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Notes to Accounts of Nelco Ltd.

Sep 30, 2014

Note 1

A. Background

The Company was formed in the year 1940 as National Ekco Radio & Engineering Co Ltd (JV between E K Cole & Fazalbhoy). The Company became "Nelco Limited" in 1969.

In 1969, the Company was pre-dominantly the manufacturer of audio-visual appliances like Television, calculator, Servo Voltage Stabilizers and such other office equipment. In late 90''s the Company entered in Automation business (SCADA, Traction & Drives), which was divested in 2010. In 1995 the Company through its subsidiary, Tatanet Services Limited (TNSL) first installed VSAT captive hub for Tata Group Companies connectivity and in 2003 it entered into the public domain in VSAT services.

Nelco is today focused in providing systems and solutions in the areas of VSAT connectivity & Managed Services. It also provides solutions in the area of Integrated Security & Surveillance

The Company offers a range of innovative and customized solutions for businesses and government institutions under one roof.

The financial year of the Company is from 1st October -30th September.

(iii) The company has issued only one class of equity shares having a par value of Rs. 10 /- per share. Each holder of equity shares is entitled to one vote per share. The company declares and pays dividend in Indian Rupees. The dividend proposed by Board of Directors is subject to the approval of shareholders in the ensuing Annual General Meeting. In the event of liquidation of the company, the holder of equity shares will be entitled to receive remaining assets of the company after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the share holders.

Note: (i) Cash credit with banks are secured by hypothecation of all tangible moveable assets, including stocks of raw materials, finished goods, goods-in-process, book debts, monies receivable and a second charge on fixed assets of the Company.

(ii) Term Loans from The Zoroastrian Co-operative Bank Limited are secured by pari-passu first charge both on the present and future fixed assets, (all tangible moveable machinery and plant) of the company.

* There are no amounts due and outstanding to be credited to Investor Education and Protection Fund.

(i) Other Trade receivables include Rs. 620.71 lakhs (Previous year: Rs.1,043.66 lakhs), which in accordance with the terms of contracts, were not due for payment as at the year end.

*represents payment of Rs. 7.00 lakhs (Previous year Rs. 3.35 lakhs ) for taxation matters to an affiliated firm in view of the networking arrangement which is registered with the Institute of Chartered Accountant of India.

2. The Board of Directors of the Company at its meeting held on April 03, 2014, inter alia, has approved the restructuring of the Company''s Automation & Control segment , by restricting operations and reducing expenditure with a view to minimize losses. This will be subject to necessary approvals / consents / permissions. However, the Company will continue to focus on building its position in the Network Systems segment.

3. The Company has accumulated losses as at 30th September,2014 which has substantially eroded the Company''s net worth. Notwithstanding this, these financial have been prepared on going concern basis in view of support letter from the parent company and the business plan of the Company.

4. In the year 2006, the Company filed arbitration proceedings against Jawaharlal Nehru Port Trust (JNPT) for enforcement of its claim in respect of the additional work carried out, wrongful deduction of liquidated damages and encashment of bank guarantee by JNPT. The Arbitration award was passed in favour of the Company on 06th February, 2012. The said award, however, was challenged by JNPT in the Hon''ble Bombay High Court which dismissed the plea on 06th February, 2014 and awarded the claim to the Company. JNPT paid in June, 2014 Rs 1,303.40 lakhs as decretal dues (including interest and costs) to the Company (of which Rs 62.50 lakhs is included in other income as provision no longer required written back).

5. In respect of equipments given on operating leases, no refundable deposits are taken and the lease rentals for the year of Rs. 244.43 lakhs (Previous Year: Rs. 319.14 lakhs) recognized in the Statement of Profit and Loss are included under Income from Services Rendered.

6. Contingent Liabilities (Rs. in Lakhs)

Particulars 2013-141 2012-73

a) Guarantees issued by the company on behalf of its subsidiary (amount of loan outstanding 2,000.00 2,000.00 against this guarantee is Rs. 371.00 lakhs (Previous year: Rs. 335.70 lakhs ))

b) Claims against the company not acknowledged as debt comprises of:

i) Excise duty, sales tax and service tax claims disputed by the company relating to 654.77 362.46 issues of applicability and classification

ii) Custom duty (excluding claims where amounts are not ascertainable) 29.28 29.28

c) Taxation matters

Demand against the company not acknowledged as debt and not provided for, relating 631.33 - to issues of deductibility and taxability in respect of which company is in appeal Future cash outflows in respect of the above matters are determinable only on receipt of judgments/decisions pending at various forums / authorities Provident Fund:

The Company makes contribution towards provident fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. The provident fund is administered by the Trust formed by the Company. The Company is required to contribute a specified percentage of salary to the retirement benefit schemes to fund the benefit.

The Rules of the Company''s provident fund administered by a Trust require that if the Board of Trustees are unable to pay interest at the rate declared by Central Government under para 60 of the Employees'' Provident Fund Scheme, 1952 then the shortfall shall be made good by the Company. Having regard to the assets of the fund and the return on the investments, the Company does not expect any shortfall in the foreseeable future.

III. Long Term Employee Benefit - Compensated Absences

Provision for Compensated Absences has been made on the basis of actuarial valuation report as at the Balance Sheet date. The charge for the year of Rs. 41.42 lakhs (Previous Year: Rs. 15.61 lakhs)has been included in the Statement of Profit and Loss.

* Considered to the extent that there are compensating timing differences, reversal of which will result in sufficient income against which this can be realized.

7 Notes:

The consumption in value has been ascertained on the basis of opening stock plus purchases less closing stock and includes adjustment in respect of write-off of obsolete raw materials and components.

8. The tax year for the company being the year ending 3 1st March, the provision for taxation for the period is the aggregate of the provision made for the six months ended 3 1st March, 2014 and the provision based on the figures for the remaining six months up to 30th September, 2014, the ultimate tax liability of which will be determined on the basis of the figures for the period 1st April, 2014 to 31st March, 2015.

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


Sep 30, 2013

A Background

The Company was formed in the year 1940 as National Ekco Radio & Engineering Co Ltd (JV between E K Cole &Fazalbhoy). The Company became "Nelco Limited" in I969.

In I 969, the Company was pre-dominantly the manufacturer of audio-visual appliances like Television, calculator, Servo Voltage Stabilizers and such other office equipment. In late 90''s the Company entered in Automation business (SCADA, Traction & Drives), which was divested in 20I0. In I995 the Company through its subsidiary, Tatanet Services Limited (TNSL) first installed VSAT captive hub for Tata Group companies'' connectivity and in 2003 it entered into the public domain in VSAT services.

Nelco is today focused in offering solutions in the areas of Integrated Security & Surveillance, VSAT connectivity & Managed Services. The Company offers a range of innovative and customized solutions for businesses and government institutions under one roof.

(i) The company has issued only one class of equity shares having a par value of Rs.I0 /- per share. Each holder of equity shares is entitled to one vote per share. The company declares and pays dividend in Indian Rupees. The dividend proposed by Board of Directors is subject to the approval of shareholders in the ensuing Annual General Meeting. In the event of liquidation of the company, the holder of equity shares will be entitled to receive remaining assets of the company after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the share holders.

Note: (i) Cash credit with banks and Buyer''s line of credit are secured by hypothecation of all tangible moveable assets, including stocks of raw materials, finished goods, goods-in-process, book debts, monies receivable and a second charge on fixed assets of the Company.

(ii) Term Loans from The Zoroastrian Co-operative Bank Limited are secured by pari-passu first charge both on the present and future fixed assets, (all tangible moveable machinery and plant) of the company.

1 In an earlier year, the Company had transferred the Traction electronics, Supervisory Control and Data Acquisition (SCADA) and Industrial drives businesses (together referred to as "Businesses")to Crompton Greaves Limited (CGL).

The Company entered into a final settlement agreement with CGL considering all claims and differences that CGL had on account of all the associated risks and liabilities of the transferred Businesses under the Original Agreement and the effects of these were given to in the financial statement for the year ended September 30, 20II. Further, during the previous year, the Company had received Rs.267.89 lakhs on account of recovery of the liquidated damages in respect of these businesses.

2 In respect of equipments given on operating leases, no refundable deposits are taken and the lease rentals recognised in the Statement of Profit and Loss for the period included under Income from Services Rendered under Income from Operations aggregate to Rs. 3I9.I4 lakhs (Previous Year: Rs. 343.0I Lakhs).

3 Contingent Liabilities (Rs. in Lakhs)

Particulars 2012-13 2011-12

a) Guarantees issued by the company on behalf of its subsidiary 2,000.00 2,000.00 (amount of loan outstanding against this guarantee is Rs. 335.70 lakhs

(Previous year: Rs. II6.00 lakhs))

b) Claims against the company not acknowledged as debt comprises of:

i) Excise duty, sales tax and service tax claims disputed by the company 362.46 4I6.29 relating to issues of applicability and classification

ii) Other matters (excluding claims where amounts are not ascertainable) 29.28 29.28

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

* above excludes charge for gratuity, provision for leave encashment as separate actuarial valuation figures are not available.

The above information regarding micro enterprises and small enterprises has been determined on the basis of information available with the company. This has been relied upon by the auditors.

Provident Fund:

The Company makes contribution towards provident fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. The provident fund is administered by the Trust formed by the Company. The Company is required to contribute a specified percentage of salary to the retirement benefit schemes to fund the benefit.

The Rules of the Company''s provident fund administered by a Trust require that if the Board of Trustees are unable to pay interest at the rate declared by Central Government under para 60 of the Employees'' Provident Fund Scheme,I952 then the shortfall shall be made good by the Company. Having regard to the assets of the fund and the return on the investments, the Company does not expect any shortfall in the foreseeable future.

Note: The above disclosure is made to the extent of information given by the actuaries.

III. Long Term Employee Benefit - Compensated Absences

Provision for Compensated Absences has been made on the basis of actuarial valuation report as at the Balance Sheet date. The charge for the year of Rs.I5.6I lakhs (Previous Year: Rs. 45.22 lakhs) has been included in the Statement of Profit and Loss.

* Considered to the extent that there are compensating timing differences, reversal of which will result in sufficient income against which this can be realized.

Note : Figures in brackets pertain to the previous year

4 The Company has incurred loss for the year and the accumulated losses as at 30th September,2013 has substantially eroded the Company''s net worth. Notwithstanding this, these financial statements have been prepared on going concern basis in view of the financial support of the parent company and the business plan of the Company.

5 The tax year for the company being the year ending 3Ist March, the provision for taxation for the period is the aggregate of the provision made for the six months ended 3Ist March, 20I3 and the provision based on the figures for the remaining six months up to 30th September, 20I3, the ultimate tax liability of which will be determined on the basis of the figures for the period Ist April, 20I3 to 3Ist March, 20I4.

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


Sep 30, 2010

1. During the previous year, the Company had extended its financial year to eighteen months to end on September 30, 2009. The Current financial year is for 12 months ended September 30, 2010.

2. On April 29, 2010, the Board of Directors approved the transfer of Traction Electronics, SCADA and Industrial Drives businesses (sub-divisions of Automation and Control segment) (together referred to as "Businesses") to Crompton Greaves Limited (CGL). The transfer is consistent with the Companys long-term strategy to focus on building its position in Strategic Electronics and Network Systems (Tatanet) and to pursue further synergistic opportunities in related areas.

On July 28, 2010 (being the Closing date), the Company transferred these Businesses as a "going concern" to CGL on a slump sale basis for a total consideration of Rs. 8,100 lakhs. Additional Rs. 1,100 lakhs has not been received as the financial parameters to be met by September 30, 2010 were not achieved by the company.

3. However, at the request of Crompton Greaves Limited, the company has continued with certain operations of the transferred businesses, pending assignment of certain contracts by customers to CGL. Consequently Sales, Income from Service rendered, Raw material consumed and sub-contracting expenses in respect of these contracts during the period July 28,2010 to September 30,2010 have been included under the respective head in these financial statements.

Particulars Rupees (000)

Sales 39,513

Income from Service rendered 7,164

Raw Material Consumed 39,128

Sub-contracting expenses 7,164



4. Consequent to the reasons stated in note 2, 3 and 4 above, figures for current year are not comparable with previous period.

* Represents payments of Rs.275 (000) (Previous Year: Rs. 1,385) (excluding service tax) for taxation matters to an affiliated firm in view of the networking arrangement which is registered with Institute of Chartered Accountants of India.

5. Sundry Debtors includes Rs. 383,677 (000) (Previous Year: Rs. 749,283 (000)), which in accordance with the terms of the contracts, were not due for payments as at 30th September, 2010 (30th September, 2009).

6. The tax year for the company being the year ending 31st March, the provision for taxation for the period is the aggregate of the provision made for the six months ended 31st March, 2010 and the provision based on the figures for the remaining six months up to 30th September, 2010, the ultimate tax liability of which will be determined on the basis of the figures for the period 1st April, 2010 to 31st March, 2011.

II. Defined Benefit Plan

a) Provident Fund

The company makes monthly contributions to Provident Fund managed by a trust administered by the company for qualifying employees. Under the schemes, the company is required to contribute a specified percentage of the payroll costs to fund the benefits. During the year the company has contributed Rs. 9,167 (000) (Previous Year: Rs. 13,466 (000)) to the Provident Fund Trust.

In keeping with the Guidance on implementation of Accounting Standard (AS) 15 (Revised) on Employees Benefits notified by the Companies (Accounting Standards) Rules, 2006, employer established provident fund trust are treated as Defined Benefit Plans, since the company is obligated to meet interest shortfall, if any, with respect to covered employees. According to the Management, the Actuary has opined that actuarial valuation cannot be applied to reliably measure provident fund liabilities in the absence of guidance from the Actuarial Society of India. Accordingly, the company is currently not in position to provide other related disclosures as required by the aforesaid AS-15 read with the Accounting Standards Board Guidance. Having regard to the assets of the fund and the return on investments, the entity does not expect any deficiency in the foreseeable future. Accordingly, no provision is required towards the guarantee given for notified interest rates.

III. Long Term Employee Benefit - Compensated Absences

Provision for Compensated Absences has been made on the basis of actuarial valuation report as at the Balance Sheet date. The charge for the year of Rs. 4,713 (000) (Previous Year: Rs. 7,857 (000)) has been made in the Profit and Loss Account.

7. (a) The aggregate lease rentals in respect of operating leases for the period charged as Lease Rentals in the Profit and Loss Account aggregate to Rs. 10,421 (000) (Previous Year: Rs. 6,048 (000)).

(b) In respect of equipments given on operating leases, no refundable deposits are taken and the lease rentals recognised in the Profit and Loss Account for the period included under Income from Services Rendered under Income from Operations aggregate to Rs.29,386 (000) (Previous Year: Rs. 40,642 (000)).

8. Provision for Warranty

Provision for Warranty relates to warranty provision made in respect of sale of certain products, the estimated cost of which is accrued at the time of sale. The products are generally covered under free warranty period ranging from one to three years.

9. Additional information pursuant to the Provisions of Paragraphs 3(i)(a) and (ii), 4C and 4D, of Part II of Schedule VI to the Companies Act, 1956.

10. Related Party Disclosure:

I. Holding company - The Tata Power Company Limited

II. Related Parties where control exists

a. Subsidiary - Tatanet Services Limited

III. Other parties with whom transactions have taken place during the year

a. Fellow Subsidiary - Af-taab Investment Company Limited

b. Associate - Nelito Systems Limited

IV. Key Management Personnel

a. Executive Directors - Mr. K . A. Mahashur

Mr. Z. J. Engineer (Retired on July 29, 2010)

11. Previous years figures have been regrouped wherever necessary.


Sep 30, 2009

1. Sundry Debtors includes Rs. 749,283 (000) (Previous Year: Rs. 368,207 (000)), which in accordance with the terms of the contracts, were not due for payments as at 30th September, 2009 (31st March, 2008).

2. The tax year for the company being the year ending 31 st March, the provision for taxation for the period is the aggregate of the provision made for the twelve months ended 31 st March, 2009 and the provision based on the figures for the remaining six months up to 30th September, 2009, the ultimate tax liability of which will be determined on the basis of the figures for the period 1st April, 2009 to 31st March, 2010.

3. The company has revised its accounting policy in respect of Pension payments which are part of the voluntary retirement compensation with effect from 1st April, 2008. The compensation on this account is now amortised equally upto the financial year ending 31st March, 2010 in line with Accounting Standard 15 "Employee Benefits" which were hitherto being amortised as and when they accrued in terms of the respective Voluntary Retirement Schemes. Consequently deferred revenue expenditure (Voluntary Retirement Scheme) for the eighteen months period ended 30th September, 2009 is higher by Rs. 19,304 (000) and the profit after tax for the eighteen months period ended is lower by Rs. 12,742 (000).

4. The company has revised its accounting policy in respect of valuation of car park/ property under development disclosed under Inventories.These inventories which were hitherto being valued at market value on the basis of the Valuers Report are now being valued in terms of the Accounting Standard 2 "Valuation of Inventories" at cost or net realisable value, whichever is lower. Consequently the carrying value of such inventories has been reduced and the increase in Finished Products and work-in-progress for the eighteen months period ended 30th September, 2009 is lower by Rs.3,803 (000) and the profit after tax for the eighteen months period ended is lower by Rs. 3,803 (000) respectively.

5. Contingent Liabilities

(Rupees 000)

2008-09 2007-08 Eighteen Twelve months months

a) Guarantees issued by the company on behalf of its subsidiary 100,000 60,000

b) Claims against the company not acknowledged as debt comprises of:

i) Excise duty, sales tax and service tax claims disputed by the 229,434 229,434 company relating to issues of applicability and classification.

ii) Arbitration proceeding initiated for non payment of royalty and 47,404 -- interest thereon under the technical knowhow agreement

iii) Other matters (excluding claims where amounts are not ascertainable) 10,756 10,756

c) Taxation Matters

Demand against the company not acknowledged as debt and not provided for, relating to issues of deductibility and taxability in respect of which company is in appeal and exclusive of the effects of similar matters in respect of assessments remaining to be completed. 36,656 27,517

6. EMPLOYEE BENEFITS

II. Defined Benefit Plan

a) Provident Fund

The company makes monthly contributions to Provident Fund managed by a trust administered by the company for qualifying employees. Under the schemes, the company is required to contribute a specified percentage of the payroll costs to fund the benefits. During the year the company has contributed Rs.13,466 (000) (Previous Year: Rs. 8,894 (000)) to the Provident Fund Trust.

In keeping with the Guidance on implementation of Accounting Standard (AS) 15 (Revised) on Employees Benefits notified by the Companies (Accounting Standards) Rules, 2006, employer established provident fund trust are treated as Defined Benefit Plans, since the company is obligated to meet interest shortfall, if any, with respect to covered employees. According to the Management, the Actuary has opined that actuarial valuation cannot be applied to reliably measure provident fund liabilities in the absence of guidance from the Actuarial Society of India. Accordingly, the company is currently not in position to provide other related disclosures as required by the aforesaid AS-15 read with the Accounting Standards Board Guidance. Having regard to the assets of the fund and the return on investments, the entity does not expect any deficiency in the foreseeable future. Accordingly, no provision is required towards the guarantee given for notified interest rates.

III. Long Term Employee Benefit - Compensated Absences

Provision for Compensated Absences has been made on the basis of actuarial valuation report as at the Balance Sheet date. The charge for the year of Rs.7,857 (000) (Previous Year: Rs. 7,912 (000)) has been made in the Profit and Loss Account.

7. (a) The aggregate lease rentals in respect of operating leases for the period charged as Lease Rentals in the Profit and Loss Account aggregate to Rs.6,048 (000) (Previous Year: Rs. 6,870 (000)).

8. Related Party Disclosure:

I. Holding company - The Tata Power Company Limited

II. Related Parties where control exists

a. Subsidiary - Tatanet Services Limited

III. Other parties with whom transactions have taken place during the year

a. Fellow Subsidiary - Af-taab Investment Company Limited

b. Associate - Nelito Systems Limited

IV. Key Management Personnel

a. Executive Directors - Mr. K . A. Mahashur

Mr. Z. J. Engineer

9. The company has changed its financial accouting year from April - March to October - September. The current financial period is for eighteen months commencing on 1st April, 2008 and ending on 30th September, 2009. Consequently, the figures for the current period are not comparable with the previous year.

10. Previous years figures have been regrouped wherever necessary.

 
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