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Notes to Accounts of Automotive Axles Ltd.

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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