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Notes to Accounts of Elgi Equipments Ltd.

Mar 31, 2023

i) Property, plant and equipment pledged as security

Refer note 47 for information on property, plant and equipment pledged as security by the company.

ii) Contractual obligations

Refer to note 44(a) for disclosure of contractual commitments for the acquisition of property, plant and equipment.

iii) Details of benami property held

No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.

iv) Title deeds of immovable properties not held in name of the company

The title deeds of all the immovable properties (other than properties where the company is the lessee and the lease agreements are duly executed in favour of the lessee), as disclosed in note 3(a) and 4 to the financial statements, are held in the name of the company.

The title to the properties in Arasur Village are held in the name of the Company as per the title deeds. In these properties, a portion in SF No-100/1 was incorrectly claimed by an individual and a connected litigation filed by him was dismissed in the Companyâs favour. The Company has now initiated action for removing the Individualâs name from the sub registrarâs records.

v) Capital work-in-progress

Capital work-in-progress mainly comprises of additions to plant & machinery under construction.

3(b) Right of use assets and Lease liabilities

This note provides information for leases where the Company is a lessee.

The Company leases various offices and warehouses. Rental contracts are typically made for fixed periods of 11 months to 7 years.

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor.

i) Amounts recognised in the balance sheet

The balance sheet shows following amounts relating to leases:

(iii) Cash outflow

The total cash outflow for leases is '' 24.31 million and '' 22.54 million for the year ended March 31, 2023 and March 31, 2022, respectively.

(iv) Extension and termination options

Extension and termination options are included in a number of property leases. The majority of extension and termination options held are exercisable only by the Company and not by respective lessor.

(v) Critical judgements in determining lease term:

In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

Estimation of Fair Value

The Company obtained independent valuations for its investment properties. The best evidence of fair value is current prices in an active market for similar properties. Where such information is not available, the Company considers information from a variety of sources including:

â¢ current prices in an active market for properties of different nature or recent prices of similar properties in less active markets, adjusted to reflect those differences,

â¢ discounted cash flow projections based on reliable estimates of future cash flows,

â¢ capitalised income projections based upon a propertyâs estimated net market income, and a capitalisation rate derived from an analysis of market evidence.

The fair values of investment properties have been determined by âS. Pichaiya & associatesâ, who is a registered valuer as defined under rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017. The main inputs used are the rental growth rates, expected vacancy rates, terminal yields and discount rates based on comparable transactions and industry data. All resulting fair value estimates for investment properties are included in level 3.

(iii) Leasing arrangements

The investment properties are leased to tenants under operating leases with rentals payable monthly. Lease income from operating leases where the group is a lessor is recognised in income on a straight-line basis over the lease term.

The Company assesses the indicators of impairment of investments in subsidiaries and joint ventures as per the requirement of Ind AS 36 at least on an annual basis. The carrying value of investments (including guarantees) being less than the networth of the subsidiary is an indicator of potential impairment. The Company has performed detailed impairment assessment and concluded that there is no impairment of carrying value of investments.

Disclosure required as per Section 186

The company has advanced loans to its subsidiary-Elgi Compressors USA Inc. to fund the business acquisition and additional working capital requirements. The loans are repayable by March 31, 2025 and carry interest rates which are at par with the prevailing market rates.

The Company has complied with the number of layers prescribed under the Companies Act, 2013.

Terms and rights attached to equity shares:

The Company has one class of equity shares having a par value of '' 1/- per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in the case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding. During the year ended March 31, 2023, the amount of Final dividend per share recognised as distributions to equity shareholders is '' 1.15 per share (March 31, 2022: '' 0.80 per share).

On September 28, 2020, the Company allotted bonus equity shares of '' 1/- each, credited as fully paid up equity shares to the holders of the existing equity shares of the Company in the proportion of one equity share of the Company for every one existing equity shares of the Company, by way of capitalizing a part of the securities premium account of the Company.

Also, the calculation of basic and diluted earnings per share for all periods presented are adjusted retrospectively for the above-mentioned bonus issue.

Nature and purpose of other reserves

Capital reserve

Represents profit of a capital nature which is not available for distribution as dividend.

Securities premium

Securities premium is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.

Statutory reserve

Represents reserve created for statutory purpose not available for distribution as dividend.

General reserve

This is available for distribution to shareholders.

Retained earnings

Companyâs share of cumulative earnings since its formation minus the dividends/capitalisation and earnings transferred to general reserve.

Share options outstanding account

The share options outstanding account is used to recognise the grant date fair value of options issued to employees under Elgi Equipments Limited Employee Stock Option Plan, 2019.

FVOCI Equity investments

The Company has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVOCI equity investments reserve within equity. The Company transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.

Secured borrowings and assets pledged as security:

a) The packing credit loans from Bank are secured by a charge on stocks and receivables of the Company and a pari passu charge on specific land & building of the Company.

Also refer note 47 for value of assets pledged as security.

b) The packing credit loans from Bank are repayable within 180 days from the date of borrowing. The borrowings carry an interest rate linked to Repo rate/T-bills plus agreed spread after reduction of eligible interest subsidy under Interest Equalisation Scheme of Reserve Bank of India.

c) There are no defaults in the repayments of above borrowings during the year. Also refer note 47 for undrawn facilities secured by charges on assets.

d) The borrowings obtained by the company from banks and financial institutions have been applied for the purposes for which such loans were taken.

e) The Company has not been declared as a wilful defaulter by any bank or financial institution or government or any government authority.

(i) Information about individual provisions and significant estimates Provision for Warranty

Provision is made for estimated warranty claims in respect of products sold which are still under warranty at the end of the reporting period. These claims are expected to be settled in the next financial year and therefore the time value of money not being material, no adjustment has been warranted. Management estimates the provision based on historical warranty claim information and any recent trends that may suggest future claims could differ from historical amounts.

(i) Leave obligations

The leave obligations cover the Companyâs liability for earned leave and sick leave.

a) The total provision for compensated absences amounts to '' 113.06 million and '' 90.57 million for March 31, 2023 & March 31, 2022 respectively.

The provision amount of '' 25.24 million (March 31, 2022: '' 20.98 million) is presented as current, since the Company expects to settle the full amount of current leave obligation in the next 12 months.

The above total provision includes sick leave provision amounting to '' 21.66 million and '' 11.51 million for year ended March 31, 2023 and March 31, 2022, respectively.

Out of the total sick leave provision, the provision amount of '' 4.07 million (March 31, 2022: '' 2.13 million) is presented as current, calculated based on expected availment by the employees within next 12 months.

(ii) Defined contribution plans Provident Fund:

The Company also has certain defined contribution plans. Contributions are made to provident fund in India for employees at the rate of 12% of basic salary as per regulations. The contributions are made to registered provident fund administered by the government. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation.

Superannuation Fund:

The Company contributes a percentage of eligible employees salary towards superannuation fund administered by Elgi Equipments Superannuation Fund and managed by Life Insurance Corporation of India.

The expense recognised during the period towards defined contribution plan is '' 90.65 million (March 31, 2022 -'' 85.43 million).

(iii) Post-employment benefit obligations - Gratuity

The Company provides for gratuity for employees in India as per the payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of Gratuity payable on retirement/ termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity is a funded plan and the Company makes contribution to recognised fund in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (Present Value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

The expected rate of return on assets is determined based on the assessment made at the beginning of the year on the return expected on its existing portfolio, along with the estimated increment to the plan assets and expected yield on the respective assets in the portfolio during the year.

(vii) Risk exposure

The Company operates the Gratuity Plan through Elgi Equipments Gratuity Fund, which invests in Life Insurance Corporation of India.

Asset Volatility: A large portion of the investment made by the LIC is in government bonds and securities and other approved securities. Hence, the Company is not exposed to the risk of asset volatility as at the balance sheet date.

Changes in bond yield: A decrease in bond yield will increase plan liabilities, although this will be partially offset by an increase in value of planâs bond holdings.

Inflation Risk: In the pension plans, the pensions in the payment are not linked to inflation, so this is a less material risk.

*excluding investments in subsidiaries and joint ventures, carried at cost less impairment losses aggregating to INR 1,705.90 million (March 31, 2022 - INR 1,705.90 million).

The equity securities are not held for trading; the Company has made an irrevocable election at initial recognition to recognise changes in fair value through OCI rather than profit or loss as these are strategic investments and the Company considers this to be more relevant.

(i) Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This consists of listed equity instruments, that have quoted price. The fair value of all equity instruments which are traded in the stock exchanges is valued using the closing price as at the reporting period.

Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. Investment in unquoted equity instrument (First Energy TN1 Pvt Ltd), pursuant to power purchase arrangement, is determined to have cost as an appropriate measure of fair value due to restriction to sell at face value.

There are no transfers between level 1, level 2 and level 3 during the year.

The companyâs policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

(ii) Valuation technique used to determine fair value

Specific valuation techniques used to value financial instruments include:

â¢ the use of quoted market prices or dealer quotes for similar instruments

â¢ the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date

â¢ the fair value of the remaining financial instruments is determined using discounted cash flow analysis.

The carrying amounts of trade receivables, trade payables, dealer deposits, cash and bank balances, deposits with financial institutions, loans to subsidiaries, borrowings and other current financial liabilities and financial assets are considered to be the same as their fair values, due to their short-term nature.

The fair values for loan to subsidiaries, loans to employees were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counter party credit risk. The security deposits are payable on demand and hence their carrying amount is considered as fair value.

For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

The Companyâs risk management is carried out by treasury department under policies approved by the Board of Directors. Company''s treasury identifies, evaluates and hedges financial risks in close co-operation with the companyâs operating units. The board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and nonderivative financial instruments, and investment of excess liquidity.

(A) Credit risk

Credit risk arises from cash and cash equivalents, favourable derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers including outstanding receivables.

(i) Credit risk management

For banks and financial institutions, only high rated banks/institutions are accepted.

The Company assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal and external ratings in accordance with the limits set by the Company. The finance function consists of a separate team who assess and maintain an internal credit rating system. The compliance with the credit limits by customers is regularly monitored by the finance function.

(ii) Security

a) Expected credit loss for loans, security deposits and investments

The entity''s investments and deposits at amortized cost are considered to have low credit risk since they have a low risk of default and the issuer has a strong capacity to meet its contractual cash flow obligations in the near term.

For loans to related parties and employees, the Company considers the probability of default upon initial recognition of loan and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk, the Company compares the risk of a default occurring on the loan as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forward-looking information. The following indicators are considered:

â¢ internal credit rating

â¢ actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrowerâs ability to meet its obligations

â¢ actual or expected significant changes in the operating results of the borrower

â¢ significant increase in credit risk on other financial instruments of the same borrower

â¢ macroeconomic information (such as market interest rates or growth rates)

The resultant internal credit rating for loans, deposits and investments is C1. The entity has estimated the 12-month expected credit loss in this scenario and the estimated gross carrying amount at default is '' Nil (March 31, 2022: '' Nil). There is no expected credit loss recognised for the year ended March 31, 2023 and March 31, 2022.

The Company also has provided guarantee for loans availed by subsidiaries (Refer Note 50), for which the Company assesses credit risk by considering the risk of default occuring on the loan to which the guarantee relates i.e., the risk that the specified debtor will default on the contract.

The entity carries out a review of the liquidity and solvency of the subsidiaries to which the guarantee has been provided as part of its strategic business reviews. The entity also corroborates its assessment with the repayments of receivables and loans by the subsidiaries to the entity. Based on the assessment performed, no expected credit loss provision has been made in respect of financial guarantee provided to subsidiaries for the year ended March 31, 2023 and March 31, 2022.

b) Expected credit loss for trade receivables under simplified approach

Customer credit risk is managed by the Company based on the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an internal credit rating system. Outstanding customer receivables are regularly monitored and assessed for its recoverability.

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 maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 12. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers have sufficient capacity to meet the obligations and the risk of default is negligible.

The expected loss rates are based on the payment profiles of sales over a period of 24 months before the reporting date and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables, if any.

Trade receivables and contract assets are written off where there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Company and a failure to make contractual payments for a period of greater than 720 days past due and the same is considered as credit impaired.

Impairment losses on trade receivables are presented as loss allowances under other expenses. Subsequent recoveries of amounts previously written off are credited against the same line item.

The Company has computed the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information.

(B) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Company treasury maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the Companyâs liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows.

The credit facility sanctioned by the banks are subject to renewal every year.

Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time in INR and can be renewed for further period of 1 year.

(ii) Maturities of financial liabilities

The tables below analyse the Companyâs financial liabilities into relevant maturity groupings based on their contractual maturities for:

a. all non-derivative financial liabilities, and

b. net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

(ii) Price risk

The Companyâs exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as fair value through OCI.

To manage its price risk arising from investments in equity securities, the Company diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Company.

The majority of the Company''s equity instruments are publicly traded and are included in the Nifty 50 index. Sensitivity

The table below summarises the impact of increases/decreases of the index on the Companyâs equity and total comprehensive income for the period. The analysis is based on the assumption that the equity index had increased by 5% or decreased by 5% with all other variables held constant, and that all the Companyâs equity instruments moved in line with the index.

Details of Joint Ventures

The Company has 26% interest in Joint venture called Elgi Sauer Compressors Limited which was set up as company together with JP Sauer & Sohn Maschinenbau GMBH in India, to sell compressors and their parts along with rendering engineering services.

The Company has 50% share in Industrial Air Solutions LLP which was set up as Limited liability partnership in India with Mr. Rajeev Sharma, for distribution of products of Elgi Equipments Limited.

The Company through its wholly owned subsidiary Elgi Compressors USA Inc, has set up a joint venture called Evergreen Compressed Air and Vacuum LLC, with Mr. Michael Keim for a share of 50% each. The joint venture is having registered office at Seattle, USA and will be the distributor of products of Elgi Equipments Limited.

The Company through its wholly owned subsidiary Elgi Compressors USA Inc, has set up a joint venture called Compressed Air Solutions of Texas, LLC, with Mr. Bryan Becker for a share of 50% each. The joint venture is a distributor of products for compressed air systems mainly in the state of Texas.

The Company through its wholly owned subsidiary Elgi Compressors USA Inc, has set up a joint venture called PLA Holding Company, LLC, with Mr. Jeffery Brandon Todd for a share of 50% each. The joint venture was formed in the state of North Carolina. PLA Holding Company, LLC, wholly owns Pattons of California, LLC, a California company which is a distributor of products for compressed air systems mainly in the state of California.

The Company through its wholly owned subsidiary Elgi Compressors USA Inc, has set up a joint venture called G3 Industrial Solutions, LLC, with Mr. Chad Gooding and Mr. Luke Johnson for a share of one third for each. The joint venture is a distributor of products for compressed air systems mainly in the states of Kansas city and Missouri.

The Company through its wholly owned subsidiary Elgi Compressors USA Inc, has set up a joint venture called Gentex Air Solutions, LLC, with Mr. James Gery Naico and Mr. Diego Hernandez for a share of one third for each. The joint venture is a distributor of products for compressed air systems mainly in the states of North Carolina.

On March 09, 2023, the Company through its wholly owned subsidiary Elgi Compressors USA Inc, has set up a joint venture called CS Industrial Services, LLC, with Mr. Kevin Melisz and Mr. Jeff Kurczewski for a share of one third for each. The joint venture is a distributor of products for compressed air systems mainly in the states of Western Newyork.

*The above Key management personnel compensation does not include gratuity since the same is computed actuarially for all the employees and amount attributable to key management personnel cannot be ascertained separately and does not include unvested share based payments.

The remuneration paid to the Managing Director amounting to '' 21.05 million and to the Executive Director amounting to '' 4.64 million is in accordance with the provisions of Section 197 read with schedule V to the Companies Act, 2013.

**Subsequent to March 31, 2023, the Board of Directors of the Company''s Subsidiary, ATS Elgi Limited have recommended a dividend of INR 1,050 per fully paid equity share (March 31, 2022 - INR 735). This proposed dividend is subject to the approval of shareholders in the ensuing Annual General Meeting.

(d) Terms and conditions

Transactions relating to dividends, subscriptions for new equity shares were on the same terms and conditions that applied to other shareholders.

All other transactions were made on normal commercial terms & conditions and market rates.

All outstanding balances are unsecured and payable in cash.

42 Share based payments

Employee Stock Option Plan

The establishment of Elgi Equipments Limited Employee Stock Options Plan, 2019 (Elgi ESOP 2019) was approved by the Board of Directors at its meeting held on December 16, 2019 and the shareholders by way of postal ballot on January 31, 2020. The plan shall be administered through a Trust via acquisition of the equity shares from the secondary market.

The Elgi ESOP 2019 plan is designed to provide benefits to the eligible employees of the company and its subsidiaries. Under the plan, the participants are granted options which vest upon completion of three years of service from the grant date. Participation in the plan is at the boardâs discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits.

Once vested, the options remain exercisable for a period of three months.

(i) Fair value of options granted

a) Grant 1 (307,600 Shares) dated March 06, 2020:

The fair value at grant date of options granted during the year ended March 31, 2020 is '' 27.71 per option after allotment of bonus shares. The fair value of these options before bonus issue were '' 55.42. The fair value at grant date is independently determined using the Black-Scholes Model which takes into account the exercise price, the term of the option, the share price at the grant date and expected volatility of the underlying share, the expected dividend yield and the risk-free rate for the term of the option.

The model inputs for the options granted during the year ended March 31, 2020 included:

a. Options are granted for no consideration and vest upon completion of service for a period of three years. Vested options are exercisable for a period of three months after vesting.

b. Exercise price: '' 200.05

c. Grant date: March 06, 2020

d. Expiry date: June 05, 2023

e. Share price at grant date: '' 201.65

f. Expected price volatility of the company''s shares: 30.45%

g. Expected dividend yield: 0.82% (determined based on latest dividend declared at '' 1.65 per share as on valuation date)

h. Risk-free interest rate: 5.48%

The expected volatility is calculated using market data for stock prices of ELGi. (Source: Bloomberg)

b) Grant 2 (474,300 Shares) dated August 03, 2021:

The fair value at grant date of options granted during the year ended March 31, 2022 is '' 65.29 per option. The fair value at grant date is independently determined using the Black-Scholes Model which takes into account the exercise price, the term of the option, the share price at the grant date and expected volatility of the underlying share, the expected dividend yield and the risk-free rate for the term of the option.

The model inputs for the options granted during the year ended March 31, 2022 included:

a. Options are granted for no consideration and vest upon completion of service for a period of three years. Vested options are exercisable for a period of three months after vesting.

b. Exercise price: '' 225

c. Grant date: August 03, 2021

d. Expiry date: November 01, 2024

e. Share price at grant date: '' 212.50

f. Expected price volatility of the company''s shares: 40.41%

g. Expected dividend yield: 0.38% (determined based on latest dividend declared at '' 0.80 per share as on valuation date)

h. Risk-free interest rate: 4.98%

The expected volatility is computed using standard deviation of returns of the share prices, for the term equal to residual maturity of the option life.

c) Grant 3 (152,600 Shares) dated September 26, 2022:

The fair value at grant date of options granted during the year ended March 31, 2023 is '' 189.46 per option. The fair value at grant date is independently determined using the Black-Scholes Model which takes into account the exercise price, the term of the option, the share price at the grant date and expected volatility of the underlying share, the expected dividend yield and the risk-free rate for the term of the option.

The model inputs for the options granted during the year ended March 31, 2023 included:

a. Options are granted for no consideration and vest upon completion of service for a period of three years. Vested options are exercisable for a period of three months after vesting.

b. Exercise price: '' 450

c. Grant date: September 26, 2022

d. Expiry date: December 25, 2025

e. Share price at grant date: '' 421.45

f. Expected price volatility of the company''s shares: 60.50%

g. Expected dividend yield: 0.27% (determined based on latest dividend declared at ''1.15 per share as on valuation date)

h. Risk-free interest rate: 7.34%

The expected volatility is computed using standard deviation of returns of the share prices, for the term equal to residual maturity of the option life.

43 Contingent liabilities and contingent assets

Contingent liabilities

(a) Claims against the Company not acknowledged as debts

(i) The company has disputed demands for excise duty, service tax and sales tax and other matters amounting to '' 17.87 million and '' 16.08 million as on March 31, 2023 and March 31, 2022 respectively. The company has deposited '' 2.83 million and '' 2.24 million against the above mentioned disputes as on March 31, 2023 and March 31, 2022, respectively.

The Company has filed appeals with appropriate authorities of Central Excise and Sales Tax Department against their claims.

(ii) The Company had deposited a sum of '' 18.80 million with Railways department of the Government of India in respect of a Road Under Bridge (RUB) project undertaken by the Railways near the Companyâs factory at Kodangipalayam village. As Railways had planned for a Limited Use Subway and as the RUB project undertaken would benefit the public at large, the deposit was made as directed by the Madras High Court as an interim measure, pending finality as to whether the Company has to bear the full cost or only the differential cost. The Company received an unfavourable order on June 03, 2020 from the single judge of the Madras High Court holding that neither party is required to make any payment to the other. The Company filed an appeal against this order before the Division bench and was able to get the stay of the order of the single judge. The Company is reasonably confident of defending the case successfully to a large extent, however, in order to be realistic and out of abundant caution, the Company has decided to make a provision of '' 7.71 Million for the year ended March

31, 2023 based on a possibility that the Company may be requested by the court to bear the incremental cost of the RUB. This provision should not be construed as an admission of liability under any circumstances and has been made purely as an accounting prudence.

(iii) The Company has evaluated the impact of the recent Supreme Court Judgment in case of "Vivekananda Vidyamandir And Others Vs The Regional Provident Fund Commissioner (II) West Bengal" and the related circular (Circular No. C-I/1(33)2019/Vivekananda Vidya Mandir/284) dated March 20, 2019 issued by the Employeesâ Provident Fund Organisation in relation to non-exclusion of certain allowances from the definition of "basic wages" of the relevant employees for the purposes of determining contribution to provident fund under the Employees'' Provident Funds & Miscellaneous Provisions Act, 1952. In the assessment of the management, the aforesaid matter is not likely to have a significant impact and accordingly, no provision has been made in these Financial Statements.

(iv) The Company received a summon during the latter part of the year from an appropriate authority under Foreign Exchange Management Act, 1999 (''FEMA'') seeking information primarily relating to imports and exports including transactions pertaining to earlier years. The Company has been submitting the relevant information and believes that it can provide additional information as needed to address the queries raised in the summon. In the management''s assessment, any consequential fee under the said Act, for the aforesaid matter is not likely to have a significant impact on the financial statements as of and for the year ended March 31, 2023.

43A The Company has received whistle-blower complaints during the year and based on the preliminary findings in relation to certain complaints and in the assessment of the management, there is no impact on the financial statements and the related internal controls as of March 31, 2023.

44 Commitments

(a) Capital commitments

Capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:

Particulars	March 31, 2023	March 31, 2022
Estimated amount of contracts remaining to be executed on capital account	210.22	166.26

(i) Borrowing secured against current assets

The Company has working capital limits from banks and financial institutions received on the basis of security of current assets.

The quarterly returns or statement of current assets filed by the Company with banks and financial institutions are in agreement with the books of accounts.

(ii) Utilisation of borrowed funds and share premium

The Company has 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 entity(ies) 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

The Company has 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 group 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

(iii) Registration of charges or satisfaction with Registrar of Companies

There are no charges or satisfaction which are yet to be registered with the Registrar of Companies beyond the statutory period.

Nature & purpose of loans and guarantees:

(i) The Company has advanced loan and provided guarantee to its subsidiaries- Elgi Compressors USA Inc. and Industrial Air Compressors Pty Ltd. to fund the business acquisition and additional working capital requirements. The guarantees provided to Elgi Compressors Europe S.R.L- Belgium is for the purpose of meeting working capital requirements and Elgi Compressors France SAS is for incurring capital expenditure.

(ii) The loans carry interest rates which are at par with the prevailing market rates. These loans are repayable within March 31, 2025.

Notes to the Standalone Financial Statements as at and for the year ended March 31, 2023

(All amounts are in Millions in INR unless otherwise stated)

52 Impact of COVID-19 Pandemic:

The second wave of COVID-19 pandemic posed certain operational and supply chain challenges which impacted the delivery of products and services to our customers in the first quarter of the last financial year. The situation has significantly improved since. There is no impact of the pandemic on the Companyâs standalone financial statements for the year ended March 31, 2023.

53 Compliance with approved scheme(s) of arrangements:

The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.

54 Relationship with struck off companies

The Company has no transactions with the companies struck off under Companies Act, 2013 or Companies Act, 1956.

Mar 31, 2022

* Computers and allied accessories have been reclassified from Plant & Machinery to Office equipments.

** Disposals of property, plant & equipment which have been carried at Deemed cost from the date of transition to Ind AS (April 01, 2015), which were reduced from the Gross carrying amount at original cost are now reduced at Deemed cost with the corresponding change in Accumulated depreciation. There is no change in the net carrying amount of assets.

i) Property, plant and equipment pledged as security

Refer note 47 for information on property, plant and equipment pledged as security by the company.

ii) Contractual obligations

Refer to note 44(a) for disclosure of contractual commitments for the acquisition of property, plant and equipment.

iii) Details of benami property held

No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.

iv) Title deeds of immovable properties not held in name of the company

v) Capital work-in-progress

Capital work-in-progress mainly comprises of additions to plant & machinery under construction. a) Ageing of Capital work-in-progress

This note provides information for leases where the Company is a lessee.

The Company leases various offices and warehouses. Rental contracts are typically made for fixed periods of 3 months to 8 years.

i) Amounts recognised in the balance sheet

The balance sheet shows following amounts relating to leases:

(iii) Cash outflow

The total cash outflow for leases is '' 22.54 million and '' 25.09 million for the year ended March 31, 2022 and March 31, 2021, respectively.

(iv) Extension and termination options

Extension and termination options are included in a number of property leases. The majority of extension and termination options held are exercisable only by the Company and not by respective lessor.

(v) Critical judgements in determining lease term:

Estimation of fair value

a) For the year ended March 31, 2022, the Company obtained independent valuations for its investment properties. The best evidence of fair value is current prices in an active market for similar properties. Where such information is not available, the Company considers information from a variety of sources including:

â¢ Current prices in an active market for properties of different nature or recent prices of similar properties in less active markets, adjusted to reflect those differences,

â¢ Discounted cash flow projections based on reliable estimates of future cash flows,

â¢ Capitalised income projections based upon a propertyâs estimated net market income, and a capitalisation rate derived from an analysis of market evidence.

b) For the year ended March 31, 2021, the fair values of investment properties were determined with reference to the guideline value as determined by the Government for the location at which the property is located, increased by the depreciated value of buildings. All the resulting fair value estimates of investment properties are included in Level 2. Guideline values were revised by the Government of Tamil Nadu with effect from June 9, 2017.

(iii) Leasing arrangements

Terms and rights attached to equity shares:

The Company has one class of equity shares having a par value of '' 1/- per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in the case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding. During the year ended March 31, 2022, the amount of Final dividend per share recognised as distributions to equity shareholders is '' 0.80 per share (March 31, 2021 '' Nil).

Also, the calculation of basic and diluted earnings per share for all periods presented are adjusted retrospectively for the above-mentioned bonus issue.

Nature and purpose of other reserves

Capital reserve

Represents profit of a capital nature which is not available for distribution as dividend.

Securities premium

Securities premium is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of Companies Act, 2013 Statutory reserve

Represents reserve created for statutory purpose not available for distribution as dividend.

General reserve

This is available for distribution to shareholders.

Retained earnings

Companyâs share of cumulative earnings since its formation minus the dividends/capitalisation and earnings transferred to general reserve.

Share options outstanding account

The share options outstanding account is used to recognise the grant date fair value of options issued to employees under Elgi Equipments Limited Employee Stock Option Plan, 2019.

FVOCI Equity investments

The company has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVOCI equity investments reserve within equity. The company transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.

23 Borrowings (Current) (Continued...)

a) The packing credit loans from Bank are repayable within 180 days from the date of borrowing. The borrowings carry an interest rate at six months Repo rate plus agreed spread after reduction of eligible interest subsidy under Interest Equalisation Scheme of Reserve Bank of India.

b) There are no defaults in the repayments of above borrowings during the year. Also refer note 47 for undrawn facilities secured by charges on assets.

c) The borrowings obtained by the company from banks and financial institutions have been applied for the purposes for which such loans were taken.

d) The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.

(i) Information about individual provisions and significant estimates Provision for Warranty

(i) Leave obligations

The leave obligations cover the Companyâs liability for earned leave and sick leave.

a) The total provision for compensated absences amounts to '' 79.07 million and '' 67.73 million for March 31, 2022 & March 31, 2021 respectively.

The provision amount of '' 18.85 million (March 31, 2021: '' 15.09 million) is presented as current, since the company expects to settle the full amount of current leave obligation in the next 12 months.

The above Total provision includes sick leave provision amounts to '' 11.51 million for year ended March 31, 2022.

(ii) Defined contribution plans Provident Fund:

Superannuation Fund:

The company contributes a percentage of eligible employees salary towards superannuation fund administered by Elgi Equipments Superannuation Fund and managed by Life Insurance Corporation of India.

The expense recognised during the period towards defined contribution plan is '' 85.43 million (March 31, 2021 -'' 85.36 million).

(iii) Post-employment benefit obligations - Gratuity

The company provides for gratuity for employees in India as per the payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of Gratuity payable on retirement/ termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity is a funded plan and the company makes contribution to recognised fund in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

(vii) Risk exposure

The Company operates the Gratuity Plan through Elgi Equipments Gratuity Fund, which invests in Life Insurance Corporation of India.

Changes in bond yield: A decrease in bond yield will increase plan liabilities, although this will be partially offset by an increase in value of planâs bond holdings.

Inflation Risk: In the pension plans, the pensions in the payment are not linked to inflation, so this is a less material risk.

The equity securities which are not held for trading, the Company has made an irrecovable election at initial recognition to recognise changes in fair value through OCI rather than profit or loss as these are strategic investments and the Company considers this to be more relevant.

(i) Fair value hierarchy

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for deposits included in level 3.

There are no transfers between level 1, level 2 and level 3 during the year.

The companyâs policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

(ii) Valuation technique used to determine fair value

Specific valuation techniques used to value financial instruments include:

â¢ the use of quoted market prices or dealer quotes for similar instruments

â¢ the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date

â¢ the fair value of the remaining financial instruments is determined using discounted cash flow analysis.

The carrying amounts of trade receivables, trade payables, dealer deposits, cash and bank balances, deposits with financial institutions, current loans to subsidiaries, borrowings and other current financial liabilities and financial assets are considered to be the same as their fair values, due to their short-term nature.

The fair values for non-current loan to subsidiaries, loans to employees were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk. The security deposits are payable on demand and hence their carrying amount is considered as fair value.

For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

The companyâs risk management is carried out by a central treasury department under policies approved by the board of directors. Companyâs treasury identifies, evaluates and hedges financial risks in close co-operation with the companyâs operating units. The board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

(a) Credit risk

(i) Credit risk management

For banks and financial institutions, only high rated banks/institutions are accepted.

(ii) Security

For some trade receivables, the Company may obtain security in form of guarantees, deeds of undertaking or letter of credit, which can be called upon if counter party is in default under the terms of the agreement. However, the Company has not obtained any such securities for its trade receivables outstanding at the reporting date.

(iii) Impairment of financial assets

The company assigns the following internal credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of the financial asset. The Company provides for expected credit loss based on the following:

a) Expected credit loss for loans, security deposits and investments

The estimated gross carrying amount at default is '' Nil (March 31, 2021: '' 541.20 million) for Investments and loans and deposits. There is no expected credit loss recognised for the year ended March 31, 2022 and March 31, 2021.

b) Expected credit loss for trade receivables under simplified approach

Customer credit risk is managed by the Company based on the Companyâs established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an internal credit rating system. Outstanding customer receivables are regularly monitored and assessed for its recoverability.

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 maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 12. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers has sufficient capacity to meet the obligations and the risk of default is negligible.

(b) Liquidity risk

The credit facility sanctioned by the banks are subject to renewal every year.

Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time in INR and can be renewed for further period of 1 year.

(ii) Maturities of financial liabilities

The tables below analyse the Companyâs financial liabilities into relevant maturity groupings based on their contractual maturities for:

a) all non-derivative financial liabilities, and

b) net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

(c) Market risk

(i) Foreign currency risk

The company operates internationally and is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the USD, EUR and AUD. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the companyâs functional currency (INR). The risk is measured through a forecast of highly probable foreign currency cash flows. The risk is managed by the Company by entering into Forward Contracts.

(ii) Price risk

The Companyâs exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as fair value through OCI.

Sensitivity

Details of Joint Ventures

The Company has 50% share in Industrial Air Solutions LLP which was set up as Limited liability partnership in India with Mr. Rajeev Sharma, for distribution of products of Elgi Equipments Limited.

The Company through its wholly owned subsidiary Elgi Compressors USA Inc, has set up a joint venture called Compressed Air Solutions of Texas, LLC, with Mr.Bryan Becker for a share of 50% each. The joint venture is a distributor of products for compressed air systems mainly in the state of Texas.

The Company through its wholly owned subsidiary Elgi Compressors USA Inc, has set up a joint venture called G3 Industrial Solutions, LLC, with Mr.Chad Gooding and Mr.Luke Johnson for a share of one third for each. The joint venture is a distributor of products for compressed air systems mainly in the states of Kansas city and Missouri.

In July 2021, the Company through its wholly owned subsidiary Elgi Compressors USA Inc, has set up a joint venture called Gentex Air Solutions, LLC, with Mr. James Gery Naico and Mr. Diego Hernandez for a share of one third for each. The joint venture is a distributor of products for compressed air systems mainly in the states of North Carolina.

Details of Joint Operations

The company has 98% interest in a joint arrangement called L.G. Balakrishnan & Bros (Firm) which was set up as partnership firm in India together with Elgi Ultra Industries Limited to earn rental income.

The company has 80% interest in a Joint arrangement called Elgi Services which was set up as partnership firm in India together with Elgi Ultra Industries Limited.

42 Share based payments

Employee Stock Option Plan

Once vested, the options remain exercisable for a period of three months.

Options are granted under the plan for no consideration and carry no dividend or voting rights. When exercisable, each option is convertible into one equity share.

(i) Fair value of options granted

a) Grant 1 (307,600 Shares) dated March 06,2020:

The fair value at grant date of options granted during the year ended March 31, 2020 is '' 27.71 per option after allotment of bonus shares. The fair value of these options before bonus issue were '' 55.42. The fair value at grant date is independently determined using the Black-Scholes Model which takes into account the exercise price, the term of the option the share price at the grant date and expected volatility of the underlying share, the expected dividend yield and the risk-free rate for the term of the option.

The model inputs for the options granted during the year ended March 31, 2020 included:

a) Options are granted for no consideration and vest upon completion of service for a period of three years. Vested options are exercisable for a period of three months after vesting.

b) Exercise price: '' 200.05

c) Grant date: March 06, 2020

d) Expiry date: June 05, 2023

e) Share price at grant date: '' 201.65

f) Expected price volatility of the companyâs shares: 30.45%

g) Expected dividend yield: 0.82% (determined based on latest dividend declared at '' 1.65 per share)

h) Risk-free interest rate: 5.48%

The expected volatility is calculated using market data for stock prices of ELGI. (Source: Bloomberg)

b) Grant 2 (474,300 Shares) dated August 03, 2021:

The fair value at grant date of options granted during the year ended March 31, 2022 is '' 65.29 per option. The fair value at grant date is independently determined using the Black-Scholes Model which takes into account the exercise price, the term of the option the share price at the grant date and expected volatility of the underlying share, the expected dividend yield and the risk-free rate for the term of the option.

The model inputs for the options granted during the year ended March 31, 2022 included:

a) Options are granted for no consideration and vest upon completion of service for a period of three years. Vested options are exercisable for a period of three months after vesting.

b) Exercise price: '' 225

c) Grant date: August 03, 2021

d) Expiry date: September 16, 2024

e) Share price at grant date: '' 212.50

f) Expected price volatility of the companyâs shares: 40.41%

g) Expected dividend yield: 0.38% (determined based on latest dividend declared at '' 0.80 per share)

h) Risk-free interest rate: 4.98%

The expected volatility is computed using standard deviation of returns of the share prices, for the term equal to residual maturity of the option life.

43 Contingent liabilities and contingent assets

Contingent liabilities

(a) Claims against the Company not acknowledged as debts

(i) The company has disputed demands for excise duty, service tax and sales tax and other matters amounting to '' 16.08 million and '' 54.42 million as on March 31, 2022 and March 31, 2021 respectively. The company has deposited '' 2.24 million and '' 44.08 million against the above mentioned disputes as on March 31, 2022 and March 31, 2021, respectively.

The Company has filed appeals with appropriate authorities of Central Excise and Sales Tax Department against their claims.

(ii) The Company had deposited a sum of '' 18.80 million with Railways department of the Government of India in respect of a Road Under Bridge (RUB) project undertaken by the Railways near the Companyâs factory at Kodangipalayam village. As Railways had planned for a Limited Use Subway and as the RUB project undertaken would benefit the public at large, the deposit was made as directed by the Madras High Court as an interim measure, pending finality as to whether the Company has to bear the full cost or only the differential cost. The Company received an unfavourable order on June 03, 2020 from the single judge of the Madras High Court holding that neither party is required to make any payment to the other. The Company filed an appeal against this order before the Division bench and was able to get the stay of the order of the single judge. As the Company is reasonably confident of defending the case successfully to a large extent, no provision has been made in the books of account yet.

(iii) The Company has evaluated the impact of the recent Supreme Court Judgment in case of âVivekananda Vidyamandir And Others Vs The Regional Provident Fund Commissioner (II) West Bengalâ and the related circular (Circular No. C-I/1(33)2019/Vivekananda Vidya Mandir/284) dated March 20, 2019 issued by the Employeesâ Provident Fund Organisation in relation to non-exclusion of certain allowances from the definition of âbasic wagesâ of the relevant employees for the purposes of determining contribution to provident fund under the Employeesâ Provident Funds & Miscellaneous Provisions Act, 1952. In the assessment of the management, the aforesaid matter is not likely to have a significant impact and accordingly, no provision has been made in these Financial Statements.

*The differences are primarily due to non-consideration of general ledger adjustments such as customer advances, other unadjusted credits and cut off adjustments which have a decreasing effect on the balances reported. This is partially offset by non-consideration of goods in transit, loose tools, spares, provisions for both inventory and book debts and overhead valuation adjustments.

(ii) Utilisation of borrowed funds and share premium

The Company has 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.

The Company has 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 group 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.

(iii) Registration of charges or satisfaction with Registrar of Companies

There are no charges or satisfaction which are yet to be registered with the Registrar of Companies beyond the

statutory period.

Nature & purpose of loans and guarantees:

(i) The Company has advanced loan and provided guarantee to its subsidiaries-Elgi Compressors USA Inc. and Industrial Air Compressors Pty Ltd. to fund the business acquisition and additional working capital requirements. The guarantees provided to Elgi Compressors Europe S.R.L-Belgium is for the purpose of meeting working capital requirements and Elgi Compressors France SAS is for incurring capital expenditure.

(ii) The loans carry interest rates which are at par with the prevailing market rates. These loans are repayable as follows, Elgi Compressors USA Inc. - USA - repayable within March 31, 2025

52 Impact of COVID-19 Pandemic:

The spread of COVID-19 impacted businesses around the globe from March 2020 onwards. The situation is constantly evolving and Governments in certain states imposed various restrictions during the previous year and also during certain parts of the current year. The restrictions are being relaxed globally with growing rate of vaccination.

As at March 31, 2022, the Company has made detailed assessment of its liquidity position for the next one year and of the recoverability and carrying values of its assets comprising Property, plant and equipment, Intangible assets, Trade receivables, Inventory and Investments and has concluded that were are no material adjustments required in the standalone financials results.

The Company will continue to monitor any material changes to the future economic conditions.

53 Compliance with approved scheme(s) of arrangements:

The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.

54 Relationship with struck off companies

The Company has no transactions with the companies struck off under Companies Act, 2013 or Companies Act, 1956.

55 Previous year figures have been regrouped/reclassified to conform to current yearâs classification.

Mar 31, 2018

General Information

Elgi Equipments Limited (âthe Companyâ) is engaged in manufacturing of air compressors. The Company has manufacturing plants in different locations in India and has its registered office in Coimbatore.

The Company is a public limited company and listed on both the Bombay Stock Exchange and the National Stock Exchange.

1 Critical estimates and judgements

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Companyâs accounting policies.

This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.

Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.

Estimation of fair value

a) The fair values of investment properties have been determined with reference to the guideline value as determined by the Government for the location at which the property is located, increased by the depreciated value of buildings. All the resulting fair value estimates of investment properties are included in Level 2.

b) Guideline values has been revised by the Government of Tamil Nadu with effect from June 9, 2017.

There are no repatriation restrictions with regard to cash and cash equivalents as at the end of the reporting period and prior periods except in respect of balances in unclaimed dividend account.

^Earmarked for payment of unclaimed dividend

Disclosure required as per Section 186

The company has advaced loans to its subsidiaries to meet their working capital requirements. The loans carry interest rates which are at par with the prevailing market rates (refer note 41 & 51)

Terms and rights attached to equity shares:

The Company has one class of equity shares having a par value of Rs.1/- per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding. During the year ended March 31, 2018, the amount of dividend per share recognized as distributions to equity shareholders is Re. 1/- (March 31, 2017: Re. 1/-).

Nature and purpose of other reserves Capital reserve

Represents profit of a capital nature which is not available for distribution as dividend.

Securities Premium

Securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.

Statutory reserve

Represents reserve created for statutory purpose not available for distribution as dividend.

General reserve

This is available for distribution to shareholders.

Retained earnings

Companyâs share of cumulative earnings since its formation minus the dividends/capitalisation and earnings transferred to general reserve.

Treasury stock

Represents the purchase value of shares of the Company held by its joint operations.

FVOCI equity investments

Secured borrowings and assets pledged as security:

(a) The borrowings from banks as at March 31, 2018 and March 31, 2017 are secured by charges on assets as disclosed on note 48.

(b) The borrowings of the Company comprise of packing credit facility from Banks. The Borrowings from Bank are repayable within 180 days from the date of borrowing and carry an interest rate of LIBOR/ EURIBOR plus 30 to 50bps.

There are no defaults in the repayments of above borrowings.

Net debt reconciliation

This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.

( i) Information about individual provisions and significant estimates Provision for Warranty

Provision for Financial Guarantee

The Company has provided financial guarantee to lenders of money to its subsidiaries. In accordance with the expected credit loss model prescribed under Ind AS, the Management had recognised a provision for these guarantees based on its best estimate of the outflow expected to be paid in the event such guarantees are invoked by the respective lenders. These guarantees had been funded during the year.

(ii) Movements in provisions

Movements in each class of provision during the financial year, are set out below: 26 (a) Employee benefit obligations

(i)Leave obligations

The leave obligations cover the Companyâs liability for earned leave.

The total provision for compensated absences amounts to Rs.70.38 million and Rs.72.36 million for March 31, 2018 & March 31, 2017 respectively.

The provision amount of Rs.36.51 million (March 31, 2017: Rs.36.45 million) is presented as current, since the company expects to settle the full amount of current leave obligation in the next 12 months.

(ii) Defined contribution plans

Provident Fund:

Superannuation Fund:

The company contributes a percentage of elgible employees salary towards supernnauation fund administered by Elgi Equipments Superannuation Fund and managed by Life Insurance Corporation of India.

The expense recognised during the period towards defined contribution plan is Rs.68.84 million (March 31, 2017Rs.57.11 million)

(iii) Post-employment benefit obligations - Gratuity

The company provides for gratuity for employees in India as per the payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of Gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity is a funded plan and the company makes contribution to recognised fund in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

(vii) Risk exposure

The Company operates the Gratuity Plan through Elgi Equipments Gratuity Fund which invests in Life Insurance Corporation of India.

Changes in bond yield: A decrease in bond yield will increase plan liabilities, although this will be partially offset by an increase in value of planâs bond holdings.

Inflation Risk: In the pension plans, the pensions in the payment are not linked to inflation, so this is a less material risk.

(viii) Defined benefit liability and employer contributions

The weighted average duration of the defined benefit obligation is 9.52 years (March 31, 2017 - 10.49 years).

The following are the expected benefit payments in future.

Goods and Service Tax (GST) has been effective from July 01, 2017. Consequently, excise duty, value added tax (VAT), service tax etc. have been replaced with GST. Until June 30, 2017, âSale of productsâ included the amount of excise duty recovered on sales. With effect from July 01, 2017, âSale of productsâ, excludes the amount of GST recovered. Accordingly, revenue from âSale of productsâ and âRevenue from operationsâ for the year ended March 31, 2018 are not comparable with those of the previous year.

(i) All dividends from equity investments designated at FVOCI relate to investments held at the end of reporting period. There were no investments derecognised during the reporting period.

(ii) Government grants are related to import duties saved on import of property, plant and equipments. The Company has an export obligation calculated at a specified percentage of duty saved, which has to be fulfilled within a specified period from the date of import.There are no other unfulfilled conditions or contingencies attaching to these grants.

(i) Fair value hierarchy

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for deposits included in level 3.

There are no transfers between levels 1 and 2 during the year.

The companyâs policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

(ii) Valuation technique used to determine fair value

Specific valuation techniques used to value financial instruments include:

-the use of quoted market prices or dealer quotes for similar instruments

-the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date -the fair value of the remaining financial instruments is determined using discounted cash flow analysis.

The carrying amounts of trade receivables, trade payables, cash and bank balances, current loans to employees and subsidiaries, borrowings and other current financial liabilities and financial assets are considered to be the same as their fair values, due to their short-term nature.

The fair values for loans to employees were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk. The security deposits are payable on demand and hence their carrying amount is considered as fair value.

For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to their fair values.

2 Financial risk management

The companyâs activities expose it to market risk, liquidity risk and credit risk.

This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the impact of hedge accounting in the financial statements

(A) Credit risk

Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers including outstanding receivables.

(i) Credit risk management

Credit risk is managed on a company basis. For banks and financial institutions, only high rated banks/institutions are accepted.

For other financial assets, The company assesses and manages credit risk based on internal credit rating system. The finance function consists of a separate team who assess and maintain an internal credit rating system.

Internal credit rating is performed on a company basis for each class of financial instruments with different characteristics. The company assigns the following credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.

C1 : High-quality assets, negligible credit risk

C2 : Doubtful assets, credit-impaired

The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk, the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forward-looking information. Especially the following indicators are included -

- Internal credit rating

- External credit rating (as far as available)

- Actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrowerâs ability to meet its obligations

- Actual or expected significant changes in the operating results of the borrower

- Significant increase in credit risk on other financial instruments of the same borrower

- Significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements

- Significant changes in the expected performance and behaviour of the borrower, including changes in the payment status of borrowers in The company and changes in the operating results of the borrower.

Macro economic information (such as regulatory changes, market interest rate or growth rates) is incorporated as part of the internal rating model.

(ii) Provision for expected credit losses

The Company provides for expected credit loss based on the following:

For the years ended March 31, 2018, March 31, 2017

(a) Expected credit loss for loans, security deposits and investments

The estimated gross carrying amount at default is Rs.552.47 million (March 31, 2017: Rs.538.38 million) for Investments and loans and deposits. Consequently expected credit loss of an amount of Rs.33.75 million for the year ended March 31, 2018 (March 31, 2017: Rs.52.91 million) has been recognised.

(b) Expected credit loss for trade receivables under simplified approach

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 maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 11. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers has sufficient capacity to meet the obligations and the risk of default is negligible.

(iv) Reconciliation of loss allowance provision - Trade receivables

(B) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Company treasury maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the companyâs liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows.

(i) Financing arrangements

The company had access to the following undrawn borrowing facilities at the end of the reporting period:

The credit facility sanctioned by the banks are subject to renewal every year.

Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time in INR and can be renewed for further period of 1 year.

(ii) Maturities of financial liabilities

The tables below analyse the companyâs financial liabilities into relevant maturity groupings based on their contractual maturities for:

a) all non-derivative financial liabilities, and

b) net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

(i) Foreign currency risk

Sensitivity

The sensitivity of profit or loss to changes in the exchange rates arises mainly from foreign currency denominated financial instruments.

(ii) Price risk

The Companyâs exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as fair value through OCI.

Sensitivity

The table below summarises the impact of increases/decreases of the index on the Companyâs equity and profit for the period. The analysis is based on the assumption that the equity index had increased by 5% or decreased by 5% with all other variables held constant, and that all the Companyâs equity instruments moved in line with the index.

Other components of equity would increase/decrease as a result of gains/losses on equity securities classified as fair value though other comprehensive income.

3 Capital management

(a) Risk management

The companyâs objectives when managing capital are to

- provide returns for shareholders and benefits for other stakeholders, and

- maintain an optimal capital structure to reduce the cost of capital.

Consistent with others in the industry, the company monitors capital on the basis of the following gearing ratio:

Net debt (total borrowings net of cash and cash equivalents and bank balances) divided by Total âequityâ (as shown in the balance sheet).

The current gearing ratio of the Company is as follows:

(i) Loan covenants

The company has complied with all the loan covenants throughout the reporting period.

(b) Dividends

(ii) Dividends not recognised at the end of the reporting period

In addition to the above dividends, since year end the directors have recommended the payment of a final dividend of Rs.1.20 per fully paid equity share (March 31, 2017 - Re. 1). This proposed dividend is subject to the approval of shareholders in the ensuing annual general meeting.

4 Related party transactions

(a) Name of the related parties and nature of relationship:

(i) Where control exists:

Subsidiaries

Details of Joint Ventures

The company has 50 % share in Industrial Air Solutions LLP which was set up as a limited liability partnership in India with Mr Rajeev Sharma, for distribution of products of Elgi Equipments Limited

Details of Joint Operations

The company has 80% interest in a joint arrangement called Elgi Services which was set up as partnership firm in India together with Elgi Ultra Industries Limited.

(b) Particulars of transactions with related parties

The following transactions occurred with related parties:

The following balances are outstanding at the end of the reporting period in relation to transactions with related parties:

An allowance of Rs.159.51 million as at March 31, 2018 (March 31, 2017: Rs.159.51 million) has been recognised in respect of impaired receivables and loans to related parties.

(d) Terms and conditions

Transactions relating to dividends, subscriptions for new equity shares were on the same terms and conditions that applied to other shareholders.

5 Contingent liabilities and contingent assets

(a) Contingent liabilities

( i) Claims against the Company not acknowledged as debts

The company has disputed demands for excise duty, service tax and sales tax and other matters amounting to Rs.108.32 million and Rs.102.61 million as on March 31, 2018 and March 31, 2017 respectively. The company has deposited Rs.49.02 million and Rs.47.72 million against the above mentioned disputes as on March 31, 2018 and March 31, 2017 respectively.

The company has filed appeals with appropriate authorities against the above mentioned disputes.

6 Commitments

(a) Capital commitments

Capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:

7 Events occurring after the reporting period

Refer Note 40 for the final dividend recommended by the directors which is subject to the approval of shareholders in the ensuing annual general meeting.

8 Exceptional Item

Exceptional item of Rs.27.44 million for the year ended March 31, 2018 pertains to expense under the Companyâs Voluntary Retirement Scheme (VRS).

9 Joint Operations

The Company has two joint operations as detailed in note-41

(i) The following share of assets and liabilities arising from the financial statements of joint operation has been recognised under Ind AS

10 Previous year figures have been regrouped /reclassfied to confirm to current years classification.

Mar 31, 2017

1. Financial risk management

The Company''s activities expose it to market risk, liquidity risk and credit risk.

This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the impact of hedge accounting in the financial statements

The Company''s risk management is carried out by a central treasury department under policies approved by the board of directors. Company''s treasury identifies, evaluates and hedges financial risks in close co-operation with the Company''s operating units. The board provides principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

(A) Credit risk

Credit risk arises from cash and cash equivalents, investments carried at fair value and deposits with banks and financial institutions, as well as credit exposures to customers including outstanding receivables.

(i) Credit risk management

Credit risk is managed on a Company basis. For banks and financial institutions, only high rated banks/institutions are accepted.

For other financial assets, the Company assesses and manages credit risk based on internal credit rating system. The finance function consists of a separate team who assess and maintain an internal credit rating system. Internal credit rating is performed on a Company basis for each class of financial instruments with different characteristics. The Company assigns the following credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.

C1 : High-quality assets, negligible credit risk

C2 : Doubtful assets, credit-impaired

- Internal credit rating

- External credit rating (as far as available)

- Actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrower''s ability to meet its obligations

- Actual or expected significant changes in the operating results of the borrower

- Significant increase in credit risk on other financial instruments of the same borrower

- Significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements

- Significant changes in the expected performance and behavior of the borrower, including changes in the payment status of borrowers in the Company and changes in the operating results of the borrower.

Macroeconomic information (such as regulatory changes, market interest rate or growth rates) is incorporated as part of the internal rating model.

Year ended March 31, 2017:

(a) The estimated gross carrying amount at default is '' 538.34 million (March 31, 2016: 485.43 million, April 1, 2015: Nil) for Investments and loans and deposits. Consequently expected credit loss of an amount of '' 52.91 million for the year ended March 31, 2017 (March 31, 2016 - '' 485.43 million) has been recognized.

(b) Expected credit loss for trade receivables under simplified approach

Customer credit risk is managed by the Company based on the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an on an internal credit rating system. Outstanding customer receivables are regularly monitored and assessed for its recoverability.

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 maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 10. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers has sufficient capacity to meet the obligations and the risk of default is negligible.

(B) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, treasury maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the Company''s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows.

(i) Financing arrangements

The company had access to the following undrawn borrowing facilities at the end of the reporting period:

The credit facility sanctioned by the banks are subject to renewal every year.

Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time in INR and can be renewed for further period of 1 year.

(ii) Maturities of financial liabilities

The tables below analyses the Company''s financial liabilities into relevant maturity groupings based on their contractual maturities for:

a) all non-derivative financial liabilities, and

b) net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

(ii) Price risk

The Company''s exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as fair value through OCI.

Sensitivity

The table below summarizes the impact of increases/decreases of the index on the Company''s equity and profit for the period. The analysis is based on the assumption that the equity index had increased by 5% or decreased by 5% with all other variables held constant, and that all the Company''s equity instruments moved in line with the index.

Other components of equity would increase/decrease as a result of gains/losses on equity securities classified as fair value though other comprehensive income.

40 Capital management

(a) Risk management

The Company''s objectives when managing capital are to

- provide returns for shareholders and benefits for other stakeholders, and

- maintain an optimal capital structure to reduce the cost of capital.

Consistent with others in the industry, The company monitors capital on the basis of the following gearing ratio: Net debt (total borrowings net of cash and cash equivalents) divided by

Total ''equity'' (as shown in the balance sheet).

The current gearing ratio of the Company is as

(ii) Dividends not recognized at the end of the reporting period

In addition to the above dividends, since year end the directors have recommended the payment of a final dividend of '' 1 per fully paid equity share (March 31, 2016 - Rs, 1). This proposed dividend is subject to the approval of shareholders in the ensuing annual general meeting.

(ii) Other related parties with whom transactions have taken place during the year

Joint venture Elgi Sauer Compressors Limited

Industrial Air Solutions LLP

Key management personnel Mr. Jairam Varadaraj, Managing Director

Mr. Sriram S, Chief Financial Officer

Relatives of Key Mr. Anvar Jay Varadaraj, son of Mr. Jairam Varadaraj

Management Personnel Mr. Varun Jay Varadaraj, son of Mr. Jairam Varadaraj

Other companies / firms in L.G. Balakrishnan & Bros Limited

which directors or their Elgi Ultra Industries Limited

relatives are interested Ellargi & Co

Elgi Rubber Company Limited

LGB Forge Limited

Pricol Travels Limited

Festo Controls Private Limited

Magna Electro Castings Limited

LGB Fuel Systems Private Limited

Elgi Automotive Services Private Limited

Details of Joint Ventures

The Company has 26% interest in Joint venture called Elgi Sauer Compressors Limited which was set up as company together with JP Sauer & Sohn Maschinenbau GMBH to sell compressors and their parts along with rendering engineering services.

Industrial Air Solutions LLP is engaged in the distribution of products of ELGi Equipments Limited.

Details of Joint Operations

The Company has 98% interest in a joint arrangement called L.G. Balakrishnan & Bros (Firm) which was set up as partnership together with Elgi Ultra Industries Limited to earn rental income from Investment Property.

The Company has 80% interest in a joint arrangement called Elgi Services which was set up as partnership together with Elgi Ultra Industries Limited.

2. Events occurring after the reporting period

Refer Note 40 for the final dividend recommended by the directors which is subject to the approval of shareholders in the ensuing annual general meeting.

The information has been given in respect of vendors to the extent they could be identified as "Micro and Small enterprises" on the basis of information available with the Company.

* Specified Bank Notes (SBNs) mean the bank notes of denominations of the existing series of the value of five hundred rupees and one thousand rupees as defined under the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs no. S.O. 3407(E), dated the November 8, 2016.

3. Transition to Ind AS

These are the Company''s first financial statements prepared in accordance with Ind AS.

The accounting policies set out in Note 1 have been applied in preparing the financial statements for the year ended March 31, 2017, the comparative information presented in these financial statements for the year ended March 31, 2016 and in the preparation of an opening Ind AS balance sheet at April 1, 2015 (the Company''s date of transition). In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP).

An explanation of how the transition from previous GAAP to Ind AS has affected the Company''s financial position, financial performance and cash flows is set out in the following tables and notes.

A. Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

A.1 Ind AS optional exemptions A.1.1 Business combinations

Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date or the specific date prior to the transition date so chosen. The Company elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date. Business combinations occurring prior to the transition date have not been restated. The Company has applied same exemption for investment in joint ventures.

A.1.2 Deemed cost

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognized in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets and investment property covered by Ind AS 40 Investment Properties.

Accordingly, the Company has elected to measure all of its property, plant and equipment, intangible assets and investment property at their previous GAAP carrying value adjusted for the impact of outstanding government grant relating to purchase of property plant and equipment and use the value so arrived as the deemed cost of the property, plant and equipment, intangible assets and investment property.

A.1.3 Designation of previously recognized financial instruments

Ind AS 101 allows an entity to designate investments in equity instruments at FVOCI on the basis of the facts and circumstances at the date of transition to Ind AS. The Company has elected to apply this exemption for its investments in equity investments.

A.1.4 Leases

Appendix C to Ind AS 17 requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. Ind AS 101 provides an option to make this assessment on the basis of facts and circumstances existing at the date of transition to Ind AS, except where the effect is expected to be not material. The Company has elected to apply this exemption for such contracts / arrangements.

A.1.5 Investments in subsidiaries and joint ventures

If a first-time adopter measures investments in subsidiary, joint venture or associate at cost in accordance with Ind AS 27, Ind AS 101 allows the entity to measure such investments at one of the following amounts in its separate opening Ind AS Balance Sheet.

(a) Cost determined in accordance with Ind AS 27 or

(b) Deemed cost.

The deemed cost of such an investment shall be its

(i) fair value at the entity''s date of transition to Ind AS in its separate financial statements or

(ii) previous GAAP carrying amount at that date.

The above options can be selected for each investment. Accordingly the Company has elected to measure all investments in subsidiary and joint venture at their previous GAAP carrying value, except for investments in its subsidiary SAS Belair (France) and Elgi Compressors Do Brazil Imp. E. Exp. LTDA which have been measured at fair value on the date of transition.

A.1.6 Joint Operations

Ind AS 101 provides an exemption for changing from equity method to accounting for share of assets and liabilities. As per the exemption, when changing from the equity method to accounting for share of assets and liabilities in respect of its interest in a joint operation, an entity shall, at the date of transition to Ind AS, derecognize the investment that was previously accounted for using the equity method and any other items that formed part of the entity''s net investment in the arrangement and recognize its share of each of the assets and the liabilities in respect of its interest in the joint operations.

The Company has elected to apply this exemption for its joint operation.

A.2 Ind AS mandatory exceptions A.2.1 Estimates

An entity''s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error. Ind AS estimates as at April 1, 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:

-Investment in equity instruments carried at FVPL or FVOCI;

-Impairment of financial assets based on expected credit loss model.

-Provision for constructive obligations.

A.2.2 Classification and measurement of financial assets

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

A.2.3 Impairment of financial assets

Ind AS 101 provides that if at the date of transition the determination of increase in credit risk since initial recognition is difficult, loss allowance to be provided at an amount equal to lifetime expected credit losses at each reporting date until de-recognition.

*The previous GAAP figures have been reclassified to conform to Ind AS presentation requirements for the purposes of this note.

C. Notes to first-time adoption

4. Joint Operations

Under previous GAAP, L.G. Balakrishnan & Bros. and Elgi Services were accounted for using the equity method. Under Ind AS, L.G. Balakrishnan & Bros. and Elgi Services have been classified as jointly controlled entities and accounted for using the proportionate consolidation method since the partnership does not have a separate legal form.

The Company has determined its interest in the assets and liabilities relating to the joint operation on the basis of its rights and obligations in a specified proportion in accordance with the contractual arrangement. The Company has measured the initial carrying amounts of the assets and liabilities by disaggregating them from the carrying amount of the investment of Rs, 124 million and Rs, 0.4 million in L.G. Balakrishnan & Bros. and Elgi Services respectively at the date of transition to Ind AS on the basis of the information used by the entity in applying the equity method.

5. Classification - Debt vs. Equity and corresponding impact of changes in foreign exchange rate

Under the previous GAAP there was no separate standard on financial instruments and classification of financial instrument into debt or equity was based on the legal form of the instrument. Under Ind AS the accounting and classification of Financial Instruments are governed by Ind AS 109 and Ind AS 32. These standards provide for classification and measurement of instruments based on substance rather than legal form.

The Company has assessed the amounts previously classified as loan under the earlier GAAP and has determined the same to be in the nature of equity per the requirements of Ind AS. Accordingly a sum of

Rs. 934.75 million as at March 31, 2016 (April 1, 2015 -Rs. 701.65 million) has been reclassified from loans to investment in subsidiaries.

Consequent to above reclassification, the said amounts no longer satisfy the definition of monetary item under Ind AS 21. Accordingly the Company has reversed foreign exchange gain amounting to Rs. 55.51 million with corresponding decrease in profit for the year ended March 31, 2016.

6. Deemed Cost for Investment in Subsidiaries

As detailed in Note A.1.5 above, the Company has elected to measure all investments in subsidiaries and joint venture at their previous GAAP carrying value, except for investments in its subsidiary SAS Belair (France) and Elgi Compressores Do Brazil Imp. E. Exp.

LTDA which have been measured at fair value on the date of transition. Accordingly the Company has accounted for a loss of of Rs. 546.80 million in its opening retained earnings as at April 1, 2015, being the difference between the fair value of the investments and their carrying amount under previous GAAP.

7. Fair valuation of investments

Under the previous GAAP, long-term investments in equity instruments were carried at cost less provision for other than temporary decline in the value of such investments. Under Ind AS, these investments (other than interests in subsidiaries, associates and joint ventures) are required to be measured at fair value.

Fair value changes with respect to investments in equity instruments designated as at FVOCI have been recognized in FVOCI - Investment Fair valuation reserve as at the date of transition and subsequently in the statement of other comprehensive income for the year ended March 31, 2016. Consequent to the above, the total equity as at March 31, 2016 has increased by Rs. 42.41 million (April 1, 2015 - Rs. 40.83 million) and other comprehensive income for the year ended March 31, 2016 increased by Rs. 1.58 million.

8. Investment property

Under the previous GAAP, investment properties were presented as part of non-current investments. Under Ind AS, investment properties are required to be separately presented on the face of the balance sheet. Accordingly a sum of Rs. 57.95 million as at March 31, 2016 (April 1, 2015 - Rs. 58.78 million) has been reclassified from non-current investments to investment property. There is no impact on the total equity or profit as a result of this adjustment.

9. Expected Credit Loss

Under the previous GAAP, allowance for financial assets were recognized upon the occurence of the loss event. As per Ind AS 109, the Company is required to apply expected credit loss model for recognising the allowances for financial assets. As a result, the allowance for trade receivables has increased by Rs. 33.75 million and allowance for impairment of investment has increased by Rs. 19.66 million as at March 31, 2016 (April 1, 2015 - Rs. 21.62 million and nil respectively ). Consequently, the total equity as at March 31, 2016 has decreased by Rs. 53.41 million (April 1, 2015 - Rs. 21.62 million) and profit for the year ended March 31, 2016 has decreased by Rs. 31.79 million.

10. Provisions for constructive obligations

Under the previous GAAP, provisions were not recognized for constructive obligations. Under Ind AS, provisions are measured for present obligations (both legal and constructive) as a result of a past event where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation. Accordingly the Company has recognized a provision for certain after sales expenses resulting from a constructive obligation amounting to Rs. 65.53 million as at March 31, 2016 (April 1, 2015 -Rs. 45.65 million). Consequently, the total equity as at March 31, 2016 has decreased by Rs. 65.53 million (April 1, 2015 - Rs. 45.65 million) and profit for the year ended March 31, 2016 has decreased by Rs. 19.88 mil I ion.

8. Proposed dividend

Under the previous GAAP, dividend proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as an adjusting event. Accordingly, provision for proposed dividend including dividend distribution tax was recognized as a liability. Under Ind AS, such dividend is recognized when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend of Rs. 190.71 Million as at March 31, 2016 (April 1, 2015 - Rs. 190.71 Million) included under provisions has been reversed with corresponding adjustment to retained earnings. Consequently the amount approved by the shareholders amounting to Rs. 190.71 million for the period 2014-15 has been recognized as a liability in the year ended March 31, 2016.

9. Forward Contracts not designated as hedging instruments

Under the previous GAAP, the Company applied the requirements of Accounting Standard 11, ''The effects of changes in foreign exchange rates'' to account for forward exchange contract for hedging foreign exchange risk related to recognized trade payables. At the inception of the contract, the forward premium was separated and amortized as expense over the tenure of the contract. The underlying trade payables and the forward contract were restated at the closing spot exchange rate. Under Ind AS, derivatives which are not designated as hedging instruments are fair valued with resulting changes being recognized in Statement of profit and loss. The above transition resulted in a net loss of Rs. 0.82 Million for the year ended March 31, 2016.

10. Revenue

Under the previous GAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of products is presented inclusive of excise duty. The excise duty paid is presented on the face of the statement of profit and loss as part of expenses. This change has resulted in an increase in total revenue and total expenses for the year ended March 31, 2016 by Rs. 551.58 Million. There is no impact on the total equity and profit.

Under the previous GAAP, discounts in the nature of cash and volume discount have presented as item of expense in the statement of profit and loss account. However under Ind AS revenue is to be recognized at the fair value of consideration received or receivable after considering such discounts. Consequently, revenue from operations for the year ended March 31, 2016 has decreased by Rs. 35.14 million with a corresponding decrease in other expenses. There is no impact on the total equity and profit.

Consequent to the above adjustments, net impact on revenue for the year ended March 31, 2016 is an increase of Rs. 516.44 million with no impact on total equity and profit.

11. Remeasurements of post-employment benefit obligations

Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognized in other comprehensive income instead of profit or loss. Under the previous GAAP, these remeasurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended March 31, 2016 increased by Rs. 28.16 Million. There is no impact on the total equity as at March 31, 2016.

12. Provision for Financial Guarantee

The Company has provided financial guarantee to lenders of money to its subsidiary Elgi Equipments (Zhejiang) Limited and its erstwhile subsidiary Belair SAS. Under the previous GAAP financial guarantees so provided were disclosed as contingent liability. Under Ind AS, such guarantees are to be recorded initially at fair value and subsequently at the higher of the amount determined in accordance with Ind AS 37 and the amount initially recognized less cumulative amortization, where appropriate. Accordingly the management has recognized a provision for these guarantees based on its best estimate of the outflow expected to be paid in the event such guarantees are invoked by the respective lenders amounting to Rs. 68.86 million for the year ended March 31, 2016 (April 1, 2015 - Rs. nil).

13. Government Grant

Under the previous GAAP, the Company had reduced the Government grants related to procurement of assets from the carrying amount of fixed asset. Under Ind AS, asset related government grants shall not be reduced from the carrying amount of asset but are required to be presented as deferred income and amortized over the useful life of the asset. Consequently the Company has recognized the outstanding government grant as at the transition date amounting to Rs. 64.78 million (Non current portion - Rs.55.85 million and current portion -Rs. 8.93 million) pertaining to capital goods imported under EPCG Scheme and recognized the same as deferred income with the corresponding impact in property, plant and equipment. As a result of the above recognition, there has been an increase in depreciation expense amounting to Rs. 8.94 million with a corresponding increase in other income for the year ended March 31, 2016. There is no impact on the total equity as at March 31, 2016 and April 1, 2015 as a result of the above transition.

14. Deferred tax

Deferred tax has been recognized on the adjustments made on transition to Ind AS.

15. Retained earnings

Retained earnings as at April 1, 2015 has been adjusted consequent to the above Ind AS transition adjustments.

16. Other comprehensive income

Under Ind AS, all items of income and expense recognized in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in profit or loss but are shown in the statement of profit and loss as ''other comprehensive income'' includes remeasurements of defined benefit plans and fair value gains or (losses) on FVOCI equity instruments. The concept of other comprehensive income did not exist under previous GAAP.

17. The annual accounts of the below listed Subsidiary Companies and the related detailed

information will be made available on the website of the company viz. www.elgi.com. Also, the accounts will be made available for inspection at the Registered Office of the Holding Company.

1 ATS Elgi Limited, Coimbatore, India

2 Adisons Precision Instruments Mfg.Co. Limited, Coimbatore, India

3 Elgi Equipments (Zhejiang) Limited, Jiaxing, China

4 Elgi Gulf (FZE), Sharjah, U.A.E

5 Elgi Compressors Trading (Shanghai) Co. Ltd, China

6 Elgi Compressor Do BRASIL IMP.E.EXP.Ltda- Brazil

7 Elgi Australia Pty Ltd, Australia

8 Elgi Compressors Italy S.r.l.

9 Elgi Compressors USA Inc

10 Ergo Design Private Limited, Bangalore, India

11 Patton''s Inc, USA

12 Patton''s Medical LLC., USA

13 PT Elgi Equipments Indonesia

14 Rotair Spa, Italy

18. DISCLOSURES PURSUANT TO SECURITIES AND EXCHANGE BOARD OF INDIA (LISTING OBLIGATION AND DISCLOSURES AND DISCLOSURES REQUIREMENTS) REGULATIONS, 2015 AND SECTION 186 OF THE COMPANIES ACT, 2013

Mar 31, 2016

1 Investment in SAS Belair

The Company in its letter to Bombay Stock Exchange Limited ("BSE'') and National Stock Exchange Limited (''NSE'') has intimated that business operations of SAS Belair, France are not smooth and the cost structures are challenging. The subsidiary has filed for protective action with the Commercial Court in Anncy, France. Pursuant to this the court has appointed an Administrator on April 26, 2016. Hence, the subsidiary is no longer under the control of the company and the company is under Legal redress as per the French Laws.

The Management is of the view that there will be no further liabilities on account of such restructuring. No provision has been considered for the carrying value of the investments, advances and receivables aggregating to Rs. 526.51 Million, as the same would be evaluated and provided depending upon the progress of the above said legal proceedings in France.

2 The annual accounts of the below listed Subsidiary Companies and the related detailed information will be made available on the website of the Company viz. www.elgi.com. Also, the accounts will be made available for inspection at the Registered Office of the Holding Company.

1 ATS Elgi Limited, Coimbatore, India

2 Adisons Precision Instruments Mfg.Co.Limited, Coimbatore, India

3 Elgi Equipments (Zhejiang) Limited, Jiaxing, China

4 Elgi Gulf (FZE), Sharjah, U.A.E.

5 Elgi Compressors Trading(Shanghai) Co.Ltd, China

6 SAS Belair, France

7 Elgi Compressores Do BRASIL IMP. E.EXP. Ltda, Brazil

8 Elgi Australia Pty Ltd, Australia

9 Elgi Compressors Italy S.r.l.

10 Elgi Compressors USA Inc

11 Rotair Spa, Italy

12 Patton''s Inc., USA

13 Patton''s Medical LLC., USA

14 PT Elgi Equipments Indonesia

15 Ergo Design Private Limited, from Jan 2016

3 Balances in the accounts of Sundry Debtors, Sundry Creditors, Security and other Deposits have been reconciled wherever letters of confirmation have been received and necessary effect has been given in the accounts.

4 Previous year figures have been regrouped and re-classified wherever necessary to make them comparable.

Mar 31, 2015

1 CONTINGENT LIABILITIES AND COMMITMENTS

a) Claims against the Company not acknowledged as debts:

Name of the Statute Nature of the Demand dues Amount [Rs. In Million]

Sales Tax LST& Penalty 8.49 LST& Penalty 59.79 CST & Penalty 29.87 CST 3.28

Central Excise Excise Duty & Penalty 0.29 Excise Duty & Penalty 5.46

Name of the Statute Amount Forum where disputes are Paid/Adj Pending [Rs. In Million]

Sales Tax 8.51 STAT (AB)-Cbe - The High Court of Madras 22.40 STAT (AB)-Cbe 2.28 JC (APPEALS)-Cbe Central Excise 0.01 Dy. Commnr.Appeals 0.34 CESTAT

The Company has filed appeals with the appropriate authorities of Central Excise and Sales Tax Department against their claims.

i) Guarantees and Letter of credit 298.80 334.08

ii) Estimated amount of contracts remaining to be executed on capital account 10.93 1066.97

In addition to the above, the Company has given SBLCs/ LOCs of USD 2 Million, USD 23.8 Million and Euro 8.95 Million in favour of its Subsidiaries Elgi Equipments (Zhejiang) Limited, Elgi Compressors USA Inc. and Elgi Compressors Italy S.r.l, respectively and Corporate Guarantee of USD 3 Million has been given in favour of Elgi Compressors USA Inc.

2 Details of security given for borrowings:

Borrowing from Banks Details of Security

Fund Based and Non-Fund Based Limits Pari-Passu charge on specified Fixed Assets and the Currrent Assets of the Company from Banks

The information has been given in respect of vendors to the extent they could be identified as "Micro and Small enterprises" on the basis of information available with the Company.

Name of related parties and description of relationship

1 Holding Company Elgi Equipments Limited

2 Subsidiaries including step down subsidiaries

Elgi Equipments Limited

a. Adisons Precision Instruments Manufacturing Company Limited

b. ATS Elgi Limited

c. Elgi Gulf (FZE)

d. Elgi Equipments (Zhejiang) Limited (China)

e. Elgi Compressors Trading (Shanghai) Co. Ltd (China)

f. SAS Belair (France)

g. Elgi Compressors Do Brasil Imp.E.Exp. Ltda. h

ElgiEquipmentsAustraliaPtyLtd.

i. Elgi Compressors Italy S.r.l.

j. ElgiCompressorsUSAInc.

k. Rotair Spa. (Italy)

l. Patton''s Inc. (USA)

m. Patton''s Medical LLC.(USA)

n. PT.ElgiEquipmentsIndonesia

3 Joint Venture Elgi Sauer Compressors Limited

4 Other Companies / Firms in which Directors or their relatives are interested

a. Elgi Ultra Industries Limited

b. Elgi Rubber Company Limited

c. LG.Balakrishman&BrosUmited

d. Ellargi&Co

e. LGB Forge Limited

f. Ergo Designs Private Limited

g. Pricol Travels Limited

h. Festo Controls Pvt Limited

i. LGB Fuel Systems Pvt Ltd

j. Magna Electro Castings Limited

5 Firms in which the Company is a partner a. Elgi Services

b. LG.Balakrishnan&Bros

6 Key Managerial Personnel

Mr. Jairam Varadaraj, Managing Director

Mr. S. Sriram, Chief Financial Officer

Ms.Vaishnavi PM, Company Secretary from 1st August 2014

Mr. R. Syam Kumar, Company Secretary till 29th May 2014

Mar 31, 2014

[ Rs.. In Million]

1 CONTINGENT LIABILITIES AND COMMITMENTS a) Claims against the company not acknowledged as debts:

Name of the Statute Nature of the Demand Amount Forum where disputes is dues Amount Paid / Adj Pending [In Million][In Million]

Sales Tax LST & Penalty 8.49 8.51 STAT (AB) -Cbe LST & Penalty 574.36 - High Court, Madras CST & Penalty 29.87 20.66 STAT (AB) -Cbe CST 3.28 3.28 JC (APPEALS) -Cbe Central Excise Excise Duty & Penalty 11.60 0.00 Dy. Commnr. Appeals Excise Duty & Penalty 3.01 0.10 CESTAT

The Company has filed appeals with the appropriate authorities of Central Excise and Sales Tax Department against their claims.

2.0 There was no forfeiture of shares during the year ended 31/03/2014.

2.1 Purchases include machining charges of Rs..63.66 Million (Previous year Rs..62.66 Million)

3 As required by Ministry of Corporate Affairs General Circular No.2/2011 dated 8th February 2011, the Board of Directors has given its consent for not attaching the Balance Sheet of the Subsidiary Companies listed below:

1) Adisons Precision Instruments Mfg.Co.Limited, Coimbatore, India

2) Elgi Equipments (Zhejiang) Limited, Jiaxing, China

3) Elgi Gulf (FZE), Sharjah, U.A.E.

4) Elgi Compressors Trading(Shanghai) Co.Ltd, China

5) SAS Belair, France

6) Elgi Compressores Do BRASIL IMP. E.EXP. Ltda, Brazil

7) Elgi Australia Pty Ltd, Australia

8) Elgi Compressors Italy S.r.l.

9) Elgi Compressors USA Inc

10) Rotair Spa, Italy

11) Patton''s Inc., USA

12) Patton''s Medical LLC, USA

13) PT Elgi Equipments Indonesia

However, the Company undertakes that the annual accounts of the Subsidiary Companies and the related detailed information will be made available to the Company''s investors seeking such information at any point of time. The annual accounts of the subsidiary companies are kept open for inspection by any investor at the registered office of the Holding and Subsidiary Companies.

4 Balances in the accounts of Sundry Debtors, Sundry Creditors, Security and other Deposits have been reconciled wherever letters of confirmation have been received and necessary effect has been given in the accounts.

Name of related parties and description of relationship

1 Subsidiaries including step down subsidiaries :

a. Adisons Precision Instruments Manufacturing Company Limited

b. ATS Elgi Limited

c. Elgi-Gulf (FZE)

d. Elgi Equipments (Zhejiang) Limited (China)

e. Elgi Compressors Trading (Shanghai) Co. Ltd. (China)

f. SAS Belair (France)

g. Elgi Compressores DO BRASIL IMP. E.EXP. Ltda h. Elgi Australia Pty Ltd.

i. Elgi Compressors Italy S.r.l.

j. Elgi Compressors USA Inc

k. RotairSpa (Italy)

l. Patton''s Inc (USA)

m. Patton''s Medical LLC. (USA)

n. PT Elgi Equipments Indonesia

2 Joint Venture : Elgi Sauer Compressors Limited

3. Other Companies / Firms in which Directors are interested

a. Elgi Ultra Industries Limited

b. Elgi Rubber Company Limited

c. L.G. Balakrishnan & Bros Limited

d. Ellargi &Co

e. LGB Forge Limited

f. Magna Electro Castings Limited

g. LGB Fuel Systems (P) Ltd.

h. Festo Controls (P) Ltd.

i. Mape Advisory Group (P) Ltd.

j. Mape Securities (P) Ltd.

4. Firms in which the Company is a partner a. Elgi Services

b. LG. Balakrishnan & Bros

5 Key Managerial Personnel : Mr. Jairam Varadaraj, Managing Director

5 Previous year figures have been regrouped and re-classified wherever necessary to make them comparable.

Mar 31, 2013

1 As required by Ministry of Corporate Affairs General Circular No.2/2011 dated 8th February 2011, the Board of Directors has given its consent for not attaching the Balance Sheet of the Subsidiary Companies listed below:

1 Adisons Precision Instruments Mfg.Co.Limited, Coimbatore, India

2 Elgi Equipments (Zhejiang) Limited, Jiaxing, China

3 Elgi Gulf (FZE), Sharjah, U.A.E.

4 Elgi Compressors Trading(Shanghai) Co.Ltd, China

5 SAS Belair, France

6 Elgi Compressores Do BRASIL IMP. E.EXP. Ltda, Brazil

7 Elgi Australia Pty Ltd, Australia

8 Elgi Compressors Italy S.r.l.

9 Elgi Compressors USA Inc

10 Rotair Spa, Italy

11 Patton''s Inc., USA

12 Patton''s Medical LLC., USA

However, the Company undertakes that the annual accounts of the Subsidiary Companies and the related detailed information will be made available to the Company''s investors seeking such information at any point of time. The annual accounts of the subsidiary companies are kept open for inspection by any investor at the registered office of the Holding and Subsidiary Companies.

2 Balances in the accounts of Sundry Debtors, Sundry Creditors, Security and other Deposits have been reconciled wherever letters of confirmation have been received and necessary effect has been given in the accounts.

Name of related parties and description of relationship

1 Holding Company : Elgi Equipments Limited

2 Subsidiaries including step down subsidiaries : a. Adisons Precision Instruments Manufacturing Company Limited

b. ATS Elgi Limited

c. Elgi-Gulf (FZE)

d. Elgi Equipments (Zhejiang) Limited (China)

e. Elgi Compressors Trading (Shanghai) Co. Ltd. (China)

f. SAS Belair (France)

g. Elgi Compressores DO BRASIL IMP. E.EXP. Ltda

h. Elgi Australia Pty Ltd.

i. Elgi Compressors Italy S.r.l.

j. Elgi Compressors USA Inc

k. Rotair Spa (Italy)

l. Patton''s Inc (USA)

m. Patton''s Medical LLC. (USA)

3 Fellow Subsidiaries : Nil

4 Joint Venture : Elgi Sauer Compressors Limited

5. Other Companies / Firms in which Directors : a. Elgi Ultra Industries Limited are interested b. Elgi Rubber Company Limited

c. L.G. Balakrishnan & Bros Limited

d. Ellargi & Co

e. LGB Forge Limited

6. Firms in which the Company is a partner a. Elgi Services

b. L.G. Balakrishnan & Bros.

7 Key Management Personnel : Dr. Jairam Varadaraj, Managing Director

3 Previous year figures have been regrouped and re-classified wherever necessary to make them comparable.

Mar 31, 2012

1 As required by Ministry of Corporate Affairs General Circular No. 2/2011 dated 8th February, 2011, the Board of Directors has given its consent for not attaching the Balance Sheet of the Subsidiary companies listed below :

1. Adisons Precision Instruments Mfg.Co.Limited, Coimbatore, India

2. Elgi Equipments (Zhejiang) Limited, Jiaxing,China

3. Elgi Gulf (FZE), Sharjah, UAE.

4. Elgi Compressors Trading (Shanghai ) Co. Ltd.

5. SAS Belair (France)

6. Elgi Compressors DO BRAZIL IMPD.E.EXP, Brazil

7. Elgi Australia Pty Ltd. Australia

However, the Company undertakes that the annual accounts of the Subsidiary Companies and the related detailed information will be made available to the Holding and Subsidiary Companies investors seeking such information at any point of time. The annual accounts of the Subsidiary Companies are kept open for inspection by any investor at the registered office of the Holding and Subsidiary Companies.

2 Balances in the accounts of Sundry Debtors, Sundry Creditors, Security and other Deposits have been reconciled wherever letters of confirmation have been received and necessary effect has been given in the accounts.

Name of related parties and description of relationship:

1 Holding company Elgi Equipments Limited

2 Subsidiaries

a. Adisons Precision Instruments Manufacturing Company Limite

b. ATS Elgi Limited

c. Elgi-Gulf(FZE)

d. Elgi Equipments Zhejiang Limited (China)

e. Elgi Compressors Trading (Shanghai) Co.Ltd.(China)

f. SAS Belair (France)

g. Elgi Compressors DO BRAZIL IMPD.E.EXP h. Elgi Australia Pty Ltd.

3 Fellow Subsidiaries Nil

4 Associates

a. Elgi Ultra Industries Limited.

b. Elgi Rubber Company Limited

c. LG.Balakrishnan & Bros Limited.

d. Ellargi & co

e. Elgi Services.

f. L.G. Balakrishnan & Bros.

g. LGB Forge Limited

5. Joint Venture Elgi Sauer Compressors Limited.

6 Key Management Personnel Dr. Jairam Varadaraj, Managing Director

3 Previous year figures have been regrouped and re-classified where ever necessary to make them comparable.

Mar 31, 2011

1) Estimated amount of contracts remaining to be executed on capital account is Rs.214.06 million (Previous year Rs.116.86 million).

2) Contingent Liabilities not provided for

Particulars 31/03/2011 31/03/2010 (Rs. In Million)(Rs. In Million)

a) Guarantees and Letter of Credit 192.16 86.14

b) Uncalled liability in respect of Partly paid shares 0.39 0.39

3) During the year, the Company issued 78935454 nos. of Bonus Shares at the ratio of 1:1, by capitalization of Share Premium. Further, 583600 nos of shares at Re.1 each were issued under Employees Stock Purchase Scheme to the eligible employees.

4) Rent includes Rs.0.12 million paid to Subsidiary Company, M/s. Adisons Precision Instruments Manufacturing Company Limited. (Previous year Rs.0.12 million)

5) As required by Ministry of Corporate Affairs General Circular No. 2/2011 dated 8th February 2011, the Board of Directors has given its consent for not attaching the Balance Sheet of the Subsidiary companies listed below :

1. Adisons Precision Instruments Mfg.Co.Limited, Coimbatore, India

2. Elgi Equipments (Zhejiang) Limited, Jiaxing,China

3. Elgi Gulf (FZE), Sharjah, UAE.

4. Elgi Compressors Trading (Shanghai ) Co. Ltd.

5 SAS Belair (France)

However, the Company undertakes that the annual accounts of the Subsidiary Companies and the related detailed information will be made available to the Holding and Subsidiary Companies investors seeking such information at any point of time. The annual accounts of the Subsidiary Companies are kept open for inspection by any investor at the registered office of the Holding and Subsidiary Companies.

6) Balances in the accounts of Sundry Debtors, Sundry Creditors, Security and Other Deposits have been reconciled wherever letters of confirmation have been received and necessary effect has been given in the accounts.

Names of related parties and description of relationship:

1. Holding Company Elgi Equipments Limited

2. Subsidiaries Adisons Precision Instruments Manufacturing Company Limited

ATS Elgi Limited

Elgi-Gulf (FZE).

Elgi Equipments Zhejiang Limited (China)

Elgi Compressors Trading (Shanghai) Co. Ltd. (China)

SAS Belair (France)

3. Fellow Subsidiaries Nil

4. Associates a. Elgi Ultra Industries Limited.

b. Elgi Rubber International Limited

c. L.G.Balakrishnan & Bros Limited.

d. Ellargi & Co.

e. Elgi Services.

f. L.G.Balakrishnan & Bros .

5. Joint Venture Elgi Sauer Compressors Limited.

6. Key Management Personnel Dr.Jairam Varadaraj , Managing Director

20) The under noted companies constitute the "Group" in terms of Regulation 3(1) (e)( i ) of SEBI Substantial (Acquisition of Shares & Takeovers) Regulation,1997,as amended, with effect from 09.09.2002.

a) Elgi Ultra Industries Limited

b) Elgi Rubber International Limited.

c) L.G.Balakrishnan & Bros.Limited

d) Elgi Securities Limited

e) Dark Horse Portfolio Investments Limited

f) Madura Public Conveyance Private Limited

g) Premier Industrial Drives Private Limited

h) Elgi Sauer Compressors Limited.

i) Salem Services Private Limited

7) Previous year Figures have been regrouped and re-classified wherever necessary to make them comparable.

Mar 31, 2010

1) Amalgamation of Elgi Industrial Products Ltd. with the company

a) In accordance with the scheme of amalgamation approved by the Honorable High Court of Madras vide its order dated 24th Sep 2010 the entire undertaking of Elgi Industrial Products Ltd. (EIPL) with all its assets liabilities and reserves stand transferred to and vested in the company as a going concern with effect from 01/04/2009. The Amalgamation has been accounted under the "Pooling of Interest Method" as per accounting standards 14 -Accounting for Amalgamation issued by Institute of Chartered Accountants of India

b) Consequent to the above 7,62,600 Equity shares are proposed to be issued to the shareholders of EIPL as per the Scheme of Amalgamation.

c) In view of this amalgamation of the company by the High Court Order, the figures for the current year are not comparable with that of the previous year

2) Estimated amount of contracts remaining to be executed on capital account is Rs.1.16 million (previous year Rs.8.80 million).

3) Contingent Liabilities not provided for

Particulars 31.03.2010 31.03.2009

Particulars (Rs.in Million) Rs. In Millionn)

a) Guarantees and Letter of Credit 86.14 108.34

b) Uncalled liability in respect of Partly paid shares 0.39 0.39

4) As per the profit share scheme effective from 01.04.05 which is available to employees below the level of officers, a sum of Rs 22.10 million has been provided under head of Salaries, wages, bonus and gratuity (previous year Rs 28.20 million)

5) Rent includes Rs.0.12 million paid to Subsidiary Company, M/s.Adisons Precision Instruments Manufacturing Company Limited. (Previous year Rs.0.12 million)

6) The Company has been exempted by the Ministry of Corporate Affairs under section 211 (4) vide letter No. 46/40/2010-CL-l 11 Dt. 12/3/2010 from furnishing information under para 3(i) (a) and 3 (ii) (a) (1) & (2) of part II of Schedule VI to the Companies Act,1956 for the year ended 31/03/10.

7) a) The Company has been exempted by the Ministry of Corporate affairs vide letter No, 47/79/2010-CL-I 11 Dt.

24/02/2010 from publishing annual accounts of its following Subsidiary Companies as required under Section 212(8) of the Companies Act,1956.

1. Adisons Precision Instruments Mfg.Co.Limited, Coimbatore, India

2. Elgi Equipments Zhejiang Limited, China

3. Elgi Gulf (FZE), Sharjah, UAE.

4. Elgi Compressors Trading (Shanghai) Co. Ltd. (China)

b) The Company has been exempted by the Ministry of Corporate affairs vide letter No, 47/79/2010-CL-l 11 Dt. 07/05/2010 from publishing annual accounts of its following Subsidiary Company as required under Section 212(8) of the Companies Act,1956.

1. SABelair-France

However the Company undertakes that the annual accounts of the Subsidiary Companies and the related detailed information will be made available to the Holding and Subsidiary Companies investors seeking such information at any point of time. The annual accounts of the Subsidiary Companies are kept open for inspection by any investor at the registered office of the Holding and Subsidiary Companies.

8) Balances in the accounts of Sundry Debtors, Sundry Creditors, Security and Other Deposits have been reconciled wherever letters of confirmation have been received and necessary effect has been given in the accounts.

Note:

Names of related parties and description of relationship:

1. Holding Company Elgi Equipments Limited

2. Subsidiaries Adisions Precision Instruments Manufacturing Company Limited

ATS Elgi Limited

ELGI-GULF (FZE).

Elgi Equipments Zhejiang Limited (China).

Elgi Compressors Trading (Shanghai) Co.Ltd (China).

SA Belair- France

3. Fellow Subsidiaries Nil

4. Associates a. Elgi Ultra Industries Limited.

b. Treadsdirect Limited.

c. Elgi Rubber Company Ltd.

d. L.G.Balakrishnan & Bros Limited.

e. Ellargi & Co.

f. Elgi Services.

g. L.G.Balakrishnan & Bros .

5. Joint Venture Elgi Sauer Compressors Limited.

6. Key Management Personnel Dr.Jairam Varadaraj , Managing Director

9) The under noted companies constitute the "Group" in terms of Regulation 3(1) (e)( i ) of SEBI Substantial (Acquisition of Shares & Takeovers) Regulation, 1997,as amended.with effect from 09.09.2002.

a) Elgi Ultra Industries Limited

b) Treadsdirect Limited

c) Elgi Rubber Company Limited.

d) L.G.Balakrishnan & Bros.Limited

e) Elgi Securities Limited

f) Dark Horse Portfolio Investments Limited

g) Madura Public Conveyance Private Limited h) Premier Industrial Drives Private Limited

i) Elgi Sauer Compressors Limited.

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