12th May 2010.

vi 20,00,000 option to the employees of the company at fixed price of Rs. 57.00 per share on 1st April 2011.

vii 5,89,883 option to the employees of the company at fixed price of Rs. 44.00 per share on 20th January 2012.

a. The equity settled options vest one year from the date of the grant and are exercisable on specified dates in 4 tranches within a period of 5 years from the date of vesting. The number of options exercisable in each tranche is between the minimum of 100 options and maximum of the options vested, except in case of the last date of exercise, where the employee can exercise all the options vested but not exercised / lapsed till that date.

Options granted, vest in 4 equal installments on the expiry of 12 months, 24 months, 36 months and 48 months respectively.

c. The company has adopted the intrinsic value method of accounting for determining compensation cost for its stock based compensation plan. Consequently, salaries, wages, bonus, etc. includes Rs.. (95.00) Lakhs (Previous Year: Rs..40.67 Lakhs) being the amortisation of deferred employee compensation, after adjusting for reversals on account of options lapsed.

Had the company adopted Fair Value Method in respect of Options granted, the employee compensation cost would have been lower by Rs.. 42.58 Lakhs (Previous Year Rs.. Nil Lakhs), Profit after tax lower by Rs.. 42.58 (Previous Year Rs.. Nil Lakhs), and the basic and diluted earnings per share would have been higher by Rs.. Nil (Previous Year Rs.. (Nil).

d. In respect of options granted during the period, accounting value of options (equal to intrinsic value) was treated as form of employee compensation, to be amortised on a straight line basis over the vesting period. Unamortised portion was disclosed under the head Employee Stock Options outstanding in Schedule 1B as deferred employee compensation expenses.

2. Long term investment in Mahindra Forgings Global Limited (MFGL) and Mahindra Forgings International Limited (MFIL)

MFGL and MFIL, the wholly owned subsidiaries of the Company have invested in Mahindra forging Europe AG (MFE AG) and its wholly owned subsidiary companies namely Jeco Jellinghaus GmbH, Schoneweiss & Co GmbH, Gesenkschmine Schineider GmbH and Falkenroth Unfirmtechnick GmbH (collectively referred to as step-down subsidiaries). After the significant decline in demand due to economic downturn in Europe the market demand showed a gradual recovery in the year under consideration. Action initiated by management such as improving operational efficiencies, close monitoring and improving piece realisation, under active guidance and CIE Automotive S.A., the ultimate parent company, started yielding results which were more visible in Q4 F14. Market demand picked up in Q4 F14 which coupled with management actions, results in a positive net result after successive losses. During the year the company invested a further Rs. 5912.90 Lakhs through equity in MFE and its subsidiaries, which helped partly offset the net worth erosion.

The management expects this momentum to continue in future. The company will continue to closely monitor the performance with periodic reviews to facilitate timely corrective actions to improve profitability.

Accordingly, erosion in the net worth is considered to be temporary and hence no provision has been made for diminution in value of these investments.

7. Related parties during the year ending on 31st March, 2014 are as follows:

Holding Company (till 3rd October, 2013) 1. Mahindra & Mahindra Limited

Subsidiary Companies (With whom the company has entered into transactions during the current/previous year)

1. Stokes Group Limited_

2. Mahindra Forgings International Limited

3. Mahindra Forgings Europe AG_

4. JECO-Jellinghaus GmbH_

5. Schonoeweiss & Co GmbH

6. Mahindra Forgings Global Limited

Fellow Subsidiaries ( With whom the company has entered into transactions during the current (till 3rd October, 2013)/previous year)

1. Mahindra Ugine Steel Company Limited_

2. Mahindra Trucks & Buses Limited_

3. Mahindra Logistics Limited_

4. Mahindra Hinoday Industries Limited._

5. Mahindra Engineering Services Limited_

6. Mahindra Vehicle Manufacturers Limited

7. Mahindra Reva Electric Vehicles Private Limited

8. Mahindra Conveyors systems Private Limited

9. Mahindra BPO Services Private Limited_

10. Mahindra Sanyo Special Steels Private Limited (Formerly known as Navyug Special Steels Private

_ Limited

8. Defence Land system India Private Limited

Fellow Subsidiaries (With whom the company has entered into transactions during the current year after 4th October, 2013)

1. Mahindra Hinoday Industries Limited.

The company ceased to be a subsidiary of Mahindra & Mahindra Limited effective from 4th October, 2013. Consequently the transactions indicated above with Mahindra & Mahindra Limited and its Fellow subsidiaries are till the date the company was a subsidiary of Mahindra & Mahindra Limited.

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


Mar 31, 2013

1. Employees'' Stock Option Scheme (ESOS) was formulated by the Remuneration Compensation committee of directors of the company and approved by it on 26th October, 2007. This was sub ect to the authority vested in it by the shareholders at the general meeting of the company held on 25th July 2007 in accordance with the Securities and Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999. nder this scheme, options entitled to one equity share of Rs. 10 - each fully paid up were granted as follows:-

i 2,96,000 options to the employees of the company at a fixed price of Rs. 197.00 per share on 26th October, 2007.

ii 3,91,000 options to the employees of the holding company (M&M) at a fixed price of Rs. 83 per share on 26th February, 2008

iii 88,000 and 12,000 options to the directors of the company at a fixed price of Rs. 197.00 per share on 26th October, 2007 and 26th February 2008 respectively.

iv 2,50,000 options to the employees of Foreign subsidiaries at a fixed price of Rs. 151.80 per share on 9th May 2008.

v 2,45,000 options to the employees of Foreign subsidiaries at a fixed price of Rs. 102.00 per share on 29th July 2008.

vi 5,00,000 options to the employees of the company at a fixed price of Rs. 109.00 per share on 26th August 2008.

vii 93,000 options to the employees of the company at fixed price of Rs. 97.06 per share on 12th May 2010.

viii 20,00,000 option to the employees of the company at fixed price of Rs. 57.00 per share on 1st April 2011

ix 5,89,883 option to the employees of the company at fixed price of Rs. 44.00 per share on 20th January 2012

a. The equity settled options vest one year from the date of the grant and are exercisable on specified dates in 4 tranches within a period of 5 years from the date of vesting. The number of options exercisable in each tranche is between the minimum of 100 options and maximum of the options vested, except in case of the last date of exercise, where the employee can exercise all the options vested but not exercised lapsed till that date.

Options granted, vest in 4 equal installments on the expiry of 12 months, 24 months, 36 months and 48 months respectively.

c. The company has adopted the intrinsic value method of accounting for determining compensation cost for its stock based compensation plan. Consequently, salaries, wages, bonus, etc. includes Rs. 40.67Lakhs (Previous ear: Rs. 133.86 Lakhs) being the amortisation of deferred employee compensation, after ad usting for reversals on account of options lapsed.

Had the company adopted Fair Value Method in respect of Options granted, the employee compensation cost would have been lower by Rs. Nil Lakhs (Previous ear Rs. 120.76 Lakhs), Profit after tax higher by Rs. Nil (Previous ear Rs. 120.76 Lakhs), and the basic and diluted earnings per share would have been higher by Rs. Nil (Previous ear Rs. 0.14).

d. In respect of options granted during the period, accounting value of options (equal to intrinsic value) was treated as form of employee compensation, to be amortised on a straight line basis over the vesting period. namortised portion was disclosed under the head Employee Stock Options outstanding in Schedule 1B as deferred employee compensation expenses.

2. In previous year other expenses includes Rs. 118.41 Lakhs against the impairment of con rod machine which was part of capital- work - in progress.

3. In Previous year exceptional items represents Rs. 155.89 Lakhs interest pertaining to previous period paid on settlement of liability relating to a borrowing.

4. Long term investment in Mahindra Forgings Global Limited (MFGL) and Mahindra Forgings Investment Limited (MFIL) MFGL and MFIL, the wholly owned subsidiaries of the Company have invested in Mahindra Forgings Europe AG (MFE AG) and its wholly owned subsidiary companies namely Jeco Jellinghaus GmbH, Schoneweiss & Co. GmbH, Gesenkschmiede Schneider GmbH and Falkenroth mformtechnik GmbH(collectively referred to as step-down subsidiaries). Due to downturn in the economic situation in Europe, the market demand declined significantly impacting the sales and profitability of MFEAG and its wholly owned subsidiaries, as a result of which the net worth of MFGL and MFIL together with net worth of the step- down subsidiaries has been substantially eroded as on 31st March 2013.

Necessary actions are being taken in MFEAG to:

- Improve the operating efficiencies and align the cost structure in line with current market demand.

- Enhanced Focus on exploiting the synergies of business in Europe and India.

- Closely monitor the performance with increased periodic reviews to facilitate timely corrective actions to improve profitability.

The management also considers the current market situation, to be temporary and expects that together with its above actions, the company should turnaround its performance in the next few years planned.

Accordingly, erosion in the net worth is considered temporary and no provision for diminution in value of these investments has been made.

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


Mar 31, 2012

1 Investment in Wardha Power Company Limited entitles the Company to obtain energy equivalent of 5MW from the Group Captive Power Plant.

These shares will receive restrictive dividend not more than 0.01% of the face value of the equity shares

The preference shares carry a coupon rate of 0.01% per annum of the face value and is redeemable on expiry of 25 years.

This investment would be amortised over a period of 25 years from the year in which the supply of power starts.

2 The Company's subsidiary, Stokes Group Limited, UK had incurred losses and the net worth of the said subsidiary company had eroded during the previous years. Accordingly during the previous years, the Company had recognised provision for diminution in the value of the investment of Rs 9018.59 Lakh representing 100% of the value of the investment.

The above figures are excluding charge for provision for leave encashment on separation and gratuity payable provided on actuarial basis.

The Company has received, an approval from the Central Government for the Managerial Remuneration till 31st August, 2012.

The appointment of Mr. K.Ramaswami is subject to the approval of the shareholders at the ensuing Annual General Meeting.

3 Micro & Small enterprises

The identification of suppliers as micro and small enterprises covered under the 'Micro small and medium enterprises development act 2006' was done on the basis of the information to the extent provided by the supplier to the Company. Total outstanding dues to micro and small enterprises, which were outstanding for more than stipulated period are given below:

4 Contingent Liabilities

(Rs In Lakhs)

Particulars As at As at March 31,2012 March 31, 2011

Claims against the company not acknowledged as debts

i)Income Tax claims against which company has preferred an appeal.

a)Non deduction of TDS and interest thereon 29.89 29.89

b) Disallowance of certain expenses 613.68 469.06

ii) Excise cases against the company, appealed by the company with CESTAT

a) Relating to cenvat availed on rejected goods 89.28 89.28

b) Interest on supplementary invoices 9.59 9.59

iii) Bill discounting facilities availed under Bill Marketing Scheme from customers 583.56 1,225.53

iv) The Company had imported capital goods under the Export Promotion Capital 10,266.75 10,172.80 Goods (EPCG) scheme, of the Government of India, at concessional rates of duty on an understanding to fulfill quantified exports against future obligation aggregates to USD 200.84 Lakhs (P.Y.USD 227.63 Lakhs) converted at year end exchange rate

v)Estimated value of contracts remaining to be executed on capital account (net 544.42 1,082.34 of advances) and not provided for

vi) Claim for interest by a financial institutions on a loan which was interest free - 164.93 loan

1. During the year, the Company received subscription of Rs 4,417.50 lakhs representing the balance 75% of 42,99,270 warrants issued @ Rs 137 per warrant to the promoter Mahindra & Mahindra Limited. The said warrants were converted into 42,99,270 equity shares of Rs 10 each with a share premium of Rs 127 per equity share.

2. Employees' Stock Option Scheme (ESOS) was formulated by the Remuneration/Compensation committee of directors of the Company and approved by it on 26th October, 2007. This was subject to the authority vested in it by the shareholders at the general meeting of the company held on 25th July, 2007 in accordance with the Securities and Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999. Under this scheme, options entitled to one equity share of Rs 10/ - each fully paid up were granted as follows:-

i 2,96,000 options to the employees of the company at a fixed price of Rs 197.00 per share on 26th October, 2007.

ii 3,91,000 options to the employees of the holding company (M&M) at a fixed price of Rs 83 per share on 26th February, 2008

iii 88,000 and 12,000 options to the directors of the company at a fixed price ofRs 197.00 per share on 26th October, 2007 and 26th February, 2008 respectively.

iv 2,50,000 options to the employees of Foreign subsidiaries at a fixed price of Rs 151.80 per share on 9th May, 2008.

v 2,45,000 options to the employees of Foreign subsidiaries at a fixed price ofRs 102.00 per share on 29th July, 2008.

vi 5,00,000 options to the employees of the company at a fixed price of Rs 109.00 per share on 26th August, 2008.

vii 93,000 options to the employees of the company at fixed price of Rs 97.06 per share on 12th May, 2010.

viii 20,00,000 options to the employees of the company at fixed price of Rs 57.00 per share on 1st April, 2011

ix 5,89,883 options to the employees of the company at fixed price of Rs 44.00 per share on 20th January, 2012

a. The equity settled options vest one year from the date of the grant and are exercisable on specified dates in 4 tranches within a period of 5 years from the date of vesting. The number of options exercisable in each trance is between the minimum of 100 options and maximum of the options vested, except in case of the last date of exercise, where the employee can exercise all the options vested but not exercised till that date.

Options granted, vest in 4 equal installments on the expiry of 12 months, 24 months, 36 months and 48 months respectively.

c. The Company has adopted the intrinsic value method of accounting for determining compensation cost for its stock based compensation plan. Consequently, salaries, wages, bonus, etc. includes Rs 133.86 Lakhs (Previous Year: Rs 81.33 Lakhs) being the amortization of deferred employee compensation, after adjusting for reversals on account of options lapsed.

Had the company adopted Fair Value Method in respect of Options granted, the employee compensation cost would have been lower by Rs 120.76 Lakhs (Previous Year Rs 49.40 lakhs), Profit after tax higher by Rs 120.76 Lakhs (Previous Year Rs 49.40 lakhs), and the basic and diluted earnings per share would have been higher by Rs 0.14 (Previous Year Rs (0.05).

d. In respect of options granted during the period, accounting value of options (equal to intrinsic value) was treated as form of employee compensation, to be amortised on a straight line basis over the vesting period. Unamortized portion was disclosed under the head Employee Stock Options outstanding in Schedule II as deferred employee compensation expenses.

1. In terms of Accounting Standard - 17 (Segment Reporting) issued by the Institute of Chartered Accountants of India, the Company operates in only one segment i.e. Forgings.

2. Exceptional items represents Rs 155.89 Lakhs interest pertaining to previous period paid on settlement of liability relating to a borrowing.

3. Other expenses include Rs 118.41 Lakhs against the impairment of con rod machines which was part of capital-work-in- progress.

4. Provision for tax is not made in view of brought forward book losses / unabsorbed depreciation.

5. The Revised Schedule VI has become effective from 1 April, 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.


Mar 31, 2010

1. The Company, at its Extra-Ordinary General Meeting held on 18th February, 2010, had approved by a Special Resolution, increase in the Authorised Capital of the Company and issue of equity shares and preferential warrants.

Pursuant to the passing of the above resolutions and in accordance to Chapter VIII of Securities & Exchange Board of India (Issue of Capital & Disclosure requirements) Regulations, 2009, as amended :

- The Company allotted 1,62,41,300 Equity Shares of face value of Rs.10/- each at price of Rs. 107.75/- per Equity Share including a premium of Rs. 97.75 per Equity Share aggregating to Rs.17,500 Lakhs to Qualified Institutional Buyers(QIB) through Qualified Institutions Placement(QIP).

- Further the Company issued 72,99,270 Preferential Warrants to Mahindra & Mahindra Limited (the holding company) at a price of Rs. 137/- per Warrant for conversion into 1 Equity Share per Warrant in one or more tranches within 18 months from the date of allotment of the Warrant.

- Out of the above Preferential Warrants issued to Mahindra & Mahindra Limited (the holding company), the Company converted 30,00,000 Preferential Warrants into Equity Shares at a face value of Rs.10/- each with a Share Premium of Rs. 127/- each. The Company has received the entire amount of Rs. 4,110 Lakhs against the issue of these shares.

- Further, the Company has received an amount of Rs. 1,472.50 Lakhs @25% of the face value of Rs.137/- per warrant towards the balance Warrants of 42,99,270 issued to Mahindra & Mahindra Limited (the holding company).

- Further the Company has issued 46000 Equity Shares of Rs.10/- each to ESOP holders under the Employees Stock Option Scheme at a premium of Rs.73/- each.

- All the term lenders have 1st charge on immovable assets & 2nd charge on movable assets whereas Working Capital lenders have 1st charge on movable assets & 2nd charge on Immovable assets of the Company.

2. Contingent Liabilities not provided for :

(Rs. in lakhs) Particulars As at 31st As at 31s1 March, 2010 March, 2009 (i) Income Tax Claims against which Company has preferred an appeal (a) Non Deduction of TDS and interest thereon 29.89 29.89 (b) Disallowance of certain expenses 93.04 71.62 (ii) Excise Cases against the Company, appealed by the Company with CESTAT. a) Relating to Cenvat availed on rejected goods 89.27 89.27 b) Interest on Supplementary Invoices 9.59 9.59

- In addition to above, the Company has availed Bill Discounting Facilities under Bill Marketing Scheme, during the year from its customers for an amount of Rs. 1,579.80 Lakhs. (31st March, 2009 Rs. 1,666.32 Lakhs)

3. The Company had imported capital goods under the Export Promotion Capital Goods (EPCG) scheme, of the Government of India, at concessional rates of duty on an understanding to fulfill quantified exports against which future obligation aggregates to USD 276.80 Lakhs (31st March, 2009 USD 283.83 Lakhs).

4. Estimated value of contracts remaining to be executed on capital account (net of advances) and not provided tor Rs. 127.52 Lakhs (31st March, 2009 Rs 432.26 lakhs).

5. Employees Stock Option Scheme (ESOS) was formulated by the Remuneration/Compensation Committee of directors of the Company and approved by it on 26"1 October, 2007. This was subject to the authority vested in it by the shareholders at the General Meeting of the Company held on 25th July, 2007 in accordance with the Securities and Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999. Under this scheme, options entitled to one equity share of Rs.10A each fully paid up were granted as follows :-

i. 2,96,000 options to the employees of the Company at a fixed price of Rs.197/- per share on 26th October, 2007.

ii. 3,91,000 options to the employees of the holding company (M&M) at a fixed price of Rs. 83/- per share on 26th February, 2008

iii. 88,000 and 12,000 options to the directors of the Company at a fixed price of Rs. 197/- per share on 26th October, 2007 and 26th February, 2008 respectively.

iv. 2,50,000 options to the employees of Foreign subsidiaries at a fixed price of Rs. 151.80/- per share on 9th May, 2008.

v. 2,45,000 options to the employees of Foreign subsidiaries at a fixed price of Rs. 102/- per share on 29th July, 2008.

vi. 5,00,000 options to the employee of the Company at a fixed price of Rs. 109/- per share on 26th August, 2008.

a. The equity settled options vest one year from the date of the grant and are exercisable on specified dates in 4 tranches within a period of 5 years from the date of vesting. The number of options exercisable in each tranche is between the minimum of 100 options and maximum of the options vested, except in case of the last date of exercise, where the employee can exercise all the options vested but not exercised till that date.

Options granted, vest in 4 equal instalments on the expiry of 12 months, 24 months, 36 months and 48 months respectively.

c. The Company has adopted the intrinsic value method of accounting for determining compensation cost for its stock based compensation plan. Consequently, salaries, wages, bonus, etc. includes Rs. 133.18 Lakhs (Previous Year: Rs. 299.97 Lakhs) being the amortisation of deferred employee compensation, after adjusting for reversals on account of options lapsed.

Had the Company adopted Fair Value Method in respect of Options granted, the employee compensation cost would have been lower by Rs. 92.71 Lakhs (Previous Year 173.26 lakhs), Profit after tax higher by Rs. 92.71 Lakhs (Previous Year Rs. 173.26 lakhs), and the basic and diluted earning per share would have been higher by Rs. 0.13 (Previous Year Rs.0.25).

d. In respect of options granted during the period, accounting value of options (equal to intrinsic value) was treated as form of employee compensation, to be amortised on a straight line basis over the vesting period. Unamortised portion was disclosed under the head Employee Stock Options outstanding in Schedule 1B as deferred employee compensation expenses.

(b) Defined Contribution Plans -

Amount recognized as an expense and included in the Schedule 12 "Contribution to Provident and other funds" of Personnel Expenses Rs 99.45 Lakhs.

6. In terms of Accounting Standard - 17 (Segment Reporting) issued by the Institute of Chartered Accountants of India, the Company operates in only one segment i.e. Forgings.

7. Amount of borrowing cost capitalised during the period is Rs. Nil (Previous. Year Rs. 119.75 Lakhs)

8. Prior Period Items include Payment of additional VAT liability arising out of VAT audit for the previous years of Rs.71.04 Lakhs (Previous year Stamp Duty related to Demerger of Chakan unit of Amforge Industries Ltd. with the Company of Rs. 132.79 Lakhs).

9. The Company had entered into a Share Subscription Agreement with Wardha Power Company Private Limited on 29th February, 2008 to invest Rs. 325 Lakhs by way of subscription to 8,81,111 Class A Equity Shares of Rs. 10/- each , 11,18,889 Class A 0.01% Redeemable Preference Shares of Rs. 10/- each and 12,50,000 Class C 0.01% Redeemable Preference Shares of Rs. 10/- each. The Company will be entitled to 5 MW of power generated from the Group Captive Power Plant as per the Power Delivery Agreement dated 29lh February, 2008. The Company has paid share application money of Rs. 200 Lakhs for Class A Equity and Redeemable Preference Shares.

Upon the expiry of the Power Purchase Agreement, Class A Equity Shares and Class A 0.01 % Redeemable Preference Shares will be bought back for a total consideration of Re.1/-. One-tenth of Class C Redeemable Preference Shares will be redeemed on every anniversary from the date of issue @ Rs. 0.01 per share.

Consequent to the amendment to the share subscription agreement dated 3rd December 2009, there has been a change in the number of Class A Equity Shares of Rs. 10/- each from 8,81,111 to 8,84,485 and Redeemable Preference Shares of Rs. 10/- each from 11,18,889 to 11,15,515. The shares instead of being allotted by Wardha Power Company Limited, were to be transferred by KSK Energy Limited to the Company.

Accordingly, the Company received 8,84,485 Class A Equity Shares of Rs.10 each of Wardha Power Company Private Limited valuing to Rs. 88.45 Lakhs after adjusting the Share Subscription Money paid by the Company. The balance amount of Rs. 111.55 Lakhs is treated as Share Application Money against 11,15,515 Class A 0.01% Redeemable Preference Shares of Rs. 10/- each. This investment would be amortised over a period of 25 years from the year in which supply of power starts.

10. The Companys subsidiary, Stokes Group Limited, UK has incurred losses and the net worth of the said subsidiary company has eroded. Accordingly during the year, the Company has recognised provision for diminution in the value of investment of Rs. 9,018.59 Lakhs representing 100% of the value of investment.

11. During the year, Company has invested Euro 9 million (Rs. 5,583 Lakhs) in 11% Redeemable, Non-cumulative Preference Shares of Mahindra Forgings International Limited, its wholly owned subsidiary. Said preference shares are redeemable after 7 years. The preference shares, being a monetary item forming part of net investment in a non-integral foreign operation, Exchange difference of Rs. 140.22 Lakhs (loss) arising on the restatement as on 31st March, 2010 is accumulated in foreign currency translation reserve.

12. The Company has made an investment of Rs. 66,952.45 Lakhs in its subsidiary companies, Mahindra Forgings International Limited (holding Jeco Group of companies) and Mahindra Forgings Global Limited (holding Schoneweiss Group of companies). Taking into account the restructuring undertaken by the Company during the entire year, future business plan of the subsidiaries diminution in the value of investments is considered temporary and does not require provisioning.

13. Figures for the previous year have been regrouped and rearranged wherever necessary.

 
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