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Notes to Accounts of NRB Industrial Bearings Ltd.

Mar 31, 2015

1. Corporate Information:

NRB Industrial Bearings Limited (The Company) was incorporated on 24th day of February, 2011 as a Private Limited Company under the provisions of the Companies Act, 1956 (the Act).On the acquisition of equity shares of the Company on 4th November, 2011 by NRB Bearings Limited, a public limited company, the Company in terms of Section 3 (1) (iv) (c) of the Act became a Public Limited Company and the name of the Company was changed from "NRB Industrial Bearings Private Limited" to "NRB Industrial Bearings Limited"

The Company is engaged in the business of manufacturing and selling of all types of industrial bearings.

The Scheme of Arrangement (the Scheme) for the transfer of Industrial Bearings Undertaking of NRB Bearings Limited (NRB) to the Company under section 391 to 394 read with section 100 to 103 of the Companies Act, 1956 was sanctioned by the Hon''ble High Court of Judicature, Bombay on 24th August 2012. The Scheme, which has become operative from 25th September, 2012 upon filing of the certified copies of the Orders of the Hon'' ble High Court with the Registrar of Companies became effective from 1st October, 2012 (the Appointed Date).

Pursuant to the Scheme, with effect from the Appointed date the Industrial Bearings Undertaking of NRB is transferred and vested in the Company as a going concern, with all its assets, liabilities, properties, rights, benefits and interest therein subject to existing charges thereon.

In terms of the Scheme, in consideration of the transfer and vesting of the Industrial Bearings Undertaking of NRB, in respect of every 4 equity shares of Rs. 2 each, held by the shareholders of NRB, 1 equity share of Rs. 2 each fully paid up aggregating 24,230,650 equity shares have been issued and allotted on 31st October, 2012, to the shareholders of NRB whose names appeared in the Register of Members, as on 25th October, 2012, being the record date.

All the staff, workmen and employees of Industrial Bearings Undertaking of NRB in service as on 1st October, 2012 have become staff, workmen and employees of the Company without any break in their service.

In terms of the Scheme, the Company recorded all the assets and liabilities pertaining to the Industrial Bearings Undertaking, at the respective book values appearing in the books of NRB as on the Appointed Date. The Company credited to its share capital account, the aggregate face value of the equity shares issued by it pursuant to the Scheme. The difference of Rs. 5,700.16 lacs between excess of net assets and the amount credited as share capital after adjusting the cancellation of existing share capital of the Company held by NRB has been credited to Capital Reserve. The equity shares allotted have been listed on the Bombay Stock Exchange and the National Stock Exchange on 9th April, 2013.

2. Rights attached to equity shares:

a) The Company has only one class of equity shares having a face value of Rs. 2 each. The Equity Shareholders have all the rights of equity shares as provided by the Companies Act, 2013 and Rules & Regulations made thereunder

b) The Company in General Meeting may declare dividend to be paid to members according to their respective rights, but no dividend shall exceed the amount recommended by the Board, but the Company in General Meeting may declare a smaller dividend.

c) In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts.

3. Footnotes:

Term loans from Bank

(a) Rs. 4224.88 lacs (Previous period Rs. 7162.37 lacs) secured by exclusive first charge over immovable fixed assets (leasehold land and buildings thereon) of the Company and its movable plant & machinery, furniture & fixtures and other movables at its factory at Shendra (near Aurangabad). The term loan is repayable in remaining 7 equal quarterly installments by November 2016. Interest rate swap taken to convert floating interest rate of LIBOR 300 bps under the loan agreement into fixed interest rate of 6.45% p.a.

(b) Rs. 938.86 lacs (Previous year Rs. 928.45) to be secured by security stated in (a) above (security created after the year end). The term loan is repayable by September 2018 in 14 equal quarterly installments commencing from June 2015 and carries floating interest rate of LIBOR 350 bps.

Term loan from Others

(a) Rs. 36.86 lacs (previous period Rs. 10.29 lacs) secured by hypothecation of vehicles. Out of these , the term loan of Rs. 8.06 lacs carrying interest rate of 10.71 % is repayable in remaining 42 equal monthly installments by September, 2018 and the term loan of Rs. 28.80 lacs carrying interest rate of 12.75 % is repayable in 60 equal monthly installments by April, 2020.

4. Contingent liabilities not provided for:

a) Bank guarantees

* To Indian Custom Department 3.95 55.00

* To Maharashtra Pollution Control Board 5.00 2.00

5. Disclosure under Accounting Standard - "Leases"

1) Lease Expense

(a) The company has taken vehicle and residential premises on operating lease. Lease rental charged to the Statement of Profit and Loss for the period ended 31.03.2015 Rs. 24.67 lacs (previous period Rs. 30.29 lacs includes minimum lease payment of 9.45 lacs for the non-cancellable period up to February, 2013)

(b) (i) Under some agreements, refundable interest free deposit have been given and contain a provision for renewal.

(ii) The agreements provide for early termination by either party with a notice period which varies from 1 month to 6 months.

2) Lease Income

The Company has entered into lease agreements for certain portion of its factory and office premises including furniture and fixtures, electrical installation, etc. During the period, Rs.96.00 lacs (previous period Rs. 68.90 lacs) recognised as rental income in the Statement of Profit and Loss. The agreement existing as at the year end provide for increase in rent after 3 years and contain renewal clause. The agreement provide for termination prior to the expiry of the term, as per mutual understanding of the parties or due to breach of terms and conditions as mentioned in the agreements.

5. Disclosure under Accounting Standard - " Segment Reporting"

The operations of the Company fall within a single primary segment viz. Industrial bearings.

6. Managerial Remuneration

The Board of Directors and the Members of the Company had approved the appointment and remuneration of Mr. Devesh Singh Sahney as Managing Director of the Company ( ""hereinafter MD"") for a term of 5 years effective October 01, 2012 to September 30, 2017 at their meetings held on October 04, 2012 and October 15, 2012 respectively.

The Central Government vide letter dated August 28, 2014 approved the appointment of MD for a term of five years and partially addressed the remuneration payable (Basic remuneration & Cash allowances) for the period upto March 31,2014 and has not specifically addressed Perquisites payable for that period. The Company has submitted an application for obtaining clarification/approval from the Central Government in respect to perquisites paid for the period upto March 31, 2014.

Pursuant to provisions of section 179 read with Schedule V of the Companies Act, 2013, the Company will seek approval by way of a special resolution from the members in the forthcoming Annual General Meeting to amend the terms of remuneration of MD by reducing the tenure of remuneration payable to three years (April 01, 2014 to March 31, 2017). The Nomination & Remuneration Committee and Board of Directors of the Company have approved remuneration payable to the MD from April 01, 2014 to March 31, 2017.

Accordingly remuneration paid to the MD of Rs. 6.00 lacs for the quarter ended March 31, 2014 and Rs. 28.81 lacs for the period ended December 31, 2013 is subject to approval by the Central Government and Rs. 65.03 lacs for the period from April 01, 2014 to March 31, 2015 is subject to approval by the members.

In terms of Clause 12.1 of the Scheme referred to in Note 1 above to the financial statement, the terms and conditions of the employment of all the employees transferred from NRB shall not be less favorable than those applicable to them with reference to NRB in relation to Industrial Bearing Undertaking on the effective date. Since the remuneration paid to the Managing Director is the same as that was paid to him by NRB as Executive Director, the Company is confident of getting approval from the Central Government and members for the remuneration paid / payable for the relevant period. Pending such clarification / approval, the Managing Director holds the remuneration paid in trust for the company.

7. (a) In terms of the separate Memorandum of Understanding entered into on 1st November, 2013 with NRB Bearings Limited, the Company has,

(i) assigned its leasehold rights in the plot of land at Aurangabad admeasuring 576 sq. mtrs. with building structure thereon admeasuring 144 sq. mtrs. of built up area for a consideration of Rs. 270 lacs. The profit on assignment of its leasehold rights of Rs. 268.44 lacs is included in Note 27 - Exceptional items.

(ii) granted exclusive rights to use 700 Sq. ft. of carpet area situated on the 3rd Floor of Building Dhannur at Mumbai, for a consideration of Rs. 185 Lacs . The profit on grant of exclusive rights of Rs. 185 lacs is included in Note 27 - Exceptional items.

8. NRB Bearings Ltd (NRB) had entered into a Joint Venture agreement in the year 2011 with IBC Industrial Bearings and Components AG, Switzerland to form a joint venture Company for manufacture of Angular Contact Bearings. Pending formation of the joint venture company, the Project was started in 2011 by NRB as a part of Industrial Bearings Undertaking and Loan of USD 2.5 Million was availed for the Project. In terms of the Scheme referred to in Note 1, Industrial Bearings Undertaking of NRB which included the said Project was transferred and vested in the Company. The Project of Angular Contact Bearings was completed in December, 2013 and Assets pertaining to the Project having aggregate cost of Rs. 3031.87 lacs (including capitalised interest on the Loan) were sold to NRB IBC Bearings Pvt. Ltd (NIBC). Also, liabilities of Rs. 694.14 lacs outstanding relating to machineries purchased were transferred. Further, premium of Rs.104.01 lacs on Call Spread Option Contract relating to the loan referred to above has been debited to NIBC. The amount of Rs. 2026.74 lacs is fully recovered during the period ended 31st March 2015.

9. The figures for the previous period have been regrouped / restated where necessary to conform to the current period''s classification.


Dec 31, 2013

1. Corporate Information:

NRB Industrial Bearings Limited (''the Company) was incorporated on 24th day of February, 2011 as a Private Limited Company under the provisions of the Companies Act, 1956 (the Act). On the acquisition of equity shares of the Company on 4th November, 2011 by NRB Bearings Limited, a public limited company, the Company in terms of Section 3 (1) (iv) (c) of the Act became a Public Limited Company and the name of the Company was changed from "NRB Industrial Bearings Private Limited" to "NRB Industrial Bearings Limited"

The Company is engaged in the business of manufacturing and sellingof all types of industrial bearings.

The Scheme of Arrangement (the Scheme) for the transfer of Industrial Bearings Undertaking of NRB Bearings Limited (NRB) to the Company under section 391 to 394 read with section 100 to 103 of the Companies Act, 1956 was sanctioned by the Humble High Court of Judicature, Bombay on 24th August 2012. The Scheme, which has become operative from 25th September, 2012 upon filing of the certified copies of the Orders of the Humble High Court with the Registrar of Companies is effective from 1st October, 2012 (the Appointed Date).

Pursuant to the Scheme, with effect from the Appointed date the Industrial Bearings Undertaking of NRB is transferred and vested in the Company as a going concern, with all its assets, liabilities, properties, rights, benefits and interest therein subject to existing charges thereon.

In terms of the Scheme, in consideration of the transfer and vesting of the Industrial Bearings Undertaking of NRB, in respect of every 4 equity shares of Rs. 2 each, held by the shareholders of NRB, 1 equity share of Rs. 2 each fully paid up aggregating 24,230,650 equity shares have been issued and allotted on 31st October, 2012, to the shareholders of NRB whose names appeared in the Register of Members, as on 25th October, 2012, being the record date.

All the staff, workmen and employees of Industrial Bearings Undertaking of NRB in service as on 1st October, 2012 have become staff, workmen and employees of the Company without any break in their service.

In terms of the Scheme, the Company recorded all the assets and liabilities pertaining to the Industrial Bearings Undertaking, at the respective book values appearing in the books of NRB as on the Appointed Date. The Company credited to its share capital account, the aggregate face value of the equity shares issued by it pursuant to the Scheme. The difference of Rs. 5,700.16 lacs being excess of net assets and the amount credited as share capital after adjusting the cancellation of existing share capital of the Company held by NRB has been credited to Capital Reserve. The equity shares allotted have been listed on the Bombay Stock Exchange and the National Stock Exchange on 9th April, 2013.

NOTE 2 - Contingent Liabilities not provided for:

As at As at 31.12.2013 30.09.2012 Rs. Lacs Rs. Lacs

a) Bank guarantees

- To Indian Custom Department 55.00

- To Maharashtra Pollution Control Board 2.00

NOTE 3 - Commitments

1. Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) 607.96

2. Other commitment

- Premium payable for remaining period of Call Spread Option Contract. 618.53

2) Defined Benefit Plans : (Funded)

Gratuity- as per actuarial valuation as at the period end (based on Projected Unit Benefit Method). The Company has an obligation towards gratuity, a funded defined benefit retirement plan covering eligible employees. The plan provides for lump sum payment to vested employees at retirement, death while in employment or on termination of the employment of an amount equivalent to 15 days salary, as applicable, payable for each completed year of service, without any payment ceiling. Vesting occurs upon completion of five years of service.

Footnotes:

(i) There were no employees in the previous period and hence disclosure under Accounting Standard 15 was not applicable.

(ii) The expected rate of return on plan assets is based on the average long term rate of return expected on investments of the fund during the estimated term of obligation.

(iii) The assumption of future salary increases, considered in actuarial valuation, takes into account inflation, seniority, promotion, increment and other relevant factors.

(iv) The discount rate is based on the benchmark rate yield of government of India security as at the Balance sheet date.

NOTE 4 - Disclosure under Accounting Standard 19 - " Leases"

1) Lease Expense

(a) The company has taken vehicle and residential premises on operating lease. Lease rental charged to the statement of profit and loss for the period ended 31.12.2013 Rs. 30.29 lacs (includes minimum lease payment of Rs. 9.45 Lacs for the non - cancellable period up to February, 2013)

(b) (i) Under some agreements, refundable interest free deposit have been given and contain a provision for renewal.

(ii) The agreements provide for early termination by either party with a notice period which varies from 1 month to 6 months.

2) Lease Income

The Company has entered into lease agreements for certain portion of its factory and office premises including furniture and fixtures, electrical installation, etc. During the period, Rs. 68.90 Lacs recognised as rental income in the Statement of Profit and Loss. The agreement existing as at the yearend provide for increase in rent after 3 years and contain renewal clause. The agreement provide for termination prior to the expiry of the term, as per mutual understanding of the parties or due to breach of terms and conditions as mentioned in the agreements.

NOTE 5 - Disclosure under Accounting Standard 17 - " Segment Reporting"

The operations of the Company fall within a single primary segment viz. Industrial bearings.

NOTE 6 - Managerial Remuneration

Mr. Devesh Singh Sahney was appointed as Managing Director of the Company w.e.f 1st October,2012 vide resolution passed by the Board of Directors in its meeting held on 4th October, 2012 in which the Board also approved the remuneration. Members of the Company in its Annual General Meeting held on 15th October, 2012 approved the said appointment and remuneration.

The Central Government has approved the appointment of the Managing Director on 14th February, 2014 for which an application was made by the Company on 10th February, 2014. The Company''s application to the Central Government made on 10th February, 2014 for the approval of remuneration to the Managing Director is pending for approval. Accordingly the remuneration of Rs 79.51 lacs to the Managing Director paid and debited to the Statement of Profit and Loss is subject to the approval of the Central Government. Pending such approval the Managing Director holds the remuneration paid in trust for the Company.

NOTE 7 - Advance against assignment of certain Rights

In terms of the seperate Memorandum of Understanding entered into on 1st November, 2013 with NRB Bearings Limited, the Company has agreed,

(i) to assign its leasehold rights in the plot of land at Aurangabad admeasuring 576 sq.mtrs. with building structure thereon admeasuring 144 sq.mtrs. of built up area for a consideration of Rs. 270 lacs subject to approval of the relevant Government Authorities, and

(ii) to grant exclusive rights to use 700 Sq. ft. of carpet area situated on the 3rd Floor of Building Dhannur at Mumbai, for a consideration of Rs. 185 Lacs Pending approval of the relevant Government Authorities/ completion of certain regulatory procedures, the aggregate amount of Rs. 455 Lacs received has been considered as advance and included under Note 10.

NOTE 8

NRB Bearings Ltd (NRB) had entered into a Joint Venture agreement in the year 2011 with IBC Industrial Bearings and Components AG, Switzerland to form a joint venture Company for manufacture of Angular Contact Bearings. Pending formation of the joint venture company, the Project was started in 2011 by NRB as a part of Industrial Bearings Undertaking and Loan of USD 2.5 Million was availed for the Project. In terms of the Scheme referred to in Note 1, Industrial Bearings Undertaking of NRB which included the said Project was transferred and vested in the Company. The Project of Angular Contact Bearings was completed in December, 2013 and Assets pertaining to the Project having aggregate cost of Rs. 3,031.87 lacs (including capitalised interest on the Loan) were sold to NRB IBC Bearings Pvt. Ltd (NIBC). Also, liabilities of Rs. 694.14 lacs outstanding relating to machineries purchased were transferred. Further, premium of Rs. 104.01 lacs on Call Spread Option Contract relating to the loan referred to above has been debited to NIBC. The amount of Rs. 2,026.74 lacs recoverable as at the year end on this account is included in Note 20 - Other current assets. The Loan availed continues to be in the books of the Company.

NOTE 9

Pursuant to the Scheme of Arrangement referred to in Note 1 investment in 112,500 equity shares of Rs. 10 each aggregating to Rs. 11.25 Lacs in joint venture, Schneeberger India Private Limited was transferred to the Company on 1st October, 2012.

In terms of the Share Purchase Agreement with Schneeberger Holding AG the above equity shares were sold for a consideration of Rs. 252.56 lacs on September 10, 2013. The profit on sale of Rs. 241.31 lacs is included in Note 27 - Exceptional items.

NOTE 10

During the month of October, 2012 the Company had placed Inter - Corporate Deposit of Rs. 10 Crores with NRB Bearings Limited, the Company covered under section 295 of the Companies Act, 1956 without obtaining previous approval of the Central Government as required under the said section. The deposit has been repaid by NRB Bearings Limited during November, 2012. The Company will be making an application to the Central Government for approval of the deposit placed.

NOTE 11

Consequent to the transfer and vesting of the Industrial Bearings Undertaking of NRB Bearings Limited to the Company in terms of the Scheme referred to in Note 1, the financial statements of the Company include the operations of the Industrial Bearings for the fifteen months period ended 31 December 2013 and therefore are strictly not comparable with the figures of the previous period ended 30 September 2012. The figures for the previous period have been regrouped / restated where necessary to conform to the current period''s classification.

 
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