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Notes to Accounts of Praj Industries Ltd.

Mar 31, 2017

1. Terms/ Rights attached to equity shares:

The Company has only one class of equity shares having a par value of INR 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.

The Board of Directors proposed a final dividend of INR 1.62 per equity share for the financial year ended 31 March 2015 and the same was approved by the shareholders at the Annual General Meeting held on 6 August 2015. The amount was recognized as distributions to equity shareholders during the year ended 31 March 2016. This event is considered as non-adjusting event.

The Board of Directors declared an interim dividend of INR 1.62 per equity share during the financial year 2015-16. The amount was recognized as distributions to equity shareholders during the year ended 31 March 2016.

The Board of Directors proposed a final dividend of INR 1.62 per equity share for the financial year ended 31 March 2017. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held and if approved, will be recognized as distributions to equity shareholders during the year ended 31 March 2018.

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 preferential amounts.

2. Shares held by holding/ultimate holding company and/or their subsidiaries/associates:

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

3. Shares reserved for issue under options:

Shares reserved for issue under the Employee Stock Option Plan (ESOP) please refer note 34.

4. Employee Stock Option Plan (ESOP)

In the meeting of the Compensation and Share Allotment Committee held on 16 November, 2010 it was decided to utilize 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 22 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 27 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. During the year 2016-17 100,000 options were granted to senior executive of the Company as ESOP 2011 - Grant VI. 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.

5. 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 property, plant and equipment and depreciated on the same basis as other property, plant and equipment.

6. Taxes

The company has not recognized MAT credit entitlement to the extent of INR 296.768 till 31st March, 2017 in respect of Income Tax paid in view of uncertainty of its utilization for payment of tax in foreseeable future.

7. Fair value measurements

As per assessments made by the management, fair values of all financial instruments carried at amortized cost (except as specified below) are not materially different from their carrying amounts since they are either short term nature or the interest rates applicable are equal to the current market rate of interest. The Company has performed a fair valuation of its investment in mutual funds which are classified as FVTPL using quoted prices

8. Financial risk management policy and objectives

Company''s principal financial liabilities, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance company''s operations and to provide guarantees to support its operations. Company''s principal financial assets include advances to subsidiaries, trade and other receivables, security deposits and cash and cash equivalents, that derive directly from its operations. In order to minimize any adverse effects on the financial performance of the company, it has taken various measures. This note explains the source of risk which the entity is exposed to and how the entity manages the risk and impact of the same in the financial statements.

9. Credit risk

Credit risk in case of the Company arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers including outstanding receivables.

Credit risk management

Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses the reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are set accordingly. The company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forward looking information such as:

10. Actual or expected significant adverse changes in business,

11. Actual or expected significant changes in the operating results of the counterparty,

12. Financial or economic conditions that are expected to cause a significant change to counterparty''s ability to meet its obligations,

13. Significant increases in credit risk on other financial instruments of the same counterparty,

14. Significant changes in the value of collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements.

The company provides for expected credit loss in case of trade receivables, claims receivable and security deposits when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or failing to engage in a repayment plan with the company. The company categorizes a receivable for provision for doubtful debts/write off when a debtor fails to make contractual payments greater than 180 days past due. The amount of provision depends on certain parameters set by the Company in its provisioning policy. Where loans or receivables have been written off, the company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized in profit or loss.

15. Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, company maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the company''s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows. This is carried out in accordance with practice and limits set by the Company. In addition, the company''s liquidity management policy involves projecting cash flows and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.

16. Foreign currency risk

The company is exposed to foreign exchange risk mainly through its sales to overseas customers and purchases from overseas suppliers in various foreign currencies. The company evaluates exchange rate exposure arising from foreign currency transactions and the company follows established risk management policies, including use of derivatives like foreign exchange forward contracts to hedge exposure to foreign currency risk, where the economic conditions match the company''s policy.

17. Capital management Risk management

The company''s objectives when managing capital are to

-safeguard it''s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and

-Maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the company monitors capital on the basis of the following gearing ratio: Net debt (total borrowings net of cash and cash equivalents) divided by total ''equity'' (as shown in the balance sheet).

18. Explanation of transition to Ind AS

These are Company''s first financial statements prepared in accordance with Indian Accounting Standards (Ind AS) as notified under Companies'' (Indian Accounting Standards) Rules, 2015. In preparing the financial statements for the year ended 31 March 2016 and balance sheet as at 1 April 2015 (date of transition), the Company has adjusted amounts reported previously in financial statements prepared in accordance with Indian Generally Accepted Accounting Principles (Indian GAAP). This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at 1 April 2015 and the financial statements for the year ended 31 March 2016.

19.. Exemptions applied

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has elected to apply the following exemptions:

20.. Property, plant and equipment, investment property and intangible assets

Since, there is no change in the functional currency, the Company has elected to continue with the carrying value for all of its property, plant and equipment, investment property and intangible assets as recognized in its Indian GAAP financials as deemed cost at the transition date.

21. Share based payments

Ind AS 102 share based payment has not been applied to equity instruments in share based transactions that vested before 1 April 2015.

22. Investments in subsidiaries

The Company has elected to continue with carrying value for all of its investment in subsidiaries as recognized in its Indian GAAP financials as deemed cost as at the transition date.

23. Exceptions applied

24. Government loans

The Company as a first-time adopter did not, under Indian GAAP, recognize and measure a government loan at a below-market rate of interest as a government grant. Accordingly, the Company has used its previous GAAP carrying amount of the loan at the date of transition.

25. Estimates

The estimates at 1 April 2015 and at 31 March 31 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items where application of Indian GAAP did not require estimation:

FVTOCI - unquoted equity shares

FVTPL - debt securities

Impairment of financial assets based on expected credit loss model Fair valuation of financial instruments carried at FVTPL

Determination of the discounted value of financial instruments carried at amortized cost

The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at 1 April 2015, the date of transition to Ind AS and as of 31 March 2016.

26. De-recognition of financial assets and liabilities

Ind AS 101, requires first time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirements of Ind AS 109, retrospectively from a date of the company''s choosing, provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities de-recognized as a result of past transaction was obtained at the time of initially accounting of transactions. The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from date of transition to Ind AS.

Explanation of transition to Ind AS

An explanation of how the transition from Indian GAAP to Ind AS has affected the Company''s financial position, financial performance and cash flow is set out in the following tables and notes that accompany the tables. The reconciliations include

- equity reconciliation as at 1 April 2015;

- equity reconciliation as at 31 March 2016;

- profit reconciliation for the year ended 31 March 2016;

There are no material adjustments to the cash flow statements

27. Excise duty

Under Indian GAAP, excise duty is reduced from gross revenues to report revenues net of excise duty. Under Ind AS, revenue includes gross inflows of economic benefits received by a company for its own account. Excise duty collected, which is a duty on manufacture and a primary obligation of the manufacturer is considered as revenue with the corresponding payments to government as expenditure. This adjustment does not have any impact on statement of profit and loss.

28. Share based payment transactions - Employee Stock Option Plan (ESOP)

Under Indian GAAP, a company uses intrinsic value approach to measure the cost of share based payments. Under this approach, if the exercise price for employee stock option is not less than the market price of the underlying shares on the date of the grant, no compensation cost is recorded. Under Ind AS, costs of share based payments are recorded based on the fair value of employee stock option. Under this approach, the instrument would have a value even if the exercise price is equal to the market price of the underlying shares on the date of grant.

29. Employee benefit expenses - actuarial gains and losses and return on plan assets

Under Indian GAAP, actuarial gains and losses and return on plan assets on post-employment defined benefit plans are recognized immediately in statement of profit and loss. Under Ind AS, re-measurements which comprise of actuarial gains and losses, return on plan assets and changes in the effect of asset ceiling, if any, with respect to post-employment defined benefit plans are recognized immediately in other comprehensive income (OCI). Further, re-measurements recognized in OCI are never reclassified to statement of profit and loss.

30. Reclassification of leases of land

Under Indian GAAP, there is no specific guidance for contracts that involve leases of land. Under Ind AS, lease of land is recognized as operating or finance lease as per definition and classification criteria stated in standard on leases. Accordingly, as on the date of transition, the leases of land have been classified as operating / finance lease as the case may be.

31. Foreign exchange forward derivative contracts

Under Indian GAAP the premium or the discount on foreign exchange forward derivative contracts related to underlying receivables and payables are amortized over the period of the contracts. In case of foreign exchange forward derivative contracts entered into at highly probable future transactions or firm commitments, mark to market losses (gains are ignored), if any, are recognized in the statement of profit and loss at the reporting date. Under Ind AS, all the foreign exchange forward derivative contracts are recorded at fair value with the subsequent changes in fair value recognized in the statement of profit and loss.

32. Corporate guarantee

Under Indian GAAP, financial guarantee given by the parent on behalf of its subsidiaries is recognized as ''contingent liability''. Under Ind AS, corporate / financial guarantee is treated as financial liability and recognized at fair value on initial and subsequent recognition. The fair value of the guarantee recoverable from the subsidiary is treated as receivable from subsidiary. The fair value of the guarantee not recoverable from the subsidiary is written off as expenditure. Finance income is recognized over the term of the guarantee using effective interest method.

33. Interest-free security deposits paid

Under Indian GAAP, interest-free lease security deposits paid are reported at their transaction values. Under Ind AS, interest-free security deposits are measured at fair value on initial recognition and at amortized cost on subsequent recognition. The difference between the transaction value and fair value of the lease deposit at initial recognition is treated as prepaid rentals. This amount is recognized in statement of profit and loss on a straight line basis over the lease term.

34. Investment property

Under Indian GAAP there is limited guidance on investment property. Under Ind AS, investment property comprises of land or building held for earning rentals or for capital appreciation or both. Where a property is held for a currently undetermined future use, it is regarded as held for capital appreciation. Investment property is required to be measured at cost and is subsequently depreciated based on its useful life. Fair value of the investment property is to be disclosed at every reporting period end.

35. Proposed dividend

Under Indian GAAP, dividend proposed after the date of the financial statements but prior to the approval of financial statements is considered as an adjusting event, and a provision for dividend is recognized in the financial statements of the period to which the dividend relates. Under Ind AS, dividend declaration is considered as a non-adjusting event and provision for dividend is recognized only in the period when the dividend is approved by the shareholders in annual general meeting.

36. Deferred tax

Under Indian GAAP, deferred taxes are recognized using income statement approach i.e. reflecting the tax effects of timing differences between accounting income and taxable income for the period. Under Ind AS, deferred taxes are recognized using balance sheet approach i.e. reflecting the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes using the income tax rates enacted or substantively enacted at reporting date. Also, deferred taxes are recognized on account of the above mentioned changes explained in notes (a)


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.


Mar 31, 2010

1.1 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.

1.2 Related party transactions

a) Parties where control exists

Subsidiaries Pacecon Engineering Projects Limited

Praj Far East Co. Limited Praj Schneider Inc. (upto 28-02-2010) BioCnergy Europa B.V. Praj Jaragua Bioenergia S.A. Praj Americas Inc. (from June 2009)

b) Key management personnel and their relatives

Executive Chairman Mr. Pramod Chaudhari

CEO & MD Mr. Shashank Inamdar

Relative of key management personnel Mrs. Parimal Chaudhari

1.3 Employee benefits

The disclosures in accordance with the requirements of Accounting Standard 15 (Revised 2005) Employee Benefits are provided below :

a) Defined contribution plans

The Company has recognised Rs. 24.038 towards post employment defined contribution plans comprising of provident and superannuation fund in the Profit and Loss Account.

1.4 Employee stock options

The Compensation Committee of the Company established the Employee Stock Option Plan on 23 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 28 December 2006 (‘Grant II’) and 3,029,626 stock options on 9 July 2009 (‘Grant III’).

The stock options vest in a graded manner equally over three years with each vesting taking effect on the expiry of 12 months from the date of grant. These can be exercised within a period of three years from the date of vesting. 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.

1.5 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.

1.6 Taxes

In consonance with retrospective amendment to Section 10AA of the Income Tax Act, related to the profit derived by SEZ undertaking which was ascertained hitherto based on the business of the assessee instead of the business of undertaking, the excess provision of current tax of earlier financial years 2007-08 & 2008-09 of Rs. 131.500 is written back during the year. Accordingly current tax expense of Rs. 69.885 is net of the said write back.

Long-term capital loss is adjustable against future capital gains considering the quantum of investible surplus available with the Company.

1.7 Exceptional item

During the year, the process of divestment of Praj Schneider Inc., the wholly owned subsidiary of the company in USA was completed. Consequently the loss of Rs 74.717 (net of write back of Rs 34.763) has been taken to Profit and Loss Account and shown under ‘exceptional items’.

1.8 Prior year comparatives

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

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