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Notes to Accounts of Varun Industries Ltd.

Mar 31, 2013

1.1) RELATED PARTIES DISCLOSURE (As per Accounting Standard 18): * (a) List of Related Parties:

(i) Key Management Personnel

Mr. Kiran N. Merita - Chairman & Managing Director

Mr. Kailash S. Agarwal - Managing Director (ii) Relatives of Key Management Personnel

(With whom company has entered into transactions during the year)

Mr. Karunesh S. Agarwal - Relation - (Brother of Mr. Kailash S. Agarwal) (iii) Enterprises over which Key Managerial person have significant influence

K. K. Enterprises

Varun Real Estate (India) Pvt. Ltd. (iv) Subsidiary Companies

Shri Sai Jewels Pvt. Ltd!

Varun Jewels Pvt. Ltd.

Varun Petroleum Corporation Pvt. Ltd.

Varun Minerals Corporation Pvt. Ltd.

Varun Holdings Ltd., Mauritius

Varun Petroleum Ltd., Mauritius

Varun Mines & Minerals Ltd., Mauritius (v) Step down Subsidiary Companies

Varun International Trading FZE, UAE

Varun Global Trading Pte. Ltd., Singapore

Varun Petroleum SARL, Madagascar (Discontinued from 29th March, 2013)

Oil & Gas Incorporation SARL, Madagascar (Discontinued from 29th March, 2013)

Varun International SARL, Madagascar (Discontinued from 29th March, 2013)

Madagascar Energy Corporation SARL, Madagascar (Discontinued from 29th March, 2013)

Varun Energy Corporation SARL, Madagascar (Discontinued from 29th March, 2013)

Varun SARL, Madagascar (Discontinued from 29th March, 2013) (vi) Associate

Varun Torian International SARL, Madagascar (Discontinued from 29th March, 2013)

1.2) Contingent Liabilities

(i) Disputed Demand raised by Income Tax department for several financial years of Rs.31.78 Crore is under appeal and rectification.

(ii) Disputed Demand raised by Sales Tax dept. for the FY 2007-08 is Rs.5.28 Cr. against which company has filed appeal and deposited Rs.0.53 Cr.

(iii) Deposit of Rs.39.54 Lacs with Rajasthan Entry Tax Department against the 50 % Entry Tax liability for the period F.Y. 06-07 Rs.0.16 lac, F.Y. 07-08 Rs.5.79 Lacs, F.Y. 08-09 Rs.14.92 lac, F.Y. 09-10 Rs.18.66 lac. However an appeal has been filed with Honorable Supreme Court for refund of the deposit and management is hopeful for favorable decision.

(iv) Disputed demand by various parties of ^10.78 Crore is under litigation in various court.

(v) Corporate Guarantee issued in favour of banks for their credit facility to Varun Jewels Pvt. Ltd. of Rs.18,300.00 lac.

(vi) Corporate Guarantee issued in favour of banks for their credit facility to Shri Sai Jewels Pvt. Ltd. of ^6,480.00 lac.

(vii) Corporate Guarantee issued in favour of bank for credit facility to M/s. K.K. Enterprises of Rs.1,200.00 lac.

(viii) Corporate Guarantee issued in favour of bank for credit facility to Varun International Trading FZE, UAE of USD 30 mn.

1.3) The Company has opted for accounting the exchange difference of long term foreign currency monetary items in line with Companies (Accounting Standards) Amendment Rules 2009 notified on 31st March 2009. Accordingly, the net exchange loss of Rs.319.41 lac (P.Y. Exchange Loss of Rs.479.07 lac) relating to long terra foreign currency monetary items has been reduced / added to the cost of respective fixed assets.

1.4) Figures for the previous year have been regrouped and/or reclassified, wherever necessary to confirm with current year''s classification / disclosure.


Mar 31, 2012

1.1) The Company has one class of Equity Shares having a par value of Rs. 10/- each. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors and approved by the shareholders in the Annual General Meeting is paid in Indian rupees. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amount, in proportion to their shareholding.

2.1) Foreign Currency Term Loan from Indian Bank outstanding Rs. 287.77 lac (P.Y. Rs. 414.00 lac) for Vasai Plant is secured by way of charge on Equitable Mortgage of Land & Building, Hypothecation of Plant & Machinery purchased by availing such term loan and personal guarantees of Shri Kiran N. Mehta and Shri Kailash S. Agarwal. The Term Loan is further secured by second Pari Passu charge on the current assets of the Company. The term loan is repayable in remaining 9 equal quarterly installments by Apr' 2014 and interest rate is linked with 6 months LIBOR plus 5%.

2.2) Foreign Currency Term Loan from UCO Bank outstanding Rs. 318.98 lac (P.Y. Rs. 689.36 lac) for Jodhpur Plant is secured by way of first charge on Equitable Mortgage of Land & Building, Hypothecation of Plant & Machinery purchased by availing such term loan and personal guarantees of Shri Kiran N. Mehta and Shri Kailash S. Agarwal. The Term Loan is further secured by second Pari Passu charge on the current assets of the Company. The term loan is repayable in remaining 1 quarterly installments by May' 2012 and interest rate is linked with 6 months LIBOR plus 7.85%.

2.3) Term Loan from IDBI Bank outstanding of Rs. 601.69 lac (PY. Nil) for Nashik Plant is secured by way of exclusive charge on Equitable Mortgage of Land & Building, Hypothecation of Plant & Machinery purchased by availing such term loan and personal guarantees of Shri Kiran N. Mehta and Shri Kailash S. Agarwal. The term loan is repayable in remaining 21 equal monthly installments and carries interest rate of 13.50%.

2.4) Three Foreign Currency Term Loans from State Bank of Travancore outstanding of Rs. 423.51 lac, Rs. 325.11 lac and Rs. 2050.52 lac respectively, totalling to Rs. 2799.15 lac (P.Y. Rs. 2776.06 lac) for Wind Power Projects are secured by way of exclusive charge on the Fixed Assets of the Wind Power Projects, Fixed Deposits under lien with bank and personal guarantees of Shri Kiran N. Mehta and Shri Kailash S. Agarwal. The term loan is repayable in remaining 9,15 and 37 quarterly installments and interest rate is linked with 6 months LIBOR plus 7 bps.

2.5) Rupee Term Loans from Central Bank of India outstanding Rs. 672.63 lac and in Foreign Currency outstanding of Rs. 1288.19 lac (P.Y. Nil) for Wind Power Project are secured by way of exclusive charge on the Fixed Assets of the Wind Power Projects and personal guarantees of Shri Kiran N. Mehta and Shri Kailash S. Agarwal. The term loan is repayable in remaining 27 quarterly installments by Oct' 2019 and interest rate is 14% and 6 months LIBOR plus 7 bps.

2.6) Term Loans from Indian Bank outstanding Rs. 873.52 lac (PY. Rs. 1262.85 lac) for Oil Rig is secured by way of exclusive charge on the Fixed Assets of the Oil Rig and personal guarantees of Shri Kiran N. Mehta and Shri Kailash S. Agarwal. The term loan is repayable in remaining 9 equal quarterly installments and carries interest rate of 12.75%.

2.7) Vehicle Loans are secured by way of hypothecation of the respective vehicles.

2.8) As on 31.03.12 continuing default in repayment of interest due in Feb'12 of term loan from Central Bank of India of Rs. 7.89 lac (paid on 24.04.12) and for interest due in Feb'12 of term loan from UCO Bank of Rs. 2.12 lac (paid on 28.04.12).

2.9) As on 31.03.12 continuing default in repayment of installment due in Feb'12 of term loan from UCO Bank of Rs. 157.28 lac and for installment due in Mar'12 of term loan from IDBI Bank of Rs. 31.25 lac.

3.1) Export Packing Credit, FDBP Credit Limits and Cash Credit Limits are secured by first charge/hypothecation of Stock/ inventory, receivables including export receivables and advances to suppliers of the Company as well as on immovable properties (shops & flats) owned by its directors, Fixed Deposits under lien with bank, second Pari Passu charge on Land & Building, Plant & Machinery of Vasai Plant and Jodhpur Plant, first Pari Passu charge on the properties at Byculla and personal guarantees of Shri Kiran N. Mehta and Shri Kailash S. Agarwal.

4.1) RELATED PARTIES DISCLOSURE (As per Accounting Standard 18):

(a) List of Related Parties:

(i) Key Management Personnel

Mr. Kiran N. Mehta - Chairman & Managing Director Mr. Kailash S. Agarwal - Managing Director Mr. Varun K. Mehta - Director

(ii) Relatives of Key Management Personnel

(With whom company has entered into transactions during the year)

Mr. Karunesh S. Agarwal

(iii) Enterprises over which Key Managerial person have significant influence K.K. Enterprises

SRK Consortium Capital Advisors LLP Classic Centre Developers Pvt. Ltd.

Jaipur Centre Developers Pvt. Ltd.

Jaipur Centre Infraprojects Pvt. Ltd.

Sure King Varun (Hong Kong) Ltd.

Sure King Varun International Ltd.

Triple A Developers Pvt. Ltd.

Varun Real Estate (I) Pvt. Ltd.

Varun Incorporation Ltd., Hong Kong Varun Global Agriculture SARL, Madagascar

(iv) Subsidiary Companies Shri Sai Jewels Pvt. Ltd.

Varun Jewels Pvt. Ltd.

Varun Petroleum Corporation Pvt. Ltd.

Varun Minerals Corporation Pvt. Ltd.

Varun Holdings Ltd., Mauritius Varun Petroleum Ltd., Mauritius Varun Mines & Minerals Ltd., Mauritius

(v) Step down Subsidiary Companies Varun International Trading FZE, UAE Varun Global Trading Pte. Ltd., Singapore Varun Petroleum SARL, Madagascar

Oil & Gas Incorporation SARL, Madagascar Varun International SARL, Madagascar Madagascar Energy Corporation SARL, Madagascar Varun Energy Corporation SARL, Madagascar Varun SARL, Madagascar

(vi) Associate

Varun Torian International SARL, Madagascar

4.2) Contingent Liabilities

(i) Disputed Demand raised by Income Tax department for several financial years of Rs. 45.36 Crore is under appeal and rectification

(ii) Disputed Demand raised by Sales Tax dept. for the FY 2007-08 is Rs. 5.28 Cr. against which company has filed appeal and deposited Rs. 0.53 Cr.

(iii) Corporate Guarantee issued in favour of banks for their credit facility to Varun Jewels Pvt. Ltd. of Rs. 18,300.00 lac.

(iv) Corporate Guarantee issued in favour of banks for their credit facility to Shri Sai Jewels Pvt. Ltd. of Rs. 6,480.00 lac.

(v) Corporate Guarantee issued in favour of bank for credit facility to M/s. K.K. Enterprises of Rs. 1,200.00 lac.

(vi) Corporate Guarantee issued in favour of bank for credit facility to Varun International Trading FZE, UAE of USD 30 mn.

4.3) Exceptional Items:-

Discount Provided to Debtors -We have provided for 10% discount to our major customers due to adverse global market conditions.

4.4) The Company has opted for accounting the exchange difference of long term foreign currency monetary items in line with Companies (Accounting Standards) Amendment Rules 2009 notified on 31st March 2009. Accordingly, the net exchange loss of Rs. 479.07 lac (P.Y. Exchange Gain of Rs. 7.86 lac) relating to long term foreign currency monetary items has been reduced / added to the cost of respective fixed assets.

4.5) Consequent to inadequacy of profits for the year, Under Section 198, 269, 309, read with Schedule XIII of the Companies Act, 1956, the remuneration paid to Managerial Personnel has resulted in an excess payment by Rs. 2.09 crores, for which steps are being taken by Company for recovering the excess remuneration.

4.6) The revised Schedule VI has become effective w.e.f. 1st April 2011 for the preparation of financial statements. This has significantly impected the disclosure and presentation made in financial statements. Figures for the previous year have been regrouped and/or reclassified, wherever necessary to confirm with current year's classification / disclosure.


Mar 31, 2010

1) EQUITY SHARE WARRANTS

In terms of approval of the members of the Company and as per applicable statutory provisions including SEBI (Disclosure and Investor Protection) Guidelines 2000, the Company on 27th August 2009, has issued 70,00,000 Equity Share Warrants on preferential basis to promoters entitling them to apply for equivalent number of fully paid up equity shares of Rs. 10/- each of the Company, at a price of Rs. 43.20 per equity share. The warrant holders have a right to apply for equity shares within18 months from the date of allotment of such equity share warrants. Subscribers have deposited non-refundable amount of Rs. 7,56,00,001/-, equivalent to 25% of total consideration which is shown as Equity Share Warrants in the Balance Sheet, pending exercise thereof.

The amount so received has been utilized for the purpose for which it was raised, namely, working capital requirements of the Company.

2) SECURED LOANS

i) Term Loan from bank for Vasai Plant is secured by way of first charge on Equitable Mortgage of Land & Building, Hypothecation of Plant & Machinery purchased and to be purchased by availing such term loan and personal guarantees of Shri Kiran N. Mehta and Shri Kailash S. Agarwal. The Term Loan is further secured by second Pari Passu charge on the current assets of the Company.

ii) Term Loan from bank for Jodhpur Plant is secured by way of first charge on Equitable Mortgage of Land & Building, Hypothecation of Plant & Machinery purchased and to be purchased by availing such term loan and personal guarantees of Shri Kiran N. Mehta and Shri Kailash S. Agarwal. The Term Loan is further secured by second Pari Passu charge on the current assets of the Jodhpur plant of the Company.

iii) Term Loans from bank for Wind Power Projects are secured by way of exclusive charge on the Fixed Assets of the Wind Power Project, Fixed Deposits under lien with bank and personal guarantees of Shri Kiran N. Mehta and Shri Kailash S. Agarwal.

iv) Term Loans from bank for Oil Rig is secured by way of exclusive charge on the Fixed Assets of the Oil Rig and personal guarantees of Shri Kiran N. Mehta and Shri Kailash S. Agarwal.

v) Export Packing Credit and FDBP Credit Limits are secured by first charge/hypothecation of Stock/inventory, receivables including export receivables and advances to suppliers of the Company as well as on immovable properties (shops & flats) owned by its directors and Fixed Deposits under lien with bank and second Pari Passu charge on Land & Building, Plant & Machinery of Vasai Plant and Jodhpur Plant and personal guarantees of Shri Kiran N. Mehta and Shri Kailash S. Agarwal.

vi) Cash Credit Limit of the Company is secured by first charge/hypothecation of Stock/inventory, receivables including export receivables and advances to suppliers of the Company as well as on immovable properties (shops & flats) owned by its directors and Fixed Deposits under lien with bank and second Pari Passu charge on Land & Building, Plant & Machinery of Vasai Plant and Jodhpur Plant and personal guarantees of Shri Kiran N. Mehta and Shri Kailash S. Agarwal.

vii) Vehicle Loans are secured by way of hypothecation of the respective vehicles.

viii) Short Term Loan is secured by first charge on the current assets and second charge on the fixed assets of plant at Vasai and Jodhpur and personal guarantees of Shri Kiran N. Mehta and Shri Kailash S. Agarwal.

3) AMALGAMATION

(i) During the year, the Company has amalgamated with itself its wholly owned subsidiary viz. Nagina Hotel Pvt. Ltd. vide scheme of Amalgamation w.e.f. 1st January 2010. The said scheme of Amalgamation has been approved by the Honorable High Court of Mumbai vide its order passed on 25th June 2010. All the assets & liabilities of the said subsidiary have been vested with the Company at Book Values and the same have been accounted for in accordance with AS-14 "Accounting for Amalgamations" issued by the Institute of Chartered Accountants of India.

(ii) Current year figures are after amalgamation of its 100% subsidiary (Nagina Hotel Pvt. Ltd.) w.e.f. 1st January 2010. Previous year figures are not comparable to that extent.

4) RELATED PARTIES DISCLOSURE (As per Accounting Standard 18): a) List of Related Parties:

I) Key Management Personnel

Mr. Kiran N. Mehta - Chairman & Managing Director Mr. Kailash S. Agarwal - Managing Director

Mr. Varun K. Mehta - Director

ii) Relatives of Key Management Personnel

(With whom company has entered into transactions during the year)

Mr. Karunesh S. Agarwal

iii) Enterprises over which Key Managerial person have significant influence

K.K. Enterprises

Varun Earthtech Limited

Varun Real Estate (I) Pvt. Ltd.

Varun Capital Market Advisory Pvt. Ltd.

Saishree Mines and Minerals India Pvt. Ltd.

Varun Incorporation Ltd., China

Varun Incorporation Ltd., Hong Kong

Varun Petroleum SARL, Madagascar

Varun Agriculture SARL, Madagascar

Varun International SARL, Madagascar

Varun Global Agriculture SARL, Madagascar

Madagascar Energy Corporation, Madagascar

Madagascar Agriculture Corp. SARL, Madagascar

iv) Subsidiary Companies.-

Shri Sai Jewels Pvt. Ltd.

Varun Jewels Pvt. Ltd.

Varun Petroleum Corporation Pvt. Ltd.

Varun Minerals Corporation Pvt. Ltd.

Varun Holdings Ltd., Mauritius

Varun Mines & Minerals Ltd., Mauritius

Varun Petroleum Ltd., Mauritius

9) CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

a. Capital Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for Nil (P.Y. Rs. 62.00 lac).

b. Contingent Liabilities

i) The Income Tax assessments of the Company have been completed up to Assessment Year 2006-07. The disputed demand outstanding up to the said Assessment Year is Rs. 10.11 lac. The applications for rectification are pending with Income Tax Department. After rectification demand will not be sustainable, so no provision is required.

ii) Deposits in Schedule 9 of Balance Sheet include Rs. 1.00 Crore deposited with Custom Department against the fine and penalty levied by them. However, an appeal has been filed with Customs, Excise & Service Tax Appellate Tribunal, West Zone, Mumbai for refund of the deposit and management is hopeful for favourable decision.

iii) Corporate Guarantee issued in favour of banks for their credit facility to M/s Varun Jewels Pvt. Ltd. of Rs. 10,900.00 lac.

iv) Corporate Guarantee issued in favour of banks for their credit facility to M/s Shri Sai Jewels Pvt. Ltd. of Rs. 2,400.00 lac.

v) Corporate Guarantee issued in favour of bank for credit facility to M/s K.K. Enterprises of Rs. 1,200.00 lac.

5) The Company has opted for accounting the exchange difference of long term foreign currency monetary items in line with Companies (Accounting Standards) Amendment Rules 2009 notified on 31" March 2009. Accordingly, the Exchange Gain of Rs. 465.83 lac (Prev. Year Exchange Loss of Rs. 1065.02 lac) relating to long term foreign currency monetary items has been deducted from the cost of respective fixed assets.

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