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Notes to Accounts of Zicom Electronic Security Systems Ltd.

Mar 31, 2015

1. Lease:

Disclosure as required by AS 19 - "Leases" issued by The Institute of Chartered Accountants of India are as follows:

Operating Lease:

The Company's significant leasing arrangements are in respect of office premises and residential flats taken on lease. The arrangements are generally from 11 months to 36 months. Under these agreements, generally refundable interest-free deposits have been given. In respect of above arrangements, lease rentals payable are recognised in the Statement of Profit and Loss for the year and included under Rent and Compensation (Disclosed under Schedule 24).

2. Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2 2006, certain disclosures are required to be made relating to Micro, Small & Medium Enterprises. The Company is in the process of compiling relevant information from its suppliers about their coverage under the said Act. Since the relevant information is not readily available, no disclosures have been made in the accounts. However, in view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of this Act is not expected to be material.

3. During the year under review, the Company made following allotments on preferential basis in accordance with SEBI's Guidelines for Preferential Issue, i.e. Chapter VII of Securities & Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009:

With the allotment at (b) above, the Paid-up Share Capital of the Company has increased to 20,199,829 Equity Shares of Rs. 10 each aggregating to Rs. 201,998,290. Further, with the above allotment the Securities Premium Account of the Company has increased by Rs.390,000,000.

4. During the year under review, the Company made following investments in securities of companies:

a. Invested in further issue of Equity Shares made by Zicom SaaS Private Limited, a wholly owned subsidiary, by subscribing to 2,500,000 Equity Shares of Rs. 10 each at a Premium of Rs. 10 each aggregating to Rs. 50,000,000. With this allotment (made on May 26, 2014), the total holding of the Company in its said subsidiary has increased to Rs. 200,000,000 comprising of 20,000,000 Equity Shares of Rs. 10 each (out of which 5,000 Equity Shares are held by Mr. Pramoud Rao as a Nominee of the Company).

b. During the Previous year, the Company has divested its entire stake in its wholly owned subsidiary 2020 Imaging India Limited (formerly known as Zicom CNA Automation Limited) and the loss incurred on divestment of the same has been recognized in the books under the head Other Expenses.

5. The Company in the earlier year had given an ICD amounting to Rs. 60,000,000 of which an amount of Rs. 32,500,000 has been recovered till date. On account of non-recovery of the said balance, the Company has filed a legal suite against the said party. In view of the fact that the principal & interest are pending to be recovered as on date on conservative basis, the Company has written-off the amount from the books amounting to Rs. 51,776,297 which has been showed under head exceptional items in the Statement of Profit and Loss in Previous Year.

6. In respect of a sum of Rs. 10,556,674 due from a customer shown under Other Non Current Assets in Previous Year, the Company had received an amount of Rs. 4,233,000 towards principal pursuant to an award granted by the Honorable Supreme Court of India. As such, the Management is confident of recovering the balance sum of Rs. 6,323,674 disclosed under the head Other Current Asset; and hence no provision has been considered necessary in this regard.

7. Segment Reporting: The Company has only one reportable segment namely "Security and Safety".

8. The Company is of the view that there are no indications of material impairment and the carrying amount of its fixed assets or where applicable, the cash generating unit to which these assets belong, do not exceed their recoverable amounts (i.e., the higher of the net selling price and value in use of the assets ). Hence, no impairment had arisen during the year as per the recommendations of AS 28 - "Impairment of Assets".

9. During the year no provision towards diminution is considered necessary in the books keeping in view the fact that the said Investments are of Long Term nature.

10 In the opinion of the Management, the Current Assets and Loans and Advances as shown in the books are expected to realise at their Book Values in the normal course of business and adequate provision have been made in respect of all known liabilities.

11. Pursuant to the enactment of Companies Act 2013, the company has applied the estimated useful lives as specified in Schedule II except in respect of certain assets as disclosed in Accounting Policy on Depreciation, Amortization and Depletion. Accordingly the unamortized carrying value is being depreciated/amortized over the revised / remaining useful lives. The written down value of Fixed Assets whose lives have expired as at 1st April 2014 have been adjusted in the opening balance of Profit and Loss Account amounting to Rs.4,502,111.

12. Certain balances under the heads Sundry Debtors, Loans & Advances, Sundry Creditors are subject to confirmations from the respective parties and consequential reconciliation, if any.


Mar 31, 2014

1 Corporate information

Zicom Electronic Security Systems Ltd. is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The company is engaged in the manufacturing and selling of Electronic security systems and equipments. The company also provides annual maintenance services for Electronic security products

March 31, 2014 March 31, 2013 Rs Rs

2. Contingent liabilities and commitments (to the extent not provided for)

(a) Letters of Credit by Bank 6,517,133 18,499,247

(b) Guarantees issued by Bank (Gross) 9,060,410 7,087,000

(c) Standby Letter of Credit (SBLC) # 525,262,500 522,500,000

(d) Corporate Guarantee and Indemnities 3,625,612,600 2,724,580,000

"(e)" Sales Tax Matters 253,087 534,471

(f) Claim Lodged by Customers Not Acknowledged as Debt 349,822 476,215

* SBLC is secured by the first charge by way of hypothecation of moveable Machinery and other Fixed Assets and Equitable Mortgage of properties situated in Mumbai and Bangluru and second charge on Current Assets of the company. It is further secured by pledge of 500,000 equity share of company held by Promoter Director.

3. Consumption of imported and indigenous items is ' Nil (2013 : Rs Nil)

4. Employee benefit plans

Amount of Rs 891,981 (2013 : '32,325) in respect of Gratuity and ' 586,467 (2013 : Rs 303,733) in respect of leave is recognised as expense and included in Employee Cost (Note No. 22) in the Statement of Profit and Loss.

General Description of significant defined plans

5. Gratuity Plan

Gratuity is payable to all eligible employees on the completion of five years of service in the event of resignation, retirement, permanent disablement or death.

6. Leave Plan

Eligible employees can carry forward the leaves as per the leave policy of the company and is payable at separation on account of retirement, permanent disablement or death.

7. Lease:

Disclosure as required by AS 19 - "Leases" issued by The Institute of Chartered Accountants of India are as follows:

Operating Lease:

The Company's significant leasing arrangements are in respect of office premises and residential flats taken on lease. The arrangements are generally from 11 months to 36 months. Under these agreements, generally refundable interest-free deposits have been given. In respect of above arrangements, lease rentals payable are recognised in the Statement of Profit and Loss for the year and included under Rent and Compensation (Disclosed under Schedule 24).

8. Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2 2006, certain disclosures are required to be made relating to Micro, Small & Medium Enterprises. The Company is in the process of compiling relevant information from its suppliers about their coverage under the said Act. Since the relevant information is not readily available, no disclosures have been made in the accounts. However, in view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of this Act is not expected to be material.

9. During the year under review, on December 2, 2013 the Company allotted 600,000 Equity Shares of Rs 10/- each at a price of Rs 46/- per Share to the holders of the 600,000 Warrants (who are Promoter Group Companies), against exercise of options attached to the said Warrants, allotted to them on July 13, 2012 in accordance with SEBI's Preferential Issue Guidelines i.e. Chapter VII of Securities & Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009:

Thus, with the above allotments the Paid-up Share Capital of the Company has increased to 17,599,829 Equity Shares of Rs 10/- each aggregating to Rs 175,998,290/- and the Securities Premium Account of the Company has increased by Rs 21,600,000/-. As the result of the above allotments Promoter Group now holds 4,237,023 Equity Shares i.e. 24.07% of post issue capital.

10. During the year under review, the Company made following investments in securities of companies:

a. Invested in further issue of Equity Shares made by Zicom SaaS Private Limited, a wholly owned subsidiary, by subscribing to 2,500,000 Equity Shares of '10/- each at a Premium of Rs 10/- each aggregating to RS 50,000,000/-. With this allotment (made on February 4, 2014), the total holding of the Company in its said subsidiary has increased to Rs 175,000,000/- comprising of 17,500,000 Equity Shares of Rs 10/- each (out of which 5,000 Equity Shares are held by Mr. Pramoud Rao as a Nominee of the Company). Further the Company has advanced Rs 50,000,000/- towards Share Application Money pending Allotment.

b. During the year, the Company has divested its entire stake in its wholly owned subsidiary 2020 Imaging India Limited (formerly known as Zicom CNA Automation Limited) and the loss incurred on divestment of the same has been recognized in the books under the head Other Expenses

12. The Company in the earlier year had given an ICD amounting to Rs 60,000,000/- of which an amount of Rs 32,500,000/- has been recovered till date. On account of non-recovery of the said balance, the Company has filed a legal suite against the said party. In view of the fact that the principal & interest are pending to be recovered as on date on conservative basis, the Company has written-off the amount from the books amounting to Rs 51,776,297 which has been showed under head exceptional items in the Statement of Profit and Loss in current year.

13. In respect of a sum of RS 10,556,674 due from a customer shown under Other Non Current Assets in Previous Year, the Company had received an amount of Rs 4,233,000 towards principal pursuant to an award granted by the Honorable Supreme Court of India. As such, the Management is confident of recovering the balance sum of Rs 6,323,674 disclosed under the head Other Current Asset; and hence no provision has been considered necessary in this regard.

14. Related Party Transactions Details of related parties:

Description of relationship Names of related parties

Subsidiary Company Unisafe Fire Protection Specialists LLC, Dubai

Subsidiary Company 2020 Imaging India Ltd (Formerly known as Zicom CNA Automation Ltd) (upto March 25, 2014)

Subsidiary Company Zicom SaaS Pvt. Ltd.

Subsidiary Company Unisafe Fire Protection Specialists India Pvt. Ltd.

Subsidiary Company Phoenix International WLL, Qatar

Subsidiary Company Unisafe Fire Protection Specialists Singapore Pte. Ltd.

Subsidiary Company Zicom Security Projects Pte. Ltd., Singapore

Associate Company The Institute for Advanced Security Training and Management Pvt. Ltd.

Promoter Group Companies (PGC) Baronet Properties & Investments Private Limited

Promoter Group Companies (PGC) Coronet Properties & Investments Private Limited

Key Management Personnel (KMP) Mr. Manohar Bidaye

Key Management Personnel (KMP) Mr.Pramoud Rao

15. Segment Reporting: The Company has only one reportable segment namely "Security and Safety".

16. The Company is of the view that there are no indications of material impairment and the carrying amount of its fixed assets or where applicable, the cash generating unit to which these assets belong, do not exceed their recoverable amounts (i.e., the higher of the net selling price and value in use of the assets ). Hence, no impairment had arisen during the year as per the recommendations of AS 28 - "Impairment of Assets".

17. During the year no provision towards diminution is considered necessary in the books keeping in view the fact that the said Investments are of Long Term nature.

18. In the opinion of the Management, the Current Assets and Loans and Advances as shown in the books are expected to realise at their Book Values in the normal course of business and adequate provision have been made in respect of all know liabilities.

19. Employee Stock Option Scheme (ESOS)

In accordance with two ESOS Schemes viz. ESOS 2006 and ESOS 2007 of the company, the employees of the company and the employees of the subsidiaries have been offered options as per respective eligible criteria fixed under the aforesaid schemes. Against each of the above options, eligible employee is entitled to acquire one equity share of '10 of the Company at a price mentioned against each series of option. Against each option 40% can be exercised by the end of first year from the date of grant of option, 30% can be exercised at the end of second year from the date of grant of the options and balance 30% can be exercised at the end of third year from the date of grant of the options. The validity of ESOS 2006 was upto August 2011 and ESOS 2007 was upto September 2012. However, the outstanding Options as on March 31,2013 i.e. 9,900 Options under ESOS 2006 and 1,800 Options under ESOS 2007 respectively were lapsed on December 26, 2013. As a result No Options were outstanding as on March 31,2014 "

20. Certain balances under the heads Sundry Debtors, Loans & Advances, Sundry Creditors are subject to confirmations from the respective parties and consequential reconciliation, if any.


Mar 31, 2013

1 Corporate information

Zicom Electronic Security Systems Ltd. is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The company is engaged in the manufacturing and selling of Electronic security systems and equipments. The company also provides annual maintenance services for Electronic security products

2.1 Exceptional Expenes in previ ous yea repr sent s t he adj ustment s to t he final consi deration r ceivabl e by t he Company from Schnei der El ectric I ndi a Private Limited ( SE) kept under Escrow as per th terms of Busines Transfer Agr ement ( BTA) dat ed March 5, 210.

2.2 Under t he Micro, Smal and Medi um Entepri es Dvelopment Act, 206 wi ch came i nt force from October , 206, certain di scl osures ar required to be ma d relating to Micro, Smal & Medi um Entepri es. The Company is in t he proces of compling rlevat information from it supliers abou t hei r coverage under t he sai d Act. Si nce th rlevat information is not readily vilabl e, no di scl osures hav ben made in t he acounts. Howver, in view of t he mnagemen, t he i mpact of intrest, if any, t hat ma y be pyabl e in acordance wi t t he provisions of this Act is not expected to be material.

2.3 1.During t he year unde rview, on Jul y 13, 2012, t he Company made flowi ng alotment s on prfrential bais in acordance with SEBI'' s Gui delines f or Prfrential I sue, i.e. Chapt er VI of Securties & Exchange Board of I ndi a (Isue of Capitl and Di scl osure Requirements) Regulations, 209:

a. ,3,0 Equity Shares of Rs. 10 each, f or cash, t a price of Rs. 46 per Equity Share, i.e. t a preium of Rs. 36 per Equity Share, to t he flowi ng foreig enties:

b. 1,6, 0 Warants, each Warant carying an enitlemen to subscribe t one ( 1) Equity Share of Rs. 10 each of t he Company, f or cash, t a price of Rs. 46 per Equity Share, i.e. t a preium of Rs. 36 per Equity Share, to t he flowi ng Promoters'' Group Compani es:

c. Out of t he above Warants, on Jul y 20, 2012, t he Company aloted 1,,0 Equity Shares of Rs. 10 each t a price of Rs. 46 per Share to t he hol ders of t he Warant s (i.e. Promot er Group Compani es) , gai nst xercise of options tached to t he 1,,0 Warants. Details of t he alotment are as under:

Wi t t he above alotment s at () and ( c) above, t he Paid-up Share Capital of t he Company has i ncreased to 16, 9,829 Equity Shares of Rs. 10 each agregating to Rs. 16, 98, 290 and t he Securties Preium Acount of t he Company has i ncreased by Rs. 154,8, 0. As th resul t of t he above alotment s Promot er Group now hol ds 3, 637, 023 Equity Shares i.e. 21. 39% of post i sue capital.

2. During th year unde rview, t he Company made flowi ng investment s in securties of compani es:

I. In Foreign Subsidiaries:

a. Invested t owards Share Capital SGD 5 f or acquiring 10% (i.e. 5 Ordinary Shares of SGD 1 each) in its wholy owned subsidiary vi z. Uni saf e Fire Protection Specialits Si ngapore Pt e. Ltd., Si ngapore, wi ch wa s i ncorporated on February 15, 2012.

b. Incorporated Zi com Security Projects Pt e. Ltd., Si ngapore, s a wholy owned subsidiary on Ma y , 2012 and i nvested t owards Share Capital SGD 1 f or acquiring 10% (i.e. 1 Ordinary Shares of SGD 1 each) in its wholy owned subsidiary.

c. The Company, jointly with its wholly owned subsidiary, viz. Unisafe Fire Protection Specialists Singapore Pte. Ltd., Singapore, entered into a Share Sale Agreement (SSA), inter-alia, to acquire Phoenix International WLL, a Limited Liability Company in Qatar, engaged in the business of fire detection, protection, safety and related services.

As a part of the SSA, the Company has acquired 5% stake (i.e. 50 Shares of QR 1,000 each), while Unisafe Fire Protection Specialists Singapore Pte. Ltd. has acquired 44% stake (i.e. 440 Shares of QR 1,000 each), in Phoenix International WLL, aggregating to joint acquisition of 49% stake (i.e. 490 Shares of QR 1,000 each); and complete management control in Phoenix International WLL, at a valuation of USD 15 million.

II. In Indian Subsidiary:

a. Invested in further i sue of Equity Shares made by Zi com SaS Private Limited, a wholy owned subsidiary, by subscribing to 1,,0 Equity Shares of Rs. 10 each agregating to Rs. 1,,0. Wi t this alotment ( made on March 29, 2013) , t he total Investment of t he Company in it sai d subsidiary has i ncreased to Rs. 15,,0 comprising of 15,,0 Equity Shares of Rs. 10 each ( out of wi ch 5, 0 Equity Shares are hel d by Director as a Nomi ne of t he Company).

III. In Associate Company

a. Invested in further i sue of 1% Non-Cumulative Compul sorily Convertible Prfrence Shares made by Insitute of Advanced Security Traiing and Mnagement Private Limited ( ASTM) , a Promot er Group Company,

by subscribing to 2,,0 Prfrence Shares of Rs. 10 each, agregating to Rs. 2,,0. Wi t this alotment ( made on February 18, 2013) , t he total Investment of t he Company in ASTM'' s Prfrence Shares has i ncreased to Rs. 72,5, 0 comprising of 7,25, 0 1% Non-Cumulative Compul sorily Convertible Prfrence Shares of Rs. 10 each (i.e. 10%) .

2.4 Segment Reporting: The Company has onl y si ngl reportabl segmet namel y "Security and Safety".

2.5 The Company is of t he vi ew t ha thre are no i ndi cations of material i mpairment and t he carying amount of its fixed asets or whre aplicabl e, t he cash gnerating uni to wi c thse asets bel ong, do not exced t hei recoverabl e amount s (i.e.,

te i gher of t he net seling price and value in use of t he asets). Hence, no i mpairment had arisen during th yer as per th recomendations of AS 28 - " Impairment of Asets" .

2.6 The Company had advanced a Inter-Corporate Deposi t (ICD) of Rs. 6,,0 to Trusted Aerospace Engi nering Lt d. ( TASE) . As per t he Consent Terms, agr ed and filed wi t t he 3rd Metrpolitan Magistrate Court, TASE had pai d an amount

of Rs. 12,5, 0. The Company has during th yer acrued intrest on t he same based on th terms agr ed bet wen t he parties wi c has ben show in ot her i ncome in t he fianci al statement as t he Mnagement is confident of recovering t he princi pl amount al ong with intrest in t he FY 2013-2014.

2.7 In respect of a sum of Rs. 10,5,674 due from a customer shown under Ot her No n Curent Asets in Previous Year, t he Company has rcived an amount of Rs. 4,23, 0 t owards princi pal pursuan to an ward grant ed by t he Hnourabl e

Supreme Court of I ndi a. A such, t he Mnagement is confident of recovering t he blance sum of Rs. 6, 23, 674 di scl osed under t head Ot her Curent Aset; and hence no provision has ben considred ncesary in this regard.

2.8 In t he opiion of t he Mnagement , t he Curent Asets and Loans and Advances a show in t he boks ar expected to realise a t hei r Bok Val ues in t he normal course of busines and adequat e provision have ben made in respect of al known liablties.

2.9 Employee Stock Option Scheme (ESOS)

"In acordance with t wo EO Schemes viz. EOS 206 and EOS 207 of t he company, th employes of t he company and th employes of t he subsidiaries have ben of red options as pe respectiv eligible criteria fixed under t he aforesai d schemes. Agai nst each of t he above options, eligibl employe is enitled to acquire on equity share of Rs. 10 of t he Company t a price mentioned gai nst each sries f option. Agai nst each option 40% can b xercised by th end o first yea from t he dat e of grant f option, 30% can b xercised a th end of second yea from t he dat e of grant of t he options and blance 30% can b xercised a th end of third yea from t he dat e of grant of t he options. The validity of EOS 206 wa s upt o Agust 201 and EOS 207 was upt o Sept ember 2012. Howver, t he outstandi ng Options as on March 31, 2013 i.e. ,90 Options under EOS 206 and 1,80 Options under EOS 207 respectively ar fective upt o Dcember 26, 2013. "

2.10 Certain blances under te heads Sundry Debtors, Loans & Advances, Sundry Creditors are subj ec t confirmations from th respective parties and consequential reconcliation, if any.


Mar 31, 2012

1 Corporate information

Zicom Electronic Security Systems Ltd. is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The company is engaged in the manufacturing and selling of Electronic security systems and equipments. The company also provides annual maintenance services for Electronic security products

2.1 Contingent liabilities and commitments (to the extent not provided for)

(Amount in Rs.

March 31, 2012 March 31, 2011

(a) Letters of Credit by Bank 43,002,826 Nil

(b) Guarantees issued by Bank (Gross) 5,846,027 24,504,200

(c) Corporate Guarantee and Indemnities 1,677,670,000 1,030,350,000

(d) Sales Tax Matters 751,974 965,470

(e) Claim Lodged by Customers Not Acknowledged as Debt 1,133,180 1,144,501

(f) Capital Contract Nil 2,200,000

(f) Warranty Claims Nil 1,000,000

2.2 During the year the company has started offering security on service basis through its 100% subsidiary Zicom SaaS Private Ltd. The company offers security managed services with four levels of security - security hardware, remote monitoring, remote response and insurance cover - all built into a holistic end-to-end security solution.

2.3 During the year the company ventured into the business of fire detection and protection through its 100% subsidiary Unisafe Fire Protection Specialists India Pvt. Ltd. The Company has good presence and strong track record in the sand line of business in UAE and expertise gained therein are being leveraged in India.

2.4 i. As per Business Transfer Arrangement (BTA) dated March 5, 2010 entered with Schneider Electric India Private Limited (SE), the Company has transferred certain assets and liabilities of Electronic Security Systems business of the company comprising of its two divisions Building Solution Group and Special Project Group business to SE with effect from April 30, 2010, as approved by the shareholders of the company through postal ballot as per Section 192A of the Companies Act, 1956 read with the Companies (Passing of Resolution by the postal ballot) Rules 2001 for a consideration of Rs. 22,500 Lacs. This transfer excludes the retail business, business of Central Monitoring Station and Video Monitoring Station and right to continue the business of fire detection and suppression on a standalone basis with the Company.

ii. Information pursuant to the Discontinuing Operations in accordance with AS 24 - "Discontinuing Operations" issued by the Institute of Chartered Accountants of India is as follows:

2.5 In April 2010, the Company had acquired an additional 49% stake in Zicom CNA Automation Ltd. (ZCNA) which became a wholly owned subsidiary of the Company from the said date. Subsequent to this acquisition, the Company has entered into BTA dated April 29, 2010 with ZCNA and acquired the entire Automation Business on Slump Sale basis (Going concern) for the consideration of Rs. 25 Lacs. No Goodwill / Capital Reserve has been recognized in the books of the company as a consequence of the above acquisition, since the Net Assets received form ZCNA are equal to the Purchase Consideration.

Keeping in view the fact that Net Worth of ZCNA as on March 31, 2011 was lower than the book value of the investments made by the company as on the said date, the company has decided to provide for diminution in the value of the said investment to the extent of Rs. 70 Lacs and has recognized in the books under the head Extraordinary items.

2.6 As a part of restructuring and in order to improve focus on the retail security business, the Board of Directors in its meeting held on September 30, 2010 has approved transfer of the retail security business of its then wholly owned subsidiary Zicom Retail Products Private Limited (ZRPPL) to the Company for a purchase consideration of Rs. 4,800 Lacs resulting in Goodwill of Rs. 2,019 Lacs which is recognized in the books of accounts, considering the benefit which will accrue as a consequence of the above, the Company has decided to amortize the Goodwill so arisen over a period of ten years in equal installment.

Consequent on transfer of the aforesaid business under slump sale on going concern basis, the company had disinvested its entire cumulative investment of Rs. 11,000 Lacs in its loss making subsidiary ZRPPL at price of Rs. 1,500 Lacs. Resulting loss is reflected in extraordinary item. The said loss was mainly on account of brand building expenses incurred over a period of 4 years while building retail security business.

2.7 In March 2011, the Company has divested its entire stake in its subsidiary Zicom Manufacturing Co. (HK) Ltd. (ZHK) for a consideration of Rs. 135 Lacs and made the profit of Rs. 109 Lacs on the disposal of the same and has recognized in the books under the head Extraordinary items.

2.8 Thus considering the profit of Rs. 12,463 Lacs made on Business Transfer Arrangement with SE as above, profit / loss on account of divestment of subsidiary ZHK and ZRPPL as above and diminution in the value of investment made in ZCNA has resulted in a net surplus of Rs. 3,002 Lacs which is shown as Extraordinary item in the statement of profit and loss.

2.9 Exceptional items represents the adjustments to the final consideration receivable by the company from Schneider Electrical India Private Limited (SE) kept under Escrow as per the terms of Business Transfer Agreement (BTA) dated March 5, 2010.

"Amount of Rs. 653,095 (Rs. 1,172,752) in respect of Gratuity and Rs. 146,939 (Rs. 89,279) in respect of leave is recognized as expense and included in Employee benefits expense (Note No. 25 ) in the Statement of Profit and Loss"

General Description of significant defined plans

I. Gratuity Plan

Gratuity is payable to all eligible employees on the completion of five years of service in the event of resignation, retirement, permanent disablement or death.

II. Leave Plan

Eligible employees can carry forward the leaves as per the leave policy of the company and is payable at separation on account of retirement, permanent disablement or death.

2.10 Lease:

Disclosure as required by AS 19 - "Leases" issued by The Institute of Chartered Accountants of India are as follows: Operating Lease:

The Company's significant leasing arrangements are in respect of office premises and residential flats taken on lease. The arrangements are generally from 11 months to 36 months. Under these agreements, generally refundable interest-free deposits have been given. In respect of above arrangements, lease rentals payable are recognized in the Statement of Profit and Loss for the year and included under Rent and Compensation (Disclosed under Schedule 13).

2.11 Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2 2006, certain disclosures are required to be made relating to Micro, Small & Medium Enterprises. The Company is in the process of compiling relevant information from its suppliers about their coverage under the said Act. Since the relevant information is not readily available, no disclosures have been made in the accounts. However, in view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of this Act is not expected to be material.

2.12 Segment Reporting: The Company has only one reportable segment namely "Security Systems and Automation".

2.13 The Company is of the view that there are no indications of material impairment and the carrying amount of its fixed assets or where applicable, the cash generating unit to which these assets belong, do not exceed their recoverable amounts (i.e., the higher of the assets' net selling price and value in use). Hence, no impairment had arisen during the year as per the recommendations of AS 28 - "Impairment of Assets".

2.14 In respect of Investments other than ZCNA, no provision towards diminution is considered necessary in the books keeping in view the fact that the said Investments are of Long Term nature.

2.15 In the opinion of the Management, the Current Assets and Loans and Advances as shown in the books are expected to realize at their Book Values in the normal course of business and adequate provision have been made in respect of all known liabilities.

2.16 Employee Stock Option Scheme (ESOS)

In accordance with two ESOS Schemes viz. ESOS 2006 and ESOS 2007 of the company, the employees of the company and the employees of the subsidiaries have been offered options as per respective eligible criteria fixed under the aforesaid schemes. Against each of the above options, eligible employee is entitled to acquire one equity share of Rs. 10 of the Company at a price mentioned against each series of option. Against each option 40% can be exercised by the end of first year from the date of grant of options, 30% can be exercised at the end of second year from the date of grant of the options and balance 30% can be exercised at the end of third year from the date of grant of the options.

Further, pursuant to the transfer of Electronic Security Systems Business (Sale Business) of the Company, comprising of its two divisions viz. Building Solutions Group (BSG) and Special Projects Group (SPG), to Schneider Electric India Pvt. Ltd. (Schneider) vide Business Transfer Agreement (BTA) dated March 5, 2010; the employees belonging to the Sale Business were transferred to Schneider. As a result, all the unexercised Stock Options granted to such employees lapsed, changing substantially the status of outstanding Employee Stock Option under ESOS 2006 and ESOS 2007 of the company.

Further, pursuant to the acquisition of the Retail Security Business (Sale Business) of Zicom Retail Products Private Limited (ZRPPL) (wholly owned subsidiary of the Company) vide Business Transfer Agreement (BTA) dated September 30, 2010; all the employees belonging to the Sale Business were transferred to the Company. As a result, the Stock Options granted to employees of ZRPPL under ESOS 2007 are held by them as employees of the Company.

2.17 In respect of Sundry Debtors representing Rs. 10,556,674 due from the customer, the company has received an award from the Honorable High Court of Andhra Pradesh in its favour. The management is confident of recovering this amount and hence no provision has been considered in this regard.

2.18 Certain balances under the heads Sundry Debtors, Loans & Advances, Sundry Creditors are subject to confirmations from the respective parties and consequential reconciliation, if any.

 
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