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Notes to Accounts of Smartlink Network Systems Ltd.

Mar 31, 2015

NOTE 1 : BACKGROUND OF THE COMPANY

Smartlink Network Systems Limited ("Company") was originally incorporated on 31st March, 1993. The Company is in the business of developing, manufacturing, marketing, distributing and servicing of networking products.

a) Terms / rights attached to equity shares

The Company has only one class of Equity shares having a par value of Rs. 2/- per share. Each holder of Equity shares is entitled to one vote per share and each Equity share carries an equal right to dividend and in case of repayment of capital.

NOTE 2 : CONTINGENT LIABILITIES AND COMMITMENTS

Contingent liabilities in respect of As at 31st As at 31st 31st march,2015 March, 2014 (Rs) (Rs)

a. Show cause notices received from - 238,259 customs authorities relating to imports made in earlier years.

The Company has received order from Commissioner (Appeals) Nos. GOA-EXCUS-000-043 & 044-14-15 dated 12-Aug-2014 dropping the less charge demand notices

b. Disputed demands of custom duty 2,414,221 2,414,221 pending before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) (Amount deposited as pre-deposit Rs.900,000/-) in connection with classification of networking products.

c. Disputed demand of excise duty 38,715,672 38,715,672 in connection with valuation of products manufactured by the Company pending before CESTAT (Amount deposited as pre-deposit Rs.11,400,000/-)

d. Disputed penalty demands of Excise 39,880,674 39,880,674 Authorities with regard to (c) above, pending before the CESTAT

e. Custom duty paid under protest

The raw material / trading material / 3,883,884 3,883,884 software imported by the Company are subjected to different rates of customs duty based on classification under respective Tariff Head. The Customs department has objected to the classifications adopted by the Company for certain items and has demanded additional duty for the same.

The Company has paid such differential duty under protest, which is included under Long term loans and advances in Note 12, pending resolution of the dispute.

The Company is confident of successfully contesting the demands and does not expect any significant liability to crystallise.

f. SEBI had filed a criminal case, in the Metropolitan Magistrate court, in June, 2006 under Section 77A(4) r/w Section 621 for alleged contravention of provisions of the Companies Act, 1956 for failing to complete the process of buy back of shares as provided under the said section.

The Company had filed an application in the Hon'ble High Court of Bombay and the Hon'ble High Court has passed the order on 03-Mar-2015 quashing the order of Metropolitan Magistrate.

VI. The assumptions of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment.

VIII. The contribution expected to be made by the Company during the financial year 2015-16 is Rs. 4,500,000/-.

IX. The plan assets are managed by the Gratuity trust formed by the Company. The management of funds is entrusted with Life Insurance Corporation of India. The details of investments made by them are not available.

B The disclosure as required under AS-15 regarding the Company's defined contribution plans is as follows : i) Contribution to provident fund Rs. 5,170,288/- (previous year Rs. 5,431,967/-).

NOTE 3 : SEGMENT INFORMATION

A Segment information for primary reporting (by business segment)

The Company has its operations in developing, manufacturing, marketing, distributing and servicing networking products. These networking products are sold to distributors, Original Equipment Manufacturers (OEM's) and System Integrators (SI). The primary reporting segment for the Company therefore, is the business segment, viz., networking products.

B Segment information for secondary segment reporting (by geographical segments)

The secondary reporting segment for the Company is the geographical segment based on location of customers, which is as follows:

i) Domestic

ii) Export

1 In previous year deferred tax asset had been recognised to the extent of deferred tax liability on prudence. Other deferred tax assets had not been recognised in the absence of virtual / reasonable certainty supported by convincing evidence that future taxable income would be available against which such deferred tax asset would be recognised.

2 Deferred tax impact in respect of transitional provisions upon application of Schedule II of the Companies Act, 2013 has been given in the reserves.

NOTE 4 : RELATED PARTY DISCLOSURES Names of related parties where control exists

Smartlink Middle East FZE has been liquidated w.e.f. 23-Oct-2014.

List of related parties with whom transactions have taken place during the year and nature of relationship

Name of the related parties Nature of relationship

Mr. Kamalaksha R. Naik Key management person

Ms. Aarti K. Naik Key management person w.e.f. (Director / Chief 09-Sep-14. (Relative of key Operating Officer) management person till 08-Sep-14)

Mr. Kamalaksha R. Naik (HUF) Enterprise over which key management person is able to exercise significant influence.

Mrs. Sudha K. Naik Relative of key management person

Mrs. Lakshana A. Sharma Relative of key management person

NOTE 5 : The Company had instituted "Employee Stock Option Plan" (ESOP) for its employees in the year 2000. To administer the ESOP the Company had created a Trust viz. D-Link (India) Limited ESOP Trust (the Trust) in September 2000. The said Trust was allotted 6,50,000 Equity Shares of Rs. 2/- each. In terms of the said ESOP, the Trust had granted options to the employees in the form of Equity Shares which vest at the rate of 25% on each successive anniversary of the grant date. The Trust had been renamed as Smartlink Network Systems Limited ESOP Trust. ESOP Compensation Committee had also re-priced the unexercised options granted to employees to compensate for reduction in the intrinsic value of the company pursuant to the Scheme of arrangement with D-link (India) Limited.

The accounting of ESOP's granted by the Trust to the employees of the Company was done in accordance with The SEBI (ESOS and ESPS) Guidelines, 1999. These Guidelines were amended in July 2004 for all accounting periods commencing after 30th June 2003. The amendment required the Company to prepare its accounts as if the ESOS/ESPS scheme was administered by itself (rather than by the Trust). The Company had accordingly considered all the options granted by the Trust on or after 1st April 2004. The difference between the Market price of the share (intrinsic value) and the exercise price of the option, on the date of grant, had been amortised over the vesting period. The annual amortization was included under "Employee benefit expenses" and the cumulative charge disclosed in the Balance sheet under "Employee stock options" There are no further options outstanding to be granted.

NOTE 6 : Excise duty collected from customers against sales has been disclosed as a deduction from turnover. The excise duty related to the difference between the opening and closing stock of finished goods is disclosed separately in the statement of profit and loss as "Excise Duty".

NOTE 7 : Previous year's figures have been regrouped, wherever necessary, to correspond with those of the current year.


Mar 31, 2014

NOTE 1 : SEGMENT INFORMATION

(A) Segment information for primary reporting (by business segment)

The Company has its operations in developing, manufacturing, marketing, distributing and servicing networking products. These networking products are sold to distributors, Original Equipment Manufacturers (OEM''s) and System Integrators (SI). The primary reporting segment for the Company therefore, is the business segment, viz., networking products.

(B) Segment information for secondary segment reporting (by geographical segments)

The secondary reporting segment for the Company is the geographical segment based on location of customers, which is as follows:

i) Domestic

ii) Export

NOTE 2 : LEASE TRANSACTION Operating leases

The Company had taken premises / vehicles on cancellable operating lease basis. The tenure of the agreement ranged from 33/60 months. There were no renewal or purchase options and escalation clauses in these agreements. The lease rentals for the year charged to revenue are Rs. Nil/- (previous year Rs. 18,160/-)

g) The Company had instituted "Employee Stock Option Plan" (ESOP) for its employees in the year 2000. To administer the ESOP the Company had created a Trust viz. D-Link (India) Limited ESOP Trust (the Trust) in September 2000. The said Trust was allotted 6,50,000 Equity Shares of Rs. 2/- each. In terms of the said ESOP, the Trust had granted options to the employees in the form of Equity Shares which vest at the rate of 25% on each successive anniversary of the grant date. The Trust had been renamed as Smartlink ESOP Trust.

ESOP Compensation Committee had also re-priced the unexercised options granted to employees to compensate for reduction in the intrinsic value of the company pursuant to the Scheme of arrangement with D-Link (India) Limited. The accounting of ESOP''s granted by the Trust to the employees of the Company was done in accordance with The SEBI (ESOS and ESPS) Guidelines, 1999. These Guidelines were amended in July 2004 for all accounting periods commencing after 30th June 2003. The amendment required the Company to prepare its accounts as if the ESOS/ESPS scheme was administered by itself (rather than by the Trust). The Company had accordingly considered all the options granted by the Trust on or after 1st April 2004. The difference between the Market price of the share (intrinsic value) and the exercise price of the option, on the date of grant, had been amortised over the vesting period. The annual amortization was included under "Employee benefit expenses" and the cumulative charge disclosed in the Balance sheet under "Employee stock options" There are no further options outstanding to be granted.

h) Excise duty collected from customers against sales has been disclosed as a deduction from turnover. The excise duty related to the difference between the opening and closing stock of finished goods is disclosed separately in the statement of profit and loss account as "Excise Duty".

i) Previous year''s figures have been regrouped, wherever necessary, to correspond with those of the current year.


Mar 31, 2013

NOTE 1 : BACKGROUND OF THE COMPANY

Smartlink Network Systems Limited ("Company") was originally incorporated on 31st March, 1993. The Company is in the business of developing, manufacturing, marketing, distributing and servicing of networking products.

NOTE 2: SEGMENT INFORMATION

(A) Segment information for primary reporting (by business segment)

The Company has its operations in developing, manufacturing, marketing, distributing and servicing networking products. These networking products are sold to distributors, Original Equipment Manufacturers (OEM''s) and System Integrators (SI). The primary reporting segment for the Company therefore, is the business segment, viz., networking products.

(B) Segment information for secondary segment reporting (by geographical segments)

The secondary reporting segment for the Company is the geographical segment based on location of customers, which is as follows:

i. Domestic

ii. Export

NOTE 3 : LEASE TRANSACTION

Operating leases

The Company has taken premises / vehicles on cancellable operating lease basis. The tenure of the agreement ranges from 33/60 months.

There are no renewal or purchase options and escalation clauses in these agreements.

The lease rentals for the year charged to revenue are Rs. 18,160/- (previous year Rs. 645,740/-)

Note : *During the current year other items have given rise to a net deferred tax asset of Rs. 25,221,503/-. However, in view of the loss incurred the Company as a matter of prudence has not recognised deferred tax asset arising out of the same. (Previous year the unabsorbed business loss, depreciation and other items had given rise to net deferred tax asset amounting to Rs. 54,826,287/-. However, in the absence of virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax asset can be realized, the Company had not accounted for the same.)

NOTE 4 : RELATED PARTY DISCLOSURES

Names of related parties where control exists

Smartlink Middle East FZE

NOTE 5 : DISCONTINUING OPERATIONS

The Board of Directors of the Company at its meeting held on 31st March, 2011 approved the sale of the Structured cabling business comprising of manufacture, sale and marketing of structured cabling products carried under the brand name "DIGILINK", hereinafter referred to as ("Digilink Business"), to Schneider Electric India Private Limited (" Schneider"). The Digilink Business together with its respective assets and liabilities, was transferred to Schneider on a ''slump sale'' basis as a going concern, for a cash consideration ofRs. 5,030,000,000/- to be adjusted for any net working capital changes as on the closing date.

In this connection, the Company had signed the Business Transfer Agreement dated 31st March, 2011 and had obtained the shareholders approval through postal ballot on 11th May, 2011. The consideration was received on 13th May, 2011, the Closing date. The balance consideration on account of net working-capital adjustments was received during the quarter ending 30th September, 2011. The profit on account of the above transaction was disclosed as an exceptional item in the previous year.

Accordingly, the ''DIGILINK'' business was considered as a ''discontinued operation'' in terms of Accounting Standard 24 on ''Discontinued Operations'' (AS 24).

Other than the above, the Company has not remitted any amount in foreign currencies on account of dividends during the year and does not have information as to the extent to which remittances, if any, in foreign currencies on account of dividend have been made by non- resident shareholders.

a) The Company had instituted "Employee Stock Option Plan" (ESOP) for its employees in the year 2000. To administer the ESOP the Company had created a Trust viz. D-Link (India) Limited ESOP Trust (the Trust) in September 2000. The said Trust was allotted 6,50,000 Equity Shares of Rs. 2/-each. In terms of the said ESOP, the Trust had granted options to the employees in the form of Equity Shares which vest at the rate of 25% on each successive anniversary of the grant date. The Trust had been renamed as Smartlink ESOP Trust. ESOP Compensation Committee had also re-priced the unexercised options granted to employees to compensate for reduction in the intrinsic value of the company pursuant to the Scheme of arrangement with D-link (India) Limited. The accounting of ESOP''s granted by the Trust to the employees of the Company was done in accordance with The SEBI (ESOS and ESPS) Guidelines, 1999. These Guidelines were amended in July 2004 for all accounting periods commencing after 30th June 2003. The amendment required the Company to prepare its accounts as if the ESOS/ESPS scheme was administered by itself (rather than by the Trust). The Company had accordingly considered all the options granted by the Trust on or after 1st April 2004. The difference between the Market price of the share (intrinsic value) and the exercise price of the option, on the date of grant, had been amortised over the vesting period. The annual amortization was included under "Employee benefit expenses" and the cumulative charge disclosed in the Balance sheet under "Employee stock options outstanding". There are no further options outstanding to be granted.

b) Excise duty collected from customers against sales has been disclosed as a deduction from turnover. The excise duty related to the difference between the opening and closing stock of finished goods is disclosed separately in the statement of profit and loss account as "Excise Duty".

c) Previous year''s figures have been regrouped, wherever necessary, to correspond with those of the current year.


Mar 31, 2012

BACKGROUND OF THE COMPANY

Smartlink Network Systems Limited ("Company") was incorporated on 31st March, 1993. The Company is in the business of developing, manufacturing, marketing, distributing and servicing of networking products.

1. Leasehold land / premises include:

(i) Plots of land of the aggregate gross value of Rs. 14,036,535- (previous year Rs. 14,036,538/-), taken on lease from the Goa Industrial Development Corporation (GIDC) for an initial period of thirty years with an option to extend the lease to ninety/ ninety-five years.

(ii) Land and premises of the aggregate gross value of Rs. 1,686,000/- (previous year Rs.1,686,000/-), taken on lease from Maharashtra Industrial Development Corporation (MIDC) for an initial period often years with an option to extend the lease to ninety-five years.

Title deeds in respect of the above are in the names of GIDC and MIDC respectively.

2. Goodwill represents the difference between the net assets of erstwhile Virtual Computers Private Limited taken over pursuant to scheme of amalgamation and the cost of shares held by the Company in the erstwhile Virtual Computers Private Limited.

3. Buildings comprises of a building given on operating lease for a period of 12 months.

NOTE 24: CONTINGENT LIABILITIES AND COMMITMENTS as at as at Contingent liabilities in respect of 31 st 31 st March 2012 March 2012

a. Show cause notices received from customs authorities relating to imports 709,043 242,015,325 made in earlier years. The Company has filed replies to these notices.

b. Disputed demands of custom duty pending before the Customs, 2,414,221 2,414,221 Excise and Service Tax Appellate Tribunal (CESTAT)

c. Disputed penalty demands of Custom Authorities with respect to (b) above, 2,412,221 2,412,221 pending before theCustoms, Excise and Service Tax Appellate Tribunal (CESTAT)

d. Disputed demand of excise duty in connection with valuation of products 38,715,672 38,715,672 manufactured by the Company pending before CESTAT

e. Disputed penalty demands of Excise Authorities with regard to (d) above, 39,517,713 39,517,713 pending before theCESTAT

f. Custom duty paid under protest The raw material / trading material / software imported by the Company are subjected 4,487,728 4,487,728 to different rates of customs duty based on classification under respective Tariff Head.

The Customs department has objected to the classifications adopted by the Company for certain items and has demanded additional duty for the same.

The Company has paid such differential duty under protest, which is included under Long term loans and advances in Note 12, pending resolution of the dispute.

g. Disputed demand of Income-tax for Assessment Year 2008-09 pending before 40,297,980 - Commissioner of Income-taxax (Appeals), Panaji.

h. SEBI had filed a criminal case, in the Metropolitan Magistrate court, in June, 2006 under Section 77A(4) r/w Section 621 for alleged contravention of provisions of the Companies Act, 1956 for failing to complete the process of buy back of shares as provided under the said section. The Company had filed an application in the Hon'ble High Court of Bombay and the Hon'ble High Court has passed Orders staying the proceedings in the Metropolitan Magistrate court. The stay is continuing.

The Company does not expect any liability on this account at this stage.

Capital commitments

Estimated amount of contracts remaining to be executed on capital account 14,246,950 231,960 and not provided for

VIII. The company has made contribution of Rs. 1,500,000/- for the FY 2012-13.

IX. The plan assets are managed by the Gratuity trust formed by the Company. The management of funds is entrusted with Life Insurance Corporation of India. The details of investments made by them are not available.

B The disclosure as required under AS-15 regarding the Company's defined contribution plans is as follows: i) Contribution to provident fund Rs. 4,062,473/- (previous year Rs. 3,224,639/-).

NOTE 28: SEGMENT INFORMATION

(A) Segment information for primary reporting (by business segment)

The Company has its operations in developing, manufacturing, marketing, distributing and servicing networking products. These networking products are sold to distributors, Original Equipment Manufacturers (OEM's) and System Integrators (SI). The primary reporting segment for the Company, therefore, is the business segment, viz., networking products.

(B) Segment information for secondary segment reporting (by geographical segments)

The secondary reporting segment for the Company is the geographical segment based on location of customers, which is as follows:

i) Domestic

ii) Export

NOTE 29: LEASE TRANSACTIONS

Operating leases

The Company has taken premises / vehicles on cancellable operating lease basis. The tenure of the agreement ranges from 33 / 60 months. There are no renewal or purchase options and escalation clauses in these agreements.

The lease rentals for the year charged to revenue are Rs. 645,740/- (previous year Rs. 1,138,304/-)

NOTE 33: DISCONTINUING OPERATIONS

The Board of Directors of the Company at its meeting held on 31st March, 2011 approved the sale of the Structured cabling business comprising of manufacture, sale and marketing of structured cabling products carried under the brand name "DIGILINK", hereinafter referred to as ("Digilink Business"), to Schneider Electric India Private Limited ("Schneider"). The Digilink Business together with its respective assets and liabilities, was transferred to Schneider on a 'slump sale' basis as a going concern, for a cash consideration of Rs. 5,030,000,000/- to be adjusted for any net working capital changes as on the closing date.

In this connection, the Company had signed the Business Transfer Agreement dated 31st March, 2011 and had obtained the shareholders approval through postal ballot on 11th May, 2011. The consideration was received on 13th May, 2011 , the Closing date. The balance consideration on account of net working capital adjustments was received during the quarter ending 30th September, 2011. The profit on account of the above transaction is disclosed as an exceptional item.

Accordingly, the 'DIGILINK' business is considered as a 'discontinued operation' in terms of Accounting Standard 24 on 'Discontinued Operations' (AS 24).

Other than the above, the Company has not remitted any amount in foreign currencies on account of dividends during the year and does not have information as to the extent to which remittances, if any, in foreign currencies on account of dividend have been made by non-resident shareholders.

i. The Company had instituted "Employee Stock Option Plan" (ESOP) for its employees in the year 2000. To administer the ESOP the Company had created a Trust viz. D-Link (India) Limited ESOP Trust (the Trust) in September 2000. The said Trust was allotted 6,50,000 Equity Shares of Rs. 2/- each. In terms of the said ESOP, the Trust had granted options to the employees in the form of Equity Shares which vest at the rate of 25% on each successive anniversary of the grant date. The Trust had been renamed as Smartlink Network Systems Limited ESOP Trust. The accounting of ESOP's granted by the Trust to the employees of the Company was done in accordance with The SEBI (ESOS and ESPS) Guidelines, 1999. These Guidelines were amended in July 2004 for all accounting periods commencing after 30th June, 2003. The amendment required the Company to prepare its accounts as if the ESOS/ESPS scheme was administered by itself (rather than by the Trust). The Company had accordingly considered all the options granted by the Trust on or after 1st April 2004. The difference between the Market price of the share (intrinsic value) and the exercise price of the option, on the date of grant, had been amortised over the vesting period. The annual amortization was included under "Employee benefit expenses" and the cumulative charge disclosed in the Balance sheet under "Employee stock options outstanding" There are no further options outstanding to be granted.

j. Excise duty collected from customers against sales has been disclosed as a deduction from turnover. The excise duty related to the difference between the opening and closing stock of finished goods is disclosed separately in the profit and loss account as "Excise Duty".

k. Remuneration to an Executive chairman aggregating to Rs. 3,761,250/- initially paid which is in excess of limits specified in Schedue XIII of the Companies Act, 1956 is being recovered from the said Director and is accordingly disclosed in Note 17 Short Term Loans and Advances. The said amount is recovered subsequent to the year end.

l. Previous year's figures have been regrouped, wherever necessary, to correspond with those of the current year.


Mar 31, 2010

1. Pursuant to the Scheme of Arrangement (the Scheme) entered into by the Company with Smartlink Network Systems Limited (Smartlink) (now known as D-Link (India) Limited), the Marketing Business of the Company, consisting of marketing and selling of "D-Link" branded active networking products etc. was transferred to Smartlink with effect from 1st April, 2008, the Appointed Date.

The said Scheme, under section 391 to 394 of the Companies Act, 1956, was approved by the Honble High Court of Judicature of Bombay at Goa, vide its Order dated 27th February, 2009.

The Scheme provided, inter alia, the transfer of the Marketing Business of the Company on a going concern basis to Smartlink in consideration for which, each shareholder in the Company whose name appeared in the Register of Members of the Company on the record date, received one fully-paid Equity Share, of the face value Rs. 21- each in Smartlink, aggregating to 30,004,850 Equity Shares of Rs. 21- each.

The Scheme became effective upon satisfaction of the conditions set out in the Scheme therein, including receipt of necessary approvals from Government Authorities and accordingly the Effective Date of the Scheme was 10th June, 2009.

In accordance with the Scheme, the following have been given effect to in the books of, account of the Company during the previous year:

The Company carried on the business of Smartlink for the period from the Appointed Date to the Effective Date, in trust as per the requirements of the Scheme. Accordingly, the amount payable to Smartlink as at 31st March 2009 aggregated to Rs. 13,803,065/-, which was net of investments aggregating to Rs. 244,223,688/- (including dividend earned there on Rs. 2,784,568/-) transferred to Smartlink in connection with the said business.

Further as an integral part of the Scheme, the foreign promoters of the Company viz. D-Link Holding Mauritius Inc. swapped 7,216,166 Equity Shares of Rs. 21- each in Smartlink held by Mr. K. R. Naik and his family members, the Indian promoters of the Company, in exchange for: (i) 10,898,497 Equity shares of Rs. 21- each held by D-Link Holding Mauritius Inc. in the Company; and (ii) the payment of an additional cash consideration of USD 5,000,000 by D-Link Holding Mauritius to Mr. K. R. Naik and his family members. Upon the swap of shares as above, and on receipt of necessary approvals, as per the Scheme, the Company was re-named as "Smartlink Network Systems Limited" and Smartlink was re-named as "D-Link (India) Limited".

VIII. The Company has contributed Rs.2,000,000/- for the financial year 2010-11 (Previous year Nil).

IX. The plan assets are managed by the Gratuity trust formed by the Company. The management of funds is entrusted with Life Insurance Corporation of India. The details of investments made by them are not available.

B. The disclosure as required under AS-15 regarding the Companys defined contribution plans is as follows: i) Contribution to provident fund Rs. 4,565,723/- (previous year Rs. 4,601,139/-).

:. A The Company had sold certain products in earlier years to Cerebra Integrated Technologies Limited ("Cerebra"), situated at Bangalore for a sum of Rs. 6,720,000/-. Cerebra had filed for financial restructuring with the Board for Industrial and Financial Reconstruction ("BIFR"). As per the final order of the BIFR the Company received 160,000 Equity Shares of Cerebra in lieu of receivable of Rs. 3,360,000/-. The Company had provided Rs. 2,315,200/- for dimunition in value of this investment having regard to the market price of the Equity Shares of Cerebra in the previous year. During the current year, the Company has sold the entire investment for a consideration of Rs. 1,662,116/-. The resultant loss of Rs. 1,697,884/- has been disclosed under "Manufacturing and other expenses" in Schedule 13.

2. Lease transactions

Operating leases

The Company has taken premises / vehicles on cancellable operating lease basis. The tenure of the agreement ranges from 33/60 months. There are no renewal or purchase options and escalation clauses in these agreements.

The lease rentals for the year charged to revenue are Rs. 1,345,178/- (previous year Rs. 1,290,987/-)

Notes:

1 There are no provisions for doubtful debts or amounts written off or written back for debts due from or due to related parties.

2 Figures in brackets are those of the previous year.

3 The disclosures are pertaining to previous year only. 15. Segment information

(A) Segment information for primary reporting (by business segment)

The Company has its operations in developing, manufacturing, marketing, distributing and servicing networking products. These networking products are sold to distributors, Original Equipment Manufacturers (OEMs) and System Integrators (SI). The primary reporting segment for the Company, therefore, is the business segment, viz., networking products.

(B) Segment information for secondary segment reporting (by geographical segments)

The secondary reporting segment for the Company is the geographical segment based on location of customers, which is as follows: i) Domestic ii) Export

3. Excise duty collected from customers against sales has been disclosed as a deduction from turnover . The excise duty related to the difference between the opening and closing stock of finished goods is disclosed separately in the profit and loss account as "Excise Duty".

4. Hitherto, the Company followed the policy of providing depreciation on Plant and machinery, Electrical installations, Air conditioners, Computer software, Furniture fittings and office equipment in accordance with Schedule XIV of the Companies Act, 1956. During the year, the Company, in order to have more appropriate presentation of the fixed assets and having regard to the extent of usage of these assets and their estimated useful life, has changed this policy and now follows the policy of depreciating these assets over their estimated useful life. As the result of the change in the method of providing for depreciation, the charge for the year is higher by Rs.65,998,936/- and the profit for the year is lower by the like amount.

5. Cash Credit account with the bank is secured by hypothecation of movable assets, stock, stores, work-in- process, book debts both present and future.

6. The Company had instituted "Employee Stock Option Plan" (ESOP) for its employees in the year 2000. To administer the ESOP the Company had created a Trust viz. D-Link (India) Limited ESOP Trust (the Trust) in September 2000. The said Trust was allotted 6,50,000 Equity Shares of Rs 21- each. In terms of the said ESOP, the Trust has been granting options to the employees in the form of Equity Shares which vest at the rate of 25% on each successive anniversary of the grant date.

During the current year, ESOP Compensation Committee has re-priced the unexercised options granted to employees to compensate for reduction in the intrinsic value of the company pursuant to the Scheme of arrangement with D-link (India) Limited.

The accounting of ESOPs granted by the Trust to the employees of the Company is done in accordance with The SEBI (ESOS and ESPS) Guidelines, 1999. These Guidelines were amended in July 2004 for all accounting periods commencing after 30th June 2003. The amendment required the Company to prepare its accounts as if the ESOS/ESPS scheme was administered by itself (rather than by the Trust). The Company has accordingly considered all the options granted by the Trust on or after 1st April 2004. The difference between the Market price of the share (intrinsic value) and the exercise price of the option, on the date of grant, is being amortised over the vesting period. The annual amortization is included under "Payments to and Provisions for Employees" in Schedule-14 and the cumulative charge is disclosed in the Balance sheet under "Employee stock options outstanding"

 
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