Home  »  Company  »  Va Tech Wabag Ltd.  »  Quotes  »  Notes to Account
Enter the first few characters of Company and click 'Go'

Notes to Accounts of Va Tech Wabag Ltd.

Mar 31, 2017

1. Terms/right attached to equity shares

The Company has issued only one class of equity shares having a face value of '' 2 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 the Board of Directors, if any, is subject to the approval of the shareholders in the ensuing Annual General Meeting, except interim dividend, which can be approved by the Board of Directors. In the event of liquidation, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts, if any. The distribution will be in proportion to the number of equity shares held by the shareholders.

2. Bonus issue

The Company had allotted 2,71,42,555 equity shares of face value Rs. 2 per share as fully paid bonus shares during the year ended 31 March 2015, pursuant to the bonus issue approved by the shareholders through postal ballot by capitalization of share premium. Bonus share of one equity share for every equity share held had been allotted.

3. Shares reserved for issue under options

The Company has reserved issuance of 2,94,440 equity shares of Rs. 2 each (Previous year : 4,65,785 shares of Rs. 2 each) for offering to eligible employees of the Company and its subsidiaries under Employees Stock Option Plan (ESOP).

4. Buy back of shares

There were no buy back of shares and shares issued pursuant to contract without payment being received in cash during the last 5 years immediately preceding 31 March 2017.

5. Capital management

The Company''s capital management objectives are:

-to safeguard the Company''s ability to continue as a going concern, and continue to provide optimum returns to the shareholders and all other stakeholders by building a strong capital base.

-to maintain an optimum 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.

For the purpose of the Company''s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders plus its borrowings, if any, less cash and cash equivalents as presented on the face of the balance sheet.

The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. The amounts managed as capital by the Company for the reporting periods under review are summarized as follows:

The Company provides performance guarantees to its customers which require it to complete projects within a specified timeframe. In the event of failure to complete a project as scheduled, or in case of a performance shortfall, the Company may generally be held liable for penalties in the form of agreed liquidated damages. The Company provides for liquidated damages when it reasonably expects that a delay in the completion of the project or a shortfall in the performance parameters might give rise to a claim from the customer. Liquidated damages are generally measured and recognized in accordance with the terms of the contracts with customers.

6. Provision for employee benefits

7. Gratuity

In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan ("the Gratuity Plan”) covering eligible employees. The Gratuity Plan provides for a lump sum payment to vested employees on retirement (subject to completion of five years of continuous employment), death, incapacitation or termination of employment that are based on last drawn salary and tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation on the reporting date and the Company makes annual contribution to the gratuity fund maintained by ICICI Prudential Life Insurance.

8. Compensated absences

The Company permits encashment of compensated absences accumulated by their employees on retirement, separation and during the course of service. The liability in respect of the Company, for outstanding balance of privilege leave at the balance sheet date is determined and provided on the basis of actuarial valuation performed by an independent actuary. The Company does not maintain any plan assets to fund its obligation towards compensated absences. The total Compensated absences recognized in the schedule of profit and loss for the year is Rs. 85 lakhs (2015-16 Rs. 89 lakhs).

9. Fair value measurement

Fair value measurement hierarchy

The Company records certain financial assets and financial liabilities at fair value on a recurring basis. The Company determines fair values based on the price it would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.

The Company holds certain fixed income investments and other financial assets such as employee loans, deposits etc. which must be measured using the fair value hierarchy and related valuation methodologies. The guidance specifies a hierarchy of valuation techniques based on whether the inputs to each measurement are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company''s assumptions about current market conditions. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Financial assets and financial liabilities measured at fair value in the balance sheet are grouped into three Levels of fair value hierarchy. These levels are based on the observability of significant inputs to the measurement, as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3: Unobservable inputs for the asset or liability.

10. Nature and extent of risks arising from financial instruments and respective financial risk management objectives and policies

The Company''s principal financial liabilities comprise of loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company''s operations and to provide guarantees to support its and group companies operations. The Company''s principal financial assets include loans, trade and other receivables, cash and short-term deposits that derive directly from its operations. The Company also enters into derivative transactions and holds short term investments.

The Company is exposed to market risk, credit risk and liquidity risk. The Company''s senior management oversees the management of these risks. The Company''s senior management is supported by the Group Treasury Team that advises on financial risks and the appropriate financial risk governance framework in accordance with the Company''s policies and risk objectives. All derivative activities for risk management purposes are carried out by Group Treasury Team that have the appropriate skills, experience and supervision. It is the Group''s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors review and agree on policies for managing each of these risks, which are summarized below.

11. Market risk

The Company is exposed to market risk through its use of financial instruments and specifically to currency risk, interest rate risk and certain other price risks, which result from both its operating and investing activities.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company''s exposure to the risk of changes in market interest rates are managed by borrowing at fixed interest rates. During the year Company did not have any floating rate borrowings.

Foreign currency risk

Most of the Company''s transactions are carried out in Indian rupees. Exposures to currency exchange rates arise from the Company''s overseas sales and purchases, which are primarily denominated in US dollars (USD) and Euro (EUR).

To mitigate the Company''s exposure to foreign currency risk, cash flows are monitored and forward exchange contracts are entered into in accordance with the Company''s risk management policies. Where the amounts to be paid and received in a specific currency are expected to largely offset one another, no further hedging activity is undertaken. Forward exchange contracts are mainly entered into for net foreign currency exposures that are not expected to be offset by other same currency transactions.

Currency risk (or foreign exchange risk) arises on financial instruments that are denominated in a foreign currency, i.e. in a currency other than the functional currency in which they are measured. For the purpose of this disclosure, currency risk does not arise from financial instruments that are non-monetary items or from financial instruments denominated in the functional currency.

The following table illustrates the sensitivity of profit and equity in regards to the Company''s financial assets and financial liabilities and the USD/INR exchange rate and EUR/INR exchange rate ''all other things being equal''. It assumes a /- 1% change of the INR/USD exchange rate for the year ended at 31 March 2017 (31 March 2016: 1%, 1 April 2015: 1%). A /- 1% change is considered for the INR/EUR exchange rate for the year ended (31 March 2016: 1%, 1 April 2015: 1%).

If the INR had strengthened against the USD by 1% during the year ended 31 March 2017 (31 March 2016: 1%, 01 April 2015: 1%) and EUR by 1% during the year ended 31 March 2017 (31 March 2016: 1%, 01 April 2015: 1%) respectively then this would have had the following impact on profit before tax and equity before tax:

The Company continuously monitors defaults of customers and other counterparties, identified either individually or by the Company, and incorporates this information into its credit risk controls. The Company''s policy is to transact only with counterparties who are highly creditworthy which are assessed based on internal due diligence parameters.

In respect of trade receivables, the Company is not exposed to any significant credit risk exposure to any single counterparty or any Group of counterparties having similar characteristics. Trade receivables consist of a large number of customers in various geographical areas. Based on historical information about customer default rates management consider the credit quality of trade receivables that are not past due or impaired to be good.

The credit risk for cash and cash equivalents, fixed deposits and mutual funds are considered negligible, since the counterparties are reputable banks with high quality external credit ratings.

Other financial assets mainly comprises of tender deposits and security deposits which are given to customers or other governmental agencies in relation to contracts executed and are assessed by the Company for credit risk on a continuous basis.

12. Liquidity risk

Liquidity risk is that the Company might be unable to meet its obligations. The Company manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows due in day-to-day business. The data used for analyzing these cash flows is consistent with that used in the contractual maturity analysis below. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on a monthly, quarterly, and yearly basis depending on the business needs. Net cash requirements are compared to available borrowing facilities in order to determine headroom or any shortfalls. This analysis shows that available borrowing facilities are expected to be sufficient over the lookout period.

The Company''s objective is to maintain cash and marketable securities to meet its liquidity requirements for 30-day periods at a minimum. This objective was met for the reporting periods. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities.

The Company considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its cash resources and trade receivables. The Company''s existing cash resources and trade receivables significantly exceed the current cash outflow requirements. Cash flows from trade receivables are all contractually due within six months except for retention and long term trade receivables which are governed by the relevant contract conditions.

The Company''s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, and short-term borrowings. The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding and debt maturing within 12 months can be rolled over with existing lenders.

13. First-time adoption of Ind AS

These are the Company''s first financial statements prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2016, the Company prepared its financial statements in accordance with Companies (Accounting Standard) Rules, 2006, notified under section 133 of the Act and other relevant provisions of the Act (Previous GAAP). Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on or after 31 March 2017, together with the comparative period data as at and for the year ended 31 March 2016. This note explains the principal adjustments made by the Company in restating its statement of financial position as at 1 April 2015 and its previously published financial statements as at and for the year ended 31 March 2016 under previous GAAP.

14. First time adoption exemptions applied

Upon transition, Ind AS 101 permits certain exemptions from full retrospective application of Ind AS. The Company has applied the mandatory exceptions and certain optional exemptions, as set out below:

Mandatory exceptions adopted by the Company

15. De-recognition of financial assets and liabilities

The de-recognition criteria of Ind AS 109 Financial Instruments has been applied prospectively for transactions occurring on or after the date of transition to Ind AS. Non-derivative financial assets and non-derivative financial liabilities derecognized before date of transition under previous GAAP are not recognized on the opening Ind AS Balance Sheet.

16. Estimates

Hindsight is not used to create or revise estimates. The estimates made by the Company under previous GAAP were not revised for the application of Ind AS except where necessary to reflect any differences in accounting policies or errors.

Optional exemptions availed by the Company

17. property, plant and equipment

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognized in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition. The Company has elected to use carrying value under previous GAAP as the deemed cost on the date of transition to Ind AS for all property, plant and equipment (including intangible assets). Land and buildings (properties) were carried in the Balance Sheet prepared in accordance with Previous GAAP on the basis of historical cost. The Company has elected to regard those values of property as deemed cost at the date of the transition since they were broadly comparable to fair value. Accordingly, the Company has not revalued the property at 01 April 2015.

18. Investment in subsidiaries, joint ventures and associates

Investment in subsidiaries, joint ventures and associates are measured at the carrying value under previous GAAP on the date of transition to Ind AS. These carrying value under previous GAAP are considered to be the deemed cost as at the date of transition.

19. Classification and measurement of financial assets

Ind AS 101 requires an entity to assess the 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. The Company has elected to apply this exemption to its financial assets.

20. Leases

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

Footnotes to the reconciliations

21. Fair valuation of Investments

Under the previous GAAP, investments in mutual funds were classified as long-term investments or current investments based on intended holding period or reliability and were accounted at cost less provision for diminution in value of investments. Under Ind AS, these investments are required to be measured at fair value. The Company has designated the investments as classified at fair value through profit or loss. The resulting fair value changes of these investments have been recognized in retained earnings as at the date of transition and subsequently in the profit or loss for the year ended 31 March 2016.

22. Expected credit losses

Under previous GAAP, the Company had created provision for doubtful receivables based on overdue receivables that reflected incurred losses. Under Ind AS 109 ''Financial Instruments'', the Company has to determine expected credit loss that reflects, amongst other factors, unbiased probability weighted amounts determined by evaluating a range of outcomes based on supportable and available information. The Company has used practical expedients for measuring these expected credit losses using a provisioning matrix. Based on this assessment, the Company impaired its financial assets by Rs. 2,886 lakhs on 01 April 2015 which has been recognized in opening retained earnings. The impact of Rs. 635 lakhs for year ended on 31 March 2016 has been recognized in the statement of profit and loss.

Under previous GAAP, the provision for impairment of financial guarantees are recognized only when there is a "more likely than not” possibility of a probable outflow of economic resources. However, under Ind AS 109, an entity shall recognize a loss allowance for expected credit losses on a financial guarantee contract at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. The impairment allowance has been determined based on Expected Credit Loss model (ECL). Under ECL model, the Company impaired its financial guarantees by Rs. 1,398 lakhs on 01 April 2015 which has been recognized in opening retained earnings.

23 provisions

Under previous GAAP, the proposed dividends (along with related dividend distribution tax) are recognized as a liability in the period to which they relate, irrespective of when they are declared. Under Ind AS, proposed dividends are considered as a non-adjusting post balance sheet event and recognized as a liability in the period in which it is declared by the company (usually when approved by shareholders in a general meeting) or paid. Accordingly the provision for proposed dividend, including dividend distribution tax, recognized under previous GAAP has been reversed.

24. Defined benefit obligation

Both under previous GAAP and Ind AS, the Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under previous GAAP, the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind-AS, re-measurements [comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability] are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through Other Comprehensive Income.

25. Other Comprehensive Income

Under Ind AS, all items of income and expense recognized in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in profit or loss but are shown in the statement of profit and loss as ''other comprehensive income'' includes re-measurements of defined benefit plans, foreign exchange differences arising on translation of foreign operations, effective portion of gains and losses on cash flow hedging instruments and fair value gains or (losses) on FVOCI equity instruments. The concept of other comprehensive income did not exist under previous GAAP.

26. Deferred tax

The various transitional adjustments lead to temporary differences that result in deferred tax liability/asset (as the case may be). Deferred tax adjustments are recognized in correlation to the underlying transaction either in retained earnings or Other Comprehensive Income. On the date of transition, the net impact on deferred tax assets is of Rs. 1,485 lakhs (31 March 2016: Rs. 1,705 lakhs).

27. Loans

Employee loans were carried at cost under previous GAAP. However, under Ind AS, these loans are classified as financial asset and is carried at its fair value.

28. Events after the reporting period

No adjusting or significant non-adjusting events have occurred between the reporting date (31 March 2017) and the date of authorization except for proposed dividend as disclosed in note 17.

29. The Company had been claiming deduction under section 80-IA of the Income Tax Act, 1961 from the financial year ended 31 March 2002 as a developer of infrastructure projects in India. The Finance Act 2009 amended the provisions of Section 80-IA retrospectively with effect from 01 April 2000 to make it inapplicable for persons having a mere works contract with the government or statutory authority. The Company believed that this amendment was in line with the objective of the government of incentivizing only a developer of infrastructure facility and not a mere works contractor. The Company strongly opined that, being a developer of infrastructure turnkey development contracts starting from the conceptualization to execution assuming significant financial commitment and risks, the Company would be treated as a developer and the amendment would not apply to it. Based on a legal opinion from a Senior Counsel, the Company had filed a writ petition in the High Court of Madras challenging the Constitutional validity of the retrospective amendment. The Company had subsequently received favourable Appellate Orders from CIT (Appeals) from financial years 2001-02 to 2006-07 allowing the benefit under section 80-IA of the Income Tax Act, while, the Income Tax department had raised a demand for Rs. 939 lakhs denying benefit under section 80-IA for the financial year 2008-09. Further to this, the Income Tax department had gone on appeal against the CIT (Appeals) order and was pending at the Income Tax Appellate Tribunal till the previous year. Considering these facts and as a matter of prudence, the Company had disclosed the total tax benefit so far claimed u/s 80-IA as contingent liability in the standalone financial statements upto 31 March 2016. However during the current year favourable orders from Income Tax Appellate Tribunal have been received by the Company which has not been contested. Hence the demand has not been considered as a contingent liability.

30. The Company, also based on an opinion taken from a professional firm believes that the interest under section 234B on account of 80-IA disallowance discussed in paragraph ''a'' above amounting to Rs. 2,855 lakhs as at 31 March 2016 would not be payable as the Jurisdictional High Court rulings and various assessment orders commencing from financial year 2001-02 are in favour of the Company on this aspect and on this basis, the amount of interest had been disclosed as contingent liability. However as detailed in paragraph ''a'' above, the same has not been considered as a contingent liability during the current year.

31. Capital commitments

The estimated amounts of contracts to be executed on capital account and not provided for (net of advances) Nil (Previous year - Nil). Other commitments are cancellable at the option of the company and hence not disclosed.

32. Segment reporting

The Company publishes standalone financial statements along with the consolidated financial statements in the annual report. In accordance with Ind AS 108, Operating segments, the Company has disclosed the segment information in the consolidated financial statements.


Mar 31, 2016

1 General Information

VA Tech Wabag Limited (''the Company''), its subsidiaries, associates and joint ventures (collectively referred to as ''the Group'') is one of the world''s leading companies in the water treatment field. The group''s principal activities include design, supply, installation, construction and operational management of drinking water, waste water treatment, industrial water treatment and desalination plants. The shares of the Company are listed in the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).

All amounts in the standalone financial statements are presented in Rupees in lakhs except per share data and as otherwise stated. Figures for the previous year have been regrouped / rearranged wherever considered necessary to conform to the figures presented in the current year.

The Company is in the business of execution of turnkey projects for water management and hence the requirements under paragraph 5(ii)(a), 5(ii)(b) and 5(ii) (d) of Part II of Schedule III to the Companies Act, 2013 are not applicable.

2.1 Capital Commitments

The estimated amount of contracts to be executed on capital account and not provided for, (net of advances) Rs. Nil (Previous year - Rs. 516 lakhs). Other commitments are cancellable at the option of the Company and hence not disclosed.

a) The Company had been claiming deduction under section 80-IA of the Income Tax Act, 1961 from the financial year ended 31 March 2002 as a developer of infrastructure projects in India. The Finance Act 2009 amended the provisions of Section 80-IA retrospectively with effect from 01 April 2000 to make it inapplicable for persons having a mere works contract with the government or statutory authority. The Company believes that this amendment is in line with the objective of the government of incentivising only a developer of infrastructure facility and not a mere works contractor.

The Company strongly opines that, being a developer of infrastructure turnkey development contracts starting from the conceptualisation to execution assuming significant financial commitment and risks, the Company would be treated as a developer and the amendment would not apply to it. Based on a legal opinion from a Senior Counsel, the Company has filed a writ petition in the High Court of Madras challenging the Constitutional validity of the retrospective amendment. The Company has subsequently received favourable Appellate Orders from CIT (Appeals) from financial years 2001- 02 to 2006-07 allowing the benefit under section 80-IA of the Income Tax Act, while, the Income Tax department has raised a demand for Rs.939 lakhs denying benefit under section 80-IA for the financial year 2008-09. Further to this, the Income Tax department had gone on appeal against the CIT (Appeals) order and is currently pending at the Income Tax Appellate Tribunal. Considering these facts and as a matter of prudence, the Company has disclosed the total tax benefit so far claimed u/s 80-IA as contingent liability in the standalone financial statements for 31 March 2016. However, on a conservative basis the liability on account of possible denial of deduction prospectively from 01 April 2009 has been fully provided as current tax in the respective years.

b) The Company, also based on an opinion taken from a professional firm believes that the interest under section 234B on account of 80-IA disallowance discussed in paragraph ''a'' above amounting to Rs. 2,855 lakhs as at 31 March 2016 would not be payable as the Jurisdictional High Court rulings and various assessment orders commencing from financial year 2001-02 are in favour of the Company on this aspect and on this basis, the amount of interest has been disclosed as contingent liability.

c) The additional liability assessed by Indirect tax authorities for various financial years from 2003-04 to 2012-13 amounts to Rs. 8,050 lakhs.

2.2 Transfer Pricing

As per the Transfer pricing norms introduced in India with effect from 1 April 2001, the Company is required to use certain specific methods in computing arm''s length price of international transactions between the associated enterprises and maintain prescribed information and documents relating to such transactions. The appropriate method to be adopted will depend on the nature of transactions/class of transactions, class of associated persons, functions performed and other factors, which have been prescribed. The Transfer pricing study for the fiscal year ended 31 March 2016 is in progress and accordingly, the contracts may be amended subsequently and related adjustment, if any, will be quantified upon completion of this study. However, in the opinion of the Management, the outcome of the study will not have material impact on the Company''s results.

2.3 Corporate Social Responsibility

As mandated by Section 135 of the Companies Act, 2013, the company has constituted a CSR committee. The company has identified areas for its CSR activities as specified in schedule VII of the Companies Act, 2013 and incurred expenses as disclosed in Note 27 to these financial statements towards such activities.

3. Interest in joint venture

The group has 32.5% (31 March 2015 : 32.5%) interest in International Water Treatment LLC, a joint venture, classified as a Jointly controlled entity domiciled in Oman which is involved in construction of a desalination plant. The joint venture was incorporated during February 2013 and commenced operations from April 2013.

4. Segment reporting

The Company publishes standalone financial statements along with the consolidated financial statements in the annual report. In accordance with Accounting Standard 17, Segment Reporting, the Company has disclosed the segment information in the consolidated financial statements.


Mar 31, 2013

1.1 General Information

All amounts in the financial statements are presented in Rupees in Lakhs except per share data and as otherwise stated. Figures for the previous year have been regrouped / rearranged wherever considered necessary to conform to the figures presented in the current year.

The Company is in the business of execution of turnkey projects for water management and hence the requirements under paragraph 5(ii)(a), 5(ii)(b) and 5(ii)(d) of Part II of Schedule VI to the Companies Act, 1956 are not applicable.

1.2 Company Overview

VA TECH WABAG Limited (''the Company''), its subsidiaries, associates and joint ventures (collectively referred to as ''the Group'') is one of the world''s leading companies in the water treatment field. The group''s principal activities include design, supply, installation, and operational management of drinking water and waste water treatment plants.

VA TECH WABAG Limited was part of the Austrian group, VA Tech and formed the water technology and engineering division of the Company.

In July 2005, VA TECH WABAG worldwide was acquired by Siemens. Soon after in September 2005, the Company had a Management buyout with 20% of the shares with the management team and 60% of the shares with ICICI Ventures and the rest with Siemens.

In November 2007, the Company acquired 100% stake in its erstwhile parent VA TECH WABAG GmbH, Vienna through its wholly owned subsidiary VA TECH WABAG (Singapore) Pte Limited.

Pursuant to an Initial Public offering of its shares, the shares of the Company were listed on 13 October, 2010 in the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).

2 Others

2.1 Capital Commitments

The estimated amount of contracts to be executed on capital account and not provided for (net of advances) Rs.2,138 lakhs (Previous year - Rs.1,612 lakhs). Other commitments are cancellable at the option of the Company and hence not disclosed.

2.2 Contingent liabilities Rs. in Lakhs

As at As at 31 March 2013 31 March 2012

Income tax impact on account of non- deductibility U/s 80-IA (Refer ''a'' below) 2,422 2,422

- Out of the above, Income tax demand contested in appeal 939 939

Interest U/s 234B on the tax liability referred above (Refer ''b'' below) 1,968 1,672

Sales tax matters under dispute (Refer ''c'' below) 395 325

a) The Company had been claiming deduction under section 80-IA of the Income Tax Act, 1961 from the financial year ended 31 March 2002 as a developer of infrastructure projects in India. The Finance Act 2009 amended the provisions of Section 80-IA retrospectively with effect from 01 April 2000 to make it inapplicable for persons having a mere works contract with the government or statutory authority. The Company believes that this amendment is in line with the objective of the government of incentivising only a developer of infrastructure facility and not a mere works contractor. The Company strongly opines that, being a developer of infrastructure turnkey development contracts starting from the conceptualisation to execution assuming significant financial commitment and risks, the Company would be treated as a developer and the amendment would not apply to it. Based on a legal opinion from a Senior Counsel, the Company has filed a writ petition in the High Court of Madras challenging the Constitutional validity of the retrospective amendment. Also, the Company has subsequently received favourable Appellate Orders from CIT (Appeals) from financial years 2001-02 to 2006-07 allowing the benefit under section 80-IA of the Income Tax Act, while, the Income Tax department has raised a demand for Rs.939 lakhs denying benefit under section 80-IA for the financial year 2008-09. Considering these facts and as a matter of prudence, the Company has presented the total tax benefit so far claimed u/s 80-IA as contingent liability in the financial statement for 31 March 2013.

However, on a conservative basis the liability on account of possible denial of deduction prospectively from 01 April 2009 has been fully provided as current tax in the respective years.

b) The Company, also based on an opinion taken from a professional firm believes that the interest under section 234B on account of 80-IA disallowance discussed in paragraph ''a'' above amounting to Rs. 1,968 lakhs as at 31 March 2013 would not be payable as the Jurisdictional High Court rulings and various assessment orders commencing from financial year 2001-02 are in favour of the Company on this aspect and on this basis, the amount of interest has been disclosed as contingent liability.

c) The additional liability assessed by sales tax authorities for various financial years from 2002-03 to 2008-09 amounts to Rs. 395 Lakhs.

2.3 Transfer Pricing

As per the Transfer pricing norms introduced in India with effect from 1 April 2001, the Company is required to use certain specific methods in computing arm''s length price of international transactions between the associated enterprises and maintain prescribed information and documents relating to such transactions. The appropriate method to be adopted will depend on the nature of transactions/class of transactions, class of associated persons, functions performed and other factors, which have been prescribed. The Transfer pricing study for the fiscal year ended 31 March 2013 is in progress and accordingly, the contracts may be amended subsequently and related adjustment, if any, will be quantified upon completion of this study. However, in the opinion of the Management, the outcome of the study will not have material impact on the Company''s results.

Note 3

SEGMENT REPORTING

The Company publishes standalone financial statements along with the consolidated financial statements in the annual report. In accordance with Accounting Standard 17, Segment Reporting, the Company has disclosed the segment information in the consolidated financial statements.


Mar 31, 2012

1.1 General Information

All amounts in the financial statements are presented in Rupees in Lakhs except per share data and as otherwise stated. Figures for the previous year have been regrouped / rearranged wherever considered necessary to conform to the figures presented in the current year.

The Company is in the business of execution of turnkey projects for water management and hence the requirements under paragraph 5(ii)(a), 5(ii)(b) and 5(ii)(d) of Part II of Revised Schedule VI to the Companies Act, 1956 are not applicable.

1.2 Company Overview

VA TECH WABAG Limited ('the Company'), its subsidiaries, associates and joint ventures (collectively referred to as 'the Group') is one of the world's leading companies in the water treatment field. The group's principal activities include design, supply, installation, and operational management of drinking water and waste water treatment plants.

VA TECH WABAG Limited was part of the Austrian group, VA Tech and formed the water technology and engineering division of the Company.

In July 2005, VA TECH WABAG worldwide was acquired by Siemens. Soon after in September 2005, the Company had a Management buyout with 20% of the shares with the management team and 60% of the shares with ICICI Ventures and the rest with Siemens.

In November 2007, the Company acquired 100% stake in its erstwhile parent VA TECH WABAG GmbH, Vienna through its wholly owned subsidiary VA TECH WABAG (Singapore) Pte Limited.

Pursuant to an Initial Public offering of its shares, the shares of the company were listed on 13th October, 2010 in the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).

2. Others

2.1 Capital Commitments

The estimated amount of contracts to be executed on capital account and not provided for (net of advances) Rs.1,612 lakhs (Previous year - Rs.771 lakhs). Other commitments are cancellable at the option of the Company and hence not disclosed.

2.2 Guarantees (Rs. in Lakhs)

As at As at 31 March 2012 31 March 2011

Bank Guarantees/ Letter of Credit issued by the banks on behalf of the Company

-Bank Guarantee 37,194 46,300

-Letter of Credit 14,928 9,787

Corporate Guarantees issued by the Company on behalf of its subsidiary

-For VA Tech Wabag GmbH, Vienna 14,949 11,506

3.1 Segment reporting

The Company operates in a single segment "Construction and maintenance of Water and Waste water treatment plant. Therefore, the Company's business does not fall under different business segments as defined by AS-17 "Segment Reporting' issued by Companies (Accounting Standards) Rules, 2006.

3.2 Transfer Pricing

As per the Transfer pricing norms introduced in India with effect from April 1, 2001, the Company is required to use certain specific methods in computing arm's length price of international transactions between the associated enterprises and maintain prescribed information and documents relating to such transactions. The appropriate method to be adopted will depend on the nature of transactions/class of transactions, class of associated persons, functions performed and other factors, which have been prescribed. The Transfer pricing study for the fiscal year ending March 31, 2012 is in progress and accordingly, the contracts may be amended subsequently and related adjustment, if any, will be quantified upon completion of this study. However, in the opinion of the Management, the outcome of the study will not have material impact on the Company's results.

a) Terms/ rights attached to equity shares

The Company has issued only one class of equity shares having a face value of Rs. 2 per share (Previous year Rs. 5 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 the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except interim dividend.

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

During the year ended 31 March 2012, the amount of dividend per share, recognized as distributions to the equity shareholders of face value Rs. 2 each (Previous year Rs. 5 each) was Rs. 6 (Previous year : Rs. 10).

b) Shares reserved for issue under options

The Company had reserved issuance of 933,070 Equity shares of Rs. 2 each (Previous year : 455,410 shares of Rs. 5 each) for offering to eligible employees of the Company and its subsidiaries under Employees Stock Option Scheme (ESOS).

c) During the year, on 18 August 2011, the Company subdivided 10,576,434 fully paid equity shares of face value of Rs. 5 each into 26,441,085 equity shares of Rs. 2 each fully paid up pursuant to the approval of the shareholders at the Annual General Meeting on 15 July 2011

d) Employee share based plan

In August 2006, the Board of Directors approved and the Company adopted the "ESOP 2006" (the "Plan") under which not more than 204,080 shares of the Company's equity shares was reserved for issuance to employees. The Board of Directors determined that the options granted under the Plan would vest not less than one year and not more than five years from the date of grant. The exercise price of options shall be Rs 200 (face value of Rs. 10 each) on the grant date. The exercise period of the options is 4 years.

Employee share based plan- ESOP 2010 Scheme

In August 2010, the Board of Directors approved and the Company adopted the "ESOP 2010" (the "Plan") under which not more than 467,831 shares of the Company's equity shares was reserved for issuance to employees. The Board of Directors determined that the options granted under the Plan would vest not less than one year and not more than five years from the date of grant. The exercise price of options shall be Rs 900 (Face value of Rs. 5 each) on the grant date. The exercise period of the options is 4 years. The company has calculated the value of options using fair value, which is lower than the exercise price.

A provision is recognized for expected warranty claims on construction contracts completed, based on past experience of level of repairs and returns. It is expected that these costs would be incurred within two years from the balance sheet date, which generally coincides with the completion of warranty period of the contract. The assumption used to calculate the provision for warranties are based on the company's current status of contracts under execution and information available about expenditure more probable to be incurred based on the company's warranty period for contracts completed.

The Company provides performance guarantees to its customers which require it to complete projects within a specified timeframe. In the event of failure to complete a project as scheduled, or in case of a performance shortfall, the Company may generally be held liable for penalties in the form of agreed liquidated damages. The Company provides for liquidated damages when it reasonably expects that a delay in the completion of the project or a shortfall in the performance parameters might give rise to a claim from the customer. Liquidated damages are measured and recognized in accordance with the terms of the contracts with customers.

The Company provides for litigations, which is predominantly on account of disputes on statutory dues. The Company assesses each demand raised by the statutory authorities and based on responses and discussions with the attorneys and when there is a present obligation as a result of a past event, where the outflow of economic resources is probable and a reliable estimate of the amount of obligation, a provision for litigation is created. Instances when there is no present obligation or where the present obligation would probably not require outflow of resources or where the same cannot be reliably estimated, the same is disclosed as contingent liability in the financial statements. The Company reverses its provisions on receipt of a favorable order from the appropriate authority and when no further obligation is envisaged.

a) Employee benefits

i) Gratuity

In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan ("the Gratuity Plan") covering eligible employees. The Gratuity Plan provides for a lump sum payment to vested employees on retirement (subject to completion of five years of continuous employment), death, incapacitation or termination of employment that are based on last drawn salary and tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation on the reporting date and the Company makes annual contribution to the gratuity fund maintained by LIC of India.

ii) Compensated absences

The Company permits encashment of compensated absences accumulated by their employees on retirement, separation and during the course of service. The liability in respect of the Company, for outstanding balance of privilege leave at the balance sheet date is determined and provided on the basis of actuarial valuation performed by an independent actuary. The Company doesn't maintain any plan assets to fund its obligation compensated absences.

1. During the year, the Company has availed two Secured overdraft facilities, one for an amount of Rs. 3,975 Lakhs from Punjab National Bank, Chennai at an interest rate of 10.40%-11.25%, which is secured against the Fixed Deposits of Rs. 4,300 Lakhs placed with the bank and another for amount of Rs. 2,843 Lakhs from Bank of India at an interest rate of 11.20%, which is secured against the Fixed Deposits of Rs. 3,000 Lakhs.

2. On 15 February 2012, the Company has availed a Working capital loan repayable on demand from Punjab National Bank for an amount of Rs. 3,500 Lakhs repayable within 60 days from the date of disbursement and is secured by the entire current assets both present and future.

b) Variable Pay and Productivity Reward

The Company has a performance related Variable pay program and the computation of the eligible pay for employees was hitherto made annually using various parameters depending on functional goals. During the year, the Company modified its Variable pay program such that it is related to quarterly target and performance. Pursuant to this updated scheme, the company has paid part of the variable pay related to performance of first half of the current year ended 31 March 2012 amounting to Rs. 102 Lakhs and has also accrued for the variable pay payable based on performance of second half of the year amounting to Rs.576 lakhs. The company has also expensed off an amount of Rs 664 lakhs, paid as variable pay to employees based on achievement of functional goals for year ended 2010-11.

Find IFSC