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Notes to Accounts of Thermax Ltd.

Mar 31, 2015

1. Contingent Liabilities - Income Tax

i. Demands disputed in appellate proceedings Rs. 47.53 Crore (Previous Year Rs. 20.40 Crore).

ii. References / Appeals preferred by Income Tax department in respect of which, should the ultimate decision be unfavourable to the company, the liability is estimated to be Rs. 53.01 Crore (Previous Year Rs. 58.56 Crore)

2. Other Contingent Liabilities & Commitments

a. Other Contingent Liabilities

i. Counter Guarantees given by the company to banks on behalf of group companies : Rs.43.11 Crore on behalf of Thermax Instrumentation Ltd.(Previous Year Rs. 46.09 Crore), Rs.1.43 Crore on behalf of Thermax Onsite Energy Solutions Ltd. (Previous Year Rs. 1.43 Crore), Rs. 0.68 Crore on behalf of Thermax SPX Energy Technologies Ltd.(Previous Year Rs. Nil) and Rs. 0.90 Crore on behalf of Thermax Senegal S.A.R.L (Previous Year Rs. Nil)

ii. Indemnity Bonds, Letter of Comfort and Corporate Guarantees given by the Company on behalf of group companies : Thermax Engineering Construction Company Ltd. Rs. 90 Crore (Previous Year Rs. 90 Crore ) Thermax Babcock & Wilcox Energy Solutions Pvt. Ltd. Rs. 66.30 crore (Previous Year Rs. Nil), Rifox - Hans Richter GmbH Rs. 3.02 crore (Previous Year Rs. Nil)

iii. Liability for unexpired export obligations Rs. 32.46 Crore (Previous Year Rs. 10.30 Crore).

iv. Claims against the company not acknowledged as debts Rs. 18.90 Crore (Previous Year Rs. 10.01 Crore).

v. Bills Discounted with banks Rs. 16.79 Crore (Previous Year Rs. 5.95 Crore).

b. Commitments

i. Liability in respect of partly paid shares Rs. 0.19 Crore (Previous Year Rs. 0.19 Crore).

ii. Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for Rs. 6.92 Crore (Previous year Rs. 3.04 Crore).

3. The Company has received show cause-cum-demand notices from the Commissioner of Central Excise (duty amount aggregating to Rs. 873.63 crore against which the Company should be entitled to claim CENVAT credit in accordance with provisions of law) for the periods up to September 2014, as to why Excise Duty should not be levied on assessable value of Boilers inclusive of cost of ''Bought Out items''. The Company has from time to time replied to these notices contesting the same. The Excise authorities are yet to adjudicate the issue. Based on an independent legal opinion, the Company is confident of the issue being ultimately decided in its favour.

4 Micro & Small Enterprises

Micro & Small enterprises as defined under the Micro, Small and Medium Enterprises Development Act 2006 (MSMED) have been identified to the extent of information available with the company. This has been relied upon by the auditors.

a. Pursuant to the provisions of Section 135 of the Companies Act, 2013, the company has contributed Rs. 9.96 crore to Thermax Social Initiative Foundation as donation towards carrying out activities eligible under Corporate Social Responsibility Rules.

b. Secured Loan

Secured loans represent following categories of borrowings :

i) Working Capital Loans (Cash Credits & Overdrafts) taken from consortium of banks. These are secured by hypothecation of present and future stock of raw materials, stock in process, semi finished & finished goods, stores and spares not relating to plant & machinery, consumables & book debts. These are repayable on demand. Working Capital loans outstanding as on March 31, 2015 are Rs. 24.14 Crore (Previous Year Rs. 13.88 Crore).

ii) Post Shipment Credit of Rs. 6.78 Crore (Previous Year Rs. 11.78 Crore) due for repayment on various dates between April 1,2015 to August 1,2015. These loans are secured by hypothecation of present and future stock of raw materials, stock in process, semi finished & finished goods, stores and spares not relating to plant & machinery, consumables & book debts.

iii) Packing Credit of Rs. Nil (Previous Year Rs. 67 Crore) outstanding as on March 31, 2015. These loans were secured by hypothecation of present and future stock of raw materials, stock in process; semi finished & finished goods, stores and spares not relating to plant & machinery, consumables & book debts.

iv) Loan from Department of Bio Technology Rs. 0.23 Crore (Previous Year Rs.0.15 Crore) and is being repaid in ten half yearly instalments starting from December 2014. Loan is secured by hypothecation of R&D equipments purchased out of these funds.

c. Unsecured Loan

i) Packing Credit of Rs. Nil (Previous Year Rs. 96 Crore) is availed of from banks.

ii) Unsecured loan from Indo-German Science & Technology Centre Rs. 0.60 Crore (Previous year Rs. 0.50 Crore) due for repayment in ten half yearly instalments starting from November 2015.

d. Diminution in Value of Investment and loan

i) The Company has reviewed the overall outlook of the business of Thermax Sustainable Energy Solutions Ltd. In view of very low prices of CERs, the viability of this business is severely affected. The Company has provided for diminution in value of its entire investment in this subsidiary and also provided for the loan extended to this Company.

ii) During the year, the company has written back the provision for diminution in value of its investment in Thermax International Limited (Mauritius) of Rs. 12.09 crore, as it is evident from the performance of its step-down subsidiaries that such provision is no longer required.

5 Segment Reporting (AS 17)

a. The Company has disclosed Business Segment as the primary segment. Segments have been identified by the management taking into account the nature of the products, manufacturing process, customer profiles, risk and reward parameters and other relevant factors.

b. Segment Revenue, Segment Results, Segment Assets and Segment Liabilities include the respective amounts identifiable to each of the segments as also amounts allocated on a reasonable basis.

The expenses, which are not directly attributable to a business segment, are shown as unallocated cost.

Assets and Liabilities that cannot be allocated between the segments are shown as a part of unallocated Assets and Liabilities respectively.

c. Secondary segments have been identified with reference to geographical location of external customers. Composition of secondary segments is as follows:

i. India

ii. Outside India

d. Inter-segment transfer price is arrived at on the basis of cost plus a reasonable mark-up.

41 Related Party Disclosures

Related party disclosures as required under Accounting Standard 18 issued by The Institute of Chartered Accountants of India are given below:

Relationship :

A. Holding Company RDA Holdings Pvt. Ltd.

B. Enterprises controlled by the Company :

Subsidiary Companies:

i. Domestic:

Thermax Sustainable Energy Solutions Ltd. Thermax Instrumentation Ltd.

Thermax Engineering Construction Co. Ltd. Thermax Onsite Energy Solutions Ltd.

Thermax SPX EnergyTechnologies Ltd. (Joint venture with SPX Netherlands BV)

Thermax Babcock & Wilcox Energy Solutions Pvt. Ltd. (Joint venture with Babcock & Wilcox India Holdings Inc)

C. Individuals having control or significant influence over the Company by reason of voting power, and their relatives : Mrs. Meher Pudumjee - Chairperson

Mrs. Anu Aga - Director

Mr. Pheroz Pudumjee - Director

D. Enterprise, over which control is exercised by individuals listed in ''C'' above Thermax Social Initiative Foundation

KRA Holdings Pvt. Ltd.

Shuffle Realtors Pvt. Ltd. (Up to April 30, 2014)

ARATrusteeship Company Pvt. Ltd.

E. Key Management Personnel:

Mr. M S Unnikrishnan - Managing Director & CEO

The following transactions were carried out during the year with related parties in the ordinary course of business.

6 Disclosure, as required by AS - 28 (Impairment of Assets):

In terms of Accounting Standard 28 (AS-28) there was no impairment loss on assets during the year under report.

7 Previous year''s figures have been regrouped wherever necessary to conform to current year''s classification.


Mar 31, 2014

1 Contingent Liability

a. Disputed demands in respect of Excise, Customs Duty and Service Tax Rs. 16.24 Crore (Previous Year Rs. 13.91 Crore), Sales Tax Rs. 16.44 Crore (Previous Year Rs. 14.69 Crore) and other Statutes Rs. 0.14 Crore (Previous Year Rs. 0.14 Crore).

b. Income Tax

i. Demands disputed in appellate proceedings Rs. 20.40 Crore (Previous Year Rs. 82.21 Crore).

ii. References / Appeals preferred by Income Tax department in respect of which, should the ultimate decision be unfavourable to the company, the liability is estimated to be Rs. 58.56 Crore (Previous Year Rs. 25.49 Crore).

c. Counter Guarantees given by the company to banks on behalf of group companies : Rs. 46.09 Crore on behalf of Thermax Instrumentation Ltd.(Previous Year Rs. 76.14 Crore), Rs. 1.43 Crore on behalf of Thermax Onsite Energy Solutions Ltd. (Previous Year Rs. 0.60 Crore) and Rs. Nil on behalf of Thermax Sustainable Energy Solutions Ltd. (Previous Year Rs. 0.09 Crore).

d. Indemnity Bonds and Corporate Guarantees given by the Company on behalf of group companies : Thermax Engineering Construction Company Ltd. Rs. 90 Crore (Previous Year Rs. Nil).

e. Liability for unexpired export obligations Rs. 10.30 Crore (Previous Year Rs. 2.50 Crore).

f. Claims against the company not acknowledged as debts Rs. 10.01 Crore (Previous Year Rs. 9.43 Crore).

g. Bills Discounted with banks Rs. 5.95 Crore (Previous Year Rs. 45.32 Crore).

h. Liability in respect of partly paid shares Rs. 0.19 Crore (Previous Year Rs. 0.19 Crore).

2 Micro & Small Enterprises

Micro & Small enterprises as defined under the Micro, Small and Medium Enterprises Development Act 2006 (MSMED) have been identified to the extent of information available with the company. This has been relied upon by the auditors.

3 Secured Loan

Secured loans represent following categories of borrowings :

i) Working Capital Loans (Cash Credits & Overdrafts) taken from consortium of banks. These are secured by hypothecation of present and future stock of raw materials, stock in process, semi finished & finished goods, stores and spares not relating to plant & machinery, consumables & book debts. These are repayable on demand. Working Capital loans outstanding as on March 31, 2014 are Rs. 13.88 Crore (Previous Year Rs. 4.76 Crore).

ii) Post Shipment Credit of Rs.11.78 Crore (Previous Year Rs. 7.12 Crore) due for repayment on various dates between April 1, 2014 to Aug 1, 2014. These loans are secured by hypothecation of present and future stock of raw materials, stock in process, semi finished & finished goods, stores and spares not relating to plant & machinery, consumables & book debts.

iii) Packing Credit of Rs. 67 Crore (Previous Year Rs. NIL) due for repayment on various dates between April 2014 to March 2015. These loans are secured by hypothecation of present and future stock of raw materials, stock in process, semi finished & finished goods, stores and spares not relating to plant & machinery, consumables & book debts.

iv) Loan from Department of Bio Technology Rs. 0.15 Crore (Previous Year Rs.0.15 Crore) is due for repayment in ten half yearly instalments starting from June 30, 2014 and carrying interest rate of 2% p.a.. Loan is secured by hypothecation of R&D equipments purchased out of these funds.

4 Unsecured Loan

i) Packing Credit of Rs. 96 Crore (Previous Year Rs. NIL) is availed of from banks. This is due for repayment on various dates between July 2014 to March 2015.

ii) Unsecured loan from Indo-German Science & Technology Centre Rs. 0.50 Crore (Previous year Rs. 0.30 Crore) due for repayment in 10 half yearly instalments starting from November 2015 and carrying interest rate of 3% p.a.

5 Unpaid Dividend

Unpaid dividends include following amounts which will be credited to Investor Education and Protection Fund (on expiry of the specified period, if the amount remains unclaimed at that time):

6 Capital and other Commitments

a. Capital Commitments : Estimated amount of contracts remaining to be executed on capital account (net of ad- vances) and not provided for Rs. 3.04 Crore (Previous year Rs. 15.51 Crore).

7 Capitalisation of expenses

Raw materials, labour and overheads capitalised in respect of Plant & Machinery Rs. 2.84 Crore (Previous Year Rs. 0.21 Crore).

8 Segment Reporting

a. The Company has disclosed Business Segment as the primary segment. Segments have been identified by the management taking into account the nature of the products, manufacturing process, customer profiles, risk and reward parameters and other relevant factors.

b. Segment Revenue, Segment Results, Segment Assets and Segment Liabilities include the respective amounts identifiable to each of the segments as also amounts allocated on a reasonable basis.

The expenses, which are not directly attributable to a business segment, are shown as unallocated cost.

Assets and Liabilities that cannot be allocated between the segments are shown as a part of unallocated Assets and Liabilities respectively.

c. Secondary segments have been identified with reference to geographical location of external customers. Compo- sition of secondary segments is as follows:

i. India

ii. Outside India

d. Inter-segment transfer price is arrived at on the basis of cost plus a reasonable mark-up.

9 Related Party Disclosures

Related party disclosures as required under Accounting Standard 18 issued by The Institute of Chartered Accountants of India are given below:

Relationship :

A. Holding Company

RDA Holdings Pvt. Ltd.

B. Enterprises controlled by the Company :

Subsidiary Companies:

i. Domestic:

Thermax Sustainable Energy Solutions Ltd. Thermax Instrumentation Ltd.

Thermax Engineering Construction Co. Ltd. Thermax Onsite Energy Solutions Ltd.

Thermax SPX Energy Technologies Ltd. (Joint venture with SPX Netherlands BV)

Thermax Babcock & Wilcox Energy Solutions Pvt. Ltd. (Joint venture with Babcock & Wilcox India Holdings Inc)

ii. Overseas:

Thermax Europe Ltd., U.K. Thermax do Brasil Energia-e Equipamentos Ltda., Brazil

Thermax International Ltd., Mauritius Thermax Inc., USA

Thermax Hong Kong Ltd., Hong Kong

Thermax (Zhejiang) Cooling & Heating Engineering Co. Ltd., China Thermax Netherlands BV. Thermax Denmark ApS, Denmark

Danstoker A/S, Denmark Boilerworks A/S, Denmark

Boilerworks Properties ApS, Denmark

Ejendomsanpartsselskabet Industrivej Nord 13 (EIN), Denmark Omnical Kessel & Apparatebau GmbH, Germany Thermax SDN. BHD.

Rifox-Hans Richter GmbH Spezialarmaturen

C. Individuals having control or significant influence over the Company by reason of voting power, and their relatives : Mrs. Meher Pudumjee - Chairperson

Mrs. Anu Aga - Director

Mr. Pheroz Pudumjee - Director

D. Enterprise, over which control is exercised by individuals listed in ''C'' above Thermax Social Initiative Foundation

KRA Holdings Pvt. Ltd.

ARA Trusteeship Company Pvt. Ltd.

Shuffle Realtors Pvt. Ltd.

E. Key Management Personnel:

Mr. M S Unnikrishnan - Managing Director

10 Tax expense includes Rs. 29 Crore being provision made for estimated liability likely to arise upon its claim for deduction of certain business expenses being held inadmissible consequent to a survey u/s 133A of the Income Tax Act, conducted by the Income Tax Department in October 2013. Consequential orders, to the extent received, have been contested by the company in appeal.

11 Disclosure as required by AS - 28 (Impairment of Assets):

In terms of Accounting Standard 28 (AS-28) there was no impairment loss on assets during the year under report.

12 The Ministry of Corporate Affairs, Government of India, vide General Circular No. 2 and 3 dated 8th February 2011 and 21st February 2011 respectively has granted a general exemption from compliance with section 212 of the Companies Act, 1956, subject to fulfilment of conditions stipulated in the circular. The Company has satisfied the conditions stipulated in the circular and hence is entitled to the exemption.

13 Previous year''s figures have been regrouped wherever necessary to conform to current year''s classification.


Mar 31, 2013

Note 1

Contingent Liability

a. Disputed demands in respect of Excise, Customs Duty and Service Tax Rs. 13.91 Crore (Previous Year Rs. 14.82 Crore), Sales Tax Rs. 14.69 Crore (Previous Year Rs. 17.40 Crore) and other Statutes Rs. 0.14 Crore (Previous Year Rs. 0.10 Crore).

b. Income Tax

i. Demands disputed in appellate proceedings Rs. 82.21 Crore (Previous Year Rs. 73.01 Crore).

ii. References / Appeals preferred by Income Tax department in respect of which, should the ultimate decision be unfavourable to the company, the liability is estimated to be Rs. 25.49 Crore (Previous Year Rs. 19.44 Crore).

c. Counter Guarantees given by the company to the banks on behalf of group companies : Rs. 76.14 Crore on behalf of Thermax Instrumentation Ltd. (Previous Year Rs. 56.84 Crore), Rs. 0.60 Crore on behalf of Thermax Onsite Energy Solutions Ltd. (Previous Year Rs. NIL) and Rs. 0.09 Crore on behalf of Thermax Sustainable Energy Solutions Ltd. (Previous Year Rs. NIL )

d. Indemnity Bonds and Corporate Guarantees given by the Company on behalf of group companies : Thermax Engineering Construction Company Ltd. Rs. NIL (Previous Year Rs. 14 Crore).

e. Liability for unexpired export obligations Rs. 2.50 Crore (Previous Year Rs. 7.97 Crore).

f. Claims against the company not acknowledged as debts Rs. 9.43 Crore (Previous Year Rs. 8.64 Crore).

g. Bills Discounted with banks Rs. 45.32 Crore (Previous Year Rs. 38.21 Crore).

h. Liability in respect of partly paid shares in Parasrampuria Synthetics Ltd. Rs. 0.19 Crore (Previous Year Rs. 0.19 Crore).

Note 2 Micro & Small Enterprises

Micro & Small enterprises as defined under the Micro, Small and Medium Enterprises Development Act 2006 (MSMED) have been identified to the extent of information available with the company. This has been relied upon by the auditors.

Note 3 Secured Loan

Secured loans represent following categories of borrowings :

i) Working Capital Loans (Cash Credits & Overdrafts) taken from consortium of banks. These are secured by hypothecation of present and future stock of raw materials, stock in process, semi finished & finished goods, stores and spares not relating to plant & machinery, consumables & book debts. These are repayable on demand. Working Capital loans outstanding as on March 31, 2013 are Rs. 4.76 Crore (Previous Year Rs. NIL).

ii) Post Shipment Credit of Rs. 7.12 Crore (Previous Year Rs. 3.56 Crore) due for repayment on various dates between April 1, 2013 to July 19, 2013. These loans are secured by hypothecation of present and future stock of raw materials, stock in process, semi finished & finished goods, stores and spares not relating to plant & machinery, consumables & book debts.

iii) Loan from Department of Bio Technology Rs. 0.15 Crore (Previous YearRs.0.08 Crore) due for repayment in ten half yearly instalments starting from December 31, 2013 and carrying interest rate of 2% p.a. Loan is secured by hypothecation of R&D equipments purchased out of these funds.

Note 4 Unsecured Loan

i) Buyers Credit availed from bank. The loan amount outstanding on March 31, 2013 is Rs. NIL (Previous Year Rs. 162.80 Crore).

ii) Unsecured loan from Indo-German Science & Technology Centre Rs. 0.30 Crore (Previous year NIL) due for repayment in 10 half yearly instalments starting from November 2015 and carrying interest rate of 3% p.a.

Note 5

In cases where letters of confirmation have been received from parties, book balances have been generally reconciled and adjusted, if required. In other cases, balances in accounts of sundry debtors, sundry creditors and advances or deposits have been taken as per books of accounts.

Note 6 Capital and other Commitments

a. Capital Commitments : Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for Rs. 15.51 Crore (Previous year Rs. 54.31 Crore).

b. Other Commitments : Current Year Rs. NIL (Previous Year Rs. 13.39 Crore for Share Purchase Agreement).

Note 7 Capitalisation of expenses

Raw materials, labour and overheads capitalised in respect of Plant & Machinery Rs. 0.21 Crore (Previous Year Rs. 1.16 Crore).

Note 8 Segment Reporting

a. The Company has disclosed Business Segment as the primary segment. Segments have been identified by the management taking into account the nature of the products, manufacturing process, customer profiles, risk and reward parameters and other relevant factors.

The Company''s operations have been mainly classified between two primary segments, ''Energy'' and ''Environment''. Composition of business segments is as follows:

b. Segment Revenue, Segment Results, Segment Assets and Segment Liabilities include the respective amounts identifiable to each of the segments as also amounts allocated on a reasonable basis.

The expenses, which are not directly attributable to a business segment, are shown as unallocated cost.

Assets and Liabilities that cannot be allocated between the segments are shown as a part of unallocated Assets and Liabilities respectively.

c. Secondary segments have been identified with reference to geographical location of external customers. Composition of secondary segments is as follows:

i. India

ii. Outside India

d. Inter-segment transfer price is arrived at on the basis of cost plus a reasonable mark-up.

Note 9 Related Party Disclosures

Related party disclosures as required under Accounting Standard 18 issued by The Institute of Chartered Accountants of India are given below:

Relationship :

A. Holding Company

RDA Holding & Trading Pvt. Ltd.

B. Enterprises controlled by the Company :

Subsidiary Companies:

i. Domestic:

Thermax Sustainable Energy Solutions Ltd. Thermax Instrumentation Ltd.

Thermax Engineering Construction Co. Ltd. Thermax Onsite Energy Solutions Ltd.

Thermax SPX Energy Technologies Ltd. (Joint venture with SPX Netherlands BV)

Thermax Babcock & Wilcox Energy Solutions Pvt. Ltd.(Joint venture with Babcock & Wilcox India Holdings Inc)

ii. Overseas:

Thermax Europe Ltd., U.K. Thermax do Brasil Energia-e Equipamentos Ltda., Brazil

Thermax International Ltd., Mauritius Thermax Inc., USA

Thermax Hong Kong Ltd., Hong Kong

Thermax (Zhejiang) Cooling & Heating Engineering Co. Ltd., China

Thermax Netherlands BV. Thermax Denmark ApS, Denmark

Danstoker A/S, Denmark

Ejendomsanpartsselskabet Industrivej Nord 13 (EIN), Denmark Omnical Kessel & Apparatebau GmbH, Germany Thermax SDN. BHD.

Rifox-Hans Richter GmbH Spezialarmaturen

C. Individuals having control or significant influence over the Company by reason of voting power, and their relatives: Mrs. Meher Pudumjee - Chairperson

Mrs. Anu Aga - Director

Mr. Pheroz Pudumjee - Director

D. Enterprise, over which control is exercised by individuals listed in ''C'' above Thermax Social Initiative Foundation

E. Key Management Personnel:

Mr. M S Unnikrishnan - Managing Director

The following transactions were carried out during the year with related parties in the ordinary course of business.

Note 10 Disclosure, as required by AS - 28 (Impairment of Assets):

In terms of Accounting Standard 28 (AS-28) there was no impairment loss on assets during the year under report.

Note 49 The Ministry of Corporate Affairs, Government of India, vide General Circular No. 2 and 3 dated 8th February 2011 and 21st February 2011 respectively has granted a general exemption from compliance with section 212 of the Companies Act, 1956, subject to fulfilment of conditions stipulated in the circular. The Company has satisfied the conditions stipulated in the circular and hence is entitled to the exemption.

Note 11 Previous year''s figures have been regrouped wherever necessary to conform to current year''s classification.

 
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