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Notes to Accounts of Spice Mobility Ltd.

Mar 31, 2016

1. Leases

Operating lease: Company as lessee

An office building has been obtained on operating lease. There is no contingent rent in the lease agreement. The lease term is for 9 years and can be extended on mutual consent of both the parties. There are no restrictions imposed by lease arrangements. There are subleases and all the leases are cancellable in nature. The Company has recognized lease expenses of Rs. 2I,944 thousand for the year ended March 3I, 20I6 (Previous period Rs 25,27I thousand)

Operating lease commitments - Company as lessor

The Company has entered into lease of its leasehold improvement carried out at building located in Noida. The lease is cancellable. There are no restrictions imposed by lease agreement and there are no contingent rents.

Further, the Company has entered into lease of its Buildings in Bangalore, Kolkata & Mumbai for terms ranging from three to five years. The lease term can be extended by mutual consent of both the parties. The leases have a lock in periods between one to five years. The leases are cancellable after the lock in period by either party by serving a notice of at least 3 months.

2. Segment information

Primary segments: Business Segments

During the year, the Company was engaged mainly in telecommunications- Mobile business which represented the business of trading of mobile handsets. The entire business was considered as a single segment in terms of Accounting Standard-I7 on Segment Reporting issued by the Institute of Chartered Accountants of India.

Secondary Segments: Geographical Segment

As the Company’s business activity falls within a single geographical segment, there is no additional disclosure required to be provided for geographical segments in terms of Accounting Standard-I7 Segment Reporting.

3. Capital & other Commitments

a) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs.I,I49 thousand (Previous period Rs.4,604 thousand).

b) The Company has given comfort letter to its two subsidiary companies, whose net worth has been fully eroded, to provide financial support in the future to enable them to settle their obligation as and when they fall due and operate as a going concern.

4. Contingent Liabilities

Contingent Liabilities (excluding interest, wherever applicable) not provided for in respect of:

a) Income Tax Demands being disputed by the Company Rs.I,38,89I thousand (Previous period Rs. I,52,7I6 thousand).*

b) Penalty under Foreign Trade (Development and Regulation) Act, I992, on account of non fulfillment of export obligation being disputed by the Company - Rs. 40,860 thousand (Previous period Rs. 40,860 thousand).*

c) Demand raised by the Excise Authorities being disputed by the Company. The Company has deposited Rs. 2,000 thousand (Previous period Rs. 2,000 thousand) under protest and the same has been included in the note of Loans and Advances under balances with statutory / government authorities - Rs. 66,263 thousand (Previous period Rs. 66,263 thousand).*

d) The Company has given corporate guarantee and pledged fixed deposits of Rs.195,476 thousand (Previous period Rs. 180,562 thousand) in respect of letter of credit/ bill discounting facility taken by a subsidiary company to the extent of Rs. 2,550,000 thousand where the Company is jointly and severally liable. Further, the Company has an equitable mortgage of its properties situated at Bl 101, 106 and 107, Boomerang, Plot No. 4A and 4B, Sakivali Village, Chandivali farm road, Kurla (W), Mumbai & at Unit No. ESNT B050I, 5th Floor, IIF/11, New Town, Rajarhat, North 24 Parganas, Kolkata, West Bengal in respect of letter of credit facility (included in the above amount) taken by subsidiary company to the extent of Rs. 450,000 thousand & 500,000 thousand respectively, where the Company is jointly and severally liable.

e) The Company has pledged its fixed deposit of Rs. 7,500 thousand (Previous period Rs. 31,138 thousand) in respect of the overdraft facility taken by subsidiary of a subsidiary Company.

* As per the management, the Company has fair chances of success in all these cases and hence no provision in respect thereof has been made in the books.

31. The Company has receivable by way of loans of Rs. 150,848 thousand (Previous period Rs 440,630 thousand) including interest of Rs.17,804 thousand (Previous period Rs 25,555 thousand), trade receivables and advances of Rs. 495,177 thousand (Previous period Rs 75,210 thousand) from one of its subsidiaries. In view of the continuing losses of the said business, the Company has taken a decision to provide loan of Rs 150,848 thousand and receivables of Rs.481,287 thousand as doubtful. The provision for doubtful debts and advances has been shown under exceptional items in the financial statements. However, the management continues to focus on growing the retail business and making it profitable on an ongoing basis.

5. The Company follows Accounting Standard (AS-22) - “Accounting for taxes on Income, notified by Companies (Accounting Standards) Rules, 2006, (as amended). Due to unabsorbed depreciation, brought forward losses and other timing differences, the Company has net deferred tax assets. Since there is no convincing evidence which demonstrates virtual certainty of realization of such deferred tax assets in the near future, the Company has not recognized the same.

Note: The loan given to Spice Retail Limited is for business purposes. The loan is repayable till March 31, 2017 or earlier as and when demanded by the Company.

6. Independent Non-Promoter (Spice Employee Benefit) Trust (‘Trust’) holds 11,901,752 (Previous year 11,901,752) Equity Shares of the Company as on 31st March, 2016, for the benefit of the employees of the Company, its associates and subsidiaries. These equity shares were transferred to the Trust pursuant to the Scheme of amalgamation of Spice Televentures Private Limited (‘STPL’), at a value at which these equity shares were held in the books of STPL and the same was recorded as receivable from the Trust in the books of the Company. Amount recoverable from Employee Benefit Trust is in respect of these shares (net of amount received till date) as on March 31, 2016 Rs. 69,200 thousand (Previous period Rs. 69,200 thousand).

Trust has framed Share Reward Rules whereby certain shares held by the Trust may be transferred to eligible employees. The Company has been legally opined that the Share Reward Rules framed by the Trust are not covered under the ambit of employee welfare schemes of the Company as the said Rules have been framed by the Trust and not by the Company. Hence, the disclosure requirement under the Guidance Note on Accounting for Employee Share based payments issued by the Institute of the Chartered Accountants of India is not applicable to the Company.

7. During the year ended March 3I, 20I6, the Company has entered into an agreement with S Mobile Devices Ltd, a wholly owned subsidiary, Itel Mobile Ltd and Cloud Ranger Ltd to engage in the business of selling “Itel” Brand Mobile handsets in India. Pursuant to the agreement and equity infusion by Itel Mobile Ltd and Cloud Ranger Ltd, S Mobile Devices Ltd has ceased to be a subsidiary of the Company.

8. Current year’s accounts have been prepared for the full year i.e. from April I, 20I5 to March 3I, 20I6. Previous year accounts were prepared for the nine months period, i.e., from July I, 20I4 to March 3I, 20I5. Hence, current year’s figures are not comparable with those of the previous period. Previous period’s figures have been regrouped / reclassed wherever considered necessary to conform to current year’s figures.


Mar 31, 2015

1. Segment information

Primary segments: Business Segments

During the period the Company did not have any business operations. During the previous year, the Company was engaged mainly in telecommunications- Mobile business which represented the business of trading of mobile handsets.The entire business was considered as a single segment in terms of Accounting Standard-17 on Segment Reporting issued by the Institute of Chartered Accountants of India.

Secondary Segments: Geographical Segment

2. Capital & other Commitments

a) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs. 4,604 thousand (Previous year Rs. Nil thousand).

b) The Company has given comfort letter to its two subsidiary companies, whose net worth has been fully eroded, to provide financial support in the future to enable them to settle their obligation as and when they fall due and operate as a going concern (Refer note 33 below).

3. Contingent Liabilities

Contingent Liabilities (excluding interest, wherever applicable) not provided for in respect of:

a) Income Tax Demand being disputed by the Company Rs.152,716 thousand (Previous year Rs. 150,167 thousand).*

b) Penalty under Foreign Trade (Development and Regulation) Act, 1992, on account of non fulfilment of export obligation being disputed by the Company - Rs. 40,860 thousand (Previous year Rs. 40,860 thousand).*

c) Demand raised by the Excise Authorities being disputed by the Company. The Company has deposited Rs. 2,000 thousand (Previous year Rs. 2,000 thousand) under protest and the same has been included in the note of Loans and Advances under balances with statutory / government authorities - Rs. 66,263 thousand (Previous year Rs. 66,263 thousand).*

d) The Company has given corporate guarantee and pledged fixed deposits of Rs. 180,562 thousand (Previous year Rs. 566,731 thousand in respect of letter of credit/ bill discounting facility taken by a subsidiary company to the extent of Rs. 2,050,000 thousand where the Company is jointly and severally liable. Further, the Company has an equitable mortgage of its property situated at B1 101, 106 and 107, Boomerang, Plot No. 4A and 4B, Sakivali Village, Chandivali farm road, Kurla (W), Mumbai in respect of letter of credit facility (included in the above amount) taken by subsidiary company to the extent of Rs. 450,000 thousand, where the Company is jointly and severally liable.

e) The Company has pledged its fixed deposit of Rs. 31,138 thousand (Previous year Rs. 30,000 thousand) in respect of the overdraft facility taken by subsidiary of a subsidiary company

*As per the management, the Company has fair chances of success in all these cases and hence no provision in respect thereof has been made in the books.

Notes:

1. No amount has been provided as doubtful debts or advances / written off or written back in respect of debts due from / to above parties except as disclosed above.

2. The Company has given corporate guarantee and pledged fixed deposits of Rs. 180,562 thousand (Previous year Rs. 566,731 thousand) in respect of letter of credit/ bill discounting facility taken by a subsidiary company to the extent of Rs. 2,050,000 thousand where the company is jointly and severally liable. Further, the Company has an equitable mortgage of its property situated at B1 101, 106 and 107, Boomerang, Plot No. 4A and 4B, Sakivali Village, Chandivali farm road, Kurla (W), Mumbai in respect of letter of credit facility (included in the above amount) taken by subsidiary company to the extent of Rs. 450,000 thousand, where the company is jointly and severally liable.

3. The Company has given comfort letter to its two subsidiary companies, whose net worth has been fully eroded, to provide financial support in the future to enable them to settle their obligation as and when they fall due and operate as a going concern.

4. The Company has pledged its fixed deposit of Rs. 31,138 thousand (Previous year Rs. 30,000 thousand) in respect of the overdraft facility taken by subsidiary of a subsidiary company

# The final dividend was paid to the shareholders in Feb'14 and pertained to FY 2012-13. ## The interim dividend was paid to the shareholders in Nov'13 and pertained to FY 2013-14.

4. The Company has over the years invested Rs.3,328,375 thousand in its Multi brand Mobile Retail Store Business as investment in the equity share capital of two subsidiaries and the same was being carried in its books at cost. In view of the continuing losses of the said business and as a prudent accounting practice, the Company has taken a decision to provide fully for the said investment as diminution in value. The provision for diminution in the value of investments has been shown under exceptional items in the financial statements. However, the management continues to focus on growing the retail business and making it profitable on an ongoing basis.

The Company also has receivable by way of loans of Rs. 440,630 thousand (including interest of Rs.25,555 thousand) (Previous year Rs 2,424,090), trade receivables and advances of Rs. 75,210 thousand (Previous year Rs. 170,933 thousand) from these companies.The management is hopeful of realising the above amounts and accordingly no provision has been made there against.

5. The Company follows Accounting Standard (AS-22) - "Accounting for taxes on Income, notified by Companies (Accounting Standards) Rules, 2006, (as amended). Due to unabsorbed depreciation, brought forward losses and other timing differences, the Company has net deferred tax assets. Since there is no convincing evidence which demonstrates virtual certainty of realization of such deferred tax assets in the near future, the Company has not recognized the same.

6. Independent Non-Promoter (Spice Employee Benefit) Trust ('Trust') holds 11,901,752 (Previous year 11,901,752) Equity Shares of the Company as on 31st March, 2015, for the benefit of the employees of the Company, its associates and subsidiaries.These equity shares were transferred to the Trust pursuant to the Scheme of amalgamation of Spice Televentures Private Limited ('STPL'), at a value at which these equity shares were held in the books of STPL and the same was recorded as receivable from the Trust in the books of the Company. Amount recoverable from Employee Benefit Trust is in respect of these shares (net of amount received till date) as on March 31,2015, Rs. 69,200 (Previous Year Rs. 73,200).

Trust has framed Share Reward Rules whereby certain shares held by the Trust may be transferred to eligible employees. The Company has been legally opined that the Share Reward Rules framed by the Trust are not covered under the ambit of employee welfare schemes of the Company as the said Rules have been framed by the Trust and not by the Company. Hence, the disclosure requirement under the Guidance Note on Accounting for Employee Share based payments issued by the Institute of the Chartered Accountants of India is not applicable to the Company.

7. Current year's accounts are prepared for the nine months period from July 1, 2014 to March 31, 2015. Previous year accounts were for the full year, i.e., from July 1, 2013 to June 30, 2014. Hence, current period's figures are not comparable with those of the previous year. Previous year's figures have been regrouped / reclassed wherever considered necessary to confirm to current period's figures.


Jun 30, 2014

1. Leases

Operating lease: Company as lessee

An office building has been obtained on operating lease. There is no contingent rent in the lease agreement. The lease term is for 9 years and can be extended on mutual consent of both the parties. There are no restrictions imposed by lease arrangements. There are subleases and all the leases are cancellable in nature except for lease of one warehouse in previous year where there was a lock in period of three years. The Company has recognised lease expenses of Rs. 33,696 thousand (Previous year Rs 70,843 lacs)

Operating lease commitments - Company as lessor

The Company has entered into lease of its leasehold improvement carried out at building located in Noida. The lease is cancellable. There are no restrictions imposed by lease agreement and there are no contingent rents.

2. Segment information

Primary segments: Business Segments

During the year, the Company is engaged mainly in telecommunications- Mobile business which represents the business of trading of mobile handsets. The entire business has been considered as a single segment in terms of Accounting Standard-17 on Segment Reporting issued by the Institute of Chartered Accountants of India.

Secondary Segments: Geographical Segment

The analysis of geographical segment is based on geographical location of the customers.

The following table shows the distribution of the Company''s consolidated revenue and trade receivables by geographical market:

Note: All assets other than trade receivables as disclosed above are located in India.

3. Capital & other Commitments

a) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Nil (Previous year Rs. 1975 thousand).

b) For commitments relating to lease arrangements, (refer note 28 above).

c) The Company has given comfort letter to its two subsidiary companies, whose net worth has been fully eroded, to provide financial support in the future to enable them to settle their obligation as and when they fall due and operate as a going concern (Refer note 43 below).

4. Contingent Liabilities

Contingent Liabilities (excluding interest, wherever applicable) not provided for in respect of:

a) Various Sales Tax Demands being disputed by the Company Nil thousand (Previous year Rs. 26,265 thousand).*

b) Income Tax Demand being disputed by the Company Rs.150,167 thousand (Previous year Rs. 210,501 thousand).*

c) Penalty under Foreign Trade (Development and Regulation) Act, 1992, on account of non fulfilment of export obligation being disputed by the Company - Rs. 40,860 thousand (Previous year Rs. 40,860 thousand).*

d) Demand raised by the Excise Authorities being disputed by the Company. The Company has deposited Rs. 2,000 thousand (Previous year Rs. 2,000 thousand) under protest and the same has been included in the note of Loans and Advances under balances with statutory / government authorities - Rs. 66,263 thousand (Previous year Rs. 66,263 thousand).*

e) Various other claims against the Company not acknowledged as debts (based on management estimate) - Nil (Previous year Rs. 4,575 thousand)*.

f) The Company has given corporate guarantee in respect of letter of credit/ bill discounting facility taken by a subsidiary company to the extent of Rs. 2,050,000 thousand where the company is jointly and severally liable.

* As per the management, the Company has fair chances of success in all these cases and hence no provision in respect there has been made in the books.

5. Related Parties

Names of related parties where control exists irrespective of whether transactions have occurred or not:

Utlimate Holding Company : Spice Global Investments Private Limited

Holding Company : Smart Ventures Limted (Converted into limited company w.e.f. 29.11.2013) (Formerly S i2i Mobility Private Limited)

Subsidiary including step down subsidiaries companies :

Spice Digital Limited

Spice Retail Limited

Hindustan Retail Private Limited

Kimaan Exports Private Limited

Spice Labs Private Limited

Cellucom Retail India Private Limited

S Retail Middle East FZE

Spice Online Retail Private Limited (w.e.f. July 24, 2012)

Mobisoc Technology Private Limited

S GIC Pte Ltd.

Spice VAS (Africa) Pte. Ltd.

Spice Digital Nigeria Limited

Beoworld Sdn. Bhd

Spice VAS Uganda Ltd.

Spice VAS Kenya Limited

S Mobility (HK) Ltd.

S Mobile Devices Ltd.

S Mobility Pte Ltd.

Spice VAS Ghana Ltd.

Spice VAS Zambia Ltd.

Spice Digital South Africa (Pty) Ltd.

Spice VAS Tanzania Limited

Spice Digital (Bangladesh) Limited (w.e.f. November 8, 2012)

Names of other related parties with whom transactions have taken place during the year:

Individual having significantly influence on the Company and relatives or such individuals :

Mr. Dilip Modi - Director

Enterprises directly or indirectly through one or more intermediaries are under common control with the Company :

Spice Enfotainment Limited

Wall Street Finance Limited

Smartvalue Ventures Private Limited (Formerly Spice Investments & Finance Advisors Pvt. Ltd.)

Spice Innovative Technologies Private Ltd.

IO Systems Limited

Saket City Hospitals Pvt. Ltd. (Formerly G M Modi Hospitals

Corporation Pvt. Ltd.)

Smart Global Ventures Private Limited

Key Management Personnel : Mr. Subramanian Murali - President Finance Mr. R S Desikan -CEO (w.e.f.February 9,2012

Relatives of key management personnel : Mrs. Jananki Desikan

Enterprises over which individuals having significant influence over the Company is able to exercise significant influence :

Plus Paper Foodpac Ltd.

Bharat IT Services Limited

V Corp Mercantile Private Limited

PT Selular Media Infotama

The amounts of foreign currency exposure that are not hedged by a derivative instrument are Nil (Previous year Nil).

(B) A sum of Nil (Previous year Rs.5,281 thousand) on account of unamortized foreign exchange premium on outstanding forward exchange contracts is being carried forward to be charged to Statement of Profit and Loss of subsequent year.

for the year ended June 30, 2014

# The final dividend has been paid to the shareholders in Feb''14 and pertains to FY 2012-13.

## The interim dividend has been paid to the shareholders in Nov''13 and pertains to FY 2013-14.

6 (a) The board of directors in the meeting held on June 19, 2013 had approved the buy back of the Company''s fully paid up equity shares of face value of Rs 3/- each from the open market through Stock Exchange mechanism at a price not exceeding Rs 75/- per share for an aggregate amount not exceeding Rs 600,000 thousand, subject to a maximum of 11,000 thousand equity shares. In pursuance to above approval, buy back commenced on July 10, 2013 and closed on May 13, 2014, the Company has bought back and extinguished 10,222,303 equity shares of face value of Rs 3 each. Out of the total extinguished shares, interim dividend has not been paid on 3,896,634 equity shares and final dividend has not been paid to 10,221,003 shares (including 6,416,587 equity shares bought back after finalisation of last year''s accounts ) being the shares extinguished prior to the respective record dates. Accordingly proposed final dividend has been reversed on 6,416,587 equity shares.

(b) The Company has, pursuant to share buy back offer, approved by the Board of Directors in the meeting held on June 19, 2013, bought back 10,222,303 equity shares of Rs 3/- each and accordingly:-

(i) The paid up Equity Share Capital has been reduced to that extent.

(ii) As required under the provisions of the Companies Act, 1956, Rs 30,666 thousand have been transferred to Capital Redemption Reserve.

(iii) Out of the price over and above face value of these shares, Rs 288,070 thousand has been adjusted from Securities Premium account and Rs 48,413 thousand has been adjusted from General Reserve.

42. In pursuance to the approval obtained from the members of Company by way of postal ballot, the Mobile Handset Business of the Company was transferred to Spice Retail Limited (SRL), a wholly owned Subsidiary of the Company, as a going concern w.e.f. 1st July, 2013 by way of slump sale at book value of Rs. 354,000 thousand.

The following statement shows the revenue and expenses of discontinued operations, i.e., Mobile Handset Division (Undertaking) of the Company which was discontinued We.f. July 1, 2013 as per Business transfer agreement dated July 1, 2013

7. The Company has invested a sum of Rs. 878,375 thousand (Previous year Rs 878,375 thousand) in the equity shares of two of the subsidiaries. Further, the Company has receivable by way of interest free loans of Rs. 2,424,090 thousand (Previous year Rs 2,405,590 ), trade receivables and advances of Rs. 170,933 thousand (Previous year Rs 369,469 thousand) from these companies. The company has given corporate guarantee in respect of the letter of credit/bill discounting facility taken by one subsidiary to the extent of Rs. 2,050,000 thousand. As per the latest audited financial statements of these subsidiaries, accumulated losses of these subsidiaries have resulted in erosion of their net worth.

These being long term investments and also in view of the projected profitable operations of the above companies and / or fair value of the companies as at June 30, 2014, management is of the view that the diminution in the value of these investments is temporary in nature and hence no provision is required to be made against the investments made, loans given and outstanding receivables.

8. The Company follows Accounting Standard (AS-22) - "Accounting for taxes on Income, notified by Companies (Accounting Standards) Rules, 2006, (as amended). Due to unabsorbed depreciation, brought forward losses and other timing differences, the Company has net deferred tax assets. Since there is no convincing evidence which demonstrates virtual certainty of realization of such deferred tax assets in the near future, the Company has not recognized the same.

9. Loans and advances in the nature of loans given to subsidiaries and companies in which directors are interested

Note: Loans are repayable on demand and are interest free.

10. Independent Non-Promoter (Spice Employee Benefit) Trust (''Trust'') holds 11,901,752 Equity Shares of the Company as on 30th June, 2014, for the benefit of the employees of the Company, its associates and subsidiaries. These equity shares were transferred to the Trust pursuant to the Scheme of amalgamation of Spice Televentures Private Limited (''STPL''), at a value at which these equity shares were held in the books of STPL and the same was recorded as receivable from the Trust in the books of the Company. Amount recoverable from Employee Benefit Trust is in respect of these shares (net of amount received till date). Trust has framed Share Reward Rules whereby certain shares held by the Trust may be transferred to eligible employees. The

Company has been legally opined that the Share Reward Rules framed by the Trust are not covered under the ambit of employee welfare schemes of the Company as the said Rules have been framed by the Trust and not by the Company. Hence, the disclosure requirement under the Guidance Note on Accounting for Employee Share based payments issued by the Institute of the Chartered Accountants of India is not applicable to the Company."

11. Current year''s accounts are prepared for the period from July 1, 2013 to June 30, 2014. However, Mobile Handset division of the Company has been transferred to Spice Retail Limited (SRL), a wholly owned Subsidiary of the Company, as a going concern w.e.f. 1st July, 2013 by way of slump sale. Hence, current year''s figures are not comparable with those of the previous year.


Jun 30, 2013

1. Nature of Operations

S Mobility Ltd ("the Company") is a public Company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The Company is primarily engaged in the trading of Mobile handset and accessories.

2. Basis of preparation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared on an accrual basis and under the historical cost convention.

The accounting policies have been consistently applied by the Company and are consistent with those of previous period.

3. Capital & other Commitments

a) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs.1,975 thousand (Previous period Rs. 787 thousands).

b) For commitments relating to lease arrangements, refer note 27 above.

c) The Company has given comfort letter to its two subsidiary companies, whose net worth has been substantially eroded, to provide financial support in the future to enable them to settle their obligation as and when they fall due (Refer note 42 below).

4. Contingent Liabilities

Contingent Liabilities (excluding interest, wherever applicable) not provided for in respect of:

a) Various Sales Tax Demands being disputed by the Company Rs. 26,265 thousand (previous period Rs. 29,234 thousand).*

b) Income Tax Demand being disputed by the Company Rs. 210,501 thousand (previous period Rs. 27,078 thousand).

c) Penalty under Foreign Trade (Development and Regulation) Act, 1992, on account of non fulfilment of export obligation being disputed by the Company - Rs. 40,860 thousand (previous period Rs. 40,860 thousand).*

d) Demand raised by the Excise Authorities being disputed by the Company. The Company has deposited Rs. 2,000 thousand (Previous period Rs. 2,000 thousand) under protest and the same has been included in the note of Loans and Advances under balances with statutory / government authorities - Rs. 66,263 thousand (Previous period Rs. 66,263 thousand).*

e) Various other claims against the Company not acknowledged as debts (based on management estimate) - Rs. 4,575 thousand (Previous period Rs. 4,327 thousand)*.

* As per the management, the Company has fair chances of success in all these cases and hence no provision in respect thereof has been made in the books.

5. During the year, the Company has revised the estimated useful life of certain plant and machinery w.e.f. January 1, 2013 based on technical estimates made by the management. Accordingly additional depreciation of Rs 9,671 thousand has been accounted for in the financial statement. Had the Company continued to use the earlier basis of providing depreciation, the charge to the statement of profit and loss for the current year would have been lower by Rs 7,644 thousand (net of tax of Rs 2,027 thousand) and the net block of fixed assets would correspondingly have been higher by Rs 9,671 thousand.

6. The board of directors in the meeting held on June 19, 2013 have approved the buy back of the Company''s fully paid up equity shares of face value of Rs 3/- each from the open market through Stock Exchange mechanism at a price not exceeding Rs 75/- per share for an aggregate amount not exceeding Rs 600,000 thousand, subject to a maximum of 11,000 thousand equity shares. In persuance to above approval, buy back has commenced on July 10,2013, Company has bought back 3,817,037 equity share of face value of Rs 3 each and out of them 3,804,416 equity shares of face value of Rs 3 each has been extinguished till date. For the purpose of providing dividend at the year end, these extinguished shares have not been considered.

7. In pursuance to the approval obtained from the members of Company by way of postal ballot, the Board of Directors of the Company in its meeting dated June 28,2013 has decided to sell/transfer the Mobile Handset Business of the Company to Spice Retail Limited(SRL), a wholly owned Subsidiary of the Company, as a going concern w.e.f. 1st July, 2013 by way of slump sale.

8 The Company has invested a sum of Rs. 878,375 thousand (Previous period Rs 808,375 thousand) in the equity shares of two of the subsidiaries. Further, the Company has receivable by way of interest free loans of Rs. 2,405,590 thousand (Previous period Rs. 2,382,090 thousand), trade receivables and advances of Rs. 369,469 thousand (Previous period Rs 208,942 thousand) from these companies. As per the latest audited financial statements of these subsidiaries, accumulated losses of these subsidiaries have resulted in erosion of their net worth substantially.

These being long term investments and also in view of the projected profitable operations of the above companies and / or fair value of the companies as at June 30, 2013, management is of the view that the diminution in the value of these investments is temporary in nature and hence no provision is required to be made against the investments made, loans given and outstanding receivables.

9. The Company follows Accounting Standard (AS-22) - "Accounting for taxes on Income, notified by Companies (Accounting Standards) Rules, 2006, (as amended). Due to losses incurred during the previous period, the Company has net deferred tax assets. Since there is no convincing evidence which demonstrates virtual certainty of realization of such deferred tax assets in the near future, the Company has not recognized the same.

10. The Board of Directors in its meeting held on June 28, 2013 decided to close down both the manufacturing units of the Company (i.e Unit I & Unit II) at Baddi (Himachal Pradesh), which were predominantly for manufacturing feature phone handsets, with immediate effect.

11. The Company has entered into an agreement to sale for Land and Building at Baddi at a consideration of Rs 35,000 thousand, having net written down value of Rs. 16,485 thousand as on June 30,2013. Company has received Rs.17,500 thousand as advance against such sale as at year end.

12. Independent Non-Promoter (Spice Employee Benefit) Trust (''Trust'') holds 11,901,752 Equity Shares of the Company as on 30th June, 2013, for the benefit of the employees of the Company, its associates and subsidiaries. These equity shares were transferred to the Trust pursuant to the Scheme of amalgamation of Spice Televentures Private Limited (''STPL''), at a value at which these equity shares were held in the books of STPL. During the year, the Trust has framed Share Reward Rules whereby certain shares held by the Trust may be transferred to eligible employees. The Company has been legally opined that the Share Reward Rules framed by the Trust are not covered under the ambit of employee welfare schemes of the Company as the said Rules have been framed by the Trust and not by the Company. Hence, the disclosure requirement under the Guidance Note on Accounting for Employee Share based payments issued by the Institute of the Chartered Accountants of India is not applicable to the Company.

13. Current year''s accounts are prepared for the twelve months period from July 1, 2012 to June 30, 2013. However, the Statement of profit and loss and cash flow of the Company for the last year was of fifteen months period from April 1,2011 to June 30,2012. Hence, current year''s figures are not comparable with those of the previous period.


Jun 30, 2012

1. Nature of operations

The Company is primarily engaged in the trading and manufacturing of Mobile handset and accessories. The Company has set up a plant at its facility in Baddi, in the state of Himachal Pradesh, for manufacturing of mobile handsets. On June 7, 2011, the name of the Company was changed from Spice Mobility Limited to S Mobility Limited.

2. Basis of preparation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared on an accrual basis and under the historical cost convention. The accounting policies have been consistently applied by the Company and are consistent with those of previous year, except for the change in accounting policy as explained below:

(a) Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of Rs. 3 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

During the period ended 30 June 20I2, the amount of dividend per share recognized as distributions to equity shareholders is Rs. I.50 (3I March 20II: Rs. I.50).

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

* Refer note no.40.

** Independent non-promoter trust which holds 35,301,215 equity shares of the Company has waived off its right to receive entire dividend on the equity shares proposed during the current period and previous year. Accordingly, provision made in the previous year for proposed dividend of Rs. 52,952 thousand in respect of these shares and tax thereon of Rs 8,590 thousand has been reversed during the period and no dividend has been provided on these shares in the current period.

Provision for warranties

A provision is recognized for expected warranty claims on products sold during last one year, based on past experience of level of customer service expenses. It is expected that significant portion of these costs will be incurred in the next financial year. Assumptions used to calculate the provision for warranties are based on past trend of sales of mobile handsets and customer service expenses incurred.

** Pursuant to amalgamation of Spice Distribution Limited (SDL) with Spice Retail Limited (SRL) with effect from July 31,2012 (appointed date April I, 2011), the Company has since received 794,262 equity shares against the shares of SDL in the ratio of I share of SRL for every 5 shares held in SDL.

*** The trust is holding 35,301,215 equity shares of the Company, the sole beneficiary of which is the Company.

3.1 Exceptional items

Exceptional item of Rs 23,514 thousand in the current period represents the provision made for dimunition in the value of long term investment in two companies.

Exceptional item of Rs 94,898 thousand in the previous year represented profit on sale of 35,818,763 equity shares of face value of Rs 10 each of Spice Distribution Limited, a 100% subsidiary of the company to Hindustan Retails Private Limited, another 100% subsidiary of the Company in view of internal restructuring of the Company.

b) Details of employee benefits

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 or part thereof in excess of six months. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summaries the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the gratuity plans:

4. Leases

operating lease: company as lessee

Office premises and office equipments are obtained on operating lease.There are no contingent rents in the lease agreements. The lease terms are for I-I0 years and renewable by mutual agreement of both the parties or at the option of the Company. There are no restrictions imposed by lease arrangements. There are no subleases and all the leases are cancellable in nature except for lease of one warehouse where there is a lock in period of three years.

operating lease commitments - Group as lessor

The company has entered into commercial property leases on its factory building at Baddi in the state of Himachal Pradesh & leasehold improvement carried out at building located in Noida. These non-cancellable leases have remaining terms between I - 20 years. There are no restrictions imposed by lease agreement and there are no contingent rents.

5. Segment information

Primary segments: Business Segments

During the period, the Company is engaged mainly in telecommunications- Mobile business which represents the business of trading / manufacturing of mobile handsets. The entire business has been considered as a single segment in terms of Accounting Standard-17 on Segment Reporting issued by the Institute of Chartered Accountants of India.

Secondary Segments: Geographical Segment

The analysis of geographical segment is based on geographical location of the customers.

The following table shows the distribution of the Company's consolidated revenue and trade receivables by geographical market:

Note: The Company has common assets for producing goods for Domestic Market and Overseas Markets. Hence, separate figures for assets/ additions to fixed assets cannot be furnished.

6. Capital & other commitments

a) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs. 787 thousand (Previous year Rs. 137,835 thousands).

b) For commitments relating to lease arrangements, refer note 27 above.

c) The Company has given comfort letter to its two subsidiary companies, whose net worth has been substantially eroded, to provide financial support in the future to enable them to settle their obligation as and when they fall due.(Refer note 42 below)

7. Contingent Liabilities

Contingent Liabilities (excluding interest, wherever applicable) not provided for in respect of:

a) Various Sales Tax Demands being disputed by the Company Rs. 29,234 thousands (previous year Rs. I5,563 thousands).*

b) Income Tax Demand being disputed by the Company Rs. 27,078 thousands (previous year Rs. Nil thousands).The Income Tax Department has adjusted refund of subsequent year with the demanded amount.*

c) Penalty under Foreign Trade (Development and Regulation) Act, I992, on account of non fulfilment of export obligation being disputed by the Company - Rs. 40,860 thousands (previous year Rs. 40,860 thousands).*

d) Demand raised by the Excise Authorities being disputed by the Company. The Company has deposited Rs. 2,000 thousand (Previous year Rs. 2,000 thousand) under protest and the same has been included in the note of Loans and Advances under balances with statutory / government authorities - Rs. 66,263 thousands (Previous year Rs. 66,263 thousands).*

e) Various other claims against the Company not acknowledged as debts - Rs. 4,327 thousands (Previous year Rs. 4,380 thousands)*.

* As per the management, the Company has fair chances of success in all these cases and hence no provision in respect thereof has been made in the books.

*Relates to Mr R S Desikan in the current period, the appointment of which is subject to approval of shareholders in the ensuing general meeting.

**The Company had paid remuneration aggregating to Rs. 28,574 thousand to two directors which was in excess of the limit laid down under Schedule XIII of the Companies Act,I956 by Rs 18,974 thousand. The directors have agreed to refund the excess remuneration to the Company. accordingly, the excess remuneration has been debited to the accounts of respective directors. Note: As the liabilities for gratuity and leave encashment are provided on an actuarial basis for the Company as a whole, the amounts pertaining to the Whole Time Director are not included above.

*An amount of Rs I5,049 thousand (Previous year Rs I3,228 thousand) has been paid as dividend to the Non Resident shareholders (including Foreign Institutional Investors).

8. Pursuant to the Scheme of Amalgamation ["the Scheme"] U/s 39I/394 of the Companies Act I956, Spice Televentures Private Limited (Transferor Company), the erstwhile Holding Company of the Company, was merged with the Company w.e.f. January 0I, 20I0 ["the appointed date"] in terms of the Orders dated November 2, 20I0 and October 8, 20I0 of the Hon'ble High Courts of judicature at Allahabad and New Delhi respectively, sanctioning the Scheme and was effective from November 4, 20I0. With effect from the appointed date, all the business undertaking, assets, liabilities, rights and obligations of the Transferor Company stood transferred to and vested in the Company.The accounting of said scheme of amalgamation was carried out in the last years' accounts.

9. Subsequent to financial year end, the members of the Company has accorded their approval with requisite majority by Postal Ballot for sale/transfer of mobile handset business of the Company to "S Mobile Devices Limited" a wholly subsidiary Company of the Company.

10. The Company has investment a sum of Rs. I,264,587 thousand in the equity shares of some of the subsidiaries. Further, the Company has receivable by way of loans, trade receivables and advances of Rs. 2,68I,376 thousand from these companies. As per the latest audited financial statements of these subsidiaries, accumulated losses of these subsidiaries have resulted in erosion of their net worth fully/ substantially.

These being long term investments and also in view of the projected profitable operations of the above companies and / or fair value of the companies as at June 30, 20I2, management is of the view that the diminution in the value of these investments is temporary in nature and hence no provision is required to be made against the investments made, loans given and outstanding receivables.

11. The Company follows Accounting Standard (AS-22) - "Accounting for taxes on Income, notified by Companies (Accounting Standards) Rules, 2006, (as amended). Due to losses incurred during the current period, the Company has net deferred tax assets. Since there is no convincing evidence which demonstrates virtual certainty of realization of such deferred tax assets in the near future, the Company has not recognized the same.

12. In an earlier year the asset of Rs. 8,978 thousand (net of Rs.50,802 thousand utilised during the previous year) recognized by the Company as 'MAT Credit Entitlement' under 'Loans and Advances', in respect of MAT payment by Spice Televentures Private Limited, amalgamated with the Company w.e.f. the appointed date January I, 2010, for the year 2009-10, represents that portion of MAT liability which can be recovered and set off in subsequent years based on the provisions of Section II5JAA of the Income Tax Act, I96I. The management based on future profitability projections, is of the view that there would be sufficient taxable income in foreseeable future, which will enable the Company to utilize MAT credit assets.

13. Till the year ended March 3I, 20II, the Company was using pre-revised ScheduleVI of the Companies Act, I956 for the preparation and presentation of its financial statements. During the period ended June 30, 20I2, the Revised Schedule VI notified under the Companies Act, I956 has become applicable to the Company. The Company has reclassified the 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 the preparation of financial statements. However, it significantly impacts presentation and disclosures made in the financial statements, particularly presentation of the balance sheet.

Current year's accounts are prepared for the fifteen months period April I, 20II to June 30, 20I2. However, the Statement of profit and loss of the Company for the last year was for the year ended March 3I, 20II. Hence, current period's figures are not comparable with those of the previous period.


Mar 31, 2011

1. Nature of Operations

The Company is primarily engaged in the trading and manufacturing of Mobile handsets and accessories. The Company has plant at its facility in Baddi, in the state of Himachal Pradesh, for manufacturing of mobile handsets.

2. Segment Information

Primary segments: Business Segments

During the current year, the Company is primarily engaged in telecommunications– Mobile business which represents the business of trading and manufacturing of mobile handsets and accessories.

In the last year, the Company was also engaged in Information Technology business which represented the business of manufacturing, trading, installation/erection and networking of computer hardware including maintenance and servicing thereof. During the year, as there is no activity in this segment and there are insignificant assets and liabilities related to this segment, the said business has been merged with mobiles business.

Secondary Segments: Geographical Segment

The analysis of geographical segment is based on geographical location of the customers.

Secondary Segment Reporting (by Geographical Segments)

3. Related parties :

List of related parties (As certified by the management)

Relation Name of the related party

Ultimate Holding Company : Spice Global Investments Private Limited (w.e.f. July 11, 2009, till December 31, 2009)

Holding Company : Spice Televentures Private Ltd. (till Dec 31,2009)

Spice Global Investments Private Limited (w.e.f. Jan 1, 2010 pursuant to Scheme of Amalgamation)

Subsidiaries including step down subsidiaries and enterprises where there is control.

: Spice Digital Limited

Hindustan Retail Private Limited

Kimaan Exports Private Limited (w.e.f. December 24, 2010)

Spice Retail Limited (Subsidiary of Hindustan Retail Private Limited)

Spice Distribution Limited (Subsidiary of Hindustan Retail Private Limited)

Spice Labs Pvt. Ltd. (Subsidiary of Spice Digital Limited)

Cellucom Retail India Private Limited (Subsidiary of Spice Retail Limited)

Mobisoc Technology Private Limited (Subsidiary of Spice Digital Limited)

Spice Mobile VAS Pte. Ltd. (Subsidiary of Spice Digital Limited)

Spice VAS (Africa) Pte. Ltd. (Subsidiary of Spice Mobile VAS Pte. Limited)

Spice Digital Nigeria Limited (Subsidiary of Spice VAS (Africa) Pte. Limited.)

Beoworld Sdn. Bhd (w.e.f. December 2, 2010) (Subsidiary of Spice Mobile VAS Pte. Limited.)

Spice VAS Uganda Ltd. (w.e.f. November 11, 2010) (Subsidiary of Spice VAS (Africa) Pte. Limited.)

Spice VAS Kenya Ltd. (w.e.f. March 31, 2011) (Subsidiary of Spice VAS (Africa) Pte. Limited.)

Fellow Subsidiaries : IO System Limited

Mudaliar & Sons Hotels Private Limited

Kimaan Exports Private Limited (Till December 24, 2010)

Spice Innovative Technologies Pvt. Ltd.

Spice Solar Technology Pvt. Ltd.

Spice Internet Service Provider Pvt. Ltd.

Spice Wimax Service Provider Pvt. Ltd.

Spice Investments & Finance Advisors Pvt. Ltd.

Spice Enfotainment Limited

Wall Street Finance Limited

Goldman Securities Pvt. Ltd.

Bharat Towers Private Limited

Spice Commodities Private Limited

Spice Stock Broking Private Limited

Spice Insurance Services Private Limited

Nutshell Technology Private Limited

Spice Solar Technology Rajasthan Private Ltd. (w.e.f. April 9, 2010)

Spice Online Retail Private Limited (w.e.f. December 20, 2010)

M Pictures Distribution Ltd. (till April 12, 2010)

G M Modi Hospitals Corporation Pvt Ltd

Harjas Logic Systems Private Limited

Individual having significant influence over the Company

: Mr. Dilip Modi Mrs. Veena Modi

Key Management Personnel (KMP) and their relatives

: Mr. Kunal Ahooja– CEO

Ms. Preeti Malhotra– Executive Director

Mr. Subramanian Murali – Group President, Finance

Mrs. Usha Murali (Wife of Mr. Subramanian Murali)

Enterprises over which individuals having significant influence over the Company is able to exercise significant influence

: Tuberose Investments Pvt. Ltd.

Spice i2i Limited (Formly Media Ring)

VCorp Mercantile Pvt Ltd

Prospective Infrastructures Pvt Ltd

Plus Paper Foodpac Ltd.

Duro International Rubber Pvt Ltd.

Plus Pac Holding Private Limited

Superior Information Technology Private Limited

Gcorp FZE– Sharjah

Ridh International FZE– Sharjah

Shenzhen Shibashi Catering Management Co.Ltd.

Spice Global Holding Pte Ltd.

Mcorp Investments Pte Ltd.

Spice Global Pte Ltd.

Spice Circle Pte Ltd.

Hollywood Travels & Tours Pte Ltd.

Spice Bulls Pte Ltd.

Spice Studio Pte Ltd.

Spice Investment Services Pte Ltd.

Spice Telnet Pte Ltd.

Innovative Management Pte Ltd.

Silvergram Ltd. ( A BVI Company)

Scorp Investments Ltd. ( A BVI Company)

Melodist Holdings Ltd. ( A BVI Company)

4. Amalgamation

a. Pursuant to the Scheme of Amalgamation ["the Scheme"] U/s 391/394 of the Companies Act 1956, Spice Televentures Private Limited (Transferor Company), the erstwhile Holding Company of the Company, stands merged with the Company w.e.f. January 01, 2010 ["the appointed date"] in terms of the Orders dated November 2, 2010 and October 8, 2010 of the Hon'ble High Courts of judicature at Allahabad and New Delhi respectively, sanctioning the Scheme and is effective from November 4, 2010. With effect from the appointed date, all the business undertaking, assets, liabilities, rights and obligations of the Transferor Company stood transferred to and vested in the Company.

c. In terms of the said Scheme, 163,448,285 equity shares of Rs.3 each aggregating to Rs. 490,345 thousand have been allotted to the equity shareholders of the Transferor Company in the ratio of 791 equity shares of Rs.3/– of the Company for 100 equity shares of the Transferor Company held by the shareholders of Transferor Company at face value.

d. All the equity shares of the Company as were held by the Transferor Company ("Trust Shares") have not been cancelled but have been transferred to and vested in two separate trusts, ("Independent Non– Promoter Trusts") as follows:

i) 1,19,04,314 equity shares of the face value of Rs. 3 each (cost of Rs 126,052 thousand) to the Independent Non– Promoter (Spice Employee Benefit) Trust, to have and hold such trust shares, in trust together with all additions or accretions thereto, exclusively for the benefit of the employees of the Transferor Company (or its successors) and its associates and subsidiaries; and

ii) 3,53,01,215 equity shares of the face value of Rs. 3 each (cost of Rs 373,799 thousand) to the Independent Non– Promoter Trust to have and hold such trust shares, in trust together with all additions or accretions thereto, exclusively for the benefit of the Transferor Company and its successors.

iii) As at March 31, 2011, the Trusts are still holding these shares. Further, the Employee Benefit Trust is yet to devise an employee benefit plan to give the benefit of the Trust shares to the employees.

e. Pursuant to the Scheme, an amount of Rs 4,282,816 thousand lying to the credit of Securities Premium Account in the books of the Transferor Company has been transferred to the General Reserves of the Company as free reserves, with effect from Jan 1, 2010.

f. The difference of Rs 469,681 thousand between the face value of equity shares allotted to the equity shareholders of the Transferor Company and the face value of equity shares of the Transferor Company of Rs. 20,664 thousand has been adjusted from the general reserves of the Company.

g. In terms of the Scheme, the Authorised Share Capital of the Transferor Company of Rs 120,000 thousand has merged with Authorised Share Capital of the Company.

h. As per the Scheme, during the period between Appointed Date and Effective Date, the Transferor Company has carried out the existing business in "trust" on behalf of the Company. Further, all profit or incomes earned and losses and expenses incurred by the Transferor Company during such period for all purposes is the profits or income or expenditure or losses of the Company. Accordingly, net losses after tax of Rs. 80,092 thousand incurred by the Transferor Company during the period from January 1, 2010 to March 31, 2010 have been shown in the financial statements of the Company of the current year.

i. Dividend amounting to Rs. 70,813 thousand paid to erstwhile holding company Spice Televentures Private Limited (STPL), has been reversed during the year, as the same has merged with the Company w.e.f the appointed date i.e. January 1, 2010 pursuant to the Scheme of Amalgamation.

j. The title deeds for leasehold, licenses, agreements, loan documents, etc of Spice Televentures Private Limited have been transferred/are in the process of being transferred in the name of the Company.

k. The audit /limited review of the accounts of the Transferor Company for the year ended March 31, 2010 and period ended December 31, 2009 was carried out by the previous statutory auditors i.e. Gupta, Garg & Agarwal. The Company has merged the accounts of the Transferor Company with the accounts of the Company w.e.f. January 1, 2010 i.e. the appointed date based on the accounts audited/reviewed by the previous auditors.

4. Leases

a) Assets taken under Operating Leases

Office premises and office equipments are obtained on operating lease. There are no contingent rents in the lease agreements. The lease terms are for 1–3 years and renewable by mutual agreement of both the parties. There is no escalation clause in the lease agreements. There are no restrictions imposed by lease arrangements. There are no subleases and all the leases are cancellable in nature except for lease of one warehouse where there is a lock in period of three years.

b) Assets given on Operating Leases

The Company has given some portion of factory building at Baddi in the state of Himachal Pradesh on operating lease. The initial lease terms are for 3 years and renewable at the option of the lessee for a maximum renewal period of 6 years. There are no restrictions imposed by lease agreement and there are no contingent rents.

c) A sum of Rs.8,587 thousand (previous year Rs.7,434 thousand) on account of unamortized foreign exchange premium on outstanding forward exchange contracts is being carried forward to be charged to Profit and Loss Account of the subsequent period.

5. Capital commitments:

Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 137,835 thousand (net of advances) [Previous year Nil].

6. i) In the opinion of the management, the decline in the market value of quoted investments by Rs. 2,415 thousand in the share capital of Spice Jet Limited at the year end is temporary and hence does not call for any provision there–against.

ii) The Company has an investment of Rs 68,060 thousand in the equity shares of Plus Paper Foodpac Limited (PPFL). As per the audited financial statements of PPFL for the year ended June 30, 2010, the value of one equity share as per net asset value is Rs 13.26; however, the Company has made the investments @ Rs 20 per share. The said company has earned profit during the financial years ended 31st March 2007, 31st March 2008 and 30th June 2010.

iii) The Company has invested a sum of Rs 1,358,137 thousand (including share application money of Rs 132,750 thousand) in the equity shares of some of the subsidiaries. Further, the Company has receivables by way of loans, debtors and advances of Rs 2,831,073 thousand from these companies. As per the latest audited financial statements of these subsidiaries, accumulated losses of these subsidiaries have resulted in erosion of their net worth fully / substantially.

These being long term investments and also in view of the projected profitable operations of the above companies and / or fair value of the companies as at March 31, 2011, management is of the view that the diminution in the value of these investments is temporary in nature and hence no provision is required to be made against the investments made, loans given and outstanding receivables.

7. Provisions and Contingencies

7.1 Provision for Warranty

A provision is recognized for expected warranty claims on products sold during last fourteen months, based on past experience of level of customer service expenses. It is expected that most of these payments would be made in the next financial year. Assumptions used to calculate the provision for warranties were based on past trend of sales of mobile handsets and customer service expenses incurred.

7.2 Contingent Liabilities (excluding interest, wherever applicable) not provided for in respect of:

(Amt. in Rs '000)

Year ended Year ended

March 31, 2011 March 31, 2010

(i) Various Sales Tax Demands being disputed by the Company. 15,563* 5,642*

(ii) Penalty under Foreign Trade (Development and Regulation) Act, 1992, 40,860* – on account of non fulfilment of export obligation being disputed by the Company.

(iii) Demand raised by the Excise Authorities being disputed by the Company. 66,263* 66,263* The Company has deposited Rs 2,000 thousand (Previous year Rs 2000 thousand) under protest and the same has been included in the Schedule of Loans and Advances.

(iv) Various other claims against the Company not acknowledged as debts. 4,380* –

* As per the management, the Company has fair chances of success in all these cases and hence no provision in respect thereof has been made in the books.

8. Details of employee benefits

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 or part thereof in excess of six months. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summaries the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the gratuity plans.

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

9. Exceptional item of Rs 94,898 thousand represents the profit on sale of 35,818,763 equity shares of the face value of Rs 10 each of Spice Distribution Limited, a 100% subsidiary of the Company, to Hindustan Retails Private Limited, another 100% subsidiary of the Company in view of internal restructuring of the Company.

10. The asset of Rs. 8,978 thousand (net of Rs.51,007 thousand utilised during the year) recognized by the Company as 'MAT Credit Entitlement' under 'Loans and Advances', in respect of MAT payment by Spice Televentures Private Limited, amalgamated with the Company w.e.f. the appointed date January 1, 2010, for the year 2009–10, represents that portion of MAT liability which can be recovered and set off in subsequent years based on the provisions of Section 115JAA of the Income Tax Act, 1961. The management based on the present trend of profitability and also the future profitability projections, is of the view that there would be sufficient taxable income in foreseeable future, which will enable the Company to utilize MAT credit assets.

11. The Company has entered into a brand licensing agreement with licensed owner of the Brand, pursuant to which certain expenses promoting the brand like sponsorship of major tournaments, TV commercial and Media spends etc. have been agreed to be undertaken by said licensor. Accordingly an amount of Rs. 286,701 thousand spent by the Company in brand promotion exercise during the six months ended September 30, 2010 has been recovered from the said licensor by debiting his accounts. With effect from October 1, 2010, such expenses have been borne directly by the licensor.

12. Previous year comparatives

i) Previous year's figures have been regrouped where necessary to conform to current year's classification.

ii) The accounts for the current year include figures of the amalgamated company "Spice Televentures Private Ltd.". Accordingly, the current year figures are not strictly comparable with those of previous year.


Mar 31, 2010

1. Nature of Operations

The Company is primarily engaged in the trading and manufacturing of Mobile handset and accessories. During the year, the Company has set up a plant at its facility in Baddi, in the state of Himachal Pradesh, for manufacturing of mobile handsets.

2. Segment Information

Primary segments: Business Segments

The Company is engaged in the Telecommunications – Mobiles business and Information Technology business. Telecommunications–Mobiles segment represents the business of trading / manufacturing of mobile handsets and Information Technology business represents the business of manufacturing, trading, installation/erection and networking of computer hardware including maintenance and servicing thereof.

Secondary Segments: Geographical Segment

The analysis of geographical segment is based on geographical location of the customers.

Note: The Company has common assets for producing goods for Domestic Market and Overseas Markets. Hence, separate figures for assets/ additions to fixed assets cannot be furnished.

3. Merger

The Board of Directors of the Company approved amalgamation of Spice Televenture Private Limited, its holding company, with the Company in the meeting held on January 30, 2010. Pursuant to this approval, the Company has on 15th April 2010, fi led with Honourable High Court at Allahabad (U.P.), a scheme of amalgamation entailing merger of the holding company with the Company. As per the said scheme, with effect from the Appointed Date i.e. January 01, 2010, the undertaking of the holding company, pursuant to the provisions contained in Sections 391 to 394 and other applicable provisions of the Companies Act 1956, shall stand transferred to and vested in the Company on a going concern basis without any further act, deed or matter. However, the amalgamation shall be effective from the date offi ling of the certified copy of the Order of the Honourable High Court with Registrar of Companies of Uttar Pradesh and Uttranchal. Pending the approval of the said High Court, the effect of the amalgamation has not been given.

4. Leases

a) Assets taken under Operating Leases

Office premises and office equipments are obtained on operating lease. There are no contingent rents in the lease agreements. The lease terms are for 1–3 years and renewable by mutual agreement of both the parties. There is no escalation clause in the lease agreements. There are no restrictions imposed by lease arrangements. There are no subleases and all the leases are cancellable in nature.

5. c) A sum of Rs.7,434 thousand (previous period Rs.3,230 thousand) on account of unamortized foreign exchange premium on outstanding forward exchange contracts is being carried forward to be charged to Profit and Loss Account of subsequent period.

6. Advances recoverable in cash or in kind or for value to be received as shown under Schedule 12 to the financial statements include Rs. 24,436 thousand (Previous period Rs. 26,044 thousand) receivable from a company with whom a binding sale agreement has been entered into for sale/transfer of some of the assets/liabilities of the IT Business.

7. Capital commitments:

Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. Nil (net of advances) [Previous period Rs. 581 thousand].

8. The Company has an investment of Rs 68,060 thousand in the equity shares of Plus Paper Foodpac Limited (PPFL). As per the latest provisional financial statements of PPFL as certified by the management, the value of one equity share as per net asset value is Rs 13.98; however, the Company has made the investments @ Rs 20 per share. The said company has earned profit during the financial years ended 31st March 2007, 31st March 2008 and 31st March 2010. This being long term investment and also in view of the projected profi table operations of the Company, the management is of the view that the diminution in the value of this investment is temporary in nature and hence no provision is required to be made there against.

9. Provisions and Contingencies

9.1 Provision for Warranty

A provision is recognized for expected warranty claims on products sold during last one year, based on past experience of level of customer service expenses. It is expected that most of these payments would be made in the next financial year. Assumptions used to calculate the provision for warranties were based on past trend of sales of mobile handsets and customer service expenses incurred.

9.2 Contingent Liabilities (excluding interest, wherever applicable) not provided for in respect of:

(Amt. in Rs 000)

Year ended Period ended

March 31, 2010 March 31, 2009

(i) Various Sales Tax Demands for the assessment periods 5,642* 5,573*

1991-92 to 2004-05 being disputed by the Company.

(ii) Demand raised by the Excise Authorities being disputed 66,263* 66,263*

by the Company. The Company has deposited Rs 2,000 thousand (Previous period Rs Nil) under protest and the same has been included in the Schedule of Loans and Advances.

(iii) Various other claims against the Company not acknowledged - 2,810* as debts.

* As per the management, the Company has fair chances of success in all these cases and hence no provision in respect thereof is made in the books.

10. Details of employee benefits

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 or part thereof in excess of six months. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summaries the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the gratuity plans.

Notes:

a. The actuarial valuation has been done from the year 2006–07 in accordance with the revised Accounting Standard 15, Employee benefi ts. Prior to that, the Actuarial valuation was done in accordance with the pre–revised Accounting Standard 15, Employee benefits. Accordingly, comparative numbers have been disclosed since the date of adoption.

b. Information relating to experience adjustments to plan assets and liabilities as required by Para 120 (n) (ii) of the Accounting Standard 15 (Revised) on Employee Benefits for earlier two periods is not available with the Company.

c. The Company has never had any obligation towards the provident fund trust except for the contributions due to the trust. Pending issuance of the Guidance Note from the Actuarial Society of India, the Companys actuary has expressed his inability to reliably measure the Provident Fund liability. Accordingly, no additional disclosures as required by paragraph 120 of AS 15 (revised 2005) have been furnished.

Note: As the liabilities for gratuity and leave encashment are provided on an actuarial basis for the Company as a whole, the amounts pertaining to the Manager / Whole Time Director are not included above.

Notes:

(1) As there are large numbers of items of IT peripheral and spare parts and spares parts of mobile handsets and there are no individual items accounting for 10 per cent or more of the value, the quantitative details in respect thereof have not been furnished.

(2) Purchase of mobile handsets are net of 26,030 units (Previous period 31,948 units) issued for warranty consumption.

(3) *Sales in value terms is included under the same of mobile handsets, being given under various schemes.

11. Previous period comparatives

i) Previous periods figures have been regrouped where necessary to conform to current periods classifi cation.

ii) The accounts for the current period have been prepared for 12 months and are not comparable with the previous period accounts prepared for 15 months.`

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