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Notes to Accounts of Sona Koyo Steering Systems Ltd.

Mar 31, 2015

NOTE 1 - SHARE CAPITAL

a) Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs. 1/- per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the board of directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

NOTE 2 - EMPLOYEES BENEFIT

Define Benefit Plans:

i) a) The Company operates post retirement defined benefit plan for retirement gratuity, which is funded. The Company through the Trust has taken group gratuity policy of Life Insurance Corporation of India Gratuity Scheme.

b) The Company makes contribution for certain employees to the Sona Koyo Steering Systems Ltd. - Employees Provident Fund Trust ('The Trust') which is a defined benefit plan. The Company contributed Rs. 35.21 lacs (previous year Rs. 27.84 lacs) during the year to the Trust.

The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate. The Company's obligation in this regard is actuarially determined and provided for if the circumstances indicate that the Trust may not be able to generate adequate returns to cover the interest rates notified by the Government.

The guidance note on implementing AS 15 Employee Benefits (revised 2005), issued by Accounting Standards Board (ASB) of The institute of Chartered Accountants of India, states that benefits involving employer established provident fund trust, which require interest shortfall to be compensated by the employer is required to be considered as defined benefits plans. The actuary has provided a valuation and based on the below mentioned assumptions, determined that there is no short fall as at March 31, 2015.

NOTE 3 - LEASES

(a) Operating lease : Company as lessee

(i) The Company has taken various residential premises under operating lease on lease and license agreements. These are cancellable; have a term of 11 to 36 months. The lease arrangements are generally renewable on the expiry of lease period subject to mutual agreement. The company has taken vehicles for its employees under operating lease agreement have a term of 48 months.Lease payments are recognised in the statement of profit & loss in the year incurred.

Period covered

NOTE 4 - CONTINGENT LIABILITIES

I) Claims against the Company not acknowledged as debt on account of :

a) Excise duty

i) Show cause notices received and 2000-01 to 2006-07 pending with adjudication authority

ii) Cases pending before appellate 2007-08 to 2011-12 authorities in respect of which the company has filed appeals

Total

b) Service Tax

i) Show cause notices received and 2004-05 to 2013-14 pending with adjudication authority

ii) Cases pending before appellate 2005-06 to 2014-15 authorities in respect of which the Company has filed appeals/ show cause notices

Total

c) VAT Haryana

i) Local area development tax (LADT) 2007-08 to 2014-15 levied by Assessing Authority Gurgaon. Writ petition civil pending with Supreme Court.

d) Customs Duty

i) Show cause notice received from 2012-13 adjudication authority (DGFT) for advance license

ii) Case of valuation of goods imported from 2013-14 to 2014-15 related party with special valuation branch under Custom Act includes penalty wherever indicated in the order and interest calculated up to 31-03-2015

e) Income Tax

i) Cases pending before appellate 2011-12 to 2013-14 authorities in respect of which the Company has filed appeal

f) Property Tax

Municipal Corporation Gurgaon Property Tax Arrears before 2010-11

Current year* Previous year (Rs./ Lacs) (Rs. / Lacs)

a) Excise duty

i) Show cause notices received and 1546.40 1608.58 pending with adjudication authority

ii) Cases pending before appellate 371.86 84.52 authorities in respect of which the company has filed appeals

1918.26 1693.10

b) Service Tax

i) Show cause notices received and 53.15 114.09 pending with adjudication authority

ii) Cases pending before appellate 290.76 228.81 authorities in respect of which the Company has filed appeals/ show cause notices

343.90 342.90

c) VAT Haryana

i) Local area development tax (LADT) 963.09 809.86 levied by Assessing Authority Gurgaon. Writ petition civil pending with Supreme Court.

d) Customs Duty

i) Show cause notice received from 6.74 6.25 adjudication authority (DGFT) for advance license

ii) Case of valuation of goods imported fro 160.24 77.20 related party with special valuation branch under Custom Act includes penalty wherever indicated in the order and interest calculated up to 31-03-2015

e) Income Tax

i) Cases pending before appellate 7.94 - authorities in respect of which the Company has filed appeal

f) Property Tax

Municipal Corporation Gurgaon Property Tax 19.00 -

The Company has been advised that the above demands are likely to be either deleted or substantially reduced and accordingly no provision is consider necessary.

II) Customer bills discounted 2430.69 300.00

III) Letter of credit opened by banks for purchase of inventory / capital goods 213.30 397.57

IV) The Government of West Bengal is in appeal in Hon'ble Supreme Court for validity of the Singur Land Rehabilitation And Development Act, 2011. Pending finalization of the case, the Company has not made any provision for the impairment of its value of land at Singur.

NOTE 5- DEFERRAL / CAPITALIZATION OF EXCHANGE DIFFERENCES

MCA vide its circular dated 29th December, 2011 and 9th August, 2012 amended AS11, The Effects of changes in foreign exchange rates, to allow companies deferral / capitalization of exchange differences arising on long term foreign currency monetary items.

NOTE 40 - The amount of excise duty disclosed as deduction from turnover is the total excise duty for the year except excise duty related to difference between the closing stock and opening stock and excise duty paid but not recovered, which has been disclosed as excise duty expense in "Changes in inventories of finished goods, work-in-progress and stock-in-trade excise duty on Increase/ (decrease) in finished goods" under note 20 annexed and forming part of statement of profit & loss.

NOTE 6 - Raw material and components consumed are net of Rs. 1479.03 lacs (previous year Rs. 2184.06 lacs) being the value of dispatches made to vendors for job work.

NOTE 7(a) - A provision is recognized for expected warranty claims on products sold during the last two to three years, based on past experience of the level of returns. It is expected that significant portion of these cost will be incurred in the next financial year and all will have been incurred within three years after reporting date. Assumptions used to calculate the provision for warranties were based on current sales level and current information available about returns based on the three year warranty period for products sold. The table below gives information about movement in warranty provisions.

NOTE 8 - AMALGAMATION OF WHOLLY OWNED SUBSIDIARY COMPANY

The Hon'ble High Court of Delhi and Punjab & Haryana sanctioned the scheme of amalgamation of Sona Stampings Limited with the Company with an effective date of April 1, 2013. Sona Stampings Ltd. was a wholly owned subsidiary of the Company and was engaged in manufacture and sale of sheet metal stampings, welded assemblies and moulds for automotive industry. The merger of Sona Stampings Ltd. into the Company has been accounted for under "pooling of interest" method refered to in Accounting Standard 14, Accounting for Amalgmation (AS-14).

All the assets and liabilities of Sona Stampings Ltd. on and after the appointed date and prior to the effective date have been transferred to the Company on a going concern basis. As Sona Stampings Ltd. was a wholly owned subsidiary of the Company, no shares have been alloted to the shareholders upon the scheme becoming effective.

NOTE 9 - REMUNERATION TO MANAGERIAL PERSONNEL

Remuneration paid to Vice Chairman & Managing Director during part of the financial year 2014-2015, in excess of the limit prescribed under Section 197 of the Companies Act, 2013 of Rs. 18.16 lacs, due to inadequacy of profits, was recovered from him.

After obtaining approval from its Board of Directors and Shareholders, the Company proposes to apply to Central Government as per applicable provisions of Companies Act, 2013 for payment of the aforesaid remuneration as "Minimum Remuneration" for the year 2014-2015.This remuneration will be paid and accounted in the year of the approval, if any, is granted.

NOTE 10 - The Company has a process whereby periodically all long term contracts including derivative contracts are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law/accounting standards for material foreseeable losses on such long term contracts including derivative contracts has been made in the books of accounts.

1. Figures in bracket are in respect of the previous year

2. * Remuneration includes director commission, contribution to superannuation and provident fund

Name of related party & description of relationship is as below:

1. The individual/entity exercise 1. Dr. Surinder Kapur control over the Company

2. The entity having substantial 1. JTEKT Corporation interest in the Company

2. Sona Autocomp Holding Ltd.

3. Others (Significant Influence) 1. Sona BLW Precision Forgings Ltd.

2. Mahindra Sona Ltd.

3. Maruti Suzuki India Ltd.

4. Sona e-design & Technologies Ltd

5. Pune Heat Treat Pvt Ltd.

6. Kapur Properties & Investment

7. Mandira Marketing Ltd.

8. Koyo Bearings India Pvt. Ltd.

9. Sona BLW Prazisionsschmiede GmbH

10.Sona BLW Precision Forge Inc.

11.Sona Koyo Steering Systems Ltd EPF Trust

12.Sona Charitable Trust

4. Subsidiaries 1. Sona Fuji Kiko Automotive Ltd.

2. JTEKT Sona Automotive India Ltd.

5. Key Management Personnel 1. Dr. Surinder Kapur - (Transactions Disclosed Under Category (1) Above)

2. Mr. Sunjay Kapur

3. Mr. Kiyozumi Kamiki

4. Mr. Sudhir Chopra

5. Mr. Rajiv Chanana (w.e.f. 30.05.2014)

6. Relative to Key Management 1. Mr. J.M. Kapur Personnel

7. Associates 1.Sona Skill Development Centre Ltd

NOTE 11 - Previous year's figures have been regrouped/reclassified, wherever necessary.




Mar 31, 2014

1. Indian rupee loans from financial institution include:

Working capital term loan of Rs. 132.76 lacs (previous year Nil) from financial institution is secured by way of hypothecation on all moveable fixed assets of transferor company acquired under direct credit scheme of SIDBI and whole of the current assets of transferor company both present and future of the Company.The term loan is further secured by way of equitable mortgage in favour of SIDBI of all the immovable properties of the transferor company. Further, the transferee company prior to merger has issued letter of comfort to bank for the aforesaid loan. The rate of interest on aforesaid loan is linked to prime lending rate of financial institution

2. Indian rupee loan from NBFC include:

Term loan Rs. 291.65 lacs (previous year Rs. 486.08 lacs) is secured by way of second charge on entire assets of the Company situated at Sanand, Gujarat to be purchased or constructed out of said term loan. The rate of interest on aforesaid loan is linked to NBFC''s prime lending rate (PLR).

3. Foreign currency loans from banks include :

(a) Foreign currency loan of USD 2.5 millions equivalent to Rs. 1370.00 lacs (previous year USD 3.5 millions equivalent toRs. 1918.02 lacs) from Standard Chartered Bank is secured by first pari-passu charge on movable and immovable fixed assets except assets exclusively charged to other banks. The loan carries interest @ LIBOR plus 3% and is fully hedged.

(b) Foreign currency loan of USD 3.75 million equivalent toRs. 1884.38 lacs (previous year USD 5 million equivalent to Rs. 2512.50 lacs) from Standard Chartered Bank is secured by first pari-passu charge on movable and immovable fixed assets except assets exclusively charged to other banks. The loan carries interest @ LIBOR plus 3.5% and is fully hedged.

(c) Foreign currency loan of USD 6 million equivalent toRs.3598.80 lacs (previous year Nil) from Standard Chartered Bank is secured by first pari-passu charge on movable and immovable fixed assets except assets exclusively charged to other banks. The loan carries interest @ LIBOR plus 3.5% and is fully hedged.

(d) FCNR loan of USD 3.81 million equivalent to Rs. 2287.48 lacs (previous year Nil) from State Bank of India is secured by first pari passu charge on movable and immovable fixed assets except assets exclusively charged to other banks & further secured by way of second charge on current assets, on pari-passu basis. The loan carries interest @ LIBOR plus 3.25% and is fully hedged.

Define Benefit Plans:

i) a) The Company operates post retirement defined benefit plan for retirement gratuity, which is funded. The Company through the Trust has taken group gratuity policy of Life insurance Corporation of India Gratuity Scheme.

b) The Company makes contribution for certain employees to the Sona Koyo Steering Systems Ltd. - Employees Provident Fund Trust (''The Trust'') which is a defined benefit plan.The Company contributed Rs. 27.84 lacs (previous yearRs. 38.71 lacs) during the year to the Trust.

The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate. The Company''s obligation in this regard is actuarially determined and provided for if the circumstances indicate that the Trust may not be able to generate adequate returns to cover the interest rates notified by the Government

The guidance note on implementing AS 15 Employee Benefits (revised 2005), issued by Accounting Standards Board (ASB) of The institute of Chartered Accountants of India, states that benefits involving employer established provident fund trust, which require interest shortfall to be compensated by the employer is required to be considered as defined benefits plans. The actuary has provided a valuation and based on the below mentioned assumptions, determined that there is no short fall as at March 31, 2014.

NOTE 4 - LEASES

(a) Operating jease: Company as lessee

The Company has taken various residential,office premises and vehicle under operating lease on lease and license agreements. These are cancellable; have a term of 11 months and five years The agreements for premises cannot be terminated by either party before the expiry of one year. Agreements of leasing of vehicles can generally be terminated early by payment of nominal fees. The lease arrangements are generally renewable on the expiry of leaser period subject to mutual agreement. Lease payments are recognised in the statement of profit & loss in the year incurred.

Period covered Current year* Previous year (Rs./ Lacs) (Rs./ Lacs)

NOTE 5 - CONTINGENT LIABILITIES

I) Claims against the Company not acknowledged as debt on account of :

a) Excise duty

i) Show cause notice received and pending with 2004-05 to 2007-08 1608.58 1529.44 Adjudication Authority & 2012-13

ii) Cases pending before Appellate authorities in 2009-10 to 2010-11 84.52 3.71 respect of which the company has filed appeals

Total 1693.10 1533.15

b) Service Tax

i) Show cause notice received and pending with 2008-09 to 2013-14 114.09 30.65 Adjudication Authority

ii) Cases pending before Appellate authorities in 2009-10 to 2011-12 228.81 261.73 respect of which the company has filed appeals/ show cause notices

Total 342.90 292.38

c) VAT Haryana

i) Local area development tax (LADT) levied by 2007-08 to 2013-14 809.86 636.15

Assessing Authority Gurgaon. Writ petition civil pending with Supreme Court.

NOTE 6 - The amount of excise duty disclosed as deduction from turnover is the total excise duty for the year except excise duty related to difference between the closing stock and opening stock and excise duty paid but not recovered, which has been disclosed as excise duty expense in "Changes in inventories of finished goods, work-in-progress and stock-in-trade- excise duty on Increase/(decrease) in finished goods" under note 20 annexed and forming part of statement of profit & loss.

NOTE 7 - Raw material and components consumed are net ofRs. 2184.06 lacs (previous yearRs. 2559.19 lacs) being the value of dispatches made to vendors for job work.

NOTE 8 - A provision is recognized for expected warranty claims on products sold during the last two to three years, based on past experience of the level of returns. It is expected that significant portion of these costs will be incurred in the next financial year and all will have been incurred within three years after reporting date. Assumptions used to calculate the provision for warranties were based on current sales level and current information available about returns based on the three year warranty period for products sold. The table below gives information about movement in warranty provisions.

NOTE 9 - AMALGAMATION OF WHOLLY OWNED SUBSIDIARY COMPANY

a) Pursuant to the Scheme of Amalgamation(''the Scheme'') of erstwhile Sona Stampings Limited with the Company under Sections 391 to 394 of the Companies Act, 1956 sanctioned by Hon''ble High Courts of Delhi and Punjab & Haryana on 16th April, 2014 and 28th April, 2014 respectively, entire business and all assets and liabilities of Sona Stampings Limited were transferred and vested in the Company effective from April 01, 2013. Accordingly the Scheme has been given effect to in these financial statements.

Sona Stampings Limited was engaged in manufature and sale of sheet metal stampings, welded assemblies and modules for automotive industry.

b) The amalgamation has been accounted for under the "Pooling of Interest" method as precribed by the Accounting Standard 14 "Accounting for Amalgamations" notified under the Companies (Accounting Standard) Rules, 2006 (as amended under Section 211(3C) of Companies Act, 1956. Accordingly, the accounting treatment has been given as under:-

i) The assets and liabilities as at April 01, 2013 were incorporated in the financial statement of the Company at its book value.

ii) Debit balance in the statement of profit & loss of Sona Stampings Limited as at April 01, 2013 amounting to Rs. 978.90 lacs was adjusted in capital redemption reserve account forRs. 120.66 lacs and the balance Rs. 858.24 lacs in securities premium account.

iii) 2,02,778 equity shares ofRs. 100/- each fully paid in Sona Stampings Limited, held as investment by the Company stands cancelled and difference between the book value and face value of such shares amounting to Rs. 434.38 lacs was adjusted against the securities premium account of the Company.

NOTE 10 - REMUNERATION TO MANAGERIAL PERSONNEL

Remuneration paid to the managerial personnel consisting of Chairman, Vice Chairman & Managing Director and Deputy Managing Director, during the financial year 2013-2014, though approved by the shareholders, due to inadequacy of profits has exceeded the limits prescribed under Section 198 and 309 read with Schedule XIII of the Companies Act, 1956 byRs. 177.90 lacs for the year. In addition to excess payment, the Company has also made a provision ofRs. 72.80 lacs for the year, to be paid to managerial personnel after requisite approvals.

After obtaining approval from its Board of Directors, the Company has applied to Central Government on 30th January, 2014 for its approval under Section 269 and 309 and other applicable provisions of Companies Act, 1956 for payment of the aforesaid remuneration as "Minimum Remuneration" for the year 2013-2014 and the Company is also seeking the required shareholders'' approval.

NOTE 11 - Previous year''s figures have been regrouped/reclassified, wherever necessary.


Mar 31, 2013

NOTE 1 - LEASES

(a) Operating lease : Company as lessee

The Company has taken various residential,office premises and vehicle under operating lease on lease and license agreements. These are cancellable; have a term of 11 months and five years. The agreements for premises cannot be terminated by either party before the expiry of one year. Agreements for leasing of vehicles can generally be terminated early by payment of nominal fees. The lease arrangements are generally renewable on the expiry of lease period subject to mutual agreement. Lease payments are recognised in the statement of profit & loss in the year incurred.

The Company has taken vechicles for its employees under operating lease agreement. An amount of Rs. 15.88 lacs (previous year Rs. 22.43 lacs) is recognised in the statement of profit & loss for the year ended March 31, 2013. The future minimum lease payments are as follows:

(b) Operating lease : Company as lessor*

The Company has given part of its factory building at Chennai under operating lease on lease and licence agreement for the period of four years. The agreement for premises can be terminated by either party early by payment of compensation fees. The lease arrangement is renewable on the expiry of lease period subject to mutual agreement. Lease receipts of Rs. 36.99 lacs (previous year Rs. 35.23 lacs) are recognised in the statement of profit & loss as per terms of agreement. The future lease receipts are as follows:

NOTE 2 - SEGMENT REPORTING

The Company is primarily engaged in the business of auto components of four wheelers, which are governed by the same set of risk and returns, and hence there is only one primary segment. The Company operates mainly to the needs-- of domestic market and export turnover is less than ten percent of thejtotal turnover and secondary geographical segments.

NOTE 3 - FORWARD CONTRACTS OUTSTANDING AND UN-HEDGED FOREIGN CURRENCIES EXPOSURES ARE AS GIVEN BELOW

The Company uses foreign exchange forward contracts to hedge its exposure to movements in foreign exchange rates. These foreign exchange contracts are not used for trading or speculation purposes.

NOTE 4 - DEFERRAL / CAPITALIZATION OF EXCHANGE DIFFERENCES

The Ministry of Corporate Affairs (MCA) had issued an amendment dated 29th December, 2011 to AS 11, The effects of changes in foreign exchange rates, to allow companies deferral / capitalization of exchange differences arising on long-term foreign currency monetary items. The MCA has further issued an amendment dated 9th August, 2012 on the treatment of borrowing cost, clarifying that the exchange difference arising on long term foreign currency monetary items, to the extent of borrowing cost, earlier charged off can be capitalised.

The Company, during the year has capitalized an exchange loss arising on long term foreign currency loans to depreciable fixed assets amounting to Rs. 158.47 lacs (previous year Rs. 192.74 lacs).

NOTE 5 - The amount of excise duty disclosed as deduction from turnover is the total excise duty for the year except excise duty related to difference between the closing stock and opening stock and excise duty paid but not recovered, which has been disclosed as excise duty expense in "Changes in inventories of finished goods, work-in-progress and stock-in-trade- excise duty on Increase/(decrease) in finished goods" under note 20 annexed and forming part of statement of profit & loss.

NOTE 6 - Raw material and components consumed are net of Rs. 2184.06 lacs (previous year Rs. 2559.19 lacs) being the value of dispatches made to vendors for job work.

NOTE 7 - A provision is recognized for expected warranty claims on products sold during the last two to three years, based on past experience of the level of returns. It is expected that significant portion of these cost will be incurred in the next financial year and all will have been incurred within three years after reporting date. Assumptions used to calculate the provision for warranties were based on current sales level and current information available about returns based on the three year warranty period for products sold. The table below gives information about movement in warranty provisions.

NOTE 8 - Previous year''s figures have been regrouped/reclassified, wherever necessary.


Mar 31, 2012

NOTE 1 - SHARE CAPITAL

b) Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs. 1/- per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the board of directors is subject to the approval of the shareholders in the ensuing annual general meeting.

NOTE 2 - LONG TERM BORROWINGS

1. Indian rupee loans from banks include:

(a) Rupee term loans of Rs. 14938.47 lacs (previous year Rs. 16414.35 lacs) are secured by first pari-passu charge over the entire movable and immovable fixed assets of the Company, both present and future, except the assets exclusively charged to Standard Chartered Bank for Rs. nil (previous year Rs. 388.89 lacs). Loans to the extent of Rs. 2325.00 lacs (previous year Rs. 1995.00 lacs) are further secured by way of second charge on current assets, on pari passu basis. The rate of interest on aforesaid loans are linked to the specific banks' Prime Lending Rate (PLR).

(b) Rupees term loan of Rs. 1750.00 lacs (previous year Rs. 3000.00 lacs) from State Bank of India is secured by way of first pari-passu charge on current assets and second parri-passu charge on movable and immovable fixed assets of the Company. The loan is further secured by way of exclusive mortgage on land situated at Plot No. 19, Dharuhera Industrial Area, Phase II, District Rewari (Haryana). The rate of interest on aforesaid loan is linked to bank's Prime Lending Rate (PLR).

(c) Rupee term Loan of Rs. 114.93 lacs (previous year Rs. 63.30 lacs) from Allahabad Bank, secured by way of exclusive charge on the vechicles financed out of the said term loan. The rate of interest on aforesaid loan is linked to bank's Prime Lending Rate (PLR).

2. Indian rupee loan from NBFC include :

Term loan of Rs. 680.52 lacs (previous year Rs. 874.95 lacs) is secured by way of second charge on entire assets of the Company situated at Sanand, Gujarat to be purchased or constructed out of said term loan. The rate of interest on aforesaid loan is linked to NBFC's Prime Lending Rate (PLR).

3. Foreign currency loans from banks include :

Foreign currency loan of USD 4 million equivalent to Rs. 2046.00 lacs (previous year Rs. nil) from Standard Chartered Bank is secured by first charge on movable and immovable fixed assets except assets exclusively charged to other banks. The loan carries interest @ LIBOR plus 3%.

Foreign currency loan of USD 5 million equivalent to Rs. 2512.50 lacs (previous year Rs. nil) from Standard Chartered Bank on fully hedged basis is secured by first charge on movable and immovable fixed assets except assets exclusively charged to other banks. The loan carries interest @ 10.28% p.a.

The estimates of future salary increases, considered in actuarial valuation, takes into account inflation, seniority, promotions and other relevant factors including supply and demand in the employment market. The above information is certified by the actuarial valuer.

The discount rate is based on the prevailing market yield of Govt. bonds as at the date of valuation.

Expected return on asset - The expected return on assets over the accounting period is based on an assumed rate of return.

iv) Investment details of plan assets :

The gratuity trust has taken up a group policy with Life Insurance Corporation of India.

NOTE 3 - LEASES

(a) Operating lease: Company as lessee

The Company has taken various residential, office premises and vehicles under operating lease on lease and license agreements. These are cancellable; have a term of 11 months and five years. The agreements for premises cannot be terminated by either party before the expiry of one year. Agreements for leasing of vehicles can generally be terminated early by payment of nominal fees. The lease arrangements are generally renewable on the expiry of lease period subject to mutual agreement. Lease payments are recognised in the statement of profit and loss in the year incurred.

NOTE 4 - SEGMENT REPORTING

The Company is primarily engaged in the business of auto components of four wheelers, which are governed by the same set of risk and returns, and hence there is only one primary segment. The Company operates mainly to the needs of domestic market and export turnover is less than ten percent of the total turnover and hence there are no reportable secondary geographical segments.

NOTE 5 - CONTINGENT LIABILITIES

Current year Previous year (Rs. / Lacs) (Rs. / Lacs)

I) Claims against the Company not acknowledged as debt on account of :

a) Excise duty 1981.78 1322.54

b) Service tax 267.06 341.88

c) Local Area Development Tax 435.72 209.16

d) Income tax - matters in appeal 30.53 56.81

e) Warranties/customers - 67.25

II) Customer bills discounted 1406.00 910.00

III) Letter of credit opened by banks for purchase of inventory /capital goods 1243.31 867.00

IV) The Company has filed a writ petition with the Hon'ble High Court of Calcutta for injunction restraining the Govt. of West Bengal for acting in terms of the Singur Land Rehabilitation And Development Act, 2011, which is being heard by a Divisional Bench alongwith the appeals of Tata Motors Ltd. and their other vendors. Pending finalization of the case, the Company has not made any provision for the impairment of value of land.

V) During the year under audit, search and seizure operation were carried out by Revenue Authorities on 29th November, 2011. However neither any unexplained money, bullion or valuables were found nor there was any seizure. Additional tax liability, if any, shall be accounted for on creation of demand against the Company.

NOTE 6 - DEFERRAL / CAPITALIZATION OF EXCHANGE DIFFERENCES

The Ministry of Corporate Affairs (MCA) has issued the amendment dated 29th December, 2011 to AS 11. The effects of changes in foreign exchange rates, to allow companies deferral / capitalization of exchange differences arising on long- term foreign currency monetary items.

In accordance with the amendment to AS 11, the Company has capitalized the exchange loss to depreciable fixed assets arising on long-term foreign currency loan, amounting to Rs.192.74 lacs (previous year nil) for the year ended 31st March, 2012. The Company does not have any other long-term foreign currency monetary items. Hence, the amount of exchange loss deferred in the "Foreign currency monetary item translation difference account" is nil.

NOTE 7 - The amount of excise duty disclosed as deduction from turnover is the total excise duty for the year except excise duty related to difference between the closing stock and opening stock and excise duty paid but not recovered, which has been disclosed as excise duty expense in "Changes in inventories of finished goods, work-in-progress and stock- in-trade-excise duty on increase/(decrease) in finished"goods" under note 20 annexed and forming part of statement of profit and loss.

NOTE 8 - Raw material and components consumed are net of Rs. 2559.19 lacs (previous year Rs. 3036.74 lacs) being the value of dispatches made to vendors for job work.

NOTE 9 - A provision is recognized for expected warranty claims on products sold during the last two to three years, based on past experience of the level of returns. It is expected that significant portion of these cost will be incurred in the next financial year and all will have been incurred within three years after reporting date. Assumptions used to calculate the provision for warranties were based on current sales level and current information available about returns based on the three year warranty period for products sold. The table below gives information about movement in warranty provisions.

NOTE 10 - PREVIOUS YEAR FIGURES : The Company was using pre-revised Schedule VI to the Companies Act, 1956, till the year ended 31st March, 2011, for preparation and presentation of its financial statements. During the year ended 31st March, 2012, the revised Schedule VI notified under the Companies Act, 1956, has become applicable to the Company. The Company has re-classified previous year figures to conform to this year's classification. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it significantly impacts presentation and disclosures made in the financial statements, particularly presentation of balance sheet.


Mar 31, 2011

1. Raw Material and Components consumed are net of Rs. 3036.74 Lacs (Previous Year Rs. 2522.39 Lacs) being the value of dispatches made to vendors for job work.

2. Miscellaneous Income in Schedule 12 includes :

a) Nil (Previous Year Rs. 29.54 Lacs) being provision for slow moving inventory written back.

b) Rs. 171.99 Lacs being Service Income from Business Support fees.

3. The Company has an R&D Centre (Approved by the Department of Scientific and Industrial Research, Ministry of Science & Technology, Govt. of India) on which revenue expenditure incurred in addition to capital expenditure is Nil (Previous Year Rs. 7.07 Lacs) is as under:

4. Defined Benefit Plans

ii) The Company operates post retirement defined benefit plan for retirement gratuity, which is funded.

5. Assumptions

The estimates of future salary increases, considered in actuarial valuation, take into account inflation, seniority, promotions and other relevant factors including supply and demand in the employment market. The above information is certified by the actuarial valuer.

The discount rate is based on the prevailing market yield of Govt. Bonds as at the date of valuation.

Expected return on asset - The expected return on assets over the accounting period, based on an assumed rate of return.

iv) Investment details of plan assets :

The Gratuity Trust has taken up a group policy with Life Insurance Corporation of India.

6. Expenditure on account of premium on forward exchange contracts to be recognised in the Profit & Loss Account of subsequent accounting period aggregates to Rs. 60.21 Lacs (Previous Year Rs. 68.52 Lacs).

7. Interest in Joint Ventures

a) During the year the Company was holding 24,000 Equity Shares of US $1 each in Sona Autocomp Inc., incorporated in USA. This was 24% of the paid up share capital of Sona Autocomp Inc.

The Companys interest in this joint venture was reported as Long Term Investments (Schedule 5) and was stated at Cost at the beginning of the year.

During the year the Company has sold its entire Investment in the said Joint Venture.

b) During the year the Company was holding 12,000 Equity Shares of Euro 1 each in Sona Autocomp Europe SARL, incorporated in France. This was 24% of the paid up share capital of Sona Autocomp Europe SARL

The Companys interest in this joint venture was reported as Long Term Investments (Schedule-5) and was stated at Cost at the beginning of the year.

During the year the Company has sold its entire Investment in the said Joint venture.

c) During the year the Company was holding 27,60,000 Equity Shares of Rs. 10/- each in AAM Sona Axle Pvt. Ltd. incorporated in India. This was 30% of the paid up capital of AAM Sona Axle Pvt. Ltd.

The Companys interest in this joint venture was reported as Long Term Investments (Schedule 5) and was stated at Cost at the beginning of the year. During the year the Company has sold its entire Investment in the said Joint venture.

8. Operating Leases

a) The Company has taken various residential, vehicle and office premises under operating lease or lease and licence agreements. These are cancelable, have a term of 11 months and five years. The agreements for premises cannot be terminated by either party before the expiry of one year. Agreements for leasing of vehicles can generally be terminated early by payment of nominal fees. The lease arrangements are generally renewable on the expiry of lease period subject to mutual agreement. Lease payments are recognised in the Profit & Loss Account in the year incurred

The Company has taken cars for its employees under operating lease agreement. An amount of Rs. 25.28 Lacs (Previous Year Rs. 44.02 Lacs) is recognised as lease expenses in the Profit & Loss Account for the year ended March 31, 2011. The future lease payments are

(i) upto 1 year Rs. 21.89 Lacs (Previous Year Rs. 26.04 Lacs)

(ii) between 1 to 5 years Rs. 27.66 Lacs (Previous Year Rs. 16.77 Lacs)

b) The Company has given part of its factory building at Chennai under operating lease on lease and licence agreement. The agreement for premises cannot be terminated by either party before the expiry of three years. The lease arrangement is renewable on the expiry of lease period subject to mutual agreement. Lease receipts of Rs. 37.01 Lacs are recognised in the Profit & Loss as per terms of agreement. The future lease receipts are

(i) upto 1 year Rs. 38.85 Lacs (Previous Year Rs. Nil)

(ii) between 1 to 5 year Rs. 68.89 Lacs (Previous Year Nil)

9. The Company is primarily engaged in the business of auto components of four wheelers, which are governed by the same set of risk and returns, and hence there is only one primary segment. The Company operates mainly to the needs of domestic market and export turnover is less than ten percent of the total turnover and hence there are no reportable secondary geographical segments.

10. Provision for warranty account details as required by AS-29

The warranty expenses of Rs. 151.81 Lacs (Previous Year Rs. 120.01 Lacs) are charged off to Profit & Loss Account included under the head Forwarding Expenses (Schedule 16).

11 (a). Related Party Disclosures (Transactions with Related Parties)

Name of Related Parties & Description of Relationship is as below :

1. The Individual/Entity Excercising Control over the Company 1. Dr. Surinder Kapur

2. The entity having substantial interest in the Company 1. JTEKT Corporation

3. Joint Ventures 1. Sona Autocomp Inc.

2. Sona Autocomp Europe SARL (Part of the year till disposal of respective investments) 3. AAM Sona Axle Pvt. Ltd.

4. Others (Significant Influence) 1. Sona Somic Lemforder Components Ltd.

2. Sona Okegawa Precision Forgings Ltd.

3. Mahindra Sona Ltd.

4. Maruti Suzuki India Ltd.

5. Sona e-Design and Technologies Ltd.

6. Fuji Autotech AB, Sweden

7. Pune Heat Treat Pvt. Ltd.

8. DRSK Management Services Pvt. Ltd

9. Sona Mobility Services Ltd.

10. Sona Autocomp Holding Pvt. Ltd

11. Kapur Properties & Investment

12. Fuji Autotech Europe SAS

5. Subsidiaries 1. Sona Fuji Kiko Automotive Ltd.

2. Sona Stampings Ltd.

3. JTEKT SONA Automotive India Ltd.

6. Key Management Personnel 1. Dr. Surinder Kapur - (Transactions disclosed under category (1) above)

2. Mr. Sunjay Kapur

3. Mr. P.V. Prabhu Parriker

4. Mr. Kiran M. Deshmukh

5. Mr. Sudhir Chopra

6. Mr. Govindrajan Sunder Rajan

12. The amount of excise duty disclosed as deduction from turnover is the total excise duty for the year except excise duty related to difference between the closing stock and opening stock and excise duty paid but not recovered, which has been disclosed as excise duty expense in "Raw Material and Components Cost - Increase/(Decrease) in excise duty on finished goods" under Schedule 14 annexed and forming part of Profit & Loss Account.

13. Previous year figures have been regrouped/recast wherever necessary.

 
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