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Notes to Accounts of Praj Industries Ltd.

Mar 31, 2016

1. Segment reporting

The Company''s activities involve predominantly one business segment i.e. Process and Project Engineering, which are considered to be within a single business segment since these are subject to similar risks and returns. Accordingly, Process and Project Engineering comprise the primary basis of segmental information as set out in these financial statements, which therefore reflect the information required by AS 17 - Segment Reporting, with respect to primary segments.

The Company has identified India and Rest of the World as geographical segments for secondary segmental reporting. Geographical sales are segregated based on the location of the customer who is invoiced or in relation to which the sale is otherwise recognised. Assets other than receivables used in the Company''s business or liabilities contracted have not been identified to any of the reportable segments, as these are used interchangeably between segments. All assets other than receivables are located in India. Similarly, capital expenditure is incurred towards fixed assets located in India.

2. Employee benefits

a) Defined contribution plans

The Company has recognised Rs. 42.474 (31st March, 2015 Rs. 37.134) towards post-employment defined contribution plans comprising of provident and superannuation fund in the Profit and loss account.

b) Defined benefit plan

In accordance with the Payment of Gratuity Act, 1972, the Company is required to provide post-employment benefit to its employees in the form of gratuity. The Company has maintained a fund with the Life Insurance Corporation of India to meet

3. Employee stock options

In the Meeting of the Compensation and Share Allotment Committee held on 16th November, 2010 it was decided to utilise the surrendered and lapsed options out of earlier grant and 1,250,000 options (Plan A) were granted to CEO & MD with vesting period of 5 years in terms of his appointment at the relevant market price as Grant IV.

In the Annual General Meeting of the Company held on 22th July, 2011, total of 9,238,936 stock options were approved under the scheme "Employee Stock Option Plan 2011". In the Meeting of the Compensation and Share Allotment Committee held on 27th January, 2015 it was decided to grant options to CEO & MD and senior executives of the Company at the relevant market price as ESOP 2011 - Grant I. The total options granted under ESOP 2011 - Grant I are 3,750,000 options out of which 250,000 options (Plan A) were granted to CEO& MD and 3,500,000 options (Plan B) were granted to Senior Executives of the Company.

During the year 2015-16 390,000 options were granted to Senior Executives of the Company as ESOP 2011 - Grant II to V. The stock options vest in a graded manner equally over the period of vesting, each vesting taking effect as per the terms of the grant. The stock options granted are exercisable at 100% of the fair market value of the underlying equity shares of the Company as on the date of grant.

4. Taxes

The Company has not recognised MAT credit entitlement to the extent of Rs. 172.943 till 31st March, 2016 in respect of Income Tax paid in view of uncertainty of its utilisation for payment of tax in foreseeable future.

5. Prior year comparatives

Previous year''s figures have been regrouped/reclassified to conform to the current year''s presentation.


Mar 31, 2015

A. Terms/ Rights attached to equity shares:

The Company has only one class of equity shares having a par value of Rs. 2 per share. Each holder of the equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

During the year ended 31st March, 2015, the amount of per share dividend recognised as distributed to equity shareholders was Rs.1.62 (31st March, 2014Rs.2.22) In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the company after distributing all preferetial amounts.

b. Shares reserved for issue under options:

Shares reserved for issue under the Employee Stock Option Plan (ESOP) please refer Note 35.

Loan received from Department of Biotechnology (DBT) carrying interest at the rate of 2%.

The Company has received disbursement of loan partly and full disbursement is not made. The loan is repayable after completion of the project as approved by ''DBT''.

2 Capital commitments, contingent liabilities and secured loans

March 2015 March 2014

Capital commitments

Estimated amount of contracts 42.109 72.390 remaining to be executed on capital account and not provided for (net of advances)

Contingent liabilities

Claims against Company not acknowledged as debts (primarily 35.679 64.329 relating to performance related claims filed by customers) Disputed demands in appeal towards income tax, Service tax & sales tax 32.463 2.203 Guarantee issued in respect of obligations of a subsidiary 186.100 291.565 Unfulfilled Export Obligations under EPCG scheme to be fulfilled over 8 years 46.402 48.910

Secured Loans

Working Capital borrowings from consortium of bankers are secured by a first charge by way of hypothecation of company''s inventories and book debts both present and future. It is further secured by way of first charge of hypothecation of movable fixed assets. Additionally there is collateral security by way of mortgage on company''s property situated at Pune.

3 Segment reporting

The Company''s activities involve predominantly one business segment i.e. Process and Project Engineering, which are considered to be within a single business segment since these are subject to similar risks and returns. Accordingly, Process and Project Engineering comprise the primary basis of segmental information as set out in these financial statements, which therefore reflect the information required by AS 17 - Segment Reporting, with respect to primary segments.

The Company has identified India and Rest of the World as geographical segments for secondary segmental reporting. Geographical sales are segregated based on the location of the customer who is invoiced or in relation to which the sale is otherwise recognized. Assets other than receivables used in the Company''s business or liabilities contracted have not been identified to any of the reportable segments, as these are used interchangeably between segments. All assets other than receivables are located in India. Similarly, capital expenditure is incurred towards fixed assets located in India.

4 Related party transactions

a) Parties where control exists Subsidiaries

Pacecon Engineering Projects Limited Praj Far East Co. Limited Praj Americas, Inc.

Praj Industries (Africa) (Pty.) Limited

Praj HiPurity Systems Limited

Praj Industries (Namibia) Pty. Limited

Praj Sur America, SRL

Praj Far East Philippines Ltd. Inc.

Fellow Subsidiaries Praj Industries (Tanzania) Limited Praj Industries (Sierra Leone) Limited Others

Others

Praj Foundation

b) Key management personnel and their relatives

Executive Chairman Mr. Pramod Chaudhari

CEO & Managing Director Mr. Gajanan Nabar

Relative of key management personnel Ms. Parimal Chaudhari (Director)

Mr. Parth Chaudhari

c) Transactions and balances with related parties have been set out below:

5 Leases

The Company has entered into operating lease arrangements for office space, equipments and residential premises for its employees. Certain lease arrangements provide for cancellation by either party and also contain a clause for renewal of the lease agreement. Lease payments on cancellable and non-cancellable operating lease arrangements debited to the profit and loss account and the future minimum lease payments in respect of non-cancellable operating leases are summarized below:

Notes:

1 Deposits with banks having maturity of more than three months aggregating to Rs. 100.520 (31st March, 2014: Rs. 135.020) are not readily liquid and have been excluded from cash and cash equivalents.

2 * Balance with bank include bank balances in relation to unclaimed dividends Rs. 9.026 (31st March, 2014: Rs. 8.561).

6 Quantitative information of foreign exchange instruments outstanding as at the Balance Sheet date

The foreign currency forward contracts outstanding as at the Balance sheet date aggregate USD 26.850 million (31st March, 2014: 10.550 million), Euro 1.000 million (31st March, 2014: Nil) & GBP Nil (31st March, 2014: Nil).

The following foreign currency receivables/ advances/payables balances are outstanding at the Balance sheet date, which are not hedged by foreign exchange instruments:

7 Employee benefits

a) Defined contribution plans

The Company has recognized Rs. 37.134 (31st March, 2014Rs.36.061) towards post-employment defined contribution plans comprising of provident and superannuation fund in the Profit and loss account.

b) Defined benefit plan

In accordance with the Payment of Gratuity Act, 1972, the Company is required to provide post- employment benefit to its employees in the form of gratuity. The Company has maintained a fund with the Life Insurance Corporation of India to meet its gratuity obligations. In accordance with the Standard, the disclosures relating to the Company''s gratuity plan are provided below:

Notes:

1 Expected rate of return on plan assets is based on actuarial expectation of the average long-term rate of return expected on investments of the fund during the estimated term of the obligations.

2 The estimates of future salary increases considered takes into account the inflation, seniority, promotion and other relevant factors on long-term basis.

8 Employee stock options

The Compensation Committee of the Company established the Employee Stock Option Plan on 23rd July, 2005. Employees covered by the Plan are granted an option to purchase shares of the Company subject to the requirements of vesting.

In the Annual General Meeting of the Company held on 23rd July 2005, total of 8,100,265 (including impact of bonus) stock options were approved, of which the employees have been granted 2,759,139 stock options on 12th October, 2005 (''Grant I''), 2,311,500 stock options on 28th December, 2006 (''Grant II'') and 3,029,626 stock options on 9th July, 2009 (''Grant III'') with a vesting period of 3 years. Stock options under Grant II lapsed on 28th December, 2010. In the Meeting of the Compensation and Share Allotment Committee held on 16th November, 2010 it was decided to utilise the surrendered and lapsed options out of Grant II to grant them to new CEO & MD in terms of his appointment letter and also to senior executives of the Company at the relevant market price as Grant IV. The total options granted under Grant IV are 1,950,000 options out of which 1,250,000 options (Plan A) were granted to CEO & MD with vesting period of 5 years and 700,000 options (Plan B) were granted to Senior Executives of the Company with vesting period of 2 years. Stock options under Grant IV - Plan B lapsed on 31st July, 2014.

In the Annual General Meeting of the Company held on 22nd July, 2011, total of 9,238,936 stock options were approved under the scheme "Employee Stock Option Plan 2011". In the Meeting of the Compensation and Share Allotment Committee held on 27th January, 2015 it was decided to grant options to CEO & MD and senior executives of the Company at the relevant market price as ESOP 2011 - Grant I. The total options granted under ESOP 2011 - Grant I are 3,750,000 options out of which 250,000 options (Plan A) were granted to CEO & MD and 3,500,000 options (Plan B) were granted to Senior Executives of the Company.

The stock options vest in a graded manner equally over the period of vesting, each vesting taking effect as per the terms of the grant. The stock options granted are exercisable at 100% of the fair market value of the underlying equity shares of the Company as on the date of grant.

9 Expenditure on research & development activities

Revenue expenditure on research and development is charged under respective heads of account in the year in which it is incurred. Capital expenditure on research and development is included as part of fixed assets and depreciated on the same basis as other fixed assets.

10 Taxes

The Company has not recognised MAT credit entitlement to the extent of Rs. 334.847 till 31st March, 2015 in respect of Income Tax paid in view of uncertainty of its utilisation for payment of tax in foreseeable future.

11 CSR Expenditure

The Company was required to spend Rs. 18.574 as expenditure on CSR as per requirements of the Companies Act, 2013. During the year, the Company has incurred CSR expenses of Rs. 18.620 as follows:

*Includes Rs. 13.500 given to Praj Foundation which is a related party.

The above expenditure includes contribution/donation of Rs. 18.500 to trusts/institute which are engaged in activities eligible under section 135 of Companies Act, 2013 read with Schedule VII thereto and other expenses of Rs. 0.120 directly incurred by the Company.

12 Prior year comparatives

Previous year''s figures have been regrouped/reclassified to conform to the current year''s presentation.


Mar 31, 2013

1. Nature of business

Praj Industries Limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The company is engaged in the business of Process and Project Engineering. The Company caters to both domestic and international markets. Further, the Company also provides design and engineering services.

2. Related party transactions

a) Parties where control exists

Subsidiaries Pacecon Engineering Projects Limited

Praj Far East Co. Limited

BioCnergy Europa B.V.

Praj Americas Inc. (from June 2009)

Praj Industries (Africa) Pty Limited

Neela Systems Limited Fellow Subsidiaries Praj Industries (Tanzania) Limited

Praj Industries (Sierra Leone) Limited

b) Key management personnel and their relatives

Executive Chairman Mr. Pramod Chaudhari

CEO & Managing Director Mr. Gajanan Nabar

Relative of key management personnel Mrs. Parimal Chaudhari

Mr. Parth Chaudhari

3. Leases

The Company has entered into operating lease arrangements for offce space, equipments and residential premises for its employees. Certain lease arrangements provide for cancellation by either party and also contain a clause for renewal of the lease agreement. Lease payments on cancellable and non-cancellable operating lease arrangements debited to the proft and loss

4. Employee benefts

a) Defned contribution plans

The Company has recognised Rs. 32.921 (31st March, 2012 Rs. 28.724) towards post employment defned contribution plans comprising of provident and superannuation fund in the Proft and loss account.

b) Defned beneft plan

In accordance with the Payment of Gratuity Act, 1972, the Company is required to provide post employment beneft to its employees in the form of gratuity. The Company has maintained a fund with the Life Insurance Corporation of India to meet its gratuity obligations. In accordance with the Standard, the disclosures relating to the Company''s gratuity plan are provided below:

5. Employee stock options

The Compensation Committee of the Company established the Employee Stock Option Plan on 23rd July, 2005. Employees covered by the Plan are granted an option to purchase shares of the Company subject to the requirements of vesting. Total of 8,100,265 (including impact of bonus) stock options were approved in the Annual General Meeting of the Company held on 23rd July, 2005, of which the employees have been granted 2,759,139 stock options on 12th October, 2005 (‘Grant I''), 2,311,500 stock options on 28th December, 2006 (‘Grant II'') and 3,029,626 stock options on 9th July, 2009 (‘Grant III'') with a vesting period of 3 years. Stock options under Grant II lapsed on 28th December, 2010. In the Meeting of the Compensation and Share Allotment Committee held on 16th November, 2010 it was decided to utilise the surrendered and lapsed options out of Grant II to grant them to new CEO & MD in terms of his appointment letter and also to senior executives of the Company at the relevant market price as Grant IV. The total options granted under Grant IV are 1,950,000 options out of which 1,250,000 options (Plan A) were granted to CEO & MD with vesting period of 5 years and 700,000 options (Plan B) were granted to Senior Executives of the Company with vesting period of 2 years.

The stock options vest in a graded manner equally over the period of vesting, each vesting taking effect as per the terms of the grant. The stock options granted are exercisable at 100% of the fair market value of the underlying equity shares of the Company as on the date of grant.

6. Expenditure on research and development activities

Revenue expenditure on research and development is charged under respective heads of account in the year in which it is incurred. Capital expenditure on research and development is included as part of fxed assets and depreciated on the same basis as other fxed assets.

7. Taxes

a) The Company has not recognised MAT credit entitlement to the extent of Rs. 275.885 till 31st March, 2013 in respect of Income Tax paid in view of uncertainty of its utilisation for payment of tax in foreseeable future.

b) In April 2012 the Income Tax Department initiated proceedings against the Company under Section 132 of the Income Tax Act, 1961. Currently, the proceedings are pending before the Settlement Commission. As per Company''s estimate, adequate provision for liability arising out of this has already been made in the books of account.

8. Buy Back of Shares

The Company had announced a scheme of buy-back of equity shares with effect from 26th December, 2011 as per Section 77A of the Companies Act, 1956. Pursuant to the board of directors approval for buy-back, the Company has bought back 2,083,013 equity shares (31st March, 2012: 5,230,631) through open market transactions for an aggregate amount of Rs. 152.810 (31st March, 2012: Rs. 405.828), by utilising Securities Premium of Rs. 152.810 (31st March, 2012: Rs. 405.828) during the year.

Capital Redemption Reserve has been created out of securities premium for Rs. 4.166 (31st March, 2012 : Rs. 10.461) being the nominal value of shares bought back in terms of Section 77A of the Companies Act, 1956.

The buy-back of equity shares was completed on 24th April, 2012. On completion of buy back the Company has bought back total 7,313,644 shares for an aggregate amount of Rs. 558.638.

9. Prior year comparatives

Previous year''s fgures have been regrouped/reclassifed to conform to the current year''s presentation.


Mar 31, 2012

1. Nature of business

Praj Industries Limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The Company is engaged in the business of Process and Project Engineering. The Company caters to both domestic and international markets. Further, the Company also provides design and engineering services.

The company does not have any holding or ultimate holding company.

31/03/2012 31/03/2011

Contingent liabilities

Claims against Company not acknowledged as debts (primarily 35.679 35.831 relating to performance related claims filed by customers)

Disputed demands in appeal towards income tax, Service tax and sales tax 1.191 39.090

Guarantee issued in respect of obligations of a subsidiary 181.773 Nil

Unfulfilled Export Obligations under EPCG scheme to be fulfilled 129.711 292.064 over 8 years

2. Segment reporting

The Company's activities involve predominantly one business segment i.e. Process and Project Engineering, which are considered to be within a single business segment since these are subject to similar risks and returns. Accordingly, Process and Project Engineering comprise the primary basis of segmental information as set out in these financial statements, which therefore reflect the information required by AS 17 - Segment Reporting, with respect to primary segments.

The Company has identified India and Rest of the World as geographical segments for secondary segmental reporting. Geographical sales are segregated based on the location of the customer who is invoiced or in relation to which the sale is otherwise recognised. Assets other than receivables used in the Company's business or liabilities contracted have not been identified to any of the reportable segments, as these are used interchangeably between segments. All assets other than receivables are located in India. Similarly, capital expenditure is incurred towards fixed assets located in India.

Notes:

1. Deposits with banks having maturity of more than three months aggregating to Rs 850.020 (31st March, 2011: 850.115) are not readily liquid and have been excluded from cash and cash equivalents.

2. *Balance with bank include bank balances in relation to unclaimed dividends Rs 5.753 (31st March, 2011: 5.257)

3. Quantitative information of foreign exchange instruments outstanding as at the Balance Sheet date

The foreign currency forward contracts outstanding as at the Balance sheet date aggregate USD 19.750 millions and GBP Nil (31st March, 2011: USD 20.850 millions, GBP Nil).

3. Employee benefits

a) Defined contribution plans

The Company has recognised Rs 28.724 (31st March, 2011 Rs 27.882) towards post employment defined contribution plans comprising of provident and superannuation fund in the Profit and loss account.

b) Defined benefit plan

In accordance with the Payment of Gratuity Act, 1972, the Company is required to provide post employment benefit to its employees in the form of gratuity. The Company has maintained a fund with the Life Insurance Corporation of India to meet its gratuity obligations. In accordance with the Standard, the disclosures relating to the Company's gratuity plan are provided below:

Notes:

1. Expected rate of return on plan assets is based on actuarial expectation of the average long-term rate of return expected on investments of the fund during the estimated term of the obligations.

2. The estimates of future salary increases considered takes into account the inflation, seniority, promotion and other relevant factors on long-term basis.

4. Employee stock options

The Compensation Committee of the Company established the Employee Stock Option Plan on 23rd July, 2005. Employees covered by the Plan are granted an option to purchase shares of the Company subject to the requirements of vesting. Total of 8,100,265 (including impact of bonus) stock options were approved in the Annual General Meeting of the Company held on 23 July 2005, of which the employees have been granted 2,759,139 stock options on 12 October 2005 ('Grant I'), 2,311,500 stock options on 28th December, 2006 ('Grant II') and 3,029,626 stock options on 9th July, 2009 ('Grant III') with a vesting period of 3 years. Stock options under Grant II lapsed on 28th December, 2010.

In the Meeting of the Compensation and Share Allotment Committee held on 16th November, 2010 it was decided to utilise the surrendered and lapsed options out of Grant II to grant them to new CEO & MD in terms of his appointment letter and also to senior executives of the Company at the relevant market price as Grant IV. The total options granted under Grant IV are 1,950,000 options out of which 1,250,000 options(Plan A) were granted to CEO & MD with vesting period of 5 years and 700,000 options (Plan B) were granted to Senior Executives of the Company with vesting period of 2 years.

5. Expenditure on research and development activities

Revenue expenditure on research and development is charged under respective heads of account in the year in which it is incurred. Capital expenditure on research and development is

included as part of fixed assets and depreciated on the same basis as other fixed assets.

6. Taxes

a) The Company has not recognised MAT credit entitlement to the extent of Rs 220.381 in respect of Income Tax paid in view of uncertainty of its utilisation for payment of tax in foreseeable future.

b) Subsequent to the balance sheet date i.e. 31st March, 2012, in April 2012, the Income Tax Department initiated proceedings against the Company under Section 132 of the Income Tax Act, 1961.

As on the date of adoption of accounts by the Board of directors (29th May, 2012), the Company is yet to receive a demand notice from the Income Tax Department and is also in the process of gathering information/documents and tax advice. Due to this, the Company is not in a position to reliably estimate the liability (if any) arising out of these proceedings. The management, on the basis of best estimate, has made a prudential provision of Rs 25 Crores in the Statement of Profit and Loss. In the subsequent quarters, when more clarity is achieved, the difference, if any, between the above referred provision and envisaged liability will be debited/credited to the profit and loss account, as the case may be.

7. Buy-back of Shares

During the year the Company had announced a buy-back of equity shares with effect from 26th December, 2011 as per section 77A of the Companies Act, 1956. Pursuant to the board of directors approval for buy-back the Company has bought back 5,230,631 shares up to 31st March, 2012 through open market transactions for an aggregate amount of Rs 405.828, by utilising Securities Premium of Rs 405.828. Capital Redemption Reserve has been created out of securities premium for Rs10.461 being the nominal value of shares bought back in terms of Section 77A of the Companies Act, 1956.

Out of 5,230,631 shares bought back up to 31st March, 2012,2,402,402 shares were extinguished in April 2012. To that extent the disclosure of number of equity shares and value thereof, as mentioned in financial statements and Corporate Governance Report differ.

The buy-back of equity shares was completed on 24th April, 2012. On completion of buy back the Company has bought back (including above) total 7,313,644 shares for an aggregate amount of Rs 558.638.

8. Insurance Claim

During the year the Company has received insurance claim of Rs 60.351 (31st March, 2011: Rs 59.413) for damage occurred for certain project from Insurance Company.

9. Acquisition of Neela Systems Limited

The Company has acquired 50.20 % stake in Neela Systems Limited on 6th January, 2012 for a total consideration of Rs 645.711.

10. Prior year comparatives

Till the year end 31st March, 2011, the company had adopted pre-revised Schedule VI as required by the Companies Act, 1956, for preparation and presentation of its financial statements. During the year ended 31st March, 2012, the revised Schedule VI notified under the Companies Act 1956, has become applicable to the Company. The Company has reclassified previous year figures to confirm to this year's classification. The adoption of revised Schedule VI does not impact recognition and measurement principle followed for preparation of financial statements. However, it significantly impacts presentation and disclosures made in the financial statements, particularly presentation of balance sheet.

 
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