Notes to Accounts of Ceat Ltd.
Mar 31, 2023
The capacity expansions undertaken is modular in nature, wherein civil work and major upstream capex are incurred, followed by downstream capex to ramp up production in line with anticipated market demand. Based on long term demand and supply planning, management estimates the annual capex requirement and project timelines which are approved by the Board. There are no projects which are overdue based on such timelines or which have exceeded cost compared to plans.
1. During the year, the company has transferred the following expenses which are attributable to the construction activity and are included in the cost of capital work-in-progress / property, plant and equipment as the case may be. Consequently, expenses disclosed under the respective notes are net of such amounts.
2. As a part of ongoing expansion project at Halol (Phase III), during the year the Company has capitalised and commissioned assets of H 9,548 lacs (March 31,2022: H 8,170 lacs).
3. As a part of ongoing expansion project at Nagpur, during the year the Company has capitalised and commissioned assets of H 13,231 lacs (March 31,2022: H 5,437 lacs).
4. As a part of ongoing green field project at Chennai, during the year the Company has capitalised and commissioned assets of H 31,708 lacs (March 31,2022: H 40,165 lacs).
5. As a part of ongoing expansion project at Ambernath (Phase II), during the year the Company has capitalised and commissioned of H 13,505 lacs (March 31,2022: H 11,625 lacs).
6. The amount of borrowing cost capitalised during the year ended March 31,2023 is H 2,000 lacs (March 31,2022: H 1,790 lacs). The rates used to determine the amount of borrowing cost eligible for capitalisation was in the range of 5% to 7.34% (March 31,2022: 6.50% to 7.25%) which is the effective interest rate of specific borrowings.
7. Refer notes 18 and 22 for details on pledges and securities.
8. During the year, the Company has reclassified leasehold land from Property, plant and equipment to Right-of-use asset to appropriately reflect nature of asset and accordingly the comparative amount of previous year of H 10,078 Lacs has also been reclassified.
a) The rate used for discounting is in range of 7-10%.
b) Refer note 42 for information about fair value measurement and note 44(c) for information about liquidity risk relating to lease liabilities.
c) Significant Judgements in determining the lease term of contracts with renewal and termination options: 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 several lease contracts that include extension and termination options. The Company applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. 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 or to terminate.
The Company included the renewal period as part of the lease term for leases of buildings and other with shorter noncancellable period. The Company typically exercises its option to renew for these leases because there will be a significant negative effect on the operations if a replacement asset is not readily available. The renewal periods for leases of building and others with longer non-cancellable periods are not included as part of the lease term as these are not reasonably certain to be exercised. Furthermore, the periods covered by termination options are included as part of the lease term only when they are reasonably certain not to be exercised.
d) During the year, the Company has reclassified leasehold land from Property, plant and equipment to Right-of-use asset to appropriately reflect nature of asset and accordingly the comparative amount of previous year of H 10,078 Lacs has also been reclassified.
a) These balances are available for use only towards settlement of matured deposits and interest on deposits. Also includes H 0.20 lacs (March 31,2022 H 0.20 lacs) outstanding for a period exceeding seven years, in respect of which a Government agency has directed the Company to hold.
b) These balances are available for use only towards settlement of corresponding unpaid dividend liabilities. The sum also includes H 1.04 lacs (March 31,2022 H 1.03 lacs) outstanding for a period exceeding seven years retained in accordance with the provisions of Section Rule 6(3) of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.
a) Includes 688 (March 31,2022 - 688) equity shares offered on right basis and kept in abeyance.
b) Terms/ rights attached to equity shares
The Company has only one class of equity shares having face value of H 10 per share. Each holder of equity shares is entitled to one vote per equity share. Dividend is recommended by the Board of Directors and is subject to the approval of the members at the ensuing Annual General Meeting except interim dividend. The Board of Directors have a right to deduct from the dividend payable to any member, any sum due from him to the Company.
In the event of winding-up, the holders of equity shares shall 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 shareholders.
The shareholders have all other rights as available to equity shareholders as per the provision of the Companies Act, applicable in India read together with the Memorandum of Association and Articles of Association of the Company, as applicable.
d) As per the records of the Company as at March 31,2023 no calls remain unpaid by the directors and officers of the company.
e) The Company has not issued any equity shares as bonus for consideration other than cash and has not bought back any shares during the period of 5 years immediately preceding March 31,2023
Amount received on issue of shares in excess of the par value has been classified as security share premium.
Capital reserve includes profit on amalgamation of entities.
Capital redemption reserve represents amount transferred from profit and loss account on redemption of preference shares during FY 1998-99.
d) Effective portion of cash flow hedges
It represents mark-to-market valuation of effective hedges as required by Ind AS 109.
The general reserve is used from time to time to transfer profits from retained earnings for appropriations purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income , items included in the general reserve will not be reclassified subsequently to the Statement of Profit and Loss.
Retained earnings are the profits that the Company has earned till date, less any transfers to reserves, dividends or other distributions paid to shareholders.
Proposed dividends on equity shares which are subject to approval at the Annual General Meeting are not recognised as a liability in the year in which it is proposed.
The Company declares and pays dividend in Indian rupees. The Finance Act 2020 has repealed the Dividend Distribution Tax. Companies are now required to pay / distribute dividend after deducting applicable taxes. The remittance of dividends outside India is also subject to withholding tax at applicable rates.
1 Non-Convertible Debentures (''''NCDs'''') H 40,000 lacs as on March 31,2023 (March 31,2022: H 25,000 lacs) allotted on October 07, 2020 (NCD Series 1), October 13, 2020 (NCD Series 2) and September 19, 2022 (NCD Series 3) on private placement basis. First two tranches of NCDs are secured by way of first charge over movable and immovable fixed assets located at Ambernath plant and third tranche of NCD is un-secured. As at March 31,2023, the NCDs carry an interest at 6.40% p.a. (NCD Series 1), 7.00% p.a. (NCD Series 2) and 7.99% p.a. (NCD Series 3) and is repayable as under:
- NCD Series 1: H 15,000 lacs (37.50% of the issue amount) repayable on October 06, 2023.
- NCD Series 2: H 10,000 lacs (25% of the issue amount) repayable on October 13, 2025.
- NCD Series 3: H 15,000 lacs (37.50% of the issue amount) repayable on September 19, 2026.
c) Provision for decommissioning liability
The Company has recognised a provision for decommissioning obligations associated with a land taken on lease at Nashik manufacturing facility for the production of tyres. In determining the fair value of the provision, assumptions and estimates are made in relation to discount rates, the expected cost to dismantle and remove the plant from the site and the expected timing of those costs. The Company estimates that the costs would be realised in year 2066 at the expiration of the lease and calculates the provision using the Discounted Cash Flow (DCF) method based on the following assumptions:
a) Cash credit facilities, export packing credit facilities and working capital demand loan from banks is part of working capital facilities availed from consortium of banks secured by way of first pari passu charge on the current assets of the Company carrying interest in the range of 4.50% p.a. to 9.70% p.a. (March 31,2022 : 4.50% to 9.70% p.a.)
b) The Company had issued commercial papers (total available limit H 50,000 lacs) at regular intervals for working capital purposes with interest ranging from 4.14% p.a. to 7.70% p.a. (March 31,2022 : 3.48% to 3.98% p.a.)
c) Quarterly returns and statements of current assets filed by the Company with banks or financial institutions are in agreement with the books of accounts
d) Refer note 44(c) for information about liquidity risk relating to borrowings.
d) Government Grant:
i) In accordance with the accounting policy for Government grants, the Company has recognised an amount of H 10,268 lacs towards state incentives (March 31,2022: H 14,907 lacs) which is included in other operating revenue.
ii) The Company has recognised a government grant as income on account of Export Incentive under Merchandise Exports from India Scheme (MEIS) from Directorate General of Foreign Trade, Government of India.
e) During the year, the Company has reclassified the sale of scrap to other operating income to appropriately reflect nature of income and accordingly the comparative amount of previous year of H 5,328 Lacs has also been reclassified.
a) The Company had introduced VRS for employees across the Company. During the year, 147 employees (March 31,2022, 38 employees) opted for the VRS.
b) The economic situation in Sri Lanka has deteriorated significantly and consequently there has been a devaluation of the currency. The exchange loss of C 182 lacs (March 31, 2022- C 588 Lacs) towards dividend and other receivables from its subsidiary / joint ventures in Sri Lanka is reflected as an exceptional item for the year ended March 31,2023.
Refer note 30 for Company''s contribution to the defined contribution plans with respect to provident fund and other funds.
b) Defined benefit plan - Gratuity
Description of plan
The Company has a defined benefit gratuity plan which is funded with an Insurance Company in the form of a qualifying Insurance policy. The Company''s defined benefit gratuity plan is a salary plan for employees which requires contributions to be made to a separate administrative fund. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, every employee who has completed five years of service gets a gratuity on separation at 15 days of last drawn salary for each completed year of service.
Governance
The fund has the form of a trust and it is governed by the Board of Trustees, which consists of employer and employee representatives. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy. Each year, the Board of Trustees reviews the level of funding.
Investment Strategy
The Board of trustees have appointed LIC of India, Birla Sun Life Insurance, India First Life Insurance, Kotak Mahindra Life Insurance & HDFC Life Insurance to manage its funds. The Board of Trustees aim to keep annual contributions relatively stable at a level such that no plan deficits (based on valuation performed) will arise. Every year, the insurance Company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company. In case of death, while in service, the gratuity is payable irrespective of vesting.
The following set out the amounts recognized in the Company''s financial statements as at March 31,2023 and March 31,2022.
|
a. Contingent Liabilities Refer note 2.21 for accounting policy on Contingent liabilities and assets (to the extent not provided for) (C in Lacs) |
||
|
Particulars |
As at March 31,2023 |
As at March 31,2022 |
|
1. Direct and indirect taxation matters* |
||
|
Income tax |
1,074 |
901 |
|
Excise duty / Service tax / GST |
16,618 |
7,859 |
|
Sales tax |
2,324 |
4,517 |
|
2. Bills discounted with banks |
20,725 |
15,164 |
|
3. Claims against Company not acknowledged as debts* |
||
|
In respect of labour matters |
988 |
743 |
|
Vendor disputes |
294 |
294 |
|
4. Other claims* (refer foot note a) |
3,210 |
28,456 |
|
*in respect of above matters, future cash outflows are determinable only on receipt of judgements pending at various forums / authorities. |
||
Note:
a) The Competition Commission of India (''CCI'') on February 02, 2022 had released its order dated August 31, 2018 against the Company and other Tyre Manufacturers and also the Automotive Tyre Manufacturer Association (ATMA) concerning contravention of the provisions of the Competition Act, 2002 in the year 2011-12 and imposed a penalty of H 25,216 lacs on the Company. The Company had filed an appeal against the CCI Order before the Honourable National Company Law Appellate Tribunal (NCLAT). NCLAT in its order dated December 01,2022, has remitted the matter back to the CCI to re-examine the order and to consider reviewing the penalty pointing out certain errors leading to wrong conclusions. CCI has filed an Appeal before the Supreme Court against the Order passed by the NCLAT. Company is also a Respondent in the said Appeal. After hearing CCI, Supreme Court on 10th April, 2023 has issued notice to all respondents returnable in September, 2023. No interim order has been passed by the Supreme Court.
|
b. |
Commitments |
(C in Lacs) |
|
|
Particulars |
As at March 31,2023 |
As at March 31,2022 |
|
|
Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advance payments) |
55,818 |
85,105 |
The Company has availed the Sales Tax Deferral Loan and Octroi refund from the Directorate of Industries for Nashik Plant. Hence, the Company has to take prior permission of the appropriate authority for removal / transfer of any asset (falling under the above Schemes) from Nashik Plant. In case of violation of terms & conditions, the Company is required to refund the entire loan / benefit along with the interest @ 22.50% on account of Sales Tax deferral Loan and @ 15% on account of Octroi refund.
d. Material demands and disputes considered as "Remote" by the Company
The Company has been served with a Show Cause cum Demand Notice from the DGCEI (Directorate General of Central Excise Intelligence) Mumbai, on the ground that, the activity of making tyre set, i.e. inserting Tubes and Flaps inside the Tyres and tied up through Polypropylene Straps, amounts to manufacture / pre-packaged commodity under Section 2(f)(iii) of Central Excise Act, read with Section 2(l) of the Legal Metrology Act, 2009. Accordingly, the authorities worked out the differential duty amounting to H 27,672 lacs. i.e., the difference between the amount of duty already paid on the basis of transaction value and duty payable on the basis of MRP under Section 4A, for the period from April 2011 to June 2017. The Company believes that Set of TT / TTF (Tyre and Tube / Tyre, Tube and Flap) is not a pre-packaged commodity in terms of provisions of Legal Metrology Act, 2009 read with Central Excise Act and Rules made thereunder. The Company has a strong case on the ground that, the said issue has been clarified by the Controller of the Legal Metrology Department vide its letter dated May 01, 1991 that "Tyre with tube & flaps tied with three thin polythene strips may not be treated as a pre-packed commodity within the meaning of rule 2(l) of the Standards of Weights and Measures (Packaged Commodities), Rules, 1977". The above clarification has been re-affirmed vide letter dated November 16, 1992 by the Legal Metrology authorities.
Terms and conditions of transactions with related parties
The sales to and purchases and other transactions with 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.
The remuneration to the key managerial personnel does not include the provisions made for gratuity as it is determined on an actuarial basis for the Company as a whole.
Managerial remuneration is computed as per the provisions of section 198 of the Companies Act, 2013. The amount outstanding are unsecured and will be settled in cash.
# As at 31 March, 2022 H 200 lacs was estimated to be excess remuneration considering the low profits and recovered from Mr. Anant Goenka, Managing Director, of which, H 147 lacs being excess remuneration as per the limits prescribed under section 197 of the Companies Act, 2013, is payable to Mr. Anant Goenka subject to the approval of the shareholders at the ensuing annual general meeting.
## Considering the possibility of inadequacy of profits, if any, the Company had paused the payment to Mr. Anant Goenka effective January 1, 2023, subject to approval of members which has been obtained subsequently by way of Postal Ballot on April 27, 2023.
During the financial year 2022-23 and 2021-22, no single external customer has generated revenue of 10% or more of the Company''s total revenue.
During the financial year 2022-23 and 2021-22, no single country outside India has given revenue of more than 10% of total revenue.
Note 41: Hedging activities and derivatives Derivatives designated as hedging instruments
The Company uses derivative financial instruments such as foreign currency forward contracts to hedge foreign currency risk arising from future transactions in respect of which firm commitments are made or which are highly probable forecast transactions. All these instruments are designated as hedging instruments and the necessary documentation for the same is made as per Ind AS 109.
Foreign currency risk
Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of committed future purchases and highly probable forecast sales.
The foreign exchange forward contract balances vary with the level of expected foreign currency sales and purchases and changes in foreign exchange forward rates.
The terms of the foreign currency forward contracts match the terms of the expected highly probable forecast transactions. As a result, no hedge ineffectiveness arise requiring recognition through the Statement of Profit and Loss.
The cash flow hedges as at March 31,2023 were assessed to be highly effective and a net unrealised gain of H 1150 lacs, with a deferred tax liability of C 289 lacs relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges as at March 31, 2022 were assessed to be highly effective and a net unrealised loss of C 56 lacs, with a deferred tax asset of C 14 lacs relating to the hedging instruments, was included in OCI.
a) The Management assessed that fair values of cash and cash equivalents, bank balances other than cash and cash equivalents, trade receivables, trade payables, short term borrowings, other current financial assets and liabilities (except derivative financial instrument those being measured at fair value through other comprehensive income) which are receivable / payable within one year approximate their carrying amounts largely due to the short-term maturities of these instruments.
b) The Management assessed that fair values of other non current financial assets and liabilities measured at amortised cost approximate their carrying amounts largely due to nature of such instruments.
The fair value of financial instruments as referred to in note 42 above have been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).
The fair values of the financial assets and liabilities are defined as the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values are consistent with those used for the year ended March 31,2022.
Financial assets and liabilities measured at fair value as at Balance Sheet date:
Derivative financial instruments: The fair values of the derivative financial instruments has been determined using valuation techniques with market observable inputs. The models incorporate various inputs including the credit quality of counter-parties, foreign exchange forward rates, etc.
Investment in others: The fair value is calculated using the Discounted Cashflow method where the significant unobservable input used is discount rate - 18.64%.
Note 44 : Financial risk management objectives and policies
The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings, 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 trade and other receivables, cash and cash equivalents that derive directly from its operations. The Company also enters into derivative transactions.
The Company''s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company''s policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. The Board of Directors through its Risk Management Committee reviews and agrees policies for managing each of these risks, which are summarised below.
The Company''s size and operations result in it being exposed to the following market risks that arise from its use of financial instruments:
⢠Interest rate risk;
⢠Foreign currency risk;
⢠Equity price risk; and
⢠Commodity risk
The above risks may affect the Company''s income and expenses, or the value of its financial instruments. The Company''s exposure to and management of these risks are explained below.
The sensitivity of the relevant Statement of 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 31,2023 and March 31,2022 including the effect of hedge accounting.
The movement in the pre-tax effect is a result of a change in the fair value of the financial asset / liability due to the exchange rate movement. The derivatives which have not been designated in a hedge relationship act as an economic hedge and will offset the underlying transactions when they occur. The same derivatives are not covered in the above table.
In Management''s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.
iii. Equity price risk
There is no material equity risk relating to the Company''s equity investments which are detailed in note 6. The Company''s equity investments majorly comprises of strategic investments rather than trading purposes.
Trade receivables 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.
Risk Management:
Customer credit risk is managed by each business unit subject to the Company''s established policy, procedures and control relating to customer credit risk management.
Trade receivables are non-interest bearing and are generally on 27 days to 60 days credit term. Credit limits are established for all customers based on internal rating criteria. Outstanding customer receivables are regularly monitored. An impairment analysis is performed at each reporting date on an individual basis for major customers. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically.
Export receivables are against Letter of Credit, bank guarantees, payment against documents. For open credit exports insurance cover is taken. Generally deposits are taken from domestic debtors under replacement segment. The carrying amount and fair value of security deposit from dealers amounts to C 49,389 lacs (March 31,2022: C 42,641 lacs) as it is payable on demand. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets.
c) Liquidity risk
The Company prepares cash flow on a daily basis to monitor liquidity. Any shortfall is funded out of short term loans. Any surplus is invested in appropriate mutual funds or bank deposits. The Company also monitors the liquidity on a longer term wherein it is ensured that the long term assets are funded by long term liabilities. The Company ensures that the duration of its current assets is in line with the current liabilities to ensure adequate liquidity in the 3-6 months period.
The table below summarises the maturity profile of the Company''s financial liabilities based on contractual undiscounted payments.
Note 45: Capital management
For the purpose of the Company''s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. 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 monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings, less cash and cash equivalents.
In order to achieve this overall objective, the Company''s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
No changes were made in the objectives, policies or processes for managing capital during the years ended March 31,2023 and March 31,2022.
Note 46: Material foreseeable losses
The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of accounts.
Note 47: 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 under section 248 of Companies Act, 2013 or section 560 of Companies Act, 1956.
(iii) The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period,
(iv) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.
(v) The Company have not advanced or loaned or invested funds to any other person(s) or entity(ies), 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
(vi) 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,
(vii) The Company have not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year 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.
Note 49: Extended Producer Responsibility
On July 21,2022, the Ministry of Environment, Forest and Climate Change issued notification containing Regulations on Extended Producer Responsibility (EPR) for Waste Tyre applicable to Tyre manufacturers and Recyclers. As per the notification, the Company has a present legal obligation as at March 31,2023 to purchase EPR certificates online from Recyclers of waste tyre, registered with the Central Pollution Control Board, to fulfil its obligations, which is determined based on certain percentage of the quantity of tyres manufactured in the year ended March 31,2021.
Currently the modalities of the above regulations are dynamic and would be fine-tuned in line with the changing requirements including measurement of obligation and timeline for achieving compliance by tyre manufacturing companies in consultation with Industry forum of Tyre companies. Accordingly, the Company has not recognised any provision towards EPR obligation for the year ended March 31,2023.
Note 50: Standards issued but not yet effective
Ministry of Corporate Affairs ("MCA") amended the Companies (Indian Accounting Standards) Rules, 2015 by issuing the Companies (Indian Accounting Standards) Amendment Rules, 2023, applicable from April 1,2023, as below.
Key synopsis are as under:
1. Ind AS 1 - Presentation of Financial Statements: The amendments require to disclose their material accounting policies rather than their significant accounting policies.
2. Ind AS 12 - Income Taxes: The amendments clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. The amendments narrowed the scope of the recognition exemption in paragraphs 15 and 24 of Ind AS 12 (recognition exemption) so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences.
3. Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors: The amendments will help entities to distinguish between accounting policies and accounting estimates. The definition of a change in accounting estimates has been replaced with a definition of accounting estimates. Under the new definition, accounting estimates are "monetary amounts in financial statements that are subject to measurement uncertainty". Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty.
While preparing the financial statement for the year ended March 31, 2023, the above amendments are not considered for disclosure as standards notified by Ministry of Corporate Affairs, but not yet effective, in accordance with IND AS.
Mar 31, 2022
a) The Company had introduced VRS for employees across the Company. During the year, 38 employees (March 31,2021, 69 employees) opted for the VRS.
b) The Company had recognised dividend income amounting to H 1,581 Lacs from Associated CEAT Holdings Company (Pvt.) Limited, wholly owned subsidiary of the Company based in Sri Lanka. The Company has realised H 762 Lacs towards the aforesaid dividend. The economic situation in Sri Lanka has deteriorated significantly and consequently there has been a devaluation of the currency. The exchange loss of H 588 Lacs towards dividend and other receivables from its subsidiary / joint ventures in Sri Lanka is reflected as an exceptional item for the year ended March 31,2022.
c) The COVID-19 pandemic had a significant impact on the Company operations in the previous year. The Company had made provision for unusable semi finished inventory and raw materials, aggregating Nil for the year ended March 31,2022 (March 31,2021: H 258 Lacs) due to abrupt stoppage of production facilities. Further, borrowing costs not capitalised due to temporary suspension related to ongoing capital projects, contract manpower cost and export detention (for the period attributable to the COVID-19) aggregate Nil for the year ended March 31,2022 (March 31,2021: H 1,753 Lacs).
d) The Companyâs Halol plant witnessed a fire incident at its Passenger Car Radial Tyre Curing Section (Phase II) on April 08, 2020. The company has provided for the loss (net of insurance claim receivable) of asset and material at H 150 Lacs.
b) Defined benefit plan - Gratuity Description of plan
The Company has a defined benefit gratuity plan which is funded with an Insurance Company in the form of a qualifying Insurance policy. The Company''s defined benefit gratuity plan is a salary plan for employees which requires contributions to be made to a separate administrative fund. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, every employee who has completed five years of service gets a gratuity on separation at 15 days of last drawn salary for each completed year of service.
The fund has the form of a trust and it is governed by the Board of Trustees, which consists of employer and employee representatives. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy. Each year, the Board of Trustees reviews the level of funding.
Investment Strategy
The Board of trustees have appointed LIC of India, Birla Sun Life Insurance, India First Life Insurance, Kotak Mahindra Life Insurance & HDFC Life Insurance to manage its funds. The Board of Trustees aim to keep annual contributions relatively stable at a level such that no plan deficits (based on valuation performed) will arise. Every year, the insurance Company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company. In case of death, while in service, the gratuity is payable irrespective of vesting.
The following set out the amounts recognized in the Companyâs financial statements as at March 31,2022 and March 31, 2021.
The discount rate indicated above reflects the estimated timing and currency of benefit payments. It is based on the yields / rates available on applicable bonds as on the current valuation date.
The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
The Companyâs best estimate of contribution during the next year is H 2,016 Lacs.
|
(H in Lacs) |
||
|
Particulars |
As at |
As at |
|
March 31, 2022 |
March 31, 2021 |
|
|
2. Claims against Company not acknowledged as debts* |
||
|
In respect of labour matters |
743 |
654 |
|
Vendor disputes |
294 |
294 |
|
3. Other claims* (refer foot note a) |
28,456 |
3,234 |
*in respect of above matters, future cash outflows are determinable only on receipt of judgements pending at various forums / authorities.
Note:
a) The Competition Commission of India (âCGIâ) on February 02, 2022 has released its order dated August 31,2018 on the Company and other Tyre Manufacturers and also the Automotive Tyre Manufacturer Association concerning the contravention of the provisions of the Competition Act, 2002 in the year 2011-12 and imposed a penalty of H 25,216 Lacs on the Company. The Company has filed an appeal against the CCI Order before the Honourable National Company Law Appellate Tribunal (NCLAT). The Company believes that it has a strong case and accordingly no provision is considered in these financial results
|
(H in Lacs) |
||
|
Particulars |
As at |
As at |
|
March 31, 2022 |
March 31, 2021 |
|
|
Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advance payments) |
85,105 |
62,352 |
|
Note 38: Commitments and contingencies a. Contingent Liabilities Refer note 2.21 for accounting policy on Contingent liabilities and assets (to the extent not provided for) (H in Lacs) |
||
|
Particulars |
As at |
As at |
|
March 31, 2022 |
March 31, 2021 |
|
|
1. Direct and indirect taxation matters* |
||
|
Income tax |
901 |
901 |
|
Excise duty / Service tax / GST |
7,859 |
7,144 |
|
Sales tax |
4,517 |
4,967 |
|
Bills discounted with banks |
15,164 |
14,305 |
The Company has availed the Sales Tax Deferral Loan and Octroi refund from the Directorate of Industries for Nashik Plant. Hence, the Company has to take prior permission of the appropriate authority for removal / transfer of any asset (falling under the above Schemes) from Nashik Plant. In case of violation of terms & conditions, the Company is required to refund the entire loan / benefit along with the interest @ 22.50% on account of Sales Tax deferral Loan and @ 15% on account of Octroi refund.
d. Material demands and disputes considered as âRemoteâ by the Company
The Company has been served with a Show Cause cum Demand Notice from the DGCEI (Directorate General of Central Excise Intelligence) Mumbai, on the ground that, the activity of making tyre set, i.e. inserting Tubes and Flaps inside the Tyres and tied up through Polypropylene Straps, amounts to manufacture / pre-packaged commodity under Section 2(f)(iii) of Central Excise Act, read with Section 2(l) of the Legal Metrology Act, 2009. Accordingly, the authorities worked out the differential duty amounting to H 27,672 Lacs i.e., the amount of duty already paid on the basis of transaction value and duty payable on the basis of MRP under Section 4A, for the period from April 2011 to June 2017. The Company believes that Set of TT / TTF (Tyre and Tube / Tyre, Tube and Flap) is not pre-packaged commodity in terms of provisions of Legal Metrology Act, 2009. The Company has a strong case on the ground that, the said issue has been clarified by the Controller of the Legal Metrology Department vide its letter dated May 01, 1991 that "Tyre with tube & flaps tied with three thin polythene strips may not be treated as a pre-packed commodity within the meaning of rule 2(l) of the Standards of Weights and Measures (Packaged Commodities), Rules, 1977â. The above clarification has been re-affirmed vide letter dated November 16, 1992 by the Legal Metrology authorities.
Note 39: Related party transactionsA) Names of related parties and related party relationship
Related parties where control exists
⢠Associated CEAT Holdings Company (Pvt.) Limited ("ACHLâ) (Subsidiary Company)
⢠CEAT AKKHAN Limited (Subsidiary Company)
⢠Rado Tyres Limited("Radoâ) (Subsidiary Company)
⢠CEAT Specialty Tires Inc. (Subsidiary Company)
⢠CEAT Specialty Tyres B.V (Subsidiary Company)
Related parties with whom transactions have taken place during the current year and previous year
⢠CEAT Kelani Holdings (Pvt.) Limited ("CKHLâ) (Joint venture of ACHL)
Terms and conditions of transactions with related parties
The sales to and purchases and others transactions with related parties are made on terms equivalent to those that prevail in armâs length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash.
The remuneration to the key managerial personnel does not include the provisions made for gratuity as it is determined on an actuarial basis for the Company as a whole.
Managerial remuneration is computed as per the provisions of section 198 of the Companies Act, 2013. The amount outstanding are unsecured and will be settled in cash.
#An amount of H 200 Lacs was estimated to be excess remuneration considering the low profits and recovered from Mr Anant Goenka, Managing Director, of which, H 147 Lacs being excess remuneration as per the limits prescribed under section 197 of the Companies Act, 2013, is payable to Mr. Anant Goenka subject to the approval of the shareholders at the ensuing annual general meeting.
During the financial year 2021-22 and 2020-21, no single external customer has generated revenue of 10% or more of the Companyâs total revenue.
During the financial year 2021-22 and 2020-21, no single country outside India has given revenue of more than 10% of total revenue.
Note 41: Hedging activities and derivatives Derivatives designated as hedging instruments
The Company uses derivative financial instruments such as foreign currency forward and options contracts to hedge foreign currency risk arising from future transactions in respect of which firm commitments are made or which are highly probable forecast transactions. All these instruments are designated as hedging instruments and the necessary documentation for the same is made as per Ind AS 109.
Cash flow hedges
Foreign currency risk
Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of recognized purchase payables, committed future purchases, recognized sales receivables and forecast sales.
The terms of the foreign currency forward and options contracts match the terms of the expected highly probable forecast transactions. As a result, no hedge ineffectiveness arise requiring recognition through the Statement of Profit and Loss.
The cash flow hedges as at March 31, 2022 were assessed to be highly effective and a net unrealised loss of H 56 Lacs, with a deferred tax asset of H 14 Lacs relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges as at March 31, 2021 were assessed to be highly effective and a net unrealised loss of H 1,759 Lacs, with a deferred tax asset of H 516 Lacs relating to the hedging instruments, was included in OCI.
The fair values of the financial assets and liabilities are defined as the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values are consistent with those used for the year ended March 31,2021.
Financial assets and liabilities measured at fair value as at Balance Sheet date:
The Management assessed that fair values of cash and cash equivalents, bank balances other than cash and cash equivalents, trade receivables, trade payables, short term borrowings, other current financial assets and liabilities (except derivative financial instrument those being measured at fair value through other comprehensive income) which are receivable / payable within one year approximate their carrying amounts largely due to the short-term maturities of these instruments.
Note 43: Fair value hierarchy
The fair value of financial instruments as referred to in note 42 above have been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).
Derivative financial instruments: The fair values of the derivative financial instruments has been determined using valuation techniques with market observable inputs. The models incorporate various inputs including the credit quality of counter-parties, foreign exchange forward rates, etc.
Investment in others: The fair value is calculated using the Discounted Cashflow method where the significant unobservable input used is discount rate - 17.57%.
Note 44 : Financial risk management objectives and policies
The Companyâs principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Companyâs operations. The Companyâs principal financial assets include trade and other receivables, cash and cash equivalents that derive directly from its operations. The Company also enters into derivative transactions.
The Companyâs financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Companyâs policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. The Board of Directors through its Risk Management Committee reviews and agrees policies for managing each of these risks, which are summarised below.
The Companyâs size and operations result in it being exposed to the following market risks that arise from its use of financial instruments:
⢠Interest rate risk;
⢠Foreign currency risk;
⢠Equity price risk; and
⢠Commodity risk
The above risks may affect the Companyâs income and expenses, or the value of its financial instruments. The Companyâs exposure to and management of these risks are explained below.
The sensitivity of the relevant Statement of 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 including the effect of hedge accounting.
The movement in the pre-tax effect is a result of a change in the fair value of the financial asset / liability due to the exchange rate movement. The derivatives which have not been designated in a hedge relationship act as an economic hedge and will offset the underlying transactions when they occur. The same derivatives are not covered in the above table.
In Managementâs opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.
There is no material equity risk relating to the Companyâs equity investments which are detailed in note 6. The Company''s equity investments majorly comprises of strategic investments rather than trading purposes.
c) Liquidity risk
The Company prepares cash flow on a daily basis to monitor liquidity. Any shortfall is funded out of short term loans. Any surplus is invested in appropriate mutual funds and bank deposits. The Company also monitors the liquidity on a longer term wherein it is ensured that the long term assets are funded by long term liabilities. The Company ensures that the duration of its current assets is in line with the current liabilities to ensure adequate liquidity in the 3-6 months period.
Note 45: Capital management
For the purpose of the Company''s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Companyâs 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 monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings, less cash and cash equivalents.
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.
Risk Management:Customer credit risk is managed by each business unit subject to the Companyâs established policy, procedures and control relating to customer credit risk management.
Trade receivables are non-interest bearing and are generally on 27 days to 60 days credit term. Credit limits are established for all customers based on internal rating criteria. Outstanding customer receivables are regularly monitored. An impairment analysis is performed at each reporting date on an individual basis for major customers. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically.
Export receivables are against Letter of Credit, bank guarantees, payment against documents. For open credit exports insurance cover is taken. Generally deposits are taken from domestic debtors under replacement segment. The carrying amount and fair value of security deposit from dealers amounts to H 42,641 Lacs (March 31, 2021: H 42,003 Lacs) as it is payable on demand. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets.
In order to achieve this overall objective, the Companyâs capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2022 and March 31,2021.
Note 46 : Estimation of uncertainties relating to the global health pandemic from COVID-19
The Company has considered the possible effects that may result from the COVID-19 pandemic in the preparation of these financial statements including the recoverability of the carrying value of financial and non-financial assets. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of COVID-19, the Company has, at the date of approval of these financial statements, used internal and external sources of information and expects that the carrying value of the assets will be recovered and there is no significant impact on liabilities accrued other than those reported in note 36. The impact of COVID-19 on the Companyâs financial statements may differ from that estimated as at the date of approval of these financial statements and the Company will continue to closely monitor any material changes to future economic conditions.
The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of accounts.
Note 48: 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 under section 248 of Companies Act, 2013 or section 560 of Companies Act, 1956.
(iii) The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period,
(iv) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.
(v) The Company have not advanced or loaned or invested funds to any other person(s) or entity(ies), 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
(vi) 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,
(vii) The Company have not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year 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
Note 50: Compliance With Approved Scheme Of Amalgamation
During FY 2020-21, the Company completed the merger of CEAT Specialty Tyres Limited (a wholly-owned subsidiary of the Company, the transferor company) via scheme of amalgamation. As per the scheme, the assets and liabilities pertaining to the transferor company have been transferred and vested to the Company at their book values from the appointed date being April 01, 2019. The amalgamation has been accounted for in accordance with Appendix C of Ind AS 103 âBusiness Combinationsâ. Further, current tax and deferred tax for year ended March 31,2021 includes the impact on tax expenses consequent to the aforesaid amalgamation.
Note 51: Standards issued but not yet effective
Ministry of Corporate Affairs ("MCAâ) through Companies (Indian Accounting Standards) Amendment Rules, 2019 has notified certain amendments to existing Ind AS via notification dated 23 March 2022. The same shall come into force from annual reporting period beginning on or after 1st April 2022 which the Company has not applied as they are not effective for annual period beginning on or after 1 April 2021.
Key synopsis are as under:
- Ind AS 16 Property, Plant and Equipment - For items produced during testing/trail phase, clarification added that revenue generated out of the same shall not be recognised in statement of profit and loss and considered as part of cost of PPE.
- Ind AS 37 Provisions, Contingent Liabilities & Contingent Assets - Guidance on what constitutes cost of fulfilling contracts (to determine whether the contract is onerous or not) is included.
- Ind AS 103 - Business Combination - Reference to revised Conceptual Framework. For contingent liabilities/ levies, clarification is added on how to apply the principles for recognition of contingent liabilities from Ind AS 37. Recognition of contingent assets is not allowed.
- Ind AS 109 Financial Instruments - The amendment clarifies which fees an entity includes when it applies the â10 per centâ test in assessing whether to derecognise a financial liability.
While preparing the financial statement for the year ended 31 March 2022, the above amendments are not considered for disclosure as standards notified by Ministry of Corporate Affairs, but not yet effective, in accordance with IND AS.
The Code on Social Security 2020 has been notified in the Official Gazette on September 29, 2020, which could impact the contributions by the company towards certain employment benefits. The effective date from which the changes are applicable is yet to be notified and the rules are yet to be framed. Impact if any of the change will be assessed and accounted in the period of notification of the relevant provisions.
Note 53: Previous year figures
Previous year figures have been regrouped/ reclassified, where necessary, to conform to this yearâs classification. Refer note 2.19 for accounting policy on Amendments to Schedule III of the Companies Act, 2013.
Mar 31, 2018
1. Building includes '' 0.10 Lacs as at March 31, 2018 (As at March 31, 2017 '' 0.10 Lacs) being value of unquoted fully-paid shares held in various co-operative housing societies.
2. As a part of green field expansion plan, during the year the Company has acquired land of '' 6,731 lacs.
3. During the year, the Company has transferred the following expenses which are attributable to the construction activity and are included in the cost of capital work-in-progress (CWIP) / Fixed assets as the case may be. Consequently, expenses disclosed under the respective notes are net of such amounts.
4. As a part of expansion project at Halol-Phase II, during the year the Company has capitalized and commissioned assets of '' 2,364 lacs (March 31, 2017 '' 18,343 lacs). This has resulted in the installed capacity as on March 31, 2018 to 120 MT per day (March 31, 2017 76 MT per day).
5. As a part of ongoing expansion project at Halol-Phase III, during the year the Company has capitalized and commissioned assets of Rs, 79 lacs. The planned expansion of 208 MT per day is expected to be commissioned, in phase, by end of March 2020.
6. As a part of ongoing expansion project at Butibori, near Nagpur, Maharashtra, during the year the Company has capitalized and commissioned assets of Rs, 5,067 lacs (March 31, 2017 Rs, 22,996 lacs). This has resulted in the installed capacity as on March 31, 2018 to 91 MT per day (March 31, 2017 54 MT per day). The planned expansion of 120 MT per day is expected to be commissioned, in phase, by end of FY 2018-19.
7. The amount of borrowing cost capitalized during the year ended March 31, 2018 is Rs, 459 lacs (March 31, 2017: Rs, 1,437 lacs). The rate used to determine the amount of borrowing costs eligible for capitalization is 7.79% (March 31, 2017: 8.89%) which is the effective interest rate of specific borrowings.
8. Refer note 20 for details on pledges and securities.
1. I n an earlier year, the Company has acquired global rights of âCEATâ brand from the Italian tyre maker, Pirelli. Prior to the said acquisition, the Company was the owner of the brand in only a few Asian countries including India. With the acquisition of the brand which is renowned worldwide, new and hitherto unexplored markets are accessible to the Company. The Company will be in a position to fully exploit the export market resulting in increased volume and price realization. Therefore, the management believes that the Brand will yield significant benefits for a period of at least twenty years.
2. The Company has acquired technical know-how and assistance from International Tire Engineering Resources LLC, for setting up of Halol radial plant. Considering the life of the underlying plant / facility, this technical know-how is amortized on a straight line basis over a period of twenty years.
*These debts are secured to the extent of security deposit obtained from the dealers
- No trade receivables are due from directors or other officers of the company either severally or jointly with any other person.
- For terms and conditions relating to related party receivables, refer note 43.
- Trade receivables are non-interest bearing within the credit period which is generally 30 to 60 days.
a) Includes 688 (March 31, 2017- 688) equity shares offered on right basis and kept in abeyance.
b) Terms/ rights attached to equity shares
The Company has only one class of equity shares having face value of Rs,10 per share. Each holder of equity shares is entitled to one vote per equity share. Dividend is recommended by the Board of Directors and is subject to the approval of the members at the ensuing Annual General Meeting except interim dividend. The Board of Directors have a right to deduct from the dividend payable to any member, any sum due from him to the Company.
In the event of winding-up, the holders of equity shares shall 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 shareholders.
The shareholders have all other rights as available to equity shareholders as per the provision of the Companies Act, applicable in India read together with the Memorandum of Association and Articles of Association of the Company, as applicable.
d) As per the records of the Company as at March 31, 2018 no calls remain unpaid by the directors and officers of the company.
e) The Company has not issued any equity shares as bonus for consideration other than cash and has not bought back any shares during the period of 5 years immediately preceeding March 31, 2018.
f) General Reserve
The general reserve is used from time to time to transfer profits from retained earnings for appropriations purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to statement of profit and loss.
Proposed dividends on equity shares which are subject to approval at the annual general meeting are not recognized as a liability (including Dividend Distribution Tax thereon) in the year in which it is proposed.
During the year ended March 31, 2018, the company has paid dividend to its shareholders. This has resulted in payment of Dividend Distribution Tax (DDT) to the taxation authorities. The Company believes that DDT represents additional payment to taxation authority on behalf of the shareholders. Hence, DDT paid is charged to equity.
Notes to Borrowings:
1. Non-Convertible Debentures (NCD) Rs, 20,000 lacs (March 31, 2017: Rs, 20,000 lacs) allotted on July 31, 2015 on private placement basis are secured by a first pari passu charge over the movable assets (except current assets) and immovable assets of the Company situated at the Nasik Plant. As at March 31, 2018, the NCDs carry an interest at 8.65% p.a. and is repayable as under:
- NCD Series 1: Rs, 1,000 lacs (5% of the issue amount) repayable on July 31, 2019
- NCD Series 2: Rs, 3,000 lacs (15% of the issue amount) repayable on July 31, 2020
- NCD Series 3: Rs, 3,000 lacs (15% of the issue amount) repayable on July 31, 2021
- NCD Series 4: Rs, 3,000 lacs (15% of the issue amount) repayable on July 31, 2022
- NCD Series 5: Rs, 4,000 lacs (20% of the issue amount) repayable on July 31, 2023
- NCD Series 6: Rs, 4,000 lacs (20% of the issue amount) repayable on July 31, 2024
- NCD Series 7: Rs, 2,000 lacs (10% of the issue amount) repayable on July 31, 2025
2. Term Loan from Export Import Bank of India (EXIM) NIL (March 31, 2017: Rs, 10,900 lacs) was pre-paid in full including interest thereon during the year. It was secured by first pari passu charge over the Company''s movable assets (excluding current assets) and immovable assets situated at the Halol plant and second pari passu charge on the current assets of the Company. It carried interest of 9.50% p.a at the time of repayment.
3. Term Loan from Kotak Mahindra Bank Limited NIL (March 31, 2017: Rs, 3,000 lacs) was pre-paid in full including interest thereon during the year. It was secured by first pari passu charge over the Company''s movable assets (excluding current assets) and immovable assets situated at Halol plant and second pari passu charge over the current assets of the Company. It carried interest of 8.60% p.a. at the time of repayment.
4. Term Loan from The Hong Kong and Shanghai Banking Corporation Limited (HSBC) NIL (March 31, 2017: Rs, 8,000 lacs) was pre-paid in full including interest thereon during the year. It was secured by a first pari passu charge over the Company''s immovable assets situated at Bhandup plant. It carried interest of 8.33% p.a. at the time of repayment.
5. Long-term buyer''s credit (for Halol expansion project) is secured by way of first pari passu charge on all movable assets (excluding current assets) and immovable assets of the Company situated at Halol plant and second pari passu charge over the current assets of the Company. It is repayable within 3 years from the date of disbursement. The long-term buyer''s credit carries interest in the range of 12 months LIBOR plus 35 bps p.a. to 12 months LIBOR plus 122 bps p.a. and 6 months LIBOR plus 52 bps p.a. to 6 months LIBOR plus 165 bps p.a. and 6 months EURIBOR plus 125 bps p.a. and 12 months EURIBOR plus 68 bps p.a. to 12 months EURIBOR plus 150 bps p.a. (Variation in range due to the movements in LIBOR/EURIBOR and the size of the deals.)
6. Long-term buyer''s credit (for Nagpur project) is secured by way of first pari passu charge on all movable assets (excluding current Assets) and immovable assets of the Company situated at Nagpur plant. It is repayable within 3 years from the date of disbursement. The long-term buyer''s credit carries interest in the range of 12 months LIBOR plus 20 bps p.a. to 12 months LIBOR plus 113 bps p.a. and 6 months LIBOR plus 50 bps p.a. to 6 months LIBOR plus 175 bps p.a. (Variation in range due to the movements in LIBOR/ EURIBOR and the size of the deals.)
Unsecured long-term borrowings (includes noncurrent portion and current maturities)
7. Public deposits included under the long-term borrowings were pre-paid in full including interest thereon on September 30, 2016.
8. Interest-free deferred sales tax is repayable in ten equal annual instalment commencing from April 26, 2011 and ending on April 30, 2025.
9. Outstanding balances shown in foot notes above, are grossed up to the extent of unamortized transaction cost.
a) Provision for warranty
A provision is recognized for expected warranty claims on product sold during the last three years, based on past experience of the level of returns and cost of claim. It is expected that significant portion of these costs will be incurred in the next financial year and within three years from the reporting date. Assumptions used to calculate the provision for warranty were based on current sales levels and current information available about returns based on the three years warranty period for all products sold. The table below gives information about movement in warranty provision.
c) Provision for decommissioning liability
The Company records a provision for decommissioning costs of land taken on lease at Nasik manufacturing facility for the production of tyres.
d) Indirect tax and labour matters
The Company is party to various lawsuits that are at administrative or judicial level or in their intial stages, involving tax and civil matters. The Company contests all claims in the court / tribunals / appellate authority levels and based on their assessment and that of their legal counsel, records a provision when the risk or loss is considered probable. The outflow is expected on cessations of the respective events.
Note:
a) Cash credit facilities from banks, export packing credit from banks and buyers credit from banks are part of working capital facilities availed from consortium of banks. Consortium limits are secured by way of first pari passu charge on the current assets of the Company, wherever situated and by way of second pari passu charge on the movable assets (except current assets) and immovable assets of the Company situated at Bhandup, Nasik and Halol Plants.
All short-term borrowings availed in Indian rupees during the current year carry interest in the range of 6.25% to 11.50% and all short-term borrowing availed in foreign currency during the year carry interest in the range of LIBOR plus 21 bps to LIBOR plus 75 bps. (LIBOR is set corresponding to the period of the loan).
b) The Company had issued Commercial Papers (total available limit Rs, 35,000 lacs) at regular intervals for working capital purposes with interest ranging from 6.22% to 6.56%. The outstanding as at March 31, 2018 is Nil lacs (As at March 31, 2017 Rs, 2,481 lacs).
b) Trade payables are non-interest bearing within the credit period which is generally 60 to 105 days.
Note:
a) Sale of goods includes excise duty collected from customers of Rs,16,891 lacs (March 31, 2017: Rs, 67,479 lacs) (refer note 2(3))
b) The Company has recognized a government grant of Rs, 1,191 lacs (March 31,2017: Rs, 1,220 lacs) as income on account of Export Incentive under Merchandise Exports from India Scheme (MEIS) from Directorate General of Foreign Trade, Government of India.
The Company has also recognized a government grant of Rs, 82 lacs (March 31, 2017: Rs, 82 lacs) relating to benefit received from Export Promotion Capital Goods (EPCG).
The Company had introduced VRS for employees across the Company. During the year, 178 employees (March 31, 2017, 93 employees) opted for the VRS.
The above expenditure of research and development has been determined on the basis of information available with the Company and as certified by the management.
Note 39: Earnings per share
Basic Earnings per share (EPS) amounts are calculated by dividing profit for the year attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on conversion of all the dilutive potential equity shares into equity shares.
The following reflects the income and share data used in the basic and diluted EPS computations:
Note 40: Significant accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require an adjustment to the carrying amount of assets or liabilities in future periods. Difference between actual results and estimates are recognized in the periods in which the results are known / materialised.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company has based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
a) Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Company establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the Company''s domicile. Based on approved plans and budgets, the Company has estimated that the future taxable income will be sufficient to absorb MAT credit entitlement, which management believes is probable. Accordingly, the Company has recognized MAT credit as an asset. Further details on taxes are disclosed in note 23
b) Defined benefit plans (gratuity benefits)
The Company''s obligation on account of gratuity, compensated absences and present value of gratuity obligation are determined based on 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, these liabilities are 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, 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. Those mortality tables tend to change only at interval in response to demographic changes. Increase in future salary and gratuity is based on expected future inflation rates.
Further details about gratuity obligations are given in note 41.
c) Provision for decommissioning liability
The Company has recognized a provision for decommissioning obligations associated with a land taken on lease at Nasik manufacturing facility for the production of tyres. In determining the fair value of the provision, assumptions and estimates are made in relation to discount rates, the expected cost to dismantle and remove the plant from the site and the expected timing of those costs. The carrying amount of the provision as at March 31, 2018 was Rs, 61 lacs (March 31, 2017: Rs, 55 lacs). The Company estimates that the costs would be realized in year 2066 at the expiration of the lease and calculates the provision using the Discounted Cash Flow (DCF) method based on the following assumptions:
- Estimated range of cost per square meter - Rs, 45 - Rs, 50
- Discount rate - 11.50%
d) Provision for warranty
The estimated liability for warranty is recorded when products are sold. These estimates are established using historical information on the nature, frequency and average cost of obligations and management estimates regarding possible future incidence based on corrective actions on product failure. The timing of outflows will vary as and when the obligation will arise - being typically up to three years. The rate used for discounting warranty provisions is 11.50%.
e) Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. (refer note 46 and 47 for further disclosures)
Note 41: Post-retirements benefit plan
a) Defined Contribution plan
The Company has recognized and included in Note No.33 âContribution to Provident and other fundsâ expenses towards the defined contribution plan as under:
b) Defined Benefit plan - Gratuity
The Company has a defined benefit gratuity plan which is funded with an Insurance Company in the form of qualifying Insurance policy. The Company''s defined benefit gratuity plan is a salary plan for employees which requires contributions to be made to a separate administrative fund.
The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, every employee who has completed five years of service gets a gratuity on separation @ 15 days
of last drawn salary for each completed year of service. The scheme is funded with an insurance Company in the form of qualifying insurance policy.
The fund has the form of a trust and it is governed by the Board of Trustees, which consists of employer and employee representatives. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy.
Each year, the Board of Trustees reviews the level of funding. Such a review includes the asset-liability matching strategy and investment risk management policy. This includes employing the use of annuities and longevity swaps to manage the risks. The Board of Trustees decides its contribution based on the results of this annual review. The Board of trustees have appointed LIC of India, Birla Sun Life Insurance, India First Life Insurance & HDFC Life Insurance to manage its funds. The Board of Trustees aim to keep annual contributions relatively stable at a level such that no plan deficits (based on valuation performed) will arise.
I n case of death, while in service, the gratuity is payable irrespective of vesting. The Company makes annual contribution to the Company gratuity scheme administered by LIC through its gratuity funds.
ix) The principal assumptions used in determining gratuity and leave encashment for the Companyâs plan are shown below
Description of Risk Exposures
Valuations are performed on certain basic set of predetermined assumptions and other regulatory frame work which may vary over time. Thus, the Company is exposed to various risks in providing the above gratuity benefit which are as follows:
Interest Rate risk
The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability (as shown in financial statements).
Liquidity Risk
This is the risk that the Company is not able to meet the shortterm gratuity payouts. This may arise due to non- availability of enough cash / cash equivalent to meet the liabilities or holding of illiquid assets not being sold in time.
Salary Escalation Risk
The present value of the defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan''s liability.
Demographic Risk
The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
Regulatory Risk
Gratuity benefit is paid in accordance with the requirements of the Payment of Gratuity Act, 1972 (as amended from time to time). There is a risk of change in regulations requiring higher gratuity payouts (e.g. Increase in the maximum limit on gratuity of Rs, 20 lacs).
Asset Liability Mismatching or Market Risk
The duration of the liability is longer compared to duration of assets, exposing the Company to market risk for volatilities/ fall in interest rate.
Investment Risk
The probability or likelihood of occurrence of losses relative to the expected return on any particular investment.
The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority and other relevant factors, such as supply and demand in the employment market.
The sensitivity analysis 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 Company has purchased an insurance policy to provide for payment of gratuity to the employees. Every year, the insurance Company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company.
The Company''s best estimate of contribution during the next year is Rs, 207 lacs.
The weighted average duration (based on discounted cash flows) of defined benefit obligation is 8 years.
The Company has purchased insurance policy, which is basically a year-on-year cash accumulation plan in which the interest rate is declared on yearly basis and is guaranteed for a period of one year. The insurance Company, as part of the policy rules, makes payment of all gratuity outflows happening during the year (subject to sufficiency of funds under the policy). The policy, thus, mitigates the liquidity risk. However, being a cash accumulation plan, the duration of assets is shorter compared to the duration of liabilities. Thus, the Company is exposed to movement in interest rate (in particular, the significant fall in interest rates, which should result in an increase in liability without corresponding increase in the asset).
Note 42: Commitments and contingencies
a. Leases
Operating lease commitments â Company as lessee
The Company has entered a lease agreement with the leasing Company for vehicles, resulting in a non-cancellable operating lease. There is no restriction placed upon the Company by entering these leases. The lease term range from one year to five years and are renewable at the option of the Company.
Lease rental on the said lease of Rs, 137 Lacs (March 31, 2017 Rs, 129 Lacs) has been charged to Statement of Profit and Loss.
*in respect of above matters, future cash outflows are determinable only on receipt of judgements pending at various forums / authorities.
d. Others
The Company has availed the Sales Tax Deferral Loan and Octroi refund from the Directorate of Industries for Nasik Plant. Hence, the Company has to take prior permission of the appropriate authority for removal/transfer of any asset (falling under the above Schemes) from Nasik Plant. In case of violation of terms & conditions, the Company is required to refund the entire loan/benefit along with the interest @ 22.50% on account of Sales Tax deferral Loan and @ 15% on account of Octroi refund.
e. Material demands and disputes considered as âRemoteâ by the Company
1. The Company has been served with a Show Cause cum Demand Notice from the DGCEI (Directorate General of Central Excise Intelligence) Mumbai, on the ground that, the activity of making tyre set, i.e. inserting Tubes and Flaps inside the Tyres and tied up through Polypropylene Straps, amounts to manufacture / pre-packaged commodity under Section 2(f)(iii) of Central Excise Act, read with Section 2(l) of the Legal Metrology Act, 2009. Accordingly, the authorities worked out the differential duty amounting to '' 27,421 Lacs i.e., the amount of duty already paid on the basis of transaction value and duty payable on the basis of MRP under Section 4A, for the period from April-2011 to March-2017. The Company believes that Set of TT / TTF (Tyre and Tube / Tyre, Tube and Flap) is not pre-packaged commodity in terms of provisions of Legal Metrology Act, 2009. The Company has a strong case on the ground that, the said issue has been clarified by the Controller of the Legal Metrology Department vide its letter dated May 1, 1991 that âTyre with tube & flaps tied with three thin polythene strips may not be treated as a pre-packed commodity within the meaning of rule 2(l) of the Standards of Weights and Measures (Packaged Commodities), Rules, 1977â. The above clarification has been re-affirmed vide letter dated November 16, 1992 by the Legal Metrology authorities.
2. The Competition Commission of India (CCI) had, while considering the representation made by All India Tyres Dealers Federation (AITDF) made a prima facie view that the major players of tyre industry (including the Company) had some understanding amongst themselves, especially in the replacement market, as they did not pass the benefit of corresponding reduction in prices of major raw material inputs for the period subsequent to the year 2011-12. According to CCI, this practice is in violation of the Competition Act 2002 (the Act). Therefore, CCI had, vide its order passed on June 24, 2014 under Section 26(1) of the Act, directed the Office of the Director General (DG) to investigate the said alleged violation of the Act.
DG submitted its investigation report to CCI in December 2015, based on which CCI passed an order on February 18, 2016 directing the said tyre manufacturers to file their suggestions/objections by May 5, 2016. Objections were filed as directed and the CCI had also heard the tyre manufacturers in detail. The case was last posted on December 1, 2016 and is now reserved for Orders.
The Company''s decision to change the price is purely a business decision which depends upon many factors like cost of production, brand value perception, profit margin of each product, quality perception of each product in the market, demand and supply situation of each product category and market potential and market shares targets of various product categories etc. In view of the above, Company believes that it has a strong case hence, considered as remote.
Note 43: Related party transactions a) Names of related parties and related party
relationship
Related parties where control exists
- Associated CEAT Holdings Company (Pvt.) Limited (âACHLâ) (Subsidiary Company)
- CEAT AKKHAN Limited (Subsidiary Company)
- Rado Tyres Limited(âRadoâ) (Subsidiary Company)
- CEAT Specialty Tyres Limited (âCSTLâ) (Subsidiary Company)
- CEAT Specialty Tires Inc. (Subsidiary of CSTL)
Related parties with whom transactions have taken
place during the year
- CEAT Kelani Holdings (Pvt.) Limited (âCKHLâ) (Joint venture of ACHL)
- Associated CEAT (Pvt.) Limited (âACPLâ) (Subsidiary of CKHL)
- Ceat-Kelani International Tyres (Pvt.) Limited (âCKITLâ) (Subsidiary of CKHL)
- Ceat Kelani Radials Limited (âCKRLâ) (Subsidiary of CKHL)
- Asian Tyres (Pvt.) Limited (âATPLâ) (Subsidiary of CKITL)
- CEAT Specialty Tyres Limited (âCSTLâ) (Subsidiary Company)
- TYRESNMORE Online Pvt Ltd. (âTNM PVT LTDâ) (Associate Company)
- RPG Enterprises Limited (âRPGEâ) (Directors, KMP or their relatives are interested)
- RPG Lifesciences Limited (âRPGLSâ) (Directors, KMP or their relatives are interested)
- Zensar Technologies Limited(âZensarâ) (Directors, KMP or their relatives are interested)
- Raychem RPG (Pvt.) Limited (âRaychemâ) (Directors, KMP or their relatives are interested)
- KEC International Limited (âKECâ) (Directors, KMP or their relatives are interested)
- Vinar Systems Pvt. Limited (âVinarâ) (Directors, KMP or their relatives are interested)
- B.N. Elias & Co. LLP (âB.N. Eliasâ) (Directors, KMP or their relatives are interested)
- Atlantus Dwellings & Infrastructure LLP (âAtlantusâ) (Directors, KMP or their relatives are interested)
- Chattarpati Apartments LLP (âChattarpatiâ) (Directors, KMP or their relatives are interested)
- Allwin Apartments LLP (âAllwinâ) (Directors, KMP or their relatives are interested)
- Amber Apartments LLP (âAmberâ) (Directors, KMP or their relatives are interested)
- Khaitan & Co. (âKhaitanâ) (Directors, KMP or their relatives are interested)
- CEAT AKKHAN Limited (Subsidiary Company)
- Rado Tyres Limited(âRadoâ) (Subsidiary Company)
- Associated CEAT Holdings Company (Pvt.) Limited (âACHLâ) (Subsidiary Company)
- TYRESNMORE Online Pvt Ltd (âTNM PVT LTDâ) (Associate Company)
- Key Management Personnel (KMP):
i) Mr. Harsh Vardhan Goenka, Chairman
ii) Mr. Anant Vardhan Goenka, Managing Director
iii) Mr. Arnab Banerjee, Whole-time Director
iv) Mr. Manoj Jaiswal, Chief Financial Officer upto January 15, 2017
v) Mr Kumar Subbiah, Chief Financial Officer w.e.f. from January 16, 2017
vi) Mr. H. N. Singh Rajpoot, Company Secretary upto August 31, 2016
vii) Ms. Shruti Joshi, Company Secretary w.e.f. from September 1, 2016
viii) Mr. Paras K. Chowdhary, Independent Director
ix) Mr. Vinay Bansal, Independent Director
x) Mr. Hari L Mundra, Non-Executive - Non Independent Director
xi) Mr. Atul Choksey, Independent Director
xii) Mr. Mahesh Gupta, Independent Director
xiii) Mr. Haigreve Khaitan, Independent Director
xiv) Ms. Punita Lal, Independent Director
xv) Mr. S.Doreswamy, Independent Director
xvi) Mr. Kantikumar Poddar, Independent Director up to February 9, 2017
Terms and conditions of transactions with related parties
The sales to, purchases and others 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.
The remuneration to the key managerial personnel does not include the provisions made for gratuity as it is determined on an actuarial basis for the Company as a whole.
Managerial remuneration is computed as per the provisions of section 198 of the Companies Act, 2013. The amount outstanding are unsecured and will be settled in cash.
Loan and guarantee to subsidiary
Following are the details of loans and guarantee given to subsidiary companies in which directors are interested, as required under Schedule V read with Regulation 34 (3) and 53 (f) of the SEBI (Listing Obligation and Disclosure Requirement) Regulation, 2015 and disclosure required under section 186 (4) of the Companies Act, 2013.
Maximum outstanding during the year as loan to CSTL was Rs, 5,900 lacs (March 31, 2017: Rs, 5,000 lacs).
ii. CEAT has given a corporate guarantee up to Rs, 22,800 lacs to Ceat Specialty Tyres Limited as collateral security for raising the term loans. The outstanding guarantee as on March 31, 2018 is Rs, 22,451 lacs (March 31, 2017: Rs, 13,477 lacs).
Note 44: Segment information
For management purpose, the Company comprise of only one reportable segment - Automotive Tyres, Tubes & Flaps.
During the FY 2017-18 and FY 2016-17, no single external customer has generated revenue of 10% or more of the CompanyRs,s total revenue.
During the FY 2017-18 and FY 2016-17, no single country outside India has given revenue of more than 10% of total revenue.
Note 45: Hedging activities and derivatives Derivatives designated as hedging instruments
The Company uses derivative financial instruments such as foreign currency forward contracts to hedge foreign currency risk arising from future transactions in respect of which firm commitments are made or which are highly probable forecast transactions. It also uses cross currency interest rate swaps (CCIRS), Range Forwards, and Coupon only Swap (COS) to hedge interest rate and foreign currency risk arising from variable rate foreign currency denominated loans. All these instruments are designated as hedging instruments and the necessary documentation for the same is made as per Ind AS 109.
Cash flow hedges Foreign currency risk
Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of recognized purchase payables, committed future purchases, recognized sales receivables, forecast sales and Foreign Currency loan (Buyer''s Credit) in US dollar & Euro. The forecast sales transactions are highly probable, and comprise about 25% of the Company''s total expected sales in US dollar.
Cross currency Interest Rate Swaps (CCIRS) measured at fair value through OCI are designated as hedging instruments in cash flow hedges for Foreign currency loan (Buyer''s Credit) in US Dollar.
Derivative options like Range Forwards, COS measured at Fair value through OCI are designated as hedging instruments in cash flow hedges for Foreign currency loan (Buyer''s Credit) in US Dollar.
* The trade payables / short term borrowings are naturally hedged (off-set) to the extent of exposure under trade receivables / advances for respective currencies.
The terms of the foreign currency forward contracts match the terms of the expected highly probable forecast transactions. As a result, no hedge ineffectiveness arise requiring recognition through statement of profit and loss.
The cash flow hedges as at March 31, 2018 were assessed to be highly effective and a net unrealized gain of Rs, 1,098 lacs, with a deferred tax liability of Rs, 380 lacs relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges as at March 31, 2017 were assessed to be highly effective and an unrealized loss of Rs, 377 lacs with a deferred tax asset of Rs, 131 lacs was included in OCI.
Note 46: Fair values
Set out below, is a comparison by class of the carrying amounts and fair value of the Company''s financial instruments, other than those with carrying amounts that are reasonable approximations of fair values:
The management assessed that fair values of cash and cash equivalents, trade receivables, trade payables, loans, bank overdrafts and other current financial assets and liabilities (except derivative financial instrument those being measured at fair value through other comprehensive income) which are receivable/payable within one year approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The foreign exchange forward contracts used for hedging the recognized import trade payables / export trade receivables have been valued based on the Closing spot value. The following methods and assumptions were used to estimate the fair values:
- The fair value of quoted mutual funds are based on price quotations at the reporting date.
- The Company enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. The foreign exchange forward contracts used for the expected future sales/expected future purchase have been valued using forward pricing, based on present value calculations. These values are the realizable values which could be exchanged with the counterparty. The foreign exchange forward contracts used for the recognized export receivables/recognized import payables have been measured using the closing currency pair spot. The forward premium is separately amortized over the period of the forward. These values are close estimations of the fair values which could be realized on immediate winding up of the deals. The swap contracts and the option contracts have been valued at the market realizable values obtained from the counterparty and the same have been valued using the swap valuation / option valuation, based on present value calculations
- The fair values of the Company''s interest-bearing borrowings and loans are determined by using DCF method using discount rate that reflects the issuer''s borrowing rate as at the end of the reporting period.
Note 47: Fair value hierarchy
The following table provides the fair value measurement hierarchy of the Company''s assets and liabilities.
There have been no transfers between Level 1 and Level 2 during the period.
*For valuation under Level 3 following assumptions were made:
a. All repayments of borrowings will happen at end of financial year and not during the year.
b. For valuation purpose we have taken rate of 11.50% which represents additional borrowing rate.
Note 48: Financial risk management objectives and policies
The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings, 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 trade and other receivables, mutual fund investments, cash and cash equivalents that derive directly from its operations. The Company also enters into derivative transactions.
The Company''s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company''s policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. The Board of Directors through its risk management committee reviews and agrees policies for managing each of these risks, which are summarized below.
a. 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. Financial instruments affected by market risk include loans and borrowings, deposits, investments and derivative financial instruments.
The sensitivity analysis in the following sections relate to the position as at March 31, 2018 and March 31, 2017.
The sensitivity analysis have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant and on the basis of hedge designations in place at March 31, 2018.
The analysis exclude the impact of movements in market variables on: the carrying values of gratuity and other post-retirement obligations and provisions.
The following assumptions have been made in calculating the sensitivity analysis:
- 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 including the effect of hedge accounting
- The sensitivity of equity is calculated by considering the effect of any associated cash flow hedges and hedges of a net investment in a foreign subsidiary at March 31 2018 for the effects of the assumed changes of the underlying risk
i. Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company''s exposure to the risk of changes in market interest rates relates primarily to the Company''s long-term debt obligations with floating interest rates.
The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. To manage this, the Company enters into interest rate swaps, in which it agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. At March 31 2018, after taking into account the effect of interest rate swaps, approximately 46% of the Companyâs total borrowings are at a fixed rate of interest (March 31,2017: 58%).
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.
ii. Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company''s exposure to the risk of changes in foreign exchange rates relates primarily to the Company''s operating activities (when revenue or expense is denominated in a foreign currency) and the Company''s net investments in foreign subsidiaries.
The Company manages its foreign currency risk by hedging transactions that are expected to occur within a maximum 6 month period for the foreign currency denominated trade payables and trade receivables. The foreign currency risk on the foreign currency loans are mitigated by entering into Cross Currency Swaps. When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of forecast transactions the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency.
At March 31, 2018, the Company hedged 94% (March 31, 2017: 95%,) of its foreign currency loans. This foreign currency risk is hedged by using foreign currency forward contracts. At March 31, 2018, the Company hedged 95% (March 31, 2017: 98%) of its foreign currency receivables/payables.
Foreign currency sensitivity
The following tables demonstrate the sensitivity to a reasonably possible change in USD and EURO rates, with all other variables held constant. The impact on the Company''s profit before tax is due to changes in the fair value of monetary assets and liabilities. The Company''s exposure to foreign currency changes for all other currencies is not material.
The movement in the pre-tax effect is a result of a change in the fair value of the financial asset/liability due to the exchange rate movement. The derivatives which have not been designated in a hedge relationship act as an economic hedge and will offset the underlying transactions when they occur. The same derivatives are not covered in the above table.
I n management''s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.
iii. Equity price risk
The Company invests its surplus funds in various debt instruments and debt mutual funds. These comprise of mainly liquid schemes of mutual funds (liquid investments) and fixed deposits.
Mutual fund investments are susceptible to market price risk, mainly arising from changes in the interest rates or market yields which may impact the return and value of such investments. However due to the very short tenor of the underlying portfolio in the liquid schemes, these do not pose any significant price risk.
There is no material equity risk relating to the Company''s equity investments which are detailed in note 5. The Company equity investments majorly comprises of strategic investments rather than trading purposes.
b. Commodity price risk
The Company is affected by the price volatility of certain commodities. Its operating activities require the ongoing purchase of rubber and carbon black and therefore require a continuous supply of rubber and carbon black. Due to the significantly increased volatility of the price of the rubber and carbon black, the Company also entered into various purchase contracts for rubber and carbon black (for which there is an active market).
The Company''s Board of Directors has developed and enacted a risk management strategy regarding commodity price risk and its mitigation.
Commodity price sensitivity
The following table approximately details the Company''s sensitivity to a 5% movement in the input price of rubber and carbon black. The sensitivity analysis includes only 5% change in commodity prices for quantity sold or consumed during the year, with all other variables held constant. A positive number below indicates an increase in profit or equity where the commodity prices decrease by 5%. For a 5% increase in commodity prices, there would be a comparable impact on profit or equity, and the balances below would be negative.
c. 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, foreign exchange transactions and other financial instruments.
Trade receivables
Customer credit risk is managed by each business unit subject to the Company''s established policy, procedures and control relating to customer credit risk management. Trade receivables are non-interest bearing and are generally on 30 days to 90 days credit term. Credit limits are established for all customers based on internal rating criteria. Outstanding customer receivables are regularly monitored. Credit risk on receivables is also mitigated by securing the same against security deposit, letter of credit and advance payment.
An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically.
Export customers are against Letter of Credit, bank guarantees, payment against documents. For open credit exports insurance cover is taken. Generally deposits are taken from domestic debtors under replacement segment. The carrying amount and fair value of security deposit from dealers amounts to Rs, 30,375 lacs (March 31, 2017: Rs, 30,757 lacs) as it is payable on demand. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets.
Other financial assets and cash deposits
Credit risk from balances with banks and financial institutions is managed by the Company''s treasury department in accordance with the Company''s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Companyâs Board of Directors on an annual basis, and may be updated throughout the year subject to approval as per the Investment policy. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.
The Company''s maximum exposure to credit risk for the components of the balance sheet at March 31, 2018 and March 31, 2017 is the carrying amounts as illustrated in note 6, note 11 and note 12 except for derivative financial instruments. The Company''s maximum exposure relating to financial derivative instruments is noted in note 21 and 27.
d. Liquidity risk
The Company prepares cash flow on a daily basis to monitor liquidity. Any shortfall is funded out of short term loans. Any surplus is invested in liquid mutual funds. The Company also monitors the liquidity on a longer term wherein it is ensured that the long term assets are funded by long term liabilities. The Company ensures that the duration of its current assets is in line with the current assets to ensure adequate liquidity in the 3-6 months period.
The table below summarizes the maturity profile of the Company''s financial liabilities based on contractual undiscounted payments. Liquidity exposure as at March 31, 2018
e. Excessive risk concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company''s performance to developments affecting a particular industry.
I n order to avoid excessive concentrations of risk, the Company''s policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly. Selective hedging is used within the Company to manage risk concentrations at both the relationship and industry levels
Collateral
The Company has hypothecated the movable, immovable properties and entire current assets to its consortium of bankers as detailed in note 20 and 25. The term lenders also have a second charge on the varied current assets.
Note 49: Capital management
For the purpose of the Company capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. 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 monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents.
In order to achieve this overall objective, the Company''s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2018 and March 31, 2017.
Note 50: Events after the reporting period
- The board has recommended dividend of Rs, 11.50 per equity share (March 31, 2017 Rs, 11.50 per equity share) of face value Rs, 10 each for financial year 2017-18.
Note 51: Standards issued but not yet effective
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. The new revenue standard will supersede all current revenue recognition requirements under Ind AS. This new standard requires revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions of the Company. Ind AS 115 is effective for the Company in the first quarter of FY 2018-19 using either one of two methods: (i) retrospectively to each prior reporting period presented in accordance with Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors, with the option to elect certain practical expedients as defined within Ind AS 115 (the full retrospective method); or (ii) retrospectively with the cumulative effect of initially applying Ind AS 115 recognized at the date of initial application (1 April 2018) and providing certain additional disclosures as defined in Ind AS 115 (the modified retrospective method).
The Company continues to evaluate the available transition methods and its contractual arrangements. The ultimate impact on revenue resulting from the application of Ind AS 115 will be subject to assessments that are dependent on many variables, including, but not limited to, the terms of the contractual arrangements and the mix of business. The Company''s considerations also include, but are not limited to, the comparability of its financial statements and the comparability within its industry from application of the new standard to its contractual arrangements. 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.
Upon adoption the Company expects there to be a change in the manner that variable consideration in certain revenue arrangements is recognized from the current practice of recognizing such revenue as the services are performed and the variable consideration is earned to estimating the achievability of the variable conditions when the Company begins delivering services and recognizing that amount over the contractual period. The Company also expects a change in the manner that it recognizes certain incremental and fulfillment costs from expensing them as incurred to deferring and recognizing them over the contractual period. 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.
Mar 31, 2017
1. Contingent liabilities and assets
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or nonâoccurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
A contingent assets is not recognized unless it becomes virtually certain that an inflow of economic benefits will arise. When an inflow of economic benefits is probable, contingent assets are disclosed in the financial statements. Contingent liabilities and contingent assets are reviewed at each balance sheet date.
1. Building includes as at March 31, 2017Rs,0.10 Lacs (As at March 31, 2016Rs,0.10 lacs; As at April 1, 2015Rs,0.10 lacs ) being value of unquoted fully-paid shares held in various co-operative housing societies.
2. During the previous year, the Company had sold the following assets that were held for sale in the year 2014-15:
a) Leasehold land at Additional Ambernath Industrial Area, Ambernath having book value ofRs,3,543.63 lacs.
b) Freehold land at Gujarat having book value ofRs,0.60 lacs.
3. During the year, the Company has transferred the following expenses which are attributable to the construction activity and are included in the cost of capital work-in-progress (CWIP) / Fixed assets as the case may be. Consequently, expenses disclosed under the respective notes are net of such amounts.
4. As a part of ongoing expansion project at Halol, during the year the Company has capitalized and commissioned assets ofRs,18,343.21 lacs(March 31, 2016:Rs,44,768.09 lacs). This has resulted in the installed capacity as on March 31, 2017 to 76 MT per day (as on March 31, 2016: 39 MT per day). Full expansion project of 120 MT per day is however expected to be commissioned, in phase, by end of July 2017.
5. In the previous year, the Company had commissioned, its Greenfield Unit, situated at Butibori, near Nagpur, Maharashtra, with effect from March 28, 2016. Accordingly, the Company has capitalized the assets amounting toRs,22,995.61 lacs (March 31, 2016:Rs,9,375.40 lacs). This has resulted in the installed capacity as on March 31, 2017 to 54 MT per day (as on March 31, 2016: 15 MT per day). Full expansion project of 120 MT per day is expected to be commissioned, in phases, by end of FY 2017-18.
6. The amount of borrowing costs capitalized during the year ended March 31, 2017 wasRs,1,437.03 lacs (March 31, 2016: ''1,447.08 lacs). The rate used to determine the amount of borrowing costs eligible for capitalization was 8.89% (March 31, 2016: 9.50%) which is the effective interest rate of specific borrowings.
7. Refer note 20 for details on pledges and securities.
1. In an earlier year, the Company has acquired global rights of "CEAT" brand from the Italian tyre maker, Pirelli. Prior to the said acquisition, the Company was the owner of the brand in only few Asian countries including India. With the acquisition of the brand which is renowned worldwide, new and hitherto unexplored markets are accessible to the Company. The Company will be in a position to fully exploit the export market resulting in increased volume and price realization. Therefore, the management believes that the Brand will yield significant benefits for a period of at least twenty years.
2. The Company has acquired technical know-how and assistance from International Tire Engineering Resources LLC, for setting up Halol radial plant. Considering the life of the underlying plant / facility, this technical know-how, is amortized on a straight line basis over a period of twenty years.
*These debts are secured to the extent of security deposit obtained from the dealers.
- No trade receivables are due from directors or other officers of the company either severally or jointly with any other person.
- For terms and conditions relating to related party receivables, refer note 43.
-Trade receivables are non-interest bearing and generally on terms of 30 to 60 days credit period.
a) Includes'' nil for March 31, 2017 (March 31, 2016Rs,nil, April 1, 2015Rs,4.53 Lacs) outstanding for a period exceeding seven years. This amount is no longer payable as the Company has adjusted this amount towards call-in arrears of partly paid-up equity shares of the Company held by the shareholders, pursuant to a resolution passed by the Board of Directors.
Notes:
a) Deposit to the extent ofRs,0.20 lacs (March 31, 2016:Rs,750.20 lacs, April 1, 2015:Rs,637.41 lacs) is created for the purpose of deposit repayment reserve account and cannot be used for any other purpose.
b) These balances are available for use only towards settlement of matured deposits and interest on deposits. Also includesRs,0.20 lacs (March 31, 2016:Rs,0.20, lacs April 1, 2015: ''0.20 lacs)outstanding for a period exceeding seven years, in respect of which a Government agency has directed to the Company to hold and not transfer / repay.
c) These balances are available for use only towards settlement of corresponding unpaid dividend liabilities.
a) Includes 688 (March 31, 2016- 688; April 1, 2015- 688) equity shares offered on right basis and kept in abeyance.
b) Terms/ rights attached to equity shares
The Company has only one class of equity shares having face value of ''10 per share. Each holder of equity shares is entitled to one vote per equity share. Dividend is recommended by the Board of Directors and is subject to the approval of the members at the ensuing Annual General Meeting except interim dividend. The Board of Directors have a right to deduct from the dividend payable to any member, any sum due from him to the Company.
I n the event of winding-up, the holders of equity shares shall 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 shareholders. The shareholders have all other rights as available to equity shareholders as per the provision of the Companies Act, applicable in India read together with the Memorandum of Association and Articles of Association of the Company, as applicable.
d) As per the records of the Company as at March 31, 2017 no calls remain unpaid by the directors and officers of the company.
e) The Company has not issued any equity shares as bonus for consideration other than cash and has not bought back any shares during the period of 5 years immediately preceding March 31, 2017.
f) General Reserve
The general reserve is used from time to time to transfer profits from retained earnings for appropriations purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income , items included in the general reserve will not be reclassified subsequently to statement of profit and loss.
Proposed dividends on equity shares, which are subject to approval at the annual general meeting are not recognized as a liability (including Dividend Distribution Tax thereon) in the year in which it is proposed.
1. Non-Convertible Debentures (NCD)Rs,20,000.00 lacs (March 31, 2016:Rs,20,000.00 lacs, April 1, 2015:Rs,Nil) allotted on July 31, 2015 on private placement basis are secured by a first pari passu charge over the movable assets (except current assets) and immovable assets of the Company situated at the Nashik Plant. As at March 31, 2017, the NCDs carry an interest at 9.25% p.a. and is repayable as under:
- NCD Series 1:Rs,1,000.00 lacs (5% of the issue amount) repayable on July 31, 2019
- NCD Series 2:Rs,3,000.00 lacs (15% of the issue
amount) repayable on July 31, 2020
- NCD Series 3:Rs,3,000.00 lacs (15% of the issue amount) repayable on July 31, 2021
- NCD Series 4:Rs,3,000.00 lacs (15% of the issue amount) repayable on July 31, 2022
- NCD Series 5:Rs,4,000.00 lacs (20% of the issue amount) repayable on July 31, 2023
- NCD Series 6:Rs,4,000.00 lacs (20% of the issue amount) repayable on July 31, 2024
- NCD Series 7:Rs,2,000.00 lacs (10% of the issue amount) repayable on July 31, 2025
2. Term loan from The Hong Kong and Shanghai Banking Corporation Limited (HSBC) ofRs,Nil (March 31, 2016:Rs,2,812.50 lacs, April 1, 2015:Rs,4,062.50 lacs) was pre-paid in full including interest thereon on June 21, 2016. It was secured by a first pari passu charge over the Company''s immovable assets situated at Bhandup plant. It carried interest at 9.65% p.a. as on March 31, 2016.
3. Term Loan from Export Import Bank of India (EXIM)Rs,10,900.00 lacs (March 31, 2016:Rs,7,600.00 lacs, April 1, 2015:Rs,Nil) is secured by first pari passu charge over the Company''s movable assets (excluding current assets) and immovable assets situated at the Halol plant and second pari passu charge on the current assets of the Company. (The Company has created the first charge on the movable properties (except current assets) and the second charge on the current assets of the Company. The security on the immovable property of the Company situated at Halol is created). It carries interest at 9.50% p.a. as at March 31, 2017 and is repayable as under:
4. Term Loan from Kotak Mahindra Bank Limited ofRs,3,000.00 lacs (March 31, 2016:Rs,3,000.00 lacs, April 1, 2015:Rs,Nil) is secured by first pari passu charge over the Company''s movable assets (excluding current assets) and immovable assets situated at Halol plant and second pari passu charge over the current assets of the Company. (The Company has created the first charge on the movable properties (except current assets) and the second charge on the current assets of the Company. The security on the immovable property of the Company situated at Halol is created). It carries interest at 9.15% p.a. as at March 31,
2017 and is repayable as under:
5. Term loan from Bank of IndiaRs,Nil (March 31, 2016:Rs,Nil, April 1, 2015:Rs,10,000.00 lacs) was pre-paid in full including interest thereon on July 31, 2015. It was secured by a first pari passu charge over the Company''s immovable assets situated at Bhandup and Nashik plants. It carried interest at 11.50% p.a. as on March 31, 2015.
6. Term loan from ICICI Bank Limited ofRs,Nil (March 31, 2016:Rs,Nil, April 1, 2015:Rs,7,000.00 lacs) was pre-paid in full including interest thereon on August 4, 2015. It was secured by a first pari passu charge over the Company''s immovable assets situated at Bhandup and Nashik plants. It carried interest at 11.50% p.a. as on March 31, 2015.
7. Term loan from ICICI Bank Limited ofRs,Nil (March 31, 2016:Rs,Nil, April 1, 2015:Rs,3,375 lacs) was pre-paid in full including interest thereon on July 11, 2015. It was secured by first pari passu charge over the Company''s movable assets (excluding current assets) both present and future and immovable assets both present and future situated at Bhandup, Halol and Nashik plants and second pari passu charge on the current assets of the Company both present and future. It carried interest at 12% p.a. as on March 31, 2015.
8. Term loan from ICICI Bank Limited ofRs,Nil (March 31, 2016:Rs,Nil, April 1, 2015:Rs,1,166.67 lacs) was repaid in full including interest thereon on August 10, 2015. It was secured by a first pari passu charge over the Company''s immovable assets both present and future situated at Bhandup plant. It carried interest at 12% p.a. as on March 31, 2015.
9. Term loan from Bank of IndiaRs,Nil (March 31, 2016:Rs,Nil, April 1, 2015:Rs,2,913.58 lacs) was pre-paid in full including interest thereon on July 31, 2015. It was secured by first pari passu charge over the Company''s movable assets (excluding current assets) both present and future and immovable assets both present and future situated at Bhandup, Halol and Nashik plants and second pari passu charge on the current assets of the Company both present and future. It carried interest at 11.50% p.a. as on March 31, 2015.
10. Term loan from IDBI Bank Limited ofRs,Nil (March 31, 2016:Rs,Nil, April 1, 2015:Rs,753.38 lacs) was pre-paid in full including interest thereon on August 31, 2015. It was secured by first pari passu charge over the Company''s movable assets (excluding current assets) both present and future and immovable assets both present and future situated at Bhandup, Halol and Nashik plants and second pari passu charge on the current assets of the Company both present and future. It carried interest at 12% p.a. as on March 31, 2015.
11. Term loan from Bank of Baroda ofRs,Nil (March 31, 2016:Rs,Nil, April 1, 2015:Rs,1,750.00 lacs) was repaid in full including interest thereon on August 31, 2015. It was secured by first pari passu charge over the Company''s movable assets (excluding current assets) both present and future and immovable assets both present and future situated at Bhandup, Halol and Nashik plants and second pari passu charge on the current assets of the Company both present and future. It carried interest at 12% p.a. as on March 31, 2015.
12. Term Loan from The Hong Kong and Shanghai Banking Corporation Limited (HSBC) ofRs,8,000.00 lacs (March 31, 2016:Rs,Nil, April 1, 2015:Rs,Nil) is secured by a first pari passu charge over the Company''s immovable assets situated at Bhandup plant. It carries interest at 8.13% p.a. and 8.33% p.a. as on March 31, 2017 and is repayable in 16 quarterly instalments post moratorium of 12 months from the date of first disbursal. (The mortgage for the loan will be completed as a part of security trustee arrangement).
13. Term loan in Indian Rupee & in foreign currency from Export Import Bank of India ofRs,Nil (March 31, 2016: ''
1,218.75 lacs, April 1, 2015:Rs,3,532.43 lacs) has been repaid in full along with the interest as per the repayment schedule. Last instalment was paid on August 01, 2016. It was secured by first pari passu charge on Company''s movable assets (except current assets) and immovable assets located at Bhandup, Halol and Nashik plants and second pari passu charge on the current assets of the Company. Rupee loan carried interest at 10.45% p.a. and foreign currency loan carried interest at 6 months LIBOR plus 275 bps p.a. as on March 31, 2016.
14. External Commercial Borrowing (ECB loan) from ICICI Bank Ltd. ofRs,Nil (March 31, 2016:Rs,Nil, April 1, 2015:Rs,1,953.12 lacs) was pre-paid in full including interest thereon on September 30, 2015. It was secured by first pari passu charge over the Company''s movable assets (excluding current assets) both present and future and immovable assets both present and future situated at Bhandup, Halol and Nashik plants and second pari passu charge on the current assets of the Company both present and future. It carried interest at 3 months LIBOR plus 250 bps p.a. as on March 31, 2015.
15. Long-term buyer''s credit (for Halol expansion project) is secured by way of first pari passu charge on all movable assets (excluding current assets) and immovable assets of the Company situated at Halol plant and second pari passu charge over the current assets of the Company. It is repayable within 3 years from the date of disbursement. (The Company has created the first charge on the movable properties (except current assets) and the second charge on the current assets of the Company. The security on the immovable property of the Company situated at Halol is created). The long-term buyer''s credit carries interest in the range of 12 months LIBOR plus 20 bps p.a. to 12 months LIBOR plus 122 bps p.a. and 6 months LIBOR plus 52 bps p.a. to 6 months LIBOR plus 165 bps p.a. and 6 months EURIBOR plus 125 bps p.a. and 12 months EURIBOR plus 54 bps p.a. to 12 months EURIBOR plus 150 bps p.a. (Variation in range due to the movements in LIBOR/EURIBOR and the size of the deals.)
16. Long-term buyer''s credit (for Nagpur project) is secured by way of first pari passu charge on all movable assets (excluding current Assets) and immovable assets of the Company situated at Nagpur plant. It is repayable within 3 years from the date of disbursement. (The creation of security for immovable properties situated at Nagpur is complete). The long-term buyer''s credit carries interest in the range of 12 months LIBOR plus 20 bps p.a. to 12 months LIBOR plus 113 bps p.a. and 6 months LIBOR plus 50 bps p.a. to 6 months LIBOR plus 175 bps p.a. (Variation in range due to the movements in LIBOR/EURIBOR and the size of the deals.)
Unsecured long-term borrowings (includes noncurrent portion and current maturities)
17. Public deposits included under the long-term borrowings were pre-paid in full including interest thereon on September 30, 2016. As on March 31, 2017, an amount ofRs,49.69 lacs (interest) and approx.Rs,78.22 lacs (principal) remains unclaimed, in cases where the deposit holders have not encashed their warrants or claim is under dispute or the same are delayed or misplaced by the postal authorities. It carried interest in the range of 9.50% p.a. to 10.75% p.a. as on March 31, 2016.
18. Interest-free deferred sales tax is repayable in ten equal annual installment commencing from April 26, 2011 and ending on April 30, 2025.
19. Outstanding balances shown in foot notes above, are grossed up to the extent of unamortized transaction cost.
a) Provision for warranty
A provision is recognized for expected warranty claims on product sold during the last three years, based on past experience of the level of returns and cost of claim. It is expected that significant portion of these costs will be incurred in the next financial year and within three years from the reporting date. Assumptions used to calculate the provision for warranty were based on current sales levels and current information available about returns based on the three years warranty period for all products sold. The table below gives information about movement in warranty provision.
The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities related to income taxes levied by the same tax authority.
During the year ended March 31, 2017 and March 31, 2016, the company has paid dividend to its shareholders. This has resulted in payment of Dividend Distribution Tax (DDT) to the taxation authorities. The Company believes that DDT represents additional payment to taxation authority on behalf of the shareholders. Hence, DDT paid is charged to equity.
During the previous year, the increase of the corporate income tax rate from 33.99% to 34.608% which was effective from April 1, 2015. As a result, the relevant deferred tax balances have been premeasured at 34.608%.
The deferred revenue relates to accrual of custom duty availed on import of plant and equipment for Halol Phase I under EPCG scheme. As at March 31, 2017 the estimated amount for deferred revenue amounted toRs,1,132.09 lacs ( March 31, 2016:Rs,1,214.22 lacs, April 1, 2015:Rs,1,296.35 lacs)
a) Working capital term loan, cash credit facilities from banks, export packing credit from banks and buyer''s credit from banks are part of working capital facilities availed from consortium of banks. Consortium limits are secured by way of first pari passu charge on the current assets of the Company, wherever situated and by way of second pari passu charge on the movable assets (except current assets) and immovable assets of the Company situated at Bhandup, Nashik and Halol Plants.
All short-term borrowings availed in Indian rupees during the current year carry interest in the range of 6.25% to 9.50% and all short-term borrowing availed in foreign currency during the year carry interest in the range of LIBOR plus 45 bps to LIBOR plus 50 bps. (LIBOR is set corresponding to the period of the loan)
b) The term loan from banks is outstanding balance of the bill discounting facility availed from scheduled bank.
c) The public deposits are accepted for the maturity of less than one year from the date of receipt.
d) During the previous year, the Company had issued Commercial papers (total available limitRs,20,000.00 lacs) at regular intervals for working capital purposes with interest ranging from 6.13% to 7.55%. The outstanding amount as at March 31, 2017 isRs,2,480.77 lacs (As at March 31, 2016Rs,NIL ; as at April 1, 2015Rs,NIL).
a) Sale of goods includes excise duty collected from customers ofRs,67,479.27 lacs (March 31, 2016:Rs,66,367.74 lacs).
b) The Company has recognized a government grant ofRs,Nil (March 31,2016:Rs,223.47 lacs) as refund of octroi duty under the package scheme of incentive received from Directorate of Industries, Government of Maharashtra for Nashik plant (refer note 42 d).
The Company has also recognized a government grant ofRs,1,220.15 lacs (March 31,2016:Rs,860.89 lacs) as income on account of Export Incentive under Merchandise Exports from India Scheme (MEIS) from Directorate General of Foreign Trade, Government of India.
The Company has recognized a government grant ofRs,82.13 lacs (March 31, 2016:Rs,82.13 lacs) relating to benefit received from Export Promotion Capital Goods (EPCG)
The above expenditure of research and development has been determined on the basis of information available with the Company and as certified by the management.
Note 20: Earnings per share
Basic Earnings per share (EPS) amounts are calculated by dividing the profit for the year attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on conversion of all the dilutive potential equity shares into equity shares.
The following reflects the income and share data used in the basic and diluted EPS computations:
Note 21: Significant accounting judgments, estimates and assumptions
The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require an adjustment to the carrying amount of assets or liabilities in future periods. Difference between actual results and estimates are recognized in the periods in which the results are known / materialized.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company has based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
a) Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Company establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the Company''s domicile. Based on approved plans and budgets, the company has estimated that the future taxable income will be sufficient to absorb MAT credit entitlement, which management believes is probable. Accordingly, the Company has recognized MAT credit as an asset. Further details on taxes are disclosed in note 23.
b) Defined benefit plans (gratuity benefits)
The Company''s obligation on account of gratuity, compensated absences and present value of gratuity obligation are determined based on 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, these liabilities are 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, 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. Those mortality tables tend to change only at interval in response to demographic changes. Increase in future salary and gratuity is based on expected future inflation rates.
Further details about gratuity obligations are given in note 41.
c) Provision for decommissioning liability
The Company has recognized a provision for decommissioning obligations associated with a land taken on lease at Nashik manufacturing facility for the production of tyres. In determining the fair value of the provision, assumptions and estimates are made in relation to discount rates, the expected cost to dismantle and remove the plant from the site and the expected timing of those costs. The carrying amount of the provision as at March 31, 2017 wasRs,54.69 lacs (March 31, 2016:Rs,49.06 lacs, April 1, 2015:Rs,44.00 lacs). The Company estimates that the costs would be realized in year 2066 at the expiration of the lease and calculates the provision using the Discounted Cash Flow (DCF) method based on the following assumptions:
- Estimated range of cost per square meter -'' 45 -Rs,50
- Discount rate - 11.50%
d) Provision for warranty
The estimated liability for warranty is recorded when products are sold. These estimates are established using historical information on the nature, frequency and average cost of obligations and management estimates regarding possible future incidence based on corrective actions on product failure. The timing of outflows will vary as and when the obligation will arise - being typically up to three years. The rate used for discounting warranty provisions is 11.50%.
e) Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See Note 47 and 48 for further disclosures.
Note 22: Post-retirements benefit plan
a) Defined Contribution plan
The Company has recognized and included in Note No.33 "Contribution to Provident and other funds" expenses towards the defined contribution plan as under:
b) Defined Benefit plan - Gratuity
The Company has a defined benefit gratuity plan which is funded with an Insurance company in the form of qualifying Insurance policy. The company''s defined benefit gratuity plan is a salary plan for employees which requires contributions to be made to a separate administrative fund.
The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, every employee who has completed five years of service gets a gratuity on separation @ 15 days of last drawn salary for each completed year of service. The scheme is funded with an insurance company in the form of qualifying insurance policy.
The fund has the form of a trust and it is governed by the Board of Trustees, which consists of employer and employee representatives. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy.
Each year, the Board of Trustees reviews the level of funding. Such a review includes the asset-liability matching strategy and investment risk management policy. This includes employing the use of annuities and longevity swaps to manage the risks. The Board of Trustees decides its contribution based on the results of this annual review. The Board of Trustees have appointed LIC of India, Birla Sun life insurance, India First life insurance & HDFC life insurance to manage its funds. The Board of Trustees aim to keep annual contributions relatively stable at a level such that no plan deficits (based on valuation performed) will arise.
In case of death, while in service, the gratuity is payable irrespective of vesting. The company makes annual contribution to the company gratuity scheme administered by LIC through its gratuity funds.
ix) The principal assumptions used in determining gratuity and leave encashment for the Company''s plan are shown below Description of risk exposures
Valuations are performed on certain basic set of predetermined assumptions and other regulatory frame work which may vary overtime. Thus, the Company is exposed to various risks in providing the above gratuity benefit which are as follows:
Interest rate risk
The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability (as shown in financial statements).
Liquidity risk
This is the risk that the Company is not able to meet the short-term gratuity payouts. This may arise due to non availability of enough cash/ cash equivalent to meet the liabilities or holding of illiquid assets not being sold in time.
Salary escalation risk
The present value of the defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan''s liability.
Demographic risk
The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
Regulatory risk
Gratuity benefit is paid in accordance with the requirements of the Payment of Gratuity Act, 1972 (as amended from time to time). There is a risk of change in regulations requiring higher gratuity payouts (e.g. Increase in the maximum limit on gratuity ofRs,10 lacs).
Asset liability mismatching or market risk
The duration of the liability is longer compared to duration of assets, exposing the Company to market risk for volatilities/fall in interest rate.
Investment risk
The probability or likelihood of occurrence of losses relative to the expected return on any particular investment.
The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority and other relevant factors, such as supply and demand in the employment market.
The sensitivity analysis 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 Company has purchased an insurance policy to provide for payment of gratuity to the employees. Every year, the insurance company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company.
The Company''s best estimate of contribution during the next year isRs,1,582.13 lacs.
The weighted average duration (based on discounted cash flows) of defined benefit obligation is 8 years.
The Company has purchased insurance policy, which is basically a year-on-year cash accumulation plan in which the interest rate is declared on yearly basis and is guaranteed for a period of one year. The insurance Company, as part of the policy rules, makes payment of all gratuity out flows happening during the year (subject to sufficiency of funds under the policy). The policy, thus, mitigates the liquidity risk. However, being a cash accumulation plan, the duration of assets is shorter compared to the duration of liabilities. Thus, the Company is exposed to movement in interest rate (in particular, the significant fall in interest rates, which should result in an increase in liability without corresponding increase in the asset).
Note 23: Commitments and contingencies
a. Leases
Operating lease commitments â Company as lessee
The Company has entered a lease agreement with the leasing company for vehicles, resulting in a non-cancellable operating lease. There is no restriction placed upon the Company by entering these leases. The lease term range from one year to five years and are renewable at the option of the Company.
Lease rental on the said lease ofRs,128.90 lacs (March 31, 2016Rs,106.41 lacs) has been charged to Statement of Profit and Loss.
* in respect of above matters, future cash outflows are determinable only on receipt of judgments pending at various forums / authorities. The amount of expected reimbursement to the Company is not ascertainable as on the Balance Sheet date.
d. Others
The Company has availed the Sales Tax Deferral Loan and Octroi refund from the Directorate of Industries for Nashik Plant. Hence, the Company has to take prior permission of the appropriate authority for removal/transfer of any asset (falling under the above schemes) from Nashik Plant. In case of violation of terms & conditions, the Company is required to refund the entire loan/benefit along with the interest @ 22.50% on account of Sales Tax Deferral Loan and @ 15% on account of Octroi refund. (Refer Note 29(b)).
e. Demands and disputes considered as "Remote" by the Company
1. The Company has been served with a Show Cause cum Demand Notice from the DGCEI (Directorate General of Central Excise Intelligence) Mumbai, on the ground that, the activity of making tyre set,
i.e. inserting Tubes and Flaps inside the Tyres and tied up through Polypropylene Straps, amounts to manufacture / pre-packaged commodity under Section 2(f)(iii) of Central Excise Act, read with Section 2(l) of the Legal Metrology Act, 2009. Accordingly, the authorities worked out the differential duty amounting toRs,8,655.63 lacs i.e., the amount of duty already paid on the basis of transaction value and duty payable on the basis of MRP under Section 4A, for the period from April-2011 to April-2015. The Company believes that Set of TT / TTF (Tyre and Tube / Tyre, Tube and Flap) is not pre-packaged commodity in terms of provisions of Legal Metrology Act, 2009. The Company has a strong case on the ground that, they said issue has been clarified by the Controller of the Legal Metrology Department vide its letter dated May 1, 1991 that "Tyre with tube & flaps tied with three thin polythene strips may not be treated as a pre-packed commodity within the meaning of rule 2(l) of the Standards of Weights and Measures (Packaged Commodities), Rules, 1977". The above clarification has been re-affirmed vide letter dated November 16, 1992 by the Legal Metrology authorities.
2. The Competition Commission of India (CCI) had, while considering the representation made by All India Tyres Dealers Federation (AITDF) made a prima facie view that the major players of tyre industry (including the Company) had some understanding amongst themselves, especially in the replacement market, as they did not pass the benefit of corresponding reduction in prices of major raw material inputs for the period subsequent to the year 2011-12. According to CCI, this practice is in violation of the Competition Act 2002 (the Act). Therefore, CCI had, vide its order passed on June 24, 2014 under Section 26(1) of the Act, directed the Office of the Director General (DG) to investigate the said alleged violation of the Act. DG submitted its Investigation Report to CCI in December 2015, based on which CCI passed an order on February 18, 2016 directing the said tyre manufacturers to file their suggestions/objections by May 5, 2016. Objections were filed as directed and the CCI had also heard the tyre manufacturers in detail. The case was last posted on December 1, 2016 and is now reserved for Orders. The Company''s decision to change the price is purely a business decision which depends upon many factors like cost of production, brand value perception, profit margin of each product, quality perception of each product in the market, demand and supply situation of each product category and market potential and market shares targets of various product categories etc. In view of the above, Company believes that it has a strong case hence, considered as remote.
Note 24: Related party transactions a) Names of related parties and related party relationship
Related parties where control exists
- Associated CEAT Holdings Company (Pvt.) Limited ("ACHL") (Subsidiary Company)
- CEAT AKKHAN Limited (Subsidiary Company)
- Rado Tyres Limited("Rado") (Subsidiary Company)
- CEAT Specialty Tyres Limited ("CSTL") (Subsidiary Company)
Related parties with whom transactions have taken
place during the year
- CEAT Kelani Holdings (Pvt.) Limited ( Joint venture of ACHL)
- Associated CEAT (Pvt.) Limited ("ACPL") (Subsidiary of CKHL)
- Ceat-Kelani International Tyres (Pvt.) Limited ("CKITL") (Subsidiary of CKHL)
- Ceat Kelani Radials Limited ("CKRL") (Subsidiary of CKHL)
- Asian Tyres (Pvt.) Limited ("ATPL") (Subsidiary of CKITL)
- RPG Enterprises Limited ("RPGE")(Directors, KMP or their relatives are interested)
- RPG Lifesciences Limited ("RPGLS") (Directors, KMP or their relatives are interested)
- Zensar Technologies Limited("Zensar") (Directors, KMP or their relatives are interested)
- Raychem RPG (Pvt.) Limited ("Raychem") (Directors, KMP or their relatives are interested)
- KEC International Limited ("KEC") (Directors, KMP or their relatives are interested)
- Vinar Systems Pvt. Limited ("Vinar") (Directors, KMP or their relatives are interested)
- B.N. Elias & Co. LLP ("B.N. Elias") (Directors, KMP or their relatives are interested)
- Swallow Associates LLP ("Swallow") (Directors, KMP or their relatives are interested)
- Atlantus Dwellings & Infrastructure LLP ("Atlantus") (Directors, KMP or their relatives are interested)
- Chattarpati Apartments LLP ("Chattarpati") (Directors, KMP or their relatives are interested)
- Allwin Apartments LLP ("Allwin") (Directors, KMP or their relatives are interested)
- Palacino Properties LLP ("Palacino") (Directors, KMP
or their relatives are interested)
- Amber Apartments LLP ("Amber") (Directors, KMP or their relatives are interested)
- Khaitan & Co. ("Khaitan") (Directors, KMP or their relatives are interested)
- Key Management Personnel (KMP):
i) Mr. Harsh Vardhan Goenka, Chairman
ii) Mr. Anant Vardhan Goenka, Managing Director
iii) Mr. Arnab Banerjee, Whole-time Director
iv) Mr Subba Rao Amarthaluru, Chief Financial Officer up to July 22, 2015
v) Mr. Manoj Jaiswal, Chief Financial Officer up to January 15, 2017.
vi) Mr Kumar Subbiah, Chief Financial Officer w.e.f. from January 16, 2017.
vii) Mr. H. N. Singh Rajpoot, Company Secretary up to August 31, 2016.
viii) Ms. Shruti Joshi, Company Secretary w.e.f. from September 1, 2016.
ix) Mr. Paras K. Chowdhary, Independent Director
x) Mr. Vinay Bansal, Independent Director
xi) Mr. Hari L Mundra, Independent Director
xii) Mr. Atul Choksey, Independent Director
xiii) Mr. Mahesh Gupta, Independent Director
xiv) Mr. Haigreve Khaitan, Independent Director
xv) Ms. Punita Lal, Independent Director
xvi) Mr. S.Doreswamy, Independent Director
xvii) Mr. Kantikumar Poddar, Independent Director (up to February 9, 2017)
xviii) Mr. Ranjit Pandit, Independent director
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.
The remuneration to the key managerial personnel does not include the provisions made for gratuity and leave benefit as they are determined on an actuarial basis for the Company as a whole.
Managerial remuneration is computed as per the provisions of section 198 of the Companies Act, 2013. The amount outstanding are unsecured and will be settled in cash.
Loans and guarantee to Subsidiary
Following are the details of loans and guarantee given to subsidiary companies in which directors are interested, as required under Schedule V read with Regulation 34 (3) and 53 (f) of the SEBI (Listing Obligation and Disclosure Requirement) Regulation, 2015 and disclosure required under section 186 (4) of the Companies Act, 2013.
Maximum outstanding during the year as loan to CSTL wasRs,5,000.00 lacs.(March 31, 2016:Rs,3,400.00 lacs)
ii. CEAT has given a corporate guarantee uptoRs,22,800.00 lacs to Ceat Speciality Tyres Limited as a collateral security for raising the term loans. The outstanding guarantee as on March 31, 2017 isRs,13,476.98 lacs.
Note 25: Segment information
For management purpose, the Company comprise of only one reportable segment - Automotive Tyres, Tubes & Flaps.
The Executive Management Committee monitors the operating results of this segment for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements.
During the year 2016-17 and 2015-16, no single external customer has generated revenue of 10% or more of the Company''s total revenue.
During the year 2016-17 and 2015-16, no single country has generated revenue of more than 10% of total revenue.
Note 26: Hedging activities and derivatives Derivatives designated as hedging instruments
The Company uses derivative financial instruments such as foreign currency forward contracts to hedge foreign currency risk arising from future transactions in respect of which firm commitments are made or which are highly probable forecast transactions. It also uses cross currency interest rate swaps (CCIRS), Range Forwards, and Coupon Only Swap (COS) to hedge interest rate and foreign currency risk arising from variable rate foreign currency denominated loans. All these instruments are designated as hedging instruments and the necessary documentation for the same is made as per Ind AS 109.
The foreign exchange forward contract balances vary with the level of expected foreign currency sales and purchases and changes in foreign exchange forward rates. CCIRS have been designated as effective hedging instrument from April 1, 2016 onwards.
* CCIRS has been designated as an effective hedging instrument w.e.f. April 1, 2016 ** Options outstanding as on March 2015 were not designated as effective hedging instrument
Cash flow hedges
Foreign currency risk
Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of recognized purchase payables, committed future purchases, recognized sales receivables, forecast sales and Foreign Currency loan (Buyer''s Credit) in US dollar & Euro. The forecast sales transactions are highly probable, and comprise about 25% of the Company''s total expected sales in US dollar.
Cross currency Interest Rate Swaps (CCIRS) measured at fair value through OCI are designated as hedging instruments in cash flow hedges for Foreign currency loan (Buyer''s Credit) in US Dollar.
Derivative options like Range Forwards, COS measured at Fair value through OCI are designated as hedging instruments in cash flow hedges for Foreign currency loan (Buyer''s Credit) in US Dollar.
The terms of the foreign currency forward contracts match the terms of the expected highly probable forecast transactions. As a result, no hedge ineffectiveness arise requiring recognition through the statement of profit and loss.
* The trade payables / short term borrowings are naturally hedged (off-set) to the extent of exposure under trade receivables / advances for respective currencies.
The cash flow hedges of the expected future sales / recognized sales receivables as at March 31, 2017 were assessed to be highly effective and a net unrealized gain ofRs,367.27 lacs, with a deferred tax liability ofRs,127.10 lacs relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges of the expected future sales as at March 31, 2016 were assessed to be highly effective and an unrealized gain ofRs,317.45 lacs with a deferred tax liability ofRs,109.86 lacs was included in OCI in respect of these contracts.
The cash flow hedges of the expected future purchases / recognized purchase payables as at March 31,2017 were assessed to be highly effective, and as at March 31, 2017, a net unrealized loss ofRs,682.42 lacs with a related deferred tax asset ofRs,236.17 lacs was included in OCI in respect of these contracts. Comparatively, the cash flow hedges of the expected future purchases/ recognized purchase payables as at March 31,2016 were also assessed to be highly effective and an unrealized loss ofRs,329.98 lacs with a deferred tax asset ofRs,114.20 lacs was included in OCI in respect of these contracts.
Note 27: Fair values
Set out below, is a comparison by class of the carrying amounts and fair value of the Company''s financial instruments, other than those with carrying amounts that are reasonable approximations of fair values
The Cash Flow hedges of the Buyer''s Credit outstanding as on March 31,2017 were assessed to be highly effective, and as at March 31, 2017, a net unrealized loss ofRs,1,520.47 lacs with a related deferred tax asset ofRs,526.20 lacs was included in OCI in respect of these contracts. Comparatively, the cash flow hedges of the Buyer''s Credit outstanding as on March 31, 2016 were assessed to be ineffective.
The management assessed that fair values of cash and cash equivalents, trade receivables, trade payables less than 1 year, bank overdrafts, current borrowing and other current financial assets and liabilities (except derivative financial instrument those being measured at fair value through other comprehensive income) approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The foreign exchange forward contracts used for hedging the recognized import trade payables / export trade receivables have been valued based on the Closing spot value. The following methods and assumptions were used to estimate the fair values:
- The fair value of quoted mutual funds are based on price quotations at the reporting date.
The Company enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. The foreign exchange forward contracts used for the expected future sales/expected future purchase have been valued using forward pricing, based on present value calculations. These values are the realizable values which could be exchanged with the counterparty. The foreign exchange forward contracts used for the recognized export receivables/recognized import payables have been measured using the closing currency pair spot. The forward premium is separately amortized over the period of the forward. These values are close estimations of the fair values which could be realized on immediate winding up of the deals. The swap contracts and the option contracts have been valued at the market realizable values obtained from the counterparty and the same have been valued using the swap valuation / option valuation, based on present value calculations
Note 28: Fair value hierarchy
The following table provides the fair value measurement hierarchy of the Company''s assets and liabilities.
*For valuation under level 3 following assumptions were made:
a. All repayments of borrowings will happen at end of financial year and not during the year.
b. For valuation purpose we have taken discounting rate of 11.50% which represents additional borrowing rate.
Note29: Financial risk management objectives and policies
The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings, 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 trade and other receivables, mutual fund investments, and cash and cash equivalents that derive directly from its operations. The Company also enters into derivative transactions.
The Company''s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company''s policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. The Board of Directors through its risk managements committee reviews and agrees policies for managing each of these risks, which are summarized below.
a. 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. Financial instruments affected by market risk include loans and borrowings, deposits, investments and derivative financial instruments.
The sensitivity analysis in the following sections relate to the position as at March 31, 2017 and March 31, 2016.
The sensitivity analysis have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant and on the basis of hedge designations in place at March 31, 2017.
The analysis exclude the impact of movements in market variables on: the carrying values of gratuity and other postretirement obligations and provisions.
The following assumptions have been made in calculating the sensitivity analysis:
- 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, 2017 and March 31, 2016 including the effect of hedge accounting
- The sensitivity of equity is calculated by considering the effect of any associated cash flow hedges and hedges of a net investment in a foreign subsidiary at March 31 2017 for the effects of the assumed changes of the underlying risk.
i. Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company''s exposure to the risk of changes in market interest rates relates primarily to the Company''s long-term debt obligations with floating interest rates.
The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. To manage this, the Company enters into interest rate swaps, in which it agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. At March 31 2017, after taking into account the effect of interest rate swaps, approximately 58% of the Company''s total borrowings are at a fixed rate of interest (March 31, 2016: 50%; April 1, 2015: 55%).
The following table provides a break-up of company''s fixed and floating rate borrowing
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.
31, 2017, the company hedged 98% (March 31, 2016: 86%) of its foreign currency receivables/payables.
Foreign currency sensitivity
The following tables demonstrate the sensitivity to a reasonably possible change in USD and EURO rates, with all other variables held constant. The impact on the Company''s profit before tax is due to changes in the fair value of monetary assets and liabilities. The Company''s exposure to foreign currency changes for all other currencies is not material.
ii. Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company''s exposure to the risk of changes in foreign exchange rates relates primarily to the Company''s operating activities (when revenue or expense is denominated in a foreign currency) and the Company''s net investments in foreign subsidiaries.
The Company manages its foreign currency risk by hedging transactions that are expected to occur within a maximum 6 month period for the foreign currency denominated trade payables and trade receivables. The foreign currency risk on the foreign currency loans are mitigated by entering into Cross Currency Swaps. When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of forecast transactions the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency.
At March 31, 2017, the Company hedged 95% (March 31, 2016: 100%, April 1, 2015: 100 %), of its foreign currency loans. This foreign currency risk is hedged by using foreign currency forward contracts. At March
The movement in the pre-tax effect is a result of a change in the fair value of the financial asset/liability due to the exchange rate movement. The derivatives which have not been designated in a hedge relationship act as an economic hedge and will offset the underlying transactions when they occur. The same derivatives are not covered in the above table.
In management''s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.
iii. Equity price risk
The Company invests its surplus funds in various debt instruments and debt mutual funds. These comprise of mainly liquid schemes of mutual funds (liquid investments) and fixed deposits.
Mutual fund investments are susceptible to market price risk, mainly arising from changes in the interest rates or market yields which may impact the return and value of such investments. However due to the very short tenor of the underlying portfolio in the liquid schemes, these do not pose any significant price risk.
There is no material equity risk relating to the Company''s equity investments which are detailed in note 5. The Company equity investments majorly comprises of strategic investments rather than trading purposes.
b. Commodity price risk
The Company is affected by the price volatility of certain commodities. Its operating activities require the ongoing purchase of rubber and carbon black and therefore require a continuous supply of rubber and carbon black. Due to the significantly increased volatility of the price of the rubber and carbon black, the Company also entered into various purchase contracts for rubber and carbon black (for which there is an active market).
The Company''s Board of Directors has developed and enacted a risk management strategy regarding commodity price risk and its mitigation.
Commodity price sensitivity
The following table details the Company''s sensitivity to a 5% movement in the input price of rubber and carbon black. The sensitivity analysis includes only 5% change in commodity prices for quantity sold or consumed during the year, with all other variables held constant. A positive number below indicates an increase in profit or equity where the commodity prices decrease by 5%. For a 5% increase in commodity prices, there would be a comparable impact on profit or equity, and the balances below would be negative.
c. 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, foreign exchange transactions and other financial instruments.
Trade receivables
Customer credit risk is managed by each business unit subject to the Company''s established policy, procedures and control relating to customer credit risk management. Trade receivables are noninterest bearing and are
generally on 30 days to 90 days credit term. Credit limits are established for all customers based on internal rating criteria. Outstanding customer receivables are regularly monitored. Credit risk on receivables is also mitigated by securing the same against security deposit, letter of credit and advance payment.
An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically.
Export customers are against Letter of Credit, bank guarantees, payment against documents and open credit and insurance cover on export outstanding under open credit is also taken. Generally deposits are taken from domestic debtors under replacement segment. The carrying amount and fair value of security deposit from dealers amounts to ''30,756.54 lacs (March 31, 2016:Rs,29,666.08 lacs; April 1, 2015:Rs,29,905.34 lacs) as it is payable on demand. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets.
Other financial assets and cash deposits
Credit risk from balances with banks and financial institutions is managed by the Company''s treasury department in accordance with the Company''s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Company''s
Board of Directors on an annual basis, and may be updated throughout the year subject to approval as per the Investment policy. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.
d. Liquidity risk
The company prepares cash flow on a daily basis to monitor liquidity. Any shortfall is funded out of short term loans. Any surplus is invested in liquid mutual funds. The company also monitors the liquidity on a longer term wherein it is ensured that the long term assets are funded by long term liabilities. The company ensures that the duration of its current assets is in line with the current assets to ensure adequate liquidity in the 3-6 months period.
The table below summarizes the maturity profile of the Company''s financial liabilities based on contractual undiscounted payments.
e. Excessive risk concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company''s performance to developments affecting a particular industry.
In order to avoid excessive concentrations of risk, the Company''s policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly. Selective hedging is used within the Company to manage risk concentrations at both the relationship and industry levels
Collateral
The Company has hypothecated the entire current assets to its consortium of bankers. The term lenders also have a second charge on the varied current assets.
Note 30: Capital management
For the pur
Mar 31, 2016
1. Debenture redemption reserve:
Debenture redemption reserve (DRR) is required to be created in
accordance with section 71 of the Companies Act, 2013 read with
Companies (Share capital and Debenture) Rules, 2014 at equivalent to
25% of the value of the debentures issued. As per the rules, the
Company needs to create Debenture Redemption Reserve for Rs. 5,000.00
Lacs, before the maturity of the first tranche of debentures commencing
from FY 2019-20. For the year under review, the Company has created a
DRR to the extent of Rs.1,667.00 Lacs and proposes to create an
equivalent DRR in the next 2 financial years.
Secured long-term borrowings (includes non-current portion and current
maturities)
1. Non-Convertible Debentures (NCD) Rs. 20,000.00 Lacs (Previous year
Nil) allotted on July 31, 2015 on private placement basis are secured
by a first pari passu charge over the movable assets (except current
assets) and immovable assets of the Company situated at the Nashik
Plant. As at March 31, 2016, the NCDs carry an interest at 9.40% and
repayable as under:
- NCD Series 1: Rs. 1,000 Lacs (5% of the issue amount) repayable on
July 31, 2019
- NCD Series 2: Rs. 3,000 Lacs (15% of the issue amount) repayable on
July 31, 2020
- NCD Series 3: Rs. 3,000 Lacs (15% of the issue amount) repayable on
July 31, 2021
- NCD Series 4: Rs. 3,000 Lacs (15% of the issue amount) repayable on
July 31, 2022
- NCD Series 5: Rs. 4,000 Lacs (20% of the issue amount) repayable on
July 31, 2023
- NCD Series 6: Rs. 4,000 Lacs (20% of the issue amount) repayable on
July 31, 2024
- NCD Series 7: Rs. 2,000 Lacs (10% of the issue amount) repayable on
July 31, 2025
2. Term Loan from The Hong Kong and Shanghai Banking Corporation
Limited of Rs. 2,812.50 Lacs (Previous year Rs. 4,062.50 Lacs) is
secured by a frst pari passu charge over the Company''s immovable assets
situated at Bhandup plant. (The creation of security for immovable
properties situated at Bhandup is pending as on March 31, 2016). It
carries interest at 9.65% as on March 31, 2016 and is repayable in 16
quarterly installments starting September 20, 2014.
3. Term Loan from Export and Import Bank of India Rs. 7,600.00 Lacs
(Previous year Rs. Nil) is secured by first pari passu charge over the
Company''s movable assets (excluding current assets) and immovable
assets situated at the Halol plant and second pari passu charge on the
current assets of the Company. (The creation of security for immovable
properties situated at Halol is pending as on March 31, 2016). It
carries interest at 10.45% p.a. as at March 31, 2016 and is repayable
as under:
4. Term Loan from Kotak Mahindra Bank Limited of Rs. 3,000.00 Lacs
(Previous year Rs. Nil) is secured by first pari passu charge over the
Company''s movable assets (excluding current assets) and immovable
assets situated at Halol plant and second pari passu charge over the
current assets of the Company. (The creation of security for immovable
properties situated at Halol is pending as on March 31, 2016). It
carries interest at 10.50% p.a. as at March 31, 2016 and is repayable
as under:
5. Term loan from Bank of India of Rs. Nil (Previous year Rs.
10,000.00 Lacs) was pre-paid in full including interest thereon on July
31, 2015.
6. Term loan from ICICI Bank Limited of Rs. Nil (Previous year Rs.
7,000.00 Lacs) was pre-paid in full including interest thereon on
August 4, 2015.
7. Term loan from ICICI Bank Limited of Rs. Nil (Previous year Rs.
3,375.00 Lacs) was pre-paid in full including interest thereon on July
11, 2015.
8. Term loan from ICICI Bank Limited of Rs. Nil (Previous year Rs.
1,166.67 Lacs) was repaid in full including interest thereon on August
10, 2015.
9. Term loan from Bank of India of Rs. Nil (Previous year Rs. 2,913.58
Lacs) was pre-paid in full including interest thereon on July 31, 2015.
10. Term loan from IDBI Bank Limited of Rs. Nil (Previous year Rs.
753.38 Lacs) was pre-paid in full including interest thereon on August
31, 2015.
11. Term loan from Bank of Baroda of Rs. Nil (Previous year Rs.
1,750.00 Lacs) was repaid in full including interest thereon on August
31, 2015.
12. Term loan in Indian rupee & in foreign currency from Export Import
Bank of India of Rs. 1,218.75 Lacs (Previous year Rs. 3,532.43 Lacs) is
secured by first pari passu charge on Company''s movable assets (except
current assets) and immovable assets located at Bhandup, Halol and
Nashik plants and second pari passu charge over current assets of the
Company.
Rupee loan carries interest at 10.45% p.a. as on March 31, 2016 and was
repayable in 20 equal quarterly installments starting from November 1,
2011 and foreign currency loan carries interest at 6 months LIBOR plus
275 bps p.a. as on March 31, 2016 and was repayable in 20 equal
quarterly installment starting from November 1, 2011.
13. ECB loan from ICICI Bank Ltd. of Rs. Nil (Previous year Rs.
1,953.12 Lacs) was pre-paid in full including interest thereon on
September 30, 2015.
14. Long-term buyer''s credit (for Halol expansion project) is secured
by way of first pari passu charge on all movable assets (excluding
current assets) and immovable assets of the Company situated at Halol
plant and second pari passu charge over the current assets of the
Company. It is repayable within 3 years from the date of disbursement.
(The creation of security for immovable properties situated at Halol is
pending as on March 31, 2016). The long-term buyer''s credit carries
interest in the range of 12 months LIBOR plus 20 bps to 12 months LIBOR
plus 122 bps and 6 months LIBOR plus 94 bps to 6 months LIBOR plus 165
bps and 12 months EURIBOR plus 54 bps to 12 months EURIBOR plus 150
bps. (Variation in range due to the movements in LIBOR / EURIBOR and
the size of the deals).
Long-term buyer''s credit (for Nagpur project) is secured by way of first
pari passu charge on all movable assets (excluding current assets) and
immovable assets of the Company situated at Nagpur plant. It is
repayable within 3 years from the date of disbursement. (The creation
of security for immovable properties situated at Nagpur is pending as
on March 31, 2016). The long-term buyers credit carries interest in
the range of 12 months LIBOR plus 95 bps to 12 months LIBOR plus 113
bps and 6 months LIBOR plus 105 bps to 6 months LIBOR plus 175 bps.
Unsecured long-term borrowings (includes non-current portion and
current maturities)
15. Public deposits included under the long-term borrowings are
repayable after 2 or 3 years from the date of acceptance of public
deposit. Long-term public deposits carries interest in the range of
9.50% p.a. to 10.75% p.a.
16. Interest-free deferred sales-tax is repayable in ten equal annual
installment commencing from April 26, 2011 and ending on April 30,
2025.
a) Provision for warranty
A provision is recognized for expected warranty claims on product sold
during the last three years, based on past experience of the level of
returns and cost of claim. It is expected that significant portion of
these costs will be incurred in the next financial year and within
three years from the reporting date. Assumptions used to calculate the
provision for warranty were based on current sales levels and current
information available about returns based on the three years warranty
period for all products sold. The table below gives information about
movement in warranty provision.
Note :
a) Working capital term loan, cash credit facilities from banks, export
packing credit from banks and buyers credit from banks are part of
working capital facilities availed from consortium of banks. Consortium
limits are secured by way of first pari passu charge on the current
assets of the Company, wherever situated and by way of second pari
passu charge on the movable assets (except current assets) and
immovable assets of the Company situated at Bhandup, Nashik and Halol
Plants.
All short-term borrowings availed in Indian rupees during the current
year carry interest in the range of 9.50% to 10.30% and all short-term
borrowing availed in foreign currency during the year carry interest in
the range of LIBOR plus 30 bps to LIBOR plus 100 bps.(LIBOR is set
corresponding to the period of the loan)
b) The term loan from banks is outstanding balance of the bill
discounting facility avalied from scheduled bank
c) The public deposits are accepted for the maturity of the less than
one year from the date of receipt.
d) During the current year, the Company had issued Commercial Papers
(total available limit Rs. 20,000.00 Lacs) at regular intervals for
working capital purposes with interest ranging from 7.30% to 8.20%. The
outstanding as at March 31, 2016 is Rs. Nil.
1. Building includes Rs. 0.10 Lacs (Previous year Rs. 0.10 Lacs) being
value of unquoted fully-paid shares held in various co-operative
housing societies.
2. During the year, the Company has sold the following assets that
were held for sale in the previous year:
a) Leasehold land at Additional Ambernath Industrial Area, Ambernath
having book value of Rs. 3,543.63 Lacs.
b) Freehold land at Gujarat having book value of Rs. 0.60 Lacs.
3. During the year, the Company has transfered the following expenses
which are attributable to the construction activity and are included in
the cost of capital work-in-progress (CWIP) / Fixed assets as the case
may be. Consequently, expenses disclosed under the respective notes are
net of such amounts.
4. In the previous year, pursuant to the Companies Act, 2013 ("the
Act"), the management, based on external technical evaluation has
reassessed the useful life of fixed assets. In accordance with the Act,
the carrying value of the fixed assets as at April 1, 2014 is
depreciated over the revised residual life of the fixed assets and where
the revised residual life of the fixed assets is nil as at that date,
the carrying value of the fixed assets, after retaining the residual
value, was adjusted to the General Reserve. Consequently in the
previous year, the General Reserve was reduced by Rs. 2,161.65 Lacs
(net of deferred tax Rs. 87.87 Lacs).
5. Pursuant to the Companies Act, 2013 ("the Act"), the management,
based on internal technical evaluation has assessed the major
components and useful life of fixed assets. In accordance with the Act,
the carrying value of the components of fixed assets as at April 1, 2015
is depreciated over the balance residual life of the fixed assets and
where the balance residual life of the fixed assets is nil as at that
date, the carrying value of the components of fixed assets, after
retaining the residual value, has been adjusted to the General Reserve.
Consequently, the General Reserve has been reduced by Rs. 560.04 Lacs
(net of deferred tax Rs. 274.36 Lacs).
6. The Company has acquired a leasehold land at Butibori Industrial
Area, Maharashtra Industrial Development Corporation, Nagpur
admeasuring 2,40,000 Sq. Mts. @ Rs. 1,150/- per sq. ft. amounting to
Rs. 2,760.00 Lacs for a lease term of ninety five (95) years. The Lease
agreement for the same was registered on March 24, 2015.
7. In an earlier year, the Company has acquired global rights of
"CEAT" brand from the Italian tyre maker, Pirelli. Prior to the said
acquisition, the Company was the owner of the brand in only a few Asian
countries including India. With the acquisition of the brand which is
renowned worldwide, new and hitherto unexplored markets are accessible
to the Company. The Company will be in a position to fully exploit the
export market resulting in increased volume and price realization.
Therefore, the management believes that the Brand will yield significant
benefits for a period of at least twenty years.
8. The Company has acquired technical know-how and assistance from
International Tire Engineering Resources LLC, for setting up for Halol
radial plant. Considering the life of the underlying plant / facility,
this technical know-how, is amortized on a straight line basis over a
period of twenty years.
9. As a part of ongoing expansion project at Halol, during the year
the Company has capitalised and commissioned assets of Rs. 44,768.09
Lacs. This has resulted in additions of 39 MT per day in the installed
capacity. Full expansion project of 120 MT per day is however expected
to be commissioned, in phase, by end of FY 2016-17.
10. During the year, the Company has commissioned, its Greenfield Unit,
situated at Butibori, near Nagpur, Maharashtra, with effect from March
28, 2016. Accordingly, the Company has capitalised the assets amounting
to Rs. 9,375.40 Lacs. This has resulted in additions of 15 MT per day
in the installed capacity. Full expansion project of 120 MT per day is
expected to be commissioned, in phases, by end of FY 2017-18.
11. Gross book value includes Rs. 68,184.11 Lacs (Previous year Rs.
69,177.84 Lacs) on account of revaluation of Land, Building and Plant
and machinery in 2007 based on the report issued by independent valuer.
c. Others
The Company has availed the sales-tax deferral loan and octroi refund
from the Directorate of Industries for Nashik plant. Hence, the Company
has to take prior permission of the appropriate authority for removal /
transfer of any asset (falling under the above schemes) from Nashik
plant. In case of violation of terms & conditions, the Company is
required to refund the entire loan / benefit along with the interest @
22.50% on account of sales-tax deferral loan and @ 15% on account of
octroi refund. (Refer note 19(2)(c)).
d. Demands and disputes considered as "Remote" by the Company
1. The Company has been served with a Show Cause cum Demand Notice from
the DGCEI (Directorate General of Central Excise Intelligence) Mumbai,
on the ground that, the activity of making tyre set, i.e. inserting
Tubes and Flaps inside the Tyres and tied up through Polypropylene
Straps, amounts to manufacture / pre-packaged commodity under Section
2(f)(iii) of Central Excise Act, read with Section 2(l) of the Legal
Metrology Act, 2009. Accordingly, the authorities worked out the
differential duty amounting to Rs. 8,417.79 Lacs i.e., the amount of
duty already paid on the basis of transaction value and duty payable on
the basis of MRP under Section 4A, for the period from April-2011 to
March-2015. The Company believes that Set of TT / TTF(Tyre Tube / Tyre
Tube and Flap) is not pre-packaged commodity in terms of provisions of
Legal Metrology Act, 2009. The Company has a strong case on the ground
that, the said issue has been clarified by the Controller of the Legal
Metrology Department vide its letter dated May 1, 1991 that "Tyre with
tube & faps tied with three thin polythene strips may not be treated as
a pre-packed commodity within the meaning of rule 2(l) of the Standards
of Weights and Measures (Packaged Commodities), Rules, 1977". The above
clarification has been re-affirmed vide letter dated November 16, 1992 by
the Legal Metrology authorities.
2. The Competition Commission of India (CCI) had, while considering the
representation made by All India Tyres Dealers Federation (AITDF) made
a prima facie view that the major players of tyre industry (including
the Company) had some understanding amongst themselves, especially in
the replacement market, as they did not pass the beneift of
corresponding reduction in prices of major raw material inputs for the
period subsequent to the year 2011-12. According to CCI, this practice
is in violation of the Competition Act, 2002 ("the Act"). Therefore,
CCI had, vide its order passed on June 24, 2014 under Section 26(1) of
the Act, directed the Office of the Director General (DG) to investigate
the said alleged violation of the Act. DG submitted its Investigation
Report to CCI in December 2015, based on which CCI passed an order on
February 18, 2016 directing the said tyre manufacturers to file their
suggestions / objections by May 5, 2016. The Company''s decision to
change the price is purely a business decision which depends upon many
factors like cost of production, brand value perception, and profit
margin of each product, quality perception of each product in the
market, demand and supply situation of each product category and market
potential and market shares targets of various product categories etc.
In view of the above the Company believes that it has a strong case.
2. The Board of Directors have declared an interim dividend of Rs.
11.50 per share pursuant to which, the total amount distributed as
dividend is Rs. 4,651.76 Lacs (Previous year final dividend of Rs. 10
per share, amounting to Rs. 4,045.01 Lacs).
3. Loans and advances in the nature of loans given to subsidiaries and
associates and frms / companies in which directors are interested, as
required under Schedule V read with Regulation 34 (3) and 53 (f) of the
SEBI (Listing Obligation and Disclosure Requirement) Regulation, 2015
and disclosure required under section 186 (4) of the Companies Act,
2013 :
(a) CEAT Specialty Tyres Limited
The loan balance as at March 31, 2016 is Rs. 3,400.00 Lacs (Previous
year Rs. 1,300.00 Lacs). Loan given during the year is Rs. 2,100.00
Lacs (Previous year Rs. 1,300.00 Lacs). The maximum amount outstanding
during the year is Rs. 3,400.00 Lacs (Previous year Rs. 1,300.00 Lacs)
The repayment schedule for the above loan is of 18 months and the rate
of interest charged is 10%. The loan will be utilized for meeting the
working capital requirements.
(b) Rado Tyres Limited
The loan balance as at March 31, 2016 is Nil (Previous year Rs. 117.50
Lacs)
The maximum amount outstanding during the year is Rs.117.50 Lacs
(Previous year Rs. 189.17 Lacs)
The loan has been fully repaid in August 2015, the rate of interest
charged on this loan was 10%.
The loan was utilized for meeting the working capital requirements.
For details of loans, advances and guarantees given and securities
provided to related parties, refer note 42
39. Operating lease
The Company has entered into a lease agreement with the leasing company
for vehicles, resulting in a non-cancellable operating lease as defined
in AS-19 "Accounting for Leases".
Lease rental on the said lease of Rs. 106.41 Lacs (Previous year Rs.
128.68 Lacs) has been charged to Statement of profit and Loss.
4. Related party disclosures:
a) Names of related parties and related party relationship: Related
parties where control exists:
- Associated CEAT Holdings Company (Pvt.) Limited ("ACHL") (Subsidiary
Company)
- CEAT AKKHAN Limited (previously known as CEAT Bangladesh Limited)
(Subsidiary Company)
- Rado Tyres Limited (Subsidiary Company) ("Rado")
- CEAT Specialty Tyres Limited ("CSTL") (Subsidiary Company) (w.e.f.
December 8, 2014)
Related parties with whom transactions have taken place during the year
and / or previous year:
- CEAT-Kelani Holding Company (Pvt.) Limited ("CKHL") (Joint Venture of
ACHL)
- Associated CEAT (Pvt.) Limited ("ACPL") (Subsidiary of CKHL)
- CEAT-Kelani International Tyres (Pvt.) Limited ("CKITL") (Subsidiary
of CKHL)
- CEAT Kelani Radials Limited ("CKRL") (Subsidiary of CKHL)
- Asian Tyres (Pvt) Limited ("ATPL") (Subsidiary of CKITL)
- Raychem RPG (Pvt.) Limited ("Raychem") (Directors, KMP or their
relatives are interested)
- KEC International Limited ("KEC") (Directors, KMP or their relatives
are interested)
- Vinar Systems Pvt. Limited ("Vinar") (Directors, KMP or their
relatives are interested)
- B.N. Elias & Co. LLP ("B.N. Elias") (Directors, KMP or their
relatives are interested)
- Atlantus Dwellings & Infrastructure LLP ("Atlantus") (Directors, KMP
or their relatives are interested)
- Chattarpati Apartments LLP ("Chattarpati") (Directors, KMP or their
relatives are interested)
- Allwin Apartments LLP ("Allwin") (Directors, KMP or their relatives
are interested)
- Palacino Properties LLP ("Palacino") (Directors, KMP or their
relatives are interested)
- Amber Apartments LLP ("Amber") (Directors, KMP or their relatives are
interested)
- Swallow Associate LLP ("Swallow") (Directors, KMP or their relatives
are interested)
- Janpragati Electoral Trust ("Janpragati") (Directors, KMP or their
relatives are interested)
- Khaitan & Co. ("Khaitan") (Directors, KMP or their relatives are
interested)
- Mr. Kunal Mundra (Relative of Director) (upto March 31, 2015)
- Key Managerial Personnel (KMP):
i) Mr. Harsh Vardhan Goenka, Chairman
ii) Mr. Anant Vardhan Goenka, Managing Director
iii) Mr. Arnab Banerjee, Whole-time Director
iv) Mr. Subba Rao Amarthaluru, Chief Financial Officer up to July 22,
2015
v) Mr. Manoj Jaiswal, Chief Financial Officer from July 22, 2015 (w.e.f.
July 20, 2015)
vi) Mr. H. N. Singh Rajpoot, Company Secretary.
5. Segment reporting:
The Company''s operations comprise of only one business segment Â
Automotive Tyres, Tubes & Flaps as its primary segment in the context
of reporting business / geographical segment as required under
mandatory accounting standards AS-17 "Segment Reporting". The
accounting policies adopted for segment reporting are in line with the
accounting policies of the Company.
The geographical Segments considered for disclosure are India and
outside India. All the manufacturing facilities are located in India.
Revenue and receivables are disclosed by location of customers, while
the other geographical information is disclosed by location of assets.
6. Other Information:
a) In the previous year, the Company had acquired 100% stake in CEAT
Specialty Tyres Limited (previously known as CEAT Specialty Tyres
Private Limited) by purchasing 10,000 shares of Rs. 10 each at face
value. Subsequently the Company purchased additional 40,000 shares.
During the current year, the Company purchased additional 1,00,00,000
shares Rs. 10 each at a premium of Rs. 90 per equity share aggregating
to Rs. 10,000.00 Lacs. The subsidiary will focus exclusively on
''off-the-road'' and speciality tyres, for sales in India and abroad.
b) In the previous year, the Company allotted 44,94,382 equity shares
of Rs. 10 each at a premium of Rs. 880 per equity share aggregating to
Rs. 39,999.99 Lacs pursuant to shares issued under a Qualified
Institutional Placement (QIP). Out of the total proceeds, the Company
incurred Rs. 655.93 Lacs (net of tax) towards issue expenses.
c) In August 2015, the Company acquired 3,50,000 12.5% redeemable
cumulative preference shares of Rs. 100 each at par, aggregating to Rs.
350.00 Lacs of Rado Tyres Limited, a subsidiary company.
7. Utilisation of money raised through Qualifed Institutional
Placement (QIP):
In the previous year, the Company raised Rs.39,999.99 Lacs through
Qualified Institutional Placement, specifically to meet its share in the
cost of setting up of various expansion projects viz. capacity
expansion of Halol plant, specialty tyres project (through its
subsidiary company) and two-three wheeler tyres project and also for
augmentation of the long-term working capital required for business
growth.
8. Previous year''s figures have been regrouped / reclassified, where
necessary to conform to current year''s classification.
Mar 31, 2014
1. CORPORATE INFORMATION
CEAT Limited is a public company domiciled in India and incorporated
under the provisions of the Companies Act, 1956. The company''s
principal business is manufacturing of automotive tyres, tubes and
flaps. The company started operations in 1958 as CEAT Tyres of India
Limited and was renamed as CEAT Limited in 1990. The company caters to
both domestic and international markets.
The company has three subsidiary companies:-
i) Associated CEAT Holdings Company (Pvt.) Limited incorporated in Sri
Lanka
ii) CEAT Bangladesh Limited Incorporated in Bangladesh
iii) Rado Tyres Limited (w.e.f. 27th September, 2013), incorporated in
India.
NOTE - 2
1) Contingent Liabilities: (Rs, in Lacs)
As at 31.03.2014 As at 31.03.2013
a) Direct and Indirect Taxation Matters*
Income Tax 127,71.64 19,41.01
Wealth Tax 6.73 6.73
Excise Duty/Service Tax 41,76.33 57,56.53
Sales Tax 34,79.40 46,95.99
b) Show cause notices 155,10.03 165,09.78
c) Bills discounted with Banks 61,26.45 24,55.14
d) Corporate Guarantee
i) Corporate Guarantees given in favour of AB Bank Limited on behalf of
CEAT Bangladesh Limited amounting to Bangladesh Taka
16,50.00 Lacs (Previous year Bangladesh Taka 16,50.00 Lacs)
12,78.26 11,48.24
ii) Letter of Comfort given to The City Bank Limited on behalf of CEAT
Bangladesh Limited amounting to Bangladesh Taka
16,00.00 Lacs (Previous year Bangladesh
Taka Nil) 9,29.64 -
iii) Covered by indemnity
undertakingfrom RPG Enterprises Ltd 25,50.00 25,50.00
4) The Board of Directors recommended a Dividend of Rs, 10/- per share
(Previous year Rs, 4 per share), the total amount to be distributed as
Dividend is Rs, 35,95.57 Lacs (Previous year Rs, 13,69.74 Lacs)
6) a) Loans and advances in the nature of loans given to subsidiary and
associate in which directors are interested. Loans and Advances in the
nature of Loans to subsidiary Rs, 1,89.17 Lacs (Previous year Rs, 2,15.00
Lacs) repayable in 36 equal installment starting from April, 2013.
b) During the year pursuant to Order of Board for Industrial and
Financial Reconstruction (BIFR), Rado Tyres Limited (Rado), has
allotted 75,00,000 Equity shares of Rs, 4/-each fully paid up to the
company on conversion of loan given to it by the company. The company''s
stake in Rado Tyres Limited now stands increased to 58.56% and
accordingly Rado Tyres Limited has become a subsidiary of the company
w.e.f. 27th September, 2013. (Refer Note 15)
3) Other Commitments
a) The Company has availed the Sales Tax Deferral Loan and Octroi
refund from the Directorate of Industries for Nasik Plant. Hence, the
Company has to take prior permission of the appropriate authority for
removal/transfer of any asset (falling under the above Schemes) from
Nasik Plant. In case of violation of terms & conditions, the Company is
required to refund the entire loan/benefit along with the interest @
22.50% on account of Sales Tax deferral Loan and @ 15% on account of
Octroi refund.
b) The Company has agreed for a minimum conversion charge of Rs, 29.50
per kg. up to March 31, 2015 to Rado Tyres Limited.
4) On 15th December 2013, CEAT Bangladesh Limited, has obtained the
approval from Bangladesh Securities and Exchange Commission to increase
its Equity Share Capital to 15,00,00,000 equity shares @ Bangladeshi
Taka 10/- each. Pursuant to this approval CEAT Bangladesh Limited has
increased the Share capital to 15,00,00,000 equity shares and CEAT
Limited has subscribed to additional 4,82,00,000 shares @ Bangladeshi
Taka 10/- each and issued 4,50,00,000 equity shares (being 30% of total
share capital) @ Bangladeshi Taka 10/- each to A. K. Khan & Company
Limited (JV Partner) as per the JV agreement. Pursuant to this
allotment, the Company is now holding 70% stake in CEAT Bangladesh
Limited (previous year Wholly owned subsidiary) (Refer Note 15).
5) Provision for Warranty:
A provision is recognized for expected warranty claims on product sold
during the last three years, based on past experience of the level of
returns and cost of claim. It is expected that significant portion of
these costs will be incurred in the next financial year and within
three years from the reporting date. Assumptions used to calculate the
provision for warranties are based on current sales levels and current
information available about returns based on the three years warranty
period for all products sold. The table below gives information about
movement in warranty provision.
6) Post Retirement Benefits Plan
Gratuity
The Company operates a defined plan of Gratuity for its employees under
the Gratuity plan, every employee who has completed five years of
service gets a gratuity on separation @ 15 days of last drawn salary
for each completed year of service. The Scheme is funded with an
Insurance company in the form of qualifying Insurance policy.
7) Related party disclosures:
a) Names of related parties and related party relationship: Related
parties where control exists:
- Associated CEAT Holdings Company (Pvt.) Limited (ACHL) (Subsidiary
Company)
- CEAT Bangladesh Limited (CEAT Bangladesh) (Subsidiary Company)
- Rado Tyres Limited (Subsidiary Company) (w.e.f. 27th September, 2013)
Related parties with whom transactions have taken place during the year
:-
- CEAT-Kelani Holding Company (Pvt.) Limited (CKHL) (Joint Venture of
ACHL)
- Associated CEAT(Pvt) Limited (ACPL) (Subsidiary of CKHL)
- CEAT-Kelani International Tyres (Pvt.) Limited, (CKITL) (Subsidiary
of CKHL)
- CEAT Kelani Radials Limited (CKRL) (Subsidiary of CKHL)
- Asian Tyres (Pvt) Limited (ATPL) (Subsidiary of CKITL) (w.e.f 14th
November, 2012)
- Instant Holdings Limited (Investing entity in respect of which CEAT
Limited is an Associate)
- Key Management Personnel:
i) Mr. AnantVardhanGoenka, Managing Director
ii) Mr. Arnab Banerjee, Whole-time Director (w.e.f. 7th May, 2013)
iii) Mr. Harsh Vardhan Goenka, Relative of key management personnel
iv) Mr. Paras Kumar Chowdhary, Whole-time Director (Retired on 1st
April, 2013)
8) Exceptional Items:
a) The Company had introduced a Voluntary Retirement Scheme (VRS) for
employees across the company during the year, 105 employees (Previous
year 188 employees) opted for the VRS. The Compensation in this respect
aggregates Rs, 6,89.19 Lacs (Previous year Rs, 13,65.33 Lacs) which is
disclosed as an exceptional Item.
b) During the previous year, the company had changed its method of
recognising provision for warranty from actual claim basis to expected
cost based on past trend. The provision based on such parameters as at
the beginning of the previous year i.e. April 1,2012 amounting to Rs,
14,04.23 Lacs had been disclosed as an exceptional expense in the
previous year.
c) The Company''s Plant at Bhandup, Mumbai, had an incident of Fire at
its Raw Material Store on 23rd February, 2014.
Fixed assets of Gross value of Rs, 3,29.67 Lacs with its written down
value of Rs, 2,30.87 Lacs and stock valuing Rs, 25,38.16 Lacs, aggregating
to Rs, 27,69.03 Lacs were destroyed in the fire. The assets were covered
under the insurance policy. The amount of Rs, 25,56.40 Lacs is expected
to be recovered from the insurance company and shown as insurance claim
receivable. The management is confident of recovering the same. The
balance amount of Rs, 2,12.63 Lacs along with the expenditure incurred of
Rs, 1,02.11 Lacs (including net incidental charges) has been charged to
the Statement of Profit and Loss and aggregate amount of Rs, 3,14.74 Lacs
has been treated as an exceptional item.
9) Segment Reporting:
The Company''s operations comprise of only one business segment
-Automotive Tyres, Tubes & Flaps as its primary segment in the context
of reporting business/geographical segment as required under mandatory
accounting standards AS -17 "Segment Reporting". The accounting
policies adopted for segment reporting are in line with the accounting
policies of the Company.
The geographical Segments considered for disclosure are in India and
Outside India. All the manufacturing facilities are located in India.
10) Previous year''s figures have been regrouped/reclassified, where
necessary to conform to this year''s classification.
Mar 31, 2013
1. CORPORATE INFORMATION
CEAT Limited is a public company domiciled in India and incorporated
under the provisions of the Companies Act, 1956. The company''s
principal business is manufacturing of automotive tyres, tubes and
flaps. The company started operations in 1958 as CEAT Tyres of India
Limited and was renamed as CEAT Limited in 1990. The company caters to
both domestic and international markets. The company has two main
overseas subsidiary companies - Associated CEAT Holdings Company (Pvt)
Limited incorporated in Sri Lanka and CEAT Bangladesh Limited
incorporated in Bangladesh.
2) The Board of Directors recommended a Dividend of Rs. 4 per share
(Previous year Rs. 1 per share), the total amount to be distributed as a
Dividend is Rs. 13,69.74 Lacs (Previous year Rs. 3,42.44 Lacs)
2) Loans and advances in the nature of loans given to subsidiaries and
associates and firms / companies in which directors are interested.
Loans and Advances in the nature of Loans to Associates Rs. 2,15.00 Lacs
(Previous year Rs. 1,50.00 Lacs ) repayable in 36 equal installment
starting from April, 2013.
4) Other Commitments
a) The Company has availed the Sales Tax Deferral Loan and Octroi
refund from the Directorate of Industries for Nasik Plant. Hence, the
Company has to take prior permission of the appropriate authority for
removal/transfer of any asset (falling under the above Schemes) from
Nasik Plant. In case of violation of terms & conditions, the Company is
required to refund the entire loan/benefit along with the interest @
22.50% on account of Sales Tax deferral Loan and @ 15% on account of
Octroi refund.
b) Rado Tyres Limited is an Associate Company, in which CEAT holds 22%
share as on 31st March, 2013. As per the Draft Rehabilitation Scheme
filed by the Operating Agency with BIFR, the Company has committed to
give Rado Tyres Limited a loan of Rs. 2,25.00 Lacs ( Previous year Rs.
1,50.00 Lacs) paid during the year, repayable in 36 equal installment
starting from April, 2013 and an advance of up to Rs. 2,25.00 Lacs
(Previous year Rs. 50.00 Lacs) already given and the same have been
recovered). The Company has also agreed for a minimum conversion charge
of Rs. 29.50 per kg. up to March 31, 2015.
c) As per the Joint Venture agreement with A. K. Khan & Company Limited
(JV Partner), the Company will subscribe 2,50,000 equity shares of CEAT
Bangladesh Limited amounting to Rs. 17.39 Lacs The date of subscription
is not finalised.
5) During the previous year the company has issued 17,12,176
convertible warrants on preferential basis to promoter''s / Promoter''s
group with an object to augment long term resources of the Company and
the amount is being utilised for the intended purpose.
6) Provision for Warranties
A provision is recognized for expected warranty claims on product sold
during the last three years, based on past experience of the level of
returns and cost of claim. It is expected that significant portion of
these cost will be incurred in the next financial year and within three
years from the reporting date. Assumptions used to calculate the
provision for warranties were based on current sales levels and current
information available about returns based on the three years warranty
period for all products sold. The table below gives information about
movement in warranty provision.
7) Operating Lease
The Company has entered into a sale and lease back agreement with the
leasing company for vehicles, resulting in a non- cancellable operating
lease as defined in "AS 19" (Leases).
Lease rental on the said lease of Rs. 1,77.62 Lacs (Previous year Rs.
1,79.94 Lacs ) has been charged to Statement of Profit and Loss
8) Post Retirement Benefits Plans
Gratuity
The Company operates a defined plan of Gratuity for its employees under
the Gratuity plan, every employee who has completed five years of
service gets a gratuity on departure @ 15 days of last drawn salary for
each completed year of service. The Scheme is funded with an Insurance
company in the form of qualifying Insurance policy.
Leave Encashment
The present value obligation of Leave Encashment is determined based on
actuarial valuation using projected unit credit method.
9) Related party disclosures
a) Names of related parties and related party relationship:
Related parties where control exists:
Associated CEAT Holdings Company (Pvt.) Limited (ACHL) (Subsidiary
Company] CEAT Bangladesh Limited (CEAT Bangladesh) (Subsidiary Company)
Related parties with whom transactions have taken place during the year
CEAT-Kelani Holdings Company (Pvt.) Limited (CKHL) (Joint Venture of
ACHL ] Associated CEAT (Pvt.) Limited (ACPL) (Subsidiary of CKHL]
CEAT-Kelani International Tyres (Pvt.) Limited, (CKITL) (Subsidiary of
CKHL) CEAT Kelani Radials Limited (CKRL) (Subsidiary of CKHL)
Rado Tyres Limited (Associate Company)
Key Management Personnel:
i) Mr. Paras K. Chowdhary, Whole Time Director (retired on 01.04.2013)
ii) Mr. Anant Goenka, Managing Director iii) Mr. Harsh Vardhan Goenka,
Relative of key management personnel
The Managerial remuneration is computed as per the provisions of
Section 198 of the Companies Act, 1956 read along with the provisions
of Schedule XIII there to.
10) Exceptional Items:
a) The Company had introduced a Voluntary Retirement Scheme (VRS) for
employees of its Bhandup Unit during the year, 188 employees opted for
the VRS. The Compensation in this respect aggregates Rs. 13,65.33 Lacs
(Previous year Rs. 3,15.64 Lacs) which is disclosed as an exceptional
Item.
b) The Company changed its method of recognizing provision for warranty
from actual claim basis to expected cost based on past trends. The
provision up to March 31, 2012 amounting to Rs. 14,04.23 Lacs has been
disclosed as an exceptional item.
11) Segment Reporting:
The Company''s operations comprise of only one business segment
-Automotive Tyres, Tubes & Flaps in the context of reporting
business/geographical segment as required under mandatory Accounting
Standards AS -17 "Segment Reporting". The accounting policies adopted
for segment reporting are in line with the accounting policies of the
Company.
The geographical Segments considered for disclosure are in India and
Outside India. All the manufacturing facilities are located in India.
12) Previous year''s figures have been regrouped / reclassified, where
necessary to conform to this year''s classification. The accompanying
notes are an integral part of the financial statements
Mar 31, 2012
A) Terms and Rights attached to equity shareholders:
The Company has only one class of equity shares having a face value of
Rs 10 per share. Each holder of equity shares is entitled to one vote
per equity share. A member shall not have any right to vote whilst any
call or other sum shall be due and payable to the Company in respect of
any of the shares of such member. All equity shares of the Company rank
pari passu in all respects including the right to dividend. The
dividend is recommended by the Board of Directors and declared by the
members at the ensuing Annual general Meeting. The Board of Directors
have a right to deduct from the dividend payable to any member any sum
due from him to the Company.
In the event of winding-up, subject to the rights of holders of shares
issued upon special terms and conditions, the holders of equity shares
shall be entitled to receive remaining assets, if any, in proportion to
the number of shares held at the time of commencement of winding-up.
The Shareholders have all other rights as available to Equity
Shareholders as per the provisions of the companies Act, 1956, read
together with the Memorandum of Association and Articles of Association
of the Company, as applicable.
b) The Company does not have any holding company or ultimate holding
company. Promoter shareholding in the Company including persons acting
in concert with the promoters as on March 31, 2012 is 1,78,43,962
equity shares i.e. 52.11% of the equity share capital of the Company.
(Previous year March 31, 2011, 1,67,23,578 ie. 48.84%).
c) Money received against Convertible warrants:
The Company has on March 12, 2012 allotted 17,12,176 Warrants of face
value Rs 10 each to Instant Holdings Limited, an entity belonging to
the Promoter Group of Companies at a price of Rs 85.03 per Warrant on a
preferential basis. The Company has received the 25% of the price of
the Warrant i.e Rs 21.26 per Warrant at the time of allotment. The
Warrants are convertible into an equivalent number of equity shares at
the option of the allottee within a period of 18 months from the date
of allotment i.e. upto September 11, 2013.
Also refer Note 4.
Note on forfeiture of Warrants allotted in 2010:
The Company had on September 30, 2010 allotted 17,12,170 Warrants of
face value Rs 10/- each to entities belonging to the Promoter Group on
a preferential basis at Rs 141.11 per Warrant. The Company has received
the 25% of the price of the Warrant i.e. Rs 35.36 per Warrant an amount
of Rs 6.05 crores at the time of allotment. The Warrants convertible
into an equivalent no. of equity shares were convertible at the option
of the allottees within a period of 18 months from the date of
allotment i.e. upto March 29, 2012. The allottees failed to exercise
their option within the stipulated time period i.e. upto March 29,
2012. The Warrants have since lapsed and the amount paid by the
entities of the Promoter Group has been forfeited by the Company and
Credited to Capital Reserve Account.
NOTE ON SECURED LONG TERM BORROWINGS
1. Term Loan availed from ICICI Bank Ltd. of Rs 1,17,00.00 lacs
(Previous year Rs 90,00.00 lacs) is secured by First pari passu charge
on movable (except Current Assets) both present and future and
Immovable Properties located at Bhandup, Halol and Nasik Plants and
second pari passu charge on the current assets of the Company both
present and future.
It is repayable in 10 equal Semi Annual Installments of Rs 13,00.00
lacs each beginning January 11, 2013 after a moratorium of 30 months.
2. ECB loan availed from ICICI Bank Ltd. of Rs Nil, (Previous year Rs
9,19.00 lacs) is secured by First pari passu charge on movable and
immovable properties of the Company situated at Bhandup and Nasik
Plants both present future.
Repayable in 10 equal Semi Annual Installment of Rs 4,59.00 lacs after
a moratorium of 18 months.
3. ECB loan availed from ICICI Bank Ltd. of Rs 33,63.21 lacs (Previous
year Rs 43,24.12 lacs ) is secured by First pari passu charge on
movable properties (except current assets) both present and future and
immovable properties of the Company situated at Bhandup, Halol and
Nasik Plants and second pari passu charge over Current Assets both
present and future.
Repayable in 24 equal Quarterly Installment of Rs 2,40.00 lacs after a
moratorium of 27 months from December 23, 2010.
4. Term Loan availed from ICICI Bank Ltd. of Rs 58,33.33 lacs
(Previous year Rs 70,00.00 lacs) is secured by First pari passu charge
on immovable properties situated at Bhandup Plant.
Repayable in 12 equal Quarterly Installment of Rs 5,83.00 lacs after a
moratorium of 27 months from November 9, 2012.
5. Term Loan availed from Bank of India of Rs 69,13.58 lacs (Previous
year Rs 47,50.00 lacs) is secured by First pari passu charge on
Company's movable (except Current Assets ) both present and future and
immovable properties located at Bhandup, Halol and Nasik Plants and
second pari passu charge over Current Assets both present and future.
Repayable in 20 quarterly installments of Rs 5,00.00 lacs each
commencing from January 1, 2012.
6. Term Loan availed from Bank of Baroda of Rs 34,99.96 lacs (Previous
year Rs 47,50.00 lacs) is secured by First pari passu charge on present
& future movable (except Current Assets ) both present and future and
immovable located at Bhandup, Halol and Nasik Plant and second
paripassu charge over Current properties both present and future.
Repayable in 20 quarterly installments of Rs 2,50.00 lacs each
commencing from January 1, 2012.
7. Term Loan availed from export Import Bank of India of Rs Nil lacs
(Previous year Rs 12,50.00 lacs) is secured by First pari passu charge
on immovable property of the Company situated at RPG House, Mumbai.
8. Term Loan availed from export Import Bank of India of Rs 70,00.71
lacs (Previous year Rs 90,00.91 lacs) is secured by First pari passu
charge on movable properties (except Current Assets) both present and
future and immovable properties located at Bhandup, Halol and Nasik
Plants and second pari passu charge over Current Assets both present
and future.
Repayable in 20 equal Quarterly Installments of Rs 5,00.00 lacs after a
moratorium of 12 months from November 1, 2011.
9. Term Loan availed from Corporation Bank of Rs 6,24.89 lacs
(Previous year Rs 18,75.00 lacs) is secured by First pari passu charge
on immovable property of the Company situated at RPG House, Mumbai.
Repayable in quarterly installments of Rs 3,13.00 lacs on 26th of every
quarter from December, 2010 after moratorium period of 12 months from
the date of first disbursement. (October 2009)
10. Term Loan availed from IDBI Bank Ltd. of Rs 17,59.07 lacs
(Previous year Rs 23,87.30 lacs) is secured by First pari passu charge
on movable properties (except current assets) both present and future
and immovable properties of the Company situated at Bhandup, Halol and
Nasik Plants and second pari passu charge on Current Assets both
present and future.
Repayable in 20 quarterly installments of Rs 1,25.00 lacs starting from
January 1, 2012.
11. Buyer's credit is secured by Letter of Comfort (LOC) / undertaking
(LOU) issued by the Bank. The said LOC / LOU is part of the working
capital term loan facilities from Bank.
A) Loan availed from Ratnakar Bank Ltd. of Rs 25,00.00 lacs (Previous
year Rs Nil) Repayment after 18 months from the date of disbursement
i.e. August 18, 2013.
B) Interest free Deferred Sales Tax incentive repayment installments
commences from April 26, 2011 and end on April 30, 2025.
Note:
1) Cash Credit and Export packing credit facilities are part of Working
Capital facilities availed from Consortium of Banks and are secured by
hypothecation by way of first pari passu charge on all its current
assets and by way of second pari passu charge on immovable and all
movable properties (excluding current assets) of the Company situated
at Bhandup, Nasik, Halol Plants and RPG House, Mumbai.
2) Buyer's credit is secured by letter of comfort (LOC) / undertaking
(LOU) which is a sublimit of working capital facilities issued by the
banks.
1. Building includes Rs 0.11 lacs (Previous year Rs 0.11 lacs) being
value of shares held in co-operative housing societies.
2. Free Hold Land includes land acquired at Halol, Gujarat vide
Memorandum of Understanding (MOU) for Rs 1.75 lacs which is subject to
registration formalities.
3. Lease Hold Land includes land acquired at Additional Ambernath
Industrial Area, Ambernath, District Thane, Maharashtra from
Maharashtra Industrial Development Corporation (MIDC) vide sanction
letter dated Octrober 30, 2009. The Company has taken physical
possession of this land on September 1, 2010 which is subject to
registration formalities.
4. Fixed assets cost includes assets revalued during last five years
on the basis of valuation report submitted by approved valuers about
their market value as summarised below:
Rs in lacs
2011-12 2010-11
1) CONTINGENT LIABILITIES:
a) Direct and Indirect Taxation Matters
Income Tax 16,40.69 16,82.62
Wealth Tax 6.73 6.73
Excise Duty / Service Tax 45,60.43 43,34.38
Value Added Tax / Central Sales Tax 44,12.36 44,17.77
b) Disputed demands of Octroi Duty 2,22.10 1,70.77
c) Bills discounted with Banks 18,12.11 27,52.04
d) Corporate Guarantees given on behalf
of others
- Covered by indemnity undertakings from
RPG Enterprises Ltd. 25,50.00 25,50.00
Rs in lacs
2011-12 2010-11
e) The Company has given Indemnity in
respect of Lease transactions entered into
with ICICI Bank Ltd., liability for which is
indeterminable - -
f) Export obligation under Export Promotion
Council Guarantee Scheme 312,47.24 396,07.89
2) CLAIMS AGAINST THE COMPANY NOT
ACKNOWLEDGED AS DEBTS (ESTIMATED):
i) in respect of labour matters 5,81.30 6,48.00
ii) other claims 11,80.35 12,35.10
3) CONTRACTS REMAINING TO BE EXECUTED:
Estimated amount of contracts remaining to
be executed on capital 12,99.85 91,65.87
account and not provided for - net of advance
payments.
4) The Board of Directors recommended a
Dividend of Rs 1/- per share, the total amount
to be distributed as a Dividend is Rs 3,42.44
lacs (Previous year Rs 6,84.87 lacs).
5) Disclosure required under the Micro, Small
and Medium Enterprises Development Act, 2006
(the Act) are given as follows:
(a) Principal Amount Due 11.89 -
Interest due - -
(b) Interest paid during the year beyond the
appointed day - -
(c) Amount of interest due and payable for
the period of delay in making payment without
adding the interest specified under the Act - -
(d) Amount of interest accrued and remaining
unpaid at the end of the year - -
(e) Amount of further interest remaining due
and payable even in the succeeding years, until
such date when the interest dues as above are
actually paid to the small Enterprises for the
purpose of disallowance as a deductible
expenditure under section 23 of the ACT. - -
The above information is based on the information available with the
Company, which has been relied upon by the Auditors. No interest has
been accrued on delayed payments.
2) DISCLOSURES AS REQUIRED UNDER CLAUSE 32 OF LISTING AGREEMENT.
i) Loans and Advances in the nature of Loans to Associates Rs 1,50.00
lacs (Previous year Rs Nil) and advance of Rs 60.79 lacs (Previous year
Rs 1,92.36 lacs)
ii) Loans and Advances in the nature of Loans where there is no
repayment schedule, or no interest or interest below Section 372A of
Companies Act, 1956: Rs Nil (Previous year Rs Nil)
iii) Loans and Advances in the nature of Loans to firms / Companies in
which Directors are interested: Rs Nil (Previous year Rs Nil)
iv) Investment by the Loanee in shares of the Company as at March 31,
2012 is Rs Nil (Previous year Rs Nil)
3) OTHER COMMITMENTS AS CERTIFIED BY THE MANAGEMENT ON WHICH AUDITORS
HAVE RELIED UPON.
a) The Company has availed the Sales Tax Deferral Incentive and Octroi
refund from the Directorate of Industries for Nasik Plant. Hence, the
Company will have to take prior permission of the appropriate authority
for removal/transfer of any asset (falling under the above Schemes)
from Nasik Plant. In the event of non - compliance of terms &
conditions, the Company will be required to refund the entire
loan/benefit along with the interest @ 15.5%.
b) Rado Tyres Limited is an Associate Company in which Company holds
22% share as on March 31, 2012. As per the Draft Rehabilitation Scheme
filed by the Operating Agency with BIFR, the Company has committed to
give Rado Tyres Limited a loan of Rs 2,25.00 lacs (Rs 1,50.00 lacs paid
during the year) and an advance of upto Rs 2,25.00 lacs ( Rs 50.00 lacs
already given). The Company has also agreed for a minimum conversion
charge of Rs 29.5 per Kg. upto March 31, 2015.
4) The Company has issued 17,12,176 convertible warrants on
preferential basis to promoter's / Promoter's group with an object to
augment long term resources of the Company and the amount is being
utilised for the intended purpose.
9) The revised Schedule VI has become effective from April 1, 2011 for
the preparation of Balance Sheet and Profit and Loss Statement.
Consequent to the changes in the disclosure and presentation
requirement, the following classifications and re- grouping has been
made in the current year.
(a) The Security Deposits from Dealers amounting to Rs 2,78,55.18 lacs
(Previous year Rs 2,64,59.69 lacs) are now grouped in Other Current
Liability under the Note No.11 (5)(b) - Deposits from Dealers & Others.
(b) Buyer's Credit has been re-grouped under Long Term Borrowing [Refer
to Note No. 5(1)(k)] if it is payable after a period of 12 months and
under Short Term Borrowing [Refer to Note No.9(1)(c)] if it is payable
within a period of 12 months.
5) OPERATING LEASE
The Company has entered into a sale and lease back agreement with the
leasing company for vehicles, resulting in a non- cancellable operating
lease as defined in "AS 19" (Leases).
6) exchange differences recognised in profit and loss account
Net foreign exchange gain recognised in Profit and Loss Account is Rs
8,70.32 lacs (Previous year gain Rs 6,18.81 lacs) out of which Rs 60.76
lacs loss (Previous year loss Rs 81.84 lacs) has been shown separately
whereas net gain of Rs 9,31.09 lacs (Previous year gain Rs 7,00.64
lacs) are included under appropriate heads of items in Profit and Loss
accounts.
7) AUDITOR'S REMUNERATION:
Other Services shown in note 29 includes an Amount of Rs 1.00 lacs
(Previous year Rs 1.00 lacs) Audit Fees paid to Cost Auditor.
8) Factory expenses includes an amount of Rs 1 lacs paid as Donation
to Kasturba Gram Vikas Mandal, Dholidungari, Taluka-Virpur, District
Kheda, Gujarat.
9) Provision for Taxation includes provision for Wealth Tax Rs 6.42
lacs (Previous year Rs 6.64 lacs).
10) RETIREMENT BENEFITS
Brief description: The type of Defined benefit plans is as follows.
Gratuity
The employees Gratuity Fund Scheme managed by Life Insurance
Corporation of India is a defined benefit plan. The present value
obligation is determined based on actuarial valuation using projected
unit credit method.
Leave Encashment
The present value obligation of Leave encashment is determined based on
actuarial valuation using projected unit credit method.
ix) The contribution expected to be paid to the Gratuity fund during
the annual period beginning after the Balance Sheet date is Rs 6,08.72
lacs (Previous year Rs 8,21.18 lacs).
x) Long term liability includes Rs 53.06 lacs (Previous year Rs 61.32
lacs) on account of Compensated Sick Leave absences.
11) DISCLOSURE OF RELATED PARTIES/RELATED PARTY TRANSACTIONS:
a) Related parties: (As certified by the Management)
(i) Related parties:
- Associated CEAT Holdings Company (Pvt.) Limited (Wholly owned
Subsidiary Company)
- CEAT-Kelani Holdings Company (Pvt.) Limited (*),
- Associated CEAT (Pvt.) Limited,
- CEAT-Kelani International Tyres (Pvt.) Limited,
- CEAT Kelani Radials Limited
- Rado Tyres Limited ( Associate Company)
(ii) Key Management Personnel:
- Mr. Paras K. Chowdhary, Managing Director
- Mr. Anant Goenka Deputy Managing Director
(*) Indicates no transactions during the year with these related
parties.
Note: -
a) Remuneration paid to Mr. Anant Vardhan Goenka is subject to approval
of the Central Government. The Company has received approval of the
Central Government for the remuneration paid to Mr. Paras K. Chowdhary.
b) The Managerial remuneration is computed as per the provisions of
Section 198 of the Companies Act, 1956 read along with the provisions
of Schedule XIII there to.
12) SEGMENT REPORTING:
Considering the organisation structure, nature of products and risk and
return profile based on geographical distribution, the tyre business is
considered as a single segment.
13) Notes required as per general instructions for preparation of
Balance Sheet and Profit and Loss Statement as per Revised Schedule VI
are given to the extent they are applicable to the Company.
14) Previous year's figures have been regrouped wherever necessary to
conform to current year's classification.
Mar 31, 2011
Rs. in lacs
2010-11 2009-10
1) Contingent Liabilities:
a) Direct and Indirect Taxation Matters on
which there are decisions of the appellate
authorities in the Company's favour, but
appeals made by tax authorities
Income Tax 2,41.36 2,04.60
Wealth Tax 6.73 6.73
Excise Duty/Service Tax 40,72.31 40,75.05
Sales Tax 47.59 1.56
b) Direct and Indirect Taxation matters
in respect of which the Company is in
appeal
Income Tax 14,41.26 10,33.41
Excise Duty/Service Tax 2,62.07 1,64.96
Sales Tax 43,70.18 60,14.86
c) Disputed demands of Octroi Duty 1,70.77 1,56.86
d) Bills discounted with Banks and
Finance Companies 27,52.04 20,35.86
e) Corporate Guarantees given on behalf
of others 25,50.00 25,50.00
Covered by indemnity undertakings from
RPC Enterprises Ltd.
f) The Company has given Indemnity in - -
respect of Lease transactions entered into
with ICICI Bank Ltd., liability for which is
indeterminable
g) Export obligation under Export Promotion
Council Guarantee Scheme 396,07.89 -
2) Operating Lease
The Company has entered into a sale and lease back agreement with the
leasing company for vehicles, resulting in a non-cancellable operating
lease as defined in "AS 19" (Leases) Lease rental on the said lease of
Rs. 2,21.30 lacs (Previous yearRs. 2,56.91 lacs) has been charged to
Profit and Loss Account
3) Consequent to commencement of commercial production for Radial
Tyres on March 25, 2011 at Halol Plant near Vadodara, Pre-Operative
expenditure of Rs. 76,21.06 lacs has been capitalised on various Fixed
Assets which are put to use
4) Exchange Differences recognised in Profit and Loss Account Net
foreign exchange gain recognised in Profit and Loss Account isRs. 6,18.80
lacs (Previous year lossRs. 1,75.36 lacs) out of which Rs. 81.84 lacs loss
(Previous year loss Rs. 6,35.28 lacs) has been shown separately whereas
net gain of Rs. 7,00.64 lacs (Previous year gain Rs. 4,59.92 lacs) are
included under appropriate heads of items in Profit and Loss accounts
5) Retirement Benefits
The required disclosure underthe Revised Accounting Standard 15 is
given below Brief description: The type of Defined benefit plans is as
follows
Gratuity
The employees Gratuity Fund Scheme managed by Life Insurance
Corporation of India is a defined benefit plan. The present value
obligation is determined based on actuarial valuation using projected
unit credit method
Leave Encashment
The present value obligation of Leave Encashment is determined based on
actuarial valuation using projected unit credit method
ix) The contribution expected to be paid to the Gratuity fund during
the annual period beginning afterthe Balance Sheet date isRs.8,21.18 lacs
(PreviousyearRs. 8,84.76 lacs).
x) Long term liability includesRs. 61.32 lacs (Previous yearRs. 70.56 lacs)
on account of Compensated Sick Leave absences
6) Micro and Small Scale Business Entities:
There are no Micro and Small Enterprise, to whom the Company owes dues,
which are outstanding for more than 30 days as at March 31, 2011. This
information as required to be disclosed underthe Micro, Small and
Medium Enterprise Development Act, 2006 has been determined to the
extent such parties have been identified on the basis of nformation
available with the Company. This has been relied upon by the Auditors
7) Disclosure of related parties/related party transactions:
a) Related parties: (As certified by the Management)
i) Enterprises directly/indirectly controlled
- Associated CEAT Holdings Company (Pvt.) Limited
- CEAT-Kelani Associated Holdings Company (Pvt.) Limited (*),
- Associated CEAT (Pvt.) Limited,
- CEAT-Kelani International Tyres (Pvt.) Limited
- Associated CEAT Kelani Radials Limited
- Rado Tyres Limited
ii) Key Management Personnel
- Mr. Paras K. Chowdhary, Managing Director
- Mr. Anant Vardhan Coenka Deputy Managing Director
(*) Indicates no transactions during the year with these related
parties
8) Disclosures as required under clause 32 of listing agreement,
i) Loans and Advances in the nature of Loans to AssociatesRs. Nil
(Previous yearRs. Nil)
i) Loans and Advances in the nature of Loans where there is no
repayment schedule, or no interest or interest below Section 372A of
Companies Act, 1956: Rs. Nil (Previous year Rs. Nil)
ii) Loans and Advances in the nature of Loans to firms / Companies in
which Directors are interested: Rs. Nil (Previous year - Nil)
iv) Investment by the Loan in shares of the Company as at March 31,
2011 is Rs. Nil (Previous yearRs. Nil)
9) Segment Reporting:
Considering the organisation structure, nature of products and risk and
return profile based on geographica distribution, the tyre business is
considered as a single segment
10) Auditor's Remuneration:
Other Services shown in Schedule 17 includes an Amount ofRs. 1.00 lacs
(Previous yearRs. 0.80 lacs) Audit Fees paid to Cost Auditor
11) The Company has allotted 17,12,170 Convertible Warrants of face
value Rs.10 each at a price of Rs. 1,41.44 perwarrant, on September 30,
2010 to the promoters of the Company on a preferential basis (25% of
the price i.e. Rs. 35.36 received by the Company). The warrants are
convertible into an equal number of equity shares at the option of the
allottee within a period of 18 months from the date of allotment (i.e.
before March 31, 2012)
12) Provision for Taxation includes provision for Wealth TaxRs. 6.64 lacs
(Previous yearRs. 9.05 lacs)
13) Previous year's figures have been regrouped wherever necessary to
conform to current Year's classification.
Mar 31, 2010
1. Term loan availed from IDBI Bank Limited of Rs. 6,00.00 lacs
(Previous year Rs 9,00.00 lacs) is secured by first pari passu charge
on Fixed Assets of the Company situated at Bhandup and Nasik plants,
both present and future.
2. ECB loan availed from ICICI Bank Limited of USD 6.00 million
(Previous year USD 8.00 million ) equivalent to Rs. 27,57.00 lacs
(Previous year Rs. 36,76.00 lacs ) is secured by first pari passu
charge on all movable and immovable properties of the Company situated
at Bhandup and Nasik plants, both present and future.
3. ECB loan availed from ICICI Bank Limited of USD 12.50 million
(Previous year USD 12.50 million ) equivalent to Rs. 57,65.50 lacs
(Previous year Rs. 60,70.19 lacs) is secured by a first pari passu
charge on the Fixed Assets of the Company situated at Bhandup, Nasik
and Halol, Gujarat both present and future. The company is in the
process of creating the charge on its immovable properties located at
Bhandup, Nasik and Halol, Gujarat.
4. Term Loan availed from Yes Bank of Rs.33,33.33 lacs has been fully
paid off during the year. Pursuant to the repayment, the charge created
for the term loan has been satisfied.
5. Term Loan availed from Exim Bank of Rs. 37,50.00 lacs (Previous
year Rs.50,00.00 lacs) and Corporation Bank of Rs.43,75.00 lacs
(Previous year Rs. 50,00.00 lacs) has been secured by a first pari
passu charge on the immovable property of the Company situated at CEAT
Mahal, Worli, Mumbai.
6. Project Term loan availed from Bank of India of Rs. 20,00.00 lacs
(Previous year Rs.Nil), Bank of Baroda of Rs. 20,00.00 lacs (Previous
year Rs.Nil) and IDBI of Rs. 2,49.03 lacs (Previous year Rs.Nil) is
secured by a first pari passu charge on the immovable and movable
properties of the Company situated at Bhandup, Nasik and Halol, Gujarat
both present and future. The Company has created charge on the movable
Fixed Assets of the Company in favour of Bank of India and IDBI Bank
Ltd. The Company is in the process of creating the charge on its
immovable properties located at Bhandup, Nasik and Halol, Gujarat.
7. Working Capital facilities availed from Consortium of Banks led by
Bank of India are secured by hypothecation of first pari passu charge
on Inventories and Book debts and by second pari passu charge on
immovable properties of the Company situated at Bhandup, Nasik plants
and CEAT Mahal property at Worli. The Company is in process of creating
the second pari - passu charge on immovable properties situated at
Halol, Gujarat.
8. The vehicle loans availed from Banks and Financial Companies are
secured by way of hypothecation of the vehicles financed by them.
9) Operating Lease
The Company has entered into a sale and lease back agreement with the
leasing company for vehicles, resulting in a non- cancellable operating
lease as defined in "AS 19" (Leases).
Lease rental on the said lease of Rs.2,56.91 Lacs (Previous year
Rs.1,14.30 Lacs) has been charged to Profit and Loss Account.
10) Exchange Differences recognised in Profit and Loss Account
Net foreign exchange loss recognised in Profit and Loss Account is Rs.
1,75.36 Lacs out of which Rs.6,35.28 Lacs loss has been shown
separately whereas net gain of Rs. 4,59.92 Lacs are included under
appropriate heads of items in Profit and Loss accounts.
11) Retirement Benefits
The required disclosure under the Revised Accounting Standard 15 is
given below
Brief description: The type of Defined benefit plans is as follows.
Gratuity
The Employees Gratuity Fund Scheme managed by Life Insurance
Corporation of India is a defined benefit plan. The present value
obligation is determined based on actuarial valuation using Projected
Unit Credit Method.
Leave Encashment
The present value obligation of Leave Encashment is determined based on
actuarial valuation using Projected Unit Credit Method.
12) Micro and Small Scale Business Entities:
There are no Micro and Small Enterprise, to whom the Company owes dues,
which are outstanding for more than 45 days as at March 31, 2010. This
information as required to be disclosed under the Micro, Small and
Medium Enterprise Development Act, 2006 has been determined to the
extent such parties have been identified on the basis of information
available with the Company. This has been relied upon by the Auditors.
13) Disclosure of related parties/related party transactions:
a) Related parties: (As certified by the Management) (i) Related
parties:
Associated CEAT Holdings Company (Pvt.) Limited
- CEAT-Kelani Associated Holdings Company (Pvt.) Limited (*),
- Associated CEAT (Pvt.) Limited,
- CEAT-Kelani International Tyres (Pvt.) Limited,
- Associated CEAT Kelani Radials Limited
- RadoTyres Limited. (ii) Key Management Personnel:
- Mr. Paras K. Chowdhary, Managing Director
- Mr. Anant Vardhan Goenka, Deputy Managing Director
(*) Indicates no transactions during the year with these related
parties.
14) Disclosures as required under clause 32 of listing agreement.
i) Loans and Advances in the nature of Loans to Associates Rs. Nil
(Previous year Rs. Nil)
ii) Loans and Advances in the nature of Loans where there is no
repayment schedule, or no interest or interest below Section 372A of
Companies Act, 1956: Rs. Nil (Previous year Rs.Nil)
iii) Loans and Advances in the nature of Loans to firms / Companies in
which Directors are interested: Rs. Nil (Previous year Rs.Nil)
iv) Investment by the Loaneein shares of the Company as at March
31,2010 is Nil.
15) Segment Reporting:
Considering the organisation structure, nature of products and risk and
return profile based on geographical distribution, the tyre business is
considered as a single segment.
16) Earnings Per Share (EPS):
2009-10 2008-09
a) Weighted Average Number of shares at the beginning and end of the
year 342,43,534 342,43,534
b) Net Profit/(Loss) afterTax available for Equity Shareholders (Rupees
in Lacs) 161,04.15 (16,11.17)
c) Face value per share (Rupees) 10 10
d) Basic and Diluted Earnings Per Share (Rupees) 47.03 (4.71)
17) Auditors Remuneration:
Other Services shown in Schedule 17 includes an Amount of Rs.0.80 lacs
(Previous year Rs.0.80 lacs) Audit Fees paid to Cost Auditor.
18) Provision for Taxation includes provision for Wealth Tax Rs. 9.05
lacs (Previous year Rs.9.94 lacs)
19) Previous years figures have been regrouped wherever necessary to
conform to current years classification.
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