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Notes to Accounts of SPEL Semiconductor Ltd.

Mar 31, 2015

1. Reconciliation of the Equity shares outstanding at the beginning and at the end of the reporting period

2. Rights attached to equity shares

The Equity share holders are entitled to receive dividends as and when declared; a right to vote in proportion to holding etc. and their rights, preferences and restrictions are governed by / in terms of their issue under the provisions of the Companies Act, 2013.

As per records of the company, including its register of shareholders / members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

3. Details of Shareholders other than the Holding Company more than 5% of the total share capital -Nil

4. Aggregate number of shares issued, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceeding the report dated is Nil

5. Shares reserved for issue under options :

Company has not reserved any equity shares for issue under the employee stock option plan (ESOP) of the company.

6. Term loan from banks are secured by first charge on all immovable assets including land and building at 5, CMDA Industrial Estate, Maraimalai Nagar and other movable/immovable fixed assets of the Company. Further secured by second over entire stocks, book debts and all other current assets of the Company, both present and future. Term Loan and is also secured by personal gaurantee of Dr.A.C.Muthiah.

7. The term loan is repayable in 16 equal quarterly instalments commmencing from 25.04.2012. The applicable interest rate is 14.25% p.a payable monthly. The principal amount of ' 1,40,70,000 due on Jan 25, 2015 is outstanding as at Mar 31, 2015 along with overdue interest of ' 28,78,977.

8. The interest payable on deposits from others are in the range of 10% to 10.25% p.a payable quarterly. The interest due on Dec 31,2013, Mar 31,2014 and for all four quarters of 2014-2015 amounting to ' 1,34,76,459 is outstanding at year end.

9. The Secured borrowings representing Working Capital Loans (Packing Credit, Overdraft Facility and Buy- ers Credit) from Banks are secured by hypothecation by way of first charge over the entire stocks and all other current assets of the Company both present and future. Further secured by the second charge on the immovable assets of all the exisiting fixed assets of the Company.

10. Additions to Plant & Machinery during the year includes Rs. Nil (Previous year ' 11,45,628) towards exchange gain adjusted in fixed assets as per GOI Notification (GO No. GSR225(E) dated Mar 31, 2009).

11. Leasehold improvements comprise capital expenditure on leased premises and is depreciated over the period of lease being lower than the life specified in Schedule II to the Act..

e. Contingent Liabilities and commitments (to the extent not provided)

Mar 31, 2015 Mar 31, 2014

(i) Contingent Liabilities

* Letter of Credit for import purchases 2,96,58,183 4,83,63,368

* Income Tax Demand 40,19,136 40,19,136

Future cash outflows in respect of the above are determinable only on receipt of judgement/ decisions pending with various forums / authorities

(ii) Capital commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for Nil Nil

12. Pursuant to the transitional provisions prescribed in Schedule II to the Companies Act, 2013, the Company has fully depreciated the carrying value of assets,(net of residual value, if any), where the remaining useful life of the asset was determined to be nil as on Apr 1, 2014, and has adjusted an amount of ' 31,40,593 (net of deferred tax of ' 14,04,404) against the Opening Surplus Balance in the Statement of Profit and Loss under Reserves and Surplus.

13. Further, pursuant to the adoption of lower useful life prescribed in Schedule II to the Companies Act, 2013, the depreciation expenses in the statement of profit and loss for the year is higher by ' 51,66,988 and consequent loss for the year is higher by the said amount as a result of the change in the useful life of the assets, as detailed above.

14. Employee benefit plans - Defined Contribution Plans

The Company makes Provident Fund and Employee State Insurance Scheme contributions which are defined contribution plans, for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognised Rs. 99,92,152 (Year ended Mar 31, 2014 Rs. 92,85,735) for Provident Fund contributions and Rs. 12,79,543 (Year ended Mar 31, 2014 Rs. 17,14,227) for Employee State Insurance Scheme contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes. The Company also makes Gratuity Scheme contributions in the nature of defined contribution plans, for qualifying employees. The Company recognised Rs. 46,00,638 (Year ended Mar 31, 201Rs.3,48,324) for Gratuity Fund contributions.

15. Gratuity

The Company has a gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service.

The following tables summarize the components of net benefit expense recognised in the statement profit and loss and the funded status and amounts recognised in the balance sheet for the Gratuity plan. Statement of Profit and Loss

16. Segment information

The Company's primary segment is identified as business segment based on nature of products, risks, returns and the internal business reporting system and secondary segment is identified based on the geographical location of the customers as per Accounting Standard 17. The Company is principally engaged in a single business segment viz Integrated Circuits for overseas market. Hence, the Company does not have seperate non-overseas reportable geographical segment.

17. The figures for the previous year have been reclassified / regrouped / amended, wherever necessary.


Mar 31, 2014

1.1 Rights attached to equity shares

The Equity share holders are entitled to receive dividends as and when declared; a right to vote in proportion to holding etc. and their rights, preferences and restrictins are governed by / in terms of their issue under the provisions of the Companies Act, 1956.

1.2 Shares held by holding/ ultimate holding company and/ or their subsidiaries/ associates and details of shareholders holding more than 5% shares in the company:

Out of equity shares issued by the company, shares held by its holding company, ultimate holding company and their subsidiaries/associates are as below:

As per records of the company, including its register of shareholders / members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares. The change in shareholding as above took place on Mar 24, 2014

1.3 Aggregate number of shares issued, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the report dated is NIL

1.4 Shares reserved for issue under options Company has not reserved any equity shares for issue under the employee stock option plan (ESOP) of the company.

2.1 Term loan from banks are secured by first mortgage of fixed assets acquired out of Bank Finance, Equitable Mortgage releating to factory land and building at 5, CMDA Industrial Estate, Maraimalai Nagar. First Charge on the existing Plant and Machinery and other Fixed Assets for Term Loan and is also secured by personal gaurantee of Dr.A.C.Muthiah.

2.2 The term loan is repayable in 16 equal quarterly instalments commmencing from 25.04.2012. The applicable interest rate is 13.25% p.a payable monthly. The principal amount of Rs.85,18,130 due on Jan 25, 2014 was paid on Apr 25, 2014. However there is no interest overdue.

2.3 The interest payable on deposits from others are in the range of 10% to 10.25% p.a payable quarterly. The interest due on Dec 31, 2013 and Mar 31, 2014 amounting to Rs.40,99,580 is outstanding at year end.

3.1 The Secured borrowings representing Working Capital Loans from Banks are secured by hypothecation by way of first charge on the current assets of the Company viz. Stock of Raw materials, Stocks in Process, Semi-finished and Finished Goods, Stores and Spares not relating to Plant and Machinery (Consumables, Stores and Spares) Bills receivables, Book debts, deposits and all other movables excluding such movables as may be permitted by Banks in their discretion from time to time, both present and future, wherever situated and further secured by the second charges on the immovable assets of the Company both present and future. The charge on current assets of the Company will rank pari passu with the existing charges created and/or agreed to be created thereon in favour of Banks.

Notes to Financial Statement for the year ended Mar 31, 2014

(All amounts are in Indian Rupees unless otherwise stated)

* Deposits is lien marked with IOB with respect to Buyer''s Credit for Nil (Previous year - Rs.1,34,20,000)

# Margin money deposit with a carrying amount of Rs.68,59,865 (Previous year:Rs.76,74,136) are given as security for opening of letter of credit with banks

Note:

Provisions for/contribution to employee retirement/post retirement and other employee benefits which are based on actuarial valuations done on an overall Company basis are excluded above

e. Contingent Liabilities and commitments (to the extent not provided). Mar 31, 2014 Mar 31, 2013

i) Contingent Liabilities

- Service Tax Demand - 1,86,100

- Letter of Credit for import purchases 4,83,63,368 3,55,10,607

- Income tax Demand 40,19,136 1,79,57,319

ii) Capital commitments

- Estimated amount of contracts remaining to be executed on capital account and not Nil Nil provided for

Notes to financial statements for the year ended Mar 31, 2014

(All amounts are in Indian rupees unless otherwise stated)

4. Employee benefit plans - Gratuity

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service.

The following tables summarize the components of net benefit expense recognised in the Statement Profit and Loss and the funded status and amounts recognised in the balance sheet for the Gratuity plan.

The estimates 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 market.

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

5. Foreign currency exposures

The Company does not use any derivative instruments to hedge its foreign currency exposures. The details of foreign currency balances which are not hedged as at the balance sheet date are as below:

6. Dues to Micro, Small and Medium Enterprises

Dues to Micro, Small and Medium Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management.

Information required to be disclosed under Micro, Small and Medium Enterprises Development Act 2006 as at Mar 31, 2014 is Nil (Mar 31,2013 - Nil)

7. The figures for the previous periods have been reclassified / regrouped / amended, wherever necessary.


Mar 31, 2013

1. Employee benefit plans - Gratuity

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The following tables summarize the components of net benefit expense recognised in the statement profit and loss and the funded status and amounts recognised in the balance sheet for the Gratuity plan.

2. Dues to Micro, Small and Medium Enterprises

Dues outstanding to enterprises covered under Micro, Small and Medium Enterprises Development Act, 2006, based on the information available with the Company as at Mar 31, 2013 amounts to NIL.

3. Impairment of Assets has been considered as per AS 28 & there is no impairment as on Mar 31, 2013.

4. Prior year comparatives

Previous year''s figures have been regrouped wherever necessary.


Mar 31, 2012

1-a Terms/rights attached to the equity shares

The Company has only one class of equity shares having a par value of Rs 10 per share. Each holder of equity is entitiled to one vote per share.

In the event of liquidation of the company, the holder of equity shars will be entitled to received 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.

1-b Shares reserved for issue under options Company has not reserved any equity shares for issue under the employee stock option (ESOP) plan of the company

Note :

A Term loans from Banks are secured by first mortgage of fixed assets acquired out of Bank Finance. Equitable Mortgage relating to Factory Land and Building at 5 CMDA Industrial Estate, Maraimalai Nagar. First Charge on the existing Plant & Machinery and other Fixed Assets for Term Loan.

B Working Capital Loans from Banks are secured by hypothecation by way of first charge on the current assets of the Company viz. Stock of Raw materials, Stocks in Process, Semi-finished and Finished Goods, Stores and Spares not relating to Plant and Machinery (Consumables, Stores and Spares) Bills receivables, Book debts, deposits and all other movables excluding such movables as may be permitted by Banks in their discretion from time to time, both present and future, wherever situated and further secured by the second charges on the immovable assets of the Company both present and future. The charge on current assets of the Company will rank pari passu with the existing charges created and/or agreed to be created thereon in favour of Banks.

C Other Terms and Condition of Sanction

C1 Security Documents Including Personal guarantee of Dr. A. C. Muthiah. Credit report of the guarantors to be provided.

C2 Any escalation in project cost due to exchange rate fluctuation will be borne by the Company.

1Contingent Liabilities

Estimated value of contracts remaining to be executed on capital account and not provided for Rs Nil (Previous year Rs 5,97,500 hundred)

Year ended Year ended Mar 31, 2012 Mar 31, 2011 (Rs in Hundred) (Rs in Hundred)

Claims against the Company not acknowledged as debts 19,500 19,500

Guarantees given to Central Excise/banks on behalf of other companies with corresponding counter guarantees from them 5,20,000 5,20,000

Service Tax Demand 1,861 -

Income-tax demand 2,23,089 36,410

Letters of Credit for import purchases 5,26,290 4,19,060

Labour Case 15,000 -

2-G3 Notes:

1 The effect of Morbidity and With drawal have been factored by Constructing a Multiple Decrement Table on assumption of above Mortality table.

2 All the assumptions above have been set following discussions with the Company in this regard.

3 We understand that the assumptions of Future Salary increases (Which has been set in Consultation with the company), take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

3-G1 One of the principal assumptions is the discount rate ,which should be based Upon the market yields available on Government bonds at the accounting date with a term that matches that of the liabilities.

3-G3 Notes:

1 The effect of Morbidity and With drawal have been factored by Constructing a Multiple Decrement Table on assumption of above Mortality table.

2 All the assumptions above have been set following discussions with the Company in this regard.

3 We understand that the assumptions of Future Salary increases (Which has been set in Consultation with the Company), take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

4 Impairment of Assets has been considered as per AS 28 & there is no impairment as on Mar 31, 2012.

5 The company has changed its accounting policy during the year to account for gains or losses on cash flow hedge in the appropriate equity account i.e., Hedge Reserve account. This is different from the method hitherto followed to recognize the same in Profit and Loss account.

6 Previous year's figures have been regrouped wherever necessary.


Mar 31, 2011

1. Estimated value of contracts remaining to be executed on capital account and not provided for Rs. 597.50 lakhs (Previous year Rs 13.11 lakhs)

2. Contingent Liabilities

Particulars Year ended Year ended

Mar 31, 2011 Mar 31, 2010

Rs. in lakhs Rs. in lakhs

i. Letters of Credit for import purchases 419.06 538.76

ii. Bank Guarantee given for Job work 0.10 0.10

iii. Guarantees given to Central Excise / banks on behalf of other companies with corresponding counter guarantees from them 520.00 520.00

iv. Claims against the Company not acknowledged as debts 45.91 45.91

3. The company has opted for accounting the exchange difference arising on reporting of long term foreign currency monetary items in line with Companies (Accounting Standards) Amendment Rules 2009 on Accounting Standard 11 (AS-11) notifed by Government of India on Mar 31, 2009 (GO No.GSR225(E) dated Mar 31, 2009). The exchange difference adjusted in the carrying amount of fxed assets during the accounting period is Rs.18.99 lakhs (decrease) (Previous year decrease Net Rs. 409.71 lakhs).

The Company is having diverse package portfolio, from 4lead (1mm x 1mm) to 80leads (12mm x 12mm). To have a common base for capacity calculation, the widely accepted industry standard Twenty Lead Equivalent (TLE) for leaded packages and Three Millimetre equivalent (TMME) for Leadless packages is used.

In the above table, numbers are appropriately converted into TLE (available leaded capacity: 214 Million) and TMME( available lead- less capacity:259 Million) to address the statutory requirements. Accordingly the Capacity utilisation is 75% and 90% respectively.

4. Segmental Reporting

The Integrated Circuits is the only segment for the company

5. Impairment of Assets has been considered as per AS 28 & there is no impairment as on Mar 31, 2011

6. The Company has during the year, adopted the principles of Accounting Standard 30 - Financial instruments: Recognition and measure- ment, issued by the Institute of Chartered Accountants of India, in respect of forward contracts for frm commitments and highly probable forecast transactions meeting necessary criteria for designation as "Cash fow hedges". The gains and losses on effective Cash fow hedges are recognised in Hedge Reserve Account till the underlying forecasted transaction occurs. There is however no impact on the proft for the year due to the aforesaid change.

7. Previous years figures have been regrouped wherever necessary.


Mar 31, 2010

1. Estimated value of contracts remaining to be executed on capital account and not provided for Rs.13.11 iakhs (Previous year Rs.7.60 lakhs)

2. Contingent Liabilities & Provisions

a. In respect of: Year ended Year ended Mar 31, 2010 Mar 31, 2009 Rs. in lakhs Rs. in iakhs

i. Letters of Credit for Import Purchases 538.76 395.87

ii. Bank Guarantee given for Job work 0.10 0.10

iii. Guarantees given to Central Excise/ Banks on 520.00 520.00 behalf of other companies with corresponding counter guarantees from them.

b. Claims against the Company not acknowledged as debts - Rs.45.91 iakhs (Previous year - Rs.45.91 iakhs).

3. The company has opted for accounting the exchange difference arising on reporting of long term foreign currency monetary items in line with Companies (Accounting Standards) Amendment Rules 2009 on Accounting Standard 11 (AS-11) notified by Government of India on Mar 31, 2009 (GO No.GSR225(E) dated Mar 31, 2009). The exchange difference adjusted in the carrying amount of fixed assets during the accounting period is Rs.409.39 lakhs (decrease) (Previous year increase Net Rs.1046.89 lakhs). The amount of profit on exchange differences included in the Profit and Loss Account for the period is Rs.99.39 lakhs (Net) (Previous year gain Net Rs.105.67 lakhs).

4. Other income of Rs.149.17 lakhs (Previous year Rs.222.27 lakhs) represents exchange profit Rs.99.39 lakhs, interest from deposits Rs.11.87 lakhs, scrap sales Rs.13.33 lakhs, lease rental income Rs.6.30 lakhs and Miscellaneous income of Rs.18.28 lakhs. (Tax deducted at source Rs.4.48 lakhs)

5. Segmental Reporting

The Integrated Circuits is the only segment for the company

6. Related party disclosure under Accounting Standard 18:

Nature of Relationship Name of the Party

A. Holding Company Southern Petrochemical

Industries Corporation Limited

B. Subsidiary Company SPEL America Inc.

C. Key Management Dr. AC Muthiah Personnel Chairman

Mr. Ar Rm Arun Vice Chairman Mr. D. Balakrishnan Chief Executive Officer Mr. N. Sivashanmugam Chief Financial Officer

D. Enterprise owned by/over ChipTest Engineering Limited which Key Management Vice Chairman is the Personnel is abie to Chairman for the exercise significant Holding Company of influence ChipTest Engineering Ltd

Cherrytec Intelisolve Limited Vice Chairman is the Chairman of Cherrytec Intelisolve Limited.

Valingro Exponenta Limited. Vice Chairman is Chairman in Valingro Exponenta Limited

Natronix Semiconductor Technology Limited Vice Chairman is Chairman in Natronix Semiconductor

Technology Limited.







D. Enterprise owned by/over which Key Management Personnel is abie to exercise significant influence

Name of Nature of Transaction with Value Relationship

A. Holding Company Balance as on Mar 31, 2010 :

a. Current Account P.s.1.77 lakhs (Dr) b. Guarantee issued Rs.520.00 lakhs

B.Subsidiary Company Marketing Fee - Rs.t 55.80 lakhs Balance Outstanding to them as on Mar 31,2010 Rs.0.90 lakhs

C. Key Management Personnel Personal Guarantee Commission - Rs.24.47 lakhs

Profit Commission - Rs.29.37 lakhs *

Remuneration - Rs.28.35 lakhs **

Remuneration - Rs.25.27 lakhs

D. Enterprise owned by/over which Key Management Personnel is abie to exercise significant influence Characterization Charges Rs.235.84 lakhs Test Engineering Charges Rs.69.79 lakhs Reliability Testing Income - Rs.4.68 lakhs Rental Income - Rs.5.52 lakhs Balance Outstanding to them as on Mar 31. 2010 Rs.113.41 lakhs

Balance Outstanding to them as on Mar 31, 2010 Rs.0.58 lakhs towards ERP implementation.

Corporate Communications charges of Rs. 18.00 lakhs. Balance Outstanding to them as on Mar 31,2010 Rs. 4.63 lakhs

Manpower Deputation Charges of Rs.15.00 iakhs. Balance Outstanding to them as on Mar 31, 2010 Rs.6.03 lakhs

* Provision has been made, subject to the statutory approvals.

** part of the year.

7. No Provision for Income Tax has been made in the current year considering the carried forward losses of the company. However, tax has been provided considering Minimum Alternate Tax as per the Income Tax Act. In pursuant to the provisions of Income Tax Act, MAT credit of Rs.49.26 iakhs has been for carry forward during this year for adjustment against the future tax payments.

8. impairment of Assets has been considered as per AS 28 & there is no impairment as on Mar 31, 2010.

9. Previous years figures have been regrouped wherever necessary.

 
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