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Notes to Accounts of Prime Securities Ltd.

Mar 31, 2015

1) Employees Stock Option Schemes (ESOS)

The Company's stock based compensation plan for employees comprises of three schemes viz. the ESOS 2007 Scheme, ESOS 2008 and the ESOS 2009 Scheme. The schemes have been instituted for all eligible employees of the Company and its subsidiaries. The Company has reserved issuance of 842,200 (Previous year 1,749,000) Equity Shares of Rs. 5/- each for offering to eligible employees of the Company and its subsidiaries under Employees Stock Option Scheme (ESOS) approved by Members. During the year, the Company has granted NIL (Previous year NIL) Options to the eligible employees.

ESOS 2007 Scheme

The Scheme permits allocation of an aggregate of 1,000,000 equity shares of the face value of Rs. 5/- per share to the eligible employees on the recommendation of the Compensation Committee at an exercise price of Rs. 38/-.

ESOS 2008 Scheme

The Scheme permits allocation of an aggregate of 1,200,000 equity shares of the face value of Rs. 5/- per share to the eligible employees on the recommendation of the Compensation Committee at an exercise price of Rs. 15/-.

ESOS 2009 Scheme

The Scheme permits allocation of an aggregate of 2,000,000 equity shares of the face value of Rs. 5/- per share to the eligible employees on the recommendation of the Compensation Committee at an exercise price of Rs. 38/-.

Net block of the Building include a residential flat of Rs. 266.71 Lacs in a co-operative society, acquired from a debtor in satisfaction of a claim. In view of the restraining orders, the society has kept in abeyance the admission of membership of the Company. In the earlier year, pursuant to the order of the Hon'ble High Court, the possession of the flat was handed over to the Official Assignee. An appeal was filed by the Company against the said order whereby the said order was set aside. Pursuant to the fresh chamber summons filed by the Company for removing attachment, the Official Assignee has been directed not to sell or dispose-off the flat. The Company has been legally advised that the said developments will not have a bearing on the Company's title to the flat and consequently there is no impairment in the value of the asset and the Company is not likely to have any further claim or liability against the said flat.

2. Contingent Liabilities (Rs. in Lacs)

Particulars Period ended Period ended March September 31, 2015 30, 2013

Demands raised by Income Tax 13.18 283.09 departments against which the Company has preferred appeals

Corporate guarantee given for 81.77 2,251.09 financial facilities for a subsidiary (Amount outstanding at the close of the year)

Claim made against the Company not 1,704.82 926.47 acknowledged as debt

(Interest liability on the same cannot be ascertained)

3. The Company has made significant financial investments which are non-current in nature; while, on the other hand, the Company has substantial dues which are current in nature. In view thereof, the analysis of the Company's assets and liabilities casts significant doubt about the Company's ability to meet its obligations as and when they fall due and therefore its ability to continue as a going concern. Based on evaluation of the current situation and plans formulated to dispose-off investments and to create new revenue streams, the management holds the view that the Company will be able to discharge its liabilities in the normal course of business. Accordingly, the financial statements have been prepared on the basis that the Company is a going concern and that no adjustments are required to the carrying value of assets and liabilities.

4. One of the Company's subsidiary Primesec Investments Limited ("PIL") has a negative networth of Rs. 7,219.67 Lacs. The Company has advanced Rs. 7,500.00 Lacs to PIL as share application monies which is pending for allotment. PIL's management has undertaken to allot the shares. Pursuant to the proposed allotment of shares PIL's networth will turn positive. In view thereof PIL has prepared its financial statements on the basis that it is a going-concern. Considering that the Company's investment in PIL is of strategic and long term in nature and having regard to proposed capitalization, no provision is presently considered necessary by the management for diminution in the value of the Company's financial exposure in PIL.

5. The Company had given corporate guarantee to Bank of India for overdraft facility enjoyed by one of its subsidiary viz. Prime Broking Company (India) Limited. The corporate guarantee was invoked by the bank claiming a sum of Rs. 878.50 lacs. Being a guarantor, the Company has assumed the liability from its subsidiary company and passed necessary entries in the books of account. The bank filed a case for recovery in the Debt Recovery Tribunal (DRT) against the subsidiary and the Company. Later, the bank under a 'one-time settlement' crystallized the loan at Rs. 900.00 lacs and has waived past and future interest, provided the Company adheres to the repayment schedule and in case of any default, the Company would be liable to pay interest and the bank would pursue the matter in DRT. The Company has given effect to the one-time settlement in the books of account by re-stating the liability as accepted under the scheme and until the end of the financial year, the Company has made payments as per the repayment schedule.

6. The Company's subsidiary had pledged 108,704 equity shares of Dr. Datson's Lab Limited belonging to a third party as a security to avail credit facility from Bank of India. The said security continues even after the loan is assumed by the Company. The Company is in the process of obtaining confirmation of the said party.

7. The Company had given a corporate guarantee to ICICI Bank for financial facilities enjoyed by one of its subsidiary viz. Prime Broking Company (India) Limited. The guarantee was invoked by the bank claiming a sum of Rs. 1,168.74 lacs. Being a guarantor, the Company has assumed the liability from its subsidiary company and passed necessary entries in the books of account. The Company has submitted a proposal to the bank for a 'one-time settlement' for repayment of principal over a period of 4 years and waiver of past and future interest. Pending acceptance of the proposal by the bank, the Company has not accounted for interest on the amount outstanding. The amount of interest is unascertained in view of no communication received from the bank.

8. The Company has not accounted for interest expense of Rs. 1,324.15 lacs (Rs. 380.67 lacs) on secured loans (from other than banks) since in the opinion of the management the same would not be payable pursuant to a proposed restructuring/settlement of the loan. The aggregate interest (including interest for earlier periods) not provided as on March 31, 2015 is Rs. 1,704.82 lacs (Rs. 380.67 lacs).

9. The Company has written back an unsecured loan of Rs. 250.00 lacs as in the opinion of the management the same was no longer payable. However, the Company is in the process of executing necessary documentation in respect of the same.

10. The Company has not obtained documentations like confirmation of balance and terms of interest / repayment in respect of an unsecured loan of Rs. 1,400 lacs (refer Note 5). The Company has not accounted for interest on the said loan on the basis that it is interest-free. Further it has been categorized as short-term borrowings on the basis of the management's representation in that regard.

11. The Company had advanced Rs. 327.50 Lacs to a party and secured a right to acquire an office premises in Mumbai within a specified period. The Company could not complete the acquisition within the specified period and the right has lapsed. The management is in discussion with the party for refund of the said advance and is hopeful of recovery and accordingly, no provision is considered necessary.

12. There has been a decline of Rs. 939.47 Lacs as on March 31, 2015 in the carrying value of Non-current Investments. No provision for diminution in the value of such investments has been considered necessary since, in the opinion of the management, such diminution is only temporary in nature.

13. One of the Company's subsidiary had given 401,674 shares of Roop Automotive Limited as a security for a loan taken by the Company. During the period, the Company has purchased the said shares from its subsidiary company. As the shares are under pledge with the lender, they have not yet been transferred in the Company's name.

14. The Company's main business is to provide corporate advisory services. All other activities are incidental to the main business. As such, there are no separate reportable segments, as per Accounting Standard on 'Segment Reporting' (AS 17) issued by the Institute of Chartered Accountants of India.

15. Retirement Benefits

(Disclosure as required by AS 15 (Revised), "Accounting for Retirement Benefits" issued by Institute of Chartered Accountants of India)

Contribution to gratuity for India based employees are accrued on the basis of actuarial valuation and are also accordingly funded. The balance of Projects Benefit Obligation (PBO) on gratuity over the funded amount is accrued as liability.

(A) During the year, a provision of Rs. 34.45 lacs (Previous year Rs. 17.04 lacs) is made on account of actuarial liability for leave encashment and compensated absences. The aggregate provision as at year end is Rs. 152.27 lacs (Previous Year Rs. 117.82 lacs). The actuarial liability is computed assuming the discount factor of 8.75%.

The Guidance Note on Accounting of Employee Share Based Compensation issued by Institute of Chartered Accountant of India applies to employee share based payment plans, the grant date of which falls on or after April 1,2005 and allows accounting for employee share based payment plans based on either the Intrinsic value method or the fair value method. The Company follows the intrinsic value method. Under the fair value method, the net loss for the period ended March 31, 2015 would have been lower by Rs. 54.97 Lacs and the Basic EPS and Diluted EPS would have been Rs. (1.86) and Rs. (1.86) respectively.

16. Related Party Disclosures

I. Related party disclosures in respect of related parties with whom transactions have taken place during the year are given below:

Relationships

i) Subsidiary Companies

* Prime Broking Company (India) Limited

* Prime Research & Advisory Limited

* Prime Commodities Broking (India) Limited

* Primesec Investments Limited

ii) Associate Company

* Gateway Entertainment Limited

iii) Key Management Personnel

* Mr. N. Jayakumar

* Mr. Ajay Shah

iv) Relative of Key Management Personnel

* Mrs. Madhu Jayakumar

17. The net effect of taxation timing differences results in a deferred tax asset. As a measure of prudence such deferred tax asset is, for the time being, not recognized in the accounts in absence of certainty about its realization.

18. Pursuant to the approval received from the Registrar of Companies, Maharashtra (Mumbai) vide its order dated November 17, 2014, the Company has extended its financial year by a period of six months to end on March 31, 2015. Therefore, the financial statements for the current period are for eighteen months.


Sep 30, 2013

1. Contingent Liabilities

(Rs. in Lacs)

Particulars Period ended Year ended Sept 30.2013 March 31,2012

Demands raised by Income Tax and Sales Tax departments against which the 283.09 20.11 Company has preferred appeals

Corporate guarantee given for financial facilities for a subsidiary (Amount outstanding 2,251.09 2,300.00 at the close of the year)

Claim made against the Company not acknowledged as debt (Interest liability on the 926.47 545.80 same cannot be ascertained)

Estimated amount of contracts remaining to be executed on capital account and not 1,360.00 provided for (Net of Advance)

In July a bank had invoked corporate guarantee given by the Company on behalf of Prime Broking Company (India) Limited ("PBCIL"), a subsidiary company, for Rs. 1,168.74 Lacs. PBCIL has thereafter provided additional security and entered into a deed of hypothecation. In view of these subsequent events the Company continues to recognize these obligations as only contingent liability.

2. One of the Company''s subsidiary Primesec Investments Limited ("PIL") has a negative networth of Rs. 6,992.71 Lacs. The Company has advanced Rs. 9,000.00 Lacs to PIL as share application monies which is pending for allotment. PIL''s management has undertaken to allot the shares. Pursuant to the proposed allotment of shares PIL''s networth will turn positive. In view thereof PIL has prepared its financial statements on the basis that it is a going-concern. Considering that the Company''s investment in PIL is of strategic and long term in nature and having regard to proposed capitalization, no provision is presently considered necessary by the management for diminution in the value of the Company''s financial exposure in PIL.

3. The Company has made significant financial investment in its subsidiary Primesec Investments Limited which is strategic and long term in nature. On the other hand the Company has substantial dues which are current in nature. In view thereof, the analysis of the Company''s assets and liabilities casts significant doubt about the Company''s ability to meet its obligations as and when they fall due and therefore its ability to continue as a going concern. Based on evaluation of the current situation and plans formulated to dispose-off investments and to create new revenue streams, the management holds the view that the Company will be able to discharge its liabilities in the normal course of business. Accordingly, the financial statements have been prepared on the basis that the Company is a going concern and that no adjustments are required to the carrying value of assets and liabilities.

4. The documentation like confirmation of balances, terms of repayment and charge of interest in respect of the following unsecured loans received by the Company (refer Note 5) have not been obtained:

The Company has not accounted for interest on such loans on the basis that they are interest-free. Further they have been categorized as short-term borrowings on the basis of the management''s representation in that regard.

5. The Company has not accounted for interest of Rs. 380.67 Lacs charged by lenders who have advanced secured loan, as the management is of the opinion that the same would not be payable pursuant to a proposed restructuring/settlement of the loan.

6. The Company had advanced Rs. 327.50 Lacs to a party and secured a right to acquire an office premises in Mumbai within a specified period. The Company could not complete the acquisition within the specified period and the right has lapsed. The management is in discussion with the party for refund of the said advance and is hopeful of recovery and accordingly, no provision is considered necessary.

7. During the year Company has pledged shares belonging to third parties to obtain credit facilities. As at the end of the period shares belonging to third parties of the following companies were pledged for which confirmations from such parties has not been received:

8. Certain shares belonging to third parties and pledged by the Company were sold by the lender on account of shortfall in margins. The Company being obliged to return the shares has returned part of the shares during the period. The financial liability for shares remaining to be returned has been accounted for.

9. There has been a decline of Rs. 1,866.74 Lacs as on September 30, 2013 in the carrying value of Non-current Investments. No provision for diminution in the value of such investments has been considered necessary since, in the opinion of the management, such diminution is only temporary in nature considering depressed market conditions prevailing at the year- end.

10. The Company maintains many demat accounts. The transactions of inflow of shares in the demat accounts were on account of purchase of shares, transfer from other demat accounts, received from third parties (for further pledge) and received on release from pledge. As and when shares were sold, either by release from pledge or directly by the lender, irrespective of the demat account from which the shares were delivered, the Company has first accounted for sale to the extent of shares owned by it and the remaining shares were treated as sold on behalf of other parties. Due to this treatment the shares effectively got pooled-in and became fungible and as a result the Company has maintained share balances only on an overall basis and not on the basis of each demat account.

11. Having reviewed the financial position of its subsidiaries the Company has during the period made a provision of Rs. 1,752.72 Lacs for diminution in value of its equity investment in two subsidiaries viz. Prime Broking Company (India) Limited and Prime Research & Advisory Limited.

12. The Company''s main business is to provide corporate advisory services. All other activities are incidental to the main business. As such, there are no separate reportable segments, as per Accounting Standard on ''Segment Reporting'' (AS 17) issued by the Institute of Chartered Accountants of India.


Mar 31, 2011

1. Contingent Liabilities (Rs. in Lacs)

Particulars Year ended Year ended

March 31,2011 March 31, 2010

Demands raised by Income Tax and Sales Tax departments against which the 20.11 20.11 Company has preferred appeals

Corporate guarantee and security given for financial facilities for a subsidiary 1,650.00 1,626.64 (Amount outstanding at the close of the year)

Claim made against the Company not acknowledged as debt (Interest liability on 545.80 545.80 the same cannot be ascertained)

2. Loans and Advances includes:

a) Rs. 40.00 Lacs (Previous year Rs. 37.50 Lacs) paid to whole time director as an advance against salary [Maximum balance outstanding during the year - Rs. 40.00 Lacs (Previous year Rs.37.50 Lacs)].

b) Rs. Nil (Previous year Rs. 3.42 Lacs) due from the Principal Officer of the Company [Maximum balance outstanding during the year - Rs. 3.42 Lacs (Previous year Rs. 6.73 Lacs)].

3. Managerial Remuneration

(a) The Company has appointed a Managing Director w.e.f. February 12,2011, subject to the approval of the shareholders at the forthcoming annual general meeting of the Company.

(b) In view of the inadequacy of profits, the managerial remuneration exceeds the maximum amount payable in accordance with provisions of Section 198 read with Schedule XIII of the Companies Act, 1956. The Company is in the process of obtaining the approval of the Central Government.

4. Fixed Assets include a residential flat of Rs. 292.34 lacs (Net) in a co-operative society, acquired from a debtor in satisfaction of a claim. In view of the restraining orders, the society has kept in abeyance the admission of membership of the Company. In the earlier year, pursuant to the order of the Hon'ble High Court, the possession of the flat was handed over to the Official Assignee. An appeal was filed by the Company against the said order whereby the said order was set aside. Pursuant to the fresh chamber summons filed by the Company for removing attachment, the Official Assignee has been directed not to sell or dispose-off the flat. The Company has been legally advised that the said developments will not have a bearing on the Company's title to the flat and the Company is not likely to have any further claim or liability against the said flat.

5. The Company is yet to receive Rs. 239.35 lacs out of an original advance of Rs. 2,400.00 lacs given towards a proposed joint venture project which was shelved on account of various commercial consideration in the earlier financial year.

6. The balances of certain inter corporate deposit taken and advances appearing under the head advances recoverable in cash or kind are subject to confirmation and consequential adjustments, if any.

7. The Company has during the year transferred at book value 14,05,859 equity shares in Roop Automotive Limited to its wholly-owned subsidiary company viz. Primesec Investments Limited.

PBCIL has debts (outstanding for over one year) of Rs. 70.96 Lacs and has an outstanding deposit balance of Rs. 1,887.48 Lacs receivable on rescinding the right to acquire development rights in a property in Mumbai. Considering that the Company's investment in PBCIL is of a strategic and long term in nature and the efforts undertaken by the Board of PBCIL to recover the amounts involved, no provision is considered necessary by the management at present for a possible dilution in the value of investment and also in respect of losses that may arise in respect of the receivables from PBCIL. PIL has recognized in its financial statements a gain of Rs. 3,319.08 lacs on account of sale of securities for which the sale consideration of Rs. 4,069.22 lacs is yet to be received by PIL. In the event of default by the purchasers in making the payment, PIL would be required to make suitable adjustments in its profit and loss account to the extent of such default which would directly affect PIL's net worth.

8. The decline in the value of Investments held as long term, in the opinion of the management, is temporary in nature and hence no diminution is accounted in the carrying value of investments.

9. The Company's main business is to provide corporate advisory services. All other activities are incidental to the main business. As such, there are no separate reportable segments, as per Accounting Standard on 'Segment Reporting' (AS 17) issued by the Institute of Chartered Accountants of India.

10. Employees Stock Option Schemes (ESOS)

The Company's stock based compensation plan for employees comprises of two schemes viz. the ESOS 2007 Scheme and the ESOS 2008 Scheme. The schemes have been instituted for all eligible employees of the Company and its subsidiaries and are approved by the members.

ESOS 2007 Scheme

The Scheme permits allocation of an aggregate of 1,000,000 equity shares of the face value of Rs. 5/- per share to the eligible employees on the recommendation of the Compensation Committee at an exercise price to be approved by the Committee.

ESOS 2008 Scheme

The Scheme permits allocation of an aggregate of 1,200,000 equity shares of the face value of Rs. 5/- per share to the eligible employees on the recommendation of the Compensation Committee at an exercise price to be approved by the Committee.

ESOS 2009 Scheme

The Scheme permits allocation of an aggregate of 2,000,000 equity shares of the face value of Rs. 51- per share to the eligible employees on the recommendation of the Compensation Committee at an exercise price to be approved by the Committee.

11. Retirement Benefits

(Disclosure as required by AS 15 (Revised), "Accounting for Retirement Benefits" issued by Institute of Chartered Accountants of India)

Contribution to gratuity for India based employees are accrued on the basis of actuarial valuation and are also accordingly funded. The balance of Projects Benefit Obligation (PBO) on gratuity over the funded amount is accrued as liability. (A) Disclosure in terms of revised AS 15 on Retirement Benefits in respect of Defined Benefits Plans (Gratuity - funded scheme)

The Guidance Note on Accounting of Employee Share Based Compensation issued by Institute of Chartered Accountant of India applies to employee share based payment plans, the grant date of which falls on or after April 1, 2005 and allows accounting for employee share based payment plans based on either the Intrinsic value method or the fair value method. The Company follows the intrinsic value method. Under the fair value method, the net profit for the year ended March 31, 2011 would have been lower by Rs. 88.76 Lacs and the Basic EPS and Diluted EPS would have been Rs. 1.26 and Rs. 1.24 respectively.

12. Related Party Disclosures

1. Related party disclosures in respect of related parties with whom transactions have taken place during the year are given below:

Relationships

i) Subsidiary Companies

- Prime Broking Company (India) Limited

- Prime Research & Advisory Limited

- Prime Commodities Broking Company (India) Limited

- Primesec Investments Limited

ii) Directors

- Mr. N. Jayakumar (Appointed w.e.f. February 12, 2011)

- Mr. R Ramachandran

- Mr. Pradip Dubhashi

- Mr. S. R. Sharma (Appointed w.e.f. January 25, 2011)

- Mr. Arun Shah (Resigned w.e.f. January 25, 2011)

Mi) Key Management Personnel

- Mr. Ajay Shah

iv) Relative of Director

- Mrs. Madhu Jayakumar

v) The following transactions were carried out with the related parties in the ordinaiy course of business during the financial year 2010-2011

13. The Company provides for the use of its wholly owned subsidiary certain facilities like use of human resources, premises, infrastructure and other facilities and services and the same are termed as 'Recovery of Shared Services'. Such shared services consisting of administrative and other expenses paid for by the Company are recovered on the basis of fair estimates of such usage.

14. As per the information available with the Company, there are no dues outstanding as on March 31, 2011 to any micro, small and medium-enterprise as defined under section 7 of Micro, Small & Medium Enterprises Development Act, 2006.

15. The net effect of taxation timing differences results in a deferred tax asset. As a measure of prudence such deferred tax asset is, for the time being, not recognized in the accounts in absence of certainty about its realization.

16. Other information pursuant to paragraph 4C of Part II of Schedule VI to the Companies Act, 1956 - Not applicable.

17. Previous year figures have been regrouped and/or re-arranged wherever considered necessary.

 
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