Notes to Accounts of TD Power Systems Ltd.

Mar 31, 2018

Corporate Information

The Company is incorporated and domiciled in India. Consequent to a Special Resolution of the Members, passed at the Company’s Extra Ordinary General Meeting held on 17th January 2011, the Company was converted to a Public Limited Company by altering its Articles of Association in terms of Section 31 read with Section 44 of the Companies Act 1956, and a fresh Certificate of Incorporation dated 4th February 2011 was issued by the Registrar of Companies, Karnataka. The registered office of the Company is located at Dabaspet, Nelamangala Taluk, Bangalore - 562 111. The Company is engaged in manufacturing AC Generators and Electric Motors for various applications which are specifically designed and tailor-made to suit the needs of the customers based on their requirements and specifications.

The financial statements for the year ended March 31, 2018 were approved by the Board of Directors and authorised for issue on May 23, 2018.

The company’s subscription to the Share Capital of its Wholly Owned Subsidiaries included in investment under non-current assets as at 31st March 2018 are as follows: -

a. 80,100 Equity Shares of USD 10 each in TD Power Systems USA Inc, USA

b. 2,000 Equity Shares of JPY 10,000 each in TD Power Systems Japan Limited, JAPAN

c. 5,50,000 * Equity Shares of Euro 1 each in TD Power Systems Europe GmbH, EUROPE (*erstwhile Platin 1255 GmbH acquired by the company during January 2016)

d. 59,99,998 Equity Shares of Rs.10 each in D F Power Systems Private Limited (excluding two shares beneficially held by the Directors of the Company)

e. 1,893 Equity Shares of Turkish Lira 100 each in TD Power System Jenerator Sanayi Anonim Sirketi which was incorporated on 21st June 2017

* The company has entered into an agreement/MOU for purchase of land during 2009 and 2010 and accordingly, amount aggregating to Rs.3372.75 lakhs was paid from time to time in pursuance of this agreement. Pending execution of sale deed and completion of certain works related to the land the said balance amount is carried under capital advance. The management of the company is of the view that considering the nature of the transaction, the registration of the sale of the land would be completed in due course and on completion the said amount would be capitalized. The total advances of Rs.1301.31 lakhs represents Rs.601.31 lakhs towards approx. 10 acres of land and Rs.700 lakhs towards development cost of the land. The management of the company does not expect any significant further cash outflow towards the acquisition except for the cost of registration and related expenses.

Other Information

I The Company has only one class of equity shares having par value of Rs.10/- each. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend 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.

II 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 liabilities. The distribution will be in proportion to the number of Equity Shares held by the shareholders

III For the period of five years immediately preceding the date as at which the Balance Sheet is prepared, there were:

a. No shares allotted pursuant to a contract without consideration being received in cash.

b. No shares allotted as fully paid up by way of bonus shares

c. No shares were bought back

IV There were no shares reserved for issue under options and contracts/commitments for the sale of shares/ disinvestment.

V There were no calls unpaid or forfeited shares.

1. FIRST-TIME ADOPTION OF IND AS – 101

i) Transition to Ind AS

The financial statements of the Company has been prepared in accordance with Ind AS. For the purposes of transition to Ind AS, the Company has followed the guidance prescribed in Ind AS 101-First Time adoption of Indian Accounting Standard, with April 1, 2016 as the transition date and IGAAP as the previous GAAP.

The transition to Ind AS has resulted in changes in the presentation of the financial statements, disclosures in the notes there to and accounting policies and principles. The accounting policies set out in note 1 have been applied in preparing the standalone financial statements for the year ended 31st March 2018 and the comparative information.

An explanation of the transition from previous GAAP to Ind AS on the Company’s financial statements, is set out below. Exemptions on first time adoption of Ind AS availed in accordance with Ind AS 101 have also been set out in note 37 (ii) below.

ii) Exemptions and exceptions availed

Ind-AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The company has accordingly applied the following exemptions.

(a) Ind AS optional exemption

1 Deemed cost

Ind AS 101 permits a first time adopter to elect to continue with carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as a deemed cost as at the date of transition. This exemption can also be used for Intangible assets covered by Ind AS 38 and investment property covered by Ind AS 40.

Accordingly, the Company has elected to measure all of its property, plants and equipments, intangible assets at their previous GAAP carrying value.

2 Investments in equity of subsidiaries

The company has elected to continue with the carrying value of its investments in equity instruments of subsidiary companies recognised as of April 1, 2016 (transition date) measured as per the previous GAAP and use that carrying value as its cost as of the transition date after making adjustment provision for impairment as estimated by the management.

iii) Reconciliations

The following reconciliations provides the effect of transition to Ind AS from IGAAP in accordance with Ind AS 101

Notes to Reconcilation statement:

a. Under Ind AS 109, the Company has evaluated the financial position of it’s Indian Subsidiary for the purposes of transition to Ind_AS and has accordingly recorded a provision of Rs.1440.75 lakhs being the excess of the carrying value of the investment of the subsidiary over the face value, by debit to the Other Equity as on 1st April 2016.

b. Payment of gratuity as per payment of gratuity Act is administered by Life Insurance Corporation of India (LIC) and Company is funding as recommended by LIC. The Company has recognised excess of fair value of plan assets over defined benefit obligations relating gratuity as asset amounting to Rs.122.18 lakhs as at 1st April 2016 and Rs.129.14 lakhs as at 31st March 2017 respectively as per the requirement of Ind AS. During the year 2016-2017, the Company has recognised excess funding towards gratuity amounting to Rs.6.96 lakhs as an asset, Rs.122.18 lakhs was considered as a transition adjustment and Rs. 6.96 lakhs was considered as Ind As Adjustment for the statement of profit and loss for the year ended 31st March, 2017.

c. Under previous GAAP, the Company followed completed contract method for revenue recognition in case of service contracts. As per requirement of IND AS, the Company has recognised revenue under percentage of completion method for service contracts. Consequently, Company has recognised revenue amounting to Rs.20.65 lakhs as on 1st April 2016 and Rs.22.65 lakhs as on 31st March 2017 respectively. As a result there is increase in the revenue for the year ended 31st March 2017 amounting to Rs.1.99 lakhs which is disclosed as Ind As Adjustment in the statement of profit and loss for the year ended 31st March, 2017.

d. Under previous GAAP Advance to employees were recognised on the historical value. Under IND AS, long term employee advances are to be recognised after considering the effective interest rate. Consequently, advance given to employees which are more than 12 months are recognised after considering the impact of interest which amounts to Rs.0.22 lakhs as at 1st April 2016 and Rs.0.07 lakhs as at 31st March 2017. This has resulted in net impact on the other income of Rs.0.14 lakhs for the year ended 31st March 2017.

e. The Company has reversed the provision for proposed dividend and dividend distribution tax made in earlier year amounting to Rs.1,241.49 lakhs to retained earnings as on 1st April 2016, since the dividends were actually declared after the balance sheet date which is in accordance with Ind As 10. Accordingly, the actual amount of dividend and dividend distribution tax paid or payable during the year ended 31st March, 2017 has been debited to the retained earnings.

f. Under previous GAAP, actuarial gains and losses were recognised in the statement of profit and loss. Under Ind AS, the actuarial gains and losses from re-measurement of net defined benefit liability / asset is recognised in other comprehensive income in the respective years. Company has reclassified acturial loss amounting to Rs.33.87 lakhs for the year ended 31st March 2017 as Other comprehensive Income from Employee benefit expenses as per IND AS requirement. Also the Company has accounted the income tax effect of Rs. 11.72 lakhs on the acturial loss in other comprehensive income.

viii. Effect on IND AS Adoption on the Statement of Cash flow for the year ended 31st March 2017

The transition from the previous GAAP to IND AS has no impact on the statement of cash flows except for regrouping among the cash flow from operating, financing and investing activities and classifying cash and bank balances into cash and cash equivalents and bank balances other than cash and cash equivalents.

2. Financial Instruements - Accounting Classifications and Fair value measurements

a). The Fair value of cash and cash equivalents, bank balances, loans, trade receivables, trade payables and others approximates their carrying amount. Trade receivables are evaluated after taking into consideration for Expected Credit Losses. Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique.

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

c. Financial Risk Management Objectives and Policies

The company’s Financial Risk Management is an integral part of business strategies. The Company’s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. In addition, Company is exposed to the following risks from its use of financial instruments:

- Credit risk

- Liquidity risk

- Market risk

This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. Further quantitative disclosures are included throughout these financial statements.

The Company’s principal financial liabilities comprise short term borrowings, trade and other payables. The main purpose of these financial liabilities is to support entity’s operations. The entity’s principal financial assets include cash and cash equivalents and trade and other receivables that derive directly from its operations.

All activities for risk management purposes are carried out by experienced teams that have the appropriate skills, experience and supervision. It is the entity’s policy that no activities in derivatives will be undertaken except foreign exchange forward contract. The Board of Directors review and agree policies for managing each of these risks, which are summarised below.

Credit Risk

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables. The customer credit risk is managed as per Company’s established policy, procedure and controls relating to customer credit risk management. It require different processes and policies to be followed based on the business risks, industry practice and customer profiles.

In order to contain the business risk, the creditworthiness of the customer is through scrutiny of its financials, status of financial closure of the project, if required, market reports and reference checks. The Company remains vigilant and regularly assesses the financial position of customers during execution of contracts with a view to restrict risks of delays and default. In view of nature of business profile and considering the size of the Company, credit risks from receivables are well contained on an overall basis.

The Company’s maximum exposure to credit risk at the reporting date is the carrying amount of trade receivable.

Receivables in excess of 10% of individual business represents receivables from four customers as on 31st March 2018, three customers as on 31st March 2017 and two customers as on 1st April 2016.

Provision for expected credit losses

The life time expected credit loss (“ECL”) is estimated on trade receivables other amounts due from entities where there is no track record of short receipts. Delays in receiving payments from the customers pursuant to sale of goods or under contracts are not considered if such delays are commonly prevalent in the industry. Other short receipts other than arising from claims are duly considered in determining ECL.

Considering the above as well as business model of the Company, engineered-to-order products and the profile of trade receivables, the determination of a provision based only on age analysis may not be a realistic considering the economic and industry circumstances. Hence, the provision for expected credit loss is determined by the management for the specific trade receivables after considering the above facts and circumstances, particularly in view of the fact that there has no bad debts in the recent past.

Provision matrix (%, amounts) of ECL for trade receivables and the reconciliation of the movement in the provision is given below.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash. The Company’s approach in managing the same is to ensure, as far as possible, sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions.

The company’s principal sources of liquidity are cash and cash equivalents, balances with banks and the cash flow that is generated from operations. The cash and cash equivalent and other bank balances aggregates to Rs.15,770.38 lakhs at the end of year (2017-Rs.19,030.90 lakhs, 2016-Rs.19,219.33 lakhs). The company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

The following are the contractual maturities of non-derivative financial liabilities, based on contractual cash flows:

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

The Company operates internationally and a major portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services and purchases from overseas suppliers in various foreign currencies.

i) Foreign currency risk exposure -: The company’s exposure to foreign currency risk at the end of reporting period, are as follows:

a) The foreign exchange forward contracts outstanding as on 31.03.2018 in respect of Euro is Rs. 1,453.29 lakhs (2017: Nil and 2016: Nil)

b) The total foreign currency exposures of the year is as under:

c) Sensitivity analysis

A movement of the Indian Rupee, as indicated below, against the USD, Euro, JPY and others at 31st March 2018 would have increased (decreased) profit or loss by the amounts shown below. This analysis is in respect of foreign currency exposure as mentioned in (b) above and based on foreign currency exchange rate variances that the Company considered to be reasonably possible at the end ofthe reporting period. The analysis is performed on the same basis for previous year, even though the actual foreign exchange rate variances were different.

ii) Interest Rate Risk

The Company’s investments are primarily in Fixed rate interest bearing deposits. Also the borrowings bear fixed rate of interest. Hence, the Company is not significantly exposed to interest rate risks.

d). Capital Management

While managing capital, the Company’s objective is to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefit for other stakeholders.

The Board of Directors monitors the earnings before interest, depreciation and tax (EBITDA), which the Company defines as result from operating activities before considering finance cost, depreciation & amortisation, exceptional items and tax expenses. The Board of Directors also monitors the level of dividends to equity shareholders

The Company’s EBITDA is 6.58% as at 31.03.2018 in comparison to 7.56% as at 31.03.2017.

The Company monitors capital, taking a medium and long term view, on the basis of a number of financial ratios generally used by industry and by the rating agencies.

3 a. The Company does not have any pending litigations which would impact its financial positon as on the reporting date except to the extent disclosed in Note.36.

b. The Company does not have any long term contracts including derivatie contracts for which there were any material foreseeable losses. Adequent provision has been made for losses in respect of short term foreign exchange forward contract (Refer Note.22).

c. There are no amounts required to be transferred to the Investor Education and Protection Fund by the Company as on the reporting date-.

4. SEGMENT REPORTING

The company’s operation comprises of Manufacturing business & Project Business. Primary segment reporting comprises of Manufacturing Business & Project Business Segments. Secondary segment reporting is based on geographical location of Activities. Under primary segment revenue and direct expenses, which relate to a particular segment and which are identifiable, are reported under that segment.

Certain expenses, which are not allocable to any specific segment, are separately disclosed at the enterprise level. Cash and bank balances in India are reported at the enterprise level as the company operates common bank accounts. Property, plant and equipments, Liabilities, Current assets and Current liabilities relating to specific business segments are identified and reported. Those that are not identifiable are reported as common items.

Secondary segment is reported based on the geographical location of the company, viz., India and Japan. Revenues in the secondary segment are based on the sales made by the branch office. Inter-segmental purchases & sales are separately identified and reported. Property, plant and equipments, Current Assets including Cash and Bank accounts, and Current Liabilities are identified based on the branch office to which they relate and are reported accordingly.

5. Disclosure as per Ind AS 19 on ‘Employee benefits

A. Gratuity

The Company has a defined benefit gratuity plan. Every employee who has rendered continuous service of five years or more is entitled to gratuity at 15 days salary (15/26 X last drawn basic salary plus dearness allowance) for each completed year of service subject to a maximum of Rs.20 Lakhs. The gratuity liability arises on account of future payments, which are required to be made in the event of retirement, death in service or withdrawal. The liability has been assessed using projected unit credit actuarial method. The company made annual contributions to the Employee’s Group Gratuity scheme of the Life Insurance Corporation of India.

vi. Risk Exposures

Valuations are based on certain assumptions, which are dynamic in nature and vary over time. As such company is exposed to various risks such as increase in salary, investment risk, discount rate, mortality, disability and withdrawals.

B. Long term Leave Liability - Unfunded

The company provides for earned leave benefit to the employees which accrue at 15 days (maximum) for the year. The earned leave is encashable while in service and up to a maximum of 105 days on retirement. The leave liability has been treated as other long term benefits and has been assessed using projected unit credit actuarial method.

6. Operating Lease

The Company has various operating leases for office facilities, guesthouse and residential premises of employees that are renewable on a periodic basis, and cancelable at its option. Rental expenses for operating leases included in the financial statements for the year is Rs.46.81 lakhs (Previous year Rs.48.36 lakhs).

Provision is made for estimated warranty claims in respect of products sold which are still under warranty at the end of the reporting period. Management estimates the provision based on historical warranty claim information and any recent trends that may suggest future claims could differ from historical amounts.

7. Subsequent Events

On 23rd May 2018 (2017: 18th May 2017, 2016: 11th May 2016), the Board of Directors of the Company have proposed a dividend of Rs.1.80 (2017: Rs.1.80 2016: Rs.3.05) per share for the year ended 31st March 2018 subject to approval of shareholders at the Annual General Meeting.

8. Research & Development

Following expenses have been incurred by the company towards Research & Development activities

9. Corporate Social Responsibility

a. Gross amount required to be spent by the company as at the year end - Nil

b. Amount spent as at the end of year is:

a. Gross amount required to be spent by the company during previous year Rs.146.59 lakhs

b. Amount spent during previous year on

10. Consequent to closure of the guarantee provided to the Indian Subsidiary, the company has recovered guarantee commission from it’s Indian Subsidiary which was prohibited by the Bank under the terms of the Guarantee document. The amount of commission so recovered from the subsidiary aggregating to Rs.1,702.09 lakhs (excluding tax) has been disclosed under exceptional items in the above financial statement. Exceptional items also include other service charges not recovered from the said subsidiary earlier amounting to Rs. 511.89 lakhs (excluding tax) which have been recovered during the year.

11. The company has evaluated the financial position of its Indian Subsidiary for the purposes of transition to Ind_AS and has accordingly recorded a provision of Rs.1,440.75 lakhs being the excess of the carrying value of the Investment of the subsidiary over the face value, by debit to the Other Equity as on 1st April 2016.

No further provision for impairment in the carrying value of the investments of the subsidiaries in the standalone financial statements is considered necessary as in the view of the management, the diminution in the net value of assets of these subsidiaries is not of a permanent nature cosidering the furture business prospect of these subsidiaries.

12. The standalone financial information of the Company for transition date i.e. opening standalone balance sheet date being April 1, 2016 and previous year ended March 31, 2017, included in these standalone financial statements, are based on the previously issued standalone financial statments which were prepared under previous GAAP and audited by a firm of Chartered Accountants other than Varma & Varma, Chartered Accountants as adjuested for the differences in the accounting principles adopted by the Company on transition to Ind AS, which have been audited by Varma & Varma, Chartered Accountants.

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Mar 31, 2016

Other Information

I The Company has only one class of equity shares having par value of Rs. 10/- each. 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.

For the period ended 31st March 2016 (31 March 2015, Rs. 2.645), a dividend per share of Rs. 3.05/- has been provided for payment to shareholders subject to approval at the Annual General Meeting of the Company.

II Equity shares include

a Shares allotted pursuant to a contract without consideration being received in cash.

Issued to the shareholder of subsidiary company, DF Power Systems Private Limited, in exchange of 1,700,000 fully paid up equity shares of Rs. 10/- each on 19th October 2010

b Shares allotted by way of bonus shares.

On Capitalization out of Reserves to an extent of 16,246,934 Equity Shares of Rs. 10/- each on 11th January 2011.

Defined Benefit Plan

The employees'' gratuity fund scheme managed by a trust is a defined benefit plan. The Present value of obligation is determined based on actuarial valuation using the projected unit credit method.

1. SEGMENT REPORTING

The Company''s operation comprises of Manufacturing business & Project Business. Primary segmental reporting comprises of Manufacturing Business & Project Business Segments. Secondary Segmental reporting is based on geographical location of Activities. Under primary segment revenue and direct expenses, which relate to a particular segment and which are identifiable are reported under that segment.

Certain expenses, which are not allocable to any specific segment, are separately disclosed at the enterprise level. Cash and bank balances in India are reported at the enterprise level as the company operates common bank accounts. Fixed assets, Liabilities, Current assets and Current liabilities relating to specific business segments are identified and reported. Those that are not identifiable are reported as common items.

Secondary segment is reported based on the geographical location of the company, viz., India and Japan. Revenues in the secondary segment are based on the sales made by the branch office. Inter-segmental purchases & sales are separately identified and reported. Fixed assets, Current Assets including Cash and Bank accounts, and Current Liabilities are identified based on the branch office to which they relate and are reported accordingly.

2. OPERATING LEASE

The Company has various operating leases for office facilities, guesthouse and residential premises of employees that are renewable on a periodic basis, and cancelable at its option. Rental expenses for operating leases included in the financial statements for the year are Rs. 10,878,320/- (Previous year Rs. 13,986,741/-).

3. WARRANTY CLAIMS

Provisions for warranties are made on an estimated basis. During the reporting period, the Company has made provisions towards Warranty claims; the details of the same areas under:

4. a. The company does not have any pending litigations which would impact its financial position as on the reporting date.

b. The company does not have any long term contracts including derivative contracts for which there were any material foreseeable losses.

c. There are no amounts required to be transferred to the Investor Education and Protection Fund by the Company as on the reporting date.

d. Previous reporting year figures have been regrouped wherever required in conformity with the presentation for the current reporting year.

Dividend declared is higher by 15% at Rs. 3.05 per share and the Dividend payout will account for 67.67 % excluding dividend distribution tax.

Forward-Looking Statement

Statements in the Management Discussion and Analysis describing the Company''s plans, estimates and projections may be ''forward looking statements'' within the meaning of applicable securities laws and regulations. Actual results may materially differ from those expressed or implied in the report. The Company assumes no responsibility to publicly amend, modify or revise any such statements on the basis of subsequent developments, information or events.

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Mar 31, 2015

1. SHARE CAPITAL

I Equity shares include

a Shares allotted pursuant to a contract without consideration being received in cash.

Issued to the shareholder of subsidiary company, DF Power Systems Private Limited, in exchange of 1,700,000 fully paid up equity shares of Rs. 10/- each on 19th October 2010.

b Shares allotted by way of bonus shares.

On Capitalisation out of Reserves to an extent of 16,246,934 Equity Shares of Rs. 10/- each on 11th January 2011.

As at As at 31.03.2015 31.03.2014 Rs. Rs.

2. CONTINGENT LIABILITIES AND COMMITMENTS

(to the extent not provided for)

Contingent Liabilities

Claims against the Company not - - acknowledged as debts

Guarantees 592,944,983 715,518,533

Letters of credit 279,059,745 175,303,155

The management believes, based on internal assessment and/or legal advice, that the probability of an ultimate adverse decision and outflow of resources of the Company is not probable and accordingly, no provision for the same is considered necessary.

Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) 89,393,155 93,300,798

Corporate Guarantee issued to the bankers of the subsidiary company (DFPS) 1,420,000,000 5,540,000,000

Corporate Guarantee issued on behalf of subsidiary company (Japan WOS)

17,506,701 182,270,682

Outstanding Bills discounted under Letter of Credit - -

Department of Income Tax (TDS Circle) have issued demand notice under section 201(1)/201(1a) of the Income Tax act, based on tax payer''s data reflected in the computer system of the department for Short deduction / Short payments and interest thereon, for the financial years 2006-07, 2007-08, 2008-09, 2009-2010, 2010-2011 amounting to Rs. 754,934/- including Rs. 322,946/- towards interest on such short deduction/payment under Forms 27EQ, 26Q & 24Q. The Company has pursued the matter with the department and the same is under appeal for such short deduction/late payment.

The Company has obtained EPCG licence No. 073001256 dt. 10.07.2013 to the extent of Rs. 6.95 Crores for importation of capital goods without payment of custom duties. Under the licence the company will have to fulfill the export obligation of Rs. 41.71 Crores.

The Company has obtained EPCG licence No. 0730014370 dt.31.03.2015 to the extent of Rs. 1.92 Crores for importation of capital goods without payment of custom duties. Under the licence the company will have to fulfill the export obligation of Rs. 11.574 Crores.

3. SEGMENT REPORTING

The Company''s operation comprises of Manufacturing business & Project Business. Primary segmental reporting comprises of Manufacturing Business & Project Business Segments. Secondary Segmental reporting is based on geographical location of Activities. Under primary segment revenue and direct expenses, which relate to a particular segment and which are identifiable are reported under that segment.

Certain expenses, which are not allocable to any specific segment, are separately disclosed at the enterprise level. Cash and bank balances in India are reported at the enterprise level as the company operates common bank accounts. Fixed assets, Liabilities, Current assets and Current liabilities relating to specific business segments are identified and reported. Those that are not identifiable are reported as common items.

Secondary segment is reported based on the geographical location of the company, viz., India and Japan. Revenues in the secondary segment are based on the sales made by the branch office. Inter-segmental purchases & sales are separately identified and reported. Fixed assets, Current Assets including Cash and Bank accounts, and Current Liabilities are identified based on the branch office to which they relate and are reported accordingly.

4. RELATED PARTIES DISCLOSURE

Name of the Related Party Relationship

DF Power Systems Private Limited Subsidiary

TD Power Systems (USA) Inc. Subsidiary

TD Power Systems Japan Limited Subsidiary

Nikhil Kumar Key Managerial Personnel

Hitoshi Matsuo Key Managerial Personnel

Tadao Kuwashima Key Managerial Personnel

Mohib N. Khericha Key Managerial Personnel

5. OPERATING LEASE

The Company has various operating leases for office facilities, guesthouse and residential premises of employees that are renewable on a periodic basis, and cancelable at its option. Rental expenses for operating leases included in the financial statements for the year are Rs. 13,986,741/- (Previous year Rs. 15,337,415/-).

6. a. The company does not have any pending litigations which would impact its financial positon as on the reporting date.

b. The company does not have any long term contracts including derivative contracts for which there were any material foreseeable losses.

c. There are no amounts required to be transferred to the Investor Education and Protection Fund by the Company as on the reporting date.

d. Previous reporting year figures have been regrouped wherever required in conformity with the presentation for the current reporting year.

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Mar 31, 2014

Contingent Liabilities

Claims against the Company not acknowledged as debts — 19,711,242

Guarantees 715,518,533 521,904,676

Letters of credit 175,303,155 107,318,622

The management believes, based on internal assessment and / or legal advice, that the probability of an ultimate adverse decision and outflow of resources of the Company is not probable and accordingly, no provision for the same is considered necessary.

As at 31.03.2014 As at 31.03.2013 Rs. Rs.

CONTINGENT LIABILITIES AND COMMITMENTS (Contd.)

Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) 93,300,798 472,196,698

Corporate Guarantee issued to the bankers of the subsidiary company (DFPS) 5,540,000,000 5,540,000,000

Corporate Guarantee issued on behalf of subsidiary company. (Japan WOS) 182,270,682 —

Outstanding Bills discounted under Letter of Credit — 24,715,274

Department of Income Tax (TDS Circle) have issued demand notice under section 201(1)/201(1a) of the Income Tax act, based on tax payer''s data reflected in the computer system of the department for Short deduction / Short payments and interest thereon, for the financial years 2006-07, 2007-08, 2008-09, 2009-2010, 2010-2011 amounting to Rs. 40,543,629/- including Rs. 10,742,443/- towards interest on such short deduction/payment under Forms 27EQ, 26Q & 24Q. The company has pursued the matter with the department during the year and the balance demand of Rs. 393,400/- is under appeal including Rs. 109,520/- towards interest on such short deduction/late payment.

2. SEGMENT REPORTING

The company''s operation comprises of Manufacturing business & Project Business. Primary segmental reporting comprises of Manufacturing Business & Project Business Segments. Secondary Segmental reporting is based on geographical location of Activities. Under primary segment revenue and direct expenses, which relate to a particular segment and which are identifiable, are reported under that segment.

Certain expenses, which are not allocable to any specific segment, are separately disclosed at the enterprise level. Cash and bank balances in India are reported at the enterprise level as the company operates common bank accounts. Fixed assets, Liabilities, Current assets and Current Liabilities relating to specific business segments are identified and reported. Those that are not identifiable are reported as common items.

Secondary segment is reported based on the geographical location of the company, viz., India and Japan. Revenues in the secondary segment are based on the sales made by the branch office. Inter-segmental purchases & sales are separately identified and reported. Fixed assets, Current Assets including Cash and Bank accounts, and Current Liabilities are identified based on the branch office to which they relate and are reported accordingly.

3. OPERATING LEASE

The Company has various operating leases for office facilities, guesthouse and residential premises of employees that are renewable on a periodic basis, and cancellable at its option. Rental expenses for operating leases included in the financial statements for the year are Rs. 15,337,415/- (Previous year Rs.29,318,726/-).

4. PREVIOUS REPORTING YEAR

Previous reporting year figures have been regrouped wherever required in conformity with the presentation for the current reporting year

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Mar 31, 2013

1 SEGMENT REPORTING

The company''s operation comprises of Manufacturing business & Project Business. Primary segmental reporting comprises of Manufacturing Business & Project Business Segments. Secondary Segmental reporting is based on geographical location of Activities. Under primary segment revenue and direct expenses, which relate to a particular segment and which are identifiable, are reported under that segment.

Certain expenses, which are not allocable to any specific segment, are separately disclosed at the enterprise level. Cash and bank balances in India are reported at the enterprise level as the company operates common bank accounts. Fixed assets, Liabilities, Current assets and Current liabilities relating to specific business segments are identified and reported. Those that are not identifiable are reported as common items.

Secondary segment is reported based on the geographical location of the company, viz., India and Japan. Revenues in the secondary segment are based on the sales made by the branch office. Inter-segmental purchases & sales are separately identified and reported. Fixed assets. Current Assets including Cash and Bank accounts, and Current Liabilities are identified based on the branch office to which they relate and are reported accordingly.

2 OPERATING LEASE

The Company has various operating leases for office facilities, guesthouse and residential premises of employees that are renewable on a periodic basis, and cancelable at its option. Rental expenses for operating leases included in the financial statements for the year are Rs. 29,318,726/- (Previous year Rs.29,285,271/-).

3 INITIAL PUBLIC OFFERING (IPO]

During the financial year 2011-2012 the company raised funds amounting to Rs. 2,269,999,872/- through an Initial Public Offer by filing prospectus with SEBI through a book building process. A share of the company was issued at the premium of Rs.246/- having face value of Rs.10 each. All the Issue Related Expense have been debited to Share Premium Account to Rs. 139,082,279/- and the statement of utilisation of IPO Proceeds is as follows:

4 MANAGERIAL REMUNERATION

1. Consequent to completion of the term of appointment, Mr. Hitoshi Matsuo ceased to be the Managing Director of the Company with effect from September 30,2012.

In terms of a resolution of the Shareholders by a postal ballot approved on August 27,2012 and on December 22,2012, Mr. Hitoshi Matsuo was appointed as a Whole time Director of the company designated as Director - International from October 1,2012 for a period of 2 years, to be based in Japan, subject to approval of the Central government. Since Mr. Matsuo is a Non-Resident, an application has been made to the Central government in this regard.

2. Mr. Nikhil Kumar Joint Managing Director was re-designated as Managing director of the company effective October 1, 2012 as approved by the Company''s shareholders through a postal ballot on August 27,2012. Approval of the Central government has been received for the same in terms of Section 268 of the Companies Act, 1956.

3. Notwithstanding the shareholders'' approval, agreements with the Managing director and whole time directors and the central government approval as applicable for a higher remuneration, the Board of Directors of the Company vide circular resolution dated November 19,2012 approved in principle and finally approved atthe Board meeting held on February 6, 2013 that, the remuneration payable to Mr. Nikhil Kumar, Managing Director, Mr. Hitoshi Matsuo, Whole time Director and Mr. Tadao Kuwashima, Whole time Director shall be computed in terms of Section 349 & 350 of the Companies Act, 1956 subject to however that, the total remuneration payable to all such Directors shall not exceed 10% of the net profits of the company. Accordingly, the remuneration payable to Managing & Whole time Directors for the financial year 2012-2013 is provided in the Books of Accounts of the Company.

5 PREVIOUS REPORTING YEAR

Previous reporting year''s figures have been regrouped wherever required in conformity with the presentation for the current reporting period

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Mar 31, 2012

I The Company has only one class of equity shares having par value of Rs.10/- each. 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 31 March 2012, the amount of per share dividend recognised as distribution to equity share holders is Rs. 2/- (31 March 2011 Rs.2/-)

Additional information

(*) Accumulated depreciation as on 01st April 2004 under Owned Assets includes accumulated depreciation of leased asset also.

(**) Dues w.r.t Motor Vehicles under Hire Purchase Scheme from ICICI Bank Limited amounts to Rs. 3,825,755 (Previous Year Rs. 7,634,710)

1 SEGMENT REPORTING

The company''s operation comprises of Manufacturing business & Project Business. Primary segmental reporting comprises of Manufacturing Business & Project Business Segments. Secondary Segmental reporting is based on geographical location of Activities. Under primary segment revenue and direct expenses, which relate to a particular segment and which are identifiable, are reported under that segment

Certain expenses, which are not allocable to any specific segment, are separately disclosed at the enterprise level. Cash and bank balances in India are reported at the enterprise level as the company operates common bank accounts. Fixed assets, Liabilities, Current assets and Current liabilities relating to specific business segments are identified and reported. Those that are not identifiable are reported as common items.

Secondary segment is reported based on the geographical location of the company, viz., India and Japan. Revenues in the secondary segment are based on the sales made by the branch office. Inter-segmental purchases & sales are separately identified and reported. Fixed assets, Current Assets including Cash and Bank accounts, and Current Liabilities are identified based on the branch office to which they relate and are reported accordingly.

2 OPERATING LEASE

The Company has various operating leases for office facilities, guesthouse and residential premises of employees that are renewable on a periodic basis, and cancelable at its option. Rental expenses for operating leases included in the financial statements for the year are Rs.29,285,271/- (Previous year Rs.17,045,961/-).

3 INITIAL PuBLIC OFFERING (IPO)

During the half year ended 30th September 2011 the company has raised funds amounting to Rs. 2,269,999,872/- through an Initial Public Offer by filing prospectus with SEBI through a book building process. The shares of the company was issued at the premium of Rs.246/- having face value of Rs.10 each. All the Issue Related Expense have been debited to Share Premium Account to Rs. 139,082,279/-.

Consequent to a Special Resolution passed at the Extra ordinary General Meeting held on 17th January 2011, the Company converted to a Public Limited Company. Accordingly, in terms of the expert opinion obtained by the Company, the appointments of the Managing director, Jt Managing director and Director- Technical are deemed to be appointments u/s Section 269 of the Companies Act 1956 and the remuneration payable to the aforesaid directors for the period 17- Jan-2011 and onwards through the respective tenure of appointment, is governed by Clause (C) of Section II of Part II of Schedule XIII of the Companies Act 1956 and until the company turns into listed public company, approval of the Central government would not be required thereto in terms of the amendment to schedule XIII of the Companies Act ,1956 vide Notification number GSR .70(E) dated 8th February 2011.

The company turned into a listed public company w.e.f September 8, 2011 consequent to its equity capital being listed on the BSE and NSE pursuant to an Initial public offering by the company. Accordingly, the company has filed applications seeking approval of the Central Government for payment of remuneration as above, to the managing Director, Jt. managing director and Director - Technical. However, provision has been made in the books of accounts relating to the remuneration as above payable to the managing Director, Jt. Managing Director and Director - Technical for the fiscal 2012, in terms of the respective terms of appointment amended from time to time. Further, the Jt. Managing Director is also the Managing Director of the wholly owned subsidiary of the company accordingly the remuneration payable shall be in terms of Section III of Schedule XIII of the Companies Act, 1956.

4 PREVIOUS REPORTING PERIOD

Previous reporting period''s figures have been regrouped wherever required in conformity with the presentation for the current reporting period.

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Mar 31, 2011

1. 31.03.2011(Rs.) 31.02.2010(Rs.)

Contingent Liabilities etc.:

i. Estimated amount of contracts remaining to be executed on Capital Account and not provided for (net of advances) 78,916,794 -

ii. Guarantees, Counter Guarantees given on Imports and Sale Contract etc. (net of margins held by bank) 1,055,047,279 829,048,472

iii. Corporate Guarantee issued to the bankers of the subsidiary company 3,790,000,000 3,790,000,000

iv. Corporate Guarantee issued on behalf of subsidiary company. 450,040,508 450,040,508

v. Outstanding Bills discounted under Letter of Credit 81,577,318 -

2. Operational Lease

The Company has various operating lease for office, transit house and residential premises for employees that are renewable on a periodic basis, and cancelable at its option. Rental expenses for operating lease included in the Income Statement for the year is Rs.17,045,961/- (Previous Year Rs.15,346,913/-).

3. Segment Reporting

the company''s operation comprises of Manufacturing business & Project Business. Primary segmental reporting comprises of Manufacturing Business & Project Business Segments. Secondary Segmental reporting is based on geographical location of Activities. Under primary segment revenue and direct expenses, which relate to a particular segment and which are identifiable, are reported under that segment.

Certain expenses, which are not allocable to an-/ specific segment, are separately disclosed at the enterprise level. Cash and bank balances in India are reported at the enterprise level as the company operates common bank accounts. Fixed assets, Liabilities, Current assets and Current liabilities relating to specific business segments are identified and reported. Those that are not identifiable are reported as common items. Secondary segment is reported based on the geographical location of the company, viz., India and Japan. Revenues in the secondary segment are based on the sales made by the branch office. Inter-segmental purchases & sales are separately identified and reported. Fixed assets, Current Assets including Cash and Bank accounts, and Current Liabilities are identified based on the branch office to which they relate and are reported accordingly.

4. Deferred Tax Liability is calculated in accordance with AS 22, and the net tax liability for the year is debited to Profit & Loss Account.

5. Disclosure in terms of Accounting Standard 29, on Provisions, Contingent Liabilities & Contingent Assets.

Consequent to a Special Resolution passed at the Extra ordinary General Meeting held on 17th January 2011, the Company converted to a Public Limited Company. In terms of the opinion obtained by the company the existing appointments are deemed to be appointments u/s Section 269 of the Companies Act 1956 and the remuneration payable to the aforesaid directors for the period 17-Jan-2011 to 31- Mar-2011 amounting to Rs. 16,912,549/- is governed by Clause (C) of Section II of Part II of Schedule XIII of the Companies Act 1956 and as specified the remuneration paid as above were approved by the Remuneration Committee of the Board at it''s meeting held on 15th March 2011 and is subject to approval of the Shareholders.

6. Based on availability and subject to its captive requirements, the company makes available its technical, marketing and financial personnel on chargeable basis to its subsidiary company M/s DF POWER SYSTEMS PRIVATE LIMITED, for execution of projects undertaken by the said subsidiary company. The value of this transaction was Rs. 30,782,480/- (Previous Year Rs.25,481,038/-)- The company has been advised that the same would not be covered by Section 297 of the Companies Act 1956.

7. Department of Income Tax (TDS Circle) have issued demand notice under section 201(l)/201(la) of the Income Tax act, based on tax payer''s data reflected in the computer system of the department for Short deduction / Short payments and interest thereon, for the financial years 2006-07, 2007-08, 2008-09 amounting to Rs.31,391,530/- including Rs.9,096,720/- towards interest on such short deduction/payment under Forms 27EQ, 26Q & 24Q. The company has preferred an appeal against the demand notice for an amount of Rs. 31,377,260/- and rectification thereon.

8. Disclosure under The Micro, Small & Medium Enterprises Development Act, 2006 in respect of establishments considered as Micro, Small & Medium Enterprise based on the information made available by the Suppliers.

9. Consequent to the announcement by the ICAI in 2005, following are the disclosures as required for the derivative instruments on hedging foreign currency exposures.

10. Disclosure requirement of AS-15 Revised (2005) "Employee Benefits"- Defined Contribution Plan

11. All the expense related to proposed capital rising is grouped under pre-paid expenses.

12. Figures in brackets refer to previous year ended 31st March 2010 and are re-grouped wherever necessary to conform to the presentation of the current year accounts and have been rounded off to the nearest Rupee.