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Notes to Accounts of Voith Paper Fabrics India Ltd.

Mar 31, 2018

1. Corporate information

Voith Paper Fabrics India Limited (âthe Companyâ) is a public limited company domiciled in India and with its registered office at Plot No. 113/114 - A, Sector - 24, Faridabad - 121005, Haryana, India under the provisions of Indian Companies Act, 1956 and its equity shares are listed on Bombay Stock Exchange in India. The Company is a subsidiary of VP Auslandsbeteiligungen GmbH which holds 74.04% paid up equity share capital of the Company. The Company is primarily involved in the business of manufacturing and selling of paper machine clothing for pulp, paper and board industry.

The write-down of inventories to net realisable value during the year amounted to Rs. 7,691,784; (31 March 2017 : 11,035,832; 1 April 2016 : 12,845,614). The reversal of write-downs during the year amounted to Rs. 5,150,814 (31 March 2017 : 6,337,176; 1 April 2016 : 14,837,513 ). The write-down and reversal are included in cost of materials or changes in inventories of finished goods and work-in-progress.

a) Rights, preferences and restrictions attached to equity shares

The company has only one class of shares referred to as equity shares having par value of INR 10 each. Holder of each equity share is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

As per the records of the Company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of equity shares.

2(a).Provision for warranty represents costs associated with providing sales and support services which are accrued at the time of recognition of revenue and are expected to be utilized over a period of 1 year. Assumption used to calculate the provision for warranties were based on current sales level and current information about actual claims settlement based on the five year warranty period for all products sold. A summary of activity is as follows:

2(b).Provision for litigation primarily made for probable liabilities/claims arising out of pending disputes/litigations with various regulatory authorities. These provisions are affected by numerous uncertainties and management has taken all efforts to make a best estimate. Timing of outflow of resources will depend upon timing of decision of cases. A summary of activity is given below:

During the year ending 31 March 2018 and 31 March 2017, the Company has paid dividend to its shareholders. This has resulted in payment of Dividend Distribution Tax (DDT) to the taxation authorities. The Company believes that DDT represents additional payment to taxation authority on behalf of shareholders. Hence DDT paid is charged to equity. Distribution tax on dividend represents distribution tax on dividend paid during the year ended 31 March 2018 amounting to Rs. 3,576,887 (31 March 2017 3,576,887).

3. Micro, small and medium enterprises

There are no Micro, small and medium enterprises, to whom the company owes dues, which are outstanding for more than 45 days as at the end of the year. The information as required to be disclosed in relation to Micro, small and medium enterprises has been determined to the extent such parties have been identified on the basis of information available with the company.

4. Employee benefits in respect of the Company have been calculated as under:

(A) Defined Contribution Plans

The company has certain defined contribution plan such as provident fund, employee state insurance, employee pension scheme, employee superannuation fund wherein specified percentage is contributed to them. During the year, the Company has contributed following amounts to:

(B) Defined Benefit Plans

(i) Gratuity

In accordance with Ind AS 19 âEmployee Benefitsâ, an actuarial valuation has been carried out in respect of gratuity. The discount rate assumed is 7.70% p.a. (31 March 2017 : 7.30% p.a.; 1 April 2016 : 7.85% p.a.) which is determined by reference to market yield at the balance sheet date on government bonds. The retirement age has been considered at 58 years (31 March 2017 : 58 years; 1 April 2016 : 58 years).

The estimates of future salary increases, considered in actuarial valuation is 10% p.a. (31 March 2017 : 10%; 1 April 2016: 10%), taking into account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The plan assets are maintained with Life Insurance Corporation of India in respect of gratuity scheme. The details of investments maintained by Life Insurance Corporation are not available with the Company, hence not disclosed. The expected rate of return based on LIC statement on plan assets is 8.25% p.a. (31 March 2017 : 8.25% p.a.; 1 April 2016 : 8.25% p.a.)

The sensitivity analysis above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the year and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant.

(ii) Retirement benefit award

In accordance with Ind AS 19 âEmployee Benefitsâ, an actuarial valuation has also been carried out in respect of retirement benefit award. The discount rate assumed is 7.70% p.a. (31 March 2017 : 7.30% p.a.; 1 April 2016 : 7.85% p.a.) which is determined by reference to market yield at the balance sheet date on government bonds. The retirement age has been considered at 58 years (31 March 2017 : 58 years; 31 March 2016 : 58 years).

(iii) Providend Fund:

The Company makes monthly contributions to provident fund managed by trust for qualifying employees. Under the scheme, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. As per Ind AS 19 on âEmployee Benefitsâ, employer established provident fund trusts are treated as defined benefit plans, since the Company is obliged to meet interest shortfall, if any, with respect to covered employees. The total liability of Nil (31 March 2017 : Nil; 1 April 2016 : Nil) has been charge to Statement of Profit and Loss during the year.

(a) Fair valuation of financial assets and liabilities with short term maturities is considered as approximate to respective carrying amount due to the short term maturities of these instruments.

(b) The fair value is determined by using the valuation model/technique with observable/non-observable inputs and assumptions.

5. Financial risk management

(A) Financial risk management Risk management framework

The Companyâs board of directors has overall responsibility for the establishment and oversight of the Companyâs risk management framework.

The Company, through three layers of defence namely policies and procedures, review mechanism and assurance, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations. The audit committee of the board with top management oversees the formulation and implementation of the Risk Management Policies. The risks and mitigation plan are identified, deliberated and reviewed at appropriate forums.

The Company has exposure to the following risks arising from financial instruments:

- credit risk (see (i))

- liquidity risk (see (ii))

- market risk (see (iii))

- liquidity risk (see (iv))

i. Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations, and arises principally from the Companyâs receivables from customers.

The carrying amount of financial assets represents the maximum credit risk exposure.

Trade receivable and other financial assets

The Company has established a credit policy under which each new customer is analysed individually for creditworthiness before the payment and delivery terms and conditions are offered. The Companyâs review includes external ratings, if they are available, financial statements, industry information and business intelligence.

In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or a legal entity, their geographic location, industry, trade history with the Company and existence of previous financial difficulties.

Expected credit loss for trade receivable:

The Company based on internal assessment which is driven by the historical experience / current facts available in relation to defaults and delays in collection thereof, the credit risk for trade receivable is considered low. The Company estimates its allowance for trade receivable using lifetime expected credit loss. The balance past due (net of expected credit loss allowance), excluding receivable from group companies and government companies is 160,546,394.

With regards to all financial assets with contractual cash flows other than trade receivable, management believes these to be high quality assets with negligible credit risk. The management believes that the parties from whom these financial assets are recoverable, have strong capacity to meet the obligations and where the risk of default is negligible and accordingly no provision for expected credit loss has been provided on such financial assets. Break up of financial assets other than trade receivables have been disclosed on balance sheet.

ii. Liquidity risk

Liquidity risk is the risk that Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Companyâs approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Companyâs reputation.

The Companyâs finance department is responsible for managing the short term and long term liquidity requirements. Short term liquidity situation is reviewed daily by finance. Long term liquidity position is reviewed on a regular basis by the Board of Directors and appropriate decisions are taken according to the situation.

Exposure to the liquidity risk

The following are remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted.

iii. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates - will affect the Companyâs income or the value of its holding of financial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, while optimising the return.

Currency risk

The Company is exposed to currency risk to the extent that there is a mismatch between currencies in which sales and purchases are denominated and the functional currency of the Company. The currencies which the Company is exposed to risk are EUR, USD, GBP and NOK.

The Company follows a natural hedge driven currency risk mitigation policy to the extent possible. Any residual risk is evaluated and appropriate risk mitigating steps are taken, including but not limited to, entering into forward contract.

Exposure to currency risk

The summary quantitative data about the Companyâs exposure to currency risk are reported to management of the company as follows:

Sensitivity analysis

A reasonable possible strengthening (weakening) of the USD, EUR, GBP and NOK against all other currencies at 31 March would have affected the measurement of financial exposure denominated in a foreign currency and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant and ignores any impact on forecast sales and purchases.

iv. 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 Companyâs exposure to the risk of changes in market interest rates relates primarily to the Companyâs fixed deposits.

Exposure to interest rate risk

The interest rate profile of the Companyâs interest-bearing financial instruments is as follows:

Fair value sensitivity analysis for fixed-rate instruments

The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

Fair value sensitivity on bank deposits has not been disclosed as interest rate on such deposits is equivalent to market rate.

6. Related Party Disclosures

(A) Related Party Names

(a) Related parties where control exists

a) Holding Company VP Auslandsbeteiligungen GmbH, Germany

b) Ultimate Holding Company Voith Paper Holding GmbH & Co. KG, Germany

(Holds 100% Equity of VP Auslandsbeteiligungen GmbH)

(b) Fellow subsidiaries

Syn Strand Inc., United State of America

Voith Paper Fabrics Stubbins Ltd., United Kingdom

Voith Digital Solutions GmbH, Germany

(Formerly known as Voith IT Solutions GmbH, Germany)

Voith Paper Fabrics Asia Pacific Sdn. Bhd., Malaysia

Voith Paper Fabrics Ipoh Sdn. Bhd., Malaysia

Voith Paper Fabrics & Rolls Systems GmbH & Co. KG, Germany

Voith Paper Technology (India) Private Limited, India

Voith Hydro Private Limited, India

Voith Paper Fabric & Roll Systems Inc. (Wilson), United State of America

Voith Paper Fabric & Roll Systems Inc. (Shreveport), United State of America

Voith Paper GmbH & Co. KG, Germany

Voith Paper Rolls GmbH & Co KG, Austria

Voith Paper Fabrics GmbH, Austria

Voith Paper Fabrics Hogsjo AB, Sweden

Voith Paper Fabrics Waycross, LLC

PT. Voith Paper Rolls Indonesia

Voith Paper (China) Co., Ltd., China

Voith Paper Fabrics BV, Nedarland

Voith Digital Solutions India Private Ltd., India

R. Krishna Kumar, Managing Director Kalyan Dasgupta, Financial Controller

C. S. Gugliani, Company Secretary

7. Contingent liabilities to the extent not provided for:

A Guarantees

Outstanding guarantees furnished by Banks on behalf of the Company is Rs. 5,483,075 (31 March 2017: 6,609,027; 1 April 2016: 5,253,346)

B Claims against Company, disputed by the Company not acknowledged as debt:

(a) Rs. 2,637,144 (31 March 2017 : Rs. 2,637,144; 1 April 2016 : Rs. 6,385,564) as the amount of demand raised by the assessing officer for assessment year 2009-10 on account of disallowances in respect of shifting expenses & repair building etc. (previous year shifting expenses, repair building and technical know-how fees).

The assessing officer disallowed in his assessment order expenses on shifting, repair building, provision for leave encashment & warranty and technical know-how fees/royalty. The Company had filed an appeal with the Commissioner (Appeals) - Income Tax against the said order. The Commissioner (Appeals) had allowed all other grounds in favour of the company except shifting expenses pursuant to which the Company and the department have filed cross appeals in Income Tax Appellate Tribunal.

(b) Rs. 1,715,600 (31 March 2017 : 1,715,600; 1 April 2016 : Rs. 1,715,600) as the amount of demand raised by the assessing officer for assessment year 2008-09 on account of shifting expenses.

The assessing officer disallowed in his assessment order expenses on shifting, repair, forex expenditure on capital assets, legal expenses and additional depreciation. The Company had filed an appeal with the Commissioner (Appeals)- Income Tax against said order. The Commissioner (Appeals) had allowed only repair expenses in favour of the company. Aggrieved by the order, the Company had preferred itâs appeal to Income Tax Appellate Tribunal. Department has also filed an appeal in Income Tax Appellate Tribunal against one ground allowed in favour of the company.

During the year, the Company has received favourable order from Income tax Appellate Tribunal. However, the department is expected to initiate further proceedings against the order of Income tax Appellate Tribunal with the higher appellate authority. Hence, the amount is continue to be disclosed in the above table.

(c) Rs. 6,614,020 (31 March 2017 : 6,614,020; 1 April 2016 : 6,614,020) as the amount of demand raised by assessing officer for assessment year 2007-08 on account of repair expenses.

The assessing officer re-opened the assessment u/s 147/148 and disallowed all the repair expenditure claimed in the Statement of Profit & Loss account. Aggrieved by the order, the Company filed an appeal with Commissioner (Appeals) which was allowed in favour of the Company. Pursuant to this order, the department has filed an appeal in the Income Tax Appellate Tribunal.

In all of the above cases, the management is confident of a favorable outcome from higher appellate authority.

C Other contingent liabilities Labour case:

15 contractual ex-employees had filed a case against the Company under Industrial Tribunal cum Labour Court II, Haryana. The dispute pertains to reinstatement of these employees with continuity of service, full back wages and all consequential benefits since the date of termination. The labour court had decided the case in favour of the workmen. The Company had filed a writ petition in High Court (Punjab & Haryana) based on a legal opinion sought in the matter. 8 employees out of the above filed an appeal for the execution of the labour court award order decided earlier. The Company brought the High Court (Punjab & Haryana) writ petition in notice of the Labour court II, Haryana, but the application has been dismissed for stay on the ground that the stay order by the High Court pertains to criminal prosecution and not the civil execution of the Award. The Company further filled a writ petition in High Court (Punjab & Haryana) against the execution order of Labour Court II, Haryana and currently awaiting for hearing. Based on the opinion from legal consultant, the Company is of the view that the likelihood of potential favorable judgement in the Companyâs favour is probable. Further, the financial implications canât be quantified in this case and will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. Further, the Company has certain other labour cases for which the liability is not ascertainable.

8. Capital Commitments:

Estimated amount of contracts remaining to be executed on capital account (net of advances) Rs. 95,498,072 (31 March 2017 : Nil; 1 April 2016 : 4,190,412)

9. Hedging and derivative instruments:

i) The Company uses foreign exchange forward contracts to selectively hedge its exposure. These derivative instruments are not used for speculative or trading purposes.

ii) Mark to market loss/ (gain) amounting to Rs. (263,719) (31 March 2017: 440,440) in respect of forward contracts have been credited/charged to the Statement of Profit and Loss. The mark to market losses on forward contract outstanding liability as at 31 March 2018 is Rs. 55,019 (31 March 2017: 318,738)

10. The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under sections 92-92F of the Income-tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company is in the process of updating the documentation for the specified domestic transactions entered into with the specified persons and the international transactions entered into with the associated enterprises during the financial year and expects such records to be in existence before the due date of filing of income tax return. The management is of the opinion that itâs international transactions are at armâs length so that the aforesaid legislation will not have any impact on financial statements, particularly on the amount of tax expense and that of provision for taxation.

11. First time adoption of Ind AS

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

The significant accounting policies set out in note 2 have been applied in preparing the financial statements for the year ended 31 March 2018, the comparative information presented in these financial statements for the year ended 31 March 2017 and in the preparation of an opening Ind AS balance sheet at 1 April 2016 (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 Standard) 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, financial performance and cash flows is set out in the following tables and notes.

(A) Exemptions and exemptions 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.

Ind AS optional exemptions

1. Deemed cost

Ind AS 101 permits a first time adopter to elect to continue with the carrying value for all of itâs 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.

Accordingly, the Company has elected to measure all of its property, plant and equipment at their previous GAAP carrying value. Ind AS mandatory exemptions

1. Estimates

An entityâs estimates in accordance with Ind ASs 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 an error.

Ind AS estimates as at 1 April 2016 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 - Impairment of financial assets based on expected credit loss model.

2. De-recognition of financial assets and liabilities

Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirements in Ind AS 109 retrospectively from a date of the entityâs choosing, provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognised as a result of past transactions was obtained at the time of initial accounting for those transactions.

The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.

3 Classification and measurement of financial assets

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

12(E) Statement of cash flows

Other than effect of certain reclassifications due to difference in presentation, there was no other material effect on cash flow from operating, financing and investing activities for all periods presented.

Note 1 : Lease equalisation reserve

Under previous GAAP, lease rentals on operating lease were required to be recognised as income on straight line basis over the lease term by recognising corresponding lease equalisation reserve. However, under Ind AS, there is no such requirement unless under specific circumstances specified in the Ind AS.

Note 2 : Expected credit loss allowance

On transition to Ind AS, the Company has recognised impairment loss on trade receivable measured at amortized cost based on the expected credit loss model as required by Ind AS 109. Consequently, trade receivable have been reduced with a corresponding decrease in retained earnings on the date of transition and there has been an incremental provision for the year ended 31 March 2017.

Note 4 : Other financial liabilities

Under the previous GAAP, liability for security deposit were classified as other current liabilities based on the realisability. Liability for security deposit was carried at cost. Under Ind AS, this security deposit is required to be measured at fair value. The resulting changes before the date of transition have been recognised in retained earnings.

Note 5 : Proposed Dividend

Under the previous GAAP, dividends proposed by the board of directors after the Balance Sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend including dividend distribution tax, was recognised as a liability. Under Ind AS, dividends so proposed by the board are considered to be non-adjusting event. Accordingly, provision for proposed dividend and dividend distribution tax recognised under previous GAAP has been reversed.

Note 6 : Excise duty

Under the previous GAAP, revenue from sale of goods was presented net of the excise duty on sales. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. Excise duty is presented in the Statement of Profit and Loss as an expense. This has resulted in an increase in the revenue from operations and expenses for the year ended 31 March 2017. The total comprehensive income for the year ended and equity as at 31 March 2017 has remained unchanged.

Note 7 : Remeasurement of post employment benefit obligation

Under Ind AS, all actuarial gains and losses are recognised in other comprehensive income. Under previous GAAP, the Company recognised actuarial gains and losses in statement of profit or loss. However, this has no impact on the total comprehensive income and total equity as on 1 April 2016 or as on 31 March 2017.

Note 8 : Tax expenses

Previous GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. Also, the above changes (decreased)/increased the deferred tax liability as follows based on a tax rate of 34.608 percent:

13. During the year, the company had no Specified Bank Notes (SBNs) as defined in the MCA notification, G.S.R.308(E), dated 31 March 2017. The details of SBNs held and transacted during the period from 8 November 2016 to 30 December 2016, the denomination-wise SBNs and other notes as per notification are as follows:

14. a) Appendix B to Ind AS 21, Foreign currency transactions and advance consideration:

On 28 March 2018, Ministry of Corporate Affairs (âMCAâ) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency.

The amendment will come into force from 1 April 2018. The Company has evaluated the effect of this on the financial statements and is of the view that no change in accounting policy is required and the impact is not material.

b) Ind AS 115- Revenue from Contracts with Customers:

On 28 March 2018, Ministry of Corporate Affairs (âMCAâ) has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Under Ind AS 115, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when âcontrolâ of the goods or services underlying the particular performance obligation is transferred to the customer.

Moreover, the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entityâs contracts with customers.

The effective date for adoption of Ind AS 115 is financial periods beginning on or after 1 April 2018. The Company will adopt the standard on 1 April 2018 by using the cumulative catch-up transition method as defined under standard and accordingly, comparatives for the year ending or ended 31 March 2018 will not be retrospectively adjusted.

While, the Company is in the process of implementing Ind AS 115 on financial statement, it is of the view that there will not be any significant change in its revenue recognition policy and the impact of the same will not be material.

15. Figures in bracket indicate deductions

16. Previous periodâs/ yearâs figures have been regrouped / reclassed, where necessary, to conform to current yearâs classification as per Ind AS.

Mar 31, 2017

b. Rights, preferences and restrictions attached to equity shares

The Company has only one class of shares referred to as equity shares having a par value of Rs. 10/- per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees.

During the year ended 31 March 2017, the amount of per share dividend paid as distributions to equity shareholders and pertaining to the year ended 31 March 2016 is Rs. 4.0 (previous year Rs. 4.5)

The Board of Directors, in its meeting held on 25 May, 2017, has proposed a final dividend of Rs. 4.00 per equity share for the financial year ended 31 March 2017. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held on 6^th July, 2017 and if approved would result in a cash outflow of approximately Rs. 21,147,123 including corporate dividend tax.

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

# Provision for warranties

A provision is recognized for expected warranty claims on products sold during the year, based on past experience of level of claim settlement. It is expected that the most of this cost will be incurred within one year of the balance sheet date. Assumption used to calculate the provision for warranties were based on current sales level and current information about claims settlement based on the five year warranty period for all products sold.

## Provision for contingencies represents the following:-

(a) Potential tax liability estimated through various notices issued by sales tax department towards differential amount of sale tax applicable on products sold - Rs. 2,707,113 (previous year: Rs. 2,707,113)

(b) Estimated contingencies in respect of Local area development tax, applicability of which is not certain on the Company -Rs. 4,439,556 (previous year: Rs. 4,439,556)

1. Gratuity and other post-employment benefit plans

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days of last drawn salary for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy. These benefits are funded with Life Insurance Corporation of India.

The Company has also agreed to pay Rs. 25,000 at retirement to all the workers (Other Retirement Benefit). These benefits are un-funded.

The following tables summarize the components of net benefit expense recognized in the statement of Profit and Loss and the funded status and amounts recognized in the Balance Sheet for the respective plans.

Statement of profit and loss

Net employee benefit expense recognized in the employment cost

2. Related party disclosures a. List of related parties:

Names of Related Parties where control exists irrespective of whether transactions have occurred or not:

(A)	Holding Company	VP Auslandsbeteiligungen GmbH, Germany
(B)	Ultimate Holding Company	Voith Paper Holding GmbH & Co. KG, Germany (Holds 100% Equity of VP Auslandsbeteiligungen GmbH)
Names of Related Parties with whom transactions have occurred during the period
(A)	Fellow subsidiaries	Syn Strand Inc., United State of America Voith Paper Fabrics Stubbins Ltd., United Kingdom Voith Digital Solutions GmbH, Germany (Formerly known as Voith IT Solutions GmbH, Germany) Voith Paper Fabrics Asia Pacific Sdn. Bhd., Malaysia Voith Paper Fabrics Ipoh Sdn. Bhd., Malaysia Voith Paper Fabrics GmbH & Co. KG, Germany Voith Paper Fabrics & Rolls Systems GmbH & Co. KG, Germany J.M. Voith GmbH & Co. Beteiligungen KG, Germany Voith Paper Technology (India) Private Limited, India Voith Hydro Private Limited, India Voith GmbH, Germany Voith Paper Fabric & Roll Systems Inc., United State of America Voith Turbo Private Limited, India Voith Paper GmbH & Co. KG, Germany Voith Paper Rolls GmbH & Co KG, Germany Voith Paper Fabrics GmbH, Austria Voith Paper GmbH, Austria Voith Paper Fabrics Hogsjo AB, Sweden Voith Paper Fabrics Waycross, LLC PT. Voith Paper Rolls Indonesia Voith Paper (China) Co., Ltd.
(B)	Key Management Personnel	R. Krishna Kumar, Managing Director

Income tax demand consists of:-

(a) Rs. 2,637,144 (Previous year - 6,385,564) as the amount of demand raised by the assessing officer for assessment year 2009-10 on account of disallowances in respect of shifting expenses & repair building etc. (previous year shifting expenses, repair building and technical know-how fees).

(b) Rs. 1,715,600 (Previous year - Rs. 1,715,600) as the amount of demand raised by the assessing officer for assessment year 2008-09 on account of shifting expenses.

The assessing officer disallowed in his assessment order expenses on shifting, repair, forex expenditure on capital assets, legal expenses and additional depreciation. The Company had filed an appeal with the Commissioner (Appeals) - Income Tax against said order. The Commissioner (Appeals) had allowed only repair expenses in favour of the company. Aggrieved by the order, the Company had preferred it''s appeal to Income Tax Appellate Tribunal. Department has also filed an appeal in Income Tax Appellate Tribunal against one ground allowed in favour of the company.

The amount disclosed above is raised on account of shifting expenses.

(c) Rs. 6,614,020 (Previous year - Rs. 6,614,020) as the amount of demand raised by assessing officer for assessment year 2007-08 on account of repair expenses.

In all of the above cases, the management is confident of a favorable outcome from higher appellate authority.

Labour case:

For the following assets, based on internal assessment and independent technical evaluation carried out by external valuers, the management believes that the useful lives as given below best represent the period over which the management expects to use these assets. Hence, the useful lives of these assets is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013:-

Mar 31, 2016

(a) Rs. 6,385,564 (Previous period - Rs 949,670) as the amount of demand raised by the assessing officer for assessment year 200910 on account of disallowances in respect of shifting expenses, repair building & technical know-how expenses.

The amount disclosed above raised on account of shifting expenses, repair building and technical know-how expenses.

(b) Rs. 1,715,600 (Previous period - Rs. 1,715,600) as the amount of demand raised by the assessing officer for assessment year 2008-09 on account of shifting expenses.

The assessing officer disallowed in his assessment order expenses on shifting, repair, forex expenditure on capital assets, legal expenses and additional depreciation. The Company had filed an appeal with the Commissioner (Appeals) - Income Tax against said order. The Commissioner (Appeals) had allowed only repair expenses in favour of the company. Aggrieved by the order, the Company had preferred its appeal to Income Tax Appellate Tribunal. Department has also filed an appeal in Income Tax Appellate Tribunal against one ground allowed in favour of the company.

The amount disclosed above is raised on account of shifting expenses.

(c) Rs. 6,614,020 (Previous period - Rs. Nil) as the amount of demand raised by assessing officer for assessment year 2007-08 on account of repair expenses.

In all of the above cases, the management is confident of a favorable outcome from higher appellate authority,

Labour case:

1. Figures have been regrouped/ rearranged wherever necessary to confirm to the classification adopted for the current year.

2. During previous period, the financial year of the Company had been extended to 31 March, 2015 in order to comply with the provisions of the Companies Act, 2013. Hence, the amounts of current period 12 months (from 1 April, 2015 to 31 March, 2016) and previous period 18 months (from 1 October, 2013 to 31 March, 2015) are not comparable.

Mar 31, 2015

1. Corporate information

Voith Paper Fabrics India Limited (''the Company'') is a subsidiary of VP Auslandsbeteiligungen GmbH which holds 74.04% paid up equity share capital of the Company. The Company is mainly in the business of manufacturing and selling of paper machine clothing for pulp, paper and board industry.

2. Basis of preparation

The financial statements have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP) under the historical cost convention on an accrual basis in compliance with all material aspect of the Accounting Standard (AS) Notified by the Companies Accounting Standard Rules, 2006 (as amended), and the relevant provisions of the Companies Act, 1956 read with General Circular 8/2014 dated April 4, 2014, issued by the Ministry of Corporate Affairs to the extent applicable. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.

All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle, and other criteria set out in the Revised Schedule VI to the Companies Act, 1956. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as up to twelve months for the purpose of current/non-current classification of assets and liabilities.

3. Terms / rights attached to equity shares

The Company has only one class of shares referred to as equity shares having a par value of Rs. 10/- per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend propsed by the Board of Directors is subject to approval of the shareholders in the ensuing Annual General Meeting.

During the period ended March 31,2015, the amount of per share dividend recognized as distributions to equity shareholoders was Rs. 3 (Previous year Rs. 3)

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

4. Provision for contingencies represents the following:-

(a) Potential tax liability estimated through various notices issued by sales tax department towards differential amount of sale tax applicable on products sold - Rs. 3,476,802 (Previous year : Rs. 3,476,802)

(b) Demand from excise department towards interest on cenvat credit wrongly availed - Rs. Nil (Previous year : Rs. 469,000)

(c) Estimated contingencies in respect of Local area development tax, applicability of which is not certain to the Company - Rs. 4,439,556 (Previous year : Rs. 4,439,556)

(d) Provision for 1% additional duty on import - Rs. 40,256 (Previous year - Rs. 40,256)

In all these cases, based on legal advice/opinion obtained or base its own assessment, management considers probable that economic outflows will occur.

5. Gratuity and other post-employment benefit plans

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days of last drawn salary for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The Company has also agreed to pay Rs 25,000 at retirement to all the workers (Other Retirement Benefit). These benefits are un-funded. The following tables summarize the components of net benefit expense recognized in the statement of Profit and Loss and the funded status and amounts recognized in the Balance Sheet for the respective plans.

Statement of profit and loss

6. Segment Reporting

(a) Primary Segment

The company is engaged in the business of manufacturing and selling of paper machine clothing for pulp, paper and board industry. The entire operation is governed by the same set of risk and returns and hence, the same has been considered as representing a single primary segment.

7. Related party disclosures

a. List of related parties :

Names of Related Parties where control exists irrespective of whether transactions have occurred or not:

(A) Holding Company VP Auslandsbeteiligungen GmbH (formerly VPT Auslandsbeteiligungen GmbH)

(B) Ultimate Holding Voith Paper Holding GmbH & Co. KG Company (Holds 100% Equity of VP Auslandsbeteiligungen GmbH)

Names of Related Parties with whom transactions have occurred during the period

(A) Fellow subsidiaries Syn Strand Inc. Voith Paper Fabrics Stubbins Limited Voith IT Solution GmbH Voith Paper Fabrics Asia Pacific Sdn Bhd Voith Paper Fabrics Ipoh Sdn. Bhd. Voith Paper Fabrics GmbH & Co. KG Voith Paper Holding (VPT) Heidenheim Voith Paper Fabrics (China) Co. Ltd. Voith Paper Technology (India) Private Limited Voith Hydro Private Limited Voith Paper Fabrics & Roll Systems GmbH Voith GmbH, Heidenheim Voith Paper Fabrics SAS Voith Turbo Private Limited Voith Paper GmbH & Co. KG Voith Paper Rolls GmbH & Co KG Voith Paper Fabrics GmbH, Frankenmarkt Voith Paper GmbH Voith Paper Fabrics Hogsjo AB

(B)Key Management Personnel R. Krishna Kumar, Managing Director (w.e.f. 01-08-2014)

8. Contingent liabilities

Particulars As at As at March 31,2015 September 30, 2013 Rs. Rs.

a) Claim against the Company not a - 1,605,000 cknowledged as debts*

b) Income tax demand** 2,665,270 19,527,915

c) Bank guarantees given 6,063,748 5,345,289 by the Company

d) Tax liability in respect of C-Forms pending to be collected 30,632,980 29,180,465

*The claims against the Company comprises of:-

(a) Rs. Nil (Previous year - Rs. 1,605,000) in respect of order from Excise department for penalty of Cenvat wrongly taken and reversed later on. The Company had filed an appeal with the Custom, Excise and Service Tax Appellate Tribunal against the said order whereby the stay was granted. During the current period, the matter has been decided in company''s favour.

** Income tax demand consists of:-

(b) Rs. Nil (Previous year - Rs. 10,169,127) as the amount of demand raised by the assessing officer for assessment year 2010-11 on account of disallowance pertaining to technical know-how fees/royalty. The Company had filed an appeal with the Commissioner (Appeals) - Income Tax against the said order. During the current period, the company has received a order dated 18th December, 2014 from CIT(Appeals) in which the issue has been allowed in company''s favour.

(c) Rs. 949,670 (Previous year - Rs 6,302,822) as the amount of demand raised by the assessing officer for assessment year 2009-10 on account of certain disallowances. The Company had filed an appeal with the Commissioner (Appeals) - Income Tax against the said order; During the current period, the company has received two orders dated 16th December, 2014 from CIT(Appeals) in which out of the 4 grounds 3 grounds have been allowed in company''s favour.

(d) Rs. 1,715,600 (Previous year - Rs. 3,055,966) as the amount of demand raised by the assessing officer for assessment year 2008-09 on account of certain disallowances. The Company had filed an appeal with the Commissioner (Appeals) - Income Tax against said order. During the current period, the appeal has been decided partly in company''s favour by CIT(Appeals).

In all of the above cases, the management is confident of a favorable outcome from higher appellate authority.

9. Previous year figures have been regrouped/rearranged wherever necessary to confirm to the classification adopted for the current year.

10. The financial year of the company has been extended to March 31,2015 in order to comply with the provisions of the Companies Act, 2013. Hence, the amounts of current period 18 months (from October 1, 2013 to March 31, 2015) and previous period 12 months (from October 1,2012 to September 30, 2013) are not comparable.

Sep 30, 2013

1. Corporate information

Voith Paper Fabrics India Limited (''the Company'') is a subsidiary of VP Auslandsbeteiligungen GmbH which holds 74.04% paid up equity share capital of the Company. The Company is mainly in the business of manufacturing and selling of paper machine clothing for pulp, paper and board industry.

2. Basis of preparation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared on an accrual basis and under the historical cost convention. The accounting policies adopted in the preparation of financial statements are consistent with those of previous year.

3. Gratuity and other post-employment benefit plans

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days of last drawn salary for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The Company has also agreed to pay Rs 25,000 at retirement to all the workers (Other Retirement Benefit). These benefits are un-funded.

The following tables summarize the components of net benefit expense recognized in the statement of Profit and Loss and the funded status and amounts recognized in the Balance Sheet for the respective plans.

4. Related party disclosures

a. List of related parties :

Names of Related Parties where control exists irrespective of whether transactions have occurred or not:

(A) Holding Company VP Auslandsbeteiligungen GmbH (formerly VPT

Auslandsbeteiligungen GmbH)

(B) Ultimate Holding Company Voith Paper Holding GmbH & Co. KG

(Holds 100% Equity of VP Auslandsbeteiligungen GmbH)

Names of Related Parties with whom transactions have occurred during the year

(A) Fellow subsidiaries Syn Strand Inc.

Voith Paper Fabrics Stubbins Limited

Voith IT Solution GmbH

Voith Paper Fabrics GmbH

Voith Paper Fabrics Asia Pacific Sdn Bhd

Voith Paper Fabrics Ipoh Sdn. Bhd.

Voith Paper Fabrics GmbH & Co. KG

Voith Paper Holding (VPT) Heidenheim

Voith Paper Fabrics (China) Co. Ltd.

Voith Paper Technology (India) Private Limited

Voith Hydro Pvt. Ltd.

Voith Paper Fabrcis & Roll Systems GmbH

Voith GmbH, Heidenheim

Voith Paper Fabrics SAS

Voith Turbo Private Limited

5. Capital and other commitments

At September 30, 2013, the Company has capital commitments of Rs. 73,091,493 (Previous year Rs 23,952,685) net of advances.

6. Contingent liabilities

Particulars As at As at September 30, 2013 September 30, 2012 Rupees Rupees

(a) Claim against the Company not acknowledged as debts* 1,605,000 2,837,344

(b) Income tax demand** 19,527,915 9,358,788

(c) Bank guarantees given by the Company 5,345,289 6,708,479

*The claims against the Company comprises of:-

(a) Rs. 1,605,000 (Previous year - Rs. 1,605,000) in respect of order from Excise department for penalty of Cenvat wrongly taken and reversed later on. The Company had filed an appeal with the Custom, Excise and Service Tax Appellate Tribunal against the said order whereby the stay was granted. The management is hopeful of matter being settled in its favor.

(b) Rs. Nil (Previous year - Rs. 1,232,344 ) in respect of duty deposited with custom authorities on account of purchase from related parties.

** Income tax demand consists of:-

(c) Rs. 10,169,127 as the amount of demand raised by the assessing officer for assessment year 2010-11 on account of disallowance pertaining to technical know-how fees/royalty. The Company has filed an appeal with the Commissioner (Appeals) - Income Tax against the said order;

(d) Rs. 6,302,822 as the amount of demand raised by the assessing officer for assessment year 2009-10 on account of certain disallowances. The Company has filed an appeal with the Commissioner (Appeals) - Income Tax against the said order;

(e) Rs. 3,055,966 as the amount of demand raised by the assessing officer for assessment year 2008-09 on account of certain disallowances. The Company has filed an appeal with the Commissioner (Appeals) - Income Tax against said order.

In all of the above cases, the management is confident of a favorable outcome.

7. During the year, the Company has recorded sales commission expense of Rs.2,439,263 in the profit and loss account. The agreements relating to this transaction expired in the month of December 2012. The necessary approval of Central Government confirming renewal of agreements for a period of five years effective from 1st January, 2013, with the selling agents, is yet to be received by the company. The management is of the view that it shall be able to obtain the approval shortly and no significant adjustments are expected from this.

8. Previous year figures have been regrouped/rearranged wherever necessary to confirm to the classification adopted for the current year.

Sep 30, 2012

1. Corporate information

Voith Paper Fabrics India Limited ('the Company') is a subsidiary of VP Auslandsbeteiligungen GmbH which holds 74.04% paid up equity share capital of the Company. The Company is mainly in the business of manufacturing and selling of paper machine clothing for pulp, paper and board industry.

2. Basis of preparation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared on an accrual basis and under the historical cost convention.

The accounting policies adopted in the preparation of financial statements are consistent with those of previous year, except for the change in accounting policy explained below.

a. Terms / rights attached to equity shares

The Company has only one class of shares referred to as equity shares having a par value of Rs. 10/- per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to approval of the shareholders in the ensuing Annual General Meeting.

During the year ended September 30, 2012, the amount of per share dividend recognized as distributions to equity shareholoders was Rs. 3 (Previous year Rs. 3)

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

# Provision for warranties

A provision is recongnized for expected warranty claims on products sold during the year, based on past experience of level of repairs and returns. It is expected that the most of this cost will be incurred in the next financial year and all will have been incurred within one year of the balance sheet date. Assumption used to calculate the provision for warranties were based on current sales level and current information about returns based on the three year warranty period for all products sold.

Provision for contigencies represents the following:-

(a) Tax claims/potential claims made by sales tax department towards differential amount of sale tax applicable on products sold - Rs. 3,476,802 (Previous year : Rs. 5,045,045)

(b) Demand from excise department towards interest on cenvat credit wrongly availed - Rs. 469,000 (Previous year : Rs. 680,281)

(c) Demand of Local area development tax applicability of which is not certain to the Company - Rs. 4,439,556 (Previous year : Rs. 4,439,556)

(d) Provision for 1% additional duty on import - Rs. 40,256 (Previous year : Rs. Nil)

In all these cases, based on legal advice/opinion obtained or base its own assessment, management considers probable that economic outflows will occur.

# Excise duty on sales amounting to Rs. 62,692,245/- (Previous Year : Rs. 53,115,182/-) has been reduced from sales in statement of profit and loss account and excise duty on decrease in stock amounting to Rs. 1,157,629 (Previous Year : Rs. 66,096) has been considered as income in note 15 of financial statement.

3. Gratuity and other post-employment benefit plans

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days of last drawn salary for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The Company also pays Rs 25,000 at retirement to all the workers (Other Retirement Benefit). These benefits are un-funded.

The following tables summarize the components of net benefit expense recognized in the statement of Profit and Loss and the funded status and amounts recognized in the Balance Sheet for the respective plans.

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

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. There has been significant change in expected rate of return on assets due to change in the market scenario.

4. Segment Reporting

(a) Primary Segment

The company is engaged in the business of manufacturing and selling of paper machine clothing for pulp, paper and board industry. The entire operation is governed by the same set of risk and returns and hence, the same has been considered as representing a single primary segment.

(b) Geographical Segments

The following is the distribution of the company's consolidated sales by geographical market, regardless of where the goods were produced:

All the assets of the Company except receivables are located in India, therefore, separate figures for fixed assets/additions to fixed assets have not been furnished.

5. Related party disclosures

a. List of related parties:

Names of Related Parties where control exists irrespective of whether transactions have occurred or not:

(A) Holding Company VP Auslandsbeteiligungen GmbH (formerly VPT

Auslandsbeteiligungen GmbH)

(B) Ultimate Holding Company Voith Paper Holding GmbH & Co. KG

(Holds 100% Equity of VP Auslandsbeteiligungen GmbH)

Names of Related parties with whom transactions have occurred during the year

(A) Fellow subsidiaries Syn Strand Inc.

Voith Paper Fabrics Stubbins Limited

Voith IT Solution GmbH

Voith Paper Fabrics GmbH

Voith Paper Fabrics Asia Pacific Sdn Bhd

Voith Paper Fabrics Ipoh Sdn. Bhd.

Voith Paper Fabrics GmbH & Co. KG

Voith Paper Holding (VPT) Heidenheim

Voith Paper Fabrics (China) Co. Ltd.

Voith Paper Technology (India) Private Limited

Voith Hydro Pvt. Ltd.

Voith Paper Fabrics & Roll Systems GmbH

Voith GmbH, Heidenheim

6. Capital and other commitments

At September 30, 2012, the Company has capital commitments of Rs. 23,952,685 (Previous year Rs 395,751) net of advances.

7. Contingent liabilities Particulars As at As at September 30, 2012 September 30, 2011 Amount (Rs.) Amount (Rs.)

(a) Claim against the Company not acknowledged as debts* 2,837,344 2,565,715

(b) Income tax demand** 9,358,788 -

(c) Bank guarantees given by the Company 6,708,479 6,697,772

*The claims against the Company comprises of:-

(a) Rs. 1,605,000 (previous year - Rs. 1,605,000) in respect of order from Excise department for penalty of Cenvat wrongly taken and reversed later on. The Company had filed an appeal with the Custom, Excise and Service Tax Appellate Tribunal against the said order whereby the stay was granted. The management is hopeful of matter being settled in its favour.

(b) Rs.1,232,344 (previous year - Rs. 960,715 ) in respect of duty deposited with custom authorities on account of purchase from related parties.

** Income tax demand consists of:-

(c) Rs. 6,302,822 as the amount of demand raised by the assessing officer for assessment year 2009-10 on account of certain disallowances. The Company has filed an appeal with the Commissioner (Appeals) - Income Tax against the said order;

(d) Rs. 3,055,966 as the amount of demand raised by the assessing officer for assessment year 2008-09 on account of certain disallowances. The Company has filed an appeal with the Commissioner (Appeals) - Income Tax against said order.

In both the above cases, the management is confident of a favorable outcome.

8. Previous year figures have been regrouped/ rearranged wherever necessary to confirm to the classification adopted for the current year. Also refer note 2.1(a).

Sep 30, 2010

1. Nature of Operations

Voith Paper Fabrics India Limited (the Company), is a subsidiary of VPT Auslandsbeteiligungen GmbH which holds 74.04% paid up equity share capital of the Company. The Company is mainly in the business of manufacturing and selling of paper machine clothing for pulp, paper and board industry.

2. Segment Information

(a) Primary Segment

The Company is engaged in the business of manufacturing and selling of paper machine clothing for pulp, paper and board industry. The entire operation is governed by the same set of risk and returns and hence, the same has been considered as representing a single primary segment. The said treatment is in accordance with the guiding principles enunciated in the Accounting Standard 17 on Segment Reporting.

(b) Geographical Segments:

The following is the distribution of the Companys consolidated sales by geographical market, regardless of where the goods were produced:

2. Related Party Disclosure

a.Names of related parties where control exists irrespective of whether transactions have occurred or not.

(A) Ultimate Holding Company VPT Auslandsbeteiligungen GmbH (VF Auslandsbeteiligungen GmbH till October 1, 2009) Voith Paper Holding GmbH & Co. KG* ("holds 100% Equity of VPTAuslandsbeteiligungen GmbH)

Names of other related parties with whom transactions have taken place during the year

(B) Fellow Subsidiary Voith Paper Fabrics Ipoh Sdn Bhd (IPOH)

Voith Paper Fabrics Syn Strand (Syn. Strand)

Voith Paper Fabrics Blackburn Ltd (VFBL) **

Voith Paper Fabrics Stubbins Ltd. (Stubbins)

Voith IT Solution GMBH, (VOIS)

Voith Paper Fabrics Frankenmarkt GMBH

Voith Paper Fabrics Asia Pacific Sdn. Bhd. (VFIS)

Voith AG, Heidenheim (VZ)

Voith Paper Fabrics GmbH & Co. KG

Voith Paper Holding GmbH & Co. KG (VPT)

Voith Paper Fabrics (China) Co. Ltd.

Voith Paper Fabrics, SA

Voith Paper Technology (India) Limited

(C) Key Management Personnel Manoj Kumar Kapoor (till March 26, 2009)

3. Details of dues to Micro and Small Enterprises

Pursuant to the amendment of Schedule VI of the Companies Act, 1956, regarding disclosure of amount due to creditors which are Micro and Small Enterprises, the Company has sent request to creditors to confirm on the status and has not received intimation regarding the status from some of suppliers hence disclosures, if any, relating to amounts unpaid as at the year end along with interest paid/payables to them as required under the said act have been given to the extent of information available. The Company generally makes payments to all its suppliers within the agreed credit period (generally less than 45 days) and thus the Management is confident that there will be no liability of interest under the MSMED Act. The disclosure required under Micro Small and Medium Enterprise Development Act, 2006 are as follows:

4. Gratuity and other post-employment benefit plans

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The Company has also agreed to provide certain additional benefits to workers. These benefits are unfunded.

The following tables summarize the components of net benefit expense recognized in the Profit and Loss Account and the funded status and amounts recognized in the Balance Sheet for the respective plans.

5. Contingent Liabilities not provided for

S.No Particulars As at As at September September 30, 2010 30, 2009 (Rs.) (Rs.)

(a) Claims against the Company not acknowledged as debts* 5,265,527 1,675,435

(b) Income Tax Demand - 1,682,980

(c) Bank Guarantees given by the Company 3,860,510 3,808,656

* The claims against the Company comprises of:-

a) Rs. 1,605,000 (previous year- Rs. 1,605,000) in respect of Order from Excise department for penalty of Cenvat wrongly taken and reversed later on. The Company had filed an appeal with the Custom, Excise and Service Tax Appellate Tribunal against the said order whereby the stay was granted.

b) Rs.2,872,952 (previous year- nil) represents the potential claims by Excise Department towards the amount of Local area development tax leviable on entry of goods in the state of Haryana. Since, the law was struck down by the state court and the case is under hearing in Supreme Court and no demands have been raised, the management does not consider this to be payable.

c) Rs.787,575 (previous year - Rs.70,435) towards non-deposition of service tax in respect of commission received without deposition of service tax. The Company has got favourable order by Additional Commissioner, Service Tax, New Delhi. The department has filed application against the said order with Commissioner of Central Excise (Appeals).

**Income tax demand of as at Sept 30,2009 consists of:

a) Rs.525,570 as the the amount of demand raised by the assessing officer in its assessment for assessment year 2005-

06 on account of certain disallowances and the Company had filed an appeal with the Commissioner (Appeals) - Income Tax against the said order; and

b) Rs. 1,157,410 as the amount of demand raised by the assessing officer in this assessment for assessment year 2006-

06 on account of disallowances which is being contested by the Company. Company has received the order of CIT(A) against it and it will file its appeal in the tribunal.

The Company has been advised by its Counsel that it is possible, but not probable, the action will succeed and accordingly no provision for any liability has been made in these financial statements.

7. In accordance with para 10 of Accounting Standard- 9 Revenue Recognition notified under the Companies (Accounting Standard) Rules, 2006 (as amended), excise duty on sales amounting to Rs. 47,050,798 (Previous year Rs.27,176,161) has been reduced from sales in profit & loss account and increase/(decrease) in excise duty on closing stock amounting to Rs. 514,863 (Previous year (Rs.2,694,080)) has been considered as income/expense in Schedule 14 of the financial statements.

8. Previous years figures have been regrouped/ reclassified wherever considered necessary to conform to current years classification.

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