Mar 31, 2018
1 General Information
Shriram EPC Limited (the âCompanyâ or âSEPCâ) which is a part of the Shriram EPC Group has diverse interests across Project Engineering & Construction. The company provides end-to-end solutions to engineering challenges, offering multi disciplinary design, engineering, procurement, construction and project management services. SEPC is focused on providing turnkey solutions for ferrous & non ferrous, cement, aluminum, copper and thermal power plants, water treatment & transmission, renewable energy, cooling towers & material handling.
2 Significant accounting policies
Significant accounting policies adopted by the company are as under:
2.1 Basis of Preparation of Financial Statements
The financial statements have been prepared using significant accounting policies and measurement basis summarized below. These were used throughout all periods presented in the financial statements, except where the company has applied certain accounting policies and exemptions upon transition to Ind AS as summarized in Note 5.
(a) Statement of Compliance with Ind AS
These financial statements have been prepared in accordance with Indian Accounting
Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the âââActââ) read with the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
The date of transition to Ind AS is April 1, 2016. The financial statements upto the year ended March 31, 2017, were prepared in accordance with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006 (âl-GAAPâ) and other relevant provisions of the Act. The figures for the year ended March 31,
2017 have now been restated as per Ind AS to provide comparability. These financials statements have been approved for issue by the Board of Directors at their meeting held on June 07, 2018.
These financial statements for the year ended 31 March 2018 are the first set of financial statements prepared in accordance with Ind AS. Refer note 5 for an explanation of how the Company has adopted Ind AS.
Accounting policies have been consistently applied to all the years presented except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
(b) Basis of measurement
The financial statements have been prepared on a historical cost convention on accrual basis, except certain financial assets and liabilities measured at fair value (Refer Accounting Policy No. 2.15 on financial instruments).
The carrying value of all the items of property, plant and equipment as on date of transition is considered as the deemed cost.
All assets and liabilities have been classified as current or non-current as per the Companyâs operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. The normal operating cycle of the entity for Construction contracts is the duration of 2 to 3 years depending on each contract. For all other segments, the normal operating cycle has been considered as a duration of 12 months.
(c) Presentation of financial statements
The Balance Sheet and the Statement of
Profit and Loss are prepared and presented in the format prescribed in the Schedule III to the Companies Act, 2013 (âthe Actâ). The statement of cash flows has been prepared and presented as per the requirements of Ind AS 7 âStatement of Cash flowsâ. The disclosure requirements with respect to items in the Balance Sheet and Statement of Profit and Loss, as prescribed in the Schedule III to the Act, are presented by way of notes forming part of the financial statements along with the other notes required to be disclosed under the notified Accounting Standards and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Amounts in the financial statements are presented in Indian Rupees in Lakhs rounded off to two decimal places as permitted by Schedule III to the
Companies Act, 2013. Per share data are presented in Indian Rupees to two decimal places.
(d) Use of estimates
The preparation of financial statements in conformity with Ind AS requires the Management to make estimate and assumptions that affect the reported amount of assets and liabilities as at the Balance Sheet date, reported amount of revenue and expenses for the year and disclosures of contingent liabilities as at the Balance Sheet date. The estimates and assumptions used in the accompanying financial statements are based upon the Managementâs evaluation of the relevant facts and circumstances as at the date of the financial statements. Actual results could differ from these estimates. Estimates and underlying assumptions are reviewed on a periodic basis. Revisions to accounting estimates, if any, are recognized in the year in which the estimates are revised and in any future years affected. Refer Note 3 for detailed discussion on estimates and judgments.
(e) Interests in Joint Operations
When the Company has joint control of the arrangement based on contractually determined right to the assets and obligations for liabilities, it recognizes such interests as joint operations. Joint control exists when the decisions about the relevant activities require unanimous consent of the parties sharing the control. In respect of its interests in joint operations, the Company recognizes its share in assets, liabilities, income and expenses line-by-line in the standalone financial statements of the entity which is party to such joint arrangement which then becomes part of the consolidated financial statements of the Group when the financial statements of the Parent Company and its subsidiaries are combined for consolidation.
2.2 Property, plant and equipment (PPE)
Property, plant and equipment is recognized when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. PPE are stated at original cost net of taxes/duty credits availed , if any less accumulated depreciation and cumulative impairment, if any. PPE acquired on hire purchase basis are recognized at their cash values. Cost includes professional fees related to the acquisition of PPE and for qualifying assets, borrowing costs capitalized in accordance with the companyâs accounting policy.
Subsequent costs are included in the assetâs carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to Statement of Profit and Loss during the year in which they are incurred.
For transition to Ind AS, the Company has elected to adopt as deemed cost, the carrying value of
PPE measured as per I-GAAP less accumulated depreciation and cumulative impairment on the transition date of April 1, 2016. In respect of revalued assets, the value as determined by valuers as reduced by accumulated depreciation and cumulative impairment is taken as cost on transition date.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under other non-current assets and the cost of assets not put to use before such date are disclosed under âCapital work-in-progressâ.
* Leasehold improvements are amortized over the lease period, which corresponds with the useful lives of the assets.
Based on the technical experts assessment of useful life, certain items of property plant and equipment are being depreciated over useful lives different from the prescribed useful lives under Schedule II to the Companies Act, 2013. Management believes that such estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
Depreciation on addition to property plant and equipment is provided on pro-rata basis from the date of acquisition. Depreciation on sale/deduction from property plant and equipment is provided up to the date preceding the date of sale, deduction as the case may be. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in Statement of Profit and Loss under âOther Incomeâ.
Depreciation methods, useful lives and residual values are reviewed periodically at each financial year end and adjusted prospectively, as appropriate. Freehold land is not depreciated.
2.3 Intangible Assets
Intangible assets are recognized when it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably. Intangible assets are stated at original cost, net of tax/duty credits availed, if any less accumulated amortization and cumulative impairment. Administrative and other general overhead expenses that are specifically attributable to the acquisition of intangible assets are allocated and capitalized as part of cost of the intangible asset.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of its all intangible assets recognized as at 1 April 2016 measured as per the Indian GAAP and use that carrying value as the deemed cost of the intangible assets.
As at the end of each accounting year, the Company reviews the carrying amounts of its PPE and Intangible Assets to determine whether there is any indication that those assets have suffered an impairment loss. If such indication exists, the PPE and Intangible Assets are tested for impairment, so as to determine the impairment loss, if any. Goodwill and Intangible Assets with indefinite life are tested for impairment each year.
2.4 Foreign Currency Transactions
(a) Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (âthe functional currencyâ). The financial statements are presented in Indian rupee (INR), which is the Companyâs functional and presentation currency.
(b) Transactions and balances
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the functional currency and the foreign currency at the date of the transaction. Gains/Losses arising out of fluctuation in foreign exchange rate between the transaction date and settlement date are
recognized in the Statement of Profit and Loss.
All monetary assets and liabilities in foreign currencies are restated at the year end at the exchange rate prevailing at the year end and the exchange differences are recognized in the Statement of Profit and Loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
2.5 Fair value measurement
The Company maintains accounts on accrual basis following the historical cost convention, except for certain financial instruments that are measured at fair value in accordance with Ind AS and certain items of property, plant and equipment that were revalued in earlier years in accordance with the l-GAAP principles. The carrying value of all the items of property, plant and equipment as on date of transition is considered as the deemed cost.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability accessible to the Company.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. The Companyâs management determines the policies and procedures for fair value measurement.
Fair value measurements under Ind AS are categorized as below based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the company can access at measurement date;
- Level 2 inputs are inputs, other than quoted prices included in level 1, that are observable for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the valuation of assets/liabilities
2.6 Revenue Recognition
A. Revenue is recognized based on the nature of activity when consideration can be reasonably measured and recovered with reasonable certainty. Revenue is measured at the fair value of the consideration received or receivable and is reduced for estimated customer returns, rebates and other similar allowances.
B. Revenue from construction contracts/ project related activity and contracts for supply/commissioning of complex plant and equipment is recognized as follows:
Fixed price contracts: Contract revenue is recognized only to the extent of cost incurred till such time the outcome of the job cannot be ascertained reliably subject to condition that it is probable the such cost will be recoverable. When the outcome of the contract is ascertained reliably, contract revenue is recognized at cost of work performed on the contract plus proportionate margin, using the percentage of completion method. Percentage of completion is the proportion of cost of work performed to date, to the total estimated contracts cost.
The estimated outcome of a contract is considered reliable when all the following
conditions are satisfied:
(i) The amount of revenue can be measured reliably;
(ii) It is probable that the economic benefits associated with the contract will flow to the Company;
(iii)The stage of completion of the contract at the end of the reporting period can be measured reliably; and
(iv)The costs incurred or to be incurred in respect of the contract can be measured reliably.
Expected loss, if any, on a contract is recognized as expense in the period in which it is foreseen, irrespective of the stage of completion of the contract.
For contracts where progress billing exceeds the aggregate of contract costs incurred to-date and recognized profits (or recognized losses, as the case may be), the surplus is shown as the amount due to customers. Amounts received before the related work is performed are disclosed in the Balance sheet as a liability towards advance received. Amounts billed for work performed but yet to be paid by the customer are disclosed in the Balance sheet as trade receivables. The amount of retention money held by the customers is disclosed as part of other current assets and is reclassified as trade receivables when it becomes due for payment.
Revenue from contracts from rendering engineering design services and other services which are directly related to construction of an asset is recognized on the same basis as stated in (B) above.
Other Operational Revenue
Other Operational Revenue represents income earned from activities incidental to the business and is recognized when the right to receive income is established as per the terms of contract.
Other Income
Interest Income is recognized on the basis of effective interest method as set out in Ind
AS 109, Financial Instruments, and where no significant uncertainty as to measurability or collectability exists.
Dividend income is accounted in the period in which the right to receive the same is established.
Other items of income are accounted as and when the right to receive such income arises and it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
2.7 Taxes
Tax expense for the year, comprising current tax and deferred tax, are included in the determination of the net profit or loss for the year.
(a) Current income tax
Current tax assets and liabilities are measured at the amount expected to be recovered or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the year end date. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
(b) Deferred tax
Deferred income tax is provided in full, using the balance sheet approach, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in financial statements. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the year and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognized for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Current and deferred tax is recognized in Statement of Profit and Loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
2.8 Leases As a lessee
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as a lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the less or) are charged to Statement of Profit and Loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
Also initial direct cost incurred in operating lease such as commissions, legal fees and internal costs is recognized immediately in the Statement of Profit and Loss.
Leases of property, plant and equipment where the Company, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the leaseâs inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in borrowings or other financial liabilities as appropriate. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the Statement of Profit and Loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
2.9 Exceptional items
An item of income or expense which by its size, type or incidence requires disclosure in order to improve an understanding of the performance of the company is treated as an exceptional item and the same is disclosed in the notes to accounts.
2.10 Impairment of non-financial assets
The Company assesses at each year end whether there is any objective evidence that a non financial asset or a group of non financial assets is impaired. If any such indication exists, the Company estimates the assetâs recoverable amount and the amount of impairment loss.
An impairment loss is calculated as the difference between an assetâs carrying amount and recoverable amount. Losses are recognized in Statement of Profit and Loss and reflected in an allowance account. When the Company considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, then the previously recognized impairment loss is reversed through Statement of Profit and Loss.
The recoverable amount of an asset or cash-generating unit (as defined below) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the âcash-generating unitâ).
2.11 Provisions and contingent liabilities
Provisions are recognized when there is a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance sheet date.
If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
The Company records a provision for decommissioning costs. Decommissioning costs are provided at the present value of expected costs to settle the obligation using estimated cash flows and are recognized as part of the cost of the particular asset. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to the decommissioning liability. The unwinding of the discount is expensed as incurred and recognized in the statement of profit and loss as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.
Provisions, contingent liabilities and contingent assets are reviewed at each Balance Sheet date. Where the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under such contract, the present obligation under the contract is recognized and measured as a provision.
2.12 Commitments
Commitments are future liabilities for contractual expenditure, classified and disclosed as follows:
a) estimated amount of contracts remaining to be executed on capital account and not provided for;
b) uncalled liability on shares and other investments partly paid;
c) funding related commitment to subsidiary, associate and joint venture companies; and
d) other non-cancellable commitments, if any, to the extent they are considered material and relevant in the opinion of management.
Other commitments related to sales/procurements made in the normal course of business are not disclosed to avoid excessive details.
2.13 Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks, cash on hand, cheques in transit and demand deposits with banks.
For the purposes of the cash flow statement, Cash and Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
2.14 Cash flow statement
Statement of Cash Flows is prepared segregating the cash flows into operating, investing and financing activities. Cash flow from operating activities is reported using indirect method, adjusting the net profit for the effects of:
i. changes during the period in inventories and operating receivables and payables transactions of a non-cash nature;
ii. non-cash items such as depreciation, provisions, deferred taxes, unrealized foreign currency gains and losses, and undistributed profits of associates; and
Hi. all other items for which the cash effects are investing or financing cash flows.
2.15 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
(a) Financial assets
(i) Initial recognition and measurement
At initial recognition, financial asset is measured at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the Statement of Profit and Loss.
(ii) Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in following categories:
a) at amortized cost; or
b) at fair value through other comprehensive income; or
c) at fair value through profit or loss.
The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows.â
Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income from these financial assets is included in finance income using the effective interest rate method (EIR).
Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognized in Statement of Profit and Loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to Statement of Profit and Loss and recognized in other gains/ (losses). Interest income from these financial assets is included in other income using the effective interest rate method.
Fair value through profit or loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss. Interest income from these financial assets is included in other income.
The company has currently exercised the irrevocable option to present in Other comprehensive Income, subsequent changes in the Fair value of Equity Instruments. Such an election has been made on instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
(iii) Impairment of financial assets
In accordance with Ind AS 109, Financial Instruments, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on financial assets that are measured at amortized cost and FVOCI.
For recognition of impairment loss on financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If in subsequent years, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognizing impairment loss allowance based on 12 month ECL.
Life time ECLs are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12 month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the yearend.
ECL is the difference between all contractual
cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e. all shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to consider all contractual terms of the financial instrument (including prepayment, extension etc.) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument.
ECL impairment loss allowance (or reversal) recognized during the year is recognized as income/expense in the statement of profit and loss. In balance sheet, ECL for financial assets measured at amortized cost is presented as an allowance, i.e. as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
(iv) Derecognition of financial assets
A financial asset is derecognized only when
a) the rights to receive cash flows from the financial asset is transferred or
b) retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the
cash flows to one or more recipients.
Where the financial asset is transferred then in that case financial asset is derecognized only if substantially all risks and rewards of ownership of the financial asset is transferred. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognized.
(b) Financial liabilities
(i) Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss and at amortized cost, as appropriate.
All financial liabilities are recognized initially at fair value and, in the case of borrowings and payables, net of directly attributable transaction costs.
(ii) Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognized in the Statement of Profit and Loss.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in Statement of Profit and Loss when the liabilities are derecognized as well as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the Statement of Profit and Loss.
(iii) Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the Statement of Profit and Loss as finance costs.
(d) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Mar 31, 2017
1A Corporate Information
Shriram EPC Limited (the âCompanyâ or âSEPCâ) which is a part of the Shriram Group has diverse interests across Financial Services, IT Services, Project Engineering & Construction, Property Development, Life Insurance and General Insurance. The Company provides end-to-end solutions to engineering challenges, offering multi disciplinary design, engineering, procurement, construction and project management services. SEPC is focused on providing turnkey solutions for ferrous & non ferrous, cement, aluminum, copper and thermal power plants, water treatment & transmission, renewable energy, cooling towers & material handling.
2 Basis of Accounting and Preparation of Financial Statements
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 (âthe 2013 Actâ) / Companies Act, 1956 (âthe 1956 Actâ), 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.
2.1 Use of estimates
The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognized in the periods in which the results are known / materialize.
2.2 Inventories
Inventories are valued at the lower of cost on FIFO basis and the net realizable value after providing for obsolescence and other losses, where considered necessary. Cost includes all charges in bringing the goods to the point of sale, including octroi and other levies, transit insurance and receiving charges.
Contract Work in Progress represent work in progress on construction contracts which reflects proportionate value of inputs and expenses on contracts yet to be billed.
2.3 Cash and cash equivalents (for the purposes of Cash Flow Statement)
Cash comprises of cash on hand, cheques in transit and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
2.4 Cash Flow Statement
Cash flows are reported using the indirect method, whereby Profit / (Loss) before Tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
2.5 Depreciation and amortization
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation on tangible fixed assets has been provided on the straight-line method as per the useful life prescribed in Schedule
II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset.
(i) Leasehold improvements are written off over the primary period of their lease.
(ii) Certain items of Plant and Machinery used at project sites are depreciated over an estimated useful life of 2 to 4 years.
(iii) Technical Know-how fees are amortized over the period of 5 to 10 years based on estimated useful life of the asset.
(iv) Software cost are amortized over a period of
5 years based on Managementâs evaluation of their estimated useful life.
(v) Lease hold Land Using Rights is amortized over the primary period of lease, which is 20 years.
(vi) Individual assets costing Rs. 5,000/- each or less is depreciated in fully in the year of acquisition.
2.6 Revenue Recognition
Sales are recognized, net of returns and trade discounts, on transfer of significant risks and rewards of ownership to the buyer, which generally coincides with the delivery of goods to customers. Sales are inclusive of all taxes.
Revenue from Construction contracts
When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract are recognized as revenue and expenses respectively by reference to the percentage of completion of the contract activity at the reporting date. The percentage of completion of a contract is determined considering the proportion that contract costs incurred for work performed upto the reporting date bear to the estimated total contract costs.
For the purposes of recognizing revenue, contract revenue comprises the initial amount of revenue agreed in the contract, the variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and they are capable of being reliably measured
The percentage of completion method is applied on a cumulative basis in each accounting period to the current estimates of contract revenue and contract costs. The effect of a change in the estimate of contract revenue or contract costs, or the effect of a change in the estimate of the outcome of a contract, is accounted for as a change in accounting estimate and the effect of which are recognized in the Statement of Profit and Loss in the period in which the change is made and in subsequent periods.
When the outcome of a construction contract cannot be estimated reliably, revenue is recognized only to the extent of contract costs incurred of which recovery is probable and the related contract costs are recognized as an expense in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense in the Statement of Profit and Loss in the period in which such probability occurs.
Revenue from Joint Venture Contracts : In respect of Jointly Controlled Operations, revenues, expenses, assets and liabilities are accounted for in the Companyâs books to the extent work is executed by the Company.
Contract Revenue earned in excess of billing is reflected as âUnbilled Revenueâ under âOther Current Assetsâ and âOther Non Current Assetsâ as the case may be and billing in excess of Contract
Revenue has been reflected as âAdvances Billingâ under âOther Current Liabilities1.
Dividend Income on Investments is accounted for when the right to receive the payment is established. Interest income is accounted on accrual basis. Interest income is included under the head âother Incomeâ in the Statement of Profit and Loss.
2.7 Fixed Assets
Fixed Assets are stated at historical cost (net of CENVAT/VAT wherever applicable) less Accumulated Depreciation / Amortization. Cost comprises of direct cost, related taxes, duties, freight and attributable finance costs till such assets are ready for its intended use. Projects under which tangible fixed assets are not yet ready for their intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest.
2.8 Foreign Currency Transaction / Translations
Foreign currency transactions are recorded at the rate of exchange prevailing on the date of the transaction. Monetary assets & liabilities outstanding at the year-end are translated at the rate of exchange prevailing at the year-end and the gain or loss, is recognized in the Statement of Profit and Loss.
Integral foreign operations: Transactions in foreign currencies entered into by the Companyâs integral foreign operations are accounted at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.
Exchange differences arising on actual payments/ realizations and year-end restatements are dealt with in the Statement of Profit and Loss. Investments in Foreign currencies are reported using the exchange rate at the date of the transaction.
Integral foreign operations: Foreign currency monetary items (other than derivative contracts) of the Companyâs integral foreign operations outstanding at the balance sheet date are restated at the year-end rates. Non-monetary items of the Companyâs integral foreign operations are carried at historical cost.
2.10 Investments
Long-term investments are carried individually at cost less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually, at the lower of cost and fair value. Cost of investments includes acquisition charges such as brokerage, fees and duties.
2.11 Employee Benefits
Employee benefits include provident fund, employee state insurance scheme, gratuity and compensated absences.
Short-term Employee Benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits. Short term employee benefits at the balance sheet date, are recognized as an expense as per the Companyâs scheme based on expected obligations on undiscounted basis.
The cost of short-term compensated absences is accounted as under : (a) in case of accumulated compensated absences, when employees render the services that increase their entitlement of future compensated absences; and(b) in case of no accumulating compensated absences, when the absences occur.
Long-term Employee Benefits (i) Defined Contribution Plans:
The Companyâs contribution to provident fund and employee state insurance scheme are considered as defined contribution plans and are charged as an expense based on the amount of contribution required to be made and when services are rendered by the employees.
(ii) Defined Benefit Plans:
For defined benefit plans in the form of gratuity fund and post-employment medical benefits, the cost of providing benefits is determined using the Projected Unit Credit method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognized in the Statement of Profit and Loss in the period in which they occur. Past service cost is recognized immediately to the extent that the benefits are already vested and otherwise is amortized on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognized in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost.
(iii) Long Term Compensated Absences:
The obligation for long term employee benefits such as long term compensated absence is provided for based on actuarial valuation as at the balance sheet date, using the Projected Unit Credit Method.
Actuarial gains and losses arising from experience adjustments and effects of changes in actuarial assumptions are immediately recognized in the Statement of Profit and Loss as income or expense.
2.12 Employee Share Based payments
The Company has formulated Employee Stock Option Schemes â2006â and â2007â (ESOS) in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Schemes provide for grant of options to employees of the Company to acquire equity shares of the Company that vest in a graded manner and that are to be exercised within a specified period. In accordance with the SEBI Guidelines; the excess, if any, of the closing market price on the day prior to the grant of the options under ESOS over the exercise price is amortized on a straight-line basis over the vesting period.
2.13 Segment Reporting
The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organization and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the executive Management in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under âunallocated revenue / expenses / assets / liabilitiesâ.
2.14 Leases
Assets leased by the Company in its capacity as lessee where substantially all the risks and rewards of ownership vest in the Company are classified as finance leases. Such leases are capitalized at the inception of the lease at the lower of the fair value and the present value of the minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the less or are recognized as operating leases. Lease rentals under operating leases are recognized in the Statement of Profit and Loss on a straight-line basis over the lease term.
2.15 Earnings Per Share
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
2.16 Taxation
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable tax laws.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognized as an asset in the Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the Company.
Deferred tax is recognized on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax liabilities are recognized for all timing differences. Deferred tax assets are recognized for timing differences of items other than unabsorbed depreciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realized. However, if there are unabsorbed depreciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realize the assets. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their reliability.
2.17 Impairment of Assets
The carrying values of assets / cash generating units at each balance sheet date are reviewed for impairment if any indication of impairment exists. The following intangible assets are tested for impairment each financial year even if there is no indication that the asset is impaired: (a) an intangible asset that is not yet available for use; and (b) an intangible asset that is amortized over a period exceeding ten years from the date when the asset is available for use.
If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognized for such excess amount. The impairment loss is recognized as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset.
The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor.
When there is indication that an impairment loss recognized for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognized in the Statement of Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss. In case of revalued assets such reversal is not recognized.
2.18 Provisions and Contingencies
A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the Notes. Contingent assets are not recognized in the financial statements.
2.19 Provision for warranty
As per the terms of the contracts, the Company provides post-contract services / warranty support to some of its customers. The Company accounts for the post-contract support / provision for warranty on the basis of the information available with the Management duly taking into account the current and past technical estimates.
Provision for Liquidated Damages
Liquidated damages are provided based on contractual terms and negotiations with the customer when the delivery/ commissioning dates of an individual project have exceeded or are likely to exceed the delivery/ commissioning dates as per the respective contracts. This expenditure is expected to be incurred over the respective contractual terms up to closure of the contract. (including defect liability period).
Provision for losses on contracts
A provision for expected loss on construction contracts is recognized when it is probable that the contract costs will exceed total contract revenue. For all other contracts loss order provisions are made when the unavoidable costs of meeting the obligation under the contract exceed the currently estimated economic benefits.
2.20 Share issue expenses
Share issue expenses are adjusted against the Securities Premium Account as permissible under Section 52 of the Companies Act, 2013, to the extent any balance is available for utilization in the Securities Premium Account. Share issue expenses in excess of the balance in the Securities Premium Account is expensed in the Statement of Profit and Loss.
2.21 Derivatives
All derivative contracts are marked-to-market and gains/losses are recognized in the Statement of Profit and Loss.
2.22 Service tax input credit
Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is reasonable certainty in availing / utilizing the credits.
2.23 Operating Cycle
An operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. The normal operating cycle of the entity for Construction Contracts is the duration of 2 to 3 years depending on each contract. For all other segments, the normal operating cycle has been considered as a duration of 12 months.
3.5 Terms/rights attached to the shares
The Company has issued equity shares having a par value of Rs. 10 per share. All these shares have the same rights and preferences with respect to payment of dividend, repayment of capital and voting rights.
In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
3.6 i) The Authorized Equity Share Capital has been increased to Rs 105,000 Lakhs with effect from 4th May 2017.
ii) Also Refer Note No. 10(i) regarding issue of Equity Shares after Balance sheet date.
3.7 Disclosure required in terms of Clause 13.5A of Chapter XIII on Guidelines for preferential issues, SEBI (Disclosure and Investor Protection) Guidelines, 2000 for preferential issue proceeds :
5.2 Corporate Debt Restructuring
During an earlier year, at the request of the Company, the Corporate Debt Restructuring Proposal (CDR Proposal) of the Company was referred to Corporate Restructuring Cell (CDR Cell) by the consortium of bankers( CDR Bankers) led by Oriental Bank of Commerce (OBC). The CDR Proposal as recommended by OBC and other lenders was approved by CDR Empowered Group (CDR EG) on 20 August 2014 and communicated to the Company vide Letter of Approval dated 11 September 2014. The Master Restructuring Agreement ( MRA) between the Company and the CDR lenders was executed on 20 September 2014, by virtue of which the restructured facilities are governed by the provisions specified in the MRA with cutoff date as 01 April, 2014.
The key features of the MRA are as follows :
i. Term loans(TL) are repayable after moratorium of 2 years from cutoff date in 32 structured quarterly installments commencing from June 2016 up to March 2024.
ii Conversion of various irregular / outstanding / devolved financial facilities into Working Capital Term Loan ( WCTL) repayable after moratorium of 2 year from cutoff date in 32 structured quarterly installments commencing from June 2016 up to March 2024.
iii The interest payable on Term Loans and WCTL during moratorium period of 2 years from cutoff date shall be converted into Funded Interest Term Loan (FITL) and repayable over 20 structured quarterly installments commencing from June 2016 up to March 2021.
iv Restructuring of existing fund based and non fund based financial facilities, subject to renewal and reassessment every year.
v The rate of interest on Term Loan(TL), WCTL , FITL and fund based working capital facilities shall be ( linked to OBC base rate ) increased in a stepped up manner :
vi Waiver of existing events of defaults, penal interest and charges etc, in accordance with MRA.
vii Right to Recompense to CDR Lenders for the relief and sacrifice extended subject to provisions of CDR Guidelines and MRA.
viii The Company to operate Trust and Retention account ( TRA ) with OBC and entire cash flow should be routed through said TRA .
ix The MRA as well as the provisions of the Master Circular on Corporate Debt Restructuring issued by the Reserve bank of India, give a right to the CDR Lenders to get a recompense of their waivers and sacrifices made as part of the CDR proposal. The total amount of recompense payable to CDR lenders at the time of exit of the CDR, as contained in the MRA is Rs 109,617 lakhs. The present value of such recompense as at 31st March 2015 was Rs 18,417 lakhs. During the previous year, certain CDR lenders agreed to take equity in the company in lieu of recompense, to the extent of Rs 14,699 lakhs payable to them and the company has allotted equity shares in full settlement of the said recompense amount. Accordingly the company has no further liability towards recompense. Also refer Note 10(i).
x As per the CDR, the Company requires to repay Rs 1,331 lakhs each year towards repayment of WCTL. However, the Company on 30th April 2016, submitted a proposal to OBC and all other CDR lenders for conversion of the entire amount of WCTL reflected above into equity effective 01st April 2016 at a price to be determined in accordance with SEBI( Issue of Capital and Disclosure) Regulations, 1999(the Regulations) the price determined in accordance with the Regulations was Rs 23.25 (inclusion of premium of Rs 13.25 per share). The Company obtained approval of CDR lenders on 29th August 2016 wherein 19 CDR lenders agreed to convert their entire WCTL dues aggregating to Rs 125829.66 lakhs to Equity. Accordingly during the year 18 CDR lenders converted the WCTL dues aggregating to Rs 112,674.40 lakhs into equity. The balance amount of Rs 13,682.44 lakhs will be converted in due course.
xi All amounts due under CDR are covered by Corporate Guarantee of SVL Limited, Promoter.
xii 843,60,560 Equity shares of the Company have been pledged with the CDR lenders by SVL Limited, Promoter.
14.2 Pursuant to the Master Restructuring Agreement dated 20th September 2014 ( CDR package), the CDR lenders are entitled to receive interest sacrifice ( recompense) at the time of exit from CDR.The total amount of recompense payable to CDR lenders at the time of exit of CDR was determined to be Rs 109,617 lakhs. The present value of such recompense as at 31st March 2015 was Rs 18,417 lakhs. Certain CDR lenders agreed to take equity in the company in lieu of recompense of Rs 14,699 lakhs payable to them, and accordingly the company has allotted equity shares in full settlement of the recompense amount. The total amount of interest sacrifice settled to the Bankers, is being amortized over CDR term. The unamortized portion of interest sacrifice as at the year end is disclosed under the head âPrepaid Expensesâ.
14.3 Long term Loans and advances as reflected above, and Other Non Current Assets as reflected in Note No. 15 of the financial statements, include Rs. 2,460 Lakhs and Rs. 6,048.79 Lakhs being amounts due from a company towards sale of Wind Energy Generators and advances given, respectively, in earlier years. Considering the future business potential of the company and the value of its underlying assets, the dues are considered fully realizable.
15.1 Other Receivables represents the balance consideration receivable from My Home Industries Limited (âMHILâ) towards certain receivables due from Sree Jayajothi Cements Limited (âSJCLâ) taken over by MHIL pursuant to an agreement dated 11 August 2013 entered into with them. This amount has been deposited in a Joint Escrow Account to be received by the Company after completion of certain formalities by Sree Jayajothi Cements Limited.
The Company has two Employee Stock Option Schemes (A) Employee stock option scheme 2006,(B) Employee stock option scheme 2007. As per the Guidance Note on Accounting for Employee Share- based Payments issued by Institute of Chartered Accountants of India, the Company has considered the best available estimate of the number of shares or stock options expected to vest based on the current attrition rates of its employees and measured the compensation expense at fair value on the date of grant.
31.1 Shriram EPC Limited 2006 ESOP Scheme (the 2006 Scheme)
The Company does not have any options outstanding as at 31 March 2016 and the rafter under this scheme and hence no disclosures have been given.
31.2 Shriram EPC Limited - 2007 - ESOP Scheme (the 2007 Scheme)
The Company instituted another Scheme for all eligible employees in pursuance of a special resolution approved by the shareholders at the extra-ordinary general meeting held on September 20, 2007.
I n accordance with the 2007 Scheme the Company has granted on October 1, 2007 and January 1, 2008 (grant dates) options to eligible employees including those of its subsidiaries and associate companies at an exercise price of Rs 10/- per equity share. Under the terms of the 2007 Scheme the options will vest in the employees in the following proportion :
The employees stock options granted shall be capable of being exercised within a period of eight years from the date of grant.
Modification in the Terms of the 2007 Scheme
The company has carried out a modification in âThe 2007 schemeâ in an earlier year and accordingly additional grants of 10,000 options have been made. These grants have been made as at June 14, 2010 and will vest with the employee in 2 years in equal proportion from the end of 1 year from the date of grant.
Deferred Stock Compensation Expense
During the period, Rs. Nil (Previous Year Rs Nil Lakhs) being employee compensation expense to the extent of options vested net off lapses, has been charged to Statement of Profit and Loss.
31.3 Fair value of Options Granted :
The estimated fair value of each stock option granted under the employee stock option Scheme 2006 is Rs. 80. The fair value was arrived at based on a transaction entered into between a willing buyer and a seller for purchase of shares recent to the grant date of the options.
The estimated fair value of each stock option granted under the employee stock option Scheme 2007 is Rs.68.42 as per the Fair value method. The model inputs were the weighted average price arrived under the following methods :
The Company has considered business segment as the primary segment for disclosure. The Companyâs operations comprises of three segments namely Construction Contracts, Wind Turbine Generators and Trading. The above segment has been identified taking into account the organization structure as well as the differing risks and return of these segments. Separate secondary segment disclosure is not required as more than 98% of the companyâs sale is in the Domestic Market.
The generally accepted accounting principles used in the preparation of the financial statements are applied to record revenue and expenditure in individual segments.
The Company has carry forward losses and unabsorbed depreciation which has given rise to deferred tax asset. However in the absense of virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realized, the said deferred tax assets has been recognized only to the extent of Deferred Tax Liability. Accordingly, there is no Deferred Tax Asset as on the balance sheet date.
37.2 International Transactions
The Company has entered into transactions with related parties. The Management is of the opinion that the Company maintains the necessary documents as prescribed by the Income Tax Act, 1961 to prove that these international transactions are at armâs length and believes that the aforesaid legislation will not have any impact on the financial statements, particularly on account of tax expense and provision for taxation.
Mar 31, 2016
Shriram EPC Limited (the "Company" or "SEPC") is the flagship Company of the Shriram Group. The Shriram Group has diverse interests across Financial Services, IT Services, Project Engineering & Construction, Property Development, Life Insurance and General Insurance. Company provides end-to-end solutions to engineering challenges, offering multi disciplinary design, engineering, procurement, construction and project management services. SEPC is focused on providing turnkey solutions for ferrous & non ferrous, cement, aluminum, copper and thermal power plants, water treatment & transmission, renewable energy, cooling towers & material handling.
1B Going Concern
The financial statements have been prepared on principles applicable to a going concern despite substantial erosion of net worth, considering
a) the committed orders on hand and in pipeline
b) expected higher cash flows based on future business projections
c) the Company''s debts have been restructured under Corporate Debt Restructuring (CDR) proposal which was approved by CDR Empowered group on 20th August 2014. The details regarding the restructured debt is as specified in the Master Restructuring Agreement between the Company and the lenders are given in Note 5 (i) and
d) the continued operational and financial support given by the Holding Company.
2 Basis of Accounting and Preparation of Financial Statements
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.
2.1 Use of estimates
The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognized in the periods in which the results are known / materialize.
2.2 Inventories
Inventories are valued at the lower of cost on FIFO basis and the net realizable value after providing for obsolescence and other losses, where considered necessary. Cost includes all charges in bringing the goods to the point of sale, including octroi and other levies, transit insurance and receiving charges.
Contract Work in Progress represent work in progress on construction contracts which reflects proportionate value of inputs and expenses on contracts yet to be billed.
2.3 Cash and cash equivalents (for the purposes of Cash Flow Statement)
Cash comprises of cash on hand, cheques in transit and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
2.4 Cash Flow Statement
Cash flows are reported using the indirect method, whereby Profit / (Loss) before Tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
2.5 Depreciation and amortization
"Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Depreciation on tangible fixed assets has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset. "
(i) Leasehold improvements are written off over the primary period of their lease.
(ii) Certain items of Plant and Machinery used at project sites are depreciated over an estimated useful life of 2 to 4 years.
(iii) Technical Know-how fees are amortized over the period of 5 to 10 years based on estimated useful life of the asset.
(iv) Software cost are amortized over a period of 5 years based on Management''s evaluation of their estimated useful life.
(v) Lease hold Land Using Rights is amortized over the primary period of lease, which is 20 years.
(vi) Individual assets costing Rs. 5,000/- each or less is depreciated in fully in the year of acquisition. 2.6 Revenue Recognition Sale of goods
Sales are recognized, net of returns and trade discounts, on transfer of significant risks and rewards of ownership to the buyer, which generally coincides with the delivery of goods to customers. Sales are inclusive of all taxes.
Revenue from Construction contracts
"When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract are recognized as revenue and expenses respectively by reference to the percentage of completion of the contract activity at the reporting date. The percentage of completion of a contract is determined considering the proportion that contract costs incurred for work performed up to the reporting date bear to the estimated total contract costs.
For the purposes of recognizing revenue, contract revenue comprises the initial amount of revenue agreed in the contract, the variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and they are capable of being reliably measured
The percentage of completion method is applied on a cumulative basis in each accounting period to the current estimates of contract revenue and contract costs. The effect of a change in the estimate of contract revenue or contract costs, or the effect of a change in the estimate of the outcome of a contract, is accounted for as a change in accounting estimate and the effect of which are recognized in the Statement of Profit and Loss in the period in which the change is made and in subsequent periods.
When the outcome of a construction contract cannot be estimated reliably, revenue is recognized only to the extent of contract costs incurred of which recovery is probable and the related contract costs are recognized as an expense in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense in the Statement of Profit and Loss in the period in which such probability occurs.
"Revenue from Joint Venture Contracts : In respect of Jointly Controlled Operations, revenues, expenses, assets and liabilities are accounted for in the Company''s books to the extent work is executed by the Company."
Contract Revenue earned in excess of billing is reflected as ''Unbilled Revenue'' under ''Other Current Assets'' and ''Other Non Current Assets'' as the case may be and billing in excess of Contract Revenue has been reflected as ''Advances Billing'' under ''Other Current Liabilities''.
Dividend Income on Investments is accounted for when the right to receive the payment is established. Interest income is accounted on accrual basis. Interest income is included under the head "other Income" in the Statement of Profit and Loss.
2.7 Fixed Assets
Fixed Assets are stated at historical cost (net of CENVAT/ VAT wherever applicable) less Accumulated Depreciation / Amortization. Cost comprises of direct cost, related taxes, duties, freight and attributable finance costs till such assets are ready for its intended use. Projects under which tangible fixed assets are not yet ready for their intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest.
2.8 Foreign Currency Transaction / Translations
Foreign currency transactions are recorded at the rate of exchange prevailing on the date of the transaction. Monetary assets & liabilities outstanding at the year-end are translated at the rate of exchange prevailing at the year-end and the gain or loss, is recognized in the Statement of Profit and Loss.
Integral foreign operations: Transactions in foreign currencies entered into by the Company''s integral foreign operations are accounted at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.
Exchange differences arising on actual payments/ realizations and year-end restatements are dealt with in the Statement of Profit and Loss. Investments in Foreign currencies are reported using the exchange rate at the date of the transaction.
Integral foreign operations: Foreign currency monetary items (other than derivative contracts) of the Company''s integral foreign operations outstanding at the balance sheet date are restated at the year-end rates. Non-monetary items of the Company''s integral foreign operations are carried at historical cost. 2.10 Investments Long-term investments are carried individually at cost less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually, at the lower of cost and fair value. Cost of investments includes acquisition charges such as brokerage, fees and duties.
2.11 Employee Benefits
Employee benefits include provident fund, employee state insurance scheme, gratuity and compensated absences.
Short-term Employee Benefits
"All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits. Short term employee benefits at the balance sheet date, are recognized as an expense as per the Company''s scheme based on expected obligations on undiscounted basis.
The cost of short-term compensated absences is accounted as under :
(a) in case of accumulated compensated absences, when employees render the services that increase their entitlement of future compensated absences; and
(b) in case of non-accumulating compensated absences, when the absences occur."
Long-term Employee Benefits
(i) Defined Contribution Plans:
The Company''s contribution to provident fund and employee state insurance scheme are considered as defined contribution plans and are charged as an expense based on the amount of contribution required to be made and when services are rendered by the employees.
(ii) Defined Benefit Plans:
For defined benefit plans in the form of gratuity fund and post-employment medical benefits, the cost of providing benefits is determined using the Projected Unit Credit method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognized in the Statement of Profit and Loss in the period in which they occur. Past service cost is recognized immediately to the extent that the benefits are already vested and otherwise is amortized on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognized in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost.
(iii) Long Term Compensated Absences:
The obligation for long term employee benefits such as long term compensated absence is provided for based on actuarial valuation as at the balance sheet date, using the Projected Unit Credit Method.
Actuarial gains and losses arising from experience adjustments and effects of changes in actuarial assumptions are immediately recognized in the Statement of Profit and Loss as income or expense.
2.12 Employee Share Based payments
The Company has formulated Employee Stock Option Schemes ''2006'' and ''2007'' (ESOS) in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Schemes provide for grant of options to employees of the Company to acquire Equity Shares of the Company that vest in a graded manner and that are to be exercised within a specified period. In accordance with the SEBI Guidelines; the excess, if any, of the closing market price on the day prior to the grant of the options under ESOS over the exercise price is amortized on a straight-line basis over the vesting period.
2.13 Segment Reporting
The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organization and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the executive Management in deciding how to allocate resources and in assessing performance.
"The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under "unallocated revenue / expenses / assets / liabilities"."
2.14 Leases
Assets leased by the Company in its capacity as lessee where substantially all the risks and rewards of ownership vest in the Company are classified as finance leases. Such leases are capitalized at the inception of the lease at the lower of the fair value and the present value of the minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognized as operating leases. Lease rentals under operating leases are recognized in the Statement of Profit and Loss on a straight-line basis over the lease term.
2.15 Earnings Per Share
"Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of Equity Shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential Equity Shares, by the weighted average number of Equity Shares considered for deriving basic earnings per share and the weighted average number of Equity Shares which could have been issued on the conversion of all dilutive potential Equity Shares."
2.16 Taxation
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable tax laws.
"Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognized as an asset in the Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the Company.
Deferred tax is recognized on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax liabilities are recognized for all timing differences. Deferred tax assets are recognized for timing differences of items other than unabsorbed depreciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realized. However, if there are unabsorbed depreciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realize the assets. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their reliability.
2.17 Impairment of Assets
"The carrying values of assets / cash generating units at each balance sheet date are reviewed for impairment if any indication of impairment exists. The following intangible assets are tested for impairment each Financial Year even if there is no indication that the asset is impaired: (a) an intangible asset that is not yet available for use; and (b) an intangible asset that is amortized over a period exceeding ten years from the date when the asset is available for use.
If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognized for such excess amount. The impairment loss is recognized as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset.
The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor.
When there is indication that an impairment loss recognized for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognized in the Statement of Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss. In case of revalued assets such reversal is not recognized."
2.18 Provisions and Contingencies
A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the Notes. Contingent assets are not recognized in the financial statements.
2.19 Provision for warranty
As per the terms of the contracts, the Company provides post-contract services / warranty support to some of its customers. The Company accounts for the post-contract support / provision for warranty on the basis of the information available with the Management duly taking into account the current and past technical estimates.
Provision for Liquidated Damages
Liquidated damages are provided based on contractual terms and negotiations with the customer when the delivery/ commissioning dates of an individual project have exceeded or are likely to exceed the delivery/ commissioning dates as per the respective contracts. This expenditure is expected to be incurred over the respective contractual terms upto closure of the contract. (including defect liability period).
Provision for losses on contracts
"A provision for expected loss on construction contracts is recognized when it is probable that the contract costs will exceed total contract revenue. For all other contracts loss order provisions are made when the unavoidable costs of meeting the obligation under the contract exceed the currently estimated economic benefits."
2.20 Share issue expenses
Share issue expenses are adjusted against the Securities Premium Account as permissible under Section 52 of the Companies Act, 2013, to the extent any balance is available for utilization in the Securities Premium Account. Share issue expenses in excess of the balance in the Securities Premium Account is expensed in the Statement of Profit and Loss.
2.21 Derivatives
All derivative contracts are marked-to-market and losses are recognized in the Statement of Profit and Loss. Gains arising on the same are not recognized, until realized, on grounds of prudence.
2.22 Service tax input credit
Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is reasonable certainty in availing / utilizing the credits.
2.23 Operating Cycle
An operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. The normal operating cycle of the entity for Construction Contracts is the duration of 2 to 3 years depending on each contract. For all other segments, the normal operating cycle has been considered as a duration of 12 months.
3.5 Terms/rights attached to the shares
The Company has issued Equity Shares having a par value of Rs. 10 per share. All these shares have the same rights and preferences with respect to payment of dividend, repayment of capital and voting rights.
In the event of liquidation of the Company, the holders of Equity Shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of Equity Shares held by the shareholders.
The Preference shares have a face value of Rs.100 each, and are entitled to receive a cumulative dividend at the rate of 10%. The preference shares shall have a maximum tenure of 10 years. The preference shares are redeemable before 10 years at the option of the shareholders.
3.6 Share Application Money Pending Allotment
During the year the Company received Rs 6,493 lakhs from its promoter and holding Company, SVL limited towards subscription of Equity on Preferential basis. The approval of shareholders for this proposed preferential issue was obtained by the Company through a postal ballot on 11th February 2016. The shares will be allotted after receipt of regulatory approvals.
5.2 Corporate Debt Restructuring
During the previous year, at the request of the Company, the Corporate Debt Restructuring Proposal (CDR Proposal) of the Company was referred to Corporate Restructuring Cell (CDR Cell) by the consortium of bankers( CDR Bankers) led by Oriental Bank of Commerce (OBC). The CDR Proposal as recommended by OBC and other lenders was approved by CDR Empowered Group (CDR EG) on 20 August 2014 and communicated to the Company vide Letter of Approval dated 11 September 2014. The Master Restructuring Agreement ( MRA) between the Company and the CDR lenders was executed on 20 September 2014, by virtue of which the restructured facilities are governed by the provisions specified in the MRA with cutoff date as 01 April, 2014.
The key features of the MRA are as follows :
i. Term loans(TL) are repayable after moratorium of 2 years from cutoff date in 32 structured quarterly installments commencing from June 2016 up to March 2024.
ii. Conversion of various irregular / outstanding / devolved financial facilities into Working Capital Term Loan ( WCTL) repayable after moratorium of 2 year from cutoff date in 32 structured quarterly installments commencing from June 2016 up to March 2024.
iii. The interest payable on Term Loans and WCTL during moratorium period of 2 years from cutoff date shall be converted into Funded Interest Term Loan (FITL) and repayable over 20 structured quarterly installments commencing from June 2016 up to March 2021.
iv. Restructuring of existing fund based and non fund based financial facilities, subject to renewal and reassessment every year.
v. The rate of interest on Term Loan(TL), WCTL, FITL and fund based working capital facilities shall be ( linked to OBC base rate ) increased in a stepped up manner :
vi. Waiver of existing events of defaults, penal interest and charges etc, in accordance with MRA.
vii. Right to Recompense to CDR Lenders for the relief and sacrifice extended subject to provisions of CDR Guidelines and MRA.
viii. The Company to operate Trust and Retention account ( TRA ) with OBC and entire cash flow should be routed through said TRA .
ix. The MRA as well as the provisions of the Master Circular on Corporate Debt Restructuring issued by the Reserve bank of India, give a right to the CDR Lenders to get a recompense of their waivers and sacrifices made as part of the CDR proposal. The total amount of recompense payable to CDR lenders at the time of exit of the CDR, as contained in the MRA is Rs 109,617 lakhs. The present value of such recompense as at 31st March 2015 was Rs 18,417 lakhs. During the year, certain CDR lenders agreed to take equity in the Company in lieu of recompense of Rs 14,699 lakhs payable to them and the Company has allotted Equity Shares in full settlement of the recompense amount. Accordingly the Company has no further liability towards recompense.
x. As per the CDR, the Company requires to repay Rs 1,331 lakhs towards first instalment of WCTL. However, the Company on 30th April 2016, submitted a proposal to OBC and all other CDR lenders for conversion of the entire amount of WCTL reflected above into equity effective 01st April 2016 at a price to be determined in accordance with SEBI( Issue of Capital and Disclosure) Regulations, 1999. The Company is hopeful of getting the acceptance of the CDR lenders and accordingly the current maturities of WCTL has not been disclosed separately in Note no 10(" Other Current Liabilities").
5.3 All amounts due under CDR are covered by Corporate Guarantee of SVL Limited ( Holding Company).
5.4 48,942,674 Equity Shares of the Company have been pledged with the CDR lenders. By SVL Limited(Holding Company).
9.1 There are no dues to Micro and Small Enterprises in terms of Section 16 of the Micro, Small and Medium Enterprises Development Act, 2006 as of 31 March 2016 and 31 March 2015, on the basis of such parties having been identified by the management and relied upon by the Auditors.
14.2 Pursuant to the Master Restructuring Agreement dated 20th September 2014 (CDR package), the CDR lenders are entitled to receive interest sacrifice ( recompense) at the time of exit from CDR.The total amount of recompense payable to CDR lenders at the time of exit of CDR was determined to be Rs 109,617 lakhs. The present value of such recompense as at 31st March 2015 was Rs 18,417 lakhs. During the year, certain CDR lenders agreed to take equity in the Company in lieu of recompense of Rs 14,699 lakhs payable to them, and accordingly the Company has allotted Equity Shares in full settlement of the recompense amount. The total amount of interest sacrifice settled to the Bankers, is being amortized over CDR term. The unamortized portion of interest sacrifice as at the year end is reflected above.
15.1 The amount of Rs.4,527.66 Lakhs represents the balance consideration receivable from My Home Industries Limited("MHIL") towards the value of certain receivables due from Sree Jayajothi Cements Limited("SJCL") taken over by MHIL pursuant to an agreement dated 11 August 2013 entered into with them. This amount has been deposited in a Joint Escrow Account to be received by the Company after completion of certain formalities of Sree Jayajothi Cements Limited.
Mar 31, 2015
1A Corporate Information
Shriram EPC Limited (the "Company" or "SEPC") is the flagship company
of the Shriram Group. The Shriram Group has diverse interests across
Financial Services, IT Services, Project Engineering & Construction,
Property Development, Life Insurance and General Insurance. Company
provides end-to-end solutions to engineering challenges, offering multi
disciplinary design, engineering, procurement, construction and project
management services. SEPC is focused on providing turnkey solutions for
ferrous & non ferrous, cement, aluminum, copper and thermal power
plants, water treatment & transmission, renewable energy, cooling
towers & material handling.
1B Going Concern
The financial statements have been prepared on principles applicable to
a going concern despite substantial erosion of net worth, considering
a) the committed orders on hand and in pipeline
b) expected higher cash flows based on future business projections
c) the company's debts have been restructured under Corporate Debt
Restructuring (CDR) proposal which was approved by CDR Empowered group
on 20th August 2014. The details regarding the restructured debt is as
specified in the Master Restructuring Agreement between the company and
the lenders are given in Note 5 (i) and
d) the continued operational and financial support given by the Holding
Company.
2 Basis of Accounting and Preparation of Financial
Statements
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.
2.1 Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognized in the periods in which
the results are known / materialize.
2.2 Inventories
Inventories are valued at the lower of cost on FIFO basis and the net
realizable value after providing for obsolescence and other losses,
where considered necessary. Cost includes all charges in bringing the
goods to the point of sale, including octopi and other levies, transit
insurance and receiving charges.
Contract Work in Progress represent work in progress on construction
contracts which reflects proportionate value of inputs and expenses on
contracts yet to be billed.
2.3 Cash and cash equivalents (for the purposes of Cash Flow Statement)
Cash comprises of cash on hand, cherubs in transit and demand deposits
with banks. Cash equivalents are short-term balances (with an original
maturity of three months or less from the date of acquisition), highly
liquid investments that are readily convertible into known amounts of
cash and which are subject to insignificant risk of changes in value.
2.4 Cash Flow Statement
Cash flows are reported using the indirect method, whereby Profit /
(Loss) before Tax is adjusted for the effects of transactions of
non-cash nature and any deferrals or accruals of past or future cash
receipts or payments. The cash flows from operating, investing and
financing activities of the Company are segregated based on the
available information.
2.5 Depreciation and amortization
"Depreciable amount for assets is the cost of an asset, or other amount
substituted for cost, less its estimated residual value.
Depreciation on tangible fixed assets has been provided on the
straight-line method as per the useful life prescribed in Schedule II
to the Companies Act, 2013 except in respect of the following
categories of assets, in whose case the life of the assets has been
assessed as under based on technical advice, taking into account the
nature of the asset, the estimated usage of the asset".
(i) Leasehold improvements are written off over the primary period of
their lease.
(ii) Certain items of Plant and Machinery used at project sites are
depreciated over an estimated useful life of 2 to 4 years.
(iii) Technical Know-how fees are amortized over the period of 5 to 10
years based on estimated useful life of the asset.
(iv) Software cost are amortized over a period of 5 years based on
Management's evaluation of their estimated useful life.
(v) Lease hold Land Using Rights is amortized over the primary period
of lease, which is 20 years.
(vi) Individual assets costing Rs.5,000/- each or less is
depreciated in fully in the year of acquisition.
2.6 Revenue Recognition
Sale of goods
Sales are recognized, net of returns and trade discounts, on transfer
of significant risks and rewards of ownership to the buyer, which
generally coincides with the delivery of goods to customers. Sales are
inclusive of all taxes.
Revenue from Construction contracts
"When the outcome of a construction contract can be estimated reliably,
contract revenue and contract costs associated with the construction
contract are recognized as revenue and expenses respectively by
reference to the percentage of completion of the contract activity at
the reporting date. The percentage of completion of a contract is
determined considering the proportion that contract costs incurred for
work performed up to the reporting date bear to the estimated total
contract costs".
For the purposes of recognising revenue, contract revenue comprises the
initial amount of revenue agreed in the contract, the variations in
contract work, claims and incentive payments to the extent that it is
probable that they will result in revenue and they are capable of being
reliably measured
The percentage of completion method is applied on a cumulative basis in
each accounting period to the current estimates of contract revenue and
contract costs. The effect of a change in the estimate of contract
revenue or contract costs, or the effect of a change in the estimate of
the outcome of a contract, is accounted for as a change in accounting
estimate and the effect of which are recognized in the Statement of
Profit and Loss in the period in which the change is made and in
subsequent periods.
When the outcome of a construction contract cannot be estimated
reliably, revenue is recognized only to the extent of contract costs
incurred of which recovery is probable and the related contract costs
are recognized as an expense in the period in which they are incurred.
When it is probable that total contract costs will exceed total
contract revenue, the expected loss is recognized as an expense in the
Statement of Profit and Loss in the period in which such probability
occurs.
"Revenue from Joint Venture Contracts : In respect of Jointly
Controlled Operations, revenues, expenses, assets and liabilities are
accounted for in the Company's books to the extent work is executed by
the Company".
Contract Revenue earned in excess of billing is reflected as 'Unbilled
Revenue' under 'Other Current Assets' and 'Other Non Current Assets' as
the case may be and billing in excess of Contract Revenue has been
reflected as 'Advances Billing' under 'Other Current Liabilities'.
Dividend Income on Investments is accounted for when the right to
receive the payment is established. Interest income is accounted on
accrual basis. Interest income is included under the head "other
Income" in the Statement of Profit and Loss.
2.7 Fixed Assets
Fixed Assets are stated at historical cost (net of CENVAT/ VAT wherever
applicable) less Accumulated Depreciation / Amortization. Cost
comprises of direct cost, related taxes, duties, freight and
attributable finance costs till such assets are ready for its intended
use. Projects under which tangible fixed assets are not yet ready for
their intended use are carried at cost, comprising direct cost, related
incidental expenses and attributable interest.
2.8 Foreign Currency Transaction / Translations
Foreign currency transactions are recorded at the rate of exchange
prevailing on the date of the transaction. Monetary assets &
liabilities outstanding at the year- end are translated at the rate of
exchange prevailing at the year-end and the gain or loss, is recognized
in the Statement of Profit and Loss.
Integral foreign operations: Transactions in foreign currencies entered
into by the Company's integral foreign operations are accounted at the
exchange rates prevailing on the date of the transaction or at rates
that closely approximate the rate at the date of the transaction.
Exchange differences arising on actual payments/ realizations and
year-end restatements are dealt with in the Statement of Profit and
Loss. Investments in Foreign currencies are reported using the exchange
rate at the date of the transaction.
Integral foreign operations: Foreign currency monetary items (other
than derivative contracts) of the Company's integral foreign operations
outstanding at the balance sheet date are restated at the year-end
rates. Non- monetary items of the Company's integral foreign operations
are carried at historical cost.
2.9 Investments
Long-term investments are carried individually at cost less provision
for diminution, other than temporary, in the value of such investments.
Current investments are carried individually, at the lower of cost and
fair value. Cost of investments includes acquisition charges such as
brokerage, fees and duties.
2.10 Employee Benefits
Employee benefits include provident fund, employee state insurance
scheme, gratuity and compensated absences.
Short-term Employee Benefits
"All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits. Short term
employee benefits at the balance sheet date, are recognized as an
expense as per the Company's scheme based on expected obligations on
undiscounted basis.
The cost of short-term compensated absences is accounted as under :
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
(b) in case of non-accumulating compensated absences, when the absences
occur".
Long-term Employee Benefits
(i) Defned Contribution Plans:
The Company 's contribution to provident fund and employee state
insurance scheme are considered as defined contribution plans and are
charged as an expense based on the amount of contribution required to
be made and when services are rendered by the employees.
(ii) Defned Benefit Plans:
For defined benefit plans in the form of gratuity fund and
post-employment medical benefits, the cost of providing benefits is
determined using the Projected Unit Credit method, with actuarial
valuations being carried out at each balance sheet date. Actuarial gains
and losses are recognized in the Statement of Profit and Loss in the
period in which they occur. Past service cost is recognized immediately
to the extent that the benefits are already vested and otherwise is
amortized on a straight-line basis over the average period until the
benefits become vested. The retirement benefit obligation recognized in
the Balance Sheet represents the present value of the defined benefit
obligation as adjusted for unrecognized past service cost.
(iii) Long Term Compensated Absences:
The obligation for long term employee benefits such as long term
compensated absence is provided for based on actuarial valuation as at
the balance sheet date, using the Projected Unit Credit Method.
Actuarial gains and losses arising from experience adjustments and
effects of changes in actuarial assumptions are immediately recognized
in the Statement of Profit and Loss as income or expense.
2.11 Employee Share Based payments
The Company has formulated Employee Stock Option Schemes '2006' and
'2007' (ESOS) in accordance with the SEBI (Employee Stock Option Scheme
and Employee Stock Purchase Scheme) Guidelines, 1999. The Schemes
provide for grant of options to employees of the Company to acquire
equity shares of the Company that vest in a graded manner and that are
to be exercised within a specified period. In accordance with the SEBI
Guidelines; the excess, if any, of the closing market price on the day
prior to the grant of the options under ESOS over the exercise price is
amortized on a straight-line basis over the vesting period.
2.12 Segment Reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organization and
management structure. The operating segments are the segments for
which separate financial information is available and for which
operating profit/loss amounts are evaluated regularly by the executive
Management in deciding how to allocate resources and in assessing
performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment. Inter-segment revenue is accounted on the
basis of transactions which are primarily determined based on market /
fair value factors. Revenue, expenses, assets and liabilities which
relate to the Company as a whole and are not allocable to segments on
reasonable basis have been included under "unallocated revenue /
expenses / assets / liabilities".
2.13 Leases
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classified as finance leases. Such leases are capitalized
at the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Each lease rental paid is allocated between
the liability and the interest cost so as to obtain a constant periodic
rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognized as
operating leases. Lease rentals under operating leases are recognized
in the Statement of Profit and Loss on a straight-line basis.
2.14 Earnings Per Share
"Basic earnings per share is computed by dividing the profit / (loss)
after tax (including the post tax effect of extraordinary items, if
any) by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the
profit / (loss) after tax (including the post tax effect of
extraordinary items, if any) as adjusted for dividend, interest and
other charges to expense or income (net of any attributable taxes)
relating to the dilutive potential equity shares, by the weighted
average number of equity shares considered for deriving basic earnings
per share and the weighted average number of equity shares which could
have been issued on the conversion of all dilutive potential equity
shares".
2.15 Taxation
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the applicable tax rates and the
provisions of the Income Tax Act, 1961 and other applicable tax laws.
Minimum Alternate Tax (MAT) paid in accordance with the laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognized as an asset in the Balance Sheet when it is highly
probable that future economic benefit associated with it will flow to
the Company.
Deferred tax is recognized on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantially enacted as at the reporting date. Deferred tax
liabilities are recognized for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation, carry forward of losses
and items relating to capital losses are recognized only if there is
virtual certainty supported by convincing evidence that there will be
sufficient future taxable income available to realize such assets.
Deferred tax assets are recognized for timing differences of other
items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realized. Deferred tax assets and liabilities are offset if such
items relate to taxes on income levied by the same governing tax laws
and the Company has a legally enforceable right for such set off.
Deferred tax assets are reviewed at each Balance Sheet date for their
reliability.
2.16 Impairment of Assets
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of
impairment exists, the recoverable amount of such assets is estimated
and impairment is recognized, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognized for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognized in the Statement of Profit and Loss,
except in case of revalued assets.
2.17 Provisions and Contingencies
A provision is recognized when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed in the Notes. Contingent assets are not recognized in the
financial statements.
2.18 Provision for warranty
As per the terms of the contracts, the Company provides post-contract
services / warranty support to some of its customers. The Company
accounts for the post-contract support / provision for warranty on the
basis of the information available with the Management duly taking into
account the current and past technical estimates.
Provision for Liquidated Damages
Liquidated damages are provided based on contractual terms and
negotiations with the customer when the delivery/ commissioning dates
of an individual project have exceeded or are likely to exceed the
delivery/ commissioning dates as per the respective contracts. This
expenditure is expected to be incurred over the respective contractual
terms upto closure of the contract. (including defect liability
period).
Provision for losses on contracts
"A provision for expected loss on construction contracts is recognized
when it is probable that the contract costs will exceed total contract
revenue. For all other contracts loss order provisions are made when
the unavoidable costs of meeting the obligation under the contract
exceed the currently estimated economic benefits".
2.19 Share issue expenses
Share issue expenses are adjusted against the Securities Premium
Account as permissible under Section 52 of the Companies Act, 2013, to
the extent any balance is available for utilization in the Securities
Premium Account. Share issue expenses in excess of the balance in the
Securities Premium Account is expensed in the Statement of Profit and
Loss.
2.20 Derivatives
All derivative contracts are marked-to-market and losses are recognized
in the Statement of Profit and Loss. Gains arising on the same are not
recognized, until realized, on grounds of prudence.
2.21 Service tax input credit
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is
reasonable certainty in availing / utilizing the credits.
2.22 Operating Cycle
An operating cycle is the time between the acquisition of assets for
processing and their realization in cash or cash equivalents. The
normal operating cycle of the entity for Construction Contracts is the
duration of 2 to 3 years depending on each contract. For all other
segments, the normal operating cycle has been considered as a duration
of 12 months.
Mar 31, 2014
1 Basis of Accounting and Preparation of Financial Statements
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 notified 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
13 September, 2013 of the Ministry of Corporate Affairs) and the
relevant provisions of the 1956 Act/ 2013 Companies Act, as applicable.
The financial statements have been prepared on accrual basis under the
historical cost. The accounting policies adopted in the preparation of
the financial statements are consistent with those followed in the
previous year.
2 Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
3 Inventories
Inventories are valued at the lower of cost on FIFO basis and the net
realisable value after providing for obsolescence and other losses,
where considered necessary. Cost includes all charges in bringing the
goods to the point of sale, including octroi and other levies, transit
insurance and receiving charges.
Stock of land for windmill projects is valued at lower of cost and net
realizable value. Cost of land includes purchase consideration, stamp
duties and registration charges for transfer of title.
Contract Work in Progress represent work in progress on construction
contracts which reflects proportionate value of inputs and expenses on
contracts yet to be billed.
4 Cash and cash equivalents (for the purposes of Cash Flow Statement)
Cash comprises of cash on hand, cheques in transit and demand deposits
with banks. Cash equivalents are short-term balances (with an original
maturity of three months or less from the date of acquisition), highly
liquid investments that are readily convertible into known amounts of
cash and which are subject to insignificant risk of changes in value.
5 Cash Flow Statement
Cash flows are reported using the indirect method, whereby Profit /
(Loss) before Tax is adjusted for the effects of transactions of
non-cash nature and any deferrals or accruals of past or future cash
receipts or payments. The cash flows from operating, investing and
financing activities of the Company are segregated based on the
available information.
6 Depreciation and amortisation
Depreciation is computed under Straight Line Method at the rates and in
the manner prescribed under Schedule XIV of the Companies Act, 1956
except for the following:
(i) Leasehold improvements are written off over the primary period of
their lease.
(ii) Certain items of Plant and Machinery used at project sites are
depreciated over an estimated useful life of 2 to 4 years.
(iii) Technical Know-how fees are amortised over the period of 5 to 10
years based on estimated useful life of the asset.
(iv) Software cost are amortised over a period of 5 years based on
Management''s evaluation of their estimated useful life.
(v) Lease hold Land Using Rights is amortised over the primary period
of lease, which is 20 years.
(vi) Individual assets costing Rs. 5,000/- each or less is depreciated
fully in the year of acquisition.
7 Revenue Recognition
Income in respect of sale of goods is recognised at the time of
transfer of title. Sales are inclusive of all taxes.
Revenue in respect of Engineering Contracts is recognised as and when
progressive bills are raised based on customers measurement acceptance
and terms of the Contract, taking into consideration technical estimate
revision, costs to complete and stages of completion. Profits are
recognized after charging corresponding proportionate costs relating to
the Contractual billings. Escalation, which in the opinion of the
Management is recoverable on the contract are also recognized as and
when the claims are accepted by the customers.
Provision for anticipated losses on contracts is being made in the year
when they are established.
Revenue from Joint Venture Contracts : In respect of Jointly Controlled
Operations, revenues, expenses, assets and liabilities are accounted
for in the Company''s books to the extent work is executed by the
Company.
Contract Revenue earned in excess of billing has been reflected as
''Unbilled Revenue'' under ''Other Current Assets'' and ''Other Non Current
Assets'' as the case may be and billing in excess of Contract Revenue
has been reflected as Advances Billing'' under ''Other Current
Liabilities''.
Revenue from the sale of power is recognised on the basis of the number
of units of power exported, in accordance with joint meter readings
undertaken on a monthly basis by representatives of the State
Electricity Board and the Company, at rates agreed upon with customers
Dividend Income on Investments is accounted for when the right to
receive the payment is established. Interest income is accounted on
accrual basis. Interest income is included under the head "other
Income" in the Statement of Profit and Loss.
8 Fixed Assets
Fixed Assets are stated at historical cost (net of CENVAT/VAT wherever
applicable) less Accumulated Depreciation / Amortisation. Cost
comprises of direct cost, related taxes, duties, freight and
attributable finance costs till such assets are ready for its intended
use.
Projects under which tangible fixed assets are not yet ready for their
intended use are carried at cost, comprising direct cost, related
incidental expenses and attributable interest.
9 Foreign Currency Transaction
Foreign currency transactions are recorded at the rate of exchange
prevailing on the date of the transaction. Monetary assets &
liabilities outstanding at the year-end are translated at the rate of
exchange prevailing at the year-end and the gain or loss, is recognized
in the Statement of Profit and Loss.
Integral foreign operations: Transactions in foreign currencies entered
into by the Company''s integral foreign operations are accounted at the
exchange rates prevailing on the date of the transaction or at rates
that closely approximate the rate at the date of the transaction.
Exchange differences arising on actual payments/ realizations and
year-end restatements are dealt with in the Statement of Profit and
Loss. Investments in Foreign currencies are reported using the
exchange rate at the date of the transaction.
Integral foreign operations: Foreign currency monetary items (other
than derivative contracts) of the Company''s integral foreign operations
outstanding at the balance sheet date are restated at the year-end
rates. Non-monetary items of the Company''s integral foreign operations
are carried at historical cost.
10 Investments
Long-term investments are carried individually at cost less provision
for diminution, other than temporary, in the value of such investments.
Current investments are carried individually, at the lower of cost and
fair value. Cost of investments includes acquisition charges such as
brokerage, fees and duties.
11 Employee Benefits Short-term Employee Benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits. Short term
employee benefits at the balance sheet date, are recognized as an
expense as per the Company''s scheme based on expected obligations on
undiscounted basis.
The cost of short-term compensated absences is accounted as under:
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
(b) in case of non-accumulating compensated absences, when the absences
occur.
Long-term Employee Benefits
(i) Defined Contribution Plans:
The Company''s contribution to provident fund and employee state
insurance scheme are considered as defined contribution plans and are
charged as an expense based on the amount of contribution required to
be made and when services are rendered by the employees.
(ii) Defined Benefit Plans:
For defined benefit plans in the form of gratuity fund and
post-employment medical benefits, the cost of providing benefits is
determined using the Projected Unit Credit method, with actuarial
valuations being carried out at each balance sheet date. Actuarial
gains and losses are recognised in the Statement of Profit and Loss in
the period in which they occur. Past service cost is recognised
immediately to the extent that the benefits are already vested and
otherwise is amortised on a straight-line basis over the average period
until the benefits become vested. The retirement benefit obligation
recognised in the Balance Sheet represents the present value of the
defined benefit obligation as adjusted for unrecognised past service
cost.
(iii) Long Term Compensated Absences:
The obligation for long term employee benefits such as long term
compensated absence is provided for based on actuarial valuation as at
the balance sheet date, using the Projected Unit Credit Method.
Actuarial gains and losses arising from experience adjustments and
effects of changes in actuarial assumptions are immediately recognised
in the Statement of Profit and Loss as income or expense.
12 Employee Share Based payments
The Company has formulated Employee Stock Option Schemes ''2006'' and
''2007'' (ESOS) in accordance with the SEBI (Employee Stock Option Scheme
and Employee Stock Purchase Scheme) Guidelines, 1999. The Schemes
provide for grant of options to employees of the Company to acquire
equity shares of the Company that vest in a graded manner and that are
to be exercised within a specified period. In accordance with the SEBI
Guidelines; the excess, if any, of the closing market price on the day
prior to the grant of the options under ESOS over the exercise price is
amortised on a straight-line basis over the vesting period.
13 Segment Reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organisation and
management structure. The operating segments are the segments for
which separate financial information is available and for which
operating profit/loss amounts are evaluated regularly by the executive
Management in deciding how to allocate resources and in assessing
performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which
are primarily determined based on market / fair value factors.
Revenue, expenses, assets and liabilities which relate to the Company
as a whole and are not allocable to segments on reasonable basis have
been included under "unallocated revenue / expenses / assets /
liabilities".
14 Leases
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classified as finance leases. Such leases are capitalised
at the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Each lease rental paid is allocated between
the liability and the interest cost so as to obtain a constant periodic
rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease rentals under operating leases are recognised
in the Statement of Profit and Loss on a straight-line basis.
15 Earnings Per Share
Basic earnings per share is computed by dividing the profit / (loss)
after tax (including the post tax effect of extraordinary items, if
any) by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the
profit / (loss) after tax (including the post tax effect of
extraordinary items, if any) as adjusted for dividend, interest and
other charges to expense or income (net of any attributable taxes)
relating to the dilutive potential equity shares, by the weighted
average number of equity shares considered for deriving basic earnings
per share and the weighted average number of equity shares which could
have been issued on the conversion of all dilutive potential equity
shares.
16 Taxation
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act, 1961.
Minimum Alternate Tax (MAT) paid in accordance with the laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is highly
probable that future economic benefit associated with it will flow to
the Company.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantially enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets in repect of unabsorbed depreciation and carry forward of losses
are recognised only if there is virtual certainty that there will be
sufficient future taxable income available to realise such assets.
Deferred tax assets are recognised for timing differences of other
items only to the extent that reasonable certainity exists that
sufficient future taxable income will be avaiable against which these
can be realised. Deferred tax assets and liabilities are offset if such
items relate to taxes on income levied by the same governing tax laws
and the Company has a legally enforceable right for such set off.
Deferred tax assets are reviewed at each Balance Sheet date for their
realisability.
17 Impairment of Assets
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of impairment
exists, the recoverable amount of such assets is estimated and
impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss,
except in case of revalued assets.
18 Provisions and Contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed in the Notes. Contingent assets are not recognised in the
financial statements.
19 Provision for warranty
As per the terms of the contracts, the Company provides post-contract
services / warranty support to some of its customers. The Company
accounts for the post-contract support / provision for warranty on the
basis of the information available with the Management duly taking into
account the current and past technical estimates.
20 Derivatives
All derivative contracts are marked-to-market and losses are recognised
in the Statement of Profit and Loss. Gains arising on the same are not
recognised, until realised, on grounds of prudence.
21 Service tax input credit
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is
reasonable certainty in availing / utilising the credits.
22 Operating Cycle
An operating cycle is the time between the acquisition of assets for
processing and their realization in cash or cash equivalents. The
normal operating cycle of the entity for Construction Contracts is the
duration of 2 to 3 years depending on each contract. For all other
segments, the normal operating cycle has been considered as a duration
of 12 months.
Mar 31, 2012
1.1 Basis of Accounting and Preparation of Financial Statements
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 notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. 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.
1.2 Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
1.3 Inventories
Inventories are valued at the lower of cost on FIFO basis and the net
realisable value after providing for obsolescence and other losses,
where considered necessary. Cost includes all charges in bringing the
goods to the point of sale, including octroi and other levies, transit
insurance and receiving charges.
Stock of land for windmill projects is valued at lower of cost and net
realizable value. Cost of land includes purchase consideration, stamp
duties and registration charges for transfer of title.
Contract in Progress represents work in Process on construction
contracts which reflects proportionate value of inputs and expenses on
contracts yet to be billed
1.4 Cash and cash equivalents (for the purposes of Cash Flow Statement)
Cash comprises of cash on hand, cheques in transit and demand deposits
with banks. Cash equivalents are short-term balances (with an original
maturity of three months or less from the date of acquisition), highly
liquid investments that are readily convertible into known amounts of
cash and which are subject to insignificant risk of changes in value.
1.5 Cash Flow Statement
Cash flows are reported using the indirect method, whereby Profit /
(Loss) before Tax is adjusted for the effects of transactions of
non-cash nature and any deferrals or accruals of past or future cash
receipts or payments. The cash flows from operating, investing and
financing activities of the Company are segregated based on the
available information.
1.6 Revenue Recognition
Income in respect of sale of goods is recognised at the time of
transfer of title. Sales are inclusive of all taxes.
Revenue in respect of Engineering Contracts is recognised as and when
progressive bills are raised based on customers measurement acceptance
and terms of the Contract, taking into consideration technical estimate
revision, costs to complete and stages of completion. Profits are
recognized after charging corresponding proportionate costs relating to
the Contractual billings. Escalation, which in the opinion of the
Management is recoverable on the contract are also recognized as and
when the claims are accepted by the customers.
Provision for anticipated losses on contracts is being made in the year
when they are established.
Revenue from other Contracts is recognized based on completed Contract
method, when rendering of service is completed or substantially
completed.
Revenue from sale of windmill development rights is recognized on
transfer ofthe rights to the buyer under the terms of contract.
Contract Revenue earned in excess of billing has been reflected as
'Unbilled Revenue' under 'Other Current Assets' and billing in excess
of Contract Revenue has been reflected as 'Advances Billing' under
'Other Current Liabilities'.
Dividend Income on Investments is accounted for when the right to
receive the payment is established. Interest income is accounted on
accrual basis. Interest income is included under the head "other
Income" in the Statement of Profit and loss.
1.7 Fixed Assets and Depreciation
Fixed Assets are stated at historical cost (net of CENVAT/VAT wherever
applicable) less Accumulated Depreciation / Amortisation. Cost
comprises of direct cost, related taxes, duties, freight and
attributable finance costs till such assets are ready for its intended
use. Capital work in progress is stated at the amount expended up to
the Balance sheet date.
Tangible Assets
Depreciation is computed under Straight Line Method at the rates and in
the manner prescribed under Schedule XIV of the Companies Act, 1 956
except for thefollowing:
Leasehold improvements are written off over the primary period of their
lease.
Certain items of Plant and Machinery used at project sites are
depreciated over an estimated useful life of 2 to 4 years.
Individual assets costing Rs.5,000/- each or less is depreciated in full
in the yearof addition.
Intangible Assets
Depreciation is computed under Straight Line method at the rates
specified below:
Technical Know-how fees are amortised over the period of 5 to 10 years
based on estimated useful life ofthe asset.
Software cost are amortised over a period of 5 years based on
Managements evaluation of their estimated useful life.
Lease hold Land Using Rights is amortised over the primary period of
lease, which is 20 years.
1.8 Foreign Currency Transaction
Foreign currency transactions are recorded at the rate of exchange
prevailing on the date ofthe transaction. Monetary assets &
liabilities outstanding at the year- end are translated at the rate of
exchange prevailing at the year-end and the gain or loss, is recognized
in the Statement of Profit and Loss.
Exchange differences arising on actual payments/realizations and
year-end restatements are dealt wiTh in the Statement of Profit and
Loss. Investments in Foreign currencies are reported using the
exchange rate at the date ofthe transaction.
1.9 Investments
Long-term investments are carried individually at cost less provision
for diminution, otherthan temporary, in the value of such investments.
Current investments are carried individually, at the lower of cost and
fair value. Cost of investments includes acquisition charges such as
brokerage, fees and duties.
1.10 Employee Benefits
Short-term Employee Benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits. Shortterm
employee benefits at the balance sheet date, are recognized as an
expense as per the Company's scheme based on expected obligations on
undiscounted basis.
Long-term Employee Benefits
(i) Defined Contribution Plans:
Contribution to state governed Provident Fund scheme and Employee State
Insurance scheme are defined contribution plans. The contribution
paid/payable underthe schemes is recognised during the period in which
the employee renders the related service.
(ii) Defined Benefit Plans:
The liability for Gratuity to employees as at Balance Sheet date is
determined on the basis of actuarial valuation based on Projected Unit
Credit Method and is not funded. The contribution there of paid /
payable is charged to Statement of Profit and Loss.
(iii) Long Term Compensated Absences:
The obligation for long term employee benefits such as long term
compensated absence is provided for based on actuarial valuation as at
the balance sheet date, using the Projected Unit Credit Method.
Actuarial gains and losses arising from experience adjustments and
effects of changes in actuarial assumptions are immediately recognised
in the Statement of Profit and Loss as income or expense.
1.11 Employee Stock Option Scheme
In respect of stock options granted to the employees under the stock
option schemes established, the Company determines the compensated cost
based on the intrinsic value method and the compensation cost is
amortised on a straight line basis over the vesting period.
1.12 Segment Reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organisation and
management structure. The operating segments are the segments for
which separate financial information is available and for which
operating profit/loss amounts are evaluated regularly by the executive
Management in deciding how to allocate resources and in assessing
performance.
The generally accepted accounting principles used in the preparation of
the financial statements are applied to record revenue and expenditure
in individual segments.
Inter-segment revenue is accounted on the basis of transactions which
are primarily determined based on market/fair value factors.
Expenses that are directly identifiable to segments are considered for
determining the segment result. Expenses which relate to the company
as a whole and are not allocable to segments are included under
unallocated corporate expenses.
Segments assets and liabilities include those directly identifiable
with the respective segments. Unallocated corporate assets and
liabilities represent the assets and liabilities that relate to the
company as a whole and notallocabletoanysegment.
1.13 Leases
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vested in the
Company are classified as finance leases. Such leases are capitalised
at the inception ofthe lease at the lower of the fairvalueand the
present value ofthe minimum lease payments and a liability is created
for an equivalent amount. Each lease rental paid is allocated between
the liability and the interest cost so as to obtain a constant periodic
rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease rentals under operating leases are recognised
in the Statement of Profit and Loss on a straight-line basis.
1.14 Taxation
Currenttax is the amount of tax payable on the taxable income forthe
year as determined in accordance with the provisions ofthe Income Tax
Act, 1 961.
Minimum Alternate Tax (MAT) paid in accordance with the laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognised on timing differences,
being the differences between the taxable income and the accounting
income that originate in one period and are capable of reversal in one
or more subsequent periods. Deferred tax is measured using the tax
rates and the tax laws enacted or substantially enacted as at the
reporting date. Deferred tax liabilities are recognised for all timing
differences. Deferred tax assets in respect of unabsorbed depreciation
and carry forward of losses are recognised only if there is virtual
certainty that there will be sufficient future taxable income available
to realise such assets. Deferred tax assets are recognised for timing
differences of other items only to the extent that reasonable certainty
exists that sufficient future taxable income will be available against
which these can be realised. Deferred tax assets and liabilities are
offset if such items relate to taxes on income levied by the same
governing tax laws and the Company has a legally enforceable right for
such setoff. Deferred tax assets are reviewed at each Balance Sheet
date fortheir realisability.
1.15 Impairment of Assets
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of impairment
exists, the recoverable amount of such assets is estimated and
impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognised for an asset in earlier accounting periods
no longer exists or may have decreased, such reversal of impairment loss
is recognised in the Statement of Profit and Loss, except in case of
revalued assets.
1.16 Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised only when there is a present obligation as a
result of past events and when a reliable estimate of the amount of
obligation can be made. Provisions are not discounted to its present
value and are determined based on best estimate required to settle the
obligation at the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect the current best estimates.
Contingent liability is disclosed for (i) Possible obligation which
will be confirmed only by future events not wholly within the control
of the Company or
(ii) Present obligations arising from past events where it is not
probable that an outflow of resources will be required to settle the
obligation or a reliable estimate of the amount of the obligation
cannot be made. Contingent assets are neither recognised nor disclosed
in the financial statements as a matter of prudence.
1.17 Derivatives
All derivative contracts are marked-to-market and losses are recognised
in the Statement of Profit and Loss. Gains arising on the same are not
recognised, until realised, on grounds of prudence.
Mar 31, 2011
1.1 Basis of Accounting
The financial statements have been prepared under the historical cost
convention on accrual basis and in accordance with the accounting
principles generally accepted in India and comply with mandatory
Accounting Standards notified by the Central Government of India under
the Companies (Accounting Standards) Rules, 2006 and with the relevant
provisions of the Companies Act, 1956.
1.2 Use of estimates
The preparation of financial statements in conformity with the
generally accepted accounting principles requires the management to
make estimates and assumptions that affect the reported amount of
assets, liabilities, revenue and expenses and disclosure of contingent
liabilities as of the date of the financial statements. Actual results
could differ from those estimated. Difference between the actual
results and estimates are recognised in the period in which the results
are known / materialised.
1.3 Revenue Recognition
Income in respect of sale of goods is recognised at the time of
transfer of title. Sales are inclusive of all taxes.
Revenue in respect of Engineering Contracts is recognised as and when
progressive bills are raised based on customers measurement acceptance
and terms of the Contract, taking into consideration technical estimate
revision, costs to complete and stages of completion. Profits are
recognised after charging corresponding proportionate costs relating to
the Contractual billings. Escalation, which in the opinion of the
Management is recoverable on the contract are also recognised as and
when the claims are accepted by the customers.
Provision for anticipated losses on contracts is being made in the year
they are established.
Revenue from other Contracts is recognised based on completed Contract
method, when rendering of service is completed or substantially
completed.
Revenue from sale of windmill development rights is recognized on
transfer of the rights to the buyer under the terms of contract.
Dividend Income on Investments is accounted for when the right to
receive the payment is established.
1.4 Investments
Long term investments are stated at cost. Provision for diminution in
value is made if the decline is other than temporary in nature.
Current Investments are stated at lower of cost and fair value
determined on the basis of each category of investments.
1.5 Fixed Assets and Depreciation
Fixed assets are stated at cost. Cost comprises of the purchase price
and any attributable cost of bringing the assets to its working
condition for its intended use. With regard to assets acquired under
the finance lease, the cost of assets is capitalised while the annual
charges are charged to revenue. Intangible Assets are stated at cost.
Tangible assets
Depreciation is provided for on Straight Line method at the rates and
in the manner prescribed under Schedule XIV of the Companies Act, 1
956.
Leasehold improvements are written off over the primary period of their
lease.
Individual assets costing Rs.5,000/- each or less is depreciated in
full in the year of addition.
Intangible assets
Technical Know-how fees are amortised over the period of 5 to 10 years
based on estimated useful life of the asset.
Software cost is amortised over a period of 5 years based on
Managements evaluation of their estimated useful life.
Lease hold Land Using Rights is amortised over the primary period of
lease, which is 20 years.
1.6 Impairment of Assets
At each balance sheet date, the carrying values of the tangible and
intangible assets ore reviewed to determine whether there is any
indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss (if
any). Where there is on indication that there is a likely impairment
loss for a group of assets, the company estimates the recoverable
amount of the group of assets as a whole and the impairment losses, if
any, recognised.
1.7 Inventories
Raw Materials and stores and spares are valued at cost. Cost on FIFO
basis includes freight, taxes and duties net of VAT credit wherever
applicable.
Stock of land for windmill projects is valued at lower of cost and net
realisable value. Cost of land includes purchase consideration, stamp
duties and registration charges for transfer of title.
1.8 Foreign Currency Transaction
Foreign currency transactions are recorded at the rate prevailing on
the date of transaction. At the year end, all monetary assets and
liabilities denominated in foreign currency are restated at the year
end exchange rates.
Exchange differences arising on actual payment/realisation are
recognised in profit and loss account.
1.9 Employee Benefits:
a. Short Term Employee Benefits : All employee benefits payable wholly
within twelve months of rendering the service are classified as short
term employee benefits. Short term employee benefits, including
accumulated compensated absences, at the balance sheet date, are
recognized as an expense as per the Company's scheme based on expected
obligations on undiscounted basis.
b. Long Term Employee Benefits:
(i) Defined Contribution Plans:
Contribution to state governed provident fund scheme and employee state
insurance scheme ore defined contribution plans. The contribution
paid/payable under the schemes is recognised during the period in which
the employee renders the related service.
(ii) Defined Benefit Plans:
The liability for Gratuity to employees as at Balance Sheet date is
determined on the basis of actuarial valuation based on Projected Unit
Credit method and is not funded. The contribution there of paid /
payable is charged in the books of accounts.
The obligation for long term employee benefits such as long term
compensated absence is provided for based on actuarial valuation as at
the balance sheet date, using the Projected Unit Credit Method.
Actuarial gains and losses arising from experience adjustments and
effects of changes in actuarial assumptions are immediately recognised
in the Profit and Loss Account as income or expense.
1.10 Taxation
Provision for taxation comprise of the Current Tax Provision, Fringe
Benefits tax and the net change in the Deferred Tax Asset or Liability
during the year.
Current Tax is determined in accordance with the provisions of Income
Tax Act, 1961, on the Income for the period chargeable to tax.
Provision for Deferred Tax is made for timing differences arising
between the taxable incomes and accounting income computed using the
tax rates and the laws that have been enacted or substantively enacted
as of the balance sheet date. Deferred Tax assets in respect of
unabsorbed depreciation and carry forward of losses are recognized if
there is virtual certainty that there will be sufficient future taxable
income available to realize such losses. Other deferred tax assets are
recognized if there is reasonable certainty that there will be
sufficient future taxable income available to realize such assets.
1.11 Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized only when there is a present obligation as a
result of past events and when a reliable estimate of the amount of
obligation can be made. Provisions are not discounted to its present
value and are determined based on best estimate required to settle the
obligation at the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect the current best estimates.
Contingent liability is disclosed for (i) Possible obligation which
will be confirmed only by future events not wholly within the control
of the Company or (ii) Present obligations arising from past events
where it is not probable that an outflow of resources will be required
to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made. Contingent assets are neither recognized nor
disclosed in the financial statements.
1.12 Segment reporting:
a. The generally accepted accounting principles used in the
preparation of the financial statements are applied to record revenue
and expenditure in individual segments.
b. Segment revenue and segment results include transfers between
business segments. Such transfers are accounted for at the agreed
transaction value and such transfers are eliminated in the
consolidation of the segments.
c. Expenses that are directly identifiable to segments are considered
for determining the segment result. Expenses which relate to the
company as a whole and are not allocable to segments are included under
unallocated corporate expenses.
d. Segments assets and liabilities include those directly identifiable
with the respective segments. Unallocated corporate assets and
liabilities represent the assets and liabilities that relate to the
company as a whole and not allocable to any segment.
1.13 Employee Stock Option Scheme
In respect of stock options granted to the employees under the stock
option schemes established, the Company determines the compensated cost
based on the intrinsic value method and the compensation cost is
amortised on a straight line basis over the vesting period.
Mar 31, 2010
1.1 Basis of Accounting
The financial statements have been prepared under the historical cost
convention on accrual basis and in accordance with the accounting
principles generally accepted in India and comply with mandatory
Accounting Standards notified by the Central Government of India under
the Companies (Accounting Standards) Rules, 2006 and with the relevant
provisions of the Companies Act, 1956.
1.2 Use of estimates
The preparation of financial statements in conformity with the
generally accepted accounting principles requires the management to
make estimates and assumptions that affect the reported amount of
assets, liabilities, revenue and expenses and disclosure of contingent
liabilities as of the date of the financial statements. Actual results
could differ from those estimated. Difference between the actual
results and estimates are recognised in the period in which the results
are known / materialised.
1.3 Revenue Recognition
Income in respect of sale of goods is recognised at the time of
transfer of title. Sales are inclusive of all taxes.
Revenue in respect of Engineering Contracts is recognised as and when
progressive bills are raised based on customers measurement acceptance
and terms of the Contract, taking into consideration technical estimate
revision, costs to complete and stages of completion. Profits are
recognised after charging corresponding proportionate costs relating to
the Contractual billings. Escalation, which in the opinion of the
Management is recoverable on the contract are also recognised as and
when the claims are accepted by the customers.
Provision for anticipated losses on contracts is being made in the year
they are established.
Revenue from other Contracts is recognised based on Completed Contract
method, when rendering of service is completed or substantially
completed.
Dividend Income on Investments is accounted for when the right to
receive the payment is established.
1.4 Investments
Long term investments are stated at cost. Provision for diminution in
value is made if the decline is other than temporary in nature. Current
Investments are stated at lower of cost and fair value determined on
the basis of each category of investments.
1.5 Fixed Assets and Depreciation
Fixed assets are stated at cost. Cost comprises of the purchase price
and any attributable cost of bringing the assets to its working
condition for its intended use. With regard to assets acquired under
the finance lease, the cost of assets is capitalised while the annual
charges are charged to revenue. Intangible Assets are stated at cost.
TANGIBLE ASSETS
Depreciation is provided for on Straight Line method at the rates and
in the manner prescribed under Schedule XIV of the Companies Act, 1956.
Leasehold improvements are written off over the primary period of their
lease.
In respect of assets impaired, the revised carrying value is
depreciated over its remaining useful life.
Individual assets costing less than Rs.5,000/- each is depreciated in
full in the year of addition.
INTANGIBLE ASSETS
Technical Know-how Fees are amortised over the period of 5 to 10 years
based on estimated useful life of the asset. Software cost are
amortised over a period of 5 years based on Managements evaluation of
the estimated useful life. Lease hold land using rights is amortised
over the primary period of lease, which is 20 years.
1.6 Impairment of Assets
At each balance sheet date, the carrying values of the tangible and
intangible assets are reviewed to determine whether there is any
indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss (if
any). Where there is an indication that there is a likely impairment
loss for a group of assets, the Company estimates the recoverable
amount of the group of assets as a whole and the impairment losses
recognised.
1.7 Inventories
Raw Materials and stores and spares are valued at cost. Cost on FIFO
basis includes freight, taxes and duties net of VAT credit wherever
applicable.
Stock of land for windmill projects is valued at lower of cost and net
realisable value. Cost of land includes purchase consideration, stamp
duties and registration charges for transfer of title.
1.8 Foreign Currency Transaction
Foreign currency transactions are recorded at the rate prevailing on
the date of transaction. At the year end, all monetary assets and
liabilities denominated in foreign currency are restated at the year
end exchange rates. Exchange differences arising on actual
payment/realisation are recognised in profit and loss account.
1.9 Employee Benefits:
a. Short Term Employee Benefits :
All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits. Short term
employee benefits, including accumulated compensated absences, at the
balance sheet date, are recognized as an expense as per the Companys
scheme based on expected obligations on undiscounted basis.
b. Long Term Employee Benefits:
The obligation for long term employee benefits such as long term
compensated absences is provided for based on actuarial valuation as at
the balance sheet date, using the Projected Unit Credit Method.
(i) Defined Contribution Plans: -
Contribution to state governed provident fund scheme and employee state
insurance scheme are defined contribution plans.
The contribution paid/payable under the schemes is recognised during
the period in which the employee renders the related service.
(ii) Defined Benefit Plans:
The liability for Gratuity to employees as at Balance Sheet date is
determined on the basis of actuarial valuation based on Projected Unit
Credit method and is not funded. The contribution thereof paid /
payable is charged in the books of accounts.
Actuarial gains and losses arising from experience adjustments and
effects of changes in actuarial assumptions are immediately recognised
in the profit and loss account as income or expense.
1.10 Taxation
Provision for taxation comprise of the Current Tax Provision, Fringe
Benefits Tax and the net change in the Deferred Ta x Asset or Liability
during the year.
Current Tax is determined in accordance with the provisions of Income
Tax Act, 1961, on the Income for the period chargeable to tax.
Provision for Deferred Tax is made for timing differences arising
between the taxable incomes and accounting income computed using the
tax rates and the laws that have been enacted or substantively enacted
as of the
balance sheet date. Deferred Tax assets in respect of unabsorbed
depreciation and carry forward of losses are recognized if there is
virtual certainty that there will be sufficient future taxable income
available to realize such losses. Other deferred tax assets are
recognized if there is reasonable certainty that there will be
sufficient future taxable income available to realise such assets.
1.11 Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised only when there is a present obligation as a
result of past events and when a reliable estimate of the amount of
obligation can be made. Provisions are not discounted to its present
value and are determined based on best estimate required to settle the
obligation at the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect the current best estimates.
Contingent liability is disclosed for (i) Possible obligation which
will be confirmed only by future events not wholly within the control
of the Company or (ii) Present obligations arising from past events
where it is not probable that an outflow of resources will be required
to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made. Contingent assets are neither recognised nor
disclosed in the financial statements.
1.12 Segment reporting:
a. The generally accepted accounting principles used in the
preparation of the financial statements are applied to record revenue
and expenditure in individual segments.
b. Segment revenue and segment results include transfers between
business segments. Such transfers are accounted for at the agreed
transaction value and such transfers are eliminated in the
consolidation of the segments.
c. Expenses that are directly identifiable to segments are considered
for determining the segment result. Expenses which relate to the
Company as a whole and are not allocable to segments are included under
unallocated corporate expenses.
d. Segments assets and liabilities include those directly identifiable
with the respective segments. Unallocated corporate assets and
liabilities represent the assets and liabilities that relate to the
Company as a whole and not allocable to any segment.
1.13 Employee Stock Option Scheme
Stock options granted to the employees under the stock option scheme
established are evaluated as per the accounting treatment prescribed by
the Employee Stock Option Scheme and Employee Stock Purchase Scheme
Guidelines, 1999 issued by Securities Exchange Board of India. The
Company follows the intrinsic value method of accounting for the
options and accordingly, the excess of market value of the stock
options as on date of grant over the exercise price of the options, if
any, is recognized as deferred employee compensation and is charged to
the Profit and Loss Account, to the extent of options vested.
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