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Notes to Accounts of TVS Motor Company Ltd.

Mar 31, 2022

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the end of the reporting period. The mutual funds are valued using the closing NAV.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, preference shares and other non current investments included in level 3.

There are no transfers among the three levels.

The company''s policy is to recognise transfers in and transfers out of fair value hierarchy levels as at the end of the reporting period.

(ii) Valuation technique used to determine fair value (Level 2)

Specific valuation techniques used to value financial instruments include:

- the use of quoted market prices or dealer quotes for similar instruments

- the fair value of interest rate swaps is calculated as the present value of estimated cash flows based on observable yield curves.

- the fair value of forward exchange contract and principal only swap is determined using forward exchange rate at the balance sheet date.

- the fair value of the remaining financial instruments is determined using discounted cash flow analysis.

(v) Valuation processes

Discount rates are determined using a capital asset pricing model to calculate a pretax rate that reflects current market assessments of the time value of money and the risk specific to the asset. Earnings growth factor of preference shares are based on cash flow projections of future earnings of the Company and unlisted equity securities are estimated based on market information for similar types of companies. Risk adjustments have been derived based on the market risk premium adjusted for companies relevant financial data.

The carrying amounts of trade receivables, trade payables, cash and cash equivalents and other current financial assets and liabilities are considered to be the same as their fair values, due to their short-term nature.

The fair values for preference shares and other debt instruments were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs, including counterparty credit risk.

The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including own credit risk.

For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time in INR and have an average maturity ranging 30 to 180 days.

(ii) Maturities of financial liabilities

The tables below analyse the Company''s financial liabilities into relevant maturity groupings based on their contractual maturities for:

a) all non-derivative financial liabilities, and

b) net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.

Rupees in crores

31 CAPITAL MANAGEMENT (a) Risk management

The Company''s objectives when managing capital are to

â¢ safeguard our ability to continue as a going concern, so that we can continue to provide returns for shareholders and benefits for other stakeholders, and

â¢ maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the Company monitors capital on the basis of the following gearing ratio: Net debt (total borrowings net of cash and cash equivalents) divided by Total ''equity'' (as shown in the balance sheet). The company''s strategy is to maintain an optimum gearing ratio. The gearing ratios were as follows:

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

(ii) Risk exposure

Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:

Asset volatility: The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit.

Changes in bond: A decrease in bond yields will increase plan liabilities, although this will be partially offset by an yield increase in the value of the plans'' bond holdings.

Inflation risks: In the pension plans, the pensions in payment are not linked to inflation, so this is a less material risk.

Life expectancy: The pension obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans'' liabilities. This is particularly significant where inflationary increases result in higher sensitivity to changes in life expectancy.

(iii) Defined contribution plans:

The Company''s contribution to defined contribution plan i.e., provident fund of $ 28.63 crores (previous year $ 17.91 crores) has been recognised in the Statement of Profit and Loss.

41 LEASES AS A LESSEE

The Company has taken land, warehouses and sales offices across the country on lease for lease period ranging from 6-99 years.

Company also has other assets on leases, the lease term here ranges for about 5 years.

Wherever the lease includes extension option and it is certain, the same is considered for computing the lease term. In rest of the

cases, the term is limited to initial lease period. Lease term includes non-cancellable period and expected lease period.

Payment made towards short term leases during the year is $ 37.82 Cr (Previous year: $ 32.98 Cr)

Payment made towards Low value during the year is Nil (Previous year: Nil)

Payment relating to leases are disclosed in Cash flow statement

Income from sub-leasing of Right of use asset $ 7.08 Cr (Previous year: $ 3.88 Cr)

42 ADDITIONAL REGULATORY DISCLOSURES AS PER SCHEDULE III OF COMPANIES ACT, 2013

(i) The Title deeds of the immovable properties (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee) are held in the name of the Company.

(ii) The Company does not have any investment property.

(iii) As per the Company''s accounting policy, Property, Plant and Equipment (including Right of Use Assets) and intangible assets are carried at historical cost (less accumulated depreciation & impairment, if any), hence the revaluation related disclosures required as per Additional Regulatory Information of Schedule III (revised) to the Companies Act, is not applicable.

(iv) The Company has not granted Loans or Advances in the nature of loan to any promoters, Directors, KMPs and the related parties (As per Companies Act, 2013) , which are repayable on demand or without specifying any terms or period of repayments.

(v) No proceedings have been initiated or pending against the Company for holding any Benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and the rules made thereunder.

(vi) The Company has sanctioned facilities from banks on the basis of security of current assets. The periodic returns filed by the Company with such banks are in agreement with the books of accounts of the Company.

(vii) The Company has adhered to debt repayment and interest service obligations on time. Wilful defaulter related disclosures required as per Additional Regulatory Information of Schedule III (revised) to the Companies Act, is not applicable.

(viii) There are no transactions with the Companies whose name are struck off under Section 248 of The Companies Act, 2013 or Section 560 of the Companies Act, 1956 during the year ended 31^st March 2022.

(ix) All applicable cases where registration of charges or satisfaction is required to be filed with Registrar of Companies have been filed. No registration or satisfaction is pending at the year ended 31^st March 2022.

(x) The Company has complied with the number of layers prescribed under clause (87) of Section 2 of the Companies Act, 2013 read with Companies (Restriction on number of Layers) Rules, 2017.

(xi) No scheme of arrangement has been approved by the competent authority in terms of Section 230 to 237 of the Companies Act, 2013.

(xii) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (ultimate beneficiaries) or

(b) provide any guarantee, security or the like to or on behalf of the ultimate beneficiary

(xiii) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries

(xiv) The Company has not operated in any crypto currency or Virtual Currency transactions

(xv) During the year the Company has not disclosed or surrendered, any income other than the income recoginsed in the books of accounts in the tax assessments under Income Tax Act, 1961.

46 BORROWING COST CAPITALISED

Borrowing cost capitalised during the year $ nil (Last year $ 12.26 crores)

The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the interest rate of 3 Month USD LIBOR plus Margin.

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

Mar 31, 2021

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, preference shares and other non current investments included in level 3.

There are no transfers among the three levels.

The company''s policy is to recognise transfers in and transfers out of fair value hierarchy levels as at the end of the reporting period.

(ii) Valuation technique used to determine fair value (Level 2)

Specific valuation techniques used to value financial instruments include:

- the use of quoted market prices or dealer quotes for similar instruments

- the fair value of interest rate swaps is calculated as the present value of estimated cash flows based on observable yield curves.

- the fair value of forward exchange contract and principal only swap is determined using forward exchange rate at the balance sheet date.

- the fair value of the remaining financial instruments is determined using discounted cash flow analysis.

(v) Valuation processes

(ii) Risk exposure

Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:

Asset volatility: The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit.

Changes in bond: A decrease in bond yields will increase plan liabilities, although this will be partially offset by an yield increase in the value of the plans'' bond holdings.

Inflation risks: In the pension plans, the pensions in payment are not linked to inflation, so this is a less material risk.

(iii) Defined contribution plans:

The Company''s contribution to defined contribution plan i.e., provident fund of $ 17.91 crores (previous year $ 16.83 crores) has been recognised in the Statement of Profit and Loss.

BORROWING COST CAPITALISED

Borrowing cost capitalised during the year $ 12.26 crores (Last year $ 12.38 crores)

The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the interest rate of 3 Month USD LIBOR plus Margin.

LABOUR CODE - TRANSITION RELATED

The Code on Social Security, 2020 which received the President''s assent on 28^th September 2020 subsumes nine laws relating to Social security, retirement and employee benefits, including the Provident Fund and Gratuity. The effective date of the Code and rules thereunder are yet to be notified. The impact of the changes, if any, will be assessed and recognised post notification of the relevant provisions.

MATERIAL CHANGES AND COMMITMENTS

Consequent to the outbreak of the CoVID-19 pandemic, the Indian government announced a lockdown in March 2020. Subsequently, the national lockdown was lifted by the government. Due to second wave of CoVID-19, regional lockdowns continue to be implemented in areas where significant number of CoVID-19 cases exists.

Based on assessment of the impact of CoVID-19 on the operations of the Company and ongoing discussions with customers, vendors and service providers, the Company is confident of obtaining regular supply of raw materials and components, resuming supply chain logistics and serving customers.

The Company has considered the possible effects of CoVID-19 on the carrying amounts of Property, Plant and Equipment, Investments, Inventories, Trade Receivable and Other Current Assets. In developing the assumptions relating to the possible future uncertainties in the economic conditions because of this pandemic, the Company, as at the date of approval of the financial results, has used external and internal sources of information / Indicators to estimate the future performance of the Company. Based on current estimates the Company expects the carrying amount of these assets to be recovered. The impact of the second wave of CoVID-19 on the Company''s financial results may differ from that estimated as at the date of approval of these results.

Mar 31, 2019

(c)(i) Rights and preferences attached to equity share:

Every shareholder is entitled to such rights as to attend and vote at the meeting of the shareholders, to receive dividends distributed and also has a right in the residual interest of the assets of the company. Every shareholder is also entitled to right of inspection of documents as provided in the Companies Act, 2013.

(ii) There are no restrictions attached to equity shares.

Details of securities created:

(i) ECB loan from Bank II - Exclusive charge over assets procured out of proceeds of the loan, charge creation is in the process.

(ii) FCNRB Loan from Bank - Exclusive charge over assets procured out of proceeds of the loan.

(iii) Soft loan - State owned corporation viz., SIPCOT - First charge on the specific plant and equipment and also secured by equitable mortgage created by way of deposit of title deeds of land.

** Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information received by the management. The entire closing balance represents the principal amount payable to these enterprises. There are no interests due or outstanding on the same.

# Balances include balances due to related parties [Refer Note 31(c)(ii)].

(i) Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.

There are no transfers among the three levels.

The company''s policy is to recognise transfers in and transfers out of fair value hierarchy levels as at the end of the reporting period.

(ii) Valuation technique used to determine fair value (Level 2)

Specific valuation techniques used to value financial instruments include:

- the use of quoted market prices or dealer quotes for similar instruments

- the fair value of interest rate swaps is calculated as the present value of estimated cash flows based on observable yield curves.

- the fair value of forward exchange contract and principal only swap is determined using forward exchange rate at the balance sheet date.

- the fair value of the remaining financial instruments is determined using discounted cash flow analysis.

(v) Valuation processes

For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

1. FINANCE RISK MANAGEMENT

The Company''s activities expose it to market risk, liquidity risk and credit risk. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the impact of hedge accounting in the financial statements.

(ii) Maturities of financial liabilities

The tables below analyse the Company''s financial liabilities into relevant maturity groupings based on their contractual maturities for:

a) all non-derivative financial liabilities, and

b) net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.

Sensitivity

The sensitivity of profit or loss to changes in the exchange rates arises mainly from foreign currency denominated financial instruments and the impact on other components of equity arises from foreign forward exchange contracts designated as cash flow hedges.

(ii) Interest rate risk

Domestic INR borrowings are based on fixed rate of interest. Normally, for short term borrowings the marginal cost of lending rate of the bank is followed. Whenever, Company resorts to short term borrowing through Commercial Paper the rate of interest is fixed in advance. In respect of foreign currency borrowings for longer period the interest rates are covered through interest rate swaps (IRS).

(iii) Price Risk

The company''s exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet either as fair value through OCI or at fair value through profit or loss. To manage its price risk from investments in equity securities, the Company diversifies its portfolio. The impact of the changes in price risk is not material.

(D) Impact of hedging activities

(i) Disclosure of effects of hedge accounting on financial position

(a) Disclosure of effects of hedge accounting on financial position as at 31-03-2019

2 CAPITAL MANAGEMENT

(a) Risk management

The Company''s objectives when managing capital are to

- safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

- maintain an optimal capital structure to reduce the cost of capital.

Consistent with others in the industry, the Company monitors capital on the basis of the following gearing ratio:

The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The Company has created an Employees'' Group Gratuity Fund which has taken a Group Gratuity Assurance Scheme with the Life Insurance Corporation of India. Company''s contributions are based on actuarial valuation arrived at the end of each year and charged to Statement of Profit and Loss.

Assumptions regarding future mortality for pension are set based on actuarial advice in accordance with published statistics and experience. These assumptions translate into an average life expectancy in years for a pensioner retiring at age 58.

(ii) Risk exposure

Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:

Asset volatility: The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Most of the plan asset investments is in fixed income securities with high grades and in government securities. These are subject to interest rate risk and the fund manages interest rate risk with derivatives to minimise risk to an acceptable level. A portion of the funds are invested in equity securities and in alternative investments which have low correlation with equity securities. The equity securities are expected to earn a return in excess of the discount rate and contribute to the plan deficit. The company has a risk management strategy where the aggregate amount of risk exposure on a portfolio level is maintained at a fixed range. Any deviations from the range are corrected by rebalancing the portfolio. The Company intends to maintain the above investment mix in the continuing years.

Changes in bond: A decrease in bond yields will increase plan liabilities, although this will be partially offset by an yield increase in the value of the plans'' bond holdings.

Inflation risks: In the pension plans, the pensions in payment are not linked to inflation, so this is a less material risk.

(iii) Defined contribution plans:

The Company''s contribution to defined contribution plan i.e., provident fund of Rs.15.06 crores (previous year Rs. 14.25 crores) has been recognised in the Statement of Profit and Loss.

On 28^th February 2019 Supreme Court (SC) gave a judgement on components / allowances paid to employees that need to be taken into account while computing an employer''s contribution of provident fund under the EPF Act. There are numerous interpretative issues relating to the components needs to be considered for the above calculation. The Company is in the process of evaluating the method of computation of its PF contribution and would record any further effect in its financial statements, on receiving further clarification on the subject.

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

A Disaggregated revenue:

Revenue from contracts with customers are disaggregated into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The Company identifies the product lines, amongst others to indicate the factors as mentioned above. The details of revenue from contracts with customers on the basis of various product lines are as under :

B The operations of the Company relate to only one segment viz., automotive vehicle and parts. Thus, the information on the relationship between disaggregated revenue under Ind AS 115 and for reportable segment under Ind AS 108 is not required.

C Reconciliation of contracts with customers:

Payment is received in advance towards contracts entered with customers, and is recognised as a contract liability. As and when the performance obligation is met, the same is recognized as revenue.

D Transaction price allocated to the remaining performance obligations:

The Company''s contracts with customers are short term (i.e., the performance obligations are expected to be met within one year or less). Therefore, taking the practical expedient, the details on transaction price allocated to the remaining performance obligations are not disclosed.

E Reconciliation of revenue with contract price:

F Impact of following earlier standard against Ind AS 115

On adoption of Ind AS 115 as compared to Ind AS 18, "Revenue from operations" is reduced by Rs.410.36 crores due to freight charges being netted off against revenue, which leads to an equivalent reduction in "Other expenses", during the year.

4. CORPORATE SOCIAL RESPONSIBILITY

Expenditure incurred on Corporate Social Responsibility (CSR) activities:

(a) Gross amount required to be spent during the year is Rs.13.09 crores (last year Rs.10.70 crores)

5. BORROWING COST CAPITALISED

Borrowing cost capitalised during the year Rs. 5.86 crores (last year Nil).

6. NON-ADJUSTING EVENTS AFTER BALANCE SHEET DATE

Pursuant to NCLT''s Order dated 16.4.2019 TVS Motor Services Limited (TVS MS) will be transferring its investment in TVS Credit Services Limited (TVS CS) equity shares to the Non-cumulative Redeemable Preference Shares holder viz., the Company towards redemption. After such transfer of TVS CS equity shares, the Company will directly hold 85.3% of equity shares in TVS CS and consequently, the Preference Shares held in TVS MS shall stand cancelled.

7. PREVIOUS YEAR''S FIGURES HAVE BEEN REGROUPED WHEREVER NECESSARY TO CONFORM TO THE CURRENT YEAR''S CLASSIFICATION.

Mar 31, 2018

1. FINANCIAL RISK MANAGEMENT

The Companyâs activities expose it to market risk, liquidity risk and credit risk. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the impact of hedge accounting in the financial statements.

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

(ii) Risk exposure

Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:

Asset volatility: The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets under perform this yield, this will create a deficit. Most of the plan asset investments is in fixed income securities with high grades and in government securities. These are subject to interest rate risk and the fund manages interest rate risk with derivatives to minimise risk to an acceptable level. A portion of the funds are invested in equity securities and in alternative investments which have low correlation with equity securities. The equity securities are expected to earn a return in excess of the discount rate and contribute to the plan deficit. The company has a risk management strategy where the aggregate amount of risk exposure on a portfolio level is maintained at a fixed range. Any deviations from the range are corrected by rebalancing the portfolio. The company intends to maintain the above investment mix in the continuing years.

Changes in bond: A decrease in bond yields will increase plan liabilities, although this will be partially offset by an yield increase in the value of the plansâ bond holdings.

Inflation risks: In the pension plans, the pensions in payment are not linked to inflation, so this is a less material risk.

Life expectancy: The pension obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plansâ liabilities. This is particularly significant where inflationary increases result in higher sensitivity to changes in life expectancy. The Company ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the employee benefit plans. Within this framework, The Companyâs ALM objective is to match assets to the pension obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due and in the appropriate currency. The Company actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the employee benefit obligations. The Company has not changed the processes used to manage its risks from previous periods. Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. A large portion of assets in 2018 consists of Government and Corporate bonds, although the Company invests in equities, cash and mutual funds. The Company believes that equities offer the best returns over the long term with an acceptable level of risk.

(iii) Defined contribution plans:

The Companyâs contribution to defined contribution plan viz., provident fund, of Rs. 14.25 crores (previous year Rs.11.47 crores) has been recognized in the Statement of Profit and Loss.

(a) (i) Related parties and their relationship where control exists

Holding company:

Sundaram-Clayton Limited, Chennai

Ultimate holding company:

T V Sundram Iyengar & Sons Private Limited, Madurai

Subsidiaries:

Sundaram Auto Components Limited, Chennai

TVS Housing Limited, Chennai

TVS Motor Services Limited, Chennai

TVS Credit Services Limited, Chennai

Harita Collection Services Private Limited, Chennai

Harita ARC Services Private Limited, Chennai

TVS Micro Finance Private Limited, Chennai

TVS Commodity Financial Solutions Private Limited, Chennai

TVS Two Wheeler Mall Private Limited, Chennai

TVS Housing Finance Private Limited, Chennai

TVS Motor (Singapore) Pte. Limited, Singapore

TVS Motor Company (Europe) B.V, Amsterdam

PT. TVS Motor Company Indonesia, Jakarta

Sundaram Holding USA Inc, USA

Green Hills Land Holding LLC, USA

Component Equipment Leasing LLC, USA

Sundaram-Clayton USA LLC, USA (Formerly known as Workspace Project LLC) Premier Land Holding LLC, USA

Associate company:

Emerald Haven Realty Limited, Chennai (Formerly known as Green Earth Homes Limited)

(ii) Other related parties and their relationship where transaction exists

Fellow subsidiaries:

TVS Electronics Limited, Chennai Southern Roadways Limited, Madurai Sundaram Industries Private Limited, Madurai Lucas-TVS Limited, Chennai Lucas Indian Service Limited, Chennai TVS Auto Assist (India) Limited, Chennai TVS Training and Services Limited, Chennai

Associate I Joint venture of holding I subsidiary I fellow subsidiary company:

Brakes India Private Limited, Chennai TVS Srichakra Limited, Madurai Wheels India Limited, Chennai Sundram Fasteners Limited, Chennai India Nippon Electricals Limited, Chennai Sundaram Brake Linings Limited, Chennai TVS Auto Bangladesh Limited, Dhaka TVS Lanka Private Limited, Colombo

TVS Logistics Services Limited, Chennai Harita Techserv Limited, Chennai Subsidiaries of associate I joint venture:

Upasana Engineering Limited, Chennai TVS Dynamic Global Freight Services Limited, Chennai TVS Commutation Solutions Limited, Chennai Enterprises in which directors are interested:

TVS Agro Products Private Limited (Formerly known as TVS Organics Private Limited) Designo Lifestyle Solutions Private Limited Dua Associates

Dua Consulting Private Limited McCann-Erickson (India) Private Limited Key Management personnel

Mr Venu Srinivasan, Chairman & Managing Director Mr Sudarshan Venu, Joint Managing Director

Relative(s) of the Key Management personnel Dr. Lakshmi Venu, Director Enterprise over which key management personnel and their relative have significant influence : Harita-NTI Limited, Chennai

2. CORPORATE SOCIAL RESPONSIBILITY

Expenditure incurred on Corporate Social Responsibility (CSR) activities:

(a) Gross amount required to be spent during the year is Rs.10.70 crores (last year Rs.9.06 crores)

(b) Amount spent during the year:

Mar 31, 2017

1 FINANCE RISK MANAGEMENT

The companyâs activities expose it to market risk, liquidity risk and credit risk. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the impact of hedge accounting in the financial statements

2 CAPITAL MANAGEMENT

(a) Risk management

The companyâs objectives when managing capital are to

- safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

- maintain an optimal capital structure to reduce the cost of capital.

Consistent with others in the industry, the Company monitors capital on the basis of the following gearing ratio:

Net debt (total borrowings net of cash and cash equivalents) divided by Total âequityâ (as shown in the balance sheet)

The companyâs strategy is to maintain an optimum gearing ratio. The gearing ratios were as follows:

The company also monitors Interest coverage ratio :

Companyâs earnings before interest and taxes (EBIT) divided by Interest

The Companyâs strategy is to maintain a optimum interest coverage ratio The Interest coverage ratio were as follows:

3 TRANSITION TO IND AS

These are the Companyâs first financial statements prepared in accordance with Ind AS.

The accounting policies set out in Note No. 1 have been applied in preparing the financial statements for the year ended 31-03-2017, the comparative information presented in these financial statements for the year ended 31-03- 2016 and in the preparation of opening Ind AS balance sheet as at 01-04-2015 (The Companyâs date of transition). In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP).

An explanation of how the transition from previous GAAP to Ind AS has affected the Companyâs financial position and financial performance is set out in the following tables and notes.

A. Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

A.1 Ind AS optional exemptions

A.1.1 Deemed cost - Property, Plant and Equipment and Intangible assets

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

Accordingly, the company has elected to measure all of its property, plant and equipment and intangible assets at previous GAAP carrying value.

A.1.2 Deemed cost - Equity Investments

Ind AS 101 permits first time adopter to elect to measure the investments in subsidiaries, associates and joint venture at cost determined in accordance with Ind AS 27 or deemed cost. Deemed cost for the purpose of transition shall mean fair value of the investment at the entityâs date of transition to Ind AS or previous GAAP carrying amount at that date (previous GAAP cost). A first-time adopter may choose either fair value or Previous GAAP carrying amount in each subsidiary, joint venture or associate that it elects to measure using a deemed cost.

Accordingly, the company has elected to measure equity investments in overseas subsidiaries at fair value and investments in domestic subsidiaries and associates at previous GAAP carrying cost.

A.1.3 Designation of previously recognised financial instruments

Ind AS 101 allows an entity to designate investments in equity instruments at FVOCI on the basis of the facts and circumstances at the date of transition to Ind AS. The company has elected to apply this exemption for its investment in equity investments.

A.1.4 Business Combinations

Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date.

The Company elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date. Business combinations occurring prior to the transition date have not been restated.

A.2 Ind AS mandatory exceptions A.2.1 Estimates

An entityâs estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error. Ind AS estimates as at 01-04-2015 are consistent with the estimates as at the same date made in conformity with previous GAAP. The company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:

- Investment in equity instruments carried at FVOCI;

- Impairment of financial assets based on expected credit loss model.

A.2.2 Classification and measurement of financial assets

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

A.2.3 Government Loans

A first-time adopter has the option to apply the requirements in Ind AS 109 (Financial Instruments) and Ind AS 20 (Accounting for Government Grants and Disclosure of Government Assistance) prospectively to government loans existing at the date of transition to Ind AS and shall not recognise the corresponding benefit of the government loan at a below-market rate of interest as a government grant. Accordingly the Company has elected to apply the above option to Sales tax deferral loans which continue to be valued at previous GAAP value.

A.2.4 Hedge Accounting

The Company had designated various hedging relationships as cash flow hedges under the previous GAAP On the date of transition to Ind AS entity had assessed that all the designated hedging relationship qualifies for hedge accounting as per Ind AS 109. Consequently, the Company continues to apply hedge accounting on and after the date of transition to Ind AS.

B. Notes to first-time adoption

Remeasurements of post-employment benefit obligations

Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income. Under the previous GAAP, these remeasurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended 31-03-2016 increased by Rs.11.84 crores. There is no impact on the total equity as at 31-03-2016.

Assumptions regarding future mortality for pension and medical benefits are set based on actuarial advice in accordance with published statistics and experience. These assumptions translate into an average life expectancy in years for a pensioner retiring at age 58.

(i) Sensitivity analysis

The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:

(ii) Risk exposure

Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:

Asset volatility: The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets under perform this yield, this will create a deficit. Most of the plan asset investments is in fixed income securities with high grades and in government securities. These are subject to interest rate risk and the fund manages interest rate risk with derivatives to minimise risk to an acceptable level. A portion of the funds are invested in equity securities and in alternative investments which have low correlation with equity securities. The equity securities are expected to earn a return in excess of the discount rate and contribute to the plan deficit. The Company has a risk management strategy where the aggregate amount of risk exposure on a portfolio level is maintained at a fixed range. Any deviations from the range are corrected by rebalancing the portfolio. The Company intends to maintain the above investment mix in the continuing years.

Changes in bond: A decrease in bond yields will increase plan liabilities, although this will be partially offset by an yield increase in the value of the plansâ bond holdings.

Inflation risks: In the pension plans, the pensions in payment are not linked to inflation, so this is a less material risk.

Life expectancy: The pension obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plansâ liabilities. This is particularly significant where inflationary increases result in higher sensitivity to changes in life expectancy. The Company ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the employee benefit plans. Within this framework, the Companyâs ALM objective is to match assets to the pension obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due and in the appropriate currency. The Company actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the employee benefit obligations. The Company has not changed the processes used to manage its risks from previous periods. Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. A large portion of assets in 2017 consists of Government and Corporate bonds, although the

Company also invests in equities, cash and mutual funds. The Company believes that equities offer the best returns over the long term with an acceptable level of risk.

(iii) Defined contribution plans:

The Companyâs contribution to defined contribution plan i.e., provident fund of Rs. 11.47 crores (previous year Rs.10.13 crores) has been recognised in the Statement of Profit and Loss.

4 CORPORATE SOCIAL RESPONSIBILITY

Expenditure incurred on Corporate Social Responsibility (CSR) activities:

(a) Gross amount required to be spent during the year is Rs.9.06 crores (last year Rs.7.15 crores)

(b) Amount spent during the year:

5 Previous yearâs figures have been regrouped wherever necessary to conform to the current yearâs classification.

Mar 31, 2015

1 (a) Defined contribution plans:

The Company''s contribution to defined contribution plan i.e., provident fund of Rs. 10.51 crores (last year Rs.10.76 crores) has been recognised in the Statement of Profit and Loss.

2 The Company operates in only one segment viz., automotive vehicles.

3 (a) Related parties and their relationship for the financial year 2014-15:

Notes:

(a) The above loans are subject to repayment schedule as agreed between the Company and its loanee. The loans are repayable within seven years.

(b) Investment by the loanee in the shares of the parent company and subsidiary company when the Company has made a loan or advance in the nature of loan - Nil.

(c) The subsidiary companies listed above also fall under the category of company in which Directors of the Company are interested.

4 During the year ended 31st March 2015, in accordance with Part A of Schedule II to the Companies Act, 2013, the management, based on Chartered Engineeer''s technical evaluation, has reassessed the remaining useful life of tangible fixed assets with effect from 1st April 2014. As a result of the same, depreciation for the year is higher by Rs.6.02 crores. For tangible fixed assets that had completed useful life as at 1st April 2014, the carrying amount of Rs.6.82 crores has been adjusted to reserves.

5 Expenditure incurred on Corporate Social Responsibility (CSR) activities is Rs.6.40 crores.

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

Mar 31, 2012

(a) (i) Rights and preferences attached to equity share:

Every shareholder is entitled to such rights as to attend the meeting of the shareholders, to receive dividends distributed and also has a right in the residual interest of the assets of the Company. Every shareholder is also entitled to right of inspection of documents as provided in the Companies Act, 1956.

(ii) There are no restrictions attached to equity shares.

Details of securities created:

(i) External Commercial Borrowings secured by exclusive charge by way of hypothecation of specific movable properties including movable plant and equipment.

(ii) Term loans

(a) First and exclusive charge on specific plant and equipment.

(b) Charge on pari-passu basis on the movable plant and equipment, spares, tools and accessories and other movables, both present and future situated in all plants, with the existing term loan lenders.

(iii) Soft loan - State owned corporation viz., SIPCOT

First charge on the specific plant and equipment and also secured by equitable mortgage created by way of deposit of title deeds of lands.

1 CONTINGENT LIABILITY NOT PROVIDED FOR:

(a) On counter guarantee given to banks 22.28 14.44

(b) On letters of credit 97.21 94.50

(c) On guarantee to Housing Development Finance Corporation Limited, Mumbai, on loans granted to employees of the Company 1.25 1.25

(d) On bills discounted with banks 31.08 13.62

(e) Capital commitment towards capital expenditure 58.92 58.84

(f) On obligation arising out of agreements facilitating credit to a company 41.66 41.66 (g) On obligation arising out of agreements facilitating credit to subsidiary company (PT.TVS Motor Company Indonesia, Jakarta) 53.88 53.88

(h) On import of capital goods under Export Promotion Capital Goods Scheme 19.63 14.64

Notes: (a) The above loans are subject to repayment schedule as agreed between the Company and its loanee.

The loans are repayable within seven years.

(b) All the above loans carry interest at agreed rates which are not less than the interest stipulated in section 372A of the Companies Act, 1956.

(c) Investment by the loanee in the shares of the parent company and subsidiary company when the Company has made a loan or advance in the nature of loan - Nil.

(d) The subsidiaries and associate companies listed above also fall under the category of company in which Directors of the Company are interested.

Mar 31, 2011

(i) Provisions

In respect of warranty obligations, provision is made in accordance with terms of sale of vehicles vide schedule XIV (c) to the Balance Sheet.

(ii) Contingent liabilities

The amount for which the Company is contingently liable is disclosed in note no. 11.

(iii) Contested liabilities are detailed in note no. 12. 2 Share capital

Authorised share capital increased to Rs.50 crores from Rs.25 crores on account of bonus equity shares issued on 10th September, 2010.

Sundaram-Clayton Limited, Chennai holds 4,20,00,000 (last year 2,10,00,000) Equity shares of Re.1/- each while its wholly owned subsidiary Anusha Investments Limited, Chennai holds 23,06,82,786 (last year 11,53,41,393) Equity shares of Re.1/- each. This aggregates to 57.40% (last year 57.40%) of the share capital of the Company.

3 (a) Amount of loan payable within one year:

(b) Details of securities created for Loans:

BANKS

(i) External Commercial Borrowings secured by exclusive charge by way of hypothecation of specific moveable properties including moveable plant and machinery located at Mysore Plant.

(ii) Rupee Term loans

(a) First and exclusive charge on specific plant and machineries located at Hosur plant.

(b) Charge on pari-passu basis on the movable plant and machinery, machinery spares, tools and accessories and other movables, both present and future situated in all plants, with the existing term loan lenders.

(iii) Cash credit facilities

First charge by way of hypothecation and / or pledge of current assets viz., stocks of raw materials, semi finished and finished goods, stores and spares not relating to plant and machinery, bills receivable,book debts and all other movable located in all plants.

OTHERS

(iv) Soft loan

First charge on the specific plant and machineries located at Hosur Plant and also secured by equitable mortgage created by way of deposit of title deeds of lands admeasuring 3.78 acres situated at Kothakondapalli, admeasuring 51.58 acres situated at Motham Agraharam, and admeasuring 11.98 acres situated at Mookandapalli - villages in Harita, Hosur, Krishnagiri district, in the State of Tamil Nadu.

4 Land

Title deed in respect of land acquired near Ahmedabad in Gujarat at a cost of Rs.0.01 crore is yet to be received from the registering authority.

During the year, 3 acres and 24 guntas of lands were converted from leasehold to freehold.

5 Miscellaneous expenditure not written off

(a) New product launch expenses carried forward from earlier years upto 31-03-2009 are charged off over 36 months. On and from the year ended 31-03-2010, new product launch expenses are charged off fully in the year of incurring such expenditure.

(b) Expenditure incurred in raising External Commercial Borrowings is being written off over the period of the loan.

Mar 31, 2010

1 Share capital

Sundaram-Clayton Limited, Chennai holds 2,10,00,000 (last year 2,10,00,000) equity shares of Re. 1/- each while its wholly owned subsidiary Anusha Investments Limited, Chennai holds 11,53,41,393 (last year 11,53,41,393) equity shares of Re. 1/- each. This aggregates to 57.40% (last year 57.40%) of the share capital of the Company.

2 Miscellaneous expenditure not written off

(a) New product launch expenses carried forward from earlier years is written off over 36 months. However, new product launch expenses incurred during this year are fully written off. Accounting Standard 26 is not applicable as it does not create any intangible asset or a resource.

(b) Expenditure incurred in raising external commercial borrowings is being written off over the period of the loan

As at/ As at/

Year ended Year ended

31-03-2010 31-03-2009

3 Contingent liability not provided for:

(a) On counter guarantee given to banks 0.46 0.72

(b) On letters of credit 77.32 34.63

(c) On guarantee to Housing Development Finance Corporation Limited, Mumbai, on loans granted to employees of the Company 1.25 1.25

(d) On bills discounted with banks 11.08 77.22

(e) Capital commitments towards Capital expenditure 5.01 5.87

(f) On obligation arising out of agreements facilitating credit to a company which was an associate company upto 03.03.2010. 16.66 41.50

(g) On obligation arising out of agreements facilitating credit to subsidiary company (PT. TVS Motor Company Indonesia) 53.88 60.88

4 Previous years figures have been regrouped wherever necessary to conform to the current years classification.

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