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Notes to Accounts of MRF Ltd.

Sep 30, 2014

A. The Company''s leasing arrangements are in respect of operating leases for premises (residential, office, godowns, etc). The leasing arrangements, which are not non-cancellable, range between eleven months and three years generally, and are usually renewable by mutual consent on agreed terms. The aggregate lease rentals payable are charged as rent.

b. Movement in provisions as required by Accounting Standard 29 "Provisions, Contingent Liabilities and Contingent Asset".

c. Provision for Taxation has been made in respect of the income presently determined for the period 1st April, 2014 to 30th September, 2014 which is subject to appropriate revision/adjustment on final determination of income for the year to end on 31st March, 2015, relevant to assessment year 2015-16. Further, provision for the assessment year 2014-15 has been determined and adjusted considering the provision already made in the accounts for the year ended 30th September, 2013.

d. Related party disclosures:

(a) Names of related parties and nature of relationship where control exists are as under:

Subsidiary Companies:

i) MRF Corp Ltd.

ii) MRF International Ltd.

iii) MRF Lanka (Private) Ltd.

iv) MRF SG Pte Ltd. ( w.e.f. 23rd July, 2014) - Ref Note q

(b) Names of other related parties and nature of relationship:

Key Management Personnel: i) Mr. K M Mammen, Chairman & Managing Director

ii) Mr. K M Philip, Whole-time Director

iii) Mr. Arun Mammen, Managing Director

iv) Mr. Rahul Mammen Mappillai, Whole-time Director

v) Mr. Ravi Mannath, Company Secretary (w.e.f. 1st April, 2014)

vi) Mr. Madhu P Nainan, Vice President Finance (w.e.f. 1st April, 2014)

Relatives of Key Management Personnel: Mr. Samir Thariyan Mappillai (Son of Chairman & Managing Director)

e. The Company is engaged mainly in the manufacture of Rubber Products such as Tyres, Tubes, Flaps, Tread Rubber and Conveyor Belt. These in the context of Accounting Standard 17 on Segment Reporting are considered to constitute one single primary segment. The Company''s operations outside India do not exceed the quantitative threshold for disclosure envisaged in the Accounting Standard. Non-reportable segments has not been disclosed as unallocated reconciling item in view of its materiality. In view of the above, primary and secondary reporting disclosures for business/geographical segment are not applicable to the Company.

f. The Micro, Small and Medium Enterprises Development Act, 2006 (''MSMED''):

The information given below and that given in Note 9 ''Trade Payables'' regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the company.

g. The total borrowing cost capitalised during the year is Rs. 18.18 crore (Previous year - Rs. 5.29 crore).

h. a) In terms of the guidance on implementing the revised AS 15 issued by the Accounting Standard Board of the Institute of Chartered Accountants of India, the Provident Fund Trust set up by the Company is treated as Defined Benefit Plan since the Company has to meet the shortfall in the fund assets,and interest based on the Government specified minimum rate of return, if any. However, as at the year end, no shortfall remains unprovided for. Further, having regard to the assets of the Fund and the Return on the Investments, the Company does not expect any deficiency in the foreseeable future. In terms of the guidance note issued by the Institute of Actuaries of India, the actuary has provided a valuation of provident fund liability based on the assumptions listed below and determined that there is no shortfall as at 31st March, 2014.

The assumptions used in determining the present value of obligation of the interest rate guarantee under deterministic approach are:

Projection is restricted to five years or earlier, if retirement occurs.

Expected guaranteed interest rate - 8.75%

Discount rate - 8.00%

i) The group gratuity Policy with LIC includes employees of Speciality Coating division divested effective 1st April, 2011.

(ii) Capital Expenditure on research and development during the year, as certified by the management is Rs. 5.44 crore (Previous Year - Rs. 4.22 crore). This information complies with the terms of the R&D recognition granted upto 31st March, 2018 for the Company''s in-house Research and Development activities by the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India, vide their Letter No. TU/IV-RD/118/2014 dated 6th June, 2014.

j. Terms of Repayment and Security Description of Long Term Borrowings:

i) ECB from The Bank of Tokyo - Mitsubishi UFJ, Ltd. availed in December 2011-USD40 Million is secured by a first charge on Plant and Machinery situated at Puduchery Unit. Interest is payable at a rate equal to the 6 months BBA LIBOR plus margin of 1.55% payable half-yearly. The said loan is fully hedged and is repayable in three equal annual instalments at the end of the fourth, fifth and sixth year beginning October, 2015.

iii) ECB(Unsecured) from the Bank of Tokyo - Mitsubishi UFJ, Ltd. availed in October, 2013 amounting to USD 15 Million is for capital expenditure. Interest is payable at a rate equal to the six months BBA LIBOR plus margin of 1.50% payable half yearly. The said Loan is fully hedged and is repayable in three equal annual instalments at the end of fourth, fifth and sixth year beginning October, 2017.

iv) ECB(Unsecured) from the Mizuho Bank, Ltd. availed in January, 2014, amounting to USD 15 Million is availed for capital expenditure. Interest is payable at a rate equal to the six months USD LIBOR plus margin of 1.50% payable half yearly. The said Loan is fully hedged and is repayable in three equal annual instalments at the end of fourth, fifth and sixth year beginning January, 2018.

v) Buyers Line of Credit (Unsecured)of USD 24.09 Million availed from a Bank for Capital Expenditure is repayable after 2 years and 364 days beginning in March, 2017 at varied interest rates as applicable on different drawdown dates. The said Loan is fully hedged.

vi) Interest free Unsecured Loan availed under Sales tax Deferral Scheme is repayable yearly and to end on 1st April, 2019.

vii) Deferred payment credit is repayable along with interest (at varying rates) in 240 consecutive monthly instalments ending in March, 2026.

viii) Fixed Deposits are Unsecured and are repayable as per the terms with interest rates ranging from 8.5% to 9.5%

k. Estimated amount of contracts remaining to be executed on Capital Account, net of advances and not provided for - Rs. 1,460.46 crore (Previous year Rs. 1,031.68 crore)

l. The Company has during the year incorporated a wholly owned subsidiary in Singapore under the name MRF SG Pte Ltd and has subscribed to 10,000 ordinary shares of Singapore Dollar 1 each for Rs. 0.05 crore. An amount of Rs. 6.06 crore was paid as share application money for subscribing to 12,63,200 ordinary shares of Singapore Dollar 1 each which has been issued on the 1st of October, 2014.

m. Contingent Liabilities not provided for:

(i) Guarantees given by the Banks - Rs. 35.18 crore (Previous year - Rs. 39.53 crore)

(ii) Corporate Guarantees given to Banks for and on behalf of wholly owned Subsidiaries - Rs. 310.85 crore (Previous year - Rs. 1.88 crore)

(iii) Letters of Credit issued by the Banks - Rs. 466.05 crore (Previous year - Rs. 317.38 crore)

(iv) Customs Duty on import of equipments and spare parts under EPCG Scheme - Rs. 161.36 crore (Previous year - Rs. 97.25 crore)

(v) Bills discounted with a bank - Rs. 22.14 crore (Previous year - Rs. 3.23 crore).

(vi) Claims not acknowledged as debts:

(a) Disputed Sales Tax demands pending before the Appellate Authorities - Rs. 18.18 crore (Previous year - Rs. 17.38 crore)

(b) Disputed Excise/Customs Duty demands pending before the Appellate Authorities/High Court - Rs. 80.31 crore (Previous year - Rs. 79.66 crore)

(c) Disputed Income Tax Demands - Rs. 63.34 crore (Previous year - Rs. 58.13 crore). Against the said demand, the Company has deposited an amount of Rs. 55.02 crore.

(d) Contested EPF Demands pending before Appellate Tribunal - Rs. 1.10 crore (Previous year - Rs. NIL).

n. Figures are rounded off to nearest lakh.


Sep 30, 2013

A. The Company''s leasing arrangements are in respect of operating leases for premises (residential, office, godowns, etc). The leasing arrangements, which are not non-cancellable, range between eleven months and three years generally, and are usually renewable by mutual consent on agreed terms. The aggregate lease rentals payable are charged as rent.

Notes :

(i) Cash outflow towards warranty provision would generally occur during the next two years. Such claims are netted off from sales.

(ii) Litigation and related disputes represents estimates mainly for probable claims arising out of litigation/disputes pending with authorities under various statutes (i.e. service tax, excise & customs duty, electricity/fuel surcharge, cess, etc). The probability and the timing of the outflow with regard to these matters will depend on the consequent decision/conclusion by the Management.

B. Provision for Taxation has been made in respect of the income presently determined for the period 1st April, 2013 to 30th September, 2013 which is subject to appropriate revision/adjustment on final determination of income for the year to end on 31st March, 2014, relevant to assessment year 2014- 15. Further, provision for the assessment year 2013-14 has been determined and adjusted considering the provision already made in the accounts for the year ended 30th September, 2012.

C. The unsecured loan of Rs. 4 crore given to MRF Lanka (P) Ltd., a wholly owned subsidiary of the Company, has been converted into 99,41,238 Equity shares of SLR 10 each during the year, after obtaining necessary approvals.

D. The Company is engaged mainly in the manufacture of Rubber Products such as Tyres, Tubes, Flaps, Tread Rubber and Conveyor Belt. These, in the context of Accounting Standard 17 on Segment Reporting are considered to constitute one single primary segment. The Company''s operations outside India do not exceed the quantitative threshold for disclosure envisaged in the Accounting Standard. Non-reportable segments have not been disclosed as unallocated reconciling item in view of its materiality. In view of the above, primary and secondary reporting disclosures for business/geographical segment are not applicable to the Company.

E. The total borrowing cost capitalised during the year is Rs. 5.29 crore (Previous Year - Rs. 49.94 crore).

F. a) In terms of the guidance on implementing the revised AS 15 issued by the Accounting Standard Board of the Institute of Chartered Accountants of India, the Provident Fund Trust set up by the Company is treated as Defined Benefit Plan since the Company has to meet the shortfall in the fund assets, and interest based on the Government specified minimum rate of return, if any. However, as at the year end, no shortfall remains unprovided for. Further, having regard to the assets of the Fund and the Return on the Investments, the Company does not expect any deficiency in the foreseeable future. In terms of the guidance note issued by the Institute of Actuaries of India, the actuary has provided a valuation of provident fund liability based on the assumptions listed below and determined that there is no shortfall as at 31st March, 2013.

The assumptions used in determining the present value of obligation of the interest rate guarantee under deterministic approach are:

Projection is restricted to five years or earlier, if retirement occurs.

Expected guaranteed interest rate - 8.50%

Discount rate - 8.00%

(ii) Capital Expenditure on research and development during the year, as certified by the management is Rs. 4.22 Crore (Previous Year - Rs. 7.50 Crore).

This information complies with the terms of the R & D recognition granted upto 31st March, 2014 for the Company''s in-house Research and Development activities by the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India, vide their Letter No. TU/IV-RD/118/2010 dated 30th April, 2010.

G. Security Description and Terms of repayment of Long-Term Borrowings:

i) ECB from The Bank of Tokyo - Mitsubishi UFJ, Ltd. is secured by a first charge on plant and machinery situated at its Pondicherry Unit. Interest is payable at a rate equal to the 6 month BTMU LIBOR plus margin of 1.55% payable half-yearly. The said loan is fully hedged and is repayable in 3 equal annual installments at the end of the 4th, 5th and 6th year beginning October 2015.

ii) The principal amount of debentures, interest, remuneration to Debenture Trustees and all other costs, charges and expenses payable by the Company in respect of debentures are secured by way of a legal mortgage of Company''s land at Gujarat and hypothecation of plant and machinery at the Company''s plants at Ankenpally, Andhra Pradesh and at Perambalur, near Trichy, Tamil Nadu, equivalent to the outstanding amount.

iii) Buyers Line of Credit availed from a bank for capital expenditure is repayable after a moratorium of 3 years beginning in February 2014 at varied interest rates as applicable on different drawdown dates.

iv) Interest free unsecured loan availed under Sales tax Deferral Scheme is repayable yearly and to end on 1st April, 2019.

v) Deferred payment credit is repayable along with interest in 240 consecutive monthly installments ending in March, 2026.

H. Estimated amount of contracts remaining to be executed on Capital Account, net of advances and not provided for - Rs. 1031.68 Crore (Previous year Rs. 220.28 Crore).

I. Contingent Liabilities not provided for:

(i) Guarantees given by the Banks - Rs. 41.41 Crore (Previous Year - Rs. 28.77 Crore).

(ii) Letters of Credit issued by the Banks - Rs. 317.38 Crore (Previous Year - Rs. 183.14 Crore).

(iii) Customs Duty on import of equipments and spare parts under EPCG Scheme - Rs. 97.25 Crore (Previous Year - Rs. 94.62 Crore).

(iv) Bills discounted with a bank - Rs. 3.23 Crore (Previous Year - Rs. 5.89 crore).

(v) Claims not acknowledged as debts:

(a) Disputed Sales Tax demands pending before the Appellate Authorities - Rs. 17.38 Crore ( Previous Year- Rs. 1.73 Crore).

(b) Disputed Excise/Customs Duty demands pending before the Appellate Authorities/High Court - Rs. 79.66 Crore (Previous Year - Rs. 78.65 Crore).

(c) Disputed Income Tax Demands - Rs. 58.13 Crore (Previous Year - Rs. 48.87 Crore). Against the said demand the Company has deposited an amount of Rs. 53.62 Crore.


Sep 30, 2010

1. Sundry Debtors include dues from a subsidiary company Rs.4.97 Crore (Previous Year - Rs.3.79 Crore).

2. Loans and Advances include:

i) Due from an Officer of the Company - Rs.0.04 Crore. Maximum balance due at any time during the year - Rs.0.06 Crore.

(Previous Year - Rs.0.06 Crore and maximum balance due at any time during the year Rs.0.08 Crore) ii) Due from a subsidiary company Rs.0.20 Crore (Previous Year - Rs.0.31 Crore)

3. The Companys leasing arrangements are in respect of operating leases for premises (residential, office, godowns, etc). The leasing arrangements are not non-cancellable, range between eleven months and three years generally and are usually renewable by mutual consent on agreed terms. The aggregate lease rentals payable are charged as rent.

4. The Company decided not to exercise the option available under Notification No.G.S.R. 225(E) dated March 31, 2009 issued by the Government of India optionally providing for a modification in accounting certain foreign currency items pursuant to AS-11 prescribed under Section 211 (3C) of the Companies Act, 1956. Accordingly, the treatment in that respect continues to be in conformity with AS-11.

5. The total borrowing cost capitalised during the year is Rs.5.90 Crore (Previous Year - Rs.12.60 Crore).

6. a) In terms of the guidance on implementing the revised AS 15 issued by the Accounting Standard Board of the Institute of Chartered Accountants of India, the Provident Fund Trust set up by the Company is treated as Defined Benefit Plan since the Company has to meet the shortfall in the fund assets, if any. Pending the issuance of the Guidance note from the Actuarial Society of India, the Companys actuary has expressed his inability to reliably measure the Provident Fund liability. However, as at the year end, no shortfall remains unprovided for. Further, having regard to the assets of the Fund and the Return on the Investments, the Company does not expect any deficiency in the foreseeable future.

7. Interest paid to Chairman & Managing Director and Managing Director on Fixed Deposits at the rates prescribed in the Companies (Acceptance of Deposits) Rules, 1975 - Rs.0.24 Crore (Previous Year - Rs.0.02 Crore). Fixed Deposits outstanding as at the year end - Rs. 3.23 Crore (Previous year - Rs.0.95 Crore)

8. Related Party disclosures:

(a) Names of related parties and nature of relationship where control exists are as under: Subsidiary Companies: i) MRF Corp Ltd.

ii) MRF International Ltd. iii) MRF Lanka (P) Ltd.

(b) Names of other related parties with whom transactions have taken place during the year:

Key Management Personnel (KMP): i) Mr. K.M. Mammen, Chairman & Managing Director

ii) Mr. K.M. Philip, Whole-time Director

iii) Mr. Arun Mammen, Managing Director Relatives of Key Management

Personnel: i) Mr. Rahul Mammen Mappillai (Son of Chairman & Managing Director)

9. The amount due and paid during the year to "Investor Education and Protection Fund" is Rs.0.16 Crore (Previous Year - Rs.0.13 Crore).

10. The Company is engaged mainly in the manufacture of Rubber Products such as Tyres, Tubes, Flaps, Tread Rubber and Conveyor Belt. These in the context of Accounting Standard 17 on Segment Reporting are considered to constitute one single primary segment. The Companys operations outside India do not exceed the quantitative threshold for disclosure envisaged in the Accounting Standard. Non-reportable segments have not been disclosed as unallocated reconciling item in view of their materiality. In view of the above, primary and secondary reporting disclosures for business/geographical segment are not applicable to the Company.

11. Estimated amount of contracts remaining to be executed on Capital Account, net of advances and not provided for - Rs.778.46 Crore. (Previous Year - Rs.384.20 Crore).

12. Contingent Liabilities not provided for:

(i) Guarantees given by the banks - Rs.1 7.75 Crore (Previous Year - Rs.16.87 Crore).

(ii) Letters of Credit issued by the banks - Rs.21 7.65 Crore (Previous Year - Rs.115.23 Crore).

(iii) Customs duty on import of equipments and spare parts under EPCG Scheme - Rs.36.92 Crore (Previous Year - Rs.23.94 Crore).

(iv) Bills discounted with a bank - Rs. Nil. (Previous Year - Rs.16.44 Crore).

(v) Claims not acknowledged as debts:

(a) Disputed Sales / Purchase Tax demands - Rs.3.09 Crore (Previous Year - Rs.3.20 Crore).

(b) Disputed Excise/Customs Duty demands - Rs.83.15 Crore (Previous Year - Rs.80.49 Crore).

(c) Disputed Income Tax Demands - Rs.1 7.1 7 Crore (Previous Year - Rs.4.88 Crore).

(d) Contested ESIC Demands - Rs.0.06 Crore (Previous Year - Rs.0.19 Crore).

13. Figures are rounded off to nearest lakh. Figures below Rs.50,000 are denoted by an *.

14. Previous years figures have been regrouped, wherever necessary.


Sep 30, 2009

1. Sundry Debtors include due from a subsidiary Company Rs.3.79 Crore (Previous Year - Rs.2.23 Crore)

2. Loans and Advances include:

i) Due from an Officer of the Company - Rs.0.06 Crore. Maximum balance due at any time during the year - Rs.0.08 Crore. (Previous Year - Rs.0.08 Crore and maximum balance due at any time during the year Rs.0.10 Crore)

ii) Due from a subsidiary Company Rs.0.31 Crore (Previous Year - Rs.0.15 Crore)

3. The Companys leasing arrangements are in respect of operating leases for premises (residential, office, godowns, etc). The leasing arrangements, which are not non-cancellable, range between eleven months and three years generally and are usually renewable by mutual consent on agreed terms. The aggregate lease rentals payable are charged as rent.

4. The Company enters into Forward Exchange Contracts, Currency Swaps and Interest Rate Swaps being derivative instruments, which are not intended for trading or speculative purposes, but for hedging purposes, to establish the amount of reporting currency required or available at the date of settlement of certain payables and receivables.

5. The Company decided not to exercise the option available under Notification No. G.S.R. 225(E) dated March 31, 2009 issued by the Government of India optionally providing for a modification in accounting certain foreign currency items pursuant to AS-11 prescribed under Section 211 (3C) of the Companies Act, 1956. Accordingly, the treatment in that respect continues to be in conformity with AS-11.

6. The total borrowing cost capitalised during the year is Rs.12.60 Crore (Previous Year - Rs.6.29 Crore).

7. (a) In terms of the guidance on implementing the revised AS 15 issued by the Accounting Standard Board of the Institute of Chartered Accountants of India, the Provident Fund Trust set up by the Company is treated as defined benefit plan since the Company has to meet the shortfall in the fund assets, if any. However, as at the year end, no shortfall remains unprovided for. Further, having regard to the assets of the Fund and the Return on the Investments, the Company does not expect any deficiency in the foreseeable future. Accordingly, other related disclosures in respect of Provident Fund have not been disclosed.

8. Interest paid to Chairman & Managing Director and Managing Director on Fixed Deposits at the rates prescribed in the Companies (Acceptance of Deposits) Rules, 1975 - Rs.0.02 Crore (Previous Year - Rs.0.01 Crore).

9. Related Party disclosures:

(a) Names of related parties and nature of relationship where control exists are as under:

Subsidiary Companies:

i) MRF Corp. Ltd. ii) MRF International Ltd. iii) MRF Lanka (P) Ltd.

(b) Names of other related parties with whom transactions have taken place during the year:

Key Management Personnel:

i) Mr. K.M. Mammen, Chairman & Managing Director

ii) Mr. K.M. Philip, Whole-time Director iii) Mr. Arun Mammen, Managing Director

Relatives of Key Management

Personnel:

i) Mrs. K.M. Mammen Mappillai

ii) Mr. Rahul Mammen Mappillai

10. The amount due and paid during the year to "Investor Education and Protection Fund" is Rs.0.13 Crore (Previous Year - Rs.0.13 Crore).

11. The Management is of the view that having regard to the future business projections and plans and considering the strategic and long term nature of investments in a subsidiary, the decline in the book value of investment is temporary in nature requiring no provision.

12. The Company is engaged mainly in the manufacture of Rubber Products such as Tyres, Tubes, Flaps, Tread Rubber and Conveyor Belt. These in the context of Accounting Standard 17 on Segment Reporting are considered to constitute one single primary segment. The Companys operations outside India do not exceed the quantitative threshold for disclosure envisaged in the Accounting Standard. Non-reportable segments have not been disclosed as unallocated reconciling item in view of their materiality. In view of the above, primary and secondary reporting disclosures for business/geographical segment are not applicable to the Company.

13. Estimated amount of contracts remaining to be executed on Capital Account, net of advances and not provided for - Rs.384.20 Crore. (Previous Year - Rs.153.13 Crore).

14. Contingent Liabilities not provided for:

(i) Guarantees given by the banks - Rs.16.87 Crore (Previous Year - Rs.21.24 Crore).

(ii) Letters of Credit issued by the banks - Rs.115.23 Crore (Previous Year - Rs.144.74 Crore).

(iii) Customs duty on import of equipments and spare parts under EPCG Scheme - Rs.23.94 Crore (Previous Year - Rs.40.12 Crore).

(iv) Bills discounted with a bank - Rs.16.44 Crore (Previous Year - Rs.Nil).

(v) Claims not acknowledged as debts:

(a) Disputed Sales / Purchase Tax demands - Rs.3.20 Crore (Previous Year - Rs.18.06 Crore).

(b) Disputed Excise/Customs Duty demands - Rs.80.49 Crore (Previous Year - Rs.83.02 Crore).

(c) Disputed Income Tax Demands - Rs.4.88 Crore (Previous Year - Rs.Nil).

(d) Contested ESI Demands - Rs.0.19 Crore (Previous Year - Rs.0.30 Crore).

15. Figures are rounded off to nearest lakh. Figures below Rs.50,000 are denoted by an.

16. Previous years figures have been regrouped, wherever necessary.

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