Mar 31, 2023
B. Contract balances
Progress on satisfying performance obligations under contracts with customers and the related billings and cash collections are recorded in accounts receivable and the unbilled receivables in Other Financial Assets. The customer advances are recorded as Other Current Liabilities. Unbilled receivables (Contract Assets) arise when the timing of cash collected from customers differs from the timing of revenue recognition, such as when contract provisions require specific milestones to be met before a customer can be billed. Those assets are recognized when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract. Contract liabilities are recorded when a milestone is met triggering the contractual right to bill but revenue recognised over time is not recognized.
When contracts are modified to account for changes in contract specifications and requirements, the Company considers whether the modification either creates new or changes the existing enforceable rights and obligations. Contract modifications that are for goods or services that are not distinct from the existing contract, due to the significant integration with the original good or service provided, are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct, they are accounted for as a new contract and performance obligation, which are recognized prospectively.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contractâs transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. When contracts with customers require highly complex integration or manufacturing services that are not separately identifiable from other promises in the contracts and, therefore, not distinct, then the entire contract is accounted for as a single performance obligation. Performance obligations are satisfied as of a point in time or over time. Performance obligations are supported by contracts with customers, providing a framework for the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance obligation is typically indicated by the terms of the contract.
Typical payment terms of fixed-price over time contracts include progress payments based on specified events or milestones, or based on project progress. For some contracts the Company may be entitled to receive an advance payment. The Company provides standard warranty on its products and records obligation on the same based on past trend.
The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for contracts with an original expected term of one year or less. Performance obligations recognized as at the year end will be satisfied over the course of future periods. The disclosure of the timing for satisfying the performance obligation is based on the requirements of contracts with customers. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts and periodic revalidations.
Information reported to the Chief operating decision maker (CODM) for the purposes of resource allocation and assessment of segment performance focuses only on one business segment i.e. Automation & Control Systems. There are no other reportable segments.
The Company generates a large percentage of its sales and profits from its business with the Honeywell group (Honeywell), its major shareholder. Sales to Honeywell group accounted for approximately 40% and 32% of our total net sales for the year ended March 31, 2023 and year ended March 31, 2022 respectively. The Companyâs ability to maintain or grow its business with Honeywell depends upon a number of performance factors. However, the Company cannot be assured that its level of sales and profits associated with its relationship with Honeywell will continue. Honeywell-specific business considerations (independent of its shareholding in the Company), including changes in Honeywellâs strategies regarding utilization of alternate opportunities available to it to source products and services currently provided by the Company (including from alternate sources which Honeywell may acquire or develop within its own group), may also reduce the level and/or mix of Honeywellâs business with the Company.
The Company has compiled this information based on intimations received from suppliers of their status as Micro or Small enterprises and / or its registration with the appropriate authority under Micro, Small and Medium Enterprises Development Act, 2006 (as amended from time to time).
Note 33 - Share Based Payments Employee share option plan of the company
Honeywell International Inc. (HII), the ultimate holding company, may grant stock options and restricted stock awards to certain employees under its stock incentive plan.
Stock OptionsâThe exercise price, term and other conditions applicable to each option granted under the stock plans are generally determined by the Management Development and Compensation Committee of the Board of Honeywell International Inc. The exercise price of stock options is set on the grant date and may not be less than the fair market value per share of the stock on that date. The fair value is recognized as an expense over the employeeâs requisite service period (generally the vesting period of the award). Options generally vest over a four-year period and expire after ten years.
Restricted Stock UnitsâRestricted stock unit (RSU) awards entitle the holder to receive one share of common stock for each unit when the units vest. RSUs are issued to certain employees as compensation at fair market value at the date of grant. RSUs typically become fully vested over periods ranging from three to seven years and are payable in Honeywell common stock upon vesting.
Fair value of share options granted in the year
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on implied volatilities from traded options on common stock of HII and historical volatility of common stock of HII. Monte Carlo simulation model is used to derive an expected term which represents an estimate of the time options are expected to remain outstanding. Such model uses historical data to estimate option exercise activity and post-vest termination behaviour. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant.
Note 34 - Contingent Liabilities and Commitments A) Contingent liabilities |
('' in lakhs) |
|
Particulars |
31st March 2023 |
31st March 2022 |
a) Income tax liability that may arise in respect of matters in appeal |
4,358 |
6,068 |
b) Excise duty claims against the Company |
2 |
2 |
c) Sales tax liability that may arise in respect of matters in appeal |
6,170 |
8,199 |
d) Customs duty claims against the Company |
133 |
187 |
e) Third party Claims against the Company not acknowledged as debts |
152 |
123 |
Note: It is not practicable for the Company to estimate the timing of cash outflow, if any, in respect of the above pending resolutions of the respective proceedings.
As at March 31, 2023, Contingent liability majorly represent demands arising on completion of assessment proceedings under the Income-tax Act, 1961 and other indirect tax act including excise, custom and sales tax.
These claims are on account of various issues of disallowances, or addition in liability by tax liabilities related to various issues including C- forms, WCT TDS etc.
These matters are pending before various appellate authorities and the Management including its tax advisors expect that its position will likely be upheld on ultimate resolution and will not have a material adverse effect on the Companyâs financial position and results of operations.
Third party claims against company not acknowledged as debts includes ongoing cases pending in commercial court/ Arbitral Tribunal in relation to claims/ counter claims raised by few vendors/ customers and HAIL for certain commercial teams disagreements.
B) Estimated amount of contracts remaining to be executed on capital accounts and not provided for (net of advances) -'' 450 (âlakhs) [31st March 2022''502 (âlakhs)]
A Litigations/ disputes mainly include:
a) Provision for disputed statutory matters comprises matters under litigation with Sales Tax and Local authorities.
b) The amount of provision made by the Company is based on the estimate made by the Management considering the facts and circumstances of each case.
To the extent the Company is confident that it may have a strong case that portion is disclosed under contingent liabilities.
c) The timing and the amount of cash flows that will arise from these matters will be determined when the matters are settled with respective Appellate Authorities.
B Warranty
Provision for warranty is considered based on the rolling average warranty expense incurred in the preceding 12 months, the warranty period for which ranges from 12 months to 24 months as per provisions of the contracts.
C P rovision for Estimated Cost to complete on Contracts
A provision for estimated cost to complete on construction contracts is recognized when it is probable that the total contract cost will exceed total contract revenue. The provision shall be utilized as and when the contract gets executed.
B Defined benefit plans (gratuity and other retirement benefits)
The Company also provides for gratuity, covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employeeâs salary and the tenure of employment.
Provident Fund contributions are made to a Trust administered by the Company for its qualifying employees. This defined benefit plans is administered by separate trust that is legally separated from the entity. The board of the trust is required by law and by its trust deed to act in the interest of the fund and of all the relevant stakeholders in the scheme; i.e. active employees, inactive employees, retirees, employers. The board of the fund is responsible for the investment policy with regard to the assets of the fund.
A significant part of the plan assets are classified as Level 2 where the fair value is determined basis the observable inputs either directly or indirectly. The financial assets carried at fair value by the trust are mainly investments in Government securities, public and private sector bonds and mutual funds.
Sensitivity analysis indicates the influence of a reasonable change in certain significant assumptions on the outcome of the Present value of obligation (PVO) and aids in understanding the uncertainty of reported amounts.
1 - Sensitivity analysis for each significant actuarial assumptions viz. Discount rate and Salary escalation rate as of the end of the reporting period, showing how the defined benefit obligation would have been affected by changes is called out in the table above.
2 - The assumptions used in preparing the sensitivity analysis is Discount rate at 100bps and - 100 bps
Salary escalation rate at 100 bps and -100 bps
3 - The method used to calculate the liability in these scenarios is by keeping all the other parameters and the data same as in the base liability calculation except for the parameters to be stressed.
4 - There is no change in the method from the previous period and the points/percentage by which the assumptions are stressed are same as that in the previous year.
investment risk- The funds are invested with an external insurer (LIC of India). The insurer manages the Gratuity Fund and provides quarterly interest returns. Considering LIC is a state insurer with a sovereign guarantee and no history of defaults the investment risk is not significant.
interest Risk - The Gratuity fund managed by an external insurer (LIC of India) is in the form of cash accumulation scheme with interest rates declared annually - A significant fall in interest (discount) rates may not be offset by an increase in value of Gratuity Fund, hence may pose an interest rate risk.
Longevity Risk - Since Gratuity is paid at retirement in form of lump sum and also during service at the time of termination to vested members, longevity risk is not applicable since maximum duration for benefit is till retirement age
Salary Risk- The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the planâs liability.
Company is exposed to foreign exchange risk on account of import risk and hedging activities; and export transactions which is monitored periodically. The Company leverages the global treasury operations of Honeywell to improve mitigation of risk relating to foreign exchange.
Foreign currency risk management
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:
Foreign currency exchange rate risk:
The fluctuation in foreign currency exchange rates may have potential impact on the income statement and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the Company. Considering the countries and economic environment in which the Company operates, its operation are subject to risks arising from fluctuations in exchange rates in those countries. The risk primarily relate to U.S. Dollars against the functional currency of Honeywell Automation India Limited.
The Company, as per its Hedging policy, uses forward contracts to hedge foreign exchange exposure. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using forward contracts in accordance with its risk management policies.
Foreign currency sensitivity analysis
The Company is exposed mainly to the fluctuation in the value of USD and EURO. The following table details the company sensitivity to a 5% increase and decrease in functional currency against the relevant foreign currency. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjust there translation at the period end for a 5 % change in foreign currency rate.
Credit risk refers to the risks that a counterparty may default on its contractual obligations resulting in financial loss to the Company. The Company deals only with credit worthy counterparties and takes appropriate measures to mitigate the risk of financial loss from defaults. Trade receivable consists of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable.
The Company manages liquidity risk by maintaining adequate reserves, banking facility and by continuously monitoring forecasts and actual cash flows and by matching the maturity profiles of financial assets and liabilities.
The Companyâs principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company has no outstanding borrowings. The Company believes that the working capital is sufficient to meet its current requirements.
Company has contributed to Honeywell Hometown Solution India Foundation (HHSIF), trust controlled by Honeywell group for CSR activities. The trust has spent funds on activities such as âEducation, Skill and Researchâ and âSustainable and Holistic Community Development Programâ etc. Refer note 29 for related party disclosure.
Unspent CSR contribution amounting to '' 45 lakhs is related to ongoing project and will be spent by HHSIF in next financial year considering the tenure of the project. The said amount is deposited in âUnspent CSR Accountâ in accordance with Section 135 of the Companies Act, 2013 within the prescribed time limit.
The financial statements were approved for issue by the board of directors on May 17, 2023 (previous year ended March 31, 2022 on May 12, 2022). The Board of Directors have recommended dividend of '' 95 per equity share for the financial year ended March 31, 2023 (previous year ended March 31, 2022: '' 90 per equity share) for approval of shareholders. The face value of the equity share is '' 10 each. This payment is subject to the approval of shareholders in the Annual General Meeting of the Company which is scheduled on August 11, 2023. This final dividend if approved by shareholders would result in a net cash outflow of approximately '' 8,399 lakhs (previous year ended March 31, 2022: '' 7,957 lakhs approved by shareholder in Annual General Meeting held on August 17, 2022).
The Company maintains the books of account electronically and itâs back-up on daily-basis on a server located outside of India. These data are accessible in India at all times. The Company has noted the recent changes in the Rule 3 of Companies Act and is in the process of evaluating the options to comply with the revised rules. The Company will notify Registrar of Companies (ROC) about the person in control of the data in its Annual filing.
Figures for the previous year have been regrouped/reclassified wherever required.
Mar 31, 2022
âDuring the year ended March 31, 2022 and March 31,2021,there is no movement in property, plant and equipment and intangible asset on account of revaluation, business combination, impairment.
The aggregate depreciation has been included under depreciation and amortization expense in the statement of Profit and Loss.â
The concentration of credit risk is limited due to the fact that the customer base is large.
The Company determines the allowance for expected credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Company has specifically evaluated the potential impact with respect to customers which could have an immediate impact and the rest which could have an impact with expected delays. Basis this assessment, the allowance for doubtful trade receivables as at March 31, 2022 is considered adequate.
The Company is not having any trade receivables representing more than 5% of total trade receivables.
There are no repatriation restrictions with regards to cash and cash equivalents as at the end of the reporting period and prior periods.
The deposits maintained by the Company with banks and financial institutions comprise time deposits, which can be withdrawn by the Company at any point without prior notice or penalty on the principal.
(a) Rights, preferences and restrictions attached to the shares
Equity shares: The Company has one class of equity shares having a par value of Rs.10 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.
e) 6,631,142 (March 31, 2021 : 6,631,142 ) Equity shares constituting 75% (March 31, 2021 : 75%) of the paid-up capital of the Company are held by Honeywell International Inc., the ultimate holding company, through its 100% subsidiary, HAIL Mauritius Limited (earlier, Honeywell Asia Pacific Inc.).
f) The Company has neither allotted any shares as fully paid up bonus shares nor pursuant to contract(s) payment being received in cash during 5 years immediately preceding March 31,2022.
Progress on satisfying performance obligations under contracts with customers and the related billings and cash collections are recorded in accounts receivable and the unbilled receivables in Other Financial Assets. The customer advances are recorded as Other Current Liabilities. Unbilled receivables (Contract Assets) arise when the timing of cash collected from customers differs from the timing of revenue recognition, such as when contract provisions require specific milestones to be met before a customer can be billed. Those assets are recognized when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract. Contract liabilities are recorded when a milestone is met triggering the contractual right to bill but revenue recognised over time is not recognized.
When contracts are modified to account for changes in contract specifications and requirements, the Company considers whether the modification either creates new or changes the existing enforceable rights and obligations. Contract modifications that are for goods or services that are not distinct from the existing contract, due to the significant integration with the original good or service provided, are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct, they are accounted for as a new contract and performance obligation, which are recognized prospectively.
The net change was primarily driven by the increase in recognition of revenue as performance obligations were satisfied exceeding milestone billings..
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contractâs transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. When contracts with customers require highly complex integration or manufacturing services that are not separately identifiable from other promises in the contracts and, therefore, not distinct, then the entire contract is accounted for as a single performance obligation. Performance obligations are satisfied as of a point in time or over time. Performance obligations are supported by contracts with customers, providing a framework for the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance obligation is typically indicated by the terms of the contract. Typical payment terms of fixed-price over time contracts include progress payments based on specified events or milestones, or based on project progress. For some contracts the Company may be entitled to receive an advance payment. The Company provides standard warranty on its products and records obligation on the same based on past trend.
The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for contracts with an original expected term of one year or less. Performance obligations recognized as at the year end will be satisfied over the course of future periods. The disclosure of the timing for satisfying the performance obligation is based on the requirements of contracts with customers. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts and periodic revalidations.
Information reported to the Chief operating decision maker (CODM) for the purposes of resource allocation and assessment of segment performance focuses only on one business segment i.e. Automation & Control Systems. There are no other reportable segments.
Notes to the financial statements
ability to maintain or grow its business with Honeywell depends upon a number of performance factors. However, the Company cannot be assured that its level of sales and profits associated with its relationship with Honeywell will continue. Honeywell-specific business considerations (independent of its shareholding in the Company), including changes in Honeywellâs strategies regarding utilization of alternate opportunities available to it to source products and services currently provided by the Company (including from alternate sources which Honeywell may acquire or develop within its own group), may also reduce the level and/or mix of Honeywellâs business with the Company.
The Company has compiled this information based on intimations received from suppliers of their status as Micro or Small enterprises and / or its registration with the appropriate authority under Micro, Small and Medium Enterprises Development Act, 2006 (as amended from time to time).
NOTE 33 - Share Based Payments Employee share option plan of the company
Honeywell International Inc. (HII), the ultimate holding company, may grant stock options and restricted stock awards to certain employees under its stock incentive plan.
Stock Options â The exercise price, term and other conditions applicable to each option granted under the stock plans are generally determined by the Management Development and Compensation Committee of the Board of Honeywell International Inc. The exercise price of stock options is set on the grant date and may not be less than the fair market value per share of the stock on that date. The fair value is recognized as an expense over the employeeâs requisite service period (generally the vesting period of the award). Options generally vest over a four-year period and expire after ten years.
Restricted Stock Units â Restricted stock unit (RSU) awards entitle the holder to receive one share of common stock for each unit when the units vest. RSUs are issued to certain employees as compensation at fair market value at the date of grant. RSUs typically become fully vested over periods ranging from three to seven years and are payable in Honeywell common stock upon vesting.
Fair value of share options granted in the year
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on implied volatilities from traded options on common stock of HII and historical volatility of common stock of HII. Monte Carlo simulation model is used to derive an expected term which represents an estimate of the time options are expected to remain outstanding. Such model uses historical data to estimate option exercise activity and post-vest termination behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant.
Note: It is not practicable for the Company to estimate the timing of cash outflow, if any, in respect of the above pending resolutions of the respective proceedings.
âAs at March 31, 2022, Contingent liability majorly represent demands arising on completion of assessment proceedings under the Income-tax Act, 1961 and other indirect tax act including excise, custom and sales tax.
These claims are on account of various issues of disallowances, or addition in liability by tax liabilities related to various issues including C- forms, WCT TDS etc.
These matters are pending before various appellate authorities and the Management including its tax advisors expect that its position will likely be upheld on ultimate resolution and will not have a material adverse effect on the Companyâs financial position and results of operations.
Third party claims against company not acknowledged as debts includes ongoing cases pending in commercial court/ Arbitral Tribunal in relation to claims/ counter claims raised by few vendors/ customers and HAIL for certain commercial teams disagreements. â
B) Estimated amount of contracts remaining to be executed on capital accounts and not provided for (net of advances) - Rs. 502 (âlakhs) [31st March 2021 Rs. 461 (âlakhs)]
A Litigations/ disputes mainly include:
a) Provision for disputed statutory matters comprises matters under litigation with Sales Tax and Local authorities.
b) The amount of provision made by the Company is based on the estimate made by the Management considering the facts and circumstances of each case.
To the extent the Company is confident that it may have a strong case that portion is disclosed under contingent liabilities.
c) The timing and the amount of cash flows that will arise from these matters will be determined when the matters are settled with respective Appellate Authorities.
Provision for warranty is considered based on the rolling average warranty expense incurred in the preceding 12 months, the warranty period for which ranges from 12 months to 24 months as per provisions of the contracts.
C Provision for Estimated Cost to complete on Contracts
A provision for estimated cost to complete on construction contracts is recognized when it is probable that the total contract cost will exceed total contract revenue. The provision shall be utilized as and when the contract gets executed.
B Defined benefit plans (gratuity and other retirement benefits)
The Company also provides for gratuity, covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employeeâs salary and the tenure of employment.
Provident Fund contributions are made to a Trust administered by the Company for its qualifying employees. This defined benefit plans is administered by separate trust that is legally separated from the entity. The board of the trust is required by law and by its trust deed to act in the interest of the fund and of all the relevant stakeholders in the scheme; i.e. active employees, inactive employees, retirees, employers. The board of the fund is responsible for the investment policy with regard to the assets of the fund.
A significant part of the plan assets are classified as Level 2 where the fair value is determined basis the observable inputs either directly or indirectly. The financial assets carried at fair value by the trust are mainly investments in Government securities, public and private sector bonds and mutual funds.
Sensitivity analysis indicates the influence of a reasonable change in certain significant assumptions on the outcome of the Present value of obligation (PVO) and aids in understanding the uncertainty of reported amounts.
1 Sensitivity analysis for each significant actuarial assumptions viz. Discount rate and Salary escalation rate as of the end of the reporting period, showing how the defined benefit obligation would have been affected by changes is called out in the table above.
2 The assumptions used in preparing the sensitivity analysis is Discount rate at 100bps and - 100 bps Salary escalation rate at 100 bps and -100 bps
3 The method used to calculate the liability in these scenarios is by keeping all the other parameters and the data same as in the base liability calculation except for the parameters to be stressed.
4 There is no change in the method from the previous period and the points/percentage by which the assumptions are stressed are same as that in the previous year.
Investment risk - The funds are invested with an external insurer (LIC of India). The insurer manages the Gratuity Fund and provides quarterly interest returns. Considering LIC is a state insurer with a sovereign guarantee and no history of defaults the investment risk is not significant.
Interest Risk - The Gratuity fund managed by an external insurer (LIC of India) is in the form of cash accumulation scheme with interest rates declared annually - A significant fall in interest (discount) rates may not be offset by an increase in value of Gratuity Fund, hence may pose an interest rate risk.
Notes to the financial statements
Longevity Risk - Since Gratuity is paid at retirement in form of lump sum and also during service at the time of termination to vested members, longevity risk is not applicable since maximum duration for benefit is till retirement age
Salary Risk - The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the planâs liability.
Notes to the financial statements Financial risk management objectives
Company is exposed to foreign exchange risk on account of import risk and hedging activities; and export transactions which is monitored periodically. The Company leverages the global treasury operations of Honeywell to improve mitigation of risk relating to foreign exchange.
Foreign currency risk management
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:
Foreign currency exchange rate risk:
The fluctuation in foreign currency exchange rates may have potential impact on the income statement and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the Company. Considering the countries and economic environment in which the Company operates, its operation are subject to risks arising from fluctuations in exchange rates in those countries. The risk primarily relate to U.S. Dollars against the functional currency of Honeywell Automation India Limited.
The Company, as per its Hedging policy, uses forward contracts to hedge foreign exchange exposure. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using forward contracts in accordance with its risk management policies.
Foreign currency sensitivity analysis
The Company is exposed mainly to the fluctuation in the value of USD and EURO. The following table details the company sensitivity to a 5% increase and decrease in functional currency against the relevant foreign currency. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjust there translation at the period end for a 5 % change in foreign currency rate.
Credit risk refers to the risks that a counterparty may default on its contractual obligations resulting in financial loss to the Company. The Company deals only with credit worthy counterparties and takes appropriate measures to
Notes to the financial statements
mitigate the risk of financial loss from defaults. Trade receivable consists of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable.
The Company manages liquidity risk by maintaining adequate reserves, banking facility and by continuously monitoring forecasts and actual cash flows and by matching the maturity profiles of financial assets and liabilities.
The Companyâs principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company has no outstanding borrowings. The Company believes that the working capital is sufficient to meet its current requirements.
Notes to the financial statements NOTE 38
As set out in section 135 of the Companies Act, 2013 the Company is required to contribute/ spend Rs. 1236 lakhs towards Corporate Social Responsibility activities, as calculated basis 2% of its average net profits of the last three financial years. Accordingly, during the current year, the Company has spent Rs. 1236 lakhs (previous year Rs.1071 lakhs). There is no shortfall for CSR spend as at 31 March 2022 and 31 March 2021. Company has contributed to Honeywell Hometown Solution, trust contolled by Honeywell group for CSR activities. Ultimately trust had spent funds on activities such as âsafe kids, safe schools,safe wate, covid relief, science program etc.
The financial statements were approved for issue by the board of directors on May 12, 2022 (previous year ended March 31, 2021 on May 31, 2021). The Board of Directors have recommended dividend of Rs. 90 per equity share for the financial year ended March 31, 2022 (previous year ended March 31, 2021: Rs. 85 per equity share) for approval of shareholders. The face value of the equity share is Rs. 10 each. This payment is subject to the approval of shareholders in the Annual General Meeting of the Company which is scheduled on 17th August. This final dividend if approved by shareholders would result in a net cash outflow of approximately Rs. 7957 lacs (previous year ended March 31,2021: Rs. 7,515 lakhs approved by shareholder in Annual General Meeting held on August 18, 2021).
Figures for the previous year have been regrouped/reclassified wherever required.
Mar 31, 2021
Contract balances
Progress on satisfying performance obligations under contracts with customers and the related billings and cash collections are recorded in accounts receivable and the unbilled receivables (Contract Assets) in Other Financial Assets. The customer advances are recorded as Other Current Liabilities. Unbilled receivables (Contract Assets) arise when the timing of cash collected from customers differs from the timing of revenue recognition, such as when contract provisions require specific milestones to be met before a customer can be billed. Those assets are recognized when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract. Contract liabilities are recorded when a milestone is met triggering the contractual right to bill but revenue recognised over time is not recognized.
When contracts are modified to account for changes in contract specifications and requirements, the Company considers whether the modification either creates new or changes the existing enforceable rights and obligations. Contract modifications that are for goods or services that are not distinct from the existing contract, due to the significant integration with the original good or service provided, are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct, they are accounted for as a new contract and performance obligation, which are recognized prospectively.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contractâs transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. When contracts with customers require highly complex integration or manufacturing services that are not separately identifiable from other promises in the contracts and, therefore, not distinct, then the entire contract is accounted for as a single performance obligation. Performance obligations are satisfied as of a point in time or over time. Performance obligations are supported by contracts with customers, providing a framework for the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance obligation is typically indicated by the terms of the contract. Typical payment terms of fixed-price over time contracts include progress payments based on specified events or milestones, or based on project progress. For some contracts the Company may be entitled to receive an advance payment. The Company provides standard warranty on its products and records obligation on the same based on past trend.
The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for contracts with an original expected term of one year or less. Performance obligations recognized as at the year end will be satisfied over the course of future periods. The disclosure of the timing for satisfying the performance obligation is based on the requirements of contracts with customers. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts and periodic revalidations.
The Company has evaluated the impact of COVID - 19 resulting from possibility of constraints to complete performance obligations within contracts with customers which may require revision of estimations of costs to complete the contract because of additional efforts, onerous obligations, liquidated damages and penalties within the terms of contract, termination or deferment of contracts by customers, invoking of force-majeure clause, etc. The Company has concluded that the impact of COVID - 19 is not material based on these estimates. Due to the nature of the pandemic, the Company will continue to monitor developments to identify significant uncertainties relating to revenue in future periods.
Information reported to the Chief operating decision maker (CODM) for the purposes of resource allocation and assessment of segment performance focuses only on one business segment i.e. Automation & Control Systems. There are no other reportable segments.
The Company generates a large percentage of its sales and profits from its business with the Honeywell group (Honeywell), its major shareholder. Sales to Honeywell group accounted for approximately 37% and 38% of our total net sales for the year ended March 31, 2021 and year ended March 31, 2020 respectively. The Companyâs ability to maintain or grow its business with Honeywell depends upon a number of performance factors. However, the Company cannot be assured that its level of sales and profits associated with its relationship with Honeywell will continue. Honeywell-specific business considerations (independent of its shareholding in the Company), including changes in Honeywellâs strategies regarding utilization of alternate opportunities available to it to source products and services currently provided by the Company (including from alternate sources which Honeywell may acquire or develop within its own group), may also reduce the level and/or mix of Honeywellâs business with the Company.
The Company has compiled this information based on intimations received from suppliers of their status as Micro or Small enterprises and / or its registration with the appropriate authority under Micro, Small and Medium Enterprises Development Act, 2006 (as amended from time to time).
NOTE 33 - Share Based Payments Employee share option plan of the company
Honeywell International Inc. (HII), the ultimate holding company, may grant stock options and restricted stock awards to certain employees under its stock incentive plan.
Stock OptionsâThe exercise price, term and other conditions applicable to each option granted under the stock plans are generally determined by the Management Development and Compensation Committee of the Board of Honeywell International Inc. The exercise price of stock options is set on the grant date and may not be less than the fair market value per share of the stock on that date. The fair value is recognized as an expense over the employeeâs requisite service period (generally the vesting period of the award). Options generally vest over a four-year period and expire after ten years.
Restricted Stock UnitsâRestricted stock unit (RSU) awards entitle the holder to receive one share of common stock for each unit when the units vest. RSUs are issued to certain employees as compensation at fair market value at the date of grant. RSUs typically become fully vested over periods ranging from three to seven years and are payable in Honeywell common stock upon vesting.
Fair value of share options granted in the year
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on implied volatilities from traded options on common stock of HII and historical volatility of common stock of HII. Monte Carlo simulation model is used to derive an expected term which represents an estimate of the time options are expected to remain outstanding. Such model uses historical data to estimate option exercise activity and post-vest termination behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant.
Note: It is not practicable for the Company to estimate the timing of cash outflow, if any, in respect of the above pending resolutions of the respective proceedings.
As at March 31, 2021, Contingent liability majorly represent demands arising on completion of assessment proceedings under the Income-tax Act, 1961 and other indirect tax act including excise, custom and sales tax.
These claims are on account of various issues of disallowances, or addition in liability by tax liabilities related to various issues including C- forms, WCT TDS etc.
These matters are pending before various appellate authorities and the Management including its tax advisors expect that its position will likely be upheld on ultimate resolution and will not have a material adverse effect on the Companyâs financial position and results of operations.
Third party claims against company not acknowledged as debts includes ongoing cases pending in commercial court/ Arbitral Tribunal in relation to claims/ counter claims raised by few vendors/ customers and HAIL for certain commercial teams disagreements.
Estimated amount of contracts remaining to be executed on capital accounts and not provided for (net of advances) - Rs. 461 (âlakhs) [31st March 2020 Rs. 2,705 (âlakhs)]
A Litigations/ disputes mainly include:
a) Provision for disputed statutory matters comprises matters under litigation with Sales Tax and Local authorities.
b) The amount of provision made by the Company is based on the estimate made by the Management considering the facts and circumstances of each case.
To the extent the Company is confident that it may have a strong case that portion is disclosed under contingent liabilities.
c) The timing and the amount of cash flows that will arise from these matters will be determined when the matters are settled with respective Appellate Authorities.
B Warranty
Provision for warranty is considered based on the rolling average warranty expense incurred in the preceding 12 months, the warranty period for which ranges from 12 months to 24 months as per provisions of the contracts.
C Provision for Estimated Cost to complete on Contracts
A provision for estimated cost to complete on construction contracts is recognized when it is probable that the total contract cost will exceed total contract revenue. The provision shall be utilized as and when the contract gets executed.
Defined benefit plans (gratuity and other retirement benefits)
The Company also provides for gratuity, covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employeeâs salary and the tenure of employment.
Provident Fund contributions are made to a Trust administered by the Company for its qualifying employees. This defined benefit plans is administered by separate trust that is legally separated from the entity. The board of the trust is required by law and by its trust deed to act in the interest of the fund and of all the relevant stakeholders in the scheme; i.e. active employees, inactive employees, retirees, employers. The board of the fund is responsible for the investment policy with regard to the assets of the fund.
A significant part of the plan assets are classified as Level 2 where the fair value is determined basis the observable inputs either directly or indirectly. This fair value factors the uncertainties arising out of COVID-19. The financial assets carried at fair value by the trust are mainly investments in Government securities, public and private sector bonds and mutual funds.
Sensitivity analysis indicates the influence of a reasonable change in certain significant assumptions on the outcome of the Present value of obligation (PVO) and aids in understanding the uncertainty of reported amounts.
1. Sensitivity analysis for each significant actuarial assumptions viz. Discount rate and Salary escalation rate as of the end of the reporting period, showing how the defined benefit obligation would have been affected by changes is called out in the table above.
2 The assumptions used in preparing the sensitivity analysis is Discount rate at 100bps and - 100 bps Salary escalation rate at 100 bps and -100 bps
3 The method used to calculate the liability in these scenarios is by keeping all the other parameters and the data same as in the base liability calculation except for the parameters to be stressed.
4 There is no change in the method from the previous period and the points/percentage by which the assumptions are stressed are same as that in the previous year.
Investment risk- The funds are invested with an external insurer (LIC of India). The insurer manages the Gratuity Fund and provides quarterly interest returns. Considering LIC is a state insurer with a sovereign guarantee and no history of defaults the investment risk is not significant.
Interest Risk - The Gratuity fund managed by an external insurer (LIC of India) is in the form of cash accumulation scheme with interest rates declared annually - A significant fall in interest (discount) rates may not be offset by an increase in value of Gratuity Fund, hence may pose an interest rate risk.
Company is exposed to foreign exchange risk on account of import risk and hedging activities; and export transactions which is monitored periodically. The Company leverages the global treasury operations of Honeywell to improve mitigation of risk relating to foreign exchange.
Foreign currency risk management
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:
Foreign currency exchange rate risk:
The fluctuation in foreign currency exchange rates may have potential impact on the income statement and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the Company. Considering the countries and economic environment in which the Company operates, its operation are subject to risks arising from fluctuations in exchange rates in those countries. The risk primarily relate to U.S. Dollars against the functional currency of Honeywell Automation India Limited.
The Company, as per its Hedging policy, uses forward contracts to hedge foreign exchange exposure. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using forward contracts in accordance with its risk management policies.
The Company uses forward exchange contracts to hedge its exposure in foreign currency. The information on derivative
Credit risk refers to the risks that a counterparty may default on its contractual obligations resulting in financial loss to the Company. The Company deals only with credit worthy counterparties and takes appropriate measures to mitigate the risk of financial loss from defaults. Trade receivable consists of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable.
The Company manages liquidity risk by maintaining adequate reserves, banking facility and by continuously monitoring forecasts and actual cash flows and by matching the maturity profiles of financial assets and liabilities. The Companyâs principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company has no outstanding borrowings. The Company believes that the working capital is sufficient to meet its current requirements.
As set out in section 135 of the Companies Act, 2013 the Company is required to contribute/ spend Rs. 1071 lakhs towards Corporate Social Responsibility activities, as calculated basis 2% of its average net profits of the last three financial years. Accordingly, during the current year, the Company has spent Rs. 1071 lakhs (previous year Rs. 828 lakhs).
The financial statements were approved for issue by the board of directors on May 31, 2021 (previous year ended March 31, 2020 on May 22, 2020). The Board of Directors have recommended dividend of Rs. 85 per equity share for the financial year ended March 31,2021 (previous year ended March 31,2020: Rs. 75 per equity share) for approval of shareholders. The face value of the equity share is Rs. 10 each. This payment is subject to the approval of shareholders in the Annual General Meeting of the Company. In view of COVID - 19 the Company is working on an Annual General Meeting date which will be announced by the Company in due course. This final dividend if approved by shareholders would result in a net cash outflow of approximately Rs. 7515 lacs (previous year ended March 31,2020: Rs. 6,631 lacs approved by shareholder in Annual General Meeting held on August 18, 2020).
Figures for the previous year have been regrouped/reclassified wherever required.
Mar 31, 2019
NOTE 1 - GENERAL INFORMATION:
Honeywell Automation India Limited (the âCompanyâ) is engaged primarily in the business of Automation & Control systems on turnkey basis and otherwise. The Company is a public limited company and is listed on the Bombay Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE).
(a) Rights, preferences and restrictions attached to the shares
Equity shares: The Company has one class of equity shares having a par value of Rs.10 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.
b) 6,631,142 (March 31, 2018 : 6,631,142 ) Equity shares constituting 75% (March 31,2018 : 75%) of the paid-up capital of the Company are held by Honeywell International Inc., the ultimate holding company, through its 100% subsidiary, HAIL Mauritius Limited (previous year Honeywell Asia Pacific Inc.)
c) The Company has neither allotted any shares as fully paid up bonus shares nor pursuant to contract(s) payment being received in cash during 5 years immediately preceding March 31, 2019.
d) Honeywell Asia Pacific Inc. (âHAPIâ) has merged with HAIL Mauritius Limited (âHAIL Mauritiusâ), resulting in:
(i) change in the immediate holding company of the Company, and
(ii) an inter se transfer of 6,631,142 equity shares aggregating to 75.00% of the shareholding of the Company, from HAPI to HAIL Mauritius. Honeywell International Inc. continues to be the ultimate holding company.
A. Contract balances
Progress on satisfying performance obligations under contracts with customers and the related billings and cash collections are recorded in accounts receivable and the unbilled receivables (Contract Assets) in Other Financial Assets. The customer advances are recorded as Other Current Liabilities. Unbilled receivables (Contract Assets) arise when the timing of cash collected from customers differs from the timing of revenue recognition, such as when contract provisions require specific milestones to be met before a customer can be billed. Those assets are recognized when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract. Contract liabilities are recorded when a milestone is met triggering the contractual right to bill but revenue recognised over time is not recognized.
When contracts are modified to account for changes in contract specifications and requirements, the Company considers whether the modification either creates new or changes the existing enforceable rights and obligations. Contract modifications that are for goods or services that are not distinct from the existing contract, due to the significant integration with the original good or service provided, are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct, they are accounted for as a new contract and performance obligation, which are recognized prospectively.
The net change was primarily driven by the increase in recognition of revenue as performance obligations were satisfied exceeding milestone billings.
B. Performance obligation
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contractâs transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. When contracts with customers require highly complex integration or manufacturing services that are not separately identifiable from other promises in the contracts and, therefore, not distinct, then the entire contract is accounted for as a single performance obligation. Performance obligations are satisfied as of a point in time or over time. Performance obligations are supported by contracts with customers, providing a framework for the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance obligation is typically indicated by the terms of the contract. Typical payment terms of fixed-price over time contracts include progress payments based on specified events or milestones, or based on project progress. For some contracts the Company may be entitled to receive an advance payment. The Company provides standard warranty on its products and records obligation on the same based on past trend.
The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for contracts with an original expected term of one year or less. Performance obligations recognized as of March 31, 2019 will be satisfied over the course of future periods. The disclosure of the timing for satisfying the performance obligation is based on the requirements of contracts with customers. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts and periodic revalidations.
NOTE 2 - SEGMENT INFORMATION
Information reported to the Chief operating decision maker (CODM) for the purposes of resource allocation and assessment of segment performance focuses only on one business segment i.e. Automation & Control Systems. There are no other reportable segments.
* Property, Plant and Equipment, Capital work in progress and Intangible assets used in the Companyâs business have not been identified to âIndiaâ or âOtherâ, as they are used interchangeably.
The Company generates more than 10% of the revenue only from Honeywell group.
The Company generates a large percentage of its sales and profits from its business with the Honeywell group (Honeywell), its major shareholder. Sales to Honeywell group accounted for approximately 38% and 37% of our total net sales for the year ended March 31, 2019 and year ended March 31, 2018 respectively. The Companyâs ability to maintain or grow its business with Honeywell depends upon a number of performance factors. However, the Company cannot be assured that its level of sales and profits associated with its relationship with Honeywell will continue. Honeywell-specific business considerations (independent of its shareholding in the Company), including changes in Honeywellâs strategies regarding utilization of alternate opportunities available to it to source products and services currently provided by the Company (including from alternate sources which Honeywell may acquire or develop within its own group), may also reduce the level and/or mix of Honeywellâs business with the Company.
NOTE 3 - LEASE TRANSACTIONS:
As a Lessee in Operating Lease
Rentals for office premises, land, building under operating leases of Rs. 2,356 (âlakhs) [Previous year Rs. 2,255 (âlakhs)] have been included under Rent Expense.
Previous year figures are indicated in brackets.
The Company has compiled this information based on intimations received from suppliers of their status as Micro or Small enterprises and / or its registration with the appropriate authority under Micro, Small and Medium Enterprises Development Act, 2006 (as amended from time to time).
NOTE 4 - SHARE BASED PAYMENTS
Employee share option plan of the company
Honeywell International Inc (HII), the ultimate holding company, may grant stock options and restricted stock awards to certain employees under its stock incentive plan.
Stock Options - The exercise price, term and other conditions applicable to each option granted under the stock plans are generally determined by the Management Development and Compensation Committee of the Board of Honeywell International Inc. The exercise price of stock options is set on the grant date and may not be less than the fair market value per share of the stock on that date. The fair value is recognized as an expense over the employeeâs requisite service period (generally the vesting period of the award). Options generally vest over a four-year period and expire after ten years.
Restricted Stock Units - Restricted stock unit (RSU) awards entitle the holder to receive one share of common stock for each unit when the units vest. RSUs are issued to certain employees as compensation at fair market value at the date of grant. RSUs typically become fully vested over periods ranging from three to seven years and are payable in Honeywell common stock upon vesting.
Fair value of share options granted in the year
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on implied volatilities from traded options on common stock of HII and historical volatility of common stock of HII. Monte Carlo simulation model is used to derive an expected term which represents an estimate of the time options are expected to remain outstanding. Such model uses historical data to estimate option exercise activity and post-vest termination behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant.
NOTE 5 - CONTINGENT LIABILITIES AND COMMITMENTS
A Contingent liabilities
B Estimated amount of contracts remaining to be executed on capital accounts and not provided for (net of advances) - Rs. 925 (âlakhs) [31st March 2018 Rs. 211 (âlakhs)]
A Litigations/ disputes mainly include:
a) Provision for disputed statutory matters comprises matters under litigation with Sales Tax and Local authorities.
b) The amount of provision made by the Company is based on the estimate made by the Management considering the facts and circumstances of each case.
To the extent the Company is confident that it may have a strong case that portion is disclosed under contingent liabilities.
c) The timing and the amount of cash flows that will arise from these matters will be determined when the matters are settled with respective Appellate Authorities.
B Warranty
Provision for warranty is considered based on the rolling average warranty expense incurred in the preceding 12 months, the warranty period for which ranges from 12 months to 24 months as per provisions of the contracts.
C Provision for Estimated Cost to complete on Contracts
A provision for estimated cost to complete on construction contracts is recognized when it is probable that the total contract cost will exceed total contract revenue. The provision shall be utilized as and when the contract gets executed.
NOTE 6 - EMPLOYEE BENEFIT PLANS
A Defined contribution plans
The company has recognized the following amounts in the Statement of Profit and Loss for the year.
B Defined benefit plans (gratuity and other retirement benefits)
The Company also provides for gratuity, covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employeeâs salary and the tenure of employment Provident Fund contributions are made to a Trust administered by the Company for its qualifying employees. This defined benefit plans is administered by separate trust that is legally separated from the entity. The board of the trust is required by law and by its trust deed to act in the interest of the fund and of all the relevant stakeholders in the scheme; i.e. active employees, inactive employees, retirees, employers. The board of the fund is responsible for the investment policy with regard to the assets of the fund.
The Principal assumptions used for the purposes of the actuarial valuations were as follows:
The estimates of future salary increases considered in actuarial valuation takes into account inflation, seniority, promotion and other relevant factors.
The current service cost and the net interest expenses for the year are included in âEmployee benefits expenseâ in the statement of profit and loss.
The remeasurement of the net defined benefit liability is included in other comprehensive income.
Note - Whenever there is a net surplus position in PF valuation, as per the PF trust act, no surplus can be transferred to the Company as it is separate from the Company. The Company would not be accounting for any amount in its books in this position.
Sensitivity Analysis
Sensitivity analysis indicates the influence of a reasonable change in certain significant assumptions on the outcome of the Present value of obligation (PVO) and aids in understanding the uncertainty of reported amounts.
1 Sensitivity analysis for each significant actuarial assumptions viz. Discount rate and Salary escalation rate as of the end of the reporting period, showing how the defined benefit obligation would have been affected by changes is called out in the table above.
2 The assumptions used in preparing the sensitivity analysis is Discount rate at 100bps and - 100 bps
Salary escalation rate at 100 bps and -100 bps
3 The method used to calculate the liability in these scenarios is by keeping all the other parameters and the data same as in the base liability calculation except for the parameters to be stressed.
4 There is no change in the method from the previous period and the points/percentage by which the assumptions are stressed are same as that in the previous year.
Impact of change in discount rate when base assumption is decreased/increased by 100 basis point
In presenting the above sensitivity analysis, the present value of the defined benefit obligations has been calculated using Projected Unit Credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the Balance sheet.
The overall expected rate of return on assets is based on the expectation of the average long term rate of return expected on investments of the Fund during the estimated term of the obligations.
A note on other risks
Investment risk: The funds are invested with an external insurer (LIC of India). The insurer manages the Gratuity Fund and provides quarterly interest returns. Considering LIC is a state insurer with a sovereign guarantee and no history of defaults the investment risk is not significant.
Interest Risk: The Gratuity fund managed by an external insurer (LIC of India) is in the form of cash accumulation scheme with interest rates declared annually - A significant fall in interest (discount) rates may not be offset by an increase in value of Gratuity Fund, hence may pose an interest rate risk.
Longevity Risk: Since Gratuity is paid at retirement in form of lump sum and also during service at the time of termination to vested members, longevity risk is not applicable since maximum duration for benefit is till retirement age
Salary Risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the planâs liability.
Financial risk management objectives
Company is exposed to foreign exchange risk on account of import risk and hedging activities; and export transactions which is monitored periodically. The Company leverages the global treasury operations of Honeywell to improve mitigation of risk relating to foreign exchange.
Foreign currency risk management
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:
Foreign currency exchange rate risk:
The fluctuation in foreign currency exchange rates may have potential impact on the income statement and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the Company. Considering the countries and economic environment in which the Company operates, its operation are subject to risks arising from fluctuations in exchange rates in those countries. The risk primarily relate to U.S. Dollars against the functional currency of Honeywell Automation India Limited.
The Company, as per its Hedging policy, uses forward contracts to hedge foreign exchange exposure. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using forward contracts in accordance with its risk management policies.
Foreign currency sensitivity analysis
The Company is exposed mainly to the fluctuation in the value of USD and EURO. The following table details the company sensitivity to a 5% increase and decrease in functional currency against the relevant foreign currency. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjust there translation at the period end for a 5 % change in foreign currency rate.
Credit risk management
Credit risk refers to the risks that a counterparty may default on its contractual obligations resulting in financial loss to the Company. The Company deals only with credit worthy counterparties and takes appropriate measures to mitigate the risk of financial loss from defaults. Trade receivable consists of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable.
Liquidity risk management
The Company manages liquidity risk by maintaining adequate reserves, banking facility and by continuously monitoring forecasts and actual cash flows and by matching the maturity profiles of financial assets and liabilities.
NOTE 7
As set out in section 135 of the Companies Act, 2013 the Company is required to contribute/ spend Rs. 605 lakhs towards Corporate Social Responsibility activities, as calculated basis 2% of its average net profits of the last three financial years. Accordingly, during the current year, the Company has spent Rs. 605 lakhs (previous year Rs. 469 lakhs).
NOTE 8
The financial statements were approved for issue by the board of directors on May 13, 2019. The Board of Directors have recommended dividend of Rs. 45 per equity share for the financial year ended March 31, 2019 (previous year ended March 31, 2018: Rs. 32 per equity share) for approval of shareholders. The face value of the equity share is Rs. 10 each.
Mar 31, 2018
NOTE 1 - CRITICAL JUDGEMENTS, ESTIMATIONS AND ASSUMPTIONS IN APPLYING ACCOUNTING POLICIES
In the application of the Company''s accounting policies, which are described in note 3, the directors of the company are required to make judgments estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
1. The preparation of financial statements involves estimates and assumptions that affect the reported amount of assets, liabilities, disclosure of contingent liabilities at the date of financial statements and the reported amount of revenues and expenses for the reporting period. Specifically, the Company estimates the probability of collection of accounts receivable by analyzing historical payment patterns, customer concentrations, customer creditworthiness and current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required.
2. The company uses the percentage-of-completion method in accounting for its contract revenue. Use of the percentage-of-completion method requires the company to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the expected contract estimates at the reporting date.
3. The stock compensation expense is determined based on the Companyâs estimate of equity instruments that will eventually vest.
4. Provision for warranty is considered based on the rolling average warranty expense incurred in the preceding 12 months, the warranty period for which ranges from 12 months to 24 months as per provisions of the contracts.
5. In case of Property, plant and equipment, The charge in respect of periodic depreciation is derived after determining an estimate of an assetâs expected useful life and the expected residual value at the end of its life. The useful lives and residual values of company''s assets are determined by management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology.
NOTE 28 - SEGMENT INFORMATION
Information reported to the Chief operating decision maker (CODM) for the purposes of resource allocation and assessment of segment performance focuses only on one business segment i.e. Automation & Control Systems. There are no other reportable segments.
* Property, Plant and Equipment and Intangibles used in the Companyâs business have not been identified to âIndiaâ or âOtherâ, as they are used interchangeably.
The Company generates more then 10% of the revenue only from Honeywell group.
NOTE 2 - RELATED PARTY DISCLOSURE :
List of related parties (as identified and certified by the Management)
i) Parties where control exists
Honeywell Asia -Pacific Inc., Holding company
Honeywell International Inc., Ultimate holding company__
Other related parties with whom transactions have taken place during the year:
ii) Fellow Subsidiaries
Honeywell Middle East B.V. Honeywell International (India) Private Limited
Honeywell Technology Solutions Qatar Honeywell Limited Australia
Honeywell Tianjin Limited Honeywell Limited
Honeywell Life Safety AS Honeywell Enraf Americas, Inc.
Honeywell B.V. Honeywell Measurex (Ireland) Limited
Honeywell & Co. Oman L.L.C. Honeywell Turki-Arabia Limited
Honeywell Pte Ltd. Honeywell Controls System Limited Honeywell Automation & Control Solutions South Africa Honeywell International Middle East Ltd.
(Pty) Ltd. MST Technology GMBH
Honeywell Kuwait K.S.C. Honeywell Security France S.A.
Automation and Control Solutions, S. de R.L. de C.V. Honeywell GMBH
Honeywell Europe N.V. Honeywell S.A. (Belgium)
Honeywell Systems (Thailand) Ltd. Honeywell Airport Systems Gmbh
Honeywell Ltd. ( Hong Kong) Honeywell s.r.l.
Enraf B.V. UOP India Private Limited
Honeywell Technology Solutions Lab Pvt. Ltd. Honeywell Engineering Sdn. Bhd.
Pittway Systems Technology Group Europe Ltd. Honeywell Co., Ltd. (Korea)
Honeywell Taiwan Inc. Honeywell S.L.
Honeywell Life Safety AS Honeywell Portugal, Automacao e Contolo, S.A.
Honeywell Building Solutions Gmbh Honeywell Automation & control Solutions Carribean Ltd.
Novar Systems Ltd. Honeywell AS Norway
Honeywell Middle East FZE Honeywell OY
Honeywell Controls International Ltd. Matrikon Middle East Co WLL
Tridium Inc. Honeywell Environmental & Combustion Controls
Honeywell Limited (New Zeland) (Tianjin) Co., Ltd.
Honeywell Austria Gesellschaft mbh Honeywell International s.a.r.l.
Honeywell A.B. Honeywell Sensing & Control China Co, Ltd.
Matrikon Pty Ltd. Honeywell Technologies SARL
Trend Control Systems Ltd. Honeywell AG
Honeywell (China) Advanced Solutions Co. Ltd. Matrikon Inc.
Honeywell Southern Africa (Proprietary) Ltd. Honeywell NV [Belgium]
Honeywell Japan Inc. Honeywell S.A.I.C.
Honeywell Angola Lda Eclipse Combustion (Pvt.) Ltd.
Honeywell E.P.E. Elster GmbH
HONEYWELL LIMITED Elster Metering Private Limited
Honeywell S.A. [France] Elster Solutions GmbH
HONEYWELL TEKNOLOJI A.S Energy ICT N.V.
MK Electric (Malaysia) SDN BHD Honeywell Teknoloji Anonim Sirketi (Previously:
Intermec Technologies (S) Pte Ltd Honeywell Otomasyon ve Kontrol Sistemleri Sanayi ve
Honeywell Hometown Solutions India Foundation Ticaret A.S.)
Honeywell Trading (Shanghai) Co. Ltd. Metrologic Asia (Pte) Ltd
UOP Limited Xtralis Pty Ltd
Other related parties with whom transactions have taken place during the year:
Honeywell Fire Systems LLC Honeywell International Services S.r.l.
Life Safety Germany GmbH HSM Technology LLC
Honeywell Automotive de Mexico, S.A. de C.V. Honeywell HBS Solutions LLC
Honeywell A/S (Denmark) UOP L.L.C.
Automation And Control Solutions Limited Honeywell Aerospace B.V.
PT Honeywell Indonesia Honeywell Turbo Technologies (India) Private Limited
Life Safety Distribution AG Honeywell Electrical Devices and Systems India Pvt. Ltd.
Enraf Tanksystem AG Honeywell do Brasil Ltda.
Honeywell Analytics Ltd. Honeywell Egypt Limited
Sinpoec Honeywell Tianjin Ltd. Honeywell EOOd
ZAO Honeywell Matrikon International, Inc.
Maxon Corporation Novar Gmbh
Honeywell ASCa Inc. Honeywell Integrated Technology (China) Co Ltd.
Maxon Combustion Equipment (Shanghai) Co. Ltd. Ademco Asia Pacific Ltd.
Maxon International BVBA Tridium Asia Pacific Pte Ltd.
BW Technologies Partnership Honeywell Building Solutions SES Corporation
Inncom International Inc Honeywell Romania s.r.l.
Bryan Donkin RMG Gas Controls Ltd. Honeywell Marine SAS
Honeywell, S.L. [Spain] Honeywell Europe Services S.A.S.
Honeywell Iraq LLC Honeywell Automation and Control Soluitons West Africa
Saia-Burgess Controls AG Limited
Honeywell spol. s.r.o. [Slovak Republic] Honeywell Automation Controls System LLP (Kazakhstan)
Integrated Technical Innovation Company for General Honeywell (Macau) Limited
Services & Trade KAC Alarm Company Limited
Honeywell Specialty Chemicals (Singapore) Pte. Ltd. Elster Water Metering Limited
Honeywell Taiwan Limited Honeywell Sp. z o.o.
Honeywell, S.A. de C.V. Honeywell Szabalyozastechnikai Kft.
Mercury Instruments LLC Honeywell spol. s.r.o. [Czech Republic]
RMG Messtechnik GmbH Honeywell Technology Solutions Inc.
Honeywell China co. Ltd. Matrikon Business Systems Inc.
Honeywell Iraq Company for Technology Solutions and Novar ED&S Limited
Services Ltd. Salisbury Electrical Safety L.L.C.
Honeywell Chile S.A. Honeywell Gas Technologies GmbH
Intelligrated Systems LLC Honeywell spol. s.r.o.
Eclipse Combustion Equipment (Suzhou) Co. Ltd. Honeywell Resins & Chemicals LLC
Honeywell Algerie S.a.r.l. Elster Holdings US, Inc.
Matrikon Europe Limited Honeywell Automation Control Solutions (China) Co. Ltd.
Movilizer GmbH EnviteC-Wismar GmbH
iii) Key Management Personnel
Mr. Vikas Chadha, Managing Director [Resigned w.e.f. July 31, 2016 (close of business hours)]
Mr. Ashish Gaikwad, Managing Director [Appointed w.e.f. October 1, 2016]
Mr. Anurag Bhagania, CFO [Resigned w.e.f. June 26, 2016 (close of business hours)]
Mr. R Ravichandran, CFO [Appointed w.e.f. June 27, 2016]
Ms. Sangeet Hunjan, Company Secretary [Resigned w.e.f. November 24, 2016 (close of business hours)]
Ms. Farah Irani, Company Secretary [Appointed w.e.f. May 16, 2017]
The Company generates a large percentage of its sales and profits from its business with the Honeywell group (Honeywell), its major shareholder. Sales to Honeywell group accounted for approximately 37% and 39% of our total net sales for the year ended March 31, 2018 and year ended March 31, 2017 respectively. The Companyâs ability to maintain or grow its business with Honeywell depends upon a number of performance factors. However, the Company cannot be assured that its level of sales and profits associated with its relationship with Honeywell will continue. Honeywell-specific business considerations (independent of its shareholding in the Company), including changes in Honeywellâs strategies regarding utilization of alternate opportunities available to it to source products and services currently provided by the Company (including from alternate sources which Honeywell may acquire or develop within its own group), may also reduce the level and/or mix of Honeywellâs business with the Company.
As a Lessee in Operating Lease
Rentals for office premises, land, building under operating leases of Rs. 2,255 (''lakhs) [Previous period Rs. 2,252 (''lakhs)] have been included under Rent Expense.
NOTE 3 - SHARE BASED PAYMENTS Employee share option plan of the company
Honeywell International Inc (HII), the ultimate holding company, may grant stock options and restricted stock awards to certain employees under its stock incentive plan.
Stock OptionsâThe exercise price, term and other conditions applicable to each option granted under the stock plans are generally determined by the Management Development and Compensation Committee of the Board of Honeywell International Inc. The exercise price of stock options is set on the grant date and may not be less than the fair market value per share of our stock on that date. The fair value is recognized as an expense over the employeeâs requisite service period (generally the vesting period of the award). Options generally vest over a four-year period and expire after ten years.
Restricted Stock UnitsâRestricted stock unit (RSU) awards entitle the holder to receive one share of common stock for each unit when the units vest. RSUs are issued to certain employees as compensation at fair market value at the date of grant. RSUs typically become fully vested over periods ranging from three to seven years and are payable in Honeywell common stock upon vesting.
Fair value of share options granted in the year
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on implied volatilities from traded options on common stock of HII and historical volatility of common stock of HII. Monte Carlo simulation model is used to derive an expected term which represents an estimate of the time options are expected to remain outstanding. Such model uses historical data to estimate option exercise activity and post-vest termination behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant.
A Disputed statutory matters mainly include:
a) Provision for disputed statutory matters comprises matters under litigation with Sales Tax and Local authorities.
b) The amount of provision made by the Company is based on the estimate made by the Management considering the facts and circumstances of each case.
To the extent the Company is confident that it may have a strong case that portion is disclosed under contingent liabilities.
c) The timing and the amount of cash flows that will arise from these matters will be determined by the Appellate Authorities only on settlement of these cases.
B Warranty
Provision for warranty is considered based on the rolling average warranty expense incurred in the preceding 12 months, the warranty period for which ranges from 12 months to 24 months as per provisions of the contracts.
C Provision for Estimated Cost to complete on Contracts
A provision for estimated cost to complete on construction contracts is recognized when it is probable that the total contract cost will exceed total contract revenue. The provision shall be utilized as and when the contract gets executed.
B Defined benefit plans (gratuity and other retirement benefits)
The Company also provides for gratuity, covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employeeâs salary and the tenure of employment.
Provident Fund contributions are made to a Trust administered by the Company for its qualifying employees. This defined benefit plans is administered by separate trust that is legally separated from the entity. The board of the trust is required by law and by its trust deed to act in the interest of the fund and of all the relevant stakeholders in the scheme; i.e. active employees, inactive employees, retirees, employers. The board of the fund is responsible for the investment policy with regard to the assets of the fund.
The current service cost and the net interest expenses for the year are included in ''Employee benefits expense'' in the statement of profit and loss.
The remeasurement of the net defined benefit liability is included in other comprehensive income.
Note - There is a net surplus position in PF valuation and however as per the PF trust act, no surplus can be transferred to the company as it is separate from the company, the company would not be accounting for any amount in its books in this position.
Sensitivity Analysis
Sensitivity analysis indicates the influence of a reasonable change in certain significant assumptions on the outcome of the Present value of obligation (PVO) and aids in understanding the uncertainty of reported amounts.
1. Sensitivity analysis for each significant actuarial assumptions viz. Discount rate and Salary escalation rate as of the end of the reporting period, showing how the defined benefit obligation would have been affected by changes is called out in the table above.
2. The assumptions used in preparing the sensitivity analysis is Discount rate at 100bps and - 100 bps
Salary escalation rate at 100 bps and -100 bps
3. The method used to calculate the liability in these scenarios is by keeping all the other parameters and the data same as in the base liability calculation except for the parameters to be stressed .
4. There is no change in the method from the previous period and the points/percentage by which the assumptions are stressed are same as that in the previous year.
In presenting the above sensitivity analysis, the present value of the defined benefit obligations has been calculated using Projected Unit Credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognied in the Balance sheet.
A note on other risks
Investment risk: The funds are invested with an external insurer (LIC of India). The insurer manages the Gratuity Fund and provides quarterly interest returns. Considering LIC is a state insurer with a sovereign guarantee and no history of defaults the investment risk is not significant.
Interest Risk: The Gratuity fund managed by an external insurer (LIC of India) is in the form of cash accumulation scheme with interest rates declared annually - A significant fall in interest (discount) rates may not be offset by an increase in value of Gratuity Fund, hence may pose an interest rate risk.
Longevity Risk: Since Gratuity is paid at retirement in form of lump sum and also during service at the time of termination to vested members, longevity risk is not applicable since maximum duration for benefit is till retirement age.
Salary Risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''s liability.
Notes to the financial statements Financial risk management objectives
Company is exposed to foreign exchange risk on account of import risk and hedging activities; and export transactions which is monitored periodically. The Company leverages the global treasury operations of Honeywell to improve mitigation of risk relating to foreign exchange.
Foreign currency exchange rate risk:
The fluctuation in foreign currency exchange rates may have potential impact on the income statement and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the company. Considering the countries and economic environment in which the company operates, its operation are subject to risks arising from fluctuations in exchange rates in those countries. The risk primarily relate to U.S. Dollars against the functional currency of Honeywell Automation India Limited.
Notes to the financial statements Credit risk management
Credit risk refers to the risks that a counterparty may default on its contractual obligations resulting in financial loss to the Company. The Company deals only with credit worthy counterparties and takes appropriate measures to mitigate the risk of financial loss from defaults. Trade receivable consists of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable.
Liquidity risk management
The Company manages liquidity risk by maintaining adequate reserves, banking facility and by continuously monitoring forecasts and actual cash flows and by matching the maturity profiles of financial assets and liabilities.
NOTE 4
As set out in section 135 of the Companies Act, 2013 the Company is required to contribute / spent Rs. 469 lakhs towards Corporate Social Responsibility activities, as calculated basis 2% of its average net profits of the last three financial years. Accordingly, during the current year, the Company has spent Rs. 469 lakhs (previous year Rs. 348 lakhs including Rs.9 lakhs toward administration cost).
NOTE 5
The financial statements were approved for issue by the board of directors on May 14, 2018. The Board of Directors have recommended dividend of Rs. 32 per equity share for the financial year ended March 31, 2018 (previous year ended March 31, 2017: Rs. 10 per equity share) for approval of shareholders. The face value of the equity share is Rs. 10 each.
Mar 31, 2017
NOTE 1 - CRITICAL JUDGEMENTS, ESTIMATIONS AND ASSUMPTIONS IN APPLYING ACCOUNTING POLICIES
In the application of the Companyâs accounting policies, which are described in note 3, the directors of the company is required to make judgments estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
1. The preparation of financial statements involves estimates and assumptions that affect the reported amount of assets, liabilities, disclosure of contingent liabilities at the date of financial statements and the reported amount of revenues and expenses for the reporting period. Specifically, the Company estimates the probability of collection of accounts receivable by analyzing historical payment patterns, customer concentrations, customer credit-worthiness and current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required.
2. The company uses the percentage-of-completion method in accounting for its contract revenue. Use of the percentage-of-completion method requires the company to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the expected contract estimates at the reporting date.
3. The stock compensation expense is determined based on the Companyâs estimate of equity instruments that will eventually vest.
4. Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which this entity operate (i.e. the âfunctional currencyâ). The financial statements are presented in Indian Rupee, the national currency of India, which is the functional currency of the Company.
5. Provision for warranty is considered based on the rolling average warranty expense incurred in the preceding 12 months, the warranty period for which ranges from 12 months to 24 months as per provisions of the contracts.
6. In case of Property, plant and equipment, The charge in respect of periodic depreciation is derived after determining an estimate of an assetâs expected useful life and the expected residual value at the end of its life. The useful lives and residual values of companyâs assets are determined by management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology.
NOTE 2 - FIRST-TIME IND-AS ADOPTION RECONCILIATIONS
The company has prepared the opening balance sheet as per Ind AS as of April 1, 2015 (the transition date) by recognizing all assets and liabilities whose recognition is required by Ind AS, not recognizing items of assets or liabilities which are not permitted by Ind AS, by reclassifying items from Previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognized assets and liabilities. However, this principle is subject to the certain optional exemptions availed by the company as detailed below :
Exemptions availed
Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS.
The Company has availed the following exemptions:
1. Deemed cost for property, plant and equipment and intangible assets: Property Plant and equipment, were carried in Balance sheet prepared in accordance with previous GAAP on 31st March 2015. The Company has elected to regard carrying values as at 31st March 2015 as deemed cost at the date of transition.
2. Derecognition of financial assets and liabilities: The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after April 1, 2015 ( the transition date).
3. Cumulative translation differences on foreign operations: Cumulative currency translation differences for all foreign operations are deemed to be zero as at 1 April 2015.
4. Impairment of financial assets: The Company has applied the impairment requirements of Ind AS 109 retrospectively; however, as permitted by Ind AS 101, it has used reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognized in order to compare it with the credit risk at the transition date. Further, the Company has not undertaken an exhaustive search for information when determining, at the date of transition to Ind ASs, whether there have been significant increases in credit risk since initial recognition, as permitted by Ind AS 101.
5. Determining whether an arrangement contains a lease: The Company has applied Appendix C of Ind AS 17 Determining whether an Arrangement contains a Lease to determine whether an arrangement existing at the transition date contains a lease on the basis of facts and circumstances existing at that date.
NOTE 3 - RELATED PARTY DISCLOSURE
List of related parties (as identified and certified by the Management)
i) Parties where control exists
Honeywell Asia -Pacific Inc., Holding company Honeywell International Inc., Ultimate holding company
Other related parties with whom transactions have taken place during the year:
ii) Fellow Subsidiaries
Honeywell Middle East B.V. Honeywell International (India) Private Limited
Honeywell Technology Solutions Quatar Honeywell Limited Australia
Honeywell Tianjin Limited Honeywell Limited
Honeywell Life Safety AS Honeywell Enraf Americas, Inc.
Honeywell B.V. Honeywell Measurex (Ireland) Ltd.
Honeywell & Co. Oman L.L.C. Honeywell Turki-Arabia Limited
Honeywell Pte Ltd. Honeywell Controls System Limited Honeywell Automation & Control Solutions South Africa Honeywell International Middle East Ltd.
(Pty) Ltd. MST Technology GMBH
Honeywell Kuwait KSC. Honeywell Security France S.A.
Automation and Control Solutions, S. de R.L. de C.V. Honeywell GMBH
Honeywell Europe N.V. Honeywell S.A. (Belgium)
Honeywell Systems (Thailand) Ltd. Honeywell Airport Systems Gmbh
Honeywell Ltd. ( Hong Kong) Honeywell s.r.l.
Enraf B.V. UOP India Pvt. Ltd.
Honeywell Technology Solutions Lab Pvt. Ltd. Honeywell Engineering Sdn. Bhd.
Pittway Systems Technology Group Europe Ltd. Honeywell Co., Ltd. (Korea)
Honeywell Taiwan Inc. Honeywell S.L.
HoneyweN Life Safety AS Honeywell Portugal, Automacao e Contolo, S.A.
HoneyweN Building S°luti°ns Gmbh Honeywell Automation & control Solutions Carribean Ltd.
Novar Systems Ltd. Honeywell AS Norway
Honeywell Middle East FZE Honeywell OY
Honeywell Controls International Ltd. Matrikon Middle East Co WLL
Tridium Inc. Honeywell Environmental & Combustion Controls
Honeywell Limited (New Zeland) (Tianjin) Co., Ltd.
Honeywell Austria Gesellschaft mbh Honeywell International s.a.r.l.
Honeywell A.B. Honeywell Sensing & Control China Co, Ltd.
Matrikon Pty Ltd. Honeywell Technologies SARL
Trend Control Systems Ltd. Honeywell AG
Honeywell (China) Advanced Solutions Co., Ltd. Matrikon Inc.
Honeywell Southern Africa (Proprietary) Ltd. Honeywell NV [Belgium]
Honeywell Japan Inc. Honeywell S.A.I.C.
Honeywell Angola Lda Eclipse Combustion (Pvt.) Ltd.
Honeywell E.P.E. Elster GmbH
Other related parties with whom transactions have taken place during the year:
HONEYWELL LIMITED / HONEYWELL LIMITEE Elster Metering Private Limited
Honeywell S.A. [France] Elster Solutions GmbH
HONEYWELL TEKNOLOJI A.S Energy ICT N.V.
MK Electric (Malaysia) SDN BHD Honeywell Teknoloji Anonim Sirketi (Previously:
Intermec Technologies (S) Pte Ltd Honeywell Otomasyon ve Kontrol Sistemleri Sanayi ve
Honeywell Hometown Solutions India Foundation Ticaret A.S.)
Honeywell Trading (Shanghai) Co., Ltd. Metrologic Asia (Pte) Ltd
UOP Limited Xtralis Pty Ltd
Honeywell Fire Systems LLC Honeywell International Services S.r.l.
Life Safety Germany GmbH HSM Technology LLC
Honeywell Automotive de Mexico, S.A. de C.V. Honeywell HBS Solutions LLC
Honeywell A/S (Denmark) UOP L.L.C.
Automation And Control Solutions Limited Honeywell Aerospace B.V.
PT Honeywell Indonesia Honeywell Turbo Technologies (India) Private Limited
Life Safety Distribution AG Honeywell Electrical Devices and Systems India Limited
Enraf Tanksystem AG Honeywell do Brasil Ltda.
Salisbury Electrical Safety L.L.C. Honeywell Egypt Limited
Honeywell Analytics Ltd Honeywell EOOD
Sinpoec Honeywell Tianjin Ltd. Matrikon International, Inc.
ZAO Honeywell Novar Gmbh
Maxon Corporation Honeywell Integrated Technology (China) Co Ltd.
Honeywell ASCa Inc. Ademco Asia Pacific Ltd.
Maxon Combustion Equipment (Shanghai) Co.,Ltd. Tridium Asia Pacific Pte Ltd.
Maxon International BVBA Honeywell Building Solutions SES Corporation
BW Technologies Partnership Honeywell Romania s.r.l.
Inncom International Inc Honeywell Marine SAS
Bryan Donkin RMG Gas Controls Ltd Honeywell Europe Services S.A.S.
Honeywell, S.L. [Spain] Honeywell Automation and Control Soluitons West
Honeywell Iraq LLC Africa Limited
Saia-Burgess Controls AG Honeywell Automation Controls System LLP
Honeywell spol. s.r.o. [Slovak Republic] (Kazakhstan)
Integrated Technical Innovation Company for General HoneyweN (Macau) Limited
Services & Trade KAC Alarm Company Limited
Honeywell Specialty Chemicals (Singapore) Pte. Ltd. RMG Regel Messtechnik GmbH
Honeywell Taiwan Limited HoneyweN Sp. z aa
Honeywell, S.A. de C.V. Honeywell Szabalyozastechnikai Kft.
Mercury Instruments LLC Honeywell spol. s.r.o. [Czech Republic]
RMG Messtechnik GmbH Honeywell Technology Solutions Inc.
Honeywell China co. Ltd. Matrikon Business Systems Inc.
Novar ED&S Limited
iii) Key Management Personnel
Mr. Vikas Chaddha, Managing Director [Resigned w.e.f. July 31, 2016 (close of business hours)]
Mr. Ashish Gaikwad, Managing Director [Appointed w.e.f. 1 October, 2016]
Mr. Anurag Bhagania, CFO [Resigned w.e.f. June 26, 2016 (close of business hours)]
Mr. R Ravichandran, CFO [Appointed w.e.f. June 27, 2016]
Ms. Sangeet Hunjan, Company Secretary [Resigned w.e.f. November 24, 2016 (close of business hours)]
Ms. Farah Irani, Company Secretary [Appointed w.e.f. May 16, 2017]
The Company generates a large percentage of its sales and profits from its business with the Honeywell group (Honeywell), its major shareholder. Sales to Honeywell accounted for approximately 39% and 33% of our total net sales for the year ended March 31, 2017 and year ended March 31, 2016 respectively. The Companyâs ability to maintain or grow its business with Honeywell depends upon a number of performance factors. However, the Company cannot be assured that its level of sales and profits associated with its relationship with Honeywell will continue. Honeywell-specific business considerations (independent of its shareholding in the Company), including changes in Honeywellâs strategies regarding utilization of alternate opportunities available to it to source products and services currently provided by the Company (including from alternate sources which Honeywell may acquire or develop within its own group), may also reduce the level and/or mix of Honeywellâs business with the Company.
NOTE 4 - SHARE BASED PAYMENTS Employee share option plan of the company
Honeywell International Inc (HII), the ultimate holding company, may grant stock options and restricted stock awards to certain employees under its stock incentive plan.
Stock OptionsâThe exercise price, term and other conditions applicable to each option granted under the stock plans are generally determined by the Management Development and Compensation Committee of the Board of Honeywell International Inc. The exercise price of stock options is set on the grant date and may not be less than the fair market value per share of our stock on that date. The fair value is recognized as an expense over the employeeâs requisite service period (generally the vesting period of the award). Options generally vest over a four-year period and expire after ten years.
Restricted Stock UnitsâRestricted stock unit (RSU) awards entitle the holder to receive one share of common stock for each unit when the units vest. RSUs are issued to certain employees as compensation at fair market value at the date of grant. RSUs typically become fully vested over periods ranging from three to seven years and are payable in Honeywell common stock upon vesting.
Fair value of share options granted in the year
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on implied volatilities from traded options on common stock of HII and historical volatility of common stock of HII. Monte Carlo simulation model is used to derive an expected term which represents an estimate of the time options are expected to remain outstanding. Such model uses historical data to estimate option exercise activity and post-vest termination behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant.
A Disputed statutory matters mainly include:
a) Provision for disputed statutory matters comprises matters under litigation with Sales Tax and Local authorities.
b) The amount of provision made by the Company is based on the estimate made by the Management considering the facts and circumstances of each case.
To the extent the Company is confident that it may have a strong case that portion is disclosed under contingent liabilities.
c) The timing and the amount of cash flows that will arise from these matters will be determined by the Appellate Authorities only on settlement of these cases.
B Warranty
Provision for warranty is considered based on the rolling average warranty expense incurred in the preceding 12 months, the warranty period for which ranges from 12 months to 24 months as per provisions of the contracts.
C Provision for Estimated Cost to complete on Contracts
A provision for estimated cost to complete on construction contracts is recognized when it is probable that the total contract cost will exceed total contract revenue. The provision shall be utilized as and when the contract gets executed.
B Defined benefit plans (gratuity and other retirement benefits)
The Company also provides for gratuity, covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employeeâs salary and the tenure of employment.
Provident Fund contributions are made to a Trust administered by the Company for its qualifying employees. This defined benefit plans is administered by separate trust that is legally separated from the entity. The board of the trust is required by law and by its trust deed to act in the interest of the fund and of all the relevant stakeholders in the scheme; i.e. active employees, inactive employees, retirees, employers. The board of the fund is responsible for the investment policy with regard to the assets of the fund.
Note : There is a net surplus position in PF valuation and however as per the PF trust act, no surplus can be transferred to the company as it is separate from the company, the company would not be accounting for any amount in its books in this position.
Sensitivity Analysis
Sensitivity analysis indicates the influence of a reasonable change in certain significant assumptions on the outcome of the Present value of obligation (PVO) and aids in understanding the uncertainty of reported amounts.
1. Sensitivity analysis for each significant actuarial assumptions viz. Discount rate and Salary escalation rate as of the end of the reporting period, showing how the defined benefit obligation would have been affected by changes is called out in the table above.
2. The assumptions used in preparing the sensitivity analysis is Discount rate at 100 bps and- 100 bps
Salary assumption at 1 % and- 1%
3. The method used to calculate the liability in these scenarios is by keeping all the other parameters and the data same as in the base liability calculation except for the parameters to be stressed .
4. There is no change in the method from the previous period and the points/percentage by which the assumptions are stressed are same to that in the previous year.
Gratuity fund asset is managed byLife Insurance Corporation of India and the funding ratio of 60% (ie asset over liability ratio of 60% ), which is above average when compared to other companies, actuary donât see any material risk of HAIL unable to meet the Gratuity payments. Also as the fund is set up as a trust, the monies as a part of the trust will not flow back into the company until the last employee of the trust is paid .
A note on other risks
Investment risk: The funds are invested by LIC and they provide returns basis the prevalent bond yields, LIC on an annual basis requests for contributions to the fund, while the contribution requested may not be on the same interest rate as the bond yields provided, basis the past experience it is low risk.
Interest Risk: LIC does not provide market value of assets, rather maintains a running statement with interest rates declared annually - The fall in interest rate is not therefore offset by increase in value of Bonds, hence may pose a risk.
Longevity Risk: Since the Gratuity Payment happens at the retirement age, longevity impact is very low at this age.
Financial risk management objectives
Company is exposed to foreign exchange risk on account of import risk and hedging activities; and export transactions which is monitored periodically. The Company leverages the global treasury operations of Honeywell to improve mitigation of risk relating to foreign exchange.
Foreign currency risk management
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The carrying amounts of the companies foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:
Notes to the financial statements Credit risk management
Credit risk refers to the risks that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company deals only with credit worthy counterparties and takes appropriate measures to mitigate the risk of financial loss from defaults. Trade receivable consists of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable.
Liquidity risk management
The Company manages liquidity risk by maintaining adequate reserves, banking facility and by continuously monitoring forecasts and actual cash flows and by matching the maturity profiles of financial assets and liabilities.
NOTE 5
As set out in section 135 of the Companies Act, 2013 the Company is required to contribute/spent Rs. 348 lakhs towards Corporate Social Responsibility activities, as calculated basis 2% of its average net profits of the last three financial years. Accordingly, during the current year, the Company has spent Rs. 348 lakhs (previous year Rs. 303 lakhs) including 9 lakhs (previous year Rs.7 lakhs) toward administration cost.
NOTE 6
Income tax expense relating to earlier years represents additional tax provision for earlier years arising out of proceedings with the authorities during the current year.
NOTE 7
The Company does not maintain any cash balance at any point in time. Accordingly, the requisite disclosures as regards its holding and dealings in Specified Bank Notes as defined in the Notification S.O. 3407(E) dated the 8th November, 2016 of the Ministry of Finance, during the period from 8th November 2016 to 30th December 2016; are not made in the financial statements.
NOTE 8
Previous periodâs figures have been regrouped, wherever necessary, to conform with current yearâs presentation.
NOTE 9
The financial statements were approved for issue by the board of directors on May 25, 2017.
Mar 31, 2015
A. GENERAL INFORMATION:
Honeywell Automation India Limited (the ''Company'') is engaged
primarily in the business of Automation & Control systems on turnkey
basis and otherwise. The Company is a public limited company and is
listed on the Stock Exchange, Mumbai (BSE) and the National Stock
Exchange (NSE).
(a) Rights, preferences and restrictions attached to the shares
Equity shares: The Company has one class of equity shares having a par
value of Rs.10 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.
a) 6,631,142 (December 31,2013 : 6,631,142 ) Equity shares constituting
75% (December 31,2013 75%) of the paid-up capital of the Company are
held by Honeywell International Inc., the ultimate holding company,
through its 100% subsidiary, Honeywell Asia Pacific Inc.
b) The Company has neither allotted any shares as fully paid up bonus
shares nor pursuant to contract(s) payment being received in cash
during 5 years immediately preceding March 31,2015.
2 Segment Reporting:
Primary business segment:
The Company has determined its business segment as Automation & Control
Systems. There are no other reportable segments.
Secondary geographical segment:
The Company has two geographical segments, viz. Domestic and Exports.
Revenue from geographical segment is given below:
Fixed assets used in the Company''s business or liabilities contracted
have not been identified to any segment as the fixed assets and
services are used interchangeably between segments. Accordingly no
disclosure relating to total segment assets and liabilities is made.
3 Related Party Disclosure :
List of related parties (as identified and certified by the Management)
i) Parties where control exists
Honeywell Asia -Pacific Inc., Holding company
Honeywell International Inc., Ultimate holding company
Other related parties with whom transactions have taken place during
the year:
ii) Fellow Subsidiaries
Honeywell Middle East B.V.
Honeywell Technology Solutions Quatar
Honeywell Tianjin Limited
Honeywell Controls and Automation India Pvt. Ltd.
Honeywell B.V.
Honeywell & Co. Oman L.L.C.
Honeywell Pte Ltd.
Honeywell Automation & Control Solutions South Africa (Pty) Ltd.
Honeywell Kuwait KSC.
Automation and Control Solutions, S. de R.L. de C.V.
Honeywell Europe N.V.
Honeywell Systems (Thailand) Ltd.
Honeywell Ltd. ( Hong Kong)
Enraf B.V.
Honeywell Technology Solutions Lab Pvt. Ltd.
Pittway Systems Technology Group Europe Ltd.
Honeywell Taiwan Inc.
Callidus Technologies India Pvt. Ltd.
Honeywell Building Solutions Gmbh
Honeywell International (India) P. Ltd Honeywell Limited Australia
Honeywell Limited Honeywell Enraf Americas, Inc.
Honeywell Measurex (Ireland) Ltd.
Honeywell Turkey Arabia Ltd.
Honeywell Controls System Limited Honeywell International Middle East
Ltd.
MST Technology GMBH Honeywell Security France S.A.
Honeywell GMBH Honeywell S.A. (Belgium)
Honeywell Airport Systems Gmbh Honeywell s.r.l.
UOP India Pvt. Ltd.
Honeywell Engineering Sdn. Bhd.
Honeywell Co, Ltd.
Honeywell S.L.
Honeywell Portugal, Automacao e Contolo, S.A.
Other related parties with whom transactions have taken place during
the year:
Novar Systems Ltd.
Honeywell Middle East FZE Honeywell Controls International Ltd.
Tridium Inc.
Honeywell Limited (New Zealand)
Honeywell Austria Gesellschaft mbh Honeywell A.B.
Matrikon Pty Ltd.
Trend Control Systems Ltd.
Honeywell (China) Advanced Solutions Co., Ltd.
Honeywell Southern Africa (Proprietary) Ltd.
Honeywell Japan Inc.
Honeywell A/S (Denmark)
ADI-Gardiner NV Honeywell China co. Ltd.
PT Honeywell Indonesia
Life Safety Distribution AG
Honeywell Analytics Asia Pacific Co.Ltd.
Honeywell Otomasyon ve Kontrol Sistemleri Sanayi ve Ticaret A.S.
Honeywell Analytics Inc,
Sinpoec Honeywell Tianjin Ltd.
ZAO Honeywell Maxon Corporation Honeywell ASCa Inc.
Maxon Combustion Equipment (Shanghai) Co.,Ltd.
Maxon International BVBA Fire Sentry Corporation Inncom International
Inc Bryan Donkin RMG Gas Controls Ltd Honeywell, S.L. [Spain]
Honeywell Iraq LLC Saia-Burgess Controls AG Honeywell spol. s.r.o.
[Slovak Republic]
Integrated Technical Innovation Company for General Services & Trade
Honeywell NV [Belgium]
Honeywell Automation & control Solutions Carribean Ltd.
Honeywell AS Norway Honeywell OY
Matrikon Middle East Co WLL
Honeywell Environmental & Combustion Controls (Tianjin) Co., Ltd.
Honeywell International s.a.r.l.
Honeywell Sensing & Control China Co, Ltd.
Honeywell Technologies SARL Honeywell AG Matrikon Inc.
Matrikon Industrial Solutions India Pvt. Ltd.
Honeywell Chile S.A.
Honeywell Aerospace B.V.
Honeywell Turbo Technologies (India) Private Limited Honeywell
Electrical Devices and Systems India Limited Honeywell do Brasil Ltda.
Honeywell Egypt Limited Honeywell EOOD Matrikon International, Inc.
Novar Gmbh
Honeywell Integrated Technology (China) Co Ltd.
Ademco Asia Pacific Ltd.
Tridium Asia Pacific Pte Ltd.
Honeywell BeijingTechnology solution Honeywell Romania s.r.l.
Enraf Marine Systems S.A.S.
Honeywell Europe Services S.A.S.
Honeywell Automation and Control Solutions West Africa Limited
Honeywell Automation Controls LLP
Honeywell (Macau) Limited
KAC Alarm Company Limited
RMG Regel Messtechnik GmbH
Honeywell Sp. z o.o.
Honeywell Szabalyozastechnikai Kft.
Honeywell Life Safety AS
iii. Key Management Personnel
Mr. Vikas Chaddha, Managing Director (w.e.f. January 1,2014)
Mr. Anant Maheshwari, Managing Director (Upto December 31,2013)
The Company generates a large percentage of its sales and profits from
its business with the Honeywell group (Honeywell), its major
shareholder. Sales to Honeywell accounted for approximately 28% and 30%
of our total net sales in the 15 months ended March 31,2015 and year
ended December 31,2013 respectively. The Company''s ability to maintain
or grow its business with Honeywell depends upon a number of
performance factors. However, the Company cannot be assured that its
level of sales and profits associated with its relationship with
Honeywell will continue. Honeywell-specific business considerations
(independent of its shareholding in the Company), including changes in
Honeywell''s strategies regarding utilization of alternate opportunities
available to it to source products and services currently provided by
the Company (including from alternate sources which Honeywell may
acquire or develop within its own group), may also reduce the level
and/or mix of Honeywell''s business with the Company.
4 Lease Transactions:
As a Lessee in Operating Lease
Rentals for office premises, land, building under operating leases of
Rs. 2,549 (''lakhs) [Previous Year Rs. 1,794 (''lakhs)] have been
included under Rent Expense.
Non cancelable
The Company has hired premises under non-cancelable operating lease
arrangements at stipulated rentals. The future minimum lease payments
under these leases as of March 31,2015 are as follows:
5 Earning per share (EPS):
EPS is calculated by dividing the profit attributable to the equity
shareholders by the average number of shares outstanding during the
year. The basic and diluted earnings per share have been calculated as
under:
6 a) Estimated amount of contracts remaining to be executed on capital
accounts and not provided for (net of advances) - Rs. 404 (''lakhs)
[Previous year Rs. 366 (''lakhs)]
b) Disclosure in accordance with Section 22 of Micro, Small and Medium
Enterprises Development Act, 2006
The Company has compiled this information based on intimations received
from suppliers of their status as Micro or Small enterprises and / or
its registration with the appropriate authority under Micro, Small and
Medium Enterprises Development Act, 2006.
7 A) Provision for taxation has been made after considering the
various allowances / deductions available and after excluding profits
derived from undertaking registered with Software Technology Parks of
India under section 10A and unit registered under Special Economic Zone
under Section 10AA of the Income Tax Act, 1961.
B) The tax year for the Company being April 1 to March 31, provision
for current taxation for the period is the aggregate of the provision
made for the three months ended March 31,2014 and the provision based
on the figures for the remaining twelve months ended March 31,2015.
In addition to the above, the Company has entered into certain foreign
currency forward contracts against highly probable forecast
transactions relating to its purchases and sales. The foreign currency
forward contracts in respect of highly probable forecast transactions
outstanding at the balance sheet date aggregate as follows:
8 Employee Stock Option Schemes:
The Company has a Employees Stock Option Plans (Stock Options "SO"
and Restricted Units "RU") in operation for certain employees,
which is administered by Honeywell International Inc. the ultimate
holding company. Since the payments/ issue of shares, if any, under the
plan are proposed to be made directly by Honeywell International Inc
without any charge back to the Company, no accounting/disclosure for
the plan has been made by the Company.
9 Contingent Liabilities:
(Rupees in lakhs)
Particulars As at As at
March 31, 2015 December 31, 2013
a) Income Tax claims
against the Company 8,259 8,344
b) Excise duty claims
against the Company 3 3
c) Sales tax refunds/claims
against the Company 4,665 2,584
d) Customs duty claims
against the Company 262 292
e) Claims against the Company
not acknowledged as debts 1,516 1,516
Note: It is not practicable for the Company to estimate the timing of
cash outflow, if any, in respect of the above pending resolutions of
the respective proceedings.
A Disputed statutory matters mainly include:
a) Provision for disputed statutory matters comprises matters under
litigation with Sales Tax and Local authorities.
b) The amount of provision made by the Company is based on the estimate
made by the Management considering the facts and circumstances of each
case.
To the extent the Company is confident that it may have a strong case
that portion is disclosed under contingent liabilities.
c) The timing and the amount of cash flows that will arise from these
matters will be determined by the Appellate Authorities only on
settlement of these cases.
B Provision for Estimated Cost to complete on Contracts
A provision for estimated cost to complete on construction contracts is
recognized when it is probable that the contract cost will exceed total
contract revenue. The provision shall be utilized as and when the
contract gets executed.
C Warranty
Provision for warranty is considered based on the rolling average
warranty expense incurred in the preceding 12 months, the warranty
period for which ranges from 12 months to 24 months from the date of
handover of the project.
10 During the period ended March 31,2015, the Company determined that
certain costs had been recorded to incorrect projects and conducted a
review to determine the impact of the same. Following conclusion of the
review, adjustments have been made in these financial statements to
reduce revenue by Rs.5,450 lakhs and profit before tax by Rs.6,729
lakhs. This reduction in profit before tax includes an impact of
Rs.1,279 lakhs for provision for future losses for certain projects in
accordance with Accounting Standard 7 - Accounting for construction
contracts.
Of the above adjustments, amounts of Rs. 4,002 Lakhs, which relate to
prior years, have been disclosed as an exceptional item.
The Company is in the process of enhancing internal controls to
minimize the risk of such incorrect recording of costs in the future.
11 Disclosures in accordance with Revised AS- 15 on "Employee
Benefits":
A Defined contribution plans
The company has recognized the following amounts in the statement of
profit and loss for the period.
Fair Value of the planned asset as at March 31, 2015 represents the
balance as confirmed by the insurer managed funds.
vi. The overall expected rate of return on assets is based on the
expectation of the average long term rate of return expected on
investments of the Fund during the estimated term of the obligations.
vii. The actual return on plan assets is as follows
The estimates of future salary increases considered in actuarial
valuation takes into account inflation, seniority, promotion and other
relevant factors.
12 As set out in section 135 of the Companies Act, 2013 the Company is
required to contribute Rs. 283 lakhs towards Corporate Social
Responsibility activities, as calculated basis 2% of its average net
profits of the last three financial years. Accordingly, during the
current year, the Company has contributed Rs. 283 lakhs towards the
eligible projects as mentioned in Schedule VII ( including amendments
thereto) of the Companies Act, 2013.
13 Consequent to the change in the financial year of the Company from
January - December to April - March with effect from the current year,
the current year''s financial statements are for 15 months from January
1,2014 to March 31, 2015. The previous year''s figures relate to the 12
months ended December 31,2013. In view of the above, the current year''s
figures are accordingly not comparable to those of the previous year.
14 Previous year''s figures have been regrouped, wherever necessary, to
conform with current period''s presentation.
Dec 31, 2013
1. Lease Transactions:
As a Lessee in Operating Lease
Rentals for office premises under operating leases of Rs. 2,462
(''lakhs) [Previous Year Rs. 2,583 (''lakhs)] have been included
under''Rent Expenses''.
2. A) Provision for taxation has been made after considering the
various allowances / deductions available and after excluding profits
derived from undertaking registered with Software Technology Parks of
India under section 10A and unit registered under Special Economic Zone
under Section 10AA of the Income Tax Act, 1961.
B) The tax year for the Company being April 1 to March 31, provision
for current taxation for the year is the aggregate of the provision
made for the three months ended March 31, 2013 and the provision based
on the figures for the remaining nine months ended December 31, 2013,
the ultimate tax liability of which will be determined on the basis of
the figures for the period April 1,2013 to March 31,2014.
A. Disputed statutory matters mainly include:
a) Provision for disputed statutory matters comprises matters under
litigation with Sales Tax and Local authorities.
b) The amount of provision made by the Company is based on the estimate
made by the Management considering the facts and circumstances of each
case.
To the extent the Company is confident that it may have a strong case
that portion is disclosed under contingent liabilities.
c) The timing and the amount of cash flows that will arise from these
matters will be determined by the Appellate Authorities only on
settlement of these cases.
B. Provision for Estimated Cost to complete on Contracts
A provision for estimated cost to complete on construction contracts is
recognized when it is probable that the contract cost will exceed total
contract revenue. The provision shall be utilized as and when the
contract gets executed.
C. Warranty
Provision for warranty is considered based on the rolling average
warranty expense incurred in the preceding 12 months, the warranty
period for which ranges from 12 months to 24 months from the date of
handover of the project.
3. Previous year figures have been regrouped, wherever necessary to
conform with current year''s presentation.
Dec 31, 2012
(a) Rights, preferences and restrictions attached to the shares
Equity Shares: The Company has one class of equity shares having a par
value of Rs.10 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.
a) 6,631,142 (December 31, 2011 : 7,182,475 ) Equity Shares
constituting 75% (December 31, 2011 : 81.24%) of the paid-up capital of
the Company are held by Honeywell International Inc., the ultimate
holding company, through its 100% subsidiary, Honeywell Asia Pacific
Inc.
b) The Company has not allotted any shares as fully paid up bonus
shares or pursuant to contract(s) neither payment being received in
cash during 5 years immediately preceding December 31, 2012.
1 Segment Reporting
Business segment has been considered as the primary segment and
geographical segment has been considered as the secondary segment.
Automation & Control systems being the only business segment constitute
one single primary segment in the context of Accounting Standard - 17
on Segment Reporting.
Fixed assets used in the Company''s business or liabilities contracted
have not been identified to any segment as the fixed assets and
services are used interchangeably between segments. Accordingly no
disclosure relating to total segment assets and liabilities is made.
The Company generates a large percentage of its sales and profits from
its business with the Honeywell group (Honeywell), its major
shareholder. Sales to Honeywell accounted for approximately 35% and 32%
of our total net sales in fiscal years 2012 and 2011 respectively. The
Company''s ability to maintain or grow its business with Honeywell
depends upon a number of performance factors. However, the Company
cannot be assured that its level of sales and profits associated with
its relationship with Honeywell will continue. Honeywell-specific
business considerations (independent of its shareholding in the
Company), including changes in Honeywell''s strategies regarding
utilization of alternate opportunities available to it to source
products and services currently provided by the Company (including from
alternate sources which Honeywell may acquire or develop within its own
group), may also reduce the level and/or mix of Honeywell''s business
with the Company.
Cancelable
Rentals paid for computers under operating leases of Rs. NIL [Previous
year Rs. 28(''lakhs)] have been included under '' Miscellaneous
Expenses''.
Rentals for office premises under operating leases of Rs. 709 (''lakhs)
[Previous Year Rs. 515 (''lakhs)] have been included under ''Rent
Expenses''
Previous year figures are indicated in brackets.
2 Earning Per Share (EPS)
EPS is calculated by dividing the profit attributable to the equity
shareholders by the average number of shares outstanding during the
year. The basic and diluted earnings per share have been calculated as
under:
3 a) Estimated amount of contracts remaining to be executed on capital
accounts and not provided for (net of advances) - Rs. 165(''lakhs)
[Previous year Rs. 148(''lakhs)]
b) Disclosure in accordance with Section 22 of Micro, Small and Medium
Enterprises Development Act, 2006
The Company has compiled this information based on intimations received
from suppliers of their status as Micro or Small enterprises and / or
its registration with the appropriate authority under Micro, Small and
Medium Enterprises Development Act, 2006.
4 A). Provision for taxation has been made after considering the
various allowances / deductions available and after excluding profits
derived from undertaking registered with Software Technology Parks of
India under section 10A and unit registered under Special Economic Zone
under Section 10AA of the Income Tax Act, 1961.
B). The tax year for the Company being April 1 to March 31, provision
for current taxation for the year is the aggregate of the provision
made for the three months ended March 31, 2012 and the provision based
on the figures for the remaining nine months ended December 31, 2012,
the ultimate tax liability of which will be determined on the basis of
the figures for the period April 1, 2012 to March 31, 2013.
5 Contingent Liabilities
(Rupees in lakhs)
Particulars As at As at
December
31, 2012 December
31, 2011
a) Income Tax claims against the Company 6,172 5,636
b) Excise duty claims against the Company 4 15
c) Sales tax refunds/claims against the Company 2,336 1,962
d) Customs duty claims against the Company 292 36
e) Claims against the Company not
acknowledged as debts 1,790 -
A Disputed statutory matters mainly include:
a) Provision for disputed statutory matters comprises matters under
litigation with Sales Tax and Local authorities.
b) The amount of provision made by the Company is based on the estimate
made by the Management considering the facts and circumstances of each
case.
To the extent the Company is confident that it may have a strong case
that portion is disclosed under contingent liabilities.
c) The timing and the amount of cash flows that will arise from these
matters will be determined by the Appellate Authorities only on
settlement of these cases.
B Provision for Estimated Cost to complete on Contracts
A provision for estimated cost to complete on construction contracts is
recognized when it is probable that the contract cost will exceed total
contract revenue. The provision shall be utilized as and when the
contract gets executed.
vi The overall expected rate of return on assets is based on the
expectation of the average long term rate of return expected on
investments of the Fund during the estimated term of the obligations.
6 The current year charge for Corporate Overhead Allocation includes
charge of Rs. 487(''lacs) (Previous Year reversal of Rs. 20 lacs) in
respect of services rendered in previous year.
7 The financial statements for the year ended December 31, 2011 had
been prepared as per the then applicable, pre- revised Schedule VI to
the Companies Act, 1956. Consequent to the notification of Revised
Schedule VI under the Companies Act, 1956, the financial statements for
the year ended December 31,2012 are prepared as per Revised Schedule
VI. Accordingly, the previous year figures have also been reclassified
to conform to this year''s classification. The adoption of Revised
Schedule VI for previous year figures does not impact recognition and
measurement principles followed for preparation of financial
statements.
Dec 31, 2011
1. Disclosures under Accounting Standards
i) Segment Reporting :
Business segment has been considered as the primary segment and
geographical segment has been considered as the secondary segment.
Automation & Control systems being the only business segment constitute
one single primary segment in the context of Accounting Standard - 17
on Segment Reporting.
Fixed assets used in the Company's business or liabilities contracted
have not been identified to any segment as the fixed assets and
services are used interchangeably between segments. Accordingly no
disclosure relating to total segment assets and liabilities is made.
The Company generates a large percentage of its sales and profits from
its business with the Honeywell group (Honeywell), its major
shareholder. Sales to Honeywell accounted for approximately 32% and 33%
of total net sales in fiscal years 2011 and 2010 respectively. The
Company's ability to maintain or grow its business with Honeywell
depends upon a number of performance factors. However, the Company
cannot be assured that its level of sales and profits associated with
its relationship with Honeywell will continue. Honeywell- specific
business considerations (independent of its shareholding in the
Company), including changes in Honeywell's strategies regarding
utilization of alternate opportunities available to it to source
products and services currently provided by the Company (including from
alternate sources which Honeywell may acquire or develop within its own
group), may also reduce the level and/or mix of Honeywell's business
with the Company.
iii) Lease Transactions :
As a Lessee in an Operating Lease:
Non cancellable
The Company has taken certain Office Premises under non cancellable
operating leases with a lock in period ranging from 12 to 60 months
generally and are usually renewable by mutual consent on agreed terms.
Rentals paid for equipments under operating leases of Rs. NIL [Previous
year Rs. 4,165 ('000)] have been included under 'Rent' under Schedule
15 to Profit and Loss Account.
Rentals paid for computers under operating leases of Rs. 2,815 ('000)
[Previous year Rs. 11,834('000)] have been included under
'Miscellaneous Expenses' under Schedule 15 to Profit and Loss Account.
Rentals paid for premises under operating leases of Rs. 86,372 ('000)
[Previous year Rs. 89,575 ('000)] have been included under 'Rent' under
Schedule 15 to Profit and Loss Account.
Previous year figures are indicated in brackets.
During the year 2011, weighted average share price for Stock Option
exercised was USD 44.17 (Previous year rate USD 46.2)
During the year 2011, weighted average share price for Restricted units
vested was USD 56.40 (Previous year rate USD 42.27)
There were 10,850 (Previous year: 60,410) Stock Options outstanding at
the end of 2011 with exercise prices in the range USD 37.75 to 57.05
(Previous Year : USD 28.25 to USD 58.48) with a weighted average
remaining contractual life of years 7.10 years(Previous Year: 8.16
years).
There were 9,852 (Previous Year: 37,775) Restricted Units at the end of
2011 with a weighted average remaining contractual life of 5.40 years
(Previous Year: 4.68 years).
2. Contingent Liabilities (Rs.'000)
Particulars December December
31,2011 31,2010
a) Income tax claims against the Company 563,575 773,014
b) Excise duty claims against the Company 1,475 1,475
c) Sales tax refunds/claims against the
Company 196,221 42,283
d) Customs duty claims against the Company 3,553 3,553
Note :
Bank Guarantees given to customers against performance/advance Rs.
3,616,854 ('000) [Previous Year Rs. 2,684,891 ('000)].
Notes:
The above information does not include:
a. As the future liability for gratuity and leave encashment is
provided on actuarial basis for the Company as a whole, the amounts
pertaining to the directors is not ascertainable and is therefore not
included above.
b. Employee Stock Options, Restricted Units and Share Awards in
respect of shares in Honeywell International Inc. (ultimate holding
company) granted to the directors.
c. Pension aggregating Rs.720('000) [Previous Year Rs.720('000)]
paid to a Non-executive director, who was previously an employee of the
company.
* Not quantifiable as the size/mix of the system varies according to
customers' requirements. Previous year figures are indicated in
brackets.
** Not Applicable
A) Disputed statutory matters mainly include:
a) Provision for disputed statutory matters comprises matters under
litigation with Sales Tax and Local authorities.
b) The amount of provision made by the Company is based on the estimate
made by the Management considering the facts and circumstances of each
case.
To the extent the Company is confident that it may have a strong case
that portion is disclosed under contingent liabilities.
c) The timing and the amount of cash flows that will arise from these
matters will be determined by the Appellate Authorities only on
settlement of these cases.
B) Provision for Estimated Cost to Complete on Contracts:
A provision for estimated cost to complete on construction contracts is
recognised when it is probable that the contract costs will exceed
total contract revenue. The provision shall be utilised as and when the
contract gets executed.
3. The current year charge for Corporate Overhead Allocation includes
reversal of Rs. 2,006 ('000) (Previous Year charge of Rs.105,200
('000)) in respect of services rendered in previous year.
4. Prior year comparatives have been re-grouped, re-classified to
conform to the current year presentation, wherever applicable.
Dec 31, 2009
1. Disclosures under Accounting Standards
i) Segment Reporting :
The business segment has been considered as the primary segment and the
geographical segment has been considered as the secondary segment.
Automation & Control being the only business segment, necessary
information has already been given in the Balance Sheet and Profit and
Loss Account.
ii) Related Party Disclosures :
List of related parties (as identified and certified by the Management)
(i) Parties where control exists :
Honeywell Asia-Pacific Inc., Holding Company Honeywell International
Inc., Ultimate Holding Company
Other related parties with whom transactions have taken place during
the year :
(ii) Fellow subsidiaries
Callidus Technologies India P. Ltd.
Honeywell & Co Oman LLC
Honeywell A/S (Danmark)
Honeywell Ab (Sweden)
Honeywell Acs Sensing & Control
Honeywell Acs South Africa
Honeywell Ag
Honeywell Airport Systems Gmbh
Honeywell Analytics Asia Pacific Co.
Honeywell Analytics Inc.
Honeywell A/S (Norway)
Honeywell ASCA Inc.
Honeywell Austria Gmbh
Honeywell Automation & Control
Honeywell B V
Honeywell Building Solutions Gmbh
Honeywell C.A.
Honeywell China
Honeywell Co. Ltd. (Korea)
Honeywell Control Systems Limited
Honeywell Controls & Automation (India)
Honeywell Ecc (Tianjin) Co. Ltd.
Honeywell Egypt Ltd.
Honeywell Electrical
Honeywell Engineering Sdn Bhd
Honeywell Engines & Systems
Honeywell Enraf Americas, Inc.
Honeywell Enraf Marine Systems Sas
Honeywell Enraf Bv
Honeywell Environmental & Combustion
Honeywell Europe Nv
Honeywell Gmbh
Honeywell International (India) Pvt.
Honeywell International Me Ltd.
Honeywell Japan Inc.
Honeywell Kuwait Ksc
Honeywell Measurex Ireland Pvt. Ltd.
Honeywell Limited
Honeywell Ltd. (Australia)
Honeywell Ltd. (Corp-Hong Kong)
Honeywell Ltd. Singapore Gbs
Honeywell Middle East Ltd.
Honeywell N V
Honeywell New Zealand
Honeywell Otomasyon Ve
Honeywell OY
Honeywell Portugal Lda
Honeywell Process Solutions Canada
Honeywell Process Solutions Us
Honeywell Pte Ltd.
Honeywell S.R.L.
Honeywell Sa
Honeywell Safety Management
Honeywell Scanning & Mobility
Honeywell Security
Honeywell Sensing & Control
Honeywell SI
Honeywell Sp. Zo.O.
Honeywell Systems (Thailand) Ltd.
Honeywell Taiwan Ltd.
Honeywell Technology Solution Lab.
Honeywell Tianjin Ltd.
Honeywell Turbo Technologies India
Honeywell Turkey Arabia Ltd.
Honeywell Xinyao Auto. Sensor (Shan
Maxon Corporation
Novar Gmbh
Novar Projects Limited
Novar Systems Ltd.
Pittway Sys Tech Grp Eur.
Pt.Honeywell Indonesia
Trend Control Systems Ltd.
Uop Lie
Xian System Sensor Electronics
Zao Honeywell
(Mi) Key Management Personnel
Mr. Vimal Kapur, Managing Director
Mr. Harshavardhan Chitale, Executive Director upto October 14, 2008
2. Contingent Liabilities (Rs.OOO)
December December
31,2009 31,2008
a) Income tax claims against
the Company 420,176 402,194
b) Excise duty claims against
the Company* 1,475 1,475
c) Sales Tax refunds/claims
against the Company* 173,992 84,675
d) Customs Duty claims against
the Company* 3,553 4,000
* Excludes penalties, if any, relating to penalty proceedings, since
the precedence indicate that the probability of levy is remote.
Note :
Bank Guarantees given to customers- against performance/advance.
Bank Guarantees issued Rs. 2,387,223 (000) [Previous Year Rs.
1,966,153 (000)] are secured by hypothecation of present and future
stocks of raw materials, semi- finished goods, finished goods, stores
and spares and book debts.
3. From the current year, the Company has recognised reimbursement of
expenses received as a part of sales, instead of netting off against
expenses. Accordingly, expenses aggregating Rs.432,031 (000s) have
been included under sales for the year 2009. Further, expenses
aggregating Rs.389,776 (OOOs)in respect of the year 2008 have been
reclassified under sales for the year 2008.
4. With effect from previous year, the Company has accounted for
corporate overhead allocation, in respect of various services rendered
by Honeywell group companies. The previous year charge includes Rs.
154,862 (000s) in respect of services rendered in the year 2007.
5. Prior year comparatives have been re-grouped, re-classified to
conform to the current year presentation, wherever applicable.