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Notes to Accounts of Timex Group India Ltd.

Mar 31, 2015

Company overview

Timex Group India Limited (''TGIL'' or the ''Company''), a subsidiary of Timex Group Luxury Watches B.V., is a limited liability company incorporated on 4 October 1988 under the provisions of the Companies Act, 1956. The Company is listed on Bombay Stock Exchange in India.

The Company is engaged in the business of manufacturing and trading of watches and rendering of related after sales service. The Company''s manufacturing facilities are located at Baddi, Himachal Pradesh. The Company also provides accounting and information and technology support services to group companies.

1 Rights, preferences and restrictions attached to equity shares

The Company has only one class of equity shares having a par value of Re. 1 per share. Each holder of equity shares is entitled to one vote per share. All equity shareholders rank equally with regard to dividends and share in the Company''s residual assets. The equity shareholders are entitled to receive dividend as declared by the Company subject to payment of dividend to preference shareholders.

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

Rights, preferences and restrictions attached to preference shares

0.1% Non-cumulative redeemable non-convertible preference shares shall be entitled to dividend at the rate of 0.1% per annum. In case of insufficiency of profits /no profits, the dividend on preference shares shall not be declared and distributed and the dividend liability on the preference shares for the respective year shall lapse.

7.1% Cumulative redeemable non-convertible preference shares shall be entitled to dividend at the rate of 7.1% per annum. In case of insufficiency of profits /no profits, the dividend on preference shares shall not be declared and distributed in the respective year but the dividend liability on the preference shares for that respective year shall be cumulated and paid to the holders of the preference shares.

Preference shares of all classes carry a preferential right as to dividend over equity shareholders. Where dividend on cumulative preference shares is not declared for a financial year, the entitlement thereto is carried forward whereas in the case of non-cumulative preference shares, the entitlement for that year lapses. The preference shares are entitled to one vote per share at meetings of the Company on any resolutions of the Company directly affecting their rights. In the event of liquidation, preference shareholders have a preferential right over equity shareholders to be repaid to the extent of capital paid-up and dividend in arrears on such shares.

2 Terms of redemption of preference shares

Maturity period for redemption of 0.1% preference shares amounting to Rs. 250 lakhs (previous year Rs. 250 lakhs) is till 24 March 2018 . Original maturity was ten years from the date of allotment i.e. 25 March 2003, with an option to the Company of an earlier redemption after 24 March 2005. The shares were due for redemption on 24 March 2013 which pursuant to the provisions of section 106 of the Companies Act, 1956 was extended by the Company with the consent of preference shareholders by five years, i.e. till 24 March 2018.

Maturity period for redemption of 7.1% preference shares amounting to Rs. 1,570 lakhs (previous year Rs. 1,570 lakhs) is till 26 March 2019. Original maturity was ten years from the date of allotment i.e. 27 March 2004, with an option to the Company of an earlier redemption after 27 March 2006. The shares were due for redemption on 26 March 2014 which pursuant to the provisions of Section 106 of the Companies Act, 1956 was extended by the Company with the consent of preference shareholders by the five years i.e. till 26 March 2019.

Maturity period for redemption of 7.1% preference shares amounting to Rs. 2,290 lakhs (previous year Rs. 2,290 lakhs) is ten years from the date of allotment i.e. 21 March 2006, with an option to the Company of an earlier redemption after 21 March 2008.

3 Provision for warranties

A provision is estimated for expected warranty claims in respect of products sold during the year on the basis of a technical evaluation and past experience regarding failure trends of products and costs of rectification or replacement. It is expected that most of this cost will be incurred over the next one year as per warranty terms.

4 Provision for sales returns

Provision for sales returns has been created for estimated loss of margin on expected sales returns in future period against products sold during the year. The provision has been setup based on management''s estimates and past trends.

5 Provision for unearned margin

Provision for unearned margin relates to certain sales where property in the goods has passed but a significant risk of ownership has not passed to the counterparty by the date of the balance sheet.

6 Provision for litigations

This represents provisions made for probable liabilities/ claims arising out of pending disputes/litigations with various regulatory authorities (in respect of excise duty, sales tax and similar matters). Above provisions are affected by numerous uncertainties and management has taken all efforts to make a best estimate. Timing of outflow of resources will depend upon timing of decision of cases.

* Cash credit facilities from bank carry interest ranging between 10%-13% p.a., computed on a monthly basis on actual amount utilised, and are repayable on demand.

Timex Group Luxury Watches BV, the holding company, has provided a standby letter of credit amounting to Rs. 3,880 lakhs (previous year Rs. 3,380 lakhs) to the bankers of the Company as a guarantee for use of cash credit and overdraft facilities.

** Working capital loans carry interest ranging between 10% to 11% p.a. The working capital loans are guaranteed by Timex Group B.V, the holding company and are repayable within 30 days.

7 Managerial remuneration of Rs 7.46 lakhs paid by the Company during the year ended 31 March 2012 was in excess of the amount approved by the Central Government. The Company''s application for approval of such excess remuneration was rejected by Central Government vide its letter dated 26 July 2012. The Company had requested the Central Government to reconsider the same and an application was made in this regard by the Company vide its letter dated 30 August 2012.

In response, the Company received direction from Central Government to recover the excess remuneration of Rs. 7.09 lakhs paid during the year ended 31 March 2012. Subsequently, the Company filed an application with the Central Government for waiver of such excess remuneration paid, since the concerned managerial person has resigned w.e.f. 31 January 2013.

In the current year, the Central government vide its letter dated 18 November 2014, has rejected the application filed by the Company for waiver of remuneration paid in excess of the limits specified in the Companies Act, 1956. The Company is in the process of taking necessary steps for recovery of this amount from the erstwhile Managing Director.

8 Earnings/ (loss) per equity share (EPS)

Basic earnings/ (loss) per equity share

The calculation of basic earnings/ (loss) per equity share for the year ended 31 March 2015 is based on the profit/ (loss) attributable to equity shareholders of Rs. (1,428) lakhs (previous year loss: Rs. (3,619) lakhs), and weighted average number of equity shares outstanding of 1,010 lakhs (previous year: 1,010 lakhs).

Diluted earnings / (loss) per equity share

The calculation of diluted earnings/(loss) per share for the year ended 31 March 2015 is based on profit/(loss) attributable to equity shareholders of Rs. (1,428) lakhs (previous year loss: Rs(3,619)lakhs and weighted average number of equity shares outstanding after adjustment for the effects of all dilutive potential equity shares of 1,010 lakhs (previous year: 1,010 lakhs).

9 Employee benefits: Post-employment benefit plans Provident fund

The Company makes contributions, determined as a specified percentage of employee salaries, in respect of qualifying employees towards Provident Fund. The Company has no obligations other than to make the specified contributions. The contributions are charged to the Statement of Profit and Loss as they accrue. The amount recognised as an expense towards contribution to Provident Fund for the period aggregated to Rs. 84 lakhs (previous year: Rs. 76 lakhs).

The Company also has an approved provident fund for its own employees, which is exempt from the Income tax Act 1961. In order to comply with the provisions of the Act, the Company matches the interest declared by Regional Provident Fund (RPFC) to its own subscribers. To the extent that the actual interest earned by the Company''s private fund falls short of the rate declared by RPFC, the shortfall is met by the Company. The benefit valued is the interest shortfall, if any, for future years on the provident fund balances of the employees.

The Defined Benefit Obligation of interest rate guarantee on exempt provident fund in respect of the employees of the Company as at 31 March 2015 works out to Rs. Nil (previous year Rs. Nil). The balance in the surplus account of the provident fund is Rs. 114 lakhs (previous year Rs. 92 lakhs) and hence the net liability which needs to be provided for in the books of accounts of the Company is Rs. Nil (previous year Nil).

Superannuation fund

The Company''s contribution paid/ payable under the scheme to the Superannuation Fund Trust, as administered by the Company is recognised as an expense in the Statement of Profit and Loss during the period in which the employee renders the related service.The amount recognised as an expense towards contribution to Superannuation fund for the period aggregated to Rs. 13 lakhs (previous year: Rs. 20 lakhs).

Employee State Insurance fund

The Company''s contribution paid/ payable under the scheme to the Employee State Insurance is recognised as an expense in the Statement of Profit and Loss during the period in which the employee renders the related service.The amount recognised as an expense towards contribution to Employee State Insurance Fund for the period aggregated to Rs. 5 lakhs (previous year: Rs. 7 lakhs).

10 Segment information

The Company''s business segment comprises:

* Watches: Manufacturing and trading of watches;

* Others: Providing IT and finance related back office support to other group companies.

Segment revenue in the geographical segments considered for disclosure are as follows:

* Revenues within India (Domestic) includes sale of watches and spares to consumers located within India; and

* Revenues outside India (Overseas) includes sale of watches manufactured in India and service income earned from customers located outside India.

Segments have been identified in line with the Accounting Standard 17 on "Segment Reporting" notified by the Companies (Accounting Standards) Rules, 2006, taking into account the nature of products and services, the risks and returns, the organisation structure and the internal financial reporting system.

Segment accounting policies

Besides the normal accounting policies followed as described in note 2, segment revenues, results, assets and liabilities include the respective amounts directly identified to each of the segments and amounts allocated on a reasonable basis. The description of segment assets and liabilities and the accounting policies in relation to segment accounting are as under:

a) Segment assets and liabilities

Segment assets include all operating assets used by a segment and consist principally of fixed assets, capital work in progress, current assets and loans and advances. Segment liabilities include all operating liabilities in respect of a segment and consist principally of creditors and accrued liabilities. Segment liabilities do not include share capital, reserves, current tax and deferred tax liability.Primary segment assets do not include advance tax, deferred tax asset, cash and bank balance and fixed deposits.

b) Segment revenue and expenses

Segment revenue and expenses are directly attributable to the segment and have been allocated to various segments on the basis of specific identification. However, segment revenue and expenses do not include interest and other income/expense in respect of non segmental activities.

11 Contingent liabilities and commitments (to the extent not provided for)

Commitments (Rs. in lakhs)

Particulars 31 March 2015 31 March 2014

Estimated amount of contracts 15 - remaining to be executed on capital account and not provided for (net of advances)

Contingent liabilities (Rs. in lakhs)

Particulars 31 March 2015 31 March 2014

Claims against the Company not acknowledged as debts

a) Sales tax 283 119

b) Excise duty 92 92

c) Customs duty 8 8

d) Income tax* - -

e) Others 141 167"

Dividend on cumulative preference shares

2012-2013 274 274

2013-2014 274 274

2014-2015 274 L

Corporate dividend tax on cumulative preference shares

2012-2013 56 47

2013-2014 56 47

2014-2015 56

* Represents additions made to the total taxable income of the Company by the tax authorities which have been disputed by the Company. No demand has been raised by the tax authorities as any additions to the income will be adjusted against the brought forward losses / unabsorbed depreciation.

12 The Ministry of Micro, Small and Medium Enterprises has issued an Office Memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum. Accordingly, the disclosure in respect of the amounts payable to such enterprises as on 31 March 2015 and 31 March 2014 has been made in the financial statements based on information received and available with the Company. Based on the information currently available with the Company, there are no dues payable to Micro and Small Suppliers as defined in the Micro, Small and Medium Enterprises Development Act, 2006.

13 The dividend liability on 15,700,000 2.9% cumulative redeemable non-convertible preference shares of Rs.10 each and 22,900,000 5.4% cumulative redeemable non-convertible preference shares of Rs. 10 each, payable until 31 March 2009, was waived off as per the consent of the holders of these preference shares vide their letter dated 15 March 2009. The coupon rate applicable to these series of preference shares was revised to 7.1% effective 1 April 2010 till the date of maturity.

14 As at 31 March 2015, the Company has foreign currency receivables amounting to Rs. 39 lakhs (previous year Rs. 40 lakhs) outstanding for a period exceeding nine months. As per Reserve Bank of India''s (RBI) Master Circular on Export of Goods and Services, foreign currency receivables should be realized, except with prior approval of RBI, within a period of nine months. The Company is in the process of filing an application with RBI to seek approval for writing off these amounts.

15 Transfer Pricing

The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing regulation under sections 92-92F of the Income-Tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company continuously updates its documentation for the international transactions entered into with the associated enterprises during the financial year and expects such records to be in existence latest by such date as required under law. The management is of the opinion that its international transactions are at arm''s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

16 During the year, the Company has renegotiated the terms of sales with one of its customers. This has resulted in reversal of provision for unearned margin recognised in the books of accounts in earlier years in respect of this customer amounting to Rs. 171 lakhs.

17 Pursuant to Companies Act, 2013 ("the Act") being effective from April 1, 2014, the Company has revised depreciation rates on tangible assets as per useful life specified in Para ''C'' of Schedule II of the Act. As a result of this change, the depreciation charge for the year ended 31 March 2015 is higher by Rs. 19 lakhs.Further, based on transitional provision provided in note no. 7 (b) of Schedule II, an amount of Rs. 67 lakhs has been adjusted against opening balance of reserves and surplus.


Mar 31, 2014

1. Company overview

Timex Group India Limited (''TGIL'' or the ''Company''), a subsidiary of Timex Group Luxury Watches B.V., is a limited liability company incorporated on 4 October 1988 under the provisions of the Companies Act, 1956. The Company is listed on Bombay Stock Exchange in India.

The Company is engaged in the business of manufacturing and trading of watches and rendering of related after sales service. The Company''s manufacturing facilities are located at Baddi, Himachal Pradesh. The Company also provides accounting and information and technology support services to group companies.

2. Managerial remuneration of Rs 7.46 lakhs paid by the Company during the year ended 31 March 2012 was in excess of amount approved by the Central Government. The Company''s application for approval of such excess remuneration was rejected by Central Government vide its letter dated 26 July 2012. The Company had requested the Central Government to re-consider the same and an application had been made in this regard by the Company vide its letter dated 30 August 2012.

The Company has received a direction to recover the excess remuneration paid till date and is in the process of fling an application with the Central Government for waiver of such excess remuneration paid, since the concerned managerial person has resigned w.e.f 31 January 2013.

3. Earnings/ (loss) per equity share (EPS)

Basic earnings/ (loss) per equity share

The calculation of basic earnings/ (loss) per equity share for the year ended 31 March 2014 is based on the loss attribut- able to equity shareholders of Rs. (3,617) lakhs (previous year loss: Rs. (4,515) lakhs), and weighted average number of equity shares outstanding of 1,010 lakhs (previous year: 1,010 lakhs).

Diluted earnings / (loss) per equity share

The calculation of diluted earnings/(loss) per share for the year ended 31 March 2013 is based on loss attributable to equity shareholders of Rs. (3,617) lakhs (previous year loss: Rs (4,515) lakhs and weighted average number of equity shares out- standing after adjustment for the effects of all dilutive potential equity shares of 1,010 lakhs (previous year: 1,010 lakhs).

4. Employee benefits: Post-employment benefit plans Provident fund

The Company makes contributions, determined as a specified percentage of employee salaries, in respect of qualifying employees towards Provident Fund. The Company has no obligations other than to make the specified contributions. The contributions are charged to the Statement of profit and Loss as they accrue. The amount recognised as an expense towards contribution to Provident Fund for the period aggregated to Rs. 76 lakhs (previous year: Rs. 80 lakhs).

The Company also has an approved provident fund for its own employees, which is exempt from the Income tax Act 1961. In order to comply with the provisions of the Act, the Company matches the interest declared by Regional Provident Fund (RPFC) to its own subscribers. To the extent that the actual interest earned by the Company''s private fund falls short of the rate declared by RPFC, the shortfall is met by the Company. The benefit valued is the interest shortfall, if any, for future years on the provident fund balances of the employees.

The Defined benefit Obligation of interest rate guarantee on exempt provident fund in respect of the employees of the Company as at 31 March 2014 works out to Rs. Nil. The balance in the surplus account of the provident fund is Rs. 116 lakhs (previous year Rs. 1,026 lakhs) and hence the net liability which needs to be provided for in the books of accounts of the Company is Rs. Nil (previous year Nil).

Superannuation fund

The Company''s contribution paid/ payable under the scheme to the Superannuation Fund Trust, as administered by the Company is recognised as an expense in the Statement of profit and Loss during the period in which the employee renders the related service. The amount recognised as an expense towards contribution to Superannuation fund for the period aggregated to Rs. 20 lakhs (previous year: Rs. 44 lakhs).

Employee State Insurance fund

The Company''s contribution paid/ payable under the scheme to the Employee State Insurance is recognised as an expense in the Statement of profit and Loss during the period in which the employee renders the related service. The amount recognised as an expense towards contribution to Employee State Insurance Fund for the period aggregated to Rs. 7 lakhs (previous year: Rs. 6 lakhs).

Gratuity

The Company operates a post-employment Defined benefit plan that provides for gratuity. The gratuity plan entitles an employee, who has rendered atleast five years of continuous service, to receive one-half month''s salary for each year of completed service at the time of retirement/exit. The Scheme is not funded by plan assets. The following table summarises the position of assets and obligations in relation to the plan:

The estimates of future salary increases considered in actuarial valuation take account of infation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

Assumptions regarding future mortality are based on published statistics and mortality tables. The calculation of the Defined benefit obligation is sensitive to the mortality assumptions.

5. Related party disclosures A. Names of related parties:

Related parties and nature of related party relationship where control exists:

Description of Relationship Name of the Party

Ultimate Holding Company Timex Group B.V.

Holding Company Timex Group Luxury Watches B.V (formerly Timex Watches B.V)

Other related parties with whom transactions have taken place:

Description of Relationship

Fellow Subsidiaries

Name of the Party

Timex Group B.V. T/A Mersey Manufacturers

Fralsen Horlogerie S.A.*

TMX Limited NV

Timex Corporation (Germany)*

Timex Limited NV

Timex Nederland B.V.

Timex Group USA Inc.

Timex Group Luxury Watches B.V. (Ferragamo) **

Timex Group Precision Engineering Limited (TGPEL)

Timex Hong Kong Limited*

Timex Portugal*

Timex Hungary Limited*

Description of Relationship

Key Management Personnel

Name of the Party

Vertime S.A.**

Vertime B.V.**

M.K Bandopadhyay

- Acting Managing Director (1 February 2013 to 17 November 2013)

- Managing Director – Operations and Supply Chain Management (18 November 2013 onwards)

Sharmila Sahai, Managing Director (18 November 2013 onwards)

a. Transactions and outstanding balances with related parties (Rs. in lakhs)

Besides the above, the Company has paid Nil (previous year Rs. 274 lakhs) to Timex Group Luxury Watches B.V. as dividend during the year.

Timex Group Luxury Watches B V, the holding company, has provided a standby letter of credit amounting to Rs. 3,380 lakhs (previous year Rs. 3,380 lakhs) to the bankers of the Company as a guarantee for use of cash credit and overdraft facilities. The working capital loans are also guaranteed by Timex Group B.V, the holding company.

Maturity period for redemption of 0.1% preference shares amounting to Rs. 250 lakhs (previous year Rs.250 lakhs) is ten years from the date of allotment i.e. 25 March 2003, with an option to the Company of an earlier redemption after 24 March 2005. The shares were due for redemption on 24 March 2013. The redemption of such shares, pursuant to the provisions of Section 106 of the Companies Act, 1956 has been extended by the preference shareholders by five years i.e. till 24 March 2018 and the Company has completed all formalities related to the same.

Maturity period for redemption of 7.1% preference shares amounting to Rs. 1,570 lakhs (previous year Rs. 1,570 lakhs) is ten years from the date of allotment i.e. 27 March 2004, with an option to the Company of an earlier redemption after 27 March 2006. The shares were due for redemption on 26 March 2014. The Company sought extension for redemption of such shares, pursuant to the provisions of Section 106 of the Companies Act, 1956 by five years i.e. till 26 March 2019. The preference shareholders have agreed to this extension. The Company is in the process of complying with the provisions of the Companies Act, 1956 in relation to the same and has received approval from the Reserve Bank of India vide its letter dated 09 April 2014 for extension of redemption date to 26 March 2019.

6. Segment information

The Company''s business segment comprises:

- Watches: Manufacturing and trading of watches;

- Others: Providing IT and finance related back office support to other group companies. Segment revenue in the geographical segments considered for disclosure are as follows:

- Revenues within India (Domestic) includes sale of watches and spares to consumers located within India; and

- Revenues outside India (Overseas) includes sale of watches manufactured in India and service income earned from customers located outside India.

Segments have been identified in line with the Accounting Standard 17 on "Segment Reporting" notifed by the Companies (Accounting Standards) Rules, 2006, taking into account the nature of products and services, the risks and returns, the organisation structure and the internal financial reporting system.

Secondary segment reporting is performed on the basis of the geographical segments.

Segment accounting policies

Besides the normal accounting policies followed as described in note 2, segment revenues, results, assets and liabilities include the respective amounts directly identified to each of the segments and amounts allocated on a reasonable basis. The description of segment assets and liabilities and the accounting policies in relation to segment accounting are as under:

a) Segment assets and liabilities

Segment assets include all operating assets used by a segment and consist principally of fixed assets, capital work in progress, current assets and loans and advances. Segment liabilities include all operating liabilities in respect of a segment and consist principally of creditors and accrued liabilities. Segment liabilities do not include share capital, reserves, current tax and deferred tax liability. Primary segment assets do not include advance tax, deferred tax asset and fixed deposits.

b) Segment revenue and expenses

Segment revenue and expenses are directly attributable to the segment and have been allocated to various segments on the basis of Specific identifcation. However, segment revenue and expenses do not include interest and other income/expense in respect of non segmental activities.

7. Contingent liabilities and commitments (to the extent not provided for)

Commitments (Rs. in lakhs)

Particulars 31 March 2014 31 March 2013

Estimated amount of contracts remaining to be executed on capital - 0 # account and not provided for (net of advances)

# Amount is below rounding of threshold adopted by the Company.

Contingent liabilities (Rs. in lakhs

Particulars 31 March 2014 31 March 2013

Claims against the Company not acknowledged as debts

a) Sales tax 119 107

b) Excise duty 92 92

c) Customs duty 8 8

d) Income tax* - -

e) Others 167 167

Dividend on cumulative preference shares

2012-2013 274 274

2013-2014 274 -

Corporate dividend tax on cumulative preference shares

2012-2013 47 45

2013-2014 47 -

Bills discounted - 2

* Represents additions made to the total taxable income of the Company by the tax authorities which have been disputed by the Company. No demand has been raised by the tax authorities as any additions to the income will be adjusted against the brought forward losses / unabsorbed depreciation.

8. The Ministry of Micro, Small and Medium Enterprises has issued an office Memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after fling of the Memorandum. Accordingly, the disclosure in respect of the amounts payable to such enterprises 31 March 2014 and 31 March 2013 has been made in the financial statements based on information received and available with the Company. Based on the information currently available with the Company, there are no dues payable to Micro and Small Suppliers as Defined in the Micro, Small and Medium

Enterprises Development Act, 2006. 40. The dividend liability on 15,700,000 2.9% cumulative redeemable non-convertible preference shares of Rs.10 each and 22,900,000 5.4% cumulative redeemable non-convertible preference shares of Rs. 10 each, payable until 31 March 2009, was waived off as per the consent of the holders of these preference shares vide their letter dated 15 March 2009. The coupon rate applicable to these series of preference shares was revised to 7.1% effective 1 April 2010 till the date of maturity.

9. Amount remitted during the year ended 31 March 2014 in foreign currency on account of dividend was Rs. Nil (previous year Rs. 274 lakhs).

10. As at 31 March 2014, the Company has foreign currency receivables amounting to Rs. 40 lakhs (previous year Rs. 49 lakhs) outstanding for a period exceeding one year. As per Reserve Bank of India''s (RBI) Master Circular on Export of Goods and Services, foreign currency receivables should be realized, except with prior approval of RBI, within a period of one year. The Company is in the process of fling an application with RBI to seek approval for writing off these amounts.

11. Transfer Pricing

The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing regulation under sections 92-92F of the Income-Tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company continuously updates its documentation for the international transactions entered into with the associated enterprises during the financial year and expects such records to be in existence latest by such date as required under law. The management is of the opinion that its international transactions are at arms length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.


Mar 31, 2013

1. Company overview

Timex Group India Limited (''TGIL'' or the ''Company''), a subsidiary of Timex Group Luxury Watches B.V., is a limited liability company incorporated on 4 October 1988 under the provisions of the Companies Act, 1956. The Company is listed on Bombay Stock Exchange in India.

The Company is engaged in the business of manufacturing and trading of watches and rendering of related after sales service. The Company''s manufacturing facilities are located at Baddi, Himachal Pradesh. The Company also provides information and technology support services to group companies.

2. Earnings per share (EPS)

Basic earnings per share

The calculation of basic earnings per share for the year ended 31 March 2013 is based on the proft/ (loss) attributable to equity shareholders of Rs. (4,514) lakhs (previous year proft: Rs 134 lakhs), and weighted average number of equity shares outstanding of 1,010 lakhs (previous year: 1,010 lakhs).

Diluted earnings per share

The calculation of diluted earnings per share for the year ended 31 March 2013 is based on proft/ (loss) attributable to equity shareholders of Rs. (4,514) lakhs (previous year proft: Rs 134 lakhs) and weighted average number of equity shares outstanding after adjustment for the effects of all dilutive potential equity shares of 1,010 lakhs (previous year: 1,010 lakhs).

3. Employee benefts: Post-employment beneft plans

Provident fund

The Company makes contributions, determined as a specifed percentage of employee salaries, in respect of qualifying employees towards Provident Fund. The Company has no obligations other than to make the specifed contributions. The contributions are charged to the Statement of Proft and Loss as they accrue. The amount recognised as an expense towards contribution to Provident Fund for the period aggregated to Rs. 80 lakhs (previous year: Rs. 70 lakhs).

The Company also has an approved provident fund for its own employees, which is exempt from the Income tax Act 1961. In order to comply with the provisions of the Act, the Company matches the interest declared by Regional Provi- dent Fund (RPFC) to its own subscribers. To the extent that the actual interest earned by the Company''s private fund falls short of the rate declared by RPFC, the shortfall is met by the Company. The beneft valued is the interest shortfall, if any, for future years on the provident fund balances of the employees.

The Defned Beneft Obligation of interest rate guarantee on exempt provident fund in respect of the employees of the Company as at 31 March 2013 works out to Rs. Nil. The balance in the surplus account of the provident fund is Rs. 1,026 lakhs and hence the net liability which needs to be provided for in the books of accounts of the Company is Rs. Nil. Contri

Superannuation fund

The Company''s contribution paid/ payable under the scheme to the Superannuation Fund Trust, as administered by the Company is recognised as an expense in the Statement of Proft and Loss during the period in which the employee renders the related service. The amount recognised as an expense towards contribution to Superannuation fund for the period aggregated to Rs. 44 lakhs (previous year: Rs. 40 lakhs).

Employee State Insurance fund

The Company''s contribution paid/ payable under the scheme to the Employee State Insurance is recognised as an expense in the Statement of Proft and Loss during the period in which the employee renders the related service. The amount recognised as an expense towards contribution to Employee State Insurance Fund for the period aggregated to Rs. 6 lakhs (previous year: Rs. 8 lakhs).

Gratuity

The Company operates a post-employment defned beneft plan that provides for gratuity. The gratuity plan entitles an employee, who has rendered atleast fve years of continuous service, to receive one-half month''s salary for each year of completed service at the time of retirement/exit. The Scheme is not funded by plan assets. The following table sum- marises the position of assets and obligations in relation to the plan:

4. Taxation

The Company has signifcant unabsorbed depreciation and carry forward losses. In view of the absence of virtual certainty of realisation of carried forward tax losses and unabsorbed depreciation, deferred tax assets are recognised only to the extent of deferred tax liabilities.

5. Segment information

The Company''s business segment comprises:

- Watches: Manufacturing and trading of watches;

- Others: Providing IT and fnance related back offce support to other group companies.

Segment revenue in the geographical segments considered for disclosure are as follows:

- Revenues within India (Domestic) includes sale of watches and spares to consumers located within India; and

- Revenues outside India (Overseas) includes sale of watches manufactured in India and service income earned from customers located outside India.

Segments have been identifed in line with the Accounting Standard 17 on "Segment Reporting" notifed by the Companies (Accounting Standards) Rules, 2006, taking into account the nature of products and services, the risks and returns, the organisation structure and the internal fnancial reporting system.

Secondary segment reporting is performed on the basis of the geographical segments.

Segment accounting policies

Besides the normal accounting policies followed as described in note 2, segment revenues, results, assets and liabilities include the respective amounts directly identifed to each of the segments and amounts allocated on a reasonable basis. The description of segment assets and liabilities and the accounting policies in relation to segment accounting are as under:

a) Segment assets and liabilities

Segment assets include all operating assets used by a segment and consist principally of fxed assets, capital work in progress, current assets and loans and advances. Segment liabilities include all operating liabilities in respect of a segment and consist principally of creditors and accrued liabilities. Segment liabilities do not include share capital, reserves, current tax and deferred tax liability. Primary segment assets do not include advance tax, deferred tax asset and fxed deposits.

b) Segment revenue and expenses

Segment revenue and expenses are directly attributable to the segment and have been allocated to various segments on the basis of specifc identifcation. However, segment revenue and expenses do not include interest and other income/expense in respect of non segmental activities.

6. Contingent liabilities and commitments

(to the extent not provided for)

Commitments (Rs. in lakhs)

Particulars 31 March 2013 31 March 2012

Estimated amount of contracts remaining to be executed on capital account 0# 1

and not provided for (net of advances)

# Amount is below rounding of threshold adopted by the Company.

Contingent liabilities (Rs. in lakhs)

Particulars 31 March 2013 31 March 2012

Claims against the Company not acknowledged as debts

a) Sales tax 107 79

b) Excise duty 92 92

c) Customs duty 8 8

d) Income tax* - -

e) Others 167 144

Dividend on cumulative preference shares

- 2012-2013 274 - Corporate dividend tax on cumulative preference shares

- 2012-2013 45 - Bills discounted 2 462

* Represents additions made to the total taxable income of the Company by the tax authorities which have been disputed by the Company. No demand has been raised by the tax authorities as any additions to the income will be adjusted against the brought forward losses / unabsorbed depreciation.

7. The Ministry of Micro, Small and Medium Enterprises has issued an Offce Memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after fling of the Memorandum. Accordingly, the disclosure in respect of the amounts payable to such enterprises 31 March 2013 and 31 March 2012 has been made in the fnancial statements based on information received and available with the Company. Based on the information currently available with the Company, there are no dues payable to Micro and Small Suppliers as defned in the Micro, Small and Medium Enterprises Development Act, 2006.

8. The dividend liability on 15,700,000 2.9% cumulative redeemable non-convertible preference shares of Rs.10 each and 22,900,000 5.4% cumulative redeemable non-convertible preference shares of Rs. 10 each, payable until 31 March 2009, was waived off as per the consent of the holders of these preference shares vide their letter dated 15 March 2009. The coupon rate applicable to these series of preference shares was revised to 7.1% effective 1 April 2010 till the date of maturity.

9. As at 31 March 2013, the Company has foreign currency receivables amounting to Rs. 49 lakhs (previous year Rs. 34 lakhs) outstanding for a period exceeding one year. As per Reserve Bank of India''s (RBI) Master Circular on Export of Goods and Services, foreign currency receivables should be realized, except with prior approval of RBI, within a period of one year. The Company has fled an application with Authorized dealer (AD) / RBI for condonation and extension of period of collection.

10. Transfer Pricing

The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing regulation under sections 92-92F of the Income-Tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company continuously updates its documentation for the international transactions entered into with the associated enterprises during the fnancial year and expects such records to be in existence latest by such date as required under law. The management is of the opinion that its international transactions are at arms length so that the aforesaid legislation will not have any impact on the fnancial statements, particularly on the amount of tax expense and that of provision for taxation.

11. Managerial remuneration of Rs. 7 lakhs provided by the Company in the previous year is in excess of the limits specifed in the relevant provisions of the Companies Act, 1956 and the amount approved by the Central Government. Further, as required by the relevant provisions of the Act, the Company is taking necessary steps to seek approval from the Central Government for excess remuneration paid.

Further, the Company had applied to the Central Government seeking approval of managerial remuneration for the period 29 April 2012 till 28 April 2013 vide its application dated 7 September 2012. The remuneration paid is in excess of the limits specifed in the Companies Act, 1956. The managerial person of the Company in respect whom the approval was sought has since resigned with effect from 31 January 2013. As required by the relevant provisions of the Act, the Company is taking necessary steps to seek approval from the Central Government for excess remuneration paid.


Mar 31, 2012

1. General information

Timex Group India Limited ("TGIL" or the "Company"), a subsidiary of Timex Group Luxury Watches B.V, is a limited liability company incorporated on 4 October 1988 under the provisions of the Companies Act, 1956. The Company is listed on Bombay Stock Exchange in India.

The Company is engaged in the business of manufacturing and trading of watches and rendering of related after sales service. The Company's manufacturing facilities are located at Baddi, Himachal Pradesh. The Company also provides accounting and information and technology support services to group companies.

2. Basis of preparation of financial statements

The financial statements are prepared and presented under the historical cost convention, on accrual basis of accounting in accordance with the Generally Accepted Accounting Principles ("GAAP") in India and comply with the accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006 and the presentational requirements of the Companies Act, 1956, to the extent applicable All the assets and liabilities have been classified as current and non-current as per the Company's normal operating cycle and other criteria set out in the revised schedule VI to the Companies Act, 1956.Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle being a period within 12 months for the purpose of classification of assets and liabilities as current and non-current.

a. Terms / rights attached to equity shares

The Company has only one class of equity shares having a par value of Re. 1 per share. Each holder of equity shares is entitled to one vote per share.

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

b. Terms / rights attached to preference shares

- 0.1% Non-cumulative redeemable non-convertible preference shares shall be entitled to dividend at the rate of 0.1%

per annum. In case of insufficiency of profits /no profits, the dividend on preference shares shall not be declared and distributed and the dividend liability on the preference shares for the respective year's shall lapse.

- 7.1% Cumulative redeemable non-convertible preference shares shall be entitled to dividend at the rate of 7.1% per annum. In case of insufficiency of profits /no profits, the dividend on preference shares shall not be declared and distributed in the respective year but the dividend liability on the preference shares for that respective year's shall be cumulated and paid to the holders of the preference shares.

- 7.1% Cumulative redeemable non-convertible preference shares shall be entitled to dividend at the rate of 7.1% per annum. In case of insufficiency of profits /no profits, the dividend on preference shares shall not be declared and distributed in the respective year but the dividend liability on the preference shares for that respective year's shall be cumulated and paid to the holders of the preference shares.

c Terms of redemption of preference shares

- Maturity period for redemption of 0.1% preference shares amounting to Rs. 250 (Previous year Rs. 250) is ten years from the date of allotment i.e. 25 March 2003, with an option to the Company of an earlier redemption after 24 March 2005.

- Maturity period for redemption of 7.1% preference shares amounting to Rs. 1,570 (previous year Rs. 1,570) is ten years from the date of allotment i.e. 27 March 2004, with an option to the Company of an earlier redemption after 27 March 2006. (Refer note 27)

- Maturity period for redemption of 7.1% preference shares amounting to Rs. 2,290 (previous year Rs. 2,290) is ten years from the date of allotment i.e. 27 March 2004, with an option to the Company of an earlier redemption after 27 March 2006. (Refer note 27)

1. (a) Capital and other commitments (Rs. in lakhs)

As at As at

Particulars 31 March 2012 31 March 2011

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) 1 5

(b) Contingent liabilities (Rs. in lakhs)

As at As at

Particulars 31 March 2012 31 March 2011

Claims against the Company not acknowledged as debts a) Sales tax 79 79

b) Excise duty 92 92

c) Customs duty 8 8

d) Income tax - 67

e) Others 144 128* Bills discounted 462 457

*During the previous years, the Company had received a notice from the relevant Government authorities for non payment of stamp duty on a lease entered into by the Company. The demand order of the same has not been received by the Company in the previous year and the liability on this account could not be ascertained. During the current year, the aforesaid demand order has been received and the amount has been settled.

2. The Ministry of Micro, Small and Medium Enterprises has issued an Office Memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum. Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2012 and as at 31 March 2011 has been made in the financial statements based on information received and available with the Company. Based on the information currently available with the Company, there are no dues payable to Micro and Small Suppliers as defined in the Micro, Small and Medium Enterprises Development Act, 2006.

3. The dividend liability on 15,700,000 2.9% cumulative redeemable non-convertible preference shares of Rs.10 each and 22,900,000 5.4% cumulative redeemable non-convertible preference shares of Rs. 10 each, payable until 31 March 2009, was waived off as per the consent of the holders of these preference shares vide their letter dated 15 March 2009. The coupon rate applicable to these series of preference shares was revised to 7.1% effective 1 April 2010 till the date of maturity.

Besides the above, the Company has paid Rs. 274 lakhs (previous year Rs. 274 lakhs) to Timex Group Luxury Watches

B.V. as dividend during the year.

Timex Group Luxury Watches BV, the holding company, has provided a standby letter of credit amounting to Rs. 1,780 lakhs (previous year Rs. 1,780 lakhs) to the bankers of the Company as a guarantee for use of cash credit and overdraft facilities.

4. Loans and advances include dues from Managing Director of the Company Rs. Nil (previous year Rs. 2 lakhs).

5. Taxation

The Company has significant unabsorbed depreciation. In view of the absence of virtual certainty of realization of carried forward tax losses and unabsorbed depreciation allowance, deferred tax assets are recognized only to the extent of deferred tax liabilities.

6. Segment information

The Company's business segment comprises:

- Watches: Manufacturing and trading of watches;

- Others: Providing IT and finance related back office support to other group companies.

Segment revenue in the geographical segments considered for disclosure are as follows:

- Revenues within India (Domestic) includes sale of watches and spares to consumers located within India; and

- Revenues outside India (Overseas) includes sale of watches manufactured in India and service income earned from customers located outside India.

Segments have been identified in line with the Accounting Standard 17 on "Segment Reporting" notified by the Companies (Accounting Standards) Rules, 2006, taking into account the nature of products and services, the risks and returns, the organization structure and the internal financial reporting system.

Secondary segment reporting is performed on the basis of the geographical segments.

Segment accounting policies

Besides the normal accounting policies followed as described in note 2, segment revenues, results, assets and liabilities include the respective amounts directly identified to each of the segments and amounts allocated on a reasonable basis. The description of segment assets and liabilities and the accounting policies in relation to segment accounting are as under:

a) Segment assets and liabilities

Segment assets include all operating assets used by a segment and consist principally of fixed assets, capital work in progress, current assets and loans and advances. Segment liabilities include all operating liabilities in respect of a segment and consist principally of creditors and accrued liabilities. Segment liabilities do not include share capital, reserves, current tax and deferred tax liability. Segment assets do not include advance tax, deferred tax asset and fixed deposits.

b) Segment revenue and expenses

Segment revenue and expenses are directly attributable to the segment and have been allocated to various segments on the basis of specific identification. However, segment revenue and expenses do not include interest and other income/ expense in respect of non segmental activities.

7. Employee benefits

The Company primarily provide the following benefits to its employees:

(a) Gratuity

(b) Provident fund

(i) The amount recognized as an expense under defined contribution plans for employer contribution Rs. 118 lakhs (previous year Rs. 100 lakhs).

(ii) The details of employee benefits with regard to provision/charge for the year on account of gratuity, which is in the nature of an unfunded defined benefit are as under:

The Company has an approved provident fund for its own employees, which is exempt from the Income tax Act 1961. In order to comply with the provisions of the Act, the Company matches the interest declared by Regional Provident Fund (RPFC) to its own subscribers. To the extent that the actual interest earned by the Company's private fund falls short of the rate declared by RPFC is met by the Company. The benefit valued is the interest shortfall, if any, for future years on the provident fund balances of the employees.

The Defined Benefit Obligation of interest rate guarantee on exempt provident fund in respect of the employees of the Company as at 31 March 2012 works out to Rs. Nil. The balance in the surplus account of the provident fund is Rs. 85 lakhs and hence the net liability which needs to be provided for in the books of accounts of the Company is Rs. Nil.

Other long term benefits:

The amount recognized in the Statement of Profit and Loss in respect of compensated absences is Rs. 23 lakhs (previous year Rs. 40 lakhs).

8. The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing regulation under sections 92-92F of the Income-Tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company continuously updates its documentation for the international transactions entered into with the associated enterprises during the financial year and expects such records to be in existence latest by such date as required under law. The management is of the opinion that its international transactions are at arms length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

9. Managerial remuneration of Rs. 7 lakhs provided by the Company in the current year is in excess of the limits specified in the relevant provisions of the Companies Act, 1956 and the amount approved by the Central Government. Further, we are informed that as required by the relevant provisions of the Act, the Company is taking necessary steps to seek approval from the Central Government for excess remuneration paid.

10. Till the financial year ended 31 March 2011, the Company was using pre-revised Schedule VI to the Companies Act, 1956, for preparation and presentation of its financial statements. During the year ended 31 March 2012, the revised Schedule VI notified under the Companies Act, 1956, has become applicable to the company. The company has reclassified previous year figures to conform to this year's classification. The adoption of Revised Schedule VI for previous year figures does not impact recognition and measurement principles followed for preparation of financial statements.


Mar 31, 2011

(A) Contingent liabilities

(Rs. in thousands)

Particulars As at As at

31 March 2011 31 March 2010

Claims against the Company not acknowledged as debts

a) Sales tax 7,854 7,854

b) Excise duty 9,188 9,188

c) Customs duty 779 779

d) Income tax 6,676 6,676

e) Others* 12,788 12,081

Bills discounted 45,663 38,719

*During the previous years, the Company had received a notice from the relevant Government authorities for non payment of stamp duty on a lease entered into by the Company. However, the demand order has not been received by the Company and the liability on this account cannot be ascertained.

2. Based on the information presently available with the management, there are no dues outstanding to micro and small enterprises covered under the Micro, Small and Medium Enterprises Development Act, 2006 as at 31 March 2011 (previous year Rs. Nil).

3. The dividend liability on 15,700,000 2.9% cumulative redeemable non-convertible preference shares of Rs.10 each and 22,900,000 5.4% cumulative redeemable non-convertible preference shares of Rs. 10 each, payable until 31 March 2009 was waived off as per the consent of the holders of these preference shares vide their letter dated 15 March 2009. The coupon rate applicable to these series of preference shares was revised to 7.1% effective 1 April 2010 till the date of maturity.

4. Related parties

a Related parties and nature of related party relationship where control exists:

Description of Relationship Name of the Party

Ultimate Holding Company Timex Group B.V.

Holding Company Timex Group Luxury Watches B. V (formerly Timex Watches B.V)

b. Other related parties with whom transactions have taken place:

Description of Relationship Name of the Party

Fellow Subsidiaries

Timex Group B.V. T/AMersey Manufacturers

Fralsen Horlogerie S.A

TMX Limited NV

TMX Limited NV (International Sales Division)

Timex Corporation (Germany)

Timex Corporation (Middlebury)

Opex S.A.

Timex Limited NV

Timex Group UK

Timex Nederland B .V.

Timex Group USA Inc.

Timex Group Luxury Watches B.V.(Ferragamo)

Tiempo, S.A. de. C.V

Timex Group Precision Engineering Limited (TGPEL)

Timex Hong Kong Limited

Timex Do Brasil Comercio E Industria Ltd.

Timex Portugal Timex Hungary Limited

Verstime S.A.

Key Management Personnel

Gopalratnam Kannan (upto 28 April 2010)V.D. Wadhwa

(w.e.f 29 April 2010)

5. Loans and advances include dues from Managing Director of the Company Rs. 153 thousand (previous year Rs. Nil). The maximum amount outstanding during the year was Rs. 153 thousand (previous year Rs. 178 thousand).

6. Taxation

The Company has significant carried forward tax losses and unabsorbed depreciation. In view of the absence of virtual certainty of realisation of carried forward tax losses and unabsorbed depreciation allowance, deferred tax assets are recognised only to the extent of deferred tax liabilities.

7. Segment information

The Company's business segment comprises:

- Watches : Manufacturing and trading of watches;

- Timex Global Services : Providing IT and finance related back office support to other group companies. Segment revenue in the geographical segments considered for disclosure are as follows:

- Revenues within India (Domestic) include sale of watches and spares to consumers located within India; and

- Revenues outside India (Overseas) include sale of watches manufactured in India and service income earned from customers located outside India.

Segments have been identified in line with the Accounting Standard 17 on "Segment Reporting" notified by the Companies (Accounting Standards) Rules, 2006, taking into account the nature of products and services, the risks and returns, the organisation structure and the internal financial reporting system.

Secondary segment reporting is performed on the basis of the geographical segments.

Segment accounting policies

Besides the normal accounting policies followed as described in Schedule 14, segment revenues, results, assets and liabilities include the respective amounts directly identified to each of the segments and amounts allocated on a reasonable basis. The description of segment assets and liabilities and the accounting policies in relation to segment accounting are as under:

a) Segment assets and liabilities

Segment assets include all operating assets used by a segment and consist principally of fixed assets, capital work in progress, current assets and loans and advances. Segment liabilities include all operating liabilities in respect of a segment and consist principally of creditors and accrued liabilities. Segment liabilities do not include share capital, reserves, current tax and deferred tax liability. Segment assets do not include advance tax, deferred tax asset and fixed deposits.

b) Segment revenue and expenses

Segment revenue and expenses are directly attributable to the segment and have been allocated to various segments on the basis of specific identification. However, segment revenue and expenses do not include interest and other income/expense in respect of non segmental activities.

8. Employee benefits

(i) The amount recognised as an expense for defined contribution plans is Rs. 4,150 thousand (previous year Rs. 3,220 thousand).

9. The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing regulation under sections 92-92F of the Income-Tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company continuously updates its documentation for the international transactions entered into with the associated enterprises during the financial year and expects such records to be in existence latest by such date as required under law. The management is of the opinion that its international transactions are at arms length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.


Mar 31, 2010

1. Background

Timex Group India Limited (TGIL or the Company), a subsidiary of Timex Group Luxury Watches B.V, is a limited liability Company incorporated on 4 October 1988 under the provisions of the Companies Act, 1956. The Company is listed on Bombay Stock Exchange in India.

The Companys business consists of manufacture and trade of watches and rendering of related after sales service. The Company provides Technology and International Taxation support services to certain group companies.

(Rs. in thousands) As at31 March 2010 As at 31 March 2009"

2.(a)Capital commitments

(i)Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) 781 144

(b) Contingent liabilities

(Rs. in thousands)

As at31 March 2010 As at 31 March 2009

(i)Claims against the Company not acknowledged as debts

a) Sales tax 7,854 7,903

b) Excise duty 10,333 10.333

c) Customs duty 779 779

d) Income tax 6,676 -

e) Others 12,081 2,742

(ii) Bills discounted 38,719 4,074

3. The Timex Global Services Division of the Company renders information technology and finance support services to its overseas group companies. The expenditure incurred by the Division is recovered from the group companies at a mark up of 10% on costs, with reimbursement of specified expenses, and forms part of the service income.

4. Based on the information presently available with the management, there are no dues outstanding to micro and small enterprises covered under the Micro, Small and Medium Enteiprises Development Act, 2006 as at 31 March 2010 (previous year Rs. Nil).

5. The dividend liability on 15.700,000 2.9% cumulative redeemable non-convertible preference shares of Rs.10 each and 22,900,000 5.4% cumulative redeemable non-convertible preference shares of Rs. 10 each, payable until 31 March 2009 was waived off as per the consent of the holders of these preference shares vide their letter dated 15 March 2009. The coupon rate applicable to these series of preference shares have been revised to 7.1% effective 1 April 2009 till the date of maturity.

6. Pursuant to shareholders approval via Postal Ballot, the Precision Engineering Division of the Company was divested on a slump sale basis to Timex Group Precision Engineering Limited, a fellow subsidiary Company w.e.f. 1 November 2008 for a consideration of Rs. 130,438 thousand, including Rs. 9,238 thousand for working capital adjustment as on date of transfer of risk and reward i.e. 1 November 2008 (effective transfer date) of the business. Profit on sale of above (shown as an exceptional item in Profit and Loss Account of the previous year) amounted to Rs 63,533 thousand. The balance consideration receivable amounting to Rs. 9,238 thousand as at the end of March, 31 2009 were included in Other Current Asset in Schedule 8. The related operations of the Division upto October 31. 2008 were included in the financial statements as "discontinued business".

* Does not include expenses towards gratuity and leave encashment since the same are based on actuarial valuation carried out for the Company as a whole. Includes Rs. 1,019 thousand as managerial remuneration in the current year which is subject to approval by the Central Government.

Note:

Tiraex Group Luxury Watches BV, the holding company, has provided a standby letter of credit amounting to Rs. 178,000 thousand (previous year Rs. 178,000 thousand) to the bankers of the Company as a guarantee for use of cash credit and overdraft facilities.

* include production at Parwanoo and Baddi in Himachal Pradesh.

** excludes plastic components, tools and moulds produced for captive consumption. (Refer to note 5 also) *** Installed capacities are as certified by management and have not been verified by the auditors, being a technical matter.

# in view of the items of varying size and nature that can be manufactured by the Companys facilities, the installed capacity is not ascertainable.

@ includes 163 thousand watches valued at Rs 117,605 thousand on account of watches received at Baddi for repackaging which are liable for excise duty.

* Values are inclusive of excise duty

** Does not include 3,035 thousands (Nos) of plastic components transferred on sale of Precision Engineering Division.

7. Loans and advances include dues from Managing Director of the Company Rs. Nil thousand (previous year Rs. 178 thousand). The maximum amount outstanding during the year was Rs. 178 thousand (previous year Rs. 311 thousand)

8. Taxation

The Company has significant carried forward tax losses. In view of the absence of virtual certainty of realisation of carried forward tax losses and unabsorbed depreciation allowance, deferred tax assets are recognised only to the extent of deferred tax liabilities.

9. The Company has taken land and building, office premises, showrooms, other business premises and residential accommodation for some of its employees under operating lease arrangements, with an option of renewal at the end of the lease term and escalation clause in some of the cases. Lease payments charged during the year to the profit and loss account aggregate Rs. 30,450 thousand (previous year Rs. 33,088 thousand). The future minimum lease payments under non-cancellable operating leases are as follows:

10. The Company has given certain items of plant and machinery on operating lease, with an option of renewal at the end of the lease term. However, the lease agreements entered into with the lessees do not provide for any escalation. Lease rentals recognised during the year in the profit and loss account amount to Rs. 1,540 thousands (previous year Rs. 1,878 thousand). The future lease payments receivable under non-cancellable operating leases are as follows:

11. i) Segment information

Following divestment of Precision Engineering Division in 2008-09 (Refer to note 5), the Companys business segment comprises of:

- Watches : Manufacturing and trading of watches;

- Timex Global Services : Providing IT and finance related back office support to other group companies.

Segment revenue in the geographical segments considered for disclosure are as follows:

Revenues within India (Domestic) include sale of watches and spares to consumers located within India; and

Revenues outside India (Overseas) include sale of watches manufactured in India and service income earned from customers located outside India.

Segments have been identified in line with the Accounting Standard 17 on "Segment Reporting" notified by the Companies (Accounting Standards) Rules, 2006, taking into account the nature of products and services, the risks and returns, the organisation structure and the internal financial reporting system.

Besides the normal accounting policies followed as described in Schedule 16, segment revenues, results, assets and liabilities include the respective amounts directly identified to each of the segments and amounts allocated on a reasonable basis.

12 Employee benefits

The details of employee benefits with regard to provision/ charge for the year on account of gratuity, which is in the nature of an unfunded defined benefit are as under:

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors. Discount rate is based on market yields prevailing on government securities for the estimated term of the obligations. ,

The guidance on implementing AS-15 issued by Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India states that benefit involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefits plans. Pending the issuance of the guidance note from Actuarial Society of India, the Companys actuary has expressed its inability to reliably measure provident fund liabilities. Accordingly, the related information has not been disclosed.

13. In relation to a sales transaction for the year ended 31 March 2009, the Company has during the year noticed misappropriation of Rs. 625 thousand by an ex-employee. The Company has taken appropriate action and has recovered the amount from the ex-employee.

14. Previous years figures have been re-grouped / reclassified, wherever necessary, to conform to current years classification. The previous year figures are not comparable as those include tool room business operation till 31 October 2008.

15. Schedules 1 to 17 form an integral part of the financial statements.

 
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