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Notes to Accounts of Nitco Ltd.

Mar 31, 2015

1. Provision for Taxation:

i. Current year charge:

No provision for Income tax has been made on account of losses during the year

ii. Deferred Tax:

The Company has been recognizing in the financial statements the deferred tax assets / liabilities, in accordance with Accounting Standard 22 "Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India. No provision for deferred tax has been made on account of losses during the year

2. As per Accounting Standard 15 "Employee benefits", the disclosures as defined in the Accounting Standard are given below:

The company has defined benefit Gratuity plan. Gratuity (being administered by a Trust) is computed as 15 days salary, for every computed year of service or part thereof in excess of six months and is payable on retirement/termination/resignation The benefit vests on the employee completing five year of service. The Gratuity plan for the company is a defied benefit scheme where annual contributions are deposited to Gratuity Trust Fund established to provide gratuity benefits. The Trust Fund has taken a scheme of insurance, whereby these contributions are transferred to the insurers. The company makes provision of such Gratuity asset/ liability in the books of accounts on the basis of actuarial valuation as per the projected unit credit method. Plan assets also include investments and bank balances used to deposit permiun until de to the insurance company

3. Segment Information:

Segment has been identified in line with the Accounting Standard on Segment Reporting [AS-17) taking into account the organization structure as well as differential risks and returns of these segments. The Company has disclosed Business Segment as Primary Segment. The Business Segment consists off

a) Tiles and other related products

b) Real Estate

The Company is involved in a number of appellate, judicial and adjudication proceedings concerning matters arising in the course of conduct of the Company's businesses (including taxation matters). Some of the proceedings in respect of matters under litigation are in early stages and in some other cases the claims are indeterminate. Management is generally unable to reasonably estimate a range of possible loss for proceedings or dispute in such matters

4. Corporate Debt Restructuring:

The Company's business model until FY12, was largely dependent on imported tiles outsourced from China. The company suffered losses on account of sudden sharp depreciation of Rupee towards later part of calendar year 2011 which had high im pact on the landed cost of tiles, adversely affecting the financial performance of the Company and its cash flow. Consequently the Company made a reference to Corporate Debt Restructuring (CDR) Cell in May 2012 for comprehensive restructuring of its loan liabilities and accordingly CDR cell sanctioned a scheme of restructuring vide LOA dated 26th December 201 2, and the lenders executed Master Restructuring Agreement (MRA) on 6th March 2013. The said package sanctioned Funded Interest Term Loan (FITL) for 18 months from the Cut Off date and moratorium for principal repayment for 24- months. The working capital lenders were to provide additional working capital approximately of Rs. 3000 lacs fund based and Rs. 14-700 lacs non fund based facility. The package also envisaged disposal of non core assets of Rs. 4-4-500 lacs until March 201 5. However due to adverse market conditions, the non core assets could not be disposed of and the working capital lenders failed to release additional working capita I facilities as per the approved CDR package. Consequently the Company defaulted on its obligation to its lenders and most of the lenders have classified the Company's debts as Non Performing Asset (NPA). Some of the Lenders aggregating approximately 40% of overall CDR lenders of the Company assigned their debts to an Asset Reconstruction Company (ARC). Consequently, the Company has exited from CDR mechanism. Since the net worth of the Company has been fully eroded and being mandatory requirement, a reference was filed under section 15(1) of the Sick Industrial Companies [Special Provisions) Act, 1985 before the Hon'ble Board For Industrial and Financial Reconstruction (BIFR) and the same was registered with BIFR vide their letter dated 12th May 2015. In view of the above position, the Company has not provided for interest after the date the loan has become NPA with the respective Banks. Had the interest as per Loan Agreements been provided for, the interest for the year would have been higher by Rs. 107,39.55 lacs and Losses would have been higher by Rs. 1 07,39.55 lacs and corresponding bank liability would have increased byRs. 107,39.55 lacs

5. In accordance with the requirement of Schedule II to Companies Act 2013, the Company has reassessed the estimated useful life of fixed assets w.e.f April 01, 2014 and depreciation is provided on the basis of useful lives as prescribed in Schedule II This has resulted in the depreciation expenses for the year ended 31st March 201 5 higher by Rs. 2,213.28 lacs. Depreciation of Rs. 509.72 Lacs on account of assets whose useful life is already exhausted as on April 01, 2014, has been adjusted in Opening Reserve

6. Previous year's figures have been regrouped / restated / reclassified / rearranged wherever necessary to make them comparable with those of the current year


Mar 31, 2014

1. Terms, Rights, Preferences and restrictions attached to equity shares:

The Company has only one class of equity shares having a face value of Rs. 10 per share. Each holder of equity share is entitled to one vote on show of hands and in case of poll, one vote per equity share. A member shall not have any right to vote whilst any call or other sum shall be due and payable to the Company in respect of any of the shares of such member. All equity shares of the Company rank pari passu in all respects including the right to dividend.

i. Term loans include Working Capital Term Loan (WCTL) and Funded Interest Term loan (FITL).

ii. Loans received from NBFCs and foreign bank have not been restructured.

iii. Repayment of term loan shall be in 32 structured quarterly installments commencing from June 30, 2014 and carrying interest rate at 11.25% per annum; repayment of WCTL shall be in 24 quarterly structured installments commencing from June 30, 2014 and carrying interest rate at 10.75% per annum; repayment of FITL shall be in 24 quarterly structured installments commencing from June 30, 2014 and carrying interest rate at 10.75% per annum;

iv. Working capital loan carries interest at 11% per annum.

2. Security Offered

i. The existing term loans including new WCTL and FITL are secured by first pari passu charge on the fixed assets and parri passu second charge on the current assets of the Company.

ii. The existing and fresh working capital facilities are secured by the first pari passu charge on current assets and second pari passu charge on fixed assets of the Company.

iii. Lenders having exclusive charge over securities prior to restructuring are continuing to have exclusive charge over those securities post restructuring.

3. LONG TERM BORROWINGS (contd.)

iv. First pari passu charge over all bank accounts of the Company, including the Trust and Retention Accounts (and all sub- accounts thereof).

v. Pledge of shares in the Company held by both Mr. Vivek Talwar and M/s Aurella Estates & Investments Private Limited.

vi. Personal guarantee from Mr. Vivek Talwar and corporate guarantee from M/s Aurella Estates & Investments Private Limited for the entire debt of the Company including the sacrifices made by the lenders.

vii. The entire debt is further secured by the corporate guarantees from certain subsidiaries who hold real estate assets, offered as additional securities to lenders.

4. PROVISION FOR TAXATION

i. Current year charge:

No provision for Income tax has been made on account of losses during the year.

ii. Deferred Tax:

The Company has been recognizing in the financial statements the deferred tax assets / liabilities, in accordance with Accounting Standard 22 "Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India. No provision for deferred tax has been made on account of losses during the year.

5. CONTINGENT LIABILITY Rs. in Lacs

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

Guarantees / Counter Guarantees given by the company / by banks on behalf of company 5,113.42 5,206.48

Letter of credits opened for which the company is contingently liable 2,019.63 3,306.73

Estimated amount of contracts remaining to be executed on capital 13.77 37.25 account and not provided for ( net of advances )

Demands against the company not acknowledged as debts and not provided for against which the company is in appeal:

Excise Duty 1,899.11 1,476.43

Custom Duty 1574.33 1,591.78

Sales Tax 472.86 -

6. CORPORATE DEBT RESTRUCTURING

The Company''s business model until FY11-12 was dependent on large imports of vitrified tiles from China. However, sudden steep drop in the value of rupee vs USD towards later part of FY 11-12, rendered the business of import of vitrified tiles and distribution within India unviable. The Company at that time was saddled with large inventories which were imported at a higher cost (due to rupee depreciation) and had to take steps to liquidate the inventories at a loss. The Company thereafter took steps to move away from China based sourcing strategy to domestic led sourcing. The China led sourcing strategy required setting up a huge infrastructure in terms of mother warehouses and regional depots across the country to facilitate distribution of imported tiles. With imports suddenly becoming unviable, company had to deal with high distribution costs which had to be scaled down gradually in line with reduction in the inventory. Being a brick and mortar Company, this significant change in the business model has taken time to correct and has resulted in adverse performance during the last two financial years.

The slump in real estate and overall state of the economy has made a quick revival that much more time consuming. Due to competitive pressures and subdued state of the economy ,sales volume could not be increased as desired, consequently the gross sales of the company during year ended 31st March 2014 has dropped.

Due to continued losses for last few quarters for the aforesaid reasons, the Company faced difficulties in managing its cash flows and working capital requirements. In order to correct its working capital position and liquidity challenges arising out of the mismatch of the loan maturities and potential projected earnings, the Company approached the lenders for restructuring of its entire debt for suitable realignment under Corporate Debt Restructuring (CDR) mechanism. The CDR Cell approved the proposal of debt restructuring with super majority of the lenders CDR Empowered Group (EG) meeting held on 8th November 2012, and issued the Letter of Approval (LOA) on 26th December 2012 and revised letter dated 31st December 2012, based on which the lenders agreeing to the package has signed the Master Restructuring Agreement (MRA) on March 6, 2013. The significant highlight of the package is as under:

i. The Cut-off-Date (COD) was April 1, 2012.

ii. The total existing term loan of Rs. 408.34 Crores which was restructured is repayable in 32 quarterly structured installments for the period commencing from 30th June 2014 and ending on 31st March 2021. Interest rate is 11.25% per annum.

iii. Working Capital Term Loan (WCTL). is repayable in 24 quarterly structured installments period commencing from 30th June 2014 and ending on 31st March 2020. WCTL carries Interest at 10.75% p.a.

iv. Funded Interest on the term loan (FITL) for a period of 18 months from COD, is repayable in 24 quarterly installments commencing from 30th June 2014 and ending on 31st March 2020. FITL carries Interest at 10.75% p.a.

v. Promoters were required to bring in Rs. 55.69 crores as their contribution under the package which has been brought in by promoters and equity shares have been issued and the said shares have been pledged in favour CDR lenders.

vi. Personal guarantee from Mr. Vivek Talwar and corporate guarantee from M/s Aurella Estates & Investments Private Limited was provided for the entire debt of the Company including the sacrifices made by the lenders.

vii. The entire debt is further secured by the corporate guarantees from certain subsidiaries who hold real estate assets, being offered as additional securities to lenders.

viii. Pledge of shares in the Company held by both Mr. Vivek Talwar and M/s Aurella Estates & Investments Private Limited.

Since the Company has not been able to dispose of the non core assets as envisaged under the approved CDR scheme, the Company has made a request to Banks for rework of the approved package.

7. Share application money pending allotment in the previous year represents promoters'' contribution received under the CDR package prior to 31st March 2013. During the year shares were allotted for the entire promoters contribution received of Rs. 55.69 crores in accordance with the SEBI guidelines and after receipt of approval from the stock exchanges and shareholders'' approval

8. Previous year''s figures have been regrouped / restated / reclassified / rearranged wherever necessary to make them comparable with those of the current year.


Mar 31, 2013

1. The management has identified obsolete, slow moving and defective inventory of Rs. Nil (previousYear Rs. 3,447.47 Lacs) and the same has been written off as exceptional items.

2. PROVISION FOR TAXATION

i. Current year charge:

No provision for Income tax has been made on account of losses during the year

ii. Deferred Tax:

The Company has been recognizing in the financial statements the deferred tax assets / liabilities, in accordance with Accounting Standard 22 "Accounting forTaxes on Income" issued by the Institute of Chartered Accountants of India. No provision for deferred tax has been made on account of losses during the year

3. REMITTANCE IN FOREIGN CURRENCY ON ACCOUNT OF DIVIDEND

The company has paid dividend in respect of shares held by Non Residents on repatriation basis.This inter-alia includes portfolio investment and direct investment, where the amount is also credited to Non Resident External Account (NRE A/C).The exact amount of dividend remitted in foreign currency cannot be ascertained.The total amount remittable in this respect is given below:

4. SEGMENT INFORMATION

Segment has been identified in line with the Accounting Standard on Segment Reporting (AS-17) taking into account the organization structure as well as differential risks and returns of these segments.The Company has disclosed Business Segment as Primary Segment.The Business Segment consists off

a) Tiles and other related products

b) Real Estate

5. CONTINGENT LIABILITY Rs. in Lacs

Guarantees / Counter Guarantees given by the company / by banks on behalf of company 5,206.48 5,206.48

Letter of credits opened for which the company is contingently liable 3,306.73 6,903.88

Export Bills discounted / purchased with the banks 165.34

Estimated amount of contracts remaining to be executed on capital account and not 37.25 711.65 provided for ( net of advances)

Demands against the company not acknowledged as debts and not provided for against which the company is in appeal:

Excise Duty 1,476.43 675.67

Custom Duty 1,591.78 398.30

6. CORPORATE DEBT RESTRUCTURING

Demand for Tiles is primarily linked with growth of Real Estate sector Real Estate sector has been grappling with problems. Slow sales and a glut of properties are hampering the residential real estate market.

Nitco had been following a policy of part in-house manufacturing and part outsourcing from China.The proportion of outsourcing from China had over the years considerably increased. Because of the large lead times in procurement from China and frequent changes in the consumer tastes, there had been a mismatch between products procured and sales achieved. Again, steep depreciation of Indian Rupee against United States Dollar had impacted the landed cost of the outsourced products. Due to competitive pressure the Company was not able to pass on excess burden on account of higher exchange rate to its consumers. Due to continued losses for last few quarters for the aforesaid reasons, the Company faced difficulties in managing its cash flows and working capital requirements. In order to correct its working capital position and liquidity challenges arising out of the mismatch of the loan maturities and potential projected earnings, the Company approached the lenders for restructuring of its entire debt for suitable realignment under Corporate Debt Restructuring (CDR) mechanism.The CDR Cell approved the proposal of debt restructuring with super majority of the lenders CDR Empowered Group (EG) meeting held on 8th November 20 12, and issued the Letter of Approval (LOA) on 26th December 20 12 and revised letter dated 31 st December 2012, based on which the lenders agreeing to the package has signed the Master Restructuring Agreement (MRA) on March 6, 20 I 3. The significant highlight of the package is as under:

i. The Cut-off-Date (COD) is April 1, 20 12.

ii. The total existing term loan of Rs. 425.37 Crores outstanding is restructured.The principal repayment shall be in 32 quarterly structured installments for the period commencing from 30th June 2014 and ending on 31st March 2021. Interest rate is I 1.25% per annum, iii. Carving outworking capital irregularities has been converted into Working Capital Term Loan (WCTL). WCTL is Rs. 603.63 crores WCTL is payable in 24 quarterly structured installments period commencing from 30th June 2014 and ending on 3 I st March 2020. WCTL carries Interest at 10.75% p.a. iv Funded Interest on the term loan (FITL) for a period of 18 months from COD, amounting to Rs. 153.18 Crores. Repayment shall be in 24 quarterly installments period commencing from 30th June 2014 and ending on 3 I st March 2020. FITL carries Interest at 10.75% p.a. v. Promoters require to bring in Rs 55.69 crores as their contribution underthe package. Out of the same Rs.28 crores has een brought in by March 3 1, 201 3 and balance to be brought by June 30, 20 13. vi. Personal guarantee from MrVivekTalwar and corporate guarantee from M/s Aurella Investments & Estates Private

Limited for the entire debt of the Company including the sacrifices made by the lenders, vii. The entire debt is further secured by the corporate guarantees from certain subsidiaries who hold real estate assets, being offered as additional securities to lenders, viii. Pledge of shares in the Company held by both MrVivekTalwar and M/s Aurella Investments & Estates Private Limited.

7. Share application money pending allotment represents promoters'' contribution underthe CDR package. Shares will be allotted in accordance with the SEBI guidelines and approval from the stock exchanges and shareholders'' approval.

8. Previous year''s figures have been regrouped / restated / reclassified / rearranged wherever necessary to make them comparable with those of the current year


Mar 31, 2012

1. SECURED LOANS

A. Term Loans from Banks / Institutions have been secured by a first charge on pari passu basis on all movable and immovable fixed assets at Alibaug, Silvassa or Thane as the case may be. It has been additionally secured by an irrevocable and unconditional personal guarantee from Mr Vivek Talwar, Managing Director of the Company

B. Cash Credit from banks has been secured by hypothecation of the whole of the current assets of the Company including inventories, book debts, consumable stores & spares (not relating to Plant & Machinery), bills receivable and all other movables, both present and future wheresoever situated. It is further secured by a second charge on the Fixed Assets of the ceramic tiles division at Alibaug and is also guaranteed by Mr Vivek Talwar, Managing Director of the Company

C. Hire Purchases have been secured by hypothecation of specific assets.

2. Excise Duty of Rs.422.06 Lacs (Previous year Rs.421.35 Lacs) and custom duty of Rs. 212.98 Lacs (Previous year Nil) has been provided on goods held in bond and consequently included in the valuation of inventories.

3. Balances of Sundry Debtors, Sundry Creditors, Loans and Advances, and Deposits are subject to confirmation and reconciliation. In the opinion of the Board, the Current Assets, Loans and Advances are of the value stated as realisable in the ordinary course of the business. Accounts receivable is net of advances. The provisions for depreciation and all the known liabilities are not in excess of the amount reasonably necessary

4. PROVISION FOR TAXATION

a) Current year charge:

No provision for Income tax has been made on account of losses during the year

b) Deferred Tax:

The Company has been recognising in the financial statements the deferred tax assets / liabilities, in accordance with Accounting Standard 22 "Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India. No provision for deferred tax has been made on account of losses during the year

5. SUNDRY CREDITORS IN SCHEDULE VI TO THE ACCOUNTS INCLUDES: -

a) Rs. 448.10 Lacs (Previous year Rs. 162.95 Lacs) due to Small Scale Industrial Undertakings.

b) Rs. 48859.08 Lacs (Previous year Rs. 24145.84 Lacs) due to other creditors.

6. The management has identified obsolete, slow moving and defective inventory of Rs. 3447.47 Lacs (previous period - NIL) and the same has been written off as exceptional items,

7. Interest Expense is net of Rs. 2520.38 Lacs (previous year Rs. 2559.67 Lacs) being the interest capitalised pertaining to qualifying assets.

8. Previous year's figures have been regrouped / restated / reclassified / rearranged wherever necessary to make them comparable with those of the current year

9 Contingent Liabilities Rupees in lakhs

Particulars 31.03.2012 31.03.2011

Guarantees / Counter Guartantees given by the company / by banks on behalf of company 5,206.48 5,187.61

Letter of credits opened for which the company is contingently liable 6,903.88 14,138.68

Export Bills discounted / purchased with the banks 165.34 219.07

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) 711.65 452.50

Demands against the company not acknowledged as debts and not provided for against which the company is in appeal

Excise Duty 675.67 27.37

Custom Duty 398.30 742.00

Disclosure in respect of material related party transactions during the year.

1) Purchase of goods include Foshan Nitco Trading Company Ltd. Rs. 274.77 Lacs (previous year Rs. 221.98 Lacs) and Nitco Terazzo Tiles Pvt. Ltd. Rs. 5.64 Lacs (previous year - Nil )

2) Sale of goods include Nitco Realties Pvt. Ltd. Rs. 0.04 Lacs (previous year - Nil )

3) Rent paid include Eden Garden Builders Pvt. Ltd. Rs. 3.18 Lacs (previous year Rs. 3.18 lacs), Enjoy Builders Pvt. Ltd. Rs. 4.37 Lacs (previous year Rs. 4.37 Lacs), Lavender Properties Pvt. Ltd. Rs. 3.16 Lacs (previous year Rs. 3.16 Lacs), Nitco Tiles and Marble Industries Pvt. Ltd. Rs. 4.49 Lacs (previous year Rs. 17.80 Lacs), Prakalp Properties Pvt. Ltd. Rs. 3.02 Lacs (previous year Rs. 3.02 lacs), Rang Mandir Builders Pvt. Ltd. Rs. 4.18 Lacs (precious year Rs. 4.18 Lacs) and Usha Kiran Builders Pvt. Ltd. Rs. 3.16 Lacs (previous year Rs. 3.16 lacs ).

4) Interest on Loans received / receivable is from wholly owned subsidiary Nitco Realties Pvt. Ltd. Rs. 1814.89 Lacs (previous year Rs. 1998.79 Lacs)

5) Rent Deposit includes Eden Garden Builders Pvt. Ltd. Rs. 150 Lacs (previous year Rs. 150 Lacs), Enjoy Builders Pvt. Ltd. Rs. 205 lacs (previous year Rs. 205 lacs), Prakalp Properties Pvt. Ltd. Rs. 145 Lacs (previous year Rs. 145 Lacs), Rang Mandir Builders Pvt. Ltd. Rs. 200 lacs (previous year Rs. 200 Lacs), Usha Kiran Builders Pvt. Ltd. Rs. 150 Lacs (previous year Rs. 150 lacs) and Lavender Properties Pvt. Ltd. Rs. 150 Lacs (previous year Rs. 150 lacs).

6) Advances include Nitco Realties Pvt. Ltd. Rs. 15160.58 Lacs (previous year Rs. 10243.08 Lacs), Keskinkaya Mermer - Turkey Rs. 308.36 lacs (previous year Rs. 217.53 Lacs) and Nitco Holdings HK company Ltd. Rs. 0.24 Lacs (previous year Rs. 0.24 lacs). The maximum balance during the year was the same as closing balance.

7) Remuneration / sitting fees include remuneration to Mr Vivek Talwar Rs. 58.28 lacs (previous year Rs. 87.65 Lacs), remuneration to Ms. Poonam Talwar Rs. 20.29 Lacs (previous year Rs. 20.18 lacs), sitting fees to Mr S.K. Bhardwaj Rs. 1.30 Lacs (previous year Rs. 1.73 Lacs) and sitting fees to Mr Atul Sud Rs. 1.74 Lacs (previous year Rs. 0.89 lacs).

 
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