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Mahindra Composites Ltd. Notes to Accounts, Mahindra Composites Ltd. Company
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Notes to Accounts of Mahindra Composites Ltd.

Mar 31, 2014

I) The Company has only one class of shares referred to as equity shares having a face value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends to its shareholders which are proposed by the Board of Directors and approved by the shareholders at the Annual General Meeting. In the event of liquidation of Company, the equity shareholders will be entitled to receive any of the remaining assets of the Company, after distribution of preferential amounts. However, no such preferential amounts exist currently. The distribution will be in proportion to the number of equity shares held by the shareholders.

ii) Refer to Note 29 for shares granted and issued under the Employee Stock Option Scheme.

iii) Refer to Note 38 regarding changes in shareholding pattern and proposed scheme of merger.

* There are no amounts which are due and payable to the Investor Education & Protection Fund.

# Based on the information available with the Company, no parties have been identified as "supplier" within the meaning of The Micro, Small and Medium Enterprises Development Act, 2006.

*Note : In giving the above information, the Company has taken the view that spares and components as referred to in clause 5(Viii)(C) of Part II of Schedule VI covers only such items as go directly on to production

(A) In respect of funded benefits with respect to gratuity, the fair value of plan assets represents the amounts invested through "Insurer Managed Funds". However, the nature of assets is not provided by the insurance company.

(B) Contributions expected to be paid to the plan during the next financial year is Rs.1,00,000 (Previous year Rs.63,000).

a) The Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of the obligations.

b) Expected rate of return on plan assets: This is based on our expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.

c) Salary escalation rate: The estimates of future salary increases considered, takes into account the inflation, seniority, promotion and other relevant factors.

Notes:

1. Inter-segment transfers have been priced at market rates.

2. (a) Polymer composite compounds includes manufacture of all compounds and services in respect thereof.

(b) Polymer composite components includes manufacture of all components and services in respect thereof.

(c) Others represents manufacture of moulds.

1. EMPLOYEES STOCK OPTIONS SCHEMES (ESOS):

In the Annual General Meeting held on 31st July, 2009, the shareholders have approved a maximum of 90,000 shares to be vested under an ''Employee Stock Options Scheme'', for the permanent employees and directors of the Company. Shares to the non-executive directors would be limited to 18,300 equity shares. The stock options were granted at an exercise price of Rs.47.40 per option. The options will vest over a period of one to three years from the date of grant and exercisable over a period of five years from the respective dates of vesting.

Out of the options outstanding at the end of the year 62,993 (Previous year 64,337) options have vested, which have not been exercised.

During the current year, no fresh options were granted. Information in respect of options granted during the earlier year is as under:

The fair value of options granted during the previous year on 31st July, 2009 is Rs.26.24 per option.

In respect of options granted under the Employee Stock Option Plan, in accordance with guidelines issued by SEBI, the accounting value of the options is accounted as defined employee compensation, which is amortized on a straight line basis over the period between the date of grant of options and the eligible dates for conversion into equity shares. Consequently, salaries, wages & bonus include Rs.269,100 (Previous year: Rs.269,100) being the amortization of deferred employee compensation.

Had the Company adopted fair value method in respect of options granted on 31st July, 2009, the total amount that would have been amortised over the vesting period is Rs.2,361,600.

2. CONTINGENT LIABILITIES NOT PROVIDED FOR

For the year ended For the year ended Particulars 31st March, 2014 31st March, 2013

Rs. Rs.

Show cause cum demand notice received from excise authorities disputed by the Company 2,816,726 551,862

Disputed Income Tax demand under Appeal 2,740,030 -

Total 5,556,756 551,862

Future cash outflows in respect of the above matters are determinable only on receipt of judgements/decisions pending at various forums/authorities.

3. Changes in shareholding pattern and proposed scheme of merger

As a part of Mahindra Group Strategy to consolidate the auto components business and formation of a global alliance with CIE Automotive, Spain., the Board of Directors of the Company at their meeting held on 15th June, 2013, duly considering the recommendation of the Audit Committee and subject to regulatory approvals, have approved a Scheme of Amalgamation under Sections 391 to 394 of the Companies Act,1956, involving merger of the company with Mahindra CIE Automotive Limited (MCIE) (Formerly known as Mahindra Forgings Limited) Appointed date of the Scheme is 1st October, 2013. ("the Scheme").

As part of the above arrangement and in accordance with the Share Purchase Agreement dated 15th June, 2013, 1,341,203 equity shares representing 29.95% of the paid up equity share capital have been transferred by Mahindra & Mahindra Limited and 220,000 equity shares representing 4.91% of the paid up equity share capital have been transferred by Mahindra Holdings Limited to Participaciones Internacionles Autometal DOS, S.L. ("PIA 2") in October''2013. Consequently PIA has become a promoter and the Board of Directors of the company and the committees thereof have been reconstituted.

Also, P1A 2 (Acquirer) along with Autometal S.A. and CIE Automotive S.A. , in their capacity as "Persons acting in Concert" with the Acquirer, made an open offer for acquisition of 1,164,616 equity shares of Rs.10 each representing 26.01% of the Total Equity Capital (including potential equity shares of ESOP scheme) from the public shareholders of the Company at a price of Rs.74.70 per share as described in Detailed Public Statement dated 15th June, 2013 and Letter of Offer dated 13th September, 2013. Consequent to the Open Offer, the Acquirer acquired 1,164,616 equity shares representing 26.01 % of the paid up capital of the Company. Accordingly, the Acquirer now hold 60.87% of the total equity capital of the company (including potential equity shares of ESOP scheme).

Securities and Exchange Board of India ("SEBI") vide its observation letter dated 7th March, 2014 has conveyed its comments on the draft Schemes to the BSE Limited ("BSE"), the designated stock exchange.

Pursuant to the above SEBI letter, the BSE Limited vide its Observation letter dated 7th March 2014 has conveyed its no-objection to file the Schemes with the Hon''ble High Court of Bombay, subject to certain conditions specified therein.

Accordingly, on 14th March, 2014, the Company has filed applications under Sections 391 to 394 of the Companies Act, 1956 before the Hon''ble High Court Of Judicature at Bombay, for seeking its directions for holding meetings of its equity shareholders and holding/ dispensation of meetings of its secured and unsecured creditors, to seek their approvals to the said Scheme. The Company is/has also initiating process of seeking approval of the public shareholders to the said scheme through a postal ballot/e- voting process as required under the provisions of the relevant circulars issued by SEBI.

Pending the scheme of merger becoming effective retrospectively from 1st October, 2013, ("appointed date") the Company is undertaking the business in trust on behalf of Mahindra CIE Automotive Limited as on 31st March,2014 and accordingly accounts have been prepared on going concern basis which ultimately will get reflected and necessary entries will be passed in the books of accounts of Mahindra CIE Automotive Limited post the order of Honourable High Court becoming effective on being filed with the Registrar of Company.

4. PREVIOUS YEAR COMPARATIVES

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 OPTIONS SCHEMES (ESOS):

In the Annual General Meeting held on 31st July, 2009, the shareholders have approved a maximum of 90,000 shares to be vested under an ''Employee Stock Options Scheme'', for the permanent employees and directors of the Company. Shares to the non-executive directors would be limited to 18,300 equity shares. The stock options were granted at an exercise price of Rs.47.40 per option. The options will vest over a period of one to three years from the date of grant and exercisable over a period of five years from the respective dates of vesting.

The compensation costs of the stock options granted to employees are accounted by the Company using the intrinsic value method.

In respect of options granted under the Employee Stock Option Plan, in accordance with guidelines issued by SEBI, the accounting value of the options is accounted as defined employee compensation, which is amortized on a straight line basis over the period between the date of grant of options and the eligible dates for conversion into equity shares. Consequently, salaries, wages & bonus include Rs.269,100 (Previous year: Rs.269,100) being the amortization of deferred employee compensation.

2. CONTINGENT LIABILITIES NOT PROVIDED FOR

For the year ended For the year ended Particulars 31st March, 2013 31st March, 2012 Rs. Rs.

Show cause cum demand notice received from excise authorities disputed by the Company pending in appeal 551,862 762,485

3. EXPECTED EXPENSES ON ACCOUNT OF KEEPING A PROJECT ON HOLD

During the previous year, the Company had obtained the approval of both Board of Directors and the Shareholders for an investment in GRP pipe project to meet the anticipated demand in infrastructure projects. Given the current slowdown in the approval cycle, the GRP pipe project is being put on hold and as a matter of abundant precaution the expected expenses as a result of the same are being provided for. The movement in the same is shown as under:

4. PREVIOUS YEAR COMPARATIVES

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


Mar 31, 2012

1. EMPLOYEES STOCK OPTIONS SCHEMES (ESOS):

In the Annual General Meeting held on 31st July, 2009, the shareholders have approved a maximum of 90,000 shares to be vested under an 'Employee Stock Options Scheme', for the permanent employees and directors of the Company. Shares to the non-executive directors would be limited to 18,300 equity shares. The stock options were granted at an exercise price of Rs. 47.40 per option. The options will vest over a period of one to three years from the date of grant and exercisable over a period of five years from the respective dates of vesting.

Out of the options outstanding at the end of the year 34,343 (Previous year 14,255) options have vested, which have not been exercised.

During the current year, no fresh options were granted. Information in respect of options granted during the earlier year is as under:

The fair value of options granted during the previous year on 31st July, 2009 is Rs. 26.24 per option.

The fair value has been calculated using the Black Scholes Options Pricing Model and the significant assumptions made in this regard

2. EXPECTED EXPENSES ON ACCOUNT OF KEEPING A PROJECT ON HOLD

During the year, the Company had obtained the approval of both Board of Directors and the Shareholders for an investment in GRP pipe project to meet the anticipated demand in infrastructure projects. Given the current slowdown in the approval cycle, the GRP pipe project is being put on hold and as a matter of abundant precaution the expected expenses as a result of the same are being provided for.

3. PREVIOUS YEAR COMPARATIVES

The Revised Schedule VI has become effective from 1st 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, 2011

2010-2011 2009-2010 Rupees Rupees

1. Contingent liabilities not provided for:

(a) Show cause cum demand notice received from excise authorities disputed by the company (the cash outflow would depend upon the final resolution of the matter by the excise authorities.) 639,073 189,106

(b) Unexpired letter of credit (these are established in favour of vendors but cargo/ material under aforesaid letter of credit are yet to be received as on year end date. Cash outflow expected on the basis of payment terms as mentioned in letter of credit) 6,676,356 -

(c) Bank guarantees (bank guarantees are provided under contractual/legal obligation. No cash outflow is expected) 301,880 -

2. Under the Export Promotion Capital Goods Scheme (EPCG), the company has imported capital goods / spares thereof on payment of concessional custom duty. This concession is subject to the company fulfilling the export obligation of USD 99,098 which is to be met within a period of 8 years. The company has fulfilled the export obligations but the procedural formalities of closing the license and retrieving the bank guarantee is pending.

3. Particulars of raw materials and bought-out components consumed

Notes:

(a) The consumption has been arrived at by adding to the opening stocks, the purchases during the year and deducting there from the closing stocks and therefore includes the excesses / shortages on physical count, write off of obsolete items, etc.

(b) The consumption in value shown in 'others' is a balancing figure based on the total consumption shown in the profit and loss account.

4. Value of imported and indigenous raw materials, bought-out components and spare parts consumed: Raw materials and bought-out components

Note: In giving the above information, the company has taken the view that spares and components as referred to in clause 4D(c) of Part II of Schedule VI covers only such items as go directly on to production.

5. Research and development expenses amounting to Rs. 2,307,402 (Previous Year : Rs. 2,259,096) debited to the profit and loss account, based on allocations made and costs estimated by the company and relied upon by the auditors.

6. Repairs to machinery include spare parts consumed Rs. 2,312,293 (Previous Year: Rs. 1,412,900).

7. Details of Employee Benefits as required by the Accounting Standard 15 (Revised) Employee Benefits are as follows:

(K) Other disclosure:

a) The discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of the obligations.

b) Expected rate of return on plan assets: This is based on our expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.

c) Salary escalation rate: The estimates of future salary increases, considered takes into account the inflation, seniority, promotion and other relevant factors.

The above is as determined by the actuary and relied upon by the auditors.

8. Information regarding capacities, production, stocks and sales / services

Notes:

(1) Licenced capacity in respect of 'Moulded Components' is as disclosed in the prescribed memoranda filed with the Secretariat for Industrial Approvals (SIA), Department of Industrial Development, in terms of notification no. S.0.577(E) dated July 25, 1991.

(2) Installed capacity is certified by management and not verified by the auditors as it is a technical matter.

(3) Including production used for captive consumption.

(4) Although the licenced and installed capacities in respect of 'Moulded Components' above are stated in tonnes, the actual production etc. has been stated in numbers as this is the form of measurement in which these are normally produced / sold. It has not been possible to indicate the licenced and installed capacities in numbers as the same will depend on product mix from year to year.

(5) The actual production disclosed against moulds manufactured is the number of such moulds sold during the year as the company considers a mould as "meant for sale' only when it is actually sold. Actual production of moulds includes moulds produced by third parties on behalf of the company.

(6) Figures in bracket relate to the previous year.

9. Based on the information available with the company, no creditors have been identified as "supplier" within the meaning of The Micro, Small and Medium Enterprises Development Act, 2006.

10. Segment Information:

Notes:

1. Inter-segment transfers have been priced at market rates.

2. (a) Polymer composite compounds includes manufacture of all compounds and services in respect thereof.

(b) Polymer composite components include manufacture of all components and services in respect thereof.

(c) Others represent manufacture of moulds.

11. (ii) Lease payments recognised in the statement of profit & loss account for the period is Rs. 2,909,484 (Previous Year Rs. 2,656,484).

(iii) The lease agreement is in respect of land and building and for a period of nine years.

12. Employee Stock Option Scheme (ESOS):

In the Annual General Meeting held on 31st July, 2009, the shareholders have approved a maximum of 90,000 shares to be vested under an "Employee Stock Options Scheme', for the permanent employees and directors of the company. Shares to the non- executive directors would be limited to 18,300 equity shares. The stock options were granted at an exercise price of Rs. 47.40 per option. The options will vest over a period of one to three years from the date of grant and exercisable over a period of five years from the respective dates of vesting.

The compensation costs of the stock options granted to employees are accounted by the company using the intrinsic value method.

In respect of options granted under the employee stock option plan, in accordance with guidelines issued by SEBI, the accounting value of the options is accounted as defined employee compensation, which is amortized on a straight line basis over the period between the date of grant of options and the eligible dates for conversion into equity shares. Consequently, salaries, wages & bonus include Rs. 2.69 lacs (Previous Year Rs. 1.79 lacs) being the amortization of deferred employee compensation.

13. The previous year's figures have been regrouped wherever necessary to conform with current year's classification.


Mar 31, 2010

2009-2010 2008-2009 Rupees Rupees

1. Contingent liabilities not provided for:

(a) Show cause cum demand notice received from Excise authorities disputed by the Company 189,106 189,106

2. Under the Export Promotion Capital Goods Scheme (EPCG), the Company has imported capital goods/spares thereof on payment of concessional custom duty. This concession is subject to the Company fulfilling the export obligation of USD 99,098 which is to be met within a period of 8 years. The Company has fulfilled the export obligations but the procedural formalities of closing the license and retrieving the Bank guarantee is pending.

3. Research and Development expenses amounting to Rs.2,259,096 (Previous Year Rs. 1,700,939) debited to the Profit and Loss Account, based on allocations made and costs estimated by the Company and relied upon by the auditors.

4. Based on the information available with the Company, no creditors have been identified as "supplier" within the meaning of The Micro, Small and Medium Enterprises Development Act, 2006,

5. Related Party Disclosures

(A) Name of the related party and nature of relationship where control exists:

Name of related party Nature of relationship

Nil Nil

(B) Related party Transactions:

6. Employee Stock Option Scheme (ESOS):

In the Annual General Meeting held on 31st July, 2009, the shareholders have approved a maximum of 90,000 shares to be vested under an Employee Stock Options Scheme, for the permanent employees and Directors of the Company. Shares to the Non- Executive Directors would be limited to 18,300 Equity Shares. The stock options were granted at an exercise price of Rs.47.40 per option. The options will vest over a period of one to three years from the date of grant and exercisable over a period of five years from the respective dates of vesting.

The compensation costs of the stock options granted to employees are accounted by the Company using the intrinsic value method.

7. The previous years figures have been regrouped wherever necessary to conform with current years classification.

 
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