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Notes to Accounts of SRF Ltd.

Mar 31, 2015

1) Rights attached to equity shares :

(i) Right to receive dividend as may be approved by the Board / Annual General Meeting.

(ii) The equity shares are not repayable except in the case of a buy back, reduction of capital or winding up in terms of the provision of the Companies Act, 2013.

(iii) Every member of the Company holding equity shares has a right to attend the General Meeting of the Company and has a right to speak and on a show of hands, has one vote if he is present in person and on a poll shall have the right to vote in proportion to his share of the paid-up capital of the Company.

2) Terms of redemption of 11% cumulative redeemable preference share of Rs. 100:

In the year ended 31st March, 2008 the Company had re-negotiated the coupon rate from 9% to 2% with effect from 18th Sept, 2002 to 31st March, 2005 and at 6% from 1st April, 2005 onwards and the repayment terms extended to 12 years repayable @ Rs. 20 per year (face value Rs.100 each) at the end of 8th, 9th, 10th, 11th and 12th year or such earlier years as the Company may deem fit. Till the completion of 12th year, the Company repaid Rs. 950 lakhs and re-negotiated the redemption terms of the Preference Shares . As per the revised terms, balance of Rs 50 lakhs will be redeemed equally over the period of two years on 18th June, 2015 and 18th June, 2016 with an enhanced coupon rate of 11% p.a. effective 18th June, 2014 till its redemption. Also pursuant to section 55 of the Companies Act, 2013, the Company has transferred Rs. 150 lakhs from current year profits (Rs. 200 lakhs in previous year) to Capital Redemption Reserve.

Considering the improved financial results the board has decided to pay dividend in arrears on 11% cumulative redeemable preference shares @ 6% for the period from 1st April, 2007 to 31st March, 2011 aggregating Rs. 230.56 lakhs.(Previous year : for the period 1st April, 2006 to 31st March 2007 @ 6% aggregating Rs. 60.00 Lakhs). After considering the effect of dividend , as stated above, arrears of cumulative dividends on the 11% Cumulative Redeemable preference Shares, considering the revised coupon rates is Rs. 86.57 lakhs (as at 31.03.2014 : Rs. 310.25 lakhs)

3. Additional information to the financial statements:

(a) Contingent liabilities not provided for :

The Company had received an Order dated 6th September, 2004 from the Employees Provident Fund Organisation raising a demand of Rs. 161.36 lakhs including interest of Rs. 46.73 lakhs for default in making payment of Employees Provident Fund and allied dues for the period April, 1986 to February, 2003. The Company has been making contributions to the ''SNL Officers Provident Fund Trust'' and ''SNL Employee''s Provident Fund Trust'', being Trusts formed by the Company in earlier years; these Trusts have net assets of Rs. 122.20 lakhs and Rs. 69.64 lakhs respectively as at 31st March, 2014 as reflected in their audited balance sheets. As per the order, the existence of the said Trusts and the act of switching over from Employees trust to the Officers trust on salary exceeding the statutory limit fixed by the Employees Provident Fund and Miscellaneous Act,1952, have been considered violative of the Act. The authorities had attached one of the Company''s bank accounts and had recovered an amount of Rs. 2.75 lakhs in an earlier year. The Company has contested the above demand and on a writ petition filed by the Company in the High Court of Jharkhand, Ranchi, the High Court has directed the authorities not to take coercive steps till the disposal of the petition. The Company denies all the allegations made against it since the Company had made the necessary applications to grant exemption to the Trusts which was neither granted nor rejected in spite of several reminders from time to time. In view of the facts of the case, the Company does not expect any liability in this regard.

(b) There are no amounts due to the suppliers covered under Micro, Small and Medium Enterprises Development Act, 2006; this information takes into account only those suppliers who have responded to the enquiries made by the Company for this purpose. The auditors have relied on the representation made by the management.

(c) Related party disclosures:

(i) Names of related parties and nature of relationship where control exists:

Holding Company : - NRB Bearings Limited

Fellow Subsidiary : - NRB Bearings (Thailand) Limited

Company over which relatives of KMP are able to exercise

significant influence : - NRB Industrial Bearings Limited

Key Management Personnel : - Ms. H. S. Zaveri

- Mr. S. C. Rangani

4.Notes:

a. The company''s best estimate of contributions expected to be paid to the plan during the annual period beginning after 31st March, 2015 is Rs. 17.12 lakhs and for previous year was Rs. 8.37 lakhs.

b. Compensated absences recognized in the statement of profit and loss for the current year, under the employee cost in note 22, is Rs. 12.27 lakhs and for previous year was Rs. 2.63 lakhs.

5) Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.


Mar 31, 2014

1. Contingent liabilities not provided for

a. Claims against the Company not acknowledged as debts:

As at As at March 31, 2014 March 31, 2013 (Rs.lakhs) (Rs.lakhs)

Excise duty, customs duty and service tax*@ 6182.32 6290.11

Sales Tax and entry tax (refer note ''b'' below)**@ 9615.65 9602.63

Income Tax**** 676.63 778.79

Stamp Duty***** 2881.55 2881.55

Others *** 940.73 576.39

* Amount deposited Rs. 455.85 lakhs (Previous year - Rs. 448.69 lakhs)

** Amount deposited Rs. 16.60 lakhs (Previous Year - Rs. 9.75 lakhs)

*** Amount deposited Rs. 8.00 lakhs (Previous Year – Rs. 8.00 lakhs)

**** Amount deposited Rs. 162.41 lakhs (Previous year – Rs. 501.65 lakhs)

***** In the matter of acquisition of the Tyrecord Division at Malanpur from Ceat Limited the Collector of Stamps, Bhind (Madhya Pradesh) has by his order dated 07.11.2001 assessed the value of the subject matter of the Deed of Conveyance dated 13.06.1996 at Rs. 30300 lakhs and levied a stamp duty of Rs. 2372.50 lakhs and imposed a penalty of Rs. 509.05 lakhs. The said demand was challenged before the High Court of Madhya Pradesh Bench at Gwalior. The High Court accepted the case of the Company that the subject matter of the Deed of Conveyance dated 13.06.1996 is only the superstructures valued at Rs. 2776.18 lakhs and not the entire undertaking valued at Rs. 30300 lakhs as claimed by the State. Consequently, the High Court of Madhya Pradesh quashed the order and demands issued by the Collector of Stamps, Bhind (Madhya Pradesh) and allowed the writ petition by an order dated 29 November 2004. Against the said order, the State of Madhya Pradesh preferred a Special Leave Petition before the Hon''ble Supreme Court which the State of Madhya Pradesh has withdrawn to enable it to approach the Hon''ble High Court of Madhya Pradesh at Gwalior in view of the change in law in the State of Madhya Pradesh relating to Letters Patent Appeal.

@ As per Business Transfer Agreement with KAMA Holdings Limited, the liabilities of Rs. 2064.30 lakhs (Previous Year - Rs. 2064.30 lakhs) and Rs. 38.00 lakhs (Previous Year - Rs. 38.00 lakhs) respectively towards Excise Duty and Sales tax are covered under Representations and Warranties.

All the above matters are subject to legal proceedings in the ordinary course of business. In the opinion of the management, the legal proceedings, when ultimately concluded, will not have a material effect on the results of the operations or financial position of the Company.

b. The Company had received demand notices from the Commercial Tax Department, Government of Madhya Pradesh ("State Government") for payment of Central Sales Tax (CST), Value Added Tax (VAT) and Entry Tax aggregating to Rs. 9491 lakhs (including interest and penalty) for the period from 2007 to 2013 in respect of sales from its manufacturing facility in Special Economic Zone (SEZ) in Madhya Pradesh to the Domestic Tariff Area (DTA).

In terms of the Policy of the Government of Madhya Pradesh and Madhya Pradesh SEZ Act, 2003, the Unit was exempt from local state taxes and levies. The Company has paid Additional Countervailing Duty (ACVD), to counter balance CST/ VAT, aggregating to Rs. 4831 lakhs for the period from 2007 to 2013 on sales from the SEZ to the DTA under the Customs laws pursuant to the Special Economic Zone Act 2005, MP SEZ Act, 2003 and the Policy of Centre and Madhya Pradesh State. The Company had filed a writ petition before the Indore Bench of the Hon''ble High Court of Madhya Pradesh ("Court") against the said demands.

The Company contended that while State is demanding local taxes, the Centre in its reply has stated that ACVD is payable and therefore this amounts to double taxation.

The Court has directed the State Government not to take any coercive steps for recovery of demand.

The matter is sub judice and is listed for further proceedings on 12 May 2014. The Management of the Company, based on the facts of the case and opinion received by the Company from legal experts, is confdent of getting a relief in the matter from the Court and, accordingly, has not made any provision for the said disputed demands.

c. Liability on account of Bank Guarantees Rs. 445.74 lakhs (Previous Year – Rs. 823.82 lakhs)

e. Guarantees given to banks for repayment of financial facilities availed by others – Rs. 250.00 lakhs (Previous Year – Rs. 250.00 lakhs). Outstanding amount as at the year-end is Rs. 99.99 lakhs (Previous Year – Rs. 66.69 lakhs).

f. The Company has been served with show cause notices regarding certain transactions as to why additional customs/excise duty amounting to Rs. 369.15 lakhs (Previous year - Rs. 266.79 lakhs) should not be levied. The Company has been advised that the contention of the department is not tenable and hence the show cause notice may not be sustainable.

2. Capital and other commitments

The estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) amounts to Rs. 5283.16 lakhs (Previous Year - Rs. 16989.76 lakhs).

Further, the Company is to make the following investments:

i) Capital expenditure projects for Packaging Films Business in South Africa and Thailand – Rs. Nil (Previous Year – USD 33.06 million i.e. equivalent to Rs. 17944.97 lakhs).

ii) SRF Holiday Home Limited – Rs. 72.50 lakhs (Previous Year – Rs. 120.00 lakhs)

The Company has other commitments, for purchase/sales orders which are issued after considering requirements per operating cycle for purchase/sale of goods and services, employee benefits including union agreements in normal course of business. The Company does not have any other long term commitments or material non-cancellable contractual commitments/contracts, which may have a material impact on the financial statements.

3. Managerial remuneration

As there is a global contribution to gratuity fund, the amount applicable to an individual employee is not ascertainable and accordingly, contribution to gratuity fund in respect of directors has not been considered in the above computation. Further, the liability on account of compensated absences in respect of directors has not been considered above, since the provision is based on an actuarial basis for the Company as a whole.

4. Employee benefits

The Company has classifed various benefits provided to employees as under: i) Defined contribution plans

a) Superannuation fund

b) Provident fund administered through Regional Provident Fund Commissioner

c) Employees'' State Insurance Corporation

The expenses incurred on account of the above benefits have been included in Note 25 "Employee benefits Expenses" under the head "Contribution to provident and other funds"

ii) Defined benefit plans a) Gratuity

b) Compensated absences – earned leaves

c) Provident fund for certain category of employees administered through a recognised provident fund trust

The Company''s best estimate of the contribution expected to be paid in the next year is Rs. 474.37 lakhs (Previous Year – Rs. 583.13 lakhs) for gratuity and Rs. 344.93 lakhs (Previous Year - Rs. 380.34 lakhs) for leave encashment.

Long Term Retention Pay

The Company has a Long Term Retention Pay Plan. The plan covers employees selected on the basis of their current band and their long term value to the Company. The incentive is payable in three years which commenced from financial year 2010-11 subject to achievement of certain performance ratings. Based on actuarial valuation, the Company has accrued Rs. 212.79 lakhs (Previous Year – Rs. 244.71 lakhs) towards this plan till 31 March 2014.

Superannuation - Defined Contribution Plan where contributions are made to a Trust which in turn contributes to ICICI Prudential Life Insurance Co. Limited

Apart from being covered under the Gratuity Plan described above, the employees of the Company also participate in a Defined contribution superannuation plan maintained by the Company. The Company has no further obligations under the plan except making annual contributions based on a specified percentage of each covered employee''s salary. From 1 November 2006, the Company provided an option to the employees to receive the said benefit as cash compensation along with salary in lieu of the superannuation benefit. Thus, no contribution is required to be made for the category of employees who opted to receive the benefit in cash.

Provident Fund

In addition to the above benefits, all employees are entitled to Provident Fund benefits as per the law. For certain category of employees the Company administers the benefits through a recognised Provident fund trust. For other employees contributions are made to the regional Provident Fund Commissioners as per law. The Government mandates the annual yield to be provided to the employees on their corpus. This plan is considered as a Defined Contribution Plan. For the frst category of employees (covered by the Trust), the Company has an obligation to make good the shortfall, if any, between the yield on the investments of the trust and the yield mandated by the Government and these are considered as Defined benefit Plans accounted for on the basis of an actuarial valuation. The details of the valuation are as below:

5. Segment reporting

A. Business segments

Based on the guiding principles laid down in Accounting Standard (AS) - 17 "Segment Reporting", the Company''s business segments include:

- Technical Textiles business: includes nylon tyre cord fabric, belting fabric, coated fabric, laminated fabric, polyester tyre cord fabric and industrial yarns and its research and development.

- Chemicals and Polymers business: includes refrigerant gases, chloromethanes, pharmaceuticals, certified Emissions Reductions & Allied products, Engineering Plastics business and its research and development.

- Packaging Film Business includes Polyester Films.

Segment revenue, Results and Capital Employed include the respective amounts identifable to each of the segments. Other unallocable expenditure includes expenses incurred on common services provided to the segments, which are not directly identifable.

In addition to the significant accounting policies applicable to the business segments as set out in note 1 above, the accounting policies in relation to segment accounting are as under:

a) Segment revenue and expenses

Joint revenue and expenses of segments are allocated amongst them on a reasonable basis. All other segment revenue and expenses are directly attributable to the segments.

b) Segment assets and liabilities

Segment assets include all operating assets used by a segment and consist principally of operating cash, debtors, inventories and fixed assets, net of allowances and provisions, which are reported as direct offsets in the balance sheet. Segment liabilities include all operating liabilities and consist principally of creditors and accrued liabilities and do not include deferred income taxes. While most of the assets/liabilities can be directly attributed to individual segments, the carrying amount of certain assets/liabilities pertaining to two or more segments are allocated to the segments on a reasonable basis.

6. Foreign currency exposure

SRF has three diverse businesses with transactions both in the nature of imports and exports. This provides a natural hedge against the exchange rate fuctuations. As per the board mandated policy, hedging is done the basis of net exposure. Further, with respect to volatility in interest rates, certain hedging transactions are entered into by the Company. Various kind of instruments are used for hedging which are mandated as per regulatory requirements and board guidelines.

7. In the previous year, pursuant to the adoption of Guidance Note on Accounting for Self-Generated certified Emission Reductions (CER) effective 1 April 2012, the stock of CER as on 1 April 2012 has been recognised at cost amounting to Rs. 135.22 lakhs, net of tax of Rs. 43.87 lakhs, by adjusting ''Surplus in statement of Profit and loss'' by Rs. 91.35 lakhs.

8. The Company had opted to apply the provisions under paragraph 46A of Accounting Standard (AS) - 11 "The Effects of Changes in Foreign Exchange Rates" with effect from 1 April 2013. Accordingly, exchange difference of Rs. 4872.23 lakhs, arising on all long term monetary items relating to acquisition of depreciable assets are added to the cost of Fixed Assets/Capital Work in Progress and will be depreciated over the balance useful life of the assets. The unamortised portion carried forward as at 31 March 2014 is Rs. 4514.50 lakhs. As a result of such change, the net Profit after tax for the year is higher by Rs. 2297.53 lakhs.

9. The Company has established a comprehensive system of maintenance of information and documents as required by transfer pricing legislation under section 92D for its international transactions as well as specified domestic transactions. Based on the transfer pricing regulations/policy, the transfer pricing study for the year ended 31 March 2014 is to be conducted on or before due date of the fling of return and the Company will further update above information and records based on the same and expects these to be in existence latest by that date. Management believes that all the above transactions are at arm''s length price and the aforesaid legislations will not have impact on the financial statement, particularly on the amount of tax expense and provision for taxation.

10. Previous year''s fgures have been regrouped/reclassified, wherever necessary, to correspond with the current year''s classification/ disclosure.


Mar 31, 2013

1 Corporate information:

SNL Bearings Limited, established in 1983, is engaged in the manufacture and marketing of antifriction bearing products. The holding company NRB Bearings acquired the company on June 01, 2000.

2 Additional information to the fnancial statements:

(a) Contingent liabilities not provided for :

(i) The Company had received an Order dated 6th September, 2004 from the Employees Provident Fund Organisation raising a demand of Rs. 161.36 lakhs including interest of Rs. 46.73 lakhs for default in making payment of Employees Provident Fund and allied dues for the period April, 1986 to February, 2003. The Company has been making contributions to the ''SNL Offcers Provident Fund Trust'' and ''SNL Employee''s Provident Fund Trust'', being Trusts formed by the Company in earlier years; these Trusts have net assets of Rs. 91.68 lakhs and Rs. 55.30 lakhs respectively as at 31st March, 2012 as refected in their audited balance sheets. As per the order, the existence of the said Trusts and the act of switching over from Employees trust to the Offcers trust on salary exceeding the statutory limit fxed by the Employees Provident Fund and Miscellaneous Act,1952, have been considered violative of the Act. The authorities had attached one of the company''s bank accounts and had recovered an amount of Rs. 2.75 lakhs in an earlier year. The company has contested the above demand and on a writ petition fled by the company in the High Court of Jharkhand, Ranchi, the High Court has directed the authorities not to take coercive steps till the disposal of the petition. The Company denies all the allegations made against it since the company had made the necessary applications to grant exemption to the Trusts which was neither granted nor rejected in spite of several reminders from time to time. In view of the facts of the case, the company does not expect any liability in this regard.

(ii) Provident fund and other matters in respect of workers: Nil, (as at 31.03.2012 : Rs. 5.05 lakhs).

(iii) Disputed penalty claim by the Central Excise and Service Tax Department vide order C.V.No. (65) (12) 79/SNL/Denovo/Adjn/Ran/11 dated January 8, 2013 under section 78 of the Finance Act, 1994 amounting to Rs. 1,170,248/- and an addtional penality of Rs 2,000/- for non-compliance with rules 4 & 7 of the Service Tax Rules, 1994, in respect of failure to pay service tax on lease rent received for leasing of equipments during the fnancial periods ending March 31, 2003, 2004, 2005 and 2006. Further, interest is also levied on the above dues by the said depatment in terms of section 75 of the Finance Act, 1994. The Company has, in earlier years, paid the service tax dues amounting to Rs.1,170,248/- against show cause notice C.V.No. V(4)65/ADJ/RAN/06/3208 dated May 22, 2007 in respect of the said service tax liability on lease rent received. Further, during the year the Company has paid Rs.294,562/- in terms of proviso to section 78 under protest in respect of the penalty claim as discussed above. The Company is of the view that the order will be settled in their favor and accordingly has not made any provison in the books of account for the year ended March 31, 2013.

(b) There are no amounts due to the suppliers covered under Micro, Small and Medium Enterprises Development Act, 2006; this information takes into account only those suppliers who have responded to the enquiries made by the Company for this purpose. The auditors have relied on the representation made by the management.

(c) Related party disclosures:

(i) Names of related parties and nature of relationship where control exists: Holding Company: - NRB Bearings Limited

Fellow Subsidiary : - NRB Bearings (Thailand) Limited

Group Company : - NRB Industrial Bearings Limited

Key Management Personnel : - Ms. H. S. Zaveri

- Ms. A. A. Gowariker

- Mr. S. C. Rangani

- M r. J. S. Maini

- M r. V. S. Iyer

VII Notes:

a. The company''s best estimate of contributions expected to be paid to the plan during the annual period beginning after 31st March, 2013 is Rs. Nil.

b. Compensated absences recognized in the statement of proft and loss for the current year, under the employee cost in note 24, is Rs. 4.91 lakhs and for previous year was Rs. 2.84 lakhs.

3 Previous year''s fgures have been regrouped / reclassifed wherever necessary to correspond with the current year''s classifcation / disclosure.

 
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