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Notes to Accounts of Timken India Ltd.

Mar 31, 2017

(a) The Company has adopted the exemption under Ind AS 101 and has considered previous GAAP carrying amount as the deemed cost for the Opening Balance sheet as at April 1, 2015. Also refer note 46.

Accordingly the Gross block of each class of Property, plant and equipment has been netted off with their respective accumulated depreciation balances as at April 1, 2015 under Previous GAAP to arrive at the deemed cost for the purpose of opening Ind AS balance sheet.

(b) Includes plant & equipment given on operating lease as follows.

The contract manufacturing agreement as well as the lease agreement between the Company and Timken Engineering Research India Private Limited (TERI)for the lease of above Plant and equipment has been discontinued in the current year.

(c) Details of Expenditure on New/ Expansion Projects (Pending Allocation and included in Capital work in progress)

1: Loans to Employees includes:

(a) Rs. Nil (March 31, 2016 0.21 million; April 1, 2015- Rs. 0.72 million) given to Directors of the Company.

(b) Rs. Nil (March 31, 2016 - Rs.0.01 million; April1,2015- Rs. 0.14million)given to other officers of the Company. Refer note 39A for credit risk exposure on security deposits.

2: Trade receivables are non-interest bearing and are generally on terms of 30 to 60 days.

3 : The carrying amount of Trade receivables may be affected by the changes in the credit risk of the counterparties as well as the currency risk as explained in note39A.

4: No trade or other receivable are due from directors or other officers of the company either severally or jointly with any other person. Nor any trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member.

(a) Bank Balances on unpaid dividend account represents monies that can be utilized only to pay dividend to equity shareholders against dividend warrants issued to them.

(b) The Company has not transacted in cash during the period November 8, 2016 to December 30, 2016 nor held any cash balance as at November 8, 2016 and December 30, 2016. Consequently, there are no details of Specified Bank Notes as envisaged in Notification G.S.R. 308(E) dated 30th March, 2017 to be furnished.

5 : Loans to Employees includes:

(a) Rs.0.21 million(March31,2016 - Rs.0.51 million; April 1,2015- Rs.0.51 million) given to Directors of the Company.

(b) Rs.0.01 million (March31,2016 - Rs.0.13 million; April 1, 2015 - Rs.0.13million)given to other officers of the Company.

Note : Includes Rs. 22.54 million (March 31, 2016 Rs.22.24 million) amount receivable from a fellow subsidiary, The Timken Corporation, being the insurance claim received by it under the global insurance arrangement towards the previous year''s loss due to fire as explained in note31.

* (i) Calls in arrears have been computed on the basis of information certified by the Registrar & Share Transfer Agent of the Company.

(ii) No Equity shares have been allotted during the year ended March 31, 2017 out of 15,150 shares of Rs. 10/- each kept in abeyance as at 31st March, 1998.

b Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share.

The Company declares and pays dividends in Indian rupees. The dividend proposed by Board of Directors of Rs.1 per equity share (March 31,2016- Rs.1 per equity share) is subject to the approval of the shareholders in the ensuing Annual General Meeting.

The Dividend for the year 2015-16 proposed by the Board and approved by the shareholders at the 29th Annual General Meeting during the year has been paid to the eligible shareholders.

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

Notes

(i) Out of the total shares issued, 50,999,988 fully paid-up Equity shares of Rs.10/- each are held by Timken Singapore PTE Limited. However, the Timken Company, USA happens to be the Ultimate Holding Company. No shares in the Company are held by any subsidiary or associates of the holding company or the Ultimate Holding Company.

(ii) As per records of the Company, including its register of shareholders/members, the above shareholding represents legal ownership of shares.

Provision for Indirect Taxes includes liabilities aggregating Rs.303.37 million (March 31, 2016: Rs. 276.79 million; April 1, 2015: Rs.221.69 million) towards customs duty on imports for various years. The Company has provided these liabilities based on the most recent assessments. Further, the management is of the view that this liability shall be payable only at the time of final assessment, pending which, the Company has also deposited Rs. 207.74 million (March 31, 2016: Rs.191.02 million; April 1, 2015: Rs. 152.88 million) with customs authorities. The net provision is included in Provision for Indirect Taxes above.

The Company has reviewed the various liabilities/ claims relating to indirect taxes and estimated the provision for contingencies based on assessment of its probability.

c) There are also provisions against Income Tax claims amounting to ? 18.98 million (March 31, 2016: Rs.18.98 million; April 1, 2015: Rs.12.33 million) which is netted off with Advance Income Tax. Also refer note 8.

Government grants have been received for import of certain items of Property, Plant and Equipment and capital work in progress against import licenses taken under export promotion capital goods scheme of Government of India. The Company has certain export obligations against such benefits availed which it would fulfill within the required time period under the scheme.

a) The above are interest bearing deposits (carrying interest @ 8% p.a.) accepted from dealers/ distributors which are repayable only upon termination of the dealership/distributor agreement at 1 month notice by either party.

b) Investor Education and Protection Fund will be credited by the amount of unpaid dividends as and when due.

NOTE 6 : REVENUE FROM OPERATIONS

* Sale of goods includes excise duty collected from customers of Rs. 610.43 million (2015-16: Rs. 588.34 million). Excise duty on movement in stock of finished goods amounting to Rs. 34.70 million (2015-16: Rs.10.92 million) has been considered as an expense in the statement of profit & loss.

(a) Commission expense includes payments made for logistics and warehouse management services rendered by a third party service provider.

(c ) Excise duty expense (net of recovery) represents duty paid/provided for on stocks written off, burnt stock, free samples etc.

During the previous year ended March 31,2016, the Pune warehouse of the Company caught fire damaging all the Inventories and Plant & Equipment(WDV) worth Rs.98.31 million. The Management had recovered an amount of Rs.68.22 million (including Rs.22.24 million receivable in respect of reimbursement from related party) against the loss. The remaining un-recoverable amount of Rs.30.09 million, had been charged off and disclosed as an exceptional item in the previous year''s financial statements.

NOTE 7 : LEASES

Assets taken on lease

Office premises are obtained on operating leases which are generally cancellable in nature except two premises for which disclosures are given below.

The lease term is for various number of years and renewable for further periods as per the lease agreements at the option of the Company. There are no restrictions imposed by the lease arrangements. There are no subleases.

Leases which are non-cancellable in nature

The Company has paid Rs.52.29 million (March 31, 2016: Rs.54.22 million) towards lease rent during the year.

Other Leases

Lease of Land and Building

The Company has taken on lease, land and building thereon, for the purposes of its facility in Raipur relating to servicing of gears/ related accessories. The significant lease terms are as follows:

a. The land lease is for a period of 30 years cancellable with six months prior notice and total lease payments during the lease term amounts to?239.18 million. The lease does not involve upfront payment and has terms of renewal and escalation clauses.

b. The building lease is for a period of 7 years cancellable with six months prior notice and total lease payments during the lease term amounts to Rs.95.26 million. The lease does not involve upfront payment and has terms of renewal and escalation clauses.

NOTE 8: SEGMENT INFORMATION

Operating Segment:

The Company has identified two Operating segments, viz. i) Mobile industry (Automotive and Railway) ii) Process industry. In accordance with the process followed by the Timken Group globally and the manner of review of performance by the management, these have been aggregated due to similar nature of products, production process and distribution process and hence no separate segment information is disclosed.

Entity wide disclosures

The management has assessed that the carrying amount of the Financial Assets/ Liabilities at amortized cost approximate their fair value largely due to their short-term nature.

NOTE 9: Financial Risk Management Objectives and Policies

The Company''s principal financial liabilities comprise trade and other payables and short term borrowings. The main purpose of these financial liabilities is to finance the Company''s operations. The Company''s principal financial assets include trade and other receivables, cash and cash equivalents and other bank balances that derives directly from its operations.

The Company is exposed to credit risk and market risk. The Company''s senior management oversees the management of these risks. The Company''s financial risk activities are governed by appropriate policies and procedures and financial risks are identified, measured and managed in accordance with the Company''s policies and risk objectives.

Credit risk

Credit risk is the risk that the 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 from its investing activities, primarily investments in mutual funds, security deposits, etc.

1. Trade receivables

Customer credit risk is managed in accordance with the Company''s established policy, procedures and controls relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored.

An impairment analysis is performed at each reporting date on an individual basis for major customers. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on historical data. The maximum exposure to credit risk at the reporting date is the carrying value of the financial assets disclosed in Note 10. The Company does not hold any collateral as security for most of its customers. The Company evaluates the concentration of risk with respect to trade receivables as low, as most of its external customers (other than related party customers) are established players in their industry or are distributors/ dealers against which the Company holds security deposit as its policy.

All the related party receivables are from various Timken group companies where there is a minimal default risk.

2. Investments

Credit risk from investments with banks and financial institutions is managed by the Company''s treasury department in accordance with the Company''s policy. Investment of surplus funds are made only with approved funds. Credit limits for each fund is reviewed by the Company''s Board of Directors on an quarterly basis, and may be updated throughout the year subject to approval of the Company''s Audit Committee. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through fund''s potential failure to make payments. Investments are only made in securities with highest grade ratings hence the credit risk is considered as minimal.

Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The Company is exposed to different types of market risks. For the Company, the market risk is the possibility of changes in foreign currency exchange rates and commodity prices which may affect the value of the Company''s financial assets, liabilities or expected future cash flows.

1. Commodity Risk

The principal raw materials for the Company products are alloy steel bars, tubes and wire rods, which are purchased by the Company''s vendors from the approved list of global suppliers, in order to leverage The Timken Company''s economies of scale. Most of the input materials such as rings and cages are procured from domestic vendors. Raw material procurement is subject to price negotiation.

In order to mitigate the risk associated with raw material and components prices, the Company manages its procurement through grading, sourcing of raw material and constant pricing negotiation with vendors. It renegotiates the prices with its customers in case there is more than normal deviation in the prices of its major raw materials.

2. Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The risk of fluctuations in foreign currency exchange rates on its financial liabilities including trade and other payables etc, which are mainly in US Dollars are mitigated through the natural hedge alignment, as Company''s export sales are predominantly in US dollars and such economic exposure through trade and other receivables in US dollars provide natural alignment. Hence, a reasonable variation in the Foreign exchange rate would not have much impact on the profit/ equity of the Company.

VI) Actuarial Assumptions

The estimates of rate of escalation in salary considered in actuarial valuation has taken into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is as certified by the Actuary.

The expected rate of return on plan assets is determined considering several applicable factors, mainly the composition of plan assets held, assessed risks, historical results of return on plan assets and the Company''s policy for plan assets management.

Each year, the Board of Trustees reviews the level of funding in the Gratuity plan. Such a review includes the asset-liability matching strategy and investment risk management policy.

Footnotes to the reconciliation

a. Property, Plant & equipment

Under Indian GAAP Government grants in the form of exemption of duties on imported assets were netted off with the value of the respective cost of the assets. Upon adoption of Ind-AS, these Government grants are added to cost of respective assets and correspondingly held as deferred income to be released to the Statement of Profit & Loss over the useful life of such assets. There is no impact on the total equity and profits due to the said change.

b. Security Deposits

Under Indian GAAP, interest free security deposits were recorded at transaction value. Under Ind-AS, these financial assets have been recorded at their amortized cost with difference being recorded as pre-paid rent-to be amortized in the Statement of Profit and Loss over the period of lease.

c. Trade Receivables

Expected credit loss on trade receivables is recognized based on the trend of historical default rates upon adoption of Ind AS.

d. Reclassifications

The Company has done the following reclassifications as per the requirements of Ind AS:

i) Assets/liabilities which do not meet the definition of a financial asset/liability have been reclassified to other asset/liability.

ii) Re-Measurement gains/ losses on long term employee defined benefit plans are re-classified from profit and loss to other comprehensive income.

iii) Company used to record sale of raw materials to its forgers and vendors made in the course of transit as sale and purchase of goods under the Indian GAAP. Upon adoption of Ind-AS such transactions are recorded on net basis since the Company does not have the intention to make profits on such transactions as these would only add to its processing costs.

iv) Security Deposits received from customers have been re-classified from non-current liabilities to current financial liabilities as the Company does not have an unconditional right to defer settlement of the liability beyond twelve months after the reporting date.

v) Excise duty collected on sales was earlier netted off with Revenue from operations under previous GAAP, now grossed up with sales and presented as an expense in accordance with Ind AS 18.

vi) Cash Discount earlier grouped under other expenses is netted off with sales.

vii) Retention money held by customers has been classified from current trade receivables to non-current trade receivables as it is not expected to be realized within twelve months after the reporting date.

viii) Provision for compensated absences, which was hitherto classified into non-current/ current on the basis of actuarial valuation report has been entirely reclassified to current as the Company does not have an unconditional right to defer settlement of the liability beyond twelve months after the reporting date.

e. Deferred tax

The various transitional adjustments lead to temporary differences which the Company has accounted for. Deferred tax adjustments are recognized in correlation to the underlying transactions either in retained earnings or in the Statement of Profit & Loss.

f. Dividend

Under Indian GAAP, proposed final dividends including Dividend Distribution Taxes (DDT) are recognized as a liability in the period to which they relate, irrespective of when they are approved. Under Ind AS, such dividend is recognized as a liability when approved by shareholders.

g. Other comprehensive income

Ind-AS requires preparation of Statement of Other Comprehensive Income in addition to Statement of Profit and Loss.

NOTE 10 : Significant accounting judgments, estimates and assumptions

The preparation of the Company''s financial statements requires management to make judgments, estimates and assumptions as described below that affect the reported amounts and the accompanying disclosures. 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.

a) Defined benefit plans

The cost of the defined benefit plans and the present value of the defined benefit obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. For further details refer to Note 40.

b) Decommissioning cost

Decommissioning cost for leasehold land at Jamshedpur has not been recognized based on management''s decision that the Company will leave the leased property in as is condition at the expiry of the term of lease. As per the terms of the agreement, in such case the Company is not obligated for any decommissioning or site restoration activity.

NOTE 11: First-time adoption of Ind AS

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

a) The Company has elected to continue with carrying value as recognized in its Indian GAAP Financial Statements of following items as deemed cost at the transition date, viz., 1 April 2015 in accordance with Ind-AS 101- First-time Adoption of Indian Accounting Standards.

i) Property Plant and Equipment

ii) Intangible Assets

b) The Company has designated unquoted equity instruments and investments in mutual funds held at April 1, 2015 as fair value through profit or loss.


Mar 31, 2015

1. CORPORATE INFORMATION

Timken India Limited ('the Company') was incorporated on 15th June, 1987. The Company is primarily into manufacture and distribution of tapered roller bearings, components and accessories for the automotive sector and the railway industry. It also provides maintenance contract services and refurbishment services. The Company also has a gear box repairing facility at Raipur where it provides repair and maintenance services of industrial gear boxes.

A Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share.

The Company declares and pays dividends in Indian rupees. The dividend proposed by Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

The Company has paid, subject to approval of the shareholders at the next Annual General Meeting, interim dividend of Rs.3 (interim dividend of Rs.6.5/- ) per equity share of Rs.10 each fully paid. This dividend was paid to all the eligible shareholders whose names appeared on the Register of Members of the Company as on November 21, 2014 (being the record date fixed for the purpose) on November 28, 2014.

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

B Details of shareholders holding more than 5% shares in the company (Refer note (i) & (ii) below)

Notes:

(i) Out of the total shares issued, 50,999,988 fully paid-up Equity shares of Rs. 10/- each are held by Timken Singapore PTE Limited. However, the Timken Company,USA happens to be the Ultimate Holding Company.

(ii) As per records of the company, including its register of shareholders/ members, the above shareholding represents legal ownerships of shares.

Note i.

a) The Company had in the previous year issued 4,265,134 equity shares of Rs.10/- each through an Institutional Placement Programme (IPP) to qualified institutional buyers at a premium of Rs.110/- per share to generate funds for long term capital requirements, working capital requirements and general corporate purposes. The total sum received aggregated Rs.511,816,080 including Rs.469,164,740 towards securities premium.

b) As at March 31,2015, the Company has fully utilised the funds towards the purchase of fixed assets.

Note : The above are interest bearing deposits accepted from dealers / distributors which are repayable only upon termination of the dealership / distributor agreement.

a) Provision for Indirect Taxes includes a liability of Rs.221,693,462 (Rs.181,558,334) towards custom duty on imports for various years.The Company has provided these liabilities based on the most recent assessments. Further, the management is of the view that this liability shall be payable only at the time of final assessment, pending which, the Company has also deposited Rs.152,882,698 (Rs.125,096,839) with customs authorities. The net provision is included in Provision for Indirect Taxes above.

b) The Company has reviewed the various liabilities/claims relating to indirect taxes and estimated the provision for contingencies based on assessment of its probability.

c) There are also provisions against Income Tax claims amounting to Rs.12,333,741 (Rs.12,333,741) which is included in Note 13 and netted off with Advance Income Tax.

* These are bills discounted with banks with recourse to the Company with various maturity dates. Interest payable ranges between 11.25% to 12.75% p.a for overdue payables.

Note :

Balance with scheduled banks on unpaid dividend account represents monies that can be utilised only to pay dividend to equity shareholders against dividend warrants issued to them.

Commission expense includes payments made for logistics and warehouse management services rendered by a third party service provider. Contribution made to Prime Minister Relief Fund as part of CSR Expenditure.

Other Expenses include:

NOTE 2 : LEASES Asset taken on lease

Office premises are obtained on operating leases which are generally cancellable in nature except two premises for which disclosures are given below.

The lease term is for various number of years and renewable for further periods as per the lease agreements at the option of the company. In few lease agreements, escalation clauses are present consequent to which straight lining of lease rental is done and accounted for accordingly. There are no restrictions imposed by the lease arrangements. There are no subleases.

Leases which are non-cancellable in nature

The details of non-cancellable lease rentals payable are given below :

The Company has paid Rs.40,751,895 (Rs.29,803,693) towards lease rent.

Other Leases

Lease of Land and Building

The Company has taken on lease, land and building thereon, for the purposes of its facility in Raipur relating to servicing of gears/related accessories. The significant lease terms are as follows:

a. The land lease is for a period of 30 years cancellable with six months prior notice and total lease payments during the lease term amounts to Rs.239,179,851. The lease does not involve upfront payment and has terms of renewal and escalation clauses.

b. The building lease is for a period of 7 years cancellable with six months prior notice and total lease payments during the lease term amounts to Rs.95,261,499. The lease does not involve upfront payment and has terms of renewal and escalation clauses.

NOTE 3 : SEGMENT INFORMATION Business Segment:

The Company has reviewed the disclosure of business segment wise information and is of the view that it manufactures and trades in bearings and related components, and provides services in connection with or incidental to such sales ('Bearings and components').This segment operates out of Jamshedpur, Chennai, Mysore, Gurgaon and Pune. The Company also provides repair and maintenance services of industrial gear boxes at its gear box repairing facility at Raipur.

'Bearings and Components' is the only reportable segment in terms of AS-17 : Segment Reporting and Related disclosures are as follows:

Geographical segments:

Revenue and receivables are specified by location of customers while the other geographic information is specified by location of the assets.

The following table presents revenue and certain asset information regarding the company's geographical segments:

Note: Since the Company has all fixed assets in India only, separate figures for additions to fixed assets for domestic and overseas segments are not furnished.

NOTE 4 - DISCLOSURES AS PER REVISED ACCOUNTING STANDARD -15 Gratuity and other post-employment benefit plans:

The Company has a defined benefit gratuity plan (funded). Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service.

The Company also has a Death Benefit Scheme (unfunded) for its employees where the immediate beneficiaries are entitled to a monthly fixed sum till the date of superannuation, for death in harness.

The Company has a separate Provident Fund Trust (funded) whereby, all the employees are entitled to benefits as per Provident Fund Act / Trust Deed. Any shortfall for the Trust is borne by the Company, hence the same is treated as a defined benefit scheme. The actuary has provided a valuation and determined the fund assets and obligations as at March 31, 2015. The corresponding disclosures mentioned below are to the extent of the shortfall in the interest guaranteed on the provident fund vis-a-vis the interest rate notified by the Government.

The following tables summarise the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the respective plans.

Statement of profit and loss :

Net employee benefit expense (recognised in Employee Cost)

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. Gratuity fund and Provident fund are 100% invested with approved funds as per the relevant Act/ trust deed. The Company expects to contribute Rs.24,550,000 (Rs.2,200,000) to the Gratuity Fund in the next year.

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

As at As at March 31, 2015 March 31,2014 Rupees Rupees

i) Sales tax matters under dispute / appeal 18,764,268 15,575,963

ii) Income tax demands under appeal 86,070,124 75,274,238

iii) Excise and customs demand under dispute / appeal 33,795,277 33,795,277

iv) Other Claims against the Company not acknowledged as debts 8,309,615 8,309,615

Based on the discussions with the solicitors/favourable decisions in similar cases/legal opinions taken by the Company on above matters, no provision there against is considered necessary.

NOTE 5 : CAPITAL & OTHER COMMITMENTS :

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 127,556,829 (Rs. 106,653,878) [Net of advances paid Rs. 44,769,464 (Rs. 15,000)].

(b) In terms of the Memorandum of Agreement dated 9th May, 2011 entered between the Company and Timken Engineering and Research India Pvt. Ltd. (TERI), TERI manufactures goods using the assets owned by the Company and leased out to TERI (as disclosed in Note 9) and the Company in consideration of purchase of such goods from TERI would give an agreed mark up on the cost incurred by TERI for manufacturing such goods. This agreement is valid for a period of 5 years with renewal option.

(c) For commitments relating to lease arrangements, please refer note 26.

NOTE 6 : CONSUMPTION OF IMPORTED AND INDIGENOUS RAW MATERIALS & COMPONENTS AND STORES & SPARE PARTS

Value of consumption of imported and indigenously obtained raw materials, components, stores and spare parts and percentage of each to the total consumption :

NOTE 7 : RELATED PARTY DISCLOSURE:

Name of the Holding Company - Timken Singapore PTE. Limited (with effect from March 26, 2012)

Name of the Ultimate Parent Company - The Timken Company, USA

List of related parties where control exists and transactions with such related parties and other related parties with whom transaction have taken place during the year/period, along with related balances as at March 31,2015 and for the year then ended are presented in the following table:

Excise duty and cess on stock represent differential excise duty and cess thereon paid/provided on opening and closing stock of finished goods.

NOTE 8

Subsequent to the balance sheet date, on May 10, 2015 the Pune warehouse of the Company caught fire damaging all the inventories and fixed assets at the warehouse.The Company is in the process of quantifying the losses suffered for necessary action and insurance claims.The financial statements have not been adjusted to give effect of the event.

NOTE 9

Previous year figures have been regrouped / reclassified, where necessary, to conform to this year's classification.

Notes : (i) EBIT/BIC i,e Beginning invested capital, a type of return on asset ratio, used internally to measure the company's performance. In broad terms, invested capital is total assets minus non interest-bearing current liabilities.

(ii) Return on Net Worth is profit after tax divided by net worth as at the end of the year.

(iii) Equity includes preference share capital net off accumulated losses and miscellaneous expenditure to the extent not written off.

(iv) Fixed Asset Turnover is net sales divided by net fixed assets as at the end of the year.

(v) Working Capital Turnover is net sales divided by net cuurent asset as at the end of the year.

(vi) Current ratio is current assets divided by current liabilities including current portion of long term loans, if any, repayable within one year.

(vii) Interest Cover is profit before interest and taxation divided by net interest expenses.


Mar 31, 2014

NOTE 1 : LEASES

Asset taken on lease

Office premises are obtained on operating leases which are generally cancellable in nature except one premise for which disclosures are given below.

The lease term is for various number of years and renewable for further periods as per the lease agreements at the option of the company. In few lease agreements, escalation clauses are present consequent to which straight lining of lease rental is done and accounted for accordingly. There are no restrictions imposed by the lease arrangements. There are no subleases.

Leases which are non-cancellable in nature

Other Leases

Lease of Land and Building

The Company has also taken on lease, land and building thereon, for the purposes of its new facility in Raipur relating to servicing of gears/related accessories which has begun operations in this year. The significant lease terms are as follows:

a. The land lease is for a period of 30 years cancellable with six months prior notice and total lease payments during the lease term amounts to Rs.239,179,851. The lease does not involve upfront payment and has terms of renewal and escalation clauses.

b. The building lease is for a period of 7 years cancellable with six months prior notice and total lease payments during the lease term amounts to Rs.95,261,499. The lease does not involve upfront payment and has terms of renewal and escalation clauses.

NOTE 2 : SEGMENT INFORMATION

Business Segment:

The Company has reviewed the disclosure of business segment wise information and is of the view that it manufactures and trades in bearings and related components, and provides services in connection with or incidental to such sales (''Bearings and components'').This segment operates out of Jamshedpur, Chennai, Mysore, Gurgaon and Pune.

In addition, during the year, the Company has also commissioned a new gear box repairing facility at Raipur where it provides repair and maintenance services of industrial gear boxes.

NOTE 3 - DISCLOSURES AS PER REVISED ACCOUNTING STANDARD -15

Gratuity and other post-employment benefit plans:

The Company has a defined benefit gratuity plan (funded). Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service.

The Company also has a Death Benefit Scheme (unfunded) for its employees where the immediate beneficiaries are entitled to a monthly fixed sum till the date of superannuation, for death in harness.

The Company has a separate Provident Fund Trust (funded) whereby, all the employees are entitled to benefits as per Provident Fund Act / Trust Deed. Any shortfall for the Trust is borne by the Company, hence the same is treated as a defined benefit scheme. The actuary has provided a valuation and determined the fund assets and obligations as at March 31, 2014. The corresponding disclosures mentioned below are to the extent of the shortfall in the interest guaranteed on the provident fund vis-a-vis the interest rate notified by the Government.

The following tables summarise the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the respective plans.

NOTE 4 : CONTINGENT LIABILITIES

As at As at March 31, 2014 March 31, 2013 Rupees Rupees

i) Sales tax matters under dispute / appeal 15,575,963 16,545,755

ii) Income tax demands under appeal 75,274,238 75,173,399

iii) Excise and customs demand under dispute / appeal 33,795,277 27,787,040

iv) Other Claims against the Company not acknowledged as debts 8,309,615 8,309,615

Based on the discussions with the solicitors/favourable decisions in similar cases/legal opinions taken by the Company on above matters, no provision there against is considered necessary.

NOTE 5 : CAPITAL & OTHER COMMITMENTS :

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for - Rs.106,653,878 (Rs.96,838,177) [Net of advances paid Rs.15,000 (Rs.30,249,177)]

(b) In terms of the Memorandum of Agreement dated 9th May, 2011 entered between the Company and Timken India Manufacturing (P) Ltd, (TIMPL), TIMPL will manufacture goods using the assets owned by the Company and leased out to TIMPL (as disclosed in Note 9) and the Company in consideration of purchase of such goods from TIMPL would give an agreed mark up on the cost incurred by TIMPL for manufacturing such goods. This agreement is valid for a period of 5 years with renewal option.

(c) For commitments relating to lease arrangements, please refer note 26.

NOTE 6 : RELATED PARTY DISCLOSURE:

Name of the Holding Company – Timken Singapore PTE. Limited (with effect from March 26, 2012)

Name of the Ultimate Parent Company – The Timken Company, USA

List of related parties where control exists and transactions with such related parties and other related parties with whom transaction have taken place during the year/period, along with related balances as at March 31, 2014 and for the year then ended are presented in the following table:

NOTE 7

Excise duty and cess on stock represent differential excise duty and cess thereon paid/provided on opening and closing stock of finished goods.

NOTE 8

Previous year figures have been regrouped / reclassified, where necessary, to conform to this year''s classification.


Mar 31, 2013

1: CORPORATE INFORMATION

Timken India Limited (''the Company'') was incorporated on 15th June 1987. The Company is primarily into manufacture and distribution of tapered roller bearings, components and accessories for the automotive sector and the railway industry. It also provides maintenance contract services and refurbishment services.

NOTE 2 : LEASES

Asset taken on lease

Office premises are obtained on operating leases which are generally cancellable in nature except two premises for which disclosures are given below. The lease term is for various number of years and renewable for further periods as per the lease agreements at the option of the company. In few lease agreements, escalation clauses are present consequent to which straight lining of lease rental is done and accounted for accordingly. There are no restrictions imposed by the lease arrangements. There are no subleases.

Lease of Land

The Company has taken land on lease during the year for the purposes of its new project in Raipur relating to servicing of gears/related accessories which is under implementation. The lease is for a period of 30 years cancellable with six months prior notice and total lease payments during the lease term amounts to Rs. 239,179,851. The lease does not involve upfront payment and has terms of renewal and escalation clauses.

NOTE 3 : SEGMENT INFORMATION

Business Segment :

The Company has reviewed the disclosure of business segment wise information and is of the view that it manufactures and trades in bearings and related components which is a single business segment in accordance with AS-17, Segment Reporting. Accordingly, no separate business segment information is furnished herewith.

Geographical Segments :

Revenue and receivables are specified by location of customers while the other geographic information is specified by location of the assets.

NOTE 4 : DISCLOSURES AS PER REVISED ACCOUNTING STANDARD 15

Gratuity and other post-employment benefit plans:

The Company has a defined benefit gratuity plan (funded). Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service.

The Company also has a Death Benefit Scheme (unfunded) for its employees where the immediate beneficiaries are entitled to a monthly fixed sum till the date of superannuation, for death in harness.

The Company has a separate Provident Fund Trust (funded) whereby, all the employees are entitled to benefits as per Provident Fund Act / Trust Deed. Any shortfall for the Trust is borne by the Company, hence the same is treated as a defined benefit scheme.

The following tables summarise the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the respective plans.

NOTE 5 : CONTINGENT LIABILITIES

As at March 31, 2013 As at March 31, 2012 Rupees Rupees

i) Sales tax matters under dispute / appeal 16,545,755 242,091,776

ii) Income tax demands under appeal 75,173,399 74,778,129

iii) Excise and customs demand under dispute / appeal 27,787,040 19,468,903

iv) Other Claims against the Company not acknowledged as debts 8,309,615 8,309,615

Based on the discussions with the solicitors/favourable decisions in similar cases/legal opinions taken by the Company on above matters, no provision there against is considered necessary.

NOTE 6 : CAPITAL & OTHER COMMITMENTS

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for - Rs. 96,838,177 (Rs. 10,090,944) [Net of advances paid Rs.30,249,177 (Rs.2,311,019)]

(b) In terms of the Memorandum of Agreement dated 9th May, 2011 entered between the Company and Timken India Manufacturing (P) Ltd, (TIMPL), TIMPL will manufacture goods using the assets owned by the Company and leased out to TIMPL (as disclosed in Note 9) and the Company in consideration of purchase of such goods from TIMPL would give an agreed mark up on the cost incurred by TIMPL for manufacturing such goods. This agreement is valid for a period of 5 years with renewal option.

(c) For commitments relating to lease arrangements, please refer note 26.

NOTE 7: RELATED PARTY DISCLOSURES

Name of the Holding Company - Timken Singapore PTE. Limited (with effect from March 26, 2012) - Timken (Mauritius) Limited (with effect from October 5, 2010 till March 25, 2012) Name of the Ultimate Parent Company - The Timken Company, USA

NOTE 8

Excise duty and cess on stock represent differential excise duty and cess thereon paid/provided on opening and closing stock of finished goods.

NOTE 9

The Company has applied to the Central Government for approval of the appointment of the Managing Director with effect from 26th October 2012 in terms of Part I of Schedule XIII to the Companies Act, 1956. Such appointment is also subject to the approval of the Company''s shareholders.

NOTE 10

Capital work-in-progress includes direct costs consisting of Salaries, Wages and Bonus Rs. 1,636,844 (Rs. Nil), Insurance Rs. 66,670 (Rs. Nil), Legal & Professional Fees Rs. 178,000 (Rs. Nil.) and Rent Rs. 162,800 (Rs. Nil) relating to the Company''s project at Raipur. Consequently, expenses disclosed under the respective notes are net of amounts capitalized by the company.

NOTE 11

Till the fifteen months period ended 31 March 2012, 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 2013, 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 does not impact recognition and measurement principles followed for preparation of financial statements. However, it significantly impacts presentation and disclosures made in the financial statements, particularly presentation of balance sheet.

Further, current year''s figures are not comparable with previous period''s figures which were for 15 months due to change of the accounting year by the company in the previous period.


Mar 31, 2012

1) Licensed Capacity is not furnished as it is not applicable in terms of Government of India's Notification No.S.O.477(E) dated 25th July, 1991.

2) The above installed capacity represents existing manufacturing facilities for respective products and are certified by the Management.

3) The above installed capacity is fixed with reference to the specific bearing size. Actual production may vary depending on the sizes that are produced in specific year.

Notes:

* Excludes free samples to customers.

** Sale of Products is stated net of excise duty and trade discount.

# Purchases are for resale and inclusive of stock in transit.

@ Quantitative information not furnished due to nature and large volume of such items with small values. None of the individual items included therein are 10% or more of the total value.

Note : In view of the fact that the company also manufactures and purchases number of similar components that are used in the manufacture of the final products, and the fact that individual identification of which is not possible, raw materials and components include both the class of materials.

As at As at

March 31, 2012 December 31, 2010

i) CONTINGENT LIABILITIES NOT PROVIDED FOR Rupees Rupees

A. Demands raised by Sales Tax/Income Tax/Excise authorities

i) Demand of sales tax for non-availability/non-consideration 238,852,264 225,219,371 by Assessing Officer of various sales tax declaration forms.

ii) Demand of sales tax on account of non-deduction of various 2,017,843 2,017,843 allowances and consequent enhancement of Gross turnover.

iii) Demand of sales tax on method of valuation of Goods. 1,221,669 1,221,669

iv) Demand for Denial of Input Credit Nil 2,425,800

v) Demand of income Tax due to disallowance of certain business 74,778,129 73,714,229 expenses & incentives by the Assessing Officer.

vi) Demand of excise duty on CVD credit for imported components of Nil 5,245,045 railway bearings.

vii) Denial of Cenvat credit of service tax on outward transportation of 1,441,114 1,441,114 goods beyond the place of removal

viii) Demand of Service tax consequent to change in service classification 18,027,789 Nil A. Other Claims against the Company not acknowledged as debts

i) Demand towards ESI contribution on employees at Kolkata office of 2,001,562 613,737 the Company. The Company has contested on the applicability of ESI for such employees and the issue is pending before the Assistant Regional Director, ESI Corporation, Kolkata.

ii) Demands arising out of suits filed by Shareholders on account of 508,351 508,351 short / non refund of Application Money for which shares have not been allotted and / or non-receipt of Share Certificates etc. Company's appeals against these issues are pending before relevant District Forums / State Commission / Civil Courts.

iii) Claims for recovery arising out of suit filed by a Contractor before the Calcutta High Court. 5,799,702 5,799,702

Based on discussions with the solicitors / favorable decisions in similar cases / legal opinions taken by the Company, the management believes that the Company has a good chance of success in above-mentioned cases (both under (A) & (B) categories) and hence, no provision there against is considered necessary.

B) ESTIMATED AMOUNT OF CONTRACTS REMAINING TO BE EXECUTED 12,401,963 35,684,755 ON CAPITAL ACCOUNT AND NOT PROVIDED FOR (NET OF ADVANCES PAID)

Note: As the liabilities for gratuity and leave encashment are provided on an actuarial basis for company as a whole, the amounts pertaining to the directors are not included above.

C) The company carries a liability of Rs.136,394,921 (Rs.84,359,586) being provision towards custom duty on imports for various years. The company has made these provisions based on most recent assessments. Further, the management is of the view that this liability shall be payable only at the time of final assessment. Pending such final assessment, the company has also deposited Rs.90,646,461 (Rs. 54,342,319) with customs authorities. The net liability is included in other liabilities in Schedule 10.

D) i) No Equity shares have been allotted during 15 months ended 31st March, 2012 out of 15,150 shares of Rs. 10/- each kept in abeyance as at 31st March, 1998.

ii) Out of the total shares issued, 50,999,988 fully paid-up Equity shares of Rs. 10/- each were held by Timken (Mauritius) Limited till 25th March 2012. On 26th March 2012, such shares were transferred to Timken Singapore PTE Limited. Consequent thereto, Timken Singapore PTE Limited is the Holding Company as at 31st March 2012.

iii) Calls in arrears of Rs.122,500 (Rs.139,500) have been computed on the basis of information certified by the Registrar & Share Transfer Agent of the Company.

E) Excise Duty and Cess on Stock represents differential excise duty and cess thereon paid/provided on opening and closing stock of Finished goods.

F) Disclosures as per Revised Accounting Standard -15 Gratuity and other post-employment benefit plans:

The Company has a defined benefit gratuity plan (funded). Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service.

The Company also has a Death Benefit Scheme (unfunded) for its employees where the immediate beneficiaries are entitled to a monthly fixed sum till the date of superannuation, for death in harness.

The Company has a separate Provident Fund Trust (funded) whereby, all the employees are entitled to benefits as per Provident Fund Act / Trust Deed. Any shortfall for the T rust is borne by the Company, hence the same is treated as a defined benefit scheme. The following tables summarise the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the respective plans.

G) Segment Information Business Segment:

The Company has reviewed the disclosure of business segment wise information and is of the view that it manufactures bearings and related components which is a single business segment in accordance with AS-17, Segment Reporting. Accordingly, no separate business segment information is furnished herewith.

Geographical Segments:

The Geographical segments have been identified on the basis of the location of the major customers of the Company.

H) Excise duty expense (net of recovery) represents duty paid/provided for stocks written off, burnt stock, free samples etc.

aa) Prior period expenses include Rs.Nil (Rs.16,029,050) towards gratuity on account of change in the estimate of one of the actuarial assumptions used in past actuarial valuations.

ad) Previous year's figures (including those in brackets) have been regrouped / rearranged, wherever necessary to correspond to current period's classifications. Further, due to change of the accounting year by the Company, current period's figures being for 15 months are not comparable with the previous year's figures of 12 months.


Dec 31, 2010

As at As at December 31, 2010 December 31, 2009

i) CONTINGENT LIABILITIES NOT PROVIDED FOR Rupees Rupees

A. Demands raised by Sales Tax/Income Tax/Excise authorities

i) Demand of sales tax for non- availability/non-consideration 225,219,371 224,268,896 by Assessing Officer of various sales tax declaration forms.

ii) Demand of sales tax on account of non-deduction of various allowances 2,017,843 5,856,165 and consequent enhancement of Gross turnover.

iii) Demand of sales tax on method of valuation of Goods. 1,221,668 1,221,668

iv) Demand for Denial of Input Credit 2,425,800 Nil

v) Demand of Additional Income Tax due to non-consideration of TDS Nil 1,476,649 Certificates by the Assessing Officer.

vi) Demand of Income Tax due to disallowance of certain business 73,714,229 85,254,317 expenses & incentives by the Assessing Officer.

vii) Demand of excise duty on CVD credit for imported components of 5,245,045 5,245,045 railway bearings.

viii) Denial of Cenvat credit of service tax on outward transportation of 1,441,114 Nil goods beyond the place of removal

p) i) No Equity shares have been allotted during the year ended 31st December, 2010 out of 15,150 shares of Rs. 10/- each kept in abeyance as at 31st March, 1998.

ii) Out of the total shares issued, 50,999,988 fully paid-up Equity shares of Rs. 10/- each were held by The Timken Company, USA till 4th October 2010. On 5th October 2010, such shares were transferred to Timken (Mauritius) Limited. Consequent thereto, Timken (Mauritius) Limited is the Holding Company as at 31st December 2010.

iii) Calls in arrears of Rs.139,500 (Rs.141,000) have been computed on the basis of information certified by the Registrar & Share Transfer Agent of the Company.

q) Excise Duty and Cess on Stock represents differential excise duty and cess paid/provided on opening and closing stock of Finished goods.

v) Disclosures as per Revised Accounting Standard -15 Gratuity and other post-employment benefit plans:

The Company has a defined benefit gratuity plan (funded). Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service.

The Company also has a Death Benefit Scheme (unfunded) for its employees where the immediate beneficiaries are entitled to a monthly fixed sum till the date of superannuation, for death in harness.

The Company has a separate Provident Fund Trust (funded) whereby, all the employees are entitled to benefits as per Provident Fund Act / Trust Deed. Any shortfall for the Trust is borne by the Company, hence the same is treated as a defined benefit scheme.

The following tables summarise the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the respective plans.

w) Segment Information

Business Segment:

The Company has reviewed the disclosure of business segmentwise information and is of the view that it manufactures bearings and related components which is a single business segment in accordance with AS-17, segment reporting. Accordingly, no separate business segment information is furnished herewith.

z) Excise duty expense (net of recovery) represents duty paid/provided for stocks written off, burnt stock, free samples etc.

aa) Prior period expenses include Rs. 16,029,050 (Rs. Nil) towards gratuity on account of change in the estimate of one of the actuarial assumptions used in past actuarial valuations and Rs. Nil (Rs. 219,840) towards service tax charge for earlier year.

ac) Previous years figures (including those in brackets) have been regrouped / rearranged, wherever necessary.


Dec 31, 2009

I) Segment Information

Business Segment:

The Company reviewed the disclosure of business segmentwise information and is of the view that it manufactures bearings and related components which is single business segment in accordance with AS-17. Accordingly, no separate business segment information is furnished herewith.

ii) Disclosures as per Revised Accounting Standard -15 Gratuity and other post-employment benefit plans:

The Company has a defined benefit gratuity plan (funded). Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service.

The Company also has a Death Benefit Scheme (unfunded) for its employees where the immediate beneficiaries are entitled to a monthly fixed sum till the date of superannuation, for death in harness.

The Company has a separate Provident Fund Trust (funded) whereby, all the employees are entitled to benefits as per Provident Fund Act / Trust Deed. Any shortfall for the Trust is borne by the Company, hence the same is treated as a defined benefit scheme.

The following tables summarise the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the respective plans.

iii) Excise duty expense (net of recovery) represents duty paid/provided for stocks written off, burnt stock, free samples etc.

aa) Prior period expense of Rs. 219,840 pertains to Service tax charge for earlier year.

ab) Previous Wage Agreement with Associates’ Union has expired in April 2008 and the management is in the final stage of negotiation for a new wage agreement, pending finalisation of which the liabilities for differential wages, as per management’s estimate has been provided and included in ‘Salaries, Wages and Bonus’ under item 3(a) of Schedule 15 without any separate allocation of such provision towards Company’s contribution to Provident and other funds. Adjustment if any, required consequent on finalisation of such negotiation, will be provided in the year of conclusion thereof.

ac) Previous year’s figures (including those in brackets) have been regrouped / rearranged, wherever necessary.

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