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Notes to Accounts of Sundaram Finance Ltd.

Mar 31, 2015

1 Net proceeds from SFL Share Trust

During the year, SFL Shares Trust sold 17,37,012 equity shares of Sundaram Finance Limited. These shares accrued to the Trust on account of the merger of Lakshmi General Finance Limited with Sundaram Finance Limited, in the year 2005, in accordance with a Scheme of Amalgamation approved by the High Court of Madras. Sundaram Finance Limited, being the sole beneficiary of the Trust received an amount of Rs.25655.70 lakhs arising from the sale of above shares and credited the same directly to the Capital Reserve, in line with the underlying substance of the transaction.

2 During the year, the Company entered into an agreement with Royal Sun Alliance Plc UK (RSA) whereby the Company would acquire 26% equity stake of RSA in Royal Sundaram Alliance Insurance Company Ltd (Royal Sundaram) for a consideration of Rs.450 Crores which is awaiting regulatory approvals. The Company currently holds 49.90% in Royal Sundaram and the said acquisition would increase its holding to 75.90%.

3 The Company has spent an amount of Rs.913.95 lakhs towards Corporate Social Responsibility (CSR) under Sec 135 of the Companies Act 2013, in the various areas covered under the regulatory provisions like health care, education, environment and protection of art and culture.

4 RELATED PARTIES DISCLOSURES:

Related party disclosures, as per Accounting Standard 18 - ''Related Party Disclosures'', for the year ended 31st March 2015, are given below:

RELATED PARTIES:

Subsidiary Companies: Associates:

Sundaram BNP Paribas Home Finance Ltd. Axles India Ltd.

Sundaram Asset Management Company Ltd. Turbo Energy Private Ltd.

Sundaram Asset Management Singapore Pte Ltd. Transenergy Ltd.

Sundaram Trustee Company Ltd. Sundaram Dynacast Private Ltd.

Sundaram Business Services Ltd. Sundaram Hydraulics Ltd.

Sundaram BPO India Ltd. Flometallic India Private Ltd.

Sundaram Insurance Broking Services Ltd. The Dunes Oman LLC (FZC)

Sundaram Finance Distribution Ltd.

LGF Services Ltd.

Sundaram BNP Paribas Fund Services Ltd.

Sundaram Infotech Solutions Ltd.

Infreight Logistics Solutions Ltd.

Sundaram Parekh Warehousing Services Ltd.(merged with Infreight Logistics Solutions Ltd. with effect from 01.04.2014)

Joint Ventures:

Royal Sundaram Alliance Insurance Company Ltd.

BNP Paribas Sundaram Global Securities Operations Private Ltd (BNP Paribas Sundaram GSO)

Key Management Personnel:

Mr T T Srinivasaraghavan, Managing Director

Mr Harsha Viji, Director (Strategy & Planning)

Mr A N Raju, Director (Operations)

5 The pending litigations as on 31st March 2015 have been compiled by the company and reviewed by the Statutory Auditors. The current position of the litigation has been evaluated and the effect thereof has been appropriately disclosed in the financial statements.

6 The Company preferred an appeal against the demand raised by the Commissioner of Customs, Tuticorin, in respect of a lease transaction. The Customs Excise and Service Tax Appellate Tribunal (CESTAT) in its Order, remanded the appeal to the Adjudicating Commissioner for requantifying the duty. The Commissioner of Customs, Tuticorin vide Order dated 19.12.2012, re-quantified the duty at Rs.43.79 lakhs. The company filed an appeal against the Order and remitted the duty under protest.

The Hon''ble High Court of Madras granted an interim stay against the collection of penalty of Rs.10 lakhs imposed by CESTAT.

The Special Director of Enforcement, New Delhi, imposed a penalty of Rs.10 lakhs on the Company. The Company has preferred an appeal against the penalty with the Appellate Tribunal for Foreign Exchange and obtained a stay after remitting Rs.2.50 lakhs as directed by the Tribunal. Meanwhile the company has initiated arbitration proceedings against the Lessee and has received an award in its favour.

7 Contingent liabilities in respect of (Rs. in lakhs)

31.03.2015 31.03.2014

a) Liability - To Banks -on Cheques discounted 3,41.05 6,97.09

on Letters of Credit 22,76.74 7,57.91

b) Claims against the company not acknowledged as debts:

Service Tax 75,89.23 64,84.63

Others 14,90.22 15,84.04

8 Estimated amount of contracts remaining to be executed on capital account - v312.65 lakhs (net of advances of Rs.611.87 lakhs) (31.03.2014 - Rs.508.63 lakhs, net of advances of Rs.346.56 lakhs) Investment in Partly paid-up Equity shares Rs.550.00 lakhs (31.03.2014 - Rs.1,098.90 lakhs)

9 Based on the current assessment of the long-term contracts in the ordinary course of business, the Company has made adequate provision for losses where required.

The derivative contracts have been entered into for hedging the foreign currency liability and interest liability. Derivative contracts being in the nature of hedge contracts, the Company does not anticipate any material losses from the same.

10 Exchange Traded Interest Rate (IR) Derivaties : NIL

11 Details of Financial Assets Sold to Securitisation / Reconstruction

Company for Asset Reconstruction: NIL

12 Details of non-performing financial assets purchased / sold during the year 2014-15:

A Details of non-performing financial assets purchased : NIL

B Details of non-performing financial assets sold : NIL

13 Details of financing of parent company products: NIL

14 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the company : NIL

15 Registration obtained from other financial sector regulators: IRDA - Composite Corporate Agency

16 Disclosure of penalties imposed by

Reserve Bank of India and other regulators : NIL

17 Overseas Assets (for those with Joint Ventures and Subsidiaries abroad) NIL

18 Off-balance sheet SPVs sponsored NIL

(which are required to be consolidated as per accounting norms)


Mar 31, 2014

1.1 Segment Reporting

Segment information is presented in the Consolidated Financial Statements in terms of the Accounting Standard 17 - Segment Reporting.

1.2 The Company preferred an appeal against the demand raised by the Commissioner of Customs, Tuticorin, in respect of a lease transaction. The Customs Excise and Service Tax Appellate Tribunal (CESTAT) in its Order, remanded the appeal to the adjudicating Commissioner for Re quantifying the duty. The Commissioner of Customs, Tuticorin vide order dated 19.12.2012, re-quantified the duty at Rs. 43.79 lakhs. The company fled an appeal against the order and remitted the duty under protest.

The Hon''ble High Court of Madras granted an interim stay against the collection of penalty of Rs. 10 lakhs imposed by CESTAT.

The Special Director of Enforcement, New Delhi, imposed a penalty of Rs. 10 lakhs on the Company. The Company has preferred an appeal against the penalty with the Appellate Tribunal for Foreign Exchange and obtained a stay after remitting Rs. 2.50 lakhs as directed by the Tribunal. Meanwhile the company has initiated arbitration proceedings against the Lessee and has received an award in its favour.

2. Estimated amount of contracts remaining to be executed on capital account – Rs. 508.63 lakhs (net of advances of Rs. 346.56 lakhs) (31.03.2013 – Rs. 1949.34 lakhs, net of advances of Rs. 101.54 lakhs)

Investment in Partly paid-up Equity shares Rs. 1098.90 lakhs (31.03.2013 – Nil).

3. There are no amounts due to Small Scale Industries in terms of "The Micro, Small and Medium Enterprises Development Act, 2006".

4. Contingent liabilities in respect of (Rs. in lakhs)

31.03.2014 31.03.2013

a) Liability –

To Banks – on Cheques discounted 6,97.09 16,46.19

on Letters of Credit 7,57.91 3,94.67

b) Claims against the company not acknowledged as debts:

Hire Purchase/Lease transactions – 31.07

Service Tax 64,84.63 61,04.70

Others 16,37.83 14,13.47

5. Previous year''s figures have been regrouped /reclassified wherever necessary to conform to the current year''s presentation.


Mar 31, 2013

1.1 Segment Reporting

Segment information is presented in the Consolidated Financial Statements in terms of the Accounting Standard 17 - Segment Reporting.

1.2 The details of securitised assets outstanding as on 31st March 2013 as per books of the Special Purpose Vehicles (SPV) sponsored by the Company are given below

1.3 In December 2012, the Reserve Bank of India, issued draft guidelines on the regulatory framework for NBFCs, which, inter alia, propose that the asset classification and provisioning norms for NBFCs should, in a phased manner, be made similar to those for banks. In view of the imminent tightening of regulations, the Company has made a provision of Rs. 1,581 lakhs on assets whose instalments are overdue for 120 days and above. Further, given the difficult economic environment, the Company has, as a measure of prudence, made an additional provision of Rs. 2,091 lakhs during the year.

1.4 The Company preferred an appeal against the demand raised by the Commisioner of Customs, Tuticorin, in respect of a lease transaction. The Customs Excise and Service Tax Appellate Tribunal (CESTAT) in its Order, remanded the appeal to the adjudicating Commissioner for requantifying the duty. The Commissioner of Customs, Tuticorin vide its order dated 19.12.2012, re-quantified the duty at Rs. 43.79 lakhs. The Company filed an appeal against the order and remitted the duty under protest.

The Hon''ble High Court of Madras granted an interim stay against the collection of penalty of Rs. 10 lakhs imposed by CESTAT.

The Special Director of Enforcement, New Delhi, imposed a penalty of Rs. 10 lakhs on the Company. The Company has preferred an appeal against the penalty with the Appellate Tribunal for Foreign Exchange and obtained a stay after remitting Rs. 2.50 lakhs as directed by the Tribunal. Meanwhile the Company has initiated arbitration proceedings against the Lessee and has received an award in its favour.

1.5 Estimated amount of contracts remaining to be executed on capital account - Rs. 1,949.34 lakhs (net of advances of Rs. 101.54 lakhs) (31.03.2012 - Rs. 774.63 lakhs, net of advances of Rs. 2,204.47 lakhs)

1.6 There are no amounts due to Small Scale Industries in terms of "The Micro, Small and Medium Enterprises Development Act, 2006".

1.7 Contingent liabilities in respect of (Rs. in lakhs)

31.03.2013 31.03.2012

a) Liability -

To Banks - on Cheques discounted 16,46.19 15,08.96

on Letter of Credit 3,94.67 28,28.95

b) Claims against the Company not acknowledged as Debts:

Hire Purchase / Lease transactions 31.07 31.07

Service Tax 61,04.70 45,01.73

Others 14,13.47 12,54.69

1.8 Previous year''s figures have been regrouped /reclassified wherever necessary to conform to the current year''s presentation.


Mar 31, 2012

A) Paid-up share capital includes 5,09,75,545 Equity Shares allotted as fully paid-up by way of bonus shares by Capitalisation of Reserves and Securities Premium and 37,75,965 Equity Shares allotted for consideration other than cash pursuant to a Scheme of Amalgamation.

b) The number of shares outstanding at the beginning and at the end of the reporting period are the same.

c) No shareholder of the Company holds more than 5% of the Equity Shares.

d) The Company issued 2,77,75,965 Equity Shares by way of bonus shares during the financial year 2008-09.

The Secured Non Convertible Debentures are secured by mortgage of immovable property ranking pari passu with charges created in favour of the trustees in addition to specific assets covered by charge on Hypothecation Loan receivables / Hire purchase / Lease agreements with a security cover of 100% / 125%, as per the terms of issue.

The Term loans from banks are secured by hypothecation of specific assets covered by a charge on Hypothecation Loan Receivables / Hire purchase / Lease agreements.

The Unsecured Subordinated Non Convertible Debentures are subordinated to the existing and future unsecured borrowings of the Company and qualify as Tier II Capital under the Non Banking Financial (Deposit accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2007.

Working capital demand loans and cash credit are secured by hypothecation of assets covered by charge on Hypothecation Loan Receivables, Hire Purchase / Lease agreements, ranking pari passu, excluding assets which are specifically charged to others.

Refer Note 4 for Security provided for Term Loans from Banks and Non-Convertible Debentures.

Face value of commercial paper outstanding as on 31.03.2012 was Rs 555,00.00 lakhs (31.03.2011 - Rs 580,00.00 lakhs). Maximum amount of face value of commercial paper outstanding at any time during the year was Rs 1715,00.00 lakhs (2010-11 - Rs 1290,00.00 lakhs)

In accordance with the Reserve Bank of India directives, the Company has created a floating charge on the statutory liquid assets comprising investment in Government Securities of face value Rs 143,62.30 lakhs (Cost - Rs 143,92.77 lakhs) and bank deposits of Rs 66,70.50 lakhs (Refer Note 17 'Cash and Bank balances') in favour of trustees representing the deposit holders of the Company.

During the year the Company has subscribed to the rights equity shares of Sundaram BNP Paribas Fund Services Ltd., Professional Management Consultants Ltd., Transenergy Ltd and Royal Sundaram Alliance Insurance Company Ltd.

During the year the Company has subscribed to the preferential equity share of Sundaram Infotech Solutions Ltd. and Sundaram Hydraulics Ltd.

(a) denotes shares are under a lock in period

(b) denotes investments where provision for diminution in value has been made

(c) denotes increase in holding on receipt of bonus shares @ face value in Omani Riyal

The Long-term loans and advances includes Non-performing Assets of Rs 2,77.00 lakhs (Previous Year - Rs 19,90.53 lakhs)

Advance income tax and tax deducted at source (net of provision) comprises:

Provision for Income Tax Rs 477,86.25 lakhs (31.03.2011 - Rs 381,34.20 lakhs)

Income tax paid under dispute Rs 47,72.76 lakhs(31.03.2011 - Rs 37,51.69 lakhs)

Advance Fringe Benefit Tax Rs 0.16 lakhs (31.03.2011 - Rs 1,70.16 lakhs)

Provision for Fringe Benefit Tax Rs 21.10 lakhs (31.03.2011 - Rs 1,60.87 lakhs)

1 General

1.1 The presentation in the Balance Sheet, Profit and Loss Statement and Notes to the Accounts is in terms of the Revised Schedule VI to the Companies Act, 1956 which has become mandatory with effect from 01st April, 2011. The assets and liabilities have been classified as current and non-current based on a twelve month operating cycle. Previous year's figures have been regrouped / reclassified wherever necessary to conform to the current year's presentation.

1.2 Segment Reporting:

Segment information is presented in the Consolidated Financial Statements in terms of the Accounting Standard - 17 - Segment Reporting.

The credit enhancement and liquidity support were provided in the form of bank deposits for Rs 46,75.00 lakhs. The Company continues to collect and service the receivables in respect of the securitised assets.

During the year, the Company assigned a part of its Hypothecation Loan receivables / Hire purchase assets - 'at par' representing the principal component, aggregating Rs 129999.44 lakhs (Previous Year - Rs 75094.31 lakhs).

1.2 RELATED PARTIES DISCLOSURES:

Related party disclosures, as stipulated by Accounting Standard - 18 - 'Related Party Disclosures', are given below:

RELATED PARTIES:

Subsidiary Companies:

Sundaram Finance Distribution Ltd.

Sundaram BNP Paribas Home Finance Ltd.

Sundaram Asset Management Company Ltd.

Sundaram Trustee Company Ltd.

LGF Services Ltd.

Infreight Logistics Solutions Ltd.

Sundaram Infotech Solutions Ltd.

Sundaram Business Services Ltd.

Professional Management Consultants Ltd.

Sundaram BNP Paribas Fund Services Ltd.

Sundaram Parekh Warehousing Services Ltd.

Sundaram Insurance Broking Services Ltd.

Caltec Servicez Private Limited

Associates:

Axles India Ltd.

Turbo Energy Ltd.

Transenergy Ltd.

Sundaram Dynacast Private Ltd.

Sundaram Hydraulics Ltd.

The Dunes Oman LLC (FZC)

Flometallic India Ltd.

Joint Ventures:

Royal Sundaram Alliance Insurance Company Ltd.

BNP Paribas Sundaram Global Securities Operations Private Ltd (BNP Paribas Sundaram GSO)

Key Management Personnel:

Mr. T. T. Srinivasaraghavan, Managing Director

Mr. Harsha Viji, Director (Strategy & Planning)

1.3 The Commissioner of Customs, Tuticorin raised a demand of Rs 500 lakhs towards penalty on the Company and Rs 1824 lakhs (towards duty) on the Company in September 2006 jointly and severally with the Lessee, in respect of a Lease transaction. The Appellate Tribunal admitted the appeal preferred by the Company and granted stay against the recovery proceedings in March 2007.

During the year, the Customs Excise and Service Tax Appellate Tribunal (CESTAT) in its Order, while mentioning the approximate duty to be around Rs 43 lakhs, remanded the appeal to the adjudicating Commissioner for requantifying the duty. The Tribunal has also revised the penalty to Rs 10 lakhs. The Company has sought legal opinion on the further course of action.

The Special Director of Enforcement, New Delhi, imposed a penalty of Rs 10 lakhs on the Company. The Company has preferred an appeal against the penalty with the Appellate Tribunal for Foreign Exchange and obtained a stay after remitting Rs 2.50 lakhs as directed by the Tribunal. Meanwhile the Company initiated arbitration proceedings against the Lessee and has received an award in its favour.

1.4 Estimated amount of contracts remaining to be executed on capital account - Rs 774.63 lakhs (net of advances of Rs 2204.47 lakhs). (31.03.2011 - Rs 3098.26 lakhs, net of advances of Rs 922.69 lakhs).

1.5 There are no amounts due to Small Scale Industries in terms of "The Micro, Small and Medium Enterprises Development Act, 2006".

1.6 Contingent liabilities in respect of

(Rs in lakhs)

31.03.2012 31.03.2011

a) Liability -

To Banks - on Cheques discounted 15,08.96 16,66.75

on Letter of Credit 28,28.95 11,86.00

b) Claims against the Company not acknowledged as Debts:

Hire Purchase transactions and termination of Lease 31.07 31.07 transactions - Appeals filed by the Company

Service Tax 45,01.73 20,60.01

Others 12,54.69 10,81.69

1.7 Derivative contracts outstanding:

Hedging exchange rate risk 47,10.00 -

Hedging interest rate risk - 545,00.00

1.8 Cost Insurance Freight (CIF) value of imports: Capital goods (on payment basis) 12,98.14 9,57.19

1.9 Expenditure in foreign currency (on payment basis): Interest 9,74.76 -

On other matters 25.43 16.94

1.10 Earnings in foreign currency

Dividend from an Associate Company 2,89.25 -

Income from other services (IT support services) 86.28 68.41

 
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