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Notes to Accounts of Automotive Axles Ltd.

Mar 31, 2022

Pursuant to an agreement between the Company and the Government of Madhya Pradesh (''Government''), on September 2012, the Company had taken a land on lease at Pithampur, Madhya Pradesh, for setting up a manufacturing unit and paid an upfront premium of INR 97 million (including a stamp duty of INR 20.24 million). The Company has applied to the Government for surrender of the land due to non-utilisation of the land. In accordance with the agreement, a surrender charge of 50% of upfront premium paid is applicable on surrender of the land.

During the previous year, the Company entered into another agreement with the Government for acquisition of another land for 99 years for a consideration of INR 124.86 million. As per the communication from the Government, the Company has remitted INR 88.81 million after adjusting INR 36.05 million pertaining to the amount recoverable on surrender of the existing leasehold land. During the previous year, the Company has provided for the initial registration and stamp duty charges, paid

towards acquisition of the land amounting to INR 20.24 million. Based on the outcome of final discussion with governmental authorities, the Company provided for the surrender charges of INR 37.69 million during the year ended March 31, 2021.

31 Disclosures in accordance with Guidance Note on Accounting for Expenditure on Corporate Social Responsibility ("CSR") Activities

As per Section 135 of the Companies Act, 2013, a Corporate Social Responsibility (''CSR'') committee has been formed by the Company. The primary function of the Committee is to assist the Board of Directors in formulating a CSR Policy and review the implementation and progress of the same from time to time. Gross amount required to be spent by the Company during the year was '' 18.74 Million (March 31, 2021: '' 24.98 Million). The expenses incurred and accrued towards CSR activities amounting to '' 19.24 Million (March 31, 2021: 7.99 INR Million) has been charged to the statement of profit and loss and is disclosed under other expenses.

33 Significant accounting judgements, estimates and assumptions

The preparation of the Company''s financial statements in conformity with Ind AS requires the management to make estimates, judgements and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses for the year reported. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimates are revised and future periods are affected. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Other disclosures relating to the Company''s exposure to risks and uncertainties includes:

i) Capital

ii) Financial risk

iii) Senstivity

Judgements:

In the process of applying the Company''s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

Determining the lease term of contracts with renewal options - Company as lessee:

The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

The Company has lease contracts that include extension options. The Company applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew.

The Company has entered into a property lease. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, the present value of the minimum lease payments amounts to substantially all of the fair value of the property and accounted for the contracts as finance lease.

Estimates and assumptions:

Key source of estimation of uncertainty as at the date of financial statements, which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, is in respect of the following:

Defined benefit plans (gratuity benefits):

The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.

The mortality rate is based on publicly available mortality tables. These mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates.

Provision for inventories:

Management reviews the aged inventory on a periodic basis. The purpose is to ascertain whether an allowance is required to be made in the financial statements for any obsolete and slow-moving items. The management also evaluates on the usability of existing inventories as a result of technological and regulatory changes in the automotive sector if any and provides for the required allowances for slow moving/ non-moving and obsolete inventory. This review also involves comparison of the carrying value of the aged inventory item with the respective net realisable value. Management believes that adequate allowance for obsolete and slow-moving inventories has been made in the financial statements.

Impairment of financial assets

The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.

Provision for warranty:

Warranty estimates are established using historical information on the nature, frequency and average cost of warranty claims and also management estimates regarding possible future outflow on servicing the customers for any corrective action in respect of product failure.

Leases - estimating the incremental borrowing rate

The Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.

34 Segment reporting

The Company is predominantly engaged in the business of manufacturing and sale of automotive components, which constitutes a single business segment and is governed by similar set of risks and returns. The operations of the Company primarily cater to the market in India, which the management views as a single segment. The management monitors the operating results of its single segment for the purpose of making decisions about resource allocation and performance assessment.

One customer individually accounted for INR 11,490.15 million (March 31, 2021: INR 7,648.53 million) which is more than 10% of the total revenue of the Company for the year ended March 31, 2022.

The Company is domiciled in India. The Company''s revenue from operations from external customers primarily relate to operations in India and all the non-current assets of the Company are located in India.

35 Leasesa) Company as a lessee

i) The Company has entered into property leases consisting of the Company''s manufacturing facilities which includes land and buildings. These leases are for a period of five to ten years and lease of land is for 99 years with renewal option included in the contracts. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets.The Company also has certain leases with lease terms of 12 months or less. The Company applies the ''short-term lease'' recognition exemption for these leases.

The Company has entered into lease agreements with Meritor HVS India Limited (''MHVSIL'') and Meritor Commercial Vehicle Systems India Private Limited (''MCVSIPL'') to obtain a land on lease from MHVSIL and to construct a R&D test lab building (''R&D Building'') and lease it back to MCVSIPL for R&D activities. This lease have a term of 20 years. Since both of these lease contracts were entered with the related parties on the same date and negotiated as one lease, these leases are essentially treated as a single contract in substance, wherein, the Company is the lessor of R&D building and MCVSIPL is the lessee. The Company at the commencement of the agreement, recognised INR 111.13 million being the present value of net lease rent receivables. Net finance income on lease receivables recognised by the Company during the year is INR 9.73 million (March 31, 2021: INR 9.72 million).

36 Commitments and contingencies a) Capital commitments

March 31, 2022

March 31, 2021

Estimated amount of contracts remaining to be executed on capital account and not provided for

22.70

63.64

b) Contingent liabilities

March 31, 2022

March 31, 2021

Income tax demands under appeal

0.21

0.21

During the financial year 2020-21, the Company has received demand order from the Income tax authorities for the financial year 2017-18 towards the disallowance of deduction taken by the Company under section 80JJAA of Income tax act, 1961. The Company has filed an appeal against the disallowance with the Commissioner of Income tax (Appeals) on March 23, 2021. The Company based on its assessment believe that no further adjustment is required in the financial statements in the current year.

Terms and conditions of transactions with related parties

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables.

38 Employee benefitsDefined contribution plans

A. Provident fund and employee state insurance scheme

The Company makes contributions to provident fund and employee state insurance scheme, which are defined contribution plan for eligible employees. Under the scheme, the Company is required to contribute a specified percentage of the salary to fund the benefits. The Company recognized INR 50.71 million (March 31, 2021: 44.32 million) for provident fund contributions and INR 5.39 million (March 31, 2021: INR 4.48 million) for employee state insurance scheme contribution in the statement of profit and loss.

B. Superannuation fund

Retirement benefits in the form of superannuation fund (being administered by LIC) are funded defined contribution schemes and the contributions are charged to the statement of profit and loss of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable. The contributions for the year ended March 31, 2022 is INR 6.42 million (March 31, 2021: INR 6.39 million).

Defined benefit plans

The Company has a defined benefit gratuity plan for its employees. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member''s length of service and salary at retirement age. The Company makes provision of such gratuity liability in the books of accounts on the basis of actuarial valuation as per the projected unit credit method.

The sensitivity analyses above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. The sensitivity analyses are based on a change in a significant assumption, keeping all other assumptions constant. The sensitivity analyses may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation from one another.

* The carrying value of these accounts are considered to be the same as their fair value, due to their short term nature. Accordingly, these are classified as level 3 fair value hierarchy.

** The fair value of these accounts was calculated based on cash flow discounted using a current lending/ borrowing rate, they are classified as level 3 fair value hierarchy due to inclusion of unobservable inputs including counterparty credit risk.

*** These investments are made in quoted mutual funds and accordingly classified as level 1 fair value hierarchy. These investments are carried at their fair value as at the year end.

# These accounts are considered to be highly liquid/ liquid and the carrying amount of these are considered to be the same as their fair value.

41 Financial risk management objectives and policies

The Company''s principal financial liabilities comprise borrowings, lease liabilities and trade and other payables. The main purpose of these financial liabilities is to finance the Company''s operations. The Company''s principal financial assets include loans, trade and other receivables, short term investments and cash and cash equivalents that derive directly from its operations. The Company is exposed to market risk, credit risk and liquidity risk. The Company''s senior management oversees the management of these risks. It is the Company''s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below:

i. Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings. The sensitivity analyses in the following sections relate to the position as at March 31, 2022 and March 31, 2021. The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt.

The analysis exclude the impact of movement in market variables on the carrying values of gratuity and other post retirement obligations and provisions.

The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2022 and March 31, 2021.

ii. Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its investing activities, including deposits with banks and financial institutions, other receivables and deposits, and other financial instruments.

a. Trade Receivable

The Company mainly sells to its related parties, OEMs and Tier I companies, having long standing relationship with the Company. Outstanding customer receivables are regularly monitored and reconciled. At March 31,2022, receivable from Company''s top 3 customers accounted for approximately 99% (March 31, 2021: 93%) of all the receivables outstanding. An impairment analysis is performed at each reporting date on an individual basis for major clients. Based on historical experience, the Company does not have any material bad debts. The Company does not hold collateral as security. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets. Further, for movement in provision for doubtful receivables during the year refer note 9.

b. Financial Instrument and Cash Deposit

Credit risk from balances with banks is managed by the Company in accordance with its policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty.

The Company''s maximum exposure to credit risk for the component of balance sheet as at March 31, 2022 and March 31, 2021 is the carrying amounts of trade receivables as illustrated in note 8.

43 Transfer pricing

The Company maintains the information and documents as required under the transfer pricing regulations under Section 92-92F of the Income Tax Act, 1961. The management is in the process of updating the transfer pricing documentation for the financial year 2021 - 2022 and is of the view that its transactions are at arm''s length and the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

44 The Code on Social Security, 2020 (''Code'') relating to employee benefits during employment and post-employment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified and the final rules/ interpretation have not yet been issued. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

46 Other Statutory Information

(i) The Company do not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.

(ii) The Company do not have any transactions with companies struck off.

(iii) The Company have not traded or invested in Crypto currency or Virtual Currency during the period.

(iv) The Company have not advanced or loaned or invested funds to any other person or entity, including foreign entities (intermediaries) with the understanding that the intermediary shall:

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

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

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

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

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

(vi) The Company have not entered into any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the period in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).


Mar 31, 2018

1. Corporate information

Automotive Axles Limited (“the Company”) is a joint venture of Kalyani Group and Meritor Inc., USA (formerly the automotive division of Rockwell International Corporation) incorporated in 1981. The Company is a public company domiciled in India. The registered office of the company is located at Hootagalli Industrial Area, Off Hunsur Road, Mysuru, Karnataka- 570018. The Company CIN is L51909KA1981PLC004198.

The Company is primarily engaged in manufacturing of Axles and Brakes at Mysuru, Rudrapur and Jamshedpur.

The financial statements were authorised for issue in accordance with a resolution of the Company’s Board of Directors on May 08, 2018.

2. Significant accounting policies

2.1 Basis of preparation

The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time).

For all periods up to and including the year ended March 31, 2017, the Company prepared its financial statements in accordance with accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). These financial statements for the year ended March 31, 2018 are the first the Company has prepared in accordance with Ind AS. Refer to note 39 and note 41 for information on first time adoption of Ind AS from April 01, 2016.

These financial statements have been prepared on a historical cost basis as explained in the accounting policies below, except for the following assets and liabilities which have been measured at fair value:

o Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments)

The financial statements are presented in Indian Rupees (‘) and all values are rounded to the nearest million (Rs.000,000), except when otherwise indicated.

(a) Terms/right attached to equity shares

The Company has issued only one class of equity share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by Board of Directors is subject to approval by the shareholders at the ensuing Annual General Meeting.

I n 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.

* Details of dues to micro and small enterprises as defined under the MSMED Act, 2006

The Company has amounts due to Micro and Small Enterprises under The Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) as at March 31, 2018, March 31, 2017 and April 01, 2016. The details in respect of such dues are as follows:

There are no Micro, Small and Medium Enterprises to whom the company owes dues which are outstanding for more than 45 days from the due date at the balance sheet date. The information as required to be disclosed under The Micro, Small and Medium Enterprises Development Act, 2006 regarding Micro and Small enterprises determined to the extent such parties have been identified on the basis of the information available with the company.

Sale of products includes excise duty collected from customers of Rs.341.76 (March 31, 2017 : Rs.1,296.65).

Sale of products net of excise duty is Rs.14,788.02 (March 31, 2017 : Rs.11,452.63).

The Government of India has implemented Goods and Service Tax (“GST”) from July 01, 2017 replacing Excise Duty, Service tax and various other indirect taxes. As per Ind AS 18, the revenue for the year ended March 31, 2018 is reported net of GST.

3.Significant accounting judgements, estimates and assumptions

The preparation of the Company’s financial statements in conformity with Ind AS requires the management to make estimates, judgements and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses for the year reported. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimates are revised and future periods are affected. Key source of estimation of uncertainty as at the date of financial statements, which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, is in respect of the following:

Defined benefit plans (gratuity benefits):

The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date (refer note 35). The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality tables. These mortality tables tend to change only at intervals in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates.

Estimation of current tax expense and payable:

The Company’s tax jurisdiction is India. Significant judgments are involved in determining the provision for income taxes and tax credits including the amount expected to be paid or refunded. Also refer note 2.2(d), note 19 and note 20.

Provision for Inventories:

Management reviews the aged inventory on a periodic basis. This review involves comparison of the carrying value of the aged inventory item with the respective net realisable value. The purpose is to ascertain whether an allowance is required to be made in the financial statements for any obsolete and slow-moving items. Management is satisfied that adequate allowance for obsolete and slow-moving inventories has been made in the financial statements.

Impairment of financial assets

The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.

Provision for warranty:

Warranty estimates are established using historical information on the nature, frequency and average cost of warranty claims and also management estimates regarding possible future outflow on servicing the customers for any corrective action in respect of product failure.

4. Segment reporting

The Company is predominately engaged in the business of manufacturing and sale of automotive components, which constitutes a single business segment and is governed by similar set of risks and returns. The operations of the Company primarily cater to the market in India, which the management views as a single segment. The management monitors the operating results of its single segment for the purpose of making decisions about resource allocation and performance assessment.

One customer individually accounted for Rs.12,379.21 (March 31, 2017: Rs.9,273.35) which is more than 10% of the total revenue of the Company for the year ended March 31, 2018.

The Company is domiciled in India. The Company’s revenue from operations from external customers primarily relate to operations in India and all the noncurrent assets of the Company are located in India.

5. Commitments and contingencies

a) Finance lease: Company as lessee

The Company has taken certain Computers & Data processing units under finance lease on non- cancellable basis. The minimum lease payments as per agreement is given below:

b) Operating lease: Company as a lessee

The Company has entered into property leases consisting of Company’s corporate office, a manufacturing facility, branch offices and certain equipments. These leases are for a period of one to five years with renewal option included in the contracts. Rent expense for such operating lease recognised in the statement of profit & loss is Rs.16.12 for the year ended March 31, 2018 (March 31, 2017 : Rs.15.95)

The future minimum lease payments under non-cancellable operating leases are as follows:

The above does not include leasehold land taken by the Company for 99 years for which the upfront lease premium has been paid in earlier years. (Refer note 6)

Terms and conditions of transactions with related parties

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended March 2018, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (March 31, 2017: Nil, April 01, 2016: Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel.

6. Employee benefits Defined contribution plans

The Company makes contributions to Provident Fund, Employee State Insurance scheme contributions which are defined contribution plan for qualifying employees. Under the scheme, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognized Rs.45.95 (March 31, 2017: Rs.38.33) for Provident Fund contributions and Rs.9.62 (March 31, 2017: Rs.7.29) for Employee State Insurance scheme contribution in the statement of profit and loss.

Defined benefit plans

The Company has a defined benefit gratuity plan for its employees. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member’s length of service and salary at retirement age.

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.

The average duration of the defined benefit plan obligation at the end of the reporting period is 6.78 years (March 31, 2017: 7.25 years).

7. Fair values hierarchy

The carrying value of financial instruments by categories is as follows:

* The carrying value of these accounts are considered to be the same as their fair value, due to their short term nature. Accordingly, these are classified as level 3 of fair value hierarchy.

** The fair value of these accounts was calculated based on cash flow discounted using a current lending/ borrowing rate, they are classified as level 3 fair value hierarchy due to inclusion of unobservable inputs including counterparty credit risk.

# These accounts are considered to be highly liquid/ liquid and the carrying amount of these are considered to be the same as their fair value.

8. Financial risk management objectives and policies

The Company’s principal financial liabilities comprise borrowings and trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. It is the Company’s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

i. Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings. The sensitivity analyses in the following sections relate to the position as at March 31, 2018 and March 31, 2017. The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt.

The analysis exclude the impact of movement in market variables on the carrying values of gratuity and other post retirement obligations and provisions.

The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2018 and March 31, 2017.

a. Interest rate risk

I nterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not have any debt obligation, hence there is no interest rate risk.

b. Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because in foreign exchange rates. The Company does not have material foreign currency transaction. Hence, it does not have any significant foreign currency risk.

ii. Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, other receivables and deposits, and other financial instruments.

a. Trade Receivable

The Company mainly sells to its related party and other marquee OEMs and Tier I companies, having long standing relationship with the Company. Outstanding customer receivables are regularly monitored and reconciled. At March 31, 2018, receivable from Company’s top 3 customers accounted for approximately 92% (March 31, 2017: 96.27%) of all the receivables outstanding. An impairment analysis is performed at each reporting date on an individual basis for major clients. Based on historical experience, the Company does not have any material bad debts. The Company does not hold collateral as security. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 8. Further, for movement in provision for doubtful receivables during the year refer note 8.

b. Financial Instrument and Cash Deposit

Credit risk from balances with banks is managed by the Company in accordance with its policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty.

The Company’s maximum exposure to credit risk for the component of balance sheet as at March 31, 2018 and March 31, 2017 is the carrying amounts as illustrated in Note 8.

9. Capital management

For the purpose of the Company’s capital management, capital includes issued equity capital, securities premium and all other equity reserves. The primary objective of the Company’s capital management is to maximise the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents. The Company’s gearing ratio, which is net debt divided by total capital plus net debt is as below:

10. First time adoption of Ind AS

These financial statements, for the year ended March 31, 2018, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended March 31, 2017, the Company prepared its financial statements in accordance with generally accepted accounting principle in India (Indian GAAP). Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for period ending on March 31, 2018, together with the comparative period data as at and for the year ended March 31, 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company’s opening statement of financial position was prepared as at April 01, 2016, the Company’s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the statement of financial position as at April 01, 2016 and the financial statements as at and for the year ended March 31, 2017.

Exemptions applied

Ind AS 101 allows first time adopters certain exemptions from the retrospective application of certain requirements under Ind AS:

The Company has applied the following exemptions:

1 Deemed cost for property, plant and equipment and intangible assets: - The Company has elected to avail exemption under Ind AS 101 to use previous GAAP carrying value as deemed cost at the date of transition for all items of property, plant and equipment and intangible assets as per the financial statements prepared in accordance with previous GAAP

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

11. Standards issued but not yet effective

The standards issued, but not yet effective up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these standards when they become effective.

i) Ind AS 115 Revenue from Contracts with Customers

Ind AS 115 was notified on March 28, 2018 and establishes a five-step model to account for revenue arising from contracts with customers. Under Ind AS 115, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The new revenue standard will supersede all current revenue recognition requirements under Ind AS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after April 01, 2018. The Company will adopt the new standard on the required effective date using the modified retrospective method. The Company has established an implementation team to implement Ind AS 115 related to the recognition of revenue from contracts with customers and it continues to evaluate the changes to accounting system and processes, and additional disclosure requirements that may be necessary. A reliable estimate of the quantitative impact of Ind AS 115 on the financial statements will only be possible once the implementation project has been completed. However, considering the nature of business of the Company, the impact is not likely to be material.

ii) Appendix B to Ind AS 21 Foreign Currency Transactions and Advance Consideration

The Appendix clarifies that, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine the transaction date for each payment or receipt of advance consideration.

Entities may apply the Appendix requirements on a fully retrospective basis. Alternatively, an entity may apply these requirements prospectively to all assets, expenses and income in its scope that are initially recognised on or after

(i) The beginning of the reporting period in which the entity first applies the Appendix, or

(ii) The beginning of a prior reporting period presented as comparative information in the financial statements of the reporting period in which the entity first applies the Appendix. The Appendix is effective for annual periods beginning on or after 1 April 2018. The Company’s operation primarily relate to operations in India. The directors of the Company do not anticipate that the application of the new standard in future will have significant impact on the financial statement.

C) Notes to reconciliation between previous GAAP and Ind AS

a. Fair valuation of security deposit

Under Ind AS interest free security deposits are carried at amortised cost by, discounting the same using interest rates applicable to the counter party. The difference between transaction cost and fair value is recognised as prepaid lease and amortised over the period of the lease on a straight-line basis. Further, interest income is recognised on the amortised cost of the security deposits over the lease period.

b. Employee benefits

Under previous GAAP actuarial gains and losses were recognized in the statement of profit and loss. Under Ind AS, the actuarial gains and losses form part of remeasurement of net defined benefit liability/asset which is recognized in other comprehensive income in the respective periods.

c. Proposed dividend and dividend distribution tax thereon

Under Ind AS, liability for dividend is recognized in the period in which obligation to pay is established. Under previous GAAP, dividend payable is recorded as liability in the period to which the dividend relates, even though the dividend may be approved by the Board of Directors/Shareholders subsequent to the reporting date. This has resulted in an increase in equity of April 01, 2016

d. Effect of Income tax

Tax adjustments include deferred tax impact on account of differences between Ind AS and Previous GAAP This has resulted in change in equity and profit and loss.

e. Provision of warranty

The Company provides normal warranty provisions for general repairs for three years on all its products sold, in line with the industry practice. A liability is recognised at the time the product is sold - see Note 16 for more information. The Company does not provide any extended warranties or maintenance contracts to its customers.

f. Other comprehensive income

Under previous GAAP, the Company had not presented other comprehensive income separately. Hence, it has reconciled previous GAAP profit or loss to total comprehensive income as per Ind AS.

Statement of cash flows

The transition from previous GAAP to Ind AS did not have a material impact on statement of cash flows.

12. Transfer Pricing

The Company maintains the information and documents as required under the transfer pricing regulations under Section 92-92F of the Income Tax Act, 1961. The management is of the view that its transactions are at arm’s length and the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

13. Events after reporting period

The Board of Directors recommended a final dividend of Rs.13.50 per equity share for the financial year ended March 31, 2018. The payment is subject to the approval of the shareholders in the ensuing Annual General Meeting of the Company. The final dividend declared in the previous year was Rs.8.00 per equity share.

14. Previous year figures

The comparative financial information of the Company for the transition date opening balance sheet as at April 01, 2016 and comparative period ended March 31, 2017 included in these Ind AS financial statements, are based on the previously issued statutory financial statements prepared in accordance with the Companies (Accounting Standards) Rules, 2006 audited by a firm of Chartered Accountants, other than S.R. Batliboi & Associates LLP


Mar 31, 2017

1. CORPORATE INFORMATION

Automotive Axles Limited (AAL) is a joint venture of Kalyani Group and Meritor Inc., USA (formerly the automotive division of Rockwell International Corporation) incorporated in 1981 under the Companies Act, 1956 with manufacturing facilities located at Mysore, Rudrapur and Jamshedpur.

NOTE 2 SHARE CAPITAL

(i) Reconciliation of the number of shares and amount outstanding at the beginning and at the end of the reporting period

(ii) Details of shares held by each shareholder holding more than 5% shares:

(iii) Right, preferences and restrictions attached to shares

The Company has issued only one class of equity share. Each holder of equity shares is entitled to one vote per share. The company declares and pays dividend in Indian Rupees. The dividend proposed by Board of Directors is subject to approval by the shareholders at the ensuing Annual General Meeting.

NOTE 3. DISCLOSURES REQUIRED UNDER SECTION 22 OF THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006

There are no Micro, Small and Medium Enterprises to whom the company owes dues which are outstanding for more than 45 days from the due date at the balance sheet date. The information as required to be disclosed under The Micro, Small and Medium Enterprises Development Act, 2006 regarding Micro and Small enterprises determined to the extent such parties have been identified on the basis of the information available with the company. This has been relied upon by the auditors.

NOTE 4. FOREIGN EXCHANGE EXPOSURE :

There is no outstanding forward exchange contract as at 31st March 2017. Currency exposure as on 31st March 2017 that have not been hedged by a derivative instrument or otherwise are given below:

NOTE 5. EMPLOYEE BENEFITS: I Defined Contribution Plans:

During the year, the Company has recognized the following amount in the Statement of Profit and Loss

II Defined Benefit Plan : Contribution to Gratuity Fund:

In accordance with Accounting Standard 15 (Revised 2005) actuarial valuation as on March 31st, 2017 was carried out in respect of the defined benefit plan of Gratuity based on the following assumptions.

NOTE 6. SEGMENT REPORTING

The company is predominately engaged in the business of manufacturing and sale of automotive components, which constitutes a single business segment. The company has no export sales or limited export sales, as such there are no reportable geographical segments. Hence the segment information as per Accounting Standard -17 “Segment reporting” is not disclosed.

NOTE 7. DEFERRED TAX

a) The net deferred tax liability comprises the tax impact arising from timing differences on account of:

b) Transfer Pricing

The Company maintains the information and documents as required under the transfer pricing regulations under Section 92-92F of the Income Tax Act, 1961. The management is of the view that its transactions are at arm’s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

8. The Payment of Bonus Act has been amended with retrospective effect from April1, 2014, to enhance the, eligibility limit for payment of bonus to employees from Rs.10,000 to Rs.21,000 per month, and the wage ceiling from Rs.3,500 to Rs.7,000 per month or the minimum wage for the scheduled employment, as fixed by the Government, whichever is higher. However the Company has created the liability only for FY 2015-16 and not for FY 2014-15. The additional liability for FY 2014-15 amounts to Rs.11.52 Million.

9. Disclosures in accordance with Guidance Note on Accounting for Expenditure on Corporate Social Responsibility Activities

10. Disclosure of Specified Bank Notes(SBN) held and transacted during the period from 08th November 2016 to 30th December 2016 provided in the below table

11. The Board of Directors recommended a final dividend of Rs.8.00 per equity share for the financial year ended March 31, 2017. The payment is subject to the approval of the shareholders in the ensuing Annual General Meeting of the Company. The final dividend declared in the previous year was Rs.5.50 per equity share.

12. Previous year’s figures have been regrouped or reclassified wherever necessary to correspond to the current year’s grouping/ classification and disclosure.


Mar 31, 2016

(i) Right, preferences and restrictions attached to shares

The Company has issued only one class of equity share. Each holder of equity shares is entitled to one vote per share. The company declares and pays dividend in Indian Rupees. The dividend proposed by Board of Directors is subject to approval by the shareholders at the ensuing Annual General Meeting.

Details of security provided for long term borrowings:

(a) The loan is secured by first pari-passu charge on all existing and future fixed assets excluding the Land and existing Building (both movable and immovable) of the Borrower, to be shared with existing term lenders. Mortgage by way of first pari-passu charge on the immovable properties being building (funded out of term loan) to be situated at Hootagalli Industrial Area, Mysuru. Repayable in 6 quarterly installments along with interest ranging from 10.95% to 1 1.25%

(b) The loan is secured by hypothecation of first pari-passu charge on all movable and immovable plant and machinery of the company both present and future. Repayable in 2 quarterly installments along with interest ranging from 10.95% to 1 1.50 %

(c) The unsecured finance lease is repayable in 8 quarterly installments along with interest ranging from 10% to 12%

Details of security provided for long term borrowings:

(a) The loan is secured by first pari-passu charge on all existing and future fixed assets excluding the Land and existing Building (both movable and immovable) of the Borrower, to be shared with existing term lenders. Mortgage by way of first pari-passu charge on the immovable properties being building (funded out of term loan) to be situated at Hootagalli Industrial Area, Mysuru. Repayable in 6 quarterly installments along with interest ranging from 10.95% to 1 1.25%

(b) The loan is secured by hypothecation of first pari-passu charge on all movable and immovable plant and machinery of the company both present and future. Repayable in 2 quarterly installments along with interest ranging from 1 0.95% to 1 1.50 %

(c) The unsecured finance lease is repayable in 8 quarterly installments along with interest ranging from 10% to 12%

NOTE 1. DISCLOSURES REQUIRED UNDER SECTION 22 OF THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006

There are no Micro, Small and Medium Enterprises to whom the company owes dues which are outstanding for more than 45 days from the due date at the balance sheet date. The information as required to be disclosed under The Micro, Small and Medium Enterprises Development Act, 2006 regarding Micro and Small enterprises determined to the extent such parties have been identified on the basis of the information available with the company. This has been relied upon by the auditors.

The estimated rate escalation in salary considered in actuarial valuation, takes into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

Note: The details with respect to investment by the fund manager (Life Insurance Corporation of India) in to major category of plan assets have not been disclosed, in absence of such information.

NOTE 2. SEGMENT REPORTING

The company is predominately engaged in the business of manufacturing and sale of automotive components, which constitutes a single business segment. The company has no export sales or limited export sales, as such there are no reportable geographical segments. Hence the segment information as per Accounting Standard -17 "Segment reporting" is not disclosed.

NOTE 3. RELATED PARTY TRANSACTIONS : a. List of Related Parties and Relationships

Relationship Related Parties

(i) Entity having substantial Influence Meritor Heavy Vehicle System LLC, USA

Meritor Inc., Troy

BF Investments Ltd- Pune

(ii) Other Related Parties with whom the

Company had transactions :

Enterprises under Common Control / Meritor HVS (S) Pte Ltd, Singapore

Enterprises over which Key Arvin Meritor, Brazil

Management Personnel have Arvin Meritor, Sweden

significant influence Meritor Heavy Vehicle Systems LLC, Maxtown

Meritor HVS Cameri Spa, Italy

Meritor Automotive Inc, Fletcher, USA

Meritor Automotive Inc., Ohio

Meritor LLC, Florance

Xuzhou Meritor Axle Co.Ltd., China

Meritor HVS (India) Limited, Mysuru

Fonderie Venissieux Sas

Meritor Hvbs Cwmbran

Sistemas Automotrices

Meritor Commercial Vehicle Systems (India) Pvt Ltd

Meritor do Brasil Sistemas Automotivos LTDA

Bharat Forge Limited, Pune

Dr. N. Muthukumar President & Whole Time Director

Mr. S. RamkumarChief Financial Officer & Company Secretary

1. Related Party relationships are as identified by the Company on the basis of information available with them and accepted by the auditors.

2. The above amounts exclude reimbursement of expenses.

3. No amount is/has been written off or written back during the year in respect of debts due from or to related party except as disclosed above.

4. Figures in brackets relate to the previous year.

b) Transfer Pricing

The Company maintains the information and documents as required under the transfer pricing regulations under Section 92-92F of the Income Tax Act, 1 961. The management is of the view that its transactions are at arm''s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

NOTE 4.(b) The Payment of Bonus Act has been amended with retrospective effect from 1st April 2014, to enhance the, eligibility limit for payment of bonus to employees from Rs, 1 0,000 to Rs, 21,000 per month, and the wage ceiling from Rs, 3,500 to Rs, 7,000 per month or the minimum wage for the scheduled employment, as fixed by the Government, whichever is higher. However the Company has created the liability only for FY 201 5-1 6 and not for FY 201 4-1 5. The additional liability for FY 2014-1 5 amounts toRs, 1 1.52 Million.

NOTE 5. Disclosures in accordance with Guidance Note on Accounting for Expenditure on Corporate Social Responsibility Activities

NOTE 6. During the year, pursuant to Schedule II to the Companies Act, 2013 with effect from 1st April 2015, the Company has carried out componentization of fixed assets. The depreciation expense in the Statement of Profit and Loss for the year is higher by Rs, 20.05 Millions consequent to the componentization of fixed assets.

NOTE 7. Current year figures represent operations for 12 months i.e. 1st April 2015 to 31st March 2016, while the previous period figures represents operations for 6 months starting 1 st October 201 4 to 31 st March 201 5 and hence are not comparable. Previous period figures have been regrouped or reclassified wherever necessary to correspond to the current year''s grouping/ classification and disclosure.


Sep 30, 2014

1. Disclosures required under Section 22 of The Micro, Small and Medium Enterprises Development Act, 2006

There are no Micro, Small and Medium Enterprises to whom the Company owes dues which are outstanding for more than 45 days from the due date at the balance sheet date. The information as required to be disclosed under The Micro, Small and Medium Enterprises Development Act, 2006 regarding Micro and Small Enterprises determined to the extent such parties have been identified on the basis of the information available with the Company. This has been relied upon by the auditors.

2. Foreign exchange exposure :

There is no outstanding forward exchange contract as at 30th September,2014. Currency exposure as on 30th September, 2014 that have not been hedged by a derivative instrument or otherwise are given below:

3. Employee benefits:

I) Defined Contribution Plans:

During the year, the Company has recognised the following amount in the Statement of Profit and Loss

II) Defined Benefit Plan

Contribution to Gratuity Fund:

In accordance with Accounting Standard 15 (Revised 2005) actuarial valuation as on 30th September, 2014 was carried out in respect of the defined benefit plan of Gratuity based on the following assumptions.

Note: The details with respect to investment by the fund manager (Life Insurance Corporation of India) in to major category of plan assets have not been disclosed, in absence of such information.

Expected payment / contribution within next one year '' 8,744,437/-

The estimated rate escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

(i) Entity having substantial Influence

Meritor Heavy Vehicle System LLC., USA Meritor Inc.,

BF Investments Ltd- Pune

(ii) Other Related Parties with whom the Company had transactions : -

Enterprises under Common Control / Arvin Meritor Brazil Enterprises over which Key Arvin Meritor Sweden

Management Personnel have Bharat Forge Limited

significant influence Ege Fren As Turkey

Meritor Italy Meritor York

Meritor Automotive Inc Heath -Ohio

Meritor HVS LLC - Maxtown Meritor HVS -Nc Fletcher

Meritor Heavy Vehicle Systems LLC

Meritor Hvbs Cwmbran Meritor HVS LLC

Morristown Meritor HVS (India) Limited - Mysuru

Meritor HVS (India) Limited - Pune Meritor LLC Florence

Key Management Personnel

Dr. B. N. Kalyani Chairman (Non-retiring) Senior Vice President & Whole time Mr. N. Muthukumar Director

1. Related Party relationships are as identified by the Company on the basis of information available with them and accepted by the auditors.

2. The above amounts exclude reimbursement of expenses.

3. No amount is/has been written off or written back during the year in respect of debts due from or to related party except as disclosed above.

4. Figures in brackets relate to the previous year.

4. Finance Lease

The Company has taken certain vehicles and office equipments under finance lease on non- cancelable basis. The minimum lease payments under agreement is given below:

b) Transfer Pricing

The Company maintains the information and documents as required under the transfer pricing regulations under Section 92-92F of the Income Tax Act, 1961. The management is of the view that its transactions are at arm''s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

5. Contingent Liability

Particulars 2013-14 2012-13 Contingent liabilities

a) Amount payable to sales tax - 636,000 authorities

b) Excise matters under appeal

The Company has won the case at Commissioner of Central excise 1,802,810 - appeals) however the department has appealed against this order with Customs, Excise and Service tax Appellate Tribunal.

6. Previous year''s figures have been regrouped/ reclassified wherever necessary to correspond with the current year''s classification / disclosure.


Sep 30, 2013

1. Disclosures required under Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006

There are no Micro, Small and Medium enterprises to whom the Company owes dues which are outstanding for more than 45 days from the due date at the balance sheet date. The information as required to be disclosed under The Micro, Small and Medium Enterprises Development Act, 2006 regarding Micro and Small enterprises determined to the extent such parties have been identified on the basis of the information available with the Company. This has been relied upon by the auditors.

2. Segment Reporting

The Company is predominately engaged in the business of manufacturing and sale of automotive components, which constitutes a single business segment. The Company has no export sales or limited export sales, as such there are no reportable geographic segments. Hence the segment information as per Accounting Standard -17 "Segment reporting" is not disclosed.

3. Contingent Liability

Sl. Particulars 2012-13 2011-12 No.

a) Contingent liabilities 636,000 -

Amount payable to sales tax authorities

4. Previous year''s figures have been regrouped/ reclassified wherever necessary to correspond with the current year''s classification / disclosure.


Sep 30, 2012

1. CORPORATE INFORMATION

Automotive Axles Limited (AAL) is a joint venture of Kalyani Group and Meritor Inc., USA (formerly the automotive division of Rockwell International Corporation) incorporated in 1981 under the Companies Act, 1956 with manufacturing facilities located at Mysore, Noida and Rudrapur.

(i) Right, preferences and restrictions attached to shares

The Company has issued only one class of equity share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by Board of Directors is subject to approval by the shareholders at the ensuing Annual General Meeting. In the event of liquidation of the Company, the equity shareholders are entitled to receive only residual assets of the Company

(i) The loan is secured by first pari-passu charge on all existing and future fixed assets excluding the Land and existing Building (both movable and immovable) of the Borrower, to be shared with existing term lenders. Mortgage by way of first pari-passu charge on the immovable properties being building (funded out of term loan) to be situated at Hootagalli Industrial Area, Mysore. Repayable in equal quarterly installments along with interest ranging from 12.75% to 13.5% .

(ii) The loan is secured by hypothecation of first pari-passu charge on all movable and immovable plant and machinery of the Company both present and future. Repayable in equal quarterly installments along with interest ranging from 11.5% to 12% .

(iii) The loan is secured by hypothecation of first pari-passu charge on all movable and immovable assets of the wind mill project at Jadeshwar site in Rajkot District, Gujarat (excluding the land which is being leased by Govt. of Gujarat). The entire recievables of the project and escrow with axis bank designated account of the receivables from the sale of power generated. Repayable in equal quarterly installments starting from July 2013. Intererst payable monthly ranging from 12.5% to 13%

The finance lease is secured by first pari-passu charge on leased vehicle. Repayable in equal monthly installments along with interest ranging from 13% to 14.60%.

The unsecured finance lease is repayable in equal quarterly installments alongwith interest ranging from 10% to 12%

The unsecured term loan repayable in equal quarterly installments along with interest at LIBOR 0.65%.

The above working capital borrowings are secured by first pari-passu charge on inventory, spares, packing material, receivables and the entire other current assets of the Company (both existing and future) and second pari-passu charge on entire gross block of fixed assets including capital work in progress of the Company

2. Disclosures required under Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006

There are no Micro, Small and Medium enterprises to whom the Company owes dues which are outstanding for more 45 days from the due date at the balance sheet date. The information as required to be disclosed under The Micro, Small and Medium Enterprises Development Act, 2006 regarding Micro and Small enterprises determined to the extent such parties have been identified on the basis of the information available with the Company. This has been relied upon by the auditors.

3. Segment Reporting

Hitherto, the Company''s primary reporting segment was based on geographies. The Company has changed its segment reporting from the current year to report by business segments to correspond with the way in which the Company now manages its business. The activities of the Company are classified into a single segment of ''Automotive Components''

1. Related Party relationships are as identified by the Company on the basis of information available with them and accepted by the auditors.

2. The above amounts exclude reimbursement of expenses.

3. No amount is/has been written off or written back during the year in respect of debts due from or to related party

4. Figures in brackets relate to the previous year.

4. Operating Lease

Operating lease expenses debited to the Statement of Profit and Loss during the year is Rs. 1,860,694/- (Rs. 2,142,579/-). There is no contingent rent.

(b) Transfer Pricing : The Company maintains the information and documents as required under the transfer pricing regulations under Section 92-92F of the Income Tax Act, 1961. The management is of the view that its international transactions are at arm''s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

5. Contingent Liability

Company has certain labour disputes which are pending adjudication. The liability that may arise on account of these disputes cannot be reasonably estimated but is not expected to be material.

6. The revised Schedule VI has become effective from 1st April, 2011 for the preparation of financial statements. This has impacted the disclosure and presentation made in the financial statements. Previous year''s figures have been regrouped/ reclassified wherever necessary to correspond with the current year''s classification / disclosure.


Sep 30, 2010

Warranty expenses are provided for in the year of sale based on technical estimates. In addition, specific provision is also made against customer claims for manufacturing defects, where necessary, even though the same may pertain to prior years.

1. The Company has identified its primary segment as geographical, i.e., domestic and exports. Export Markets have been considered together as the product sold to these markets have comparable risks and rewards.

2. Sales for Exports represent export sales channelised through Meritor HVS (India) Limited and includes DEPB.

3. There are no Inter-segment Transactions during the year (Previous year None).

4. Fixed Assets of the Company have not been identified to the segments as they are common to the segments. Depreciation has been allocated to segments based on standard rates determined by the Company.

5. Secondary Segment disclosures have not been furnished as there is only a Single Business Segment.

6. Figures in brackets relate to the previous year.

7. Related party transactions :

a. List of Related Parties and Relationships

Relationship Related Parties

(i) Controlling Enterprises Meritor Heavy Vehicle System LLC., USA Arvin Meritor Inc.,

(ii) Other related parties with whom the Company had transactions : -

Enterprises under Common Control Bharat Forge Limited

Kalyani Forge Limited

Meritor HVS Cameri, SPA, Italy.

Meritor HVS India Ltd

Meritor HVS, Florence

Meritor Automotive Inc, Fletcher, USA

Meritor Automotive Inc, Ohio, USA

Meritor HVS, Sweden.

Meritor Automotive

Export Ltd., UK Arvin

Meritor China (Wuxi)

TRW Automotive U.S. LLC, USA

Meritor Heavy Vehicle, Australia

Arvin Meritor, Brazil

Arvin Meritor

Frankfort, USA

Arvin Meritor Inc., Maxton, USA

Meritor Automotive Export, South Wales NP

TRW Commercial Sterring

Key Management Personnel Dr. B.N. Kalyani Chairman (Non-retiring) Mr. Ashok Rao President and Wholetime Director

Mr. C. K. Sabareeshan Chief Financial Officer & Company Secretary

1. Related Party relationships are as identified by the Company on the basis of information available with them and accepted by the auditors.

2. The above amounts exclude reimbursement of expenses.

3. No amount is/has been written off or written back during the year in respect of debts due from or to related party.

4. Transactions reported above reflects, relationship with the parties from the date such relationship came into effect and hence the current year figures may not be comparable to the previous years figures.

5. Figures in brackets relate to the previous year.

8. Taxation

a) The net deferred tax liability comprises the tax impact arising from timing differences on account of :

2009-10 2008-09

Depreciation & Amortisation 438,460,140 560,945,436

Provision for employee benefits & others (30,989,400) (144,056,198)

407,470,740 416,889,238

Net deferred tax liability relating to the above 135,350,652 141,700,652

(b) Transfer Pricing: The Company maintains the information and documents as required under the transfer pricing regulations under Section 92-92F of the Income Tax Act 1961. The management is of the view that its international transactions are at arms length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation

9. Contingent Liability :

a) Company has certain labour disputes which are pending adjudication. The liability that may arise on account of these

disputes cannot be reasonably estimated but is not expected to be material.

b) Other claims against the company not acknowledged as debt for Rs.Nil (Previous year Rs.Nil).

c) Company has discounted endorsed customer bills with its bankers which are with recourse and the liability that may rise on account of the same is to the extent of Rs.Nil (Previous Year Rs.172 million).

10. The information as required to be disclosed under The Micro, Small and Medium Enterprises Development Act, 2006 and that given in Current Liabilities - Schedule 10 regarding Micro and Small enterprises determined to the extent such parties have been identified on the basis of the information available with the company. This has been relied upon by the auditors.

11. Foreign Exchange Exposure:

(a) The company has entered into the following hedging mechanism:

(i) Forward Exchange Contracts, which are not intended for trading or speculative purposes, but for hedge purposes, to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables.

(ii) There is no outstanding Forward Exchange Contract as on 30th September, 2010:

12. Previous years figures have been regrouped/reclassified wherever necessary. Signatures to Schedule 1 to 18.

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