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Notes to Accounts of Rallis India Ltd.

Mar 31, 2015

Corporate Information:

Rallis India Limited (the "Company") is an Indian public limited company, incorporated on 23 August, 1948, which is a subsidiary of Tata Chemicals Limited. It has been engaged primarily in the business of manufacture and marketing of Agri Inputs. The Company has its manufacturing facilities in India and sells both in India and across the globe. The Company is listed on the Bombay Stock Exchange ("BSE") and the National Stock Exchange ("NSE").

2. contingent liabilities and commitments (to the extent not provided for) (Refer Note 30):

The Company is involved in a number of appellate, judicial and arbitration proceedings (including those described below) concerning matters arising in the course of conduct of the Company''s businesses. Some of these proceedings in respect of matters under litigation are in early stages, and in some other cases, the claims are indeterminate. A summary of claims asserted on the Company in respect of these cases have been summarised below.

Tax contingencies

Amounts in respect of claims asserted by various revenue authorities on the Company, in respect of taxes, which are in dispute, have been tabulated below:

rs lac Nature of Tax As at As at 31 March, 2015 31 March, 2014

Sales Tax 1,836.30 1,808.34

Excise Duty 360.84 401.56

Customs Duty 144.10 144.10

Income Tax 6,904.98 6,900.28

Service Tax 113.06 93.74

Property Cases 47.36 47.36

The management believes that the claims made are untenable and is contesting them. As of the reporting date, the management is unable to determine the ultimate outcome of above matters. However, in the event the revenue authorities succeed with enforcement of their assessments, the Company may be required to pay some or all of the asserted claims and the consequential interest and penalties, which would reduce net income and could have a material adverse effect on net income in the respective reported period.

Management is generally unable to reasonably estimate a range of possible loss for proceedings or disputes other than those included in the estimate above, including where:

(i) plaintiffs / parties have not claimed an amount of money damages, unless management can otherwise determine an appropriate amount; " (ii) the proceedings are in early stages;

(iii) there is uncertainty as to the outcome of pending appeals or motions or negotiations; (iv) there are significant factual issues to be resolved; and/or (v) there are novel legal issues presented.

However, in respect of the above matters, management does not believe, based on currently available information, that the outcomes of the litigation, will have a material adverse effect on the Company''s financial condition, though the outcomes could be material to the Company''s operating results for any particular period, depending, in part, upon the operating results for such period.

(ii) commitments

(A) During the financial year 2010-11, the Company had acquired a majority of the equity shares of Metahelix Life Sciences Limited ("Metahelix"). Besides, the shares already acquired, it has allowed the founder shareholders, a put option exercisable over a period of 1 years (Previous Year: 2 years), 6,895 shares held by them for an amount aggregating Rs. 1,348.59 lac (Previous Year: 6,895 shares for an amount aggregating Rs. 1,348.59 lac). At the end of 3 years, the Company has a call option to acquire the balance shares held by the founder shareholders, at the fair market value as at the date of exercise.

(B) Estimated amount of contracts remaining to be executed on capital account of tangible assets is Rs. 774.96 lac (Previous YearX 826.79 lac) and Intangible assets is Rs. 274.27 lac (Previous YearX 144.01 lac) against which advances paid aggregate X 200.02 lac (Previous YearX 303.93 lac).

(C) For lease commitments and derivatives, refer note no 26 and 37 respectively.

During the year the Company has also incurred Rs. 234.83 lac (Previous Year Rs. 242.20 lac) towards capital research and development expenditure which is included under Intangible Assets under Development. The total amount included in Intangible Assets under Development as at 31st March 2015 is Rs. 665.86 lac (Previous YearRs.693.42 lac).

The above figures include the amounts based on separate accounts for the Research and Developments ("R&D") Centre recognised by the Department of Scientific & Industrial Research ("DSIR"), Ministry of Science and Technology for in- house research (consonance with the DSIR guidelines for in-house R & D Centre will be evaluated at the time of filing the return with DSIR).

Due to the numerous uncertainties and variables associated with certain assumptions and judgments, and the effects of changes in the regulatory and legal environment, both the precision and reliability of the resulting estimates of the related contingencies are subject to substantial uncertainties. The Company regularly monitors its estimated exposure to such loss contingencies and, as additional information becomes known, may change its estimates significantly. However, no estimate of the range of any such change can be made at this time.

4 SEGMENT REPORTING

The Company has determined its business segment as "Agri - Inputs" comprising of Pesticides, Plant Growth Nutrients and Seeds. The other business segment comprises "Polymer" and is non reportable.

(i) Segment Revenue includes Sales of Products less Excise Duty.

(ii) Unallocable assets include Investments, Advance Income Tax, Advance Fringe Benefit Tax, Interest Accrued on Investments and Fixed Deposits.

(iii) Unallocable liabilities includes Long Term Borrowings (includes current maturities on long-term debt), Short Term Borrowings, Provisions for Equity Dividend and tax thereon, Provision for Supplemental Payments, Provision for Income and Fringe Benefit Tax and Deferred Tax Liabilities.

(iv) Unallocable income includes income from investment activities.

(v) Unallocable expenditure includes charge in respect of Supplemental Payments on retirement valued on actuarial basis.

5 FOREIGN cURRENcY EXPOSURES :-

The Company, in accordance with its risk management policies and procedures, enters into foreign currency forward contracts and currency option contracts to manage its exposure in foreign exchange rate variations. The counter party is generally a bank. These contracts are for a period between one day and four years.

(a) Derivative Instruments:

The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The use of foreign currency forward contracts is governed by the Company''s strategy approved by the Board of Directors, which provide principles on the use of such forward contracts consistent with the Company''s Risk Management Policy. The Company does not use forward contracts for speculative purposes.

6 EMPLOYEE BENEFIT OBLIGATIONS:

Defined-Benefits Plans:

The Company offers its employees defined-benefit plans in the form of a gratuity scheme (a lump sum amount) and a supplemental pay scheme (a life long pension). The gratuity scheme covers substantially all regular employees, while supplemental pay plan covers former certain executives. In the case of the gratuity scheme, the Company contributes funds to Gratuity Trust, which is irrevocable, while the supplemental pay scheme is not funded. Commitments are actuarially determined at year-end. The actuarial valuation is done based on "Projected Unit Credit" method. Gains and losses of changed actuarial assumptions are charged to the Statement of profit and loss.

The estimates of future salary increases, considered in the actuarial valuation, take into account inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market.

The discount rate is based on the prevailing market yields of Government of India securities as at the balance sheet date for the estimated term of the obligations.

Defined-contribution Plans:

The Company makes Provident Fund contributions to defined contribution retirement benefit plans for eligible employees. Under the schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The contributions as specified under the law are paid to the provident fund set up as a trust by the Company in case of certain locations. The Company is generally liable for annual contributions and any deficiency compared to interest computed based on the rate of interest declared by the Central Government under the Employees'' Provident Fund Scheme, 1952 and recognises, if any, as an expense in the year it is determined.

As of 31 March, 2015, the fair value of the assets of the fund and the accumulated members'' corpus is Rs. 4,277.07 lac and Rs. 4,086.86 lac respectively. In accordance with an actuarial valuation, there is no deficiency as the present value of the expected future earnings on the fund is greater than the expected amount to be credited to the individual members based on the expected guaranteed rate of interest of 8.75%. The actuarial assumptions include discount rate of 7.74% and an average expected future period of 6 years.

Amount recognised as expense and included in the Note 22 — "Contribution to Provident and Other Funds" — Rs. 495.10 lac (Previous Year Rs. 440.65 lac).

Pursuant to the transition provisions prescribed in Schedule II to the Companies Act, 2013, the Company has fully depreciated the carrying value of assets, net of residual value, where the remaining useful life of the asset was determined to be Nil as on 1 April, 2014, and has adjusted an amount ofRs. 236.63 lac (net of deferred tax ofRs. 121.92 lac) against the opening surplus balance in the Statement of Profit and Loss under Reserves and Surplus.

The depreciation expense in the Statement of Profit and Loss for the year is higher by Rs. 557.99 lac consequent to the change in the useful life of the assets.

7 The Company had invested Rs. 880.00 lac in Non-Convertible Debentures ("NCDs") of Advinus Therapeutics Ltd. having a coupon rate of 4.25%. The NCDs were redeemable between December 2010 and May 2013 at a premium of 25%.

Income recognised during the year includes Nil (Previous YearRs. 0.38 lac) in respect of redemption premium determined on the basis of the internal rate of return. During the year debentures amounting to Nil (Previous YearRs. 103.84 lac) were redeemed at a 25% premium which aggregated Nil (Previous YearRs.25.96 lac).

8 Previous years'' figures have been regrouped / restated wherever necessary to conform to the classification of the current year.


Mar 31, 2014

1. CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR):

(i) Contingent Liabilities:

Rs. lacs

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

a. Claims against the Company not acknowledged as debts:

- Sales Tax 2,032.72 2,000.40 - Excise Duty 401.56 360.84

- Customs Duty 144.10 144.10

- Income Tax 6,900.28 6,838.48

- Service Tax 93.74 65.21

- Property Cases 47.36 47.36

- Labour Cases 98.79 109.00

- Other cases 89.98 109.56

- Number of cases where amount is not quantifiable 41 Nos. (Previous Year 41 Nos.)

b. Other money for which the company is contingently liable:

- Bills Discounted (fully covered by buyer''s letters of credit) 458.01 1,547.36

10,266.54 11,222.31

Note :

The Company does not expect any liability in respect of items (a) and (b ) to devolve in respect of its exposure and therefore no provision has been made in respect thereof.

(ii) Commitments

(A) During the financial year 2010-11, the Company had acquired a majority of the equity shares of Metahelix Life Sciences Limited ("Metahelix"). Besides, the shares already acquired, it has allowed the founder shareholders, a put option exercisable over a period of 2 years (Previous Year: 3 years), 6,895 shares held by them for an amount aggregating Rs.1,348.59 lacs (Previous Year: 8,433 shares for an amount aggregating Rs.1,649.11 lacs). The Commitment made in the previous year to acquire 2,591 equity shares from certain shareholder (other than founder shareholder) for an amount aggregating Rs.506.77 lacs has been fulfilled during the year.

At the end of 3 years, the Company has a call option to acquire the balance shares held by the founder shareholders, at the fair market value as at the date of exercise.

(B) Estimated amount of contracts remaining to be executed on capital account of tangible assets isRs.826.79 lacs (Previous Year Z934.83 lacs) and Intangible assets is Rs.144.01 lacs (Previous Year Z12.80 lacs) against which advances paid aggregate Rs.303.93 lacs (Previous Yeart144.54 lacs).

(C) For lease commitments and derivatives, refer note no 28 and 39 respectively.

2. FOREIGN CURRENCY EXPOSURES :-

The Company, in accordance with its risk management policies and procedures, enters into foreign currency forward contracts and currency option contracts to manage its exposure in foreign exchange rate variations. The counter party is generally a bank. These contracts are for a period between one day and four years.

(a) Derivative Instruments:

The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The use of foreign currency forward contracts is governed by the Company''s strategy approved by the Board of Directors, which provide principles on the use of such forward contracts consistent with the Company''s Risk Management Policy. The Company does not use forward contracts for speculative purposes.

3. RELATED PARTY DISCLOSURES :

Disclosure as required by Accounting Standard (AS) - 18 "Related Party Disclosures" as prescribed under section 211 (3C) of the Companies Act, 1956.

(a) Names of the related parties and description of relationship:

(i) Holding / Ultimate Holding Company : Tata Chemicals Limited

(ii) Subsidiary Companies: Rallis Chemistry Exports Ltd

Metahelix Life Sciences Ltd

Dhaanya Seeds Ltd (Merged with Metahelix Life Sciences Ltd. w.e.f 1st April, 2013)

Zero Waste Agro Organics Ltd. w.e.f 18th October,2012

(iii) Key Management Personnel : Mr.V.Shankar - Managing Director & CEO

4. EMPLOYEE BENEFIT OBLIGATIONS: Defined-Benefits Plans:

The Company offers its employees defined-benefit plans in the form of a gratuity scheme (a lump sum amount) and a supplemental pay scheme (a life long pension). The gratuity scheme covers substantially all regular employees, while supplemental pay plan covers certain former executives. In the case of the gratuity scheme, the Company contributes funds to Gratuity Trust, which is irrevocable, while the supplemental pay scheme is not funded. Commitments are actuarially determined at year-end. The actuarial valuation is done based on "Projected Unit Credit" method. Gains and losses of changed actuarial assumptions are charged to the Statement of profit and loss.

Defined-Contribution Plans:

Amount recognised as expense and included in the Note 24 - "Contribution to Provident and Other Funds" - Rs. 440.65 lacs (Previous Year Z408.53 lacs).

5. Trade Payable includes amount payable to Micro, Small and Medium Enterprises as follows:

a The total amount of delayed payments during the year aggregate Rs. 58.48 lacs in respect of 28 parties with amounts ranging from Rs. 0.02 lacs to Rs.20.96 lacs. (Previous Year Rs. *14.94 lacs in respect of 7 parties with amounts ranging from Rs. 0.03 lacs to T4.01 lacs).

b The amount of principal outstanding in respect of the above as at Balance Sheet date is Rs. 843.45 lacs in respect of 45 parties (Previous Year T596.34 lacs in respect of 31 parties with amounts ranging from f0.13 lacs to 144.29 lacs) with amounts ranging from Rs. 0.15 lacs to Rs. 152.90 lacs.

c The total interest payable on account of delayed payment during the year is Rs. 0.15 lacs. The Company has made payment of Rs. 0.15 lacs during the year. The total interest payable aggregates Rs. NIL (Previous Year Rs. NIL) and outstanding balance as at the year end is Rs. NIL (Previous Year Rs. NIL).

6. The Company had invested Rs. 880.00 lacs in Non-Convertible Debentures ("NCDs") of Advinus Therapeutics Ltd. having a coupon rate of 4.25%. The NCDs is redeemed between December 2010 and May 2013 at a premium of 25%. Income recognised during the year includes Rs. 0.38 lacs (Previous Year T28.49 lacs) in respect of redemption premium determined on the basis of the internal rate of return. During the year debentures amounting to Rs. 103.84 lacs (Previous Year T296.15 lacs) were redeemed at a 25% premium which aggregated Rs. 25.96 lacs (Previous Year T74.04 lacs).

7. Previous years’ figures have been regrouped / restated wherever necessary to conform to the classification of the current year.


Mar 31, 2013

A. The Equity Shares of the Company have voting rights and are subject to the preferential rights as prescribed under law or those of the preference shareholders, if any. The Equity Shares are also subject to restrictions as prescribed under the Companies Act, 1956.

b. As per records of the company, no calls remain unpaid by the directors and officers of the Company as on 31st March, 2013.

a. 750 (Previous Year: 750) 9.05% Secured Redeemable Non-Convertible Debentures (2010-11 Series 1) having a face value of Rs. 10 lacs each redeemable at par on 29th October, 2013.

b. These Non Convertible Debentures are secured by a first pari-passu mortgage over factory building and certain plant and machinery of Ankleshwar and Lote units.

c. The Company can repurchase some or all of the debentures at any time prior to date of redemption. The Company has the right to re-issue debentures bought back subject to provisions of the Companies Act, 1956.

Notes :

(i) # Other guarantees issued by Bank for which the Company is contingently liable. These are covered by the charge created in favour of Company''s bankers by way of hypothecation of stock and debtors.

(ii) The Company does not expect any liability in respect of items (a), (b) and (c ) to devolve in respect of its exposure and therefore no provision has been made in respect thereof.

(ii) Other Commitments :

(A) During the financial year 2010-11, the Company had acquired a majority of the equity shares of Metahelix Life Sciences Limited (Metahelix). Besides, the shares already acquired, it has made the following Commitmets:

(a) to acquire shares from certain shareholders (other than founder shareholders) 2,591 equity shares for an amount aggregating Rs. 506.77 lacs. (previous year 2,591 equity shares held by them for an amount aggregating Rs. 506.77 lacs.)

(b) to allow the founder shareholders, a put option exercisable over a period of 3 years (Previous Year: 4 years), 8,433 shares held by them for an amount aggregating Rs. 1,649.11 lacs (Previous Year: 11,244 shares for an amount aggregating Rs. 2,199.21 lacs).

At the end of 3 years, the Company has a call option to acquire the balance shares held by the founder shareholders, at the fair market value as at the date of exercise.

(B) During the financial year 2012-13, the Company has acquired 12,956 equity shares of Zero Waste Agro Organics Private Limited (ZWAOPL) for an amount aggregating to Rs. 1,000.07 lacs. Besides, the shares already acquired, it has made the following commitments:

(a) Investment of Rs. 1,900.03 lacs in respect to ZWAOPL effectively taking the shareholding of Rallis to 50.06%.

(C) Estimated amount of contracts remaining to be executed on capital account of tangible assets is Rs. 934.83 lacs (Previous Year Rs. 1,848.66 lacs) against which advances paid aggregate Rs. 144.54 Lacs (Previous Year Rs. 150.21 lacs) and Intangible assets is Rs. 12.80 lacs (Previous Year Rs. 95.79 lacs).

(D) For derivatives and lease commitments, refer note no 42 and 28 respectively.

1 The Company has procured motor vehicles under non-cancellable operating leases. Lease rent charged to the Statement of Profit and Loss during the year is Rs. 427.84 lacs (Previous Year Rs. 203.53 lacs) net of amount recovered from employees Rs. 3.59 lacs (Previous Year Rs. 2.34 lacs). Disclosures in respect of non-cancellable leases are given below:

During the year the Company has also incurred Rs. 919.94 lacs (Previous Year Rs.471.14 lacs) towards development expenditure which is included under Intangible Assets under Development/Capital work in progress. The total amount included in Intangible Assets under Development/Capital work in progress as at 31st March 2013 is Rs. 1,094.17 lacs (Previous Year Rs. 1,638.98 lacs).

Included in the foregoing is an amount of Rs. 422.69 lacs (Previous Year Rs. 582.94 lacs) paid to an external agency.

2 SEGMENT REPORTING:

Segment information has been presented in the Consolidated Financial Statements as permitted by Accounting Standard (AS-17) on Segment Reporting as notified under the Companies (Accounting Standards) Rules, 2006.

3 FOREIGN CURRENCY EXPOSURES

The Company, in accordance with its risk management policies and procedures, enters into foreign currency forward contracts and currency option contracts to manage its exposure in foreign exchange rate variations. The counter party is generally a bank. These contracts are for a period between one day and four years.

Derivative Instruments:

The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The use of foreign currency forward contracts is governed by the Company''s strategy approved by the Board of Directors, which provide principles on the use of such forward contracts consistent with the Company''s Risk Management Policy. The Company does not use forward contracts for speculative purposes.

The net loss on the derivative instrument of Rs. 63.40 lacs (net of Deferred Tax Asset of Rs. 30.45 lacs) recognised in 2011-2012 in the Hedging Reserve Account has been recycled in the Statement of Profit and Loss in 2012-2013.

4 RELATED PARTY DISCLOSURES :

Disclosure as required by Accounting Standard (AS) - 18 "Related Party Disclosures" as prescribed under section 211 (3C) of the Companies Act, 1956.

(a) Names of the related parties and description of relationship:

(i) Holding / Ultimate Holding Company : Tata Chemicals Limited

(ii) Subsidiary Companies: Rallis Chemistry Exports Ltd

Metahelix Life Sciences Ltd Dhaanya Seeds Ltd

Zero Waste Agro Organics Pvt. Ltd. w.e.f 18th October,2012 Rallis Australasia Pty Ltd.(Liquidated on 25th January, 2012)

(iii) Key Management Personnel : Mr.V.Shankar - Managing Director & CEO

5 EMPLOYEE BENEFIT OBLIGATIONS:

Defined-Benefits Plans:

The Company offers its employees defined-benefit plans in the form of a gratuity scheme (a lump sum amount) and a supplemental pay scheme (a life long pension). The gratuity scheme covers substantially all regular employees, while supplemental pay plan covers certain executives. In the case of the gratuity scheme, the Company contributes funds to Gratuity Trust, which is irrevocable, while the supplemental pay scheme is not funded. Commitments are actuarially determined at year-end. The actuarial valuation is done based on "Projected Unit Credit" method. Gains and losses of changed actuarial assumptions are charged to the Statement of profit and loss.

Defined-Contribution Plans:

Amount recognised as expense and included in the Note 24 — "Contribution to Provident and Other Funds" — Rs.408.53 lacs (Previous Year Rs.413.78 lacs).

6 TRADE PAYABLE INCLUDES AMOUNT PAYABLE TO MICRO, SMALL AND MEDIUM ENTERPRISES AS FOLLOWS:

a The total amount of delayed payments during the year aggregate Rs. 14.94 lacs in respect of 7 parties with amounts ranging from Rs. 0.03 lacs to Rs. 4.01 lacs. (Previous Year Rs.37.62 lacs in respect of 7 parties with amounts ranging from Rs.0.57 lacs to Rs.17.11 lacs).

b The amount of principal outstanding in respect of the above as at Balance Sheet date is Rs. 596.34 lacs in respect of 31 parties (Previous Year Rs.379.67 lacs in respect of 28 parties with amounts ranging from Rs.0.02 lacs to Rs.166.60 lacs) with amounts ranging from Rs. 0.13 lacs to Rs. 144.29 lacs.

c The total interest payable on account of delayed payment during the year is Rs. 0.03 lacs. The Company has made payment of Rs. 0.14 lacs during the year. The total interest payable aggregates Rs. Nil (Previous Year Rs.0.12 lacs) and this entire amount was paid, outstanding balance as at the year end is Nil.

7 The Company has invested Rs. 880.00 lacs in Non-Convertible Debentures ("NCDs") of Advinus Therapeutics Ltd. having a coupon rate of 4.25%. The NCDs will be redeemed between December 2010 and May 2013 at a premium of 25%. Income recognised during the year includes Rs. 28.49 lacs (Previous Year Rs. 22.72 lacs) in respect of redemption premium determined on the basis of the internal rate of return. During the year debentures amounting to Rs. 296.15 lacs (Previous Year Rs. 290.40 lacs) were redeemed at a 25% premium which aggregated Rs. 74.04 lacs (Previous Year Rs. 72.60 lacs).

8 During the year, the Company has acquired / subscribed to equity shares comprising 22.81% of the equity shares of Zero Waste Agro Organics Private Limited (ZWAOPL).

9 During the previous year, Rallis Australasia Pty. Ltd. a subsidiary of the Company has been liquidated. The Company has received an amount of Rs. 107.69 lacs as a surplus over its investment on account of liquidation.

10 Previous years''s figures have been regrouped / restated wherever necessary to conform to the classification of the current year.

 
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