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Notes to Accounts of Redington (India) Ltd.

Mar 31, 2015

1. Company Overview

Redington (India) Limited ("the Company"), is a public limited Company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The Company's equity shares are listed on the bourses of BSE Limited and National Stock Exchange of India Limited. The Company operates in the Information Technology product distribution business supply chain solutions and after sales services of Information Technology products. The Company has setup a branch in Singapore which has become operational during the year. The Company and its subsidiaries operate in India, Middle East, Turkey, Africa, and South Asia countries.

2. Basis of preparation of financial statements

2.1 The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act") / Companies Act, 1956 ("the 1956 Act"), as applicable. The financial statements have been prepared on accrual basis under the historical cost convention. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.

3. Terms/rights attached to equity shares;

Each holder of equity share is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. For the year ended March 31, 2015 a dividend of Rs. 1.90 per equity share has been proposed by the Board of Directors (Previous year Rs. 0.90 per equity share). The dividend proposed by the Board of Directors is subject to the approval of the shareholders at the ensuing Annual General Meeting which includes an agenda item to consider declaration of dividend.

4. Contingent Liabilities & Commitments Rs. in Lakhs

Particulars 31-Mar-2015 31-Mar-2014

i. Bills Discounted 6,200.79 9,396.64

ii. Channel financing 1,975.00 4,603.70

ii. Factoring 7,525.00 8,212.50

iv. Claims not acknowledged as debts 359.36 337.68

v. Disputed Customs Duty/Income Tax/Sales Tax demands

Rs. in Lakhs

Nature of Dues 31-Mar-2015 31-Mar-2014

Customs duty 97.03 97.03

Income Tax 952.79 18,964.47 @

Sales Tax 1,566.34 1,813.64

@ The Income tax demand on the Company of Rs. 129 Crores (besides interest of Rs. 78 Crores) arising mainly on account of tax on capital gains from the transfer of Company's investment in an overseas subsidiary to another overseas step-down subsidiary raised for the assessment year ended on March 31,2009 has been set aside by the Income Tax Appellate Tribunal, Chennai vide its order dated July 7, 2014. The Company has not received any intimation to date from the Income tax department contesting the Appellate order of Income Tax Appellate Tribunal.

5. Capital Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs. 34.25 Lakhs (Previous Year Rs. 1,245.25 Lakhs).

Pursuant to the announcement of the Institute of Chartered Accountants of India (ICAI) in respect of "Accounting for Derivatives", the Company had opted to follow the recognition and measurement principles relating to derivatives as specified in AS 30 "Financial Instruments, Recognition and Measurement", issued by the ICAI, from the year ended March 31,2008.

Consequently, as of March 31,2015, the Company has recognised Mark to Market (MTM) loss of Rs. 3.14 Lakhs. (Previous Year loss of Rs. 9.86 Lakhs) relating to forward contracts and other derivatives entered into to hedge the foreign currency risk of highly probable forecast transactions that are designated as effective cash flow hedges, in the Hedge Accounting Reserve as part of the Shareholders Funds.

The MTM net loss on undesignated / ineffective forward contracts amounting to Rs. 17.68 Lakhs (Previous Year Rs. 23.25 Lakhs) has been recognised in the Statement of Profit and Loss.

6. Related party disclosures (As per AS 18)

1) Key Management Personnel

Mr. R Srinivasan, Managing Director (Till October 17, 2014)

Mr. Raj Shankar, Managing Director (from October 17, 2014)

Mr. M Raghunandan, Wholetime Director

Refer Note 28 below for remuneration

7. Names of the related parties

Party where the Company Redington Employee Share Purchase has control Trust *

Parties having Significant Harrow Investment Holding Limited, Influence on the Company Mauritius * (Ceased to be parties having significant influence in the current financial year)

Synnex Mauritius Limited, Mauritius *

Subsidiary Companies Nook Micro Distribution Limited, India * Cadensworth (India) Limited, India * Redington International Mauritius Limited, Mauritius * Redington Gulf FZE, Dubai Cadensworth FZE, Dubai * Redington Gulf & Co. LLC, Oman Redington Nigeria Ltd, Nigeria Redington Egypt Ltd, Egypt Redington Kenya Ltd, Kenya Redington Middle East LLC, Dubai Redington Qatar WLL, Qatar

Subsidiary Companies Ensure Services Arabia LLC, Saudi Arabia Redington Africa Distribution FZE. Dubai Ensure Services Bahrain SPC, Bahrain Redington Distribution Pte Ltd, Singapore * Redington Bangladesh Limited, Bangladesh Redington Qatar Distribution WLL, Qatar Redington Kenya EPZ Ltd, Kenya Redington Limited, Ghana Redington Uganda Limited, Ugand Africa Joint Technical Services, Libya Redington Gulf FZE Co, Iraq Cadensworth United Arab Emirates LLC, Dubai Redington Morocco Limited, Morocco Redington Tanzania Ltd., Tanzania Redington SL (Private) Limted, Sri lanka Redington Angola Limited, Angola Redington Turkey Holdings S.A.R.L, Luxembourg Arena Bilgisayar Sanayi Ve Ticaret Anonim Sirketi, Turkey # Arena International FZE, UAE Ensure IT Services PTY Limited, South Africa ProConnect Supply Chain Solutions Limited, India * Ensure Gulf FZE, Dubai Ensure Technical Service (PTY) Limited, South Africa Ensure Middle East Trading LLC,UAE Ensure Technical Services Kenya Limited, Kenya Ensure Technical Services Tanzania Limited, Tanzania Ensure Services Uganda Limited, Uganda Ensure Solutions Nigeria Limited, Nigeria Redington Rwanda Limited, Rwanda Redington Kazakhstan LLP, Kazakhstan Republic Sensonet Teknoloji Elelektronik Ve Bilisim Hizmetlen Sanayi- Ve Ticaret Limited Sirketi, Turkey ProConnect Supply Chain Logistics LLC, Dubai Ensure Ghana Limited, Ghana Ensure Support Services (India) Limited, India * Ensure Technical Services Morocco Limited(SARLAU), Morocco Ensure Digital FZ LLC, Dubai ADEO Bilisim Danismanlik Hizmetleri San. ve Tic.A.S., Turkey A

Formed during the year Redington Senegal Limited SARL, Senegal Redington Saudi Arabia for Distribution Company, Saudi Arabia

Acquired during the year Paynet Odemet Hizmetleri A. s.

Associate Redington (India) Investments Limited, India *

Subsidiary of Associate Currents Technology Retail (India) Limited, India *

* Represents related parties with whom transactions have taken place during the year.

# As Redington Turkey Holdings S.A.R.L. has effective control over the composition of Board of Directors, Arena Bilgisayar Sanayi Ve Ticaret Anonim Sirketi is considered as subsidiary.

A Arena Bilgisayar Sanayi Ve Ticaret Anonim Sirketi, the step down subsidiary acquired 50% shares. Related Parties are as identified by the management.

8. Since the Company prepares consolidated financial statements as per AS-17 "Segment Reporting", segment information has been disclosed in consolidated financial statements

9. The Company is required to spend Rs. 495 Lakhs on "Corporate Social Responsibility (CSR)" during the financial year 2014-15. The Company has accordingly constituted a CSR Committee which has approved the budgeted expenditure to be spent on identified areas / projects and the management is committed to spend this amount during the financial year 2015-16. Accordingly a provision for the said amount has been made in these financial statements. The Company has also earmarked the funds for meeting the expenditure by transferring the amount of Rs. 495 Lakhs to a separate bank account opened for this purpose (Refer note 16).

10. The figures of the previous year have been regrouped wherever necessary to conform to the classification of the current year.


Mar 31, 2014

1. Company Overview

Redington (India) Limited ("the Company"), is a public limited Company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The Company''s equity shares are listed on the bourses of BSE Limited and National Stock Exchange of India Limited. The Company operates in the Information Technology and other products distribution and after sales service. The Company and its subsidiaries operate in India, South Asia, Middle East, Turkey and Africa.

2. Basis of preparation of financial statements

2.1 The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notifed under Section 211(3C) of the Companies Act, 1956 ("the 1956 Act") (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 ("the 2013 Act") in terms of General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs) and the relevant provisions of the 1956 Act/2013 Act, as applicable. The financial statements have been prepared on accrual basis under the historical cost convention. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.

The financial statements and documents required to be attached thereto, upto year ended March 31, 2014 would be governed by the provisions of Schedule VI of the Companies Act, 1956 as clarifed by Ministry of Corporate Affairs in its circular no 08/2014 dated April 4, 2014.

3. Contingent Liabilities & Commitments

Rs. in Lakhs

Particulars 31-Mar-2014 31-Mar-2013

i. Corporate Guarantees on behalf of subsidiaries - 57,025.50

ii. Bills Discounted 9,396.64 4,619.76

iii. Channel fnancing 4,603.70 4,350.00

iv. Factoring 8,212.50 9,525.00

v. Claims not acknowledged as debts 337.68 253.16

vi. Disputed Customs Duty/Income Tax/Sales Tax demands

Rs. in Lakhs Nature of Dues 31-Mar-2014 31-Mar-2013

Customs duty 97.03 110.88

Income Tax 18,964.47 795.39

Sales Tax 1,813.64 1,006.63

The Income Tax Assessment for the Accounting Year ended on March 31, 2009 has been completed in January 2014 resulting in a tax demand of Rs. 129 Crores (besides interest of Rs. 78 Crores) mainly on account of tax on Capital Gain arising from Transfer of Company''s investment in an overseas subsidiary to another overseas step-down subsidiary in November 2008.

The Company has preferred an appeal against the said demand before the Income Tax Appellate Tribunal (ITAT), Chennai. The Company has paid Rs. 22 Crores under protest and the ITAT has granted stay for recovery of balance tax demand till August 31, 2014 or disposal of the case whichever is earlier.

Based on eminent tax counsels opinion the management is hopeful of successfully contesting the demand in appeal; accordingly no provision towards the disputed tax claim is presently considered necessary.

vii. Capital Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs. 1,245.25 Lakhs (Previous Year Rs. 2,615.25 Lakhs).

4. Operating Leases

The Company has taken cancelable operating leases for its office premises, which is for a period ranging from 11 months to 9 years.

5. Accounting for Financial Instruments

Pursuant to the announcement of the Institute of Chartered Accountants of India (ICAI) in respect of "Accounting for Derivatives", the Company had opted to follow the recognition and measurement principles relating to derivatives as specified in AS 30 "Financial Instruments, Recognition and Measurement", issued by the ICAI, from the year ended March 31, 2008.

Consequently, as of March 31, 2014, the Company has recognised Mark to Market (MTM) loss of Rs. 9.86 Lakhs. (Previous Year loss of Rs. 0.54 Lakhs) relating to forward contracts and other derivatives entered into to hedge the foreign currency risk of highly probable forecast transactions that are designated as effective cash fow hedges, in the Hedge Accounting Reserve as part of the Shareholders Funds.

The MTM net loss on undesignated / ineffective forward contracts amounting to Rs. 23.25 Lakhs (Previous Year Rs. 5.65 Lakhs) has been recognised in the Statement of profit and Loss.

6. Related party disclosures

1) Key Management Personnel

Mr. R Srinivasan, Managing Director Mr. Raj Shankar, Joint Managing Director Mr. M Raghunandan, Whole-Time Director

Refer Note 28 below for remuneration

2) Names of the related parties

Party where the Company has control

Redington Employee Share Purchase Trust *

Parties having significant Infuence on the Company

Harrow Investment Holding Limited

(formerly known as Redington (Mauritius) Limited), Mauritius *

Synnex Mauritius Limited, Mauritius *

Subsidiary Companies

Nook Micro Distribution Limited, India *

Cadensworth (India) Limited, India*

Easyaccess Financial Services Limited* (Ceased to be Subsidiary w.e.f January

22,2014 (Refer note-35))*

Redington International Mauritius Limited, Mauritius*

Redington International (Holdings) Limited, Cayman Islands ¥

Redington Gulf FZE, Dubai

Cadensworth FZE, Dubai*

Redington Gulf & Co. LLC, Oman

Redington Nigeria Ltd, Nigeria

Redington Egypt Ltd, Egypt

Redington Kenya Ltd, Kenya

Redington Middle East LLC, Dubai

Redington Qatar WLL, Qatar

Ensure Services Arabia LLC, Saudi Arabia (formerly known as Redington Arabia

Limited, Saudi Arabia)

Redington Africa Distribution FZE. Dubai

Ensure Services Bahrain SPC, Bahrain (formerly known as Redington Bahrain SPC,

Bahrain)

Redington Distribution Pte Ltd, Singapore *

Redington Bangladesh Limited, Bangladesh

Redington Qatar Distribution WLL, Qatar

Redington Kenya EPZ Ltd, Kenya

Redington Limited, Ghana

Redington Uganda Limited, Uganda

Africa Joint Technical Services, Libya

RGF Private Trust Company Limited, Cayman Islands

Subsidiary Companies

Redington Gulf FZE Co, Iraq

Cadensworth United Arab Emirates LLC, Dubai

Redington Morocco Limited, Morocco

Redington Tanzania Ltd., Tanzania

Redington SL (Private) Limted, Sri lanka

Redington Angola Limited, Angola

Redington Turkey Holdings S.A.R.L, Luxembourg

Arena Bilgisayar Sanayi Ve Ticaret Anonim Sirketi, Turkey #

Arena International FZE, UAE

Ensure IT Services PTY Limited, South Africa

ProConnect Supply Chain Solutions Limited, India*

Ensure Gulf FZE, Dubai

Ensure Technical Service (PTY) Limited, South Africa

Ensure Middle East Trading LLC,UAE

Ensure Technical Services Kenya Limited, Kenya

Ensure Technical Services Tanzania Limited, Tanzania

Ensure Services Uganda Limited, Uganda

Ensure Solutions Nigeria Limited, Nigeria

Redington Rwanda Limited, Rwanda

Redington Kazakhstan LLP, Kazakhstan Republic

Sensonet Teknoloji Elelektronik Ve Bilisim Hizmetlen Sanayi- Ve Ticaret Limited Sirketi,

Turkey

Formed during the year

Ensure Supply Chain Logistics LLC, Dubai

Ensure Ghana Limited, Ghana

Ensure Support Services (India) Limited, India*

Ensure Technical Services Morocco Limited(SARLAU), Morocco

Ensure Digital FZ LLC, Dubai

Acquired during the year

ADEO Bilisim Danismanlik Hizmetleri San. ve Tic.A.S., Turkey ^

Associate

Subsidiary of Associate

Redington (India) Investments Limited, India * Currents Technology Retail (India) Limited, India *

* Represents related parties with whom transactions have taken place during the year.

# As Redington Turkey Holdings S.A.R.L. has effective control over the composition of Board of Directors, Arena Bilgisayar Sanayi Ve Ticaret Anonim Sirketi is considered as subsidiary.

^ Arena Bilgisayar Sanayi Ve Ticaret Anonim Sirketi, the step down subsidiary acquired 50% shares.

¥ Redington International Holdings Limited got merged with Redington International Mauritius Limited on July 10, 2013.

Related Parties have been identified by the management.

7. The Company has setup a branch in Singapore on February 28, 2014. As at the Balance Sheet date, the Branch is yet to commence its operations.

8. Event occurring after the Balance Sheet date

The Company has made an additional equity investment of Rs. 2,924.63 Lakhs in its wholly-owned subsidiary Redington International Mauritius Limited in May 2014.

9. Exceptional item

Pursuant to the approval of the shareholders through Postal ballot, the Company divested its equity interest in Easyaccess Financial Services Limited to M/s. Harrow Investment Holding Limited, 86% in January 2014 and balance 14% in March 2014. Consequently Easyaccess Financial Services Limited ceased to be a subsidiary Company w.e.f January 22, 2014. profit of Rs. 6,575.66 Lakhs arising out of divestment of equity interest in Easyaccess Financial Services Limited is disclosed as exceptional item.

10. The figures of the previous year have been regrouped wherever necessary to conform to the classifcation of the current year.


Mar 31, 2013

1. Company Overview

Redington (India) Limited ("the Company"), is a public limited Company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The Company''s stocks are listed on the bourses of BSE Limited and National Stock Exchange of India Limited. The Company operates in the distribution business and after sales service of Information Technology and other products. The Company and its subsidiaries operate in India, South East Asia, Middle East, Africa and Turkey.

2. Basis of preparation of financial statements

2.1 The financial statements have been prepared under the historical cost convention on accrual basis and in accordance with Generally Accepted Accounting Principles in India ("Indian GAAP"). These financial statements comply with the relevant provisions of the Companies Act, 1956 ("the Act") and the Accounting Standards notified by the Central Government under Companies (Accounting Standard) Rules, 2006/ issued by The Institute of Chartered Accountants of India. The accounting policies adopted in the preparation of financial statements are consistent with the previous year.

3. Non-current Investments

Trade Investments

Investment in Equity Instruments - Unquoted Investment in Subsidiaries & Associates

i. Disputed Customs Duty/Income Tax/Sales Tax demands

The Company has paid Rs. 251.39 lakhs under protest (Previous Year Rs. 495.73 Lakhs), which is included under Long-term loans and advances.

ii. Capital Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs. 2,615.25 Lakhs (Previous Year Rs. 2,575.90 Lakhs).

4. Until November 17, 2008, the Company''s Middle East and Africa (MEA) business was conducted through its wholly owned subsidiary Redington Gulf FZE, Dubai (RGF). To facilitate investment by a Private Overseas Equity Investor in Redington International Holdings Limited (RIHL) a step down subsidiary of the Company, Redington (India) Limited transferred its 100% shareholding in RGF, without consideration, to RIHL.

In the assessment for the year ended March 31, 2009, the Assessing Officer has sought to bring to taxation the imputed profits on transfer of the above shares to RIHL without consideration, leading to a potential demand of Rs. 138 Or excluding interest. The Company has made a representation on this to the Dispute Resolution Panel.

Management is hopeful of successfully contesting in appeal if and when a demand is raised.

5. Operating Leases

The Company has taken cancelable operating lease for its office premises, which are for a period ranging from 11 months to 9 years.

6. Accounting for Financial Instruments

Pursuant to the announcement of the Institute of Chartered Accountants of India (ICAI) in respect of "Accounting for Derivatives", the Company had opted to follow the recognition and measurement principles relating to derivatives as specified in AS 30 "Financial Instruments, Recognition and Measurement", issued by the ICAI, from the year ended March 31, 2008.

Consequently, as of March 31, 2013, the Company has recognised Mark to Market (MTM) loss of Rs. 0.54 lakhs. (Previous Year gain of Rs. 17.52 lakhs) relating to forward contracts and other derivatives entered into to hedge the foreign currency risk of highly probable forecast transactions that are designated as effective cash flow hedges, in the Hedge Accounting Reserve as part of the Shareholders Funds.

The MTM net loss on undesignated / ineffective forward contracts amounting to Rs. 5.65 Lakhs (Previous Year Rs. Nil) has been recognised in the Statement of Profit and Loss.

7. Related party disclosures

1) Key Management Personnel

Mr. R.Srinivasan, Managing Director Mr. Raj Shankar, Deputy Managing Director Mr. M.Raghunandan, Wholetime Director

Refer Note 29 for remuneration

2) Names of the related parties

Party where the Company has control Redington Employee Share Purchase Trust *

Parties having Significant Influence on the Company

Redington (Mauritius) Limited, Mauritius * Synnex Mauritius Limited, Mauritius *

Subsidiary Companies Nook Micro Distribution Limited, India *

Cadensworth (India) Limited, India *

Easyaccess Financial Services Limited, India *

Redington International Mauritius Limited, Mauritius*

Redington International (Holdings) Limited, Cayman Islands

Redington Gulf FZE, Dubai

Cadensworth FZE, Dubai

Redington Gulf & Co. LLC, Oman

Redington Nigeria Ltd, Nigeria

Redington Egypt Ltd, Egypt

Redington Kenya Ltd, Kenya

Redington Middle East LLC, Dubai

Redington Gatar WLL, Qatar

Redington Arabia Limited, Saudi Arabia

Redington Africa Distribution FZE. Dubai

Redington Bahrain SPC, Bahrain

Redington Distribution Pte Ltd, Singapore *

Redington Bangladesh Limited, Bangladesh

Redington Qatar Distribution WLL, Qatar

Redington Kenya (EPZ) Ltd., Kenya

Redington Limited, Ghana

Redington Uganda Limited, Uganda

Africa Joint Technical Services, Libya

RGF Private Trust Company Limited, Cayman Islands

Redington Gulf FZE Co, Iraq

Cadensworth United Arab Emirates LLC, Dubai

Subsidiary Companies Redington Morocco Limited, Morocco

Redington Tanzania Ltd., Tanzania

Redington SL Pvt Limted, Sri lanka

Redington Angola ADA, Angola

Redington Turkey Holdings S.A.R.L, Luxembourg

Arena Bilgisayar Sanayi Ve Ticaret Anonim Sirketi, Turkey*

Arena International FZE, UAE

Ensure IT Services (PTY) Limited, South Africa (Formerly known as Redington IT Services (PTY) Limited)

Subsidiary Companies Formed during the year

ProConnect Supply Chain Solutions Limited, India*

Ensure Gulf FZE, Dubai

Ensure Technical Service (PTY) Limited, South Africa Ensure Middle East Trading LLC,UAE Ensure Technical Services Kenya Limited, Kenya Ensure Technical Services Tanzania Limited, Tanzania Ensure Services Uganda Limited, Uganda Ensure Solutions Nigeria Limited, Nigeria Redington Rwanda Limited, Rwanda Redington Kazakhstan LLP, Kazakhstan Republic

Sensonet Teknoloji Elelektronik Ve Bilisim Hizmetlen Sanayi- Ve Ticaret Limited Sirketi, Turkey

Associate Redington (India) Investments Limited, India*

Subsidiary of Associate Currents Technology Retail (India) Limited, India*

* Represents related parties with whom transactions have taken place during the year.

* As Redington Turkey Holdings S.A.R.L. has effective control over the composition of Board of directors, Arena Bilgisayar Sanayi Ve Ticaret Anonim Sirketi is considered as subsidiary.

8. The figures of the previous year have been regrouped wherever necessary to conform to the classification of the current year.


Mar 31, 2012

1. Company Overview

Redington (India) Limited, is a public limited Company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The Company's stocks are listed on the bourses of Bombay stock exchange and National stock exchange of India. The Company primarily operates in the distribution business and after sales service of Information Technology and other products. The Company and its subsidiaries operate in India, South Asia, Middle East Africa and Turkey.

2. Basis of preparation of financial statements

The financial statements have been prepared under the historical cost convention on accrual basis and in accordance with Generally Accepted Accounting Principles in India (Indian GAAP). These financial statements comply with the relevant provisions of the Companies Act, 1956 (the Act) and the Accounting Standards notified by the Central Government under Companies (Accounting Standard) Rules, 2006. The accounting policies adopted in the preparation of financial statements are consistent with the previous year.

The Company has paid Rs 495.73 lakhs under protest (Previous Year Rs 631.23 Lakhs), which is included under Long- term loans and advances.

i. Capital Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs 2,575.90 Lakhs (Previous Year Rs 406.34 Lakhs).

3. Operating Leases

The Company has taken cancelable operating lease for its office premises, which are for a period ranging from 11 months to 9 years.

4. Segment Reporting

The Company primarily operates in distribution business and after sales services of IT and other products and as the revenue from service segment is less than 10% of the total revenue, there are no reportable segments as required to be disclosed under the Accounting Standard 17 "Segment Reporting". Although the Company's operations cover various States in India, the State laws have no significant impact on profitability. Accordingly there are no geographical segments to be reported.

5. Accounting for Financial Instruments

Pursuant to the announcement of the Institute of Chartered Accountants of India (ICAI) in respect of "Accounting for Derivatives", the Company had opted to follow the recognition and measurement principles relating to derivatives as specified in AS 30 "Financial Instruments, Recognition and Measurement", issued by the ICAI, and from the year ended 31 March 2008.

Consequently, as of 31 March 2012, the Company has recognised Mark to Market (MTM) Gain of Rs 17.52 lakhs. (Previous Year loss of t 2.09 lakhs) relating to forward contracts and other derivatives entered into to hedge the foreign currency risk of highly probable forecast transactions that are designated as effective cash flow hedges, in the Hedge Reserve Account as part of the Shareholders Funds.

The MTM net loss on undesignated / ineffective forward contracts amounting to Rs Nil (Previous Year 1111.55 lakhs) has been recognised in the Statement of Profit and Loss.

The Contracts in Hedge Reserve Account are expected to be recognised in the Statement of Profit and Loss on occurrence of transactions which are expected to take place over the next 12 months.

6. Related party disclosures

1) Key Management Personnel

Mr. R.Srinivasan, Managing Director Mr. Raj Shankar, Deputy Managing Director Mr. M.Raghunandan, Wholetime Director Refer below Note 30 for remuneration

A. Stock price

The closing market price on the date prior to the date of grant on National Stock Exchange (NSE) has been considered for the purpose of option valuation.

B. Volatility

Volatility is a measure of the amount by which a price has fluctuated or is expected to fluctuate during a period. The measure of volatility used in the Black-Scholes option-pricing model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time.

The period to be considered for volatility has to be adequate to represent a consistent trend in the price movements. It is also important that movements due to abnormal events get evened out.

There is no research that demonstrates conclusively how long the historical period used to estimate expected long- term future volatility should be. However, Guidance note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accountants of India recommends including the historical volatility of the stock over the most recent period that is generally commensurate with the expected life of the option being valued.

The entity's stocks have been publicly traded on NSE and BSE. For calculating Volatility, we have considered the daily volatility of the stock prices on NSE, over a period prior to the date of grant, corresponding with the expected life of the options.

The Fair value of an option is very sensitive to this variable. Higher the volatility, higher is the Fair value. The rationale being, the more volatile a stock is, the more is its potential to go up (or come down), and the more is the probability to gain from the movement in the price. Accordingly, an option to buy a highly volatile stock is more valuable than the one to buy a less volatile stock, for the probability of gaining is lesser in the latter case.

C. Risk free interest rate

The risk-free interest rate being considered for the calculation is the interest rate applicable for maturity equal to the expected life of the options based on the zero-coupon yield curve for Government Securities.

D. Exercise Price

Options have been granted primarily at a price of Rs 348.05 on 29th February 2008. Subsequently, 19,59,830 and 75,000 options were re-priced at a Market price of 1130/- and 1165/- on 28th January 2009 and 22nd May 2009 respectively. On December 5, 2011 1,73,212 options were granted at a price of Rs 396.50 per option.

E. Time to Maturity / Expected Life of options

Time to Maturity / Expected Life of options is the period for which the Company expects the options to be live. The minimum life of a stock option is the minimum period before which the options cannot be exercised and the maximum life is the period after which the options cannot be exercised.

According to SEBI Guidelines, the expected life of an award of stock options shall take into account the following factors -

i. The expected life must at least include the vesting period.

ii. The average lengths of time of similar grants have remained outstanding in the past. If the Company does not have a sufficiently long history of stock option grants, the experience of an appropriately comparable peer group may be taken into consideration.

iii. The expected life of stock options should not be less than half of the exercise period of the stock options issued until and unless the same is supported by historical evidences with respect to stock options issued by the Company earlier.

The fair value of each award has been determined based on different expected lives of the options that vest each year, as it would be if the award were viewed as several separate awards, each with a different vesting date. A weighted average of all vests has been calculated to arrive at the value of the options.

The time to maturity has been estimated as illustrated by the following example. In case of the grant made on December 5, 2011, the earliest date of exercise is December 5, 2012 i.e. one year from the date of grant. The exercise period is five years from the date of vest.

Hence, the time to maturity for the first vest is equal to the average of the minimum period plus the maximum period i.e. 1 year 6 Years = 3.5 years. Time to Maturity has been estimated on a similar basis for the remaining vests.

Expected Dividend yield: Expected dividend yield has been calculated as an average of dividend yields for the preceding 2 years to the year of grant.

The impact on the profit of the Company as at the year end and the basic and diluted earnings per share, had the Company followed the fair value method of accounting for stock options is set out below:

 
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