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Notes to Accounts of Thermax Ltd.

Mar 31, 2017

1. Significant accounting judgments, estimates and assumptions

The preparation of the Company’s separate financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities, and the accompanying disclosures and the disclosure of contingent liabilities as at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

2 Judgments

In the process of applying the Company’s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognized in the separate financial statements:

i. Revenue recognition on construction contracts

A significant portion of the Company’s business relates to construction activity which is accounted using percentage-of-completion method, recognizing revenue as the performance on the contract progresses. This requires Management to make judgment with respect to identifying contracts which need to be accounted

under percentage-of-completion method, depending upon the level of customization and the period of the fulfillment of the performance obligations under the contract. The percentage-of-completion method requires Management to make significant estimates of the extent of progress towards completion including accounting of multiple contracts which need to be combined and considered as a single contract.

ii. Legal contingencies

The Company has received various orders and notices from tax authorities in respect of direct taxes and indirect taxes. The outcome of these matters may have a material effect on the financial position, results of operations or cash flows. Management regularly analyzes current information about these matters and provides provisions for probable losses including the estimate of legal expense to resolve such matters. In making the decision regarding the need for loss provisions, management considers the degree of probability of an unfavorable outcome and the ability to make a sufficiently reliable estimate of the amount of loss. The filing of a suit or formal assertion of a claim against the company or the disclosure of any such suit or assertions, does not automatically indicate that a provision of a loss may be appropriate.

iii. Segment reporting

Ind AS 108 Operating Segments requires Management to determine the reportable segments for the purpose of disclosure in separate financial statements based on the internal reporting reviewed by Chief Operating Decision Maker (CODM) to assess performance and allocate resources. The standard also requires Management to make judgments with respect to aggregation of certain operating segments into one or more reportable segment.

Operating segments used to present segment information are identified based on the internal reports used and reviewed by the Board of Directors to assess performance and allocate resources. The management has determined that some of the segments exhibit similar economic characteristics and meet other aggregation criteria and accordingly aggregated into three reportable segments i.e. energy, environment and chemical.

3. Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the separate financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

i. Constructions contracts:

- Provisions for liquidated damages claims (LDs): the Company provides for LD claims where there have been significant contract delays and it is considered probable that the customer will successfully pursue such a claim. This requires an estimate of the amount of LDs payable under a claim which involves a number of management judgments and assumptions regarding the amounts to be recognized.

- Project cost to complete estimates: at each reporting date, the Company is required to estimate costs to complete on fixed-price contracts. Estimating costs to complete on such contracts requires the Company to make estimates of future costs to be incurred, based on work to be performed beyond the reporting date. This estimate will impact revenues, cost of sales, work-in-progress, billings in excess of costs and estimated earnings and accrued contract expenses.

- Recognition of contract variations: the Company recognizes revenues and margins from contract variations where it is considered probable that they will be awarded by the customer and this requires management to assess the likelihood of such an award being made by reference to customer communications and other forms of documentary evidence

-Provision for onerous contracts: the Company provides for future losses on long-term contracts where it is considered probable that the contract costs are likely to exceed revenues in future years. Estimating these future losses involves a number of assumptions about the achievement of contract performance targets and the likely levels of future cost escalation over time. Refer note 19(b) for details for provision for onerous contract.

ii. Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit (CGU) exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a Discounted Cash Flow (DCF) model. The cash flows are derived from the budget for the next five years as approved by the Management and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the terminal growth rate used.

iii. Defined benefit plans - gratuity

The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. The parameter which is most subjected to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on Indian Assured Lives Mortality (2006-08) Ultimate. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates. Further details about gratuity obligations are given in note 34.

iv. Fair value measurement of unquoted financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer note 37 for further disclosures.

v. Warranty provision

The Company generally offers warranty for its various products. Warranty costs are provided based on a technical estimate of the costs required to be incurred for repairs, replacements, material costs, servicing cost and past experience in respect of warranty costs. Management estimates the related provision for future warranty claims based on historical warranty claim information, as well as recent trends that might suggest that past cost information may differ from future claims. The assumptions made in current period are consistent with those in the prior year. Factors that could impact the estimated claim information include the success of the Company’s productivity and quality initiatives. Warranty provisions are discounted using a pretax discount rate which reflects current market assessments of time value of money and risks specific to the liability. Refer note 19 for further details.

vi. Impairment of financial assets

The impairment provisions for financial assets are based on assumptions about risk of default, expected loss rates and timing of cash flows. The Company uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on the Company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.

As a practical expedient, the Company uses a provision matrix to determine ECL impairment allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed. On that basis, the Company estimates a default rate of total revenue for trade receivables and of contract revenue for contract receivables. The Company follows provisioning norms based on ageing of receivables to estimate the ECL provision. For retention receivables, the Company additionally categorizes the receivables due from Public Sector Undertakings (PSUs) and Non-PSUs and follows a wider aged bucket provisioning norms as the performance guarantee tests require certain time period after the supplies are completed. Refer note 7 and 9(b) for details of impairment allowance recognized at the reporting date.

vii. Useful lives of property, plant and equipment and intangible assets

The Company determines, based on independent technical assessment, the estimated useful lives of its property, plant and equipment and intangible assets for calculating depreciation and amortization. This estimate is determined after considering the expected usage of the asset or physical wear and tear. Management reviews the residual value and useful lives annually and future depreciation and amortization charge would be adjusted where the management believes the useful lives differ from previous estimates. Refer note 2(e) above for further details.

viii. Intangible asset under development

The Company capitalizes intangible asset under development in accordance with the accounting policy. Initial capitalization of costs is based on management’s judgment that technological and economic feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. In determining the amounts to be capitalized, management makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of benefits. The carrying amount of capitalized intangible asset under development includes significant investment in the development of power plants using alternative energy solutions. The innovative nature of the product gives rise to some uncertainty as to performance parameters stated in the contract would be satisfied. Refer note 4(b) for details of intangible asset underdevelopment.

ix. Deferred taxes

At each balance sheet date, the Company assesses whether the realization of future tax benefits is sufficiently probable to recognize deferred tax assets. This assessment requires the use of significant estimates with respect to assessment of future taxable income. The recorded amount of total deferred tax assets could change if estimates of projected future taxable income or if changes in current tax regulations are enacted. Refer note 10 for further information on potential tax benefits for which no deferred tax asset is recognized.

Financial assets at fair value through other comprehensive income reflect the positive change in fair value of foreign exchange forward contracts, designated as cash flow hedges to hedge highly probable forecast sales and purchases in various foreign currencies.

Unbilled revenue is disclosed net of impairment allowance of Rs. 11.04 (March 31,2016: Rs. 15.35; April 1,2015: Rs. 17.19) for contract assets.

The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off income tax assets and liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

The Company has tax losses which arose in India of Rs. 9.14 (March 31, 2016: Rs. 12.37, April 1, 2015: Rs. 12.37) that are available for offsetting for eight years against future taxable profits. The losses will expire over the next 5 financial years till March 2022.

Deferred tax assets have not been recognized in respect of these losses as they may not be used to offset taxable profits elsewhere in the Company and there are no other tax planning opportunities or other evidence of recoverability in the near future. If the Company were able to recognize all unrecognized deferred tax assets, the profit for the year would increase by Rs. 2.50 (March 31,2016: Rs. 2.48).

During the year, the Company has paid dividends to its shareholders. This has resulted in payment of Dividend Distribution Tax (DDT) to the taxation authorities. The Company believes that DDT represents additional payment to taxation authority on behalf of the shareholders. Hence DDT paid is charged to equity.

(b) Terms /rights attached to equity shares

The Company has one class of equity shares having a par value of Rs. 2 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

As per records of the Company, including its register of shareholders/ members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents the legal ownerships of shares.

(e) The Company has several trusts set up for welfare of employees (including ESOP trust). Such trusts together hold 65,41,440 (March 31, 2016: 65,41,440; April 1, 2015: 65,41,440) equity shares representing 5.49% (March 31, 2016:5.49%; April 1,2015:5.49%) of equity share in the Company.

General reserve

Represent amounts transferred from retained Earnings in earlier years as per the requirements of the erstwhile Companies Act 1956 and transition adjustments on implementation of new accounting standards.

Cash flow hedge reserve

This reserve comprises the effective portion of the cumulative net change in the fair value of the cash flow hedge instruments related to hedged transactions that have notyet occurred.

Secured loan pertained to loan from Department of Bio Technology. As per the agreement, the loan was to be repaid in ten half yearly installments starting from December 2014 however the balance loan outstanding was repaid during the year. Loan was secured by hypothecation of equipment purchased for research and development out of these funds.

Unsecured loan represents loan from Indo-German Science & Technology Centre. As per the agreement, the loan was to be repaid in ten half yearly installments starting from November 2015 however the balance loan outstanding was repaid during the year.

Secured loans include bill discounted by suppliers amounting to Rs. 65.21 (March 31, 2016: Rs. 83.11; April 1, 2015: Rs. 97.43) that are repayable within 60 to 120 days of the invoice date.

Secured loans include post-shipment credit of Rs 1.01 (March 31,2016: Rs 7.64; April 1,2015: Rs. 6.78) carries an interest rate ranging between 2 to 5% due for repayment on various dates ranging upto 180 days.

These loans are secured by hypothecation of present and future stock of all inventories, stores and spares not related to plant and machinery, book debts and other moveable assets.

Provision for decommissioning liability

A provision has been recognized for decommissioning costs associated with the land taken on lease by the Company. The Company is committed to decommission the site as a result of the construction of manufacturing facility. The timing of cash outflows in respect of such provision cannot be reasonably determined.

Provision for warranties

Warranty costs are provided based on a technical estimate of the costs required to be incurred for repairs, replacements, material costs, servicing cost and past experience in respect of such costs. It is expected that this expenditure will be incurred over the contracted warranty period ranging up to 2 years. If warranty claim costs vary by 10% from management’s estimate, the warranty provisions would be an estimated Rs. 8.35 higher or lower (March 31,2016 Rs. 7.92; April 1,2015: Rs. 7.64)

Provision for onerous contracts

A provision for expected loss on construction contracts is recognized when it is probable that the contracts costs will exceed total contract revenue. For all other contracts, provision is made when the unavoidable costs of meeting the obligation under the contract exceed the estimated economic benefits. The timing of cash outflows in respect of such provision is over the contract period.

4Contingent liabilities and commitments A Contingent liabilities

a) During the previous year, the Commissioner of Central Excise, upon adjudication of the show cause-cum demand notices issued by the Department for the period June 2000 till March 2015, has raised demands of Rs. 1,263.24 crores on the Company (including penalty but excluding interest not presently quantified). During the year, the Company was served an additional demand order of Rs.67.40 crores (including penalty but excluding interest not presently quantified) for the period April 2015 to September 2015 for the same matter.

These demands are of excise duty payable on inclusion of the cost of bought out items in the assessable value of certain products manufactured by the Company, though such duty paid bought out items are directly dispatched by the manufacturers thereof to the ultimate customer, without being received in the Company''s factory. The Company filed an appeal against the said orders received before CESTAT, Mumbai. Based on an independent legal advice, the Company is confident of the issue being ultimately decided in its favour and accordingly, no provision has been considered necessary as at March 31,2017.

The Company has issued various guarantees for performance, deposits, tender money etc. The management has considered the probability for outflow of the same to be remote and accordingly no amount has been disclosed here.

The timing and amount of the cash flow which will arise from these matters, will be determined by the relevant authorities on settlement of the cases or on receipt of claims from customers.

B Capital and other commitments

a) Liability in respect of partly paid shares Rs. 0.19 (March 31,2016 Rs.0.19, April 1,2015 Rs. 0.19)

b) Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for is Rs. 43.93 (March 31,2016 Rs. 69.11 April 1,2015 Rs. 6.92)

c) Lease commitments

i. Operating lease: Company as lessee

The Company has taken office buildings on operating lease. The tenure of such leases ranges from 1 to 5 years. Lease rentals are charged to the Statement of profit and loss for the year. There are no subleases. The leases are renewable on mutually agreeable terms. At the expiry of the lease term, the company has an option to terminate the agreement or extend the term by giving notice in writing.

ii. Operating lease: Company as less or

The Company has leased certain parts of its surplus office and buildings. The tenure of such lease agreements ranges from 1 to 5 years. All leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions. For nature of assets refer note 4(a)

5 Gratuity

The Company operates a defined benefit plan viz. gratuity for its employees. Under the gratuity plan, every employee who has completed at least specified years of service gets a gratuity on departure @ 15 days (minimum) of the last drawn salary for each completed year of service. The scheme is funded with an insurance Company in the form of qualifying insurance policy. The fund has formed a trust and it is governed by the Board of Trustees.

The fund is subject to risks such as asset volatility, changes in bond yields and asset liability mismatch risk. In managing the plan assets, Board of Trustees reviews and manages these risks associated with the funded plan. Each year, the Board of Trustees reviews the level of funding in the gratuity plan. Such a review includes asset-liability matching strategy and investment risk management policy (which includes contributing to plans that invest in risk-averse markets). The Board of Trustees aim to keep annual contributions relatively stable at a level such that no plan deficits (based on valuation performed) will arise.

The above sensitivity analysis is based on a change in assumption while holding all other assumptions constant. In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of defined benefit obligation calculated with the Projected Unit Credit Method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognized in the balance sheet.

The method and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous periods.

D Individuals having significant influence over the Company by reason of voting power, and their relatives

1 Mrs. Meher Pudumjee-Chairperson

2 Mrs. Anu Aga-Director

3 Mr. Pheroz Pudumjee-Director

E Enterprise, over which control is exercised by individuals listed in ‘D’ above:

1 Thermax Foundation, India (formerly known as Thermax Social Initiative Foundation)

2 KRA Holdings Private Limited, India

F Key Management Personnel:

1 Mr. M S Unnikrishnan - Managing Director and Chief Executive Officer

2 Dr Raghunath A. Mashelkar - Independent Director

3 Dr Valentin A. H. von Massow-Independent Director

4 Dr Jairam Varadaraj - Independent Director

5 Mr. Nawshir Mirza - Independent Director

6 Mr. Harsh Mariwala - Independent Director (w.e.f. November 10,2016)

7 Mr. Amitabha Mukhopadhyay - Chief Financial Officer

8 Mr. Amit Atre - Company Secretary (Up to January 12,2017)

II. Commitments

Pursuant to the agreement between the Company, First Energy Private Limited, India (FEPL) and the shareholders of FEPL, the Company has a call option to increase its equity holding in FEPL up to 76% and counter party has corresponding put option. This commitment and the related consideration is subject to certain pre-conditions, including conditions linked to future performance, and timelines, which are not disclosed due to sensitivity of the information.

III. Terms and conditions for outstanding balances

1. All outstanding balances are unsecured and repayable in cash.

2. Loan to joint venture has been given on a short-term basis at market rates of interest.

IV. Terms and conditions of related party transactions

The sales to and purchases from related parties are assessed to be at arm’s length transactions by the management. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash.

There have been no guarantees provided or received for any related party receivables or payables. For the year ended March 31, 2017, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (March 31, 2016: Rs. Nil, April 1, 2015: Rs. Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

6 Segment information

In accordance with para 4 of Ind AS 108 “Operating Segments”, the company has disclosed segment information in the consolidated financial statements.

The management has assessed that the carrying amounts of the above financial instruments approximate their fair values.

The Company enters into derivative financial instruments with banks. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs which captures credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies. All derivative contracts are fully cash collateralized, thereby eliminating both counterparty and the Company’s own non-performance risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognized at fair value.

7 (a) Financial risk management

The Company’s principal financial liabilities, other than derivatives, comprise trade and other payables and loans and borrowings. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include loans, trade and other receivables and cash and cash equivalents that derive directly from its operations. The Company also holds FVTPL investments and enters into derivative transactions.

Risk is inherent in the Company’s activities but it is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Company’s continuing profitability and each individual within the Company is accountable for the risk exposures relating to his or her responsibilities. The Company is exposed to market risk, credit risk and liquidity risk.

The Company’s Board of Directors is ultimately responsible for the overall risk management approach and for approving the risk strategies and principles. No significant changes were made in the risk management objectives and policies during the years ended March 31, 2017 and March 31, 2016. The management of the Company reviews and agrees policies for managing each of these risks which are summarized below:

I Market risk

Market risk is the risk that the value of an asset will fluctuate as a result of changes in market variables such as interest rates, foreign exchange rates, and equity prices, whether those changes are caused by factors specific to the individual investment or its issuer or factors affecting all investments traded in the market.

Market risk is managed on the basis of pre-determined asset allocations across various asset categories, diversification of assets in terms of geographical distribution and industry concentration, a continuous appraisal of market conditions and trends and management’s estimate of long and short term changes in fair value.

a Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not currently exposed significantly to such risk.

b Foreign currency risk

Foreign exchange risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the Company’s functional currency. Foreign exchange risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.

Foreign exchange risk is managed on the basis of limits determined by management and a continuous assessment of current and expected exchange rate movements and entering into derivative contracts that hedge the maximum period of exposure of underlying transactions (i.e. highly probable forecast sales and purchases).

When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of forecast transactions the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency.

Foreign currency sensitivity

The following tables demonstrate the sensitivity to a reasonably possible change in USD, SEK and EUR exchange rates, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities including foreign currency derivatives not designated as cash flow hedge and foreign currency derivatives with underlying foreign currency monetary assets/liabilities designated as cash flow hedge. The impact on the Company’s pre-tax equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges.

Favorable impact shown as positive and adverse impact as negative.

The exposure to other foreign currencies is not significant to the company’s financial statements, c Price risk

The Company’s equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. These securities are unquoted. The Company manages the equity price risk through diversification and by placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Company’s senior management on a regular basis. The Company’s Board of Directors reviews and approves all equity investment decisions.

II Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables and contract assets) and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on individual credit limits and risk of potential default based on defined credit risk parameters. An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous group and assessed for impairment collectively. The calculation is based on losses as per historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in notes 7 and 9(b) above. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Financial instruments and bank deposits

Credit risk from balances with banks, mutual funds, loans and other financial assets are managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties having a good market reputation and within credit limits assigned to each counterparty. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.

The Company’s maximum exposure to credit risk for bank balances and deposits as at March 31,2017, March 31, 2016 and April 1, 2015 is the carrying amounts as disclosed in Note 9(a) and 13, maximum exposure relating to financial guarantees is disclosed in note 33 and financial derivative instruments in notes 9(b) and 18(b) to the financial statements.

Ill Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, company treasury maintains flexibility in funding by maintaining availability under committed credit lines.

The management monitors rolling forecasts of the Company’s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows. This is generally carried out at operating segments level in the Company in accordance with practice and limits set by the Company. In addition, the Company’s liquidity management policy involves projecting future cash flows and considering the level of liquid assets necessary to meet these and monitoring balance sheet liquidity ratios against internal requirements.

(i) Maturities of financial liabilities

The tables below summarizes the company’s financial liabilities into relevant maturity profile based on contractual undiscounted payments:

38(b) Hedging activities and derivatives Cash flow hedges Foreign currency risk

Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast sales in EUR, USD, SEK, and forecast purchases in USD, SEK, JPY, USD . These forecast transactions are highly probable, and fully cover the Company’s expected future sales and future purchases based on the orders received.

While the Company also enters into other foreign exchange forward contracts with the intention to reduce the foreign exchange risk of expected sales and purchases, these other contracts are not designated in hedge relationships and are measured at fair value through profit or loss.

The foreign exchange forward contract balances vary with the level of expected foreign currency sales and purchases and changes in foreign exchange forward rates.

All the derivative contracts expire in next 12 months.

The cash flow hedges of the expected future sales during the year ended March 31, 2017 were assessed to be highly effective and a net unrealized gain of Rs. 41.45, with a deferred tax liability of Rs.14.35 relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges of the expected future sales during the year ended March 31,2016 were assessed to be highly effective and an unrealized gain of Rs. 13.34 with a deferred tax liability of Rs. 4.62 was included in OCI in respect of these contracts.

The cash flow hedges of the expected future purchases during the year ended March 31,2017 were assessed to be highly effective, and as at 31 March 2017, a net unrealized loss of Rs. 11.60 with a related deferred tax asset of Rs. 4.02 was included in OCI in respect of these contracts. Comparatively, the cash flow hedges of the expected future purchases during the year ended March 31,2016 were also assessed to be highly effective and an unrealized gain of Rs. 0.23 with a deferred tax liability of Rs. 0.08 was included in OCI in respect of these contracts.

The amounts retained in OCI at March 31,2017 are expected to mature and affect the statement of profit and loss during the year ended March 31,2018.

Reclassifications to profit or loss during the year gains or losses included in OCI are shown in Note 30.

8 Capital Management

The Company’s objective for capital management is to maximize shareholder value, safeguard business continuity and support the growth of the Company. The Company determines the capital requirement based on annual operating plans and long- term and other strategic investment plans. The funding requirements are met through equity and operating cash flows generated. No changes were made in the objectives, policies or processes during the years ended March 31,2017 and March 31,2016. Capital represents equity attributable to equity holders of the Parent Company.

9 Impairment of Investment in Subsidiaries and Joint Venture

The Management has assessed the recoverability of its investment in Thermax Babcock & Wilcox Energy Solutions Private Limited, a joint venture, following continued losses on account of low demand, fewer committed orders resulting in lower capacity utilization and intense competition. Consequently, the investment has been impaired by Rs. 111.84 and the related charge has been disclosed as an exceptional item in the statement of profit and loss.

The significant judgments used by an independent valuer in the valuation of the entity mainly include the government published land rates for industrial property in the vicinity of the property under valuation, estimated remaining useful life, cost of construction for similar buildings and replacement cost of the buildings, and price trends in the cost of plant and machinery.

First Energy Private Limited (FEPL), a subsidiary, witnessed significant deterioration due to structural change in energy price dynamics and delayed recoveries from customers. The Company therefore tested the investment in FEPL for impairment as at the year-end. The recoverable value has been determined based on value-in-use calculation using cash flow projections from financial budgets approved by senior management covering a 5-year period. The projected cash flows have been updated to reflect the decreased demand for the products and services. The pre-tax discount rate applied to cash flow projections is 18% and the cash flows beyond the 5-year period have been extrapolated using a long-term average growth rate of 4%. As a result of this analysis, The Company has recorded an impairment loss of Rs. 16 which has been presented as an exceptional item in the Statement of profit and loss.

The Management has assessed the recoverability of its investment in Thermax (Zhejiang) Cooling & Heating Engineering Company Ltd., a subsidiary in China, following continued losses on account of low demand resulting in lower capacity utilization and intense competition. Consequently, the investment has been impaired by Rs. 5 and the related charge has been disclosed as an exceptional item in the statement of profit and loss.

Total impairment of investments on subsidiaries and joint venture presented as an exceptional item in the Statement of Profit and Loss amounts to Rs. 132.84.

10 (a) Standards issued but not yet effective

In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments)

Rules, 2017, notifying amendments to Ind AS 7, ‘Statement of cash flows ‘and Ind AS 102, ‘Share-based payment. ‘These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, ‘Statement of cash flows’ and IFRS 2, ‘Share-based payment,’ respectively. The amendments are applicable to the company from April 1,2017.

Amendment to Ind AS 7:

The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of separate financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and noncash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement. Application of these amendment will result in additional disclosures in the financial statement.

Amendment to Ind AS 102:

The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes. It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity-settled awards. Market-based performance conditions and non-vesting conditions are reflected in the ‘fair values’, but non-market performance conditions and service vesting conditions are reflected in the estimate of the number of awards expected to vest. Also, the amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction are modified with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date of the modification. Further, the amendment requires the award that include a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an equity settlement.

The Company has evaluated the requirements of the amendment and concluded that there is no impact on the separate financial statements.

11(b) Event after reporting date

The Company, through its step-down subsidiary in Denmark, has acquired 100% stake in Barite Investments SP. Z.O.O., Poland (“Barite”) from Weiss SP. Z.O.O. in Poland. With this, Barite became a step-down subsidiary of the Company. Subsequent to March 31,2017, as part of a definitive agreement entered into with Weiss SP. Z.O.O. in Poland, Thermax acquired the assets and production activities related to boiler manufacturing. The transaction was completed on May 4, 2017, on which date the control has been transferred to the Company for a total consideration of Rs 23 Crores and is payable in cash.

The initial accounting of the transaction has not been completed till the date of authorization of these financial statements given a short time period between the acquisition date and the date of authorization of the financial statements. Accordingly, the acquisition date fair values of each major classes of assets acquired and liabilities assumed, including the computation of Goodwill, if any cannot be presented.

The Company expects to finalize identifying and measuring the identifiable assets acquired and liabilities assumed at their acquisition date fair value within the measurement period of 12 months from the date of acquisition as defined in Ind AS 103.

12 First-time adoption

Transition to Ind AS

These financial statements for the year ended March 31,2017, are the first financial statements prepared in accordance with Ind AS. For all periods up to and including the year ended March 31, 2016, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).

Accordingly, the Company has prepared financial statements which comply with Ind AS applicable as at March 31,2017, together with the comparative period data for the year ended March 31,2016, as described in note 2.1 above. In preparing these financial statements, the Company’s opening balance sheet was prepared as at April 1,2015, the Company’s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at April 1, 2015 and the financial statements as at and for the year ended March 31,2016.

Ind AS 101 allows first-time adopters certain exemptions/ exceptions from the retrospective application of certain requirements under Ind AS as follows:

i) Leases

Appendix C to Ind AS 17 requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. However, the Company has used Ind AS 101 exemption and assessed all arrangement based for embedded leases based on conditions in place as at the date of transition.

ii) Deemed cost

Ind AS 101 permits a first time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognized in the financial statements as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets and Capital work-in-progress and intangible assets under development. Accordingly, the Company has elected to measure all of its property, plant and equipment, intangible assets, capital work-in-progress and intangible assets under development at their Previous GAAP carrying value.

iii) Designation of previously recognized financial instruments

Financial assets and financial liabilities are classified at fair value through profit and loss or fair value through other comprehensive income based on facts and circumstances as at the date of transition to Ind AS i.e. April 1, 2015. Financial assets and liabilities are recognized at fair value as at the date of transition to Ind AS i.e. April 1,2015 and not from the date of initial recognition.

iv) Investments in subsidiaries and joint ventures

The Company has elected to apply previous GAAP carrying amount for its investment in subsidiaries and joint ventures as deemed cost at the date of transition to Ind-AS, except for investment in Thermax (Zhejiang) Cooling & Heating Engineering Company Limited (a subsidiary) and Thermax Babcock & Wilcox Energy Solutions Private Limited (a joint venture) where the Company has elected to use fair value as deemed cost on the date of transition to Ind-AS.

v) Estimates

The estimates as at April 1, 2015 and March 31, 2016 are consistent with those made for the same dates in accordance with Indian GAAP except impairment of financial assets based on expected credit loss model and unquoted equity shares at fair value through profit and loss. The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at April 1,2015 the date of transition to Ind AS and as of March 31,2016.

vi) Hedge accounting

The Company uses derivative financial instruments namely forward currency contracts, to hedge its foreign currency risks. Under Previous GAAP, there was no mandatory standard that deals comprehensively with hedge accounting, which has resulted in the adoption of varying practices. The Company has designated various economic hedges and applied economic hedge accounting principles to avoid profit or loss mismatch. All the hedges designated under Indian GAAP are of types which qualify for hedge accounting in accordance with Ind AS 109 also. Moreover, the Company, before the date of transition to Ind AS, has designated a transaction as hedge and also meets all the conditions for hedge accounting in Ind AS 109. Consequently, the Company continues to apply hedge accounting after the date of transition to Ind AS.

vii) Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

Notes to first-time adoption a Proposed dividend

Under Previous GAAP, proposed dividends including Dividend Distribution Tax (DDT) are recognized as a liability in the period to which they relate, irrespective of when they are declared. Under Ind AS, a proposed dividend is recognized as a liability in the period in which it is declared by the company (usually when approved by shareholders in a general meeting) or paid.

In the case of the Company, the declaration of dividend occurs after period end. Therefore, the liability of Rs. 86.04 for the year ended on March 31, 2016 (April 1, 2015 Rs. 100.39) recorded for dividend has been reversed with corresponding adjustment to retained earnings. Correspondingly, total equity increased by this amount.

b Fair value adjustments on financial instruments

Current investments: Under Previous GAAP, current investments in equity instruments such as mutual funds are recognized at cost or net realizable value, whichever is lower. Long-term investments in equity instruments were recorded at cost less provision for other than temporary decline in the value of investments. Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes of these investments have been recognized in retained earnings as at the date of transition and subsequently in Statement of profit and loss for the year ended March 31,2016. This resulted in an increase in retained earnings as at March 31, 2016 by Rs 1.61 (April 1,2015: Rs0.82).

Financial guarantees: The Company has issued certain financial guarantees to banks in relation to loans availed by a joint venture from these banks. Ind-AS requires liability from such financial guarantees to be recorded initially at fair value. This has no impact on equity as on the date of transition. However, the amortization of financial guarantee has resulted in a gain amounting to Rs 1.78 for the year ended March 31, 2016 as the loan is repaid by the joint venture.

Investment in preference shares of a subsidiary: The Company’s investment in preference shares of one of its

subsidiaries, Thermax Instrumentation Limited, is fair valued on initial recognition which resulted in a fair value adjustment of Rs. 2.65 resulting a decrease in the retained earnings as on the transition date. According to the Company’s accounting policy, this difference has been adjusted to the retained earnings on the economic substance of the adjustment. The fair value adjustment on account of interest accretion for the year ended March 31,2016 amounted to Rs 0.78 which has been charged to the Statement of profit and loss.

c Provision for expected credit loss under Ind AS 109

Under Previous GAAP, the Company has created provision for impairment of receivables and contract assets i.e. unbilled revenue consists only in respect of specific amount for incurred losses. Under Ind AS, impairment allowance has been determined based on Expected Credit Loss (ECL) model. The total ECL provision amounting to Rs 135.57 considered as on the transition date has been adjusted against the retained earnings. The impact of Rs 20.68 for the year ended March 31,2016 has been charged off to the Statement of profit and loss.

d Fair value as deemed cost for investment in subsidiaries and joint ventures

Ind-AS 101 allows considering fair value as deemed cost for the Company’s investment in subsidiaries, associates and joint ventures. This choice is available for each investment individually. The deemed cost for all investment in equity instruments has been considered as the cost under the Previous GAAP except for Thermax (Zhejiang) Cooling & Heating Engineering Company Limited (a subsidiary) and Thermax Babcock & Wilcox Energy Solutions Private Limited (a joint venture) wherein the Company has their fair value as the deemed cost. Consequently, a total fair value adjustment amounting to Rs 130 has been considered as on the transition date thereby leading to a decrease in retained earnings as on that date.

e Others

These adjustments pertain to the provisions which under the Previous GAAP were accounted for at the undiscounted amount. In contrast, Ind AS 37 requires that where the effect of time value of money is material, the amount of provision should be the present value of the expenditures expected to be required to settle the obligation. The discount rate should not reflect risks for which future cash flow estimates have been adjusted. Ind AS 37 also provides that where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. This increase is recognized as borrowing cost. This led to a decrease in provision on the date of transition by Rs. 4.35 which was adjusted against retained earnings. The corresponding adjustment for the year ended March 31,2016 led to a decrease in provision by Rs 2.93 which was taken to the Statement of profit and loss.

The adjustment also includes provision for decommissioning liabilities on lease hold land as required under Ind AS 16 added to the cost of property, plant and equipment amounting to Rs. 0.41 which was adjusted against the retained earnings. The corresponding adjustment for the year ended March 31, 2016 amounted to loss of Rs. 0.32 which was taken to the Statement of Profit and Loss.

f Deferred tax

The various transitional adjustments have led to temporary differences and accordingly, the Company has accounted for such differences. Deferred tax adjustments are recognized in correlation to the underlying transaction either in retained earnings or a separate component of equity.

g Actuarial loss transferred to Other Comprehensive Income

Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognized in other comprehensive income instead of statement of profit and loss. As a result of this change, the profit for the year ended March 31, 2016 has increased by Rs. 4.03. There is no impact on total equity.

h Other comprehensive income

Under Ind AS, all items of income and expense recognized in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in profit and loss but are shown in the Statement of profit and loss as ‘other comprehensive income’ includes remeasurements of defined benefit plans and net gain on cash flow hedge

The concept of other comprehensive income did not exist under the Previous GAAP.


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.


Mar 31, 2012

Note 28 Contingent Liability

a. Disputed demands in respect of Excise, Customs Duty and Service Tax Rs. 14.82 Crore (Previous Year Rs. 19.88 Crore), Sales Tax Rs. 17.40 Crore (Previous Year Rs. 14.41 Crore) and other Statutes Rs. 0.10 Crore (Previous Year Rs. 0.09 Crore).

b. Income Tax

i. Demands disputed in appellate proceedings Rs. 73.01 Crore (Previous Year Rs. 41.99 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. 19.44 Crore (Previous Year Rs. 19.44 Crore)

c. Counter Guarantees given by the company to the banks on behalf of group companies : Rs. 56.84 Crore on behalf of Thermax Instrumentation Ltd. (TIL) (Previous Year Rs. 64.78 Crore).

d. Indemnity Bonds/Corporate Guarantees given by the Company on behalf of group companies: Thermax Denmark ApS, Denmark Rs. Nil (Previous Year Rs. 62.84 Crore) and Thermax Engineering Construction Company Ltd. (TECC) Rs. 14 crore (Previous Year Rs. Nil).

e. Liability for unexpired export obligations Rs. 7.97 Crore (Previous Year Rs. 56.84 Crore).

f. Claims against the company not acknowledged as debts Rs. 8.64 Crore (Previous Year Rs. 9.00 Crore).

g. Bills Discounted with banks Rs. 152.42 Crore (Previous Year Rs. 119.43 Crore).

h. Liability in respect of partly paid shares in

Parasrampuria Synthetics Ltd. Rs. 0.19 Crore (Previous Year Rs. 0.19 Crore).

Note 29 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 33 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, 2012 are Rs. NIL (Previous Year Rs. 0.56 Crore).

ii) Post Shipment Credit of Rs. 3.56 Crore (Previous Year Nil) due for repayment on various dates between April 16, 2012 to July 16, 2012. 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 0.08 Crore (Previous Year Rs.0.08 Crore) due for repayment in 36 months from July 1, 2013. and carrying interest rate of 2% p.a.. Loan is secured by hypothecation of R&D equipments purchased out of these funds.

Note 34 Unsecured Loan

Buyers Credit availed from bank. The loan amount outstanding on March 31, 2012 is Rs 162.80 Crore (Previous Year Rs. 48.04 Crore).

a. Rs. 32.72 Crore due for repayment on June 5, 2012.

b. Rs. 47.01 Crore due for repayment on Oct 29, 2012.

c. Rs. 83.07 Crore due for repayment on Nov 29, 2012.

Note 36

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 account.

Note 38 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. 54.31 Crore (Previous year Rs. 13.49 Crore).

b. Other Commitments : The Company has entered into "Share Purchase Agreement" (SPA) with two Indian Companies to acquire their share holding in an overseas Company. The amount involved in this contract and not provided for is Rs. 13.39 Crore (Previous year Rs. Nil).

Note 39 Capitalisation of expenses

Raw materials, labour and overheads capitalised in respect of Plant & Machinery Rs. 1.16 Crore (Previous Year Rs. 0.18 Crore).

Note 41 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 the 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 42 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., Netherlands Thermax Denmark ApS, Denmark

Danstoker A/S, Denmark Danstoker (UK) Ltd., UK

Ejendomsanpartsselskabet Industrivej Nord 13 (EIN), Denmark

Omnical Kessel & Apparatebau GmbH, Germany

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

Note 46 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 50

The financial statements have been prepared in accordance with the requirement of the revised schedule VI to the Companies Act, 1956 as per the Government Notification no. F.No.2/6/2008-C.L-V dated March 30, 2011. The comparative figures for previous year have also been accordingly restated to conform to the current year's presentation.


Mar 31, 2011

1. Contingent Liability

a) Disputed demands in respect of Excise, Customs Duty and Service Tax Rs. 19.88 Crore (Previous Year Rs. 22.11 crore), Sales Tax Rs. 14.41 Crore (Previous Year Rs. 13.38 Crore) and other Statutes Rs. 0.09 Crore (Previous Year Rs. 0.09 Crore).

b) Income Tax

i) Demands disputed in appellate proceedings Rs. 41.99 Crore (Previous Year Rs. 34.55 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.19.44 Crore (Previous Year Rs.19.38 Crore)

c) Counter Guarantees given by the company to the banks on behalf of group companies : Rs. 64.78 Crore on behalf of Thermax Instrumentation Ltd. (TIL) (Previous Year Rs. 92.64 Crore for TIL and Rs. 0.34 Crore for Thermax Engineering Construction Co. Ltd.).

d) Indemnity Bonds/Corporate Guarantees given by the Company on behalf of group companies : Thermax Denmark ApS, Denmark Rs. 62.84 Crore (Previous Year Nil).

e) Liability for unexpired export obligations Rs. 56.84 Crore (Previous Year Rs. 48.71 Crore).

f) Claims against the company not acknowledged as debts Rs. 9.00 Crore (Previous Year Rs. 9.45 Crore).

g) Bills Discounted with banks Rs.119.43 Crore (Previous Year Rs. 43.39 Crore).

h) Liability in respect of partly paid shares in Parasrampuria Synthetics Ltd. 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. Directors Remuneration **

@ includes Rs. 0.55 Crore (Previous Year Rs. 0.42 Crore) commission payable to the Managing Director.

** Within the limits specified by Schedule XIII of the Companies Act, 1956.

Note : Provisions for contribution to employee retirement / post retirement and other employee benefits which are based on valuation done on an overall company basis are excluded above.

4. Share Capital

Issued, Subscribed & Paid up Equity Capital includes 1,06,78,200 Equity Shares of Rs. 2/- each allotted as fully paid up for consideration other than cash as per various schemes of amalgamation and 1,71,37,500 shares of Rs. 2/- each issued by way of bonus shares on capitalisation of General Reserve.

5. Extraordinary items of expenses/income

Extraordinary expense for the year ended 31.03.2010, Rs. 174 crore (Rs 114.86 crore, net of tax), represents the rupee equivalent of USD 38 million payable under a business settlement agreement dated 23.02.2010 with Purolite International Ltd., a US competitor, in settlement of a business dispute concerning, inter alia, their trade secrets. As per the agreement, the amount was payable in four instalments of USD 9.5 million each, spread over the calendar year, beginning April 2010.

6. Secured Loan

Working capital facilities (packing credits, shipping loans, cash credits & overdrafts) from banks are secured by hypothecation of present and future stock of raw materials, consumables, spares, semi-finished goods, finished goods & book debts.

7. 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 account.

8. Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for Rs.13.49 Crore (Previous year Rs. 15.57 Crore).

9. Capitalisation of expenses

Raw materials, labour and overheads capitalised in respect of Plant & Machinery Rs. 0.18 Crore (Previous Year Rs.3.07 Crore).

10. Companies acquired during the year

During the year, the company, through its wholly owned subsidiary Thermax Denmark ApS, acquired 100% stake in Danstoker A/S, Denmark and Ejendomsanpartsselskabet Industrivej Nord 13 (EIN), Denmark. In turn, Danstoker A/S has wholly owned subsidiaries namely Omnical Kessel & Apparatebau GmbH, Germany and Danstoker (UK) Ltd., UK. As a result of these acquisitions, the company now owns boiler manufacturing facilities in Denmark and Germany.

11. Segment Reporting

i 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 Companys operations have been mainly classified between two primary segments, Energy and Environment. Composition of business segments is as follows:

Segment Products Covered

a) Energy Boilers and Heaters, Absorption Chillers/Heat Pumps, Power Plants

b) Environment Air Pollution Control Equipments/ Systems, Water & Waste Recycle Plants,

Ion Exchange Resins & Performance Chemicals.

ii 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 the 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.

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

a) India

b) Outside India

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

21. 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., Netherlands Thermax Denmark ApS, Denmark

Danstoker A/S, Denmark Danstoker (UK) Ltd., UK

Ejendomsanpartsselskabet Industrivej Nord 13 (EIN), Denmark

Omnical Kessel & Apparatebau GmbH, Germany

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

12. Disclosure, as required by AS - 28 (Impairment of Assets)

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

13. Disclosure in relation to in-house Research & Development (R&D) expenses and fixed assets.

A) Details of R&D Revenue Expenses incurred during the year :

Expenses included in respective category of Schedule 13, 14, 15 & 16, incurred for the purpose of in-house Research and Development activity.

14. 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 fulfillment of conditions stipulated in the circular. The Company has satisfied the conditions stipulated in the circular and hence is entitled to the exemption.

15. Previous years figures have been regrouped wherever necessary to conform to this years classification.


Mar 31, 2010

1. 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.

2. Share Capital

Issued, Subscribed & Paid up Equity Capital includes 1,06,78,200 Equity Shares of Rs. 2/- each allotted as fully paid up for consideration other than cash as per various schemes of amalgamation and 1,71,37,500 shares of Rs.2/- each issued by way of bonus shares on capitalisation of General Reserve.

3. Extraordinary items of expenses/income during the year are as follows

Extraordinary expense for the year ended 31.03.2010, Rs. 174 crore (Rs 114.86 crore, net of tax), represents the rupee equivalent of USD 38 million payable under a business settlement agreement dated 23.02.2010 with Purolite International Ltd., a US competitor, in settlement of a business dispute concerning, inter alia, their trade secrets. As per the agreement, the amount is payable in four instalments of USD 9.5 million each, spread over the calendar year, beginning April 2010.

Extraordinary income for the year ended 31.03.2009 Rs. 1.36 crore represents write back of the provision made by the company towards possible financial obligations on account of counter guarantees given by the company in relation to ME Engineering Ltd., UK.

4. Secured Loan

Working capital facilities (packing credits, shipping loans, cash credits & overdrafts) from banks are secured by hypothecation of present and future stock of raw materials, consumables, spares, semi-finished goods, finished goods & book debts.

5. Other Liabilities

Other Liabilities 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. 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 account.

7. Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for Rs. 15.57 Crore (Previous year Rs. 39.16 Crore).

8. Capitalisation of expenses

Raw materials, labour and overheads capitalised in respect of Plant & Machinery Rs. 3.07 Crore (Previous Year Rs.1.71 Crore).

9. Segment Reporting

i 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:

ii 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 the 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.

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

a) India

b) Outside India

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

10. 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)

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

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.

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. Previous year’s figures have been regrouped wherever necessary to conform to this year’s classification.

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