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Notes to Accounts of Spice Mobility Ltd.

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.

 
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